|
|
NUMBER 13-03-267-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
CITGO REFINING AND MARKETING, INC.,
AND CITGO PETROLEUM CORPORATION, Appellants,
v.
AMELIA GARZA, ET AL., Appellees.
On appeal from the 28th District Court
of Nueces County, Texas.
O P I N I O N
Before Justices Hinojosa, Yañez, and Castillo
Opinion by Justice Castillo
Appellant, Citgo Refining and Marketing, Inc. and Citgo Petroleum Corp. ("Citgo"), appeals from a final judgment finding breach of a settlement agreement. The underlying suit involves a class action against numerous defendants claiming damage to various parcels of real property and resulting diminution in value from airborne toxic contaminants. Appellees are representatives of the class and subclasses as originally certified by the trial court in an order dated November 14, 1995. Citgo (independent of other defendants) and appellees entered into a stand-alone settlement agreement in late September 1998. Appellees amended their pleadings to sue for breach of the settlement in March 2000. The parties tried the matter before the court in August 2001; an order finding breach issued October 17, 2001. A separate hearing on attorneys' fees was held in February 2002. In September 2002, the trial court held a hearing to determine fairness of the settlement agreement. Final judgment, finding the settlement to be fair, adequate and reasonable, and awarding damages in favor of appellees, issued April 4, 2003 . This appeal ensued. We reverse and remand.
Background
The underlying suit sought certification of a class of real property owners alleging nuisance, trespass, and negligence of various defendants, including Citgo, for damages and resulting diminution in property value based upon airborne contamination. The trial court held a hearing on the certification issues in October 1995. The trial court issued an order certifying the class on November 14, 1995, composed of various subclasses based upon location of a class member's property and its date of acquisition. Three classes were certified: (1) the I-37 North Residential Property Damage Class ("I-37 North Class") (composed of several subclasses based upon date of acquisition of the property); (2) the I-37 North Free Phase Hydrocarbon Property Damage Subclass (a subclass of the North Class, a/k/a the "Oak Park Triangle"); and (3) the I-37 South Residential Property Damage Class ("I-37 South Class") (composed of several subclasses based upon (a) geography in relation to Leopard Street and (b) date of acquisition of the property). The order certifying the class, in addition to identifying the various classes and subclasses, states: "The Court finds the Plaintiffs= have satisfied their burden of presenting some evidence that reasonable class definitions and other conditions of Rule 42 are satisfied with respect to the Plaintiffs proposed property damage classes."[1] Certification of the class was appealed and affirmed in August 1996. See Amerada Hess Corp. v. Garza, 973 S.W.2d 667, 671, 682 (Tex. App.BCorpus Christi 1996) ("Garza I"). The matter was further appealed to the Supreme Court, but dismissed for want of jurisdiction. See Coastal Corp. v. Garza, 979 S.W.2d 318 (Tex. 1998).[2]
In September 1997, Citgo and appellees reached a settlement agreement, by which Citgo would pay $12,292,758.19 to buy back properties located in the Oak Park Triangle, pay $3.55 million to the balance of the I-37 North class, and pay $1.45 million for the I-37 South class. Attached to and incorporated as part of the settlement agreement are various exhibits including, among other things, a breakdown of the valuation amount to be paid for each property in Oak Park (exhibit 3) and an Oak Park Protocol Agreement. The protocol agreement sets out that the offer for each parcel of property is based upon the adjusted assessed value of the parcel as of 1996, to which a factor is applied and other allowances are added. Exhibit 3 sets out the exact offer price for each parcel of property. The settlement called for all class representatives to sign the document no later than October 6, 1997.[3] The agreement sets forth various conditions which must be satisfied before it is effective, including approval by the trial court. The parties agreed to seek preliminary approval at the hearing scheduled for October 10, 1997; there are provisions to provide for a continuance in the event approval was denied. If no court approval was secured, Citgo had no obligation to pay under the agreement. The agreement recites that by signing, the claimants provided a full release and discharge, along with a covenant not to sue or institute other legal, equitable or administrative proceedings against the settling defendants.[4] The settlement is a stand-alone agreement between Citgo and the appellees, independent of any other settlements that might be reached with other defendants in the suit.
Appellees presented the settlement to the trial court for approval in October 1997. Plaintiffs' Motion for Preliminary Approval of Settlements and Approval of Notice actually requested approval not only of the Citgo settlement, but also of settlements with three other defendants, for a total of three separate settlement agreements. The motion reflects that the settlement with Citgo involves only release of property damage claims and any medical monitoring claims. The motion further states that "[a]s part of the settlement of CITGO, Class counsel and CITGO seek approval of a small additional class of all persons who own property in the Oak Park Areas, as of June 1, 1991 who have since sold such property. . . . This requires the creation of a small sub-class . . . ." In conjunction with the other settlements, appellees noted they were also filing contemporaneously a request for certification of a Commercial Settlement Class.
At the hearing held October 10, 1997,[5] the trial court appointed a guardian ad litem to review the settlement and assist in determining its fairness to class members, expressing its concerns that dollars allotted for the Oak Park Triangle might be inadequate.[6] On October 31, 1997, the ad litem reported to the court that the settlement reflected monies paid to Oak Park property owners were calculated upon the 1996 assessed value. The ad litem discusses a "settlement proposal" which impliedly incorporates the other settlements, including those either under consideration or already executed with other defendants, since in addition to the Oak Park Triangle funds (which dollars exactly match the monies contemplated in Citgo's settlement), additional substantial sums totaling $17 million are discussed as part of the settlement.[7]
On November 6, 1997, Citgo filed its Memorandum in Support of Motion to Approve Preliminary Settlement Class. Citgo explained the basis for its position that the monies tendered for the Oak Park Triangle, as well as for remaining class members, were fair and adequate. Much of this memorandum directly addresses concerns of the court and others as expressed at the October 10 hearing. Attached to the memorandum are detailed materials reflecting how the property valuations were derived and calculated.
