ACCEPTED
03-15-00436-CV
6512011
THIRD COURT OF APPEALS
AUSTIN, TEXAS
8/14/2015 5:04:13 PM
JEFFREY D. KYLE
CLERK
NO. 03-15-00436-CV
___________________________________________________
FILED IN
3rd COURT OF APPEALS
IN THE COURT OF APPEALS AUSTIN, TEXAS
THIRD JUDICIAL DISTRICT COURT 8/14/2015 5:04:13 PM
JEFFREY D. KYLE
AUSTIN, TEXAS Clerk
___________________________________________________
CHARLES O. “CHUCK” GRIGSON,
APPELLANT
VS.
THE STATE OF TEXAS, THE TEXAS DEPARTMENT OF INSURANCE,
THE TEXAS COMMISSIONER OF INSURANCE;
and FARMERS GROUP, INC. ET AL.,
APPELLEES
___________________________________________________
On Appeal from the 261st Judicial District Court of Travis County, Texas
Cause No. D-1-GV-02-002501
___________________________________________________
APPELLANT GRIGSON’S MOTION FOR LEAVE TO FILE SUR-REPLY IN OPPOSITION
TO APPELLEES’ REPLY AND JOINT MOTIONS TO DISMISS APPELLANTS’ APPEALS
FOR LACK OF APPELLATE JURISDICTION
___________________________________________________
Joe K. Longley Philip K. Maxwell
LAW OFFICES OF JOE K. LAW OFFICE OF PHILIP K.
LONGLEY MAXWELL
State Bar No. 12542000 State Bar No. 13254000
1609 Shoal Creek Blvd. #100 1609 Shoal Creek Blvd #100
Austin, Texas 78701 Austin, Texas 78701
512-477-4444 512-947-5434
Attorneys for Appellant Grigson
TO THE HONORABLE COURT OF APPEALS:
Appellant Grigson files this Motion for Leave to File a Sur-Reply in
Opposition to Appellees’ Reply and Joint Motions to Dismiss Appellants’ Appeals
for Lack of Appellate Jurisdiction to show the Court the following:
Appellees’ Reply necessitates a Sur-Reply by Grigson to address the
Appellees’ errors and omissions in their Reply relating to both the Order made the
subject of this appeal, and the record regarding the law applicable to his case.
CONCLUSION AND PRAYER
For these reasons, Grigson respectfully requests that the Court grant him
leave to file the accompanying Sur-Reply, consider the attached Sur-Reply, and
further grant all other relief to which Grigson may show himself justly entitled.
Date: August 14, 2015 Respectfully submitted,
CHARLES O. “CHUCK” GRIGSON
APPELLANT
LAW OFFICES OF JOE K. LONGLEY
_______/s/ Joe K. Longley__________
Joe K. Longley
State Bar No. 12542000
1609 Shoal Creek Blvd. #100
Austin, Texas 78701
512-477-4444 PHONE
512-477-4470 FAX
Appellant Motion for Leave 2
LAW OFFICE OF PHILIP K. MAXWELL
_______/s/ Philip K. Maxwell_________
Philip K. Maxwell
State Bar No. 13254000
1609 Shoal Creek Blvd #100
Austin, Texas 78701
512-947-5434 PHONE
ATTORNEYS FOR APPELLANT,
CHARLES O. “CHUCK” GRIGSON
CERTIFICATE OF SERVICE
The undersigned hereby certifies that a true and correct copy of the above
and foregoing document was served on the following counsel of record by
eFile.TXCourts.gov electronic filing system on August 14, 2015.
Joshua Godbey Marcy Greer
Office of the Attorney General of Alexander Dubose Jefferson &
Texas Townsend, LLP
P. O. Box 12548 515 Congress Ave., Suite 2350
Austin, TX 78711-2548 Austin, TX 78701
Sara Waitt Michael J. Woods
General Counsel 8620 N. New Braunfels, Ste. 522
Texas Department of Insurance San Antonio, TX 78217
P. O. Box 149104
Austin, TX 78714-9104 Joseph C. Blanks
PO Box 999
M. Scott Incerto Doucette, TX 75942
Norton Rose Fulbright
98 San Jacinto Blvd #1100
Austin, TX 78701
_______/s/ Joe K. Longley__________
Joe K. Longley
Appellant Motion for Leave 3
CERTIFICATE OF CONFERENCE
Grigson’s counsel has conferenced with Scott Incerto, Lead Counsel for the
Farmers Parties; and Ryan Mindell, Counsel for the State of Texas, about the
merits of the foregoing motion, pursuant to Texas Rule of Appellate Procedure
10.1(a)(5), and counsel for Farmers Parties does not oppose the Motion, while
counsel for the State does.
_______/s/ Joe K. Longley__________
Joe K. Longley
CERTIFICATE OF COMPLIANCE WITH TEX. R. APP. P. 9.4(i)
I certify that the foregoing document contains 115 words and complies with
the word limit set forth in Texas Rule of Appellate Procedure 9.4(i).
_______/s/ Joe K. Longley__________
Joe K. Longley
NO. 03-15-00436-CV
___________________________________________________
IN THE COURT OF APPEALS
THIRD JUDICIAL DISTRICT COURT
AUSTIN, TEXAS
___________________________________________________
CHARLES O. “CHUCK” GRIGSON,
APPELLANT
VS.
THE STATE OF TEXAS, THE TEXAS DEPARTMENT OF INSURANCE,
THE TEXAS COMMISSIONER OF INSURANCE;
and FARMERS GROUP, INC. ET AL.,
APPELLEES
___________________________________________________
On Appeal from the 261st Judicial District Court of Travis County, Texas
Cause No. D-1-GV-02-002501
___________________________________________________
APPELLANT GRIGSON’S SUR-REPLY IN OPPOSITION TO
APPELLEES’ REPLY AND JOINT MOTIONS TO DISMISS APPELLANTS’ APPEALS
FOR LACK OF APPELLATE JURISDICTION
___________________________________________________
Joe K. Longley Philip K. Maxwell
LAW OFFICES OF JOE K. LAW OFFICE OF PHILIP K.
LONGLEY MAXWELL
State Bar No. 12542000 State Bar No. 13254000
1609 Shoal Creek Blvd. #100 1609 Shoal Creek Blvd #100
Austin, Texas 78701 Austin, Texas 78701
512-477-4444 512-947-5434
Attorneys for Appellant Grigson
TO THE HONORABLE COURT OF APPEALS:
Appellant Grigson files this Sur-Reply in Opposition to Apellees’ Reply and
Joint Motions to Dismiss Appellants’ Appeals for Lack of Appellate Jurisdiction
and in further support of his Emergency Motion to Stay the Sending of Class
Notice, filed on July 16, 2015.
Argument
The State and Farmers refuse to acknowledge what is in plain sight. The
2003 certification order is expressly conditioned on approval of one, specific
settlement agreement—the 2003 settlement.1 Nothing in that order says or
suggests that the certification applies to anything else, let alone a new settlement
agreement proposed for approval 12 years in the future, a settlement containing
different terms and negotiated under different and troubling circumstances not
addressed in 2003. In fact, the 2003 Settlement Agreement expressly prohibits the
2003 agreed certification to be used for any other purpose. 2
1
See EXHIBIT 1 (2003 Order).
2
The 2003 certification applied exclusively to the 2003 Settlement Agreement. In the 2003
Settlement Agreement, the State and Farmers agreed that “The Parties will seek, and the Farmers
Parties agree to, conditional certification of the Settlement Classes pursuant to this Settlement
Agreement. The Farmers Parties do not agree to certification of the Settlement Classes for any
purpose other than to effectuate this Settlement Agreement.” EXHIBIT 2. (Emphasis added).
Thus Farmers and the State agreed—in 2003—that the 2003 conditional certification could not
be used for any purpose other than to effectuate the 2003 settlement. The same language
appeared in the 2013 settlement, and drew the attention of the trial court at the September 4,
2014 hearing on Farmers’ Motion to Strike Grigson’s Intervention. In an exchange with the trial
court, Scott Incerto, confirmed that this language means the certification applies only to
effectuating the settlement then before the court and nothing else. Cont’d on next page.
Appellant’s Sur-Reply 2
There is likewise nothing in the law of class actions—and certainly nothing
in the 16 cases that the State and Farmers make us read—that says or suggests that
a 2003 settlement-only, conditional certification can be severed from the 2003
settlement agreement that is its sole reason for existence, a settlement that the
parties themselves terminated years later by entering a new and different 2013
settlement agreement that expressly supersedes and replaces all agreements before
it, and that this severed 2003 certification can then be stitched onto yet another new
and different 2015 settlement agreement that expressly supersedes and replaces all
others before it. The 2003 certification is neither Dracula nor Frankenstein. It
cannot be brought back to life to serve the interests of the State and Farmers in
attempting to destroy this Court’s statutory jurisdiction.
THE COURT: Well, does that mean if I decline to approve a settlement, this
settlement, and you’re now going to litigate it--* * * In other words, you are agreeing
to a class action trial or not?
MR. INCERTO: No, your honor, we agreed for purposes of this settlement
agreement—
THE COURT: Exactly.
EXHIBIT 3 at 56. (Emphasis added).
The plain meaning of the contractual language, confirmed by Farmers’ lawyer, is that an
agreed certification can only be used to effectuate the settlement then before the court. There is
accordingly no contractual room for the State and Farmers to argue today that a 2003 conditional
certification can be used to effectuate a 2015 settlement.
Appellant’s Sur-Reply 3
That to abrogate this Court’s jurisdiction is the goal of the State and Farmers
is obvious. And yet not one word of their reply do the State and Farmers devote to
convincing the Court that an alternate, less malignant purpose lays behind their last
minute switch of orders, from the order attached to and required by the 2015
settlement (with the Rule 42 and Insurance Code findings and the words “hereby
certifies”) to the order now before the Court (with the Rule 42 and Insurance Code
findings and “hereby certifies” redacted) and its missing paragraphs 3 and 4.3 The
State and Farmers could hardly have been worried that the trial court, if they dared
present it with the “hereby certifies” order, would not have signed it. The trial
court repeatedly remonstrated Grigson’s counsel during his objections to the
switched order that “I’m going to sign the order they presented;” “I’m not going to
entertain any substantive differences” [in their order]; and “It’s going to be the
3
The numbering sequence jumps from para. 2 directly to para. 5. Exhibit A to the 2013
Settlement (attached here as EXHIBIT 4) remained the State and Farmers’ proposed order to
preliminarily approve the 2015 settlement throughout the entire preliminary approval process,
including the close of evidence at the July 2, 2015 preliminary approval hearing. That was the
moment the ditch and switch occurred. When the trial court asked the parties if they had a
proposed order, Farmers’ lawyer Marcy Greer handed to the court and, for the first time, to
Grigson’s counsel, the redacted order. Ms. Greer admitted that she had not previously provided
the new proposed order to the “opposing parties.” Ms. Greer also admitted that “being
completely detail oriented” she had found some typographical errors and even some mistakes she
wanted to correct and the State’s lawyers they wanted to correct some website addresses, which
the trial court let them do. See EXHIBIT 5 Tr. 7/2/2015 at 116-122. The reason for the ditch
and switch was clear to the trial court: “I know what they’re doing.” Apparently neither the trial
court nor the State and Farmers were “detailed oriented” enough to note that the order was
missing its paragraphs 3 and 4.
