Court of Appeals of Texas, Third District, Austin
THE DISTRICT COURT OF TRAVIS COUNTY, 250TH JUDICIAL DISTRICT
NO. D-1-GN-15-005808, HONORABLE SCOTT H. JENKINS, JUDGE
Chief Justice Rose, Justices Kelly and Smith
a suit for judicial review pursuant to the Administrative
Procedure Act, Tex. Gov't Code §§
2001.001-.902. The Harris County Hospital District filed a
complaint with the Public Utility Commission (PUC) contesting
certain fees Southwestern Bell Telephone Company charged its
telecommunications customers in the 1990s. Southwestern
Bell's successor in interest, AT&T, contends the fee
dispute was resolved by a class-action settlement in 2000.
The PUC ultimately dismissed the complaint, holding the
Hospital District's claims barred by res judicata due to
the class-action settlement. The district court reversed that
order, holding that the Hospital District is not bound by the
settlement because it was not represented in that action in
accordance with Section 281.056(b-1) of the Health and Safety
Code, which requires a county or district attorney to
represent certain hospital districts "in all legal
matters." See Tex. Health & Safety Code
§ 281.056(b-1)(2) (requiring such representation in any
county "with population of 3.4 million or more").
We agree with AT&T and the PUC that the Hospital District
is bound by the disputed settlement decree. We will therefore
reverse the district court's order and render judgment
dismissing the case. See Tex. R. App. P. 43.2
(requiring this court to render the judgment the trial court
should have rendered).
utilities in Texas may charge customers a fee to recover
certain costs resulting from use of public rights of way.
These "municipal fees" are governed by Section
54.206 of the Utilities Code, which allows the utility
"to collect a fee that a municipality imposes . . .
through a pro rata charge to the customers [with]in the
boundaries of the municipality." Tex. Util. Code §
54.206(b). For more than two decades, customers have alleged
that Southwestern Bell imposed excessive municipal fees
throughout the 1990s, resulting in several lawsuits. Four are
commenced in 1998 in Cameron County when two residential
customers sued Southwestern Bell and alleged the utility had
been charging excessive municipal fees since October of 1991.
The parties ultimately negotiated a cy pres
class-action settlement-now known as the Mirales
Settlement-to resolve all related claims in Texas. The
proposed settlement defined the putative class as:
[A]ll persons and entities who currently reside in the State
of Texas who subscribe, or formerly subscribed, to telephone
service provided by [Southwestern Bell] and pay, or paid, to
[Southwestern Bell] a municipal fee imposed pursuant to a
municipal ordinance, other than an ordinance based on a
percentage of gross receipts, and collected pursuant to a
tariff or statute.
definition excluded certain customers not relevant here,
including employees of Southwestern Bell and the district
proposed settlement, once accepted by the district court,
would prohibit any class member from pursuing any claim
arising from Southwestern Bell's collection of these
allegedly excessive fees:
"Released Claims" means any and all claims, rights,
causes of action, suits, matters, issues, controversies, or
other bases for liability, whether known or unknown, that
have been, could have been, or that might be asserted
hereafter in the Lawsuit or in any other court or
administrative or regulatory proceeding . . . which have
arisen, arise now, or hereafter may arise or relate in any
way to the pass-through or collection of municipal fees in
Texas, including all causes of action that are or could be
raised under Plaintiffs' pleadings on file herein or that
consumers or customers could raise in relation to
Southwestern Bell's pass-through of municipal fees.
continues, "Any member of the Settlement Class who has
not properly and timely requested exclusion from the
Settlement Class shall be bound by any and all judgments,
settlements, or releases entered or approved by the Court
whether favorable or unfavorable to the class."
See Tex. R. Civ. P. 42(c)(2)(B)(v) (establishing
putative class member's right to opt out of class).
allowing the parties time to notify putative class members of
the proposed settlement, the district court held two hearings
on the fairness of the proposed certification and settlement.
At the first hearing, certain commercial customers objected
to the putative class as too variant to satisfy the
commonality requirement of certification. See id. R.
42(b)(3) (requiring common questions of law and fact to
"predominate" over any individual questions). This
challenge was led by Southwestern Tariff Analyst (STA), a
telecommunications billing auditor that had attempted to
intervene as named plaintiff but whose petition in
intervention had been stricken on Southwestern Bell's
district court continued the hearing to afford Southwestern
Bell time to address the objections to certification. The
hearing resumed a week later, and the reporter's record
reflects that STA offered to withdraw its objections and
waive any right to appeal the intervention ruling if
Southwestern Bell would preserve STA's right to bring a
separate class action on behalf of governmental and
commercial customers. Southwestern Bell declined to change
the class definition but agreed not to raise res judicata or
related defenses "in any class action lawsuit brought by
STA as plaintiff." The agreement was memorialized under
Rule 11 and dictated into the reporter's record.
district court then certified the class and accepted the
settlement proposal. On May 4, 2000, the court's final
judgment "grant[ed] final approval to the Settlement
Agreement" and deemed it "in all respects, fair,
reasonable, adequate, and in the best interests of the
Settlement Class." The judgment indicates that all
objections were "carefully considered and [were] all
overruled." The district court later issued a judgment
nunc pro tunc to correct certain typographical and clerical
errors in the final judgment.
the Mirales Class settled its claims, STA filed a
class action in 2003, proposing to represent nearly 7, 000
governmental and commercial customers with respect to any
remaining claims arising from the same allegedly excessive
fees. See Southwestern Bell Tel. Co. v. Marketing on
Hold, Inc., 308 S.W.3d 909, 914 (Tex. 2010)
(STA). The Hospital District was identified by the
class representative and separately by Southwestern Bell as
one of these putative class members, but no attorney other
than class counsel appeared on behalf of the Hospital
district court eventually certified the class and the court
of appeals affirmed, but the Supreme Court of Texas reversed,
holding that STA-as the only named plaintiff-had not met its
burden to show it could adequately represent the class.
See Tex. R. Civ. P. 42(a) (requiring, inter alia, a
showing that "the representative parties will fairly and
adequately protect the interests of the class");
STA, 308 S.W.3d at 27 ("Although STA satisfied
the typicality and predominance requirements to be a class
representative . . . it failed to establish that it is an
adequate class representative.").