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Wartick v. United Services Automobile Association

Court of Appeals of Arkansas, Division I

May 24, 2017



          Trammell Law Firm, by: Robert D. Trammell; and Walas Law Firm, PLLC, by: Breean Walas, for appellants.

          Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C., by: John Keeling Baker and Megan D. Hargraves, for appellees.

          BART F. VIRDEN, Judge

         This appeal arises from a class-action lawsuit filed by appellees Mark and Katherine Adams against appellees United Services Automobile Association and related companies (collectively "USAA"). In 2015, the Adamses and USAA entered into a class-action settlement. Appellants Kenneth Wartick, Thomas Meadows, and Paul Siedsma objected to the settlement and attempted to intervene in the case. The Polk County Circuit Court denied intervention and approved the settlement. Appellants now appeal the court's rulings. We affirm.

         I. Background

         The Adamses were insureds under a USAA homeowners policy when they suffered a covered loss in 2009. They made a claim under the policy, and USAA paid them the actual cash value (ACV) of their loss, meaning the cost of repairs minus an amount attributable to age and wear and tear. However, in calculating the ACV, USAA depreciated not only the cost of the materials that would be used in the repairs but the cost of labor as well.

         In 2013, our supreme court held that an insurer cannot depreciate labor when calculating ACV. Adams v. Cameron Mut. Ins. Co., 2013 Ark. 475, 430 S.W.3d 675. After that ruling, the Adamses filed a class-action lawsuit against USAA in Polk County Circuit Court asking that they and all others similarly situated recover the labor costs that USAA improperly depreciated. The case was removed to federal court, where the Adamses and USAA engaged in negotiations and eventually entered into a class-action settlement. The settlement provided, inter alia, that payments would be made to those class members who timely submitted a claim form; that USAA could pay "as much as" $3, 445, 598 to the class members; and that class counsel would receive, without objection, $1, 850, 000 in fees, expenses, and costs.

         After reducing their settlement agreement to writing, the Adamses and USAA voluntarily nonsuited their case in federal court, refiled the case in Polk County Circuit Court, and asked that court to approve the settlement pursuant to Ark. R. Civ. P. 23(e)(1) (2016).[1] The Polk County Circuit Court preliminarily approved the settlement in August 2015 and set forth requirements for those who wished to object to the settlement, opt out of the settlement, or intervene in the case. Included among the requirements was that objections must be exercised individually and not as a member of a group or subclass.

         On November 16, 2015, appellants filed an "Objection to Settlement Terms" both as individuals and as representatives of a group of veterans.[2] They asserted, among other things, that USAA had violated its fiduciary duty to the veterans by entering into the settlement; that discovery should be permitted; that the settlement was moving too quickly; that the claim form for class members was too lengthy and complex; that USAA had not committed to paying any particular amount to the class members; and that the entire process had simply produced a large attorney's fee. Appellants did not mention intervention, other than to describe the lawyer who signed the pleading as the "Attorney for Intervenor."

         At the final-approval hearing on December 16, 2015, appellants argued that they should be allowed to intervene in the class action as a matter of right. The court noted, "You have not filed a motion to intervene, is that correct?" Appellants responded that, to the contrary, their motion to intervene was contained in paragraph twenty-three of their "Objection to Settlement Terms." That paragraph reads as follows:

MOTION: A subclass of veteran [sic] should be recognized, constituting all the residents of Arkansas that are not members of this class, but rather, are all insureds of USAA during the years of the settlement and therefore legal "owners." USAA is a member-owned company. USAA does not have the liberty to deny the truth to the member. Background: 25 Army officers form USAA in 1922, deciding to insure each other's automobiles. Their motto: "Service to the Services." By 1933, those officers exceeded the reserves required of the Texas regulator, and $230, 000 was given back to its members. That is why the sub-class deserves recognition. Today's members are seeing their money spent unwisely, or, they are entitled to hear USAA say, "Yes we did it, and let us explain." The members do not need a Little Rock trial lawyer insist [sic] the agreement is entered into with no admission of anything. Five of six active duty officers in Arkansas are USAA members. They are entitled to petition and be heard.

         The court ruled that appellants had not in fact moved to intervene, citing the lack of an actual motion to intervene and the absence of a pleading setting forth a claim in intervention as required by Rule 24(c) of the Arkansas Rules of Civil Procedure. The court went on to overrule appellants' objections to the settlement, approve the settlement, and dismiss the class action with prejudice.

         After the dismissal, appellants filed an "Amended Motion to Intervene, " which the court treated as a postjudgment motion for intervention. Upon considering the motion, the court ruled that it did not meet the standards for postjudgment intervention under Arkansas law. ...

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