Justice HECHT delivered the opinion of the Court, in which Chief Justice PHILLIPS, Justice OWEN, Justice JEFFERSON, and Justice RODRIGUEZ joined.
Under Rule 42(b)(4) of the Texas Rules of Civil Procedure, the district court certified a nationwide class of some 20,000 purchasers of three dental practice management software products. There are members of this class in all fifty states. The five named plaintiffs and their counsel allege that the software was defective and was sold under false pretenses on which buyers relied. Some of the causes of action they assert are breach of contract, breach of express and implied warranties, fraudulent and negligent misrepresentations, and violations of the Texas Deceptive Trade Practices—Consumer Protection Act.
Henry Schein, Inc. and two subsidiaries, Easy Dental Systems, Inc. and Dentisoft, Inc. (together, "Schein"), produced and marketed three office management software applications for dental practices, one DOS-based, "Easy Dental", and two Windows-based, "Easy Dental for Windows" and "Easy Dental Lite". Shelly E. Stromboe, D.D.S., a purchaser of the Windows software, and Jeanne N. Taylor, D.D.S., a purchaser of the DOS software, sued Schein on behalf of themselves and a class of all purchasers of the software in the nation. (Taylor has been joined by Alan B. Helig, D.D.S., Bart Presti, D.D.S., and Presti's wife and office manager, Kelly Presti, to whom we refer together as "Taylor".) Stromboe and Taylor have filed separate petitions in the trial court.
Stromboe's petition alleges that in the process of opening her own dental office, she contacted Schein for advice about what management software program would be best for her. "In reliance on Schein's recommendation," Stromboe alleges, she selected "Easy Dental Lite". When she tried to use the software, she says, she found that
Stromboe contends that she complained to Schein, who admitted that the software was defective but "steered" her to its more expensive product, "Easy Dental for Windows", which she purchased. Stromboe alleges that she
Stromboe's petition asserts the following causes of action:
Stromboe's petition alleges damages as follows:
Plaintiff Stromboe also seeks to recover for herself and other Windows Class members actual damages incurred as a result of Defendants' unlawful practices and false, misleading and deceptive acts or practices under the DTPA. All of these acts were committed knowingly and/or intentionally and Plaintiff Stromboe and the other Windows Class members are entitled to recover additional damages of not more than three (3) times the amount of actual damages under the DTPA.
The damages sought herein for each individual Plaintiff and each individual member of the Windows Class, including interest, attorney's fees, costs, actual and additional damages and exemplary damages, are less than $74,000.00. It is the specific intention of Plaintiff Stromboe and all other Windows Class members to keep all claims for relief, including all damages, pre-judgment interest, post-judgment interest, attorney's fees (when calculated on a per capita basis) and other costs and expenses below the minimum jurisdictional limit for diversity jurisdiction of the United States District Court.
In the prayer of the petition, Stromboe requests for herself and all class members "actual, special and consequential damages, including attorney's fees", "exemplary damages", "actual damages" caused by the DTPA violations, "additional damages" under the DTPA, and "restitution of all money or property that Defendants have collected from Plaintiff Stromboe and the Windows Class".
[a] class action is an appropriate vehicle for relief in this case [because] ... there is a well-defined community of interest in the questions of law or fact affecting the Class that predominates over any questions affecting only individual members, including: (i) whether Defendants engaged in deceptive acts and practices in selling and guaranteeing software products and support services to Plaintiff Stromboe and members of the Windows Class through misrepresentations and deceit; (ii) whether Defendants caused Plaintiff Stromboe and members of the Windows Class to rely upon false or misleading information and enter into contracts with Defendants; (iii) whether Defendants breached the contracts entered into with Plaintiff Stromboe and members of the Windows Class; (iv) whether Plaintiff Stromboe and members of the Windows Class have sustained damages, and the proper measure of any damages; (v) whether Defendants' products have defects common to all users of said products; and (vi) whether Defendants' common marketing strategy has perpetuated a fraud on the public.
Taylor's petition alleges that the four named plaintiffs each purchased Schein's DOS software, "Easy Dental", "upon Defendant's representation that they would
After Plaintiffs purchased the DOS software, Defendants informed each of these Plaintiffs that, contrary to the original representations made in the marketing literature, they would no longer support the software with technical support unless a new version was purchased. Further, Defendants started to charge for technical support that had been represented to be free and unlimited. Such conduct constitutes an unconscionable action or course of action with respect to marketing Easy Dental for DOS. Defendants used coercion to try to force Plaintiffs to purchase unlimited technical support ("Easy Dental Connection") and contrary to their original representations, arbitrarily refused to provide them further support for the original programs they purchased.
It is Defendants' business practice to send its customers unsolicited upgrades, enhancements and additional products such as software and charge them for such upgrades, enhancement and additional products if such products are not returned. For example, Defendants sent Plaintiffs several versions of software and/or updates and instructed them, as well as other members of the DOS Class, to return this software in order to avoid being charged for the full purchase. Such a business practice violates the DTPA, §§ 35.42 and 35.45 of the Texas Business & Commerce Code and constitutes a breach of contract.
