Civil Practice – Class Certification – Door Closing Statute

Listen to this article

Rule 23 governs Plaintiff’s claims, and the district court erred by applying the Door Closing Statute.

We reversed the district court’s order denying Plaintiff’s motion for class certification and remanded.

Plaintiff, a South Carolina resident, sued Defendant bank, which is an entity organized under Michigan law, in South Carolina federal district court. Plaintiff contended that Defendant engaged in three wrongful overdraft fee assessment practices. First, Defendant considered customer accounts to be overdrawn even when they had enough money to cover a transaction. Second, Defendant generated fees by charging more than one insufficient-funds fee for a single transaction. Third, Defendant charged two separate out-of-network fees for a single withdrawal from an out-of-network ATM. Plaintiff moved to certify nationwide classes for each type of wrongful fee Defendant allegedly assessed. Defendant opposed the motion, arguing that S.C. Code Ann. § 15-5- 150 prohibited Plaintiff from representing nationwide classes. The district court applied the Door Closing Statute to putative class members, and limited membership in Plaintiff’s proposed classes to only South Carolina residents. Consequently, the district court held that Plaintiff could not meet Rule 23’s numerosity requirement and denied Plaintiff’s motion for class certification.

On appeal, we considered whether Rule 23 answers the same question as the Door Closing Statute: when a class action may be maintained. Requiring that Plaintiff satisfy Rule 23 and the Door Closing Statute to maintain her putative class action violates Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559 U.S. 393 (2010). Rule 23, as interpreted by Shady Grove, and the Door Closing Statute directly conflict, so Rule 23 alone controls.

This left the step-two question: whether Rule 23 is “ultra vires,” “that is, outside Congress’s constitutional rule making power or the statutory authorization provided by the Rules Enabling Act. The rule at issue here—Rule 23—is procedural. It “leaves the parties’ legal rights and duties intact and the rules of decision unchanged.” Or said slightly differently, “insofar as [Rule 23] allows willing plaintiffs to join their separate claims against the same defendants in a class action,” it “falls within [the Rules Enabling Act]’s authorization” and is valid. The Door Closing Statute is procedural and not “so intertwined with a state right or remedy that it functions to define the scope of the state-created right.” Accordingly, we determined that Rule 23 governs Plaintiff’s claims, and the district court erred by applying the Door Closing Statute.

Reversed and remanded.

Grice v. Independent Bank (Lawyers’ Weekly No. 001-148-25, 24 pp.) (DeAndrea Gist Benjamin, J.) Appealed from the U.S. District Court for the District of South Carolina, at Spartanburg (Timothy M. Cain, J.) ARGUED: Matthew W.H. Wessler, GUPTA WESSLER LLP, Washington, D.C., for Appellant. Jonathan M. Knicely, NELSON MULLINS RILEY & SCARBOROUGH, LLP, Columbia, South Carolina, for Appellee. ON BRIEF: Sophia Goren Gold, KALIEL GOLD PLLC, Oakland, California; Gregory A. Beck, GUPTA WESSLER LLP, Washington, D.C.; David Matthew Wilkerson, VAN WINKLE LAW FIRM, Asheville, North Carolina, for Appellant. A. Mattison Bogan, Jacob D. Kea, NELSON MULLINS RILEY & SCARBOROUGH LLP, Columbia, South Carolina, for Appellee. Andrew Bradt, Professor of Law, BERKELEY LAW, Berkeley, California; Jonathan M. Streisfeld, KOPELOWITZ OSTROW P.A., Fort Lauderdale, Florida, for Amicus Curiae. U.S. Court of Appeals for the Fourth Circuit