Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_07-cv-00326/USCOURTS-azd-4_07-cv-00326-3/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 12:635 Breach of Insurance Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Rosemary Guadiana, 

Plaintiff, 

vs.

State Farm Fire and Casualty Company, 

Defendant. 

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No. CIV 07-326 TUC FRZ (GEE)

REPORT AND RECOMMENDATION

 Pending before the court is the plaintiff’s motion for class certification pursuant to Rule

23, FED.R.CIV.P. [doc. #58] The defendant filed a response, the plaintiff filed a reply, and the

defendant filed a surreply.

The plaintiff, Rosemary Guadiana, claims the defendant breached her homeowner’s

insurance policy by failing to pay the costs of tearing out and replacing part of the structure

when she replaced her polybutylene plumbing. She moves that this court certify her suit as a

nationwide class action pursuant to FED.R.CIV.P. 23(b)(2) and (b)(3).

The case has been referred to Magistrate Judge Edmonds for all pretrial matters pursuant

to Local Civil Rule 72.2. Rules of Practice of the U.S. District Court for the District of Arizona.

A hearing on the motion was held on Wednesday, October 14, 2009. The motion should

be denied. Guadiana has not shown the law of contract interpretation across the country is so

uniform that this court may apply Arizona law to all claimants.

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FACTUAL AND PROCEDURAL BACKGROUND

Guadiana had a homeowner’s insurance policy with the defendant, State Farm.

(Amended complaint, p. 3.) On September 9, 2004, her home sustained water damage when

the plumbing leaked. Id.

Guadiana discovered her home plumbing system was constructed with polybutylene (PB)

pipe. Id. PB pipe is no longer used for home plumbing systems because chlorine in the water

causes the pipe to become brittle and crack. Id. This pipe embrittlement cannot be remedied.

Id. The only feasible method of repairing a plumbing system constructed of PB pipe is to

replace all the pipe. Id. 

Guadiana claims State Farm is obliged, under her homeowner’s policy, to pay the costs

incurred in tearing out and replacing that part of the structure necessary to replace her entire PB

piping system. Id., p. 4. State Farm believes it is only obligated to pay the costs necessary to

access the portion of the pipe that was leaking. Id.

On July 11, 2007, Guadiana filed the instant class action in U.S. District Court. She

claims State Farm’s failure to pay the entire tear-out cost is a breach of contract and a breach

of the duty of good faith. (Amended complaint.) 

On September 14, 2007, State Farm filed a motion to dismiss for failure to state a claim

upon which relief can be granted pursuant to Rule 12(b)(6). FED.R.CIV.P. This court denied

the motion on September 2, 2008. The court construed the tear-out provision applying Arizona

law, and assessed Guadiana’s claim as follows: “If Guadiana can establish as a matter of fact

that the system that caused the covered loss includes all the pipes in her house and it was

necessary to replace all the pipes to repair that system, State Farm is obligated to pay the tearout costs necessary to replace all the pipes, even those not leaking.” [doc. # 29]; [doc. # 25, p.

4]

In the instant motion, Guadiana moves for class certification pursuant to FED.R.CIV.P.

23(b)(2) and (b)(3). Her proposed class is defined in pertinent part as follows:

All current or former insureds of State Farm Fire and Casualty Co. who:

(1) own or owned real property located in the United States which was

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insured by Defendant;

(2) experienced a leak in a PB System (defined as a plumbing system

which included polybutylene pipe) within the insured property, which

leak was acknowledged by Defendant to result in a covered loss;

(3) incurred costs (or expended labor) for tearing out and/or replacing part

of the insured property to repair the PB System (“Tear-Out Costs”); and

(4) during the Class Period either:

(a) received payment from Defendant in response to the PB leak

claim, which payment failed to include Tear-Out Costs; or

(b) were informed by Defendant that no payment was due as a

result of the PB leak claim.

For purposes of the Class Definition, the Class Period is defined as July 11,

2003 to the date class certification is granted and the class certification order

becomes final.

(Plaintiff’s motion, p. 2.) A hearing on the motion was held on October 18, 2009. At the

hearing, Guadiana explained that she no longer intends to pursue her claims for bad faith and

punitive damages.

