### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-03-00374- CV

Ja n Lubin , G ilbe r to Vi lla nue va , M ic hae l P ala dina o, G e r ald Hoo ks a nd

Lesly K. Hooks, Appellan ts

v. F ar m e r s G r oup, Inc .; F ar m e r s U nde r wri te r s A sso c iat ion ; F ir e Und e r wri te r s A sso c iat ion ; F arm ers Insurance Exchange; F ire Insurance Exchange; Texas F arm ers Insurance Com pany; Mid-Century Insu rance C om pany of Texas; Mid-Ce ntury Insu rance Co m pany ; T r uc k Ins ur anc e Exc hang e ; T r uc k Un de r wri te r s A sso c iat ion ; F arm ers Texas C ounty Mutual I nsu rance C om pany; Th e State of Texas; Texas De partm ent of In surance; and Texas Com m ission er of Insu rance, A ppellees

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 261ST JUDICI AL DISTRICT NO. GV202501 , HO NORAB LE SCOTT H. JENKI NS, JUDGE PRESI DING

O P I N I O N The issue in this interlocutory appea l is wh et her a

rticle 21.21, sec tion 17 of the ins ur anc e c od e a llo ws the Attor ne y Ge ne ra l to ma int a in a

c la ss a c tio n w ith ou t satis fy ingthe c la ss action prerequisites set out in article 21.21, section 18. See Tex. Ins. Code Ann. ar t. 21.21, §§ 17, 18 (We st Su

pp . 2 00 4- 05 ). Se c tio n 1 7 o f ar tic le 21 .2 1 au tho ri zes the Attor ne y Ge ne ra l, at th e re qu e st of the Te x as De partment of I nsuranc e (the “De partment” ), to institut e a c lass-ac tion suit to rec overTh e re are e le ve n a pp e lle e s, a ll r e la te d o r a sso c ia te d in sura nc e pr ov ide rs . We wi ll r e fe r t o 1 appellee s collectively

as “F arme rs.” 2 from an insurer damag es for injuries done to the insurance -buying public. Id
. § 17(a)
. Section 18
se ts o ut pr ocedu

ra l r e qu ir e me nts fo r c la ss a c tio ns , in c lud ingthe a pp oin tme nt o f a

c la ss repr esentative. Id . § 18. I n this case, the Attorney Gene ral initiated a c lass action under section 17, but did not comply

with section 18’s proc edura l require ments; in particular, no c lass repr esentative
was a ppointed. T h e d i s t rict cour t found that strict compliance with section 18 was unne cessa ry be c a us e the Attor

ne y Ge ne ra l w a s q

ua lif ie d thro ug h h is c a

pa city a s parens patriae to a de qu a te ly
re pr e se nt t

he in te re sts of

the po te nti a l c la ss m e mbe rs wi tho ut t he a pp oin tme nt o f a

c la ss
re pr e se ntativ e . Ap pe lla

nts , ind ivi du a l po lic y

ho lde rs wh o int e rv e ne d and ob je c te d to the cla ss settlement ag ree ment, contend that the trial cour t erre d in allowing the Attorney Gene ral to pursue
a c la ss action with o u t s a ti s f y in g th e r e qu ir e me n ts o r d in ar il y a p p li e d to c la s s a c ti o nla

w s u it s . We ag ree and hold that the Attorne y Gene ral must comply

with the proce dural require ments of sec tion 18 to maintain a class- action suit under se ction 17. Acc ording ly , we reve rse the district court’s or der
c e rt if y ingthe c la ss a

nd re mand the c a us e to t he dis tr ic t c ourt

fo r f ur the r p ro c e e din g s.
P ROCEDURAL AND F ACTUAL BACK GR OUND I n late 2001, F arme rs stopped offe ring HO-B (“a ll-risk”) homeowner s policies and 1 b ega no ff er i n g HO -A (“ s t at ed -p er i l ”) h o m eo wn er s p o l i ci es t h at l i m i t edco v er age fo r w at er d am age and el i m i nated mold cove rag e. The Depa rtment investigated and discove red that even with the reduc ed cove rag e, F arme rs’ pre miums had in fact incr ease d. The De partment deter mined that the rate incre ase w as due to the method Fa rmers use d to calculate homeowne r rates. Althoug h Fa rmers“Tying” is the practice of conditioning the sale of one poli cy on the purchase of another, 2 for e x ample, re quiring a purcha ser to buy an auto policy

as a c ondition of obtaining a homeowner s policy
. Orig inally , the suit was broug ht not as a cla ss action but “in the name of the State of Te x as

3 an d o nb eh al f o f t h e T ex as C o m m i s s i o n er o f I n s u ra n ce ” aga i n s t Fa rm er s fo r “d ec ep t i v e, m i s l ea d i n g, and discriminatory

homeowner s-insuranc e pra ctices” in violation o f t he insuranc e code and the Dec eptive Tra de Prac tices Ac t. See Tex. Bus. & Com. Code Ann. §§ 17.41-.63 (West 2002 & Supp. 2004-05) ( the “DT PA”). Section 83.051 of the insura nce code authorizes the Commi ssioner of I nsuranc e to issue 4 an e me rg e nc y ceas e and

de sis t or de r i f h e be lie ve s a n in sure r i s c omm itt inga n unf a ir a c t th a t is fra udulent, endang ers public safe ty , or will cause imminent public injury incapa ble of be ing r ectifie d and likely to have e ffe ct. Tex. I ns. Code Ann. § 83.051 (West Supp. 2004-05). 3 had esta blished discounts ba sed on a policy holder’s g ood cre dit, ge og raphic location, and a g e of the ho me , th os e dis c ounts we re no t a pp lie d un if

or mly , re su lti ng in ov e r- and un de rc ha rg e s, un fa ir

rate s, and g eog raphic discrimination.

I n l a t e 2 0 01 , th e Of

fi c e of the Attor ne y Ge ne ra l op e ne d a

n inve sti g a tio n in to F arm e rs ’ fa ilure to d isc los e the us e of c re dit sc or ingin d e te rm ini ngrate s o r t he pa rt ic ula rs of its mana g e me ntfe e arr ang e me nt wit

h sub sid iari e s. I n J un e 20 02 , th e Attor ne y Ge ne ra l op e ne d a

se pa rate anti tr us t investiga tion into whet h er

Fa rm er s wa s i mp ro p er l y

t y i n g au t o an d

h o m eo wn er s p o l i ci es and whe ther 2 it eng ag ed in an unlaw ful boy cott when it discontinued off eringall-risk insuranc e. The De partment re fer

red its investig ation to the Attorney Gene ral, and on Aug ust 5, 20 02 , th e Attor

ney Ge ne ra l su e d F arm e rs , a lle g ingtha t F arm e rs fa ile d to a de qu a te ly dis c los e its
ratin g pr a c tic e s and

the us e of

c re dit sc or ingand

that so me of

its ratin g pr a c tices were unf a ir ly discriminatory
. On Aug ust 13, 2002, th e C o m m i ssioner of Insuranc e beg an an a dminist rative 3 pr oc e e din g a g a ins t F arm e rs and iss ue d a n e me rg ency

c e a se and

de sis t or de r, or de ri ngF arm e rs to chang e its ra

ting prac tices within thre e months. On Aug ust 30, 2002, Far mers filed suit in district 44

court, a ppealingthe ce ase a

nd desist order a

nd seekinga dec laration that the Comm issioner of I ns ur anc e la c ke d r e g ulator y a uth or ity ov e r F arm e rs . On Novembe r 30, 2002, the State, the A ttorney Gene ral, the D epar tment, and the Com mis sio ne r o f I

ns ur anc e e nte re d into a Me mor and um of Un de rs tand ing(“ MO U” ) w ithF arm e rs , settling the administrative proce eding and the Attorney Gene ral’s inve stigations and suit and setting forth the terms of a

