Petition for Writ of Certiorari — Ballard v. Advance America

, _ Supreme Court, U.S.

FILED

No. 02 876DEC 4 2002

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ike LL alt

IN THE

Supreme Court of the Anited States

TERESA BALLARD, ET AL.,

Petitioners,

Vv.

PHYLLIS GARRETT AND ADVANCE AMERICA,

CASH ADVANCE CENTERS OF ARKANSAS, INC.,

Respondents.

ON PETITION FOR WRIT OF CERTIORARI

TO THE SUPREME COURT OF THE

STATE OF ARKANSAS |

PETITION FOR WRIT OF CERTIORARI

RICHARD A. FISHER DAVID G. NIXON

Counsel of Record

THE FISHER LAW FIRM

1510 STUART ROAD THE NIXON LAW FIRM

SUITE 210 2340 GREEN ACRES RD.

CLEVELAND, TN 37364 SUITE 12

TEL: (423) 479-7009 FAYETTEVILLE, AR 72703

TEL: (479) 582-0020

Counsel for Petitioners

4 tial a

QUESTIONS PRESENTED

Whether class member objectors who were denied

intervention have standing to appeal an order approving a

proposed settlement agreement.

Whether a denial of such class members’ right to appeal

violates their rights to due process and equal protection.

PARTIES TO THE PROCEEDING

Petitioners

Petitioners are Teresa Ballard, Kenisha Bryant, and

Cheryl King, individual citizens of the United States.

Ms. Ballard and Ms. King reside in the State of Arkansas and

Ms. Bryant resided there at the time this litigation

commenced. Ms. Bryant now resides in Texas. The

Petitioners have no corporate affiliations. The Petitioners

were objecting class members in the Circuit Court of Clark

County, Arkansas and the Appellants before the Arkansas

Supreme Court.

Respondents

Phyllis Garrett is an individual citizen of the United

States, residing in the State of Arkansas. Ms. Garrett was the

designated class representative in the Circuit Court of Clark

County, Arkansas and an Appellee before the Arkansas

Supreme Court.

Advance America, Cash Advance Centers of Arkansas,

Inc. (“Advance America”) is an Arkansas corporation and is

affiliated with numerous’. payday-lending _ entities

throughout the United States. Advance America was the

defendant in the Circuit Court of Clark County, Arkansas

and an Appellee before the Arkansas Supreme Court.

TABLE OF CONTENTS

SEY BIE TEED snc crccsssvscsosoecesssscnssnessescsostsessouossesonsanns i

PARTIES TO THE PROCEEDING........csssscsssscssssssscsssscssssesosseee ii

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SARE PTO EE IID o.cesssnvsssnzesnvssovcnsessnsinsnicscsndesonsseassoonnes v

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STATEMENT OF JURISDICTION .........sssscssssesssssessssssssseccossteoses 1

CONSTITUTIONAL AND STATUTORY PROVISIONS

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REASONS FOR GRANTING THE PETITION ....eseessesssseccssseese 6

I. The Decision of the Arkansas Supreme Court

Conflicts with Recent Precedent from this Court........6

A. Devlin v. Scardelletti Applies to Classes Containing

I 8

B. Devlin v. Scardelletti Applies to State Court

I la carci tio chincnlas inlesipanieshecesstarhcdieninanen 9

Il. The Appellate Rule of the Arkansas Supreme Court

Denies Equal Protection to the Petitioners and to All

Other Similarly Situated Litigants. .0....0........cssscsseesssse: 11

Ill. The Appellate Rule of the Arkansas Supreme Court

Denies Due Process to the Petitioners and to All

Other Similarly Situated Litigants. .0....00......cccssssescssse: 13

IV. This Question is Important due to the Potential Split

Developing in the Federal Circuits.....0.......cccsseccssessoes 15

V. The Petitioners were Denied Due Process by not

being Permitted to Examine Documents Presented to

and Considered by the Trial Court. .0.......ccccccsecssssssses 16

VI. The Question Presented is Important. ..........ccce.sssese00 17

CONCLUSION ......:.scssssssssssssssssssssnsessenesensnennsensrsnenesennsnnensnsensnes 18

APPENDIX IN SEPARATE VOLUME

APPENDIX A .....sescssessssscssssssccesessenesessansensnnanesnsnsenenasnnenennenss la

APPENDIX B...........+0+5 sesebcthenidentememorinacsnetenenecoateaenbennieeorsennennl 6a

APPENDIX C. .....ccscesscssessesssessscsssseseessensessasnssnnsersnssnsensensones 12a

APPENDIX D........essssesssesssssssensssnseseensensnesnsnsnneensansensaaanenens 14a

APPENDIX E.......escescesscessescesssssssssssssenensensenesscsvenseneseneneenes 21a

APPENDIX F .......escescessessessscescessssceseeessnsenenessesseaseeensensensenss 32a

iv

TABLE OF AUTHORITIES

Federal Cases

Boddie v. Connecticut, 401 U.S. 371, 376, 91 S.Ct. 780,

Fe Se CoM BAD (ROOD) whi sescsihtinesssesveninitbcniniiosnsabascesincnsiin 14

Devlin v. Scardelletti, 536 U.S. ---. 122 S.Ct. 2005, 153

Cea GE GIMME cstnbenssocovcsesseisansasebioasvensbebibssstittesoxasensan’ passim

Gideon v. Wainwright, 372 U.S. 335, 83 S. Ct. 792, 9

L.Ed.2d 799, 93 A.LR.2D 733 (1963)........cccccsesesssseessseeees 10, 14

Goldberg v. Kelly, 397 U.S. 254, 269-71, 90 S.Ct. 1011,

NOZ1=22, 25 UDG DBT (EDAD) visecicecsesesescceiseccnsesccscsosocevsveess 17

Gottlieb v. Wiles, 11 F.3d 1004 (C.A.10 1993).........cccessessesessesseees 9

Hansberry v. Lee, 311 U.S. 32, 61 S.Ct. 115, 85 L.Ed.

