ACCEPTED 06-14-00106-CV SIXTH COURT OF APPEALS TEXARKANA, TEXAS 2/17/2015 1:24:11 PM DEBBIE AUTREY CLERK
NO. 06-14-00106-CV
IN THE SIXTH COURT OF APPEALS FILED IN 6th COURT OF APPEALS TEXARKANA, TEXAS TEXARKANA, TEXAS 2/17/2015 2:01:00 PM PETER G. MILNE, INDIVIDUALLY, PETER G. MILNE P.C., & HEALY , MILNE DEBBIE & AUTREY Clerk ASSOCIATES, P.C.
Appellants
v.
VAL RYAN & JOY RYAN
Appellees
Appeal from the 4th Judicial District Court Rusk County, Texas
ORAL ARGUMENT REQUESTED
BRIEF FOR APPELLANTS
J. CHAD PARKER Cparker@theparkerfirm.net Bar Card No: 15489000 FORREST F. MAYS Fmays@theparkerfirm.net Bar Card No: 24072228 THE PARKER FIRM, P.C. 3808 Old Jacksonville Rd. Tyler, Texas 75701 (903) 595-4541 - telephone (903) 595-2864 - facsimile
Attorneys for Appellants Peter G. Milne, Ind., Peter G. Milne, P.C., PETER G. MILNE Pmilne@tylertaxlaw.com Bar Card No. 24037118 327 W. Houston St. Tyler, Texas 75702 903-593-9300 - telephone 903-593-9325 - facsimile Attorneys for Appellant Milne & Associates, P.C.
i IDENTITY OF PARTIES AND COUNSEL
Appellants/Defendants
Peter G. Milne, Individually Peter G. Milne, P.C. Healy, Milne & Associates, P.C.
Counsel for Appellants
J. CHAD PARKER Bar Card No: 15489000 FORREST F. MAYS Bar Card No: 24072228 THE PARKER FIRM, P.C. 3808 Old Jacksonville Rd. Tyler, Texas 75701
Attorneys for Appellants Peter G. Milne, Ind., & Peter G. Milne, P.C.,
PETER G. MILNE Bar Card No. 24037118 327 W. Houston St. Tyler, Texas 75702
Attorneys for Appellant Healy, Milne & Associates, P.C.
Appellees/Plaintiff
Val Ryan Joy Ryan
Counsel for Appellees
James A. Holmes State Bar No. 00784290 212 South Marshall Henderson, Texas 75654
ii TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL ...................................................................... ii
INDEX OF AUTHORITIES ........................................................................................ v-vi
STATEMENT OF THE CASE ................................................................................... ... vii
ISSUES PRESENTED ................................................................................................ viii
1. Did the district court err by failing to meet the clearly-ascertainable requirement in its class definition contrary to Intratex Gas Co. v. Beeson, 22 S.W.3d 398, 403 (Tex. 2000)?
2. Did the district court err by certifying claims of unconsionability under the Texas Deceptive Trade Practices Act against the Hicks Defendants in violation of Tex. R. Civ. P. 42(a)(2) and 42(b)(3) because individualized inquiries into whether such actions took advantage of the lack of knowledge, ability, experience or capacity of class members are imperative and cannot be resolved by only looking to Appellees claims?
3. Did the district court err by certifying claims of unconscionability and breach of fiduciary duty against the Hicks Defendants where they are not typical of Appellees claims?
4. Did the district court err in certifying claims for declaratory judgment against Appellants where the proposed claims for class-wide relief relate exclusively or predominately to money damages in violation of Tex. R. Civ. P. 42(b)(2).
