In re City of San Benito, s. 13-01-172-C

• Decision Date: 31 August 2001
• Docket Number: 13-01-199-CV,Nos. 13-01-172-C,s. 13-01-172-C
• Citation: 63 S.W.3d 19
• Parties: (Tex.App.-Corpus Christi 2001) IN RE: CITY OF SAN BENITO, ET AL., Relators, CITY OF SAN BENITO, ET AL., Appellants, v. RIO GRANDE VALLEY GAS COMPANY AND SOUTHERN UNION COMPANY D/B/A SOUTHERN UNION GAS COMPANY, Appellees
• Court: Texas Court of Appeals

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63 S.W.3d 19 (Tex.App.-Corpus Christi 2001) IN RE: CITY OF SAN BENITO, ET AL., Relators, CITY OF SAN BENITO, ET AL., Appellants,
v.
RIO GRANDE VALLEY GAS COMPANY AND SOUTHERN UNION COMPANY D/B/A SOUTHERN UNION GAS COMPANY, Appellees. Nos. 13-01-172-CV, 13-01-199-CV COURT OF APPEALS OF TEXAS, CORPUS CHRISTI August 31, 2001
Rehearing Overruled November 15, 2001
Dissenting Opinion on Overruling of Rehearing En Banc November 15, 2001

On Petition for a Writ of Mandamus. On appeal from the 370th District Court of Hidalgo County, Texas.

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Before Justices Hinojosa, Yanez, and Castillo

OPINION

Opinion by Justice Hinojosa

Relators/appellants, the cities of San Benito, Alamo, San Juan, Donna, Palmview, Santa Rosa, Alton, La Joya, La Villa, Penitas, Pharr, Port Isabel, Edcouch, Primera, and Elsa, have filed this appeal and petition for a writ of mandamus. Relators/appellants complain of two orders signed by respondent, the Honorable Noe Gonzalez, presiding judge of the 370th District Court of Hidalgo County, denying (1) their requests to opt out of a class action lawsuit and (2) their objections to the class settlement agreement. The real parties in interest/appellees are Rio Grande Valley Gas Company and Southern Union Company d/b/a Southern Union Gas Company.

A. Background And Procedural History

On June 24, 1996, the 92nd District Court of Hidalgo County,¹ certified as a class:

All Texas municipal corporations, municipalities, cities, towns, or villages (hereinafter referred to as "municipalities"), excluding the cities of Edinburg and McAllen, that have, or have had, existing or expired municipal franchise fee ordinances or agreements with Rio Grande Valley Gas Co. or Southern Union Gas Company (hereinafter referred to collectively as the "LDC") and where the municipalities were entitled to a franchise fee or payment based on a percentage of the LDC's gross income derived from natural gas sales, and where there has not been the execution of any effective releases of the entire claims alleged in this litigation.

The City of Pharr was designated as a class representative. This Court affirmed

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the class certification order in Rio Grande Valley Gas Co. v. City of Pharr, 962 S.W.2d 631 (Tex. App.-Corpus Christi 1997, pet. dism'd). After certifying the class, the trial court, in a notification order dated June 24, 1996, authorized official class notices to be sent to all class members. The order states, in relevant part:

It is further ORDERED, subject to further order of the Court, that a class member may exclude itself from the class by providing the Court with a duly authorized notification indicating its desire to be excluded from the class, and transmitting a certified copy of same by certified U.S. mail, return receipt requested, postmarked on or before August 1, 1996, to Plaintiffs' counsel, Mr. Benjamin L. Hall, III, . . . .

During the designated period, the following cities attempted to file opt out notices: Alton, Donna, La Joya, La Villa, Mission, Palmview, Penitas, Port Isabel, Primera, San Benito, San Juan, Santa Rosa, Edcouch, Harlingen, Wichett, and Alamo. On November 15, 1999, the City of Elsa filed a "Motion To Accept Late Notice of Opting-Out." At a hearing on November 23, 1999, the cities contended that they had opted out of the class action.² In an order dated February 1, 2000, the trial court found:

that the Cities of Wichett, Harlingen, and Mission timely opted out of this litigation and will not be considered class members for purpose of this class action suit. Regarding the City of Harlingen, the Court finds sufficient evidence that Harlingen and class counsel have operated in a manner to establish that Harlingen is no longer a class member and, therefore, Harlingen is declared not to be a class member in this case.

