(Article from Insurance Law Alert, May 2015)
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A New Jersey appellate court affirmed a trial court’s denial of class certification prior to discovery in a putative class action against automobile insurers. Myska v. New Jersey Manuf. Ins. Co., 2015 WL 2130870 (N.J. Super. Ct. App. Div. May 8, 2015).
Plaintiffs alleged that automobile insurers systematically and improperly denied claims for diminution in value of automobiles following car accidents. The complaint alleged breach of contract and the implied covenant of good faith and fair dealing and statutory violations. Prior to discovery, the trial court concluded that class certification was improper and that the statutory claims were not actionable. On appeal, plaintiffs argued, among other things, that the denial of class certification was premature. A New Jersey appellate court disagreed and affirmed the trial court order.
Under New Jersey law, class certification is appropriate only where common issues predominate over individualized questions and where a class action is superior to other methods of adjudication. See N.J. Rule 4:32- 1(b)(3). Governing statutory law does not specify the timing for granting or denying class certification. Rather, it provides that "the court shall, at an early practicable time, determine by order whether to certify the action." N.J. Rule 4:32-2(a). Based on this statutory language, the court "flatly reject[ed] plaintiffs’ urging to impose a bright-line rule prohibiting examination of the propriety of class certification until discovery is undertaken" and held that class certification, regardless of timing, depends on whether the claims alleged satisfy the statutory prerequisites for class certification. Here, the appellate court concluded that they did not, citing to differences in factual circumstances giving rise to each claim, as well as variations in class members’ insurance policies. The appellate court also upheld the trial court’s consideration of documents outside of the complaint in denying class certification because the complaint referenced those materials.
The ruling supports efforts by class action defendants to avoid the expense of class action discovery where class certification is unwarranted. The decision is also significant because state courts are commonly considered a more favorable forum than federal courts for class action suits.