Charles O. "Chuck" Grigson, Gerald Hooks, and Leslie Hooks v. State

Opinion

ACCEPTED 03-15-00436-CV 6465052 THIRD COURT OF APPEALS AUSTIN, TEXAS 8/12/2015 2:02:21 PM JEFFREY D. KYLE CLERK No. 03-15-00436-CV

In the Third Court of AppealsFILED IN Austin, Texas 3rd COURT OF APPEALS AUSTIN, TEXAS 8/12/2015 2:02:21 PM CHARLES O. “CHUCK” GRIGSON, JEFFREY D. KYLE GERALD HOOKS, AND LESLIE HOOKS, Clerk Appellants, v. THE STATE OF TEXAS; THE TEXAS DEPARTMENT OF INSURANCE; THE TEXAS COMMISSIONER OF INSURANCE; AND FARMERS GROUP, INC. ET AL., Appellees.

On Appeal from the 261st Judicial District Court, Travis County, Texas Cause No. D-1-GV-02-002501

APPELLEES’ MOTION FOR LEAVE TO FILE REPLY IN FURTHER SUPPORT OF JOINT MOTIONS TO DISMISS APPELLANTS’ APPEALS FOR LACK OF APPELLATE JURISDICTION

Marcy Hogan Greer Joshua R. Godbey State Bar No. 08417650 State Bar No. 24049996 mgreer@adjtlaw.com joshua.godbey@texasattorneygeneral.gov ALEXANDER DUBOSE JEFFERSON & Ryan S. Mindell TOWNSEND LLP State Bar No. 24089707 515 Congress Ave., Suite 2350 ryan.mindell@texasattorneygeneral.gov Austin, Texas 78701 Jennifer S. Jackson Telephone: 512-482-9300 State Bar No. 24060004 Telecopier: 512-482-9303 jennifer.jackson@texasattorneygeneral.gov OFFICE OF THE ATTORNEY GENERAL M. Scott Incerto P.O. Box 12548 State Bar No. 10388950 Austin, Texas 78711-2548 scott.incerto@nortonrosefulbright.com Telephone: (512) 475-4209 NORTON ROSE FULBRIGHT US LLP Fax: (512) 477-2348) 98 San Jacinto Blvd., Suite 1100 Austin, Texas 78701 COUNSEL FOR PLAINTIFFS-APPELLEES, THE Telephone: 512-474-5201 STATE OF TEXAS, THE TEXAS DEPARTMENT Telecopier: 512-536-4598 OF INSURANCE, AND THE TEXAS COMMISSIONER OF INSURANCE COUNSEL FOR DEFENDANTS-APPELLEES THE FARMERS PARTIES TO THE HONORABLE COURT OF APPEALS:

Appellees, the State of Texas, the Texas Department of Insurance and the

Texas Commissioner of Insurance (jointly, “the State”) and the Farmers Parties 1

(together with the State, the “Settling Parties”) file this Motion for Leave to File

Reply in Further Support of Joint Motions to Dismiss Appellants’ Appeals for

Lack of Appellate Jurisdiction to show the Court the following:

Appellant Charles O. “Chuck” Grigson filed his Response to Appellees’

Joint Motion to Dismiss for Lack of Appellate Jurisdiction (“Grigson’s Response”)

on July 31, 2015.

Appellants Gerald and Leslie Hooks untimely 2 filed their Response to

Appellees’ Joint Motion to Dismiss Gerald and Leslie Hookses’ Appeal for Lack

of Appellate Jurisdiction (“Hookses’ Response”) on August 7, 2015.

Grigson’s Response and the Hookses’ Response necessitate a reply by the

Settling Parties to address Grigson’s and the Hookses’ characterizations of the

record and the law applicable to this case.

1 Farmers Group, Inc., Fire Underwriters Association, Farmers Underwriters Association, Farmers Insurance Exchange, Fire Insurance Exchange, Texas Farmers Insurance Company, Mid-Century Insurance Company of Texas, Mid-Century Insurance Company, Farmers Texas County Mutual Insurance Company, Truck Insurance Exchange, and Truck Underwriters Association 2 On July 27, 2015, this Court directed the Hookses to file their response on or before August 6, 2015. CONCLUSION AND PRAYER For these reasons, the Appellees, the Settling Parties, request that the Court

grant them leave to file the accompanying Joint Reply, consider the attached Joint

Reply, and grant all other and further relief the Appellees have requested in this

appeal and are entitled to.

2 Date: August 12, 2015 Respectfully submitted,

/s/ M. Scott Incerto Marcy Hogan Greer State Bar No. 08417650 mgreer@adjtlaw.com ALEXANDER DUBOSE JEFFERSON & TOWNSEND LLP 515 Congress Avenue, Suite 2350 Austin, Texas 78701-3562 Telephone: (512) 482-9300 Facsimile: (512) 482-9303

M. Scott Incerto State Bar No. 10388950 scott.incerto@nortonrosefulbright.com NORTON ROSE FULBRIGHT US LLP 98 San Jacinto Blvd., Suite 1100 Austin, Texas 78701 Telephone: 512-474-5201 Telecopier: 512-536-4598

Darryl W. Anderson State Bar No. 24008694 darryl.anderson@nortonrosefulbright.com Geraldine W. Young State Bar No. 24084134 geraldine.young@nortonrosefulbright.com NORTON ROSE FULBRIGHT US LLP 1301 McKinney, Suite 5100 Houston, Texas 77010 3095 Telephone: 713 651 5151 Telecopier: 713 651 5246

ATTORNEYS FOR DEFENDANTS-APPELLEES FIRE UNDERWRITERS ASSOCIATION, FARMERS GROUP, INC., FARMERS UNDERWRITERS ASSOCIATION, FARMERS INSURANCE EXCHANGE, FIRE INSURANCE EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY, TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS ASSOCIATION

3 Respectfully submitted,

KEN PAXTON Attorney General of Texas

CHARLES E. ROY First Assistant Attorney General

JAMES E. DAVIS Deputy Attorney General for Civil Litigation

ROBERT O’KEEFE Division Chief Financial Litigation, Tax, and Charitable Trusts Division

/s/ Joshua R. Godbey JOSHUA R. GODBEY Assistant Attorney General LEAD ATTORNEY State Bar No. 24049996 Telephone: (512) 475-4209 joshua.godbey@texasattorneygeneral.gov RYAN S. MINDELL Assistant Attorney General State Bar No. 24089707 Telephone: (512) 936-1721 ryan.mindell@texasattorneygeneral.gov JENNIFER S. JACKSON Assistant Attorney General State Bar No. 24060004 Telephone: (512) 463-9917 jennifer.jackson@texasattorneygeneral.gov Financial Litigation, Tax, and Charitable Trusts Division P.O. Box 12548 Austin, Texas 78711-2548 Fax: (512) 477-2348)

ATTORNEYS FOR PLAINTIFFS-APPELLEES, THE STATE OF TEXAS, THE TEXAS DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF INSURANCE

4 CERTIFICATE OF SERVICE On August 12, 2015, I electronically filed the Appellees’ Motion for Leave

to File Reply in Further Support of Joint Motions to Dismiss Appellants’ Appeals

for Lack of Appellate Jurisdiction with the Clerk of the Court using the

eFile.TXCourts.gov electronic filing system which will send notification of such

filing to the following (unless otherwise noted below).

Joe K. Longley Michael J. Woods Philip K. Maxwell 8620 N. New Braunfels, Ste. 522 1609 Shoal Creek Blvd. # 100 San Antonio, TX 78217 Austin, TX 78701 MichaelJWoods@sbcglobal.net Joe@JoeLongley.com phil@philmaxwell.com Pro Se Intervenor/Objector

Counsel for Appellant Charles O. “Chuck” Grigson

Joseph C. Blanks P.O. Box 999 Doucette, TX 75942 blanxlex@gmail.com

Counsel for Appellants Gerald and Lesly Hooks

/s/ M. Scott Incerto M. Scott Incerto

5 CERTIFICATE OF CONFERENCE I certify that, on August 11, 2015, I conferred with Joe K. Longley, counsel

for Appellant Charles O. “Chuck” Grigson, and with Joseph Blanks, counsel for

Appellants Gerald and Leslie Hooks, about the merits of the foregoing motion,

pursuant to Texas Rule of Appellate Procedure 10.1(a)(5), and they stated,

respectively, that Grigson and the Hookses were opposed to the motion.

CERTIFICATE OF COMPLIANCE WITH TEX. R. APP. P. 9.4(i)

I certify that the foregoing document contains 310 words and complies with

the word limit set forth in Texas Rule of Appellate Procedure 9.4(i).

6 No. 03-15-00436-CV

In the Third Court of Appeals Austin, Texas

CHARLES O. “CHUCK” GRIGSON, GERALD HOOKS, AND LESLIE HOOKS, Appellants, v. THE STATE OF TEXAS; THE TEXAS DEPARTMENT OF INSURANCE; THE TEXAS COMMISSIONER OF INSURANCE; and FARMERS GROUP, INC. ET AL., Appellees.

On Appeal from the 261st Judicial District Court, Travis County, Texas Cause No. D-1-GV-02-002501

APPELLEES’ REPLY IN FURTHER SUPPORT OF JOINT MOTIONS TO DISMISS APPELLANTS GRIGSON’S AND THE HOOKSES’ APPEALS FOR LACK OF APPELLATE JURISDICTION

Marcy Hogan Greer Joshua R. Godbey State Bar No. 08417650 State Bar No. 24049996 mgreer@adjtlaw.com joshua.godbey@texasattorneygeneral.gov ALEXANDER DUBOSE JEFFERSON & Ryan S. Mindell TOWNSEND LLP State Bar No. 24089707 515 Congress Ave., Suite 2350 ryan.mindell@texasattorneygeneral.gov Austin, Texas 78701 Jennifer S. Jackson Telephone: 512-482-9300 State Bar No. 24060004 Telecopier: 512-482-9303 jennifer.jackson@texasattorneygeneral.gov OFFICE OF THE ATTORNEY GENERAL M. Scott Incerto P.O. Box 12548 State Bar No. 10388950 Austin, Texas 78711-2548 scott.incerto@nortonrosefulbright.com Telephone: (512) 475-4209 NORTON ROSE FULBRIGHT US LLP Fax: (512) 477-2348) 98 San Jacinto Blvd., Suite 1100 Austin, Texas 78701 COUNSEL FOR PLAINTIFFS-APPELLEES, THE Telephone: 512-474-5201 STATE OF TEXAS, THE TEXAS DEPARTMENT Telecopier: 512-536-4598 OF INSURANCE, AND THE TEXAS COMMISSIONER OF INSURANCE COUNSEL FOR DEFENDANTS-APPELLEES THE FARMERS PARTIES TO THE HONORABLE COURT OF APPEALS:

Appellees, the State of Texas, the Texas Department of Insurance and the

Texas Commissioner of Insurance (jointly, “the State”) and the Farmers Parties 1

(together, the “Settling Parties”) file this Reply in further support of their:

(1) Joint Motion to Dismiss Appellant Charles O. “Chuck” Grigson’s

Appeal for Lack of Appellate Jurisdiction and Request for Expedited

Consideration of the Motion (“Motion to Dismiss Grigson’s Appeal”), which was

filed on July 20, 2015; and

(2) Joint Motion to Dismiss Appellants Gerald and Leslie Hookses’ Appeal

for Lack of Appellate Jurisdiction and Request for Expedited Consideration of the

Motion (“Motion to Dismiss Hookses’ Appeal”), which was filed on July 24, 2015.

