Stonebridge Life Ins. Co. v. Pitts

• Decision Date: 31 August 2007
• Docket Number: No. 06-0655.,06-0655.
• Citation: 236 S.W.3d 201
• Parties: STONEBRIDGE LIFE INSURANCE COMPANY (f/k/a J.C. Penney Life Insurance Company), J.C. Penney Direct Marketing Services, Inc., and AEGON Direct Marketing Services, Inc. (f/k/a AEGON Special Markets Group, Inc.), Petitioners, v. Gayle G. PITTS and Mary Vanderford, Respondents.
• Court: Texas Supreme Court

236 S.W.3d 201

STONEBRIDGE LIFE INSURANCE COMPANY (f/k/a J.C. Penney Life Insurance Company), J.C. Penney Direct Marketing Services, Inc., and AEGON Direct Marketing Services, Inc. (f/k/a AEGON Special Markets Group, Inc.), Petitioners, v. Gayle G. PITTS and Mary Vanderford, Respondents.

No. 06-0655.

Supreme Court of Texas.

August 31, 2007.

Craig T. Enoch, J. David Brown, Joel Wilson Reese, Winstead Sechrest & Minick, P.C., Dallas, Frank Weathered, Dunn Weathered Coffey Rivera Kasperitis & Rodriguez, P.C., Corpus Christi, for petitioner.

Tamera L. Venzke, John P. Venzke, The Venzke Law Firm, L.L.P., David H. Berg, Berg & Androphy, Houston, Stephen Gardner, Law Office of Stephen Gardner, PC, Dallas, J.A. (Tony) Canales, Canales & Simonson, P.C., Corpus Christi, for respondent.

PER CURIAM.

Consumers brought this class-action suit for "money had and received" to recover premiums they were charged pursuant to an allegedly misleading telemarketing scheme involving accidental death and dismemberment insurance.¹ The trial court certified a statewide class, and the court of appeals affirmed. ___ S.W.3d ___. We conclude that individualized inquiry will predominate over common issues of proof, making the claim inappropriate for class certification. Accordingly, we decertify the class and remand the case to the trial court for proceedings consistent with this opinion.

Stonebridge Life Insurance Company² provides accidental death and dismemberment insurance nationwide through a uniform telemarketing effort. The company purchases personal information about potential customers, including their credit-card and bank-account numbers, from other businesses and credit-card issuers. Telemarketers then call those customers and, using a standardized script, describe the insurance and the enrollment process. The insurance is offered on a sixty- or ninety-day trial basis free of charge, during which time the customer can decide whether to keep or cancel the coverage. The customer is informed that the premium will be automatically charged to the customer's credit card or bank account when the "bonus" period ends unless the customer calls to cancel coverage. Customers who indicate they want the insurance are transferred to a licensed agent who enrolls them in the program. The agent confirms the customer's understanding that the coverage is provided at no cost during the "bonus" period, and explains that unless the coverage is cancelled before the "bonus" period expires the premium will be charged to the customer's account every month. Although the customer is told which account Stonebridge will charge, the agent does not disclose that Stonebridge already has the specific account information or explain that there will be no further contact from the company before the account is charged.

Gayle G. Pitts and Mary Vanderford brought this suit against Stonebridge on behalf of a class of insurance customers who enrolled through the telemarketing program. The class representatives claim they were never informed that the company already had their credit card or bank account information, nor were they told there would be no further contact before their accounts were charged for premiums when the trial period ended. The class seeks restitution of insurance premiums based on a single liability theory — "money had and received." The trial court certified a statewide class,³ identifying the common liability issue as:

[D]id the Defendants obtain money from the Plaintiffs by charging their credit cards or debiting their bank accounts for accidental death and dismemberment insurance premiums which in equity belongs to the Plaintiffs?

The court of appeals affirmed the trial court's certification order. 236 S.W.3d 226.

The class members claim they were each subjected to essentially the same telemarketing effort and initially consented to the trial program, and contend the only issue in the case is whether Stonebridge charged their credit cards or debited their bank accounts for premiums which "in equity and good conscience" belong to the class members. Because Stonebridge's liability turns exclusively on the answer to that question, the class argues, common issues predominate over individual issues in the case. Stonebridge, on the other hand, contends class certification is inappropriate because the equitable claim the class members assert requires resolution of individual issues that will predominate at trial. We agree with Stonebridge.

