Title: Mega Life and Health Ins. Co. v. Jacola

State: arkansas

Issuer: Arkansas Supreme Court

Document:

The MEGA LIFE and HEALTH INSURANCE COMPANY,
Charles Hall, and Jim Dawson v. 
Michael D. JACOLA and Pamela R. Jacola,
Individually and as Parents and Natural
Guardians of Kristen M. Jacola, a Minor

96-1343                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
               Opinion delivered October 16, 1997


1.   Action -- class action -- certification -- requirements. -- According to
     Ark. R. Civ. P. 23, a trial court may certify a class only if
     the following conditions are met: (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 of the
     claims or defenses of the class; and (4) the representative
     parties will fairly and adequately protect the interests of
     the class; additionally, the court must find that questions of
     law or fact common to the members of the class predominate
     over any questions affecting only individual members, and that
     a class action is superior to other available methods for the
     fair and efficient adjudication of the controversy.

2.   Action -- class action -- certification -- trial judge's discretion. -- A
     trial court has broad discretion in determining whether the
     elements necessary for certification of a class action have
     been satisfied, and the appellate court will not reverse
     absent an abuse of that discretion.

3.   Action -- class action -- certification -- merits of underlying claim not
     subject to examination. -- Neither the trial court nor the
     appellate court may delve into the merits of the underlying
     claim when determining whether the requirements of Ark. R.
     Civ. P. 23 have been satisfied.

4.   Action -- class action -- certification -- trial court may hold hearing to
     determine whether Ark. R. Civ. P. 23 requirements have been met. --
     Although, regarding a class action, a trial court may not
     consider whether the plaintiffs have a cause of action or if
     they will ultimately prevail on the merits, the court may hold
     a hearing to determine whether the requirements of Ark. R.
     Civ. P. 23 have been satisfied.

5.   Appeal & error -- failure to request specific findings -- issue waived on
     appeal. -- Where appellant failed to request specific findings
     in regard to the Ark. R. Civ. P. 23(b) elements either prior
     to or after the entry of the order of certification, the
     supreme court held that it waived this issue on appeal.

6.   Action -- class action -- certification -- appellant did not waive right
     to contest conclusion that all six Ark. R. Civ. P. 23 elements had been
     satisfied. -- Where it was implicit in the trial court's order
     granting class certification that the court's ultimate
     conclusion was that all six elements of class certification
     had been satisfied, the supreme court held that appellant had
     waived only its right under Ark. R. Civ. P. 52 to have the
     trial court enter specific findings in its order regarding the
     satisfaction of each of the six elements of class
     certification but that appellant had not waived its right to
     contest the trial court's ultimate conclusion that all six
     elements had been satisfied as required by Ark. R. Civ. P. 23;
     the supreme court found no merit to appellant's argument that
     the certification order should be reversed because the trial
     court failed to make specific findings regarding the Rule 23
     requirements of predominance and superiority.

7.   Action -- class action -- certification order reversed only for abuse of
     discretion. -- The supreme court will reverse a trial court's
     certification order only when the court has abused its
     discretion; in making this determination, the court has
     consistently reviewed the evidence in the record to determine
     whether it supports the trial court's ultimate conclusion
     regarding certification; the supreme court had not previously
     required the trial court to enter into the record a detailed
     explanation of why it concluded that certification was proper,
     and it refused to impose such a requirement.

8.   Action -- class action -- numerosity requirement. -- The exact size of
     the proposed class and the identity of the class members need
     not be established for the court to certify a class, and the
     numerosity requirement may be supported by common sense; the
     supreme court has not adopted a bright-line rule to determine
     how many class members are required to satisfy the numerosity
     requirement.

9.   Action -- class action -- trial court did not abuse discretion in finding
     numerosity requirement satisfied. -- Whether the plaintiffs have
     stated a cause of action or will ultimately prevail on the
     merits is immaterial to our determination of whether the trial
     court erred when it found that the class should be certified
     under Ark. R. Civ. P. 23; the supreme court concluded that the
     trial court did not abuse its discretion when it found that
     the numerosity requirement had been satisfied.     

10.  Action -- class action -- trial court did not abuse discretion in finding
     commonality requirement satisfied. --  Where, if the four issues
     common to all members of the class were resolved in favor of
     the class, the individual members would have suffered a common
     injury of paying premiums for a void insurance policy and thus
     might be entitled to rescission of the policies and a refund
     of the premiums paid or coverage for outpatient services; the
     supreme court concluded that the trial court did not abuse its
     discretion when it found that the commonality requirement had
     been satisfied.

11.  Action -- class action -- predominance requirement satisfied. -- The
     supreme court held that the common issues presented by this
     case must be resolved prior to addressing the individual
     issues and concluded that appellees had satisfied the
     predominance requirement.

12.  Action -- class action -- superiority requirement satisfied. -- The
     supreme court found that by first addressing the issues common
     to all members of the class, the trial court could achieve
     real efficiency; moreover, certifying the case as a class
     action would be fair to both sides, enabling appellant to
     pursue its individual defenses and proving more economical to
     appellees; the supreme court concluded that the superiority
     requirement had been satisfied.

13.  Action -- class action -- typicality requirement discussed. -- The
     typicality requirement is satisfied if the representative's
     claim arises from the same wrong allegedly committed against
     the members of the class; when analyzing this factor, the
     supreme court focuses upon the defendant's conduct and not
     upon the injuries or damages suffered by the plaintiffs. 

14.  Action -- class action -- trial court did not abuse discretion in
     determining appellees' claim satisfied typicality requirement. -- Where
     each of the common claims arose from the same wrong allegedly
     committed by appellant, the supreme court found no abuse in
     the trial court's determination that appellees' claim was
     typical of the claims presented in the class action.

