American Exp. Travel Related Services Co., Inc. v. Walton

• Decision Date: 09 August 1994
• Docket Number: No. 05-93-01630-CV,05-93-01630-CV
• Parties: AMERICAN EXPRESS TRAVEL RELATED SERVICES CO., INC. and American Express Co., Appellants, v. G. Wayne WALTON, on behalf of himself and all others similarly situated, Appellee.
• Court: Texas Court of Appeals

Page 703

883 S.W.2d 703

AMERICAN EXPRESS TRAVEL RELATED SERVICES CO., INC. and American Express Co., Appellants, v. G. Wayne WALTON, on behalf of himself and all others similarly situated, Appellee.

No. 05-93-01630-CV.

Court of Appeals of Texas,

Dallas.

Aug. 9, 1994.

Charles S. Bergen, George R. Dougherty, Christopher Hill, Chicago, IL, Alan W. Harris, Jack D. Ballard, Dallas, for appellants.

W.D. Nasterson, Roger F. Claxton, Robert J. Hill, Dallas, Irving Malchman, Roger W. Kirby, New York City, for appellee.

Before BAKER, KINKEADE and ROSENBERG, JJ.

OPINION

BAKER, Justice.

This is an interlocutory appeal from an order certifying a class action under Texas Rule of Civil Procedure 42. Walton represents a class of past and present American Express cardholders whose names and addresses American Express sold or rented to third parties for direct mail advertisements. American Express appeals, claiming the trial court abused its discretion by certifying the class. We reverse the trial court's order in part and affirm it in part. We remand the cause for further proceedings.

FACTUAL BACKGROUND

In this action, Walton complains of American Express's marketing activities. American Express compiles lists of its cardholders based on its analysis of the information American Express collects about its cardholders. American Express then uses or rents these lists to establishments accepting the American Express card for direct mail advertisements. Walton complains that American Express wrongfully uses cardholders' personal information for profit.

In Walton's amended motion for class certification, he seeks actual damages, including revenue realized from American Express's marketing activities, exemplary damages, injunctive relief, and court costs. Walton argued class certification was proper because: (1) there was a risk of inconsistent judgments; (2) permanent injunctive relief was proper for the entire class; and (3) common questions of law and fact predominate over individual questions of law and fact. Walton also argued American Express could send notice of the class action in cardholders' American Express bills.

The trial court granted Walton's motion to certify the class. The trial court defined a nationwide class of thirty-nine million past and present American Express cardholders. The trial court found individual notice to the class members was unnecessary. The trial court found one-time publication in the Wall Street Journal was adequate notice. The trial court ordered American Express to pay for the publication notice.

PARTIES' CONTENTIONS

American Express claims the trial court abused its discretion by certifying the class without requiring Walton to provide individual notice to the class members. American Express argues the trial court abused its discretion by certifying a nationwide class. American Express argues the trial court abused its discretion in certifying the class because Walton's claims are inappropriate for class-action relief. Finally, American Express argues the trial judge had no jurisdiction to certify the class because he had an interest in the suit. ¹

Walton first argues this court does not have jurisdiction to review American Express's complaints about notice to class members or class size. Walton claims those matters are collateral to class certification. Alternatively, Walton argues that since the suit primarily seeks injunctive relief, publication notice to class members is adequate. Walton argues the trial court had jurisdiction to certify a nationwide class. Finally, Walton argues the trial court properly certified the class because it satisfied the requirements for a class action.

JURISDICTIONAL ISSUES

A. The Trial Court's Jurisdiction

American Express questions whether the trial court had jurisdiction to enter the order certifying the class. American Express argues rule 18b(1) disqualified the trial judge because he was an American Express cardholder. See TEX.R.CIV.P. 18b. Walton argues the parties knew the trial judge was a cardholder. Walton notes that American Express did not object when the trial judge stated he was a cardholder. Walton argues American Express has waived any complaint. Alternatively, Walton argues rule 18b(1) does not disqualify the trial judge because he did not have an interest in the litigation before he certified the class.

Judges shall disqualify themselves in proceedings in which they know they have an interest in the subject matter in controversy. See TEX.R.CIV.P. 18b(1). A judge shall recuse himself in any proceeding in which he knows he has a financial interest in the litigation, or any other interest that the outcome of the proceeding could substantially affect. See TEX.R.CIV.P. 18b(2)(e). A trial judge shall also recuse himself in any proceeding in which a party might reasonably question the trial judge's impartiality. TEX.R.CIV.P. 18b(2)(a). Parties may waive any ground for recusal after the trial court fully discloses it on the record. TEX.R.CIV.P. 18b(5).

