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Class Action Defense Cases-John v. National Security: Fifth Circuit Upholds District Court Dismissal Of Class Action Allegations Because Class Action Complaint Failed To Plead An Ascertainable Class

Class Action Requirements of Rule 23 Implicitly Require District Court to Determine Whether Class Action Complaint Adequately Pleads an Ascertainable Class Fifth Circuit Holds

Plaintiffs filed a class action lawsuit against their homeowner’s insurance carrier for damages caused by Hurricane Rita, alleging inter alia that the insurer “systematically under-adjust[ed] damages claims by failing to account for the inevitable inflation in the price of labor and materials for home repair that follows from natural disasters.” John v. National Sec. Fire & Cas. Co., 501 F.3d 443, 2007 WL 2743633, *1 (5th Cir. 2007). The class action complaint alleged further that the insurer breached the terms of its insurance policies by “systematically failing to account for general contractors’ overhead profit…when repair required the exercise of two or more trades.” Id. Defense attorneys moved to dismiss the class action for failure to state a claim, and for failure to plead an ascertainable class, id. The district court agreed with the defense arguments and dismissed the fraud claim and the class action allegations; the Fifth Circuit granted interlocutory review to resolve the issue of whether the district court erred in dismissing the class action allegations. The Circuit Court affirmed.

Preliminarily, the Fifth Circuit rejected plaintiffs’ efforts to redefine their class action allegations. Specifically, the Circuit Court noted that on appeal plaintiffs’ proposed two separate classes, and that plaintiffs “do not argue in favor of certifying a unitary class, as they proposed in their amended complaint.” John, at *1. Because, however, the Circuit Court’s jurisdiction was limited to whether the district court properly dismissed the unitary class action allegations in the pleadings, the Court explained at page *1 that it “may not consider whether the court should have certified two separate classes that were never proposed to it.” (Citing La. Patients’ Comp. Fund Oversight Bd. V. St. Paul Fire &Marine Ins. Co., 411 F.3d 585, 588 (5th Cir. 2005).) The Fifth Circuit rejected also plaintiffs’ claim that “dismissal of a class allegation on the pleadings is never proper.” Id. The Circuit Court explained at page *1:

The existence of an ascertainable class of persons to be represented by the proposed class representative is an implied prerequisite of [Rule 23]. Where it is facially apparent from the pleadings that there is no ascertainable class, a district court may dismiss the class allegation on the pleadings. Because [plaintiffs] do not contend that the class they propose is ascertainable, but instead propose two newly defined classes, we need not determine whether they pleaded sufficiently facts, in their complaint alleging an ascertainable class, to survive scrutiny under rule 12(b)(6).

Accordingly, the Fifth Circuit affirmed the dismissal of the class action allegations. John, at *1.

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