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Rule 42. Class Action (1984)

TEXT

(a) Prerequisites to a Class Action

One or more members of a class may sue or be sued as representative parties on behalf of all only if (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.

Derivative Suit. In a derivative suit brought pursuant to Article 5.14 of the Texas Business Corporation Act, the petition shall contain the allegations (1) that the plaintiff was a record or beneficial owner of shares, or of an interest in a voting trust for shares at the time of the transaction of which he complains, or his shares or interest thereafter devolved upon him by operation of law from a person who was the owner at that time, and (2) with particularity, the efforts of the plaintiff to have suit brought for the corporation by the board of directors, or the reasons for not making any such efforts. The derivative suit may not be maintained if it appears that the plaintiff does not fairly and adequately represent the interests of the shareholders similarly situated in enforcing the right of the corporation. The suit shall not be dismissed or compromised without the approval of the court, and notice in the manner directed by the court of the proposed dismissal or compromise shall be given to shareholders.

(b) Class Actions Maintainable

An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:

(1) the prosecution of separate actions by or against individual members of the class would create a risk of

(A) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or

(B) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or

(2) 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; or

(3) where the object of the action is the adju­dication of claims which do or may affect specific property involved in the action; or

(4) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (8) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action.

(c) Determination by Order Whether Class Action to be Maintained; Notice; Judgment; Actions Conducted Partially as Class Actions

(1) As soon as practicable after the commencement of an action brought as a class action, the court shall, after hearing, determine by order whether it is to be so maintained. This determination may be altered, amended, or withdrawn at any time before final judgment. The court may order the naming of additional parties in order to insure the adequacy of representation.

(2) After the court has determined that a class action may be maintained it shall order the party claiming the class action to direct to the members of the class the best notice practicable under the circumstances including individual notice to all members who can be identified through reasonable effort. In all class actions maintained under sub­divisions (b)(I), (b)(2), and (b)(3), this notice shall advise the members of the class (A) the nature of the suit, (B) the binding effect of the judgment, whether favorable or not, and (C) the right of any member to appear before the court and challenge the court's determinations as to the class and its representatives. In all class actions maintained under subdivision (b) (4) this notice shall advise each member of the class (A) the nature of the suit; (B) that the court will exclude him from the class if he so requests by a specified date; (C) that the judgment, whether favorable or not, will include and bind all members who do not request exclusion by the specified date; and (D) that any member who does not request exclusion may if he desires, enter an appearance through his counsel.

(3) The judgment in an action maintained as a class action under subdivisions (b) (1), (b) (2), and (b) (3), whether or not favorable to the class, shall include, describe, and be binding upon all those whom the court finds to be members of the class and who received notice as provided in subdivision (c) (2). The judgment in an action maintained as a class action under subdivision (b) (4), whether or not favorable to the class, shall include and specify or describe those to whom the notice provided in subdivision (c) (2) was directed, and who have not request­ed exclusion, and whom the court finds to be members of the class.

(d) Actions Conducted Partially as Class Actions

When appropriate (1) an action may be brought or maintained as a class action with respect to particular issues, or (2) a class may be divided into sub­classes and each subclass treated as a class, and the provisions of this rule shall then be construed and applied accordingly.

(e) Dismissal or Compromise

A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs.

(f) Discovery

Unnamed members of a class action are not to be considered as parties for purposes of discovery.

(g) Effective Date

This rule shall be effective only with respect to actions commenced on or after September 1, 1977.

Amended by order of Dec. 5, 1983, eff. April 1, 1984: The paragraph concerning a derivative suit is added to paragraph (a).

ADVISORY OPINIONS

(No. 22) Question: Where the owner of a por­tion of a royalty under an oil lease brings suit against the lessee to recover damages because of the breach of implied contract of reasonable development, is it manda­tory that all persons who own portions of the royalty be joined?

Answer: This matter is dealt with by Rule 39 which provides that persons hav­ing a joint interest shall be joined in the suit. This rule is taken from Federal Rule 19, and under the annotations to the Fed­eral rule it has been held a number of times that the phrase, "joint interest," should be construed to mean those who would be necessary in the sense of indis­pensable parties under the previous prac­tice.

If under the previous practice all royalty owners were not necessary parties in such a suit, then it is the opinion of the com­mittee that it would not be necessary to join them because of the adoption of new rules. On the other hand, if joinder of all would have been necessary under the old practice, then it is still necessary under the new rules.

The subcommittee calls attention to pos­sible relaxations suggested by and under the conditions stated in Subdivisions (b) and (c) of Rule 39 and in Rule 42.

The subcommittee feels that the above general construction of the rule is as far as it can properly go in answering the question. In other words, the subcom­mittee feels that it should confine its interpretations to general explanation of the rules, and should not undertake to brief questions arising under the facts of specific cases.

In the above opinion the subcommittee consulted with and was aided by Roy W. McDonald.

5 Tex. B.J. 287 (1942) reprinted in 8 Tex. B.J. 19 (1945).