Court Opinion

ID: 2718928
Source: CourtListenerOpinion
Date Created: 2014-08-19 19:00:28.236903+00
Date Added: 2024-06-11T15:42:23.421001
License: Public Domain

PUBLISHED

                 UNITED STATES COURT OF APPEALS
                     FOR THE FOURTH CIRCUIT

                              No. 13-414

EQT PRODUCTION COMPANY,

               Petitioner,

          v.

ROBERT ADAIR, on behalf of himself and all others similarly
situated,

               Respondent.

                              No. 13-415

EQT PRODUCTION COMPANY,

               Petitioner,

          v.

EVA MAE ADKINS, on        behalf   of   herself   and   all   others
similarly situated,

               Respondent.

                              No. 13-418

EQT PRODUCTION COMPANY,

               Petitioner,

          v.
JULIE A. KISER, Plaintiff and Class Representative,

               Respondent.

                              No. 13-419

CNX GAS COMPANY, LLC,

               Petitioner,

          v.

JEFFREY CARLOS HALE, on behalf of himself and all others
similarly situated,

               Respondent.

                              No. 13-421

CNX GAS COMPANY, LLC,

               Petitioner,

          v.

DORIS BETTY ADDISON, on behalf of herself and all others
similarly situated,

               Respondent.

                              No. 13-422

BUCKHORN COAL COMPANY LLLP; COMMONWEALTH COAL CORPORATION;
HARRISON-WYATT LLC,

               Petitioners,

          v.

                                  2
DORIS BETTY ADDISON; JEFFREY CARLOS HALE,

               Respondents.

On Petitions for Permission to Appeal from the United States
District Court for the Western District of Virginia, at
Abingdon.   James P. Jones, District Judge.   (1:10-cv-00037-JPJ-
PMS;   1:10-cv-00041-JPJ-PMS;   1:11-cv-00031-JPJ-PMS;   1:10-cv-
00059-JPJ-PMS; 1:10-cv-00065-JPJ-PMS)

                              No. 13-2376

ROBERT ADAIR, on behalf of himself and all others similarly
situated,

               Plaintiff – Appellee,

          v.

EQT PRODUCTION COMPANY,

               Defendant – Appellant.

                              No. 13-2378

EVA MAE ADKINS, on        behalf   of   herself   and   all   others
similarly situated,

               Plaintiff – Appellee,

          v.

EQT PRODUCTION COMPANY,

               Defendant – Appellant.

                                    3
                           No. 13-2381

JULIE A. KISER, Plaintiff and Class Representative,

               Plaintiff – Appellee,

          v.

EQT PRODUCTION COMPANY,

               Defendant – Appellant.

                           No. 13-2382

JEFFREY CARLOS HALE, on behalf of himself and all others
similarly situated,

               Plaintiff – Appellee,

          v.

CNX GAS COMPANY, LLC,

               Defendant – Appellant.

                           No. 13-2383

DORIS BETTY ADDISON, on behalf of herself and all others
similarly situated,

               Plaintiff – Appellee,

          v.

CNX GAS COMPANY, LLC,

               Defendant – Appellant.

                                4
                            No. 13-2384

DORIS BETTY ADDISON; JEFFREY CARLOS HALE,

                Plaintiffs – Appellees,

           v.

BUCKHORN COAL COMPANY LLLP; COMMONWEALTH COAL CORPORATION;
HARRISON-WYATT LLC,

                Defendants – Appellants.

Appeals from the United States District Court for the Western
District of Virginia, at Abingdon.     James P. Jones, District
Judge.   (1:10-cv-00037-JPJ-PMS; 1:10-cv-00041-JPJ-PMS; 1:11-cv-
00031-JPJ-PMS; 1:10-cv-00059-JPJ-PMS; 1:10-cv-00065-JPJ-PMS)

Argued:   May 13, 2014                     Decided:   August 19, 2014

Before WILKINSON, KEENAN, and DIAZ, Circuit Judges.

Vacated and remanded by published opinion. Judge Diaz wrote the
opinion, in which Judge Wilkinson and Judge Keenan joined.

ARGUED: Jonathan Todd Blank, MCGUIREWOODS LLP, Charlottesville,
Virginia; Michael Willis Smith, CHRISTIAN & BARTON, Richmond,
Virginia, for Appellants.      Elizabeth Joan Cabraser, LIEFF,
CABRASER, HEIMANN & BERNSTEIN, LLP, San Francisco, California,
for Appellees.   ON BRIEF: Stephen M. Hodges, Wade W. Massie,
Mark E. Frye, PENN, STUART & ESKRIDGE, Abingdon, Virginia; R.
Braxton Hill, IV, CHRISTIAN & BARTON, Richmond, Virginia, for
Appellant EQT Production Company.    Lisa M. Lorish, Tennille J.
Checkovich,   John   Tracy   Walker,    IV,   MCGUIREWOODS  LLP,
Charlottesville, Virginia; James R. Creekmore, Blair Nivia Wood,
CREEKMORE LAW FIRM PC, Blacksburg, Virginia, for Appellant CNX
Gas Company, LLC.   Blair M. Gardner, Lee Adair Floyd, JACKSON
KELLY PLLC, Charleston, West Virginia; Eric D. Whitesell,

                                 5
GILLESPIE, HART, ALTIZER & WHITESELL, Tazewell, Virginia, for
Appellants   Buckhorn  Coal  Company  LLLP,   Commonwealth  Coal
Corporation, and Harrison-Wyatt LLC. David S. Stellings, Daniel
E. Seltz, LIEFF CABRASER HEIMANN & BERNSTEIN, LLP, New York, New
York; Jackson S. White, Jr., THE WHITE LAW OFFICE, Abingdon,
Virginia, for Appellees.

                               6
DIAZ, Circuit Judge:

      This appeal arises from the district court’s decision to

certify five related class action suits.                The plaintiffs in each

of the five classes generally allege that EQT Production Co. and

CNX   Gas    Co.    have     unlawfully     deprived    the   class    members    of

royalty     payments       from   the   production     of   coalbed   methane    gas

(“CBM”) in Virginia.              Four of the five classes claim that EQT

and CNX have improperly remitted royalty payments to escrow or

suspense accounts instead of to the royalty owners.                         All five

classes allege that EQT and CNX have been underpaying royalties.

      The defendants petitioned for permission to appeal the five

orders granting class certification pursuant to Federal Rule of

Civil Procedure 23(f).              We deferred ruling on the petitions,

consolidated the cases, and ordered formal briefing.

      We    now    grant    the    appeal   and   conclude    that    the   district

court abused its discretion when it certified the five classes.

As we explain below, Rule 23 requires a more rigorous analysis

as to whether the requirements for class certification have been

satisfied.        We therefore vacate and remand for reconsideration

of the plaintiffs’ motions for class certification.

                                            7
                                              I.

     A    brief    explanation           of       the    historical       and    statutory

background   is    necessary        to    assess         the    implications      of    class

certification in this case.

                                              A.

     CBM is a form of natural gas that resides in the pores of

coal.     When the pressure on coal is reduced--for example, from

natural    geologic   shifts        or    mining--CBM           is    released    from    the

surface of coal.

     Like    any   form       of    methane,            CBM     is    highly     explosive.

Historically, miners viewed CBM as a dangerous waste product and

ventilated it into the atmosphere as a safety measure.                                 By the

1970s, however, it became apparent that CBM could be used as an

energy    resource,     and        producers            began    to    capture     it     for

commercial use.       CBM has since been recognized in Virginia as a

“distinct mineral estate,” Harrison-Wyatt, LLC v. Ratliff, 593
S.E.2d 234, 238 (Va. 2004), which means that the rights to CBM

can be severed from the land.

     Questions regarding ownership of the CBM estate have long

plagued its commercial development in Virginia.                             CBM drilling

often occurs on tracts of land where different persons own the

subsurface gas rights (the “gas estate”) and coal mining rights

(the “coal estate”).          Until recently, severance deeds generally

did not mention CBM, much less assign ownership rights.                                    At

                                              8
times,       both    gas        estate    owners        and     coal   estate        owners       have

claimed      title        to    CBM.      Further         complicating           matters,     a    CBM

drilling unit--the area of land underlying and surrounding a CBM

well--typically                encompasses      60        to    80     acres.            Multiple,

separately owned tracts of land often underlie a single unit,

and each tract has the potential for an ownership conflict if

the coal estate has been severed from the gas estate.

                                                B.

       In 1990, the Virginia legislature enacted the Virginia Gas

and    Oil    Act,    Va.        Code    Ann.   § 45.1-361.1           et        seq.,   to   enable

producers to capture CBM “[w]hen there are conflicting claims to

the ownership of coalbed methane gas.”                           Id. § 45.1-361.22.               Upon

application from a CBM producer, the Act authorizes the Virginia

Gas and Oil Board to enter orders “pooling all interests or

estates      in     the    [CBM]        drilling        unit    for    the       development       and

operation         thereof.”             Id.         Once       issued,       a     pooling    order

consolidates all adjoining tracts of land with subsurface CBM

into    a    single       pool     or    unit   of        interests,        enabling      the      CBM

producer to extract the gas from a common reservoir.                                     Under the

Act, a pooling order deprives potential CBM owners of the right

to    prevent       CBM    extraction         but       does   entitle       CBM    owners        to   a

royalty payment.

