Claims and Bad Faith Law Blog

STANDING TO SUE AND CLASS ACTION PROCEDURES: Part 2 of 2.

This is the second part of a two-part article featuring Federal class action procedures as explained by a U.S. District Judge in a lender force-placed insurance case, Wilson v. Everbank, N.A., No. 14-CIV-22264, ___ F. Supp. 3d ___, 2015 WL 265648 (S.D. Fla. Jan. 6, 2015).  The author is at work on a book on "Lender Force-Placed Insurance Practices" which the American Bar Association has scheduled for publication in the Spring of 2015.

    The continuing discussion below is taken without change from the U.S. District Court's opinion at page *18:

By contrast, courts have addressed lack of standing claims prior to considering certification and dismissed claims asserted by the named plaintiff under state statutory schemes enacted to protect the interests or citizens of a particular state, where that named defendant had no connection to the statute at issue. See, e.g., Renzi v. Demilec (USA) LLC, 2013 WL 6410708, at *3 (S.D. Fla. Dec. 9, 2013) (holding that Florida plaintiff lacked standing to bring state statutory claims parallel to her FDUTPA claim on behalf of a national class because “plaintiffs may only assert a state statutory claim if the named plaintiff resides in that state”);  In re Terazosin Hydrochloride Antitrust Litig., 160 F. Supp. 2d 1365, 1371-72 (S.D. Fla. 2001) (named plaintiffs could not pursue antitrust claims under state statutes from states in which they did not reside because “[n]one of these statutes authorizes antitrust actions based on commerce in other states”); Stone v. Crispers Restaurants, Inc., 2006 WL 2850103, at *1-2 (M.D. Fla. Oct. 3, 2006) (named plaintiff himself lacked standing to pursue claims under wage law of his or other states).

Here, the named Plaintiffs each have standing to assert their common law unjust enrichment and tortious interference claims under the laws of Florida, New York and Illinois, respectively. Indeed, the Insurer Defendants do not challenge their individualized standing. Rather, they argue that Plaintiffs are precluded, jurisdictionally, from bringing parallel claims under the laws of the other forty-seven states of the Union, and should be limited to asserting claims only on behalf of Florida, New York and Illinois citizens. The Court declines to preempt the class certification analysis by considering the standing issue at this logically precedent stage in the litigation. Plaintiffs are not attempting to piggyback on the claims of unnamed putative class members or gain access to state statutes whose protection they do not warrant, but rather, to seek redress for what they allege to be common injuries suffered by EverBank borrowers, nationwide. The Court's consideration of the standing issue as a precursor to class certification is not compelled either by precedent, logic, or case management considerations. Contra Xi Chen Lauren v. PNC Bank, N.A., 296 F.R.D. 389, 391 (W.D. Pa. 2014) (finding that “deferral would trigger extensive discovery costs and delay”).

 

End of Part 2 of 2.  Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall.  All rights reserved.  No claim to Original U.S. Government Works.

 

 

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STANDING TO SUE AND CLASS ACTION CERTIFICATION: PART 1.

    Recent lawsuits have raised the question of whether the plaintiffs have standing to sue.  For example, questions have been raised about whether the four named plaintiffs have sufficiently alleged damage in their alleged class action presenting the latest challenge to Obamacare.  The questions were summarized here on February 12 and on February 15, 2015.  Moreover, it is a real question whether several States have standing to sue as plaintiffs in the latest iteration of challenges to immigration in a Federal Court in South Texas.

    Class actions present a mixture of Constitutional questions involving standing, and issues about how the Federal Courts handle class action certification.  An understanding of class action procedures is very helpful to this dicussion, and no better explanation has been given recently than by the Federal District Judge in the lender force-placed insurance case of Wilson v. EverBank, N.A., No. 14-CIV-22264, ___ F. Supp. 3d ___, 2015 WL 265648 (S.D. Fla. January 6, 2015).

