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Supreme Court cuts attorney general slack on class action rules

By Legal News Line | Apr 30, 2007

Justice Scott Brister

AUSTIN -- The Texas Supreme Court has reinstated the class certification in a class-action lawsuit brought by the state attorney general against a major insurer threatening to leave the state. The original $177 million settlement of a lawsuit first brought by the Texas attorney general against Farmers Group is the largest in Texas insurance history. The settlement's terms can now proceed as negotiated. The Supreme Court's ruling Friday in Farmers Group, et. al. v. Lubin, Vilolanueva and Paladino (docket# 05-0196) overturned a Court of Appeals decision that the attorney general hadn't met two class certification requirements. A trial court had earlier certified a class of insurance buyers originally reached by negotiation between the two parties despite the objection of several policyholders, who appealed. The Third District Court of Appeals ruled in the policyholders' favor. But on appeal, Supreme Court Justice Scott Brister wrote that the appellate court did not determine whether the attorney general's claims met the class requirements of "typicality" and "adequacy." Class certification requirements "cannot be applied in a way that renders attorney general class actions impossible, a result that would frustrate the Legislature's intent," Brister wrote. But in a lone partial dissent, Justice Nathan Hecht wrote that the "four prerequisites" for class certification in the Texas Insurance Code only apply to class members. "By the plain statutory text, the four prerequisites do not apply to as class action brought by the Attorney General," Hecht wrote. But he also added: "I agree that the case should be returned to the court of appeals for consideration of the numerous other issues respondents have raised."

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