       To apply for a pooling order, producers must send notice to

every “potential owner of an interest” in the CBM underlying a

                                                    9
planned         drilling    unit.     Id.    § 45.1-361.22.1.      The    notices

typically give each interest holder the option of reaching a

voluntary lease agreement with the CBM producer prior to the

entry of the final pooling order.                 A person who does not reach

such an agreement is typically “deemed . . . to have leased his

gas or oil interest to the [CBM] well operator.”                    Id. § 45.1-

361.22.6.         Under the provisions of the Board’s pooling orders,

deemed lessors are entitled to a royalty of one-eighth of the

net proceeds received by the CBM producer for their share of the

CBM.

       To identify the persons to whom they must send notice, CBM

producers have historically prepared ownership schedules listing

all        of    the      potential    interest     holders--and    conflicting

claimants--to the CBM involved in each drilling unit.                    Preparing

these schedules is often an arduous process, requiring extensive

research and the preparation of numerous lease reports and title

opinions.           The    Board’s    pooling    orders   adopt   the    ownership

schedules submitted by the CBM producers and memorialize the

ownership conflicts identified therein. 1

       1
       There is usually a gap between the issuance of a proposed
pooling order and the entry of a final order. During that time,
potential interest holders are permitted to contact the CBM
producer to reach a voluntary lease arrangement.        The CBM
producer must update the schedules accordingly. A person who is
deemed a lessor under the statute is likewise free to
demonstrate, through a “final legal determination of ownership,”
(Continued)
                                            10
       Whenever a CBM ownership conflict is identified, the Board

must    establish     an     escrow      account      to    receive       the   royalties

attributable to the disputed interest.                     See id. § 45.1-361.22.2.

The    CBM    producer     must    “deposit        into    the   escrow    account     one-

eighth of all proceeds attributable to the conflicting interests

plus all proceeds in excess of ongoing operational expenses.”

Id. § 45.1-361.22.4.              As of January 2010, the Board’s escrow

account contained over $25 million.

       The Act provides three ways for persons with a disputed

ownership claim to CBM to gain release of the escrowed funds.                            A

claimant       can   obtain       “(i)   a    final       decision    of    a   court   of

competent jurisdiction adjudicating the ownership of [CBM] as

between [conflicting claimants]; (ii) a determination reached by

an arbitrator . . . ; or (iii) an agreement among all claimants

owning       conflicting    estates      in    the    tract      in   question    or    any

undivided interest therein.”             Id. § 45.1-361.22.5.

                                             II.

       In this consolidated appeal, we consider the claims of five

separate plaintiff classes, comprising actual or potential CBM

that they are the true owner of the CBM interest. See Va. Code
Ann. § 45.1-361.22.6.   Any such changes that occurred in this
case are not material to our resolution of the appeal.

                                              11
interest holders, against two CBM producers, EQT and CNX.                               The

Adair, Adkins, and Kiser cases involve claims against EQT, while

Hale and Addison involve claims against CNX.

                                            A.

        Defendants      EQT   and   CNX     operate       numerous       CBM    wells    in

Virginia, many of which are subject to Board pooling orders. 2                           To

apply    for    Board    pooling      orders,      both     EQT    and    CNX    prepared

schedules attempting to identify every potential CBM interest

holder    and   any     ownership     conflict      involved       in    each    drilling

unit.

     In     their     submissions      to    the    Board,        EQT    and    CNX   have

consistently        taken     the   position        that     a     CBM    interest       is

conflicted if, for a given tract of land that is part of a

drilling unit, different persons own the gas estate and the coal

estate.         Because       Board     pooling       orders        incorporate         the

defendants’     schedules,      those      orders    memorialize         the    ownership

conflicts identified by EQT and CNX.

     Buckhorn        Coal     Co.   LLP,     Commonwealth          Coal    Corp.,       and

Harrison-Wyatt,         LLC    (collectively,         the     “BCH-W       defendants”)

intervened as defendants in the two cases against CNX--Hale and

     2
       As of 2011, EQT operated approximately 1,977 CBM wells in
Virginia, between 250 and 400 of which were subject to Board
pooling orders.    As of 2009, CNX operated approximately 3,200
CBM wells in Virginia, approximately 500 of which were subject
to pooling orders.

                                            12
Addison.      All of the BCH-W defendants have lease arrangements

with CNX granting it the right to drill wells into coal seams

owned by the BCH-W defendants.         Based on these agreements, the

BCH-W defendants claim an interest in the CBM at issue in this

case. 3

                                  B.

      The plaintiff classes can be categorized by their shared

circumstances and requested relief.

                                  1.

      Four of the five classes--Adair, Addison, Hale, and Kiser--

consist of persons who have never received CBM royalties for a

CBM interest they claim to own. 4         As defined by the district

court, the classes include (1) all persons or their successors,

(2) whom EQT or CNX have identified as being the owners of the

gas estate in a tract underlying a CBM drilling unit, (3) whose

interest in the CBM is “in conflict” because a different person

owns the coal estate in the same tract.

      3
       Four of the five class complaints initially named as
defendants the persons and entities that EQT and CNX identified
as conflicting coal estate owners in the defendants’ submissions
to the Board.   The plaintiffs subsequently amended each of the
complaints to omit the coal owners as defendants on the theory
that the coal owners were not necessary for a court to determine
CBM ownership.
      4
          We refer to these cases as the “ownership” classes.

                                  13
       The ownership classes can be further broken down.                     In two

cases       (the       “force    pooled”     classes)--Adair         and   Hale--the

plaintiffs’ purported CBM interests have been force pooled by a

Board order.

       In the other two ownership cases (the “voluntary lease”

classes)--Kiser          and    Addison--the     defendants     entered    voluntary

lease        arrangements         with     the      putative     class      members.

Nonetheless, the class members’ CBM interests have been subject

to pooling, and their royalties have either been paid into Board

escrow accounts or internally withheld by EQT and CNX. 5

       The primary object of the ownership classes is to obtain

the release of escrowed or suspended royalties.                       To that end,

they       seek    a    declaratory      judgment    that:     (1)   the   ownership

conflict EQT and CNX identified between gas estate owners and

coal estate owners is “illusory”; (2) as gas estate owners, the

class members are entitled to the CBM royalties withheld; and

(3) any royalties held in escrow or internally suspended by EQT

and CNX as a result of the “illusory” ownership conflict must be

paid to the class members.

       5
       When EQT and CNX obtained consent from all potential CBM
interest holders, they pooled the relevant interests themselves
without seeking a Board order. But if the defendants deemed the
gas estate owner’s interest to be conflicted, they internally
suspended payment of the royalties, effectively escrowing them.

                                            14
                                            2.

       The    fifth    class--Adkins--is             unique,    as    it     consists    of

persons whose CBM ownership interest is not disputed.                            Instead,

the putative class includes persons who have received a royalty

from   EQT    at    some     point    since     January    1,    1995.        The   Adkins

plaintiffs     allege        that    EQT   has    systematically           underpaid    CBM

royalties.         The four other classes make similar claims against

the defendants.            Each of the classes seek a complete accounting

of the royalties EQT and CNX have remitted to class members,

paid into escrow, or internally suspended.

       In addition to the declaratory judgment relief sought by

the ownership classes, each class alleges a variety of other

theories of recovery, including tort, property, and contract,

and they all seek punitive damages.

                                            C.

       The lead plaintiffs filed the various complaints between

June   2010    and     April      2011.        The    district       court    coordinated

discovery and pretrial proceedings in the five cases, referring

many of the preliminary motions to a magistrate judge.

       After discovery and numerous hearings, the magistrate judge

issued   a    report       and    recommendation        (“R&R”)       supporting       class

certification         of    the     proposed     classes       and   claims     with    two

exceptions.        First, the magistrate judge found the claims of the

                                            15
class representative in Kiser--then Eva Mae Adkins 6--atypical of

the other class members, and thus recommended against certifying

that class until a suitable representative could be substituted.

See Adair v. EQT Prod. Co., Nos. 1:10–cv–00037, 1:10–cv–00041,

1:11–cv–00031, 1:10–cv–00059, 1:10–cv–00065, 2013 WL 5429882, at

*42, *44-*45 (W.D. Va. Sept. 5, 2013).                 Second, the magistrate

judge    recommended     against     certifying     the    breach   of    contract

claims related to the underpayment of royalties in Kiser and

Adkins because the class members had different lease agreements

with EQT.    See id. at *42.         Such variation, the magistrate judge

concluded, defeated Rule 23’s requirement that class claims be

typical of one another.