STATEMENT OF FACTS ....................................................................................... 1–4
A. The Appellees Claims ...............................................................................1–2
B. The Hicks Defendants, the 2001 Permanent Injunction, and relationship with Appellants ...............................................................2-3
C. Proceedings in the district court ................................................................3-4
SUMMARY OF THE ARGUMENT .............................................................................5–6 iii STANDARD OF REVIEW ......................................................................................... 6–7
ARGUMENT............................................................................................................7-17
I. The district court erred in its class definition and violated the clearly- ascertainable requirement of a class definition ........................................7–10
II. The district court erred by certifying claims of unconscionability against the Hicks Defendants because common issues of law and fact do not predominate .............................................................................................10-14
III. The district court erred by certifying claims of unconscionability and breach of fiduciary duty against the Hicks Defendant because they are not typical of Appellees claims ......................................................15
IV. The district court erred in certifying claims for declaratory judgment against Appellants in violation of Tex. R. Civ. P. 42(b)(2) because the proposed claims for class-wide relief relate exclusively or predominately to money damages ......................................................................................16-17
CONCLUSION AND PRAYER ......................................................................................17
CERTIFICATE OF COMPLIANCE WITH RULE 9.4(E) ...................................................18
CERTIFICATE OF SERVICE ........................................................................................19
iv INDEX OF AUTHORITIES
Cases
Allison v. Citgo Petroleum Corp., 151 S.W.3d 402, 425 (5th Cir. 1998) ......................................................6, 16
Bailey v. Kemper Casualty Ins. Co., 83 S.W.3d 840, 847 (Tex. App. – Texarkana 2002, pet dism’d w.o.j) ....6, 7
Bolin v. Sears, Roebuck & Co., 231 F.3d 970, 978 (5th Cir. 2000) .............................................................16
Dafforn v. Rousseau Assocs., Inc., 1976–2 Trade Cases ¶ 61, at 219 (N.D. Ind.1976) .....................................10
East Texas Motor Freight v. Rodriguez, 431 U.S. 395, 403 (1977) .......................................................................... 15
Entex v. City of Pearland, 990 S.W.2d 904, 909 (Tex. App.–Houston [14th Dist.] 1999, no pet.) ......7
Forsyth v. Lake LBJ Inv. Corp., 903 S.W.2d 146, 149 (Tex. App.– Austin 1995, writ dism'd w.o.j.) ...........7
Gilchrist v. Bolger, 89 F.R.D. 402, 406 (S.D.Ga.1981) .............................................................15
Henry Schein, Inc. v. Stromboe, 28 S.W.3d 196, 200–01 (Tex. App.– Austin 2000, pet. dism'd w.o.j.)...6, 13
Hi–Lo Auto Supply, L.P. v. Beresky, 986 S.W.2d 382, 386 (Tex. App.–Beaumont 1999, no pet.) ......................6
Intratex Gas Co. v. Beeson, 22 S.W.3d 398, 403 (Tex. 2000) ..........................................................vi, 5, 9
v Pellman v. Cinerama, Inc., 89 F.R.D. 386, 389 (S.D.N.Y.1981) .............................................................15
Peltier Enterprises, Inc. v. Hilton, 51 S.W.3d 616, 623–24 (Tex. App. – Tyler 2000, pet. denied)................5, 12
Southwest Refining Co. v. Bernal, 22 S.W.3d 425, 433 (Tex. 2000) ..................................................................11
Spera v. Fleming, Hovenkamp & Grayson, P.C., 4 S.W.3d 805, 810 (Tex. App.—Houston 1999, no pet .) ...........................11
Texas S. Rentals, Inc. v. Gomez, 267 S.W.3d 228, 244 (Tex. App. – Beaumont 2008, no pet.).......................5
Wente v. Georgia Pacific Corp., 712 S.W.2d 253, 257 (Tex. App.—Austin 1986, no writ) .......................... 11
Statutes
Tex. Bus. & Com. Code Ann. § 17.45(5) (Vernon Supp.1998) .............................12
Rules
Tex. R. Civ. P. 42 ............................................................................. vi, 6, 11, 15–17
vi STATEMENT OF THE CASE
Nature of the case Val & Joy Ryan (“Appellees”) sued Defendants Richard Hicks, Individually and d/b/a Elder Advisory Services and Elder Advisory Tax Group, LLC (“Hicks Defendants”), Appellants, and others for numerous causes of action arising from Hicks’ provision of legal services and/or Medicaid planning services purportedly in violation of a 2001 injunction from the 114th District Court, Smith County. Hicks was an independent contractor of Appellants Peter G. Milne, P.C. and Healy, Milne & Associates, P.C. over the period of 2005 to 2012. (4RR: 9, 11, 14.) Appellees sought certification of approximately 450-575 members on claims of unconscionability under the Texas DTPA, breach of fiduciary duty, declaratory relief, and vicarious liability under theories of partnership, joint enterprise, and civil conspiracy. (2CR: 278–309; 6RR: 23–24.)
