Lon Smith & Assocs. v. Key

• Decision Date: 14 April 2022
• Docket Number: 02-21-00227-CV
• Court: Texas Court of Appeals
• Parties: Lon Smith & Associates, Inc., and A-1 Systems, Inc. d/b/a Lon Smith Roofing and Construction, Appellants v. Joe Key and Stacci Key, Appellees

Lon Smith & Associates, Inc., and A-1 Systems, Inc. d/b/a Lon Smith Roofing and Construction, Appellants v. Joe Key and Stacci Key, Appellees

No. 02-21-00227-CV

Court of Appeals of Texas, Second District, Fort Worth

April 14, 2022

On Appeal from the 236th District Court Tarrant County, Texas Trial Court No. 236-267881-13

Before Bassel, Wallach, and Walker, JJ.

OPINION

Mike Wallach Mike Wallach Justice.

This is an interlocutory appeal from an order denying Appellants' Lon Smith & Associates, Inc., and A-1 Systems, Inc. d/b/a Lon Smith Roofing and Construction ("Smith") Motion to Amend Class Definition or Motion to Compel Arbitration. We will dismiss the appeal of their Motion to Amend Class Definition for lack of jurisdiction. We will affirm the trial court's order denying their Motion to Compel Arbitration.

I. Background

A. Smith 1

This is part two of this court's saga with this litigation. Part one (Smith 1), can be read at Lon Smith & Assocs., Inc. v. Key, 527 S.W.3d 604 (Tex. App.-Fort Worth 2017, pet. denied). The facts giving rise to this dispute were summarized in Smith 1:

A May 2011 hailstorm damaged the roof of the Keys' residence. The Keys notified their homeowners' insurance carrier of the damage, and Joe signed a contract with A-1 for the installation of a new roof with a total price of $33, 769.50. Stacci did not sign the contract; the Keys allege that Joe signed it on her behalf. The "Acceptance and Agreement" provision of the contract provided that

[t]his Agreement is for FULL SCOPE OF INSURANCE ESTIMATE AND UPGRADES and is subject to insurance company approval. By signing this agreement homeowner authorizes Lon Smith Roofing and Construction ("LSRC") to pursue homeowners['] best interest for all repairs, at a price agreeable to the insurance company and LSRC. The final price agreed to between the insurance company and LSRC shall be the final contract price.

A-1 installed the new roof. The Keys paid their homeowners' insurance proceeds of $18, 926.69 to A-1, leaving a balance on the $33, 769.50 amount. To collect the amount A-1 claimed that the Keys owed, A-1 filed suit against Joe in a justice court and obtained a default judgment. Joe subsequently challenged the default judgment and obtained a June 23, 2015 judgment setting it aside as void. A-1 appealed the June 23, 2015 judgment to the county court at law. See Tex.R.Civ.P. 506.1.

Meanwhile, in September 2013, the Keys sued LSRC, asserting that the Acceptance and Agreement provision in the contract with A-1, which did business collectively with Associates, violated Texas Insurance Code section 4102.051's prohibition against a corporation acting or holding itself out as a public insurance adjuster in the absence of a license. See Tex. Ins. Code Ann. § 4102.051(a) (West Supp. 2016). Accordingly, the Keys claimed the agreement was illegal, void, and unenforceable. See id. § 4102.207(a), (b) (West 2009) (setting forth remedies for violation of chapter 4102).

Based on the alleged illegality of LSRC's agreement under section 4102.051, the Keys pleaded a claim for declaratory relief-to declare the agreement with LSRC illegal, void, and unenforceable and to declare, consequently, that they and other class members are "entitled to a judgment restoring all monies paid to [LSRC] under the illegal contract" pursuant to the statutory remedy provided by section 4102.207(b). See Tex. Ins. Code Ann. §§ 4102.051, .207(b); Tex. Civ. Prac. & Rem. Code Ann. §§ 37.002, .011 (West 2015). The Keys also pleaded causes of action for damages based on DTPA violations, fraud, violations of the Texas Debt Collection Practices Act, and fraudulent use of court records.

In due course, the Keys obtained class certification of their declaratory-judgment claim and their DTPA claims under sections 17.50(a)(3) (Unconscionability) and 17.50(a)(4) (Violation of Chapter 541 of the Texas Insurance Code).^[1]

Id. at 610-11.

The trial court's certification order that led to Smith 1 certified the Keys to represent a class defined as follows:

All Texas residents who from June 11, 2003 through the present signed agreements with [LSRC] that included the following provision, or language substantially similar to the following provision: "This Agreement is for FULL SCOPE OF INSURANCE ESTIMATE AND UPGRADES and is subject to insurance company approval. By signing this agreement homeowner authorizes Lon Smith Roofing and Construction ("LSRC") to pursue homeowners['] best interest for all repairs at a price agreeable to the insurance company and LSRC. The final price agreed to between the insurance company and LSRC shall be the final contract price."

