Shields v. State Farm Mutual Automobile Insurance Co

UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF LOUISIANA

LAFAYETTE DIVISION

DARREN MICHAEL SHIELDS ET AL. CASE NO. 6:19-CV-01359

VERSUS JUDGE JAMES D. CAIN, JR.

STATE FARM MUTUAL AUTOMOBILE MAGISTRATE JUDGE PATRICK J.

INSURANCE CO. HANNA

MEMORANDUM RULING

Before the court is a Motion for Class Certification [doc. 82] filed pursuant to

Federal Rule of Civil Procedure 23 by plaintiff Connie Bourque. Defendant State Farm

Mutual Automobile Insurance Company opposes the motion. Doc. 98. The matter came

before the court for a hearing on November 2 and 3, 2021, and the undersigned now issues

this ruling.

I.

BACKGROUND

A. Procedural Background

This lawsuit challenges a valuation system used by car insurers to determine cash

value of vehicles on total loss claims. Darren Shields and Connie Bourque are two

Louisiana residents who had insurance policies through State Farm. Under the terms of

these policies, State Farm agreed to pay the owner the actual cash value (“ACV”) of the

insured vehicles upon the occurrence of a total loss. To determine the ACV, State Farm

used a product known as the Autosource Market-Driven Valuation (“Autosource”), which

was developed by a company known as Audatex and allegedly marketed exclusively to

insurance companies. Doc. 1, ¶¶ 7–13.

Mr. Shields filed a claim under his collision coverage, after his 2008 Isuzu i-370 LS

truck was involved in an accident that occurred on or about April 27, 2019. Id. at ¶¶ 7–8,

18. Ms. Bourque also filed a claim under her collision coverage, based on damage sustained

to her 2016 Toyota Rav4 XLE in an accident occurring on or about March 7, 2018. Id. at

¶¶ 9–10, 21. Both individuals challenge the adjusted value of their vehicles, as determined

by the Autosource valuation report, and allege that it resulted in their claims being

undervalued compared to values derived from publicly available sources like Kelly Blue

Book or NADA Guides. They filed suit in this court on October 16, 2019, invoking the

court’s jurisdiction under 28 U.S.C. § 1332 and alleging that State Farm’s use of

Autosource resulted in a breach of the insurance contract as well as violations of Louisiana

law. Id. at ¶¶ 27–48. They seek certification on behalf of State Farm policyholders who

have been similarly undercompensated based on the use of Autosource. Id. at ¶¶ 50–59.

On a prior motion for summary judgment, the court dismissed plaintiff Shields’s

claims on the grounds of judicial estoppel due to his failure to disclose this suit in his

bankruptcy proceedings. Doc. 67. The court also denied as premature motions for partial

summary judgment brought by State Farm, on plaintiff’s bad faith claims and whether

NADA values constituted ACV of a vehicle. Doc. 119. The motion for class certification

then came before the court for a two-day hearing beginning on November 2, 2021. Docs.

137, 138. Here plaintiff seeks certification under Federal Rule of Civil Procedure 23 of a

class defined as:

All persons insured by State Farm who have made a claim for first party

total loss, which State Farm evaluated using Autosource, or a

predecessor product, from January 1, 2017, to the present date.

Doc. 82, p. 1.

B. Evidence Adduced at Hearing

1. Testimony of Plaintiff

As described above, Ms. Bourque’s claim is premised on the Autosource valuation

of her vehicle following an accident in March 2018. The NADA base value for her vehicle

was $20,150.00 and the fully adjusted (“clean retail”) value was $20,050.00, after

adjustments for mileage and options. Doc. 154, att. 19, p. 16. Her Autosource base value

was $19,863.00, with an adjusted value of $19,928.00 (she received a positive condition

adjustment). Id. at 12. State Farm moved for summary judgment on the issue of whether

she had compromised her claim, and the court denied the motion due to genuine issues of

material fact. Doc. 67. At the hearing Ms. Bourque testified that she understands her

responsibility to the class, is willing to put the class’s interests above her own, and is

prepared to participate in whatever manner is required. Tr., Day 1, p. 58.

2. Autosource Functions

To determine ACV of a totaled vehicle, State Farm typically uses a third-party

software. Tr., Day 2, pp. 158, 240. From early 2016 until recently, State Farm used

Autosource as its exclusive software platform for these purposes in Louisiana. Id. at 158–

59. In the first year of using Autosource, and under its prior platform, State Farm’s ACV

determinations were based on the vehicle’s NADA values. Id. In 2017, however, State

Farm switched to Autosource’s “multi-comp” approach, which determines vehicle values

based on comparable vehicle sales and sale listings in the local market area. Id. at 160,

272–75.

