Opinion ID: 1790322
Heading Depth: 1
Heading Rank: 1

Heading: designation of the class and certification of this as a class action

Text: The original plaintiffs alleged that their claims are typical of claims of the entire class (subscribers for health care benefits provided by Blue Cross); and that, in their representative capacities, they will fairly and adequately protect the interests of the class (subscribers for health care benefits provided by Blue Cross). These are two of the prerequisites that must be alleged and proved before a trial court can determine whether the action can proceed as a class action. Rule 23(a), A.R.Civ.P.; Rowan v. First Bank of Boaz, 476 So.2d 44, 46 (Ala. 1985). Count I of the complaint reads, in pertinent part, as follows: The provisions of Section 10-4-100 et seq. provide for the operation of [nonstock corporations organized not for profit to establish and maintain health care service plans] and make specific provisions as to amounts which can be held in reserve by said corporations.... [Original plaintiffs] aver that [Blue Cross] has violated the provisions of Section 10-4-100 et seq. in that it has accumulated an illegal and/or excessive profit and/or reserve and surplus in excess of the amount allowed by statute in Alabama, or required for the solvency of the plan. [The original plaintiffs] aver that they and members of the ... class that they represent have had a direct economic cost imposed upon both them and members of the class as a result of said illegal and improper actions by [Blue Cross]. .... [Blue Cross] continues to maintain and accumulate excessive reserves and/or profits and continues ... in violation of Alabama statutes and law, all to the detriment of [original plaintiffs'] class. [Original plaintiffs] and the members of [their] class have suffered and continue to suffer economic harm as a result of the illegal actions of [Blue Cross] ... in the excessive premiums charged.... .... [Original plaintiffs] request that this Honorable Court enter pursuant to Rule 23(b)(1) and 23(b)(2), Alabama Rules of Civil Procedure, an Order allowing this cause to be maintained as a Plaintiff's class action.... That the Court enter a declaratory judgment declaring that [Blue Cross] violated the law by accumulating an excessive and/or illegal reserve and/or profit. .... That this Court declare an amount which may be held by Blue Cross as reserve and/or unassigned profits which is reasonably necessary to insure the solvency of the company and the compliance of [Blue Cross] with Alabama statutes and that the Court order such other and further relief as may be appropriate under the circumstances as regards ... disposition of any amounts held by [Blue Cross] in excess of that amount determined by the Court to be reasonable reserves or surplus. (Emphasis added.) Blue Cross filed a motion to dismiss and assigned as a separate ground that the original plaintiffs lack standing to assert the matters made the basis of the complaint. To support this motion, Blue Cross filed an affidavit of E. Gene Thrasher, executive vice-president of Blue Cross, who swore that he was familiar with the rating and actuarial aspects of Blue Cross's business and that he was competent to make the statements set forth in the affidavit. In his affidavit, Thrasher swore that Ms. Sanderson and Ms. Mobley were participants in a self-insured health care service plan and, as such, did not contribute to the contingency reserve and that [t]he level of Blue Cross's contingency reserves has no effect whatsoever on benefits available to [Ms. Sanderson and Ms. Mobley] or on the amount of charges for coverage that [Ms. Sanderson and Ms. Mobley] are required to bear under their self-insured plan. Thrasher further swore that Ms. Sanderson and Ms. Mobley did benefit from the contingency reserve to the extent that the contingency reserve provides cash flow for payment of benefits from one contract period to the next in the event that advance deposits from their employer fall short of claims paid during the contract period. As to the only other original plaintiff, Robert Sanderson, Thrasher swore that he was a participant in the Medicare Complimentary C-Plus category of business and that this category benefited from Blue Cross's contingency reserve in an amount substantially in excess of the amount of total premiums paid by that category of business. As of March 31, 1988, the date the complaint was filed, the Medicare Complimentary C-Plus category had paid $2,277,558 less in total premiums than it had received in total benefits from the Blue Cross coverage. Thrasher further testified that if Blue Cross had maintained no contingency reserve, Blue Cross would have been required to discontinue the C-Plus program or would have been required to substantially increase premiums under the C-Plus program in order to generate sufficient income to cover the cost of paying the benefits under that program. This was not controverted by the plaintiffs. Therefore, the undisputed facts before the trial court, when it certified this as a class action and designated the class, showed that the original plaintiffs' claims could not have been typical of the claims of a class that [has] suffered and continue[s] to suffer economic harm as a result of the illegal actions of [Blue Cross] ... in [regard to] the excessive premiums charged. All of the original plaintiffs benefited from the alleged actions of Blue Cross. To present a justiciable case or controversy, the individual plaintiff must have standing to sue; to have standing, the individual must allege an injury directly arising from or connected with the wrong alleged. The standing requirement applies whether the plaintiff sues individually or on behalf of a class. A person who has not been injured may not sue individually or on behalf of the class, because he or she lacks standing. When there has been a class wrong, any person who was injured has standing to sue. When the action is brought on behalf of a class, the standing requirement is not changed, but [another] dimension is addedthe plaintiff must have capacity to raise [common issues on behalf of others]. 