Crouch v. Tenneco, Inc.

• Decision Date: 24 March 1993
• Docket Number: No. 10-92-120-CV,10-92-120-CV
• Citation: 853 S.W.2d 643
• Parties: Clyde CROUCH, et al., Appellants, v. TENNECO, INC., et al., Appellees.
• Court: Texas Court of Appeals

Page 643

853 S.W.2d 643

Clyde CROUCH, et al., Appellants, v. TENNECO, INC., et al., Appellees.

No. 10-92-120-CV.

Court of Appeals of Texas,

Waco.

March 24, 1993.

Opinion Denying Rehearing May 19, 1993.

Charles G. King, James P. Pennington, Scott, Douglas & Luton, L.L.P., Houston, for appellants.

Roger Townsend, Jennifer Bruch Hogan, Joy M. Soloway, Fulbright & Jaworski, Houston, Matt Dawson, Dawson, Sodd Before THOMAS, C.J., and CUMMINGS and VANCE, JJ.

Moe & Means, P.C., Corsicana, for appellees.

OPINION

VANCE, Justice.

Fourteen of three hundred fifty-five plaintiffs appeal from a judgment approving a settlement in a class-action suit and awarding $6,425,000 in attorney's fees to class counsel. The lawsuit involves a dispute between Tenneco and its employees who were qualified participants of a bonus plan. The class action was settled through mediation approximately ten and one-half months after being filed, creating a common fund of $22.5 million, from which the attorney's fee award was deducted. From a review of the entire record, we find no abuse of discretion by the trial court in either the method it used to compute the award or in the amount it awarded. We will affirm the judgment.

FACTUAL BACKGROUND

Tenneco, Inc. announced in the spring of 1988 its decision to sell its oil and gas operations, which had been conducted through a subsidiary, Tenneco Oil Company. To retain 385 key employees involved with those operations until the sale was complete, Tenneco offered what it called a Value Incentive Plan--a bonus designed to induce those employees to continue working. According to the Plan, eligible employees were to be paid bonuses based on the sales proceeds received for the sale of the "total company." However, prior to the sale of the oil and gas operations, Tenneco, Inc., its subsidiaries, and other named defendants took actions which substantially reduced the value of the oil and gas assets, thereby reducing the bonuses due the participants of the Plan.

In 1989, a Louisiana law firm (the Perret firm) filed suit against Tenneco, Inc. in Louisiana on behalf of several of the Plan participants. This suit eventually included more than one-hundred plaintiffs. In July 1989, a similar lawsuit (the Ausburger suit) was filed in the 11th Judicial District Court in Harris County by two Houston firms. In mid-December 1990, after the Louisiana lawsuit stalled, the Perret firm approached the law firm of Hardy, Milutin and Johns (the Hardy firm) to discuss the possibility of filing a class-action suit in Texas on behalf of the Plan participants. The Perret and Hardy firms reached an agreement that authorized the Hardy firm to file a class-action suit in Wharton County on behalf of Charles A. Mills and seven others, individually and as representatives of a class of persons (the Mills Class) who were qualified participants in the Plan. The petition filed in the Mills class action alleged generally the same causes of action as had been asserted in the Ausburger and Louisiana suits.

In March 1991, by an agreed order transferring venue, the Mills Class suit was transferred to the 55th Judicial District Court of Harris County. The Louisiana plaintiffs had already agreed to join the class action. On May 15, the Ausburger suit and the Mills Class suit were consolidated in the 11th Judicial District Court of Harris County. The consolidated suit involved more than 300 Tenneco, Inc. employees.

In October 1991, the parties to the consolidated action entered non-binding mediation which resulted in a $45 million settlement, to be split equally between the Mills Class plaintiffs and the Ausburger plaintiffs. The attorneys for the Mills Class requested $7.5 million in attorney's fees, to be split equally between the Hardy and Perret firms. At the hearing on approval of the settlement, fifty-five class members objected to the attorney's fees sought. The trial court entered a final judgment on December 9 approving the settlement and awarding $6,425,000 in attorney's fees. Appellants perfected their appeal of the amount of attorney's fees, attacking the award in nine points asserting that:

the court erred in awarding unreasonable and excessive attorney's fees;

the evidence is legally and factually insufficient to support the award the award is against the great weight and preponderance of the evidence;

the court abused its discretion in awarding a larger fee than requested;

the court erred in not using the "lodestar method" to compute the amount of fees awarded to the Hardy firm;

the court erred in awarding fees to an out-of-state firm which was never authorized to act as class counsel and whose lawyers were not authorized to practice in Texas; and

the court erred in refusing to file findings of fact and conclusions of law.

