State Farm Fire & Cas. Co. v. Ledbetter

• Court: Arkansas Supreme Court
• Writing for the Court: Donald L. Corbin
• Citation: State Farm Fire & Cas. Co. v. Ledbetter, 129 S.W.3d 815, 355 Ark. 28 (Ark. 2003)
• Decision Date: 20 November 2003
• Docket Number: No. 02-1355.,02-1355.
• Parties: STATE FARM FIRE & CASUALTY COMPANY v. Jewel LEDBETTER.

129 S.W.3d 815

STATE FARM FIRE & CASUALTY COMPANY v. Jewel LEDBETTER.

No. 02-1355.

Supreme Court of Arkansas.

November 20, 2003.

Baker, Donelson, Bearman & Caldwell (Memphis), by: George T. Lewis, III; and Rieves, Rubens & Mayton (West Memphis), by: Kent J. Rubens, for appellant.

Taylor Halliburton & Ledbetter (Memphis), by: Mark Ledbetter, for appellee.

DONALD L. CORBIN, Justice.

Appellant State Farm Fire and Casualty Company appeals the order of the Crittenden County Circuit Court certifying Appellee Jewel Ledbetter's suit as a class action pursuant to Ark. R. Civ. P. 23. On appeal, State Farm argues that (1) the trial court erred in granting Ledbetter's motion for certification without any response by them; and (2) class certification is not appropriate in this suit. This case was certified to us from the Arkansas Court of Appeals as involving an issue of first impression. Our jurisdiction is thus pursuant to Ark. Sup.Ct. R. 1-2(b)(1). We reverse and remand.

The record reflects that Ledbetter owns a home in West Memphis, Arkansas, that has been insured with State Farm since 1990. After noticing cracks in the walls of her home and doors that were not properly closing, Ledbetter contacted State Farm. State Farm retained the services of American Leak Detection to investigate the problem. It was discovered that water was leaking from a broken drain or pipe under the home and was washing out the dirt beneath the home's concrete slab. This, in turn, caused the foundation of the home to settle, leading to the cracks and door problems. Ledbetter filed a claim under her homeowner's insurance policy. In a letter dated, December 5, 2001, State Farm denied the claim, relying on policy exclusions regarding damage caused by "settling" or "earth movement."

Thereafter, on February 7, 2002, Ledbetter filed a complaint against State Farm, alleging that its denial of her claim resulted in a breach of contract. She sought declaratory relief that the policy language relied upon by State Farm does not exclude her claim. She also sought monetary damages stemming from the insured loss, as well as attorney's fees, statutory penalty, and prejudgment interest. Ledbetter also sought certification of her suit as a class action. In its answer, State Farm denied that a class action was appropriate or that Jewel Ledbetter was an appropriate class representative. State Farm then removed the case to federal court, but the federal court summarily remanded the matter back to state court on May 23, 2002.

Ledbetter filed a motion for class certification on July 8, 2002, averring in detail that her suit complied with the six requirements for class-action status set forth in Rule 23. The motion requested that the class be certified as "All State Farm homeowners' insurance policyholders who are or have been insured in the State of Arkansas under the Form FP7955 homeowner's policy since the effective date of said policy (November 1, 1999) to include all current policyholders." Attached to the motion was an affidavit signed by Ledbetter, in support of the motion for class certification. As part of her affidavit, Ledbetter stated that the numerosity element of Rule 23 was present because, based on information provided to her from the Arkansas Insurance Department, there were no less than 134,823 policies using the Form FP7955 language. An e-mail to Ledbetter's counsel from Becky Harrington, an employee with the Department, confirmed the number of policies using this language. An affidavit signed by Harrington and detailing the number of policies that might be affected by a class action was filed by Ledbetter on July 31, 2002.

State Farm did not file a response to the motion for class certification. A hearing on the issue was scheduled for July 29, 2002, but State Farm sought a continuance of the hearing due to scheduling conflicts. Ledbetter resisted the continuance sought by State Farm, but the court ultimately rescheduled the hearing for October 14, 2002.

