Ex parte First Nat. Bank of Jasper

Decision Date16 December 1997
Citation717 So.2d 342
PartiesEx parte FIRST NATIONAL BANK OF JASPER. (Re Henry Dale ODOM v. FIRST NATIONAL BANK OF JASPER). 1961542.
CourtAlabama Supreme Court

Hobart A. McWhorter, Jr., and Matthew H. Lembke of Bradley, Arant, Rose & White, Birmingham, for petitioner.

Garve Ivey, Jr., of King, Ivey & Junkin, Jasper, for respondent.

COOK, Justice.

First National Bank of Jasper ("the Bank") petitions for a writ of mandamus directing Judge James Moore, judge of the Fayette County Circuit Court, to vacate an order "conditionally" certifying an action against the Bank as a class action pursuant to Ala. R. Civ. P. 23. We grant the petition.

This action began on May 24, 1994, when Henry Dale Odom filed a complaint in the Fayette County Circuit Court against the Bank. Also named as defendants were John Crump Motors, Inc., d/b/a/ John Crump Mazda ("Crump"); and Protective Life Insurance Company. Odom alleged that he had purchased an automobile from Crump, pursuant to an installment contract that "included charges for credit life insurance premiums"; and that "the amount of insurance actually purchased for [his] benefit and provided by the Defendants was far in excess of an amount sufficient to protect the unpaid indebtedness ... under his installment contract." He sought compensatory and punitive damages under theories of breach of contract, fraud, and the tort of outrage, and equitable relief under a theory of unconscionability. In addition, he sought certification of a class composed of "persons who ... bought credit life insurance through the Defendants."

On April 22, 1997, Odom filed his own affidavit "in support of conditional class certification." Three days later, the Bank filed a "notice of deposition of plaintiff," "first interrogatories and requests for production," and "first requests for admissions to plaintiff." However, on June 19, 1997, before the deposition was conducted; before a response to the other discovery requests was filed; and before any hearing on class certification was held, the trial court entered an "order of conditional certification," by which the "action [was] conditionally certified under [Ala. R. Civ. P.] 23(b)(3) as to all claims for money damages and [under] Rule 23(b)(2) as to all claims for injunctive relief." (Emphasis added.)

On June 19, 1997, the Bank filed this petition for a writ of mandamus directing the trial judge to vacate his order of conditional certification. The Bank stated:

"The Bank submits this petition because the trial court ... conditionally certified a class without a motion for conditional certification ever having been filed, and without conducting a hearing, thus denying the Bank an opportunity to be heard on the certification issue. ... The circumstances surrounding the entry of the certification order comport with neither the requirements of Rule 23, nor the requirements of fundamental fairness guaranteed under the Due Process Clause of the United States Constitution."

Odom, however, argues that Rule 23(c)(1) "expressly sanctions conditional class certification." Answer and Brief in Response to Petition for Writ of Mandamus, at 9. Specifically, Rule 23(c)(1) provides: "As soon as practicable after the commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained. An order under this subdivision may be conditional, and may be altered or amended before the decision on the merits." (Emphasis added.) The Bank urges us to use this "opportunity to put to rest the widespread uncertainty as to whether 'conditional' class certification is an allowable procedure under the Alabama Rules of Civil Procedure." Petition for Writ of Mandamus, at 1-2.

As the Bank correctly points out, the practice of granting--in a summary or ex parte manner--motions for "conditional certification," has become commonplace throughout Alabama. Indeed, this Court is today deciding no fewer than four cases--besides this one--involving this precise issue. See Ex parte American Bankers Life Assurance Co. of Florida, 715 So.2d 186 (Ala.1997); Ex parte Citicorp Acceptance Co., 715 So.2d 199 (Ala.1997); Ex parte Equity National Life Insurance Co., 715 So.2d 192 (Ala.1997); and Ex parte Mercury Finance Corp. of Alabama, 715 So.2d 196 (Ala.1997). The Bank argues that this procedure violates the rule set forth in General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 102 S.Ct 2364, 72 L.Ed.2d 740 (1982), and "the requirements of fundamental fairness guaranteed under the Due Process Clause of the United States Constitution."

This case and those other four like it, cited above, actually require the Court to address two problems involving class-action practice. The first is to determine whether the practice of certifying classes "conditionally," as was done in this case, complies with Rule 23 and with due process guarantees. If we answer that question in the negative, then we must then address the incentive that gave rise to the practice.

