Pallister v. Blue Cross & Blue Shield of Mont., Inc. (In re Blue Cross & Blue Shield of Mont., Inc.)

383 Mont. 404

372 P.3d 457

2016 MT 121

In re BLUE CROSS AND BLUE SHIELD OF MONTANA, INC., n/k/a Caring for Montanans, Inc., and Montana Comprehensive Health Association Insurance Litigation.

Tyson Pallister, Kevin Budd, Kenneth Walsh, Martin T. Mangan, Shirley Mangan, Ray Lee, and Laura Fortune, Objectors and Appellants

v.Blue Cross and Blue Shield of Montana, Inc., n/k/a Caring for Montanans, Inc., and Montana Comprehensive Health Association, Defendants and Appellees.

No. DA 15–0458.

Supreme Court of Montana.

Submitted on Briefs April 6, 2016.

Decided May 24, 2016.

For Appellants: James G. Hunt, Hunt Law Firm, Helena, Montana, Jory C. Ruggiero, Domenic A. Cossi, Western Justices Associates, Bozeman, Montana.

For Appellant Laura Fortune: Lawrence A. Anderson, Attorney at Law, P.C., Great Falls, Montana.

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

For Appellee Caring for Montanans, Inc.: Michael F. McMahon, Stefan T. Wall, McMahon, Wall & Hubley, PLLC, Helena, Montana.

For Class Representatives: Robert G. McCarthy, McCarthy Law, P.C., Butte, Montana.

Justice PATRICIA 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, now known as Caring for Montanans, Inc. (CFM) and Montana Comprehensive Health Association (MCHA) (collectively “Insurers”). The District Court certified a class of claimants for settlement purposes only. The District Court then held a fairness hearing on a proposed settlement agreement and approved the settlement. Several class members objected to the settlement (Objectors) and appealed to this Court, arguing they should be allowed to conduct further discovery to ascertain the fairness of the settlement agreement. We agreed with Objectors and remanded the case to the District Court for further discovery and a second fairness hearing. The District Court allowed further discovery, held a second fairness hearing, and determined that the same settlement agreement was fair, reasonable, and adequate. The Objectors again appeal. We affirm.

ISSUES

¶ 2 We restate the issues on appeal as follows:

¶ 3 Has Objector Laura Fortune waived her right on appeal to object to the settlement agreement?

¶ 4 Does Objector Kevin Budd have standing to object to the settlement agreement?

¶ 5 Did the District Court abuse its discretion by certifying this matter as a class action?

¶ 6 Did the District Court abuse its discretion by approving the settlement agreement?

¶ 7 Did the District Court err by allowing individual settlements?

FACTUAL AND PROCEDURAL BACKGROUND

¶ 8 This case arises out of claims asserted by multiple persons against CFM and MCHA. The claimants assert that while they were insured by CFM or MCHA, they submitted claims that the insurers denied based upon exclusions contained in their health insurance policies. These exclusions generally provided that the insurer would not pay for health care costs of the injured insureds if the insureds received, or were entitled to receive, benefits from any automobile liability policy. These exclusions were subsequently disapproved by the Montana Commissioner of Insurance, see Blue Cross & Blue Shield of Mont. v. Mont. State Auditor (State Auditor ), 2009 MT 318, 352 Mont. 423, 218 P.3d 475, and the insureds sought the previously-denied benefits. We affirmed the disapproval on appeal. State Auditor, ¶ 20.

¶ 9 Following our ruling in State Auditor, the Second Judicial District Court certified a class of claimants for settlement purposes only and appointed class counsel. A settlement was negotiated, which the District Court approved after conducting a settlement fairness hearing. Several members of the class objected to the settlement and appealed to this Court, claiming the District Court erred in denying their motion to conduct discovery into the fairness of the settlement. We held in Pallister v. Blue Cross & Blue Shield of Mont., Inc. (Pallister I ), 2012 MT 198, 366 Mont. 175, 285 P.3d 562 that the District Court should have allowed the Objectors to conduct discovery into how the class members were identified and how the class counsel's fee was negotiated. We concluded that this information was necessary for the District Court to evaluate whether the proposed settlement agreement was “fair, reasonable and adequate.” Pallister I, ¶ 34. We therefore vacated the District Court's approval of the settlement agreement, and reversed and remanded for discovery, a second fairness hearing, and an evaluation of the totality of the evidence to determine if the proposed settlement agreement was fair, reasonable and adequate. Pallister I, ¶ 36. We instructed the District Court to evaluate the fairness of the proposed settlement by analyzing the factors identified in Jones v. GN Netcom, Inc. (In re Bluetooth Headset Prods. Liab. Litig. ), 654 F.3d 935, 946 (9th Cir.2011) as well as any other factors the District Court deemed critical to the case. Pallister I, ¶¶ 38–39.

