Putative Class Notice Issues: Guichard v. State Farm

David A. Szwak

Putative Class Notice Issues: Guichard v. State Farm

Postby David A. Szwak » Wed Dec 28, 2005 8:17 pm

Not Reported in F.Supp., 1995 WL 702510 (E.D.La.)

United States District Court, E.D. Louisiana.
Bernice A. GUICHARD, et al
v.
STATE FARM FIRE & CASUALTY COMPANY.
Civ. A. No. 95-2963.
Nov. 28, 1995.


McNAMARA, District Judge.
*1 Before the court are the following two motions:
(1) "Motion to Dismiss, or Alternatively, to Compel Amendment" filed by Defendant, State Farm & Casualty Company ("State Farm") and opposed by Plaintiffs, Bernice and Vernon Guichard, et al; and
(2) "Motion for Order regarding Communications with Putative Class Members" filed by Defendant, State Farm, and opposed by Plaintiffs.
Both motions, set for hearing on Wednesday, November 22, 1995, are before the court on briefs without oral argument. Having considered the memoranda of counsel, the record, and the applicable law, the court now rules.
(1) Defendant's "Motion to Dismiss, or Alternatively, to Compel Amendment"
The original plaintiffs, Bernice and Vernon Guichard, are a husband and wife who are policyholders of State Farm. On September 8, 1995, they asserted a class action on behalf of all persons whose claims under homeowner's/renter's insurance policies were investigated by State Farm, alleging violations of the Fair Credit Reporting Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), and various state laws. Plaintiffs further claim that State Farm has illegally profited by committing these offenses in the regular course of its claims handling procedure. In Defendant's Motion to Dismiss, Defendant urges this court to dismiss the Class Action Complaint and the First Supplemental and Amended Class Action RICO Complaint.
"A motion to dismiss an action for failure to state a claim 'admits the facts alleged in the complaint, but challenges plaintiff's right to relief based upon those facts.' " Crowe v. Henry, 43 F.2d 198, 203 (5th Cir.1995) (citation omitted). Dismissal is proper only when it appears beyond doubt that the plaintiffs would not be entitled to recover under any set of facts that they could prove in support of their claim. Id.
Here, Plaintiffs allege RICO violations under 18 U.S.C. § 1962(a), (b), (c), and (d). The Fifth Circuit has reduced these subsections to their simplest terms as follows:
(a) a person who has received income from a pattern of racketeering activity cannot invest that income in an enterprise;
(b) a person cannot acquire or maintain an interest in an enterprise through a pattern of racketeering activity;
(c) a person who is employed by or associated with an enterprise cannot conduct the affairs of the enterprise through a pattern of racketeering activity; and
(d) a person cannot conspire to violate subsections (a), (b), or (c).
Id. Three elements are common to all of these RICO subsections: (1) a person who engages in (2) a pattern of racketeering activity (3) connected to the acquisition, establishment, conduct, or control of an enterprise. Id. at 204.
Defendant argues that "the plaintiffs' pleadings provide no particularized facts to support the allegations of fraud and RICO. This case presents nothing more than a complaint by insureds that their insurance claims are not paid immediately and without question by the insurer. Such claims do not support the maintenance of a RICO claim (sic) action lawsuit." (Defendant's Memo., p. 18). However, in reviewing plaintiffs' Complaint and Rico Statement, the court finds that plaintiffs have adequately pled:
*2 (1) an association-in-fact enterprise consisting of State Farm employees acting in concert with credit reporting agencies, financial institutions, legal counsel and others and that this association-in-fact conducts or participates in unlawful claims adjusting activities;
(2) that State Farm, a RICO person, engaged in a pattern of racketeering activity connected to the acquisition, establishment, conduct, or control of that enterprise; and
(3) that State Farm committed violations of 18 U.S.C. § (a), (b), and (c). [FN1]
Defendant is only correct in asserting that Plaintiffs have failed to adequately allege a RICO conspiracy under 18 U.S.C. § 1962(d). "[B]ecause the core of a RICO civil conspiracy is an agreement to commit predicate acts, a RICO civil conspiracy complaint, at the very least, must allege specifically such an agreement." Crowe, 43 F.3d at 206. While Plaintiffs have pled the conclusory allegation that the defendant "conspired," nowhere do they allege facts implying any agreement to commit predicate acts of racketeering. Thus, Plaintiffs' claim under 18 U.S.C. § 1962(d) must be dismissed.
(2) Defendant's "Motion for Order regarding Communications with Putative Class Members"
On September 11, 1995, Plaintiffs' counsel published a newspaper advertisement (although not identified as such) addressed to putative class members. (See Attachment A to Defendant's Memo. in support of Motion for Order). On September 29, 1995, nine new plaintiffs were added. On or about October 18, 1995, similar advertisements appeared in various newspapers around the state. (See Attachment B to Defendant's Memo. in support of Motion for Order).
In its motion, Defendant argues that plaintiffs' advertisements are deceptive and misleading in that:
(1) They give the appearance to the public of being a notice officially caused to be published (and therefore sanctioned) by this Court;
