ACCEPTED
06-15-00037-CV
SIXTH COURT OF APPEALS
TEXARKANA, TEXAS
11/9/2015 11:10:06 AM
DEBBIE AUTREY
CLERK
NO. 06-15-00037-CV
FILED IN
IN THE COURT OF APPEALS FOR THE 6th COURT OF APPEALS
TEXARKANA, TEXAS
SIXTH DISTRICT OF TEXAS 11/9/2015 11:10:06 AM
DEBBIE AUTREY
AT TEXARKANA Clerk
MICHAEL D. LEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPELLANT
V.
THE ROGERS AGENCY, C. MICHAEL ROGERS
& NEW YORK LIFE INSURANCE COMPANY.. . . . . . . . . . . . . . . APPELLEES
On Appeal from the 124th Judicial District Court
of Gregg County, Texas
Honorable Alfonso Charles Presiding
BRIEF OF APPELLANT
John R. Mercy James A. Holmes
Texas State Bar No. 13947200 Texas State Bar No. 00784290
MERCY p CARTER p TIDWELL, L.L.P. THE LAW OFFICE OF JAMES HOLMES, PC
1724 Galleria Oaks Drive 212 South Marshall
Texarkana, TX 75503 Henderson, TX 75654
Telephone: (903) 657-2800
Telephone: (903) 794-9419
Facsimile: (903) 657-2855
Facsimile: (903) 794-1268 Email: jh@JamesHolmesLaw.com
E-mail: jmercy@texarkanalawyers.com
ATTORNEYS FOR APPELLANT
Oral Argument Requested
IDENTITY OF PARTIES AND COUNSEL
Pursuant to Rule 38.1(a) of the Texas Rules of Appellate Procedure, Appellant
lists below the names and addresses of all parties to the trial court’s final judgment
together with their counsel in the trial court. This list is provided so that the justices
of this Court may evaluate possible disqualification and recusal, and so that the Clerk
of the Court of Appeals may notify all parties of this Court’s final judgment.
Michael D. Lee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appellant
James A. Holmes
Texas State Bar No. 00784290
THE LAW OFFICE OF JAMES HOLMES, PC
212 South Marshall
Henderson, TX 75654. . . . . . . . . . . . . . . . . . . . . . . . . . Trial Counsel for Appellant
John R. Mercy
MERCY p CARTER p TIDWELL, L.L.P.
1724 Galleria Oaks Drive
Texarkana, TX 75503. . . . . . . . . . . . . . . . . . . . . . Appellate Counsel for Appellant
The Rogers Agency
C. Michael Rogers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appellees
LaToyia Pierce
WILSON, ELSER, MOSKOWITZ,
EDLEMAN & DICKER LLP
4800 Bank of America Plaza
901 Main Street
Dallas, TX 75202.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney for Appellees,
The Rogers Agency and C. Michael Rogers
New York Life Insurance Company... . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appellee
i
Andrew Jubinsky
Ryan McComber
FIGARI & DAVENPORT, LLP
3400 Bank of America Plaza
901 Main Street
Dallas, TX 75202.. . . . . . . . . . . . . . . . . . Trial and Appellate Counsel for Appellee,
New York Life Insurance Company
ii
TABLE OF CONTENTS
Page
Identity of Parties and Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
Index of Authorities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
Statement of the Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Statement of Oral Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Issue Presented. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Summary of the Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Argument and Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Res Judicata.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Standard of Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Undisputed Facts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Lee’s Extra-Contractual Claims. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
New York Life’s Motion for Summary Judgment. . . . . . . . . . . . . . . . . . . . 12
Not a Class Member. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Not in Privity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
No Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Notice Was Not Adequate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
iii
Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Prayer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Certificate of Service.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Certificate of Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Appendix:
A - Order Granting Defendants’ Motion for Summary Judgment
(CR 1074 and SCR 1065)
B - Class Member Definition (CR 319)
iv
INDEX OF AUTHORITIES
Cases: Page
All American Siding & Windows, Inc. v.
