Court Opinion

ID: 2831226
Source: CourtListenerOpinion
Date Created: 2015-08-26 23:00:59.713483+00
Date Added: 2024-06-11T11:15:37.112656
License: Public Domain

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                                           MDL No. 12-0156
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      In re State Farm Lloyds Hurricane Ike Litigation

                    ═════════════════════════════════════════════════════════════
                           ON REVIEW BY THE MULTIDISTRICT LITIGATION PANEL
                    ═════════════════════════════════════════════════════════════

Presiding Judge Peeples delivered the opinion of the MDL Panel.
      State Farm Lloyds has  asked  us  to  transfer  266  insurance  lawsuits,  pending  in  sixteen
counties, to an MDL pretrial court.[1]  The cases arise  from  damage  caused  by  Hurricane  Ike  in
2008.[2]  By separate orders issued earlier, we have granted State  Farm’s  Motion  to  Transfer  and
assigned a pretrial judge.
      Administrative Rule13 authorizes us to transfer “related” cases (i.e.  cases  involving  common
questions of fact) from different trial courts to a single pretrial judge if transfer will (1)  serve
the convenience of the parties and witnesses and (2) promote the just and efficient  conduct  of  the
litigation.  See In re Petroleum Wholesale Litig., 339 S.W.3d 405, 406 (Tex. M.D.L. Panel  2009);  In
re Hurricane Rita Evacuation Bus Fire, 216 S.W.3d 70, 71-72 (Tex. M.D.L. Panel 2006);  Tex.  R.  Jud.
Admin. 13.2(f), 13.3(a), 13.3(l).
      These cases are related because they arise from  one  event  and  the  plaintiffs  seek  common
discovery on the ground that State Farm has a “general business practice” of adjusting  claims  in  a
way that is unfairly designed to tilt  the  process  in  its  favor  and  against  the  policyholder.
Plaintiffs seek discovery tailored to each specific  case  and  also  discovery  delving  into  State
Farm’s broader practices in property insurance cases generally.[3]   For the reasons stated in In  re
Texas Windstorm Insurance Ass'n Hurricanes Rita and Humberto Litig.,  339 S.W.3d 401  (Tex.  M.D.L.
Panel 2009), and In re Delta Lloyds Insurance Company, 339 S.W.3d 384  (Tex.  M.D.L.  Panel  2008),
which need not be repeated here, the cases are related for purposes of Rule 13.[4]
      Rule 13 is patterned after the federal MDL  process,  which  seeks  to  “eliminate  duplicative
discovery, avoid inconsistent pretrial rulings, and conserve the  resources  of  the  parties,  their
counsel, and the judiciary.”  See In re  Vioxx  Prods.  Liab.  Litig.,  360 F. Supp. 2d  1352,  1354
(J.P.M.L. 2005); accord 15 Charles A. Wright, et al, Federal Practice and Procedure §  3863,  at  175
(2d ed. Supp. 2003).
      Rule 13 rests on the premise that a legal  system  should  not  give  different  answers  to  a
      question, or allow repetitive  discovery,  or  subject  witnesses  or  lawyers  to  conflicting
      demands, simply because the cases are pending before different judges in different parts of the
      state.

In re Digitek Litig., No. 09-0408, at *3 ( Tex. M.D.L. Panel, Aug. 5, 2009).
      In deciding whether transfer to a  pretrial  court  will  further  the  general  MDL  goals  of
convenience, efficiency, and justice, our more  specific  inquiry  is  whether  transfer  would:  (1)
eliminate duplicative and repetitive discovery, (2) minimize conflicting demands  on  witnesses,  (3)
prevent inconsistent decisions on common issues, and (4) reduce unnecessary travel.  Id.  at  *2.   A
fifth objective of the MDL  process  is  to  allocate  finite  judicial  resources  intelligently  by
minimizing the occasions when different judges decide the same or similar  issues  again  and  again.
When one trial judge has decided an issue that is common to a set of related cases, the legal  system
cannot afford to let other trial judges spend time deciding the issue again.   Time  and  energy  are
finite quantities, and when a judge spends docket time and effort on A and B there will be less  time
and energy remaining for X and Y.  Rule  13's  concern  for  efficiency  rests  on  the  belief  that
unnecessary relitigation of issues, which  can  deprive  other  litigants  of  their  fair  share  of
courtroom time, is an extravagance that the legal system cannot afford.   “To  the  extent  that  the
pretrial judge’s workload does increase, that would seem to be more  than  offset  by  the  decreased
workload the other [] judges will collectively enjoy.”  See In re Silica  Prods.  Liab.  Litig.,  166
S.W.3d 3, 8 (Tex. M.D.L. Panel 2004).

