Fall 2004 Class Action Update
By Dean Foster

Ford Motor Co. v. Ocanas, Nos. 13-02-015-CV, 13-02-215-CV (Tex. App. – Corpus Christi, April 22, 2004, no pet.) (not designated for publication), 2004 WL 874939. 

In this case a truck owner petitioned for class certification in his lawsuit against the truck manufacturer alleging breach of express warranties, breach of implied warranties of merchantability, and DTPA violations.  These allegations were based on the manufacturer’s representation to consumers that trucks with a towing package would have a larger radiator installed.  While the Texas class certification was on appeal, the trial court also granted a nationwide class certification under Tex. R. Civ. P. 42(b)(4). 

Rule 42(b)(4) allows for certification of a class action if the court finds that questions of law or fact common to the members of the class will predominate over any questions affecting only individual members of the class.  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 parties and the court.  The plaintiff alleged breach of express and implied warranties and DTPA “laundry list” violations which require each class member to prove reliance as a prerequisite to recovery.  While there was evidence that Ford did intend for customers to rely on its representation that the trucks with the towing package would come with larger radiators, there was not any evidence that purchasers actually did rely on Ford’s representations so uniformly that common issues of reliance would predominate over individual issues.  The court held that appellee had failed to show that individualized determinations would not predominate over common questions of law and fact, and that a class action would be more efficient than other methods of adjudicating the claims.     

J.C. Penney Co. v. Pitts, No. 13-02-540-CV (Tex. App. – Corpus Christi, July 15, 2004, no pet.) (not designated for publication), 2004 WL 1576520.

Plaintiffs filed a class action suit against defendant alleging they improperly charged plaintiffs’ credit card accounts for insurance premiums without obtaining consent for the charges.  The trial court certified the class.  Following the trial court’s certification the Texas Supreme Court released its decision in Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675 (Tex. 2002).  In Schein the Court reversed the certification of a class because individual reliance was an element of the plaintiffs’ principal cause of action and individual issues would therefore predominate over the common questions of law and fact.  In light of Schein, on appeal of the certification order the plaintiffs attempted to abandon a portion of their claims to salvage the certification.  Citing Schein the court of appeals held that the trial court’s certification of the class must be reversed because the plaintiffs cannot amend the trial court’s order so that it may be affirmed by simply abandoning a portion of their claims.  In addition, because plaintiffs are attempting to abandon the claims, not because they lack merit, but simply in order to save the class certification from reversal, the notice requirements of Tex. R. Civ. P. 42(e) would be triggered.  Rule 42(e) provides that a class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class.  Therefore the court of appeals considered all of plaintiffs’ claims in reviewing the certification and determined that the plaintiffs had failed to show that common issues of law and fact would predominate. 

In re Wood, No. 03-0754, slip op., 2004 WL 1535237 (Tex. July 9, 2004). 

In this case the Texas Supreme Court decided the issue of whether an arbitrator or a court should rule on class certification issues when the contracts at issue dictate that all disputes arising out of the agreements shall be resolved through arbitration.  The contracts at issue were between attorney John O’Quinn and approximately three thousand women he represented in breast-implant litigation.  Each of the plaintiffs signed a contract of representation with O’Quinn providing that attorneys would be reimbursed out of the “costs and expenses of litigation.”  When the clients received their respective settlement proceeds there was a 1.5 percent deduction for “common expenses.”  The contracts also provided that all disputes arising out of the fee agreement will be submitted to binding arbitration “pursuant to the Federal Arbitration Act in accordance with the Commercial Arbitration rules then in effect with the American Arbitration Association.” 

Suit was filed on behalf of a putative class of more than 2,000 O’Quinn clients.  The trial court ordered the case to arbitration without ruling on the class certification issue.  Wood moved to clarify whether the trial court or the arbitrator would decide the issue of class certification.  The trial court issued an order specifically authorizing the arbitrator to decide the class certification issue.  O’Quinn filed for mandamus relief in the court of appeals, requesting that the court order each of the claims to a separate arbitration.  The court conditionally granted the writ, directing the trial court to vacate the order and make a determination as to whether or not the contracts permitted class arbitration and to decide the certification issue.  Two days before the court of appeals issued its opinion; the United States Supreme Court held that when parties agree to submit all disputes arising from a contact to an arbitrator, it includes issues of class certification.  See Green Tree Fin. Co. v. Bazzle, 123 S.Ct. 2403, 2407 (2003) (plurality opinion).  The court of appeals dismissed Green Tree as inapplicable.  The Texas Supreme Court disagreed and found Green Tree to be directly on point, holding that as a matter of contract interpretation, the issue of class certification was committed to the arbitrator.  The Court determined that a dispute as to whether the arbitration clause in a contract forbids class arbitration procedures is a dispute relating to the contract, and the parties have agreed that an arbitrator, rather than a judge, would decide the issue.

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