3rd Cir. Holds Defendants Arguing Class Not Ascertainable in TCPA Suit Must Still Produce Putative Class Member Info

The U.S. Court of Appeals for the Third Circuit recently reversed an order denying a motion to compel production of a marketing database of putative class members in a federal Telephone Consumer Protection Act (TCPA) lawsuit.

In so ruling, the Third Circuit held that:  (1) defendants arguing that a class is not ascertainable should be required to produce information in its possession about putative class members during discovery, and (2) although affidavits from potential class members alone do not satisfy the ascertainability standard for class certification, such affidavits in combination with other records can meet the ascertainability standard.

A copy of the opinion in City Select Auto Sales Inc. v. BMW Bank of North America Inc. is available at:  Link to Opinion.

A marketing company operated an internet-based service that connected independent car dealers with various lenders.  A finance company offered direct automotive financing to customers through a division that provided financing to borrowers at independent car dealers for all makes and models of cars.

The finance company and the marketing company entered into a contract, under which the finance company would offer loans to borrowers at participating independent car dealers through the marketing company’s system.

In 2012, the marketing company used a vendor to fax advertisements to independent car dealers.  The advertisements included the finance company division’s logo, identified the finance company, and stated the finance company “is looking for your BUSINESS!!”  An employee of the marketing company used the vendor to successfully send 5,480 faxes on Nov. 29, 2012; 5,107 faxes on Dec. 4, 2012; and 10,402 faxes on Dec. 27, 2012 (collectively, the “Up2Drive faxes”).

To send each fax, the employee generated a list of recipients from the marketing company’s customer database.  The database contained dealership contact information, sometimes including fax numbers, and information regarding the dealership’s relationship, if any, with the marketing company and the date the dealership was added to the database.

Once the database was uploaded to the vendor’s online portal, the vendor then broadcasted the fax to each recipient and billed the marketing company for each fax successfully completed.  Neither the marketing company nor the vendor retained a list of recipients of the Up2Drive faxes.

The plaintiff received one of the faxes sent on Dec. 27, 2012.  The plaintiff alleged that it had no preexisting business relationship with the marketing company or finance company, and that the fax was unsolicited.

The plaintiff filed a complaint on behalf of a putative class for violations of the TCPA, 47 U.S.C. 227, et seq., and sought certification of a class defined as:

“All auto dealerships that were included in the [marketing company’s] database on or before December 27, 2012, with fax numbers identified in the database who were sent one or more telephone facsimile messages between November 20, 2012 and January 1, 2013, that advertised the commercial availability of property, goods or services offered by [the finance company].”

During class certification discovery, the plaintiff sought to compel production of the marketing company’s database.  The database was not preserved as of December 2012, but was preserved as of February 2014.  The plaintiff argued that class members can be identified from the 2014 database by determining those customers who were added to the database before December 2012 and who had fax numbers listed in the database.

However, the plaintiff’s motion to compel was denied, because the trial court held that the proposed class failed to meet the ascertainably standard, as there was no reliable and administratively feasible means of determining whether putative class members received any of the finance company’s faxes during the relevant time period.

The plaintiff petitioned for interlocutory appeal from the trial court’s order denying class certification under Federal Rule of Civil Procedure 23(f).

As you may recall, every putative class action must satisfy the four requirements of Federal Rule of Civil Procedure 23(a):  numerosity, commonality, typicality, and adequacy.  See, e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613 (1997).  In addition to the Rule 23(a) requirements, a class action must be maintainable under Rule 23(b)(1), (2), or (3).  In this case, Rule 23(b)(3) required the plaintiff to meet the additional requirements of predominance and superiority.  See, e.g., Amchem, 521 U.S. at 615.

A Rule 23(b)(3) class must also be “currently and readily ascertainable based on objective criteria.”  Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 593 (3d Cir. 2012).  To satisfy this standard, the plaintiff must show that “(1) the class is ‘defined with reference to objective criteria’; and (2) there is ‘a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition.’”  Byrd v. Aaron’s Inc., 784 F.3d 154, 163 (3d Cir. 2015).

The Third Circuit began its analysis by reviewing consumer class action precedent, determining that its precedents did not categorically preclude affidavits from potential class members, in combination with the marketing company’s database, from satisfying the ascertainability standard.

The proposed class definition in this case was limited to “auto dealerships that were included in the [marketing company’s] database on or before December 27, 2012.”  The trial court concluded that the class was not certifiable because the database was over-inclusive, and thus it would be impossible to identify class members in a reliable and administratively feasible way.

The Third Circuit believed that this determination was based, in part, on the marketing company’s representation that its database included more entries than the number of finance company faxes sent in the three batches.  To the extent that this conclusion was based on a categorical determination that the database, in combination with affidavits from potential class members, could never satisfy the ascertainability standard, the Third Circuit disagreed with the trial court’s conclusion.

In Byrd, the Third Circuit held that affidavits from potential class members, alone, without “records to identify class members or a method to weed out unreliable affidavits,” did not constitute a reliable and administratively feasible means of determining class membership.  Byrd, 784 F.3d at 171.  However, affidavits in combination with other records can meet the ascertainability standard.  Id., at 170-71.

Relying on Byrd, the Third Circuit determined that affidavits in combination with the marketing company’s database could potentially meet the ascertainability standard.

In fact, according to the Third Circuit, the only factual inquiry required to determine class membership was whether a particular dealership in the database received one of the finance company’s faxes on one of the dates in question.  Answering this factual question of identification through affidavits or other available records did not necessarily require individualized fact-finding that would be administratively infeasible.

Additionally, the Third Circuit determined that the trial court’s conclusion – that there was no evidence that the finance company’s faxes were sent to every customer who had a fax number in the database during the relevant time period – was not supported by the record.  Because the marketing company never produced the database for examination, the Third Circuit noted there was no evidence in the record of the number of customers who both had fax numbers and were in the database as of December 2012.

Moreover, the Third Circuit noted that because the marketing company’s database was not produced during discovery, the plaintiff was denied the opportunity to demonstrate whether a reliable, administratively feasible method of ascertaining the class existed based, in whole or in part, on that database.

Accordingly, the Third Circuit vacated the trial court’s order and remanded for further consideration in accordance with the opinion.

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Eric Tsai practices in Maurice Wutscher’s Commercial Litigation and Consumer Credit Litigation groups, and in its Regulatory Compliance group. He concentrates his practice primarily on the defense of consumer and commercial financial services companies, including mortgage lenders and servicers, mortgage loan investors, third party debt collectors, and other financial services providers. He also counsels clients on regulatory compliance, licensing, and other consumer protection matters. Eric earned his undergraduate degree from the University of California, Irvine. Prior to attending law school, he worked as a loan officer for national direct lenders. He earned his Juris Doctor from California Western School of Law and thereafter obtained a Master of Laws (LLM) in Taxation from the University of San Diego School of Law. Eric publishes extensively on various issues affecting consumer lending and litigation, including both federal and California-specific developments. He is licensed to practice law in California, Nevada, and Oregon, and is admitted in all United States District Courts in the State of California, the United States District Court for the District of Oregon, the United States District Court for the District of Nevada, the U.S. Tax Court, and the Ninth Circuit Court of Appeals. He is also a licensed real estate broker in the State of California.