A not uncommon tactic in class actions is for plaintiffs to propose one class definition to obtain certification (one minimizing individual issues) and then to morph the definition after certification to try to make the case easier for plaintiffs to prevails at trial. Another evolution is to broaden the class to increase its size, and thus maximize possible damages. The Alabama Supreme Court recently rejected a class action in which the trial court had accepted a new class definition after the certification hearing. See Baldwin Mut. Ins. Co. v. McCain, No. 1131058 (Ala., 2/20/15).
On September 29, 2010, McCain filed a class complaint against her insurance company. The genesis of the claims was that Baldwin Mutual allegedly had wrongfully been reducing the amount paid on claims made on actual-cash-value polices inasmuch as its practice was to deduct some amount for depreciation not only of the damaged materials and the labor costs of initially installing those damaged materials (based on their condition prior to the covered damage and their expected life span), but also of the labor costs associated with the removal of the damaged materials. It is improper and impossible to depreciate those labor costs, McCain argued, because they had not previously been incurred at some defined time in the past; rather, they are being incurred at the time of the current repair.
Plaintiff originally sought certification of a class of all Baldwin Mutual policyholders with insured properties in Alabama who suffered a loss in the past six years for which Baldwin Mutual had reduced the actual cash value of the same by reduction for the loss of value of un-depreciable loss elements. But after the certification hearing, plaintiff filed a brief in further support of class certification in which she proposed a new class definition: the new definition would also include insurance customers with replacement-cost policies in addition to those with actual-cash-value policies.
After the hearing, and after the supplemental briefing, over objections from Baldwin Mutual, the lower court certified the class and adopted McCain’s later, broader class definition. Baldwin Mutual had also argued that it was improper for McCain to seek to expand the proposed class after the
Defendant appealed, and the supreme court reversed. The class definition proposed by McCain in her brief submitted after the class-certification hearing was materially different from the class definition offered by McCain in her original complaint – the class definition proposed following the class certification hearing, which was accepted by the trial court, also included those Baldwin Mutual customers who held replacement-cost policies. The trial court exceeded its discretion in certifying the class in accordance with a definition proposed by McCain without giving Baldwin Mutual a full and fair opportunity to oppose the certification of the proposed class at a hearing conducted for that purpose pursuant to the Alabama rules.
The class-certification order must therefore be reversed, said the state Supreme Court.