IN THE SUPREME COURT OF
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No. 03-1189
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DaimlerChrysler Corporation, Petitioner,
v.
Bill Inman, David Castro, and John Wilkins, Each Individually and on Behalf of All Others Similarly Situated, Respondents
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On Petition for Review from the
Court of Appeals for the Thirteenth District of
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Argued January 6, 2005
Chief Justice Jefferson, joined by Justice O’Neill, Justice Green, and Justice Johnson, dissenting.
In determining the propriety of a class action, the question is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of [the procedural rule governing class actions] are met.
Eisen v. Carlisle & Jacquelin,
417
This case comes to us on appeal of a trial court’s order certifying a nationwide[2] class action against DaimlerChrysler. The trial court had previously denied DaimlerChrysler’s motion for summary judgment, which asserted that the class allegations failed to state a cause of action.[3] In the court of appeals, Chrysler—for the first time—asserted that the plaintiffs lacked standing to sue. Today, the Court agrees and, in doing so, improperly equates standing with the merits of the plaintiffs’ claim. Because this contravenes fundamental tenets of the standing doctrine, our rules of procedure, and the statute governing interlocutory appeals, I respectfully dissent.
I
Standing
The Court never reaches the
choice-of-law issue, instead dismissing the entire action based on its
conclusion that the plaintiffs lack standing. But standing “focuses on the
party seeking to get his complaint before a . . . court and not on the issues
he wishes to have adjudicated.” Simon v. E. Ky. Welfare Rights Org., 426
Putative class representatives, like
any other plaintiffs, must demonstrate standing to sue. M.D. Anderson Cancer
Ctr. v. Novak, 52 S.W.3d 704, 710 (
As the Court notes, in most states
(including
The key distinction between this case and a “no-injury” product liability suit is that the Coghlans’ claims are rooted in basic contract law rather than the law of product liability: the Coghlans assert they were promised one thing but were given a different, less valuable thing. The core allegation in a no-injury product liability class action is essentially the same as in a traditional products liability case: the defendant produced or sold a defective product and/or failed to warn of the product's dangers. The wrongful act in a no-injury products suit is thus the placing of a dangerous/defective product in the stream of commerce. In contrast, the wrongful act alleged by the Coghlans is Wellcraft's failure to uphold its end of their bargain and to deliver what was promised. The striking feature of a typical no-injury class is that the plaintiffs have either not yet experienced a malfunction because of the alleged defect or have experienced a malfunction but not been harmed by it. Therefore, the plaintiffs in a no-injury products liability case have not suffered any physical harm or out-of-pocket economic loss. Here, the damages sought by the Coghlans are not rooted in the alleged defect of the product as such, but in the fact that they did not receive the benefit of their bargain.
Coghlan v. Wellcraft Marine Corp., 240 F.3d 449, 455 n.4 (5th Cir. 2001).
The Fifth Circuit also noted that
“the determination that there has been no injury in [cases like this] must be
an evidentiary one.”
The Court notes—accurately—that two
similar class actions have been brought in other states “without success.” ___
S.W.3d at ___. But that is only part of the story. While both cases involved
putative class actions involving the Gen-3 buckles, neither was decided on the basis
of standing. The Quacchia court held that
common issues did not predominate, and thus the trial court did not abuse its
discretion in refusing to certify the class. Quacchia
v. DaimlerChrysler Corp., 19
This case turns on a relatively simple question, at least as to damages — Is a car with defective seatbelt buckles worth less than a car with operational seatbelt buckles? Common sense indicates that it is, but, at this stage of the case, we need not decide that issue. Rather, we only determine that Collins is entitled to go forward with her case.
Collins v.
