2009 Ct. Sup. 14515
No. X08-CV03-0196141SConnecticut Superior Court Judicial District of Stamford-Norwalk, Complex Litigation Docket at Stamford
August 26, 2009
Memorandum of Decision Re Class Certification Issues
ALFRED J. JENNINGS JR., Judge Trial Referee.
Procedural Background
This is a class action brought in by the four named plaintiffs on behalf of a class of Connecticut auto body shops against The Hartford Fire Insurance Company (the “Hartford.”). The approved designated plaintiff class is all “Connecticut licensed auto body repair shops, or licensed individuals that have performed physical auto body repairs paid for directly or indirectly, partially or in full, by Hartford as the result of automobile insurance policies issued by Hartford.” The plaintiffs, who seek money damages and injunctive relief, allege that the Hartford engaged in a pattern of unfair and deceptive acts and practices in violation of the Connecticut Unfair Trade Practices Act, Conn. Gen. Stat. § 42-110a et seq., (“CUTPA”) and that the Hartford was unjustly enriched as a result of the alleged acts and practices. In summary, the plaintiffs allege that the Hartford has wrongfully steered its insureds and other insurance claimants to auto body repair shops favored by the Hartford (Direct Repair Providers or “DRPs”) and part of the Hartford’s Customer Repair Service Program (CRSP) under which the DRP shops agree in return for the referrals of repair jobs by the Hartford to charge a lower hourly rate for body repair labor. It is also alleged that the Hartford has prevailed upon its own independent appraisers to establish an artificially low standard of hourly labor rates for auto body repair work generally in Connecticut to the damage and detriment of non-DRP repair shops such as the plaintiffs. The case, including an interlocutory appeal of the class designation, has been pending since August 2003. After several continuances of the trial date, jury selection is now scheduled to commence on September 17, 2009 in anticipation of evidence commencing in early October.
Now before the court is the issue of how to treat for class designation purposes those Connecticut body repair shops which fall within the class CT Page 14516 definition but which were during the entire class period (January 1, 2000 to date) or at least some part of the class period signed up as DRPs of the Hartford. It has been recognized from the outset that Hartford DRP plaintiff class members who choose not to opt out of this class action present special class definition issues to be addressed after the number and makeup of the class became known. When this court first granted the plaintiffs’ motion for class determination and approved the class definition, quoted above, Judge Adams discussed the issues presented by the possible inclusion of DRP shops in the class:
There may be some reason to create a subclass of plaintiffs to include the CRSP auto body shops [the Hartford DRP shops]. These businesses may have incurred ascertainable loss from doing business paid for by Hartford at allegedly improperly low labor rates. On the other hand, they may have benefitted by the additional business gained as the recipients of allegedly steered business. How this is calculated and whether this creates conflicts within the class can be the subject of further litigation, but it does seem that the CRSP shops present issues unique to them, and should be segregated in a separate subclass of plaintiffs. Artie’s Auto Body Inc., et als. v. Hartford Fire Insurance Company, [this case] Docket No. X08CV03-0196141, Superior Court, Complex Litigation Docket at Stamford, at 17-18 (August 26, 2006, Adams, J.)
The defendant appealed from the granting of the motion for class certification. The appeal went to the Supreme Court, which affirmed Artie’s Auto Body Inc., et als. v. Hartford Fire Insurance Company, 287 Conn. 208 (2008). Although the class definition was not challenged on appeal, the Supreme Court confirmed the trial court’s obligation to monitor discovery and other pretrial developments in the case to insure that class certification remains appropriate:
We note that, in the event that circumstances change as discovery proceeds and the trial court determines that class certification is improper, it may issue an order modifying its prior certification order or decertifying the class altogether. Our courts . . . have stated that [a trial court] has broad discretion in determining whether a suit should proceed as a class action . . . Nonetheless, despite the absence of a requirement under our class action rules that trial CT Page 14517 courts monitor developments that may bear [on certification] such a procedure is prudent and sensible when a trial court considers it warranted under the circumstances of a particular case. (Citation and internal quotation marks omitted.) Id.
236.
Discovery on the class certification issue is now complete and the period for potential class members to opt out of the plaintiff class has expired, and the parties have thoroughly briefed the issue of class treatment of the DRP shops such that it is now ripe for adjudication.
Facts
The following facts are undisputed. A court-approved class action notice along with a form for opting out of the class was effectively mailed to an agreed list of Connecticut auto body shops which resulted (after returns) in 1,575 effective mailings. Thirty-eight of those shops did opt out of this action, leaving a potential plaintiff class of 1,537 shops. Of the original 1,575 shops noticed, 110 shops had been under contract as a DRP shop of the Hartford at some time. Ten of those 110 shops were among the shops opting out, leaving potentially 100 DRP shops in the class of 1,537 shops.
