BOB McCOY, Justice.
In this interlocutory appeal,
The underlying issue in this class certification appeal involves the rights of members of an electric cooperative and the statutory, fiduciary, and contractual duties, if any, owed by the cooperative to its members.
CoServ is a member-owned, nonprofit electric cooperative formed under the Texas Electric Cooperative Corporation Act (ECCA). See Tex. Util.Code Ann. §§ 161.001-.254 (West 2007). It has approximately 135,000 members, comprised of a diverse socio-economic and demographic group of residential users as well as commercial and public users.
Appellee Nicole Hackett is a CoServ member. Mark Glover and Janice Brady, also CoServ members, are parties in the proceeding below. Glover is a former CoServ director, and Brady unsuccessfully campaigned in June 2008 for election to CoServ's board.
In 2008, a CoServ member complained about receiving a robo-call from Brady on his unlisted phone number during Brady's election campaign. CoServ investigated, and Brady admitted that she possessed members' personal information but refused to disclose her source. In February 2009, Glover admitted that he had provided Brady with the members' personal information.
Brady filed a class action suit against CoServ in February 2009, alleging, among other things, that CoServ breached its fiduciary duty by undermining the cooperative's democratic process in its refusal to make its members' contact information available to nonincumbents running for election to CoServ's board of directors. CoServ removed the suit to federal court
Glover filed a counter-petition on his own behalf and on behalf of a class consisting of "[a]ll current members of Denton County Electric Cooperative, Inc. entitled to vote in board elections," excluding the
Brady filed a petition in intervention, seeking a declaratory judgment that CoServ had a duty to provide challengers with all voter lists and other information available to incumbent directors; that CoServ's member contact information is not confidential, a trade secret, or otherwise privileged from disclosure to other members; that Policy No. 310 violates state law; that providing member information to a person running for election to the board of directors conforms with state law and does not violate a board member's fiduciary duties; and that CoServ member information is not CoServ's property.
The trial court denied CoServ's motion to strike Brady's petition in intervention or, in the alternative, to stay Brady's lawsuit based on Brady's similar suit formerly pending in the federal court. CoServ subsequently filed an amended petition against Glover and an original verified petition against Brady, alleging trade secret misappropriation, conversion, and "conspiracy/aiding and abetting" by Glover and Brady and breach of fiduciary duty and breach of contract by Glover.
Brady filed an amended petition and Hackett combined her original petition in intervention with Brady's amended petition. They referred to themselves collectively as "Class Plaintiffs," defined the voting subclass, listed their common questions of law and fact for the class, and made claims for breach of fiduciary duty, statutory duties, and contract, as well as for conversion, oppression, and fraudulent concealment.
CoServ complained that Hackett and Brady lacked standing and argued that Brady, Hackett, and Glover were inadequate class representatives, that there were irreconcilable conflicts among the members of the putative class, that a class action was not the superior method of adjudicating the dispute, and that common questions did not predominate over individual issues.
Brady and Hackett filed Brady's second amended petition and Hackett's first amended petition in intervention on August 31, 2009, the same day that the trial court began the five-day hearing on class certification. Their new petitions omitted the claim for breach of statutory duties. Nonetheless, on November 6, 2009, the trial court signed an order certifying the class under rule of civil procedure 42(b)(2) that included the statutory duties claim as an issue.
The order set out the following:
The order also set out the declarations sought by the class representative before stating that the entitlement to the declaratory, injunctive, and other relief sought by the Voting Subclass could be determined by applying the law to the facts common to the entire class, including the following:
The trial court indicated in its order that it would determine whether Texas corporate governance statutes and common law applied to an entity formed under chapter 161 of the utilities code.
In its fourth issue, CoServ contends that the trial court misunderstood or failed to consider the law underlying the substantive claims made by Hackett and therefore granted class certification based on faulty assumptions. This issue is dispositive. However, before we may reach it, we must determine whether CoServ is correct in the part of its third issue in which it argues that the trial court's order and trial plan do not satisfy Southwestern Refining Co. v. Bernal, 22 S.W.3d 425 (Tex.2000), because the order recites proposed declarations that are not supported by the pleadings on some of Hackett's substantive claims.
