Texas South Rentals, Inc. v. Gomez

• Decision Date: 17 July 2008
• Docket Number: No. 13-06-629-CV.,13-06-629-CV.
• Citation: 267 S.W.3d 228
• Parties: TEXAS SOUTH RENTALS, INC., a/k/a Texas South Inc. and the Hertz Corporation, Appellants, v. Jose M. GOMEZ, Individually and on behalf of all others similarly situated persons, Appellee.
• Court: Texas Court of Appeals

267 S.W.3d 228

TEXAS SOUTH RENTALS, INC., a/k/a Texas South Inc. and the Hertz Corporation, Appellants, v. Jose M. GOMEZ, Individually and on behalf of all others similarly situated persons, Appellee.

No. 13-06-629-CV.

Court of Appeals of Texas, Corpus Christi-Edinburg.

July 17, 2008.

Bruce Hawn, Welder, Leshin & Mahaffey, Thomas F. Nye, Vidaurri Lyde Gault Quintana, Jorge C. Rangel, Jaime S. Rangel, Randall L. Meredith, The Rangel Law Firm, Corpus Christi, Eric J. Mayer, Shawn Raymond, William Merrill, Susman Godfrey, Houston, for appellants.

Austin Tighe, Vic Feazell, Austin, Jerry Guerra, Armando L. Reyna, Corpus Christi, Jay Davis Watson, Bryan, for appellee.

Before Justices YAÑEZ, RODRIGUEZ, and BENAVIDES.

OPINION

Opinion by Justice BENAVIDES.

This is an interlocutory appeal by appellants, the Hertz Corporation and Texas South Rentals, Inc.,¹ from an order certifying a class of plaintiffs and designating appellee, Jose M. Gomez, as class representative. Hertz and Texas South have raised numerous issues challenging the class-certification order.² For the following reasons, we reverse the trial court's order, decertify the class, and remand to the trial court for further proceedings consistent with this opinion.

I. Background

Hertz is a nationally operated rental car company. Texas South is an independently owned and operated Hertz licensee. As part of these companies' rental agreements, a customer is presented with three refueling options. First, the companies offer a "fuel purchase option" or "FPO." Under this option, the companies charge the customer up-front for a full tank of gas at a specified price per gallon. The customer can then return the car with less than a full tank of gas without incurring any additional charge. According to Gomez, the FPO is typically close to the market price for gas in the immediate surrounding area.

Second, a customer may refuel the car before returning it to the rental location. This option requires the customer to return the car with a full tank of gas, and the price the customer paid for the gas is obviously dependent upon his or her selection of a gas station.

The dispute in this case centers on the third option. If the customer does not pre-pay for gas under the FPO option and does not return the car with a full tank of gas, the companies charge a "fuel and service charge" or "FSC" to refuel the car. The price per gallon of gasoline under this option is higher than the FPO.

On January 17, 2003, Gomez rented a car from Texas South. At the time of the rental, these options were explained in the rental agreement and by the customer service representative. In fact, Gomez's rental agreement states, in all caps, that "THE PER GALLON COST OF THE FUEL PURCHASE OPTION WILL ALWAYS BE LOWER THAN THE FUEL AND SERVICE CHARGE." In Gomez's rental agreement, the price for the FSC was $3.99 per gallon.

Gomez did not purchase the FPO and did not refuel the car before returning it to Texas South. Texas South, therefore, imposed an FSC of $52.04. Gomez paid the charge and did not dispute it with Texas South. Over a year later, Gomez filed suit against Hertz on February 6, 2000. Later, on September 15, 2000, he amended his pleadings to include Texas South.

Gomez alleged claims for common-law fraud, illegal penalty, unconscionability, and breach of contract. In order to establish liability on Hertz, Gomez alleged several agency theories of liability, including apparent authority, agency by estoppel, ratification, vice principal, joint enterprise, conspiracy, and partnership. Gomez pleaded class allegations and sought to certify a class action of all Texas residents who paid an FSC after February 6, 2000.

Hertz and Texas South pleaded numerous affirmative defenses, such as voluntary payment, waiver, ratification, estoppel, and accord and satisfaction. Additionally, Texas South asserted that claims by class members who paid an FSC before September 15, 2000 would be barred by the four-year statute of limitations.