Taylor's petition asserts the following causes of action:
• breach of contract;
• breach of express warranties (none specified);
• breach of implied warranties (none specified);
• fraudulent representations or omissions which "Plaintiffs and the DOS Class have relied on ... to their damage"— specifically, that "Defendants have charged Plaintiffs Taylor, Helig, and the Presti's, and the DOS Class for technical support knowing that they had represented technical support was to be free and unlimited";
• negligent misrepresentations which "Plaintiffs and the DOS Class relied on... and have been damaged as a result"—specifically, the misrepresentation alleged to have been fraudulent;
• promissory estoppel—that "(a) Defendants made promises; (b) it was foreseeable that Plaintiffs and the Class would rely on Defendants' promises; and (c) Plaintiffs and the Class substantially relied on these promises to their detriment";
• DTPA violations—specifically, by:
• "(a) causing confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services; (b) causing confusion or misunderstanding as to affiliation, connection, or association with or certification by another; (c) representing that goods or services have sponsorship, approval, characteristics, uses, and benefits that they do not have; (d) representing the goods or services or of a particular standard quality or grade when they were of another; (e) advertising goods or services with the intent not to sell them as advertised; (f) failing to disclose information concerning goods or services that was known at the time of the transaction and with the intent to induce a consumer into a transaction which the consumer would not have entered into had the information been disclosed; and (g) representing that an agreement confers or involves rights, remedies
• engaging in an unconscionable action or course of action;
• breaching express and implied warranties;
• Texas Unsolicited Goods Statute.
The damage allegations in Taylor's petition are essentially identical to those in Stromboe's petition. The reasons Taylor asserts for maintaining the action on behalf of a class are also the same, except that Taylor does not refer to any defect in the DOS software and instead states that a common question of law or fact is
The hearing on the plaintiffs' motion to certify a class lasted five days. Twenty-two witnesses testified, and over 180 exhibits were admitted in evidence. Regarding the Windows software, plaintiffs offered evidence that it contained a defective database, but there was also evidence, which the trial court credited, that the defect in the software affected its operation in different ways. Specifically, the trial court found that the operational problems were:
In other words, problems ranged from the failure of bells-and-whistles performance to basic disfunctions. There was evidence that the software worked with fewer problems in certain environments and on certain equipment, although there was also evidence that it was not fit for the purpose of providing automated practice solutions for dentists and that all purchasers complained to Schein. Regarding the DOS software, the undisputed evidence was that Schein promised or advertised over certain periods of time that it would provide free, unlimited technical support and did not make good on that promise, but during other time periods it promised free technical support only on certain conditions or not at all. As for Schein's sending upgrades and other products unsolicited, some purchasers' license agreements expressly permitted that and others did not.
The trial court certified two subclasses, one of 5,000 Windows software purchasers, and the other of 15,000 DOS software purchasers. In its order it found that "[i]n light of the amount any individual Plaintiff could recover in this case"—an amount the court did not determine but which Stromboe and Taylor pleaded would not exceed $74,000—"and the fact that Plaintiffs are owners and operators of small businesses,... the economics of pursuing their claims individually would not be feasible". Among the common questions of fact the court identified for the Windows class were whether members experienced any of the operational problems it had listed; whether advertisements and other communications
The court also found in its order that questions of law regarding essentially all of the legal theories asserted by Stromboe and Taylor were common to the class. Because class members reside in all fifty states, Schein offered evidence of the differences in state law that might apply to different class members. The trial court determined that Texas law would apply to all claims by all members because (1) all of the Windows software license agreements and some of the DOS software license agreements chose Texas law as the governing law, and (2) the software was designed, developed, programmed, and manufactured in Dallas, shipped from there, and partially marketed there. The court did not explain why either of these factors supported application of Texas law to class members' claims for breach of implied warranties, fraud, negligent misrepresentation, and violations of consumer protection statutes.
The trial court's order summarized its conclusions as follows:
The Court further finds that both the requirements in Texas Rules of Civil Procedure Rule 42(b)(1) and (4) met [sic] in the present case. Unless this case is certified, the prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications, which would establish incompatible standards of conduct for Defendants. Since Defendants have sold software all across the country, the only way to individually adjudicate the claims of the class members in this case would be to impanel juries in every state. The risk of varying adjudications would be present, with no clear standard of conduct created for Defendants. Here, all claims for both classes are governed by Texas law.
In addition, 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 a class action is superior to other available methods for a fair and efficient adjudication of the controversy. The court and the litigants in this case will concentrate most of their efforts on the common issues.
The court did not explain how it expected to try the case, other than to say:
There are no insurmountable difficulties likely to be encountered in the management of this case, including the management of damage issues. It may be possible to determine damages on a class wide basis from Defendants' records, but if that cannot be done, the Court finds nothing to indicate that damages could not be efficiently determined through proof of claim forms, individual damage hearings, or other manageable means. Because this is a contract action an opt out class is appropriate.
Regarding issues related to the individual class members, however, the court of appeals was something less than definite. Although the court stressed four times that the plaintiffs' "primary measure of damages" was "the benefit of their bargain" or "disgorgement of the amounts they paid",
Concerning exemplary damages, the court said only that they "may be resolved by asking a jury whether Easy Dental committed the alleged actions knowingly, if at all."
