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Lawler v. Johnson

Supreme Court of Alabama

October 20, 2017

Stanley D. Lawler
v.
Sam Johnson and City of Birmingham Retirement and Relief System Clete Walker
v.
Sam Johnson and City of Birmingham Retirement and Relief System Georgia Urology, P.A., et al.
v.
Sam Johnson and City of Birmingham Retirement and Relief System

         Appeals from Jefferson Circuit Court (CV-03-6630)

          STUART, CHIEF JUSTICE.

         Stanley D. Lawler; Clete Walker; Georgia Urology, P.A., and several of its member physicians (those physicians are hereinafter referred to collectively with Georgia Urology, P.A., as "the Georgia Urology claimants"; Lawler, Walker, and the Georgia Urology claimants are hereinafter referred to collectively as "the objectors"), filed objections in the Jefferson Circuit Court challenging a $124 million attorney fee awarded by the Jefferson Circuit Court to class counsel as part of the settlement of Johnson v. Caremark Rx, LLC ("the Caremark class action).[1] After the trial court overruled their objections and its judgment approving the settlement became final, the objectors appealed the attorney fee to this Court. We vacate the trial court's order awarding attorney fees and remand the case.

         I.

         This Court has previously had before it appellate proceedings arising from the Caremark class action on multiple occasions. See, e.g., Ex parte Caremark Rx, LLC, [Ms. 1151160, Feb. 24, 2017] ___ So.3d ___ (Ala. 2017); CVS Caremark Corp. v. Lauriello, 175 So.3d 596 (Ala. 2014); and Ex parte Caremark RX, Inc., 956 So.2d 1117 (Ala. 2006). Although we have described the basic facts of the case on each of those occasions, we briefly do so again here to provide context to the instant appeals.

         Beginning in approximately 1998, MedPartners, Inc., was the subject of dozens of securities-fraud lawsuits alleging that it had made false statements regarding its financial condition and anticipated future performance. Many of those lawsuits were eventually consolidated into a class action in the Jefferson Circuit Court ("the MedPartners class action"), and in 1999 the MedPartners class action was settled for $56 million based on MedPartners' assertions that the negotiated settlement exhausted its available insurance coverage and that it possessed limited other assets it could use to pay a larger award or settlement. Post-settlement, however, it was revealed in unrelated litigation that MedPartners actually held an excess-insurance policy providing unlimited coverage during the period in which the alleged fraud had been committed. In 2003, the Caremark class action was initiated against MedPartners' corporate successor, an entity now known as Caremark Rx, LLC ("Caremark"), and its previous insurer asserting fraud and suppression claims based on the $56 million settlement agreed to in the MedPartners class action.

         Little progress was made toward resolution of the Caremark class action over the next several years because disputes concerning class certification, class representatives, and which attorneys would act as class counsel resulted in time-consuming delays and multiple appeals to this Court. Ultimately, however, Caremark and its insurer agreed in May 2016 to settle the claims asserted against them in the Caremark class action for $310 million. The trial court subsequently approved the settlement and awarded class counsel 40% of the settlement fund, or $124 million, as an attorney fee. The primary issue in these appeals is the size of the awarded attorney fee; the objectors argue that it is excessive and amounts to a windfall for class counsel and that they were given insufficient time and information to properly object to the size of the attorney-fee award.

         In its June 1, 2016, order giving preliminary approval to the $310 million settlement, the trial court set forth the terms of the proposed settlement and outlined the procedures by which class members could file with Gilardi & Co, LLC, the appointed claims administrator, both proof of claims and any objections to the proposed settlement. The trial court also set forth the following relevant deadlines:

June 17, 2016 -- notice of the proposed settlement, in the forms approved by the trial court, must be published in the Wall Street Journal and on the official settlement Web site and mailed to all identifiable class members. Class counsel's attorney-fee application must also be posted on the settlement Web site.
July 22, 2016, -- written objections to any aspect of the proposed settlement, including class counsel's attorney-fee application, must be delivered to Gilardi; any objectors desiring to present oral argument regarding their objections must also deliver notice of that desire to the trial court and counsel for all the parties.
July 29, 2016 -- class counsel must file and serve its attorney-fee application along with all supporting materials.
August 8, 2016 -- trial court to conduct a fairness hearing to consider fairness, reasonableness, and adequacy of the proposed settlement.
September 30, 2016 -- class members must deliver proof of claims to Gilardi.

         The trial court also approved the notice form that would be mailed to class members ("the short-form notice") and the more detailed notice that would be posted on the settlement Web site ("the long-form notice").

         In accordance with this time line, on or around June 17, 2016, the short-form notice was mailed to identified class members. Under a header stating "Your right to additional information and/or to object, " the short-form notice provided:

"A longer and more detailed notice of the settlement, which describes additional terms of the settlement and the procedures applicable to the settlement, is available at www.aig-caremarkclassaction.com. The settlement hearing will be held on August 8, 2016 at 1:30 p.m. [at the Jefferson County Courthouse]. ... Any class member may object to the proposed settlement, the plan of allocation, or the fee and expense application and/or incentive awards. A class member may do so by filing a written objection and/or by appearing at the settlement hearing and showing cause why the court should not approve the proposed settlement, the plan of allocation, or the fee and expense application and/or incentive awards. Additional information regarding objecting to the settlement, including the requirements for submitting valid objections, is available at www.aig-caremarkclassaction.com."

