Peter G. Milne, P.C., Peter G. Milne, Individually, and Healy, Milne & Associates, P.C. v. Val Ryan and Joy Ryan , 477 S.W.3d 888 ( 2015 )

In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
No. 06-14-00106-CV
PETER G. MILNE, P.C., PETER G. MILNE,
INDIVIDUALLY, AND HEALY, MILNE & ASSOCIATES, P.C., Appellants
V.
VAL RYAN AND JOY RYAN, Appellees
On Appeal from the 4th District Court
Rusk County, Texas
Trial Court No. 2013-243
Before Morriss, C.J., Moseley and Burgess, JJ.
Opinion by Justice Burgess
OPINION
In this accelerated appeal,1 Peter G. Milne (Milne), Peter G. Milne, P.C. (the PC), and
Healy, Milne & Associates, P.C. (Healy), (collectively referred to as the Milne Defendants)
challenge the trial court’s decision to certify class-action claims brought by Val and Joy Ryan.
The Ryans’ claims arose from the unauthorized practice of law by Richard Hicks and his
businesses, Elder Advisory Services, Elder Tax Advisory Group, LLC, and Elder Tax Advisory
Services, LLC, (collectively referred to as the Hicks Defendants) and their alleged affiliation with
the Milne Defendants. This appeal concerns the portion of the certification order that defined the
class, certified breach of fiduciary duty and unconscionability claims against the Hicks
Defendants, and certified class claims for declaratory relief against both the Hicks and Milne
Defendants.
We affirm the trial court’s certification of class claims of breach of fiduciary duty against
the Hicks Defendants. However, we find that the Ryans failed to meet the commonality and
predominance requirements with respect to the unconscionability claims and that the trial court
erred in certifying claims for declaratory relief. Accordingly, we reverse the portion of the trial
court’s order that certified these claims.
I. Factual and Procedural Background
“At the initial certification stage, the trial court is not required to try the merits of . . . the
cause of action.” St. Louis Sw. Ry. Co. v. Voluntary Purchasing Grps., Inc., 929 S.W.2d 25, 30
1
See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(3) (West 2015).
2
(Tex. App.—Texarkana 1996, no writ). However, class representatives “must at least show some
facts to support certification.” Id. Here, the events that gave rise to the Ryans’ claims, which span
a decade, are critical to the parties’ arguments and are, therefore, recited below.
A. Medicaid Eligibility Planning and Application Services
The issues in this case arose out of the business arrangement between the Hicks Defendants
and the Milne Defendants to provide Medicaid eligibility and planning services. To fully
understand the issues in this case, it is necessary to briefly review the law concerning Medicaid
eligibility.
Title XIX of the Social Security Act of 1965 created the federal Medicaid program.
Medicaid Act, Pub. L. No. 89-97, 79 Stat. 343 (1965) (codified as amended at 42 U.S.C. §§ 1396–
1396w-5 (West, Westlaw through P.L. 114-49 approved Aug. 7, 2015)); see Miller v. State Dep’t
of Soc. & Rehab. Servs., 64 P.3d 395, 399 (Kan. 2003). Medicaid is a “federal-state program
designed to provide health care to the neediest individuals.” Miller, 64 P.3d at 399 (citing Williams
v. Kansas Dep’t of Soc. & Rehab. Servs., 899 P.2d 452, 455 (Kan. 1995)). Thus, state Medicaid
programs have income eligibility limits which vary depending on the applicant’s marital status and
other factors. 51 Molly Dear Abshire et al., Texas Practice Series: Elder Law § 8:56 (2015–2016
ed.). “Because Medicaid only covers categorically needy persons, individuals do not become
eligible for Medicaid assistance until they ‘spend down’ their private assets below a[n] income
ceiling set by state statute.” Leocata ex rel. Gilbride v. Wilson-Coker, 343 F. Supp. 2d 144, 149
(D. Conn. 2004) (citing Schweiker v. Gray Panthers, 453 U.S. 34, 37–40 (1981)).
3
Moreover, eligibility can be denied if an applicant improperly transfers assets for less than
fair market value within three to five years prior to applying for Medicaid services. 42 U.S.C.
§ 1396p(c) (West, Westlaw through P.L. 114-49 Aug. 7, 2015). If this were not so, then applicants
with assets sufficient to provide their own medical care could become eligible by simply
transferring those assets to family members. Abshire, supra p.3, § 8:116. Yet, certain transfers
can be made without running afoul of the Medicaid eligibility requirements,2 and “[a]ny discussion
of asset protection in long-term care planning logically requires an understanding of the [Medicaid]
transfer rules.” Laura Zdychnec, The Perilous Path to Long-Term Care: It’s Not Really about
Asset Protection, BENCH & B. MINN. (Jun. 5, 2013), http://mnbenchbar.com/2013/06/the-perilous-
path-to-long-term-care-its-not-really-about-asset-protection/.3 However, the transfer rules are
complicated.4 For this reason, many attorneys provide estate planning services to those persons
2
For example, in Texas, “[m]any people in need of nursing home care receive too much income to qualify for
Medicaid, but are unable to afford the astronomical cost of nursing home care.” Abshire, supra p.3, § 8:56. “This
problem was solved in the Omnibus Budget Reconciliation Act of 1993 (OBRA ‘93) which contained provisions
allowing for some relief from the ‘income cap’ by transferring income into a trust with certain provisions.” Id. A
qualifying Miller Trust accomplishes the goal of spending down assets to qualify for Medicaid. Id. § 8:57. “A Miller
Trust must only be funded with the applicant’s pension, Social Security, and other income of the individual (and
accumulated income in the trust).” Id. “Additionally, the Miller Trust must be irrevocable and contain a provision
that the State will receive all amounts remaining in the trust upon the death of the individual up to an amount equal to
the total medical assistance paid by Medicaid on behalf of the individual.” Id.
3
In addition to the rules regarding transfers from a Medicaid recipient to other relatives, there are also unique rules
regarding transfers between spouses. See Wisconsin Dep’t of Health & Family Servs. v. Blumer, 534 U.S. 473, 479–
81 (2002) (discussing “anti-pauperization” Medicaid rules governing spouses).
4
As one commentator put it, “Federal Medicaid law alone has been described by some impressive legal minds as
‘among the most intricate ever drafted by Congress,’ ‘almost unintelligible to the uninitiated,’ and ‘an aggravated
assault on the English language, resistant to attempts to understand it.’” Zdychnec, supra.
4
who have an immediate family member requiring long-term care who have too many assets to
meet the Medicaid eligibility requirements.5
At all times relevant to this case, Hicks operated a Medicaid planning and application
service. As part of that operation, Hicks, who is a layman, not an attorney, helped his clients
determine how to become eligible for Medicaid benefits and then assisted them with the
application process. The fact that Hicks is not an attorney is at the heart of the parties’ dispute in
this case.
B. Hicks Is Enjoined from the Unauthorized Practice of Law in 2001
In 2001, the Unauthorized Practice of Law Committee of the Supreme Court of Texas
discovered Hicks’ actions and sued him along with his associated businesses, Elder Advisory
Services and Elder Advisory Services, Inc.6 As a result of that lawsuit, Hicks was permanently
enjoined from the unauthorized practice of law by the 114th Judicial District Court of Smith
County, Texas. The September 2001 agreed permanent injunction provided:
1. Defendants, Richard Hicks and Advisory Services for Mature
Americans, Inc., and their officers, agents, servants, employees, and attorneys, and
those persons in active concert of participation with them who receive actual notice
of this Order, are hereby permanently enjoined from engaging in, or aiding or
abetting any person in engaging in, the following acts, unless they are at the time
of such acts: (i) an attorney duly licensed by the State of Texas, or (ii) employees
5
“Medicaid planning involves taking measures to preserve one’s assets in order to gain Medicaid eligibility by meeting
the program’s financial criteria.” Andrew D. Wone, Don’t Want to Pay for Your Institutionalized Spouse? The Role
of Spousal Refusal and Medicaid in Funding Long-Term Care, 14 ELDER L.J. 485, 487 (2006). “[E]lderly couples,
especially those in the middle class, face the increasing burden of nursing home expenses, as governments have taken
measures to restrict Medicaid planning and control costs. As a result, elder law attorneys and their clients will look
for alternative Medicaid-planning strategies to qualify for Medicaid benefits.” Id. (footnotes omitted).
6
Hicks testified that the Dallas chapter of the Unauthorized Practice of Law Committee determined that assisting
individuals with Medicaid planning was considered practicing law without a license.
5
of an attorney duly licensed by the State of Texas and working under the direct and
active supervision of an attorney duly licensed by the State of Texas:
(a) preparing a qualified income trust (otherwise known as a Miller
[T]rust) (referred to herein as a “Miller Trust”);
(b) preparing Powers of Attorney;
(c) advising persons regarding the creation of a Miller Income Trust, or
a Power of Attorney, provided that this restraint shall not prohibit an[y] person
enjoined by this judgment from referring a person to an attorney licensed to practice
law in Texas for the purpose of obtaining advice from such attorney regarding the
creation of a Miller Income Trust or a Power of Attorney;
(d) selling, advertising, mailing representations concerning, or
recommending the purchase of, a Miller Trust;
(e) preparing for any person other than Defendants documents for the
creation of a Miller Trust;
(f) providing advice to any person other than Defendants concerning a
Miller Trust;
(g) providing advice for a fee to any person other than Defendants
regarding how that person, or a relative (by marriage or consanguinity) or a
principal under a power of attorney, may become qualified for Medicaid benefits;
(h) providing advice for a fee to any person other than Defendants
regarding how that person, or a relative (by marriage or consanguinity) or a
principal under a power of attorney, may become qualified for benefits available
under any program administered by the Social Security Administration or the Texas
Department of Human Services;
(i) making case-specific recommendations for a fee to any person
regarding how that person, or a relative (by marriage or consanguinity) or a
principal under a power of attorney, may become eligible for Medicaid benefits;
(j) making case-specific recommendations for a fee to any person
regarding how that person, or a relative (by marriage or consanguinity) or a
principal under a power of attorney, may become eligible for benefits available
6
under any program administered by the Social Security Administration or the Texas
Department of Human Services;
(k) aiding, assisting or representing applicants and recipients in
procuring Medicaid benefits from the Texas Department of Human Services for a
fee; and
(l) advertising assistance in procuring Medicaid benefits for a fee by
any form of media, including, but not limited to, mail, fax, internet, seminars, radio,
television, newspaper, email, or by solicitation by spoken word . . . .[7]
C. Hicks Associates with the Milne Defendants
1. The Nature of the Service
In order to continue providing Medicaid advisory and planning services, Hicks decided to
associate himself with an attorney licensed by the State of Texas. Hicks testified that in 2005, he
met with Milne, provided him a copy of the injunction, and “asked [Milne] multiple times [if he
could] be an employee” so he could continue providing enjoined services to clients without
violating the injunction. The Milne Defendants declined to hire Hicks as an employee. 8 Instead,
they negotiated an oral agreement whereby (1) the Hicks Defendants, acting as independent
contractors, would provide “Medicaid pre-planning and qualification services to clients” of the
Milne Defendants, (2) the Milne Defendants would provide the necessary legal services, and
(3) the Hicks Defendants would market the combined services. According to discovery responses
provided by the Milne Defendants, Hicks operated as a “satellite office . . . for the purpose of
7
As explained later in this opinion, items (a)-(l) of the injunction are referred to as “enjoined services.”
