PER CURIAM.
In these consolidated appeals, Carol M. Perdue, individually and as next friend and guardian of her daughter, Anna K. Perdue; William D. Motlow, Jr.; and Shane Sears (hereinafter collectively referred to as "the objectors"), all of whom are objecting class members in class-action litigation related to the Alabama Prepaid Affordable College Tuition ("PACT") Trust Fund a/k/a The Wallace-Folsom Prepaid College Tuition Trust Fund, appeal the trial court's judgment approving a class-action settlement concluding the litigation.
This Court, in Ex parte Callan Associates, Inc., 87 So.3d 1161 (Ala.2011), explained the pertinent history of the PACT program, as it led to the underlying class-action litigation and to other litigation, as follows:
87 So.3d at 1162-64 (footnote omitted).
In response to then State Treasurer Ivey's disclosure, several lawsuits were filed against the PACT board, including a class-action complaint filed in March 2009 in the Montgomery Circuit Court (case no. CV-09-900351) by Lisa Nix Green, individually and as next friend of Brent A. Green and Blake A. Green. In that action, Green, purporting to represent a class consisting of those who had purchased a PACT contract before 1995, alleged breach of contract and a violation of 42 U.S.C. § 1983. The action sought a judgment declaring that the PACT board was liable to PACT contract holders for the sums guaranteed in their respective contracts. In September 2009, Green's complaint was dismissed on the ground that the stated claims were not ripe because, the trial court concluded, no PACT beneficiary had yet been denied contractual benefits and, therefore, no PACT beneficiary had suffered a loss. Green subsequently filed a motion to alter, amend, or vacate the trial court's judgment.
The action underlying these appeals (case no. CV-10-900013) was instituted by a separate complaint filed in January 2010 — while Green's postjudgment motion
In their complaint in the underlying action, which included claims virtually identical to those asserted by Green in her initial action, the above-named plaintiffs alleged that their claims were typical of and consistent with the claims of all class members, whose numbers allegedly made joinder impractical, and sought to be named representatives for their respective classes. Acting under the premise that the PACT program was created to allow the designated beneficiary of a PACT contract to attend college without being required to pay tuition or mandatory fees, regardless of the financial health of the PACT Trust Fund and/or the ability of the PACT program to pay, the plaintiffs alleged that the PACT board had indicated its inability to fulfill outstanding PACT contracts. The complaint also alleged, in a claim not included in Green's initial action, that, at the time of filing, "not all of the tuition and fees covered by PACT contracts [were] being paid by the [PACT board]."
The PACT board answered and filed a counterclaim. In its "counterclaim for declaratory relief," the PACT board alleged that, based upon actuarial projections, the PACT Trust Fund lacked sufficient assets to continue payment of full tuition expenses past the year 2015. The PACT board further noted that it had "adopted proposed amendments to its existing rules and regulations," which, though specifically aimed at remitting payment for mandatory fees and expenses to all PACT contract holders, might result in payment of "an amount less than the full tuition and fees charged by the respective college or university" in direct conflict with the plaintiffs' interpretation of their contract rights. Thus, the PACT board requested, pursuant to Ala.Code 1975, § 6-6-220 et seq.
The plaintiffs thereafter moved for class certification of the two proposed classes pursuant to Rule 23(b)(1) and (b)(2), Ala. R. Civ. P.
While this case was pending, the legislature enacted Act No. 2010-725, Ala. Acts 2010, which was effective April 30, 2010, and which, among other things, amended the statutory provisions relating to the PACT program to provide annual appropriations to the PACT Trust Fund beginning in 2015 and continuing through 2027.
§ 16-33C-17(a), Ala.Code 1975.
The 2010 amendment further provides that
§ 16-33C-17(c), Ala.Code 1975.
Finally, the legislature in Act No. 2010-725
§ 16-33C-19, Ala.Code 1975 (emphasis added).
In response to the passage of Act No. 2010-725, the PACT board filed a motion seeking to dismiss the plaintiffs' claims on the ground "that recent legislation [had] rendered [the] Plaintiffs' claims moot." More specifically, the PACT board argued in support of its motion that the plaintiffs' claims were based upon the premise that the PACT program would, at some future date, be unable to fulfill all outstanding obligations and that Act No. 2010-725 resolved all such concerns; therefore, it contended, the legislation had rendered any controversy moot and thereby had deprived the trial court of jurisdiction. After a hearing, the trial court denied the PACT board's motion without explanation.
Following the PACT board's filing of a stipulation evidencing its qualified, general agreement that class-based relief was proper, the trial court in December 2010 entered an order of class certification. Specifically, the trial court found that the underlying action was "an appropriate case for class certification for the Plaintiffs under Rule 23(b)(2), [Ala. R. Civ. P.,] and for the [PACT board] on [its] Counterclaim under Rule 23(b)(1)(A)(B) [sic] [, Ala. R. Civ. P.]," and certified several classes and subclasses.
Subsequent to the entry of the trial court's certification order, some of the plaintiffs filed a motion seeking to compel mediation of the parties' respective claims. The matter thereafter proceeded to mediation upon consent of the parties.
On May 5, 2011, the parties submitted a joint motion, along with a proposed settlement agreement, requesting that the trial court approve the proposed class-action settlement agreement, the professed purpose of which was "to provide Class Members with the maximum amount of benefits from the available assets." In order to effect that stated purpose, the proposed settlement agreement purported to modify the terms of the outstanding PACT contracts. The proposed modification was accompanied by a purported waiver by the class members of the application of Ala. Code 1975, § 16-33C-1 et seq., and the terms of their individual PACT contracts to the extent the provisions in either the statutes or the PACT contracts were inconsistent with the terms of the settlement agreement.
Additionally, the proposed settlement agreement set tuition and fee payments at tuition and fee rates applicable for fall 2010; provided that class members waived the provisions of § 16-33C-17, as set out above; and required class members to be personally responsible for payment of any tuition and fees not covered by the PACT program payments. Class members were also afforded, as an alternative remedy, the right to cancel their PACT contracts and to receive refunds less any applicable taxes or penalties.
The settlement agreement also included, as part of its terms, an award of attorney fees to class members' counsel in the amount of $4,950,000 and an award for litigation-related expenses in the amount of $15,000. The settlement agreement also contained a release of class members' potential claims against the PACT board ("and all other related persons and entities"), including the following:
On May 5, 2011 — the same date the proposed settlement agreement was submitted — the trial court entered an order preliminarily approving the proposed settlement agreement and setting a fairness hearing. Thereafter, pursuant to Rule 23(e), Ala. R. Civ. P., notice of the proposed settlement was purportedly provided to all class members,
At the subsequent fairness hearing, the PACT board offered the expert testimony of Daniel Sherman, an actuary employed by the PACT board. Sherman explained that, although the PACT Trust Fund had, in the past, operated at a surplus, he calculated a deficit, in the spring of 2009, of $460 million. According to Sherman, although the legislature appropriated approximately $548 million to the PACT program in Act No. 2010-725, subsequent evaluations revealed a $269 million deficit, which he attributed to "the increase in tuition levels at the Auburn [University] and [the University of] Alabama school systems," which increases, he said, were higher than the legislature had projected in reaching the determination that its 2010 appropriations had fully funded the PACT program. Sherman's quarterly evaluation in December 2010 revealed that "the deficit [had] increased from [$] 269 million ... to [$] 338 million." Sherman testified that, faced with evidence of the increasing deficit, even with the 2010 legislative appropriations, the assets of the PACT Trust Fund were insufficient to meet its future liabilities.
Regarding the proposed settlement, Sherman explained that it was aimed at ensuring that the available moneys were evenly distributed so that as many beneficiaries as possible received as much as possible and to make sure that the PACT program was fully funded on an actuarial basis. According to Sherman, the limitation in the settlement agreement on tuition increases, which limits tuition payments by the PACT Trust Fund to the fall 2010 rate as certified by each affected school, rendered the settlement actuarially viable — even with the reduction in assets associated with the attorney-fee award and any potential cancellations of PACT contracts by class members. He further noted that the investment of the PACT assets in fixed-income investments was also a central component of the proposed settlement agreement in that it was aimed at preserving the remaining capital in the PACT Trust Fund.
Regardless, Sherman acknowledged that the settlement, because of the variability of both tuition amounts and investment return, did not eliminate all future risk. While admitting that the previous actuarial assumptions underlying the legislative appropriations in Act No. 2010-725 turned out to be incorrect, Sherman testified that the probability that the actuarial assumptions underlying the proposed settlement agreement were accurate was much higher because of the elimination of the risks
The chairman of the PACT board testified and confirmed that based on Sherman's December 2010 report, even with the inclusion of the $548 million in legislative appropriations included in Act No. 2010-725, the PACT Trust Fund remained underfunded by $338 million. He further confirmed that, because of unanticipated tuition increases and the fact that the investments of the PACT Trust Fund had not performed as well as anticipated, the obligations of the PACT Trust Fund far exceeded its assets. The chairman of the PACT board testified that the PACT board, acting alone, had no knowledge of or access to any solution or other moneys that would allow it to provide full contract benefits to all PACT contract holders. The chairman, therefore, opined that the proposed settlement was fair and reasonable to all class members and recommended its approval.
At the conclusion of the PACT board's evidence, 13 objectors, who were present and who had filed written objections in the trial court, were provided an opportunity to argue in opposition to the proposed settlement. The various objectors raised numerous issues, including the argument that the settlement was contrary to Act No. 2010-725.
By order entered July 27, 2011, the trial court entered a final judgment approving the proposed settlement agreement. The trial court's finding that the settlement was fair, adequate, and reasonable was explained in its 35-page order in which it both considered the factors outlined by this Court in Adams v. Robertson, 676 So.2d 1265, 1273 (Ala.1995), and purported to resolve the concerns of the objectors.
Following the entry of the trial court's judgment, the PACT board on August 9, 2011, paid to the clerk of the trial court $4,977,500 in satisfaction of the outstanding judgment for attorney fees, case-related expenses, and amounts awarded to the class representatives pursuant to the terms of the settlement agreement. On that same date, Perdue filed her notice of appeal.
The next day, class counsel petitioned the trial court for disbursement of the funds on deposit with the clerk of the trial court. That motion specifically referenced Perdue's pending appeal but stated that Perdue had failed to "include a supersedeas bond necessary to stay the above judgment." The following day, despite its awareness of Perdue's pending appeal, the trial court entered an order permitting immediate disbursement of the funds.
Disch v. Hicks, 900 So.2d 399, 404 (Ala. 2004).
It is clear that the legislature, in enacting Act No. 2010-725, attempted to rectify the financial difficulties of the PACT program. Act No. 2010-725 provided supplemental funding to the program, placed a limitation on tuition costs, and authorized the PACT board to make certain changes for the benefit of the PACT program. That said, the legislature also clearly undertook to preserve the benefits originally promised to PACT contract holders. Section 12 of Act No. 2010-725, now codified at § 16-33C-19 and quoted above, provides that the PACT board was "strongly encouraged" to make "any financially beneficial changes to PACT rules, procedures, or policies, to the extent that the PACT board is authorized or permitted to make such changes and to the extent that such changes would not violate the contractual relationship existing between a PACT contract holder and the PACT board." The PACT board was thus encouraged to make changes, but limited in making only those changes that "would not violate" the then "existing" contractual relationship between it and the contract holders.
The settlement agreement states: "The purpose and effect of this Settlement shall be to modify the dispositive terms of the PACT Trust Fund and/or the terms of the contractual relationships between Class Members and the PACT Board."
