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An April 19 decision by the Texas Supreme Court could put more pressure on defendants to settle class actions in the future, a South Texas College of Law professor says. “This decision makes it a little harder to appeal [class] certification,” says Jeff Rensberger, an expert on civil law and class actions at STCL in Houston. Rensberger says the ruling enables trial courts to keep “a little more control” over class actions. “It sort of insulates lower courts’ decisions from review,” he says. The high court ruled 5-3 in Bally Total Fitness Corp. v. Keith Jackson that it was premature to decide Bally’s claim that San Antonio’s 131st District Judge John Gabriel Jr. fundamentally changed the class he had certified by determining the club’s liability before notice was sent to class members. “Because Bally may still appeal [certification] after final judgment, its constitutional arguments concerning one-way intervention are premature,” Justice Harriet O’Neill wrote for the majority opinion. O’Neill was joined in the opinion by Chief Justice Tom Phillips and Justices Craig Enoch, James Baker and Deborah Hankinson. If the court had ruled for Bally, it would have opened up class actions to multiple interlocutory appeals, says Barry Snell, a partner in San Antonio’s Bayne, Snell & Krause and the lawyer representing the class. Bally argued that anything affecting a class can be appealed, but the supreme court disagreed, Snell says. “It seemed just open and shut to me — a no-brainer,” he says. Texas law authorizes interlocutory appeals from an order that certifies or refuses to certify a class action. Bally argued that there was no reason to draw a distinction between the facts of its case and the facts in De Los Santos v. Occidental Chemical Corp. In 1996, the supreme court held in De Los Santos that a trial court modified a class by changing it from an opt-out class to a mandatory class. In that case, the class counsel agreed to the restructuring to meet the defendant’s requirement for a settlement, even though the class had opposed that action. NOTICE ISSUE According to court records in Bally Total Fitness Corp., Jackson filed the class action against Bally — formerly known as Health and Tennis Corp. of America — in 1995. The suit alleged the club charged customers who purchased club memberships on the installment plan a time-price differential that exceeded the amount allowed by state credit laws. The allegation was that the charges amounted to monthly dues that other customers did not have to pay. In a brief, Snell alleged that approximately 207,000 customers were overcharged by more than $42 million. Gabriel certified an opt-out class in December 1995. Bally appealed the certification order, which was affirmed by San Antonio’s 4th Court of Appeals. The supreme court’s majority opinion indicates discovery disputes arose over potential class membership, delaying the delivery of notice to the class. Before the notice was sent, Gabriel ruled in September 1998 that Bally had violated the Texas Consumer Credit Code and the Deceptive Trade Practices Act. Bally moved to decertify the class on the grounds that a partial summary judgment should not have been issued before notice was sent to the class members. Gabriel issued two orders denying the club’s motions. The 4th Court dismissed Bally’s appeal in May 1999 for want of jurisdiction. Justice Alma Lopez, author of the court’s opinion, said orders denying decertification of a class and granting partial summary judgment are not appealable. She was joined in the decision by Justices Catherine Stone and Karen Angelini. Bally argued that De Los Santos made it possible to appeal any order that changes the fundamental nature of a class. The club contended that class members’ incentive to opt out virtually was eliminated when the trial court resolved the liability issue in the plaintiffs’ favor. It also contended that the pre-notice partial summary judgment allows class members to intervene once a court decides the merits in their favor, although they would not have been bound if the ruling had gone the other way. O’Neill noted in the supreme court’s majority opinion that the class notice approved by the trial court informs class members that state law limits the amount of penalty awarded in a class action and that they may be able to recover more damages if they aren’t a part of the class. Contrary to Bally’s argument, it does not appear that the pre-notice partial summary judgment eliminated incentive to opt out of the class, the opinion said. “But even if that were so, any incentive to stay in the class that might result from the trial court’s order would affect only the size of the class, not its fundamental nature,” O’Neill wrote. “And in De Los Santos we said that simply enlarging the class’ membership is not enough.” DECERTIFICATION QUEST In a dissenting opinion, Justice Priscilla Owen said the fundamental nature of the class was altered when the trial court issued a decision on liability before notice to class members had been given. The trial court changed the class from one that didn’t permit one-way interventions to one that did, the opinion said. “After that ruling, a class could no longer be certified. Decertification was required,” Owen wrote. Justices Nathan Hecht and Greg Abbott joined Owen in the dissent. Justice Wallace Jefferson, the newest member of the court, did not participate in the case. Bally attorney Sharon Callaway, a partner in Crofts & Callaway in San Antonio, declines comment and refers calls to Bally. Jefferson formerly was a partner in Crofts & Callaway before being nominated to the bench on March 14. Two other San Antonio attorneys representing Bally — Keith Kaiser with Cox & Smith and Ricardo Cedillo with Davis, Cedillo & Mendoza — did not return phone calls. A written statement issued by the health club says: “Bally remains confident that this class action will ultimately be decertified. While it is disappointed that the supreme court majority did not choose to decertify now, it will continue to seek that result in an appropriate forum at an appropriate time.”

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