Reply Brief — Allstate Insurance v. Baksalary

Supreme Court brief1985

Ask Donna

What actually matters in this document.

Text

y | PILED —)

No. 84-768 ef DEC 24 1984

ALEXANDER STEVaS,

IN THE | CLERK

Supreme Court of the United States

October Term, 1984

ALLSTATE INS. COMPANY, ARGONAUT INS. COMPANY,

HARLEYSVILLE INS. COMPANY, OHIO CASUALTY GROUP OF

INS. COMPANIES, ROYAL INS. COMPANY, SUN COMPANY, INC.,

TRAVELERS INS. COMPANY and WAUSAU INS. COMPANIES,

Appellants/Objecting Members of Defendant Class,

VS.

RICHARD BAKSALARY, WILLIAM JONES, MORRIS TUCKER,

CHARLES SAMUEL, Individually and on behalf of

all others similarly situated,

Appellees/Plaintiffs,

and

PAUL J. SMITH, C. JOHN URLING, JR., WILLIAM J. SHEPPARD,

GRACE M. SLOAN, THE STATE WORKMEN’S INSURANCE FUND,

PENNSYLVANIA MANUFACTURERS ASSOC. INS. COMPANY,

AMERICAN MUTUAL LIABILITY INS. COMPANY, THE SCHOOL

DISTRICT OF PHILADELPHIA, BITUMINOUS CASUALTY CORP.

and all other insurance carriers and/or self-insured employers similarly

situated,

Defendants (Appellees).

On APPEAL FROM THE UNITED STATES DisTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA.

BRIEF OPPOSING MOTION TO DISMISS OR AFFIRM

RICHARD D. HARBURG

SWARTZ, CAMPBELL & DETWEILER

1700 Land Title Building

Philadelphia, Pennsylvania 19110

Phone: (215) 564-5190

Attorneys for Appellants

Batavia Times Publishing Co. =

Edward W. Shannon

Philadeiphia. Pa. (215) 232-8181

TABLE OF CONTENTS.

pT | FREE Prete errr ie eee

els Ea ES mPa ery, ey Se

Absent members of a defendant class, against

whom a final order of a three judge district

court imposes individual injunctive _ relief,

having appeared and _ objected’ upon

notification of the fairness hearing on a consent

decree proposed by named parties after

constitutional determination on the merits by

the Court, are parties entitled to maintain a

direct appeal of such _ constitutional

determination to the United States Supreme

Court pursuant to 28 U.S.C. §1253...........

IN te ahs cane cae eed

TABLE OF AUTHORITIES.

A. CASES:

Airline Stewards & Stewardesses Ass’n v. Trans

World Airlines, Inc., 630 F.2d 1164 (7th Cir.

1980), rev'd sub nom. Zipes v. Trans World

Airlines, Inc., 455 U.S. 385 (1982)..............

Armstrong v. Board of School Directors, 616 F.2d

a Ae en re

Carson v. American Brands, Inc., 450 U.S. 79

ra Ea eee REE AEP a a eae

Research Corp. v. Asgrow Seed Co., 425 F.2d 1059

I i545 4 ain wan bbe Cewek Ae

United Airlines, Inc. v., McDonald, 432 U.S. 385

EU da Sete cade kaa ae ined ena hewes

5,6

Il.

Page

United States v. Armour & Co., 402 U.S. 673

ER. os co aw eke ead bene eee 3,4

Walsh v. Great Atlantic & Pacific Tea Co., Inc., 726

ef & £- Ts SS. Bap re ee 5

B. STATUTORY PROVISIONS:

1. United States Code

SD Te oe ec cb cat de kcnesaes op euaceet 2,3

Sa, To cco ovedeecucheueaseaess 3

2. Federal Rules

ee Re Se er eee 2

Pie: Th. ee ee Se wc eke eee oon 7

3. Pennsylvania Workmen's Compensation Act

§413(a); Pa. Stat. Ann. tit. 77, §774 (Purdon

Pe rere Pe re 2,5

C. MISCELLANEOUS:

3B Moore’s Federal Practice 423:80[5] (1982 & Supp.

