Where a named plaintiff’s insurance policy was issued by an insurance company that is part of a group of insurance companies that share the same parent company, can the named plaintiff bring a putative class action only against the company that dealt with and allegedly injured her, or can she sue the entire group of companies on a theory that they operate jointly?  The Second Circuit recently held that a named plaintiff has standing to sue only the company that allegedly injured her.  This outcome is something that I think many insurance companies and defense counsel had presumed was the correct result, but there had not been much appellate precedent directly addressing it. 

In Mahon v. Ticor Title Ins. Co., No. 10-3005-cv, 2012 U.S. App. LEXIS 12947 (2d Cir. Jan. 25, 2012), the plaintiff alleged that she and members of a putative class were improperly overcharged for title insurance on refinance transactions because they were charged the full rate for a new mortgage instead of the discounted refinance rate.  (This has been a fairly hot issue in title insurance class actions – see the Title Insurance page of this blog for more updates.)  She purchased her policy from Chicago Title Insurance Company, but, in addition to suing Chicago Title, she also sued Ticor Title Insurance Company and Ticor Title Insurance Company of Florida.  Her theory was that, under the “juridical link” doctrine adopted by the Ninth Circuit, she could sue the Ticor entities “because Chicago Title and the Ticor entities are wholly-owned subsidiaries of the same parent company, share resources in Connecticut, coordinated in drafting their premium rate schedules, and operate in the same manner with respect to overcharging Connecticut borrowers in refinance transactions . . . .”  Id. at *4. 

Judge Thompson of the District of Connecticut ruled that plaintiff had no standing to sue the Ticor entities because she was not injured by them, finding that the “juridical link” doctrine was inapplicable because it relates only to class certification and not to Article III standing.  On appeal, the plaintiff agreed with the district court that the “juridical link” doctrine did not impact standing, but argued that Article III standing could be established as long as only one defendant caused injury.  

The Second Circuit disagreed with the plaintiff and affirmed.  It explained that “[d]emonstrating that the defendant’s allegedly unlawful conduct caused injury to the plaintiff herself is thus generally an essential component of Article III standing,” and that “[plaintiff’s] proposed interpretation of Article III – that it permits suits against non-injurious defendants as long as one of the defendants in the suit injured the plaintiff – is unprecedented.”  Id. at *9.  The Second Circuit further explained that whether Rule 23 would allow class representation could not impact standing because a rule of civil procedure could not modify the constitutional requirement of Article III standing.  Id. at *12-13.  The Second Circuit disagreed with a Seventh Circuit opinion, Payton v. County of Kane, 308 F.3d 673 (7th Cir. 2002), which had concluded that class certification should be decided before standing, based on dictum of the Supreme Court in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999).  The Second Circuit noted that in some cases it may be more efficient for a federal court to resolve class certification before standing where it finds certification to be improper, but certification should not necessarily come before standing.  It found the juridical link doctrine to be separate from issues of standing.  Judge Hall, however, issued a concurring opinion disagreeing “with the majority’s implication that the juridical link doctrine and Article III standing are wholly independent,” noting that “there will be cases in which the presence of a juridical link will suggest that Article III is also satisfied.”  Id. at *19-20 (Hall, J., concurring in the judgment).  Judge Hall’s opinion suggested that the “juridical link” doctrine is properly applicable only in cases where the plaintiff asserts a public interest or public right (e.g., where suit is brought against government officials arising out of government action), not where private interests are at stake.  Judge Hall’s opinion does not appear to dilute the strength of this decision insofar as it impacts insurance cases. 

Insurers that find themselves with a putative class action filed not only against the company that issued coverage to the named plaintiff(s) but also against the parent company or other companies in the corporate family now have a powerful new weapon in seeking dismissal of the entities that had no contractual relationship with the named plaintiff(s).