One strategy defendants often consider at the outset of a class action is filing a motion to strike the class allegations based on the pleadings. Such a motion challenges whether the case as pled could ever be certified as a class action, similar to a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted. The defense strategy here is to try to avoid the time and expense of discovery on class certification-related issues where the court might conclude that such discovery is not necessary. But there is some risk for the defendant because a denial of a motion to strike can sometimes make it more likely the judge will certify a class, and the filing of a motion to strike also can prompt a plaintiff to re-plead the case in a manner that increases the chances of certification. In federal court, a motion to strike class allegations is provided for by Fed. R. Civ. P. 23(d)(1)(D), which states that “the court may issue orders that . . . require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly . . . .” Many state class action rules modeled on the federal rules have similar provisions. (Sometimes defendants also rely on Rule 12(f), which authorizes a motion to strike from a pleading “any redundant, immaterial, impertinent, or scandalous matter,” but in my view that is not the proper authority for a motion to strike class allegations. It might make sense to rely on Rule 12(b)(6) as well as Rule 23(d)(1)(D) given that you are challenging whether the complaint states a claim upon which class relief could potentially be granted.)
The recent decision in Lawson v. Life of the South Insurance Company, Case No. 4:06-cv-42 (WLS), 2012 U.S. Dist. LEXIS 140831 (M.D. Ga. Sept. 28, 2012) will be particularly useful to insurance companies in support of motions to strike class allegations, especially in multi-state or nationwide class actions, and cases in which the putative class claims implicate different policy forms. Lawson involved a credit insurance policy purchased in connection with an automobile loan. Under the terms of the policy, if the loan was paid off early, unearned premium was to be refunded. The plaintiffs claimed that the defendant failed to make a refund in accordance with the policy. Id. at *3-4. The complaint pled a nationwide class. The insurer’s motion to strike class allegations focused on key differences in policy forms issued to putative class members, and differences in state law. The insurer argued that these differences would defeat the predominance and superiority requirements for class certification under Rule 23(b)(3).
The court concluded that it was appropriate to decide these issues on a motion to strike class allegations because “the issues for class certification are sufficiently represented in the pleadings . . . .” Id. at *14. The court agreed with the insurer that differences in the contract language and differences in state law would readily preclude class certification. Here are some key passages from the opinion:
To illustrate, some of Defendant’s insurance contracts provide for an insured’s right to a refund or an account credit of the unearned premium, but do not require the insured to notify Defendant. (See, e.g., Doc. 144-2 at 51-54). Others explicitly inform the insured that he must contact the insurer to inform it of early payoff (id. at 10, 37), while others instruct the insured’s creditor, and not the insured, to notify Defendant of the early termination of credit insurance due to early payoff or otherwise (id. at 98).
The required period within which a refund must be made also differs among the credit insurance contracts. Some contracts state that a refund must be made “promptly” (see, e.g., Doc. 144-3 at 98) or “promptly” within thirty days of the notice of early payoff (id. at 33), while others require payment of the refund with no designation of a required time period within which to do so (id. at 107). The contracts further vary as to the minimum refund amount: some of Defendant’s contracts state that refunds under $10 will not be made (see, e.g., Docs. 144-2 at 5, 144-3 at 112), and others set the minimum amounts at $1, $3, or $5 (see, e.g., Docs. 144-4 at 4, 6, 12).
As a result of these and other variations among the contract provisions, which the Court finds to be material, the resolution of the overarching common issue of whether and when Defendant has (or will have) a duty to refund an unearned premium “breaks down into an unmanageable variety of individual legal and factual issues.” Klay, 382 F.3d at 1264.
. . .
The Court’s review of applicable bodies of state law on credit insurance law reveal that substantial, material differences exist among the applicable state laws with regard to statutory requirements on notice provisions, the calculation of the refund amounts, and statutory minimum refunds, among other requirements. (See Doc. 144-5 at 48 to 51, 102 & accompanying notes; Doc. 144-7 at 24 to 77 (tables comparing relevant state statutory provisions on credit insurance policies)). Like the material variations among the provisions of Defendant’s various contracts, see supra p. 13-14 & n.9, these state laws differ, for example, as to whether the lender, creditor, or insurer is obligated to refund the unearned premium; whether the debtor is required to provide notice of early payoff; and the formula for calculating the unearned premium. 11 (See Doc. 144-7 at 24 to 77).
Id. at *24-25, 31.