285 P.3d 562
Mont.2012Background
- Class members insured by BCBSMT or MCHA alleged denial of benefits due to policy exclusions for automobile medical coverage.
- Commissioner of Insurance disapproved the exclusion terms in 2001; BCBSMT later resumed using similar exclusions until 2006-2007 exchange with Commissioner.
- A multi-year class action developed, with Lucas, Speare, and Smith as class representatives; Pallister, Budd, and Normandeau objected to a settlement.
- District Court approved a Settlement Agreement after mediation and certification efforts; objections and requests for discovery were denied.
- Pallister moved to conduct discovery about settlement negotiations and class counsel’s billing; the District Court denied discovery under Rule 23(d).
- This Court reversed the discovery denial, vacated the settlement approval, and remanded for limited discovery and a new fairness hearing.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Did the district court abuse its discretion by denying Pallister’s discovery request? | Pallister argued discovery was needed to assess fairness. | BCBSMT/MCHA argued discovery was unnecessary and could undermine confidentiality. | Yes; the court abused its discretion and remanded for limited discovery and a new fairness hearing. |
Key Cases Cited
- Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998) (require heightened scrutiny in settlement of uncertified class actions)
- Reynolds v. Beneficial Nat’l Bank, 288 F.3d 277 (7th Cir. 2002) (settlement approvals may require scrutiny for potential collusion)
- In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935 (9th Cir. 2011) (three subtle signs of collusion; fee arrangements; distribution to class vs. fees)
- Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975) (objector discovery tied to testing settlement strengths and weaknesses)
- Hemphill v. San Diego Ass’n of Realtors, 225 F.R.D. 616 (S.D. Cal. 2004) (court may limit discovery; mediator involvement not dispositive of collusion concerns)
- Newby v. City, 394 F.3d 296 (5th Cir. 2004) (mediator or prior disclosures can affect discovery decisions in settlements)
- Clark v. Am. Residential Servs., 175 Cal.App.4th 785 (Cal. Ct. App. 2009) (need for information to assess reasonableness of settlement terms (california standard))
- Kullar v. Foot Locker Retail, Inc., 168 Cal.App.4th 116 (Cal. Ct. App. 2008) (strength of merits vs. settlement amount; warning against rubber-stamp approvals)