Trial court 4th Judicial District Court, Rusk County Honorable Clay Gossett
Trial court’s disposition Entered Order of Class Certification that Granted Appellees’ Motion and Supplemental Motions for Class Certification as to claims of unconscionability and breach of fiduciary duty against Hicks Defendants, granted as to Appellees’ claims for declaratory relief and vicarious liability under theories of partnership, joint enterprise, and civil conspiracy against Appellants, and denied as to Appellees’ claims for unconscionability and breach of fiduciary duty against Appellants (3CR: 526.)
vii ISSUES PRESENTED
1. Did the district court err by failing to meet the clearly-ascertainable requirement in its class definition contrary to Intratex Gas Co. v. Beeson, 22 S.W.3d 398, 403 (Tex. 2000)?
2. Did the district court err by certifying claims of unconsionability under the Texas Deceptive Trade Practices Act against Richard Hicks in violation of Tex. R. Civ. P. 42(a)(2) and 42(b)(3) because individualized inquiries into whether such actions took advantage of the lack of knowledge, ability, experience or capacity of class members are imperative and cannot be resolved by only looking to Appellees claims?
3. Did the district court err by certifying claims of unconscionability and breach of fiduciary duty against the Hicks Defendants where they are not typical of Appellees claims?
4. Did the district court err in certifying claims for declaratory judgment against Appellants where the proposed claims for class-wide relief relate exclusively or predominately to money damages in violation of Tex. R. Civ. P. 42(b)(2).
viii STATEMENT OF FACTS
A. The Appellees Claims
Appellees Val & Joy Ryan moved Val’s parents from Louisiana to Autumn
Leaves Nursing Home in Henderson around November 2007. (6RR: 28-29.) The
Ryans spoke with Raymond Pyle, a social worker at Autumn Leaves, about Val’s
parents’ financial situation and Mr. Pyle furnished the Ryans with Richard Hicks
telephone number. (Id. at 29.) The Ryans called and made an appointment with Hicks
at his office in Tyler. (Id.) According to Mr. Ryan, Hicks notified the Ryans that they
needed to “stay away from the government, you don’t need the government to pay for
anything, you need to try to do this on your own.”(Id.) Ryan testified that Hicks
encouraged them to invest in National Note of Utah to help finance their parents’
nursing home expenses. (Id.) Ryan testified that the he and his wife went home to
think about it and then decided they wished to invest and called Hicks back to make
another appointment. (Id. at 29–30.) Hicks did not charge the Ryans anything for his
services related to the investment but did ask the Ryans whether they and their
parents were in need of various legal documents that could be drafted for them. (Id.
at 30.) They said they were and obliged his services for a fee of $3,000.00 which they
paid to Elder Advisory Services. (Id at 30–31, 38; 8RR: PX1H.) Ryan testified that
during these meetings, he heard the name Peter Milne referenced and was presented
with brochures and business cards bearing his name. (Id. at 31; 8RR: PX1C–PX1E.)
Page 1 Ryan testified that once the documents were drafted, Hicks personally delivered them
to him and his parents at Autumn Leaves. (6RR: 36–38.)
Ryan testified that he did not receive any Medicaid advice from Hicks other
than that Medicaid was not proper for their situation and they should pursue private
pay for their parents’ nursing home expenses. (6RR: 50.) Ryan testified that Hicks
represented to them that he was not a lawyer. (Id. at 51.) Ryan stated that he felt that
if it was necessary for them to meet Milne, that Hicks would have introduced them
and that they did not feel it was necessary to “check out his story” because Hicks had
a nice office. (Id.)
B. The Hicks Defendants, the 2001 Permanent Injunction, and relationship with Appellants
Hicks testified that he negotiated with the Texas Unauthorized Practice of Law
Committee in 2001 and entered an agreed injunction in the 114th District Court of
Smith County on the grounds that the Committee determined that providing Medicaid
planning services was considered the practice of law. (4RR: 10.) Hicks stated that,
after the injunction was entered, he changed the way he performed his services by
working in direct relationship with a law firm. (Id.) Appellant Peter G. Milne, P.C.
was formed in 2005. (3CR: 510.) Peter G. Milne, P.C. dissolved in 2007 and Healy,
Milne & Associates, P.C. was formed and operated from October 2006 until July
2010. (Id.) Peter G. Milne, P.C. was reinstated in 2010. (Id.) Hicks testified that he
and Milne entered an oral agreement whereby Milne would “assist me in cases where Page 2 we were assisting individuals with Medicaid planning once they were placed into a
nursing facility.” (4RR: 7.) For cases in which client intake originated with Hicks’
office, Hicks testified that he would obtain 75% and Appellants would receive 25%
of the fee. (4RR: 16.) For cases in which client intake originated with Milne’s office,
Hicks would obtain 60% of the fee and Appellants would obtain 40%. Hicks was an
independent contractor of Appellants Peter G. Milne, P.C. and Healy, Milne &
Associates, P.C. over the period of 2005 to 2012. (4 RR 9, 11, 14.)
