*1 SOUTHWESTERN BELL COMPANY, Petitioner,
TELEPHONE INC.,
MARKETING ON HOLD d/b/a Analyst, Tariff
Southwest
Respondent.
No. 05-0748.
Supreme Court of Texas. 22,
Argued March 2007.
Decided Feb. 2010.
Rehearing May Denied *4 Liddell, LLP,
& Loegering, Weston C. Luce, LLP, Hughes & D. Christopher Kratovil, LLP, Dallas, &K L Cyn- Gаtes Malone, Parr, F. thia M. Richard San An- tonio, for Petitioner. O’Quinn,
John M. Russell T. Lloyd, Jon- Stoger, athan Scott O’Quinn Law Firm, Hill, Bray, Thomas J. Hill Marcus & Hill, P.C., Holman, David W. The Holman Firm, P.C., Houston, Vela, Law Manuel M. Harlingen, Jr., Ernesto Gamez Browns- ville, for Respondent.
Justice WAINWRIGHT delivered *5 opinion of the Court in which Justice HECHT, GREEN, Justice Justice JOHNSON, and joined. Justice WILLETT In this interlocutory appeal aof trial order, court’s class certification the class assignments obtained claims that the telephone defendant com- pany improperly charged some of its busi- ness customers certain fees. The appeals court of affirmed the state- 814, wide class certification. 170 S.W.3d We conclude that provide are valid and standing, that representative’s typical claims are claims, the other class members’ and that questions common or predomi- law fact However, putative nate. because representative failed to establish class, adequately represents we re- judgment verse the appeals of the court of decertify the class. I. Factual and Procedural Background Hatehell, Hatchell, Molly Mike A. H. LLP, Liddell,
Locke Lord Bissell & Aus- Telephone Company tin, (Southwestern Dove, Bell) Christopher Benjamin Locke telephone provides Liddell, LLP, Houston, Lord Bissell & packages service to its businеss custom- Castaneda, Kirsten M. Locke Bissell compensate Lord ers.1 To municipalities for 15(d) 1934, wholly-owned Exchange 1. Southwestern now a Bell is of the Securities Act T, T, subsidiary of AT & Inc. See AT for & Inc. Year Fiscal Ended December (Form 10-K), 1-8610, Report Annual 13 or Pursuant Section File No. Exhibit municipal fees. STA neither subscribed rights-of-way for tele- maintaining public services, municipalities telephone assess Bell’s service phone Southwestern class, Bell un- against fee Southwestern proposed annual in the packages at issue “Specified Payment,” Annual der various at issue. paid any disputed nor fees See, e.g., Browns- or “SAP” ordinances. four-day cer- The court conducted a trial 95-1296, ville, Tex., § (July Ordinance twenty- hearing tification and issued a 1995). ordinances authorize The eight page certifying order class. charge Bell to its customers Southwestern class is as: defined fee, provided share of proportionate profit persons assign- Bell does not or Southwestern All and entities their charge. from the Id. payment(s) to ees who made Southwest- Telephone Company ern Bell Hold, Marketing d/b/a charges which were characterized (STA), Analyst provides auditing Tariff or Southwestern Bell’s bill statement telephone of business bills and services “municipal charge” “municipal or sur- adjust- in seeking its customers assists fee,” charge” similar “municipal or telephone companies for im- ments (hereinafter designation collectively re- In proper billing practices. the course of at a “municipal charge”), to as a ferred Bell tele- auditing several Southwestern charge time service customers, when customer’s discov- phone bills upon “municipal charge” such which mu- ered that Southwestern assessed *6 imposed, provided municipality a nicipal fees for services STA claims were having in the of Texas a[n the 1991 located State exempted by ordinances from to assignment agree- 1998. into ordinance.... SAP] STA entered five its customers2 con- ments with of part and all or of the such so-called per assignment. of ten sideration dollars charge” upon ... “municipal was based provide The that the assignments further by charges customer service made customer-assignors seventy receive would in the [services SWBT for included percent thirty percent and STA retain of SmartTrunk, Loop, Ho- Digital and Bell recovery from Southwestern that subscription packages].3 tel/Motel subsequently filed a obtains. that the satis- trial court found class suit, plaintiff, against as named numerosity, typicali- commonality, fied sought desig- Bell and tо be Southwestern re- ty, adequacy representation and of approxi- nated for representative 42(a) quirements of rule of the Texas 6,900 of Bell business mately Southwestern ques- and Rules of Procedure that Civil customers. STA asserted claims for tions of or fact common the class contract, enrichment, law unjust breach of services, questions over un- express warranty predominated individual breach of (now 42(b)(4) 42(b)(3)). per negligence illegally charging and se for der then-rule rule (filed 25, 2009) principal incur (describing Feb. service allows hotel or motel to T, Inc.). basis, of charges allowing subsidiaries AT& per-call on a thus guests telephone receive and local make 2. The five customers are Russell & Smith Digital Loop charged calls to the and room. Inc., Ford, United Services Automobile Asso- makes Smart Trunk describe an interface that Bank, ciation, Riverway Engineer- Petrocon single telephone com- connection with ing, Engineering. & B and S provides with pany then the customer twenty-three telephone channels for commu- pro- these Each of terms describe a service nication. vided Southwestern Bell. The Hotel/Motel filed, court also found that STA had time suit is without regard The trial of the standing proceed on behalf class claims.” M.D. Anderson Cancer Ctr. Novak, (Tex.2001). proper representative and was a 52 S.W.3d assigned claims. owner requirement “The in this State appealed Southwestern a plaintiff have standing to assert a interlocutory trial court’s certification or claim derives from the Texas Constitu der, appeals and the court of affirmed. separation powers tion’s among the de See Tex. Civ. Prac. Rem.Code & partments government, which denies 51.014(a)(3). § Southwestern Bell subse judiciary authority to decide issues Court, quently complaining petitioned abstract, Open Courts in affirm appeals that the court of erred provision, provides which only court access ” ing Specifi the class certification order. ‘person to a an injury done him.’ (1) cally, Bell challenges: Southwestern Inman, DaimlerChrysler v. 252 S.W.3d ability standing represent and its (Tex.2008) (quoting Tex. Const. (2) adequately; the class whether STA’s 13). 1, § art. We have held that this re (3) class; typical claims are actions; quirement applies equally to class questions predominance of common where therefore, the class must be allegedly require several claims individual a member of the class and have individual proof ized of reliance and the assessment Anderson, standing to sue. M.D. damages requires individualized review at 710-11. custоmer bills other records. We argue Southwestern Bell does not granted petition Bell’s were invalid due to the review the trial court’s class certification legal precepts necessary absence of the under an abuse discretion standard. create binding assignment— contractual Schein, Stromboe, Henry Inc. v. meeting of the minds and consideration. (Tex.2002). 675, 691 *7 Mills, Inc., v. Hathaway Gen. 711 S.W.2d (Tex.1986). 227, Instead, 228 Southwest- Standing II. ern Bell claims assignments are argues that the contractually contrary invalid as assignments under which STA claims against public SAP ordinances and as poli- standing are void as a matter of law cy. arguments We address those in turn. and, therefore, public policy, no has ability standing to sue or to serve as the The ordinances contain representative. Rule “anti-assignment” 42’s clauses that bar the “[B]efore as considered, requirements are a signment “any right named of that accrues from ordinance,” plaintiff satisfy must first the including threshold the claims assert See, requirement standing by e.g., of individual at the ed STA in case.4 this Browns- subject 4. The relevant text in the ordinance is as tem to the restrictions set forth follows: herein ... SECTION 13—ASSIGNMENT OF ORDI- SECTION 1—PURPOSE NANCE Texas, Pursuant to laws of the State of any rights Ordinance, privileges This Ordinance and or the CITY Charter and assignable any hereunder shall not be TELEPHONE COMPANYhas the NON-EX- entity right exрress without the privilege CLUSIVE other consent of to USE the public the CITY. Such consent shall be evidenced RIGHTS-OF-WAY in the CITY for operation by sys- fully of a which recite the telecommunications ordinance shall 916 95-1296,
ville, Tex.,
§
(July
assignability
of a cause of ac
Ordinance
The
1995).5
18,
preclude
The clauses
South-
generally freely permitted,
tion is
but as
assigning
Bell from
other
western
signments may
public
be invalidated on
entity
“rights
privileges,”
or
defined
policy grounds.
In re Prudential
Ins. Co.
“right
privilege
the ordinance as
Am.,
124,
(Tex.
148 S.W.3d
129 & n. 11
of
Id.
public
RIGHTS-OF-WAY.”
USE
2004) (“As
rule, parties
right
have the
13,
§§
of the anti-
plain language
see fit
they
long
contract as
as their
assignment
preclude assignment
clauses
agreement
pub
does not violate the law or
rights-of-way,
assignment
use of the
not
policy.”);
lic
State Farm Fire &
v.
Cas. Co.
damages
improper charges.
claims for
696,
(Tex.1996)
Gandy, 925
707-19
Moreover,
anti-assignment
clauses bar
(listing
invalidating
cases
assignments);
only
assigning,
Southwestern Bell from
(Second)
Restatement
of ContRacts
the customers of STA or of Southwestern
317(2)(b) (1981)(“A
§
right
contractual
can
anti-assignment
Bell. The
clauses do not
assigned
assignment
be
unless ...
Bell’s customers
prevent Southwestern
by
inop
forbidden
statute or is otherwise
assigning
claims for these over-
grounds
public policy.”);
erative
see
charges.
Servs.,
also Cordes & Fin.
Inc. v.
Co.
A.G.
Sons, Inc.,
contractually Edwards &
Because STA holds
F.3d
(2d Cir.2007)
assignments,
steps
into the
(holding
assignees
valid
and is
shoes
claim-holders
consid
necessarily antagonistic solely
are not
be
ered under the law to have suffered the
status,
assignee
cause of their
which sal
injury
assignors
same
as the
and have the
vages
might
claims that
otherwise be lost
ability to pursue
Holy
same
the claims.
transferring
claims “to someone
Wolf,
Cross Church God Christ
better
willing
pursue
able more
(Tex.2001);
see also Vt.
risk”).
claim or to undertake the
haveWe
Agency Natural Res. v.
States
United
assignments
invalidated
in
tend to
Stevens,
765, 773,
ex rel.
529 U.S.
120 S.Ct.
prolong litigation unnecessarily,
crease or
(2000).
1858, 146L.Ed.2d 836
tend to
litigation process,
distort the
or are
otherwise inconsistent with the purpose of
argues
Southwestern Bell also
statutory
cause
action. See PPG In
should be invalidated on
dus. v.
Ctrs. Partners Ltd.
JMB/Houston
public policy grounds. Southwestern Bell
*8
(Tex.2004)
79,
P’ship, 146
87 n. 31
S.W.3d
allowing
assignee
pur
contends that
to
(providing specific examples of types of
right
chase the
to serve as the class repre
law);
assignments prohibited under Texas
“entrepreneurial
sentative will result
in
(holding
see also id. at 92
assign
the
actions,”
or the commercial market
ment of a Texas Deceptive Trade Practices
ing
representatiоn.
