Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

ON MOTION FOR REHEARING

NO. 03-94-00284-CV

William P. Forsyth, et al., Appellants

v.

Lake LBJ Investment Corp., et al., Appellees

FROM THE DISTRICT COURT OF LLANO COUNTY, 33RD JUDICIAL DISTRICT

NO. 9849, HONORABLE B. B. SCHRAUB, JUDGE PRESIDING

The Court's earlier opinion issued March 8, 1995 is withdrawn and the following

substituted therefor.

This is an interlocutory appeal from a district court order denying class

certification. See Tex. Civ. Prac. & Rem. Code Ann. § 51.014 (3) (West Supp. 1995). In their

single point of error, appellants (1) contend that the trial court abused its discretion by denying their

motion for class certification. We will affirm the order of the district court.

BACKGROUND

The underlying action involves a dispute over the validity of restrictive covenants

that apply to all lot owners in the Horseshoe Bay subdivision ("Horseshoe Bay"), which is located

in Burnet and Llano counties. The appellees who were the original plaintiffs below (2) are all

developers of Horseshoe Bay. Appellants intervened in the trial court proceeding. Various

Horseshoe Bay property owners were defendants below, but are not involved in this appeal.

Restrictive declarations or covenants apply to the Horseshoe Bay properties.

Originally adopted by developer Lake Lyndon B. Johnson Improvement Corporation in 1971, the

declarations have been amended four times. (3) Defendants below sought to rally support among

Horseshoe Bay residents to challenge the enforceability of the declarations. The original plaintiffs

below sued in response, seeking a declaratory judgment with respect to the validity of the

declarations as well as damages under three causes of action.

Parties intervened on both sides of the action. Twelve Horseshoe Bay property

owners intervened to support the original plaintiffs below. Subsequently, appellants and eight

others intervened as counter-plaintiffs to support defendants below. Claiming to represent all

Horseshoe Bay property owners in a class action, appellants sought a declaratory judgment

pronouncing certain amendments to the declarations invalid. Appellants also sought damages on

behalf of the class alleging seven causes of action.

Appellants' vigorous attempts to secure greater participation in the action failed.

In fact, within three months, three of the intervenors in support of appellants' position dropped

out of the lawsuit. Among the lot owners actually participating in the action, the number of those

in favor of the declarations exceeded the number opposed.

Seven months after intervening in the action, appellants and one other intervenor

filed a motion for class certification. (4) They requested that the trial court certify the intervenors

as representatives of a class encompassing all lot owners in the Horseshoe Bay development. All

appellees opposed the motion, and a hearing was held. None of the movants appeared at the class

certification hearing to testify in person; appellants Christine K. Forsyth and A. L. "Dusty"

Rhodes testified through deposition. Appellant James Crownover was the only intervenor

supporting the motion who appeared at the hearing and offered live testimony. At the conclusion

of the movants' presentation of their evidence at the class certification hearing, the trial court

denied class certification. The district court's order does not state the reason for the denial of

class certification, and the record does not contain findings of fact or conclusions of law, despite

appellants' timely request. But see Tex. R. App. P. 42(a) (the trial court need not file findings

of fact and conclusions of law). Appellants seek reversal of the trial court's order and ask us to

direct the trial court to certify their intervention as a class action.

STANDARD OF REVIEW

We review a court order denying class certification using an abuse-of-discretion

standard. Hutchins v. Grace Tabernacle United Pentecostal Church , 804 S.W.2d 598, 601 (Tex.

App.--Houston [1st Dist.] 1991, no writ). A trial court has broad discretion in determining

whether to grant or deny class certification. American Express Travel Related Servs. Co. v.

Walton , 883 S.W.2d 703, 707 (Tex. App.--Dallas 1994, no writ h.). An appellate court must not

substitute its judgment for that of the trial court. Id. Even if a trial court determines an issue

differently than would an appellate court, the ruling does not necessarily constitute an abuse of

discretion. Dresser Indus., Inc. v. Snell , 847 S.W.2d 367, 371 (Tex. App.--El Paso 1993, no

writ) (citing Downer v. Aquamarine Operators, Inc. , 701 S.W.2d 238, 242 (Tex. 1985), cert.

denied , 476 U.S. 1159 (1986)); see also Vinson v. Texas Commerce Bank-Houston, Nat'l Ass'n ,

880 S.W.2d 820, 824 (Tex. App.--Dallas 1994, no writ) ("[E]ven if certification would have been

proper, a denial may still not be an abuse of discretion.").