Appellees' counsel forwarded a letter to the trial court on November 7, 1997, stating that the "parties have continued their efforts to settle the class action." The correspondence notes that the guardian ad litem was assigned to review only the proposal for the Oak Park Triangle, that the plaintiff class included many additional property owners, and that any settlement must treat all class members equally.
In a supplemental letter to the court dated November 17, 1997, the ad litem stated his conclusion that "the initial settlement proposal should be modified to reflect a redistribution of the offered funds." Although he notes that the proposed modification would not require an increase in any settlement monies offered by the settling defendants, the ad litem treats the various agreements as though each is contingent upon and interconnected with the others. He contemplates an increase in monies allotted to the Oak Park Triangle, principally from a potential settlement between the class and Amerada Hess. Importantly, he criticizes the Oak Park Triangle portion of the settlement proposal (to which Citgo alone was contributing) because it utilized 1996 property appraisal values as a basis for calculation of offer price. He recommended specific "revisions" to the proposal.[8] He proposed that the settlement utilize an entirely different calculation to find a property value for the Oak Park Triangle, that persons owning single family residences as of September 29, 1997, receive an additional sum for each year they lived in their home, and a redistribution of monies allotted for attorneys' fees. He states that "no other settlement monies would be affected except for funds contributed in the future by [an as-yet unsettling defendant.]" He then states: "The suggested modifications to the initial settlement proposal are being presented to this Court after much consideration . . . The proposed revisions have been discussed with class representatives and have communicated to me as being acceptable on behalf of the class." There is no statement that the proposed modifications were acceptable to Citgo, or any acknowledgment that Citgo's settlement is independent of and not part of a larger package.
Appellees' counsel subsequently communicated with the trial court on November 25, stating they were "evaluating the increased cost" of the ad litem's recommendations. Appellees' counsel stated: "We are committed to accomplishing a 'global' resolution of the class action, and we cannot encourage the taking of money from some class members for the purpose of accomplishing the buy-out of Oakpark (to the detriment of the rest of the class members.) . . . . We are also continuing our efforts for a 'global' resolution of the lawsuit." On December 3, 1997, appellees' counsel sent another letter to the trial court, summarizing settlements reached to date; five defendants had entered into settlements totaling $28.56 million for the Residential Class.[9] This communication to the court reflects the allocations as proposed in early October 1997, as well as modifications proposed by the guardian ad litem. Each of the two proposed modifications deal directly with funds for the Oak Park Triangle. Appellees' counsel addressed the proposals in light of the increased costs they generated, including perceived problems or issues if the suggestions were adopted exactly as proposed. They concluded: "While the current allocation of settlements is fair and reasonable to the entire class and should be preliminarily approved by this court, counsel would like the opportunity to discuss possible alternatives with the ad litem."
On December 11, 1997, a "revised offer" was tendered to the trial court. The transmitting letter reflects that attorneys for settling defendants, including Citgo, and class counsel had met "in an attempt to find a solution to the concerns expressed at the preliminary approval hearing." They had agreed to and recommended several adjustments to the plan to purchase properties in the Oak Park Triangle, increasing monies paid.[10] The letter noted: "The original buyout proposal was to be funded entirely by Citgo. In order to put additional funds into the Oak Park buyout, funds from other settling defendants must be and will be utilized. Therefore all of the proposed settlements must be accepted by the entire class (subject to opt in/out limits), or else there is no funding for the Oak Park buyout (a consequence of [the ad litem's] recommendations)." A proposed order which would approve settlement in accord with this letter was attached.
On December 12, 1997, the trial court issued a letter to counsel for appellees and to the guardian ad litem, rejecting the revised proposal since it would only allocate approximately $35,500 for each home in the Oak Park Triangle. "This Court therefore orders that each owner occupant of the Oak Park Triangle receive a minimum recovery of $50,000.00. . . . In addition, this Court is rejecting [the guardian ad litem's] proposal of $1,000.00 per year per resident." None of the settlements were approved.
On January 8, 1998, appellees filed a Supplemental Motion for Preliminary Approval of Settlements, Conditional Certification of Settlement Classes, and Approval of Notice of Settlements.[11] Appellees referenced not only the earlier three settlement agreements, including the one with Citgo, but also two additional agreements. Included in the supplemental motion for preliminary approval is a request for "approval of three settlement classes:"
The first is the Oak Park Settlement Class. It includes all persons who owned property zoned for single family residential use within the Oak Park area on June 1, 1991 or September 27, 1997. The second class is the Residential Settlement Class. It includes all persons who owned real property zoned for single family residential use within the Residential Area as of June 1,1991. Class counsel seeks approval of these two classes as to claims against the Settling Defendants only and for settlement purposes only.
In addition, as part of the settlements with Southwestern, Champlin, UPC, Hess, and OxyChem, these companies and Class Counsel request that the Court conditionally certify a Commercial Settlement Class of all persons who owned property as of June 1, 1991, other than property zoned single-family residential, within the Commercial Class Area.
The motion states that "Settling Defendants and the Class Members agree that each of these classes meets the criteria for certification under Rule 42."
