CVS Caremark Corp. v. Lauriello

• Citation: 175 So.3d 596
• Decision Date: 12 September 2014
• Docket Number: 1120114.,1120010
• Parties: CVS CAREMARK CORPORATION et al. v. John LAURIELLO et al. John Lauriello et al. v. CVS Caremark Corporation et al.
• Court: Supreme Court of Alabama

175 So.3d 596

CVS CAREMARK CORPORATION et al.

v.John LAURIELLO et al.

John Lauriello et al.

v.CVS Caremark Corporation et al.

1120010

1120114.

Supreme Court of Alabama.

Sept. 12, 2014.

As Modified on Denial of Rehearing Feb. 27, 2015.

David G. Hymer and Joel M. Kuehnert of Bradley Arant Boult Cummings LLP, Birmingham; and M. Robert Thornton, Philip E. Holladay, Jr., and Jonathan R. Chally of King & Spalding LLP, Atlanta, Georgia, for appellant/cross-appellee CVS Caremark Corp.

M. Christian King and Lee M. Hollis of Lightfoot Franklin & White, LLC, Birmingham; and Edward P. Krugman and Joel Kurtzberg of Cahill Gordon & Reindel LLP, New York, New York, for appellants/cross-appellees American International Group, Inc., National Union Fire Insurance Company of Pittsburgh, PA, AIG Technical Services, Inc., and American International Specialty Lines Insurance Company.

Bruce J. McKee, John W. Haley, Ralph D. Cook, Scott A. Powell, and James R. Pratt III of Hare, Wynn, Newell & Newton, LLP, Birmingham; James L. North and J. Timothy Francis of James L. North & Associates, Birmingham; and John Q. Somerville of Somerville, LLC, Birmingham, for appellees/cross-appellants John Lauriello et al.

Opinion

SHAW, Justice.

In case no. 1120010, CVS Caremark Corporation (“Caremark”); American International Group, Inc.; National Union Fire Insurance Company of Pittsburgh, PA; AIG Technical Services, Inc.; and American International Specialty Lines Insurance Company (hereinafter sometimes referred to collectively as “Caremark and the insurers”) appeal from the trial court's order certifying as a class action the fraud claims asserted by John Lauriello; James O. Finney, Jr.; Sam Johnson; and the City of Birmingham Retirement and Relief System (hereinafter sometimes referred to collectively as “the plaintiffs”). In case no. 1120114, the plaintiffs cross-appeal from the same class-certification order, alleging that, though class treatment was appropriate, the trial court erred in certifying the class as an “opt-out” class pursuant to Rule 23(b)(3), Ala. R. Civ. P., rather than a “mandatory” class pursuant to Rule 23(b)(1), Ala. R. Civ. P. For the reasons discussed below, we affirm in both appeals.

Facts and Procedural History

In connection with a 1998 nationwide, securities-fraud class action initiated against MedPartners, Inc., a physician-practice-management/pharmacy-benefits-management corporation and the predecessor in interest to Caremark (“the 1998 litigation”), the Jefferson Circuit Court certified a class that included the plaintiffs.¹ Based on the alleged financial distress and limited insurance resources of MedPartners, the 1998 litigation was concluded in 1999 by means of a negotiated “global settlement,” pursuant to which the claims of all class members were settled for $56 million—an amount that, according to the representations of MedPartners, purportedly exhausted its available insurance coverage.² Purportedly based on representations of counsel that MedPartners lacked the financial means to pay any judgment in excess of the negotiated settlement and that the settlement amount was thus the best potential recovery for the class, the trial court, after a hearing, approved the settlement and entered a judgment in accordance therewith.

Thereafter, however, MedPartners, now Caremark,³ allegedly disclosed, in unrelated litigation, that it had actually obtained—and thus had available during the 1998 litigation—an excess-insurance policy providing alleged “unlimited coverage” with regard to its potential-damages exposure in the 1998 litigation—the existence of which it had purportedly concealed in negotiating the class settlement. As a result, in 2003, Lauriello, seeking to be named as class representative, again sued Caremark and the insurers in the Jefferson Circuit Court, pursuant to a class-action complaint alleging misrepresentation and suppression—specifically, that Caremark and the insurers had misrepresented the amount of insurance coverage available to settle the 1998 litigation and that they also had suppressed the existence of the purportedly unlimited excess policy—on behalf of himself and all others similarly situated, i.e., the members of the class certified in the 1998 litigation. Alternatively, Lauriello sought relief from the judgment pursuant to Rule 60(b), Ala. R. Civ. P. Frank G. McArthur, Bill Greene, and Virginia Greene, also members of the class certified in the 1998 litigation, filed a separate but substantially similar action in the Jefferson Circuit Court; their proposed class-action complaint asserted claims almost identical to Lauriello's but named, as additional defendants, plaintiffs' counsel from the 1998 litigation.

