The recent Sixth Circuit decision in Pipefitters Local 636 Insurance Fund v. Blue Cross Blue Shield of Michigan, 2011 U.S. App. LEXIS 16624 (6th Cir. Aug. 12, 2011) makes some interesting points about superiority that I think are particularly significant, and have not seen in other class action decisions.
The case involved whether certain fees imposed by Blue Cross Blue Shield of Michigan on an employee union’s insurance fund were authorized by Michigan law and whether there was an improper failure to disclose these fees. See id. at *2-4. The district court ruled on summary judgment motions that collecting the fees at issue was contrary to Michigan law, and then granted class certification. Id. at *16-21.
The Sixth Circuit reversed the class certification on several grounds, but what I found most interesting were two points the court made about commonality:
- The court explained that, because the district court had already decided the central legal issues, a class action was not the superior method of resolution — “it would have been more judicially efficient to enter a final judgment in the individual action so as to allow BCBSM to file an appeal. In this way, the central legal issue could have been resolved by this court, and based on that outcome, other potential class members could then decide whether to pursue an individual suit . . . .” Id. at *18. This rationale applies in many insurance class actions, where all that is really needed is a final appellate resolution of a central issue of coverage or statutory interpretation, and then the decision can be applied to individual cases. A class action may not be the superior method of getting the issue resolved.
- The court gave significant weight to an amicus brief filed by the Michigan insurance commissioner in support of the insurer’s position. The amicus brief explained that the fees at issue helped fund coverage for senior citizens under a Medigap program, and thus a class action could lead to higher premiums or reduced coverage for seniors. The court wrote that “[t]he serious financial repercussions to Michigan’s elderly population further support a conclusion that a class action is not a superior method of resolving the Fund’s allegation,” and thus “[t]he public’s interest would also be better served by allowing the individual suit . . . to proceed to this court for appellate review.” Id. at *32. I rarely see these kinds of public interest arguments made in insurance class actions. This one clearly caught the court’s attention, although it’s rare that the insurance commissioner will weigh in with an amicus brief. But this is something that is certainly worth giving serious thought to in appropriate cases. In many instances the certification of an insurance class action will benefit a relatively small group of insureds and the plaintiffs’ lawyers but potentially to the detriment of the rest of the company’s insureds.