Intratex Gas Co. v. Beeson

Decision Date15 January 1998
Docket NumberNo. 01-96-01173-CV,01-96-01173-CV
Citation960 S.W.2d 389
PartiesINTRATEX GAS COMPANY, Appellant, v. Richard BEESON; Eclipse Oil & Gas, Inc.; and O'Neill Properties, Ltd.; et al.; For Themselves and all others Similarly Situated, Appellees. (1st Dist.)
CourtTexas Court of Appeals

Carrin G. Patman, Jim Flegle, J. Clifford Gunter, III, Houston, for Appellant.

Ronald D. Krist, Herbert T. Schwartz, Houston, for Appellees.

Before ANDELL, MIRABAL and HEDGES, JJ.

OPINION

ANDELL, Justice.

This is an appeal from an interlocutory order 1 certifying a class action under TEX.R. CIV. P. 42. We affirm.

Richard Beeson, Eclipse Oil & Gas, Inc. (Eclipse), and O'Neill Properties, Ltd. (O'Neill) (collectively Plaintiffs) brought the underlying lawsuit on behalf of a "class of persons who, at any given time from 1978 to the present, have held overriding royalty interests or working interests in natural gas producing properties on which the production was dedicated to or purchased by" Intratex Gas Company. Plaintiffs allege Intratex did not purchase natural gas in ratable proportions from the wells of more than 900 producers. Plaintiffs asserted violation of Texas statutory law and the Texas Railroad Commission regulations, breach of contract, intentional and/or negligent misrepresentation, and fraud. The trial court granted Plaintiffs' motion to certify only on the issue of whether Intratex took ratably from the class members. Certification as to all other issues and claims was denied. Intratex brings this appeal on three points of error, asserting that Plaintiffs did not meet any of the requirements of TEX.R. CIV. P. 42.

We review the trial court's determination that this case should proceed as a class action using an abuse-of-discretion standard. General Motors Corp. v. Bloyed, 916 S.W.2d 949, 955 (Tex.1996); Reserve Life Ins. Co. v. Kirkland, 917 S.W.2d 836, 839 (Tex.App.--Houston [14th Dist.] 1996, no writ). We will not substitute our judgment for that of the trial court, but will only determine whether the trial court's action was so arbitrary as to exceed the bounds of reasonable discretion. Dresser Indus., Inc. v. Snell, 847 S.W.2d 367, 371 (Tex.App.--El Paso 1993, no writ). We view the evidence in a light most favorable to the trial court's action, and indulge every presumption favorable to the trial court's action. Kirkland, 917 S.W.2d at 839; Dresser, 847 S.W.2d at 371-72.

RULE 42
CLASS ACTIONS

There is no automatic right to maintain a lawsuit as a class action. Weatherly v. Deloitte & Touche, 905 S.W.2d 642, 647 (Tex.App.--Houston [14th Dist.] 1995, writ dism'd w.o.j.). Instead, a trial court may certify a class action if the class proponent satisfies all four requirements of TEX.R. CIV. P. 42(a), and at least one of the requirements under TEX.R. CIV. P. 42(b). Kirkland, 917 S.W.2d at 839; Life Ins. Co. of the Southwest v. Brister, 722 S.W.2d 764, 770 (Tex.App.--Fort Worth 1986, no writ). Although plaintiffs must do more than merely allege they fulfill the requirements of rule 42, and they must show at least some facts to support certification, they are not required to prove a prima facie case or make an extensive evidentiary showing in support of a motion for class certification. Weatherly, 905 S.W.2d at 647.

Trial courts enjoy a wide range of discretion in determining whether to maintain a lawsuit as a class action, but may not consider the substantive merits of the class claims in making such a determination. Dresser, 847 S.W.2d at 371, 375. Certification is not irreversible, and the trial court may alter, amend, or withdraw class certification at any time before final judgment. Morgan v. Deere Credit, Inc., 889 S.W.2d 360, 365 (Tex.App.--Houston [14th Dist.] 1994, no writ); TEX.R. CIV. P. 42(c)(1). Therefore, when a trial court makes a determination of class status at an early stage in the litigation before supporting facts are fully developed, it should favor maintenance of a class action. Morgan, 889 S.W.2d at 365.

As a preliminary matter, Intratex asserts that a viable cause of action is a prerequisite to an ascertainable class. Intratex contends that no private cause of action exists for violation of the Texas Common Purchasers Act, TEX. NAT. RES.CODE ANN. §§ 111.081--111.097 (Vernon 1993), and the implementing regulations of the Railroad Commission. Intratex relies upon Sowell v. Northwest Central Pipeline Corp., 703 F.Supp. 575, 580 (N.D.Tex.1988), which held that the Act did not provide a private cause of action for violation of TEX. NAT. RES.CODE ANN. § 111.081. Intratex argues that because Plaintiffs have no cause of action against it, an ascertainable class does not exist.

