Eldridge v. Provident Companies

11 Mass. L. Rptr. 413
CourtMassachusetts Superior Court
DecidedFebruary 15, 2000
DocketNo. 97-1099
StatusPublished

This text of 11 Mass. L. Rptr. 413 (Eldridge v. Provident Companies) is published on Counsel Stack Legal Research, covering Massachusetts Superior Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Eldridge v. Provident Companies, 11 Mass. L. Rptr. 413 (Mass. Ct. App. 2000).

Opinion

Toomey, J.

On December 20, 1999, these parties were before the court on the motion of plaintiff insurance brokers, Stephen F. Eldridge (“Eldridge”) and Cheryl Eberting (“Eberting”), for class certification in their action against defendants, Provident Companies (“Provident”), The Paul Revere Corporation (“Paul Revere”) and others (collectively, “defendants”).

On January 1, 1995, Paul Revere had reduced the commissions theretofore paid to its brokers when policyholders exercised riders to increase their disability coverage (“rider commissions”). In their original complaint, plaintiffs allege that the reduction in rider commissions violated both their individual Broker Agreements (“Agreements”) with Paul Revere and their rights under G.L.c. 93A, the Massachusetts Consumer Protection Act. Plaintiffs seek now to certify a nationwide class of several thousand Paul Revere brokers, many of whom live outside the Commonwealth of Massachusetts.

For the following reasons, plaintiffs’ motion for nationwide class certification will be ALLOWED.

BACKGROUND

Prior to 1991, Paul Revere paid each broker a 55% first year commission on every new disability policy the broker sold and a 5% commission for renewal of each policy during the second through tenth years of the policy’s term (“renewal commissions”). In 1991, the base rate for first year commissions was reduced to 50%; the annual renewal commissions remained at 5%.

An insured who purchased a disability policy also had the right to exercise certain riders designed to increase the amount of disability coverage in subsequent years.3 Prior to 1995, Paul Revere did not include rider commissions as part of its written commission schedule. The company did, however, treat such riders as new business, paying brokers a first-year commission for the year in which the rider was exercised, followed by 5% renewal commissions for the next nine years. Thus, brokers received first-year rider commissions of 55% prior to January 1, 1991 and 50% from January 1, 1991 to January 1, 1995.

On January 1, 1995, Paul Revere revised its commission schedule. The new schedule included disability rider commissions, providing a flat base commission of 10% for the first ten years after the rider was exercised. This 10% replaced the commissions Paul Revere had paid brokers for disability riders prior to 1991 and 1995. Thus, instead of receiving a commission of 50 or 55% the first year the rider was exercised, and 5% for the next nine years, after 1995 brokers received 10% for the first year and for each of the following nine years the rider remained in effect, even if the original disability policy had been issued prior to 1995.

Plaintiffs, who are not residents of Massachusetts, argue that this reduction in their commissions violated their Agreements with Paul Revere as well as G.L.c. 93A, which prohibits unfair or deceptive business practices. The parties agree that the Agreements prevented Paul Revere from reducing commissions “under any schedule” and from reducing commissions on “in-force” policies. They dispute, however, the proper interpretation of that contract language.

[414]*414Paul Revere contends that the language of the Agreements did not prohibit it from reducing commissions on disability riders because rider commissions were not explicitly included in any commission schedule prior to 1995 and because the exercise of new riders on existing policies could not be considered “in-force” policies.

The plaintiffs respond that Paul Revere included rider commissions under its commission schedule prior to 1995 by consistently treating the exercise of such riders as new business. They also argue that, because the riders increased the amount of coverage on existing disability policies, the riders constituted commissions on “in-force” policies. The brokers maintain, therefore, that their commissions on these disability riders were protected under the language of the Agreements.

This case centers on two major issues, to wit, the definition of “in-force” policies and the question of whether Paul Revere, prior to 1995, impliedly included rider commissions under its commission schedule. The proceedings on plaintiffs’ complaint will likely focus on those issues and the suit will turn on the resolution of the parties’ dispute on those points.

Plaintiffs now move for nationwide class certification of several thousand Paul Revere brokers pursuant to Mass.R.Civ.P. 23(a) and (b) and G.L.c. 93A, §11. Defendants respond that plaintiffs are not entitled to nationwide certification because the proposed action does not satisfy due process requirements for the certification of out-of-state plaintiffs and because individual issues predominate. At bottom, defendants maintain that plaintiffs’ efforts to obtain class certification are fatally flawed by the absence of an “opt-out” provision in the Massachusetts procedure and by the need for individualized attention to the circumstances of each prospective class member’s claim.

DISCUSSION

I. NATIONWIDE CERTIFICATION

The United States Supreme Court has addressed the issue of whether a state may certify a nationwide class of plaintiffs when that state does not permit prospective plaintiffs to “opt out” of the proceedings. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812 (1985). Where a state wishes to bind an absent plaintiff in an action for money damages, but does not have minimum contacts with that plaintiff, the state must provide the plaintiff with minimal due process protections, including notice, an opportunity to be heard, and the opportunity to remove oneself from the class. Id. at 812.4

Mass.R.Civ.P. 23(b), unlike its federal counterpart, does not afford a potential class member the opportunity to opt out of a class action. Defendants argue, therefore, that Shutts precludes a Massachusetts court from exercising personal jurisdiction over a nationwide class of plaintiffs. Id.

There are some situations, however, in which the law provides that an “opt-out” provision is not the sine qua non for certification of a nationwide class. The opportunity to opt out may not be required in those instances where a state can establish personal jurisdiction over all potential plaintiffs or where the quest for equitable relief predominates over the pursuit of money damages. Such is the case at bar.

A. Personal Jurisdiction

Where a state can establish personal jurisdiction over all potential plaintiffs, an opt-out provision is not essential to class certification if the other requirements of certification are satisfied. See In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 292 [2d Cir. 1992] (“Shutts mandates that a plaintiff be permitted to opt out of a proposed class when the court does not have personal jurisdiction over the plaintiff’).

At bar, plaintiffs contend that Massachusetts has established sufficient minimum contacts with all potential class members — thousands of brokers from many different states — to justify an exercise of personal jurisdiction by Massachusetts courts.

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Bluebook (online)
11 Mass. L. Rptr. 413, Counsel Stack Legal Research, https://law.counselstack.com/opinion/eldridge-v-provident-companies-masssuperct-2000.