Slade v. Progressive Security Insurance Co

Filing 164

ORDER: IT IS ORDERED that the prerequisites for class certification are satisfied pursuant to Federal Rule of Civil Procedure 23; IT IS FURTHER ORDERED that parties meet, confer, and thereafter submit to the Court a joint proposal of notice and op-ou t procedure no later than 10/24/2017. If the parties are unable to agree on the proposed notice and/or op-out procedure, the parties shall file the appropriate motion(s) with their objections no later than 10/31/2017. Signed by Magistrate Judge Carol B Whitehurst on 10/2/2017. (crt,Chicola, C)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF LOUISIANA
LAFAYETTE DIVISION
Slade

Civil Action No. 6:11-CV-2164

versus

Judge Rebecca F. Doherty

Progressive Security Insurance Co

Magistrate Judge Carol B. Whitehurst
ORDER

Pending before the Court on referral from the District Judge, is a Memorandum
Of Facts And Law Regarding Issue Remanded By The U.S. Fifth Circuit Court Of
Appeals filed by Plaintiff Cheryl Slade, individually and on behalf of others similarly
situated [Rec. Doc. 151], an Opposition Memorandum filed by Defendant Progressive
Security Insurance Company (“Progressive”) [Rec. Doc. 155] and Plaintiffs’ Reply
thereto [Rec. Doc. 158].
I. Factual And Procedural Background
Plaintiffs originally filed this class action lawsuit on November 10, 2011, in
the15th Judicial District Court for the Parish of Lafayette, State of Louisiana. In their
Complaint, Plaintiffs allege that Progressive’s use of the Mitchell Work Center Total
Loss (WCTL) system to determine the base value of first party motor vehicle total
loss claims violates the requirement of La. R.S. 22:1892 B(5) that the insurer pay “the
retail cost as determined from a generally recognized used motor vehicle industry
source.” Plaintiffs claim that Progressive’s unlawful use of WCTL, instead of lawful

sources such as the National Automobile Dealers Association (NADA) Guidebook
or the Kelly Blue Book (KBB), resulted in significant underpayments on their
insurance claims. Plaintiff’s suit seeks to recover those underpayments.
The action was removed to this Court on December 16, 2011. Plaintiffs moved
for class certification and an evidentiary hearing on class certification was held on
September 16, 2014. At the hearing, Plaintiffs contended that damages can be
calculated by replacing Defendant’s allegedly unlawful WCTL base value with
a lawful base value, derived from either NADA or KBB, and then adjusting that
new base value using Defendant’s current system for condition adjustment. Plaintiffs
also contended that such a calculation can be done on a class-wide basis because
Defendant already possesses NADA scores for most of the class, NADA or KBB
scores are otherwise publicly available, and Defendant already had condition scores
for each vehicle. Plaintiffs’ damages expert opined that she could apply Defendant’s
condition determination to Defendant’s NADA scores or publicly available NADA
or KBB data. By rerunning Defendant’s calculation of actual case value with a lawful
base value—NADA or KBB—the resulting damages would be isolated to the
allegedly unlawful based value. Because Defendant’s condition adjustment was made
in a separate and unrelated step from the calculation of base value, the Defendant’s
own condition adjustment scores could be used to adjust the base values derived from
2

NADA or KBB. The Court1 issued a written ruling finding that class certification was
proper.
Progressive appealed the ruling to the Fifth Circuit Court of Appeals. Based on
Plaintiff’s argument, the Fifth Circuit held that “Plaintiffs’ damages methodology
does not preclude class treatment.” Slade v. Progressive Security Insurance
Company, 856 F.3d 408, 411 (5th Cir. 2017). The court noted, however, that counsel
for Progressive had suggested at oral argument that the class representative was not
adequate because the representative had purportedly waived potential challenges to
the individual condition determination of Progressive adjusters. On May 9, 2017, the
Fifth Circuit issued its opinion remanding the matter to this Court to address the
waiver issue raised by Progressive’s counsel at oral argument.2
The Court conducted a hearing with oral argument on September 26, 2017 on
the parties’ Memoranda in response to the Fifth Circuit’s Judgment. R. 162.
II. Discussion
In its Judgment, the Fifth Circuit stated that the fact that Plaintiffs challenged
only the base value calculation and did not challenge the “condition adjustments”

1

At that time, the case was assigned to retired District Judge Richard T. Haik, Sr.

2

The Fifth Circuit also reversed a March 5, 2013 ruling by Judge Haik allowing
certification of Plaintiff’s fraud claims, R. 44, R. 46, which need not be addressed by this Court.