The court of appeals was equally dismissive of Schein's argument that reliance is not a common issue but must necessarily
The court of appeals noted that the misrepresentations Schein is alleged to have made were substantially similar, regardless
Finally, the court considered what law should apply to the plaintiffs' claims. The court acknowledged that under Texas law "`[t]he rights and duties of the parties with respect to an issue in contract are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the transaction and the parties under the principles listed in [section 6 of the Restatement (Second) of Conflict of Laws].'"
we remain mindful that appellees' tort-related claims are clearly derivative of, and completely interrelated with, their claims for breach of contract. Thus, we apply much the same analysis [as we have for the breach of contract claim]. Upon considering all the relevant factors and policy considerations, we conclude that Texas law should likewise apply to the plaintiffs' remaining tort-related causes of action, all of which arise out of the parties' contractual relationships.
Schein petitioned this Court for review. We first dismissed the petition for want of jurisdiction
This Court has jurisdiction over an interlocutory appeal from an order certifying a class action when the court of appeals "holds differently from a prior decision of another court of appeals or of the supreme court".
Schein argues that the court of appeals' decision conflicts in two respects with ours in Southwestern Refining Co. v. Bernal.
In Bernal, we held that
it is improper to certify a class without knowing how the claims can and will likely be tried. A trial court's certification order must indicate how the claims will likely be tried so that conformance with Rule 42 may be meaningfully evaluated. "Given the plaintiffs' burden, a court cannot rely on [mere] assurances of counsel that any problems with predominance or superiority can be overcome."
Schein argues that the court of appeals failed to hold the trial court's certification order to this standard. We agree.
The court of appeals acknowledged our admonitions in Bernal that "`a cautious approach to class certification is essential,' "
The plaintiffs argue that the court of appeals' decision does not conflict with Bernal because the court did not refuse to
Here, as in Ramirez, the court of appeals correctly stated the law but misapplied it. In Bernal, the trial court actually formulated a plan for the trial of the case, setting out the issues and the order in which they would proceed.
The plaintiffs argue correctly that Bernal should not be read to require a "trial plan" by that name, set out in a separate document. Rule 42 does not require adoption of a trial plan as a mere formality; rather, according to Bernal, the rule requires a rigorous analysis and a specific explanation of how class claims are to proceed to trial. Here, the trial court concluded only:
There are no insurmountable difficulties likely to be encountered in the management of this case, including the management
The court of appeals' conclusion that the certification order is proper conflicts with Bernal.
We also held in Bernal:
The predominance requirement [of Rule 42(b)(4) ] is intended to prevent class action litigation when the sheer complexity and diversity of the individual issues would overwhelm or confuse a jury or severely compromise a party's ability to present viable claims or defenses. But the predominance requirement has not always been so rigorously applied. When presented with significant individual issues, some courts have simply remarked that creative means may be designed to deal with them, without identifying those means or considering whether they would vitiate the parties' ability to present viable claims or defenses. Other courts have indulged every presumption in favor of the trial court's ruling, viewed the evidence in the light most favorable to that ruling, and frankly acknowledged that if they erred, it would be in favor of certification. Still others have postulated that because a settlement or a verdict for the defendant on the common issues could end the litigation before any individual issues would be raised, predominance need not be evaluated until later. Other courts have suggested that the predominance requirement is not really a preliminary requirement at all because a class can always later be decertified if individual issues are not ultimately resolved.
We reject this approach of certify now and worry later....
Courts must perform a "rigorous analysis" before ruling on class certification to determine whether all prerequisites to certification have been met. Although it may not be an abuse of discretion to certify a class that could later fail, we conclude that a cautious approach to class certification is essential. The "flexibility" of Rule 42 "enhances the usefulness of the class-action device, [but] actual, not presumed, conformance with [the Rule] remains ... indispensable."
In the present case, the court of appeals stated:
Schein argues that the court of appeals' standard of review, both as stated and as applied, conflicts with the highlighted language in Bernal. We agree.
As we have already explained, the trial court did not set out any plan for trying the plaintiffs' claims. The certification order only lists some common issues and simply concludes that there is "nothing to indicate" that individual claims cannot be managed. Reviewing this portion of the certification order, the court of appeals stated: "we are confident that any individual damages issues may be resolved in a `manageable, time-efficient, yet fair manner.'"
The plaintiffs argue that the court of appeals' reference to "entertain[ing] every presumption in favor" of the trial court merely restated the standard of review for abuse of discretion, but Bernal shows that this argument is incorrect. In Bernal, we expressly stated that the trial court's decision to certify a class was to be reviewed for an abuse of discretion,
Having thus concluded that we have jurisdiction over this appeal, we turn to the substantive issues raised by the parties. Schein argues, and the plaintiffs agree, that the trial court erred in certifying a class under Rule 42(b)(1), which requires that
(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....
Litigation by class members individually may well yield varying results; some may win and some may lose. But the plaintiffs have not shown, nor do they claim to have shown, how the prosecution of individual actions would "establish incompatible standards of conduct" for Schein, dispose as a practical matter of other class members' interests, or "impair or impede" protection of class members' interests. Thus, we agree that the trial court erred in certifying a class under Rule 42(b)(1).
