Charles O. "Chuck" Grigson, Gerald Hooks, and Leslie Hooks v. State

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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.... ..:!£?, . - l'f!l/1;:.. ! ..~~~\ \..J.:l~i~l MARYANN PARRIS Notary Public, State of Texas NOtarY~~ My Commission Expires: ~ ~ ~ ~1'\\B ,' .J.V .... ";J'i'M""'~$ .,,,,, ,,\: . My Commission Expires July 08 2018 ~ - --- 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 r ·{~o- . \~ pv . fl .~ 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- .J .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- 1l , ...J 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 5594-1841 .2 -6- 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 55944114 1.2 -7-