Ferrell v. Allstate Insurance Co.

150 P.3d 1022

2007 NMCA 017

Joan FERRELL, Maria C. Cappuzzello, Elizabeth Martinez, and H. Jake Salazar, for themselves and all others similarly situated, Plaintiffs-Appellees, v. ALLSTATE INSURANCE COMPANY and Allstate Indemnity Company, Defendants-Appellants.

No. 26,058.

Court of Appeals of New Mexico.

November 29, 2006.

Certiorari Granted, No. 30,165, January 23, 2007.

COPYRIGHT MATERIAL OMITTED

Floyd D. Wilson, McCary, Wilson & Pryor, Robert Hanson, Peifer, Hanson & Mullins, David Freedman, Freedman, Boyd, Daniels, Hollander & Goldberg, P.A., John M. Eaves, Alan Konrad, Eaves & Mendenhall P.A., Albuquerque, NM, Timothy G. Blood, Lerach Coughlin Stoia Geller Rudman & Robbins, LLP, San Diego, CA, for Appellees.

Lisa Mann, Jennifer A. Noya, Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, NM, Jeffrey Lennard, Mark L. Hanover, Sonnenschein Nath & Rosenthal LLP, Chicago, IL, for Appellants.

Randal W. Roberts, Simone, Roberts & Weiss, P.A., Albuquerque, NM, for Amicus Curiae National Association of Insurance Commissioners.

Ann Maloney Conway, Dylan O'Reilly, Miller Stratvert P.A., Albuquerque, NM, for Amicus Curiae Property Casualty Insurers Association of America.

OPINION

PICKARD, Judge.

{1} In this case, we review the district court's decision to certify a multistate class action. We determine that the district court erred in concluding that New Mexico law should be applied to all class members. We also determine that the case cannot proceed with the district court applying the laws of the various jurisdictions because, under those circumstances, the action would fail to meet the requirements of Rule 1-023 NMRA as a matter of law. Finally, we address whether the defendant has waived its right to argue on remand or in any subsequent appeal that the class should not have been certified with regard to New Mexico class members. We reverse the portion of the certification order that certified the class with regard to proposed plaintiffs from other states, and we remand for the action to proceed on behalf of the class of New Mexico plaintiffs only.

BACKGROUND

{2} This case is similar to a "modal premium" case. Such cases generally involve the legitimacy of a life insurance company charging an additional fee for payment of the premium in installments. Plaintiffs' theory of the case is as follows. Allstate issues vehicle insurance policies showing an amount of money that is labeled "TOTAL PREMIUM." Allstate offers its insureds the option of paying on a monthly basis. When insureds choose to pay on a monthly basis, they pay a service fee of $3.50 per month. That fee is clearly disclosed on the bills received by insureds, but it is not included in the amount designated as the "TOTAL PREMIUM" on the face of the insurance policy. Plaintiffs contend that Allstate has breached its contracts with its insureds by "charging premiums, in the form of service fees, which exceed the "TOTAL PREMIUM' . . . specified in their policies."

{3} Plaintiffs rely heavily on two New Mexico statutes, which we discuss below. See NMSA 1978, § 59A-18-3 (1984) (defining "premium"); NMSA 1978, § 59A-16-24(B) (1984) (prohibiting certain charges that are not indicated in the insurance policy). Citing the general proposition that "[a] contract incorporates the relevant law, whether or not it is referred to in the agreement," see Allstate Ins. Co. v. Perea, 2000-NMCA-070, ¶ 19, 129 N.M. 364, 8 P.3d 166 (internal quotation marks and citation omitted), overruled on other grounds by Padilla v. State Farm Mut. Auto. Ins. Co., 2003-NMSC-011, 133 N.M. 661, 68 P.3d 901, Plaintiffs appear to argue that by virtue of acting in contravention of the two New Mexico statutes, Allstate has necessarily breached its contracts with its insureds.

{4} Plaintiffs initially asked the district court to certify a class of Allstate insureds from fifteen states. Finding that proposed class members from two of the fifteen states should not be included in the class, the district court certified the following class: persons "who have, within six years of the commencement of this action, paid installment fees to Allstate, and reside in these thirteen (13) states: Alaska, Arizona, California, Florida, Idaho, Kentucky, Montana, Nevada, New Mexico, North Dakota, Oregon, West Virginia and Wyoming." With regard to choice of law, the district court made the following two findings:

13. The law is sufficiently uniform across the fifteen (15) states in the proposed class action as to interpretations of insurance contracts, breach of contract law, definition of and specification of insurance premiums, ambiguities in policies construed in favor of insured and right to trial by jury.

