California’s Ascertainability Requirement Following Noel v. Thrifty Payless, Inc.

On May 29, 2020, the Fifth Appellate District of the California Court of Appeal issued an unpublished opinion discussing the state court ascertainability requirement for class certification in Manmohan Dhillon v. Anheuser-Busch, LLC, pending in the Superior Court of California for the County of Fresno.¹ This is one of the first decisions by the Court of Appeal applying the standard for ascertainability recently set forth by the California Supreme Court in Noel v. Thrifty Payless, Inc. (2019) 7 Cal.5th 955.

Denial of Class Certification in Dhillon

Plaintiffs in Dhillon alleged that they and a class of retail convenience store owners in Fresno and Madera counties had been subjected to unfair business practices related to the wholesale pricing of Anheuser-Busch products.  Specifically, plaintiffs averred that Anheuser-Busch and its wholesaler, Donaghy Sales, had “engaged in a systematic scheme to favor certain retailers over others in the pricing of the beer defendants sold to them.”  Plaintiffs further alleged that the defendants provided certain “favored retailers” a disproportionately large number of consumer coupons that such retailers were then allowed to redeem for their own benefit in obtaining wholesale pricing that was substantially lower than market.  On that basis, plaintiffs asserted claims for violation of wholesale beer pricing and unfair competition laws.

Plaintiffs filed a motion for class certification, broadly defining the class to be certified as:

All persons who own retail business establishments in Fresno and Madera Counties classified in the Donaghy sales database within one of the following channel descriptions and channel id numbers (‘Cid#’): a) Convenience/Cid#190); b) Oil and service/Cid#195); c) Grocery/Cid#265; d) Gas and convenience/Cid#294; e) Package liquor/Cid#290; f) Mom and Pop/Cid#175; g) Deli/Cid#180; h) Bodega/Cid#185; and i) Package Liquor/Cid#290 and which purchased from Defendant Donaghy beer manufactured and/or sold by Defendant Anheuser-Busch during the period from October 10, 2010 through December 31, 2014 excluding [the] Vohra [brothers] and Hardeep Singh and all entities owned, controlled by or affiliated with any of them.

2020 Cal. App. Unpub. LEXIS 339 at *15, n.2.  On December 15, 2016, the trial court denied plaintiffs’ motion for class certification, finding that plaintiffs had failed to demonstrate the existence of an ascertainable class because they had “provided no explanation, and no evidence, regarding how the favored retailers or coconspirators could be identified, through Donaghy’s business records or otherwise, and excluded from the class.”  Dhillon, 2020 Cal. App. Unpub. LEXIS 339 at *16.  The Court of Appeal affirmed the trial court’s order on January 28, 2019, and the Supreme Court of California thereafter granted plaintiffs’ petition for review.  On October 23, 2019, without issuing an opinion, the Supreme Court transferred the case back to the Court of Appeal, with instructions to vacate and reconsider its affirmance in light of the Supreme Court’s July 2019 decision in Noel.

The California Supreme Court “Clarifies” the Ascertainability Requirement in Noel

In Noel, the California Supreme Court held that the “ascertainability” requirement is satisfied if the class definition is stated in terms of objective characteristics and common transactional facts that make the ultimate identification of class members possible when that identification becomes necessary.  The Court found the Seventh Circuit’s decision in Mullins v. Direct Digital, LLC, 795 F.3d 654 (7th Cir. 2015), “illuminating” and “helpful in resolving the issue,” and determined that the correct standard for ascertainability did not require a showing that class members can “be readily identified without unreasonable expense or time by reference to official records.” 7 Cal.5th at 977, 986.

The California Supreme Court nonetheless affirmed the existence of an ascertainability requirement for class certification and acknowledged that arguments and evidence relating to the difficulty in identifying class members could be a basis to deny certification in the context of assessing whether other requirements for class certification were met (i.e., typicality, manageability, and superiority).  In this regard, the Court noted: “Arguments and evidence relating to the provision of notice to the class conceivably could counsel against class certification insofar as they may show that another requirement for a proper class proceeding, aside from ascertainability, has not been met — e.g., that a class action would be unmanageable, even after due consideration is given to how manageability concerns could be resolved; or that a class proceeding would not be superior to the alternatives.”  7 Cal.5th at 986.

The Court of Appeal Applies Noel to Dhillon

In Dhillon, the Court of Appeal began by describing the applicable standard of review, noting that, unlike in ordinary appeals, in reviewing a class certification ruling, “[w]e review the trial court’s actual reasons for granting or denying certification; if they are erroneous, we must reverse, whether or not other reasons not relied upon might have supported the ruling.” 2020 Cal. App. Unpub. LEXIS 339 at *7 (quoting Ayala v. Antelope Valley Newspapers, Inc. 59 Cal.4th 522, 530 (2014)).  The Court of Appeal further explained: “We interpret Noel to mean a plaintiff can satisfy its burden of showing it will be possible to identify the class members when necessary by showing the definition will allow the members either to identify themselves as part of the class or to be identified through records of relevant transactions.” Id. at *13-14.

Applying these standards to the trial court’s denial of class certification based solely on ascertainability, the Court of Appeal scrutinized the narrow grounds of the lower court ruling and observed that “[t]he trial court applied a test of ascertainability that included elements rejected by Noel.”  Id. at *14.  On that basis, the Court of Appeal determined that the trial court’s decision “rested on improper criteria or erroneous legal assumptions and must be reversed.” Id. at *19. 

In reversing and remanding the case to the trial court to re-determine the class certification motion, the Court of Appeal interestingly observed (in line with the Supreme Court’s commentary in Noel) that “the disconnect between the class definition proposed in the motion for class certification and theories of liability set out in the second amended complaint and expounded on in the expert reports submitted in support of the motion […] would be better addressed in connection with other elements of the class certification analysis.” Id. at *20.  The Court of Appeal specifically mentioned the elements of predominance, typicality, manageability, and superiority in suggesting that a more thorough analysis by the trial court might yield a similar outcome, albeit under a factor other than ascertainability. Id. at *20-21.

Conclusion

Despite its outward rejection of the ascertainability analysis applied by the trial court, the Court of Appeal’s decision in Dhillon—like the California Supreme Court’s decision in Noel—is not the death knell for the ascertainability requirement in California.  Nor does it spell the end of certification analyses turning on the burdensome identification of class members.  As the California Supreme Court observed, “these issues, where they exist, are appropriately addressed outside of and separately from the ascertainability requirement.” 7 Cal.5th at 986.  Likewise, Dhillon encourages trial courts to take an expansive view by more fully exploring issues impacting the identification of class members through the elements of predominance, typicality, manageability, and superiority, and not just ascertainability. 

—————————————————————-

¹ 2020 Cal. App. Unpub. LEXIS 339 (Appeal No. F074952; Super. Ct. No. 14CECG03039).