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August 06, 2010

The U.S. District Court in Texarkana, Texas, dismissed Hollinger, et al. v. Home State County Mutual Insurance Company, et al, on August 5, 2010 for lack of subject matter jurisdiction. The action alleged discrimination in violation of Texas Insurance Code Sec. 544.052. Larry Parks of Mitchell Williams’s Austin, Texas, office represented two of the principal insurance company defendants and seven of the reinsurance company defendants.  There were thirty auto insurance companies and reinsurers sued in the action.

The action was dismissed based on the “home state” and “local controversy” exceptions to Class Action Fairness Act (“CAFA”) minimum diversity jurisdiction.  Generally, class action cases that have national or multi-state implications can be maintained in federal courts.  Alternatively, if a class action implicates only (or primarily) the citizens of one state, the federal courts should decline jurisdiction.  The “home state” and “local controversy” exceptions to federal class action jurisdiction are based on the requirement that the court should decline jurisdiction if more than two-thirds of the potential class plaintiffs are “citizens” of the state in which the action is filed.

The insurance company defendants used a combination of company data (99.99% of the insured vehicles are in Texas) and U.S. Census Bureau data (11% of Texans are not U.S. citizens) to satisfy the court that more than two-thirds of the potential class plaintiffs are Texas and U.S. citizens.  The order dismissing the case says, “Although the [insurance company] statistics about Texas residents are not specific to the policyholders, these statistics are nonetheless probative, particularly in the absence of any contrary showing by plaintiffs.”  The court took judicial notice that Texas is a “sticky state”—that is, only about 5.2% of Texans moved out of the state during the relevant time period—rebutting the plaintiffs’ argument that the policyholders could have fled the state and thereby impacted the requirement that two-thirds of the potential class members are Texas and U.S. citizens.

Texas class action lawyers continue to avoid filing cases in state courts because they have difficulty getting their cases certified as class actions.  Their alternative is to file in federal court—but they must meet the jurisdictional requirements to stay there.  In Hollinger, et al. v. Home State, et al., the plaintiffs were not able to persuade the court that the case had implications outside of Texas and the case was dismissed.

Larry Parks is certified in Civil Trial Law by the Texas Board of Legal Specialization.  This is his 38th year of practicing law in Austin, Texas.

Please click below to view the Order of Dismissal.

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