Audry Hunter v. Transamerica Life Insurance Co , 498 F. App'x 430 ( 2012 )

Case: 11-20735 Document: 00512066127 Page: 1 Date Filed: 11/28/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
November 28, 2012
No. 11-20735 Lyle W. Cayce
Clerk
AUDRY HUNTER, Individually and on behalf of all others similarly situated,
Plaintiff-Appellant
v.
TRANSAMERICA LIFE INSURANCE COMPANY, a foreign corporation,
Defendant-Appellee
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:10-CV-4906
Before DAVIS, DENNIS, and HAYNES, Circuit Judges.
PER CURIAM:*
Audry Hunter (“Hunter”) appeals the district court’s decision granting
Transamerica Life Insurance Company’s (“Transamerica”) motion to dismiss her
complaint, finding that her claims were barred by res judicata and collateral
estoppel and that the court lacked jurisdiction to consider Hunter’s collateral
attack on a state-court judgment. Specifically, Hunter argues that the district
court erred by: (1) finding that it lacked subject-matter jurisdiction; (2)
determining that the judgment in Runyan v. Transamerica Life Insurance Co.,
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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No. CV-09-2066 (Dec. 21, 2009 Pulaski Cnty. Cir. Ct., Ark.) [hereinafter
“Runyan”], was entitled to preclusive effect; (3) according full faith and credit to
the Runyan judgment because it conflicts with the Texas Insurance Code; and
(4) failing to offensively apply the doctrine of issue preclusion to prevent
Transamerica from raising the Runyan judgment as an affirmative defense. We
AFFIRM the district court’s judgment dismissing the lawsuit based on the
preclusive effect of the Runyan judgment.
I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Hunter purchased a supplemental “cancer only” insurance policy from
Transamerica’s predecessor-in-interest, which is now administered by
Transamerica. Hunter’s policy provides, inter alia, that it will reimburse her for
“actual charges” incurred with respect to various covered services, such as
chemotherapy-related expenses. After Transamerica announced that it would
interpret the term “actual charges” in the cancer insurance policy to mean the
lower discounted rate that the insurer actually pays on behalf of the insured,
rather than the higher “billed” charge (never paid by anyone), several class
actions were filed against Transamerica by policy holders. In these class actions,
the plaintiffs argued that the phrase “actual charges” meant the amount billed,
regardless of how much the medical provider actually agreed to receive in
satisfaction of the claim.1
1
Essentially, despite the policy’s insuring clause—which insures the policyholder “for
loss incurred”—the plaintiffs in these class actions are seeking a windfall. Typically, in a
situation where there is an agreement between the insurer and the medical provider, the
medical provider will bill a certain amount, but the patient’s insurer will reduce that charge
to an amount it deems reasonable. Based upon that “reasonable rate,” the insured is then
responsible for his or her deductible or co-pay, and the insurer pays the rest of the “reasonable
rate.” The difference between the amount billed and the “reasonable rate” is never paid or
owed to anyone. For example, a hospital bills a patient $1,000 for a set of x-rays. Assume the
“reasonable rate” is $700. The $300 difference will never be paid or owed by either the insured
or the insurer. Nevertheless, the insureds in these class actions allege that the “actual
amount” that the insurer must pay to the insureds under their cancer-only policies means the
amount billed—$1,000—rather than the amount actually owed—$700—providing the insured
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One of these class actions was Runyan—a case filed in Arkansas state
court. In that case, the plaintiff class reached a settlement with Transamerica
that accepted that the phrase “actual charges” meant the lower discounted
amount in return for, inter alia, receiving a premium rate freeze for a period of
time. This settlement was approved by the Arkansas court. Rather than opting
out of the Runyan class action, Hunter filed pro se objections to the settlement
agreement. In her objections, however, Hunter expressly stated that she had “no
problem with a plan paying ‘Actual Charges’ for Medical services according to
one of the proposed settlement features. This seems fair and reasonable. But
constant increases in premiums is not fair and reasonable.” She also said that
she was not able to appear at the fairness hearing.