This Reply also responds to Grigson’s Response to the Motion to Dismiss

Grigson’s Appeal (“Grigson’s Response”) that was filed on July 31, 2015, and the

Hookses’ Response to the Motion to Dismiss Hookses’ Appeal (“Hookses’

Response”) that was untimely filed on August 7, 2015. 2

1 Farmers Group, Inc., Fire Underwriters Association, Farmers Underwriters Association, Farmers Insurance Exchange, Fire Insurance Exchange, Texas Farmers Insurance Company, Mid-Century Insurance Company of Texas, Mid-Century Insurance Company, Farmers Texas County Mutual Insurance Company, Truck Insurance Exchange, and Truck Underwriters Association 2 On July 27, 2015, this Court directed the Hookses to file their response on or before August 6, 2015. PRELIMINARY STATEMENT Grigson’s and the Hookses’ Responses confirm that the district court’s

Order of Preliminary Approval (“Preliminary Approval Order”) cannot be

appealed under the narrow jurisdictional window for orders that certify or refuse to

certify a class. Grigson and the Hookses (jointly, “Intervenors”) can point to no

language in the order that certifies the Settlement Classes. 3 Given that the

Settlement Classes were indisputably certified in 2003 and affirmed on appeal by

the Texas Supreme Court and this Court, it is not surprising that the district court

did not engage in a superfluous re-certification of the same classes—a fact

Intervenors recognized at the preliminary approval hearing itself, but now seek to

avoid in an effort to obtain an unwarranted second bite at the appellate apple.

To try and create an appellate hook, Intervenors’ Responses resort to

contradictory positions and mischaracterization. Intervenors assert that the district

court’s reference to its prior certification decision, approval of class notice, and

rejection of Grigson’s “collusion” allegations somehow means that the court

“expressly” certified the Settlement Classes anew. In the alternative, they argue

the converse—that the district court also wrongly omitted express certification

language from the Preliminary Approval Order. In this regard, they claim that the

3 For consistency, the Settling Parties will continue to use the terms they defined in their Motions to Dismiss.

2 prior 2003 certification decision “terminated” or was “abandoned”—even though

the Parties to the agreement themselves and the district court have confirmed that

the relevant documents do not support such an interpretation. Intervenors also

argue that an interlocutory appeal is permitted because the Preliminary Approval

Order “altered” the Settlement Classes but they fail to show any alteration in the

Settlement Classes—only changes in the Settlement Agreement, which are not

appealable at this time. In short, Grigson’s and the Hookses’ arguments are

supported by neither law nor evidence and fail to provide any jurisdictional basis

for their identical attempted appeals. Grigson’s arguments about staying class

notice are the same groundless assertions from his Emergency Motion to Stay the

Sending of Class Notice and should also be rejected.

For the reasons demonstrated here and in the Settling Parties’ Motions to

Dismiss, Grigson’s and the Hookses’ appeals should be dismissed.

ARGUMENT

I. Intervenors Fail to Demonstrate that the District Court’s Preliminary Approval Order Certified a Class Action Grigson first argues that the Preliminary Approval Order is, “[b]y its express

terms . . . a class certification order” because the Order contains language about the

class definitions, class notice, and no collusion that is similar to the language found

3 in the Texas class action rule, Texas Rule of Civil Procedure 42. 4 Grigson’s

Response at 2. The Hookses, on the other hand, concede that the Order lacks

express certification but nonetheless argue that it “certifies the settlement classes.”

Hookses’ Response at 2.

At the outset, Intervenors’ inability to identify any actual class certification

language in the Order defeats their own arguments. If there were any doubt, the

Court need only read the passages from the July 2015 preliminary approval hearing

where the district court made it absolutely clear that it was not recertifying the

Settlement Classes and was rejecting arguments that recertification was required

under any reading of the Settlement Agreement or the district court’s prior orders.

Ex. 3 to Motion to Dismiss Grigson’s Appeal, Tr. 122-23, 133-34. Indeed,

Grigson’s complaint to the district court was not that it wrongly certified a class

but instead that the district court erred in refusing to make another certification

determination. 5 Because, as Grigson complained, the district court did not even

decide certification, its Preliminary Approval Order cannot be one that “certifies or

4 In fact, the certification of this class action was affirmed pursuant to the Insurance Code, see Tex. Ins. Code § 541.251, as the Texas Supreme Court made clear in its prior ruling affirming the certification decision. See Lubin v. Farmers Grp., Inc., 222 S.W.3d 417, 424-27 (Tex. 2007). 5 See Ex. 3 to Motion to Dismiss Grigson’s Appeal, Tr. 122 (Grigson’s counsel objecting to “an order that does not certify classes”), Tr. 134:14-16 (Grigson’s counsel acknowledging on the record that the district court’s Order “will not have a separate certification or refusal to certify”); Ex. 4 to Grigson’s Response, at 4 (Grigson’s Response to Preliminary Approval, May 15, 2015) (“Grigson objects to preliminary approval of the proposed settlement without a hearing on whether the settlement classes can be certified and a Court determination on that issue.”).

4 refuses to certify a class.” See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(3).

Unable to quote any actual “express terms,” Intervenors instead present the Court

with an entirely twisted reading of the Preliminary Approval Order that fails to

provide interlocutory jurisdiction.

First, Intervenors have no basis, under Rule 42, Texas Insurance Code

§ 541.251, or any other authority, to argue that the mere recitation of the settlement

class definitions somehow turns an order into a certification decision. See

Grigson’s Response at 2. As is evident from the face of the Order, the district

court only acknowledged that it “previously certified” the classes, with definitions

that have not changed since 2003, and that the certification “has been affirmed in

its entirety by the appellate courts of Texas.” Ex. 1 to Motion to Dismiss

Grigson’s Appeal, at 2-3 ¶ 2. That is not a certification or a refusal to certify.

Second, Intervenors cannot establish interlocutory appellate jurisdiction

based on the district court’s approval of a revised class notice in the Preliminary

Approval Order. See, e.g., Citgo Ref. and Mktg., Inc. v. Garza, 94 S.W.3d 322,

327 (Tex. App.—Corpus Christi-Edinburg 2002, no pet.) (“[N]o Texas court has

held that an order approving the form of notice to a class is subject to interlocutory

appeal. . . . the present attempted appeal is dismissed for want of jurisdiction.”).

Third, contrary to Intervenors’ arguments, the Preliminary Approval Order

does not “fundamentally alter[]” the 2003 certification decision in this case. See

5 Grigson’s Response at 2. It does not alter the Settlement Classes one iota.

Grigson’s redline comparison in his Response actually demonstrates that any

changes made to the no collusion portion of the Order were minor and immaterial.

See Grigson’s Response at 3. In the Order, the district court affirms its previous

conclusion about no collusion and the State’s representation of the classes. Ex. 1

to Motion to Dismiss Grigson’s Appeal, at 3 ¶ 5. Nowhere does the court say that

it is making a new certification determination under Rule 42(a)(4) or Texas

Insurance Code § 541.251. Moreover, Intervenors’ “collusion” allegations were

considered in connection with preliminary approval of the settlement—not class

certification—and the preliminary approval is not subject to an interlocutory

appeal. See McAllen Med. Ctr., Inc. v. Cortez, 66 S.W.3d 227, 234 (Tex. 2001)

(“[T]he trial court’s preliminary approval of the [] settlement has no binding force.

. . . appellate review is premature.”).

Finally, Intervenors’ overall argument—that a class action order that merely

mentions class action requirements is an appealable order under § 51.014(a)(3)—is

contrary to the statute and well-established Texas law and public policy. 6 It was

“the [Texas] Legislature’s intent that section 51.014 be strictly construed . . . [and]

6 Hall v. Pedernales Elec. Co-op., Inc., 278 S.W.3d 536, 549 (Tex. App.—Austin 2009, no pet.) (“Appellate review of the trial court’s approval of a class settlement is limited, due to ‘the strong judicial policy favoring the resolution of disputes through settlement.’”); Briscoe v. Goodmark Corp., 102 S.W.3d 714, 716 (Tex. 2003) (law of the case doctrine).

6 that an appeal lies only from an order that ‘certifies or refuses to certify a class.’”

Bally Total Fitness Corp. v. Jackson, 53 S.W.3d 352, 355, 358 (Tex. 2001). It was

not the Legislature’s intent to “[a]llow[] interlocutory appeals whenever a trial

court refuses to change its mind” like the district court did here when it refused to

re-do its 2003 certification decision; a contrary rule “would invite successive

appeals and undermine the statute’s purpose of promoting judicial economy.” City

of Houston v. Estate of Jones, 388 S.W.3d 663, 667 (Tex. 2012) (per curiam).

Texas courts have even gone so far as to reject attempted interlocutory appeals

from orders modifying a class definition or the size of a class 7 and orders refusing

to decertify a class. 8

Thus, had Intervenors actually moved the district court to decertify the

classes based on their “collusion” and “conflict” arguments or the purported

7 Bally, 53 S.W.3d at 355 (“[T]he statute does not authorize an appeal of an order merely enlarging the size of a class or an order modifying a class’s definition.”); Tana Oil & Gas Corp. v. Cernosek, No. 03-02-00096-CV, 2002 WL 536308, at *1 (Tex. App.—Austin Apr. 11, 2002, no pet.) (dismissing an interlocutory appeal from a class modification order for lack of jurisdiction); Garza, 94 S.W.3d at 328 (“[A] trial court’s exercise of its continuing power to alter or amend the nature of an existing certified class by an order increasing its size does not ‘certify or refuse to certify a class’ for purposes of an interlocutory appeal. Similarly, an order modifying the class definition is not subject to interlocutory appeal . . . .”). 8 Estate of Jones, 388 S.W.3d at 667 (“A trial court’s refusal to decertify was not the functional equivalent of a decision granting certification; the Legislature could have added language to section 51.014(a)(3) to permit appeals from orders refusing to decertify a class, but did not.”); Rainbow Grp., Ltd. v. Wagoner, 219 S.W.3d 485, 491 (Tex. App.—Austin 2007, no pet.) (“[A]n order denying a motion to decertify a class is not within the scope of the statute authorizing interlocutory appeals.”); Union Pac. Res. Grp., Inc. v. Hankins, 51 S.W.3d 738, 740-41 (Tex. App.—El Paso 2001, no pet.) (holding that the trial court’s orders supplementing a class certification order and denying a motion to reconsider certification were not appealable).

7 termination of the prior settlement, clear authority from the Texas Supreme Court

would have precluded an appeal from an order denying that relief. Yet Intervenors

ask this Court to uphold jurisdiction over these same issues, where they never even

attempted to modify, much less move to decertify, the Settlement Classes. If

intervenors could create appellate jurisdiction over class action settlements merely

by refraining from actually filing a formal motion to decertify, the limits on

jurisdiction enforced by the Texas Supreme Court would be rendered illusory.

