John Lauriello v. CVS Caremark Corporation

REL:09/12/2014

Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter. Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
229-0649), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.

SUPREME COURT OF ALABAMA
SPECIAL TERM, 2014
_________________________

1120010
_________________________

CVS Caremark Corporation et al.

v.

John Lauriello et al.
_________________________

1120114
_________________________

John Lauriello et al.

v.

CVS Caremark Corporation et al.

Appeals from Jefferson Circuit Court
(CV-03-6630)
1120010; 1120114
SHAW, Justice.

In case no. 1120010, CVS Caremark Corporation

("Caremark"); American International Group, Inc.; National

Union Fire Insurance Company of Pittsburgh, PA; AIG Technical

Services, Inc.; and American International Specialty Lines

Insurance Company (hereinafter sometimes referred to

collectively as "Caremark and the insurers") appeal from the

trial court's order certifying as a class action the fraud

claims asserted by John Lauriello; James O. Finney, Jr.; Sam

Johnson; and the City of Birmingham Retirement and Relief

System (hereinafter sometimes referred to collectively as "the

plaintiffs"). In case no. 1120114, the plaintiffs cross-

appeal from the same class-certification order, alleging that,

though class treatment was appropriate, the trial court erred

in certifying the class as an "opt-out" class pursuant to Rule

23(b)(3), Ala. R. Civ. P., rather than a "mandatory" class

pursuant to Rule 23(b)(1), Ala. R. Civ. P. For the reasons

discussed below, we affirm in both appeals.

Facts and Procedural History

In connection with a 1998 nationwide, securities-fraud

class action initiated against MedPartners, Inc., a physician-

2
1120010; 1120114
practice-management/pharmacy-benefits-management corporation

and the predecessor in interest to Caremark ("the 1998

litigation"), the Jefferson Circuit Court certified a class

that included the plaintiffs.1 Based on the alleged financial

distress and limited insurance resources of MedPartners, the

1998 litigation was concluded in 1999 by means of a negotiated

"global settlement," pursuant to which the claims of all class

members were settled for $56 million –- an amount that,

according to the representations of MedPartners, purportedly

exhausted its available insurance coverage.2 Purportedly

based on representations of counsel that MedPartners lacked

the financial means to pay any judgment in excess of the

negotiated settlement and that the settlement amount was thus

the best potential recovery for the class, the trial court,

1
The 1998 litigation originated from 21 separate suits in
state and federal courts based on allegations that
MedPartners, in connection with a planned merger, made false
and misleading statements to both the public and the
Securities and Exchange Commission concerning its financial
condition and its anticipated performance.
2
This amount was, according to the class representatives,
a bargain, given the egregious –- and purportedly indefensible
-- nature of the alleged securities violations. In addition
to the $56 million settlement of the class-based litigation,
the global settlement also included an additional $9 million
payout to settle non-class-based litigation.
3
1120010; 1120114
after a hearing, approved the settlement and entered a

judgment in accordance therewith.

Thereafter, however, MedPartners, now Caremark,3 allegedly

disclosed, in unrelated litigation, that it had actually

obtained –- and thus had available during the 1998 litigation

-- an excess-insurance policy providing alleged "unlimited

coverage" with regard to its potential-damages exposure in the

1998 litigation -- the existence of which it had purportedly

concealed in negotiating the class settlement. As a result,

in 2003, Lauriello, seeking to be named as class

representative, again sued Caremark and the insurers in the

Jefferson Circuit Court, pursuant to a class-action complaint

alleging misrepresentation and suppression –- specifically,

that Caremark and the insurers had misrepresented the amount

of insurance coverage available to settle the 1998 litigation

and that they also had suppressed the existence of the

purportedly unlimited excess policy -- on behalf of himself

and all others similarly situated, i.e., the members of the

class certified in the 1998 litigation. Alternatively,

3
Nothing before this Court suggests that Caremark, as
successor in interest to MedPartners, did not assume all of
MedPartners' assets and liabilities.
4
1120010; 1120114
Lauriello sought relief from the judgment pursuant to Rule

60(b), Ala. R. Civ. P. Frank G. McArthur, Bill Greene, and

Virginia Greene, also members of the class certified in the

1998 litigation, filed a separate but substantially similar

action in the Jefferson Circuit Court; their proposed class-

action complaint asserted claims almost identical to

Lauriello's but named, as additional defendants, plaintiffs'

counsel from the 1998 litigation.

In January 2005, the trial court issued an "Order on

Class Certification," in which it concluded that it was

unnecessary to certify a new class because, pursuant to the

terms of the settlement agreement in the 1998 litigation, it

retained jurisdiction of all matters relating to the

settlement, including Lauriello's newly asserted fraud claims.

Subsequently, Caremark and the insurers simultaneously

appealed the trial court's January 2005 order and filed a

petition for a writ of mandamus seeking relief therefrom. See

Ex parte Caremark RX, Inc., 956 So. 2d 1117 (Ala. 2006).

Also in response to the trial court's order, McArthur,

Bill Greene, and Virginia Greene (hereinafter sometimes

referred to collectively as "the intervenors") sought to

5
1120010; 1120114
intervene in the Lauriello litigation, challenging the

qualifications of both Lauriello and his counsel to represent

the class and specifically adding as defendants in the

complaint in intervention both Lauriello and plaintiffs'

counsel from the 1998 litigation. The trial court denied that

request as untimely; the intervenors appealed.

This Court, in considering the consolidated appeals and

petition for the writ of mandamus, concluded that the petition

for the writ of mandamus was the appropriate avenue by which

to challenge the trial court's order.4 As a result, we

dismissed the direct appeal filed by Caremark and the

insurers. 956 So. 2d at 1119-20. We further granted the

mandamus petition and directed the trial court to vacate the

challenged order on the ground that any action by Lauriello

purportedly filed pursuant to Rule 60(b) was untimely in that

it had not been filed within four months after the judgment

from which Lauriello sought relief as mandated by Rule 60(b).

956 So. 2d at 1124. In addition, we noted that because

Lauriello had added new defendants, namely insurers that had

4
In reaching this conclusion, we specifically noted that
the "the trial court's ... order was not one certifying or
refusing to certify a class...." 956 So. 2d at 1119.
6
1120010; 1120114
not been named in the 1998 litigation, "Lauriello [was] not

seeking merely to reopen the settlement agreement [therein] to

renegotiate the amount of damages payable to the class ...."

956 So. 2d at 1125. Therefore, despite the fact that the

class identified by Lauriello was indisputably identical to

the class certified by the trial court in the 1998 litigation,

we nonetheless concluded that, in order to certify the class

in the new action, Rule 23, Ala. R. Civ. P., and § 6-5-641,

Ala. Code 1975, required the trial court's performance of a

"rigorous analysis" to consider, as to the proposed class

members, "their relationship to the particular claims and

defenses to be asserted in the [new] class action," which the

trial court had clearly failed to evaluate with regard to the

suitability for class treatment. 956 So. 2d at 1125. As to

the intervenors' appeal, we reversed the trial court's order

denying them intervention based on our findings that "none of

the parties [would] be prejudiced by the intervention, ...

justice [might] not be attained if intervention [was] not

allowed, and ... intervention at this stage of the litigation

would not prejudice the ... parties." 956 So. 2d at 1129.