Later, after obtaining counsel, Hunter filed additional objections and a
motion to intervene. The Arkansas circuit court denied her motion to intervene,
noting that Hunter initially represented to the court that she did not intend to
participate in the fairness hearing and that she did not object to the definition
of “actual charges” in her pro se objections. The court pointed out that although
Hunter changed her mind once represented by counsel, she did not timely file
her motion to intervene. The court also denied her request to supplement her
objections, noting that Hunter’s later objections were untimely and
“contradict[ed] rather than supplement[ed]” her previously-filed pro se
objections. Hunter appealed the denial of her motion to intervene to the
Arkansas Supreme Court. See Hunter v. Runyan, No. 10-306, 2011 WL 478594(Ark. Feb. 9, 2011).
On appeal, the Arkansas Supreme Court addressed Hunter’s argument
that she was denied her due process right to participate in the Runyan fairness
hearing. Id. at *25. The court also addressed the final order and judgment
with a $300 windfall.
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approving the settlement in Runyan. Id. at *7. The court specifically noted, in
affirming the denial of Hunter’s motion to intervene and finding that she was
afforded adequate process, that “the circuit court did allow Hunter’s counsel to
appear at the hearing on her motion to intervene and to present argument as to
[her] supplemental requests; thus, Hunter did have an opportunity to be heard
. . . .” Id. at *25.
The Arkansas Supreme Court also rejected Hunter’s argument that she
was not adequately represented by class counsel because the parties’ interests
were not adverse. On the contrary, the court found that “even if the general
parameters of a settlement had been reached, the fact remains that the parties
were adverse and negotiations could have broken down at any time before the
written agreement was executed . . . .” Id. at *13. The Arkansas Supreme Court
thus affirmed the denial of Hunter’s motion to intervene and otherwise
dismissed the appellants’ challenges to the settlement. The U.S. Supreme Court
denied certiorari. See Crager v. Runyan, 132 S. Ct. 243 (2011).
Before the Arkansas Supreme Court issued its decision, Hunter filed this
action in the United States District Court for the Southern District of Texas.
She argued that the Runyan settlement was not entitled to preclusive effect
because it was rendered in violation of the class members’ due process rights,
and it was not fully contested in good faith. Shortly after the Arkansas Supreme
Court affirmed the denial of Hunter’s motion to intervene, Transamerica filed
a motion to dismiss the federal suit pursuant to Federal Rules of Civil Procedure
12(b)(1) and 12(b)(6). Transamerica argued that the Runyan judgment was
entitled to preclusive effect, Hunter lacked standing, the district court lacked
subject-matter jurisdiction, and the court was bound to enforce the judgment
pursuant to the Full Faith and Credit Act, 28 U.S.C. § 1738.
The district court granted Transamerica’s motion to dismiss, finding that
it need not address the merits of Hunter’s suit because “[t]he plaintiff is
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attempting another bite at the apple by trying to re-litigate a case that has
already settled.” The court concluded that Hunter’s “claims are barred by res
judicata, collateral estoppel, and the release in the Runyan final judgment,
pursuant to the Full Faith and Credit Act, 28 U.S.C. § 1738.” Additionally, the
court noted that it lacked jurisdiction because “[i]f the plaintiff is not satisfied
with the Arkansas Supreme Court’s decision, her exclusive remedy lies with the
U.S. Supreme Court, not this Court.” Hunter timely appealed.
II. STANDARD OF REVIEW AND JURISDICTION
This court reviews a decision granting a motion to dismiss under Federal
Rules of Civil Procedure 12(b)(1) and 12(b)(6) de novo, applying the same
standard as the district court. See Equal Access for El Paso, Inc. v. Hawkins,
509 F.3d 697, 702 (5th Cir. 2007). However, although the district court
purported to rule on Transamerica’s motion to dismiss, both Transamerica and
Hunter offered documents outside of the pleadings (other than documents
attached to and referenced in the complaint), and it appears that the district
court considered these documents.2
Accordingly, because the district court considered documents outside the
pleadings and Hunter had notice and opportunity to respond, we construe the
district court’s order as a grant of summary judgment. See Causey v. Sewell
Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004) (“If a court considers
materials outside of the pleadings, the motion to dismiss must be treated as a
motion for summary judgment under Rule 56[a].” (citation omitted)); Bolen v.
