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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