Bally Total Fitness Corp. v. Jackson

• Decision Date: 27 September 2001
• Docket Number: No. 99-1002,99-1002
• Citation: 53 S.W.3d 352
• Parties: (Tex. 2001) Bally Total Fitness Corporation f/k/a Health & Tennis Corporation of America, successor by merger to Dallas Health Clubs, Inc. d/b/a Bally's, Petitioner v. Keith Jackson, individually and on behalf of all others similarly situated, and Freddy Mack, Respondents
• Court: Texas Supreme Court

Page 352

53 S.W.3d 352 (Tex. 2001)

Bally Total Fitness Corporation f/k/a Health & Tennis Corporation of America, successor by merger to Dallas Health Clubs, Inc. d/b/a Bally's, Petitioner v. Keith Jackson, individually and on behalf of all others similarly situated, and Freddy Mack, Respondents

No. 99-1002

IN THE SUPREME COURT OF TEXAS

Argued September 6, 2000

Decided April 19, 2001.

Rehearing Overruled Sept. 27, 2001

On Petition for Review from the Court of Appeals for the Fourth District of Texas

Justice O'Neill delivered the opinion of the Court, joined by Chief Justice Phillips, Justice Enoch, Justice Baker, and Justice Hankinson. Dissenting opinion by Justice Owen, joined by Justice Hecht and Justice Abbott.

A party may not appeal an interlocutory order unless authorized by statute. Cherokee Water Co. v. Ross, 698 S.W.2d 363, 365 (Tex. 1985) (per curiam). Section 51.014(a)(3) of the Texas Civil Practice and Remedies Code allows a party to appeal an interlocutory order that certifies or refuses to certify a class action. Tex. Civ. Prac. & Rem. Code § 51.014(a)(3). In De Los Santos v. Occidental Chemical Corp., 933 S.W.2d 493, 495 (Tex. 1996), we held that an interlocutory order that changed a certified class from opt-out to mandatory and created conflict between the class and its counsel altered the fundamental nature of the class and was appealable under the statute.

In this case the trial court certified a class, but that order is not the subject of this appeal. Rather, the defendant, Bally Total Fitness, seeks to appeal three subsequent interlocutory orders. The first order granted a partial summary judgment holding that Bally had charged certain customers an illegal time-price differential. The other two orders overruled Bally's two motions to decertify the class. We must decide whether the combined effect of these orders meets the De Los Santos test for interlocutory-appeal jurisdiction. We hold that it does not. Whether or not the trial court abused its discretion in issuing the orders Bally seeks to appeal, which we do not decide, those orders do not alter the fundamental nature of the class as De Los Santos requires. Accordingly, we affirm the court of appeals' dismissal for want of jurisdiction.

I

Keith Jackson filed this class action against Bally claiming that it charged certain customers amounts that exceeded the maximum time-price differential permitted by the Texas Consumer Credit Code. See Tex. Rev. Civ. Stat. art. 5069-6.02(9)(a) (repealed) (current version at Tex. Fin. Code § 345.055(a)). Jackson also claimed that Bally was liable under the Texas Deceptive Trade Practices Act for unconscionable conduct and for representing that an agreement conferred rights and obligations prohibited by law. See Tex. Bus. & Comm. Code §§ 17.50(a)(3), 17.46(b)(12). In 1995, the trial court certified an opt-out class under Rule 42(b)(4) of the Texas Rules of Civil Procedure. Bally appealed the certification order, but the court of appeals affirmed the trial court. See Health & Tennis Corp. of Am. v. Jackson, 928 S.W.2d 583, 592 (Tex. App. San Antonio 1996, writ dism'd w.o.j.).

Discovery disputes concerning potential class membership arose after the certification, delaying the delivery of notice.¹ As a result, notice had not been sent when Jackson moved for partial summary judgment on the liability issue. The trial court granted Jackson's motion and ruled that Bally had violated the Texas Consumer Credit Code and the DTPA. Bally then moved to decertify the class, complaining that the partial summary judgment should not have preceded notice to the class members.² The trial court issued two orders denying the motions.

Bally filed an appeal and a petition for writ of mandamus with the court of appeals. The writ of mandamus was denied, and the appeal proceeded. After oral argument, the court of appeals dismissed the interlocutory appeal for want of jurisdiction. 2 S.W.3d 327. Bally filed both a petition for writ of mandamus and a petition for review in this Court. We denied the writ of mandamus, 43 Tex. Sup. Ct. J. 609 (April 13, 2000), but granted the petition for review to consider whether the court of appeals correctly decided its jurisdiction. See Long v. Humble Oil & Refining Co., 380 S.W.2d 554, 555 (Tex. 1964) (holding that this Court has jurisdiction to review whether the court of appeals had jurisdiction).