Bank of America National Association,
367 S.W.3d 490 (Tex. App. – Texarkana 2012, pet. denied). . . . . . . . . . . . . . . . . . 9
Bailey v. Kemper Casualty Ins. Co.,
83 S.W.3d 840 (Tex. 2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Barr v. Resolution Trust Corp.,
837 S.W.2d 627 (Tex. 1992). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Bogard v. Cook,
586 F.2d 399 (5th Cir. 1978). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Celtic Life Ins. Co. v. Coats,
885 S.W.2d 96 (Tex. 1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
City of San Antonio v. Cortes,
468 S.W.3d 580 (Tex. App. – San Antonio 2015, pet. filed). . . . . . . . . . . . . . . . . . 8
FM Props Operating Co. v. City of Austin,
22 S.W.3d 868 (Tex. 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Ford Motor Co. v. Sheldon,
22 S.W.3d 445 (Tex. 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Getty Oil Co. v. Ins. Co. of N. Am.,
845 S.W. 2d 794 (Tex. 1992). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Hill v. Tx An Anesthesia Mgmt. LLP,
443 S.W.3d 416 (Tex. App. – Dallas 2014, no pet.).. . . . . . . . . . . . . . . . . . . . . . . 14
In Re Allstate County Mutual Ins. Co.,
447 S.W.3d 497 (Tex. App. – Houston [1st Dist.] 2014, orig. proceeding). . . . . . 11
v
In Re ER,
385 S.W.3d 552 fn. 18 (Tex. 2012).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
In re: Nissan Motor Corp. Antitrust Litig.,
552 F.2d 1088 (5th Cir. 1977). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Intratex Gas Co. v. Beeson,
22 S.W.3d 398 (Tex. 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Ison v. Carlile & Jacquelin,
417 U.S. 156 (1974). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Johnson v. General Motors Corp.,
598 F.2d 432 (5th Cir. 1979). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Peter G. Milne, P.C. v. Ryan,
2015 WL 5999898 at 10 (Tex. App. – Texarkana, October 15, 2015).. . . . . . . . . 13
Pinson v. Terminal Transport Co.,
634 F.2d 989 (5th Cir. 1981). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Provident Life & Accident Ins. Co. v. Knott,
128 S.W.3d 211 (Tex. 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Royal Globe Ins. Co. v. Bar Consultants, Inc.,
577 S.W.2d 688 (Tex. 1979). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Strather v. Dolgen Corp. of Texas, Inc.,
96 S.W.3d 420 (Tex. App. – Texarkana 2002, no pet.). . . . . . . . . . . . . . . . . . . . . . 9
Travelers Ins. Co. v. Joachin,
315 S.W.3d 860 (Tex. 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Truck Ins. Exchange v. Mid-Continent Cas. Co.,
320 S.W.3d 613 (Tex. App. – Austin 2010, no pet.). . . . . . . . . . . . . . . . . . . . . . . 14
Union Pacific R. Co. v. Ameriton Properties, Inc.,
448 S.W.3d 671 (Tex. App. – Houston [1st Dist.] 2014, pet. denied).. . . . . . . . . . . 8
vi
Viles v. Sec. Int’l Ins. Co.,
788 S.W.2d 566 (Tex. 1990). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Willson v. New York Life Ins. Co., et al,
Index No. 94/127804 (Sup. Ct. N.Y. Co.).. . . . . . . . . . . . . . . . . . . . 5, 10, 13 passim
Rules:
TEX. R. CIV. P. 166a(c). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Statutes:
TEX. BUS. COM. CODE
§ 17.46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
§ 17.50. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12
TEX. INS. CODE
§ 541.060(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
§ 541.151. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
§ 542.003(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
§ 542.058. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
vii
NO. 06-15-00037-CV
IN THE COURT OF APPEALS FOR THE
SIXTH DISTRICT OF TEXAS
AT TEXARKANA
MICHAEL D. LEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPELLANT
V.