In determining whether a matter should be litigated as a class action, a trial court

abuses its discretion if its decision is arbitrary, unreasonable, or without reference to any guiding

principles. Dresser Indus. , 847 S.W.2d at 371 . Further, a trial court abuses its discretion if it

does not properly apply the law to the undisputed facts, but does not abuse its discretion if it bases

its decision on conflicting evidence. Vinson , 880 S.W.2d at 823 . To satisfy their burden,

appellants must "demonstrate that the undisputed evidence negates any valid rationale by which

the trial court could have denied class certification." Id. at 825 . To do this, appellants must

provide an appellate record sufficient to demonstrate error. Tex. R. App. P. 50(d); Employers

Casualty Co. v. Texas Ass'n of Sch. Bds. Workers' Compensation Self-Ins. Fund , 886 S.W.2d

470, 473 (Tex. App.--Austin 1994, writ requested); Fort Bend County v. Texas Parks & Wildlife

Comm'n , 818 S.W.2d 898, 900 (Tex. App.--Austin 1991, no writ).

In making its class certification decision, the trial court can consider the pleadings

and other material in the record, along with the evidence presented at the hearing. Employers

Casualty Co. , 886 S.W.2d at 474 . The appellate court reviews the entire record to determine if

the trial court abused its discretion in denying certification. See Chrysler Corp. v. Blackmon , 841

S.W.2d 844, 852-53 (Tex. 1992). We must determine whether the record contains some evidence

in support of the order. Vinson , 880 S.W.2d at 828 . We view the evidence in a light most

favorable to the trial court's action, entertaining every presumption that favors its judgment. Id .

at 823; see also Texas Dep't of Mental Health & Mental Retardation v. Petty , 778 S.W.2d 156,

160-61 (Tex. App.--Austin 1989, writ dism'd w.o.j.); Brittain v. General Tel. Co. , 533 S.W.2d

886, 889 (Tex. Civ. App.--Fort Worth 1976, writ dism'd) (citing Richardson v. Kelly , 144 Tex.

497 , 191 S.W.2d 857 (1945)) (observing that trial court's finding as to class certification is

entitled to great weight on appeal). If the record supports the court's ultimate decision, we cannot

say that the trial court abused its discretion.

REQUIREMENTS OF CLASS CERTIFICATION

Texas Rule of Civil Procedure 42(a) sets out the following prerequisites for a class

action:

(1) the class must be so numerous that joinder is impracticable (numerosity);

(2) questions of law or fact must be common to the class (commonality);

(3) the class representatives must have claims or defenses typical of the class

(typicality); and

(4) the class representatives must fairly and adequately protect the interests of

the class (adequacy of representation).

Tex. R. Civ. P. 42(a). In addition, Rule 42(b) enumerates the following standards for

maintenance of a class action:

(1) individual suits would result in inconsistent or varying adjudications;

(2) an adjudication concerning an individual member would be dispositive of

interests of other members, or would substantially impair the ability of those

members to protect their interests;

(3) the party opposing the class has acted or refused to act on grounds generally

applicable to the class;

(4) the suit affects specific property; and

(5) common questions of law or fact predominate over questions affecting only

individual members, and a class action is the superior method of resolving

the controversy.

Tex. R. Civ. P. 42(b). A trial court may certify a class action if a plaintiff establishes all four

prerequisites in Rule 42(a), and meets at least one of the criteria for class maintenance in Rule

42(b). See Vinson , 880 S.W.2d at 824 (observing that Texas law does not require trial court to

certify class action even if plaintiff satisfies Rule 42 requirements).

The record reflects that appellants established the numerosity, commonality, and

typicality prerequisites. Numerosity is not disputed. (5) Commonality is evident. If the trial court

were to determine the enforceability of the declarations as to one Horseshoe Bay resident, the

adjudication would resolve the issue as to all other residents simultaneously. Additionally,

appellants' claims are typical of those of the class; appellants possess the same interests as all

other owners of Horseshoe Bay property. In theory, all class members have the same claims as

appellants, even though it may not be in their best interests to assert their claims. (6) However,

appellants have failed to demonstrate their adequacy of representation.

