Shebay v. Davis

• Decision Date: 13 August 1986
• Docket Number: No. 08-86-00011-CV,08-86-00011-CV
• Citation: Shebay v. Davis, 717 S.W.2d 678 (Tex. App. 1986)
• Parties: Andrew G. SHEBAY, III, Intervenor, Appellant, v. W.R. DAVIS, For Himself and on Behalf of the Class Comprised of All Sellers of Crude Oil to The Permian Corporation, and the Permian Corporation, Appellees.
• Court: Texas Court of Appeals

Page 678

717 S.W.2d 678

Andrew G. SHEBAY, III, Intervenor, Appellant, v. W.R. DAVIS, For Himself and on Behalf of the Class Comprised of All Sellers of Crude Oil to The Permian Corporation, and the Permian Corporation, Appellees.

No. 08-86-00011-CV.

Court of Appeals of Texas El Paso.

Aug. 13, 1986.

Rehearing Denied Sept. 10, 1986.

Daniel K. Trevino, Jr., R. Scott Williams, Law Offices of Daniel K. Trevino, Jr., P.C., Houston, for appellant.

Cecil Munn, Cantey, Hanger, Gooch, Munn, & Collins, Fort Worth, Glen Clover, Liddell, Sapp & Zivley, Houston, for appellees.

Before STEPHEN F. PRESLAR, C.J. (Retired), OSBORN, C.J., and SCHULTE, J.

OPINION

SCHULTE, Justice.

This suit originated as a class action for an accounting for overages of oil allegedly received and not paid for by The Permian Corporation (Permian). W.R. Davis (Davis), for himself and on behalf of other sellers of crude, originally filed the suit in 1979. Appellant here, an intervenor and seller of crude, contested the proposed settlement. Appeal is taken from the "Final Order Approving Settlement and Related Matters." This order of December 3, 1985, set up a settlement fund of $4,500,000.00 to be distributed by Permian. Certain fees, costs, expenses and taxes, as approved by the Court, were to be paid out of the fund. The order declared that it was a final judgment subject only to the continuing jurisdiction of the trial court to effect implementation. In approving the agreement, the judgment recited that the settlement was fair and reasonable. We affirm.

Davis alleged that Permian had received oil for which it had not paid as a result of improper volume measurements, with resulting damages to Davis and the class. Permian denied the allegations and raised specific affirmative defenses, including statute of limitations, estoppel and waiver. Permian also challenged the maintainability of the action as a class action and Davis's representation of the class. On January 30, 1980, the trial court certified the case as a class action pursuant to Rule 42(a) and 42(b)(4), Tex.R.Civ.P. Davis was designated representative of the plaintiff class comprised of all sellers of crude oil to Permian from October 1, 1973, through December 31, 1979. A notice of class action dated November 7, 1980, was sent to the class members informing them of the lawsuit. Appellant Andrew G. Shebay, III (Shebay), a class member, intervened on behalf of himself and a subclass on December 12, 1980. In September, 1981, Shebay filed a motion to certify a subclass. The motion was subsequently and materially amended on May 29, 1984. After a hearing, the trial court denied subclass certification on September 12, 1985. The trial court's denial of subclass certification is the subject of an interlocutory appeal concerning which a separate opinion issues contemporaneously with this opinion under our file No. 08-85-00255-CV.

In June, 1982, while this case was pending, Permian entered into a settlement with the Department of Energy (D.O.E.). As a part of this settlement and pursuant to the consent order evidencing that settlement, Permian established an escrow account. The funds in the escrow account were to be used in connection with judgments and settlements of certain litigation and claims between Permian and various claimants. In May, 1985, the proposed settlement agreement in this case was submitted to the D.O.E. for its approval. After reviewing the agreement and the history of the litigation, the D.O.E. approved payment of the $4.5 million settlement figure from the escrow account.

On September 12, 1985, the trial court conducted a hearing and approved a notice of class action settlement. Pursuant to the court's order, the approved notice, together with a copy of the settlement agreement and a show cause order, was distributed to the members of the "[c]lass certified on January 30, 1980, and to all persons and other entities who sold crude oil (including condensate) to The Permian Corporation at any time from January 1, 1973, through September 30, 1973, or from January 1, 1980, through December 31, 1983,...."

On November 19, 1985, the court held a hearing to consider approval of the settlement agreement, applications for payment of fees and expenses and other motions relating to the settlement. Testimony and evidence were introduced by Davis, Permian and Shebay. On December 3, 1985, the trial court signed the final order approving settlement and related matters.

