In Taranto v. Louisiana Citizens Prop. Ins. Corp.(pdf), the Louisiana Supreme Court ruled, in a 5-2 decision, that the filing of a proposed class action lawsuit against an insurance company extends the time to bring suit for all members of the proposed class under suit limitation provisions in homeowners’ policies. (The time to sue was originally one year under most policies but had been extended, with respect to Katrina and Rita claims, by the Louisiana Legislature.)
The central issue in the case was how you interpret the term “liberative prescription” in Article 596 of the Louisiana Code of Civil Procedure. Under Article 596, “liberative prescription” is “suspended” when a proposed class action is filed. “Prescription” is essentially the Louisiana term for what the rest of the country calls a statute of limitations. When “prescription” is “suspended” it means that the time to sue stops running while the proposed class action is pending, but, when the time starts running again, you count the time that ran before the proposed class action was filed. So if a proposed class action was filed two days before the deadline, when the suspension stops running (as I’ll discuss further below), individual members of the proposed class would have only two days to sue. But if the proposed class action was filed about a year before the deadline (which some Katrina cases were), the homeowners would have another year or so to sue when the suspension stops.
The debate within the court centers on whether “liberative prescription” refers only to a statute or also refers to a contractual limitations period. In my view, the plurality opinion of Justice Johnson and the concurring opinion of Justice Weimer (joined by Justice Clark) stretch a bit to find that a contractual provision is really equivalent to a statute. Even though parties to an insurance contract were allowed under Louisiana law to select any time period from 1 year up to 10 years, the court says that is really no different from a statutory limitations period because the legislature has placed bounds on both ends. But there are many different ways in which statutes and insurance department regulations place limitations on various different types of insurance contract provisions. Would the court hold all of those provisions are in effect statutory and not really contractual? I doubt it. The dissent of Justice Victory seems to have the better of that argument. The majority may have been concerned about whether a different result would place Louisiana out of the mainstream on class action tolling, see American Pipe & Constr. Co. v. Utah. But there is little federal law on the issue in Taranto of whether class action tolling applies to contractual provisions as opposed to statutory ones.
Taranto leaves two questions without a clear answer:
- Article 596(3) requires that the suspension of the time to sue does not stop until notice is given to the proposed class members that a proposed class action has been dismissed or class treatment has been denied. This is unique — federal law does not require this and I am not aware of any other state rule with a similar requirement. Does the publication of a court decision constitute adequate notice, or is something more required? If more is required, what is required — publication in a newspaper or on the web? Personal mailings? And does a court have to approve the notice? And who pays for it? There does not appear to be a crystal clear answer to this in the code itself, or in Taranto or other case law. There likely will be further litigation on this issue. It seems quite unfair to require defendants who have successfully defeated an unsuccessful (or, in some cases, frivolous) proposed class action to pay for any type of costly notice. And in some cases the proposed class is so badly defined that it will be difficult to identify to whom notice must be given.
- Does this notice requirement apply where the class action was dismissed in federal court, where the Federal Rules of Civil Procedure apply and do not require that notice be given of a dismissal of a proposed class action?
Stay tuned — the resolution of these issue will be critical in determining to what extent Taranto has opened the floodgates for more Katrina and Rita insurance lawsuits.