Autosource’s process begins with physical inspection of the damaged vehicle. Tr.,

Day 2, p. 254. If the vehicle appears to be a total loss, the estimator assigns condition

ratings to a number of components such as vehicle interior, paint, and tires. Id. at 230–1;

Doc. 155, att. 8 (Autosource Total Loss Condition Book). The vehicle is then compared

against those in Autosource’s database, which is made up of vehicle listings in the local

market area from the last 120 days. Tr., Day 2, pp. 256–57. The software searches outward

in 25-mile increments from the location of the totaled vehicle until it has located at least

ten comparable vehicles (“comps”).1 Id.

Autosource then applies certain adjustments to the comps. Because many of the

database values represent dealer-advertised prices rather than actual sales, Autosource

applies a “typical negotiation adjustment” based on the fact that dealers routinely reduce

the price of vehicles in negotiations with would-be car purchasers. Id. at 259–60. This

adjustment is only applied where there is reason to believe that the advertised price will

exceed the vehicle’s true value. Accordingly, no negotiation adjustment is made for prices

advertised by “no-haggle” dealerships or when the data reflects sold rather than advertised

prices. Id.; Doc. 155, att. 33, ¶ 24. Autosource reevaluates its negotiation adjustment for

accuracy twice a year. Tr., Day 2, pp. 259–60. Adjustments are also made for configuration

and mileage, to make the comparable vehicles more similar to the totaled vehicle. Id. The

1 If ten comparable vehicles cannot be found, Autosource generates an “exception” report based on a smaller number

of vehicles or on dealer opinions about the value of the totaled car. Tr., Day 2, p. 174.

values of the comparable vehicles are then averaged and a final adjustment may be made

for condition. Id. at 260–63. The condition adjustment compares the totaled vehicle’s

condition to the typical condition of a vehicle of its age and mileage. Id. NADA “clean

retail,” by contrast, assumes a vehicle in “clean retail condition” with minimal interior

defects, high gloss finish and shine, no mechanical defects, and all equipment in complete

working order. Id. at 270; Doc. 155, att. 39, p. 7.

The output of this process, the Autosource Report, is delivered to State Farm. Tr.,

Day 2, p. 265. A State Farm representative reviews the report with the insured, who may

provide additional information or corrections necessitating adjustments to the report. Id.

About 70 percent of insureds accept the valuation provided by the Autosource report. Id.

at 178–79. In the other 30 percent of cases, the insured disagrees with the valuation and

State Farm may conduct additional valuation research or obtain an exception report. Id. at

174–75. According to a 2015 Autosource evaluation, its methodology results in valuations

that are on average higher than the actual sale price in Louisiana. Doc. 155, att. 22.

3. Damages Methodology

State Farm used Autosource to value total losses in Louisiana from January 1, 2017,

until October 15, 2021. Tr., Day 2, p. 222. State Farm has admitted that prospective class

members’ claim-related information, such as claim number, date of loss, vehicle owner,

cause of loss, valuation information, actual cash value of the vehicle, the tax paid,

deductibles, and the total amount paid for each claim is in its Enterprise Claim Adjustment

System (ECS) data base. Doc. 154, att. 35, pp. 16–17. State Farm’s corporate representative

confirmed this at the hearing. Tr., Day 2, p. 212. Even if it has not already been done, the

information necessary to identify class members is available in a searchable database or

obtainable by administrative means using information in computer records. The

Autosource Report is in each insured’s claim file. Id. at 169.

Plaintiff contends that damages can be calculated class-wide from the difference

between the ACV payouts under Autosource and “what a lawful system, like NADA,

would pay.” Doc. 82, att. 1, p. 14. This methodology was approved by the Fifth Circuit in

Slade v. Progressive Security Insurance Company, 856 F.3d 408 (5th Cir. 2017), a class

action based on a car insurance company’s use of a different software for valuing total loss

claims. An analysis by State Farm expert Holly Sharp of over 50,000 total loss claims in

Louisiana, however, shows that more than 50% of their customers received more based on

an Autosource valuation than they would have if the ACV of their totaled vehicle was

determined based on NADA clean retail. Tr., Day 2, pp. 305–09; Doc. 155, atts. 34 & 36.

