Farmers Group, Inc., Farmers Underwriters Association, Fire Underwriters Association, Farmers Insurance Exchange and Fire Insurance Exchange v. Sandra Geter--Appeal from 172nd District Court of Jefferson County

In The
Court of Appeals
Ninth District of Texas at Beaumont
____________________
NO. 09-03-404 CV
NO. 09-03-396 CV
____________________
FARMERS GROUP, INC., FARMERS UNDERWRITERS ASSOCIATION,

FIRE UNDERWRITERS ASSOCIATION, FARMERS INSURANCE EXCHANGE,

and FIRE INSURANCE EXCHANGE, Appellants
V.
SANDRA GETER, ET AL, Appellees
and
IN RE FARMERS GROUP, INC., FARMERS UNDERWRITERS
ASSOCIATION, FIRE UNDERWRITERS ASSOCIATION, FARMERS
INSURANCE EXCHANGE and FIRE INSURANCE EXCHANGE
On Appeal from the 172nd District Court
Jefferson County, Texas
Trial Cause No. E-167,872
and
Original Proceeding
MEMORANDUM OPINION

This interlocutory appeal arises from the trial court's certification of a class of Texas homeowner's insurance policyholders under Texas Rule of Civil Procedure 42(b)(2). Individually and on behalf of the homeowners' class, appellee Sandra Geter ("Geter") sued Farmers Group Inc., Farmers Underwriters Association, Fire Underwriters Association, Farmers Insurance Exchange, and Fire Insurance Exchange (collectively referred to as "Farmers"), seeking a declaration of rights under a certain form of homeowners' insurance policy (Texas Department of Insurance Form HO-B). Geter contends Farmers breached contracts with its policyholders by failing to renew their HO-B policies and that she and the members of the class are entitled to renewal of the coverage provided by those policies. (1) Farmers brings six issues attacking the trial court's class certification order, in addition to a mandamus proceeding regarding the trial court's refusal to abate because of a pending class action in Travis County, Texas. As to the appeal, we will reverse in part and remand; we will deny the petition for writ of mandamus.

Background

In November 2001, Farmers and other insurers requested the Texas Department of Insurance ("TDI") to approve a new homeowners policy. After TDI approved a new policy form, HO-A, which excluded coverage for most mold and water damage claims, Farmers stopped offering its HO-B policies and instead began offering its policyholders HO-A policies as the HO-B policies came up for renewal.

In response to policyholders' complaints that the new policy offered reduced coverage at unfair prices, TDI and the Texas Attorney General began an investigation of Farmers. Subsequently, the following events occurred.

 

1. August 5, 2002 - the Texas Attorney General sued Farmers in Travis County on behalf of Texas policy holders in State v. Farmers Group, Inc., No. GV-202501, 261st Judicial District Court, Travis County, Texas. Included in the State's claims was Farmers' "switching" of policyholders from the HO-B policy, allegedly resulting in less coverage but higher costs for policyholders. The State requested injunctive relief against Farmers, but did not assert a claim for class relief. Further, the State did not challenge Farmers' nonrenewal of the HO-B policies and did not seek a declaration that the HO-B policies were wrongfully nonrenewed.

2. August 13, 2002 - TDI issued an Emergency Cease and Desist Order against Farmers, requiring Farmers to cease and desist from increasing rates and seeking to regulate the new rates.

3. August 27, 2002 - Geter filed her class action petition seeking declaratory relief regarding the HO-B policyholders' contractual rights to renewal of their policies. (2)

4. December 18, 2002 - the State amended its petition in the Travis County case to assert a claim for settlement class relief and request creation of three settlement classes. One of the settlement classes, the Rate Class, includes all policyholders "who received a notice at any time after November 14, 2001, that their HO-B policy would not be renewed." The damages sought are limited to the "restoration" of excessive premiums charged to policyholders who bought the HO-A policies they were offered when their HO-B policies were not renewed.

5. December 18, 2002 - the State and Farmers entered into a settlement agreement for the Travis County litigation. The claims released include those that arise out of or relate to Farmers' decisions to "no longer offer HO-B policies" and to offer "HO-A policies in place of HO-B policies."

6. January 2003 - Farmers filed a counterclaim in the Travis County litigation requesting a declaratory judgment that: (a) its nonrenewal of HO-B policies and offering HO-A policies in place of HO-Bs was consistent with Texas law; (b) the restrictions on non-renewal of policies contained in TDI's non-renewal endorsement did not prohibit non-renewal based on Farmers' business decision not to offer Ho-B policies anymore; (c) Farmers' offering HO-A policies was consistent with any and all obligations that may have been imposed upon Farmers by the Insurance Code or TDI.

7. June 27, 2003 - the Travis County trial court certified the settlement class and preliminarily approved the settlement agreement in the State's case against Farmers.

8. August 29, 2003 - the trial court here certified the Geter Class (3) after Farmers' request for emergency stay of the certification hearing was denied by this Court and the Texas Supreme Court.

9. December 17, 2003 - The Third District Court of Appeals heard oral arguments on an appeal of the certification order in the Travis County case, Lubin v. Farmers Group, Inc., No. 03-03-00374-CV, Third Court of Appeals, Austin, Texas.