THE ROGERS AGENCY, C. MICHAEL ROGERS
& NEW YORK LIFE INS. CO.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPELLEES
BRIEF OF APPELLANT
TO THE HONORABLE COURT OF APPEALS:
COMES NOW Appellant, MICHAEL D. LEE, and appeals the trial court’s
June 26, 2015 summary judgment, and would show unto the Court the following
Statement of the Case
Nature of the Case This is a suit by Lee for negligence, deceptive trade
practices, insurance code violations, declaratory
relief and breach of contract against his insurance
agent, agency, and NY Life. 1
1
Appellant, Michael D. Lee, will be referred to as “Lee”; Appellee, The Rogers Agency,
will be referred to as “ The Agency)”; Appellee, C. Michael Rogers, will be referred to as “Rogers”;
and Appellee, New York Life Ins. Co., will be referred to individually as “NY Life.” With reference
to the Motion for Summary Judgment and arguments to it the Appellees collectively will be referred
to as “New York Life.” The Clerk’s Record will be cited as “CR ___” ; and the Supplemental
Clerk’s Record as “SCR ___; and the Reporter’s Record will be cited as “ RR __.”
1
Trial Court: The Honorable Alfonso Charles,
124th District Court, Gregg County
Parties: Plaintiff – Michael D. Lee
Defendants – The Rogers Agency,
C. Michael Rogers
New York Life Ins. Co.
Course of Proceedings: Suit was filed by Lee against Rogers, The Rogers
Agency, and NY Life for negligence, deceptive trade
practices, violations of the Insurance Code,
declaratory relief, and breach of contract. (CR 5, 13,
717). Defendants denied the allegations. (CR 796,
800, 809). Defendants removed the case to federal
court. (CR 24). The federal court remanded the case
to the 124th District Court, Gregg County, Texas.
(CR 36). New York Life moved for summary
judgment based upon res judicata.(CR 50, 703, 706,
714, 726). Lee filed a brief in response pointing out
that res judicata did not apply.
Trial Court Disposition: The trial court granted the summary judgment
motion based on res judicata. (CR 1074). This
appeal ensued. (CR 1075).
2
STATEMENT OF ORAL ARGUMENT
This case presents unique factual issues regarding class notification and
whether res judicata applies to non-class members. Therefore oral argument may be
helpful to the Court in understanding the issues as presented.
3
ISSUE PRESENTED
Issue No. 1
Res judicata based on a prior class action does not apply to Lee for
three specific reasons:
a. Res judicata does not apply because Lee was not a
member of the Willson class;
b. Res judicata does not apply because Lee was not in
privity with the Willson class;
c. Res judicata does not apply because even if Lee were a
member of the Willson class Lee did not receive proper
notice; and
d. Res judicata does not apply because even if Lee were a
member of the class and received notice, the notice was
not adequate to apprise Lee that his extra-contractual
claims would be barred by the class judgment.
Therefore it was error by the court to grant summary judgment based on res
judicata.
4
STATEMENT OF FACTS
On July 28, 1995, NY York Life settled a two billion dollar class action with
certain defined class members. (CR 55). In the case styled Willson v. New York Life
Ins. Co., et al, Index No. 94/127804 (Sup. Ct. N.Y. Co.) (CR 55), the judgment
approving the settlement specifically defined the class as “. . . all persons or entities
who have, or had, at the time of the policy’s termination, an ownership interest in one
or more policies issued by New York Life at any time during the class period, . . .
(CR 319). Under the Willson class definition to be a member of the class a person
or entity had to have an ownership interest at (1) the time of the settlement of the
Willson case, or (2) at the time of the policy’s termination. (CR 319). In Lee’s case
to be a member of the class Lee would have had to own the policy on July 28, 1995
or in May of 2012 when the settlement was approved or the policies in question were
terminated. (CR 751).
Between 1985 and 1987 Lee purchased three whole-life policies from New
York Life Insurance Company through its local agent, Rogers, of The Rogers
Agency. (CR 54). Each policy provided that Lee could “shorten the premium paying
period for this policy by having it made fully paid up with no more premiums due”.
(CR 737, 750). In 1989, based upon Rogers’ representations, Lee paid $238,188.15
to fully pay up the policies so no more premiums would be due. (CR 55, 738, 750).
5
Based upon Rogers’ representations Lee paid no further premiums on the policies.
(CR 738, 750).