Ole TIE RTRs FO CE ossicinscsssevinseininsnansiicasinnctestsitants 9, 10, 13

Henderson v. General American Life Ins. Co., 122 S.Ct.

2584 (Mem), 153 L.Ed.2d 773 (2002) ..........:ssssescrsssssessssesseesees 9

In re General American Life Ins. Co. Sales Practices

Litigation, 268 F.3d 627 (8th Cir. 2001) ............ccscse0000 9,15, 16

In re Navigant Consulting, Inc., Securities Litigation,

SID Fae FO CAE, BO sisisissniensesescnishasinininabcisoneanrnesoee 16

Jenkins v. McKeithen, 395 U.S. 411, 428-29, 89 S.Ct.

1843, 1852-53, 23 L.Ed.2d 404 (1969).........cccscsessesssessesseseeees 17

Lindsey v. Normet, 405 U.S. 56, 77, 92 S.Ct. 862, 876

CUFT aiisinsceancivanieiebincsreiieseaieneinnversiosssiiniiniieenbsdibeciabatectionbeineatesske 13

Northeastern Florida Chapter of the Associated General

Contractors of America v. City of Jacksonville,

Florida, 508 U.S. 656, 666, 113 S.Ct. 2297, 2303, 124

ARE GEA aOR OR OO 11

Orr v, Orr, 440 US. 268, 99 S.Ct. 1102, 59 L.Ed.2d

SER IRE AEA EEE Dea ee ae 10, 14

Vv

Plain v. Murphy Family Farms, 296 F.3d 975 (10th

Cie, FITTED secccsnssevenonininssensnscnismnenniiuipiitiainiaiaenvestetiininesianncnensitens 16

Richardson v. Ramirez, 418 U.S. 24, 39-40, 94 S.Ct.

2655, 2664, 41 L.Ed.2d 551 (1974) ......scccsssescsssesesesesesnsees 10, 13

State of Minnesota v. National Tea Company, 309 U.S.

551, 557, 60 S.Ct. 676, 679, 84 L.Ed. 920 (1940) .........cscs00e 17

United States Catholic Conference v. Abortion Rights

Mobilization, Inc., 487 U.S. 72, 76, 108 S.Ct. 2268,

TOT LB. GD (SEG) cnscssosessserenscecereiqnonscsetvesosnbotannnqoavenseneoss 12

State Cases

Arkansas State Highway Commission v. Perrin, 240

Ark. 302, 305, 399 S.W.2d 287, 289-90 (1996) .........ccsseeseees 12

Dootson v. State, 2000 WL 1745267 (Ark. App. 2000) ............. 12

Hodges v. Gray, 321 Ark. 7, 901 S.W.2d 1 (1995)......seceseeeeenees 12

In re $ 3,166,199, 337 Ark. 74, 79, 987 S.W.2d 663,

666 (19D vere vecscorscocnsscsishiioniinnentichneniianiliabnstiiedannwinnnnsbeisnenanies 12

In the Matter of Allen, 304 Ark. 222, 800 S.W.2d 715

(RDDD) « evieresnesseorsncnnsiahieisinctebintinslinnelibilinianiaeiltacnthaape tein 12

McCoy v. Moore, 338 Ark. 740, 741, 1 S.W.3d 11, 12

(RODD. -nraserevinneseressctanieepeeingninncclt iillallaneianatiiaiamastiptlaeatalys 12

Ouachita Baptist College v. Scott, 64 Ark. 349, 42 S.W.

SOG CEBB7) x .-iscrnncereosecieihiniaieiepitpierblaiiainialantiedliteesitidlenlaDniaiiabbagbal 12

Federal Statutes :

9B UE III sicistenssnssiissanvaithscdecieaccuiniavebicealaooteles 1

UO. &. Capua PRM Ves iaverisicnsniesssinciacrrmnntinavbonvinceion 1, 7,10

U. S. Comat. Amie: FLY sevitectntetencsiginvesnmamniteeienneginin 1, 7, 10, 13

State Statutes

ACA: $164GMR ok ee 1,12

LA. 8 ai ikviinethectsininnarcteaviediiashoipaaiiimemia 1,12

Federal Rules

i ie a __ E n ee 9

State Rules

ee ee Ce 2,12

IE Wi iaitinstiinctpiiiiibilnanctictaciatintiica atid tees aia, 2,9, 11

Petitioners respectfully petition for a Writ of Certiorari to

review the judgment of the Arkansas Supreme Court in this

case.