Plaintiff’s accounting expert, Lisa Zakowicz, testified that the methodology was

also a good fit for Autosource claims and that she could compile the data and manipulate

it as required, including removal of the claims where the Autosource valuation exceeded

NADA. Tr., Day 1, pp. 94–117. At the hearing it was revealed that up to 18 months of

additional claims data exist that have been “anonymized” by Autosource in accordance

with its contract with State Farm. Tr., Day 2, pp. 291, 299–301. The insured’s information

is still available but will have to be manually pulled from each Autosource report. Tr., Day

1, pp. 131–32. Ms. Zakowicz’s methodology, however, assumes that the Autosource value

reflects the amount actually paid to the insurer. It does not take into account the estimated

30 percent of users who disputed the Autosource valuation and may have been paid a

different amount. The amount paid to those individuals is recorded in claim notes, also

requiring a file-by-file review. Tr., Day 2, pp. 185–86.

II.

CLASS CERTIFICATION STANDARD

“The class action is ‘an exception to the usual rule that litigation is conducted by

and on behalf of the individual named parties only.’” Comcast Corp. v. Behrend, 569 U.S.

27, 33 (2013) (quoting California v. Yamasaki, 442 U.S. 682, 700–01 (1979)). The party

seeking class certification bears the burden of establishing that it is appropriate under the

requirements of Federal Rule of Civil Procedure 23, by a preponderance of the evidence.

O’Sullivan v. Countrywide Home Loans, Inc., 319 F.3d 732, 737–38 (5th Cir. 2003). To

this end the district court must “conduct a rigorous analysis of the Rule 23 prerequisites

before certifying a class.” Id. (internal quotations omitted) At issue here are the four

requirements set forth under Rule 23(a) (numerosity, commonality, typicality, and

adequacy of representation) as well as Rule 23(b)(3)’s requirement that common questions

predominate over individual ones.

III.

LAW & APPLICATION

A. Plaintiff’s Claims

Class determinations “[f]requently . . . entail some overlap with the merits of the

plaintiff’s underlying claim.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 351 (2011).

Here plaintiff seeks certification on two claims: breach of insurance contract and penalties

under Louisiana Revised Statute § 22:1973. Both claims relate to the provisions of

Louisiana Revised Statute § 22:1892 outlining acceptable methods for calculating actual

cash value of a totaled vehicle:

When an insurance policy provides for the adjustment and settlement of first-

party motor vehicle total losses on the basis of actual cash value or

replacement with another of like kind and quality, and the insurer elects a

cash settlement based on the actual cost to purchase a comparable motor

vehicle, such costs shall be derived by using one of the following:

(a) A fair market value survey conducted using qualified retail

automobile dealers in the local market area as resources. If there are

no dealers in the local market area, the nearest reasonable market can

be used.

(b) The retail cost as determined from a generally recognized used motor

vehicle industry source; such as, an electronic database, if the

valuation documents generated by the database are provided to the

first-party claimant, or a guidebook that is available to the general

public. If the insured demonstrates, by presenting two independent

appraisals, based on measurable and discernable factors, including the

vehicle’s preloss condition, that the vehicle would have a higher cash

value in the local market area than the value reflected in the source’s

database or the guidebook, the local market value shall be used in

determining the actual cash value.

(c) A qualified expert appraiser selected and agreed upon by the insured

and insurer. The appraiser shall produce a written nonbinding

appraisal establishing the actual cash value of the vehicle’s preloss

condition.

(d) For the purposes of this Paragraph, local market area shall mean a

reasonable distance surrounding the area where a motor vehicle is

principally garaged, or the usual location of the motor vehicle covered

by the policy.

La. Rev. Stat. 22:1892(B)(5). Additionally, Louisiana Revised Statute 22:1973 imposes on

insurers a duty of good faith and fair dealing with a penalty “in an amount not to exceed

two times the damages sustained or five thousand dollars, whichever is greater.” La. Rev.

Stat. § 22:1973(A), (C). It outlines several acts that, “if knowingly committed or performed

by an insurer,” constitute a breach of this duty. Id. at § 22:1973(B). These include “[f]ailing

to pay the amount of any claim due . . . within sixty days after receipt of satisfactory proof

of loss from the claimant when such failure is arbitrary, capricious, or without probable

cause.” Id. at § 22:1973(B)(5).

Plaintiff alleges that total loss payments calculated by Autosource do not come from

“[a] fair market value survey conducted using qualified retail automobile dealers in the

local market area as resources” as required by § 22:1892(B)(5)(a). The initial search for

comparables is limited to a 25-mile radius, expanding concentrically until the requisite

number of comparable vehicles are found, but plaintiff contends that this does not satisfy

the statute. The statute requires that “qualified retail automobile dealers in the local market

area” be used as “resources” to determine a fair value for the totaled vehicles. Under the

plain language of the statute, according to plaintiff, the survey is supposed to be of

“qualified retail automobile dealers in the local market area.” Plaintiff asserts that this

reading makes sense because such dealers would have the most pertinent opinions on

values in the local market area. Plaintiff also alleges that Autosource’s preliminary first

step of identifying comparables is not what drives the ultimate values that are derived; the

various proprietary algorithms that drive adjustments for the selling price adjustment,

mileage, condition, and options are based on nonlocal data, completely unrelated to the

comparables found in the first survey.