     The district court adopted the magistrate judge’s R&R but

certified additional classes and claims.               See Adair v. EQT Prod.

Co., No.    1:10-CV-00037,     2013 WL 5442369      (W.D.   Va.    Sept.   30,

2013);    Addison   v.   CNX   Gas    Co.,    No.   1:10-CV-00065,        2013 WL
5442373 (W.D. Va. Sept. 30, 2013); Adkins v. EQT Prod. Co., No.

1:11-CV-00031, 2013 WL 5442378 (W.D. Va. Sept. 30, 2013); Hale

v. CNX Gas Co., No. 1:10-CV-00059, 2013 WL 5429901 (W.D. Va.

     6
        Although Eva Mae Adkins was replaced as the class
representative in Kiser for certification purposes, the district
court certified her as the class representative in the case we
call Adkins.    As a result of these changes, some of the case
names below differ from what we use on appeal. The case we call
Kiser was called Adkins below.   The case we refer to as Adkins
was referred to as Legard below.

                                       16
Sept. 30, 2013); Legard v. EQT Prod. Co., No. 1:10-CV-00041,

2013 WL 5429885 (W.D. Va. Sept. 30, 2013).               Specifically, the

district    court   substituted     Julie       A.   Kiser   as     the    class

representative in Kiser and certified the class.                   See Adkins,

2013 WL 5442378, at *2.         Additionally, and without explanation,

the court certified the breach of contract claims in Kiser and

Adkins.    See id. at *1; Legard, 2013 WL 5429885, at *1.

     Finally, the court revised the class definitions for each

of the classes.     Relevant to this appeal, it added language in

Adkins--the pure royalty underpayment case--to limit the class

to include only those royalty owners whose leases are “silent as

to the deduction of costs, according to the business records

maintained by EQT.”       See Legard, 2013 WL 5429885, at *1.                 In

Kiser, one of the voluntary lease cases, the court certified a

class of all lease holders, but also certified a subclass of

persons “whose lease is silent as to the deduction of costs.”

Adkins, 2013 WL 5442378, at *1.             The district court did not

clarify what it meant by “silent as to the deduction of costs”

in either of the certification orders.

     The    defendants    timely   filed    petitions    pursuant     to     Rule

23(f) for    permission    to   appeal    the   five   orders     granting   the

plaintiffs’ motions for class certification.             We deferred ruling

on the petitions, consolidated the actions, and ordered briefing

on the merits.

                                     17
                                     III.

       As a threshold matter, we first consider the defendants’

petitions for permission to appeal under Federal Rule of Civil

Procedure   23(f).     That   rule   authorizes    courts   of   appeals   to

review decisions granting or denying class certification on an

interlocutory basis.      See Fed. R. Civ. P. 23(f).

       We apply a five-factor test to assess the appropriateness

of granting a Rule 23(f) petition.          See Lienhart v. Dryvit Sys.,

Inc., 255 F.3d 138, 145 (4th Cir. 2001).            The relevant factors

are:

       (1)   whether   the    certification  ruling   is   likely
       dispositive   of    the   litigation;  (2)   whether   the
       district court’s certification decision contains a
       substantial weakness; (3) whether the appeal will
       permit the resolution of an unsettled legal question
       of general importance; (4) the nature and status of
       the litigation before the district court (such as the
       presence of outstanding dispositive motions and the
       status of discovery); and (5) the likelihood that
       future events will make appellate review more or less
       appropriate.

Id. at 144.     We consider these factors on a holistic basis, but

the court should grant the petition, notwithstanding the other

factors, “[w]here a district court’s certification decision is

manifestly erroneous and virtually certain to be reversed on

appeal.”    Id. at 145.

       As discussed in greater detail below, class certification

in this case was manifestly improper.             We therefore grant the

                                      18
petitions      for    review      and   assess    the   merits    of   the    district

court’s certification orders.

                                          IV.

       We review a district court’s decision to certify a class

for abuse of discretion.                Brown v. Nucor Corp., 576 F.3d 149,

152 (4th Cir. 2009).               A district court abuses its discretion

when it materially misapplies the requirements of Rule 23.                         See

Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 424 (4th Cir.

2003).

       Rule 23(a) requires that the prospective class comply with

four     prerequisites:        (1)      numerosity;      (2)     commonality;      (3)

typicality; and (4) adequacy of representation.                         See Fed. R.

Civ. P. 23(a).         In addition, “the class action must fall within

one    of   the      three     categories        enumerated      in    Rule    23(b).”

Gunnells, 348 F.3d at 423.

       Here,    the     plaintiffs        seek     certification       under     Rules

23(b)(2) and 23(b)(3).             Rule 23(b)(2) authorizes class treatment

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.”                     Fed. R. Civ. P.

23(b)(2).       As the Supreme Court has instructed, “[t]he key to

the (b)(2) class is the indivisible nature of the . . . remedy

                                           19
warranted.”        Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541,

2557 (2011) (internal quotation marks omitted).                            Certification

under      this   provision       is    appropriate       “only          when    a     single

injunction or declaratory judgment would provide relief to each

member of the class.”           Id.

      By     contrast,         certification        under         Rule     23(b)(3)       is

appropriate       when   all    of    the   prerequisites          of    Rule   23(a)     are

satisfied and two other requirements are met.                           See id. at 2558.

Specifically,       (1)     common      questions       of        law    or     fact    must

predominate over any questions affecting only individual class

members; and (2) proceeding as a class must be superior to other

available methods of litigation.                 See Fed. R. Civ. P. 23(b)(3).

      A party seeking class certification must do more than plead

compliance with the aforementioned Rule 23 requirements.                                  See

Wal-Mart, 131 S. Ct. at 2551 (“Rule 23 does not set forth a mere

pleading standard.”).            Rather, the party must present evidence

that the putative class complies with Rule 23.                                See Comcast

Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013).

      To determine whether the party seeking certification has

carried its burden, a district court may need to “probe behind

the     pleadings    before      coming      to    rest      on    the     certification

question.”        Id. (internal quotation marks omitted).                            Although

Rule 23 does not give district courts a “license to engage in

free-ranging       merits      inquiries    at    the   certification           stage,”     a

                                            20
court should consider merits questions to the extent “that they

are relevant to determining whether the Rule 23 prerequisites

for class certification are satisfied.”                     Amgen Inc. v. Conn.

Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1194-95 (2013).

     It is the plaintiffs’ burden to demonstrate compliance with

Rule 23, but the district court has an independent obligation to

perform   a     “rigorous        analysis”      to    ensure      that    all    of   the

prerequisites have been satisfied.                   See Wal-Mart, 131 S. Ct. at

2551.

                                           V.

     In light of the foregoing principles, we first consider the

district court’s decision to certify the four classes asserting

CBM ownership claims.            At bottom, the ownership classes seek a

declaration that the class members are the true owners of CBM,

as well as payment of the royalties they believe EQT and CNX

have improperly escrowed or withheld.

     After reviewing the magistrate judge’s R&R and the district

court’s   certification          orders,     we    conclude    that      the    district

court abused its discretion in at least two ways.                              First, it

failed to rigorously analyze whether the administrative burden

of identifying class members in the ownership cases would render

class proceedings too onerous.                    Second, the court improperly

lowered   the    burden     of    proof    the       plaintiffs    must    satisfy    to

                                           21
demonstrate         the      prospective      classes’           compliance      with      Rule

23(a)’s commonality requirement.                   We address each issue in turn.

                                              A.

       We    have    repeatedly      recognized        that       Rule   23    contains     an

implicit threshold requirement that the members of a proposed

class be “readily identifiable.”                     Hammond v. Powell, 462 F.2d
1053, 1055 (4th Cir. 1972); see also In re A.H. Robins Co., 880
F.2d 709, 728 (4th Cir. 1989) (“Though not specified in [Rule

23], establishment of a class action implicitly requires . . .

that    there      be   an    identifiable         class    . . . .”),        abrogated      on

other    grounds,         Amchem   Prods.,     Inc.    v.        Windsor,     521 U.S. 591

(1997).          Our sister circuits have described this rule as an

“ascertainability” requirement.                    See, e.g., Marcus v. BMW of N.

Am., LLC, 687 F.3d 583, 592-94 (3d Cir. 2012); John v. Nat’l

Sec. Fire & Cas. Co., 501 F.3d 443, 445 (5th Cir. 2007); In re

Initial Pub. Offerings Sec. Litig., 471 F.3d 24, 44-45 (2d Cir.

2006).

       However      phrased,       the   requirement        is     the   same.      A   class

cannot      be    certified     unless    a   court        can    readily     identify      the

class members in reference to objective criteria.                               See Marcus,
687 F.3d at 593; see also Crosby v. Soc. Sec. Admin., 796 F.2d
576, 579-80 (1st Cir. 1986) (finding that a class failed to

satisfy Rule 23 requirements because it would be impossible to

                                              22
identify class members without “individualized fact-finding and

litigation”).

