In a class action filed by plaintiff against defendant title insurance company alleging that she was overcharged for title insurance when she refinanced her home, the United States District Court for the District of Idaho recently granted defendant’s motion to decertify the class, holding, among other things, that proof of liability as to each class member is too highly individualized. See Lewis v. First Am. Ins. Co., 2017 WL 3269381 (D. Idaho 2017). In the case, the Court initially granted class certification for residential customers in the State of Idaho. Thus, it held that defendant’s liability was contingent upon violations of the Idaho Rate Manual, which states that a discount “reissue rate” must be applied when a title policy is issued within two years of a previous title insurance policy on the same property by the same owner. Specifically, the discount should have been given when either (1) “[t]he prior policy or a copy thereof is presented to the issuing company and shall be retained in the issuing company’s file,” or (2) “in the absence thereof, reasonable proof of [prior] insurance is provided to the [issuing] company.” Plaintiff, who had the burden of completing class notice and performing the necessary associated tasks pursuant to the Court order, then sought discovery from defendant and the independent policy-issuing agents in order to identify class members. Defendant produced the documents it had in its possession, but plaintiff had difficulties obtaining similar documents from the independent agents. Plaintiff then submitted a partial proposed list of class members, which was limited to those policies issued directly through defendant and did not identify individuals who purchased a policy through the independent agents. Defendant filed a motion to decertify the class, which the magistrate judge denied. After further discovery, defendant filed renewed objections to the magistrate judge’s order denying its motion to decertify, and the Court held that the motion to decertify should have been granted.
The Court first stated that the standard for class decertification is the same as class certification – i.e., the Court must be satisfied that the Rule 23(a) prerequisites are met (numerosity, commonality, typicality and adequate representation). Additionally, the proposed class must satisfy at least one of the three requirements listed in Rule 23(b); here, plaintiff sought class certification for an unjust enrichment claim under Rule 23(b)(3), alleging predominance.
In granting defendant’s motion, the Court found the 2012 order granting class certification to be clearly erroneous for three reasons: (1) it incorrectly presumes that decertification is contingent upon a finding that direct proof of a policy is required to establish eligibility for the reissue rate; (2) it ignores the individual nature of proof required to adjudicate liability; and (3) it ignores additional evidence in the record that demonstrates this case is not manageable as a class action. Specifically, the record reflects that defendant’s examiners applied different approaches to the “reasonable proof inquiry,” leaving the Court with “a highly individualized approach to liability” such that questions of law or fact common to class members no longer predominate over questions affecting only individual members. The Court further referenced the fact that plaintiff’s proposed class list yielded a 91% error rate, which is “overwhelming evidence in support of the Court finding that the fact-specific inquiry into class membership, like that of proving liability, is not manageable on a class-wide basis.” Finally, the Court noted that many other courts in other similar reissue rate cases have rejected class certification or decertified class actions given the individualized nature of the proof involved in determining appropriate title insurance rates. “The only pervasive pattern Plaintiffs convincingly establish is [defendant’s] practice of allowing title agents to assess the borrower’s entitlement to and apply the appropriate discount rate in each of its real estate transactions . . . the trial courts and fact finders must examine each transaction to determine whether the individual was entitled to, but did not receive, the reissue rate. This type of individualized approach is not the appropriate subject of a class action lawsuit.” (internal citations omitted).