A new decision by the Third Circuit speaks to a number of important class certification issues.  Although it’s a case involving an alleged product defect, the court’s commentary on class certification law should have a broader reach to insurance class actions and beyond.

In Marcus v. BMW of North America, LLC, Nos. 11-1192 & 11-1193, 2012 U.S. App. LEXIS 16389 (3d Cir. Aug. 7, 2012), the plaintiffs filed a putative class action alleging that run-flat tires manufactured by Bridgestone and included as original equipment on certain BMW vehicles were purportedly defective because they were highly susceptible to flats, cannot be repaired when damaged, and expensive, without adequate disclosure on those issues.  The district court certified a class, and the Third Circuit vacated and remanded.  The Third Circuit’s opinion addresses several issues of broad application:

• Class Definitions: The court found the definition for the proposed New Jersey statewide class to be “not clear and precise” because it did not make clear whether the putative class included people who did not buy their car from a BMW dealer, and potentially included those who bought their car outside New Jersey, if the car was originally purchased or leased in New Jersey.  The court flyspecked this class definition with great care.
• Specification of Class Issues:  The Third Circuit also found the class certification order insufficient because “the certification order does not define the claims, issues, or defenses to be treated on a class basis at all.”  Id. at *15.  The Third Circuit’s decision echoes a recent Seventh Circuit decision on this point.  This is a sometimes-overlooked requirement of Rule 23(c)(1)(B) that defendants can potentially take advantage of – for more on this see my Feb. 3, 2012 blog post.
• Ascertainability:  The Third Circuit expressly adopted a requirement that the members of a proposed class must be readily ascertainable by objective criteria, explaining that “[m]any courts and commentators have recognized that an essential prerequisite of a class action, at least with respect to actions under Rule 23(b)(3), is that the class must be currently and readily ascertainable based on objective criteria.”  Id. at *16.  The Third Circuit explained that, on remand:

[The district court] must resolve the critical issue of whether the defendants’ records can ascertain class members and, if not, whether there is a reliable, administratively feasible alternative.  We caution, however, against approving a method that would amount to no more than ascertaining by potential class’ members say so.  For example, simply having potential class members submit affidavits that their Bridgestone RFTs have gone flat and been replaced may not be “proper or just.”  BMW and Bridgestone will be able to cross-examine Marcus [i.e., the named plaintiff] at trial about whether and why his tires “have gone flat and been replaced.”  Forcing BMW and Bridgestonre to accept as true absent persons’ declarations that they are members of the class, without further indicia of reliability, would have serious due process implications.

Id. at *20 (emphasis added).  The due process rationale here is particularly significant because it could apply to state court class actions as well.  Where defendants’ records cannot readily identify the members of the putative class, this new appellate decision provides a powerful citation in opposing class certification.

• Numerosity:  The Third Circuit found that there was insufficient evidence to establish numerosity for the proposed New Jersey state-wide class.  Although the plaintiff had developed evidence that BMW had received 582 complaints nationwide during the relevant time period about run-flat tires, 196 of which involved Bridgestone run-flat tires, this was insufficient because “we can only speculate as to how many 2006-2009 BMWs were purchased or leased in New Jersey with Bridgestone RFTs that have gone flat and been replaced.”  Id. at *26 (emphasis in original).  The court explained that “a plaintiff must show sufficient circumstantial evidence specific to the products, problems, parties, and geographic areas actually covered by the class definition to allow a district court to make a factual finding.  Only then may the court rely on ‘common sense’ to forgo precise calculations and exact numbers.”  Id. at *28.  The bottom line here?  While defendants sometimes concede numerosity, think twice (or thrice) before doing that.
• Causation and Predominance:  The Third Circuit also emphasized that predominance of common issues of law and fact is lacking where causation requires an individualized inquiry.  This is particularly significant for insurance cases because often insurance coverage issues turn on causation.  The court explained that, on the facts of Marcus, “any tire can ‘go flat’ for myriad reasons,” and “[e]ven ‘defective’ tires can go flat for reasons completely unrelated to their defects,” and thus adjudication of the case would require an individual examination of every tire.  Id. at *50.

In short, Marcus is an opinion worth citing in defending many class actions, including insurance cases, regardless of whether you’re in the Third Circuit.