Taff v. Caremark RX, LLC (Ex parte Caremark RX, LLC)

• Decision Date: 24 February 2017
• Docket Number: 1151160
• Citation: 229 So.3d 751
• Parties: EX PARTE CAREMARK RX, LLC, formerly known as MedPartners, Inc., and Caremark, Inc. (In re: James Taff v. Caremark Rx, LLC, formerly known as MedPartners, Inc., and Caremark, Inc.)
• Court: Alabama Supreme Court

229 So.3d 751

EX PARTE CAREMARK RX, LLC, formerly known as MedPartners, Inc., and Caremark, Inc.(In re: James Taff

v.Caremark Rx, LLC, formerly known as MedPartners, Inc., and Caremark, Inc.)

1151160

Supreme Court of Alabama.

Feb. 24, 2017

Matthew H. Lembke and David G. Hymer of Bradley Arant Boult Cummings LLP, Birmingham; and Daniel Gray McDowell of McDowell, Beason & Hamilton, PC, Russellville, for petitioner.

D. Frank Davis and John E. Norris of Davis & Norris, LLP, Birmingham; and Jeffrey L. Bowling of Bedford, Rogers & Bowling, P.C., Russellville, for respondent.

Bruce J. McKee, John W. Haley, Scott A. Powell, Brian M. Vines, Ralph D. Cook, and Tempe D. Smith of Hare, Wynn, Newell & Newton, LLP, Birmingham; J. Timothy Francis of Francis Law, LLC, Birmingham; and John Q. Somerville of Somerville, LLC, Birmingham, for amici curiae class counsel for certified class in Johnson v. Caremark Rx, LLC, in support of the petitioner.

STUART, Justice.

In June 2000, the Franklin Circuit Court ("the trial court") entered a final judgment approving a settlement agreement in Taff v. Caremark, Inc., a class-action lawsuit against the corporate predecessor of the petitioner, Caremark Rx, LLC ("Caremark). Approximately 16 years later, in July 2016, Taff class counsel moved the trial court to enter an order requiring Caremark to produce for them certain information regarding the members of the Taff class so that Taff class counsel could notify those members of a proposed settlement in a separate class-action lawsuit pending against Caremark in the Jefferson Circuit Court, Johnson v. Caremark Rx, LLC, in which some of the members of the Taff class might be able to file claims. The trial court ultimately granted Taff class counsel's request and ordered Caremark to produce the requested information. Caremark now petitions this Court for a writ of mandamus directing the trial court to vacate that order. We grant the petition and issue the writ.

I.

On September 15, 1997, MedPartners, Inc., a physician-practice-management/pharmacy-benefits-management corporation that was the predecessor in interest to Caremark, Inc., and Caremark, began issuing to investors a type of convertible security known as threshold-appreciation-price securities, or TAPS. TAPS holders were entitled to receive interest payments through the final settlement date, August 31, 2000, at which time they would receive a yield-enhancement payment and all their TAPS would be converted into shares of MedPartners common stock. The funds received by MedPartners in exchange for the TAPS were to be held in escrow until the final settlement date, when they would be released to MedPartners; however, if certain "termination events" indicating that MedPartners had become financially distressed occurred before August 31, 2000, TAPS holders were entitled to an immediate payment.

In March 1999, a California state agency appointed a conservator over a MedPartners subsidiary operating in California; that conservator subsequently initiated bankruptcy proceedings on behalf of the subsidiary. In March 2000, certain TAPS holders initiated the Taff action in Franklin County to resolve the issue whether the bankruptcy of the California subsidiary constituted a termination event entitling them to an immediate payment. A settlement was quickly reached and, on June 9, 2000, the trial court entered a final judgment approving the terms of that settlement and further stating, as relates to the case presently before this Court:

"The court hereby reserves and maintains continuing jurisdiction over all matters relating to the settlement agreement or the consummation of the settlement, the validity of the settlement, the construction and enforcement of the settlement and any orders entered pursuant thereto; and the entry and enforcement of this final judgment, including, in the event of reversal, vacation, or modification, jurisdiction to revoke this order and final judgment in its entirety and to reinstate all claims dismissed or released; to discipline class members, parties or attorneys who do not comply with the terms of this final judgment; to provide an award of attorneys fees; to tax court costs; and to all other matters pertaining to the settlement agreement, its implementation, and enforcement."

There is no evidence in the record indicating, nor has there been any allegation, that the parties in Taff did not abide by the terms of the June 2000 final judgment.

