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

• Decision Date: 01 December 2003
• Docket Number: No. 02-35432.,02-35432.
• Citation: 350 F.3d 1018
• Parties: Kristine E. LIERBOE, Individually and on behalf of all others similarly situated, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

350 F.3d 1018

Kristine E. LIERBOE, Individually and on behalf of all others similarly situated, Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation, Defendant-Appellant.

No. 02-35432.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted June 5, 2003 — Seattle, Washington.

Submission Withdrawn June 6, 2003.

Resubmitted October 31, 2003.

Filed December 1, 2003.

Bradley J. Luck, Garlington, Lohn & Robinson, PLLP, Missoula, Montana; Peter A. Danelo, Michael Dion, Heller Ehrman White & McAuliffe, LLP, Seattle, Washington, for the Defendant-Appellant.

Allan M. McGarvey, McGarvey, Heberling, Sullivan & McGarvey, Kalispell, Montana, for the Plaintiffs-Appellees.

Appeal from the United States District Court for the District of Montana; Donald W. Molloy, District Judge, Presiding. D.C. No. CV-01-00026-DWM.

Before: DONALD P. LAY,^* ALFRED T. GOODWIN, and RONALD M. GOULD, Circuit Judges.

OPINION

GOULD, Circuit Judge:

We decide whether to vacate a district court's class certification following a subsequent ruling that the class's sole named plaintiff has no cognizable claim. Because the class is inadequately represented, we vacate the class certification and remand with instructions to dismiss.

I

On September 9, 1996, while riding as a passenger in a Jeep Cherokee that she owned and that State Farm Mutual Automobile Insurance Company ("State Farm") insured, Kristine Lierboe sustained serious injuries in a car accident. She alleges that her combined medical bills exceeded the Jeep policy's medical payment coverage, which was subject to a "cap" or limit of $5,000.

Lierboe sought additional coverage under a separate State Farm policy for a Dodge Dakota pickup ("Dodge") owned by, and listing as the named insured, her closely-held business, Shining Mountain Design and Construction, Inc. The Dodge policy stated that State Farm afforded no coverage for "injury ... sustained while occupying ... a vehicle owned or leased by you or any relative, which is not insured under this coverage." Based on that language in the policy, State Farm denied coverage.

On February 2, 2001, Lierboe filed a class action in which she appeared as the only named plaintiff, seeking payments for insureds whose claims State Farm had limited by refusing to "stack" more than one policy. She argued that the alleged "anti-stacking" provision in State Farm's Dodge policy was rendered void by a 1997 Supreme Court of Montana case, Ruckdaschel v. State Farm Mut. Auto. Ins. Co., 285 Mont. 395, 948 P.2d 700 (1997), which ruled that "[an] `anti-stacking' provision is unenforceable as a violation of Montana's public policy."¹ Id. at 702. The Ruckdaschel decision held that when two or more medical pay claims apply to a given incident (involving pedestrians or victims of accidents riding in non-owned vehicles), the insured may recover up to the limit of both policies combined. After Ruckdaschel was issued, Montana's Insurance Commissioner notified State Farm of the decision and required it to comply. State Farm apparently applied Ruckdaschel's "anti-stacking" requirement only to insureds who were injured as pedestrians or while riding in a vehicle that they did not own.²

Lierboe raised state law claims alleging breach of contract, violation of the implied covenant of good faith and fair dealing, and unfair claims practices. Lierboe also sought injunctive relief to have State Farm identify and notify all class members of their rights concerning stackable coverages and to require State Farm to pay with interest all reasonable medical expenses covered under the stackable policies. In addition, Lierboe sought punitive damages, interest, costs, and fees.³

On June 15, 2001, State Farm moved to dismiss the complaint, arguing that Lierboe's case did not involve a stacking issue and that many of her claims were precluded by Montana statutory law or barred by the statute of limitations. On July 17, 2001, Lierboe moved to certify the class under Fed.R.Civ.P. 23. On November 30, 2001, the district court certified the class under Rule 23(b)(3). However, three days earlier, the district court had certified to the Supreme Court of Montana two questions of state law on which the district court sought interpretation from Montana's highest state court. The Supreme Court of Montana ultimately addressed as dispositive one of these questions:

Given the facts of this case, if Kristine Lierboe is covered under the Shining Mountain Design and Construction Inc. policy, does the anti-stacking holding in Ruckdaschel apply under the terms of the policies?