At the hearing on the proposed class certification order, two months after the class certification hearing, CoServ raised the same complaint that it does on appeal, that "many of [the] proposed declarations [in the certification order] were not supported by the pleadings on file at the time. For example, Declarations 7-8, 11, and 13-20 are not supported by the pleadings that were on file at the time of the class hearing." Here, we are concerned only with Declarations 19 and 20, as set out above in our recitation of the facts.
As a general rule, an amended pleading supersedes the original pleading. See Conn v. Rhodes, No. 02-08-00420-CV, 2009 WL 2579577, at *3 (Tex.App.-Fort Worth Aug. 20, 2009, no pet.) (mem. op.) (citing Tex.R. Civ. P. 65, and Sheerin v. Exxon Corp., 923 S.W.2d 52, 55 (Tex.App.-Houston [1st Dist.] 1995, no writ) (op. on reh'g)). Under this rule, a party may voluntarily dismiss claims by omitting them from the amended pleading. Id.; see FKM P'ship, Ltd. v. Bd. of Regents of Univ. of Houston Sys., 255 S.W.3d 619, 634 (Tex.2008) (noting that an amended pleading effects a voluntary dismissal of claims not included in the amended pleading). And, generally, under civil practice and remedies code section 51.014, we consider the live pleading on file at the time the trial court entered its appealable interlocutory order. See Tex. Civ. Prac. & Rem.Code Ann. § 51.014; City of Arlington v. Randall, 301 S.W.3d 896, 906 (Tex. App.-Fort Worth 2009, pet. denied) (setting out claims from the live pleading on file when the trial court denied the city's plea to the jurisdiction); see also Presbyterian
On August 31, 2009, the first day of the class certification hearing, Brady and Hackett filed Brady's second amended petition and Hackett's first amended petition in intervention. This document constituted the live pleading when the trial court issued its class certification order. The pleading did not include a specific claim for breach of statutory duties, unlike the immediately preceding pleading filed in July 2009. However, the new pleading still set forth the facts that are the basis of the breach of statutory duties claim, and it is clear from the record of the five-day hearing on Brady and Hackett's class certification motion that breach of statutory duties was an issue upon which they sought relief — the equivalent of being tried "by consent." See, e.g., Tex.R. Civ. P. 67 (stating that when issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been raised by the pleadings). Therefore, we overrule this portion of CoServ's third issue.
In its fourth issue, CoServ specifically complains that the trial court improperly certified the class based on a significant misunderstanding of the law because it owes no fiduciary duty to its members; it has no contract with its members via its bylaws; oppression is not a viable claim; and it owes no statutory duties to its members under the ECCA. Hackett responds that CoServ owes contractual, statutory, and fiduciary duties to its members and that she has abandoned her claim for oppression.
Rule of civil procedure 42 governs class actions in Texas. See Tex.R. Civ. P. 42. We review the trial court's certification for an abuse of discretion. Sw. Bell Tel. Co. v. Marketing on Hold, Inc., 308 S.W.3d 909, 915 (Tex.2010). However, we do so "without indulging every presumption in favor of the trial court's decision." Stonebridge Life Ins. v. Pitts, 236 S.W.3d 201, 204-05 (Tex.2007) (citing Henry Schein, Inc. v. Stromboe, 102 S.W.3d 675, 691 (Tex.2002), and Bernal, 22 S.W.3d at 434-35, 439). "Actual conformance with Rule 42 is indispensable, and compliance with the rule must be demonstrated, not presumed." Id. at 205.
Prior to ruling on a motion for class certification, courts must perform a "rigorous analysis" to determine whether all prerequisites to certification have been met, and a cautious approach to class certification is essential. Bernal, 22 S.W.3d at 435; see also Compaq Computer Corp. v. Lapray, 135 S.W.3d 657, 671 (Tex.2004) (applying Bernal to rule 42(b)(2) certifications). It is improper to
Hackett argues that CoServ owes its members statutory duties under sections 22.152-.154, 22.158, and 22.351 of the business organizations code and sections 161.070 and 161.072 of the utilities code and contractual duties under CoServ's bylaws. The first portions of these claims present a question of statutory interpretation.
When a general statutory provision conflicts with a special statutory provision, both provisions shall be construed, if possible, to give effect to both; but if the conflict is irreconcilable, the special provision prevails absent certain exceptions. Chesser v. LifeCare Mgmt. Servs., L.L.C., 356 S.W.3d 613, 620 (Tex.App.-Fort Worth 2011, no pet.); see also Tex. Gov't Code Ann. § 311.026(b) (West 2005) (stating that the special provision prevails as an exception to the general provision unless the general provision is the later enactment and the manifest intent is that the general provision prevail).