8
Peter G. Milne, PC, was formed on January 12, 2005, and dissolved on December 12, 2007, after Milne joined the
Milne, Healy Law Firm. The Milne, Healy Law Firm was formed on October 4, 2006. In 2010, Peter G. Milne, PC
was reinstated.
7
Medicaid planning only,” clients were informed that Hicks was not a lawyer, the PC did not control
the means or methods of Hicks’ work, and Hicks was not authorized to give legal advice.
2. Advertising
Once the agreement was finalized, Hicks began marketing the combined services of the
Hicks and Milne Defendants. Hicks’ business cards contained the PC’s logo followed by the
statement “Attorney and Counselor at Law,” as shown below:
Hicks created this Elder Advisory Services logo that incorporated the scales of justice and used
the logo on marketing materials along with the PC’s logo:
Mailers containing this logo advertised community workshops entitled “Dispelling the
Myths of Medicaid” and represented Hicks as the “Elder Advisory Services Associate of Healy
Milne Law Firm.” Invitations to Hicks’ seminars listed him as an “associate.” Hicks spoke at
nursing homes and hospice agencies and had a handout called “Asset Protection and Medicaid
Planning: TOP TEN DO’S AND DON’TS” which referred to Elder Advisory Services as “A
8
service of Peter Milne, P.C.” Patty Siehl, a Healy employee, sent emails to third parties stating,
“My colleague is Richard Hicks. His company is Elder Advisory Services. He works as a
consultant to our law firm, Healy Milne and Associates, P.C.”
The Hicks Defendants’ written marketing materials also mentioned the Milne Defendants.
Hicks’ brochure for the Elder Services Office contained the PC’s logo on the front and stated,
At the Elder Services Office of Peter G. Milne, P.C., we realize the
confusion that comes with the Medicaid planning process. . . . We can help. . . .
The Elder Services Office of Peter G. Milne, P.C., provides individualized services
to elders and their family members. Our firm assists in determining options to meet
their needs. . . .
For more information, contact:
PETER G. MILNE, P.C.
RICHARD HICKS
ELDER SERVICES OFFICE
Rhonda Toole, Hicks’ secretary, testified that the Hicks Defendants had letterhead with Milne’s
name on it, but that both the letterhead and marketing brochure were later changed to omit Milne’s
name.
3. Operation and Fee Allocation
Hicks testified about his relationship with the Milne Defendants. According to Hicks, if
potential clients contacted Hicks’ office due to his marketing efforts or otherwise, Hicks received
seventy-five percent of the fee paid by the client and Milne received twenty-five percent. If clients
contacted Milne first, Hicks received sixty percent of the fee and Milne received the remaining
forty percent. Pursuant to the oral agreement, all client checks were made payable to Milne, who
9
would then redirect the funds to Hicks.9 Hicks stated, “MILNE paid me as a contract labor[er]
(IRS Form 1099).” According to Hicks, Milne and Hicks handled their own expenses, and there
was no agreement to share in joint profits or losses.10
Hicks stated that it was his responsibility to interview the clients and collect required
documentation and data. If the client agreed to enlist the Hicks Defendants/Milne Defendants’
services, the client would sign an “Elder Advisory Services Contract for Legal Services,” which
stated that the agreement was between the client and “Peter G. Milne, P.C. (“Attorney”) and Elder
Advisory Services (“Consultant”).” The contract stated, “Client hereby retains and employs
Attorney/Consultant to prepare a formal, written plan to assist Client in structuring Client’s assets
in accordance with the Medical Assistance Program guidelines for the purpose of qualifying for
Medicaid benefits and assistance in implementation of desire[d] plan of choice.”
It also contained this disclaimer:
Client understands that Elder Advisory Services is a satellite office of Peter G.
Milne, P.C.[,] for the purpose of Medicaid planning only and client has been
informed and understands that Richard Hicks and Elder Advisory Services are not
attorneys and are not authorized by Peter G. Milne, P.C.[,] or the state of Texas
to render legal advice [on] behalf of Peter G. Milne, P.C.
After gathering the client’s assets, Hicks would draft an estate summary, which he
forwarded to the client for review. Once the client approved the estate summary, Hicks’ staff
9
During a deposition with the Securities and Exchange Commission (SEC), Hicks testified that clients would write
checks to Elder Services, Hicks would sign the checks over to Milne, Milne would deposit the checks, and finally,
Milne would compensate Hicks.
10
Hicks testified that he and Milne shared marketing, advertising, and promotion expenses, but that he did not know
how much Milne spent on these endeavors because they bore these expenses independently.
10
contacted Milne to schedule a delivery of formal recommendations. According to Hicks, Milne
reviewed the formal recommendations prior to delivery, clients would typically meet at Hicks’
office to receive formal recommendations, and Hicks would then assist the family throughout the
implementation of the plan.11 If the client was in a nursing home, Hicks delivered the
recommendations to the client personally without Milne.
4. The Extent of the Milne Defendants’ Supervision of Hicks
The degree of supervision exercised by the Milne Defendants’ over Hicks’ activities is
disputed and will be the subject of continued litigation. Nevertheless, Hicks admitted that all of
the services he provided “were within the scope of [his] unauthorized practice of law injunction”
and that, with the exception of four clients, he did not believe that he was working under Milne’s
direct and active supervision. Since, according to Hicks, Milne had no “clue about Medicaid,” the
“vast majority” of Medicaid recommendations came from Hicks, and Milne “deferred to [Hicks]
throughout when it came to Medicaid eligibility planning.” Thus, Hicks worked without
supervision when a client simply needed a Miller Trust or assistance completing the Medicaid
application, and Hicks did not share fees with Milne for these “simple services.” Hicks stated that
he provided these “simple services” without Milne’s supervision to 125 clients who had written
checks directly to the Hicks Defendants. Hicks also stated that he collected a fee for advice he
rendered during Medicaid planning consultations.
Hicks’ testimony about the operation between his office and the Milne Defendants was supported by the Milne
11
Defendants’ answers to discovery requests from the Ryans. However, the Milne Defendants also claimed that “Hicks
was advised that his only affiliation with Peter G. Milne, P.C., was for the purpose of Medicaid planning only.”
11
D. The Ryans Engage the Hicks Defendants’ Services
In late 2007, the Ryans placed Val’s parents into a nursing home called Autumn Leaves
and sought advice on financially planning for their long term care. Autumn Leaves’
“Medicare/Medicaid kind of specialist,” Raymond Pile, referred them to Hicks. The Ryans
contacted Hicks, who represented that he was an associate of the Milne Defendants, but was not a
lawyer. On the PC’s letterhead, Hicks wrote letters to the Ryans to explain the nature of services
offered. The letters also represented that Hicks was an associate.
In response to these letters, the Ryans gathered detailed financial information and met with
Hicks to review their estate planning and their plan for Val’s parents’ long term care. The Ryans
met with Hicks at the Elder Advisory Services office. Val testified that while there, he heard
Milne’s name “[a]ll over. On brochures, on business cards. [Hicks] mentioned the name.
Everywhere was Peter G. Milne.” The Ryans discussed their financial situation with Hicks in
detail. Hicks advised them about Texas marital property law, probate law, federal income tax law,
and Medicare and Medicaid planning. According to Val, Hicks stated, “[Y]ou need to stay away
from the government, you don’t need the government to pay for anything, you need to try to do
this on your own.”
Hicks told the Ryans that Val’s parents could not qualify for Medicaid and advised them
to invest their savings in promissory notes issued by National Note of Utah. The Ryans allege that
Hicks represented National Note to be a safe investment that paid a guaranteed, risk-free, twelve
percent, annual return and that the promissory notes were secured by real property. According to
the Ryans, Hicks told the Ryans that National Note was recommended to him by Randy Stevenson
12
of Stevenson Capital Wealth Management, LCC, as a safe and prudent investment opportunity.
The Ryans invested $300,000.00 with National Note, and Hicks received a $6,000.00 commission
from that company.12
In addition to advising the Ryans to invest in National Note, Hicks drafted wills, medical
powers of attorney, and other legal documents for the Ryans in exchange for a $3,000.00 check
made out to “Elder Advisory.” Specifically, Hicks prepared the following legal documents:
 The Ryan Family Living Trust
 Certificate of Trust
 Marital Property Agreement
 Assignment of Personal Property
 Last Will and Testament of Valery J. Ryan
 Last Will and Testament of Joy Lanier Ryan
 Durable Power of Attorney for Management of Property and Personal Affairs for both Val
and Joy
 Texas Medical Power of Attorney
 Texas Directive to Physicians and Family or Surrogates
 Warranty Deed transferring real property to the living trust
 Summary of Estate Planning Provisions.
Hicks then brought the documents in a binder to the nursing home and delivered all of the
documents to the Ryans. In early 2008, Hicks met with the Ryans to review the powers of attorney
that he had prepared for Val’s parents and to explain the substance and legal effect of the
documents. The Ryans never signed any contract with either the Milne Defendants or the Hicks
Defendants and never met Milne during the process. Nevertheless, they believed that Milne was
involved with the legal work conducted in their case.
12
Hicks testified that National Note paid him two percent of the principal amount invested.
13
The Ryans later learned that National Note was nothing more than a Ponzi scheme that
paid “investors” solely out of money collected from new victims.13 In 2011, National Note ran
out of funds and stopped paying the Ryans on their promissory note. In June 2012, the SEC placed
National Note into receivership and filed suit against the company and its principals for violations
of federal securities laws.
