In Re: Katrina Canal, et al

Filing

UNPUBLISHED OPINION FILED. [09-31071 Affirmed ] Judge: EHJ , Judge: TMR , Judge: CH Mandate pull date is 12/02/2010 [09-31071]

In Re: Katrina Canal, et se: 09-31071 Ca al

Document: 00511291342 Page: 1 Date Filed: 11/11/2010

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IN THE UNITED STATES COURT OF APPEALS United States Court of Appeals FOR THE FIFTH CIRCUIT Fifth Circuit FILED
November 11, 2010 N o . 09-31071 Lyle W. Cayce Clerk

I N RE: KATRINA CANAL BREACHES LITIGATION -----------------------------------------------------------------------------------------G L A D Y S CHEHARDY; CHUCK MORRIS; DAY MORRIS; SPENCER F A L O U ; HEATHER FALOU; ET AL, P la in t if f s - A p p e lla n t s v. S T A T E FARM FIRE & CASUALTY COMPANY.; ALLSTATE INDEMNITY C O M P A N Y ; ALLSTATE INSURANCE COMPANY; AMERICAN I N S U R A N C E COMPANY; LAFAYETTE INSURANCE COMPANY; L IB E R T Y MUTUAL FIRE INSURANCE COMPANY; CHUBB CUSTOM I N S U R A N C E COMPANY; AAA HOMEOWNERS AUTO CLUB FAMILY I N S U R A N C E COMPANY; LOUISIANA CITIZENS PROPERTY I N S U R A N C E CORP; LEXINGTON INSURANCE COMPANY; ENCOMPASS I N S U R A N C E COMPANY OF AMERICA; AEGIS SECURITY INSURANCE C O M P A N Y ; GREAT NORTHERN INSURANCE COMPANY; HANOVER I N S U R A N C E COMPANY; STANDARD FIRE INSURANCE COMPANY, Defendants-Appellees

A p p e a l from the United States District Court fo r the Eastern District of Louisiana U S D C No. 2:05-CV-4182

B e fo r e JONES, Chief Judge, and REAVLEY and HAYNES, Circuit Judges.

Dockets.Justia.com

Case: 09-31071 Document: 00511291342 Page: 2 Date Filed: 11/11/2010

No. 09-31071 P E R CURIAM:* P la in t i f f s -A p p e lla n t s , who are policy holders of the various insurance c o m p a n y defendants, appeal following the district court's grant of a motion to strik e class action allegations and subsequent dismissal of Plaintiffs' case. When t h e Plaintiffs declined the opportunity to refile their claims as individual actions, t h e district court dismissed. The claims stem from the Hurricane Katrina

d is a s t e r in Louisiana. Plaintiffs sought, inter alia, certification of statutory p e n a lt y claims for the Defendants' alleged bad faith in adjusting their Katrinar e la t e d insurance claims. The district court held that class certification was im p r o p e r because the claims required an analysis of myriad individualized, facts p e c ific issues. We AFFIRM. T h e district court's denial of class certification is reviewed for an abuse of d is c r e t io n , but we review the legal standards employed by the court de novo. See A r c h d io c e s e of Milwaukee Supporting Fund, Inc. v. Halliburton Co., 597 F.3d 3 3 0 , 334 (5th Cir. 2010). " A ll classes must satisfy the four baseline requirements of Rule 23(a): n u m erosity, commonality, typicality, and adequacy of representation." Anderson v . U.S. Dep't of Housing & Urban Dev., 554 F.3d 525, 528 (5th Cir. 2008); see F ED. R. CIV. P. 23. In addition, a putative class must also be one of the three t y p e s of class actions listed in Rule 23(b). See Maldonado v. Ochsner Clinic F o u n d ., 493 F.3d 521, 523 (5th Cir. 2007). The issue in this appeal is whether t h e Plaintiffs' proposed class satisfied Rule 23(b)(3), which requires the court to fin d that "the questions of law or fact common to class members predominate o v e r any questions affecting only individual members[.]" FED. R. CIV. P. 23(b)(3). The predominance inquiry is more demanding than the Rule 23(a) question of

Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

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No. 09-31071 c o m m o n a lit y . O'Sullivan v. Countrywide Home Loans, Inc., 319 F.3d 732, 738 ( 5 t h Cir. 2003). The court must assess "how the matter will be tried on the m e r it s , which `entails identifying the substantive issues that will control the o u tc o m e , assessing which issues will predominate, and then determining w h e t h e r the issues are common to the class.'" In re Wilborn, 609 F.3d 748, 755 (5 t h Cir. 2010) (citation omitted). T h e Plaintiffs' underlying claims in this case are based on the Defendants' d u t ie s under state law to pay or make written offer to settle claims within thirty d a y s after receipt of satisfactory proof of loss. See LA. REV. STAT. ANN. § 22:658 (n o w codified at LA. REV. STAT. ANN. § 22:1892). A cause of action for statutory p e n a lt ie s for violation of § 22:658 "requires a showing that (1) an insurer has r e c e iv e d satisfactory proof of loss, (2) the insurer fails to tender payment within t h ir t y days of receipt thereof, and (3) the insurer's failure to pay is arbitrary, c a p r ic io u s or without probable cause." La. Bag Co. v. Audubon Indem. Co., 999 S o . 2d 1104, 1112­13 (La. 2008). Penalties may not be assessed unless "the facts n e g a t e probable cause for nonpayment." Id. at 1114 (internal quotation marks a n d citation omitted). This standard requires an assessment of the

r e a s o n a b le n e s s of the defendant insurer's conduct, and "when there are s u b s t a n t ia l, reasonable and legitimate questions as to the extent of an insurer's lia b ilit y or an insured's loss, failure to pay within the statutory time period is not a r b it r a r y , capricious or without probable cause." Id. T h e district court held, and we agree, that class certification is not a p p r o p r ia te in this case because each Plaintiff's claim turns on the r e a s o n a b le n e s s of the Defendants' conduct in deciding whether to make p a y m e n t s to each individual Plaintiff. Such a determination is a fact-specific in q u ir y that will vary based on the individualized circumstances of each claim. Plaintiffs contend that the Defendants' bad faith may be adjudicated on a classw id e basis because they have alleged an over-arching scheme among the 3

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No. 09-31071 D e fe n d a n t s with respect to adjusting Hurricane Katrina claims. But even in the fa c e of such a scheme, individualized issues will predominate, such as the nature a n d extent of a class member's damage, whether and how much a class member w a s paid and for what type of damage, and whether any payment was sufficient a n d timely. There will also be issues as to whether the class member fulfilled h is duty to timely notify the insurer of the claim and whether there was s u ffic ie n t proof of loss. All of these individual inquiries will be part of the overall d e t e r m in a t io n of whether the insurer acted arbitrarily and capriciously, and t h e r e fo r e defeat class certification. See, e.g., Maldonado, 493 F.3d at 525

(h old in g that class certification not appropriate where reasonableness of medical fe e s charged to class members depended on multiple factors). P la in t iffs contend that the reasonableness of Defendants' actions may be d e t e r m in e d on a class-wide basis by focusing on a minimal standard of conduct u n d e r state law rather than merely the desired conduct of the insurers. We are u n p e r s u a d e d . As noted by the district court, Plaintiffs' distinction between these p u r p o r t e d standards for reasonableness is not supported by legal authority. Moreover, the Louisiana Supreme Court has defined the necessary inquiry into r e a s o n a b le n e s s as dependent "on the facts known to the insurer at the time of it s action." La. Bag, 999 So. 2d at 1114. This inquiry will necessarily involve d e t a ile d and individualized considerations of each class members' claim. Furthermore, because the state law provides an adequate basis for consideration o f the case, Plaintiffs' request for certification of the issues in this appeal to the L o u is ia n a Supreme Court fails. See In re Katrina Canal Breaches Litig., 495 F .3 d 191, 208 n.11 (5th Cir. 2007). P la in t iffs also argue that certification is proper in order to avoid a d is p a r it y between the federal courts and the Louisiana state courts, which have p e r m it t e d similar class actions. Federal class action certification is controlled b y federal procedural rules, notwithstanding state law. 4 See Shady Grove

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No. 09-31071 O r th o p e d ic Assocs. v. Allstate Ins. Co., 130 S. Ct. 1431, 1437 (2010). Because R u le 23 governs the instant actions, and we conclude that the district court c o r r e c t ly applied the rule, reliance on state court decisions in support of c e r t ific a t io n is unavailing. F in a lly , Plaintiffs argue that the district court erroneously denied their r e q u e s t to order Defendants to notify individual policyholders of the district c o u r t's decision and the existence of their individual rights. They contend that the court was empowered to order such notice by FED. R. CIV. P. 23(d)(1)(B). Even assuming that the district court had the power to issue such an order, w h ic h we do not decide, there is nothing that requires the court to order notice o f the denial of class certification, and we find no abuse of discretion in the c o u r t's refusal to do so. See, e.g., Pearson v. Ecological Science Corp., 522 F.2d 1 7 1 , 177 (5th Cir. 1975) ("[W]here a court has ruled under Rule 23(c)(1) that an a c t io n cannot properly be maintained as a class action the notice requirements o f Rule 23(e) do not apply . . . ."); see also Eisen v. Carlisle & Jacquelin, 417 U.S. 1 5 6 , 178, 94 S. Ct. 2140, 2153 (1974) ("The usual rule is that a plaintiff must in it ia lly bear the cost of notice to the class."). A F F IR M E D .

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