We note initially that section 2.010 of the business organizations code states that "[a] nonprofit corporation may not be organized or registered under this code to conduct its affairs in this state to: (1) engage in or operate as a ... rural electric cooperative corporation." Tex. Bus. Orgs.Code Ann. § 2.010(1) (West 2011) (setting out a list of cooperative associations); see also Tex. Att'y Gen. Op. No. DM-479 (1998), available at 1998 WL 346647, at *2 (noting that since 1959, the Non-Profit Corporation Act has expressly excluded from its application cooperatives organized for particular purposes, including rural electric cooperatives, because each one of the excluded corporations is provided for and may be incorporated under a specific statute).
The ECCA specifically governs electric cooperatives. See Tex. Util.Code Ann. §§ 161.001-.254. Section 161.005 provides, "This chapter is complete in itself and is controlling," and the powers of electric cooperatives are solely derived from and
The legislature passed the ECCA in 1937 to provide for the organization of cooperative, nonprofit membership corporations for the purpose of engaging in rural electrification. Act of Mar. 30, 1937, 45th Leg., R.S., ch. 86, § 3, 1937 Tex. Gen. Laws 161, 161-62, repealed and recodified by Act of May 8, 1997, 75th Leg., R.S., ch. 166, §§ 1, 9-10, 1997 Tex. Gen. Laws 713, 947-57, 1018 (current version at Tex. Util. Code Ann. §§ 161.001-.254); Tri-Cnty. Elec. Co-op. v. Clair, 217 S.W.2d 681, 682 (Tex.Civ.App.-Fort Worth 1949, writ ref'd n.r.e.). The ECCA was recodified in 1997 without any substantive changes. See Act of May 8, 1997, 75th Leg., R.S., ch. 166, § 10, 1997 Tex. Gen. Laws 713, 1018.
The ECCA, however, does not always control. See Tri-Cnty. Elec., 217 S.W.2d at 683. In 1949, in a personal injury suit involving nonfatal electrical-burn injuries, we held that former article 1528b, section 36 of the ECCA
Unlike Tri-County Electric, this is not a personal injury suit involving standards of construction, operation, and maintenance of electric lines. Cf. 217 S.W.2d at 683. Further, two of the business organizations code provisions that Hackett lists to support her argument are duplicated in the ECCA. That is, Hackett argues that CoServ owes statutory duties to its members under the following sections: section 22.152, which states that members of a nonprofit corporation are not personally liable for a debt, liability, or obligation of the corporation; (2) section 22.153, which provides for an annual meeting; (3) section 22.154, which provides legal recourse for a member if the nonprofit corporation's board of directors fails to call the annual meeting of members when required; (4) section 22.158, which provides for the preparation and inspection of a list of voting members, including the voting members' addresses; and (5) section 22.351, which provides for a member's right to inspect books and records. See Tex. Bus. Orgs.Code Ann. §§ 22.152-.154, .158, .351.
However, utilities code section 161.060 provides that a member is not liable for a debt of an electric cooperative except for (1) a debt contracted between the member and the cooperative or (2) an amount not to exceed the unpaid amount of the member's membership fee. Compare Tex. Bus. Orgs.Code Ann. § 22.152, with Tex. Util. Code Ann. § 161.060. And utilities code section 161.067 provides for an annual meeting. Compare Tex. Bus. Orgs.Code Ann. § 22.153, with Tex. Util.Code Ann. § 161.067 (stating where and when an electric cooperative will hold its meeting and setting out who may call a special meeting of the members). In light of utilities code section 161.005, which provides that the ECCA is complete in itself and controlling, and because the utilities code contains more specific provisions addressing the same items in business organizations code sections 22.152 and 22.153, the utilities code provisions must control. See Tex. Gov't Code Ann. § 311.026(b). Therefore, neither Hackett nor the purported class has a substantive claim based on business organizations code sections 22.152 and 22.153. We sustain this portion of CoServ's fourth issue.
