In re Blue Cross and Blue Shield of Montana, Inc.

In re Blue Cross and Blue Shield of Montana, Inc., 2016 MT 121 (May 24, 2016) (Cotter, J.) (5-0, aff’d)

Issue: (1) Whether objector Laura Fortune waived her right on appeal to object to the settlement; (2) whether objector Kevin Budd has standing to object to the settlement agreement; (3) whether the district court abused its discretion in certifying this matter as a class action; (4) whether the district court abused its discretion in approving the settlement agreement; and (5) whether the district court erred by allowing individual settlements.

Short Answer: (1) Yes; (2) no; (3) no; (4) no; and (5) no.


Facts: Claimants assert that while they were insured by Blue Cross Blue Shield (now Caring for Montanans, Inc.) or Montana Comprehensive Health Association (MCHA), they submitted claims that the insurers denied based on policy exclusions that were subsequently disapproved by the Montana Commissioner of Insurance. The insureds sought the previously denied benefits, and the district court certified a class of claimants for settlement purposes and appointed class counsel. The parties negotiated a settlement, which the district court approved after holding a fairness hearing. Several class members objected to the settlement and appealed the district court’s denial of their motion to conduct discovery. This Court held that discovery was necessary to evaluate the fairness of the settlement, and remanded for discovery and a second fairness hearing. Pallister, 2012 MT 198.

Procedural Posture & Holding: On remand the district court held a second fairness hearing. The court issued findings, conclusions and an order in which it found the agreement to be fair, reasonable, and adequate, and approved the settlement. The objectors appeal, again challenging the settlement agreement as well as the certification of the class and the allowance of individual settlements.

Reasoning: (1) The district court initially held Fortune lacked standing because her excluded claims had been paid in full by BCBSMT. Pallister, ¶ 42. The insurers now contend that Fortune lacks standing to challenge the settlement agreement because she did not participate in the second fairness hearing and did not avail herself of the opportunity provided by this Court in Pallister to present evidence to the district court to establish her standing. Although couched as a standing argument, the insurers’ argument is in effect a waiver argument and the Court addresses it as such.

The Court does not reach the issue of whether a class member who files written objections to a settlement but does not appear at the fairness hearing may appeal the settlement’s approval. Instead, the Court holds that Fortune has waived her right on appeal to reassert her objections to the settlement because she did not avail herself of the opportunity to supplement the record on remand and obtain a different ruling on her standing.

(2) Insurers argue that objector Budd lacks standing because he is not a class member, and objectors do not respond. The district court initially held that Budd lacks standing to object, and this Court did not reverse that finding on appeal. Pallister I, ¶ 82 (Morris, J., dissenting). The Court declines to disturb that finding now.

(3) Objectors contend the district court certified the class in violation of typicality and adequacy of representation. Although some class members were part of a plan governed by ERISA and some class members were not, the remedy is the same as the remedy for all: recovery of the benefits denied. The district court did not err in concluding the class satisfied the typicality requirement. Additionally, the Court agrees that the interests of the class representatives are not antagonistic to the interests of the class, affirming the finding of adequacy of representation, and concluding the district court did not abuse its discretion in certifying the class.

(4) Objectors contend the district court abused its discretion in approving the settlement by (a) approving the settlement without sufficient information to determine its fairness, (b) identifying class members, and (c) failing to recognize collusion between the insurers and class counsel, which resulted in an unfair settlement for objectors.

Regarding (a), the Court cites Pallister I for the proposition that objectors were given leave to conduct discovery regarding fairness. Objectors did not discover information suggesting unfairness, and instead complain class counsel did not discover it for them. The district court found the information provided by all parties sufficient to determine fairness, and the Court will not disturb that finding.

Regarding (b), objectors contend that Caring for Montanans (formerly BCBSMT) should not be allowed to identify class members through its own database, as that creates a conflict of interest. However, objectors offer no evidence that CFM’s method is not the best method for identifying class members, nor have they argued or proven that a different search would identify class members not identified by CFM’s searches. The district court found the database search adequate, especially in light of the fact that the settlement allows known and unknown class members to submit claims. The Court holds this was not an abuse of discretion.

Regarding (c), objectors contend the flat fee of $600,000 paid to class counsel is evidence of collusion. Reviewing the record, the district court found no evidence of collusion, and this Court agrees.

(5) The district court granted leave to class members to settle their claims individually, and as of July 6, 2015, 745 individual claims had been so settled. Rule 23(e) does not bar non-approved settlements with individual members. The district court did not err in allowing individual settlements.