IN THE

Supreme Court of the United States

October Term, 1984

No. 84-768

ALLSTATE INS. COMPANY, ARGONAUT INS. COMPANY,

HARLEYSVILLE INS. COMPANY, OHIO CASUALTY GROUP OF

INS. COMPANIES, ROYAL INS. COMPANY, SUN COMPANY, INC.,

TRAVELERS INS. COMPANY and WAUSAU INS. COMPANIES,

Appellants/Objecting Members of Defendant Class,

vs.

RICHARD BAKSALARY, WILLIAM JONES, MORRIS TUCKER,

CHARLES SAMUEL, Individually and on behalf of

all others similarly situated,

Appellees/Plaintiffs,

and

PAUL J. SMITH, C. JOHN URLING, JR., WILLIAM J. SHEPPARD,

GRACE M. SLOAN, THE STATE WORKMEN’S INSURANCE FUND,

PENNSYLVANIA MANUFACTURERS ASSOC. INS. COMPANY,

AMERICAN MUTUAL LIABILITY INS. COMPANY, THE SCHOOL

DISTRICT OF PHILADELPHIA, BITUMINOUS CASUALTY CORP.

and all other insurance carriers and/or self-insured employers similarly

situated,

Defendants (Appellees).

On APPEAL FROM THE UNITED STATES District COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA.

BRIEF OPPOSING MOTION TO DISMISS OR AFFIRM

ARGUMENT

Absent members of a defendant class, against whom a

final order of a three judge district court imposes

individual injunctive relief, having appeared and objected

upon notification of the fairness hearing on a consent

decree proposed by named parties after constitutional

determination on the merits by the Court, are parties

entitled to maintain a _ direct appeal of such

constitutional determination to the United States

Supreme Court pursuant to 28 U.S.C. §1253.

This is a dual class action insisted upon by plaintiffs

and imposed upon defendants under Fed. R. Civ. Pro.

23(b)(2). Plaintiff-employees sought and _ obtained

individual declaratory and injunctive relief against each

and every one of some nine hundred insurance companies

and self-insured employer members of defendant class,

proscribing the use of a supersedeas procedure set forth

in §413(a) of the Pennsylvania Workmen’s Compensation

Act, Pa. Stat. Ann. tit. 77, $774 (Purdon Supp. 1984),

with liability for apportioned share of plaintiffs’

attorney's fee.

Having secured this result, after urging that there was

a violation of procedural due process under the

Fourteenth Amendment to the United States

Constitution by reason of an interim suspension of

workmen’s compensation benefits without prior notice

and opportunity to be heard, plaintiffs-appellees now

vigorously maintain that the appellants, as absent

defendant class members who were not furnished formal

notice of the proceedings, prior to the scheduling of the

fairness hearing, shall have no opportunity themselves to

be heard on the constitutional issue resolved against

them.

ss Daas ikl ii

Appellants did appear, object and argue at the fairness

hearing on the proposed consent decree entered into by

the named parties after the decision by the lower court.

In addition appellants did specifically note preservation

of the right to object to the entire constitutional

determination. (Apdx. 136a, 138a, 144a, 147a). Following

the court’s final order, granting both declaratory and

injunctive relief against each defendant class member,

appellants initially filed a protective appeal to the Court

of Appeals for the Third Circuit (Apdx. 84a), and then a

direct appeal to this Court (Apdx. 87a), both within the

required time.

As parties aggrieved by a final order of a three judge

court granting injunctive relief, appellants have an

evident statutory right to direct appeal to this Court

under 28 U.S.C. §1253. There is no law or logic to the

contrary. The cases cited by appellees are inapposite, nor

do they suggest any rational theory that would

recommend the position they advance.

In Carson v. American Brands, Inc., 450 U.S. 79

(1981), the district court denied a motion to enter a

consent decree proposed by plaintiff class and the named

defendants. Plaintiffs appealed to the circuit court where

the appeal was dismissed for want of jurisdiction. This

Court granted certiorari and held that the district court's

refusal to approve the consent decree had the practical

effect of refusing an injunction, which, with the

additional determination of irreparable consequences,

constituted an exception to the ‘final judgment rule,”

permitting appeal that should have been entertained by

the circuit court under 28 U.S.C. §1292(a)(i). Id. at 84-85.

