This is the next in a continuing series of articles reprinted from the manuscript of the author's article published by Westlaw Publishing Co. as "Force-placed, Lender-placed Insurance Class Actions: Is the Lender Placement of Insurance Authorized by Law, Or Simply Beyond the Reach of the Courts?", 35 Insurance Litigation Reporter 221 (2013) © 2013 Thomson Reuters. Installments in this series will alternately be presented here and on Insurance Claims and Issues Blog. Permission to reprint from the author's manuscript is given by John K. DiMugno, Esquire, Editor-in-Chief of ILR, by Thomson Reuters Westlaw, and by the author.
As we saw here in the post which began our discussion of Class Actions in this article, on Thursday, August 15, 2013, one of the "Defenses" to FPI claims is not really a defense. It is based entirely on the fact that the amounts of money involved in FPI claims are often too small to attract legal representation absent a class action vehicle to aggregate many potential, similar FPI claims. The current state of class action procedure does not always invite FPI claims, and that too is a fact.
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3. Typicality. As has been discussed earlier in this article, there are a variety of claims alleged by plaintiffs in force-placed insurance cases. However, the underlying theory of liability is always the same. It has been held that this fact requires a finding that the "typicality" requirement of Rule 23 is met in such a case:
Regardless of which claim a class member were seeking to recover under, however, the theory of liability is identical, namely that Wells Fargo and QBE colluded and charged the class member excessive and inflated insurance premiums for their force-placed insurance.[1]
4. Adequate representation. Satisfying this requirement will depend on the plaintiffs and their counsel in each case. However, it is worth a passing mention here that this requirement too has been found satisfied in force-placed insurance Federal class action cases even when the class ultimately was not certified.[2]
5. Predominance in commonality. This requirement, imposed by Rule 23(b)(3),[3] links the concept of predominance to the questions of law or fact common to the class as required by Rule 23(a)(4).[4] This was the publicly stated reason for decision discussed above by the 5-to-4 majority in Comcast, that the class action in that case was improperly certified because common questions of law or fact did not "predominate"; rather, "[q]uestions of individual damage calculations will inevitably overwhelm questions common to the class."[5]
The requirement of predominance in commonality is precisely the basis for decision as well in some of the available decisions denying class certification in force-placed insurance cases depending on the classes which the plaintiffs requested to be certified. The District Court in the case of Gordon v. Chase Home Finance, LLC,[6] refused to certify two classes, "one concerning force-placed insurance and one concerning excess flood insurance requirements," both requested classes to consist of "United States residents with mortgages owned or serviced by" the defendants.[7]
With respect to the plaintiffs' claims of breach of contract and asserted breach of "implied warranty of good faith and fair dealing claims" a defendant and the Court agreed that predominance was lacking because "'each borrower's claim necessarily depends on the particular language of each mortgage.'"[8] Similarly, claims for alleged breaches of fiduciary duties would also "rise or fall" depending not only on each plaintiff's relationship with the defendant but "may also change depending on the state of contracting."[9] Nor did the plaintiffs' alleged unconscionability claims predominate even when limited to Florida law, apparently, for similar reasons including "because the Court lacks a homogenous contract to evaluate for the presence of egregious terms."[10]
Class action certification was similarly denied in the case of Kunzelmann v. Wells Fargo Bank, N.A.[11] The plaintiff in that case requested certification of two classes. We know from a previous appearance before the same District Judge in the Kunzelmann case that the plaintiff's complaint contained two counts: alleged breach of an implied covenant of good faith and fair dealing, and unjust enrichment.[12] The two classes for which the plaintiff requested certification was, one, what again was to be a nationwide class of "borrowers with properties throughout the United States" and who claimed "unjust enrichment". The second set was to be a subclass of just "borrowers with properties in Florida" and who claimed "breach of the implied covenant of good faith and fair dealing."[13]
The Court denied certification of the nationwide class in that case in part because "the substantial variations in law among the fifty states" would prevent common questions from predominating. The Court denied certification of the Florida subclass in part because the Court interpreted Florida case law to require individualized determinations which would have the effect of preventing predominance in a class action:
While Plaintiff argues that this may be that rare case, it seems to be a textbook example of why such a claim can not be certified. First, a claim for unjust enrichment or a claim based on a breach of the implied covenant of good faith and fair dealing requires examination of the particular circumstances of an individual case as well as the expectations of the parties to determine whether an inequity would result or whether their reasonable expectations were met.[14]
Resolution of a Rule 12(b)(6) motion to dismiss does not necessarily determine the outcome of class action certification. The same Court previously denied the defendants' Rule 12(b)(6) motion to dismiss in the same case.[15]