Standard of Review

As the Texas Supreme Court recently explained, appellate courts review a trial court's decision on class certification for abuse of discretion, but a reviewing court must not indulge every presumption in favor of the trial court's ruling. Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 691(Tex. 2002). While some of the trial court's determinations, such as "those based on its assessment of the credibility of witnesses, for example - must be given the benefit of the doubt . . . [c]ompliance with Rule 42 must be demonstrated; it cannot merely be presumed." Id. A trial court abuses its discretion when it: (1) acts arbitrarily or unreasonably; (2) does not properly apply the law to the undisputed facts; or (3) rules on factual assertions not supported by the record. Vincent v. Bank of America, N.A., 109 S.W.3d 856, 864 (Tex. App.--Dallas 2003, pet. denied).

All classes seeking certification must satisfy all four requirements of Rule 42(a) and at least one of the requirements of Rule 42(b). Tex. R. Civ. P. 42; Southwestern Refining Co., Inc. v. Bernal, 22 S.W.3d 425, 433 (Tex. 2000). Under Rule 42(a), the plaintiff must show: (1) the class is so numerous that joinder is impracticable (numerosity); (2) there are common questions of law or fact (commonality); (3) the representative's claims are typical of the class (typicality), and (4) the representative parties will protect the interests of the class (adequacy of representation). See Tex. R. Civ. P. 42(a); Bernal, 22 S.W.3d at 433. Where the 42(a) requirements have been satisfied, a Rule 42(b)(2) class may be certified if "the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole." See Tex. R. Civ. P. 42(b)(2). (4)

In issue one, Farmers asserts the trial court improperly certified the class under Rule 42(b)(2). In reviewing this issue, we apply principles recently enunciated by the Texas Supreme Court in Compaq Computer Corporation v. LaPray, 135 S.W.3d 657 (Tex. 2004).

In considering class 42(b)(2) certification, the LaPray Court noted that Rule 42 is silent on whether damages are available in a (b)(2) class and that the United States Supreme Court has not yet determined whether a (b)(2) mandatory class can include claims for monetary relief. LaPray, 135 S.W.3d at 665. Moreover, LaPray observed a split of authority on this question in the U.S. Circuit Courts, (5) with the Fifth, Seventh, and Eleventh Circuits holding that claims for monetary relief predominate over equitable claims unless the monetary relief sought is incidental to the requested injunctive relief. Id. (citing Murray v. Auslander, 244 F.3d 807, 812 (11th Cir. 2001); Jefferson v. Ingersoll Int'l, Inc., 195 F.3d 894, 898 (7th Cir. 1999); Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998)). The Second and Ninth Circuits, however, employ an ad hoc balancing to determine if certification is proper. Id.

LaPray, however, declined to focus on "whether monetary relief predominates, or whether injunctive or declaratory relief will be necessary at some point." Id. at 667. Rather, LaPray made the following pertinent determinations discussed below.

a. Individual notice and opt-out rights where monetary damages are sought

Individual notice and opt-out rights must be considered by a trial court considering (b)(2) certification for any class seeking monetary damages under any theory. Id. at 667 (noting further that due process may require individual notice and opt-out rights).

b. Individual notice and opt-out rights where no damages are sought

Individual notice and opt-out rights should be considered by a trial court considering (b)(2) certification for any class seeking declaratory relief involving breach of warranty claims, but excluding damages such as the instant case, in order to avoid any conclusion that such classes are trying to "'shoehorn' their damages action into the '(b)(2) framework, depriving class members of notice and opt- out protections.'" Id. at 670 (quoting Bolin v. Sears, Roebuck & Co., 231 F.3d 970, 976 (5th Cir. 2000)). Concerns about such (b)(2) certifications, however, are "largely irrelevant" where the trial court orders notice and opt-out for the (b)(2) class members. Id.

c. Rigorous Analysis

The LaPray Court further determined trial courts are required to apply the Bernal "rigorous analysis" standard to (b)(2) certification requests. (6) See Id.; see Bernal, 22 S.W.3d at 435. The Bernal Court held that "[c]ourts must perform a 'rigorous analysis' before ruling on class certification to determine whether all prerequisites to certification have been met." Bernal, 22 S.W.3d at 435. "All prerequisites" means all four 42(a) elements-- numerosity, commonality, typicality and adequacy of representation-- as well as one of the several 42(b) elements. (7) LaPray, 135 S.W.3d at 671. See Tex. R. Civ. P. 42. If the class seeks (b)(2) certification, "the trial court must rigorously analyze cohesiveness." LaPray, 135 S.W.3d at 671.

