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New Texas Supreme Court Decision Highlights Several Defense Strategies for Defeating Class Certification
Tuesday, June 11, 2024

A recent Texas Supreme Court decision in a class action caught my eye because it addressed several significant class certification issues, including one that I’ve seen regularly and another that the court analyzed in a new and different way. First, the court held that a named plaintiff does not have standing to seek injunctive relief where the possibility of imminently sustaining a similar future injury is speculative. Second, standing can pose a predominance problem—the court held that “the predominance requirement cannot be met when, from the outset, it is clear that substantial variation exists among the class regarding standing.” Third, a named plaintiff with an “atypically strong” claim may not satisfy the typicality requirement.

In USAA Casualty Insurance Co. v. Letot, No. 22-0238, – S.W.3d –, 2024 WL 2490521 (Tex. May 24, 2024), the plaintiff owned a vintage Mercedes sedan that was rearended by another driver. She made a third-party claim with the other driver’s insurer. The insurer concluded the vehicle was a total loss, promptly issued a check to the plaintiff for the vehicle’s pre-loss value, and notified the Texas Department of Transportation (“DOT”) that the vehicle was salvage (meaning it could not be driven on public roads or sold without obtaining a salvage title). The plaintiff disagreed with the total loss determination and with the insurer’s notification to the DOT. She later brought a putative class action alleging that the insurer should not notify the DOT before a vehicle owner accepts the proposed payment. Skipping over some other procedural history not pertinent to this decision, the trial court ultimately certified a class seeking both injunctive relief and damages, and the court of appeals affirmed. The Texas Supreme Court reversed.

First, the Texas Supreme Court held that the named plaintiff did not have standing to seek injunctive relief, but she had standing to seek damages. Texas law on standing appears to largely mirror federal law. The court explained that a past injury can be sufficient for standing only if it is “quite likely that [the plaintiff] will go through the same experience again.” Here, the plaintiff could encounter the same problem only if she experienced another accident in which the other driver was responsible and was insured by the same insurer. The court explained that this was the same risk that anyone else in the general public would face and was thus insufficient to confer standing. On top of that, the same issue would arise again only if the insurer determined there was a total loss, made the same report to the DOT, and the plaintiff disagreed. All of this was too speculative to confer standing to seek injunctive relief. But the plaintiff adequately alleged a damages claim based on the alleged impact of the report to the DOT.

Second, in addressing class certification, the Texas Supreme Court concluded that the predominance requirement was not satisfied because “standing itself poses a threat to predominance” by necessitating “highly individualized inquiries.” Some class members would want the insurer to expedite the payment of their claim and would not object to notifying the DOT. While the Texas Supreme Court did not decide whether every class member must have standing (an open question in federal courts at the U.S. Supreme Court level), it concluded that where standing would be a highly individualized question, a class could not be certified. This holding is potentially helpful to defendants in other contexts, such as data breach cases where standing is often highly individualized.

Third, the named plaintiff’s claim failed the typicality requirement because it was “atypically strong” – she had good (but unusual) reasons why she did not want her vintage car declared a total loss and had persuaded the insurer to try to withdraw its notice to the DOT. This is a good example of why selecting a “strong” class representative can sometimes backfire for plaintiffs’ counsel.

Overall, this case presents several potentially useful strategies for defense counsel: (1) defending against an attempt to certify an injunctive relief class on the ground that the potential for the named plaintiff to suffer a future injury is speculative; (2) focusing on the individualized nature of standing determinations for class members in challenging the predominance requirement; and (3) recognizing that an “atypically strong” named plaintiff may be an inappropriate class representative.

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