Wente v. Georgia-Pacific Corp.

• Decision Date: 11 June 1986
• Docket Number: No. 14583,GEORGIA-PACIFIC,14583
• Parties: Amos M. WENTE, Trustee for Austin Supply & Drywall Co., Inc., Appellant, v.CORPORATION, Appellee.
• Court: Texas Court of Appeals

Page 253

712 S.W.2d 253

Amos M. WENTE, Trustee for Austin Supply & Drywall Co Inc., Appellant, v. GEORGIA-PACIFIC CORPORATION, Appellee.

No. 14583.

Court of Appeals of Texas Austin.

June 11, 1986.

Lisa Ott Laky, Law Offices of Baker & Price, Austin, for appellant.

R. James George, Jr., David H. Donaldson, Jr., Elizabeth A. Crabb, Graves, Dougherty, Hearon & Moody, Austin, for appellee.

Before POWERS, BRADY and CARROLL, JJ.

POWERS, Justice.

Amos Wente ¹, bankruptcy trustee for Austin Supply & Drywall Co., Inc. (Austin Supply), filed a "class action suit" against Georgia Pacific Corporation (G-P) on behalf of Austin Supply and

all other persons similarly situated, to wit: All other open account customers of Defendant in or doing business in the State of Texas who have contracted for, been charged by, or have paid interest to Defendant at rates prohibited by Texas law, ....

After a hearing, the trial court denied class certification ² and Austin Supply appealed before final judgment as authorized by Tex.Civ.Prac. & Remedies Code § 51.014 (1986). We will affirm the order of the trial court denying class certification.

Austin Supply raises several points of error falling into two general categories: (1) the trial court erred in conducting the class-certification hearing before all court-ordered discovery had been completed, so that Austin Supply was not fully prepared on the issues pertinent to the hearing; and (2) the trial court erred in concluding that not all the requisites of a class action were satisfied. We will discuss the second category first.

CLASS-ACTION PREREQUISITES

In General. "Class actions" differ from individual actions in the following respects: (1) the wrong complained of is not merely to an individual but is a wrong to a class of individuals and (2) the judgment in the case binds the entire class, not merely the named parties. These distinctive aspects warrant the four statutory prerequisites found in the Texas Rules of Civil Procedure One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is 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.Ann. 42(a) (Supp.1986).

The first two prerequisites pertain to the class itself and govern whether a class will be certified. In these two initial considerations, the dominant concern is judicial economy--i.e., providing the most economical way to adjudicate a large number of related causes of action. See 1 Newberg on Class Actions § 1110f at 184 (1977). The second two prerequisites deal with the competency of the plaintiff to represent properly the class. Thus, a trial court may refuse to certify a class either because the alleged "class" is determined not to be a class within the meaning of the rule or because the would-be representative plaintiff is not competent to represent the claims of the class.

Rule 42(c) commands the trial court to determine "as soon as practicable after the commencement of an action" whether that action shall be maintained as a class action. In making this determination, a trial court is given broad discretion. Jones v. City of Dallas, 604 S.W.2d 543 (Tex.Civ.App.1980, writ dism'd). Review of the decision is limited to whether the trial court abused its discretion. RSR Corp. v. Hayes, 673 S.W.2d 928 (Tex.App.1984, writ dism'd).

We conclude the trial court did not in the present case abuse its discretion in denying class certification. Our conclusion is based on our determination that the predominant questions of law and fact are not common to the class for which certification was requested.

Common Questions of Law or Fact. The common-question test is best understood in conjunction with the impracticability-of-joinder test because the two tests form the conceptual basis of class actions. Rule 42(a) does not require that all or even a substantial portion of the questions of law or fact be common to the class; it is only required that there exist some common questions of law or fact. Therefore, it is conceivable that a single common question would provide adequate grounds for a class action under the rule. ³ This is a logical assumption given the interplay between the need for judicial economy and the adjudication of a large number of related claims. A single issue, when pressed by a large class, may arguably call for class procedures to the same degree as multiple issues would, the quantitative component being the class size and not the issues raised.

