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City Select Auto Sales Inc. v. Bmw Bank of North America Inc.

United States Court of Appeals, Third Circuit

August 16, 2017

CITY SELECT AUTO SALES INC., a New Jersey corporation, individually and as the representative of a class similarly situated persons, Appellant
v.
BMW BANK OF NORTH AMERICA INC.; BMW FINANCIAL SERVICES NA LLC; CREDITSMARTS CORP.

          ARGUED: January 25, 2017

         On Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 1-13-cv-04595) District Judge: Honorable Noel L. Hillman

          Phillip A. Bock, Esq. [ARGUED], Jonathan B. Piper, Esq., Bock, Hatch, Lewis & Oppenheim, LLC, Alan C. Milstein, Esq., Sherman, Silverstein, Kohl, Rose & Podolsky, P.A. Counsel for Appellant City Select Auto Sales, Inc.

          Ryan L. DiClemente, Esq., Saul Ewing LLP, Raymond A. Garcia, Esq., Stroock & Stroock & Lavan LLP, Julia B. Strickland, Esq. [ARGUED], Stroock & Stroock & Lavan LLP Counsel for Appellees BMW Bank of North America, Inc., and BMW Financial Services NA, LLC.

          Thomas J. Gaynor, Jr. Esq., Robert A. Smith, Esq., Smith & Doran, William B. Hayes, III, Esq. [ARGUED] Counsel for Appellee Creditsmarts Corp

          Jonathan D. Hacker, Esq., O'Melveny & Myers, Hannah Y.S. Chanoine, Esq., Anton Metlitsky, Esq. Counsel for Amicus Curiae The Chamber of Commerce of the United States of America and the Grocery Manufacturers Association

          Before: KRAUSE, SCIRICA, and FUENTES, Circuit Judges.

          OPINION OF THE COURT

          SCIRICA, CIRCUIT JUDGE.

         In this Federal Rule of Civil Procedure 23(f) appeal, a New Jersey automobile dealership contests the denial of class certification of claims brought against the consumer financing division of BMW and its contractor for junk faxes allegedly sent in violation of the Telephone Consumer Protection Act. The District Court denied class certification on the sole ground that there was no reliable and administratively feasible means of determining whether putative class members fell within the class definition. We will vacate and remand.

         I.

         Defendant Creditsmarts Corporation operates an internet-based "indirect business-to-business lending tree" that helps independent car dealers connect customers with various lenders. Dealers input customer information into Creditsmarts's online portal, Creditsmarts forwards the information to lenders based on the customer's credit profile and the automobile to be purchased, and lenders may, if appropriate, approve a loan for the customer. Creditsmarts benefits dealers by providing customers with access to financing options to facilitate sales and benefits lenders by connecting them with potential borrowers at many small independent dealerships.

         Defendants BMW Bank of North America, Inc., and BMW Financial Services NA, LLC (collectively "BMW") offer direct automotive financing to customers through a division called "up2drive." up2drive provides financing to borrowers at independent car dealers for all makes and models of cars.

         In 2012, BMW and Creditsmarts entered into a contract, memorialized in a Master Professional Services Agreement and a Marketing Agreement, under which BMW would offer up2drive loans to borrowers at participating independent car dealers through the Creditsmarts system. Creditsmarts agreed to "establish electronic systems to permit customers to communicate with up2drive through mutually agreed secure lines of communication" and "process all application forms using the minimum credit parameters established by up2drive and the information obtained . . . from the application form including the customer's credit history, that will provide sufficient data to determine whether the customer may qualify for any loan programs offered . . . by up2drive." In exchange, Creditsmarts would receive compensation from BMW for customers referred to up2drive through its system. As part of the marketing agreement, BMW agreed to provide "general institution information (including logos or Trademarks) to be published on the Vendor web site (Creditsmarts.com)."

         On a number of occasions in late 2012, Creditsmarts used the services of a fax broadcaster, WestFax, Inc., to fax advertisements to independent car dealers. The advertisements included the up2drive logo, identified BMW Bank of North America, and stated "UpToDrive is looking for your BUSINESS!!" A Creditsmarts employee used WestFax to successfully send 5, 480 faxes on November 29, 2012; 5, 107 faxes on December 4, 2012; and 10, 402 faxes on December 27, 2012 (collectively "the BMW faxes").

