Hayes v. Wal-Mart Stores, Inc.

• Decision Date: 02 August 2013
• Docket Number: No. 12–2522.,12–2522.
• Citation: 725 F.3d 349
• Parties: William HAYES v. WAL–MART STORES, INC., doing business as Sam's Club; ABC Corporations I–V (fictitious names) Wal–Mart Stores, Inc., doing business as Sam's Club, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

725 F.3d 349

William HAYES

v. WAL–MART STORES, INC., doing business as Sam's Club; ABC Corporations I–V (fictitious names)Wal–Mart Stores, Inc., doing business as Sam's Club, Appellant.

No. 12–2522.

United States Court of Appeals, Third Circuit.

Argued: Jan. 8, 2013.

Filed: Aug. 2, 2013.

Charles B. Casper, Esq., John G. Papianou, Esq. [argued], Paul H. Zoubek, Esq., Montgomery, McCracken, Walker & Rhoads, Philadelphia, PA, for Appellant.

Daniel Lapinski, Esq. [argued], Wilentz, Goldman & Spitzer, Woodbridge, NJ, James C. Shah, Esq., Shepherd, Finikelman, Miller & Shah, Collingswood, NJ, for Appellee.

Before: SCIRICA, AMBRO and FUENTES, Circuit Judges.

OPINION OF THE COURT

SCIRICA, Circuit Judge.

This is an interlocutory appeal under Fed.R.Civ.P. 23(f). Plaintiff Hayes brought a putative class action against Wal–Mart, asserting claims for violation of the New Jersey Consumer Fraud Act, breach of contract, and unjust enrichment in connection with Wal–Mart's sale of extended warranty plans through Sam's Club retail stores. Defendant Wal–Mart contests the trial court's order granting plaintiff Hayes' motion for class certification. Post certification, we decided Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir.2012), which thoroughly explored Rule 23's class definition, ascertainability,and numerosity requirements. Because those requirements are key issues in this appeal, we will vacate the certification order and remand in light of Marcus.

I.

Sam's Club is a members-only retail warehouse owned and operated by Wal–Mart. Each of Sam's Club's stores has a section for certain clearance items, called “as-is” items. Items may be designated for the as-is section for a variety of reasons. They may be: (1) display items, which were removed from their packaging to show to members; (2) items that were purchased and then returned; (3) items that are brand-new but that Sam's Club wants to clear out, called “last one” items; or (4) items that were damaged in-Club. Each item in the as-is section is marked with an orange sticker that states the product is being sold as-is.

When a person desires to purchase an as-is item, a Sam's Club cashier at the point of sale scans the item. The original price appears on the point of sale system, and the cashier must perform a “price override” by manually entering the discounted price. Sam's Club's software records the fact that a price override was performed, but does not include the reason for the override. Significantly, price overrides can be made for reasons other than the fact that an item was designated as-is, including when a member requests a discount because the item is sold for less elsewhere, or when a member purchases an item and later finds it on sale. Separately, each of the Sam's Club stores keeps a handwritten log of items that are marked as-is and the reason for doing so. It is notable that the log does not track the sale of those items.

Sam's Club contracted with National Electronics Warranty Corporation (“NEW”) to sell extended warranty products called Service Plans for various items sold in the store. The Service Plans state NEW will not cover “products sold ‘as-is' including but not limited to floor models (unless covered by a full manufacturer's warranty on your date of purchase) and demonstration models.” As indicated, Service Plans will cover as-is items that still have their manufacturers' warranties, including “last one” items that are sealed and brand-new, as well as some display items.¹

Plaintiff Hayes made two separate purchases of as-is items. On each occasion, a Sam's Club employee offered and Hayes agreed to purchase a Service Plan for the as-is item. At the time of his purchases, Hayes contends he was not told whether the Service Plan would actually cover his as-is item. On August 7, 2008, Hayes purchased an as-is power washer for $100 along with a Service Plan that cost $5.26. There is no evidence that Hayes was offered a refund for the Service Plan or that he had problems with the product and sought to have it serviced. On July 1, 2009, Hayes purchased an as-is television set for $350 along with a Service Plan that cost $39.85. After taking the television set home and discovering it was missing certain pieces, he returned to the store. The store eventually provided Hayes with a manual and remote. A store employee also informed him that Sam's Club should not have sold him the Service Plan because it did not cover the television and offered to refund him the cost of the Service Plan. Hayes declined.