“g lobal settlement.” Unde r the settlement, the A ttorney Gene ral wa s to amend his pleading s to transform the suit into a settlement cla ss action including all claims that had be en
or c ou ld b e ma de by

ind ivi du a l po lic y

ho lde rs in T e xas. Th e MO U s ta te d th a t th e a me nd e d s uit : shall include (a

nd the Parties will stipulate to) the definiti on of a settlement class or c la ss w ithse ttl e me nt s ub -c la sse s und e r R ule 42 of the Te xas R

ule s o f C ivi l Procedur e and the parens patriae doctrine, and based upon the [Att orney Gene ral]’s authority under a rticle 21.21 § 17 of the Texas I nsuranc e Code . . . .
Under the MOU, F arme rs ag ree d t o re d uce home owner s’ base rate s by 6.8% immediatel y , ref

rain fr om increa sing those ba se rates until August 31, 2003, and a dopt
n o n d i s c r i m i n a t o r

y d i s c o u n t s b a s e d

o na h o m e ’ s a g e an d

l o c a t i o nan d

t h e i n s u r e d s ’ c r e d i th i s t o r y. Th e MO U a l s o c r e a t e d s e v e r a l s e t t l e m e n t f u n d s . F ar

m e r s a g r e e d t o o f

f e r r e f u n d s t o p a st policy holders who did not re new t h ei r h o meowner s’ policies whe n Fa rmers r eplac ed the HO -B policies with HO-A policie s. One f und was to be use d to compensate policy holders who we re wrong ly denied a ny discounts, and another

was to re imburse policy holders for

any overc harg es associate d with errone ous cre dit information. T he MOU also called f or the pa y ment of $2 million in attorney s’ fe es and c osts to the State, included a provision allowing either party to terminate theThe Rate Class wa s to encompass a ll Far mers’ Te x as homeowne rs-insura nce policy holders 5 whose policies be g an or w ere rene wed between Dece mber 28, 2001 and De cembe r 27, 2002, or who rec eived notice afte r Nove mber 14, 2001 that their H O-B policies wo u ld not be rene wed. The Di sc ount C la ss w a s to c on sis t of a ll Te xas ho me ow ne rs -i ns ur anc e po lic y ho lde rs wh o w e re e lig ibl e t o re ce i v e c er t ai nd i s co u n t s fr o m No v em b er 1 6 , 2 0 0 0 t h ro u gh De ce m b er 1 0 , 2 0 02
. T h e C re d i tUs age Cla ss w a s to inc lud e a ll Te xas ho me ow ne rs or a uto -i ns ur anc e po lic y

ho lde rs wh o re c e ive d o r s ho uld have r ece ived a c redit usag e notice f rom Octobe r 1, 1999 throug h Fe bruar y 28, 2003. 5 settlement ag ree ment if more than 2% of the elig ible policy holders opted out of the settlement, a nd require d Fa

rmers to discontinue its prac tice of ty ing one kind of policy

with another. On De c e mbe r 1 8, as requ ire d b y the MO U, the Attor

ne y Ge ne ra l f

ile d h is f ir st amende d pe ti ti o n “ in th e n a me o f th e St a te o f T e xa s . . . an d o n b e h a lf o f th e Co mm issioner of I nsuranc e . . . , the De partment of I nsuranc e . . . , and c ert ai n cl as s es o f Tex as homeowne rs and automobile insureds.” The amended petit ion stated, “At the request of t he C ommissi oner and in the public interest, the St ate, by and through the Offic e of the Att orney Gene ral, bring s these cla ims as a cla ss action pursuant to Te x . I ns. Code art. 21.21, § 17 a n d T ex . R
. C i v . P . 42 on behalf of the Settleme n t C l as s es,” and define d the following three settlement classe s: the “Rate Class,” the

“ Di sc ount C la ss, ” and

the “ Cr e dit

Us a g e No tic e Cla ss. ” Th e pe tit ion a lso a lle g e d: 5 The prere quisites to maintaining a class action under the Tex as I nsuranc e Code have been met. The classes are so numerous that joinder of all member s is impracticable , there ar e q u es t i o n s of law or fac t common to the classes, the c laims that Pl aintiffs have br oug ht a

re ty pical of the claims of cla ss members, and the State will fairly and adequately

protec t the interests of the c lasses. . .
. Fur thermore , the questi ons of law or fac t c omm on

to e a c h c la ss p re do min a te ov e r a ny qu e sti on s a ff

e c tin g on ly individual members, and a cla ss action is superior to other available methods for the f a i r an d e f f i c i e n ta d j u d i c a t i o no f

t h e c o n t r o v e r s y.6 On Fe bruar

y 18, 2003, the Attorney Gene ral filed a second a mended pe tition m aking the same substantive alleg ations. The Attorney Gene ral c hang ed the manne r in which he purported to re pr e se nt t

he c la ss p art ie s f

ro m st a tin g tha

t he wa s b ri ng ingthe su it “ on behalf of
. . . c e rt a in
c la sse s o f T e xas h ome ow ne rs and a uto mob ile ins ur e ds ” to a sse rt ing that he wa s br ing ing the su it “ in theint e re st o f F arm e rs ’ T e xas h ome ow ne rs -i ns ur anc e po lic y ho lde rs and

the Autom ob ile I ns ur e rs ’ automobile-insuranc e policy holders.” ( Emphasis added.) The de scription of t he Attorne y

Gene ral’s
ro le c h an g e d a s w e ll , to s tate , “ A t th e r e qu e s t o f th e Co mm is s io n e r an d in th e p u b li c in tere st, the State, by and throug h the Off

ice of the Attorney

Gene ral, b ri n gs t h ese c laims as a cla ss action purs ua nt t o T e x. I ns . Co de Ann. art . 2 1. 21 , § 17 and a s parens patriae un de r Te x. R. C iv. P. 4 2 to
se e k res tituti on

fo r i ns ur e ds of

De fe nd ants .” Th e pe tit ion a g a in a lle g e d th a t th e pr e re qu isi te s to main ta in in g a c la s s a c ti o n u n d e r th e in s u r an c e c o d e w e r e me t, an d a d d e d an a s s e rti o nthat the pr e re qu isi te s to ma int a ini nga c la ss a c tio n a s parens patriae wer e also satisfied. The district cour

t conducted a

leng thy hear ing on the class ce rtification issue and hear d testimony

from seve ral witnesse s. One of the main issues was whether sections 17 and 18 of
art ic le 21 .2 1 o f t

he ins ur anc e c od e a

uth or ize d th e Attor

ne y Ge ne ra l to br inga

c la ss a c tio n s uit wi tho ut s a tis fy

ingtr a dit ion a l c la ss- a c tio n p re re qu isi te s, in p art ic ula r, the a pp oin tmen t of

a c la ss repr esentative who would ade quately repr esent the in tere sts of the class a nd whose c laims were ty pical of the class. S

ee T ex . I ns. Code Ann. ar t. 21.21, §§ 17, 18(a)( 3), (a )(4) . The Attorne y Gene ral a rg ued that he w as not requir ed to desig nate a class re prese n t ati ve bec ause se ction 18(a) applied by

its terms only

to “private class ac tions” and bec ause the Attorney Gene ral was, a s a matter of law, un a

uth or ize d to e nte r i nto an atto rn e y -c lie nt r e la tio ns hip wi th an in div idu a l c la ssUn de r fe de ra l law, an a tto rn e y g e ne ra l may su e a s parens patriae on behalf of the state’ s 6 citizens for monetary relief for injury done to citizens by

antitrust violations. 15 U.S .C.A. § 15c(a ) (West 1997)
. This le g islation wa s desig ned to e nhance the eff ectivene ss of antit ru s t enforceme nt on behalf of sm all consumers by authorizing states’ attorney s g ener al t o bring suits in their ca pacities a s parens pa t riae on

be ha lf of the ir c iti zen s w ith ou t c omp lia nc e wi th F e de ra l Ru le of Civ il Procedur e 23 prer equisites for maintaining a fede ral class ac tion. Illinois v. Abbott & Assocs., Inc

. , 460 U.S. 557, 573 n.29 (1983). Texas Rule of Civil Procedur e 42 (“Rule 42”) was patterne d afte r Fe dera l Rule of Civil Procedur e 23 (“Rule 23” ). Sta ry v . D e Bo rd , 967 S.W .2d 352, 353 (Tex. 1998). Rule 42 and sec tion 18 of article 21.21 a re ne arl y i d en t i cal, and those rules, a long w ith Rul e 23, impose the same r equire ments for es t ab l i shing the propriety of a c lass-ac tion suit
. Compare Fe d. R. Civ. P . 23 with Tex. R. C iv. P. 42 and Tex. I ns. Code Ann. art. 21.21, § 18 (West Supp. 2004-05). 7 repr esentative. One of Fa rmers’ s witnesses, Professor Samuel I ssacha

roff , ag ree d and opined that
a suit broug ht by the Attorney Gene ral under section 17 was c ompara ble to a parens patriae action broug ht under fe dera l law. 6

On J une 27, 2002, the court signed an “Or der of Preliminary

Approva l,” finding that the Attorney

Gene ral c ould bring the class action. The c ourt found that the Attorne y Gene ral c ould, “fulfill the role of the Settlemen t C l as s es ’ Counsel” by virtue of “ the parens patriae a uth or ity g ra nte d in se c tio n 1 7 o f a

rt ic le 21 .2 1 o f t

he I ns ur anc e Cod e and Rul e 42 of the Te xas R ule s o f C ivi l Procedur e.” T he cour

t further found that, if the r equire ment s of Rule 42 and sec tion 18 had to be satisfied:

eac h of those re quirements has be en met, spec ificall y : (a) eac h of the Settlement Class es is so numerous that joinder of a ll members is impractica ble; (b) ther e ar e questions of law or f

act c ommon to the Settl ement Classes which predominate ove r any individual que stions; (c ) the claims or defe nses broug ht by the State on behalf of Fa rmers’ policy

holders are ty

pical of the claims or defense s of the Settlement Classes and the State is authorized to bring claim s o n behalf of the Settlement Classes; (d) in neg otiating a

nd enter ing into the Settlement Agr ee ment, the State has fa irly and adequately

repr esente d and prote cted the inter ests of the Settlement Classe s; (e) the questions of law o r fa ct common to the Settlement Classes predominate ove r any qu e sti on s a ff

e c tin g on ly

ind ivi du a l me mbe rs ; a

nd (f ) c e rt if y ing thi s A c tio n a s a

c la ssTh e Ho ok se s, wh o a re a lso c la ss m e mbe rs in a brea c h o f c on tr a c t su it b ro ug ht a g a ins t 7 Fa rmers in August 2002 by