2
Any challenge to the district court’s consideration of these documents fails for two
reasons. First, Hunter actually presented her own evidence and had a reasonable opportunity
to respond before the district court decided the motion to dismiss. Second, although she
objected below to the district court’s consideration of Transamerica’s exhibits and mentions
this issue in a footnote of her brief on appeal, she does not object to the lack of proper notice
on appeal and therefore has waived this argument. See Gen. Universal Sys. v. HAL, Inc., 500
F.3d 444, 454 (5th Cir. 2007) (“[F]ailure to advance arguments in the body of the appellant’s
brief . . . result[s] in waiver of those arguments” even where an argument is mentioned in
passing in the text of a brief).
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Dengel, 340 F.3d 300, 312-13 (5th Cir. 2003) (“Even if the district court erred by
failing to review [the movant’s] motion to dismiss as a motion for summary
judgment, this error is reversible only if [the non-movant] had no notice or
opportunity to refute [the movant’s] allegations in the motion to dismiss.”); see
also FED. R. CIV. P. 12(d).
This court reviews a grant of summary judgment de novo, applying the
same standard as the district court. Gen. Universal Sys., 500 F.3d at 448. We
view all evidence in the light most favorable to the non-movant. Id. Summary
judgment is appropriate “if the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of
law.” FED. R. CIV. P. 56(a). As discussed below, the district court had
jurisdiction pursuant to 28 U.S.C. § 1332, and this court has jurisdiction under
28 U.S.C. § 1291.
III. DISCUSSION
A. Subject-Matter Jurisdiction Exists to Consider Hunter’s
Claims
The district court erred in concluding that it lacked jurisdiction over
Hunter’s claims based on the Arkansas Supreme Court’s decision in Runyan.
The district court’s order cites Atlantic Coast Line Railroad Co. v. Brotherhood
of Locomotive Engineers, 398 U.S. 281, 296 (1970), and Corpus Christi
Taxpayer’s Ass’n v. Corpus Christi, 858 F.2d 973, 976 (5th Cir. 1988), which
stand for the proposition that lower federal courts cannot sit in direct review of
state-court decisions. However, at the time that Hunter filed her federal
lawsuit, the state-court judgment denying her motion to intervene and her
challenge to the Runyan settlement agreement was not final. Consequently, the
district court did not stand in direct review of a final state court decision and it
was free to exercise jurisdiction over the matter. Indeed, the Court in Atlantic
Coast Line expressly recognized that when state and federal courts have
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concurrent jurisdiction, “neither court [is] free to prevent either party from
simultaneously pursuing claims in both courts.” 398 U.S. at 295. Thus, the
district court and the state court had concurrent jurisdiction at the time Hunter
filed her federal suit, and the district court had jurisdiction under 28 U.S.C. §
1332.
B. The Runyan Judgment Has Preclusive Effect and Bars
Hunter’s Collateral Attack
The district court alternatively and appropriately determined that the
Runyan judgment was entitled to preclusive effect. See Exxon Mobil Corp. v.
Saudi Basic Indus., 544 U.S. 280, 293 (2005) (“Disposition of the federal action,
once the state-court adjudication is complete, would be governed by preclusion
law.”). Hunter argues that preclusion does not apply and that she is entitled to
collaterally attack the Runyan judgment because the district court cannot give
full faith and credit to a judgment that was entered in violation of due process.
Hunter relies on the Supreme Court’s decision in Hansberry v. Lee, 311 U.S. 32,
39-42 (1940), where the Court held that a court should not give full faith and
credit to a judgment in a class action lawsuit against absent class members who
were neither adequately represented nor afforded due process. Hunter also
relies on our decision in Gonzales v. Cassidy, 474 F.2d 67 (5th Cir. 1973), which
held that a district court erred in applying principles of res judicata to a prior
class action judgment because the class representative did not adequately
represent the interests of the class. Id. at 75.
