Knight et al v. Stewart Title Guaranty Company

Filing 116

MEMORANDUM OPINION & ORDER: 1) Plfs' MOTION to Certify Class 108 is DENIED; and 2) Within 10 days of the date of entry of this Order, Plfs shall file a status report indicating whether Plfs wish to proceed with their individual claims. Signed by Judge David L. Bunning on 1/13/2017.(ECO)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
NORTHERN DIVISION
AT COVINGTON
CIVIL ACTION NO. 07-87-DLB-CJS
DAVID KNIGHT, ET AL.

vs.

PLAINTIFFS

MEMORANDUM OPINION AND ORDER

STEWART TITLE GUARANTY COMPANY

DEFENDANT

************
Plaintiffs David Knight and Jackie Chandler, on behalf of themselves and others
similarly situated, seek class certification on their unjust enrichment, fraud, constructive
fraud, negligent misrepresentation, breach of contract, breach of fiduciary duty, civil
conspiracy, and statutory claims against their title insurance company, Stewart Title
Guaranty Company (STGC).

Specifically, Knight and Chandler allege that STGC

overcharged them and other title insurance purchasers in two ways: (1) by charging
premiums that did not include discounts available under STGC’s filed rate schedules; and
(2) by allowing STGC agents to charge an additional $50 fee for the preparation of a “title
binder” or “title commitment” document.

Plaintiffs seek certification of two distinct

classes–one for each type of alleged overcharge. The Court has jurisdiction over this
matter pursuant to 28 U.S.C. § 1332(d)(2)(A).
I.

Factual and Procedural Background
STGC is a corporation headquartered in Texas that is authorized to underwrite and

issue title insurance policies in Kentucky. (Doc. # 86 at ¶¶ 9, 10). Kentucky law requires
1

title insurers like STGC to file a schedule of the risk portion of the premium rates they
charge for title insurance with the Kentucky Department of Insurance (KDOI) and to adhere
to those rates when selling title insurance policies in Kentucky. Ky. Rev. Stat. Ann. §
304.22-020. Any amendment to or modification of the rate schedule must also be filed with
KDOI. Id.
Like many title insurance companies throughout the country, STGC issues title
insurance in Kentucky through policy issuing agents who act pursuant to agreements with
STGC. (See, e.g., Doc. ## 74-3, 74-4, 74-5). Before issuing a policy, the agent typically
performs a title examination, for which it charges a fee to the purchaser. (Doc. # 74-3 at
¶ 3). Those title examination fees are retained by the policy-issuing agents, not STGC.
(Id.) The agent also prepares a title commitment (at times called a title insurance binder)
that details the terms under which STGC will issue a title policy. (Id. at ¶ 4; Doc. # 108-19
at 4).

The policy issuing agent, not STGC, retains the fee for preparing the title

commitment. (Doc. # 74-3 at ¶ 4.) The agent then calculates and charges a premium
using STGC’s filed rates, a portion of which is remitted to STGC after the closing of the
transaction. (Id. ¶ 5). Knight’s and Chandler’s premiums and agents’ fees (including binder
fees) were recorded on HUD-1 forms (a federally published document used in real estate
closings). (Doc. ## 108-14; 108-17; 108-18).
STGC issues title insurance policies to both owners and lenders to insure against
defects in the seller’s title. Buyers receiving financing are often required to purchase
policies for the benefit of their lenders. According to its agency agreement with STGC, the
agent retains copies of the documents supporting the title search and examination and
STGC may examine the agent’s files. (See, e.g., Doc. ## 74-4, 74-5).
2

Plaintiffs Knight and Chandler seek certification of two (2) classes: a “Premium
Overcharge”1 class and a “Binder Fee” class. The Court will examine the facts related to
each proposed class in turn.
A.

“Premium Overcharge” Class

Plaintiff Knight purchased a home in Covington, Kentucky in February 2005. (Doc.
# 72 at ¶ 32). As part of that transaction, he purchased both an owner’s and a lender’s title
insurance policy. (Id.)2 When Knight refinanced his mortgage a year later, in 2006, he was
required to purchase a new lender’s policy. (Doc. # 72 at ¶¶ 33-34). His second lender’s
policy was issued by STGC, and his policy issuing agent was Vintage Title Agency LLC.
(Doc. # 108-14). Knight claims that, under the rate schedule in effect at the time of his
second lender’s policy, he was entitled to a 60% discount of the original lender’s rate of
$339. (Doc. # 72 at ¶¶ 35-36). Instead, Knight was charged $341 and did not receive a
discount. (Doc. # 108-14). Knight is the proposed representative for the “premium
overcharge” class, defined as:
all persons or entities in the Commonwealth of Kentucky who, between December

1

Starting in their class certification briefing, Plaintiffs call this proposed class the “Premium Upcoding”
class. The term “upcoding” is most often used to describe a fraudulent medical billing practice where
a payor is billed for a service more complex (and therefore more costly) than the service a patient
actually received. See, e.g., Centers for Medicare & Medicaid Servs., Dep’t of Health & Human
Servs., Health Care Fraud and Program Integrity 4, 7-8 (May 2016),
https://www.cms.gov/Medicare-Medicaid-Coordination/Fraud-Prevention/Medicaid-Integrity-Educa
tion/Downloads/fwa-overview-booklet.pdf. Title insurance premiums, unlike medical procedures, are
not commonly billed using numeric codes, and do not reflect the cost of a specific service rendered.
Accordingly, the Court finds the term “upcoding” to be confusing and inapplicable in this context.
There is no need for Plaintiffs to reinvent the linguistic wheel–“overcharge” is an apt, familiar word that
the Court has used before to describe Plaintiffs’ allegations (see generally Doc. # 84) and a word that
both sides used repeatedly throughout their briefing. For those reasons, the Court will refer to this
class as the “Premium Overcharge” class.