Sandra G eter

in Jeffe rson County , further asser t in this appea l that the Attor ne y Ge ne ra l w a s not au tho ri zed to re le a se the c la ims of the Ge te r cl a ss de a lin g wi th F arm e rs ’ contra ctual oblig ation to rene w HO- B policie s. On Octobe r 21, 2004, the Be au m o n t C ourt of Appea ls rever sed the trial c ourt’s order certifying the Geter class and r emande d the ca use to allow the trial cour

t to consider notice a

nd opt-out issues and to “rig orously analy ze [ class] cohesivene ss,” relying on a

rec ent supreme court decision reg arding class cer tifications under rule 42(b)( s) of the rules of c ivil procedure
. Farmers Group, Inc . v. Ge ter , Nos. 09-03-404- CV, 09-03-396-CV, 2004 Tex. App. L EXI S 9364, at *13-17 (B ea u m o n t Oct. 21, 2004, no pet.) ( memorandum op.) ( citing Compaq Computer Corp. v. LaPray , 135 S.W .3d 657, 667-70 (Te x . 2004)). 8 action is superior to othe r available methods for the fair and eff icient adjudication of t h e c o n t r o v e r s y. Appellants broug ht this i nterloc utory appea l. See Tex. I ns. Code Ann. ar t. 21.21, § 18(d) ( authorizing interloc utory appea ls of cer

tification order s). Appellants ar g ue that the district court a bused its discretion in cer tify ing the settlement class action beca use (1) the Attorney

Gene ral is not ex empt from the r equire ments of section 18 and rule 42; ( 2) there is no class repr esentative; (3 ) se ttl e me nt cl a sse s ar e su bje c t to he ig hte ne d s c rutiny ; ( 4) the Attor ne y Ge ne ra l la c ks a

uth or ity to
asser t the class’s stronge st claims; (5) there is a conf lict of interest be tween the Attorney Gene ral a nd the De pa rtme nt; (6 ) t

he re is i ntr a -c la ss c on fl ic t; a nd (7 ) t he Attor ne y Ge ne ra l f a ile d to e va luate so me of the re le a se d c la ims
. B e c a us e we c on c lud e tha

t th e dis tr ic t c ourt com mi tt ed an e rr or of law i n 7
cer tify ing the settlement class without a c lass repr esentative, we limit our revie w to that issue alone.
STA ND AR

D O F RE VI EW We reviewa trial c ourt’s pre liminary order to cer tify a cla ss for an a

buse o f discre tion. Southwestern Ref. Co. v. Bernal , 2 2 S. W.3 d 4 25 , 4 33 (T e x. 20 00 ); see G eneral Motors Corp. v. Bloyed, 91 6 S. W.2 d 9 49 , 955 (T e x. 19 96 ). A tri a l c ourt a bu se s it s d isc re tio n w he n r uli ngon c la ss9

cer tification if it does not proper ly apply the law to the undisputed fa cts. Sta te In du s. , I nc . v . F ain , 38 S.W .3d 167, 169 (Tex. App.—Waco 2000, pet. denie d).

Be cause the trial cour

t’s ruling was ba sed on its construction of sec tions 17 and 18 of the insura

nce c ode, we apply

rules of statutory

construction in dec iding to what ex tent the Attorney Gene ral must comply with se ction 18(a) of article 21.21 of the insura nce c ode in bring ing a cla ss-ac tion suit under se ction 17. Statutory construction is a question of law we revie w de novo
. J oh ns on v . Ci ty

of F or t W or th , 774 S.W .2d 653, 656 (Tex. 1989). I n cons t ru ing a statute, the pr ima ry ob je c tiv e is t o d e te rm ine and g ive e ff e c t to t he le g isl a tur e ’s int e nt, be g inn ingwi th t he pla in and co m m o n meaningof the statute’ s words. McI ntyre v . Ramirez , 1 0 9 S. W. 3 d 7 4 1 , 7 4 5 ( T e x. 2003). We are bound to construe th e s tatute as wr itten, and if possible, asce rtain the leg islature’s intent from the languag e used in the statute. Texas W orkers’ Comp. I

ns. Fund v. Del Indus., Inc. , 35 S.W .3d 591, 593 (Tex. 2000). I n asce rtaining leg islative intent, w e may consider the evil soug ht to be reme died, the leg islative history , and the conseque nces of a par ticular c onstruction. Se e Lib e rty Mut. Ins. Co. v. Garrison Contractors, Inc. , 966 S
. W
. 2d 482, 484 (Tex. 1998). Additionally , we must consider the statute a s a whole r ather than as isolated pr ovisions and should not give one provision a mea

ning inc onsistent with other provisions, although it might be susceptible to such a construction standing alone. Ba rr v . B e rn ha rd , 562 S.W .2d 844, 849 (Tex. 1978).
DI SCU SSIO N The issue is whethe r sec tions 17 and 18 of ar t i cl e 21.21 authoriz e the Attorne y Gene ral to bringa parens patriae action or, a lternatively , whe t her he may bring a cla ss action without comply ing w ith the class ac tion requireme nts of section 18, subsec tions (a)(3) and (4)
.The B oard is empowe red to “ investigate into the aff airs of e very

person en gag ed in the 8 business of insuranc e in this state” to deter mine whether

“such pe rson has been or is e ng ag ed in any un fa ir me tho d of co mpe tit ion or in any un fa ir or de c e pti ve a c t or

pr a c tic e .” Te x. I ns . Co de Ann. a rt
. 21.21, § 5 (West Supp. 2004-05). Section 14, entitled “Administrative Class A ction,” authorizes the Depa rtment to or der a

n 9 insurer to re fund pre miums t o policy holders injured by

the insurer ’s unlawf

ul acts. Tex. I ns. Code Ann. ar t. 21.21, § 14( a) (West Supp. 2004-05). I f the insurer f ails to comply

with the Depa

rtment’s ref und order , the Depa

rtment may ask the Attorney Gene ral to sue the insure r to enfor ce the order
. Id . § 14(b). 10

We b e g in o ur

ana ly sis wi th a

te xtua l r e vie w o f s e c tio ns 17 and 18 . Sec tio n 1 7 is
e nti tle d “ Cla ss Ac tio ns .” Te x. I ns . Co de Ann. art . 2 1. 21 , § 17 . Se c tio n 1 7( a ) a uth or ize s a

c la ss action for damag es if a member of the i nsuranc e-buy ing public is harme d by

an unlawf

ul dece ptive trade prac tice. Id . The suit may be brought by

“the individual damag ed . . . on beha lf of himself and others similarly

situated” or by

the Attorney

Gene ral at the reque st of the Boa rd of I nsuranc e. Id
. 8 I n either situation, the plaintiff may seek damag es, costs and attorney s’ fees, injunctive re lief, and any other re lief the c ourt dee ms proper. Id . § 17(a) , (b). Subsection (c) authorizes a cour t to awar d attorney ’s fe es to a de fenda nt insurer whe re a

n “individual plaintiff” ha s sued in bad fa ith or for the purpose of hara ssment. Id . § 17(c) . Subsection (e) prohibits a class-a ction suit by an individual or the Attorney

Gene ral if the A ttorney

Gene ral ha d alre ady

initiated an “a dminist rative c lass action
un de r S e c tio n 1 4 o f t

his Ar tic le ” a g a ins t the same ins ur e r fo r t he same a c ts o r p ra c tic e s. Id . § 17(e)
. 9 Section 18 is entitled “Class Action: Proc edure .” Id . § 18. Parag raph ( a) pr ovides that a court may allow one or more c lass members to ac t as “re prese ntative par ties” and to sue or

be11

sued o n b e h a lf o f th e c la s s if th e n u mb e r o f p o te n ti a l c la s s me mb e r s is s o la r g e th a t it would be imp ra c tic a

ble to joi n e a c h ind ivi du a lly , the c la ss m e mbe rs sh are c omm on qu e sti on s o f l aw o r f

a c t, the re prese ntative’s cla ims are ty pical of individual cla ss members’ claims, and the repre sentative would fairly

and ade quately

protec t the interests of the individ u al cl as s m ember s. Id . § 18(a) (re fer red to a s “numeros i t y , ” “c ommonality ,” “ty picality ,” and “ adequa cy of re prese ntation” require ments). Un d er section 18(b), “ an ac tion may be maintained a s a cla ss action if the pr e re qu isi te s o f S ub se c tio n ( a )” are me t and on e of the fo llo wi ngis tru e : ( 1) pr os e c uti on of se pa rate actions by individual c lass members would cre ate a risk of inconsistent a djudications or individual
a dju dic ati ons e sse nti a lly