There are distinctions between this proposal and that set forth in the Citgo settlement agreement beyond the redefinition of the classes. Citgo's Oak Park Protocol agreement provided for an "offer price" composed of an "adjusted assessed value of any improvements located on that land plus a premium payment equal to 85% of the adjusted assessed value of such land and improvements," based on the 1996 appraised values. Additionally, the Citgo agreement defined "owner occupant" as a person with title to property zoned single family residential in the program area "as of September 29, 1997." This new proposal called for payment to be made to those owning property as of June 1, 1991, in an amount equal to "185% of the highest appraised values, between 1989 and 1996," and "no person . . . will receive an offer less than $45,500." Class members deciding to participate in the settlement "must sell their property to CITGO . . . ." Appellees attached to their motion a proposed "Order Conditionally Certifying Settlement Classes, Preliminarily Approving Settlements and Form of Notice and Directing Notice to be Sent to the Settlement Class."
Attached to the supplemental motion for preliminary approval was a copy of a settlement agreement with Amerada Hess (although this agreement lacks any signatures by Amerada Hess). Also attached was a settlement agreement (executed) by yet another settling defendant. Each of these settlement documents sought "approval of three settlement classes"B those for which certification was requested in appellees' motion. The agreements are drafted accordingly. No addendum referencing a similar request with regard to the Citgo settlement is provided.[12] The settlement with Amerada Hess provided specifically that residents of the Oak Park Triangle "will receive 185% of the highest appraised values, between 1989 and 1996," and that no person owning such a property "will receive an offer less than $45,500. . . . Class members who decide to participate in the settlement must sell their property to Citgo for the stated price within one year." This settlement directs certain sums for distribution to the newly-defined Residential and Oak Park classes, but includes no indication as to how the monies will be allocated between those classes. Additional monies are designated for the newly-defined Commercial Class. The other settlement provides for monies to be contributed to the Residential and Commercial classes only. Each of these agreements calls for a distribution protocol to be developed after preliminary approval is given by the trial court.
At the time this proposal was submitted, Citgo's interlocutory appeal from the original class certification order was still pending before the Texas Supreme Court. Appellees' counsel forwarded a letter brief to the court asserting the court did nevertheless have jurisdiction to approve a settlement pending such an appeal, but did not address the proposal to certify differently-defined classes.[13]
On January 12, 1998, Citgo filed a Memorandum of Law in Opposition to Plaintiffs' Original and Supplemental Motions for Preliminary Approval of Settlement. In this document Citgo contended that (1) the court had no jurisdiction to alter definition of the plaintiff classes pending the interlocutory appeal, and (2) Citgo had not consented to any revisions to its settlement agreement with members of the class, and its agreement did not comport to the proposal as submitted to the court. Citgo urged that its buy-out program was a "stand-alone deal," and, in particular, that the opt-out provisions in the new proposal differed substantially from those in Citgo's proposal, removing many of the protections Citgo had built in to its agreement. Citgo urged that in its agreement it was free to proceed with the Oak Park Triangle buy-out even if more than ten percent opted out of the settlement, but its decision to proceed under the new proposal could be controlled by other defendants. Secondly, Citgo urged that the separate opt-out provisions provided in Citgo's agreement were removed and now inextricably intertwined to acceptance of the settlement by the other classes. Citgo urged that while a trial court may suggest modifications to a settlement proposal, it may not adopt a settlement that has been modified absent the consent of all parties, and it certainly may not unilaterally impose modifications to an "agreed settlement" against the will of any party. A formal notice of objection was also filed by Citgo on January 12, 1998. Appellees urge that this memorandum in opposition to the supplemental motion for approval of the settlement agreements constituted the first instance of Citgo's breach, by which Citgo failed to adhere to its agreement to "work diligently and cooperatively to obtain the effectuation of the settlement embodied in this Settlement Agreement."[14]
A hearing was held on the motion for preliminary approval on January 13, 1998. Counsel for appellees represented that the settlement with Amerada Hess had been finalized, but Amerada Hess's counsel clarified that it had not yet executed the agreement; it remained an agreement in principle. Citgo urged that its opposition was based first on the issue of jurisdiction, but secondly on the fact that the settlement agreement as presentedBas a package dealBdid not comport and in fact conflicted with the stand-alone agreement earlier executed by Citgo. Appellees countered, as they do here, that no changes to the Citgo agreement were envisioned; rather any issues arise from the integration of Citgo's settlement with the others to enhance the purchase prices for the Oak Park Triangle properties. Appellees' counsel conceded that the proposed settlement classes did differ from those earlier certified by the trial court:
What other differences are there to show that they're not substantially the same? Well, they're different in terms of time. They cover different time periods, therefore, different people. They're different in terms of geography. They don't cover the same area physically that [the earlier certified classes] covered and they're different in scope because they cover a commercial class which [was not] certif[ied]."
Counsel for appellees urged that "[t]he settlement classes are completely apart from the validity of the certification order," and that by agreeing to settle each defendant did not have to agree with the merits order earlier entered.[15] Citgo continued to urge that opt-out provisions for class members in the various agreements also differed and necessarily impacted Citgo's rights to proceed or not to proceed with the settlement. Discussion also arose about Citgo's proposal to go forward independently with its purchase of the Oak Park Triangle properties, exactly as it had proposed under its settlement agreement. Several other defendants urged that they simply wanted to resolve and finalize their settlements.
On January 22, 1998, class counsel forwarded a letter to class members stating that Citgo
. . . has withdrawn their offer of settlement regarding this lawsuit, effectively removing themselves from the trial court=s judicial supervision. Citgo has proposed to buy properties within the Oak Park Triangle at the price ordered by the trial court, and with the same conditions negotiated by our law firm. . . . In order to protect the interests of all the class members, we will be filing a motion today to decertify the class action that was originally certified . . . in November of 1995. It is our belief that the original class certification no longer accurately reflects the current status of this litigation.
The motion was filed that same day, January 22, and urged that decertification would moot the pending interlocutory appeal, thereby removing any remaining obstacles to Citgo proceeding with its settlement agreement.[16] The trial court's order of January 27, 1998 stayed consideration of the motion to dissolve pending resolution of the pending appeal.