     The plaintiffs need not be able to identify every class

member at the time of certification.               But “[i]f class members

are impossible to identify without extensive and individualized

fact-finding       or    ‘mini-trials,’     then     a   class       action     is

inappropriate.”         Marcus, 687 F.3d at 593; see also 7A Charles

Alan Wright et al., Federal Practice & Procedure § 1760 (3d ed.

2005) (“[T]he requirement that there be a class will not be

deemed satisfied unless . . . it is administratively feasible

for the court to determine whether a particular individual is a

member.”).

     Here, the proposed classes raise serious ascertainability

issues   because    they    are   defined   to    include    both    former    and

current gas estate owners.

     The   district      court    defined   the    classes    to    include    all

persons,     and   their    successors-in-interest,          who    EQT   or   CNX

identified in their filings with the Board as being the owners

of a gas estate, whose interest in CBM is conflicted because a

different person owns the coal estate in the same tract. 7                     The

court correctly concluded that some class members will be easy

     7
       Because the district court accepted the magistrate judge’s
R&R with only a few exceptions, we refer to the magistrate
judge’s findings in the R&R as the district court’s findings.

                                      23
to identify because the classes are all defined in reference to

the ownership schedules that EQT and CNX submitted to the Board.

When       ownership         has    not       changed     hands,     identifying        class

membership may be as simple as cross-referencing the ownership

schedules the defendants themselves prepared.                             See Adair, 2013
WL 5429882, at *33.

       Complications arise, however, because ownership of the gas

estate has not been static since EQT and CNX first prepared the

ownership schedules.                Some of the schedules were prepared some

twenty years ago, and they have not been updated to account for

changes      in    ownership.           The    schedules     therefore      cannot      aid   a

court in ascertaining those class members who obtained their

interest      in       the   gas    estate      after     the     schedules      were   first

prepared. 8

       The    district          court     largely       glossed    over    this    problem,

merely noting that any ownership changes could be determined by

reference         to    local      land   records.         See     id.     But    resolving

       8
       With the exception of Adkins, neither the magistrate judge
nor the district court specifically defined the class periods
for any of the classes.     The class period in Adkins clearly
extends from January 1, 1995 to the present.     See Legard, 2013
WL 5429885, at *1.   For the other four classes, we assume that
the class period begins on the first date the defendants
submitted ownership schedules to the Board as part of their
applications for pooling orders and extends through the present.
Although the record is not entirely clear as to this date, the
earliest reference in the record to a pooling order involving
the defendants appears to be June 1992.

                                                24
ownership      based    on     land    records   can    be    a    complicated      and

individualized process.             Cf. Johnson v. Kan. City S., 224 F.R.D.
382,     389    (S.D.        Miss.     2004)     (denying         certification       on

ascertainability         grounds      when     determining        class      membership

“would      require    individualized        review    of    thousands       of    title

documents containing differing and diverse conveyance language

that    would    have    to    be     analyzed   according        to   the    specific

language used and applicable case law to ascertain the intention

of the parties to the conveyances and the legal effect of the

instruments”), aff'd sub nom. Johnson v. Kan. City S. Ry. Co.,

208 F. App'x 292, 297 (5th Cir. 2006).                   As the record in this

case highlights, numerous heirship, intestacy, and title-defect

issues plague many of the potential class members’ claims to the

gas estate.      In our view, these complications pose a significant

administrative barrier to ascertaining the ownership classes.

       On    appeal,     the    plaintiffs       minimize     these       challenges,

arguing that a court can identify current gas estate owners at

the back-end.          According to them, ownership issues only affect

the      plaintiffs’          entitlement        to     royalties,           not     the

ascertainability of class membership.                 See Appellees’ Br. at 58-

60.

       We disagree.          The fact that verifying ownership will be

necessary for the class members to receive royalties does not

mean it is not also a prerequisite to identifying the class.

                                          25
Without      even    a   rough    estimate      of   the   number   of   potential

successors-in-interest, we have little conception of the nature

of the proposed classes or who may be bound by a potential

merits ruling.           Lacking even a rough outline of the classes’

size       and    composition,     we     cannot     conclude     that   they    are

sufficiently ascertainable.

       On    remand,     the     district       court   should    reconsider     the

ascertainability issues posed by the ownership classes.                         At a

minimum, the district court should endeavor to determine the

number      of    potential    class     members     who   have   obtained      their

interest in the gas estate after the defendants first prepared

the ownership schedules.                The court should also give greater

consideration to the administrative challenges it will face when

using land records to determine current ownership, and assess

whether any trial management tools are available to ease this

process.         The district court should also determine whether it is

possible to adjust the class definitions to avoid or mitigate

the administrative challenges we have identified. 9

       9
       Although the issue was briefed and argued below, the
district court did not address whether it is possible to define
the classes without creating a fail-safe class. See Messner v.
Northshore Univ. HealthSys., 669 F.3d 802, 825 (7th Cir. 2012)
(explaining that a fail-safe class “is defined so that whether a
person qualifies as a member depends on whether the person has a
valid claim”).   On remand, the district court should consider
this issue as part of its class-definition analysis.

                                           26
                                        B.

     In   addition     to   questioning         the   ascertainability      of   the

ownership classes, the defendants challenge the district court’s

conclusion that the ownership classes comply with Rule 23(a)’s

commonality requirement.        As discussed previously, Rule 23(a)(2)

requires a plaintiff to show that “there are questions of law or

fact common to the class.”        Fed. R. Civ. P. 23(a)(2).

     Although    the   rule    speaks      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, 131 S. Ct. at 2551

(internal quotation marks omitted).                   A single common question

will suffice, id. at 2556, but it must be of such a nature that

its determination “will resolve an issue that is central to the

validity of each one of the claims in one stroke,” id. at 2551.

     As   we    explain     below,   the     plaintiffs       in   the   ownership

classes have yet to identify such a question.

                                        1.

     To a great extent, commonality for the ownership classes

turns on the proper meaning of the Supreme Court of Virginia’s

decision in Harrison-Wyatt.          In that case, the court considered

a 19th century severance deed conveying “all the coal in, upon,

and underlying” certain tracts of land.                    Harrison-Wyatt, 593
S.E.2d at 235 (internal quotation marks omitted).                        The court

                                        27
held that the conveyance of coal did not transfer title to the

CBM estate, and that the grantor--the surface owner--retained

ownership of the CBM.           See id. at 238.           The Virginia legislature

subsequently codified that holding as part of the Virginia Oil

and Gas Act, providing that “[a] conveyance, reservation, or

exception of coal shall not be deemed to include coalbed methane

gas.”    Va. Code Ann. § 45.1-361.21:1.

       The plaintiffs interpret Harrison-Wyatt and the Act to mean

that a severance deed conveying coal never transfers title to

CBM, and that the owner of the gas estate in a tract of land

owns    the    underlying       CBM    as    a    matter      of    law.     Since      the

plaintiffs have all been identified as gas estate owners by EQT

and    CNX,   they   believe     the    question         of   CBM   ownership     can    be

resolved on a classwide basis--and in their favor.

       The    defendants    say       that       the   relevant      authorities     only

establish that deed language conveying coal--and only coal--does

not transfer title to CBM.                  But, they contend, deed language

varies significantly, and broader conveyances may transfer CBM.

They maintain that CBM ownership can only be determined on a

deed-by-deed     basis     by    examining         the    intent     of    the   parties.

According to the defendants, the need for such individualized

review defeats commonality.

       Although the district court did not rule on the meaning of

Harrison-Wyatt, it agreed with the plaintiffs that the case gave

                                             28
rise    to   at     least    one    common    question    capable     of   classwide

resolution.        See Adair, 2013 WL 5429882, at *36.                Specifically,

the    court      agreed     that    whether      Harrison-Wyatt      entitles     the

plaintiffs to CBM royalties             is a question “subject to a common

resolution.”        Id. 10

       We conclude that certification based on this question was

premature.         Prior to certifying a class, a district court must

definitively determine that the requirements of Rule 23 have

been satisfied, even if that determination requires the court to

resolve      an    important       merits    issue.      See    Gariety    v.    Grant

Thornton,      LLP,    368 F.3d 356,    365-66   (4th    Cir.   2004).      The

district court failed to do so here by refusing to resolve--one

way    or    the      other--the      implications       of    Harrison-Wyatt     for

commonality purposes.

       10
       The plaintiffs also claim that the ownership conflict EQT
and CNX identified between gas estate owners and coal estate
owners is “illusory,” meaning that the existence of a severance
deed does not automatically signal an ownership conflict.    See
Appellees’ Br. at 23. The district court agreed that this issue
was also subject to classwide resolution and independently
supported certification. See Adair, 2013 WL 5429882, at *36.
     As we read the complaints and the briefs, however, the
plaintiffs ultimately want a much broader declaration--that
they, as gas estate owners, are entitled to CBM royalties. See,
e.g., Appellees’ Br. at 27.         Although this question is
ultimately a merits issue, we believe it should be the focus of
the commonality inquiry.   The only other question discussed by
the district court and identified by the plaintiffs--whether the
ownership conflict is “illusory”--does not provide a suitable
basis for class certification because answering that question
would not advance the litigation.   See Wal-Mart, 131 S. Ct. at
2551.