dis po sin g of

the no n- pa

rt y c la ss m e mbe rs ’s int e re sts or su bs tanti a lly impairing their ability

to protect their inter ests; (2) the opposing party has ac ted or re fused to act on g rounds g ener ally applicable to the class, there by making appropr iate injunctive or de clar atory relief with respec t to the class as a whole; or (3 ) co m mon questions of law or f act pr edominate ove r individual issues, making a class action superior to othe r methods for a fair a nd eff icient adjudication of the c ontroversy
. Id . § 18 (b ). Th e re ma ind e r o f s e c tio n 1 8 c an b e su mma ri zed a s f oll ow s:
su bs e c tio n ( c ) d ir e c ts the c ourt s to c on sid e r case s inte rp re tin g fe de ra l Ru le 23 fo r guid anc e in construing section 18; subse ction (d) require s an expedited cer tification proce eding and author izes
an interlocutory appea l f

rom a cer tification order ; notice is discusse d in subse ctions (e) , (f) , and (i); subsection (g ) re quires cour t approva l of an a g ree ment dismiss ing, se ttling, or co m p ro m ising the
c la ss a c tio n; s ub se c tio n ( h) a llo ws the c re a tio n o f s ub c la sse s; su bs e c tio n (j ) a

uth or ize s th e c ourt

to manag e the pr ocee dings; a nd s u b s ec t i o n (k ) provides f or the tolling of

limit ations. Id . § 18 (c )- (j ) (West Supp. 2004-05).“ Qu a si- so ve re ig n” int e re sts inc lud e tho se tou c hin g on the “ he a lthand

we ll- be ing

—b oth 10 phy sical and e conomic—of its re sidents in g ener al.” Alfred L. Snapp & Son, Inc. v . Puerto Rico , 458 U.S. 592, 607 (1982). 12 Parens Patriae

Ap pe lle e s argue that se c tio n 17 of art ic le 21 .2 1 of the ins ur anc e c od e g ra nts parens patriae authority

for the A ttorney

Gene ral to bring this ty

pe of c lass action, pointing to the e volution of the parens patriae do c tr ine and the le g isl a tiv e his tor y of art ic le 21 .2 1. De ri ve d f

ro m th e En g lis h common law, parens patriae means “par ent of the country ,” and e nabled the K ing to a ct as guardia n for “ infants, idiots, and lunatics.” See Alfred L. Snapp & Son, Inc. v . Puerto Rico , 458 U.S. 592, 600 (1 98 2) ; Hawaii v. Standard Oil Co. , 4 05 U. S. 25 1, 25 7 (1 97 2) ; B la c k’ s L aw D ic tio na ry 11 14 (6 th ed. 1990). I n the United States, the parens patriae do c tr ine e xpand e d to inc lud e state -b ro ug ht s uit s to “pre vent or re pair ha

rm to its quasi-sovereig n interests.” Ha wai i , 405 U.S. at 257-28. To have standing under parens patriae , a g ov e rnme nta l ent ity

mus t e sta

bli shthat th e state ha s a quasi-sover eig n interest, apart from the i ntere sts of private pa rties, there is an injury

to a substantial 10 seg ment of its population, and the injured individuals could n o t o btain complete r elief throug h a private suit. Alfred L. Snapp , 458 U.S. at 607-08.

Acc ording to appellee s, the leg islative purpose be hind the passag e of a rticle 21.21 can be trac ed to Hawaii v. Standard Oil Co. and Calif ornia v. Frito-Lay, Inc. , 474 F.2d 774 ( 9th Cir. 1973), both of which conce rned the use of parens patriae power . The issue in Ha wai i was whe ther
a pa rt ic ula r f e de ra l sta tut e a

uth or ize d a sta te to sue fo r dama g e s for inj ur y to its e c on omy . 4 05 U. S.
a t 25 2- 53 . A c tin g in i ts p ro pr ie tary c a pa c ity , in its parens patriae capa city , and as the re prese ntative of a c lass, Hawa ii sued Standard Oil for a ntit ru st violations. Id . at 25 3. Th e Sup re me Court he ld13

that in de te rm ini ngwh e the r H awa ii co ul d mai nt a in t he a c tio n, the iss ue wa s n ot w he the r H a wa ii
c ou ld s ue on

be ha lf of its c iti zen s und e r g e ne ra l parens patriae principles but whether the injury was compensa ble under the statute in question. Id
. at 259. The Court he ld that the statute authorized a state to rec over f

or injuries suffe red in its capa city as a consumer of g oods and ser vices, but not for economic injurie s to the sovere ign inter ests of a state
. Id . at 265. The Court concluded that if the statut e we re int e nd e d to a llo w a state to r e c ov e r f

or dama g e to i ts g e ne ra l e c on omy , th e n “ we sh ou ld ins ist up on a c le ar ex pr e ssi on

of a c on g re ssi on a l pu

rp os e to m a ke it s o, and

no su c h e xpre ssi on

is to be found in” the statute. Id . at 264.

The issue a ddresse d in Frito Lay wa s w he the r a state c ou ld s ue a s parens patriae for injury to the business or proper ty of the state’s citizens. See 474 F.2d at 775. California sued F ritoL ay , a rguin g tha

t th e pr a c tic a l in a

bil ity of an in jur e d c iti zen

to brin g an ind ivi du a l anti tr us t su it
war rants a state to act on be half of the individual. Id . The Ni nth Cir c uit no te d th a t parens patriae actions had not be en re cog nized a s a basis for rec overy of money damag es for

injuries suffe red by individuals; i nstead, parens patriae ac t i o n s we re gen er al l y u s edt o “h al ti n

j u ry t o a q u as i -s o v er ei gn state intere st . . . ‘apar

t from that of pa

rticul ar i n d i v i d u al s who may be af fec ted.’” Id . (quoting Georgia v. Pe nnsylvania R.R. , 324 U.S. 439, 4 5 1 (1 9 4 5)). The court obser ved that the state was
a c tin g “ no t a s parens patriae in the sense in which that term is rec og niz ed in this country , but as g uardia n ad litem ” for

the class it purporte d to repre sent and that the state ’s proc edure by passed the proce dural require ments of Rule 23. Id . at 776 & n. 9. He e din g the Sup re me Court ’s a dmo nit ion in Ha wai i , the Nint h Circuit conclude d that “if the state is to be empower ed to ac t in the fashion her e14

soug ht, we fe el that authority must c ome not throug h judicial improvisation but by leg islation and rule making .” Id. at 777.

Under Ha wai i and Frito-Lay , w it h o u t a s p e c if

ic s tatuto r

y g r an t o f a

u th o r it y , the Attorney Gene ral may not rely on a gene ral invocation of parens patriae authority to bring suit for damag es on behalf of individually injured per sons. Se e Ha wai i , 40 5 U .S. a t 26 4- 65 ; Frito-Lay , 474 F.2d at 777. We disag ree with appellee s’ asser tion that the leg islature, in dra ftingarticle 21.21 of t h e i n s u r an c e c o d e , p r o v i d e d a “ c l a s s i c g r an to f

s t a tu t o r y parens patriae authority to the At torney Gene ral to protec t the interest of Te x as insureds.”

Th e g e ne ra l r

ule in Te xas is that the Attor ne y Ge ne ra l c an o nly

a c t w ith in t

he lim its of t he Tex as C onstitut ion and statutes. Pe rry v . D e l R io , 67 S.W .3d 85, 92 (Tex. 2001) . Consist ent with this rule, absent a spe cial provision, the Attorne y Gene ral must comply with the same rule s of proce dure a s other litiga

nts. Texas De

p’t of Corrections v. Herring , 513 S.W .2d 6, 7-8 (Te x . 1974). P a r en s patriae has bee n used spar ingly in Texas. Lak

esh or e Ut il. Co. v . Te

x as Natural R es. Conservat i o n Comm’n , 92 S.W .3d 556, 565 (Tex. App.—Austin 2002, pet. g rante d). Clear leg islative intent is require d befor e we will recog nize parens patriae authority to sue for mone tary damag es. Se e Ha wai i , 405 U.S. at 264.

A plain re ading of ar

ticle 21.21 re veals no c lear g rant of parens patriae author ity
un de r s e c tio ns 17 a nd

18 . T he le g isl a tur e e xplic itl y stated th at in

int e rp re tin g se c tio n 1 8, c ourt s sh ou ld b e guid ed by

fe de ra l c a se s c on str

uin g the fe de ra l c la ss a c tio n r ule , a nd thr ou g ho ut a

rt ic le 21 .2 1, the statut or

y langua g e re fe re nc e s “c la ss ac tio ns ,” no t parens patriae su its . A s th e Sup re me Court made cle ar, parens patriae a c tio ns are no t int e rc ha ng e a ble wi th c la ss a c tio ns : “Parens patriae15

actions may , in theory , be re lated to class act i ons, but the latter ar e def initely pref era ble in the
anti tr us t are a . Ru le 23 pr ov ides sp eci fi c ru le s f or de lin e a tin g the a

pp ro pr ia te pla int if

f- c la ss, establishes who is bound by the action, and effec tively preve nts duplicative recove ries.” Id . at 266.