Appellant’s Sur-Reply 4
order they’ve proposed.”4 The trial court’s “been there, done that” view of his
duty as guardian of the class showed quite clearly that whatever “their order” said
or didn’t say, the trial court was going to sign it.
So why in the world go to all the time and trouble to fabricate and defend a
“conditional settlement certifications live forever” view so inconsonant with the
caution the courts have been instructed to follow when approving settlement only
class actions, especially those agreed to at the instance of the defendant? 5 To
abrogate this Court’s jurisdiction, that much we know. But is that all? What can
we expect at the final hearing, when the trial court is supposed to sign another
order attached to and required by the 2015 settlement—the “FINAL
JUDGMENT”? 6 Like the preliminary approval order ditched and switched by the
State and Farmers, the Final Judgment contains all the certification findings
required by Rule 42 and the Insurance Code. If the preliminary approval order
required by the settlement can be ditched and switched, what’s to prevent the final
judgment from suffering the same fate?
4
EXHIBIT 5, Tr. 07/2/2015 (Trial Court’s Ruling Section Tr. 116-135) at 123:11-12, 133:24-
25, 134:17-18.
5
It is undisputed that the State agreed to convert its enforcement action to a settlement-only
class action was done totally at the insistence of Famers as a condition of settlement. See Lubin
v. Farmers Group, Inc., et al 2009 WL 3682602 at *4 (Tex.App.—Austin).
6
EXHIBIT 6.
Appellant’s Sur-Reply 5
And that would be a powerful argument indeed. For if a 12-year-old
superseded conditional certification can be used when preliminarily approving a
different settlement at the preliminary approval stage, why can’t it be used when
finally approving that same settlement at the final approval stage? While such a
result would require a stunning rebuke of the Supreme Court’s warnings about
certifying settlement-only class actions, and the heightened diligence required of
the trial courts to police them for collusion and conflicts, the result follows
ineluctably from the argument the State and Farmers are now making to this Court.
What is at stake here, then, is not simply a “jurisdictional” question relating to this
particular case. At stake here is the duty of trial courts as “guardians of the class”
in all settlement-only class action cases. The State and Farmers “jurisdictional”
argument—motivated by perverse purpose and reeking with perverse
consequences—must be rejected.
CONCLUSION
Appellant Grigson respectfully asks this Court to deny the State and
Farmers’ Joint Motion to Dismiss for Lack of Appellate Jurisdiction; and to stay
class notice to preserve the Court’s jurisdiction to decide the important issues in
this case.
Appellant’s Sur-Reply 6
Date: August 14, 2015 Respectfully submitted,
CHARLES O. “CHUCK” GRIGSON
APPELLANT
LAW OFFICES OF JOE K. LONGLEY
_______/s/ Joe K. Longley__________
Joe K. Longley
State Bar No. 12542000
1609 Shoal Creek Blvd. #100
Austin, Texas 78701
512-477-4444 PHONE
512-477-4470 FAX
LAW OFFICE OF PHILIP K. MAXWELL
Philip K. Maxwell
State Bar No. 13254000
1609 Shoal Creek Blvd #100
Austin, Texas 78701
512-947-5434 PHONE
ATTORNEYS FOR APPELLANT,
CHARLES O. “CHUCK” GRIGSON
Appellant’s Sur-Reply 7
CERTIFICATE OF SERVICE
The undersigned hereby certifies that a true and correct copy of the above
and foregoing document was served on the following counsel of record by
eFile.TXCourts.gov electronic filing system on August 14, 2015.
Joshua Godbey Marcy Greer
Office of the Attorney General of Alexander Dubose Jefferson &
Texas Townsend, LLP
P. O. Box 12548 515 Congress Ave., Suite 2350
Austin, TX 78711-2548 Austin, TX 78701
Sara Waitt Michael J. Woods
General Counsel 8620 N. New Braunfels, Ste. 522
Texas Department of Insurance San Antonio, TX 78217
P. O. Box 149104
Austin, TX 78714-9104 Joseph C. Blanks
PO Box 999
M. Scott Incerto Doucette, TX 75942
Norton Rose Fulbright
98 San Jacinto Blvd #1100
Austin, TX 78701
_______/s/ Joe K. Longley__________
Joe K. Longley
Appellant’s Sur-Reply 8
CERTIFICATE OF COMPLIANCE WITH TEX. R. APP. P. 9.4(i)
I certify that the foregoing document contains 821 words and complies with
the word limit set forth in Texas Rule of Appellate Procedure 9.4(i).
_______/s/ Joe K. Longley__________
Joe K. Longley
Appellant’s Sur-Reply 9
VERIFICATION
THE STATE OF TEXAS §
COUNTY OF TRAVIS §
BEFORE ME, the undersigned authority, on this day personally appeared
Joe K. Longley, a person whose identity is known to me. After I administered an
oath to him, upon his oath, he said the following:
"My name is Joe K. Longley, and I am capable of making this verification,
and the facts in this verification are true and within my personal knowledge. I am
lead counsel for Appellant Charles 0 "Chuck" Grigson. All documents included in
the APPENDIX filed for this Sur-Reply are true and correct copies of documents
filed or presented to the trial court in this action. I have read the Sur-Reply and the
factual statements contained therein that are not otherwise established by this
record are within my personal knowledge and are true and correct."
"Further, Affiant sayeth not."
Joe K. Longley
SUBSCRIBED AND SWORN TO before me on this the 14th day of August,
2015. !f111.h J.A.... ..:!£?, . -
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MARYANN PARRIS
Notary Public, State of Texas
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VERIFICATION OF JOE K. LONGLEY
NO. 03-15-00436-CV
___________________________________________________
IN THE COURT OF APPEALS
THIRD JUDICIAL DISTRICT COURT
AUSTIN, TEXAS
___________________________________________________
CHARLES O. “CHUCK” GRIGSON,
APPELLANT
VS.
THE STATE OF TEXAS, THE TEXAS DEPARTMENT OF INSURANCE,
THE TEXAS COMMISSIONER OF INSURANCE; and FARMERS GROUP,
INC. ET AL.,
APPELLEES
___________________________________________________
On Appeal from the 261st Judicial District Court of Travis County, Texas
Cause No. D-1-GV-02-002501
___________________________________________________
APPELLANT GRIGSON’S APPENDIX IN SUPPORT OF HIS SUR-REPLY IN
OPPOSITION TO APPELLEES’ REPLY AND JOINT MOTIONS TO DISMISS
APPELLANTS’ APPEALS FOR LACK OF APPELLATE JURISDICTION
___________________________________________________
EXHIBIT 1 6-27-2003 Order of Preliminary Approval
EXHIBIT 2 6-13-2003 Amended Settlement Agreement
EXHIBIT 3 9-4-2014 Hearing Transcript
EXHIBIT 4 Exhibit A to Second Amended Settlement Agreements -
Order of Preliminary Approval
EXHIBIT 5 7-2-2015 Hearing Transcript
EXHIBIT 6 6-13-2003 Exhibit K to Second Amended Settlement
Agreement – Final Judgment
EXHIBIT 1
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CAUSE NO. GV202501
THE STATE OF TEXAS, THE TEXAS § IN THE DISTRJCT COURT
DEPARTMENT OF INSURANCE, and §
THE TEXAS COMMISSIONER OF §
INSURANCE, §
§
Plaintiffs, §
§
v. §
§
FARMERS GROUP, INC., FARMERS §
UNDERWRITERS ASSOCIATION, FIRE § OF TRAVIS COUNTY, TEXAS
l UNDERWRITERS ASSOCIATION,
FARMERS INSURANCE EXCHANGE,
FIRE INSURANCE EXCHANGE, TEXAS
§
§
§
FARMERS INSURANCE CO:rvt:PANY, §
1 MID-CENTURY INSURANCE COMPANY §
OF TEXAS, MID-CENTURY IN"SURANCE §
COMPANY, FARMERS TEXAS COUNTY §
MUTUAL INSURANCE CO:rvt:P ANY, §
TRUCK INSUR.A_NCE EXCHANGE, and §
TRUCK UNDERWRITERS § 261ST JUDICIAL DISTRICT
ASSOCIATION,
Defendants.
ORDER OF PRELIMINARY APPROVAL
This matter came on for hearing May 19-22, 2003, for preliminary approval of the
Settlement Agreement and Stipulation of December 18, 2002, as amended on June 13, 2003,
("Settlement Agreement") between the State of Texas, the Texas Department of Insurance, and
'l the Texas Commissioner of Insurance, on behalf of Texas policyholders of the Defendants in the
classes defined below (collectively, the "State") and Fire Underwriters Association, Farmers
Group, Inc. d/b/a Fanners Underwriters Association, Fanners Insurance Exchange, Fire
Insurance Exchange, Texas Farmers Insurance Compaf!Y~ ~i.~tw.y ~surance Company of
Texas, Mid-Century Insurance Company, Farmers ~lW~tYPf1-UW.al Insurance Company,
(._• 04
1
-J 30491649.1
Truck Insurance Exchange, and Truck Underwriters Association (collectively, the "Fann~rs
Parties"). The State and the Farmers Parties have moved jointly, pursuant to Texas Rule of Civil
Procedure Rule 42( e) and Texas Insurance Code article 21.21 § 18(g), for an Order of
Preliminary Approval (the "Order") (1) preliminarily approving the settlement of all claims
asserted in the above-captioned cause (the "Action"), the terms of which are set forth in the
Settlement Agreement which has been filed with the Clerk of the Court, and (2) approving the
proposed notice to the Classes.
,] The Court having read and considered the Settlement Agreement and attached exhibits,
including the proposed Notice of Proposed Class Settlement, the proposed Claim Form, the
l proposed form of Final Judgment, exhibits, pleadings and record in this case, the evidence and
other materials presented at the hearing, and argument of counsel and applicable authorities,
finds that there exists substantial and sufficient grounds for entering this Order.
IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED THAT:
l
. l
1. The Court, for purposes of this Order, adopts all defined terms as set forth in the
Settlement Agreement.
2. Pursuant to Rule 42 and Texas Insurance Code article 21.21 §§ 17 & 18, this
Court hereby certifies, only for purposes of effectuating the Settlement Agreement, the following
Settlement Classes (the "Settlement Classes"):
j
J (i) All of the Exchanges' Texas homeowners insurance policyholders (a)
whose homeowners insurance policy incepted (including renewals) from
December 28, 2001, through and including December 27, 2002, or (b)
who received a notice at any time after November 14, 2001, that their HO-
B policy would not be renewed (the "Rate Class");
(ii) All of the Exchanges' Texas homeowners insurance policyholders who
according to Farmers' records were eligible to receive discounts for
FPRA, age of home, or territory from November 16, 2000, through and
including December 10, 2002 (the "Discount Class"); and
30491649.1
-2-
(iii) All Texas homeowners or automobile insurance policyholders of the
Exchanges or the Automobile Insurance Providers who according to
Farmers' records were provided or should have been provided a Credit
Usage Notice from October 1, 1999, through February 28, 2003 (the
"Credit Usage Notice Class").