    The Wilson Court's explanation cannot be stated more clearly than the Court itself stated it.  Accordingly, for the benefit of the readers of Insurance Claims and Bad Faith Law Blog, here is the unfiltered explanation given by a U.S. District Court of Federal class action procedures, which begins at page *16 and, in this first part of this article, continues through the top of page *18 of the Wilson decision filed on January 6, 2015:

A named plaintiff “in a class action who cannot establish the requisite case or controversy between himself and the defendants simply cannot seek relief for anyone—not for himself, and not for any other member of the class.” Griffin v. Dugger, 823 F.2d 1476, 1483 (11th Cir. 1987). “It is not enough that a named plaintiff can establish a case or controversy between himself and the defendant by virtue of having standing as to one of many claims he wishes to assert. Rather, each claim must be analyzed separately, and a claim cannot be asserted on behalf of a class unless at least one named plaintiff has suffered the injury that gives rise to that claim.”  Prado-Steinman ex rel. Prado v. Bush, 221 F.3d 1266, 1280 (11th Cir. 2000).

However, following Klay v. Humana, Inc., 382 F.2d 1241 (11th Cir. 2004), provided that the named plaintiff articulates a redressable injury suffered as a result of the defendant's conduct and that her claims are based on principles of law that are uniform among the states that are involved, courts in this Circuit permit named plaintiffs to represent class members with claims arising under other states' laws. See Klay, 382 F.2d at 1262 (“if a claim is based on a principle of law that is uniform among the states, class certification is a realistic possibility”); In re Checking Account Overdraft Litig., 275 F.R.D. 666 (S.D. Fla. 2011) (certifying nationwide class with common law claims represented by Plaintiffs from New York, California, and Washington, finding “Plaintiffs' claims arise out of the same course of conduct and are based on the same legal theories as those of the absent class members”).

As the Supreme Court has explained, it is appropriate to defer standing objections until after class certification where certification issues are “ ‘logically antecedent’ to Article III concerns.”  Ortiz v. Fibreboard Corp., 527 U.S. 815, 831 (1999). Thus, there is a strong consensus in favor of “treat[ing] class certification as logically antecedent to standing where class certification is the source of the potential standing problems.”  In re Grand Theft Auto Video Game Consumer Litig. (No. II), 2006 WL 303993, at *2 (S.D.N.Y. Oct. 25, 2006); see also In re Bayer Corp. Combination Aspirin Prods. & Mktg. Sales Practices Litig., 701 F. Supp. 2d 356 (E.D.N.Y. 2010) ( “Whether the named plaintiffs have standing to bring suit under each of the state laws alleged is ‘immaterial’ because they are not bringing those claims on their own behalf, but are only seeking to represent other, similarly situated consumers in those states.”); In re Polyurethane Foam Antitrust Litig., 799 F. Supp. 2d 777, 806 (N.D. Ohio 2011) (explaining that whatever standing issues may arise as a result of the assertion of parallel state common law claims will be resolved in considering class certification). This makes sense. Where a named plaintiff has established individual standing to bring specific claims against a defendant in his or her own right, but asserts parallel common law claims arising under different states' laws on behalf of a putative class, the plaintiff is not “attempting to piggy-back on the injuries of the unnamed class members.”  Winfield v. Citibank, N.A., 842 F. Supp. 2d 560, 574 (S.D.N.Y. 2012).  Thus:

the issue is not whether the named plaintiff has standing to sue the defendant, but whether his or her injuries are sufficiently similar to those of the purported class to justify the prosecution of a nationwide class action, which is properly determined at the class certification stage, when th[e] [c]ourt may consider commonality and typicality issues with respect to the named plaintiffs and other putative class members.

Id. at 214 (quotation omitted).

End of Part 1.  Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall.  All rights reserved.  No claim to Original U.S. Government Works.

 

 

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BAD FAITH LAW APPLIED TO WORKER’S COMP CLAIM DENIAL.

          There is something of an open question in insurance bad-faith law concerning denial of worker’s compensation claims.  Some say that insurance bad-faith law should be applied; others contend that worker’s compensation coverage is unique and separate from other forms of insurance coverage and bad faith standards.

          In the case of Paulino v. Chartis Claims, Inc.,[1] the Eighth Circuit applied the Iowa law of bad faith to denial of worker’s compensation benefits.  The Court summarized Iowa bad faith law as follows:

          Under Iowa law, a prima facie claim of bad-faith denial of insurance benefits requires proof of two elements: (1) that the insurance company “had no reasonable basis for denying the plaintiff's claim” and (2) “the defendant knew or had reason to know that its denial or refusal was without a reasonable basis.”  Bellville v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473 (Iowa 2005).[2]

Under this formulation of bad faith law, perfection is not required.  “Rather, ‘[t]he focus is on the existence of a debatable issue, not on which party is correct.’”[3]

          The Court applied this bad faith standard to Mr. Paulino’s claim that the defendant insurance company withdrew its authorization to pay his living expenses because he was “an undocumented Mexican national”.  Mr. Paulino concluded that the carrier’s investigation of his immigration status means, in essence, “that Chartis sought to have him deported to avoid paying his claim.”

