Hunter v. Runyan

• Decision Date: 31 March 2011
• Docket Number: No. 10–306.,10–306.
• Citation: 2011 Ark. 43,382 S.W.3d 643
• Parties: Audrey HUNTER, William Shepherd, and Daniel Crager, Appellants v. Edison RUNYAN; Dwight Pipes; Earl L. Purifoy; John Ross, as The Legal Representative of Elizabeth Ross; Mary Weidman; Durain Weidman; Marion Harris; and Van R. Nolan, each individually and on behalf of all others similarly situated; Transamerica Life Insurance Company; Life Investors Insurance Company of America; Monumental Life Insurance Company; and Aegon USA, Inc., Appellees.
• Court: Arkansas Supreme Court

2011 Ark. 43
382 S.W.3d 643

Audrey HUNTER, William Shepherd, and Daniel Crager, Appellants
v.
Edison RUNYAN; Dwight Pipes; Earl L. Purifoy; John Ross, as The Legal Representative of Elizabeth Ross; Mary Weidman; Durain Weidman; Marion Harris; and Van R. Nolan, each individually and on behalf of all others similarly situated; Transamerica Life Insurance Company; Life Investors Insurance Company of America; Monumental Life Insurance Company; and Aegon USA, Inc., Appellees.

No. 10–306.

Supreme Court of Arkansas.

Feb. 9, 2011.
Rehearing Denied March 31, 2011.

[382 S.W.3d 645]

The Law Offices of James F. Swindoll, Little Rock, by: James F. Swindoll and Brown & Gould, PLLC, by: Tony Gould, for appellant Audrey Hunter.

Dan Turner and H. Gregory Campbell, Little Rock, for appellant William Shepherd.

Matthews, Sanders & Sayes, Little Rock, by: Doralee Chandler and Gail Matthew, for appellant Daniel Crager.

Tom Thompson and Casey Castleberry and Philip Borher and Scott E. Brady, Batesville, for appellees.

Ryan P. Baudin, Jorden Burt LLP, by: Markham R. Leventhal, Farrokh Jhabvala, and Julianna Thomas McCabe, and Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., Little Rock, by: John K. Baker, Lyn P. Pruitt, and Jeffrey L. Spillyards, for appellees Transamerica Life Insurance Company, Life Investors Insurance Company of America, Monumental Life Insurance Company, and Aegon USA, Inc.

DONALD L. CORBIN, Justice.

[2011 Ark. 1]Separate Appellants, Audrey Hunter, William Shepherd, and Daniel Crager, appeal the orders of the Pulaski County Circuit Court denying their separate motions to intervene and approving a class-action settlement between the Appellees who were plaintiffs below, Edison Runyan; Dwight Pipes; Earl L. Purifoy; John Ross, as the legal representative of Elizabeth Ross; Mary Weidman; Durain Weidman; Marion Harris; and Van R. Nolan, each individually and on behalf of all others similarly situated (“the Settling Plaintiffs”), and the Appellees who were defendants below, Transamerica Life Insurance Company; Life Investors [2011 Ark. 2]Insurance Company of America; Monumental Life Insurance Company; and Aegon USA, Inc. (all of which are affiliated companies and hereinafter referred to as “the Company”). The separate Appellants each raise individual arguments for reversal. In addition, both groups of Appellees have filed motions to dismiss Crager's appeal for lack of standing. This appeal is of substantial public interest in that it involves a nationwide class of approximately 250,000 persons who held supplemental cancer insurance policies and presents an issue of first impression in this state regarding subject-matter jurisdiction in class-action settlements. Jurisdiction is thus properly in this court pursuant to Arkansas Supreme Court Rule 1–2(b)(1) & (b)(4) (2010). We dismiss Crager's appeal for lack of standing. We find no error in the circuit court's orders and affirm.

I. Facts and Procedural History

The Settling Plaintiffs initiated this case in Pulaski County Circuit Court on March 13, 2009, when they filed a class-action complaint asserting numerous causes of action sounding in contract and tort, both individually and on behalf of a class of current and former policyholders or their legal representatives who held certain supplemental cancer insurance policies and specified disease policies issued by the Company or its predecessor companies. The policies at issue are guaranteed renewable and provide for payment of cash benefits directly to the policyholder based upon the “actual charges” for certain services such as chemotherapy, radiation therapy, blood-related expenses, and other services. It is the Company's change in

[382 S.W.3d 646]

its determination and payment of “actual charges” that is at the center [2011 Ark. 3]of this case. In addition to claiming that the Company has underpaid benefits based on “actual charges,” the complaint also challenged the Company's premium rate increases.

