A case pitting hundreds of tenants against the owner and manager of an apartment complex in Harris County will get a hearing before the Texas Supreme Court. The case presents the Court with important issues relating to class action certification under Rule 42, TRCP, and the retroactivity of a statute enacted by the Legislature in 2017, a few months after the litigation commenced.

In granting review, 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, 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 After suit was filed, however, the Legislature repealed the tenant’s private cause of action and conferred exclusive jurisdiction to the PUC for such claims.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 §54.014(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.

We will follow this case to see what SCOTX’s thinking might be on class certification, though the facts, at least on their face, would seem to show that this is exactly the kind of case for which a class action would work best. But in view of the fact that, if the 2017 statute does indeed apply retroactively, it wipes out the lawsuit altogether, this case gives the Court another opportunity to add to its jurisprudence on retroactive laws. Interestingly, the enrolled bill, SB 873, had no applicability provision but only an effective date (in the event, the bill received a two-thirds vote in each house for immediate effect). What might the Court say about the tenants’ “settled expectations” in this case?

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