3. The Court hereby acknowledges and confirms the State, through the Office of the
. l
I
r
I Attorney General, to fulfill the role of the Settlement Classes' Counsel. The Court finds that the
Attorney General's office is authorized to bring this class action by the parens patn·ae authority
granted in section 17 of article 21.21 of the Insurance Code and Rule 42 of the Texas Rules of
. 1
Civil Procedure.
1
4. Alternatively, if the requirements of Rule 42(a) & (b) and article 21.21 § 18(a) &
(b) must be satisfied, then, with respect to the Settlement Classes, this Court finds and concludes
that each of those requirements has been met, specifically: (a) each of the Settlement Classes is
so numerous that joinder of all members is impracticable; (b) there are questions of law or fact
common to the Settlement Classes which predominate over any individual questions; (c) the
claims or defenses brought by the State on behalf of Fanners'. policyholders are typical of the
claims or defenses of the Settlement Classes and the State is authorized to bring claims on behalf
of the Settlement Classes; (d) in negotiating and entering into the Settlement Agreement, the
State has fairly and adequately represented and protected the interests of the Settlement Classes;
(e) the questions of law or fact common to the Settlement Classes predominate over any
'j questions affecting only individual members; and (f) certifying this Action as a class action is
superior to other available methods for the fair and efficient adjudication of the controversy.
5. The Court further finds that there has been no collusion between the State and the
Farmers Parties with respect to negotiating the Settlement Agreement and that the State has
J
represented, and will continue to represent, the interests of the Farmers' policyholders fairly and
J adequately and without a conflict of interests. Accordingly, the Court preliminarily approves:
30491649.1 -3-
J
(a) the Settlement Agreement, including the terms and the releases set forth therein, as being f~r,
just, reasonable, and adequate as to each of the parties thereto, and (b) the Settlement Funds
described therein, including the Prospective Rate Reduction, Retrospective Rate Reduction,
Individualized Discount Adjustment, and Credit Usage Notice Adjustment Fund, and the
proposed additional consideration, subject to the right of any member of the Settlement Classes
to exclude himself or herself from the Settlement Classes in accordance with the terms set forth
in the Settlement Agreement, and to show cause, if any exists, why a Final Judgment should not
'l
j be entered in accordance with the terms of the Settlement Agreement.
6. A hearing (the "Settlement Hearing") shall be held before this Court on
September 29, 2003, at 9:00 a.m. in the 53rd Judicial District Court Room: (a) to determine
whether the proposed Settlement Agreement is fair, reasonable, and adequate and should be
approved, and whether the Final Judgment should be entered as to claims asserted therein, or
which could have been asserted, against the Released Parties on the merits; (b) to determine
whether the Settlement Classes members' right to adequate representation has been satisfied; and
(c) to reserve jurisdiction to effect and enforce the Settlement Agreement.
7. The Fanners Parties shall disseminate notice of the proposed Settlement
Agreement and Settlement Hearing to putative members of the Settlement Classes within thirty
(30) days of the date of this Order. A copy of the Notice of Proposed Class Settlement (the
(
... "Notice"), together with a copy of the Claim Form, substantially in the form attached hereto as
1 Exhibit A, shall be mailed by first-class U.S. mail, postage prepaid, to all members of the
-j
Settlement Classes at the address of each such person as set forth in the records of the Released
Parties or as otherwise may be identified through reasonable effort. In addition, commencing
l within seven (7) days of the date of this Order and continuing until the date of the Settlement
,J
30491649.1 -4-
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.l
I
i
Hearing, the Office of the Attorney General, the Texas Department of Insurance, and the
Farmers Parties shall post on their respective Internet web-sites (www.oag.state.tx.us,
l www.tdi.state.tx.us and www.farmers.com) the Notice and a Summary Notice of Settlement,
j
substantially in the form attached hereto as Exhibit B ("Summary Notice").
8. The Court approves the form of Notice, the Summary Notice, and the Claim
Form, and finds that the procedures established for mailing and distributing such notices
substantially in the manner and form set forth in paragraph 7 of this Order meet the requirements
of Rule 42 of the Texas Rules of Civil Procedure, article 21.21 § 18 of the Texas Insurance
Code, and due process, and constitute the best notice practicable under the circumstances.
9. To effectuate the provision of notice provided in paragraph 7 hereof, the Fanners
Parties shall be responsible for the receipt of all responses from the members of the Settlement
Classes and, until further order of this Court, shall preserve all entries of appearance, Claim
Forms, requests for exclusion, and any and all other written communications from members of
the Settlement Classes or any other person in response to the Notice. The costs of notification of
the Settlement Classes as provided herein, including printing, mailing, and posting on the
Internet of all required notices, shall be borne by the party charged with the responsibility for
such actions in paragraph 7 of this Order.
10. Three (3) days before the date fixed by this Court for the Settlement Hearing, the
l
j State and the Fanners Parties shall cause to be filed with the Clerk of the Court affidavits or
declarations of the person or persons under whose general direction the mailing of the Notice and
the distribution of the Surtrmary Notice by posting on the web-sites identified in paragraph 7
shall have been made, showing that such mailing and publication have been made in accordance
with this Order.
J
30491649.1
-5-
J
11. Each member of the Settlement Classes will be bound by the proposed settlement
provided for in the Settlement A~eement, and by the Final Judgment or any other determination
by this Court affecting the Settlement Classes, unless such member shall mail, by first-class U.S.
mail, a written request for exclusion from the Settlement Classes, post-marked no later than
August 29, 2003, addressed to "Exclusion Requests", c/o Rust Consulting, Inc.; P.O. Box 9348;
Minneapolis, MN 55440-9348. Such request for exclusion must state (a) the name, address and
telephone number of the person seeking exclusion; (b) whether such person has a homeowners or
l automobile insurance policy from the Farmers Parties, or both; (c) the date of inception of such
policy(ies) and the most recent date of renewal for such policy(ies), if available; (d) the policy
l number(s), if available; and (e) that the person making the request wishes to be excluded from
the Settlement Classes. Because the Settlement Agreement is intended to be a resolution of all
Released Claims, any person requesting exclusion must either exclude himself or herself from
the Settlement Agreement in its entirety, or submit to the Settlement Agreement in its entirety. A
request for exclusion shall not be effective unless it is made in the manner and within the time set
forth in this paragraph and in the Notice. If a member of the Settlement Classes requests to be
excluded, that person will not receive any benefit from the Retrospective Rate Reduction, the
Individualized Discount Adjustment, or the Credit Usage Notice Adjustment Fund provided for
in the Settlement Agreement, in the event the Settlement Agreement is approved by the Court,
nor will such person· be permitted to participate further in the Action. Any Class Member who
does not request exclusion in the manner provided for herein may, but need not, enter an
appearance in this Action at his or her own cost through counsel of his or her own choice. If a
member of the Settlement Classes does not enter an appearance, that person's interests will be
.J represented by the State in the Action .
J
30491649.1 -6-
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12. Any member of the Settlement Classes who has not requested exclusion from ti:e
Settlement Classes may appear at the Settlement Hearing, in person or through counsel, to object
and be heard in opposition to any of the matters to be heard at the Settlement Hearing, including
- l
(a) the requested approval of the Settlement Agreement as fair, adequate, and reasonable, and/or
lI
(b) the requested entry of the Final Judgment. A member of the Settlement Classes cannot
request exclusion from the Settlement Classes AND object to the Settlement Agreement. For
any objection to be considered by the Court, the objector must mail a valid written objection, and
it must be postmarked by no later than August 29, 2003. In order to be valid, the written
objection must set forth (a) a reference, at the top, to "State of Texas v. Farmers, Cause No.
GV20250 1," (b) a statement as to whether the objector intends to appear at the Settlement
Hearing, either in person or through counsel, (c) a detailed statement of the specific basis for the
objection, (d) the name that is set forth on the Notice that was sent to the objector, (e) the
objector's current name, if different from the name set forth on the Notice, (f) the objector's
current address, (g) the objector's current telephone number and, if available, telecopier number,
(h) the objector's type of policy and policy number, and (i) the objector's signature or that of his
or her authorized representative. Three copies of the written objection must be sent, the first
addressed to the District Clerk of Travis County, Texas, 1000 Guadalupe Street, Austin, Texas
78701, the second addressed to David C. Mattax, Chief, Financial Litigation Division, P.O. Box
j
J 12548, Austin, Texas 78711-2548, and the third addressed to Richard N. Carrell, Fulbright &
Jaworski L.L.P ., 1301 McKinney, Suite 5100, Houston, Texas 77010-3095. If an objection does
not include all of the required information or if it is not timely mailed to the three correct
addresses, then it shall be invalid and it will not be considered by the Court. Any member of the
Settlement Classes who does not object in the manner provided shall be deemed to have waived
30491649.1
-7-
such objection and shall forever be foreclosed from making any objection to the fairnes.s,
adequacy, or reasonableness of the Settlement Agreement and the proposed Final Judgment.
13. If the Court gives final approval to the Settlement Agreement and enters a final
judgment, in order to be entitled to participate in the Credit Usage Notice Adjustment Fund
portion of the Settlement Agreement, a member of the Credit Usage Notice Class who has not
requested exclusion from the Settlement Classes must submit a Claim Form, substantially in the
form attached as Exhibit C hereto, to the Farmers Parties at the address set forth in the Notice.
Such Claim Form must be completed and postmarked on or before May 15, 2004. Any member
of the Credit Usage Notice Class who does not submit a completed Claim Form shall not be
entitled to share in the Credit Usage Notice Adjustment Fund but nonetheless shall be bound by
the terms of the Settlement Agreement and by the Final Judgment and any other Order of this
Court approving the Settlement Agreement, including all releases therein, and shall be barred
and enjoined in this or any other action from asserting any Released Claims.
14. Members of the Rate and Discount Classes shall automatically receive their share
of Settlement Funds upon final approval of the Settlement Agreement and entry of final
judgment, unless they file a written request for exclusion from the Settlement Classes as
provided in paragraph 11 herein.
15. The Court expressly retains the power to adjourn the Settlement Hearing, without
any further notice other than an announcement at the Settlement Hearing of adjournment thereof,
and to approve, modify, or disapprove the Settlement Agreement without further notice to
members of the Settlement Classes. The Court retains jurisdiction over this Action to consider
all further applications arising out of or connected with the proposed settlement herein.
J
30491649.1
-8-
16. The administration of the Settlement Agreement, and the decision of all disput~d
questions of law and fact with respect to the validity of any claim or right of any person to
participate in the distribution of the Settlement Fund, shall be under the authority of the Court.