OPINIONS BELOW

The original opinion of the Arkansas Supreme Court

(App. A at 1a) is reported at 349 Ark. 545, 79 S.W.3d 835

(2002). The opinion of the Arkansas Supreme Court denying

the Petitioners’ Petition for Rehearing (App. C at 12a) is not

reported. The opinion of the Circuit Court of Clark County,

Arkansas approving the proposed settlement agreement

over the objection of the Petitioners (App. B at 6a) is not

reported.

STATEMENT OF JURISDICTION

The judgment of the Arkansas Supreme Court was

entered July 5, 2002. The Arkansas Supreme Court entered

its order denying the Petitioners’ timely Petition for

Rehearing on September 5, 2002 (Glaze, J. not participating).

The jurisdiction of this court is invoked pursuant to 28

U.S.C. § 1257(a).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

This case involves the following statutory provisions:

1. U.S. Const., Amend. V. (App. E at 21a.)

U.S. Const., Amend. XIV. (App. E at 22a.)

A.C.A. § 16-11-302. (App. E at 24a.)

~~ Je

A.C.A. § 16-65-119. (App. E at 26a.)

5. ARK. R. CIv. P. 23(b) and (c). (App. E at 27a.)

6. ARK.R. APP. P. - Civil 2. (App. E at 29a.)

STATEMENT OF THE CASE

This appeal arises from an order of the Circuit Court for

Clark County, Arkansas, the Hon. John A. Thomas,

approving - over the Petitioners’ objection - a proposed

class action settlement agreement. (App. B at 6a.)

The case began on October 12, 1999 as a suit by

Respondent Garrett against Respondent Advance America,

Cash Advance Centers of Arkansas, Inc. (“Advance

America”). The case was certified as a class action on

April 9, 2001, simultaneous notice of .certification and

settlement was given on or about May 23, 2001, and the

Petitioners sought to intervene on July 6, 2001, which was

denied as untimely. The Petitioners timely objected to the

proposed settlement agreement, which proposed to pay

claiming class members and their counsel $ 750,000.00 and to

forgive all “NSF” checks (with alleged value of $ 550,000.00),

as being inadequate, unreasonable, and unjust.!

Ms. Garrett submitted financial information concerning

Advance America to the Court under seal and offered that

information into evidence. The Petitioners were denied an

opportunity to examine that information and objected to its

introduction. The Petitioners submitted evidence that the

amount of potential damages awardable to the class could

- range between $ 10,000,000.00 and $ 20,000,000.00, that

Advance America’s shareholders might be jointly liable for

those damages and that Advance America, that its 27

1 Respondent Advance America admitted in its Response Brief below

that the remaining NSF checks it was “forgiving” under the settlement

were actually worthless to Advance America, but might have value to the

class members who had already received cash for them. Petitioners

responded that whatever value was represented in those checks had been

conveyed independently of the proposed settlement.

sureties could be liable for a total of $ 1,350,000.00 of any

such award, and that its shareholders and sureties could pay

any amounts awarded at trial. The trial court quashed the

subpoena Petitioners issued to Advance America.

Over the Petitioners’ objection, on July 18, 2001, the trial

court approved the class action settlement agreement. (App.

B at 6a.) On August 10, 2001, the Petitioners appealed the

trial court orders denying intervention and approving the

settlement agreement.”

In their Opening Brief to the Arkansas Supreme Court, _

the Petitioners raised the issues of due process as applied to

class action proceedings. The Petitioners stated:

When determining whether a proposed

settlement agreement should be approved, the

burden is on the proponents of the agreement to

show that it is fair, reasonable, and adequate. In re

General Motors Corp. Pick-Up Truck Fuel Tank Products

Liability Litigation, 55 F.3d 768 (3rd Cir. 1995). This

makes sense since it is the proponents who allegedly

possess all of the facts underlying the negotiations

and who stand to benefit from the agreement.

Moreover, since the proposed settlement is intended

to have res judicata effect as to the absent class

members and class counsel bears a duty toward the

class, it is only right that class counsel be called upon

to demonstrate that the proposed settlement was the

2 The trial court subsequently entered an order requiring the Petitioners

to post a $ 750,000.00 supersedeas bond in the absence of any supersedeas

order. The Petitioners’ appeal of that order was similarly dismissed by the

Arkansas Supreme Court for lack of standing and is the subject of a

companion Petition for Certiorari, No. 02-426, now pending before this

Court.

Petitioners also have a Petition for Certiorari, No. 02-542, pending

regarding the Arkansas Supreme Court's initial adoption and application

of standards by which to gauge proposed class action settlement

agreements.

subject of vigorous and independent negotiation on

behalf of the class.

Due process requires nothing less. This Court

has previously held that due process considerations

are relevant in the class action context. See, e.g.,

Kemp-Bradford VFW Post 4764 v. Wood, 262 Ark. 168,

554 S.W.2d 344 (1977) (“We do not believe the rights

of the members of any class, whether alcoholic

beverages are involved or not, should ever be

determined without reasonable notice or without

evidence that parties are adequately representative of

the class.”); Ford Motor Credit Co. v. Rogers, 285 Ark.

64, 685 S.W.2d 145 (1985).

Petitioners’ Opening Brief to the Arkansas Supreme Court,

p. 2. This issue, as well as that of equal protection, was also

implied to the Arkansas Supreme Court by the Petitioners’

specific reference to Devlin v. Scardelletti, 536 U.S. —, 122

S.Ct. 2005, 153 L.Ed.2d 27 (2002), in Petitioners’ Motion to

Take Judicial Notice filed June 12, 2002 below. (App. D at

14a.)