A c omp ari so n to a

fe de ra l st a tut e tha

t e xpre ssl y

g ra nts parens patriae a

uth or ity further support s o u r re adingof ar ticle 21.21 as nothing more than a class ac tion statute. The Har t-Sc o tt
- Ro d in o A nti tr

u s t I mp r o v e me nts A ct of 1976, e nacte d soon after the Ha wai i and Frito-Lay de c isi on s, a

uth or ize s st a te s’ a tto rn e y s g e ne ra l to su e fo r mon e tary re lie f on be ha lf of state re sid e nts injured by

fede ral a ntitrust viol ations. See 15 U.S.C.A. § 15c (West 1997) (the “HSRA”) ( “Any attorney g ener al of a

State may bring a civil ac tion in the name of such State, a s pare ns patriae on b e h a l f o f n a tu r a l p e r s o n s r e s i d i n g i ns u c h S t a t e . ” )
. T h e H S RA ’ s p r o v i s i o n s a l l o w i n g s t a t e a t t o r n e ys g e n e ra l t o b ri n g parens patriae s u it s o n b e h a lf o f s tate r e s id e n ts w e r e e n a c te d to r emedy the difficulties and c omplex ities associated with cer tify ing a nd maintaining a

ntitrust class actions under fede ral Rule 23 and in distributing da mag es. Illinois v. A bbott & Assocs., Inc

. , 460 U.S. 557, 573
n. 29 (1 98 3) ; see New Y

ork v. Re ebok I

nt’l Ltd. , 96 F.3d 44, 46 (2d Cir. 1996). Cong ress unde rstood that an individual consumer overc harg ed a small a mount lac ked a prac tical, individual remedy and that Rule 23 class-a ction suits were ine ffe ctive bec ause la rg e consume r cla sses with small indivi dual claims wer e unmana g eable
. See H.R. Rep. No. 94-499, pt. 1, at 2575-76 ( 1976).

Th e HSR A i llu str a te s th e kin d o f “ c le ar a nd e xpre ss” statut or

y mand a te re qu ir e d to
cre ate parens patriae authority . I t does not ref er t o cl ass actions or class ac tion procedur es but ins te a d e xplic itl y

a llo ws a state a tto rn e y

g e ne ra l to br inga

c ivi l a c tio n in

the state ’s name a s parens patriae on behalf

of the state’ s citiz ens. 15 U.S.C.A. § 15c. I n contra st, nothing in article 21.21’sAppellee s cite Ba ra v . Maj or Fu nd ing Cor po ra tio n Li qu ida tin g Tr us t , 876 S.W .2d 469 11 (Tex. App.—Austin 1994, writ denied), a nd Texas De

part me n t of Mental Health & Mental Re tar da tio n v. Pe tty , 778 S.W .2d 156 (Tex. A pp.—Austin 1989, writ dism’d w.o.j.), assertingthat “Te x as cour

ts have re cog nized the validity of st atutory pare ns patriae suits brought by the Attorney Gene ral in order to restore unlawfully obtained funds to Texas citizens.” Howeve r, we note first t hat our re fer ence to section 17 in Pe tty wa s d ic ta and se c on d th a t th e oth e r tw o c ite d statut e s e xplic itl y allowed the A ttorney

Gene ral to interve ne in suit or repr esent c erta in individuals. See 778 S.W .2d at 163 (c iting former section 32.51 of education c ode, which re quired c ompliance with Rule 42 and allowed Attorney Gene ral to join as class a ction plaintiff, see Act of Ma y 29, 1971, 62d L eg ., R.S., ch. 620, § 1, 1971 Te x . Gen. L aws 2006, 2015 (rep ea l ed 1993), and a rticle 4447w, se ction 6 of re vis e d statu te s, wh ic h s pe c if ic a lly a uth or ize d A tto rn e y

Ge ne ra l to re pr e se nt “ c la ss o f i nd ivi du a ls composed of ve tera

ns,” see Act of Ma

y 27, 1981, 67th L eg ., R.S., ch. 874, § 1, 1981 Te x . Gen. L aws 3330, 3331 (re peale d 1989)). In Ba ra , we he ld that a DTPA suit broug ht by the Attorney

Gene ral in the State’s name a

nd on behalf of “a specifie d g roup of indivi duals” wa s a “ de fac to class ac tion” that tolled the running of limitations aga in s t i n d i v iduals while they wer e par t of the Attorney Gene ral’s suit. 876 S.W.2d at 472-73. Petty and Bara do not support a conc lusion that section 17 g ra nts the Attor

ne y Ge ne ra l parens patriae authority to sue. 16 lang u age o r leg islative history indicates that the le g islature intended to c reate parens patriae authority as an alternative to class actions in this contex t. See Tex. Ins. Code Ann. art. 21.21, § 17(a ) (“I f a me mber of the insurance buy ing public ha s been da mag ed by an unlawf

ul m et h o d, act, or prac tice . . . the B oard ma

y reque st the Att orney Gene ral to bring a class action .
. . .”). We ther efor e ho ld t hat art ic le 21 .2 1 o f t

he ins ur anc e c od e do e s n ot g ra nt parens patriae a

u t h o r i t y. 11 Modified Class Action

Ap pe lle e s c on c e de that th e se ttl e me nt c la ss d oe s n ot h a ve a c la ss r e pr e se ntativ e ; thus , the se ttl e me nt c la ss do e s no t me e t the ty pic a lity and a de qu a c y of re pr e se ntatio n pre re qu isi te s. Howeve r, they

contend the A ttorney

Gene ral is not require d to do so, arg uing that section 17 allows for two diff

ere nt ty pes of class action suits—(1) one broug ht by an individual, a nd (2) one broug ht by the Attorney Gene ral—a nd that only

actions broug ht by

individuals must meet the pr ere quisites17

of sec tion 18(a). Acc ording to appellee s, the leg islature has de termined that the A ttorney Gene ral
a de qu a te ly

fu lf ill s th e ro le of

c la ss r e pr e se ntativ e , th

us ob viati ng th e need fo r a tr a dit ion a l c la ss repr esentative wi t h t y

p i ca l claims. For suppor t, they focus on the f

irst sentence of sec tion 18(a):

“ Th e c ourt

sh a ll p e rm it on e or

mo re me mb e rs o

f a c las s to sue or be sue d as re prese ntative par ties on behalf of the c lass only

if” the pr ere quisites of numerosity , commonality , ty picality , and ade quacy of repr esentation a

re satisfied. Tex. Ins. Code Ann. art 21.21, § 18(a) (empha sis added). A ppellees
c on c lud e that only in cl a ss a c tio ns ini tiate d b y ind ivi du a l c la ss m e mbe rs mus t th e pr os pe c tiv e c la ss satisfy section 18(a )’s prer equisites. I n other wor ds, appellee s assert that whe n the Attorney Gene ral instit utes a c lass action under ar t icle 21.21, he is not constra ined by the traditional cla ss action requi r e me nts a

n d n e e d o n ly c o mply with section 18(b) be cause the leg islature has a lrea dy deter mined that he is an a dequate class re prese ntative. We disag ree . Statutory Language

A re view of the lang uag e used in article 21.21 shows that a class-ac tion suit broug ht by the Attorney

Gene ral should be tre ated the same as one brought by a member

of the insura

ncebuy ingpu bli c . Ar tic le 21 .2 1 p ro vid e s f

or tw o ty pe s o f c la ss- a c tio n s uit s: ( 1) an a dmi nis tr a tiv e c ivi l enfor cem ent class a ction under se ction 14 and (2) a more traditional section 17 cla ss action. See Tex. I ns. Code Ann. ar

t. 21.21, §§ 14 (West Supp. 2004-05) (“Administrative C l ass Action”) , 17 (“ C l as s Ac t i o n s ”)
. T h e t wo t y p es o f s u i t s ad dre s s t wo d i s t i n ct ci rc u m s t an ce s : (1 ) r ec o v ery t h ro u gh
an administrative class action of unlawfully obtained pre miums after a Boa rd finding that an insurer committed some sanctionable a ct, and (2) recover y of damag es after a judicial deter mination that an insurer ha s committed a sanctionable act. Cl ear ly , section 17 authorizes a cla ss action by either the18