On January 23, 1998, the trial court issued an order (1) severing all claims against settling defendants other than Citgo, (2) conditionally certifying two of the proposed settlement classes for the Residential[17] and Commercial classes, (3) preliminarily approving the settlement agreements with the severed settling defendants as fair and reasonable, and (4) approving notice for the Commercial and Residential settlement classes.
Citgo forwarded a letter to all counsel on February 3, 1998, announcing it had undertaken an independent property purchase program in the Oak Park Triangle, following the guidelines set out by the trial court and the guardian ad litem.[18] Class counsel responded on February 12, 1998, stating it would not "stand between our Oak Park clients and a buy-out of their properties. Indeed Class Counsel are responsible for creating the buy-out in the first place . . . . However, we also represent non-Oak Park Class members who stand to lose . . . as a result of Citgo's decision to breach its Settlement Agreement. This is to inform you and your client that we intend to hold you responsible for breach of the settlement agreement. . . ." Appellees contend this buy-out, which then proceeded between April 1998 and March 1999, was the second instance of a breach of the settlement agreement by Citgo.
The supreme court dismissed the interlocutory appeal from the class certification order on July 14, 1998, finding that it did not have conflicts jurisdiction. On July 16, 1998, appellees withdrew their motion to decertify the class. Throughout the remainder of 1998 and 1999, appellees proceeded with discovery and other pre-trial matters, actively litigating the property devaluation claims against Citgo. The original class structure as defined in the class certification order of November 1995 remained in effect for Citgo, as a non-settling defendant, with respect to those class members who had not already resolved and released their claims against Citgo as a result of the Oak Park Triangle buy-out (which included some residents of the Hillcrest area as well).
The docket control order then in place identified May 1, 1999 as the deadline to amend pleadings, with a trial date of June 1, 1999. Trial was subsequently reset for January 24, 2000. Then, on January 12, 2000, appellees' counsel filed a notice of oral hearing on their motions and supplemental motions for preliminary approval of the settlement and approval of notice relating to the Citgo settlement agreement, filed in October 1997. That same date Citgo filed renewed and supplemental objections, urging that the settlement agreement had been abandoned or waived by the plaintiff class since then, it having taken numerous inconsistent actions. Citgo also urged the doctrine of quasi-estoppel prevented revival of the settlement agreement, as well as laches. Citgo further urged that appellees were requesting that the court approve a settlement to which Citgo never agreed. Citgo attached the affidavit of its in-house counsel, Miles Davidson, relating the sequence of events, the lack of opposition to and acquiescence with the Oak Park Triangle buy-out, the aggressive pursuit by appellees of their claims on the merits, including extensive and expensive discovery, their expressed determination to try the case against Citgo, as well as their expressed belief that the settlement agreement was no longer viable. Davidson also referenced a meeting in November 1998, at which appellees' counsel delivered a settlement demand for $14,000,000 to resolve the remaining claims. He stated there had never been any suggestion that the settlement agreement had any continuing effect in the intervening two years, that the trial setting in early summer of 1999 had passed without any reference to the supposed settlement, appellees had unequivocally abandoned the settlement agreement as void, and that active discovery had continued through December 1999. Davidson asserted that Citgo reasonably relied on those acts and statements to its detriment, proceeded with its buy-out of the Oak Park Triangle at the enhanced levels recommended by the guardian ad litem (ultimately costing in excess of $14.8 million, which was in excess of that provided for in the settlement agreement), and the additional expenditures on attorney fees and litigation expenses in excess of $500,000 in the intervening two years.
The trial court conducted a hearing on appellees' motions on January 14 and 25, 2000. The trial court noted that its letter of December 12, 1997, in which it ordered that a minimum of $50,000 was provided to each property owner in the Oak Park Triangle, was only directed to appellees' counsel and the guardian ad litem. The trial court's opinion was that
. . . this letter did not change the settlement agreement that was entered into by the parties, and it did not modify the money that Citgo was going to give to the Plaintiffs. The only thing that this letter was to do was to change the allocation or the distribution of the settlement proceeds, which had nothing to do with Citgo. . . . So although time has passed, it's still a viable settlement agreement in this Court's view.
The trial court then gave preliminary approval to the settlement agreement and severed Citgo out of the case. The trial court issued a formal order to that effect on January 25, 2000, reciting that the court found the settlement to be "sufficiently reasonable, adequate and fair to warrant giving notice to members of the Settlement Class . . . ."
On March 29, 2000, appellees amended their petition to allege for the first time, as an alternative claim, that Citgo had breached the settlement agreement. Appellees urged, in addition to the other two alleged instances of breach, that Citgo had failed to fund the remaining balance of $5 million due under the settlement agreement within five days of its preliminary approval by the court.
The parties exchanged motions for summary judgment, which were each denied on April 25, 2001. Citgo filed a supplemental motion to decertify on July 6, 2001, urging that intervening events in the case and developments in case law, including Southwestern Ref. Co., Inc. v. Bernal, 22 S.W.3d 425, 435 (Tex. 2000) (requiring a rigorous analysis to ensure predominance and superiority) precluded the matter from proceeding as a class action.
The parties tried the matter before the court in August 2001 on the breach of contract claim; an order finding breach issued October 17, 2001. The order recites, among other things, that (i) Citgo entered into a valid and enforceable settlement which remained valid and enforceable at all times prior to Citgo's breach, (ii) Citgo waived any defense it may have had based on the lack of timely signatures of certain class representatives, (iii) the Plaintiff Class satisfied all of its obligations under the Settlement, and all conditions precedent have been met or are excused, (iv) the Court never disapproved or modified Citgo's settlement but only made recommendations for a plan of distribution, (v) the Plaintiff Class did not waive its claims for breach, and (vi) did not make an election to abandon its claims for breach, and (vii) Citgo's other defenses and affirmative defense were without merit.
