Case Title: General Motors Acceptance Corp. v. Massey

Citation: 893 So. 2d 314

Docket Number: 1030209

State: alabama

Court: Alabama Supreme Court

Date: 2004-05-14T00:00:00Z

Document:
893 So. 2d 314 (2004)
GENERAL MOTORS ACCEPTANCE CORPORATION et al.
v.
Donald MASSEY et al.
1030209.

Supreme Court of Alabama.
May 14, 2004.
*315 Warren B. Lightfoot and Sara Anne Ford of Lightfoot, Franklin & White, L.L.C., Birmingham, for appellants.
G.Daniel Evans and K. Edward Sexton II of Evans & Sexton, P.C., Birmingham, for appellees.
WOODALL, Justice.
General Motors Acceptance Corporation ("General Motors"); Motors Insurance Corporation ("MIC"), a subsidiary of General Motors; and MIC Property and Casualty Corporation ("MICPAC"), a subsidiary of MIC (hereinafter collectively referred to as "GMAC"), appeal from an order refusing to decertify a class that had been certified on September 15, 1995, but amending the class-certification order, pursuant to Ala. R. Civ. P. 23(b)(3). We vacate the order and remand the cause with directions.
This action arises out of a class-action complaint filed on December 14, 1993  as amended on June 8, 1995  in which Donald Massey and Judy Jennings alleged that General Motors had improperly "force-placed" collateral protection insurance ("CPI") against their accounts with GMAC. Massey and Jennings each executed a retail installment contract for the purchase of an automobile to be financed by General Motors. Each contract provided for the placement by General Motors of CPI coverage in the event the buyer failed or refused to insure the financed vehicle. The contracts provided, in pertinent part:
Massey and Jennings failed to maintain physical damage insurance on their vehicles, and General Motors purchased CPI for their vehicles. General Motors paid MIC $771 for single-interest coverage on Jennings's vehicle, and added that amount, plus $190 in "finance charges," to the balance General Motors claimed under Jennings's retail installment contract. Similarly, General Motors purchased CPI from MICPAC for Massey's vehicle.
The amount of insurance purchased in each case was based on the amount of the outstanding loan balance. MIC and MICPAC, however, were obligated to pay claims based on the lesser of (1) the cost of repair, (2) the actual cash value of the vehicle, or (3) the outstanding loan balance.
Massey paid no portion of his CPI premium. Subsequently, his vehicle was totally destroyed in an accident with a third party, and General Motors canceled the policy as of the accident date. At Massey's request, General Motors took possession of the vehicle, and MICPAC paid General Motors $5,946.16, based on Massey's outstanding account balance. General Motors applied the payment to Massey's account, leaving an alleged $635.70 deficiency, a portion of which was the unpaid CPI premium.
In their amended complaint, Massey and Jennings averred that GMAC "routinely overcharged [them] and [the putative] class members for [CPI]" in two ways. First, they alleged that the CPI was merely "phantom insurance coverage." In that connection, the complaint stated:
(Emphasis added.)
Second, Massey and Jennings averred that GMAC "charged them for additional insurance coverages which protected one or more of the defendants, but which provided no protection for the plaintiffs or class members." They describe this "additional coverage" as a "kickback" to General *317 Motors or MIC in the form of a "commission" or "administrative fee," which is never "credited to the account of the plaintiffs or class members." They sought damages under various theories, including (1) breach of contract, (2) wrongful repossession, (3) breach of fiduciary duty, and (4) violation of Ala.Code 1975, § 5-19-20 and certain "State Banking Regulations."
On March 21, 1994, General Motors filed a "conditional" class-wide counterclaim, averring, in pertinent part:
Subsequently, General Motors also filed a counterclaim against Massey specifically, seeking recovery of the alleged deficiency of "$635.70, plus all accrued interest, plus attorney's fees and costs."
On September 15, 1995, the trial court certified the following class:
The litigation "simmered" for the next several years, while it was removed to federal court and remanded to the state court, where multiple trial judges recused themselves. Meanwhile, the Legislature enacted Act No. 99-250, Ala. Acts 1999, codified at Ala.Code 1975, §§ 6-5-640 to -642. Section 6-5-642 provides a right of appeal from an order certifying a class. Section 6-5-641 contains a number of provisions concerning the procedures for class certification. Section 6-5-641(a) mandates compliance with §§ 6-5-641 and -642, as a prerequisite for class certification. Section 6-5-641(b) requires the trial court to conduct a scheduling conference
(Emphasis added.) Section 6-5-641(e) provides, in pertinent part:
(Emphasis added.)
On January 14, 2003, GMAC moved to decertify the class, arguing that since the date of certification, "class-action law in Alabama has undergone a metamorphosis," requiring a more "rigorous" and "demanding" analysis. GMAC argued that General Motors' counterclaims and defenses would overwhelm "any common points that may exist," rendering the case unsuitable for class-action disposition. More specifically, it argued that resolution of the case would involve predominantly individual inquiries as to whether the premium payments of the putative class members were made to General Motors voluntarily ("the voluntary-payment defense"). It also argued that the counterclaims against Massey and the putative class for unpaid amounts were compulsory counterclaims, and that they could be resolved only on a case-by-case basis.
On October 8, 2003, the trial court  without addressing the counterclaims or defenses  amended the September 15, 1995, certification order, stating:
From that order, GMAC appealed.
Avis Rent A Car Sys., Inc. v. Heilman, 876 So. 2d 1111, 1116 (Ala.2003).
This Court must "review de novo the question whether the trial court applied the correct legal standard in reaching its decision [to certify the class]." Compass Bank v. Snow, 823 So. 2d  at 667, 671 (Ala.2001). On appeal, GMAC complains of the trial court's apparent failure to consider the counterclaims and defenses. GMAC's brief, at 50-51, 60. Regarding the voluntary-payment defense, GMAC states: "The only way for class members to survive this defense is to prove that, despite the presumption running against them, in their case, payments made to [General Motors] can be deemed in voluntary. But this entails an inquiry into the situation of the class member in question." GMAC's brief, at 56 (emphasis in original). As for the counterclaims, GMAC states:
GMAC's brief, at 51 (citations to the record omitted). At the hearing on GMAC's motion to decertify the class, GMAC presented as a witness Kimberly Fiscus, a "customer relations analyst" for General Motors. She testified that only a "minority" of debtors actually paid the CPI premiums, and that, if the debtors "said they did not [want to] pay it, [General Motors] did not pursue the issue. If they just said they were going to pay the regular monthly payment, that's what [General Motors] collected."
GMAC contends that "[t]he question of [General Motors'] counterclaims[1] and defenses cannot be ignored by any cogent Rule 23[, Ala. R. Civ. P.,] analysis." GMAC's brief, at 51. We agree.
Section 6-5-641, as well as recent opinions of this Court, compel the conclusion that a class-certification order that does not consider compulsory counterclaims does not reflect a "rigorous analysis" of the Rule 23 factors. Section 6-5-641(b) expressly contemplates that a certification hearing will not be conducted before the time has expired for the filing of any counterclaims. Section 6-5-641(e) requires that, as part of its "rigorous analysis," the trial court must not only consider and analyze all the Rule 23 certification factors, but must also "place in the record... a written order addressing all such factors and specifying the evidence, or lack of evidence, on which the court... based its decision with regard to whether each such factor has been established." (Emphasis added.) Under this section, the trial court has no discretion to omit consideration  and discussion  of counterclaims and relevant defenses.[2]
