175 So. 3d 596
Ala.2014Background
- MedPartners (later Caremark) settled a 1998 nationwide securities-fraud class action for $56 million, with the court approving a global settlement exhausting available insurance.
- Lauriello later sued Caremark and insurers in 2003 for fraud in the settlement and suppression of an unlimited excess policy, seeking Rule 60(b) relief and naming additional defendants including plaintiffs’ counsel.
- The trial court retained jurisdiction over settlement matters and later certified a new class in the Lauriello actions, appointing Finney, Johnson, and the Retirement System as class representatives.
- Intervenors sought to challenge the class and to intervene; the trial court allowed intervention and later, after various procedural steps, certified a class under Rule 23(b)(3) with a defined settlement class scope and excluded opt-outs.
- Caremark and insurers appealed the class certification, and plaintiffs cross-appealed seeking a Rule 23(b)(1) mandatory class instead of opt-out treatment; the Supreme Court affirmed the Rule 23(b)(3) certification and rejected the Rule 23(b)(1) cross-arguments.
- The core issue is whether the fraud claims arising from the settlement of the 1998 litigation are suitable for class treatment, considering predominance, adequacy of counsel, and potential class definition issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Predominance under Rule 23(b)(3) | Fraud on the class is uniform; reliance is not individualized because it targeted the class's agents (counsel) and the class-wide settlement. | Fraud claims require individualized reliance and damages, so predominance fails. | Predominance established; common questions predominate; class certified. |
| Adequacy of class counsel under Rule 23(a)(4) | Proposed counsel are adequate; disputes over ethics do not defeat adequacy. | Counsel may be witnesses/adverse to the class; adequacy is questionable and should be reviewed. | Trial court did not err; issue of potential witness-disqualification reserved for trial; not ripe at certification. |
| Past conduct of appointed counsel | Alleged misconduct does not automatically disqualify counsel; merits are contested but do not defeat certification. | Ethical and fiduciary missteps require denial of certification. | Courts rejected the asserted misconduct as basis to defeat certification; certification affirmed. |
| Overbreadth of the certified class | Current fraud claims are common to all class members and past subclass delineations are immaterial to the new claims. | Class includes opt-outs or non-participants, risking overbreadth and conflicts. | Class defined to exclude opt-outs; no abuse of discretion; certification upheld. |
| Cross-appeal: Rule 23(b)(1) mandatory class vs Rule 23(b)(3) opt-out | Rule 23(b)(1) is a better fit due to unique procedural posture and risk of inconsistent adjudications. | Rule 23(b)(1) inappropriate for monetary damages; 23(b)(3) is proper. | Rule 23(b)(3) affirmation; Rule 23(b)(1) rejected; cross-appeal denied. |
Key Cases Cited
- Ex parte Household Retail Servs., Inc., 744 So.2d 871 (Ala. 1999) (fraud class certification depends on the commonality and reliance considerations)
- Harbor Ins. Co. v. Blackwelder, 554 So.2d 329 (Ala. 1989) (standard fraud class action may lie where a common thread exists)
- Grayson, 878 So.2d 280 (Ala. 2003) (reliance elements and commonality in fraud class actions; typicality and predominate analysis)
- Voyager Ins. Cos. v. Whitson, 867 So.2d 1065 (Ala. 2003) (predominance test; common questions must predominate over individual ones)
- Reynolds Metals Co. v. Hill, 825 So.2d 100 (Ala. 2002) (predominance and class action framework guidance)
- In re Warfarin Sodium Antitrust Litig., 212 F.R.D. 231 (D. Del. 2002) (economic-harm class actions supportiveness for class certification)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (S. Ct. 1997) (framework for Rule 23(b)(3) predominance and class cohesion)
- Ex parte Government Emps. Ins. Co., 729 So.2d 299 (Ala. 1999) ( Rule 23(b)(1) considerations for damages-focused classes)
- Ryan v. Patterson, 23 So.3d 12 (Ala. 2009) (money damages and class certification considerations)