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Decided: August 19, 2014

The Fourth Circuit held that the district court abused its discretion when it certified five class action suits. The Court vacated the lower court’s decision and remanded for reconsideration.

The appellees are five separate classes that believed that the appellants, producers of coal-bed methane (CBM), withheld CBM royalties from the classes of appellees that claimed ownership of the CBM and underpaid royalties to the classes that had lease agreements with the appellants. The district court certified the five classes and their claims; the appellants petitioned the Court to review on an interlocutory basis the decision granting class certification.

The Federal Rules of Civil Procedure (F.R.C.P.) require that a prospective class satisfy the following conditions: (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation. Rule 23(a).   The Court also noted that an implicit requirement of F.R.C.P. Rule 23 is that “the members of a proposed class be ‘readily identifiable.’” Hammond v. Powell, 462 F.2d 1053, 1055 (4th Cir. 1972). The district court did not address the potential difficulty of identifying class members who may have acquired ownership after the initial compilation of CBD ownership twenty years prior to the current claim. Accordingly, the Court instructed that on remand the “district court should reconsider the ascertainability issues posed by the ownership classes.” The Court also reasoned that the commonality element was not clearly met and would require further inquiry because the deeds that conveyed property rights at issue contained varying language.

In addition to meeting the four requirements of F.R.C.P. Rule 23(a), “the class action must also fall within one of the three categories enumerated in Rule 23(b).” Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 423 (4th Cir. 2003). The district court certified the royalty underpayment claims under F.R.C.P. Rule 23(b)(3), which requires a showing of predominance and superiority. The Court reasoned that while the appellants used common practices, it was unclear whether the common conduct was sufficient to ensure the litigation would focus on a predominant common issue, rather than individual issues. Thus, the Court concluded that the district court’s analysis “lacked the requisite rigor to ensure the requirements of F.R.C.P. Rule 23 were satisfied by any of the certified classes,” and remanded the case.

Full Opinion

Amanda K. Reasoner