2

Discovery revealed that those policies were issued by Chicago Title Company, which is not a
defendant. (Doc. # 112-18 at 3).

3

1, 2003 and up to the date that the Court enters an Order certifying the Class, were
charged an original title insurance premium by Stewart Title as defined by the
operative fee schedules on file with the [KDOI] and when:
(a) there was an existing title insurance policy issued by Stewart Title on the
insured property within the applicable date threshold to receive a reissue
premium as reflected by the operative fee schedules on file with [KDOI]; or
(b) a refinance loan was made to the same borrower on the same property,
and the prior loan was covered by title insurance issued by Stewart Title
within the applicable date threshold to receive a substitution or refinance
premium as reflected by the operative fee schedules on file with [KDOI].
(Doc. # 108-1 at 1).
The parties have identified three separate rate schedules in effect during the
proposed class period–the first operative from 2003-2007 (when Knight purchased his
policy), the second from 2007-2013, and the third from 2013 to today. (Doc. ## 112-15,
112-16, 112-17). Each rate schedule sets out premium rates for original title insurance
policies and, crucially, offers a discounted premium rate for a title insurance policy if title
to the property was previously insured within a certain time period.
It is this discounted premium rate that Knight argues he and his fellow class
members, who purchased policies between 2003 and today, were entitled to and did not
receive. But the devil is in the details. The operative rate schedules vary in their
requirements for premium discount eligibility, with some schedules requiring presentment
of certain kinds of evidence to prove the existence of a prior policy, some schedules
requiring the prior policy to be issued by STGC, and some schedules disclaiming any
obligation by STGC to uncover evidence of eligibility. The varying terms of the rate
schedules are summarized below.
1.

Rate Schedule 2003-07

The rate schedule in effect from 2003 until 2007 offered “reissue premiums” for
4

owner’s and lender’s policies. “When the same property has been insured by [a] policy
issued by any title insurance company licensed to do business within ten (10) years prior
to” the application for the new policy, the reissue premium for the owner’s policy was set
at 60% of the premium for an original owner’s policy. (Doc. # 112-15 at 1). It offered a
similar discount for lender’s policies: “[w]hen the owner of property on which application is
made for loan or mortgage title insurance has been insured by an Owner’s or Leasehold
Policy covering the same property within ten (10) years prior to such application,” reissue
premiums for a lender’s policy were set at 60% of the premium for an original lender’s
policy. (Id.)
The rate schedule also offered a “substitution title insurance premium” with a sliding
discount scale based on the age of the original loan “[w]hen a substitution loan is made to
the SAME borrower on the SAME property, title to which was insured by [STGC] by the
issuance of a loan or mortgage policy.” (Id.) In addition to the requirement that the prior
policy be issued by STGC, the substitution premium required an additional showing: “[i]n
order to receive [the substitution premium] rates, [STGC] must be advised that these rates
are applicable; provided with the number of its former policy; and given the amount of the
unpaid principal balance secured by the original insured loan or mortgage.” (Id.)
2.

Rate Schedule 2007-13

The second rate schedule, in effect from 2007 to 2013, contained different terms.
Reissue premiums for owner’s policies were set at 50% of the premium for an original
owner’s policy. (Doc. # 112-16 at 4). The rate schedule also contained a presentment
requirement, which provided that, “[i]n order to be entitled to a reissue premium for an
owner’s or leasehold policy, the owner of the property must provide evidence of the prior
5

owner’s or leasehold policy. The following may be relied on as such evidence: [a] copy of
the prior owner’s or leasehold policy; or [a] copy of the signed HUD-1 or other settlement
statement that indicates that the transaction actually closed, that the premium was paid for
the prior policy, and that discloses the amount of insurance issued in the prior policy; or [a]
statement from the agent who closed the prior transaction confirming that an owner’s or
leasehold title insurance policy was issued and stating the amount of the prior policy.” (Id.)
The rate schedule further stated that “[n]either the agent nor [STGC] is under any
obligation to determine the existence of a prior policy or the eligibility for a reissue premium.
The existence of a prior or existing mortgage lien does not obligate Stewart Title or its
agent to provide any reduction in original title insurance premium charges.” (Id.) Reissue
premiums for lender’s policies had similar terms.
In lieu of the substitution premiums it previously offered, STGC’s rate schedule
created “refinance premiums,” which applied “when a refinance loan is made to the same
borrower on the same property, and the prior loan was covered by title insurance issued
within the past five (5) years by any insurance company authorized to conduct business in
the Commonwealth of Kentucky.” (Doc. # 112-16). As with the reissue premiums, “[i]n
order to be entitled to a refinance premium for a loan policy, the borrower must provide
evidence of the prior loan policy,” and STGC stated that it was not obligated to determine
the existence of a prior policy or an insured’s eligibility for a refinance premium.
3.

Rate Schedule 2013-Present

The third rate schedule, which went into effect in 2013, also contains different terms.
The reissue premiums for owner’s policies are set at 70% of an original owner’s policy.
And there are no reissue premiums for lender’s policies–instead, “[a] refinance charge
6

applies for policies insuring a replacement or refinance loan on property subject to an
institutional mortgage dated and recorded within the previous five years.” (Doc. # 112-17).
With respect to both types of discounted premiums, the rate schedule states that STGC “is
under no obligation to seek or make a determination of the existence of a previous policy.”
(Id.)
B.