If Intratex believes Plaintiffs have no recognizable cause of action to assert, it should refer to the Texas Rules of Civil Procedure for the proper mechanisms to resolve that issue. Weatherly, 905 S.W.2d at 649, n. 3; Employers Cas. Co. v. Texas Ass'n of School Bds. Workers' Comp. Self-Insurance Fund, 886 S.W.2d 470, 476-77 (Tex.App.--Austin 1994, writ dism'd w.o.j.). The use of special exceptions and summary judgment are more appropriate procedures for determining whether Plaintiffs have stated a cause of action. Weatherly, 905 S.W.2d at 649, n. 3; Employers Cas., 886 S.W.2d at 477; TEX.R. CIV. P. 91, 166a. Decertification, however, is not the appropriate procedural tool. Employers Cas., 886 S.W.2d at 477.

CLASS DEFINITION

Implicit in rule 42 is the requirement that the court first determine whether there is an identifiable class. Hagen v. City of Winnemucca, 108 F.R.D. 61, 63 (D.Nev.1985); Vietnam Vet. Against the War v. Benecke, 63 F.R.D. 675, 679 (W.D.Mo.1974). 2 Here, the class is defined as: "All persons who were producers of natural gas sold to the defendant between January 1, 1978 and December 31, 1988 whose natural gas was taken by the defendant in quantities less than their ratable proportions." In point of error one, Intratex asserts the trial court erred in granting certification because the definition requires an improper conclusion on the merits of Plaintiffs' claims, is vague, and does not constitute an ascertainable class.

A class definition must be sufficiently definite so that it is administratively feasible for the court to determine whether a particular individual is a member of the proposed class. Kirkland, 917 S.W.2d at 840; Ladd v. Dairyland Cnty. Mut. Ins. Co. of Texas, 96 F.R.D. 335, 338 (N.D.Tex.1982). For a class to be sufficiently definite, the identity of the class members must be ascertainable by reference to objective criteria. Gomez v. Illinois State Bd. of Educ., 117 F.R.D. 394, 397 (N.D.Ill.1987). But the class does not need to be so definite that every potential member can be identified at the commencement of the action. Carpenter v. Davis, 424 F.2d 257, 260 (5th Cir.1970); Cook v. Rockwell Int'l Corp., 151 F.R.D. 378, 382 (D.Colo.1993). As long as the general outlines of class membership are determinable at the outset of the litigation, a class will be deemed to exist. Cook, 151 F.R.D. at 382; Rutherford v. United States, 429 F.Supp. 506, 508-509 (W.D.Okla.1977).

Intratex argues that the identity of the class members cannot be ascertained without addressing the central issue in the case: from which wells, if any, did Intratex take quantities in less than their ratable proportions. Intratex also attacks the methodology used by Plaintiffs' expert, Don Rhodes, to prepare a study from which Plaintiffs propose to identify the class membership. In fact, both parties submitted extensive testimony and a great deal of the almost-three-day hearing was spent on arguments over Rhodes's study. 3 Plaintiffs focused on the fact of the undertaking only, while Intratex focused on the "whys" and "hows" of the undertaking. All the criticisms raised by Intratex regarding the study are merits issues. The validity of Plaintiffs' study, whether Intratex undertook due to some reason beyond its control, or whether some producers were both undertaken and overtaken are all issues to be decided at a trial on the merits. Although it is possible these questions might defeat certification under one or more of the rule 42 factors, for the purpose of defining the class, these issues should not defeat certification at this stage. It is the act of not taking ratably, and not the reasons for the undertaking or whether there is proof of a compensable injury, that is important. The court properly defined the class with reference to the objective conduct of Intratex. Bloyed, 916 S.W.2d at 951; Covelo Indian Community v. Watt, 551 F.Supp. 366, 376 (D.D.C.1982).

Intratex also alleges the definition is vague and amorphous because there is no way, at this preliminary stage, to identify the producers whose natural gas was taken by Intratex in quantities less than their ratable proportions. But Intratex does not dispute that the identity of the producers can be obtained from its own records and from the Texas Railroad Commission records. If Intratex is correct, the class can always later be de-certified or the class definition modified. Based upon the allegations and material presented by Plaintiffs at the certification hearing, the trial court did not abuse its discretion in defining the class as it did.

We overrule the first point of error.

RULE 42(A)

: PREREQUISITES TO A CLASS ACTION

In point of error two, Intratex asserts that Plaintiffs did not meet any of the four requirements of rule 42(a), which are: (1) the class must be "so numerous that joinder of all members is impracticable," (2) "there are questions of law or fact common to the class," (3) "the claims or defenses of the representative parties are typical of the claims or defenses of the class," and (4) "the representative parties will fairly and adequately protect the interests of the class." TEX.R. CIV. P. 42(a)(1), (2), (3), & (4).

1. The "Numerosity" Requirement

Plaintiffs assert the class numbers approximately 983 potential class members. 4...

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