Opinion ID: 1466612
Heading Depth: 1
Heading Rank: 2

Heading: Class Certification Inappropriate

Text: State Farm's second point on appeal is that the trial court erred in granting Ledbetter's motion for class certification, because the highly individualized nature of insurance claims renders class action treatment inappropriate in the present case. Specifically, Appellant argues that the subclasses set forth in the order do not meet the requirements of Rule 23. Under Rule 23(a), a trial court may certify a class only if the following conditions are satisfied: (1) [T]he 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 interests of the class. Pursuant to subsection (b) of Rule 23, the court must also find that: [T]he 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. The question of whether the elements of a class action have been satisfied is a matter within the broad discretion of the trial court, and we will not reverse the trial court's decision absent an abuse of that discretion. Advance America, Cash Advance Ctrs. of Ark., Inc. v. Garrett, 344 Ark. 75, 40 S.W.3d 239 (2001); Mega Life & Health Ins. Co. v. Jacola, 330 Ark. 261, 954 S.W.2d 898 (1997); Direct Gen. Ins. Co. v. Lane, 328 Ark. 476, 944 S.W.2d 528 (1997). However, the determination is purely a procedural question. BNL Equity Corp. v. Pearson, 340 Ark. 351, 10 S.W.3d 838, cert. denied, 531 U.S. 823, 121 S.Ct. 66, 148 L.Ed.2d 32 (2000). Neither the trial court nor the appellate court may delve into the merits of the underlying claim when deciding whether the requirements of Rule 23 have been met. Id.; see also Fraley v. Williams Ford Tractor & Equip. Co., 339 Ark. 322, 5 S.W.3d 423 (1999) (holding that the trial court may not consider whether plaintiff will ultimately prevail). Remaining mindful of this standard, we now turn to State Farm's arguments regarding class certification.
State Farm's first argument on this point is that the monetary-damages subclass is amorphous and is not susceptible to definition. State Farm argues that a class specifically defined to consist of persons with a common question of law or fact with the named plaintiff is improper. According to State Farm, under this definition it would be necessary for the court to delve into the merits of the underlying claim in order to determine if the requirements of Rule 23 have been met. Ledbetter contends that the class is susceptible to definition because it consists of a group of policyholders all insured under the same policy. This court discussed the requirements of class definition in the recent case of Arkansas Blue Cross & Blue Shield v. Hicks, 349 Ark. 269, 78 S.W.3d 58 (2002): It is axiomatic that in order for a class action to be certified, a class must exist. The definition of the class to be certified must first meet a standard that is not explicit in the text of Rule 23, that the class be susceptible to precise definition. This is to ensure that the class is neither amorphous, nor imprecise. Concurrently, the class representatives must be members of that class. Thus, before a class can be certified under Rule 23, the class description must be sufficiently definite so that it is administratively feasible for the court to determine whether a particular individual is a member of the proposed class. Furthermore, for a class to be sufficiently defined, the identity of the class members must be ascertainable by reference to objective criteria. Id. at 280-81, 78 S.W.3d at 64-65 (quoting Ferguson v. Kroger Co., 343 Ark. 627, 631-32, 37 S.W.3d 590, 593 (2001) (quoting 5 Jeremy C. Moore, Moore's Federal Practice § 23.2(1) (Matthew Bender 3d ed. 1997))). In the present case, the money-damages subclass is defined as: [A]ll those insureds of Defendant under Form FP7955 who have a property damage claim or who have had an unpaid property damage claim under said policy that involves a common question of law or fact with the Plaintiff[.] State Farm contends that it will be impossible to prove whether or not a policyholder has a common question of law or fact with Ledbetter, unless each of the homes of the potential class members is inspected for foundation damage alleged to have resulted from water leakage. It is true that Rule 23(a)(2) requires a determination by the trial court that there are questions of law or fact common to the class. BPS, Inc. v. Richardson, 341 Ark. 834, 20 S.W.3d 403 (2000); see also Mega Life, 330 Ark. 261, 954 S.W.2d 898. Simply defining a class so as to track the language of Rule 23, however, does not allow the trial court to readily ascertain the identity of potential class members. Ledbetter has proffered no suggested mechanism for identifying the class other than the common insurance policy. In other words, there are no objective criteria the trial court may employ to determine who is a proper class member. This court faced a similar problem of identifying class members in Ferguson, 343 Ark. 627, 37 S.W.3d 590. There, the appellants argued that the trial court erred in denying their motion for class certification in an action by grocery shoppers against the Kroger Company stemming from a dispute over the grocer's double-coupon program. This court concluded that it would be impossible to identify members of the proposed class, particularly because of the passage of time and changes in the shoppers' circumstances. The court in Ferguson recognized that clearly defining the class insures that those people who are actually harmed by a defendant's wrongful conduct will participate in the relief ultimately awarded. As the class in this case is presently defined, the trial court would be required to inquire into the facts of each insured's case in order to determine whether that person is a suitable class member. We have repeatedly held that neither the trial court nor the appellate court may delve into the merits of the underlying claim when deciding whether the requirements of Rule 23 have been met. The Money Place v. Barnes, 349 Ark. 518, 78 S.W.3d 730 (2002); Fraley, 339 Ark. 322, 5 S.W.3d 423 (1999); see also Capital One Bank v. Rollins, 106 S.W.3d 286 (Tex.App.2003) (holding that a class definition was defective where it required a determination of the merits before the court could ascertain the existence of a class). Accordingly, the trial court abused its discretion in certifying this matter as a class action where the class definition provides no objective criteria for ascertaining class membership and also requires the trial court to delve into the underlying merits in order to determine who is an appropriate class member.