Opinion
No. 14-02-00796-CV.
Memorandum Opinion filed September 23, 2003.
Appeal from the 56th District Court, Galveston County, Texas, Trial Court Cause No. 99-CV-0563.
Reversed and Remanded.
MEMORANDUM OPINION
General Electric Company (GE) appeals from the district court's certification of a nationwide class. The facts are known to the parties, so we do not recite them here. Because all dispositive issues are clearly settled in law, we issue this memorandum opinion. Tex.R.App.P. 47.1.
The trial court certified class claims for breach of contract, fraud, and violation of Kentucky's Consumer Protection Act. After the Supreme Court issued Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675 (Tex. 2003), the class representative withdrew his request for certification of the fraud and consumer protection claims, and requested remand of the contract claim to the trial court for reconsideration in the light of Schein. It is unclear whether the representative's abandonment of the first two claims was intended to be with or without prejudice. But in either case, that portion of the trial court's certification order must be reversed. See id. at 692 (holding plaintiffs' abandonment of several grounds for certification on appeal required reversal of those portions of certification order).
Moreover, the class representative's abandonment of the fraud and consumer protection claims requires reversal and remand of the remaining contract claim as well. In some (but not all) states, the abandoned claims entitle consumers to damages far beyond those available in a contract action. See Tracker Marine, L.P. v. Ogle, 108 S.W.3d 349, 354 (Tex.App.-Houston [14th Dist.] 2003, no pet. h.). Because the claims were not abandoned until this appeal, the trial court has not considered whether the waiver of such damages renders a class action inferior to other alternatives, or whether the class representative is typical of other members in his willingness to forego them. The Schein court held that such circumstances require us to reverse and remand for the trial court to consider them in the first instance. 102 S.W.3d at 695 (holding plaintiffs' abandonment of several grounds for certification on appeal rendered appellate court unable to determine whether certification remained proper as to remaining claims).
We also note that in the event of recertification, the trial court must consider whether class members are entitled to notice and an opportunity to be heard before these claims are abandoned. See Tex.R.Civ.P. 42(e); Henry Schein, Inc., 102 S.W.3d at 695 (noting but not deciding whether this is required).
We also hold there was insufficient choice-of-law analysis below. Before addressing class certification, the class representative must present and the trial court must conduct an extensive analysis of the state laws that might apply to each consumer's claims. See Tracker Marine, 108 S.W.3d at 352. While the trial court held that Kentucky or Georgia law would govern all claims based on choice-of-law clauses in the service contracts, those clauses do not apply if the result contravenes a fundamental policy of a state with a more significant relationship to the transaction and a materially greater interest in the determination of the particular issue. See Chesapeake Operating, Inc. v. Nabors Drilling USA, Inc., 94 S.W.3d 163, 169-70 (Tex.App.-Houston [14th Dist.] 2002, no pet.); Restatement (Second) of Conflict of Laws § 187(2)(b) (1971). Normally, states where consumers encounter misrepresentations and buy products based on them have a far greater interest in protecting their own consumers than the state where the manufacturer resides. See Tracker Marine, 108 S.W.3d at 355-59. Further, the unusual limitation in the choice-of-law clauses here (restricting them to circumstances in which the contract is not "otherwise governed by applicable state law") may render the clause itself ambiguous and subject to testimony concerning the intentions of the parties in each contract.
Finally, as we did in Tracker Marine, see id. at 360-61, we note several other matters that may render certification unsustainable on remand. First, certification is generally disfavored in novel claims (as this one appears to be), because it is hard to say whether common issues will predominate before one of them ever goes to trial. See id. at 361. Second, the class representative's claim for economic injury at the moment of purchase (even for those who never requested service) may be one that is not recognized in Texas. See id. at 362. Third, the trial court's reliance on appointment of a special master and post-judgment proof-of-claim forms or questionnaires may contravene GE's right to confront and cross-examine each class member on relevant issues. See id. at 363.
We reverse the trial court's certification order and remand for proceedings consistent with this opinion.
Judgment rendered and Memorandum Opinion filed September 23, 2003.