In January 2005, the trial court issued an “Order on Class Certification,” in which it concluded that it was unnecessary to certify a new class because, pursuant to the terms of the settlement agreement in the 1998 litigation, it retained jurisdiction of all matters relating to the settlement, including Lauriello's newly asserted fraud claims. Subsequently, Caremark and the insurers simultaneously appealed the trial court's January 2005 order and filed a petition for a writ of mandamus seeking relief therefrom. See Ex parte Caremark RX, Inc., 956 So.2d 1117 (Ala.2006).

Also in response to the trial court's order, McArthur, Bill Greene, and Virginia Greene (hereinafter sometimes referred to collectively as “the intervenors”) sought to intervene in the Lauriello litigation, challenging the qualifications of both Lauriello and his counsel to represent the class and specifically adding as defendants in the complaint in intervention both Lauriello and plaintiffs' counsel from the 1998 litigation. The trial court denied that request as untimely; the intervenors appealed.

This Court, in considering the consolidated appeals and petition for the writ of mandamus, concluded that the petition for the writ of mandamus was the appropriate avenue by which to challenge the trial court's order.⁴ As a result, we dismissed the direct appeal filed by Caremark and the insurers. 956 So.2d at 1119–20. We further granted the mandamus petition and directed the trial court to vacate the challenged order on the ground that any action by Lauriello purportedly filed pursuant to Rule 60(b) was untimely in that it had not been filed within four months after the judgment from which Lauriello sought relief as mandated by Rule 60(b). 956 So.2d at 1124. In addition, we noted that because Lauriello had added new defendants, namely insurers that had not been named in the 1998 litigation, “Lauriello [was] not seeking merely to reopen the settlement agreement [therein] to renegotiate the amount of damages payable to the class....” 956 So.2d at 1125. Therefore, despite the fact that the class identified by Lauriello was indisputably identical to the class certified by the trial court in the 1998 litigation, we nonetheless concluded that, in order to certify the class in the new action, Rule 23, Ala. R. Civ. P., and § 6–5–641, Ala.Code 1975, required the trial court's performance of a “rigorous analysis” to consider, as to the proposed class members, “their relationship to the particular claims and defenses to be asserted in the [new] class action,” which the trial court had clearly failed to evaluate with regard to the suitability for class treatment. 956 So.2d at 1125. As to the intervenors' appeal, we reversed the trial court's order denying them intervention based on our findings that “none of the parties [would] be prejudiced by the intervention, ... justice [might] not be attained if intervention [was] not allowed, and ... intervention at this stage of the litigation would not prejudice the ... parties.” 956 So.2d at 1129.

Following the release of our opinion, proceedings resumed in the trial court in accordance with that opinion, including the trial court's entry of an order deeming the intervenors' “Class Action Complaint in Intervention” filed. Lauriello amended his class-action complaint to add Finney, Johnson, and the City of Birmingham Retirement and Relief System (“the Retirement System”) as additional named plaintiffs; the newly added plaintiffs later moved to be named as class representatives.

Following the defendants' answers to the amended complaint, the trial court entered an order dismissing with prejudice “the lawyer defendants”⁵ added by the intervenors' complaint in intervention on the ground that the four-year statute of repose applicable under the Alabama Legal Services Liability Act, see § 6–5–574, Ala.Code 1975, barred all claims against them. The trial court certified that judgment as final pursuant to Rule 54(b), Ala. R. Civ. P., and the intervenors again timely appealed. The trial court, thereafter, denied Lauriello's motion seeking to similarly dismiss the remaining claims asserted against him by the intervenors' complaint. This Court subsequently affirmed, without an opinion, the trial court's dismissal of the lawyer defendants. See McArthur v. Yearout & Traylor, P.C. (No. 1070513, Sept. 12, 2008), 34 So.3d 737 (2008) (table).

Following our no-opinion affirmance, proceedings again resumed in the trial court, including the voluntary dismissal of intervenor Bill Greene as a party and the withdrawal by the remaining intervenors, McArthur and Virginia Greene, of their complaint in intervention, including the claims against Lauriello, and their motion seeking to disqualify Lauriello and Lauriello's counsel pursuant to a “Lead Counsel Agreement” reached between the two plaintiff groups and their respective counsel.⁶ In addition, Lauriello withdrew his previous request to be appointed a class representative.

Thereafter, discovery as to the class-certification issue commenced. The record reflects numerous discovery-related disputes, which ultimately necessitated the trial court's appointment of a special master to oversee the process.⁷ The plaintiffs, thereafter, sought certification pursuant to Rule 23(b)(1) and (b)(3),...