Farm Bureau Mut. Ins. Co. v. Farm Bureau Policy Holders and Members

FARM BUREAU MUTUAL INSURANCE COMPANY OF
ARKANSAS, INC., and Southern Farm Bureau
Casualty Insurance Company v. FARM BUREAU
POLICY HOLDERS AND MEMBERS, Dennis Lee, Class
Representative

95-402                                             ___ S.W.2d ___

                    Supreme Court of Arkansas
                Opinion delivered March 18, 1996


1.   Actions -- class action -- A.R.C.P. Rule 23 is comparable to
     F.R.C.P. Rule 23 -- supreme court interprets in same manner as
     federal courts. -- Rule 23 of the Arkansas Rules of Civil
     Procedure, the Arkansas class-action rule as now revised, is
     comparable to Rule 23 of the Federal Rules of Civil Procedure;
     the supreme court interprets Ark. R. Civ. P. 23 in the same
     manner that the federal courts interpret the comparable Fed.
     R. Civ. P. 23.

2.   Actions -- class action -- order regarding class certification
     is separate from merits of case. -- An order denying or
     granting class certification is separate from the merits of
     the case.

3.   Appeal & error -- arguments abandoned or not made to trial
     court -- not addressed on appeal. -- Where appellants candidly
     admitted in oral argument that the arguments in their brief
     were in error in asserting that they could delve into the
     merits of the claim, and they abandoned reliance on such a
     premise, and where appellants argued that allegations of fraud
     should not be certified but did not make the argument to the
     trial court, the supreme court did not not address the issues
     raised.

4.   Actions -- class action -- certification -- standard of
     review. -- The standard of review for either the grant or
     denial of a certification of a class action is whether the
     trial court abused its discretion.

5.   Actions -- class action -- commonality -- trial court did not
     abuse its discretion in finding commonality of interests. --
     Where the trial court ruled in the present case that
     commonality of interests and common questions of law were
     present; where the testimony showed that, to secure auto
     insurance from one of appellant companies, an insured must pay
     the membership dues to the Farm Bureau Federation; and where
     the trial court certified as a class "only those insureds that
     have had, during the last five years, automobile insurance
     with one or both of the defendant companies" and "any insureds
     who purchased automobile insurance from defendant companies
     during the past five years preceding this case," the trial
     court did not abuse its discretion in ruling on the
     commonality of interests; however, the supreme court noted,
     even if the trial court should eventually determine that the
     class should be splintered with respect to some individual
     claims, efficiency could still be achieved by resolving those
     common questions which predominate over individual questions.

6.   Actions -- class action -- typicality -- claims are typical
     when they arise from same wrong -- trial court did not abuse
     its discretion in finding typicality. -- Even if allegations
     about injuries and damages are different, claims are typical
     when they arise from the same wrong allegedly committed
     against the class; where the allegation was that dues were
     wrongfully collected by appellant insurance companies, even
     though some class members might collect more than others, the
     claims were still typical because they arose from the same
     alleged wrong; the trial court did not abuse its discretion in
     ruling on typicality where it found that appellee class
     representative's automobile insurance policy and membership
     dues were typical of that of others who had auto insurance
     with appellant companies.


     Appeal from Chicot Chancery Court; Lawrence E. Dawson,
Chancellor; affirmed.
     Laser, Wilson, Bufford & Watts, P.A., by: Sam Laser, for
appellants.
     Gibson Law Office, by: C.S. "Chuck" Gibson, II, and Charles S.
Gibson, for appellees.

     Robert H. Dudley, Justice.March 18, 1996   *ADVREP1*




FARM BUREAU MUTUAL INSURANCE
COMPANY OF ARKANSAS, INC., AND
SOUTHERN FARM BUREAU CASUALTY
INSURANCE COMPANY,
                    APPELLANTS,

V.

FARM BUREAU POLICY HOLDERS AND
MEMBERS, DENNIS LEE, CLASS
REPRESENTATIVE,
                    APPELLEES.



95-402


APPEAL FROM THE CHICOT COUNTY
CHANCERY COURT,
NO. E-94-17-1,
HON. LAWRENCE E. DAWSON, JUDGE,




AFFIRMED.


                   Robert H. Dudley, Justice.