In this case, the trial judge was an American Express cardholder. He stated on the record that he was a cardholder. American Express did not object to the trial judge continuing to hear the case. We find the trial judge did not have an interest in the litigation until he certified the class. Before he certified the class, the only person with an interest in the litigation was Walton individually. Rule 18b did not disqualify the trial judge until he certified the class.

The facts of this case show American Express may have reasonably questioned the trial judge's impartiality. However, the trial court disclosed he was a cardholder, and American Express did not object. American Express waived any complaint about the trial judge's failure to recuse himself. The trial judge had jurisdiction to enter the certification order.

B. Appellate Jurisdiction

In his first reply point, Walton argues this court does not have jurisdiction to consider American Express's complaints about notice and class size. Walton contends these matters are collateral to class certification. He maintains this court cannot consider collateral matters in an interlocutory appeal. American Express argues this court has jurisdiction over the entire certification order, not just to determine whether the class certification was proper.

The civil practice and remedies code provides that a party may appeal from a trial court's interlocutory order that certifies or refuses to certify a class in a suit brought under rule 42. See TEX.CIV.PRAC. & REM.CODE ANN. § 51.014(3) (Vernon Supp.1994). A party may take an interlocutory appeal only when authorized by statute. See Cherokee Water Co. v. Ross, 698 S.W.2d 363, 365 (Tex.1985) (per curiam). We do not have jurisdiction over an interlocutory order disposing of matters relating to class certification such as class size if the order does not certify or refuse to certify the class. Pierce Mortuary Colleges, Inc. v. Bjerke, 841 S.W.2d 878, 880 (Tex.App.--Dallas 1992, writ denied); Permian Corp. v. Davis, 610 S.W.2d 236, 237 (Tex.App.--El Paso 1980, writ ref'd) (per curiam).

Under the plain language of section 51.014, we have jurisdiction over the class certification order. We find section 51.014 allows a party to complain of all matters pertaining to certification of the class decided by the interlocutory order certifying or refusing to certify a class. Section 54.014(3) of the civil practice and remedies code gives this court jurisdiction to consider American Express's complaints about notice and class size because the trial court disposed of the issues in its order certifying the class.

NOTICE REQUIREMENT

A. Applicable Law

1. Standard of Review

A trial court has broad discretion in determining whether the plaintiff should maintain a lawsuit as a class action. Dresser Indus., Inc. v. Snell, 847 S.W.2d 367, 371 (Tex.App.--El Paso 1993, no writ). We may not disturb an order certifying a class unless the trial court clearly abused its discretion. Chevron U.S.A. Inc. v. Kennedy, 808 S.W.2d 159, 161 (Tex.App.--El Paso 1991, writ dism'd w.o.j.). We limit our review of a class certification order to whether the trial court abused its discretion. Wiggins v. Enserch Exploration, Inc., 743 S.W.2d 332, 334 (Tex.App.--Dallas 1987, writ dism'd w.o.j.). We do not substitute our judgment for that of the trial court. See Dresser Indus., Inc., 847 S.W.2d at 371.

A trial court does not abuse its discretion if it bases its decision on conflicting evidence. RSR Corp. v. Hayes, 673 S.W.2d 928, 930 (Tex.App.--Dallas 1984, writ dism'd). A trial court does abuse its discretion when it improperly applies the law to the undisputed facts. Wiggins, 743 S.W.2d at 334. We may reverse a trial court for abuse of discretion only if, after searching the record, we find the trial court's order clearly was arbitrary and unreasonable. See Simon v. York Crane & Rigging Co., Inc., 739 S.W.2d 793, 795 (Tex.1987).

2. Rule 42

A trial court may certify a class action if a plaintiff satisfies the prerequisites of rule 42(a) and meets at least one requirement of rule 42(b). TEX.R.CIV.P. 42. A plaintiff must demonstrate the right to maintain the suit as a class action. Life Ins. Co. of the Southwest v. Brister, 722 S.W.2d 764, 770 (Tex.App.--Fort Worth 1986, no writ).

As soon as practicable the trial court shall, after a hearing, determine whether an action should proceed as a class action. TEX.R.CIV.P. 42(c)(1). After the trial court determines a party may maintain a class action, it shall order the party claiming the class action to direct to the class members the best notice practicable under the circumstances including individual notice to all class members whom he can identify through reasonable effort. TEX.R.CIV.P. 42(c)(2).

Rule 42 is patterned after Federal Rule of Civil Procedure 23. Federal rule 23 and the cases interpreting it are persuasive authority when we interpret rule 42. See Ball v. Farm & Home...