The district court’s Preliminary Approval Order had zero impact on the

certified classes, precluding any legitimate argument for an interlocutory appeal at

this time. The Preliminary Approval Order only preliminarily approved the

Settlement Agreement and authorized that a revised class notice, 12 years overdue,

finally be sent to the 1.8 million absent class members. Such an order does not fit

within the legislature’s small window for interlocutory appeals.

II. The Preliminary Approval Order Is Not Otherwise Appealable

A. The 2003 Certification Still Governs, As the Law of the Case and As Recognized by the District Court and the Settling Parties Intervenors try to manufacture appellate jurisdiction by arguing that, at the

time of the Preliminary Approval Order, the class settlement in this case and

previously certified classes had “terminated” or been “abandoned” and thus the

Settling Parties and district court are somehow “abrogating” appellate jurisdiction

8 by omitting express certification from the Order. 9 Grigson’s Response at 4-12;

Hookses’ Response at 3. These arguments are contrary to the express language of

the 2003 certification order, the settlement documents in this case, and the intent of

the Settling Parties and the district court—all of which have maintained that the

2003 certification still governs. 10 In any event, the Settling Parties’ agreement

could not abrogate the orders and opinions of the district court, this Court, and the

Texas Supreme Court.

Under all iterations of the Settlement Agreement, certification of the

Settlement Classes can be vacated only “[i]f this Settlement Agreement is

terminated pursuant to its terms, or if the Effective Date does not occur for any

reason.” Ex. 6 to Grigson’s Response, at 8 § III.5; Ex. 13 to Grigson’s Response,

at 8 § III.5. Intervenors have not argued that any of these events have occurred,

9 But, contradictorily, Grigson claims earlier in his Response that the certification is “express.” See Grigson’s Response at 2-3. 10 See Ex. 1 to Motion to Dismiss, at 2-3 ¶ 2; Ex. 3 to Motion to Dismiss, Tr. 122-23 (recognizing the Settling Parties’ position “that the class was previously certified . . . and that the class has never been decertified,” before stating that the district court will enter the Settling Parties’ preliminary approval order as presented without any re-certification language). Grigson’s excerpted quote from the September 4, 2014, hearing (Response at 8) mischaracterizes the statements by the district court, which later recognized the updated 2013 settlement as merely a “continuation” of the 2003 settlement and clarified, at the preliminary approval hearing, its intent not to engage in re-certification. Ex. 1 to Reply, 9/4/2014 Hearing Tr. 58:8-16; see also id. at 55-58 (full discussion); Ex. 3 to Motion to Dismiss Grigson’s Appeal, Tr. 134:7-18 (“[Y]ou were each trying to spin my prior comments on the record to be a ‘oh, we need to recertify this class’ from your perspective and ‘no we don't’ from their perspective. . . . It’s going to be the order they’ve proposed.”); Ex. 3 to Reply, 4/29/2014 Hearing Tr. 104 (“We did all of the standards of class certification. I don’t want to redo them.”).

9 nor could they. Under the settlement’s terms, only the parties to the agreement—

and not an intervenor like Grigson or the Hookses—have the right to terminate it,

and neither Settling Party has exercised that right. See Ex. 6 to Grigson’s

Response, at 14 §§ VII.1, VII.4; Ex. 13 to Grigson’s Response, at 15-16 §§ VII.1,

VII.4. Indeed, despite a decade of delay and failed appeals by intervenors

(including the Hookses and the former client of Grigson’s counsel), the Settling

Parties have maintained, and only enhanced the benefits in, their agreement. And

while the “Effective Date” (or final judgment) has not yet occurred, it can still

occur (even if Intervenors prevailed on their baseless appeals). See Ex. 6 to

Grigson’s Response, at 2; Ex. 13 to Grigson’s Response, at 2.

Furthermore, the Settlement Agreement in this case expressly allows and

contemplates that the Settling Parties would amend and modify the agreement in

writing, as the parties have done, without terminating the agreement or

certification. See Ex. 6 to Grigson’s Response, at 17 § X.3; Ex 13 to Grigson’s

Response, at 18 § X.3. Contrary to Intervenors’ assertions (Grigson’s Response at

5; Hookses’ Response at 3-4), the 2013 Second Amended Settlement Agreement

modified the 2003 Settlement Agreement in this case as little as possible, not

renegotiating any settlement terms and only bringing the settlement current, but it

did not require the parties to re-seek class certification. See Ex. 13 to Grigson’s

Response, at 8 § III.2. And the 2015 Supplement expressly provides that the

10 Settling Parties have fulfilled the requirement of obtaining class certification,

leaving no doubt of their intention that the Second Amended Settlement

Agreement and Supplement have no impact on the class definitions as previously

certified. Ex. 11 to Grigson’s Response at 2 § III.

The district court’s decision in 2014 not to preliminarily approve the Second

Amended Settlement Agreement (that, along with the 2015 Supplement, was just

preliminarily approved) also had no effect on certification. Contra Grigson’s

Response at 7. The “termination clause” excerpted by Grigson from the Second

Amended Settlement Agreement states only that “[i]n the event that the Court were

not to approve and certify the Settlement Classes in all respects as defined in this

Settlement Agreement (1) any stipulations and agreements made herein are null

and void.” Grigson’s Response at 7. There can be no question that the district

court has certified and the appellate courts have affirmed the Settlement Classes in

all respects as they are defined in the current Settlement Agreement. In sum,

neither Grigson nor the Hookses have any basis to argue “termination” or

“abandonment” of the 2003 certification. 11

11 Indeed, Intervenors’ tortured contractual reading is fundamentally at odds with hornbook contract law. It does not comport with the plain language of the Settlement Agreement; it is contrary to the expressed (and agreed) intent of the parties that signed the Settlement Agreement; and it has been rejected by the district court. In no case of which the Settling Parties are aware are non-signatories to a contract permitted to tell contracting parties that their agreement means something different than what they think and intended it to mean. Certainly, Intervenors cite to no authority for such a breathtaking usurpation of the law of contracts.

11 Grigson nonetheless brazenly asserts the “complicity of the trial court” in

this alleged effort to “abrogate” appellate jurisdiction. Grigson’s Response at 12;

see also id. at 9-12. As evidenced by the voluminous record and colloquy with

Grigson’s counsel, the district court heard Grigson’s and the Hookses’ objections,

as well as the evidence and arguments presented by the Settling Parties, and ruled

against Grigson and the Hookses. See Grigson’s Response at 10-11. There is

nothing complicit about that. Moreover, “a trial court is afforded considerable

authority and discretion in . . . decertifying or modifying the class if necessary as

the case develops.” Philadelphia Am. Life Ins. Co. v. Turner, 131 S.W.3d 576, 585

(Tex. App.—Fort Worth 2004, no pet.). None of the Intervenors even moved the

district court to invoke that discretion. The July 1-2, 2015, hearing was instead

about preliminary approval of the Settlement Agreement. Even if the Preliminary

Approval Order “might be wrong . . . [that] does not make it appealable, else all

alleged irregularities in a class-action suit would be immediately subject to

review.” Bally, 53 S.W.3d at 355-56. An appeal can be taken from the final

judgment if the Settlement Agreement is ultimately approved. But Grigson and the

Hookses lack any basis for invoking appellate jurisdiction at this time.

B. The District Court’s Preliminary Approval Order Did Not Fundamentally Change the Nature of the Settlement Classes Grigson and the Hookses also claim that this Court has appellate jurisdiction

over the Preliminary Approval Order even if the Order says nothing about

12 certification. Grigson’s Response at 12; Hookses’ Response at 9-10. The only

case they cite for that proposition, Phillips Petroleum Co. v. Yarbrough, 405

S.W.3d 70 (Tex. 2013), fails to support their argument. Phillips and the earlier

case that it relies on, De Los Santos v. Occidental Chemical Corp., 933 S.W.2d

493 (Tex. 1996) (per curiam), stand only for the “narrow” proposition that an

order, with no express certification, is appealable only if “it alters the fundamental

nature of the class.” Id. at 494; Phillips, 405 S.W.3d at 76.

In De Los Santos, after the district court previously certified a litigated opt-

out class, the parties settled and the class counsel, contrary to its previous position,

agreed to turn the opt-out class into a mandatory class, which the district court then

certified. 933 S.W.2d at 494. The Texas Supreme Court ruled that that specific

order was subject to an interlocutory appeal because “[c]hanging a class from opt-

out to mandatory does not simply enlarge its membership; it alters the fundamental

nature of the class.” Id. at 494. The Texas Supreme Court has since construed De

Los Santos as a “narrow ruling” that only covers orders that fundamentally alter

class certification. Bally, 53 S.W.3d at 355-56; see also Tana Oil & Gas Corp. v.

Cernosek, No. 03-02-00096-CV, 2002 WL 536308, at *1 (Tex. App.—Austin Apr.

11, 2002, no pet.) (dismissing appeal for lack of jurisdiction where there was “no

fundamental change in the class certification order”); Garza, 94 S.W.3d at 328

(“[A]n order that merely alters attributes of a class and does not affect the

13 underlying certification of the action as a class action is not an order subject to

interlocutory appeal under article 51.014(a)(3).”).

In Phillips, the Texas Supreme Court once again emphasized that the “ruling

in De Los Santos is narrow.” Phillips, 405 S.W.3d at 76. In that case, involving a

litigated class action, the class representative amended her petition after class

certification to add a new claim; the defendant moved for a ruling to preclude

adding the new claim as part of the class and for a new certification hearing, which

the district court denied. Id. at 72. The Texas Supreme Court found, for that

narrow circumstance, that appellate jurisdiction existed because the district court’s

order “changed the fundamental nature of the class in allowing the addition of the

claim.” Id. at 80.

Grigson and the Hookses have failed to, and could not, demonstrate that the

Preliminary Approval Order in this case has changed or altered “the fundamental

nature of the class[es]” that were previously certified by the district court in 2003

and affirmed by this Court and the Texas Supreme Court. De Los Santos, 933

S.W.2d at 494 (emphasis added). The class definitions or structure have not been

changed in any way. Unlike Phillips and De Los Santos, there has been no change

from opt-out to mandatory. Nor has any new claim been added. Instead, while the

Settling Parties updated their settlement in 2013 and 2015, they did not change the

nature of the classes or the claims settled, and the class definitions and

14 fundamental settlement structure in this case have remained exactly the same since

the 2003 certification order that was affirmed by this Court in 2009. See Ex. 13 to

Grigson’s Response, at 5; Lubin v. Farmers Grp., Inc., No. 03-03-00374-CV, 2009

WL 3682602 (Tex. App.—Austin Nov. 6, 2009, no pet.). 12

Grigson’s and the Hookses’ arguments in their Responses instead target

either the Settling Parties’ maintenance of settlement terms, entered into and

preliminarily approved in 2003, or issues that are irrelevant to certification and

settlement approval or that pertain only to preliminary approval of the settlement’s

terms—none of which are appealable at this time:

• Intervenors both complain about the State’s decision, as class counsel, to maintain the original settlement term that undistributed settlement proceeds will go to the Texas Unclaimed Property fund. This is a baseless challenge to a settlement term that not only existed in 2003 but cannot, under Texas law, be appealed at this time; 13

• Intervenors allege that the Settling Parties, by cooperating in post- settlement efforts (as settling parties do), have somehow participated in “collusion.” Once again, they lack any basis for that serious accusation, 14 which, as shown above, is not appealable at this time;

