Adams v. Robertson

• Decision Date: 22 December 1995
• Citation: 676 So.2d 1265
• Parties: Guy E. ADAMS, et al. v. Charlie Frank ROBERTSON and Liberty National Life Insurance Company. 1 1931603 to 1931607, 1931610 to 1931617.
• Court: Alabama Supreme Court

Page 1265

676 So.2d 1265

Guy E. ADAMS, et al. v. Charlie Frank ROBERTSON and Liberty National Life Insurance Company. ¹

1931603 to 1931607, 1931610 to 1931617.

Supreme Court of Alabama.

Dec. 22, 1995.

Rehearing Denied Feb. 16, 1996.

Norman E. Waldrop, Jr., and M. Kathleen Miller of Armbrecht, Jackson, DeMouy, Crowe, Holmes & Reeves, L.L.C., Mobile, for Appellants in 1931603.

Steve C. Olin of Olin & McGlothren, P.C., Mobile, for Appellants in 1931604 and 1931617.

George W. Finkbohner III of Finkbohner & Lawler, Mobile, and C.S. Chiepalich, Mobile, for Appellants in 1931605.

William C. Roedder, Jr., W. Alexander Mosely and J. Michael Fincher of Hand, Arendall, Bedsole, Greaves & Johnston, Mobile, for Appellants in 1931606.

J. Gusty Yearout of Yearout, Myers & Traylor, P.C., Birmingham; and M. Clay Ragsdale IV, Birmingham, for Appellants in 1931607.

John D. Richardson, David F. Daniell and G. Randall Spear of Richardson, Daniell, Spear and Upton, P.C., Mobile, for Appellants in 1931610 and 1931611.

Kent Baxley, Mobile, for Appellants in 1931611.

Roderick P. Stout of Stout & Rossler, Mobile, for Appellants in 1931614.

Philip J. Sanchez IV, Monroeville, for Appellants in 1931615.

Richard L. Thiry and Lester McIntyre of Thiry & Caddell, Mobile, for Appellants in 1931616.

James W. Gewin, Michael R. Pennington and James W. Davis of Bradley, Arant, Rose & White, Birmingham; and Horace Williams, Eufaula, for Appellee Liberty National Life Ins. Co.

Jere L. Beasley, Frank M. Wilson and James Allen Main of Beasley, Wilson, Allen, Main & Crow, P.C., Montgomery; and Walter R. Byars, Jr., of Steiner, Crum & Baker, Montgomery, for Appellee Charlie Frank Robertson, etc.

KENNEDY, Justice.

This is an appeal by approximately 400 objecting class members (hereinafter "Objectors") from a judgment based on a class action settlement regarding cancer insurance policies.

Liberty National Life Insurance Company began selling cancer insurance policies (hereinafter referred to as "old policies") in the 1960's. The policies provided unlimited coverage for radiation, chemotherapy, and prescription drugs to fight cancer. Specifically, the policies covered the costs of radiation and chemotherapy, whether it was done on an inpatient basis or on an outpatient basis. Also, the policies provided coverage for drugs and medicine administered outside the hospital, including pain and anti-nausea medications. As long as the policyholder paid the premiums, the cancer policies could not be canceled and were guaranteed renewable for the life of the policyholder.

According to the objectors, in late 1986 Liberty National began a cancer policy exchange program whereby its agents attempted to persuade those with the old policies to switch to the new policies. The new cancer policies contained some benefits not included in the old policies, such as a first-occurrence benefit, hospice care, and dread disease benefits. However, the new policies contained severe limitations on coverage in comparison to the old policies. Radiation and chemotherapy benefits were each limited to $500 a day. Prescription drugs covered under the new policies were limited to certain "cancer fighting" prescription drugs, while pain and anti-nausea drugs were no longer covered. Outpatient chemotherapy benefits were limited to $8,000 a year.

Liberty National denied the allegations about "switching" policies and contended that the new policies provided substantially greater overall coverage than the old policies and that the new policies have paid substantially greater sums in benefits to those who were diagnosed with cancer.

