North American Consultants, Inc. v. MacLennan, D.A., D.C., Individually and as Representative of all Persons Similarly Situated--Appeal from 130th District Court of Matagorda County

NUMBER 13-00-289-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI

____________________________________________________________________

NORTH AMERICAN

CONSULTANTS, INC., Appellant,

v.

D.A. MACLENNAN, D.C., INDIVIDUALLY AND AS

CLASS REPRESENTATIVE OF ALL PERSONS SIMILARLY SITUATED, Appellee.

____________________________________________________________________

On appeal from the 130th District Court of Matagorda County, Texas.

____________________________________________________________________

O P I N I O N

Before Justices Hinojosa, Ya ez, and Chavez

Opinion by Justice Ya ez

This is an interlocutory appeal from an order certifying a class of individual chiropractors alleging claims of defamation and tortious interference against appellant, North American Consultants, Inc. ("NAC"), a company that reviews medical and billing records for insurance carriers. Because the trial court's certification order does not meet the requirements recently articulated by the Texas Supreme Court, we reverse and remand to the trial court. See Southwestern Ref. Co., Inc. v. Bernal, 22 S.W.3d 425, 435 (Tex. 2000).(1)

Appellee, D. A. MacLennan ("MacLennan"), is a chiropractor who treated a patient, Michael Garcia, and submitted a bill for chiropractic services to Farmers Insurance Company ("Farmers") requesting payment. NAC reviews patients' records and provides opinions in the form of "retrospective reviews" concerning bills submitted by medical service providers for payment. MacLennan alleges that NAC's opinions to Farmers regarding the "reasonableness" of certain charges and the "medical necessity" of certain chiropractic treatments constitutes defamation and tortious interference in his personal service contract with his patient.

Background

Garcia received chiropractic treatment from MacLennan in connection with injuries he received in an automobile accident. Garcia's attorney, Lynn Grebe, forwarded Garcia's medical bills, including those submitted by MacLennan, to Farmers for payment under an automobile insurance policy. Following a review, Farmers forwarded the bills to NAC for a retrospective review concerning the reasonableness of the charges and the medical necessity of the treatment provided. A chiropractor retained by NAC reviewed the bills and issued a report to Farmers, dated January 22, 1998, stating that of the $2,410 in charges submitted by MacLennan, $1,275 was for treatment which was "not medically necessary." Farmers sent the report to Grebe, who, in turn, forwarded it to MacLennan for a response. MacLennan provided additional information regarding treatment, and asked for reconsideration. NAC issued a second report, dated February 20, 1998, which, like the first report, characterized $1,275 as for treatment "not medically necessary." The opinions in the February 20, 1998 report form the basis of MacLennan's claims for defamation and tortious interference.(2)

MacLennan filed a class action lawsuit on behalf of all similarly situated chiropractors, alleging that NAC's reports constitute defamation.(3) After NAC moved for summary judgment, MacLennan filed an amended petition, adding a cause of action for tortious interference in the doctor-patient relationship. The trial court denied NAC's motion for summary judgment.

MacLennan submitted a motion for class certification, and without a hearing, the trial court issued a certification order on April 14, 2000, certifying a class of "[a]ll chiropractors whose treatment of patients has been the subject of a report by defendant, North American Consultants, Inc., to any person other than the chiropractor." This interlocutory appeal followed.

By three issues, NAC contends: (1) the trial court abused its discretion by certifying a class of plaintiffs asserting individual defamation and tortious interference claims; (2) MacLennan failed to show that the numerosity, typicality, commonality, adequacy, and predominance requirements of Texas Rule of Civil Procedure 42 are satisfied; and (3) the trial court erred by improperly certifying a broad class, because the class is defined by the ultimate issue of liability; is not limited to the applicable one-year limitations period; is unlimited in scope; and includes instances in which reviews are allowed, or even required, by Texas or federal law. MacLennan argues that the common issue, i.e., whether a statement to a third party, to the effect that a chiropractor gives a patient medically unnecessary treatment, is defamatory, predominates over any individual issues of class members. He also argues that NAC waived its argument that individual issues predominate because it refused discovery concerning the nature of the individual issues.

