Court of Appeals of Texas, Beaumont.
Robert C. GRONWALDT, individually and as agent for Mobil Oil Corp. Mobil Oil Corp., and National Union Fire Insurance Company of Pittsburgh, Pennsylvania, Appellants,
v.
Jerry C. MCCLELLAND, Appellee.
No. 09-94-238 CV.
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Dec. 29, 1994.
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Rehearing Overruled Jan. 19, 1995.
Before WALKER, C.J., and BROOKSHIRE and BURGESS, JJ.
OPINION
PER CURIAM
*1 An interlocutory appeal from the decision of the trial court to certify this litigation as a class action under Tex.R. Civ. P. 42. The plaintiff-appellee, Jerry C. McClelland (“appellee”), filed this action against defendants-appellants, Mobil Oil Corp., Robert C. Gronwaldt, Individually and as Agent of Mobil Oil, and National Union Fire Insurance Company of Pittsburgh, Pennsylvania (“appellants”).
In his amended motion for class certification, appellee petitioned to represent a class of persons consisting generally of all Mobil employees in the past ten years who have been injured in the course and scope of their employment and have had their claims adjusted by Mobil employees including, but not limited to, a named defendant, Robert Gronwaldt.
A hearing was conducted which has been characterized, inter alia, as a hearing of oral arguments and on other matters, including offers of evidence. This hearing was on the amended motion for class certification. Certain exhibits were offered and accepted into evidence before the trial court. These offers were made by appellee. At the hearing, testimony was offered from and by the appellee’s attorney. The trial court then certified a class certification consisting of Mobil employees injured in the course and scope of their employment who had had their claims adjusted by any other Mobil employee.
On June 20, 1994, the trial court entered its order designating and declaring a class certification. Timely, the appellants perfected their appeal from that order certifying the class. The certification order was signed the 20th day of June, 1994, by J. Michael Bradford as judge presiding. The order concludes in this manner: “It is therefore ordered that McClelland’s motion for class action certification is hereby granted in all things.”
We note that the body of the order is somewhat lengthy and goes into very considerable detail. The order, among many other matters, states that Jerry McClelland asserted that he had sustained damages as a result of the defendants’ conspiracy and fraud in allowing Mobil Corp. to dictate the methods and the terms by which his workers compensation claim was handled and settled.
The district judge noted that this type of conduct is defined as fraudulent conduct under the Texas Workers Compensation Commission Board Rules. McClelland had brought this suit in his individual capacity and also as a class representative of all persons or prospective members of a class injured in the course and scope of their employment with any Mobil Corp. in Texas, who have had their workers compensation claim or claims handled, settled, or adjusted in any manner by any Mobil employee from 1988 through 1993.
In a significant ruling, the trial court found that after considering McClelland’s motion to certify a class, that the facts and materials introduced before the trial court, as well as the argument of counsel at the hearing, caused the trial court to find that McClelland has met the requirements of Tex.R. Civ. P. 42(a)(b)(I)(a) and also the requirements Tex.R. Civ. P. 42(a)(b)(I)(a)(IV). The trial court found that a class composed of the current defendants and the Mobil employees and former employees, as were listed, should be certified.
*2 No useful purpose would be served by delineating and setting out the numerous matters found and ruled upon in the crucial order, but it is salutary to note that the trial judge considered and dealt with in detail the issues of numerosity, commonality, typicality, adequacy of representation, predominance of common issues, the superiority of class action, the sufficiency of the evidence, and other related matters.
In brief, the trial bench found that McClelland’s proposed class meets the requirements of numerosity. This special determination is based on the numbers of over 700 names involved in the class. Also, the court found, relevant to commonality, that a number of common issues exist: (1) The alleged fraudulent conduct of the defendants in dictating the methods and the terms by which the workers compensation claims were handled and settled; (2) the defendants’ knowledge of this conduct; and (3) the defendants’ participation in a conspiracy or scheme to defraud certain Mobil employees employed in Texas.
Relevant to typicality, the trial benchman found that the claims of and the defenses involving McClelland have the same essential characteristics as those of the members of the class certified. The district court also found that the claims of McClelland and others in the class need not be identical, but need to be only substantially similar. The court reasoned that additionally the element of fraud vitiates and invades all that fraud touches and in this connection, McClelland’s claims and positions are virtually identical to those of the class members. In addition thereto, a number of other potential class members have had the same legal claims against the defendants arising from the same factual circumstances which claims and suits have been previously consolidated from other district courts into the district court presided over by Judge J. Michael Bradford. Thus, the trial court decided and decreed in its order that clearly McClelland had met his burden of establishing typicality under Tex.R. Civ. P. 42(a)(3).