DaimlerChrysler Corp., 894 So.2d 988, 989-90 (
The Court relies in part on Rivera v. Wyeth-Ayerst Labs., 283 F.3d 315 (5th Cir. 2002). But the Fifth Circuit’s recent decision in Cole v. General Motors Corp., 484 F.3d 717 (5th Cir. 2007), shows why Rivera is inapposite. In Cole, Cadillac DeVille owners sued General Motors, alleging that the DeVilles had a defect that caused the airbags to deploy inadvertently and that GM had failed to repair or replace the airbags within a reasonable time. None of the class plaintiffs had actually experienced an inadvertent deployment, and GM (which had previously recalled the vehicles) challenged their standing to sue. Cole, 484 F.3d at 719-20. The Fifth Circuit, distinguishing Rivera, concluded that the plaintiffs had standing to pursue their claims:
In Rivera, purchasers of a prescription drug sought recovery of economic damages after learning that the manufacturer had withdrawn the drug from the market because the drug had caused liver damage to other patients. We concluded that the Rivera plaintiffs lacked standing because they described their claim as emanating from the drug manufacturer’s failure to warn and sale of a defective product, but the plaintiffs did not claim that the drug had caused them any physical or emotional injury. Although the plaintiffs quantified their injury in terms of economic damages, we concluded that merely asking for economic damages failed to establish an injury in fact because the plaintiffs never defined the source of their economic injury. The plaintiffs could not assert benefit-of-the-bargain damages because they had no contract with the manufacturer. Due to these factors, we determined that the injuries that the plaintiffs alleged were suffered not by them, but rather, by the non-party plaintiffs suffering liver damage. And we referred to the Rivera plaintiffs’ claim as a “no-injury products liability” suit.
Rivera is distinguishable
from the instant case. In Rivera, the plaintiffs sought damages for
potential physical injuries; because they never suffered actual physical injuries,
they could only allege injuries that were suffered by non-parties. The Rivera
plaintiffs did not assert economic harm emanating from anything other than
potential physical harm. Here, although plaintiffs do not assert physical
injuries (either their own or those of other persons), they do assert their own
actual economic injuries. Plaintiffs allege that each plaintiff suffered
economic injury at the moment she purchased a DeVille
because each DeVille was defective. Plaintiffs
further allege that each plaintiff suffered economic injury arising from GM’s
unreasonable delay in replacing their defective [airbags]. Plaintiffs seek
recovery for their actual economic harm (e.g., overpayment, loss in value, or
loss of usefulness) emanating from the loss of their benefit of the bargain.
Notably in this case, plaintiffs may bring claims under a contract theory based
on the express and implied warranties they allege. Whether recovery for
such a claim is permitted under governing law is a separate question; it is
sufficient for standing purposes that the plaintiffs seek recovery for an
economic harm that they allege they have suffered. See Parker v.
District of Columbia, 478 F.3d 370, 377(D.C. Cir. 2007) (“The Supreme Court
has made clear that when considering whether a plaintiff has Article III
standing, a federal court must assume arguendo
the merits of his or her legal claim.”) (citing Warth
v. Seldin, 422
This Court’s attempt to distinguish Cole reveals the extent to which it has misread that case. In its discussion of Cole and Rivera, the Court asserts that:
An important difference between these two cases is that the Cole plaintiffs alleged a defect that would cause GM’s side-impact air bags to deploy by itself unexpectedly during normal operation, something GM conceded in its voluntary recall, while the Rivera plaintiffs alleged a defect in medication which had caused injury only when taken by someone contrary to Wyeth’s instructions. In Cole, injury was a matter of time; in Rivera, it might never happen. The air bags in Cole’s vehicle might deploy improperly regardless of what she did, just as they might in the other vehicles in which they were installed. Taking Duract had not hurt Rivera, and there was almost no chance that the defect she alleged in the drug ever would injure her, given that she was fully aware of the restrictions on its use. Any possibility of injury to the plaintiffs in the present case is even more remote than it was in Rivera.
__S.W.3d at__. Based on this description, one would think that Cole turned on the likelihood of personal injury to the plaintiffs. As seen above, however, the Cole panel distinguished Rivera on very different grounds. The Fifth Circuit found that the plaintiffs in Cole had standing not because unexpected air bag deployment was inevitable[6] or otherwise more likely to cause harm to the plaintiffs than the drug in Rivera, but because the plaintiffs alleged that the defect—and GM’s failure to cure it in a reasonable time—deprived them of the benefit of their bargain. The plaintiffs here, like those in Cole, have made a claim for economic damages—replacement cost and loss of use—arising from, among other things, an alleged breach of warranty. This is sufficient to establish the plaintiffs’ standing, Cole, 484 F.3d at 722-23, and neither the Court’s dim view of their ability to prove a defect nor its disdain for their bid to adjudicate the rights of “ten million vehicle owners and lessees across the nation” in Nueces County deprives them of it. __S.W.3d at__.
Similarly, the Court’s analogy to M.D.