     This is an interlocutory appeal from an order certifying a
class action.  See Ark. Sup. Ct. R. 1-2(a)(12), Ark. R. App. P.
2(a)(9), and Ark. R. Civ. P. 23.  We affirm the order of
certification.
     Appellee Dennis Lee, the class representative, alleged in his
complaint that appellants Farm Bureau Mutual Insurance Company of
Arkansas, Inc., and Southern Farm Bureau Casualty Insurance
Company, Inc., require all purchasers of their automobile insurance
policies to pay $35.00 in annual membership dues to the Farm Bureau
Federation.  He alleged that after he paid the premium, but during
the effective dates of the insurance contract, he was contacted by
a representative of Farm Bureau who asked him to pay the membership
fee and informed him that his automobile insurance would be
cancelled if he did not pay the fees.  He pleaded that neither the
application for insurance nor the policy specifies the premium, as
required by statute; consequently, "the membership dues are invalid
and further constitute a fraudulent inducement to contract."  He
prayed for reformation of his insurance contract, a declaratory
judgment that "all such membership dues were wrongfully collected,"
and, because the companies "had been unjustly enriched," for a
constructive trust to be placed on the corpus of the funds to be
distributed to members of the class.  He pleaded that the class is
composed of insureds who have been, continue to be, and may in the
future be adversely affected by the companies' charging membership
dues, and that the numerosity requirement was met because the class
consisted of more than 180,000 insureds.  
     The trial court ruled (1) the numerosity requirement was
satisfied because the class totals over 180,000 people; (2) the
commonality requirement was satisfied because the proposed class
consists of "other insureds of these companies with similar type of
insurance as Plaintiff Dennis Lee"; (3) the typicality requirement
was satisfied because the insurance appellee had was typical of the
type of automobile insurance of the other insureds of appellant; 
and (4) the adequate representation requirement was met because
counsel for appellee "appear[ed] to be exerting maximum effort in
behalf of his client" and had "diligently approached this case in
a manner that more than meets the requirements of the law."  In
addition, the court found that the questions of law or fact common
to all class members predominate over any questions affecting only
individual members and that costs would be prohibitive for the case
to be pursued individually; thus, it was the economically feasible
approach.  The trial court certified the class as (1) only those
insureds that have had, during the last five years, automobile
insurance with one or both the defendant companies and (2) any
insureds who purchased automobile insurance in Arkansas from the
defendant companies within the five years immediately preceding the
filing of the action.   
     Separately, the companies moved for summary judgment on the
ground that the applicable statutes allow insurance companies to
charge membership dues.  The trial court denied the motion for
summary judgment because there are disputed issues of material
fact.
     Appellant companies make a number of arguments that we do not
address on appeal.  In the arguments contained in their brief to
this court, the companies contend that a plaintiff "individually
must have a claim before he can seek certification of a class." 
From that premise, they make a number of arguments about appellee's
lack of a cause of action.  However, the premise is false, as the
statement is an erroneous statement of the law.
     Rule 23 of the Arkansas Rules of Civil Procedure, the Arkansas
class-action rule as now revised, is comparable to Rule 23 of the
Federal Rules of Civil Procedure.  We have said that we will
interpret Ark. R. Civ. P. 23 in the same manner the federal courts
interpret the comparable Fed. R. Civ. P. 23.  Union Nat'l Bank v.
Barnhart, 308 Ark. 190, 823 S.W.2d 878 (1992).  In Eisen v.
Carlisle & Jacquelin, 417 U.S. 156 (1974), the Supreme Court held
that a trial court does not have authority to conduct a preliminary
inquiry into the merits of a suit in order to determine whether it
may be maintained as a class action.  Id. at 177-78.  The Court
opined that a preliminary hearing on the merits might substantially
prejudice the parties, since it would be unaccompanied by
traditional rules and procedures applicable in civil trials.  Id.
at 178.  It said that the proper focus of the inquiry 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 [of the Federal Rules of Civil Procedure] are met."  Id.
at 178 (quoting with approval Miller v. Mackey Int'l, Inc., 452 F.2d 424, 427 (5th Cir. 1971)) (emphasis added).    
     In Miller v. Mackey International, Inc., 452 F.2d 424 (5th.
Cir. 1971), the case cited with approval in Eisen v. Carlisle &
Jacquelin, the Fifth Circuit Court of Appeals reversed an order
