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Smith v. Key

Court of Appeals of Texas, Second District, Fort Worth

August 3, 2017

LON SMITH & ASSOCIATES, INC. AND A-1 SYSTEMS, INC., D/B/A LON SMITH ROOFING AND CONSTRUCTION APPELLANTS
v.
JOE KEY AND STACCI KEY APPELLEES

          FROM THE 236TH DISTRICT COURT OF TARRANT COUNTY TRIAL COURT NO. 236-267881-13

          PANEL: LIVINGSTON, C.J.; WALKER and MEIER, JJ.

          OPINION

          SUE WALKER JUSTICE

         I. Introduction

         This is an interlocutory appeal from an order certifying a class action.[1]Appellants Lon Smith & Associates, Inc. and A-1 Systems, Inc., d/b/a Lon Smith Roofing and Construction[2] raise five issues claiming that the trial court erred by certifying a class because various class-certification requirements of Texas Rule of Civil Procedure 42 were not met.[3] For the reasons set forth below, we will affirm that portion of the trial court's October 15, 2015 "Order Certifying Class Action with Trial Plan" that certifies for class treatment Joe and Stacci Keys' declaratory-judgment claim and the Keys' Deceptive Trade Practices Act (DTPA) claim based on section 17.50(a)(4) (Violation of Chapter 541 of the Texas Insurance Code); we will reverse the portion of the trial court's October 15, 2015 "Order Certifying Class Action with Trial Plan" that certifies for class treatment the Keys' DTPA claim based on section 17.50(a)(3)[4] (Unconscionability); and we will remand this cause to the trial court: (1) with instructions to decertify the DTPA section 17.50(a)(3) (Unconscionability) claim, and (2) for further class proceedings.

         II. Factual Background, Existing Legal Landscape, and Certification Hearing and Order

         A. The Keys' Lawsuit

         A May 2011 hailstorm damaged the roof of the Keys' residence. The Keys notified their homeowners' insurance carrier of the damage, and Joe signed a contract with A-1 for the installation of a new roof with a total price of $33, 769.50. Stacci did not sign the contract; the Keys allege that Joe signed it on her behalf. The "Acceptance and Agreement" provision of the contract provided that

[t]his Agreement is for FULL SCOPE OF INSURANCE ESTIMATE AND UPGRADES and is subject to insurance company approval. By signing this agreement homeowner authorizes Lon Smith Roofing and Construction ("LSRC") to pursue homeowners['] best interest for all repairs, at a price agreeable to the insurance company and LSRC. The final price agreed to between the insurance company and LSRC shall be the final contract price.

         A-1 installed the new roof. The Keys paid their homeowners' insurance proceeds of $18, 926.69 to A-1, leaving a balance on the $33, 769.50 amount. To collect the amount A-1 claimed that the Keys owed, A-1 filed suit against Joe in a justice court and obtained a default judgment. Joe subsequently challenged the default judgment and obtained a June 23, 2015 judgment setting it aside as void. A-1 appealed the June 23, 2015 judgment to the county court at law. See Tex. R. Civ. P. 506.1.

          Meanwhile, in September 2013, the Keys sued LSRC, asserting that the Acceptance and Agreement provision in the contract with A-1, which did business collectively with Associates, violated Texas Insurance Code section 4102.051's prohibition against a corporation acting or holding itself out as a public insurance adjuster in the absence of a license. See Tex. Ins. Code Ann. § 4102.051(a) (West Supp. 2016). Accordingly, the Keys claimed the agreement was illegal, void, and unenforceable. See id. § 4102.207(a), (b) (West 2009) (setting forth remedies for violation of chapter 4102).

         Based on the alleged illegality of LSRC's agreement under section 4102.051, the Keys pleaded a claim for declaratory relief-to declare the agreement with LSRC illegal, void, and unenforceable and to declare, consequently, that they and other class members are "entitled to a judgment restoring all monies paid to [LSRC] under the illegal contract" pursuant to the statutory remedy provided by section 4102.207(b). See Tex. Ins. Code Ann. §§ 4102.051, .207(b); Tex. Civ. Prac. & Rem. Code Ann. §§ 37.002, .011 (West 2015). The Keys also pleaded causes of action for damages based on DTPA violations, fraud, violations of the Texas Debt Collection Practices Act, and fraudulent use of court records.

