Hege v. AEGON USA, LLC
2011 U.S. Dist. LEXIS 6109
| D.S.C. | 2011Background
- Transamerica and Life Investors issued supplemental cancer policies with an “actual charges” provision; the policy paid based on billed charges before 2006 and then changed to pay the amount providers accepted as payment in full, reducing many claims.
- Plaintiffs Hege filed a diversity action in 2010 seeking breach of contract, bad faith, fraud, and declaratory relief related to the policy interpretation.
- This case is part of a multi-district wave challenging the meaning of “actual charges”; Runyan (Arkansas state court) approved a national class settlement in March–December 2009, including a $3.5 million fee for class counsel and a notice describing non-monetary and monetary benefits, with a proposed construction of “actual charges” as the amount legally owed.
- Hege objected to the Runyan settlement and moved to carve out a South Carolina subclass or extend opt-out time; Runyan issued a Final Order approving the settlement and dismissing class claims in December 2009; Gooch (M.D. Tenn.) granted partial summary judgment in favor of plaintiffs on similar issues.
- Transamerica sought summary judgment claiming that the Runyan Order had preclusive effect under res judicata/Full Faith and Credit Act, and that Rooker–Feldman barred the Heges’ claims; the court found jurisdiction exists and that Rooker–Feldman does not bar the Heges’ independent state-law claims given due-process concerns with Runyan.
- The court ultimately held that the Runyan Order is not entitled to full faith and credit due to due-process deficiencies in Runyan (notably inadequate notice and inadequate representation), and that under Arkansas law the Runyan Order also lacks preclusive effect as the Runyan action lacked adversarial litigation and proper jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Rooker-Feldman bars the Heges’ claims. | Heges argue the Runyan Order collaterally estops their claims. | Transamerica contends Runyan precludes all claims. | Rooker-Feldman does not bar the Heges; claims are independent and not reverse of Runyan. |
| Whether the Runyan Order is entitled to full faith and credit. | Runyan was infirm due to due-process defects (notice/representation). | Runyan complied with due process; should be given full faith and credit. | Runyan Order not entitled to full faith and credit due to due-process deficiencies. |
| Whether notice in Runyan satisfied due process. | Notice was materially misleading by describing benefits and misapplying South Carolina law. | Notice adequately described rights and benefits. | Notice was materially misleading and violated due process. |
| Whether Runyan counsel’s representation was adequate under Shutts. | Class counsel demonstrated conflicts of interest and self-interest (fee) undermining class interests. | Counsel adequately represented class by pursuing settlement. | Runyan representation was inadequate; violates Shutts. |
| Whether Runyan Order has preclusive effect under Arkansas law. | Arkansas lacked proper jurisdiction/adversarial proceedings; not fully contested. | Runyan Order precludes related claims. | Runyan Order has no preclusive effect under Arkansas law. |
Key Cases Cited
- Hansberry v. Lee, 311 U.S. 32 (U.S. 1940) (collateral attack on absent class members requires adequate representation)
- Shutts v. Tes, 472 U.S. 797 (U.S. 1985) (due process in class actions; notice and opt-out requirements)
- Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367 (U.S. 1996) (scope of collateral due process review in class settlements)
- Exxon Mobil Corp. v. Saudi Basic Indus. Corp., 544 U.S. 280 (U.S. 2005) (preclusion and Rooker-Feldman framework; independence of claims)
- Davani v. Va. Dept. of Transp., 434 F.3d 712 (4th Cir. 2006) (Rooker-Feldman depends on independent claims; jurisdiction not lost by collateral attack)