Roose v. Lincoln Cnty. Emp. Grp. Health Plan

• Citation: 362 P.3d 40,381 Mont. 409
• Decision Date: 17 November 2015
• Docket Number: No. DA 14–0632.,DA 14–0632.
• Parties: Kent D. ROOSE, Plaintiff and Appellee, v. LINCOLN COUNTY EMPLOYEE GROUP HEALTH PLAN; Employee Benefit Management Services, Inc.; Joint Powers Trust ; John Does 1–50; John Does 51–100, Defendants and Appellants.
• Court: United States State Supreme Court of Montana

381 Mont. 409

362 P.3d 40

Kent D. ROOSE, Plaintiff and Appellee,

v.LINCOLN COUNTY EMPLOYEE GROUP HEALTH PLAN; Employee Benefit Management Services, Inc.; Joint Powers Trust ; John Does 1–50; John Does 51–100, Defendants and Appellants.

No. DA 14–0632.

Supreme Court of Montana.

Submitted on Briefs June 17, 2015.

Decided Nov. 17, 2015.

For Appellants: Robert C. Lukes, Peter J. Arant, Justin K. Cole, Garlington, Lohn & Robinson, PLLP; Missoula, Montana.

For Appellee: Erik B. Thueson, Erik Thueson Law Office; Helena, Montana William R. Bieler, Burk, Lee & Bieler, PLLC; Choteau, Montana.

For Amicus Curiae Montana Defense Trial Lawyers Association: David C. Clukey, James M. Duncan, Crowley Fleck PLLP; Billings, Montana.

Justice MICHAEL E. WHEAT delivered the Opinion of the Court.

¶ 1 Employee Benefit Management Services, Inc. (EBMS) and Joint Powers Trust (JPT) appeal from the order of the Montana First Judicial District Court, Lewis and Clark County, granting Kent D. Roose's (Roose) motion for class certification and declaratory judgment. We affirm.

PROCEDURAL AND FACTUAL HISTORY

¶ 2 On October 3, 2007, Roose was severely injured in an automobile crash on Highway 93. The driver of the other vehicle, Steams, whose negligence is undisputed, was killed in the accident. Steams' liability insurance carrier tendered the limit of its liability coverage, and his estate also paid funds to Roose; however, these payments fell short of covering the more than $320,000 in medical expenses incurred by Roose for treatment at Kalispell Regional Hospital (the Hospital) after his injury.

¶ 3 At the time of the crash, Roose's wife was an employee of Lincoln County. The County provided health benefits via a group health plan (the Plan) that was part of JPT, a pool of local government health plans. The JPT plans were administered by EBMS, which acted primarily as a third-party administrator, and which administers other local government plans in Montana.

¶ 4 The Plan contained an exclusion stating that medical benefits would not be paid when any automobile or third-party liability insurance was available to pay medical costs. Appellants informed Roose, the Hospital, and Steams' liability insurer of the exclusion.

¶ 5 The Hospital subsequently asserted a medical lien for $40,000. Steams' insurer tendered its $100,000 liability limit to Roose in the form of a check made out to both Roose and the Hospital. The Hospital refused to sign the check or release its lien until Roose agreed to pay the Hospital $40,000 of the $100,000 payment, which Roose did.

¶ 6 Roose contacted EBMS and objected to the fact that the $40,000 hospital charge was paid out of the liability insurance funds, rather than from the Plan. He requested reimbursement for the $40,000 he paid to the Hospital out of the liability insurance payment he received. EBMS denied his request. In a letter dated August 6, 2009, EBMS rejected all allegations of wrongdoing.

¶ 7 In October 2009, Roose brought suit against EBMS, JPT, and Lincoln County, though the County was later dismissed as a party, requesting declaratory and injunctive relief, and class action certification. In 2013, we published our opinion in Diaz v. State (Diaz III), 2013 MT 331, 372 Mont. 393, 313 P.3d 124, wherein we held that exclusions such as the one contained in the Plan violated § 2–18–902(4), MCA, Montana's made-whole law. Following the publication of Diaz III, Appellants reimbursed Roose the $40,000 paid to the Hospital.

¶ 8 On April 4, 2014, Roose filed a motion for partial summary judgment and class certification. Roose argued that Appellants violated § 2–18–902(4), MCA, through systematic practices that amounted to seeking subrogation against Steams' liability carrier before Roose was made whole. Roose also requested class certification on behalf of every member of Appellants' plans subject to Montana law that contained the coverage exclusion. Roose requested a declaratory judgment that both the exclusion and Appellants' systematic practices violate Montana's made-whole laws. He also sought an injunction requiring Appellants to cease all illegal practices. Finally, Roose, as an individual, requested a trial seeking actual and punitive damages for bad faith.