The parties to this Settlement Agreement, counsel herein in any capacity in which they may act
hereunder, and any employees or agents of such law firms or the parties to the Settlement
Agreement (including, without limitation, those employees who may furnish services in
connection with the proposed Settlement) shall not be liable for anything done or omitted in
l connection with the Settlement Agreement and the administration thereof except for their own
willful misconduct.
l 17. The parties to the Settlement Agreement are directed to carry out their obligations
under the Settlement Agreement.
18. In the event that the Settlement Agreement is not approved by the Court, or the
Court enters the Final Judgment and it is vacated or modified on appeal, or otherwise altered in a
material way, or the Effective Date for any other reason does not occur, and if any party to the
Settlement Agreement thereafter exercises its right to terminate the Settlement Agreement as
provided therein, then the Settlement Agreement and any actions to be taken in connection
therewith shall be vacated and terminated and shall become null and void for all purposes, and
all negotiations, transactions and proceedings connected with it (a) shall be without prejudice to
J the rights of any party hereto; (b) shall not be deemed or construed as evidence or an admission
by any party of any fact, matter or thing; and (c) shall not be admissible in evidence or used for
any purpose in any subsequent proceeding in the Action, or any other action or proceeding in this
or any other forum, judicial, administrative, or otherwise, except proceedings to enforce the
Settlement.
j
J 30491649.1 -9-
. 1
I
SIGNED 0UJu 21 '2003.
J
l
_j
l
30491649.1 -10-
EXHIBIT 2
.. ,
AMENDED SETTLEMENT AGREEMENT AND STIPULATION
This Amended Settlement Agreement and Stipulation (the "Settlement Agreement")
amends and supersedes the Settlement Agreement and Stipulation entered into on the 18th day of
December, 2002, by and among the State of Texas ('·'Texas"), the Office of the Attorney General
("OAG''), the Texas Department of Insurance ·("TDI"), including the Texas Commissioner of
Insurance ("Commissioner'~) (hereafter sometimes referred to collectively as the "State"), and
defendants Fire Underwriters Association, Farmers Group, Inc., individually and d/b/a. Fanners
Underwriters Association, Fanners Insurance Exchange, Fire Insurance Exchange, Texas
Fanners Insurance Company, Mid-Century Insurance Company of Texas, Mid-Century
Insurance Company, Fanners Texas County Mutual Insurance Company, Truck Insurance
Exchange, and Truck Unde:rwriters Association (hereafter sometimes referred to collec~ively as
the "Fanners Parties"). The State and the Farmers Parties (hereafter collectively the "Parties")
agree as follows:
I. DEFINITIONS
For purposes of this Settlement Agreement, the following terms have the meanings
specified below:
~'Administrative . .Proceeding'' . means...:the..-Notice_of.P_ublic...Hearing,_J}o_cket.No_..A54_-:_Q3=-----·- _.....
0193.D, To Consider Whether Commissioner's Emergency Cease and Desist Order No. 02-0844
Should Be Affirmed and Whether Disciplinary Action Should Be Taken Against Fanners
Insurance Exchange and Fire Insurance Exchange, which TDI issued on or about September 18,
2002.
"AG Lawsuit" means Cause No. GV202501, The State of Texas an.d The Texas
Commissioner of Insurance v. Farmers Group, Inc., Fanners Undenvriters Association, Fire
Underwriters Association, Farmers Insurance Exchange, and Fire Insurance Exchange, in the
.261st Judicial DistriCt Court of Travis County, Texas, filed on or about August 5, 2002, and
including all amendments thereto.
"Agreed Discounts" means the discounts described in SectioniV, Paragraph ~(h), b~low.
"Associations" means defendants Fire Underwriters Association and Farmers Group, Inc.
d/b/a Farmers Underwriters Association, acting as the Exchanges' attorneys in. fact.
"Automobile insurance" means private passenger automobile insur~ce.
"Automobile Insurance Providers" means defendants Texas Farmers Insurance Company,
Mid-Century Insurance Company of Texas, 11ld-Century Insurance Co,inpany, Fanners Texas
County Mutual Insurance Company, and Truck Insurance Exchange.
"Cease and Desist Order" means the Cease and Desist Order, No. 02-0844, which the
Commissioner signed and entered against the Exchanges, on or about August 13,2002.
30491689. f
"Claim Form" means the form to be used by applicants for the Credit Usage Notice
Adjustment Fund, attached as Exhibit E hereto and addressed in Section IV, Paragraph 4(b)
below.
"Commissioner" means the Texas Commissioner of Insurance.
"Court" means the 261st Judicial District Court of Travis County, Texas, in which the
AG Lawsuit was filed.
"Credit Period" shall have the meaning given it in Section IV, Paragraph 2, below.
"Credit Usage Notice" means a notice of adverse action nnder the Fair Credit Reporting
Act.
"Effective Date" means the date by which all of the following have occurr.ed: (i) an
Order of Preliminary Approval has been entered by the Court in the AG Lawsuit giving notice of
a hearing on the Settlement of the Settlement Classes' claims; (ii) the Court has approved the
Settlement in all respects; (iii) a Final Judgment as described below shall have been entered by
the Court and not vacated, stayed, or modified in any material way, upon appeal or otherwise;
and (iv) either the time to appeal or otherwise seek review of the Final Judgment has expired
-· __ _Mth:9.!1L@YJ~PR_eat }J.i!_\jng_been t*-e.Il.9!:!~Yi~'Y.-~_9:t!&hh_Q.~.-~f an ~Q~-~J~.-~en o~_!~view~ought _______ ·____ ...
the expiration of five days after such an appeal or review shall have been finalfy determined by
the highest court before which appeal or review is sought and is not subject to further judicial
reVIew.
"Exchanges" means Farmers Insurance Exchange and Fire Insurance Exchange.
"Exchanges Lawsuit" means Cause No. GN-203156, Fanners Insurance Exchange and
Fire Insurance Exchange v. Jose Montemayor, individually and in his capacl.ty as TeXa-s
Commissioner of Insurance, and Texas Department of Insurance, in the 353rd Judicial District
Court of Travis County, Texas. ·
"PARA" means· Farmers Auto Risk Assessment.
"FCRA" means the Fair Credit Reporting Act.
"Credit Usage Notice Adjustment Fund" shall have' the meaning given it in Section rv,
Paragraph 4, below.
"FPRA" means Farmers Property Risk Assessment.
"Homeowners insurance" means and includes policies written on TDI-promulgated forms
described as HO-A (including TDP-1), HO-B (as defined in "Released Claims"), HO-B-CON,
and HO-B-T, and all endorsements, promulgated or approved, for use with such· forms.
"IDA Eligibili~" shall have the meaning given it in Section IV, Paragraph 3(a), below.
30491689.1 -2-
"Individualized Discount Adjustment" shall have the meaning given it in Section IV,
Paragraph 3, below.
"Final Judgment" means a final judgment to be rendered by the 261 51 Judicial District
Court of Travis County, Texas, substantially in the form attached as Exhibit K hereto.
"MOU" means the Memorandum of Understanding between and among .the Parties,
which was signed by authorized representatives of the Parties on November 30, 2002.
''Notice of Proposed Class Settlement" means the notice of this Settlement Agreement
and of the Settlement Hearing substantially in the form of Exhibit B hereto that is to be made
available to all persons in the Settlement Classes pursuant to Section ill, Paragraph 7 below.
"OAG CIDs" means all Civil Investigative Demands that OAG has served on the
Released Parties and that are outstanding as of the date of this Settlement Agreement. These
OAG CIDs are listed in the attached Exhibit N.
"Opt-Out Claimant" means a member of the Settlement Classes who submits a timely
and valid request for exclusion in accordance with the Order of Preliminary Approval and the
Notice of Proposed Class Settlement, and who does not revoke that request for exclusion in
wri_ting._at le~t_s~yen {711i~~_p_riQr JQ__ 1:b.~-S~.ttlementJ1~~g~ __s_ych regue§j:§ fo_r _e~clusio:Q. sh and (2) the ''Notice of Report to
Commissioner; Alleged Violations by Farmers Insurance Exchange and Fire Insurance
Exchanges," dated August 14, 2002. The Stat~ agrees that, upon such setting aside, the Report is
of no further force and effect whatsoever; and that such Report may not be used as evidence of,
or be used or relied upon by any person in any proceeding as evidence of, any Violation of law or
breach of contract by the Released Parties.
2. Termination of OAG CIDs. All OAG CIDs issued to the Released Parties
(listed in Exhibit N hereto) shall be withdrawn and all associated investigations as to the
Released Parties shall be terminated. The investigations associated with the time periods
covered by each CID are concluded and there will be no new investigations or CIDs for these
time periods. The Farmers Parties also will disiniss with prejudice their challenges that have
been filed in the district courts of Travis County to certain of the OAG CIDs, substantially in the
form of the example attached as Exhibit 0 hereto.
30491689.1 -14-
3. Termination of Market Conduct Examination. The market conduct
examination of the Exchanges commenced by TDI in January 2002 pursuant to article 1.15 of the
Texas Insurance Code, and all associated investigations, shall be ·terminated and no new
investigation will commence conc~ng Released Claims. The market conduct examination
report has never been finalized and shall be withdrawn in its entirety and with prejudice, in the
form attached as Exhibit M hereto, and shall not be used in
evidence of or relied upon by any
person in any proceeding as evidence of any violation of law or breach of contract by the
Released Parties.
4. Dismissal With Prejudice of Exchanges' Lawsuit and .Counterclaim. The
Exchanges agree that they will ·dismiss with prejudice the claims that the Exchanges made
against 1DI and the Commissioner and Jose Montemayor, individually, in the Exchanges
Lawsuit, substantially in the form attached as Exhibit 0 hereto. The Fanners Parties also will
dismiss with prejudice their counterclaim in the. AG Lawsuit, subs~tially in the form contained
in the Final Judgment attached as· Exhibit K hereto. The dismissal of the Farmers Parties'
counterclaim in tl;le AG Lawsuit shall have no effect on obligations set forth in the Protective
Orders entered therein regarding the Parties, continuing duties regarding confidential documents
or documents produced under seal or in camera.
5. Abatement Pendine Effective Date. Upon execution of .this Settlement
··-··Agreement-,---e()tlflse1-fer--the Parties--ift-tfte-legal-preooe4iags--FsfeFeooefi-in-thi-s~oo--IX,- ... ----·-· -q --
Paragraphs 1..:4 above, will take all appropriate steps to stay or abate those matters until either (a)
the Final Judgment entered in accord with Section VI. of this Settlement Agreement becomes
final and no longer subject to appeal or review, or (b) the Court refuses or declines to enter the
Final Judgment in accord With this Settlement Agreement, or (c) such a Final Judgment is
reversed or vacated on appeal,. or (d) it becomes impossible for the Effective Date to occur for
any reason. If the Effective Date occurs, then the Parties agree that, within thirty (30) days after
the Effective Date, they will take the appropriate steps in the cases listed in this Section IX to
enter the indicated dismissals with prejudice. ·
6. Management fee. For the--Released Parties and any other company or reciprocal
or inter-insurance exchange associated or affiliated with the Released Parties, and regardless of
whether snch entity is or is not subject to rate regulation in Texas, TDI agrees henceforwardJhat
it will not consider the management fee (profits or expenses) as a separate element in its
evaluation of such company's expense structure or consider such m3na:gement fee in the
benchmark rate process generally, but may cori.sider the over-all expense component of the-rate
as it compares the companies' expenses with other agency distribution companies doing business
in Texas. This section does not preclude TDI from evaluating overall rate levels as authorized by
law.
