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Stuart v. State Farm Fire and Casualty Co.

United States District Court, W.D. Arkansas, Texarkana Division

June 10, 2019

JAMES STUART and CAREDA L. HOOD, individually and on behalf of all others similarly situated PLAINTIFFS
v.
STATE FARM FIRE AND CASUALTY COMPANY DEFENDANT

          ORDER

          Susan O. Hickey, Chief United States District Judge.

         Before the Court is Plaintiffs' Opposed Motion for Order Approving Class Notice Plan and Class Notice. (ECF No. 168). Defendant has filed a response. (ECF No. 175). Plaintiffs have filed a reply. (ECF No. 179). The Court finds the matter ripe for consideration.

         I. BACKGROUND

         Plaintiffs assert that Defendant unlawfully depreciated labor in calculating their payment obligations under the parties' homeowner's insurance contracts. Plaintiffs allege that Arkansas law in place at the time prohibited an insurance company from depreciating the cost of labor. Plaintiffs claim that, by depreciating this cost in initial “actual cash value” payments made to insureds, Defendant breached its contract with Plaintiffs.

         On August 24, 2016, the Court granted Plaintiffs' motion for class certification. (ECF No. 142). Defendant subsequently appealed that ruling pursuant to Federal Rule of Civil Procedure 23(f). On December 6, 2018, the Eighth Circuit issued its opinion, affirming the Court's certification ruling, as modified.

         On April 1, 2019, Plaintiffs filed the instant motion, asking the Court to approve its proposed Class Notice Plan (ECF No. 168-1) and require that the parties and proposed third-party administrator, JND Legal Administration (“JND”), carry out and comply with the terms of the notice plan. Plaintiffs' proposed Class Notice Plan provides as follows. Notice will be given to the class via individually mailed notices, a website banner notification, a newspaper publication, and a class-action website. To accomplish this, within twenty-one days of the Court's approval of the Class Notice Plan, Defendant will compile in an electronic format substantively similar to Plaintiffs' Exhibit D (ECF No. 168-1, p. 15), the following information for all persons who meet the Class Definition from the period of May 1, 2010, through December 6, 2013: first and last name, last known mailing address, last known email address, policy and claim numbers, and date of covered loss. This information will be transmitted to Plaintiffs' counsel, who will provide it to the third-party administrator.

         The third-party administrator will then mail to each class member's last known address a Postcard Notice, in a form substantially similar to Plaintiffs' Exhibit A (ECF No. 168-1, p. 6). If any mailing is returned with a forwarding address, the third-party administrator will mail the Postcard Notice to that address. The third-party administrator will also email the contents of the Postcard Notice to any known email address of a class member whose Postcard Notice mailing is returned.

         The third-party administrator will place a publication notice in the Arkansas Democrat-Gazette, in a form substantially similar to Plaintiffs' Exhibit E (ECF No. 168-1, p. 16), running once a week for four consecutive weeks. The third-party administrator will also create and maintain a dedicated case website that will host, inter alia, the pleadings filed in this case, the Court's class certification order and the Eighth Circuit's opinion affirming the same, the individual notice forms discussed above, and this case's operative Final Scheduling Order.

         Defendant will also place a banner on its website, in a form substantially similar to Plaintiffs' Exhibit C (ECF No. 168-1, p. 14). The banner will be located at the top of the screen after an existing customer logs into the payment portal[1] and will be accessible both via computer and on Defendant's mobile app. The banner states that a class action lawsuit may affect the rights of insureds who received an actual cash value payment for a covered loss between May 1, 2010, and December 6, 2013. The banner will also link to the class website.[2]

         Class members who do not validly and timely opt out of the class will be bound by the terms of any final judgment entered in this case. Class members may opt out of the class only by mailing to the third-party administrator a letter containing this case's name and case number; the class member's name, address, telephone number, and signature; and a sentence expressly stating that the individual wishes to be excluded from the class. (ECF No. 168-1, p. 4). To be valid and timely, an opt-out request must be mailed to a specified address and must be postmarked on or before an exclusion deadline date. The opt-out period will run for sixty days, beginning on the date the third-party administrator begins mailing and publication.

         On April 15, 2019, Defendant responded to the instant motion. Defendant makes no objection to most of Plaintiffs' proposed Class Notice Plan. However, Defendant requests that the Court reject five aspects of the proposed plan and modify the plan accordingly before approving the notice plan.

         II. DISCUSSION

         For any class certified under Federal Rule of Civil Procedure 23(b)(3), courts must direct to class members “the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.” Fed.R.Civ.P. 23(c)(2)(B). Because “an action maintained as a class suit under Rule 23 has res judicata effect on all members of the class, ” constitutional due process requires that the class be provided the best notice practicable, “reasonably calculated, under all of the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections . . . and . . . must afford a reasonable time for those interested to make their appearance.” Grunin v. Int'l House of Pancakes, 513 F.2d 114, 120 (8th Cir. 1975). To that end, the class notice must “clearly and concisely state in plain, easily understood language” the following: (1) the nature of the action; (2) the definition of the class certified; (3) the class claims; (4) that a class member may enter an appearance through an attorney if so desired; (5) that the court will exclude from the class those members who request exclusion; (6) the time and manner for requesting exclusion; and (7) the binding effect of a class judgment on members. Fed.R.Civ.P. 23(c)(2)(B)(i)-(vii). Providing class notice is not an exact science, however, and the specific mechanics of the notice process “are left to the discretion of the court[, ] subject only to the broad ‘reasonableness' standards imposed by due process.” Grunin, 513 F.2d at 121.

