Farmers Insurance Exchange Truck Insurance Exchange Fire Insurance Exchange Mid-Century Insurance Co. Mid-Century Insurance Co. of Texas Farmers New World Life Insurance Co. Farmers Texas County Mutual Insurance Company Farmers Group, Inc. v. Michael Leonard and Michael Sawyer on Behalf of Themselves and All Others Similarly Situated

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-01-00649-CV

Farmers Insurance Exchange; Truck Insurance Exchange; Fire Insurance Exchange;
Mid-Century Insurance Company; Mid-Century Insurance Company of Texas;
Farmers New World Life Insurance Company; Farmers Texas County
Mutual Insurance Company; Texas Farmers Insurance
Company; and Farmers Group, Inc., Appellants

v.

Michael Leonard and Michael Sawyer on Behalf of Themselves
and all Others Similarly Situated, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT
NO. GN-001634, HONORABLE W. JEANNE MEURER, JUDGE PRESIDING

Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance Exchange, Mid-

Century Insurance Company, Mid-Century Insurance Company of Texas, Farmers New World Life

Insurance Company, Farmers Texas County Mutual Insurance Company, Texas Farmers Insurance

Company, and Farmers Group, Inc. (collectively AFarmers@), bring this interlocutory appeal challenging the

trial court=s order certifying a class action. See Tex. Civ. Prac. & Rem. Code Ann. ' 51.014(a)(3) (West

Supp. 2002). By four issues, Farmers contends that the trial court erred in certifying the class action

brought by appellees, Michael Leonard and Michael Sawyer. Farmers contends that the class does not

meet the requirements for class certification under rule 42 of the Texas Rules of Civil Procedure, and urges

reversal and decertification. We will affirm the trial court=s order.
 BACKGROUND

This case involves a number of essentially unilateral bonus award contracts that Farmers

gives its agents each year to reward them for meeting certain profitability and sales requirements. Although

Farmers offers a number of award programs, only four distinct bonus programs are implicated in this

dispute. The four bonus contracts, and the years in which Leonard and Sawyer claim Farmers breached the

agreements, are the Underwriting Contract Value Bonus for 1995-1999, the Agency Profitability Bonus for

1995-1999, the Auto Retention Bonus for 1999, and the Life Performance Bonus for 1996-1999.

Farmers sent these bonus contracts to 13,000 agents in twenty-nine states.

Because these contracts may change, Farmers explains the bonus programs in annual

Achievement Award Brochures, Field Bulletins, and the Farmers Agent Guide. These written explanations

contain the rules, eligibility criteria, and qualification requirements for each bonus award available that year.

Each bonus is calculated by Farmers, based on an individual agent=s sales and profitability. Accordingly, the

written explanations for the bonus contracts notify the agents that A[p]roduction qualifications are based on

official Company production records for the qualifying period for each award.@ Farmers also furnishes its

agents with a copy of their individual production records so that they will be able to monitor their individual

sales, production, and profitability, as determined by Farmers. Leonard and Sawyer claim that Farmers

uniformly breached the four bonus contracts at issue by improperly calculating and awarding the bonuses

due to the class members. Accordingly, Leonard and Sawyer filed this suit as a putative class action.1

1
Although each of the four bonuses involve different methods of calculation in order to determine

2
an agent=s eligibility and the size of the bonus awarded, an explanation of the intricacies of each bonus is
unnecessary for purposes of this opinion.

3
 After a six-day certification hearing, the trial court certified the class. Farmers appeals that

decision and raises the following four issues for our consideration: (1) the trial court erred in determining that

California=s substantive law should apply in this case; (2) the decision to allow Leonard and Sawyer to

represent multiple subclasses was an abuse of discretion; (3) the determination that Leonard and Sawyer

are adequate representatives typical of the class was in error and amounts to an abuse of discretion; and (4)

the requirements of rule 42(b)(4) have not been met because individual issues do not predominate, the class

action is not superior to individual actions, and the proposed trial plan is unworkable.

STANDARD OF REVIEW

In a class action, the trial court is charged with the duty of actively policing the proceedings

and guarding the class interests. See General Motors Corp. v. Bloyed, 916 S.W.2d 949, 954 (Tex.

1995). Therefore, the trial court is afforded broad discretion in defining the class and determining whether

to grant or deny a class certification. See Intratex Gas Co. v. Beeson, 22 S.W.3d 398, 406 (Tex. 2000).