The Appellees contend by counterpoint that Appellant Shebay lacks standing to object to the settlement on appeal. They argue that Shebay voluntarily opted out of the class and, therefore, his rights cannot be affected and he is not bound by the settlement. Appellees base their argument on the following exchange between the trial court and the Appellant's counsel, made during the hearing on the settlement agreement.

THE COURT: [W]ho do you represent here, Mr. Trevino?

MR. TREVINO: The intervenor, Mr. Andrew G. Shebay.

THE COURT: Has he opted out of this lawsuit?

MR. TREVINO: Mr. Shebay is an Intervenor, Your Honor. By the very sense of the deal, he has opted out, and he is specifically being represented in this--

A class action notice must advise a class member of the following:

(A) the nature of the suit; (B) that the court will exclude him from the class if he so requests by a specified date; (C) that the judgment, whether favorable or not, will include and bind all members who do not request exclusion by the specified date; and (D) that any member who does not request exclusion may if he desires, enter an appearance through his counsel.

Rule 42(c)(2), Tex.R.Civ.P. The class action notice in this suit informed Appellant that he had the right to be excluded if he requested "such exclusion by letter addressed and mailed to the District Clerk of Midland County, Texas, Post Office Box 1922, Midland, Texas, 79702 and postmarked on or before the 15th day of December, 1980." The notice also informed Appellant that if he did not request exclusion, he had the right to enter an appearance through separate counsel. Appellant filed a petition in intervention for himself and on behalf of a subclass. There is no record that he excluded himself from the class pursuant to statute. The quoted comment did not fulfill the formal requirements for exclusion. Furthermore, Shebay appeared through counsel at the settlement hearing in opposition to the settlement without objection from Appellees. Thus, Appellant remains a member of the class and may object to the settlement on appeal. The counterpoint is not sustainable.

Appellant advances four points of error encompassing multiple arguments. In reviewing this case we apply an abuse of discretion standard. "The approval of settlements in class actions is left to the sound discretion of the district court. A decision to approve will not be disturbed on appeal unless it is clearly shown that the approval resulted from an abuse of discretion." Miller v. Republic National Life Insurance Company, 559 F.2d 426, 429 (5th Cir., 1977). The burden of proving that the trial court abused its discretion lies with the party attacking the court's action. Marshall v. Good Times, Inc., 537 S.W.2d 536, 538 (Tex.Civ.App.--Fort Worth 1976, writ dism'd). An abuse of discretion implies more than error of judgment; it must amount to arbitrary and unreasonable action by the trial court. Landry v. Travelers Insurance Company, 458 S.W.2d 649, 651 (Tex.1970). In determining the abuse of discretion standard, we view the evidence in the light most favorable to the action of the court below and indulge every legal presumption in favor of the trial court's judgment. Parks v. U.S. Home Corporation, 652 S.W.2d 479, 485 (Tex.App.--Houston [1st Dist.] 1983, writ dism'd). The trial court's action is presumed to be correct and must be sustained in the absence of a contrary showing. Lone Star Steel Company v. Owens, 302 S.W.2d 213, 219 (Tex.Civ.App.--Texarkana 1957, writ ref'd n.r.e.).

In Appellant's first point of error, he contends that the trial court abused its discretion by approving a class action settlement without issuing a memorandum opinion in support of its conclusion. Appellant cites In re Corrugated Container Antitrust Litigation, 643 F.2d 195, 207 (5th Cir., 1981), and Cotton v. Hinton, 559 F.2d 1326, 1330 (5th Cir., 1977), for the proposition that the trial judge must undertake an analysis of the facts and law relevant to the proposed compromise and support his conclusion by memorandum opinion or otherwise in the record so that an appellate court has a basis on which to judge the trial court's exercise of discretion.

The Appellees argue that the cases cited by Appellant are an interpretation of Fed.R.Civ.P. 52(a), which requires a judge to make findings of fact and conclusions of law. The Texas rules, on the other hand, only require that a judge file findings of fact and conclusions of law if requested to do so by the parties. Rule 296, Tex.R.Civ.P. According to Appellees, Appellant waived any right to complain by failing to make such a request.

It is not clear, however, that the cases cited by Appellant are an interpretation of federal Rule 52(a) or even that Appellant would be entitled to findings of fact and conclusions of law if he requested them pursuant to Rule 296, Tex.R.Civ.P. What is clear, however, is that the Texas Rules of Civil Procedure have no provision requiring a trial judge to issue a memorandum opinion in approving a class action settlement and we decline to establish such a requirement. We accept the rationale of the Cotton court that an appellate court "must have a basis for judging the exercise of the trial judge's discretion." Cotton, supra. Here, the record provides a sufficient basis on which to appraise the trial court's discretion. Appellant's Point of Error No. One is overruled.

In Appellant's second point of error, he contends that the trial court's approval of the...