Monthly Archives: August 2014

Fourth Circuit Vacates Five Related Class Certifications

View David Wright's Complete Bio at RBH.com As the saying goes, one person’s trash is another person’s treasure. Judge Diaz issued a decision yesterday pertaining to five class actions concerning coalbed methane gas, long thought to be a “dangerous waste product,” but later discovered to be an energy resource and the source of a “distinct mineral estate.” The Fourth Circuit granted Rule 23(f) review and held that “class certification in this case was manifestly improper.” The Court emphasized, in its holding, that to sustain a class, “the party must present evidence that the putative class complies with Rule 23;” pleading a class does not suffice. The Court said that the certification decision was an abuse of discretion for two reasons: (1) “it failed to rigorously analyze whether the administrative burden of identifying class members in the ownership cases would render class proceedings too onerous” and (2) the court “improperly lowered the burden of proof the plaintiffs must satisfy to demonstrate compliance with Rule 23(a)(1)’s commonality requirement.” The panel emphasized that “a class cannot be certified unless a court can readily identify the class members in reference to objective criteria,” noting that the proposed classes raise “serious ascertainability issues.” In a footnote, the Court observed that the district court should address whether the class could be defined without designating a “fail-safe class,” something we have discussed in this post. The Court remanded on the commonality issue, noting that the district court must determine whether ownership can be established under a Virginia precedent; if not, there is “no way for the district court to answer the ownership question on a common basis.” The Fourth Circuit also concluded that the district court had abused its discretion under Rule 23(b)(3), noting that “the mere fact that the defendants engaged in uniform conduct is not, by itself, sufficient to satisfy” the predominance requirement. In addition, the Court cautioned the district court about certifying individual contract claims, something that is hard to do, and about ignoring individual statute of limitations issues. The panel also provided tutorial advice to the district court about potential predominance of state-law issues, always a challenge in certification proceedings. Although the Court reversed the district court, it did not hold that a class action could never proceed in the case – leaving that decision to the district court on remand.

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Train Derailment Causes Estimated Damages in Excess of $13 Million

View Amanda Pickens’ Complete Bio at RBH.comLecroy v. CSX Transportation, Inc., No. 2:14-cv-02128 (D.S.C. June 2, 2014) arises from a CSX train derailment at the underpass of Cypress Gardens Road in Berkley County, South Carolina, which caused a bridge to collapse. A purported class of Berkley County citizens filed a negligence and strict liability action against CSX, seeking damages for the “cost for transportation,” including costs associated with a 22-mile detour route around the collapsed bridge. The lawsuit alleges a strict liability claim under South Carolina’s Anti-Blocking Statute, S.C. Code § 57-7-240, which imposes a fine of $5.00 to $20.00 per day per person against a railroad for blocking a public roadway. (Query, however, whether the state statute is preempted by Section 10501 of the Interstate Commerce Commission Termination Act, which confers exclusive jurisdiction over the regulation of railroad transportation to the Surface Transportation Board.)

CSX removed the action to the District Court of South Carolina pursuant to the Class Action Fairness Act, which permits removal of class actions where the putative class has at least 100 proposed members, the parties are of at least minimal diversity, and the aggregate amount in controversy exceeds $5 million. The first two requirements were undisputed, but the third requirement was more problematic because the complaint does not specify the amount of damages. CSX, in removing the action, stated that it had to prove by a preponderance of the evidence that the amount in controversy exceeds the jurisdictional requirement. The District Court has not ruled on this issue, but CSX relied on Crosby v. CVS Pharmacy, Inc., 409 F. Supp. 2d 665, 668 (D.S.C. 2005) in coming to this conclusion. But see Bartnikowski v. NVR, Inc., 307 F. App’x 730, 734 (4th Cir. 2009) (applying the preponderance of the evidence standard to determine the jurisdictional amount for an unspecified damages claim upon the parties’ agreement, but recognizing that although other circuits employ a preponderance standard, it has not yet been adopted in the Fourth Circuit). To estimate damages, CSX relied on a South Carolina Department of Transportation report stating that it will take 180 days to replace the bridge and that the bridge had an average daily traffic count of 6,200 vehicles. CSX calculated the plaintiffs’ requested damages to be in excess of $13 million by multiplying the IRS mileage reimbursement rate of $0.56 by a 22-mile detour route for 180 days, which equaled $2,217.60 per class member and $13,749,120 total for a class of 6,200 members. This $13 million was enough to satisfy the $5 million removal threshold. CSX also offered an alternative justification to meeting the amount-in-controversy requirement for removal based on the South Carolina Anti-Blocking Statute fines.

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