(Emphasis added.) Thus, although the trial court's June 1, 2016, order indicated that a class member objecting to the proposed settlement was required to file a written objection with Gilardi by July 22, 2016, the short-form notice mailed to class members informed them that they could object to the proposed settlement "by filing a written objection and/or by appearing at the settlement hearing." In this respect, the language of the short-form notice actually mailed to the class members differed from the language of the short-form notice approved by the trial court in conjunction with its June 1, 2016, order; the approved short-form notice provided that "[a] class member may [object] by filing a written objection and by appearing at the settlement hearing ...." (Emphasis added.) Class counsel asserts in one of its briefs filed with this Court that the language was changed before the short-form notice was mailed in an attempt to clarify that an objector was not required to attend the August 8 fairness hearing in order to assert an objection.

         At approximately this same time, the long-form notice was posted on the settlement Web site. The long-form notice provided that, "[a]t the settlement hearing, class counsel will request the court to award attorneys' fees not to exceed 40% of the settlement amount, plus expenses not to exceed $3, 000, 000." On July 22, 2016, Walker and the Georgia Urology claimants filed their objections to the proposed settlement; Walker also submitted notice that he intended to appear at the August 8 fairness hearing. Their objections to the proposed settlement raised the same general issues -- that they were given insufficient time and information to properly consider the settlement and to prepare any objections; that they were given insufficient time to gather the approximately 20-year-old records needed to establish their claims; and that a potential award of attorney fees up to $124 million was excessive. On July 29, 2016, class counsel filed their attorney-fee application formally requesting $124 million in attorney fees, an additional $2, 585, 933 for expenses, and $50, 000 service awards for each of three current or former named plaintiffs; class counsel also filed responses to the objections made by Walker and the Georgia Urology claimants. This attorney-fee application had not been previously posted on the settlement Web site or made available for class members to review.

         On August 5, 2016, Lawler filed an objection to the proposed settlement; his objection focused solely on class counsel's requested $124 million attorney fee. Lawler also filed notice with the trial court that he planned to be represented at the August 8 fairness hearing. The fairness hearing was subsequently held as scheduled, and, although class counsel argued that Lawler's objection was untimely, the trial court nevertheless allowed Lawler to present his argument. Walker also presented argument on his objections at the hearing, and class counsel argued in response that Walker, as well as the Georgia Urology claimants, had failed to establish that they were class members and that their objections should be overruled on that basis.[2] Class counsel also argued generally that the arguments made by the various objectors should be rejected on their merits because, they argued, the schedule set by the trial court provided adequate notice in all respects and the $124 million attorney-fee award was warranted.

         On August 15, 2016, the trial court entered a number of orders by which it overruled the objections of Lawler and Walker, granted in whole class counsel's attorney-fee application with respect to the requests for an attorney fee, expenses, and service awards for the named plaintiffs, and entered a final judgment approving the terms of the $310 million settlement. On September 13, 2016, Walker filed a motion pursuant to Rule 59(e), Ala. R. Civ. P., asking the trial court to alter, amend, or vacate its orders overruling his objection, granting class counsel's attorney-fee application, and entering a final judgment. Thereafter, Lawler, Walker, and the Georgia Urology claimants, before the September 30, 2016, deadline, filed claim forms with Gilardi seeking to establish their eligibility to receive compensation from the settlement fund. After that deadline passed, however, class counsel moved the trial court to review the claim forms filed by Walker and the Georgia Urology claimants to determine whether they had in fact asserted valid claims; class counsel argued that they had not and urged the trial court to overrule their objections and Walker's Rule 59(e) motion on that basis.

         Class counsel thereafter also moved the trial court to enter a new order explicitly finding that Lawler's objection was untimely. On October 31, 2016, the trial court entered an order stating that Lawler's objection was both untimely and without merit and another order holding that the Georgia Urology claimants had failed to present evidence establishing either (1) that they were members of the class or (2) that they had suffered a loss that entitled them to compensation from the settlement fund. On November 7, 2016, the trial court entered a similar order holding that the claim forms submitted by Walker also failed to establish that he was entitled to any share of the settlement. On November 10, 2016, the trial court denied Walker's Rule 59(e) motion and, pursuant to a motion jointly filed by the parties seeking to resolve perceived procedural issues related to its previous orders, entered a new order restating the terms of its previous order awarding class counsel the requested attorney fee and expenses, as well as providing service awards to the named plaintiffs.

         Out of an abundance of caution, the objectors had all filed separate notices of appeal to this Court before the entry of the trial court's November 10 orders, and, pursuant to Rule 4(a)(5), Ala. R. App. P., those notices of appeal were held in abeyance while Walker's Rule 59(e) motion was pending. Following the resolution of that motion, the notices of appeal became effective, and the appellate process began in earnest. Because the objectors stipulated that they were not contesting the general terms of the settlement agreement, Caremark and its insurer subsequently transferred the agreed-upon $310 million into a settlement fund. The trial court thereafter also authorized the disbursement of the awarded attorney fee, expense reimbursement, and service awards. On December 13, 2016, this Court consolidated Lawler's appeal (no. 1151347), Walker's appeal (no. 1160049), and the Georgia Urology claimants' appeal (no. 1160158) for review based on the similarities of the issues presented.

         II.

         In Perdue v. Green, 127 So.3d 343, 356 (Ala. 2012), this Court explained the standard of review applicable in appeals such as these where objectors seek appellate review of a trial court's judgment approving the settlement of a class action:

"'[T]he standard of review applicable to a trial court's approval of a proposed settlement of a class ...

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