General Motors Corp. v. Bloyed

• Decision Date: 09 February 1996
• Docket Number: No. 94-0777,94-0777
• Citation: 916 S.W.2d 949
• Parties: 39 Tex. Sup. Ct. J. 258 GENERAL MOTORS CORPORATION, Tommy Dollar and others, Petitioners, v. Clyde BLOYED, Ron Godbey, and Regina Godbey, Respondents.
• Court: Texas Supreme Court

Page 949

916 S.W.2d 949

39 Tex. Sup. Ct. J. 258

GENERAL MOTORS CORPORATION, Tommy Dollar and others, Petitioners, v. Clyde BLOYED, Ron Godbey, and Regina Godbey, Respondents.

No. 94-0777.

Supreme Court of Texas.

Argued March 21, 1995.

Decided Feb. 9, 1996.

Franklin Jones, Jr., Marshall, Rosemary T. Snider, Marshall, Sam Baxter, Marshall, Joe R. Greenhill, Austin, Larry F. York, Austin, Bob E. Shannon, Austin, Patrick O. Keel, Austin, Timothy J. Crowley, Houston, Eugene A. Cook, Houston, J. Andrew Langan, Chicago, IL, W. Richard Davis, Dallas, Ernest R. Higginbotham, Dallas, P. Michael Jung, Dallas, Lee A. Schutzman, Detroit, MI, Edward C. Wolfe, Detroit, MI, Robert B. Ellis, Chicago, IL, Gael Plauche, Houston, for petitioners.

Stephen Gardner, Dallas, Roger L. Mandel, Dallas, Marc R. Stanley, Dallas, for Respondents.

Justice CORNYN delivered the opinion of the Court, in which all Justices join.

The question in this appeal is whether the trial court abused its discretion under Texas Rule of Civil Procedure 42(e) when it approved the settlement of a class action involving about 645,000 owners of certain pickup trucks manufactured by General Motors Corporation (GMC). The plaintiffs claim that the trucks' side-saddle gas tanks, located outside the vehicle frame, make the trucks particularly vulnerable to combustion and fire after side impact. The plaintiffs sought only economic damages of diminished market value or cost of repair; the plaintiffs specifically excluded claims for personal injury or death.

The court of appeals determined that the trial court abused its discretion by approving a settlement agreed to by the class representatives, class counsel, and GMC. 881 S.W.2d 422. We granted the applications for writ of error filed by GMC and the class representatives challenging the court of appeals's conclusions that the settlement was not fair, adequate, and reasonable and that the notice to the class was deficient because it did not disclose the amount of attorney's fees that class counsel requested. We affirm the judgment of the court of appeals and remand this case to the trial court for further proceedings in accordance with this opinion.

I. Facts

On November 17, 1992, Tommy Dollar and six other people filed this action against GMC and others in Harrison County on behalf of all Texas residents who purchased, on or before October 16, 1992, full-size Chevrolet and GMC C/K or R/V series pickup trucks manufactured between 1973 and 1991. Four plaintiffs moved for certification of their case as a class action. Before the trial court ruled on the motion, however, the parties announced that they had reached a tentative settlement. The parties signed the settlement agreement on July 19, 1993. On that same day, GMC settled a national class action, which included GMC truck owners in every state but Texas, on terms that were nearly identical to those in this case. Compare 881 S.W.2d at 427 n. 2, with In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 780-81 & n. 4 (3d Cir.), cert. denied sub nom. General Motors Corp. v. French, --- U.S. ----, 116 S.Ct. 88, 133 L.Ed.2d 45 (1995). In a well-reasoned and comprehensive opinion, the Third Circuit Court of Appeals set aside the national settlement and remanded the case due to the federal district court's failure to make the factual findings required to certify the class.

On July 20, 1993, the trial court certified the Texas case as a class action for settlement purposes only and ordered that notice of the terms of the proposed settlement be mailed to 645,312 registered Texas truck owners. Notices were also published in USA TODAY and the MARSHALL NEWS MESSENGER. The notice instructed class members who wished to opt out of the settlement class to send a written request to the district clerk by October 5, 1993. Class members wishing to object to the settlement were instructed to write to the district clerk, class counsel, and GMC by October 5, 1993. Class members Clyde Bloyed, Ron Godbey, Regina Godbey, and others filed objections to the proposed settlement. After considering affidavits and arguments of counsel, the trial court overruled all objections and rendered judgment approving the settlement on November 2, 1993.