While the Supreme Court of Montana considered the question certified to it, State Farm filed a timely interlocutory appeal to this court, arguing, inter alia, that Lierboe's claims did not meet the "predominance" and "superiority" requirements of Fed.R.Civ.P. 23(b)(3), and did not satisfy the "typicality" requirement of Rule 23(a)(3). In addition, State Farm argued that because at Lierboe's deposition it became apparent that Lierboe was unaware that her counsel had brought her suit as a class action, she had effectively abdicated responsibility for controlling and directing the litigation on behalf of the purported class.

We heard oral argument on the class certification question in June 2003 but stayed State Farm's appeal until the Supreme Court of Montana decided the threshold question of whether Lierboe had a stacking claim under her pertinent policies.⁴ In early July 2003, the Supreme Court of Montana ruled that Lierboe in fact did not have a stacking claim. See Lierboe v. State Farm Mut. Auto. Ins. Co., 316 Mont. 382, 73 P.3d 800 (2003). The Court held that Lierboe's case involved coverage, not stacking. Because of the clear and unambiguous language of both automobiles' policies, Lierboe's coverage was limited to $5,000. Though Lierboe had coverage under the Jeep policy, the Supreme Court of Montana held that the "No Coverage Provision" of the Dodge policy precluded Lierboe's recovery under that policy. Id. at 802. The Court concluded:

Ruckdaschel does not apply in this case because Lierboe's accident in her Jeep was covered only by a single policy. Therefore, there was no second covering policy to stack. No stacking issue exists unless there are multiple policies which actually cover the accident in question.

Id.

We ordered the parties to submit supplemental briefing after the Supreme Court of Montana's ruling that Lierboe, the sole named plaintiff in the already certified class, did not have a stacking claim under Ruckdaschel. State Farm urges us to decide whether the class action could properly be certified under Rule 23(b)(3) despite the ruling that Lierboe has no claim under state law. State Farm argues that "[g]iven the likelihood that this Court will need to rule on State Farm's (b)(3) arguments at some point — and in light of the fact that the appeal has been fully briefed and argued — it is in the interests of judicial economy and efficiency for this Court to retain jurisdiction to resolve these issues." Lierboe's counsel, who had initially filed the motion to intervene to guard against the possibility of a ruling adverse to Lierboe in the Supreme Court of Montana, now argues that the appeal of the class certification is moot because Lierboe has no stacking claim, and urges that we dismiss Lierboe's appeal and remand to the district court with instructions to decertify the class.

We have jurisdiction to hear Rule 23(f) appeals pursuant to 28 U.S.C. § 1292(3). Under Fed.R.Civ.P. 23(f), we are permitted to consider timely filed appeals of orders granting or denying class certification.

II

We turn to consideration of State Farm's appeal of the class certification pursuant to Rule 23(f).⁵ Because the Supreme Court of Montana's decision establishes that Lierboe has no stacking claim, it is premature to assess the prerequisites of Rule 23(a) or the standards for compliance under Rule 23(b)(3), which were briefed on appeal. The issues of predominance, superiority, typicality, and other challenges to Lierboe's class representation need not be considered if she is not in the subject class.

The district court believed that "whether Lierboe has a stacking claim ... is not relevant for the purposes of class certification." The court certified the class before the Supreme Court of Montana had ruled on whether the sole named plaintiff could even state a claim for relief.

However, our law makes clear that "if none of the named plaintiffs purporting to represent a class establishes the requisite of a case or controversy with the defendants, none may seek relief on behalf of himself or any other member of the class." O'Shea v. Littleton, 414 U.S. 488, 494, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974). As Herbert B. Newberg explains in his seminal work on class actions, "standing is the threshold issue in any suit. If the individual plaintiff lacks standing, the court need never reach the class action issue." 3 Herbert B. Newberg on Class Actions § 3:19, at 400 (4th ed.2002); see also Pence v. Andrus, 586 F.2d 733, 736-37 (9th Cir.1978) ("[I]n class actions, the named representatives must allege and show that they personally have been injured, not that injury has been suffered by other, unidentified members of the class to which they belong and which they purport to represent.") (internal citations omitted). Stated another way, if Lierboe has no stacking claim, she cannot represent others who may have such a claim, and her bid to serve as a class representative must fail. This principle is dispositive of the appeal of the class certification. Because the Supreme Court of Montana has now established that Lierboe has and had no stacking claim, the district court's certification of the class with Lierboe as its representative...