On June 10, 1991 Lee transferred ownership of the policies to the Michael D.
Lee Irrevocable Insurance Trust using NY Life’s provided documents. (CR 738). By
the terms of the NY Life forms, the owner of the policies became Richard A. Dial, the
trustee of the irrevocable insurance trust. (CR 738). NY Life even confirmed to Dial
that he had all the rights of ownership of the policies. (CR 739). After June 10, 1991
Lee had no further ownership interest in the policies. (CR 739).
In May of 2012, NY Life notified Lee that the policies had lapsed due to
unpaid premiums. (CR 751). Lee filed suit in March of 2014 asserting his individual
extra-contractual claims for negligence, deceptive trade practices, violations of the
insurance code, declaratory relief, and under contract. (CR 5, 13, 717). Defendants
attempted to remove the case to federal court. (CR 24). The case was remanded to the
124th District Court of Gregg County. (CR 36). Defendants then immediately filed a
motion for summary judgment claiming that because of the Willson case res judicata
applied to Lee’s claims. (CR 50, 703, 706, 714, 726). The court granted Defendants’
summary judgment motion, dismissing all of Lee’s claims. (CR 1074).
6
SUMMARY OF THE ARGUMENT
For res judicata to apply this Court must make sure that it complies with due
process requirements. Here it does not because Lee was not a member of the prior
class or in privity with the prior class, did not receive notice of the class settlement,
and the notice was not sufficient even had he received it. As this Court is aware, res
judicata can only apply in very specific instances, none of which are met in this case.
It was therefore error to grant summary judgment based upon it.
7
ARGUMENT AND AUTHORITIES
The res judicata effect of a class settlement does not apply when a person is not
a member of the class, not in privity with the class, does not receive notice of the
class settlement, or notice is inadequate. Here the trial court erred by granting
summary judgment based on res judicata where none of these existed.
Res Judicata
Res judicata is the generic term for a group of related concepts concerning the
conclusive effects given to final judgments. Barr v. Resolution Trust Corp., 837
S.W.2d 627, 628 (Tex. 1992); City of San Antonio v. Cortes, 468 S.W.3d 580 (Tex.
App. – San Antonio 2015, pet. filed). Claims preclusion under res judicata prevents
the relitigation of a claim or cause of action that has been fully adjudicated or should
have been adjudicated in a prior suit. Union Pacific R. Co. v. Ameriton Properties,
Inc., 448 S.W.3d 671, 680 (Tex. App. – Houston [1st Dist.] 2014, pet. denied); Barr,
837 S.W.2d at 628. To prevail on a res judicata defense a party must show that (1)
in a previous action, a court of competent jurisdiction rendered a final determination
on the merits; (2) the parties in the earlier action are identical to, or in privity with,
the present parties; and (3) the pending claim is identical to the prior claim or arises
out of the same subject matter as the prior claim and could have been litigated in the
previous action. Travelers Ins. Co. v. Joachin, 315 S.W.3d 860, 862 (Tex. 2010).
8
Standard of Review
Whether summary judgment is proper is a question of law that is reviewed de
novo. FM Props Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000).
The standard for reviewing a traditional summary judgment is well established. All
American Siding & Windows, Inc. v. Bank of America National Association, 367
S.W.3d 490, 497 (Tex. App. – Texarkana 2012, pet. denied). Traditional summary
judgment is proper if (1) there is no genuine issue of material fact, and (2) the movant
is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c). When reviewing
a summary judgment the court of appeals must take as true all evidence favorable to
the non-movant, and indulge every reasonable inference and resolve all doubts in
non-movant’s favor. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211,
215-16 (Tex. 2003). When the trial court does not specify on what basis it granted
summary judgment, the appellant must argue that every ground in the summary
judgment motion is erroneous. Strather v. Dolgen Corp. of Texas, Inc., 96 S.W.3d
420, 422-23 (Tex. App. – Texarkana 2002, no pet.).
Undisputed Facts
! NY Life issued three (3) one million dollar life insurance policies to Lee
between 1985 and 1987. (CR 49, 54).
