Free Motion to Certify Class - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 00-cv-01841-LTB-PAC RICKY EUGENE CLARK, on behalf of himself and all others similarly situated, Plaintiff, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois Corporation, Defendant.

MEMORANDUM IN SUPPORT OF MOTION FOR CLASS CERTIFICATION ______________________________________________________________________________

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TABLE OF CONTENTS PAGE I. II. INTRODUCTION ...............................................................................................................1 STATEMENT OF FACTS ..................................................................................................3 A. B. C. D. III. Plaintiffs' Allegations Are Taken As True For The Purposes Of This Motion.......3 Mr. Clark's Claim Under The Madrid Policy..........................................................4 The Intervenor Plaintiffs' Claims ............................................................................6 The Class' Claims ....................................................................................................9

ARGUMENT.....................................................................................................................11 A. B. C. This Case Is Well-Suited For Certification............................................................11 The Proposed Class Is Properly Defined ...............................................................11 The Proposed Class Satisfies the Prerequisites of Rule 23(a) ...............................14 1. 2. 3. 4. D. Class members are so numerous that joinder is impracticable ..................14 The common issues in this case easily satisfy Fed. R. Civ. P. 23(a)(2) ....17 Plaintiffs' claims satisfy the typicality requirement of Rule 23(a)(3) .......19 Plaintiffs will fairly and adequately represent the Class............................20

Plaintiffs Meet the Requirements of Fed. R. Civ. P. 23(b)....................................21 1. 2. The Class' claims should be certified in whole or in part under Rule 23(b)(2) ......................................................................................................22 Alternatively, the Class' claims may be certified under Rule 23(b)(3) .....25 a. b. The focus on common issues satisfies the predominance inquiry here.................................................................................................25 A class action is superior to other available methods for resolving this controversy..............................................................................27

IV.

CONCLUSION..................................................................................................................29

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TABLE OF AUTHORITIES CASES PAGE Adamson v. Bowen, 855 F.2d 668 (10th Cir. 1988) .................................................................................4, 19, 20 Alliance to End Repression v. Rochford, 565 F.2d 975 (7th Cir. 1977) .............................................................................................12 Allison v. Citgo Petroleum Co., 151 F.3d 402 (5th Cir. 1998) .............................................................................................25 In re Aluminum Phosphide Antitrust Litig., 160 F.R.D. 609 (D. Kan. 1995)............................................................................................4 Amchem Prods. v. Windsor, 521 U.S. 591 (1997)...........................................................................................................25 Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1975) .............................................................................................26 Boughton v. Cotter Corp., 65 F.3d 823 (10th Cir. 1995) .............................................................................................26 Brennan v. Farmers Alliance Mut. Ins. Co., 961 P.2d 550 (Colo. App. 1998) ................................................................................ passim Clark v. State Farm Mut. Auto. Ins. Co. ("Clark II"), 292 F. Supp. 2d 1252 (D. Colo. 2003)....................................................................... passim Clark v. State Farm Mut. Auto. Ins. Co. ("Clark I"), 319 F.3d 1234 (10th Cir. 2003) ................................................................................. passim Clark v. State Farm Mut. Auto. Ins. Co. ("Clark III"), 433 F.3d 703 (10th Cir. 2005) ................................................................................... passim Colorado Cross-Disability Coal v. Taco Bell Corp., 184 F.R.D. 354 (D. Colo. 1999) ........................................................................................12 Cook v. Rockwell Int'l Corp., 151 F.R.D. 378 (D. Colo. 1993) ..................................................................................11, 13 Cook v. Rockwell Int'l Corp., 181 F.R.D. 473 (D. Colo. 1998) ........................................................................................26 Daigle v. Shell Oil Co., 133 F.R.D. 600 (D. Colo. 1990) ...................................................................................11,12 - ii 001434-11 166034 V1

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Davoll v. Webb, 160 F.R.D. 142 (D. Colo. 1995) ........................................................................................12 Davy v. Sullivan, 354 F. Supp. 1320 (M.D. Ala. 1973) .................................................................................15 Dean v. Boeing Co., 2003 U.S. Dist. Lexis 8787 (D. Kan. Apr. 24, 2003) ........................................................27 Ditty v. Check Rite, 182 F.R.D. 639 (D. Utah 1998) .................................................................................18, 19 Edgington v. R.G. Dickinson & Co., 139 F.R.D. 183 (D. Kan. 1991)..........................................................................................26 Eisen v. Carlisle & Jacquelin, 391 F.2d 555 (2d Cir. 1968)...............................................................................................27 Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974).............................................................................................................3 Emig v. Tobacco Co., Inc., 184 F.R.D. 379 (D. Kan. 1998)..........................................................................................19 In re Energy Sys. Equip. Leasing Sec. Litig., 642 F. Supp. 718 (E.D.N.Y. 1986) ....................................................................................14 Esplin v. Hirschi, 402 F.2d 94 (10th Cir. 1968) .................................................................................11, 26, 27 Eubanks v. Billington, 110 F.3d 87 (D.C. Cir. 1997) .............................................................................................21 General Tel. Co. of the Southwest v. Falcon, 457 U.S. 147 (1982)...........................................................................................................17 In re Great Southern Life Ins. Co. Sales Practices Litig., 192 F.R.D. 212 (N.D. Tex. 2000) ........................................................................................4 Gruber v. Price Waterhouse, 117 F.R.D. 75 (E.D. Pa. 1987)...........................................................................................13 Gunnells v. Healthplan Servs., Inc., 348 F.3d 417 (4th Cir. 2003) .............................................................................................18 Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) .....................................................................................18, 28 Hawaii v. Standard Oil Co., 405 U.S. 251 (1972)...........................................................................................................11 - iii 001434-11 166034 V1

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Horn v. Associated Wholesale Grocers, Inc., 555 F.2d 270 (10th Cir. 1977) ...........................................................................................14 In re Indus. Diamonds Antitrust Litig., 167 F.R.D. 374 (S.D.N.Y. 1996) .........................................................................................4 In re Infant Formula Antitrust Litig., 1992 U.S. Dist. Lexis 21981 (N.D. Fla. Jan. 13, 1992) .......................................................4 J.B. by Hart v. Valdez, 186 F.3d 1280 (10th Cir. 1999) .....................................................................................3, 18 Jefferson v. Ingersoll Int'l, Inc., 195 F.3d 894 (7th Cir. 1999) .............................................................................................21 Kupfer v. Goodman, 2000 U.S. Dist. Lexis 7951 (E.D.N.Y. May 17, 2000)........................................................4 Leyva v. Buley, 125 F.R.D. 512 (E.D. Wash. 1989)....................................................................................15 Lockwood Motors, Inc. v. General Motors Corp., 162 F.R.D. 569 (D. Minn. 1995)........................................................................................19 In re Lorazepam & Clorazepate Antitrust Litig., 202 F.R.D. 12 (D.D.C. 2001)...............................................................................................4 Marcus v. Department of Revenue, 206 F.R.D. 509 (D. Kan. 2002)....................................................................................19, 20 Mastro v. Brodie, 682 P.2d 1162 (Colo. 1984)...............................................................................................14 McReynolds v. Sodexho Marriott Servs., Inc., 208 F.R.D. 428 (D.D.C. 2002).............................................................................................4 In re Monumental Life Ins. Co., 365 F.3d 408 (5th Cir. 2004) .............................................................................................21 Molski v. Gleich, 318 F.3d 947 (9th Cir. 2003) ...........................................................................................21 Morris v. Geer, 720 P.2d 994 (Colo. App. 1986) ........................................................................................14 Olenhouse v. Commodity Credit Corp., 136 F.R.D. 672 (D. Kan. 1991)..........................................................................................11 Penn v. San Juan Hosp., Inc., 528 F.2d 1181 (10th Cir. 1975) .........................................................................................19 - iv 001434-11 166034 V1