. . . .

c. The case is manageable in the forum of New Mexico as there is no debilitating conflict of law among the thirteen (13) states on the issues of contract interpretation, right to jury trial, and the definition and specification of insurance policy premiums[.]

It appears that the district court intended to apply New Mexico law to the entire class.

{5} Allstate filed an application for interlocutory review of the certification decision under Rule 1-023(F), which we granted. On appeal, Allstate argues that the district court erred in certifying the class because there are significant differences between the laws of the class states, making it improper to apply New Mexico law to all class members. Allstate also raises an issue involving forum selection clauses that appear to be present in some of the policies, but due to our disposition on the choice-of-law question, we need not reach the issue of the forum selection clauses.

STANDARD OF REVIEW

{6} We generally review a certification decision for abuse of discretion. Berry v. Fed. Kemper Life Assurance Co., 2004-NMCA-116, ¶ 25, 136 N.M. 454, 99 P.3d 1166. However, we think it more appropriate to review the district court's choice-of-law decision de novo. See Nat'l Bank of Ariz. v. Moore, 2005-NMCA-122, ¶ 7, 138 N.M. 496, 122 P.3d 1265 (stating that choice of law is reviewed de novo); see also In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1016 (7th Cir.2002) (conducting "plenary" review of choice-of-law question in the context of class certification); Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186-87 (9th Cir.2001) (reviewing certification decision for abuse of discretion, but reviewing choice-of-law issues that bear on certification de novo), opinion amended on denial of rehearing by 273 F.3d 1266 (9th Cir.2001); Spence v. Glock, Ges.m.b.H., 227 F.3d 308, 310-11 (5th Cir.2000) (same); Vanderbilt Mortgage & Fin., Inc. v. Posey, 146 S.W.3d 302, 310, 313 (Tex.Ct.App.2004) (same); and see Stetser v. TAP Pharm. Prods., Inc., 165 N.C.App. 1, 598 S.E.2d 570, 579 (2004) (conducting de novo review of choice-of-law question in the context of class certification).

{7} We recognize that Berry set forth the general abuse of discretion standard and then conducted a review of the district court's choice-of-law decision, purportedly under that standard. 2004-NMCA-116, ¶¶ 25, 82-94, 136 N.M. 454, 99 P.3d 1166. However, an examination of Berry's choice-of-law analysis does not reveal deference to the district court's decision. See id. ¶¶ 82-94. Moreover, the general rule is that a district court always abuses its discretion when it makes a legal error. See, e.g., id. ¶ 25 ("The district court abuses its discretion when it misapprehends the law[.]"). The determination of whether the district court made a legal error is obviously itself a question of law that should be reviewed de novo. Accordingly, regardless of how we label the appropriate standard of review in this case, the district court's choice-of-law determination is ultimately a question of law that is subject to de novo review.

DISCUSSION

{8} On appeal, Allstate argues that the laws of the class states are not similar enough to New Mexico law to allow application of New Mexico law to all class members. Plaintiffs contend that this case presents a false conflict of laws such that forum law can be applied to all class members. Plaintiffs argue in the alternative that the case may still proceed as a multistate class action even if the laws of numerous jurisdictions must be applied. Plaintiffs also argue that by taking an interlocutory appeal of the district court's certification decision without arguing that certification was improper as to class members from New Mexico, Allstate has waived the right to argue against certification with regard to New Mexico class members. We conclude that New Mexico law cannot be applied to out-of-state class members and that the case cannot proceed as a multistate class action. We also hold, as we explain below, that Allstate retains only a limited right to argue against certification of a class made up of only New Mexico insureds.

1. General Statement of the "False Conflict" Doctrine

{9} Plaintiffs' primary argument is that this case presents a "false conflict." A false conflict can occur where "the laws of the involved states are identical, or different, but produce identical results." See Eugene F. Scoles et al., Conflict of Laws § 2.9, at 28 n. 16 (4th ed.2004) [hereinafter Scoles]. When presented with a false conflict situation, a court may ignore choice-of-law questions and apply forum law. We are not aware of any New Mexico case that has applied the false conflict rule. But cf. First Nat'l Bank in Albuquerque v. Benson, 89 N.M. 481, 484, 553 P.2d 1288, 1291 (Ct.App. 1976) (Hernandez, J., dissenting) (stating that a Supreme Court case did not decide the relevant question because the Supreme Court case actually presented a "false conflict"). However, it appears to be a logical and widely used rule, and we see no reason to disallow its use in New Mexico. See, e.g., Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455, 462 (3d Cir.2006) ("According to conflicts of laws principles, where the laws of the two jurisdictions would...