          Further, Chartis did not pay Mr. Paulino’s living expenses after the Iowa Workers’ Compensation Commissioner issued a decision requiring Chartis to pay his claim, but while Chartis exercised its right to seek judicial review of the Commissioner’s decision.

          After the Court applied this bad faith standard to each charge of bad faith alleged by Mr. Paulino, the Court held with regard to each charge that the District Court was correct in granting the carrier’s motion for summary judgment on Mr. Paulino’s bad faith claims.  In sum, Mr. Paulino, the Court said, “raised no genuine issue of material fact as to whether Chartis had a reasonable basis to deny benefits”.[4]

Please Read The Disclaimer.  ©2015 by Dennis J. Wall.  All rights reserved.  No claim to Original U.S. Government Works.

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[1] Paulino v. Chartis Claims, Inc., 774 F.3d 1161 (8th Cir. 2014)(case involved Iowa substantive law).

 

[2] Paulino v. Chartis Claims, Inc., 774 F.3d 1161, 1163 (8th Cir. 2014).

 

[3] Paulino v. Chartis Claims, Inc., 774 F.3d 1161, 1164 (8th Cir. 2014), quoting Bellville v. Farm Bureau Mut. Ins. Co., 702 N.W.2d 468, 473 (Iowa 2005).

 

[4] Paulino v. Chartis Claims, Inc., 774 F.3d 1161, 1165 (8th Cir. 2014).

OBAMACARE AND SCOTUS LAWSUIT: NO STANDING, NO CLASS.

    And where champerty and maintenance have gone to die.

    The latest challenge to the Affordable Care Act a/k/a Obamacare seems to be coming apart at the seams.  Some or all of the named plaintiffs in this suit, which is filed as a class action, seem to lack standing to sue because they will suffer no harm from the law they challenge.  See, e.g.,  the article posted here on Lincoln's Birthday, "SUPREME COURT LATEST OBJECTORS TO OBAMACARE SUE WITHOUT STANDING ... Because they can.  For some reason known only to them, their handlers, and others in their orbit."

    Without being damaged by Obamacare, the named plaintiffs would lack more than their own individual standing to sue.  Each one of them is supposed to be representative of the class of persons who are damaged by Obamacare.  They filed their lawsuit as a class action.  It is axiomatic, as they say, that in order to be a class representative, a plaintiff in a class action must share the significant characteristics of the alleged class.  Perhaps the most significant of these is shared harm.  If these people do not share the harm alleged to the class, they have no previously recognized right to represent the class.

    These things are recognized immediately by lawyers, of course.  Except, it seems, for lawyers employed by the Obama administration.  "While the Obama administration hasn't said whether it will pursue a new challenge to the case based on the latest information, several legal experts said it would be a strong strategy."  Sarah Ferris, "O-Care Fans:  SCOTUS Case 'Unraveling'" posted by The Hill on Friday, February 13, 2015.

    There is another issue lurking in the back of the minds of lawyers of a certain age.  Perhaps these minds include the minds of lawyers involved in the latest lawsuit.  While this issue may not justify a legal ruling in this instance, it may subconsciously affect not only the credibility of the plaintiffs, but also the credibility of the case itself.  This particular issue exists separately but in tandem with the likely-to-prevail-but-only-if-they-are-raised-arguments surrounding standing and adequate class representation.

    Wikipedia sets out commonly accepted definitions of "champerty" and "maintenance" as follows:

Champerty and maintenance are doctrines in common law jurisdictions, that aim to preclude frivolous litigation. "Maintenance" is the intermeddling of a disinterested party to encourage a lawsuit. It is "A taking in hand, a bearing up or upholding of quarrels or sides, to the disturbance of the common right." "Champerty" is the "maintenance" of a person in a lawsuit on condition that the subject matter of the action is to be shared with the maintainer.  Among laypersons, this is known as "buying into someone else's lawsuit."