Further, nothing we have reviewed so far has indicated that the legislature meant to incorporate general provisions of the business organizations code into the ECCA. Cf. Tex. Agric. Code Ann. §§ 51.002, 52.004, 55.003; Tex. Health & Safety Code Ann. §§ 301.003, 301.033; Tex. Util.Code Ann. § 162.079. Therefore,
In a 1998 letter ruling, the attorney general reviewed what constitutes a "cooperative" and described it as "a corporation or association organized for the purpose of providing economic services, without gain to itself, to shareholders or members who own and control it," with the defining characteristic of being obliged to distribute net proceeds to its members in the form of patronage refunds or dividends in amounts determined by the use made by the members of the association facilities. Tex. Att'y Gen. Op. No. DM-479 (1998), available at 1998 WL 346647, at *1 (citing United Grocers, Ltd. v. United States, 186 F.Supp. 724, 733 (N.D.Ca.1960), aff'd, 308 F.2d 634 (9th Cir.1962), and Roswell Magill & Allen H. Merrill, The Taxable Income of Cooperatives, 49 Mich. L.Rev. 169, 173-74 (1950)). Additional characteristics that distinguish cooperatives from other business structures include "the features of democratic control and voting; distribution of economic benefits on an equal basis or proportionate use made of association facilities; limited return on capital; and of transaction of business with their own members." Id.; see also United States v. Miss. Chem. Corp., 405 U.S. 298, 311, 92 S.Ct. 908, 915, 31 L.Ed.2d 217 (1972) (observing that "the essential nature of cooperatives and corporations differs").
Cooperatives operate on different foundational principles than corporations. See Miss. Chem., 405 U.S. 298, 308 n. 14, 92 S.Ct. at 914 n. 14 ("Cooperatives and corporations operate on different principles. Whereas the corporate structure separates control and management, the essence of a cooperative requires that these functions be integrated."); see also Steve F. Brault, Equity Financing of Cooperatives: Advantageous Federal Securities Law and Tax Treatment, 21 Willamette L.Rev. 225, 226 (1985). Specifically, these principles, called the "Rochdale Principles," are the principles that "have guided the formation of cooperative businesses throughout the world and serve as the essential identifying characteristics of cooperative business organizations." Brault, 21 Willamette L.Rev. at 226. The Rochdale Principles are open membership; democratic control; limited return on member capital; use of new savings for development, common services, and distribution of patronage refunds; cooperative education; and cooperation among cooperatives.
In comparing cooperatives to corporations,
In evaluating the characteristics of a cooperative, it has been said that:
The ECCA defines a "member" as "a person admitted to membership in the electric cooperative as provided by Section 161.065." Tex. Util.Code Ann. § 161.002(5); see also Rep. Jim Cooper, Electric Co-operatives: From New Deal to Bad Deal? 45 Harv. J. on Legis. 335, 337 (2008) ("Electric co-ops are owned by their customers, who are called `members' of the co-op due to their dual role as customer/owner."). Section 161.065 states that a person is eligible to become a member if he or she has a dwelling, structure, apparatus, or point of delivery at which he or she does not receive central station service from another source and in an area where the cooperative is authorized to provide electric energy, and he or she (1) uses or agrees to use electric energy or the facilities, supplies, equipment, or services furnished by the cooperative at the dwelling, structure, apparatus, or point of delivery, or (2) is an incorporator of the cooperative. Tex. Util.Code Ann. § 161.065(a). Membership in an electric cooperative is not transferable, and a membership certificate in an electric cooperative is exempt from the Texas Blue Sky Law.
The ECCA provides that an electric cooperative shall operate without profit to its members, but it also contains a statutory distribution scheme to return revenue to members. Id. § 161.059(a), (c)-(d). The cooperative's bylaws regulate and manage its affairs. See id. § 161.064 (stating that the bylaws may contain any provision for the regulation and management of the cooperative's affairs that is consistent with the articles of incorporation). And its business and affairs are managed by a board of directors, each of whom "must be a member of the cooperative." Id. § 161.071(a). Each member present at a meeting of the membership of an electric cooperative is entitled to one vote on each matter submitted to a vote at the meeting, although the bylaws may provide for voting by proxy or by mail. Id. § 161.070. Although there is very little case law interpreting chapter 161, it appears that its emphasis — as with all cooperatives — lies in member participation and ownership.