12 These and other facts are also in the personal knowledge of the undersigned, and so, no affidavit in support is needed. TEX. R. APP. P. 10.2. 13 See Cortez, 66 S.W.3d at 234 (at preliminary approval, “the proposed settlement’s terms do not affect the parties or the proceedings, and appellate review is premature”). This challenge and its erroneous citation to the Highland Homes v. State case were also fully refuted by the Texas Commissioner of Insurance, David Mattax, at the July 1, 2015, preliminary approval hearing. Ex. 2 to Reply, Tr. 94:17-96:11, 137:7-138:4, 234:11-236:18; see also id. at 71:7-74:2. 14 As the Supreme Court has made clear, the question of “collusion” turns on whether or not the settlement was “negotiated at arms’ length.” Gen. Motors Corp. v. Bloyed, 916 S.W.2d 949, 955

15 • Grigson’s cursory and groundless objection to the joint representation of the Farmers Parties by their counsel of 13 years, from 2002 to the present, is irrelevant to the settlement and does not transform the Preliminary Approval Order into an appealable order; 15

• Grigson asserts a frivolous “ex parte” allegation, related to his denied Motion to Disqualify, that is not only grounded in no law or facts but is irrelevant to certification and the settlement; 16

• The Hookses claim, without any actual evidence, that class membership has changed because a “quarter” of class members “have likely expired” or died. Even if true, the certified classes are still the same, as previously recognized by the district court and even the Hookses’ counsel. 17 In any event, Texas law is clear that modification of class size (which was not even done in the Preliminary Approval Order) does not give rise to an interlocutory appeal; 18 and

(Tex. 1996). Intervenors do not challenge the negotiation of any settlement terms but merely challenge the Settling Parties’ decision to stick with the law of the case. That is not collusion. 15 See Garza, 94 S.W.3d at 329 (“[The Texas Supreme Court] did not hold . . . that a conflict of interest alone, even if one is created, transforms an order that is not otherwise subject to interlocutory appeal into one that is.”). In any event, this “conflict” allegation was fully heard and rejected by the district court in December 2014 when it refused to grant Grigson’s baseless Motion to Disqualify opposing counsel, filed in September 2014 (12 years after the joint representation started) and joined in by the Hookses. Grigson and the Hookses have never sought a writ of mandamus from that ruling, and now it is far too late. 16 With no evidence whatsoever, Grigson continues to make the extraordinary claim that the mediator in this case, former Judge Patrick Keel, who presided over a mediation that Grigson refused to participate in, improperly contacted the district court at the Settling Parties’ request; this allegation was refuted by mediator Keel in his testimony at the July 1, 2015, preliminary approval hearing. Ex. 2 to Reply, Tr. 59:19-60:8. 17 When the Hookses previously made this same argument, the district court rejected it and explained, “Whether they died or divorced or remarried or whatever, it’s still the same group of people”; in response, the Hookses’ counsel conceded, “Well, in the abstract, the definition is still the same definition.” Ex. 3 to Reply, 4/29/2014 Hearing Tr. 103 (emphasis added). The Hookses also previously claimed in 2014, again with no evidence, that “10 percent or so” of class members had died, so their “death” figure has more than doubled in just a year. Id. at 102. 18 Bally, 53 S.W.3d at 355 (“[T]he statute does not authorize an appeal of an order merely enlarging the size of a class or an order modifying a class’s definition.”); Garza, 94 S.W.3d at 328 (“[A] trial court’s exercise of its continuing power to alter or amend the nature of an existing

16 • The Hookses cite several settlement updates (the enhancement of $10 million in settlement funds to class members, a carve-out in the released claims, and elimination of the State’s attorneys’ fees)—but fail to explain how those updates alter the fundamental nature of the Settlement Classes—as opposed to the Settlement Agreement. The updates are preliminarily approved settlement terms that cannot be appealed at this time.

See Grigson’s Response at 12-14; Hookses’ Response at 4-9.

In short, Grigson and the Hookses have no basis to argue, under De Los

Santos, Phillips, or any other Texas authority, that they can take an appeal from a

Preliminary Approval Order that effects no change to any aspect of the previously

certified classes. This Court therefore lacks appellate jurisdiction to and cannot

reach the merits of Grigson’s and the Hookses’ challenges to the terms of the

settlement until after a final judgment is signed. 19

III. A Stay of Class Notice Is Unwarranted and Would Be Unnecessary and Unfair to the Other Class Members A stay of the sending of class notice is not required or supported by any

legal, factual, or equitable basis, as demonstrated in the Appellees’ Joint Response

to Appellant Grigson’s Emergency Motion to Stay the Sending of Class Notice

(“Joint Response to Stay Motion”), which is incorporated here by reference.

certified class by an order increasing its size does not ‘certify or refuse to certify a class’ for purposes of an interlocutory appeal.”). 19 In stark contrast to the evidence cited by the Settling Parties, Grigson and the Hookses cite no evidence from the record to support any of their allegations. This utter lack of evidence is particularly egregious given the severity of the baseless allegations they have lodged against the district court, the mediator, and the Settling Parties and their counsel in this case.

17 First, in his Response, Grigson offers no legal authority for his argument

(which was not even raised in his Stay Motion) that class notice is somehow

automatically stayed in this case. Instead, as demonstrated above, because Grigson

has no basis for invoking the Court’s interlocutory appellate jurisdiction, he has no

basis for staying any proceeding in the district court—whether automatic or

discretionary.

Second, as refuted in the Joint Response to the Stay Motion, sending class

notice as currently scheduled would not notify the class “of a hearing that cannot

happen,” nor will it interfere with the appellate process. See Grigson’s Response at

14-15; Joint Response to Stay Motion at 3-5. There is no appellate jurisdiction to

be interfered with but, even if there were, no interference would occur. Under the

Preliminary Approval Order and the Class Notice in this case, staying class notice

is unnecessary even if the final hearing in this case cannot occur as scheduled

because both documents contemplate that possibility and inform potential class

members of it. Ex. 1 to Motion to Dismiss Grigson’s Appeal, at 9, ¶ 15; Ex. 1 to

Motion to Dismiss Grigson’s Appeal, at Ex. 1 (Class Notice), at 9 ¶ 21. The result

would therefore be the same as any other case where a hearing date needed to be

moved; there is nothing “absurd” about that common occurrence.

Third, Grigson’s claim that the Court should grant a stay in 2015 because it

granted a stay in 2003 is unavailing. In 2003, the appeal concerned the district

18 court’s express certification decision, and the primary issue before the Court then

was whether the State could bring and certify this class action at all. See Lubin,

222 S.W.3d at 420. Today’s circumstances are entirely different, particularly

given the long appellate history of this case, warranting a different result. The fact

that the district court’s class certification decision has already been the subject of a

full round of appellate review is a reason against staying notice now, not, as

Grigson seems to think, a reason in favor of yet further delay.

Finally, class notice will not impose any “irreparable” harm on class

members. See Grigson’s Response at 15-16. As well-chronicled in the annals of

this case, the district court performed the required analysis and scrutiny in 2003

when it certified the Settlement Classes in this case that, to this day, have remained

fundamentally the same. See Hookses’ Response at 8 (“[H]eightened scrutiny is

required to protect the absent class members. The trial court did this in 2003.”).

And as established with evidentiary support in the Joint Response to Stay Motion,

class notice will not be paid by “policyholders’ own money” and will not harm

policyholders who are class members in any way. Joint Response at Stay Motion,

at 6-7 & Exs. 1-3. Grigson, on the other hand, despite being apprised of the

Settling Parties’ arguments and presentation of evidence, has yet to produce any

evidence to support his conclusory allegation of harm.

19 It is instead Grigson’s and the Hookses’ improperly attempted interlocutory

appeals and Grigson’s Stay Motion that will harm the approximately 1.8 million

class members who have effectively been shut out of the settlement approval

process for the past 12 years. No more delay should be allowed. Grigson and the

Hookses had the full opportunity to participate in a full-blown preliminary

approval hearing (the second for the Hookses and Grigson’s counsel), and they

failed in their opposition—a failure that is not appealable. The other absent class

members are entitled to be informed of the preliminarily approved settlement as

soon as practicable.

CONCLUSION AND PRAYER For these reasons and those stated in their Joint Motions to Dismiss for Lack

of Appellate Jurisdiction, the Settling Parties request that the Court: (i) expedite

consideration of their requests; (ii) grant the Appellees’ Joint Motions to Dismiss

Intervenors Grigson’s and the Hookses’ Appeals for Lack of Appellate

Jurisdiction; (iii) dismiss the two appeals; and (iv) grant such other and further

relief to which the Appellees are entitled.

20 Date: August 12, 2015 Respectfully submitted,

/s/ M. Scott Incerto Marcy Hogan Greer State Bar No. 08417650 mgreer@adjtlaw.com ALEXANDER DUBOSE JEFFERSON & TOWNSEND LLP 515 Congress Avenue, Suite 2350 Austin, Texas 78701-3562 Telephone: (512) 482-9300 Facsimile: (512) 482-9303

M. Scott Incerto State Bar No. 10388950 scott.incerto@nortonrosefulbright.com NORTON ROSE FULBRIGHT US LLP 98 San Jacinto Blvd., Suite 1100 Austin, Texas 78701 Telephone: 512-474-5201 Telecopier: 512-536-4598

Darryl W. Anderson State Bar No. 24008694 darryl.anderson@nortonrosefulbright.com Geraldine W. Young State Bar No. 24084134 geraldine.young@nortonrosefulbright.com NORTON ROSE FULBRIGHT US LLP 1301 McKinney, Suite 5100 Houston, Texas 77010 3095 Telephone: 713 651 5151 Telecopier: 713 651 5246

ATTORNEYS FOR DEFENDANTS-APPELLEES FIRE UNDERWRITERS ASSOCIATION, FARMERS GROUP, INC., FARMERS UNDERWRITERS ASSOCIATION, FARMERS INSURANCE EXCHANGE, FIRE INSURANCE EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY, TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS ASSOCIATION

21 Respectfully submitted,

ROBERT O’KEEFE Division Chief Financial Litigation, Tax, and Charitable Trusts Division

/s/ Joshua R. Godbey JOSHUA R. GODBEY Assistant Attorney General LEAD ATTORNEY State Bar No. 24049996 Telephone: (512) 475-4209 joshua.godbey@texasattorneygeneral.gov RYAN S. MINDELL Assistant Attorney General State Bar No. 24089707 Telephone: (512) 936-1721 ryan.mindell@texasattorneygeneral.gov JENNIFER S. JACKSON Assistant Attorney General State Bar No. 24060004 Telephone: (512) 463-9917 jennifer.jackson@texasattorneygeneral.gov Financial Litigation, Tax, and Charitable Trusts Division P.O. Box 12548 Austin, Texas 78711-2548 Fax: (512) 477-2348)

ATTORNEYS FOR PLAINTIFFS-APPELLEES, THE STATE OF TEXAS, THE TEXAS DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF INSURANCE

22 CERTIFICATE OF SERVICE On August 12, 2015, I electronically filed the Appellees’ Reply in Further

Support of Joint Motions to Dismiss Appellants Grigson’s and the Hookses’

Appeals for Lack of Appellate Jurisdiction with the Clerk of the Court using the

eFile.TXCourts.gov electronic filing system which will send notification of such

Joe K. Longley Michael J. Woods Philip K. Maxwell 8620 N. New Braunfels, Ste. 522 1609 Shoal Creek Blvd. # 100 San Antonio, TX 78217 Austin, TX 78701 MichaelJWoods@sbcglobal.net Joe@JoeLongley.com phil@philmaxwell.com Pro Se Intervenor/Objector

Joseph C. Blanks P.O. Box 999 Doucette, TX 75942 blanxlex@gmail.com

23 CERTIFICATE OF COMPLIANCE WITH TEX. R. APP. P. 9.4(i) I certify that the foregoing document contains 6,966 words and complies

with the word limit set forth in Texas Rule of Appellate Procedure 9.4(i).