The chronological breakdown of the terms of the 100 Hartford DRP shop contracts with reference to the class period commencing January 1, 2000 works out as follows:
DRP continuously from 1/1/00 to date 12
DRP started and ended before start of class period 7
DRP started after 1/1/00 and continued to date 27
DRP started on or after 1/1/00 and ended during class period 54
Total 100
Discussion
The Hartford argues that the entire class should be decertified because of conflicts of interest due to antagonistic interests of class members, referring to “antithetical position[s]” between those shops that were Hartford DRP shops at any time during the class period and those who were CT Page 14518 not, and also referring to its claim that the class includes more than 100 auto body shops that are no longer in business whose interests could be antagonistic to the interests of the class members (including all the class representatives) who are still operating businesses, particularly with regard to the need for prospective injunctive relief or possible settlement negotiations.[1] The defendant has not filed an actual motion to decertify the class, but has suggested that remedy in response to the court’s invitation to the parties to brief the issue of class treatment of the DRP shop class members.[2] Plaintiffs reassert their earlier position that no exclusion from the class or segregation into a subclass of the DRP shops is necessary, but have reported to the court their unsuccessful offer to resolve this issue by agreeing to exclude from the class the twelve shops that were and are Hartford DRP shops for the entire class period, and to continue to include the other 88 shops that were Hartford DRP shops for at least some portion of time in the original plaintiff class, but only “for the time periods during which they were not Hartford CRSP [DRP] shops.”
The court has reviewed the memoranda of law and all the authorities cited by both parties, and enters the following orders:
A. Class Members who are Current Hartford DRP Shops
The twelve shops which were DRP shops of the Hartford for the entire class period, as well as the twenty-seven shops who were not Hartford DRP shops at the start of the class period but became DRP shops sometime during the class period and remain at present as Hartford DRP shops are excluded from the plaintiff class. Their concurrent contractual status with the defendant as active participants in the CRSP program places them in present direct conflict with the rest of the class as to the two theories of liability claimed by the class. This would impact the requirement of Practice Book § 9-7(4) that “the representative parties will fairly and adequately protect the interests of the class;” Collins v. Anthem Health Plans, Inc., (“Collins II”) 275 Conn. 309, 326-27
(2005), and would impact the requirement of Practice Book § 9-7(3) that “the claims or defenses of the representative parties are typical of the claims or defenses of the class.” Danvers Motor Company, Inc. v. Ford Motor Company, 543 F.3d 141, 150 (3 Cir. 2008) First, they are the direct participants and beneficiaries of the allegedly illegal, immoral, unethical and unjust practice of steering business to DRP Shops. “It is axiomatic that a putative representative cannot adequately protect the class if his interests are antagonistic to or in conflict with the objectives of those he purports to represent.” 7A Charles Alan Wright
Arthur R. Miller, Federal practice and Procedure § 1768 at 326. (2d ed. 1986) as quoted in Pickett v. Iowa Beef Processors, 209 F.3d 1276, 1280
CT Page 14519 (11 Cir. 2000). Thus a class cannot be certified when it consists of members who benefit from the same acts alleged to be harmful to other members of the class. Pickett, supra. And their status as current DRP shops of the Hartford likewise spills over and could very likely play a role in the labor rate suppression claim for the earlier time periods when they were not Hartford DRP shops. As the report of plaintiffs’ expert witness Dr. Frederick Jennings demonstrates and confirms, the allegedly illegally suppressed labor rates paid by the Hartford over the class period for non-CRSP jobs was basically the same rate it paid to its DRP shops under the CRSP program.[3] Unlike other class members, then, the current Hartford DRP shop members are placed at a distinct disadvantage in claiming that the rates allegedly thrust upon them by the Hartford at some earlier time in the class period when they were not DRP shops of the Hartford were illegal, immoral unethical and unjust when, at a later stage of the class period they chose to contractually obligate themselves and continue to this date to obligate themselves to accept virtually those same labor rates as DRP shops of the Hartford. Their presence in the class creates significant intra-class conflict and antagonism. The current class representatives would compromise the class claims because the inclusion of current DRP shops in the class would directly undermine the class’ attempt to prove either theory of alleged CUTPA liability. The plaintiffs suggest the exclusion of the DRP shops from the plaintiff class only for the periods of time when they were DRP shops, but this ignores the reality that they are presently in a contractual relationship with the adversary party which makes it likely that they will “need to pursue different, and possibly conflicting legal theories to succeed” even for claims accruing during the earlier periods when they were not part of the Hartford CRSP program. See Danvers, supra, (“some members of the proposed class received benefits under the BOP, while others did not . . . The wide range of interests among members of the proposed class precludes a finding of typicality or adequacy in this case.”). A class with subgroups that are so incompatible as to be on opposite sides of the case is not feasible. Carroll v. American Federation of Musicians, 372 F.2d 155, 162 (2 Cir. 1967), vacated and remanded on other grounds, 391 U.S. 99 (“Since all members of the class are to be bound by the judgment, diverse and potentially conflicting interests within the class are incompatible with maintenance of a true class action.”). The 12 shops which were and still are Hartford DRP shops for the entire class period and the 27 shops that first became DRP shops of the Hartford during the class period and remain Hartford DRP shops at this time are excluded from the plaintiff class.