of class
Because this
Act claim to a non-consumer was inconsis
would undermine the
of the
purpose
statutory
tent with the
device,
purpose); Gandy,
argues,
action
Bell
Southwestern
(prohibiting assign
917 abuser).6 proposed with her suit collude settlement vanquish against would claims Southwest- financial already had a substantial been adjudicated.7 ern that had not in Southwest against the claims interest The trial court excluded the claims at is- assignments. prior ern Bell Cf. in this the By sue case from settlement. Baker, 157, v. Mallios 11 S.W.3d 170 assignments, purchased these (Tex.2000) in (assigning proceeds interest customer-assignors’ “right full or interest to legal malpractice claim disinter from in the Claims” in in exchange this case party). dispute third Prior ested “a reduction of the pre-existing consulting case, STA customers represented hаd fifty percentage” thirty fee per- years in an at Bell for assignments cent.8 Although the also con- overcharges to recover on tempt alleged veyed authority the “sole for decisions phone the five their bills. STA and cus regards with prosecuting settling by tomer-assignors consulting were bound Claims,” the did not convey agreed contracts which STA audit status, representation as Southwest- bill in telephone exchange the customers’ ern Bell contends. Because STA had (50%) of all “fifty percent recovered relationship with pre-existing assign- overcharges, through whether recovered ors that directly was related to the sub- purchased refunds or credits.” STA as claims, of the ject appear STA does not signments of claims in this case after it a “stranger/entrepreneur” be whose ac- the trial disrupt convinced court another class tions the class suit vehicle and Smith, 240, hearing. also Elbaor v. 845 S.W.2d STA intervened at See the fairness (Tex. 1992) Mary dropped agreement (prohibiting objection Carter once an 247-48 was settling agreements scope reached that because the defendant narrowed of the Mí- plaintiff apparently incentivized with the reles to collude settlement to exclude release defendants); against remаining Int'l Pro claims of Southwestern Bell's business Co., Corp. paid municipal pursuant v. teins Ralston-Purina customers who fees 932, (Tex.1988) assignment (prohibiting types telephone pack- to the three service plaintiff's against ages action cause of one issue in this case. joint tortfeasor to another tortfeasor who had plaintiff's injury); contributed to the Trevino 8.Specifically, assignments convey Turcotte, 682, (Tex. 1978) remedies, interests, v. 564 S.W.2d "rights, customer’s bene- assignment right (prohibiting fits, action, defenses, claims, to chal choses in de- lenge lawsuits, liens, a will to taken mands, debts, collateral, those who had under the dam- will); Groce, Hebdon, Zuniga covenants, & actions, Locke ages, agreements, cross- (Tex.App.-San actions, counterclaims, claims, Antonio third-party ref'd) (prohibiting assignment legal nature, writ against causes of action malpractice it "would claims because cause a The claims are [Southwestern based Bell].” " positions each reversal taken set of 'municipal charges’ ... [that] were not clients”). lawyers and by municipal imposed authorized or ordi- agreement nance or franchise re- *9 consulting lating company public [Southwestern Bell’s] another hold to use of assignments agrees right-of-ways.” pay of claims in a relatеd class action the cus- brought tomer-assignors percent pro- the settlement in the 357th District Court "70 of net recovery County, any the of Cameron Texas. The claims in ceeds from on Claims as part assigning case this were carved out another class consideration to STA brought by remaining action Míreles and Patricia in the Claims.” "Net Jose interest against proceeds recovery any on the Genuchi Southwestern Bell for im- Claims” is (in funds) by recovery good proper paid approximately "any defined re- fees as court, Bell ceived five million Southwestern business and on the Claims less STA’scosts of fees, offsets, expenses, attorneys' any in After a in- residential customers Texas. settle- (the settlement) reached, recovery pursuing curred in on the ment Míreles Claims.” 918 Cordes, at 170 to 502 at judicial process.
distort the id. be considered. F.3d Cf. (“[A]n (Hecht, J., 103-04. concurring) assignment legal malpractice an interest in a claim in Certainly, class actions are not if the contrary public policy assignee is tended to serve as vehicles for commercial purely takes the interest as an invest- in large investment desired recoveries or
ment unrelated to other transaction entrepreneurial avenues business acquires merely a financial inter- development. To extent con those a significant right est outcome but suit, in a cerns exist courts of this prosecution of control over the of the state on must scrutinize circumstances claim.”) added). (emphasis case-by-case basis to determine if the
arrangement undermines the tenets and
argues
purpose of the class action vehicle or oth
representation
litigation
STA’s
distorts
Mallios,
public policy.
erwise violates
See
process
legitimate goals
J.,
and flouts the
(Hecht,
concurring)
that the Federal Rules of Civil Procedure should, ern Bell contends we that STA’s shall not “abridge, enlarge modify” assignments are on public policy void preexisting rights). But these togo issues grounds, we abrogate would STA’s individ adequacy STA’s representa as the class standing bring ual its claims as either a tive, below, up matter we take not the putative member of the class as defined validity assignments holds. The the trial court or in an individual lawsuit. distinction, court in recognized Cordes standing change individual does not noting validity standing based whether it asserts that *10 in “hаrdly that case was the end of the member, as a class support its bid to matter,” and that other certification re seiwe representative, class or as quirements, including adequacy, litigant. standing require- remained individual
919
Daccach,
ments remain the same because each class
cess clauses of the United States and Tex- Southwestern Bell’s remaining as Constitutions to ensure that plaintiffs, arguments on standing concern whose represented STA’s des interests are by anoth- er, ignation representative. as class have notice and an Howev opportunity to be er, heard in whether plaintiff proceedings the named proper is a that the class representative representative adequately represents is part of the their Daccach, interests. Anderson, at standing inquiry. 455-58 M.D. Lee, (citing Hansberry v. U.S. 42- Assignee-class representa 43, 45, (1940)). 61 S.Ct. L.Ed. undoubtedly tion raises concerns about the Southwestern Bell claims that STA fails potential for misappropriation of the class rule 42’s typicality and adequacy require- device, and, above, action as discussed ments, but challenge dоes not numerosity potential implicates for abuse public policy or commonality. However, concerns. rep evaluate class A representation
resentatives whose class action may satisfy ei must also at least 42(b). ther threaten or one of the requirements further the proper use of rule Here, STA class actions claims the class rights and the action satisfies absent class 42(b)(3), members, rule requires which we employ “ques- legal well-established tions of law or fact common to the mem- adequacy, mechanisms-the predominance, bers of the predominate any over typicality requirements. questions affecting only individual mem- Accordingly, we decline to invalidate the bers” and that class treatment is “superior public policy grounds. to other available methods for the fair and Having concluded that STA has standing, adjudication efficient controversy.” of the we turn to the merits of Southwestern Daccach, 217 S.W.3d at (citing 438-39 petition Bell’s pro- and the —whether 42(b)(3)). “Rule 42 contains Tex.R. Civ. P. posed satisfy requirements in a list of non-exhaustive factors to aid a Texas Rule of Civil Procedure 42. (b)(3) court in determining if certification (A) appropriate: the interest of mem-
III. Rule 42 bers of the in individually controlling prosecution or separate defense of ac- All class satisfy actions must four (B) tions; the extent and nature requirements: litigation concerning the controversy al- (1) numerosity class is so numer- ready against commenced members —the joinder ous that all (C) class; members is im- of the the desirability or unde- (2) practicable; commonality are sirability of concentrating the litigation of —there questions of law or fact common to forum; (D) the claims in the particular (3) class; typicality claims or de- likely difficulties to be encountered in the —the fenses of the representative parties management are of a class action.” Id. at 439 typical 42(b)(3)). claims or (citing defenses of the Tex.R. Civ. P. (4) class; adequacy of representa- Typicality A.
