Presently before the Court are the following two motions: (1) a motion by the defen
I. BACKGROUND
A. Factual Background
The following factual background is set forth in the Court’s Memorandum of Decision and Order dated July 27, 2002. Familiarity with that decision is assumed; however, for the purposes of this motion, the Court repeats the pertinent facts.
On an unspecified date, Nationwide sold Steinberg a contract for automobile insurance for his leased 1999 BMW 7401. The insurance contract states: “COMPREHENSIVE COVERAGE. We will pay for loss to your auto not caused by collision of upset. We will pay for the loss less your declared deductible.” The contract defines the word deductible as “the amount of loss to be paid by the insured when a loss occurs.” The contract also defines the word “loss” as “direct and accidental loss or damage to your auto including its equipment.”
The insurance contract also contains a provision entitled, “LIMITS OF PAYMENT.” This section states, “ACTUAL CASH VALUE. The limit of our coverage is the cash value of your auto or its damaged parts at the time of loss. We will consider fair market value, age, and condition of the property at the time of loss to determine cash value. We may pay you directly for a loss. We may, at our option, replace your auto.”
In September 1999, the plaintiffs BMW engine was damaged by water that entered the engine and caused an “hydraulic lock.” On behalf of Nationwide, an adjuster consented to the replacement of the engine and agreed to pay the repairing dealer an unspecified amount for the replacement engine and related work that was made necessary by the loss. The dealer repaired the automobile and Nationwide tendered a check to the plaintiff. However, the check did not reflect the sum upon which the dealer and the adjuster had agreed or the sum upon which the dealer and the plaintiff had agreed. Nationwide had subtracted from that agreed-upon sum the deductible, which is provided for in the insurance contract, and a “betterment charge” deduction of $563.17. The term “betterment” is not contained in the automobile insurance contract between Nationwide and Steinberg.
Steinberg alleges that the deduction by Nationwide of the “betterment charge” constitutes a breach of the insurance contract between him and Nationwide because, under the contract, the only amount of the loss an insured must pay is the deductible. Stein-berg further alleges that the term “deductible” as defined in the insurance contract does not reflect a “betterment charge.” Steinberg also contends that Nationwide has breached the contract by applying the “betterment charge” to the loss of parts, such as the engine in the plaintiffs case.
The complaint further alleges that, since on or about January 1, 1993, Nationwide has entered into automobile insurance contracts that are substantially similar to the contract described above with “millions” of people in every state except Hawaii, Massachusetts, and New Jersey. Steinberg seeks to maintain a class action on behalf of all individuals who entered into automobile insurance contracts with Nationwide and have had, since January 1, 1993, a collision or comprehensive loss (1) for which Nationwide paid the amount necessary for repair minus the deductible and a “betterment charge”; or (2) that was repaired at a Blue Ribbon Repair Shop where the insured paid a deductible and a “betterment charge.”
B. Procedural Background
The plaintiff originally commenced this action against Nationwide on October 13, 1999, in the Supreme Court of the State of New York, Suffolk County. On November 24, 1999, Nationwide removed the action to this Court pursuant to 28 U.S.C. §§ 1441 and 1446. In papers dated December 9, 1999, the plaintiff moved to remand the action to state court on the ground that this Court lacked subject matter jurisdiction. In partic
In a decision and order dated April 6, 2000, Steinberg v. Nationwide,
In papers dated September 12, 2001, Stein-berg moved the Court for permission to file a Second Amended Complaint, which, he stated, would narrow the claims in the complaint. In particular, Steinberg sought to withdraw a claim that the defendant’s use of used, reconditioned, or remanufactured parts when repairing a car is also a breach of contract. In papers dated September 19, 2001, Nationwide stated that it did not oppose the plaintiffs motion. In an order dated September 22, 2001, the Court granted the plaintiffs motion to file a Second Amended Complaint, and Steinberg filed the Second Amended Class Action Complaint on September 26, 2001.
