United States: Fourth Circuit Puts Teeth Into Ascertainability, Commonality, And Predominance Requirements For Class Certification

Last Updated: September 15 2014
Article by Donald M. Falk

Keywords: ascertainability, commonality, predominance, class certification, EQT Production Co. v. Adair, Fourth Circuit

Sometimes it's hard to know who's in a class without substantial individualized inquiries.  Can a court certify a class of persons with allegedly similar injuries by pigeonholing the question of class membership as a question of damages to be determined later?  Not so fast, the Fourth Circuit held in EQT Production Co. v. Adair (pdf).  A class that is not ascertainable ex ante is not a class at all.

And the Fourth Circuit also decided another question that has led to different answers from different courts.  When the rule of law proposed by plaintiffs would permit a controlling question to be answered in common for the class, but the competing rule proposed by defendants would require individualized inquiries, can the trial court treat the dispute of law as itself a common question supporting class certification?  On this point, the Fourth Circuit held that the court must first determine the correct rule and then decide whether it is susceptible to a common answer.  In a recent post, we described a California Court of Appeal decision taking the contrary view; the California Supreme Court has since denied review. (We submitted an amicus letter (pdf) on behalf of the U.S. Chamber of Commerce supporting the petition.)

Finally, the Fourth Circuit outlined a qualitative rather than a quantitative, issue-counting approach to predominance.  Under this approach, it is not how many circumstances are common among class members, but whether the common circumstances or other, individualized ones will be more significant in determining class members' entitlement to relief.

EQT arises from a series of disputes about who was entitled to royalties for coal-based methane, a coal byproduct that is an energy source in its own right; wells are drilled to extract methane gas. The owners of surface rights to real property often sever coal mining rights (the "coal estate") from subsurface gas rights (the "gas estate"). The disputes in EQT focus on who owns the rights to coal-based methane when the owner of the gas estate and the owner of the coal estate for a particular tract differ.  The plaintiffs are gas estate owners who assert that they are entitled to royalties for coal-based methane.

The district court certified five classes.  Four consist of current and former gas estate owners who were never paid coal-based methane royalties; the members of the fifth class assert that they were underpaid.  The Fourth Circuit reversed all five certifications.

First, the court of appeals held that you can't certify a class if you can't tell who is in it.  The Fourth Circuit held that the district court had not properly considered whether identifying class members "would render class proceedings too onerous" in light of a variety of "heirship, intestacy, and title-defect issues" affecting many potential class members' claims. The Fourth Circuit understood ascertainability to require a way to "readily identify the class members in reference to objective criteria"—which means something less individualized than tract-by-tract ownership analyses.

Plaintiffs often like to recharacterize the deficiencies in a class definition as pertaining only to damages calculations—and that's what the EQT plaintiffs did to get around their inability to determine who was in the class and who was out.  Plaintiffs contended that it would not be necessary to resolve the individualized ownership issues until the damages phase, but the court of appeals disagreed:  "The fact that verifying ownership will be necessary for the class members to receive royalties does not mean it is not also a prerequisite to identifying the class."

Second, the court held that a dispute over the dispositive rule of law is not automatically a common issue if one competing rule could be resolved only upon individualized inquiries.  In certifying the four classes who had never been paid royalties, the district court found that the overriding common issue was a dispute over whether Virginia law entitled the owners of the gas estate to coal-bed methane royalties.  One legal rule would entitle all gas-estate owners to those royalties; the other would make the answer hinge on particular deed language.  The Fourth Circuit held that the district court should have resolved the question, and went ahead to hold that deed language was paramount.  The court of appeals left open the possibility of subclasses organized around deeds for which the relevant language was materially similar.

Finally, the Fourth Circuit rejected the finding of predominance for the class of owners claiming underpayment. On that issue, the district court had pointed to a large number of uniform practices by the defendants that were relevant to the royalty calculation.  The Fourth Circuit rejected this quantitative approach because the dispositive questions again hinged on the specific contract language, again recognizing that subclasses perhaps could be constructed around materially similar terms.

EQT provides some welcome structure and discipline to class certification analysis. Let's hope that other courts of appeals will provide similar guidance.

Visit us at www.classdefenseblog.com

Originally published on September 08, 2014

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