On appeal, our review is strictly limited to determining whether the trial court abused its discretion in

ordering class certification. See Tana Oil & Gas Corp. v. Bates, 978 S.W.2d 735, 740 (Tex.

App.CAustin 1998, no pet.); Vinson v. Texas Commerce Bank-Houston, N.A., 880 S.W.2d 820, 823

(Tex. App.CDallas 1994, no writ). An appellate court must not substitute its judgment for that of the trial

court. Tana Oil, 978 S.W.2d at 740. Even if a trial court determines an issue differently than would an

appellate court, the ruling does not necessarily constitute an abuse of discretion. Downer v. Aquamarine

Operators, Inc., 701 S.W.2d 238, 242 (Tex. 1985). In determining whether a matter should be litigated

4
as a class action, a trial court abuses its discretion if its decision is arbitrary, unreasonable, or without

reference to any guiding principles. Tana Oil, 978 S.W.2d at 740.

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 Cas. Co. v. Texas

Ass=n of Sch. Bds. Workers= Comp. Self-Ins. Fund, 886 S.W.2d 470, 474 (Tex. App.CAustin 1994, writ

dism=d w.o.j.). The evidence on which a trial court bases its certification ruling need not be in a form

necessary to be admissible at trial. See Texas Commerce Bank Nat=l Ass=n v. Wood, 994 S.W.2d 796,

801 (Tex. App.CCorpus Christi 1999, pet. dism=d w.o.j.); Microsoft Corp. v. Manning, 914 S.W.2d

602, 615 (Tex. App.CTexarkana 1995, writ dism=d). We view the evidence in the light most favorable to

the trial court=s action, entertaining every presumption that favors its judgment. Vinson, 880 S.W.2d at

823.

Although the standard of review, generally, for class certification decisions is an abuse of

discretion, because Farmers challenges the trial court=s choice of law determination, we must apply a

different standard for that discrete issue. The determination of which state=s law applies is a question of law

for the court to decide. Torrington Co. v. Stutzman, 46 S.W.3d 829, 848 (Tex. 2000). Therefore, we

must review the trial court=s decision to apply California law in this case de novo. See Minnesota Mining

& Mfg. Co. v. Nishika Ltd., 955 S.W.2d 853, 856 (Tex. 1996). But determining the state contacts to be

considered by the court in making this legal determination involves a factual inquiry. Hughes Wood Prods.,

Inc. v. Wagner, 18 S.W.3d 202, 204 (Tex. 2000). Texas courts apply the Restatement=s Amost significant

5
relationship@ test to decide choice of law issues. Torrington, 46 S.W.3d at 848; Restatement (Second) of

Conflict of Laws ' 6 (1971).

Our review of the record in this case supports the trial court=s decision to apply California

law and our conclusion that the trial court did not abuse its discretion in certifying the class. The trial court

conducted a thorough certification hearing in which it went well beyond the parties= pleadings in order to

examine the claims, defenses, relevant facts, and applicable substantive law of this case to make a

meaningful determination of the certification issues. The record before us indicates that the trial court

conducted a rigorous analysis of all issues presented and arrived at a reasoned decision in certifying the

class.

REQUIREMENTS OF CLASS CERTIFICATION

Texas rule 42, governing class actions, is patterned after its federal counterpart.

Consequently, federal decisions and authorities interpreting current federal class action requirements are

persuasive authority. Southwestern Ref. Co., Inc. v. Bernal, 22 S.W.3d 425, 433 (Tex. 2000). The

class action serves as a mechanism to eliminate or reduce the threat of repetitive litigation, prevent

inconsistent resolution of similar cases, and provide a means of redress for individual claims that are too

small to make independent actions economically viable. See Ford Motor Co. v. Sheldon, 22 S.W.3d 444,

452 (Tex. 2000). The principal purpose of the class action device is the efficiency and economy of

litigation. See id. (discussing origins and general design of class action device). Thus, when properly used,

a class action saves the court=s and the parties= resources by allowing class-wide issues to be tried in an

economical fashion. See id. at 452 (citing General Tel. Co. v. Falcon, 457 U.S. 147, 155 (1981)).

6
 All class actions must satisfy the following four threshold requirements: (1) numerosityCthe

class is so numerous that joinder of all members is impracticable, (2) commonalityCthere are questions of

law or fact common to the class, (3) typicalityCthe claims or defenses of the representative parties are

typical of the claims or defenses of the class, and (4) adequacy of representationCthe representative parties

will fairly and adequately protect the interests of the class. See Tex. R. Civ. P. 42(a); Bernal, 22 S.W.3d at

433. Additionally, class actions must satisfy at least one of four subdivisions of rule 42(b). Here, the trial

court certified the class under rule 42(b)(4), which requires that common questions of law or fact common

to the class predominate over questions affecting only individual members and that class treatment be

superior to other available methods for the fair and efficient adjudication of the controversy. Tex. R. Civ. P.