"Champerty and Maintenance," Wikipedia.  It is widely reported that the plaintiffs were recruited for the latest litigious attack on Obamacare:  "A problem with standing could be trouble for the plaintiffs and the conservative groups leading the lawsuit," including the one funding it.  Sarah Ferris, The Hill, supra.

    In order to reach the "merits" of the pending case, let alone decide the case, the Supreme Court is going to have to ignore a lot of reality.

Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall.  All rights reserved.

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SUPREME COURT LATEST OBJECTORS TO OBAMACARE SUE WITHOUT STANDING...

... Because they can.  For some reason known only to them, their handlers, and others in their orbit.

    Ms. Gail Collins nails the glaring defect in each plaintiff's suit currently presenting the latest challenge to Obamacare in the U.S. Supreme Court:

None of these people have suffered any damage from Obamacare.  To the contrary, most, perhaps all of them, will benefit from Obamacare.

Each of these people suing has no standing to sue.

Yet they are allowed to sue.

Gail Collins, "An Ode to Obamacare" p. A27, col. 5 (New York Times Nat'l ed., Thursday, February 12, 2015).

    I wish I had known it was that easy to allege standing.  I would never have wasted a minute arguing against allowing people to sue who lack all standing to sue when they have not been harmed.  The fact that the lawsuit filed in the name of these particular people has gotten all the way to the Supreme Court may definitely assist in predicting the outcome.

    This standing business might be worth a further look.

Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall.  All rights reserved.

 

RETURN OF THE SUBPRIME RESIDENTIAL MORTGAGE MESS?

    Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA) almost seem to be in a race to resurrect the availability of credit to home loan borrowers by requiring much smaller down payments, as low as 3% in the case of Fannie and Freddie, and 3.5% in the case of the FHA.  See Tara Siegel Bernard, "Your Money / Home Loan Programs Let Buyers Put Less Down," p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Saturday, February 7, 2015).

    Many people question whether Fannie's and Freddie's mortgage race with the FHA is in the end a race to return the subprime mortgage mess.

Please Read The Disclaimer.  Copyright 2015 by Dennis J. Wall.  All rights reserved.

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WHEN SANCTIONS MAKE LANDFALL: THE NEW YORK SANDY CASES.

The reader's appreciation of this article may benefit from also reading related earlier posts on Insurance Claims and Issues Blog.

     Failure to provide the requested production in one such case presented circumstances which famously led the Magistrate Judge presiding over discovery disputes in that Hurricane Sandy case, to conclude that the nonproduction warranted the imposition of sanctions.[1]

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[1] In re Hurricane Sandy Cases, No. 14 MC 41 (Raimey v. Wright Nat’l Flood Ins. Co., No. 14 CV 461), 303 F.R.D. 17 (E.D.N.Y. 2014)(Brown, U.S.M.J.), affirmed “[f]or the reasons set forth in detail below,” and adopted in its entirety by United States District Judge, ___ F. Supp. 3d ___, 2014 WL 7399179, *1 (E.D.N.Y. December 31, 2014)(Bianco, U.S.D.J.).  As noted in the immediately preceding footnote, the entire Committee of Magistrate Judges managing Hurricane Sandy cases has ruled that Magistrate Judge Brown’s discovery ruling applies to all of the pending Hurricane Sandy cases.

          The District Judge listed in detail all of the many factors taken into account in the course of affirming and adopting the imposition of sanctions by Magistrate Judge Brown, factors which the District Judge summarized over the course of three (3) pages.  Raimey v. Wright Nat’l Flood Ins. Co., ___ F. Supp. 3d ___, 2014 WL 7399179, *1-*3 (E.D.N.Y. December 31, 2014).

 __________________________________________________

 

Reprinted with the permission of Thomson Reuters West from the manuscript of the author's 2015 Supplement chapters in “Catastrophe Claims:  Insurance Coverage for Natural and Man-Made Disasters” ©2015 by Thomson Reuters West.

 

Please Read The Disclaimer.

 

PAY NO ATTENTION TO THE SETTLEMENT BEHIND THE CURTAIN.

