(251) 299-0101

CLASS ACTION - PERDUE V. GREEN

Perdue v. Green, [Ms. 1101337, Mar. 16, 2012] and Motlow v. Green, [Ms. 1101506, Mar. 16, 2012] __ So. 3d __(Ala. 2012); In these consolidated appeals, the Supreme Court of Alabama held that the trial court exceeded its discretion by approving a class action settlement concluding litigation related to the Alabama Pre-paid Affordable College Tuition trust fund ("PACT"). In 2009, Alabama's Treasurer issued a letter to purchasers of PACT contracts informing them that the downturn of the stock market had negatively impacted the assets of the PACT trust fund, but indicating that the PACT board remained committed to honoring the PACT contracts and that the PACT board was investigating options and exploring opportunities that would allow PACT benefits to be consistently paid. In response to the State Treasurer's disclosure, several lawsuits were filed against the PACT board, including a class action in which Plaintiffs requested a declaratory judgment construing the respective rights and obligations under the PACT contracts and controlling statutes. While the class action was pending, the legislature enacted Act No. 2010-725, Ala. Acts 2010, which, among other things, amended the statutory provisions relating to the PACT program to provide annual appropriations to the PACT trust beginning in 2015 and continuing through 2027. In response to the passage of Act No. 2010-725, the PACT board filed a motion seeking to dismiss the plaintiffs' claims on the grounds that "the recent legislation [had] rendered [the] plaintiffs' claims moot." After a hearing, the trial court denied the PACT board's motion without explanation. In December of 2010, the trial court entered an order of class certification. On May 5, 2011, the parties submitted a joint motion along with a proposed settlement and requested the trial court approve a proposed class action settlement agreement. The same day, the trial court entered an order preliminarily approving the proposed settlement agreement and setting a fairness hearing. Thereafter, numerous written objections were filed with the trial court by class members. However, on July 27, 2011, the trial court entered a final judgment approving the proposed settlement agreement. Following the entry of the trial court's judgment, Purdue, one of the objectors, filed a notice of appeal. On appeal, the Court held that, although Act No. 2010-725 encouraged the PACT board members to make changes, it limited such changes to ones that would not violate existing contractual relationships. It was undisputed that the terms of the settlement agreement altered the contract of each PACT contract holder and that the objectors did not consent to any change or waive any of their statutory rights. The Court held that the Legislature had placed specific limitations on the board's authority to craft solutions including prohibitions on violating the contractual relationships provided to the PACT holders. Therefore, the Court held that the trial court exceeded its discretion in approving the settlement agreement and, therefore, the settlement was void and due to be vacated.
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