In addition, in denying class certification of force-placed insurance claimants in Kunzelmann, the Court took account of defenses available to the defendants. In particular, the Court held, "differences between the states in their application of the filed-rate doctrine render certification of a nationwide class improper."[16] Previously, the Court denied the defendants' Rule 12(b)(6) motion to dismiss because the filed rate doctrine did not apply:
I find that in this case Plaintiff's claims are not barred by the filed rate doctrine because he is not challenging the rates filed by Defendants' insurers. Rather, Plaintiff challenges the manner in which Defendants select insurers, the manipulation of the force-placed insurance process, and the impermissible kickbacks that were included in the premium. (DE 37 at ¶ 21-36, 40, 53, 62, 78.) Accordingly, Plaintiff's claims are not barred by the filed rate doctrine.[17]
In holding that the filed rate doctrine did not apply to the force-placed insurance claims before the Court, the Kunzelmann Court was holding squarely with the mainstream of Federal Courts confronting Rule 12(b)(6) motions to dismiss in force-placed insurance cases as to the filed rate doctrine: The filed rate doctrine does not apply to such allegations. The next year, when the same Court discussed a doctrine which the Court had already held did not apply, the Court was of the view that the inapplicable doctrine would "render the class unmanageable."[18]
It is also of more than passing interest here, that Mr. Kunzelmann was unlike most of his putative class members. (Therefore, he could not meet the typicality requirement for that reason in that case.) Mr. Kunzelmann paid the premium for the insurance placed upon him by force by his lender whereas most of the putative class members explicitly did not.[19]
That was all in early 2013. In 2012, in contrast, a more specific, concentrated class of plaintiffs was certified in a different force-placed insurance case in the same District as the one in which the 2013 Kunzelmann decision was made. Although the 2013 Kunzelmann decision is the later of the two and although it involved an identical defendant, it never mentioned the decision. The 2012 decision in question is in the case of Williams v. Wells Fargo Bank, N.A.[20]
In Williams, a different District Judge in the same District had no problem certifying this compact class of force-placed insurance plaintiffs:
This Court certifies the following class to proceed under the Counts remaining in the Plaintiffs' Amended Complaint:
All borrowers that had mortgages with and/or serviced by Wells Fargo Bank, on property located within the State of Florida, that were charged, and who either paid or who still owe, premiums for a force-placed insurance policy within the applicable statute of limitations through April 7, 2011 (“the Class Period”), unless (1) the lender has obtained a foreclosure judgment against the borrower; (2) the borrower has entered into a short-sale agreement with the lender; (3) the borrower has granted a deed in lieu of foreclosure to the lender; (4) the borrower has entered into a loan modification agreement with the lender; (5) the borrower has filed a claim for damages which has been paid in full or part by the force-placed insurer; or, (6) the cost of force-placed insurance was canceled out in full.[21]
The "Counts remaining in the Plaintiffs' Amended Complaint," were alleged "claims of unjust enrichment and breach of the covenant of good faith and fair-dealing," as to which the plaintiffs limited a proposed class "to only Florida properties."[22]
With specific focus on certifying the class of Florida unjust enrichment claimants in this force-placed insurance case, the Williams Court rejected as irrelevant whether individual claimants may have been aware of the defendants' alleged injustice, in basic terms, when addressing potential reasons for denying certification:
Wells Fargo and QBE argue that an individuated inquiry will be necessary to determine whether class members were aware that force-placed insurance would be more expensive than self-placed coverage. The Defendants are incorrect in this assertion. The Plaintiffs claim is that Wells Fargo and QBE secretly colluded to artificially and unjustly inflate the cost of the force-placed insurance. Therefore, it is not relevant whether a particular class member was aware that force-placed insurance is generally more expensive because the claim in this case is not just that the force-placed insurance was more expensive, but that the force-placed insurance was artificially and unjustly more expensive due to the illicit actions of Wells Fargo and QBE.[23]
As noted, the Williams Court certified a class of Florida plaintiffs pursuing claims for alleged breach of the implied covenant of good faith and fair dealing in this force-placed insurance case.[24] In contrast, the Kunzelmann Court in the same District refused to certify a similar class, holding that Florida law requires "a fact intensive inquiry" for claimed violations of an implied covenant of good faith and fair dealing.[25] "Like the claim for unjust enrichment," the Kunzelmann Court ruled when denying class certification, "the need to examine the state of mind of each borrower, including awareness, expectations, and conduct requires individualized scrutiny incompatible with class treatment."[26] While those perceived needs may or may not apply in jurisdictions outside of Florida, they do not apply in Florida actions based either on unjust enrichment, or on breach of an implied covenant of good faith and fair dealing. Those perceived needs may be justifications for denying certification of a national class, as in Gordon and as in Kunzelmann, but they do not exist in Florida classes of plaintiffs presenting those claims as in Williams or in other, non-force-placed insurance Federal class actions.[27]
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[1] Williams v. Wells Fargo Bank, N.A., 280 F.R.D. 665, 673 (S.D. Fla. 2012).
