Class Decertification, Case Law Update – Campbell v. First American Title Insurance Company

A class action is a lawsuit where one or members of a class may sue or be sued as representative parties on behalf of all members. The class action must have the characteristics of commonality, adequacy, numerosity, and typicality. Commonality refers to there being one or more claims common to the entire class. Adequacy refers to the representative parties adequately protecting the interests of the class. Numerosity refers to the class being so large that joinder of all members is impractical. Typicality refers to claims or defenses being typical of the plaintiffs or defendants.

Collecting a large number of individualized claims into one representational lawsuit has advantages. First, a class action effectively and efficiently brings together small claims that would be unlikely or impractical to litigate on their own. Second, the plaintiff has a strengthened position for negotiating settlement when a class is certified. Nevertheless, a class may be decertified at any time prior to final judgment. Class decertification may destroy the incentive to go forward with an individual claim because continuing may not justify the expense of litigation.

In Loef v. First American Title Insurance Company, No. 2:08-cv-311-GZS, (Dec. 10, 2012), the United States District Court for the District of Maine granted a motion to decertify the class provisionally certified in Campbell v. First Am. Title Ins. Co., 269 F.R.D. 68 (D. Me. 2010). The class consisted of homeowners who had refinanced a prior mortgage on residential property in Maine that was issued within two years of the refinancing and who had been overcharged for their title insurance by First American. Although the class had been provisionally set by Judge George Z. Singal, a court remains free to modify a class certification order at any time prior to final judgment. In assessing whether class certification remains viable, the court must consider not only developments of the factual record, but also any newly announced legal precedent.

First American moved for class decertification on two grounds. First, under Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), the class failed to satisfy Rule 23(a)’s commonality requirement. Once a low bar, the Supreme Court’s decision in Dukes changed the class certification standard to a far more searching inquiry. In addition to requiring a common question, class certification now requires common answers. Thus, while even one common question can satisfy Rule 23(a)(2), dissimilar answers to that question among class members may mean that commonality is lacking.

Second, First American asserted that “the central liability question in this case is whether each class member qualified for and was wrongly denied the refinance rate” and there was no common answer to this underlying liability question. Consequently, First American showed the court that there was no common cause for the alleged title insurance overcharges. Each class member offered unique facts as to what was presented in connection with their title insurance purchase and what steps were taken to ascertain whether they qualified for the refinance rate.

In a review of nearly 230 transactions identified as overcharges by Plaintiff’s class certification expert, First American found about one-third had not been overcharged or were not eligible for the refinance rate. Additionally, for another 94 transactions, First American could not locate a copy of a loan policy from a prior mortgage transaction within the two-year look back period making it extremely difficult to determine whether these transactions qualified for but did not receive the discounted rate.

Accordingly, the court agreed with First American’s assertion that liability depended on a file-by-file review of documents from each potential class member’s refinance transaction and prior transaction. File-by-file review defeats commonality and predominance under Rules 23(a) and 23(b)(3). The overcharging was not systematic, but rather the result of errors that are apt to occur in any set of hundreds of thousands of customer transactions. In sum, the stricter class certification standards set in Dukes along with factual developments led the court to find that there was no longer sufficient commonality to justify class certification.

The purpose of title insurance is to protect the purchaser of real estate and the holder of a mortgage against loss from defective titles, liens, and encumbrances. Protecting a buyer against loss is accomplished by the issuance of a title insurance policy. When a dispute arises under a title insurance policy, often a claim will have to be made to the insurer.  Schecter Law is prepared to handle all aspects of your title insurance claims, including coverage disputes, closing protection letter disputes and title and closing agent disputes. Call one of our experienced attorneys today at 954-779-7009.

Baldwin v. Regions Financial Corp., — So.3d —-, 2012 WL 4094147 (Fla. 3d DCA 2012)

On September 19, 2012, the District Court of Appeal of the Third District of Florida held that an arbitration clause of a loan agreement containing a class action waiver was not void as being against public policy despite the argument that the clause defeated the remedial provisions of the Florida Consumer Collection Practices Act (FCCPA), Florida Statute section 559.77(2).  Baldwin v. Regions Financial Corp., — So.3d —-, 2012 WL 4094147 (Fla. 3d DCA 2012).

In this case, Bruce Baldwin (“Baldwin”) appealed a non-final order granting Regions Financial Corporation’s (“Regions”) amended motion to compel arbitration, which the Court ultimately affirmed.  Baldwin had obtained a vehicle loan from Regions containing an arbitration clause which provided that either party could choose to arbitrate any dispute between them, and if a dispute is arbitrated, Baldwin waived his class action rights.  In the initial action, Baldwin filed a putative class action suit alleging that Regions violated Florida Statutes section 559.72(16) by sending him and other debtors of Regions envelopes with the words “Consumer Collections” printed on the outside. Baldwin asserted that the envelopes were meant to embarrass the debtors. Florida Statute section 559.72(16) states that a person attempting to collect a consumer debt cannot mail communications to a debtor in an envelope with any words on the outside calculated to embarrass the debtor. Fla. Stat. § 559.72(16) (2010).  Pursuant to the vehicle loan, Regions made a motion to compel arbitration.