Plaintiff also alleges that the Autosource system violates § 22:1892(B)(5)(b)

because it does not provide the “retail cost as determined from a generally recognized used

motor vehicle industry source; such as, an electronic database, if the valuation documents

generated by the database are provided to the first-party claimant, or a guidebook that is

available to the general public.” Autosource’s corporate representative testified that while

NADA is a guidebook, Autosource is “a product that provides valuations to our clients.”2

Doc. 82, att. 3, pp. 63–64. Plaintiff alleges that Autosource is not a “generally recognized

used motor vehicle industry source” either, since only insurers or their agents use and

otherwise have access to this program. See id. at 65. Consumers cannot use it because they

have no access to it as it would too expensive. Tr., Day 2, p. 241. Autosource valuations

are prepared for the insurance companies, not the consumers. Doc. 82, att. 3, p. 65.

Plaintiff also maintains that, even assuming that Autosource is a “generally

recognized used motor vehicle industry source,” “the valuation documents generated by

the database” are not “provided to the first party claimant” since the final report is only

given to the insured when requested. Doc. 82, att. 2, pp. 53–54. Even when the Autosource

Report is provided to State Farm insureds, plaintiff showed, the basis for the selling price

adjustments, and the other proprietary data and algorithms about mileage, options, and

condition adjustments, are not provided. Such data would only be provided to Autosource’s

“customer” (the insurance company). Tr., Day 2, p. 284.

Plaintiff also alleges that even if the base price determined by Autosource complies

with the statute, any negative conditioning adjustment violates the law. Louisiana Revised

Statute § 22:1892(B)(5)(b) requires an insurance company to pay its insured “[t]he retail

cost as determined from a generally recognized used motor vehicle industry source . . . .”

This section of the statute continues, “[i]f the insured demonstrates, by presenting two

independent appraisals, based on measurable and discernable factors, including the

2 Autosource marketing materials also contrast it with guidebooks: “Autosource is focused on the insurance industry”

while “[g]uidebooks are primarily used for vehicle loan financing by banks and dealership purchasing of trade-ins

during the sales process.” Doc. 154, att. 3, p. 63.

vehicle's preloss condition, that the vehicle would have a higher cash value in the local

market area than the value reflected in the source’s database or the guidebook, the local

market value shall be used in determining the actual cash value.” Plaintiff reads the statute

as establishing the floor, not the ceiling, when a generally recognized used motor vehicle

industry source is used to establish retail value. According to plaintiff, the statute grants

the insured—and the insured only—the ability to present additional evidence as to why his

or her particular vehicle had a higher value than what the generally recognized used motor

vehicle industry source (like NADA) determined.

Plaintiff asserts that State Farm’s violation of § 22:1892B(5) (if found) is also a

breach of State Farm’s insurance contract with each class member. State Farm’s policy

states that the coverage is provided “in accordance with Louisiana insurance law. If any

provisions of this policy are in conflict with Louisiana statutes, the policy is amended to

conform to the minimum requirements of the statutes.” Doc. 154, att. 18, p. 41.

In sum, plaintiff alleges that State Farm had a duty to comply with Louisiana law,

in this case Louisiana Revised Statute § 22:1892B(5), when it valued total loss vehicles for

its insureds in Louisiana. Plaintiff alleges that State Farm’s use of Autosource violates §

22:1892B(5) and thus its contract with its insureds because it is neither a generally

recognized used motor vehicle industry source nor a fair market value survey using local

automobile dealers as resources. Plaintiff alleges that this breach of the insurance contract

gives rise to a claim for penalties under § 22:1973 for all class members, regardless of the

amount State Farm paid for those insureds’ total losses.

B. Commonality and Predominance

State Farm offers no argument in opposition to plaintiff’s contention that the

numerosity requirement is satisfied. The court concludes that it is based on both the number

of total loss claims and the number that received less under Autosource than they would

have under NADA, infra. The court’s analysis therefore begins with Rule 23’s related

concepts of commonality and predominance.

Rule 23(a)(2) requires that there be “questions of law or fact common to the class.”

For class actions seeking money damages, Rule 23(b)(3) also requires that these questions

“predominate over any questions affecting only induvial members,” effectively

superseding the commonality requirement with a “far more demanding” standard. Unger

v. Amedisys Inc., 401 F.3d 316, 320 (5th Cir. 2005) (quoting Amchem Prods., Inc. v.