Green and the other appellees contend that § 16-33C-19 does not prohibit the underlying settlement because, they argue, that Code section was clearly predicated on the legislature's mistaken belief that, in light of the accompanying appropriations in Act No. 2010-725, the PACT program was 100 percent funded. They further maintain that the contravention by the settlement of that express statutory provision was permissible because "the settlement did not reflect a unilateral change by the PACT Board" and that "§ 16-33C-19 would only apply to changes made unilaterally by the PACT Board." (Appellees' brief, at p. 21.) Instead, they say, the settlement agreement represents "a mutual, compromise entered by all affected parties." (Appellees' brief, at p. 21.)
However, Green and the other appellees cite no support for the proffered statutory construction, and this Court sees nothing within the prohibitory language of § 16-33C-19 indicating that the prohibition was contingent on the funding status of the PACT program. "When the language of a statute is plain and unambiguous, as in this case, courts must enforce the statute as written by giving the words of the statute their ordinary plain meaning — they must interpret that language to mean exactly what it says and thus give effect to the apparent intent of the Legislature." Ex parte T.B., 698 So.2d 127, 130 (Ala.1997). This is true even if "we might sometimes think that the ramifications of the words [in a statute] are inefficient or unusual.... [I]t is our job to say what the law is, not to say what it should be." DeKalb Cnty. LP Gas Co. v. Suburban Gas, Inc., 729 So.2d 270, 276 (Ala.1998).
The trial court's final judgment approving the terms of the proposed settlement agreement stated, and Green and the other appellees contend, that the trial court derived its authority, at least in part, to approve portions of the proposed settlement agreement from § 19-3B-412, Ala. Code 1975, which provides, in pertinent part:
This Code section recognizes the general power of a trial court to modify certain terms of a trust. Assuming, without deciding, that § 19-3B-412 even applies to the facts of this case, the legislature has spoken specifically and directly to the terms, conditions, and modifications to the PACT program proposed by the settlement agreement. Statutes relating to specific subjects control general provisions in statutes relating to general subjects; when the law descends to particulars, the specific provisions must be understood as exceptions to any general rules laid down to the contrary. Ex parte E.J.M., 829 So.2d 105, 108-09 (Ala.
In undertaking to remedy the financial problems facing the PACT program, the legislature has explicitly placed certain limits on the PACT board's authority to craft solutions that would violate the contractual rights provided to PACT contract holders. Neither the PACT board, under § 16-33C-19, nor the judiciary, under Ala. Const.1901, § 43, has the authority to ignore the explicit statutory law specifically enacted to address a particular situation. See Ex parte Jones Mfg. Co., 589 So.2d at 210 ("An administrative agency cannot usurp legislative powers or contravene a statute. A regulation cannot subvert or enlarge upon statutory policy." (citation omitted)); Finch v. State, 271 Ala. 499, 504, 124 So.2d 825, 830 (1960) (noting that the separation-of-powers doctrine of Ala. Code 1901, § 43, restrains the judicial branch "from imposing its methods or substituting its judgment for that of the executive and legislative branches of the government"); Champion v. McLean, 266 Ala. 103, 117-18, 95 So.2d 82, 97 (1957) (observing that "[t]he power to make the law has been committed to the legislature by the Constitution" and that "`[s]o long as no constitutional limitations are exceeded, the Legislature is of supreme authority, and the courts, as well as all others, must obey'" (quoting State v. Birmingham S. Ry., 182 Ala. 475, 479, 62 So. 77, 79 (1913))); and L.C.S. v. J.N.F., 941 So.2d 973, 980 (Ala.Civ.App.2005) (stating both that "[i]t is well settled that in the absence of a valid constitutional challenge, the judicial branch is bound to enforce the will of the Legislature" and that "`[t]he Legislature's power should not be interfered with unless it is exercised in a manner which plainly conflicts with some higher law'" (quoting Beasley v. Bozeman, 294 Ala. 288, 290, 315 So.2d 570, 571 (1975))). Therefore, we can reach no other conclusion but that the trial court exceeded its discretion in approving a settlement agreement that is plainly "adverse to the enactments of the legislature, [and] is[, therefore,] illegal and void." Carrington, 2 Stew. at 192.
The settlement is void, and we must vacate the entire settlement agreement, i.e., as to all the parties. See In re Airline Ticket Comm'n Antitrust Litig., 953 F.Supp. 280, 284 (D.Minn.1997) ("[A]n illegal term would render a class action settlement invalid, `no matter how much the parties, for whatever reason, wanted it.'" (quoting Little Rock Sch. Dist. v. Pulaski Cnty. Special Sch. Dist., 921 F.2d 1371, 1384 (8th Cir.1990))); and Dillard v. Crenshaw Cnty., 748 F.Supp. 819, 823 (M.D.Ala.1990) ("The court also has a duty to ensure that the settlement is not illegal, against public policy, or the product of fraud or collusion."). In reversing orders adopting class-action settlements, other courts, albeit in factually and procedurally dissimilar cases, have rejected the conclusion that objectors who appeal represent only their own interests and that any reversal of the settlement applies only to those objectors. See Hefty v. All Other Members of the Certified Settlement Class, 680 N.E.2d 843, 857 (Ind.1997) (reversing, upon appeal by six objecting class members, a class-action settlement and specifically rejecting the conclusion "that the Objectors represent only their individual interests in challenging the fairness of the settlement and that any reversal of the settlement approval would only apply to those Objectors who appealed at the time of the settlement and not to the whole class"), and In re General Motors Corp. Engine Interchange Litigation, 594 F.2d 1106, 1122 (7th Cir.1979) ("Limiting
We are unaware of any precedent that supports the view that disapproval of a settlement agreement in a class action operates only to insulate an objector from the binding effect of a settlement agreement. Such a result would be particularly anomalous in the context of a class certified pursuant to Rule 23(b)(2), Ala. R. Civ. P., a mandatory class action designed to afford a class uniformity of relief. A member of a Rule 23(b)(2) class has no right to remove himself or herself simply by opting out as is the case in a class certified pursuant to Rule 23(b)(3). Adams, 676 So.2d at 1270. Nor does Devlin v. Scardelletti, 536 U.S. 1, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002), compel a different conclusion. In Devlin, the Supreme Court recognized the right of an objector to appeal a judgment approving a settlement in a class action where the class had been certified pursuant to Rule 23(b)(1), Fed.R.Civ.P. The Court observed:
536 U.S. at 9, 122 S.Ct. 2005 (emphasis added).
The subject of this appeal is the trial court's judgment approving the settlement agreement and rejecting the objections to the settlement agreement advanced by the objectors. The scope of the objections in the trial court was not the narrow question whether the order should bind only the objectors, but, on the contrary, the issue presented is the broader question whether the trial court's judgment approving the settlement agreement is due to be affirmed. In the parlance of the Devlin
We do not here deal with an attempt to assert an objection peculiar to the objectors and not the class as a whole. It is true that the objectors are different from the members of the class who have not objected in that the objectors have not acquiesced in the settlement agreement. However, if this circumstance alone creates a personal interest that can be resolved simply by protecting the objectors through reversal of the approval as to them and allowing the rest of the settlement agreement to stand, we would defeat the basis for certification of a mandatory class action pursuant to Rule 23(b)(2) by reaching a result that binds less than all members of the class. Indeed, if the objectors had sought to extract only themselves from the settlement agreement and the trial court had obliged and the other parties appealed, a substantial question would exist as to whether we would be required to reverse to protect the mandatory nature of a Rule 23(b)(2) class action.
The trial court's judgment entered on the settlement agreement is vacated and this case is remanded for further proceedings.
1101337 — JUDGMENT VACATED AND CAUSE REMANDED.
1101506 — JUDGMENT VACATED AND CAUSE REMANDED.
WOODALL, PARKER, and SHAW, JJ., and LYONS and PITTMAN, Special Justices,
HOUSTON, Special Justice,
MOORE, Special Justice,
MALONE, C.J., and STUART, BOLIN, MURDOCK, MAIN, and WISE, JJ., recuse themselves.
HOUSTON, Special Justice (concurring specially).
Upon initial consideration, I was inclined to dissent; however, infallibility was not my long suit while I was on the Bench, nor is it in retirement.
Alabama Code 1975, § 16-33C-6(b), provides: "A PACT Contract ... does not constitute a debt or obligation of the state...."
By the vacation of the judgment approving the settlement agreement, based upon the undisputed financial data presented to the trial court those beneficiaries of PACT contracts now in college or soon to be in college will have their tuition paid in full; those beneficiaries who are scheduled to attend college in future years will receive nothing. If this Court had affirmed the judgment in this case, each owner of a PACT contract could have, at his or her discretion, obtained a refund of the amount he or she paid into the fund, subject to certain taxes, or, if the owner elected not to withdraw from the PACT contract, each beneficiary would have received approximately $32,000 in tuition under the PACT contract, the specific value depending upon the college or university the beneficiary chose to attend. The 2008-2009 economic
I believe that the settlement may have provided the greatest good for the greatest number of people. That, however, is not a ground for dissent.
There are approximately 30,000 remaining owners of PACT contracts and approximately 40,000 remaining beneficiaries under those contracts. Therefore, only 0.18% of the total group objected to the settlement agreement and 99.82% of the owners and beneficiaries of all PACT contracts did not timely object to the settlement. This was not a ground for dissent.
At the fairness hearing to evaluate the merits of the settlement, the trial court heard live testimony from the ex officio chairman of the PACT board, who testified that the settlement was designed to distribute equitably among class members all the available assets to reflect the respective time value of money and to allow those class members who did not believe such value to be beneficial to cancel their PACT contracts and obtain refunds. However, he testified that in late 2012 the PACT program would lack sufficient assets with which to refund class members the full amounts of their original investments. He testified that the settlement agreement would provide class members as a whole with a sufficient benefit and return on investment as opposed to merely receiving refunds or potentially nothing if all assets are depleted. He asked for the proposed settlement agreement to be approved, but he testified that the proposed settlement agreement violated the laws of the State. in fact, the settlement agreement provides: "The purpose and effect of the settlement shall be to modify the dispositive terms of the PACT Trust Fund" and/or "the terms of the contractual relationships between class members and the PACT board." (Emphasis added.)
Section 16-33C-19, Ala.Code 1975, added by Act No. 2010-725, Ala. Acts 2010, provides that any changes that the PACT board made to "rules, procedures, or policies" could not "violate the contractual relationship existing between a PACT contract holder and the PACT board." (Emphasis added.)
To "violate" is "to break or disregard (a law or promise)." American Heritage Dictionary of the English Language 1921 (4th ed.2001). To "modify" is "to change in form or character; alter." Id., at 1131. A distinction without a difference — or vice versa. Therefore, I concur.
MOORE, Special Justice (dissenting).
I respectfully dissent.
