State Farm corporate headquarters campus in Bloomington, Ill. Photo: The Pantagraph/Steve Smedley via AP

A class action that had State Farm and the U.S. Chamber of Commerce banging the table over “extraordinarily burdensome” discovery orders has ended in a whimper after a federal appeals court reversed certification on entirely different issues.

Monday’s ruling by the U.S. Court of Appeals for the Eighth Circuit gave short shrift to the discovery concerns raised by the defense bar. Instead, the panel honed in on the specific language in property insurance policies that convinced U.S. District Judge Nanette Laughrey of the Western District of Missouri to certify a class of 144,900 potential members. The case alleges that State Farm inappropriately depreciated payments made to policyholders for property damages. But the panel found there was no commonality in the class, reversing certification and ordering Laughrey to dismiss the case.

Dan Gustafson, founding member of Gustafson Gluek in Minneapolis, who argued on behalf of the plaintiffs on appeal, said he was “extremely disappointed” with the ruling and was evaluating whether to petition the Eight Circuit for en banc review.

“The court faced two issues: Class certification and the ‘proportional aspect of discovery,’” he said. “Instead, without full briefing or argument, the Court reached out and decided the merits of the case.”

State Farm Fire and Casualty Co. was represented by Heidi Dalenberg, a Chicago partner at Riley Safer Holmes & Cancila, in the appeal. State Farm spokesman Justin Tomczak said in an email: “We are aware of the decision and appreciate the Eighth Circuit’s decision to reverse and dismiss the complaint.”

The case attracted amicus briefs from other insurers, such as Allstate and Liberty Mutual, many of which face similar suits over labor depreciation.

The plaintiff, Amanda LaBrier, sued in 2015 after State Farm deducted more than $1,000 for labor from her insurance payment to pay for a new roof, which was damaged in a hail storm. The class members are all Missouri residents who claim State Farm improperly changed the way it calculated payment amounts made to policyholders by depreciating labor from the actual cash value.

“Our argument is the policy doesn’t allow you to depreciate the labor,” Gustafson said.

Last year, Laughrey ordered State Farm to provide information on each claim so that plaintiffs could calculate damages. That prompted State Farm to file a petition for writ of mandamus before the Eighth Circuit, citing “important issues of first impression” and reversal of two of the discovery orders. The main issue raised in the writ was whether the “extraordinarily burdensome” orders, which State Farm claimed would cost up to $10 million and require 300 claims personnel, properly applied 2015 amendments to the Federal Rule of Civil Procedure 26 that require discovery to be “proportional to the needs of the case.”

The discovery dispute got the attention of Lawyers for Civil Justice and the Chamber, which said in an amicus brief that the “prohibitively expensive request for discovery” in the case ran afoul of the Rule 26 amendments.

“This matter has significant implications for the Chamber’s members, for whom the costs of discovery frequently soar into millions of dollars, resulting in an inexorable pressure to settle claims regardless of the underlying merits,” wrote noted appellate attorney Carter Phillips, a partner at Sidley Austin in Washington, D.C., in the brief.

Another plaintiffs attorney, Christopher Roberts, a partner at Butsch Roberts & Associates in St. Louis, said in a brief opposing the writ that Laughrey, working with a special master, considered the Rule 26 amendments when issuing the discovery orders.

On the same day State Farm filed its writ, Laughrey certified the class. State Farm appealed certification, and the Eighth Circuit consolidated both matters for briefing and oral argument. But Monday’s order focused exclusively on class certification and, in particular, the definition of “actual cash value” in insurance policies.

Laughrey had found that the policy’s language of providing “actual cash value” to policyholders was ambiguous, and therefore gave no indication that labor would be depreciated. But the Eighth Circuit delved into a detailed analysis of insurance law to conclude otherwise.

“The district court erred in concluding that Missouri law does not define ‘actual cash value’ and therefore the term is ambiguous absent a definition in the policy,” wrote panelist James Loken.

Contact Amanda Bronstad at abronstad@alm.com. On Twitter: @abronstadlaw.