The trial court held a separate hearing on attorneys' fees in February 2002, followed by another hearing in September 2002 (after providing notice to class members and an opportunity to be heard) to determine fairness of the settlement agreement. Final judgment, finding the settlement to be fair, adequate and reasonable, and awarding damages in favor of appellees, issued April 4, 2003.
Issues on Appeal
Citgo brings numerous issues on appeal, challenging not only the finding of breach but also asserting that the settlement agreement was rejected and/or modified by the court, and/or abandoned and/or waived by appellees prior to the issuance of the requisite court approval.[19] Citgo further urges that it was error to certify the matter as a class action, that common issues do not predominate, and that the trial court never conducted the requisite vigorous analysis. Citgo also challenges the award of attorneys= fees.[20]
Appellees counter that (1) class certification is a moot issue and not properly under review by this court, (2) the 1995 class certification was in any event the result of rigorous analysis by the trial court and satisfied the requisites of rule 42, (3) the trial court correctly found Citgo liable for breach, and (4) the trial court did not abuse its discretion in awarding attorneys= fees.
The Settlement Agreement
"The public policy of both our state and federal governments favors agreements to resolve legal disputes through such voluntary settlement procedures." Jack B. Anglin Co. v. Tipps, 842 S.W.2d 266, 267 (Tex. 1992). The law favors settlement of disputes and the prevention of litigation, and therefore "compromise of doubtful and conflicting rights and claims is not only good and sufficient consideration to uphold an agreement, but it is highly favored in law." McDonough v. First Nat'l Bank, 34 Tex. 309, 320 (1871). "When parties agree to settle their differences, this is commonly understood as fully resolving those differences." Gunn Infiniti v. O'Byrne, 996 S.W.2d 854, 860 (Tex. 1999) (citing Herring v. Dunning, 446 S.E.2d 199, 202 (Ga. Ct. App. 1994); Yancey v. Yancey, 55 S.E.2d 468, 469 (N.C. 1949) ("The word 'settle' means 'to place in a fixed or permanent condition; to determine.' And the word being used in connection with litigation must be understood as signifying that the controversy had been adjusted and brought to an end.")).
In the circumstances of this case, any issue as to whether or not class certification was proper was necessarily resolved by compromise upon entry into a settlement agreement. However, where proper issues have been preserved and raised on appeal, we may not disregard the possibility that a party to such an agreement has abandoned or waived his rights thereunder, by inconsistent conduct or otherwise, effectively repudiating the agreement. Further, we may not fail to evaluate whether, in the instance of a class action, court approval was given to a still viable agreement as it was written, without modification (absent all parties' subsequent agreement), or to a different agreement.
We determine that we must first evaluate whether the settlement agreement was viable at the time and in the same form as approved by the court, before we may determine whether it was breached. If the agreement was viable, the issue of class certification is moot and will not be addressed, and we will consider breach. If, however, the settlement agreement was not viable at the time of court approval, or was distinct from that ultimately approved by the court, then breach is no longer an issue, and we may consider whether the requisites of rule 42 were satisfied, such that class certification was proper.[21] See Tex. R. App. P. 42.
A. Issues Relating to Viability of the Settlement Agreement
We first address (a) two subissues in Citgo's third issue (was the evidence legally and factually sufficient to support that (i) Citgo entered into a settlement with the class that was valid and enforceable at all times prior to Citgo's alleged breach, and (ii) the "Plaintiff Class satisfied all of its obligations under the Settlement and all conditions precedent have been met or are excused"), (b) Citgo's fourth issue (did appellees' intentional conduct inconsistent with claimed rights under the settlement agreement establish that appellees had waived and/or abandoned any rights or claim against Citgo under the settlement agreement), and (c) Citgo's fifth issue (was it against the great weight and preponderance of the evidence to fail to find that appellees waived any rights or claim against Citgo under the settlement agreement). We also address (a) the subissue in Citgo's first issue (whether the trial court abused its discretion in approving a class action settlement agreement), and (b) Citgo's second issue (whether the court approved the settlement agreement actually entered into between appellees and Citgo, or a "modified settlement to which Citgo" never agreed).
B. Standard of Review
We note the underlying matter was tried to the court in a bench trial, with virtually all facts undisputed. The trial court's Order of October 17, 2001, included findings that, as a matter of law: (a) Citgo's settlement agreement remained valid and enforceable at all times prior to Citgo's breach; (b) the trial court "never disapproved or modified the settlement with the plaintiffs class but simply made recommendations . . . for a plan of distribution of settlement proceeds from several settlements with multiple defendants, including Citgo;" (c) appellees did not waive their claims, and (d) appellees did not make any election to abandon their claims against Citgo.[22]
A trial court's conclusions of law are not binding on this Court, and we are free to make our own legal conclusions. McAllen Police Officers Union v. Tamez, 81 S.W.3d 401, 404-05 (Tex. App.BCorpus Christi 2002, pet. dism'd) (citing Harlingen Irrigation Dist. Cameron County No. 1 v. Caprock Communications, 49 S.W.3d 520, 530 (Tex. App.BCorpus Christi 2001, pet denied); Muller v. Nelson Sherrod & Carter, 563 S.W.2d 697, 701 (Tex. Civ. App.BFort Worth 1978, no writ)). "Conclusions of law are reviewed de novo as a question of law and will be upheld if the judgment can be sustained on any legal theory supported by the evidence." Tamez, 81 S.W.3d at 404-05; Harlingen Irrigation Dist., 49 S.W.3d at 520 (citing Circle C Child Dev. Ctr., Inc. v. Travis Cent. Appraisal Dist., 981 S.W.2d 483, 485 (Tex. App.BAustin 1998, no pet.)). A trial court's conclusions of law may not be reviewed for factual sufficiency, Tamez, 81 S.W.3d at 404, and may be reversed only if they are erroneous as a matter of law. Id. (citing Stable Energy, L.P. v. Newberry, 999 S.W.2d 538, 547 (Tex. App.BAustin 1999, pet. denied); Hofland v. Fireman's Fund Ins. Co., 907 S.W.2d 597, 599 (Tex. App.BCorpus Christi 1995, no writ)). Incorrect conclusions of law do not require reversal, provided that the controlling findings of fact support a correct legal theory. Tamez, 81 S.W.3d at 405; Stable Energy, 999 S.W.2d at 547.