7
1120010; 1120114
Following the release of our opinion, proceedings resumed

in the trial court in accordance with that opinion, including

the trial court's entry of an order deeming the intervenors'

"Class Action Complaint in Intervention" filed. Lauriello

amended his class-action complaint to add Finney, Johnson, and

the City of Birmingham Retirement and Relief System ("the

Retirement System") as additional named plaintiffs; the newly

added plaintiffs later moved to be named as class

representatives.

Following the defendants' answers to the amended

complaint, the trial court entered an order dismissing with

prejudice "the lawyer defendants"5 added by the intervenors'

complaint in intervention on the ground that the four-year

statute of repose applicable under the Alabama Legal Services

Liability Act, see § 6-5-574, Ala. Code 1975, barred all

claims against them. The trial court certified that judgment

as final pursuant to Rule 54(b), Ala. R. Civ. P., and the

5
This designation includes the following lawyers and/or
firms who served as plaintiffs' counsel in the 1998
litigation: Yearout & Traylor, P.C.; Lowey, Danenberg,
Bemporad, Selinger & Cohen, P.C.; Milberg Weiss & Bershad LLP
(formerly known as Milberg Weiss Bershad & Schulman LLP,
formerly known as Milberg Weiss Bershad Hynes & Lerach LLP);
William S. Lerach; Neil L. Selinger; Steven E. Cauley; Stephen
E. Cauley, P.A.; D'Amato & Lynch; and Richard George.
8
1120010; 1120114
intervenors again timely appealed. The trial court,

thereafter, denied Lauriello's motion seeking to similarly

dismiss the remaining claims asserted against him by the

intervenors' complaint. This Court subsequently affirmed,

without an opinion, the trial court's dismissal of the lawyer

defendants. See McArthur v. Yearout & Traylor, P.C. (No.

1070513, Sept. 12, 2008), 34 So. 3d 737 (2008) (table).

Following our no-opinion affirmance, proceedings again

resumed in the trial court, including the voluntary dismissal

of intervenor Bill Greene as a party and the withdrawal by the

remaining intervenors, McArthur and Virginia Greene, of their

complaint in intervention, including the claims against

Lauriello, and their motion seeking to disqualify Lauriello

and Lauriello's counsel pursuant to a "Lead Counsel Agreement"

reached between the two plaintiff groups and their respective

counsel.6 In addition, Lauriello withdrew his previous

request to be appointed a class representative.

6
McArthur was, in fact, later dismissed on his own motion
as a party; therefore, of the three original intervenors, only
Virginia Greene, whose current legal name, according to the
record on appeal, is now Virginia Greene Hoffman, remains a
party.
9
1120010; 1120114
Thereafter, discovery as to the class-certification issue

commenced. The record reflects numerous discovery-related

disputes, which ultimately necessitated the trial court's

appointment of a special master to oversee the process.7 The

plaintiffs, thereafter, sought certification pursuant to Rule

23(b)(1) and (b)(3), Ala. R. Civ. P. The plaintiffs'

certification request was supported by an accompanying brief

and numerous evidentiary exhibits and was opposed on various

grounds by Caremark and the insurers.

The trial court, as directed by this Court in Ex parte

Caremark, subsequently conducted a lengthy class-certification

hearing during which it both heard testimony and received

numerous evidentiary submissions. Following the parties'

further submission of post-hearing briefs, the trial court

issued an order granting class-action certification under Rule

23(b)(3) based upon its purported rigorous analysis, which

resulted in the following findings:

"Alabama Rule of Civil Procedure 23(a) --
Prerequisites to a Class Action -- states that:

7
At or around this time, the plaintiffs again amended
their class-action complaint to more accurately reflect
Caremark's corporate name as "CVS Caremark Corporation."
10
1120010; 1120114
"'One or more members of a class may sue or
be sued as representative parties on behalf
of all only if (1) the class is so numerous
that joinder of all members is
impracticable, (2) there are questions of
law or fact common to the class, (3) the
claims or defenses of the representative
parties are typical of the claims or
defenses of the class, and (4) the
representative parties will fairly and
adequately protect the interests of the
class.'

"1. Numerosity

"'The test is whether the number of members in
the class is so numerous as to make joinder
impracticable. Ala. R. Civ. P. 23(a)(1); State Farm
Fire & Cas. Co. v. Evans, 956 So. 2d 390 (Ala.
2006).' American Bar Association Survey of State
Class Action Law: Alabama § 5 (database updated Dec.
2011). From the administration of this class's
Fifty Six Million and No/100 ($56,000,000.00) Dollar
settlement in 1999, it is clear there are about
80,000 potential class members, and it is certain
that approximately 18,000 actually filed claims that
were verified and approved. Thus, Plaintiffs have
carried their burden of proving numerosity.
Furthermore, Defendants do not dispute the issue.

"2. Commonality

"'Commonality requires only that there be common
questions of law or fact.... [W]here essentially
identical representations are made at different
times to different class members but share a common
thread and are redressable under the same theory of
recovery, the test of commonality may be met.' ABA
Survey, supra, at Alabama § 5. As shown by facts
presented above and the evidence presented to the
Court during the certification hearing, the Court is
convinced that there are common questions of law and

11
1120010; 1120114
fact regarding every class member. Furthermore,
like numerosity, Defendants do not dispute the
issue.

"3. Typicality

"The typicality element is satisfied only if
'the relationship between the injury to the class
representative and the conduct affecting the entire
class of plaintiffs [is] sufficient for the Court to
properly attribute a collective nature to the
challenged conduct.' Warehouse Home Furnishing
Distributors, Inc. v. Whitson, 709 So. 2d 1144, 1149
(Ala. 1997). To meet the typicality requirement,
there must be 'a sufficient nexus ... between the
legal claims of the named class representatives and
those individual class members to warrant class
certification.' Prado-Steiman v. Bush, 221 F.3d
1266, 1278 (11th Cir. 2000).

"The three proposed class representatives, James
O. Finney, Jr., Sam Johnson and the City of
Birmingham Retirement and Relief System, have claims
typical of the proposed class as each was a member
of the 1999 Settlement Class.

"Defendants argue that the typicality
requirement cannot be met on this record because of
the three subclasses -- common stock, TAPS and
tender offer -- which existed in the underlying 1999
Settlement Class.[8] It is Defendants' position that
each of the proposed class representatives is a

8
The original class included three subclasses of
purchasers of MedPartners' securities: purchasers of
MedPartners common stock during the applicable period; persons
who purchased MedPartners 6 ½% Threshold Appreciation Price
Securities ("TAPS") in a September 15, 1997, public offering
or who purchased TAPS thereafter that were traceable to the
public offering; and purchasers who tendered common shares of
Talbert Medical Management Holdings Corporation to MedPartners
in a tender offer.
12
1120010; 1120114
member of the common stock subclass and, therefore,
they do not have claims which are typical of the
TAPS and tender offer subclasses.

"When examining whether these proposed class
representatives present claims typical of the entire
class, it is critical to understand that the parties
are not re-litigating the underlying securities
fraud claims. The claim presented in this action is
for fraud-in-the-settlement. The alleged fraud did
not vary depending on whether one owned common
stock, TAPS or a tender offer. Any alleged fraud
touched all class members identically.

"It is the Court's determination that any
conflicts between the subclasses were resolved in
the 1999 class settlement. The three subclasses,
with representation, and with joint participation of
Defendants, settled all differences in Judge Wynn's
court. The subclasses agreed in 1999 on a formula
that defined how any class action recovery was to be
distributed. All conflicts between the subclasses
have been litigated and resolved.