24 No. 03-15-00436-CV

CHARLES O. “CHUCK” GRIGSON, GERALD HOOKS, AND LESLIE HOOKS, Appellants,

v. THE STATE OF TEXAS; THE TEXAS DEPARTMENT OF INSURANCE; THE TEXAS COMMISSIONER OF INSURANCE; and FARMERS GROUP, INC. ET AL., Appellees.

On Appeal from the 261st Judicial District Court Travis County, Texas Cause No. D-1-GV-02-002501

APPENDIX TO APPELLEES’ REPLY IN FURTHER SUPPORT OF JOINT MOTIONS TO DISMISS APPELLANTS GRIGSON’S AND THE HOOKSES’ APPEALS FOR LACK OF APPELLATE JURISDICTION

Exhibit 1 Transcript Excerpts from the September 4, 2014, Hearing on Motions to Strike and Motion to Lift Stay on Discovery

Exhibit 2 Transcript Excerpts from the July 1, 2015, Hearing on Joint Motion for Preliminary Approval

Exhibit 3 Transcript Excerpts from the April 29, 2014, Hearing on Preliminary Approval

25 Exhibit 1 TO APPELLEES’ REPLY IN FURTHER SUPPORT OF JOINT MOTIONS TO DISMISS APPELLANTS GRIGSON'S AND THE HOOKSES' APPEALS FOR LACK OF APPELLATE JURISDICTION 1

1 REPORTER'S RECORD VOLUME 1 OF 1 VOLUME 2 TRIAL COURT CAUSE NO. D-1-GV-02-002501

3 STATE OF TEXAS, THE TEXAS ) IN THE DISTRICT COURT 4 DEPARTMENT OF INSURANCE, ) AND THE TEXAS ) 5 COMMISSIONER OF ) INSURANCE, ) 6 Plaintiffs, ) ) 7 VS. ) ) 8 ) FARMERS GROUP, INC., ) 9 FARMERS UNDERWRITERS ) TRAVIS COUNTY, TEXAS ASSOCIATION, FIRE ) 10 UNDERWRITERS ASSOCIATION, ) FARMERS INSURANCE ) 11 EXCHANGE, FIRE INSURANCE ) EXCHANGE, TEXAS FARMERS ) 12 INSURANCE COMPANY, ) MID-CENTURY INSURANCE ) 13 COMPANY OF TEXAS, AND ) FARMERS TEXAS COUNTY ) 14 MUTUAL INSURANCE COMPANY, ) Defendants. ) 261ST JUDICIAL DISTRICT 15 ------------------------------------------------- 16 HEARING ON MOTIONS TO STRIKE 17 AND MOTION TO LIFT STAY ON DISCOVERY

18 --------------------------------------------------

19 On the 4th day of September, 2014, the following

20 proceedings came on to be heard in the above-entitled

21 and numbered cause before the Honorable Scott H.

22 Jenkins, Judge presiding, held in Austin, Travis County,

23 Texas;

24 Proceedings reported by machine shorthand. 25 2

1 A P P E A R A N C E S

2 FOR THE PLAINTIFFS, THE STATE OF TEXAS, THE TEXAS 3 DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF INSURANCE: 4 DAVID C. MATTAX 5 SBOT NO. 13201600 Deputy Attorney General for Defense Litigation 6 JOSHUA GODBEY SBOT NO. 24049996 7 Assistant Attorney General OFFICE OF THE ATTORNEY GENERAL 8 P.O. Box 12548 Austin, Texas 78711-2548 9 (512) 463-0150

11 FOR DEFENDANTS FIRE UNDERWRITERS ASSOCIATION, FARMERS GROUP, INC., FARMERS INSURANCE EXCHANGE, FIRE INSURANCE 12 EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE 13 COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY, TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS 14 ASSOCIATION:

15 RICHARD N. CARRELL SBOT NO. 03871000 16 LAYNE KRUSE SBOT NO. 11742550 17 DARRYL ANDERSON SBOT NO. 24008694 18 FULBRIGHT & JAWORSKI 1301 McKinney, Suite 5100 19 Houston, Texas 77010-3095 (713) 651-5151 20 M. SCOTT INCERTO 21 SBOT NO. 10388950 FULBRIGHT & JAWORSKI 22 98 San Jacinto Boulevard, Suite 1100 Austin, Texas 78701 23 (512) 474-5201 24

25 3

1 A P P E A R A N C E S (CONTINUED) 2

3 MARCY HOGAN GREER 4 SBOT NO. 08417650 ALEXANDER, DUBOSE, JEFFERSON & TOWNSEND 5 515 Congress Avenue, Suite 2350 Austin, Texas 78701 6 (512) 482-9300

8 FOR INTERVENORS GERALD HOOKS AND LESLY HOOKS:

9 JOSEPH BLANKS 10 SBOT NO. 02456770 LAW OFFICE OF JOSEPH C. BLANKS 11 P.O. Box 999 Doucette, Texas 75942 12 (409) 837-9707

14 FOR INTERVENOR MICHAEL J. WOODS:

15 MICHAEL J. WOODS, PRO SE 8620 N. New Braunfels #522 16 San Antonio, Texas 78217 (210) 822-1560 17 18

22 23

25 4

3 FOR INTERVENOR CHARLES O. "CHUCK" GRIGSON: 4 JOE K. LONGLEY 5 SBOT NO. 12542000 LAW OFFICE OF JOE K. LONGLEY 6 1609 Shoal Creek Boulevard, Suite 100 Austin, Texas 78701 7 (512) 477-4444

8 PHILIP K. MAXWELL SBOT NO. 13254000 9 LAW OFFICE OF PHILIP K. MAXWELL 1609 Shoal Creek Boulevard, Suite 100 10 Austin, Texas 78701 (512) 947-5434 11

13 14

16 17

25 5

1 I N D E X

2 VOLUME 1

3 HEARING ON MOTIONS TO STRIKE

4 AND MOTION TO LIFT STAY ON DISCOVERY

5 SEPTEMBER 4, 2014

6 Page Vol. 7 Announcements............................ 8 1 8

9 MOTION TO STRIKE INTERVENTION OF WOODS

10 Argument by Mr. Incerto.................. 15 1

11 Argument by Mr. Woods.................... 25 1

12 Further Argument by Mr. Incerto.......... 29 1

13 MOTION TO STRIKE INTERVENTION OF GRIGSON 14 Argument by Mr. Incerto.................. 30 1 15 Argument by Mr. Longley.................. 39 1 16 Further Argument by Mr. Incerto.......... 54 1 17

18 Comments by Mr. Mattax................... 60 1

19 Court's Ruling........................... 73 1

20 Adjournment.............................. 101 1

21 Court Reporter's Certificate............. 102 1 22 23

25 55

1 judgment on the settlement that went up through appeals.

2 That has not occurred at this point. This language was

3 brought forward and, you know --

4 THE COURT: What am I to make of the

5 language farther up the page, though, that he didn't

6 cite, Farmers parties do not agree to certification of

7 the settlement classes for any purpose other than to

8 effectuate this settlement agreement?

9 Well, I haven't approved this settlement

10 agreement. In fact, I rejected it. So you are now in a

11 posture where you don't agree with the class action.

12 And in fact, you were the party who wanted the class

13 action 12 years ago. So it seems to me we're back at

14 square one with no settlement agreement, no certified

15 class, because no party -- I mean, you were the party

16 who asked for it, and now you don't agree to it,

17 according to your own signed document, and the State

18 really wasn't the one who asked for it to begin with.

19 So what am I to make of all that?

20 MR. INCERTO: Well, I have to respectfully

21 disagree with the Court's analysis on that. I think we

22 do have a class action. I believe it's law in the case

23 from the Supreme Court. I believe that this particular

24 provision --

25 THE COURT: Well, then is this just 56

1 gratuitous? You put it in this -- this is the one you

2 signed, and you put it as part of your motion filed in

3 August of 2013 that you wanted me to read and consider

4 to approve the settlement and to approve -- well, to

5 approve the settlement, get preliminary approval. Now

6 that I have declined to do that, I mean, this is the

7 language that you kept in there. And you obviously gave

8 it a lot of attention because I looked at the changes

9 you made.

10 MR. INCERTO: Your Honor, we tried to

11 change as little as possible and carried forward

12 everything from the prior agreement except what

13 absolutely needed to be changed because of I said the

14 problem with the credit notice -- credit reports not

15 being --

16 THE COURT: Well, does that mean if I

17 decline to approve a settlement, this settlement, and

18 you're now going to litigate it -- because I went back

19 and read what now Justice Boyd said at the time when he

20 was a witness, we'll have to decide how to structure

21 this trial in this case. In other words, you are

22 agreeing to a class action trial or not?

23 MR. INCERTO: No, Your Honor. We agreed

24 for purposes of this settlement agreement --

25 THE COURT: Exactly. 57

1 MR. INCERTO: -- if this Court denies the

2 preliminary approval.

3 THE COURT: Exactly. Since I've denied

4 it, it seems to me now there's no agreement. I've got

5 the State who didn't want to do it -- didn't ask to do

6 it to begin with, Farmers who wanted to do it because

7 they wanted to effectuate a settlement, and now the

8 Court has declined to approve the settlement. I'm just

9 thinking that that language is significant. You don't

10 think that it is, apparently.

11 MR. INCERTO: Your Honor, I don't think

12 the Court has denied preliminary approval. There's no

13 order denying preliminary approval of the current

14 settlement agreement. The Court has expressed some

15 concerns and some issues --

16 THE COURT: Well, actually, that's what we

17 started off with at this hearing. I thought I was

18 pretty clear on April 29th I'm declining to approve the

19 second amended settlement agreement. I thought that was

20 pretty clear, and I thought that you and I had that sort

21 of meeting of the minds at the beginning of this

22 hearing, but I guess if I wasn't clear, I'm hopefully

23 clear now. So what does that mean?

24 MR. INCERTO: Well, Your Honor, what it

25 means is we've got -- we've -- the parties have been 58

1 working on a settlement agreement that we believe

2 addresses the issues that the Court has outlined.

3 THE COURT: And that's because you knew I

4 was refusing to approve this and so you worked on a new

5 one. You've been working since then on a new one.

6 MR. INCERTO: We've been working on a new

7 one.

8 THE COURT: And that makes perfect sense.

9 I thought you would. And so it comes back to this line

10 here, since I did not approve -- effectuate this

11 settlement agreement, I didn't approve it -- I guess

12 you're saying we're still trying to effectuate it. This

13 will be the third amended, and therefore, that's sort of

14 a continuation of our effort, and as long as we can

15 enter into a settlement agreement, we're still agreeing

16 to class action, but in no other circumstances.