Standard of Review

“As the party seeking class certification, [Guadiana] bears the burden of demonstrating

that she has met each of the four requirements of Rule 23(a) and at least one of the requirements

of Rule 23(b).” Zinser v. Accufix Research Institute, Inc., 253 F.3d 1180, 1186 (9th Cir. 2001),

amended, 273 F.3d 1266 (9th Cir. 2001). The four preliminary requirements are as follows: (1)

numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation. FED.R.CIV.P.

23(a). 

A class may be certified pursuant to Rule 23(b)(2) if “the party opposing the class has

acted or refused to act on grounds that apply generally to the class, so that final injunctive relief

or corresponding declaratory relief is appropriate respecting the class as a whole.”

FED.R.CIV.P.

A class may be certified pursuant to Rule 23(b)(3) if “the court finds that the questions

of law or fact common to class members predominate over any questions affecting only

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individual members, and that a class action is superior to other available methods for fairly and

efficiently adjudicating the controversy.” FED.R.CIV.P.

“Before certifying a class, the trial court must conduct a ‘rigorous analysis’ to determine

whether the party seeking certification has met the prerequisites of Rule 23.” Zinser, 253 F.3d

at 1186. “While the trial court has broad discretion to certify a class, its discretion must be

exercised within the framework of Rule 23.” Id. When analyzing a motion to certify a class,

“[t]he court is bound to take the substantive allegations of the complaint as true. . . .” Blackie

v. Barrack, 524 F.2d 891, 901 n. 17 (9th Cir. 1975), cert. Denied, 429 U.S. 816 (1976).

State Farm argues first that the motion should be denied because Guadiana seeks to

certify a different class than the one proposed in her amended complaint. Her proposed class,

as it appears in her amended complaint, reads in pertinent part as follows:

All policyholders who (1) own or owned real property located in the United

States which was insured by Defendant, (2) submitted to Defendant a claim for

a covered loss to the insured real property during the period from four years prior

to the filing of the Original Complaint in this case to the present, which claim

included a claim for costs for tearing out and replacing part of the building

necessary to replace the entire polybutylene piping system, and (3) were paid an

amount (or were not paid at all) based on an estimate that failed to include the full

cost of tearing out and replacing the parts of the building necessary to replace the

entire polybutylene system. 

(Amended complaint, p. 6.) To qualify for membership in this class, a homeowner must have

submitted a claim for tear-out costs that included the costs necessary to replace all the PB

piping. In the class proposed in the instant motion, this requirement is eliminated.

Guadiana agrees that the class eventually certified should conform to the complaint, but

she intends to amend her complaint if her motion is granted. (Plaintiff’s reply, p. 2.) The issue

then is whether amendment to the complaint would be permitted at this point in the litigation.

When amendment is sought after the Rule 16 deadline has passed, the party seeking

amendment must comply with Rule 16(b), not the more liberal standard of Rule 15(a). 

Coleman v. Quaker Oats, 232 F.3d 1271, 1294-95 (9th Cir. 2000), cert. denied, 533 U.S. 950

(2001); Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 607-08 (9th Cir. 1992). The

party is effectively moving to modify the deadline as well as moving to amend the pleading.

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A court’s scheduling order “shall not be modified except upon a showing of good cause.”

FED.R.CIV.P. 16(b). The good cause standard focuses primarily on the diligence of the party

seeking the amendment. Johnson v. Mammoth Recreations, Inc., 975 F.2d 604, 609 (9th Cir.

1992). “Although the existence or degree of prejudice to the party opposing the modification

might supply additional reasons to deny a motion, the focus of the inquiry is upon the moving

party’s reasons for seeking a modification.” Id. “If that party was not diligent, the inquiry

should end.” Id.

In this case, Guadiana seeks to amend the class because of information she uncovered

during discovery. Specifically, she found that State Farm sent to her (and presumably to its

other insureds seeking coverage for water damage) a letter explaining that State Farm’s

homeowner’s insurance policy “does not provide coverage to tear into the building to replace

the entire system, only the portion of the building necessary to repair the piece of pipe that

failed and caused the water damage.” (Plaintiff’s motion, Exhibit B, p. 79.) Because of this

letter, Guadiana believes limiting her class to insureds who actually made a tear-out claim for

all the piping would miss many persons who are entitled to tear-out coverage. She therefore

proposes to change her class description to include those insureds who could have made a claim

but did not because they were advised by State Farm that there was no tear-out coverage for

replacing all of the PB piping.

