Hefty v. All Other Members of the Certified Settlement Class, No. 61S05-9507-CV-799

Docket NºNo. 61S05-9507-CV-799
Citation680 N.E.2d 843
Case DateJune 02, 1997
CourtSupreme Court of Indiana

Page 843

680 N.E.2d 843
Michael D. HEFTY, Virgil Jackson, Mangus Trust, (Walter L.
Mangus, Trustee), Mary Ann's Trust and Richard's Trust
(Forest Warren, Trustee), Carolyn Pickering, Forest Warren,
Appellants (Class Members and Objectors below),
v.
ALL OTHER MEMBERS OF THE CERTIFIED SETTLEMENT CLASS, Namely,
All Initially Noticed Persons Owning Real Property Adjacent
to Railroad Rights-of-Way in the State of Indiana which the
Penn Central Corporation Formerly Owned or Controlled and
Which Were Transferred to U.S. Railroad Vest by Quitclaim in
1992 Except for those Who Have Submitted Valid Written
Requests for Exclusion, Appellee (Class Representative below),
Penn Central Corporation and U.S. Railroad Vest Corporation,
Appellees (Defendants below).
No. 61S05-9507-CV-799.
Supreme Court of Indiana.
June 2, 1997.
Rehearing Denied Sept. 26, 1997.

Page 846

Nels J. Ackerson, Stewart A. Block, The Ackerson Group, Washington, DC, Henry J. Price, Melissa A. Clark, Price & Barker, Indianapolis, for Appellants.

David C. Ford, Indiana Farm Bureau, Inc., Indianapolis, for Amici Curiae Indiana Farm Bureau, Inc., Indiana Farmers' Union, Indiana Landowners for Justice, Save Property Rights and Taxes, Inc.

James P. Buchanan, Buchanan & Buchanan, Lebanon, for Appellee, All Other Members of the Certified Class.

Robert J. Palmer, May, Oberfell & Lorber, South Bend, Matthew J. Siembieda, Carl M. Buchholz, Blank, Rome, Comisky & McCauley, Philadelphia, PA, for Appellee, Penn Central Corporation.

Gerald F. Lutkus, Joseph R. Fullenkamp, Barnes & Thornburg, South Bend, for Appellee, Railroad Vest Corporation.

ON PETITION TO TRANSFER

SULLIVAN, Justice.

In the context of litigation to determine the ownership of abandoned railroad rights-of-way, we set forth the principles to be used by Indiana trial courts in evaluating proposed settlements in class action cases.

Background

Warren Buchanan filed a class action in the Parke Circuit Court on July 31, 1992. Buchanan claimed that defendants, Penn Central Corporation and U.S. Railroad Vest Corporation (USRV), had slandered the title of persons owning land adjacent to the abandoned Penn Central railroad line known as the Crawfordsville Secondary Track. Buchanan sought to quiet title to the railroad rights-of-way previously granted to Penn Central and later assigned to USRV. On August 31, 1992, Buchanan filed a petition to enlarge his complaint to include everyone owning land adjacent to abandoned Penn Central rights-of-way in Indiana.

On October 19, 1992, Fern Firestone filed a similar class action in Hamilton County. Firestone alleged claims against USRV for

Page 847

fraud, slander of title, theft, criminal conversion, criminal mischief and deception and racketeer influenced and corrupt organizations (RICO) violations.

On December 15, 1992, Buchanan filed an amended class action complaint to enlarge the class as previously requested by motion in August and to add claims of conversion, fraud and RICO violations. That same day, the trial court preliminarily approved the class for settlement purposes only and preliminarily approved James Buchanan as class counsel for settlement purposes only. The parties submitted a proposed settlement agreement to the trial court on December 30, 1992. The trial court set a hearing for the proposed settlement for April 2, 1993. The notices sent to all class members provided that all requests for exclusion from the settlement class be postmarked no later than March 2, 1993. The notice informed class members of how they could object to or opt out of the proposed settlement.

On January 14, 1993, Firestone sought to intervene in the Buchanan action to prevent the sending of the settlement notice to the Buchanan class members. On the same day, Firestone sought to intervene in the Buchanan action to revoke the Parke Circuit Court's certification of a statewide class. The trial court denied both motions to intervene. On February 23, 1993, Firestone procured a statewide class certification of the Firestone action in the Hamilton County trial court. Buchanan obtained an order from the Parke County trial court vacating the Hamilton County trial court's order and consolidating the two actions pursuant to Ind.Trial Rule 42(D). 1 The former Firestone class representatives opted out of the Buchanan settlement.