tion—the parties will fairly adequately protect the inter- For a proper class certifica ests tion, class. 42 requires rule that “the claims or
920 theo- parties overcharges legal of the are based on the same representative
defenses class; therefore, typical of the claims or defenses of the ries and conduct as 42(a)(3). “A claim is typical class.” STA’s claims are of the class. Tex.R. P. Civ. typical Further, if it from the same event or assignee arises an under Texas common practice gives of conduct that assignor. course law in the shoes of his stands members, Thweatt, 171, rise to the claims of other class v. 883 S.W.2d 174 Jackson (Tex.1994) Bledsoe, and if his or her claims are based on the (citing v. 989 FDIC theory.” CenturyTel, (5th Cir.1993)). legal 805, same Beattie v. F.2d 810 Because Cir.2007) Inc., (6th (in- 554, 511 F.3d 561 assignee STA is the of the customer-as- omitted) quotations (interpreting ternal signors, STA into the customers’ steps 23). Southwestern Bell ar- may inju- shoes and assert a claim for the Fed.R.Civ.P. gues atypical that STA’s claims are be- ry assignor and all members shared paid disputed cause STA never definition, By of the class. STA’s claims and, therefore, charges never a mem- against are same ber of the never suffered a class and Additionally, the class members. because injury. argues Southwestern Bell also validity resolved the Court has destroyed typicality by STA has bur- STA’s both as a matter of law dening questions regarding the class with public policy, it will not be an issue at assignee validity an its status as Therefore, trial. ar- Southwestern Bell’s assignments. gument that this issue will skew the focus litigation unavailing. of the is See In re previously opportu have not We had Cardizem, F.R.D. at 200 304-05. We nity typicality assign- to address the of an conclude that therefore STA has satisfied representative’s ee-class claims. Other typicality requirement. considering courts this issue have focused the legal on theories behind the claims
asserted,
not the characteristics of the as-
B. Predominance
signee,
unique
unless a defense
to the as-
guards against
Predominance
signee will “skew
litigation
the focus of the
certifying class actions that could over
danger
and create a
that absent class
jury
whelm or confuse a
or compromise a
members will suffer if their
Schein,
party’s defense.
at
S.W.3d
preoccupied
unique
with defenses
to it.” 690; Bernal,
921 object soning most of the that alleged will be of where the defendant’s sues standardized, litigants and the court.” misconduct is efforts of the circumstantial (internal Bernal, can 22 at evidence be used to quota 434 show class-wide S.W.3d reliance). omitted); argues STA Stonebridge, poten- 236 also that the tions see also tial inquiries individualized by S.W.3d at 205. identified are hypothetical Bell and argues Southwestern Bell individualized speculative. agree. We of of proof reliance review customer Texas courts been reluctant cer- damages bills and other records to assess tify a class when of proof reliance is re- precludes finding predominance. a of We quired as an element of a claim. See disagree. Schein, 102 at 694 (declining S.W.3d Liability 1. a certify plaintiffs’ class when five of the fraud, express breach of warranty, claims— argues Southwestern Bell that re negligent misrepresentation, promissory liance is an element of the class claims for estoppel, laundry and DTPA list viola- warranty express unjust breach of reliance) required proof of (citing enrichment, proof and thus individualized tions — GMAC., (5th 433, v. Perrone 232 F.3d 440 of each on the in customer’s reliance bills Cir.2000)); Fid. & Guar. Ins. Co. v. will question litigatiоn. be focus of Life Pina, 416, 165 S.W.3d 423 (Tex.App.-Cor- responds showing particu STA that a of pus 2005, (DTPA); pet.) Christi no GMC required larized reliance is not to establish Garza, 76, v. (Tex.App.-San 179 82 express warranty unjust breach of or en (breach 2005, pet.) express Antonio no richment, is, but even if it class-wide proof warranty). of express warranty Breach of reliance is available in this case because requires proof of some form of reliance. employs a standard for Schein, See 102 (citing Am. bills, in telephone including mat a line Grinnell, 420, Co. v. Tobacco 951 S.W.2d STA item fees. cites the (Tex.1997)) (stating that “reliance is allegations petition that “[a] to, only also not relevant but an element of member cannot independently Class veri of, proof plaintiffs’ claims of breach of determine, or fy, independently the cus PPG, express warranty”); 146 S.W.3d at charges tomer service on which the ‘munic proof required Whether reliance is ipal charge’ being applied and the rate for unjust depends enrichment on the na- applied charges.” to such customer service Bros., allegations. ture of the Heldenfels argues that class members were sub Christi, 39, Corpus Inc. v. 832 S.W.2d jected misrepresentation uniform (Tex.1992) (“A may party recover under the bills—that the amount the municipal unjust theory enrichment one when that, by fee was legally authorized —and person has a benefit obtained from another bills, paying their class members on relied fraud, duress, taking undue misrepresentation. South Whether advantage.”). to charge western was authorized mu nicipal question fees on the Assuming alleges services fraud- enrichment, rep theory unjust whether class members relied based resentation, contends, are inquiry unjust thus sus determinative under both ceptible proof. to class-wide See warran Klay express enrichment breach Humana, Inc., 1241, ty regard 382 F.3d inquiries 1258-59 is whether individual (11th Cir.2004), denied, ing predominate. cert. 543 U.S. reliance we have When (2005) (rea- 125 S.Ct. inquiries L.Ed.2d 825 concluded individual would *13 consistently changes any