Perdue v. Green

Decision Date19 April 2013
Docket Number1101337 and 1101506.
PartiesCarol M. PERDUE, individually and as next friend and guardian of Anna K. Perdue v. Lisa Nix GREEN et al. William D. Motlow, Jr., and Shane Sears v. Lisa Nix Green et al.
CourtAlabama Supreme Court

127 So.3d 343

Carol M. PERDUE, individually and as next friend and guardian of Anna K. Perdue
Lisa Nix GREEN et al.
William D. Motlow, Jr., and Shane Sears
Lisa Nix Green et al.

1101337 and 1101506.

Supreme Court of Alabama.

March 16, 2012.
Opinion on Rehearing July 11, 2012.

Opinion on Return to Remand April 19, 2013.

[127 So.3d 348]

George W. Walker III and David C. Rayfield of Pope, McGlamry, Kilpatrick, Morrison & Norwood, LLP, Columbus, Georgia; and Richard H. Gill of Copeland, Franco, Screws & Gill, P.A., Montgomery, for Carol M. Perdue, individually and as next friend and guardian of Anna K. Perdue.

Michael R. Lunsford of Porterfield, Harper, Mills & Motlow, P.A., Birmingham, for William D. Motlow, Jr., and Shane Sears.

Chad W. Bryan of Capell & Howard, P.C., Montgomery; J. Doyle Fuller and Susan Copeland of Fuller & Copeland, Montgomery; Andrew P. Campbell of Leitman, Siegal, Payne & Campbell, P.C., Birmingham; and Donald W. Stewart, Anniston, for appellees.


In these consolidated appeals, Carol M. Perdue, individually and as next friend and guardian of her daughter, Anna K. Perdue; William D. Motlow, Jr.; and Shane Sears (hereinafter collectively referred to as “the objectors”), all of whom are objecting class members in class-action litigation related to the Alabama Prepaid Affordable College Tuition (“PACT”) Trust Fund a/k/a The Wallace–Folsom Prepaid College Tuition Trust Fund, appeal the trial court's judgment approving a class-action settlement concluding the litigation. 1 We vacate the trial court's judgment and remand the case.

Facts and Procedural History

This Court, in Ex parte Callan Associates, Inc., 87 So.3d 1161 (Ala.2011), explained the pertinent history of the PACT program, as it led to the underlying class-action litigation and to other litigation, as follows:

“In 1990, the Alabama Legislature established the Alabama Prepaid Affordable College Tuition (‘PACT’) program as part of the Wallace–Folsom College Savings Investment Plan, see §§ 16–33C–1 to 8, Ala.Code 1975. As explained by the Court of Civil Appeals in

[127 So.3d 349]

Johnson v. Taylor, 770 So.2d 1103 (Ala.Civ.App.1999), the purpose of the PACT program is

“ ‘to assist payment of college tuition costs by allowing a person to purchase PACT contracts in advance of a child's attending college. The PACT program obligates the state to pay tuition in accordance with the contract if the minor child attends a state college or university. § 16–33C–1. The purchase price of a PACT contract is determined actuarially. § 16–33C–6(f). Payments received become public funds, which the state invests to generate assets to fund the child's education. § 16–33C–6(d).’

“770 So.2d at 1104.

“Pursuant to the statutory scheme, the PACT program is overseen by a ‘PACT board,’ which serves as both ‘[t]he board of directors and trustees of the PACT Trust Fund.’ § 16–33C–3(14), Ala.Code 1975. Also pursuant to statute, the members of the PACT board are specifically empowered ‘[t]o invest as [the board] deems appropriate any funds in the PACT Trust Fund....’ § 16–33C–5(3), Ala.Code 1975. In fulfilling that responsibility, including decisions relating to ‘acquiring, investing, reinvesting, exchanging, retaining, selling, and managing property of the PACT Trust Fund,’ both ‘the PACT board and any person or investment manager to whom the PACT board delegates any of its investment authority’ is charged with ‘exercis[ing] the judgment and care under the circumstances then prevailing which persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not in regard to speculation but to permanent disposition of funds, considering the probable income as well as the safety of their capital.’ § 16–33C–6(d), Ala.Code 1975.