Title Binder Fee Claims

Plaintiffs Knight and Chandler were each charged $50 by STGC’s policy-issuing
agents for what the HUD-1 form identified as a “title insurance binder” when they purchased
their title insurance policies. (Doc. ## 108-14, 108-17, 108-18). This fee was not part of
STGC’s filed premium and was not paid to STGC. Plaintiffs move for certification of a
“Binder Fee” class, with both Knight and Chandler as representatives,
consisting of all persons or entities in the Commonwealth of Kentucky who, from
May 15, 2004 and up to the date the Court enters an order certifying the Class, were
charged a fee identified as a “title insurance binder” or a “title commitment” for a title
insurance policy that was issued by [STGC].
(Doc. # 108-1 at 1).
II.

Analysis
A.

Standard of Review

“The class action is ‘an exception to the usual rule that litigation is conducted by and
on behalf of the individual named parties only.’” Wal-Mart Stores, Inc. v. Dukes, 564 U.S.
338, 348 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979)). “In order
to justify a departure from that rule, ‘a class representative must be part of the class and
possess the same interest and suffer the same injury as the class members.’” Id. at 348-49
(quoting E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403 (1977)).
7

Accordingly, the named plaintiffs must meet the requirements of Rule 23 to “sue or
be sued as representatives on behalf of all members” of a class. Fed. R. Civ. P. 23. Rule
23(a) contains four prerequisites: numerosity, commonality, typicality, and adequacy of
representation. Id.; Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 156 (1982) (explaining
that the prerequisites “limit the class claims to those fairly encompassed by the named
plaintiff’s claims”). In addition to meeting Rule 23(a)’s prerequisites, the proposed class
must also satisfy one of the three subsections of Rule 23(b). Wal-Mart, 564 U.S. at 345.
Here, Plaintiffs seek to certify their class under subsection (b)(3), which requires the Court
to find “that the questions of law or fact common to class members predominate over any
questions affecting only individual members, and that a class action is superior to other
available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P.
23(b)(3).
“Rule 23 does not set forth a mere pleading standard.” Wal-Mart, 564 U.S. at 350.
Rather, the party seeking certification must “affirmatively demonstrate his compliance with
the Rule.” Id. Certification is “proper only if the trial court is satisfied, after rigorous
analysis, that the prerequisites of Rule 23(a) have been satisfied.” Id. (internal quotation
marks omitted). The same goes for Rule 23(b)(3)’s requirements–“[i]f anything, Rule
23(b)(3)’s predominance criterion is even more demanding than Rule 23(a).” Comcast
Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013).
Although district courts must not “engage in free-ranging merits inquiries at the
certification stage,” Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 119495 (2013), a rigorous analysis of the Rule 23 factors will often “entail some overlap with the
merits of the plaintiff’s underlying claim.” Wal-Mart, 564 U.S. at 351. That is because “the
8

class determination generally involves considerations that are enmeshed in the factual and
legal issues comprising the plaintiff’s cause of action.” Falcon, 457 U.S. at 160.
B.

“Premium Overcharge” Class
1.

The Class Definition

“[C]ourts must be vigilant to ensure that a certified class is properly constituted.”
Powers v. Hamilton Cty. Public Defender Comm’n, 501 F.3d 592, 619 (6th Cir. 2007). The
Supreme Court has “repeatedly held that a class representative must be part of the class
and possess the same interest and suffer the same injury as the class members.” Falcon,
457 U.S. at 156. Therefore, before reaching the Rule 23 requirements, the Court must
consider two questions. The first is whether Knight has standing to represent the proposed
“premium overcharge” class at all. The second is whether the class is sufficiently definite.
First, Plaintiffs’ proposed class definition includes only those class members with a
prior title insurance policy issued by STGC. (Doc. # 108-1 at 1) (requiring that, before the
transaction giving rise to the claim, there be “an existing title insurance policy issued by
[STGC]” or a “prior loan covered by title insurance issued by [STGC]”). This requirement
is a problem for Plaintiffs because STGC points to record evidence, which Knight does not
dispute, that Knight’s prior policy was issued by Chicago Title Insurance Company, not
STGC. (See Doc. # 112-18 at 3; Doc. # 113 at 2-3). If the sole named plaintiff is not a
member of the class he seeks to have certified, certification is inappropriate. Heard v.
Mueller Co., 464 F.2d 190, 194 (6th Cir. 1972).
In their Reply, Plaintiffs acknowledge the “apparently inartful wording” of their class
definition (Doc. # 113 at 2) and urge the Court to focus on STGC’s alleged overcharges for
subsequent policies instead of the identity of the issuer of the prior policies. And because
9

“district courts have broad discretion to modify class definitions,” the Court will modify the
proposed class definition not to require a prior STGC policy so that it may analyze the
remainder of Plaintiffs’ class certification motion. Powers, 501 F.3d at 619.
Second, “[b]efore a court may certify a class pursuant to Rule 23, the class definition
must be sufficiently definite so that it is administratively feasible for the court to determine
whether a particular individual is a member of the proposed class.” Young v. Nationwide
Mut. Ins. Co., 693 F.3d 532, 537-38 (6th Cir. 2012) (internal quotation marks omitted). To
meet that standard, “the court must be able to resolve the question of whether class
members are included or excluded from the class by reference to objective criteria.” Id. at
538 (internal quotation marks omitted).
Here, the criteria for class membership are objective, although complicated. Class
members must be individuals or entities in Kentucky that purchased title insurance from
STGC between December 1, 2003, and today. They must have been charged the original
title insurance premium (or greater) under the operative rate schedule then on file with
KDOI. And at the time they were charged that premium, they must have had an existing
title insurance policy within the applicable date range under the operative rate schedule to
receive a reissue or refinance premium.3 Geographical boundaries, dates, and the price
of premiums charged and collected are “classic categories of objective criteria.” Young,
693 F.3d at 538. As a result, the proposed class is not too “‘amorphous or imprecise’” to
be certified. Id. (quoting 5 James W. Moore, et al., Moore’s Federal Practice § 23.21[1] (3d
ed. 1997)).

