Young v. Nationwide Mut. Ins. Co.

• Decision Date: 29 October 2012
• Docket Number: 11–5019,11–5018,11–5016,11–5020.,Nos. 11–5015,s. 11–5015
• Parties: Jason YOUNG, et al., Plaintiffs–Appellees, v. NATIONWIDE MUTUAL INSURANCE COMPANY, et al., Defendants–Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

693 F.3d 532

Jason YOUNG, et al., Plaintiffs–Appellees,

v.NATIONWIDE MUTUAL INSURANCE COMPANY, et al., Defendants–Appellants.

Nos. 11–5015, 11–5016, 11–5018, 11–5019, 11–5020.

United States Court of Appeals, Sixth Circuit.

Argued: April 11, 2012.

Decided and Filed: Sept. 5, 2012.

Rehearing and Rehearing En Banc Denied Oct. 29, 2012.

ARGUED:Drew H. Campbell, Bricker & Eckler LLP, Columbus, Ohio, for Appellants. Gary E. Mason, Mason LLP, Washington, D.C., for Appellees. ON BRIEF:Drew H. Campbell, James P. Schuck, Bridget Purdue Riddell, Bricker & Eckler LLP, Columbus, Ohio, for Appellants in 11–5015. Joseph L. Hamilton, Michael D. Risley, Marjorie A. Farris, Stites & Harbison, PLLC, Louisville, Kentucky, Mark G. Arnzen, Arnzen Molloy & Storm, P.S.C., Covington, Kentucky, for Appellants in 11–5016. Gerald F. Dusing, Adams, Stepner, Woltermann & Dusing, Covington, Kentucky, Mark A. Johnson, Rand L. McClellan, Baker & Hostetler LLP, Columbus, Ohio, for Appellants in 11–5018. John R. Crockett, III, Jason P. Renzelmann, Cory J. Skolnick, Frost Brown Todd LLC, Louisville, Kentucky, for Appellants in 11–5019 and 11–5020. Gary E. Mason, Mason LLP, Washington, D.C., Alexander F. Edmondson, Jason V. Reed, Edmondson & Associates, Covington, Kentucky, Christopher S. Nordloh, Nordloh Law Office, P.C., Covington, Kentucky, John C. Whitfield, Whitfield & Cox, P.S.C., Madisonville, Kentucky, for Appellees.

Before: SUHRHEINRICH, STRANCH, and DONALD, Circuit Judges.

STRANCH, J., delivered the opinion of the court in which, DONALD, J., joined, and SUHRHEINRICH, J., joined only in the judgment.

OPINION

JANE B. STRANCH, Circuit Judge.

Defendants, insurance companies doing business in Kentucky, appeal the district court's certification under Federal Rule of Civil Procedure 23(a) and (b)(3) of statewide plaintiff subclasses. Plaintiffs, insureds of Defendants, allege in this diversity action that they were assessed incorrect charges for local government premium taxes as a result of Defendants' failure to correctly identify the taxing jurisdiction in which the insured risks of each of the policyholders were located. The district court accepted Plaintiffs' proposed ten subclasses (each comprising of one Defendant company), severed each subclass into a separate action, and certified the subclasses. Defendants appealed the certification orders and five appeals remain for consideration. For the following reasons, we AFFIRM certification of the subclasses.

I. BACKGROUND

Nationwide Mutual Insurance Company, Kentucky Farm Bureau Mutual Insurance, State Farm Fire and Casualty Insurance, Standard Fire Insurance Company, and Travelers Property Casualty Insurance Company (collectively, the “Defendants”) are all insurers that write consumer and commercial insurance in Kentucky. Kentucky has a unique system of taxation that authorizes local governments to impose a tax on insurers for the premiums the insurer collects on its sale of certain insurance products. Ky.Rev.Stat. Ann. § 91A.080. The statute also allows the insurer to charge a “reasonable collection fee” as compensation for collecting the taxes that are remitted to the particular local government authority and most insurers, including all Defendants, pass the tax itself on to the insureds along with the collection fee. SeeKy.Rev.Stat. Ann. § 91A.080(4).

The named Plaintiffs in the five subclasses in this appeal—Jason and Diana Young, Matthew Sanning, Robert and Johnna Dyas, and Martha Yunker—are policyholders of their respective subclass Defendant insurers. Each Plaintiff claims that their insurer charged them a local government tax on their premiums when either the tax was not owed or the tax amount owed was less than the insurer billed. Plaintiffs allege that these miscalculations of premium tax obligations were unlawful under various state law causes of action.

In June 2006, Plaintiffs brought their claims in two separate cases filed in Kentucky state court. Both actions were removed to federal court and were considered together for the purpose of class certification. Plaintiffs' claims were ultimately narrowed to illegal dealing in premiums, negligence, conversion, and a declaration of rights; Plaintiffs sought refunds of the amount of improperly charged municipal tax and collection fee as well as injunctive and declarative relief.

