Class Certification Upheld

In this class action concerning certain practices of a life insurance settlement company, the Court of Appeals upheld a decision to certify the case as a class action.  The defendants challenged the decision on several grounds, including that the trial court purportedly failed to consider “the res judicata risks” of certifying a class action on absent class members.  The Court, however, rejected this argument, pointing to facts in the record showing that the trial court considered the other pending lawsuits.  The Court also pointed to the certification order which specifically limits the class to the narrow focus of the lawsuit and which directed that class members should be given notice of their right to opt out of the class.

Life Partners, Inc. v. McDermott

Class Action Contacts Insufficient to Trigger Personal Jurisdiction

In an interesting case on the scope of “minimum contacts,” the Court of Appeals held that serving as the representative plaintiff in a nationwide class action (with members from Texas) against a Texas company was not sufficient to create minimum contacts for purposes of personal jurisdiction.

The case arose out of a nationwide class action that the Appellees, as class representatives, filed in Illinois against King Supply Company, LLC alleging violations of the Telephone Consumer Protection Act (TCPA).  King settled the class action for $20 million, but as part of the settlement the Appellees covenanted that, except for $200,000 paid by King, their only source of payment would be King’s insurance policies.  King’s Texas-based insurance companies (Appellants) then filed a declaratory action in Dallas against Appellees seeking a declaration that they had no duty to defend or indemnify King.

Appellees filed a special appearance contesting personal jurisdiction, which the trial court granted.  Appellants appealed, arguing that by representing a nationwide class (12% of which were Texas residents) against a Texas company and seeking to recover funds from Texas insurance policies, Appellees’ contacts with Texas were sufficient to warrant personal jurisdiction over them.  The Court of Appeals disagreed, concluding that the evidence failed to show that Appellees “purposefully availed themselves of the privilege of conducting activities in Texas, thus invoking the benefits and protections of Texas law.”

Nat’l Fire Ins. Co. v. CE Design, Ltd., No. 05-13-00720-CV

No Class

The district court certified a class of claimants who alleged that Stewart Title Guaranty Co. had charged them more than permitted by the Texas Department of Insurance in renewing their mortgage title policies. On interlocutory appeal, the court of appeals has now reversed that class certification. The opinion is lengthy and fact-intensive, but the case basically boils down to the question of whether questions of law or fact common to the class predominated over questions affecting only individual members. Unfortunately for the plaintiffs, the Fifth Circuit had recently rejected class actions in two recent cases alleging similar claims against different lenders.  See Ahmad v. Old Republic Nat’l Title Ins. Co., 690 F.3d 698 (5th Cir. 2012); Benavides v. Chicago Title Ins. Co., 636 F.3d 699 (5th Cir. 2011). The court of appeals discussed both cases extensively and followed them to the same conclusion, holding that that facts of each class member’s loans would have to be examined individually, negating any possibility that common questions would predominate over those individual inquiries.

Stewart Title Guaranty Co. v. Mims, No. 05-12-00534-CV

No Cash for the Class, No Cash for Counsel

In 2009, a class of shareholders challenged the stock-for-stock merger between Centex Corp. and Pulte Homes, charging that the board breached its fiduciary duties by failing to obtain an adequate price for the shareholders.  As often happens, the parties quickly settled, and Centex and Pulte agreed to disclose additional information about the merger in the proxy statements.  While the settlement provided class counsel with a hefty cash payment of attorneys’ fees, the shareholder’s reward was simply more information.

Rocker raised several objections to the settlement, but his most salient objections were (1) that the settlement’s release was too broad because it waived all known and unknown claims without granting the shareholders an opportunity to opt-out; and (2) that class counsel could not recover their attorneys’ fee in cash, when the class received only injunctive relief.  The Court credited both of Rocker’s arguments.  Regarding the first, the Court held that “[i]f appellees require a ‘limitless release,’ then due process requires that class members be afforded the option to be excluded from the class.” Regarding the second, it found that “if there is no cash recovery for the class, fees could not be awarded in cash, regardless of the value of the benefit to the class.”    The Court then remanded the case to the trial court for further proceedings.

Rocker v. Centex Corp, No. 05-10-00903