Under the terms of the settlement approved by the trial court, each class member, upon written request, is entitled to receive a $1,000.00 certificate to use toward the purchase of a new Chevrolet or GMC truck or van. Each class member must redeem the certificate within fifteen months after class member receives notice that the certificates are available. The class member can use the certificate toward the down payment on a new vehicle, and the class member need not disclose an intent to use the certificate until striking his best deal with the dealer. The class member can also use the $1,000.00 certificate in conjunction with any marketing incentives or promotional offers available through GMC or General Motors Acceptance Corporation (GMAC).

Alternatively, the class member can transfer the certificate to an immediate family member who resides with the class member. Or, the class member can transfer the $1,000.00 certificate with the title to the settlement class vehicle, that is, to a third party who purchases the settlement class member's vehicle.

In lieu of a $1,000.00 certificate, and without transferring title to the settlement class vehicle, a class member may instead request that GMC issue a nontransferable $500.00 certificate to any third party except a GMC dealer or its affiliates. This $500.00 certificate is redeemable with the purchase of a new C/K series GMC or Chevrolet full-size pickup truck or its replacement model. The class member cannot use the $500.00 certificate in conjunction with any GMC or GMAC marketing incentive and is subject to the same fifteen-month redemption period.

In return, the settlement releases GMC from all claims related to the fuel system design of the trucks, excluding all claims arising out of any vehicular crash resulting in personal injury or death.

II. The Class Action's Uneasy Role in the Adversary System

Class action suits furnish an efficient means for numerous claimants with a common complaint to obtain a remedy "[w]here it is not economically feasible to obtain relief within the traditional framework of a multiplicity of small individual suits for damages." Deposit Guar. Nat'l Bank v. Roper, 445 U.S. 326, 339, 100 S.Ct. 1166, 1174, 63 L.Ed.2d 427 (1980); see also 1 HERBERT B. NEWBERG & ALBA CONTE, NEWBERG ON CLASS ACTIONS § 1.06, at 1-20 (3d ed. 1992) (listing the objectives of class actions as: promoting efficiency, protecting defendants from inconsistent verdicts, protecting the rights of absent class members, allowing recovery by small claimants, and enforcing laws through private attorney general suits) [hereinafter NEWBERG & CONTE]. Class actions also facilitate "the spreading of litigation costs among numerous litigants with similar claims." United States Parole Comm'n v. Geraghty, 445 U.S. 388, 403, 100 S.Ct. 1202, 1212, 63 L.Ed.2d 479 (1980). We do not doubt the salutary nature of this procedural device under appropriate circumstances. But, class actions are extraordinary proceedings with extraordinary potential for abuse. Therefore, among other prerequisites, before certifying a case as a class action, the trial court must first determine "that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." TEX.R.CIV.P. 42(b)(4).

One of the foremost objectives of Rule 42 is to protect the interests of absent class members. The law generally requires notice of a lawsuit and an opportunity for a hearing before any person may be bound by a court's judgment. E.g., Cunningham v. Parkdale Bank, 660 S.W.2d 810, 813 (Tex.1983). By contrast, "[t]he judgment in an action maintained as a class action ... whether or not favorable to the class, shall ... be binding upon all those whom the court finds to be members of the class and who received notice as provided in subdivision (c)(2)." TEX.R.CIV.P. 42(c)(3). The United States Supreme Court has made it clear that due process requires adequate representation of the interests of absentee class members that the judgment will bind. Hansberry v. Lee, 311 U.S. 32, 42-43, 61 S.Ct. 115, 118-19, 85 L.Ed. 22 (1940).

In a class action, the absentee members of the class may not even learn of the proposed judgment until a tentative settlement has been struck on their behalf by the defendant, the class representative, and class counsel. When notice of a proposed settlement and notice of the class action are sent simultaneously, the absent class members may perceive it as a fait accompli. Mars Steel Corp. v. Continental Ill. Nat'l Bank & Trust Co., 834 F.2d 677, 680-81 (7th Cir.1987). The potential for conflicts of interest under these circumstances is substantial and to some extent unavoidable.

During the last decade scholars have expressed growing concern about the conflicts that may arise between the class and its counsel: "[T]hese attorneys are not subject to monitoring by their putative clients, they operate largely according to their own self-interest, subject only to whatever constraints might be imposed by bar discipline, judicial oversight, and their own sense of ethics and fiduciary responsibilities." Jonathan R. Macey & Geoffrey P. Miller, The Plaintiffs' Attorney's Role in Class Action and Derivative Litigation, 58 U.CHI.L.REV. 1, 7-8 n. 4 (1991); see also John C. Coffee, Jr., Rethinking the Class Action, 62 IND.L.J. 625, 628-29 (1987) (listing several factors that have contributed to entrepreneurial class action litigation, including the relatively low cost of filing dubious class action suits, the large amounts defendants are willing to pay in settling these suits, and the incentive for class counsel to invest little time and effort in protecting the absent class...