    It is a generally accepted ‘best practice’ for a court considering a class action settlement to take the amount of the settlement into account when approving it.  In the usual case, the size of the settlement is the only thing that the parties ask the court to conceal.  Reams of paper have been spent recording the opinions of judges and other lawyers about the benefits of open settlements openly arrived at, or at least with the amount openly stated.  See Goesel v. Boley Int’l (H.K.) Ltd., 738 F.3d 831, 834 (7th Cir. 2013)(Posner, J., motions judge for the Seventh Circuit in this consolidated case, citing numerous authorities including the Federal Justice Center’s publication, Sealed Settlement Agreements in Federal District Court).

    In the case of Moore v. GMAC Mortgage, No. 07-4296, 2014 WL 7690156 (E.D. Pa. September 18, 2014), the Federal District Court was presented with Plaintiffs’ Unopposed Motion for Final Approval of Class Action Settlement, Certification of Settlement Class, Approval of Plan of Allocation, Appointment of Class Representatives, and Appointment of Lead Class and Class Counsel.  The Federal District Court approved a rather large class to be bound by the class action settlement, as requested by the parties in their settlement agreement:

The Parties have proposed the following Settlement Class:

All persons who obtained residential mortgage loans originated and/or acquired by GMAC Mortgage, GMAC Bank (now known as Ally Bank), and/or their affiliates on or after January 1, 2004, with private mortgage insurance which was reinsured by Cap Re.

 Moore v. GMAC Mortgage, No. 07-4296, 2014 WL 7690156, *1 (E.D. Pa. September 18, 2014).

    However, the Federal District Court entered its Order approving the class action settlement without once mentioning the amount of the settlement.

    Perhaps the amounts of money actually involved in the case contain reasons why none of these amounts were mentioned when the Federal District Court approved the class action settlement in GMAC Mortgage.  The settlement agreement is attached to the Plaintiffs’ Unopposed Motion for (etc.) as an exhibit.  The settlement agreement reveals that the amount of the class action settlement in this case was $6,250,000.00 before deductions for awards to the named plaintiffs and for attorney’s fees and costs, among other things.  Dkt. No. 272-3, ¶ 3.1, at p. 9.  Download Moore v. GMAC Mort Dkt 272-3 is Settlement Agreement, Ex 1 to Dkt 272 Motion Approve S.A. (ED Pa. No. 07-4296).

    The Federal District Court awarded $15,000.00 to three named plaintiffs, Moore v. GMAC Mortgage, No. 07-4296, 2014 WL 7690156, ¶ 8 at *7 (E.D. Pa. September 18, 2014).  The Federal District Court entered a separate Order in which it mentioned the settlement amount and in which the Court awarded $1,875,000.00 in attorney’s fees and $454,097.14 in costs, for a total award of fees and costs in the amount of $2,344,027.14.  Dkt. No. 296, at p. 1.  Download Moore v GMAC Mort Dkt 296 09.19.14 Order Attys Fees (ED Pa. No. 07-4296).

    Deducting just these two amounts from the settlement amount before distribution to the class in that case– the amounts awarded to the named plaintiffs, and the amounts of attorney’s fees and costs which were awarded -- resulted in some $3,906,000 to distribute to the participating class members in accordance with a formula suggested to the Court by the parties in their settlement agreement.  The formula was essentially based on the extent to which the given plaintiff’s primary mortgage was reinsured under a reinsurance policy issued by one of the main defendant’s subsidiaries which was winding up its business in dissolution.  The Federal District Court approved the formula suggested by the parties.  See  Moore v. GMAC Mortgage, No. 07-4296, 2014 WL 7690156, ¶ 10, at *7 (E.D. Pa. September 18, 2014).

    It is unclear and perhaps unknowable how much money each plaintiff in the class might have been entitled to receive under the settlement formula used in this case.  The size of the class is known, however, at least insofar as the Federal District Court recognized that the proposed class actually increased to “122,963 Members at Final Approval.” Moore v. GMAC Mortgage, No. 07-4296, 2014 WL 7690156, *2 (E.D. Pa. September 18, 2014).  [Emphasis added.]

    For talking purposes, so to speak, if each participating class member were entitled to an equal share of the remaining settlement amount, then each participating class member would receive:

$31.77 apiece, rounding up.

 The author is at work on a book on “Lender Force-Placed Insurance” which includes analysis of reinsurance schemes and class action settlements.  The American Bar Association has scheduled it for publication this Spring.

©2015 by Dennis J. Wall.  All rights reserved.  No claim to Original U.S. Government Works.

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