         In due course, the Keys obtained class certification of their declaratory-judgment claim and their DTPA claims under sections 17.50(a)(3) (Unconscionability) and 17.50(a)(4) (Violation of Chapter 541 of the Texas Insurance Code).[5]

         B. Chapter 4102 of the Texas Insurance Code

         The Texas Legislature enacted chapter 4102 of the Texas Insurance Code effective September 1, 2005. See Act of May 24, 2005, 79th Leg., R.S., ch. 728, § 11.082(a), 2005 Tex. Gen. Laws 2259, 2259-72 (codified at Tex. Ins. Code Ann. §§ 4102.001-.208). Chapter 4102 is a comprehensive licensing statute regulating public insurance adjusters. See Tex. Ins. Code Ann. §§ 4102.001- .208 (West 2009 & Supp. 2016). According to an amicus brief tendered in this case by the National Association of Public Insurance Adjusters and the Texas Association of Insurance Adjusters, forty-five states plus the District of Columbia have enacted such statutes.[6]

         Chapter 4102 expressly prohibits a "person" from acting as a public insurance adjuster in Texas without a license. See Tex. Ins. Code Ann. § 4102.051(a) (providing that "[a] person may not act as a public insurance adjuster in this state or hold himself or herself out to be a public insurance adjuster in this state unless the person holds a license issued by the commissioner"). The term "person" is defined as including a corporation. Id. § 4102.001(2). And a "public insurance adjuster" is "a person who, for direct, indirect, or any other compensation . . . acts on behalf of an insured in negotiating for or effecting the settlement of a claim or claims" while acting as a public insurance adjuster and "also includes advertising, soliciting business, and holding oneself out to the public as an adjuster of claims." Id. § 4102.001(3)(A)(i), (ii). A licensed public insurance adjuster is expressly prohibited from participating directly or indirectly in the reconstruction, repair, or restoration of damaged property that is the subject of a claim adjusted by the license holder; acting as a public insurance adjuster and a contractor on the same claim is a statutorily-defined conflict of interest. Id. § 4102.158(a)(1).[7] Any contract for services regulated by chapter 4102 that is entered into by an insured with a person in violation of the chapter's licensing requirements "may be voided at the option of the insured." Id. § 4102.207(a). If a contract is so voided, "the insured is not liable for the payment of any past services rendered, or future services to be rendered, by the violating person under that contract or otherwise." Id.

         C. The Reyelts Opinion

         In addition to Texas Insurance Code chapter 4102, the legal landscape forming the basis of the Keys' motion for class certification includes a federal court case, Reyelts v. Cross, 968 F.Supp.2d 835 (N.D. Tex. 2013), aff'd, 566 F.App'x 316 (5th Cir. 2014).[8] The Keys cited and relied upon the Reyelts case in their pleadings and in their motion for class certification.[9]

         In the Reyelts case, the Reyeltses signed a contract with LSRC.[10] Id. at 839. The Reyeltses' contract with LSRC, like the contract signed by Joe, contained the provision quoted above. See id. The Reyeltses alleged, and Magistrate Judge Cureton found, that the inclusion of the Acceptance and Agreement provision in the contract rendered it "illegal, void[, ] and unenforceable" as violative of Texas Insurance Code chapter 4012 and that the Reyeltses were not liable for payment of any past or future services rendered under the agreement. See id. at 843-44; see also Tex. Ins. Code Ann. §§ 4102.206(a), .207(a), (b).[11]

         In Reyelts, Magistrate Judge Cureton also determined that LSRC had "engaged in an unconscionable action or course of action as prohibited by section 17.50(a)(3) of the DTPA." 968 F.Supp.2d at 844. He found that LSRC had used an "agreement that was and is illegal and violative of Chapter 4102 of the Texas Insurance Code [and] constituted an act or practice in violation of Chapter 541 of the Texas Insurance Code and, thus, a violation of section 17.50(a)(4) of the DTPA." Id. Magistrate Judge Cureton found that LSRC committed such wrongful conduct knowingly and intentionally and ultimately signed a judgment awarding the Reyeltses their economic damages, mental anguish damages, a trebling of the economic damages, court costs, and reasonable and necessary attorney's fees. Id. at 845.

