Posts Tagged ‘harm’

Texas Supreme Court Guts Consumer Class Action Protections

Wednesday, July 27th, 2011

Texas Rule of Civil Procedure 42 specifically authorizes Texas citizens to bring class action lawsuits.  A case cannot be pursued as a class action, however, until a Texas trial court determines and certifies that the requirements of Rule 42 have been met.  The Texas Supreme Court, through a series of decisions beginning in 2000, has created so many obstacles to certification that it has become practically impossible to have a class action in a state court. The Texas Supreme Court has restrictively interpreted Rule 42 so as to effectively eliminate class actions in Texas courts. .

Rule 42 was intended to be used when a group of people have suffered similar harm from similar actions of a particular defendant.  The one or more individuals that bring the lawsuit are called “class representatives” and represent the interests of the entire class harmed by the defendant’s conduct.  The claims of the class representatives arise from facts or law common to all class members.  If a class action settles, a judge must approve the amount of the settlement and the compensation paid to the lawyers.  If a class action lawsuit results in a favorable jury verdict after trial, the class members will split the damages awarded by the jury among themselves.

Class action lawsuits have many advantages over individual lawsuits when many have been similarly harmed.  In fact, the U.S. Congress has stated:

“Class action lawsuits are an important and valuable part of the legal system when they permit the fair and efficient resolution of legitimate claims of numerous parties by allowing the claims to be aggregated into a single action against a defendant that has allegedly caused harm.”

Class Action Fairness Act of 2005, Section 2(a)(1).

One advantage of class actions is that a person who has suffered minimal damages (not enough to justify pursuing the case on their own), can seek compensation by combining their claims with others similarly situated so that litigation against a large corporation becomes feasible. It makes no financial sense for an individual consumer to sue to recover, for example, a $5.00 fee that was improperly charged. Keep in mind that if a company improperly charges $5.00 to a million customers, they have made a $5 million illegal profit.  Rule 42 class actions were intended to provide consumers a tool to stop such corporate misconduct.

Aggregating similar claims also leads to a more efficient use of precious judicial resources.  If 1000 people file separate claims in separate lawsuits, the courts would be flooded with duplicative cases and it would take literally years to resolve all of the disputes.  By aggregating claims into a single lawsuit, the litigation is handled efficiently by a single judge presiding over a single lawsuit and trial.  Defendants also benefit by aggregating many small claims into one lawsuit because their defense costs are substantially reduced.

Another advantage of class action lawsuits is that they often alter the conduct of businesses and corporations in ways that benefit society.  The threat of being exposed to hundreds of millions of dollars in damages can cause a corporation to think twice about illegal, unethical, discriminatory or unsafe conduct.

Despite the important consumer protection purposes behind Rule 42, the Texas Supreme Court announced a new and highly restrictive approach to class action lawsuits in two cases, Intratex Gas Co. v. Beeson and Southwestern refining Co. v. Bernal, 22 S.W.3d 425, decided in 2000. The Texas Supreme Court in Beeson, Bernal, and a number of subsequent cases has consistently reversed class certifications.

So, even if a trial court in Texas does certify a class action under Rule 42, that does not mean the defendant will settle, or consumers will get their money back, or that the case will even go to trial as a class action. The defendant can appeal to have the class decertified.  That happened again recently in Southwestern Bell Telephone Co. v. Marketing on Hold, Inc. A lawsuit was filed alleging that Southwestern Bell had improperly charged fees to approximately 6,900 customers from 1991-1998.  The trial court conducted a four day certification hearing and determined that all of the Rule 42 requirements had been met for class certification.  The Court of Appeals agreed.  And the Texas Supreme Court reversed and decertified the class.