The plaintiffs contend, however, and the court of appeals held, that the trial court's error does not require reversal because the plaintiffs are free to abandon that part of the certification order in the course of this appeal and have done so.
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.
Schein argues that the plaintiffs' abandonment on appeal of class claims under Rule 42(b)(1) is tantamount to a dismissal of those claims which cannot be permitted without notice to the class.
The purpose of Rule 42(e) is to prevent a significant impairment in class rights by the named plaintiffs or class counsel without court oversight and notice to the class. It may be that an abandonment of viable claims on appeal cannot be distinguished from "dismissal" within the meaning of the rule, but we need not decide that issue today because the same cannot be said of a refusal to press claims wholly without merit. The plaintiffs' concession on appeal of obvious error in the certification of a class under Rule 42(b)(1) should no more trigger the protections of Rule 42(e) than a simple reversal by an appellate court. Under these circumstances, the plaintiffs' concession does not trigger the concerns of Rule 42(e).
However, the court of appeals erred in affirming the certification order in its entirety, including certification under Rule 42(b)(1). The plaintiffs cannot by their concession amend the trial court's order so that it may be affirmed. The court of appeals should have reversed that portion of the order.
Rule 42(a) prescribes the following prerequisites for 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.
Rule 42(b)(4) provides that:
An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:
(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; (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; (D) the difficulties likely to be encountered in the management of a class action.
Schein argues that the plaintiffs have failed to show that "the questions of law or fact common to the members of the class predominate over any questions affecting only individual members," as the rule requires.
As we have noted, reliance is an element of five of the plaintiffs' causes of action: fraud, breach of express warranty (to a certain extent), negligent misrepresentation, promissory estoppel, and DTPA "laundry list violations". The burden on plaintiffs to prove reliance in order to recover on any of these theories is in no way altered by the assertion of claims on behalf of a class. As we stressed in Bernal:
The class action is a procedural device intended to advance judicial economy by trying claims together that lend themselves to collective treatment. It is not meant to alter the parties' burdens of proof, right to a jury trial, or the substantive prerequisites to recovery under a given tort. Procedural devices may "not be construed to enlarge or diminish any substantive rights or obligations of any parties to any civil action." Tex.R. Civ. P. 815; see also Tex. Gov't Code § 22.004(a); In re Ethyl Corp., 975 S.W.2d 606, 613 (Tex.1998) ("The systemic urge to aggregate litigation must not be allowed to trump our dedication to justice, and we must take care that each individual plaintiff's—and defendant's —cause not be lost in the shadow of a towering mass litigation.") (quoting In re Brooklyn Navy Yard Asbestos Litig., 971 F.2d 831, 853 (2d Cir.1992)). Although a goal of our system is to resolve lawsuits with "great expedition and dispatch and at the least expense," the supreme objective of the courts is "to obtain a just, fair, equitable and impartial adjudication of the rights of litigants under established principles of substantive law." Tex.R. Civ. P. 1. This means that "convenience and economy must yield to a paramount concern for a fair and impartial trial." In re Ethyl Corp., 975 S.W.2d at 613. And basic to the right to a fair trial—indeed, basic to the very essence of the adversarial process—is that each party have the opportunity to adequately and vigorously present any material claims and defenses.
Thus, the 20,000 class members in the present case are held to the same standards of proof of reliance—and for that matter all the other elements of their claims—that they would be required to meet if each sued individually. This does not mean, of course, that reliance or other elements of their causes of action cannot be proved class-wide with evidence generally applicable to all class members; class-wide proof is possible when class-wide evidence exists. But evidence insufficient to prove reliance in a suit by an individual does not become sufficient in a class action simply because there are more plaintiffs. Inescapably individual differences cannot be concealed in a throng. The procedural device of a class action eliminates the necessity of adducing the same evidence over and over again in a multitude of individual
The plaintiffs contend that they have established "class-wide reliance" on misrepresentations made by Schein, but this is not supported by the record. It is true, as the plaintiffs say, that there is evidence that Schein wanted purchasers to rely on its advertisements and other representations about its software products, as most marketers of any product would, but there is no evidence that purchasers actually did rely on Schein's statements so uniformly that common issues of reliance predominate over individual issues. To the contrary, there is, for example, significant evidence that purchasers relied on recommendations from colleagues and others rather than any statements made directly or indirectly by Schein. The trial court did not explain in its certification order how the plaintiffs can avoid individual proof of reliance or why the necessity for such proof would not defeat the predominance requirement for certification. Such an explanation would be an important part of the trial plan required by Bernal. The court of appeals premised affirmance of the order on the mistaken belief that reliance was not an element of the plaintiffs' principal causes of action.
The Fifth Circuit has recently observed that if "individual reliance is necessary to prove actual damages, a class action may not be certified on this issue."
Again as already noted, the plaintiffs claim a number of different types of damages. There is evidence that their claim for restitution of amounts paid could be proved by Schein's records or by checks, charge slips, receipts, or other evidence of payment. It appears from the record that the determination of such amounts would be common to the class and would not require individual examination of class members except in unusual instances.