E. The Ryans Sue Hicks and the Milne Defendants
As a result of the investigation into the National Note Ponzi scheme and Milne and the
PC’s lawsuit against Hicks,14 the Ryans discovered in June 2013 that the Milne Defendants had
not reviewed the legal documents that Hicks had prepared and that they had allegedly allowed
Hicks to engage in the unauthorized practice of law.15 The Ryans sued the Hicks Defendants, the
Milne Defendants, Randy Stevenson, and Stevenson Capital Wealth Management, LLC. 16 Their
petition contained detailed causes of action for negligence, common-law fraud, fraud by non-
disclosure, violation of the Texas Deceptive Trade Practices Act (DTPA), breach of fiduciary duty,
13
Hicks testified that he did not conduct any due diligence with respect to whether National Note would be a prudent
investment.
14
After the collapse of National Note, Milne and the PC filed suit against the Hicks Defendants and Rebecca Hicks
seeking declaratory relief and monetary damages for breach of contract, fraud, embezzlement of funds, conversion,
and theft. Responding to the lawsuit, Hicks admitted that he had “engaged in and provided, without Milne’s
knowledge, unauthorized legal services to at least one hundred and fifty (150) clients, including Medicaid pre-planning
and qualification and other legal services . . . and received over $140,000 in fees which [he] did not remit to Milne.”
Hicks readily admitted that he “defrauded and deceived Milne and the clients.” The 114th Judicial District Court for
Smith County, Texas, entered judgment in the amount of $296,903.75, plus attorney fees, court costs, and prejudgment
interest in favor of Milne and the Milne PC against the Hicks Defendants and Rebecca Hicks. Subsequently, Hicks
was indicted on ten counts by a grand jury. The record does not reflect the exact nature of the criminal charges.
15
They also discovered that none of the defendants were licensed to sell securities.
16
Stevenson and Stevenson Capital are not parties to this appeal.
14
civil conspiracy, aiding and abetting, and declaratory relief that would result in the disgorgement
of fees. The Ryans also alleged that Hicks was acting in the course and scope of his employment
with, or as an agent, vice-principal, joint venturer, and/or partner of the Milne Defendants. In the
alternative, the Ryans alleged that Hicks was acting in the course and scope of his employment
with Elder Advisory Services, LLC, and Elder Tax Advisory Group, LLC, and that those entities
were agents, vice-principals, joint venturers and/or partners of the Milne Defendants.
The Ryans also brought these claims on behalf of the following proposed class:
The class of plaintiffs which the RYANS seek to represent is composed of every
individual or entity who/which paid a fee for “enjoined services” performed by
HICKS since January 1, 2005. For purposes of this suit, “enjoined services” means
any of the services listed in the 2001 injunction entered against HICKS by the 114th
Judicial District Court of Smith County, Texas. . . .
. . . . [The proposed class] excludes any individuals or entities who/which
received services from HICKS through his affiliation with any attorney or law firms
other than Peter G. Milne, Peter G. Milne, P.C.[,] and Healy, Milne & Associates,
P.C.
On behalf of the class, the Ryans sought a full forfeiture of fees for services paid to Hicks in
violation of the 2001 injunction, attorney fees, and costs.
Hicks filed an affidavit averring that he “acted solely in soliciting clients for National
Note,” that he “never acted with Milne’s authority, express or implied, in soliciting clients for
National Note,” that “Milne was not involved in soliciting clients for National Note in any way,”
and that Milne received no money from Hicks’ activities with National Note.17 At the class
17
However, in his deposition with the SEC, Hicks testified that Milne knew about National Note, even though he was
uninvolved in that aspect of Hicks’ practice. In this case, Milne also testified that he told Milne about National Note,
that Milne knew that Hicks was recommending National Note to his clients, and that Milne signed documentation
approving the National Note recommendation as part of the client’s plan. Hicks only recommended National Note to
twelve families.
15
certification proceedings, the Ryans agreed not to seek class certification on issues dealing with
National Note. Instead, they asked the trial court to certify only (1) claims for breach of fiduciary
duty and unconscionable conduct under the DPTA against the Hicks Defendants,18 (2) their
allegations of partnership, joint venture, joint enterprise, and civil conspiracy against the Milne
Defendants, and (3) their claims for declaratory relief against both the Hicks and Milne
Defendants.
F. The Class Certification Order
The trial court appointed the Ryans to represent a class defined as “All individuals and
entities who/which paid a fee for enjoined services performed by Richard Hicks since January 1,
2005,” and defined the term “enjoined services” to mean “any of the services listed in the 2001
[permanent] injunction.” The trial court based the class definition on the 2001 injunction, which
prohibited Hicks and “those persons in active concert of participation with” him from engaging in
enjoined services unless they were “(i) an attorney duly licensed by the State of Texas, or
(ii) employees of an attorney duly licensed by the State of Texas and working under the direct and
active supervision of an attorney duly licensed by the State of Texas.”
Then, the trial court certified three separate classes using the same class definition. First,
the trial court certified a class under Rule 42(b)(3) of all persons within the class definition
asserting claims against the Hicks Defendants for breach of fiduciary duty and unconscionability
under the DTPA. See TEX. R. CIV. P. 42(b)(3). Second, the trial court certified a class under Rule
18
See TEX. BUS. & COM. CODE ANN. §§ 17.45(5), 17.50(a)(3) (West 2011).
16
42(b)(3) of all persons within the class definition asserting claims against the Milne Defendants
for joint enterprise, civil conspiracy, and aiding and abetting. Finally, the trial court certified a
class under Rule 42(b)(2) of all persons within the class definition seeking a declaration that all
defendants violated the 2001 injunction and the extent to which any such violations entitle
Plaintiffs to a refund of the fees collected by Hicks. See TEX. R. CIV. P. 42(b)(2). The Milne
Defendants did not appeal the second class, and the Hicks Defendants did not appeal at all.
Accordingly, the issues before this Court in this appeal concern only that part of the trial court’s
order certifying a Rule 42(b)(3) class against the Hicks Defendants and a Rule 42(b)(2) class
against all defendants.
II. Issues Presented
On appeal, the Milne Defendants’ challenge three aspects of the Rule 42(b)(3) class
certification: (1) whether the class definition is proper, or more specifically, whether it creates a
fail-safe class the members of which cannot presently be ascertained; (2) whether the trial court
erred in certifying class claims for breach of fiduciary duty because the Ryans do not meet the
typicality requirement of Rule 42(a), see TEX. R. CIV. P. 42(a); and (3) whether the trial court erred
in certifying class claims for unconscionability because the Ryans do not meet the typicality,
commonality, or predominance requirements of Rule 42(a). The Milne Defendants also challenge
the Rule 42(b)(2) mandatory class claims for declaratory relief, alleging that declaratory relief did
not predominate over the monetary damages sought. In response, the Ryans argue that the Milne
Defendants do not have standing to raise complaints related to certification of class claims against
the Hicks Defendants.
17
III. The Milne Defendants Have Standing to Challenge Certification of Claims Against
the Hicks Defendants
We must first address the Ryans’ argument that the Milne Defendants lack standing to
appeal the trial court’s certification of claims against Hicks before discussing whether class
certification of these claims was appropriate. “Texas courts have long held that an appealing party
may not complain of errors that do not injuriously affect it or that merely affect the rights of
others.” Torrington Co. v. Stutzman, 46 S.W.3d 829, 843 (Tex. 2000). Thus, “[a]lthough [a] class
certification order is ripe for appellate review, only a party with standing may seek that review.”
McAllend Med. Ctr., Inc. v. Cortez, 66 S.W.3d 227, 234 (Tex. 2001).
The Milne Defendants argue that the certification order affects them because the trial court
certified the Ryans’ claims of partnership, joint venture, joint enterprise, and civil conspiracy. The
Texas Business Organizations Code provides that in certain circumstances, a partnership may be
held liable for the wrongful acts and omissions of a partner and that, generally, all partners are
jointly and severally liable for all obligations of the partnership. TEX. BUS. ORG. CODE ANN.
§§ 152.303–.304(a) (West 2012). “Joint enterprise liability makes ‘each party thereto the agent of
the other and thereby . . . hold[s] each responsible for the negligent act of the other.’” Tex. Dep’t
of Transp. v. Able, 35 S.W.3d 608, 613 (Tex. 2000) (quoting Shoemaker v. Estate of Whistler, 513
S.W.2d 10, 14 (Tex. 1974)).19 “When two or more persons jointly engage in the commission of a
19
The elements of a joint enterprise are: “‘(1) an agreement, express or implied, among the members of the group;
(2) a common purpose to be carried out by the group; (3) a community of pecuniary interest in that purpose, among
the members; and (4) an equal right to a voice in the direction of the enterprise, which gives an equal right of control.’”
Able, 35 S.W.3d at 613 (quoting RESTATEMENT (SECOND) OF TORTS § 491 cmt. c (1965)).
18
tort, they are jointly and severally liable.” Century 21 Page One Realty v. Naghad, 760 S.W.2d
305, 310 (Tex. App.—Texarkana 1988, no writ). Also, “[o]nce a conspiracy is proven, each
conspirator is responsible for all acts done by any of the conspirators in furtherance of the
conspiracy.” Paschal v. Great W. Drilling, Ltd., 215 S.W.3d 437, 451 (Tex. App.—Eastland 2006,
pet. denied). Accordingly, “co-conspirators are each responsible for the damage the conspiracy
caused.” Chu v. Hong, 249 S.W.3d 441, 445–46 (Tex. 2008).
Here, (1) the Ryans have pled several theories by which the Milne Defendants can be held
responsible for damages caused by the Hicks Defendants,20 (2) the names of the Milne Defendants
will be included in the class notice that will include the claims of partnership, joint venture, joint
enterprise, and civil conspiracy, and (3) in Milne’s suit against Hicks, the trial court determined
that Hicks was “responsible to indemnify plaintiff and . . . to defend [Milne and the PC] in any
future suits brought by defendants’ National Note clients and any other clients defendants
fraudulently engaged.” Therefore, we find that the Milne Defendants have demonstrated that they
have been adversely affected by and have standing to appeal the trial court’s certification of claims
against the Hick Defendants. See Torrington, 46 S.W.3d at 843–44 (indemnity obligation confers
standing on co-defendant to challenge judgment against idemnitee); see Cortez, 66 S.W.3d at 235
20
In support of their argument that certification of claims against Hicks does not adversely affect the Milne Defendants,
the Ryans cite to Bhatia v. Piedrahita, 756 F.3d 211, 219 (2d Cir. 2014). Bhatia dealt with the issue of whether a
non-settling defendant had standing to object to a settlement agreement between the plaintiffs and settling defendants.
