District Court Certifies Class Action Against Title Insurers for Allegedly Charging Premiums in Excess of State-Approved Rates
Plaintiffs filed a class action against First American Title and United General Title in Maryland state court alleging that, in connection with refinances, the insurers charged higher premiums than permitted by law. Defense attorneys removed the class action to federal court, and plaintiffs moved for class certification of two classes, one involving First American customers and one involving United General customers. Mitchell-Tracey v. United General Title Ins. Co., 237 F.R.D. 551, 553-55 (D. Md. 2006). The defense vigorously opposed class certification on four grounds, which the district court summarized as follows: (1) records do not exist by which plaintiffs could prove class membership, liability or damages; (2) specific fact questions present in each affected transaction will predominate over individual issues; (3) the calculation of monetary damages for class members will be “highly individualized and is neither typical nor common among all class members”; and (4) the parties will be unable to identify class members because the necessary records are “in the possession of hundreds of independent title insurance agents and the task of compiling such information to adequately determine class membership is virtually impossible.” Id., at 555. The court disagreed with defense arguments and certified the matter to proceed as a class action, concluding that “Application of the principles embodied in Rule 23 to the circumstances of this case compels the conclusion that the class action device is wholly appropriate.” Id., at 556.
As is common, Maryland law requires title insurers to file with the state information concerning rates and premiums to be charged in connection with the issuance of title insurance policies, and to charge only those rates approved by the state. Mitchell-Tracey, at 553 (citations omitted). Though not required by Maryland law, First American and United General also filed with the state discounted “reissue rates,” applicable if borrowers meet certain conditions. Id., at 554. The class action complaint alleged that defendants charged fees in excess of the reissue rates filed with and approved by the state, and sought declaratory relief and monetary damages. Id.
In analyzing the requirements for class action certification, the district court first concluded that the class was sufficiently numerous to satisfy Rule 23(a)(1). Mitchell-Tracey, at 556-57. It then addressed commonality, typicality and adequacy of representation elements of Rule 23(a), which the court considered “similar and overlapping,” id., at 557 (citation omitted), devoting the most time on commonality. The court rejected defense claims that the “level of knowledge” of each class member defeats commonality. The district court concluded that the commonality requirement was satisfied, explaining at page 557:
The pertinent facts and applicable law at issue in this case are common to all the members of the proposed classes. The scope of the central question shared by all members of the proposed classes-whether they where eligible for and entitled to the ‘reissue rate’ under the Defendants’ filed rates, and whether they failed to receive that rate as a result of Defendants’ wrongdoing-is identical in all material respects.
The district court recognized that “variations exist” as to the amounts each class member paid for title insurance, but held that these differences “do not alter the fundamental nature of the claims, as it is the nature of the transactions, the rate charged, and the reasons therefor, that are in fact at issue in this case.” Mitchell-Tracey, at 557. The court reasoned that “Defendants allegedly utilized standardized forms, processes and practices,” and noted that “The existence of routine and standardized practices giving rise to numerous claims weigh in favor of finding commonality, as well as typicality.” Id. The court also found that the calculation of damages would easily determinable, id.
The federal court next found that the typicality prong of Rule 23(a) was satisfied because the claim “involve common issues of fact and law.” Mitchell-Tracey, at 558. Defense attorneys contended that the claims were not typical because each class member “worked with a different local agent and as a result received a range of information,” id.; the district court was not persuaded, finding that in point of fact “Plaintiffs’ claims present virtually identical fact patterns and legal theories and are based upon the same conduct by the Defendants,” id.
The court then addressed the Rule 23(b) factors, and found that plaintiffs’ proposed class action satisfied not just one but all three of its subparts. Mitchell-Tracey, at 558-60. A class action would avoid the risk of inconsistent judgments (Rule 23(b)(1)), id., at 559, and would secure injunctive relief benefiting the entire class and thus satisfied Rule 23(b)(2) even though the complaint also sought monetary damages, id. (The author notes that courts generally have held that certification is inappropriate under Rule 23(b)(2) when the complaint primarily seeks monetary relief.)
Finally, the federal court held that the proposed class action satisfied the requirements of Rule 23(b)(3), rejecting defense claims that individual issues will predominate over common issues. Mitchell-Tracey, at 559-60. The district court held that “the essential issues, both factually and legally, are common to the class as a whole and predominate over any individual questions ” Id., at 559. And with respect to defense arguments concerning damage calculations, the court observed that “individualized proof of damages does not necessarily create a bar to class actions,” id., at 560. Accordingly, the court certified both classes. Id.
NOTE: Defense attorneys apparently did not contest numerosity or adequacy of representation. The district court found that the class was sufficiently numerous to satisfy Rule 23(a)(1), Mitchell-Tracey, at 556-57, and that plaintiffs and their counsel would adequately represent the interests of the class, id., at 558.