ADEQUACY OF REPRESENTATION

To comply with the adequacy of representation prerequisite, appellants must show

that the class representatives will fairly and adequately protect the interests of the class members.

Tex. R. Civ. P. 42(a)(4). This requirement has two basic components: (1) an absence of

antagonism between the class representatives and the class members, and (2) an assurance that the

representatives will vigorously prosecute the class members' claims and defenses. Wiggins v.

Enserch Exploration, Inc. , 743 S.W.2d 332, 335 (Tex. App.--Dallas 1987, writ dism'd w.o.j.).

Whether the representatives adequately represent the class is a question of fact, which must be

determined by reference to the circumstances of each case. Dresser Indus., Inc. , 847 S.W.2d at

373 . Factors affecting the determination include:

(1) adequacy of counsel;

(2) potential conflicts of interest;

(3) the personal integrity of the plaintiffs;

(4) the representatives' familiarity with the litigation and their belief in the

legitimacy of the grievance;

(5) whether the class is unmanageable based on geographical limitations; and

(6) whether the plaintiffs can afford to finance the class action.

Id. ; see also Adams v. Reagan , 791 S.W.2d 284, 291 (Tex. App.--Fort Worth 1990, no writ)

(citing Horton v. Goose Creek Indep. Sch. Dist. , 690 F.2d 470 , 484 (5th Cir. 1982), cert. denied ,

463 U.S. 1207 (1983)) ("[T]he trial court must inquire into the zeal and competence of class

counsel and into the willingness and ability of the representatives to take an active role in and

control the litigation and to protect the interests of absentees.").

(1) Intra-Class Antagonism

We first examine whether any antagonism exists between the class representatives

and the class members. A conflict that goes to the very subject matter of the litigation will defeat

a party's claim of representative status. Adams , 791 S.W.2d at 291 . Federal cases offer guidance

on this issue. (7) In Horton v. Goose Creek Independent School District , 690 F.2d 470 (5th Cir.

1982), cert. denied , 463 U.S. 1207 (1983), the court addressed the relationship between intra-class antagonism and the adequacy of representation prerequisite. According to the court, class

certification may be denied for lack of adequate representation if there is a possibility of

significant disagreement within the proposed class. See id. at 485-86; see also Swain v. Brinegar ,

517 F.2d 766, 780 (7th Cir. 1975) (denying certification for lack of adequate representation

because possibility existed that some class members would not support class action); Ihrke v.

Northern States Power Co. , 459 F.2d 566, 572-73 (8th Cir. 1972) (denying certification for lack

of typicality because some class members might oppose objectives of class action). Furthermore,

where there is "hard evidence of real disagreement" within the class, courts are more inclined to

deny certification. Horton , 690 F.2d at 485; see also East Tex. Motor Freight Sys. Inc. v.

Rodriguez , 431 U.S. 395, 405 (1977) (denying certification for lack of adequate representation

because, in part, certain class members voted against named plaintiffs' objectives at union

meeting); Peterson v. Oklahoma City Hous. Auth. , 545 F.2d 1270, 1273 (10th Cir. 1976) (finding

that antagonism existed and that certification should be denied for lack of adequate representation

where many potential class members openly opposed object of action). In any event, the party

opposing certification has only a slight evidentiary burden to show that intra-class antagonism may

develop. Horton , 690 F.2d at 486.

In the instant cause, the validity of the declarations is not only the subject matter

of the underlying litigation, but also the source of the dispute between the proposed

representatives and the opposing twelve intervening class members. The opposition of twelve

class members does not, by itself, indicate that a majority of the class members opposes

appellants' position. However, among the class members actively participating in the action,

those opposing appellants outnumber those who support them. This division constitutes actual

intra-class antagonism. Such an inconsistency between appellants' interests and those of class

members regarding the very subject matter of the litigation weighs against appellants' claim of

representative status. Adams , 791 S.W.2d at 291 . (8)