LaPray further instructs that the degree of cohesion required depends upon whether the class members have a right to exit the class and that often the cohesion analysis "will be identical to the 'predominance and superiority' directive undertaken by trial courts certifying (b)(3) classes." Id. (citing Amchem Prods., Inc. v.Windsor, 521 U.S. 591, 594, 117 S. Ct. 2231, 138 L. Ed. 2d 689 (1997)). But, where the class is mandatory, a more rigorous definition of class cohesion should apply. LaPray, 135 S.W.3d at 671. "[I]in such cases a (b)(2) class 'may require more cohesiveness than [a] (b)(3) class. This is so because in [a] (b)(2) action, unnamed members are bound by the action without the opportunity to opt out.'" Id. (quoting Barnes v. Am. Tobacco Co., 161 F.3d 127, 142- 43 (3rd Cir. 1998)). However, where notice and opt-out rights are included in (b)(2) certifications, "the cohesiveness required in a (b)(2) class need not be greater than the predominance and superiority necessary for a class certified under (b)(3)." Id.

We find the trial court here did not examine the notice and opt-out issues as now required by LaPray, an examination that could affect the class's composition. And, of course, the trial court has had no opportunity to analyze the cohesiveness that will exist if the court orders notice and opt-out for the (b)(2) class members. Thus, we reverse those parts of the trial court's judgment that determine Geter has carried her burden under Rule 42(b)(2). Other arguments that Farmers advanced in Issue one (8)

need not be considered as resolution of them in Farmers' favor would result in no greater relief than it receives here.

Issue two maintains the trial plan fails to consider the remedies raised by the allegations and, thus, is insufficient under Bernal, 22 S.W.3d 425 and Stromboe, 102 S.W.3d 675. As we have determined that the trial court must consider notice and opt-out issues as well as rigorously analyze cohesiveness, it necessarily must reconsider its trial plan in view of any changes it must make in light of LaPray. Issue two is overruled.

As to the 42(a) requirements - numerosity, commonality, typicality and adequacy of representation - Farmers does not challenge the trial court's findings as to numerosity and commonality, but does contest the findings on typicality and adequacy of representation in issues three and five.

Typicality

In Issue five, Farmers maintains Geter's claims are not typical of the class. A class representative's claim is typical if it arises from the same event or course of conduct giving rise to the claims of other class members; it also must be based on the same legal theories. Hi-Lo Auto Supply, L.P. v. Beresky, 986 S.W.2d 382, 387 (Tex. App.--Beaumont 1999, mand. denied). Geter must show there is a nexus or substantial similarity between her injury and that of the class. Id.

Farmers cites Weatherly v. Deloitte & Touche, 905 S.W.2d 642, 653 (Tex. App.--Houston [14th Dist.] 1995, writ dism'd w.o.j.) and Adams v. Reagan, 791 S.W.2d 284, 290 (Tex. App.--Fort Worth 1990, no writ) in support of its argument that Geter is not an adequate or typical representative because subsets of the class are subject to unique defenses. While both cases recognized the "unique defense" proposition, both also promptly limited it. Weatherly, 905 S.W.2d at 653; Adams, 791 S.W.2d at 290. The Weatherly Court noted that "factual differences have not defeated class certification in other securities actions where the claims arose from the same legal theory." Weatherly, 905 S.W.2d at 653. Even where class members did not rely on the same documents, the Adams Court held typicality still existed because a common thread of deceit ran through all alleged claims. Adams, 791 S.W.2d at 290-91.

Clearly, there is a nexus between Geter's claim and those of other class members. The claims all stem from Farmers' conduct in making representations within the HO-B policies that the policies would be renewed according to the policy terms. See Weatherly, 905 S.W.2d at 653 (typicality found where "same misrepresentations in the same documents" were made to investors and where class representative and other class members relied on same theory of liability). Geter and the class members claim they are entitled to renewal of the coverage provided by the HO-B policy form. And they rely on this claim in seeking a declaratory judgment Issue five is overruled.

 
Adequacy of Representation

In issue three, Farmers contends Geter cannot fairly and adequately represent the class as required by Rule 42(a)(4). See Tex. R. Civ. P. 42(a)(4).

As we previously have explained:

Adequate representation requires an absence of antagonism between the class representatives and the class members, and an assurance the representative parties will vigorously prosecute the class claims and defenses. Only a conflict that goes to the very subject matter of the litigation will defeat a party's representative status. A speculative conflict is insufficient to show an abuse of discretion by the trial court finding adequacy of representation.

 

Beresky, 986 S.W.2d at 388 (citations omitted). Adequacy of representation is a question of fact addressed to the sound discretion of the trial court, and the trial court does not abuse its discretion in finding adequacy if there is evidence to support the finding. See Glassell v. Ellis, 956 S.W.2d 676, 681-82 (Tex. App.--Texarkana 1997, pet. dism'd w.o.j.).

A number of factors affect the determination of adequate representation; they include adequacy of counsel; potential conflicts of interest; the personal integrity of the plaintiffs; the representatives' familiarity with the litigation and their belief in the legitimacy of the grievance; the manageability of the class considering geographical limitations; and the ability to finance the class action. See Forsyth v. Lake LBJ Inv. Corp., 903 S.W.2d 146, 150 (Tex. App.--Austin 1995, writ dism'd w.o.j.). Farmers attacks Geter's class representative designation under two of the Forsyth factors: (a) conflict of interests and (c) familiarity with litigation.