42(b)(4); see also Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 615 (1997); Bernal, 22 S.W.3d at

433.

DISCUSSION

Choice of Law

In its first issue, Farmers contends that the trial court erred in determining that California=s

substantive law should apply to the claims of all class members. Farmers argues that, under a proper choice

of law analysis, each agent=s claim should be decided under the law of the state in which that agent worked

and resided. In an interesting juxtaposition, Farmers further argues that the application of California law to

class members from other states is unfair to those class members because they would have a better chance

of success under the law of their home states. Specifically, Farmers argues that California law, more so than

the law of other states, allows for the introduction of extrinsic evidence in contract disputes that could aid

7
Farmers in undermining the class members= claims. Farmers contends that a proper choice of law analysis

requires the application of the law of all twenty-nine states in which the class members live. It follows,

according to Farmers, that the class must be decertified because the individual issues would predominate

and a class action would no longer be the superior method of adjudicating this dispute. We disagree.

Applying the relevant sections of the Restatement of Conflict of Laws to the facts of this dispute leads us to

the conclusion that the trial court was correct in determining the proper substantive law to be applied in this

case is that of California.

We begin our choice of law analysis with the Restatement=s Amost significant relationship@

test. See Torrington, 46 S.W.3d at 848; Restatement (Second) of Conflict of Laws ' 6 (1971). That

section requires us to apply the following factors to the facts of this case:

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum,

(c) the relevant policies of other interested states and the relative interests of those states
in the determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law to be applied.

Restatement (Second) of Conflict of Laws ' 6(2).

8
 The basic principles of section 6 favor the application of California law. Because all

drafting, mailing, calculating, and awarding of bonuses originated from California, it is reasonable to assume

that Farmers and its agents expected that California law would control any disputes that arose between the

parties concerning the bonuses. See id. ' 6(2)(d) (protection of justified expectations). No other state

involved in this dispute has equal interests to California in having its law applied. While each agent=s home

state has a great interest in having its law applied to disputes arising within its borders, the only actions in

dispute here occurred in California. While the agents sold insurance policies in their home states, the dispute

here concerns the calculation of bonuses which occurred only in California. See id. ' 6(2)(c) (relative

interests of states in determining particular issue). Also, with virtually all activity involving the bonus

contracts having originated in California, and the relative uniformity in the various states= laws governing this

dispute, the ease of determination and application factor favors California law. See id. ' 6(2)(g) (ease in

determination and application of law to be applied). Finally, in a class action such as this one, where the

class members reside in twenty-nine states but all of the defendants= alleged breaches of contract occurred

in California, the desire for certainty, predictability, and uniformity of result lean heavily toward application

of California law. See id. ' 6(2)(f) (certainty, predictability, and uniformity of result).

However, our inquiry does not end with section 6. Because these unilateral contracts did

not have choice of law provisions, we must also examine the factors listed in section 188. See Restatement

(Second) of Conflict of Laws ' 188 (1971). Section 188 provides the following:

(2) In the absence of an effective choice of law by the parties . . ., the contacts to be
taken into account in applying the principles of ' 6 to determine the law applicable to
an issue include:

9
 (a) the place of contracting,

(b) the place of negotiation of the contract,
(c) the place of performance,

(d) the location of the subject matter of the contract, and

(e) the domicil, residence, nationality, place of incorporation and place of business of
the parties.

These contacts are to be evaluated according to their relative importance with respect to
the particular issue.

Id. ' 188(2).

Although not all of the appellants have their principal place of business in California, the

most integral actor with regard to the class members= allegations, Farmers Group, Inc., does maintain its

primary office in California.2 Farmers Group, Inc. is the only appellant that is not an insurance company.

However, Farmers Group, Inc. acts as the agent for Farmers in administering the bonuses that form the crux

of this case. Farmers Group, Inc. drafted the bonus contracts, collected the data, determined how that data

2
Of the nine appellants, five have their principal place of business in California. Those five are
Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance Exchange, Mid-Century Insurance
Company, and Farmers Group, Inc. Three others, Mid-Century Insurance Company of Texas, Farmers
Texas County Mutual Insurance Company, and Farmers Texas Insurance Company, maintain their principal
place of business in Texas, and a fourth, Farmers New World Life Insurance Company, maintains its
principal place of business in Washington.