In papers dated October 5, 2001, Nationwide moved to dismiss the Second Amended Complaint on the ground that the Court lacked subject matter jurisdiction. Nationwide stated that Steinberg’s Second Amended Complaint did not request the injunctive relief that this Court previously held satisfied the amount in controversy element of diversity jurisdiction. As such, Nationwide argued that the amount in controversy did not exceed $75,000 and that the Court must dismiss the complaint for lack of subject matter jurisdiction. Steinberg conceded that the request for injunctive relief was missing from his Second Amended Complaint and explained that he had inadvertently deleted the request. On October 24, 2001, Steinberg requested permission to supplement the pleading pursuant to Fed.R.Civ.P. 15(a) so as to include the request for injunctive relief.
In an order dated July 27, 2002, the Court granted Nationwide’s motion to dismiss the Second Amended Complaint. The Court also granted Steinberg’s motion to file an amended complaint that differed from the Second Amended Complaint only in that it contained a request for injunctive relief. On August 7, 2002, Steinberg filed the Third Amended Class Action Complaint.
II. DISCUSSION
A. The Defendant’s Motion to Strike Legal Argument from Reply Affidavit of D. Brian Hufford
The defendant moves to strike the legal arguments from the reply affidavit of D. Brian Hufford in support of the plaintiffs motion for class certification. In response, the plaintiff moves to strike the legal arguments from the declaration of Adam S. Levy. A review of the reply affidavit shows that, unlike the Levy declaration, it raises a multitude of legal arguments and citations. Local Civil Rule 7.1 provides:
Except as otherwise permitted by the court, all motions and all oppositions thereto shall be supported by a memorandum of law, setting forth the points and authorities relied upon in support of or in opposition to the motion, and divided, under appropriate headings, into as many parts as there are points to be determined. Willful failure to comply with this rule may be deemed sufficient cause for the denial of a motion or for the granting of a motion by default.
Although the plaintiff did forth his legal arguments in his reply memorandum of law, his attorney’s affidavit also contains a number of legal arguments. The legal arguments set forth in the affidavit are improper and have the effect of circumventing the Court’s page limits on memoranda which is 10 pages for a reply memorandum. Accordingly, the Court grants the defendant’s motion to strike the legal arguments set forth in the reply affidavit by the plaintiffs counsel.
In determining whether a putative class qualifies for certification, the only question is whether the requirements of Fed.R.Civ.P. 23 have been met. See Eisen v. Carlisle & Jacquelin,
In deciding certification, courts must take a liberal rather than a restrictive approach in determining whether the plaintiff satisfies these requirements and may exercise broad discretion in weighing the propriety of a putative class. See In re NASDAQ Market-Makers Antitrust Litig.,
1. Rule 23(a) Requirements
To qualify for class certification, the plaintiff must first prove that the putative class meets the four threshold requirements of Rule 23(a):
(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); See also In re Visa Check/MasterMoney Antitrust Litigation,
a. Numerosity
Rule 23(a)(1), generally referred to as the numerosity requirement, requires that the class be “so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). “Impracticable,” in this context, is not to be confused with impossible. Rule 23(a)(1) only requires that, in the absence of a class action, joinder would be “difficult” or “inconvenient.” Vengurlekar,
b. Commonality
The commonality requirement set forth in Rule 23(a)(2) requires a showing that common issues of fact or law exist and affect all class members. However, the individual circumstances of the class members can differ without precluding class certification. See Vengurlekar,
c. Typicality
Rule 23(a)(3), also known as the typicality requirement, requires that “each class member’s claims arise from the same course of events and [that] each class member makes similar legal arguments to prove [the] defendant’s liability.” Vengurlekar,
d. Adequacy of Representation
The adequacy of representation requirement set forth in Rule 23(a)(4) requires the plaintiff to prove that the “representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a)(4). To satisfy this requirement, the plaintiff must demonstrate (1) “that class counsel is qualified, experienced, and generally able to conduct the litigation,” In re Drexel Burn-ham Lambert Group, Inc.,
2. Rule 23(b)(3) Requirements
In addition to satisfying the four prerequisites established in Rule 23(a), the plaintiff must prove that the putative class is maintainable under at least one of the categories enumerated in Rule 23(b). See In re Visa Check,
a. Predominance
While the commonality requirement of Rule 23(a)(2) mandates that common questions of law or fact exist among the putative class members, the first prong of Rule 23(b)(3), also known as the predominance requirement, is more stringent and requires that such common questions be the focus of the litigation. See Continental Orthopedic Appliances, Inc. v. Health Insurance Plan of Greater New York, Inc.,
b. Superiority
The second prong of Rule 23(b)(3), commonly referred to as the superiority element, requires the court to examine whether a class action is superior to other methods of adjudication. See Vengurlekar,
(A) the interest of the members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the difficulties likely to be encountered in the management of a class action.
