Direct Ins. Co. v. Lane

DIRECT GENERAL INSURANCE COMPANY, MSI
Insurance Company, Direct General Insurance
Agency, Inc., A. C. Payne, and John Does 1-
275 v. Jolanda LANE

96-1554                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                 Opinion delivered May 12, 1997


1.   Civil procedure -- class actions -- requirements for
     certification. -- In determining whether to certify a class
     action, a trial court must consider the factors set forth in
     Ark. R. Civ. P. 23, which provides that a member of a class
     may sue or be sued as representative parties on behalf of all
     only if the requirements of numerosity, commonality,
     typicality, and fair and adequate representation are met; if,
     after these elements are met, the court finds that the
     questions of law or fact common to the members of the class
     predominate over any questions affecting only individual
     members and that a class action is superior to other available
     methods for the fair and efficient adjudication of the
     controversy, a class may be certified.

2.   Civil procedure -- certification for class action -- trial
     judge has broad discretion. -- The trial judge has broad
     discretion as to whether or not a class should be certified.

3.   Civil procedure -- class actions -- typicality requirement
     discussed. -- A representative's claim is typical of the class
     members' claims under Ark R. Civ. P. 23(a)(3) if the
     representative's claim arises from the same wrong allegedly
     committed against the class; a plaintiff's claim is typical if
     it arises from the same event or practice or course of conduct
     that gives rise to the claims of other class members and if
     his or her claims are based on the same legal theory; when it
     is alleged that the same unlawful conduct was directed at or
     affected both the named plaintiff and the class sought to be
     represented, the typicality requirement is usually met
     irrespective of varying fact patterns which underlie
     individual claims.

4.   Civil procedure -- class actions - typicality requirement met
     even though damages suffered vary among class members. -- The
     fact that the injuries and damages suffered as a result of the
     alleged wrongdoing may vary among class members does not make
     an action fail the typicality requirement; the typicality
     requirement may be satisfied even where the class
     representative and the class members stand to recover
     different amounts of damages; even though some class members
     may collect more than others, the claims are still typical
     because they arise from the same alleged wrong.


5.   Civil procedure -- class actions -- trial court did not abuse
     its discretion in determining that typicality requirement had
     been met. -- The trial court did not abuse its discretion in
     this case by concluding that the typicality prerequisite was
     satisfied where appellee's claims and those of the class
     members arose from precisely the same wrong allegedly
     committed by appellant; the allegations were that appellant
     (1) levied a usurious interest rate through the premium-
     finance agreements in violation of the Arkansas Constitution,
     and (2) made certain misrepresentations in the agreements
     concerning the interest rate and other charges and fees in
     violation of federal statutory and regulatory provisions;
     where appellee's claims and those of the class members all
     arose from this alleged misconduct, the typicality requirement
     was satisfied.

6.   Motions -- summary judgment -- trial court's order denying
     neither reviewable or appealable. -- A trial court's order
     denying a motion for summary judgment is neither reviewable
     nor appealable. 

7.   Civil procedure -- class actions -- supreme court declined to
     decertify subclasses -- factual dispute existed as to whether
     appellee suffered damages. -- The supreme court declined to
     decertify the two subclasses on the basis of appellant's
     position that appellee has not suffered damages where, in
     ruling against appellant on its motion for summary judgment,
     the trial court determined that there was a genuine factual
     dispute as to whether the $15 fee paid by appellee was charged
     by appellant in violation of the usury laws or the relevant
     federal provisions; the finding of the trial court would have
     to be entirely disregarded in order to reverse the trial
     court's certification order on theses grounds; the supreme
     court was not in a position to conclude that appellee had not
     suffered damages and was therefore presenting claims that were
     atypical of the class members' claims.

8.   Civil procedure -- certification of class action -- trial
     court's focus should be on whether requirements of Rule 23 are
     met -- merits of case are not issue. -- The trial court's
     proper focus in deciding whether to certify a class is not
     whether the plaintiff or plaintiffs have stated a cause of
     action or will prevail on the merits, but rather whether the
     requirements of Rule 23 are met; it is totally immaterial
     whether the petition will succeed on the merits or even if it
     states a cause of action; an order denying or granting class
     certification is separate from the merits of the case. 