C. Viability of the Agreement - Analysis
In form, the agreement approved by the trial court in January 2000 is the same agreement entered into by Citgo in September 1997 and first tendered for approval in October 1997. Citgo contends, however, that changes in the posture of the case in the intervening years necessarily impacted the rights and provisions under Citgo's settlement. Citgo urges that the original class structure as set out in the November 1995 certification order, and upon which its settlement was crafted, was abandoned and no longer viable. Citgo further urges that members of the Oak Park Triangle class, as well as some other members of the North Class in the Hillcrest area, had sold their properties to Citgo and independently settled and executed releases in favor of Citgo. Yet, they remain within the defined settlement classes as the agreement was approved.
The facts are unequivocal in establishing that the settlement with Citgo was executed in September 1997,[23] it was tendered to the trial court for approval in October 1997, that approval was not forthcoming, a guardian ad litem was appointed to review fairness of the settlement, that the ad litem found problems with the settlement and, in light of comments from the court, worked to craft a network of settlements that would provide a higher recovery to members of the Oak Park Triangle. In the meantime, the parties attempted to renegotiate certain terms to meet concerns of the trial court. Those modifications were then tendered to the trial court, and they were also rejected as inadequate. The fact that the trial court later took the position that its actions did not "change the settlement agreement" and "did not modify the money that Citgo was going to give to the Plaintiffs" does not alter the fact that the trial court never gave approval to the settlement agreement prior to January 25, 2000. The court, in its order, asserts that it only intended to "change the allocation or the distribution of the settlement proceeds, which had nothing to do with Citgo." However, it nevertheless did impact Citgo[24] in that, at the least, preliminary approval of the Citgo settlement was delayed for more than two years. The real problem and complication is that until January 2000, the trial court never treated the Citgo settlement agreement as a stand-alone agreement independent of other settlements. Rule 42 of the Texas Rules of Civil Procedure mandates that the trial court "must approve any settlement, dismissal, or compromise of the claims, issues, or defenses of a certified class." Tex. R. Civ. P. 42(e)(1)(A). The court must approve the agreement as it is tendered. The court may issue such approval only after a hearing and upon finding that the settlement, dismissal, or compromise is fair, reasonable, and adequate. Tex. R. Civ. P. 42(e)(1)(C). Until such mandatory approval is given, a class action may not be dismissed or compromised, and any such settlement agreement therefore remains contingent upon that approval. See Tex. R. Civ. P. 42.
In the interim time period, significant events altered the landscape. Citgo subsequently completed the buy-out of properties in the Oak Park Triangle to which appellees acquiesced. In so doing, Citgo paid values exceeding those set out in the settlement agreement, in order to address concerns raised by both the trial court and the guardian ad litem. At the time of approval of the agreement, therefore, the Oak Park Triangle class had already, in majority, released its claims against Citgo.
Citgo urges that during this interim period appellees, by their conduct, either abandoned or waived, or were estopped to pursue any rights or claims under the settlement agreement.
Waiver has been defined as "intentional conduct inconsistent with the assertion of a known right." Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848, 851 (Tex. 1980); CKB & Assoc., Inc. v. Moore McCormack Petroleum Inc., 734 S.W.2d 653, 656 (Tex. 1987). Waiver may be the result of intentional conduct inconsistent with claiming that right, and may be inferred from a person's conduct. Sun Exploration and Prod. Co. v. Benton, 728 S.W.2d 35, 37 (Tex. 1987); First Interstate Bank, N.A. v. S.B.F.I., Inc., 830 S.W.2d 239, 248 (Tex. App.BDallas 1992, no writ).
The doctrine of quasi‑estoppel precludes a party from asserting, to another's disadvantage, a right inconsistent with a position previously taken by him. Stable Energy, L.P. v. Newberry, 999 S.W.2d 538, 548 (Tex. App.BAustin 1999, pet. denied); Atkinson Gas Co. v. Albrecht, 878 S.W.2d 236, 240 (Tex. App.BCorpus Christi 1994, writ denied). The doctrine applies when it would be unconscionable to allow a person to maintain a position inconsistent with one in which he previously acquiesced, or from which he accepted a benefit. Newberry, 999 S.W.2d at 548; Albrecht, 878 S.W.2d at 242‑43.
Citgo also contends that appellees, by their intentional conduct inconsistent with pursuit of the settlement agreement, effected such a delay as to justify Citgo in believing the agreement had been abandoned, and that, indeed, Citgo relied upon that conduct and other related communications to its detriment.
