Dresser Industries, Inc. v. Snell

• Decision Date: 03 February 1993
• Docket Number: No. 08-91-00354-CV,08-91-00354-CV
• Citation: 847 S.W.2d 367
• Parties: DRESSER INDUSTRIES, INC., Titan Services, Inc., B.J. Services Company, U.S.A., Inc., B.J. Hughes Holding Company, Baker Hughes Production Tools, Inc., and Baker Hughes, Inc., Appellants, v. Glyn SNELL, et al., Appellees.
• Court: Texas Court of Appeals

Page 367

847 S.W.2d 367

DRESSER INDUSTRIES, INC., Titan Services, Inc., B.J Services Company, U.S.A., Inc., B.J. Hughes Holding Company, Baker Hughes Production Tools, Inc., and Baker Hughes Inc., Appellants, v. Glyn SNELL, et al., Appellees.

No. 08-91-00354-CV.

Court of Appeals of Texas El Paso.

Feb. 3, 1993.

Rehearing Overruled March 3, 1993.

David Corban, Fulbright & Jaworski, Houston, James E. Nelson, Shafer, Davis, McCollum, Ashley, O'Leary & Stoker, Odessa, Ronald D. Secrest, Beck, Redden & Secrest, Christopher C. Pappas, Dunn, Kacal, Adams, Pappas & Law, Houston, James P. Boldrick, Boldrick & Clifton, Midland, Mike A. Hatchell, Ramey, Flock, Jeffus, Crawford, Harper & Collins, Tyler, for appellants.

Don Graff, McCleskey, Harriger, Grazell & Graff, Lubbock, Vann Culp, Stubbeman, McRae, Sealy, Laughlin & Browder, Inc., Midland, Jim Hund, McCleskey, Harriger, Brazill & Graf, L.L.P., Lubbock, for appellees.

Before OSBORN, C.J., and BARAJAS and LARSEN, JJ.

OPINION

LARSEN, Justice.

This is an interlocutory appeal from an order certifying a class action under Tex.R.Civ.P. 42. The plaintiffs are owners of royalty or overriding royalty interests in one or more of 523 West Texas oil wells. We affirm the order certifying the case as a class action.

FACTS

This suit involves a number of oil wells operated by Parker & Parsley Petroleum Company. Some of the wells were not as productive as the company wished, so it contracted with Appellant Dresser Industries, Inc., a well servicing company, along with its subsidiaries and successor companies, (collectively "Dresser" or "defendants") to treat the wells between 1983 and 1988. The treatments consisted of acidizing and fracturing the wells. ¹ Plaintiffs allege that the servicing companies committed fraud, negligence and gross negligence during the servicing of each of the wells, which resulted in damage to every owner of a royalty or overriding royalty interest. ² Specifically, plaintiffs allege that defendants engaged in a systematic shorting scheme which involved cheating on the sand, gel, acid and breaker used to service the wells. In essence, there was a serious difference between the materials specified for jobs, and the materials actually used for acidizing and fracturing the formations.

The shorting scheme was allegedly common practice for about six years. Plaintiffs claim that this shorting on materials resulted in reduction of the length and height of the fractures in the formation, which in turn reduced the amount of oil that could ultimately be recovered from the wells. Thus, their royalty and overriding royalty interests were damaged. Defendants deny that this case is suitable for class certification, and assert that the trial court abused its discretion in certifying the class for the reasons outlined below.

STANDARD OF REVIEW

Trial courts enjoy a wide range of discretion in determining whether a lawsuit should be maintained as a class action. An order certifying a class may not be disturbed on appeal unless a trial court has 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.); Amoco Production Co. v. Hardy, 628 S.W.2d 813 (Tex.App.--Corpus Christi 1981, writ dism'd). A trial court abuses its discretion only when its actions are without reference to any guiding principles, are arbitrary or unreasonable. Smithson v. Cessna Aircraft Company, 665 S.W.2d 439, 443 (Tex.1984); Craddock v. Sunshine Bus Lines, 134 Tex. 388, 133 S.W.2d 124, 126 (1939). That a trial judge decided an issue differently than would the appellate judge, does not alone demonstrate an abuse of discretion. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 242 (Tex.1985). In reviewing the order certifying the plaintiffs' class, this Court is required to view the evidence in a light most favorable to the trial court's action and indulge every presumption favorable to the trial court's judgment. Parks v. U.S. Home Corporation, 652 S.W.2d 479, 485 (Tex.App.--Houston [1st Dist.] 1983, writ dism'd).