9.   Civil procedure -- class action certification -- "adequacy of
     representation" prerequisite described. -- The elements of the
     "adequacy of representation" prerequisite are: (1) the
     representative counsel must be qualified, experienced and
     generally able to conduct the litigation; (2) that there be no
     evidence of collusion or conflicting interest between the
     representative and the class; and (3) the representative must
     display some minimal level of interest in the action,
     familiarity with the practices challenged, and ability to
     assist in decision making as to the conduct of the litigation;
     the "adequacy of representation" element is satisfied if the
     representative displays a minimal level of interest in the
     action, familiarity with the challenged practices, and ability
     to assist in litigation decisions.

10.  Civil procedure -- certification of class actions -- trial
     court acted within its discretion in concluding that appellee
     will adequately and fairly represent interests of two
     subclasses. -- Where, at the certification hearing, appellee
     testified that she understood the responsibility she was
     undertaking by agreeing to become the class representative,
     that she had reviewed the relevant documents and had decided
     to become a class representative out of a desire to prevent
     appellant from charging other people excessive interest and
     fees, and that she hoped to recover any amount that was found
     to be an overcharge, and the record demonstrated that the law
     firm that represented appellee had extensive experience in
     conducting class-action litigation, the trial court clearly
     acted within its discretion in concluding that appellee will
     adequately and fairly represent the interests of the two
     subclasses.

11.  Civil procedure -- class actions -- appellant's merit-based
     argument inappropriate for contest to class certification --
     appellee's interest in action clearly sufficient to satisfy
     Rule 23 (a)(4). -- Appellant's contention that appellee would
     be unable to protect the interests of the subclasses because
     she had suffered no damage herself and therefore did not have
     a sufficient interest in the case was without merit; the
     supreme court could not say that appellee had not suffered
     damages on account of the alleged misconduct of appellant, and
     it was inappropriate for appellant to attempt to contest class
     certification by raising merits-based arguments; appellee
     demonstrated that she was committed to pursuing the case
     against appellant, and her interest in the action was clearly
     sufficient to satisfy the requirements of Rule 23(a)(4).


     Appeal from Pulaski  Circuit Court; Morris W. Thompson, Judge;
affirmed.
     Mitchell, Williams, Selig, Gates & Woodyard PLLC, by:  Byron
Freeland, for appellants.
     Allen Law Firm, by:  H. William Allen, for appellee.

     David Newbern, Justice.
     Direct Insurance Company and the other appellants have brought
this interlocutory appeal from the Trial Court's order certifying
a class action.  See Ark. R. App. P.--Civ. 2(a)(9).  We will refer
to the appellants collectively as "Direct Insurance."  Jolanda
Lane, the appellee, brought an action against Direct Insurance on
her own behalf and proposed to represent two subclasses of
individuals who entered into agreements with Direct Insurance for
the purpose of financing the premiums for their automobile
liability insurance policies.  Ms. Lane alleged that she and other
individuals were charged a usurious interest rate in violation of
Ark. Const. art. 19,  13, and that certain aspects of the premium-
finance agreements violated the federal Truth in Lending Act
("TILA"), 15 U.S.C.  1601-1693 (1994), and the regulations
promulgated thereunder, including Regulation Z, 12 C.F.R.  226.1. 
Ms. Lane sought damages under these federal provisions and under
Arkansas usury law.
     The Trial Court held a hearing on the certification motion,
which was resisted by Direct Insurance.  Pursuant to Ark. R. Civ.
P. 23, the Trial Court granted Ms. Lane's motion and permitted her
to act as the representative of one subclass of individuals
asserting usury claims and a second subclass asserting TILA claims. 
On appeal, Direct Insurance contends that the Trial Court's
certification order should be reversed because Ms. Lane's claim is
not typical of the claims of the other class members and because
Ms. Lane will not fairly and adequately protect the interests of
the two subclasses.  We hold that the Trial Court did not abuse its
discretion in certifying the class action and affirm.
     In determining whether to certify a class action, a trial
court must consider the factors set forth in Ark. R. Civ. P. 23,
which provides in part as follows:

          (a) Prerequisites to Class Action.  One or more
     members of a class may sue or be sued as representative
     parties on behalf of all only if (1) the class is so
     numerous that joinder of all members is impracticable,
     (2) there are questions of law or fact common to the
     class, (3) the claims or defenses of the representative
     parties are typical of the claims or defenses of the
     class, and (4) the representative parties will fairly and
     adequately protect the interests of the class.
          (b) Class Actions Maintainable.  An action may be
     maintained as a class action if the prerequisites of
     subdivision (a) are satisfied, and the court finds that
     the questions of law or fact common to the members of the
     class predominate over any questions affecting only
     individual members, and that a class action is superior
     to other available methods for the fair and efficient
     adjudication of the controversy. ....