In comparison to the ECCA, the business organizations code does not require a nonprofit's board of directors to be composed of the nonprofit's members. Compare Tex. Bus. Orgs.Code Ann. § 22.203 (stating that a director is not required to be a member unless the certificate of formation or a bylaw imposes that requirement), with Tex. Util.Code Ann. § 161.071(a) (stating that each director must be a member of the cooperative). The business organizations code also sets out procedures to amend the certificate of formation of a corporation "with members having voting rights" and of one that has no members or has no members with voting rights, Tex. Bus. Orgs.Code Ann. §§ 22.105, .107, and it provides that each member, regardless of class, is entitled to one vote on each matter submitted to a vote of the corporation's members, "except to the extent that the voting rights of members of a class are limited, enlarged, or denied by the certificate of formation or bylaws of the corporation," unlike the one-member, one-vote provision in the ECCA.
There are two ECCA provisions that specifically incorporate portions of the business organizations code. See Tex. Util.Code Ann. §§ 161.078, .121(10). In section 161.078, the ECCA specifically incorporates the provisions of the business organizations code pertaining to mandatory and permissive indemnification, advancement of expenses, and liability insurance. See id. § 161.078 (incorporating former article 1396-2.22A of the revised civil statutes, now found in business organizations code sections 8.051-.052, 8.101-.105, and .151-.152, to provide that an electric cooperative may indemnify and provide indemnity insurance in the same manner and to the same extent as a nonprofit corporation under the business organizations code). In section 161.121(10), the ECCA specifically incorporates the provisions of the Non-Profit Corporation Act pertaining to its general powers to exercise "any other power, for which the cooperative is organized, including other or additional purposes that benefit members and nonmembers, either directly or through affiliates, described in Section A, Article 2.01, Texas Non-Profit Corporation Act (Article 1396-2.01, Vernon's Texas Civil Statutes)." Id. § 161.121(10) (incorporating provisions now found in business organizations code section 22.051); Hilco Elec. Co-op., 111 S.W.3d at 77 (stating that the ECCA entitles an electric cooperative to create and own a for-profit company "if necessary, convenient, or appropriate to effectuate the [ECCA's] permitted purposes: rural electrification or purposes like those listed in article 1396-2.01(A) of the Non-Profit [Corporation] Act").
Based on the nature of the electric cooperative and the specific differences set out in the ECCA as compared to the provisions of the business organizations code, as well as the fact that the legislature deliberately chose to incorporate only two specific provisions of the business organizations code into the ECCA, we conclude that the legislature did not intend to provide electric cooperative members with the same rights set out in business organizations code sections 22.154, 22.158, and 22.351. Compare Tex. Util.Code Ann. §§ 161.078, 161.121(10) (deliberately incorporating specific provisions of business organizations code), with Tex. Agric. Code Ann. §§ 51.002, 52.004, 55.003; Tex. Health & Safety Code Ann. §§ 301.003, .033; Tex. Util.Code Ann. § 162.079; see also First Fed. Sav. & Loan Ass'n of Twin Falls v. E. End Mut. Elec. Co., 112 Idaho 762, 735 P.2d 1073, 1077-78 (Idaho Ct.App.1987) (stating that "[o]ur Legislature evidently has determined that this type of service provider [an unregulated, private, nonprofit electric cooperative], which typically serves a limited group of customers and is owned by the customers themselves, merits a lesser degree of public intrusion"); Hunerjager v. Dixie Elec. Membership Corp., 434 So.2d 590, 591 (La.Ct.App.) (concluding that member-plaintiffs had no statutory right to examine electric cooperative's records because although there were specific provisions for records examinations in the Business Corporation Law and Non-Profit Corporation Law, there were no sections in the Electric Cooperative Law regarding the examination of records by the membership and the Electric Cooperative Law did not provide that the business or nonprofit corporate law was supplementary to its provisions), writ denied, 440 So.2d 149 (La.1983). Rectifying this situation is a task best suited for the legislature. Therefore, we sustain the portion of CoServ's fourth issue pertaining to the breach of statutory duties claim under business organizations code sections 22.154, 22.158, and 22.351.
Hackett also contends that CoServ owes and breached statutory duties to its members under utilities code sections 161.070 and 161.072. CoServ argues that the ECCA does not confer an express private right of action on Hackett, giving her no standing to sue under the ECCA.