“On February 27, 2009, Kay Ivey, then state treasurer and, by virtue of that office, chairman of the PACT board, issued a letter to the purchasers (holders) of PACT contracts informing them that a downturn in the stock market had negatively impacted the assets of the PACT Trust Fund but indicating that the PACT board remained committed to honoring the PACT contracts and that the PACT board was investigating options and exploring opportunities that would ‘allow PACT benefits to be consistently paid.’ ”

87 So.3d at 1162–64 (footnote omitted).

In response to then State Treasurer Ivey's disclosure, several lawsuits were filed against the PACT board, including a class-action complaint filed in March 2009 in the Montgomery Circuit Court (case no. CV–09–900351) by Lisa Nix Green, individually and as next friend of Brent A. Green and Blake A. Green. In that action, Green, purporting to represent a class consisting of those who had purchased a PACT contract before 1995, alleged breach of contract and a violation of 42 U.S.C. § 1983. The action sought a judgment declaring that the PACT board was liable to PACT contract holders for the sums guaranteed in their respective contracts. In September 2009, Green's complaint was dismissed on the ground that the stated claims were not ripe because, the trial court concluded, no PACT beneficiary had yet been denied contractual benefits and, therefore, no PACT beneficiary had suffered a loss. Green subsequently filed a motion to alter, amend, or vacate the trial court's judgment.

The action underlying these appeals (case no. CV–10–900013) was instituted by a separate complaint filed in January 2010—while Green's postjudgment motion

[127 So.3d 350]

in the first action, case no. CV–09–900351, 2 remained pending—against the PACT board in the Montgomery Circuit Court by Lisa Nix Green; Brent A. Green; Blake Green; Eldridge M. Franklin; 3 Eason L. Franklin; and Kimberly H. Franklin, individually and as next friend of John Stephen Franklin, all of whom were PACT contract holders and/or PACT beneficiaries, who purported to represent “a class of persons who purchased a [PACT] contract prior to May 9, 2001,” and the designated beneficiaries of each such PACT contract. That same pleading also included as plaintiffs Brian A. McVeigh, individually and as next friend of Sarah K. McVeigh; Allen R. Hudson, individually and as next friend of Emma L. Hathaway; and Nina McGinnis, individually and as next friend of Stevie A. Graves, who purported to represent “a class of persons who purchased a [PACT] contract [on or] after May 9, 2001,” and the designated beneficiaries of each such PACT contract. The underlying class action was assigned to a different judge in the Montgomery Circuit Court than the judge who presided over Green's separate action. 4

In their complaint in the underlying action, which included claims virtually identical to those asserted by Green in her initial action, the above-named plaintiffs alleged that their claims were typical of and consistent with the claims of all class members, whose numbers allegedly made joinder impractical, and sought to be named representatives for their respective classes. Acting under the premise that the PACT program was created to allow the designated beneficiary of a PACT contract to attend college without being required to pay tuition or mandatory fees, regardless of the financial health of the PACT Trust Fund and/or the ability of the PACT program to pay, the plaintiffs alleged that the PACT board had indicated its inability to fulfill outstanding PACT contracts. The complaint also alleged, in a claim not included in Green's initial action, that, at the time of filing, “not all of the tuition and fees covered by PACT contracts [were] being paid by the [PACT board].” 5 The plaintiffs requested a declaratory judgment construing the respective rights and obligations of the individual

[127 So.3d 351]

classes under the PACT contracts and the controlling statutes so they could decide whether to remain in the PACT program or to cancel their existing contracts and seek a refund (less any applicable tax penalty). They also stated a claim under 42 U.S.C. § 1983, alleging violations of rights guaranteed by various provisions of the United States Constitution.

The PACT board answered and filed a counterclaim. In its “counterclaim for declaratory relief,” the PACT board alleged that, based upon actuarial projections, the PACT Trust Fund lacked sufficient assets to continue payment of full tuition expenses past the year 2015. The PACT board further noted that it had “adopted proposed amendments to its existing rules and regulations,” which, though specifically aimed at remitting payment for mandatory fees and expenses to all PACT contract holders, might result in payment of “an amount less than the full tuition and fees charged by the respective college or university” in direct conflict with the plaintiffs' interpretation of their contract rights. Thus, the PACT board requested, pursuant to Ala.Code 1975, § 6–6–220 et seq.6 and § 19–3B–101 et seq.,7 the trial court's assistance in construing the PACT board's powers and responsibilities under the statutes establishing the PACT program; a determination as to whether the proposed changes to its rules and regulations violated the statutory, constitutional, or contractual rights of the PACT contract holders and/or the PACT contract beneficiaries; and a determination as to whether the PACT board could liquidate the PACT Trust Fund and distribute the remaining assets.

The plaintiffs thereafter moved for class certification of the two proposed classes pursuant to Rule 23(b)(1) and (b)(2), Ala. R. Civ. P.

While this case was pending, the legislature enacted Act No. 2010–725, Ala. Acts 2010, which was effective April 30, 2010, and which, among other things, amended the statutory provisions relating to the PACT program to provide annual appropriations to the PACT Trust Fund beginning in 2015 and continuing through 2027.8 See Ala.Code 1975, § 16–33C–1 et seq. According to § 16–33C–16, the stated annual appropriations “will make the PACT Program 100 percent fully funded, according to the actuarial...

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