Certain parties have requested clarification as to whether certain other cities have timely or properly excluded themselves from this class action suit. The Court finds that the remaining questioned cities, that are not listed in the above paragraph have not. It is therefore, ORDERED, ADJUDGED and DECREED that the following cities did not timely or properly opt out of this class action and, therefore, are class members of this case: Alamo, Alton, Combes, Donna, Eagle Pass, Edcouch, Elsa, Hidalgo, La Feria, La Joya, La Villa, Los Fresnos, Lyford, Palm Valley, Palmview, Port Isabel, Primera, Progreso, Rancho Viejo, Raymondville, Rio Hondo, San Benito, San Juan, Santa Rosa.

On December 14, 2000, all class members were sent a "Class Notification of Proposed Class Action Settlement." The class members were notified that they could object to the proposed settlement agreement by filing a written objection with the Hidalgo County District Clerk by January 31, 2001.³

On January 23, 2001, the City of Elsa filed "City of Elsa's Amended Objections and Notice of its Intent to Appear at Fairness Hearing." On January 31, 2001, the Cities of Alamo, Harlingen, San Juan, San Benito, Donna, Palmview, Santa Rosa, Alton,

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La Joya, La Villa, Mission, Penitas, Port Isabel, Edcouch, and Primera filed "Objections to Settlement, Motion to Reconsider Opt Out Request And Request To Be Excluded From Class." The trial court held a fairness hearing for final settlement approval, and after hearing argument of counsel, the court approved the Class Settlement Agreement in an order dated February 15, 2001.

1. The Mandamus

On March 9, 2001, the Cities of San Benito, Alamo, San Juan, Donna, Palmview, Santa Rosa, Alton, La Joya, La Villa, Penitas, Pharr, Port Isabel, Edcouch, and Primera filed a petition for a writ of mandamus in which they asked this Court to direct the respondent to (1) vacate the Agreed Final Judgment of February 15, 2001, and/or (2) vacate the order dated February 1, 2000 regarding the cities' motions to opt out of the class action, in Cause No. C-4558-95-G-2. The cities also filed a motion for emergency temporary relief in which they requested this Court to stay the Agreed Final Judgment . On March 13, 2001, this Court declined to grant the request to stay the Agreed Final Judgment, but set the mandamus proceeding for oral argument.

On March 21, 2001, the City of Elsa asked this Court for permission to join the mandamus proceeding. We granted Elsa's motion on March 27, 2001.

2. The Appeal

On March 14, 2001, the City of Elsa filed a notice of appeal. On March 16, 2001, the Cities of San Benito, Alamo, San Juan, Donna, Palmview, Santa Rosa, Alton, La Joya, La Villa, Penitas, Pharr, Port Isabel, Edcouch, and Primera filed a notice of appeal.⁴ This Court then determined that the appeal should be accelerated and considered together with the mandamus proceeding. See Tex. R. App. P. 2.

In their briefs, the Cities contend they were improperly denied the opportunity to opt out of the class action and that the class action settlement approved by the trial court is a grossly unfair and disproportionate settlement.⁵

B. The Appeal

The critical issue herein is whether the Cities have standing to prosecute this appeal. Standing is a component of subject matter jurisdiction; it cannot be waived and may be raised for the first time on appeal. Waco Indep. Sch. Dist. v. Gibson, 22 S.W.3d 849, 851 (Tex. 2000). In class actions in which the "settlement class"⁶ device has not been used, unnamed class members who have not intervened in a class action lawsuit do not have standing to appeal the final judgment in a class action. San Juan 1990-A, L.P. v. Meridian Oil Inc., 951 S.W.2d 159, 165 (Tex. App.-Houston [14th Dist.] 1997, pet. denied);see also Entex v. City of Pearland, 990 S.W.2d 904, 912 (Tex. App.-Houston

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[14th Dist.] 1999, no pet.); O'Reilly v. Brodie, 975 S.W.2d 57, 59-60 (Tex. App.-San Antonio 1998, pet. denied).⁷ Sound reasons exist for requiring unnamed class members to formally intervene in the action to gain standing to appeal, including that: (1) unnamed class members cannot represent the class, absent the procedural protections provided in the class action rules; (2) class members who disagree with the course of a class action have adequate procedures available through which their individual interests may be protected; and (3) class actions would become entirely unmanageable and unproductive if each member had standing to individually appeal a judgment. See San Juan 1990-A, L.P., 951 S.W.2d at 163.

The record reflects that the Cities are unnamed class members. Although the City of Pharr initially served as a named class representative, at its request, it was dismissed as a class representative by court order dated February 1, 2000.

The City of Elsa contends in its brief that it did in fact intervene. Elsa argues that its motion to opt out and its objections to the settlement agreement should be construed as an intervention. However, we conclude that by merely objecting to the settlement and appearing through counsel at the fairness hearing, the City of Elsa did not intervene. Rule 60 explicitly requires "filing a...