In Mr. Dee’s Inc. v. Inmar, Inc., 127 F.4th 925 (4th Cir. 2025), the Fourth Circuit affirmed a decision by Judge William L. Osteen, Jr. of the Middle District of North Carolina denying, for the third time, plaintiffs’ attempt to certify a class of coupon manufacturers.

It is not only the facts and number of attempts at class certification that make this case unique and worthy of a post. The circuit court’s opinion also stands out for its didactic approach to several fundamental tenets of class action litigation. Specifically, the Fourth Circuit reinforced that plaintiffs have the burden to show that Rule 23’s requirements are satisfied (with no shortcuts) and that a district court does not abuse its discretion in denying class certification where the proposed class is either over- or under-inclusive related to the alleged harm.

Couponing:  A Look Behind the Scenes

Mr. Dee’s involves antitrust litigation in the world of couponing.  We’re all familiar with coupons generally—a consumer presents a coupon at checkout and receives a discount. But what happens next? Well, the retailer wants to be reimbursed for the discount, and, on the other end, coupon manufacturers want to ensure that they only reimburse retailers for properly redeemed coupons. Enter “coupon processing.” 

At the time this action was filed—nearly 20 years ago—coupon processing involved two additional players: (1) “retailer processors,” to whom retailers would send coupons for counting and invoicing; and (2) “manufacturer processors,” hired by manufacturers to verify coupon counting and invoicing. Retailers and retailer processors could ask manufacturers to pay processing fees and shipping fees in addition to the face value of the coupons. Manufacturers, however, would have a contractual obligation to do so, and would often disagree with the amount charged. This is the backdrop against which litigation in Mr. Dee’s took place.

Coupon Processing Conspiracy Spurs Antitrust Litigation

The three named plaintiffs in this case are Mr. Dee’s, a manufacturer that issues coupons and purchases processing services; Retail Marketing Services, a purchaser of coupon processing services for retailers; and Connective Food Association, another purchaser of coupon processing services. The defendants are Inmar, Inc. and its subsidiary Carolina Manufacturer’s Services (“CMS”), both of which sell coupon processing services to manufacturers and retailers. Inmar also has two other subsidiaries, Carolina Coupon Clearing (“CCC”) and Carolina Services, that sell processing services to retailers only.

The plaintiffs alleged that Inmar conspired with a competitor, International Outsourcing Services, LLC (“IOS”), to fix prices and raise shipping fees. The conspiracy ended after about six years, when IOS and some of its personnel were criminally indicted. The plaintiffs initiated this action in the Eastern District of Wisconsin in 2008, which was stayed while IOS’s criminal prosecution was ongoing, and eventually transferred to the Middle District of North Carolina in 2019, after IOS filed for bankruptcy and was dismissed from the civil suit. 

The Plaintiffs’ Three Attempts to Get a Manufacturer Class Certified

Once in North Carolina federal court, the plaintiffs sought certification of two classes: a class of manufacturer purchasers of coupon processing services, and a class of retailer purchasers. The district court granted class certification for the retailers. As to the manufacturers, plaintiffs filed a total of three motions—and they fell flat each time.

Discovery issues arose when the plaintiffs filed their first motion for class certification; accordingly, the district court allowed the parties to supplement their submissions and, in the interest of clarifying the record, denied the motion without prejudice as a precautionary measure. 

In their second motion, the plaintiffs attached to their brief a list of over 5,000 manufacturers identified by plaintiffs’ expert as having “directly paid observably higher CCC or IOS shipping fees during the class period.” The district court denied class certification, explaining that the proposed class was “an impermissible fail-safe class because class membership [was] conditioned on having suffered antitrust injury or impact in the form of increased shipping fees.” 

Then there was the plaintiffs’ third motion—but, as the Fourth Circuit would hold, the third time was not the charm. This time, the plaintiffs sought certification of three different defined classes:

• The “Limited Payer Class,” defined as “a class of manufacturers that directly paid CCC shipping fees during more than 8 different calendar months during the class period . . . and/or were clients of CMS and directly paid shipping fees to IOS for at least 2.2 million coupons during the class period.”
• The “All Payer Class,” defined as “manufacturers that directly paid CCC shipping fees during the class period and/or were clients of CMS and directly paid shipping fees to IOS.”
• The “Fixed List Class,” defined as the above-referenced list of 5,000 plus manufacturers.

The district court denied certification of all three proposed classes. The plaintiffs petitioned the Fourth Circuit under Rule 23(f) to appeal the denial of certification of the manufacturer class, and the Fourth Circuit granted review. 

At the outset, citing Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), and Comcast Corp. v. Behrend, 569 U.S. 27 (2013), the Fourth Circuit emphasized that “[t]he Supreme Court has made it clear that a party seeking class certification must affirmatively demonstrate his compliance with Rule 23.” “This is so,” the circuit court explained, “because the class action device is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Then, the circuit court reviewed each version of the proposed manufacturer class.

The Limited Payer Class:  Under-Inclusive

Plaintiffs’ Limited Payer Class included manufacturers that paid shipping fees during a specific time frame (more than eight months during the class period) and/or for a specific quantity of coupons (at least 2.2M). The district court rejected this proposed class because it was “untethered from Defendants’ alleged wrongs,” and thus “failed Rule 23’s implicit ascertainability requirement.” In other words, the Limited Payer Class was under-inclusive as it excluded more than 2,000 manufacturers allegedly injured by the defendants’ conspiracy who just happened not to fit into the proposed class’s parameters.

The Fourth Circuit agreed with the district court. “An essential purpose of any class action is to redress an injury.” “If the criteria for class membership bear little relationship to the defendants’ conduct, then the class definition is untethered from the purpose of employing the class action procedure in the first instance.” Here, the plaintiffs’ model excluded many allegedly injured manufacturers, and was thus insufficiently related to the antitrust misconduct at the heart of this action. 