17 MR. INCERTO: That's correct.

18 THE COURT: All right. I get it.

19 MR. INCERTO: Your Honor, let me address

20 some of the other arguments that were made and starting

21 with this one. Mr. Grigson wants to talk about investor

22 meetings and who's going to pay. It's simply like I

23 said in my opening remarks. They want to talk about the

24 merits of the issues they raise before they establish --

25 and frankly in lieu of establishing that they have a 102

1 REPORTER'S CERTIFICATE

3 THE STATE OF TEXAS )

4 COUNTY OF TRAVIS )

5 I, Chavela V. Crain, Official Court

6 Reporter in and for the 53rd District Court of Travis

7 County, State of Texas, do hereby certify that the above

8 and foregoing contains a true and correct transcription

9 of all portions of evidence and other proceedings

10 requested in writing by counsel for the parties to be

11 included in this volume of the Reporter's Record, in the

12 above-styled and numbered cause, all of which occurred

13 in open court or in chambers and were reported by me.

14 I further certify that this Reporter's Record of

15 the proceedings truly and correctly reflects the

16 exhibits, if any, offered in evidence by the respective

17 parties.

18 WITNESS MY OFFICIAL HAND this the 10th day of

19 September, 2014.

20 /s/ Chavela V. Crain 21 Chavela V. Crain Texas CSR 3064, RMR, CRR 22 Expiration Date: 12/31/2015 Official Court Reporter 23 53rd District Court Travis County, Texas 24 P.O. Box 1748 Austin, Texas 78767 25 (512) 854-9322 * Exhibit 2 TO APPELLEES’ REPLY IN FURTHER SUPPORT OF JOINT MOTIONS TO DISMISS APPELLANTS GRIGSON'S AND THE HOOKSES' APPEALS FOR LACK OF APPELLATE JURISDICTION 1

1 REPORTER'S RECORD VOLUME 1 OF 2 VOLUMES 2 TRIAL COURT CAUSE NO. D-1-GV-02-002501 3 STATE OF TEXAS, THE TEXAS ) IN THE DISTRICT COURT DEPARTMENT OF INSURANCE, ) 4 AND THE TEXAS ) COMMISSIONER OF ) 5 INSURANCE, ) Plaintiffs, ) 6 ) VS. ) 7 ) ) 8 FARMERS GROUP, INC., ) FARMERS UNDERWRITERS ) TRAVIS COUNTY, TEXAS 9 ASSOCIATION, FIRE ) UNDERWRITERS ASSOCIATION, ) 10 FARMERS INSURANCE ) EXCHANGE, FIRE INSURANCE ) 11 EXCHANGE, TEXAS FARMERS ) INSURANCE COMPANY, ) 12 MID-CENTURY INSURANCE ) COMPANY OF TEXAS, AND ) 13 FARMERS TEXAS COUNTY ) MUTUAL INSURANCE COMPANY, ) 14 Defendants. ) 261ST JUDICIAL DISTRICT

15 -------------------------------------------------

16 HEARING ON JOINT MOTION FOR 17 PRELIMINARY APPROVAL OF SECOND AMENDED SETTLEMENT AGREEMENT 18

19 --------------------------------------------------

20 On the 1st day of July, 2015, the following

21 proceedings came on to be heard in the above-entitled

22 and numbered cause before the Honorable Scott H.

23 Jenkins, Judge presiding, held in Austin, Travis County,

24 Texas;

25 Proceedings reported by machine shorthand. 2

2 FOR THE PLAINTIFFS, THE STATE OF TEXAS, THE TEXAS 3 DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF INSURANCE: 4 JOSHUA GODBEY 5 SBOT NO. 24049996 RYAN MINDELL 6 SBOT NO. 24089707 JENNIFER JACKSON 7 SBOT NO. 24060004 Assistant Attorney General 8 OFFICE OF THE ATTORNEY GENERAL P.O. Box 12548 9 Austin, Texas 78711-2548 (512) 475-4209 10

11 FOR DEFENDANTS FIRE UNDERWRITERS ASSOCIATION, FARMERS 12 GROUP, INC., FARMERS INSURANCE EXCHANGE, FIRE INSURANCE EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY 13 INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY, 14 TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS ASSOCIATION: 15 M. SCOTT INCERTO 16 SBOT NO. 10388950 NORTON ROSE FULBRIGHT 17 98 San Jacinto Boulevard, Suite 1100 Austin, Texas 78701 18 (512) 474-5201

19 DARRYL ANDERSON SBOT NO. 24008694 20 NORTON ROSE FULBRIGHT 1301 McKinney, Suite 5100 21 Houston, Texas 77010-3095 (713) 651-5151 22 MARCY HOGAN GREER 23 SBOT NO. 08417650 ALEXANDER, DUBOSE, JEFFERSON & TOWNSEND 24 515 Congress Avenue, Suite 2350 Austin, Texas 78701 25 (512) 482-9300 3

3 FOR INTERVENORS GERALD HOOKS AND LESLY HOOKS: 4 JOSEPH BLANKS 5 SBOT NO. 02456770 LAW OFFICE OF JOSEPH C. BLANKS 6 P.O. Box 999 Doucette, Texas 75942 7 (409) 837-9707

9 FOR INTERVENOR MICHAEL J. WOODS:

10 MICHAEL J. WOODS, PRO SE 8620 N. New Braunfels #522 11 San Antonio, Texas 78217 (210) 822-1560 12

13 FOR INTERVENOR CHARLES O. "CHUCK" GRIGSON: 14 JOE K. LONGLEY 15 SBOT NO. 12542000 LAW OFFICE OF JOE K. LONGLEY 16 1609 Shoal Creek Boulevard, Suite 100 Austin, Texas 78701 17 (512) 477-4444

18 PHILIP K. MAXWELL SBOT NO. 13254000 19 LAW OFFICE OF PHILIP K. MAXWELL 1609 Shoal Creek Boulevard, Suite 100 20 Austin, Texas 78701 (512) 947-5434 21

23 24

3 HEARING ON JOINT MOTION FOR 4 PRELIMINARY APPROVAL OF SECOND AMENDED SETTLEMENT AGREEMENT 5 JULY 1, 2015 6

7 Page Vol.

8 Announcements............................ 25 1

9 INTERVENOR GRIGSON'S WITNESSES 10 Direct Cross Vol. 11 PATRICK KEEL 12 By Mr. Maxwell 33 1

13 Page Vol.

14 Opening Statement by Mr. Godbey.......... 60 1

15 Opening Statement by Mr. Woods........... 78 1

16 PLAINTIFF STATE'S WITNESSES 17 Direct Cross Vol. 18 DAVID MATTAX 19 By Mr. Godbey 83 1 By Mr. Incerto 99 1 20 By Mr. Longley 106 1

21 22 23

1 I N D E X VOLUME 1 - CONTINUED 2 HEARING ON JOINT MOTION FOR 3 PRELIMINARY APPROVAL OF SECOND AMENDED SETTLEMENT AGREEMENT 4 JULY 1, 2015 5

6 DEFENDANT FARMERS' WITNESSES

7 Direct Cross Vol.

8 SHANNON WHEATMAN By Ms. Greer 160 1 9 By Mr. Maxwell 174 1 By Mr. Blanks 189 1 10 By Ms. Greer 200 1 By Mr. Maxwell 202 1 11 By Mr. Blanks 217 1

13 PLAINTIFF STATE'S WITNESSES

14 Direct Cross Vol.

15 DAVID MATTAX (CONTINUED) By Mr. Longley 219 1 16 By Mr. Blanks 252 1 By Mr. Woods 266 1 17 By Mr. Incerto 283 1 By Mr. Longley 290 1 18 By Mr. Woods 295 1

19 Page Vol. 20 Adjournment............................... 300 1 21 Court Reporter's Certificate.............. 301 1 22 23

25 59

1 he may have had information he learned about this case,

2 you may. I mean, I don't know.

3 Q. (BY MR. MAXWELL) Did you have any other

4 communication in which you learned things about this

5 case?

6 A. When?

7 Q. At any time.

8 A. I read about the case in the newspaper about

9 ten years ago, as I recall.

10 Q. All right. Nothing else?

11 A. Not to my recollection.

12 Q. You've read of Judge Jenkins' recollection of

13 this conversation as contained in the transcripts,

14 haven't you?

15 A. I have.

16 Q. And do you agree with those?

17 A. I do.

18 Q. All right. Well, just housekeeping,

19 Mr. Longley never gave you any authority to contact the

20 Court, did he?

21 A. Mr. Longley didn't participate in the

22 mediation, so no, he did not.

23 Q. All right. And you realize that it was an

24 ex parte contact?

25 THE COURT: I'm sorry. I couldn't -- 60

1 Q. (BY MR. MAXWELL) You realize it was an

2 ex parte contact with the Court, correct?

3 A. Mr. Maxwell, I don't agree with that. I do not

4 believe it is an ex parte communication when a party

5 chooses not to participate in a mediation and the

6 mediator gets the permission of the parties who do

7 participate to communicate with the Court. It never

8 occurred to me that that would be considered ex parte.

9 Q. Well, you have read the motion with regard to

10 having you testify, correct? In other words, my

11 response to the motion to quash, you've seen that,

12 haven't you?

13 A. I have.

14 Q. And you have seen the revisions that I have

15 quoted in the material?

16 A. I have.

17 Q. And that anything -- that any communication

18 with the Court where not all parties to the court

19 proceedings are present is an ex parte contact; you

20 understand that, don't you?

21 A. I do understand your argument.

22 Q. Well, the mediation statute doesn't talk about

23 ex parte, does it?

24 A. I don't believe the term ex parte appears in

25 the statute. 71

1 THE REPORTER: Getting this deal what?

2 MR. GODBEY: Getting this deal forward.

3 Sorry. When the mold acts up --

4 THE COURT: Just keep the pace slow and it

5 solves everything.

6 MR. GODBEY: Exactly, Your Honor.

7 Your Honor, Highland Homes isn't controlling on the

8 decision to preliminarily approve this settlement in

9 this case either. Highland Homes very clearly -- the

10 decision in Highland Homes very clearly says at the

11 beginning of the discussion that in that case the

12 Unclaimed Property Act does not apply in that

13 circumstance. And to be clear, the circumstance of the

14 settlement in the Highland Homes case involved a

15 settlement with checks that would go out. The checks

16 were valid for 90 days at which point they become void

17 and then they would be cy pres to The Nature

18 Conservancy.

19 So in the Highland Homes case they never

20 had to address Chapter 73 of the Property Code, which is

21 money that's held by financial institutions, because in

22 the Highland Homes case it was held by financial

23 institutions for 90 days and then it went out in cy pres

24 to The Nature Conservancy.

25 In our case we have no such provision that 72

1 voids out the checks or any such provision that

2 transfers money cy pres to a charitable institution. So

3 Chapter 73 of the Property Code becomes operative in our

4 case where it was not operative in the Highland Homes

5 decision.