10
would be applied in the calculations, and issued the bonuses to Farmers= agents. Furthermore, although the

class members reside in twenty-nine states, a majority live in California. Based on these facts, the trial court

found that California had the most significant relationship to the bonus contracts at issue and the parties to

the lawsuit.

Taking into account the requirements of section 188, we conclude that the trial court was

correct in ruling that California law applied to the claims of the class. Particularly relevant is the place of

performance of the contract. See id. ' 188(2)(c). Farmers argues that the place of performance is the

place where the agents performed the functions that qualified them for the bonuses in questionCin other

words, the place of performance is where the insurance agents sold the insurance products. Farmers=

argument overlooks the nature of the bonus contracts at issue. The relevant performance for the purposes

of this dispute is that of Farmers. Once these unilateral bonus contracts were formed, Farmers had an

obligation to accurately calculate and remit bonus payments to their agents.3 The calculation of these

bonuses, the central issue in this case, was performed by Farmers in California. In the context of these

bonus contracts, the actions of the agents in selling and maintaining various insurance products merely

3
While it is true that the acceptance, and thus the formation, of these unilateral bonus contracts was
triggered by the agents selling a certain amount of insurance policies, the dispute between the parties does
not focus on contract formation. All issues in this case revolve around the breach of contract which
allegedly occurred during Farmers= performance of its obligations under these contracts.

11
provides the measuring stick that Farmers uses in performing its obligations under the contract. Thus, the

relevant place of performance of these bonus award contracts was California.

The remaining factors listed in section 188 also point to the application of California law.

Because these bonus award contracts were drafted solely by Farmers in California and then sent from

California to the class members without the possibility for further input from those class members, the place

of contracting factor indicates that California law should apply. See id. ' 188(2)(a) (place of contracting).

The location of the subject matter of the contracts is also California because Farmers maintained all official

company production records for the calculation of the bonuses in California. See id. ' 188(2)(d) (location

of subject matter of contract). Finally, with regard to the relative importance of these particular contracts,

the party solely responsible for performance, Farmers Group, Inc., has its principal place of business in

California. See id. ' 188(2)(e) (place of business of parties).

Farmers attempts to overcome the strong indication from sections 6 and 188 that California

law should apply by arguing that section 196 of the Restatement, the section governing service contracts,

trumps the other sections. Section 196 provides the following:

The validity of a contract for the rendition of services and the rights created thereby are
determined, in the absence of an effective choice of law by the parties, by the local law of
the state where the contract requires the services, or a major portion of the services, be
rendered, unless, with respect to the particular issue, some other state has a more significant
relationship under the principles stated in ' 6 to the transaction and the parties, in which
event the local law of the other state will be applied.

Restatement (Second) of Conflict of Laws ' 196 (1971).

12
 Because the agents provided the service of selling insurance products in their home states,

Farmers contends that the contracts in question should be governed by the law of the states in which those

sales took place. We disagree. We have already discussed the place of performance for these bonus

contracts in our discussion of section 188, and we conclude that the proper law to be applied in this case is

that of California.

Although our examination of the relevant sections of the Restatement has brought us to the

conclusion that the trial court properly determined that California law should apply to the class members=

claims, Farmers urges that the differences in the parol evidence rules between California and the other

twenty-eight jurisdictions involved in this case require the application of each states= substantive law in order

to protect the absent class members= interests. The essence of Farmers= argument is as follows: if the law of

Farmers= home state of California applies to the claims raised by the class, class members from other states

will suffer because the more liberal California law on parol evidence will allow Farmers to defeat the claims

of the class. Therefore, rather than using the liberal rules of its own state=s law against the class, Farmers

urges this Court to protect the interests of the absent class members and decertify the class, thus allowing

each class member a better opportunity to successfully bring an individual breach of contract claim against

Farmers in that class member=s home jurisdiction.

Ignoring the irony of Farmers= position, we are unpersuaded by this argument concerning

the differences in the twenty-nine states= parol evidence rules. As applied to this case, the parol evidence

rules of all twenty-nine states, including California, function in a substantially similar manner and would allow

extrinsic evidence to be admitted. Farmers correctly asserts that California=s parol evidence rule does not

13
restrict contract disputes to the four corners of an unambiguous document. Cal. Civ. Proc. Code ' 1856

(2001) (extrinsic evidence admissible unless meant to contradict writing by showing prior agreement or

contemporaneous oral agreement). However, California=s rule only differs from the parol evidence rules of

the other twenty-eight states when the contracts in question are unambiguous because those jurisdictions

limit the examination of unambiguous contracts to the four corners of the documents. See, e.g., Butts v.

