Class Certification in the Fourth Circuit in 2024: A Year of Mostly Defense-Friendly Decisions

Last year was an eventful one for class action practice in the Fourth Circuit. The Fourth Circuit issued several decisions on class certification, many of them in defendants’ favor, offering guidance on ascertainability, commonality, standing, and the relationship between Rule 12(b)(6) and class certification. This article summarizes the decisions and the lessons they provide for those litigating class actions in the Fourth Circuit and beyond.

Ascertainability: Plaintiff’s Burden When Required, but Not Required for Rule 23(b)(2) Classes

The Fourth Circuit has held that Rule 23 contains an implicit requirement that a class cannot be certified unless a court can “readily identify the class members in reference to objective criteria.” EQT Prod. Co. v. Adair, 764 F.3d 347, 358 (4th Cir. 2014). Accordingly, class certification is inappropriate where identifying the class members would involve “extensive and individualized fact-finding.” Id. Last year, the court issued two key decisions on ascertainability.

Let’s start with Career Counseling v. AmeriFactors Financial Group, LLC, 91 F.4th 202 (2024), which affirmed the district court’s denial of class certification due to the plaintiffs’ failure to satisfy the ascertainability requirement. The plaintiff and proposed class representatives alleged that the defendant sent it and thousands of other recipients an unsolicited advertisement via fax in violation of the Telephone Consumer Protection Act of 1991 (TCPA). Posing an issue for the putative class, the TCPA prohibits unsolicited advertisements sent to stand-alone fax machines—not online fax services. Thus, identifying class members required identifying which of the thousands of recipients used stand-alone fax machines.

The plaintiff contended that it could identify pertinent class members by sending a subpoena to the telephone carrier associated with each recipient’s fax number and asking the carrier whether it offered an online fax service in connection with each number. The Fourth Circuit found logical flaws in this method, pointing out that just because a recipient’s telephone carrier did not offer an online fax service did not necessarily mean that the recipient was therefore using a stand-alone fax machine. The recipients may still have been using online fax services provided by someone other than the carrier. Thus, the district court would be left to make individualized inquiries as to whether each recipient was using a stand-alone fax machine at the relevant time, rendering a class of stand-alone fax machine users not ascertainable. Therefore, the Fourth Circuit held, the district court properly denied class certification.

In Kadel v. Folwell, 100 F.4th 122, 133 (4th Cir. 2024), the Fourth Circuit, sitting en banc, touched on the ascertainability requirement in consolidated appeals from North Carolina and West Virginia. The central issue was whether these states’ healthcare plans that excluded coverage of certain treatments unique to transgender patients violated the Equal Protection Clause and other provisions of federal law. Although class certification issues were not at the heart of the decision, the majority briefly touched on class certification.

The court noted that “courts of appeals have consistently declined to impose an ascertainability requirement in 23(b)(2) cases requesting that a party be enjoined from certain actions.” Rule 23(b)(2) allows for certification when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” The 6–2 majority explained that a “readily identifiable” or “ascertainable” class is important under Rules 23(b)(1) and 23(b)(3), where issues of notice and damages are at play, but those issues are not at stake in a 23(b)(2) case that seeks only declaratory and injunctive relief from a discriminatory policy.

Commonality: Common Statutory Violations and Generalized Allegations of Company Policy Are Not Enough

Rule 23(a)(2) requires a plaintiff to show that “there are questions of law or fact common to the class.” Although Rule 23(a)(2) is phrased in terms of common questions, “what matters to class certification . . . is . . . the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011) (internal quotations and citations omitted). In 2024, the Fourth Circuit issued two key commonality decisions that built on Dukes’s teachings.

In the first case, G.T. v. Board of Education of County of Kanawha, 117 F.4th 193 (4th Cir. 2024), the court addressed commonality in the context of alleged statutory violations. The court reversed a district court class certification order on the ground that the plaintiffs failed to satisfy the commonality requirement.

The plaintiffs in G.T. alleged that the school board violated the Individuals with Disabilities Education Act (IDEA) by failing to provide effective behavior supports for students with disabilities. As a result, the plaintiffs claimed, students were unjustifiably removed from their classrooms for misbehavior. The Fourth Circuit was concerned about the plaintiffs’ failure to identify any uniform policy driving the alleged violations. The court concluded that resolving whether the school board adequately developed appropriate behavioral supports for any individual class member would turn on that particular child’s needs and goals.