"Given the 1999 class settlement and the nature
of the allegations in this action, it is this
Court's conclusion that James O. Finney, Jr., Sam
Johnson and the City of Birmingham Retirement and
Relief System present claims typical of the proposed
class."

Applying an identical rationale, the trial court similarly

found that Finney, Johnson, and the Retirement System "are

adequate to represent this class."

In addition, noting that "[a]lthough all parties agree

that proposed class counsel are adequate to prosecute class

actions, the parties disagree on whether these attorneys are

13
1120010; 1120114
competent and/or able to adequately represent this proposed

class," the trial court considered and rejected, in turn, each

challenge by Caremark and the insurers to proposed class

counsel. Ultimately, as to this issue, the trial court

concluded:

"In opposition of proposed class counsel,
Defendants have raised every possible roadblock and
issue to endeavor to influence this Court to find
proposed class counsel inadequate, as such is their
duty. In their endeavor to have proposed class
counsel disqualified, Defendants know full well that
if this Court rules with them on this issue
Defendants will have gained a victory without having
to adjudicate this case before an Alabama jury.

"Litigation is combative, particularly where the
damages sought may exceed Three Billion and No/100
($3,000,000,000.00) Dollars. These plaintiff
attorneys [sic] have labored thousands of hours
since 2003 seeking to represent and protect this
proposed class, and have done so without
remuneration for their time and monumental expenses
incurred. Here, adequacy, not perfection, is the
trait that this Court and the Supreme Court are
seeking based upon the statute, the caselaw and
Alabama Rule of Civil Procedure 23. This civil
action spanning into its tenth year is so complex
and replete with filings, depositions and rulings,
it is a virtual certainty that no lawyer and/or law
firm would now invest the time and incur the expense
to represent this class.

"Finally, Alabama Rule of Civil Procedure 1
states that '[the] rules shall be construed and
administered to secure the just, speedy and
inexpensive determination of every action.' Given
this mandate to apply the Alabama Rule of Civil

14
1120010; 1120114
Procedure 23 justly, it is this Court's considered
judgment, as laid out above, that the Hare Wynn,
North and Somerville firms are deemed adequate to
represent this proposed class."

Finally, having concluded that the plaintiffs satisfied

the initial prerequisites to maintaining a class action, as

set out in Rule 23(a), Ala. R. Civ. P., the trial court next

determined that the plaintiffs had likewise met the additional

requirement of satisfying Rule 23(b)(3). See, e.g.,

University Fed. Credit Union v. Grayson, 878 So. 2d 280, 286

(Ala. 2003). In reaching that conclusion, the trial court

specifically rejected the objections of Caremark and the

insurers to class certification, i.e., the alleged individual

reliance of each class member on the purported

misrepresentation and the potential for the necessity of

applying conflicting laws from various states. Noting both

that the conflict-of-law argument raised by Caremark and the

insurers was untimely and that the parties' stipulation of

settlement provided that Alabama law controlled, the trial

court concluded that the only real challenge to Rule 23(b)(3)

certification was the claim by Caremark and the insurers that

issues of individual reliance predominated over common

questions of law and fact.

15
1120010; 1120114
In sum, in consideration of the foregoing findings, the

trial court appointed Finney, Johnson, and the Retirement

System as class representatives; appointed Hare, Wynn, Newell

& Newton; North & Associates; and Somerville, LLC, as class

counsel, and certified a class consisting of the following:

"All Persons who (i) purchased MedPartners, Inc.
('MedPartners') common stock [including, but not
limited to, through open-market transactions,
mergers or acquisitions in which MedPartners issued
common stock, acquisition through the Company's
Employee Stock Purchase Plan ('ESPP'), and any other
type of transaction in which a person acquired one
or more shares of MedPartners stock in return for
consideration] during the period from October 30,
1996, through January 7, 1998, inclusive
(MedPartners employees who purchased shares through
the ESPP in January 1998 being deemed to have
purchased their shares on December 31, 1997); (ii)
purchased call option contracts on MedPartners
common stock during the period October 30, 1996,
through January 7, 1998, inclusive; (iii) sold put
option contracts on MedPartners common stock during
the period October 30, 1996, through January 7,
1998, inclusive; or (iv) purchased MedPartners
Threshold Appreciation Price Securities ('TAPS') in
the September 15, 1997, offering or thereafter
through January 7, 1998; or (v) tendered shares of
Talbert Medical Management Holdings Corporation to
MedPartners between August 20, 1997, and September
19, 1997 ('The Settlement Class'); excluding all
those members who opted out of the 1999 Class
Settlement."9

9
The description of the certified class is, excepting the
addition of the final phrase excluding members who opted out
of the class certified in the 1998 litigation, identical to
the class certified by the trial court in the 1998 litigation.
16
1120010; 1120114
The parties appeal from the trial court's class-

certification order. See § 6–5–642, Ala. Code 1975 ("A

court's order certifying a class or refusing to certify a

class action shall be appealable in the same manner as a final

order to the appellate court which would otherwise have

jurisdiction over the appeal from a final order in the

action.").

Standard of Review

"'This Court has stated that "class actions may
not be approved lightly and ... the determination of
whether the prerequisites of Rule 23 have been
satisfied requires a 'rigorous analysis.'"'
Mayflower Nat'l Life Ins. Co. v. Thomas, 894 So. 2d
[637] at 641 [(Ala. 2004)] (quoting Ex parte
Citicorp Acceptance Co., 715 So. 2d 199, 203 (Ala.
1997)). 'In reviewing a class-certification order,
this Court looks to see whether the trial court
exceeded its discretion in entering the order;
however, we review de novo the question whether the
trial court applied the correct legal standard in
reaching its decision.' University Fed. Credit
Union v. Grayson, 878 So. 2d 280, 286 (Ala. 2003).
Furthermore,

"'[w]e note that an abuse of discretion in
certifying a class action may be predicated
upon a showing by the party seeking to have
the class-certification order set aside
that "the party seeking class action
certification failed to carry the burden of
producing sufficient evidence to satisfy
the requirements of Rule 23." Ex parte
Green Tree Fin. Corp., 684 So. 2d 1302,
1307 (Ala. 1996). Thus, we must consider

17
1120010; 1120114
the sufficiency of the evidence submitted
by the plaintiff[s]....'

"Compass Bank v. Snow, 823 So. 2d 667, 672 (Ala.
2001). See also Smart Prof'l Photocopy Corp. v.
Childers–Sims, 850 So. 2d 1245, 1249 (Ala. 2002)
(holding that if plaintiffs fail to meet the
evidentiary burden as required by Rule 23, Ala. R.
Civ. P., then the trial court exceeds its discretion
in certifying a class action). If the plaintiffs
here have failed to meet the evidentiary burden as
required by Rule 23, then the trial court exceeded
its discretion in certifying a class action."

Eufaula Hosp. Corp. v. Lawrence, 32 So. 3d 30, 34-35 (Ala.

2009).