Lawrence, 919 P.2d 363, 367 (Kan. 1996); Ruble v. Reich, 611 N.W.2d 844, 849-50 (Neb. 2000);

Geo. B. Smith Chem. Works, Inc. v. Simon, 555 P.2d 216, 217 (Nev. 1976); Spring Brook Acres

Water Users Assoc. v. George, 505 N.W.2d 778, 780 (S.D. 1993); Wolter v. Equitable Res. Energy

Co., 979 P.2d 948, 951 (Wy. 1999).

Although both Farmers and the class members argue that the contracts in question are

unambiguous, they dispute which documents constitute the contracts. Thus, a question of intent concerning

contract formation is raised. A disagreement as to what documents form a contract is a latent ambiguity that

allows for the admission of parol evidence. See, e.g., Friendswood Dev. Co. v. McDade + Co., 926

S.W.2d 280, 282-83 (Tex. 1996) (AA latent ambiguity exists when a contract is unambiguous on its face,

but fails by reason of some collateral matter when it is applied to the subject matter with which it deals.@);

Wolter, 979 P.2d at 952 (existence of latent ambiguity allows parties to explain intent with extrinsic

evidence). Therefore, regardless of which state=s law is applied to this case, the rules governing the

admission of extrinsic evidence remain constant.

Finally, while we remain steadfast in our decision that California=s substantive law should

apply in this case, we are equally convinced that Farmers= argument concerning the parol evidence rule does

14
not result in the need to decertify the class.4 Because the same rules governing parol evidence apply to

every state once a latent ambiguity is found in the contract, a decision to apply the law of any of the twenty-

nine states involved would result in the same effect on the parties. We overrule Farmers= first issue.

Representation of Absent Class Members

Farmers= second and third issues challenge the trial court=s ruling that Leonard and Sawyer

can protect the interests, and serve as adequate representatives, of every class member. The trial court=s

order has divided the class into four subclasses. The definitions for each subclass correspond to the type of

bonus contract the agents in that subclass were eligible to receive. Thus, we will refer to the subclasses as

(1) the Agency Profitability subclass, (2) the Underwriting Contract Value subclass, (3) the Auto Retention

subclass, and (4) the Life Performance subclass. The trial court ordered that both Leonard and Sawyer

would serve as the representatives for the Agency Profitability, Underwriting Contract Value, and Life

Performance subclasses, but only Sawyer would represent the Auto Retention subclass. In its second issue,

Farmers contends that, initially, the trial court abused its discretion because a conflict exists within the Life

Performance subclass and, secondly, another conflict may be created by allowing Leonard and Sawyer to

represent multiple subclasses with possibly divergent interests. The latter argument relies on the assumption

that the subclasses will compete with one another to maximize each subclass=s share of the available funds if

4
Of course, if class members feel disadvantaged by applying the law of a foreign state to their
claims, they may opt out of this class action litigation and pursue an individual breach of contract claim
individually in their home state.

15
the parties settle the lawsuit. In its third issue, Farmers challenges Leonard=s and Sawyer=s credibility and

personal integrity. Absent a proper finding that these representatives possess these two qualities, Farmers

contends it was error for the trial court to allow Leonard and Sawyer to represent the various subclasses.

Adequacy of representation is a question of fact addressed to the sound discretion of the

trial court, and the trial court does not abuse its discretion in finding adequacy if there is evidence to support

the finding. See Glassell v. Ellis, 956 S.W.2d 676, 681-82 (Tex. App.CTexarkana 1997, pet. dism=d

w.o.j.). Only a conflict that goes to the very subject matter of the litigation will defeat a finding of adequacy.

Nissan Motor Co., Ltd. v. Fry, 27 S.W.3d 573, 583 (Tex. App.CCorpus Christi 2000, pet. denied).

Speculative allegations concerning potential conflicts are insufficient to show that the trial court abused its

discretion in finding the representatives to be adequate. Employers Cas., 886 S.W.2d at 476.