On January 26, 2010, Hayes filed suit on behalf of himself and all other persons who purchased a Service Plan for an as-is product from Sam's Clubs in New Jersey since January 11, 2004. He asserted a violation of the New Jersey Consumer Fraud Act, breach of contract, and unjust enrichment. The trial court certified the following Rule 23(b)(3) class:

All consumers who, from January 26, 2004 to the present, purchased from Sam's Clubs in the State of New Jersey, a Sam's Club Service Plan to cover as-is products. Excluded from the Class are consumers whose as-is product was covered by a full manufacturer's warranty, was a last-one item, consumers who obtained service on their product, and consumers who have previously been reimbursed for the cost of the Service Plan.

The trial court found the class, under this amended definition, fulfilled the requirements of Fed.R.Civ.P. 23. Specifically, the court found the class was ascertainable because members could be determined with reference to objective criteria. The court found the class was sufficiently numerous because Sam's Club had records of 3,500 member transactions during the class period that included both a price override and the purchase of a Service Plan; the court reasoned that if even 5% of those price overrides were for as-is items that were ineligible for Service Plan protection, the class would be sufficiently numerous. The court found that common issues predominated over individualized issues because the essential elements of each claim were susceptible to common proof. In addition, the court found Hayes' purchase of a Service Plan for the as-is power washer was a proper basis for class certification but not his purchase of a Service Plan for the as-is television set, since the Service Plan for the television set was honored when Sam's Club replaced the missing remote. We granted Wal–Mart's interlocutory appeal under Fed.R.Civ.P. 23(f).

II.²

“[Class] certification is proper only if ‘the trial court is satisfied, after a rigorousanalysis, that the prerequisites of Rule 23(a) have been satisfied.’ Frequently that ‘rigorous analysis' will entail some overlap with the merits of the plaintiff's underlying claim. That cannot be helped.” Wal–Mart Stores, Inc. v. Dukes, ––– U.S. ––––, 131 S.Ct. 2541, 2551, 180 L.Ed.2d 374 (2011) (citations omitted) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982)). “Factual determinations supporting Rule 23 findings must be made by a preponderance of the evidence,” In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 307 (3d Cir.2008), and the burden of proof rests on the movant, id. at 316 n. 14. “A party's assurance to the court that it intends or plans to meet the requirements is insufficient.” Id. at 318.

“We review a class certification order for abuse of discretion, which occurs if the district court's decision ‘rests upon a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact.’ ” Id. at 312 (quoting Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 165 (3d Cir.2001)). We review whether an incorrect legal standard has been used de novo. Id.

III.

Wal–Mart asserts the trial court erred in certifying the class because plaintiff failed to meet his burden of showing (A) there is a reliable and administratively feasible method for ascertaining the class, (B) the class is sufficiently numerous to qualify for class action treatment, and (C) issues common to the class predominate over issues affecting only individual members. In part (D), we consider sua sponte whether Hayes has constitutional standing to bring suit in this case.

A.

The trial court found the class was ascertainable because the amended definition specifies “ ‘a particular group that was harmed during a particular time frame, in a particular location, in a particular way,’ ” and uses objective criteria. Hayes v. Wal–Mart, 281 F.R.D. 203, 210 (D.N.J.2012) (quoting Rowe v. E.I. Dupont De Nemours & Co., 262 F.R.D. 451, 455 (D.N.J.2009)). The court explained that although plaintiff need not “ ‘prove that class members have been injured for purposes of defining the [class],’ ” id. (quoting Rowe, 262 F.R.D. at 455), the amended definition nonetheless excludes those individuals who have not suffered comparable harm.

Wal–Mart asserts the trial court erred in failing to consider whether it is administratively feasible to ascertain the class. Wal–Mart argues the trial court will have to engage in impractical mini-trials to determine if putative class members fall within the class definition.

It is plaintiff's burden to show that a class action is a proper vehicle for this lawsuit. See Comcast Corp. v. Behrend, ––– U.S. ––––, 133 S.Ct. 1426, 1432, 185 L.Ed.2d 515 (2013) (“The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only. To come within the exception, a party seeking to maintain a class action must affirmatively demonstrate his compliance with Rule 23.” (citations and quotation marks omitted)). As “an essential prerequisite” to class certification, Marcus, 687 F.3d at 592, plaintiff must show by a preponderance of the evidence that the class is ascertainable. See In re Hydrogen Peroxide, 552 F.3d at 320 (“Factual determinations necessary to make Rule 23 findings must be made by a preponderance of the...