On July 5.2002, the Arkansas Supreme Court dismissed

the Petitioners’ appeal of the order approving the settlement

agreement on the grounds that they had been denied leave

to intervene, were therefore not parties to the proceedings,

and hence had no standing as objecting class members to

appeal from that order. (App. A at la.) The court said:

However, because we found appellants did not

timely intervene, appellants do not have standing to

bring this appeal. In Devlin v. Scardelletti et al., WL

1270617 (June 16, 2002), the United States Supreme

Court determined that unnamed class members, who

have objected in a timely manner to approval of a

class action settlement at the fairness hearing, have

the power to bring an appeal without first

intervening, abrogating the lack of standing issue.

However, Devlin involves facts and issues that are

re ae NERO CN TL NN NO MOOT Te eee &

distinguishable from those presented by this appeal.

Specifically, Devlin addresses a question of law and

procedure arising under the Federal Rules of Civil

Procedure, and not under Arkansas law. Arkansas

Rule of Civil Procedure 23(b) differs from that of Rule

23(b) of the Federal Rules of Civil Procedure. In

addition, the petitioner in Devlin did not have the

ability to opt out of the settlement. Here, appellants

had the ability to opt out and instead elected to object

to the settlement and risk being bound by it, if

approved by the court over their objections.

Accordingly, the Devlin opinion is

distinguishable from this case on appeal, and this

court's opinion in Haberman v. Lisle, 318 Ark. 177, 884

S.W.2d 262 (1994), continues to be the controlling

precedent in Arkansas. In Haberman, the court found

that for unnamed class members to have standing to

appeal a class-action settlement in state court, those

class members must have intervened at the trial court

level. Haberman, supra. Non-parties and unnamed

members of the class who have failed to intervene are

precluded from appealing a class _ settlement.

Haberman, supra.

Throughout this litigation, appellants have

conceded that Haberman is the applicable and

controlling law. At a hearing before the circuit court

on September 5, 2001, counsel for appellants-stated

“[t]he Haberman decision from the Arkansas

Supreme Court makes it very clear that in order for a

party to appeal a settlement agreement, they must be

an intervenor. That is the law.” Appellants have

now changed their position and suggest that Devlin

gives them the ability to appeal the settlement

approval in this case without first intervening. We

disagree and continue to follow Haberman.

Unlike the petitioner in Devlin, appellants here

had the ability to opt out of the settlement and avoid

being bound by it. Indeed, appellants were ideally

positioned to opt out of the settlement because they

already had an action pending against Advance

America in federal court for the same relief as sought

by the class representative in this litigation. By

attempting to intervene at the last minute, rather than

opting out of a settlement to which they objected,

appellants willingly undertook the risk that their

motion to intervene might be defied for failure to

meet the requirements of Rule 24 (a) of the Arkansas

Rules of Civil Procedure, and that they would then

be bound by the settlement as approved by the circuit

court. Appellants’ strategic election not to opt out of

the settlement has left them without standing to

pursue this appeal. Therefore, by following

Haberman, appellants have no standing; thus the

appeal is dismissed. 3

Opinion of the Supreme Court of Arkansas. (App. A at 1a.)

The Petitioners asked the Arkansas Supreme Court to

reconsider its dismissal of their appeal of the trial court's

order approving the Respondents’ settlement agreement

(App. F at 32a) and that Petition for Rehearing was denied

on September 5, 2002 (App. C at 12a).

REASONS FOR GRANTING THE PETITION

I. The Decision of the Arkansas Supreme Court Conflicts

with Recent Precedent from this Court.

The Arkansas Supreme Court unequivocally held that

unnamed class members who have not successfully

intervened are without standing to appeal a trial court order

requiring them to post a supersedeas bond. The Arkansas

Supreme Court said:

However, because we found appellants did not

timely intervene, appellants do not have standing to

bring this appeal. In Devlin v. Scardelletti, et al., WL

1270617 (June 10, 2002), the United States Supreme

Court determined that unnamed class members, who

have objected in a timely manner to approval of a

class action settlement at the fairness hearing, have

the power to bring an appeal without first

intervening, abrogating the lack of standing issue.

However, Devlin involves facts and issues that are

distinguishable from those presented by this appeal.

Specifically, Devlin addresses a question of law and

procedure arising under the Federal Rules of Civil

Procedure, and not under Arkansas law. Arkansas

_Rule of Civil Procedure 23(b) differs from that of Rule

23(b) of the Federal Rules of Civil Procedure. In

addition, the petitioner in Devlin did not have the

ability to opt out of the settlement. Here, appellants

had the ability to opt out and instead elected to object

to the settlement and risk being bound by it, if

approved by the court over their objections.

(Emphasis added) (App. A at 3a.)

On June 10, 2002, this Court decided Devlin v. Scardelletti,

536 U.S. —-, 122 S.Ct. 2005, 153 L.Ed.2d 27 (June 10, 2002).

That case held, inter alia, that an unnamed class member who

timely objects to the terms of a class action settlement has

standing to appeal and is a “party” who may appeal. This

Court’s decision in Devlin was timely brought to the

attention of the Arkansas Supreme Court by the Petitioners

(App. D at 14a) and the issues it raised were considered and

ruled upon by that court. (App. A at la; App. C at 12a.)