But the same is not true for the plaintiffs' other damage claims. Consequential damages, for one, would obviously have to be determined class member by class member. Stromboe, for example, alleges that she "lost time, records and production". Unlike the restitution of amounts paid, the value of that loss cannot readily be ascertained, and Schein would be entitled to cross-examine her on the subject. The plaintiffs do not argue otherwise, nor do they appear to contend that an individual determination of consequential damages would be manageable. Rather, the plaintiffs now say on appeal that they are simply willing to forego their claims for consequential damages. They have not, however, amended their pleadings to strike that claim, and it is not clear that they could readily do so. Such an amendment
Even if the plaintiffs could and would concede individual consequential damages without impairing the superiority of a class action, they have given no indication that they would also be willing to concede exemplary or statutory damages. The plaintiffs argue that exemplary or statutory damages can be proved without regard to individual claimants, but they have not shown how this can be done. By statute, as it pertains to this case, "exemplary damages may be awarded only if the claimant proves by clear and convincing evidence that the harm with respect to which the claimant seeks recovery of exemplary damages results from ... fraud [or] malice...."
For all of these reasons, plaintiffs have failed to show that common fact questions regarding damages predominate.
The lower courts determined that common legal questions predominate because all of the plaintiffs' claims should be governed by Texas law. Class members who live in states whose laws do not cap exemplary or statutory damages or require proof by clear and convincing evidence must suffer the limits imposed by Texas law, and class members whose states do not allow recovery of exemplary damages in these circumstances will get a benefit here that their own domicile does not confer. Class members who live in states with consumer protection laws that
The only basis for this decision to apply Texas law to all of the plaintiffs' claims appears to be that those claims are in some sense primarily contractual. The trial court's choice-of-law analysis in its certification order mentions only two factors. One is that all of the Windows software licensing agreements, and some for the DOS products, provided that the agreements would be governed by Texas law. But those purchasers whose agreements did not call for the application of Texas law cannot be bound by agreements they never made. The other factor mentioned in the certification order is that Schein developed, programmed, and manufactured the software in Dallas, shipped it from Dallas, and marketed some of it from there.
If we assume that the choice-of-law provisions in the licensing agreements are all valid, then Texas law would apply to the claims of many of the class members. As for the class members who did not agree to be governed by Texas law:
Section 6 [of the Restatement] provides that absent a statutory directive concerning the law to be applied in a case, "the factors relevant to the choice of the applicable rule of law include (a) the needs of the interstate and international systems, (b) the relevant policies of the forum, (c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue, (d) the protection of justified expectations, (e) the basic policies underlying the particular field of law, (f) certainty, predictability and uniformity of result, and (g) ease in the determination and application of the law to be applied."
Thus, class members who have not agreed to be bound by Texas law are not necessarily required to do so merely because Schein is in Texas. As for tort claims, Texas law requires that courts weigh the following factors in determining what law applies:
Schein offered evidence of the differences in the law of other states, but we do not have the benefit of an analysis of those differences by the lower courts. Accordingly, we are not prepared to say that Texas law will not govern any of the class members' other claims besides those for breach of licensing agreements with choice-of-law provisions. We can say, however, that the plaintiffs have wholly failed to demonstrate that Texas law should apply to so many of those claims that common legal issues predominate.
In a very recent case, In re Bridgestone/Firestone, Inc.,
Class members numbered in the millions and resided in all fifty states.
Instead, the court of appeals concluded that Indiana would apply the law of each class member's residence to all of his claims, contract, tort, and statutory.
Finally, Schein argues that the plaintiffs have not demonstrated that "a class action is superior to other available methods for the fair and efficient adjudication of the controversy"
The court of appeals did not discuss whether a class action here is superior to the pursuit of individual claims. The trial court alluded to the requirement in a single sentence:
We are not persuaded that the amount of recovery is so small as to prohibit individual claims. The plaintiffs have specifically pleaded that they will limit their recovery to $74,000 so as to avoid removal to federal court, strongly suggesting that individual recoveries could exceed that figure. Counsel
But there is another, more important reason why the plaintiffs have failed to satisfy the superiority requirement of Rule 42(b)(4), and that is that they have failed to show that a class action is either more fair or more efficient in these circumstances. As the Seventh Circuit cogently explained in Bridgestone:
We fully agree and think the same observations are appropriate in the present case.
* * * * * *
The judgment of the court of appeals must be reversed. We cannot say, of course, that no class can be certified in this case; that matter must be decided by the trial court in the first instance.
Justice O'NEILL filed a dissenting opinion, in which Justice ENOCH and Justice HANKINSON joined.
Justice SCHNEIDER did not participate in the decision.
Justice O'NEILL, dissenting.