This Court reviews a trial court's decision to certify a class under an abuse of discretion standard, but does so without indulging every presumption in favor of the trial court's decision. Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 691 (Tex. 2002); see Sw. Ref. Co. v. Bernal, 22 S.W.3d 425, 434-35, 439 (Tex.2000). Actual conformance with Rule 42 is indispensable, and compliance with the rule must be demonstrated, not presumed. Schein, 102 S.W.3d at 689-90 (citing Bernal, 22 S.W.3d at 434-35).

Because predominance is one of the most stringent prerequisites to class-action certification, it is considered first in our review and must be rigorously applied. See Bernal, 22 S.W.3d at 433-35; see also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). The predominance requirement prevents class certification when complex and diverse individual issues would overwhelm or confuse a jury or severely compromise a party's ability to present otherwise viable claims or defenses. Schein, 102 S.W.3d at 690; Bernal, 22 S.W.3d at 434. Certification is not appropriate unless it is determinable from the outset that the individual issues can be considered in a manageable, time-efficient and fair manner. Schein, 102 S.W.3d at 688 (citing Bernal, 22 S.W.3d at 435). Predominance under Rule 42(b)(3) is satisfied when common questions of law or fact will predominate over questions affecting only individual members. Schein, 102 S.W.3d at 694; Bernal, 22 S.W.3d at 433. "The test for predominance is not whether common issues outnumber uncommon issues but . . . whether common or individual issues will be the object of most of the efforts of the litigants and the court." Bernal, 22 S.W.3d at 434 (quoting Central Power & Light Co. v. City of San Juan, 962 S.W.2d 602, 610 (Tex.App.-Corpus Christi 1998, pet. dism'd w.o.j.)). To evaluate predominance, we identify the substantive issues that will control the litigation, assess which issues will predominate, and determine if the predominating issues are, in fact, those common to the class. Bernal, 22 S.W.3d at 434.

The class contends the facts in this case present the precise scenario for which class actions were designed. However, due process requires that class actions not be used to diminish the substantive rights of any party to the litigation. See Schein, 102 S.W.3d at 693; TEX.R. CIV. P. 815; see also In Re Ethyl Corp., 975 S.W.2d 606, 613 (Tex.1998) ("The systemic urge to aggregate litigation must not be allowed to trump our dedication to individual justice, and we must take care that each individual plaintiff's — and defendant's — cause not be lost in the shadow of a towering mass litigation.") (quoting In Re Brooklyn Navy Yard Asbestos Litig., 971 F.2d 831, 853 (2d Cir.1992)). The opportunity to adequately and vigorously present material defenses lies at the very core of the adversarial process and the right to a fair trial, and may not be disregarded for reasons of convenience or economy. Schein, 102 S.W.3d at 693; Bernal, 22 S.W.3d at 437; see also In re Ethyl Corp., 975 S.W.2d at 613.

In this case, the only cause of action that the class asserts is for "money had and received." Stonebridge does not argue in this appeal that no class member can state a viable claim. Cf. State Farm Mut. Auto. Ins. Co. v. Lopez, 156 S.W.3d 550, 557 (Tex.2004). Because the plaintiffs' claim is equitable in nature, the defendant may present any facts and raise any defenses that would deny the claimant's right or show that in equity and good conscience the claimant should not recover. See Stone v. White, 301 U.S. 532, 535, 57 S.Ct. 851, 81 L.Ed. 1265 (1937); B & R Devel., Inc. v. Rogers, 561 S.W.2d 639, 643 (Tex. Civ.App.-Texarkana 1978, writ ref. n.r.e.) (citing Red Ball Motor Freight, Inc. v. Bailey, 332 S.W.2d 411 (Tex.Civ.App.-Amarillo 1960, writ ref'd n.r.e.)).

Equitable defenses raise important substantive issues that may have a significant effect on class-action litigation. See BMG Direct Mktg., Inc., 178 S.W.3d at 777. Evidence that individual class members understood they would be charged without further notice, or that individual members consented to the charges after they were made, or that a policy holder wanted the coverage irrespective of how premiums were charged, would be relevant to this assessment. For example, Stonebridge points to one former class representative who, after receiving his certificate of insurance from Stonebridge, marked on the envelope that the insurance was "updated [and] good, because it is being paid through my Diamond Shamrock credit card every month." Another customer called Stonebridge to inquire about the beneficiary designation under her policy, and her husband admitted that she purposefully bought the insurance. These examples suggest that at least some customers understood they were being charged for premiums by Stonebridge and wanted the insurance. At this juncture, it is impossible to determine how many other customers may have knowingly consented to the charges. But with an estimated class size of some 1.5 million, the vast majority of the litigation could be spent trying to determine which individuals should recover their premiums under the equities presented and which should not.

The court of appeals concluded that, because each class member was subjected to a common telemarketing effort...