Fed.R.Civ.P. 23(b)(3).
C. Analysis of the Motion for Class Certification
1. Rule 23(a) Requirements
a. Numerosity
Nationwide appears to concede that the putative class is “so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). The putative class involves Nationwide policyholders from 47 states. The plaintiff asserts that, from January 1, 1992 through October 1, 1999, Nationwide policy
b. Commonality
The commonality element of Rule 23(a)(2), which requires the plaintiff to demonstrate that common issues of law or fact exist and affect all class members, is considered a “minimal burden for a party to shoulder.” Lewis Tree Service, Inc. v. Lucent Technologies Inc.,
Here, the plaintiffs central issue is whether the uniform language used by Nationwide in its automobile insurance policies permits it to take what it calls a “betterment” deduction from repair reimbursements. The plaintiff seeks certification of a proposed class of:
All persons or businesses who entered into automobile insurance contracts with Nationwide, and who, since January 1, 1993, have had a collision or comprehensive loss and for which the insured was responsible for a portion of the repair costs due to a “betterment” charge or deduction imposed by or on behalf of Nationwide (the “Class”).
Because the plaintiff has demonstrated that (1) all putative class members have signed substantively identical or similar form agreements with Nationwide; and (2) Nationwide’s practice of taking “betterment” deductions is a common course of conduct that has affected all putative class members, the Court finds that common questions of fact exist among the putative class. See Lewis Tree,
Adjudication of the plaintiffs claim will require the Court to interpret key terms, such as “deductible,” “actual cash value,” and “loss,” as they appear in each of Nationwide’s automobile insurance policies. Because these key terms, their definitions, and other pertinent contractual provisions are substantively similar, if not identical, in all of Nationwide’s automobile insurance contracts, such contracts can be considered uniform or “form contracts” for the purposes of this litigation. The Court notes that “in light of Rule 23, claims arising from interpretations of a form contract appear to present the classic case for treatment as a class action, and breach of contract cases are routinely certified as such.” Klay v. Humana, Inc., No. 02-16333,
That the defendant engaged in a common course of conduct with respect to the putative class further demonstrates that common questions of fact exist among the class. See Mortimore v. Federal Deposit Insurance,
Because Nationwide’s automobile insurance contracts are, for the purposes of this litigation, substantially form contracts and Nationwide’s practice of taking “betterment” deductions is a standard practice affecting the entire putative class, the Court finds that the plaintiff has adequately shown that a “common factual nexus” exists among the putative class. Lewis Tree,
Accordingly, the Court finds that the plaintiff has adequately proven the existence of common issues of fact and law among the putative class in satisfaction of the commonality requirement in Rule 23(a)(2).
c. Typicality
The defendant contends that the plaintiff does not meet the typicality requirement of Rule 23(a)(3) because he is “shbject to unique defenses which threaten to become the focus of the litigation,” Gary Plastic Packaging Corp. v. Merrill Lynch, Pierce, Fenner & Smith,
That the plaintiff settled a prior lawsuit against BMW and leased his vehicle are also facts irrelevant to the issue of whether Nationwide’s “betterment” deductions are in breach of its automobile insurance policies. Accordingly, the Court finds that such defenses do not “threaten to become the focus of the litigation” and thus, do not serve to defeat class certification.