3

The class definition does not require “eligibility” for the premium, nor could it. That would create an
impermissible fail-safe class. See Young, 693 F.3d at 537-58.

10

STGC challenges whether it is administratively feasible to access the information
needed to identify potential class members without individual file-by-file review (or even
individual testimony), given that the documents confirming the existence of prior policies
would be in the possession of the issuing agents, not STGC. Plaintiffs suggest that policyissuing agents can be subpoenaed, but due to the date range in the class definition, STGC
notes that, of the 25 agents Plaintiffs proposed for subpoena, 15 were out of business and
others had no information to produce, meaning that Plaintiffs did not present evidence from
any subpoenaed agent in support of their motion. (Doc. # 112 at 10). STGC also argues
that Stewart Prior Files, a web-based program with information about policies issued by
STGC, contains incomplete records and could not meaningfully assist in identifying class
members. Instead, individualized proof will be required to ascertain class membership,
which STGC argues precludes class certification.
Even if the Court assumes that STGC’s prediction of file-by-file review will come to
pass, the Sixth Circuit has instructed that “the size of a potential class and the need to
review individual files to identify its members are not reasons to deny class certification.”
Young, 693 F.3d at 539. “If it were, defendants against whom claims of wrongful conduct
have been made could escape class-wide review due solely to the size of their businesses
or the manner in which their business records were maintained. . . . It is often the case that
class action litigation grows out of systemic failures of administration, policy application, or
records management that result in small monetary losses to large numbers of people. To
allow that same systemic failure to defeat class certification would undermine the very
purpose of class action remedies.” Young, 693 F.3d at 540 (internal quotation marks
omitted).
11

In this case, the lack of Rule 23(a) prerequisites of commonality and typicality and
Plaintiffs’ inability to show that common issues predominate are far more serious barriers
to class treatment.

To reach those issues, the Court assumes that determining

membership in the class is administratively feasible.
2.

Rule 23(a) Prerequisites
a.

Numerosity

The party seeking class certification must demonstrate that “the class is so
numerous that joinder of all members is impracticable.” Fed. R. Civ. P. 23(a)(1). “There
is no strict numerical test for determining the impracticability of joinder.” In re Am. Med.
Sys., Inc., 75 F.3d 1069, 1079 (6th Cir. 1996). Instead, courts must examine the specific
facts of each case. Id. “When class size reaches substantial proportions, however, the
impracticability requirement is usually satisfied by numbers alone.” Id.
Plaintiffs assert that they have established numerosity for the Premium Overcharge
class with mathematical calculations. Plaintiffs start with a base number of over 200,000
STGC premiums charged at the original rate during the class period. Second, Plaintiffs
assume that STGC made an error in its rate assessment in 1% of those policies, leaving
over 2,000 suspect transactions.4 Plaintiffs further assume that only 25% of the remaining
transactions represent policies of unique individuals or entities who actually had prior
policies within the applicable date range, which results in over 500 possible class members.

4

This assumption is apparently based on a recent, uncited STGC rate filing with KDOI, where the
company acknowledged that its agents “occasionally” make errors in rate assessments. (Doc. # 1081 at 20.)

12

STGC asserts that the estimate is “nothing more than rank speculation.” (Doc. #
112 at 31). The Court does not find Plaintiffs’ percentage estimates persuasive, untethered
as they are from any record evidence. In a footnote, however, Plaintiffs explain that the
significant disparity between the percentage of refinance discounts given by STGC (5% of
all policies received a refinance rate) and national statistics on the prevalence of refinances
(40-80% of Fannie Mae and Freddie Mac mortgages were refinances) suggests that many
more of the 200,000 transactions done by STGC in the class period were mortgage
refinances, meaning that a prior mortgage (and therefore a lender’s title insurance policy)
probably existed. (Doc. # 108-1 at 20 n.7).
Had Plaintiffs connected the dots between the national statistics and STGC’s
percentage of reissues, numerosity would probably not be a difficult question. As it is,
however, the Court bases its denial of certification on failure to satisfy the commonality,
typicality, and predominance requirements, and leaves numerosity for another day.
b.

Commonality

The party seeking class certification must also show that “there are questions of law
or fact common to the class.” Fed. R. Civ. P. 23(a)(2). This language “is easy to misread,
since ‘[a]ny competently crafted class complaint literally raises common questions.’” WalMart, 564 U.S. at 349 (quoting Richard A. Nagareda, Class Certification in the Age of
Aggregate Proof, 84 N.Y.U. L. Rev. 97, 131-32 (2009)). “Commonality requires the plaintiff
to demonstrate that the class members ‘have suffered the same injury.’” Id. at 349-50
(quoting Falcon, 457 U.S. at 157). “This does not mean merely that they have all suffered
a violation of the same provision of law.” Id. at 350. Rather, the class members’ “claims
must depend upon a common contention . . . that is capable of classwide resolution–which
13