In the meantime, on August 8, 2002, the trial court signed an order granting Ledbetter's motion for class certification, and the order was entered of record on August 13, 2002. The events leading up to the entry of that order are in conflict. State Farm alleges that the trial court entered the order after ex-parte communications between counsel for Ledbetter and the court's case coordinator took place. State Farm alleges that counsel for Ledbetter requested entry of the order after stating that State Farm was in default for failing to respond to the motion for class certification. Counsel for Ledbetter denied that any improper ex-parte communications occurred.

After learning of the entry of the order, State Farm filed a motion requesting that the trial court set aside its order, asserting that it was not in default in filing a response and that it had a right to present its position at the hearing scheduled for October 14, 2002. Several days later, on August 20, 2002, State Farm filed a motion pursuant to Rule 52, requesting that the trial court make additional findings of fact and conclusions of law with regard to the order granting certification. One week later, State Farm filed a motion opposing class certification. A telephone hearing involving counsel for State Farm, counsel for Ledbetter, and the trial court was held on September 6, 2002, after State Farm filed an emergency motion requesting that the trial court prohibit Ledbetter from further publication of class notice. Counsel for State Farm argued that it had not been in default on its response to the motion for class certification, as its response was not due until August 15, and that a hearing was scheduled for October 14. State Farm asked the trial court to set aside its order certifying the class and to maintain the status quo until the hearing on October 14. Ledbetter's counsel objected to any discussion regarding setting aside the trial court's order, because the only motion to be considered was the emergency order regarding class notice. The trial court admitted that it entered the order certifying the class on the basis that it believed State Farm to be in default. The trial court then stated that it needed time to study the parties' briefs and review the law. A hearing was then scheduled for September 10, 2002, and the trial court stated that it would take care of the business regarding the original order.

At the September 10 hearing, there was confusion over the exact nature of the issue to be considered by the trial court. At the outset, however, the trial court again stated that the sole purpose of the hearing was to revisit the class certification order. State Farm argued that there were three reasons to set aside the order: (1) that State Farm was denied procedural due process with respect to entry of the order; (2) that the order was entered because of a mistaken impression that State Farm had defaulted in responding to the motion for class certification; and (3) judicial economy would be served by setting aside the order. The trial court then explained that the purpose of the hearing was to allow State Farm to place any objections it had to certification on the record.

In a ruling from the bench, the trial court stated that it could find no reason to set aside the order certifying the class and, thus, allowed the original order to stand. The trial court did not rule on State Farm's contentions that it had been denied due process when the order was entered prior to the time they filed a response and prior to the time scheduled for a hearing. This appeal followed.

I. Timeliness of State Farm's Response to Motion for Class Certification

For its first point on appeal, State Farm argues that the trial court erred in granting Ledbetter's motion for class certification after erroneously concluding that State Farm was in default for failing to respond to Ledbetter's motion within the time allowed under Ark. R. Civ. P. 6(c). State Farm contends that it was not in default because Ledbetter's motion was not complete until a signed and notarized affidavit of Becky Harrington was filed on July 29, 2002, thereby, giving it until August 15 to file its response. State Farm bases this assertion on the fact that Harrington's affidavit was required as a supporting affidavit that should have been filed with the certification motion under Ark. R. Civ. P. 7(b)(2). State Farm argues further that the trial court erred because there is no requirement that it file a written response to the motion, and that it had a right to present its position on the motion at a hearing scheduled for October 14, 2002. According to State Farm, the pleadings in this case did not conclusively show that class certification was appropriate, thus, the trial court abused its discretion in certifying the class. We are unable to reach the merits of this argument, as it is not preserved for appellate review.

The record reveals that after the trial court granted Ledbetter's motion for class certification, State Farm filed a motion to set aside the order. It also filed a motion requesting additional findings of fact and conclusions of law. During an emergency telephone conference on a separate issue, State Farm argued that it had not been in default and that it was entitled to present its position regarding certification at the hearing scheduled for October 14. The trial court then scheduled a hearing for September 10 and stated that it would consider the issue of whether class certification was appropriate, and if so, would allow the prior order to stand. At that September 10 hearing, State Farm again raised its arguments regarding the timing of its response and its alleged default. The trial court again explained that the purpose of the hearing was to give the parties a chance to submit their proof regarding class certification. The trial court then concluded that there was no reason to set aside the previous order granting class certification. The...