Plaintiff is not an Adequate Class Representative if She does not have a Viable Claim Against Defendant thus Compelling Denial of Class Action Certification Motion in Breach of Contract Class Action Against Life Insurer Pennsylvania Federal Court Holds
Plaintiff filed a putative class action against life insurance company for breach of contract, constructive fraud and unjust enrichment alleging that State Farm the premiums it charged for the insurance policies covering the lives of her two minor children “was based on an aggregate of mortality rates for both smokers and non-smokers, rather than a premium based solely on the mortality rate of non-smokers.” Alleman v. State Farm Life Ins. Co., 508 F.Supp.2d 452, 453 (W.D.Pa. 2007). Plaintiff moved for certification of a class action on the breach of contract claim only; defense attorneys opposed class action treatment and moved for summary judgment on the grounds that plaintiff did not have a viable breach of contract claim. Id. The district court agreed with the defense, denied the class action certification motion, and granted summary judgment in favor of the defense.
The federal court began its analysis by explaining the need to consider the class action certification motion and summary judgment motion as one – a point that often puzzles inexperienced state and federal courts that are concerned with ruling on the “merits” prior to class certification. As the district court explained at page 453, “Because the issue of whether plaintiff’s claims are typical of the class and whether plaintiff is an adequate representative as required by [Rule 23] and defendant’s summary judgment motion turn on whether plaintiff has a viable breach of contract claim we will address the two issues as one.” In other words, a court must determine as a threshold matter whether a particular putative class representative may assert a valid claim against the defendant in his or her own name; if not, then class action treatment is inappropriate because there is no adequate class representative to pursue the claim. As the Third Circuit explained, “Depending on the circumstances, class certification questions are sometimes enmeshed in the factual and legal issues comprising the plaintiff’s cause of action and courts may delve beyond the pleadings to determine whether the requirements for class certification are satisfied.” Beck v. Maximus Inc., 457 F.3d 291, 297 (3d Cir. 2006) (citations and internal quotations omitted). Here, for example, because the plaintiff did not herself have a viable breach of contract claim, she was not an adequate class representative (compelling denial of the class action certification motion) and supporting the defense motion for summary judgment. Id., at 453-54.
The material facts were straightforward and undisputed: In 2002, plaintiff’s husband purchased two life insurance policies from State Farm insuring the lives of their minor sons, which required that he complete the standard application form wherein he disclosed that neither child smoked or used tobacco products. Alleman, at 454. State Farm issued the requested life insurance policies, and the premium rates were “contained conspicuously” within each policy, id. Plaintiff’s husband paid the premiums, and plaintiff continued to do so after her husband died. Id. The class action allegations failed to “identify any specific term of the policy defendant breached”; rather, the complaint simply asserted that “children were entitled to a premium rate based upon the mortality rate for juvenile non-smokers only” and defendant committed a breach of contract because it “calculated a premium rate based upon an aggregate of mortality rates for juvenile non-smokers and smokers.” Id. In essence, plaintiff argued that by advising the insurance company that her children did not smoke or use tobacco products, she had a “reasonable expectation” that the premium would be calculated solely on the mortality rate of minor non-smokers. Id.
State Farm admitted that its business practice is to calculate premiums for individuals under the age of 20 based on the mortality rates of juvenile smokers and non-smokers – a practice plaintiff concedes is permitted under Pennsylvania law – and that its insureds are ineligible for a non-smoking premium rate discount until they reach the age of 20. Alleman, at 454. We do not here discuss the district court’s analysis because for our purposes it is sufficient that the court held that plaintiff could not prevail on her breach of contract claim. See id., at 455-58.
The district court then turned to the Rule 23(a) requirements of numerosity, commonality, typicality and adequacy of representation. Alleman, at 458. Because plaintiff was not involved with the purchase of the insurance policies and her husband had since died, she would be unable to produce evidence concerning the purchaser’s “reasonable expectation” as advanced in the class action complaint, thus subjecting her to a unique defense that undermines the typicality of her claim. Id. And because plaintiff’s claims are not typical, she is not an adequate representative of the class. Accordingly, the requirements of Rule 23(a) had not been met, compelling denial of the class certification motion. Id., at 458-59.
NOTE: Plaintiff’s lawyer sought to “reserve” her right to seek class action certification of the constructive fraud and unjust enrichment claims, but the district court held that she had waived her right to pursue such class certification because the purported “reservation” was inconsistent with the district court’s scheduling order and with the local rules. Alleman, at 453 n.1.
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