Attorneys for Appellants Attorneys for Appellees
David R. Frick Irwin B. Levin
Anthem Insurance Co., Inc. David J. Cutshaw
Indianapolis, Indiana Cohen & Malad, LLP
Thomas G. Stayton
John Joseph Tanner
Daniel R. Roy
Baker & Daniels
Interlocutory Appeal from the Marion Superior Court, No. 49D12-9912-CP-1710
The Honorable Robyn L. Moberly, Judge
On Petition To Transfer from the Indiana Court of Appeals, No. 49A05-0203-CV-122
March 31, 2005
This appeal challenges the trial court's determination that the predominance and superiority requirements
of Indiana Trial Rule 23(B)(3) were satisfied for purposes of maintaining a class
action. Concluding that predominance was not established, we reverse the class certification.
The plaintiffs, Dr. William R. Lewis, Dr. Darryl Fortson, and Wabash Avenue Medical
Center (collectively, "the Providers"), brought this action to compel the defendants, Associated Medical
Networks, Ltd., Associated Insurance Companies, Inc., and Anthem Health Systems, Inc. (collectively, "Anthem"),
for payment of medical expenses under assignments executed by patients, and for certification
as a class to proceed on behalf of all other similarly situated health
The class certification was preceded by rather extensive litigation in both the state
and federal courts, as more fully described in the opinion of the Court
of Appeals. This interlocutory appeal is based on the trial court's Order
Certifying Plaintiff Class, which made the following findings with respect to T.R. 23(B)(3),
the focus of this appeal:
The elements of Rule 23(B)(3) are satisfied in the present matter because common questions predominate over individual ones and a class action is superior to other available methods for the fair and efficient adjudication of this controversy. The Court notes that individual class members do not appear to wish to control the prosecution of separate actions, that no other litigation concerning this controversy has been commenced, that it is desirable to concentrate this litigation in a single forum, and that no difficulties are likely to be encountered in the management of this action as a class action. Defendants' common course of conduct in paying patients of non-Network health care providers
directly is a predominant factual and legal issue.
Appellants' Appendix at 15. The court then defined and certified the following plaintiff class:
Any and all health care providers in the State of Indiana, who have ever had restrictions placed on their license to practice medicine by the Health Professions Bureau, including their professional associations, corporations, partnerships, associates, and partners, or who, for any reason, were not preferred health care providers or network providers, and to which Defendants and their predecessors failed to forward checks for medical services rendered to patients insured by Defendants or their predecessors (under health insurance contracts which are not governed by ERISA or which are specifically exempted from ERISA pursuant to 29 U.S.C. sec. 1003 See footnote ) directly to the health care provider, or otherwise include said health care provider as a payee on said checks, and who were damaged
Id. at 15-16 (footnote added). Anthem sought and received permission from the trial court and the Court of Appeals to bring this interlocutory appeal of the class certification order. The Court of Appeals affirmed the class certification. Assoc. Med. Networks Ltd. v. Lewis, 785 N.E.2d 230 (Ind. Ct. App. 2003). We granted transfer. 804 N.E.2d 752 (Ind. 2003).
As its sole contention in this interlocutory appeal, Anthem asserts that the trial
court erroneously found that the Providers satisfied the "predominance" and "superiority" requirements of
T.R. 23(B)(3). The relevant language of T.R. 23(B) provides:
(B) Class actions maintainable. An action may be maintained as a class action if the prerequisites of subdivision (A) are satisfied, and in addition:
(1) * * *
(2) * * *; or
(3) 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. The matters pertinent to the findings include:
(a) the interest of members of the class in individually controlling the prosecution or defense of separate actions;
(b) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;
(c) the desirability or undesirability of concentrating the litigation of the claims in the particular forum;
(d) the difficulties likely to be encountered in the management of a
For purposes of this opinion, the language of subsection (B)(3) stating the requirement that certain questions "predominate over any questions affecting only individual members" is referred to as the "predominance requirement." And the language requiring that "a class action is superior to other available methods for the fair and efficient adjudication of the controversy" is referred to as the "superiority requirement."