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Probe v. State Teachers' Ret. Sys., 780 F.2d 776 (9th Cir. 1986) ............................................................................................23 Putnam v. Davies, 169 F.R.D. 89 (S.D. Ohio 1996) ........................................................................................26 Realmonte v. Reeves, 169 F.3d 1280 (10th Cir. 1999) .........................................................................................18 Rodriguez v. Gates, 2002 U.S. Dist. Lexis 10654 (C.D. Cal. May 30, 2002)......................................................4 Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180 (10th Cir. 2002) .........................................................................................20 Schreiber v. NCAA, 167 F.R.D. 169 (D. Kan. 1996)..........................................................................................11 Schwartz v. Celestial Seasonings, Inc., 178 F.R.D. 545 (D. Colo. 1998) ........................................................................................19 Shelter Realty Corp. v. Allied Maintenance Corp., 574 F.2d 656 (2d Cir. 1978).................................................................................................4 Simmons v. Kansas City, 129 F.R.D. 178 (D. Kan. 1989)....................................................................................15, 23 Slanina v. William Penn Parking Corp., 106 F.R.D. 419 (W.D. Pa. 1984) .......................................................................................15 Smith v. MCI Telecommunications Corp., 124 F.R.D. 665 (D. Kan. 1989).................................................................................. passim Taylor v. Safeway Stores, Inc., 524 F.2d 263 (10th Cir. 1975) .....................................................................................19, 20 Thompson v. Budget Rent-A-Car Sys., 940 P.2d at 990 (Colo. App. 1998) ......................................................................................3 Valdez v. Kansas State Dep't of Social & Rehabilitative Servs., 1977 U.S. Dist. Lexis 15307 (D. Kan. 1977).....................................................................23 Volkman v. United Transp. Union, 1986 U.S. Dist. Lexis 30187 (D. Kan. Jan. 22, 1986) .......................................................23 Warnell v. Ford Motor Co., 189 F.R.D. 383 (N.D. Ill. 1999).........................................................................................28 Wilcox v. Commerce Bank of Kansas City, 474 F.2d 336 (10th Cir. 1973) ...........................................................................................27 -v001434-11 166034 V1

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STATUTES C.R.S. § 10-4-703 ........................................................................................................................2, 6 C.R.S. § 10-4-706 .................................................................................................................. passim C.R.S. § 10-4-707 ............................................................................................................................5 C.R.S. § 10-4-710 .................................................................................................................. passim C.R.S. § 10-4-725 ............................................................................................................................2

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Plaintiff Ricky Eugene Clark and the proposed intervenor Plaintiffs Roy McIntosh, Florinda Reed and Matthias Hobza, 1 (collectively, "Plaintiffs"), by and through their attorneys of record, respectfully request that this Court certify the following Class pursuant to Fed. R. Civ. P. 23(b)(2) and/or (b)(3): All pedestrians who received No-Fault benefits under a Colorado State Farm automobile insurance policy where the governing policy documents at the time of the accident were issued prior to January 1, 1999. Excluded from the Class are all State Farm executives, their legal counsel, and their immediate family members, the Court and its staff, and all employees of proposed Class Counsel. I. INTRODUCTION

This case arises from State Farm's uniform failure to comply with the provisions of Colorado's No-Fault law requiring that extended personal injury protection ("PIP") benefits for pedestrians be offered for inclusion in all automobile insurance policies.2 Given the common course of conduct by State Farm in failing to offer the coverage it was obliged to offer, each member of the proposed Class has an identical claim for reformation, which results in a

1 2

See Motion to Intervene, filed herewith.

In fact, Colorado law required that extended PIP benefits be offered to all categories of "insureds" listed in C.R.S. § 10-4-707(1), including named insureds, resident relatives, and passengers occupying the vehicles with the insured's consent, as well as pedestrians. See Clark v. State Farm Mut. Auto. Ins. Co., 433 F.3d 703, 713 (10th Cir. 2005) ("Clark III"). As the Tenth Circuit recognized, Mr. Clark sought "to bring a class action on behalf of additional groups of claimants." Id. However, notwithstanding the fact that these other claimants have standing, Hill v. Allstate Ins. Co., 479 F.3d 735, 740 (10th Cir. 2007), this Court has Ordered Plaintiff to exclude these other claimants from the proposed Class. April 9, 2007 Order (Dkt. No. 199). Accordingly, Plaintiff has modified the definition of the proposed Class to limit the scope of the proposed Class as originally pled. -1001434-11 166034 V1

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declaration of coverage and payment of the extended benefits to which they are entitled under Colorado law. 3 In fact, before correcting its defective form policy effective January 1, 1999, 4 State Farm uniformly failed to offer extended PIP benefits for pedestrians (this term includes non-motorists such as bicyclists; see C.R.S. § 10-4-703(9)) because State Farm never offered the mandated optional coverage amounts of APIP benefits, as described in C.R.S. § 10-4-710. State Farm could not have offered the mandated optional extended PIP benefits described in C.R.S. § 10-4710 for inclusion in a complying policy because the only policy it had available for purchase did not contain APIP benefits as described in C.R.S. § 10-4-710. Hence, State Farm's acts and omissions have occurred in the exact same manner and resulted in every instance in the offer and issuance of automobile insurance policies throughout the State of Colorado that failed to meet State Farm's pre-issuance obligations. See Clark v. State Farm Mut. Auto Ins. Co., 319 F.3d 1234 (10th Cir. 2003) ("Clark I"); Brennan v. Farmers Alliance Mut. Ins. Co., 961 P.2d 550 (Colo. App. 1998). Plaintiffs' claims are typical of the claims of all Class members, and all Class members share the same overriding common interests in (i) reforming their policies and (ii) collecting the resultant APIP benefits. Because all of State Farm's offers of automobile insurance policies during the relevant period are known to be deficient, causation is presumed and the coverage that State Farm was

