State Farm Fire & Cas. Co. v. (In re Re)

872 F.3d 567

IN RE: STATE FARM FIRE AND CASUALTY COMPANY Petitioner/Defendant–Appellant

Amanda LaBrier Respondent/Plaintiff–Appellee

Chamber of Commerce of the United States; Liberty Mutual Fire Insurance Company; Safeco Insurance Company of America; Lawyers for Civil Justice; Allstate Insurance Company; American Family Mutual Insurance Company; American Insurance Association; Property Casualty Insurers Association of America; Amici on Behalf of Petitioner/Appellant

United Policy Holders Amicus on Behalf of Respondent/Appellee

Nos. 16-3185, 16-3562.

United States Court of Appeals, Eighth Circuit.

Submitted: January 11, 2017

Filed: September 25, 2017

Rehearing Denied October 31, 2017

Heidi Dalenberg, Joseph Cancila, Jr., Riley & Safer, Chicago, IL, Daniel Wilke, Wilke & Wilke, Saint Louis, MO, for Petitioner.

Christopher E. Roberts, David T. Butsch, Butsch & Simeri, Clayton, MO, Daniel E. Gustafson, Gustafson & Gluek, Minneapolis, MN, Joe David Jacobson, Jacobson & Press, Saint Louis, MO, Thomas Joseph Snodgrass, Larson & King, Saint Paul, MN, for Respondent.

Kathryn L. Comerford Todd, Sheldon Gilbert, U.S. Chamber of Commerce, Washington, DC, Robert D. Keeling, Carter G. Phillips, Sidley & Austin, Washington, DC, for Chamber of Commerce of the United States.

John Robert Keena, Hellmuth & Johnson, Edina, MN, for United Policy Holders.

Chris A. Thompson, David T. Moran, Sean Daniel Jordan, Jackson & Walker, Austin, TX, for Liberty Mutual Fire Insurance Company, Safeco Insurance Company of America.

Robert T. Adams, Shook & Hardy, Kansas City, MO, Mark Alan Behrens, Patrick Leo Oot, Jr., Shook & Hardy, Washington, DC, Susan Burnett, Bowman & Brooke, Austin, TX, Wendy F. Lumish, Bowman & Brooke, Coral Gables, FL, Mary T. Novacheck, Bowman & Brooke, Minneapolis, MN, Robert L. Wise, Bowman & Brooke, Richmond, VA, for Lawyers for Civil Justice.

Mark L. Hanover, Leah R. Bruno, Dentons US LLP, Chicago, IL, Elizabeth Ferrick, Dentons US, LLP, Saint Louis, MO, for Allstate Insurance Company.

Before WOLLMAN, LOKEN, and MURPHY, Circuit Judges.

LOKEN, Circuit Judge.

A hailstorm struck Amanda LaBrier's home in St. Louis, Missouri, damaging the home's exterior roof, siding, and gutters. LaBrier filed a property damage claim with State Farm Fire and Casualty Company under the Coverage A—Dwelling section of her State Farm Homeowners Policy. The policy provides "Replacement Cost" property loss coverage, that is, "the cost to repair or replace ... the damaged part of [covered] property." However, the policy's Loss Settlement provisions state that, "until actual repair or replacement is completed, we will pay only the actual cash value at the time of the loss of the damaged part of the property ... not to exceed the cost to repair or replace the damaged part." The policy does not define actual cash value. State Farm provides insureds a "Building Estimate Summary Guide" that explains, "Net Actual Cash Value Payment" means "[t]he repair or replacement cost of the damaged part of the property less depreciation and deductible," and defines "depreciation" as "[t]he decrease in the value of property over a period of time due to wear, tear, condition, and obsolescence."

State Farm's adjuster inspected LaBrier's home, determined the dwelling had suffered covered property damage, and estimated replacement cost by inputting each damaged part into a computer program called Xactimate. The Xactimate estimate of total cost to repair LaBrier's home was $8,088.07. Consistent with State Farm's practice in Missouri at that time, Xactimate also estimated depreciation at $2,009.79 by multiplying each damaged item's replacement cost by a depreciation factor that varied with the item's age. State Farm subtracted this estimated depreciation and LaBrier's deductible ($1,421) from the estimated replacement cost and paid LaBrier $4,657.28 for the actual cash value of the damaged property. In a statement attached to the payment, State Farm explained, "[b]ased on our estimate, the additional amount available to you for replacement cost benefits (recoverable depreciation) is $2,009.79."