C. Proceedings in the district court
Appellees’ live pleading is their Fifth Amended Petition and they have filed a
Motion and three supplemental motions for Class Certification. (1CR: 144, 106, 162,
2CR: 261, 3CR: 316.) Through those Motions they have sought certification of the
claims of unconscionability under the DTPA and breach of fiduciary duty against the
Hicks Defendants and Appellants, certification of theories of vicarious liability
through partnership, joint enterprise, and civil conspiracy, and a declaratory judgment
that Appellants were in violation of the 2001 injunction rendered against the Hicks
Defendants. Two hearings were held on the class certification motions. (5 RR, 6 RR.)
Appellees constructed a Master Exhibit List containing all people believed to
constitute potential members of the proposed Class. (2CR: 278–309.)
Hicks served Amended Answers to Interrogatories on August 30, 2014, in
which he claimed that all of the services he provided to those on the Master Exhibit
Page 3 List were enjoined services pursuant to the terms of the 2001 Permanent Injunction.
(2CR: 273.) Appellees supplemented their Class Certification Motion to alert the
district court of these developments. (2CR: 261.) However, of those on the Master
Exhibit List, 114 are what have been termed “acknowledged clients” to whom Hicks
and Appellants provided services jointly and in which both partook of the fee. (3CR:
392.) Another group containing 219 clients are “small case” clients whom Hicks
never disclosed to Appellants and for which Hicks retained the entire fee. (3CR:
392–393.) Another group containing approximately 127 people are “simple case”
clients whom Hicks alleges were made known by Milne but whom Milne authorized
Hicks to perform services that involved the practice of law and that he told Hicks he
could retain the entire fee. (3CR: 393.)
The Court entered its Order on Class Certification on November 26, 2014.
(3CR: 526.)
Page 4 SUMMARY OF THE ARGUMENT
The district court erred by violating the clearly-ascertainable requirement of a
class definition by framing the class definition as a legal conclusion; i.e. the class
encompasses those who paid a fee for “enjoined services” performed by Richard
Hicks since January 1, 2005. This definition necessarily requires a determination on
the merits before the court can ensure the existence of a class which renders it
impossible to define at least a portion of the class until ultimate liability as to that
person is made. This violates Intratex Gas Co. v. Beeson, 22 S.W.3d 398, 403 (Tex.
2000).
The district court erred by certifying claims of unconscionability against the
Hicks Defendants because common issues of law and fact do not predominate with
respect to the third and fourth elements of the unconcionability claims – whether the
Hicks Defendants’ actions took advantage of the lack of knowledge, ability,
experience, or capacity of the proposed Class to a grossly unfair degree. Such an
answer as to Appellees does not answer the question for the approximately 450-575
people that have been proposed as members of the Class and precludes certification.
See Peltier Enterprises, Inc. v. Hilton, 51 S.W.3d 616, 623–24 (Tex. App. – Tyler
2000, pet. denied); Texas S. Rentals, Inc. v. Gomez, 267 S.W.3d 228, 244 (Tex. App.
– Beaumont 2008, no pet.).
The district court erred in certifying claims for unconscionable conduct and
Page 5 breach of fiduciary duty against the Hicks Defendants because Appellees’ claims are
not typical of the proposed Class.
The district court erred in certifying claims for declaratory judgment against
Appellants in violation of Tex. R. Civ. P. 42(b)(2) because the proposed claims for
class-wide relief relate exclusively or predominately to money damages. See Allison
v. Citgo Petroleum Corp., 151 S.W.3d 402, 425 (5th Cir. 1998).
STANDARD OF REVIEW
An appellate court reviews the decision of the trial court in certifying or
refusing to certify the class for abuse of discretion. Bailey v. Kemper Casualty Ins.