At the certification hearing, Dean Edward F. Sherman testified for the plaintiff class

members that dividing the class into four proposed subclasses would provide superior means for trying the

breach of contract issues in this case. On cross-examination, Farmers attempted to elicit testimony from

Sherman showing a potential conflict within the Life Performance subclass. However, Sherman=s testimony

established that no conflict existed because, by definition, the subclass excluded agents with a potential

conflict of interest. The trial court=s certification order includes the class definition for the Life Performance

subclass that excludes such agents. Because the trial court=s order is supported by the evidence presented

and we have found no conflict within the subclass, we conclude that the trial court did not abuse its

discretion in overruling Farmers= objection. See Glassel, 956 S.W.2d at 682.

16
 Next, Farmers speculates that allowing both Leonard and Sawyer to represent multiple

subclasses will create a conflict if a settlement opportunity occurs because these classes will be competing

for the maximum return from a limited settlement fund. Farmers claims that each subclass requires its own

representative in order to adequately represent the interests of each member of that particular subclass.

Additionally, Farmers argues that the presence of both former and current agents in the competing

subclasses will exacerbate the conflict because the former agents do not need to maintain an ongoing

business relationship with Farmers. In support of its argument, Farmers cites us to two cases involving

settlement classes in which conflicts were present between subclasses. See Amchem, 521 U.S. 597; Ortiz

v. Fibreboard Corp., 527 U.S. 815 (1999).

We are unpersuaded by Farmers= reliance on these two cases. Both Amchem and Ortiz

dealt with the certification of a proposed settlement class in personal injury class actions based on the class

members= exposure to asbestos. Therefore, the posture of those cases that led to the development of intra-

class conflicts differs from the posture of this case. The class in our case does not involve personal injury

causes of action, nor has a proposed settlement been negotiated by the parties prior to the certification

hearing. The problems which led to a conflict in the asbestos cases were unique to personal injury cases. In

Amchem and Ortiz, the proposed settlement had already been established but the damages to each class

member were largely undefined and could vary based on time and severity of exposure to asbestos. That

situation created a conflict because not all members of the class had suffered the same amount of damages,

but all would be competing for a portion of the same settlement fund.

17
 Farmers= case differs from Amchem and Ortiz because the amount of damages for each

subclass can be determined mathematically based on the amount of the bonus due to each class member

according to the bonus award contracts. Thus, the damages for each class member are identifiable and

questions about the mathematical calculations to be applied for each class member could be answered by

the fact finder. Furthermore, this case does not involve a settlement class. Because the parties have not

negotiated a settlement, Farmers= argument that possible conflicts between the subclasses could develop if

the opportunity to settle presents itself is purely speculative. Farmers presented no evidence at the

certification hearing that it would be limited in its ability to pay the class members= claims if a jury determined

a breach occurred, and thus, there is nothing in the record to suggest a limitation on Farmers= ability to pay

damages. The conflicts present in Amchem and Ortiz do not exist in this case. We overrule Farmers=

second issue.

In its third issue, Farmers contends that Leonard and Sawyer fail to meet the requirements

of rule 42 concerning adequacy of representation. Two elements must be considered for determining if the

named plaintiffs adequately represent a class: (1) it must appear that the named plaintiffs will vigorously

prosecute the class claims through their attorneys, and (2) there must be an absence of antagonism or

conflict between the named plaintiffs= interests and the interests of the absent class members. Sun Coast

Res., Inc. v. Cooper, 967 S.W.2d 525, 538 (Tex. App.CHouston [1st Dist.] 1998, pet. dism=d w.o.j.).

Among the factors affecting the adequacy determination are (1) adequacy of counsel, (2) potential for

conflicts of interest, (3) personal integrity of the plaintiffs, (4) whether the class is unmanageable because of

geographical limitations, (5) whether the plaintiffs can afford to finance the class action, (6) the

18
representatives= familiarity with the litigation and belief in the legitimacy of the grievance, and (7) the

representatives= willingness and ability to take an active role in and control the litigation, and to protect the

interests of the other class members. Forsyth v. Lake LBJ Inv. Corp., 903 S.W.2d 146, 150 (Tex.

App.CAustin 1995, writ dism=d w.o.j.); Glassell, 956 S.W.2d at 682. A class representative should be

familiar with the basic issues, including composition of the class and damages sought. See Microsoft, 914

S.W.2d at 615.