¶ 10 After allowing for further discovery, the District Court held a second fairness hearing on March 3, 2015, during which the parties presented arguments and submitted additional documents. On July 7, 2015, the District Court issued Findings of Fact, Conclusions of Law, and a Final Order and Judgment. The District Court analyzed the same proposed settlement agreement according to the Jones factors, found the agreement to be fair, reasonable, and adequate, and approved the settlement. The Objectors appeal from that order, and again are challenging the settlement agreement, as well as the certification of the class and the allowance of individual settlements.

STANDARD OF REVIEW

¶ 11 A district court “is in the best position to consider the most fair and efficient procedure for conducting any given litigation,” so we review for abuse of discretion a district court's decision whether to certify a class. Sieglock v. Burlington Northern & Santa Fe Ry. Co., 2003 MT 355, ¶ 8, 319 Mont. 8, 81 P.3d 495 (citing McDonald v. Washington, 261 Mont. 392, 399, 862 P.2d 1150, 1154 (1993) ). “However, [t]o the extent that the ruling on a Rule 23 requirement is supported by a finding of fact, that finding, like any other finding of fact, is reviewed under the clearly erroneous standard. And to the extent that the ruling involves an issue of law, review is de novo.” Jacobsen v. Allstate Ins. Co., 2013 MT 244, ¶ 25, 371 Mont. 393, 310 P.3d 452 (citing Mattson v. Mont. Power Co., 2012 MT 318, ¶ 17, 368 Mont. 1, 291 P.3d 1209 ) (internal quotations omitted).

¶ 12 Rule 23 of the Montana Rules of Civil Procedure is identical to the federal Rule 23, so “federal authority is instructive.” Jacobsen, ¶ 28. We review for abuse of discretion a district court's decision to approve a class action settlement. Dunleavy v. Nadler (In re Mego Fin. Corp. Sec. Litig. ), 213 F.3d 454, 458 (9th Cir.2000). We will affirm if the district court “applies the proper legal standard and [its] findings of fact are not clearly erroneous.” Dunleavy, 213 F.3d at 458.

DISCUSSION

¶ 13 Has Objector Laura Fortune waived her right on appeal to object to the settlement agreement?

¶ 14 Objectors Tyson Pallister, Kevin Budd, Kenneth Walsh, Martin Mangan, Shirley Mangan, and Ray Lee filed a joint brief on appeal, and Objector Laura Fortune (Fortune) filed her own brief. In their response briefs, the Insurers responded to the issues raised by all the Objectors and separately raised the issue of Fortune's standing to object to the settlement agreement.

¶ 15 The issue of Fortune's standing as a putative class member to object to the settlement agreement was raised in Pallister I . We said then that

The District Court determined that she lacked standing to object to the fairness of the Settlement Agreement because her excluded claims had been paid in full by BCBSMT. Fortune disputes this assertion. Because we are remanding for further discovery, Fortune shall be given the opportunity to present evidence to the District Court that will establish whether or not she has been paid for her excluded claims and whether she therefore has standing.

Pallister I, ¶ 42. The Insurers now argue that Fortune does not have standing to challenge the settlement agreement because she did not participate in the second fairness hearing and she did not avail herself of the opportunity provided by this Court to present to the District Court on remand evidence to establish her standing. Although the Insurers' argument is couched as a standing argument, it is in effect a waiver argument and we will address it as such.

¶ 16 The Insurers urge this Court not to consider Fortune's objections to the settlement agreement because Fortune “did not participate in the district court proceedings after remand.” The Insurers maintain that although Fortune joined the Objectors' combined brief filed prior to the second fairness hearing, the fact that Fortune and her attorneys did not appear at or object during the fairness hearing means she has now waived her right to object to the settlement agreement. Federal courts that have addressed similar situations have reached different conclusions regarding an unnamed non-intervening class member's right to object to a settlement agreement. The Tenth Circuit held that a class member who filed written objections to a settlement agreement was not entitled to appeal approval of the settlement because he did not object during the fairness hearing, which was a requirement imposed by the district court in the notice to class members of the proposed settlement. Weinman v. Fid. Capital Appreciation Fund (In re Integra Realty Res., Inc. ), 354 F.3d 1246, 1257–58 (10th Cir.2004). The Sixth Circuit came to the opposite conclusion and held that a class member who filed written objections to a settlement but did not appear at the fairness hearing was nonetheless entitled to appeal the district court's...