Co., 83 S.W.3d 840, 847 (Tex. App. – Texarkana 2002, pet dism’d w.o.j)(citing
Hi–Lo Auto Supply, L.P. v. Beresky, 986 S.W.2d 382, 386 (Tex.App.-Beaumont 1999,
no pet.)). A trial court abuses its discretion only if it “fails to properly apply the law
to the undisputed facts or acts arbitrarily, unreasonably, or without reference to any
guiding principles.” Bailey, 83 S.W.3d at 847 (citing Henry Schein, Inc. v. Stromboe,
28 S.W.3d 196, 200–01 (Tex.App.-Austin 2000, pet. dism'd w.o.j.)). In conducting
this review, the court must view the evidence in the light most favorable to, and
indulge every presumption in favor of, the trial court's action. Bailey, 83 S.W.3d at
847 (citing Entex v. City of Pearland, 990 S.W.2d 904, 909 (Tex.App.-Houston [14th
Dist.] 1999, no pet.)). An appellate court may not substitute its judgment for that of
Page 6 the trial court, even if it would determine the issues differently than the trial court.
Bailey, 83 S.W.3d at 847 (citing Forsyth v. Lake LBJ Inv. Corp., 903 S.W.2d 146,
149 (Tex.App.-Austin 1995, writ dism'd w.o.j.)).
ARGUMENT
I. The district court erred in its class definition and violated the clearly- ascertainable requirement of a class definition
The district court’s Order on Class Certification states that Appellees and their
attorney are appointed to represent a class consisting of “All individuals and entities
who/which paid a fee for enjoined services performed by Richard Hicks since January
1, 2005.” For purposes of this suit, “enjoined services” means any of the services
listed in the 2001 injunction entered against HICKS by the 114 Judicial District Court
of Smith County, Texas. [sic] (4CR: 527.) In listing the issues of law and fact
common to the class, the Court included among them: “ 7. Whether the 2001
injunction requires that Hicks be an “employee” of a lawyer or law firm in order to
provide the enjoined services.” (4CR: 530.) The Court goes on to state that “The
Court finds that because Hicks’ violations of the 2001 injunction are uncontested and
have been admitted in open Court, the Court and the parties will concentrate the bulk
of their efforts on the following issues: . . . 1. Whether the law firms’ admitted failure
to “employ” Hicks violated the terms of the 2001 injunction . . . 4. Whether Plaintiffs
Page 7 are entitled to declaratory judgment that Defendants violated the 2001 injunction.”
(4CR: 530 – 531.)
The class is not clearly-ascertainable because the definition of “enjoined
services” under the 2001 injunction necessarily requires a determination on the merits
before at least a portion of the class meets the definition. Approximately 114 of the
proposed members of the Class belong to a group consisting of clients for whom the
Hicks Defendants and Appellants provided services jointly over the time duration that
the definition encompasses – the so-called “acknowledged clients”. (2CR: 175-179;
5RR: 19–20, 28–31.) For that group, a determination on the merits on three separate
issues must be resolved by the Court before the class is properly defined:
(1) Whether Appellants are bound by the 2001 injunction either by virtue of
participating in the 2001 proceedings or being a real party in interest when the
injunction was rendered. (4CR: 477–478, 503–504);
(2) Whether the Court may interpret the 2001 injunction of the 114th Judicial
District Court. (4CR: 476, 502); and
(3) If “yes” to Nos. 1 & 2, whether the 2001 Injunction required Hicks to be an
“employee” of Appellant law firms to not be in violation of the Injunction.
(8RR: 226–229)
For a class definition to be objective and its members presently ascertainable,
the definition cannot require a determination of the merits. Deciding the merits of the
Page 8 suit in order to determine the scope of the class or its maintainability as a class action
is not appropriate. Intratex Gas Co. v. Beeson, 22 S.W.3d 398, 404 (Tex. 2000). A
proposed class definition that rests on the paramount liability question cannot be
objective, nor can the class members be presently ascertained; when the class
definition is framed as a legal conclusion, the trial court has no way of ascertaining
whether a given person is a member of the class until a determination of ultimate
liability as to that person is made. Id. A fail-safe class that is based on resolving the
ultimate liability issue is bound only by a judgment favorable to plaintiffs but not by
a judgment favorable to defendants. Id. at 404–05. Certifying a fail-safe class
inevitably creates one-sided results. If the defendant is found liable, class membership
is then ascertainable and the litigation comes to an end. A determination that the
defendant is not liable, however, obviates the class, thereby precluding the proposed
class members from being bound by the judgment. The Texas Supreme Court does
not support such a result when “[r]ule [42] was never meant to be an exception to the
rules of res judicata or to provide a risk-free method of litigation.” Id. at 405 (quoting
Dafforn v. Rousseau Assocs., Inc., 1976–2 Trade Cases ¶ 61, at 219 (N.D. Ind.1976)).