opened [merchandise].” have relied predominate, we post- In at same was evidence of individual variation. Id. 161-62. This notice on Stonebndge, example, for consumers al Although in the Id. at 162. the ed store. subject a uniform they issues, that were leged such claim involved common scheme to misleading telemarketing and restocking whether the fee was uni- “money a had under and sell insurance formly and cus- applied calculated when 236 S.W.3d theory. Stonebridge, received” items, we held that the tomers returned they were never class claimed at to inquire entitled whether defendant was credit or bank informed that their cards members aware of individual class were charged premiums for accounts would be voluntarily agreed and restocking the fee with them without further contact 163; at they purchases. to it as made Id. period when the trial ended. Id. We held Magaña, v. 142 S.W.3d Snyder see also inquire that the defendant was entitled (Tex.2004) that, 295, when (holding 301-02 under whether members individual policy the defendant offered its written they be without fur charged stood would why an em- setting forth several reasons notice, charges after ther consented rejected, could be ployee’s commission made, coverage they were wanted employer denied improperly whether premiums irrespective of how were promised was an individual commissions holding, In we charged. Id. at 206-07. so trial). that predominate issue would at that pointed evidence some customers case, in this Conversely, Southwestern they being charged were for understood Bell a format employs standard the defendant and wanted premiums by bills, including line item telephone a at the insurance. Id. 206. Because the charge municipal municipal fees. The representatives prove that failed to uniformly After applied. man calculated inquiries these individual cоuld be efficiently, rigorous analysis, court found aged fairly held that the trial we predominance requirement was not satis on alleged misrepresentation that Schein, 206-07; see owing fied. Id. at also due each bill—an amount (holding that class-wide municipal charge to all mem- uniform —“is ” not supported of reliance was proof bers of the class.... The trial court also pur record because there was evidence found that can be “evidence reliance chasers relied on recommendations from demonstrated from records of [South- colleagues any by others rather than by showing western that the mem- Bell] defendant). bers of the bill putative paid after it we presented.” Again, re- existed that individual
When evidence view the certification an abuse of under experiences reasonably class members’ Schein, discretion standard. 102 S.W.3d varied, could have we have likewise re at 691. certify fused to the class. We held Best
Buy v. Barrera that the class claim to Co. The class has met its burden of fee, restocking recover a based proof establishing class-wide of reliance equitable “money had and received” theo because had choice but to plaintiffs no ry, turned on individual issues would rely misrepresentation. рaying on the In at trial. 248 predominate (Tex.2007). bill, the amount of the Southwestern Bell’s The class representative was paid customers must have the total amount given receipt which contained a state due, they ment her that restock fee. If notifying including 15% “[a] amount, ing charged paid fee will on returns or ex- had a different such as one be fee, rate; however, not include the amount of did interest the testimony of certainly would have the plaintiffs varied as to whether they action, cancelling taken such as services. would purchased the annuity had See, World, Inc., e.g., Paulos Caesars they known that the high interest rate (9th Cir.2004) 379 F.3d (recog 667-68 would not continue past the year. first Id. nizing reliance can be shown where it contrast, case, at 424. In in this *14 the cus- provides the “common “logical sense” or already tomers had used the services and explanation” for the behavior of plaintiffs required pay were the amount due on class, and the members of the in which the bill. many Whereas may factors have class-wide); case reliance could be established influenced plaintiffs’ Pina, decisions in Healy, 598, ner v. 184 F.R.D. Gar the customers in this case had no decision (N.D.Ill.1999) (holding 603-04 that reliance to make. They were required to pay the could be resolved on а class-wide basis amount due and owing on the bill to con- alleged because the fraud was perpetrated tinue telephone service. in a uniform manner when a company sold Accordingly, we hold that the trial court wax,” wax). “car which in fact contained no did not abuse its discretion in finding that requires To defeat certification more than individual liability issues of for the breach allegations mere that individual issues will of warranty unjust and enrichment claims
predominate. predominate will not over common issues argument Schein,
Southwestern Bell’s 694; at trial. 102 S.W.3d at Ber nal, that some of its may customers have 22 called at S.W.3d 438. adjustment,
customer service to obtain an Damages 2. pay
failed to
entirely,
bill
or otherwise
inconsistently
acted
with a showing of reli
Even though the class claims
hypothesis
ance is mere
and does not de
are susceptible to
proof
class-wide
of reli
feat
proof
class-wide
of reliance. Class- ance and thus liability, it will still be neces
proof
wide
possible
of reliance is
when
sary to determine the refund or credit
class-wide evidence of reliance exists.
owed to each
Although
customer.
individ
Schein,
case,
The use of
while
damages
expert
database to calculate class-wide
Southwestern Bell’s
did not. Hav-
approved by
cases has been
appropriate
ing
testimony
reviewed their
giving
See, e.g., Klay,
decision,
382 F.3d at
several courts.
due deference to
trial court’s
1260;
Svcs., Inc.,
Healthplan
v.