Colorado's No-Fault statute has since been repealed. However, it is undisputed that its provisions were in effect throughout the Class Period. See Ex. 1, (State of Colorado, Division of Insurance listing "Amendment of No-Fault ­ Coverage P," Form # 6850AJ, with an "effective Date" of January 1, 1999); see also C.R.S. § 10-4-725(2) (required that new insurance forms had to be sent to Insurance Commissioner prior to the use of the new form). -2001434-11 166034 V1 4

3

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required to offer must be read into each policy. As this Court is well-aware, when "an insurer fails to offer the insured optional coverage that it is statutorily required to offer, additional coverage in conformity with the required offer is incorporated into the agreement." Thompson v. Budget Rent-A-Car Sys., 940 P.2d at 990 (Colo. App. 1998); see also Clark I, 319 F.3d at 124142. Accordingly, the Class seeks (i) reformation of the relevant insurance contracts such that they provide extended PIP benefits; (ii) injunctive relief requiring State Farm to notify all covered pedestrians of the availability of extended PIP benefits; and (iii) the payment of the additional PIP benefits owed to those who are so entitled as a result of State Farm's statutory violations. Even after the Tenth Circuit made indisputably clear in 2003 that all Class members had such a claim, State Farm did not reform the agreements and waited another three years before notifying any Class members that additional PIP benefits might be available. Only through certification of the proposed Class can the Court ensure that the claims of all injured pedestrians covered by State Farm's defective policies will be finally, fairly and fully resolved. II. A. STATEMENT OF FACTS

Plaintiffs' Allegations Are Taken As True For The Purposes Of This Motion The Court must accept the Complaint's allegations as true. J.B. by Hart v. Valdez, 186

F.3d 1280, 1290 n.7 (10th Cir. 1999) ("We recognize that, when deciding a motion for class certification, the district court should accept the allegations contained in the complaint as true."). Moreover, as the United States Supreme Court held in Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177 (1974), there is "nothing in either the language or history of Rule 23 that gives a court

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any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action. Indeed, such a procedure contravenes the Rule." See, e.g., Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir. 1988) ("in making the class certification determination[], the district court should avoid focusing on the merits underlying the class claim"); In re Aluminum Phosphide Antitrust Litig., 160 F.R.D. 609, 616 (D. Kan. 1995) ("Tenth Circuit case law strictly prohibits the Court from examining the merits of plaintiff's claims when determining whether to certify a class."). 5 Accordingly, this Court should disregard any attack State Farm may lodge on the merits of Plaintiffs' claims in opposition to this motion. B. Mr. Clark's Claim Under The Madrid Policy While crossing a Colorado intersection on foot in 1996, Plaintiff Eugene Clark was struck by a vehicle driven by Monica Madrid and insured by State Farm through a form "Car Policy." See also, e.g., McReynolds v. Sodexho Marriott Servs., Inc., 208 F.R.D. 428, 430-32 (D.D.C. 2002) ("The parties dispute the nature of Sodexho's organizational structure. However because the allegations in the complaint are presumed true for purposes of a motion for class certification...the Court will assume the facts as set forth by plaintiffs."); Kupfer v. Goodman, 2000 U.S. Dist. Lexis 7951, at *6 (E.D.N.Y. May 17, 2000) ("Courts must accept the allegations in the complaint as true"); Shelter Realty Corp. v. Allied Maintenance Corp., 574 F.2d 656, 661 n.15 (2d Cir. 1978); In re Lorazepam & Clorazepate Antitrust Litig., 202 F.R.D. 12, 14 (D.D.C. 2001) ("For purposes of the instant motions for class certification and to dismiss, the Court will accept as true the allegations of the plaintiffs' complaint."); In re Infant Formula Antitrust Litig., 1992 U.S. Dist. Lexis 21981, at *8 (N.D. Fla. Jan. 13, 1992) ("[t]he substantive allegations of the pleadings are accepted by the court as true when determining a class"); In re Indus. Diamonds Antitrust Litig., 167 F.R.D. 374, 378 (S.D.N.Y. 1996) ("In evaluating a motion for class certification, however, the court does not have the authority to conduct a preliminary inquiry into the merits of the case, and hence the substantive allegations contained in the complaint are accepted as true."); Rodriguez v. Gates, 2002 U.S. Dist. Lexis 10654, at *6 n.2 (C.D. Cal. May 30, 2002) ("For purposes of deciding this [class certification] motion the Court accepts all of Rodriguez's factual allegations as true."); In re Cardizem CD Antitrust Litig., 200 F.R.D. 297, 303 (E.D. Mich. 2001) ("[c]ourts also assume that the substantive allegations of the complaint are true."); In re Great Southern Life Ins. Co. Sales Practices Litig., 192 F.R.D. 212, 221 (N.D. Tex. 2000) ("Therefore, taking Plaintiff's claims as true, the Court finds that, under these alleged facts...this cause of action is certified."); Herbert Newberg & Alba Conte, NEWBERG ON CLASS ACTIONS § 7.26 (3d ed. 1992) (cited in Hart, 186 F.3d at 1284). -4001434-11 166034 V1 5

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¶¶ 17-20. 6 As a result of the accident, Mr. Clark suffered personal injuries, medical and rehabilitative expenses and lost wages. ¶ 19. As a pedestrian hit by the Madrid vehicle, Mr. Clark was considered to be insured by State Farm under the Madrid policy. C.R.S. § 10-4707(c). Accordingly, Mr. Clark was entitled to personal injury protection benefits ("PIP") from State Farm under the Madrid policy. Id.; see also ¶¶ 20-22, 28. The Madrid policy provided PIP benefits for pedestrians only to the extent of the "minimum coverages" as defined in C.R.S. § 10-4-706. ¶¶ 21, 26. State Farm did not offer the Madrid policyholder anything beyond the statutory minimum coverages for pedestrians. ¶¶ 2425. In the Madrid policy, PIP coverage is described in Section II ­ Coverage P, the Limits of Liability, at page 12 of the "specimen policy" (Complaint, Exhibit A): The most we pay for each insured who sustains bodily injury and the period of time from the date of the accident in which the services must be furnished or the loss of income incurred shall not exceed: 1. The amount and period of time shown in the Schedule applicable to each benefit under the coverage symbol P1 if the insured is a pedestrian. This does not apply to you, your spouse or any relative. [Emphasis in original.] As a result of State Farm's failure to offer additional PIP benefits for pedestrians (hereafter "extended benefits"), Mr. Clark received lost wage benefits for only 52 weeks, and in an amount less than 85% of his lost income, as provided for in the minimum coverages contained in the Madrid policy. ¶ 23. Mr. Clark's recovery was so limited even though his lost wages exceeded the Madrid policy limits. ¶ 34. "¶ ___" refers to paragraphs of the Class Action Complaint and Jury Demand, unless otherwise noted. -5001434-11 166034 V1 6