The trial bench ascertained that there was no evidence of antagonism between McClelland and the other potential class members. Also the evidence simply does not show that McClelland will be inadequate and McClelland will not vigorously defend the class members’ interest; but to the contrary, McClelland will vigorously defend and prosecute the interest of the members of the class. The order specifically recites that the evidence presented establishes that Reaud, Morgan & Quinn and Glen W. Morgan are extremely well-qualified counsel, which have had experience in mass tort and class action litigation and the lawyer or lawyers will vigorously prosecute this action. Therefore the interest of the members of the class will be protected.
Concerning the predominance of common issues, the trial court recited correctly that the standard or criteria in evaluating the predominance of issues is not whether the common issues would actually out number the individual issues but rather, whether the common issues or individual issues will be the main object of most of the efforts of the litigants before the court.
*3 The trial bench noted that the defendants herein have unsuccessfully, in our Ninth Court of Appeals, attempted to mandamus the trial court below in more than one attempt to prevent McClelland from obtaining a simple list of names to show a common interest and a common issue in numerosity. Defendants had previously failed. McClelland had finally obtained the list with names and addresses but no phone numbers. This factor, among others, the lower court declared, was a clear justification for handling this litigation and these disputes on a representative rather than an individual basis. Where, as before the trial court, the common issues represent a significant aspect or factor of the case and the same common issues can be resolved for all members of a class in a single adjudication, then ample justification exists for declaring a class and the members thereof.
The court below recited that it is not necessary that all issues be resolved in the initial trial and, indeed, the resolution of one issue or a small group of issues may so advance the litigation that they may fairly be said to predominate. The trial bench cited In Re School Asbestos Litigation, 789 F.2d 996 (3rd Cir.1986), cert. denied, 479 U.S. 852, 93 L.Ed.2d 117, 107 S.Ct. 182. The court, having considered the factors before it and the factors especially set out in Tex.R. Civ. P. 42(b)(1)(A) and/or (4), concluded that the class action procedure was and is superior to other methods available for the adjudication of the many claims of the class members and that, moreover, the class members will benefit greatly and in a salutary fashion from the discovery that had already been commenced by McClelland.
This in turn will eliminate the duplication and waste of time and effort on all parties’ behalf and will insure, the benchman determined, an expedited resolution of these common issues. Relevant to the question of the sufficiency of the evidence, the trial bench, inter alia, reasoned and declared that to accept the defendants’ contentions and arguments would require the trial court to try, at least in part, the very substantive and substantial merits of the class proponents’ claims when considering the motion for class certification. Such would clearly be inappropriate and imprudent. The trial bench pronounced that so long as the trial judge has sufficient material before him to determine the nature of the litigations and the nature of the allegations, the rule on compliance with the class rules and requirements are met. Also, if the trial court bases its ruling on that material, then its reasoning, rationale, approach and decision cannot be faulted because the class members or the plaintiff’s proof and evidence may become inadequate at the later time on the trial on the merits. Blackie v. Barrack, 524 F.2d 891 (9th Cir.1975), cert. denied, 429 U.S. 816, 50 L.Ed.2d 75, 97 S.Ct. 59.
The court noted also that the certification of the class may, indeed, and, as a matter of course, be altered, amended, or withdrawn at any appropriate time before the entry and the signing of the final judgment. And, in addition thereto, the trial court may by further orders require the naming of additional parties to insure the adequacy of the representation. Thus, the trial benchman below reasoned, correctly conclude, that at this stage the definite and preferred practice is to act in favor of and not against the maintenance of a class action since the class certification order is always subject to modification should later developments during the course of the litigation or during the course of the trial so indicate and require.
*4 Currently and widely acknowledged is the fact that Tex.R. Civ. P. 42 is patterned after the Federal Rule of Civil Procedure concerning class actions. Thus, certain Federal court opinions and decisions are persuasive and meaningful in interpreting and applying Tex.R. Civ. P. 42. See and compare National Gypsum v. Kirbyville School D., 770 S.W.2d 621 (Tex.App.-Beaumont 1989, writ dism’d w.o.j.); Wiggins v. Enserch Exploration, Inc., 743 S.W.2d 332 (Tex.App.-Dallas 1987, writ dism’d w.o.j.).
