The Texas Supreme Court has just issued an opinion that could impact many class action lawsuits in the state. The court addressed what sort of “conflict” is necessary to find that a proposed class representative is not “adequate” to represented the absent class members.
The claims in the case (Riemer v. State NO. 11-0548 (Tex. 2013), involve an ongoing dispute between landowners and the State concerning the boundaries of the Canadian River in Hutchinson County. See Brainard v. State, 12 S.W.3d 6, 11–12 (Tex.1999) (discussing the history and impetus surrounding the dispute, namely the completion of the Sanford Dam in 1965 and resulting surveys).
The origins of this particular suit trace back to 1993 when the State sued Glenn Riemer’s father for an alleged trespass to land. On Riemer’s motion, the trial court abated the case until the Supreme Court resolved Brainard. See Brainard, 12 S.W.3d at 10 (holding that changes brought about or influenced by an artificial structure that was not created by the riparian owner must be considered in marking the gradient boundary of a river).
Because the State owns the riverbeds and the minerals underneath the riverbeds in Texas, the boundary of the riverbed is critical in determining the rights of the State, riparian mineral interest owners, and riparian surface owners.
After the decision in Brainard, Glen Riemer, individually and as independent executor of his father’s estate, filed a counterclaim against the State for trespass and conversion. The State non-suited its claims against Riemer. Riemer, joined by other landowners, filed a putative class action against the State of Texas and its oil and gas lessee, J.M. Huber Corporation. The class representatives alleged an unconstitutional taking of their property arising from the State’s approval of a 1981 survey that established the boundaries of a portion of the Canadian River at issue in this case.
The class representatives moved to certify a class composed of all owners of any real property interests in a twelve-mile stretch of land adjacent to the Canadian River in Hutchinson County. Prior to the certification hearing, the State, Huber, and various non-party mineral interest owners settled their disputes by entering into the “Canadian River Mineral Boundary Agreement” (MBA), which used the 1981 survey to establish the boundary lines amongst the parties to the settlement. The named plaintiffs in this case also settled with Huber.
The trial court ultimately denied class certification, finding that certain named plaintiffs lacked standing to bring the alleged takings claims. The trial court also found that the proposed class action failed to satisfy the typicality and adequacy-of-representation prerequisites of Rule 42(a), and any one of the requirements outlined in Rule 42(b). The class representatives filed an interlocutory appeal challenging the trial court’s order denying class certification.
The court of appeals rejected the trial court’s findings on standing but affirmed its order denying class certification, holding that the trial court did not abuse its discretion in finding that the class representatives would not fairly and adequately protect the interests of the class. In particular, the court of appeals focused on the following two conflicts initially identified by the trial court: “(1) the claims of the class representatives conflict with the claims of other proposed class members who had signed the MBA and (2) the claims of the class representatives conflict with claims of other proposed class members who own land on opposite sides of the Canadian River.
The Texas Supreme Court granted the class representatives’ petition for review and has now reversed the court of appeals and trial court. Riemer v. State, NO. 11-0548 (Texas 2013).
As part of the MBA, the settling parties agreed upon a location for the banks of the Canadian River so that the boundary between the settling landowners and the State could be established. Those landowners who agreed to the MBA were necessarily included within the definition of the class that the class representatives initially sought to be certified.
The court of appeals held that the testimony of one landowner who opposed his inclusion in the class coupled with the class representatives’ questioning of the validity of the MBA lent sufficient support to a potential conflict that would prevent class certification. The class representatives argued that the MBA fails to create a real conflict between the class representatives and the settling landowners because the conflict does not go to the heart of the litigation. The State responded that antagonism between the settling landowners and class representatives is sufficiently established by the settling landowner’s testimony and the class representatives’ counsel’s statements at the certification hearing regarding their intent to challenge the MBA.
The Supreme Court disagreed with the State and the court of appeals’ holding that a potential conflict among the settling landowners and the class representatives regarding the MBA is sufficient to deny class certification in this case. The Supreme Court first noted that “Rule 42 does not require that all members agree on the propriety of the action in order to certify the class.” Id. Thus, “[i]f the settling landowners wished to honor the MBA and thus dispute the appropriateness of this lawsuit, then they may utilize Rule 42’s procedures for opting out of the class.” Id.
“Second, the class representatives clarify their position in this Court that it is not their intention to invalidate the MBA.” Id. The Supreme Court saw “no reason why the settling landowners could not continue to honor the MBA, to the extent it is valid, regardless of the relief, if any, that may be ultimately awarded in this case.” Id.
The trial court and the court of appeals had also ruled that the class representatives failed to satisfy Rule 42’s adequacy-of-representation requirement due to the potential conflict between landowners on the north and south of the Canadian River in locating the boundaries of the riverbed. The class representatives argued that no evidence supports antagonism between proposed class members on opposite sides of the river, and even if there was a conflict, the class representatives direct the Court to authority that holds that a conflict must be more than speculative or hypothetical. The State responded that locating the riverbed creates a “risk” that landowners on the north side will attempt to locate their lands as far south as possible while landowners on the south side want the exact opposite.
The Supreme Court did “not disagree with the State that there is a risk for a conflict between the proposed class members on opposite sides of the river” but held “this risk is too speculative and theoretical to prevent class certification under Rule 42(a)(4).” The court noted its:
holding is supported by the fact that the purported conflict rests on the questionable proposition that locating the northern boundary of the riverbed is dependent on locating the southern boundary. It is entirely probable—and we are presented with no evidence to the contrary—that locating the northern boundary of the Canadian River will have no effect on where its southern boundary is located. Therefore, the court of appeals erred in holding that the purported conflict between class members on opposite sides of the river prevented the class representatives from establishing adequacy under Rule 42(a)(4).
The Supreme Court ultimately concluded that the trial court abused its discretion by relying on the conflicts identified in its order denying class certification to establish that the class representatives’ failed to satisfy Rule 42(a)(4)’s adequacy-of-representation prerequisite. And, the court of appeals erred when it affirmed the trial court’s order on the same grounds.
Thus, the Texas Supreme Court reversed the court of appeals’ judgment and remanded the case back to the court of appeals to address the remaining contested requirements of class certification under Rule 42.