Stuart Ex Rel. Situated v. State Farm Fire & Cas. Co., 910 F.3d 371

Background

State Farm issued replacement-cost homeowner policies that paid Actual Cash Value (ACV) pre-repair and Replacement Cost Value (RCV) after repairs; ACV under the form policy was defined as the cost to repair or replace damaged property less depreciation.
State Farm calculated ACV using Xactimate, which during the class period depreciated both materials and labor.
Arkansas Supreme Court in Adams (2013) held that labor may not be depreciated when ACV is calculated from an undefined ACV term; plaintiffs sued State Farm for depreciating labor on ACV payments for losses from Nov. 21, 2008 to Dec. 6, 2013.
Plaintiffs sought class certification under Fed. R. Civ. P. 23(b)(3); the district court certified a class of Arkansas insureds who received ACV payments with labor depreciation.
The Eighth Circuit stayed the appeal pending In re State Farm (LaBrier) and, after LaBrier, affirmed the district court’s certification as modified to exclude claimants bound by a prior state-court class settlement (Chivers).

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether common questions predominate for Rule 23(b)(3) class certification	State Farm’s uniform use of Xactimate and the parties’ contract formula (cost to repair less depreciation) create a common, classwide question whether depreciating labor breached the contract	LaBrier shows individualized inquiries about reasonableness of ACV methodology prevent predominance	Certification affirmed: common question (whether labor depreciation breached the contract under the agreed formula and Arkansas law) predominates
Whether LaBrier controls and defeats class treatment	Adams and the explicit contract formula make the issue discrete (labor depreciation) and resolvable classwide	LaBrier requires case-by-case proof when contract does not specify ACV methodology, so it precludes predominance here	LaBrier distinguished: because Arkansas contracts specified the formula and Adams barred labor depreciation, LaBrier does not control
Standing / injury-in-fact for class members who later received RCV or repaired for ≤ ACV	All who received an improperly-depreciated ACV payment suffered a legal injury (breach) regardless of later recovery	Those who ultimately recouped depreciation or repaired for ≤ ACV suffered no injury and thus lack standing	Injury-in-fact analysis is not a merits review; class need only be defined so members would have standing; merits defenses (e.g., later RCV recovery) are not fatal to certification
Effect of prior Chivers class settlement (res judicata) on class definition	Plaintiffs agree Chivers members should be excluded from this class	State Farm argues res judicata bars certain claims and class should exclude them	Court modified certification order to exclude claimants bound by Chivers settlement and affirmed certification as so modified

Key Cases Cited

In re State Farm Fire & Casualty Co., 872 F.3d 567 (8th Cir. 2017) (analyzing ACV methodology and class predominance under Missouri law)
Adams v. Cameron Mut. Ins. Co., 430 S.W.3d 675 (Ark. 2013) (Arkansas Supreme Court held labor may not be depreciated when ACV is calculated as replacement cost minus depreciation)
Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (class certification standards and the requirement that the plaintiff demonstrate Rule 23 prerequisites)
Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016) (common issues can predominate even if individualized damages inquiries remain)
Kuhns v. Scottrade, Inc., 868 F.3d 711 (8th Cir. 2017) (breach-of-contract allegation confers standing even if the merits are uncertain)