Discussion

I. Case No. 1120010

"In order to obtain class certification, the
plaintiffs must establish all the criteria set forth
in Rule 23(a), Ala. R. Civ. P., and at least one of
the criteria set forth in Rule 23(b). University
Federal Credit Union v. Grayson, 878 So. 2d [280] at
286 [(Ala. 2003)]. Rule 23(a) provides:

"'(a) Prerequisites to a Class Action.
One or more members of a class may sue or
be sued as representative parties on behalf
of all only if (1) the class is so numerous
that joinder of all members is
impracticable, (2) there are questions of
law or fact common to the class, (3) the
claims or defenses of the representative
parties are typical of the claims or
defenses of the class, and (4) the
representative parties will fairly and
adequately protect the interests of the
class.'

18
1120010; 1120114
"Rule 23(b) provides, in pertinent part:

"'(b) Class Actions Maintainable. An
action may be maintained as a class action
if the prerequisites of subdivision (a) are
satisfied, and in addition:

"'....

"'(2) the party opposing the
class has acted or refused to act
on grounds generally applicable
to the class, thereby making
appropriate final injunctive
relief or corresponding
declaratory relief with respect
to the class as a whole; or

"'(3) the court finds that
the questions of law or fact
common to the members of the
class predominate over any
questions affecting only
individual members, and that a
class action is superior to other
available methods for the fair
and efficient adjudication of the
controversy. The matters
pertinent to the findings
include: (A) the interest of
members of the class in
individually controlling the
prosecution or defense of
separate actions; (B) the extent
and nature of any litigation
concerning the controversy
already commenced by or against
members of the class; (C) the
desirability or undesirability of
concentrating the litigation of
the claims in the particular
forum; (D) the difficulties

19
1120010; 1120114
likely to be encountered in the
management of a class action.'"

Lawrence, 32 So. 3d at 35. In the instant case, the trial

court certified the class action under Rule 23(b)(3). On

appeal, Caremark and the insurers present several challenges

to the trial court's class-certification order.

A. Alleged Predomination of Individual Issues

First, Caremark and the insurers contend that the trial

court exceeded its discretion in certifying the class pursuant

to Rule 23(b)(3) because, they argue, the individual issues

necessarily attendant to fraud claims predominate and render

class certification inappropriate. More specifically, relying

on past decisions of this Court indicating that "fraud claims

are uniquely unsuited for class treatment," see, e.g., Compass

Bank v. Snow, 823 So. 2d 667, 673 (Ala. 2001) (internal

citations and quotation marks omitted), the plaintiffs argue

that each member of the class must be individually questioned

–- purportedly pursuant to the rules applicable in their

various jurisdictions -- regarding the circumstances of that

member's alleged knowledge of and reliance on the alleged

misrepresentations regarding the insurance proceeds available

to MedPartners. The plaintiffs counter that authorities cited

20
1120010; 1120114
by Caremark and the insurers are inapposite in that they

"deal[] with individual fraud scenarios," whereas, here, it

was the class itself [–- an 'entity' separate from the

individual members comprising the class –-] that was

defrauded" as a result of the fraud perpetrated on the class's

appointed agent. Plaintiffs' brief, at p. 26.

"As noted above, Rule 23(b)(3) requires a
finding that 'questions of law or fact common to the
members of the class predominate over any questions
affecting only individual members, and that a class
action is superior to other available methods for
the fair and efficient adjudication of the
controversy.' This requirement '"tests whether
proposed classes are sufficiently cohesive to
warrant adjudication by representation."' Reynolds
Metals [Co. v. Hill], 825 So. 2d [100] at 104 [(Ala.
2002)] (quoting Amchem Prods., Inc. v. Windsor, 521
U.S. 591, 623, 117 S. Ct. 2231, 138 L. Ed. 2d 689
(1997)). In making this determination, '[c]ourts
examine the substantive law applicable to the claims
and determine whether the plaintiffs presented
sufficient proof that common questions of law or
fact predominate over individual claims.' Voyager
Ins. Cos. v. Whitson, 867 So. 2d 1065, 1071 (Ala.
2003). 'When individual issues predominate over the
common claims, manageability of the action as a
class is not possible.' Voyager Ins., 867 So. 2d at
1077. Therefore, this Court must determine whether
[the plaintiffs] presented sufficient evidence that
common questions of law or fact predominate over
individual issues as to [the plaintiffs' fraud-
based] claims."

Grayson, 878 So. 2d at 286.

21
1120010; 1120114
The parties' counsel acknowledge that they were unable to

find a decision directly on point with the factual

circumstances of the present case, i.e., a decision involving

allegations of a fraud perpetrated on a certified class in

connection with the settlement of the class action in which

that class had previously been certified. Regardless,

however, there are available certain established principles

that guide our resolution of this issue.

First, it is undisputed that both the plaintiffs'

misrepresentation and suppression claims include, as the

plaintiffs contend, a reliance element. See Grayson, supra,

at 286-87, 289 (noting that the elements of a fraud action

necessarily include a demonstration that the plaintiff

reasonably relied on the alleged misrepresentation to his or

her detriment and that the elements of a fraudulent-

suppression claim include a demonstration that the alleged

suppression "induced the plaintiff to act or to refrain from

acting"). See also Regions Bank v. Lee, 905 So. 2d 765, 774

(Ala. 2004) ("The element of a duty to disclose in a

fraudulent-suppression case is analogous to the element of

reliance in a misrepresentation case." (citing Mack v. General

22
1120010; 1120114
Motors Acceptance Corp., 169 F.R.D. 671, 677 (M.D. Ala.

1996))).

Additionally, it is true, as this Court has previously

acknowledged, that the reliance element in fraud claims

generally renders such claims unsuitable for class treatment.

See, e.g., Snow, supra. That general principle, however, is

not a hard and fast rule applicable in all fraud cases, as we

have explained:

"We agree with the [In re] Memorex [Security Cases,
61 F.R.D. 88, 98 (N.D. Cal. 1973) (securities-fraud
cases),] court and hold that the issue whether proof
of reliance involves so many individual questions of
fact that the individual questions of fact
predominate should be addressed at the initial stage
of the proceeding.

"As noted above, two other schools of thought
exist as to whether proof of reliance raises too
many individual questions of fact to certify a fraud
action as a class action. One school prohibits the
certification of fraud class actions, and the other
examines the facts of each case according to the
applicable rule of civil procedure.

"Without addressing the issue of class-action
treatment of the issue of reliance, this Court has
affirmed the certification of fraud class actions.
See Warehouse Home Furnishing Distributors, Inc. v.
Whitson, 709 So. 2d 1144 (Ala. 1997); Ex parte Gold
Kist, 646 So. 2d 1339 (Ala. 1994); Harbor Ins. Co.
v. Blackwelder, 554 So. 2d 329 (Ala. 1989).
Significantly, in Harbor Insurance Co., this Court
held that '[w]here plaintiffs allege and prove a
standard claim for fraud based on misrepresentations
with a common thread, as is the case here, their

23
1120010; 1120114
cause is maintainable as a class action.' 554 So. 2d
at 335. But, in Butler v. Audio/Video Affiliates,
Inc., 611 So. 2d 330 (Ala. 1992), this Court
affirmed the denial of certification in a fraud
class action, where the denial was based, in part,
on varying oral representations that created too
many individual issues of reliance and damages.
Butler, 611 So. 2d at 332. The differences in these
cases indicate that this Court has not thus far
adopted a blanket prohibition against the
certification of a fraud class action. Therefore,
as with other courts that have addressed the issue,
we must consider whether proof of reliance in this
case involves predominating individual issues of
fact. In so doing, we use the same standard as the
federal courts, i.e., whether there 'was a material
variation in the representations made or in the
kinds or degrees of reliance by the persons to whom
they were addressed.' Advisory Committee Notes to
Rule 23(b)(3) (on 1966 amendments to rules), Fed. R.
Civ. P."