Standing is a prerequisite to suit before rule 42's adequacy requirement may be considered. See M.D. Anderson Cancer Ctr. v. Novak, 52 S.W.3d 704, 706, 711 (Tex.2001) (stating that a named plaintiff's lack of individual standing at the time suit is filed deprives the court of subject matter jurisdiction over the plaintiff's individual claims and claims on behalf of the class); see also DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299, 304-05 (Tex.2008) ("For standing, a plaintiff must be personally aggrieved; his alleged injury must be concrete and particularized, actual or imminent, not hypothetical."). A plaintiff has standing to bring suit if she has a legal right that has been breached. Nobles v. Marcus, 533 S.W.2d 923, 927 (Tex.1976); McDaniel v. Town of Double Oak, No. 02-10-00452-CV, 2012 WL 662367, at *3 (Tex. App.-Fort Worth Mar.1, 2012, no pet. h.) (mem. op.). Without a breach of a legal right belonging to the plaintiff, no cause of action arises or can accrue to the plaintiff's benefit. Nobles, 533 S.W.2d at 927.
We start with the plain language of the statutes in construing them. Exxon Corp. v. Emerald Oil & Gas Co., L.C., 331 S.W.3d 419, 422 (Tex.2010) (op. on reh'g) (concluding that natural resources code section 85.321, entitled "suit for damages," which provides that a party "may sue for and recover damages and have any other relief to which he may be entitled at law or in equity," creates a private cause of action for damages resulting from statutory violations). "When a private cause of action is alleged to derive from a constitutional or statutory provision, our duty is to ascertain the drafters' intent." Brown v. De La Cruz, 156 S.W.3d 560, 563 (Tex.2004) (citing Rocor Int'l, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA, 77 S.W.3d 253, 260 (Tex.2002)).
Section 161.070, entitled "Voting by Members," states, "Each member present at a meeting of the members is entitled to one vote on each matter submitted to a vote at the meeting. The bylaws may provide for voting by proxy or by mail." Tex. Util.Code Ann. § 161.070 (emphasis added). Section 161.072, entitled "Election of Directors; Vacancies," provides as follows:
Id. § 161.072 (emphasis added).
Unlike the business organizations code provisions for nonprofit corporations, which specifically set out the procedure to enforce the right to inspect books and records and to obtain the list of voting members and the duty of the nonprofit corporation to make records, books, and reports available to the public for inspection or copying, there are no similar specific provisions set out in the ECCA, and — as previously discussed above — they are not incorporated into the ECCA. Cf. Tex. Bus. Orgs.Code Ann. §§ 22.158, 22.351, 22.353;
Rather, utilities code sections 161.070 and 161.072 focus attention on the bylaws rather than setting out specific provisions for legal recourse. Cf. Hilco Elec. Co-op., 111 S.W.3d at 77-78 (construing utilities code section 161.121 in suit for declaratory judgment by members, some of whom were propane dealers, regarding cooperative's statutory authority to engage in propane sales).
CoServ's 2009 bylaws comply with utilities code section 161.070 with regard to voting rights.
CoServ also argues that it owes no fiduciary duties to its members. Nothing in the ECCA provides for a fiduciary duty from the cooperative to its members. See id. §§ 161.001-.254. Nothing in the ECCA incorporates the provisions of the business organizations code that provide for duties of good faith and ordinary care by the "governing persons" and officers of a corporation to the corporation. See Tex. Bus. Orgs.Code Ann. §§ 3.102-.103 (West 2011); Int'l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 576-77 (Tex.1963) (discussing fiduciary duties owed by corporate officers and directors to the corporation). And to the extent that a fiduciary duty might be owed by CoServ's directors to CoServ's members, Hackett and the class did not sue CoServ's directors. Compare Wilson v. Harlow, 860 P.2d 793, 798 (Okla.1993) (holding no fiduciary duty at common law between utility's directors and its ratepayers because utility was not a cooperative), cert. denied, 510 U.S. 1117, 114 S.Ct. 1067, 127 L.Ed.2d 386 (1994), and Hargrave v. Canadian Valley Elec. Co-op., Inc., 792 P.2d 50, 52-53, 56-57 (Okla.1990) (remanding summary judgment on fiduciary duty issue in class action brought by utility ratepayer-member against electric cooperatives and their trustees because trustees owed fiduciary duty under Oklahoma statute and controverted issues of fact remained with regard to whether trustees had breached their fiduciary duty), with Peoples Elec. Co-op. v. W. Farmers Elec. Co-op., 746 F.Supp.2d 1202, 1206 (W.D.Okla.2010) (stating, in dispute between two cooperatives, that "[a]n assumption that the entity itself also owes broad-based fiduciary duties runs the risk of upsetting the balance struck by director-focused standards"). But see True v. Robles, 571 F.3d 412, 417-23 (5th Cir. 2009) (stating that "[t]he relevant Texas statutes do not address whether the directors of a reciprocal insurance exchange owe a fiduciary duty to individual subscribers, and we are not aware of any cases, in Texas or elsewhere, that do so," before concluding — after an analysis of analogous law — that there is no fiduciary or contractual relationship between individual subscribers and the board of directors).
