Court Opinion

ID: 4502502
Source: CourtListenerOpinion
Date Created: 2020-01-29 15:11:03.903665+00
Date Added: 2024-06-11T15:38:00.901732
License: Public Domain

THE STATE OF SOUTH CAROLINA
                In The Supreme Court

   Kenneth and Angela Hensley, on behalf of their minor
   child BLH, and all other similarly situated children,
   Petitioners,

   v.

   South Carolina      Department    of   Social    Services,
   Respondent.

   Appellate Case No. 2018-001351

ON WRIT OF CERTIORARI TO THE COURT OF APPEALS

              Appeal from Spartanburg County
            Brian M. Gibbons, Circuit Court Judge
                      Opinion No. 27941
        Heard October 29, 2019 – Filed January 29, 2020

               VACATED AND DISMISSED

   Timothy Ryan Langley and Charles J. Hodge, Hodge &
   Langley Law Firm, PC; and James Fletcher Thompson,
   James Fletcher Thompson, LLC; all of Spartanburg, for
   Petitioner.

   Andrew F. Lindemann and Joel Steve Hughes,
   Lindemann, Davis & Hughes, PA, of Columbia, for
   Respondent.
JUSTICE FEW: Kenneth and Angela Hensley filed this lawsuit against the South
Carolina Department of Social Services on behalf of their adopted minor child BLH
and a class of approximately 4000 similarly situated adopted children. The central
allegation of the lawsuit is that DSS breached an Adoption Subsidy Agreement with
the parents of each member of the class by reducing each parent's adoption subsidy
by $20 a month, beginning in 2002. The circuit court issued an order finding the
Hensleys satisfied the requirements of Rule 23(a) of the South Carolina Rules of
Civil Procedure, and certifying the proposed class. The court of appeals reversed.
We find the circuit court's order is not immediately appealable. We vacate the court
of appeals' opinion and dismiss the appeal.

      I.     Facts and Procedural History

BLH was born on February 20, 1997. DSS placed her in foster care with the
Hensleys in April 1997. The Hensleys received a foster care maintenance subsidy
of $675 per month from DSS through the federal Adoption Assistance and Child
Welfare Act of 1980. See 42 U.S.C.A. §§ 670-679c (2011 & Supp. 2019). The
Hensleys adopted BLH in 1999. DSS then entered into an Adoption Subsidy
Agreement with the Hensleys pursuant to 42 U.S.C.A. § 673(a)(1)(A), which
requires the State to "enter into adoption assistance agreements . . . with the adoptive
parents of children with special needs." See also S.C. Code Ann. §§ 20-7-1900 to -
1970 (Supp. 2002) ("South Carolina Adoption Supplemental Benefits Act"
(currently codified at S.C. Code Ann. §§ 63-9-1700 to -1810 (2010))); S.C. Code
Ann. § 20-7-1950(A) (Supp. 2002) ("When the department determines that a child
is eligible for supplemental benefits, a written agreement must be executed between
the parents and the department." (currently codified at S.C. Code Ann. § 63-9-
1770(A))). The agreement—entered on a form prepared by DSS—required DSS to
make a "monthly cash payment" to the Hensleys of $675. The agreement stated it
was made "for the purpose of facilitating the legal adoption of" BLH "and to aid the
adoptive parents in providing proper care for this child." By its terms, the contract
was to be "renewed annually by the adoptive parents and DSS," and the "parents
may appeal DSS's decision to reduce, change, or terminate any adoption subsidy."

In June 2002, the acting director of DSS notified foster and adoptive parents by letter
that DSS would reduce all federally funded monthly foster care maintenance and
adoption subsidies by $20. In 2004, DSS restored the $20 for foster care
maintenance subsidies but not for adoption subsidies.

In 2011, the Hensleys filed a class action lawsuit in state court against DSS and its
director alleging a violation of the Contract Clause (art. I, § 10) of the United States
Constitution and civil rights violations under 42 U.S.C.A. § 1983 (2012). The
defendants removed the case to federal court. The Hensleys dismissed their claims
against DSS itself but added several former directors as defendants. The district
court granted the Hensleys' motion for class certification, denied the remaining
defendants' motion for summary judgment on the basis of qualified immunity, and
denied the Hensleys' cross motion for summary judgment.