Gunnells
we conclude the trial court did not abuse
(4th
Cir.2003);
348 F.3d
Smilow
giving
expert’s
its discretion
tes-
Inc.,
Sys.,
v. Sw. Bell Mobile
323 F.3d
timony
weight
more
in the face of conflict-
(1st Cir.2003);
Consurve,
Roper
40-41
Schein,
ing evidence. See
102 S.W.3d at
(5th Cir.1978).
Inc.,
1106, 1112
(“A
578 F.2d
trial court
has discretion
rule
chal-
makes several
issues,
class certification
and some of its
lenges
proposed computer program
determinations —like those based on its as-
damage
model. Southwestern Bell
witnesses,
credibility
sessment of the
*15
argues
first
that an accurate calculation of
for example
given
be
the benefit of
—must
damages
each
individual class member
doubt.”).
in
timely
cannot be made
and efficient
Finally,
argues
that
conflicting expert
manner. There was
tes-
computer program
accurately
cannot
timony on this issue. Southwestern Bell’s
assign damages
particular
to
class mem-
expert testified that the construction of a
timely
bers in a
and efficient manner.
computerized
approxi-
database would cost
Southwestern Bell’s records are identified
mately
million and take
three
almost
$2.3
number,
by telephоne
not customer name.
years
complete. Conversely,
STA’s ex- The
changes
records do not reflect
in own-
pert testified that historical customer rec-
subdivided,
ership,
charges
whether
were
in
ords maintained
Southwestern Bell’s
paid
or whether someone else
the bill on
computer
optical
database and
microfiche
the customer’s behalf. Because the class
efficiently
records can be
economically
and
as
defined
those customers who made
retrieved. He testified that it would take
Bell,
payments
to Southwestern
South-
$50,000
approximately 600 hours and cost
western Bell contends that each class
damages.
to calculate
Based on that as-
investigated
member must be
to determine
sessment,
argues
that
the damages
actually paid
if she
each of the bills at
calculation
not predominate
would
over
period.
issue for the 96-month
other class-wide issues at trial.
The class definition —customers who
argues
Southwestern Bell also
that the
payments
made
to Southwestern Bell—is
proposed computer program fails to ad- materially indistinguishable from the cus-
dress critical problems
calculating
dam-
responsible
tomer
for payment. The stat-
data,
ages, including missing
possibili-
customer,
utе makes clear that a
defined
ty
that “reallocated”
charges will
as the person “responsible
payment
for the
increase or decrease individual damage
charges,”
shall receive a
in
refund
awards, billing adjustments,
changes
overbilling.
case of
16 Tex. Admin. Code
area
or municipality,
changed
code
and
or
26.27(a)(3)(B).
§
the telephone
Whether
Again,
discontinued services.
STA’s ex-
charges
ultimately
were
subdivided
pert refuted each of Southwestern Bell’s
tenants,
customer and
on to
passed
expert’s
regarding
difficulty
claims
in guests,
employees
is irrelevant —the bill
calculating damages.
customer,
submitted
and the
testimony
at the
responsible
payments.
certification
customer was
for its
hearing
addition,
that
expert
proof
shows
had ex
In
of ownership
pay-
perience in evaluating allegations
may
over-
efficiently
ment
be
determined
claims,
typical
forms or
oth-
through proof-of-claim
some
and that
the class claims
Schein, 102
vehicle.
S.W.3d at 690.
class,
er
predominate
the putative
therefore
that the trial court
We
conclude
prove
must
it
finding
abuse its discretion
did
adequately represent
will
the class. An
can be
in a
proof
damages
managed
assignee’s interests are not “necessarily
Bernal,
еfficient,
fair
timely,
manner.
antagonistic” solely
because
is an as-
11. Linda S. against another.” [of members] class prolific sity of Law and au- Texas School of any long STA’s lack of claim of own makes as it not a stranger seeking its en- actions, in unique among it members of class. trepreneurship class and it only knowledge of the it holds Its claims not litigation process. does distort from instance, must be obtained assignors. STA, In this assignee, had identified the record as act- individuals existing an business relationship with respect to class ing for STA with were members, class is a class member itself president Marketing on Hold and an valid assignments obtained employee corporate with limited au- class members. As with class repre- thority. they Both indicated that would sentative, satisfy STA also must the re- rely heavily on STA’s counsel conduct quirements of Rule 42 of the Texas Rules litigation. recognize While we of Civil Although Procedure. STA satis- litigation class counsel’s control over class typicality predominance fied the re- greater is often than it is in non-class quirements to be representative litigation, the class action rule contem- (numerosity and were commonality that the plates is “not challenged), it failed to establish that it is simply lending name suit con- [its] [ ] adequate representative. Ac- entirely attorney.” 7A by trolled cordingly, we reverse the judgment of Wright, Arthur R. Miller Alan Charles & class, the court of appeals, decertify Mary Kay Kane, Federal Practice and remand trial court for further (3d ed.2005). § In this proceedings Procedure opinion. consistent with this case, litigation by STA’s interest in the assignment removes and its counsel one Justice dissenting O’NEILL filed members, step further from the class en- opinion which Chief Justice hancing the risk of conflicts. JEFFERSON and Justice MEDINA case,
In this has adequate- failed to joined. claims,
ly show that in pursuing its Justice participate GUZMAN did not will advance the interests of class. the decision. Schein, 102 (holding 691-92 proponent of certification the burden bears O’NEILL, joined Justice Chief *18 issues). proof on certification We there- Justice JEFFERSON and Justice
fore hold that STA has not established MEDINA, dissenting. that it can adequately represent class.12 The Marketing Court concludes that