On March 16, 1993, Firestone again petitioned the Parke County court to intervene as of right to dismiss the amended Buchanan complaint under T.R. 12(B)(8). That same day, the plaintiffs ("Objectors") in this action, Buchanan class members who had not opted out of the settlement class, filed a motion to intervene, objections to the settlement proposal, a motion to dismiss the amended complaint under T.R. 12(B)(8), and a motion to disqualify the Buchanan class representative and class counsel. The trial court denied both Firestone's and Objectors' petitions to intervene.

The trial court held a hearing on the fairness of the settlement on April 2, 1993, at which time the court heard testimony from certain class members who objected to the settlement, but refused to allow testimony from nonclass members and class members who had opted out. The trial court issued its order and final judgment accepting the settlement proposal on April 19, 1993.

Objectors appealed. The Court of Appeals affirmed the trial court's judgment. Hefty v. All Other Members of the Certified Settlement Class, 638 N.E.2d 1284, 1292 (Ind.Ct.App.1994). The Court of Appeals found that those Objectors who filed objections to the settlement in the trial court had preserved their right to appeal. Id. at 1288. However, the appellate court concluded that the fourteen page proposed settlement notice that was sent out to class members was sufficiently clear and not unduly burdensome. Id. at 1289-90. The Court of Appeals then reviewed the strength of Objectors' case on the merits balanced against the settlement offer, the amount of opposition to the settlement, and whether class counsel adequately represented Objectors' interests, and determined that the settlement was fair and reasonable. Id. at 1290-92.

Objectors petitioned for transfer and this Court granted transfer on July 3, 1995. Objectors assert that the opinion of the Court of Appeals is erroneous for the following reasons: (1) it affirms a trial court settlement that is unfair to class members; (2) it wrongly states that any reversal of the settlement approval would only apply to those objectors who appealed at the time of settlement; (3) it affirms a trial court settlement that fails to comply with the requirements of Ind.Trial Rule 23; and (4) it affirms a trial court settlement that takes Objectors' private land in violation of the U.S. and Indiana Constitutions, Indiana Law and Indiana public policy.

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The defendants contend that the Court of Appeals correctly applied the abuse of discretion standard of review in affirming the trial court's approval of this class action settlement. They argue that the class members shoulder the burden of proving they have fee simple title for the rights of way, that title depends upon the language of the original conveyance, and that the language used in the majority of the conveyances at issue is ambiguous as to the property rights conveyed. Thus, defendants argue that this settlement is a compromise that provides a relatively inexpensive means to quiet title.

Discussion

Appellate review of a trial court's rulings on class action issues made under Ind.Trial Rule 23 employs an abuse of discretion standard of review. American Cyanamid Co. v. Stephen, 623 N.E.2d 1065, 1070 (Ind.Ct.App.1993); ConAgra, Inc. v. Farrington, 635 N.E.2d 1137, 1139 (Ind.Ct.App.1994)(standard of review of a trial court's class certification is abuse of discretion). Trial Rule 23 is based upon Fed.R.Civ.P. 23 and it is appropriate for courts to look at federal court interpretations of the federal rule when applying the Indiana rule. In re Tina T., 579 N.E.2d 48, 55 (Ind.1991). A federal court may find an abuse of discretion where the "district court's decision rests upon a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact." In re General Motors Corp. Pick-Up Truck Fuel Tank, 55 F.3d 768, 783 (3d Cir.1995), cert. denied sub nom., General Motors Corp. v. French, 516 U.S. 824, 116 S.Ct. 88, 133 L.Ed.2d 45. "A finding of fact is clearly erroneous when, although there is evidence to support it, the reviewing court, based on the entire evidence, concludes with firm conviction that a mistake has been made." Id. (citation omitted).

The main issue in this petition to transfer is whether the trial court abused its discretion under T.R. 23(E) by approving the settlement agreement here as fair. 2 Before addressing that particular issue, we discuss the distinctive nature of class actions that requires special and careful judicial scrutiny. Second, we explain the importance of the trial court's duty to certify formally a class under the prerequisites of T.R. 23(A) and (B) when approving a settlement class agreement. Third, we outline a list of factors as a guide to trial courts in structuring their determinations of the fairness of class action settlements. Finally, we apply these fairness factors to the particular facts in the Hefty settlement to determine whether the trial court abused its discretion in approving the settlement. In this regard, we will differentiate the standard of review to be applied by a trial court when reviewing a proposed class action settlement from the standard applied by an appellate court when reviewing a trial court's approval of a class action settlement.

