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Joining the Trend: D.C. Circuit Latest Court of Appeals to Decline to Certify Class Containing Uninjured Members

A few weeks ago, the U.S. Court of Appeals for the D.C. Circuit weighed in on a recurring question in class action litigation: can a court certify a class where some class members—even if only a small fraction of the class—are uninjured? Joining a string of recent decisions on this subject, the circuit court held in In re Rail Freight Fuel Surcharge Antitrust Litig., 934 F.3d 619 (Aug. 30, 2019), that class certification was properly denied for lack of predominance because twelve percent of the proposed class—constituting thousands of proposed class members—were uninjured by the defendants’ alleged misconduct. This ruling follows a similar determination from the First Circuit last October, covered here. Although both cases involved antitrust allegations, their holdings are readily applicable to consumer product class actions, where there is often evidence—either from the defendants’ files or the plaintiffs’ own experts’ analysis—that a considerable number of proposed class members were uninjured by defendant’s alleged mislabeling.

The Rail Freight District Court Denies Class Certification

In Rail Freight, plaintiffs alleged that the four largest freight railroads in the United States conspired to fix rate-based fuel surcharges for shipping goods. In October 2017, the district court refused to certify a proposed class of direct purchasers, i.e., individuals or companies who allegedly purchased rail freight from defendants and who were assessed a rail surcharge for the transportation. 292 F. Supp. 3d 14 (D.D.C. 2017). The plaintiffs’ damages expert had submitted a damages model that found that 2,037 members of the proposed class—or 12.7% of the class—suffered only “negative overcharges” and thus were uninjured by the alleged conspiracy. As the district court observed, these uninjured class members’ claims would have to be excised from the liability determination, thus necessitating individualized inquiries to parse out claims of injured and uninjured class members.

The district court recognized that several other courts have held that a class action can proceed where a “de minimis” number of class members are uninjured. Surveying the case law, the court found that “5% or 6% constitutes the outer limits of a de minimis number of uninjured class members”—i.e., that any greater concentration of uninjured members within the class “precludes a finding of predominance.” Id. at 137 (collecting cases). Moreover, while in other cases it may have been possible for the court to “back out the uninjured members,” here it would be “far more difficult for a court to weed out over 2,000 uninjured class members—or some subset of that number—from a class of over 16,000.” Id. at 137-38. Accordingly, the district court held that the number of uninjured class members was “beyond the outer limits of what can be considered de minimis for purposes of establishing predominance.” Id. at 138.

The First Circuit Denies Certification of a Class with Thousands of Uninjured Members

In October 2018, the First Circuit took up the same question of whether a proposed class with uninjured members can be certified. The district court had found that 10% of the proposed class in In re Asacol Antitrust Litig., 907 F.3d 42 (1st Cir. 2018)—again equating to thousands of proposed class members—were unharmed by the pharmaceutical manufacturer defendants’ alleged anti-competitive conduct. The First Circuit held that the proposed class could not be certified because the need to identify those thousands of uninjured class members “will predominate and render an adjudication unmanageable.” Id. at 53-54.

Interestingly, the First Circuit distinguished its prior holding in In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015), which some courts had read as permitting certification of a class that included a significant number of uninjured members. The Asacol court essentially limited Nexium to its facts, explaining that certification was proper in that case only because defendants had conceded that they would not contest class members’ proof of individualized injury. Id. at 52. Since (1) the number of uninjured class members in Asacol was not de minimis, (2) defendants indicated an intention to challenge plaintiffs’ individualized proof, and (3) plaintiffs had not proffered any “mechanism that can manageably remove uninjured persons from the class in a manner that protects the parties’ rights,” the First Circuit held that the proposed class could not be certified. Id. at 53-54. In so holding, it joined “the majority view” among federal Courts of Appeals that a class cannot be certified if it contains an unexcludable number of uninjured members. Id. at 56-57 (collecting cases from the Second, Third, Fifth, Eighth, and D.C. Courts of Appeals, and contrasting decisions from the Seventh and Ninth Circuits).