(2) They imply that a class is appropriate and has been certified ("entitled to participate as a member of the class;" "attorneys for the class");
(3) They incorrectly indicate that recovery can be had even if a putative class member's claims are res judicata ("participate .. even if your claim has already been denied, settled, or has gone to trial"); and,
(4) They fail to make clear that they are merely client solicitations unilaterally placed by plaintiffs' counsel.
(See Defendant's Memo. in support of Motion for Order, pp. 3-4).
Defendant seeks the court to:
(1) Prohibit future advertisements and solicitations without prior court review and approval, or stipulation of counsel; and
(2) Compel plaintiffs to produce to defendant the identities of persons responding to the advertisements, as well as all non-privileged information and documents received from such persons.
The Supreme Court has instructed that "an order limiting communications between parties and potential class members should be based on a clear record and specific findings that reflect a weighing of the need for a limitation and the potential interference with the rights of the parties." Gulf Oil Co. v. Bernard, 452 U.S. 89, 101, 101 S.Ct. 2193, 2200, 68 L.Ed.2d 693 (1981). Here, the court has reviewed the "Notices" in question (attached as Exhibits A & B to Defendant's memorandum) and finds that they are written in plain English language to inform the public of the existence of this lawsuit, the factual basis of the claim, and who to contact if the reader has questions.
*3 The court concludes that verbatim adoption of Defendant's proposed Order (attached as Exhibit C) is not justified as the mere possibility of abuses from the "Notices" are outweighed by the interference which Defendant's proposed Order would create in limiting the right of the proposed class representatives and their attorneys to investigate their claims by contacting potential class members. Further, the court finds that Defendant's proposed order short circuits the normal discovery process.
However, the court finds that a less burdensome remedy is appropriate and specifically orders that any future written communication/advertisement prepared by plaintiffs' counsel must comply with Louisiana Rule of Professional Conduct 7.2(b)(iii)(A-B) [FN2] which states:
(B) A lawyer shall not initiate targeted solicitation, in the form of a written or recorded communication, of a person or persons known to need legal services of a particular kind provided by the lawyer in a particular matter for the purpose of obtaining professional employment unless such communication complies with the requirements set forth below and is not otherwise in violation of these rules:
(iii) In the case of a written communication:
(A) such communication shall not resemble a legal pleading, notice, contract or other legal document and shall not be delivered via registered mail, certified mail or other restricted form of delivery; and
(B) the top of each page of such communication and the lower left corner of the face of the envelope in which the communication is enclosed shall be plainly marked "ADVERTISEMENT" in print size at least as large as the largest print used in the written communication, provided that if the written communication is in the form of a self-mailing brochure or pamphlet, the "ADVERTISEMENT" mark shall appear above the address panel of the brochure or pamphlet.
Further, any future advertisements with reference to "class" or "class action" must be clearly worded to reflect that no class has been certified or approved by any court. [FN3]
Accordingly;
IT IS ORDERED that Defendant's "Motion to Dismiss, or Alternatively, to Compel Amendment" be and is hereby GRANTED only to the extent that the court dismisses Plaintiffs' claims asserted under 18 U.S.C. § 1962(d); otherwise Defendant's Motion to Dismiss is DENIED; and
IT IS FURTHER ORDERED that Defendant's "Motion for Order regarding Communications with Putative Class Members" be and is hereby GRANTED only to the extent that the court ORDERS plaintiffs and their counsel to:
(1) comply with Louisiana Rule of Professional Conduct 7.2(b)(iii)(A-B) (as set forth above) in any and all future written communications/advertisements; and
(2) clearly word any future advertisements with reference to "class" or "class action" to reflect that no class has been certified or approved by any court. Otherwise, Defendant's Motion for Order regarding Communications with Putative Class members is DENIED.

* * *


FN1. Defendant complains repeatedly that Plaintiffs have failed to allege specific facts as to "the who, what, when, where and how of the alleged fraudulent conduct and statements." The court, however, finds that Plaintiffs have set forth facts to adequately put Defendant on adequate notice of the specifics of every element of Plaintiffs' complaint. Further, much of the information regarding "the who, what,
where and how" will be flushed out in discovery.



FN2. This court has adopted the Louisiana Rules of Professional Conduct pursuant to Uniform District Local Court Rule 20.04E.



FN3. The rulings herein should not be construed to reflect whether or not a class will ultimately be certified in this matter.

E.D.La.,1995.
Guichard v. State Farm Fire & Casualty Co.
Not Reported in F.Supp., 1995 WL 702510 (E.D.La.)

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