Pallister v. Blue Cross & Blue Shield of Mont., Inc.

366 Mont. 175

285 P.3d 562

2012 MT 198

Tyson S. PALLISTER, Kevin Budd, Jessica Normandeau, and Laura Fortune, Class Members and Appellants,

v.BLUE CROSS AND BLUE SHIELD OF MONTANA, INC., and Montana Comprehensive Health Association, Defendants and Appellees,

v.Brittany C. Smith, Renee Neary, as parent and guardian of Dylan Dallaserra; Krista Lucas and Alice Jean Speare; each individually and as representative members of a class of similarly situated plaintiffs, Class Representatives and Appellees.

No. DA 11–0431.

Supreme Court of Montana.

Argued April 11, 2012.

Submitted April 26, 2012.

Decided Sept. 5, 2012.

For Class Members and Appellants Pallister, Budd and Normandeau: James G. Hunt (Argued), Jonathan McDonald, Dix, Hunt & McDonald, Helena, Montana, Erik B. Thueson, Thueson Law Office, Helena, Montana, Jory C. Ruggiero, J. Breting Engel, Western Justice Associates, Bozeman, Montana.

For Class Member and Appellant Laura Fortune: Lawrence A. Anderson (Argued), Attorney at Law, Great Falls, Montana, Rex Palmer, Attorneys Inc., P.C., Missoula, Montana.

For Appellee Blue Cross and Blue Shield of Montana, Inc.: Michael F. McMahon, Stefan T. Wall (Argued), McMahon, Wall & Hubley, PLLC, Helena, Montana.

For Appellee Montana Comprehensive Health Association: Jacqueline T. Lenmark (Argued), Keller, Reynolds, Drake, Johnson & Gillespie, P.C., Helena, Montana.

For Class Representatives and Appellees: Robert G. McCarthy (Argued), McCarthy Law, P.C., Butte, Montana.

Justice PATRICIA O. COTTER delivered the Opinion of the Court.

¶ 1 This case arises out of claims asserted by multiple persons against Blue Cross and Blue Shield of Montana (BCBSMT) and Montana Comprehensive Health Association (MCHA).¹ Claimants assert that while they were fully insured by BCBSMT or MCHA, they submitted claims that the insurers denied based upon exclusions contained in their insurance policies. These exclusions were subsequently disapproved by the Montana Commissioner of Insurance (Commissioner) and the insureds sought the previously-denied benefits. Eventually, the matter evolved into a class action and three of the claimants, Krista Lucas, Brittany Smith, and Alice Speare, were named class representatives.² A class was certified that included claims filed—or claims that could have been filed—from December 29, 2000, through December 31, 2008. Class counsel was appointed. Subsequently, a settlement was negotiated. Three other claimants, Tyson Pallister, Kevin Budd and Jessica Normandeau, objected to the settlement and sought review by the Second Judicial District Court. The District Court approved the settlement. Pallister, Budd and Normandeau appeal asserting numerous errors by the District Court including but not limited to the court's error in denying Pallister's motion to conduct discovery. We reverse and remand on the discrete issue of discovery and vacate the District Court's approval of the Settlement Agreement. As a result, we do not address the parties' remaining allegations of error.

FACTUAL AND PROCEDURAL BACKGROUND

¶ 2 This case has a long and complex procedural history. It involves multiple actions filed by numerous individuals in two state district courts and in the Montana federal court, as well as an interim proceeding before this Court. Our resolution of this matter does not require that we recite a detailed description of the many parties and their claims. However, to the extent facts pertaining to specific parties are relevant to our analysis, they are presented below.

¶ 3 The appellants/objectors, the class representatives/appellees, and all class members, were insured by BCBSMT or MCHA at the time they were injured in separate automobile accidents over a period of several years. They were covered under both ERISA ³ and non–ERISA policies. Each of their policies contained an exclusion for automobile medical coverage, generally providing that the insurer would not pay for health care costs of its injured insureds if the insureds received, or were entitled to receive, benefits from any automobile liability policy. The parties filed timely claims for benefits with BCBSMT and/or MCHA based upon the dates of their respective accidents and the insurers denied all, or part, of their claims based upon the exclusions in their individual policies.

¶ 4 An earlier action initiated by complaints to the Commissioner about BCBSMT's denial of claims based upon these or similar exclusions was the forerunner to the case now before us. In Blue Cross & Blue Shield of Mont. v. Mont. State Auditor, 2009 MT 318, 352 Mont. 423, 218 P.3d 475( State Auditor ), we explained that BCBSMT submits its policy forms to the Commissioner for approval in accordance with applicable law, § 33–1–501, MCA. In October 2001, the Commissioner disapproved certain terms, conditions and provisions contained in BCBSMT's policies and forms, including the above-referenced automobile insurance exclusion provisions. BCBSMT requested an administrative hearing. State Auditor, ¶ 5. In March 2002, the Commissioner and BCBSMT reached an agreement, memorialized by correspondence rather than a formal order, allowing BCBSMT to continue to use the agreed-upon exclusion language in its forms. The administrative proceeding was not dismissed and BCBSMT continued using these forms through most of 2006. State Auditor, ¶ 6.