means that determination of truth or falsity will resolve an issue that is central to the validity
of each one of the claims in one stroke.” Id. Stated another way,
[w]hat matters to class certification . . . is not the raising of common
‘questions’–even in droves–but, rather the capacity of a classwide proceeding
to generate common answers apt to drive the resolution of the litigation.
Dissimilarities within the proposed class are what have the potential to
impede the generation of common answers.
Id. (quoting Nagareda, 84 N.Y.U. L. Rev. at 132).
Plaintiffs seek class certification for negligence per se (from a statutory violation),
breach of contract, unjust enrichment, breach of fiduciary duty, fraud, constructive fraud,
and negligent misrepresentation. (Doc. # 108-1 at 25-32). Plaintiffs’ core contention for
all these claims, repeated throughout their briefs, is that STGC’s failure to require all of its
agents to use Stewart Prior Files when issuing policies, which would help verify whether
a prior policy existed, “had a common adverse impact on the class (read: incurring an
overcharge) for which [STGC] should be found legally responsible.” (Doc. # 108-1 at 2223; id. at 13, 26-27, 28, 29; Doc. # 113 at 5).
However, this “common contention” is not sufficient to meet Rule 23(a)(2)’s
requirement. At the most basic level, Plaintiffs fail to show that the class members “have
suffered the same injury.” Id. at 349-50 (internal quotation marks omitted). At least some
members of the proposed class, including the proposed class representative, suffered no
injury from STGC’s failure to mandate use of Stewart Prior Files because their prior files
were not issued by STGC and therefore would not be included in the database. In seeking
to fit all their claims under one roof, Plaintiffs have left Knight (and, presumably, unnamed
class members) out in the cold.

14

There are other reasons that Plaintiffs’ claims are not susceptible to classwide proof
that drives the litigation forward. The gravamen of Knight’s claims are that he (and others
in the proposed class) were entitled to and did not receive premium discounts, and the
resulting overcharge harmed them.5 But entitlement to the discount for many proposed
class members turns on the circumstances of the individual transactions.
Because the class definition is so broad, the putative class encompasses individuals
who could have qualified for a substitution loan under the first rate schedule (which requires
a prior STGC policy), a reissue or refinance loan under the second rate schedule (which
contained an explicit requirement that evidence of a prior policy be presented), or a reissue
or refinance loan under the third rate schedule (in which STGC disclaimed its obligation to
determine eligibility for discounts). Or, like Knight, a putative class member might be
entitled to a reissue discount under a rate schedule with no presentment requirement or
disclaimer at all. (See Doc. # 113 at 2).
The starkly differing terms of the three rate schedules encompassed in the class
period undermines Plaintiffs’ argument that class treatment could “generate common
5

All of the claims include actual injury as an element. See Ky. Rev. Stat. Ann. §§ 304.22-020(3) (title
insurance company “shall adhere” to its rate schedule), 446.070 (to succeed on negligence per se
claim, person must be “injured” by the “violation” of a statute and “may recover . . . such damages as
he sustained by reason of the violation”); Baptist Physicians Lexington, Inc. v. New Lexington Clinic,
P.S.C., 436 S.W.3d 189, 193 (breach of fiduciary duty action requires proof of injury and causation);
Rivermont Inn v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636, 641 (Ky. Ct. App. 2003) (claim of fraud
by omission requires proof that a plaintiff suffered actual damages as a result of a failure to disclose);
Presnell Constr. Mgrs., Inc. v. EH Constr., LLC, 134 S.W.3d 575, 580 (Ky. 2004) (negligent
misrepresentation claim subjects supplier of false information “to liability for pecuniary loss caused
to them by their justifiable reliance upon the information”); Jones v. Sparks, 297 S.W.3d 73, 78 (Ky.
Ct. App. 2009) (unjust enrichment claim requires a “benefit conferred upon defendant at plaintiff’s
expense” and “inequitable retention of benefit [by defendant] without payment for its value”). Plaintiffs
do not mention by name the civil conspiracy claim alleged in their Complaint, but the analysis for that
claim is the same. In Kentucky, the action for civil conspiracy is one “for damages caused by acts
committed pursuant to a formed conspiracy,” because without damages “no civil action lies against
anyone since the gist of the civil action for conspiracy is the act or acts committed in pursuance of the
conspiracy, not the actual conspiracy.” James v. Wilson, 95 S.W.3d 875, 897 (Ct. App. Ky. 2002).

15

answers apt to drive the resolution of the litigation.” Wal-Mart, 564 U.S. at 350 (internal
quotation marks omitted). If Knight (and others like him) were entitled to a discounted rate
whether he presented evidence of a prior policy or not, his claim cannot be decided in the
same stroke as that of an individual who was entitled to a discounted rate only if she
produced evidence of a prior policy.
Plaintiffs try to get around this by arguing that the presentment requirement and
STGC’s disclaimer may be legally void. That is a merits question. But even if Plaintiffs
ultimately prevail on that argument, the fact that a significant legal question exists for some
members of the class but not for others, including the named plaintiff, show that
commonality (and typicality, see infra at 19-20) is lacking. “Dissimilarities within the
proposed class are what have the potential to impede the generation of common answers.”
Wal-Mart, 564 U.S. at 350. The propriety of class treatment cannot hinge on a crucial
merits question being decided in a particular way in the future. See id. (“Th[e] common
contention, moreover, must be of such a nature that it is capable of classwide
resolution–which means that determination of its truth or falsity will resolve an issue that
is central to the validity of each one of the claims in one stroke.”).
Other district courts to have confronted proposed classes like this one have reached
similar conclusions. In Chesner v. Stewart Title Guar. Co., No. 06-cv-476, 2009 WL
585823, at *8 (N.D. Ohio Jan. 9, 2009) (Chesner II), the court decertified a class similar to
the one proposed here because the rate manual required that “the evidence of the actual
prior policy must be provided,” and “[t]here is simply no question that Plaintiffs cannot
provide class-wide proof establishing that every class member purchased a prior lender’s
policy. To do so, every individual file must be examined in detail.” Id.
16

Similarly, the Sixth Circuit affirmed the decertification of a class of Ohio ratepayers
who alleged they were not granted discounts they were entitled to because “determining
liability would require an examination of each individual policy [defendant] issued to
determine if [defendant] had received a copy of the prior policy or ‘other information’
suggesting that such a policy had previously been issued.