I. Conditional Certification

The place to begin our analysis of this aspect of the case is with the Rule itself and an examination of the language on which Odom relies. Rule 23(c)(1) provides that "[a]n order ... may be conditional." (Emphasis added.) Furthermore, Rule 23(d) provides that in class actions "the court may make appropriate orders: (1) determining the course of proceedings or prescribing measures to prevent undue repetition or complication in the presentation of evidence or argument; ... (3) imposing conditions on the representative parties or on intervenors; ... [or] (5) dealing with similar procedural matters." It is well settled that these provisions authorize trial courts to certify "conditional" or "temporary" classes under certain conditions.

For example, a conditional class may properly be certified to operate "as long as no potential conflicts materialize, provided common issues alleged are borne out by discovery, provided the case remains manageable, provided suitable notice can be given, or the like." 2 Newberg on Class Actions § 7.33 (3d ed.1992). Other examples are those cases in which "defendants ... stipulate or determine not to oppose class certifications." Id. § 7.10 (emphasis added) (footnotes omitted).

Perhaps the most familiar example of this latter type is the certification of "conditional" or "temporary" classes for settlement purposes. "When the court has not yet entered a formal order determining that the action may be maintained as a class action, the parties may stipulate that it be maintained as a class action for the purpose of settlement only." Id. § 11.27, at 11-40 (footnote omitted). "In these circumstances, courts often accommodate the parties by establishing temporary classes for settlement purposes in connection with the sending of notices to class members under Rule 23(e)." Id. The certification of a "temporary settlement class [may be viewed] as nothing more than a tentative assumption indulged in by the court to facilitate the amicable resolution of the litigation, rather than as some sort of conditional class ruling under Rule 23 criteria." Id. at p. 11-50 (emphasis added). Newberg continues:

"The actual class ruling is deferred in these circumstances until after hearing on the settlement approval, following notice to the class. At that time, the court in fact applies the class action requirements to determine whether the action should be maintained as a class action and whether the class settlement should be approved. Viewed in this light, a court ruling creating a temporary settlement class at the request of the parties is not a formal class ruling. The court has not yet applied Rule 23 criteria--either in a strict or a lax fashion--so that the contention that use of this device undermines the proper application of class actions tests appears to miss the mark."

Id. (emphasis added) (footnote omitted).

Temporary settlement classes bear two significant characteristics. First, they are entered upon the agreement of the defendant. Second, they promote the strong policy favoring settlements. See id. at 11-44; In re Chicken Antitrust Litig. American Poultry, 669 F.2d 228, 238 (5th Cir.1982); In re PaineWebber Limited Partnerships Litig., 171 F.R.D. 104 (S.D.N.Y.), aff'd, 117 F.3d 721 (2d Cir.1997). Thus, as observed by In re General Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litig., 55 F.3d 768 (3d Cir.), cert. denied sub nom. General Motors Corp. v. French, 516 U.S. 824, 116 S.Ct. 88, 133 L.Ed.2d 45 (1995), modified on other grounds, Amchem Prod., Inc. v. Windsor 521 U.S. 591, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997):

"[N]otwithstanding that there is an absence of clear textual authorization for settlement classes, many courts have indulged the stipulations of parties by establishing temporary classes for settlement purposes only. See, e.g., Mars Steel v. Continental Illinois Nat'l Bk. & Trust, 834 F.2d 677 (7th Cir.1987); Weinberger v. Kendrick, 698 F.2d 61 (2d Cir.1982), cert. denied, 464 U.S. 818, 104 S.Ct. 77, 78 L.Ed.2d 89 (1983); In re A.H. Robins Co., 880 F.2d 709, 738-39 (4th Cir.1989); In re Dennis Greenman Sec. Litig., 829 F.2d 1539, 1543 (11th Cir., 1978[1987]); Plummer v. Chemical Bank, 668 F.2d 654 (2d Cir.1982); In re Beef Industry Antitrust Litig., 607 F.2d 167, 173 (5th Cir.1979); Malchman v. Davis, 706 F.2d 426, 433-34 (2d Cir.1983); In re Taxable Mun. Bond Sec. Litig., [MDL-863, E.D. La., Nov. 15, 1994]; In re Silicone Gel Breast Implant Prod. Liab. Litig., [CV-92-P-10000-S., N.D. Ala., Sept. 1, 1994]; In re First Commodity Corp. of Boston, 119 F.R.D. 301, 306-08 (D.Mass.1987); In re Bendectin, 102 F.R.D. 239, 240 (S.D.Oh.1984), rev'd on other grounds, 749 F.2d 300 (6th Cir.1984); In re Mid-Atlantic Toyota Antitrust Litig., 564 F.Supp. 1379, 1388-90 (D.Md.1983); In re Chicken Antitrust Litig., 560 F.Supp. 957, 960 (N.D.Ga.1980)."

55 F.3d at 786. Class certifications of the type involved in ...

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