denying a class action because the district judge improperly
considered the merits of the claim in passing on the class action
request.  Id. at 430.  The court said that, for Rule 23 purposes,
it is totally immaterial whether the petition will succeed on the
merits or even if it states a cause of action.  Id. at 427 and
cases cited therein.  It stressed that the propriety of a class
action is "basically a procedural question."  Id.  We have
specifically adopted the reasoning of Eisen v. Carlisle & Jacquelin
and held that an order denying or granting class certification is
separate from the merits of the case.  See Arkansas State Bd. of
Educ. v. Magnolia School Dist. No. 14 of Columbia County, 298 Ark.
603, 769 S.W.2d 419 (1989).  
     In oral argument to this court, the companies' counsel
candidly admitted that the arguments in their brief were in error
in asserting that they could delve into the merits of the claim,
and they abandoned reliance on such a premise.  Consequently, we do
not address the companies' arguments that the trial court erred in
denying summary judgment, or in finding that the complaint did not
state a cause of action.  Further, in oral argument, the companies'
counsel forthrightly admitted that the trial court's certification
of a class was proper for the claims alleging reformation [breach
of contract] and declaratory judgment, but steadfastly contended
that certification was improper for claims alleging fraud.  Counsel
contended in oral argument that tort claims involve different
amounts of damage for each member of a class, and therefore tort
claims should not be allowed in class actions.  Counsel for the
class responded by stating that damages will not vary: The damages
are the same for all members--thirty-five dollars for each year the
dues were paid.  We do not address the companies' argument that
allegations of fraud should not be certified since the argument was
not made to the trial court.
     The companies' only remaining challenge to class certification
is that the action is lacking in commonality and in typicality. 
The standard of review for either the grant or denial of a
certification of a class action is whether the trial court abused
its discretion.  Arthur v. Zearley, 320 Ark. 273, 895 S.W.2d 928
(1995); LeMarco, Inc. v. Wood, 305 Ark. 1, 804 S.W.2d 724 (1991). 
In the case at bar, the common question is whether the applicable
statutes preclude the companies from requiring their insureds to
pay membership dues to the Farm Bureau Federation.  The trial court
ruled that commonality of interests and common questions of law
were present.  The trial court found, in part:
     The record is abundant with exhibits that have been
     offered, that, on their face, tend rather strongly to
     support the argument that there are common questions of
     fact involved between [appellee], as a past insured of at
     least one of the defendant companies and a past member of
     the Farm Bureau Federation, and other insureds of these
     companies with similar type of insurance as [appellee].
     The testimony showed that, to secure auto insurance from one
of the defendant companies, an insured must pay the membership dues
to the Farm Bureau Federation.  The trial court certified as a
class "only those insureds that have had, during the last five
years, automobile insurance with one or both of the defendant
companies" and "any insureds who purchased automobile insurance
from defendant companies during the past five years preceding this
case."  The trial court did not abuse its discretion in ruling on
the commonality of interests; however, even if the trial court
should eventually determine that the class should be splintered
with respect to some individual claims, efficiency could still be
achieved by resolving those common questions which predominate over
individual questions.  See LeMarco, Inc. v. Wood, 305 Ark. 1, 804 S.W.2d 724 (1991), and International Union of Elec., Radio, & Mach.
Workers v. Hudson, 295 Ark. 107, 747 S.W.2d 81 (1988).
     The companies also contest the trial court's ruling on the
requirement of typicality.  The trial court found that the
plaintiff's automobile insurance policy and membership dues were
typical of that of others who have auto insurance with the
companies.  In Chequenet Systems, Inc. v. Montgomery, 322 Ark. 742,
911 S.W.2d 956 (1995), we said, even if allegations about injuries
and damages are different, claims are typical when they "arise from
the same wrong allegedly committed against the class."  Id. at 749,
911 S.W.2d  at 959.  Here, 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.  See also
Summons v. Missouri Pac. R.R., 306 Ark. 116, 813 S.W.2d 240 (1991)
(quoting H. Newberg, Class Actions,  3.13 (1985)).  Thus, the
trial court did not abuse its discretion in ruling on typicality.
     Affirmed.
     Special Chief Justice William Randal Wright and Special
Justice Judy Simmons Henry join in this opinion.
     Jesson, C.J., and Glaze, J., not participating.