      The parties disagree as to whether  judges  in  the  different  counties  have  already  issued
inconsistent  rulings,  and  whether  witnesses  have  already  been  inconvenienced  by  conflicting
demands.[5]  We need not resolve these disagreements about  the  past  because  Rule  13  focuses  on
whether assigning the cases to  an  MDL  pretrial  court  will  further  the  goals  of  convenience,
efficiency, and just handling in the future.   See, e.g., In re  Continental  Airlines  Flight  1404,
No. 09-0201, at *7 (Tex. M.D.L. Panel, May 7, 2009) (“A moving party need not establish  an  existing
problem that requires correction”); In re Ocwen Loan Servicing Litig.,  286 S.W.3d 669,  672  (Tex.
M.D.L. Panel 2007) (“Rule 13 seeks to prevent the occurrence of problems in the  future  and  is  not
limited to correcting ongoing problems from the past”); Hurricane Rita Bus Fire,  supra,  216  S.W.3d
at 72 (“The movant need not show that anyone has  already  been  inconvenienced  or  that  there  are
existing problems to be addressed”)[6]; Silica Litig., supra, 166 S.W.3d at 5 (MDL  motion  does  not
require showing of inconvenience or other past problems; it “looks ahead” and asks  whether  transfer
to a pretrial judge would promote convenience in the future).[7]
      To be sure, a history  of  inconsistent  rulings  and  conflicting  demands  on  witnesses  can
indicate what might happen in the future; and such  a  history  can  also  help  justify  a  stay  of
proceedings while the motion is being considered.  But nothing  in  the  rule,  or  the  policies  it
serves, requires proof of existing dysfunction before the MDL process may be invoked to  bring  order
and rationality to the handling of related cases.
      When 266 cases with common issues are pending in sixteen counties, litigants  who  are  unhappy
with an early ruling may be tempted  to  present  the  issue  again  in  a  second  court.   This  is
especially true with rulings on the scope of discovery, such as what categories  of  documents  (like
those summarized in footnote 3) must be located and produced, and for how many  years.[8]   Discovery
will be reasonably confined when the issues are limited to coverage, causation, the claim  settlement
process, and damages involving one plaintiff’s property and a single event.  But when, as  here,  the
issues are expanded to a defendant’s business practices generally, over a period of years, there  are
likely to be repeated efforts to seek broader discovery rulings from  other  courts.   This  is  true
because if a second court grants discovery that  the  first  court  denied,  the  documents  are,  in
practical effect, produced for all cases.
      We now consider arguments that: (1) transfer will cause  delay;  (2)  transfer  is  not  needed
because several counties have already set up pretrial courts for  these  cases;  (3)  transfer  to  a
pretrial court will result in “one  size  fits  all”  discovery;  and  (4)  the  panel  should  await
decisions in pending mandamus proceedings, a corrective process that shows the system is  working  as
designed.
      Delay.  Plaintiffs express concern that transferring these 266  cases  to  one  pretrial  court
will delay several existing trial settings and will also delay all the cases generally.  As  we  have
said before, an MDL proceeding should not cause delay unless the pretrial judge consciously  decides,
as a matter of discretion, to remand a case later rather than sooner.[9]   The  delay  argument  also
seems weakened by the fact that some cases arising from this  September  2008  hurricane  were  filed
recently, and most of the older cases were abated for more than three years to  allow  mediation.[10]
Moreover, we are not  persuaded  that  appointing  one  judge  to  give  coordinated  and  consistent
management to 266 cases, with common issues decided once and for all,  will  be  slower  than  having
several judges in different counties hold sequential hearings on the  same  issues,  as  the  parties
relitigate one or more common issues that were decided earlier in another court.
      Existing pretrial courts.  We are told that an MDL pretrial court is  not  needed  because  the
largest counties have already assigned their cases to one judge  for  pretrial  handling,  a  process
that is to be commended.  Not every county has done this, and even if all twelve counties  with  more
than one case had placed their cases into the hands of  one  judge,  there  would  still  be  sixteen
judges  handling  266  cases.   Pretrial  courts  operating  under  the  rules  of  civil  procedure,
supplemented by local rules, are simply not able to serve Rule 13's goals  because  an  MDL  pretrial
court, unlike other trial courts, is empowered—and instructed—to ensure the orderly  and  coordinated
remand of cases for trial:
            . . . Rule 13 contemplates that the pretrial judge will be involved  in  the  details  of
      trial settings.  When discovery is complete and an MDL case is ready for trial,  Rule  13  does
      not allow the pretrial judge to simply return the case to the trial court without  consultation
      or further instructions.  On the  contrary,  when  remanding  a  case  the  pretrial  judge  is
      instructed to: (1) consult with the trial judge about  the  trial  setting,  (2)  consider  the
      convenience of the parties and witnesses in the remanded case, and (3) consider  the  efficient
      handling of the cases remaining in the MDL proceeding. . . .
            Pretrial judges are granted continuing authority over remanded cases for the plain reason
      that continuances, resettings, and further discovery after  remand  could  interfere  with  the
      pretrial judge's management of the remaining MDL cases.  Rule 13  therefore  limits  the  trial
      judge's power to make rulings in remanded cases that might interfere  with  the  remaining  MDL
      cases.  Thus the pretrial judge, being responsible for the efficient  handling  of  the  entire
      group of MDL cases, might want to ensure that each trial setting is a realistic one, that it is
      first on the docket and not merely one among many cases competing for attention.