X. OTHER PROVISIONS
1. Cooperation. It is the mutual intent of the Parties to consummate this Settlement
Agreement promptly. The Parties therefore agree to cooperate and to exercise their best efforts
to the extent necessary to effectuate ?Tid implement all of its terms and conditions as quickly as
possible. The OAG, TDI, and the Commissioner further agree to comply with all reasonable
requests for assistance that the Released Parties may make in order to give effect to the purposes
30491689.1 -15-
of the Settlement, including (Without limitation) providing affidavits and/or testimony ~~n
connection with any lawsuits, claims or demands that have been made or could have been made
by or on behalf of the Released Parties' policyholders in any forum arising out of or relating to
the subject matters of the AG Lawsuit (as amended), the Cease and Desist Order, or the
Administrative Proceedings. The intent and spirit of this Settlement Agreement is to terminate
ill of the disputes arising out of and relating to the Released Claims, except as provided herein,
and to permit the Farmers Parties to continue to provide insurance in the Texas market. The
Parties agree to take all reasonable steps and exercise best efforts to achieve. that goaL As an
initial step towards the restoration of a correct and constructive relationship between the
Released Parties· and the IDI, the IDI agrees·that should it have concern in the future about any
practice undertaken by the Released Parties, it will use its best efforts as authorized by statute to
contact the appropriate representative of the Released Parties to discuss· and hopefully resolve
any such concerns. The Released Parties will use their best efforts to notify the 1DI, in advance,
of any material changes in their course of conduct.
2. This Settlement Agreement and· the Exhibits hereto constitute the entire
agreement among the Parties. All other agreements and understandings between the Parties,
including the MOU, are superseded by this Settlement Agreement.
._.3. This. __5e.ttlemenLAgreemenL.may_ he_amend~d_ .Qr_mo_difi.e_d__only_lzy__a_wri!.t~n- -·-------
instrument ~igned by or on behalf of the Parties or their successors in interest.
4. Except as otherwise expressly provided in this Settlement Agreement, each Party
shall bear its own costs, including taxable court costs.
5. The undersigned each represent that he or she is fully authorized to execute this
Settlement Agreement on behalf of the Parties for which he or she signs.
6. This Settlement Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective agents) representative~, successors and assigns. This
Settlement Agreement can be signed in multiple counterparts:
TilE STATE OF TEXAS, AND THE OFFICE OF
THE ATIORNEY GENERAL
30491689.i -16-
.: :~. ~ .
TEXAS DEPARTMENT OF INSURANCE
JOS NfEMAYOR, INDIVIDUALLY AND
AS CO:MlvflSSIONER, TEXAS DEPAR'Th1ENT
OF INSURANCE .
FARlvfERS INSURANCE.EXCHANGE
FIRE INSURANCE EXCHANGE
FIRE UNDERWRITERS ASSOCIATION
FA.Rlv1ERS GROUPt INC., INDIVIDUALLY AND
D/B/A FARMERS UNDERWRITERS
ASSOCIATION
30491689.1 -17-
TEXAS DEPARTMENT OF INSURANCE
JOSE MONTEMAYOR, INDIVIDUALLY AND
AS COMMISSIONER, TEXAS DEPARTMENT
OF INSURANCE
FARMERS INSURANCE EXCHANGE
--·------··----
\S~~ -
-~
....
~
FIRE INSURANCE EXCHANGE
FIRE UNDERWRITERS ASSOCIATION
\
30491689.1 -17-
TEXAS FAR.11ERS INSURANCE COMPANY
MID-CENTURY INSURANCE CO:MPANY OF
TEXAS
MID-CENTURY INSURANCE COMPANY
0/<21~'
-- ___,_:=: ___----=:::: .. -- ·-- -··· - ·-···· ------ ----------· . ---·-·-
FARMERS TEXAS COUNTY-MUTUAL
INSURANCE COMPANY
TRUCK INSURANCE EXCHANGE
TRUCK UNDERWRITERS ASSOCIATION
30491689.1 -18-
TEXAS FARMERS INSURANCE COMPANY
MID-CENTURY INSURANCE COMPANY OF
TEXAS
:MID-CENTURY INSURANCE C011P ANY
--------------·---·---------·--
FARMERS TEXAS COUNTY MUTUAL
INSURANCE COMPANY
'
TRU~CEEXCHANGE .
TRUCK UNDERWRITERS ASSOCIATION
30491689.1 -18-
EXHIBIT 3
1
1 REPORTER'S RECORD
VOLUME 1 OF 1 VOLUME
2 TRIAL COURT CAUSE NO. D-1-GV-02-002501
3
STATE OF TEXAS, THE TEXAS ) IN THE DISTRICT COURT
4 DEPARTMENT OF INSURANCE, )
AND THE TEXAS )
5 COMMISSIONER OF )
INSURANCE, )
6 Plaintiffs, )
)
7 VS. )
)
8 )
FARMERS GROUP, INC., )
9 FARMERS UNDERWRITERS ) TRAVIS COUNTY, TEXAS
ASSOCIATION, FIRE )
10 UNDERWRITERS ASSOCIATION, )
FARMERS INSURANCE )
11 EXCHANGE, FIRE INSURANCE )
EXCHANGE, TEXAS FARMERS )
12 INSURANCE COMPANY, )
MID-CENTURY INSURANCE )
13 COMPANY OF TEXAS, AND )
FARMERS TEXAS COUNTY )
14 MUTUAL INSURANCE COMPANY, )
Defendants. ) 261ST JUDICIAL DISTRICT
15
-------------------------------------------------
16
HEARING ON MOTIONS TO STRIKE
17 AND MOTION TO LIFT STAY ON DISCOVERY
18 --------------------------------------------------
19 On the 4th day of September, 2014, the following
20 proceedings came on to be heard in the above-entitled
21 and numbered cause before the Honorable Scott H.
22 Jenkins, Judge presiding, held in Austin, Travis County,
23 Texas;
24 Proceedings reported by machine shorthand.
25
55
1 judgment on the settlement that went up through appeals.
2 That has not occurred at this point. This language was
3 brought forward and, you know --
4 THE COURT: What am I to make of the
5 language farther up the page, though, that he didn't
6 cite, Farmers parties do not agree to certification of
7 the settlement classes for any purpose other than to
8 effectuate this settlement agreement?
9 Well, I haven't approved this settlement
10 agreement. In fact, I rejected it. So you are now in a
11 posture where you don't agree with the class action.
12 And in fact, you were the party who wanted the class
13 action 12 years ago. So it seems to me we're back at
14 square one with no settlement agreement, no certified
15 class, because no party -- I mean, you were the party
16 who asked for it, and now you don't agree to it,
17 according to your own signed document, and the State
18 really wasn't the one who asked for it to begin with.
19 So what am I to make of all that?
20 MR. INCERTO: Well, I have to respectfully
21 disagree with the Court's analysis on that. I think we
22 do have a class action. I believe it's law in the case
23 from the Supreme Court. I believe that this particular
24 provision --
25 THE COURT: Well, then is this just
56
1 gratuitous? You put it in this -- this is the one you
2 signed, and you put it as part of your motion filed in
3 August of 2013 that you wanted me to read and consider
4 to approve the settlement and to approve -- well, to
5 approve the settlement, get preliminary approval. Now
6 that I have declined to do that, I mean, this is the
7 language that you kept in there. And you obviously gave
8 it a lot of attention because I looked at the changes
9 you made.
10 MR. INCERTO: Your Honor, we tried to
11 change as little as possible and carried forward
12 everything from the prior agreement except what
13 absolutely needed to be changed because of I said the
14 problem with the credit notice -- credit reports not
15 being --
16 THE COURT: Well, does that mean if I
17 decline to approve a settlement, this settlement, and
18 you're now going to litigate it -- because I went back
19 and read what now Justice Boyd said at the time when he
20 was a witness, we'll have to decide how to structure
21 this trial in this case. In other words, you are
22 agreeing to a class action trial or not?
23 MR. INCERTO: No, Your Honor. We agreed
24 for purposes of this settlement agreement --
25 THE COURT: Exactly.
102
1 REPORTER'S CERTIFICATE
2
3 THE STATE OF TEXAS )
4 COUNTY OF TRAVIS )
5 I, Chavela V. Crain, Official Court
6 Reporter in and for the 53rd District Court of Travis
7 County, State of Texas, do hereby certify that the above
8 and foregoing contains a true and correct transcription
9 of all portions of evidence and other proceedings
10 requested in writing by counsel for the parties to be
11 included in this volume of the Reporter's Record, in the
12 above-styled and numbered cause, all of which occurred
13 in open court or in chambers and were reported by me.
14 I further certify that this Reporter's Record of
15 the proceedings truly and correctly reflects the
16 exhibits, if any, offered in evidence by the respective
17 parties.
18 WITNESS MY OFFICIAL HAND this the 10th day of
19 September, 2014.
20
/s/ Chavela V. Crain
21 Chavela V. Crain
Texas CSR 3064, RMR, CRR
22 Expiration Date: 12/31/2015
Official Court Reporter
23 53rd District Court
Travis County, Texas
24 P.O. Box 1748
Austin, Texas 78767
25 (512) 854-9322
*
EXHIBIT 4
I
/
CAUSE NO. GV202501
THE STATE OF TEXAS, THE TEXAS IN TH E DISTRICT COURT
DEPARTMENT OF INSURANCE. and
THE TEXAS COMMISSIONER OF
INSURANCE,
Plaintiffs.
v.
FARMERS GROUP. INC.. FARMERS
UNDERWRITERS ASSOCIATION, FIRE OF TRAVIS COUNTY, TEXAS
UNDERWRITERS ASSOCIATION,
FARMERS INSURANCE EXCHANGE,
FIRE INSURANCE EXCHANGE, TEXAS
FARMERS INSURANCE COMPANY,
MID-CENTURY INS URANCE COMPANY
OF TEXAS, MID-CENTURY INSURANC E
COMPANY, FARMERS TEXAS COUNTY
MUTUAL INSURANCE COMPANY,
TRUCK INSURANCE EXCHANGE, and
TRUCK UNDER WRITERS 261 ST JUDICIAL DISTRICT
ASSOCIATION,
Defendants.