Ex parte Household Retail Servs., Inc., 744 So. 2d 871, 881

(Ala. 1999) (emphasis added).

Further, we have stated:

"'Whether a fraud claim is suitable for class-action
treatment depends on the degree of similarity
between the representations made to the class
members.... Courts have often found that cases
involving written misrepresentations distributed to
all members of the class are suitable for class
treatment.' Ex parte Household Retail Servs., 744
So. 2d at 877; see also Ex parte AmSouth
Bancorporation, 717 So. 2d 357, 365 (Ala. 1998)
('questions of fraud based on documents are more
typically suited for class-action determination').
Grayson argues, and the trial court noted, that the
alleged fraud in this case stems from a common,
uniform 'core' or nucleus of facts, namely, that a
uniform misrepresentation was made to each and every

24
1120010; 1120114
member of the putative class: i.e., that they were
paying a $2.50 'filing fee' when, in fact, nothing
was actually filed with a government agency.
Because this alleged misrepresentation is uniform,
Grayson argues, common issues predominate.

"Even if the alleged misrepresentations in a
fraud case are uniform or have a 'common core,' the
action may still be unsuited for class-action
treatment if the degree of reliance varies among the
persons to whom the representations were made. See
Alfa Life Ins. Corp. v. Hughes, 861 So. 2d 1088,
1097 (Ala. 2003) ('Even if numerous representations
have a "common core," an action may still be
unsuited for class-action treatment if material
variations exist in the representations or if the
degree of reliance varies among the persons to whom
the representations were made.' (emphasis added));
see also Committee Comments, Rule 23(b)(3), Fed. R.
Civ. P. ('although having some common core, a fraud
case may be unsuited for treatment as a class action
if there was material variation in the
representations made or in the kinds or degrees of
reliance by the persons to whom they were
addressed'). In Hughes, an insurance policyholder
alleged that his insurer, Alfa Life Insurance
Corporation, had made certain fraudulent
misrepresentations to him and to members of a class
of policyholders. Hughes, 861 So. 2d at 1098. This
Court stated:

"'Even if we were to find that the
misrepresentations the Alfa agents made to
the plaintiff policyholders were uniform,
the issue of each class member's
"reasonable reliance" precludes class
c e r t i f i c a t i o n o f t h e
fraudulent-misrepresentation claim. See
Foremost Ins. Co. v. Parham, 693 So. 2d 409
(Ala. 1997). The plaintiff policyholders
contend that there was common reliance by
the class members and that "[e]veryone
acted the same." Plaintiff policyholders'

25
1120010; 1120114
brief, p. 62 n. 22. The trial court agreed
and concluded that because of the objective
"reasonable reliance" standard,
individualized inquiries would not be
necessary. However, a determination of
each class member's reliance would require
individualized inquiry as to whether that
reliance was reasonable "'based on all of
the circumstances surrounding [the]
transaction, including the mental capacity,
educational background, relative
sophistication, and bargaining power of the
parties.'" Reynolds Metals [Co. v. Hill],
825 So. 2d [100] at 108 [(Ala. 2002)]
(quoting Foremost Insurance, 693 So. 2d at
421)).'

"861 So. 2d at 1100. See also Voyager Ins. [Cos. v.
Whitson], 867 So. 2d [1065] at 1070 [(Ala. 2003)]
(recognizing that the plaintiff's failure to prove
whether class members had relied on
misrepresentations or omissions made class
certification inappropriate)."

Grayson, 878 So. 2d at 287-88 (first emphasis added). Thus,

as Caremark and the insurers argue, "a fraud claim is not

certifiable as a class action when individual reliance is an

issue." Lee, 905 So. 2d at 775 (emphasis added).

Here, however, the class-based fraud claim rests upon the

purported representation by the defendants and/or their

representatives to counsel for the original class certified in

the 1998 litigation to induce counsel to accept a reduced

settlement offer on behalf of the entire class. Thus, the

alleged misrepresentation was uniform and the class members'

26
1120010; 1120114
individual reliance irrelevant. See Ex parte Household Retail

Servs., 744 So. 2d at 877 ("Courts have often found that cases

involving written misrepresentations distributed to all

members of the class are suitable for class treatment.");

Grainger v. State Sec. Life Ins. Co., 547 F.2d 303, 307 (5th

Cir. 1977) ("[T]he key concept in determining the propriety of

class action treatment is the existence or nonexistence of

material variations in the alleged misrepresentations.").

This fact distinguishes the present case from the authorities

cited by Caremark and the insurers, in which a finding of

liability is necessarily dependent upon varying communications

to individual class members and the class members' varying

reliance on those communications. Compare Ex parte Household

Retail Servs., 744 So. 2d at 878-79 (concluding that the trial

court erred in certifying a fraud claim for class treatment

when the evidence demonstrated that oral representations made

to the class members were not standardized but, instead, that

the class members had dealt with different salespersons

employed by different dealers); Compass Bank v. Snow, 823 So.

2d at 674-76 (concluding that the plaintiff customers failed

to satisfy the predominance requirement of Rule 23(b)(3), Ala.

R. Civ. P., as to their fraudulent-suppression claim when

27
1120010; 1120114
individual issues regarding each customer's knowledge of the

posting order used by the bank defendant and the extent to

which each customer relied on that knowledge predominated over

common issues); Reynolds Metals Co. v. Hill, 825 So. 2d 100

(Ala. 2002) (holding, despite the alleged uniform nature of

the oral representation, that evidence disputing common

reliance by the plaintiff employees on that representation

demonstrated that individualized issues necessarily

predominated); Alfa Life Ins. Corp. v. Hughes, 861 So. 2d

1088, 1100 (Ala. 2003) (reversing the trial court's class

certification of a fraudulent-suppression claim on the ground

that, even assuming the alleged misrepresentations were

uniform, "a determination of each class member's reliance

would require individualized inquiry as to whether that

reliance was reasonable '"based on all of the circumstances

surrounding [the] transaction, including the mental capacity,

educational background, relative sophistication, and

bargaining power of the parties"'" (quoting Reynolds Metals,

825 So. 2d at 108)); Voyager Ins. Cos. v. Whitson, 867 So. 2d

1065, 1074 (Ala. 2003) (affirming the trial court's denial of

class treatment as to fraud-based claims when the record

failed to establish "whether the customers relied on varying

28
1120010; 1120114
representations made by the sales representatives instead of

on the alleged nondisclosure or ... whether the information

allegedly not disclosed would have made a difference ....");

Grayson, 878 So. 2d at 288-89 (vacating the trial court's

certification order on the ground that the evidence

demonstrated material variations in individual class members'

reliance on alleged misrepresentation); Lee, 905 So. 2d at

775-76 (holding, despite the collective nature of the duty

owed by the bank to bondholders and the collective nature of

the bondholders' remedy, that individual issues nonetheless

predominated, as "the trial court would have to determine

whether the individual bondholders received notice of the

occurrence of an event of default, if a majority of the

bondholders would have agreed to take action upon notice of

the default ... and what specific action they would have

elected to take").