Windsor, 521 U.S. 591, 623–24 (1997)). The predominance element requires the court to

consider “how a trial on the merits would be conducted if a class were certified,” including

“identifying the substantive issues that will control the outcome, assessing which issues

will predominate, and then determining whether the issues are common to the class.”

Madison v. Chalmette Refining, LLC, 637 F.3d 551, 555 (5th Cir. 2011) (internal quotations

omitted). The goal of this process is to “prevent[] the class from degenerating into a series

of individual trials.” Id.

As the Fifth Circuit recently emphasized, a need to calculate damages on an

individual basis will not necessarily preclude class certification. Mitchell v. State Farm

Fire & Cas. Co., 954 F.3d 700, 710–11 (5th Cir. 2020). The issue turns on whether the

damages of each plaintiff can be determined by mathematical or formulaic calculation. Id.

Where the claims “focus almost entirely on facts and issues specific to individuals rather

than the class as a whole, the potential that the class action may degenerate in practice into

multiple lawsuits separately tried renders class treatment inappropriate.” Bell Atl. Corp. v.

AT&T Corp., 339 F.3d 294, 307 (5th Cir. 2003) (cleaned up).

Plaintiff argues that there is common evidence of class-wide injury in this matter

because (1) every member of the putative class suffered a concrete harm regardless of

whether they were underpaid, and (2) there is common evidence of class-wide injury

because Ms. Zakowicz can identify every putative class member who received an

Autosource valuation that was less than the NADA valuation for the total loss. State Farm

maintains that, under the Supreme Court’s recent decision in TransUnion LLC v. Ramirez,

__ U.S. ___, 141 S.Ct. 2190 (2021), any member who was not underpaid by Autosource

lacks standing and that individual issues also predominate as to the putative class members

who were underpaid.

In Ramirez, the Supreme Court considered a jury verdict for statutory penalties and

damages for a Rule 23(b) class of over eight thousand consumers bringing suit under the

Fair Credit Reporting Act . The class members had all received alerts on their credit reports

because they were a potential match to a name on a list of terrorists, drug traffickers, and

other serious criminals on a list maintained by the Office of Foreign Assets Control, and

they alleged that the agency failed to exercise reasonable care in maintaining this list.

However, less than twenty-five percent of the class could show a concrete harm (the

dissemination of misleading credit reports to third party creditors). Emphasizing that

Article III standing requires “a concrete injury even in the context of a statutory violation”

and that “Article III grants federal courts the power to redress harms that defendants cause

plaintiffs, not a freewheeling power to hold defendants accountable for legal infractions,”

the Court held that the members bringing suit only for statutory penalties lacked such

standing. Ramirez, 141 S.Ct. at 2205 (internal quotations omitted).

As plaintiff notes, Ramirez was decided after a trial on the merits. The Court

specified that it was not addressing “the distinct question of whether every class member

must demonstrate standing before a court certifies a class.” 141 S.Ct. at 2208 n. 4. This

court is also mindful that an inability to show damages does not always translate to a lack

of standing. See Stuart v. State Farm Fire & Cas. Co., 910 F.3d 371, 377 (8th Cir. 2018)

(“[W]hether some Plaintiffs are unable to prove damages because they eventually recouped

. . . payment is a merits question, and the district court has the power to amend the class

definition at any time before the judgment.”) At the same time, Ramirez remains clear in

its pronouncements on standing. In this matter the proposed class members who were not

underpaid under plaintiff’s damages model are readily ascertainable; the court can see little

point in including them in a class definition if they have no claim for recovery.

Louisiana law does not provide a statutory penalty for a violation of Louisiana

Revised Statute § 22:1892(B)(5), based on either the plain language of the penalty statutes

or any Louisiana jurisprudence located by this court. The question, then, is whether

plaintiffs in this matter may establish standing based on the insurer’s alleged violation of

the penalty statutes, which punish the insurer’s bad faith handling of a claim, without any

associated economic harm. As a matter of first impression, the court determines that they

cannot.3

When determining whether an intangible harm may provide standing, the court

should look to whether the harm has “a close relationship to a harm that has traditionally

been recognized as providing a basis for a lawsuit in English or American courts.” Spokeo,

Inc. v. Robins, 578 U.S. 330, 341 (2016). The legislature’s intent is “instructive and

important,” but its “role in identifying and elevating intangible harms does not mean that a

plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a

person a statutory right and purports to authorize that person to sue to vindicate that right.”