The decision of the Arkansas Supreme Court in this case

specifically and categorically rejected Devlin, id. As a result,

it created in Arkansas a standard for objecting class

members that is not only inconsistent with Devlin, but (for

the reasons set forth there) denies them due process and

equal protection afforded under the Fifth and Fourteenth

Amendments to the United States Constitution.

A. Devlin v. Scardelletti Applies to Classes Containing

Opt-Out Provisions.

One reason given by the Arkansas Supreme Court for

distinguishing this case from Devlin is that it involved a non-

opt-out class while the class in the instant case contained an

opt-out provision. In explicitly rejecting Devlin, the

Arkansas Supreme Court said:

... the petitioner in Devlin did not have the ability

to opt out of the settlement. Here, appellants had the

ability to opt out and instead elected to object to the

settlement and risk being bound by it, if approved by

the court over their objections.

eek

Unlike the petitioner in Devlin, appellants here

had the ability to opt out of the settlement and avoid

being bound by it. Indeed, appellants were ideally

positioned to opt out of the settlement because they

already had an action pending against Advance

America in federal court for the same relief as sought

by the class representative in this litigation. By

attempting to intervene at the last minute, rather than

opting out of a settlement to which they objected,

appellants willingly undertook the risk that their

motion to intervene might be defied for failure to

meet the requirements of Rule 24 (a) of the Arkansas

Rules of Civil Procedure, and that they would then

be bound by the settlement as approved by the circuit

court. Appellants’ strategic election not to opt out of

the settlement has left them without standing to

pursue this appeal. Therefore, by following

Haberman, appellants have no standing; thus the

appeal is dismissed. (App. A at 3a-5a.)

With the utmost respect toward the Arkansas Supreme

Court, the Petitioners believe it misconstrued Devlin. This

Court spent only one sentence in Devlin referring to the

absence of an opt-out provision and did so only to

emphasize the correctness of the rest of its reasoning.

This Court subsequently held on June 17, 2002 that the

presence of an opt-out provision was a distinction without a

difference in applying Devlin. See, Henderson v. General

American Life Ins. Co., 122 S.Ct. 2584 (Mem), 153 L.Ed.2d 773

(2002), reversing and remanding In re General American Life

Ins. Co. Sales Practices Litigation, 268 F.3d 627 (8th Cir. 2001).

This result makes sense because a class member's standing

arises from the due process considerations that permit a

representative to adjudicate class members’ rights in the first

place, not as a result of whether there is an opt out

provision. See, e.g., Hansberry v. Lee, 311 USS. 32, 61 S.Ct.

115, 85 L.Ed. 22, 132 A.L.R. 741 (1940). Accordingly, the

Arkansas Supreme Court's rationale on this point must be

rejected.

Moreover, in granting certiorari “to resolve a

disagreement among the Circuits as to whether nonnamed

class members who fail to properly intervene may bring an

appeal of the approval of a settlement” (Devlin at 2008), this

Court used as an example at least one case that provided for

class member opt-outs. See, e.g., Gottlieb v. Wiles, 11 F.3d

1004 (C.A.10 1993). This implies to Petitioners that this

Court deemed the presence or absence of opt-out rights

immaterial in deciding this question.°

B. Devlin v. Scardelletti Applies to State Court

Proceedings.

The other reason given by the Arkansas Supreme Court

for distinguishing and rejecting Devlin is that Devlin dealt

with issues arising under FED. R. CIv. P. 23 while the instant

case arose under ARK. R. CIv. P. 23. The court said:

3 Potential confusion among the Circuits is already appearing over this

issue and will be discussed below.

However, Devlin involves facts and issues that

are distinguishable from those presented by this

appeal. Specifically, Devlin addresses a question of

law and procedure arising under the Federal Rules of

Civil Procedure, and not under Arkansas law.

Arkansas Rule of Civil Procedure 23(b) differs from

that of Rule 23(b) of the Federal Rules of Civil

Procedure.

Opinion of Arkansas Supreme Court. (App. A at 3a.)

That justification must also be rejected here. In the first

place, this Court has held that state class action rules are

subject to federal constitutional protections. Richardson v.

Ramirez, 418 U.S. 24, 39-40, 94 S.Ct. 2655, 2664, 41 L.Ed.2d

551 (1974); Hansberry v. Lee, supra. That would presumably

encompass both the due process and equal protection

guarantees arising under the Fifth and Fourteenth

Amendments. Gideon v. Wainwright, 372 U.S. 335, 83 S. Ct.

792, 9 L.Ed.2d 799, 93 A.LR.2D 733 (1963). The federal

constitutional issues of due process and equal protection

were timely raised by the Petitioners and were ruled upon

by the Arkansas Supreme Court, thereby allowing this Court

to exercise jurisdiction in this matter. Orr v. Orr, 440 U.S.

268, 99 S.Ct. 1102, 59 L.Ed.2d 306 (1979).