3

made by Defendant’s adjusters, they “may have resolved [Rule 23(b)(3)’s]
predominance problem.” However, the Fifth Circuit warned, “resolving the
predominance problem with a waiver of claims raises a separate potential bar to class
certification—adequacy.” Id. at 412.
The court explained why Defendant expressly couched its waiver argument as
an attack on purported conflict of interest rather than predominance,
Adequacy encompasses three separate but related inquiries (1) “the zeal
and competence of the representative[s’] counsel”; (2) “the
willingness and ability of the representative[s] to take an active
role in and control the litigation and to protect the interests of
absentees”; and (3) the risk of “conflicts of interest between the named
plaintiffs and the class they seek to represent.” Feder v. Elec. Data Sys.
Corp., 429 F.3d 125, 130 (5th Cir. 2005) (quoting Berger v. Compaq
Comp.Corp., 279 F.3d 313, 313–14 (5th Cir. 2002)). When the class
representative proposes waiving some of the class’s claims, the decision
risks creating an irreconcilable conflict of interest with the class.
See, e.g., Back Doctors Ltd. v. Metro. Prop. & Cas. Ins. Co., 637
F.3d 827, 830–31 (7th Cir. 2011) (“A representative can’t throw away
what could be a major component of the class’s recovery.”).

Id. Regardless, the court noted that deciding whether a class representative’s decision
to forgo certain claims defeats adequacy requires an inquiry into: “(1) the risk that
unnamed class members will forfeit their right to pursue the waived claim in future
litigation, (2) the value of the waived claim, and (3) the strategic value of the waiver,

4

which can include the value of proceeding as a class (if the waiver is key to
certification).” Id. at 413 (citations omitted).
Because this Court did not have an opportunity to weigh the value of the
potentially waived claim against the strategic value of the waiver, the issue was
remanded. In particular, the court stated that “on remand, the district court can
consider the risk of preclusion, the value of the potentially waived claims, and the
relative strategic value of Plaintiffs’ proffered waiver.” Id. at 415. The court
instructed that this Court has “options” which, depending on how the case develops
may or may not be appropriate, include: (1) Concluding the risks of preclusion are too
great and declining to certify the class; (2) Certifying the class as is and then tailoring
the notice and op-out procedure to alert the class and the risk of preclusion; (3)
Concluding that the benefits of proceeding as a class outweigh the risks of future
preclusion and certifying the class as is; or (4) Defining the class in a way to exclude
unnamed plaintiffs who may quarrel with the condition adjustment. Id.
Here, Plaintiffs contend that any speculative recovery from a challenge to the
adjusters’ condition determinations would be worth only a small faction of the
statutory claims that are being asserted on behalf of the class. In the event this Court
finds that some action is necessary to preserve potential individual condition
adjustment challenges of absent class members, Plaintiffs maintain, in the alternative,
5

that either tailoring notice to advise class members of the possibility of issue
preclusion, or tailoring the class definition to exclude class members who have a
quarrel with the condition adjustment, would be preferable to “throwing the class
action baby out with the claim preclusion bathwater.”
Defendant argues that certifying this action would risk the purported class
members from litigating potentially valuable condition-adjustment claims in the
future. They contend that there is no difference between a claim that Progressive
“undervalued” a total loss vehicle by using an allegedly artificially low “base” value
and a claim that Progressive “undervalued” a total loss vehicle by improperly
discounting the value based on the vehicle condition. In essence, Defendant attempts
to morph base value and condition determination, the two issues distinguished and
discussed by Plaintiffs—and more importantly by the Fifth Circuit—into the same
argument. They maintain that the notice and opt-out mechanism would be
insufficient.
Upon considering the parties’ memoranda and the parties oral arguments, as
well as the Fifth Circuit’s directive to take into account “the risk of preclusion, the
value of the potentially waived claims, and the relative strategic value of Plaintiffs’
proffered waiver,” the Court finds that option number 2, above, is appropriate in this
case. Therefore, the prerequisites for class certification pursuant to Rule 23 are
6

satisfied and the Court’s class action certification remains unchanged. The Court will
order that the parties meet and confer in good faith in an attempt to draft by mutual
agreement regarding a proposed notice and op-out procedure adequate to alert the
class to the risk of preclusion.
III. Conclusion
Based on the foregoing,
IT IS ORDERED that the prerequisites for class certification are satisfied
pursuant to Federal Rule of Civil Procedure 23;
IT IS FURTHER ORDERED the parties meet, confer, and thereafter submit
to the Court a joint proposal of notice and op-out procedure no later than October 24,
2017. If the parties are unable to agree on the proposed notice and/or op-out
procedure, the parties shall file the appropriate motion(s) with their objections no
later than October 31, 2017.
THUS DONE AND SIGNED at Lafayette, Louisiana, this 2nd day of October,
2017.

7