This conclusion is exemplified by recent opinions of this Court, which have ordered the decertification of classes where the *320 action included claims that were subject to counterclaims, or which have vacated certification orders for failure to address defenses. See U-Haul Co. of Alabama v. Johnson, 893 So. 2d 307 (Ala.2004); Compass Bank v. Snow, supra; Ex parte Water Works & Sewer Bd. of City of Birmingham, 738 So. 2d 783 (Ala.1998); see also General Motors Acceptance Corp. v. City of Red Bay, 825 So. 2d 746, 749 (Ala.2002) (vacating a "lengthy" certification order and remanding for further proceedings, where there were "several indicia of a lack of a rigorous analysis"); Alfa Life Ins. Corp. v. Johnson, 822 So. 2d 400 (Ala.2001) (vacating a certification order where the trial court failed to determine whether the insurance contract at the center of the dispute was ambiguous).
In Ex parte Water Works & Sewer Board of City of Birmingham, supra, this Court vacated, by a writ of mandamus, class-certification orders that denied the defendant "the right to assert [compulsory] counterclaims against [the] delinquent class members." 738 So. 2d  at 787.[3] The St. Clair Circuit Court had certified a class pursuant to Rule 23(b)(3) but had excluded the defendant's counterclaims, concluding that "the counterclaims would engender confusion and disruption in the administration of the class action." 738 So. 2d  at 786. This Court instructed the trial courts to "assess each of the provisions of Rule 13 [Ala. R. Civ. P., dealing with counterclaims] and Rule 23 in determining whether class certification is appropriate in each case." 738 So. 2d  at 796 (emphasis added). It stated that where "compulsory counterclaims make the class unmanageable,... the trial court should not certify the class." 738 So. 2d  at 795-96 (citing Heaven v. Trust Co. Bank, 118 F.3d 735 (11th Cir.1997); Marshall Durbin & Co. of Jasper, Inc. v. Jasper Utils. Bd., 437 So. 2d 1014 (Ala.1983), overruled on other grounds, Ex parte Waterjet Sys., Inc., 758 So. 2d 505 (Ala.1999)). In vacating the certification orders, this Court instructed the trial courts to "conduct a rigorous analysis, applying Rule 23 and, where appropriate, Rule 13 to the facts of the respective class actions before ordering the classes certified or not certified." 738 So. 2d  at 797.
In Compass Bank v. Snow, 823 So. 2d  at 678, we held that, in addition to other manageability problems, a breach-of-contract claim against Compass Bank and Compass Bancshares, Inc., by account holders did not satisfy the Rule 23(b)(3) "superiority" requirement, because class members were subject to potential counterclaim liability that threatened to "exceed[ ] any potential recovery." In U-Haul Co. of Alabama v. Johnson, 893 So. 2d  at 313, we held that the "trial court exceeded its discretion in failing to address the voluntary-payment doctrine in its class-certification order," vacated the order, and remanded the case with directions to "consider the effect on the issue of class certification of the ... defendants' assertion of the voluntary-payment defense."
Because the trial court failed to address the compulsory counterclaims, or the defenses, the October 8, 2003, certification order does not reflect the necessary "rigorous analysis." That order is, therefore, vacated, and cause remanded. The trial court is directed on remand to analyze and address those matters, as required by § 6-5-641(e).
ORDER VACATED; CAUSE REMANDED WITH DIRECTIONS.
*321 HOUSTON, SEE, and LYONS, JJ., concur.
JOHNSTONE, J., concurs specially.
JOHNSTONE, Justice (concurring specially).
I concur in the main opinion. I maintain the views I expressed in my special concurrence in U-Haul Co. of Alabama v. Johnson, 893 So. 2d 307, 313 (Ala.2004).
[1]  Massey and Jennings do not challenge GMAC's characterization of the counterclaims as "compulsory."
[2]  Because § 6-5-641(e) requires the trial court to place in the record a written order containing its findings and conclusions, we cannot assume, in the case of a class-certification order, that the trial court made those findings necessary to support its order.
[3]  That case involved orders entered in actions filed in both St. Clair County and Jefferson County.