Attorney Gene ral or a

n individual. Se e id . § 17(a) . Such a suit, howeve r, may only be broug ht if “a member of

the insuranc e buying public ha s been da mag ed.” Id
. I n other wor ds, even at the insistence of the Boa

rd, the Attorne y

Gene ral c annot initiate a cla ss action to rec over da mag es done only to the State or the De partment in their pr oprietar y capa cities. A class action for damag es may be broug ht under sec tion 17 only when the public has been injured, although it offe rs two choice s as to who may

initiate such an a ction. We disag ree with appellee s that section 18 cre ates two ty pes of c lass actions that may be broug ht on be half of the injured insurance -buying public. I ndeed, section 18(b), whic h mandates
c omp lia nc e wi th t

he su bs e c tio n ( a ) c la ss a c tio n p re re qu isi te s, make s cl ear that se c tio n 1 7 c la ss actions broug ht by

the Attorney

Gene ral a

re subject to the same prer equisites as those initiated by indiv i dual class membe rs. Subsection 18(b) doe s not disti ng uish suits broug ht by class member s from those broug ht by

the Attorney

Gene ral in re quiring compliance with subsectio n (a) ’s prer equisites. Compare id. § 18(a) with i d. § 1 8 (b ). Under appellee s’ ar g ument, the Attorney Ge ne ra l c ou ld b ri nga

c la ss a c tio n o n b e ha lf

of any numbe r o f c la ss m e mbe rs wi tho ut r e g a rd to ty pical i ty or commonality

of injury or ade quacy

of re prese ntation. Appellees’ argument lacks support in the plain lang uag e of section 18(b), which does not qua lify its requireme nt of section 18
c omp lia nc e ba se d o n th e ini tiator

of the su it. Th e la

ngua g e is c le ar: a ll s e c tio n 1 7 c la ss a c tio ns mus t meet the r equire ments of sec tion 18(a). Legislative History and Fe deral Rule 23

Article 21.21 was enac ted in 1951 to ba r insurers from discriminating in the se tting of premiums. See Act of June 7, 1951, 52d L eg ., R.S., ch. 491, § 2, 1951 Tex. Gen. L aws 868, 1075-Ap p e ll e e s c it e th e c o mm e n ts p r e c e d in g H o u s e B il l 4 1 7 , w h ic h e n a c te d th e D T PA a nd 12 e xpand e d a

rt ic le 21 .2 1 to a llo w c la ss a c tio ns , in wh ic h th e n- Attor

ne y Ge ne ra l John

Hi ll s ta te d: [House Bill 417] s trikes direct l y at t h e inequities now e x isting in consumer protec tion legi s l ation, and will provide re medies under which the Attorne y Gene ral’s O ffice can pr operly deter mine betwee n preme ditat ed pra cticed dece ption a

nd honest err or. . . . Under our sy stem as it now stands, a suit can be filed by

a consume r ag ainst a per son or org anization committ ing a n act, but the consumer

must prove common law fra ud. The pre sent conditions provide on ly fo r t he Atto rn e y

Ge ne ra l’ s o ff

ic e to b ri nga

re str a ini ngor de r a

nd lim its the ir a b il it y to p r o s e c u te
. T h e c o mm o n la w r e me dy is n o t a d e qu a te for a consumer to r ecove r the los s, thereby making this bil l a major step in the direc tion of providing the consumer, throug h the Attorney Gene ral ’s o ffice, wi th t he ne c e ssa

ry too ls f or e qu ita ble re c ov e ry su

bje c t to, of c ours e , a

ru lin g in favor of the c onsumer. House Com m. on Bus. & I ndus., Bill Analy sis, Tex . H.B . 417, 63d L eg ., R.S. (1973). This ex plains th e ra t i o n al e for

allowing the Attorney

Gene ral to bring

a cla ss-ac tion suit but does not answer whether , in doing so, the A ttorney Gene ral must comply

with section 18(a)
. 19 76. I n 1973, the leg islature ena cted House Bill 417, which amended a rticle 21.21, a ddi ng section 14, “Administrative Class Actions,” se ction 17, “Class Actions,” a nd section 18, “Class Ac tion: Procedur e.” See Act of Ma y 10, 1973, 63d L eg ., R.S., ch. 143, § 2, 1973 Tex. Gen. L aws 322, 338- 4 1
. The pa

rties disag ree over the leg islative purpose be hind the enac tment of House B ill 417. 12 Appellee s assert that the le g islative history shows that the leg islature intended to exempt Attorney Gene ral c lass actions fr om traditional class-a ction require m en t s , cit ing the committee notes on
se c tio ns 17 and

18 , w hic h s ta te tha

t se c tio n 1 7 “ [d]e lin e a te s th e pr oc e dure s av ailab le fo r c la ss
a c tio ns ,” and that se c tio n 18 “ [s]e ts ou t the pr oc e dure fo r a pr ivate c la ss a c tio n a nd is the same a s” th e p r o c e d

u r e f o r me r ly in c lu d e d in

th e D T PA
. H o u s e Co mm . o nB u s . & I n d u s . , B il l A n a ly s is , T e x. H.B . 417, 63d L eg ., R.S. (1973). A l t h o u gh ap pellees a rg ue that by

“private class a ction” the20

committee meant one instit uted by an injured indivi d u al , t h e notes can also be inter prete d as distinguishing “a private class action,” w hich must be broug ht by a per son ag g rieve d by

an insurer ’s conduct or

the Att o rn ey

Gene ral, fr om a sec tion 14 “administrative class a ction” broug ht by the Attor ne y Ge ne ra l a t th e De pa

rtme nt’ s r e qu e st. Ac c or din g to a

pp e lla nts , th e bil l w a s e na c te d in res po ns e to t he Te xas S up re me Court’s decision in Com me rc ial Tra v e le rs Life In su ra nc e Co. v . S pe ar s , which revea led the proble m with the former

version of Rule 42 unde r which class action ce rtification depe nded on whe ther the class ac tion was “true ,” “hy brid,” or “ spurious.” See 4 8 4 S
. W
. 2 d 5 7 7 , 5 7 8 -7 9 (T ex . 1 9 7 2 ) ( o ri g. proce eding ). A y ear

afte r the S

pe ar s d ec ision, the leg islature ena cted a rticle 21.21’s c lass action provisions, using Rule 23’s proc edure s and fe dera l decisions construing Rule 23 as precede nt. See Bernal , 2 2 S. W.3 d at 43 3; Sta ry v . D e Bo rd , 967 S.W .2d 352, 353 (Tex. 1998). The languag e of se ction 18 mirrors that fo u n d i n fede ral Rule 23, which inc ludes subtitl es for eac h subsection. For example, Rule 23(a) is tit led, “Pre requisites to a Class Action,” and Rule 23(b) is “Class Actions Maintainable,” maki n g it clear that subsections (a) and (b) wer e intended to work tog ether . Be fore individuals may sue on beha lf of a c lass, they must first satisfy the s ubsection (a) prerequisites. After those pre requisites ar e satisfied, the class ac tion can only be “maintained” if the elements of subsection (b) a re pr esent. In other wor ds, subsection (a) deter mines wh e the r a n in div idu a l c an r e pr e se nt the c la ss, a nd if so , sub se c tio n (b) de te rm ine s w he the r t he su it
may be ma int a ine d a s a

c la ss a c tio n. Al tho ug h s e cti on 18 do es no t inc lud e the se same tit le s, it i s modeled af

ter Rule 23 and the desc riptive phrase s of Rule 23 may proper ly g uide our c onstruction of sec tion 18.21

F ederal Case Law

A re v i ew of fede ral c ase la w re veals that some c ourts have a pproved of

a state’ s attorney g ener al ac ting a s a cla ss repre sentative. In some of those c ases, howeve r, the state itself wa s part of the injured cla ss and there fore satisfied the “ty picality ” require ment, a fac t not prese nt in the
c a s e b e f o r e u s. Se e Sta te Te ac he rs R e t. B d. v . F luo r Co rp ., 73 F.R.D. 569, 572 (S.D.N.Y . 1976) (h old ingthat st a te a tto rn e y g e ne ra l ma

y a c t on be ha lf of out- of -s ta te c la ss m e mbe rs wh e n s ta te
a g e nc y he re pr e se nts is a lli e d w ithc la ss m e mbe rs and ag e nc y ’s re pr e se ntativ e ne ss i s su ff ic ie ntl y sh ow n) ; In re Antibi otic Antitrust Actions , 333 F. Supp. 278, 280 (S.D.N.Y. 1971) ( court de termined states’ c laims were ty

pical of c onsumer cla ims because states supported we lfare prog rams that
re im b u r s e d f o r p r e s c r ip ti o n dr

u g s an d th e r e f

o r e s to o d “ in th e s h o e s o f a s u b s ta n ti a l n u mb e r of purc ha se rs of

the dr ug s” ); see ge nerally In re Anthracite Coal Antitrust Liti gations , 78 F.R.D. 709 (M.D. Pa. 1978) ( state-plaintiff satisfied require ment that it be persona lly aff ected and har

med by def e nd ant i n s a me mann e r a s p ro po se d c la ss b ut d id n ot s a tis fy oth e r r e qu ir e me nts fo r c la ss
c e rt i f i c a t i o n , s u c h a s c o m m o nqu e s t i o n s o f l aw an d f a c t )
. In o t h e r

c a s e s i nw h i c h s t a t e a t t o r n e ys g ener al w e r e a ll o w e d

to r e p r e s e n t a

c la s s , th e a tt o r

n e y s g e n e r a l r e p r e s e n te d

o th e r g o v e r n me n ta l entities. Se e Il lin ois v . B ru ns wic k Cor p ., 32 F.R.D. 453, 460 (N .D. I ll. 1963) (attorne y g ener al ac ted as cla ss repre sentative in antitrust suit broug ht by “the State of