B. Class Members Whose Tenure as Hartford DRP Shops Pre-dated the Class Period
CT Page 14520 The seven shops which signed up as Hartford DRP shops in the 1997-1999 period but terminated their DRP relationship with the Hartford before the commencement of the class period on January 1, 2000 may remain as members of the plaintiff class without any change in their status. Any relationship between their pre-class period status and the claims which allegedly accrued during the class period is too tenuous and remote to warrant exclusion from the class or even the creation of a sub-class (which would not meet the numerosity requirement in any event).
C. Shops whose DRP status with the Hartford started on or after January 1, 2000 but Terminated Later in the Class Period
The 54 shops which are not presently Hartford DRP shops but did serve as DRP shops on or after January 1, 2000 for part of the class period present a difficult decision, over which the court has deliberated considerably. It can be said that these shops share to some extent the infirmities of the 39 shops which are current Hartford DRP shops, and therefore should be excluded from the class. On the other hand, they are not presently in conflict with or antagonistic to the claims of the class. Having tried the DRP status and rejected it, their presence in the class would not undermine the liability claims to the same extent as the inclusion of those who did the opposite. Having experienced both sides of the issue and chosen to operate outside the scope of the CRSP program, they arguably might even enhance rather than diminish the liability claims. Still, they differ from others in the class in that they might be subject to a claim that they have suffered no “ascertainable loss” for CUTPA purposes because the benefits they received by having business steered to them while they were Hartford DRP shops could offset their claimed losses on the steering claim.[4] To prevail on a CUTPA claim the plaintiffs must prove, as an element of the cause of action, that each class member has suffered an ascertainable loss due to a CUTPA violation. Collins II, 334. “Ascertainable loss” is a loss that is capable of being discovered, observed, or established. Hinchcliffe v. American Motors, Corp., 184 Conn. 607, 613 (1981). “The term `loss’ necessarily encompasses a broader meaning than the term `damage'” and has been held synonymous with deprivation, detriment and injury. Id. To establish an ascertainable loss, a plaintiff is “not required to prove actual damages of a specific dollar amount,” Id. “[A] loss is ascertainable if it is measurable even through the precise amount of the loss is not known.” Id. 614. One who has received benefits of the same or greater magnitude than the losses caused by an unfair or deceptive practice might have difficulty proving a measurable ascertainable loss. Plaintiffs argue that the effects of steering have already been taken CT Page 14521 into account in their expert’s calculation of damages. That is true for the labor rate suppression claim where Dr. Jennings, before calculating damages based on jobs performed during the class period, has reallocated the allegedly steered jobs from the Hartford DRP shops to a “steering adjusted” number of total hours for the independent shops (Dr. Jennings Final Report, Table 5). Since there is no indication that any member of the plaintiff class ever benefitted from the alleged suppression of labor rates, that methodology is probative of an ascertainable loss on the labor suppression claim. But it is not true as to the calculation of damages caused by the steering claim where Dr. Jennings has calculated the steered jobs, valued them at average compensation and assessed damages (lost profits) based on an assumed average net profit margin (Tables 1, 2, 4). The calculation of damages from steering, which is also the evidence of ascertainable loss from steering, does not account for the benefits which dual-status shops may have enjoyed while they were under a DRP contract with the Hartford (in some cases as long as ten years). Each CUTPA claim must be separately analyzed. Indeed, the jury may find liability on one claim, but not the other. The failure to account for benefits on the steering claim means that individualized proof (which may come from the Hartford’s records or the plaintiffs’ records) may have to be examined to determine whether or not these 54 shops can establish an ascertainable loss from the steering claim. But this is not such an antagonistic interest as to require exclusion from the class, which calls into consideration the plaintiffs’ alternate suggestion first put forth in their memorandum of July 15, 2008 that a subclass be created with the plaintiff Skrip’s Auto Body as the class representative.[5]
The court concludes that the 54 shops which were Hartford DRP shops at some time during the class period but are no longer DRP shops of the Hartford, should be a separate subclass for purposes of the CUTPA illegal steering claim provided that the subclass would independently meet the Practice Book Requirements for class certification. There is no need for a subclass on the labor rate claim of these shops for the period when they were not Hartford DRP shops because the effects of steering are already reflected in the damage calculations of plaintiffs’ expert witness, and there is no indication of any benefit flowing to any class member because of rate suppression.
