Lewis & Ellis, Inc. v. General American Life Insurance

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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No. 01-1264
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In re: General American Life Insurance *
Company Sales Practices Litigation *
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Lewis & Ellis, Inc.; Karen Shapiro, *
*
Movants, *
*
James Henderson, *
*
Appellant, * On Remand from the
* United States Supreme Court.
William P. Ludwig; Jeffrey L. Sippil; *
Darrell D. Cunningham; *
John R. D’Alessandro; Bobby L. Chain; * [TO BE PUBLISHED]
Howard L. Zimmon, Trustee, *
Howard M. Newburg Trust *
U.T.A. 5/21/92, Individually and *
on Behalf of All Others Similarly *
Situated and representative capacities, *
*
Appellees, *
*
v. *
*
General American Life *
Insurance Company, *
*
Appellee. *
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Submitted: August 19, 2002
Filed: September 5, 2002
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Before BOWMAN, MORRIS SHEPPARD ARNOLD, and BYE, Circuit Judges.
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BYE, Circuit Judge.
This class action concerns more than 240,000 current and former policyholders
who claim General American Life Insurance Company (GALIC) committed fraud and
made material misrepresentations in the course of selling certain life insurance
policies. GALIC agreed to settle the case by paying class members at least $55
million in the form of additional policy benefits.
Several unnamed class members, including appellant James Henderson,
objected to the settlement terms. The settlement offered class members the option of
receiving a lump-sum payment or participating in a claims processing system. Class
members who chose the claims processing system would have their claims evaluated
to identify the extent of their losses and proof of GALIC wrongdoing. Evaluators
scored the claims from “three,” which merited the greatest relief, to “zero,” which
provided no compensation from the settlement fund in the event class members
presented frivolous claims. Henderson objected to the inclusion of a zero score
because he thought it unfair not to compensate every class member in some form.
Henderson moved to intervene in the district court1 and pressed the scoring
objection as a reason for rejecting the proposed settlement. The district court
1
The Honorable Catherine D. Perry, United States District Judge for the Eastern
District of Missouri.
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overruled Henderson’s objection, denied his motion to intervene in the action, and
formally approved the parties’ settlement in August 2000. Henderson was the only
objecting class member to appeal from the district court’s ruling that the settlement
fairly rewarded the class. We dismissed his appeal on jurisdictional grounds because
he was not a party and he failed to acquire the status of a party by successfully
intervening in the district court. In re Gen. Am. Life Ins. Co. Sales Practices Litig.,
268 F.3d 627, 631-33 (8th Cir. 2001). The Supreme Court subsequently granted
Henderson’s petition for writ of certiorari, Henderson v. Gen. Am. Life Ins. Co., 122
S. Ct. 2584 (2002), vacated our judgment, and remanded the case for further
consideration in light of Devlin v. Scardelletti, 122 S. Ct. 2005 (2002).
Devlin concerned the appellate rights of an unnamed class member who
challenged the fairness of a settlement in a mandatory class action, see Fed. R. Civ.
P. 23(b)(1). The Fourth Circuit had dismissed the unnamed class member’s appeal
because he did not intervene in the class action and thus was not a party who could
appeal the district court’s approval of a settlement. But the Supreme Court reversed,
holding that unnamed class members “who have objected in a timely manner to
approval of the settlement at the fairness hearing have the power to bring an appeal
without first intervening.” Id. at 2013. Devlin drew its strength from the mandatory
character of the class action: “Particularly in light of the fact that petitioner had no
ability to opt out of the settlement, appealing the approval of the settlement is
petitioner’s only means of protecting himself from being bound by a disposition of
his rights he finds unacceptable and that a reviewing court might find legally
inadequate.” Id. at 2011 (internal citation omitted).
Because the Court relied upon the mandatory character of the class action, we
question whether Devlin’s holding applies to opt-out class actions certified under
Rule 23(b)(3). At least one court has already drawn this distinction as a basis for
limiting Devlin’s application to mandatory class actions. Ballard v. Advance
America, ___ S.W.3d ___, 2002 WL 1453665, at *2 (Ark. July 5, 2002). Following
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this approach would lead us to the same conclusion we ventured in the first appeal
because members of the GALIC class action were permitted to opt out of the class
settlement. Though we believe the limited reading of Devlin has considerable merit,
we need not finally resolve the debate because, as it happens, Henderson’s case has
become moot in the months since our first decision.
Class counsel has introduced an affidavit from Christopher Seeger, the Claim
Evaluator who administered the claims processing system that disbursed settlement
proceeds to thousands of class members. (Henderson has not contested the accuracy
or veracity of this affidavit.) Seeger avers that by August 15, 2002, the claims
processing system had scored the claims of all class members who declined lump-sum
payments and not one class member received a zero score. These facts undercut the
basis for Henderson’s appeal. The appeal challenges the fairness of the class
settlement because it authorized zero scores. Because no zero scores were awarded,
Henderson’s objection to the settlement is effectively moot. See Church of
Scientology v. United States, 506 U.S. 9, 12 (1992) (“[I]f an event occurs while a case
is pending on appeal that makes it impossible for the court to grant any effectual
relief whatever to a prevailing party, the appeal must be dismissed.”) (internal
quotation omitted). We therefore dismiss Henderson’s appeal.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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