The determination of whether an action is maintainable as a class action is
"committed to the sound discretion of the trial court." Northern Ind. Public
Service Co. v. Bolka, 693 N.E.2d 613, 615 (Ind. Ct. App. 1998), trans.
denied. Appellate courts reviewing a class certification employ an abuse of discretion
standard. Id. The trial court's certification determination will be affirmed if
supported by substantial evidence. Id. A misinterpretation of law, however, will
not justify affirmance under the abuse of discretion standard. McCullough v. Archbold
Ladder Co., 605 N.E.2d 175, 180 (Ind. 1993).
In response, the Providers primarily contend that, under Indiana case law, merely showing
a common course of conduct will establish predominance. Asserting that Anthem admits
"it engaged in a common course of conduct: it does not pay non-participating
health care providers who have obtained assignment of benefits from their patients, but
instead, pays their patients directly in derogation of the assignments," Appellees' Br. at
13, the Providers urge that the trial court was correct to thus find
that a "common course of conduct permeated each member's claim and predominated."
Id. at 13-14. The Providers argue that the existence of a common
course of conduct is sufficient to establish predominance without needing to prove all
or a major portion of the elements of each class member's claim.
The Providers do not dispute the existence of any of the six specific
issues of fact urged by Anthem, but assert that these do not defeat
predominance and may be handled in a claims process after the legal issues
The Providers additionally emphasize that predominance can be satisfied by either "questions of
law or fact common to the members of the class," T.R. 23(B)(3), and
assert that predominance is satisfied by two common legal issues that permeate all
the class members' claim: (a) "whether a physician can sue a health insurer
directly when the insurer pays a patient over an assignment of benefits," and
(b) "whether a non-assignment clause in Anthem's identical health insurance policies can legally
prevent direct recovery by the health care provider against the health insurance company."
Appellee's Br. at 14.
Anthem replies that the trial court, in its class certification order, does not
find predominance from, or even mention, either of the two legal issues urged
by the Providers. As to "whether a physician can sue a health
insurer directly," Anthem argues that this is not an issue in the case
because the Providers' complaint asserts "nothing more than a breach of contract claim."
Appellants' Reply Br. at 14-15. Anthem points out that when it
filed its motion for summary judgment, it did not challenge the legal viability
of the Providers' assignment of benefits theory. Anthem further contends that the
Providers' second alleged issue, regarding an alleged non-assignment provision in its contracts, is
not a common issue because "only some of Anthem's health plans contain non-assignment
provisions" and that this question is therefore an individual rather than a common
issue. Id. at 15. Anthem emphasizes that "[a]lthough Anthem does not
dispute the [Providers'] legal theory, each class member still has to prove every
element of that cause of action with his or her own evidence."
We believe that the parties' arguments essentially present two questions as to the
issue of predominance under T.R. 23(B)(3):
(1) Can the existence of facts showing a common course of conduct, but which do not resolve any of the elements for the relief sought in the underlying claim, be sufficient to establish predominance?
(2) Are there issues of law common to the members of the class that predominate over questions affecting only individual members?
Significantly, the trial court's determination that predominance was satisfied was based upon Anthem's "common course of conduct in paying patients of non-Network health care providers directly," which the trial court found to be both a "factual and legal issue." Appellants' Appendix at 15.
While not an issue in this case, the Indiana class action rule requires
the satisfaction of other prerequisites to maintain a class action. One of
these is that there must be "questions of law or fact common to
the class." Ind. T.R. 23(A)(2). This requirement of "commonality" is then
augmented by the "predominance" requirement of T.R. 23(B)(3), which requires not only the
existence of "questions of law or fact common to the members of the
class," but also that questions must "predominate over any questions affecting only individual
members." Thus, the language of the rule itself requires more than the
mere existence of questions of law or fact common to the class.