         To send each fax, the employee generated a list of recipients from Creditsmarts's customer database. The customer database contains dealership contact information, sometimes including fax numbers, as well as information regarding the dealership's relationship, if any, with Creditsmarts and the date the dealership was added to the database. After generating the recipient list from the customer database, the employee uploaded the list and the advertisement to Westfax's online portal. Westfax then broadcast the fax to each recipient and billed Creditsmarts for each fax successfully completed. Neither Creditsmarts nor Westfax retained the lists of recipients of the BMW faxes.

         Plaintiff City Select Auto Sales, Inc., received one of the faxes sent on December 27, 2012. City Select alleges that it had no preexisting business relationship with Creditsmarts or BMW and that the fax was unsolicited.

         On July 30, 2013, City Select filed a complaint in the United States District Court for the District of New Jersey asserting, inter alia, a claim under the Telephone Consumer Protection Act, 47 U.S.C. § 227, and a state law claim for conversion based on the BMW fax. In addition to its individual claim, City Select asserted claims under Federal Rule of Civil Procedure 23 on behalf of a class of other car dealers who received the BMW faxes. City Select sought certification of a class defined as:

All auto dealerships that were included in the Creditsmarts database on or before December 27, 2012, with fax numbers identified in the database who were sent one or more telephone facsimile messages between November 20, 2012 and January 1, 2013, that advertised the commercial availability of property, goods or services offered by "BMW Bank of North America."

         During class certification discovery, City Select sought to compel production of the Creditsmarts database. The database was not preserved as of December 2012, but was preserved as of February 2014. City Select avers that class members can be identified from the 2014 database by determining those customers who were added to the database before December 2012 and who had fax numbers listed in the database. But City Select's motion to compel production of the Creditsmarts database was denied.[1]

         The District Court denied City Select's motion for class certification on the sole ground that the proposed class failed to meet our Circuit's ascertainability standard because there was no reliable and administratively feasible means of determining whether putative class members fell within the class definition. City Select Auto Sales, Inc. v. BMW Bank of N. Am., Inc., Civil Action No. 13-4595, 2015 WL 5769951, at *9 (D.N.J. Sept. 29, 2015); see Byrd v. Aaron's Inc., 784 F.3d 154, 163 (3d Cir. 2015). The Court concluded that "even though Plaintiff may be able to identify the potential universe of fax recipients, there is no objective way of determining which customers were actually sent the BMW fax." City Select appealed.

         II.

         The District Court had jurisdiction under 28 U.S.C. §§ 1331 and 1367. We granted plaintiff's petition for interlocutory appeal from the District Court's order denying class certification under Federal Rule of Civil Procedure 23(f) and have jurisdiction under 28 U.S.C. § 1292(e).

         "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." In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 312 (3d Cir. 2008) (internal quotation marks omitted). We review the legal standard applied by the district court de novo. Id.

         III.

         The question presented in this appeal is whether the District Court correctly determined that there was no reliable and administratively feasible means of determining whether putative class members were within City Select's proposed class definition. Because we conclude the District Court erred in its analysis of plaintiff's proposed method of determining class membership, we will vacate and remand.

         Every putative class action must satisfy the four requirements of Federal Rule of Civil Procedure 23(a): numerosity, commonality, typicality, and adequacy. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613 (1997). In addition to the Rule 23(a) requirements, a class action must be maintainable under Rule 23(b)(1), (2), or (3). Only Rule 23(b)(3) is at issue in this case, which requires plaintiff to meet the additional requirements of predominance and superiority. Amchem, 521 U.S. at 615.

         A Rule 23(b)(3) class must also be "currently and readily ascertainable based on objective criteria." Marcus v. BMW of N. Am. LLC, 687 F.3d 583, 593 (3d Cir. 2012).[2] To satisfy this standard, plaintiff must show that "(1) the class is 'defined with reference to objective criteria';[3] and (2) there is 'a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition.'" Byrd, 784 F.3d at 163 (quoting Carrera v. Bayer Corp., 727 F.3d 300, 306 (3d Cir. 2013)). Plaintiff has the burden of making this showing by a preponderance of the evidence, and the district court must "undertake a rigorous analysis of the evidence to determine if the standard is met." Carrera, 727 F.3d at 306; see In re Hydrogen Peroxide, 552 F.3d at 318. However, plaintiff need not "be able to identify all class members at class certification-instead, a plaintiff need only show that 'class members can be identified.'" Byrd, 784 F.3d at 163 (quoting Hayes v. Wal-Mart Stores, Inc., 725 F.3d 349, 355 (3d Cir. 2013)) (emphasis in Byrd).