Farmers disputes Leonard=s capacity to serve as a representative on the grounds that he

breached a fiduciary duty he owed to Farmers. Although this matter does not directly bear on the breach of

contract claims asserted by the class, Farmers claims that Leonard=s purported breach provides Farmers

with an affirmative defense as to Leonard individually, thus rendering Leonard atypical of the class. Farmers

also challenges the personal integrity of the class representatives by claiming that both Leonard and Sawyer

suffer from a lack of credibility. Farmers bases its contention largely on the fact that Leonard and Sawyer

made a large number of errata sheet corrections to their deposition testimony. Farmers also contends that

Sawyer concealed facts after he had resigned as an agent and then sought reinstatement. Farmers believes

that Sawyer=s failure to disclose that he had been in discussions with Leonard and class counsel about the

possibility of filing this lawsuit because Farmers breached the bonus contracts, demonstrates that Sawyer is

dishonest and unsuitable to serve as class representative. Farmers also doubts that class counsel can

provide adequate representation for the class because class counsel permitted Leonard and Sawyer to

change their depositions. However, Texas Rule of Civil Procedure 203.1 allows a witness to change

deposition responses. Tex. R. Civ. P. 203.1(b). Although the errata sheet changes totaled 163 combined

19
corrections, we note that the Leonard and Sawyer depositions lasted for approximately fourteen hours, and

resulted in 873 pages and 21,000 lines of testimony. Farmers presented these arguments at the certification

hearing. Although Farmers reiterates these arguments on appeal, we recognize that the trial court is in the

best position to weigh the credibility of Leonard and Sawyer as well as to determine the ability and integrity

of class counsel to represent the entire class.

After the certification hearing concluded, the trial court found that class counsel possessed

the qualifications and experience to handle this class action litigation.5 Furthermore, the trial court found that

Leonard and Sawyer would fairly and adequately protect the interests of the class and that their individual

interests were not antagonistic to the members of the subclasses which they represent. The trial court also

found that each class representative demonstrated personal integrity, possessed sufficient knowledge,

interest, and understanding of the litigation, and believed in the legitimacy of his case. Farmers= arguments,

based on Leonard=s and Sawyer=s credibility and that they made too many changes to their depositions, do

not persuade us that the trial court abused its discretion in determining that Leonard and Sawyer met their

burden on the adequacy of representation requirement. Therefore, we overrule Farmers= third issue.

Predominance and Superiority

5
Farmers points to that portion of the record wherein the trial court admonished class counsel for
certain alleged misstatements and inaccuracies regarding some submitted case authority. However, we note
that, in exercising its discretion in ruling on the adequacy of representation, the trial court concluded in its
findings of fact and conclusions of law that class counsel possessed the qualifications and experience to
represent the class and conduct this litigation.

20
 In its fourth issue, Farmers claims that the trial court abused its discretion in certifying the

class because the predominance and superiority requirements have not been met. See Tex. R. Civ. P.

42(b)(4). Farmers asserts that the certification order does not contain an adequate trial plan describing how

the trial court anticipates the common and individual issues in the case will be tried. Within its attack on the

trial plan, Farmers opines that the common issues in the case do not predominate over the individual issues.

Farmers also contends that the class action device in this case is not the superior means for trying the class

members= claims because individual adjudication is plausible.

In conducting the initial evidentiary review at the certification hearing, the trial court must

conduct a rigorous analysis to determine whether all prerequisites have been met before ruling on class

certification. Bernal, 22 S.W.3d at 435. Trial courts may not adopt a Acertify now and worry later@

approach to class certification. Id. However, we accord trial courts an abuse of discretion standard

because the class certification decision occurs early in the litigation process, before the parties have had the

opportunity to fully develop the case and such issues as trial plan will have only been determined as a

preliminary matter. The trial court must approach the certification decision cautiously in order to balance the

requirements of rule 42 and the difficulties presented by the case=s infancy. See id. Thus, the trial court=s

certification order must indicate how the claims will likely be tried so that conformance with the rule may be

meaningfully evaluated. Id.

After thoroughly reviewing the record, we are convinced that the trial court rigorously

analyzed the issues presented in this case and properly arrived at the determination to certify the class. In

addition to hearing multiple motions from both parties prior to the certification hearing, the trial court

21
conducted a six-day certification hearing. During this lengthy hearing, the trial court thoroughly reviewed all

of the parties= claims and was presented with an enormous amount of evidence. The record in this case

comprises a seven-volume clerk=s record containing 1,579 pages, a five-volume first supplemental clerk=s

record containing an additional 1,974 pages, and a ten- volume reporter=s record. The trial court heard

testimony from ten witnesses and received deposition transcripts from a number of other witnesses. During

the hearing, nearly 260 exhibits, including expert witness reports and all of the contracts at issue, were

admitted into the record. The trial court based its certification decision on the extensive development of the

issues presented in this case, and we cannot say that its decision was improper. The trial court=s order and

the state of the record assure us that the trial court=s decision was informed, cautious, and made in

compliance with the requirements of rule 42.