II

By statute, a party may appeal an interlocutory order that certifies or refuses to certify a class action. Tex. Civ. Prac. & Rem. Code § 51.014(a)(3). The three interlocutory orders at issue here do not expressly certify or refuse to certify a class. Rather, one grants a partial summary judgment and the other two refuse to decertify the class. Bally concedes this point, but argues that De Los Santos broadened the statute's reach so that an appeal lies from any order that changes the fundamental nature of the class. Bally offers several reasons why the trial court's orders altered the class's fundamental nature. Before addressing Bally's arguments, we examine the facts presented in De Los Santos.

In De Los Santos, plaintiff Grant filed suit against OxyChem and others for injuries caused by a butadiene plant's accidental chemical release. Other plaintiffs intervened and the defendants, facing hundreds of personal injury suits, successfully moved the court to certify a mandatory class over the plaintiffs' vigorous objections. Grant and others appealed the certification, but a group of over 500 plaintiffs represented by attorney Gonzalez did not join in the appeal even though they had initially opposed the certification. While appeals of the certification order were pending, the case was transferred to another court. The new court granted the plaintiffs' motion to reconsider and certified the class as an opt-out class. The Gonzalez plaintiffs and others opted out, and the Grant plaintiffs proceeded to trial.

The jury found defendants to be negligent and grossly negligent, and awarded actual damages. Before proceeding to the punitive damages phase of the trial, the defendants offered to settle for $65,700,000 provided that a mandatory class was certified and approved by the trial court. The class counsel, who had previously opposed a mandatory class, accepted and joined the defendants in convincing the court to modify the class by changing it from an opt-out class to a mandatory settlement class. This was done over the objection of those plaintiffs who had rejected class counsel's representation by opting out and not participating in the trial.

The court of appeals dismissed the objecting plaintiffs' appeal for want of jurisdiction, relying upon Pierce Mortuary for the proposition that an order changing the size of a class merely modifies a certification order and does not qualify as an "order certifying or refusing to certify a class." See Pierce Mortuary Colleges, Inc. v. Bjerke, 841 S.W.2d 878, 880-81 (Tex. App. Dallas 1992, writ denied). But we held that the interlocutory order at issue in De Los Santos did more than simply change the size of the class: "[c]hanging a class from opt-out to mandatory does not simply enlarge its membership; it alters the fundamental nature of the class." 933 S.W.2d at 495. In reaching our decision we voiced concern about conflicts that may arise between the class and its counsel, particularly with regard to settlement. We noted that "[t]o deny interlocutory appeal in this situation, when class counsel agrees to a fundamental restructuring of the class to which they were once opposed aggravates those concerns." Id.; see also Gen. Motors Corp. v. Bloyed, 916 S.W.2d 949, 953-54 (Tex. 1996) (noting "special concerns" raised by settlement classes).

Our narrow ruling in De Los Santos comports with the Legislature's intent that section 51.014 be strictly construed as "'a narrow exception to the general rule that only final judgments and orders are appealable.'" Montgomery County v. Fuqua, 22 S.W.3d 662, 665 (Tex. App. Beaumont 2000, pet. denied) (quoting Tex. Dep't of Transp. v. City of Sunset Valley, 8 S.W.2d 727, 730 (Tex. App. Austin 1999, no pet.)); America Online, Inc. v. Williams, 958 S.W.2d 268, 271 (Tex. App. Houston [14th Dist.] 1997, no pet.). In Stary v. DeBord, for example, we rejected the argument that a corporate-shareholder derivative claim, even though closely resembling a class action, fit within the statutory language. 967 S.W.2d 352, 353-54 (Tex. 1998) (per curiam). Similarly, the statute does not authorize an appeal of an order merely enlarging the size of a class, Pierce Mortuary, 841 S.W.2d at 880-81, or an order modifying a class's definition, Koch Gathering Systems, Inc. v. Harms, 946 S.W.2d 453, 455-56 (Tex. App. Corpus Christi 1997, writ denied).

Nevertheless, Bally argues that we should extend De Los Santos to cover an interlocutory order that makes it less likely that class members will opt out. According to Bally, because the partial summary judgment resolved liability in the plaintiffs' favor, the potential class members' incentives to opt out have been virtually eliminated; thus the class, while nominally an opt-out class, is actually a de facto mandatory class. Bally also argues that the pre-notice partial summary judgment invites impermissible one-way intervention. "One-way intervention" refers to the practice of permitting class members to intervene after the court has decided the merits in their favor, although they would not have been bound by an adverse decision. See 28 U.S.C. app. at 604 (1988). According to Bally, the Advisory Committee drafters intended Rule 23(c)(3) of the Federal Rules of Civil Procedure to eliminate this practice by allowing a judgment to bind only class members who have received notice and not opted out: "Under proposed subdivision (c)(3), one-way intervention is excluded; the action will have been early determined to be a class or nonclass action, and in the former case the judgment, whether...