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In Clark I, the Tenth Circuit ruled that "the interpretation of section 710 contained in Brennan must be applied retroactively." Clark I, 319 F.3d at 1242. Accordingly, it held, because State Farm did not offer Mrs. Madrid the option of purchasing extended PIP benefits that included extended pedestrian coverage, Mr. Clark "is entitled as a matter of law to reformation of the Madrid policy to include extended PIP benefits." Id. at 1241. It left for this Court to "determine, based on the particular circumstances presented here, the effective date of reformation for the Madrid policy." Id. at 1242. Subsequently, this Court ruled that (i) the effective date of reformation for Mr. Clark was the December 19, 2003 date of its Order, Clark v. State Farm Mut. Auto. Ins. Co., 292 F. Supp. 2d 1252, 1268 (D. Colo. 2003) ("Clark II"); (ii) the policy, as reformed to include extended benefits under the "P4" coverage, would contain an aggregate cap of $200,000; id. at 1268-69; and (iii) awarded Mr. Clark the difference between the $67,723.98 State Farm had already paid him and the $200,000 to which he was entitled ­ or a total of $132,276.02. Id. at 1269. 7 On appeal, the Tenth Circuit affirmed this Court's decision in Clark II in its entirety. Clark III, 433 F.3d 703. C. The Intervenor Plaintiffs' Claims Roy McIntosh was a pedestrian on January 16, 1999, when he was struck by a vehicle operated by intoxicated State Farm-insured Tyson White. Mr. McIntosh suffered serious injuries including but not limited to both of his knees and his back. After the accident State Farm
7

Because the Court chose to make the reformation effective as of the date of its reformation order in Clark II, it dismissed Mr. Clark's remaining claims for breach of contract, breach of the duty of good faith and fair dealing. Clark II, 292 F. Supp. 2d at 1252. Incredibly, State Farm still refused to pay Mr. Clark's benefits in a timely fashion, causing Mr. Clark to file a separate bad faith action against State Farm. -6001434-11 166034 V1

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provided Mr. McIntosh a notice of benefits, notifying him he was entitled to receive PIP benefits under Mr. White's automobile insurance policy only to the extent of the "minimum coverages" as defined in C.R.S. § 10-4-706. Mr. McIntosh submitted a PIP application and State Farm subsequently paid him PIP benefits in the amount of approximately $69,000.00 for medical and rehabilitation expenses through January 16, 2004, including knee replacement surgery to both knees and steroid injections to his back. State Farm notified Mr. McIntosh that he is not entitled to receive any additional benefits as of January 16, 2004. Nonetheless, Mr. McIntosh continues to need treatment for his accident-related injuries and continues to incur additional expenses for reasonable and necessary treatment related to the January 16, 1999, accident. Mr. McIntosh has incurred additional unpaid accident-related medical expenses in excess of the "minimum coverages" as defined in C.R.S. § 10-4-706 since January 16, 2004, including expenses related to further surgical treatment for his knee. Florinda Reed was a pedestrian bicyclist on May 20, 1999, when she was struck by a vehicle operated by State Farm-insured Tho Huynh. Ms. Reed suffered serious injuries including but not limited to her neck, back and shoulders. After the accident State Farm provided Ms. Reed a notice of benefits, notifying her she was entitled to receive PIP benefits under Mr. Huynh's automobile insurance policy only to the extent of State Farm's optional "P3" PIP coverage. Although the notice directed Ms. Reed to Mr. Huynh's policy for an explanation of the benefits available to her, State Farm did not and continues to refuse to provide Ms. Reed a copy of the policy. Ms. Reed does not know Mr. Huynh and has been unable to locate him to request a copy of the policy.

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Ms. Reed submitted a PIP application and State Farm subsequently paid her PIP benefits in the amount of $150,000.00 for medical and rehabilitation expenses. Once State Farm paid $150,000.00 in benefits, it notified Ms. Reed that she is not entitled to receive any additional benefits. Nonetheless, Ms. Reed has incurred additional expenses for items necessary and related to her May 20, 1999, accident, expenses beyond State Farm's optional "P3" PIP coverage. Ms. Reed has incurred an additional $2,520.00 in unpaid medical expenses. She has incurred approximately $97,000.00 in unpaid work loss expenses. Matthias Hobza was a pedestrian bicyclist on April 27, 1998, when he was injured in a collision involving a vehicle operated by State Farm-insured Barbara Archer. As a result of this accident, Mr. Hobza suffered serious injuries including but not limited to a head wound, knee injuries including a torn meniscus and ligament damage requiring surgical reconstruction and resulting in permanent impairment, and neck and back injuries. After the accident State Farm provided Mr. Hobza a notice of benefits, notifying him he was entitled to receive PIP benefits under Ms. Archer's automobile insurance policy only to the extent of the "minimum coverages" as defined in C.R.S. § 10-4-706. Mr. Hobza submitted a PIP application and State Farm subsequently paid him PIP benefits in the amount of some $23,000.00 for medical and rehabilitation expenses, as well as loss of income benefits. Mr. Hobza earned approximately $440 per week prior to the accident, and sustained an unreimbursed loss of income due to his accident-related injuries in the amount of $22,695 through September 2000. State Farm notified Mr. Hobza that he would not be entitled to receive any additional PIP benefits after April 27, 2003. Nonetheless, Mr. Hobza has incurred additional expenses related

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to his April 27, 1998, accident, expenses beyond the "minimum coverages" as defined in C.R.S. § 10-4-706. According to his orthopedic surgeon, Mr. Hobza will require further surgical reconstruction in the form of a tibial osteotomy and then a total knee arthroplasty. Because his reconstructed knee has prevented him from earning the same level of income after the accident, Mr. Hobza's income decreased approximately $13,400 per year due to his accident-related injuries, and he has incurred well in excess of $25,000.00 in unpaid work loss expenses since September 2000. D. The Class' Claims From July of 1992 until January 1, 1999 when form 6850AJ became effective,8 State Farm's standard policy did not include the offer of extended PIP benefits to pedestrians struck by State Farm's insured vehicles. ¶¶ 29, 32-33. With respect to new policyholders only, "[i]n fall 1998, State Farm initiated a change in its policies to eliminate the Pedestrian Limitation." Clark II, 292 F. Supp. 2d at 1262. 9 Thus, Class members covered by policies in which the named insured did not select extended coverage did not receive the level of coverage to which they were entitled under Brennan and Clark I. Indeed, State Farm did not reform the policies covering Class members even after (i) the Colorado Court of Appeals in Brennan explicitly held that such policies must be reformed to include extended benefits available under C.R.S. § 10-4-710; 10 (ii) the Tenth Circuit explicitly held in Clark I in 2003 that the rule of Brennan was not limited to prospective application; 11 (iii)
8 9

See supra n. 4. In fact, the new policies were offered effective January 1, 1999. See supra n. 4. Brennan Farmers Alliance Mut. Ins. Co., 961 P.2d 550 (Colo. App. 1998). Clark v. State Farm Mut. Auto. Ins. Co., 319 F.3d 1234 (10th Cir. 2003) ("Clark I"). -9-

