In these appeals, Heidi Disch, Mary Sisk Rawls, Alice Lusk, and Mrs. Henry Little (hereinafter referred to collectively as the "objectors") appeal from an order approving the settlement of a class action filed by Sharon Hicks against Oxmoor House, Inc. We reverse and remand with directions.
On May 29, 2003, Sharon Hicks sued Oxmoor House, Inc., a corporation engaged in the marketing and selling of books. Oxmoor House uses a "negative option plan" in marketing its books. This means that once a consumer orders a single book on a "30-day trial plan," the consumer is enrolled in a program pursuant to which Oxmoor House notifies the consumer that another related book (a "subsequent book") will automatically be sent to the consumer unless the consumer notifies Oxmoor House that he or she does not want the subsequent book. Once the consumer receives the subsequent book, the consumer may return the book, if the consumer decides not to keep it, at his or her own expense and no payment is due.
Sharon Hicks alleged in her complaint that, upon receiving a subsequent book from Oxmoor House, she and many other consumers believed that they were obligated to pay for the book. Additionally, she alleged that, in many cases, Oxmoor House began billing the consumer for the subsequent book, regardless of whether the consumer had requested the subsequent book and regardless of whether the consumer returned the subsequent book or kept it. She also alleged that, in many cases, Oxmoor House sent letters to consumers threatening to take legal action to collect payment for the subsequent book, even when the subsequent book had not been requested and even when the consumer had returned the subsequent book.
In her complaint, Hicks included claims of unjust enrichment and money had and received, suppression, misrepresentation, and a violation of § 35-1-3, Ala.Code 1975.
On June 19, 2003, the trial court entered a preliminary order, conditionally certifying a nationwide class for settlement purposes. The trial court scheduled a fairness hearing for September 15, 2003, to consider the adequacy and reasonableness of the proposed settlement. The trial court ordered actual and publication notice be given to the class members so that they could opt out of the class or object to the proposed settlement.
The trial court conducted the fairness hearing on September 15, 2003. The trial court received 30 objections to the proposed settlement; only 10 of those objections were timely. Of those 10 objectors, Heidi Disch, Mary Sisk Rawls, Alice Lusk, Mrs. Henry Little, and David Hill appeared, through their respective counsel, at the fairness hearing.
The trial court approved the proposed settlement on October 31, 2003. In its order approving the settlement, the trial court certified the following class:
The trial court's order also incorporated the parties' stipulation of settlement and the exhibits filed with that stipulation.
By approving the proposed settlement, the trial court agreed with Hicks (the class representative) and Oxmoor House that
The trial court also awarded $3,010,000 to the plaintiffs' attorneys in legal fees and expenses. Neither the trial court's October 31, 2003, order nor any of the pleadings and exhibits incorporated into that order addressed the Rule 23, Ala. R. Civ. P., criteria for class certification. In its order, the trial court simply stated that the class representative and class counsel had adequately represented the class under Rule 23; that the settlement met all the criteria required by law; and that the notice of the certification of the class and the proposed settlement provided to the class members met all of the requirements of Rule 23, Ala. R. Civ. P.
Little filed a motion to alter, amend, or vacate the order approving the class settlement. The trial court denied this motion on January 2, 2004.
Disch, Rawls, Lusk, and Little appeal.
Little is represented by different counsel. She asserts that the trial court erred by certifying the class without conducting the rigorous analysis required by § 6-5-641, Ala.Code 1975; she also challenges the adequacy, fairness, and reasonableness of the settlement. Our resolution of the issues raised by Little pretermits our discussion of the issues raised by the other objectors.
Standard of Review
Mayflower Nat'l Life Ins. Co. v. Thomas, 894 So.2d 637, 640 (Ala.2004). Additionally, the standard of review applicable to a trial court's approval of a proposed settlement of a class action is as follows:
Adams v. Robertson, 676 So.2d 1265, 1272-73 (Ala.1995) (citations omitted).
On appeal, Little argues that in certifying this action for class treatment, the trial court erred in failing to conduct a rigorous analysis, as required by § 6-5-641, Ala. Code 1975, before certifying the class. Little argues that the certification is defective in three ways: (1) the class certification does not satisfy the predominance requirement as required by Rule 23(a); (2) the class certification does not satisfy the superiority requirement as required by Rule 23(a); and (3) the class certification must fail because the court failed to perform a rigorous analysis to determine whether the actions taken by Oxmoor House were legal in other states.
