Safeco Insurance Co. of America v. American International Group, Inc.
2013 U.S. App. LEXIS 5855
| 7th Cir. | 2013Background
- About 45 days after argument, parties moved to dismiss because settlement had been reached; ACE INA Holdings did not join but did not oppose dismissal.
- This is a class action; the court considered potential adverse effects on nonparties to the settlement.
- The class settled with AIG for $450 million, including releases of claims across lines of business; Liberty Mutual objected to the allocation, arguing a larger share was warranted.
- Liberty Mutual chose to stay in the class; most other insurers accepted the district court’s settlement approval.
- Liberty Mutual settled separately with AIG, reducing potential concerns about the settlement’s impact on the class; the district court approved the class settlement.
- The majority concluded there was no live controversy or injury to class members sufficient to warrant continued appellate review, so the appeals were dismissed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether dismissal under Rule 42(b) was proper given class interests | Liberty Mutual argues dismissal risks the class' interests | Court may dismiss on terms to protect nonconsenting members | Yes; dismissal appropriate as no live controversy against class interests |
| Whether the settlement was fair to nonparticipants in the pool | Settlement may leave nonparticipants worse off | All nonparticipants receive what they previously accepted; no additional relief needed | Yes; nonparticipants receive the same outcome as before; no further review required |
| Whether Liberty Mutual’s appeal could injure other class members | Appeal could undermine allocation fairness and class unity | Any potential infringement was addressed by the settlement and opt-out provisions | No likely injury; settlement fairness remains intact and appeal withdrawal is permissible under rule 23(e) |
| Whether further proceedings were needed to review Liberty Mutual’s separate settlement with AIG | Separate agreement could affect class distribution | Separate settlement resolves Liberty Mutual’s individual concerns without harming the class | Not necessary; no further proceedings required to review the separate settlement |
Key Cases Cited
- Devlin v. Scardelletti, 536 U.S. 1 (2002) (protects nonparticipants' rights in class actions when dismissing or settling)
- U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18 (1994) (establishes when dismissal may proceed without further action)
- Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999) (requires adequate representation in class actions)
- Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997) (class action settlements require careful fairness review)
- In re Literary Works in Electronic Databases Copyright Litigation, 654 F.3d 242 (2d Cir. 2011) (allocation issues and subclass considerations in class actions)
- Creative Montessori Learning Centers v. Ashford Gear LLC, 662 F.3d 913 (7th Cir. 2011) (class counsel incentives in settlements and potential conflicts)