As to conflict of interests, Farmers maintains class counsel also are counsel of record for two private plaintiffs in individual actions seeking damages for the same allegedly wrongful conduct. Farmers says this representation prevents class counsel from serving here where the class purportedly seeks only non-monetary relief. Relying on Zachery v. Texaco Exploration & Production, Incorporated, 185 F.R.D. 230, 242 (W.D. Tex. 1999), Farmers argues that class counsel, by requesting a Rule 42(b)(2) non opt-out class, foreclosed their own individual clients' rights to pursue lawsuits seeking damages. The Zachery Court stated that where there appears to be no clear opt-out right in a (b)(2) class action,

the named Plaintiffs are asking the class members being represented here to risk waiving their right to monetary damages solely so the action for disparate treatment can proceed as a class action. Although the opt-out issue has not been fully decided, the Court is unwilling to risk this result. The decision by the named Plaintiffs to drop the monetary damages claim cannot be imposed upon the absent class members without raising a very serious conflict of interest. This conflict prevents certification of the proposed class for the claims as stated.

 

Id. at 244. We appreciate the Zachery Court's concern regarding the opt-out issue. But in light of our determination requiring remand for consideration of opt-out rights, any possible conflict here should not be such as to preclude the trial's finding of adequate representation.

As to familiarity with the litigation, Farmers asserts that Geter has not considered the effect of the Travis County Settlement Agreement upon her class members and as support cites her testimony at the class certification hearing. However, at the hearing, Geter testified she was familiar with the Travis County litigation, but had not reviewed the preliminary approval order. Though she was keeping up with the Travis County litigation because it was similar to that in Jefferson County, she stated she could not make a determination about the effect of the Travis County litigation on the Jefferson County class because the Travis County litigation had not been concluded. In Geter's affidavit, she stated that she had reviewed the pleadings and motions filed in the Jefferson County case; that she had assisted her attorneys in preparing the case; that her claim was the same as that of all other class members and could be resolved by interpretation of the form HO-B policy; that she had reviewed materials from TDI about Farmers' policies; and that she understood the nonrenewal language in her policy was part of a form and was contained in other HO-B policies sold in Texas.

The evidence indicates Geter understands the scope of the potential class and the relief being sought. As there is evidence to support the trial court's adequacy finding, we conclude the trial court did not abuse its discretion. See Glassell, 956 S.W.2d at 681-82. Issue three is overruled.

Issue four contends Geter lacks standing to serve as class representative. "Standing is a prerequisite to subject-matter jurisdiction, and subject-matter jurisdiction is essential to a court's power to decide a case." The M.D. Anderson Cancer Center v. Novak, 52 S.W.3d 704, 708 (Tex. 2001) (citing Bland I.S.D. v. Blue, 34 S.W.3d 547, 553-54 (Tex. 2000)). Generally, standing requires a real controversy between the parties - one that will be determined by the judicial declaration sought. Texas Workers' Compensation Com'n v. Garcia, 893 S.W.2d 504, 517-18 (Tex. 1995). One has standing to sue if he: (1) has sustained, or is in immediate danger of sustaining, some direct injury as a result of the wrongful act of which he complains; (2) has a direct relationship between the alleged injury and claim sought to be adjudicated; (3) has a personal stake in the controversy; (4) the challenged action has caused him some injury in fact; or (5) is an appropriate party to assert the public's interest in the matter as well as his own interest. Sturges v. Wal-Mart Stores. Inc., 39 S.W.3d 608, 615 (Tex. App.--Beaumont 1998), rev 'd on other grounds, 52 S.W.3d 711 (Tex. 2001). Whether a plaintiff has standing to bring a class action suit is a distinct inquiry from whether a plaintiff is a proper class representative and standing must be established before delving into adequacy issues described in 42(a) such as typicality or adequacy of representation. Tex. R. Civ. P. 42(a); Met-RX USA. Inc. v. Shipman, 62 S.W.3d 807, 811 (Tex. App.--Waco 2001, pet. denied).

Farmers contends that Geter fails to demonstrate any cognizable injury during the

time in which her HO-B policy was in force and, therefore, lacks standing. In support of this assertion, Farmers cites Rivera v. Wyeth-Ayerst Laboratories, 283 F.3d 315 (5th Cir. 2002). In Rivera, the class representatives for purchasers of an anti-inflamatory drug sued the drug's manufacturer for economic damages on several theories; the Fifth Circuit dismissed the cause for lack of standing. Id. at 321-22. This ruling was largely based on the particular theories Rivera pursued, including a failure to warn of a potentially dangerous defect in violation of the DTPA, defective operation of the product in violation of the implied warranty of merchantability, and common law unjust enrichment. Under each theory, Rivera seemed to argue that since the drug had caused some end-users liver damage, she deserved economic compensation for purchasing and using the same product, no matter that it had worked effectively for her and the members of her class. Id. at 319. That Rivera herself had neither suffered liver damage nor alleged that other class members suffered any said damage caused by the drug proved fatal to her case. Id. at 320.