Standard of Review

An appellate court reviews a trial court's determination that a case should be certified as a class action using an abuse of discretion standard. Monsanto Co. v. Davis, 25 S.W.3d 773, 781 (Tex. App.--Waco 2000, no pet.); Health & Tennis Corp. of Am. v. Jackson, 928 S.W.2d 583, 587 (Tex. App.--San Antonio 1996, writ dism'd w.o.j.). The trial court abuses its discretion when it does not properly apply the law to the undisputed facts, when it acts arbitrarily or unreasonably, or when its ruling is based on factual assertions unsupported by the record. Monsanto, 25 S.W.3d at 781. In reviewing the trial court's ruling on certification, an appellate court is required to view the evidence in a light most favorable to the trial court's action and indulge every presumption in favor of the trial court's ruling. See Spera v. Fleming, Hovenkamp, & Grayson, 4 S.W.3d 805, 810 (Tex. App.--Houston [14th Dist.] 1999, no pet.); Rainbow Group, Ltd. v. Johnson, 990 S.W.2d 351, 356 (Tex. App.--Austin 1999, pet. dism'd).

Class Certification

To merit certification, a class action must satisfy each of the four threshold requirements of Texas Rule of Procedure 42(a): (1) numerosity ("the class is so numerous that joinder of all members is impracticable"); (2) commonality ("there are questions of law or fact common to the class"); (3) typicality ("the claims or defenses of the representative parties are typical of the claims or defenses of the class"); and (4) adequacy of representation ("the representative parties will fairly and adequately protect the interests of the class"). See Tex. R. Civ. P. 42(a); Bernal, 22 S.W.3d at 433; Nissan Motor Co., Ltd. v. Fry, 27 S.W.3d 573, 581 (Tex. App.--Corpus Christi 2000, pet. filed). In addition to these prerequisites, the class action must satisfy at least one of the subsections of rule 42(b). Bernal, 22 S.W.3d at 433. At the certification stage, the burden of proof is on the plaintiffs to establish their right to maintain an action as a class action. See Life Ins. Co. of the Southwest v. Brister, 722 S.W.2d 764, 770 (Tex. App.--Fort Worth 1986, no writ).

The trial court found that MacLellan not only met the four threshold requirements for class certification under rule 42(a), but also satisfied the requirements of rule 42(b)(4), which requires common questions of law or fact to predominate over any questions affecting only individual members and that a class action is superior to other available methods for fair and efficient adjudication of the controversy. Tex. R. Civ. P. 42(b)(4).

Discussion

NAC contends generally that the trial court abused its discretion by certifying a class of plaintiffs asserting individual defamation and tortious interference claims. NAC argues that certification of a class of defamation plaintiffs is inappropriate because defamation is a personal injury cause of action involving highly individualistic determinations, such as an analysis of truth and falsity and "damage to reputation" injuries. In the present case, MacLellan alleged that the opinions expressed in the retrospective review report were false, intentionally made, and caused personal injuries in the form of damage to reputation, mental anguish, humiliation, and embarrassment. NAC argues that the resolution of such claims requires highly case-specific determinations. It also argues that highly specific fact-intensive inquiries will be required to determine for each claimant the applicability of various affirmative defenses to defamation, such as truth, mere opinion, not defamatory as a matter of law, the doctrine of invitation/consent, the "defamation-proof plaintiff," judicial privilege, and qualified privilege. NAC contends that because resolving such individual issues will result in a series of mini-trials, common issues do not predominate over individual issues and rule 42(b)(4)'s predominance requirement is not met.

MacLellan contends NAC waived its predominance argument because it refused discovery of evidence concerning the nature of individual issues. However, MacLellan cites no authority in support of its waiver argument and therefore, we do not address it. See Tex. R. App. P. 38.1(h), 38.2.