Although Hunter is correct that a litigant may collaterally attack a class
action judgment based on a lack of due process, see id. at 74-75, her argument
fails on these facts for several reasons. First, Hunter received the required
“notice plus an opportunity to be heard and participate in the litigation, whether
in person or through counsel.” Phillips Petroleum Co. v. Shutts, 472 U.S. 797,
812 (1985) (recognizing that absent class members must be afforded adequate
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due process to be bound by a class action judgment). The evidence is undisputed
that she actually received notice and an opportunity to be heard in the Runyan
proceedings: she received notice of the Runyan class action settlement; she had
an opportunity to object to the settlement agreement; and her counsel presented
arguments to the state court concerning the fairness hearing. Thus, this is not
a case where an absent class member did not receive notice at all. See
Hansberry, 311 U.S. at 42-43 (noting that “members of a class not present as
parties to the litigation may be bound by the judgment . . . where they actually
participate in the conduct of the litigation in which members of the class are
present as parties”).
Second, and more importantly, Hunter was not an absent class member;
she actually litigated in state court whether the Runyan settlement was reached
in violation of her due process rights and declined to opt out of that proceeding.
See Hunter, 2011 WL 478594, at *25-26. The Full Faith and Credit Act provides
that “judicial proceedings” of any State “shall have the same full faith and credit
in every court within the United States . . . as they have by law or usage in the
courts of such State . . . from which they are taken.” 28 U.S.C. § 1738. “Federal
courts may not ‘employ their own rules . . . in determining the effect of state
judgments,’ but must ‘accept the rules chosen by the State from which the
judgment is taken.’” Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 373
(1996) (quoting Kremer v. Chem. Constr. Corp., 456 U.S. 461, 481-82 (1982)).
Hunter’s participation in Runyan distinguishes her case from Gonzales, 474 F.2d
at 74, where we addressed whether absent class members were bound by the
determination in that case. There, we concluded that absent class members
were not bound because the named plaintiff obtained relief that was not given
to other class members; his failure to appeal that lack of relief resulted in a
conclusion that he was not an adequate class representative at that point;
accordingly, absent class members were not bound. Id. at 74-76.
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Thus, we must apply Arkansas law to determine what effect the Arkansas
courts would give to the Runyan judgment. Arkansas law provides that “[t]he
claim-preclusion aspect of res judicata bars relitigation of a subsequent suit
when: (1) the first suit resulted in a final judgment on the merits; (2) the first
suit was based on proper jurisdiction; (3) the first suit was fully contested in
good faith; (4) both suits involve the same claim or cause of action; and (5) both
suits involve the same parties or their privies.” Beebe v. Fountain Lake Sch.
Dist., 231 S.W.3d 628, 635 (Ark. 2006). The only element that Hunter argues is
missing in this case is the third element—that the Runyan litigation was not
fully contested in good faith.
However, Hunter actually litigated the “good faith” issue in the Arkansas
courts and therefore this issue is itself barred by the doctrine of res judicata.
Before the Arkansas Supreme Court, Hunter argued that the Arkansas state
court violated her due process right to participate in the Runyan litigation.
Hunter, 2011 WL 478594, at *24-25. The court explicitly rejected her argument,
noting that her “argument is wholly without merit” because Hunter had
previously “waived her right to participate in the [fairness] hearing in her pro
se objection that she timely filed with the circuit court,” and had untimely filed
her supplemental objections and request to appear at the fairness hearing. Id.Additionally, another party in Hunter argued that “the parties in [Runyan
were] not adverse because they had reached agreement on the material terms
of the settlement prior to the complaint being filed.” Id. at *12. The court
squarely rejected this argument as well, noting that the “contention that the
interests of [Transamerica] and the Settling Plaintiffs were no longer adverse
because the parties had already reached a settlement when the complaint was
filed is simply not supported by the record.” Id. at *13. Thus, the Arkansas
Supreme Court has already decided that the Runyan judgment was litigated in
good faith in a ruling where Hunter was a direct (not absent) participant.
