Cullen v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 05 November 2013
• Docket Number: No. 2012–0535.,2012–0535.
• Citation: 999 N.E.2d 614,137 Ohio St.3d 373
• Parties: CULLEN, Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant.
• Court: Ohio Supreme Court

137 Ohio St.3d 373

999 N.E.2d 614

CULLEN, Appellee,

v.STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant.

No. 2012–0535.

Supreme Court of Ohio.

Submitted Feb. 26, 2013

Decided Nov. 5, 2013

Reversed and remanded.

O'Neill, J., filed a dissenting opinion.

Syllabus of the Court

1. A trial court must conduct a rigorous analysis when determining whether to certify a class pursuant to Civ.R. 23 and may grant certification only after finding that all of the requirements of the rule are satisfied; the analysis requires the court to resolve factual disputes relative to each requirement and to find, based upon those determinations, other relevant facts, and the applicable legal standard, that the requirement is met.

2. In resolving a factual dispute when a requirement of Civ.R. 23 for class certification and a merit issue overlap, a trial court is permitted to examine the underlying merits of the claim as part of its rigorous analysis, but only to the extent necessary to determine whether the requirement of the rule is satisfied. ( Ojalvo v. Bd. of Trustees of Ohio State Univ., 12 Ohio St.3d 230, 466 N.E.2d 875 (1984), clarified.)

3. A party seeking certification pursuant to Civ.R. 23 bears the burden of demonstrating by a preponderance of the evidence that the proposed class meets each of the requirements set forth in the rule.

4. Claims for declaratory relief that merely lay a foundation for subsequent determinations regarding liability or that facilitate an award of damages do not meet the requirement for certification set forth in Civ.R. 23(B)(2).

Bashein & Bashein Co., L.P.A., W. Craig Bashein, and John P. Hurst; and Paul W. Flowers Co., L.P.A., and Paul W. Flowers, Cleveland, for appellee.

Baker & Hostetler, L.L.P., Mark A. Johnson, Joseph E. Ezzie, Robert J. Tucker, Columbus, and Michael K. Farrell, Cleveland, for appellant.

Carpenter, Lipps & Leland, L.L.P., Michael H. Carpenter, and Katheryn M. Lloyd, Columbus, urging reversal for amici curiae Nationwide Property and Casualty Insurance Company, Nationwide Mutual Fire Insurance Company, Nationwide Mutual Insurance Company, Nationwide Insurance Company of America, Nationwide Assurance Company, and Nationwide General Insurance Company.

Thompson Hine, L.L.P., and Stephen J. Butler, Cincinnati; and Severson & Werson and Jan T. Chilton, urging reversal for amicus curiae American Financial Services Association.

Thompson Hine, L.L.P., Elizabeth B. Wright, Brian A. Troyer, and Stephanie M. Chmiel, Cleveland, urging reversal for amici curiae Washington Legal Foundation and Ohio Chemistry Technology Council.

Vorys, Sater, Seymour & Pease, L.L.P., Philip F. Downey, Akron, Robert N. Webner, and Robert J. Krummen, Columbus, urging reversal for amici curiae Grange Indemnity Insurance Company and Grange Mutual Casualty Company.

Vorys, Sater, Seymour & Pease, L.L.P., Thomas E. Szykowny, and Michael Thomas, Columbus, urging reversal for amicus curiae National Association of Mutual Insurance Companies and Ohio Insurance Institute.

Bricker & Eckler, L.L.P., Kurtis A. Tunnell, and Anne Marie Sferra, Columbus; and Shook, Hardy & Bacon, L.L.P., Victor E. Schwartz, Mark A. Behrens, and Cary Silverman, pro hac vice, urging reversal for amicus curiae Ohio Alliance for Civil Justice.

Shook, Hardy & Bacon, L.L.P., Victor E. Schwartz, Mark A. Behrens, pro hac vice, and Cary Silverman, urging reversal for amici curiae Ohio Chamber of Commerce, Ohio Alliance for Civil Justice, Chamber of Commerce of the United States of America, and American Tort Reform Association.

O'DONNELL, J.

{¶ 1} State Farm Mutual Automobile Insurance Company appeals from a judgment of the Eighth District Court of Appeals affirming class certification of claims brought by Michael Cullen alleging that State Farm failed to disclose all benefits available to policyholders who made claims for damaged windshields. This case clarifies the standards to apply when an appellate court reviews certification of a class action pursuant to Civ.R. 23.