I llinois , fo r i t s el f, i ts ag encie s and pu bli c ins tit uti on s, the va

ri ou s sc ho ol d istri c ts o f t

he State
. . . an d all oth e r I lli no is sc ho ol d istri c ts sim ila rl y sit uate d b y c la ss” ); se e ge ne ra lly

Mi nn eso ta v . U

nit e d S tat es S te e l Co rp ., 44 F.R.D. 559 (D. Minn. 1968) (a

ttorney s g ener al, re prese nting p la intiff-states in antitrust suit, allowed to repr esentAs supporting authority , appellee s cite In re Toys “R” Us Antitrust L itigati on , 191 F.R.D. 13 347 (E.D.N.Y . 2000), and In re Sc later , 40 B.R. 594, 595 (E.D. Mich. 1984). I n Toys “R” Us , the a t t o r n e y g e n e r a l s u e d

p u r s u an tt o h i s s t a tu t o r

y parens patriae authority , which is lackinghere . 191 F.R.D. at 349. I n Sclater , th e a tto rn e y g e ne ra l w a s a llo we d to a c t a s c la ss r e pr e se ntativ e un de r h is p a r e n s p a tr iae au t h o ri t y

and under

a state la w allowing him to “bring a cla ss action on beha lf of persons re siding in or injure d in this st ate.” 40 B.R. at 597. The Sc lat e r co u rt re l ied on d i s t i n gu i s h ab l e f

ed er al ca s es , an d

we d ec l i n e t o fo l l o w i t s re as o n i n g.

22 c la ss o f g ov e rnme nta l e nti tie s) ; Illinois v. Harper &Row Publishers, Inc ., 301 F. Supp. 484 (N.D
. I ll. 1969) (same)
.

When a state-pla intiff has not bee n injured in the same ma nner a s the members of

a
c la ss, ho we ve r, c ou

rt s h a ve fr e qu e ntl y

re fu se d to a llo w the a tto rn e y g e ne ra l to a c t a s c la ss
r e p r e s e n tati v e. S

ee Il l i n o i s ex. re l. Bowman v. HomeFed. Sav . & Loan Ass’n , 521 F.2d 704, 707 (7th Cir. 1975) (state’ s attorney soug ht to sue savi n gs an d loan associations on behalf of c itiz ens seekinghome mortg age l o an s but did not allege that state soug ht such a loan; “ [a] state, like any plaintiff-re prese ntative, may maintain a cla ss action on beha lf of its citiz ens onl y if it satisfies the require ments of Rule 23,” and “[s] ince the State’ s Attorney is not a member of

the class whic h he purp or ts t o r e pr e se nt, the dis tr ic t c ourt pro perly dis mis se d th e c omp la int ” ); se e als o I n r e Ru sty Jones, I nc ., 128 B.R. 1001, 1012-15 (N.D. I ll
. 1 991) (pr oposed cla ss repre sentatives (attorney g ener al, bankingcommissioner, insuranc e commissioner, and g overnme ntal committee) could not satisfy require ments of Rule 23(a) and could not adequately and fa irly repr esent the pr oposed cla ss). We conclude that absent express s tatutory lang uag e g ranting the Attorney Gene ral parens patriae authority , the Attorney Gene ral cannot maintain a cla ss action without satisfy ing the class-a ction prer equisites. Article 21.21, which mirror s the fede ral c lass-ac tion rule, contains no 13 clea r, express g rant of a

uthority for the A ttorney Ge n er al to assume parens patriae a u t h o r i t y.23

F ur the r, the Attor

ne y Ge ne ra l ha s n ot s ho wn

that th e State ha s su ff

e re d an in ju ry simila

r t o th os e suffe red by

the class membe rs and thus has not sho wn t h at h e m ay act a s the class re prese ntative him se lf . T he re fo re , th e Attor

ne y Ge ne ra l mu st c omp ly wi th t he c la ss- a c tio n p re re qu isi te s li ste d in section 18.
1. Class Representative and the A ttorney Ge neral as Class Counsel

The Attorne y

Gene ral mai n t ains that he may not act as c lass counsel in the usual meaningof the term. J eff Boyd, Deputy Attorney Gene ral, testified that there was no a uthority for the Attor ne y Ge ne ral to h ave an atto rn e y -c lie nt r e la tio ns hip wi th i nd ivi du a ls o the r t ha n s ta te officia ls, ag encie s, or employ ees. Professor I ssacha roff rea d 17(a) to “g rant the A ttorney Gene ral the capacity to bring a class action whe n reque sted by ” the De partment a nd opined that allowing the Attorney Gene ral to re prese nt an individual would cre ate a “bizarre mecha

nism” where by

he mig ht have to solicit a c lass repr esentative. I ssacha roff continued:
I ’ll conce de that the AGcould ea sily find somebody

to pu t u p as a na

med plaintiff if they had to. B ut the rea son that it’s not require d in the AG class actions, Ibelieve, is that w h en t h e AG spe aks on beha lf of the c itiz ens of the state, the leg itimacy of re pr e se ntatio n is pr e su me d, or c on c lus ive ly pr e su me d, a s opp os e d to wh e n a pr ivate party does that. . . . I t is presumed t hat ce rtain off icials ca n act on be half of the pe op le that th e y

a lr e a dy re pr e se nt.
Howeve r, the plain languag e of se ctions 17 and 18 does not show a leg islative intent to allow the Attorney

Gene ral to avoid mee ting the class re prese ntative re quirement. Se e ge ne ra lly Susan Be th Far

mer, More Lessons from the Laboratori es: Cy Pres Distributions i n Parens Patriae A n t i t r u s t Actions Brought by State Attorneys Ge neral , 68 For dham L . Rev. 361, 376-81 (1999)
.24

I ndeed, se ction 17 arguably confe rs on the Attorney Gene ral the ver y authority Boyd and I ssacha

roff testified was la cking

—the authority

to repre sent “a

member of

the i n suranc e buying public [who] has bee n damag ed by

an unlawf

ul method, act, or prac tice.” Tex. I ns. Code Ann. ar t. 21.21, § 17(a);

c f. T e x as De p’ t of M e nta l H e alt h &Me nta l R e tar

da tio n v . P e tty , 7 7 8 S. W. 2 d 1 5 6 , 1 6 3 ( T e x. App.—Austin 1989, writ dism’d w.o.j.) (citing Act of Ma y 27, 1981, 67th L eg ., R.S., ch. 874, § 1, 1981 Tex. Gen. L aws 3330, 3331 (r epea led 1989)) (s t at u t e p rovided that Attorne y Gene ral “ may repr esent a

class of individuals composed of veter ans” injure d by

Ag ent Ora

ng e).
2. Does Ade quacy of Re presentation Exc use Sec tion 18 Compli ance? Appellee s contend that strict c ompliance with section 18 and Rule 42 is unnec essar y be c a us e the Attor

ne y Ge ne ra l w ill a de qu a te ly

re pr e se nt t

he c la ss m e mbe rs . H ow e ve r, the Sup re me Court rejec ted a similar ar g ument that as long as there was a dequate repr esentation, technical compliance with fede ral Rule 23 and it s notice provisions was unne cessa ry . Se e Ei

se n v . Ca rli

sle & J ac qu e lin , 417 U.S. 156, 176-77 (1974). The Eisen Court he ld t hat a fi nd ingof

a de qu a te repr esentation did not excuse the class repr esentative from g iving notice to potential class member s under Rule 23. Id
. The Court observe d that under the petitioner’s arg ument, notice would not be require d at all, and stated, “This cannot be so, for quite apar t from what due proce ss may require , the command of Rule 23 is c lear ly to the contra

ry .” Id . In o the r w or ds , “ ind ivi du a l no tic e to i de nti fi a ble class member s is not a discretionar y consideration to be waived i n a particular c ase. It is, rather, a n unambig uous requ i re m ent of Rule 23.” Id . at 176. Simil arly , section 18 imposes unambig uous require ments, not discretionary considerations, on class actions broug ht under the insura nce c ode.25 Appellee s argue that st rict complianc e is unnec essar y if the settlement is deter

mined to be fa ir, but in Amche m Products, Inc . v. W indsor the Sup re me Court re je c te d the same argume nt:
The saf eg uards pr ovided by

the Rule 23(a) and (b) class-qua lify ing c riteria, w e emphasize, are not impractica l impediments—c hecks shor n of utility

