Rivera-Platte v. First Colony Life Ins. Co.

• Decision Date: 22 May 2007
• Docket Number: No. 25,402.,No. 25,401.,No. 25,412.,No. 25,409.,25,401.,25,402.,25,409.,25,412.
• Citation: 2007 NMCA 158,173 P.3d 765
• Parties: Lorenne Rebecca RIVERA-PLATTE, and all others similarly situated, Plaintiffs-Appellees, v. FIRST COLONY LIFE INSURANCE COMPANY, a Virginia Corporation, Defendant-Appellee, v. Michael B. Hopkins, Robin H. Hopkins, and James McCoy, Objectors/Proposed Intervenors-Appellants, Martin Sir, Objector/Proposed Intervenor-Appellant, Paul R. Holley and Phillip Mickens, Objectors/Proposed Intervenors-Appellants, Lisa Treat, Objector-Appellant.
• Court: Court of Appeals of New Mexico

173 P.3d 765

2007 NMCA 158

Lorenne Rebecca RIVERA-PLATTE, and all others similarly situated, Plaintiffs-Appellees, v. FIRST COLONY LIFE INSURANCE COMPANY, a Virginia Corporation, Defendant-Appellee, v. Michael B. Hopkins, Robin H. Hopkins, and James McCoy, Objectors/Proposed Intervenors-Appellants, Martin Sir, Objector/Proposed Intervenor-Appellant, Paul R. Holley and Phillip Mickens, Objectors/Proposed Intervenors-Appellants, Lisa Treat, Objector-Appellant.

No. 25,401.

No. 25,402.

No. 25,409.

No. 25,412.

Court of Appeals of New Mexico.

May 22, 2007.

Certiorari Granted, No. 30,691, November 30, 2007.

The Eaves Law Firm, P.A., John M. Eaves, Kerry Kiernan, Karen S. Mendenhall, McCary, Wilson & Pryor, Dennis M. McCary, Floyd D. Wilson, Alan R. Wilson, Alan Konrad, Albuquerque, NM for Appellee Lorenne Rebecca Rivera-Platte.

Scheuer, Yost & Patterson, P.C., Mel E. Yost, Christopher M. Grimmer, Santa Fe, NM, Weil, Gotshal & Manges LLP, Mindy J. Spector, John P. Mastando III, Alana L. Brown, Jessica D. Lubarsky, New York, NY, for Appellee First Colony Life Insurance Co.

Caddell & Chapman, Michael A. Caddell, Cynthia B. Chapman, James Juranek, Houston, TX, McClaugherty & Silver, P.C., Joe L. McClaugherty, Santa Fe, NM, for Appellants Michael B. Hopkins, Robin H. Hopkins, and James McCoy.

White, Koch, Kelly & McCarthy, M. Karen Kilgore, Santa Fe, NM, for Appellant Martin Sir.

George T. Geran, Santa Fe, NM, for Appellants Paul R. Holley and Phillip Mickens.

The Law Office of Brian K. Branch, Brian K. Branch, Albuquerque, NM, for Appellant Lisa Treat.

OPINION

WECHSLER, Judge.

{1} This appeal stems from the entry of an order approving a settlement reached between the Class and First Colony Life Insurance Company. Seven unnamed class members appealed. This Court consolidated the appeals to resolve in a single opinion all the issues advanced. As a preliminary matter, we address the right of unnamed class members in an opt-out class action to appeal the approval of a settlement. Concluding that unnamed class members may appeal, we address Appellants' arguments that the district court erred in approving the form of the notice, in approving the settlement and the attorney fees, in denying their motions to intervene, and in denying their motions for discovery. Because the district court erred in denying the motion to intervene and because the record and findings are insufficient to enable meaningful review, we reverse and remand for further proceedings.

FACTS AND PROCEEDINGS

{2} On November 9, 2000, Plaintiff Lorenne Rebecca Rivera-Platte initiated this proceeding by filing, as representative, a putative class action complaint against First Colony alleging breach of contractual, common law, and statutory obligations. The Class consists of certain life insurance policyholders who have paid monthly or semi-annual premiums (modal premiums) to First Colony or its subsidiary. In its complaint, the Class argued that First Colony knowingly concealed or failed to disclose material facts regarding the premium payments options in its insurance policies. Although the policy states that the annual premiums appearing in the policy are the maximum premiums charged, the Class complained that the disclosed cost applies only to premiums paid in single, annual installments. The option of paying monthly or semi-annual premiums results in what the Class alleged to be additional, undisclosed charges. The Class argued that First Colony's alleged failure to disclose these modal premium charges constitutes a violation of the New Mexico Unfair Practices Act (UPA), NMSA 1978, §§ 57-12-1 to -24 (1967, as amended through 2005), and amounts to a breach of contract, a breach of the affirmative duty of disclosure arising out of the relationship between an insurer and the insured, and a breach of the common law covenant of good faith and fair dealing. In April 2001, the putative Class, through its putative representative, moved for class certification under Rule 1-023 NMRA.