Id. at 217. Because no settlement is at issue, Bhatia is not directly applicable.
19
(finding that nonsettling defendant had standing to appeal certification of class against settling
defendant where class notice mentioned nonsettling defendant and treated it as defendant).
We now turn to the merits of this appeal.
IV. Standard of Review Applicable to Class Action Certification Orders
Under Rule 42(a) of the Texas Rules of Civil Procedure,
[a]ll class actions must satisfy four threshold requirements: (1) numerosity (“the
class is so numerous that joinder of all members is impracticable”);
(2) commonality (“there are questions of law or fact common to the class”);
(3) typicality (“the claims or defenses of the representative parties are typical of the
claims or defenses of the class”); and (4) adequacy of representation (“the
representative parties will fairly and adequately protect the interests of the class”).
Sw. Ref. Co. v. Bernal, 22 S.W.3d 425, 433 (Tex. 2000) (citing See TEX. R. CIV. P. 42(a)). “In
addition to these prerequisites, class actions must satisfy at least one of [three] subdivisions of
Rule 42(b).” Id. A class may be certified under Rule 42(b)(2) if the plaintiffs can establish the
four requirements of Rule 42(a) and “the party opposing the class has acted or refused to act on
grounds generally applicable to the class, thereby making appropriate final injunctive relief or
corresponding declaratory relief with respect to the class as a whole.” TEX. R. CIV. P. 42(b)(2). A
class may be certified under Rule 42(b)(3) if the plaintiffs can establish the four requirements of
Rule 42(a), and “the questions of law or fact common to the members of the class predominate
over any questions affecting only individual members, and a class action is superior to other
available methods for the fair and efficient adjudication of the controversy.” TEX. R. CIV. P.
42(b)(3).
20
In Amchem Products, Inc. v. Windsor, 521 U.S. 591, 615–17 (1997), the United States
Supreme Court observed that “Rule 23(b)(2) permits class actions for declaratory or injunctive
relief where ‘the party opposing the class has acted or refused to act on grounds generally
applicable to the class.’ Civil rights cases against parties charged with unlawful, class-based
discrimination are prime examples.”21 Id. at 614 (quoting FED. R. CIV. P. 23 advisory committee’s
notes)). By contrast, “Rule 23(b)(3) permits certification where class suit ‘may nevertheless be
convenient and desirable.’” Id. (quoting FED. R. CIV. P. 23 advisory committee’s notes) Thus,
Rule 23(b)(3) classes were designed to allow groups of people who had individually suffered only
minimal damages to be vindicated “‘by aggregating the relatively paltry potential recoveries into
something worth someone’s (usually an attorney’s) labor.’” Id. at 617 (quoting Mace v. Van Ru
Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997)). Accordingly,
“Rule 23(b)(2) does not ‘cover cases where the primary claim is for damages, but
is only applicable where the relief sought is . . . predominantly injunctive or
declaratory.’” Thorn [v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 329 (4th Cir.
2006)] (quoting Lukenas v. Bryce’s Mountain Resort, Inc., 538 F.2d 594, 595 (4th
Cir. 1976)). While in Rule 23(b)(3) actions, the court will generally need to conduct
individual hearings to determine the amount of damages for each plaintiff, the goal
in the remedy phase of a Rule 23(b)(2) class action is “either to make a declaration
about or enjoin the defendant’s actions affecting the class as a whole, and individual
hearings will not be necessary.” Id. at 330.
Bulmash v. Travelers Indem. Co., 257 F.R.D. 84, 89–90 (D. Md. 2009).
21
See Bernal, 22 S.W.3d at 433 (holding that Rule 42 of Texas Rules of Civil Procedure is patterned after Rule 23 of
Federal Rules of Civil Procedure and that “federal decisions and authorities interpreting current federal class action
requirements are persuasive authority”).
21
“The party seeking class certification has the burden to establish its right to a class action.”
Bailey v. Kemper Cas. Ins. Co., 83 S.W.3d 840, 847 (Tex. App.—Texarkana 2002, pet. dism’d
w.o.j.). It must properly define the class and meet the requirements of Rule 42 of the Texas Rules
of Civil Procedure. We “review[] a trial court’s decision to certify a class under an abuse of
discretion standard, but do[] so without indulging every presumption in favor of the trial court’s
decision.” Stonebridge Life Ins. Co. v. Pitts, 236 S.W.3d 201, 204–05 (Tex. 2007) (per curiam)
(citing Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 691 (Tex. 2002); Bernal, 22 S.W.3d at
434–35, 439); see Bailey, 83 S.W.3d at 847. “Actual conformance with Rule 42 is indispensable,
and compliance with the rule must be demonstrated, not presumed.” Id. at 205 (citing Schein, 102
S.W.3d at 689–90; Bernal, 22 S.W.3d at 434–35).
V. Issues Relating to the Rule 42(b)(3) Class Against the Hicks Defendants for Breach of
Fiduciary Duty and Unconscionability Under the DTPA
A. Whether the Class Definition is Proper
“‘[I]t is axiomatic that for a class action to be certified[,] a ‘class’ must exist.’” Ford Motor
Co. v. Sheldon, 22 S.W.3d 444, 453 (Tex. 2000) (quoting Simer v. Rios, 661 F.2d 655, 669 (7th
Cir. 1981)). “For a class to be sufficiently defined, it must be precise: the class members must be
presently ascertainable by reference to objective criteria.” Intratex Gas Co. v. Beeson, 22 S.W.3d
398, 403 (Tex. 2000). “This means that the class should not be defined by criteria that are
subjective or that require an analysis of the merits of the case.” Id. “[W]hen the class definition
is framed as a legal conclusion, the trial court has no way of ascertaining whether a given person
is a member of the class until a determination of ultimate liability as to that person is made.” Id.
22
at 404. Here, the Ryans bear “the burden to demonstrate that an identifiable class exists and is
susceptible to precise definition.” Bailey, 83 S.W.3d at 848.
As previously noted, the trial court appointed the Ryans to represent a class consisting of
“[a]ll individuals and entities who/which paid a fee for enjoined services performed by Richard
Hicks since January 1, 2005.” In the class certification order, the trial court defined “enjoined
services” to mean “any of the services listed in the 2001 injunction entered against HICKS by the
114th Judicial District Court of Smith County, Texas.” The Milne Defendants first argue that the
trial court’s order creates a fail-safe class because the merits of the case must be addressed before
the court can determine who qualifies as a plaintiff under the class definition.22
Specifically, they argue that the term “enjoined services,” defined as the “services listed in
the 2001 injunction,” requires interpretation in order to determine the members of the class. The
Milne Defendants reach this conclusion in three steps. First, they argue that the class is actually
comprised of three types of clients, including (1) 114 “acknowledged clients” to whom the Hicks
Defendants and the Milne Defendants provided joint services for which they received a fee, which
they shared; (2) 219 “simple case” clients whom Milne knew about and for whom Milne authorized
the Hicks Defendants to perform work and collect a fee; and (3) 127 “unacknowledged small case”
clients whom Hicks hid from the Milne Defendants even though they were entitled to a portion of
22
A “fail-safe” class is defined as “a class bound only by a judgment for the plaintiffs. . . . In such a case, ‘[a]
determination that the defendant is not liable . . . obviates the class, thereby precluding the proposed class members
from being bound by the judgment.’” Citizens Ins. Co. of Am. v. Daccach, 217 S.W.3d 430, 438 (Tex. 2007) (quoting
Beeson, 22 S.W.3d at 405). Thus, fail-safe classes are improper because “Rule [42] was never meant to be an
exception to the rules of res judicata or to provide a risk-free method of litigation.” Beeson, 22 S.W.3d at 405
(alteration in original) (quoting Daffarn v. Rousseau Assocs., Inc., 1976-2 Trade Cases ¶ 61, at 219 (N.D. Ind. 1976)).
23
the fees paid by those clients. Next, the Milne Defendants argue that for the acknowledged clients
group, the trial court must determine the following before a class is properly defined: (1) whether
the Milne Defendants are bound by the 2001 injunction since they were not parties to that litigation,
(2) whether the trial court can interpret the 2001 injunction, and (3) whether the injunction required
Hicks to be an employee of a lawyer or law firm in order to provide enjoined services, or whether
he could provide such services if directly supervised by a lawyer or law firm.23 Thus, they
conclude that, at least as to the acknowledged clients group, in order to determine whether someone
is a class member, the trial court will have to decide whether the Defendants are liable.
The Milne Defendants cite Beeson in support of this argument. Beeson, 22 S.W.3d at 400.
There, the trial court certified a class “of producers of natural gas whose gas was taken by Intratex
between 1978 and 1988 in less than ratable proportions.”24 Id. at 402. The Texas Supreme Court
concluded that the class definition in Beeson was a fail-safe class because it required the court to
determine whether Intratex took gas non-ratably from the class members, which was the central
issue to be determined at trial. Id. at 405. Beeson does not bolster the Ryans’ arguments. Instead,
it demonstrates why the class definition here is proper.
In Beeson, a person was not a class member unless Intratex took his or her natural gas in
less than ratable portions, yet, if Intratex did not take the natural gas in less than ratable portions,
23
The Milne Defendants also take issue with the trial court’s order, which specified that it would focus on whether
their admitted failure to “employ” Hicks violated the terms of the 2001 injunction and whether the Ryans are entitled
to a declaratory judgment that the Milne Defendants violated the 2001 injunction.
“Texas law requires an intrastate pipeline like Intratex to buy gas without discrimination (i.e. ‘ratably’) from the
24
producers selling to it at the wellhead; the law also requires the producers to produce ratably.” Beeson, 22 S.W.3d at
400.
