On Dec. 17, lawyers for the state and Farmers Insurance tried to convince a skeptical appeals court that Attorney General Greg Abbott has the authority to bypass portions of state law in order to certify the state’s settlement with the insurance giant as a “class action.”
Lawyers for a group of individual Farmers’ policyholders argue that if the 3rd Court of Appeals grants Abbott that authority, it will usurp their right to due process under the law. Attorneys Philip Maxwell and Joe Blanks argued that in reaching the settlement with Farmers, Abbott agreed to dismiss a host of claims without offering individual policyholders any compensation or avenues for redress — and if the settlement is certified, those policyholders will be forever barred from seeking legal resolution for their complaints.
Abbott’s predecessor, now U.S. Sen. John Cornyn, filed suit against Farmers in August 2002, charging the company with a host of violations to the state’s law against deceptive trade practices — including overcharging for homeowners insurance policies and unfair use of credit scoring. After months of legal wrangling, state District Judge Scott Jenkins in May gave the state the go-ahead for the proposed $117.5 million settlement with the company. “This court ruling is great news for Farmers policyholders, the Texas insurance market, and all Texas consumers,” TDI Commissioner Jose Montemayor said on May 22.
Of course, exactly how “great” the news was is debatable. In settling the case, the state agreed to dismiss some of the claims brought against Farmers, including a charge that Farmers breached its contract with certain consumers by refusing to renew their comprehensive homeowners policies — instead offering only a bare-bones policy. According to Blanks, who represents policyholders suing Farmers for breach of contract, the state “settled away the rights of this complaint class,” without really reviewing the merits of their claim and without offering individual policyholders any monetary compensation.
The state doesn’t have any authority to bring an action “about individual renewal claims,” Blanks argued before the 3rd Court’s Chief Justice Kenneth Law and associate justices Mack Kidd and David Puryear. Yet, he said, the state offered to “immunize Farmers from any breach of contract for the nonrenewal claims” — clearly violating due process requirements, he said. Maxwell argued that in attempting to certify the class, Abbott claims that he only has to comply with those portions of state law that give him the power to bring and authorize a class-action settlement — while claiming he is exempt from other provisions that would require him to show that all class members and their claims are being adequately represented. Abbott has argued that the “heightened scrutiny” provisions are “irrelevant,” Maxwell told the court, “which I thought was a little bit on the cavalier side.”
But Assistant Attorney General David Mattax argued that the “plain language” of the law “grants the AG express authority” to bring a class action and to represent the class — an argument met with skepticism from justices Kidd and Puryear. If the law grants Abbott the authority to file a class-action suit, Puryear asked Mattax, what rules would the AG have to comply with to ensure the settlement satisfies class-action requirements? “What we’re saying is that [those requirements] do not apply,” Mattax replied.
That argument didn’t appear to satisfy Puryear or Kidd, who tried to get Mattax to explain how the AG would ensure that individual due process rights were satisfied if he isn’t required to follow the laws that ensure due process rights aren’t being violated. “There’s been heightened scrutiny there,” Mattax replied, simply, “and there will continue to be.”
This article appears in December 26 • 2003.