     Direct Insurance does not argue that the "numerosity" and
"commonality" elements under subdivision (a) of the rule, or the
"predominance" and "superiority" elements under subdivision (b) of
the rule, are not satisfied.  Rather, Direct Insurance asserts only
that the Trial Court erred in finding that the "typicality" and
"adequacy of representation" elements under Rule 23(a) were
satisfied.  Given the "longstanding rule that the trial judge has
broad discretion in matters of class certification," Union Nat'l
Bank v. Barnhart, 308 Ark. 190, 197, 823 S.W.2d 878, 881 (1992),
we conclude that the Trial Court's order in this case must be
affirmed.  See also First Nat'l Bank v. Mercantile Bank, 304 Ark.
196, 200, 801 S.W.2d 38, 40 (1990)("We have consistently recognized
that the trial judge has broad discretion as to whether or not a
class should be certified.").

                         1.  Typicality
     We explained in Summons v. Missouri Pac. R. R., 306 Ark. 116,
813 S.W.2d 240 (1991), that a representative's claim is typical of
the class members' claims under Rule 23(a)(3) if the
representative's claim arises from the same wrong allegedly
committed against the class.  Quoting a passage from Professor
Newberg's treatise on class actions, we said:

     Typicality determines whether a sufficient relationship
     exists between the injury to the named plaintiff and the
     conduct affecting the class, so that the court may
     properly attribute a collective nature to the challenged
     conduct.  In other words, when such a relationship is
     shown, a plaintiff's injury arises from or is directly
     related to a wrong to a class, and that wrong includes
     the wrong to the plaintiff.  Thus, a plaintiff's claim is
     typical if it arises from the same event or practice or
     course of conduct that gives rise to the claims of other
     class members, and if his or her claims are based on the
     same legal theory.  When it is alleged that the same
     unlawful conduct was directed at or affected both the
     named plaintiff and the class sought to be represented,
     the typicality requirement is usually met irrespective of
     varying fact patterns which underlie individual claims.

Summons v. Missouri Pac. R. R., 306 Ark. at 121, 813 S.W.2d  at 243,
quoting Herbert B. Newberg, Newberg on Class Actions,  3.13, at pp. 166-67
(2d ed. 1985).
     In the Summons case, we rejected the argument that the
representatives' claims were not typical of the class members'
claims simply because the representatives' allegations as to their
injuries and damages differed from the injuries and damages
allegedly suffered by the class members.  "Although the Summonses'
allegations as to their injuries and damages are different from
those they describe for other members of the class," we said,
"their claims are typical in the sense that they arise from the
alleged wrong to the class which includes the wrong allegedly done
to them, and that is sufficient."  Summons v. Missouri Pac. R. R.,
306 Ark. at 121, 813 S.W.2d  at 243.
     We followed this reasoning in Cheqnet Systems, Inc. v.
Montgomery, 322 Ark. 742, 911 S.W.2d 956 (1995).  In that case, Ms.
Montgomery filed a class-action complaint alleging that Cheqnet
violated the federal Fair Debt Collections Practices Act by
charging a fee for returned checks in excess of the amount set by
the Act.  Cheqnet objected to certification and contended that Ms.
Montgomery's claim was atypical of the other members' claims
because she had never paid the alleged overcharge.
     We affirmed the Trial Court's decision to certify.  We
rejected Cheqnet's argument concerning the typicality requirement
because we found that

     Montgomery's injuries and damages arise from the same
     wrong allegedly committed against the class--the
     collection or attempt to collect for dishonored checks in
     violation of Arkansas statutory law.  The fact that the
     injuries and damages suffered as a result of the alleged
     wrongdoing may vary among class members does not make
     this action fail the typicality requirement, and the fact
     that Montgomery did not actually pay the overcharge does
     not keep her claim from being typical of the class since
     the class is defined as those persons from whom appellant
     collected or attempted to collect a $25 service fee per
     returned check.  Cheqnet's argument that Montgomery was
     not damaged involves a fact question that is common to
     all class members from whom appellant attempted
     unsuccessfully to collect $25.

