Benavides v. Chicago Title Insurance

Case: 10-10136 Document: 00511420945 Page: 1 Date Filed: 03/23/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
March 23, 2011
No. 10-10136 Lyle W. Cayce
Summary Calendar Clerk
EMMA BENAVIDES, individually and on behalf of all others similarly
situated,
Plaintiff–Appellant
v.
CHICAGO TITLE INSURANCE CO.,
Defendant–Appellee
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:07-CV-1441-D
Before WIENER, PRADO, and OWEN, Circuit Judges.
PER CURIAM:*
Emma Benavides appeals the district court’s denial of her motion for class
certification. Benavides sued Chicago Title Insurance Co. (“Chicago Title”) on
behalf of a purported class for refusing to give her a title insurance premium
discount mandated by Texas law. The district court denied class certification on
the ground that Benavides had not shown that common questions would
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
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predominate as required for a class seeking certification under Federal Rule of
Civil Procedure 23(b)(3). Benavides appeals, arguing that Mims v. Stewart Title
Guaranty Co., 590 F.3d 298 (5th Cir. 2009), controls. Because Mims does not
control and because the district court properly addressed Mims, we affirm the
district court.
I. FACTUAL AND PROCEDURAL BACKGROUND
Benavides filed a Complaint in district court on August 22, 2007, against
Chicago Title, alleging that she and others similarly situated were denied a
mandatory title insurance discount when she purchased a title insurance policy
from Chicago Title. Specifically, Texas Insurance Code Rate Rule 8 (“R-8”)
entitles a mortgage borrower to a discount on a title insurance policy issued on
a loan to fully take-up, renew, extend, or satisfy an old mortgage when the new
loan is issued within seven years of the initial mortgage and the initial mortgage
was also covered by a title insurance policy. T HE B ASIC M ANUAL OF R ULES,
R ATES AND F ORMS FOR THE W RITING OF T ITLE I NSURANCE IN THE S TATE OF T EXAS
§ 3 Rate Rule 8 (available at www. tdi.state.tx.us/title/titlem3b.html#R-8).
Benavides alleges she was entitled to a discount of $370.40 after she refinanced
her mortgage within two years after taking out the initial mortgage loan.
Benavides alleged violations of the Real Estate Settlement Procedures Act
(“RESPA”), 12 U.S.C. § 2607(b), and state-law causes of action for unjust
enrichment, money had and received, and breach of implied contract. The
RESPA and unjust enrichment causes of action were previously dismissed by the
district court on summary judgment.
As the district court noted in its order denying class certification, there is
often no definitive way for a title insurer to determine, based on the documents
available to it, whether or not a prior mortgage was covered by title insurance
such that the new title insurance policy would qualify for the reissue discount.
Chicago Title, like other title insurance companies, had a policy of giving the
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discount when the borrower’s file contained certain circumstantial evidence that
the prior mortgage was insured. Benavides alleges that, regardless of Chicago
Title’s ad hoc policies, it routinely fails to give the discount when required.
Chicago Title admits that, regardless of the circumstantial evidence in the
borrower’s file, the discount is mandatory for all borrowers who qualify.
Benavides sought to certify a class of “all persons who, within seven years
after the date of their existing mortgage on their real property in Texas,
refinanced or otherwise replaced their existing mortgage and were charged a
premium for a new lender title insurance policy issued by Defendant Chicago
Title Insurance Company that did not include the reissue discount.” On
December 9, 2009, the district court denied Benavides’s motion for class
certification. In its Order, the district court examined each of Benavides’s
purported questions common to the class. Those questions were:
(1) Whether the plaintiffs refinanced an existing mortgage within
seven (7) years after the recording of the existing mortgage;
(2) Whether the plaintiffs qualify for the mandatory reissue discount
in connection with the reissue lender title policy;
(3) The dollar amount of the reissue discount required to be applied
to the plaintiff’s transaction;
(4) Whether Defendant split the unearned discounts with its agents;
(5) Whether Defendant’s splitting of the unearned premiums with
title agents violated Section 8(b) of RESPA;
(6) Whether Defendant breached other legal duties to class members
by failing to give them the reissue discount mandated by Texas law
and retaining those unearned premiums; and
(7) Whether plaintiffs are entitled to recover three times the amount
charged to them for the reissue lender title insurance policies,
pursuant to 12 U.S.C. § 2607(d)(2).
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The district court determined questions 4, 5, and 7 pertained only to
Benavides’s RESPA claim which had been dismissed. It determined that the
remaining questions, while “common” in that each purported plaintiff would
need the question answered, could not be determined on a class-wide basis using
class-wide proof. Rather, each of the remaining questions had to be answered
specifically and individually as to each plaintiff. Accordingly, the district court
determined that none of the questions advanced by Benavides was common to
the class and that Benavides had therefore failed to satisfy the predominance
requirement of Rule 23(b)(3). The district court noted that the only “common”
question—whether a borrower who qualified for the R-8 discount and did not
receive it was entitled to a refund—was not in dispute as Chicago Title admitted
the discount was mandatory for all borrowers who qualified. The district court
therefore based its order denying certification on two grounds: “First,
certification of the class would require an extensive file-by-file review to sort out
the factual details as to each plaintiff. Second, there are no truly class-wide
questions that would benefit from class determination.”
