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Class Action Defense Cases-Pastor v. State Farm: Seventh Circuit Affirms Refusal To Certify Class Action Holding Individual Fact Issues Predominate Over Common Questions Rendering Class Action Treatment Unmanageable

District Court Properly Denied Class Certification Motion on Grounds of Unmanageability because Literally Thousands of Individual Evidentiary Hearings would be Required Seventh Circuit Holds

Plaintiff filed a putative class action in Illinois federal court against State Farm alleging that it failed to pay insureds $10 as required by its insurance policies when car repairs render the insured’s vehicle unusable for at least one day but the insured does not rent a car during the repair period. Pastor v. State Farm Mut. Auto. Ins. Co., 487 F.3d 1042, 1043 (7th Cir. 2007). Defense attorneys argued against certification of a class action, and the district court agreed; plaintiff thereafter accepted an offer of judgment, and appealed the denial of class certification. Id. The Seventh Circuit affirmed, holding that class action treatment was not appropriate because common issues did not predominate over individual issues.

Plaintiff’s car windshield was damaged in an accident 11 years ago. Pastor, at 1044. Her auto insurer, State Farm, paid for the repairs, which were completed in about one hour, but it did not pay her an additional $10 pursuant to a provision in her policy that required State Farm to “pay you $10 per day if you do not rent a car while your car is not usable.” Id. The policy states that the “per day” entitlement period begins at the time of the accident or “if your car can run, when you leave it at the shop for agreed repairs,” and ends when the repairs are complete. Id. Plaintiff did not rent a car for the one-hour repair period and did not ask State Farm for the extra $10, but the class action complaint alleges that the insurer was contractually obligated “to notify her that she was entitled to the money,” id. The Circuit Court was harsh in its characterization of plaintiff’s claim, stating “there is nothing in the policy to suggest that upon receipt of a claim seeking reimbursement of one cost (the cost of repairing the windshield) the insurer must determine and inform the insured of any additional entitlement that the policy might confer on her, just in case its customers don’t bother to read their insurance policies when they file claims under them.” Id. Despite this problem, just before the expiration of the 10-year statute of limitations period, plaintiff filed a putative class action in Illinois federal court seeking to represent all State Farm insureds who “received payments for claims for damage to their vehicles, did not rent a car, yet did not receive any payment pursuant to the $10 a day clause.” Id.

Plaintiff sought class action treatment of her claims; the district court denied the motion, finding the case would be unmanageable because “the contractual entitlement of each member of the class would depend on whether and how long the car was out of service (without the owner’s renting a replacement vehicle) because it was being repaired, and on whether the member notified State Farm that the car was out of service (and for how long) and that he hadn’t rented a car and was therefore entitled to $10 a day for x days.” Pastor, at 1044. The Seventh Circuit agreed with the district court, brushing aside the parties’ efforts to argue contract interpretation because it found that the central issue “lies elsewhere.” Id., at 1045-46. Instead, the Circuit Court held, class action treatment was inappropriate because “Individual hearings would be necessary to determine whether a class member made a claim for his $10 a day, whether his car was unusable, and if so for how long,” id., at 1046, and that the class size would most likely run into the millions, id., at 1046-47.

In the Court’s words, “The picture of a federal district judge presiding over thousands of evidentiary hearings each involving a trivial amount of money is not a pretty one.” Pastor, at 1047. The Seventh Circuit explained at page 1047, “[W]hen a separate evidentiary hearing is required for each class member’s claim, the aggregate expense may, if each claim is very small, swamp the benefits of class-action treatment. And that is the case here.” Put simply, common issues of fact do not predominate, thus supporting the district court’s refusal to grant class action treatment in the case. Id.

NOTE: Plaintiff’s acceptance of the offer of judgment did not render the appeal moot because it left unresolved the dispute between the defendant and the absent members of the putative class. Pastor, at 1043-44 (citing, inter alia, Deposit Guaranty Nat’l Bank v. Roper, 445 U.S. 326, 332-33 (1980)). Additionally, the Seventh Circuit discusses at some length State Farm’s failure to comply with Circuit Rule 28 concerning jurisdictional statements, see id., at 1047-48; the author believes that the Circuit Court’s discussion is a helpful reminder to appellate practitioners.

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