Prior to its final consideration of class certification, the district court considered several motions that are relevant to this appeal. On March 31, 2007, the court denied Defendants' Motions to Dismiss, which alleged that the court lacked jurisdiction because Kentucky law allowed Plaintiffs an administrative remedy, then subsequently granted their request to bifurcate class certification discovery from merits-based discovery. Defendants also unsuccessfully moved to strike Plaintiffs' class allegations contending that the definition would require the court to engage in impermissible individual determinations on the merits of the claims of each putative class member. Finally, on March 31, 2009, the district court denied Defendants' motions in limine to exclude the testimony of Plaintiffs' expert, Paul Manning, on whom Plaintiffs intended to rely to show that Defendants' data was compatible with geocoding software to assist in identifying the proper tax jurisdiction for Defendants' insureds. Prior to entry of its class certification order, the district court also approved several voluntary class settlements between originally named Defendants and their insureds.

On July 10, 2008, Plaintiffs moved for class certification. The district court entered an order on September 30, 2010 subdividing the Plaintiffs into ten subclasses, each comprising one of the remaining ten Defendants, and sua sponte severing the subclasses into separate actions. The district court found the class ascertainable and administratively feasible, the Rule 23(a) prerequisites—numerosity, commonality, typicality and adequacy of representation—met, and the Rule 23(b)(3) requirements—that class litigation is superior and common questions predominate over individuals ones—satisfied. The subclasses, as certified, are each defined as follows:

All persons in the Commonwealth of Kentucky who purchased insurance from or underwritten by [Defendant insurer] during the Relevant Time Period [ (June 16, 2001, through the present) for 06–141 and (June 22, 2001, through the present) for 06–146] and who were charged local government taxes on their payment of premiums which were either not owed, or were at rates higher than permitted. ¹

Defendants timely appealed, challenging each of the district court's findings. After several voluntary settlements, only five appeals remain before this court.

II. DISCUSSION

A. Standard of Review

The district court has broad discretion to decide whether to certify a class, In re Whirlpool Corp. Front–Loading Washer Prods. Liab. Litig., 678 F.3d 409, 416 (6th Cir.2012), and this court reviews class certification for an abuse of discretion, Pipefitters Local 636 Ins. Fund v. Blue Cross Blue Shield of Mich., 654 F.3d 618, 629 (6th Cir.2011), cert. denied,––– U.S. ––––, 132 S.Ct. 1757, 182 L.Ed.2d 532 (2012). A district court's decision to certify a class is subject to “very limited” review and will be reversed only if a strong showing is made that the district court clearly abused its discretion. Olden v. LaFarge Corp., 383 F.3d 495, 507 (6th Cir.2004). An abuse of discretion occurs if the district court relies on clearly erroneous findings of fact, applies the wrong legal standard, misapplies the correct legal standard when reaching a conclusion, or makes a clear error of judgment. Pipefitters Local 636 Ins. Fund, 654 F.3d at 629. This court should not find an abuse of discretion unless it has a “definite and firm conviction that the trial court committed a clear error of judgment.” Miami Univ. Wrestling Club v. Miami Univ., 302 F.3d 608, 613 (6th Cir.2002) (citation and internal quotation marks omitted).

B. Class Certification

“The class action is ‘an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.’ ” Wal–Mart Stores, Inc. v. Dukes, ––– U.S. ––––, 131 S.Ct. 2541, 2550, 180 L.Ed.2d 374 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700–01, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979)). “A class representative must be part of the class and possess the same interest and suffer the same injury as the class members.” Id. (citation and internal quotation marks omitted). To be certified, a class must satisfy all four of the Rule 23(a) prerequisites—numerosity, commonality, typicality, and adequate representation—and fall within one of the three types of class actions listed in Rule 23(b). Sprague v. Gen. Motors Corp., 133 F.3d 388, 397 (6th Cir.1998) (en banc). The party seeking class certification has the burden to prove the Rule 23 certification requirements. In re Am. Med. Sys., Inc., 75 F.3d 1069, 1079 (6th Cir.1996).

“Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule.” Dukes, 131 S.Ct. at 2551. Such compliance must be checked through a “rigorous analysis.” Id. (quoting Gen. Tel. Co. v. Falcon, 457 U.S. 147, 161, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982)). Meeting the requirements of “Rule 23(a) requires something more than mere repetition of the rule's language; ‘[t]here must be an adequate statement of the basic facts to indicate that each requirement of the rule is fulfilled.’ ” Pipefitters Local 636 Ins. Fund, 654 F.3d at 629 (citation omitted). Ordinarily, this means the class determination should be predicated on evidence the parties present concerning the maintainability of the class action. In re Am. Med. Sys., Inc., 75 F.3d at 1079.Dukes verified that the district court should not merely presume that the plaintiffs' allegations in the complaint are true for the purposes of class motion without resolving...