Connecticut Courts often look to federal case law interpreting Rule 23
of the Federal Rules of Civil Procedure for guidance on issues involving class certification. Collins II, 322-23. It is well established under federal law that each proposed subclass, to be properly certified, must independently meet the requirements of Rule 23. Federal Practice
Procedure, § 1790; Agan v. Katzman Korr, P.A., 222 F.R.D. 692, 696
CT Page 14522 (S.D. Fla., 2004). The subclass proposed herein must therefore be examined to determine satisfaction with the numerosity, commonality, typicality, and adequacy requirements of Practice Book § 9-7 and the predominance and superiority requirements of Practice Book § 9-8. Since the main class has already been certified and that certification affirmed on appeal, the analysis of the subclass need only touch on those factors that represent a change in circumstances from the certification of the original class. The Supreme Court noted the need for this court to monitor the class certification issue and modify the prior certification order “in the event circumstances change.” Arties’ Auto Body, Inc., supra, 287 Conn. at 235-36. “In the absence of materially changed or clarified circumstances, or the occurrence of a condition on which the initial class ruling was expressly contingent, courts should not condone a series of rearguments of the class issues by either the opponent or the proponent of the class.” Newberg on Class Actions, § 7:47 at p. 159 (4th ed. 2008). Each requirement will be examined.
Numerosity
The Requirement of Practice Book § 9-7(1) is that: “the class is so numerous that joinder of all members is impracticable. The subclass would represent a material change in circumstances in terms of numbers. The original class at the time of certification was estimated to be 550 shops. In fact it turned out to be 1,537 shops. The proposed subclass would be about 54 shops. There is no “magic number” that provides a watershed, because numerosity is tied to the impractibility of joinder under the particular circumstances of the case. Arduni v. Automobile Insurance Co. Of Hartford, 23 Conn.App. 585, 590 (1990). The Second Circuit has suggested that a group of forty might presumptively be large enough to make joinder unwieldy and impractical. Robidoux v. Celani, 987 F.2d 931, 935 (2 Cir. 1993). I find that the numerosity requirement would be met for the proposed subclass of 54 auto body shops, particularly since jury selection is scheduled to commence in about a month in the Stamford courthouse here in the extreme southwestern part of the state and the subclass consists of small businesses sprinkled throughout all regions of the state. Under these circumstances individual joinder would be unwieldy and most impractical.
Commonality
The commonality test is met when there is at least one issue whose resolution will affect all or a significant number of putative class members, and the threshold of commonality is not high. Collins II, 324. The defendants conceded at the Supreme Court in 2007 that the plaintiff class (which included the 54 members of the putative subclass) satisfied CT Page 14523 the commonality requirement, and there has been or would be no material change in circumstances which would alter that conclusion as applied to the putative subclass.
Typicality
Typicality requires that the particular claims of the representative plaintiff[s] be typical of the claims of the putative class. Collins v. Anthem Health Plans, Inc., 266 Conn 12, 34 (2003) (“Collins I“). This prerequisite “is satisfied when each class member’s claim arises from the same course of events, and each class member makes similar arguments to prove the defendant’s liability.” Id. Provided the subclass representative plaintiff is Skrip’s Auto Body or some other member of the original plaintiff class which was at any time during the class period but is no longer a DRP shop of the Hartford, the concession of typicality of the original class applies equally to the putative subclass.
Adequacy of Representation
This requirement deals with both the competency of plaintiffs’ counsel to litigate this class action on behalf of the putative subclass, and the ability of the proposed subclass representative to fairly and adequately protect the interests of the proposed subclass without conflict of interest Collins II, 326.
There is no question that the firm of Hurwitz, Sagarin Slossburg
Knuf is competent to represent the putative subclass in advancing its steering claim in this action. Also, the court has ordered the subclass to remediate any conflict of interest or antagonism between the steering claim of these former Hartford DRP shops and the main class of shops which were never Hartford DRP shops. But for that change, there has been no other change in circumstances which would negate in any way the previous determinations of adequacy of representation which is therefore satisfied for the putative subclass.
