Exxon Mobil Corp. v. Gill

• Decision Date: 12 April 2007
• Docket Number: No. 13-06-048-CV.,13-06-048-CV.
• Citation: 221 S.W.3d 841
• Parties: EXXON MOBIL CORPORATION, Appellant, v. Dan GILL, Individually, and As Successor in Interest to Dan Gill, Inc., d/b/a Dan Gill Exxon, Patrick T. Morrow, Individually, and as Successor in Interest to Carrollton Exxon, f/d/b/a Carrollton Exxon, Josey Lane Petroleum, Inc., d/b/a Carrollton Exxon, Appellees.
• Court: Texas Court of Appeals

221 S.W.3d 841

EXXON MOBIL CORPORATION, Appellant, v. Dan GILL, Individually, and As Successor in Interest to Dan Gill, Inc., d/b/a Dan Gill Exxon, Patrick T. Morrow, Individually, and as Successor in Interest to Carrollton Exxon, f/d/b/a Carrollton Exxon, Josey Lane Petroleum, Inc., d/b/a Carrollton Exxon, Appellees.

No. 13-06-048-CV.

Court of Appeals of Texas, Corpus Christi-Edinburg.

April 12, 2007.

David M. Gunn, Russell S. Post, John S. Adcock, Beck, Redden & Secrest, L.L.P., Houston, Richard C. Godfrey, Mark S. Lillie, Andrew A. Kassof, Kirkland & Ellis, Chicago, IL, J.A. `Tony' Canales, Canales & Simonson, P.C., Corpus Christi, for appellant.

David T. Bright, Watts Law Firm, Corpus Christi, Walter C. Thompson, Jr., James M. White, III, Barkley & Thompson, New Orleans, LA, William Large, Hosie, Frost, Large & McArthur, Anchorage, AK, William Denton, Biloxi, MS, Robert C. Josefsburg, Miami, FL, James P. Roy, Bob F. Wright, Lafayette, LA, Fredric Levin, Troy Rafferty, Pensacola, FL, Bruce Wecker, Spencer Hosie, Hosie, Frost, Large & Arthur, San Francisco, CA, William Hoese, Kohn, Swift & Graf, Philadelphia, PA, for appellees.

Before Justices YAÑEZ, RODRIGUEZ, and GARZA.

OPINION

Opinion by Justice GARZA.

Exxon Mobil Corporation ("Exxon") has filed this interlocutory appeal from the trial court's order certifying a statewide class of plaintiffs in a breach of contract action for money damages. See Tex. Civ. Prac. & Rem.Code Ann. § 51.014(a)(3) (Vernon Supp.2006) (allowing interlocutory appeal of class certification orders); Tex.R. Civ. P. 42(b)(3) (providing for certification of class based on predominance of common questions). We affirm the order.

I. Background¹

This case was brought in 2003 by three current and former Exxon service-station dealers—Dan Gill, Howard Granby, and Patrick Morrow—who had participated in certain Exxon rebate programs in the 1990s. Exxon's rebate programs took two basic forms: ones that were volume-based (how much gasoline a dealer sold), and others based on how a dealer operated and maintained his station (for example, keeping a station open 24-hours-a-day). Exxon's volume-based programs included "RASPP" (Retail Auto Store Performance Program), "VIP" (Volume Incentive Program) and "SVIP" (Supreme Volume Incentive Program). A dealer could qualify for rebates under these programs if the dealer's sales surpassed a preset threshold. Exxon set the volume threshold requirements individually based on each dealer's own "historical volume, competitiveness, image, service, appearance, merchandising, promotional activity, and hours of operation." Under the "Hours of Operation" rebate program, Exxon paid dealers rebates for staying open 24 hours a day, while other dealers received smaller rebates when operating fewer hours.

Notably, each dealer's standardized sales contract with Exxon has an "open price" term, which allows Exxon to change its per-gallon sales prices "on a near-constant, often daily basis" in response to the "intensity of retail competition." The price charged to dealers under the contracts is known as the "DTT price" (dealer tank truck price).

In this lawsuit, the named plaintiffs complain that Exxon cheated them out of the economic benefit of the rebates by adding the average per-gallon cost of the rebate programs to the DTT price of gasoline. They have sued Exxon for three causes of action related to the rebate programs: breach of contract regarding the DTT prices charged under their sales agreements, breach of the duty of good faith and fair dealing, and breach of the promise to provide economic benefits under the rebate programs.

On motion of the named plaintiffs, the trial court certified a class consisting of "all persons, partnerships, corporations, associations and entities which are and/or were at the material times Exxon-branded retail service station dealers who owned or operated Exxon branded retail motor fuel stores in the state of Texas and who entered into a standardized contract or agreement with ExxonMobil ... [, with] material times [meaning] the period during which the rebate programs ... were in effect in Texas."