While the trial court possesses significant discretion to modify the class definition or
even decertify the class as the case develops, the trial court must still certify only
those classes that are sufficiently defined and meet the Rule 42 requirements. Beeson,
22 S.W.3d at 405.
Page 9 Because a determination on the merits will be required to see whether
“enjoined services” were provided to members of the Class, the class is not presently
ascertainable and a fail-safe class has been constructed. What is particularly
damaging to Appellants about this fail-safe definition is that, even were these issues
to be resolved as a matter of law in their favor, the proposed Class would not be
bound by the judgment because they were not ascertainable when the Class was
certified and Appellants cannot rely on res judicata to prevent subsequent litigation.
Because the class definition in this case is not precise, and its members cannot
be ascertained until the alleged ultimate liability issue is decided, the district court
abused its discretion when it certified the class. Id. at 405.
II. The district court erred by certifying claims of unconscionability against the Hicks Defendants because common issues of law and fact do not predominate
The district court’s Order on Class Certification granted Appellees’ Motion for
Class Certification as to their claims for unconscionable conduct. (4CR: 526.) The
Order defined the inquiry into unconscionable conduct as “whether the defendant
committed an act or practice that, to a consumer’s detriment, took advantage of his
lack of knowledge, ability experience or capacity to a grossly unfair degree.” (Id. at
528.)
Under Rule 42, “common” questions must predominate over questions
Page 10 affecting only individual class members. Tex. R. Civ. P. 42(b)(4). A common
question exists when the answer as to one class member is the same as to all. Spera
v. Fleming, Hovenkamp & Grayson, P.C., 4 S.W.3d 805, 810 (Tex.App.—Houston
1999, no pet .). Common questions that do not produce common answers do not
satisfy the Rule 42 commonality requirement. Wente v. Georgia Pacific Corp., 712
S.W.2d 253, 257 (Tex.App.—Austin 1986, no writ). The “predominance requirement
... is one of the most stringent prerequisites to class certification.” Southwest Refining
Co. v. Bernal, 22 S.W.3d 425, 433 (Tex. 2000). Courts determine if common issues
predominate by identifying the substantive issues that will control the outcome of the
litigation, assessing which issues will predominate, and determining if the
predominating issues are, in fact, common to the class. Id. at 434. The test for
predominance is not whether common issues outnumber uncommon issues, but
whether common or individual issues will be the subject of most of the litigant's and
court's efforts. If, after common issues are resolved, presenting and resolving
individual issues is likely to be an overwhelming or unmanageable task for a single
jury, then common issues do not predominate. Bernal, 22 S.W.3d at 434. Ideally, a
judgment in favor of the named plaintiffs should decisively settle the entire
controversy, and all that should remain is for other class members to file proofs of
claim. Id. It is improper to certify a class without knowing how the claims can and
Page 11 will likely be tried. Id. at 435. Individual scrutiny by the trial court is necessary to
ensure that certification does not “restrict a party from presenting viable claims or
defenses without that party's consent.” Id.
The Court granted certification of claims of unconscionability under the DTPA.
Unconscionability requires proof of (1) an act or practice that, (2) to a person's
detriment, (3) takes advantage of his lack of knowledge, ability, experience, or
capacity, (4) to a grossly unfair degree. Tex.Bus. & Com.Code Ann. § 17.45(5)
(Vernon Supp.1998). There must be a showing of what the consumer could have or
would have done if he had known about the information. See Peltier Enterprises, Inc.
v. Hilton, 51 S.W.3d 616, 623–24 (Tex. App. – Tyler 2000, pet. denied).
The proposed class has ranged in approximation from between approximately
450-575 members depending upon the data being looked at. (2CR: 278–309; 6RR:
23–24.) Disparities between the variety of ages, education, experience, and capacity
of people who encountered the Hicks Defendants and engaged their services is
relevant to elements three and four of the unconscionability claims and Appellants
should be permitted to explore those issues to determine viable defenses. Bernal, 22
S.W.3d at 435. 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 actions; it does not lessen
Page 12 the quality of evidence required in an individual action or relax substantive burdens
of proof. Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 693–94 (Tex. 2002).
Of the voluminous documents submitted to the Court at the certification
hearing on July 10, 2014, PX1 and DX1, DX3 & DX4 contains documents most
relevant to the appellate court’s review of the district court’s certification of the
unconscionability cause of action. PX1 contains files retrieved from the Hicks
Defendants pertaining to services provided by them to clients from 2005 onward.