24
it was not liable. Therefore, whether a person was a class member and whether Intratex was liable
to the class both depended upon whether Intratex took gas from the class members in less than
ratable portions. Here, the question of whether a person is a class member is separate and distinct
from the question of whether the Defendants are liable to that person. A person is a class member
if he or she paid a fee for enjoined services, i.e., services listed in the 2001 injunction. But whether
the Defendants are liable to the class depends on whether Hicks breached a fiduciary duty to them
and whether the Milne and Hicks Defendants were involved in a joint enterprise, or civil
conspiracy or whether they aided and abetted one another. Likewise, (1) whether the Milne
Defendants are bound by the 2001 injunction since they were not parties to that litigation,
(2) whether the trial court can interpret the 2001 injunction, and (3) whether the injunction required
Hicks to be an employee of a lawyer or law firm in order to provide enjoined services, or whether
he could provide such services if directly supervised by a lawyer or law firm, are issues that go
towards deciding whether the Milne Defendants are liable, but are not necessary to determine if a
person is or is not a class member. Consequently, class membership and liability are separate and
independent issues, and this is not a fail-safe class.
“[A] class definition need not be so specific ‘that every potential member can be identified
at the commencement of the action,’” so long as it is defined by a set of objective criteria that does
not require analysis of the merits of the case. Sheldon, 22 S.W.3d at 453–54 (quoting 7A Charles
Alan Wright et al., Federal Practice & Procedure § 1760 (2d ed. 1986)). Here, the trial court
defined the term enjoined services to mean “any of the services listed in the 2001 injunction.” The
only services listed in the injunction are the unambiguous laundry list of items in paragraphs (a)–
25
(l). Pursuant to the class definition, the class is comprised of persons who paid a fee to Hicks since
January 1, 2005, for any service listed in the permanent injunction. The trial court can presently
determine whether a potential class member paid Hicks in the relevant timeframe for advice about
or for preparation of items included in paragraphs (a)–(l) of the injunction, such as Miller Trusts,
powers of attorney, Medicaid benefit applications, etc. Thus, even if the Ryans lose on the ultimate
issues of liability (i.e., whether either the Hicks Defendants or the Milne Defendants violated the
injunction), a class of members who paid Hicks for services listed in paragraphs (a)–(l) of the
injunction during the relevant timeframe will be bound by the judgment.
Accordingly, we conclude that the class definition is presently ascertainable by objective
criteria and does not require the trial court to determine that the injunction was violated in order to
determine the members of the class. We overrule the Milne Defendants’ first point of error.
A. The Trial Court Did Not Abuse Its Discretion in Determining that Typicality
Was Met
Next, the Milne Defendants argue that the Ryans’ claims of breach of fiduciary duty and
unconscionability against the Hicks Defendants are not typical of the claims of the class because:
“[u]nlike the acknowledged clients, [the Ryans] had no contract with Hicks” and (2) while there
is no evidence that Hicks stated his affiliation with the Milne Defendants to the 211
unacknowledged small case clients, the Ryans “testified that it was falsely represented to them that
[the Milne Defendants] were involved” in their case.
“For a proper class certification, rule 42 requires that ‘the claims or defenses of the
representative parties are typical of the claims or defenses of the class.’” Sw. Bell Tel. Co. v. Mktg.
26
on Hold, Inc., 308 S.W.3d 909, 919–20 (Tex. 2010) (quoting TEX. R. CIV. P. 42(a)(3)). “‘[T]he
test for typicality is not demanding.’” Tex. S. Rentals, Inc. v. Gomez, 267 S.W.3d 228, 252 (Tex.
App.—Corpus Christi 2008, no pet.) (quoting Mullen v. Treasure Chest Casino, LLC, 186 F.3d
620, 625 (5th Cir. 1999)). “‘A claim is typical if it arises from the same event or practice or course
of conduct that gives rise to the claims of other class members, and if . . . [it is] based on the same
legal theory.’” Sw. Bell Tel. Co., 308 S.W.3d at 920 (quoting Beattie v. CenturyTel, Inc., 511 F.3d
554, 561 (6th Cir. 2007)). “The injuries suffered need not be identical, but there must be a nexus
between the injuries suffered by the representative and those suffered by the other members of the
class.” Bailey, 83 S.W.3d at 854.
In their active petition, the Ryans alleged that Hicks owed a fiduciary duty to the class that
he breached by (1) failing to inform the class that he had been enjoined from the unauthorized
practice of law, (2) practicing law without a license, and (3) failing to inform the class that he was
sharing fees with the Milne Defendants. The petition also alleged that Hicks violated the DTPA
by “[c]ommitting various unconscionable acts including practicing law without a license and in
violation of an injunction from a court of competent jurisdiction.”25
The Ryans argue that their claims arise out of the same course of conduct that affects the
other members of the class—Hicks’ unauthorized practice of law in violation of the injunction.
25
The trial court correctly determined that the breach of fiduciary duty claim required “(a) [t]he existence of a fiduciary
relationship, (b) a violation of a fiduciary obligation and (c) a resulting injury to the Class or a benefit to the
Defendants.” See Blakeney v. Holmes, No. 06-10-00075-CV, 2010 WL 4514391, at *2 (Tex. App.—Texarkana
Nov. 10, 2010, pet. denied) (mem. op.) (citing Burrow v. Arce, 997 S.W.2d 229, 237 (Tex. 1999)). For the claim of
unconscionable conduct, the trial court framed the question as follows: “Whether the defendant committed an act or
practice that, to a consumer’s detriment, took advantage of his lack of knowledge, ability, experience or capacity to a
grossly unfair degree.”
27
They also contend (1) that their claims are based on the same legal theories as those of the class,
(2) that Hicks’ conduct “provides the nexus between the injuries suffered by [the Ryans] and those
suffered by the other members of the class,” and (3) that the injury—payment of fees for legal
work to a non-lawyer—is the same across the class. Id. The Ryans also argue that the
idiosyncrasies of each class member’s case do not defeat typicality. We agree.
Typicality “‘focuses on the similarity between the named plaintiffs’ legal and remedial
theories and the theories of those whom they purport to represent.’” Mullen v. Treasure Chest
Casino, LLC, 186 F.3d 620, 625 (5th Cir. 1999) (quoting Lightbourn v. County of El Paso, 118
F.3d 421, 426 (5th Cir. 1997)). If “the evidence establishes that the class representative’s claims
have the same essential characteristics as those of the class as a whole,” the typicality requirement
has been satisfied, even where “the particular facts of each member’s case may differ.” Bailey, 83
S.W.3d at 854.
Here, we find that no abuse of discretion has been shown in the trial court’s determination
that the Ryans’ claims and the claims of the class (1) are similar, (2) arise from Hicks’ unauthorized
practice of law and his provision of enjoined services, and (3) are remedied by the forfeiture of
fees paid to the Hicks Defendants. We overrule the Milne Defendants’ second point of error.
C. The Ryans Fail to Meet the Commonality and Predominance Requirements
With Respect to the Unconscionability Claim Against Hicks
1. The Commonality And Predominance Requirements
The Milne Defendants next assert that certification of the Rule 42(b)(3) class regarding
Plaintiffs’ DTPA unconscionability claims are improper because the common issues of law and
28
fact do not predominate over issues only affecting individual members. Specifically, the Milne
Defendants argue that because the “[d]isparities between the variety of ages, education,
experience, and capacity of people who encountered the Hicks Defendants and engaged their
services is relevant to elements three and four of the unconscionability claims . . . [,] [the]
[a]ppellants should be permitted to explore those issues to determine viable defenses.” Moreover,
the Milne Defendants argue that “they should not be denied individual inquiries into whether and
to what extent each of these clients, or their [legal representatives] or responsible parties on their
behalf, were taken advantage of due to lack of knowledge, ability, experience, or capacity, if any.”
“In determining the validity of class certification, it is . . . essential that the trial court has
an understanding of the ‘claims, defenses, relevant facts, and applicable substantive law.’”
Philadelphia Am. Life Ins. Co. v. Turner, 131 S.W.3d 576, 585 (Tex. App.—Fort Worth 2004, no
pet.) (quoting Bernal, 22 S.W.3d at 435); Castano v. Am. Tobacco Co., 84 F.3d 734, 744 (5th Cir.
1996)). To meet the commonality requirement, there must be questions of law or fact common to
the class. “A common question exists when the answer as to one class member is the same as to
all.” Peltier Enters., Inc. v. Hilton, 51 S.W.3d 616, 622 (Tex. App.—Tyler 2000, pet. denied)
(citing Spera v. Fleming, Hovenkamp & Grayson, P.C., 4 S.W.3d 805, 810 (Tex. App.—Houston
[14th Dist.] 1999, no pet.)). Yet, “[t]hat language is easy to misread, since ‘[a]ny competently
crafted class complaint literally raises common “questions.”’” Wal-Mart Stores, Inc. v. Dukes,
131 S. Ct. 2541, 2551 (2011) (quoting Richard A. Nagareda, Class Certification in the Age of
Aggregate Proof, 84 N.Y.U. L. REV. 97, 131–132 (2009)).
29
Accordingly, “[c]ommonality requires the plaintiff to demonstrate that the class members
‘have suffered the same injury.’” Id. (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157
(1982)). “‘What matters to class certification . . . is not the raising of common ‘questions’—even
in droves—but, rather the capacity of a classwide proceeding to generate common answers apt to
drive the resolution of the litigation. Dissimilarities within the proposed class are what have the
potential to impede the generation of common answers.’” Id. (quoting Nagareda, 84 N.Y.U. L.
REV., at 132). However, “[c]ommonality does not require that all questions of law and fact must
be identical, but only that an issue of law or fact exists that inheres in the complaints of all class
members.” Bailey, 83 S.W.3d at 853. “A single question could provide adequate grounds for a
class action.” Id.
When a class is certified under 42(b)(3), the predominance requirement is “rigorously
applied,” “is one of the most stringent prerequisites to class-action certification,” and “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.” Pitts,
236 S.W.3d at 205. “‘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.’”26 Id. (quoting Bernal, 22 S.W.3d at 434). “To evaluate
26
Matters pertinent to the question of whether the predominance requirement is met include:
(A) the interest of members of the class in individually controlling the prosecution or
defense of separate actions;
(B) the extent and nature of any litigation concerning the controversy already
commenced by or against members of the class;
30
predominance, [courts] 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.” Id. “If, after common issues are resolved, presenting and resolving individual issues
is likely to be an overwhelming or unmanageable task for a single jury, then common issues do
not predominate.” Peltier Enters., 51 S.W.3d at 622 (citing Bernal, 22 S.W.3d at 434). Courts
“consider Rule 42(b)[3]’s predominance requirement first because it is one of the most stringent
prerequisites to class certification.” Bernal, 22 S.W.3d at 433; see Pitts, 236 S.W.3d at 205.