These consolidated appeals involve the validity of objections filed by Carol M. Perdue, William D. Motlow, Jr., and Shane Sears to a class-action settlement agreement approved by the Montgomery Circuit Court ("the trial court"). In that settlement agreement, all contract holders in the Alabama Prepaid Affordable College Tuition ("PACT") program and the beneficiaries of those contracts agreed, among other things, to accept payment of college tuition and mandatory fees at a baseline established by 2010 tuition rates and to waive any statutory or contractual rights they may have that would be inconsistent with the terms of the settlement, specifically including any rights arising under the Wallace-Folsom College Savings Investment Act ("the Act"), codified at § 16-33C-1 et seq., Ala.Code 1975. Perdue, Motlow, and Sears (sometimes hereinafter referred to collectively as "the objectors") filed timely written objections to the settlement agreement, which contained a non-opt-out provision, and appeared, through counsel, at two fairness hearings conducted
The main opinion concludes that the judgment approving the settlement agreement should be vacated because it violates § 16-33C-19, Ala.Code 1975. I respectfully disagree. Section 16-33C-19 does not preclude the class members from waiving their rights or the PACT board from agreeing with the class members to a modification of the terms of their PACT contracts. Even if it did, the objectors do not have standing because they have failed to prove that they have been harmed by the settlement agreement. I also reject the objectors' argument that, in amending the Act through Act No. 2010-725, Ala. Acts 2010, the legislature intended to guarantee full funding for the PACT Trust Fund. The objectors have failed to present any other ground for vacating the trial court's judgment, and it should be affirmed.
Section 16-33C-19 provides, in pertinent part:
By its plain language, § 16-33C-19 expressly forbids the PACT board from making "changes to PACT rules, procedures, [and] policies" that would "violate the contractual relationship existing between a PACT contract holder and the PACT board." See IMED Corp. v. Systems Eng'g Assocs. Corp., 602 So.2d 344, 346 (Ala.1992) ("[W]here plain language is used a court is bound to interpret that language to mean exactly what it says.").
The first clause in § 16-33C-19 refers to "changes to ... rules, procedures, or policies" made by the PACT board, an agent of the State. See § 16-33C-5, Ala.Code 1975.
Ex parte Western Union Tel. Co., 200 Ala. 496, 500, 76 So. 438, 442 (1917) (Sayre, J., dissenting) (quoting Merchants' Bank v. Cook, 21 Mass. 405 (1826)). The Act vests the PACT board with the power "[t]o adopt the rules and regulations necessary to implement the provisions of [the Act]...," § 16-33C-5(2), Ala.Code 1975, and "to establish other policies, procedures, and criteria necessary to implement and administer the provisions of this chapter," § 16-33C-5(11), Ala.Code 1975. Those terms — "rules and regulations" and "policies, procedures, and criteria" — carry definite and well understood legal meanings; thus, the "rules, procedures, or policies" to which § 16-33C-19 refers must be those adopted and established by the PACT board pursuant to § 16-33C-5.
Most state agencies may change their rules only through compliance with the Alabama Administrative Procedure Act ("the AAPA"), § 41-22-1 et seq., Ala.Code 1975, see § 41-22-2(d), Ala.Code 1975, which generally requires notice and a period
The last clause of the first sentence of § 16-33C-19 prohibits the PACT board from making changes to its rules, procedures, or policies that "would ... violate the contractual relationship existing between a PACT contract holder and the PACT board." The word "violation" is defined as "Injury; infringement; breach of right, duty, or law; ... The Act of breaking, infringing or transgressing the law." Black's Law Dictionary 1570 (6th ed.1990). "Violate" means, among other things, "[t]o break or disregard (a law or promise, for example)." American Heritage Dictionary of English Language 1921 (4th ed.2001). "Contractual" is defined as "of, relating to, or having the nature of a contract," American Heritage Dictionary 399, and "relationship" means "a particular type of connection existing between people related or having dealings with one another." Id. at 1473. The phrase "violate the contractual relationship" suggests a breaking of the interpersonal connection established by a contract. The last clause of the first sentence in § 16-33C-19 prohibits changes that would have the effect of rescinding, voiding, suspending, or terminating existing PACT contracts.
When the first sentence of § 16-33C-19 is properly read, the last clause specifically limits the general power of the PACT board to unilaterally amend its rules, procedures, and policies. Although the first clause confers upon the PACT board the power to make "any financially beneficial changes" to its rules, procedures, and policies, the last clause excepts from that authority the power to make changes to
As properly construed, § 16-33C-19 does not address, nor does it limit, the power of the PACT board to enter into contracts with PACT contract holders, such as the settlement agreement at issue here. That power is actually addressed elsewhere. Section 16-33C-5(4) bestows upon the PACT board the broad authority "[t]o execute contracts and necessary instruments," the only limitation being that the contract must be "necessary or convenient to carry out the purposes and provisions of [the Act]."
The settlement agreement does not run afoul of § 16-33C-19 when that Code section is applied as written. The settlement agreement certainly cannot be considered a unilateral action of the PACT board to amend its rules, procedures, and policies to thereby rescind, void, suspend, or terminate the contractual relationships with any of the PACT contract holders. The settlement agreement did not result from any administrative proceeding; rather, it resulted from a legal proceeding in which the parties, considering the uncertainties involved and weighing their various options, decided to compromise and settle the protracted litigation.
The main opinion eschews the literal meaning of § 16-33C-19 by ignoring the first clause of the first sentence. The main opinion does not attempt to interpret the words "mak[ing] ... changes to the PACT rules, procedures, or policies." This leads the main opinion to construe the language in the last clause — "violate the contractual relationship existing between a PACT contract holder and the PACT board" — as if it existed separate and apart from the first clause. However, when construing a statute, this Court should not focus on isolated words and phrases but should consider them in the context in which they are used. Edwards v. Kia Motors of America, Inc., 8 So.3d 277, 282 (Ala.2008). The last clause cannot be construed independently of the first clause, which it modifies. As shown above, when considered with the first clause, the last clause can be read only as restraining the rule-making, procedure-making, and policy-making power of the PACT board.
The main opinion further misconstrues the last clause of the first sentence in § 16-33C-19 by substituting the words "terms and obligations" for the word "relationship." 127 So.3d at 357 n. 14. In doing so, the main opinion violates at least two other well settled rules of statutory construction.
First and foremost, "`[t]his Court is not at liberty to rewrite [a] statute or to substitute its judgment for that of the legislature.'" Willis v. Kincaid, 983 So.2d 1100, 1103 (Ala.2007) (quoting Gowens v. Tys. S., 948 So.2d 513, 522 n. 1 (Ala.2006)). A court can depart from the literal meaning of the words in a statute when the literal meaning would "produce an absurd and unjust result that is clearly inconsistent with the purpose and policy of the statute." City of Bessemer v. McClain, 957 So.2d 1061,
Second,
Trott v. Brinks, Inc., 972 So.2d 81, 85 (Ala.2007) (holding that legislature's use of terms "reimbursement" and "subrogation" in Alabama Workers' Compensation Act, § 25-5-1 et seq., Ala.Code 1975, signaled legislative intent that those words be treated differently). In § 16-33C-5(9), Ala.Code 1975, the legislature authorized the PACT board "[t]o define the terms and conditions of ... PACT contracts." In § 16-33C-6(b), Ala.Code 1975, the legislature designates the PACT Trust Fund as "the source for payment of PACT Program's obligations under PACT contracts" and pledges that the moneys in the PACT Trust Fund will be used "to pay amounts due under the terms of its PACT contracts." Section 16-33C-7(a), Ala.Code 1975, specifically provides that the PACT contracts "shall include ... the terms and conditions" for payment by PACT contract purchasers, for substitution of beneficiaries, and for any other purpose deemed necessary by the PACT board, as well as terms prescribing "all other rights or obligations of the purchaser and the PACT Program." The term "contractual relationship" appears only in § 16-33C-19. Therefore, we must presume that the legislature did not intend "contractual relationship" to be synonymous with "contractual terms or obligations" because, if it had so intended, the legislature would have used those more precise terms already used in other sections of the Act.
By substituting the words "terms and obligations" for "relationship," the main opinion gives an entirely different substantive meaning to § 16-33C-19, effectively amending the statute. "[I]t is not the
Even assuming that the language of § 16-33C-19 could validly be transformed to prevent the PACT board from changing its rules, procedures, and policies so as to "violate" the "contractual terms and obligations" of the "existing" PACT contracts, as the main opinion posits, 127 So.3d at 356-57 n. 14, nothing in § 16-33C-19 would preclude the PACT contract holders from waiving any terms in their PACT contracts or from agreeing with the PACT board to a modification of those terms.
A waiver is "the voluntary and intentional surrender or relinquishment of a known right." Dominex, Inc. v. Key, 456 So.2d 1047, 1058 (Ala.1984). "`Waiver involves the acts and conduct of only one of the parties....'" Inland Mut. Ins. Co. v. Hightower, 274 Ala. 52, 56, 145 So.2d 422, 425 (1962) (quoting Sovereign Camp, Woodmen of the World v. Newsom, 142 Ark. 132, 219 S.W. 759, 768 (1920)). "Waiver of the right to enforce an agreed term is accomplished unilaterally...." Angus Med. Co. v. Digital Equip. Corp., 173 Ariz. 159, 164, 840 P.2d 1024, 1029 (Ct.App.1992); see also 3A Arthur L. Corbin, Corbin on Contracts § 752 (1960) ("[I]t appears that `waiver' consists of the voluntary action of the obligor alone."). A waiver does not remove, modify, or terminate the contractual terms, but excuses nonperformance of those terms. See generally E. Allan Farnsworth, Contracts § 8.5, at 561 (3d ed.1999). A waiver relinquishes only the right to enforce a contractual provision and does not affect the existence of the underlying right.
By waiving any rights they may have that are inconsistent with the terms of the settlement, the class members are acting unilaterally. Unlike an offer to make a binding bilateral contract, a waiver does not require any formal acceptance in order to be effective. See Robinson v. Robinson, 961 S.W.2d 292, 298 (Tex.Ct.App.1997) (finding no waiver but recognizing that waiver, as a unilateral act, does not require acceptance by other party). By acknowledging the class members' waiver, the PACT board does not take any action that could implicate its authority; it certainly would not be unilaterally "changing" "any rules, procedures, or policies." § 16-33C-19. Moreover, even if the PACT board adopted rules, procedures, and policies consistent with the class members' waiver, doing so would not "violate the contractual [terms and obligations] existing between a PACT contract holder and the PACT board." Id. The terms and obligations of the PACT contracts remain intact; the class members only voluntarily and unilaterally agree not to enforce those terms and obligations against the PACT board.
A modification of a contract, on the other hand, requires mutual assent from both parties and, therefore, can be achieved only through bilateral conduct. Angus Med. Co., 173 Ariz. at 164, 840 P.2d at 1029. Section 16-33C-19 prohibits only unilateral actions by the PACT board in adopting or amending rules, procedures, and policies; it does not prohibit bilateral actions involving the PACT board and the PACT contract holders. Moreover, with all due respect to Justice Houston, a modification of a contract is not equivalent to a violation of a contract. 127 So.3d at 362 (Houston, J., concurring specially). Legally speaking, the term "violation of a contract" is synonymous with the term "breach of contract," which is defined as a "[v]iolation of a contractual obligation by failing to perform one's own promise, by repudiating it, or by interfering with another party's performance." Black's Law Dictionary 213 (9th ed.2009). A "modification of a contract," on the other hand, involves the mutual assent of both contracting parties to new or changed contractual terms while the original contract remains executory. See McLemore v. Hyundai Motor Mfg. Alabama, LLC, 7 So.3d 318, 333 (Ala.2008); and Alabama Terminix Co. v. Howell, 276 Ala. 59, 62, 158 So.2d 915, 918 (1963); see also Beacon Terminal Corp. v. Chemprene, Inc., 75 A.D.2d 350, 354, 429 N.Y.S.2d 715, 717-18 (1980) ("The modification of a contract results in the establishment of a new agreement between the parties which pro tanto supplants the affected provisions of the original agreement while leaving the balance of it intact."). A contract "may be modified by mutual agreement before a breach without any other consideration
Therefore, even under the main opinion's revised version of § 16-33C-19, that statute does not preclude the PACT board from entering into an agreement with PACT contract holders to modify existing contract terms and to adopt rules, procedures, and policies consistent with those agreed-upon modifications. It appears from the language in § 16-33C-19 that the legislature did not even contemplate such an agreement. Ex parte Berryhill, 801 So.2d 7, 9-10 (Ala.2001) ("The polestar of statutory construction is to ascertain and give effect to the Legislature's intent in enacting a statute.").