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Therefore, all state requirements for finding that a challenge to the
Runyan judgment is barred by the doctrine of res judicata have been met. See
Beebe, 231 S.W.3d at 635. Because Hunter’s claims that Runyan was issued in
violation of due process have already been litigated, those determinations are
entitled to preclusive effect, and Hunter cannot raise them again here. Thus, we
need not reach the question of the degree to which a subsequent court must
analyze the due process provided to an absent class member, because we do not
have that situation here.3 The district court did not err in concluding that
Runyan is enforceable.
C. Interpretation of “Actual Charges” Does Not Prevent
According Full Faith and Credit to the Runyan Judgment
We also find Hunter’s argument that the district court erred by giving full
faith and credit to the Runyan judgment because it misinterpreted the phrase
“actual charges” unavailing for two reasons. First, Runyan did not interpret the
phrase “actual charges” in a manner inconsistent with Texas law. Section
1201.0601 of the Texas Insurance Code defines the term “actual charge” as “the
amount actually paid by or on behalf of the insured and accepted by a provider
for services provided.” TEX. INS. CODE ANN. § 1201.0601 (2005). Hunter suggests
that this definition cannot apply to her policy that was issued in 1997 on a
“guaranteed renewable” basis because the House Bill that was signed into law
by the Governor states that “[e]xcept as provided by Subsection (b) of this
3
In a related case, the Sixth Circuit addressed the preclusive effect of this judgment
on absent class members who sought to be represented by Gooch, a class member who opted
out. See Gooch v. Life Investors Ins. Co. of Am., 672 F.3d 402, 420 (6th Cir. 2012). Gooch
determined that it is appropriate for a federal court addressing claims of absent class members
to conduct a “full” due process review in deciding whether to accord res judicata effect to the
prior proceeding. Id. In Gooch, the court determined that it should independently analyze
both the notice given and the adequacy of the class representation. Id. at 420-22. After
undertaking that analysis, it determined that the Runyan settlement was entitled to
preclusive effect as to absent class members. Id. at 426-27. As we have stated, Hunter was
not “absent,” but even if we applied a “full” due process analysis, we would reach the same
result as the Sixth Circuit and adopt its reasoning in that regard.
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section, the change in law made by the Act applies only to an insurance policy
delivered, issued for delivery, or renewed on or after the effective date of this Act
[i.e., September 1, 2005],” TEX. H.B. 1775, 79th Leg. (2005), codified by TEX. INS.
CODE ANN. § 1201.0601. Instead, Hunter argues, Transamerica must interpret
the term “actual charges” in accordance with the law as it existed prior to
September 1, 2005.
Hunter’s interpretation of the statute does not account for the language
in subsection (2)(b) of the House Bill, which provides that “[t]he change in law
made by this Act applies to an insurance policy in effect on the effective date of
this Act only if the policy does not define ‘actual charge’ or ‘actual fee.’” TEX.
H.B. 1775, 79th Leg. (2005) (emphasis added). In order to give effect to
subsection (2)(b), we must apply the definition of “actual charges” in the statute
to any policy “in effect” on September 1, 2005, unless the policy defines “actual
charge” or “actual fee.” See TEX. H.B. 1775, 79th Leg. (2005) (comparing
subsection 2(a) with subsection 2(b)); see also Eddins-Walcher Butane Co. v.
Calvert, 298 S.W.2d 93, 96 (Tex. 1957) (“Every word of a statute is presumed to
have been used for a purpose, and a cardinal rule of statutory construction
requires that each sentence, clause, phrase and word be give[n] effect if
reasonably possible.”). Because Hunter’s policy was “in effect” on September 1,
2005, and did not define “actual charges,” the Texas Insurance Code’s definition
of that term applies, and the Runyan judgment’s interpretation of this term
comports with Texas law.