                                             29
       Here, the meaning of Harrison-Wyatt is inescapably part of

the Rule 23(a) analysis.                  To even demonstrate commonality, the

plaintiffs must prevail on their reading of the case.                                    That is,

they must establish that the common question--who owns the CBM--

will be answered in their favor.                             If Harrison-Wyatt does not

support such a conclusion, the plaintiffs have no other argument

as to how CBM ownership can be resolved on a classwide basis,

and they will have failed to carry their burden of establishing

even     a    single      common       question.               Cf.     Phillips         v.     Asset

Acceptance, LLC, 736 F.3d 1076, 1081 (7th Cir. 2013) (concluding

that   the     district        court      erred     when      it   declined        to   decide    a

merits       issue    before     certifying            the    class    when   resolving         the

question would “determine whether the suit could be maintained

as a class action at all”).

       The     district    court       abused          its    discretion      by    failing      to

resolve the meaning of Harrison-Wyatt prior to certification.

Although       the     court     noted        its      probable       agreement         with    the

plaintiffs’          reading    of     the    case,      it     declined      to    decide       the

matter one way or the other.                      By leaving the issue unresolved,

the court improperly left open, at the time of certification,

whether       CBM    ownership       is      an   individual          or   common       question.

Certifying a class in the face of such uncertainty runs afoul of

the rule that “actual, not presumed, conformance with Rule 23(a)

                                                  30
[is] . . . indispensable.”          Gen. Tel. Co. of Sw. v. Falcon, 457
U.S. 147, 160 (1982).

                                         2.

     We also do not believe Harrison-Wyatt and the Virginia Oil

and Gas Act can provide classwide answers to the question of CBM

ownership,    at     least    as   the    classes    are    currently      defined.

Although we do not hold that the plaintiffs can never satisfy

Rule 23’s commonality requirement, we believe the district court

misread the implications of those authorities when it certified

the ownership classes.

     We read Harrison-Wyatt and the Act to establish only that a

surface    owner’s    conveyance     of    coal--and       only   coal--does      not

automatically transfer title to CBM.                But many of the severance

deeds at issue in this case explicitly convey much more than

coal.     For example, one deed in Hale confers “[a]ll the coal,

minerals,    petroleum,       metallic    substances,       fluids   and    gas    of

every description, in, upon, or underlying that certain tract of

land.”     J.A. 1780.        A different Hale deed grants “all the coal

and mineral of every description, in, on and underlying that

certain tract.”        J.A. 1784.         Yet another deed from the same

class transfers “all the coal and other substances, properties,

rights and interests in and upon that certain tract of land

. . . .”     J.A. 1793.        Neither Harrison-Wyatt nor the Act fully

resolves who owns the CBM under these broader deeds.

                                         31
      We also note that lower Virginia courts have not adopted

the    plaintiffs’   reading    of   Harrison-Wyatt.         Instead,     they

continue to resolve CBM ownership conflicts on a deed-by-deed

basis, looking at the language of the deeds in each case. 11              See,

e.g., Wade v. Hugh MacRae Land Trust, CL09000476-00, at 3 (Va.

Cir. Ct. Aug. 31, 2010) (suggesting that Harrison-Wyatt gives

rise to a presumption that a severance deed conveying only coal

does not transfer title to the CBM estate, but noting that such

a presumption is rebuttable). 12

      The plaintiffs’ reading is also at odds with longstanding

principles of Virginia contract law, which require courts to

review deed language to ascertain the parties’ intent.                    See,

e.g., Vicars v. First Va. Bank-Mountain Empire, 458 S.E.2d 293,

294-95 (Va. 1995) (stating that ownership rights are determined

by    the   construction   of   deeds,    which   requires    a   court    to

determine the grantor’s intent); Virginian Ry. Co. v. Avis, 98
S.E. 638, 639 (Va. 1919) (“The purpose of all written . . .

      11
        The defendants argue that a court cannot determine CBM
ownership in the absence of those persons whom EQT and CNX
identified as the coal estate owners in their submissions to the
Board.   Although all such coal estate owners may not have a
valid claim to CBM, we believe they should be allowed to assert
their potential interests--a right that the current class
proceedings would not readily afford.
      12
        The order granting summary judgment to a land owner
seeking payment of CBM royalties in Hugh MacRae is reproduced at
J.A. 706-09.

                                     32
conveyances         is     to    say    what      the       parties     mean,   and    the     only

legitimate         or    permissible         object         of    interpreting    them       is   to

determine the meaning of what the parties have said therein.”). 13

       If        ownership       cannot      be    established           on     the    basis      of

Harrison-Wyatt and the Act alone, we see no way for the district

court       to    answer        the    ownership        question       on   a   common    basis.

Rather, the court will need to resolve each ownership conflict

with reference to specific deed language.                                Such individualized

review precludes a finding of commonality.                              See, e.g., Isaacs v.

Sprint Corp., 261 F.3d 679, 682 (7th Cir. 2001) (finding class

certification “decidedly inappropriate” when the case involved

“different         conveyances          by   and       to    different      parties      made     at

different times over a period of more than a century”); Johnson,

208 F. App’x at 297 (concluding that a class failed to satisfy

Rule    23(a)       when     the      case   involved            “a   multitude   of    property

       13
        The Supreme Court of Virginia has granted review of
Belcher v. Swords Creek Land Partnership, CL11000283-00 (Va.
Cir. Ct. Sept. 17, 2013), to resolve a number of questions that
directly implicate this case.     Among other things, the court
will consider whether: (1) a deed conveying “coal and other
things” conveys property rights to CBM; (2) a coal estate
owner’s ownership of coal and appurtenant rights includes the
right to extract and recover CBM; and (3) a surface owner’s
claim to all of the CBM royalties--to the exclusion of the coal
estate owner--is a form of unjust enrichment. Without limiting
the district court’s discretion, we encourage it to review the
implications of any ruling in that case when it considers anew
whether the ownership question can produce common answers.

                                                  33
owners,     each   with   individual          conveyances     stating     different

things”).

     This is not to say that certification could never be proper

for any of the ownership classes or some subdivision thereof.

Harrison-Wyatt     may    provide    a   common     answer    to    the   ownership

question for a class of gas estate owners whose severance deeds

convey coal and only coal.          Likewise, the plaintiffs may be able

to identify a finite number of variations in deed language, such

that the ownership question is answerable on a subclass basis.

Cf. Fisher v. Va. Elec. & Power Co., 217 F.R.D. 201, 216-17

(E.D. Va. 2003) (granting certification when the easements at

issue     were   “the   product     of   a    limited   set    of   substantially

similar conveyances,” so that “determining the relevant property

interest [would] require analysis of only a limited array of

easement language and the vast majority of conveyances at issue

contain[ed] substantially similar language”).                      That the deeds

may be classifiable will not, by itself, mean that there is an

adequate common question.           But it may aid the district court’s

analysis of Rule 23(a)’s requirements. 14

     14
        As the defendants suggest, the district court may also
need to consider whether different methods of CBM extraction
affect CBM ownership rights, a question that Harrison-Wyatt
explicitly left open. See 593 S.E.2d at 235, 238 n.3.

                                         34
      As   it   stands,      however,    neither     the    plaintiffs      nor   the

district court have conducted the necessary substantive analysis

of the severance deeds at issue in this case.                    Neither we nor

the district court knows the number of deed variations or the

materiality of the discrepant language.                 Without such evidence,

the    plaintiffs      have     failed        to    carry     their     burden      of

demonstrating        commonality.             By    certifying        the    classes

notwithstanding       this    failure,    the      district   court     abused     its

discretion      by   relaxing   the     plaintiffs’     burden   of     proof     with

respect to Rule 23’s commonality requirement. 15

                                         VI.

      The district court also certified the class claims relating

to EQT’s and CNX’s alleged underpayment of royalties.                       We again

      15
         Because we conclude that the plaintiffs have not
demonstrated   the   ownership   classes’   compliance   with the
ascertainability and commonality requirements, we take no
position today on the adequacy of the district court’s findings
with respect to the other Rule 23(a) prerequisites.           See
Gunnells, 348 F.3d at 434 n.11.     Likewise, we need not discuss
whether   the   ownership   classes   can  satisfy   any   of the
requirements of Rule 23(b).     See Broussard v. Meineke Discount
Muffler Shops, Inc., 155 F.3d 331, 337 n.3 (4th Cir. 1998).
     On remand, however, the district court should rigorously
analyze each class’s compliance with all of the Rule 23
requirements.   This will almost certainly require the court to
reconsider additional obstacles to class treatment under the
other provisions of Rule 23.

                                         35
conclude that the district court abused its discretion when it

certified these classes.

                                                A.