We conclude that whether the cooperative itself owes a fiduciary duty to its members is another claim best suited for a legislative determination, and we sustain this portion of CoServ's fourth issue. See also McCarthy v. Middle Tenn. Elec. Membership Corp., 466 F.3d 399, 403, 410 (6th Cir.2006) (stating with regard to members' claims against cooperative for mismanagement, self-dealing, and breach of fiduciary duty that such claims must generally be brought as derivative actions because breaches of fiduciary duty are deemed to injure only the corporation).
Having overruled CoServ's third issue in part and having sustained CoServ's fourth issue in part, we vacate the trial court's class certification order and remand the case to the trial court for further proceedings without reaching CoServ's remaining issues or Hackett's issues. See Tex. R.App. P. 47.1; Gill, 299 S.W.3d at 129 (stating that when a class has been certified based on a significant misunderstanding of the law, remand to the trial court is appropriate so that it may determine the
WALKER, J. filed a dissenting opinion.
SUE WALKER, Justice, dissenting.
I respectfully dissent. I agree with the majority that the trial court had a duty to understand the substantive law, claims, and defenses in determining whether the purported class can meet the certification prerequisites under Texas Rule of Civil Procedure 42, but I cannot agree with the majority's holding — dispositive of the class's breach-of-statutory-duties and breach-of-fiduciary-duties claims — that the trial court misunderstood the applicable law when we do not know that to be true based on the record before us.
In determining the propriety of a class action, the question is not whether the plaintiffs have stated a cause of action or will prevail on the merits, but solely whether the requirements of rule 42 have been met. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177, 94 S.Ct. 2140, 2152, 40 L.Ed.2d 732 (1974); Garcia v. Gloor, 618 F.2d 264, 267 (5th Cir.1980), cert. denied, 449 U.S. 1113, 101 S.Ct. 923, 66 L.Ed.2d 842 (1981);
Texas Parks & Wildlife Dep't v. Dearing, 240 S.W.3d 330, 357 (Tex.App.-Austin 2007, pet. denied); see Clark, 184 S.W.3d at 909 (interpreting trial court's order dismissing case as summary judgment, rather than
Here, in this interlocutory appeal of the trial court's class certification order, the majority delves into a lengthy analysis of the interplay between the Texas Electric Cooperative Corporation Act (ECCA) and chapter 22 of the Texas Business Organizations Code and ultimately determines that the trial court improperly certified the class based on a misunderstanding of the law. However, the trial court did not discuss these statutes in its order certifying the class, nor were they discussed at the hearing on the certification. We do not know if the trial court misconstrued or misapplied the applicable law. Cf. Gill, 299 S.W.3d at 127 (explaining, in holding that trial court misapplied case law, that trial court acknowledged and distinguished case law that was, in fact, indistinguishable); Lopez, 156 S.W.3d at 557 (refusing, in interlocutory appeal of trial court's certification order, to address argument that policyholders' claims on merits should be dismissed when trial court did not identify specific causes of action to be decided nor indicate how they would be tried or substantive issues that would control their disposition). In fact, in its order certifying the class, the trial court found that common questions of the class include "[w]hether CoServ has a statutory duty to the Voting Subclass vis-à-vis governance, director elections, and voting procedures." [Emphasis added.] Moreover, the majority's holding reaches the viability of the class's claims, a matter best addressed through established procedural mechanisms — such as pleas to the jurisdiction, summary-judgment motions, and special exceptions — that are not the basis of this appeal. Cf. Lopez, 156 S.W.3d at 557 (declining to reach viability issues and remanding so trial court could address pending plea to the jurisdiction and special exceptions).
For these reasons, I would overrule Appellant's fourth issue and address its remaining issues.