Consumer class action defendants in New Jersey state courts may be able to avoid costly discovery following a New Jersey state appeals court’s recent affirmance of a pre-discovery denial of class action certification in Myska v. New Jersey Manufacturers Co.
The putative class alleged that the defendants violated New Jersey’s Consumer Fraud Act by improperly denying diminution in value damages as a covered component of the underinsured and uninsured motorist provisions in their respective automobile insurance policies. The lower court granted the defendants’ pre-discovery motion to dismiss because, inter alia, class certification was improper.
New Jersey’s appellate division affirmed, “reject[ing] plaintiffs’ urging to impose a bright-line rule prohibiting examination of the propriety of class certification until discovery is taken.” In New Jersey, court rules dictate that “the court shall, at an early practicable time, determine by order whether to certify the action.” Although, in making this determination, New Jersey courts must “liberally view class allegations and allow reasonable inferences to be gleaned from the complaint’s allegations and search for a possible basis for class relief so as to avoid premature dismissals,” the appellate division held that this does not preclude a court from performing the requisite analysis prior to discovery.
Pre-discovery denial of class certification was appropriate in this case because “the facts underpinning each plaintiff’s claims were dependent upon the individual insurance policy provisions, the distinct vehicle damaged and the specific calculation of damages alleged, which require separate litigation of every action.” And even where the policies contained similar provisions, “the facts and circumstances surrounding the claim and an insured’s compliance with the policy terms to submit claims remain[ed] unique.” As such, the appellate division held that the class lacked typicality, thus precluding class certification.
The appellate division’s ruling is potentially significant because it establishes that class certification may be denied (or granted) before the discovery phase of litigation, meaning New Jersey class action plaintiffs no longer have sole control over the timing of class certification. Also, as noted, New Jersey class action defendants may be able to avoid costly discovery in certain cases.
Federal courts have previously denied class-certification prior to discovery, but it remains to be seen whether other state courts will follow the New Jersey state appeals court and permit denial of class certification in pre-discovery motion practice.
The plaintiffs in Myska may appeal the appellate division’s ruling to New Jersey’s Supreme Court.