15.  Action -- class action -- adequacy requirement -- elements. -- The three
     elements of the requirement that the representative fairly and
     adequately protect the interests of the class are that (1) the
     representative counsel must be qualified, experienced and
     generally able to conduct the litigation; (2) there be no
     evidence of collusion or conflicting interest between the
     representative and the class; and (3) the representative must
     display some minimal level of interest in the action,
     familiarity with the practices challenged, and ability to
     assist in decision making as to the conduct of the litigation.

16.  Action -- class action -- adequacy requirement -- first and second elements
     satisfied. -- Absent a showing to the contrary, the supreme
     court presumed that the representative's attorney would
     vigorously and competently pursue the litigation;
     additionally, there was no evidence that appellees had a
     conflict of interest with the class members; thus, the court
     held that the first and second elements of the adequacy
     requirement had been established.

17.  Action -- class action -- trial court did not err in finding appellees had
     fulfilled adequacy requirement. -- The minimal-interest element of
     adequacy is satisfied if the representative displays a minimal
     level of interest in the action, a familiarity with the
     challenged practices, and the ability to assist in litigation
     decisions; where appellee testified that he had read the
     complaint and understood the allegations against appellant,
     that he had stayed in touch with his lawyer since the lawsuit
     was filed, that he understood his duties as class
     representative, and that he was willing to comply with those
     duties, the supreme court concluded that the trial court did
     not err when it held that appellees had fulfilled the adequacy
     requirement.  

18.  Action -- class action -- appellant's adequacy argument addressed merits
     of case -- not considered on appeal. -- Where appellant's argument
     addressed the merits of the underlying case, and thus the
     supreme court would not consider it when determining whether
     the requirements of Ark. R. Civ. P. 23 had been satisfied; the
     supreme court found no error in the trial court's
     determination that the adequacy requirement had been
     satisfied.


     Appeal from Saline Circuit Court; John W. Cole, Judge;
affirmed.
     Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., by: 
R.T. Beard III and Mark N. Halbert, for appellants.
     Lovell & Nalley, by: John Doyle Nalley, for appellees.

     Annabelle Clinton Imber, Justice.
     This is an interlocutory appeal from an order certifying a
class action.  See Ark. Sup. Ct. R. 1-2(a)(11); Ark. R. App. P.--
Civ. 2(a)(9).  We affirm the trial court's order.
     On September 1, 1994, the appellees, Michael and Pamela
Jacola, purchased a group health insurance policy from the
appellants, Mega Life & Health Insurance Company ("Mega"), for
themselves and their two dependents.  The group policy was issued
through the Alliance for Affordable Health Care ("Alliance")
which served as group master policyholder.  Soon thereafter, the
Jacolas' minor daughter received outpatient medical treatment,
and Mega refused to pay the medical bills.   
     On May 17, 1995, the Jacolas filed a tort action against
Mega and the two agents who sold them the policy alleging
numerous individual theories for recovery including negligence,
fraud, misrepresentation, and false advertising.  In their
complaint, the Jacolas also requested class certification so that
they could represent approximately 400 other Arkansans who had
purchased identical health insurance policies from Mega.  
     In their motion for class certification, the Jacolas alleged
that Alliance was a sham organization thereby making the Mega
health insurance policies individual, instead of group, policies. 
Additionally, the Jacolas asserted on behalf of the proposed
class that the policies they purchased from Mega were void in two
respects.  First, the Jacolas asserted that the policies were
void because Mega failed to comply with Ark. Code Ann.  23-98-
107(a) (Repl. 1992), which requires issuers of minimum basic
benefit policies to obtain from their prospective insureds a
written statement acknowledging the limited nature of the
coverage provided.  The Jacolas also claimed that the policies
were void because Mega failed to comply with Insurance Commission
Rule 18 which requires a stamped notification on the first page
of an individual health insurance policy that does not cover
outpatient services.  On behalf of the class, the Jacolas asked
the court to declare the policies void, force Mega to withdraw
use of the policy in Arkansas, grant compensatory damages in the
amount of the premiums collected from the insured for the past
five years, and award punitive damages.
     The trial court conducted two hearings on the Jacolas'
certification motion.  On August 8, 1996, the trial court granted
the Jacolas' motion for certification pursuant to Ark. R. Civ. P.
23.  In its order, the court found that the Jacolas had satisfied
the Rule 23(a) requirements of numerosity, commonality,
typicality, and adequacy.  The trial court, however, did not make
specific findings regarding the existence of the Rule 23(b)
requirements of predominance or superiority.  
     On appeal, Mega asserts that the trial court's order of
certification is erroneous because the Jacolas failed to satisfy
each of the six requirements listed in Rule 23(a) & (b). 
According to Ark. R. Civ. P. 23, a trial court may certify a
class only if the following conditions are met:
     (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 of
     the claims or defenses of the class, and (4) the
     representative parties will fairly and adequately
     protect the interests of the class.
Ark. R. Civ. P. 23(a).  Additionally, the court must find that 
questions of law or fact common to the members of the class
predominate over any questions affecting only individual members,
and that a class action is superior to other available methods
for the fair and efficient adjudication of the controversy.  Ark.
R. Civ. P. 23(b).   A trial court has broad discretion in
determining whether these elements have been satisfied, and we
will not reverse absent an abuse of that discretion.  Direct Gen.
Ins. Co. v. Lane, 328 Ark. 476, 944 S.W.2d 528 (1997); Farm
Bureau Mutual Ins. Co. v. Farm Bureau Policy Holders & Members,
323 Ark. 706, 918 S.W.2d 129 (1996); Cheqnet Sys., Inc. v.
Montgomery, 322 Ark. 742,