In order to maintain this lawsuit as a class action, plaintiffs must first satisfy four requirements: the class is so numerous that it is impracticable to join all members; there are common questions of law or fact; the representative parties have claims or defenses typical to the class; and the representatives will fairly and adequately protect the interests of the class. Tex.R.Civ.P. 42(a); Chevron, 808 S.W.2d at 161. Once these prerequisites are shown, the plaintiffs must also plead and prove that the action falls within one of the categories for maintenance of class action set forth in Tex.R.Civ.P. 42(b). See George v. United Federal Savings and Loan Association, 63 F.R.D. 631, 636 (N.D.Ga.1974). ³ Defendants initially challenge the trial court's findings on the issues of commonality, typicality and adequacy of representation. Numerosity is not disputed.

COMMONALITY

The factual or legal basis for the suit must be common to all members of the class in a class action. Tex.R.Civ.P. 42(a). The commonality requirement, however, does not mean all questions of law and fact must be identical, but rather that an issue of law or fact exists that inheres in the complaints of all the class members. Cooper v. University of Texas at Dallas, 482 F.Supp. 187, 191 (N.D.Tex.1979). There are a number of common issues to be decided here, including: whether defendants participated in a tortious scheme to short materials in the 523 wells; whether the defendants' acts caused damage to the class of royalty and overriding royalty interest owners; whether defendants' acts were such that punitive damages should be assessed. The common questions here are sufficient to justify the certification of a class.

TYPICALITY

The claims of the class representatives must be typical of the claims of the class as a whole. Tex.R.Civ.P. 42(a); Gilchrist v. Bolger, 89 F.R.D. 402, 406 (S.D.Ga.1981); Pellman v. Cinerama, Inc., 89 F.R.D. 386, 389 (S.D.N.Y.1981). The United States Supreme Court has defined the typicality requirement as mandating that the representative "possess the same interests and suffer the same injury." East Texas Motor Freight v. Rodriguez, 431 U.S. 395, 403, 97 S.Ct. 1891, 1896, 52 L.Ed.2d 453, 462 (1977). Although it is not necessary that the named representative suffer precisely the same injury as the other class members, there must be a nexus between the injury suffered by the representative and the injuries suffered by other members of the class. See Gilchrist, 89 F.R.D. at 404-05. The claims or defenses need not be identical or perfectly coextensive, only substantially similar. Chevron, 808 S.W.2d at 162. In the Chevron case, this Court reviewed a class certification order that also involved royalty interest owners with differing individual damage claims. Because the class claims were based upon the same event or the same legal theories, however, this Court ruled that the varying damage claims would not defeat class certification. ⁴ This case is similar to Chevron, and we will follow our reasoning in that case here.

Defendants first argue that the claims necessarily arose from conduct that varied from well to well and job to job, destroying the typicality of the class representatives' claims. This argument fails for the following reasons.

The class representatives all own royalty or overriding royalty interests in one or more of the 523 wells. Their claims all stem from the same systematic shorting scheme in servicing the wells, which a number of defendants' employees witnessed and documented. The claims are all based upon identical tort theories of common-law fraud, negligence and gross negligence. The plaintiffs all seek money damages in tort.

Second, defendants argue that the existence of three different defenses with varying impact on the different class members destroys typicality. The defenses they present are limitations, lack of misrepresentation and ratification. Defendants rely upon the authority of Adams v. Reagan, 791 S.W.2d 284 (Tex.App.--Fort Worth 1990, no writ), in urging that the presence of even an arguable defense peculiar to a named plaintiff or small subset of class members destroys typicality. This reliance on Adams is seriously misplaced. Far from supporting defendants' position, Adams holds that "where the defendant is alleged to have engaged in a common course of conduct, the commonality requirement is met and class certification is appropriate.... Fraud perpetrated on numerous persons through the use of similar misrepresentations may be suitable for class action." Adams, 791 S.W.2d at 289. Indeed, Adams specifically rejects the argument urged by defendants, that differing defenses necessarily destroy commonality. "Despite the fact that one of a variety of devices for deceit may have been used upon differing claimants, nevertheless a common thread of deceit runs through all alleged claims." Id. at 291. That common thread was sufficient to satisfy the commonality requirement there, and we hold that the overall scheme alleged by plaintiffs is likewise sufficient here.

ADEQUACY OF REPRESENTATION

The named parties in a class action must fairly and adequately protect the interests of the class. Tex.R.Civ.P. 42(a). Adequacy of representation is a question of fact and must be determined based on the individual circumstances of each case. It is addressed to the sound discretion of the court. Group Hospital Service, Inc. v. Barrett, 426 S.W.2d 310, 315 (Tex.Civ.App.--Houston [14th Dist.] 1968, writ ref'd n.r.e.); Brittian v. General Telephone Company of the Southwest, 533 S.W.2d 886, 889 (Tex.Civ.App.--Fort Worth 1976, writ dism'd). Factors we consider in deciding whether the named plaintiffs adequately represent the class include: the adequacy of counsel, potential conflicts of interest, the personal integrity of the plaintiffs, the representative's knowledge of the litigation and belief in the...