4th Cir.: Grice v. Independent Bank- Nationwide Federal Class Action Allowed Despite State "Door Closing" Statute

Summary:

Jamila Grice, a South Carolina resident, sued Independent Bank (a Michigan-chartered bank) over three allegedly improper account fee practices:

1. Treating accounts as overdrawn despite sufficient funds;
2. Charging multiple NSF fees for the same transaction; and
3. Doubling up on out-of-network ATM fees for a single withdrawal.

She sought to certify nationwide classes for each practice. Independent Bank argued that South Carolina’s “Door Closing Statute” (S.C. Code § 15-5-150), as interpreted in Farmer v. Monsanto Corp., prohibited nonresidents from joining a class unless their claim arose in South Carolina. The district court agreed, excluded out-of-state members, found numerosity lacking, and denied certification.

The Fourth Circuit reversed. Writing for the majority, Judge Benjamin held that under Shady Grove Orthopedic Assocs. v. Allstate, Rule 23 directly conflicts with the Door Closing Statute because both answer the same question—when a class action may be maintained. Since Rule 23 is valid under the Rules Enabling Act and the Constitution, it governs exclusively in federal court. State laws can’t add extra requirements to class certification.

Judge Agee concurred in the judgment but would have taken a simpler route: Farmer itself construed the statute as applying only in state circuit courts, not federal courts. On that reading, there’s no conflict to resolve—§ 15-5-150 never applies in federal class actions in the first place.

Commentary & Utility in Consumer Bankruptcy:
The ruling reaffirms that in federal court, Rule 23’s “one-size-fits-all” approach overrides state procedural limits on class membership. That means a nationwide class action can proceed in South Carolina’s federal courts without excluding nonresidents, even if a state statute would bar them in state court.

For consumer bankruptcy attorneys, the implications could extend beyond bank fee litigation. Many violations of bankruptcy protections—such as the automatic stay (§ 362), the discharge injunction (§ 524(a)(2)), the failure to properly credit plan payments or correct account histories under § 524(i), and failures to give accurate postpetition mortgage notices under Rule 3002.1—are committed by large national creditors and servicers whose conduct affects debtors in every state.

Grice strengthens the argument that such violations can be addressed through nationwide class actions in bankruptcy courts or in federal district court proceedings related to bankruptcy cases because:

Nationwide scope preserved: Creditors cannot use state “door closing” statutes to limit class membership only to debtors in a single state, keeping the remedy proportionate to the scope of the harm.
Uniform federal protections: The Bankruptcy Code and Rules are federal law; enforcing them through Rule 23 nationwide classes in federal court aligns with the uniformity principle of bankruptcy jurisdiction.
Enhanced deterrence: Including all affected debtors in a single class action—rather than splintering cases by state—raises the stakes for systemic violations of § 362, § 524, § 524(i), and Rule 3002.1.
Judicial efficiency: Particularly for automated, repeated violations (e.g., post-discharge collection letters, misapplication of payments, failure to file payment change notices), a single nationwide proceeding avoids duplicative litigation in multiple courts.

In short, Grice is not just about bank overdraft fees—it could be a procedural green light for pursuing classwide relief for violations of federal bankruptcy protections without being hobbled by state-law residency restrictions. This can make class remedies a viable and potent tool when systemic misconduct affects debtors nationwide.

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