¶ 5 In October and November 2006, BCBSMT once again submitted forms containing the exclusion language to the Commissioner for approval. In May 2007, the Commissioner disapproved the forms on the grounds that the exclusion language conflicted with the subrogation statutes at §§ 33–30–1101 and –1102, MCA (2005), and applicable case law. Resurrecting the 2002 administrative hearing proceeding, BCBSMT requested a contested case hearing which was held in July 2007. The hearing examiner issued his proposed findings of fact and conclusions of law in October 2007 upholding the decision to disapprove the forms. State Auditor, ¶ 6.

¶ 6 In March 2008, the Commissioner adopted the hearing examiner's proposed decision. BCBSMT sought judicial review by the First Judicial District Court. That court, in December 2008, upheld the Commissioner's decision and BCBSMT appealed. State Auditor, ¶ 7. On September 24, 2009, we affirmed the Commissioner's rejection of the forms, expressly holding that the exclusions allowed BCBSMT:

to avoid any payment of benefits to its insured if the insured is “entitled to receive” benefits from any other auto ... liability policy, whether or not the insured actually receives any of those benefits, and whether or not the insured has been made whole. Only when the insured is made whole as defined in Montana law, and then only after BCBS has paid out benefits to its insured, could BCBS be entitled to claim subrogation.... The BCBS exclusions therefore violate Montana statutory and case law on subrogation.

State Auditor, ¶ 19.

¶ 7 It is against the backdrop of State Auditor that the action currently before us was filed and evolved into a class action, potentially including over 3,000 class members who were denied benefits between 2000 and 2008 based upon these policy exclusions.

ISSUE

¶ 8 The dispositive issue for purposes of this Opinion is whether the District Court abused its discretion by denying Pallister's motion to conduct discovery.

STANDARD OF REVIEW

¶ 9 We review a district court's discovery rulings for an abuse of discretion. Heggem v. Capitol Indem. Corp., 2007 MT 74, ¶ 17, 336 Mont. 429, 154 P.3d 1189.

DISCUSSION

¶ 10 Did the District Court abuse its discretion by denying Pallister's motion to conduct discovery?

¶ 11 Neary, Lucas and Speare filed their initial action against BCBSMT in the Second Judicial District Court on December 29, 2008, shortly after the First Judicial District Court affirmed the Commissioner's decision in State Auditor. In January 2009, their case was removed to federal court where Neary was ultimately dismissed as a plaintiff. In March 2009, MCHA moved, and was granted the right, to intervene as a defendant. The case remained in federal court until January 14, 2010, when it was remanded back to the Second Judicial District Court.⁴

¶ 12 On the day the Second Judicial District Court again took control of the case, BCBSMT, MCHA, Lucas, and Speare filed a M.R. Civ. P. 23(c) (Rule 23) Stipulation for Class Certification Consideration (Stipulation) with the District Court.⁵ In this Stipulation, they agreed to consolidate their case with a similar case filed by Smith against BCBSMT in September 2009 in the Second Judicial District Court.⁶ The consolidated case for purposes of this Opinion will be referred to as In re BCBSMT/MCHA. On January 19, 2010, Pallister and Budd moved to intervene, as a matter of right, in In re BCBSMT/MCHA. Normandeau then moved to intervene as well.⁷ The proposed intervenors, who were members of the class, believed the Stipulation compromised and did not protect their rights. They requested that the District Court take no action on the proposed Stipulation until the proposed intervenors had fully briefed the issue and the court ruled on their motions for intervention.

¶ 13 On January 22, 2010, BCBSMT, MCHA and Lucas filed a Stipulated Protective Order governing the “use of ‘Confidential Information’ produced in response to any discovery request, deposition, subpoena or other means.” “Confidential information” was defined, in part, as “any patient and/or client information including but not limited to name of patient, date of birth, Social Security number, healthcare information, billing record, note, or other document, generated and/or maintained by [BCBSMT] or [MCHA] or any person or entity on their behalf, involving financial or proprietary information.” The District Court judge signed both of the insurers' and Lucas's stipulated motions on January 22.

¶ 14 On January 25, 2010, Honorable John Whelan as mediator met with counsel for BCBSMT, counsel for MCHA, and Smith, Speare and their attorney...