Benavides filed a motion for reconsideration, arguing that Mims, which
was decided by this court the same day the district court issued its order denying
class certification, outlined a different evidentiary standard for liability and for
class membership than followed by the district court. The district court denied
the motion on December 23, 2009, noting that while the Fifth Circuit in Mims
affirmed certification of a class based on factually similar state-law claims, the
opinion did not call into question the district court’s decision that there were no
class-wide questions that would benefit from certification. Benavides was given
permission to appeal the denial of class certification pursuant to Federal Rule
of Civil Procedure 23(f), and this appeal followed.
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II. ANALYSIS
We review the denial of class certification for abuse of discretion. See
O’Sullivan v. Countrywide Home Loans, Inc., 319 F.3d 732, 738 (5th Cir. 2003).
Because, however, a court by definition abuses its discretion when it applies an
incorrect legal standard, we review such errors de novo. Id. While the “party
seeking certification bears the burden of proof” and the district court has
substantial discretion to grant or deny certification, the “district court must
conduct a rigorous analysis of the rule 23 prerequisites before certifying a class.”
Castano v. American Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996).
Rule 23(a) provides four prerequisites to a class action: (1) a class “so
numerous that joinder of all members is impracticable”; (2) “questions of law or
fact common to the class”; (3) named parties’ claims or defenses “typical . . . of
the class”; and (4) representatives that “will fairly and adequately protect the
interests of the class.” F ED. R. C IV. P. 23(a); Amchem Prods., Inc. v. Windsor, 521
U.S. 591, 606–08 & nn. 8, 9, 11, 13 (1997). In addition to these prerequisites, a
party seeking class certification under Rule 23(b)(3) must also demonstrate “both
(1) that questions common to the class members predominate over questions
affecting only individual members, and (2) that class resolution is superior to
alternative methods for adjudication of the controversy.” Bell Atl. Corp. v. AT&T
Corp., 339 F.3d 294, 301 (5th Cir. 2003). “Whether common issues predominate
and whether the class action is a superior method to resolve the controversy
requires an understanding of the relevant claims, defenses, facts, and
substantive law presented in the case.” Steering Comm. v. Exxon Mobil Corp.,
461 F.3d 598, 601 (5th Cir. 2006) (citing Castano, 84 F.3d at 744).
In Mims, this court reversed the granting of class certification of a RESPA
claim in a case with facts remarkably similar to the case at hand. The defendant
in that case, Stewart Title Guarantee Company (“Stewart”), appealed
certification of the state-law claims on the grounds that (1) the class was
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improperly defined to include all plaintiffs who replaced their mortgage within
seven years and who met one of Stewart’s underwriting guidelines from which
Stewart would assume the prior mortgage was covered by title insurance; and
(2) the equitable nature of plaintiff’s state-law claims required an individualized
factual inquiry to determine disclosure and waiver issues. The Mims court
denied both grounds of appeal, but remanded the case to the district court to
determine whether it should retain pendent jurisdiction over the remaining
state-law claims.1 590 F.3d at 301. In its order denying reconsideration of its
order denying class certification, the district court here noted that while the
Mims case could call into doubt the district court’s ruling on the proper class
definition and proper proof of liability, it explained that its decision “did not rely
solely on the problems raised by using internal guidelines as evidence of past
insurance.” Rather, its order on class certification made clear that, even if it
accepted Benavides’s proposed class definition (which was similar to that
affirmed in Mims), it would still deny class certification because there was still
no common question capable of class-wide determination.
Benavides argues that the Mims decision held to the contrary: that
questions of liability can be determined on a class-wide basis purely based on
whether a plaintiff is a member of the class under Stewart’s underwriting
guidelines. All that Mims held, however, was that the class definition was
appropriate; not that there were any common class-wide questions, that those
questions would predominate trial, or that mere membership in the class was
sufficient to establish liability en masse. While the Mims court stated in the
Introduction that it saw “no legal impediment to the certification of a class on
1
In Mims, the only purported bases of jurisdiction was 28 U.S.C. § 1331 (federal
question) and 28 U.S.C. § 1367 (pendent jurisdiction). In this case Benavides asserts
jurisdiction under §§ 1331 and 1367 and 28 U.S.C. § 1332(d)(2)(A) as a class action where one
class member is diverse from one defendant and the amount in controversy exceeds
$5,000,000.
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the state law claims,” the issue Benavides raises was not before the Mims court
on appeal. As the district court explained in its order denying class certification,
Chicago Title does not contest that it owes the R-8 discount to everyone who
qualifies. The only issues to be determined are therefore individualized
inquiries as to whether particular persons qualify for the discount and were
denied it.
The district court therefore did not abuse its discretion in denying
plaintiff’s motion for class certification.
III. CONCLUSION
The district court did not abuse its discretion when it determined that
there were no common questions capable of class-wide determination. We
therefore affirm the district court.
AFFIRMED.
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