Guadiana’s new theory is based primarily on the deposition testimony of Debbie Smith,

State Farm claims section manager, given on April 30, 2009. (Plaintiff’s reply, pp. 1-2.)

Guadiana informed State Farm of her intention to amend her class definition on May 27, 2009,

less than one month later. Id. Based on these facts, it appears that Guadiana has been diligent

in her prosecution of this action. Accordingly, as a preliminary matter, there appears to be no

obstacle to her amending her complaint to conform to her amended class. See also Gen. Tel.

Co. of Sw. v. Falcon, 457 U.S. 147, 160, 102 S.Ct. 2364, 2372 (1982) (The court has broad

discretion to approve a class and revisit that approval during the litigation.).

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State Farm further argues Guadiana’s proposed amendment unnecessarily expands the

scope of the class and creates liability based on a new legal theory that State Farm is required

to accurately advise its insureds of the parameters if its coverage. 

Guadiana’s proposed class includes homeowners who

(4) during the Class Period either:

(a) received payment from Defendant in response to the PB leak

claim, which payment failed to include Tear-Out Costs; or

(b) were informed by Defendant that no payment was due as a

result of the PB leak claim.

(Plaintiff’s motion, p. 2.) Subsection (4)(b) apparently was designed to include those insureds

who failed to make a claim for tear-out costs because they were informed by State Farm that

there was no tear-out coverage for pipes that were not leaking. It achieves its goal, but it also

unnecessarily interjects a new theory of liability into the action. It should be possible to achieve

Guadiana’s goal of expanding class membership without creating a new theory of liability. To

that end, the court asked the parties at the motion hearing to comment on a proposed class

reading in pertinent part as follows:

All current or former insureds of State Farm Fire and Casualty Co. who:

(1) own or owned real property located in the United States which was

insured by Defendant;

(2) experienced a leak in a PB System (defined as a plumbing system

which included polybutylene pipe) within the insured property, which

leak was acknowledged by Defendant to result in a covered loss;

(3) incurred costs (or expended labor) for tearing out and/or replacing part

of the insured property necessary to replace the entire polybutylene system; and

(4) during the Class Period were paid an amount(or were not paid at all) that

failed to include the full cost of tearing out and replacing parts of the building

necessary to replace the entire polybutylene system.

See also Hagen v. City of Winemucca, 108 F.R.D. 61, 64 (D.C. Nev. 1985) (“Many circuits have

held that the court itself may construct a definition of the class . . . or may modify a proposed

definition where the original is inadequate. . . .”). This proposed class would include those

homeowners who replaced their PB pipes but did not file a claim because they believed it would

not be allowed. It does not introduce additional theories of liability.

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1

 Court reporter’s transcript.

2

 State Farm’s arguments against class certification were actually raised against the class as it

was proposed in Guadiana’s motion, but they may be applied with equal force to the reformulated class

as proposed by the court and modified by Guadiana.

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At the hearing, Guadiana’s counsel offered to adopt the court’s hypothetical class with

two amendments. He would replace the phrase: “to replace the entire polybutylene system”

with the phrase “to replace the polybutylene pipe and fittings within the system” in paragraphs

(3) and (4). (R.T. p. 35.)1

 With Guadiana’s amendments, this proposed class resolves State

Farm’s objection to addressing new theories of liability.

State Farm further argues the proposed class is not administratively feasible or

ascertainable.2

 State Farm maintains it is not possible to identify the class members based on

information contained in its claim files. For example, the type of pipe material involved in the

covered leak may not be in the claim files. State Farm’s objections, however, miss the mark.

At this point, the court need only decide if the proposed class is sufficiently definite for the class

members to be identified unambiguously. Parkinson v. Hyundai Motor America, 258 F.R.D.

580, 593 (C.D.Cal. 2008). It does not matter whether or not the class members can be identified

from the information currently contained in State Farm’s claim files. Id. The proposed class

is sufficiently definite for certification.