The certification order contains a detailed explanation of the anticipated trial plan.

Following the certification hearing and a review of all of the evidence before it, the trial court determined that

the substantive matters at issue in Leonard=s and Sawyer=s breach of contract claims are identical to the

issues of all class members. The trial court found that the bonus documents and the manner in which they

were applied were identical for the class. Therefore, a determination of all questions raised in Leonard=s

and Sawyer=s pleadings resolve all of the issues for the class. Furthermore, the trial court found that the

calculation of any damages for Leonard and Sawyer would establish a formula by which all class members=

damages, if any, could be computed. These findings demonstrate that the issues common to the class

predominate over individual issues.

22
 Based on these findings, the trial court announced in the order that the case could be tried

as a single breach of contract action in a bench trial. The order continues with the following statement:

Issues such as whether any or all of the bonus documents constitute one or more contracts,
the identity of the parties to any such contracts, the terms of the offers, the meaning of the
terms, words, and phrases contained within any such contracts, and the interpretation of
any such contracts are questions of law which the Court anticipates can be determined at a
summary judgment or bench trial.

Recognizing that other issues, such as a determination that the bonus award contracts were in fact

ambiguous, may develop in the course of this litigation, thereby requiring a reevaluation of the trial plan, the

trial court included the following alternative to the trial plan:

In the event fact issues of contract interpretation develop, the Court anticipates presenting a
single jury with specific questions concerning the disputed terms and, once receiving the
jury=s findings, utilizing those findings to determine as a matter of law the correct contract
interpretation and, depending upon the findings, establishing a damage formula applicable to
all Class Members.

In Bernal, the supreme court stated that a trial court abuses its discretion if it certifies a class

without knowing how the claims can and will likely be tried. Bernal, 22 S.W.3d at 435 (citing Castano v.

American Tobacco Co., 84 F.3d 734, 744 (5th Cir. 1996)). The trial court=s findings and statements

regarding a trial plan comply with the Bernal mandate. The trial court=s order demonstrates that based on

the parties= claims and defenses, the relevant facts, all of the evidence in the record, the applicable

substantive law, and the parties= anticipated theories of the case, the trial of this case may proceed under

one of two alternative paths, both of which will be manageable and protect the interests of all parties.

23
 Finally, Farmers contends that this case does not comply with the requirement that class

treatment be superior to other available methods for the fair and efficient adjudication of the controversy.

See Tex. R. Civ. P. 42(b)(4); Bernal, 22 S.W.3d at 433. Among the factors a court should consider in

determining superiority are (1) the interests of members of the class in individually controlling the prosecution

or defense of separate actions, (2) the extent and nature of any litigation concerning the controversy already

commenced by or against members of the class, (3) the desirability or undesirability of concentrating the

litigation in the particular forum, and (4) the difficulties likely to be encountered in the management of a class

action. Bernal, 22 S.W.3d at 433-34. Farmers bases its superiority challenges on the fact that the

damages for each class member could be substantial enough to make individual adjudication not only

possible, but the superior method of disposing of these claims. However, a marginal case value for

individual cases, while important in determining superiority in some class actions, is not an absolute

prerequisite to certification under the rule. See Tex. R. Civ. P. 42(b)(4).

The trial court found class adjudication to be superior to individual actions for a number of

reasons. Trying this case as a single action provides great economic benefits, as opposed to the alternative

of trying 13,000 individual actions. And with no other lawsuits having been filed regarding these particular

issues, the economic benefit has not been diluted. Furthermore, individual adjudication of identical fact

patterns poses the risk of inconsistent results. Finally, because many of the unnamed class members are

current Farmers agents, class treatment can quell the fears of retaliation by Farmers if individual lawsuits

were filed. Based on this reasoning, we cannot say the trial court erred in determining that class issues

24
predominate over individual issues and that class treatment is superior to the pursuit of 13,000 individual

actions. We overrule Farmers= fourth issue.

CONCLUSION

Having reviewed the record and considered the arguments of both parties, we conclude

that the trial court did not abuse its discretion in ordering class certification. The trial court=s order is

affirmed.

Mack Kidd, Justice

Before Justices Kidd, Patterson and Puryear

Affirmed

Filed: August 30, 2002

Publish

25