The language of § 16-33C-19, applied either literally or as revised by the main opinion, does not dilute the general contractual authority of the PACT board. The PACT board has the contractual power to enter into an enforceable settlement, see Smith v. Tillman, 958 So.2d 333 (Ala. 2006), including the power to agree to all the terms contained in the settlement agreement in this case. The contractual power of the PACT board is not even implicated in regard to the waiver provision, which does not require its acceptance to be valid. Because the settlement does not contravene § 16-33C-19, I find no basis for vacating, on that ground, the judgment approving the settlement agreement.
I further note that, even if § 16-33C-19 could be construed as preventing the PACT board from entering into agreements that modify the terms or obligations in existing PACT contracts, the objectors have utterly failed to show that they have been harmed by such a modification. A thorough review of the record shows that Perdue did not even enter her PACT contract into evidence. Although Motlow and Sears represented to the trial court and to this Court that, between them, they had entered into four separate PACT contracts, they attached only one 1992 PACT contract, presumably benefiting Lindsey Motlow, to their written objections. Motlow has failed to produce evidence showing that the now 20-year-old PACT contract remains executory, i.e., that Lindsey has yet to receive the full benefits set out in the contract and that the PACT board remains obligated to pay, on her behalf, full tuition and fees at current rates. Even assuming that the 1992 PACT contract guaranteed payment of full tuition and fees and remains executory, Motlow has not shown that the PACT board has paid, or will pay, less than those amounts on Lindsey's behalf.
The objectors lack standing to complain that the judgment approving the settlement agreement injures other class members.
That same standing problem infects Perdue's argument that the settlement agreement violates § 16-33C-17,
In enacting § 16-33C-17, the legislature plainly intended "to limit the cost of tuition for certain PACT plan participants," Preamble to Act No. 2010-725, Ala. Acts 2010 (emphasis added), namely, those contract holders whose beneficiaries attend State postsecondary institutions other than the University of Alabama and Auburn University. This Court need not decide whether mandatory waiver of § 16-33C-17 is contrary to the interests of those class members, as Perdue argues, because Perdue
By vacating the judgment, the main opinion essentially determines that the class members are forbidden by law from working out a plan with the PACT board to avoid a devastating financial outcome. Cf. Kinmon v. J.P. King Auction Co., 290 Ala. 323, 325, 276 So.2d 569, 570 (1973) (noting that "[a] citizen of Alabama is free to contract in any way he sees fit" and that "[c]ontracting parties are free to modify their contract by mutual assent"). Despite the objectors' protestations to the contrary, the evidence fully supports the trial court's factual findings regarding the poor financial health of the PACT Trust Fund. Daniel Sherman, an actuary employed by Buck Consultants and retained by the Retirement Systems of Alabama to review the financial condition of the PACT Trust Fund, testified at the first fairness hearing that, as of the end of 2010, the PACT Trust Fund needed an additional infusion of $338 million to fully fund the present value of its future obligations.
The objectors dispute those dire projections, arguing that they have been fabricated
The original act, Act No. 89-862, Ala. Acts 1989, established the PACT Trust Fund in former § 16-33C-6(a), Ala.Code 1975, to consist of "[p]ayments received by the board from purchasers on behalf of qualified beneficiaries or from any other source, public or private." Former § 16-33C-6(c), Ala.Code 1975. The assets of the PACT Trust Fund were considered "public funds of the state" that could be pooled with other state funds for investment purposes. Former § 16-33C-6(d), Ala.Code 1975. The original act further provided that,
Former § 16-33C-6(h), Ala.Code 1975.
From its plain terms, the original act did not obligate the State to fund the PACT Trust Fund.
Effective May 9, 2001, see Act No. 2001-427, § 1, p. 544, Ala. Acts 2001, the legislature amended the original act to state that "[a] PACT contract and any other contract entered into by or on behalf of the [PACT Trust Fund], does not constitute a debt or obligation of the state...." Former § 16-33C-6(b), Ala.Code 1975. When the legislature again amended the original act in 2010, it retained that clause. See § 16-33C-6(b), Ala.Code 1975, as amended by Ala. Acts 2010, Act. No. 2010-725.
Motlow and Sears interpret the language in § 16-33C-16(b), Ala.Code 1975, as establishing that the PACT Trust Fund is, and always will be, 100% fully funded by state funds as a matter of law so that it cannot be proven as a matter of fact that the State will not fully fund the PACT Trust Fund. That interpretation seriously overstates the meaning of the language employed in § 16-33C-16(b). Section 16-33C-16(b) provides that
(Emphasis added.) Section 16-33C-16(b) explains only that the legislature had received information indicating the amount needed to fully fund the PACT Trust Fund at the time the 2010 amendments became effective and that the legislature had relied upon that information in determining the amount of financial aid it would appropriate to fulfill that need. Nowhere does Act No. 2010-725 provide that, should the amount allocated prove insufficient, the legislature was committing itself to additional funding in order to guarantee the contractual obligations of the PACT board.
According to the testimony at the fairness hearings, absent the settlement agreement, the PACT Trust Fund needs $338 million, in addition to the approximately $548 million already appropriated by the legislature, to fully fund its current liabilities. That amount could increase in the future depending on the rate of tuition and fee increases and the rate of investment returns realized by the PACT Trust Fund. In §§ 16-33C-14, -15, and -16, the legislature appropriated funds for the PACT Trust Fund from the Education Trust Fund, which is the primary source of funding for statewide public education. See Ala. Const. of 1901, Art. XIV, § 260. In effect, the objectors argue that the legislature diverted additional hundreds of millions of dollars from other public educational institutions attended by hundreds of thousands of Alabama students, if not more, in order to ensure the viability of the PACT Trust Fund for the benefit of
First, in Act No. 2010-725, the legislature only "appropriated" funds to support the PACT Trust Fund. A legislative appropriation of funds is not a guarantee of funding. Under § 41-4-90, Ala.Code 1975, with some exceptions not applicable here,
As explained in Siegelman v. Alabama Association of School Boards, 819 So.2d 568 (Ala.2001):
819 So.2d at 579 (quoting brief of Alabama Association of School Boards). Consequently, by appropriating approximately $548 million to aid the PACT Trust Fund, the legislature did not, by any means, guarantee that those payments would be made as scheduled. Otherwise, the legislature would have incurred a debt in violation of Ala. Const. of 1901, Art. XI, § 213 ("[N]o new debt shall be created against, or incurred by the state, or its authority except to repel invasion or suppress insurrection...."). See John E. Ballenger Constr. Co. v. State Bd. of Adjustment, 234 Ala. 377, 380, 175 So. 387, 389 (1937).
Second, even if the legislature could guarantee the payment of all PACT contracts, such a guarantee must be shown clearly and unequivocally from the terms of the appropriating statute. Shamburger v. Tierney, 257 S.W.2d 592, 593 (Ky.1953) ("It is a fundamental rule of construction that statutes authorizing the appropriation of public funds will not be extended beyond the natural and fair meaning of the words used."). Outside the legislative context,
38 Am.Jur.2d Guaranty § 5 (2012). No good reason exists to treat statutes any differently. Any promise undertaken by the legislature to "guarantee" the debts of the PACT Trust Fund should be "clear and explicit," especially considering the monumental amount at issue. See California State Employees' Ass'n v. Cory, 123 Cal.App.3d 888, 896, 176 Cal.Rptr. 904, 909 (1981) (refusing to find appropriation of $18 million in interest, "hardly a small-change operating budget item," without
The legislature erased any doubt about that conclusion when, as Boozer testified, it refused his requests for additional funding beyond the $547,629,100 appropriated under Act No. 2010-725. The clear expression of the legislature as to the amount of public funds to be committed to the PACT Trust Fund cannot be overcome by any statutory language allegedly implying otherwise. See Hale v. Randolph Cnty. Comm'n, 423 So.2d 893, 896 (Ala.Civ. App.1982) (rejecting argument by deputy sheriffs that county commission must pay all overtime incurred by them because that "would be to approve an open-ended appropriation for [that] purpose," which would not "be the law"). A court cannot infer an additional legislative appropriation from a statute that does not explicitly provide such. See California State Employees' Ass'n v. Cory, supra (holding that court could not infer that legislature intended to appropriate funds to cover interest from statute appropriating only principal amount).
In order to agree with the objectors on this point, this Court would have to mandate that the legislature appropriate funds for the purpose of paying full tuition and fees to PACT contract holders, regardless of the amount needed. Article IV, § 71, Ala. Const. of 1901, provides that "[n]o money shall be paid out by the treasury except upon appropriation by law...." "`The authority to determine the amount of appropriations necessary for the performance of the essential functions of government is vested fully and exclusively in the legislature.'" Riley v. Joint Fiscal Comm. of Alabama Legislature, 26 So.3d 1150, 1154 (Ala.2009) (quoting Morgan Cnty. Comm'n v. Powell, 292 Ala. 300, 306, 293 So.2d 830, 834 (1974), citing in turn Abramson v. Hard, 229 Ala. 2, 155 So. 590 (1934)). Article III, § 43, Ala. Const. of 1901, provides, in pertinent part, that "the judicial shall never exercise the legislative and executive powers, or either of them." Hence, "the judiciary may not encroach upon power given to the Legislature, and judicial officials cannot order legislative officials to take a particular policy course." Ex parte James, 713 So.2d 869, 909 (Ala. 1997) (Hooper, C.J., dissenting). The courts "do not have the authority to tell the Legislature ... in what fashion it must spend public funds in a particular area." Ex parte James, 836 So.2d 813, 868 (Ala. 2002) (Moore, C.J., concurring in the result in part and dissenting in part). "It is therefore not within the sphere of the judicial branch to determine what appropriations are to be made...." Sparks v. Parker, 368 So.2d 528, 531 (Ala.1979).
The legislature has not guaranteed the obligations of the PACT Trust Fund, and the legislature has not appropriated or agreed to appropriate any funds for the purpose of paying PACT contracts other than those explicitly set out in §§ 16-33C-14, -15, and -16. The objectors are simply incorrect in arguing that the legislature has resolved to take responsibility for PACT funding and to supply any funds necessary to assure PACT contract holders full tuition and fees. Their argument, therefore, provides no basis for vacating the judgment approving the settlement agreement.
The objectors make numerous other arguments in an effort to secure a reversal of the judgment. However, the objectors lack standing to assert some of those arguments;
Perhaps the only objection that deserves further consideration concerns the argument that the settlement agreement releases the PACT board from any further responsibility for properly managing the PACT Trust Fund, although that argument does not warrant vacating the trial court's judgment.
The settlement agreement provides that all class members release the PACT board members and their representatives from all claims that could have been brought in this action, as well as
(Emphasis added.)
Section "F" of the settlement agreement provides that any future receipts will be deposited in the PACT Trust Fund
(Emphasis added.) Section "K" of the settlement agreement further provides that, except for those specific provisions waived by the class members, the PACT board remains subject to the Act. Those two provisions require the PACT board to comply with existing statutes regarding the management of the PACT Trust Fund.