Texas Windstorm, supra, 339 S.W.3d at  404-405  (emphasis  in  original).   The  use  of  county-wide
pretrial courts for these cases, while commendable, cannot suffice for a pretrial court with Rule  13
obligations and powers.
      “One size fits all” discovery.  One plaintiff stresses  that  he  is  interested  in  different
discovery than the great majority of plaintiffs, who are largely represented  by  one  law  firm.[11]
He fears that an MDL pretrial court will limit him to “one size fits all” discovery.   This  argument
rests on a mistaken assessment of what the pretrial judge is expected  to  do.   The  pretrial  judge
will, of course, deal with general discovery issues common to the majority of cases.   Common  issues
will be given uniform judicial treatment and will be decided consistently.  But the judge  will  also
give individual attention to the unique issues and contentions in other cases.  Every lawsuit  in  an
MDL proceeding will have its individual, case-specific issues, which the pretrial judge  will  decide
as any trial judge would. Transfer of cases to a pretrial court does not  make  this  a  “big  issues
only” proceeding; “it simply puts a different  judge  in  place  to  make  decisions  about  pretrial
matters . . . .”  Cano Petroleum, supra, 283 S.W.2d  at  182.   As  we  have  said  before,  “We  are
confident that the pretrial judge will give individual consideration to case-specific  issues,  while
giving consistent, uniform treatment to the common and recurring issues.”  See Silica Litig.,  supra,
166 S.W.3d at 6.
      “The system is working.”  State Farm has sought mandamus review of  several  adverse  discovery
rulings.  We are told that the appellate courts will soon  decide  these  cases  and  therefore  “the
system is working as it is designed to work.”   This  argument  fails  to  recognize  two  realities.
First, mandamus review of individual rulings for abuse of discretion will not  address  any  of  Rule
13's most  salient  objectives:  to  eliminate  duplicative  and  repetitive  discovery,  to  promote
consistent rulings on common issues, to avoid conflict and inconvenience, and  to  conserve  judicial
resources. The availability of mandamus review, whose importance is not questioned, does not  satisfy
the need for a pretrial court.   Second,  and  more  important,   the  MDL  procedure  must  also  be
considered part of the Texas legal system “as it is designed to work.”  Rule 13, based on  a  mandate
from the Texas Legislature in 2003, has added an additional procedure for cases  with  common  issues
of fact where the values of convenience, efficiency,  and  just  handling  are  implicated.   When  a
pretrial MDL court is assigned in an appropriate set of cases, as has happened here,  the  system  is
working as it is designed to work.

      For the reasons stated, the motion to transfer is granted.

Chief Justice Stone, Chief Justice McClure, and Justice Brown concur.  Chief Justice Wright  did  not
participate.

                                  __________________________________
                                         David Peeples, Presiding Judge
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      [1] The counties with pending  cases  are:  Harris  (134),  Jefferson  (37),  Fort  Bend  (22),
Galveston (18), Brazoria (16),  Orange (14), Montgomery (8), Hardin  (4),  Polk  (3),  Chambers  (2),
Liberty (2), Tyler (2), Grimes (1), Matagorda (1), Cherokee (1), and Wharton (1).

      [2] Most of the cases were filed in 2010, although others were filed in 2009, 2011,  and  2012.
The cases before us are those remaining after a three-year abatement for mediation.
      [3] Our record includes a sampling of pleadings, discovery requests, and orders that  are  said
to be representative in these cases.

      Most of the allegations and discovery are case-specific.   A  typical  petition,  for  example,
alleges that: (1) Hurricane Ike damaged the insured plaintiff’s roof, allowing  water  to  enter  and
damage the house and contents; (2) the adjusters mishandled and  undervalued  the  claim;  (3)  State
Farm and the adjusters did not make timely settlement offers, did not timely pay the  claim,  engaged
in fraud and misrepresentation, failed to explain their reasons  for  inadequate  offers,  failed  to
conduct  a  reasonable  investigation,  made  an  outcome-oriented   investigation,   and   concealed
information; and (4) plaintiff is entitled to actual, treble,  and  punitive  damages  because  State
Farm engaged in unfair settlement practices, violated the insurance code, breached the  contract  and
its duty of good faith and fair dealing, and committed fraud.

