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Recent Fourth Circuit Class-Certification Decisions Shed Light on Mootness, Standing, and Evidentiary Burden at Class Certification

Over the past year, the Fourth Circuit has issued three decisions on class certification—all of which either affirmed certification or reversed and remanded to the district court to rule on certification. The opinions show the Fourth Circuit applying key principles in class-action practice, including mootness and the relation-back exception, standing in injunctive-relief class actions, and the evidentiary burden for showing predominance. Read below for a short dive into each of these issues, and a few takeaways.

  1. Uncertainty about how long a claim can stay alive before class certification is a key factor in determining whether the relation-back exception applies to a moot class representative’s claim.

In a class action, as with any litigation, there must be a live controversy for the case to be justiciable. This means that, to certify a class, there must be a live controversy between the class representatives and the defendant (as well as a live controversy between the defendant and the class). What happens if the controversy between the named plaintiffs and the defendant becomes moot before a class is certified? It may be grounds for dismissal, and require plaintiffs’ counsel to find a new class representative. Or, class certification may be allowed if the relation-back exception applies.

As Newberg and Rubenstein explain, the relation back exception may be applied when a plaintiff’s claim is moot and the claim at issue is so “inherently transitory” that individual plaintiffs cannot expect to maintain the claim long enough to obtain a decision on, or even file a motion for, class certification.1 William B. Rubenstein, Newberg and Rubenstein on Class Actions § 2:13 (6th ed. 2022). The Fourth Circuit applied this exception in Jonathan R. ex rel. Dixon v. Justice, 41 F. 4th 316, 341 (4th Cir. 2022), allowing certification after concluding that the named plaintiffs’ claims were all moot.

Johnathan R. involved a class action brought on behalf of West Virginia’s foster children. Six named plaintiffs alleged that West Virginia’s state department so mismanaged foster care that it systematically violated the due process rights of all children who went through the system. Due, in part, to COVID delays, the six named plaintiffs aged out of foster care before the district court ruled on their motion for class certification. The district court held that the mootness of the class representatives’ claims prevented the court from certifying a class.

The plaintiffs argued that at least two exceptions kept the class action alive: (1) the claims were not moot because they were capable of repetition yet evaded review, and (2) the relation-back exception. The district court rejected both of these arguments. It concluded that the claims were not sufficiently capable of repetition, because there was only a marginal chance that any of the named plaintiffs would re-enter foster care. The district court also rejected the plaintiffs’ attempt to apply the relation-back exception. The court concluded that the claims were not inherently transitory because the plaintiffs failed to show that foster children are moved in and out of care so quickly that their claims are effectively unreviewable.

The Fourth Circuit reversed. It agreed with the district court that the “capable of repetition yet evading review” exception did not apply because the foster children aged out and therefore, “there was not a reasonable expectation” that the same children—now adults—would be subject to the same action again. However, the Fourth Circuit reversed the district court’s holding on the relation back exception.

According to the Fourth Circuit, the length of time a claim could survive before class certification was key in determining that the class members’ claims were inherently transitory and that relation-back applied. The Court identified several concepts at play in the analysis including whether the lifespan of any particular plaintiff’s claim could be determined at the outset, whether there was uncertainty that any such claim would remain alive, and whether defendants’ conduct creates a significant possibility that any single named plaintiff would be dismissed before class certification.

Each of these concepts supported application of the relation-back exception in Johnathan R because foster care placements are “exceedingly unpredictable” and the facts alleged showed “constant existence of a class of persons suffering from deprivation as a result of the defendants’ conduct.”

Judge Rushing dissented. In her view, the relation-back exception should only apply when the claims raised “are so inherently transitory that the trial court will not have even enough time to rule on a motion for class certification before the proposed representative’s individual interest expires.” According to Judge Rushing, that was not the case in Johnathan R. She reasoned that, because the named plaintiffs’ claims were pending for three years and multiple plaintiffs remained, some plaintiff would have a personal stake in the litigation long enough for the district court to rule on class certification. As a result, plaintiffs’ counsel should be required to find someone who still had a live controversy to serve as the class representative.

Johnathan R. thus shows that, where there is uncertainty about how long a claim will remain alive, the relation-back exception may permit certification where the named plaintiffs’ claims become moot before certification. But, as the disagreement between the district court, the Fourth Circuit majority, and the dissent shows, parties should, as always, carefully consider the arguments in favor and against the claims being inherently transitory, as this is an area where reasonable minds can differ.

  1. In a class action seeking only injunctive relief, lack of standing by a majority of the class did not defeat class certification.

More than forty years ago, the Supreme Court held that a plaintiff seeking to bring claims on behalf of others must, herself, have standing. Sierra Club v. Morton, 405 U.S. 727, 734-35 (1972). That is, the plaintiff must show (1) that she has suffered an injury in fact, (2) that is traceable to the defendant’s conduct, and (3) that the injury can be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). Accordingly, in a putative class action, named plaintiffs seeking to represent a class must show that they, personally, meet the three standing criteria—not least of which being that each of them has been injured by the defendant’s conduct.

