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Nationwide class allegations dismissed due to plaintiff’s lack of standing in lender-placed insurance case

On January 28, 2014 by Schnader in Finance

By Monica C. Platt

In Lauren v. PNC Bank, N.A., a judge in the Western District of Pennsylvania dismissed nationwide class allegations in an action challenging lender-placed insurance practices. The decision limits named plaintiffs’ ability to bring state law claims under the laws of states where they do not reside and where they were not injured.

Ultimately, the issues in this case boiled down to whether a named plaintiff who did not suffer injuries in a particular state has standing to assert a proposed national class action for claims based on that state’s laws, and whether a standing determination must await class certification. The court found—prior to certification—that such a plaintiff lacks standing.

Lauren, whose property was located in Ohio and who was a resident of Ohio, asserted unjust enrichment claims under Ohio law and under other states’ laws on behalf of putative class members. Defendants argued that although she could assert the Ohio claims, she lacked standing to assert unjust enrichment claims under the laws of any other state. The district court agreed. Lauren claimed that because she clearly had standing to assert the Ohio law claims, her fitness to assert claims under the law of other states on behalf of class members should be deferred until after class certification. Circuits are split on this issue, but the court decided that the named plaintiff’s standing to assert state law claims is a threshold issue that should come before class certification.

The court relied primarily on the analysis of the Eastern District of Pennsylvania in In re Wellbutrin XL Antitrust Litigation, which found that standing must be analyzed claim-by-claim and state-by-state. The judge adopted the Wellbutrin court’s analysis that “[a] named plaintiff whose injuries have no causal relation to, or cannot be redressed by, the legal basis for a claim does not have standing to assert that claim.” Therefore, if a named plaintiff’s injuries have no relation to the state in which a claim is made, and that state’s laws cannot provide any remedy, the named plaintiff does not have standing to assert a violation of that state’s laws.

The court also found persuasive the Wellbutrin court’s analysis that to determine standing only after a class is certified would allow the named plaintiffs to engage in time-consuming class discovery in potentially every state and possibly result in named plaintiffs representing the “claims of parties whose injuries and modes of redress they would not share.” This, the Wellbutrin court found, was exactly what the doctrine of standing was designed to prevent, and would result in the court having to address the same question later in litigation.