Section 16-33C-4.1, Ala.Code 1975, provides, in pertinent part, that
Section 16-33C-6(d) also provides, in pertinent part:
Those statutes require the members of the PACT board to exercise fiduciary responsibilities when managing the PACT Trust Fund, subject to liability for acting in bad faith when deviating from the standard of care set out in § 16-33C-6(d).
In addition, the release language also expressly preserves any claims the class members may have in the event of a default of the obligations set out in the settlement agreement. Thus, in the event the PACT board fails to pay out tuition and fees in accordance with the terms of the settlement agreement, the class members have not released any claims arising out of that breach. The settlement agreement does not allow the PACT board to shirk its settlement obligations without legal consequence, and the trial court did not err on that ground in approving the settlement agreement.
The settlement agreement provides for an equitable distribution of the PACT Trust Fund that will significantly increase the probability that all class members will receive at least some economic benefit from the PACT contracts. The settlement was within the authority of the PACT board and the class members to make. Those objections properly raised and argued by the objectors do not justify a vacation of the judgment approving the settlement agreement. For the foregoing reasons, I respectfully dissent.
PER CURIAM.
In Perdue v. Green, [Ms. 1101337, March 16, 2012] 127 So.3d 343 (Ala.2012), this Court vacated the trial court's judgment approving a class-action settlement concluding litigation related to the Alabama Prepaid Affordable College Tuition ("PACT") Trust Fund a/k/a The Wallace-Folsom Prepaid College Trust Fund on the ground that the settlement agreement impermissibly contravened Act No. 2010-725, Ala. Acts 2010,
The PACT board now applies for a rehearing of our decision vacating the trial court's judgment, contending, among other things, that the impediment to approval of the class-action settlement agreement, which this Court found in the statutory language of § 16-33C-19, has been removed. In support of its applications, the PACT board emphasizes this Court's duty to apply "any change in the substantive law" that may occur while a case remains pending on appeal.
Resolution of the retroactivity issue necessarily requires a determination as to the constitutionality of the retroactive application of Act No. 2012-198 under the facts of this case. In keeping with our general rule that such issues should be first addressed by the trial court, see, e.g., Alabama Power Co. v. Turner, 575 So.2d 551, 553 (Ala.1991), we grant the applications for rehearing and remand this case for further proceedings consistent with this opinion. Upon the conclusion of those proceedings, the trial court shall enter an order and file it with this Court on return to remand for further appellate proceedings.
1101337 — APPLICATION FOR REHEARING GRANTED; REMANDED.
1101506 — APPLICATION FOR REHEARING GRANTED; REMANDED.
WOODALL, PARKER, and SHAW, JJ., and HOUSTON, LYONS, PITTMAN, and MOORE, Special Justices,
MALONE, C.J., and STUART, BOLIN, MURDOCK, MAIN, and WISE, JJ., recuse themselves.
PER CURIAM.
Immediately following the release of our previous opinion in this matter, see Perdue v. Green, [Ms. 1101337, March 16, 2012] 127 So.3d 343 (Ala.2012) ("Perdue I"), the legislature passed Act No. 2012-198, Ala. Acts 2012 ("the 2012 Act"), repealing the statutory provision underpinning our decision in Perdue I, in which we vacated the judgment of the Montgomery Circuit Court approving a settlement agreement concluding litigation involving the Alabama Prepaid Affordable College Tuition ("PACT") program. The legislature's action
As discussed in Perdue I, this case involves the PACT program and its board of directors ("the PACT board"). The PACT program allows persons to purchase contracts in advance of a child's attending college; the contracts provide certain tuition payments from the PACT program's trust fund if the child subsequently attends a college or university. See §§ 16-33C-5, -6, Ala.Code 1975, and Johnson v. Taylor, 770 So.2d 1103, 1104 (Ala.Civ.App. 1999).
In January 2010, numerous plaintiffs
Perdue I, 127 So.3d at 351 (footnotes omitted).
While the underlying action was pending in the trial court, the legislature enacted Act No. 2010-725, Ala. Acts 2010 ("the
(Emphasis added.)
Ultimately, the trial court certified the underlying action as a class action, and the parties eventually negotiated a proposed settlement:
Perdue I, 127 So.3d at 353-54.
On May 5, 2011, the trial court entered an order preliminarily approving the proposed settlement agreement and setting a fairness hearing. The trial court directed that notice of the proposed settlement be provided by mail to class members whose addresses were discernible from the records of the PACT program. Additionally, a notice was posted on the Web site for the PACT program. Numerous written objections were subsequently filed in the trial court by certain class members.
Testimony was presented at the subsequent fairness hearing, including testimony by an actuary employed by the PACT board. As detailed in Perdue I, the actuary testified that the assets of the PACT program were insufficient to meet its future liabilities. The proposed settlement, it was asserted, was intended to ensure that the available funds were evenly distributed so that as many beneficiaries as possible received as much as possible, and the limits on the tuition payments rendered the settlement actuarially viable. Further, the chairman of the PACT board testified that the PACT program's investments had not performed as well as anticipated and that its obligations far exceeded its assets. The chairman testified that, other than the proposed settlement agreement, the PACT board had no solution that would allow it to provide benefits to all PACT contract holders and beneficiaries. Certain persons objecting to the settlement were provided an opportunity at the hearing to argue in opposition and raised numerous issues, including the argument that the proposed settlement agreement was contrary to the 2010 Act. In an order entered July 27, 2011, the trial court approved the proposed settlement agreement, finding that it was fair, adequate, and reasonable.
Carol M. Perdue, individually and as next friend and guardian of her daughter, Anna K. Perdue; William D. Motlow, Jr.; and Shane Sears (hereinafter collectively referred to as "the objectors"), all of whom are objecting class members, appealed the trial court's judgment approving the settlement agreement.
Perdue I, 127 So.3d at 357 (footnotes omitted).
We rejected arguments by the plaintiffs and the PACT board that § 16-33C-19 did not prohibit the PACT board from entering into the settlement agreement:
Perdue I, 127 So.3d at 358. We concluded:
Perdue I, 127 So.3d at 360. We thus vacated the trial court's order approving the settlement and remanded the cause.
While the PACT board's application for rehearing was pending in this Court, the legislature passed the 2012 Act, which, among other things, specifically repealed § 16-33C-19. As to the repeal of § 16-33C-19, the 2012 Act stated that it was "remedial and curative and is retroactive to April 30, 2010," the effective date of the 2010 Act. On July 11, 2012, we granted the application for rehearing and remanded this case to the trial court to consider the constitutionality of the retroactive application of the 2012 Act. Perdue v. Green, [Ms. 1101337, July 11, 2012] 127 So.3d 343 (Ala.2012). The trial court on September 17, 2012, entered an "Order on Remand" in which it concluded that the retroactivity provision of the 2012 Act was constitutional.
The limitation in § 16-33C-19 on the power of the PACT board to diminish the contractual rights of the PACT contract holders was the linchpin of our holding in Perdue I and the sole basis for this Court's vacation of the judgment approving the settlement agreement. There is no dispute that the retroactive repeal of that Code section would have the effect of removing § 16-33C-19 as a basis for our decision and invalidating the rationale of Perdue I; instead, the issue presented on return to remand is whether the retroactive application of the 2012 Act is constitutional.
"Continental Nat'l Indem. Co. v. Fields, 926 So.2d 1033, 1034-35 (Ala.2005). Likewise,
"State ex rel. King v. Morton, 955 So.2d 1012, 1017 (Ala.2006)."
Madaloni v. City of Mobile, 37 So.3d 739, 742-43 (Ala.2009).
The objectors maintain that the application of the 2012 Act in this case would violate certain constitutional rights.
Ex parte F.P., 857 So.2d 125, 137 (Ala. 2003). See also Blake v. State ex rel. Going, 178 Ala. 407, 411, 59 So. 623, 625 (1912) ("It is a general rule ... that when a statute is repealed it stands as if it had never existed, except as to vested rights which have accrued under its operation."). Further, Ala. Const. 1901, Art. I, § 22, provides that "[no] law, impairing the obligations of contracts ... shall be passed by the legislature."
In her brief, Perdue appears to start with the premise that all PACT contract holders have a vested right in their contracts and that the settlement agreement diminishes those contractual rights. She then points to statements by the plaintiffs' class counsel and the PACT board members indicating that the 2012 Act is a "blessing" or "endorsement" of the settlement agreement and argues that such blessing or endorsement of the settlement agreement equates to the legislation diminishing vested rights:
Perdue's brief on return to remand, at 20.
We disagree. As the appellees argue, the 2012 Act does not impair anything. While it removes certain prohibitions on the actions of the PACT board — i.e., removes the barrier of § 16-33C-19 to the PACT board's negotiation of the settlement agreement with the class members — the legislation itself neither diminishes, removes, or impairs any contractual rights or obligations, vested or not, nor mandates any particular result. The objectors point to nothing in the 2012 Act that curtails the rights and remedies of PACT contract holders; indeed, we are cited no authority indicating that a legislative enactment granting authority to a State entity can run afoul of § 22 or § 95 of the Alabama Constitution. It is the settlement agreement that alters the rights found in the PACT contracts, not the 2012 Act.
Perdue also contends that § 16-33C-19 provides a "defense" that, under § 95, cannot be retroactively repealed. As noted above, § 95 states: "After suit has been commenced on any cause of action, the legislature shall have no power to take
Perdue's brief on return to remand, at 25 (footnote omitted).
In explaining what constitutes a "defense to such suit" for purposes of § 95, this Court has stated: "We have held that [the `existing-defense' provision of § 95] applies `only to matters of substance and not to matters of form or to statutes which are remedial in nature;' [and] that `"no person has a vested right in a particular remedy ... or in particular modes of procedure."'" Tyson v. Johns-Manville Sales Corp., 399 So.2d 263, 269 (Ala.1981) (quoting State Bd. of Optometry v. Lee Optical Co. of Alabama, 284 Ala. 562, 565, 226 So.2d 623, 625 (1969), quoting in turn 2 Frank E. Horack, Jr., Sutherland on Statutory Construction § 2218 (3d ed. 1943)). Further, the "existing defense" must be "vested." Id.
Section 16-33C-19 was enacted after the underlying action was filed in the trial court. Further, the bar to the settlement agreement recognized in Perdue I as created by § 16-33C-19 was not in the nature of a statutory or common-law affirmative defense to a cause of action or a claim. The briefs before us do not discuss or address whether the argument that the PACT board did not have the power to accept the settlement agreement under § 16-33C-19 constituted an "existing defense" as contemplated by § 95, and there is no citation to caselaw, such as Tyson, discussing the proper analysis for that issue. In other words, we have no analysis or authority showing that the legal argument regarding the effect of § 16-33C-19 equates to a "defense" as that term is contemplated in § 95. Rule 28(a)(10), Ala. R.App. P., requires that arguments in appellate briefs contain discussions of facts and relevant legal authorities to support a party's position; if the briefs do not contain the legal and factual analysis necessary to comply with the rule, then the argument is waived. White Sands Group, L.L.C. v. PRS II, LLC, 998 So.2d 1042, 1058 (Ala.2008). Because the briefs on return to remand do not explain how § 16-33C-19 constitutes an "existing defense" under § 95, and because no authority in support of this argument is presented, the argument is waived.
