Government Employees Insurance Co. v. Bloodworth, No. M2003-02986-COA-R10-CV (Tenn. App. 6/29/2007), M2003-02986-COA-R10-CV.

• Decision Date: 29 June 2007
• Docket Number: No. M2003-02986-COA-R10-CV.,M2003-02986-COA-R10-CV.
• Parties: GOVERNMENT EMPLOYEES INSURANCE CO., ET AL. v. LINDA BLOODWORTH, ET AL.
• Court: Court of Appeals of Tennessee

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GOVERNMENT EMPLOYEES INSURANCE CO., ET AL. v. LINDA BLOODWORTH, ET AL.

No. M2003-02986-COA-R10-CV.

Court of Appeals of Tennessee, at Nashville.

February 8, 2005 Session.

Filed June 29, 2007.

Appeal from the Circuit Court for Davidson County; No. 01C2325; Thomas Brothers, Judge.

Judgment of the Circuit Court Vacated.

John S. Hicks, Nashville, Tennessee; Stephen G. Anderson, Knoxville, Tennessee; David P. Gersch, Washington, D.C. for the appellants, Government Employees Insurance Company, et al.

Andrew S. Friedman, Elaine A. Ryan, Phoenix, Arizona; Van Bunch, Signal Mountain, Tennessee; Hal D. Hardin, Nashville, Tennessee; David Futscher, Covington, Kentucky; Debra Brewer Hayes, Houston, Texas; Morris A. Ratner, Scott P. Nealy, San Francisco, California; John J. Stoia, Jr., San Diego, California, for the appellees Linda Bloodworth, et al.

Patricia J. Cottrell, J., delivered the opinion of the court, in which William C. Koch, Jr., P.J., M.S., and William B. Cain, J., joined.

OPINION

PATRICIA J. COTTRELL, JUDGE.

The trial court certified a class of residents of twenty-four states in this breach of contract action to recover from class members' uninsured motorist insurance provider claimed diminished value resulting to class members' vehicles after accidents with uninsured motorists. We conclude that the trial court was required to conduct a "rigorous analysis" of the class certification requirements in light of the issues raised; that such an analysis necessarily includes choice of law considerations where a multi-state class is involved; and that the question of whether common questions of law and fact predominate over individual ones requires identification of common and individual questions and a decision that the cause of action can be established by classwide proof. We also conclude that the classwide proof offered by the class proponents to show that decrease in value was actually suffered by the class members does not comport with Tennessee law. Because, based on the record before us, we cannot conclude that the trial court applied the correct legal standards and also cannot conclude that the class proponent met her burden of establishing that the requirements of Tenn. R. Civ. P. 23.03 have been met, we must vacate the trial court's certification decision.

Two individuals, Linda Bloodworth and Krista Lawrence, brought this action on behalf of themselves and others who were insured for certain losses by Government Employees Insurance Co. and/or GEICO General Insurance Company (hereinafter jointly "GEICO"). Although the plaintiffs sought injunctive and declaratory relief as well as monetary damages, the only cause of action alleged is breach of contract.

The essence of the plaintiff's breach of contract claims is (1) under the standard uninsured motorist policy language, GEICO agreed to pay an insured the amount he or she would be "legally entitled" to recover from the uninsured motorist or third party; (2) in addition to repair costs, that amount includes any loss in value (or diminished value) resulting from the damage caused by the uninsured motorist or third party; (3) a loss in value necessarily occurs with certain types of damage to a vehicle because the post-accident market value, even after repairs, is always less than before the accident; and (4) that GEICO systematically fails to compensate insureds for the loss in value or inform them of the right to such payment.