Appellants rely on Horton for the proposition that certification would be

appropriate, notwithstanding the presence of intra-class antagonism, because appellees would

adequately represent the interests of any dissident absentee class members. (9) Horton is

distinguishable because actual intra-class antagonism, as opposed to the mere possibility of

antagonism, exists in the instant case. The possibility that appellees, and those class members

intervening to support appellees, will represent any dissenting views within the class is a factor

to be weighed in determining adequacy of representation. However, it does not mandate class

certification when intra-class antagonism actually exists. (10)

(2) Zealous Representation

Next, we consider whether the representatives would avidly pursue the claims and

defenses of the class members. Although an attorney represented appellants at the class

certification hearing, the failure of the movants for class certification and all but one intervenor

to attend the hearing in person casts doubt upon the enthusiasm with which the proposed

representatives would act on behalf of the class. Appellants relied almost entirely on their counsel

at the certification hearing. This fact weighs against certification. See Adams , 791 S.W.2d at 291

(providing that trial court must consider whether representatives will "take an active role in and

control the litigation . . . to protect the interests of absentees" in determining adequacy of

representation prerequisite).

Federal authority is instructive on the issue of zealous representation. In Weisman

v. Darneille , 78 F.R.D. 669 (S.D.N.Y. 1978), the court denied class certification because

representation was inadequate. In support of its decision, the court wrote:

Plaintiff's superfluous role here does not meet the requirements of Rule 23(a)(4).

The class is entitled under that rule to more than competent counsel. It must also

be assured that it will have an adequate representative, one who will check the

otherwise unfettered discretion of counsel in prosecuting the suit and who will

provide his personal knowledge of the facts underlying the complaint. . . .

Plaintiff's evident willingness to rely on counsel's ability to protect the interests of

the class is inconsistent with the participation required of an adequate class

representative.

Id. at 671 . Similarly denouncing apathetic class representation, another court wrote: "The class

is entitled to more than blind reliance upon even competent counsel by uninterested and

inexperienced representatives." In re Goldchip Funding Co. , 61 F.R.D. 592, 594 (M.D. Pa.

1974); see also Pashek v. Arizona Bd. of Regents , 82 F.R.D. 62, 64 (D. Ariz. 1979) (finding

class representation inadequate because representative passively acquiesced to decisions of her

attorney in seeking class certification).

CONCLUSION

The record shows that obvious antagonism exists between appellants and at least

twelve class members who intervened and oppose appellants' objectives. This antagonism

regarding the very subject matter of the underlying litigation suggests a real possibility of conflict

between a significant number of the proposed class members and those who seek to be class

representatives. Moreover, the record does not indicate that appellants have zealously pursued

the class members' claims and defenses; they have neither taken an active role in nor taken control

of the litigation. In light of the record evidence, we cannot say that appellants or other

intervenors will adequately and fairly protect the interests of the class members. The record

suggests a reasonable basis for the trial court to have denied class certification for lack of adequate

representation.

Even though a case concerning the construction of restrictive covenants is uniquely

suited for a class action, (11) the trial court has broad discretion in determining whether to grant or

deny class certification. From the record, the trial court could have determined that appellants

and the other intervenors may not adequately and fairly protect the interests of the class. Based

on the record, we cannot say that the trial court abused its discretion when it denied class

certification. Appellants have failed to prove that the undisputed evidence negates any valid

rationale by which the trial court could have denied certification. Because appellants have not

demonstrated that they met the adequacy of representation prerequisite required by Rule 42(a),

we do not reach the Rule 42(b) elements. Accordingly, we overrule appellants' point of error and

affirm the order of the trial court.

Marilyn Aboussie, Justice

Before Justices Powers, Aboussie and B. A. Smith

Affirmed

Filed: July 19, 1995

Publish

1. The appellants are William P. Forsyth and Christine K. Forsyth, Trustees of the Forsyth

Living Trust; Forsyth Properties, Ltd.; A. L. "Dusty" Rhodes; and James D. Crownover.

2. The appellees who were the original plaintiffs below are Lake LBJ Investment Corp.;

Lake Lyndon B. Johnson Improvement Corporation; Horseshoe Bay Maintenance Fund,

Inc.; Horseshoe Bay Resort and Conference Center, Inc.; Norman C. Hurd, individually and

as executor of the estate of Dorothy E. Hurd, deceased; Norman C. Hurd, Trustee #1;

Wayne Hurd; and Eileen Hurd. Appellees who intervened in support of the original

plaintiffs below are Shelton Thibodeaux and Jennie Thibodeaux; Jim Rowe and Melissa

Rowe; Al Broome and Renata Broome; Ted Burget and Sally Burget; Roland Wilson and

Carolyn Wilson; Sue Ann Mabray; and Faye Morgan.