ORDER OF PRELIMINARY APPROVAL
This matter came on for hearing on October 18. 2013. at 9:00 a.m. for preliminary
approval of the Second Amended Settlement Agreement and Stipulation of December 18, 2002,
as amended on June 13, 2003, and as further amended on August _ , 2013 ("Second Amended
Settlement Agreement"") between the State of Texas. the Texas Department of Insurance, and the
Texas Commissioner of Insurance. on behalf of Texas policyholtkrs of the Defendants in the
classes defined below (collectivdy. the "State'') and Fire Undervvriters Association. Farmers
Group. Inc. · llS11~ . 2
-l 0-
EXHIBIT 5
1
1 REPORTER'S RECORD
VOLUME 2 OF 2 VOLUMES
2 TRIAL COURT CAUSE NO. D-1-GV-02-002501
3 STATE OF TEXAS, THE TEXAS ) IN THE DISTRICT COURT
DEPARTMENT OF INSURANCE, )
4 AND THE TEXAS )
COMMISSIONER OF )
5 INSURANCE, )
Plaintiffs, )
6 )
VS. )
7 )
)
8 FARMERS GROUP, INC., )
FARMERS UNDERWRITERS ) TRAVIS COUNTY, TEXAS
9 ASSOCIATION, FIRE )
UNDERWRITERS ASSOCIATION, )
10 FARMERS INSURANCE )
EXCHANGE, FIRE INSURANCE )
11 EXCHANGE, TEXAS FARMERS )
INSURANCE COMPANY, )
12 MID-CENTURY INSURANCE )
COMPANY OF TEXAS, AND )
13 FARMERS TEXAS COUNTY )
MUTUAL INSURANCE COMPANY, )
14 Defendants. ) 261ST JUDICIAL DISTRICT
15 -------------------------------------------------
16
HEARING ON JOINT MOTION FOR
17 PRELIMINARY APPROVAL OF SECOND AMENDED
SETTLEMENT AGREEMENT
18
19 --------------------------------------------------
20 On the 2nd day of July, 2015, the following
21 proceedings came on to be heard in the above-entitled
22 and numbered cause before the Honorable Scott H.
23 Jenkins, Judge presiding, held in Austin, Travis County,
24 Texas;
25 Proceedings reported by machine shorthand.
116
1 THE COURT: Well, I asked questions
2 because of the very -- for the very same reason I'm
3 asking now, does anybody know that answer, and I
4 think --
5 MR. LONGLEY: I don't know of any
6 empirical evidence that's in this record.
7 COURT'S RULING
8 THE COURT: Okay. Thank you. That
9 answers my question. You both answered my question the
10 same way. Thank you. And that's my only question.
11 All right. You need to submit to my staff
12 proposed orders. I know your proposed order will be to
13 grant the joint motion for preliminary approval.
14 And I know your motion -- or your order
15 will be to deny the joint motion for preliminary
16 approval. It might even have more in it such as to sign
17 an order that decertifies the class. I don't know.
18 But do you, as you sit here now, have in
19 your possession the very proposed order that you wish
20 for this Court to sign after I go back and think about
21 whether I'm prepared to sign your proposed order? Do
22 you have your order?
23 MS. GREER: We do, Your Honor.
24 THE COURT: Would you hand that to my
25 court operations officer? And I assume you've already
117
1 tendered that to the opposing parties.
2 MS. GREER: No, we weren't presuming at
3 this point.
4 THE COURT: That's okay. Please do that
5 now.
6 MS. GREER: And I have provided it to the
7 State.
8 THE COURT: Thank you. Do the intervenors
9 have a proposed order to conclude this hearing?
10 MR. LONGLEY: No, Your Honor. We were
11 relying upon the form of the order that was attached to
12 their moving motion, which is obviously far different
13 from this order.
14 THE COURT: Okay. That's great. Well,
15 let's just take a moment to look at it and see what it
16 is they're asking the Court to do at the conclusion of
17 this hearing.
18 This question is directed to the moving
19 parties. Exhibits 1, 2 and 3 to this order are
20 identical to the forms that were already submitted in
21 your joint motion materials, correct?
22 MS. GREER: Yes, Your Honor.
23 THE COURT: Thank you. I'm not going to
24 go reread --
25 MS. GREER: Although I did note, being
118
1 completely detail oriented here, one typographical error
2 in the notice that we might as well address now.
3 THE COURT: On which exhibit is this?
4 MS. GREER: That would be Exhibit 1,
5 Your Honor.
6 THE COURT: Yes, the notice.
7 MS. GREER: There's a reference --
8 THE COURT: What page are you on?
9 MS. GREER: I am on Page 5 under Question
10 No. 9. At the end of that first paragraph, it says see
11 Question 14, and that actually should be Question 13.
12 Since we're here I thought we could correct it.
13 THE COURT: Oh, I see. At the end of the
14 first paragraph?
15 MS. GREER: Yes, Your Honor.
16 THE COURT: Question 14 is a mistake. It
17 should be Question 13.
18 MS. GREER: Yes, sir.
19 THE COURT: Okay. Otherwise, these are
20 identical to what you submitted before?
21 MS. GREER: Correct.
22 THE COURT: And in fact, it is identical,
23 but it contains a mistake, and so it now needs to be
24 corrected.
25 MS. GREER: Correct.
119
1 THE COURT: I get it.
2 MS. GREER: And, Your Honor, the State has
3 pointed out a couple of small nits in the order itself
4 just with website names on Page 4.
5 THE COURT: At the bottom?
6 MS. GREER: Yes, Your Honor. The Texas
7 Attorney General has changed its website to
8 www.texasattorneygeneral.gov.
9 THE COURT: All spelled out?
10 MS. GREER: All spelled out. And the
11 next --
12 THE COURT: And then it's still dot state
13 dot TX, et cetera?
14 MR. GODBEY: No, Your Honor.
15 THE COURT: Okay. So it's just
16 www.texasattorneygeneral --
17 MS. GREER: Dot gov.
18 THE COURT: -- dot gov. Yes, we changed
19 ours here in the County also, which causes no end to
20 problems, although most of it's seamless, but not
21 entirely.
22 MS. GREER: And Your Honor, there's a typo
23 in the next website, and I apologize because it's mine.
24 It should be TDI.state.tx.
25 THE COURT: I'm sorry. It should be --
120
1 MS. GREER: TDI, Texas Department of
2 Insurance.
3 THE COURT: Of course, instead of just TI.
4 MS. GREER: Correct.
5 THE COURT: Got that.
6 MR. MINDELL: Your Honor, actually the TDI
7 website is now www.TDI.Texas.gov.
8 MS. GREER: We got the Norton Rose one
9 right.
10 THE COURT: Well, that's nice. That's
11 good. All right. Anybody else find any other typos?
12 I mainly wanted to make sure -- because I
13 did not take the time to reread Exhibits 1, 2 and 3,
14 because I've already read those things. I only wanted
15 to read with some care the proposed order that you want
16 me to sign, and I've done that.
17 And so I'm prepared to tell you -- because
18 I've spent a lot of time on this, we all have, for many,
19 many years. I've read everything you've asked me to
20 read, every case you've asked me to read, and thought
21 about everything you wanted me to think about, and I
22 really do appreciate what you said, but I'm now about to
23 rule in a way that the intervenors are asking me not to.
24 I'm about to grant this joint motion for preliminary
25 approval.
121
1 And there are some blanks that will have
2 to be filled in which will involve all of us. Certainly
3 it will involve the moving parties and the Court. And
4 so -- and you're going to get out the notice within
5 60 days of the signature on this order. And I'll be
6 signing it with corrections no later than Monday, maybe
7 sooner if I finish this work today, but I've got other
8 work to do, and so we'll just see. But I'd like to get
9 this done. So we need to figure out what date this will
10 be set. I need to ask them that question first. Thank
11 you, Mr. Longley.
12 MR. INCERTO: We have proposed dates if
13 the Court wants to --
14 THE COURT: Would you hand that to the
15 court operations officer with a copy to the -- do you
16 have copies for the other side?
17 MR. INCERTO: It's a little confusing.
18 The yellow highlighted are --
19 THE COURT: Well, I always like to walk
20 back -- begin with the end in mind.
21 MR. INCERTO: Right.
22 THE COURT: Walk back to the end, just
23 like we do on a trial scheduling order, and figure out
24 what needs to be done in advance of that and how far in
25 advance it needs to be accomplished.
122
1 MR. INCERTO: I think the end --
2 THE COURT: Do we need to discuss all
3 these time periods on the record or may I give the
4 court reporter a break now?
5 MR. LONGLEY: I want to make an objection
6 on the record before we go off the record, Your Honor,
7 regarding the form of the order that you're about to
8 sign. We object to the form.
9 THE COURT: Then tell me what the defect
10 is in the form of the order.
11 MR. LONGLEY: The defect is that, number
12 one, we were just handed this order. It was not
13 attached as part of the moving papers. The one that was
14 attached to the moving papers in Paragraph 2 says this
15 Court hereby certifies classes, and this is the first
16 time we've seen an order that does not certify classes.
17 THE COURT: That's because their position,
18 as you know, all along in this joint motion has been
19 that the class was previously certified -- or the Court
20 gave preliminary approval before, it's come back to the
21 Court and that the class has never been decertified.
22 That's -- has that been your argument?
23 MS. GREER: Yes, Your Honor.
24 MR. GODBEY: Yes, Your Honor.
25 THE COURT: And so what you like about
123
1 that other order is that it suggests that I have to go
2 back and recertify the class, and that's what you'd like
3 me to put in the order, right?
4 MR. LONGLEY: Either that or that you
5 refuse to certify a class in this particular order for
6 the reason that you're adopting their view that it's
7 already been certified and you're applying that
8 certification in 2003 to this new 2015 settlement.
9 THE COURT: No, I understand what they're
10 doing in this order, and I thought about that very thing
11 as I read it, just as you did, and I am going to sign
12 the order as they've presented it.
13 MR. LONGLEY: And --
14 THE COURT: But I understand why you don't
15 like that.
16 MR. LONGLEY: Well, the point -- the
17 reason we don't like it is it's an attempt through
18 collusion to deny these -- let me finish, please.
19 THE COURT: Well, I'm not going to morph
20 into argument. I'm only going to talk about the form of
21 the order. And I understand why you don't want me to
22 sign the order, but I don't want to morph into argument
23 now, which it sounds like you want to do, and I
24 understand that, but we're not going to do that.
25 Is there any other defect in the form of
124
1 the order, that is, errors, bad grammar, misstatement of
2 the record? I don't believe that does misstate the
3 record, and I am going to sign that.
4 MR. LONGLEY: I have not had time to read
5 the new order, and I would request respectfully that we
6 have a red lined copy of what the differences are
7 between the order they just handed us and the order they
8 attached to their moving papers for this hearing,
9 because I've seen nothing except what I've just told the
10 Court, and I want to see what's been added, what's been
11 subtracted, because I went through this whole hearing
12 without having a copy of this.
13 THE COURT: I understand.
14 MR. LONGLEY: And I object to it as a
15 matter of form.