The Court notes that “typicality, a matter closely related to commonality, is satisfied when each class member’s claim arises from the same course of events and each class member makes similar legal arguments to prove the defendant’s liability.” In re Frontier Ins. Group, Inc. Securities Litigation,
d. Adequacy of Representation
The defendant maintains that the plaintiff is inadequate as a class representative. There is “no simple test for determining if a class will be adequately represented by a named plaintiff’ and “each case must be approached on an individualized basis.” In re LILCO,
The plaintiff, an attorney and a sole practitioner, initiated this case as a pro se litigant and now, after retaining counsel, acts as class representative. He has a sophisticated understanding of the lawsuit and substantial involvement in the litigation. Over the past five years, the plaintiff has narrowed the issues in his lawsuit so as to strengthen his position. Because the plaintiff is no longer
While the defendant challenges the plaintiffs adequate representation on grounds that the plaintiff has changed his position, failed to follow the rules of civil procedure, and provided the defendant with inadequate discovery responses while acting as class counsel, such contentions are irrelevant to the litigation now that the plaintiff has retained the law firm of Pomerantz Haudek Block Grossman & Gross LLP (the “Pomerantz firm”) as counsel. The problems of which the defendant complains, including the plaintiffs desire to be paid attorney’s fees for the time that he acted as counsel, are not “central to the plaintiffs case” and are not “so substantial that they threaten to undermine the plaintiffs case as a whole.” In re Ski Train Fire in Kaprun,
In addition, the Court finds that the Pomerantz firm is “qualified, experienced, and generally able to conduct the litigation.” Id. at 201. The Pomerantz firm has a strong reputation as class counsel and has demonstrated its competence to serve as class counsel in this motion for class certification. Accordingly, the Court finds that the plaintiff has satisfied the adequacy of representation requirement of Rule 23(a)(4).
2. Rule 23(b)(3) Requirements
a. Predominance
The defendant’s central argument against certifying the putative class is that the plaintiff has failed to satisfy the predominance requirement of Rule 23(b)(3). In support of its contention, the defendant argues that, (1) class action litigation would be unmanageable because it would require the application of the substantive law of 46 states; and (2) Nationwide’s policies differ substantially from state to state and, therefore, prevent common issues of fact from predominating. However, the majority of the cases that the defendant relies upon to support its claim, see, e.g., In re Bridgestone/Firestone, Inc.,
The burden is on the plaintiff to prove that a state law class should be certified and that common issues of law and fact predominate. See Potchin v. The Prudential Home Mortgage Company, No. 97 Civ. 525,
The plaintiff concedes that the McCarran-Ferguson Act, 15 U.S.C. § 1011, mandates that the laws and regulations of the state of each individual member of the putative class must be applied to analyze and interpret the policy of each putative class member. Nationwide has issued its contracts throughout the country and such contracts are issued under the laws of different states. However, the plaintiff alleges that the differences in the applicable principles of contract law do not drastically differ from state to state and that the variances in the state laws can be categorized and easily man
In determining whether Nationwide has breached its standard automobile insurance contracts by using “betterment” deductions, a practice that is never expressly described in its contracts, the Court will first be asked to consider whether the contract is unambiguous and, if so, to interpret the unambiguous language. See Golden Pacific Bancorp v. FDIC,
According to the plaintiff, in 39 states, including New York, the Court must simply look at the “four corners” of the form contract to determine if a betterment deduction is permissible under its clear and unambiguous terms. Of those 39 states, the plaintiff alleges that 17 also permit the Court to consider the “reasonable expectations” of a prudent insured in interpreting the contract and determining whether it is ambiguous. The plaintiff asserts that the remainder of those states either do not recognize the “reasonable expectations” doctrine or apply it only after the contract has been deemed to be ambiguous.
For the remaining 12 states which do not follow the “four corners” approach to determine whether ambiguity exists, the plaintiff alleges that the Court may consider extrinsic evidence to determine whether the contract is ambiguous. Of the 12 states, 5 either do not recognize the “reasonable expectations” doctrine or do not recognize it prior to finding that the contract is ambiguous and 7 permit the Court to apply the “reasonable expectations” doctrine in addition to examining extrinsic evidence.
