Uninjured Class Members Can Defeat Predominance: the Ninth Circuit Provides a Way in Van v. LLR

Types : Alerts

In TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2208 (2021), the Supreme Court declared that “[e]very class member must have Article III standing in order to recover individual damages.” Though the Court immediately clarified that it was not going to discuss what that statement meant for class certification, id. at n.4, the lower courts have started to pick up where the Court left off.

One way defendants have opposed class certification post-TransUnion has been to argue and offer evidence that the plaintiff’s proposed class contains too many uninjured class members. Some courts have been receptive to the idea in principle (even before TransUnion) that a class should not be certified if it includes a large number of uninjured persons, but these decisions do not specify whether there is a threshold or what that threshold should be. See, e.g., Messner v. Northshore University HealthSystem, 669 F.3d 802, 824 (7th Cir. 2012) (a class with “a great number of members who for some reason could not have been harmed … is defined too broadly to permit certification.”); In re Marriott Int’l, Inc., Customer Data Sec. Breach Litig., 341 F.R.D. 128, 141 (D. Md. 2022) (“[T]he presence of a large number of uninjured persons in a proposed class would undermine predominance.”) (internal quotations omitted). Conversely, the Ninth Circuit’s en banc decision, Olean Wholesale Grocery Coop. Inc. v. Bumble Bee Foods, LLC, 31 F.4th 651 (9th Cir. 2022), rejected the argument that the defendants merely needed to show that the proposed class “potentially includes more than a de minimis number of uninjured class members.” Id. at 669. The Ninth Circuit concluded that adopting a “per se rule that a class cannot be certified if it includes more than a de minimis number of uninjured class members” would add a requirement to Rule 23(b)(3) that is not there. Id. n.13. Olean requires that the question of uninjured class members be addressed as part of the predominance inquiry. Id. at 669.

The Ninth Circuit recently recognized how that type of attack could work in a panel that included Olean’s author, Judge Sandra Segal Ikuta. Specifically, in Van v. LLR, Inc., 61 F.4th 1053 (9th Cir. 2023), the court vacated certification because the defendants had raised a credible concern that establishing a class member’s injury might require individualized proofs that threatened to grind litigation to a halt. Notably, the panel opinion rejected the district court’s analysis, which had certified a class over the defendants’ opposition because, the district court concluded, the defendants had shown only a de minimis number of class members were affected.

In Van, the plaintiffs sued a marketing company that sells clothing through social media influencers and other individuals. The company offered its retailers a point-of-sale system that, as it turns out, miscalculated the applicable sales tax for thousands of transactions. Id. at 1058-59. The plaintiffs sued under Alaska’s consumer protection statute on behalf of a class, representing 10,606 Alaskan purchasers who paid too high of a tax on 72,373 transactions. Id. at 1059.

The defendant argued that class certification was inappropriate because whether the members had actually paid an unlawful tax could only be determined on an individualized basis. At least some of the retailers knew about the tax calculation glitch at the time, and four had signed affidavits testifying that they recalled occasionally providing discounts to offset improper sales taxes. Id. at 1060. The defendants offered evidence that 13,680 discounts were provided to class members and submitted 18 receipts that actually proved the discount had been provided to offset excess tax. Id. at 1068. The trial court reviewed this evidence and rejected the defendant’s argument that it proved class certification was inappropriate; instead, the court concluded that, at best, it proved that only a “de minimis” number of class members might not be eligible to recover damages. Id.

The Ninth Circuit court vacated the district court’s order. It concluded that the defendant had “invoked an individualized issue—that retailer discounts left some class members uninjured—and provided evidence that at least some class members lack meritorious claims because of this issue[.]” Id. at 1069. The 18 receipts proved “an inquiry into the circumstances and motivations behind” the transactions might be necessary—one that could require numerous depositions and a lengthy trial to resolve. Id. That raised serious predominance concerns that had been left untouched by the court’s analysis. The Ninth Circuit remanded with instructions for the district court to reexamine whether, notwithstanding this individualized problem, “a class-member-by-class-member assessment of the individualized issue will be unnecessary or workable.” Id.

The analysis the Ninth Circuit conducted in Van likely stems from the growing consensus among the federal circuits that a plaintiff’s burden at class certification is to prove by a preponderance of the evidence that all of Rule 23’s requirements are satisfied. The defendants do not have a burden to disprove any Rule 23 requirements, but if they offer competent evidence (whether it be 18 receipts or 1,800,) that suggests that one or more of the Rule 23 requirements cannot be satisfied, the plaintiff will need to counter that evidence to prove that each requirement is met.