Our Per Curiam in National Gypsum is cited by appellee with our definite approval. We re-affirm our opinion in National Gypsum. We decline to retreat therefrom. In the well-written case of Life Ins. Co. of Southwest v. Brister, 722 S.W.2d 764 (Tex.App.-Fort Worth 1986, no writ), the Fort Worth court set forth, among other relevant matters, an admirable list of the Texas legal principles relevant to class certification issues. The elements summarized were:
1) in reviewing a trial court’s determination that a case should proceed as a class action is limited to determining whether or not the trial court abused its discretion;
2) the court must identify substantive law issues so that the court can determine whether the character and nature of the case satisfies the requirements of a class action procedure-not, however, to weigh substantive merits of each class member’s claim;
3) class action proponents are definitely not required to prove a prima facie case in order to be properly certified as a class;
4) maintainability of a class action may be determined on the basis of the pleadings;
5) so long as the trial bench has sufficient material (and not necessarily “evidence”) before it to determine the nature of the allegations, and rule on compliance with the rules requirements. And if the trial bench bases its ruling on that material, then the trial bench’s approach cannot be faulted because later on the plaintiffs’ proof may fail;
6) the determination of class status at an early stage of the proceeding before all supporting facts are fully developed should err in favor of and not against the maintenance of the class action since the crucial order is always subject to modification;
7) in cases wherein it appears that the common issues may preponderate over the individual issues, the most efficient approach for the trial court is to allow class certification at the present existing time, subject, of course, to a motion (by the opposing parties after the case has been developed) to then dissolve the class on the grounds that the common questions are not predominant at the later stage and at the stage of the trial on the merits;
8) to obtain a reversal of a judgment based upon an error in the trial court, the appellant or appellants are under a burden of proving a two-pronged burden,
a) first the opposing parties must show that there was in fact error and secondly, that such error was reasonably calculated to cause and probably did cause a rendition of an improper judgment or order.
*5 This burden is correctly placed because the policy of Texas courts is to refuse to set aside or reverse judgments for errors of law committed during the trial unless in the sound judgment of the appellate court the errors contributed in such a substantial way as to bring about a clearly unjust result.
Following the Texas law as set out in Brister, supra, and the Ninth Court’s definite approval of Brister in National Gypsum, under this record, we hold that there was no abuse of discretion in the certification of the class action as ordered by Judge J. Michael Bradford. We thus affirm the order certifying the class. The trial bench did not abuse its discretion and indeed a trial bench does abuse its discretion only when its actions and rulings are without reference to any guiding principles. For a reversal, the trial court’s actions must be found to be arbitrary, capricious, or unreasonable; but here they are not. See and compare Smithson v. Cessna Aircraft Co., 665 S.W.2d 439, 443 (Tex.1984). Additionally, on appeal, in reviewing the order certifying the class action, this intermediate court is required to view the evidence as well as the material in a light most favorable to the trial court’s actions and orders. Further, this intermediate appellate court is to indulge every presumption that is a reasonable presumption in favor of the trial court’s order. See and compare Parks v. U.S. Home Corp., 652 S.W.2d 479, 485 (Tex.App.-Houston [1st Dist.] 1983, writ dism’d).
Thus, the appellants’ point of error number one averring that the trial court abused its discretion by certifying this action as a class action is overruled and by like reasoning we overrule appellants’ point of error number two which states: “The trial court abused its discretion in certifying the class because questions of law and fact affecting individual class members predominate over any common questions which might be present.”
Rule 42 sets out the requirements and elements of a proper class action. It is the paramount rule governing this appeal. The Rule states in substance that one or more members of a class may sue or be sued as representative parties on behalf of all members if 1) the class is so numerous that joinders of all members is impractical; 2) there exists questions of law or questions of 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 lastly, 4) the representative party of parties will fairly and adequately protect the interest of the class.
The record before us and the precedents of Brister and our case of National Gypsum fully support and sustain our affirmance of the trial court’s order. We recognize that when an action may be maintained as a class action that the prerequisites of Rule 42(a) are to be satisfied and in addition to Rule 42(a), it must be demonstrated that the prosecution of separate actions by or against individual members of the class would create a risk of inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class or the certification of the class; or, the trial court is to find that the questions of law or fact are common to the members of the class and that either the questions of law or fact which are common predominate over other questions affecting only individual members, and that a class action is superior to other available methods for a full and efficient adjudication of the controversies. See Tex.R. Civ. P. 42(b)(I)(a) and 42(b)(4).
