Third Circuit Reverses Class Certification Order in Sam’s Club Extended Warranty Case and Remands for Further Fact Finding


Sam’s Club is a members-only retail warehouse that features a section for clearance items, called “as-is” items. Items may be designated “as-is” for various reasons and may be damaged or undamaged. Every as-is item is marked with an orange sticker; when a cashier scans the item, the original price appears and the cashier must perform a manual override. The software records the fact that a price override was performed, but does not include the reason. Overrides can occur for reasons other than “as-is” designation. Sam’s contracted with NEW to sell extended warranties for items sold in the store. NEW will not cover some “as is” products, including some purchased by Hayes. On each occasion, Sam’s employees offered and Hayes purchased a NEW warranty. The store provided Hayes with a manual and remote missing from a television he purchased and offered to refund the warranty price. Hayes declined. Hayes sued, on behalf of himself and all other persons who purchased a warranty for an as-is product from Clubs in New Jersey since 2004, asserting violation of the state Consumer Fraud Act, breach of contract, and unjust enrichment.

The trial court certified a Rule 23(b)(3) class. The Third Circuit vacated and remanded for consideration of Rule 23’s class definition, ascertainability, and numerosity requirements in light of its recent decision of Marcus v. BMW of North America, LLC, 687 F.3d 583 (3d Cir. 2012). The Third Circuit reasoned:

Because the able trial court here did not have the benefit of Marcus’s guidance, it did not consider whether it would be administratively feasible to ascertain class members. In discussing numerosity, however, the court noted that Sam’s Club had no method for determining how many of the 3,500 price-override transactions that took place during the class period were for as-is items. The court did not see this as a barrier to class certification, reasoning that plaintiff should not be hindered from bringing a class action because defendant lacked certain records. But the nature or thoroughness of a defendant’s record keeping does not alter the plaintiff’s burden to fulfill Rule 23’s requirements. Nor has plaintiff cited any statutory or regulatory authority obligating Wal-Mart to create and maintain a particular set of records. … Given the trial court’s finding that Wal-Mart lacks records that are necessary to ascertain the class, to be successful on remand, plaintiff must offer some reliable and administratively feasible alternative that would permit the court 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. … To summarize, plaintiff must show by a preponderance of the evidence that there is a reliable and administratively feasible method for ascertaining the class.

You can view the full Third Circuit opinion here

The Chicago class action attorneys at Lubin Austermuehle have decades of experience representing consumers throughout the greater Chicago area and the Mid-West region, including Illinois, Indiana, Wisconsin and Iowa. Class action lawsuits give consumers a way to assert their rights in cases of consumer fraud, even if they lack the resources individually to fight a much larger opponent. Please contact us today online, at (630) 333-0333, or at 630-333-0333 to schedule a confidential consultation with one of our attorneys.

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