          D. Class-Certification Requisites[12]

         All class actions must satisfy the four threshold requirements contained in Texas Rule of Civil Procedure 42(a): (1) numerosity ("the class is so numerous that joinder of all members is impracticable"); (2) commonality ("there are questions of law or fact common to the class"); (3) typicality ("the claims or defenses of the representative parties are typical of the claims or defenses of the class"); and (4) adequacy of representation ("the representative parties will fairly and adequately protect the interests of the class"). Tex.R.Civ.P. 42(a)(1)-(4); see Bernal, 22 S.W.3d at 433. In addition to the subsection (a) prerequisites, class actions also must satisfy at least one of the subdivisions of rule 42(b). See Tex. R. Civ. P. 42(b) (subsection (b) directs that only certain kinds of actions can be class actions); Bernal, 22 S.W.3d at 433. The plaintiffs, here the Keys, bore the burden of establishing each of the requisites for class certification. See, e.g., Bailey v. Kemper Cas. Ins. Co., 83 S.W.3d 840, 847 (Tex. App.-Texarkana 2002, pet. dism'd w.o.j.).

         E. The Class-Certification Hearing

         At the hearing on the Keys' motion for class certification, both the Keys and LSRC presented evidence. Joe Key testified that he had signed the contract with LSRC. Joe testified that Thomas Kirkpatrick, an A-1 salesman and estimator, said LSRC was "handling everything as far as insurance." According to Joe, LSRC never told him that he could or should get a public insurance adjuster involved in his roof-damage claim under his homeowners' policy. Joe understood that LSRC was contracting to discuss his insurance claim with his insurer and was also contracting to repair his roof. But the Keys' insurer did not pay LSRC the price ultimately set forth in the LSRC contract, and LSRC sued Joe in a justice court for the difference. Joe explained that he was suing LSRC to recover the monies paid under the contract and that if the class were certified, he would seek recovery of those same monies for each class member--that is, the monies each class member paid LSRC for a new roof pursuant to an illegal, void contract.

         In support of their motion for class certification, the Keys admitted into evidence the deposition of David Cox, the corporate representative for A-1, and the exhibits attached to Cox's deposition. Cox's deposition and the attached exhibits established that since 2003, A-1 has utilized a standard form contract containing the Acceptance and Agreement provision, which the Keys and thousands of others have signed. Included in the Keys' evidence was A-1's admission, in response to the Keys' requests for admission, that A-1 was not and never had been a licensed public insurance adjuster.

         In their brief in support of their motion for class certification, the Keys explained,

The issue here is simple-given the existence of thousands of standardized form contracts that have been held by multiple courts to be "illegal, void, and unenforceable, " is it more appropriate for the claims arising from the illegal contract to be adjudicated in one big lawsuit or in thousands of smaller lawsuits scattered around the State? The answer is clear-this case should be certified to proceed as a class.

         At the class-certification hearing, LSRC proffered no live testimony but obtained admission of nineteen exhibits.[13] Twelve of LSRC's nineteen exhibits related to, or were documents filed in, the Reyelts case. LSRC's exhibits O and P are the "Memorandum Opinion and Order and Findings of Fact And Conclusions of Law" and the final judgment against LSRC, respectively, that were signed by Magistrate Judge Cureton in the Reyelts case.

         F. The Class-Certification Order

         The trial court signed a twenty-two page "Order Certifying Class Action with Trial Plan." The trial court found that the Keys had met their burden of establishing the class-certification requirements of rule 42(a), 42(b)(3), 42(b)(2), and 42(b)(1)(A).

          The class-certification order appointed the Keys to represent a class defined as follows:

All Texas residents who from June 11, 2003 through the present signed agreements with [LSRC] that included the following provision, or language substantially similar to the following provision: "This Agreement is for FULL SCOPE OF INSURANCE ESTIMATE AND UPGRADES and is subject to insurance company approval. By signing this agreement homeowner authorizes Lon Smith Roofing and Construction ("LSRC") to pursue homeowners['] best interest for all repairs at a price agreeable to the insurance company and LSRC. The final price agreed to between the insurance company and LSRC shall be the final contract price."

         The order certified three claims for class treatment: "(a) Plaintiffs' declaratory judgment claim, (b) Plaintiffs' DTPA claim based on Section 17.50(a)(3) (Unconscionability), and (c) Plaintiffs' DTPA claim based on Section 17.50(a)(4) (Violation of Chapter 541 of the Texas Insurance Code)."

