CLASS ACTION UPDATE
By Dean Foster – Associate

Shell Cortez Pipeline Co. v. Shores, No. 2-01-006-CV, 2004 WL 4141 (Tex. App. – Fort Worth, January 8, 2004, no pet.),

Because the Denton County statutory probate court lacked subject matter jurisdiction over the class claims, the class certification order it entered was void.

Appellants filed an interlocutory appeal of the class certification order entered by the Denton County Probate Court, in which one of the class members was an inter vivos trust.  The probate court certified a class consisting of current and former overriding royalty owners alleging defendants had underpaid carbon dioxide royalties.  Appellees argued that the probate court had jurisdiction pursuant to Texas Probate Code § 5A(c), which provides for concurrent jurisdiction with the district court in all actions “involving an inter vivos trust.”  Appellees also argued that the class action involved a matter “incident to an estate”, giving the probate court jurisdiction under Probate Code § 5A(d). 

In interpreting the scope of the statutory grant of jurisdiction to the probate court, the court of appeals applied the rules of statutory construction.  The court noted that the primary goal is to ascertain and effectuate the legislature’s intent.  To do so the court began with the plain language of the statute because it is assumed that the legislature’s words are the surest guide to its intent.  The court of appeals held that the mere fact that an inter vivos trust has the same or similar claims as other class members does not transform the class claims into actions that involve the trust, and the plain language of Probate Code § 5A(c) does not confer probate jurisdiction over class claims having nothing to do with an inter vivos trust.  In addition, the court stated that in interpreting a statute it may consider the consequences of a particular construction.  The court therefore determined that to hold that the probate court had jurisdiction over class claims simply because an inter vivos trust is a member of the class would “circumvent and impermissibly broaden the legislature’s intentionally narrow grant of jurisdiction to statutory probate courts.”   

With respect to Probate Code § 5A(d) the court held that ancillary or pendent jurisdiction was only conferred over claims that bear some relationship to an estate pending before the court.  In this case the court determined that no estate was pending in the probate court, there was no close relationship between non-probate class claims and pending probate matters, and resolution of the class claims will not aid in the efficient administration of anything related to the trust.  Therefore, the probate court lacked jurisdiction and its class certification order was void.

Am. Mfr. Mut. Ins. Co. v. Schaefer, No. 02-0295, 2003 WL 22417186 (Tex. October 17, 2003).

A personal automobile policy does not require the insurer to pay for the diminished market value of a fully and adequately repaired vehicle.

Following an automobile accident Schaefer, the insured, had his vehicle inspected by an adjuster and the insurer decided to repair the vehicle.  Schaefer did not contest the quality or adequacy of the repairs, but maintained that the insurer was obligated to compensate him for the diminished value of the vehicle due to market perception that a repaired vehicle is worth less than one that has never been damaged.  Schaefer filed a class action suit against his and several other insurers that issued policies with the same language, claiming violations of the Texas Insurance Code and breach of contract. The trial court granted summary judgment in favor of Schaefer’s insurer before the class was certified.  The court of appeals reversed holding that Schaefer could seek diminished value damages.    

Focusing on the “Limit of Liability” section of the policy the Supreme Court stated that it must give the policy language its ordinary and generally accepted meaning unless the policy shows that the words used are intended to impart a technical or different meaning.  The court notes that the concept of “repair” with regard to a vehicle connotes tangible actions, like the removal of a dent or fixing parts on the vehicle. The court therefore concludes that the generally accepted meaning of the word “repair”, as used in the policy, does not include compensating for the market’s perception that a damaged but fully repaired vehicle has less value than a vehicle which has never been damaged.  “To expand the ordinary meaning of ‘repair’ to include an intangible, diminished value element would be ignoring the policy language or giving the contract text a meaning never intended.”

In addition to applying the plain meaning to policy terms, the court stated that it must read the policy as a whole, giving effect to each provision.  The court points out that if it were to include diminished market value in the meaning of “repair or replace” it would render other provisions of the policy meaningless.  If diminished market value were to be compensated, the insurer’s obligation would be cumulative.  The insurer would be required to repair and pay for diminished value, effectively insuring the vehicle’s ACV in every instance and defeating the insurer’s right to choose a course of action.  The court also determined that the inclusion of diminished market value would render the “Payment of Loss” section meaningless.  The inclusion of diminished value would obligate the insurer to repair and pay money for all losses, which is counter to the disjunctive language of the policy.

With regard to the court of appeals opinion affirming the jury’s award for diminished market value, the court noted that the lower court erroneously applied a tort measure of damages that is generally designed to make an injured party whole.  The Court stated that such a measure of damages may apply when the insurer’s obligation is based on the policy’s liability coverage.  In a footnote the Court points out that the Texas Department of Insurance has recognized this distinction, stating that “an insurer is not obligated to pay a first party claimant for diminished market value,” but that an insurer “may be obligated to pay a third party claimant for any loss of market value of the claimant’s automobile, regardless of the completeness of the repair.”  (citing Tex. Dep’t of Ins. Commissioner’s Bulletin, No. B-027-00 (April 6, 2002)).  First party coverage, however, does not indemnify the insured against all loss, but instead the insurer’s liability is bounded by the policy’s Limit of Liability and Payment of Loss provisions.

Canales Martinez, et al. v. Dow Chem. Co., 219 F.Supp.2d 719 (E.D. La. 2002). 

Defendants failed to demonstrate that Costa Rica, Honduras, and the Philippines were available and adequate for plaintiffs’ claims.

Foreign banana workers filed a class action suit in state court against manufacturers of the chemical dibromochloropropane and fruit companies using the chemical on banana farms in Central America.   The workers alleged that exposure to the chemical rendered them sterile.  After removal to federal court, the defendants moved to dismiss the suit for forum non conveniens. 

Under the doctrine of forum non conveniens, a court may decline to exercise its jurisdiction if the moving party can establish that the convenience of the parties and the court and the interests of justice indicate that the case should be tried in another forum.   A defendant seeking a forum non conveniens dismissal must first establish the existence of an alternate forum that is both available and adequate.  A foreign forum is considered available when the entire case and all parties can come within the jurisdiction of that forum.  A foreign forum is adequate when the parties will not be deprived of all remedies or treated unfairly, even though the benefits received may not be equal to those of an American court.  

The district court held that none of the suggested alternative fora were available and adequate for plaintiffs’ claims.   Costa Rica was not an available alternative forum because the law of Costa Rica divests its courts of jurisdiction when plaintiff has first filed his claim in another forum of competent jurisdiction.  Honduras was not an available alternative forum because Honduran law authorizes filing of suits in a defendant’s domicile and a preemptive jurisdiction rule that favors a plaintiff’s first choice of forum.  The Philippines was not an available forum because under Philippine law the court first taking cognizance acquires jurisdiction to the exclusion of all other courts.  In addition, the plaintiffs’ claims were likely time-barred under Philippine law.  Therefore the district court held that the defendants had failed to satisfy their burden of persuasion and demonstrate to the court that Costa Rica, Honduras, and the Philippines were adequate and available for the Plaintiffs.

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