Hold, doing business as Southwest Tariff IY. Conclusion (STA), Analyst holds valid class, typical It is claims standing well-settled that a valid as- has to member, of a claim signee standing has to be a assert its claims as a class is member of a class action neither a stranger litigation related to that nor a assignee claim. The disqualified entrepreneur, is not class-action will not dis- serving from as a class representative rupt so vehicle distort class-suit argues lenges zealously represent 12. Southwestern Bell also STA's whether STA will class, directly interests conflict with the due supervise the class and Be- class counsel. remedies, preference to STA's for lack cash its cause we concluded is not that STA an assignment of an scriber, from a sub- Hotel/Molel grounds, adequate representative on other we possibility and the that some custom- need not reach Southwestern Bell's additional damages may ers' be reduced or eliminated arguments. fees, municipal reallocation of and chal- customers, Bell bills for Southwestern Yet the Court decides judicial process. im- had company that the discovered representa- STA adequate not an STA is charges through municipal properly passed hypothetical potential tive based on relating to Smart- for certain services record. no basis in the that have conflicts Trunk, ser- Loop and Digital deciding Hotel/Motel is The states Court describe these trademarks vices. Each of an ade- can ever be assignee whether Bell to by Southwestern provided a service if STA but representative, quate customers.1 its business imagine to who it is hard qualify doesn’t were established assignors The would. who number of customers had a STA relied on who business customers STA Southwestern to some of these subscribed South- knowledge about superior STA’s and those customers Bell services.2 action, informa- billing procedures, Bell’s western in another class class members were systems, and the tariffs rеtrieval tion Bell Tele v. Southwestern reles Mi industry, and regulated govern highly this District in the 357th Company, phone that would or conflict exists antagonism no included County, which Court Cameron represent to adequacy STA’s affect Bell’s residential of Southwestern most view, unique expertise my In class. in Texas. When customers and business ability superior to that gives it an in Míreles cy pres settlement pending litiga- pursue class member other claims of its busi to release the threatened supervise similarly tion as situat and others ness customers counsel, the trial of class informed its the activities compensation, with no ed customers, concludes their assign found. Because Court court who decided otherwise, respectfully I dissent. carved those STA then claims to STA. settlement, preserv the class claims out of fees un- Bell is assessed custom Bell’s business ing Southwestern ordinances in order municipal various der SmartTrunk, Digital relating claims ers’ enacting them compensate the cities charges, Loop and Hotel-Motel administering rights-of-way. public subject of this class-action are the which pass the fees company is allowed suit. subscribers, but it telephone to its through hearing certification four-day After a from making profit prohibited Tex., class satis- Brownsville, that the See, trial cоurt determined e.g., charge. 1995). commonality, typicali- numerosity, 95-1296, § fied the (July Ordinance representation re- adequacy ty, business auditing services of provides 42(a) of the Texas of Rule quirements assists its customers telephone bills and Procedure, that ques- Rules of Civil telephone companies seeking refunds from *19 fact common to class tions of law and exchange billing practices, improper un- questions individual over predominated its custom- percentage for a of the amount 42(b)(4) 42(b)(4). Tex.R. P. Rule auditing der recover. In the course of ers Civ. are United Services Automo- 2. The customers the hotel or 1. The service allows Hotel/Motel basis, (USAA), Engineers, charges per-call S & B incur on a motel to bile Association Constructors, Ltd., lo- allowing guests to receive and make Engineers thus & B and Inc./S charged Bank, Di- telephone Inc., calls to the room. cal Riverway Engineering, Petrocon inter- gital Loop Trunk describe an and Smart Ford, Inc. & Smith and Russell single with the that makes a connection face provides the telephone company that then twenty-three tele- channels for customer with phone communication. 42(b)(3)). (now Court, The trial According Rule court also to the STA must have standing to proceed held that STA had a lesser making interest itsеlf and the is a proper behalf of the class and class whole because it was “never person representative as the owner of its custom- ally aggrieved by Southwestern Bell’s al assigned ers’ According claims. leged overcharging its and maximum re findings, nothing trial court’s there was covery is than less half the of any value improper about the methods which STA individual for damages.”3 claim But nei acquired been assignments, STA has ther of these circumstances a creates con auditing business By flict. assignments, which the Court years, Bell’s and utilities’ bills other acknowledges entirely valid, are knowledge expertise STA has and about customers, stands in the shoes of its whose billing procedures Southwestern Bell’s claims from arise the same overbillings systems information retrieval which are give rise the other class members’ not knowledge widely common known to claims. Nor does STA’s smaller financial members, putative class knowl- interest litigation in the affect ability edge expertise give superior abili- adequately represent the class. other As ty pursue litigation supervise noted, courts plain the amount of the activities class counsel. trial The court also found that are tiffs STA’s interests financial interest in the suit not with, to, aligned antagonistic and not ability determinative of its reрresent putative The of ap- class members. court See, class adequately. e.g., In re Cardiz peals affirmed trial court’s certification em, (E.D.Mich.2001); 200 F.R.D. rejected order. 170 S.W.3d 825. It Prods., In re S. Bakery Cent. States Southwestern Bell’s portent order 407, 418 (M.D.La.1980). F.R.D. The Court opening floodgates to entrepreneurial theorizes that since STA never paid the abuse in light findings the trial court’s itself, overcharges it might greater have a pre- that STA’s came from quickly incentive to settle more than other customers, existing those customers had paid class members who the charges and been members the Míreles action However, might any want more. incentive derived, from which this suit and STA did might have to minimize litigation ex not improperly assignments. solicit penses by settling early appears be no too, Id. at 825. The of appeals, court different other any mem rejected Southwestern Bell’s claims that have, ber would and STA’s incentive to with antago- STA’s interests conflict or are recovery maximize appears to be no differ nistic to other class members. Id. at 826- Though ent either. posits the Court however, today, The Court concludes might ultimately pursue theories of that STA’s interests conflict with those of relief more efficient for itself at the ex putative class such that it be an cannot members, pense of absentee class it does adequate representative. poten- speculate might what those theories be hypothesizes, tial conflicts Court how- specu and none have been asserted. Such ever, real, imagined are more than and in lative conflicts are far ren too tenuous to insufficiently event are compelling to *20 STA inadequate. der The disqualify representing apparent STA from Court the class. ly believes the fact that STA not was assigned assignors proceeds 3. The their any customers