{¶ 2} A class action is an exception to the general rule that litigation is conducted by and on behalf of the named parties only, and therefore, to justify a departure from this rule, the representative of the putative class is required to affirmatively demonstrate that each requirement of Civ.R. 23 has been satisfied. When determining whether to certify a class, a trial court must conduct a rigorous analysis, and it may grant certification only after resolving all relevant factual disputes and finding that sufficient evidence proves that all requirements of Civ.R. 23 have been satisfied.

{¶ 3} Here, the appellate court affirmed certification of the class pursuant to Civ.R. 23(B)(2) and (3). However, because the declaratory relief at issue here is incidental to an individualized claim for monetary damages, Cullen has not met the requirement for certification set forth in Civ.R. 23(B)(2). In addition, because individual questions predominate over the questions common to the proposed class, Cullen has not proven that this action satisfies Civ.R. 23(B)(3). Accordingly, we reverse the judgment of the court of appeals and remand the matter to the trial court for further proceedings consistent with this opinion.

Facts and Procedural History

{¶ 4} In 2003, Michael Cullen contacted his automobile insurance carrier, State Farm, to report damage to the windshield of his car. After speaking with his agent, Cullen spoke to a representative from Lynx Services, L.L.C., a company that began handling windshield claims for State Farm in 1996. As a result of that conversation, Twinsburg Glass & Mirror repaired his windshield.

{¶ 5} In 2005, Cullen sued State Farm, requesting class certification and a declaratory judgment that State Farm's practices were illegal and violated obligations owed by fiduciaries pursuant to Ohio law. In addition, Cullen asserted claims for breach of contract, bad faith, and breach of fiduciary duty and sought compensatory and punitive damages. The complaint defined the class to include all State Farm policyholders on or after February 18, 1990, and alleged that State Farm had denied them full payment on windshield claims because, instead of replacing windshields, it repaired some windshields with a chemical compound that it knew or should have known was “only temporary, not entirely translucent, and incapable of restoring the windshield to its preaccident condi tion” and that State Farm was not “paying the insured to replace the glass,” less any deductible. As a result of State Farm's alleged breach, Cullen and the class demanded “damages in an amount to be determined at trial under principles of Ohio common law” or that State Farm be ordered to “tender benefits sufficient to replace the windshields in accordance with policy requirements.”

{¶ 6} The trial court held a hearing on the certification issue. Although Cullen could not remember speaking to a representative of Lynx or whether he had been offered the choice of replacing his windshield or receiving the cash value of a new windshield, less his deductible, he asserted that State Farm agents and representatives failed to disclose to policyholders making “glass-only” claims that the policies contained a benefit referred to as the “cash-out” option. According to Cullen, although the State Farm policy promised its insureds the option of receiving a cash payment of the replacement cost of the windshield, less any deductible, it prepared a script for representatives to induce policyholders to repair their windshields without disclosing the cash-out option. State Farm referred to the outline it provided to its agents and representatives handling glass-only claims as a “word track,” arguing that it gave them discretion to respond to questions asked by insureds.

{¶ 7} The trial court concluded that Cullen and the class satisfied the requirements of Civ.R. 23(A) and (B)(2) and (3), specifically finding that the class satisfied Civ.R. 23(B)(2) because “it appear[ed] that the same practices which the Named Plaintiff experienced [were] still ongoing” and it further determined that a declaratory judgment and injunctive relief were “potential available remedies which can be issued on a class wide [sic] basis in the event that [Cullen] prevails upon the merits of his claim.” In finding that Cullen and the class met the requirements for certification pursuant to Civ.R. 23(B)(3), the trial court explained:

The Court is sufficiently convinced that Plaintiffs' claims for relief are founded squarely upon standardized policies and practices which had been adopted and employed by State Farm throughout Ohio on a systematic basis during the Class Period. Given that the maximum individual recoveries will be relatively modest, separate lawsuits are not realistic. And it is doubtful that the Ohio judicial system could afford full and fair relief to thousands of aggrieved insureds on a case-by-case basis. A class action is thus the most preferable and superior method for adjudicating the common questions of law and fact, which the Court concludes, predominate over any individual questions which may exist.

{¶ 8} The trial court defined the class as follows:

All persons and business entities covered under an Ohio motor vehicle insurance policy issued by [State Farm] who made a “Glass Only” physical damage comprehensive coverage claim on or after January 1, 1991 for cracked, chipped or damaged windshields and received a chemical filler or patch repair, or payment thereof, instead of a higher amount for actual cash value or replacement cost of the windshield. The lesser of the amount of the actual cash value or the replacement cost of the windshield for each claim must exceed the insured's applicable deductible.

The trial court further divided the class into two subclasses: those insureds who had their claims administered by Lynx and those who did not.

{¶ 9} State Farm appealed, and the Eighth District Court of Appeals affirmed...