Mega Life & Health Ins. Co. v. Jacola

• Decision Date: 16 October 1997
• Docket Number: No. 96-1343,96-1343
• Citation: 330 Ark. 261,954 S.W.2d 898
• Parties: The MEGA LIFE AND HEALTH INSURANCE COMPANY, Charles Hall, and Jim Dawson, Appellants, v. Michael D. JACOLA and Pamela R. Jacola, Individually and as Parents and Natural Guardians of Kristen M. Jacola, a Minor, Appellees.
• Court: Arkansas Supreme Court

Page 898

954 S.W.2d 898

330 Ark. 261

The MEGA LIFE AND HEALTH INSURANCE COMPANY, Charles Hall and Jim Dawson, Appellants, v.Michael D. JACOLA and Pamela R. Jacola, Individually and as Parents and NaturalGuardians of Kristen M Jacola, a Minor, Appellees.

No. 96-1343.

Supreme Court of Arkansas.

Oct. 16, 1997.

Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. by R.T. Beard, III and Mark N. Halbert, Little Rock, for appellants.

Lovell & Nalley by John Doyle Nalley, Benton, for appellees.

IMBER, Justice.

This is an interlocutory appeal from an order certifying a class action.See Ark. Sup.Ct. R. 1-2(a)(11);Ark.R.App. P.--Civ. 2(a)(9).We affirm the trial court's order.

On September 1, 1994, the appellees, Michael and Pamela Jacola, purchased a group health insurance policy from the appellants, Mega Life & Health Insurance Company("Mega"), for themselves and their two dependents.The group policy was issued through the Alliance for Affordable Health Care ("Alliance") which served as group master policyholder.Soon thereafter, the Jacolas' minor daughter received outpatient medical treatment, and Mega refused to pay the medical bills.

On May 17, 1995, the Jacolas filed a tort action against Mega and the two agents who sold them the policy alleging numerous individual theories for recovery including negligence, fraud, misrepresentation, and false advertising.In their complaint, the Jacolas also requested class certification so that they could represent approximately 400 other Arkansans who had purchased identical health insurance policies from Mega.

In their motion for class certification, the Jacolas alleged that Alliance was a sham organization thereby making the Mega health insurance policies individual, instead of group, policies.Additionally, the Jacolas asserted on behalf of the proposed class that the policies they purchased from Mega were void in two respects.First, the Jacolas asserted that the policies were void because Mega failed to comply with Ark.Code Ann. § 23-98-107(a)(Repl.1992), which requires issuers of minimum basic benefit policies to obtain from their prospective insureds a written statement acknowledging the limited nature of the coverage provided.The Jacolas also claimed that the policies were void because Mega failed to comply with Insurance Commission Rule 18 which requires a stamped notification on the first page of an individual health insurance policy that does not cover outpatient services.On behalf of the class, the Jacolas asked the court to declare the policies void, force Mega to withdraw use of the policy in Arkansas, grant compensatory damages in the amount of the premiums collected from the insured for the past five years, and award punitive damages.

The trial court conducted two hearings on the Jacolas certification motion.On August 8, 1996, the trial court granted the Jacolas' motion for certification pursuant to Ark. R. Civ. P. 23.In its order, the court found that the Jacolas had satisfied the Rule 23(a) requirements of numerosity, commonality, typicality, and adequacy.The trial court, however, did not make specific findings regarding the existence of the Rule 23(b) requirements of predominance or superiority.

On appeal, Mega asserts that the trial court's order of certification is erroneous because the Jacolas failed to satisfy each of the six requirements listed in Rule 23(a) & (b).According to Ark. R. Civ. P. 23, a trial court may certify a class only if the following conditions are met:

(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

Ark. R. Civ. P. 23(a).Additionally, the court must find that 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.Ark. R. Civ. P. 23(b).A trial court has broad discretion in determining whether these elements have been satisfied, and we will not reverse absent an abuse of that discretion.Direct Gen. Ins. Co. v. Lane, 328 Ark. 476, 944 S.W.2d 528(1997);Farm Bureau Mutual Ins. Co. v. Farm Bureau Policy Holders & Members, 323 Ark. 706, 918 S.W.2d 129(1996);Cheqnet Sys., Inc. v. Montgomery, 322 Ark. 742, 911 S.W.2d 956(1995).

