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Douglas J. Campion v. Old Republic Home Protection Company

January 6, 2011

DOUGLAS J. CAMPION,
PLAINTIFF,
v.
OLD REPUBLIC HOME PROTECTION COMPANY, INC.,
DEFENDANT.



The opinion of the court was delivered by: Jan M. AdlerU.S. Magistrate Judge

ORDER DENYING PLAINTIFF'S MOTION FOR CLASS CERTIFICATION AND DEFENDANT'S MOTION TO STRIKE DOC. NO. 30 & 48

On May 28, 2010, Plaintiff Douglas J. Campion filed a motion for class certification pursuant to Fed. R. Civ. P. 23. (Doc. No. 30.) Defendant Old Republic Home Protection Company, Inc. filed an opposition to the motion (Doc. No. 47) and a motion to strike the expert report submitted in connection with Plaintiff's motion (Doc. No. 48) on August 18, 2010. Plaintiff filed a reply in support of the motion for class certification (Doc. No. 49) and an opposition to the motion to strike (Doc. No. 50) on September 8, 2010. Defendant filed a reply in support of the motion to strike on September 14, 2010. (Doc. No. 51.) After the close of briefing, on November 5, 2010, Plaintiff informed the Court of a recent class certification order issued in Kaplan v. Fidelity Nat'l Home Warranty Co., Superior Court of California, San Diego County, Case No. 37-2008-0087962-CU-BT-CTL. (Doc. No. 53.)

Pursuant to CivLR 7.1.d.1, both motions are suitable for disposition without oral argument. After due consideration of the parties' briefs and evidentiary submissions and as set forth below, the Court DENIES Plaintiff's motion for class certification and DENIES Defendant's motion to strike.

I. INTRODUCTION

Defendant sells home warranty insurance policies to homeowners, pursuant to which it is obligated to repair or replace covered systems and appliances that become inoperable due to normal wear and tear during the term of the contract. Complaint, ¶ 25. Plaintiff purchased a plan from Defendant in April 2007. Declaration of Douglas J. Campion in Support of Motion for Class Certification ("Campion Dec."), ¶ 2. In February 2008, he made a warranty claim regarding his garbage disposal. Id. ¶ 3. Defendant assigned Oasis Plumbing & Drain to respond to the claim. Id. As required by the warranty plan, Plaintiff paid Oasis $50 upon its technician's arrival at Plaintiff's residence and before commencing work. Id. The Oasis technician inspected the garbage disposal and told Plaintiff Oasis would call him to set up another time to replace it. Id. Oasis later called and informed Plaintiff that Defendant denied coverage because the garbage disposal was improperly installed. Id. Plaintiff hired another contractor to replace the garbage disposal at Plaintiff's expense. Id. The following month, Plaintiff made a second claim under his plan for problems he was experiencing with his electric range/oven. Declaration of Tammy Boggs in Support of Opposition to Motion for Class Certification ("Boggs Dec."), Ex. B (Transcript of Deposition of Douglas J. Campion ("Campion Depo.") pp. 28-30; ln. 7-7). Another contractor responded to the claim, Plaintiff paid the $50 service fee, and the appliance was repaired to Plaintiff's satisfaction. Id.

Plaintiff, on behalf of himself and the putative class members, alleges, inter alia, that Defendant fraudulently induced them to purchase warranty plans by misrepresenting that it would pay the cost of covered items under the home warranty plans when, in fact, it maintained policies, procedures and economic incentives to deny legitimate claims or to shift the majority of the costs for repair or replacement work to the policyholder. Complaint, ¶ 51 and 71. The causes of action asserted include Breach of Contract, Breach of Implied Covenant of Good Faith and Fair Dealing, Violation of Cal. Civ. Code § 1790 (Consumer Legal Remedies Act ("CLRA")), Violation of Cal. Bus. & Prof. Code § 17200 (Unfair Competition Law ("UCL")), Violation of Cal. Civ. Code § 1710(1) (Intentional Misrepresentation & Concealment), and Violation of Cal. Civ. Code § 1710(4) (False Promise). The proposed class consists of all persons who, during the period of approximately March 6, 2003 through the present, made a claim under a home warranty plan issued by Defendant. Id. ¶ 15.

II. LEGAL STANDARD

A class may be certified only if: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a). A class action may be maintained if Rule 23(a) and at least one of the following three conditions is satisfied:

(1) the prosecution of separate actions would create a risk of: (a) inconsistent or varying adjudications or (b) individual adjudications dispositive of the interests of other members not a party to those adjudications; (2) the party opposing the class has acted or refused to act on grounds generally applicable to the class; or (3) questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy. Fed. R. Civ. P. 23(b).

The party seeking certification bears the burden of showing that each of the four requirements of Rule 23(a) and at least one requirement of Rule 23(b) have been met. Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir. 2001), amended by 273 F.3d 1266 (9th Cir. 2001). In this case, Plaintiff seeks certification under Fed. R. Civ. P. 23(b)(3), which requires the Court 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. The matters pertinent to these findings include: (A) the class members' interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action. Alternatively, Plaintiff seeks certification under Fed. R. Civ. P. 23(b)(2), which requires that the party opposing the class acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.