The Fourth Circuit reversed the denial of the defendants' motion for summary
judgment. Hensley v. Koller, 722 F.3d 177 (4th Cir. 2013). The court found that
when DSS reduced foster care maintenance subsidies in 2002, it was required by
federal law to also reduce adoption subsidies. 722 F.3d at 183 (citing 42 U.S.C.A.
§ 673(a)(3) (providing that "in no case may the amount of the adoption assistance
payment . . . exceed the foster care maintenance payment . . . if the child with respect
to whom the adoption assistance payment is made had been in a foster family
home")). On this basis, the court found "the Hensleys cannot establish that the
Directors violated the Hensleys' rights under the Act and therefore the Directors are
entitled to qualified immunity." 722 F.3d at 183. The Fourth Circuit "remand[ed]
the case for entry of a judgment consistent with this opinion." 722 F.3d at 184.

While the federal case was on appeal at the Fourth Circuit, on April 1, 2013, the
Hensleys filed this breach of contract action in state court in Spartanburg County.
They claimed DSS breached the Adoption Subsidy Agreement by reducing the
monthly cash payments in 2002, and by not increasing the payment for adoptive
parents in 2004 when DSS restored the foster care maintenance subsidy to the
original level. As with the first action, the Hensleys brought the claim as a class
action. The circuit court held a hearing on class certification and DSS's motion for
summary judgment. The court granted the motion for class certification in an order
filed May 29, 2014, and then filed an amended order on September 16, 2014,
certifying the proposed class. The court denied DSS's motion for summary
judgment.

In the September 2014 order, the circuit court required "Defendant shall serve on
each class member a Notice of Class Action." The court later granted DSS's Rule
59(e), SCRCP, motion to amend its order only on the question of who must provide
notice to the class. In an order filed April 30, 2015, the court ordered the Hensleys
to prepare a proposed notice and submit it to the circuit court for approval.

DSS appealed the September 2014 order before the circuit court ruled on DSS's Rule
59(e) motion. The court of appeals stayed the appeal until the Rule 59(e) motion
was resolved. After the circuit court granted the motion in part on April 30, the court
of appeals proceeded to hear the appeal. The court of appeals found the order
granting class certification was immediately appealable and reversed on the basis
the Hensleys did not satisfy the commonality requirement of Rule 23(a). Hensley ex
rel. BLH v. S.C. Dep't of Soc. Servs., 423 S.C. 422, 430-31, 814 S.E.2d 638, 642-43
(Ct. App. 2018). We granted the Hensleys' petition for a writ of certiorari.

      II.    Immediate Appealability

As the court of appeals correctly recognized, class certification orders are ordinarily
not immediately appealable. 423 S.C. at 428, 814 S.E.2d at 641 (quoting Salmonsen
v. CGD, Inc., 377 S.C. 442, 448, 661 S.E.2d 81, 85 (2008)); see also Knowles v.
Standard Sav. & Loan Ass'n, 274 S.C. 58, 59, 261 S.E.2d 49, 49 (1979) (rejecting
the argument "class certification is a decision on the merits and affects substantial
rights, therefore, appealable by virtue of S.C. Code [Ann.] § 14-3-330 (1976)"). To
find the order immediately appealable in this case, the court of appeals relied on a
narrow point of law from Doe v. Howe, 362 S.C. 212, 607 S.E.2d 354 (Ct. App.
2004), which we will discuss below. The court of appeals stated "this case involves
the disclosure of personal and potentially sensitive information for which there
would be 'no appellate remedy . . . likely to repair any damage done by an improper
disclosure.' Therefore, we hold this case is properly before the appellate court." 423
S.C. at 429, 814 S.E.2d at 642 (citation omitted).