Anderson misses the mark. In that case, we held that a plaintiff who was
never defrauded lacked standing to sue on behalf of those who were. See M.D.
Anderson Cancer Ctr. v. Novak, 52 S.W.3d 704, 707-11 (
The Court correctly notes that
standing is a prerequisite to subject matter jurisdiction. ___ S.W.3d ___. It
may be raised not only by a plea to the jurisdiction, but by any number of
procedural methods, including summary judgment. Bland I.S.D. v. Blue, 34
S.W.3d 547, 554 (
Moreover, crafting new standing rules
creates a host of problems, not the least of which involves collateral attacks
on judgments. Without standing, a court lacks subject matter jurisdiction to
hear the case.
We have recognized that “[i]f . . . no class member can state a viable claim,
dispositive issues should be resolved by the trial court before certification
is considered.” State Farm Mut. Auto. Ins. Co. v.
Lopez, 156 S.W.3d 550, 557 (
We require that trial courts, in certifying or denying certification, comply with the detailed requirements of Rule 42. That rule requires, among other things, that the court delineate the elements of each claim or defense asserted in the pleadings; any issues of law or fact common to the class members; any issues affecting only individual class members; those issues that will be the object of most of the efforts of the litigants and the court; other available methods of adjudication; why common issues do or do not predominate; why a class action is or is not superior; and how class and individual claims will be tried in a manageable, time efficient manner. Tex. R. Civ. P. 42(c)(1)(D). Moreover, trial courts must conduct a “rigorous analysis” before ruling on class certification to determine “whether all prerequisites to class certification have been met.” Bernal, 22 S.W.3d at 435.
But we have never before held that
if class representatives cannot prove their case at the class-certification
stage, the trial court lacks jurisdiction. While “[t]he court may require
plaintiff to supplement the pleadings with outside material in order to
determine whether to certify [a class action]. . . . this does not mean that
the litigant bringing the action as a representative must establish the merits
of the case before a preliminary determination of the class-action question can
be made.” 7B Wright, Miller and Kane,
Federal Practice and Procedure § 1798. Indeed “although a preliminary
evidentiary hearing may be utilized [prior to class certification], that
hearing is directed toward examining the underlying facts to determine whether
they are susceptible to common proof and is not to determine the probability of
success on the merits.”
We have followed the United States
Supreme Court’s directive in Eisen, holding
that “[d]eciding the merits of the suit in order to
determine the scope of the class or its maintainability as a class action is
not appropriate.” Intratex Gas Co. v.
Beeson, 22 S.W.3d 398, 404 (
The determination whether there is a proper class does not depend on the existence of a cause of action. A suit may be a proper class action, conforming to Rule 23, and still be dismissed for failure to state a cause of action. Rule 23 delineates the scope of inquiry to be exercised by a district judge in passing on a class action motion. Nothing in that Rule indicates the necessity or the propriety of an inquiry into the merits. Indeed, there is absolutely no support in the history of Rule 23 or legal precedent for turning a motion under Rule 23 into a Rule 12 motion to dismiss or a Rule 56 motion for summary judgment by allowing the district judge to evaluate the possible merit of the plaintiff's claims at this stage of the proceedings. Failure to state a cause of action is entirely distinct from failure to state a class action.
Miller v.
Mackey Int'l, Inc., 452 F.2d 424, 427-28 (5th Cir. 1971) (citations
omitted). Even if we were to change course and disavow Eisen,
the better practice would be to do so through our rulemaking procedure. Several
commentators have suggested just such a solution with regard to the Federal
Rules of Civil Procedure. See, e.g.,
II
Choice of Law
A threshold question in any
appellate review of an order certifying a multistate class action must be an analysis
of whose law governs the class claims. See Compaq, 135 S.W.3d at 672. In
this case, the trial court certified a multistate class but did not perform a
choice-of-law analysis, concluding that it was unnecessary.[13] Noting this deficiency, the court of
appeals held that “the trial court still ha[d] significant work to do on
choice-of-law issues” and that our decision in Henry Schein “compel[led]
reversal” of the class certification order on that basis. 121 S.W.3d at 886.