[2] E.g., Williams v. Wells Fargo Bank, N.A., 280 F.R.D. 665, 673 (S.D. Fla. 2012)(case involved force-placed insurance claims; class certified). Rule 23 of course requires that "the representative parties will fairly and adequately protect the interests of the class." Fed. R. Civ. P. 23(a)(4). [Emphasis added.] In Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 139913 *6 (S.D. Fla. January 10, 2013), the District Judge expressly observed that the named plaintiff in that case, "Mr. Kunzelmann[,] is represented by skilled counsel," [emphasis added], despite the same Judge's further comments which are not of the same kind or stripe. See Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 139913 *11 (S.D. Fla. January 10, 2013). The Federal Judge declined to make a finding on adequacy of representation by the representative parties in Kunzelmann, although the Court ultimately denied class action certification in that case regardless. Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 139913 *6 (S.D. Fla. January 10, 2013)("Since I find that the requirements of commonality and typicality are not met and that the predominance and superiority requirements of Rule 23(b)(3) cannot be demonstrated, I decline to make a finding as to adequacy.").
[3] Fed. R. Civ. P. 23(b)(3). This provision is quoted in pertinent part, supra.
[4] Fed. R. Civ. P. 23(a)(4). This provision is also quoted, supra.
[5] Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1433 (U.S. 2013). [Emphasis added.]
[6] Gordon v. Chase Home Fin., LLC, 2013 WL 436445 (M.D. Fla. February 5, 2013).
[7] Gordon v. Chase Home Fin., LLC, 2013 WL 436445 *3, *8, *11 (M.D. Fla. February 5, 2013).
[8] Gordon v. Chase Home Fin., LLC, 2013 WL 436445 *8-*9 (M.D. Fla. February 5, 2013).
[9] Gordon v. Chase Home Fin., LLC, 2013 WL 436445 *10 (M.D. Fla. February 5, 2013).
[10] Gordon v. Chase Home Fin., LLC, 2013 WL 436445 *10 (M.D. Fla. February 5, 2013).
[11] Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 1339913 (S.D. Fla. January 10, 2013).
[12] Kunzelmann v. Wells Fargo Bank, N.A., 2012 WL 2003337 *5, *6 (S.D. Fla. June 4, 2012).
[13] Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 1339913 *2 (S.D. Fla. January 10, 2013). [Emphasis added.]
[14] Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 1339913 *6 (S.D. Fla. January 10, 2013).
[15] The Court denied the defendants' earlier Rule 12(b)(6) motion to dismiss because the Court held that there were sufficiently pleaded facts as to the count for alleged breach of an implied covenant of good faith and fair dealing, concerning contravention of the parties' reasonable expectations, no competitive bids, and kickbacks, and Rule 8(d) allows for alternative pleading even if there was an express contract at issue which would preclude relief on the unjust enrichment claim. Kunzelmann v. Wells Fargo Bank, N.A., 2012 WL 2003337 *5-*6 (S.D. Fla. June 4, 2012).
[16] Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 1339913 *12 (S.D. Fla. January 10, 2013).
[17] Kunzelmann v. Wells Fargo Bank, N.A., 2012 WL 2003337 *3 (S.D. Fla. June 4, 2012).
[18] Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 1339913 *6 (S.D. Fla. January 10, 2013).
[19] Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 1339913 *4, *9 (S.D. Fla. January 10, 2013). It is also interesting to note that the insurance in question in a previous iteration before the same District Judge was consistently called only "force-placed insurance," Kunzelmann v. Wells Fargo Bank, N.A., 2012 WL 2003337 (S.D. Fla. June 4, 2012), while in the iteration under discussion it was consistently called only "lender-placed insurance".
[20] Williams v. Wells Fargo Bank, N.A., 280 F.R.D. 665 (S.D. Fla. 2012).
[21] Williams v. Wells Fargo Bank, N.A., 280 F.R.D. 665, 675-76 (S.D. Fla. 2012). [Emphasis added.]
[22] Williams v. Wells Fargo Bank, N.A., 280 F.R.D. 665, 669 (S.D. Fla. 2012). [Emphasis added.]
[23] Williams v. Wells Fargo Bank, N.A., 280 F.R.D. 665, 674 (S.D. Fla. 2012).
[24] See Williams v. Wells Fargo Bank, N.A., 280 F.R.D. 665, 669, 675-76 (S.D. Fla. 2012).
[25] Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 139913 *9 (S.D. Fla. January 10, 2013).
[26] Kunzelmann v. Wells Fargo Bank, N.A., 2013 WL 139913 *10 (S.D. Fla. January 10, 2013).
[27] If it were otherwise, there could never be any Federal class actions in which a class is certified consisting of plaintiffs pursuing any claims for alleged violations of an implied covenant of good faith and fair dealing, yet there are. Besides the Williams force-placed insurance class action of Florida real property owners which is discussed at length in the text, a class and thirteen subclasses of plaintiffs were certified including claimants who alleged bad faith, unjust enrichment, unconscionability and various statutory claims under the laws of Connecticut, New Jersey, Pennsylvania and Vermont, against banks in connection with their overdraft fees activity, in In re Checking Account Overdraft Lit., 281 F.R.D. 667 (S.D. Fla. 2012). In particular as to bad faith claims apparently including under the laws of jurisdictions in addition to Florida, the Court said: "To the contrary, breach of the duty of good faith and fair dealing may be shown by class-wide evidence of a defendant's subjective bad faith or objectively unreasonable conduct." In re Checking Account Overdraft Lit., 281 F.R.D. 667, 682 (S.D. Fla. 2012).
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