The further language quoted in Carson, at 86, from

United States v. Armour & Co., 402 U.S. 673, 681 (1971),

relied upon by appellees, does not apply in context here.

In Armour, it was stated:

Consent decrees are entered into by parties to a

case after careful negotiation has produced

agreement on their precise terms. The parties waive

their right to litigate the issues involved in the case

and thus save themselves the time, expense, and

inevitable risk of litigation. ... Because the

defendant has, by the decree, waived his right to

litigate the issues raised, a right guaranteed to him

by the Due Process Clause, the conditions upon

which he has given that waiver must be respected,

and the instrument must be construed as it is

written, and not as it might have been written had

the plaintiff established his factual claims and legal

theories in litigation.

Id. at 681-682. Such comment by the Court not only fails

to support appellees’ contention, but indeed lends

inferential weight to, if not specific authority for,

appellants’ position as objecting members of defendant

class, with regard to the processing of the instant appeal,

since they did not negotiate, agree, consent or ‘‘waive

their right to litigate.”’

In Armour, the government was seeking to include a

subsequently-acquired company within the prohibitory

terms of the previous consent decree. This Court found

such effort to be unsupported by the precise terms of the

consent decree, and it was in such context that the

quoted statement was made about decrees entered by

agreement having constituted a waiver of the consenting

parties’ right to litigate the issues. In fact, then, Armour

does not contradict appellants’ right, as objecting

members of the defendant class, to litigate the issues

resolved against them.

<< —_

While opinions typified by Walsh v. Great Atlantic &

Pacific Tea Co., Inc., 726 F.2d 956 (3d_Cir. 1983), may

fairly be said to support a general, if not axiomatic,

proposition that courts favor settlement of complex

litigation, the merit of such consummation rather

obviously was not compelling here. Similarly, the

appellees’ basic assertion that ‘‘[t]he very reason why

litigants enter into settlements, by Consent Decree or

otherwise, is to avoid a judicial determination of the

merits of the underlying controversy,’’ Motion to

Dismiss at 10, is singularly inappropriate and strikingly

inapplicable. This case was not ‘‘settled’’; instead, it was

litigated for eight years, following which the court—not

the parties—made that very ‘judicial determination of

the merits of the underlyix.g controversy.” Jd.

In a fifty page majority and concurring opinion, the

lower court decided that the interim suspension

procedure in §413(a) of the Pennsylvania Workmen's

Compensation Act violates the due process clause of the

Fourteenth Amendment to the United States

Constitution. It was the declaratory and injunctive

implementation of that constitutional determination

against defendant class members that was then agreed

to by the named parties. Comments in cases reviewing,

not a judgment, but rather the propriety of a monetary

settlemegt to a plaintiff class are not controlling and are

hardly relevant here. Accord, Airline Stewards &

Stewardesses Ass'n v. Trans World Airlines, Inc., 630

F.2d 2164 (7th Cir. 1980), rev'd sub nom. Zipes v. Trans

World Airlines, Inc., 455 U.S. 385, 398 (1982), where this

Court rejected a supposed jurisdictional prerequisite, and

actually reversed the circuit court decision which had

denied an intervenor’s appeal after a class action

settlement providing monetary and seniority relief. The

earlier comment by the circuit court about the “virtue

which may reside in a compromise” had been made in

the context of ‘‘avoidance of wasteful litigation and

expense’”’ by effecting a settlement in lieu of pursuing a

decision on the merits. 630 F.2d at 1167. Here, however,

after eight years of litigation, a decision on the merits

was rendered by the lower court. In any event, in Zipes

tnis Court did in fact entertain the appeal to the extent

ef ruling on the jurisdictional question. Thus if the case

has any application here it is supportive of, and not

contra to, the instant appeal.