Less clear is whether each member of the class must demonstrate standing. In TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2208 (2021), the Supreme Court held that every class member must have standing to recover damages. The Supreme Court emphasized that “Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.” However, as Best in Class pointed out in reviewing TransUnion, the Supreme Court did not address whether every class member must demonstrate standing before a court certifies a class. Scott Hazelgrove, “Transunion LLC v. Ramirez: A Pyrrhic Victory for Class Action Defendants?” Ellis & Winters LLP Best in Class Blog (Sept. 13, 2021).

In Transunion, the Supreme Court also did not address how standing and class certification interact for class actions involving only injunctive relief. The Fourth Circuit did just this in Carolina Youth Action Project v. Wilson, 60 F.4th 770 (4th Cir. 2023). There, the Fourth Circuit flatly rejected the defendants’ attempt to undo class certification because the majority of class members had not been injured by the defendants’ conduct and may not benefit from a favorable decision.

Carolina Youth Action Project involved a constitutional challenge to two South Carolina laws that made it a crime to, among other things, act “disorderly” or in a “boisterous manner” at school. Four named students, along with a non-profit organization, filed a putative class action against South Carolina’s Attorney General and other state officials, contending the laws were unconstitutionally vague.

The plaintiffs sought an injunction permanently enjoining enforcement of the laws against South Carolina elementary and secondary school students. The district court certified a class of students who faced a risk of prosecution under the laws, granted summary judgment in favor of the class, and granted the requested injunction.

On appeal, the defendants contended that the district court abused its discretion in certifying a class because, among other reasons, a majority of class members had never been prosecuted under the challenged laws and could not show that they were likely to be prosecuted in the future. Accordingly, the defendants contended, a majority of the class had not suffered a concrete injury. The defendants also contended that many students may prefer that the laws be enforced and these students would not benefit from the injunction sought on their behalf.

According to the Fourth Circuit “none of that ha[d] anything to do with class certification.” The Court affirmed the district court’s certification of a class, along with its ruling on the merits. Quoting Newberg and Rubenstein on Class Actions, the Fourth Circuit noted that, if a class representative shows that she has standing, “a proper party to raise the issue is before the court” and “there is no further, separate ‘class action standing’ requirement.” In Carolina Youth Action Project, because at least one of the named plaintiffs satisfied all three standing requirements, “nothing more [was] required on [the standing] score.”

While parts of the Fourth Circuit’s standing analysis are phrased in general terms, because Carolina Youth Action Project involved injunctive relief alone, it, like Transunion, leaves open the question whether, in a damages class action, every class member must demonstrate standing before a court certifies a class. Newberg and Rubenstein on Class Actions affirms that this remains an “unresolved question that has generated differing approaches.” § 2:3. “Individual standing of class representative as prerequisite; individual standing of absent class members not measured,” 1 Newberg and Rubenstein on Class Actions § 2:3 (6th ed.).

As Best in Class highlighted last fall, the much discussed “Tuna case” from the Ninth Circuit, Olean Wholesale Grocery Cooperative, Inc. v. Bumble Bee Foods LLC, 31 F.4th 651 (2022), gave the Supreme Court an opportunity to decide once and for all whether the presence of uninjured class members in a damages class action poses a barrier to class certification, and, if some uninjured class members can pass certification, how many is too many. Joseph D. Hammond and Kyle A. Medin, “The Ninth Circuit’s “Tuna Case” Lets Uninjured Class Members Off the Hook at Certification but May Reel in the Supreme Court,” Ellis & Winters LLP Best in Class Blog (Aug. 2, 2022). As Best in Class discussed, the federal circuits appear split on these issues, with six indicating that all class members must be injured for a damages class to be certified, five that there is some de minimis number of uninjured class members that will not preclude certification, and two having yet to weigh in. The Fourth Circuit falls in the middle camp. See Krakauer v. Dish Network, LLC, 925 F.3d 643, 658-59 (4th Cir. 2019) (noting in dicta that uninjured class members should not preclude certification where there was “not a large number of uninjured persons included within the plaintiffs’ class”). Unfortunately, because the Supreme Court denied certiorari in the Tuna case, resolution of these issues will have to wait for another day.

  1. Rule 23(b) predominance required common evidence—not common evidence that was likely to succeed.

Speaking of damages class actions, under Federal Rule of Civil Procedure 23(b)(3), a court may certify one only if “questions of law or fact common to class members predominate over any questions affecting only individual members.” The Fourth Circuit has “stressed in case after case” that, to certify a damages class action, the burden is on the class representatives to show that they will be able to prove their claims with common evidence. See Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 321 (4th Cir. 2006). The Fourth Circuit has instructed that, to meet this burden “the record must affirmatively reveal” that resolution of the claims on their merits “may be accomplished on a class-wide basis.”