In Bernal, the Texas Supreme Court noted that rule 42(b)(4)'s predominance requirement is "one of the most stringent prerequisites to class certification." Bernal, 22 S.W.3d at 433. Courts determine if common issues predominate by identifying the substantive issues of the case that will control the outcome of the litigation, assessing which issues will predominate, and determining if the predominating issues are, in fact, those common to the class. Id. at 434. The test for predominance is not whether common issues outnumber uncommon issues but, "whether common or individual issues will be the object of most of the efforts of the litigants and the court." Id. Common issues do not predominate if, after common issues are resolved, presenting and resolving individual issues is likely to be an overwhelming or unmanageable task for a single jury. Id. Ideally, "a judgment in favor of the class members should decisively settle the entire controversy, and all that should remain is for other members of the class to file proof of their claim." Id. "The predominance requirement is intended to prevent class action litigation when the sheer complexity and diversity of the individual issues would overwhelm or confuse a jury or severely compromise a party's ability to present viable claims or defenses." Id.

Before a reviewing court can determine whether individual issues predominate over common ones, it must consider how to apply the predominance requirement. Id. The Bernal court expressly rejected the "certify now and worry later" approach to class certification, concluding that a cautious approach to class certification is essential. Id. at 435. Therefore, it is improper to certify a class without knowing how the claims can and will likely be tried. Id. "A trial court's certification order must indicate how the claims will likely be tried so that conformance with Rule 42 can be meaningfully evaluated." Id. (emphasis added); see also Nissan, 27 S.W.3d at 592 ("Bernal clearly requires that the certification order contain a plan for dealing with individual issues, and for the specifics of the plan to be considered by the trial court in determining whether common issues will predominate over individual issues.").

Here, the certification order stated, in part, as follows:

It is ORDERED, ADJUDGED, and DECREED that this case be certified as a class action in that 1) the class is so numerous that joinder of all members is impractical; 2) there are questions of fact and law common to the class; 3) the claims of the representative party, D. A. MacLellan, D.C., are typical of the claims of the class; and 4) the class representative, D. A. MacLellan, D.C., will fairly and adequately represent the class.

It is ORDERED, ADJUDGED, and DECREED that this case be certified as a class action as to defendant, North American Consultants, Inc.

It is ORDERED, ADJUDGED, and DECREED that this case be certified under Tex. R. Civ. P. 42(b)(4).

Thus, the trial court, acting before the Texas Supreme Court's ruling in Bernal, did not indicate in its certification order how the class claims in this case are likely to be tried. The certification order clearly fails to identify the causes of action, how those causes of action would be tried, or the substantive issues that would control the outcome of the case. Absent a trial plan or other indication in the certification order describing how the class claims against NAC will likely be tried, this Court cannot perform a meaningful evaluation to ensure that rule 42's requirements have been satisfied. Because it is improper to certify a class without including this information in the certification order, we reverse and remand the trial court's order of certification for compliance with the Texas Supreme Court's requirements in Bernal.

LINDA REYNA YA EZ

Justice

Do not publish. Tex. R. App. P. 47.3.

Opinion delivered and filed this the

7th day of December, 2000.

1. The trial court's class certification order was signed April 14, 2000. The Texas Supreme Court issued its decision in Southwestern Ref. Co., Inc. v. Bernal, 22 S.W.3d 425, 435 (Tex. 2000), on May 11, 2000. Thus, the trial court granted the certification order without the benefit of the supreme court's ruling in Bernal.

2. MacLennan's lawsuit was filed on February 24, 1999. Accordingly, the January 22, 1998 report is outside the one-year limitations period for defamation and cannot form the basis for MacLennan's claims. See Tex. Civ. Prac. & Rem. Code Ann. 16.002 (Vernon Supp. 2000).

3. MacLennan initially filed suit against both NAC and Farmers. Farmers was subsequently non-suited.