Under the present circumstances, we find persuasive the

following rationale:

"[In] In re Baldwin-United Corp. Litig. [122 F.R.D.
424, 426-27 (S.D.N.Y. 1986)10], a class of investors

10
Because the Alabama Rules of Civil Procedure were
patterned after the Federal Rules of Civil Procedure, cases
construing the federal rules are considered authority in
29
1120010; 1120114
asserting federal securities, RICO, and state law
claims against broker-dealers and a promotional
corporation in a fraud action was certified despite
the defendants' contention that the core issues in
the plaintiffs' complaint turned on largely oral
rather than written representation or on nonuniform
documents that would require greater investigation
and analysis of individual facts than class
treatment would allow:

"'This Court disagrees. The nub of
plaintiffs' claims is that material
information was withheld from the entire
putative class in each action, either by
written or oral communication.
[Essentially, this is a course-of-conduct
case, which as pleaded satisfies the
commonality requirement of Rule 23, Fed. R.
Civ. P.] ... Plaintiffs allege not that the
promotional materials themselves were
uniform, but rather that the information
they contained -- and hence that the
broker-dealers disseminated -- was
uniformly misleading. ... Liability in this
case does not depend on proof of the
individual, face-to-face dealings between
the class members and the registered
representatives of the broker-dealers....
As a result, the relevant questions are
readily susceptible to class-wide proof.'"

4 Herbert B. Newberg & Alba Conte, Newberg on Class Actions

§ 22.15 at 22–46 (3d ed. 1992) (emphasis added; footnotes

omitted). Indeed, we have previously noted that "[w]here

plaintiffs allege and prove a standard claim for fraud based

construing the Alabama rules. Cutler v. Orkin Exterminating
Co., 770 So. 2d 67, 70 n.2 (Ala. 2000).

30
1120010; 1120114
on misrepresentations with a common thread, as is the case

here, their cause is maintainable as a class action." Harbor

Ins. Co. v. Blackwelder, 554 So. 2d 329, 335 (Ala. 1989). See

also Ex parte Household Retail Servs., 744 So. 2d at 877

("Whether a fraud claim is suitable for class-action treatment

depends on the degree of similarity between the

representations made to the class members."). Further, there

is nothing to suggest that any of the class members ever

engaged in any type of oral communication with Caremark and

the insurers and/or any representative thereof; thus, there is

no danger of the individualized oral misrepresentations that

have rendered the cases relied on by the plaintiffs unsuitable

for class treatment.

Instead, here, the class's fraud claims result from the

fact that the class as a whole –- not each individual member

-- was defrauded. As noted by Professor William B.

Rubenstein, the plaintiffs' retained expert and the current

editor of Newberg on Class Actions, supra –- an authority on

which this Court has often relied -- "[i]n settling the [1998

litigation], the defendants did not negotiate with individual

class members" but, instead, "negotiated solely with the

class's agents and then sought approval of that settlement

31
1120010; 1120114
from the class's fiduciary." Thus, as Professor Rubenstein

further explained:

"[T]he normal problems that plague certification of
fraud cases do not ... apply here for one simple
reason related to the unique nature of this case:
this is a class action lawsuit about a class action
lawsuit, not about a set of individual market
transactions. The nature of the underlying
transaction -- the class action lawsuit -- renders
individual class member reliance irrelevant."

In consideration of the foregoing, we hold that the

evidence supports the trial court's conclusion that the

plaintiffs satisfied the predominance requirement of Rule

23(b)(3) in that the fraud claims present questions of law and

fact that are common to the class and that they are therefore

suitable for trial pursuant to a single adjudication.

Therefore, Caremark and the insurers have failed to

demonstrate that the trial court exceeded its discretion in

certifying the class based on its conclusion that common

issues predominate.11 See In re Warfarin Sodium Antitrust

Litig., 212 F.R.D. 231, 249 (D. Del. 2002), aff'd, 391 F.3d

11
In making this determination, we express no opinion as
to the merits of the newly asserted fraud claims. See
Mayflower Nat'l Life Ins. Co. v. Thomas, 894 So. 2d 637, 641
(Ala. 2004) ("On a motion for class certification, the sole
issue before the trial court is whether the requirements of
Rule 23 have been met ....").

32
1120010; 1120114
516 (3d Cir. 2004) ("The fact that plaintiffs alleged purely

economic harm from a common cause ... further supports

certification of the class."); In re Towers Fin. Corp.

Noteholders Litig., 177 F.R.D. 167, 171 (S.D.N.Y. 1997) ("The

predominance inquiry tests 'whether proposed classes are

sufficiently cohesive to warrant adjudication by

representation.' Amchem Prods., Inc. v. Windsor, 521 U.S.

[591] at 621, 117 S.Ct. [2231] at 2249 [(1997)]. As the

Advisory Committee Notes make clear, 'a fraud perpetrated on

numerous persons by the use of similar misrepresentations may

be an appealing situation for a class action....' Fed. R.

Civ. P. 23(b)(3) Advisory Committee's Note; accord, e.g.,

Green v. Wolf, 406 F.2d [291] at 300-01 [(C.A.N.Y. 1968)].").

The unique facts of this case -– the alleged representations

were made to the class's agents (counsel) –- distinguishes

this case from those in which the reliance of individual class

members was at issue. In reaching this conclusion we

specifically reject the importance of the pre-settlement

differences among class members, which Caremark and the

insurers emphasize. Cf. Walco Invs., Inc. v. Thenen, 168

F.R.D. 315, 325 (S.D. Fla. 1996) (noting, in recognizing the

similarity of the common-issue requirement of Rule 23(a)(2)

33
1120010; 1120114
and the predominance requirement of 23(b)(3), that, "[w]hile

it may be true ... that unique defenses will be asserted by

the Defendants in this action, this fact alone is insufficient

to destroy the commonality requirement," because "the

commonality prerequisite does not require that all of the

questions of law and/or fact be common").

B. Class Counsel as Necessary Witnesses

Caremark and the insurers also argue on appeal that

current class counsel cannot meet the adequacy requirements of

Rule 23(a)(4), Ala. R. Civ. P., because, they say, "[c]lass

counsel ... will be necessary witnesses for the defense, and

their testimony will be adverse to the class." Caremark and

the insurers' brief, at p. 63. Therefore, they contend, the

trial court erred in failing to address this particular

challenge in the context of its class-certification order.

The plaintiffs dispute the fact that any of the current class

counsel are necessary witnesses and therefore disqualified, as

Caremark and the insurers urge. They further contend that,

even if certain lawyers might ultimately be disqualified, that

disqualification would not necessarily affect the ability of

the disqualified lawyer's firm or remaining counsel to

represent the class.