10 11

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this Court reformed one such State Farm policy in Clark II in 2003; 12 and (iv) the Tenth Circuit affirmed this Court's reformation order in Clark III in 2005. 13 Only in April of 2006 ­ 8 years after Brennan and nearly three years after Clark II ­ did State Farm send letters to a subset of the proposed Class members advising them for the first time that they may be entitled to receive additional PIP benefits. See infra, § III(C)(1). Mr. Clark filed suit on behalf of himself and a class of all injured persons covered under a State Farm automobile insurance policy wherein the policy holder was not offered the chance to purchase extended benefits coverage as required by C.R.S. § 10-4-710 of the Colorado Auto Accident Reparations Act ("No Fault Act"), and who were not provided the additional benefits enumerated therein. ¶ 9. The Class now seeks (i) reformation of the governing policies to provide extended benefits up to the $200,000 aggregate cap set by this Court in Clark II, and (ii) their resultant additional benefits. 14 State Farm's after-the-fact effort to prevent certification by sending letters to a small percentage of the proposed Class is too little, too late. Only a Classwide reformation Order and assessment of benefits owed can remedy State Farm's wide-spread failure to comply with Colorado's No-Fault law, and the rulings of the Tenth Circuit in Clark I and this Court in Clark II.

12

Clark v. State Farm Mut. Auto. Ins. Co., 292 F. Supp. 2d 1252 (D. Colo. 2003) ("Clark Clark v. State Farm Mut. Auto. Ins. Co., 433 F.3d 703 (10th Cir. 2005) ("Clark III"). The Class does not now seek to certify any of the other claims pleaded in the Complaint. - 10 -

II").
13 14

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III. A.

ARGUMENT

This Case Is Well-Suited For Certification Class actions are appropriate where, as here, large numbers of potential class members

have relatively small claims which may be impractical to litigate on an individual basis. Hawaii v. Standard Oil Co., 405 U.S. 251, 266 (1972). Courts should be liberal in their consideration of class certification motions because class orders can always be modified as the issues are refined in the course of the litigation. Fed. R. Civ. P. 23(c)(1); Cook v. Rockwell Int'l Corp., 151 F.R.D. 378, 381 (D. Colo. 1993). Indeed, the Tenth Circuit has long counseled that "if there is to be an error made, let it be in favor and not against the maintenance of the class action." Esplin v. Hirschi, 402 F.2d 94, 99 (10th Cir. 1968); accord, e.g., Olenhouse v. Commodity Credit Corp., 136 F.R.D. 672, 679 (D. Kan. 1991); Schreiber v. NCAA, 167 F.R.D. 169, 173 (D. Kan. 1996). Here, the absent Class members are joined with Plaintiffs in their claim for reformation of the policies under which they are covered, and in their resultant collection of additional benefits. Even if it were economically feasible for each such person to bring an individual claim, it would hardly be an efficient use of the court system to do so. Certification of the Class will allow the Court to conduct a single reformation hearing to establish the appropriate date for reformation, and will ensure that each and every Class member obtains the relief to which they are plainly entitled under Clark I, Clark II and clear Colorado law. B. The Proposed Class Is Properly Defined As this Court has held, [a]lthough not specifically mentioned in Rule 23, an essential prerequisite of an action under Rule 23 is the existence of an identifiable class. Daigle, 133 F.R.D. at 602; Wright, Miller & Kane, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2D § 1760 (2d

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ed. 1990). A class is sufficiently defined if it is "administratively feasible for the court to determine whether a particular individual is a member." Davoll v. Webb, 160 F.R.D. 142, 143 (D. Colo. 1995). Colorado Cross-Disability Coal v. Taco Bell Corp., 184 F.R.D. 354, 356-57 (D. Colo. 1999) (Babcock, C.J.). This Court has also recognized that it is not bound by class definitions proposed by the parties, but at all time retains the "discretion to alter, expand, subdivide or modify the class definition." Id. at 357. Accordingly, and in keeping with this Court's Order of April 9, 2007, Plaintiffs submit the following Class Definition: All pedestrians who received No-Fault benefits under a Colorado State Farm automobile insurance policy where the governing policy documents at the time of the accident were issued prior to January 1, 1999. Excluded from the Class are all State Farm executives, their legal counsel, and their immediate family members, the Court and its staff, and all employees of proposed Class Counsel. Plaintiffs believe that this definition cures the perceived ambiguity in the prior definition, and is properly "`defined by the activities of the defendant[].'" Daigle v. Shell Oil Co., 133 F.R.D. 600, 602 (D. Colo. 1990) (quoting Alliance to End Repression v. Rochford, 565 F.2d 975, 978 (7th Cir. 1977)). Class membership is easily ascertainable, Davoll v. Webb, 160 F.R.D. 142, 144 (D. Colo. 1995), as the definition includes only those pedestrians covered by State Farm policies that were issued in violation of Colorado's No-Fault law because of State Farm's failure to offer extended PIP benefits for pedestrians. 15 The defect was cured with respect to all policies or

Although State Farm has claimed that Class membership is not ascertainable, it sent out letters to the limited number of people it believes to be in the proposed Class on the basis of a file review. While State Farm's criteria led to a grossly under-inclusive group, Plaintiffs agree with State Farm that Class membership can be determined through a file review. - 12 001434-11 166034 V1

15

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renewals issued after January 1, 1999. See supra n. 4. The Class contends that all State Farm policies and renewals prior to that date are subject to reformation. See Clark II, 292 F. Supp. 2d at 1263 ("where an offer was made for extended PIP benefits, and that offer did not include extended pedestrian coverage, the appropriate remedy is to incorporate extended coverage for the pedestrian"); Brennan, 961 P.2d at 552 (when an insurer fails to offer a policy that provides for extended PIP benefits payable to pedestrians, the policy should be reformed "to include such coverage"). Once the governing policies are reformed, temporal restrictions will be lifted and monetary limitations will be expanded for all Class members.16 For a predominant number of Class members, it will then be simply a mechanical matter to determine the amount of additional benefits owed. 17 Finally, while State Farm has complained that Plaintiffs' proposed definition contains some individuals whose claims may be barred by the statute of limitations, that merits-based attack is premature. See, e.g., Cook v. Rockwell Int'l Corp., 151 F.R.D. at 386 (statute of limitations defense cannot bar class certification because it is impermissible to allow an argument based on the merits of an affirmative defense to preclude class certification); Gruber v. Without authority in Colorado insurance law, State Farm has suggested that only persons who would actually get payment are entitled to be included in the Class. Once again, under Brennan, all non-compliant policies are subject to reformation. Moreover, State Farm's suggestion puts the cart before the horse. The assessment of damages can occur only after reformation is accomplished. Medical and rehabilitation expenses can arise years after an accident ­ yet without reformation, there is simply no reason for the injured pedestrian to submit such claims. Most Class members' claims would be easily and mechanically calculated based on the percentage difference between basic and enhanced PIP on less than 52 weeks of wage loss. Moreover, under the law of the case, Class members' claims will be capped at $200,000. See Clark II, 292 F. Supp. 2d at 1268-69. Hence, there will be little difficulty assessing the additional benefits for those with large claims: they will get the difference between $200,000 and the amounts they have already been paid. - 13 001434-11 166034 V1 17 16