Even if Hunter’s argument is correct, and the phrase “actual charges”
should be interpreted according to case law prior to the effective date of the
statute, the Runyan agreement’s interpretation of “actual charges” would not be
inconsistent with Texas law. Hunter argues that because the term “actual
charges” is ambiguous, it should be interpreted in her favor. See Nat’l Union
Fire Ins. Co. of Pittsburgh v. Hudson Energy Co., 811 S.W.2d 552, 555 (Tex.
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1991).4 However, Hunter cites no authority for the proposition that, under Texas
law at the time her insurance policy was issued, Texas courts would interpret
“actual charges” to mean something other than the amount actually sought to
be recovered by the provider for services rendered from the insurer (together
with any deductible paid or to be paid by the insured). Indeed, Texas courts
would likely have interpreted the phrase “actual charges” in a manner that
would prevent the “windfall” that Hunter seeks. Cf. Haygood v. De Escabedo,
356 S.W.3d 390, 397 (Tex. 2011) (noting that the effect of a statute passed in
2003 that limited a patient’s recovery to the amount paid, rather than the billed
amount, would “prevent a ‘windfall’ to a claimant”); see generally Paramount
Fire Ins. Co. v. Aetna Cas. & Sur. Co., 353 S.W.2d 841, 844 (Tex. 1962) (involving
a fire insurance policy and refusing to allow recovery beyond that which is
necessary to put an insured “in the same condition pecuniarily in which he
would have been had there been no fire” (internal quotation marks and citation
omitted)). As explained in Haygood, 356 S.W.3d at 397, the Texas Legislature
added a provision to the Texas Civil Practice and Remedies Code in 2003—which
was intended to reflect existing law—that provided that “recovery of medical or
health care expenses incurred is limited to the amount actually paid or incurred
by or on behalf of the claimant,” TEX. CIV. PRAC. & REM. CODE § 41.0105. The
court’s analysis in Haygood indicates that even prior to 2005, Texas courts would
have interpreted the phrase “actual charges” to avoid giving a “windfall” to
Hunter.
Finally, even assuming the Runyan judgment misapplied Texas law, the
judgment would still be entitled to full faith and credit. While it is true that “the
4
Although Hunter cites this court’s opinion in Guidry v. American Public Life
Insurance Co., 512 F.3d 177 (5th Cir. 2007), for the proposition that the phrase “actual
charges” is ambiguous, that case applied Louisiana law, and it did not hold that the phrase
“actual charges” meant the amount billed. Id. at 183-84.
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Full Faith and Credit Clause does not require a State to apply another State’s
law in violation of its own legitimate public policy,” Nevada v. Hall, 440 U.S.
410, 422 (1979) (emphasis added), a judgment of a state is entitled to full faith
and credit in another state even if it misapplies that state’s law. See Baker v.
Gen. Motors Corp., 522 U.S. 222, 233 (1998). As explained by the Court, while
“[a] court may be guided by the forum State’s ‘public policy’ in determining the
law applicable to a controversy[,]” there is “no roving ‘public policy exception’ to
the full faith and credit due judgments.” Id. at 223. The Court cited two of its
prior cases that accorded full faith and credit to judgments despite the fact that
the judgments misapplied the law of the state asked to recognize those
judgments. See id. at 233 (citing Estin v. Estin, 334 U.S. 541, 546 (1948);
Fauntleroy v. Lum, 210 U.S. 230, 237 (1908)). Thus, the Runyan judgment is
entitled to full faith and credit even if it misapplies Texas law.
D. Offensive Issue Preclusion Does Not Apply to Transamerica’s
Affirmative Defense
Hunter argues on appeal that because Transamerica was a party to a
different proceeding in which a court held that the Runyan judgment violated
due process, Transamerica cannot relitigate the question of whether the Runyan
judgment is entitled to preclusive effect.5 See Hege v. Aegon USA, LLC, 780 F.
Supp. 2d 416, 416 (D.S.C. 2011). In Hege, the federal district court concluded
that as applied to the Heges—absent class members in Runyan who did not opt
out of the settlement agreement but did not move to intervene—the notice was
deficient because it did not adequately address the meaning of “actual charges”
under South Carolina law. Id. at 430-31. The court also concluded that the
5
Transamerica argues that Hunter waived her argument concerning the offensive
application of preclusion by failing to raise it below. While she could have discussed this
argument more prominently in her submissions to the district court, we find that the issue is
not waived because Hunter raised the argument several times in her response to
Transamerica’s motion to dismiss.