Motlow and Sears appear to advance the position that some contract holders may have relied on the passage of the 2010 Act as a "representation" that the State was obligating itself to pay full tuition on the PACT contracts. However, although the 2010 Act made certain future funding appropriations and expressed the legislature's belief that, based on certain actuarial projections, the program would be fully funded, see § 16-33C-16(b), Ala.Code 1975 (repealed by the 2012 Act), the 2010 Act actually expressed no obligation or guarantee. Because the 2010 Act was enacted after the underlying action was filed, the class members clearly were not relying on the subsequently added funding provisions of the 2010 Act or the restrictions on the PACT board's powers in the 2010 Act when they purchased their contracts or when they filed this action. Further, at all
Here, the retroactive application of the 2012 Act will not result in a taking of the class members' contractual rights to payments of tuition and fees; rather, the 2012 Act was passed and is applied retroactively in order to remove a hurdle identified by this Court in Perdue I to the PACT board's ability to negotiate a settlement that, with the consent of the class, results in the alteration of the contractual obligations. Given that Alabama law requires this Court to presume that the 2012 Act is constitutional and valid, that this Court is required to seek to sustain it rather than to strike it down, and that the objectors have failed to show that it is unconstitutional, we are constrained by Alabama law to uphold the ruling of the trial court as to the constitutionality of the retroactive application of the 2012 Act.
Because the 2012 Act has removed § 16-33C-19 as a basis on which to challenge the trial court's approval of the settlement agreement, we now consider the additional grounds asserted by the objectors in their initial appeal.
Both the plaintiffs and the PACT board stipulated that certification of a class action was appropriate in this case; therefore, no challenges were initially lodged in the trial court to the class-certification process. Motlow and Sears contend on appeal that the trial court failed to conduct, before it certified the subject classes, the "rigorous analysis" required by § 6-5-641, Ala.Code 1975. Additionally, they maintain that the prerequisites of Rule 23(a) and 23(b), Ala. R. Civ. P., were not met. More specifically, they argue, there is a lack of both commonality and typicality between the class members and "the representative parties do not clearly and adequately protect the interest of the class."
Other than their general citation to the requirements of Rule 23 and caselaw establishing the necessity of a rigorous analysis, no argument is offered or authority cited demonstrating that the trial court's analysis and resulting order in this case are legally insufficient. A close reading of Motlow and Sears's brief reveals that this argument simply restates the general dissatisfaction with the settlement terms, as discussed in more detail below. Notably, the brief fails to contain citations to the record or to the trial court's certification order and also fails to identify any deficiencies attendant to the certification hearing.
Motlow and Sears also argue that the trial court's certification of the class action — and, ultimately its imposition of the settlement terms on that class — without an "opt-out" provision both violates the class members' due-process rights and conflicts with "dicta of the United States Supreme Court." Motlow and Sears's brief, at 24. This argument, however, is fraught with inconsistencies.
The record reflects that, following the PACT board's filing of a stipulation evidencing its qualified, general agreement that class-based relief was proper and that certification could later be reevaluated, in December 2010 the trial court entered the order certifying the class. Specifically finding that the underlying action was "an appropriate case for class certification for the Plaintiffs under Rule 23(b)(2), [Ala. R. Civ. P.,] and for the [PACT board] on [its] Counterclaim under Rule 23(b)(1)(A)(B) [sic] [, Ala. R. Civ. P.]," the trial court certified several classes and subclasses.
In their brief, Motlow and Sears, in keeping with the trial court's certification order, initially argue that "Alabama Courts do not allow a mandatory class to be certified under Rule 23(b)(2) when the predominant relief sought is damages." In support of their argument, they cite Compass Bank v. Snow, 823 So.2d 667 (Ala.2001). Although the pinpoint citation to Snow included in their brief does not stand for the proposition for which it is identified, Snow does, generally, hold that "certification
To the extent that the objectors argue that the settlement agreement, which releases non-class-based claims for monetary damages, somehow evidences that monetary relief is at issue here and thus required Rule 23(b)(3) certification, we disagree. In First Alabama Bank of Montgomery, N.A. v. Martin, 425 So.2d 415 (Ala.1982), we held 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." 425 So.2d at 423 (citing Senter v. General Motors Corp., 532 F.2d 511 (6th Cir.1976); Robinson v. Lorillard Corp., 444 F.2d 791 (4th Cir.1971)). See also Muzquiz v. City of San Antonio, 378 F.Supp. 949 (W.D.Tex. 1974), aff'd, 520 F.2d 993 (5th Cir.1975), judgment vacated and remanded on other grounds, 438 U.S. 901, 98 S.Ct. 3117, 57 L.Ed.2d 1144 (1978) (upholding certification of Rule 23(b)(2) class where an accounting and restitution were sought along with injunctive relief). Therefore, the objectors have failed to demonstrate that the trial court erred in certifying the class as a non-opt-out class under Rule 23(b)(1) and (b)(2).
The objectors maintain that the trial court erroneously concluded that the settlement agreement was fair, adequate, and reasonable as to all class members. As the objectors acknowledge, the trial court must approve a settlement in class-action litigation. See Perdue I, 127 So.3d at 348; Rule 23(e), Ala. R. Civ. P. The proponents of any class-action settlement bear the burden of demonstrating that the proposed settlement is fair, adequate, and reasonable. The trial court's findings are accorded "[g]reat weight," and we review the trial court's order approving such a settlement agreement to determine whether the trial court exceeded its discretion. Perdue I, 127 So.3d at 356; Grayson, 878 So.2d at 286.
In determining whether the present settlement agreement was fair, adequate, and reasonable, the trial court considered the following factors outlined in Adams v. Robertson, 676 So.2d 1265 (Ala. 1995):
676 So.2d at 1273. See also Knight v. Alabama, 469 F.Supp.2d 1016, 1032 (N.D.Ala.2006). As explained in Knight, in evaluating the terms of a class-action settlement for fairness, adequacy, and reasonableness, the trial court "should compare the terms of the settlement agreement with the likely rewards that the `class would have received following a successful trial of the case.'" 469 F.Supp.2d at 1032 (quoting Cotton v. Hinton, 559 F.2d 1326, 1330 (5th Cir.1977)).
The objectors contend that in the present case the trial court's determination was defective in the following respects:
Initially, the objectors argue that the trial court erred in concluding that the class members' potential lack of success should the matter proceed to trial weighed in favor of the approval of the settlement. Specifically, they maintain that an examination of the three factors identified by them as relevant to this determination, "(1) the merits of the class members' claims, (2) the defenses raised by the defendants, and (3) the manageability of the trial," does not support the trial court's determination.
As to this factor, the trial court's final judgment approving the settlement agreement specifically found that, other than legislative appropriations and its current assets, the PACT board had no means of honoring a potential judgment awarding full benefits to all class members; thus, the trial court concluded, it was unable to "say that the class members would likely obtain a more favorable or more equitable result at trial than they would receive under the proposed Settlement." Because the undisputed evidence adduced at the fairness hearing indicated the assets of the PACT trust fund were insufficient to fully pay tuition under the outstanding PACT contracts, we are constrained to agree with the trial court that the award guaranteed to each class member under the terms of the settlement agreement likely exceeds the reward the class members would receive if they were successful at trial. See Knight, 469 F.Supp.2d at 1033.
We further note that, given the alleged time-sensitive nature of the relief afforded by the settlement agreement, proceeding to trial would have consumed considerable time and would have further depleted the limited assets of the PACT program. As explained by the court in Knight:
469 F.Supp.2d at 1033.
The objectors next maintain that the trial court's approval of the settlement agreement was inappropriate in that the settlement was achieved both while the case remained in its infancy and without the benefit of "any real discovery." Perdue's brief, at 52. More specifically, they contend that the limited number of depositions and written discovery requests coupled with class counsel's failure to obtain an opposing expert or to depose the PACT board members or their actuary regarding the funding shortfall demonstrates that the case was not in the proper posture for settlement and that the trial court's contrary conclusion was erroneous.
The trial court, in support of its finding in this regard, noted that, at the time the initial proposed settlement was reached as a result of mediation, the matter had been pending for more than a year. It further found as follows:
The objectors argue that "[t]he fact that all discovery has been completed and the case is ready for trial is important, because it ordinarily assures sufficient development of the facts to permit a reasonable judgment on the possible merits of the case." Knight, 469 F.Supp.2d at 1033. Given the wealth of information regarding the financial crisis facing the PACT board, however, this Court declines to hold contrary to the trial court that the parties and their counsel lacked a sufficient understanding of the merits of their respective cases at the time that settlement was achieved. Further, although no expert was obtained to testify on behalf of the plaintiffs, both
The objectors contend that the trial court failed to properly compare the terms of the settlement agreement with the likely rewards the class would have received following trial because it did not factor a "level of success for the [class]." According to Perdue, the initiation of the underlying action actually diminished class members' contractual benefits in that before the action was filed each member was still receiving full benefits. Motlow and Sears further contend that the settlement agreement actually provides little or no relief to class members in light of the legislature's statutory assurances of full funding.
Contrary to those claims, however, it is undisputed that the PACT program is facing an economic shortfall and that, with or without initiation of the underlying action, and even with the funding added by the 2010 Act, each class member could not expect to continue to receive full payment of benefits indefinitely, nor could a class member anticipate that the trial court would have ordered the PACT board to do something that the undisputed evidence indicates it was clearly incapable of doing, i.e., paying full tuition for all PACT contracts. In support of its finding in this regard, the trial court stated:
(Emphasis added.)
As demonstrated by the foregoing findings of the trial court, it appears both that the proposed resolution of the litigation by settlement is fair and reasonable and that it is at least on par with the anticipated result (and the only result identified as possible) should the matter proceed to a trial on the merits. The settlement agreement is aimed at providing the highest level of benefits possible to all class members. Therefore, we are unable to conclude that the trial court erred in finding that the settlement agreement was reasonable as compared to the range of possible recovery in this action.
The objectors acknowledge that, of the 40,000 outstanding PACT contracts owned by 30,000 participants on the PACT program, there were at most only approximately 70 objectors.
The trial court further explained that the objections received collectively challenged the settlement on the following five grounds (with the third stated ground allegedly being the most common):
We note that other challenges regarding the settlement agreement included in the written objections that were expressed during the fairness hearing included the lack of input from the legislature; the allegedly disparate treatment in the settlement agreement of PACT contract holders based on purchase and/or anticipated matriculation dates, i.e., that the proposed settlement was not in the best interest of all class members; that the settlement agreement conflicted with and modified the alleged terms of the original PACT contracts in that the settlement agreement provided for payment of less than full tuition and mandatory fees; concerns regarding the proposed tuition-payment cap and the class members' liability for any shortfall; that the settlement agreement represented an unconstitutional taking of vested property rights with regard to class members holding paid-in-full contracts; that the settlement agreement left class members in a worse position than they were in as a result of the 2010 Act and the
The fact that less than 70 class members out of 30,000 objected to the settlement agreement weighs in favor of approval of the settlement agreement.
676 So.2d at 1273. Although this Court is cognizant of the frustration evidenced in each written objection, the relatively limited number of objections as well as the concerns raised therein do not undermine the trial court's approval of the settlement agreement against which they were lodged.
Citing the potential for abuse, the objectors also challenge the trial court's approval of the portion of the settlement agreement awarding class counsel nearly $5 million in attorney fees.
Recounting the evidence offered in support of each of the factors identified in Brown, the trial court ultimately concluded that the evidence justified the requested award, which it termed "fair and reasonable," and that the awarded fee was "significantly lower than a typical fee awarded in such a complex and difficult case."
