Madison - St. Clair Record

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Fifth District: Illinois judges can approve national settlements of class actions

By The Madison County Record | Feb 16, 2016

MOUNT VERNON – Illinois judges can approve national settlements of class actions without any connection between the state and plaintiffs in other states, Fifth District appellate judges ruled on Feb. 9.

The justices affirmed St. Clair County Circuit Judge Vincent Lopinot, who approved settlement of a claim that Liberty Mutual Insurance underpaid health providers.

They denied an objection from provider David Kerbs of Washington State, who argued that he could have achieved a better result in a court there.

They rejected his view that an Illinois Supreme Court decision from 2005, Avery v. State Farm, prohibited certification of a national class.

“Avery did not stand for the proposition that an Illinois class representative could not maintain a nationwide settlement class where the class included absent plaintiffs,” wrote Justice Thomas Welch.

“In Avery, our supreme court concluded that the alleged breach of contract claims were unsuitable for class certification in light of the number of contracts implicated by the class claims and the material differences in the policy language of these contracts.”

Welch wrote that the court found it could not uniformly interpret automobile insurance contracts from 48 states.

“There was nothing in Avery that suggested that the certification of a settlement class must be subjected to the same rigorous scrutiny that a court applies when determining whether to certify a litigation class,” he wrote.

“Illinois law is clear that a trial court must evaluate a settlement as a whole, as it is the product of extensive and complex negotiations.

“Thus, a reviewing court cannot rewrite the parties’ settlement to eliminate unfair provisions; it can only approve or disapprove of the entire settlement.

“The essence of a settlement is compromise and the court cannot reject a

settlement solely because it does not provide a complete victory to plaintiffs.”

Justices Gene Schwarm and Randy Moore concurred.

Class actions over Liberty Mutual’s payments to providers have run since 2003.

In 2008, Liberty Mutual took over Safeco Insurance and inherited similar class actions against it.

In 2014, Robert Schmieder of St. Louis sued Liberty Mutual and Safeco, on behalf of Lebanon Chiropractic Clinic, in St. Clair County circuit court.

The parties soon agreed to settle for $2.5 million with providers receiving half of past reductions upon submission of a claim.

The amount included $1.2 million for attorney’s fees and expenses.

Lopinot granted preliminary approval in October 2014.

A settlement administrator sent notice to 2,953,505 potential class members.

About 800 providers asked for exclusion from the class.

Kerbs filed an objection last January, asking Lopinot to deny approval or exclude Washington providers.

He alleged a conflict of interest between the settlement and one he achieved against Safeco in Washington.

He argued that Lopinot lacked jurisdiction.

He reopened his case in Washington and moved for an injunction against the St. Clair County settlement.

Lopinot signed an order stating that the settlement was intentionally drafted to ensure there was no conflict with the relief ordered in Washington.

He wrote that he wouldn’t sign a final order lacking specific language that the settlement would not conflict with the Krebs settlement.

He held a fairness hearing last February, and Krebs did not attend.

Lopinot concluded that the settlement resulted from good faith negotiations at arm’s length.

Kerbs appealed and submitted as supplemental authority a transcript of a hearing in Washington, in a separate case against Safeco.

Fifth District judges quoted portions of it on jurisdiction, and then rejected it.

Welch wrote that it wasn’t binding or persuasive with regard to jurisdiction, and that the court didn’t have the benefit of full briefing by all parties.

He wrote that the class notice afforded due process to potential class members.

He wrote that a judge deciding certification of a settlement class should not apply the same criteria to judge legal and factual as in a trial on the merits.

He wrote that turning a settlement hearing into a trial would defeat the purposes of reaching a compromise.

“Accordingly, a class that is suitable for settlement purposes might not be suitable for litigation purposes because the settlement might eliminate all of the contested issues that the court would have to resolve if the case went to trial,” Welch wrote.

“The standard for class settlement approval is not whether the parties could have done better. The standard is whether the compromise was fair, reasonable, and adequate.”

Chet Kelly of Belleville represented Kerbs.

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