The Texas Supreme Court has reversed a Dallas Court of Appeals decision allowing a class action to proceed even though the court had already determined that plaintiffs did not satisfy the criteria for certification of the class as a whole under Rule 42(b).
Frisco Medical Center, L.L.P. and Texas Regional Medical Center, L.L.C. v. Paula Chestnut and Wendy Bolen, On Behalf of Themselves and All Others Similarly Situated (No. 23-0039; May 17, 2024) arose from a lawsuit filed against the hospitals for failing to disclose emergency medical care fees charged by the hospital to patients seen in the emergency room. Plaintiffs seek declaratory relief, equitable relief, and restitution under the Declaratory Judgment Act and DTPA, plus costs and attorney’s fees. Plaintiffs moved to certify a class action under Rule 42, TRCP, which the trial court granted. The hospitals appealed.
The court of appeals reversed in part and affirmed in part. It agreed with the trial court that Plaintiffs met the numerosity, commonality, typicality, and adequate representation requirements of Rule 42(a). The question then became whether Plaintiffs satisfied Rule 42(b), which requires a showing of at least one of three requirements, risk of inconsistent adjudications if separate actions, need for injunctive relief for the class as a whole, or predominance of common questions (citations omitted). Here the court of appeals determined that Plaintiffs did meet meet any of the Rule 42(b) criteria for the class as a whole.
That should have ended the inquiry, but the trial court also deployed Rule 42(d)(1), which provides that “[w]hen appropriate . . . an action may be brought or maintained as a class actions with respect to particular issues” (emphasis added). The court identified four discrete issues that could, in its judgment, be isolated for purposes of the class cohesiveness mandate of Rule 42(b): (1) whether the hospitals owed a duty to inform emergency room patients of the fee prior to the charge being incurred; (2) whether language in the hospitals’ form contract with patients provides a promise or agreement to pay a fee for their emergency room visits; (iii) whether the Emergency Medical Treatment and Active Labor Act, 42 U.S.C. § 1395dd, prohibits the hospitals from disclosing their intention to charge a fee for patients prior to the fee being incurred; and (4) whether the hospitals disclose their fee in a reasonable manner prior to the charge being incurred. The court of appeals took the position that the cohesiveness requirement was satisfied as to three of the four issues and affirmed class certification to that extent. The hospitals sought SCOTX review.
In a per curiam opinion, SCOTX reversed. The question before the Court was whether the court of appeals erred when it allowed certification of three issues based on Rule 42(d)(1) when its analysis indicated that Plaintiffs did not meet the certification requirements for the class as a whole under Rule 42(b). In a prior case, Citizens Insurance Co. of America v. Daccach, 217 S.W.3d 430, 455 (Tex. 2007), drawing from Fifth Circuit precedent, the Court held that Rule 42(d)(1) is “a housekeeping rule” that “cannot be used to manufacture compliance with the certification prerequisites” (citations omitted). In other words, all Rule 42(d)(1) does is allow severance of common issues for a class trial where a class has already been certified, not provide an independent basis for class certification where the class prerequisites of Rules 42(a) and (b) are not met. Finally, the Court rejected Plaintiffs’ alternative request for review of the court of appeals’ ruling that the proposed class did not satisfy Rule 42(b) because Plaintiffs waived the request by “specifically endorsing the court of appeals’ opinion and by failing to provide even a single point about why it is wrong regarding certification of the claims as a whole.”
When we reported the court of appeals’ decision in this case in December 2022, we questioned whether the class issues singled out under Rule 42(d0(1) really met the cohesiveness requirement of Rule 42(b), as the court of appeals determined. The hospitals argued that the class was not cohesive because a single declaratory judgment would not provide relief to every class member, since some patients had prior knowledge of the fee and agreed to pay it, others’ insurers refused to pay it, and federal law might operate differently with respect to different claimants depending upon whether prior knowledge of the fee would actually discourage them from receiving treatment. The court rejected this argument, focusing on the “limited scope” of these issues and their general applicability to all class members. But the court of appeals’ opinion did not really counter the defendants’ argument in detail or the real possibility that all class members are not created equal (i.e., if some of them clearly had advance notice of the fee and agreed to pay it anyway, doesn’t the whole basis for class certification go out the window?).
It also appeared to us that the court of appeals permitted certification of a class with no practical way for a jury to determine what relief to which each class member would be entitled. Defendants clearly showed that damages would have to be determined on an individual basis, requiring extensive discovery and analysis. Some claimants may not be entitled to relief at all, either because their insurers never paid the fee and the hospitals never balance billed them for it because their negotiated rate contracts didn’t authorize reimbursement in the first place. SCOTX disposed of the case on a reading of Rule 42, avoiding (since Plaintiffs waived it) the court of appeals’ dubious slicing and dicing of the issues to “manufacture” class certification. Still, here SCOTX had to step in for basic error correction in which a court simply did not properly apply the law.