In the second place, the Petitioners submit that the issue

of one’s standing to appeal a decision arising out of a state

class action proceeding is not, strictly speaking, a Rule 23

procedural issue... It is an issue involving the substantive

principles of due process and equal protection. Due process

is involved since unnamed class members are entitled to

those protections before their rights may be affected in the

proceeding and equal protection is involved to the extent

they are denied the right to appeal otherwise afforded to

similarly situated litigants. If those rights are violated -

even under a state rule of procedure - this Court may

fashion a remedy.

10

Il. The Appellate Rule of the Arkansas Supreme Court

Denies Equal Protection to the Petitioners and to All

Other Similarly Situated Litigants.

Petitioners have standing to petition this Court for

redress of equal protection violations. See, e.g., Northeastern

Florida Chapter of the Associated General Contractors of America

v. City of Jacksonville, Florida, 508 U.S. 656, 666, 113 S.Ct. 2297,

2303, 124 L.Ed.2d 586 (1993). Even though the Petitioners

have a direct interest in the outcome of this litigation, the

Arkansas appellate rule in question will also affect all future

objecting class members in the State and will deny them

equal protection on several fronts: (1) Given their standing

as unnamed, objecting class members, they will be denied

appellate review that is being otherwise afforded to named

parties in class action proceedings; (2) They will be denied

appellate review that is being otherwise afforded to class

members in non-opt-out classes; and (3) As persons whose

pecuniary interests are affected by the fairness order, they

will be denied appellate review afforded to non-parties in

other contexts.

Named parties to a class action proceeding in Arkansas

or intervenors therein are afforded access to that state’s

appellate courts. See, e.g., Haberman v. Lisle, 318 Ark. 177 884

S.W.2d 262 (1994). The Petitioners have been denied

appellate review solely because they are non-intervening

unnamed class members. This illustrates the anomaly

inherent in this objectionable practice under Arkansas law:

ARK. R. Civ. P. 23(c)(2) requires that all classes be opt-out

classes, which means that all objecting class members will be

denied the right to appeal (unless they have been permitted

to intervene, of course) and left solely with the choice of

accepting what's offered under the settlement or opting out

and trying to obtain adequate relief independently of the

class. At the same time, ARK. R. CIV. P. 23(c)(4) provides

that the notice to them disclose that “any member who does

not request exclusion may, if the member desires, participate

in the litigation, either in person or through counsel”, while

these class members may - in the discretion of the trial court

11

- be denied participation “as parties”, i.e., intervenors, and

be denied access to appellate review.

In the broader context of non-class action proceedings,

the Arkansas Supreme Court has long recognized the right

of unnamed parties to appeal where their pecuniary interests

are affected by an order of a lower court. See, e.g., Ouachita

Baptist College v. Scott, 64 Ark. 349, 42 S.W. 536 (1897); In the

Matter of Allen, 304 Ark. 222, 800 S.W.2d 715 (1990) (trial

court's order directing witness to pay $ 10,000 toward care of

ward exceeded court’ jurisdiction); Hodges v. Gray, 321 Ark.

7,901 S.W.2d 1 (1995) (attorney for party permitted to appeal

criminal contempt citation against him); Arkansas State

Highway Commission v. Perrin, 240 Ark. 302, 305, 399 S.W.2d

287, 289-90 (1996) (“No one is aggrieved except the

[Highway] commission, and, whether technically a party or

not in the County court, appellant certainly is the one

affected by the court order. This court has long recognized

the right of one who feels aggrieved by an order of a court,

to appeal to a higher tribunal.”); In re $ 3,166,199, 337 Ark.

74, 79, 987 S.W.2d 663, 666 (1999) (appeal of Arkansas

Highway Patrol allowed to claim portion of res in

proceeding to which it was not a named party); McCoy v.

Moore, 338 Ark. 740, 741, 1 S.W.3d 11, 12 (1999) (appeal

dismissed because not timely filed); Dootson v. State, 2000

WL 1745267 (Ark. App. 2000) (witness cited for contempt

allowed to appeal).

This result is consistent with this Court's reasoning in

Devlin and other cases. See, e.g., United States Catholic

Conference v. Abortion Rights Mobilization, Inc., 487 U.S. 72, 76,

108 S.Ct. 2268, 101 L.Ed.2d 69 (1988). It is also consistent

with extant laws of Arkansas dealing with the right of

appeal. For example, Ark. R. App. P. - Civil 2 does not limit

the right of an appeal to a “party.” See also, A.C.A. §§ 16-11-

302 and 16-65-119.

12

’ This Court has stated:

When an appeal is afforded, however, it cannot

be granted to some litigants and capriciously or

arbitrarily denied to others without violating the

Equal Protection Clause. Griffin v. Illinois, supra;

Smith v. Bennett, 365 U.S. 708, 81 S.Ct. 895, 6 L.Ed.2d

39 (1961); Lane v. Brown, 372 U.S. 477, 83 S.Ct. 788, 9

L.Ed.2d 892 (1963); Long v. District Court of Iowa, 385

U.S. 192, 87 S.Ct. 362, 17 L.Ed.2d 290 (1966); Gardner

v. California, 393 U.S. 367, 89 S.Ct. 580, 21 L.Ed.2d 601

(1969). Cf. Coppedge v. United States, 369 U.S. 438, 82

S.Ct. 917, 8 L.Ed.2d 21 (1962); Ellis v. United States, 356

US. 674, 78 S.Ct. 974, 2 L.Ed.2d 1060 (1958).