Id. at 614-15.

The order certified three claims for class treatment: (a) the Keys' declaratory judgment claim, (b) the Keys' DTPA claim based on Section 17.50(a)(3) (Unconscionability), and (c) the Keys' DTPA claim based on Section 17.50(a)(4) (Violation of Chapter 541 of the Texas Insurance Code). The class-certification order set forth the trial court's findings of fact and conclusions of law that the Keys had met their burden of establishing all four requirements of Civil Procedure Rule 42(a) and subdivisions (1)(A), (2), and (3) of Rule 42(b). See Tex. R. Civ. P. 42(a), (b)(1)(A), (2), (3). The order certified the class alternatively under each of these subsections of Rule 42(b); provided for notice and opt-out provisions for each of the classes certified alternatively under Rule 42(b)(3), 42(b)(2), and 42(b)(1)(A); appointed class counsel; and set forth a trial plan. Smith 1, 527 S.W.3d at 615.

LSRC and A-1 appealed the class certification on multiple grounds in Smith 1. We reversed that portion of the trial court's class certification order certifying a class under Section 17.50(a)(3) (unconscionability) under the DTPA and affirmed the remainder of the class certification. Id. at 640. The Supreme Court denied petition for review, and the case went back to the trial court for further proceedings, which now brings us this appeal, Smith 2.

B. Smith 2

On January 30, 2020, the Keys filed their Motion to Shift Class Notice Costs to Smith, arguing this court had already determined the merits of this case in favor of the Keys and, therefore, Smith should be required to bear the costs associated with class notice. Smith opposed the motion as the trial court had already entered a trial plan which provided for the Keys or class counsel to bear the cost of notice, noting that appointed class counsel had agreed to devote the resources to effect the notice.

On June 24, 2020, the trial court signed an Order Directing Defendants [Smith] to Pay Costs of Class Notice, ordering them "to pay all invoices reflecting costs and expenses incurred to provide of [sic] class notice." Smith filed their Motion to Amend Class Definition or Motion to Compel Arbitration, requesting the trial court to (1) amend the class definition, pursuant to Rule 42(c) of the Texas Rules of Civil Procedure, to exclude from the class those customers whose agreements with Smith included arbitration provisions, or (2) compel arbitration under the Federal Arbitration Act. Smith alleged that they had provided summary lists to opposing counsel pursuant to Rule 1006 of the Texas Rules of Evidence of the 22, 258 customers with arbitration provisions in their agreements from the 36, 899 customer class files produced by Smith to the Keys. The arbitration language in those customers' agreements allegedly provided:

All parties agree to settle any disputes regarding damages, quality of materials or workmanship through binding arbitration with the local Better Business Bureau before either party may officially file suit with any court. ARBITRATION SHALL BE BINDING.

On July 15, 2021, the trial court signed its Order Denying Smith's Motion to Amend Class Definition or Motion to Compel Arbitration, which also sustained the Keys' objections to the admissibility of the evidence filed in support of the Motions.

II. Jurisdictional Challenge

Whether we have jurisdiction to hear an interlocutory appeal is a question of law. Texas A & M Univ. Sys. v. Koseoglu, 233 S.W.3d 835, 840 (Tex. 2007). The Keys contend that this court lacks jurisdiction of this appeal in two points. First, they contend that this court lacks jurisdiction over that portion of the trial court's order declining to amend the class definition. Second, the Keys contend that the remainder of the appeal is a disguised motion to decertify the class, which this Court also lacks jurisdiction to review. It is uncontroverted that this is an interlocutory appeal. Smith's Appellant's Brief contains no statement of jurisdiction regarding the order denying the motion to amend the class definition, only the denial of the motion to compel arbitration. The Keys raised the issue of jurisdiction in their Appellees' Brief. Smith's Reply Brief does not attempt to justify interlocutory jurisdiction of this court over the trial court's denial of the Motion to Amend Class Certification, only over that portion of the trial court's denial of the Motion to Compel Arbitration.

We hold that we lack jurisdiction over the trial court's order denying the Motion to Amend Class Certification. This Court has jurisdiction over an interlocutory appeal only if a statute explicitly so provides. Stary v. DeBord, 967 S.W.2d 352, 352-53 (Tex. 1998). "Appellate jurisdiction is never presumed," and "[u]nless the record affirmatively shows the propriety of appellate jurisdiction," courts of appeals "must dismiss" appeals of interlocutory orders. In re Est of Brown, 346 S.W.3d 780, 781 (Tex. App.-Dallas 2011, no pet.). No Texas statute authorizes jurisdiction over an interlocutory appeal of an order denying a motion to amend or modify a class definition. See Tex. Civ. Prac....