By their nature, class-certification decisions present complex and important issues. On one hand, the class-action device affords an avenue for relief to large numbers of people who might not otherwise be able to pursue individual claims; on the other hand, the decision to certify a class can have staggering economic consequences. These concerns would, perhaps, justify our interlocutory review of class-certification orders should the Texas Legislature decide to grant us jurisdiction to do so. But as it stands, the Legislature has chosen to limit our jurisdiction over interlocutory appeals like this one unless the court of appeals' decision conflicts with a prior decision of this court or another court of appeals. Deloitte & Touche, LLP v. Fourteenth Court of Appeals, 951 S.W.2d 394, 396 (Tex.1997); Tex. Gov't Code §§ 22.001(a)(2), 22.225(b), 22.225(c); TEX. CIV. PRAC. & REM.CODE § 51.014(a)(3). Frustrated by this constraint, the Court distorts well-established conflicts jurisprudence to usurp the very power that the Legislature has deliberately denied. While I appreciate the Court's frustration, the important issues this case presents cannot override due respect for precedent and legislative boundaries. Because we do not have jurisdiction to reach the merits of the trial court's certification order, I dissent.
Jurisdiction over interlocutory appeals is generally final in the courts of appeals, absent an express constitutional or legislative grant. Tex. Gov't Code §§ 22.225(b), 22.001(a)(2); Coastal Corp. v. Garza, 979 S.W.2d 318, 319 (Tex.1998). The Legislature has vested jurisdiction in this Court when, among other instances not pertinent here, "one of the courts of appeals holds differently from a prior decision of another court of appeals or of the supreme court on a question of law material to a decision of the case." Tex. Gov't Code § 22.001(a)(2); see also Tex. Gov't Code § 22.225(c).
We have often noted how "`difficult [it is] to establish conflicts jurisdiction'" under this limited legislative grant. Garza, 979 S.W.2d at 319 (quoting Gonzalez v. Avalos, 907 S.W.2d 443, 444 (Tex.1995) (citing Christy v. Williams, 156 Tex. 555, 298 S.W.2d 565, 567 (1957))). While complete factual identity is not required, for this Court to have conflicts jurisdiction "it must appear that the rulings in the two cases are `so far upon the same state of facts that the decision of one case is necessarily conclusive of the decision in the other.'" Id. at 319 (quoting Gonzalez, 907 S.W.2d at 444). Further, "`[t]he conflict must be on the very question of law actually involved and determined ... the test being whether one would operate to overrule the other in case they were both rendered by the same court.'" Garza, 979 S.W.2d at 319-20 (quoting Christy, 298 S.W.2d at 568-69 (quoting West Disinfecting Co. v. Trs. of Crosby Indep. Sch. Dist., 135 Tex. 492, 143 S.W.2d 749, 750 (1940))). It is this strict standard that governs our conflicts analysis.
The Court concludes that the court of appeals' opinion conflicts with our decision in Southwestern Refining Co. v. Bernal, 22 S.W.3d 425, 435 (Tex.2000), because the
In Bernal, we considered an order that certified a class of more than 900 personal injury claims arising from a refinery explosion. The order proposed a three-phase trial plan in which the defendant's liability on various theories, including gross negligence, would be adjudicated first. Id. at 429. Phase II would address punitive damages, and Phase III would determine whether individual class members could show sufficient specific injuries or damages and whether they were proximately caused by the explosion. Id. Punitive damages determined in Phase II would then be reduced in proportion to the number of individuals who could not demonstrate actual damages or proximate cause in Phase III. Id. The court of appeals modified the trial plan to require proof of the class representatives' actual damages before determining punitive damages. Southwestern Refining Co. v. Bernal, 960 S.W.2d 293, 298-99 (Tex.App.—Corpus Christi 1997), reversed, 22 S.W.3d 425 (Tex.2000). In evaluating the predominance requirement for certification under Rule 42(b)(4), the court of appeals failed to consider whether common issues would predominate throughout the entire trial. Instead, the court looked at each phase separately and determined that common issues would predominate in two phases of the trial, while individual issues would only predominate in determining causation and damages. Id. at 299. Considering this showing sufficient for predominance purposes, and going so far as to suggest that separate juries could be summoned to resolve the individual issues, the court of appeals affirmed the certification order as modified. Bernal, 22 S.W.3d at 429 (citing 960 S.W.2d at 297, 299).
This Court has previously held that the differences between personal injury classes and non-personal injury classes are so significant as to defeat conflicts jurisdiction. Coastal, 979 S.W.2d at 321 ("Because this case does not involve certification of personal injury claims, we cannot say that the decisions are in conflict on a material question of law such that this Court has conflict jurisdiction."). That is because "[p]ersonal injury claims will often present thorny causation and damage issues with highly individualistic variables that a court or jury must individually resolve," such as, in that case, "each class member's dosage, location, activity, age, medical history, sensitivity, and credibility." Bernal, 22 S.W.3d at 436, 437. The Court does not even attempt to explain why this distinction that defeated conflicts jurisdiction in Coastal does not apply here. Instead, the Court ignores significant factual and legal differences between this case and Bernal and grounds its conflicts analysis on nothing more than disagreement with the court of appeals' result. This has never been sufficient to invoke our interlocutory-appeal jurisdiction, until today.