Id. “Concrete injuries embrace not only tangible harms — like a picked pocket or a broken

leg — but also intangible ones, like the suppression of free speech or religious exercise, or

the invasion of a common-law right (including a right conferred by contract) actionable

without wallet injury.” Amrhein v. eClinical Works, LLC, 954 F.3d 328, 330–31 (1st Cir.

2020) (cleaned up).

Plaintiff argues that the intangible harm resulting from an insured’s breach of its

fiduciary duty provides the concrete injury necessary to establish standing in this matter.

Generally, however, a tort claim based on breach of a fiduciary duty requires the plaintiff

to show a resulting harm. Amrhein, 954 F.3d at 334 (citing Restatement (Second) of Torts

§ 874 (1979)); see also Erickson v. AmeriCold Logistics LLC, 311 F.Supp.3d 1073, 1076–

77 (D. Minn. 2016) (union trustees lacked standing to bring breach of fiduciary duty claims

3 Though the Louisiana Supreme Court held in Sultana Corporation v. Jewelers Mutual Insurance Company, 860

So.2d 1112 (La. 2003), that proof of actual damages is not a prerequisite to recovery under the predecessor to Louisiana

Revised Statute § 22:1973, that case was a simple question of statutory interpretation rather than standing.

against employers over pension fund, when they could not show actual injury to plan or its

participants). Here there is no actual or threatened injury to the prospective plaintiffs who

received a greater ACV determination under Autosource than they would have under

NADA. Whatever the intent of the Louisiana legislature, the court finds that a bad faith

claim with no other harm to plaintiff (underpayment, delay, et cetera) alleged as a result

does not provide standing to sue in federal court.

The court may, however, “construe the complaint or redefine the class” if it finds

plaintiff’s proposed class definition unacceptable. See Beal v. Midlothian Indep. Sch. Dist.,

2002 WL 1033085, at *4 (N.D. Tex. May 21, 2002) (quoting 7A Charles Alan Wright &

Arthur R. Miller, FEDERAL PRACTICE AND PROCEDURE § 1759, at 111–12 (1986)).

It will do so in this matter, drawing on plaintiff’s proposal to redefine the class as:

All persons insured by State Farm in Louisiana who have made a claim

for first party total loss, which State Farm evaluated using Autosource,

or a predecessor product, from January 1, 2017, to October 15, 2021,

and whose Autosource Base Value was less than the NADA Fully

Adjusted Value (“Clean Retail”).

State Farm argues against such a redefinition, pointing to concerns of

ascertainability and the rule in some other circuits against “fail-safe” classes. See, e.g.,

Cordoba v. DIRECTV, LLC, 942 F.3d 1259, 1276-77 (11th Cir. 2019) (defining a class to

include only injured members “would run the risk of promoting so-called ‘fail-safe’

classes, whose membership can only be determined after the entire case has been litigated

and the court can determine who actually suffered an injury”). Defendants in other matters

have also urged such a rule in this circuit, arguing that these definitions are “hopelessly

circular” and that because membership was contingent on the ultimate issue of causation,

the claimants are not objectively identifiable. In re Rodriguez, 695 F.3d 360, 369–70 (5th

Cir. 2012) (collecting cases). The Fifth Circuit has rejected a bright-line rule, however. Id.

State Farm notes that most of the approved “fail-safe classes” have arisen in the injunctive

relief context under Rule 23(b)(2), where ascertainability is of less concern and the focus

is on “common behavior by the defendant toward the class.” Yates v. Collier, 868 F.3d 354,

367 (5th Cir. 2017). However, in Mullen v. Treasure Chest Casino, LLC, 186 F.3d 620 (5th

Cir. 1999), the circuit court upheld certification of a Rule 23(b) damages class of riverboat

casino employees whose respiratory illnesses were “caused by or exacerbated by” the

vessel’s defective ventilation system. The court also addressed defendant’s fail-safe

concerns, reiterating its holding from Forbush v. J.C. Penney Co., 994 F.2d 1101 (1993)

that these arguments were “meritless and, if accepted, would preclude certification of just

about any class of persons alleging injury from a particular action.” Id. at 624 n. 1.

In this matter, the proposed definition here presents an objectively identifiable

group of plaintiffs. It does not require a premature determination on the merits—

Autosource’s compliance with Louisiana law and State Farm’s compliance under the

contract claim remain open issues, as do State Farm’s potential defenses—but instead

disposes of the plaintiffs who would have no standing. Accordingly, the court modifies the

class definition over defendant’s objections.

