Ascertainability has been a hot topic in class action appeals recently. The Third Circuit recently clarified its ascertainability standard (see my April 20 blog post). The committee considering potential Rule 23 amendments is exploring adding an explicit ascertainability requirement to the rule. (My fellow class action blogger Paul Karlsgodt just posted a great summary of the latest on those deliberations.) For now, ascertainability remains an implicit requirement that the proposed class members must be identifiable – for purposes of notice, for example, and determining who is bound by any judgment.
Courts have debated the precise contours of this standard. The Second Circuit recently weighed in, holding that for a class to be ascertainable it must: (1) be defined by objective criteria; (2) be administratively feasible; and (3) not require mini-hearings to determine class membership. This is similar to how most circuits have defined ascertainability, although some courts have suggested that objective criteria alone might be sufficient.
In Brecher v. Republic of Argentina, No. 14-4385 (2d Cir. Sept. 16, 2015), the district court certified a class of bondholders in a case involving Argentina’s defaulting on sovereign debt. As initially certified, the class was limited to persons who continuously held a beneficial interest in a particular bond series for a certain time period. In a prior decision, the Second Circuit held that the district court’s method of calculating damages for that class was inflated, and remanded the case. The district court then modified the class definition to expand the class to include all holders of beneficial interests in the bond series, without any time limitation. This was intended to make the damages calculation easier. But the Second Circuit allowed an appeal under Rule 23(f) on the new class definition.
The Second Circuit held that the new class definition failed the ascertainability test. The court explained that “[a] class is ascertainable when defined by objective criteria that are administratively feasible and when identifying its members would not require a mini-hearing on the merits of each case.” Slip op. at 5. Objective criteria alone are not sufficient if they “do not establish the definite boundaries of a readily identifiable class.” Id. at 6. The court explained that, due to the manner in which the Argentinian bonds are identified and traded on the secondary market, it is “practically impossible to trace purchases and sales of a particular beneficial interest,” making the proposed class not ascertainable. Id. at 7-8. “Even if there were a method by which the beneficial interests could be traced, determining class membership would require the kind of individualized mini-hearings that run contrary to the principle of ascertainability.” Id. at 8-9.
In insurance cases, ascertainability is often a strong argument against class certification. Often plaintiffs propose to define a class in a manner that requires an individual file-by-file review of claim or underwriting files to determine whether the potential claimant fits the class definition. And even those files may be unclear regarding the relevant criteria, thus requiring mini-hearings. If plaintiffs broaden the class in an attempt to avoid those issues, that can often mean that the class includes many people who have no potential entitlement to any relief and no standing to sue, leading to another series of defenses to class certification.