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Price Waterhouse, 117 F.R.D. 75, 80 (E.D. Pa. 1987) (same); In re Energy Sys. Equip. Leasing Sec. Litig., 642 F. Supp. 718, 753 (E.D.N.Y. 1986) (citing cases). Indeed, the questions of what the proper limitations period is, and whether it was tolled in this case where neither the injured pedestrians nor the policyholders were aware of the defect in State Farm's practice, 18 are simply two more common questions that can most efficiently be resolved on a Class-wide basis in this action. C. The Proposed Class Satisfies the Prerequisites of Rule 23(a) Rule 23(a) sets forth four prerequisites for certification of a class: (a) numerosity; (b) commonality; (c) typicality; and (d) adequacy of representation. As detailed below, this case meets all of the Rule 23(a) prerequisites. 1. Class members are so numerous that joinder is impracticable

Rule 23(a)(1) requires the class to be so numerous that joinder of all class members is "impracticable." Where "the class is composed of a substantial number, no great need is present to identify each and every one." Horn v. Associated Wholesale Grocers, Inc., 555 F.2d 270, 276 (10th Cir. 1977). Indeed, the exact number of potential members need not be known, Taco Bell Corp., 184 F.R.D. at 358, and the Court "may make `common senses assumptions' to support a finding that joinder would be impracticable." Id. (quoting Civic Ass'n of Deaf of New York City, Inc. v. Giuliani, 915 F. Supp. 622, 632 (S.D.N.Y. 1996)).

See, e.g., Morris v. Geer, 720 P.2d 994 (Colo. App. 1986) (holding in a legal malpractice action that accrual begins when a plaintiff has knowledge of facts which would put a reasonable person on notice of the general nature of the damage that the damage was caused by wrongful conduct); Mastro v. Brodie, 682 P.2d 1162 (Colo. 1984) (holding that a statute of limitation should only be applied if the plaintiff had or should have had knowledge not only of the conduct or injury, but also that conduct was wrongful). - 14 001434-11 166034 V1

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The number of Class members here can be estimated from the available data. According to the nationwide data compiled by the National Highway Traffic Safety Administration ("NHTSA"), during the years 1998-2003, the average number of injury-causing accidents involving pedestrians was approximately 4.3%. See Affidavit of Steven Strzelec ("Strzelec Aff.," Ex. 3), ¶ 10. Based on the patterns Mr. Strzelec observed with respect to the thousands of automobile claims he handled or supervised during his seventeen-year tenure at State Farm, his participation in State Farm multi-state surveys and his knowledge of the nationwide statistics compiled by the NHTSA, he believes that State Farm experienced approximately the same percentage of automobile injury claims involving pedestrians in Colorado as the NTHSA has documented on a nationwide basis. Id., ¶ 11. During the years 1994 through 1998, State Farm paid PIP Benefits on an average of 12,797 claims per year. 19 Assuming that 4.3% of these claims were for pedestrians, there were 550 claims by Class members each year. Thus, the proposed Class easily contains over 3000 members. 20 While no set number establishes impracticability, courts have regularly found numerosity with as few as 10 class members. 21
19

See Responses to Plaintiff's First Set of Interrogatories (July 29, 2003). Ex. 2. State Farm has yet to supplement its responses to include the year 1999. Plaintiffs contend the limitations period should be tolled such that the Class Period begins in 1992. Accordingly, the proposed Class spans more than seven years, and contains more than 3000 members. See Davy v. Sullivan, 354 F. Supp. 1320, 1324 (M.D. Ala. 1973) (class of ten prison inmates certified); Block v. Abbott Labs., 2002 U.S. Dist. Lexis 5453, at *7 (N.D. Ill. Mar. 28, 2002) ("Because there is no mystical number at which the numerosity requirement is established, courts have found this element satisfied when the putative class consists of as few as 10 to 40 members."); Slanina v. William Penn Parking Corp., 106 F.R.D. 419 (W.D. Pa. 1984) (25 class members sufficient); Simmons v. Kansas City, 129 F.R.D. 178, 180 (D. Kan. 1989) (49 class members sufficient); Smith v. MCI Telecommunications Corp., 124 F.R.D. 665, 675 (D. Kan. 1989) (96 class members sufficient); Leyva v. Buley, 125 F.R.D. 512, 515 (E.D. Wash. 1989) (50 class members sufficient). - 15 001434-11 166034 V1 21 20

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Here, the sheer number of Class members is easily sufficient to meet the numerosity requirement. Plaintiffs anticipate that State Farm will argue that its belated "voluntary re-evaluation" plan has destroyed numerosity, but any such argument cannot prevail. According to supplementary discovery responses produced on May 3, 2007, 22 in 2006 State Farm finally "reevaluated whether it had an obligation to pay additional enhanced PIP benefits to any of its insureds." See Supp. Resp. at 1. State Farm limited its "evaluation" to "claims for 1997-1998 where injured parties were pedestrians," Supp. Resp., SF 02860, and found 718 such files. Id. State Farm next eliminated all but 199 of the files one the basis that the total payout of medical and rehabilitation benefits was "less than $100,000 . . .." Id. State Farm subsequently identified approximately 115 claimants who met its criteria, and "sent letters to each claimant's last known address, explaining that they may be entitled to additional PIP benefits." Supp. Resp. at 2. Of these persons, 65 have received and negotiated checks for APIP benefits. Id. State Farm does not disclose how many persons it was unable to contact, or whether it attempted any sort of publication notice campaign to find such people. State Farm's belated acknowledgement of its obligations under Clark II cannot destroy numerosity here. As an initial matter, State Farm has included only pedestrians injured during the years 1997 to 1998, yet Plaintiffs' proposed Class begins far earlier and extends beyond 1998. 23 As discussed above, the proposed Class easily contains over 3000 people. See Defendant State Farm's Second Supplemental Discovery Reponses, ("Supp. Resp.") Ex. 4 hereto. That is because persons injured after January 1, 1999 who are covered by policy documents executed prior to January 1, 1999 are entitled to reformation and resultant additional benefits. - 16 001434-11 166034 V1 23 22