         The class-certification order set forth the trial court's findings of fact and conclusions of law that the Keys had met their burden of establishing all four requirements of rule 42(a) and three subdivisions of rule 42(b)--42(b)(3), 42(b)(2), and 42(b)(1)(A). The order certified the class alternatively under each of these subsections of rule 42(b); provided for notice and opt-out provisions for each of the classes certified alternatively under rule 42(b)(3), 42(b)(2), and 42(b)(1)(A); appointed class counsel; and set forth a trial plan.

         III. Standard of Review

         We review a class-certification order for an abuse of discretion. Bowden v. Phillips Petroleum Co., 247 S.W.3d 690, 696 (Tex. 2008); Compaq Comput. Corp. v. Lapray, 135 S.W.3d 657, 671 (Tex. 2004). A trial court abuses its discretion if it acts arbitrarily, unreasonably, or without reference to any guiding principles. Bowden, 247 S.W.3d at 696. We do not indulge every presumption in the trial court's favor, however, "as compliance with class action requirements must be demonstrated rather than presumed." Id. (citing Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 691 (Tex. 2002)). "Courts must perform a 'rigorous analysis' before ruling on class certification to determine whether all prerequisites have been met." Bernal, 22 S.W.3d at 435. Appellate courts have traditionally construed this directive to require trial courts to, among other things, look "'beyond the pleadings . . . as a court must understand the claims, defenses, relevant facts, and applicable substantive law in order to make a meaningful determination of the certification issues.'" Id. at 435 (quoting Castano v. Am. Tobacco Co., 84 F.3d 734, 744 (5th Cir. 1996)).

         IV. The Trial Court's Understanding of the Substantive Law Concerning the Certified Claims

         LSRC's first issue asserts that "the trial court misunderstood or failed to consider the law underlying the substantive claims at issue." LSRC complains that the trial court failed to properly analyze the substantive law concerning chapter 4102 of the insurance code, concerning the DTPA unconscionability claim, and concerning the DTPA violation-of-chapter-541-of-the-insurance-code claim and that the trial court's misunderstanding of the substantive law "resulted in the wrongful certification of a cause of action that does not exist." LSRC argues in its brief and reply brief that the trial court "improperly refused[] to analyze the dispositive issue of whether any putative class member can state viable claims." In response, the Keys contend that these arguments are prohibited "merits-based attacks" disguised as "misunderstanding of the law" contentions.

         Trial courts do not certify class actions based upon the probability of success on the merits, and in determining the certification issue, trial courts should not rule on the merits of the class members' claims. See Intratex Gas Co. v. Beeson, 22 S.W.3d 398, 404 (Tex. 2000). Nonetheless, to properly analyze certification issues, trial courts must go beyond the pleadings and must understand the claims, defenses, relevant facts, and applicable substantive law in order to make a meaningful determination of the certification issues. Bernal, 22 S.W.3d at 435. Frequently, the rigorous analysis required under rule 42 will entail some overlap with the merits of the plaintiffs' underlying claim, which cannot be helped. See Wal-Mart v. Dukes, 564 U.S. 338, 350, 131 S.Ct. 2541, 2551 (2011). Accordingly, we review the merits of the Keys' claims below as necessary to address LSRC's contentions and to determine whether the trial court conducted a rigorous analysis in determining that the prerequisites of rule 42 were satisfied.[14]

          A. Putative Class Members Can State Viable Claims

         In part of its first issue, LSRC argues that the trial court "improperly refused[] to analyze the dispositive issue of whether any putative class member can state viable claims" by failing to conduct a hearing on LSRC's motion for summary judgment prior to the class-certification hearing.[15] And the evidence presented to the trial court at the class-certification hearing--including the "Memorandum Opinion and Order and Findings of Fact, " the judgment, and other documents from the Reyelts case--show that putative class members can state viable claims. Magistrate Judge Cureton made a conclusion of law in the Reyelts case that the very same contractual provision that forms the basis of the Keys' claims here made LSRC's contract with the Reyeltses "[i]llegal, void[, ] and unenforceable" and awarded DTPA damages to the Reyeltses based on facts substantially identical to those forming the basis of the Keys' claims and the claims certified in the class-certification order. And the order granting partial summary judgment for the plaintiffs in the Spracklen case was also presented to the trial court, reflecting that Judge Cosby had declared a similar provision included in a roofing-repair contract to be "illegal, void[, ] and unenforceable." Indeed, at the hearing on a motion to compel, LSRC's counsel agreed that the form contract signed by Joe Key had in fact been declared illegal but argued that LSRC disagreed and did not think it was illegal. Given the evidence presented to the trial court, some of it by LSRC, concerning the Reyelts and Spracklen cases, we cannot agree with LSRC's contentions in its first issue that no putative class member can state a viable claim.[16] We overrule this portion of LSRC's first issue.