At the hearing on the motion, Baldwin alleged that the arbitration clause waiving the right to a class action was in violation of the remedial provisions of the FCCPA, Florida Statute section 559.77(2), not that the clause was unconscionable. Baldwin argued that this section of the FCCPA allowed for twice the amount ($2,000 cap) of statutory damages if a claim was brought as a class action as opposed to an individual action ($1,000 cap). Baldwin also argued that the allowance for punitive damages and other equitable relief under the same section was greater for a class action claim than for an individual claim.

The Court disagreed with both arguments.  Florida Statute section 559.77(2) provides that, if an action is filed on an individual basis, a prevailing plaintiff may recover “additional statutory damages” not exceeding $1,000. § 559.72(2). Similarly, if an action is filed as a class action, and the class prevails, the named plaintiff can receive “additional statutory damages of up to $1,000” and all remaining class members may receive “an aggregate award of additional statutory damages up to the lesser of $500,000 or 1 percent of the defendant’s net worth,” but “the aggregate award may not provide an individual class member with additional damages in excess of $1,000.”  Baldwin’s argument failed due to this final statement.  The Court held that the statute applies uniformly to actions brought either as a class action or as an individual action.

 To read the entire opinion, click here.

Miami Auto. Retail, Inc. v. Christine F. Baldwin, No. 3D10-2136 (Fla. 3d DCA June 27, 2012)

This case came up on appeal from an order certifying a class of automobile buyers who traded in a vehicle at Miami Auto Retail, also known as Brickell Honda. In the underlying case the plaintiff, Christine Baldwin, purchased a Honda CR-V at Brickell Honda and traded in the Honda Civic she was currently leasing. Pursuant to the agreement between the parties, Brickell Honda agreed to pay off the remaining amount Baldwin owed on the leased Civic. At the time of purchase, the exact amount Baldwin owed on her Civic was not available, and as a result the parties estimated the payoff amount and trade-in value and this amount was listed in the purchase documents. Baldwin alleged that she was told by Brickell Honda that if the actual payoff amount was less than the amount estimated, she would be refunded the difference. When the actual payoff amount in fact turned out to be less than the estimate, however, Brickell Honda did not notify Baldwin or give her a refund for the difference.

Baldwin sued alleging Brickell Honda violated the Florida Unfair and Deceptive Trade Practices Act (FDUTPA) by failing to refund the difference between the estimated and actual payoff amounts on her trade-in, and sought class certification.  The trial court granted class certification under section 501.976(11), Florida Statutes and appointed Baldwin as class representative. Brickell Honda appealed. 

On appeal, the Third District Court of Appeal held that the trial court abused its discretion by granting the class certification and reversed the order. In its analysis, the court stated that in order to obtain class certification Baldwin was required to submit evidence sufficient to prove the four factors listed in Florida Rule of Civil Procedure 1.220(a) and at least one of the categories of factors listed in Rule 1.220(b). Under Rule 1.220(a), the court must conclude that:

(1) the members of the class are so numerous that separate joinder of each member is impracticable, (2) the claim or defense of the representative party raises questions of law or fact common to the questions of law or fact raised by the claim or defense of each member of the class, (3) the claim or defense of the representative party is typical of the claim or defense of each member of the class, and (4) the representative party can fairly and adequately protect and represent the interests of each member of the class.  Id. at 6 (emphasis in original).

The court found that Baldwin established the first two of the above factors, numerosity and commonality, since the potential class members were large in number and their claims all arose out of Brickell Honda’s overestimating trade-in values and failure to return the difference. For the remaining two factors, typicality of the claim or defense and adequacy of representation, the court found Baldwin failed to satisfy her burden. With regard to the typicality requirement, the court stated that Brickell Honda’s estimate regarding the balance owed on Baldwin’s leased vehicle was based on her own representations and that the difference between the estimated amount and the actual amount paid to satisfy the lease was created by Baldwin inadvertently making an additional monthly lease payment after she signed the contract with Brickell Honda. This presents Brickell Honda with unique defenses against Baldwin’s claim that would preoccupy her to the detriment of the unnamed class members and destroy the typicality requirement. The court also found that Baldwin did not establish the requirement that she be an adequate class representative by failing to offer any evidence on her ability, or the ability of the appointed class counsel, to assume the costs to litigate the case on behalf of the class.

The court then examined whether Baldwin meets the requirements of predominance and superiority as stated in Florida Rule of Civil Procedure 1.220(b)(3), which “requires that common questions of law or fact predominate over any individual questions of the separate members, and that class representation is superior to other available methods for the fair and efficient adjudication of the controversy.” Kia Motors Am. Corp. v. Butler, 985 So. 2d 1133, 1136 (Fla. 3d DCA 2008).

The Third District Court of Appeal concluded that Baldwin’s FDUTPA claims require determination of individual issues regarding representations and negotiations between each class member and Brickell Honda as to the payoff amount of their trade-in vehicle. As a result these determinations of individual issues of fact and law will predominate over common questions of fact and law and render class treatment impractical, and not superior to individual adjudication. Furthermore, the court stated that since FDUPTA does not impose a threshold for claims and provides prevailing party attorney fees the cost of bringing a suit would not deter other potential plaintiffs even if the damages incurred are small. 

To read the entire opinion, click here.