(6RR: 18; 8RR: 155.) Of those files appearing in PX1, approximately 211 of them
contain no reference to Appellants. (8RR: 298–310) Only 24 of them contain
references to Appellant Healy, Milne & Associates, Inc either in an “engagement
letter” (contract) or other reference. (8RR: 315–317). Only 51 of them contain any
reference to Peter G. Milne or Peter G. Milne, PC either in an “engagement letter”
(contract) or other reference. (8RR: 318–320) In 16 of those files where reference was
made to Healy, Milne & Associates, PC or Peter G. Milne, PC, such references were
dated at times when Peter G. Milne, PC or Healy, Milne & Associates, PC were
terminated entities.1 Of those client files appearing in Exhibit PX1 all but the those
Peter G. Milne, PC was formed January 12, 2005 and officially terminated December 12, 2007, but performed no business from October 4, 2006 until its termination. Peter G. Milne PC was reinstated effective July 27, 2010. (4CR: 509–525.) Healy, Milne & Associates, PC was formed on October 4, 2006 and terminated effective December 27, 2010, but performed no business from July 27, 2010 until its termination. (Id.) References were made to Peter G. Milne, PC or Healy, Milne &
Page 13 appearing in the following footnote were clients whose dealings with the Hicks
Defendants appear to have taken place through a Power of Attorney (“POA”) or other
Responsible Party (“RP”).2 Appellants urge they should not be denied individual
inquiries into whether and to what extent each of these clients, or their POA or
responsible parties on their behalf, were taken advantage of due to lack of knowledge,
ability, experience, or capacity, if any. (5RR: 42–44; 6RR: 79–83.)
Appellants would urge that they are in a unique position in this litigation by
virtue of the fact that the Hicks Defendants have not even filed an answer, let alone
shown any interest in asserting any defenses to the allegations being made by
Appellees. This makes Appellants’ interest in pursuing viable defenses that are not
but could otherwise be asserted by the Hicks Defendants all the more important.
Associates, PC in files pertaining to the following people at times when both entities were not performing business or had terminated. Bohling, Robert, Boyd, Beatrice, Brown, Jimmy & Elizabeth, Byrd, Ron, Cadena, Noe, Calendar, Odaysel, Chapa, Esther, Clark, Cochran, William, Bruce & Laura, David, Robert, Millard, Derosset, Eads, Gerard, Finley, Doris, Guidry, Lula, Harris, Mary Ruth, & Jones, Edward. (2CR: 279–287, 289–90.) 2
Askew, Bassett, Beasley, Benefield, Bland, Blomquist, Bohling, Bomer, Booth, Brady, Brown, Jimmy & Elizabeth, Burgamy, Cable, Camp, Cannon, Carter, Catlett, Chandler, Chapa, C., Clark, O., Cochran, Collins, Concepcion, Conner, Cordell, Craig, Dailey, Deaver, Denney, Dews, Dutoit, Eckstadt, Elledge, Elliot, Fleming, Futch, Gaddie, Garcia, R., Gonzalez, J., Goodman, Goodner, Grider, Grigg, Guidry, Guinn, Gurganus, Haight, Hallbrook, Hallette, Hancock, Hand, Heldt, Heppner, Hernandez, H., Hernandez, P., Herwood, Higginbotham, Hippler, Honeycutt, H., Honeycutt, K., Hood, Florine, Hood, Floyd, Hooper, P.B., Hornbuckle, Horton, House, Huff, Isaacks, Jackson, Nancy, Jackson, R., Jones, E., Jones, L., Jordan, Kirby, Lackey, Landon, Lavender, Wiklund, Wilbanks, Williams, J., Williams, T., Wrentz,
Page 14 III. The district court erred by certifying claims of unconscionability and breach of fiduciary duty against the Hicks Defendant because they are not typical of Appellees claims
The claims of the class representatives must be typical of the claims of the class
as a whole. Tex. R. Civ. P. 42(a); Gilchrist v. Bolger, 89 F.R.D. 402, 406
(S.D.Ga.1981); Pellman v. Cinerama, Inc., 89 F.R.D. 386, 389 (S.D.N.Y.1981). The
United States Supreme Court has defined the typicality requirement as mandating that
the representative “possess the same interests and suffer the same injury.” East Texas
Motor Freight v. Rodriguez, 431 U.S. 395, 403 (1977). Although it is not necessary
that the named representative suffer precisely the same injury as the other class
members, there must be a nexus between the injury suffered by the representative and
the injuries suffered by other members of the class. See Gilchrist, 89 F.R.D. at
404–05.