In those cases where the “fair, reasonable, and

adequate’ standard for a consent decree is stated, it was

in fact the fairness, reasonableness, and/or adequacy of

the consent decree that had been put in issue, but none

of the cases cited and/or relied upon by appelleos actually

support their contention that these appelants are

precluded from raising on appeal the merits of the

underlying controversy. Significantly, in Arm.:trong v.

Board of School Directors, 616 F.2d 305 (7th Cir. 1980),

though cited by appellees, is found an authoritative

statement on the very issue they raise, specifically

supporting the appeal filed by these appellants:

An unnamed class member who appears in response

to a Rule 23(e) notice and objects to a settlement

has a right to appeal from an adverse judgment.

Id. at 327. So too said the court in Research Corp. v.

Asgrow Seed Co., 425 F.2d 1059, 1060 (7th Cir. 1970);

see also 3B Moore's Federal Practice 423:80[5] (1982 and

Supp. 1984).

oss enaacaiieeieieainh eae

In the case at bar, it was only at the time of the

scheduled fairness hearing on the consent decree to

implement the court’s decision on the merits that Rule

23(e) notice of the proceedings was finally given to non-

named class members, with instructions as to method

4 and means of objection. Appellants duly appeared,

objected and argued, noting their intent to preserve their

right to question the entire constitutional determination.

It seems anomalous, if not incredible, in a case

| predicated upon a supposed deprivation of due process to

| an employee class complaining about absence of prior

notice and opportunity to be heard, for those employees

to argue now that non-named members of employer

class, though they objected at first notice of the

proceedings, nevertheless shall have no opportunity to be

| heard on the merits of a final constitutional

determination that visits both declaratory and injunctive

prohibition upon each one of them.

Such could hardly be a reasonable or required result.

Surely objecting employers and insurance carriers, as

members of the designated defendant class, must be due

and afforded ‘‘process’’ that includes a meaningful

| opportunity to be heard on the merits by timely appeal.

That seems implicit in this Court’s decision in United

Airlines, Inc. v. McDonald, 432 U.S. 385 (1977), where a

putative member of a class that had been denied

designation was permitted to intervene for purposes of

appealing that issue, following an agreed-upon award.

Appellees concede that appeal by these appellants did

lie on ‘‘whether the district court abused its discretion,

or misapplied governing legal precepts, in approving the

Consent Decree.’ Motion at 9. If so, then some form of

appellate review was to be had, and there would be no

logic whatever to suggest that in the case at bar, review

should vacuously consider only some element of fairness

of the remedy. This is not a case involving one issue on

the merits and a separate issue on damages, where

parties might accept an adverse result, but seek to

question some compromised award for or against them.

Here, the declaratory and injunctive relief proscribing

the use of the supersedeas procedure actually flows as a

direct continuation of and from the determination of

unconstitutional conduct. To question fairness of the

remedy would, by indirection, necessarily put in question

the constitutional basis for relief, and that is exactly

what these appellants seek to do directly in this appeal.

Moreover, any multiplicity of litigation that class

actions are thought or intended to avoic should be

recognized as horizontal in nature, to preclude collateral

duplication. But most assuredly and particularly class

action ‘“‘theory’’ should support, if not insist upon,

vertical completion of the litigation, to include thorough

and unrestricted appellate review by class members

affected adversely by the class determination.

Opportunity for such inclusive appellate review within

the required time does not prolong the litigation in chief

beyond what would be required if a named party were to

appeal, and serves to assure the basic and essential due

process fairness to be accorded to —all class

members—named and absent—before any class result is

imposed inexorably upon each and all of them.

There is no case law cited that precludes these

appellants from review of the lower court's constitutional

determination on the merits. All relevant statements,

comments and inferences, together with the weight of

common sense, logic and, indeed, due process itself, urge,

if they do not dictate, to the contrary. Appellants

therefore pray this Honorable Court to permit the

pending appeal on substantial constitutional issues to

proceed.

Conclusion

For the reasons stated, this Court should note probable

jurisdiction, deny appellees’ Motion to Dismiss or

Affirm, and permit the instant appeal to be heard on the

constitutional merits. g

Respectfully submitted,