of the of net 100% 70% recov- STA, part claims to but as consider- ered and retain 30% itself. assignment agreed pay ation for the STA to Clearly non-cash rem- by Bell’s refunds credits. directly injured Southwestern out, in- and merely holds an economic the conduct and edies not been ruled recovery in means that STA has any testimony employee terest of not in- does than other class priorities a different set of otherwise. dicate all, most, in if not commer- members. But fact points Bell that Southwestern like the one members cial actions not hold an from a assignment STA does are motivated economic of the class who to customer subscribed Hotel/Motel Here, represents five STA considerations. pur- and no to services thus has incentive members, thus, anything, and if is However, highly it is sue such claims. cognizant a of greater more of number unlikely any potential represen- that typical the economic interests than on would have a claim based all tative The would be. evidence subscription of types packages. three the to assigned that claims demonstrates is claims point salient Hotel/Motel range large, sup- small from to course arise from same unauthorized has finding court’s ports trial claims, conduct the other class all asserting rights an interest brought statutory under are same putative class members. legal with the same theories. scheme thir- Bell contends STA’s Southwestern not Southwestern Bell has articulated how will ty-percent interest recovered funds the interests or claims of Smart Trunk and likely disregard make it more to a settle- Loop from or Digital customers differ con- coupons In paid ment for in or credits. flict with those of customers. Hotel/Motel points Bell to support, Southwestern Cardizem, F.R.D. As the See at 306. testimony at the employee’s certifica- found, appeals trial court court he as to hearing tion was uncertain 814, 827, is agreed, there no coupon would be whether a settlement conflict between Ho- evidence settlements, proper Coupon this case.4 customers other members tel/Motel however, favored in always have not been also the class. Southwestern Bell con- See, e.g., jurisprudence. class-action our right charges its to reallocate cre- tends Bloyed, Corp. General Motors potential ates additional for conflict. (Tex.1996). A general it argues that while will expression uncertainty hypotheti- it a refund to customers over- make coupon cal of a future settlement propriety to right reapportion it has the charged, adequacy rep- to does diminish STA’s essentially to customers who under- fee class, especially when non-cash resent Bell, charged. According to Southwestern in the contemplated assign- remedies were have make strategic STA will decisions assignments allow col- ments. STA’s it to knowing some class members are affected all lect recovered percentage course, differently by overcharges, through whether recovered reallocation.5 Of charge Bell employee 4. That testified as follows: western would its customers 9% municipal charge recoup $9 million Q: coupon be “And a settlement would $100,000 with a bill fee. A customer would cаse, proper what STA in this as to should $9,000 municipal charge have had without percent receive for 30 interest?” however, If, only $90 million in reallocation. A: “I'm not certain.” appropriately subject was revenue these charges, Bell would then have expert Bell’s offered fol- 5. Southwestern charge lowing example: if the its customers a hypothetical munici- 10% charge recoup $9 fee. pal the million Under $9 fee million and Southwestern reallocation, taxable, revenues, $99,000 only then $100 had million in then South- if *21 42(a)(4). However, unique is not to STA and Tex.R. Crv. P. complaint quoted this full, equally any purport- other apply would Shelton’s statement demonstrates response, In representative. ed class that he is aware of duty vigorous- his “[t]o challenges hypothetical whether this real- ly class, represent put their needs all ours, location could occur at since Southwest- above to—as we’re doing today, may only ern Bell “backbill” a customer disposal we’re here at the lawyers, prior for the six months to when the un- disposal at the of the vigorously Court to discovered, derbilling period and that pursue this case and protect the class See 16 Tex. Admin. passed. has rights.” Southwestern Bell claims another Code 26.27(a)(3)(C)(i). § assuming But even Wilder, employee, Mark familiarity lacks occur, pre- some reallocation would surrounding with the facts legal theo- testimony any expert sented realloca- However, ries. possesses Wilder knowl- tion would at most cause a minor reduction edge expertise regarding billing member, in the total amount due to a class procedures case, issue which are highly unlikely any and that it is class not knowledge widely common nor known actually have an member would increase putative to members of the class. The expert pointed fees.6 The also to evidence supports evidence the trial court’s determi- that Southwestern collected substan- nation that STA is an appropriate class tially paid more from its customers than it representative, testimony and the of its municipalities, making unlikely to the it an employees does well. reappor- increase of fees would result from sum, In speculative conflicts the tionment, particularly if Southwestern hypothesize Court and Southwestern Bell Bell’s overcollection exceeds the amount between STA and the other class members sought by the class. A potential con- are too inadequate tenuous render an might flict exist if it were shown that representative. Considering the ab- rеallocation result in a significantly would potential sence of realistic for conflict damages reduced award for some custom- class, antagonism or between STA and the ers and not others. But Southwestern together superi- with STA’s demonstrated Bell has at most shown that in the case of expertise in subject matter of the a hypothetical reallocation some customers litigation, I would hold that STA has satis- might damages have their reduced a adequacy requirement fied the and affirm amount negligible compared to other cus- certification of the class. Because the tomers, enough disqualify which is not otherwise, concludes I respectfully Court adequate STA as an representative. dissent. challenges also whether representatives STA and its
the qualifications, background, and inter- represent supervise
est to the class and counsel, pointing testimony Shelton, employee, Mike
“we’re here at the disposal lawyers.” $9,900 $2,560.67 pay damages that customer would have to a without reallocation $2,563.74. Bank, municipal charge. Ridgeway would be For customer-assignor, damages small with real- USAA, example, large damages $99.66 For customer- location would be with- damages assignor, $102.59. with reallocation would be out reallocation would be