Predominance of Common Issues
The predominance requirement of Practice Book § 9-8[6] was the only actually contested issue before the Supreme Court when it affirmed the certification of the plaintiff class in this case. Arties Auto Body, Inc., supra. The Supreme Court determined after a detailed analysis of the elements of the causes of action raised by the pleadings and the proposed common evidence (primarily the anticipated testimony of plaintiffs’ expert witness Dr. Jennings) that (1) generalized class-wide evidence may be used to prove that the Hartford engaged in unfair or CT Page 14524 deceptive acts or practices that caused each of the putative class members to suffer an ascertainable loss, Id. 225; and (2) that the common issues of law and fact predominate over issues that require individualized proof, Id. 235. The only change in circumstances that the creation of the subclass for the steering claim of the shops that were former Hartford DRP shops is that individualized proof may have to be considered on the issue of ascertainable loss if there is a claim that some or all of these shops benefitted more from steering than they were banned by steering and therefore have no ascertainable loss. There is no change that would impact the holding that generalized proof may be used on the liability issues of unfair or deceptive practices and that the generalized proof on those issues alone would satisfy the predominance requirement. Predominance exists when common questions will be the object of most of the efforts of the litigants and the court. Collins II, 332. Judge Adams found (affirmed by the Supreme Court) in certifying the main class in this ease that the common evidence relating to allegations that the Hartford committed unfair or deceptive practices was “hotly contested by Hartford and in the court’s estimation at least half the trial time, if not substantially more, will be spent on the evidence tending to prove or disprove these allegations.” (Memorandum of Decision, 8/30/06 p. 16.) I find likewise that the common evidence to be submitted on behalf of or against the subclass on the still hotly contested issue of deception or unfairness (as defined under CUTPA) of the Hartford’s practice of steering claimants to its DRP shops will occupy more than half of the trial time presenting the steering the claims of the subclass as well, even if some individualized proof must be offered to prove or disprove that some or all subclass members did or did not suffer ascertainable loss from that practice. The proof, if any, of benefits from steering would be statistical and in all likelihood uncontested.
For these reasons I find that the predominance requirement is satisfied for the subclass.
Superiority
Practice Book § 9-8 also includes a requirement that a class action be “superior to other available methods for the fair and efficient adjudication of the controversy.” The court in Collins I, 56-57, identified from the federal cases construing Rule 23(b)(3), FRCP, the four factors pertinent to the superiority analysis: (1) the interests of the members of the class in individually controlling the prosecution or defense of separate actions; (2) the extent and nature of any litigation concerning the controversy commenced by or against members of the class; (3) the desirability or undesirability of the litigation in a particular forum; and (4) the difficulties likely to be encountered in the CT Page 14525 management of a class action. Judge Adams found the superiority requirement satisfied with respect to the main class (including the 54 shops which would be in the subclass for purposes of the steering claim), noting no indication of any interest by any class member in controlling the prosecution of a separate action involving the subject matter of this case, and the lack of any knowledge or indication of any other existing cases raising similar issues by or against members of the class, and the advantages of the class action format for resolution of these claims including the elimination of duplication of effort and the lack of inconsistent rulings. This court is aware of no change in circumstances since that ruling was made which would be indicative of a different conclusion with respect to the adjudication of the steering claim of the subclass as part of the existing class action. The superiority requirement is therefore satisfied for the creation of the subclass.
The court therefore finds that all the requirements of Practice Book §§9-7 and 9-8 are satisfied and that the putative subclass should be confirmed.
Order
(1) All current class members who are presently under contract with the defendant as DRP shops of the Hartford are excluded from the class;
(2) A subclass is certified for purposes of the CUTPA claim and the unjust enrichment claim premised on alleged illegal steering of insureds and other automobile body damage claimants to the preferred DRP shops of the defendant. The subclass definition is: all members of the class who were at any time during the class period a DRP shop of the defendant, but are presently not a DRP shop of the defendant. The subclass representative is the plaintiff Skrip’s Auto Body provided it can be confirmed that it meets the subclass definition. Otherwise the plaintiff shall nominate another subclass representative which does meet the subclass definition. Class counsel Hurwitz, Sagarin, Slossberg and Knuff may also represent the subclass; and
(3) the plaintiffs shall prepare and submit to the court forthwith proposed class notices to the excluded class members and the subclass members advising them of the foregoing. The defendant shall indicate its objection(s), if any, to the proposed notices within five days after they are filed.
CT Page 14528