Motion for Class Certification Denied in Fraud Action Against Xactware

On August 3, Davis Polk & Wardwell LLP secured an order from the Eastern District of Louisiana denying a motion for class certification in a fraud case against its client, Xactware Solutions, Inc. (Xactware). Xactware is a software company that provides programs and data that aid in the estimation of insurance claims and construction costs. One such program, Xactimate, provides insurance companies and contractors with a sophisticated tool that allows them to keep track of, and more easily determine, an estimate for damage to a home. Xactware also publishes price lists on a periodic basis that can be plugged into Xactimate, and that provide an estimate for the costs to repair particular line items, such as roofing damage and drywall.

An action was brought against Xactware and State Farm Fire & Casualty Co., alleging that they intentionally drove down the listed prices for repairing specific items, and that this resulted in underpayment of insurance claims to Louisiana homeowners particularly in the wake of Hurricanes Katrina and Rita. Both defendants vigorously deny those allegations. The plaintiffs originally alleged that Xactware was liable for antitrust, fraud, negligence and breach of contract. After several motions to dismiss, the court dismissed all claims against Xactware except the fraud claim.

After an evidentiary hearing, the court denied plaintiffs' motion for class certification. In doing so, the court relied on the argument that the determination of whether and to what extent homeowners were underpaid by their insurer for damage to their homes was necessarily an individualized inquiry that could not be determined on a class-wide basis.

The Davis Polk team on the class certification dispute included partner Joel M. Cohen, counsel Gina Caruso, associates Daniel S. Kahn, Seth Caffrey and Zachary D. Shankman, and legal assistant Michael E. Martin. Associates Michael Scheinkman, Scott K. McCulloch and Peter A. Nelson worked on the motions to dismiss. All members of the Davis Polk litigation team are based in the New York office.

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