Cheqnet Systems, Inc. v. Montgomery, 322 Ark. at 749-50, 911 S.W.2d 
at 959 (emphasis added).
     Finally, in Farm Bureau Mutual Ins. Co. v. Farm Bureau Policy
Holders, 323 Ark. 706, 918 S.W.2d 129 (1996), we again stressed
that the typicality requirement may be satisfied even where the
class representative and the class members stand to recover
different amounts of damages.  In that case, the plaintiff alleged
that Farm Bureau had been wrongfully collecting annual membership
dues from its policy holders.  We affirmed the Trial Court's ruling
on the typicality question because we found that "the allegation is
that dues were wrongfully collected by the companies.  Therefore,
even though some class members may collect more than others, the
claims are still typical because they arise from the same alleged
wrong."  Farm Bureau Mutual Ins. Co. v. Farm Bureau Policy Holders,
323 Ark. at 711, 918 S.W.2d  at 131.
     While we do not necessarily agree with the assessment that
Rule 23(a)(3) imposes a "liberal typicality standard," Kenneth S.
Gould, New Wine in an Old Bottle--Arkansas's Liberalized Class
Action Procedure--A Boon to the Consumer Class Action?, 17 U.A.L.R.
L.J. 1, 25 (1994)(emphasis added), we hold that the Trial Court did
not abuse its discretion in this case by concluding that the
typicality prerequisite was satisfied.  Ms. Lane's claims and those
of the class members arise from precisely the same wrong allegedly
committed by Direct Insurance.  Here, the allegations are that
Direct Insurance (1) levied a usurious interest rate through the
premium-finance agreements in violation of the Arkansas
Constitution, and (2) made certain misrepresentations in the
agreements concerning the interest rate and other charges and fees
in violation of federal statutory and regulatory provisions. 
Because Ms. Lane's claims and those of the class members all arise
from this alleged misconduct, the typicality requirement is
satisfied.
     Direct Insurance maintains on appeal that Ms. Lane's claims
are not typical of the other class members' claims because, in its
view, Ms. Lane has not paid any interest and therefore has suffered
no damage.  Direct Insurance presented this very argument to the
Trial Court in seeking summary judgment.  The Trial Court denied
Direct Insurance's motion for summary judgment because it believed
there was a factual dispute as to whether Ms. Lane had suffered
damages.  The Trial Court pointed out that Ms. Lane had paid a $15
"policy fee" as part of a $130.75 down payment on her insurance
policy.  The Trial Court concluded that reasonable minds could
differ as to whether the $15 fee constituted interest charged in
violation of usury law or the federal provisions mention above.
     Generally speaking, a trial court's order denying a motion for
summary judgment is neither reviewable nor appealable.  Nucor
Holding Corp. v. Rinkines, 326 Ark. 217, 931 S.W.2d 426 (1996);
Amalgamated Clothing v. Earle Indus., Inc., 318 Ark. 524, 886 S.W.2d 594 (1994).  Direct Insurance acknowledges this well-settled
principle, and it maintains that it is not seeking review of the
Trial Court's denial of summary judgment.  Nonetheless, Direct
Insurance asks us to find that Ms. Lane has not suffered any
damages and that her claim, therefore, is not typical of the class
members' claims under Rule 23(a)(3).
     We decline to decertify the two subclasses on the basis of
Direct Insurance's position that Ms. Lane has not suffered damages. 
In ruling against Direct Insurance on its motion for summary
judgment, the Trial Court determined that there is a genuine
factual dispute as to whether the $15 fee paid by Ms. Lane was
charged by Direct Insurance in violation of the usury laws or the
relevant federal provisions.  Although we have not been asked to
review or reverse this finding of the Trial Court, we would have to
disregard it entirely in order to reverse the Trial Court's
certification order on the ground advanced by Direct Insurance.  We
are reluctant to do so.  While the findings made by the Trial Court
in connection with its summary-judgment ruling may not control our
analysis of the Trial Court's certification ruling, we simply are
not in a position to conclude that Ms. Lane has not suffered
damages and is therefore presenting claims that are atypical of the
class members' claims.
     Even if it were true that Ms. Lane has suffered little, if
any, damages in relation to the other class members, this fact, in
light of our holdings in the Summons, Cheqnet, and Farm Bureau
cases, does not mean that the typicality prerequisite has not been
satisfied.  As we have said, Ms. Lane's claims are typical of those
of the class members because they all arise from the same alleged
"wrong" committed by Direct Insurance.  An alleged disparity
between the injuries or damages suffered by the class
representative and the class members does not make the action fail
Rule 23's typicality requirement.
     Moreover, it is apparent that Direct Insurance, by asserting
that Ms. Lane has not suffered any damages, has attempted to defeat
class certification by delving into the merits of the case.  That
is inappropriate.  In the Farm Bureau case, we said that the trial
court's proper focus in deciding whether to certify a class "is not
`whether the plaintiff or plaintiffs have stated a cause of action
or will prevail on the merits, but rather whether the requirements
of Rule 23 ... are met.'"  Farm Bureau Mutual Ins. Co. v. Farm
Bureau Policy Holders, 323 Ark. at 709, 918 S.W.2d  at 130
(citations omitted).  As we observed, "it is totally immaterial
whether the petition will succeed on the merits or even if it
states a cause of action. ..."  Id.  "[A]n order denying or
granting class certification is separate from the merits of the
case."  Farm Bureau, 323 Ark. at 710, 918 S.W.2d  at 130-31.  See
First Nat'l Bank v. Mercantile Bank, 304 Ark. 196, 801 S.W.2d 38
(1990).
     We do not know if Ms. Lane will prevail on the merits of her
case, but that question is irrelevant at this point.  Even if Ms.
Lane ultimately fails to make her case as to damages, the question
before the Trial Court was whether the claims of Ms. Lane and the
class members arise from the same wrong allegedly committed by
Direct Insurance.  We cannot say that the Trial Court abused its
discretion by answering this question affirmatively.

