Texas Supreme Court: Putting the Squeeze on Class Actions?

by Steve Gardner

  Last Thursday, the Texas Supreme Court drove another nail in the class action coffin.

Justifiably, Texas is now considered by most class action lawyers (on both sides of the aisle) to be the state most hostile to class actions. One judge commented to the author, “I don’t know why anyone would bring a class action in state court in Texas because as far as I can tell, the Texas Supreme Court has abolished class actions — it just hasn’t said so.”

In Citizens Insurance Company of America v. Daccach, --- S.W.3d ----, 2007 WL 623799 (Tex. Mar. 2, 2007), Texas's High Court tightened the class action noose a bit further.  (Citations to the opinion will use Westlaw star system, e.g., “Daccach *8”.)

But, first, some history.  Starting at the beginning of this Millennium, the court has repeatedly applied excessively strict criteria to various aspects of class action litigation, running the gamut from making it almost impossible to bring a class action when reliance might be at issue, Schein v. Stromboe, 102 S.W.3d 675, 695 (Tex. 2002), to requiring a detailed trial plan.  Southwestern Refining Co., Inc. v. Bernal, 22 S.W.3d 425, 435 (Tex. 2000). The court has faulted trial plans that did not contain a rigorous analysis of (1) all causes of action, (2) how those claims will be tried, (3) every controlling substantive issue, (4) whether or how individual issues related to limitations will be determined, (5) how it would dispose of issues of reliance, (6) how it would try damages, both actual and punitive, (7) why individual issues did not predominate, and (8) why a class action is superior to other methods of resolving the dispute. State Farm Mutual Automobile Ins. Co. v. Lopez, 156 S.W.3d 550, 557 (Tex. 2004) [first three points]; Nat’l Western Life Ins. Co. v. Rowe, 164 S.W.3d 389 (Tex. 2005) [remaining points].

Throughout its holdings, the court insists that when a trial court certifies a class action compliance with class action requirements must be demonstrated rather than presumed.” Compaq Computer Corp. v. Lapray, 135 S.W.3d 657, 672 (Tex. 2004).   In practice, this has turned out to be less of a Show Your Work requirement than a game of Guess What Number I’m Thinking Of, as the court adds barrier after barrier to class certification.

In Daccach, the court now holds that any claims not asserted because they can’t be brought in a class action may be subject to res judicata anyway. That is, an issue that involves “too little commonality to allow for a class to survive the predominance requirements may still be precluded for later individual action.” Daccach *16. Here, the court seemingly conflates (a)(1) commonality requirements with (b)(3) predominance requirements.

Finally, the Texas Supreme Court allows defendants in Texas court class actions to have their cake and eat it too — they can defeat certification because a plaintiff cannot survive the procedural maze the court has created but they can also preclude later individual litigation of the very claims that could not be brought as a class.

The court’s pretzel logic is exemplified by two quotes from the opinion. First, when the court wants to find res judicata effect, it says that “Nothing forces plaintiffs seeking damages into a class suit. They may decide to opt out...,” Daccach *18, but when it wants to find that adequacy of the class representation is at issue because he decided to “abandon” non-certifiable claims, the court says that “A class representative’s decision to abandon certain claims may be detrimental to absent class members for whom those claims could be more lucrative or valuable, assuming those class members do not opt out of the class.” Daccach *22.  (To give the devils their due, the court permitted a worldwide class certified using Texas Securities Law as the underlying cause of action for all class members. Daccach *8.)

Since the phrase “Judicial Hellholes” has been appropriated by defenders of the defense industry, I nominate Texas for a preeminent position in a new list of Dens of Iniquity.

Comments

[Brooks Schuelke]

Steve--

It's been a long time since we've talked. I hope you're doing well.

I just had to ask why you put a question mark at the end of your post's title. Is there really a question at this point?

Take care.

[Beth]

I found your blog while searching for information concerning the Luby's Houston class action suit for labor laws concerning tips. Are you familiar with it?

Do you have the names and numbers I can call/contact to determine if a lawyer is reputable?
Also, how can I find which court is handling a particular case?

[Stephen Gardner]

I don't know the case or the lawyers, but the Houston Chronicle (Oct 01, 2008) reports thus:

Wait staff at Luby's restaurants around Texas may have a chance to collect one big ol' tip if a federal class-action case succeeds.

U.S. District Judge Samuel Kent on Wednesday denied a request from the restaurant that a 2007 lawsuit over tip-sharing be dropped. Kent also conditionally approved that the lawsuit be a class action for the waiters and waitresses at Luby's.

Bob Debes, a Houston attorney representing 10 wait staff from around the state, said if they win the lawsuit, his clients could potentially collect, on a sliding scale, up to $4.42 an hour for each hour they worked in the last two to three years. The amount will depend in part on the prevailing minimum wage.

The lawsuit is over mandatory tip-sharing between the wait staff -- the folks who ask diners if you need anything like tea or dessert -- and the service attendants who clean off dishes after the wait staff removes them from the tables.

Key to the lawsuit will be the definition of duties and how much the service attendants are like bus boys, who can legally share in tips. If the judge or a jury decides they are more like kitchen staff, who can't share in tips, the wait staff could have a big pay day.

The next step is for Luby's to provide a list of waiters and waitresses at Luby's restaurants around the state in the last few years. These people will be contacted and can join this federal wage lawsuit if they wish, Debes said.

Luby's lawyer Terrence Robinson said the tips were properly shared.

"This suit attempts to create something out of nothing. These guys are bussers, and the tips were properly divided," Robinson said.

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