! Lee claimed that Rogers misrepresented to him in 1989 that (1) he could
fully pay the premiums on the policies for $238,188.15; and (2) after he
9
made such payment the policies would remain in effect for his lifetime.
(CR 750).
! On June 10, 1991 he transferred ownership of all three policies to the
Michael D. Lee Irrevocable Insurance Trust. (CR 750).
! On February 1, 1996 the court approved a final judgment in Willson v.
New York Life Insurance Co., et al, Index No. 94/127804 (Supreme
Court New York County).(CR 56).
! The Willson judgment defined class members as “all persons or entities
who have or had at the time of the policies’ termination an ownership
interest in one or more policies issued by New York Life at any time
during the class period, . . .” (CR 319).
! The Willson judgment defined class period as the period from January
1, 1982 through December 31, 1994, inclusive. (CR 320).
! Lee did not have an ownership interest in the policies on February 1,
1996. (CR 751).
! Lee did not have an ownership in the policies in May of 2012. (CR 751).
! Notice was not sent specifically to Lee. (CR 751).
! Notice concerning the policies was only sent to Richard Dial, the trustee
for the Michael D. Lee Irrevocable Insurance Trust. (CR 822).
10
Lee’s Extra-Contractual Claims
Claims for violation of the Texas Insurance Code and the common law duty of
good faith and fair dealing are separate and independent from claims for contractual
benefits. See In Re Allstate County Mutual Ins. Co., 447 S.W.3d 497, 500 (Tex. App.
– Houston [1st Dist.] 2014, orig. proceeding); Viles v. Sec. Int’l Ins. Co., 788 S.W.2d
566, 567 (Tex. 1990). The supreme court has held that an insurer or its agents may
be liable under the Texas Insurance Code and/or the DTPA for misrepresenting a
policy even without a claim under the contract itself. Celtic Life Ins. Co. v. Coats,
885 S.W.2d 96, 99 (Tex. 1994); In Re Allstate, 447 S.W.3d at 500.
In this case, Lee asserts extra-contractual claims under the Texas Insurance
Code and the DTPA for misrepresentation of the policy. In particular, he complains
that his agent misrepresented the nature of the policy and the amount of premiums to
“make it fully paid up.” He asserts causes of action under Sections 541.060(a),
542.003(b) and 542.058 of the Texas Insurance Code and Sections 17.46 and 17.50
of the Texas Business & Commerce Code. These causes of action arise in favor of
any “person” and any “consumer” damaged by the misrepresentations. E.g., TEX. INS.
CODE § 541.151 (West 2015); TEX. BUS. COM. CODE § 17.50 (West 2015). They are
not reserved for policy owners or even insureds. See id.
These claims are separate and independent from any claims for contractual
benefits. In Re Allstate, 447 S.W.3d at 500. They can be asserted even in the absence
11
of a claim for benefits under the policies. Royal Globe Ins. Co. v. Bar Consultants,
Inc., 577 S.W.2d 688, 694 (Tex. 1979). They arose in favor of Lee when his agent
misrepresented the terms of his policy to him in 1989. While Lee could have
transferred these claims to the Trust, he did not. As New York Life concedes, the
plain language of the Trust instrument conveys only Lee’s “right, title and interest in
the policies. (CR 815). The fact that the Trust became the “absolute owner” of the
policies does not foreclose Lee’s right to assert his claim as a “person” and
“consumer” under the Texas Insurance Code and the DTPA. E.g., TEX. INS. CODE §
541.151; TEX. BUS. COM. CODE § 17.50.
New York Life’s Motion for Summary Judgment
The sole basis, and “threshold issue”, for New York Life’s motion for summary
judgment was that the final judgment in the Willson case barred Lee’s claims by res
judicata.2 (CR 54). In analyzing the elements of res judicata, in the context of the
Willson case, res judicata clearly does not apply to Lee’s claims.
Not a Class Member
In the context of a class action, for the Willson judgment to have preclusive
effect Lee must have been a member of the class. The definition of a class member
must be precise and presently ascertainable by reference to object to the criteria.
2
Rogers and The Agency joined in the motion for summary judgment. (CR 703, 704).