2. The Parties’ Arguments
The Milne Defendants assert that each class member must prove that the Defendants took
advantage of his or her lack of knowledge, ability, experience, or capacity to an unfair degree in
order to establish unconscionability under the DTPA and that class certification does not lessen
the quality of evidence required in an individual action or relax substantive burdens of proof.
Given the fact that disparities exist between the “ages, education, experience, and capacity of
people who encountered the Hicks Defendants and engaged their services,” the proof necessary to
establish each class member’s claim will vary. Accordingly, they argue that common issues of
law and fact do not predominate over issues only affecting individual members.
The Milne Defendants further argue that the court cannot certify a class where certification
would “restrict a party from presenting viable claims or defenses without that party’s consent.”
(C) the desirability or undesirability of concentrating the litigation of the claims in the
particular forum; and
(D) the difficulties likely to be encountered in the management of a class action.
TEX. R. CIV. P. 42(b)(3).
31
Bernal, 22 S.W.3d at 434. They posit that because certification of the Rule 42(b)(3) class with
respect to the unconscionability claims would deny them the right to make individual inquiry into
whether and to what extent each of the class members were taken advantage of due to a lack of
knowledge, ability, experience, or capacity, certification of the class was improper.
The Ryans counter argue that the commonality and predominance requirements are met
with respect to the unconscionability cause of action, damages arising therefrom, and the Milne
Defendants’ defenses thereto because the actionable conduct—practicing law without a license in
violation of the 2001 injunction—is unconscionable as a matter of law. The Ryans cite Oxford
Finance Cos. v. Velez, 807 S.W.2d 460, 466 (Tex. App.—Austin 1991, writ denied), in support of
this argument. In that case, Plaintiff Velez, entered into a contract with Major Material
Corporation to install aluminum siding on her house. Id. at 461. Major Material executed a lien
on Velez’ property to secure payment on the contract. The Oxford Finance Companies, Inc.,
provided the financing for Major Material’s services and obtained an assignment of Major
Material’s contract and lien. Subsequently, a dispute arose over the work provided, and Velez
stopped making payments under the contract. Oxford foreclosed on the home and sold it to Mid-
Tex Investments at a foreclosure sale. Id. at 462.
Velez filed suit against Oxford, Major Material, and Mid-Tex. She sought a declaratory
judgment that the contract, lien, and foreclosure sale were void due to alleged violations of the
DTPA and the Home Solicitation Transactions Act (HSTA). Mid-Tex filed a cross-claim against
Oxford, pleading that in the event the foreclosure sale was voided, it should recover the purchase
price it paid to Oxford. The trial court rendered judgment in Velez’ favor and held that the contract,
32
trust deed, lien, and foreclosure sale were void. It awarded her damages and attorney fees. The
trial court also required Oxford to repay Mid-Tex the purchase price paid for the home at the
foreclosure sale. Id. at 462.
On appeal, Oxford asserted that “the pleadings, evidence, and jury findings [were]
insufficient to support the award” of damages to Mid-Tex on any theory of law. Id. at 465. In
particular, Oxford argued that Mid-Tex failed to obtain a jury finding that “Oxford’s retention of
the [purchase price] would be unconscionable.” Id. at 466. The court of appeals noted that Mid-
Tex sought restitution under the doctrine of unjust enrichment and that, while unjust enrichment
is not a cause of action, a party may obtain restitution under that doctrine where it can show “not
only that the party from whom [it] is seeking restitution was unjustly enriched, but also that the
party ‘had wrongfully secured a benefit or had passively received one which it would be
unconscionable for [it] to retain.’” Id. at 466 (quoting Barrett v. Ferrell, 550 S.W.2d 138, 143
(Tex. Civ. App.—Tyler 1977, writ ref’d n.r.e.)). The court of appeals held that Mid-Tex was
entitled to judgment under that theory because, “[a]s a matter of law, Oxford’s retention of the
purchase price under [those] circumstances would be unconscionable.”27 Id.
3. Analysis and Resolution of the Issues
The Ryans are correct that the court of appeals in Velez found that Oxford’s retention of
the purchase price paid by Mid-Tex at the foreclosure sale after the foreclosure sale had been
27
Of course, Velez did not decide whether Oxford’s conduct was unconscionable under the DTPA, but whether Mid-
Tex established that it was unconscionable for Oxford to retain the purchase price after the sale was voided in order
to establish his unjust enrichment claim. We do not decide whether the term has a different definition in either of
those contexts, but rather assume that the two definitions are equivalent for purposes of resolving the issues here.
33
voided would be unconscionable as a matter of law. Further, we acknowledge that the argument
that we should likewise hold that the violation of an injunction against the unauthorized practice
of law is unconscionable as a matter of law is attractive. Nevertheless, for the reasons discussed
below, we cannot reach that conclusion in this case.
The lawsuit at issue in Velez was brought by an individual litigant, not by a class
representative. This distinction is important because the DTPA defines the term unconscionable
as “an act or practice which, to a consumer’s detriment, takes advantage of the lack of knowledge,
ability, experience, or capacity of the consumer to a grossly unfair degree.” TEX. BUS. & COM.
CODE ANN. § 17.45(5). The pertinent language in this case is the phrase “to a consumer’s
detriment.” While Hicks’ actions were actionable and violated the 2001 injunction, determining
whether they were detrimental to any given class member requires an examination of that class
member’s specific situation.
For example, assume that a class member needed a Miller Trust in order to qualify for
Medicaid benefits and that Hicks provided the member with a valid Miller Trust that did, in fact,
render the member eligible for Medicaid funding benefits. Under this scenario, Hicks’ action in
drafting the Miller Trust for a fee would have violated the 2001 injunction and would have been
actionable, but it would not have operated to the class member’s detriment. Of course, this
example assumes that a Miller Trust was needed, that Hicks could prepare a valid Miller Trust,
and that preparation of the Miller Trust would not have other financial or legal consequences that
would be more detrimental to the client than not obtaining the trust in the first place. Attorneys
are trained not just to prepare documents, but rather to evaluate each client’s unique situation,
34
including the potential consequences of a particular course of action, to advise the client on the
best course of action, and then to prepare the necessary documents to implement the agreed upon
action plan. Because Hicks is not trained or educated to provide such services, there is a substantial
likelihood that Hicks would cause more harm than good by providing such legal services without
understanding the full range of potential negative consequences of doing so. This is especially so
in areas as complicated as Medicaid eligibility, financial, and estate planning. Indeed, in this case,
Hicks advised the Ryans to invest $300,000.00 in a Ponzi scheme as an estate planning tool. This
case clearly demonstrates why non-attorneys are prohibited from performing such tasks, and the
injuries suffered by the Ryans and others are precisely the types of harm the 2001 injunction sought
to avoid.
But we are not called upon to address the unauthorized practice of law; instead, we must
determine whether the asserted cause of action satisfies the commonality and predominance
requirements of Rule 42(b)(3). Whether Hicks violated the 2001 injunction and is subject to
contempt of court for those violations is one issue; whether Hicks actually harmed the people who
retained him by violating the injunction is a separate issue. Notwithstanding the significant odds
against it, it is not impossible that Hicks could have prepared a valid Miller Trust when one was
needed without creating greater problems for that client. Therefore, it cannot be said that Hicks’
actions in this case operated to the detriment of each and every class member without first
examining each member’s specific situation.
In addition, we cannot determine with certainty that each class member would have
rejected Hicks’ services had they known the facts underlying the Plaintiffs’ unconscionability
35
claims. This is another factor that defeats the predominance requirement. For example, in Peltier
Enterprises, Inc., the court of appeals held that a class action could not be based on a DTPA
unconscionability claim under the facts presented there because the common questions of law and
fact did not predominate over the individual class members’ claims. Peltier Enters., Inc., 51
S.W.3d at 619. In that case, Peltier would sell a car to a consumer, provide dealer financing,
“shop” the note to a bank that would purchase it at a lower rate of interest, and keep the differential
as a dealer participation fee. The plaintiffs in that case alleged that the dealer participation fee was
a kickback to the dealership from the bank for giving the bank the financing business. Id. at 620.
The trial court certified several claims against Peltier, including an unconscionability claim under
the DTPA. Id. at 619–20. The court of appeals found that the cause could not be maintained as a
class action because the predominance requirement could not be met. Id. at 623. It reasoned,
There must be a showing of what the consumer could have or would have done if
he had known about the information. For example, if the consumer could not get
financing through any other source and still wanted the car, he may have purchased
it under the retail installment contract as written even if told of the transaction with
the Bank. Or if the difference in payments was very small, the consumer might not
have cared at all. Plus, there would need to be some showing of each customer’s
“knowledge, ability, experience, or capacity.” A plaintiff with knowledge about
indirect lending or with years of experience in the car-selling business would not
be able to show that Peltier did anything that was “unconscionable.”
Id. at 623–24 (footnote omitted).
Likewise, in McPeters v. LexisNexis, 11 F. Supp. 3d 789 (S.D. Tex. 2014), the plaintiffs
alleged that by charging e-filing fees that were “grossly higher than those of competitors and/or
set in contravention of the Texas Government Code,” LexisNexis engaged in an “‘unconscionable
action or course of action’” in violation of the DTPA. Id. at 803 (quoting TEX. BUS. & COM. CODE
36
ANN. § 17.50(a)). The plaintiffs sought certification of a class under Rule 23(b)(3) of the Federal
Rules of Civil Procedure. Id. The plaintiffs argued that they met the predominance requirement
because the question of whether class members were taken advantage of to a grossly unfair degree
based on LexisNexis’s conduct was a common question and that what mattered was “the fee, not
the class member.” Id. Because the issues of whether LexisNexis’s fee was higher than its
competitors and whether the fee violated the Texas Government Code were capable of class-wide
resolution, the plaintiffs argued that the class should be certified. Id.
The United States District Court for the Southern District of Texas, Houston Division,
determined that “adjudicating an unconscionability claim would require an inquiry into what class
members knew about the e-filing system . . . and whether, upon learning about LexisNexis’s
system, they would have nevertheless chosen to file and serve in the same manner.” Id. It also
found that the court would “need to inquire into whether LexisNexis’s actions were the ‘producing
cause’ of the plaintiff’s injuries.” Id. Accordingly, the court concluded that individual issues
predominated over class-wide issues, and it denied class certification. Id. at 803–04.