—in the se ttl e me nt c la ss c on te xt. F ir st, the sta nd ard s se t fo r the pr ote c tio n of a bsent c la ss members se rve to inhibi t a p p r a is a ls of

the cha ncellor’ s foot kind—class ce rtifications depende nt upon the court’s g estalt judg ment or over arc hing impre ssion o f t he se ttl e me nt’ s f

a ir ne ss. Se c on d, if a fa ir ne ss inq uir y un de r Rul e 23 (e ) c on tr oll e d c e rt if ic a tio n, e c lip sin g Rul e 23(a) and (b), a

nd permitting c lass desig nation despite the impossibili ty of litigation, both class counse l and court would be dis arme d.
. . . Fe dera l courts, in any case , lack authority to substit ute for Rule 23’ s cer tificatio n cr i teria a

standard ne ver adopted—that if a

settlement is “fa ir,” then c ertification is proper.
5 2 1 U
. S
. 5 9 1 , 6 2 1

- 6 2 2 ( 19 97 ); s ee also Ortizv. Fibreboard Corp. , 527 U.S. 815, 849 (1999) (“ a fairne ss hear ing . . . is no substitute for rigor ous adher ence to those provisions of the Rule ‘de signe d to pr otect absente es’” ). Fur ther, the Te x as Supreme Court r ece ntly rea ffirme d that the law r equire s strict compliance with Rule 42’ s class-a ction require ments. See Compaq Computer Corp. v. Lapray , 135 S.W .3d 657, 670-71 (Te x . 2004). In Lapray , th e c ourt a dmo nis he d tr ia l c ourt s to pe rf or m a “rig orous ana ly sis” to determine w hether all prer equisites to c lass cer tification have been met, and stated, “ Al l prer equisites means all prer equisites.” Id
. at 6 7 1 (q u o t i n g Bernal , 22 S.W .3d at 435) (e mp has is add ed) ; see also Mc Allen Med. Ctr., Inc . v. Cortez , 66 S.W .3d 227, 232 (Tex. 2001) (subjectingsettlement class a ction to “heig htened sc rutiny ”). A lthough the district court made an
a lte rn a tiv e fi nd ingtha

t th e Attor

ne y Ge ne ra l did co mpl y wi th the pr oc e dura l re qu ir e me nts of Rul e 42 and sec tion 18, the rec ord shows a la ck of stric t compliance wi t h R u l e 4 2 and ar ticle 21.21,26

section 18(a) and (b) because no class re prese ntative was a ppointed. See Tex. R. C iv. P. 42(a)(3) , (4); Te x . I ns. Code Ann. ar t. 21.21, § 18(a)( 3), (4)
. Finally , t o en s u re f

air a nd adequa

te re prese ntation there must be ( 1) an a bsence of antag onism between the class re prese ntative and the c lass member s and (2) an assur ance that the
c la ss r e pr e se ntativ e wi ll v ig or ou sly pr os e c ute the c la ss me mbe rs ’ cl a ims and de fe ns e s. Forsyth v. Lake LBJ Inv . Corp. , 9 03 S.W. 2d 14 6, 15 0 ( Tex . App .—

Au sti n 1 99 5, wr it d ism ’d w. o. j.) ; see Gene ral Tel. Co. of

the SW v. Falcon , 457 U. S. 147 , 1 57 n. 13 (1 98 2) ; So sn a v . I owa , 419 U.S. 393, 403 (1975). Although the district c ourt found that there wer e no conflicts betwee n the class and the Attorney

Gene ral, it had no c lass repr esentative ag ainst which conf licts could be mea sured. The
rec ord s h o ws that a discove ry dispute arose betwee n the Attorney Gene ral a

nd appellants/interve nors, putative member s of t he class he sought to repr esent. Appellants, as putative class member s, sought documentation related to the settlement neg otiations resulting in the MOU, some of which w ere in the possession of two senators involved in se ttling the dispute. The Attorne y Gene ral re sisted, and th e district cour t gr anted the A ttorney

Gene ral a protec tive order . Fur

ther, ther e
was e vidence that the Attorney Gene ral himself initially saw the seeds of possible c onflict. I n a letter to F arm e rs , E xec uti ve De pu ty Com mis sio ne r o f I

ns ur anc e Ca sa

ri sa id, “ F arm e rs ’ p ro po sa l c le a rl y attemp t s t o u s e Farmers’ signific ant marke t share a s levera g e to induce a conflict be tween the De pa rtme nt’ s r e sp on sib ili tie s to pr ote c t po lic y ho lders fr om u

nf a ir a c ts a nd to a lso pr omo te competition in the marketplac e.” T he Attorne y Gene ral may

be conf lict ed b y t he dual r oles he purports to play

as both the De partment’s attorney and t h e cl ass re prese ntative. See Trbovic h v.27

United Mine W

orkers of Am. , 404 U.S. 528, 539 (1972) (discussingconflicting interests of Sec reta ry of L abor in prote ctingrig hts of union members). Aclass re prese ntative ag ainst whom the ade quacy of settlement ca

n be mea sured is indispensable to prote ct both the class and F arme rs. See Phillips Pe tro le um Co. v . S

hu tts , 4 72 U. S. 7 97 , 8 12 (1 98 5) (n oti c e , opp or tun iti e s to be he ard

and to o pt o ut,
and a de qu a te re pr e se ntatio n a re fu nd a me nta l du e pr oc e ss c omp on e nts of c la ss l iti g a tio n) ; Ha ns be rry v. Lee , 3 11 U. S
. 32 , 4 4- 45 (1 94 0) (p e rs on s w ithc on fl ic tin g int e re sts wh o a re ina de qu a te ly
re pr e se nte d in pr ior a c tio n c ann ot be bo un d by pr ior jud g me nt) ; se e als o A mc he m Pro ds

. , 5 21 U. S.
a t 62 5- 26 & n. 20 (a de qu a c y inq uir y un c ov e rs c on fl ic ts of int e re st be tw e e n r e pr e se ntativ e and c la ss members) . We hold that the Attorney Gene ral must comply

with section 18.
CO NC LU SION Ap pe lle e s argue that on ly so me of the ru le s se t out in se c tio n 1 8 a

nd Rul e 42 a

pp ly to c la ss a c tio ns br ou g ht b y the Attor ne y Ge ne ra l: “ Al tho ug h sec tio n 18( a ) & (b ) ar e ina pp lic a ble to this suit , other portions of section 18 are indeed applicable
. I ndeed, section 18(g ), requiringcourt
a pp ro va l of

the se ttl e me nt, a

pp lie s b e c a

us e un lik e se c tio n 1 8( a ), se c tio n 1 8( g ) i s n ot l imi te d b y its te r ms to c la s s a c ti o n s broug ht by a c la s s me mb e r

‘ o nb e h a lf

o f ’ o th e r s s im il ar ly

s it u a te d
. ” We disag ree . As in fede ral Rule 23, sec tion 18(a) de termines whe ther a party can r epre sent a c lass, and section 18(b) deter

mines whether

the suit may

be maintained a s a cla ss action. Section 18(a ) does not excuse a cla ss action broug ht by the Attorney

Gene ral under section 17 fr om strict compliance wi th the oth e r ru le s set ou t in se c tio n 18 an d Rule 42 . N or may the Attor ne y Ge ne ra l br ingthi s su it under parens patriae po we rs wi tho ut a n e xplic it g ra

nt o f t ho se po we rs in t

his c on te xt.28 Section 17 allows the Attorney Gene ral to bringa cla ss action at the De p ar t m ent’s
re qu e st i f a me mbe r of the ins ur anc e -b uyingpu bli c ha s b e e n d a ma g e d b y an unla wf ul a c t. T e x. I ns . Code Ann. ar

t. 21.21, § 17(a). Se ction 18 provides that a c lass action may be instituted if the require ments of numerosity , commonality , ty picality and ade quacy

of re prese nt at i o n ar e met. Id
. § 1 8
. We a r e b o u n d b y th e p la in la n g u a g e o f th e statutes, s ee B ernal , 22 S.W .3d at 435 (c iting Amche m Prods., 521 U.S. at 620), and do not believe that the le g islature intended se ctions 17 and 18 to a llow the Attorney Gene ral to br ing a class action suit without comply ing w ith the traditional cl a s s a c ti o nr e qu ir e me n ts
. U n li k e th e le g is lati v e h is to r y o f th e H SR A , th e le g is lati v e h is to r

y of
art ic le 21 .2 1 doe s not sho w an int e nt to exe mpt the Attor ne y Ge ne ra l f ro m th e re qu ir e me nts of

Rul e 42 or sec tion 18(a). As stated in Frito-Lay , such an e x emption would ignor e the pr oblems associate d with c lass actions: “The joining of the claims of numer ous, dispersed c laimants in a single judicial action is inhere ntly complicated and requires safeg uards if injusti ce is to be avoided.” See 474 F.2d at 777 n.11. When the Attorney Gene ral bring s a cla ss action suit pursuant to article 21.21, se ction 17 of the insura

nce c ode, he must comply with the requirements out lined in section 18(a ) and ( b). W e r ev er s e t h e t ri al co u rt ’s j u d gm en tce rt i fy i n g t h e c l as s an d re m an d t h e c as e f

o r p ro ce ed i n gs consistent with this opi nion.

__________________________________________ David Pury ear , J ustice Be fore Chief J ustice L aw, Justi ces K idd and Pury ear ; J ustice Kidd Not Participating Reverse d and Remande d Filed: January

21, 2005