During this same period, MedPartners was embroiled in other litigation. In 1998, approximately 21 separate lawsuits were filed against MedPartners in various state and federal courts alleging that MedPartners had, in connection with a planned merger with Phycor Inc., made false and misleading statements to both the public and the Securities and Exchange Commission concerning its financial condition and anticipated future performance. Some of those lawsuits asserted claims on behalf of TAPS holders based on their general status as holders of MedPartners-issued securities; however, none of those lawsuits was specifically related to TAPS or implicated the issues subsequently addressed in the Taff action. Those various cases were ultimately consolidated in the Jefferson Circuit Court and, in 1999, a global settlement was reached. This Court subsequently described the details of that settlement—along with a subsequent attempt to reopen the settlement based on allegations that MedPartners and its insurer had fraudulently suppressed information regarding MedPartners' insurance coverage—in CVS Caremark Corp. v. Lauriello, 175 So.3d 596, 598–99 (Ala. 2014) :

"Based on the alleged financial distress and limited insurance resources of MedPartners, the 1998 litigation was concluded in 1999 by means of a negotiated ‘global settlement,’ pursuant to which the claims of all class members were settled for $56 million—an amount that, according to the representations of MedPartners, purportedly exhausted its available insurance coverage. Purportedly based on representations of counsel that MedPartners lacked the financial means to pay any judgment in excess of the negotiated settlement and that the settlement amount was thus the best potential recovery for the class, the trial court, after a hearing, approved the settlement and entered a judgment in accordance therewith.

"Thereafter, however, MedPartners, now Caremark, allegedly disclosed, in unrelated litigation, that it had actually obtained—and thus had available during the 1998 litigation—an excess-insurance policy providing alleged ‘unlimited coverage’ with regard to its potential-damages exposure in the 1998 litigation—the existence of which it had purportedly concealed in negotiating the class settlement. As a result, in 2003, [a member of the class that was subject to the 1999 settlement] ... again sued Caremark and the insurers in the Jefferson Circuit Court, pursuant to a class-action complaint alleging misrepresentation and suppression—specifically, that Caremark and the insurers had misrepresented the amount of insurance coverage available to settle the 1998 litigation and that they also had suppressed the existence of the purportedly unlimited excess policy ...."

(Footnotes omitted.) For the next several years, the involved parties—class members in the Jefferson County action, Caremark, its insurer, and various attorneys who had at one time or were now representing class members—litigated various matters not directly related to the ultimate issue whether the settlement that ended the 1998 litigation had been procured by fraud. That litigation resulted in multiple appeals to this Court. See Lauriello; McArthur v. Yearout & Traylor, P.C., 34 So.3d 737 (Ala. 2008) (table); and Ex parte Caremark RX, Inc., 956 So.2d 1117 (Ala. 2006).

On August 15, 2012, the Jefferson Circuit Court certified the fraud claims asserted against MedPartners and its insurer based on the settlement of the 1998 litigation as being appropriate for class-action treatment, and it also defined the applicable class to include, among other holders of MedPartners securities, "[a]ll persons who ... purchased MedPartners [TAPS] in the September 15, 1997, offering or thereafter through January 7, 1998." This Court affirmed the August 15, 2012, order of the Jefferson Circuit Court in Lauriello, 175 So.3d at 614, and the Jefferson Circuit Court thereafter ordered that notice of the class action be provided to all potential class members. Over 99,000 notices were subsequently mailed out to parties previously identified as owners of record or beneficial owners of MedPartners securities, as well as to over 250 brokerages, custodial banks, and other financial institutions that may have held MedPartners securities on behalf of others. Notice was also published in the The Wall Street Journal. No objections were made claiming that those methods of notice were inadequate.

The Jefferson County action was ultimately restyled as Johnson v. Caremark Rx, LLC, and, on June 1, 2016, the Jefferson Circuit Court gave preliminary approval to a $310 million settlement agreement. Pursuant to the terms of that settlement, class members had to affirmatively file a claim to receive any portion of the settlement fund. In giving preliminary approval to the settlement, the Jefferson Circuit Court also approved the parties' plan for publishing, mailing, and distributing settlement notices and claim forms to potential claimants, ordered that any objections to the proposed settlement be filed by July 22, 2016, scheduled a final fairness hearing for August 8, 2016, and set a deadline of September 30, 2016, for class members to file claim forms.

At some point after the Jefferson Circuit Court entered its June 1, 2016, order in Johnson, Taff class counsel decided to contact the members of the Taff class to notify them that they might be able to receive funds from the settlement of the Johnson case if they filed a timely claim. However, Taff class counsel did not have a...