Key Points

  • The Court of Appeals for the Sixth Circuit, sitting en banc, reverses class certification in a State Farm 'actual cash value' dispute, joining other circuits in rejecting class treatment of similar claims on predominance grounds.
  • The court holds that individualized vehicle valuation evidence, appraisal rights, and alternative valuation methods under Tennessee's insurance regulation defeat predominance even where a common damages formula exists.
  • The majority invokes the Rules Enabling Act, warning that damages models barring insurer rebuttal evidence amount to an impermissible 'Trial by Formula.'
  • A seven-judge dissent argues the adjustment's alleged uniform, unlawful effect should have supported class-wide proof of injury, citing a comparable case that reached a jury verdict in another federal court.

The Court of Appeals for the Sixth Circuit, sitting en banc, has reversed an order certifying a class of roughly 90,000 State Farm auto policyholders who challenged the insurer's practice of discounting comparable-vehicle prices before calculating the 'actual cash value' of totaled cars. The court held that individualized valuation questions predominate over any common issues.

The dispute centers on a 'typical negotiation' adjustment that State Farm applied to advertised prices of comparable used vehicles when estimating a totaled car's actual cash value, on the theory that buyers typically negotiate discounts off sticker prices. Named plaintiff Jessica Clippinger argued the adjustment was outdated given modern online used-car shopping and systematically undervalued claims. She did not challenge any other part of State Farm's valuation methodology.

The Western District of Tennessee certified the class, accepting Clippinger's proposed formula: recalculate each member's Autosource Report by simply removing the negotiation adjustment and refunding the difference. A divided panel affirmed, but the en banc court vacated that decision and reheard the case, with argument held March 18, 2026.

The majority opinion frames the case as the latest entry in an increasingly uniform body of circuit law. 'Five circuit courts have now said "no" because individual issues about the unique value of each used car will dominate all other matters,' the opinion states, citing recent decisions from the Third, Fourth, Fifth, Seventh, and Ninth Circuits.

The court found that Clippinger's proposed common question—whether the adjustment 'accurately reflects' negotiation practices in the used-car market—does not resolve whether any individual class member was underpaid. Because State Farm's policy and a Tennessee valuation regulation permit multiple appraisal methods and preserve a binding appraisal process, the insurer retains the right to introduce vehicle-specific evidence, including alternative valuations and appraiser findings, to show it paid fair market value to any given member notwithstanding the adjustment. A jury would have to weigh 'unique evidence about each vehicle's value,' the opinion explains, and that individual valuation would 'predominate' over all other questions under Federal Rule of Civil Procedure 23(b)(3).

The court also held that the damages formula below violated the Rules Enabling Act by effectively stripping State Farm of a substantive right to litigate valuation on a case-by-case basis. Courts, the opinion explains, 'may not meet the predominance element by barring a defendant from raising unique statutory or contractual defenses to individual claims,' and a court flouts the Act if it tries to streamline a class action by 'replac[ing]' the claim-by-claim proceedings required by 'individualized' defenses with a 'Trial by Formula' approach.

In a separate concurrence, one member of the en banc court went further, arguing that Clippinger's own case—in which she first accepted a settlement and later received a higher appraisal award—demonstrated she had already received everything owed under the policy, making her an inadequate class representative under Rule 23(a)(4). The concurrence also flagged, for future cases, an unresolved question about whether absent class members without a cognizable injury can be counted toward Rule 23(a)(1) numerosity.

Seven judges dissented. The dissent argued that Clippinger's theory was categorical rather than individualized: if the adjustment is always negative and legally improper, then every class member was necessarily underpaid by the same mechanism, making the resulting damages calculation amenable to common proof. 'Because the district court did not abuse its discretion in concluding that these common questions of liability predominate over any individualized damages issues, we respectfully dissent,' the dissent states, pointing to a materially identical class that reached a jury verdict and settlement in another federal case.

For practitioners, the decision supplies a roadmap for insurers defending valuation-adjustment classes: emphasize that the policy and any governing regulation permit multiple valuation methods and preserve appraisal rights; show through the named plaintiff's own claims history that valuations can move in either direction after the challenged adjustment; and resist any damages model that forecloses vehicle-specific rebuttal evidence as an improper 'Trial by Formula.'