Citing Farm Bureau Mutual Ins. Co. v. Farm Bureau Policy Holders & Members, 323 Ark. 706, 918 S.W.2d 129(1996), Mega asserts that a trial court is not allowed to look beyond the pleadings to determine whether the requirements of Rule 23 have been satisfied.We, however, rendered no such ruling in Farm Bureau.Rather, we clearly enunciated that neither the trial court nor the appellate court may delve into the merits of the underlying claim when determining whether the requirements of Rule 23 have been satisfied.Id.Although a trial court may not consider whether the plaintiffs have a cause of action or if they will ultimately prevail on the merits, the court may hold a hearing to determine whether the requirements of Rule 23 have been satisfied.In fact, two such hearings were held in this case and both sides were allowed to present testimony and introduce documentary evidence.Thus, we conclude that Mega's interpretation of Farm Bureau is erroneous.

I.Failure to Make Findings

First, Mega asserts that we must reverse the certification order because the trial court failed to make specific findings regarding the existence of the Rule 23(b) requirements of predominance and superiority.This issue is governed by Ark. R. Civ. P. 52(a) which states that "findings of fact and conclusions of law are unnecessary on decisions of motions under these Rules," but that the court shall enter such specific findings and conclusions upon the request of a party.It does not appear from the abstract that Mega ever requested that the court make such specific findings in regard to the predominance and superiority requirements of Rule 23(b).

Moreover, Rule 52(b) states that upon a motion of a party made no later than ten days after the entry of judgment, the court may amend its findings of fact or make additional findings.Thus, Mega had ten days after the order of certification was entered to ask the trial court to make additional findings regarding the Rule 23(b) elements.Mega, however, failed to make such a request.Because Mega failed to request specific findings in regard to the Rule 23(b) elements either prior to or after the entry of the order of certification, we hold that it has waived this issue on appeal.SeeSmith v. Quality Ford, Inc., 324 Ark. 272, 920 S.W.2d 497(1996);Brown v. Seeco, Inc., 316 Ark. 336, 871 S.W.2d 580(1994).

Implicit in the trial court's order granting class certification is the court's ultimate conclusion that all six elements of class certification have been satisfied.Thus, on appeal we hold that Mega has waived only its right under Ark. R. Civ. P. 52 to have the trial court enter specific findings in its order regarding the satisfaction of each of the six elements of class certification.Mega has not, however, waived its right to contest the trial court's ultimate conclusion that all six elements have been satisfied as required by Ark. R. Civ. P. 23.We agree with the dissent that there must be evidence in the record to support the trial court's ultimate conclusion that all six elements of class certification, including the predominance and superiority requirements of Rule 23(b), have been satisfied.We, however, disagree with the dissent's assertion that we must reverse a certification order that does not make specific findings regarding the Rule 23(b) requirements when the complaining party failed to request specific findings under Rule 52.Accordingly, we find no merit to Mega's first argument on appeal.

We also must respond to the dissent's contention that the certification order must be reversed because the trial court failed to conduct a "rigorous analysis" of the Rule 23(b) requirements of predominance and superiority.In support of this argument, the dissent cites Arthur v. Zearley, 320 Ark. 273, 895 S.W.2d 928(1995).The Arthur opinion, however, is devoid of any language requiring the trial court to conduct a "rigorous analysis."In fact, we are unable to find any Arkansas case requiring the trial court to conduct a rigorous analysis, or for that matter, any case that describes exactly what such an analysis entails.Instead, we have consistently held that we will reverse a trial court's certification order only when the court has abused its discretion.Direct Gen. Ins. Co. v. Lane, 328 Ark. 476, 944 S.W.2d 528(1997);Farm Bureau Mutual Ins. Co. v. Farm Bureau Policy Holders, 323 Ark. 706, 918 S.W.2d 129(1996).In making this determination, we have consistently reviewed the evidence in the record to determine whether it supports the trial court's ultimate conclusion regarding certification.See, e.g., Direct Gen., supra;Arthur, supra;We have not, as argued by the dissent, previously required the court to enter into the record a detailed explanation of why it concluded that certification was proper, and we refuse to impose such a requirement upon the trial court at this time.

II.Requirements of Rule 23

Next, Mega claims that the order of certification must be reversed because the Jacolas failed to satisfy each of the six requirements of Rule 23.We disagree with this assertion, and accordingly we affirm the trial court's order of certification.

A. Numerosity

The first requirement of class certification is "that the class is so numerous that joinder of all members is impractical."Ark. R. Civ. P. 23(a)(1).In Cheqnet Systems, Inc. v. Montgomery, 322 Ark....