Understanding the meaning and application of this predominance requirement has been the subject
of several Indiana cases. One of the earlier ones, Arnold v. Dirrim,
398 N.E.2d 426, 436 (1979), trans. not sought, described the requirement as depending
"on whether the claims of the class members derive from a common nucleus
of operative facts." But then, after identifying the "essence of the class
members' claims," it found that the common nucleus of common facts "would be
largely the same for all class members." Id. This phrase "common
nucleus of operative facts" has been employed in subsequent decisions. In Skalbania
v. Simmons, 443 N.E.2d 352, 358 (Ind. Ct. App. 1982), trans. denied, the
court analyzed each of several counts of the plaintiffs' complaint for damages to
determine whether for that count there existed a nucleus of facts common to
the class that was also the "focus of inquiry." In Conagra, Inc.
v. Farrington, 635 N.E.2d 1137, 1143 (Ind. Ct. App. 1994), trans. not sought,
which involved a suit alleging breach of contract, unjust enrichment, fraud, negligence, and
other counts, the common nucleus was that the "facts surrounding the misconduct would
be largely the same for all class members" and that "injury and damages
were common to the class." Similar fraud theories were asserted in Edward
D. Jones & Co. v. Cole, 643 N.E.2d 402, 405 (Ind. Ct. App.
1994), trans. denied, where the court found predominance because the common nucleus involved
the "existence and implementation of a common scheme by Jones to defraud its
clients." In Connerwood Healthcare, Inc. v. Estate of Herron, 683 N.E.2d 1322,
1329 (Ind. Ct. App. 1997), trans. denied, a class action seeking damages for
personal injuries and wrongful death of residents of a nursing facility, predominance was
found because the "common operative facts" involved allegations of food poisoning following a
common meal of scrambled eggs. And the common nucleus of operative facts
found to satisfy predominance in Bolka, 693 N.E.2d at 620, was that damage
to the plaintiffs' boats was caused by emissions from the defendant's power plant.
We agree with the Court of Appeals in Wal-Mart Stores, Inc. v. Bailey,
808 N.E.2d 1198, 1206 (Ind. Ct. App. 2004), trans. pending:
The common theme throughout Bolka, Connerwood Healthcare, and Skalbania is that the existence of a common course of conduct by the defendant/defendants established that common issues predominated over individual issues and thus warranted certification. In each case, it is evident from this court's analysis and holding that the common course of conduct could establish a main issue with respect to the case, such as the negligence of the party. . . . [W]hile a common nucleus of operative facts may satisfy the predominance
requirement, such is not necessarily so.
The court indicated its agreement with the assertion that "just because the claims may arise from 'a common nucleus of operative facts' does not mean that the common claims necessarily predominate." Id. at 1204.
These cases correctly require that there must be more than a mere nucleus
of facts in common with the plaintiff class. Predominance requires more than
commonality. Predominance cannot be established merely by facts showing a common course
of conduct, but the common facts must also actually "predominate over any questions
affecting only individual members." T.R. 23(B)(3).
Indiana's Trial Rule 23 is based upon Rule 23 of the Federal Rules
of Civil Procedure, and it is thus appropriate to consider federal court interpretations
when applying the Indiana rule. Hefty v. All Other Members of Certified
Settlement Class, 680 N.E.2d 843, 848 (Ind. 1997); Connerwood Healthcare, 683 N.E.2d at
1325-26; Skalbania, 443 N.E.2d at 357. The text of 23(B)(3) is identical
in both rules. The Federal Advisory Committee Notes, which supported the adoption
of Rule 23, in discussing the predominance requirement, states, "It is only where
this predominance exists that economies can be achieved by means of the class-action
device." Published in William F. Harvey, 2 Indiana Practice, Rules of Procedure
annotated 464. It is generally accepted that the analogous federal Rule 23(b)(3)
"is designed to be a means of achieving economies of time, effort, and
expense." James Wm. Moore, 5 Moore's Federal Practice § 23.44, at 23-207,
and cases cited therein at footnote 4. Other noted commentators explain:
Thus the predominance test really involves an attempt to achieve a balance between the value of allowing individual actions to be instituted so that each person can protect his own interests and the economy that can be achieved by allowing a multiple party dispute
to be resolved on a class action basis.
