Class Decertification, Case Law Update – Campbell v. First American Title Insurance Company

A class action is a lawsuit where one or members of a class may sue or be sued as representative parties on behalf of all members. The class action must have the characteristics of commonality, adequacy, numerosity, and typicality. Commonality refers to there being one or more claims common to the entire class. Adequacy refers to the representative parties adequately protecting the interests of the class. Numerosity refers to the class being so large that joinder of all members is impractical. Typicality refers to claims or defenses being typical of the plaintiffs or defendants.

Collecting a large number of individualized claims into one representational lawsuit has advantages. First, a class action effectively and efficiently brings together small claims that would be unlikely or impractical to litigate on their own. Second, the plaintiff has a strengthened position for negotiating settlement when a class is certified. Nevertheless, a class may be decertified at any time prior to final judgment. Class decertification may destroy the incentive to go forward with an individual claim because continuing may not justify the expense of litigation.

In Loef v. First American Title Insurance Company, No. 2:08-cv-311-GZS, (Dec. 10, 2012), the United States District Court for the District of Maine granted a motion to decertify the class provisionally certified in Campbell v. First Am. Title Ins. Co., 269 F.R.D. 68 (D. Me. 2010). The class consisted of homeowners who had refinanced a prior mortgage on residential property in Maine that was issued within two years of the refinancing and who had been overcharged for their title insurance by First American. Although the class had been provisionally set by Judge George Z. Singal, a court remains free to modify a class certification order at any time prior to final judgment. In assessing whether class certification remains viable, the court must consider not only developments of the factual record, but also any newly announced legal precedent.

First American moved for class decertification on two grounds. First, under Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), the class failed to satisfy Rule 23(a)’s commonality requirement. Once a low bar, the Supreme Court’s decision in Dukes changed the class certification standard to a far more searching inquiry. In addition to requiring a common question, class certification now requires common answers. Thus, while even one common question can satisfy Rule 23(a)(2), dissimilar answers to that question among class members may mean that commonality is lacking.

Second, First American asserted that “the central liability question in this case is whether each class member qualified for and was wrongly denied the refinance rate” and there was no common answer to this underlying liability question. Consequently, First American showed the court that there was no common cause for the alleged title insurance overcharges. Each class member offered unique facts as to what was presented in connection with their title insurance purchase and what steps were taken to ascertain whether they qualified for the refinance rate.

In a review of nearly 230 transactions identified as overcharges by Plaintiff’s class certification expert, First American found about one-third had not been overcharged or were not eligible for the refinance rate. Additionally, for another 94 transactions, First American could not locate a copy of a loan policy from a prior mortgage transaction within the two-year look back period making it extremely difficult to determine whether these transactions qualified for but did not receive the discounted rate.

Accordingly, the court agreed with First American’s assertion that liability depended on a file-by-file review of documents from each potential class member’s refinance transaction and prior transaction. File-by-file review defeats commonality and predominance under Rules 23(a) and 23(b)(3). The overcharging was not systematic, but rather the result of errors that are apt to occur in any set of hundreds of thousands of customer transactions. In sum, the stricter class certification standards set in Dukes along with factual developments led the court to find that there was no longer sufficient commonality to justify class certification.

The purpose of title insurance is to protect the purchaser of real estate and the holder of a mortgage against loss from defective titles, liens, and encumbrances. Protecting a buyer against loss is accomplished by the issuance of a title insurance policy. When a dispute arises under a title insurance policy, often a claim will have to be made to the insurer.  Schecter Law is prepared to handle all aspects of your title insurance claims, including coverage disputes, closing protection letter disputes and title and closing agent disputes. Call one of our experienced attorneys today at 954-779-7009.