The factual basis for the court of appeals' holding is that there may be adopted
children in the class whose parents made a conscious decision not to tell them they
are adopted. The court reasoned that when notice of the class is given to these
parents—or to their child if she has reached majority—the child will learn she is
adopted. 423 S.C. at 429, 814 S.E.2d at 642. As the court of appeals recognized,
the law protects the confidentiality of this information. See S.C. Code Ann. § 63-9-
780(A)-(C) (2010 & Supp. 2019) (providing all adoption proceedings and
proceedings regarding supplemental benefits to adoptive parents are confidential and
must be closed, the related court records are confidential and must be sealed, and the
related DSS records are confidential and are not subject to inspection, the only
exception being "upon court order for good cause shown").

The legal basis for the court of appeals' holding comes from Doe v. Howe. In that
case, our court of appeals allowed an immediate appeal of a pretrial order denying
permission to a plaintiff to proceed anonymously in a civil case involving allegations
the plaintiff was the victim of sexual assault as a child. The Doe court focused on
the nature of the specific information the plaintiff sought to keep confidential, 362
S.C. at 217-19, 607 S.E.2d at 356-57, and in particular the "social stigmatization"
and "embarrassment and humiliation" the plaintiff "understandably seeks to avoid,"
362 S.C. at 219, 607 S.E.2d at 357. The Doe court turned to federal precedent on
the narrow question before it—whether a pretrial order denying a plaintiff
permission to proceed anonymously is immediately appealable. 362 S.C. at 216,
607 S.E.2d at 356-57 (citing James v. Jacobson, 6 F.3d 233, 238 (4th Cir. 1993)).
Based on the specific facts of the case (the plaintiff was a child sexual assault
victim), and the narrow issue the court faced (the plaintiff sought to pursue the case
anonymously), the Doe court found the order immediately appealable.

We disagree with the court of appeals that Doe supports an immediate appeal in this
case. First, Doe is the only case in the jurisprudence of this State in which the need
to preserve confidential information was the basis on which an immediate appeal of
an otherwise unappealable order was permitted. Cf. Ex parte Capital U-Drive-It,
Inc., 369 S.C. 1, 6, 8, 630 S.E.2d 464, 467-68, 469 (2006) (finding an order
appealable because it was a final order, but discussing the immediate appealability
of interlocutory orders disclosing confidential information). The issue in Doe was
narrow. The Doe court relied on similarly narrow precedent—federal decisions on
the identical issue. There is little in Doe, or in the federal precedent on which it
relies, that suggests its reasoning should extend beyond the narrow question of
whether a plaintiff may immediately appeal a pretrial order denying the plaintiff the
right to proceed anonymously to avoid public disclosure of the fact he was sexually
assaulted as a child.

DSS argues the immediate appealability of the class certification order is also
supported by Ex parte Capital U-Drive-It. The court of appeals relied on the case.
423 S.C. at 429, 814 S.E.2d at 642. In Ex parte Capital U-Drive-It, the plaintiff
brought a civil embezzlement action in circuit court against a recent family court
litigant. 369 S.C. at 4, 630 S.E.2d at 466. In the course of discovery in the circuit
court action, the plaintiff sought to unseal the family court record so it could "review
and copy all information in the file pertaining to [the civil defendant]'s financial
affairs." 369 S.C. at 4-5, 630 S.E.2d at 466. The circuit court plaintiff filed the
motion to unseal the record in family court. Id. The family court granted the motion
to unseal the record and permitted the circuit court plaintiff to inspect it. 369 S.C.
at 5, 630 S.E.2d at 466. We found the family court order was appealable because "it
is a final order issued by the family court which stands separate and apart from the
civil lawsuit." 369 S.C. at 6, 630 S.E.2d at 467.1 Because our decision in Ex parte

1
 We addressed two additional points that were not necessary to our decision. First,
we stated,
Capital U-Drive-It turned on the fact it was an appeal from a final order, it does not
support the immediate appeal of any interlocutory order.

Whether this Court should extend the reasoning of Doe to allow immediate appeals
of orders other than those denying a child sexual assault victim's request to proceed
anonymously in a civil lawsuit is an important question. For the reasons we will
explain, however, we decline to address the question until the actual danger of
disclosure of confidential information is squarely before the Court.