Rivera is distinguishable from our case, however. There, the court's main concern was simply that Rivera and the other class members had suffered no personal injury warranting relief under the theories she brought. Here, Geter alleges that Farmers inappropriately refused to renew her homeowner's policy, along with all other class members' policies. Unlike Rivera, Geter has personally felt the effect of the alleged wrong.

Farmers further asserts that since Geter has obtained a new insurance policy from another carrier, and does not seek damages for the difference in price between the HO-A and HO-B policies, she has no potential injuries to attribute to the non-renewal. That Geter has acquired new homeowner's coverage or does not seek damages proves unhelpful and unpersuasive in our standing analysis because these facts are ancillary to the central issues in Geter's petition. At issue is whether Farmers had the contractual right to refuse to renew Geter's policy under the given circumstances and whether Geter has a right to renew the policy. Not at issue, however, is the functionality of the policy during the coverage period.

Despite the policy's stated reasons for which non-renewal is warranted, Farmers's initial notice of nonrenewal to Geter and the class indicates that it chose not to renew the HO-B policy "[b]ecause of substantial losses which we have incurred." Farmers later explained simply that it "no longer writes [that] policy form." In light of the apparent contradiction between Farmers's reasons for non-renewal and the plain language of the policy, Geter contends a justiciable controversy exists to determine "the grounds for nonrenewal authorized by the contract for insurance and whether [Geter] and the class have the right to have their HO-B policy renewed." (9)

After considering the contract's non-renewal terms and Farmers' stated reasons for not renewing Geter's policy, we reject Farmers' argument that Geter lacks standing. The controversy in this case is whether Geter and the class have a right to renew their HO-B policies based on the terms stipulated in the contract. A judicial declaration on this issue, whether in the positive or negative, will effectively settle the dispute. And Geter certainly has a personal stake in the outcome of the proceeding, as she is one of the over 400,000 Texas residents whom Farmers denied the right to renew HO-B coverage. Issue four is overruled.

Issue six maintains that certifying the Geter class improperly creates duplicative litigation. Relying on Wyatt v. Shaw Plumbing Co., 760 S.W.2d 245, 247-248 (Tex. 1988), Farmers maintains the trial court has violated Texas's policy against duplicative litigation and should have abated the case because the State's case was filed before Geter filed suit in Jefferson County.

We review a trial court's action on a plea in abatement for abuse of discretion. Dolenz v. Cont'l Nat'l Bank of Fort Worth, 620 S.W.2d 572, 575 (Tex. 1981). In Downer v. Aquamarine Operators, Inc. 701 S.W.2d 238, 241-42 (Tex. 1985)(citations omitted),

[t]he test for abuse of discretion is not whether, in the opinion of the reviewing court, the facts present an appropriate case for the trial court's action. Rather, it is a question of whether the court acted without reference to any guiding rules and principles. Another way of stating the test is whether the act was arbitrary or unreasonable.

 

We consider not only when the cases were filed, but the substance of the pleadings. See Perry v. Del Rio 66 S.W.3d 239, 252-253 (Tex. 2001)(in determining dominant jurisdiction, an exception to the "first-filed rule" is when the first court does not have the full matter before it). While here, the State sued Farmers in Travis County on August 5, 2002, the State did not assert a claim for class relief, did not challenge Farmers' nonrenewal of the HO-B policies, and did not seek a declaration the HO-B policies were wrongfully nonrenewed. When, on August 27, 2002, Geter filed her class action petition, she sought declaratory relief regarding the HO-B policyholders' contractual rights to renewal of their policies.

It was not until December 18, 2002, that the State amended its petition and asserted a claim for settlement class relief. Also on that date, the State and Farmers entered into a settlement agreement that released certain claims including those arising out of that nonrenewal of HO-B policies and the offering of HO-A policies in place of HO-B policies. And it was not until January 2003, that Farmers filed a counterclaim requesting a declaratory judgment that its nonrenewal policies were consistent with Texas law.

Since Geter was the first to file a claim regarding Farmers' nonrenewal policies, the trial court may have determined that it had acquired dominant jurisdiction over that claim. See Wyatt, 760 S.W.2d at 248. Or, even if the trial court decided the Travis County case was "first filed," it may have determined that dominate jurisdiction was precluded in Travis County where the Travis County court did not have "the full matter before it" prior to Geter's filing the Jefferson County suit. See Perry, 66 S.W.3d at 252. And, as to the amended pleadings in the Travis County suit setting forth nonrenewal claims, the trial court could have determined that such pleadings "should be treated for purposes of determining dominant jurisdiction as a new suit as of the time it is filed, but not relating back to the commencement of the action." Id. at 253 (emphasis added).

In view of the foregoing, we cannot say the trial court acted without reference to any guiding rules and principles. Thus, we find the trial court did not abused its discretion in denying Farmers' plea in abatement. Issue six is overruled.

Farmers notes that its petition for mandamus is currently pending in this Court. See In re Farmers Group, Inc., No. 09-03-396-CV (Tex. App.--Beaumont, 2004). Generally, however, mandamus is not available to review the refusal of a trial court to abate an action based on the pendency of another action, unless one of the courts directly interferes with the other by issuing a conflicting order or injunction. Hall v. Lawlis, 907 S.W.2d 493, 494 (Tex. 1995) (orig. proceeding). "In the absence of such interference, the refusal to abate can be adequately reviewed on appeal." Id. Here, there has been no interference. We deny Farmers' petition for writ of mandamus.

