Farmers Group, Inc. v. Lubin
| Decision Date | 27 April 2007 |
| Docket Number | No. 05-0169.,05-0169. |
| Citation | 222 S.W.3d 417 |
| Parties | FARMERS GROUP, INC., et al., Petitioners v. Jan LUBIN, Gilberto Villaneuva, and Michael Paladino, Respondents. |
| Court | Texas Supreme Court |
Katherine D. Mackillop, Richard N. Carrell, Layne E. Kruse, Gerard G. Pecht, Marcy Hogan Greer, Mary S. Dietz and M. Scott Incerto, Fulbright & Jaworski L.L.P., Austin, for Farmer Group Inc.
Marcy Hogan Greer, Fulbright & Jaworski, L.L.P., Austin, for Farmers Underwriters Association, Fire Underwriters Association, Farmers Insurance Exchange, Texas Farmers Insurance Company, Mid-Century Insurance Company of Texas, Mid-Century Insurance Company, Truck Insurance Exchange, Truck Underwriters Association, and Farmers Texas County Mutual Insurance Company.
Russell S. Post, Joe K. Longley, Law Offices of Joe K. Longley, Philip K. Maxwell, Law Offices of Philip K. Maxwell, Stephen L. McCleery, Austin, Michael T. Gallagher, The Gallagher Law Firm, Daniel M. Downey, Gallagher Lewis Downey & Kim, Houston, for Jan Lubin.
David C. Mattax, Chief Financial Litigation, John M. Hohengarten, James R. Wenzel, William T. hall & Associates, Jeff M. Graham, Lisa Royce Eskow, Weil, Gothshal & Manges LLP, Amy Warr, Alexander Dubose Jones & Townsend, LLP, Greg Abbott, Atty. Gen., Barry Ross McBee, Edward D. Burbach, Rafael Edward Cruz, Paul D. Carmona, Austin, for State.
Joseph C. Blanks, Doucette, for Gerald Hooks and Lesly K. Hooks.
David H. Burrow, Burrow & Parrott, L.L.P., Houston, for Michael Paladino.
David H. Burrow, Burrow & Parrott, L.L.P., Russell S. Post, David Watkin Jones, Beck Redden & Secrest, L.L.P., Dwight E. Jefferson, Houston, for Gilberto Villanueva.
In 1973, the Legislature amended the Insurance Code to allow an attorney general to bring a class action on behalf of insurance buyers. This is the first time an attorney general has tried. The trial court certified a class, but the court of appeals reversed, finding the Attorney General had not strictly complied with two of the certification requirements.
We agree courts must rigorously analyze whether a party has strictly complied with all requirements for class certification.1 But those requirements cannot be applied in a way that renders attorney general class actions impossible, a result that would frustrate the Legislature's intent. Accordingly, we hold the standard class action requirements must be applied generally to the claims asserted by the Attorney General, not the Attorney General himself.
As a result of an investigation by the Texas Department of Insurance, the Texas Attorney General sued various Farmers entities alleging inadequate disclosure and discrimination in its homeowners rating practices.2 The Commissioner of Insurance also issued a cease-and-desist order against Farmers, and initiated proceedings to collect administrative penalties. Farmers responded by announcing its withdrawal from the Texas homeowners insurance market.
In these dire straits, the parties turned from litigation to negotiation. Within a few weeks, they reached a global agreement in which Farmers signed a class action settlement requiring it to reduce its base premiums, adopt uniform discounts, offer refunds to nonrenewing policyholders, discontinue certain tying practices, and pay the State $2 million in attorney's fees and costs. The agreement was terminable by either party if more than 2 percent of the class members opted out. The settlement was valued at $117 million, the largest property and casualty insurance settlement in the State's history.
The parties applied to the district court for class certification and settlement approval. Five policyholders intervened objecting to both.3 The district court granted certification and preliminarily approved the settlement.
The Intervenors filed an interlocutory appeal,4 and the Third Court of Appeals reversed, holding the Attorney General could not bring a class action under the Insurance Code without naming individual class members as representatives.5 The State and Farmers filed petitions for review.
In 2003, the Legislature expanded this Court's jurisdiction to include interlocutory review of class certification orders to the same extent as in the courts of appeals.6 Thus, the Government Code now grants the following jurisdiction to all Texas appellate courts:
A person may appeal from an interlocutory order of a district court, county court at law, or county court that . . . certifies or refuses to certify a class in a suit brought under Rule 42 of the Texas Rules of Civil Procedure . . .7
Here, certification was sought and granted under two alternatives: (1) Rule 42 and (2) the separate but virtually identical class-action provisions in the Insurance Code. The Intervenors point out that section 51.014(3) mentions only the former, and argue that we have no jurisdiction because the class can meet the requirements, if at all, of only the latter.
We disagree. Assuming the Legislature intended to allow interlocutory review of Rule 42 classes but not Insurance Code classes (an issue we do not reach), in this case the State and Farmers sought both. "As we have repeatedly recognized, if our jurisdiction is properly invoked on one issue, we acquire jurisdiction of the entire case."8 As we have jurisdiction to review certification under Rule 42, we may review certification under the Insurance Code as well.