Numerosity

A proposed class action satisfies the numerosity prerequisite if “the class is so numerous

that joinder of all members is impracticable.” FED.R.CIV.P. 23(a)(1). “Generally, 40 or more

members will satisfy the numerosity requirement.” Perez v. First American Title Ins. Co., 2009

WL 2486003, *2 (D.Ariz. 2009). “The party seeking class certification need not identify the

precise number of potential class members.” Id.

Guadiana has not precisely identified the size of the class, but it appears that it will

number more than 40. Debbie Smith, a State Farm claims section manager for Arizona and

Utah, opined that the number of PB leak claims was “[pure] guess, probably more than a

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hundred.” (Plaintiff’s motion, Exhibit B, pp. 8, 58.) She estimated the number of PB leak

claims “in the last four years in Arizona and Utah” was “[p]ure guess, more than 50.” Id., p.

58. A computerized search of State Farm’s claim files for water leaks that mentioned the

material polybutylene uncovered 4,756 claim files. (Plaintiff’s motion, p. 12.) Of course, this

number is not limited to persons who had a PB plumbing system, had a covered loss, and

decided to replace their entire PB piping system. 

Finally, Guadiana notes that after she suffered the water damage, State Farm informed

her by letter that “[t]he policy does not provide coverage to tear into the building to replace the

entire system, only the portion of the building necessary to repair the piece of pipe that failed

and caused the water damage.” (Plaintiff’s motion, Exhibit B, p. 79.) Debbie Smith testified

in her deposition that this letter accurately reflects State Farm’s position with regards to tearout. Id., p. 80. The fact that State Farm has a specific policy regarding tear-out is some

evidence that this is a recurring issue for the company. Guadiana has made a sufficient showing

to satisfy the numerosity prerequisite.

Commonality

 A proposed class action satisfies the commonality prerequisite if “there are questions

of law or fact common to the class.” FED.R.CIV.P.23(a)(2). The rule is construed permissively.

Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir.1998). “The existence of shared legal

issues with divergent factual predicates is sufficient, as is a common core of salient facts

coupled with disparate legal remedies within the class.” Id.

This case presents common questions of fact and law: Is it necessary to replace all the

PB piping whenever there is a leak, and does the tear-out provision apply to access piping that

was not leaking?

Typicality

A proposed class action satisfies the typicality prerequisite if “the claims or defenses of

the representative parties are typical of the claims or defenses of the class.” FED.R.CIV.P.

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23(a)(3). “[U]nder the rule’s permissive standards, representative claims are ‘typical’ if they

are reasonably coextensive with those of absent class members; they need not be substantially

identical.” Staton v. Boeing Co., 327 F.3d 938, 957 (9th Cir. 2003).

Here, Guadiana is in the same factual and legal posture as are the class members. She

had a PB plumbing system in her home. She was insured by the defendant, State Farm. She

suffered a covered loss when her plumbing sprang a leak. She replaced all her piping because

she believed that was the only means of repairing a PB plumbing system. She was not

reimbursed for her tear-out costs incurred in replacing all her pipes. Guadiana’s claims are

typical of the class members.

Adequacy

Rule 23(a)(4) permits the certification of a class action only if “the representative parties

will fairly and adequately protect the interests of the class.” FED.R.CIV.P. 23(a)(4) “To

determine whether the representation meets this standard, we ask two questions: (1) Do the

representative plaintiffs and their counsel have any conflicts of interest with other class

members, and (2) will the representative plaintiffs and their counsel prosecute the action

vigorously on behalf of the class?” Staton v. Boeing Co., 327 F.3d 938, 957 (9th Cir. 2003).

Guadiana asserts in her declaration that she has participated actively in the prosecution

of her action and she intends to continue to vigorously pursue her claim. (Plaintiff’s motion,

Exhibit E.) Her counsel, Michael A. Caddell, asserts in his declaration that he, his law firm, and

associate counsel have the resources, skill, and experience necessary to prosecute the action.

(Plaintiff’s motion, Exhibit F.) 

