To overturn a trial court’s judgment, an appellant must show that the trial judge abused his discretion. On March 5, the Third Court of Appeals in Austin ruled that appellant David Allen Hall did not clear that steep hurdle.
In an interview Tuesday, Hall reflected on the court’s ruling. “I’m grateful for the support and encouragement given me by many concerned PEC members, and disappointed for their sake in the outcome at the appeals court. The settlement and its blessing by the court were in my opinion the product of expediency rather than justice. But I hope that the appeal, by focusing some attention on the problems of the past, contributed to better PEC governance.”
After a two year stint as a Navy Engineering Duty Officer and a 30-year career as an engineer at IBM, Hall launched a new career in law. A graduate of the University of Texas School of Law, Hall began practicing law in 2002, and opened his patent practice in a corner office of the historic Blanco County Courthouse in 2005. He never anticipated becoming a pivotal figure in a civil case alleging fraud, abuse of fiduciary duty and breach of contract that would touch thousands of households.
In April 2008, Hall was one of the 220,000 members of the Pedernales Electric Cooperative to receive the Notice of Settlement in the class action case filed by three co-op members. “Summarizing 22 pages of settlement terms in 22 lines seemed insufficient to me, especially when gauged against the vast amount of information members were not privy to at the time.”
Hall and 267 other PEC members filed objections to the proposed settlement of the class action law suit prior to the fairness hearing in May 2008. Travis County District Judge John Dietz said he considered all the objections and ruled against them all.
In his appeal brief, Hall alleged that the notice was not sufficient since it did not inform members that PEC would be paying $1.6 of the $4 million awarded to the plaintiffs’ attorneys and that individual defendants such as Bud Burnett and Bennie Fuelberg would not be responsible for paying any part of that sum. Hall also alleged that the releases and immunities given to directors, officers, attorneys, insurers and others related to PEC in the settlement were excessive.
The 27-page appellate court opinion found that Hall did not prove that Judge Dietz clearly abused his discretion in approving the settlement and denied Hall’s challenge in its entirety.
PEC General Manager Juan Garza testified at trial in favor of the settlement, and after the appellate court’s ruling last week commented on the case. “We have consistently maintained the settlement is in the membership’s best interest, and I remain convinced settling the lawsuit was the most prudent financial course. We are heartened by the Court of Appeals’ decision,” Garza continued, “and we are ready to move ahead. We also appreciate our members’ involvement in making their cooperative a better, more responsive entity.”
John Worrall, Glenn Van Shellenbeck and Linda G. Evans are the three PEC members who were plaintiffs in the class action, and were appointed class representatives by Judge Dietz after the fairness hearing. Worrall said he is “delighted with the substance and alacrity of the ruling of the Third Court of Appeals.”
Worrall understands some members’ “frustration with the settlement” but believes the settlement deserved to be upheld “because the class action lawsuit and the settlement have accomplished so much in terms of positive change at the PEC.” Each of the three class representatives will receive $15,000 from the $4 million awarded as plaintiffs’ attorneys’ fees in the suit.
Because the PEC, its directors and officers, and the three co-op members who filed the class action agreed to the settlement, the fairness hearing before Judge Dietz last year was not an adversarial proceeding in the traditional sense. The witnesses for the three plaintiffs and the witnesses for the nine defendants all agreed that the settlement should be approved by the court.
Judge Dietz chose not to appoint an interim class council to represent co-op members during the settlement negotiations or the fairness hearing, and the judge was an active participant in the settlement negotiations. Hall objected to a trial judge playing the dual role of negotiating a settlement then later approving it as fair, but the appellate court said this was not an abuse of discretion by the trail judge. “The trial court’s involvement in class settlement negotiations was not improper because, ‘(w)hile the trial court generally plays a relatively detached role in most civil proceedings, in a class action the court is the guardian of the class interest.’”
Several co-op members who filed written objections also presented their objections in person at the hearing. The Third Court of Appeals held that none of the oral or written objections filed by 267 other PEC members could be considered in Hall’s appeal, saying “an appellant may not rely on the objections of other class members to preserve issues not raised in his own objections….”
The opinion explained that settlements in class actions are favored by the legal system. “Appellate review of the trial court’s approval of a class settlement is limited, due to ‘the strong judicial policy favoring the resolution of disputes through settlement.’” The court said settlements “produce an amicable resolution of disputes and minimize demands on judicial time and resources.”
Hall was one of three co-op members who filed notices of appeal last June to the class action settlement. Hall is the only one who actually filed briefs and perfected his appeal. Max Moudy of Horseshoe Bay filed a notice of appeal but later abandoned the appeal on his own motion. The appeal filed by Danny O’Dell was dismissed by the court for want of prosecution.
While Hall was the only cooperative member to pursue his appeal, his effort garnered support from throughout the PEC service area. Milton Hawkins set up the Fair Settlement Appeal Fund in June 2008 to raise funds to help offset Hall’s out of pocket expenses. After the fund received $6,605 from 55 different individuals or couples, Hall asked Hawkins to stop accepting donations as he did not believe his expenses would reach the amount already collected. “People still wanted to contribute even after I told them we had raised sufficient funds,” said Hawkins. “Someone even mailed in $10 cash to the bank for the fund.”
Hall’s out of pocket expenses totaled $2,772, but the Third Court of Appeals ordered Hall to “pay all costs relating to this appeal, both in this Court and the court below.” At this time, Hall does know the amount of such costs. Hawkins said he will refund the balance of the account to each of the donors on a pro rata basis. As of press time, Hall had not decided whether he would ask the Third Court of Appeals for a rehearing or consider an appeal to the Texas Supreme Court.
A three-judge panel consisting of Justices Diane Henson, Jan Patterson and Alan Waldrop was assigned to decide Hall’s appeal. Justice Henson authored the opinion.