After the court of appeals issued its judgment in this case, we decided Compaq,
in which we mandated a detailed choice-of-law analysis in multistate class
actions like this one, and we held that the lower courts erred by failing to
conduct such an analysis. Compaq, 135 S.W.3d at 673 (noting that the
lower “courts never assessed the substance of other states' laws but instead
concluded that the theory was sound under
We have recognized that “[i]n the context of a nationwide class action, the determination of the applicable substantive law is of paramount importance. If the court does not know which states' laws must be applied, it cannot determine whether variations in the applicable laws would defeat predominance in a [Rule 42](b)(3) class action . . . .” Id. at 672. Moreover, “[i]f the laws of fifty-one jurisdictions apply in [a] class action, the variations in the laws of the states and District of Columbia ‘may swamp any common issues and defeat predominance.’” Id. (quoting Castano v. Am. Tobacco Co., 84 F.3d 734, 741 (5th Cir. 1996)).
It is settled that in reviewing a class certification order, we must evaluate “‘the claims, defenses, relevant facts, and applicable substantive law.’” Bernal, 22 S.W.3d at 435 (quoting Castano, 84 F.3d at 744). In so doing, we have required “trial courts [to] abandon the practice of postponing choice-of-law questions until after certification, as courts can hardly evaluate the claims, defenses, or applicable law without knowing what that law is.” Compaq, 135 S.W.3d at 672 (citing Tracker Marine, L.P. v. Ogle, 108 S.W.3d 349, 351-52 (Tex. App.—Houston [14th Dist.] 2003, no pet.)) (emphasis added); see also Spence v. Glock, 227 F.3d 308, 313 (5th Cir. 2000) (holding that "the district court is required to know which law will apply before it makes its predominance determination"); Citizens Ins. Co. of Am. v. Daccach, 217 S.W.3d 430, 441 (Tex. 2007). In light of our recent cases on this issue, the court of appeals correctly held that the case must be remanded to the trial court for further proceedings.
III
Conclusion
Proposals to modify class action procedure present serious questions of policy. Standing is different. It implicates a court’s fundamental power to adjudicate a claim, rather than an assessment of whether the claim will ultimately succeed. Today, the Court conducts an extraordinary and unworkable reading of both pleading and precedent to conclude that the plaintiffs “lack[s] standing because [their] claim of injury is too slight for a court to afford redress.” ___ S.W.3d at ___. We have never before stretched the doctrine this far. The Court’s opinion reveals a visceral distaste for class actions, see Mejdrech v. Met-Coil Sys. Corp., 319 F.3d 910, 912 (7th Cir. 2003), but that distaste should not upend our substantive law of standing and subject matter jurisdiction which, even more than the right of trial by jury, is fundamental to our system of justice. I would affirm the court of appeals’ judgment.
__________________
Wallace B. Jefferson
Chief Justice
OPINION DELIVERED: February 1, 2008
[1] Texas Rule of Civil Procedure 42 is patterned after Federal Rule of Civil Procedure 23; consequently, federal decisions and authorities interpreting current federal class action requirements are persuasive authority. Sw. Ref. Co., Inc. v. Bernal, 22 S.W.3d 425, 433 (Tex. 2000) (citations omitted).
[2] In fact, the case is nearly nationwide, encompassing forty-eight states. California and Nevada residents were excluded from the proposed class definition.
[3] The motion nowhere asserts that the trial court lacked jurisdiction based on standing and seeks not dismissal, but a take-nothing judgment. Rather, DaimlerChrysler moved for summary judgment on the pleadings, alleging that the plaintiffs sustained no damages, an essential element of each claim, and that DaimlerChrysler was therefore entitled to judgment on the merits. DaimlerChrysler later supplemented its motion with excerpts from the class representatives’ depositions. The trial court denied the motion.