As for the damages model and common evidence, the court agrees that NADA is

not required for a determination of ACV under Louisiana law. However, it is one lawful

method of determining ACV under Louisiana Revised Statute 22:1892(B)(5). The

difference between a lawful measure, such as NADA, and the Autosource-derived ACV

provides an appropriate measure for determining who might have suffered economic harm

as a result of State Farm’s allegedly improper use of Autosource and even a baseline for

calculating their damages. The individuals who received more based on an Autosource-

derived ACV than they would have under NADA would have no claim for damages arising

from an underpayment and could be excluded. The thirty percent of plaintiffs who

contested their Autosource valuation in some measure present a greater challenge to

determining damages. As Ms. Zakowicz testified, however, the amount accepted by these

individuals can still be determined from State Farm’s files. Whether any of these

individuals wound up accepting more than the NADA valuation of their vehicles can be

determined by simple mathematical calculation.

State Farm also asserts that its affirmative defense of compromise presents

individualized inquiries that defeat the predominance requirement. It notes that the court

denied summary judgment on the issue of compromise for Ms. Bourque’s claim, because

there was a fact issue on the parties’ mutual consent. It further notes Ms. Bourque’s

testimony at the certification hearing that she “didn’t know she had agreed to [the

Autosource ACV determination].” Tr., Day 1, p. 57. State Farm argues that these facts will

necessarily differ among putative class members, requiring a review of each claim file,

correspondence between the insured and State Farm, and perhaps the insured’s testimony.

It also argues that plaintiff’s counterargument, that these communications were not an offer

of compromise but an unconditional McDill tender4, require further individualized proof

4 The Louisiana Supreme Court holds that, “[w]hile an insurer need not tender payment for amounts that are reasonably

in dispute . . . there can be no good reason . . . for withholding an undisputed amount.” La. Bag Co., Inc. v. Audubon

Indem. Co., 999 So.2d 1104, 1114 (La. 2008) (cleaned up). “Where there is a substantial, reasonable and legitimate

of whether the valuation was disputed at the time of the offer. As the court stated in its

summary judgment ruling, this is a prerequisite for a McDill tender under Louisiana law.

See La. Bag Co., Inc. v. Audubon Indem. Co., 999 So.2d 1104, 1115–16 (La. 2008).

In the summary judgment ruling, the undersigned determined that State Farm’s

documents were insufficient to establish a party’s acceptance of the ACV determination

and release of claims against State Farm. Doc. 67. The court continued:

While either plaintiff might have gained a greater understanding of

State Farm’s intent through their phone calls, the deposition testimony shows

at most that both plaintiffs understood that they could contest the ACV

determination with State Farm but decided not to—not that they understood

that they would forfeit their right to do so by executing the [Special Limited

Power of Attorney]. Accordingly, there is insufficient evidence of the

parties’ mutual consent to compromise and summary judgment must be

denied on this issue.

Id. at 9.5

“Predominance requires a qualitative assessment; it is not bean counting.” Toney v.

Qual. Res., Inc., 323 F.R.D. 567, 586 (N.D. Ill. 2018) (quoting Butler v. Sears, Roebuck &

Co., 727 F.3d 796, 801 (7th Cir. 2013)). Affirmative defenses are relevant to the court’s

predominance inquiry under Rule 23(b)(3), and the predominance of individual issues

under such a defense may defeat certification. E.g., Gene and Gene LLC v. BioPay LLC,

541 F.3d 318, 327 (5th Cir. 2008). At the same time, affirmative defenses are often easy to

resolve and district courts have several tools for managing them. Brown v. Electrolux Home

Prods., Inc., 817 F.3d 1225, 1240–41 (11th Cir. 2016). Accordingly, when “one or more

dispute as to the extent or amount of the loss, the insurer can avoid the imposition of penalties only by unconditionally

tendering the undisputed portion of the claim.” Id. (citing McDill v. Utica Mut. Ins. Co., 475 So.2d 1085, 1091 (La.

1985)) (emphasis in original). This is known as a McDill tender.

5 The reference to “parties” is due to the fact that the motion was also brought against former plaintiff Shields.

of the central issues in the action are common to the class and can be said to predominate,

the action may be considered proper under Rule 23(b)(3) even though other important

matters will have to be tried separately, such as damages or

some affirmative defenses peculiar to some individual class members.” Tyson Foods, Inc.

v. Bouaphakeo, 577 U.S. 442, 453–54 (2016) (quoting 7AA C. Wright, A. Miller, & M.

Kane, Federal Practice and Procedure § 1778, pp. 123–124 (3d ed. 2005)).