Specifically, following the court's failure to approve the settlement agreement, appellees aggressively pursued their claims on the merits, including extensive and expensive discovery through December 1999. They clearly expressed their intent to try the case against Citgo on the merits. In November 1998, appellees delivered a settlement demand for $14,000,000 to resolve the remaining claims; not only did this demand exceed that provided for in the Citgo agreement, but it also reflects a position and, under reasonable interpretation, a reasonable belief that the earlier agreement had been abandoned. Appellees also filed a motion to decertify the class. They tendered and secured certification of classes differently defined from those in the Citgo agreement to accomplish settlements with other defendants. Beyond the one letter sent February 3, 1998, to which there was no follow-up, appellees made no overt expression in the intervening timeBin excess of two yearsBthat they intended to pursue the settlement, and all activity in the case reflected that it had been abandoned. Evidence was tendered that Citgo reasonably relied on appellees' acts and statements to its detriment, including by proceeding with its buy-out of the Oak Park Triangle at the enhanced levels recommended by the guardian ad litem (ultimately costing in excess of $14.8 million (an amount in excess of that provided for in the settlement agreement), and that Citgo sustained extensive additional expenses and attorneys= fees in the intervening time.
Appellees contend that they were entitled to pursue alternative claims right up until trial, including either claims on the merits, or claims for breach of the settlement agreement (which would dispose of claims on the merits). We disagree. It is certainly true that a claimant may simultaneously pursue alternative remedies, based upon the same or similar causes of action, and a claimant may even pursue inconsistent theories of recovery or causes of action. However, the thrust of a claimant's efforts in such circumstances are to seek redress for a wrong. Upon a perceived breach, as appellees contended in February 1998, appellees had the option to pursue either a breach of contract claim on the settlement agreement or to reassert their original claims on the underlying merits. Murray v. Crest Constr., 900 S.W.2d 342, 344 (Tex. 1995) (citing 12 Jaegar, Williston on Contracts ' 1457, at 49 (3d ed. 1970) (when a claim is released for a promised consideration that is not given, the claimant may either pursue rights under the release, or treat the release as rescinded and recover on the claim). Appellees could not do both.
Conclusion
We conclude that appellees engaged in intentional and, indeed, aggressive conduct inherently inconsistent with the pursuit of rights under a settlement agreement that was not approved by the trial court, that Citgo relied upon that conduct and engaged in alternative acts (including the Oak Park buy-out), with acquiescence from appellees, that were inherently inconsistent with the provision of relief exclusively under the settlement agreement, and that Citgo's conduct was reasonable in the circumstances. We conclude that appellees are estopped from asserting, to Citgo's disadvantage, rights inconsistent with positions previously taken by appellees. We therefore conclude that the settlement agreement was not viable in January 2000, and could not then have been approved by the trial court. Because we reach this conclusion, we need not reach the remaining issues on appeal. See Tex. R. App. P. 47.1. We reverse and remand.
ERRLINDA CASTILLO
Justice
Opinion delivered and filed this
the 30th day of Septmeber, 2005.
[1] The order also found class counsel qualified for service and rejected certification of any class for proposed medical monitoring.
[2] Citgo argued that conflicts jurisdiction attached, because the court of appeals' decision conflicted with RSR Corp. v. Hayes, 673 S.W.2d 928 (Tex. App.BDallas 1984, writ dism'd w.o.j.). The supreme court rejected that view, distinguishing RSR. See Coastal Corp. v. Garza, 979 S.W.2d 318, 319, 321-22 (Tex. 1998).
[3] Of the 35 class representatives, 12 had signed the agreement by October 6, 1997; another 10 signed after that date. Thirteen never signed the settlement agreement.
[4] The settlement is lengthy, and includes many other protective clauses, contingent upon the happening of various events. There are provisions to secure preliminary court approval, provide notice to and then secure releases from the entire class, and then obtain final approval from the court. There are escape provisions if a certain percentage of property owners elect to opt out of the class. There are provisions for the set up of accounts to be used for purchasing the properties, and making payments to class members. There are provisions for the payment of attorneys' fees.
[5] On October 19, 1997, Citgo filed a response to plaintiffs' motion for preliminary approval, clarifying that Citgo's settlement agreement allocated monies to purchase properties "in connection with the payment of compensatory damages to Property owners and the payment for purchase of land in the Program Area," and noting that the Program Protocol Agreement included more detailed specifics.
[6] The formal order issued October 14, 1997.
[7] Additional sums contemplated in Citgo's settlement totaled only $5 million.
[8] The ad litem appears to reference all the settlements together as the "settlement proposal," and does not consider Citgo's settlement in isolation. In particular, he refers to the "initial settlement plan" as allotting $12,292,758.19 to the Oak Park Triangle," with a "remaining $17.5 million" "proposed to be distributed as follows: $7.5 million . . . to residents of Hillcrest and residents of the class area on the south side of Interstate 37 (again, under these proposed revisions these $7.6 million dollars would remain untouched), $7.4 million . . . as requested attorneys' fees, and an additional $2 million was earmarked for reimbursement of attorneys' expenses." The sums referenced obviously exceed those addressed in the Citgo settlement agreement; however, only monies in the Citgo agreement are dedicated to the Oak Park Triangle and it is those monies that are challenged as inadequate.
[9] Settlements had yet to be reached with three of the defendants; a fourth, Amerada Hess, had agreed "in principle" to a settlement. The letter notes that, at the time the Citgo settlement was negotiated, only three class representatives did not endorse it; however, other additional class representatives subsequently elected to withhold their endorsement.
[10] Signed approvals to these revisions of fifteen of the class representatives are attached to that proposal.
[11] A draft copy of this document was forwarded to counsel on December 19, 1997.
[12] The final attachments include three proposed notices to the three new settlement classes for which certification is sought.
[13] On December 31, 1997, Citgo filed a motion with the supreme court requesting that it stay or abate further action on the pending appeal in light of the potential settlement. Citgo states this was an effort to preserve the trial court's jurisdiction which was subsequently withdrawn January 7, 1998.