6 The money will be transferred to the

7 settlement administrator. The settlement administrator

8 will, of course, put that money in their bank and checks

9 will be sent out. Those checks will be good. The

10 settlement money will remain in the bank account and at

11 which point Chapter 73.002 and 73.102 of the Property

12 Code become operative. The bank will be a depository

13 under 002 of that statute, which means they are subject

14 to the Unclaimed Property Act. And 102 provides the

15 checks that are cut that have not been cashed for three

16 years are presumed abandoned under the Unclaimed

17 Property Act. That's the difference between us and the

18 Highland Homes decision, because these checks will live

19 out there for three years, which will allow them to

20 become presumed abandoned by the Unclaimed Property Act

21 and delivered to the comptroller so that they can then

22 be claimed by absent class members down the road.

23 Furthermore, Highland Homes is really

24 fundamentally about the discretion of the class

25 representatives and the class counsel to make decisions 73

1 that they feel are in the best interest of the class as

2 a whole. And what we feel is in the best interest of

3 the class as a whole, it's the same thing that we felt

4 in 2003 when the provision -- the unclaimed property

5 provision was put in the settlement agreement. It was

6 never objected to at the time as being in any way unfair

7 to the class members. We feel the Unclaimed Property

8 Act is the best.

9 A narrow reading of the Highland Homes

10 decision that's being advanced by the intervenors in

11 this case would allow for a class action structure where

12 you could never return funds to absent class members who

13 don't request those funds in a very narrow window like

14 the 90-day window. You would be forced under that

15 decision to either cy pres the funds, which would not

16 benefit absent class members who don't fall into that

17 narrow window, or the settling parties would be forced

18 to pro rata out the funds to the class members who do

19 make claims or are easily found, which, of course, would

20 harm absent class members and could also, depending on

21 the structure of the settlement, prove to be a windfall

22 for those class members who do assert claims or do have

23 current addresses. The other option would be to revert

24 the money back to the party defendant, which as

25 Your Honor well knows is highly disfavored in class 74

1 action jurisprudence and really what is -- the argument

2 that has been --

3 THE COURT: You were here yesterday in

4 yesterday's hearing.

5 MR. GODBEY: Yes, Your Honor.

6 THE COURT: You heard that Mr. Maxwell was

7 suggesting that very thing. I believe that's what he

8 was suggesting. He'll let us know in a minute. Just

9 leave the money in the Exchanges. Did you hear that?

10 MR. GODBEY: I did, Your Honor.

11 THE COURT: Okay. That's where you're

12 going now. I thought you might.

13 MR. GODBEY: Yes, Your Honor. And so not

14 only is that reverting money to a party defendant, which

15 is highly disfavored, but it also does not benefit the

16 class as a whole. As has been argued, the class -- the

17 members of the class are not all current Farmers

18 policyholders anymore just by the passage of time.

19 THE COURT: He was suggesting I think

20 yesterday that they hold the money and just keep paying

21 it out over time whenever these claimants appear years

22 later, "I would like my money now, Exchange; please pay

23 me," I guess. That seems to be what he was saying

24 yesterday, but it was -- it was somewhat cryptic, but

25 that seemed to be the suggestion. Did you pick up on 94

1 Commissioner Karina Casari's testimony, they were

2 actually claiming --

3 THE COURT: Slow that down a little bit.

4 Deputy Commissioner --

5 THE WITNESS: Oh, I'm sorry. Deputy

6 Commissioner Karina, K-a-r-i-n-a, Casari,

7 K[sic]-a-s-a-r-i.

8 I did go back and read her testimony in

9 preparation for this hearing, and she reminded me that

10 at the time Farmers was claiming that this was a

11 politically charged trumped-up lawsuit at the time that

12 had no basis in law or fact. And so I think the fact

13 that we were able to, through some very difficult

14 negotiations in 2002, provide a lot of relief to the

15 Farmers policyholders, I think it was a great result

16 then, and I think it's even a better result now.

17 Q. (BY MR. GODBEY) Commissioner, regarding the

18 disposition of unclaimed funds under the settlement

19 agreement, do you think that it would be fair to class

20 members to put those unclaimed funds back into the

21 Farmers Exchanges?

22 A. No. Let me, if I may -- and I think it may

23 come up at a later date. But I recently entered into a

24 settlement agreement with State Farm, and there was a

25 provision in that agreement that any unclaimed proceeds 95

1 from that settlement were paid to the unclaimed property

2 fund. Let me explain why. The position of the

3 Department of Insurance is when a premium is overcharged

4 to a policyholder, then the company that collects that

5 excessive premium must return that to the policyholders.

6 And if the policyholders for whatever reason don't

7 collect it, it should go to the unclaimed property

8 fund --

9 THE REPORTER: I'm sorry. Don't collect

10 it?

11 THE WITNESS: Don't collect -- if the

12 policyholders --

13 THE COURT: For whatever reason don't

14 collect it is what he said.

15 THE WITNESS: Yes. Thank you. For

16 whatever reason don't collect that, then it's placed in

17 the unclaimed property fund to be held in perpetuity for

18 those policyholders. That has been the position of the

19 Department of Insurance in the past. That was the

20 position in that settlement. And until last year it had

21 been the position of the attorney general in all class

22 action settlements that the money should go into the

23 Unclaimed Property Act.

24 And so I think that it's the fairest thing

25 to do here, because, frankly, if you just return it to 96

1 surplus, it's not going to do anything. It's just going

2 to sit there. And so to sort of do what the Court did

3 in the Highland Homes case and basically have this Court

4 decide to extinguish the rights of those policyholders I

5 think is the wrong approach.

6 Now, Highland Homes did say that the class

7 action counsel has the authority to extinguish the

8 rights of absent class members, and therefore, the

9 attorney general has the authority to do that here,

10 extinguish their rights and give the money somewhere

11 else, but I would disagree with that.

12 THE COURT: The court reporter's been

13 going -- we all have -- close to an hour and a half now.

14 If you need to ask another question or two to close a

15 topic that's okay, but we're going to need to break

16 soon. Is this a good break time or do you need to cover

17 anything else?

18 MR. GODBEY: Your Honor, I estimate I

19 probably only have five minutes left with Commissioner

20 Mattax. I would be happy to break now if that works

21 best for everyone, but if you'd rather that I break when

22 I pass --

23 THE COURT: I don't want you to feel

24 rushed. Five minutes comes and goes pretty quickly.

25 THE WITNESS: I would just -- let's all 137

1 A. Correct.

2 Q. And the checks that come back, those are the

3 checks that are in play whether they stay with the

4 Exchanges or do they go to the unclaimed property

5 section of the comptroller's office?

6 A. Or go to a charity.

7 Q. Or to a charity. And y'all have chosen, at

8 least throughout this settlement, that it goes to the

9 comptroller's office.

10 A. It goes to the unclaimed property fund because

11 we think that historically has been the best way to get

12 the money back to the rightful owner. We do not agree

13 that sending it back to the defendant is a good idea,

14 nor do we think -- although the Highland Homes court did

15 say it was okay for class counsel to give it -- to

16 extinguish those rights and give it to a charity, we

17 think it better not to extinguish these people's rights

18 to their money and enable them to get it later through

19 the programs the comptroller has to find these folks on

20 their website. That's the appropriate way to do it.

21 If you have $500 in a bank account you

22 forgot about, the bank doesn't get to keep it to make

23 money on it. The bank turns that over to the unclaimed

24 property fund so that you may have access to get it

25 later. So to me, as commissioner of insurance, it's 138

1 more appropriate to use the structure that the State has

2 set up for people to get their money than to extinguish

3 their rights, and I think that can be done under

4 Highland Homes.

5 Q. But the money has never left the Exchanges, has

6 it? They're not getting it back. It's never left if

7 you leave it there. Am I right?

8 A. I hope it leaves, because I hope the

9 policyholders get paid someday.

10 Q. Well, what I'm saying, though, is the money

11 hasn't left if the checks haven't been cashed?

12 A. The money then would be -- if after three years

13 the checks remain uncashed, then the money is turned

14 over to the comptroller, so the comptroller then has it

15 as unclaimed property. And pursuant to all the rules of

16 unclaimed property, they retain that in perpetuity for

17 the rightful owners of the property.

18 And I think what we disagree on is who is

19 the rightful owner of this property. And the rightful

20 owner of the property is the people who paid too much in

21 premiums, not future policyholders of Farmers, not a

22 charity. It's the owners of the property. And the

23 unclaimed property fund is the vehicle the State uses to

24 hold forever their rights. I am not in favor of

25 extinguishing their rights, which is what you're asking 233

1 to get new lawyers, I'd already have a deal for those

2 lawyers to look at, so I would have streamlined this

3 process. That's the point of it.

4 Q. So your assumption was that the

5 disqualification of the lawyers would not change the

6 dynamics of the settlement that you were wed to?

7 A. That's true. I don't think it would have.

8 Q. Thank you.

9 THE COURT: Is this a good break time?

10 All right. We'll go ahead and break now. Let me tally

11 up your time so you'll know how much you've used.

12 You may step down if you wish.

13 The intervenors have used two hours and

14 49 minutes. The State and Farmers collectively have

15 used an hour and 12 minutes. I'll see you back in about

16 15 minutes, maybe 20. It depends on how much I'm going

17 to find in my office on other matters that I need to

18 juggle.

19 (Recess taken)

20 THE COURT: You may resume.

21 Q. (BY MR. LONGLEY) Mr. Mattax, I thought I heard

22 State's counsel say in opening that the Highland Home --

23 you're familiar with Highland Homes, are you not?

24 A. I read it a couple days ago.

25 Q. Okay. I thought I saw your name on some of the 234

1 briefs in that. Were you actually on the briefs?

2 A. I could have been, because either I would have

3 been the division chief at the time of the briefing or

4 the deputy attorney general for litigation, but I didn't

5 read any of the underlying briefs.

6 Q. But the State in that case was against

7 Fulbright & Jaworski as well as Alexander DuBose,

8 correct?

9 A. They were wrong, but the Supreme Court

10 disagreed.

11 Q. So that didn't come out in your favor, but I

12 thought I heard your counsel say that the Highland Homes

13 case does not apply to this settlement. Did I hear that

14 correctly?

15 A. That's correct.

16 Q. And can you tell me why?

17 A. Yeah. It's rather complicated, but let me -- I

18 did read the case in anticipation of getting that

19 question. So what the Court in Highland Homes said was

20 when a class is certified, the class representative

21 makes a claim for whatever is at issue in that case.

22 And therefore, when the class counsel makes -- or the

23 class representative makes the claim, there is no

24 unclaimed property. Hence, if the class counsel wants

25 to release or extinguish the rights of class members who 235

1 didn't get their money, he had the right to do that.

2 And in that case, the decision was made that any checks

3 that weren't cashed would go to, I guess, The Wildlife

4 Conservancy or something like that.

5 THE COURT: The Nature Conservancy.

6 THE WITNESS: Nature. Thank you. Thank

7 you, Your Honor. The Nature Conservancy.

8 So what that means to me is this, is that

9 when you are a class action counsel, you no longer have

10 to follow a case. But frankly, my division tried in

11 1995 the Snell case which said that the Unclaimed

12 Property Act prevented class counsel from extinguishing

13 the rights of class members. The Supreme Court has now

14 said they can extinguish the class rights if they want

15 to. In this settlement class counsel has chosen not to

16 extinguish the rights of the policyholders.

17 So what does that mean? What that means

18 is a check will be sent to all the policyholders as has

19 been discussed, and if that check remains uncashed, then

20 there is no provision for those rights to be terminated.