The trial court's certification order is reversed and the certification issue is remanded for further proceedings consistent with this opinion. We express no view on the district court's ultimate decision whether to certify in light of today's opinion, nor do we comment on the merits of the substantive claims.

 

REVERSED AND REMANDED; WRIT DENIED.

 

________________________________

DON BURGESS

Justice

 

Submitted on May 2, 2004

Opinion Delivered October 21, 2004

 

Before Burgess, Murphy (10) and Sondock, (11) JJ.

DISSENTING OPINION

While I agree with the majority in remanding this case to the trial court, I would remand with directions to decertify the class. (12) The reasons are threefold:

I. Mrs. Geter does not meet the threshold of standing.

II. The State of Texas acting for all policyholders released Farmers from claims asserted by Mrs. Geter.

 

III. The trial court certified a competing class.

 
I. STANDING

Mrs. Geter has alleged that she and the class seek a declaratory judgment on the grounds "that Plaintiff and members of the class are entitled to renewal of the HO-B policies nonrenewed by Defendants[,]" but "[t]he class does not seek consequential damages[.]" In my opinion, the threshold question is standing. Whether a plaintiff has standing to bring a class action is a different inquiry than whether a plaintiff is a proper class representative. "[A] plaintiff desiring to represent a class must have personally suffered an injury or wrong to have standing." The M.D. Anderson Cancer Center v. Novak, 52 S.W.3d 704, 708 (Tex. 2001) (citing Simon v. E. Ky. Welfare Rights Org., 426 U.S. 26, 40 n.20, 96 S. Ct. 1917, 48 L. Ed. 2d 450 (1976) (quoting Warth v. Seldin, 422 U.S. 490, 502, 95 S. Ct. 2197, 45 L. Ed. 2d 343 (1975)).

Mrs. Geter does not allege that she has suffered any actual injury. Instead she asserts that "[w]hether individual insureds who get their HO-B [policy] back suffer a loss whether the loss is covered and the like would be based on facts, events, and conduct that may or may not occur at some future time and would be the subject of first party coverage litigation." Justice Owen has emphasized the necessity of injury in class action suits. "A named plaintiff in a class action must show that the threat of injury in a case is 'real and immediate' not 'conjectural' or 'hypothetical.'" (13) The M.D. Anderson Cancer Center, 52 S.W.3d at 710. "[I]f a [named] plaintiff does not assert that he or she as an individual suffered a concrete injury, then the court's inquiry must cease." The M.D. Anderson Cancer Center, 52 S.W.3d at 709 (citing Sosna v. Iowa, 419 U.S. 393, 402, 95 S. Ct. 553, 42 L. Ed. 2d 532 (1975) and Texas Dep't of Mental Health and Mental Retardation v. Petty, 778 S.W.2d 156, 164 (Tex. App.- Austin 1989, writ dism'd w.o.j.)).

I agree that the trial court's decision to certify this case does not meet the requirements of Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675 (Tex. 2002), or Compaq Computer Corp. v. LaPray, 135 S.W.3d 657 (Tex. 2004), or the "rigorous analysis" standard of Southwestern Refining Co., Inc. v. Bernal, 22 S.W.3d 425 (Tex. 2000), for class representation under Tex. R. Civ. P. 42(a) and 42(b)(2). However, I believe Mrs. Geter's lack of standing dispenses with any necessity to engage in lengthy discussion of whether she can properly represent the class.

The majority states the controversy in this case to be whether Mrs. Geter and the class have a right to renew their HO-B policies based on the policy terms in the contract. (14) Appellee relies on the same policy language to support her position that Farmers did not have the right to refuse to renew the HO-B policy.

Anyone has the right to rely on the terms stipulated in any contract. Farmers would not be free to refuse to honor those terms if they continued to offer HO-B policies. However, appellant's position that Farmers was obligated to renew the HO-B policy assumes that there can be no other reason for non-renewal and, more important, assumes that the company must continue to offer the HO-B policy so long as she or any policyholder wishes to buy - ad infinitum.

The evidence is undisputed. The Insurance Commissioner for Texas as well as a former Deputy Commissioner and a Deputy Attorney General testified that Farmers was not required to offer the HO-B policy. In fact after 2001, Farmers did not offer the policy for sale to anyone. It is undisputed that Farmers never established the premium for the HO-B policy after 2001. Clearly, neither Mrs. Geter nor any policyholder was required to renew the HO-B policy. Mrs. Geter actually purchased an HO-A policy from another company.

Under the facts of this case, I consider non-renewal of the HO-B policy to be a non-issue. Since Farmers had no obligation to continue to issue the HO-B policy, and since the policy was not offered, renewal was not a possibility under the facts of this case.

II. RELEASE

An Amended Settlement Agreement and Stipulation (15) ("Settlement") was entered by the 261st Judicial Court of Travis County on June 27, 2003. That Settlement grew out of State v. Farmers Group Inc., No. GV-202501, filed in the 261st Judicial District Court, Travis County Texas, by the Texas Attorney General on behalf of all Texas policyholders.