In short, the plaintiff contends that the 50 states can be categorized into 4 groups for this initial analysis of the states’ principles of contract law for determining whether a contract is ambiguous: (1) states that follow the “four corners” method without using the “reasonable expectations” doctrine; (2) states that follow the “four corners” method using the “reasonable expectations” doctrine; (3) states that examine extrinsic evidence without using the “reasonable expectations” doctrine; (4) states that examine extrinsic evidence using the “reasonable expectations” doctrine.
The plaintiff further explains that if, at this stage, the Court deems the contract unambiguous, it must simply interpret it to see if a “betterment” deduction is consistent with the clear and unambiguous terms. Thus, if the Court deems the contract unambiguous, the only variations of state law that apply to the adjudication of the plaintiffs claim are those listed above. The Court finds that such variances are manageable. See In re LILCO,
Furthermore, the plaintiff analyzes the variances in state law principles of contract construction that arise if the Court deems the contract ambiguous and is forced to construe the pertinent language. According to the plaintiff, 43 states have adopted a straight-forward interpretation of the contra proferentem doctrine which requires a court to interpret any ambiguous provision in a form contract drafted by an insurer in favor of the insured. The plaintiff then asserts that 33 states of the 43 permit the “reasonable expectations” doctrine” to be used in conjunction with contra proferentem. For the remaining 8 states, the plaintiff contends, the Court should first consider any extrinsic evidence which may assist it in construing the ambiguous contract prior to applying the contra proferentem doctrine. All but two of those states also permit the “reasonable expectations” doctrine to be considered.
Thus, the plaintiff, again, categorizes the states into four groups concerning the state
Variances in the states’ contract laws, such as differences in statutes of limitation, do not preclude class certification. See In re Energy Systems Equipment Leasing Securities Litig.,
Here, the Court finds adjudication of the class action according to the plaintiffs analysis to be manageable. However, if confusion involving the applicable law were to arise later, the Court may sub-classify the putative class. See In re Visa Check,
While a motion for class certification is not the appropriate vehicle by which to resolve choice of law issues, this Court does not, at the present time, foresee any reason to deny certification based on any potential insurmountable conflicts of law issues. See In re LILCO,
If a conflict of law is found to exist in this litigation, this Court, sitting in diversity, is bound to apply the choice of law rules of the forum state, New York. See Schenk v. Red Sage, Inc., No. 91 Civ. 7868,
As a federal court sitting in diversity, this Court has the ability to adjudicate class action litigation that involves the application of numerous states laws. See In re LILCO,
Moreover, courts in this Circuit have previously acknowledged that “even if New York choice of law rules required a court to apply the law of all fifty states, this would not render the trial per se unmanageable” and that it is “certainly” possible to “apply the laws of many states in a single class action.” In re LILCO Litig.,
Next, the defendant argues that its automobile policies are not identical from state to state and that individual issues of fact will inevitably predominate over common issues of fact among the putative class because of such differences. For the purposes of this litigation, the Court is only concerned with the pertinent contractual provisions of the class members’ contracts for resolution of the plaintiffs breach of contract claim. The Court will be required to ascertain only whether the practice of taking “betterment” deductions is a breach of the insurance contract.
Here, of major importance, the Court finds that all of Nationwide’s automobile insurance contracts contain similar, if not identical, key terms pertinent to this litigation. The plaintiffs contract provides that, in the event of a collision or comprehensive loss, Nationwide will “pay for covered loss above the deductible amount.” “Deductible” is defined as “the amount of loss to be paid by the insured when a loss occurs” and “loss” is defined as “direct and accidental loss or damage to your auto including its equipment.” Both Nationwide’s “comprehensive coverage” and “collision coverage” policies are likewise similarly defined in all contracts from state to state. Each state that Nationwide is responsible for paying the insureds “loss less [their] deductible.” “Coverage Exclusions” are also similarly defined in all policies as loss due to “wear and tear,” “freezing,” and “mechanical or electrical breakdown or failure.” Finally, all policies include a section regarding “limits of payment,” which describes how Nationwide limits its coverage to the “actual cash value” of the “[insureds] auto or its damaged parts at the time of the loss.” All contracts explain that Nationwide will consider “fair market value,” “age,” and “condition of the property at the time of the loss” to determine cash value. The Court finds that any differences in language or format from policy to policy are only stylistic and do not change the substantive meaning.