It should also be noted that the common issue may be one either of law or fact. Some courts have denied class certification on the basis that there were not common questions of law and fact. In Ward v. Luttrell, 292 F.Supp. 165 (E.D.La.1968), a class action was brought on behalf of all female workers in the state challenging state labor laws that prescribed maximum hours that women could work, thus preventing them from earning overtime pay. Even though any challenger would necessarily raise the same legal issues, the court would not certify the class saying, "True the law would be common to the 'class,' but we cannot conceive that the questions of fact would be." 292 F.Supp. at 168.

However, this position seems unwarranted in light of the language of the rule, and the majority position is to the contrary. Like v. Carter, 448 F.2d 798 (8th Cir.1971), was an action on behalf of eligible welfare recipients seeking to force the agency to process their applications within 30 days. The trial court denied the class certification for a failure to meet the common-questions- of-law-or-fact requirement. The circuit court reversed the judgment and held that although the factual situations pertaining to the delays varied from case to case, common questions of law based on applicable statutes and regulations satisfied the requirement.

Two Texas courts have interpreted the analogous state-rule requirement to mean that there are "questions which when answered as to one class member are answered as to all class members." Amoco Production Co. v. Hardy, 628 S.W.2d 813, 816 (Tex.App.1981, writ dism'd); RSR Corp. v. Hayes, supra. This rule appears to be a sensible approach to the problem, and following the analysis in Amoco, we first inquire concerning what questions will predominate in a trial on the merits under the allegations made by Austin Supply.

Before May 8, 1981, the Texas usury law divided commercial transactions into essentially three categories: (1) if the parties to an agreement do not specify a rate of interest, an interest of "six percent per annum [is] allowed on all accounts and contracts ascertaining the sum payable," Tex.Rev.Civ.Stat.Ann. art. 5069-1.03 (Supp.1986); (2) if the parties agree on a rate of interest and the debtor is not a corporation or the debtor is a corporation and the account is less than $5,000, the maximum amount of interest charged is ten percent per annum, Tex.Rev.Civ.Stat.Ann. art. 5069-1.02 (1971); (3) if the debtor is a corporation and the account is more than $5,000, then the maximum interest allowed is eighteen percent per annum, Tex.Rev.Civ.Stat.Ann. art. 1302-2.09 (1980).

Thus, before May 8, 1981, the transcending questions in determining whether an interest charge was usurious were as follows:

1. Did the parties agree on the amount of interest to be charged?

2. Was the debtor a corporation?

3. If the debtor was a corporation, was the account for more than $5,000?

On May 8, 1981, the Texas Omnibus Usury Bill, "HB 1228," Tex.Rev.Civ.Stat.Ann. art. 5069-1.04 (Supp.1986), became effective. This statute increased the basic usury ceiling for any written contract from the ten percent ceiling allowed by earlier law to a ceiling which floated ⁴ between a minimum of eighteen percent and a maximum of twenty-four or twenty-eight percent, depending on the kind of transaction involved.

The act also provided for four categories ⁵ of accounts:

1. Closed-end fixed

2. Closed-end variable

3. Open-end fixed

4. Open-end variable

Therefore, after May 8, 1981, a new set of questions pertained to usury actions based on written contracts, to wit:

1. What type of account did the debtor have?

2. What were the maximum amounts of interest allowable for the various time periods when the account was active?

In actions not based on a written contact, the questions remained the same as before the statutory changes.

Obviously, a usury action could raise a variety of controlling issues, especially in light of the 1981 act. In addition, the usury law is structured in a way that the primary task is to determine the category into which the debtor's account must fall, making the initial questions individual and not common. We shall carry forward these general observations to the evidence presented at the class-certification hearing in the trial court.

Concerning all open-account customers of G-P, the evidence shows that some may have written contracts and some may not; some will be corporations and some will not; some of the corporations may have accounts less than $5,000 and some may have accounts more than that; and where a written contract exists after May 8, 1981, the maximum allowable interest will be different for different customers, depending on the type of account and when the interest is to be computed. In short, it is likely that every conceivable variation of this part of the usury law would be present in a class taken from all Texas customers of G-P having open accounts with the company.

Wente argues in his brief that, "[i]n the case at bar, the common question as to all class members is whether each one was subject to the application of G-P's consistent policy relating to interest charges on open...