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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.
The Court ultimately concludes that the unclaimed checks are not abandoned property because the class representative has asserted a claim or exercised a right of ownership over the class members' claims by negotiating the class settlement. See ––– S.W.3d at –––– (noting that “the class representatives asserted claims for refunds in the litigation, controlled the prosecution of those claims as owners, negotiated the terms for settling the claims, asserted claims for payments under the settlement agreement, and then released all claims”). But that all occurred before the three-year period for determining abandonment of the checks even commenced. The assertion of a claim or the exercise of an act of ownership occurring before the three-year period begins is, I submit, meaningless. Under the Texas Unclaimed Property Act (“the Act”),5 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.
HIGHLAND HOMES LTD., Petitioner, v. The STATE of Texas, Respondent.
The State has standing to, and did in fact, challenge the cy pres distribution to The Nature Conservancy in both the court of appeals and this Court. Class representatives—again, on behalf of settlement class members—acknowledged that Highland Homes denied all liability in the action and agreed to a global release of Highland Homes and its affiliates12 from liability on all claims either brought or that could have been brought. The parties agreed to use their best efforts to obtain judicial approval of their agreement, and that if it was substantively altered, a party adversely affected could terminate the agreement. As the Court acknowledges, the UPA prohibits private limitation and escheat agreements that seek to evade the process for reporting and delivering abandoned property to the State.
See DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299, 304 (Tex.2008) (“For standing, a plaintiff must be personally aggrieved ․”). The cy pres award was a significant part of the settlement, and we cannot assume that Highland Homes would have reached the same agreement without it. V. Daccach, 217 S.W.3d 430, 450 (Tex.2007) (“Basic principles of res judicata apply to class actions just as they do to any other form of litigation.”) .
Highland Homes Ltd. v. State
The Court reasons that unclaimed settlement funds have not been abandoned because the class representative has exercised ownership over the property on the class members' behalf by entering into the agreement with Highland. Highland used its business records to precisely tailor the size of the settlement fund, reserving the right to reduce the fund by the amounts attributable to class members who opted-out. Highland then used these same records to issue checks to each settling class member, who under the settlement agreement were designated as the owners of their particular share of the fund and were issued checks representing that share. The cy pres provision then subsequently forfeited that property interest if the class member did not cash the issued check within 90 days.
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.
Supreme Court of Texas.
Klier v. Elf Atochem N. Am., Inc., 658 F.3d 468, 474–75 (5th Cir.2011). Typically, this might occur when a defendant does not have sufficient information or resources to determine the precise size of the class or the identity of its members and thus relies on a claims-form process to qualify membership. In that situation, any unallocated surplus in the settlement fund might appropriately be disposed of under a cy pres provision. Airlines, Inc., 880 F.2d 807, 813 (5th Cir.1989) . In this case, however, all of the identifiable class members were not compensated. As to this latter point, the Court acknowledges the State's warning that cy pres awards “can be ․ nothing more than a judicial giveaway of private property” but suggests that the State either lacked standing to challenge the appropriateness of the award in this case or waived the complaint.
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.
Highland Homes Ltd. v. State, 448 S.W.3d 403 (Tex.
As already discussed, the class representative's authority extends to the settlement of the class claims but not to the disposition or forfeiture of the individual class member's vested property rights. The class action rule may authorize the representative to settle the class member's claim, but it does not authorize the representative to take away the member's share of that settlement once it has vested. The UPA prevents individuals or entities that hold property belonging to others from prospectively contracting for the disposition of such property, if unclaimed by the rightful owner. Thus, for example, landlords, banks, utilities, and insurance companies cannot contract for the future disposition of unclaimed funds owed to their respective tenants, customers, or policyholders in circumvention of the UPA. The Court here, however, imbues the class representative in class-action litigation with special power to make such disposition.
An administrator designated by the parties would then use computer software and other means to update the addresses. If the settlement was finally approved, Highland Homes would issue refunds checks, sending them to existing subcontractors as it would their paychecks or by mailing checks to former subcontractors last known addresses. The following example illustrates the flaw in the State's argument. Suppose Benny & Benny had never asserted class claims, had settled its own claims on the same terms, and then had decided to tear up the $28,000 settlement check in hopes of getting more business from Highland Homes. Surely the State could not insist that Highland Homes was nevertheless obligated to pay the $28,000 to the Comptroller until Benny & Benny broke down and took it. Suppose Benny & Benny made the same decision for Polendo, acting as his attorney-in-fact.
For purposes of the UPA and the three-year period, at least, a check represents a property right that is distinct from the underlying obligation or transaction it represents. Missing property owners and in so doing also marginalizes the UPA's public policy concerns. Generally, when those circumstances persist for three years, the property in the possession of another is presumed abandoned by its owner and must be turned over to the State for safekeeping under the UPA. Not prevent property from being presumed abandoned. But that provision is inconsequential here. First place, the class representative also had the authority to prescribe the terms under which the checks would be paid.
If they went unclaimed for three years. State by Furman v. Jefferson Lake Sulphur Co. To a civil action” but to facilitate the efficient adjudication of such rights and obligations.
While I agree that the class representative exercised authority over the class claims and was authorized to settle, its authority did not extend to the subsequent disposition of the settlement checks, which are the individual class members' property rights created under the settlement agreement. Quite simply, the class representative lacked authority to claim, spend, or give away any other class member's settlement check. The Court mistakenly conflates the representative's authority over the class claims with the settlement proceeds it negotiated on behalf of the individual class members. Because the class representative could not assert any missing class member's ownership interest in the fund or cash their individual checks, in my view, it did not exercise ownership over such property. When the property went unclaimed, it was abandoned within the UPA's meaning, notwithstanding the cy pres provision. 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.
Why should money escheat to the State, if a charity can benefit from unclaimed settlement proceeds? The problem, as I see it, is two fold. First, and foremost, under the terms of this settlement agreement, the money belongs to the missing class members, not to Highland or the class representative. The missing parties' property rights can only be preserved if the State is permitted to act as their custodian under the UPA. Second, even if this were an appropriate case for a cy pres distribution , the cy pres distribution here is contrary to existing law on the subject.
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