In its recitation of the facts, the majority indicates that the State "did not assert a claim for class relief, the State did not challenge Farmers' nonrenewal of the HO-B policies and did not seek a declaration that the HO-B policies were wrongfully nonrenewed." I respectfully disagree. The majority does recognize that the "claims released include those that arise out of or relate to Farmers' decisions to 'no longer offer HO-B polices.'"

Actually the Settlement Agreement defines "Released Claims" to include:

all existing, known and unknown claims, demands and causes of action against the Released Parties, whether pending or threatened, suspected or unsuspected, contingent or non-contingent, for all existing, known and unknown damages and remedies that arise out of or relate to the acts and/or occurrences alleged in the AG Lawsuit, or in the Cease and Desist Order or the Administrative Proceedings, or in the OAG CIDs to the extent any such acts or occurrences took place prior to November 30, 2002 including but not limited to issues concerning or related to the decision to no longer offer HO-B Policies (including HO-Protector Plus (PTP), HO380 endorsement, TDP-2, TDP-3, DF-Builder's Risk, and HO-A with HO-170 endorsement (collectively referred to herein as "HO-B")), the offering of HO-A policies in place of HO-B policies, and all notices and statements that the Released Parties have made or issued in connection with the above, including but not limited to the notices of non-renewal of the HO-B policies . . . .

 

The Settlement Agreement defines "Released Parties" to mean and include:

Farmers Group, Inc., individually and d/b/a Farmers Underwriters Association, Fire Underwriters Association, Farmers Insurance Exchange, Fire Insurance Exchange, Texas Farmers Insurance Company, Mid-Century Insurance Company of Texas, Mid-Century Insurance Company, Farmers Texas County Mutual Insurance Company, Truck Insurance Exchange, and Truck Underwriters Association, as well as their affiliates, officers, employees, agents, directors or governors, representatives, attorneys, predecessors, successors and assigns.

 

The "Releasing Party" is defined to include "Texas, the OAG (both on behalf of Texas and, . . . the members of the Settlement Class )." In turn "Settlement Classes" was defined to include "(1) all of the Exchanges' Texas homeowners insurance policyholders (a) whose homeowners insurance policy incepted (including renewals) from December 28, 2001, through and including December 27, 2002, or (b) who received a notice at any time after November 14, 2001, that their HO-B policy would not be renewed. . . ."

The Settlement Agreement also contained an opt-out provision. Although Mrs. Geter's counsel attended the multi-day hearing in the 261st District Court, she did not participate or intervene. Neither has she exercised the opt-out provision.

The broad language contained in the Settlement Agreement released Farmers from any further liability for non-renewal of HO-B policies.

III. COMPETING CLASS

I would find that the class action filed by Mrs. Geter is a competing class. Competing class actions are not favored by the courts. Wyatt v. Shaw Plumbing Co., 760 S.W.2d 245, 246 (Tex. 1988). They obviously do not promote judicial economy, one purpose intended to result from class actions. Ford Motor Co. v. Sheldon, 22 S.W.3d 444, 452 (Tex. 2000).

Further, in this case, there is reason to believe that there is disagreement within the class. Mrs. Geter purports to seek a non-opt-out declaratory judgment requesting no damages, albeit with a caveat. (16) The evidence indicates that counsel for Mrs. Geter has filed other lawsuits against Farmers seeking damages for failure to renew the HO-B policy on behalf of two individuals who would be members of the class. "Courts are more inclined to deny certification where there is 'hard evidence of real disagreement' within the class." Hi-Lo Auto Supply, L.P. v. Beresky, 986 S.W.2d 382, 389 (Tex. App.- Beaumont 1999, mand. denied) (citing Forsyth v. Lake LBJ Inv. Corp., 903 S.W.2d 146, 151 (Tex. App.- Austin 1995, writ dism'd w.o.j.)).

CONCLUSION

Reduced to basics, Mrs. Geter, as the class representative who suffered no damage, filed this suit because Farmers refused to renew the HO-B policy -

a policy that Farmers was not required to offer or renew,

a policy that Farmers has not sold to anyone since 2001,

a policy for which no price was ever established, and

a policy that no policyholder was required to purchase.

I would remand this case to the trial court with instructions to decertify the class.

____________________________

RUBY SONDOCK

Justice (17)

 

Dissent Delivered October 21, 2004

1. Geter does not seek monetary damages.

2. Contained in paragraph 6, subparagraphs a, b, and c of the policy, the pertinent language is :

 

a. We may not refuse to renew this policy because of claims for losses resulting from natural causes.

b. We may not refuse to renew this policy solely because you are an elected official.

c. We may refuse to renew this policy if you have filed three or more claims under the policy in any three year period that do not result from natural causes.

 

If you have filed two claims in a period of less than three years, we may notify you in writing, that if you file a third claim during the three year period, we may refuse to renew this policy by providing you proper notice of our refusal to renew as provided in d. below. If we do not notify you after the second claim, we may not refuse to renew this policy because of losses.