Among other forms of monetary and nonmonetary relief, the complaint sought a declaration that the undefined term “actual charges” in the policies means the amount paid according to the Company's practice prior to 2006, which was to pay the amount billed on the health-care provider's statement before allowing for any discount, reduction, write-off, or third-party payments. According to the complaint, the Company changed this practice some time in 2006 when it began underpaying benefits according to the amount actually accepted by the health-care provider as payment in full for services rendered.

The Company answered the complaint on April 3, 2009, denying all claims alleged therein and denying that the case was appropriate for class certification. The Company asserted that its correction in claims practices regarding actual charges was motivated by the need to pay benefits in accordance with the terms of the policies, as well as a good-faith attempt to benefit policyholders as a whole by reducing the frequency or amount of future premium rate increases. The Company later explained that health-care billing practices had changed since the mid–1970s when it first developed the “actual charges” policies at issue.

On or about April 17, 2009, the Settling Plaintiffs and the Company executed a class-action-settlement agreement, which defined a conditional settlement class, established a comprehensive notice plan, provided for both monetary and nonmonetary relief to the class, set a limit on attorney's fees for class counsel, and provided for a dismissal and release of all [2011 Ark. 4]claims. The agreement stated that the terms of the settlement would apply not only in the present case, but also in six other class actions that each of the plaintiffs had pending in various federal district courts:

Pipes v. Life Investors Insurance Company of America, Case No. 1:07–cv–00035, in the United States District Court for the Eastern District of Arkansas;

Runyan v. Transamerica Life Insurance Company, Case No. 6:08–cv–6034, in the United States District Court for the Western District of Arkansas;

Ross v. Life Investors Insurance Company of America, Case No. 4:08–cv–00064, in the United States District Court for the Southern District of Mississippi;

Weidman v. Life Investors Insurance Company of America, Case No. 2:08–cv–12870, in the United States District Court for the Eastern District of Michigan;

Harris v. Transamerica Life Insurance Company, Case No. 572027, in the Nineteenth District Court of the State of Louisiana, East Baton Rouge Parish, removed as Case No. 09–13–JVP–SCR, in the United States District Court for the Middle District of Louisiana; and

Nolan v. Life Investors Insurance Company of America, Case No. 3:08–cv–00839, in the United States District Court for the Middle District of Louisiana.

On April 20, 2009, the Settling Plaintiffs and the Company filed with the circuit court a joint motion for preliminary approval of the proposed class-action-settlement agreement. Each side filed briefs and the circuit court held a hearing on the joint motion. On April 23, 2009, at the conclusion of the hearing, the circuit court entered an order finding that the proposed

[382 S.W.3d 647]

settlement agreement was sufficiently fair, reasonable, adequate, and in the best interest of the class members to warrant preliminary approval and the sending of notice to the settlement class. The preliminary approval order established a comprehensive notice plan that [2011 Ark. 5]included personal notice mailed to over 250,000 settlement-class members, publication notice in USA Today, a settlement website with access to claims forms and other documents, and a toll-free call center. The preliminary approval order initially set the final fairness hearing for July 27, 2009, and noted that class members who did not opt out could object to the proposed settlement in writing and at the fairness hearing upon compliance with certain parameters. The preliminary approval order noted further that any failure to comply with the objection parameters would operate as a waiver of any objections. Proceedings in the six federal courts were, upon joint motion, stayed pending final approval of the settlement.

Pursuant to the preliminary approval order, notice was mailed to over 250,000 members of the settlement class on May 14, 2009, advising them of the nature of the litigation, the terms of the settlement agreement, their right to object, and their right to exclude themselves or “opt out” of the settlement, along with the deadlines and procedures for doing so. After notice was mailed and published, approximately twenty members filed objections. Some of the objections were withdrawn, and by the time of the fairness hearing only nine objectors remained. Separate Appellants Crager and Hunter were among the nine remaining objectors.

The circuit court postponed the fairness hearing, due in part because counsel for other plaintiffs in competing class actions pending in other jurisdictions had filed requests to enjoin or otherwise delay the settlement or the final fairness hearing in this case. See, e.g., Gooch v. Life Investors Ins. Co., 589 F.3d 319 (6th Cir.2009) (denying mandamus relief, and reversing [2011 Ark. 6]and vacating an injunction precluding the Company from pursuing this settlement in Pulaski County Circuit Court). The circuit court observed that the plaintiffs in those competing class actions had timely excluded themselves from the present settlement class, but that their attorneys also represented other members of the present settlement class who chose to remain members of the class rather than to exclude themselves. Appellants Crager, Hunter, and Shepherd are among this latter group—those persons who are represented by plaintiffs' counsel in competing class actions, but chose to remain members of the present settlement class and either file an objection to the settlement or a motion to intervene, or both.

Appellants Crager, Hunter, and Shepherd all...