         We have articulated three principal rationales for this standard. First, "ascertainability and a clear class definition allow potential class members to identify themselves for purposes of opting out of a class." Carrera v. Bayer Corp., 727 F.3d 300, 306 (3d Cir. 2013). "Second, it ensures that a defendant's rights are protected by the class action mechanism, " id., and that "those persons who will be bound by the final judgment are clearly identifiable, " Marcus, 687 F.3d at 593. Finally, "it ensures that the parties can identify class members in a manner consistent with the efficiencies of a class action." Carrera, 727 F.3d at 307.

         A.

         An examination of the various factual circumstances in which we have analyzed the ascertainability standard helps to demonstrate its contours. We first addressed this standard in Marcus, in which plaintiff proposed a class of New Jersey purchasers of BMW vehicles equipped with "run-flat tires" that had "gone flat and been replaced" during the class period. 687 F.3d at 592. This definition presented several serious ascertainability issues. First, the vehicles in question were manufactured by a foreign subsidiary who was not a party to the action and thus defendant did not have access to records of which vehicles were equipped with the defective tires. Id. at 593. Second, dealerships regularly replaced the run-flat tires with regular tires, and plaintiff did not present a method of obtaining records from individual dealerships. Id. at 593- 94. Finally, plaintiff limited the class to purchasers of BMWs whose tires had "gone flat and been replaced" and did not propose a method of determining who met this part of the class definition. Id. at 594. Because plaintiff left the answer to each of these questions to "potential class members' say so, " we remanded to the District Court to consider "the critical issue of whether the defendants' records can ascertain class members and, if not, whether there is a reliable, administratively feasible alternative." Id.

         In Hayes v. Wal-Mart Stores, Inc., we considered claims brought by a putative class of New Jersey retail discount club customers who purchased goods with extended warranties. 725 F.3d at 352. Plaintiff's proposed class definition included all customers who purchased a "Service Plan to cover as-is products" but excluded any customers 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." Id. at 353. We noted that this class definition required a number of separate factual inquiries to determine class membership: "(1) whether a Sam's Club member purchased a Service Plan for an as-is item, (2) whether the as-is item was a 'last one' item or otherwise came with a full manufacturer's warranty, and (3) whether the member nonetheless received service on the as-is item or a refund of the cost of the Service Plan." Id. at 356. We remanded so that plaintiff could propose reliable and administratively feasible methods of answering these questions without requiring "extensive and individualized fact-finding." Id.

         In Carrera, the District Court certified a class composed of all purchasers of a particular over-the-counter diet supplement over several years in the state of Florida. 727 F.3d at 304. Defendants in that case were the drug manufacturers, and thus did not have access to any retailer records that could have established which customers purchased the drug during the requisite time period. Id. Plaintiff proposed using "retailer records of online sales and sales made with store loyalty or rewards cards" combined with affidavits from potential class members. Id. But plaintiff had not sought, nor obtained, the proposed records during class discovery. Id. at 308-09. We determined that it was inappropriate to certify the class without further inquiry into the nature and extent of the available records, and remanded in part for this purpose. Id. at 309. In addition, we noted that, even if the proposed records did exist, there was no evidence that a "single purchaser, " let alone the whole class, could be identified using them. Id.. For these reasons, among others, we remanded so that plaintiff could conduct additional discovery into whether there was a reliable and administratively feasible means of determining class membership. Id. at 312.

         Most recently, in Byrd we considered claims brought by people who leased computers with spyware that was installed and activated without their consent. 784 F.3d at 160. The class definition included both the lessees and their household members. Id. Defendants kept detailed records enabling identification of the lessees. Id. at 169. We concluded that identification of the household members was unlikely to pose "serious administrative burdens that are incongruous with the efficiencies expected in a class action." Id. at 170 (quoting Marcus, 687 F.3d at 593). We explained "[a]ny form used to indicate a ...


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