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Heges were not adequately represented by class counsel and that the Runyan
judgment was not entitled to preclusive effect under Arkansas law because it
was not fully contested in good faith and was not based on proper jurisdiction.
Id. at 432, 435-36.
Despite this holding in Hege, the district court here did not err by
declining to offensively apply the doctrine of issue preclusion to Transamerica’s
defense. We have declined to offensively apply collateral estoppel in situations
where the ruling at issue was neither final nor subject to appellate review,
finding that it would be unfair to apply issue preclusion to such an order. See,
e.g., Winters v. Diamond Shamrock Chem. Co., 149 F.3d 387, 395-96 (5th Cir.
1998) (concluding that a district court did not abuse its discretion in refusing to
offensively apply collateral estoppel to a jurisdictional ruling that could not be
reviewed on appeal); Avondale Shipyards, Inc. v. Insured Lloyd’s, 786 F.2d 1265,
1270 (5th Cir. 1986) (noting that the court was not aware of “any federal
appellate decision which has applied preclusion to a prior nonfinal ruling as to
which appellate review was unavailable, nor any which contradicts [its] ...
opinions stating that partial summary judgment orders under Rule 56(d) are not
preclusive”).
For example, this court in Avondale Shipyards refused to give preclusive
effect to a partial summary judgment order because that order “lack[ed] the
finality necessary for preclusion.” 786 F.2d at 1270. The court rejected the
argument that such an order should be given preclusive effect because there was
later a final judgment in the case. Id. at 1272. It noted that while the final
judgment could support claim preclusion, the summary judgment order was not
mentioned in that judgment and therefore could not operate to render the partial
summary judgment order “final” for purposes of collateral estoppel. Id.Here, similar to the situation in Avondale Shipyards, Hunter points to an
order denying a motion for summary judgment in Hege in support of her
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argument that offensive collateral estoppel should apply. See Hege, 780 F. Supp.
2d at 439. However, such an order is not final and therefore cannot preclude
Transamerica from asserting that the Runyan judgment is entitled to preclusive
effect. Moreover, the parties in the Hege litigation settled, and the final
judgment in that case did not mention the order denying the motion for
summary judgment. See Hege v. Aegon USA, LLC, No. 8:10-cv-01578-GRA,
Final Judgment, at 1 (D.S.C. July 11, 2011). Thus, pursuant to this court’s
precedent, the Hege decision cannot support Hunter’s offensive collateral
estoppel argument.
Additionally, even if we were to give the interlocutory order in Hege
preclusive effect, it does not bar Transamerica’s affirmative defense. Hege’s
ruling on the notice issue is not “identical” to the issue in this case, because it
involved the definition of “actual charges” under South Carolina law, not Texas
law (which, as discussed above, is not inconsistent with the definition reached
through settlement). See 780 F. Supp. 2d at 430-31. Further, unlike Hunter,
who not only appealed the denial of her motion to intervene but obtained a
ruling in the state courts on her due process argument, the parties in Hege did
not actually participate in Runyan. See id. at 422-23 (explaining that the Heges
did not attempt to intervene and therefore could not challenge the Runyan
judgment on direct appeal). Therefore, the district court did not err in declining
to offensively apply the doctrine of collateral estoppel to Transamerica’s
affirmative defense.
IV. CONCLUSION
The district court appropriately determined that the Runyan judgment is
entitled to preclusive effect and did not err in affording that judgment full faith
and credit. The district court also did not err in declining to offensively apply
the doctrine of collateral estoppel to prevent Transamerica from arguing that the
15
Case: 11-20735 Document: 00512066127 Page: 16 Date Filed: 11/28/2012
No. 11-20735
Runyan plaintiffs were afforded adequate due process. Accordingly, we AFFIRM
the district court’s judgment dismissing the case.
16