The defendant points to differences in Nationwide’s policies such as the “specific language regarding losses from non-physical causes” that are contained in only some of the policies and minor variations in language regarding appraisal processes through which Nationwide resolves reimbursement disputes. However, such differences are not relevant to the adjudication of the plaintiffs claim. The plaintiff is neither disputing the amount he was reimbursed nor the methods by which Nationwide appraises automobiles. Rather, the plaintiff asserts simply that Nationwide’s practice of taking “betterment” deductions is not written into the contract and is, therefore, in breach of Nationwide’s automobile
The defendant also contends that the Court may be required to apply the individual methods adopted by each state for determining the “actual cash value” of the property and claims that, in failing to address such differences in his analysis of the applicable law, the plaintiff did not meet his burden of providing sufficient analysis of state law in compliance with Rule 23(b)(3). However, because “actual cash value” is defined in each of Nationwide’s policies, it is unlikely that the state methods for determining “actual cash value” would be necessary for adjudication of the plaintiffs claim. A review of the Third Amended Complaint reveals that the plaintiff is not claiming that Nationwide’s “betterment” deductions are in breach of state regulations, only that the “betterment” deduction is in breach of Nationwide’s specific policies.
For purposes of the litigation, the pertinent provisions of Nationwide’s policies are substantially uniform and adjudication of the putative class’ breach of contract claim would not invoke predomination of individual issues of fact.
b. Superiority
The defendant also argues- that a class action is not a superior method of adjudication for this claim and that, therefore, the plaintiff does not satisfy the superiority prong of Rule 23(b)(3).
The plaintiff addresses each of the four non-exhaustive factors listed in the Federal Rules for determining whether a class action is a superior method of adjudication. Fed.R.Civ.P. 23(b). The plaintiff alleges that there are no members of the class who seek to individually control the prosecution. See Id. Similarly, no other litigation concerning the controversy has been commenced and none of the putative class members has expressed a desire to litigate in a particular forum. See Id. In addition, according to the plaintiffs analysis of the variances in the applicable state law and in Nationwide’s automobile insurance contracts, the Court finds that no material difficulties are likely to be encountered in the management of the class action. See Id.
The defendant alleges that calculating damages for the putative class would be unwieldy because it would require an individual review of each class member’s file. However, this Court notes that if common questions of law predominate over individual questions as to liability, courts will generally find Rule 23(b)(3) to be satisfied “even if individual damages issues remain.” Bolanos v. Norwegian Cruise Lines Ltd.,
The defendant also maintains that because some of Nationwide’s automobile contracts contain “alternative dispute mechanisms with respect to betterment,” class action adjudication is improper. However, after review of the defendant’s papers, the Court finds that the arbitration provisions are with regard to Nationwide’s appraisal methods used to resolve disputes over reimbursements; the contracts do not contain any arbitration clauses with regard to breach of contract claims.
In sum, “the interests of justice will be well served by resolving the common disputes of potential class members in one forum.” Id. Class action adjudication will avoid duplicative lawsuits with potentially inconsistent results. In addition, “due to the relatively small size of each individual class member’s claim, it is likely that their claims will never be brought to court without use of the class action procedure.” Mortimore v. Federal Deposit Insurance Corp.,
Because the plaintiff has successfully fulfilled the requirements of Rule 23(a) and Rule 23(b)(3), the Court holds that certification of the putative class is proper.
Based on the foregoing, it is hereby
ORDERED, that the defendant’s motion to strike the legal argument from the reply affidavit of the plaintiffs attorney is GRANTED; and it is further
ORDERED, that the plaintiffs motion for class certification pursuant to Rule 23 is GRANTED in its entirety.
SO ORDERED.