Charles Alan Wright, Arthur Miller, Mary Kay Kane, 7A Federal Practice and Procedure §1777, at 518-19. Professor Moore's treatise provides a helpful look at the problems of determining predominance under the heading "No Bright Line Test Measures Predominance; Each Case Is Measured by Its Own Facts:"
In a Rule 23(b)(3) class action, common questions of law or fact must predominate over questions affecting only individual members. There is no precise test for determining whether common questions of law or fact predominate, however. Instead, the Rule requires a pragmatic assessment of the entire action and all the issues involved. In making that assessment, courts have enunciated a number of standards, finding . . . predominance if:
( The substantive elements of class members' claims require the same proof for each class member;
( The proposed class is bound together by a mutual interest in resolving common questions more than it is divided by individual interests.
( The resolution of an issue common to the class would significantly advance the litigation.
( One or more common issues constitute significant parts of each class member's individual cases.
( The common questions are central to all of the members' claims.
( The same theory of liability is asserted by or against all class members, and all defendants raise the same basic defenses.
Courts generally agree that the predominance of common issues does not mean that common issues merely outnumber individual issues. Nor should a court determine predominance by comparing the time that the common issues can be anticipated to consume in the litigation to the time that individual issues will require. Otherwise, only the most complex common issues could predominate, because only complex issues tend to require
more time to litigate.
5 Moore's Federal Practice § 23.45, at 23-210 to 212 (footnotes omitted).
The Providers do not dispute the issues of proof claimed by Anthem to
be necessary for the resolution of each claim for insurance benefits asserted by
each individual class member. The common course of conduct alleged by the
providers to satisfy the predominance requirement--that Anthem does not pay non-participating health care
providers who have obtained assignment of benefits from their patients but instead directly
pays their patients--is not only undisputed, but also is not relevant to any
of the issues of proof in the causes of action asserted. Establishing
this common question will not establish any of the substantive elements of any
of the class members' claims, nor will it advance the litigation in any
respect. We perceive no economy of time, effort, or expense will be
We thus conclude that Anthem's conduct in directly paying patients of non-Network health
care providers does not constitute a question of fact that predominates over the
questions affecting only individual class members, as required by T.R. 23(B)(3).
As an alternative to this claimed common question of fact, however, the Providers
assert that predominance under the rule is satisfied by the existence of questions
of law common to members of the plaintiff class: (a) whether a physician
can sue a health insurer based on a patient's assignment, and (b) whether
Anthem's non-assignment clauses bar recovery in such claims. The first is not
a disputed question, however. Anthem acknowledges its network policy of paying the
claims from all non-network providers directly to their patients. In addition, Anthem
does not challenge the legal viability of the Providers' assignment of benefits theory.
Among the issues Anthem identifies as elements at trial, it asserts no
general claim that a physician's suit cannot be based on an assignment from
a patient. To the extent that this first issue presents any question,
its resolution will not substantially advance the class members' claims nor achieve any
economy of time, effort, or expense. More importantly, this first claimed question
of law was not identified by the trial court as an issue of
law upon which it found predominance satisfied. The first claimed question does
not satisfy predominance.
As to the legal question regarding Anthem's non-assignment clauses, Anthem contends in part
that it is not a common issue because "only some of Anthem's health
plans contain non-assignment provisions." Appellant's Reply Br. at 15. The trial
court made no finding as to whether this is a question of law
"common to the members of the class" as required by T.R. 23(B)(3).
In fact, the non-assignment clause question was not the basis for the trial
court's determination that predominance was satisfied. The only finding made by the
trial court to support its conclusion of predominance was Anthem's "common course of
conduct in paying patients of non-Network health care providers directly," which the trial
court found to be both a "factual and legal issue." Appellants' Appendix
at 15. The trial court did not find predominance based upon any
question regarding the enforceability of Anthem's non-assignment clauses.
We conclude that the class certification in this case fails as a matter
of law to comply with the dominance requirement of T.R. 23(B)(3), which is
not satisfied by the trial court's finding of Anthem's common course of conduct
in directly paying patients of non-Network providers.
Shepard, C.J., and Sullivan and Rucker, JJ., concur. Boehm, J., not participating.