In Re: General American Life Insurance Company Sales Practices Litigation Lewis & Ellis, Inc. Karen Shapiro, Movants, James Henderson
Docket: 627
Court: Court of Appeals for the Eighth Circuit; May 21, 1992; Federal Appellate Court
The case involves consolidated appeals related to a nationwide class action settlement between General American Life Insurance Company (GALIC) and over 240,000 policyholders who alleged fraud and material misrepresentations in the sale of life insurance policies. GALIC agreed to compensate class members with at least $55 million in additional policy benefits. In appeal 01-1264, appellant James Henderson contests the district court's determination that the settlement adequately rewards the class; however, this appeal is dismissed due to lack of jurisdiction. In appeal 01-1453, GALIC challenges the district court's decision allowing certain class members with potentially defective opt-out requests to be excluded from the class, which is affirmed by the court.
The proceedings originated from the consolidation of three actions against GALIC by the Judicial Panel on Multidistrict Litigation in May 1997, which were transferred to the Eastern District of Missouri for pretrial resolution. The plaintiff class included individuals who purchased GALIC whole life insurance policies between 1984 and 1996 and universal life insurance policies between 1982 and 1996. The allegations against GALIC centered on the sale of "vanishing premium" policies, where the company misrepresented that premium payments would cease over time, and practices of "churning," where policyholders were encouraged to withdraw cash values from existing policies to buy new ones. Additionally, the plaintiffs claimed that GALIC misrepresented certain policies as investments rather than life insurance.
GALIC and class counsel reached a settlement, presenting a Stipulated Agreement to the district court on August 24, 2000, which was provisionally accepted on August 28, 2000. The court mandated GALIC to notify all known class members of the settlement via mail and through publication in 13 newspapers, informing them of their right to opt out and the details of a December 15, 2000 hearing for objections to the settlement's fairness. Specific procedures were established for class members wishing to opt out, requiring written requests to be sent to the Clerk of the Court by November 8, 2000, and to specify the Policies excluded. Any class member not timely opting out would be bound by future proceedings regarding the settlement.
Class members were directed to submit exclusion requests to a claims processing center in Minneapolis, including personal information and GALIC policy details. After the opt-out deadline, GALIC contested several exclusion requests that did not comply with court orders. Notably, 29 requests were received on November 10, 2000, two days late, with undated postmarks raising suspicions of intentional delay by a law firm. Additionally, six letters were unsigned, and one lacked both a date and signature from the class member. Class counsel sought to have the late opt-out requests considered timely, arguing that they should be deemed postmarked by November 8, and insisted that attorneys could sign on behalf of clients. They did not provide explanations for the defective filings but requested permission for class members to submit corrected exclusion requests.
The district court found that class members did not fully comply with the technical requirements for opting out but still allowed their exclusion from the class based on the "interests of justice." The court determined that the opt-out requests were timely mailed, despite objections from GALIC. The court approved the settlement, which offered class members the choice of a lump sum payment or a claims-processing system to potentially receive greater relief based on their losses and proof of wrongdoing by GALIC. Claims were scored from "three" (maximum relief) to "zero," with zero indicating frivolous claims, which would receive no compensation. Henderson objected to the zero score and sought to intervene, arguing this aspect was unfair, but the district court denied his motion.
Henderson's challenge to the settlement faced a jurisdictional issue because he did not establish party status in the district court and did not contest the denial of this status on appeal. Absent class members, such as Henderson, cannot appeal a settlement approved by the district court unless they first intervene and gain party status. The court emphasized the need for such intervention, particularly when the challenge opposes the consensus of other class members. Henderson's failure to successfully challenge the denial of his intervention means he remains an absent class member without the right to appeal the settlement.
Henderson has not contested the validity of the district court's order denying his motion to intervene, focusing instead on the merits of the settlement, which can only be addressed if he is determined to be a party eligible to intervene. His failure to mention the intervention issue in his Statement of Issues or brief results in a waiver of that issue, effectively conceding his non-party status. Consequently, he lacks the standing to challenge the district court's ruling on the class settlement's fairness, as established by Marino, 484 U.S. at 304.