The named plaintiffs sought certification of a multistate class including "tens of thousands" of persons who had purchased an uninsured motorist policy from GEICO in twenty-four states. The named plaintiffs later sought to include insureds whose claims involved "hit and run" accidents and were handled by GEICO under the insured's collision coverage rather than under uninsured motorist coverage and who were not compensated for, nor informed of their right to, damages for loss in value. Ms. Bloodworth's claim is actually one of the "hit and run" claims. During this time, the trial court granted GEICO's motion for summary judgment as to Ms. Lawrence, the only other named plaintiff, because she had previously released her claims against GEICO.¹

The parties briefed the class certification motion and made voluminous filings in support of and opposition to the motion. The trial court held a hearing on the certification motion on May 22, 2002. On October 7, 2003, the court entered an order certifying a plaintiff class. The definition of the class, whose certification is on appeal, is:

All GEICO insureds who after August 2, 1995:

(1) Were paid under the uninsured motorists ("UM") coverage provisions of their GEICO policy or;

(2) Had uninsured motorist property damage coverage and were involved in an accident with a hit-and-run motorist, but received payment under GEICO's collision coverage, and;

(3) Were not compensated for diminished value where:

(A) The estimate, including supplements, to repair the vehicle was more than $1,000;

(B) The vehicle suffered structural (frame damage) and/or required body work; and

(C) The vehicle was less than six years old (model year plus five) and had less than 90,000 miles on it at the time of the accident.²

The class includes insureds who reside in Tennessee as well as the following other states: Alaska, Arkansas, California, Colorado, Delaware, Georgia, Illinois, Indiana, Louisiana, Maryland, Mississippi, New Mexico, North Carolina, Oregon, Rhode Island, South Carolina, Texas, Utah, Vermont, Virginia, Washington, and West Virginia. The District of Columbia is also included.

In its order certifying the class, the trial court held that the plaintiff satisfied all the requirements of Tenn. R. Civ. P. 23.01. The trial court's order further stated that the plaintiff's claims met the requirements under both Tenn. R. Civ. P. 23.02(2) (allowing prospective injunctive relief) and Tenn. R. Civ. P. 23.02(3) (seeking primarily monetary damages) "in that the existence of diminished value is a common fact issue subject to class-wide proof." GEICO appeals the certification order.³

I. CLASS CERTIFICATION REQUIREMENTS

The requirements for bringing and maintaining a lawsuit on behalf of a class of persons and the standards to be applied in determining whether to certify a particular class are set out in Rule 23 of the Tennessee Rules of Civil Procedure. Although there are not a large number of reported opinions from Tennessee courts on class action certification, federal courts have frequently dealt with the issues surrounding class certification under the federal rule, which is substantially the same as the state rule, and which therefore may be consulted as persuasive authority. Meighan v. U. S. Sprint Communications Co., 924 S.W.2d 632, 637 n.2 (Tenn. 1996), citing Bayberry Associates v. Jones, 783 S.W.2d 553, 557 (Tenn. 1990).⁴

The first set of prerequisites is found in the first subsection of Rule 23, which allows an action to be brought by a representative party on behalf of all members of a class only if:

(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 interest of the class.

Tenn. R. Civ. P. 23.01.

These prerequisites, frequently called numerosity, commonality, typicality, and adequate representation, are not at issue in this appeal. Instead, the dispute relates primarily to one of the additional requirements for maintaining a class action set out in Tenn. R. Civ. P. 23.02, which places additional limitations on the situations in which a class action can be maintained or in which class certification is appropriate. Meighan v. U. S. Sprint Communications Co., 924 S.W.2d at 636. It is the third of those enumerated situations that is the basis for this appeal.⁵ As stated in Tenn. R. Civ. P. 23.02(3), the additional requirements are:

(3) the court finds that the question of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (a) the interest of 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; (d) the difficulties likely to be encountered in the management of a class action.

Unlike the other sections that provide for class action litigation based on the type or effect of the relief sought, the common question class is based simply on the criteria listed in the rule on the justification that the actual interests of the parties will be best served by resolving the disputes in a single lawsuit. 7AA Wright, Miller & Kane, FEDERAL PRACTICE AND PROCEDURE: Civil 3d §1777. Class actions certified under this subsection are subject to specific requirements for notice to and opt out provisions for class members. The rule at issue

encompasses those cases in which a class action would achieve economies of time, effort, and expense, and promote uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.

Fed R. Civ. P. 23(b)(3) (adv. comm. n. to 1966 amend).

Class actions and relief to a class are "peculiarly appropriate" when the "issues involved are common to the class as a whole" and when they "turn on questions of law applicable in the same manner to each member of the class," because in those situations, the class action mechanism "saves...