3. For convenience, we will refer to the declarations and their amendments as "the

declarations."

4. Appellant James D. Crownover did not move for class certification; movant Thomas

Norwood is not an appellant.

5. Appellants presented proof that potential class membership would exceed 6,600

Horseshoe Bay lot owners. Conceding that the numerosity requirement was satisfied,

appellees did not present contrary evidence.

6. See Horton v. Goose Creek Indep. Sch. Dist. , 690 F.2d 470 , 485 n.27 (5th Cir. 1982), cert.

denied , 463 U.S. 1207 (1983). According to the court in Horton , typicality and adequacy of

representation are closely related, "for demanding typicality on the part of the representative helps

insure his adequacy of representation." Id. Because some analytical overlap necessarily occurs

in ascertaining whether these two prerequisites are satisfied, it makes organizational sense to

consolidate our inquiry. As did the Horton court, we will analyze the question of intra-class

antagonism under the adequacy of representation requirement.

7. Because Rule 42 is patterned after the federal class action rule, cases interpreting the

federal rule are persuasive. Ball v. Farm & Home Sav. Ass'n , 747 S.W.2d 420, 422-23 (Tex.

App.--Fort Worth 1988, writ denied); RSR Corp. v. Hayes , 673 S.W.2d 928, 931-32 (Tex.

App.--Dallas 1984, writ dism'd).

8. The record also reflects previous legal disputes between two proposed representatives and

certain appellees. In addition, we note that the record suggests that the challenged declarations

were unanimously ratified by the elected Board of Directors of the Horseshoe Bay Property

Owners' Association.

9. The defendant in Horton , who opposed the class action, offered no proof of actual

antagonism within the proposed class. Rather, he asserted that the mere possibility of antagonism

existed because no potential class members, other than the three named plaintiffs, complained

about the practices in question. Horton , 690 F.2d at 485. Agreeing with the defendant that "a

very real possibility" of antagonism existed among the proposed class members, the court

observed that class certification may be denied in such circumstances. Id. However, the court

went on to certify the class, reasoning that the defendant would adequately represent the views

of any dissenting absentee class members. Id. at 487-88.

10. Horton is also distinguishable from the instant case based on a difference between the federal

and Texas class action rules. Under the federal rule, absent class members have the right to opt

out of the class action. Fed. R. Civ. P. 23(c). The theory behind this procedural escape hatch

is that courts are reluctant to bind people to class action judgments that they do not approve.

Horton , 690 F.2d at 487. Thus, with the opt-out provision in mind, a number of federal courts

have certified class actions despite substantial intra-class antagonism. See id. at 485 (and cases

cited therein).

The Texas class action rule does not contain a comparable provision. Instead of opting

out of the action, absentee class members opposing their inclusion in the class action may only

"appear before the court and challenge the court's determinations as to the class and its

representatives." Tex. R. Civ. P. 42(c)(2). In the instant case, twelve potential class members

intervened in the underlying litigation. Together with any other proposed class members who

oppose the class action, those intervenors cannot opt out if the class is certified. Instead, they

would be forced to support an action that is antagonistic to their own interests simply because they

live in Horseshoe Bay. See Pashek v. Arizona Bd. of Regents , 82 F.R.D. 62, 64 (D. Ariz. 1979)

(recognizing that heightened standard of scrutiny applies in determining adequacy of

representation when opt-out provision of federal class action rule does not apply).

11. See Townplace Homeowners' Ass'n v. McMahon , 594 S.W.2d 172, 177 (Tex. Civ.

App.--Houston [1st Dist.] 1980, writ ref'd n.r.e.) ("A suit for construction of restrictive covenants

is especially suited for class action litigation."); Adams v. Owens , 519 S.W.2d 260, 261 (Tex.

Civ. App.--Beaumont 1975, writ ref'd n.r.e.) (recognizing that construction of restrictive

covenants "is a question touching each owner of lots in [an] addition, with common questions of

law and fact," and noting "that this is the type of situation uniquely designed for a class action").