High Court to Review Rights in Class Action Lawsuit Terms

Article excerpt

WASHINGTON (Bloomberg) -- The Supreme Court will try to untangle complicated legal rules about when individuals have the right to refuse the terms of a negotiated class-action lawsuit settlement.

The justices have agreed to consider an appeal by some former policyholders who were included, over their objections, in a settlement of an Alabama fraud lawsuit against Torchmark Corp.'s Liberty National Life Insurance Co.

The high court case could have a substantial impact on a company's ability to use a single class-action case to quickly resolve large numbers of legal claims by thousands or even millions of people with similar complaints. In the Liberty National case, some former cancer insurance policyholders argue that they were wrongly forced to accept an inadequate settlement, claiming that class-action lawyers negotiated a sweetheart deal with the company. The Alabama Supreme Court, however, upheld the settlement, which prohibits the policyholders from filing their own future lawsuits against the company. The class-action suit against Liberty National charged that the company fraudulently persuaded cancer-insurance policyholders to change their policies by promising new benefits, when the changes actually cut some important benefits and raised policy prices. The policyholders asked the high court to clarify rules about when people must be given a right to "opt-out" of a negotiated class- action agreement so they can pursue their own individual lawsuits. They argue that, by forcing them to accept an agreement that prevents future legal action, the courts deprived them of their constitutional right to a jury trial in cases for monetary damages. Liberty National and the class-action lawyers, however, argue that the agreement primarily involves only court-enforced changes in the insurance company's practices. Previous court decisions have held that judges don't have to offer an "opt-out" provision in class- action cases where the stakes involve court orders and not money damages. "We think the Alabama Supreme Court was correct. …