When considering a motion for class certification, the Court must conduct a "rigorous analysis" to ensure the prerequisites of Rule 23(b) are actually satisfied, not just presumed from the pleadings. Dukes v. Walmart Stores, Inc., 603 F.3d 571, 581 th Cir. 2010) (citing Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160-61 (1982)). In some instances, the pleadings will be sufficient to demonstrate whether a class should be certified, but often courts are required to look "behind the pleadings" even to issues overlapping with the merits of the underlying claims. Id. The U.S. Supreme Court has cautioned against "conduct[ing] a preliminary inquiry into the merits of a suit" at the class certification stage. Eisen v. Carlisle & Jacqueline, 417 U.S. 156, 177 (1974).

does not, however, prohibit the Court from considering facts that are relevant to the Rule 23 determination, even though the facts may also relate to the underlying merits of the case. Dukes, 603 F.3d at 586. In fact, the Court must probe behind the pleadings if doing so is necessary to make findings on the Rule 23 certification decision.

at 589. A court is not required to "unquestioningly accept a plaintiff's arguments as to the necessary Rule 23 determinations." Id.

III. DISCUSSION

A. Standing

As a threshold issue, Defendant argues Plaintiff's class definition is overbroad and includes putative class members who do not have standing, as required by Article III. To meet the Article III standing requirement, a plaintiff must have suffered an "injury in fact" that is "distinct and palpable," the injury must be fairly traceable to the challenged action, and the injury must be likely redressable by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992). An injury-in-fact must be "distinct and palpable," as opposed to "abstract," and the harm must be "actual or imminent," not "conjectural or hypothetical." Whitmore v. Arkansas, 495 U.S. 149, 155-56 (1990) (internal quotation marks omitted). An injury-in-fact, however, differs from a "legal interest." An injury-in-fact need not be capable of sustaining a valid cause of action and may simply be the fear or anxiety of future harm. For example, exposure to toxic or harmful substances has been held sufficient to satisfy the Article III injury-in-fact requirement even without physical symptoms of injury caused by the exposure, and even though exposure alone may not provide sufficient ground for a claim under state tort law. Id. at 155 ("Our threshold inquiry into standing 'in no way depends on the merits of the [plaintiff's claim.]'" (quoting Warth v. Seldin, 422 U.S. 490, 500 (1975)). For purposes of determining standing, the Court "must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party" (i.e., the class members). Warth, 422 U.S. at 501.

"Generally standing in a class action is assessed solely with respect to class representatives, not unnamed members of the class." In re General Motors Corp. Dex-Cool Products Liability Litigation, 241 F.R.D. 305, 310 (S.D. Ill. 2007). It is not required that each member of a class submit evidence of personal standing. See, e.g., Rozema v. The Marshfield Clinic, 174 F.R.D. 425, 444 (W.D. Wis.1997) ("Those represented in a class action are passive members and need not make individual showings of standing."); PBA Local No. 38 v. Woodbridge Police Dep't, 134 F.R.D. 96, (D.N.J.1991) ("Once it is ascertained that there is a named plaintiff with the requisite standing, however, there is no requirement that the members of the class also proffer such evidence."); see also Herbert B. Newberg & Alba Conte, Newberg On Class Actions § 2.7 (4th ed. 2002) ("[P]assive members need not make any individual showing of standing, because the standing issue focuses on whether the plaintiff is properly before the court, not whether represented parties or absent class members are properly before the court.").

Defendant does not question whether Plaintiff has standing to prosecute the claims for monetary relief. Instead, it focuses solely on the proposed class definition, arguing it is overbroad and includes putative class members who lack standing. This argument touches on issues that are more appropriately addressed under Rule 23(b)(3)'s predominance requirement, which is discussed below. The Court is satisfied the standing requirement is met.

B. Rule 23(a) Requirements

1. Numerosity

Rule 23(a)(1) requires the members of a proposed class to be so numerous that joinder of all of the class members would be impracticable. Fed. R. Civ. P. 23(a). "Impracticability does not mean 'impossibility,' but only the difficulty or inconvenience in joining all members of the class." Harris v. Palm Springs Alpine Estates, Inc., 329 F.2d 909, 913-14 (9th Cir. 1964) (quoting Advertising Specialty Nat. Ass'n v. FTC, 238 F.2d 108, 119 (1st Cir. 1956)).

There does not appear to be a dispute regarding whether the proposed class is sufficiently numerous to satisfy Rule 23(a)(1). "[T]here are hundreds of thousands of customers who purchased home warranty plans and made claims during the period March 6, 2003 through the present." Declaration of Brett M. Weaver in Support of Class Certification ("Weaver Dec."), Notice of Lodgment, Ex. 8.4, lines 7-9. Joinder is impracticable for such a large group. The numerosity requirement of Rule 23(a)(1) is, therefore, satisfied.