       Before    turning          to    the    merits          of    the     district          court’s

certification         decision,         we    first          clarify       the     scope       of   our

review.        The    defendants          have         asked    us     to    exercise          pendent

appellate jurisdiction over an earlier ruling of the district

court.     Specifically, they ask that we consider the district

court’s    determination               that    Virginia             courts       would     apply      a

doctrine called the “first marketable product” rule to determine

whether the defendants have underpaid royalties.

       Broadly speaking, the first marketable product rule holds

that     all    oil        and    gas    lessees             have    an      implied       duty      of

marketability.             That is, lessees have an implied duty to bear

the cost of putting the oil and gas in a marketable condition

after     it    is         removed       from          the     well,         including          common

postproduction             expenses       for          gathering,           compressing,            and

dehydrating      oil       and    gas.        See      generally          Byron     C.   Keeling      &

Karolyn King Gillespie, The First Marketable Product Doctrine:

Just    What    is    the        Product,     37       St.     Mary’s       L.J.    1,     5   (2005)

(summarizing         the    doctrine).             A    number       of     state    courts         have

adopted variations of the doctrine to guide their interpretation

of oil and gas leases.                 See, e.g., Rogers v. Westerman Farm Co.,

29 P.3d 887, 902-03 (Colo. 2001) (en banc); Gilmore v. Superior

                                                36
Oil Co., 388 P.2d 602, 606-07 (Kan. 1964); Mittelstaedt v. Santa

Fe Minerals, Inc., 954 P.2d 1203, 1205 (Okla. 1998).

       Many of the plaintiffs’ theories of royalty underpayment in

this    case      depend,    either   explicitly       or   implicitly,   on     the

existence of an implied duty of marketability.                     For example,

according to some of the classes, the first marketable product

rule renders illegitimate many of the deductions the defendants

have taken from the plaintiffs’ royalty payments.

       In   an    earlier    ruling   denying    the    defendants’     motion    to

dismiss,     the    district    court    held   that    Virginia   courts      would

apply the first marketable product rule, and that the doctrine

would guide its analysis of the royalty underpayment claims in

this case. 16       On appeal, the defendants ask us to review that

non-final judgment.

       Under the doctrine of pendent appellate jurisdiction, “we

retain the discretion to review issues that are not otherwise

subject      to     immediate     appeal      when     such    issues     are     so

interconnected        with    immediately     appealable      issues    that    they

warrant concurrent review.”             Rux v. Republic of Sudan, 461 F.3d
461, 475 (4th Cir. 2006).             We exercise jurisdiction under this

       16
         EQT also moved to certify to the Supreme Court of
Virginia the question of whether Virginia courts would apply the
first marketable product rule.    The district court denied the
request.

                                         37
exception        sparingly,         and     only          when:    (1)      “an     issue       is

inextricably       intertwined          with     a    question       that    is    the     proper

subject     of     an     immediate         appeal”          or     (2)     “review        of     a

jurisdictionally          insufficient           issue       is    necessary        to     ensure

meaningful       review      of    an    immediately         appealable       issue.”           Id.

(internal quotation marks omitted).

      We decline to exercise such discretion here.                                The district

court did not mention the implied duty of marketability in its

certification decision, which suggests that the issue was not

inextricably       intertwined            with       its     determination          that        the

plaintiffs satisfied Rule 23’s requirements.

      Additionally,          we    need     not      revisit       the    district        court’s

marketability       ruling        to    decide       the    central       issue    on     appeal:

whether     the    district         court      abused        its     discretion          when   it

certified the claims of the five classes alleging underpayment

of   royalties.         As    we       discuss       in    greater       detail    below,       the

classes do not satisfy Rule 23’s requirements even if we assume

the first marketable product rule applies to their claims.

                                               B.

      We   next    turn      to    the    substance          of    the    district        court’s

decision    to    certify         the   classes       asserting          claims    of     royalty

underpayment.        The classes’ theories of underpayment vary, but

there are some common threads.                       For example, all five classes

allege that the defendants sold the CBM at too low a price, in

                                               38
part,     by   selling   the    gas   to    affiliates     in   non-arms-length

transactions.      Most of the classes also contend that EQT and CNX

have taken improper or excessive deductions, for example, for

common    postproduction       expenses.      Based   on    these    and   other

diverse theories, 17 the plaintiffs assert a host of property,

tort, and breach of contract/unjust enrichment claims arising

from the defendants’ purported underpayments.

     The district court certified these classes as Rule 23(b)(3)

class actions.      See Adair, 2013 WL 5429882, at 38. 18             As noted

     17
       The other claims are class-specific. The Hale and Adair
classes claim that EQT and CNX began producing CBM before
receiving permission from the Board and without paying royalties
on that unauthorized production.      In Hale and Addison, the
plaintiffs claim that CNX failed to calculate royalties based on
its actual proceeds by not including proceeds received from
hedging and swap transactions.        In Hale and Kiser, the
plaintiffs allege that EQT and CNX improperly deducted certain
taxes from their royalty payments.       In Kiser, Addison, and
Adkins, the classes claim that EQT and CNX should have based
royalty calculations on the amount of CBM produced at the
wellhead, rather than the amount actually sold, but that the
defendants improperly required the plaintiffs to bear the cost
of CBM lost during the production process. Finally, the Adkins
class alleges that EQT misled class members by failing to
disclose all of the deductions it was taking on the check stubs
it remitted to royalty owners as proof of sale.
     18
         The district court did not clarify whether it was
certifying the classes’ additional demand for an accounting
under Rule 23(b)(2) or Rule 23(b)(3).    Failing to specify the
basis for certifying that claim was an abuse of discretion, as
the district court must ensure that every class falls into one
of the three Rule 23(b) categories.   See Gunnells, 348 F.3d at
423.   If the district court chooses to certify the accounting
claim on remand, it should explain whether it is doing so under
(Continued)
                                       39
above, a class certified under that provision must satisfy all

of Rule 23(a)’s prerequisites and two additional requirements:

predominance and superiority.           See Fed. R. Civ. P. 23(b)(3).

      As with the ownership classes, the primary issue on appeal

for   the    underpayment      claims    is    whether       the     plaintiffs      have

demonstrated       common   questions     of    law     or    fact.        Because    the

district     court   certified    these        classes       under    Rule    23(b)(3),

however, we consider that issue in conjunction with the court’s

further conclusion that common questions also predominate.                            See

Lienhart, 255 F.3d at 146 n.4 (“In a class action brought under

Rule 23(b)(3), the ‘commonality’ requirement of Rule 23(a)(2) is

‘subsumed     under,   or     superseded       by,    the    more     stringent      Rule

23(b)(3)      requirement      that     questions        common       to     the   class

predominate over’ other questions.” (quoting Amchem Prods., 521
U.S. at 609)); see also Comcast, 133 S. Ct. at 1432 (noting that

“[t]he      same   analytic    principles”           governing       the   Rule    23(a)

commonality analysis apply to Rule 23(b)(3), but the latter’s

predominance requirement is “more demanding”).

      For a variety of reasons, we conclude that the district

court abused its discretion when it certified the five classes

under Rule 23(b)(3).

Rules 23(b)(2) or 23(b)(3) and why certification under that rule
is appropriate.

                                         40
                                                 1.

       We    first           review    the     aspects       of    the    district       court’s

analysis that apply to all five royalty underpayment classes.

       At    bottom,          the     district     court      believed         that     both    the

commonality            and     predominance      requirements            of    Rule     23      were

satisfied         by    the     same     basic     fact:      the     defendants         employed

numerous      uniform           practices      related        to    the       calculation       and

payment      of    CBM        royalties.         These       common      practices       are    not

irrelevant to Rule 23(b)’s predominance requirement.                                      But we

hold that the district court abused its discretion by failing to

consider the significance of this common conduct to the broader

litigation.

       The    district           court       identified       numerous         common    royalty

payment practices.                  For example, it noted that EQT sells all of

the CBM it produces in Virginia to an affiliate, EQT Energy, and

that “all royalty owners within the same field have been paid

royalties based on the same sales price for the CBM.”                                        Adair,

2013 WL 5429882, at *38.                 With respect to CNX, it noted that CNX

“has    uniform             policies     and     procedures         which       governed        its

calculation            of     CBM     revenues,”       and    that       “it    has     deducted

severance     and           license    taxes    when     calculating          royalties        since

January 1, 2004.”              Id. at *39.

       That the defendants engaged in numerous common practices

may be sufficient for commonality purposes.                           As noted above, the

                                                 41
plaintiffs    need    only   demonstrate      one     common      question   of

sufficient importance to satisfy Rule 23(a)(2).

       But the mere fact that the defendants engaged in uniform

conduct is not, by itself, sufficient to satisfy Rule 23(b)(3)’s

more    demanding    predominance     requirement.          The   predominance

inquiry focuses not only on the existence of common questions,

but also on how those questions relate to the controversy at the

heart of the litigation.           See Amchem Prods., 521 U.S. at 623

(noting that the predominance inquiry “trains on the legal or

factual questions that qualify each class member’s case as a

genuine controversy”).       Even a plethora of identical practices

will not satisfy the predominance requirement if the defendants’

common conduct has little bearing on the central issue in the

litigation--in      this   case,    whether   the     defendants     underpaid

royalties.    Absent such a relationship, there is no basis for

concluding that individual issues will not predominate.