Whether Little adequately preserved her objection on the certification issue before the trial court is debatable. Before the fairness hearing, Little filed a written motion objecting to the proposed settlement. In that motion, she argued at length that both the notice and the relief provided to the class members regarding the proposed settlement were inadequate. She did not argue that the class did not meet the predominance and superiority requirements of Rule 23(a). However, in that motion Little requested that the trial court withdraw its conditional certification of the class for settlement purposes, that it allow further discovery on the merits of class certification, and that it conduct a hearing on class certification.
At the fairness hearing, Little's attorney stated that her objection was based upon the fact that the settlement was not fair, adequate, or reasonable; that the notice of the proposed settlement sent to the class members was confusing; and that the objectors did not know how many claims for relief were actually being filed under the proposed settlement. Little requested that the trial court stay the hearing; she also requested that the trial court order Oxmoor House to produce the records necessary to show how many claims it had actually received so that she could assess the fairness and adequacy of the proposed settlement.
At that hearing, Little's attorney added the following: "We would also ask that the Court lodge our objection to the order granting the preliminary approval of the proposed settlement class because it does not meet the rigorous analysis standard." Little's attorney did not present any specific argument to support Little's "objection" based on the court's alleged failure to meet the rigorous-analysis standard. Additionally, Little's attorney never cited
Finally, although Little filed a motion to alter, amend, or vacate the trial court's order approving the settlement, she did not argue in that motion that the trial court had not met the rigorous-analysis standard. Thus, the request for relief found in Little's written objection to the proposed settlement and the sentence quoted above made at the fairness hearing constitute the extent of Little's argument before the trial court regarding the class-certification issue. However, we conclude that Little's argument before the trial court and her request for a hearing on the issue of class-certification was sufficient to raise the issue before the trial court. She has also appealed from the trial court's order, raising those issues. Although Little failed to elaborate upon her objection to the class certification and her request for a hearing to address the Rule 23 criteria and failed to reference § 6-5-641, Ala.Code 1975, in her objection, we conclude that Little preserved her objection for purposes of appeal and that the issue whether the class was properly certified is properly before us.
Thus, we address whether, under § 6-5-641, Ala.Code 1975, a trial court must conduct a rigorous analysis and issue a written order explaining and applying the Rule 23, Ala. R. Civ. P., criteria for class certification, even when it is conditionally certifying a class for settlement purposes only. We find no prior cases discussing whether § 6-5-641, Ala.Code 1975, allows a trial court to certify a settlement class without conducting the rigorous analysis required in that Code section. We conclude that the language of § 6-5-641, Ala.Code 1975, requires a trial court to conduct a rigorous analysis, even when it is conditionally certifying a class for settlement purposes only.
Section 6-5-641, Ala.Code 1975, provides:
We note that neither § 6-5-641 nor Rule 23, Ala. R. Civ. P., expressly contemplates the conditional certification of a settlement class and neither the statute nor the rule expressly provides for a less than rigorous analysis to be performed in certifying class actions for settlement purposes. Subsection (e) recognizes that the court may treat a factor as having been established if the parties so stipulate and the trial court finds that the factor could have been established. However, this language still requires the trial court to independently assess the factor to some degree. Additionally, even though Hicks and Oxmoor House may have stipulated that the Rule 23 requirements were met in this case, Little did not so stipulate. She specifically objected on the basis that the class had been certified without benefit of the required rigorous analysis, and she requested an evidentiary hearing to address the Rule 23 criteria.
Section 6-5-641(d) requires the trial court to conduct an evidentiary hearing on class-certification issues and to record that hearing, if any "party" requests such a hearing by motion. Upon first receiving notice of the proposed settlement and fairness hearing, Little requested such a hearing. The trial court scheduled a fairness hearing to address the proposed settlement; the trial court, however, then issued its order approving the class-action settlement without the benefit of a hearing at which the Rule 23(a) and (b) criteria for class certification could be addressed.
Section 6-5-641(e), Ala.Code 1975, also requires that the trial court issue a written order addressing the Rule 23 criteria and the specific application of those criteria to the case before it. The trial court's order approving the proposed settlement does not address those factors and their application to the claims asserted in this action.