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Even if State Farm were correct that the Class could only encompass the years 1997 and 1998, numerosity would still be easily established. State Farm effectively concedes that each of the 115 claimants who met its criteria are entitled to reformation ­ and none of them have obtained this remedy. In addition, State Farm improperly excluded any Class member whose medical payments were denied on the basis of being after the five-year cut-off for such claims that was in the governing policy. Under Clark II, such claims should be paid. State Farm also improperly excluded Class members where the combined total of medical and rehabilitation benefits paid was less than $100,000 but where wage losses were $250/wk or higher, as well as all post-52 week wage losses. Once again, under Clark II, such claims should be paid. Simply put, the only way to fully and finally resolve the Class' claims is through certification, a Court-approved notice campaign, class-wide reformation and adjudication of the resultant additional benefits. State Farm's cynical "voluntary" notification campaign is simply too little, too late. 2. The common issues in this case easily satisfy Fed. R. Civ. P. 23(a)(2)

Rule 23(a)(2) requires Plaintiffs to show "commonality," or the existence of "questions of law or fact common to the class." As the United States Supreme Court has noted, "[t]he commonality and typicality requirements of Rule 23(a) tend to merge. Both serve as guideposts for determining whether under the particular circumstances maintenance of a class action is economical and whether the named plaintiff's claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence." General Tel. Co. of the Southwest v. Falcon, 457 U.S. 147, 158 (1982).

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The threshold for commonality is not high. Indeed, Plaintiffs need only show a single issue common to the Class; factual differences among individual Class members do not preclude certification of a claim seeking application of a common policy. See, e.g., J.B. by Hart, 186 F.3d at 1288. Moreover, commonality is satisfied where a discrete legal question linking Class members is substantially related to the resolution of the litigation even if individual members are not identically situated. Realmonte v. Reeves, 169 F.3d 1280, 1285 (10th Cir. 1999); J.B. by Hart, 186 F.3d at 1289. Courts have not considered commonality a difficult hurdle; the requirement should be "construed permissively." Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). Plaintiffs here have alleged that State Farm uniformly failed to offer the requisite APIP coverage for pedestrians. As a result, each member of the proposed Class of injured pedestrians seeks reformation of the relevant policy, and the increased benefits to which they are entitled. See Ditty v. Check Rite, 182 F.R.D. 639, 642 (D. Utah 1998) (internal citation omitted) ("Claims arising out of standard documents present a `classic case for treatment as a class action.'"). Class members seek the same relief as the result of the same course of conduct. The overriding questions for all Class members are (i) does State Farm's conduct in failing to offer extended PIP coverage entitle them to reformation of the relevant policy; and (ii) to what additional benefits are they entitled, if any? Finally, the law is clear that commonality is not destroyed by the virtually inevitable circumstance that Class members will be entitled to varying amounts of benefits. See, e.g., Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 427-28 (4th Cir. 2003) ("Rule 23 contains no suggestion that the necessity for individual damage determinations destroys commonality,

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typicality, or predominance, or otherwise forecloses class certification."); Schwartz v. Celestial Seasonings, Inc., 178 F.R.D. 545, 551 (D. Colo. 1998) ("Nor need the injuries complained of be identical among the class members and the class representative; only the harm complained of must be common to the class."); Ditty v. Check Rite, 182 F.R.D. at 644 ("Class certification is not properly withheld merely because there may be some variation in damages among members of the plaintiff class."); Lockwood Motors, Inc. v. General Motors Corp., 162 F.R.D. 569, 581-82 (D. Minn. 1995) ("Differences which may arise in calculating the amount of individual damages plaintiffs may have sustained will not prevent certification under Rule 23(b).") Accordingly, Plaintiffs satisfy the commonality requirement of Rule 23(a)(2). 3. Plaintiffs' claims satisfy the typicality requirement of Rule 23(a)(3)

Rule 23(a)(3) requires that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." It is important to note that "[c]laims do not have to be identical to meet the typicality requirement." Marcus v. Dep't of Revenue, 206 F.R.D. 509, 512 (D. Kan. 2002) (citing Adamson v. Bowen, 855 F.2d 668, 676 (10th Cir. 1988)); see also Emig v. Tobacco Co., Inc., 184 F.R.D. 379, 385 (D. Kan. 1998). As this Court has recognized, the typicality requirement is not that difficult to meet: "According to the Tenth Circuit, `the typicality requirement is ordinarily not argued . . . .'" Taco Bell Corp., 184 F.R.D at 360 (quoting Penn v. San Juan Hospital, Inc., 528 F.2d 1181, 1189 (10th Cir. 1975)). Instead of requiring absolute uniformity of claims, the typicality inquiry "requires a comparison of the claims or defenses of the representative with the claims or defenses of the class." Taylor v. Safeway Stores, Inc., 524 F.2d 263, 270 (10th Cir. 1975). Typicality is met "so long as the claims of the class representative and the class members are

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based on the same legal or remedial theory." Marcus, 206 F.R.D. at 512 (citing Adamson, 855 F.2d at 676); see also Taylor, 524 F.2d at 270 (typicality is met when named plaintiffs show that absent class members have the same or similar grievances). So long as the type of harm suffered by class representatives and absent class members is the same, then "the typicality requirement is met even if the degree of [the named plaintiffs'] harm . . . differ[s] from that of the members of the proposed class." Smith v. MCI Telecommunications Corp., 124 F.R.D. at 675. This standard is met here, as absent Class members share Plaintiffs' claims against State Farm, sue under the same legal theory, and seek the same remedies: reformation and the payment of benefits due. 4. Plaintiffs will fairly and adequately represent the Class

Rule 23(a)(4) requires that "the representative parties will fairly and adequately protect the interests of the class." As the Tenth Circuit has held: Resolution of two questions determines legal adequacy: (1) do the named plaintiffs and their counsel have any conflicts of interest with other class members and (2) will the named plaintiffs and their counsel prosecute the action vigorously on behalf of the class? Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1187-88 (10th Cir. 2002). Both prongs of the adequacy requirement are met here. Plaintiffs' interests are fully aligned with those of absent Class members, since the absent Class members bring the same claims for similar remedies under the same legal theories. There is no conflict of interest between the named Plaintiffs and absent Class members, or between counsel and Class members. Mr. Clark remains fully committed to obtaining class certification and will continue to meet all his obligations as Class representative, just as he has done to date. His adequacy as a Class

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representative cannot be impacted by this Court's adoption of State Farm's proposal to adjudicate Mr. Clark's claim prior to adjudicating this motion for class certification. The interests of the intervernor Plaintiffs are likewise fully aligned with those of the Class. Moreover, Plaintiffs' counsel are fully capable of prosecuting this action, as they have extensive experience in class-action and insurance litigation, and have successfully prosecuted numerous class actions in federal district courts. See Ex. 5 (firm resume of the Carey Law Firm); Ex. 6 (firm resume of Hagens Berman Sobol Shapiro); Ex. 7 (firm resume of Franklin D. Azar Associates). Plaintiffs have satisfied Rule 23(a)(4). 24 D. Plaintiffs Meet the Requirements of Fed. R. Civ. P. 23(b) When an action satisfies the prerequisites of Rule 23(a), the action may be certified for class treatment provided that it meets at least one of the categories in Rule 23(b). Here, Plaintiffs request that the Court certify the proposed Class under Rule 23(b)(2), 25 or, alternatively, under Rule 23(b)(3). 26

24 25

Plaintiffs have therefore also satisfied Rule 23(g)(1)(B) and (C).