 

A claim does not include a claim that is filed but is not paid or payable under the policy.

3. The trial court defined the class as plaintiff Sandra Geter and all persons who, on or after November 14, 2001, received a notice from one or more Defendants advising them that their current HO-B homeowner policies covering property in the State of Texas would not be renewed upon expiration.

4. (b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:

(1) the prosecution of separate actions by or against individual members of the class would create a risk of

(A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or

(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or

(2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or

(3) the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy. . . .

 

Tex. R. Civ. P. 42(b)

 

5. As Texas Rule of Civil Procedure 42 is modeled on Federal Rule of Civil Procedure 23, "federal decisions and authorities interpreting current federal class action requirements are persuasive in Texas actions." Ford Motor Co. v. Sheldon, 22 S.W.3d 444, 452 (Tex.2000).

6. "Generally, (b)(2) classes are premised on an assumption of homogeneity. . . . They are presumed to be cohesive, hence notice and opt-out are not mandated by the rules." LaPray, 135 S.W.3d.at 670 (citations omitted). "'[T]he predomination requirement of Rule 23(b)(2) serves essentially the same functions as the procedural safeguards and efficiency and manageability standards mandated in (b)(3) class actions.'" Id. at 670-71 (quoting Allison, 151 F.3d at 414-15).

7. The Rule 42(a) elements are numerosity, commonality, typicality and adequacy of representation. See Tex. R. Civ. P. 42(a).

Under Rule 42(b), the plaintiff must show one of the following: (1) prosecution of separate actions would create risks of inconsistent adjudication or adjudication that would be dispositive of, or impede the protection of, interests of non-parties; (2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or (3) questions of law or fact common to class members predominate over questions affecting only individual members, and a class action is superior to other methods for a fair and efficient adjudication of the controversy. See Tex. R. Civ. P. 42(b).

8. In issue one, Farmers presented the following arguments:

(1.) The actual remedy sought by Geter is damages, not specific performance.

(2.) The trial court has deprived class members and defendants of procedural protections by granting class certification under 42(b)(2).

(3.) Geter's proposed declaratory relief does not form the basis for or correspond to injunctive relief.

(4.) Geter's proposed class fails the "predominance" requirement because the class members are too diverse and the class is unmanageable.

(5.) The trial plan does not comply with Bernal or Schien (an argument also made in issue two.).

9. Geter sues under the Uniform Declaratory Judgments Act, which provides, among other things, that "[a] person interested under a . . . written contract . . . may have determined any question of construction or validity arising under the . . . contract, . . . and obtain a declaration of rights, status, or other legal relations thereunder." Tex. Civ. Prac. & Rem. Code 37.004 (Vernon 1997).

10. The Honorable Paul Murphy, sitting by assignment pursuant to Tex. Gov't Code Ann. 74.003(b) (Vernon Supp. 2004).

11. The Honorable Ruby Sondock, sitting by assignment pursuant to Tex. Gov't Code Ann. 74.003(b) (Vernon Supp. 2004).

12. I would answer appellant's issue number four in the affirmative, and answer issues number one and number six in the negative.

13. Unless otherwise noted, all emphasis in this dissent is added.

14. Contained in paragraph 6, subparagraphs a, b, and c of the policy, the pertinent language is:

 

a. We may not refuse to renew this policy because of claims for losses resulting from natural causes.

b. We may not refuse to renew this policy solely because you are an elected official.

c. We may refuse to renew this policy if you have filed three or more claims under the policy in any three year period that do not result from natural causes.

 

If you have filed two claims in a period of less than three years, we may notify you in writing, that if you file a third claim during the three year period, we may refuse to renew this policy by providing you proper notice of our refusal to renew as provided in d. below. If we do not notify you after the second claim we may not refuse to renew this policy because of losses.

 

A claim does not include a claim that is filed but is not paid or payable under the policy.

15. [A]mends and supersedes the Settlement Agreement and Stipulation entered into on the 18th day of December, 2002, by and among the State of Texas ("Texas"), the Office of the Attorney General ("OAG"), the Texas Department of Insurance ("TDI"), including the Texas Commissioner of Insurance ("Commissioner") (hereafter sometimes referred to collectively as the "State"), and defendants Fire Underwriters Association, Farmers Group, Inc., individually and d/b/a Farmers Underwriters Association, Farmers Insurance Exchange, Fire Insurance Exchange, Texas Farmers Insurance Company, Mid-Century Insurance Company of Texas, Mid-Century Insurance Company, Farmers Texas County Mutual Insurance Company, Truck Insurance Exchange, and Truck Underwriters Association. . . ."

16. Mrs. Geter's original petition contains the following language:

 

"Plaintiff and the class further reserve the right to seek and obtain any supplemental relief to which they may be entitled under CPRC 37.011, to the extent such supplemental relief is found appropriate by this Court after resolution of Plaintiff and the class' request for declaratory judgment."

17. The Honorable Ruby Sondock, sitting by assignment pursuant to Tex. Gov't Code Ann. 74.003(b) (Vernon Supp. 2004).