Under this framework,

establishing that [defendant] received this information is essential to proving liability and,
as the district court found, a highly individual inquiry.” Randleman v. Fidelity Nat’l Title Ins.
Co., 646 F.3d 347, 353 (6th Cir. 2011) (holding that common questions did not
predominate); see id. (explaining that “district courts in Ohio considering similar class
actions brought against other title insurers have all concluded that common issues do not
predominate and have either denied class certification or decertified classes”). See also
Scott v. First Am. Title Ins. Co., 276 F.R.D. 471, 478 (E.D. Ky. 2011) (“Far from resolving
the entitlement issue in one stroke, the resolution of whether a putative class member
qualified for a discount that he or she failed to receive requires highly individualized factbased inquiries into each borrowers’ relevant real estate transactions because discounts
are applicable under First American’s rate scheme only if title to the property was
previously insured.”); Corwin v. Lawyers Title Ins. Co., 276 F.R.D. 484, 490 (“[I]nstead of
liability being established ‘in one stroke,’ it would take an assessment of each transaction
to determine if the absent class member qualified for the discount rate.”).
Contrary to Plaintiffs’ contention, the Jefferson County Circuit Court’s certification
of a different overcharge case in Finney does not suggest that common questions are
presented here. Stewart Title Guar. Co. v. Finney, No. 11-499, 2012 WL 5378813 (Ky. Ct.
App. Nov. 2, 2012). That case encompassed claims regarding fees under only one rate
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schedule–the 1999 rate schedule. Id. at *3. And the trial court found that policy-issuing
agents “monolithically followed” the directives of 1994’s higher-rate schedule (that KDOI
had rejected) even when the 1999 rate schedule was meant to apply, meaning that the
agents necessarily denied the lower 1999 rates and discounts to every insurance
purchaser. Id. at *4-5. There is no such common contention here.
In Finney, “[t]he primary dissimilarity [among class members STGC] identified [wa]s
the number of policies each Stewart insured has purchased, which agent they purchased
the policies from, and in what region of Kentucky the insureds reside.” Id. at *5. The
district court held that those dissimilarities did not impact the import of common proof
because “[t]he number of policies does not affect the rates and discounts used” and “[t]here
is no evidence that the identity of the agent or the area where the customer lives is relevant
to whether the agents used the 1999 rates and discount.”

Id.

In this case, the

dissimilarities are much more significant and central to liability. For the putative premium
overcharge class, eligibility for the discounts for some individuals may turn on whether and
what type of evidence of a prior policy was provided prior to the settlement. And there are
three operative rate schedules that give multiple answers to that question. By contrast, the
Finney case contains no mention of a presentment requirement for any class members.
Certification in Finney does not control certification here.
Plaintiffs do raise other questions, such as “whether [STGC] can be held liable for
the conduct of its agents; whether [Ky. Rev. Stat. Ann.] § 304.22-020 protects the ratepayer or only the policyholder; and whether [STGC] owed Plaintiffs and the [class] a duty
to disclose the correct rates.” (Doc. # 108-1 at 23). But “reciting these questions is not
sufficient to obtain class certification” because the answers to these questions are not “apt
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to drive the resolution of the litigation.” Wal-Mart, 564 U.S. at 350. As a result, they do not
satisfy the commonality prerequisite. Id.
c.

Typicality

The party seeking class certification must also demonstrate that his or her claims
or defenses “are typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3).
Stated another way, the class members’ claims must be “fairly encompassed by the named
plaintiffs’ claims.” In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig., 722 F.3d
838, 851-52 (6th Cir. 2013) (internal quotation marks omitted). This ensures that “the
representatives’ interests are aligned with the interests of the represented class members
so that, by pursuing their own interests, the class representatives also advocate the
interests of the class members.” Id. at 853.
In practice, the concepts of typicality and commonality often overlap. See Wal-Mart,
564 U.S. at 349, n.5 (stating that both prerequisites “serve as guideposts for determining
whether under the particular circumstances maintenance of a class action is economical
and whether the named plaintiff’s claim and the class claims are so interrelated that the
interests of the class members will be fairly and adequately protected in their absence”).
“A claim is typical if it arises from the same event or practice or course of conduct that gives
rise to the claims of other class members, and if his or her claims are based on the same
legal theory.” Beattie v. CenturyTel, Inc., 511 F.3d 554, 561 (6th Cir. 2007) (internal
quotation marks omitted).
As with commonality, typicality is frustrated in this case because the operative rate
schedule when Knight’s claim arose included no presentment requirement and no antiobligation language. Plaintiffs “maintain, and intend to prove at summary judgment or trial,
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that this language is void and unenforceable.” (Doc. # 108-1 at 5). But regardless of the
legal merits of that argument, Knight does not need to prove it to win on his claim. The
typicality requirement is not satisfied when “[a] named plaintiff who proved his own claim
would not necessarily have proved anybody else’s claim.” Sprague v. Gen. Motors Corp.,
133 F.3d 388, 399 (6th Cir. 1998). “The premise of the typicality requirement is simply
stated: as goes the claim of the named plaintiff, so go the claims of the class.” Id. Like in
Sprague, “[t]hat premise is not valid here” because Knight’s claim depends on his
interactions with STGC and its agent, which occurred pursuant to different operative rate
schedules than others he seeks to represent. See id. at 397-99 (decertifying a class on
commonality and typicality grounds because of “myriad variations” in representations made
by the defendant company to plaintiff retirees). Therefore, Plaintiffs cannot show the
required typicality.
d.

Adequacy of Representation

STGC does not contest the adequacy of representation prong of Rule 23(a). In light
of the proposed class’s fatal flaws in commonality, typicality, and predominance, the Court
sees no need to address that prerequisite.
3.