34
1120010; 1120114
Clearly, the trial court, in its certification order,

made the necessary finding that proposed class counsel were

adequate; however, it specifically declined to make a final

ruling on the issue whether, despite their adequacy, counsel

might be subject to disqualification on the ground that they

might also be necessary witnesses at trial. The trial court's

rationale was that discovery was not complete and that the

issue was, therefore, not ripe for adjudication. We initially

question whether, in the absence of an adverse ruling on the

record below, Caremark and the insurers have adequately

preserved this issue for appellate review; indeed, the record

makes it abundantly clear that the trial court specifically

reserved its ruling on this issue for future consideration in

the event the matter actually proceeds to trial. See, e.g.,

CSX Transp., Inc. v. Day, 613 So. 2d 883, 884 (Ala. 1993)

("[I]t is familiar law that an adverse ruling below is a

prerequisite to appellate review."). Additionally, the

testimony of both parties' expert witnesses at the

certification hearing indicated that, pursuant to advisory

authority issued by the Alabama Bar Association, consideration

of disqualification issues during pretrial proceedings is

premature. In fact, Caremark and the insurers' own expert,

35
1120010; 1120114
Professor Tom Morgan, although attempting through his

testimony to remove this case from within the ambit of that

general rule, clearly acknowledged during the certification

hearing that the exclusion of a lawyer as a potential witness

is evaluated, not during pretrial proceedings, but at the time

of trial. In light of that acknowledgment and the failure of

Caremark and the insurers to actually cite any authority

requiring the trial court's consideration of this issue at the

time the class is certified, we find no error in the trial

court's reservation of this issue for future consideration.

C. Past Conduct of Appointed Counsel

Caremark and the insurers next argue that alleged

unethical conduct exhibited by class counsel in connection

with both the 1998 litigation and the present case precludes

their representation of the certified class. Therefore,

according to Caremark and the insurers, the trial court erred

in concluding that appointed counsel's representation would

fairly and adequately protect the interest of the class as

required by Rule 23(a)(4).12 Specifically, in support of this

12
It is undisputed that the challenge of Caremark and the
insurers in this regard is not based on the experience,
ability, or credentials of class counsel, the high level of
which all parties concede.
36
1120010; 1120114
claim, Caremark and the insurers identify the following

instances of alleged disqualifying conduct: the alleged

failure of class counsel to fulfill their fiduciary duty to

class members by ascertaining the fairness of the settlement

concluding the 1998 litigation by means of confirmatory

discovery; the alleged unethical division of class counsel's

fee with their client, Lauriello, in violation of Rule 5.4(a),

Ala. R. Prof. Cond.; the alleged unethical division of class

counsel's fee with their cocounsel in the 1998 litigation, in

violation of Rule 1.5(e), Ala. R. Prof. Cond.; the alleged

unethical representation of Lauriello by class counsel in his

capacity –- at one time, at least –- as both a named plaintiff

and a named defendant in this action, in violation of Rule

1.7(a), Ala. R. Prof. Cond.; and the execution in the present

litigation of the lead-counsel agreement between class counsel

and counsel for the intervenors.

As Caremark and the insurers note, the trial court's

class-certification order reflects that it considered -– and

ultimately rejected pursuant to its rigorous analysis13 -– each

13
Reliable Money Order, Inc. v. McKnight Sales Co., 704
F.3d 489, 498 (7th Cir. 2013) ("So long as the district court
employs the 'rigorous analysis' required by Rule 23, it enjoys
broad leeway in deciding the adequacy of class counsel. See
37
1120010; 1120114
of the inadequacy grounds advanced by Caremark and the

insurers below. Our review of the transcript of the class-

certification hearing reflects that the instances of alleged

misconduct were hotly contested, with the plaintiffs providing

expert testimony establishing that each of the purported

violations was not, as Caremark and the insurers allege,

actually unethical when considered in the context in which the

conduct occurred.

Moreover, Caremark and the insurers cite no authority

demonstrating that any of the alleged instances of misconduct

automatically disqualifies class counsel from serving in the

present case or renders them, as a matter of law, inadequate.

The record further establishes, despite Caremark and the

insurers' arguments to the contrary, that there was no

evidence before the trial court suggesting the type of

egregious self-dealing and/or dishonesty aimed at class

members, which appears in the authorities on which Caremark

and the insurers rely and which would require a denial of

class certification. Compare Creative Montessori Learning

Kirkpatrick v. J.C. Bradford & Co., 827 F.2d 718, 728 (11th
Cir. 1987) (noting 'adequacy of class representation is
primarily a factual issue').").
38
1120010; 1120114
Ctrs. v. Ashford Gear LLC, 662 F.3d 913, 917 (7th Cir. 2011)

(observing that class counsel's undisputed misconduct in both

obtaining material on the basis of a promise of

confidentiality while concealing counsel's true intent and

falsely implying to a potential named plaintiff that there

already was a certified class to which the plaintiff belonged

"demonstrated a lack of integrity that casts serious doubt on

[counsel's] trustworthiness as representatives of the class"

of which they were fiduciaries); In re Mid-Atlantic Toyota

Antitrust Litig., 93 F.R.D. 485, 490 (D.C. Md. 1982) (holding

that an agreement between named plaintiffs and class counsel

was both unethical and prejudicial to unnamed class members in

that, to the extent that counsel agreed to bear ultimate

responsibility for all costs of litigation, counsel acquired

a financial stake in the litigation that was "tantamount to

the unacceptable situation of the attorney being a member of

the class of litigants while serving as class counsel"). See

also Reliable Money Order, Inc. v. McKnight Sales Co., 704

F.3d 489, 498 (7th. Cir. 2013) (noting that "[n]ot any ethical

breach justifies the grave option of denying class

39
1120010; 1120114
certification").14 Therefore, we decline to hold that the

trial court exceeded its discretion in approving class

counsel.

D. Alleged Overbreadth of the Certified Class

Finally, Caremark and the insurers contend that the

class, as defined in the trial court's class-certification

order, is "impermissibly broad." Caremark and the insurers'

brief, at p. 88. Specifically, according to Caremark and the

insurers, the class definition improperly includes

stockholders who did not opt into participation in the 1998

litigation and also improperly consolidates the three separate

categories of stockholders identified in the 1998 litigation.

They further note, however, that, although all three of the

class representatives appointed by the trial court did submit

a claim in the 1998 litigation, all three were holders of

MedPartners common stock, i.e., from a single one of the

original three classes included in the 1998 litigation.

Therefore, Caremark and the insurers maintain, the appointed

14
Further, although not determinative, we do note the
absence of the institution of disciplinary proceedings against
class counsel as a result of the alleged misconduct.
Additionally, the interests of the class may also be
adequately protected by means of the trial court's inherent
supervisory role in class-based litigation.
40
1120010; 1120114
representatives fail to satisfy the adequacy and typicality

requirements of Rule 23 in that they have a purported conflict

as a result of the difference in their interests from those of

other class members. Contrary to this claim, however, the

plaintiffs contend, as the trial court concluded in its

certification order, that the current fraud claims "are common

to each and every class member" and that the previous

designation of the various classes of shareholders is

irrelevant.

Caremark and the insurers cite authority indicating that

the Rule 23(a)(4) requirement of adequate representation is

unsatisfied when the interests of the named plaintiffs and the

class members conflict. See, e.g., Cutler v. Orkin

Exterminating Co., 770 So. 2d 67, 71 (Ala. 2000). However,

although Caremark and the insurers attempt to argue that the

potential weakness of the underlying security-based claims of

certain classes of shareholders may affect the determination

of those shareholders' damages in the present fraud case, we

fail to see the identified danger. Instead, it appears to

this Court that the merits of the underlying claims of each

group in the 1998 litigation are largely irrelevant in that

the present fraud claims were perpetrated on the group as a

41
1120010; 1120114
whole, irrespective of their original, potentially individual

interests. Moreover, as occurred by means of the percentage

distribution in the 1998 litigation, we emphasize the trial

court's ability to fashion any class-based recovery so as to

prevent the excess recovery of any particular group within the

class.