Additionally, the Limited Payer Class presented a Rule 23 superiority problem. Under Rule 23(b)(3), a class action must be superior to other means of adjudicating the controversy at issue. The superiority requirement supports the goal of efficiency and guards against exposing a defendant to a stream of additional related lawsuits. 

Here, because the Limited Payer Class excluded thousands of injured manufacturers, it left the defendants exposed to the possibility of facing potentially thousands of additional lawsuits. Accordingly, the Limited Payer Class called into question whether the class action mechanism was truly superior to other means. But the Fourth Circuit clarified that plaintiffs are not required to establish that a class action is the best means for adjudicating a controversy—just that, in this instance, the district court acted within its discretion in denying class certification for a proposed class that excluded thousands of complainants.

The All Payer Class:  Over-Inclusive

With the All Payer Class, the plaintiffs proposed a class of essentially any manufacturer who had paid shipping fees to CCC during the class period “and/or” any CMS clients who had paid shipping fees to IOS. Because this model could not show a demonstrable antitrust injury for almost a third of the class, the district court rejected it for failure to meet Rule 23’s predominance requirement. In other words, it was over-inclusive.

On appeal, the plaintiffs argued that the district court’s rejection was wrong for two reasons:  the court “erred in finding as a matter of fact that [about a third] of the members . . . were uninjured”; and, according to the plaintiffs, “nothing in Rule 23 permits the district court to deny certification to a class because of a high share of uninjured class members.” 

The Fourth Circuit was not persuaded.  First, it treated the district court’s determination that a third of the proposed class members did not suffer injury as a finding of fact. The circuit court concluded that, where a significant number of proposed class members did not present evidence of injury, it was “hardly left with the definite and firm conviction that a mistake [was] committed,” meaning the finding survived clear error review.  

Second, the Fourth Circuit agreed that the All Payer Class presented a Rule 23 predominance issue. Where there was no evidence of harm for nearly a third of all class members, the circuit court held that the district court did not err in concluding that common questions of injury and damages did not predominate. Plus, the class members for whom there was evidence of injury also faced a predominance issue: “the circumstances surrounding the payment of shipping fees varied substantially” because, in the absence of contractual agreements, fees were determined by “company-specific policies.”   

The All Payer Class also raised standing concerns. Here, the Fourth Circuit cited TransUnion LLC v. Ramirez, 594 U.S. 413, 431 (2021), where the Supreme Court held “every class member must have Article III standing in order to recover individual damages.” The Fourth Circuit noted that TransUnion leaves open the question of whether plaintiffs must show that every class member has standing prior to certification.[1] Nonetheless, the Fourth Circuit has “underscored the importance of standing concerns in class action litigation,” see, e.g., Alig v. Rocket Mortg., LLC, 126 F.4th 965 (4th Cir. 2025), and the district court paid proper heed to that principle. 

Here, a third of the All Payer Class lacked injury. The Fourth Circuit determined that that number was “much too high.” Without establishing a brightline rule, the court noted, “[j]ust as the question of under-inclusiveness was not a marginal one with respect to the Limited Payer Class, so too the question of over-inclusiveness for the All Payer Class [was] not a close call.” And so, again, the district court did not abuse its discretion in rejecting the plaintiffs’ third proposed class.[2]

The Fixed List Class:  Fail-Safe Failure

Finally, the district court rejected the Fixed List Class because it was too similar to the previous “fail-safe” class it had already rejected on the plaintiffs’ second motion. Finding persuasive Messner v. Northshore University Health Systems, 669 F.3d 802 (7th Cir. 2012), the Fourth Circuit explained that a “fail-safe” class is one that is “defined so that whether a person qualifies as a member depends on whether the person has a valid claim.” 

The Fourth Circuit acknowledged that it “not expressly recognized an independent prohibition against fail-safe classes as some of [its] sister circuits have done.” But that would not matter here, because the Fixed List Class “suffer[ed] from more basic defects under Rule 23.” In fact, the Fixed List Class did not define a class at all—the plaintiffs merely provided a list, delegating the task of “devis[ing] a class definition” to the district court. But proving compliance with Rule 23 is not the court’s job—it’s the movant’s. Thus, once more, the district court did not abuse its discretion in rejecting the Fixed List Class.

* * *

In conclusion, while the Fourth Circuit did not answer every class action question arising from the underlying antitrust litigation, its key takeaways are clear: 

• Proceeding by class action is the exception, not the rule—if plaintiffs want it, they have to work for it;
• A class must be targeted to the defendant’s alleged misconduct and cannot be defined by liability or be either over- or under-inclusive; and
• We will never look at grocery store coupons the same way again.

[1] That issue may be decided soon in Laboratory Corporation of America Holdings v. Davis, No. 24-304, (U.S. Jan. 24, 2025), in which the Supreme Court granted certiorari to resolve “[w]hether a federal court may certify a class action pursuant to Federal Rule of Civil Procedure 23(b)(3) when some members of the proposed class lack any Article III injury.”

[2] The district court granted certification of the retailer class because, even though it included a few uninjured class members, that number was de minimis and thus did not violate the predominance requirement, or any other requirement, of Rule 23.  Mr. Dee’s Inc. v. Inmar, Inc., No. 1:19-CV-141, 2023 WL 5436178, at *23 (M.D.N.C. Aug. 23, 2023), aff’d, 127 F.4th 925 (4th Cir. 2025). This differed starkly from the proposed All Payer Class of manufacturers, which failed the predominance requirement because, as the district court described, “one-third of the class [was] uninjured.”  Id.