THE STANDARD OF REVIEW

We will first address the standard of review by which we are bound on the case in its entirety. Approval of settlements in class actions is left to the sound discretion of the trial court, and the decision to approve a settlement will not be disturbed on appeal absent an abuse of that discretion. Ball v. Farm & Home Sav. Ass'n, 747 S.W.2d 420, 423 (Tex.App.--Fort Worth 1988, writ denied); Shebay v. Davis, 717 S.W.2d 678, 681 (Tex.App.--El Paso 1986, no writ). Generally, court-ordered awards of attorney's fees, as opposed to attorney's fees assessed as damages against a losing party, are reviewed solely for an abuse of discretion. See e.g., Simon v. York Crane & Rigging Co. Inc., 739 S.W.2d 793, 794 (Tex.1987); Valley Coca-Cola Bottling v. Molina, 818 S.W.2d 146, 148 (Tex.App.--Corpus Christi 1991, writ denied). Thus, when a settlement of a class-action suit results in recovery of a common fund, the amount of attorneys fees to be awarded from the fund is within the discretion of the court. The burden of proving an abuse of discretion lies with the opponent of the settlement. Ball, 747 S.W.2d at 423. An abuse of discretion implies more than an error in judgment. Id. It must be an arbitrary and unreasonable action by the trial court. Smithson v. Cessna Aircraft Co., 665 S.W.2d 439, 443 (Tex.1984); Landry v. Travelers Insurance Company, 458 S.W.2d 649, 651 (Tex.1970). Stated another way: Did the court act without reference to any guiding principles? Craddock v. Sunshine Bus Lines, 134 Tex. 388, 133 S.W.2d 124, 126 (1939); Landon v. Jean-Paul Budinger, Inc., 724 S.W.2d 931, 934-37 (Tex.App.--Austin 1987, no writ). The mere fact that an appellate court might have decided a matter within the trial court's discretion in a different manner does not demonstrate that an abuse of discretion has occurred. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 242 (Tex.1985), cert. denied, 476 U.S. 1159, 106 S.Ct. 2279, 90 L.Ed.2d 721 (1986); Southwestern Bell Telephone Company v. Johnson, 389 S.W.2d 645, 648 (Tex.1965); Jones v. Strayhorn, 159 Tex. 421, 321 S.W.2d 290, 295 (1959). With respect to resolution of factual issues, the reviewing court may not substitute its judgment for that of the trial court. Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992).

FINDINGS OF FACT AND CONCLUSIONS OF LAW

In point nine, Appellants complain of the court's failure to make findings of fact and conclusions of law. Because the correct standard of review in this case is whether the court abused its discretion, which does not encompass a review of the legal and factual sufficiency of the evidence, findings and conclusions of the trial court are not required. See Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 853 (Tex.1992). Although findings and conclusions can be "helpful" in assisting an appellate court in determining whether the trial court exercised its discretion in a reasonable and principled fashion, we do not evaluate the trial court's action in this instance with reference to the sufficiency of the evidence to support its findings. See id.; TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 919 n. 9 (Tex.1991 (orig. proceeding); Fidelity & Guar. Co. v. Rossa, 830 S.W.2d 668, 672 (Tex.App.--Waco 1992, writ denied). Moreover, although the trial court declined to file findings and conclusions in this case, it did state on the record its reasons for its ruling, and the record on appeal includes the complete statement of facts from the hearing on the attorney's fees award. See Sheldon Pollack Corp. v. Pioneer Concrete, 765 S.W.2d 843, 845 (Tex.App.--Dallas 1989, writ denied). Therefore, because we determine that the applicable standard of review is abuse of discretion, we overrule point nine.

METHOD OF DETERMINING ATTORNEY'S FEES AWARD

We must now decide, using the applicable standard of review, whether the trial court abused its discretion in using the "percentage-of-the-common-fund method" in computing the attorney's fees awarded to class counsel. ¹ The court acknowledged at the time it announced and explained its ruling on the record that it had employed the common-fund method in arriving at the amount of $6,425,000 in fees to be awarded to class counsel. The common-fund method has been recognized in Texas and elsewhere, particularly in Federal jurisdictions. E.g., Knebel v. Capital National Bank in Austin, 518 S.W.2d 795, 799 (Tex.1974); City of Dallas v. Arnett, 762 S.W.2d 942, 954 (Tex.App.--Dallas 1988, writ denied). Under the common-fund method, the court in the exercise of its equitable jurisdiction may award a reasonable fee out of the common fund to the attorney who maintained the suit which created the fund. In Re Terra-Drill Partnerships Securities Litigation, 733 F.Supp. 1127, 1129 (S.D.Tex.1990). The equitable objective of the common-fund method is to distribute the burden of expenses, including attorney's fees, among those who share in a common benefit. Id. Thus, because the method is recognized as a way of determining attorney's fees in common-fund cases, the trial court did not abuse its discretion in using it to compute the award of attorney's fees to class counsel....