Rule 23(b) Criteria

Rule 23(b) sets forth three circumstances in which class actions may be certified.6
The third subsection, and the one that Plaintiff seeks to utilize, is an “adventuresome

6

The first subsection “covers cases in which separate actions by or against individual class members
would risk establishing ‘incompatible standards of conduct for the party opposing the class,’ or would
‘as a practical matter be dispositive of the interests’ of nonparty class members ‘or substantially impair
or impede their ability to protect their interests.’” Amchem Prods. v. Windsor, 521 U.S. 591, 614
(1997) (quoting Fed. R. Civ. P. 23(b)(1)(A) & (B)). The second authorizes class actions “for
declaratory or injunctive relief where ‘the party opposing the class has acted or refused to act on
grounds generally applicable to the class.’” Id. (quoting Fed. R. Civ. P. 23(b)(2)).

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innovation,” which “added to the complex-litigation arsenal class actions for damages
designed to secure judgments binding all class members save those who affirmatively
elected to be excluded.” Id. (internal quotations omitted). It is “[f]ramed for situations in
which ‘class-action treatment is not as clearly called for[,]’” but “‘may nevertheless be
convenient and desirable.’” Id. (quoting Adv. Comm. Notes, 28 U.S.C. App., p. 697).
“To qualify for certification under Rule 23(b)(3), a class must meet two requirements
beyond the Rule 23(a) prerequisites: Common questions must ‘predominate over any
questions affecting only individual members’; and class resolution must be ‘superior to
other available methods for the fair and efficient adjudication of the controversy.’” Id.
(quoting Fed. R. Civ. P. 23(b)(3)). “In adding ‘predominance’ and ‘superiority’ to the
qualification-for-certification list, the Advisory Committee sought to cover cases ‘in which
a class action would achieve economies of time, effort, and expense, and promote . . .
uniformity of decision as to persons similarly situated, without sacrificing procedural
fairness or bringing about other undesirable results.’” Id. (quoting Adv. Comm. Notes, 28
U.S.C. App., p. 697).
a.

Predominating Common Questions

“Rule 23(b)(3)’s predominance criterion is even more demanding than Rule 23(a).”
Comcast, 133 S. Ct. at 1432 (citing Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623-24
(1997)). That said, predominance “does not require a plaintiff seeking class certification
to prove that each element of her claim is susceptible to classwide proof.” Amgen Inc. v.
Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1196 (2013) (internal quotation marks
omitted). The common issues need only predominate.

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In this case, common issues do not predominate. The key question of liability for
all of Plaintiffs’ claims turns on whether individuals were actually entitled to a discounted
rate. That question cannot be answered without an individualized inquiry into every
transaction because the rate schedules impose varying terms, some of which call for
particularized proof of a previous title policy. For the same reasons that the class fails to
satisfy the commonality and typicality requirements, Rule 23(b)(3)’s predominance
requirement is not met either. Indeed, the overwhelming trend in title insurance overcharge
cases like this one is to deny certification for precisely these reasons. See supra at 13-20.
This class is no different.
b.

Superiority of the Class Action

Although the relatively small dollar amounts mean that class treatment may be
warranted because “class members are not likely to file individual actions,” the prohibitive
problems with commonality, typicality, and predominance mean that class treatment is not
superior. In re Whirlpool, 722 F.3d at 861.
C.

