CLASS-CERTIFICATION ORDER SURVIVES

Life Partners, Inc. v. McDermott
Dallas Court of Appeals, No. 05-12-01623-CV (June 23, 2014)
Justices Bridges (Opinion), Lang
The Court of Appeals affirmed the trial court’s order certifying a class in a case brought by investors against a life settlement company, finding the trial court conducted a sufficiently rigorous analysis and upholding the court’s findings of numerosity and adequacy of representation.

Life Partners purchases life-insurance policies, usually backed by investors who purchase fractional interests in specific policies. In these transactions, Life Partners typically pays the premiums on a policy until the insured dies, and passes on these costs to the investors. In this case, one of the investors in a policy alleged Life Partners improperly pre-paid premiums for the policy and failed to recover those premiums, resulting in overcharges to the investors. The investor sought certification of a class consisting of the 38 investors in the policy at issue, and the trial court certified the class.

Life Partners’s first complaint on appeal was that the trial court failed to conduct a rigorous analysis of all the class-certification requirements. It pointed out that the hearing on the motion began at 4:32 p.m. on a Friday and was allotted only 15 minutes on the trial court’s docket. It also complained that it was not given an opportunity to fully respond to opposing counsel’s arguments, and that the certification order contained no discussion of its primary arguments, relating to res judicata and adequacy of representation. The Court of Appeals rejected these arguments, noting that Life Partners’s exhibits were all admitted at the hearing, it had an opportunity to question its witness at the hearing without curtailment, and it could not identify any specific argument it was prevented from making to the trial court. The Court found no authority for the proposition that the length of the certification hearing is relevant in assessing the rigor of a trial court’s analysis.

The Court of Appeals was also unpersuaded by Life Partners’s substantive challenge to the trial court’s findings regarding res judicata, numerosity, and adequacy of representation. The Court concluded the trial court had incorporated appropriate safeguards to protect absent class members from a res-judicata bar, including by requiring notice and an opportunity to opt out. The Court also rejected Life Partners’s argument that McDermott had a conflict of interest because he owns a business that offers life settlements and had been a licensee for Life Partners. The trial court could reasonably have concluded this evidence showed McDermott was a highly-qualified class representative. Finally, the Court concluded the numerosity requirement was satisfied, emphasizing the small dollar amounts—about $2,000—at issue in each class member’s claim.

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