Rather than seek an additional replacement cost benefit under the policy, or challenge State Farm's estimated actual cash value payment by an appraisal proceeding or by an action in court—remedies the policy expressly authorizes—LaBrier paid a family friend $5,975 to repair her home and brought this putative class action in Missouri state court, alleging that State Farm's practice of deducting "labor depreciation" from estimated replacement cost in determining actual cash value breached the insurance contract. State Farm removed the case to federal court and moved to dismiss. The district court denied the motion, concluding that "actual cash value" and "depreciation" are ambiguous terms that must be construed in favor of insureds under Missouri law and therefore State Farm breached the insurance contract when it depreciated labor in estimating actual cash value. LaBrier v. State Farm Fire & Cas. Co., 147 F.Supp.3d 839, 846–47, 849–51 (W.D. Mo. 2015) ( LaBrier I ).

Based upon its decision denying State Farm's motion to dismiss, the district court ordered full discovery before a class was certified and appointed a special master to supervise discovery disputes. After much wrangling over access to State Farm's claims-adjusting database and other issues, the special master in Special Master Order No. 4 ordered State Farm to answer interrogatories asking it to identify for all 144,900 putative class members (i) "labor depreciation that was actually withheld," (ii) the date labor depreciation was withheld, (iii) any labor depreciation State Farm subsequently paid as replacement cost benefits, and (iv) any facts that support State Farm's affirmative defenses.

The district court overruled State Farm's objections to Order No. 4, concluding that State Farm failed to establish that the Order caused an undue burden in light of the discovery's relevance and State Farm's refusal to provide another method to discover the information. LaBrier v. State Farm Fire & Cas. Co., 314 F.R.D. 637, 641–43 (W.D. Mo. 2016) ( LaBrier II ). State Farm petitioned for a writ of mandamus, asking this Court to vacate what it alleges are overly-burdensome discovery orders. On the day State Farm filed its mandamus petition, the district court certified a class consisting of:

All State Farm Fire and Casualty Company ... property insurance policyholders who submitted a claim for structural damage to a property in Missouri, and whose actual cash value ... payment was reduced by the withholding of labor depreciation, during the time period from March 20, 2005 to the date of trial, inclusive.

The court excluded only insureds who were paid their policy limits and those whose claims were the subject of appraisal or litigation. LaBrier v. State Farm Fire & Cas. Co., 315 F.R.D. 503, 510–11 (W.D. Mo. 2016) ( LaBrier III ). We granted State Farm leave to appeal the class certification, see Fed. R. Civ. P. 23(f), consolidated the appeal with State Farm's petition for a writ of mandamus, and now reverse.

I.

No class action may be certified unless the party seeking certification "affirmatively demonstrate[s] his compliance with Rule 23." Comcast Corp. v. Behrend, 569 U.S. 27, 133 S.Ct. 1426, 1432, 185 L.Ed.2d 515 (2013) (quotation omitted). "Here, the district court certified the class [ ] under Rule 23(b)(3), which requires finding ‘that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.’ " Powers v. Credit Mgmt. Servs., Inc., 776 F.3d 567, 569 (8th Cir. 2015).

"An individual question is one where members of a proposed class will need to present evidence that varies from member to member, while a common question is one where the same evidence will suffice for each member to make a prima facie showing or the issue is susceptible to generalized, class-wide proof." Tyson Foods, Inc. v. Bouaphakeo, –––U.S. ––––, 136 S.Ct. 1036, 1045, 194 L.Ed.2d 124 (2016) (quotation omitted). "What matters to class certification ... is not the raising of common ‘questions'—even in droves—but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation." Wal–Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011) (quotation omitted). This "preliminary inquiry ... may require the court to resolve disputes going to the factual setting of the case, and such disputes may overlap the merits of the case." Powers, 776 F.3d at 569 (quotation omitted); see Comcast, 133 S.Ct. at 1432. To prove a breach of contract, LaBrier must show: (1) the existence of a contract; (2) the rights and obligations of the parties; (3) State Farm's breach; and (4) the damages she suffered. See Kieffer v. Icaza, 376 S.W.3d 653, 657 (Mo. 2012). The preliminary predominance inquiry requires "rigorous analysis" of whether "the same evidence will suffice for each member to make a prima facie showing" that the insurance contract was breached, causing injury. Avritt v. Reliastar Life Ins. Co., 615 F.3d 1023, 1029 (8th Cir. 2010) (quotation omitted); see Comcast, 133 S.Ct. at 1433 ; Ebert v. Gen. Mills, Inc., 823 F.3d 472, 479–80 (8th Cir. 2016).

On appeal, State Farm challenges the district court's determination that common issues predominate. In certifying the class, the district court noted (i) "the overarching, undisputed, and common fact of State Farm's practice of withholding payment from all its insureds for the depreciated labor component," and (ii) the court's prior resolution of "a central legal question ... that the terms ‘actual cash value’ and ‘depreciation’ as used in State Farm's policy are ambiguous and must be construed in favor of the insureds." LaBrier III, 315 F.R.D. at 513. Therefore, the court concluded,...