But even if Bernal's toxic exposure/personal injury context does not distinguish it from this case, the court of appeals' decision here is not so far upon the same set of facts as to overrule Bernal. In this case, the court of appeals did not endorse the "certify now and worry later" approach that the lower courts followed and we disavowed in Bernal. Instead, it affirmed based upon a detailed examination of the extensive trial court record. The record from the five-day certification hearing consists of twelve bound volumes of documents containing over 180 exhibits, and six volumes of testimony and argument. The trial court made extensive findings enumerating the issues common to the class,
The court of appeals' conclusion that common issues will predominate may or may not ultimately bear out. But the court of appeals "carefully scrutiniz[ed] the predominance standard to ensure that the proposed class is `sufficiently cohesive to warrant adjudication by representation,'" as Bernal mandates. Bernal, 22 S.W.3d at 435 (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)). Its decision would not operate to overrule Bernal, and therefore it cannot provide a basis for conflicts jurisdiction.
Having crafted a conflict upon which to base jurisdiction, the Court is then free to consider all issues in the case. Brown v. Todd, 53 S.W.3d 297, 301 (Tex.2001). Rather than proceeding to do so, however, the Court gratuitously identifies an additional purported conflict with Bernal based upon the review standard the court of appeals articulated in this case. But even a cursory review of the two opinions reveals the weakness of the Court's conflicts analysis on this point. Moreover, the Court's unnecessary treatment of this issue, albeit dicta, starkly illustrates its desire to expand our interlocutory-appeal jurisdiction beyond the clear parameters the Legislature has imposed.
In this case, in a section entitled "Standard of Review," the court of appeals recited the abuse-of-discretion review standard that applies to class-certification decisions. 28 S.W.3d at 201. In the course of that discussion, the court states: "In our review of the trial court's decision, we view the evidence in the light most favorable to the trial court's action and entertain every presumption in favor of its judgment." Id. In Bernal, we identified a variety of less-than-rigorous approaches some appellate courts had taken in evaluating the predominance requirement for class certification, including an approach whereby the court "indulged every presumption in favor of the trial court's ruling, viewed the evidence in the light most favorable to that ruling, and frankly acknowledged that if they erred, it would be in favor of certification." 22 S.W.3d at 434. We rejected this and other "certify now and worry later" approaches to predominance in favor of a more "rigorous analysis." Id. at 434-35. But in reviewing the trial court's certification order under this principle, we applied an abuse of discretion standard, just as the court of appeals did here. Id. at 439. There is nothing in the court of appeals' opinion in this case to suggest that the court was uncertain about predominance
The court of appeals' description of the standard of review does not conflict with the review standard we recited in Bernal. And even if it did, we have long recognized that inconsistent statements are not sufficient for conflicts jurisdiction. See Gonzalez, 907 S.W.2d at 444 (quoting Christy, 298 S.W.2d at 567); see also Collins v. Ison-Newsome, 73 S.W.3d 178, 185 (Tex. 2001) (Jefferson, J., concurring) (citing Gonzalez, 907 S.W.2d at 444 (quoting Christy, 298 S.W.2d at 567)). The court of appeals' articulation of the review standard simply does not conflict with Bernal "`on the very question of law actually involved and determined,'" and thus cannot invoke our jurisdiction over this interlocutory appeal. Bernal, 22 S.W.3d at 430 (quoting Coastal, 979 S.W.2d at 329-20).
Schein also contends that we have jurisdiction based upon a conflict with Checker Bag Co. v. Washington, 27 S.W.3d 625 (Tex.App.-Waco 2000, pet. denied). I disagree. In this case, the court of appeals states in a footnote that "[c]onsumers are not required to prove reliance in order to recover for misrepresentations under the DTPA." 28 S.W.3d at 206 n. 9. In Checker Bag, the court of appeals observed that a plaintiff in a DTPA laundry-list suit must establish that the defendant engaged in a false, misleading, or deceptive act on which the plaintiff relied. Checker Bag, 27 S.W.3d at 634. Undoubtedly, these two statements are diametrically opposed. But we have long recognized that inconsistent statements are not sufficient to establish conflicts jurisdiction. See Gonzalez, 907 S.W.2d at 444 (quoting Christy, 298 S.W.2d at 567). Instead, our conflicts jurisdiction arises only if one court holds differently from another on a question of law material to deciding the case. Tex. Gov't Code § 22.001(a)(2). To meet that standard, the two decisions must conflict on "`the very question of law actually involved and determined.'" Garza, 979 S.W.2d at 319 (emphasis added) (quoting Christy, 298 S.W.2d at 568-69); see Collins, 73 S.W.3d at 185 (citing Gonzalez, 907 S.W.2d at 444 (quoting Christy, 298 S.W.2d at 567)); Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 552 (Tex.2000).
I am not sure that I agree with Schein that the court of appeals' statement in this case about reliance was material to its decision. In discussing the predominance requirement, the court noted that
[t]he depositions and documentary evidence comprising the bulk of the record directly relate to ... the nature of the defects in Easy Dental's software, the extent of Easy Dental's knowledge of those defects, Easy Dental's alleged uniform misrepresentations about the software and the technical support that it would provide, and Easy Dental's alleged common scheme of sending and billing class members for unsolicited software [and that] these common issues are the most heavily disputed and will be the focus of most of the trial court's and parties' efforts.
