Title: Direct Ins. Co. v. Lane

State: arkansas

Issuer: Arkansas Supreme Court

Document:

DIRECT GENERAL INSURANCE COMPANY, MSI
Insurance Company, Direct General Insurance
Agency, Inc., A. C. Payne, and John Does 1-
275 v. Jolanda LANE

96-1554                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered May 12, 1997


1.   Civil procedure -- class actions -- requirements for
     certification. -- In determining whether to certify a class
     action, a trial court must consider the factors set forth in
     Ark. R. Civ. P. 23, which provides that a member of a class
     may sue or be sued as representative parties on behalf of all
     only if the requirements of numerosity, commonality,
     typicality, and fair and adequate representation are met; if,
     after these elements are met, the court finds that the
     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, a class may be certified.

2.   Civil procedure -- certification for class action -- trial
     judge has broad discretion. -- The trial judge has broad
     discretion as to whether or not a class should be certified.

3.   Civil procedure -- class actions -- typicality requirement
     discussed. -- A representative's claim is typical of the class
     members' claims under Ark R. Civ. P. 23(a)(3) if the
     representative's claim arises from the same wrong allegedly
     committed against the class; a plaintiff's claim is typical if
     it arises from the same event or practice or course of conduct
     that gives rise to the claims of other class members and if
     his or her claims are based on the same legal theory; when it
     is alleged that the same unlawful conduct was directed at or
     affected both the named plaintiff and the class sought to be
     represented, the typicality requirement is usually met
     irrespective of varying fact patterns which underlie
     individual claims.

4.   Civil procedure -- class actions - typicality requirement met
     even though damages suffered vary among class members. -- The
     fact that the injuries and damages suffered as a result of the
     alleged wrongdoing may vary among class members does not make
     an action fail the typicality requirement; the typicality
     requirement may be satisfied even where the class
     representative and the class members stand to recover
     different amounts of damages; even though some class members
     may collect more than others, the claims are still typical
     because they arise from the same alleged wrong.


5.   Civil procedure -- class actions -- trial court did not abuse
     its discretion in determining that typicality requirement had
     been met. -- The trial court did not abuse its discretion in
     this case by concluding that the typicality prerequisite was
     satisfied where appellee's claims and those of the class
     members arose from precisely the same wrong allegedly
     committed by appellant; the allegations were that appellant
     (1) levied a usurious interest rate through the premium-
     finance agreements in violation of the Arkansas Constitution,
     and (2) made certain misrepresentations in the agreements
     concerning the interest rate and other charges and fees in
     violation of federal statutory and regulatory provisions;
     where appellee's claims and those of the class members all
     arose from this alleged misconduct, the typicality requirement
     was satisfied.

6.   Motions -- summary judgment -- trial court's order denying
     neither reviewable or appealable. -- A trial court's order
     denying a motion for summary judgment is neither reviewable
     nor appealable. 

7.   Civil procedure -- class actions -- supreme court declined to
     decertify subclasses -- factual dispute existed as to whether
     appellee suffered damages. -- The supreme court declined to
     decertify the two subclasses on the basis of appellant's
     position that appellee has not suffered damages where, in
     ruling against appellant on its motion for summary judgment,
     the trial court determined that there was a genuine factual
     dispute as to whether the $15 fee paid by appellee was charged
     by appellant in violation of the usury laws or the relevant
     federal provisions; the finding of the trial court would have
     to be entirely disregarded in order to reverse the trial
     court's certification order on theses grounds; the supreme
     court was not in a position to conclude that appellee had not
     suffered damages and was therefore presenting claims that were
     atypical of the class members' claims.

8.   Civil procedure -- certification of class action -- trial
     court's focus should be on whether requirements of Rule 23 are
     met -- merits of case are not issue. -- The trial court's
     proper focus in deciding whether to certify a class is not
     whether the plaintiff or plaintiffs have stated a cause of
     action or will prevail on the merits, but rather whether the
     requirements of Rule 23 are met; it is totally immaterial
     whether the petition will succeed on the merits or even if it
     states a cause of action; an order denying or granting class
     certification is separate from the merits of the case. 

9.   Civil procedure -- class action certification -- "adequacy of
     representation" prerequisite described. -- The elements of the
     "adequacy of representation" prerequisite are: (1) the
     representative counsel must be qualified, experienced and
     generally able to conduct the litigation; (2) that 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;
     the "adequacy of representation" element is satisfied if the
     representative displays a minimal level of interest in the
     action, familiarity with the challenged practices, and ability
     to assist in litigation decisions.