In a 34-page order certifying the statewide class, which we have attached as an appendix to this opinion, the trial court recounted the proceedings leading to the certification order and gave both a summary of the case and an overview of the evidence, arguments, motions, and briefs presented and discussed during the certification hearing. See Class Certification Order, appendix. The court's order also provides a lengthy evaluation of how the named plaintiffs have met the requirements for class certification under Rule 42(a) and (b)(3). See Tex.R. Civ. P. 42(a), (b)(3). The order includes findings of fact and conclusions of law on the specific requirements for class certification. In addition, the order discusses Exxon's objections to class certification and explains the trial court's grounds for overruling the objections. The order includes a seven-page trial plan, which outlines a proposal for trying both the class's claims against Exxon and Exxon's defenses to the claims.

II. Class Certification under Rule 42

Texas Rule of Civil Procedure 42 governs class certification. Tex.R. Civ. P. 42. Rule 42 is patterned after Federal Rule of Civil Procedure 23, and federal decisions and authorities interpreting current federal class action requirements are persuasive authority for Texas courts. Southwestern Ref Co. v. Bernal, 22 S.W.3d 425, 433 (Tex.2000) (citing RSR Corp. v. Hayes, 673 S.W.2d 928, 931-32 (Tex.App.-Dallas 1984, writ dism'd)). All class actions must satisfy four threshold requirements: (1) numerosity ("the class is so numerous that joinder of all members is impracticable"); (2) commonality ("there are questions of law or fact common to the class"); (3) typicality ("the claims or defenses of the representative parties are typical of the claims or defenses of the class"); and (4) adequacy of representation ("the representative parties will fairly and adequately protect the interests of the class"). Id. (quoting Tex.R. Civ. P. 42(a)). In addition to these prerequisites, class actions must satisfy at least one of the three subdivisions of Rule 42(b). Id. (citing Tex.R. Civ. P. 42(b)).

III. Standard of Review

We review class certification orders for abuse of discretion. Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 691 (Tex.2003) (citing Bernal, 22 S.W.3d at 439).² Actual, demonstrated compliance with Rule 42 is required for certification. Id. The trial court must perform a rigorous analysis and provide a specific explanation for how class claims will proceed to trial. Id. at 689 (citing Bernal, 22 S.W.3d at 439). A trial plan is required in every class certification order "to allow reviewing courts to assure that all requirements for certification under Rule 42 have been satisfied." BMG Direct Mktg. v. Peake, 178 S.W.3d 763, 778 (Tex.2005); State Farm Mut. Auto. Ins. Co. v. Lopez, 156 S.W.3d 550, 555 (Tex.2004). To make a proper analysis, "going beyond the pleadings is necessary, as a court must understand the claims, defenses, relevant facts, and applicable substantive law in order to make a meaningful determination of the certification issues." Bernal, 22 S.W.3d at 435. Although it may not be an abuse of discretion to certify a class that could later fail, a cautious approach to class certification is essential. Id. We cannot indulge every presumption in favor of the trial court's ruling on class certification. See Henry Schein, 102 S.W.3d at 691. Instead, we review the certification order for "actual, demonstrated compliance," giving deference, where appropriate, to the trial court's resolution of certain limited issues, such as determinations based on the "assessment of the credibility of witnesses." See id.

IV. Analysis

The trial court certified the class based on Rule 42(b)(3), which requires that "questions of law or fact common to the class ... predominate over any questions affecting only individual members" and that class treatment be "superior to other available methods for the fair and efficient adjudication of the controversy." Tex.R. Civ. P. 42(b)(3). Exxon now raises challenges to each of the requirements for class certification, with the exception of numerosity. See Tex.R. Civ. P. 42(a), (b)(3).

Exxon complains that "the trial court ... misinterpreted the underlying law ...." See, e.g., Appellant's Brief, p. 34. Although the trial court certified a class of plaintiffs with contract claims, many of Exxon's arguments characterize the order as having certified a class of fraud plaintiffs. Exxon emphasizes how difficult it will be for the class representatives to produce class-wide proof that each class member individually and reasonably "relied" on a false representation by Exxon. See Ernst & Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001) (stating that fraud claimant must "show that it actually and justifiably relied on the representation and thereby suffered injury"); Trenholm v. Ratcliff, 646 S.W.2d 927, 930 (Tex.1983) (same).

Because Exxon has raised pervasive complaints regarding the trial court's interpretation and application of controlling substantive law, we begin our analysis with an overview of the legal causes of action certified in this case and the controlling law. Although we are not to resolve the merits of the claims in our analysis, the Texas Supreme Court has explained that "issues [such] as commonality, typicality, superiority, and predominance are at least tangentially related to the merits; i.e., one cannot know whether a representative's claim is `typical' of those of the class without knowing something about the merits." In re Alford Chevrolet-Geo, 997 S.W.2d 173, 182 (Tex. 1999). Thus, "substantive law ... must be taken into consideration in determining whether the purported class can meet the certification prerequisites under Rule 42." Union Pac. Res....