State Supreme Court Decisions of Note
By Chris Kramer
Although the decisions of a State Supreme Court don't have the same broad application as those of the United States Supreme Court, they can be important for several reasons. First, the State Supreme Court is the final authority in interpreting the laws of that state.
Even the United States Supreme Court cannot overrule a state's interpretation of its own laws or its own Constitution. Perhaps even more important, though, is the impact of State Supreme Court decisions as "persuasive authority".
Persuasive authority is authority that is not binding on a court rendering a decision, but that the court may consider as a source of guidance. Often, when an issue remains unsettled in one state, decisions of another state regarding a similar statute or Constitutional provision may be introduced by attorneys as persuasive authority and considered by the Court.
See also: The Most Influential Privacy Cases of the Decade
Texas Supreme Court Applies Res Judicata to Abandoned Claims in Class Action
The Texas Supreme Court recently held res judicata applies to claims abandoned in order to meet class certification requirements. Citizens v. Daccach. (Texas No.03-0505). Holders of life insurance policies sold by Citizens Insurance Company of America, attempted sue the company for breach of contract, fraud, and other related civil violations in Texas state court.
Dr Fernando Hakim Daccach, representing the group, filed a motion to have the group certified as a class. The trial court certified the class, but Citizens appealed. The court of appeals modified the definition of the class and allowed certification of the class under its definition. Citizens appealed to the Supreme Court asserting the class was still not properly certified.
Citizens sells life insurance policies through agents in foreign countries to people living in those countries. Citizens then allows the policyholders to assign the policy benefits to offshore accounts. The managers of the accounts then use the deposits to purchase shares of stock in Citizens. Because Citizens sells the policies from Texas, the lawsuit jurisdiction was proper in Texas.
The members of the class had originally brought claims of breach of contract and fraud, as well as several other related claims. When Daccach filed a motion for designation as the class representative, he artfully attempted to fit the suit into Texas' Rule 42. Daccach alleged only one class claim against Citizens: selling and offering securities from Texas in the form of the life insurance policies without registering with the Texas Securities Board. He expressly disclaimed any intention to pursue the other causes of action.
The Texas Supreme Court held that the class was not properly certified and decertified the class. The Court held that the trial court had not sufficiently examined conflict-of-law issues with the multitude of possible jurisdictions where the case could have been brought. The class did not meet the "desirability or undesirability of concentrating the litigation of the claims in the particular forum" provision of the Rule 42. TEX. R. CIV. P. 42(b)(3). The Court further held that res judicata applies to any action taken by the members of the class as individuals.
Because Daccach had abandoned the claims against Citizens for breach of contract, fraud, etc., the theory of claim preclusion applies the abandonment to each member of the class, individually. The Court relied on Rule 42's provisions requiring the class representative to keep the members of the class informed and allow them to opt out before class certification. The Court deemed that any member who failed to opt out of the class was covered by res judicata.
Daccach asserted that claim preclusion could not apply because the fraud claims could not be brought, as a class, under Rule 42. The Court said that Rule 42 did not create an exception to basic res judicata principles. Accordingly, the Court held that "claims not pursued, or abandoned, in a class suit seeking damages that proceeds to final judgment on other claims arising from the same subject matter are subject to preclusion from relitigation by the principles of res judicata."
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