         B. The Declaratory Judgment Claim

         LSRC also asserts under its first issue that the trial court "misunderstood the law related to the Keys' claim for declaratory relief." LSRC argues that "[a]ssuming arguendo that by using the Agreement LSRC acted as or held itself out as a public insurance adjuster, and that LSRC did not have the proper license or certificate, doing so could not render the contract illegal, void, or unenforceable, which is the entire underlying basis of the request for declaratory judgment." LSRC asserts that Texas Insurance Code section 4102.207 makes contracts with unlicensed public insurance adjusters merely voidable, not void, thereby purportedly defeating any claim for a declaratory judgment that the contracts are void.[17]

         Under the Uniform Declaratory Judgments Act, a person interested under a written contract may have determined a question of construction or validity arising under the contract and obtain a declaration of rights. See Tex. Civ. Prac. & Rem. Code Ann. § 37.004 (West 2015). The law is well-settled that a contract to fulfill an obligation that cannot be performed without violating the law contravenes public policy and is void. See Lewis v. Davis, 145 Tex. 468, 471-72, 199 S.W.2d 146, 148-49 (1947); see also Phila. Indem. Ins. Co. v. White, 490 S.W.3d 468, 490-91 (Tex. 2016) (recognizing that when agreement cannot be performed without violating law or public policy, it is per se void). Courts will not enforce an illegal contract, particularly when the contract involves the doing of an act prohibited by statutes that were enacted for the protection of the public health and welfare. See, e.g., Merry Homes, Inc. v. Luu, 312 S.W.3d 938, 949- 50 (Tex. App.--Houston [1st Dist.] 2010, no pet.) (affirming judgment declaring lease void when lease required use of leased premises only for purposes prohibited by ordinance because of leased premises' proximity to school); Swor v. Tapp Furniture Co., 146 S.W.3d 778, 783-84 (Tex. App.-Texarkana 2004, no pet.) (holding oral agreement for finder's fee void because "finder" was not licensed real-estate broker in violation of Real Estate License Act); Peniche v. Aeromexico, 580 S.W.2d 152, 155 (Tex. Civ. App.-Houston [1st Dist.] 1979, no writ) (holding contract for driving services void and illegal because driver did not have chauffeur's license and, consequently, performance of contract would violate law requiring chauffeur's license, which was enacted for purpose of public safety). The rationale behind this rule-that courts will not enforce an illegal contract that involves the doing of an act prohibited by statutes enacted for the protection of the public's health and welfare-is not to protect or punish either party to the contract but to benefit and protect the public. See, e.g., Cruse v. O'Quinn, 273 S.W.3d 766, 776 (Tex. App.-Houston [14th Dist.] 2008, pet. denied); see also Jankowiak v. Allstate Prop. & Cas. Ins. Co., 201 S.W.3d 200, 210 (Tex. App.-Houston [14th Dist.] 2006, no pet.) (explaining that the appropriate test when considering whether a contract violates public policy "is whether the tendency of the agreement is injurious to the public good, not whether its application in a particular case results in actual injury").

          Because parties to a contract are presumed to be knowledgeable of the law, including public-safety laws, courts will generally leave parties to an illegal contract as they find them. See Plumlee v. Paddock, 832 S.W.2d 757, 759 (Tex. App.-Fort Worth 1992, writ denied). That is, courts are no more likely to aid one attempting to enforce such a contract than they are disposed in favor of the party who uses the illegality to avoid liability. Id. But an exception exists to this general common-law rule-that courts will not exercise equitable powers to aid parties to an illegal contract-when the parties are not in pari delicto and it is the least culpable party that is seeking relief. See, e.g., Oakes v. Guarantee Ins. Co., 573 S.W.2d 899, 902 (Tex. Civ. App.-Eastland 1978, writ ref'd n.r.e.) (citing Am. Nat'l Ins. Co. v. Tabor, 111 Tex. 155, 161, 230 S.W. 397, 400 (1921)). The exception is particularly applied when the illegality of the transaction depends on the existence of peculiar facts known to the defendant but unknown to the plaintiff and when the plaintiff had no intention of violating the law. Id. Thus, "where a person sues for services rendered another in an occupation which is illegal, unless the employer is duly licensed to carry it on, which he is not, such person may recover unless he knew that the employer had no license, for while he is bound to know that the employer must have a license to make the business legal, his mistake as to his having such license is a mistake of fact and not of law." Id.