The Fourth Circuit emphasized, as set forth in Dukes, that the commonality requirement is not satisfied just because all class members were exposed to a violation of the same provision of law. Commonality requires the plaintiff to demonstrate that all class members suffered the same injury from the alleged violation.

Shortly before year’s end, the Fourth Circuit also addressed commonality in Stafford v. Bojangles’ Restaurants, Inc., 123 F.4th 671 (4th Cir. 2024). Bojangles involved a putative class and collective action alleging that the Southeastern fast-food chain violated the Fair Labor Standards Act by requiring unpaid off-the-clock work and by making unauthorized edits to employee time records to avoid paying overtime wages. The Fourth Circuit used the case to underscore class action basics.

The plaintiffs alleged that Bojangles required employees to perform a variety of off-the-clock work, including pre-shift activities like disabling alarms and checking parking lots, post-closing tasks such as cleaning, workday trips to the bank to make deposits, and travel between different stores to transport goods or assist understaffed restaurants. The plaintiffs pointed to an alleged common policy regarding certain pre-shift work, and when granting class certification, the district court found commonality because an estimated 80 percent of the putative class members likely worked an opening shift under the policy.

The Fourth Circuit granted the defendant’s Rule 23(f) petition for immediate review of the class certification order. The court first took the opportunity to clarify the purposes of and standards for class certification. The court noted that class certification law “has been beset by a seemingly endless tug of pros and cons.” Class actions promote the efficiency and economy of litigation by resolving many similar suits at the same time; however, class action lawsuits “can ratchet liability to potentially ruinous levels and force companies to settle or bet the store.” Rule 23 is designed to balance “the worthy uses and serious abuses of the class-action device.” For example, Rule 23 requires a party seeking class certification to affirmatively demonstrate compliance with the rule and thus “holds plaintiffs to a higher bar than a pleading standard.”

The court ultimately vacated the class certification order and remanded. The court explained that the district court “employed an inappropriately high level of generality” when addressing the commonality requirement and created overly broad class definitions. In particular, the district court relied on generalizations about Bojangles’s policies and failed to account for differences in various kinds of off-the-clock work. The Fourth Circuit noted that the off-the-clock activities performed by putative class members raised distinct questions about the types of work employees were required to perform and how much time employees spent performing such work. Even if there was a common policy related to certain pre-shift activities, that common policy did not support certifying a class for various other types of off-the-clock work that were not subject to the policy. The court emphasized that the commonality requirement “require[s] something more than conclusory assertions of some highly generalized company policy to have shift managers work without pay.”

The Fourth Circuit also concluded that the class definitions were too broad. The only parameter was that the class member worked as a Bojangles shift manager in the relevant state within three years of the filed complaint. Although there is no bright-line rule for defining classes, the definition must provide proper detail to identify whether a prospective class member was injured and whether that person’s claim aligns with the claims of the rest of the certified class. Here, the district court’s class definitions did not mention the type of off-the-clock work class members performed or whether the class members were subject to unauthorized edits to their time sheets, and thus swept in persons who may not have been injured by the defendant’s conduct. The court noted that, in addition to the class definitions failing to satisfy Rule 23(c)(1)(B)’s requirement to “define the class and the class claims, issues, or defenses,” the class definitions also revealed the lack of commonality.

Standing: Certification Improper If the Named Plaintiff Lacks Standing

The Fourth Circuit also addressed standing in its 2024 class certification jurisprudence. In Fernandez v. RentGrow, Inc., 116 F.4th 288 (4th Cir. 2024), the court highlighted that standing issues can be a basis for undermining certification. The named plaintiff, Marco Fernandez, had applied to rent an apartment. His class action complaint alleged that a consumer reporting agency falsely reported to his landlord, in connection with a tenant screening report, that he was a “possible match” to someone on a national security watch list, which violated the Fair Credit Reporting Act.

The defendant argued that Mr. Fernandez failed to demonstrate that he and the putative class members suffered a concrete injury sufficient to establish Article III standing. The district court disagreed, finding that dissemination of a misleading report alone was sufficient to demonstrate a concrete injury and thus it did not matter whether the recipient read or understood it. The district court certified a class of all individuals who were the subject of a consumer report that reflected a false possible match with someone on a national security watch list.

