In seeking to certify multistate and nationwide class actions against insurance companies, plaintiffs’ attorneys often argue that the law of breach of contract is essentially the same nationwide, and therefore class certification is proper.  This argument has some appeal to some judges, at least at first blush.  As I think back to my contracts class in the first year of law school (with E. Allan Farnsworth), I don’t recall a lot of discussion about differences in state law.  At the 30,000 foot level, when you are learning the fundamentals, the basics of the law of contract formation and breach are fairly uniform.  But what courts don’t always recognize in class actions is that, when it comes to important nuances, such as what constitutes an ambiguity or what rules the court follows if it finds an ambiguity, there is substantial variation in state law.  It’s also not uncommon that even under what are nominally the very same rules on ambiguity, two judges in two different states applying their own state precedents will reach the opposite result. 

In Krueger v. Northwestern Mutual Life Insurance Company, 2011 U.S. Dist. LEXIS 79440 (N.D. Fla. July 21, 2011), the court held that differences in state law on breach of contract precluded certification (along with other grounds).  The plaintiff alleged that Northwestern Mutual entered into annuity contracts that promised to pay dividends from its surplus, and then later changed its practice and paid interest on a short-term bond instead, allegedly in breach of the contracts.  Id. at *1-2.  In a single-state class action that was certified in Wisconsin, the case went to trial and the court found a breach of contract and breach of fiduciary duty.  Id. at *4.  The plaintiff in the Florida case sought to certify a class of purchasers of these annuities who resided in Florida either at the time of purchase or currently.  Id.  The parties agreed that Wisconsin’s choice of law rules governed, but under those rules, the law of the state where the contract was entered into generally would apply, and that would vary because the class included people who purchased the annuities in various states and then moved to Florida (given Florida’s popularity as a retirement destination, not an uncommon occurrence).  Id. at *10-11.

The court denied certification on typicality, predominance and manageability grounds.  It found that the plaintiff had failed to meet her burden of showing uniformity or near-uniformity of state law.  The court explained that states have different standards for ambiguity, and different standards for admissibility of extrinsic evidence.  Id. at *11-13.   

Another key deciding factor in this decision was that the defendant intended to assert defenses of waiver, notice and estoppel, where available under state law, and these defenses would require a factual inquiry into the facts surrounding the purchase of the annuities.  Id. at *15-16.  As I’ve noted before on this blog, defenses are often key to defeating class certification in insurance class actions.  The Supreme Court made clear in Wal-Mart v. Dukes (see my prior blog post) that the class action device cannot be used in a manner that strips a defendant of its defenses that require introduction of individual facts.  That part of Wal-Mart was unanimous, and was something Justice Sotomayor was stressing during oral argument.  In opposing class certification, these defenses should be demonstrated with evidence of concrete examples from the putative class.  Sometimes it can be hard work to find the evidence to demonstrate those examples, but they are powerful.