Moreover, the trial judge granted certification under both alternatives here. We have held that an alternative holding may establish jurisdiction if, even though a judgment could have been based on either of two grounds, it was based on both.9 This rule is a practical one, because (1) appellate jurisdiction generally attaches to orders, not reasons, and (2) reviewing one ground for an order would be futile if the order would stand on the unappealed ground regardless. Here, for example, if we have no jurisdiction to review certification based on the Insurance Code, neither did the court of appeals, and thus the class would remain certified under the Insurance Code regardless of either court's Rule 42 analysis. We cannot construe section 51.014 so strictly as to render it futile.10 As the parties sought and the trial court granted certification under both Rule 42 and the Insurance Code, we have jurisdiction to review both grounds for that order.
We begin by placing Insurance Code class actions in context. The Code prohibits a list of unfair insurance practices,11 and delegates enforcement in three ways:
• the Department of Insurance may conduct investigations,12 issue cease-and-desist orders,13 assess monetary penalties,14 and order premium refunds;15
• the Attorney General may file suits seeking injunctions,16 monetary penalties,17 and restitution;18 and
• any person may file suit for damages.19
Due to the wide-spread use of standard provisions in insurance policies, a single insurance practice may often affect many consumers. Thus, the Code provides for three different types of class actions:
• an administrative class action brought by the Department of Insurance for premium refunds;20
• a judicial class action brought by the Attorney General;21 and
• a judicial class action brought by "a member of the insurance buying public" who has been damaged by an unlawful practice.22
Relief under the first is limited to premium refunds,23 while judicial class actions may recover damages and attorney's fees.24 But administrative class actions take precedence; no judicial class action can be brought once an administrative class action has started.25
Unlike any other statute, the Insurance Code contains its own set of class action rules. While almost identical to those currently in Rule 42 (), the Insurance Code provisions were adopted first.26 Both include the same four prerequisites for all class actions (numerosity, commonality, typicality, and adequacy of representation)27 and the same four types of class actions maintainable (those involving a risk of inconsistent adjudications, those that might impair nonparties' interests, those seeking injunctive or declaratory relief, and those in which common questions predominate).28
The Code unquestionably authorizes an attorney general to file a class action;29 the question here is what showing an attorney general must make. The State asserts an attorney general may file a class action as parens patriae without meeting the normal certification requirements; the Intervenors assert an attorney general must meet them all, even though this will require recruiting policyholders (such as themselves) as class representatives. We address each argument in turn.
The State argues that the doctrine of parens patriae (literally "parent of the country")30 allows an attorney general to represent a class without designating representative parties whose claims are typical and who will adequately protect the interests of the class. We decline to engraft the parens patriae doctrine on the Code for several reasons.
First, the words "parens patriae" appear nowhere in the Code's class action provisions or their legislative history. The entire Code uses the term only once, when it bars the office of public insurance counsel from intervening in "parens patriae proceedings brought by the attorney general."31 Because the Code authorizes an attorney general to bring so many different proceedings, it is unclear which this provision references.
Second, a parens patriae action is not a type of class action but an alternative to it. In 1972, the United States Supreme Court rejected antitrust standing for states under this doctrine, stating that ...
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...to federal rules, but “are not inconsistent,” and “therefore we look to the federal rules for guidance”); Farmers Group, Inc. v. Lubin, 222 S.W.3d 417, 425 (Tex.2007) (looking to cases interpreting federal rules where Texas rules incorporated the identical language); Hallco Tex., Inc. v. Mc......
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...parens patriae is a possibility, that does not necessarily mean it is superior to a class action). See generally Farmers Group v. Lubin, 222 S.W.3d 417 (Tex. 2007) (noting Congress established parens patriae as an alternative to class action). 45. 15 U.S.C. § 15c(a)(1). 46. 15 U.S.C. § 15c(......
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Introduction
...parens patriae is a possibility, that does not necessarily mean it is superior to a class action). See generally Farmers Group v. Lubin, 222 S.W.3d 417 (Tex. 2007) (noting Congress established parens patriae as an alternative to class action). 43. 15 U.S.C. § 15c(a)(1). 44. 15 U.S.C. § 15c(......
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CHAPTER 1 Introduction
...to federal rules, but "are not inconsistent," and "therefore we look to the federal rules for guidance"); Farmers Grp., Inc. v. Lubin, 222 S.W.3d 417, 425 (Tex. 2007) (looking to cases interpreting federal rules where Texas rules incorporate identical language); In re Kimberly-Clark Corp., ......
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CHAPTER 6 - 6-2 Disclosures in General
...to federal rules, but "are not inconsistent," and "therefore we look to the federal rules for guidance"); Farmers Grp., Inc. v. Lubin, 222 S.W.3d 417, 425 (Tex. 2007) (looking to cases interpreting federal rules where Texas rules incorporate identical language). ...