State Farm's Tennessee auto policy promises to pay the “actual cash value” of a totaled vehicle, a figure generated through an Audatex “Autosource Report” that draws on a database of advertised and recently sold vehicles. When the report relied on advertised prices, Audatex applied a “typical negotiation” adjustment to reflect that, as its experts assumed, “most people” negotiate used-car prices down from the listed amount. Named plaintiff Jessica Clippinger — whose 2017 Dodge minivan was totaled in 2019 — sought to represent about 90,000 Tennesseans whose payouts included the adjustment, alleging that it systematically undervalued comparator vehicles in breach of her policy and the Tennessee regulation governing total-loss settlements.
U.S. District Judge Thomas L. Parker certified the class in 2023, identifying the “central question” as whether the typical-negotiation adjustment “accurately reflects how cars are valued and sold in the market.” To avoid vehicle-by-vehicle proof, he approved a damages model that would recalculate each member's actual cash value by “running every step of State Farm's methodology” except for the typical-negotiation adjustment. A divided Sixth Circuit panel affirmed in 2025, but the en banc court vacated that decision and reheard the case on March 18, 2026.
Writing for a 10-7 majority, Judge Eric E. Murphy concluded that even assuming common market-condition questions exist, individualized valuation issues swamp them. “To determine whether State Farm paid ‘actual cash value’ for the 90,000 used vehicles in the class, a jury would have to consider unique evidence about each vehicle's value.” Murphy wrote, adding that the class's common contract claims will require, in his words, “mini trials as to each” class member. The majority emphasized that Tennessee equates actual cash value with fair market value — “the price a willing buyer would pay a willing seller” — and, quoting the court's 2022 decision in Tarrify Properties LLC v. Cuyahoga County, that determining that value “requires an independent and individualized assessment of each absent class member's property.”
The court went further, holding that the district court's formulaic damages model independently violated the Rules Enabling Act, 28 U.S.C. § 2072(b). Murphy wrote that “the district court created a much bigger one: its proposal would violate the Rules Enabling Act.” Quoting Wal-Mart Stores Inc. v. Dukes, 564 U.S. 338 (2011), the majority reasoned that a district court flouts the statute if it seeks to make a class action more manageable by “replac[ing]” the claim-by-claim proceedings required by “individualized” defenses with a “Trial by Formula” approach. Because the policy let State Farm prove fair market value through “other valuation sources, other expert appraisers, other comparable vehicles, or the like” — Murphy's words — limiting it to a scrubbed Autosource Report would strip its “substantive right” to defend individual claims and could harm absent class members whose vehicles might have been undervalued by more than the adjustment amount.
The en banc decision aligns the Sixth Circuit with five other circuits that have rejected materially similar class actions against auto insurers. The court catalogued the lineup: Ambrosio v. Progressive Preferred Ins. Co., 154 F.4th 1107 (9th Cir. 2025); Freeman v. Progressive Direct Ins. Co., 149 F.4th 461 (4th Cir. 2025); Schroeder v. Progressive Paloverde Ins. Co., 146 F.4th 567 (7th Cir. 2025); Drummond v. Progressive Specialty Ins. Co., 142 F.4th 149 (3d Cir. 2025); and Sampson v. United Servs. Auto. Ass'n, 83 F.4th 414 (5th Cir. 2023). The opinion opened by noting that “Five circuit courts have now said ‘no’ because individual issues about the unique value of each used car will dominate all other matters.” With Friday's ruling, no federal appellate court has approved classwide treatment of a negotiation-adjustment claim outside the narrow Washington-regulation context of Jama v. State Farm Mutual Automobile Insurance Co., 113 F.4th 924 (9th Cir. 2024).
The majority took pains to distinguish its own 2020 decision in Hicks v. State Farm Fire & Casualty Co., 965 F.3d 452, which upheld a class challenge to a labor-cost depreciation in Kentucky homeowners' policies. Kentucky law, the court said, barred State Farm from recalculating an initial overestimate and thus left the insurer with no “substantive right” to recontest individual valuations classwide. “Clippinger may not rely on Tennessee law to avoid the need for individual inquiries in the way that Hicks relied on Kentucky law.” Murphy wrote. Jama was likewise distinguishable, the majority said, because a Washington regulation categorically banned any negotiation adjustment, whereas the Tennessee regulation “does not categorically prohibit State Farm from using a typical-negotiation adjustment.”
Judge John K. Bush joined the majority in full but wrote separately to highlight “some additional points” under Rules 23(a) and (b)(3) that he said independently doomed the class. Because Clippinger accepted State Farm's initial offer and later prevailed at a binding appraisal that added about $4,000 to her payout, Bush concluded there could be “no doubt that Clippinger received all of the money that she was owed under the policy.” He warned that certifying the class could force insurers to “raise premiums” or add “arbitration provisions and class action waivers” to their policies, outcomes that, in his words, “may be more of an economic detriment for the absent class members in the long run than the short-term legal problems it purports to solve.”
Judge Julia Smith Gibbons, joined by Judges Karen Nelson Moore, Eric L. Clay, Stephanie Dawkins Davis, Andre B. Mathis, Rachel S. Bloomekatz and Kevin A. Ritz, dissented sharply. “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.” Gibbons wrote. Reading Hicks and the Ninth Circuit's Jama decision to permit certification “when the challenged adjustment categorically results in all class members receiving less than the [ACV].” the dissent warned that the majority “conflicts with circuit precedent and would prevent the certification of valuation-based classes in even the most egregious circumstances.” Borrowing from the Ambrosio dissent, Gibbons wrote that under the majority's view there is “no articulable limit (if any) to what methods are permitted beyond what is provided for in the Contract.” a regime that, she warned, “could prevent class certification even when, for example, an insurer calculated ACV by employing orangutans to pick valuations or by throwing darts at randomly placed valuations on a dartboard.” She also pointed to a parallel class trial in the Eastern District of Arkansas — Chadwick v. State Farm Mutual Automobile Insurance Co. — where a jury found that State Farm's use of the same adjustment breached the class's contracts, calling it “concrete proof of concept” that the damages model could work.
The court reversed the class-certification order and remanded for proceedings consistent with its opinion, leaving Clippinger to pursue any remaining individual breach-of-contract claim on her own and likely foreclosing similar actual-cash-value class actions in the circuit absent state-law authority expressly prohibiting the challenged adjustment. State Farm is represented on appeal by Theodore J. Boutrous Jr., Bradley J. Hamburger, Daniel R. Adler and Matt Aidan Getz of Gibson, Dunn & Crutcher LLP; Jeffrey B. Wall and Judson O. Littleton of Sullivan & Cromwell LLP; Christopher L. Vescovo of Lewis Thomason; and Peter W. Herzog III and Eric L. Robertson of Wheeler Trigg O'Donnell LLP. Clippinger is represented by Jacob L. Phillips of Jacobson Phillips PLLC and Hank Bates and Lee Lowther of Carney Bates & Pulliam PLLC. Adam G. Unikowsky of Jenner & Block LLP argued for amici curiae. The case is Jessica Clippinger v. State Farm Automobile Insurance Co., case number 24-5421, in the U.S. Court of Appeals for the Sixth Circuit.