16 THE COURT: I understand. But I had read
17 it so thoroughly before, things jumped out at me just as
18 they jumped out to you because you and I have both read
19 this so carefully. I understand it. Let me ask them if
20 they have a red lined copy. And if they do, I will
21 certainly ask them to give you one. And if they don't,
22 I will give you this afternoon to read this and compare
23 it to the previous one and send electronically to the
24 Court by, I would say, 3:00 or 4:00 -- I mean, you're
25 going to need to work now side by side and compare it,
125
1 what form errors there are -- I know you have
2 substantive disagreements; I'm not going to go backwards
3 on that -- form errors you have on the form of the order
4 given your comparison of the previous form and this
5 form, and I will certainly read that, if not today then
6 tomorrow, if not tomorrow then Saturday, because I want
7 to get this done before I start a trial on Monday.
8 MR. LONGLEY: Well, I respectfully request
9 that they provide us with a red lined because they have
10 these documents on their computers.
11 THE COURT: I just mentioned I'm going to
12 ask them that. And if not, I'll let you do the green
13 eye shade work of looking back and forth, but let's see
14 if they have it.
15 MR. LONGLEY: Okay.
16 THE COURT: Thank you. Do you have that?
17 MS. GREER: No, Your Honor, we haven't
18 created that.
19 THE COURT: Okay. Never have created it.
20 They say they haven't created it. And I know you take
21 them at their word that they've never created that.
22 This is simply -- this is their new and improved
23 proposed order. And I understand that you see
24 differences. I do, too. But that's why I wanted to
25 take enough time so that I felt comfortable knowing
126
1 what's in this that was not in the previous order.
2 Amazingly I do. I guess I'm still able to move that
3 quickly. And so I'll keep reading it, though, but I
4 wanted to let you know while you're all here that having
5 read it, though I discerned some differences too, I'm
6 prepared to approve it. But I want to give you the next
7 two or three hours to go through it yourself and see if
8 you find any other errors in it and submit that
9 electronically simultaneously copying the other side,
10 because I would like to get this, you know, out of the
11 court along with all the other findings of fact and
12 conclusions of law on other trials I've got that I'm
13 going to be working on today and this weekend. Okay.
14 MS. GREER: Your Honor --
15 THE COURT: Anything else?
16 MS. GREER: Your Honor, the document that
17 has the colored lines on it that has the dates is in the
18 form of an Excel spreadsheet, and we can manipulate
19 those numbers if the Court --
20 THE COURT: Let's talk about the final
21 fairness hearing and work back from that, okay?
22 MS. GREER: Okay.
23 THE COURT: Because you need me for that.
24 MS. GREER: Correct.
25 THE COURT: And you only get me at certain
127
1 times. Can we now go off the record and give the
2 court reporter a break? I don't want to do that if you
3 want to keep the scheduling discussions on the record.
4 I can go back and repeat it on the record what we've
5 agreed to, but I thought I'd give her a break if we can
6 be conversational for a moment about scheduling the
7 final fairness hearing. Is that okay or do you want to
8 keep -- do you want to stay on the record about
9 discussing our calendars?
10 MR. LONGLEY: We can go off the record for
11 a few minutes, Your Honor.
12 THE COURT: Okay. Great. You should
13 enjoy that.
14 All right. Let's talk about my calendar
15 and your calendar.
16 (Discussion off the record)
17 THE COURT: All right. We're back on the
18 record, Counsel. We've had a discussion about timing
19 and giving everyone ample time in advance of the final
20 fairness hearing to file objections and to file any
21 briefing about those objections so that the Court can
22 thoroughly consider that. And having consulted and
23 worked collegially about this, I think everyone's in
24 agreement that we can give more than ample time for all
25 of that to be accomplished if we set the final fairness
128
1 hearing for February 1st. And if no one says they
2 disagree with that, I think I just summarized correctly
3 what everyone has worked together to ensure that the
4 Court is going to do, and that is to have a thorough
5 opportunity to consider any objections to final fairness
6 in advance of that hearing and to begin that hearing on
7 February 1st. So that date will be put in this order,
8 and then you will back up from that date and put
9 briefing -- you're going to add a briefing schedule to
10 this order, correct?
11 MR. INCERTO: That's correct.
12 THE COURT: And you're going to add, are
13 you, a subpoena deadline to this order, or do you want
14 to think about that?
15 MR. INCERTO: I think we'll add the
16 subpoena deadline and we'll add the briefing deadline as
17 the 14th of December.
18 THE COURT: All right. Well, I want to
19 review that order. And if there's some -- and I ask you
20 to send that to Mr. Longley and his colleagues so that
21 you can, again, collegially discuss any deadlines to
22 make sure that everyone's had an opportunity to think
23 about who they want to subpoena. But then, for
24 everyone's sake, and especially the witnesses, so we
25 don't have the last-minute subpoenas we've had in this
129
1 preliminary fairness hearing, I would like to cook some
2 deadlines in there. Do you have any questions about
3 what I'm going to do?
4 MR. LONGLEY: No, Your Honor, I don't.
5 What I would request is that the nits that you have
6 requested, that they be included in whatever they send
7 over to us so that we don't -- I haven't written all
8 these down as we've gone through here informally. So
9 just correct whatever it is they're going to correct and
10 send it over to us. As to form, we have no objection
11 with the date the Court has said that you want to have
12 the final fairness hearing. We're not agreeing to it.
13 THE COURT: I understand.
14 MR. LONGLEY: Yeah.
15 THE COURT: But you have no objection
16 to --
17 MR. LONGLEY: We have no objection to the
18 setting.
19 THE COURT: To the setting. And you have
20 no objection to baking into this order deadlines for
21 subpoenas, deadlines for briefing provided those are
22 reasonable. And we've talked about roughly six or more
23 weeks before the final fairness hearing having the final
24 briefs submitted. Given how far in advance we're
25 setting this final fairness hearing, you have during our
130
1 discussions offered no objections to the idea that we
2 would bake in some deadlines so that the Court has an
3 ample opportunity to have us all prepared for the final
4 fairness hearing.
5 MR. LONGLEY: We understand thoroughly,
6 Your Honor, the need for dates to be in there, and as to
7 that part of the form we have no objection.
8 THE COURT: Thank you for saying that.
9 And I know you're speaking on behalf of the other
10 intervenors, too. Thank you.
11 Anything else we need to say on the record
12 about this so that I can then review this order you're
13 going to get to me hopefully later today and I can sign
14 it sometime today or over the weekend? The next time
15 it'll be filed if it's not filed by 5:00 p.m. today --
16 the clerk's office shuts down, so they won't be filing
17 it until Monday no matter what I'm signing, but I will
18 get it signed no later than Monday. And you're going to
19 be getting that to me this afternoon; is that correct?
20 MR. INCERTO: That is correct.
21 THE COURT: And Mr. Longley requested just
22 now, could you -- when you redo this, correcting the
23 nits, could you shoot that over to his office and his
24 co-intervenors in a form that allows them to quickly
25 see --
131
1 MR. INCERTO: We'll red line --
2 THE COURT: -- the nit corrections you've
3 done?
4 MR. INCERTO: We'll red line the original
5 order to show the corrections and the nits.
6 THE COURT: Thank you. I know he
7 appreciates that. Anything else we need to say on the
8 record?
9 MR. INCERTO: Nothing further, Your Honor.
10 MR. GODBEY: Nothing, Your Honor.
11 MR. LONGLEY: I think we're finished,
12 Your Honor. Do we need to report back to you tomorrow?
13 Is that what you were asking?
14 THE COURT: First I need to let the
15 court reporter know she's through. Is there anything
16 else we need to say on the record? No?
17 MR. LONGLEY: Only when you want us to
18 report back to you with regard to what they're going to
19 send to us so that we know the deadline that we've got
20 to get you something, objections or something about this
21 order.
22 THE COURT: Well, they're not going to
23 give you a red line comparing this order today with the
24 previous order.
25 MR. LONGLEY: I understand that.
132
1 THE COURT: They're only going to give you
2 a little red line with the nit corrections.
3 MR. LONGLEY: Right.
4 THE COURT: So your job now is to go back
5 now, which you're already doing, and I am too -- I've
6 already compared it in my mind because I remember what
7 was in the previous order, and that's why you and I both
8 knew one of the changes in this order. You now need to
9 go back and compare this to the previous order, and you
10 also need to let me know by the end of the day what
11 corrections, even before you get the nit red lines, you
12 are finding in this order. Then if there's something
13 about their -- so you'll need to do that this afternoon
14 also. I suggest at 4:00 o'clock that you need -- but I
15 would like it no later than 4:00. I'd prefer it
16 earlier.
17 How long is it going to take you to go
18 back and read the order that you already argued on the
19 record is different from this order in some material
20 way, especially as it references the certification of
21 the class? You know what I'm referring to now.
22 MR. LONGLEY: Yes, sir, I do.
23 THE COURT: Anything else like that you
24 want me to understand that you think I might not have
25 understood -- I believe I have, but if you don't think I
133
1 have, I want to know by what time this afternoon you're
2 going to put that in an e-mail to the Court so I can
3 give one last thought to that. I'm not going to rethink
4 my decision, but I am thinking about the form of the
5 order.
6 MR. LONGLEY: I think I can meet that
7 timetable so long as I get what they're going to send
8 over to me reasonably soon.
9 THE COURT: Well, that's just nit
10 corrections with dates. I need to know anything in
11 addition to the thing that you said earlier such as,
12 well, this changes what you're saying about the class
13 certification. Yes, yes it does, in some respects, and
14 I'm signing it. If there's anything else like that, I
15 need to know by 3:00, 4:00 at the latest. I would hope
16 by 3:00. I would hope you could go back right now and
17 compare it and tell me anything else that you
18 couldn't -- because I know you've read this thoroughly
19 before.
20 MR. LONGLEY: I guess what I need to know
21 is the Court is not going to entertain any alternative
22 order to refuse with regard to what we might want to
23 submit?
24 THE COURT: I'm not going to entertain any
25 substantive differences, that's correct.
134
1 MR. LONGLEY: Such as the certification.
2 THE COURT: That's correct. That's
3 exactly right.
4 MR. LONGLEY: We're addressing that right
5 now.
6 THE COURT: Exactly, we are addressing
7 that right now. And I understood that from the briefing
8 you gave me in advance of this hearing that you were
9 each trying to spin my prior comments on the record to
10 be a "oh, we need to recertify this class" from your
11 perspective and "no we don't" from their perspective. I
12 understood that completely.
13 MR. LONGLEY: And I think I do, too,
14 Your Honor, that this particular settlement that you're
15 approving will not have a separate certification or
16 refusal to certify.
17 THE COURT: It's going to be the order
18 they've proposed.
19 MR. LONGLEY: I gotcha. And I can get
20 back to you by 5:00 o'clock today or to e-mail
21 Ms. Daniel.
22 THE COURT: No.
23 MR. MAXWELL: 4:00 o'clock, Joe.
24 THE COURT: No, by 4:00 o'clock.
25 MR. LONGLEY: 4:00 o'clock. Okay. Sorry.
135
1 THE COURT: Okay. Good. All right. Any
2 other questions or statements on the record before I let
3 the court reporter get a well-deserved break?
