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Certification and Settlement in Katrina/Rita Class Action Claims

The settlement in Orrill v. Louisiana Citizens Fair Plan demonstrates some of the hurdles faced by class action litigants and the benefits of having experienced class counsel. In that case, Katrina and Rita victims sought statutory penalties for their insurers’ failure to pay claims within the 30 days required by statute. The long history of the case dates to 2005, immediately after the storms first hit. The Berniard Law Firm vigorously pursued their claims past procedural roadblocks along the way to a final settlement this past January.

While class actions provide an obviously efficient way of adjudicating large controversies, the drawbacks associated with this device are equally apparent. Class actions allow courts to resolve all claims related to an occurrence in a single proceeding. This means, however, that even claims of those who do not participate must be decided. Otherwise, class members could “free ride” off the efforts of others, waiting to see whether a legal strategy or theory will succeed or fail without expending any efforts or resources. Courts have long resolved this dilemma by requiring class action plaintiffs to provide adequate notice to those who might have claims and by requiring that participants meet a series of requirements.

First, the class must consist of a sufficiently large number of claimants. Courts have not defined this “numerosity” requirement precisely; rather, a plaintiff satisfies this requirement by establishing that traditional methods of joining parties would be unreasonably difficult or expensive. Second, the claims of the class members must involve common issues. To meet this “commonality” requirement, it is not enough simply to have claims resulting from the same injury. Instead those claims must be capable of resolution in the same way. As the United States Supreme Court has stated, what is important is not the raising of common questions, but “capacity of a classwide proceeding to generate common answers.”
Third, the “named plaintiff,” the party actively pursuing the case on behalf of the other members in the class, must establish that her injuries are of the same kind, that is, that they are “typical” of those experienced by the class. This requirement ensures that the party litigating the case has the same incentives and motivations as those for whose benefit the claims are being pursued. Fourth, she must establish her ability to “fairly and adequately protect the interests of the class” in pursuing the claims. Finally, the plaintiff must define the class “objectively” and by “ascertainable criteria.” This requirement aims to inform prospective class members whether they come within the class definition, so they may decide whether to participate.

These five prerequisites apply before any class action may be instituted. However, in most class actions, the plaintiff must also establish what courts refer to as “predominance” and “superiority.” These final two requirements are often critical in determining whether a court will certify a class for trial or settlement. “Predominance” means that the issues that the class members share in common must, on balance, outweigh the issues that require individual treatment.

In the Orill case, state law required the insurance company to pay claims within thirty days after receiving “satisfactory proof of loss.” The insurers argued that determining whether each storm victim provided “satisfactory proof of loss” and the timing of that proof would defeat the purpose of the class action by requiring the court to make individualized determinations as to each class member, the very problem the class action mechanism seeks to avoid. In this sense, the “superiority” requirement is closely related to the predominance requirement: when individual issues predominate over common issues, the court will likely find that the class action mechanism is not superior to other methods of adjudication.

In denying the motion to de-certify, however, the court noted that the predominance requirement should not so seriously constrain use of the class action mechanism. The court focused primarily on two points. First, it noted that class actions usually consist of two stages; one disposing of common issues and another adjudicating the individualized issues. Second, the court emphasized the discretion accorded trial court judges in determining whether or not the predominance requirement has been satisfied.

As a result of its ruling, the insurance companies resumed settlement talks with the class counsel, who negotiated a $20 million settlement of the claims at issue. Attorney Jeffrey Berniard, lead counsel for the plaintiff class, played a crucial role in both persuading the court to deny the insurer’s de-certification motion and finally settling the case. As a result, this case has finally come to a long-awaited resolution.