Class Action

Hurricane Class Action Defense Cases-Audler v. CBC Innovis: Fifth Circuit Holds Plaintiff Lacked Standing To Prosecute Class Action Against Companies Unrelated To His Property And Affirms Dismissal Of Class Action Complaint Against Remaining Defendant

By Michael J. Hassen

Class Action Alleging Companies Erroneously Advised Lenders that Homes were Outside Flood Zones Properly Dismissed because (1) Plaintiff Lacked Standing to Pursue Class Action Claims Against Companies that did not Provide Plaintiff’s Lender with Flood Zone Determination and (2) Company that Provided such Determination on Plaintiff’s Property owed Duties Only to Lender not Plaintiff Fifth Circuit Holds

After his home suffered floodwater damage from Hurricane Katrina, plaintiff filed a putative class action in Louisiana state court against numerous defendants that provide flood zone determinations to lenders; the class action alleged that defendants failed to properly determine whether homes were located within a Special Flood Hazard Area (SFHA), and sought damages under state law based on theories of negligence, failure to warn, detrimental reliance, and breach of guaranty or warranty. Audler v. CBC Innovis Inc., ___ F.3d ___, 2008 WL 509323 (5th Cir. February 27, 2008). Each claim in the class action complaint was “separate and apart from the federal flood insurance legislation governing lenders and… none of [the] claims arise under that legislation.” Id., at *3. In essence, the class action alleged that the class members failed to secure flood insurance because defendants erroneously advised them that their homes were outside a SFHA, so they were uninsured when Hurricane Katrina struck. Id., at *2. Defense attorneys removed the class action to federal court on the ground of diversity jurisdiction and under the Class Action Fairness Act of 2005 (CAFA), id., at *3. The defense then moved to dismiss the class action complaint for failure to state a claim and for lack of standing, id. The district court agreed with the defense arguments and dismissed the class action. Id. The Fifth Circuit affirmed.

Preliminarily, it bears noting that “[a] determination…that a property is not located within a SFHA does not prevent a borrower from purchasing private flood insurance.” Audler, at *2. The defendant involved in plaintiff’s loan (CBC) argued that it prepared flood zone determinations for the lender and that it owed no duties to the borrower in the loan transaction. Id., at *3. The other class action defendants argued that they were not involved in plaintiff’s loan and thus he lacked standing to prosecute any claims against them, id. Following dismissal of the class action complaint, plaintiff appealed to the Fifth Circuit; two defendants moved to dismiss the appeal for lack of standing. Id.

Full post as published by Class Action Defense Blog on March 13, 2008 (boomark / email).