I

Class actions by their nature require increased judicial involvement. See Manual for Complex Litigation § 30 at 211 (3d ed.1995)[hereinafter MCL]. 3 The potential for prejudice to litigants is great and an overriding consideration prevails in class actions:

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28 practice notes
  • Perdue v. Green, 1101337 and 1101506.
    • United States
    • Supreme Court of Alabama
    • 19 Abril 2013
    ...that any reversal of the settlement applies only to those objectors. See Hefty v. All Other Members of the Certified Settlement Class, 680 N.E.2d 843, 857 (Ind.1997) (reversing, upon appeal by six objecting class members, a class-action settlement and specifically rejecting the conclusion “......
  • Community Care Centers, Inc. v. FSSA, No. 30A01-9702-CV-62.
    • United States
    • Indiana Court of Appeals of Indiana
    • 22 Septiembre 1999
    ...and adequate, and to decide whether it is in the best interest of all class members. Hefty v. Certified Settlement Class (1997) Ind., 680 N.E.2d 843, 849, reh'g denied.19 In making this determination, the trial court must "comprehensively" consider several factors, including the following: ......
  • Richmond State Hosp. v. Brattain, No. 49A02-0908-CV-718
    • United States
    • Indiana Court of Appeals of Indiana
    • 8 Octubre 2010
    ...certification have been met is a question of fact for the trial court. Hefty v. All Other Members of the Certified Settlement Class, 680 N.E.2d 843, 851 (Ind. 1997). "Appellate courts reviewing a class certification employ an abuse of discretion standard."20Associated Med. Networks, Ltd. v.......
  • RICHMOND State Hosp. v. BRATTAIN, No. 49A02-0908-CV-718.
    • United States
    • Indiana Court of Appeals of Indiana
    • 27 Diciembre 2010
    ...certification have been met is a question of fact for the trial court. Hefty v. All Other Members of the Certified Settlement Class, 680 N.E.2d 843, 851 (Ind.1997). “Appellate courts reviewing a class certification employ an abuse of discretion standard.” 20 Associated Med. Networks, Ltd. v......
  • Request a trial to view additional results
28 cases
  • Perdue v. Green, 1101337 and 1101506.
    • United States
    • Supreme Court of Alabama
    • 19 Abril 2013
    ...that any reversal of the settlement applies only to those objectors. See Hefty v. All Other Members of the Certified Settlement Class, 680 N.E.2d 843, 857 (Ind.1997) (reversing, upon appeal by six objecting class members, a class-action settlement and specifically rejecting the conclusion “......
  • Community Care Centers, Inc. v. FSSA, No. 30A01-9702-CV-62.
    • United States
    • Indiana Court of Appeals of Indiana
    • 22 Septiembre 1999
    ...and adequate, and to decide whether it is in the best interest of all class members. Hefty v. Certified Settlement Class (1997) Ind., 680 N.E.2d 843, 849, reh'g denied.19 In making this determination, the trial court must "comprehensively" consider several factors, including the following: ......
  • Richmond State Hosp. v. Brattain, No. 49A02-0908-CV-718
    • United States
    • Indiana Court of Appeals of Indiana
    • 8 Octubre 2010
    ...certification have been met is a question of fact for the trial court. Hefty v. All Other Members of the Certified Settlement Class, 680 N.E.2d 843, 851 (Ind. 1997). "Appellate courts reviewing a class certification employ an abuse of discretion standard."20Associated Med. Networks, Ltd. v.......
  • RICHMOND State Hosp. v. BRATTAIN, No. 49A02-0908-CV-718.
    • United States
    • Indiana Court of Appeals of Indiana
    • 27 Diciembre 2010
    ...certification have been met is a question of fact for the trial court. Hefty v. All Other Members of the Certified Settlement Class, 680 N.E.2d 843, 851 (Ind.1997). “Appellate courts reviewing a class certification employ an abuse of discretion standard.” 20 Associated Med. Networks, Ltd. v......
  • Request a trial to view additional results

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