Opinion ID: 1465768
Heading Depth: 1
Heading Rank: 4

Heading: Virtual-Representation Requirements

Text: Generally, only parties of record may appeal a trial court's judgment. El Paso Indep. Auto. Dealers Ass'n, 1 S.W.3d at 110. On a few occasions, though, we have determined that a person or entity who was not a named party in the trial court may pursue an appeal in order to vindicate important rights. In El Paso Independent Automobile Dealers Ass'n, for example, we held that the court of appeals erred in dismissing the Motor Vehicle Board's and Attorney General's appeal of a judgment declaring Texas's Blue Law unconstitutional. Id. at 111. In the underlying case, the El Paso Independent Automobile Dealers Association sued the El Paso District, City, and County Attorneys seeking a declaration that the Blue Law, which made it illegal to sell cars on consecutive weekend days, was unconstitutional. Id. at 110. Although the Association's petition did not name the Board or the Attorney General as defendants, the Association served the Attorney General with a copy of its petition in compliance with section 37.006(b) of the Texas Civil Practice and Remedies Code. Id. The Attorney General, by letter, declined to participate in the case. Although the local officials filed a general denial, they ultimately concluded that the Blue Law was, in fact, unconstitutional and negotiated a pretrial agreement for findings of fact and conclusions of law in line with that conclusion. Id. After the trial court rendered judgment declaring the Blue Law unconstitutional and enjoining its enforcement, the Attorney General and the Board filed post-judgment motions in an attempt to intervene. Id. The trial court denied the motions. Id. We held that the Attorney General and the Board, who bore statutory-enforcement responsibilities, were entitled to appeal under the virtual-representation doctrine. Id. at 110-11. Similarly, in City of San Benito, we held that unnamed class members who had contested the fairness of a proposed settlement and attempted to opt out of a class action were entitled to appeal the settlement under the same doctrine. City of San Benito, 109 S.W.3d at 755. In this case, Sonat contends Lumbermens may not invoke the virtual-representation doctrine's benefit because Lumbermens has acknowledged that its interests and Cudd's have diverged, in that Cudd no longer wishes to contest the trial court's choice-of-law decision. Lumbermens responds that its and Cudd's ultimate aim  to reverse the underlying judgment  remains the same. We agree with Lumbermens. The identity of interest upon which the virtual-representation doctrine in this case turns relates to protecting the funds that the underlying judgment puts at risk. See Huizar, 740 S.W.2d at 434 (GONZALEZ, J., dissenting). [6] That different legal theories may be asserted to defend those funds does not defeat the identity of interest between Lumbermens and Cudd that the insuring contract creates and the virtual-representation doctrine protects. In any event, our decisions in El Paso Independent Automobile Dealers Ass'n and City of San Benito illustrate that the position of one who relies on the virtual-representation doctrine to appeal and the party that formerly represented its interests will have often, if not always, diverged to some extent by the time the beneficiary of the doctrine invokes it. In El Paso Automobile Dealers Ass'n, for example, the interests of the Attorney General and the Motor Vehicle Board in defending the Blue Laws' constitutionality were initially protected by the local attorneys. Not until those attorneys abandoned their defense of the statute did the need arise for the Attorney General and the Board to directly participate in order to protect their interests. Despite the diverging positions of the state and local entities regarding the Blue Law's constitutionality, we held that the Attorney General and the Board were entitled to appeal. 1 S.W.3d at 110-11. And in City of San Benito, the interests of the named class representatives who supported the proposed class settlement had clearly diverged from those of the settlement's opponents. See 109 S.W.3d at 756. Thus, that Lumbermens' interest in pursuing the choice-of-law issue had diverged from Cudd's by the time Lumbermens filed its intervention motion does not defeat Lumbermens' ability to participate in the appeal pursuant to the virtual-representation doctrine. Sonat contends Lumbermens should not be allowed to invoke the virtual-representation doctrine because it can ultimately avoid coverage for the judgment by invoking a noncooperation clause in Cudd's policy. But irrespective of any potential coverage dispute between Lumbermens and Cudd, Lumbermens has pledged $29 million to secure the judgment in Sonat's favor. Even if Lumbermens could eventually recoup the amount it has pledged through a potential coverage suit against Cudd, its obligation to pay the underlying judgment to Sonat is immediate and binding in the event Cudd's appeal is unsuccessful. In this case, neither the fact that Cudd's and Lumbermens' interests in pursuing appeal of the choice-of-law issue have diverged, nor the possibility that Lumbermens could later assert a noncooperation defense against Cudd, prevent Lumbermens from invoking the virtual-representation doctrine. But because the doctrine is equitable, we must determine whether other considerations weigh against applying the doctrine to allow Lumbermens' intervention on appeal. See Huizar, 740 S.W.2d at 430 (holding that right to appeal insurer may have had under virtual-representation doctrine was waived by voluntary payment of judgment); see also Gonzalez v. Banco Cent. Corp., 27 F.3d 751, 761 (1st Cir.1994) ([V]irtual representation is best understood as an equitable theory rather than as a crisp rule with sharp corners and clear factual predicates . . . such that a party's status as a virtual representative of a nonparty must be determined on a case-by-case basis. (citation omitted)); Tyus v. Schoemehl, 93 F.3d 449, 455 (8th Cir.1996); see City of San Benito, 109 S.W.3d at 756 (emphasizing that intervening class members had preserved appellate rights by attempting to opt out of class and objecting to settlement).