Binder Fee Class

The binder fee claim that Plaintiffs seek certification to pursue is not the same claim
they raise in their Complaint. In the Complaint, Plaintiffs allege that STGC charged them
a $50 “binder fee” for a contract for temporary insurance, and that such temporary title
insurance contracts are prohibited in Kentucky. (See Doc. # 72 at ¶¶ 2, 3, 45, 46, 83, 123
(referring to the binder fee as “a charge that is expressly prohibited under Kentucky law,”
“a charge expressly prohibited by statute,” “a charge being expressly prohibited by law,”
“an unequivocal legal fiction,” and a “charge[ that] exceeded the amount that should have
or could have been legally charged,” citing Ky. Rev. Stat. Ann. § 304.14-220(4) (declaring
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that provisions governing “[b]inders or other contracts for temporary insurance” do not
apply to title insurance))). Plaintiffs also alleged that STGC retained the entirety of the $50
fee. (Id. at ¶¶ 26, 31, 41). These binder fees form the basis of several causes of action
in the Complaint: breach of contract and the covenant of good faith and fair dealing (id. at
¶ 83) and negligent misrepresentation (id. ¶ 123). As purported support for their legal
theory, Plaintiffs attached an opinion letter from KDOI to their Complaint, which explains
that binder fees, to the extent they constitute temporary insurance, are prohibited and
should not be passed on to the consumer. (Doc. # 108-2 at 1).
Now, after discovery, Plaintiffs have “elected not to pursue their theory that the
charges for title binders are per se illegal charges for temporary insurance.” (Doc. # 113
at 6). Instead, they assert that the $50 charges are improper because they should be
included in the premium, not “characterize[d]” by policy-issuing agents as search and
examination costs. (Id. at 8-9). Plaintiffs fault STGC for not having a “method to detect
and/or stop its agents from overcharging in this manner.” (Id. at 9). The overcharging is
to STGC’s benefit, according to Plaintiffs, because of negative competition in the title
insurance market: although STGC does not retain the binder fees, Plaintiffs claim that
STGC “can attract more business from agents, and boost its own market share, by closing
its eyes when agents charge and retain junk fees from [STGC’s] consumers.” (Id.) In
addition, Plaintiffs now seek certification for causes of action beyond the breach of contract
and covenant of good faith and fair dealing and negligent misrepresentation claims raised
in the Complaint, including negligence per se (for exceeding the filed premium rate, on the
theory that the binder fees should be included in the premium), unjust enrichment, breach
of fiduciary duty, and fraud. (Id. at 9; see also Doc. # 108-1 at 29-32).
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STGC argues that certification of the Binder Fee class should be denied because,
due to the divergence between the Complaint and class certification briefing, STGC did not
have fair notice of Plaintiffs’ binder fee claims or the grounds on which they rest. (Doc. #
112 at 34-35). See McDonald v. Franklin Cty., 306 F.R.D. 548, 553-54 (S.D. Ohio 2015)
(denying class certification where “[n]othing in the operative complaint puts the County on
notice that Plaintiff is challenging, on behalf of a class, the County’s practice of allegedly
permitting a male ID Tech to photograph the private tattoos of female detainees”); id.
(“Plaintiff cannot circumvent [the denial of a motion to amend] by introducing a new class
of individuals in her motion to certify. . . . [T]he new proposed Cross-Gender Class . . . adds
a new theory of liability over and above the County’s liability for the tattoo policy.”).
Plaintiffs counter that STGC is on notice of these claims and that they are permitted
to seek certification on the most viable legal theory. For the latter point, Plaintiffs cite In re
Conseco Life Insurance Co. LifeTrend Insurance Sales & Marketing Litigation, 270 F.R.D.
521, 531-32 (N.D. Cal. 2010). But Conseco is not analogous to this case. In Conseco,
unlike here, the district court ordered supplemental class certification briefing after learning
that the Defendant had entered into a regulatory settlement that “altered the nature of
plaintiffs’ allegations and the scope of the proposed class.” Id. at 526. Plaintiffs “refined
their theory of contract liability as a result of the changes occasioned by the issuance of the
regulatory settlement,” id. at 532, and “clarified their breach of contract claim as a result of
the unusual factual developments,” id. at 532 n.10. They did not add new causes of action
or make new factual allegations after their prior claims were undermined by discovery.
Contrary to Plaintiffs’ arguments, neither the Complaint, the KDOI letter, Plaintiffs’
summary judgment briefing, nor the Court’s ruling on summary judgment put STGC on
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notice of this new claim. As shown above, the Complaint offers no notice of the new binder
fee theory because the overwhelming implication from the Complaint is that the “binder
fees” are illegal because contracts for temporary insurance, called binders, are prohibited.
Nor does the KDOI letter put STGC on notice of this new legal theory. The KDOI
letter explains that binder charges, to the extent they constitute temporary insurance, are
prohibited and should not be passed on to the consumer. (Doc. # 108-2 at 1). It also
opines that the rate-filing statutes “serve[] to prevent insurance producers and insurance
companies from collecting any amount from the insured for the purchase of insurance that
is not filed as a component of the premium.” (Doc. # 108-2 at 2). “In this case, any charge
for the title insurance policy must be filed in as a component of the premium in accordance
with [Ky. Rev. Stat. Ann.] § 304.22-020.” (Id.). Plaintiffs pin their hopes on the latter
sentence, but to say that the letter “states that the binder charge should be included in the
premium, rather than charged separately” is a stretch. (Doc. # 113 at 7 n.3). Nothing in
the KDOI letter mentions title commitments.
Nor did Plaintiffs give sufficient notice of their new binder fee claim in their opposition
to summary judgment. In their memorandum, Plaintiffs suggested that the binder fees
“could be unlawful and predicate facts for Plaintiffs[’] other claims. Defendant has produced
no evidence that it or its agents did any work justifying the ‘title insurance binder’ fees that
they were charged, suggesting that the fees are, indeed, merely a method for Defendant
and/or its agents to inflate their fees.” (Doc. # 113 at 7 (footnote omitted)). Plaintiffs go on
to explain that the name of the fee is likely to confuse, “making it impossible for the
consumer to divine the purpose, if any, of the charges.” (Id.) None of this suggests that
binder fees must be charged as part of the premium, or that they are the result of collusion
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between STGC and its policy-issuing agents, which is now the basis of Plaintiffs’ Binder
Fee class claims.
Plaintiffs also claim the Court’s earlier ruling “acknowledged Plaintiffs’ premium
overcharge theory related to binder fees, and authorized discovery for it.” (Doc. # 113 at
8). That is inaccurate. The Court identified a disputed issue of fact as to whether the
services actually rendered were for temporary contracts of insurance (as Plaintiffs alleged
in their Complaint) or title commitments (as STGC argued). “Until STGC can prove these
fees were not paid in exchange for an insurance binder, a genuine issue of material fact
will remain unsettled. Thus far, all that is offered [by STGC] is a plausible alternative;
however, STGC still has not proven that a title commitment was actually conducted with
respect to either of Plaintiffs’ transactions.” (Doc. # 84 at 35). The Court went on to explain
that even if STGC did prove that a title commitment was actually conducted, it would have
to further link that title commitment to the $50 binder fee (to dispel any notion that, for
example, both a title commitment and a temporary insurance contract existed). (Id.)
For all of these reasons, class certification of the Binder Fee class is not warranted.
The claims Plaintiffs seek to pursue through class treatment have not been pled in their
Complaint, and are so divergent from their prior claims that STGC does not have fair notice
of the claims or the grounds on which they rest.
III.

Conclusion
In conclusion, and for the reasons stated herein, IT IS ORDERED that:
(1) Plaintiffs’ Motion for Class Certification (Doc. # 108) is DENIED; and
(2) Within ten (10) days of the date of entry of this Order, Plaintiffs shall file a

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status report indicating whether Plaintiffs wish to proceed with their individual claims.
This 13th day of January, 2017.

K:\DATA\ORDERS\Cov07\07-87 Knight MOO.wpd

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