This is, in fact, the second reason we disagree with the court of appeals and find the
class certification order in this case is not immediately appealable. Neither the
parties, the circuit court, the court of appeals, nor this Court has any certainty of
whether a disclosure of confidential information is even at stake in this case. The
amended class certification order requires the Hensleys to prepare a notice for the
circuit court's approval that will protect the confidentiality concerns raised by DSS.
Until the circuit court has a chance to evaluate the proposed notice and hear from
the parties as to how confidential information will be protected—or how it may be
compromised—nobody knows whether any confidential information is actually put
at risk in this case.

             the order issued by the family court unsealing the record
             determined a substantial matter forming the whole or part
             of the family court proceeding in which [the civil plaintiff]
             sought access to the record of the . . . divorce. No further
             action is required in the family court to determine the
             parties' rights; therefore, the order is immediately
             appealable under Section 14-3-330(1).
369 S.C. at 7-8, 630 S.E.2d at 468. Second, we addressed the question of whether
the disclosure of confidential information by itself rendered the order immediately
appealable. We stated,

             we agree with courts which have been inclined to find such
             an order immediately appealable because, after a court file
             is unsealed and the information released, no appellate
             remedy is likely to repair any damage done by an improper
             disclosure.
369 S.C. at 8, 630 S.E.2d at 468.
The third reason we disagree with the court of appeals—on immediate
appealability—relates to the requirements a class action plaintiff must satisfy to
establish commonality under Rule 23(a). The circuit court identified two issues
common to all class members, 2 and found "South Carolina has no predominance . . .
requirement." The court of appeals reversed, however, on the basis that there is
some predominance-related requirement in Rule 23(a), which it found the Hensleys
did not meet. See 423 S.C. at 431, 814 S.E.2d at 643 (identifying four issues that
"will require individualized inquiry" and holding "the necessity of such
individualized inquiries 'negates the benefits of a class action suit'[3]").

Under Rule 23(b)(3) of the Federal Rules of Civil Procedure—which South Carolina
specifically did not adopt as a part of our Rule 23—a district court may not certify
the type of class action we address here unless "the court finds that the questions of
law or fact common to class members predominate over any questions affecting only
individual members." This provision requires the court to balance the efficiency to
be gained from one trial on common issues versus the difficulty to be suffered by
having to conduct individual trials or hearings on issues that are not common.

Though our Rule 23 does not specifically require the common issues "predominate,"
there must be a proper balance between common and individualized issues in order
to achieve the efficiencies the class procedure was designed to promote. The court

2
  The circuit court found two common questions: whether (1) DSS's 2002 decision
to reduce adoption subsidies, or (2) DSS's 2004 decision not to raise the adoption
subsidy to its original level, breached the written terms of the Adoption Subsidy
Agreement or its implied covenant of good faith and fair dealing.
3
  The court of appeals indicates it is quoting McGann v. Mungo, 287 S.C. 561, 340
S.E.2d 154 (Ct. App. 1986), but it appears to be quoting Gardner v. S.C. Department
of Revenue, 353 S.C. 1, 22, 577 S.E.2d 190, 201 (2003). The court of appeals'
reliance on McGann on this point is important, however, because McGann was the
first class action case addressed by our appellate courts after Rule 23(a) was adopted
in 1985. In McGann, Judge Goolsby of the court of appeals quoted and relied on
Dean Lightsey and Professor Flanagan's discussion of commonality and
predominance in their 1985 treatise published simultaneously to the promulgation
of our Rules of Civil Procedure. 287 S.C. at 566-71, 340 S.E.2d at 156-59. See
Harry M. Lightsey & James F. Flanagan, South Carolina Civil Procedure 198-99,
201-02 (1st ed. 1985).
of appeals' recognition of this requirement has support in academic sources and in
our precedent.