¶ 9 On September 22, 2014, the District Court issued its order on the motion for summary judgment and class certification. The court found that certification was appropriate for an equitable relief class under M.R. Civ. P. 23(b)(2) and authorized a notice to be sent to potential class members to determine the viability of the class and to gauge the necessity of certifying a restitution subclass. The court granted a declaratory judgment stating that JPT, as an insurer governed by Title 2, MCA, was required to comply with Montana's made-whole laws. Thus, JPT was required to provide coverage for medical expenses regardless of the availability of third-party liability coverage. Once the insured was made whole, JPT could seek reimbursement from the liability carrier. The court ordered Appellants to remove the illegal exclusion from their plans and to cease systematic practices that violated the made-whole laws. The court also ordered Appellants to process all claims incurred in the past without the application of the illegal exclusion. The court ruled on Roose's bad faith claim in a different order and granted his motion for a jury trial on that issue.

¶ 10 Appellants timely appealed the District Court's order regarding class certification.

STANDARD OF REVIEW

¶ 11 We review a district court's decision on a motion for class certification for an abuse of discretion. Chipman v. Northwest Healthcare Corp., 2012 MT 242, ¶ 17, 366 Mont. 450, 288 P.3d 193. The abuse of discretion question is "not whether this Court would have reached the same decision, but whether the district court acted arbitrarily without conscientious judgment or exceeded the bounds of reason." Rolan v. New West Health Servs., 2013 MT 220, ¶ 13, 371 Mont. 228, 307 P.3d 291 ; Chipman, ¶ 17 (quoting Newman v. Lichfield, 2012 MT 47, ¶ 22, 364 Mont. 243, 272 P.3d 625 ). The district court's judgment on certification should be accorded the greatest respect because it is in the best position to consider the most fair and efficient procedure for conducting any given litigation. Chipman, ¶ 17. Further, "[t]rial courts have the broadest discretion when deciding whether to certify a class." Sieglock v. Burlington Northern & Santa Fe Ry. Co.,

2003 MT 355, ¶ 8, 319 Mont. 8, 81 P.3d 495 (citing McDonald v. Washington, 261 Mont. 392, 399, 862 P.2d 1150, 1154 (1993) ).

DISCUSSION

¶ 12 Appellants present two issues for review:

1. Did the District Court abuse its discretion when it certified the proposed class under Rule 23 of the Montana Rules of Civil Procedure ?

2. If the class was properly certified, did the District Court abuse its discretion by defining the class over-broadly?

We will address each issue in turn.

¶ 13 1. Did the District Court abuse its discretion when it certified the proposed class under Rule 23 of the Montana Rules of Civil Procedure ?

¶ 14 A class action is "an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Mattson v. Mont. Power Co. (Mattson III), 2012 MT 318, ¶ 18, 368 Mont. 1, 291 P.3d 1209 (quoting Califano v. Yamasaki, 442 U.S. 682, 700–01, 99 S.Ct. 2545, 2557, 61 L.Ed.2d 176 (1979) ). A class action allows the representative party to conserve the judiciary's and the similarly-situated parties' resources by permitting the single litigation of common issues of fact and law. Morrow v. Monfric, Inc., 2015 MT 194, ¶ 8, 380 Mont. 58, 354 P.3d 558 (citations omitted). Class actions are governed by Rule 23 of the Montana Rules of Civil Procedure. In order for a class action to proceed it must first meet the four requirements of Rule 23(a). Morrow, ¶ 8. However, the class action proponent need not prove each element with absolute certainty. Once Rule 23(a) is satisfied a district court must then determine whether the class action conforms to the type of class actions available pursuant to Rule 23(b). Diaz v. Blue Cross & Blue Shield (Diaz I), 2011 MT 322, ¶ 27, 363 Mont. 151, 267 P.3d 756. Rule 23 provides a district court with flexible management tools to adjust the certified class as the case proceeds. In Rolan v. New West Health Servs., we declined to override the district court's determination as to the breadth of the class definition where the court included insureds who had never filed claims. Rolan, ¶¶ 23, 26. Further, we stated:

[C]lass action certification orders "are not frozen once made"; instead, the District Court maintains discretion to alter the class definition as the case proceeds. Amgen Inc. v. Conn. Ret. Plans & Trust Funds, –––U.S. ––––, 133 S.Ct. 1184, 1202 n. 9 (2013) (" Rule 23 empowers district courts to 'alter or amend' class-certification orders based on the circumstances developing as the case unfolds.") (citing F.R. Civ. P. 23(c)(1) and 23(c)(1)(C) ); see Howe v. Townsend, 588 F.3d 24, 39 (1st Cir.2009) ("Courts can amend certification orders to reflect major changes or minor adjustments to the class.") (citing F.R. Civ. P. 23(c)(1)(C) ).

Rolan, ¶ 15.

¶ 15 Appellants argue Roose failed to demonstrate the class numerosity requirement under Rule 23(a)(1) and failed to demonstrate the class commonality and typicality requirements under Rule 23(a)(2)–(3). Further, Appellants argue because Roose's claims are not common and typical to the class, he is an inadequate representative under Rule 23(a)(4). Each argument is addressed in turn below.

A. Rule 23

¶ 16 M.R. Civ. P. 23, "Class Actions," states in part:

(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:

(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

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