28 S.W.3d at 205. The court emphasized that the plaintiffs seek disgorgement of the software's purchase price as their primary
What is clear, however, is that the Checker Bag court's statement about reliance was not material to its decision and is dictum. There, the court noted that, to succeed in a DTPA laundry-list suit, a plaintiff must show that "(1) he is a consumer, (2) the defendant engaged in false, misleading, or deceptive acts, (3) on which the plaintiff relied, and (4) these acts constituted a producing cause of the consumer's damages." Checker Bag, 27 S.W.3d at 634 (citing Tex. Bus. & Com.Code § 17.50(a)(1)). The defendant challenged the factual sufficiency of the evidence to support reliance, but the court held that the defendant had not preserved error and declined to address defendant's sufficiency challenge. Checker Bag, 27 S.W.3d at 635. Thus, it was unnecessary for the Checker Bag court to consider, nor did it consider, the reliance element's relation to the plaintiff's claims in the case. See St. Paul Surplus Lines Ins. Co., Inc. v. Dal-Worth Tank Co., Inc., 974 S.W.2d 51, 53 (Tex. 1998) (holding that defendant waived error "and thus [we] need not consider [the substantive issue]."); Keetch v. Kroger Co., 845 S.W.2d 262, 267 (Tex.1992) (holding that, because error was not preserved, "we need not decide whether failure to submit in broad form was reversible error."). Clearly, the court's recitation of the DTPA laundry-list elements was immaterial to its decision and was not a holding that would operate to overrule the court of appeals' decision in this case. Consequently, Checker Bag does not present a conflict with this case for jurisdictional purposes.
Schein also argues that the court of appeals' decision conflicts with Daughety v. National Association of Homebuilders of the United States, 970 S.W.2d 178 (Tex. App.—Dallas 1998, no pet.). In Daughety, the court of appeals affirmed an order denying class certification. Id. at 182. Although the plaintiffs had sought to certify a nationwide class on several causes of action, they argued on appeal that the trial court should have certified a class on a single claim. Id. The court of appeals affirmed the trial court's order because the plaintiffs had never presented the trial court with an opportunity to rule on a single-claim class. Id.
Schein contends that this case conflicts with Daughety because the court of appeals "affirmed by effectively narrowing Plaintiffs' claims, ignoring some, and holding that fraud was `ancillary to and subsumed by appellees' DTPA claims.'" But the court of appeals did not certify a class different than the one before the trial court; instead, in considering predominance, it merely reasoned that the majority of the litigants' efforts would be focused upon breach-of-contract questions. 28 S.W.3d at 206-07. The two opinions do not conflict on "`the very question of law actually involved and determined.'" Bernal, 22 S.W.3d at 430 (emphasis added) (quoting Garza, 979 S.W.2d at 319).
Schein also asserts that the court of appeals' opinion conflicts with our decision in Intratex Gas Co. v. Beeson, 22 S.W.3d 398 (Tex.2000), because the court "changed the nature of the certification order by ruling that `reliance' was unimportant to the analysis of Rule 42(b)(4) and was not a common question, because the reliance-dependent claims were `ancillary to and subsumed by' the DTPA claim." But contrary to Schein's characterization, the court of
Finally, Schein argues that the court of appeals' opinion conflicts with Gutierrez v. Collins, 583 S.W.2d 312 (Tex.1979), because sections 6 and 145 of the Restatement (Second) of Conflicts of Law, which we adopted in that case, "do not mention the parties' contractual relationship as a factor—much less the controlling factor for determining the state with the most significant relationship to the case." The court of appeals' decision in this case, however, falls far short of overruling Gutierrez. In Gutierrez, we held that the most-significant-relationship test set out in sections 6 and 145 of the Restatement (Second) of Conflicts would apply in all future tort cases. Gutierrez, 583 S.W.2d at 318. We concluded that the law of Texas would likely apply to a case involving Texas residents, even though the case arose from an accident in Mexico. Id. at 319. In this case, the court applied the most-significant-relationship test set out in the Restatement and Gutierrez, and concluded that Texas law applied to the class members' contract claims. 28 S.W.3d at 208-09. The court then concluded that Texas law should apply to the class members' tort claims because those claims arise from the parties' contractual relationship. Id. at 209. The case before us does not conflict with Gutierrez.
While Schein raises important issues concerning the trial court's certification order which may or may not have merit, we cannot ignore the limits the Legislature has placed on our jurisdiction. The author of today's decision has consistently, but unsuccessfully, advocated a broader approach to conflicts jurisdiction. See Collins, 73 S.W.3d at 185-93 (Tex.2001); Garza, 979 S.W.2d at 322-26 (Hecht, J., dissenting); Wagner & Brown, Ltd. v. Horwood, 53 S.W.3d 347, 349-51 (Hecht, J., dissenting from denial of motion for rehearing of petition for review). A majority of the Court has heretofore resisted the call to abandon precedent and expand the legislative constraints on our jurisdiction. Today, inexplicably, the majority yields. Because I do not believe that our conflicts jurisprudence supports jurisdiction in this case, I dissent.