12
Intratex Gas Co. v. Beeson, 22 S.W.3d 398, 403 (Tex. 2000); Peter G. Milne, P.C. v.
Ryan, 2015 WL 5999898 at 10 (Tex. App. – Texarkana, October 15, 2015). A proper
class definition determines who is entitled to notice, who is entitled to relief, and
what relief can be awarded. Intratex, 22 S.W.3d at 403. It also determines which
parties will be bound by the judgment. Id. Ford Motor Co. v. Sheldon, 22 S.W.3d
445, 453 (Tex. 2000). Bailey v. Kemper Casualty Ins. Co., 83 S.W.3d 840, 851 (Tex.
2002). For the class action settlement to apply to Lee the must have been a member
of the class. It is undisputed that he was not.
To determine whether Lee was a member of the class this Court must simply
look at the definition of class members set forth in the Willson case, and the
undisputed facts with regard to Lee. Willson defined the class as “. . . all persons or
entities who have, or had at the time of the policy’s termination an ownership interest
in one or more policies issued by New York Life at any time during the class period.”
(CR 319). In doing so it is apparent that Lee did not have an ownership interest either
when the Willson judgment was signed on July 28,1995, or when the policies were
terminated in May 2012. (CR 751). Thus by definition he was not a member of the
Willson class. This should end this Court’s inquiry and the summary judgment
should be reversed.
13
Not in Privity
New York Life argued to the trial court that on the one hand that somehow Lee
was in privity with the trust while admitting that all ownership of the trust as
transferred to the Irrevocable Insurance Trust on June 10, 1991. (CR 817, 820).
These positions are mutually exclusive.
New York Life claims privity on three bases: (1) that Lee and the trust were
preceding and succeeding owners of the policies; (2) Lee’s extra-contractual claims
were represented by the trust and other named plaintiffs; and (3) the trust designated
the trustee as having the power to bind “those interested in the trust.” (CR 820).
None of these are supported by the summary judgment evidence and required the trial
court to improperly presume they were correct.
There is no specific definition of privity that can be applied in res judicata
cases. Truck Ins. Exchange v. Mid-Continent Cas. Co., 320 S.W.3d 613, 618 (Tex.
App. – Austin 2010, no pet.); Hill v. Tx An Anesthesia Mgmt. LLP, 443 S.W.3d 416,
424-25 (Tex. App. – Dallas 2014, no pet.). Each case requires an examination of the
particular facts and circumstances of the case . Getty Oil Co. v. Ins. Co. of N. Am.,
845 S.W. 2d 794, 800 (Tex. 1992). A person can only be in privity in three ways: (1)
he can control the action even though not a party to it; (2) his interests can be
represented by a party to the action; and (3) he can be a successor in interest deriving
his claim through a party to the prior action. Hill, 443 S.W.2d at 425. Lee does not
14
fall into any of these three categories. He could not control the action because he was
not an owner of the policies on the two relevant dates. His interests were not
represented. Finally, he did not derive his extra-contractual claims from the trust.
Based on Lee’s affidavit alone there is a disputed fact issue that must be decided to
find privity. (CR 751). New York Life’s arguments for privity stretch the concepts
of due process sought to be protected by the very specific class member definition.
This should end this Court’s inquiry and the summary judgment should be
reversed.
No Notice
For argument’s sake, even if this Court assumes that Lee was a member of the
class due process requires that he receive some notice that the class action is pending
and that his claims may be adjudicated as part of it. Johnson v. General Motors
Corp., 598 F.2d 432, 438 (5th Cir. 1979). Adequate notice and opportunity to be
heard are fundamental requisites of the constitutional guarantee of procedural due
process. Ison v. Carlile & Jacquelin, 417 U.S. 156, 174 (1974). In Re ER, 385
S.W.3d 552 fn. 18 (Tex. 2012). For a class member to be forever barred from
pursuing an individual damage claim due process requires that he receive some form
of notice that the class action is pending and his damage claims may be adjudicated
as part of it. Johnson v. General Motors Corp., 598 F.2d at 438. Here the evidence
is undisputed that Lee did not receive a notice of the Willson case or its settlement.