21 That payment will always -- that policyholder will

22 always be able to claim that payment from the claims

23 administrator.

24 So what you have there is a situation,

25 which I think Mr. Godbey was alluding to -- you now have 236

1 a situation where the agreement has the claims

2 administrator/Farmers holding that check in perpetuity

3 for the rightful owner. Much as if I had $200 in a

4 bank, the fact that I haven't done anything with that

5 bank doesn't mean they can spend it. They still have to

6 hold it for me in perpetuity. And what the State has

7 done through the Unclaimed Property Act is allow

8 situations like that where banks are holding unclaimed

9 property to give it to the unclaimed property fund, and

10 then they would hold it in perpetuity.

11 So that's the distinction that I believe

12 class counsel is making in this case, and I believe that

13 is consistent with what's going on in the Highland

14 Homes, because the decision to extinguish the rights or

15 not extinguish the rights rests with class counsel. And

16 if that decision isn't made, then after three years the

17 money would go into the unclaimed property fund. That's

18 the way I interpret it.

19 Q. (BY MR. LONGLEY) Okay. And so on any check

20 that's not cashed, that money is still not gone. It's

21 still being held by the administrator; is that what you

22 said?

23 A. The admin -- well, I think the money is being

24 held by the -- by Farmers.

25 Q. Right. 301

11 included in this volume of the Reporter's Record, in the

18 WITNESS MY OFFICIAL HAND this the 13th day of July,

19 2015.

20 /s/ Chavela V. Crain 21 Chavela V. Crain Texas CSR 3064, RMR, CRR 22 Expiration Date: 12/31/2015 Official Court Reporter 23 53rd District Court Travis County, Texas 24 P.O. Box 1748 Austin, Texas 78767 25 (512) 854-9322 * Exhibit 3 TO APPELLEES’ REPLY IN FURTHER SUPPORT OF JOINT MOTIONS TO DISMISS APPELLANTS GRIGSON'S AND THE HOOKSES' APPEALS FOR LACK OF APPELLATE JURISDICTION 1

1 REPORTER'S RECORD VOLUME 1 OF 1 VOLUME 2 TRIAL COURT CAUSE NO. D-1-GV-02-002501

3 STATE OF TEXAS, THE TEXAS ) IN THE DISTRICT COURT 4 DEPARTMENT OF INSURANCE, ) AND THE TEXAS ) 5 COMMISSIONER OF ) INSURANCE, ) 6 Plaintiffs, ) ) 7 VS. ) ) 8 ) FARMERS GROUP, INC., ) 9 FARMERS UNDERWRITERS ) TRAVIS COUNTY, TEXAS ASSOCIATION, FIRE ) 10 UNDERWRITERS ASSOCIATION, ) FARMERS INSURANCE ) 11 EXCHANGE, FIRE INSURANCE ) EXCHANGE, TEXAS FARMERS ) 12 INSURANCE COMPANY, ) MID-CENTURY INSURANCE ) 13 COMPANY OF TEXAS, AND ) FARMERS TEXAS COUNTY ) 14 MUTUAL INSURANCE COMPANY, ) Defendants. ) 261ST JUDICIAL DISTRICT 15 ------------------------------------------------- 16 HEARING ON JOINT MOTION FOR 17 PRELIMINARY APPROVAL OF THE SECOND AMENDED SETTLEMENT AGREEMENT 18 AND STIPULATION OF CLASS NOTICE

20 On the 29th day of April, 2014, the following

2 FOR THE PLAINTIFFS, THE STATE OF TEXAS, THE TEXAS 3 DEPARTMENT OF INSURANCE, AND THE TEXAS COMMISSIONER OF INSURANCE: 4 DAVID C. MATTAX 5 SBOT NO. 13201600 Deputy Attorney General for Defense Litigation 6 JOSHUA GODBEY SBOT NO. 24049996 7 Assistant Attorney General JAMES R. WENZEL 8 SBOT NO. 21179370 Assistant Attorney General, Consumer Protection 9 OFFICE OF THE ATTORNEY GENERAL P.O. Box 12548 10 Austin, Texas 78711-2548 (512) 463-0150 11

12 FOR DEFENDANTS FIRE UNDERWRITERS ASSOCIATION, FARMERS 13 GROUP, INC., FARMERS INSURANCE EXCHANGE, FIRE INSURANCE EXCHANGE, TEXAS FARMERS INSURANCE COMPANY, MID-CENTURY 14 INSURANCE COMPANY OF TEXAS, MID-CENTURY INSURANCE COMPANY, FARMERS TEXAS COUNTY MUTUAL INSURANCE COMPANY, 15 TRUCK INSURANCE EXCHANGE, AND TRUCK UNDERWRITERS ASSOCIATION: 16 RICHARD N. CARRELL 17 SBOT NO. 03871000 LAYNE KRUSE 18 SBOT NO. 11742550 FULBRIGHT & JAWORSKI 19 1301 McKinney, Suite 5100 Houston, Texas 77010-3095 20 (713) 651-5151

21 M. SCOTT INCERTO SBOT NO. 10388950 22 FULBRIGHT & JAWORSKI 98 San Jacinto Boulevard, Suite 1100 23 Austin, Texas 78701 (512) 474-5201 24 25 3

3 MARCY HOGAN GREER 4 SBOT NO. 08417650 ALEXANDER, DUBOSE, JEFFERSON & TOWNSEND 5 515 Congress Avenue, Suite 2350 Austin, Texas 78701 6 (512) 482-9300

9 JOSEPH BLANKS 10 SBOT NO. 02456770 LAW OFFICE OF JOSEPH C. BLANKS 11 P.O. Box 999 Doucette, Texas 75942 12 (409) 837-9707

14 FOR INTERVENORS RODOLFO AND ANNA VELA:

15 RODOLFO VELA, SR., PRO SE 1001 Coffeyville Trail 16 Grand Prairie, Texas 75052 (972) 639-2487 17

18 FOR INTERVENOR MICHAEL J. WOODS: 19 MICHAEL J. WOODS, PRO SE 20 8620 N. New Braunfels #522 San Antonio, Texas 78217 21 (210) 822-1560

3 FOR INTERVENOR CHARLES O. "CHUCK" GRIGSON: 4 JOE K. LONGLEY 5 SBOT NO. 12542000 LAW OFFICE OF JOE K. LONGLEY 6 1609 Shoal Creek Boulevard, Suite 100 Austin, Texas 78701 7 (512) 477-4444

8 PHILIP K. MAXWELL SBOT NO. 13254000 9 LAW OFFICE OF PHILIP K. MAXWELL 1609 Shoal Creek Boulevard, Suite 100 10 Austin, Texas 78701 (512) 947-5434 11

3 HEARING ON JOINT MOTION FOR

4 PRELIMINARY APPROVAL OF

5 THE SECOND AMENDED SETTLEMENT AGREEMENT

6 AND STIPULATION OF CLASS NOTICE APRIL 29, 2014

7 Page Vol. 8 Announcements.......................... 7 1 9 Argument by Mr. Mattax................. 21 1 10 Argument by Mr. Carrell................ 66 1 11 Argument by Mr. Blanks................. 95 1 12

13 INTERVENOR HOOKS WITNESSES 14 Direct Cross Vol. 15 DAN ROSENTHAL 16 By Mr. Blanks 107 1 By Ms. Greer 120 1 17

18 Page Vol.

19 Adjournment.............................. 142 1

20 Court Reporter's Certificate............. 143 1 21

25 102

MR. BLANKS: Right.

THE COURT: But in terms of composing the

class, people who bought HOA policies and who allegedly

were overcharged for that are the rate class, right?

MR. BLANKS: Well --

THE COURT: We know what the discount

class is. We know what the credit class is. And why

would we -- other than carving out Geter, why would we

go back and have to litigate that all over again because

those people are still those people who were affected by

that?

MR. BLANKS: Well, Mr. Mattax said that

the settlement hadn't been modified, the class hadn't

been modified, but I say the class has modified itself.

In 11 years, probably 10 percent or so of those people

have died. Another 7, 8, 9, 10, 12 percent have

divorced.

THE COURT: Well, the people you say who

fall within the retrospective rate -- let's talk about

the first class, the rate class. That's simple; can you

agree? So you're saying in the retrospective rate

compensation group, something you already heard me

concerned about there being no interest -- I'm not so

concerned about no interest for the first couple years

when everybody would have thought we might have finished 103

this, but no interest for a decade is concerning me, as

you know. But we want to finish this settlement -- or

they want to finish this settlement and compensate those

people. And you're saying, well, some of them have

died. Well, then it would go to their estate. Some of

them are divorced. Well, it would be part of the

marital estate. Hopefully it was accounted for, but

maybe not. Maybe they didn't even know it was in their

marital estate because they didn't know about the class.

So that's going to be very interesting.

I can't imagine -- I can't -- in my

14 years, I don't think I've dealt with that where we

didn't know that was in the estate. But, I mean, those

things can be accounted for. It's still, though, the

people who were the HOA people. So I'm not

understanding you is what I'm saying. That's still that

same group of people. Whether they died or divorced or

remarried or whatever, it's still the same group of

people.

MR. BLANKS: Well, in the abstract, the

definition is still the same definition --

THE COURT: Yes.

MR. BLANKS: -- and you define the same

class, but I'm just saying the makeup of the class has

drastically changed. I don't know how the advocates 104

deal with it. I assume that they can, but it's

definitely a different class. And how you define the

class today perhaps should be changed too.

THE COURT: Well, how -- I will need a

written definition from you assuming that -- and you

have to understand that I -- I was satisfied that they

met the class requirements that the attorney general is

required to meet. There was some argument about whether

adequacy of representation is one. I thought it was

because it was an argument of collusion that they

couldn't adequately represent. But we did all of that.

We did all of the standards for class certification. I

don't want to redo them.

MR. BLANKS: I appreciate that.

THE COURT: So what I need from you is

evidence that shows me that I have to revise in some way

this class, which I've already decided is worthy of

being a class, and I'm not going to go backwards on

that, and carving out Geter, which I know you embrace,

and some other tweaking of the settlement before I can

embrace its possible fairness, and you already heard

those rhetorical questions. So I will need from you

evidence about how it is I'm supposed to change the

settlement, like with interest, what that interest

should be, or what to do about people who died. I don't 143

REPORTER'S CERTIFICATE

THE STATE OF TEXAS )

COUNTY OF TRAVIS )

I, Chavela V. Crain, Official Court

Reporter in and for the 53rd District Court of Travis

County, State of Texas, do hereby certify that the above

and foregoing contains a true and correct transcription

of all portions of evidence and other proceedings

requested in writing by counsel for the parties to be

included in this volume of the Reporter's Record, in the

above-styled and numbered cause, all of which occurred

in open court or in chambers and were reported by me.

I further certify that this Reporter's Record of

the proceedings truly and correctly reflects the

exhibits, if any, offered in evidence by the respective

parties.

WITNESS MY OFFICIAL HAND this the 12th day of May,

2014.

/s/ Chavela V. Crain Chavela V. Crain Texas CSR 3064, RMR, CRR Expiration Date: 12/31/2015 Official Court Reporter 53rd District Court Travis County, Texas P.O. Box 1748 Austin, Texas 78767 (512) 854-9322