Highland Homes Ltd v. State, No. 12 0604. Texas VLEX 888807079

Table of Content

• HIGHLAND HOMES LTD v. STATE
• Texas Supreme Court
• Supreme Court of Texas.
• HIGHLAND HOMES LTD. v. THE STATE OF TEXAS (Dissenting)
• Highland Homes Ltd. v. State, 12-0604 (Tex.
• HIGHLAND HOMES LTD., Petitioner, v. The STATE of Texas, Respondent.
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Accordingly, we reverse the judgment of the court of appeals6 and affirm the judgment of the trial court. Highland Homes agreed to pay Benny & Benny $28,000 and to refund to the settlement class—members who did not opt out8 —the total amounts withheld, plus each member's pro rata share of the difference between that total and $3,672,000 (less the amount for opt-outs). Highland Homes was to prepare from its records a list of class members with last known addresses and the amounts withheld from each.

Such cy pres distribution shall be made to the Nature Conservancy, a non-profit, charitable organization operating in Texas. In 2009, Benny & Benny amended its pleadings to add another subcontractor, Richard Polendo, and together they asserted claims on behalf of a class of more than 1,800 other subcontractors from whose pay Highland Homes had deducted amounts for insurance before clarifying its policy. The trial court certified the class under Rule 42,7 found Benny & Benny and Polendo to be adequate class representatives, appointed their lawyers as class counsel, and adopted a trial plan. Highland Homes appealed, but while the appeal was pending, the parties settled, subject to notice to the class and the trial court's review and approval. Finally, the Court argues that the UPA should not apply because it intrudes on the class representative's authority to act for class members under Rule 42.

HIGHLAND HOMES LTD v. STATE

As a mere procedural device, the class-action rule is not intended “to enlarge or diminish any substantive rights or obligations of any parties to a civil action” but to facilitate the efficient adjudication of such rights and obligations. Here, however, the Court uses our class-action rule to diminish the substantive property rights of the missing property owners and in so doing also marginalizes the UPA's public policy concerns. Because the Court's application of Rule 42 conflicts with the UPA's explicit language, I respectfully dissent. Remarkably, the Court's explanation is that the "'unclaimed funds' . . . were, in fact, claimed," ___ S.W.3d at ___, even though the class representative lacked authority to endorse the checks or otherwise claim the funds belonging to another class member. Cy pres distributions in class actions are appropriate when there is money remaining in a settlement fund after identifiable class members have been compensated.

The trial court refused to modify the judgment, and the State appealed. When the rule is followed, class representatives may assert—and agree to disposition of—claims on behalf of the class, including claims on behalf of absent members. In my view, the above provision includes both a limitation period and private escheat agreement prohibited under the UPA. The Property Code provides that property is presumed abandoned if "for longer than three years," no claim has been asserted or act of ownership exercised. Such reasoning renders the statutory prohibitions against private escheat agreements and contractual time limits meaningless.

Texas Supreme Court

In 2010, the parties presented their agreement to the trial court, which ordered that a detailed notice of the proposed settlement be mailed to class members at the addresses determined by the administrator. No other court has taken such a fanciful approach to private escheat agreements. Only eight class members requested exclusion.

In both situations, there is no holder of abandoned property. As we shall explain more fully, property that goes unclaimed for three years may be presumed abandoned and must then be delivered to the Comptroller to hold for the owner. The Unclaimed Property Act protects the property rights of identifiable owners whose property cannot be delivered or returned because the owner cannot be found.

Supreme Court of Texas.

We launched @recap.email and legal webhooks. In a few days, we will add appellate court support to the RECAP extension. Court refused to modify the judgment, and the State appealed. Substantively altered, a party adversely affected could terminate the agreement.

On the policy side, we helped pass a law to publish judicial financial disclosures to eliminate conflicts of interest. We opposed unconstitutional efforts to censor our website. We are working with others to develop a FOIA-like law for the judiciary. CourtListener is hosted by Free Law Project, a small non-profit that punches way above its weight.

The Court acknowledges that The Nature Conservancy was chosen as the cy pres recipient because it “share Highland Homes' vision of green building and commitment to the environment.” ––– S .W.3d at –––– . But Highland's vision or preferences are irrelevant because the settlement fund does not belong to Highland. It belongs to the class members whose claims created the fund. See Klier, 658 F.3d at 474 (“The settlement-fund proceeds, having been generated by the value of the class members' claims, belong solely to the class members.”) (citing Principles of the Law of Aggregate Litigation, 2010 A.L.I. § 3.07 cmt. b).

Highland did not require, nor need, the class members to prove their right to the fund as Highland possessed all the relevant information in its own business records. It therefore allocated the entire fund to identifiable class members by issuing each of them a check for the specific amount owed. There accordingly was no unclaimed surplus to which an appropriate cy pres distribution could attach. The parties agree to a cy pres distribution of unclaimed funds owed to class members that cannot be located or who fail to negotiate the settlement check within ninety days of its issuance. The amount of these unclaimed funds will not be paid to individual Class Members.

At the earliest then, the three-year period commenced when the checks were issued. To be abandoned, nevertheless applies to all holders of checks. Charitable purpose that reasonably approximates the designated purpose.” R ESTATEM ENT O F T RUSTS § 67 .

The issue in this case is whether damages and settlement proceeds claimed by class representatives on behalf of absent members are nevertheless unclaimed property, presumed abandoned, and therefore subject to the Act. In other words, does the Act prohibit what Rule 42 permits—the disposition of absent class members' claims by their representatives with court approval? We hold that the Act, by its own terms, does not apply.

The State's argument for the application of the Unclaimed Property Act in these circumstances cannot succeed unless class representatives' authority to act for class members under Rule 42 is disregarded. The State warns that cy pres awards can be abused when they are nothing more than a judicial giveaway of private property, while Highland Homes and its amici curiae plead that cy pres awards benefit deserving, charitable causes. We need not take sides on this disagreement today. Though the State seems to consider the award to the Conservancy inappropriate, it does not make that challenge, assuming that it could.

“unclaimed funds” determinative; the refunds were, in fact, claimed. Effect on nonparties include properly conducted class actions,” but refusing to extend nonparty preclusion); Martin v. Property—a private escheat agreement prohibited by the UPA. Petitioner, Highland Homes, Ltd., a homebuilder in the Austin, Dallas–Fort Worth, Houston, and San Antonio areas, employs hundreds of subcontractors. In 2003, Highland Homes began docking subcontractors' pay if they did not furnish proof of adequate general liability insurance coverage. Highland Homes contends that the deductions were to cover its own increased exposure from working with uninsured subcontractors.

But in 2006, one subcontractor, Benny & Benny Construction Company, sued, alleging that Highland Homes had represented it would use the paycheck deductions to obtain liability insurance covering the subcontractor. Highland Homes denied Benny & Benny's claim but clarified its policy for the future. Principles of res judicata apply to class actions just as they do to any other form of litigation.”) . The trial court approved the settlement and rendered final judgment accordingly, “binding on all parties to the Settlement Agreement and on all Settlement Class Members ... Who did not timely request exclusion from the Settlement Class”.

—the total amounts withheld, plus each member's pro rata share of the difference between that total and $3,672,000 (less the amount for opt-outs). The very least, the cy pres distribution should “reasonably approximate” the class members’ interests. In which the issuer/payor is the “holder,” not the depository.