In both Peltier and McPeters, the courts noted that the individual class members could have
been fully aware of the facts upon which the plaintiffs’ unconscionability claims were based and
decided to accept the service regardless. Thus, the courts held that whether the class members
suffered a detriment depended upon the individual facts of each class member’s case. Likewise,
in the present case, it is possible that some class members may have decided to go forward with
Hicks’ assistance, even if they had known of the 2001 injunction and the facts underlying the
37
Plaintiffs’ unconscionability claim.28 Thus, determining whether Hicks’ actions were
unconscionable requires evaluation of each member’s individual circumstances.
For an action to be unconscionable under the DTPA definition as a matter of law in a class-
action lawsuit, the action would have to be detrimental to every class member no matter the
circumstances presented. The Ryans have not directed this Court to any Texas case, and we have
found none, holding that the unauthorized practice of law is unconscionable under the DTPA as a
matter of law. “[W]e cannot rely on ‘mere assurances of counsel’ to conclude that the
predominance and superiority requirements are, or can be, met.” Turner, 131 S.W.3d at 585
(quoting Bernal, 22 S.W.3d at 435).
“The Texas Supreme Court has mandated a cautious approach to class certification and
has expressly rejected the ‘certify now and worry later’ approach.” Id. (quoting Bernal, 22 S.W.3d
at 435). “Although we are limited to determining whether the trial court abused its discretion in
ordering class certification, the trial court’s exercise of discretion cannot be supported by every
presumption that can be made in its favor.” Id. (citing Schein, 102 S.W.3d at 691). “Certification
is only appropriate where the trial court can make an initial determination that the individual issues
can be considered in a ‘manageable, time-efficient, yet fair manner.’” Id. (quoting Bernal, 22
28
To the extent the Ryans argue that the mere payment of fees for Hicks’ services was detrimental to each and every
class member as a matter of law, we would note that the class members would still have paid a fee had they hired a
qualified attorney to perform the work rather than Hicks. Whether the class members suffered a detriment does not
turn on whether they paid a fee, but on whether the person to whom they paid the fee harmed them by providing
defective services. The fact that he was neither qualified nor permitted to perform those services factors into the
question of whether the services were defective, but it is not determinative. Therefore, to determine whether each
member actually suffered a detriment would require an analysis of each member’s unique circumstances.
38
S.W.3d at 436). “An appellate court, in reviewing a trial court’s decision, should not err in favor
of certification.” Id.
Here, we find that the Milne Defendants have demonstrated that the unconscionability
cause of action itself, their defenses, and the appropriate measure of damages present individual
issues that render the common questions incapable of class-wide resolution. See Dukes, 131 S. Ct.
2541, 2556–57. Thus, we sustain the Milne Defendants’ third point of error.
VI. Issue Relating to the Rule 42(b)(2) Class: The Trial Court Erred in Certifying Claims
for Declaratory Relief
In addition to the 42(b)(3) certification, the trial court also certified a mandatory 42(b)(2)
class. See TEX. R. CIV. P. 42(b)(2), (3). Rule 42(b)(2) of the Texas Rules of Civil Procedure
provides that an action for declaratory relief may be maintained as a class action if “the party
opposing the class has acted or refused to act on grounds generally applicable to the class, thereby
making appropriate final injunctive relief or corresponding declaratory relief with respect to the
class as a whole.” Id. The trial court’s certification order states that it will determine “[w]hether
Plaintiffs are entitled to [a] declaratory judgment that Defendants violated the 2001 injunction”
and “[t]he extent to which Defendants’ violation of the injunction entitles Plaintiffs to a refund of
the fees collected by Hicks for [the] provision of enjoined services” “based on the undisputed fact
that Hicks provided enjoined services to Class members without either becoming a lawyer or being
‘employed’ by a lawyer and working under a lawyer’s direct and active supervision.”
The Milne Defendants argue that certification under 42(b)(2) was erroneous because the
only meaningful relief sought on behalf of the class was for monetary damages. They point to the
39
Ryans’ petition, which prayed for a declaratory judgment that the Hicks and Milne Defendants
violated the 2001 injunction and asked that “[a]s a result, all of the fees charged and collected for
services within the scope of the 2001 injunction . . . be disgorged.” We agree that certification of
the Rule 42(b)(2) class is inappropriate.
A. Legal Requirements of Rule 42(b)(2)29
To begin with, a plaintiff is not required to establish Rule 42(b)(3)’s predominance
requirement in a Rule 42(b)(2) certification. Instead, Rule 42(b)(2) “requires common behavior
by the defendant towards the class.” 30 In re Rodriguez, 695 F.3d 360, 365 (5th Cir. 2012) (citing
Casa Orlando Apartments, Ltd. v. Fed. Nat’l Mortg. Ass’n, 624 F.3d 185, 198 (5th Cir. 2010)).
Accordingly, in Bailey we noted that
[t]he framers of the federal rule, from which the Texas rule is drawn, intended (b)(2)
to “reach situations where a party has taken action or refused to take action with
respect to a class and final relief of an injunctive nature or of a corresponding
declaratory nature, settling the legality of the behavior with respect to the class as
a whole, is appropriate.”
29
Rule 42 (b)(2) of the Texas Rules of Civil Procedure “derives from its federal parallel, Rule 23(b)(2), and reads
identically.” Lapray, 135 S.W.3d at 664. Thus, Texas courts often look to federal court precedent in resolving issues
under Rule 42 of the Texas Rules of Civil Procedure.
30
Rule 42(b)(3) requires that “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). This predominance requirement does not
apply to classes certified under Rule 42(b)(2). Nevertheless, the federal cases interpreting Federal Rule 23(b)(2) use
the term “predominant” when referring to the Rule 23(b)(2) requirement that “common behavior by the defendant
towards the class” be shown. See FED. R. CIV. P. 23(b)(2); Allison v. Citgo Petroleum Corp., 151 F.3d 402, 411 (5th
Cir. 1998) (“We, like nearly every other circuit, have adopted the position taken by the advisory committee that
monetary relief may be obtained in a (b)(2) class action so long as the predominant relief sought is injunctive or
declaratory.”). The Texas Supreme Court has held, “Although [Rule 42](b)(2) does not explicitly require
predominance and superiority as [Rule 42](b)(3) does, [Rule 42](b)(2) does require a rigorous analysis of
‘cohesiveness.’ See, e.g., Barnes v. Am. Tobacco Co., 161 F.3d 127, 143 (3d Cir. 1998) (noting that ‘[w]hile 23(b)(2)
class actions have no predominance or superiority requirements, it is well established that the class claims must be
cohesive’).” Compaq Computer Corp. v. Lapray, 135 S.W.3d 657, 670 (Tex. 2004) (quoting Barnes, 161 F.3d at
143).
40
Bailey, 83 S.W.3d at 856 (quoting FED. R. CIV. P. 23 (advisory committee notes)). The United
States Supreme Court explained in Dukes that
claims for individualized relief . . . do not satisfy the Rule. The key to the (b)(2)
class is “the indivisible nature of the injunctive or declaratory remedy warranted—
the notion that the conduct is such that it can be enjoined or declared unlawful only
as to all of the class members or as to none of them.” Nagareda, 84 N.Y.U. L. REV.,
at 132. In other words, Rule 23(b)(2) applies only when a single injunction or
declaratory judgment would provide relief to each member of the class. It does not
authorize class certification when each individual class member would be entitled
to a different injunction or declaratory judgment against the defendant. Similarly,
it does not authorize class certification when each class member would be entitled
to an individualized award of monetary damages.
Dukes, 131 S. Ct. at 2557.
To satisfy Rule 23(b)(2)’s cohesiveness requirement, a plaintiff must show that “(1) the
defendant’s actions . . . are generally applicable to the class as a whole and (2) injunctive [or
declaratory] relief predominates over damages sought.” In re Rodriguez, 695 F.3d 360, 365 (5th
Cir. 2012) (citing Bolin v. Sears, Roebuck & Co., 231 F.3d 970, 975 (5th Cir. 2000)). Thus, while
“monetary relief may be obtained in a [Rule 23](b)(2) class action so long as the predominant relief
sought is injunctive or declaratory,” Rule 23(b)(2) is not appropriate when “‘final relief relates
exclusively or predominately to money damages.’” Allison v. Citgo Petroleum Corp., 151 F.3d
402, 411 (5th Cir. 1998); see Bolin v. Sears, Roebuck & Co., 231 F.3d 970, 978 (5th Cir. 2000)
(quoting FED. R. CIV. P. 23 advisory committee’s notes). Accordingly, “[c]ases interpreting Texas
41
Rule of Civil Procedure 42(b)(2) require the court to find the declaratory relief sought must
predominate the monetary relief sought.” Bailey, 83 S.W.3d at 856.31
“The underlying premise of the (b)(2) class—that its members suffer from a common injury
properly addressed by class-wide relief—‘begins to break down when the class seeks to recover
back pay or other forms of monetary relief to be allocated based on individual injuries.’” Allison,
151 F.3d at 413 (quoting Eubanks v. Billington, 110 F.3d 87, 95 (D.C. Cir. 1997)). “[M]onetary
relief must be ‘capable of computation by means of objective standards and not dependent in any
significant way on the intangible, subjective differences of each class member’s circumstances.’”
In re Wilborn, 609 F.3d 748, 757 (5th Cir. 2010) (quoting Allison, 151 F.3d at 415). Here, “[t]he
amount that each plaintiff was charged . . . and any amount to be disgorged will depend on the
specific circumstances of each class member and whether and how fees were imposed.” Id.; see
Rodriguez, 695 F.3d at 366.