"When class certification is validly sought in the alternative under Rule 23(b)(2) and (b)(3), a mandatory (b)(2) class is preferred." Cook, 151 F.R.D. at 388 (citing Bing v. Roadway Express, Inc., 485 F.2d 441, 447 (5th Cir. 1973)). If the Court certifies pursuant to Fed. R. Civ. P. 23(b)(2), under which notice to Class members is not mandatory, Plaintiffs request that the Court exercise its discretion to order "appropriate notice to the class." Fed. R. Civ. P. 23(c)(2)(A). Further, pursuant to Rule 23(d)(2), Plaintiffs request that this Court give Class members an opt-out right. See, e.g., In re Monumental Life Ins. Co., 365 F.3d 408, 416 (5th Cir. 2004); Molski v. Gleich, 318 F.3d 937, 947 (9th Cir. 2003) ("a district court may require notice and the right to opt-out under its discretionary authority provided in Rule 23(d)(2)."); Jefferson v. Ingersoll Int'l, Inc., 195 F.3d 894, 898 (7th Cir. 1999) (contemplating the use of opt-out rights for a rule 23(b)(2) class); Eubanks v. Billington, 110 F.3d 87, 94 (D.C. Cir. 1997) (holding that the language of Rule 23 is sufficiently flexible to afford district courts the discretion to grant opt-out rights for Rule 23(b)(2) classes). - 21 001434-11 166034 V1 26

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1.

The Class' claims should be certified in whole or in part under Rule 23(b)(2)

Classes may be certified pursuant to Rule 23(b)(2) when: The party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole. The requirements of this subsection of Rule 23 are satisfied where "settling the legality of the [opposing party's] behavior with respect to the class as a whole, is appropriate." Fed. R. Civ. P. 23, Advisory Committee Notes. State Farm has acted or refused to act on grounds generally applicable to the Class by uniformly failing to offer enhanced PIP coverage to all policyholders, and then refusing to acknowledge the obligation to provide such enhanced coverage that arises from this failure. To remedy this conduct, the proposed Class seeks declaratory and injunctive relief: (i) declaring that State Farm did not offer the enhanced PIP benefits required by C.R.S. § 10-4-710; (ii) declaring State Farm's failure to offer the coverage a violation of C.R.S. § 10-4-710; (iii) reforming every State Farm policy during the Class Period to include the enhanced PIP benefits; and (iv) declaring that all pedestrians who sustained injuries and received benefits in a covered occurrence are entitled to enhanced PIP benefits. Not even State Farm can seriously dispute that the reformation claim is properly certified under Rule 23(b)(2). Plaintiffs seek reformation for the Class as a whole. The claim requires a determination of the legality of State Farm's practices and, if the Class succeeds, reformation of the relevant policies to the benefit of the entire Class. This is an archetypical application of Rule

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23(b)(2), as the date of reformation must be set for each Class member in order to finally resolve the Class' claims. 27 In addition to Class-wide policy reformation, the Class seeks the benefits that flow directly from the reformation of the relevant policies: namely, the additional benefits to which they are entitled as a result of incorporation enhanced PIP into the governing policies. Where, as here, the damages are incidental to declaratory and injunctive relief, the mere fact that monetary relief will result does not preclude certification under Rule 23(b)(2). See Monumental Life, 365 F.3d 408; see also, e.g., Probe v. State Teachers' Ret. Sys., 780 F.2d 776, 780 (9th Cir. 1986) ("Class actions certified under Rule 23(b)(2) are not limited to actions requesting only injunctive or declaratory relief, but may include cases that also seek monetary damages."); Simmons v. Kansas City, 129 F.R.D. 178, 181 (D. Kan. 1989) ("[n]or do plaintiffs' prayers for monetary, in addition to injunctive, relief make certification improper under Rule 23(b)(2)"); Volkman v. United Transp. Union, 1986 U.S. Dist. Lexis 30187, at *24-25 (D. Kan. Jan. 22, 1986) (same holding with respect to the equitable remedy of backpay in a Title VII case); Valdez v. Kansas State Dep't of Social & Rehabilitative Servs., 1977 U.S. Dist. Lexis 15307, at *30-31 (D. Kan. 1977) (same). The reasoning of the Fifth Circuit in Monumental Life is compelling, and fully applicable to the facts of this case. In Monumental Life, the plaintiff policyholders sought injunctive relief, reformation and resultant monetary relief as a result of their claims that the defendant life insurance companies paid lower benefits and charged higher premiums to African Americans. 365 F.3d at 411. Plaintiffs sought "(1) an injunction prohibiting the collection of discriminatory Given the Court's explicit power under Rule 23(c)(4), it may choose to certify only these issues pursuant to Rule 23(b)(2). - 23 001434-11 166034 V1 27

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premiums, (2) reformation of policies to equalize benefits, and (3) restitution of past premium overcharges or benefit underpayments." Id. at 412-13. The district court denied plaintiffs' motion for certification pursuant to Rule 23(b)(2) based primarily upon the findings that (i) "the majority of class members would not benefit from injunctive relief," id. at 411; and (ii) "plaintiffs' claims for monetary relief predominate over their claims for injunctive relief." Id. at 413. The Fifth Circuit found this holding to be an abuse of discretion, and reversed. The Fifth Circuit flatly rejected the district court's suggestion that a (b)(2) class could not be certified because "`many' proposed class members ­ those whose policies have lapsed, those whose policies have already been voluntarily adjusted by defendants, and those whose death benefits already have been paid ­ would not benefit from injunctive relief." Id. at 415. Because a "sufficient proportion" of the class members would benefit from certification, the Fifth Circuit found "that the class as a whole is deemed properly to be seeking injunctive relief." Id. at 416. The same is true here, where many (but not all) of those injured pedestrians who have received PIP payments will benefit from the relief sought. Likewise, the Fifth Circuit found that that the prayer for monetary damages posed no bar to (b)(2) certification ­ even though Monumental Life was "not a case in which class members are entitled to a one-size-fits-all refund; assuming liability is established, individual damages will depend on the idiosyncracies of the particular dual rate or dual plan policy," and would require "`thousands' of grids . . . to account for the myriad of policy variations." Id. at 419-19. Noting that "the monetary predominance test does not contain a sweat-of-the-brow exception," id., the court held that (b)(2) certification was available so long as the monetary relief "flow[s] directly from liability to the class as a whole on the claims forming the basis of the injunctive or

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declaratory relief." Id. at 416 (emphasis in original) (quoting Allison v. Citgo Petroleum Co., 151 F.3d 402, 415 (5th Cir. 1998)). The same is true here: once the date of reformation is establ