State Farm argues Guadiana is not an adequate class representative because she has

dropped her claims for bad faith and punitive damages. Some courts have found that

representation is not adequate where the class representative disclaims certain causes of action

sometimes in a less than transparent attempt to salvage a class action where the differences

between class members is apparent. See, e.g., Western States Wholesale, Inc. v. Synthetic

Industries, Inc., 206 F.R.D. 271, 277 (C.D.Cal. 2002); Martin v. Home Depot U.S.A., Inc., 225

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F.R.D. 198, 203 (W.D.Tex. 2004). Here, however, the claims for bad faith and punitive

damages are not central to the main class issue of tear-out coverage. Moreover, as State Farm

points out in its motion for summary judgment (filed after this motion), there is little evidence

to support those claims. Accordingly, there is reason to believe Guadiana’s decision to drop bad

faith and punitive damages does no harm to the majority of class members. Moreover, those

who wish to pursue these claims will be able to do so on their own provided they are informed

of their rights and given a chance to opt out of the class action (as they must be under Rule

23(b)(3)). Finally, the decision to drop the bad faith and punitive damage claims eliminates

certain legal problems because the law of bad faith is not uniform throughout the United States.

State Farm makes this precise point in its brief. (Defendant’s response.) Guadiana’s decision

to disclaim bad faith and punitive damages does not make her representation of the class

inadequate. See, e.g., Murray v. GMAC Mortg. Corp., 434 F.3d 948, 953 (7th Cir. 2006)

(“Unless a district court finds that personal injuries are large in relation to statutory damages,

a representative plaintiff must be allowed to forego claims for compensatory damages in order

to achieve class certification.”).

State Farm further argues Guadiana’s representation would be inadequate because she

is an employee of local counsel, Joseph Watkins. Some courts have found that a relationship

between the plaintiff and class counsel can render plaintiff’s representation inadequate because

such a plaintiff might suffer from a conflict of interest. For example, if the plaintiff will share

in some way in the counsel’s fees, she might put the interests of the attorney before the interest

of the class members. See Shroder v. Suburban Coastal Corp., 729 F.2d 1371, 1375 (11th Cir.

1984); Lyon v. Arizona, 80 F.R.D. 665, 667 (D. Ariz. 1978).

In this case, although Guadiana is an employee of one of the class counsels, there is no

evidence that she has a financial interest in her employer’s compensation. In her deposition,

Guadiana specifically testified that she will receive no compensation or bonus in connection

with her employer’s success in prosecuting this case. (Plaintiff’s reply, Exhibit B, p. 103.)

Accordingly, there is no evidence of a conflict of interest that would preclude her from

functioning as an adequate class representative. See, e.g., Irvin E. Schermer Trust by Kline v.

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Sun Equities Corp., 116 F.R.D. 332, 338 (D.Minn. 1987). Guadiana will fairly and adequately

protect the interests of the class.

State Farm further argues Guadiana is not an adequate class representative because she

is no longer a State Farm insured and will not adequately represent the class’s interest in

ensuring State Farm treats PB claims properly in the future. This objection stems from

language in Guadiana’s prayer for relief in which she asks for “injunctive relief pursuant to

federal and state law requiring Defendant to stop its practice of underpaying claims involving

the replacement of PB piping systems.” (Amended complaint, pp. 10-11.) State Farm correctly

observes that Guadiana’s interest in State Farm’s future behavior may be influenced by the fact

that she no longer carries State Farm insurance. At the motion hearing, Guadiana announced

her intention to abandon this demand for relief (at least where the class is certified pursuant to

Rule 23(b)(3)) so this issue is moot. (R.T., p. 20.); (see below).

FED.R.CIV.P. 23(b)

Guadiana moves for class certification under Rule 23(b)(2) and Rule 23(b)(3). Under

Rule 23(b)(2), a class action may be maintained if “the party opposing the class has acted or

refused to act on grounds that apply generally to the class, so that final injunctive relief or

corresponding declaratory relief is appropriate respecting the class as a whole . . . .”