[14] Language in the agreement continues, by providing that all parties "agree to seek preliminary approval from the Court of the settlement embodied in this Settlement Agreement at the hearing scheduled for October 10, 1997, and in the event that hearing does not go forward, as promptly thereafter as the parties can be heard."
[15] While is it certainly true that the various defendants could agree to define settlement classes in whatever manner they chose, it is also true that if the various settlements are tied together with respect to distribution of funds, consistency would be required between those various settlements as to those definitions. The Citgo settlement was entered prior to the proposal for the new settlement classes, which are reflected in the later agreements.
[16] Citgo filed an objection to dissolution in the trial court, urging that such action not be taken pending the appeal because it would deprive Citgo of its appellate remedies. Citgo also filed an emergency motion for temporary order of stay with the supreme court.
[17] The Residential Class as approved by this January 1998 order, although differently defined from that set out in the earlier certification order of the court, encompasses essentially the same geographical properties, including the Oak Park Triangle. The Oak Park Triangle is no longer defined as a separate class.
[18] Citgo requested that it be notified immediately if any of the individuals identified as property owners were then represented by counsel and if any claims for attorneys' fees existed against any of the respective properties.
[19] Rule 42 requires that "the court must approve any settlement, dismissal, or compromise of the claims, issues, or defenses of a certified class." Tex. R. Civ. P. 42(e)(1)(A).
[20] Citgo's issues on appeal are framed as follows:
1. Following a bench trial, the trial court rendered judgment that CITGO breached a class action settlement agreement. It is black letter law that, absent a properly certifiable class action, class-wide settlements are neither valid nor enforceable. In light of the predominance, superiority, and typicality requirements of Rules 42(a) and (b)(4), as well as the "rigorous analysis" and "trial plan" requirements, did the trial court abuse its discretion in certifying the claims against CITGO as a 42(b)(4) class action? Following its original certification, did the trial court abuse its discretion in (1) maintaining the claims as a Rule 42(b)(4) class, instead of decertifying them; (2) approving a class action settlement agreement; and (3) rendering judgment against CITGO for breach of that agreement?
2. It is also the law that, to be valid and enforceable, settlement of a class action must first be approved by the trial court, and the court may only approve (or disapprove) the settlement actually presented by the partiesBthe court is powerless to approve a modified settlement to which one of the parties does not consent and impose the modified agreement upon the unwilling party. Did the trial court approve the settlement agreement that Plaintiffs and CITGO actually presented to the court, or was the "settlement" the court eventually approved a modified settlement to which CITGO never agreed?
3. Is the evidence legally and factually sufficient to support the following determinations of the trial court: (a) that CITGO entered into a settlement with the class which was valid and enforceable at all times prior to CITGO's alleged breach; (b) that CITGO breached the settlement agreement with the class; (c) that the class satisfied all of its obligations under the settlement and all conditions precedent were met or are excused; (d) that the class was damaged in the amount of $5 million by CITGO's alleged breach?
4. Does the evidence of Plaintiffs' intentional conduct inconsistent with claiming any rights under the settlement agreement conclusively prove that Plaintiffs waived and/or abandoned any rights or claim against CITGO under the settlement agreement?
5. Was the trial court's failure to find that Plaintiffs waived any rights or claim against CITGO under the settlement agreement against the great weight and preponderance of the evidence?
6. Is the evidence legally and factually sufficient to support the trial court's award of attorneys' fees to the class in connection with their breach of contract claim, and/or is the award excessive?
[21] We reject appellees' contention that this court's prior review of the class certification issue absolutely precludes us from considering it further. The original class certification opinion, Amerada Hess Corp. v. Garza, 973 S.W.2d 667 (Tex. App.BCorpus Christi 1996, pet. dism'd w.o.j.) ("Garza I"), issued at an early point in the proceedings and considered only whether the trial court had appropriately assessed and had not abused its discretion in determining that, at that point in the litigation, the requisites of rule 42 appeared to have been satisfied. In addition, the second interlocutory appeal dealing with the class certification issue, Citgo Refining and Mktg., Inc. v. Garza, 94 S.W.3d 322 (Tex. App.BCorpus Christi 2002, no pet.) ("Garza II"), directly addressed a jurisdictional question (whether an order of notice to the class constituted a fundamental alteration in the nature of the class). While observations of the court may well be applicable and appropriate to consider, none of these cases, in our view, constitute law of the case or preclude us from considering certification issues, should that be appropriate based upon other findings. Further, we agree that the requirements of Southwestern Refining Co. v. Bernal, 22 S.W.3d 425 (Tex. 2000) are appropriately applied to determine whether class certification is proper. See State Farm Mut. Auto Ins. Co. v. Lopez, 156 S.W.3d 500, 555-56 (Tex. 2004) (holding that analysis required in Bernal is properly applied even where certification order issued prior to Bernal).
[22] We agree that approval of a settlement in a class action, including the determination of whether it is fair and equitable, is left to the sound discretion of the trial court, and is not to be disturbed absent an abuse of discretion. Gen. Motors Corp. v. Bloyed, 916 S.W.2d 949, 955 (Tex. 1996). However, before determining whether a settlement is fair and equitable, it is necessary to determine whether the proposed settlement still survives as a viable agreement.
[23] We note that all of the class representatives never executed the settlement agreement, but no issue as to this has been raised in this appeal, and appellees contend that any such issue was, in any event, waived.
[24] We also note the effects of trying to craft inter-related settlement agreements in a "global settlement," where Citgo's settlement was drafted as a stand-alone agreement, necessarily did impact Citgo's rights under the settlement. We agree that the proposals would have altered Citgo's ability to independently determine whether to proceed despite excessive opt-outs, and they would have inextricabliy intertwined not only Citgo with other defendants, but also the various classes with each other.