B. The Ryans’ Argument
The Ryans argue that application of Allison to the facts of this case should lead this Court
to the conclusion that injunctive relief predominates. In support, they cite In re Bratcher, 365 F.3d
31
In Dukes, the Supreme Court questioned whether monetary relief would ever be recoverable under a Rule (b)(2)
class for injunctive or declaratory relief. See Dukes, 131 S. Ct. at 2557 (“Our opinion in Ticor Title Ins. Co. v. Brown,
511 U.S. 117, 121 (1994) (per curiam) expressed serious doubt about whether claims for monetary relief may be
certified under [Rule 23(b)(2)]. We now hold that they may not, at least where (as here) the monetary relief is not
incidental to the injunctive or declaratory relief.”). Moreover, the Supreme Court observed, but did not affirm or
reject, Allison’s holding “that a (b)(2) class would permit the certification of monetary relief that is ‘incidental to
requested injunctive or declaratory relief.’” Id. at 2560. Rather, the Supreme Court declined to answer that question
because the monetary relief in that case was not incidental to the injunctive relief requested, “even assuming, arguendo,
that ‘incidental’ monetary relief can be awarded to a 23(b)(2) class.” Id. at 2561. Because neither the United States
nor the Texas Supreme Courts have subsequently held that monetary damages incidental to injunctive or declaratory
relief are not recoverable under Rule 42(b)(2), we assume that they are.
42
408 (5th Cir. 2004). In Bratcher, plaintiffs challenged defendants’ alleged practice of paying lower
benefits and charging higher premiums to African-American consumers in the sale of low-value
life insurance. The plaintiffs sued several insurance companies on the claims that they
(1) “plac[ed] blacks in industrial policies offering the same benefits as do policies sold to whites,
but at a higher premium (dual rates),” or “placed blacks in specially-designed substandard
industrial policies providing fewer or lower benefits than do comparable plans sold to whites (dual
plans).” Id. at 412. These practices were “memorialized in the insurer’s rate books and records,
which explicitly distinguish[ed] dual rate and dual plan policies by race.” Id. Plaintiffs sought
injunctive and declaratory relief and requested “restitution of past premium overcharges or benefit
underpayments.” Id. at 413.
In analyzing whether injunctive relief predominated, the Fifth Circuit noted that the class
members were not “entitled to a one-size-fits-all refund” and that individual damages would
depend on the idiosyncracies of the particular dual rate or dual plan policy and the age at which a
class member purchased a dual rate policy. Id. at 418–19. Even though “thousands” of restitution
grids or standardized formulas would be required to prove up the damages, the Fifth Circuit
concluded that the Rule 23(b)(2) class should nevertheless be certified because the calculation of
damages would “‘neither introduce new and substantial legal or factual issues, nor entail complex
individualized determinations.’” Id. at 419 (quoting Allison, 151 F.3d at 415). It reasoned:
In the list of policy variables cited by defendants and the district court, none
requires the gathering of subjective evidence. This is not, for example, like Allison,
a title VII case in which class members’ claims for compensatory and punitive
damages necessarily “implicate[ ] the subjective differences of each plaintiff’s
circumstances.” Rather, assuming that unlawful discrimination is found, class
43
members automatically will be entitled to the difference between what a black and
a white paid for the same policy. Not coincidentally, such damages flow from
liability in much the same manner that an award of backpay results from a finding
of employment discrimination.
We are well aware that, as Allison qualifies, the calculation of monetary
damages should not “entail complex individualized determinations.” Although it
is arguable that the construction of thousands of restitution grids, though based on
objective data, involves the sort of complex data manipulations forbidden by
Allison, we read Allison to the contrary. The policy variables are identifiable on a
classwide basis and, when sorted, are capable of determining damages for
individual policyowners; none of these variables is unique to particular plaintiffs.
The prevalence of variables common to the class makes damage computation
“virtually a mechanical task.”
Id. at 419 (alteration in original) (citations omitted) (footnotes omitted). Because they only “seek
a declaration that Hicks is not entitled to any of the fees which the court prohibited him from
collecting,” the Ryans argue that, as in Bratcher, every member of the class would be entitled to
an automatic refund of the fees paid for enjoined services, and there would be no need for
additional hearings, extrinsic evidence, or individualized inquiries.
C. Resolution of the Arguments
1. Certification Is Not Proper Under Rule 42(b)(2) Because Claims for
Damages Already Before the Court Cannot Be Shoehorned Into a
Claim for Declaratory Relief Under Rule 42(b)(2).
In Bratcher, the primary relief sought by the class was an injunction prohibiting racial
discrimination in the collection of premiums and payment of policy benefits; the recovery of
overpaid premiums and underpaid policy benefits was secondary to that injunctive relief. In the
present case, the Ryans do not seek injunctive relief; indeed, they do not need to because the 114th
Judicial District Court has already enjoined Hicks from providing the prohibited services. Thus,
44
the class members already have the injunctive relief they need. Instead, the Ryans seek a
declaration on behalf of the class (1) that Hicks violated the injunction and (2) that the Milne
Defendants, who were not parties to the injunction, violated the injunction by failing to employ
Hicks.
Yet, these same arguments are the basis of the breach of fiduciary duty and civil conspiracy
claims already before the trial court. “A declaratory judgment action is not appropriate where
plaintiff’s cause of action is mature and enforceable in a pending suit that involves the same parties
and the same issues as alleged in the declaratory judgment action.” Tucker v. Graham, 878 S.W.2d
681, 683 (Tex. App.—Eastland 1994, no writ) (holding that plaintiff cannot bring cause of action
for violation of statute based on nuisance and seek declaratory judgment that defendant created
nuisance); see Ysasaga v. Nationwide Mut. Ins. Co., 279 S.W.3d 858, 863 (Tex. App.—Dallas
2009, pet. denied) (citing BHP Petroleum Co. v. Millard, 800 S.W.2d 838, 841 (Tex. 1990)); Tex.
Dep’t of Pub. Safety v. Alexander, 300 S.W.3d 62, 78 (Tex. App.—Austin 2009, pet. denied)
(“Declaratory judgment is inappropriate if it would add nothing to the injunctive or other relief
sought.”); Silver Lion, Inc. v. Martinez, No. 14-05-00746-CV, 2007 WL 665253, at *4 n.6 (Tex.
App.—Houston [14th Dist.] Mar. 6, 2007, no pet.) (mem. op.); Barnett v. City of Colleyville, 737
S.W.2d 603, 607 (Tex. App.—Fort Worth 1987, writ denied). Moreover, a plaintiff cannot
shoehorn a claim for money damages into a Rule 42(b)(2) class. See Bolin v. Sears, Roebuck &
Co., 231 F.3d 970, 976 (5th Cir. 2000) (expressing concern that “plaintiffs may attempt to shoehorn
damages actions into the Rule 23(b)(2) framework, depriving class members of notice and opt-out
45
protections”). To hold otherwise would blur the carefully-crafted distinctions between the three
subsections of Rule 42(b).32
2. Certification Is Not Proper Under Rule 42(b)(2) Because the Ryans Do
Not Claim the Injunction Is Ambiguous or that it Required
Clarification Via Declaratory Judgment
Section 37.004 of the Civil Practice and Remedies Code, which is the Texas declaratory
judgment statute, provides:
A person interested under a deed, will, written contract, or other writings
constituting a contract or whose rights, status, or other legal relations are affected
by a statute, municipal ordinance, contract, or franchise may have determined any
question of construction or validity arising under the instrument, statute, ordinance,
contract, or franchise and obtain a declaration of rights, status, or other legal
relations thereunder.
TEX. CIV. PRAC. & REM. CODE ANN. § 37.004 (West 2015). A declaratory judgment is remedial
in nature, and “its purpose is to settle and to afford relief from uncertainty and insecurity with
respect to rights, status, and other legal relations.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.002
32
The United States Court of Appeals for the Fifth Circuit has described the process by which Federal Rule 23(b) was
drafted:
Under Rule 23, the different categories of class actions, with their different requirements, represent
a balance struck in each case between the need and efficiency of a class action and the interests of
class members to pursue their claims separately or not at all. See Amchem Prod., Inc. v. Windsor,
521 U.S. 591, 117 S. Ct. 2231, 2246, 138 L. Ed. 2d 689 (1997); United States Parole Comm’n v.
Geraghty, 445 U.S. 388, 402–03, 100 S. Ct. 1202, 63 L. Ed. 2d 479 (1980); Rutherglen, Title VII
Class Actions, 47 U. Chi. L.Rev. 688, 697–98 (1980) (citing Kaplan, Continuing Work of the Civil
Committee: 1966 Amendments of the Federal Rules of Civil Procedure, 81 Harv. L.Rev. 356, 387–
92 (1967)). The different types of class actions are categorized according to the nature or effect of
the relief being sought.
Allison, 151 F.3d at 412.
46
(West 2015). “A declaratory judgment should not be rendered when there is no claim that a statute
is ambiguous or invalid.” Alexander, 300 S.W.3d at 78.
Here, the Ryans did not argue that the 2001 injunction was ambiguous or invalid. Rather,
they assert:
It is undisputed that throughout the class period, Hicks was neither an attorney nor
an employee of an attorney. It is likewise undisputed that he provided the very
services which the court [forbade] him to provide to every member of the class and
that every member of the class paid him a fee for those services. Appellees seek a
declaration that Hicks is not entitled to any of the fees which the court prohibited
him from collecting.
Consequently, the Ryans have not stated a claim within the terms of Section 37.004. For that
reason, they are not entitled to certification of a class seeking that relief under Rule 42(b)(2).33
VII. Conclusion
For the reasons set forth above, we find that the trial court erred in certifying a class action
under Rule 42(b)(3) as to the Ryans’ DTPA unconscionability claim and in certifying a class action
under Rule 42(b)(2) as to the Ryans’ declaratory judgment claim. We find that the trial court
correctly certified a class action under Rule 42(b)(3) as to the Ryans’ breach of fiduciary duty
claims against the Hicks Defendants. Finally, neither Defendant appealed the trial court’s order
certifying a class of persons asserting joint enterprise, civil conspiracy, and aiding and abetting
claims against the Milne Defendants, so we do not disturb that ruling.
33
As noted previously, an appellate court reviewing an order certifying a class action does not decide the merits of the
case itself. St. Louis S.W. Rwy., 929 S.W.2d at 30. Accordingly, we do not decide whether the Ryans’ liability claims
have merit, but only that the Ryans may not duplicate their Rule 42(b)(3) breach of fiduciary duty claim as a
declaratory judgment action under Section 37.004 in a Rule 42(b)(2) class action.
47
Accordingly, we (1) reverse the portion of the trial court’s order certifying class claims of
unconscionability against the Hicks Defendants and creating a mandatory Rule 43(b)(2) class,
(2) affirm the remainder of the trial court’s certification order, and (3) remand the matter to the
trial court for further proceedings consistent with this opinion.
Ralph K. Burgess
Justice
Date Submitted: July 29, 2015
Date Decided: October 15, 2015
48