We recognize that courts in other jurisdictions have taken different approaches to and expressed other views on the use of class certification for settlement purposes. The topic is discussed at length in 4 Herbert Newberg and Alba Conte, Class Actions §§ 11.27-11.28 (4th ed.2002). Newberg and Conte appear to favor such certifications of a settlement class.
The Fifth Circuit Court of Appeals, citing Newberg, stated:
607 F.2d at 177-78.
Thus, it appears that a leading authority on class actions and some federal authority, which we typically look to for guidance in interpreting Rule 23, Ala. R.Civ. P., favor class certifications for settlement purposes, under the appropriate circumstances. However, to the extent those authorities do not interpret Rule 23 to require a rigorous analysis of the class-action criteria before certification of a class for settlement purposes, we decline to follow them.
Additionally, those authorities were not bound by § 6-5-641, Ala.Code 1975. That statute, effective May 25, 1999, was designed to address problematic aspects of class-action litigation in this state. In attempting to remedy the problems associated with class-action litigation in Alabama, the Legislature expressly placed upon the trial courts a mandatory duty to conduct a rigorous analysis to determine whether the prerequisites of Rule 23 were met. We have construed the duty imposed upon the
We also conclude that Little's objection was not deficient for her failure to reference § 6-5-641, Ala.Code 1975. Little objected because the trial court failed to conduct the rigorous analysis required for class certification. As we have discussed, the rigorous-analysis requirement arises not solely from § 6-5-641 but also from Rule 23, Ala. R. Civ. P., as well as the existing caselaw of this State. The rigorous-analysis requirement existed even before the enactment of § 6-5-641 in 1999. See, e.g., Ex parte Water Works & Sewer Bd. of Birmingham, 738 So.2d 783, 788 (Ala.1998), in which this Court recognized:
(Quoting Ex parte Citicorp Acceptance Co., 715 So.2d 199, 203 (Ala.1997).) See also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (recognizing that, when faced with a request for a class certification for settlement-only purposes, a district court need not inquire whether the case would present intractable problems of trial management, but that the other requirements for class certification must still be met).
As Professor Newberg recognized, "Rule 23 class requirements are more readily satisfied in the settlement context, where the circumstances are less complex, than if they were being applied to certify a class action for litigation purposes." Newberg § 11.28. Although it may be easier for a plaintiff to satisfy the Rule 23 requirements for settlement classes, the
The trial court failed to comply with the requirements of § 6-5-641, Ala.Code 1975, and Rule 23, Ala. R. Civ. P. We reverse the trial court's order and remand this action for further proceedings consistent with this opinion. On remand, the trial court shall schedule a hearing pursuant to § 6-5-641(d), Ala.Code 1975, and shall comply with the requirements of § 6-5-641(e), Ala.Code 1975. Because of our resolution of the class-certification issue, we pretermit consideration of the remaining issues.
1030403—REVERSED AND REMANDED WITH DIRECTIONS.
1030404—REVERSED AND REMANDED WITH DIRECTIONS.
1030405—REVERSED AND REMANDED WITH DIRECTIONS.
1030758—REVERSED AND REMANDED WITH DIRECTIONS.
NABERS, C.J., and HOUSTON, SEE, LYONS, HARWOOD, and WOODALL, JJ., concur.
JOHNSTONE, J., dissents.
JOHNSTONE, Justice (dissenting).
Section 6-5-641(e), Ala.Code 1975, provides, in pertinent part:
The named "parties to the action" did stipulate on the record that all of the Rule 23, Ala. R. Civ. P., factors had been established. Pursuant to that stipulation, the class certification order stated that the trial court "specifically [found] that the requirements under Alabama Rule of Civil Procedure 23 for class certification have been met."
At the time of the stipulation by the named "parties to the action," before the putative classes had been certified, neither Objector Little nor any other unnamed member of the putative classes was a "part[y] to the action," since only the subsequent class certification made them parties. Section 6-5-641(e) does not require, and could not practicably require, that all putative class members join in such a stipulation. Therefore, a stipulation by Objector Little was not necessary to a stipulation by "all parties to the action" sufficient to authorize the trial court to "treat [the] factor[s] as having been established" and thereupon to certify the classes. § 6-5-641(e).