U.S. THIRD CIRCUITT

Hayes v. Wal-Mart Stores Inc.

CIVIL PROCEDURE — CLASS CERTIFICATION

New Jersey Law Journal

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Hayes v. Wal-Mart Stores Inc., No. 12-2522; Third Circuit; opinion by Scirica, U.S.C.J.; decided Agust 2, 2013. Before Judges Scirica, Ambro and Fuentes. On appeal from the District of New Jersey. [Sat below: Judge Simandle] D.D.S. No. 11-8-1053 [25 pp.]

Plaintiff William 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.

Each of Sam's Club's stores has a section for clearance of "as-is" items. They may be: (1) display items; (2) returned items; (3) new items that Sam's Club wants to clear out, called "last one" items; or (4) damaged items. When a person buys an as-is item, the original price appears on the point of sale system and the cashier must do a "price override" by manually entering the discounted price. Price overrides can be made for reasons other than the fact that an item was designated as-is. Each Sam's Club keeps a handwritten log of items that are marked as-is but 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. The Service Plans state they do not cover products sold as-is unless they still have their manufacturers' warranties.

Hayes purchased an as-is power washer and a Service Plan and an as-is television and a Service Plan. Upon discovering the TV was missing a manual and remote, he returned to the store, which provided him with those items. An employee told him that he should not have been sold the Service Plan because it did not cover the TV. Hayes declined a refund of the cost of the Service Plan.

Hayes then filed this action. The trial court certified a Rule 23(b)(3) class of "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 . . . 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."

On appeal, 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.

Held: On the existing record, the class does not survive the ascertainability and numerosity requirements as articulated by Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir. 2012), but because plaintiff did not have an opportunity to address these requirements in the trial court, the certification order is vacated and the matter is remanded for further proceedings.

The Third Circuit says that class certification is proper only if the trial court is satisfied, after rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied. Plaintiff has the burden to show that a class action is a proper vehicle for this lawsuit.

Marcus, decided after certification was granted here, says that a plaintiff must show by a preponderance of the evidence that the class is ascertainable and that ascertainability entails two elements: (1) the class must be defined with reference to objective criteria, and (2) there must be a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition.

Because the trial court did not have the benefit of Marcus's guidance, it did not consider whether it would be administratively feasible to ascertain class members. However, it noted that Sam's Club had no method for determining how many of the 3,500 price-override transactions during the class period were for as-is items, but reasoned that plaintiff should not be hindered from bringing a class action because defendant lacked certain records.

The court says the nature or thoroughness of a defendant's recordkeeping does not alter the plaintiff's burden to fulfill Rule 23's requirements.

The court says plaintiff has not fulfilled his burden of showing that there is a feasible and reliable method to determine (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. Because plaintiff did not have the benefit of Marcus when he submitted evidence of ascertainability, the matter is remanded.

The trial court found numerosity satisfied, reasoning that if even 5 percent of the price overrides were for as-is items ineligible for Service Plan protection, the class would be sufficiently numerous. However, Marcus said that mere speculation is insufficient and a plaintiff must show sufficient direct or 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. Plaintiff did not fulfill this burden.

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