         Defendant objects to portions of Plaintiffs' proposed Class Notice Plan. Specifically, Defendant takes issue with the following five aspects of the proposed plan: (1) the placement of a banner on Defendant's website; (2) that class members may only opt out of the class via letter; (3) the length of the opt-out period; (4) the requirement that Defendant must compile the class members' information, including each policy number, in a digital spreadsheet format resembling Plaintiffs' Exhibit D; and (5) that the proposed Class Notice Plan does not address who bears the cost of the notice process.[3] The Court will discuss each challenged item in turn.

         A. Website Banner

         The major fighting point of Plaintiffs' proposed Class Notice Plan is the requirement that Defendant place a banner on its website, located at the top of the screen after an existing customer logs into the payment portal, which will be accessible both via computer and on Defendant's mobile app. The website banner would state that a class action lawsuit may affect the rights of State Farm insureds who received an actual cash value payment for a covered loss to a dwelling or structure in Arkansas between May 1, 2010, and December 6, 2013. The banner would also link to the class website maintained by the third-party administrator.

         Defendant objects on several grounds, arguing that the website banner: (1) is unnecessary because individual notice may be accomplished for most, if not all class members; (2) is unfairly prejudicial and could have significant negative effects on Defendant's business; (3) would be seen by an overly inclusive group of customers and could confuse Defendant's nationwide customer base; and (4) is inconsistent with notice plans this Court has approved in prior labor depreciation class action cases.

         Plaintiffs argue that the website banner is not unnecessary because it would serve as a supplemental form of notice. Plaintiffs also argue that Defendant has provided no evidence that a website banner would negatively impact Defendant's business and that Defendant has already generated ample media coverage and publicity of this case by appealing the Court's class certification order. Plaintiffs argue further that Defendant has provided no evidence that a website banner would confuse people as to whether or not they are class members. Plaintiffs concede that this Court has not utilized a website banner in previous labor depreciation class action notice plans, but also note that Plaintiffs' counsel recently utilized website banners in two unopposed class notice plans approved in unrelated class actions in the United States District Court for the Eastern District of Texas. Plaintiffs also argue that notice by electronic means is specifically contemplated by Rule 23 and that courts in other jurisdictions have found the Internet to be a particularly effective means of providing notice. Thus, Plaintiffs analogize their proposed website banner to newspaper publication and conclude that the Court should approve its use as a supplemental form of notice to ensure that as many class members receive notice as possible.

         Individual notice is required for all members who can be identified through reasonable effort. Fed.R.Civ.P. 23(c)(2)(B); Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176 (1974). However, publication notice is often used as a supplement to individualized notice. See William B. Rubenstein, 3 Newberg on Class Actions § 8:29 (5th ed. 2018). Although publication notice has traditionally been accomplished through newspaper ads, the Internet is increasingly becoming an acceptable avenue for accomplishing publication notice. Id. at § 8:30. Publication notice via the Internet is “a useful supplement to individual notice, might be provided at a relatively low cost, and will become increasingly useful as the percentage of the population that regularly relies on the Internet for information increases.” Stoffels ex rel. SBC Tel. Concession Plan v. SBC Commc'ns, Inc., 254 F.R.D. 294, 299 (W.D. Tex. 2008) (citing David F. Herr, Manual for Complex Litigation § 21.311 (4th ed.)). “Accordingly, many courts include the Internet as a component of class certification and class . . . notice programs.” Id.

         District courts within the Eighth Circuit have approved the use of targeted banner ads on high-traffic, third-party websites in nationwide class action cases. See, e.g., Swinton v. SquareTrade, Inc., No. 418-cv-00144SMRSBJ, 2019 WL 617791, at *4 (S.D. Iowa Feb. 14, 2019) (authorizing banner ads on the Google Display Network and Facebook); Klug v. Watts Regulator Co., No. 815-cv-00061JFBTDT, 2016 WL 7156480, at *3 (D. Neb. Dec. 7, 2016) (authorizing banner ads on the Conversant Ad Network, Yahoo Ad Network, and Facebook); In re Zurn Pex Plumbing Prod. Liab. Litig., No. 08-MDL-1958 ADM/AJB, 2013 WL 716088, at *8 (D. Minn. Feb. 27, 2013) (authorizing banner ads on major online networks such as AOL, Facebook, and 24/7 Real Media). However, it seems to be unsettled in this circuit whether a class notice plan can call for a website banner to be placed on the defendant's own ...


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