In her challenge to the attorney-fee award, Perdue contends that the common-fund doctrine is inapplicable because no common fund was actually created in this case; instead, she asserts, the settlement agreement and the attorney-fee award drain the PACT program's funds. However, the common-fund doctrine does not apply only if a fund is "created"; instead, the "principle [is] designed to compensate an attorney whose services on behalf of his client operated to create, discover, increase, preserve, or protect a fund to which others may also have a claim." Henley & Clarke v. Blue Cross-Blue Shield of Alabama, 434 So.2d 274, 276 (Ala.Civ.App.1983) (emphasis added).
As to Perdue's challenge to the amount of the attorney-fee award, we note that an award of an attorney fee under the common-fund doctrine "is within the sound discretion of the trial court, and the ruling on that question will not be reversed on appeal" absent a showing that the trial court exceeded that discretion. Ex parte Horn, 718 So.2d 694, 702 (Ala.1998). Here, the trial court found that the settlement agreement resulted in a benefit to the plaintiffs of approximately $400 million and that the attorney fee awarded was approximately 1.25% of that amount. See supra note 13. Even so, an attorney-fee award "must bear a reasonable relationship to the time expended on the case" and generally cannot be based "solely on an arbitrary percentage of the value of property or funds at issue in the proceedings. Carver v. Foster, 928 So.2d 1017, 1027 (Ala.2005). In Carver, we reversed an attorney-fee award and remanded the case for the trial court "to award a reasonable fee commensurate with the time spent, as well as other factors, including the absence of periodic payments, any risk associated with the appropriate discharge of legal responsibilities in the undertaking, and any other applicable factors...." 928 So.2d at 1027. The objectors cite no authority, such as Carver, setting forth the proper standard for this Court to use in analyzing whether the amount of the attorney-fee award in this case was proper. The only attempt on appeal by any of the objectors to challenge the calculation of the attorney fee, other than Perdue's stating in a conclusory fashion that "no evidence justified it," is an argument by Perdue that 11 of the 3,600 computerized-research inquiries on the Westlaw database purportedly performed by class counsel do not involve research regarding this case. There is no challenge to the hours purportedly invested in the prosecution of this case by class counsel, no challenge regarding the litigation expenses, and no challenge to the trial court's resolution of the 13 Brown factors set forth above; further, no alternate method of calculation of the attorney fee is proposed by the objectors.
The objectors argue that the attorney-fee award is evidence that class counsel had a conflict of interest.
Perdue also contends that class counsel did not hire an expert to challenge or to verify the findings of the PACT board's actuarial expert. However, Perdue presents no argument as to why this additional expense was necessary in this case: there is no allegation by any party — including the plaintiffs, the objectors, and PACT board — that the actuarial projections by the PACT board's expert incorrectly stated the financial peril of the PACT program.
Perdue also contends that a potential conflict of interest arises when class-based relief is negotiated at the same time as class counsel's fee is negotiated and that such conflict is "plainly evident" in this case. As noted in Knight: "The Court pays attention to the amount of attorneys' fees awarded to class counsel because `the simultaneous negotiation of class relief and attorney's fees creates a potential for conflict.'" 469 F.Supp.2d at 1036 (quoting Manual for Complex Litigation § 30.42, at 239 (3d ed. 1995)). However, according to the appellees, class counsel's fee was negotiated only after class-based relief had already been resolved. Furthermore, at the hearing on the attorney-fee award, the deposition of the mediator in this case, retired Associate Justice Bernard Harwood, was entered into evidence "for the limited purposes to show that it was an arm length's negotiation." It stated:
Finally, Perdue argues that certain postjudgment actions by the PACT board and class counsel evidence a conflict of interest; she specifically notes that class counsel was paid the attorney-fee award while this case was pending on appeal. As explained in Perdue I:
Perdue I, 127 So.3d at 355-56 (footnote omitted). This Court noted that such disbursement of the attorney fees by the trial court "appear[ed] contrary" to the disbursement procedures set forth in the settlement agreement. 127 So.3d at 355 n. 13. Nevertheless, the premature disbursement was an action taken by the trial court, not the parties.
Perdue filed in this Court a motion to stay the execution of judgment. The plaintiffs and the PACT board opposed the motion on the grounds that no such motion had been filed first in the trial court, that no supersedeas bond had been posted, that delay in execution would disrupt the PACT contract-payment scheme embraced in the settlement agreement, and that a stay of the payment of the attorney fees and expenses was moot because the PACT board had already satisfied the judgment.
Perdue characterizes these actions as evidencing a conflict of interest because class counsel "was urging this Court to let them keep their fee." Perdue's brief, at 63. Chief Justice Moore, in his dissent, characterizes these actions as the PACT board and class counsel "work[ing] together to authorize immediate payment of the attorney fees in violation of the very settlement agreement they now ask this Court to approve." 127 So.3d at 411. However, as the above facts demonstrate, the PACT board had no role in the premature disbursement of the funds, and the subsequent joint acts of the PACT board and class counsel were attempts to simply defend their entire judgment on appeal.
The objectors next argue that the trial court erred in approving a settlement agreement pursuant to which the named plaintiffs are the only class members receiving monetary relief. With regard to this aspect of the settlement-agreement approval, the trial court's order contained the following findings:
Thus, although it is true that the class representatives were awarded actual monetary relief under the terms of the settlement agreement, it is also clear that the amount awarded was small and was aimed solely at compensating the representatives for the time and effort they expended on behalf of the class as a whole. The objectors cite nothing disputing the trial court's findings, as set out above, or otherwise evidencing that the trial court exceeded its discretion in this regard.
The objectors also contend that the trial court erred in approving a settlement that purportedly treats particular segments of the class differently from other segments based on the anticipated matriculation date of the beneficiary. Specifically, Perdue notes that "beneficiaries matriculating to college earlier will have a higher percentage of their tuition paid.... Those matriculating to college later will receive significantly less from the settlement when reduced to present value, i.e., $35,000 in 2010 dollars will be worth significantly more than $35,000 in 2025 dollars." Perdue's brief, at 67. The trial court's order approving the settlement agreement does not appear to contain a separate finding addressing this particular factor; however, the trial court did specifically conclude that "[t]he proposed settlement ... serve[s] to address the undisputed funding shortfall by establishing parameters for an equitable distribution of the limited assets of the [PACT program], along with the legislative appropriations of [the 2010 Act]." Further," [i]t is well settled that `"where the trial court does not make specific factual findings, this court will assume that the trial court made such findings as would support its judgment....""' Poh v. Poh, 64 So.3d 49, 59-60 (Ala.Civ.App.2010) (quoting Herboso v. Herboso, 881 So.2d 454, 456 (Ala.Civ.App. 2003), quoting in turn Berryhill v. Reeves, 705 So.2d 505, 507 (Ala.Civ.App.1997)).
The PACT board notes that, although all class members might not be treated equally in this regard, "the relative benefit of the settlement is distributed equitably among all of the class members," with
Although perhaps not truly equal, the settlement agreement — for all that appears — presents the best possible distribution of the fund's limited assets among the numerous claimants. As the trial court noted:
Thus, the evidence suggests that the proposed distribution provided for in the settlement agreement is the only means of ensuring that every class member receives at least some return on his or her investment.
Given the above, we conclude that the trial court did not exceed its discretion in holding that the settlement agreement met the applicable factors outlined in Adams, supra.
Motlow and Sears contend that the notice advising class members of the proposed settlement was deficient in numerous respects, including its alleged failure to inform class members of specific settlement terms, such as the compensation due class counsel and the method by which that compensation was calculated and/or negotiated; its failure to specify the 2010 rates at which tuition payments would, under the terms of the settlement agreement, be paid; the insufficient time allegedly allowed by the mailing date to review the settlement and respond before the scheduled hearing date; and the failure of the notice to inform class members of the total value and/or projected benefit of the settlement.
Following its preliminary approval of the settlement agreement, the trial court ordered that approved forms of notice be sent to all class members at the addresses appearing in the records of the PACT program and that notice also be posted on the Web site for the PACT program. The court-approved notice provided, in full, as follows:
In its final order of approval, the trial court specifically found that "the ... distribution of notice was in compliance with the requirements of the preliminary approval order, the Alabama Rules of Civil Procedure, and due process."
Rule 23(e), Ala. R. Civ. P., provides that notice of a compromise in class-action litigation "shall be given to all members of the class in such manner as the court directs." The objectors fail to include authority that establishes a minimum time frame for such notification or that requires that the notice contain the alleged omissions they identify. There is also no authority cited establishing that the designated beneficiaries, who were not included as named class members, were also entitled to notice. Further, they fail to establish that the notice violated Rule 23(e) or notions of due process.
Battle v. Liberty Nat'l Life Ins. Co., 770 F.Supp. 1499, 1522 (N.D.Ala.1991).
Finally, the objectors challenge the trial court's approval of the terms of the settlement agreement on the ground of overbreadth. In this regard, they argue both that the settlement agreement improperly provides for relief that was not prayed for in either the initial complaint or the resulting counterclaim and that the release contained in the settlement agreement is overbroad in the present context in that it releases the PACT board members from liability for potential tort claims beyond the scope of the present litigation and for which class members allegedly received no corresponding benefit.
The sole authority this Court can locate in the objectors' briefs challenging the purportedly overbroad nature of the relief provided, however, is aimed at the infringement of the contract modifications in light of the 2010 Act. The objectors cite nothing actually establishing that a mutually negotiated settlement agreement cannot include relief different than the relief prayed for in the complaint.
Moreover, the objectors fail to adequately allege the value and/or viability of the potential tort claims, which they contend were improperly released, in light of the fact that the PACT board members were sued in their official capacities and thus may be entitled to State immunity. See Burgoon v. Alabama State Dep't of Human Res., 835 So.2d 131, 132-33 (Ala.2002) (a suit for damages against State officials in their official capacities is, in essence, an action against the State itself and cannot proceed). Finally, although the objectors appear to contend that the release excuses the PACT board for any future mismanagement or corresponding breach of fiduciary duty, we note that, as set out in our original opinion in this matter, the release extended only to claims "`which were asserted or which could have been asserted as of the execution of [the] Settlement.'" Perdue I, 127 So.3d at 353. Therefore, we see no merit in this contention. Suffice it to say, although the release may be "broad," the objectors have provided no authority demonstrating that it is so overly broad that the trial court exceeded its discretion in approving it.
After thoroughly reviewing the trial court's findings of fact and conclusions of law, we cannot hold that the trial court exceeded its discretion in finding that the settlement agreement was fair, adequate, and reasonable.
In consideration of the foregoing, the trial court's July 27, 2011, order approving the settlement agreement and its September 17, 2012, order entered on remand finding the retroactive application of the 2012 Act to be constitutional are affirmed.
1101506 — AFFIRMED.
SHAW, J., and LYONS, Special Justice,
MOORE, C.J., concurs in part and dissents in part.
SHAW, Justice (concurring specially).
I concur in the main opinion. I write separately only to make several observations.
The PACT program was created with laudable intentions and apparently operated effectively for a number of years; however, as demonstrated by the facts set out in the main opinion, it now stands as a cautionary tale with respect to the creation of government programs operating in areas traditionally reserved to families or individuals. PACT contracts purchased before 1995, it is alleged in this case, were to fully pay the college tuition of the beneficiaries; after 1995, purchasers were purportedly informed that the tuition paid depended on the financial health of the program. In any event, the record indicates that the PACT program cannot fulfill its financial obligations; most regrettably, the families and individuals who have invested in, and relied on, this once promising program bear the full brunt of this forfeiture and are now faced with the difficulties of dealing with the financial shortfall of the PACT program.
