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Rule 42. Class Actions (2004)

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.

(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) 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. The matters pertinent to these issues 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;

(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.

(c) Determining by Order Whether to Certify a Class Action; Notice and Membership in Class

(1) (A) When a person sues or is sued as a representative of a class, the court must - at an early practicable time - determine by order whether to certify the action as a class action.

(B) An order certifying a class action must define the class and the class claims, issues, or defenses, and must appoint class counsel under Rule 42 (g).

(C) An order under Rule 42 (C) (1) may be altered or amended before final judgment. The court may order the naming of additional parties in order to insure the adequacy of representation.

(D) An order granting or denying certification under Rule 42(b)(3) must state:

(i) the elements of each claim or defense asserted in the pleadings;

(ii) any issues of law or fact common to the class members;

(iii) any issues of law or fact affecting only individual class members;

(iv) the issues that will be the object of most of the efforts of the litigants and the court;

(v) other available methods of adjudication that exist for the controversy;

(vi) why the issues common to the members of the class do or do not predominate over individual issues;

(vii) why a class action is or is not superior to other available methods for the fair and efficient adjudication of the controversy; and

(viii) if a class is certified, how the class claims and any issues affecting only individual members, raised by the claims or defenses asserted in the pleadings, will be tried in a manageable, time efficient manner.

(2)(A) For any class certified under Rule 42(b)(1) or (2), the court may direct appropriate notice to the class.

(B) For any class certified under Rule 42(b)(3), the court must direct to class members the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice must concisely and clearly state in plain, easily understood language:

(i) the nature of the suit action;

(ii) the definition of the class certified;

(iii) the class claims, issues, or defenses;

(iv) that a class member may enter an appearance through counsel if the member so desires;

(v) that the court will exclude from the class any member who requests exclusion, stating when and how members may elect to be excluded; and

(vi) the binding effect of a class judgment on class members under Rule 42 (c) (3).

(3) The judgment in an action maintained as a class action under subdivision (b)(l) or (b)(2) whether or not favorable to the class, shall include and describe those whom the court finds to be members of the class. The judgment in an action maintained as a class action under subdivision (b)(3), 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; Multiple Classes and Subclasses. 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) Settlement, Dismissal, or Compromise.

(1)(A) The court must approve any settlement, dismissal, or compromise of the claims, issues, or defenses of a certified class.

(B) Notice of the material terms of proposed settlement, dismissal or compromise, together with an explanation of when and how the members may elect to be excluded from the class, shall be given to all members in such manner as the court directs.

(C) The court may approve a settlement, dismissal, or compromise that would bind class members only after a hearing and on finding that the settlement, dismissal, or compromise is fair, reasonable, and adequate.

(2) The parties seeking approval of a settlement, dismissal, or compromise under Rule 42 (e)(1) must file a statement identifying any agreement made in connection with the proposed settlement, dismissal or compromise.

(3) In an action previously certified as a class action under Rule 42(b)(3), the court may not approve a settlement unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so.

(4) (A) Any class member may object to a proposed settlement dismissal, or compromise that requires court approval under Rule 42 (e)(1)(A).

(B) An objection made under Rule 42 (e)(4)(A) may be withdrawn only with the court's approval.

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

(g) Class Counsel.

(1) Appointing Class Counsel.

(A) Unless a statute provides otherwise, a court that certifies a class must appoint class counsel.

(B) An attorney appointed to serve as class counsel must fairly and adequately represent the interests of the class.

(C) In appointing class counsel the court

(i) must consider:

- the work counsel bas done in identifying or investigating potential claims in the action

- counsel's experience in handling class actions, other complex litigation, and claims of the type asserted in the action;

- counsel's knowledge of the applicable law; and

- the resources counsel will commit to representing the class;

(ii) may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class;

(iii) may direct potential class counsel to provide information on any subject pertinent to the appointment and to propose terms for attorney fees and nontaxable costs; and

(iv) may make further orders in connection with the appointment.

(2) Appointment Procedure.

(A) The court may designate interim counsel to act on behalf of the putative class before determining whether to certify the action as a class action.

(B) When there is one applicant for appointment as class counsel, the court may appoint that applicant only if the applicant is adequate under Rule 42(g)(1)(B) and (C). If more than one adequate applicant seeks appointment as class counsel, the court must appoint the applicant or applicants best able to represent the interests of the class.

(C) The order appointing class counsel may include provisions about the award of attorney fees or nontaxable costs under Rule 42(h) and (i).

(h) Procedure for determining Attorney Fees Award. In an action certified as a class action, the court may award attorney fees in accordance with subdivision (i) and nontaxable costs authorized by law or by agreement of the parties as follows:

(1) Motion for Award of Attorney Fees. A claim for an award of attorney fees and nontaxable costs must be made by motion, subject to the provisions of this subdivision, at a time set by the court. Notice of the motion must be served on all parties and, for motions by class counsel directed to class members in a reasonable manner.

(2) Objections to Motion. A class member, or a party from whom payment is sought may object to the motion.

(3) Hearing and Findings. The court must hold a hearing in open court and must find the facts and state its conclusions of law on the motion. The court must state its findings and conclusions in writing or orally on the record.

(i) Attorney's fees award.

(1) In awarding attorney fees, the court must first determine a lodestar figure by multiplying the number of hours reasonably worked times a reasonable hourly rate. The attorney fees award must be in the range of 25% to 400% of the lodestar figure. In making these determinations, the court must consider the factors specified in Rule 1.04(b), Tex. Disciplinary R. Prof. Conduct.

(2) If any portion of the benefits recovered for the class are in the form of coupons or other noncash common benefits, the attorney fees awarded in the action must be in cash and noncash amounts in the same proportion as the recovery for the class.

(g) Effective date. Rule 42(i) applies only in actions filed after September 1, 2003.

Amended by order of Oct. 9, 2003, eff. Jan. 1, 2004.

Comment to 2003 amendment: The requirement that certification be decided "at an early practicable time" is a change from the previous Texas rule 42 (c)(1) and federal rule 23 (c)(1), which required the trial court to decide the certification issue "as soon as practicable after the commencement of [the suit]." The amended language is not intended to permit undue delay or permit excessive discovery unrelated to certification, but is designed to encourage good practices in making certification decisions only after receiving the information necessary to decide whether certification should be granted or denied and how to define the class if certification is granted.

Comment to 2003 amendment: The second paragraph of sub­division (a) regarding derivative suits has been deleted because it is redundant of Article 5.14 of the Business Corporation Act, which sets forth detailed procedures for derivative suits.

Comment to 2003 amendment: Subparagraph (b)(3) is omitted as unnecessary.

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).