FED.R.CIV.P. “[I]n order to permit certification under this rule, the claim for monetary damages

must be secondary to the primary claim for injunctive or declaratory relief.” Molski v. Gleich,

318 F.3d 937, 947 (9th Cir. 2003).

Guadiana argues this action qualifies under section (b)(2) because State Farm has acted

to deny tear-out claims in accordance with its erroneous construction of the policy language in

a manner generally applicable to the class as a whole. Further, she seeks injunctive relief to

properly inform members of the class of their rights to tear-out coverage. The court does not

agree.

This suit is about damages. Guadiana seeks tear-out coverage she believes was

improperly denied her by the defendant. Guadiana seeks injunctive relief, not as an end in

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itself, but only because it facilitates the class of insureds in their quest for damages. This action

cannot be certified under section (b)(2). See also Kanter v. Warner-Lambert Co., 265 F.3d 853,

860 (9th Cir. 2001); Packard v. Provident Nat. Bank, 994 F.2d 1039, 1050 (3rd Cir. 1993) (“[A]

plaintiff may not turn what is essentially a legal claim into an equitable one merely by

demanding an injunction requiring the payment of money.”), cert. Denied, 510 U.S. 964 (1993).

At the hearing, Guadiana’s counsel argued the court could certify a section (b)(2) class

to allow for a jury determination that PB pipes have to be replaced “only in some instances.”

(R.T. p 29.) If that happened, Guadiana would ask for an injunction directing State Farm to

give its insureds notice that some PB systems need to be replaced and homeowners with these

systems could claim tear-out costs. 

This theory of the case, however, was not raised in Guadiana’s amended complaint.

Accordingly, it cannot form the basis for class certification. The court also notes that Guadiana

has presented no expert testimony to support this theory. See [docs. ## 77, 78] Accordingly,

it would be futile to amend the complain to include it now.

In the alternative, Guadiana moves for certification pursuant to Rule 23(b)(3). An action

may be certified pursuant to Rule 23(b)(3) if “the questions 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.” Fed.R.Civ.P. 23(b)(3). 

In this case, there are issues common to all members of the class. Factual questions in

common include the following: (1) Do the PB pipes constitute a “system” that caused the

covered loss, and (2) is it necessary to replace all the PB piping in order to repair that system?

These questions form the basis for the breach of contract action and are common to all members

of the class. 

State Farm argues these are individual issues because each claimant must show her PB

pipes constitute a single system that must be replaced in its entirety whenever there is a leak.

State Farm maintains PB pipes can be repaired depending on circumstance such as the source

of the leak or the quality of the water. State Farm, however, fails to grasp the gravamen of the

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plaintiff’s claim. Guadiana asserts PB pipes and their fittings always constitute a complete

system that never can be repaired short of complete replacement. Assuming she can prove this

at trial, these are not individual issues. 

Of course, there are some questions that affect only individual class members: The

amount of damages will be unique to each class member. In addition, each class member will

have to qualify for inclusion in the class by proving he or she had homeowner coverage with

the defendant, suffered a covered loss, had PB piping, replaced the PB piping, and did not

receive tear-out payment for replacing the pipes that were not leaking. These individual issues,

however, should not be particularly difficult to resolve, and they do not predominate over the

factual issues in common. 

State Farm further argues that this action should not proceed as a class because of the

difficulties inherent in maintaining a nationwide class action based on diversity. The court finds

this argument is well taken.

In a diversity action, the court must apply the choice of law rules of the forum state. See

Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 1021-22, 85 L.Ed.

1477 (1941). State Farm asserts (and Guadiana does not dispute) that under Arizona’s choice

of law rule the court must apply the substantive law of each homeowner’s state. Because this

is a nationwide class action, it appears at first blush that this the court must apply the substantive

law of all fifty states. If this were true, it would preclude a finding that common questions of

law and fact predominate in this action. See Zinser, 253 F.3d at 1190.

Guadiana, on the other hand, argues there are no meaningful differences in the law, and

the court may apply Arizona law to all claimants. Guadiana, however, has not discharged her

burden to prove this point. In her brief, Guadiana points to cases holding that contract law is

essentially the same in all jurisdictions. In other words, “a breach is a breach is a breach.”

(Plaintiff’s reply, p. 13) (citing Klay v. Humana, Inc., 382 F.3d 1241, 1262-63 (11th Cir. 2004).