       We believe the district court placed an inordinate emphasis

on the sheer number of uniform practices without considering

whether    those     practices     are     relevant    to      assessing     the

defendants’ ultimate liability.            Some of the common practices

that the district court identified--e.g., the fact that EQT sold

all of its CBM into one of two interstate pipelines--have little

relevance to the validity of the defendants’ royalty payment

practices.

                                      42
      The district court did identify common practices that may

be pertinent to the predominance inquiry--e.g., the fact that

“EQT calculated all royalties based on the same methodology.”

Adair,     2013 WL 5429882,      at     *38.         But   the    district       court’s

analysis fell short because it never analyzed why those common

practices        were   sufficient       to        ensure    that    the    class      members’

common issues would predominate over individual ones.

      The     defendants         have    highlighted          a     number      of     uncommon

practices     that      might    cause        individual      issues       to   predominate.

For example, EQT notes that it calculates royalties in different

ways for different class members, depending on where the CBM is

produced.           Its       method     of        calculating       royalties--and         the

deductions        it    applies--have          also       changed       over    time.      CNX

submitted evidence that it takes different deductions depending

on where it sells the CBM, and that its deduction calculations

sometimes vary between and even within wells during different

time periods.

      We    do    not     decide      today    whether       the     disparate       practices

identified        by    the    defendants           are   sufficient       to     defeat    the

predominance requirement.                 On remand, the district court may

well conclude that the defendants’ common conduct is sufficient

to   ensure      the    predominance          of    common    issues       over      individual

ones.      But it was an abuse of discretion for the district court

to   focus       only     on    the     number       of     common      practices       without

                                               43
considering       the   significance       of   the    defendants’        disparate

conduct in the broader litigation. 19

                                          2.

     We    also    remand   for     the   district    court   to   give    greater

consideration      to   Rule   23    factors    that    affect     only    certain

classes.    In particular, the district court should consider how

variations in the defendants’ royalty obligations to the class

members implicate the commonality and predominance inquiries in

Kiser, Adkins, and Addison.

     The defendants have relatively uniform royalty obligations

with respect to the class members in the two force pooled cases-

-Adair and Hale.        All plaintiffs in those classes are                  deemed

     19
        The district court also failed to consider whether the
different elements of the diverse causes of action the
plaintiffs assert may affect the Rule 23(b)(3) analysis. As the
Supreme Court has noted, “[c]onsidering whether questions of law
or fact common to class members predominate begins . . . with
the elements of the underlying cause of action.” Erica P. John
Fund, Inc. v. Halliburton Co., 131 S. Ct. 2179, 2184 (2011)
(internal quotation marks omitted).
     Here, the plaintiffs assert a diverse array of claims, yet
the court failed to consider whether any of the unique elements
of those claims would affect the predominance analysis.     This
error is clearest with respect to the district court’s decision
to certify the breach of contract claims in Kiser and Adkins,
which it did without explanation and notwithstanding the
magistrate’s recommendation to the contrary.    And neither the
magistrate nor the district court addressed the breach of
contract claims in Addison.
     On remand, the district court should rigorously analyze
each of the plaintiffs’ claims to determine whether any of the
distinct elements of those actions might affect the predominance
of common questions.

                                          44
lessors, which means that Board pooling orders dictate the terms

of the defendants’ royalty obligations.        Those terms are largely

uniform among the class members. 20

     The   issue   is    more   complicated   in   Kiser,   Adkins,     and

Addison, because those class members all have voluntary lease

arrangements   with     the   defendants.     As   the   district     court

recognized, “these leases vary as to the language as to the

payment of royalties and post-production deductions.”               Adair,

2013 WL 5429882, at *42.        For example, while some leases require

the defendants to calculate royalties based on the proceeds they

receive from the sale of CBM, others require the defendants to

use the market value of CBM.        Some leases specify that the price

for CBM must be determined at the well, while others permit

calculation at the point of sale.

     Although the district court recognized the problem of lease

language variation, it did not see it as a barrier to class

certification in any of these cases.           In our view, however,

these variable terms will make it difficult, if not impossible,

     20
       This is not to say that the Adair and Hale classes should
be certified for these claims.      The ascertainability issues
discussed above apply equally to these classes’ claims for
royalty underpayment.    And the district court will need to
address the other potential barriers to predominance discussed
above.

                                    45
for a court to assess the validity of the defendants’ royalty

payment practices on a classwide basis.

        For example, the question of whether a gathering charge 21 is

legitimate     will       produce   different    answers      for     class    members

whose     leases    specifically     authorize    that       charge    versus    those

whose leases specifically forbid it.                   Such dissimilarity will

preclude the generation of a common answer to the plaintiffs’

common     question.        See,    e.g.,    Wallace    B.    Roderick    Revocable

Living Trust v. XTO Energy, Inc., 725 F.3d 1213, 1218-1219 (10th

Cir. 2013) (concluding that the plaintiffs failed to demonstrate

commonality        when    there    was     significant      evidence     of    lease

language variation); Chieftain Royalty Co. v. XTO Energy, Inc.,

528 F. App’x 938, 942-44 (10th Cir. 2013) (remanding to allow

the district court to examine whether lease language variations

in a similar royalty underpayment case defeat commonality).

     The plaintiffs argue that the first marketable product rule

renders lease variation a moot point because that rule prohibits

producers from deducting any postproduction costs.                     But even the

plaintiffs concede that an express lease term--e.g., authorizing

a particular postproduction charge--supersedes any implied duty

under the rule.           Based on the sampling of deeds in the record,

     21
        A gathering charge is a deduction for the cost                              of
aggregating gas from several wells at a common receipt point.

                                            46
we know at least some of the class members’ leases expressly

negate part or all of the implied duty.                    See, e.g., J.A. 2556-57

(requiring the lessor to pay a proportionate share of common

postproduction            charges,   including      the   cost        of    gathering      and

dehydrating gas).

       It was the plaintiffs’ burden to demonstrate commonality on

the implied duty of marketability.                  See Thorn v. Jefferson-Pilot

Life Ins. Co., 445 F.3d 311, 321 (4th Cir. 2006).                            Yet they have

made no attempt to do so.                  Neither they nor the district court

engaged       in    any      substantive    analysis      of    the    lease       terms   to

determine whether language variations destroy the possibility of

resolving the common question(s) on a classwide basis.                             Assuming

the first marketable product rule does apply, the plaintiffs

have        yet    to     demonstrate      even    the    lesser           requirement     of

commonality on the implied duty of marketability.

       Contrary         to    the    plaintiffs’     assertions,             the   district

court’s class definitions do not solve this problem.                               In Kiser

and Adkins, the court defined the classes to include only those

gas    owners       whose      leases   are    “silent”        with    respect      to     the

deduction          of   costs. 22       According    to        the    plaintiffs,        this

       22
        As noted above, the district court actually certified
both a class of all voluntary leaseholders in Kiser and a
subclass of persons whose leases are “silent” as to the
deduction of costs. It did not explain how the plaintiffs could
(Continued)
                                              47
limitation     obviates    the    need    for    them     to   review    the   leases

individually because the class members’ “leases are the same

with respect to the one issue that is material to their claims:

they do not contain language allocating to the lessor the costs

of making gas . . . marketable.”               Appellees’ Br. at 37.

      But the “silence” requirement raises as many problems as it

solves.      The court never explained what it meant by “silent as

to the deduction of costs” in either Kiser or Adkins.                            See

Adkins, 2013 WL 5442378, at *1; Legard, 2013 WL 5429885.                       Would

a   lease requiring       the    lessor   to     pay    “all   excise,   depletion,

privilege and production taxes” 23 but not postproduction charges

qualify?       See J.A. 1069.        What about a lease that permits a

lessee to use any gas produced from the premises “for fuel in

its operations . . . free of charge”?                  J.A. 1073.   We agree with

the defendants that disputes will inevitably arise regarding the

meaning of “silence,” and the court will have to sort out these

differences based on the particular lease language.

      The issues are slightly different in the other voluntary

lease      case,   Addison,     because   the     class    definition     does   not

contain a “silence” requirement.               The district court nonetheless

demonstrate commonality for those class members whose leases are
not “silent.”
      23
           These are common taxes charged on oil and gas production.