We do agree, however, with the contention of Caremark and

the insurers that the alleged fraud perpetrated by them in

connection with the settlement of the 1998 litigation could

not have damaged those shareholders who had previously opted

out of participation therein and that their inclusion in the

present class would render it impermissibly broad. The trial

court's certification order, however, as quoted above, appears

to specifically "exclud[e] all [potential class] members who

opted out of the 1999 Class Settlement." Thus, because the

trial court appears to have, on its own directive, limited the

class to actual participants in the prior settlement process,

we also fail to perceive the possibility advanced by Caremark

and the insurers that "[t]he class, as certified, ... includes

individuals who did not submit claims in the 1998 litigation."

Caremark and the insurers' brief, at p. 93. We, therefore,

conclude that the court did not exceed its discretion as to

42
1120010; 1120114
the designation of the class included in its certification

order.

II. Case No. 1120114

The plaintiffs' sole contention in their cross-appeal

from the trial court's class-certification order is that the

trial court exceeded its discretion in also failing to certify

the class, as the plaintiffs had requested, pursuant to Rule

23(b)(1), Ala. R. Civ. P. Although acknowledging, as did the

trial court, the contrary and well established legal

principles demonstrated by this Court's decision in Funliner

of Alabama, L.L.C. v. Pickard, 873 So. 2d 198, 217 (Ala.

2003), in which we clearly indicated that "certification under

Rule 23(b)(1) is inappropriate when a plaintiff seeks monetary

damages,"15 the plaintiffs contend that "[Rule 23](b)(1) is a

better 'fit' to these unique facts" than is Rule 23(b)(3).

Plaintiffs' brief, at p. 65. More specifically, they argue

that the separate legal status afforded the class certified in

the 1998 litigation makes a mandatory class certified pursuant

15
See also Ex parte Government Emps. Ins. Co., 729 So. 2d
299, 306 (Ala. 1999) ("'Class suits seeking damages
exclusively are prime candidates for Rule 23(b)(3) classes.'"
(quoting 1 H. Newberg & A. Conte, Newberg on Class Actions §
4.08 (3d ed. 1992))).

43
1120010; 1120114
to Rule 23(b)(1) more appropriate than the opt-out class

certified by the trial court pursuant to Rule 23(b)(3).16

First, we note the plaintiffs' admitted inability to

provide authority supporting the requested departure from this

Court's established application of either provision of Rule

23(b)(1). Moreover, the plaintiffs similarly fail to

demonstrate the potential danger of inconsistent adjudications

of class members' rights, which they assert exists. See Ex

parte Government Emps. Ins. Co., 729 So. 2d 299, 306-07 (Ala.

1999) ("'"Rule 23(b)(1)(A) class actions involve those classes

formed if the prosecution of separate lawsuits would create

the risk of inconsistent adjudications."'" (quoting Ex parte

Holland, 692 So. 2d 811, 815 (Ala. 1997), quoting in turn

Adams v. Robertson, 676 So. 2d 1265, 1269 (Ala. 1995))).

Indeed, we see nothing to suggest the existence of such a risk

in the present matter. Additionally, there is also nothing

suggesting that the present case is a limited-fund case as was

true in the 1998 litigation; therefore there is also no

16
In support of their claim, the plaintiffs analogize the
present situation to one in which individuals, who are
shareholders of the same corporate entity, seek collective
redress: "If a corporation has been defrauded, the law does
not permit each shareholder to file individual fraud claims."
Plaintiffs' brief, at p. 67.
44
1120010; 1120114
indication –- at least in the arguments before us –- that

adjudication of one class member's interest would necessarily

either "be dispositive of the interests of the other members

not parties to the adjudications or substantially impair or

impede their ability to protect their interests." Rule

23(b)(1)(B).

Conclusion

Based on the foregoing, we conclude that the trial court

properly certified the plaintiffs' claims for class treatment;

that judgment is, therefore, due to be affirmed in all

respects.

1120010 -- AFFIRMED.

Moore, C.J., and Stuart, Parker, Murdock, Main, Wise, and

Bryan, JJ., concur.

1120114 -- AFFIRMED.

Moore, C.J., and Stuart, Parker, Main, Wise, and Bryan,

JJ., concur.

Murdock, J., dissents.

45
1120010; 1120114
MURDOCK, Justice (dissenting in case no. 1120114).

I disagree with the holding in the cross-appeal to the

effect that certification of the class as an "opt-out" class

under Rule 23(b)(3), Ala. R. Civ. P., is appropriate. We hold

in the appeal (case no. 1120010) that individual-reliance

issues are not material (thus justifying class certification

at all) because it was "the class" that was defrauded. That

is, the same misrepresentation was received and relied upon by

the same persons on behalf of all the members of the class.

By the same token, certification under Rule 23(b)(3) is

inappropriate. The claims of the class members in this

unusual case do not vary, and we therefore should not make

possible a multitude of individual lawsuits that all seek to

vindicate the same wrong with the same injury (proportionally)

to each class member. Such a certification would allow

inconsistent outcomes, even as to the most basic question of

liability. The risk of such inconsistency is a key reason for

certifying a "non-opt-out" class under Rule 23(b)(1), Ala. R.

Civ. P. See, e.g., Ex parte Government Emps. Ins. Co., 729

So. 2d 299, 306 (Ala. 1999) (observing that "'"Rule

23(b)(1)(A) class actions involve those classes formed if the

prosecution of separate lawsuits would create the risk of

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inconsistent adjudications"'" (quoting Ex parte Holland, 692

So. 2d 811, 815 (Ala. 1997), quoting in turn Adams v.

Robertson, 676 So. 2d 1265, 1269 (Ala. 1995))).

The trial court expressly stated that it felt obligated

in its role as a lower court to follow precedent from this

Court preferring Rule 23(b)(3) "opt-out" certification where

money damages are involved but that it questioned whether this

was the correct approach in this unusual case. With regard to

our precedent, I note that this Court has not instituted a

blanket prohibition on class certification under Rule 23(b)(1)

where monetary relief is sought by the class in question. In

Ryan v. Patterson, 23 So. 3d 12, 20 (Ala. 2009), we noted:

"'[C]lose scrutiny is necessary if money damages are
to be included in any mandatory class in order to
protect the individual interests at stake ....'
Coleman v. General Motors Acceptance Corp., 296 F.3d
443, 448 (6th Cir. 2002). This Court has observed
that '[a]s a general rule, certification of a class
pursuant to Rule 23(b)(2) is improper if the primary
relief sought is money damages,' Compass Bank v.
Snow, 823 So. 2d 667, 678 (Ala. 2001); it is also
true that 'the fact that a Rule 23(b)(1) or (b)(2)
suit may ultimately result in a monetary recovery
from a defendant does not prevent certification
under those subdivisions.' First Alabama Bank of
Montgomery, N.A. v. Martin, 425 So. 2d 415, 423
(Ala. 1982)."

Both the trial court and the main opinion agree that the

situation presented in this case is a novel one. Given the

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nature and uniqueness of the claims presented, an exception to

our general policy of not permitting class certification under

Rule 23(b)(1) for actions seeking monetary relief is both

prudent and permissible. In short, this is a novel case not

governed by any indistinguishable precedent to the contrary;

it therefore stands to reason that we can, indeed must, simply

apply the language and policy underlying Rule 23 to decide

this novel case. Doing so would require a reversal of the

decision of the trial court in the cross-appeal.

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