             The commonality requirement [of Rule 23(a), SCRCP,] is
             a condition of class action status, but the existence of
             common questions alone is not sufficient . . . . [T]he class
             action must be a better procedural mechanism for
             resolving the litigation than named joinder or separate
             litigation. Under Fed. R. Civ. P. 23(b)(3), this is reflected
             in the requirement that the common questions predominate
             over individual issues. Although not specifically required
             by this Rule, it is inherent in the general conditions for
             class actions. The Court should first determine the
             existence of common questions, and then whether they are
             sufficient[ly] central to justify the class action.

Harry M. Lightsey & James F. Flanagan, South Carolina Civil Procedure 199 (1st
ed. 1985); see also Gardner, 353 S.C. at 22, 577 S.E.2d at 201 (reversing the circuit
court's certification of a class because "the factual differences . . . are the crux of a
predominant legal issue," and stating, "A representative class cannot exist where the
court must investigate each plaintiff's . . . claim where it is one of the two
predominate issues in the case. Requiring such individualized examination negates
the benefits of a class action suit"); McGann, 287 S.C. at 568, 340 S.E.2d at 158
(stating "commonality is a judgment that the issues are sufficiently similar so that
the class action will be a more efficient means of resolving the problem, even though
some individual issues may be litigated in any event" (quoting Lightsey & Flanagan,
supra at 198)).

In this case, the circuit court correctly identified two issues common to the claims of
all class members. However, the court has not yet determined which issues might
need individualized trials or hearings. There are several potentially significant issues
that may require individual treatment. For example, DSS contends each class
member was required to appeal DSS's decision to reduce the monthly cash payments
through the administrative appeals process. See Stinney v. Sumter Sch. Dist. 17, 391
S.C. 547, 550 n.1, 707 S.E.2d 397, 398 n.1 (2011) ("exhaustion of administrative
remedies . . . applies when a litigant invokes the original jurisdiction of the circuit
court to adjudicate a claim based upon a statutory violation for which the legislature
has provided an administrative remedy"); S.C. Code Ann. § 20-7-1960 (Supp. 2002)
("A decision concerning supplemental benefits by the department which the
adoptive parents consider adverse to the child is reviewable according to department
regulations." (currently codified at S.C. Code Ann. § 63-9-1790 (2010)); S.C. Code
Ann. Regs. 114-100 to -190 (2012 & Supp. 2019) (generally discussing the DSS
decision-making process); id. at 114-110 ("allow[ing] an individual to contest an
adverse action taken by [DSS] and to have his or her objections to the adverse action
heard by an impartial hearing officer or committee"). The court of appeals agreed
with DSS that this question "will require individualized inquiry." 423 S.C. at 431,
814 S.E.2d at 643.

The exhaustion of administrative remedies question DSS raises is not whether the
Hensleys or any particular class member's parents completed the administrative
appeals process. That would be a question addressed to the merits. Rather, DSS
raises the question of what process—if any—the circuit court must go through to
answer that merits question. If the requirement to exhaust administrative remedies
does not apply in this case, then the court would have to go through no individualized
process. If the requirement does apply, however, the circuit court may have to
conduct individual trials or hearings. The circuit court did not address this question,
and the question is not before this Court at this time. The answer to the question will
nevertheless affect whether this case is appropriate for class treatment.

The court of appeals identified other issues that may require individualized trials or
hearings. See id. (identifying the following issues—"whether each set of adoptive
parents accepted or consented to the reduction in payments, . . . entered into renewal
agreements, or at any pertinent time terminated their agreements"—that "will require
individualized inquiry"). DSS raises the additional question of whether the
calculation of damages requires significant individual treatment, or—as the
Hensleys contend—the damages can be calculated by simple formula. All of these
questions relate directly to whether the circuit court will ultimately permit this
lawsuit to be maintained as a class action. See Salmonsen, 377 S.C. at 454, 661
S.E.2d at 88 ("class certification may be altered at any time prior to a decision on
the merits").

      III.   Conclusion

We find under the circumstances of this case that the class certification order is not
immediately appealable. We vacate the opinion of the court of appeals and dismiss
this appeal.

BEATTY, C.J., KITTREDGE, HEARN and JAMES, JJ., concur.