      Other allegations and discovery are not limited to the individual case.   Some  petitions,  for
example, after making the assertions summarized above, continue with this paragraph:

      Plaintiff’s experience is not an isolated case. The acts and omissions State Farm committed  in
      this case, or similar acts and omissions, occur with such  frequency  that  they  constitute  a
      general business practice of State Farm with regard to handling these types  of  claims.  State
      Farm’s entire process is unfairly designed to reach favorable outcomes for the company  at  the
      expense of the policyholders.

      A typical request for production seeks these items for the last five years:  (1)  training  and
educational materials; (2) procedure and policy manuals; (3) communications from  the  Department  of
Insurance about claims-handling practices; (4) advertisements; (5) demand  letters,  complaints,  and
lawsuits; (6) materials given to adjusters, contractors,  and  roofers;  (7)  computer  programs  and
electronic data; (8) reference materials; (9)  materials  and  documents  given  to  contractors  and
roofers; (10) organizational charts; and (11) correspondence about problems with billing  and  claims
handling.

      The same request seeks the following documents from 2002 to the present: (1) correspondence  to
and from vendors; and (2) all property-damage lawsuits or “disputes” against State  Farm  nationwide.
It also seeks the following documents  without  time  limitation:  (1)  previous  discovery  requests
concerning property damage; (2) discovery requests concerning training; and (3) studies  that  either
analyze claims strategies or are designed to help  improve  corporate  profits.   One  other  request
seeks correspondence and lawsuits since 2000.
      [4] We have denied the motion for transfer in the Theresa Moor case,  which  was  filed  by  an
attorney who has only one lawsuit and seeks only case-specific discovery.
      [5] The main brief for the plaintiffs says the various courts “have made literally thousands of
pretrial rulings.”
      [6] As we said in Hurricane Rita, though no witnesses “have yet been subjected  to  conflicting
demands or repetitive discovery, we conclude that assigning one pretrial judge to  handle  the  cases
arising from this one  tragic  event  will  further  rule  13's  laudable  goals  of  efficiency  and
convenience.”  Hurricane Rita Bus Fire, 216 S.W.3d at 72.
      [7] These holdings “[do] not mean that it  is  sufficient  to  make  the  bare  assertion  that
witnesses might be inconvenienced.  The circumstances of  the  litigation  must  at  least  make  the
assertion plausible.”  In re Ad Valorem Tax Litig., 216 S.W.3d 83, 86 (Tex. M.D.L. Panel 2006).   The
assertion is plausible here, where 266 cases remain after mediation of many  more,  discovery  is  in
full swing, and many cases involving common witnesses may be remanded for trials.
      [8] For example, some of the local pretrial courts have disagreed significantly about the scope
and extent of e-mails to be produced concerning State Farm’s business practices—the  subject  matter,
the senders and recipients, and the period of time.
      [9]  In In re Cano Petroleum, Inc., 283 S.W.3d 179 (Tex. M.D.L. Panel 2008), we  observed  that
MDL proceedings cause delay only if the pretrial judge decides there are  reasons  not  to  remand  a
case:

      First, appointment of a pretrial judge has no direct effect on existing settings.  It does  not
      necessarily cause delay; it simply puts a different judge in  place  to  make  decisions  about
      pretrial matters, including whether and when to remand cases for trial and whether to  postpone
      and reschedule existing trial settings. . . .  Existing trial settings are not affected  unless
      the pretrial judge makes such a ruling and postpones a trial setting.

      Second, the granting of an MDL motion does not mean that all cases must proceed at the pace  of
      the slowest.  When an individual case is ready for trial, the pretrial  judge  will  ordinarily
      remand it for trial after consulting with the original trial court about docket realities.  The
      readiness of one case for remand should not be affected by the readiness of other cases because
      appointment of a pretrial judge does not consolidate cases for purposes  of  trial;  it  brings
      them together for pretrial purposes only.  There is no reason why all  related  cases  must  be
      ready for trial before any may be remanded.  Nothing in this opinion or our order granting  the
      MDL motion prevents the pretrial judge from remanding any case for trial at any time  he  deems
      the case ready.  Whether a case is ready for remand and trial is a decision  for  the  pretrial
      court to make in its broad discretion.

Id. at 182 (emphasis in original).
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      [13] One law firm represents the plaintiffs in 200 of the 266 cases.