In the recent case of Benavides v Chicago Title Insurance Co, --- F.3d ----, 2011 WL 1107009, No. 10-10136 (5th Cir. March 23, 2011), the Fifth Circuit affirmed the Northern District of Texas’s denial of class certification which was based on a finding that there lacked predominance of common questions over individualized ones. In Benavides, the plaintiff filed a class action alleging that the defendant title insurer failed to provide a discount, mandated by Texas insurance code, applicable to title insurance premiums, “when the new loan is issued within seven years of the initial mortgage and the initial mortgage was also covered by the title insurance policy.”
The plaintiff sought certification of a Fed. R. Civ. P. 23(b)(3) class proposed to include those who refinanced their mortgage and “were charged a premium for a new lender title insurance policy issued by [the defendant] that did not include the reissue discount.” The proposed common questions related to whether the members of the class were entitled to, but deprived of, the discount required by the insurance code. In denying certification, the district court noted that there is “no definitive way for the title insurer to determine, based on the documents available to it, whether or not a prior mortgage was covered by title insurance such that the new title insurance policy would qualify for the reissue discount.” Accordingly, (1) “certification of the class would require an extensive file-by-file review to sort out the factual details as to each plaintiff” and (2) “there are no truly class-wide questions that would benefit from class determination.”
Benavides filed a subsequent motion for reconsideration arguing that Mims v. Stewart Title Guaranty Co., 590 F.3d 298 (5th Cir. 2009), which affirmed certification on almost identical facts, controlled and warranted certification. In denying reconsideration, the district court distinguished the Mims case on the ground that, although factually similar, “the opinion did not call into question the district court’s decision that there were no class-wide questions that would benefit from certification.” And, indeed, a review of the Mims case indicates that the ground for appeal was that the class definition, similar to the one in Benavides, violated the defendant’s due process because it included members that were not necessarily entitled to the title insurance discount. The Fifth Circuit in Mims rejected that argument holding that “[c]lass certification is not precluded simply because a class may include persons who have not been injured by the defendant's conduct.” In its reconsideration order, the district court also held that even if it accepted the proposed class definition, which was similar to the one in Mims, it would still deny certification because “there was still no common question capable of class-wide determination.” The district court nevertheless certified the issue for review pursuant to Rule 23(f).
In affirming the district court’s rulings on class certification, the Fifth Circuit noted that in Mims it ruled solely on the defendant’s challenge to the class definition: “[a]ll that Mims held . . . was that the class definition was appropriate; not that there were any common class-wide questions, that those questions would predominate at trial, or that mere membership in the class was sufficient to establish liability en masse.” Accordingly, “the issue Benavides raises was not before the Mims court on appeal” and in the present case, the “district court did not abuse its discretion when it determined that there were no common questions capable of class-wide determination.”
The significance of Benavides is twofold. First, the case illustrates the sometimes unwieldy relationship between the class definition and the criteria for class certification. In light of Mims’ approval of a class definition that the Benavides court refused to certify for lack of common questions, it seems that a class definition is simply the object of less scrutiny (and less fertile grounds for appeal) than the other criteria for class certification such as commonality. Second, the case demonstrates the Fifth Circuit’s strict limitation of the precedential scope of its rulings, at least in the context of a Rule 23(f) appeal. While at first blush, it might appear that approval of the breadth of a class definition would inherently encompass a determination as to the existence of the other prerequisites for certification, the Fifth Circuit in Benavides carefully treated the two issues as being separate.