Tuesday, October 09, 2007, 11:37 AM

Fourth Circuit: Potential Variation In State Laws Thwarts Nationwide Class Certification

Yesterday the Fourth Circuit affirmed the denial of nationwide class certification in an insurance coverage case. The case is Ward v. Dixie National Life Insurance Co., and it arose from South Carolina (S.C.).

The district court allowed certification of a class of S.C. residents but not a nationwide class, relying on S.C.'s "door-closing" statute. Rather than deciding whether the door-closing statute forecloses non-resident class membership in suits heard in a S.C. federal court sitting in diversity and not just in state court (which is now an open issue), the Fourth Circuit went down a different track, holding that plaintiff failed to show that common issues would predominate over individual issues in a nationwide class action.

Some plaintiffs don't appreciate the burden they bear in moving for certification of a multistate class. They must demonstrate to the trial court that common issues will predominate over individual issues, and this includes legal issues, which produce variations in factual issues. In a multistate class, where multiple states' laws may apply, variations in state law naturally lead to individualized issues; and these individualized issues tend to predominate over common questions in many cases, particulary when many states are involved, as is the case with a proposed nationwide class.

As the Fourth Circuit underscored yesterday, the burden is on the plaintiff: (1) to identify all the state laws that may apply to the claims of the proposed class members (often this will be the laws of the states in which the class members reside or sustained their injuries); and (2) to compare any variations in those states' laws (charts are often used) to demonstrate that their respective laws don't vary materially:

"In a class action potentially governed by the laws of multiple states, identifying the applicable body or bodies of state law is critical because variations in state law may swamp any common issues and defeat predominance. [The named plaintiff] has the burden of showing that common questions of law predominate, and [she] cannot meet this burden when the various laws have not been identified and compared.... Ward failed to identify and compare applicable state laws. When a plaintiff seeking certification fails to provide this analysis, it is not possible for the district court to determine whether any variations in state law pose insuperable obstacles to certification of a multistate class." (Internal quotation marks omitted)

This is a substantial burden. As Judge Posner has held in this context, even the law of negligence varies materially across the nation. Matter of Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir. 1995) ("The law of negligence, including subsidiary concepts such as duty of care, foreseeability, and proximate cause, may as the plaintiffs have argued forcefully to us differ among the states only in nuance, though we think not . . . . But nuance can be important, and its significance is suggested by a comparison of differing state pattern instructions on negligence and differing judicial formulations of the meaning of negligence and the subordinate concepts.").

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