In this case, however, the predominant issue is not “breach” so much as “contract

interpretation.” 

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Guadiana has not shown that the law of contract interpretation across the country is so

similar that this court may apply Arizona law to all claimants. See Phillips Petroleum Co. v.

Shutts, 472 U.S. 797, 816, 105 S.Ct. 2965, 2977 (1985) (“We must first determine whether

Kansas law conflicts in any material way with another law which could apply.”). Accordingly,

the court cannot conclude that common issues of law and fact predominate in this action. See

Zinser, 253 F.3d at 1190; Lozano v. AT & T Wireless Services, Inc., 504 F.3d 718, 728 (9th Cir.

2007) (Class would not be certified where the plaintiff did not perform a nationwide analysis

of the law of contract unconscionability.); but see also Kleiner v. First Nat. Bank of Atlanta, 97

F.R.D. 683, 695 n. 13 (N.D.Ga. 1983) (Class was certified where the court found no material

differences in the laws of contract interpretation in Georgia, Tennessee, North Carolina, South

Carolina, and Virginia).

State Farm identifies other issues that may differ between the various jurisdictions. The

statute of limitations may differ, and the point at which a claim accrues may differ as well.

Guadiana has not discharged her burden to show these differences, if any, can be

accommodated. See Marino v. Home Depot U.S.A., Inc., 245 F.R.D. 729, 735 (S.D.Fla. 2007)

(Class would not be certified, in part, because “the fifty states have different statutes of

limitations for breach of contract actions. . . .”).

State Farm further argues the various jurisdictions may vary as to their treatment of the

collateral source rule. State Farm notes that some homeowners may have already received

compensation from the Cox PB settlement fund to repipe their homes. (Defendant’s response,

pp. 23, 38-40.) If so, that payment may affect the damages calculation in this action depending

on each jurisdiction’s collateral source rule. In her reply brief, Guadiana agrees that those

homeowners who recovered compensation from that fund should be excluded from the class.

(Plaintiff’s reply, p. 17.) This issue is therefore moot.

In deciding whether “a class action is superior to other available methods for fairly and

efficiently adjudicating the controversy” the court must consider four factors: 

(A) the class members’ interests in individually controlling the prosecution or

defense of separate actions; 

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(B) the extent and nature of any litigation concerning the controversy already

begun by or against class members; 

(C) the desirability or undesirability of concentrating the litigation of the claims

in the particular forum; and 

(D) the likely difficulties in managing a class action. 

FED.R.CIV.P. 23(b)(3); Zinser v. Accufix Research Institute, Inc., 253 F.3d 1180, 1190 (9th Cir

2001).

Here, the damages for each class member is likely to be relatively small3

 in relation to

the costs of litigation. Accordingly, it is unlikely that the individual members would be able to

pursue litigation by themselves. This factor favors proceeding via a class action. See Zinser,

253 F.3d at 1190-91. (“We recognize that a party with a claim of $50,000 might have a difficult

time alone pursuing a complex products liability case.”)

Factor (B) weighs against class action treatment if there are other actions pending that

cover the same subject matter. Zinser, 253 F.3d at 1191. There is no indication from either

party that any similar action is pending. 

The third factor, (C), considers the desirability of concentrating the litigation of the

claims in the particular forum. Here, concentrating the litigation in a single forum conserves

judicial resources and reduces the need for costly expert testimony.

Factor (D) considers “the likely difficulties in managing a class action.” Here, the “likely

difficulties” depend in large part on the choice of law issue and the statute of limitation issue.

A class action cannot be the best way for adjudicating this dispute without a showing that these

issues can be accommodated.

RECOMMENDATION:

The Magistrate Judge recommends the District Court, after its independent review of the

record, enter an order 

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Denying the plaintiff’s motion for class certification pursuant to Rule 23, FED.R.CIV.P.

[doc. #58]. 

Pursuant to 28 U.S.C. §636 (b), any party may serve and file written objections within

10 days of being served with a copy of this Report and Recommendation. If objections are not

timely filed, they may be deemed waived. 

The Clerk is directed to send a copy of this Report and Recommendation to the parties

or their counsel. 

DATED this 18th day of December, 2009.

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