10.  Civil procedure -- certification of class actions -- trial
     court acted within its discretion in concluding that appellee
     will adequately and fairly represent interests of two
     subclasses. -- Where, at the certification hearing, appellee
     testified that she understood the responsibility she was
     undertaking by agreeing to become the class representative,
     that she had reviewed the relevant documents and had decided
     to become a class representative out of a desire to prevent
     appellant from charging other people excessive interest and
     fees, and that she hoped to recover any amount that was found
     to be an overcharge, and the record demonstrated that the law
     firm that represented appellee had extensive experience in
     conducting class-action litigation, the trial court clearly
     acted within its discretion in concluding that appellee will
     adequately and fairly represent the interests of the two
     subclasses.

11.  Civil procedure -- class actions -- appellant's merit-based
     argument inappropriate for contest to class certification --
     appellee's interest in action clearly sufficient to satisfy
     Rule 23 (a)(4). -- Appellant's contention that appellee would
     be unable to protect the interests of the subclasses because
     she had suffered no damage herself and therefore did not have
     a sufficient interest in the case was without merit; the
     supreme court could not say that appellee had not suffered
     damages on account of the alleged misconduct of appellant, and
     it was inappropriate for appellant to attempt to contest class
     certification by raising merits-based arguments; appellee
     demonstrated that she was committed to pursuing the case
     against appellant, and her interest in the action was clearly
     sufficient to satisfy the requirements of Rule 23(a)(4).


     Appeal from Pulaski  Circuit Court; Morris W. Thompson, Judge;
affirmed.
     Mitchell, Williams, Selig, Gates & Woodyard PLLC, by:  Byron
Freeland, for appellants.
     Allen Law Firm, by:  H. William Allen, for appellee.

     David Newbern, Justice.
     Direct Insurance Company and the other appellants have brought
this interlocutory appeal from the Trial Court's order certifying
a class action.  See Ark. R. App. P.--Civ. 2(a)(9).  We will refer
to the appellants collectively as "Direct Insurance."  Jolanda
Lane, the appellee, brought an action against Direct Insurance on
her own behalf and proposed to represent two subclasses of
individuals who entered into agreements with Direct Insurance for
the purpose of financing the premiums for their automobile
liability insurance policies.  Ms. Lane alleged that she and other
individuals were charged a usurious interest rate in violation of
Ark. Const. art. 19,  13, and that certain aspects of the premium-
finance agreements violated the federal Truth in Lending Act
("TILA"), 15 U.S.C.  1601-1693 (1994), and the regulations
promulgated thereunder, including Regulation Z, 12 C.F.R.  226.1. 
Ms. Lane sought damages under these federal provisions and under
Arkansas usury law.
     The Trial Court held a hearing on the certification motion,
which was resisted by Direct Insurance.  Pursuant to Ark. R. Civ.
P. 23, the Trial Court granted Ms. Lane's motion and permitted her
to act as the representative of one subclass of individuals
asserting usury claims and a second subclass asserting TILA claims. 
On appeal, Direct Insurance contends that the Trial Court's
certification order should be reversed because Ms. Lane's claim is
not typical of the claims of the other class members and because
Ms. Lane will not fairly and adequately protect the interests of
the two subclasses.  We hold that the Trial Court did not abuse its
discretion in certifying the class action and affirm.
     In determining whether to certify a class action, a trial
court must consider the factors set forth in Ark. R. Civ. P. 23,
which provides in part as follows:

          (a) Prerequisites to Class Action.  One or more
     members of a class may sue or be sued as representative
     parties on behalf of all 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 of the claims or defenses of the
     class, and (4) the representative parties will fairly and
     adequately protect the interests of the class.
          (b) Class Actions Maintainable.  An action may be
     maintained as a class action if the prerequisites of
     subdivision (a) are satisfied, and the court finds that
     the 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. ....

     Direct Insurance does not argue that the "numerosity" and
"commonality" elements under subdivision (a) of the rule, or the
"predominance" and "superiority" elements under subdivision (b) of
the rule, are not satisfied.  Rather, Direct Insurance asserts only
that the Trial Court erred in finding that the "typicality" and
"adequacy of representation" elements under Rule 23(a) were
satisfied.  Given the "longstanding rule that the trial judge has
broad discretion in matters of class certification," Union Nat'l
Bank v. Barnhart, 308 Ark. 190, 197,