In his reply brief, Henderson claims he did challenge the denial of intervention by referencing the district court's December 2000 order in his notice of appeal. However, this assertion is insufficient, as new issues cannot be raised in a reply brief according to Republican Party of Minn. v. Kelly, 247 F.3d 854, 881 (8th Cir. 2001). Moreover, merely designating an order in a notice of appeal does not fulfill the requirement to articulate and develop arguments in the opening brief as per Fed. R. App. P. 28(a)(9). Henderson fails to explain how the district court erred in denying his intervention, which is necessary for appellate review.
As there is no argument presented that the district court's denial was improper, the issue is considered waived. Therefore, Henderson is not a party to the class action and cannot appeal regarding the settlement's fairness, leading to the dismissal of his appeal.
In a related appeal, GALIC asserts that the district court wrongly allowed several class members to opt out of the class without adhering to specified formalities. This decision is reviewed for abuse of discretion. GALIC argues that 29 class members who filed tardy opt-out requests failed to demonstrate "excusable neglect" as required by the court’s protocol, which they did not attempt to show.
A party that fails to comply with a court-ordered act within a specified timeframe may seek to have their late action accepted by demonstrating "excusable neglect," as outlined in Federal Rules of Civil Procedure 6(b) and 60(b)(1). This standard has been consistently applied across multiple circuits for untimely opt-out requests from class actions, requiring class members to show that their delay was due to excusable neglect. Courts have discretion to accept late opt-out requests, considering the reasons for the delay, the presence of excusable neglect, and any potential prejudice caused.
While the current court has not formally adopted the excusable neglect standard for tardy opt-out requests, previous case language suggests a favorable inclination toward that standard. However, it is unnecessary to adopt this standard in the present appeal.
The court must first determine if the opt-out requests were timely before analyzing excusable neglect. GALIC claims the requests were late, but evidence indicates they may have been timely. The district court's order specified that class members needed to inform the claims processing center via letter postmarked by November 8, without requiring receipt by that date. The disputed requests had date-less postmarks indicating they were mailed in November 2000, and while they arrived after the deadline, the court found them timely postmarked on or before November 8. This determination is treated as a factual finding, warranting deference unless clearly erroneous, thus supporting the view that the requests were indeed timely mailed.
The court upheld the district court's finding that the disputed opt-out requests were timely mailed, noting that the majority were sent from Mobile, Alabama, with others from Jackson, Mississippi, and Pittsburgh, Pennsylvania. Given that mail delivery between these locations typically exceeds one day, it is reasonable to conclude the requests were postmarked by the deadline of November 8, aligning with the court's order. Consequently, the court dismissed the need to analyze "excusable neglect" regarding the timeliness of the requests.
Regarding a group of seven class members whose opt-out requests were unsigned, the district court initially agreed with GALIC that this constituted non-compliance with the court's order requiring personal signatures. However, the court recognized that the requests were signed by attorneys, which is permissible under Alabama and Pennsylvania law. The court determined that the attorney's signatures met legal standards, despite not adhering to the literal wording of the order. Additionally, even if there was a technical violation, the court found it reasonable to overlook these issues in the interest of justice, emphasizing the need for flexibility in interpreting what constitutes an effective opt-out request.
Class members' violations of procedural rules are comparable to minor non-compliance with local court rules, where district courts have significant discretion in enforcement. It has been established that district courts can choose to overlook certain deviations from local rules and may opt not to impose sanctions for non-compliance with discovery orders. In this case, the court determined that allowing class members to opt out of a settlement, despite not signing their opt-out letters personally, did not constitute an abuse of discretion. Consequently, James Henderson's appeal is dismissed, and the district court's decision allowing class members to opt out is affirmed.