*6 Bearing in mind Rule 42(a) and (b) and bearing in mind the allegations of fraud relating to the continued course of conduct of the appellants, we determine that it is proper to look to certain original Committee Notes concerning the adoption of Federal Rules of Civil Procedure 23 (Tex.R. Civ. P. 42). This committee reasoned substantially that a court is required to find as a necessary condition of holding that a class action may be maintained that the questions common to the class predominate over the questions affecting individual members. The committee stated in substance that it is only where this predominance exists that economies can be achieved by means of the class action device, but importantly following this view a fraud perpetrated on numerous persons by use of similar misrepresentations may be an appealing situation for a class action and a class action may remain in effect despite the need, if liability is found, for separate determinations of damages to be made concerning the damages suffered by individual persons or litigants within the class.
It must be stressed that the appellee’s allegations and the appellee’s basis for a class action arise out of averred and credibly fraudulent conduct that the defendants have engaged in over several years in alleged violation of the Workers Compensation Board rules. Indeed, the appellee vociferously complains and forcefully argues that the defendants below have fraudulently and tortiously handled and worked and adjusted numerous workers compensation claims of employees in Texas and appellee further maintains that through a conspiracy the defendants have engaged in fraudulent conduct as defined in the rules of the Texas Workers Compensation Board Rule 65.10(i) which states in pertinent part:
The following willful acts shall be deemed unethical or fraudulent conduct by the Board: Allowing an employer to dictate the methods by which and the terms on which a (workers compensation) claim is handled and settled. (Parenthetical added)
Thus, the appellee’s position is boldly stated in this, that the plaintiff’s causes of action and the members of the class causes of action are clearly demonstrated to be properly certified as a class action by the undisputed fact that the defendant, Robert Gronwaldt, was a Mobil employee and paid by Mobil at the time that the said Robert Gronwaldt was adjusting workers compensation claims involving the employees of that employer within the State of Texas. Further, that Mr. Gronwaldt had never received any compensation or benefits or any type of wages or salaries from the supposed or alleged to be actual carrier in this litigation. The carrier was National Union Fire. The appellee’s position on the compensation of Mr. Gronwaldt was based on W-2 forms. Furthermore, the appellee advances that Gronwaldt fraudulently handled over and also settled over 700 worker compensation claims.
Upon revisiting the element of numerosity, we conclude that numerosity has been more than adequately demonstrated.
*7 Germane to the element of commonality, especially noteworthy are the testimonies of Gronwaldt. Certain documentary evidence including certain W-2 forms and the Texas Workers Compensation Board Rule 65.10(i) wherein and whereby certain willful acts have been deemed to be both unethical and actually fraudulent by the Workers Compensation Board. One such willful act is allowing an employer to dictate the methods by which and the terms on which a workers compensation claim is handled and settled. The trial bench was within its prerogatives in weighing and assessing the record concerning the defendant, Robert Gronwaldt, adjusting workers compensation claims involving Mobil employees in the State of Texas, while at the same time Mr. Gronwaldt was a Mobil employee. The trial court could have taken the position that Mr. Gronwaldt had never actually received any real compensation or benefits from the carrier, National Union Fire, and therefore, it followed in accordance with the Board’s rules that such a situation was fraudulent although the names of the various affiliates of Mobil were changed from time to time. The testimony of Gronwaldt is subject to the interpretation that he occupied offices in the area where several subsidiary companies of Mobil or divisions of Mobil were also situated although at times Mr. Gronwaldt used the stationary and letterheads of National Union Fire.
The appellee vociferously argues here and it was appellee’s position below that by using Mobil employees or the employees of subsidiaries of Mobil that this was a manner or method by which the terms on which the workers compensation claims were handled and settled. Thus, this practice or situation was fraudulent under the rules of the Board. Additionally, the appellee was one of a number of other claimants or persons claiming workers compensation causes of action under similar situations or circumstances and the trial court took notice of this general situation.
The trial court’s finding on common issues is thus supported by the record. The court found that common issues existed as to the fraudulent conduct of the defendants in dictating the methods by which and the terms on which the workers compensation claims were handled and settled in Texas for a number of years and that the defendants had knowledge of this conduct and that the defendants participated in such an arrangement or scheme or combination which was fraudulent under the rules of the Board and which defrauded Mobil’s employees in Texas who were injured in the course and scope of their employment from about 1988 through 1993.
No abuse of discretion existed on the part of the trial bench in finding that the claims of McClelland and relevant defenses of McClelland and others have and possess the same essential characteristics as those of the class. The trial bench determined well within its broad discretion that individual issues such as the differences as to each plaintiff’s damages did not destroy typicality.