         Texas's regulation of the business of and licensing of public insurance adjusters is based on the policy of protecting the public. See, e.g., Tex. Ins. Code Ann. § 4102.004(1) (authorizing commissioner to adopt reasonable and necessary rules including qualifications of license holders necessary to protect public interest), § 4102.005 (requiring commissioner to adopt a code of ethics for public insurance adjusters), § 4102.057 (requiring, with certain exceptions, each applicant for a license as a public insurance adjuster to take and pass an examination), § 4102.103 (prohibiting licensed public insurance adjuster from utilizing contract for adjusting services not approved by commissioner), §§ 4102.104, .105, .106 (setting forth requirements concerning licensed public adjuster's commissions, proof of financial responsibility, and maintenance of place of business, respectively), § 4102.111 (requiring licensed public adjuster to hold funds received as claims proceeds in a fiduciary capacity).[18] And, in responses to requests for admission, A-1 admitted that it is not and never has been a licensed public insurance adjuster. Therefore, a declaratory-judgment action by the Keys and putative class members (as the least culpable parties who lacked knowledge of the fact that LSRC was not a licensed insurance adjuster) declaring any contracts in which LSRC agreed to engage in acts that constituted acting as or holding itself out as a public insurance adjuster (which is illegal as violative of insurance code section 4102.051(a)) void and unenforceable by LSRC is viable under substantive law.[19]

         LSRC argues that its contracts cannot be declared void per se because section 4102 makes them only voidable at the option of the insured. See Tex. Ins. Code Ann. § 4102.207(a). Contrary to LSRC's position, however, the fact that insurance code section 4102.207 provides that a contract for public insurance adjusting services to be performed by a person lacking a license "may be voided at the option of the insured" does not alter the void-per-se status of the contracts as to LSRC. Instead, as provided by the common law of contracts and as discussed above, such a contract violates public policy and is per se void as to LSRC. Section 4102.207 simply statutorily codifies the not-in-pari-delicto exception to the general rule that courts will not enforce contracts that are void for illegality so that "[a]ny contract for services regulated by [chapter 4102 of the insurance code] may be voided at the option of the insured." See id. That is, the legislature has statutorily made a contract that is void for illegality under the common law enforceable or voidable at the option of the least culpable party- the insured-when a person contracts with the insured to perform services as a public insurance adjuster but does not have a public insurance adjuster's license. See Int'l Risk Control, LLC v. Seascape Owners Ass'n, Inc., 395 S.W.3d 821, 824-25 (Tex. App.-Houston [14th Dist.] 2013, pet. denied) (explaining that when licensed public insurance adjuster acts in violation of chapter 4102, adjuster's contract is not void-administrative penalties apply; but when unlicensed person acts as public insurance adjuster in violation of chapter 4102, contract is void at option of insured under section 4102.207).[20] We overrule the portions of LSRC's first issue claiming that the trial court misunderstood the law related to the Keys' claim for declaratory relief because even if LSRC acted as or held itself out as a public insurance adjuster and did not have the proper license, "doing so could not render the contract illegal, void, or unenforceable, which is the entire underlying basis of the request for declaratory judgment."

         LSRC also claims under its first issue that the trial court misunderstood the law regarding public insurance adjusting because the Keys did not actually plead that LSRC acted as a public insurance adjuster but merely that LSRC held itself out as a public insurance adjuster and promised to act-without actually acting- as a public insurance adjuster. This contention by LSRC is a distinction without a difference; section 4102.207 gives an insured the option to void a contract entered into with a person "who is in violation of Section 4102.051." See Tex. Ins. Code Ann. § 4102.207(a). And section 4201.051 prohibits a person both from acting as a public insurance adjuster and from "hold[ing] himself or herself out to be a public insurance adjuster" if the person does not have a license. See id. §§ 4102.051(a), .207(a). LSRC did not have a public insurance adjuster license, so it was prohibited from both acting as and holding itself out as a public insurance adjuster; either type of conduct violates section 4102.051. We overrule this portion of LSRC's first issue.