4 MR. INCERTO: Nothing further.
5 MR. GODBEY: Nothing further, Your Honor.
6 MR. LONGLEY: Nothing further.
7 MR. BLANKS: Nothing from the Hooks,
8 Your Honor.
9 MR. WOODS: Nothing.
10 THE COURT: All right. Thank you all.
11 (Court adjourned)
12
13
14
15
16
17
18
19
20
21
22
23
24
25
136
1 REPORTER'S CERTIFICATE
2
3 THE STATE OF TEXAS )
4 COUNTY OF TRAVIS )
5 I, Chavela V. Crain, Official Court
6 Reporter in and for the 53rd District Court of Travis
7 County, State of Texas, do hereby certify that the above
8 and foregoing contains a true and correct transcription
9 of all portions of evidence and other proceedings
10 requested in writing by counsel for the parties to be
11 included in this volume of the Reporter's Record, in the
12 above-styled and numbered cause, all of which occurred
13 in open court or in chambers and were reported by me.
14 I further certify that this Reporter's Record of
15 the proceedings truly and correctly reflects the
16 exhibits, if any, offered in evidence by the respective
17 parties.
18 WITNESS MY OFFICIAL HAND this the 12th day of July,
19 2015.
20
/s/ Chavela V. Crain
21 Chavela V. Crain
Texas CSR 3064, RMR, CRR
22 Expiration Date: 12/31/2015
Official Court Reporter
23 53rd District Court
Travis County, Texas
24 P.O. Box 1748
Austin, Texas 78767
25 (512) 854-9322
EXHIBIT 6
CAUSE NO. GY202501
THE STATE OF TEXAS, THE TEXAS § IN THE DISTRICT COURT
DEPARTMENT OF INSURANCE. and §
THE TEXAS COMMISSIONER OF ss
INSURANCE, §
§
Plaintiffs, §
~
s
V. §
§
FARMERS GROUP, INC., FARMERS §
UNDERWRITERS ASSOCIATION, FIRE § OF TRAVIS COUNTY, TEXAS
UNDERWRITERS ASSOCIATION, §
FARMERS INSURANCE EXCHANGE, §
FIRE INSURANCE EXCHANGE, TEXAS §
FARMERS INSURANCE COMPANY, §
MID-CENTURY INSURANCE COMPANY §
OF TEXAS, MID-CENTURY INSURANCE §
COMPANY, FARMERS TEXAS COUNTY §
MUTUAL INSURANCE COMPANY, §
TRUCK INSURANCE EXCHANGE, and §
TRUCK UNDERWRITERS §
ASSOCIATION, §
§
Defendants. § 261 ST JUDICIAL DISTRICT
FINAL .JUDGMENT
The Court held an evidentiary hearing in this action on the day of January 22, 2014.
After considering the Second Amended Settlement Agreement and Stipulation ("Settlement
Agreement"), the releases contained therein and the exhibits thereto, objections received
regarding the proposed settlement, pleadings and record in this case, the evidence presented at
the hearing. and arguments of counsel and applicab le authorities, the Court rules as follows:
1. The Court has jurisdiction over the subject matter of this Action and over the
parties to the Action, including the State of Texas, the Texas Department of Insurance, and the
Second Amended Settlement
Agreement and Stipulation
EXHIBIT K
·,.
Texas Commissioner of Insurance (collectively. the " State''), as well as the Settlement Class
Members, as plaintiffs, and Fire Underwriters Association, Farmers Group, Inc. d/ b/a Farmers
Underwriters Association, farmers Insurance Exchange, Fire Insurance Exchange. Texas
Fam1ers Insurance Company, Mid-Century Insurance Company of Texas, Mid-Century
Insurance Company, Farmers Texas County Mutual Insurance Company, Truck Insurance
Exchange, and Truck Underwriters Association, as defendants (collectively, the " Farmers
Parties");
2. The Settlement Agreement is reasonable, fair, just, and adequate and satisfies
Texas Rule of Civil Procedure 42 and Texas Insurance Code§ 541.266(a);
3. The State has satisfied the Settlement Class Members' rights to adequate
representation;
4. The Court hereby acknowledges and confirms the State, through the Office of the
Attorney General, to fulfi ll the role of the Settlement Classes ' Counsel. The Court finds that the
Attorney General's office is authorized to bring this class action by the parens patriae authority
granted in sections 541.251 and 541.256-.257 of the Texas Insurance Code and Rule 42 of the
Texas Rules of Civil Procedure;
5. This Court additionally finds and concludes that each of the requirements of Rule
42(a) and (b) and sections 541.256 and 541.257 of the Texas Insurance Code has been met,
specifically: (a) each of the Settlement Classes is so numerous that joinder of all members is
impracticable; (b) there are questions of law or fact common to the Settlement Classes which
predominate over any individual questions; (c) the claims or defenses brought by the State on
behalf of Farmers ' policyholders are typical of the claims or defenses of the Settlement Classes
and the State is authorized to bring claims on behalf of the Settlement Classes; (d) in negotiating
55944l!41 .2
-2-
and entering into the Settlement Agreement, the State has fairly and adequately represented and
protected the interests of the Settlement Classes; (e) the questions of law or fact common to the
Settlement Classes predominate over any questions affecting only individual members; and
(f) certifying this Action as a class action for settlement purposes is superior to other available
methods for the fair and efficient adjudication of the controversy;
6. The Court further finds that there has been no collusion between the State and the
Farmers Parties with respect to negotiating the Settlement Agreement and that the State has
represented, and will continue to represent, the interests of the Farmers' policyholders fairly and
adequately and without a conflict of interests.
7. The Notice provided pursuant to the Court's Order of Preliminary Approval
signed the day of October 18, 2013, provided the best notice practicable to all persons within the
definition of the Settlement Classes under the circumstances, and fully complies with Tex. R.
Civ. P. 42(c)(2), sections 541.261 and 541.267(b) of the Texas Insurance Code, and the Texas
and United States Constitutions;
8. At the time Farmers Insurance Exchange and Fire Insurance Exchange
("Exchanges") ceased offering HO-B form policies in Texas, they were not subject to the
withdrawal requirements found in former art. 21.49-2C of the Texas Insurance Code pursuant to
former Texas Insurance Code Article 19.12;
9. The Farmers Parties have no statutory or regulatory duty nor any contractual
obl igation under fonns approved by the Texas Department of Insurance, either to renew or offer
1-10-B policies to policyholders in the State of Texas; and
5S944841.2
-3-
I 0. The decision to discontinue the Exchanges' HO-B policy offerings, and offer. us
an alternative to the HO-B policy, an amended HO-A policy, was accepted by the Commissioner
of Insurance.
The Court ORDERS as follows:
1. The Settlement Agreement, including the definitions contained therein and the
exhibits thereto, is approved and shall be consummated in accordance with the terms and
provisions thereof: and the Court orders the Parties to comply with the Settlement Agreement.
The terms "Released Parties," "Released Claims," "Settlement Classes," "Settlement Class
Members," and all other terms in this Final Judgment are defined in accord with the terms in the
Settlement Agreement.
2. This Final Judgment is binding on all parties to the Settlement Agreement and on
all Settlement Class Members. Settlement Class Members, as defined in the Settlement
Agreement, include all of the following who did not timely request exclusion from the
Settlement Classes:
(a) All of the Exchanges' Texas homeowners insurance
policyholders (a) whose homeowners insurance policy incepted (including
renewals) from December 28, 2001, through and including December 27,
2002, or (b) who received a notice at any time after November 14, 200 1,
that their l ·I 0-8 policy would not be renewed (the "Rate Class");
(b) All of the Exchanges' Texas homeowners insurance
policyholders who according to Farmers' records were eligible to receive
discounts for FPRA, age of home, or territory from November 16, 2000,
through and including December I 0, 2002 (the "Discount Class"); and
(c) All Texas homeowners or automobile insurance
policyholders of the Exchanges or the Automobile Insurance Providers
who according to Farmers' records had a homeowners or automobile
insurance policy in effect with Farmers from October I, 1999, through
February 28, 2003 (the "Credit Usage Class").
559.J4841.2 -4-
3. In accordance with and pursuant to the tenns of the Settlement Agreement, the
Released Parties shall make available to eligible Settlement Class Members the Prospective Rate
Reduction , the Retrospective Rate Reduction, the Individualized Discount Adjustment, and the
Credit Usage Notice Fund.
4. Entry of this Final Judgment approves the Settlement Agreement and settles all
Released Claims. As of the Effective Date of the Settlement Agreement, the State and
Settlement Class Members shall be forever barred from bringing or prosecuting any action or
proceeding that involves or asserts any of the Released Claims, as defined in the Settlement
Agreement against the Released Parties, and shall be deemed to have released and forever
discharged the Released Parties from all Released Claims.
5. As of the Effective Date of the Settlement Agreement, the State and Settlement
Class Members shall be conclusively deemed to have acknowledged the release of all Released
Claims, including but not limited to claims, rights, demands, causes of action, liabilities or suits
that are not known or suspected to exist as of November 30, 2002.
6. The Settlement Funds, Revised Credit Usage Notices, and payment of attorney's
fees and costs provided in the Settlement Agreement are the only consideration, fees, and
expenses the Farmers Parties shall be obligated to give the State and Settlement Class Members
in connection with the Settlement Agreement.
7. All Released Claims, as defined 111 the approved Settlement Agreement. are
dismissed in their enti rety, with prejudice.
The Court DECLARES as follows:
559-1-ll!-112 -5-
1. The Released Parties were under no obligation- whether statutory, regulatory or
under forms approved by the Texas Department of Insurance-to renew or offer HO-B policies
to policyholders in the State of Texas;
2. The HO-B policy nonrenewal endorsements contained in the HO-B insurance
policies issued by the Released Parties impose no renewal obligation on Released Parties; and
3. The Texas Department of Insurance's nonrenewal endorsement, H0-350, does
not limit the Released Parties' ability to cease offering HO-B policies to policyholders in the
State of Texas.
The Court further ORDERS as follows:
I. The Court reserves and retains exclusive and continuing jurisdiction over this
Action, the State, the Settlement Class Members, and the Released Parties, to the fullest extent
allowed by Texas law, for the purposes of supervising the enforcement, construction, and
interpretation of:
(a) the Settlement Agreement,
(b) the Court's Protective Order signed the lOth day of February, 2003, and
(c) this Final Judgment.
2. The Court' s Protective Order entered on February 10, 2003, shall continue in
effect by its terms;
3. This Final Judgment and the Settlement Agreement, and all papers related thereto,
are not, and shall not be construed to be, an admission by any Party of any liability or
wrongdoing whatsoever; and
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4. This Final Judgment incorporates all other orders and resolves all claims in this
case made by all parties. All other relief not expressly granted herein to the State or the
Settlement Class Members, or to the Farmers Parties as counter-plaintiffs, is hereby DENIED.
SIGNE D - - - - - - ' 2014.
JUDGE PRESIDING
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