2. Commonality

Rule 23(a)(2) requires "questions of law or fact common to the class." Plaintiff contends the following issues of law and fact are common to the members of the proposed class:

-- Each of the home warranty contracts is nearly identical and, therefore, the customers' rights and Defendant's obligations are nearly the same;

-- Defendant's advertisements were disseminated via uniform written materials. Plaintiff also alleges Defendant misrepresented facts about the warranty plans in the plan documents themselves, which were sent to each and every class member;

-- Defendant ranks and rewards contractors the same way, meaning every contractor has the same financial incentive to deny claims, perform band-aid fixes, refuse to work on expensive jobs and gouge the customer;

-- Defendant's uniform wrongful practices interfered with the class members' right to receive benefits under the plan. Each member who made a claim faced the risk that Defendant's contractor would deny legitimate claims, perform cheap repairs, and punt on expensive jobs or upsell the customer on "non-covered charges." Thus, Defendant breached the implied covenant of good faith and fair dealing and engaged in intentional conduct designed to deprive class members of benefits;

-- If Plaintiff establishes liability, the Court can fashion equitable relief that benefits every class member equally, such as enjoining the continued use of wrongful business practices and ordering restitution for the amounts paid for policy premiums and service call fees.

Defendant counters Plaintiff has failed to demonstrate there are substantial questions common to the class because the fact Defendant has a policy of ranking contractors is neither wrongful nor unfair. (Opposition to Motion for Class Certification, pp. 29-30.) Plaintiff, it argues, cannot even demonstrate how the policy caused his own claim to be denied. Furthermore, the putative class is comprised of individuals with both covered and denied claims, individuals who paid varying premium amounts for different levels of coverage, and individuals who paid different trade call fees to thousands of different contractors. Id.

Defendant's arguments are more properly directed to a Rule 23(b)(3) inquiry as to whether common issues predominate over individual issues, which is addressed below. Commonality under "Rule 23(a)(2) only requires there be some common issues of fact and law." Keilholtz v. Lennox, 268 F.R.D. 330, 337 (N.D. Cal. 2010) (emphasis in original). Here, each member of the proposed class made a claim under a home warranty plan obtained from Defendant and the claims made on their behalf in this case are based on a common theory of liability. Thus, Rule 23(a)(2)'s commonality requirement is satisfied.

3. Typicality

Rule 23(a)(3) requires the claims or defenses of the representative parties be typical of the claims or defenses of the class. Plaintiff contends the typicality requirement is met because his claims arise from Defendant's uniform wrongful practice and course of conduct. Memorandum of Points & Authorities in Support of Class Certifica- , pp. 17-18. Plaintiff argues that whenever any homeowner made a claim, the contractor sent by Defendant had a financial incentive to deny claims, perform band-aid fixes, up-sell the customer or refuse to work on expensive jobs because of this uniform policy. Thus, he alleges, regardless of the nature of the claims, each class member suffered the same type of injury and their causes of action are based on the same legal theories. Id.

Defendant counters Plaintiff's claims are not typical of the putative class because he made two home warranty claims, one of which was covered and, thus, resulted in no injury, and the other of which is alleged to have been improperly denied. Opposition to Motion for Class Certification, p. 29. With regard to the latter claim, referred to as the garbage disposal claim, Defendant alleges Plaintiff fails to show the contractor had a financial incentive to deny the claim, perform a band-aid fix, or shift costs. Defendant also points to circumstances relating to the purchase of the warranty plans. Plaintiff purchased his plan directly from Defendant, and was exposed to different marketing materials than many of the class members, whose plans were purchased for them. Id.

Rule 23(a)(3)'s typicality requirement provides that a "class representative must be part of the class and possess the same interest and suffer the same injury as the class members." Keilholtz, 268 F.R.D. at 337 (quotation omitted). The purpose of Rule 23(a)(3) is "to assure that the interest of the named representative aligns with the interests of the class." Hanlon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992). The requirement is satisfied where the named plaintiffs have the same or similar injury as the unnamed class members, the action is based on conduct which is not unique to the named plaintiffs, and other class members have been injured by the same course of conduct. Id.

Plaintiff and the putative class members' claims are based on the allegation Defendant sold home warranty policies by misrepresenting it would pay for claims covered under the policies and without adequately disclosing it utilized a system that weighs against claims being administered to the benefit of the homeowner. The alleged injury is not the wrongful denial of benefits, but rather the risk each class member faced that Defendant's contractor would deny legitimate claims, perform cheap repairs or upsell the homeowner on "non-covered charges." Memorandum of Points & Authorities in Support of Class Certification, p. 16. The facts highlighted by Defendant that are unique to Plaintiff do not render his claims atypical from those of the putative class members under Ninth Circuit law. Rather, these circumstances are relevant to the viability of the asserted legal theories, and whether the claims can be proved on a class-wide basis without examining the particular circumstances of each class member. These issues are, therefore, more appropriately ...


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