Lindsey v. Normet, 405 U.S. 56, 77, 92 S.Ct. 862, 876 (1972).

The Petitioners are arbitrarily being denied the right to

appeal otherwise afforded named class members and

afforded persons whose pecuniary interests are affected

solely because of their status as non-intervening, objecting

class members. This misguided rule appears to be a relic of

the pre-Devlin confusion between the Circuit Courts of

Appeal on this issue that just refuses to pass away. No good

reason for this disparity is evident or can withstand

examination under the Fourteenth Amendment's gaze.

III. The Appellate Rule of the Arkansas Supreme Court

Denies Due Process to the Petitioners and to All Other

Similarly Situated Litigants.

If Petitioners are “parties” sufficiently to permit the trial

court to enter an order determining their rights, they ought

to be entitled to due process.

As stated above, this Court has held that state class

action rules are subject to federal constitutional protections.

Richardson v. Ramirez, 418 U.S. 24, 39-40, 94 S.Ct. 2655, 2664,

41 L.Ed.2d 551 (1974); Hansberry v. Lee, supra (“In all such

cases, so far as it can be said that the members of the class

13

who are present are, by generally recognized rules of law,

entitled to stand in judgment for those who are not, we may

assume for present purposes that such procedure affords a

protection to the parties who are represented though absent,

which would satisfy the requirements of due process and

full faith and credit.”); Gideon v. Wainwright, 372 U.S. 335, 83

S. Ct. 792, 9 L.Ed.2d 799, 93 A.LR.2D 733 (1963). The federal

constitutional issue of due process was timely raised by the

Petitioners and was ruled upon by the Arkansas Supreme

Court, thereby allowing this Court to exercise jurisdiction in

this matter. Orr v. Orr, 440 U.S. 268, 99 S.Ct. 1102, 59 L.Ed.2d

306 (1979). This Court has previously stated:

Thus, this Court has seldom been asked to view

access to the courts as an element of due process. The

legitimacy of the State's monopoly over techniques of

final dispute settlement, even where some are denied

access to its use, stands unimpaired where

recognized, effective alternatives for the adjustment

of differences remain. But the successful invocation

of this governmental power by plaintiffs has often

created serious problems for defendants’ rights. For

at that point, the judicial proceeding becomes the

only effective means of resolving the dispute at hand

and denial of a defendant's full access to that process

raises grave problems for its legitimacy.” (Emphasis

added.)

Boddie v. Connecticut, 401 U.S. 371, 376, 91 S.Ct. 780, 785, 28

L.Ed.2d 113 (1971).

The Petitioners were given notice of the proposed

settlement and their right to object to it and be heard. They

‘were denied the right to examine Advance America’s

financial information, which was central to the most

important settlement factor: The amount offered in

settlement compared to the potential judgment. The

Petitioners’ subpoena of Advance America was quashed.

The balance of the evidence offered by Garrett in support of

the proposed settlement was hearsay, yet it was approved in

i

14

the face of credible evidence that the case was worth far

more than the settlement offered. The trial court made no

specific findings of fact on the merits of the settlement from

which the appellate court could determine whether there

had been an abuse of discretion. Instead, the Petitioners

were simply denied appellate review entirely.

In essence, the Petitioners are being denied due process

because the Arkansas rules of standing are being used to

subject them to obligations in its judicial system, while

denying them access to the appellate courts.

IV. This Question is Important due to the Potential Split

Developing in the Federal Circuits.

As discussed above, the Arkansas Supreme Court

incorrectly relied on and misconstrued one sentence from

this Court’s decision in Devlin for the proposition that this

Court would have decided Devlin differently if it concerned

an opt-out class. The sentence relied upon is:

Particularly in light of the fact that petitioner had

no ability to opt out of the settlement, see Fed. Rule

Civ. Proc. 23(b)(1), appealing the approval of the

settlement is petitioner's only means of protecting

himself from being bound by a disposition of his

rights he finds unacceptable and that a reviewing

court might find legally inadequate.

Devlin, 122 S.Ct. at 2011.4

Subsequently, this Court reversed and remanded the

cases of In re General American Life Ins. Co. Sales Practices

4 This logic is no less compelling in the opt-out context where each class

member holds a small claim. Objectors in such cases act for the benefit of

the class no less than the named representative insofar as it is the class who

benefits from those efforts.

15

~~

Litigation, 268 F.3d 627 (8th Cir. 2001)5 (an opt-out case), and

In re Navigant Consulting, Inc., Securities Litigation, 275 F.3d

616 (7th Cir. 2001) (opt-out status unknown) both of which

involved appeals by objecting, non-intervening class

members. In General American, supra, on remand the Eighth

Circuit Court reviewed with approval the reasoning of the

Arkansas Supreme Court in the instant case for the

proposition that Devlin should not apply to opt-out classes

(dismissing on other grounds), while the Tenth Circuit Court

has applied Devlin without any attempt to distinguish it on

that basis. See, Plain v. Murphy Family Farms, 296 F.3d 975

(10th Cir. 2002). -It is apparent, therefore, that at least one

Circuit Court of Appeal, the Eighth, is already tempted not

to follow Devlin in the context of opt-out classes and that a

split may already be developing.’

V. The Petitioners were Denied Due Process by not being

Permitted to Examine Documents Presented to and

Considered by the Trial Court.