                 2.  Adequacy of representation
     We further hold that the Trial Court did not abuse its
discretion by finding that Ms. Lane, in accordance with Rule
23(a)(4), will fairly and adequately protect the interests of the
two subclasses that were certified in this case.  In First Nat'l
Bank v. Mercantile Bank, 304 Ark. 196, 200, 801 S.W.2d 38, 40-41
(1990), we quoted the following passage from Gentry v. C & D Oil
Co., 102 F.R.D. 490, 493 (W.D. Ark. 1984), in describing the
"adequacy of representation" prerequisite:

     The elements of the requirement are:  (1) the
     representative counsel must be qualified, experienced and
     generally able to conduct the litigation; (2) that there
     be no evidence of collusion or conflicting interest
     between the representative and the class; and (3) the
     representative must display some minimal level of
     interest in the action, familiarity with the practices
     challenged, and ability to assist in decision making as
     to the conduct of the litigation.

We have continued to cite this language for the proposition that
the "adequacy of representation" element is satisfied if the
representative displays a minimal level of interest in the action,
familiarity with the challenged practices, and ability to assist in
litigation decisions.  See Cheqnet Systems, Inc. v. Montgomery, 322
Ark. at 750, 911 S.W.2d  at 959; Union National Bank v. Barnhart,
308 Ark. 190, 198, 823 S.W.2d 878, 882 (1992).
     At the certification hearing, Ms. Lane testified that she
understood the responsibility she was undertaking by agreeing to
become the class representative.  She said that she had discussed
the matter with her mother and that she had visited with her
attorney several times about the case and had reviewed the relevant
documents.  According to Ms. Lane, she decided to become a class
representative out of a desire to prevent Direct Insurance from
charging other people excessive interest and fees, and she hopes to
recover any amount that is found to be an overcharge.  Moreover,
the record demonstrates that the Allen Law Firm, which represents
Ms. Lane, has extensive experience in conducting class-action
litigation.  Based on the testimony presented in the hearing and
other evidence in the record, the Trial Court clearly acted within
its discretion in concluding that Ms. Lane will adequately and
fairly represent the interests of the two subclasses.
     Direct Insurance contends, however, that Ms. Lane will be
unable to protect the interests of the subclasses because she has
suffered no damage herself and therefore does not have a sufficient
interest in the case.  As we mentioned above, we cannot say at this
point that Ms. Lane has not suffered damages on account of the
alleged misconduct of Direct Insurance, and we stress the
inappropriateness of contesting class certification by raising
merits-based arguments.  Ms. Lane demonstrated that she is
committed to pursuing the case against Direct Insurance, and her
interest in the action is clearly sufficient to satisfy the
requirements of Rule 23(a)(4).
     Affirmed.