Liberty National had approximately 400,000 customers with the old policies. The objectors contend that those customers who switched from an old policy to a new policy On May 12, 1992, Charlie Frank Robertson sued Liberty National, alleging that it had fraudulently caused loans to be made against his life insurance policy. On October 2, 1992, the complaint was amended to add new allegations concerning a pattern and practice of fraud that caused approximately 200,000 holders of old cancer policies to exchange their policies for new cancer policies. The amended complaint sought equitable and legal relief for all the policyholders by virtue of a class action, with Robertson as a class representative. Following a hearing, a class was certified. Robertson's original life insurance claim was subsequently settled.

did so based upon a pattern and practice of fraud perpetrated by Liberty National.

Certain policyholders filed objections to their inclusion in the class. Two different groups of objectors also filed their own class actions involving the cancer policy exchange programs. These class actions were stayed by this Court because where two or more courts have concurrent jurisdiction the one that takes cognizance of the action first retains exclusive jurisdiction until a final determination. Ex parte Liberty Nat'l Life Ins. Co., 631 So.2d 865 (Ala.1993).

Liberty National and counsel for the class began settlement negotiations. On June 16, 1993, Liberty National and the class representatives entered into a settlement agreement. The trial court preliminarily approved the settlement, subject to notice to the class and an opportunity for the objectors to present their objections to the settlement at a fairness hearing.

In August 1993, notice of a class action was mailed to the more than 400,000 policyholders. The notice included a copy of the settlement agreement and advised the class members of their right to object and be heard. Approximately 1,000 of the 400,000 class members filed objections to the settlement.

A fairness hearing was held on January 20, 1994. The trial court heard oral testimony, and written materials were also submitted. On February 4, 1994, the trial court entered an order conditionally approving the settlement so long as the parties agreed to certain court-imposed modifications to the settlement. The trial court stayed its order pending certain objectors' concerns over releasing Liberty National's parent company, Torchmark Corporation, and allowed the objectors to have additional discovery.

On May 19, 1994, the trial court held a final hearing concerning the proposed settlement. On May 26, 1994, the trial court entered its findings of fact and conclusions of law in a 67-page memorandum and made the order final. (C.R. 5656-5721, 5722-34.) Approximately 400 objectors appealed.

The objectors argue that the trial court abused its discretion in denying the objectors the right to a jury trial on their claims against Liberty National. Specifically, the objectors claim that their constitutional right to a trial by jury was violated when the trial court failed to allow them to "opt out" of participating in the class action settlement. An opt-out provision would allow the objectors to pursue their own individual lawsuits against Liberty National based on the same claim.

At the outset, we note that Rule 23 of the Alabama Rules of Civil Procedure reads the same as Rule 23 of the Federal Rules, and we consider federal case law on class actions to be persuasive authority for the interpretation of our own Rule 23. See, First Alabama Bank of Montgomery, N.A. v. Martin, 381 So.2d 32 (Ala.1980).

A class action is a procedural device created solely for the purposes of litigation. The goal of a class action is to provide a simple and efficient way for processing numerous interrelated claims. A class action allows one or more persons, known as class representatives, to sue on behalf of the many persons who have the same, or similar, questions of law or fact as the representatives.

Under Rule 23(a), A.R.Civ.P., certain prerequisites must be met in order for one to proceed with a class action: (1) the class must be so numerous that joinder is impracticable; (2) there must be questions of law or fact common to the class; (3) the claims or defenses of the class representatives must be typical of the claims or defenses of the class; and (4) the class representatives must be able to fairly and adequately protect the Once the prerequisites are met, the class action must fit within one of the types of classes described in Rule 23(b).

interests of the class. It is undisputed that the prerequisites have been met in this case.

Rule 23(b)(1) provides that a class action may be maintained if

"the prosecution of separate actions by or against individual members of the class would create a risk of

"(A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or

"(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests...."

A class action may be maintained under Rule 23(b)(2) if "the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole."

A class action under Rule 23(b)(3) is appropriate when

"the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the...