When the trial court received financial information from

Ms. Garrett and/or Advance America under seal, it should

not have considered it for purposes of decision without

giving the Petitioners-an opportunity to examine it and test

its authenticity, relevance, and probative value. Ms. Garrett

and Advance America laid no foundation for the admission

of that evidence and Petitioners timely objected to it and

requested an opportunity to examine it and argue from it.

The denial of that examination was a violation of the

5 See, Henderson v. General American Life Ins. Co., 122 S.Ct. 2584 (Mem),

153 L.Ed.2d 773 (2002).

6 See, Grimes v. Navigant Consulting, Inc., 122 S.Ct. 2584 (Mem), 153

L.Ed.2d 774 (2002).

7 The Eighth Circuit’s decision in Croyden Associates v. Alleco, Inc., 969

F.2d 675 (8 Cir. 1992) was the basis for the Arkansas Supreme Court's

decision in Haberman v. Lisle, 318 Ark. 177, 884 S.W.2d 262 (1994).

Haberman (and by implication, Croyden) is still the basis for the Arkansas

Supreme Court's decision below.

16

Petitioners’ due process rights. Goldberg v. Kelly, 397 US.

254, 269-71, 90 S.Ct. 1011, 1021-22, 25 L.Ed.2d 287 (1970);

Jenkins v. McKeithen, 395 U.S. 411, 428-29, 89 S.Ct. 1843, 1852-

53, 23 L.Ed.2d 404 (1969).

Given the fact that the class’ underlying claims were

based on violations of the Arkansas Constitution’s

prohibition against usury (which provides for double

damages and forgiveness of outstanding debt), the contents

of those records were directly relevant to the amount of

damages the class might recover as well as to Advance

America’s ability to pay. Both of these factors are central to

consideration of the adequacy of a class action settlement’s

terms. Moreover, to the extent those documents might

reveal payment of dividends or other transfers to Advance

America’s shareholders, they could have shed some light on

the ability of those parties to pay an eventual judgment.

The absence of any meaningful findings arising from the

hidden financial records is further grounds for finding a

violation of due process. Goldberg v. Kelly, supra at 271, 1022.

VI. The Question Presented is Important.

This Court has stated that it, and not the state courts, is

to be the final arbiter of federal constitutional questions and

may make such disposition of the case as justice requires.

State of Minnesota v. National Tea Company, 309 U.S. 551,

557, 60 S.Ct. 676, 679, 84 L.Ed. 920 (1940).

The rule adopted by the Arkansas Supreme Court as to

non-intervening objecting class members eliminates their

access to the appellate courts of the State for all purposes

and will affect their rights in all future class litigation. The

fact that the Arkansas Supreme Court's opinions dismissing

8 Advance America’s shareholders and sureties were released under the

settlement agreement even though they had not been sued and

contributed nothing toward the settlement fund. Petitioners argued this

result was inequitable to the class.

17

the Petitioners’ appeals of the trial court orders approving

the settlement agreement and ordering a supersedeas bond

have been designated for publication demonstrates that

court’s intention to apply those decisions in future class

action litigation. | Moreover, those decisions ignore

completely the denial of due process resulting from the

Petitioners’ preclusion from examining Advance America’s

financial information.

Objecting class members or class members subjected to

other orders of the trial court cannot predict with any

certainty whether they will be allowed to intervene and yet

they will continue ts be subject to orders affecting their

property or liberty interests. If intervention is allowed to

remain as the key to the Arkansas Supreme Court's

chambers, these class members’ due process and equal

protection rights will be granted or denied in the discretion

of the trial court. Petitioners, in No. 02-542, have also

requested this Court to ensure that there be objective

standards by which to judge the exercise of such discretion.

These rights should be absolute and assured to all who are

affected by those proceedings.

CONCLUSION

If the Petitioners, who timely objected to the proposed

settlement and appealed from the order approving it, have

enough standing for due process to permit a trial court to

enter its order determining their property rights and cutting

off their ability to sue non-parties (Advance America’s

shareholders and sureties), it is a denial of due process to

deny them an opportunity to be heard on appeal. Moreover,

since the courts of Arkansas permit appeals by named class

members and defendants in class actions and by non-parties

whose pecuniary and liberty interests are implicated by a

trial court's order in other settings, the Petitioners and all

future objecting class members are being denied equal

protection under the law if they are arbitrarily denied the

same rights of appeal.

18

The Petitioners respectfully request this Court to enter its

order reversing and remanding these proceedings to the

Arkansas Supreme Court for proceedings in conformity with

this Court's ruling.

>: ea em eee:

——

David G. Nixon

THE NIXON LAW FIRM

2340 Green Acres Road, Ste 12

Fayetteville, AR 72703

Tel: 479-582-0020

Fax: 479-582-0030

Richard A. Fisher, Esq.

THE FISHER LAW FIRM

1510 Stuart Road, Ste 210

Cleveland, TN 37364-0191

Tel: 423-479-7009

Attorneys for Petitioners

Teresa Ballard, Kenisha Bryant,

and Chery] King

s:\check cashing cases\state actions\ garrett v. advance america, no. ca 01-1190

(appeal-settlement) \ u.s. supreme court\ certiorari, petition.doc

19

APPENDIX

The Appendix is in a separate volume submitted herewith.