15
(CR 822). Defendants attempt to argue that because the trust received a notice it was
good notice to Lee. That is simply not correct. Again, this should end this Court’s
inquiry and the summary judgment should be reversed.
The Notice Was Not Adequate
Assuming for argument’s sake that Lee was a member of the class, and that the
notice to the trust was notice to him, the notice itself was still inadequate to inform
Lee that his rights could be precluded by the settlement. Res judicata will not bar a
subsequent suit for damages if the notice does not adequately inform an absent class
member of his rights under the settlement. e.g. Pinson v. Terminal Transport Co., 634
F.2d 989, 995 (5th Cir. 1981); Bogard v. Cook, 586 F.2d 399 (5th Cir. 1978). The
notice must contain an adequate description of the proceeding written in an objective,
neutral terms that insofar as possible may be understood by the average absentee class
member. In re: Nissan Motor Corp. Antitrust Litig., 552 F.2d 1088 (5th Cir. 1977).
In essence, the content of the notice must meet due process requirements in giving
notice that the settlement class can use to determine whether they are included. The
notice here described the settlement class as those who “have or had at the time of the
Policies’ termination an ownership interest in one or more Policies.” Had Lee
received a notice, the notice did not alert him that his claims were being settled,
merely those owned by the trust. Such a notice did not adequately inform Lee that
16
his claims were being settled by the class settlement. This should finally end this
Court’s inquiry and the summary judgment should be reversed.
CONCLUSION
Based upon the undisputed evidence, the trial court erred in granting summary
judgment based on res judicata against Lee. He was not a member of the class, did
not receive notice, and the notice would not have apprised him of the loss of his
claims. Therefore summary judgment was improper.
PRAYER
WHEREFORE, PREMISES CONSIDERED, Appellant, MICHAEL D. LEE,
prays that the Court reverse the trial court judgment, remand the case for trial, and for
such other and further relief to which he may show himself to be entitled.
Respectfully submitted,
/s/ John R. Mercy
John R. Mercy
Texas State Bar No. 13947200
MERCYp CARTER p TIDWELL, L.L.P.
1724 Galleria Oaks Drive
Texarkana, TX 75503
Telephone: (903) 794-9419
Facsimile: (903) 794-1268
Email: jmercy@texarkanalawyers.com
17
James A. Holmes
Texas State Bar No. 00784290
THE LAW OFFICE OF JAMES HOLMES, PC
212 South Marshall
Henderson, TX 75654
Telephone: (903) 657-2800
Facsimile: (903) 657-2855
Email: jh@JamesHolmesLaw.com
ATTORNEYS FOR APPELLANT
CERTIFICATE OF SERVICE
I hereby certify that on November 9, 2015, a true and correct copy of the
foregoing Brief of Appellant was served on all counsel of record for Appellees by the
Electronic Service Provider as follows:
Ms. LaToyia Pierce
WILSON, ELSER, MOSKOWITZ,
EDLEMAN & DICKER LLP
4800 Bank of America Plaza
901 Main Street
Dallas, TX 75202
Email: latoyia.pierce@wilsonelser.com
Mr. Andrew Jubinsky
Email: andy.jubinsky@figdav.com
Mr. Ryan McComber
Email: ryan.mccomber@figdav.com
FIGARI & DAVENPORT, LLP
3400 Bank of America Plaza
901 Main Street
Dallas, TX 75202
/s/ John R. Mercy
John R. Mercy
18
CERTIFICATE OF COMPLIANCE
Pursuant to Tex. R. App. P. 9.4, I hereby certify that the foregoing Brief of
Appellant contains 2,907 words. This is a computer-generated document created in
WordPerfect using 14-point typeface. In making this certificate I am relying on the
word count provided by the software used to prepare the document.
/s/ John R. Mercy
John R. Mercy
19
APPENDIX
A - Order Granting Defendants’ Motion for Summary Judgment
(CR 1074 and SCR 1065)
B - Class Member Definition (CR 319)
Michael D. Lee v. the Rogers Agency, C. Michael Rogers & New York Life Ins. Co.
Combined Opinion