The Fourth Circuit concluded, leaning on TransUnion LLC v. Ramirez, 594 U.S. 413 (2021), that the district court erred in its standing analysis. In TransUnion, the Supreme Court held that a misleading alert to a match on a national security watch list causes no concrete harm if it is not disclosed to a third party. Without publication, there can be no reputational harm. Thus, the Fourth Circuit explained, to show that he had standing, Mr. Fernandez had to show that a third party read, understood, or considered the misleading information in its screening report. Mr. Fernandez failed to do so. Thus, the Fourth Circuit held that he lacked standing.

The Fourth Circuit did not outright reverse class certification, however, based on Fernandez’s lack of standing. Rather, the court reasoned that, because the district court’s erroneous standing analysis “undermine[d] [its] reasoning at various points throughout the class certification order,” a remand for reconsideration of class certification with a correct standing analysis was in order.

Pendent Appellate Jurisdiction: An Opportunity for Review of a 12(b)(6) Denial in a Rule 23(f) Appeal

Just as an erroneous standing analysis can lead to an erroneous class certification decision, so too can an erroneous ruling at the 12(b)(6) stage. See Elegant Massage, LLC v. State Farm Mut. Auto. Ins. Co., 95 F.4th 181 (4th Cir. 2024). Although a denial of a motion to dismiss is usually not immediately appealable, Elegant Massage shows how Rule 23(f) appeals from certification orders may afford an opportunity to challenge a trial court’s denial of a motion to dismiss.

Due to emergency orders issued during the pandemic, Elegant Massage, which operated a massage parlor in Virginia, had to temporarily cease operations. Elegant Massage filed a claim with its insurance company, State Farm, for loss of business income under its “all risk” commercial property policy. The coverage included “loss of income” sustained during “suspension” of operations during any “period of restoration.” To qualify for “loss of income” coverage, the policy required that the “suspension” be caused by “accidental direct physical loss” to the covered property. State Farm denied the claim on the ground that Elegant Massage voluntarily closed before any Virginia emergency executive order went into place and there was no known damage to the covered property.

Elegant Massage filed a putative class action against State Farm for breach of contract and breach of the duty of good faith and fair dealing. State Farm moved to dismiss, arguing that Elegant Massage did not allege “accidental direct physical loss” to the covered property. The district court denied the motion to dismiss, concluding “direct physical loss” could mean that the covered property was uninhabitable or inaccessible because of intangible sources. The district court certified a class of all persons and entities in Virginia with a businessowners’ insurance policy issued by State Farm whose policies were in effect between March and June 2020.

The Fourth Circuit granted immediate review of the class certification order under Rule 23(f) and considered whether it had pendent appellate jurisdiction to review the denial of State Farm’s motion to dismiss. Under the doctrine of pendent appellate jurisdiction, an appellate court may review an issue not otherwise subject to immediate appeal when that issue is “so interconnected” with an issue properly raised on appeal so as to warrant concurrent review. The majority concluded that it was appropriate to exercise pendent appellate jurisdiction and reversed the denial of the defendant’s motion to dismiss. The majority explained that the dismissal order and certification order were interconnected because the district court’s denial of State Farm’s motion to dismiss and resulting assumptions underlying its class certification order conflicted with Fourth Circuit precedent addressing nearly identical language in a different insurance policy. The court reversed the class certification order and remanded to the district court with instructions to dismiss the case.

Conclusion

In sum, the Fourth Circuit handed down a number of class certification decisions in 2024. While each case is unique, there are a few key takeaways:

• Plaintiffs must demonstrate a logical method of identifying class members (except in Rule 23(b)(2) classes where the “ascertainability” requirement does not apply).
• The Supreme Court’s decision in Dukes requires plaintiffs to show a common injury and not just a common statutory violation, and plaintiffs cannot rely on generalized allegations of common company policy.
• Standing issues can matter at class certification.
• Pendent appellate jurisdiction may be available to obtain review of earlier orders in a Rule 23(f) appeal.

We will see what 2025 has in store for class action litigants at the Fourth Circuit.