The D.C. Circuit Affirms in Rail Freight

On appeal in Rail Freight, the D.C. Circuit affirmed the denial of class certification. 934 F.3d 619. The court reasoned that the 12.7% uninjured class members found by the district court “is more than twice [the] approximate upper bound reflected in analogous caselaw.” Id. at 625. It concluded that the district court was within its discretion in holding that segregating the thousands of uninjured members presented an acute manageability problem—particularly since plaintiffs had proposed no method, “short of full-blown, individual trials,” to resolve this issue. Id. And the panel rejected plaintiffs’ reliance on Nexium, which had been “sharply limited” by Asacol and, in any event, was distinguishable because the Nexium defendants’ concession they would not contest individual affidavits eliminated the need for individual factfinding. Id.

Application in False Advertising Class Actions

Asacol and Rail Freight most obviously limit class certification in antitrust cases. But their reasoning applies with equal force to false advertising class actions involving food, drug, or other consumer products. In these types of class actions, it often emerges in fact or expert discovery that a material segment of proposed class members did not see the challenged advertising statement, did not rely or care about the statement (or, in omission cases, the absence of an allegedly material disclosure) in making their purchases, or even preferred the product the way it is rather than how plaintiff alleges it should have been. In these instances, any injury to those consumers is purely theoretical or nonexistent, as the evidence suggests that those consumers would have purchased the product with or without the challenged advertising statement (or the allegedly necessary disclosure) and at the same price. And if there is more than a de minimis number of such uninjured consumers—over six percent of the proposed class, according to the D.C. Circuit—individualized factfinding should militate against class certification.

For example, in Algarin v. Maybelline, LLC, 300 F.R.D. 444 (S.D. Cal. 2014), plaintiffs claimed that Maybelline’s “Superstay Makeup 24HR” labeling claim was false and misleading. Maybelline adduced survey evidence showing that a significant number of proposed class members were uninjured: 45% of purchasers were satisfied with the product based on repeat purchases, over half could not recall seeing the “24HR” duration claim, and many purchasers were motivated by factors other duration. Id. at 453-54. Like in Asacol and Rail Freight, the court denied class certification because, based on this evidence, “many purchasers were satisfied with” the challenged products, signifying injury could not be established on a classwide basis. Id. at 455. 

The court denied class certification for a similar reason in White v. Just Born, Inc., 2018 U.S. Dist. LEXIS 132466 (W.D. Mo. Aug. 7, 2018). Plaintiffs claimed they were deceived by the amount of empty space or “slack-fill” in defendant’s Hot Tamales and Mike and Ike candy boxes. Id. at *1-2. However, the court concluded that many proposed class members were likely uninjured because they knew about the amount of slack fill in the product boxes and purchased them anyway. Id. at *14. Again, the court rejected certification of a class that included a significant number of uninjured members. See also, e.g., Tomassini v. FCA US LLC, 326 F.R.D. 375, 386 (N.D.N.Y. 2018) (denying class certification motion because “plaintiff's class definition includes a significant number of individuals who do not have standing”—i.e., purchasers who bought used cars in which the allegedly defective part had been replaced—and “the individualized inquiry necessary to determine whether individual used car purchasers have standing in this case would overwhelm questions common to the proposed class”); In re Bisphenol-A (BPA) Polycarbonate Plastic Prods. Liab. Litig., No. 08-1967-ODS, 2011 U.S. Dist. LEXIS 150015, at *4-*13, *22-23 (W.D. Mo. Dec. 22, 2011) (predominance not met where court would need to engage in individual inquiries to determine which consumers were uninjured, either because they were aware of the risk of allegedly toxic ingredient in baby bottles or because they used the bottles without sustaining any ill effects).

To date, district courts have not been not consistent in denying class certification on this basis in false advertising cases. But particularly in light of the compelling reasoning of Rail Freight and Asacol, more courts may follow the growing consensus among circuit courts and hold that the inextricable inclusion of uninjured members precludes class certification in consumer goods cases.