{3} In June 2001, First Colony filed a motion to stay proceedings pending this Court's decision in Azar v. Prudential Insurance Co. of America, 2003-NMCA-062, 133 N.M. 669, 68 P.3d 909, an interlocutory appeal expected to control a threshold inquiry into the primary jurisdiction of the Insurance Division of the New Mexico Public Regulation Commission. In July 2001, the district court stayed the proceedings pending a decision in Azar. The Azar opinion, filed in January 2003, did not ultimately address the threshold jurisdictional question, and, in March 2003, the New Mexico Supreme Court denied certiorari. Azar, 2003-NMCA-062, ¶¶ 2, 96, 133 N.M. 669, 68 P.3d 909.

{4} In late 2002, the parties retained a mediator, and a final settlement agreement was signed and memorialized in April 2004. Following a joint motion of the parties, the district court entered an order of preliminary approval of the settlement agreement, preliminary approval of the Class for purposes of a nationwide settlement, and approval of the form and manner of notice of the settlement.

{5} Between June 14 and 18, 2004, notice of the settlement was mailed to each class member. The notice detailed the compensation to the Class, the rights of the class members to opt out or object to the settlement, the consequences of settlement, and the time, place, and purpose of the final fairness hearing. The notice also provided written disclosures regarding premium payment options, which had been omitted from the policies. Of the estimated 822,000 class members, approximately 603 people opted out of the settlement. Fifty people objected to the settlement, seven of whom are the unnamed class members bringing the present, consolidated appeal. Some objectors also filed motions to intervene as of right under Rule 1-024(A) NMRA. The objectors argued that the notice failed to provide information necessary for class members to evaluate the settlement and that the timing of the notice was intentionally designed to hinder their ability to adequately assess the fairness of the settlement. The objectors also challenged the settlement itself, arguing that its value to class members is inflated and therefore does not reflect the actual and inadequate benefit conferred. The settlement, the objectors complained, unduly benefits First Colony and class counsel. A few objectors also sought discovery to examine the fairness of the settlement and attorney fees.

{6} At the fairness hearing, held on August 3 and October 14, 2004, the district court permitted all attending objectors to speak. The district court also held a hearing on September 28, 2004, on the motions to conduct discovery, which it denied on the grounds that there was no showing of collusion, improper actions, or incompetent representation and that the discovery requests were unreasonable. Having determined that the settlement was fair, adequate, and reasonable, the district court denied the motions to intervene and entered a final order approving the settlement agreement, defining and certifying the Class for purposes of the settlement, dismissing the complaint with prejudice, and releasing First Colony from future claims of the settling class members. Seven objectors appeal.

RIGHT OF UNNAMED CLASS MEMBERS TO APPEAL

{7} Article VI, Section 2 of the New Mexico Constitution provides that "an aggrieved party shall have an absolute right to one appeal." The Class contends that Appellants have no right to appeal the settlement because, having failed to successfully intervene, they are not "parties" within the meaning of Article VI, Section 2. Appellants argue that our interpretation of the term "parties" should be governed by Devlin v. Scardelletti, 536 U.S. 1, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002). The Class and First Colony contend that Devlin and the policies underlying Devlin are not applicable to opt-out class actions such as the current action.

{8} We begin by discussing the holding in Devlin. Although we conclude that Devlin does not govern our analysis, we nonetheless discuss the portions of Devlin that are relevant to this opinion. We then address the question, not at issue in Devlin, of whether unnamed class members in opt-out class actions have an acceptable alternative means of preserving their interests. Finally, we discuss the difference between New Mexico and federal law. We conclude that Appellants are parties for the purposes of appeal.

{9} Devlin focuses on the purpose of Federal Rule of Civil Procedure 23. Devlin, 536 U.S. at 11-14, 122 S.Ct. 2005 (rejecting the argument that intervention should be required because such a requirement would be inconsistent with the purpose and structure of Rule 23). Because our Rule 1-023 is similar to the federal rule, Devlin's analysis applies to our rule as well. See Romero v. Philip Morris Inc., 2005-NMCA-035, ¶ 35, 137 N.M. 229, 109 P.3d 768 (recognizing that federal law is an appropriate guide to interpretation of Rule 1-023(B)(3) because of the similarity to Rule 23(b) of the Federal Rules of Civil Procedure).

{10} In Devlin, the United States Supreme Court held that a unnamed class member was a "party" for the purposes of appeal because he objected at a fairness hearing and would be bound by the settlement from which he appealed.

What is most important to this case is that nonnamed class members are parties to the proceedings in the sense of being bound by the settlement. It is this feature of class action litigation that requires that class members be allowed to appeal the approval of a settlement when they have objected at the fairness hearing. To hold otherwise would deprive nonnamed class members of the power to preserve their own interests in a settlement that will ultimately bind them, despite their expressed objections before the trial court. Particularly in light of the fact that petitioner had no ability to opt out of the settlement, appealing the approval of the settlement is petitioner's only...