         Also under its first issue, LSRC argues that, in fact, it never acted as or held itself out as a public insurance adjuster. LSRC points to an Insurance Commissioner Bulletin authorizing roofing companies to "discuss the amount of damage to the consumer's home, the appropriate replacement, and reasonable cost of replacement with the insurance company."[21] The same Bulletin, however, provides that a roofing company may not "advocate on behalf of a consumer" or "discuss insurance policy coverages and exclusions." See Tex. Dep't Ins. Comm'r Bulletin B-0017-12. As set forth above, the LSRC Acceptance and Agreement provision provided:

This Agreement is for FULL SCOPE OF INSURANCE ESTIMATE AND UPGRADES and is subject to insurance company approval. By signing this agreement homeowner authorizes Lon Smith Roofing and Construction ("LSRC") to pursue homeowner[s'] best interest for all repairs, at a price agreeable to the insurance company and LSRC. The final price agreed to between the insurance company and LSRC shall be the final contract price.

         To the extent LSRC asserts that it never acted or held itself out as a public insurance adjuster because LSRC merely agreed to "discuss the amount of damage to the consumer's home, the appropriate replacement, and reasonable cost of replacement with the insurance company" but did not agree to "advocate on behalf of a consumer" or "discuss insurance policy coverages and exclusions[, ]" we cannot agree. By the express terms of the contractual provision set forth above, LSRC agreed to "pursue homeowners['] best interest" and to reach an agreement with the insurance company for the final roofing contract price-"[t]he final price agreed to between the insurance company and LSRC shall be the final contract price." By contracting to "pursue homeowners['] best interest" and to reach a settlement with the Keys' insurance company, LSRC explicitly agreed to "advocate on behalf of a consumer [the Keys]"-which is conduct prohibited by the same Insurance Commission Bulletin that LSRC claims authorized its conduct. See generally Tex. Ins. Code Ann. § 4102.001(3) (defining "public insurance adjuster" as including a "person" who acts on behalf of an insured in negotiating settlement of a claim). We overrule this portion of LSRC's first issue.

         LSRC also argues that the trial court misunderstood the law of collateral estoppel and res judicata concerning Magistrate Judge Cureton's holdings in Reyelts.[22] The trial court's class-certification order made no findings regarding collateral estoppel. The Keys argue on appeal that they do not rely on collateral estoppel to establish their class claims; the Keys assert that "[t]he class-wide claims are rock solid and stand on their own merit." Accordingly, we review the propriety of the class-certification order without applying collateral estoppel or any benefits from application of that doctrine to the alleged class claims. We overrule this part of LSRC's first issue; neither the Keys, the trial court, nor the class-certification order purport to apply the doctrine of collateral estoppel to support class certification.

         C. The DTPA Section 17.50(a)(4) (Violation of Chapter 541 of the Texas Insurance Code) Claim

         Also within its first issue, LSRC complains that the trial court "did not vigorously analyze the DTPA section 17.50(a)(4) claim." LSRC asserts that a violation of chapter 4102 does not constitute a violation of chapter 541 and therefore is not actionable under DTPA section 17.50(a)(4).

         The Keys pleaded the following in their petition for class certification:

Of critical importance to Plaintiffs, [LSRC]'s form contracts, including the "Agreement" executed by Plaintiffs, expressly provided that [LSRC] would act on Plaintiffs' behalf in negotiating for and effecting the settlement of Plaintiffs' claim with their insurance carrier and that [LSRC] would do so with Plaintiffs' "best interest" in view.
. . . .
What Plaintiffs did not know and what [LSRC] never told them was that at the time [LSRC] had Plaintiffs sign the "Agreement, " [LSRC] could not legally provide the insurance claims negotiation services that it was promising because [LSRC] lacked the requisite license to provide such services. As Lon Smith was well aware, the Texas Insurance Code has provided since 2003 that "a person may not act as a public insurance adjuster in this state or hold himself or herself out to be a public insurance adjuster in this state unless the person holds a license of certificate ...

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