*8 Importantly, the trial bench determined it was apparent that even after weighing these individual personal issues as to damages, that they are not critical to the resolution of the common issues found by the trial court which common issues essentially address and concern the defendants’ conduct, practices, courses of procedure and liability. The trial court specifically wrote and found that several other potential class members have the same legal claims against the defendants arising out of and from the same factual backgrounds and circumstances. Such potential class members and their legal claims had already been consolidated from other courts into the case pending in the 58th Judicial District Court of Jefferson County, Texas. As an example, we note the Dorothy Davis case, originally in the 172nd District Court; the Audrey E. Eaves case; the Eddie Shamp, III case. Thus, we conclude that McClelland has met and discharged his duty and burden of establishing typicality under Rule 42(a)(3).
Germane to the element of adequacy of representation being very noteworthy and significant is the zeal and forcefulness as well as the somewhat aggressiveness demonstrated by counsel for McClelland in this record. But, counsel for McClelland got as good as he gave. As an example, during the taking of one deposition which was really never concluded, the various parties through their attorneys, each of which exhibited the greatest and the highest arts of aggressive, assertive, combative advocacy, interrupted the deposition on at least two occasions, contacted the district judge over the telephone, and engaged in long dialogues and colloquy among themselves and with the district judge concerning the type of questions that could be asked during the deposition. At least in this writer’s opinion, it was made glaringly clear that all of the attorneys involved, at least four in number, were acting-and acting properly-like the chivalrous knights of old commissioned to go forth and right all wrongs within the King’s realms. The attorneys, and each of them, were diligently zealous to protect the rights of their clients. Each stated and restated several times his positions and his objections to the district judge. In fact, a careful review of this deposition shows that they even turned the district judge around on some of his tentative rulings and this is said with respect and admiration to all. The attorneys were so vocal, although properly so, that really the district judge had very little to say except to ultimately make his rulings which were then reargued again and again. We are definitely constrained to reaffirm the trial judge’s rulings and holdings concerning the adequacy of representation not only on behalf of McClelland but also on behalf of all the other parties to this lawsuit-all of which will assure, we think, an arrival of the true facts and protect the interest and rights of all of the parties, both plaintiff and defendants.
Again, germane to the predominance of common issues, we sanguinely determine that the district bench was correct in evaluating the predominance of the issues. Clearly it is settled law that in passing upon the predominance of the issues the trial bench does not test to see whether the common issues necessarily actually out number individual issues, but whether common or individual issues will be the object of most of the efforts and endeavors and work of the litigants as well as the trial court. See and compare Brister, supra. Indeed, where certain important, common issues represent a significant area of the litigation and these same important crucial issues can be resolved with some facility for all the members of the class by way of a single adjudication proceeding, then there exists ample justification for handling the dispute as a class action and for trying these matters on a representative basis rather than on an individual repetitive, time consuming basis which would waste judicial time and manpower.
*9 Some important considerations are that if and when a class action jury makes findings on the class questions and the common issues, if such findings will probably significantly advance the resolution of the underlying hundreds of cases; then, the class action device offers realistic hope of greatly reducing the expenditure of the time and money and efforts of the litigants as well as the time and expenditure of judicial resources. Thus, the trial court was correct in concluding that the class action procedure, in this case, is realistically superior to other methods available for the adjudication of the claims of the very numerous potential class members. The potential class members will benefit materially from the discovery that has been put into action by McClelland.
These discovery procedures will beneficially eliminate and certainly reduce the duplication of time, effort, and money to the benefit of all parties and will very probably result in an expedited resolution of the common issues. As a safeguard, if any difficulties arise in the management of the class, such difficulties are now outweighed by the benefits of a class action and class wide resolution of significant, common issues. If the future proves that this is not so, the trial court can take effective, remedial steps. Nextly, we decide and hold that there is sufficiency of evidence of probative force and also sufficient material and materials as well as the numerous allegations to justify a class certification. Neither the trial bench nor we are governed under this record by whether the plaintiff’s proof may not be ample at the ultimate trial on the merits. See Blackie v. Barrack, supra. But in any event, the certification of the class and the certification itself may be in the future altered, amended, or withdrawn before the signing of the final judgment and it is the court’s prerogative to mandate the naming of additional parties to assure the adequacy of representation. Judge J. Michael Bradford’s action and order are affirmed.
AFFIRMED.