In our original decision in this case, this Court, following the plain language of the legislature's 2010 enactments, which were intended to rescue the PACT program, held that the PACT board could not alter the contractual rights of the PACT contract holders. Perdue v. Green, [Ms. 1101337, March 16, 2012] 127 So.3d 343 (Ala.2012). Act No. 2012-198, Ala. Acts 2012 ("the 2012 Act"), however, has given broad powers to the PACT board to alter those rights. The judicial branch of state government does not have the authority to reject an act that is the duly enacted, constitutional exercise of the legislature's inherent power. Doing so would intrude upon the power of the legislature in violation of Ala. Const. 1901, Art. III, § 43, which forbids the judicial branch from exercising the power of the legislative branch, so that our government is one "of laws and not of men." All the Justices in this case agree that the 2012 Act is not unconstitutional based on its retroactive application. Our decision today follows the law provided by the legislature, which has the exclusive power to formulate the public policy of this State, subject to the constitution. Boles v. Parris, 952 So.2d 364, 367 (Ala.2006) ("[T]he legislature, and not this Court, has the exclusive domain to formulate public policy in Alabama.").
To me, it is an understatement to say that the amount of the attorney fees awarded in this case is unsettling, given the source of the funds from which the fee must be paid and the intended purpose of the PACT program. However, whether I would have reached a different result with respect to this issue had I been the trial judge in this case is irrelevant for purposes
LYONS, Special Justice (concurring specially).
I concur fully in the main opinion. I write specially to endorse that aspect of Justice Shaw's special concurrence in which he observes that "it is an understatement to say that the amount of the attorney fees awarded in this case is unsettling," 127 So.3d at 407, yet notes that he is constrained by the limitations imposed on an appellate court by the adversarial system, thereby preventing him from going beyond the materials before the court in order to reach a more palatable result.
If the award of an attorney fee exceeded a trial court's subject-matter jurisdiction, such as where payment of the fee would be inconsistent with the doctrine of sovereign immunity, this Court could raise the issue on its own motion, notwithstanding that the issue had not been asserted by any of the parties to the appeal. Aland v. Graham, 287 Ala. 226, 229, 250 So.2d 677, 678 (1971). However, the PACT trust funds are clearly not State funds; therefore, no issue of sovereign immunity is presented. See § 16-33C-6(b), Ala.Code 1975 ("The amounts on deposit in the PACT Trust Fund shall not constitute property of the state, and the state may have no claim or interest in them.").
I, too, am "holding my nose" as I join in upholding the attorney fee, but I do so for the reasons set forth in the main opinion and as amplified by Justice Shaw in his special concurrence. Justice Scalia recently dealt with the circumstance of a judge finding it necessary to uphold a result he or she dislikes. He said: "The judge who always likes the results he reaches is a bad judge."
MOORE, Chief Justice (concurring in part and dissenting in part).
In Perdue v. Green, [Ms. 1101337, March 16, 2012] 127 So.3d 343 (Ala.2012) ("Perdue I"), this Court held that, "to the extent the PACT Board acted to change its existing rules, procedures, or policies to accept modification of the PACT contracts,... it violated the contractual relationship with the PACT contract holders by exceeding the express limitation set out in § 16-33C-19[, Ala.Code 1975.]" 127 So.3d at 357. Therefore, the settlement approved by the trial court was "clearly contrary
While the PACT board's application for rehearing in Perdue I was pending in this Court, the legislature passed Act No. 2012-198, Ala. Acts 2012 ("the 2012 Act"), repealing § 16-33C-19, Ala.Code 1975. I agree with Part I of the majority opinion that the retroactive application of the 2012 Act is not unconstitutional and does not impair the contractual rights or obligations of the PACT contract holders. I dissent, however, from Part II of the majority opinion regarding the award of $4,950,000 in attorney fees because such a fee is not justified in this case under the facts presented and is clearly excessive. I am also persuaded that the settlement agreement in this case should not have been approved because there exists an apparent conflict of interest between class counsel and the members of the class itself.
When considering the fairness, adequacy, and reasonableness of a proposed settlement agreement in a class action, a court must pay special "attention to the amount of attorneys' fees awarded to class counsel because `the simultaneous negotiation of class relief and attorney's fees creates a potential for conflict.'" Knight v. Alabama, 469 F.Supp.2d 1016, 1036 (N.D.Ala.2006) (quoting Manual for Complex Litigation § 30.42, at 239 (3d ed. 1995)). Because of this potential for conflict between class members and their attorneys in class-action matters, a court reviewing an award of attorney fees in a class-action settlement must be careful to scrutinize the reasonableness of the attorney fees. As the federal district court explained in Bowen v. SouthTrust Bank of Alabama, 760 F.Supp. 889, 892 (M.D.Ala. 1991):
Accordingly, this Court should more carefully examine the trial court's award of class counsel's attorney fees for reasonableness as well as for the inherent conflict of interest with class members that existed when exorbitant fees were agreed to by the PACT board during settlement negotiations. With regard to the issue of the attorney fees, I cite Carol M. Perdue's brief and her brief on return to remand throughout this dissent. Those briefs speak for themselves regarding whether the appellants challenge class counsel's fees on appeal. The Court does not need to search the record to make the appellants' case for them; Perdue makes her case by citing to the record in her briefs to this Court. See Perdue's brief, at 42-66; Perdue's brief on return to remand, at 54-58.
As Perdue notes in her brief on original submission, a fact that weighs against such an excessive attorney-fee award is that this case was settled in the early pretrial stages of the proceedings, only six depositions having been taken by the PACT board and at most two depositions by class counsel. Perdue's brief, at 51-53. Furthermore, as Perdue argues, class counsel never disclosed an expert, and there is no indication that an expert was even consulted. Perdue's brief at 43, 51-52, 59, 64-65. Moreover, nothing in the record shows that class counsel deposed members of the PACT board or the actuary upon whose testimony the settlement amount was based. Perdue alleges as much in her brief. Perdue's brief, at 43, 51-52, 58-59,
In light of the foregoing, the time and labor required of class counsel to this point in this case do not appear to warrant an award of $4,950,000 in attorney fees out of the already strained PACT trust fund. See Perdue's brief, at 43, 46, 59-63. See also Rule 1.5, Ala. R. Prof. Conduct (time and labor expended by an attorney are to be considered in determining whether a fee is excessive).
Perhaps most problematic is that the interactions of class counsel and the PACT board during settlement negotiations leave the impression that those parties lacked an adversarial relationship. Perdue discusses this alleged conflict at length in her briefs to this Court. Perdue's brief, at 42-44, 59-66; Perdue's brief on return to remand, at 53-58. As one objector noted: "`I'm not too happy with what I've seen in the court here with opposing counsel. Seems like they are holding hands more than they are representing two different sides.'" Perdue's brief, at 42.
Class counsel distributed to the members of the class a "Settlement Description" and a "Questions and Answers" form, both of which repeated the financial conclusions of the PACT board and the actuary retained by the PACT board, even though class counsel had never retained their own expert to challenge or verify those conclusions. Perdue's brief, at 43, 51-52, 56-59, 64-65; Perdue's brief on return to remand, at 55-56. It appears that class counsel took at face value all the claims of the PACT board and its actuary regarding the financial condition of the trust fund and used those claims to encourage the class members to reach a settlement. See Perdue's brief, at 43, 46, 51-52, 58-59, 64-65; Perdue's brief on return to remand, at 54-56. Moreover, although class counsel had never deposed an expert to refute the findings of the actuary hired by the PACT board, the "Settlement Description" and "Questions and Answers" form distributed by class counsel warned the class in strong language about the consequences of not settling the case:
Perdue's brief, at 56-57. Such inducements to settle seem particularly suspect when class counsel stood to benefit $4,950,000 should the class members accept the settlement. Perdue's brief, at 42-44, 46, 52-53, 55-59, 60-61, 65; Perdue's brief on return to remand, at 56-58. And class members have every reason to suspect a lack of an adversarial relationship when class counsel and the PACT board agreed to full payment of attorney fees prior to this Court's ruling on the appeal, despite the fact that the settlement agreement restricted such payments until after the appeal process had been completed. Perdue's brief, at 43, 61-63; Perdue's brief on return to remand, at 56-58.
After the objectors filed a "Motion to Stay of Execution of Judgment and Expedited Treatment" with this Court, class counsel and the PACT board submitted a joint response in opposition to the motion, filings noted in Perdue's brief, at 43, 62-63, and in Perdue's brief on return to remand, at 56. Both class counsel and the PACT board worked together to authorize immediate payment of the attorney fees in violation of the very settlement agreement they now ask this Court to approve. I must respectfully disagree with the majority opinion that "nothing indicat[es] that the trial court exceeded its discretion in failing to find that a conflict of interest affected the attorney-fee award in this case." 127 So.3d at 402.
In conclusion, although I find no fault in the enactment of the 2012 Act and the legislature's attempt to address potential problems with the PACT program, I am compelled to disapprove a settlement agreement that both class counsel and the PACT board have already violated, and I respectfully dissent from the majority opinion both as to the attorney fees awarded and as to the approval of the settlement agreement entered in this class action.
(Emphasis added.) The disbursement of the attorney fees appears contrary to this provision.
"Contractual relationship" must instead refer to the terms and obligations of the contract between the parties; in other words, "contractual relationship" must consist of the terms of the contractual relationship "existing" and in place at the time Act No. 2010-725 was passed, because only the terms of the contract — and not the relationship of the parties — were susceptible to a violation of their "existing" state by the powers granted the PACT board in § 16-33C-19.
4 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 11:48 (4th ed.2002).
Allapattah Serv., Inc. v. Exxon Corp., (No. 91-0986-CIV, Apr. 7, 2006) (S.D.Fla.2006) (not reported in F.Supp.2d).
I agree with the district court that Devlin intended that an objector may challenge on appeal only those aspects of a settlement that adversely affect the objector personally. To the extent that the main opinion relies on any contradictory federal circuit court cases predating Devlin, 127 So.3d at 361, I do not find those cases persuasive.
Section 16-33C-15(a) provides:
Section 16-33C-16(a) provides:
Motlow and Sears contend that the notice did not adequately and timely inform class members of the terms of the settlement agreement. They clearly read and understood the settlement agreement and filed written objections within the time parameters established by the trial court; therefore, they cannot assert any objections based on lack of sufficient notice. Likewise, they do not have standing to contest any alleged failure to send copies of the notice to the beneficiaries of the PACT contracts because they received notice and have appealed solely as PACT contract holders.
Although we note that the appellate record contains no transcript of a class-certification hearing, given the ambiguity of the foregoing and in light of the plain language of the trial court's order, we assume that the trial court entered that order, as indicated, following a hearing on that issue. Regardless, however, we note that we have previously declined to hold "that a pre-certification evidentiary hearing is required in every case — or even in most cases." Ex parte First Nat'l Bank of Jasper, 717 So.2d 342, 346 (Ala.1997). See also § 6-5-641(d), Ala.Code 1975 (providing that the trial court "shall" hold an evidentiary hearing "on motion of any party"). Further, because we uphold the certification of a non-opt-out class under Rule 23(b)(1) and (b)(2), Ala. R. Civ. P., see Part II.A.2, infra, any procedural error in this regard is harmless.