The claims of unconscionability and breach of fiduciary duty against the Hicks
Defendants are not typical of Appellees’ claims. Unlike the acknowledged clients,
Appellees had no contract with Hicks. (2CR: 234–235, 5RR: 27, 6RR: 48.) Unlike
approximately 211 members of the proposed class for which there was no evidence
that Hicks represented Appellants’ involvement, Appellees have testified that it was
falsely represented to them that Appellants were involved. 6RR: 31, 8RR: 298–310.)
Page 15 IV. The district court erred in certifying claims for declaratory judgment against Appellants in violation of Tex. R. Civ. P. 42(b)(2) because the proposed claims for class-wide relief relate exclusively or predominately to money damages
Injunctive or declaratory relief is not appropriate when “final relief relates
exclusively or predominately to money damages.” In Allison v. Citgo Petroleum
Corp., the Fifth Circuit held that “monetary relief predominates . . . unless it is
incidental to requested injunctive or declaratory relief.” 151 F.3d 402, 415 (5th Cir.
1998). Incidental means that “damages flow directly from liability to the class as a
whole on the claims forming the basis of the injunctive or declaratory relief.” Id. The
mere recitation of a request for declaratory relief cannot transform damages claims
into a [Rule 23(b)(2)] class action. Bolin v. Sears, Roebuck & Co., 231 F.3d 970, 978
(5th Cir. 2000). [Rule 23(b)(2)] states that certification is proper for a class seeking
“final injunctive relief or corresponding declaratory relief.” Id. Thus, the declaratory
relief must “as a practical matter afford[ ] injunctive relief or serve[ ] as a basis for
later injunctive relief.” Id.
Similar to Bolin, Appellees seek declaratory relief under the Texas Uniform
Declaratory Judgment Act that the Hicks Defendants and Appellants were in violation
of the 2001 Injunction. However, “besides authorizing a declaratory judgment, the
declaratory judgment act does not create remedies otherwise unavailable to the
Page 16 plaintiffs.” Id. at 977. In this case, there are no “specific claims that form the basis of
. . . the declaratory relief” – Appellees only seek a declaration that the Hicks
Defendants or Appellants are in violation of the 2001 Injunction for which monetary
damages are not an incidental result.
Certification under Tex. R. Civ. P. 42(b)(2) was an abuse of discretion because
the only meaningful relief sought on behalf of the class is for monetary damages, not
declaratory relief.
CONCLUSION AND PRAYER
Appellants would show that the district court abused its discretion by failing
to correctly apply the law to the undisputed facts or acted arbitrarily,
unreasonably, or without reference to any guiding principles by improperly
defining the class, certifying claims of unconscionability and breach of fiduciary
duty against the Hicks Defendants when common issues of law and fact do not
predominate and Appellees claims are not typical of the proposed Class, and
certifying claims for declaratory relief against Appellants upon which the relief
sought is predominately or exclusively monetary. Appellants respectfully request
that this Court reverse the judgment of district court and remand to the district
court to decertify the class.
Page 17 CERTIFICATE OF COMPLIANCE WITH RULE 9.4(e)
1. This brief complies with the type-volume limitation of Texas Rule of Appellate Procedure 9.4(e)(i)(2)(B) because, according to the Microsoft Word 2010 word count function, it contains 2,683 words on pages 7-17, excluding the parts of the brief exempted by Texas Rule of Appellate Procedure 9.4(e)(i)(1).
2. This brief complies with the typeface requirements of Texas Rule of Appellate Procedure 9.4(e) because it has been prepared in proportionally spaced typeface using Microsoft Word 2010 software in Times New Roman 14-point font in text and Times New Roman 12-point in footnotes.
/s/ J. Chad Parker J. Chad Parker
Page 18 CERTIFICATE OF SERVICE
I certify that a true and correct copy of the Brief of Appellant PETER G. MILNE, IND., PETER G. MILNE, P.C. was served by electronic service and/or email to the following counsel of records on February 17, 2015.
James A. Holmes Law Office of James Holmes, PC 212 South Marshall Henderson, TX 75654 Via Email
Peter G. Milne Peter G. Milne, PC 327 W Houston Tyler, TX 75702 Via Email
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