At least in Ms. Bourque’s case, and likely in several others, the compromise defense

cannot be decided on summary judgment because it involves questions of credibility. Still,

these questions are narrow at present and based largely on State Farm’s speculation

regarding the merits of its defense across the pool of potential class members. State Farm

can test the viability of this defense as to each plaintiff through limited discovery and can

attempt decertification if it uncovers greater evidence of variation or summary judgment

against a sub-class if it finds greater documentary proof of compromise. The availability

of the defense, however, is not enough for the court to determine that it overrides the

common issues of liability on all claims6 and injury in the redefined class.

C. Typicality and Adequacy

Under Rule 23(a)(3), the named representative’s claims must be typical of those of

the class. This requirement is not demanding and “focuses on the similarity between the

named plaintiffs’ legal and remedial theories and the theories of those whom they purport

to represent.” Mullen, 186 F.3d at 625. “When the claims permeate from a similar course

6 State Farm asserts that the bad faith claim will also present an individualized inquiry. The court disagrees, observing

that the evidence presented so far shows a relatively uniform usage of the Autosource program and that bad faith will

depend on a showing that this usage was arbitrary and capricious.

of conduct or transaction and share the same legal theory, factual differences will not defeat

typicality.” Chauvin v. Chevron Oronite Co., LLC, 263 F.R.D. 364, 369 (E.D. La. 2009).

Relatedly, the named plaintiff must “fairly and adequately protect the interests of the class.”

Fed. R. Civ. P. 23(a)(4). This inquiry “serves to uncover conflicts of interest between the

named parties and the class they seek to represent.” Amchem Prods., 521 U.S. at 625. In

the Fifth Circuit, adequacy encompasses three separate but related inquiries: (1) “the zeal

and competence of the representative[s’] counsel;” (2) “the willingness and ability of the

representative[s] to take an active role in and control the litigation and to protect the

interests of absentees;” and (3) the risk of “conflicts of interest between the named

plaintiffs and the class they seek to represent.” Feder v. Elec. Data Sys. Corp., 429 F.3d

125, 130 (5th Cir. 2005) (quoting Berger v. Compaq Comput. Corp., 257 F.3d 475, 479–

80 (5th Cir. 2001)).

State Farm raises no challenge to the adequacy of Ms. Bourque’s counsel. The court

finds that they are competent to proceed in this matter by virtue of their performance to

date and their experience in similar matters. Instead, State Farm focuses on the existence

of an intra-class conflict because plaintiff’s proposed damages methodology is detrimental

to more than half of the putative class members she seeks to represent. The court’s revision

of the class definition, however, disposes of this concern. Ms. Bourque’s claims arising

from her alleged underpayment through Autosource appear typical of other putative

members under the revised definition, and she has shown herself willing to participate as

class representative. Accordingly, these factors do not present a bar to certification.

D. Superiority

Under Rule 23, the court is also required to find “that a class action is superior to

other available methods for fairly and efficiently adjudicating the controversy.” Fed. R.

Civ. P. 23(b)(3). This inquiry is fact-specific and depends on the circumstances of each

case. Ibe v. Jones, 836 F.3d 516, 529 (5th Cir. 2016). The court looks to the following

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

defense of separate actions; (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).

The differences between Autosource and NADA valuations are not enough to justify

the cost of litigation in many if not all of these cases, resulting in a negative value claim.

“The existence of a negative value claim is the ‘most compelling rationale for finding

superiority.’” Slade v. Progressive Sec. Ins. Co., 2014 WL 6484588, at *9 (W.D. La. Oct.

31, 2014) (quoting Castano v. Am. Tobacco Co., 84 F.3d 734, 748 (5th Cir. 1996)). Neither

party points to any other litigation covering these potential class members, and the court

cannot find an adequate interest in their individual control of the litigation given the

relatively low value of each claim. This forum represents a desirable one for the litigation

by reason of its easy accessibility within the state were most of the claimants will still be

located. Finally, for the reasons set forth in the predominance section, management of a

class in this matter may prove difficult when it comes to certain affirmative defenses.

However, these issues do not predominate over the common evidence and issues of law

regarding liability and damages. Accordingly, the superiority factor is satisfied.

IV.

CONCLUSION

For the reasons stated above, the Motion for Class Certification [doc. 82] is hereby

GRANTED. The parties are ORDERED to meet and confer within ten days of this ruling,

to agree on a method for exchanging identifying information of potential plaintiffs so that

notice can be distributed to the class as defined above. The parties are further ORDERED

to file a status report within 21 days of this ruling outlining those agreements and

identifying any areas of disagreement. Plaintiff is to propose a notice plan within 30 days

of this ruling for consideration by the court.

THUS DONE AND SIGNED in Chambers on this 3rd day of January, 2022.

UNITED STATES DISTRICT JUDGE

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