1 Newberg On Class Actions, p. 190 (1977). (Emphasis added.) The United States Supreme Court has repeatedly held that `a class representative must be part of the class and possess the same interest and suffer the same injury as the class members.' General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 156, 102 S.Ct. 2364, 2370, 72 L.Ed.2d 740 (1982), quoting East Texas Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395, 97 S.Ct. 1891, 52 L.Ed.2d 453 (1977), quoting Schlesinger v. Reservists Committee To Stop The War, 418 U.S. 208, 94 S.Ct. 2925, 41 L.Ed.2d 706 (1974). Eight additional parties were added as plaintiffs by amendments to the complaint. The beginning paragraph of each amendment, adding these plaintiffs, stated that the complaint was being amended by adding the following parties as Plaintiffs. Six of the added plaintiffs were individuals: Dennis J. Walford (changed by amendment to Lawford), Danny Belcher, Rachel Parrish, Deborah Coleman, Martha Rowe, and Miles Jackson. The paragraphs adding each of these plaintiffs read: New Plaintiff [name] is over the age of nineteen (19) years and is a resident of [name of county], Alabama, and a subscriber to a health care plan of [Blue Cross]. Two of the added plaintiffs were corporations: Stallworth Timber Company and ABC Enterprises, Inc. The paragraphs adding each of these read: New Plaintiff [name], an Alabama Corporation, a subscriber to a health care plan of [Blue Cross]. There was no allegation that any added party was suing in a representative capacity, that their claims were typical of the claims of the entire class, or that they could fairly and adequately protect the interests of the class. Rule 23(a), A.R.Civ.P; Rowan v. First Bank of Boaz, supra. Rule 20(a), A.R.Civ.P., provides, in pertinent part, as follows: All persons may join in one action as plaintiffs if they assert any right to relief jointly, severally, or in the alternative in respect of or arising out of the same transaction [or] occurrence, ... and if any question of law or fact common to all these persons will arise in the action.... A plaintiff ... need not be interested in obtaining ... all the relief demanded. Judgment may be given for one or more of the plaintiffs according to their respective rights to relief.... (Emphasis added.) Therefore, the new plaintiffs could have been joined even if they were seeking only individual relief against Blue Cross. Rule 23(a) provides that one or more members of a class may sue as representative parties on behalf of all only if the claims of the representative parties are typical of the claims of the class and the representatives will fairly and adequately protect the interests of the class. The proponent of the class action status bears the burden of alleging this as to each party who purports to represent a class, just as he bears the burden of proof as to each of the four (4) prerequisites of Rule 23(a). Rowan v. First Bank of Boaz, supra. At oral argument, the plaintiffs contended that their amendments adding parties plaintiff related back to the filing of the original complaint under Rule 15(c), A.R. Civ.P., which provides the following in the only portion that could possibly be relevant: Whenever the claim ... asserted in the amended pleading arose out of the conduct, transaction or occurrence set forth or attempted to be set forth in the original pleading, the amendment relates back.... An amendment changing the party against whom a claim is asserted relates back if the foregoing provision is satisfied.... (Emphasis added.) Even if the allegations were procedurally adequate, the plaintiffs totally failed to introduce any evidence that Lawford, Belcher, Jackson, Parrish, Coleman, Rowe, Stallworth Timber Company, or ABC Enterprises, Inc., had claims that were typical of the claims of the class and that they would fairly and adequately protect the interests of the class. The uncontroverted evidence shows: (1) that Coleman had no Blue Cross coverage; (2) that Rowe was a member of a self-insured plan, as were original plaintiffs Ms. Sanderson and Ms. Mobley, and, therefore, could not be representative of, or protect the interests of, the class described in the complaint, for the same reason that Ms. Sanderson and Ms. Mobley could not; and (3) that Jackson had Medicare Complimentary C-Plus coverage, and, therefore, could not be representative of, or protect the interests of, the class described in the complaint, for the same reason that Mr. Sanderson could not. There is no evidence that the other added plaintiffs are representative of the class described in the complaint or could fairly and adequately protect the interests of the class described in the complaint. The burden to prove each of the four (4) prerequisites of Rule 23(a) is on the proponents of the class action (the plaintiffs in this case), and they have failed to meet this burden. Rowan v. First Bank of Boaz, supra. On the same date that the trial court entered its order on class action status, it dismissed those named plaintiffs who were covered under self-insured plans administered by Blue Cross. There is uncontradicted evidence that this includes Ms. Sanderson, Ms. Mobley, and Ms. Rowe. No appeal has been taken from this action of the trial court. We cannot determine from the pleadings or the record whether any of the other plaintiffs were covered under self-insured funds administered by Blue Cross. We do know that the group health benefit plans of which Dennis J. Walford and Parrish are participants and the health benefit plans maintained by Stallworth Timber Company and ABC Enterprises, Inc., are employee welfare benefit plans governed by the Employee Retirement Income Security Act of 1974 (ERISA); but there is no evidence to show whether these were self-insured plans. There is no evidence of what type plan Dennis Lawford is covered under. Who were the remaining plaintiffs at the time of the class designation? Did those remaining plaintiffs, other than Mr. Sanderson, sue in a representative capacity; and, if so, are they representative of the class described in the complaint? Can the remaining plaintiffs fairly and adequately protect the interests of the class described in the complaint? The burden of presenting sufficient evidence by which these questions could be answered rested with the proponents of class designationthe plaintiffs in this case. They have not met their burden. If we could assume, and we cannot, that the remaining plaintiffs sue in a representative capacity and are representative of the class described in the complaint (those who have suffered and continue to suffer economic harm as a result of the illegal actions of [Blue Cross] ... in [regard to] the excessive premiums charged), we still could not affirm the trial court's designation of the class. In the complaint and its amendments, the remaining plaintiffs are designated as subscriber[s] to a health care [service] plan of Blue Cross; and the original plaintiffs brought this action on behalf of all members of the class composed of all subscribers for health care benefits provided by Blue Cross. The trial court designated the class as: All subscribers, policyholders, holders of certificates of coverage, and members or participants of group coverage directly issued and underwritten by [Blue Cross] on March 31, 1988. There was no allegation in any pleading and no proof that any of the remaining plaintiffs sued in a representative capacity, that their claims are typical of the claims of the class, or that they would fairly and adequately protect the interests of [a]ll..., policyholders, holders of certificates of coverage, and members or participants of group coverage directly issued and underwritten by [Blue Cross] on March 31, 1988. Likewise, even if it should ultimately be proven, and it has not been, that some of the remaining plaintiffs could fairly and adequately protect the interests of the limited class of [a]ll subscribers ... of group coverage directly issued and underwritten by [Blue Cross] on March 31, 1988, it is undisputed that some of themMr. Sanderson and Colemancould not. It is settled that a plaintiff cannot be an adequate representative if she or he has a conflict of interest with class members.... The conflict that will prevent a plaintiff from meeting the Rule 23(a)(4) prerequisite must be fundamental. It must go to the specific issues in controversy. 4 Newberg On Class Actions pp. 47-49, § 22.21 (1985). Mr. Sanderson and Coleman's conflict with those subscribers who are alleged to be injured by Blue Cross's contingency reserve goes to the specific issue in controversythe size of the contingency reserve from which Mr. Sanderson and Coleman and members of their class have benefited. Coleman and Mr. Sanderson could not adequately represent those class members who have been injured, for they would have a conflict of interest. The trial court rushed to judgment in designating the class. The designation was made without any motion having been filed asking for the class to be designated and without any evidence being presented to satisfy the prerequisites for designation set out in Rule 23(a). Rule 23(b) provides: An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition: [subsection (1)(A) or (1)(B) or (2) or (3) of Rule 23(b) is satisfied]. In Rowan v. First Bank of Boaz, 476 So.2d at 46, Justice Almon wrote: All of the above prerequisites [of Rule 23(a) ] must be satisfied before consideration of the additional criteria set out in (b) of Rule 23. Huff v. N.D. Cass Company of Alabama, 468 F.2d 172 (5th Cir.1972). The trial court ordered that this case proceed hereafter as a class action under Rule 23(b)(2). Rule 23(b)(2) provides for class certification if: the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole. The trial court rushed to judgment in certifying this as a class action and, in doing so, abused its discretion in certifying this as a class action under Rule 23(b)(2); that abuse of discretion requires this Court to reverse the trial court's order certifying this as a class action under Rule 23(b)(2). The trial court is directed to set aside its order designating a class and certifying this as a class action.