Yesterday TCJL filed an amicus brief in the Texas Supreme Court arguing that a class action brought against a corporate landlord based on alleged “overcharges” of certain fees should be dismissed under legislation enacted in 2017 to transfer exclusive jurisdiction over such complaints to the PUC.
As we reported several months ago, SCOTX consolidated three cases arising from the same facts. For purposes of this report, we will refer to Mosaic Baybrook One, L.P. and Mosaic Baybrook Two, L.P. v. Paul Simien (No. 21-0159). The dispute arose from Baybrook’s billing practices for water and sewer services, which are paid by tenants. In addition to water and sewer fees, Mosaic allegedly bundled other charges into that line item, including fees for law enforcement, fire protection, and emergency medical services. Under a statute that existed at the time Simien, a tenant, filed suit, a tenant could sue a landlord for violations of PUC rules and recover three times the amount of the overcharge, a civil penalty of one month’s rent, reasonable attorney’s fees, and court costs. In this case, plaintiffs allege that Mosaic violated a PUC rule by bundling other fees into its charge for water and sewer services. After suit was filed, however, the Legislature repealed the tenant’s private cause of action and conferred exclusive jurisdiction to the PUC for such claims.
The trial court first granted Simien’s motion for summary judgment, and second to certify a class action on behalf of similarly situated tenants under Rule 42. With respect to the summary judgment motion, the trial court allowed a permissive interlocutory appeal, which the Houston [First] Court of Appeals denied. In certifying the class action, the trial court found that the putative class satisfied the elements of Rule 42: ascertainability, numerosity, commonality, typicality, adequacy, predominance, and superiority. Mosaic did not dispute that it charged all the tenants in the putative class the same way but attempted to undermine Simien’s credibility as a class representative, i.e., that the tenant had misstated facts surrounding a past bankruptcy and had been recruited by the attorney to bring a suit he didn’t know much about. Mosaic likewise challenged the trial court’s implied determination that the 2017 change in the statute did not apply retroactively to bar Simien’s (and thus the class) claims.
The court of appeals affirmed the class certification. With regard to the retroactivity and liability issues, the court of appeals held that it lacked authority to review them because Mosaic’s interlocutory appeal was brought under § 51.014(a)(3), which allows appeal from an interlocutory order certifying or refusing to certify a class under Rule 42. Specifically, as part of its appeal, Mosaic asked the court of appeals to review the trial court’s alleged failure to consider its substantive law claims relating to defenses and its special exceptions based on the 2017 statutory change. While acknowledging that consideration of the merits had a role to play in its analysis, the court of appeals found that Mosaic’s special exceptions (including the retroactivity issue) “do not point to any theory unmoored from the [plaintiff’s] pleadings. Nor do they undermine the trial court’s finding that the class claim satisfies Rule 42’s” requirements. That Mosaic disagrees with the trial court’s substantive law rulings is a merits issue, not an abuse of discretion issue. Moreover, the trial court acted within its discretion when it judged Simien as a credible and adequate class representative.
In a 5-4 opinion by Justice Busby, joined by Justices Lehrmann, Boyd, Devine, and Young, SCOTX affirmed. First, the Court addressed Mosaic’s argument that the 2017 statutory amendments stripped the trial court of jurisdiction over Simien’s claims for certain elements of damages and other relief repealed by the Legislature, including the trebling of overcharges, a one-month rent penalty, and attorney’s fees. Noting that the statutory change retained statutory damages in the amount of the overcharges, the Court declined to split hairs on which remedies the trial court may have retained jurisdiction over and which it did not. As long as the trial court retained the ability to redress the tenants’ injury, even if the statute retroactively repealed other remedies, that was enough, particularly in the post-Dubai era of avoiding collateral attacks on final judgments based on jurisdictional arguments. The Court further declined to wade into the retroactivity issue, since Mosaic’s appeal did not include it. Finally, the Court held that Simien had standing because he alleged a concrete, out-of-pocket injury (payment of fees not authorized under the lease), not simply a procedural violation based on the mislabeling of an otherwise valid claim. As Justice Busby observed, “[w]hich party is correct goes to the merits, not to subject-matter jurisdiction.”
Mosaic responded to the opinion by filing a motion to dismiss for lack of state-court jurisdiction. This motion is distinct from a motion for rehearing, since whether a court has subject-matter jurisdiction may be raised at any time, regardless of whether a party raised the issue at prior stages (though Mosaic did in fact raise the issue at the trial court). TCJL’s brief supports the motion to dismiss on the basis that SB 873, the 2017 Water Code amendments at issue, took immediate effect and—departing from common procedure in bills that alter substantive and procedural rights and remedies—did not apply by its terms to actions commenced on or after the effective date. We submit that the Legislature made it clear that the bill applied to this case (which was filed just a few weeks before the bill passed), and that, in any event, simply changing the tribunal in which plaintiffs’ claims could be heard from the courthouse to the PUC had no effect on plaintiffs’ rights and remedies under the statute. We hope that the Court will reconsider the issue in light of its jurisprudence on retroactive statutes and determine that the trial court lost jurisdiction over this case at the moment the Governor signed his name to the bill.