Gomez moved to certify the class. After numerous filings by the parties and a hearing, the trial court certified a class consisting of "[a]ll Texas residents who were charged an FSC in Texas after February 6, 2000." Appendix at p. 36. The trial court's order further clarified the limits of the class definition as follows:

This is a statewide Class only. Excluded from the foregoing Class are rentals that commenced anywhere other than at a Hertz location in the State of Texas; the presiding judge of the court in which this cause is filed, any other judge assigned to that court or to this cause, the immediate family of such judge(s), Class counsel, and each of the defendants and their respective officers, directors, employees, agents, and attorneys.³

Id. at pp. 35-36.⁴ This interlocutory appeal ensued. TEX. CIV. PRAC. & REM.CODE § 51.014(a)(3) (Vernon Supp.2007).

II. Standard of Review

We review an order certifying a class under an abuse of discretion standard. Stonebridge Life Ins. Co. v. Pitts, 236 S.W.3d 201, 204-05 (Tex.2007). However, we must do so "without indulging every presumption in favor of the trial court's decision." Id. at 205 (citing Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 691 (Tex.2002)). We review the trial court's order to determine whether the plaintiff demonstrated actual compliance with Texas Rule of Civil Procedure 42. Id. Compliance may not be presumed, but it must be apparent from the record and the trial court's order. See id.

All class actions must satisfy the four threshold requirements set out in rule 42(a): (1) the class must be so numerous that joinder of all members is impracticable; (2) there must be questions of law or fact common to the class; (3) the claims or defenses of the representative parties must be typical of the claims or defenses of the class; and (4) the representative parties must be capable of fairly and adequately protecting the interests of the class. TEX.R. CIV. P. 42(a); see Sw. Ref. Co. v. Bernal, 22 S.W.3d 425, 433 (Tex. 2000).

Additionally, the class must satisfy at least one of the requirements set forth in rule 42(b). TEX.R. CIV. P. 42(b). In this case, Gomez has alleged that he satisfies rule 42(b)(3), which requires that common questions of law or fact predominate over questions affecting only individual class members and that class treatment is superior to other methods of adjudication. Id. at R. 42(b)(3).

The trial court is required to look beyond the parties' pleadings, investigate the factual and legal bases for all the claims, and explain in a detailed trial plan how the claims will proceed as a class. Bernal, 22 S.W.3d at 435. In the absence of such an analysis, it is nearly impossible for a reviewing court to evaluate whether the class requirements have been satisfied. State Farm Mut. Auto. Ins. Co. v. Lopez, 156 S.W.3d 550, 556-57 (Tex.2004).

III. Predominance Requirement

Hertz and Texas South assail the trial court's findings regarding typicality, adequacy of representation, predominance of common issues, superiority of the class vehicle, and the trial plan requirement. Because the predominance requirement is one of the "most stringent prerequisites to class-action certification," we begin by addressing Hertz and Texas South's arguments that common issues will not predominate in this case. Stonebridge Life Ins. Co., 236 S.W.3d at 205.

A class may be certified under Texas Rule of Civil Procedure 42(b)(3) when "the questions of law or fact common to the members of the class predominate over any questions affecting only individual members...." TEX.R. CIV. P. 42(b)(3). Stated conversely, a class cannot be certified under this provision 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." Stonebridge Life Ins. Co., 236 S.W.3d at 205 (citing Henry Schein, Inc., 102 S.W.3d at 690).

Predominance of common issues, as with all prerequisites to certification, must be rigorously examined by the trial court. Henry Schein, Inc., 102 S.W.3d at 694; Bernal, 22 S.W.3d at 434. "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.)). The trial court must decide at the outset that any individual issues can be determined in a "manageable, time-efficient and fair manner"; otherwise, certification is improper. Stonebridge Life Ins. Co., 236 S.W.3d at 205.

In conducting this inquiry, the trial court must identify the substantive issues involved, assess which of those issues will predominate, and determine if the predominating issues are those common to the class. Id. at 205; Bernal, 22 S.W.3d at 434. "Ideally, `a judgment in favor of the class members should decisively settle the entire controversy, and all that should remain is for other members of the class to file proof of their claim.'" Exxon Mobil Corp. v. Gill, 221 S.W.3d 841, 856 (Tex. App.-Corpus Christi 2007, pet. filed) (quoting Bernal, 22 S.W.3d at 434).

The trial court analyzed Gomez's claims and found that there are no individual issues with respect to any of the claims. Appendix at pp. 16, 19, 21, 22, 24, 26, 30, 34-35. Thus it found that common issues would predominate. Both Hertz and Texas South advance several arguments against this finding. First, they argue that the class fraud claims demand an individualized inquiry into whether the alleged misrepresentations were material to the class members and whether the class members justifiably relied on the alleged misrepresentations. Second, they argue that the class claims are subject to the voluntary payment defense, which requires an individualized inquiry into the class members'...