                                          48
concluded that Rule 23 was satisfied because it found that CNX--

the defendant in that case--employs a standard gas lease.                                Thus,

it assumed there would be no lease language variation that could

affect the uniformity of CNX’s royalty obligations.                              See Adair,

2013 WL 5429882, at *39.

      But     the   fact    that    CNX    now        uses      a   form     lease    for    CBM

royalties     does    not   establish          that       all   of     the    Addison    class

members’ leases are uniform.                   CNX has inherited a large number

of   leases    from    predecessor        companies,            many    of    which     contain

different royalty provisions.                  Compare J.A. 2556-57 (providing a

gas royalty of “12.5% of the value of gas produced from the

leased premises and sold on or off the leased premises . . .

less a proportionate part of the costs incurred by Lessee in

heating,      sweetening,          gathering,          transporting,            dehydrating,

compressing, exacting, processing, manufacturing, or any other

post-production costs incurred by Lessee in making such gas or

other substance merchantable”), with J.A. 4914-15 (providing a

royalty of “the value of 1/8th of the gas so sold or used,”

where “value” means “the selling price stipulated in a bona fide

contract entered into by Lessee as a result of an arms-length

negotiation     with    a   third     party          not   a    subsidiary,         parent    or

affiliate      of    Lessee,”      or,    if        the    transaction         is     with    an

affiliate without the lessor’s permission, “on the basis of the

current     market     value    of       the        production       so      disposed    of”).

                                               49
Perhaps     the    legality          of    CNX’s    deduction     practices    can   be

assessed as to only those class members who signed its standard

lease.      But     the    class          definition   is   not   limited     to   those

persons, and the plaintiffs have made no effort to explain how

commonality might be established for the other Addison class

members.

      In short, the plaintiffs have failed to demonstrate that

variations in lease language in Kiser, Adkins, and Addison do

not   defeat      even    the    lesser       requirements   of    Rule   23(a).      On

remand, after reviewing the leases in this case, the plaintiffs

may be able to show that there are a limited number of lease

forms, such that the validity of the defendants’ conduct can be

assessed on a subclass basis.                  See, e.g., Foster v. Merit Energy

Co., 282 F.R.D. 541, 556 & n.12 (W.D. Okla. 2012).                        The district

court may also be able to craft more definite class definitions,

thus eliminating or mitigating some of the problems described

above.      At this point, however, the plaintiffs have not yet

carried their burden of demonstrating the classes’ compliance

with all of Rule 23’s requirements.

                                               3.

      The   plaintiffs          in    Adkins    face   additional     complications,

which arise from the defining characteristic of that class: all

of the class members have received a royalty payment from EQT at

some point in the past twenty years.                   This fact raises at least

                                               50
two issues that are likely to implicate the district court’s

Rule 23 analysis.

     First,     at    least   with      respect    to   the    breach    of   contract

claims,   the    court     will    likely      need     to    consider    course   of

performance evidence.          See Video Zone, Inc. v. KF & F Props.,

L.C., 594 S.E.2d 921, 924 (Va. 2004) (“Generally, the parties’

interpretation and dealings with regard to contract terms are

entitled to great weight and will be followed unless doing so

would violate other legal principles.”).                     The record highlights

the individualized nature of such evidence.                       See, e.g., J.A.

3855-98    (documenting           one     Adkins        plaintiff’s       individual

communications with EQT regarding its royalty obligations under

her lease).      At a minimum, the need for individualized proof

strongly affects the predominance analysis of Rule 23(b).                        Yet,

as the defendants note, the district court failed to discuss

course of performance evidence entirely.                  See Appellants’ Br. at

53-54.

     Second,         the   district        court        should    reevaluate       the

implications of the defendants’ statute of limitations defense

for Rule 23’s predominance requirement. 24

     24
       The district court discussed EQT’s statute of limitations
defense only with respect to Adkins.      Although we similarly
focus on that case, the court should on remand analyze the
implications of this defense with respect to the other classes
and claims.

                                          51
       Below,       EQT    moved     to    dismiss           several      of    the    plaintiffs’

claims on the grounds that they were time-barred by applicable

statutes of limitations.                    In response, the plaintiffs argued

that the limitations period should have been tolled because EQT

issued misleading reports about the kinds of deductions it was

taking from its royalty payments.

       The     district         court     “refused           to    grant       EQT’s    motion   to

dismiss       . . .       based    on     its    finding          that   the     plaintiffs      had

alleged       sufficient          facts    to        plead    fraudulent         concealment       by

which       EQT     may    be     estopped       from        asserting         th[e    statute     of

limitations] defense.”                  Adair, 2013 WL 5429882, at *39.                          The

court elaborated that “the doctrine of fraudulent concealment

does not focus on the actions or knowledge of the plaintiffs,

but    on     the    actions       of     the        defendant.”           Id.         Because   the

defendants’         representations             to    the    plaintiffs          regarding   their

royalty deductions were relatively uniform, the court concluded

that    the       defendants’       common       conduct          was    again    sufficient       to

satisfy the commonality and predominance requirements.                                   See id.

       The district court misapplied the doctrine of fraudulent

concealment.          Although a defendant’s conduct is not irrelevant,

attention must also be paid to the plaintiff’s knowledge and

actions.          “A party seeking to invoke the doctrine of fraudulent

concealment must demonstrate that ‘(1) the party pleading the

statute of limitations fraudulently concealed facts that are the

                                                     52
basis       of   plaintiff’s          claim,   and       (2)    the       plaintiff        failed   to

discover those facts within the statutory period, despite (3)

the exercise of due diligence.’”                             Detrick v. Panalpina, Inc.,

108 F.3d 529,     541     (4th      Cir.    1997)       (quoting           Supermarket       of

Marlinton, Inc. v. Meadow Gold Dairies, Inc., 71 F.3d 119, 122

(4th    Cir.      1995)).         In    this   context,             a   plaintiff’s        knowledge

typically requires individual evidence, Thorn, 445 F.3d at 321,

which will frequently defeat Rule 23’s requirements.

       Here, the district court abused its discretion by failing

to give any consideration to what proof the plaintiff-focused

elements         of     the     doctrine       of       fraudulent            concealment      might

require,         even    if     the    court       is    ultimately           correct      that     the

statute of limitations is no bar to class certification. 25

                                                   4.

       We        conclude       by      briefly          discussing            Rule     23(b)(3)’s

superiority           requirement.                 Because          all       of     the     royalty

underpayment            classes       and    claims          were       certified     under       Rule

23(b)(3),         the    plaintiffs         must        be    able       to    demonstrate        that

proceeding as a class “is superior to other available methods

       25
       As noted above, we need not address the district court’s
judgment with respect to every Rule 23 prerequisite, nor is our
focus on commonality and predominance intended to constrain the
district court’s discretion on remand.   The court remains free
to reconsider its judgment that the other requirements of Rule
23 have been satisfied.

                                                   53
for fairly and efficiently adjudicating the controversy.”                             Fed.

R. Civ. P. 23(b)(3).

       The district court concluded that the royalty underpayment

classes satisfied this requirement, focusing on the barriers to

individual litigation that many CBM royalty claimants face.                            See

Adair, 2013 WL 5429882, at *40.                    As the court noted, “many CBM

royalty    claimants       own    only    a     fractional      interest     in   a   12.5

percent royalty,” a fact that, “no doubt, has resulted in the

sparse number of individual cases filed to date over . . . the

calculation of royalties.”               Id.       Additionally, the court found

that     concerns    of    judicial       economy        supported    a     finding    of

superiority because a collective action would allow a court to

resolve all of the royalty owners’ claims in a single forum and

lessen     the      risk    of     inconsistent           judgments        against     the

defendants.      See id.         We agree with the district court that the

factors it identified are relevant to the superiority analysis.

Indeed, for many of these claimants, collective action may offer

the only realistic opportunity to recover.

       Nevertheless,       the     district         court    should    give       further

thought    to    other     factors       that      may   bear   on   the    superiority

analysis.       Without intending to limit the scope of the relevant

inquiry, the court should consider how the dominance of state-

law issues may affect the suitability of this litigation in a

federal forum, and what state-law mechanisms may be available to

                                              54
resolve the underpayment claims as an alternative to a class

action.

       We also think it proper for the district court to assess

the    extent    of    the    defendants’         efforts      to   resolve   and    pay

undisputed claims.           A finding that the defendants have not acted

in good faith toward that end may weigh strongly in favor of a

finding of superiority of a class action.

       Where the proper balance lies in the superiority analysis

we leave to the district court on remand as part of its broader

consideration of the other Rule 23(b)(3) factors.

                                        VII.

       We   ultimately       hold    that    the     district       court’s   analysis

lacked the requisite rigor to ensure the requirements of Rule 23

were satisfied by any of the certified classes.                        On remand, the

district court may conclude that one or more subclasses should

be certified.         It may also find that class certification should

be    denied    entirely.       At    this       point,   we    only   conclude     that

certification was premature.

       We recognize that there are numerous CBM owners in Virginia

who haven’t received a penny of CBM royalties and others who may

have gotten less than their due.                   We are not unsympathetic to

their plight.

                                            55
      But sympathy alone cannot justify certification under Rule

23.    We   therefore   vacate   the    district   court’s   grant   of   the

plaintiffs’ motions for class certification, and remand the case

for further proceedings consistent with this opinion.

                                                     VACATED AND REMANDED

                                       56