Justice Brett Busby
By a 5-4 majority, the Texas Supreme Court has affirmed a trial court’s class certification order in a dispute putting hundreds of residential tenants against a Harris County corporate landlord.
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, 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 After suit was filed, however, the Legislature repealed the tenant’s private cause of action and conferred exclusive jurisdiction to the PUC for such claims.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 an 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.”
The Court then turned to the trial court’s order granting partial summary judgment to Simien based on a violation of PUC rules. Noting that the trial court “commendably followed our instruction that ‘dispositive issues should be resolved by the trial court before [class] certification is considered’” and properly certified the dispositive issue, e.g., the rules violation, to the Houston [1st] Court of Appeals, the Court found that the requirements for a permissive appeal were met (although, as Justice Busby pointed out, the court of appeals summarily rejected it). The Court thus had jurisdiction to review the summary judgment order and concluded, after a lengthy analysis of the statute and rules governing charges for water and wastewater services, that Simien conclusively established a violation of PUC rules and the resulting overcharge. The Court went on to reject Mosaic’s lease-based challenge as well, holding that the Simien’s lease did not authorize Mosaic to charge tenants the disputed fire, EMS, and law enforcement fees.
Justice Bland, joined by Chief Justice Hecht and Justices Blacklock and Huddle, took sharp issue with the majority’s analysis of the scope of the statute and PUC rules. In brief, the dissent argued that Mosaic did not violate PUC rules because the rules regulate only metered per-gallon charges for water usage, not the unrelated charges at issue in the case. Justice Busby responded that “[e]ven if Mosaic had taken the position advocated by the dissent . . . the statute and rules do not regulate only billing of volume-based charges calculated using a master meter. Rather, they regulate the billing of all costs of master metered utility service,” including fixed costs and customer service charges occurring outside the master meter. Consequently, the trial court did not abuse its discretion in certifying a class, as Mosaic argued, based on “a significant misunderstanding of the law.” Moreover, the trial court properly disposed of Mosaic’s statute of limitations defense prior to certification by limiting the class to tenants who paid overcharges during a two-year period within the limitations period.
This decision leaves a very interesting issue open for further litigation. First, the 2017 statutory change that repealed the tenant’s cause of action and limited remedies was meant to retroactively apply to this case. Mosaic raised the issue in the trial court, but the court overruled its special exceptions and motion to strike the affected remedies. The fact that the retroactivity issue got lost in the shuffle and didn’t get up to SCOTX is curious indeed. We don’t know if there are any other cases in the pipeline in which that issue would be preserved, but it would be nice to have a SCOTX opinion on whether the retroactivity of the 2017 fix was constitutional. In any event, this case reveals a sharp split within the Court on textual interpretation. Using precisely the same guiding legal principles, five justices went one way and four went the other. If nothing else, this demonstrates that the “plain meaning” of a document is never as easy to ascertain as some would like us to believe.