When the Fourth Circuit said, “may be accomplished,” it apparently meant it, as the Court’s recent decision in Williams v. Martorello, 59 F.4th 68 (2023), shows.

In Williams, borrowers who took out high-interest loans from payday lenders succeeded in certifying a class of similarly situated borrowers against an individual defendant, Matt Martorello, who controlled operations for the lenders. The borrowers alleged that the lenders had been organized under tribal laws to evade usury and other lending regulations. The lenders, which originally had been named as defendants, were dismissed from the case on sovereign immunity grounds, but sovereign immunity did not apply to Mr. Martorello.

The district court certified a class against Mr. Martorello on the borrowers’ claims that the loans violated Virginia’s usury law and resulted in unjust enrichment of Mr. Martorello. Virginia’s usury law permits a borrower to recover excess interest from the person who received payments from an offending loan. Similarly, to recover for unjust enrichment, a plaintiff must establish that she conferred an undue benefit on the defendant. So, in Williams, to prove either their usury or unjust enrichment claim, the borrowers had to show that Mr. Martorello received some portion of the interest payments for their loans.

In opposing class certification, Mr. Martorello emphasized that this meant that each borrower would have to show that he received a portion of each borrower’s interest payments. Doing so, he contended, would require tracing the funds for each borrower’s loan. This would require individualized inquiries for each borrower and could not be done on a class-wide basis.

The borrowers disagreed, contending they could prove that Mr. Martorello received a portion of each of their loans via an alternative method that involved common evidence. They maintained that contracts between the lenders and several entities owned by Mr. Martorello, along with proof of Mr. Martorello’s receipt of loan payments from a certain bank account, would demonstrate that Mr. Martorello received a portion of each borrower’s loan. The district court, concluding that this proffer satisfied the predominance requirement, granted class certification on the usury and unjust enrichment claims.

On appeal, Mr. Martorello contended that the borrowers had not sufficiently demonstrated that their proffered evidence would, in fact, prove that he had received a portion of each borrower’s loan. Thus, Mr. Martorello contended, the district court erred in certifying a class on the usury and unjust enrichment claims. The Fourth Circuit disagreed and affirmed certification of the class.

The Fourth Circuit emphasized that, at class certification, a court “need not decide” whether the proffered common evidence “in fact” would prove the plaintiffs’ claims on the merits. This is because, at class certification, courts may not “engage in free-ranging merits inquiries.” Instead, courts may consider merits issues only to the extent necessary to determine if Rule 23’s requirements have been satisfied.

Thus, in Williams, the sole question for the district court on predominance was whether the borrowers had shown that Mr. Martorello’s liability was “capable” of resolution on a class-wide basis. That inquiry was not concerned with whether the borrowers’ proffered evidence was persuasive, nor whether it was likely to carry their burden of proof at trial. In fact, according to the Fourth Circuit, it would have been “improper” for the district court to deny class certification on grounds that the evidence was unpersuasive or unlikely to carry the day. Class certification was appropriate so long as the borrowers identified evidence that they intended to use to prove their claims, and that the evidence indeed was common to the class.

The Fourth Circuit noted that Mr. Martorello—who insisted that tracing was the only way to actually prove that he had received each borrowers’ funds—did not dispute that the borrowers had proffered an alternative method of proving this issue, nor that their alternative method was common to the class.

Importantly, in Williams, Mr. Martorello apparently had not (yet) filed a motion for summary judgment challenging the sufficiency of the borrowers’ proffered evidence. The Fourth Circuit suggested that, at summary judgment, the district court might conclude that the proffered evidence was not sufficient to meet their burden of proof. If the district court so concluded, then the claims would fail as to the entire class. But, the Fourth Circuit emphasized, failure of the claims as to the entire class did not mean that Rule 23’s predominance requirement was not met—and that was the question for the court at class certification.

Williams, in sum, sheds light on the evidentiary showing a plaintiff must make to satisfy Rule 23(b)(3)’s predominance inquiry, and highlights that a summary judgment standard does not apply. It also suggests that the timing of summary judgment motions may be important. For defendants trying to prevent certification of a class, a summary judgment motion at the class-certification stage may be necessary, where the plaintiffs’ proffered evidence meets the common criteria but may be insufficient, for other reasons, to prove their claims at trial.

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Johnathan R., Carolina Youth Action Project, and Williams suggest that the past year has been a good one for plaintiffs seeking class certification in the Fourth Circuit—but, whatever side of the v. you’re on, and whatever circuit you call home, the cases illustrate some class-action basis and provide food for thought on class-certification strategy.

This blog post was originally published as an article in the Newsletter of the American Bar Association’s Litigation Section, Class Actions & Derivative Suits Committee, on May 25, 2023.

**Ellis & Winters’s Best in Class Blog covers developments in class actions in courts across the United States, focusing on insights for class-action defense.**

May 30, 2023 Andrew Parks Carter Michelle A. Liguori
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