[4] That court noted:
In Walsh v. Ford Motor Co., 106 F.R.D. 378 (D.D.C. 1985), for example, the trial court certified an “all owners” class of plaintiffs, notwithstanding the defendant's protestation that many of the class members' cars had “performed as warranted and therefore [were] merchantable.” Id. at 396. The court specifically noted, however, that it was certifying the class solely on the basis of the “commonality” of the prospective members' interests, and that it was not determining separately whether the plaintiffs had stated a “viable” cause of action for breach of the implied warranty of merchantability. Id. at 397. Essentially the same can be said for each of the remaining cases on which the plaintiffs principally rely. See In re Cadillac V8-6-4 Class Action, 93 N.J. 412, 461 A.2d 736, 743 (1983) (approving certification of “all owners” class where plaintiffs charged breach of implied warranty of merchantability on account of “common defect”; court holds that allegation of “loss-of-bargain” damages is sufficient to state cause of action, but relies on cases where such loss occurred as result of manifest defects in plaintiffs' cars); Landesman v. General Motors Corp., 356 N.E.2d 105, 107-08, 42 Ill.App.3d 363, 1 Ill. Dec. 105, 107-08 (1st Dist. 1976) (court certified class of plaintiffs claiming damages partly attributable to diminished resale value, but specifically declined to decide question of whether allegations supported viable cause of action); Anthony v. General Motors Corp., 33 Cal.App.3d 699, 109 Cal.Rptr. 254 (2d Dist. 1973) (“all owners” class certification; no discussion of viability of underlying cause of action).
Carlson, 883 F.2d at 297.
[5] Ultimately, the court concluded that the district court abused its discretion in certifying the class, as the plaintiffs “failed to adequately address, much less ‘extensively analyze,’ the variations in state law . . . and the obstacles they present to predominance.” Cole, 484 F.3d at 730.
[6] It is far from clear that injury to the Cole plaintiffs was merely “a matter of time.” In that case, GM indicated that “it had received 306 reports of inadvertent deployment out of approximately 224,000 affected vehicles.” Cole, 484 F.3d at 719. Further, “[a]ccording to GM . . . the likelihood of inadvertent deployment decreased significantly over time.” Id. at 720 n.2.
[7] The court of appeals recognized this, noting that “‘[r]isk of injury’ [was] an inaccurate characterization” of the alleged harm. 121 S.W.3d at 879. Rather, the court noted that “[e]ach plaintiff claim[ed] injury in the form of insufficient product value” and “[o]n the basis of these allegations, each plaintiff claims a concrete and particularized injury in fact sufficient to confer standing to sue.” Id.
[8] Brown, 53 S.W.3d at 305 n.3.
[9] The Court asserts that the plaintiffs “do not contend that the Gen-3 buckles made their vehicles worth less than they paid for them.” While the plaintiffs may not use these exact words, they do allege concrete economic harm stemming from breach of express and implied warranties. See Tex. Bus. & Comm. Code § 2.714(b); Nobility Homes of Tex., Inc. v. Shivers, 557 S.W.2d 77, 78 n.1 (Tex. 1977) (stating that “direct economic loss may be ‘out of pocket’—the difference in value between what is given and received—or ‘loss of bargain’—the difference between the value of what is received and its value as represented. Direct economic loss also may be measured by costs of replacement and repair.”) (citations omitted).
[10] The Court states, in response to the argument that it is incorrectly considering the merits in determining standing, that “[w]e do not render judgment that the plaintiffs take nothing, as we would if their claims failed on the merits; we dismiss the case for want of jurisdiction.” ___S.W.3d___. This is quite true, but utterly non-responsive. The troubling part of the Court’s opinion is, of course, not the disposition in and of itself, but how it was reached.
[11] Indeed, standing is typically challenged in a plea to the jurisdiction, which is a “dilatory plea, the purpose of which is to defeat a cause of action without regard to whether the claims asserted have merit.” Bland, 34 S.W.3d at 554 (emphasis added).
[12] The Advisory Committee on the (federal) Civil Rules “also considered, but did not propose for formal review, a new provision of Rule 23(b)(3) that would have required a preliminary hearing on the merits prior to certification.” Deborah R. Hensler et al., Class Action Dilemmas: Pursuing Public Goals for Private Gain 500 n.2 (2000). That provision “encountered opposition from both plaintiff and defense bars.” Id. As one commentator has noted:
Defendants were torn between the attraction of drawing trial judges’ attention to the merits of proposed class actions and the possibility that such an early merits determination would simply provide more opportunity for adversarial procedure at a time when the record had not yet been sufficiently developed to support a sound judicial assessment. Defendants’ disagreement among themselves on the issue of a preliminary merits determination subsequently led the Advisory Committee to abandon this proposal.
Id. at 44 n.103.
[13] The class certification order stated that “[a] class certification order need not address choice of law. . . . In the absence of a proper choice of law motion, the Court will continue to presume, as it is entitled to presume, that the law of other jurisdictions is the same as Texas law.”