Containing a local business dispute that had, at least temporarily, been blown into a nationwide class action, the First District Court of the Texas Court of Appeals in Houston recently overturned a trial court’s certification of claims brought on behalf of a class of persons whose personal information may (or may not) have been obtained from the trash – the case of Bliss & Glennon Inc. v. Ashley and Ashley General Agency, LLC, No. 01-12-01177-CV, 2014 WL 47758 (Tex. App. — Houston 1st Dist. Jan. 7, 2014). In its ruling, the Court of Appeals confirmed that, because Texas Rule of Civil Procedure 42 was “patterned after Federal Rule of Civil Procedure 23, federal decisions and authorities interpreting current federal class action requirements are instructive,” including Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). Id. at *10. The ruling is instructive for all employers – and businesses – facing class litigation in Texas.

Background To The Case

The case arose after Lyle Ashley, a former employee of insurance broker Bliss & Glennon (“B&G”), founded a competing agency and began luring current B&G employees to his new business. One of the crossover employees had been head of IT at B&G.  This employee purportedly removed business information — including hard drives that contained social security numbers of individuals and other confidential third party information — from a dumpster near the B&G facilities.  After receiving complaints from customers regarding breaches of confidential information, B&G filed suit and moved for a temporary restraining order (“TRO”) to stop its competitor from using any information it may have obtained from the trash.  Ashley refused to return the items. In response to B&G’s lawsuit, Ashley filed counterclaims, including a claim under Texas’ Identity Theft Enforcement and Protection Act, on behalf of himself and a class of similarly situated persons whose information was stored on the B&G equipment that was allegedly placed in the dumpster.

The Trial Court’s Class Certification Order

To support his motion for class certification, Ashley argued that B&G’s TRO provided all the information necessary to support certification, and that B&G should be estopped from arguing otherwise. The trial court agreed and certified a nationwide class of persons whose information was stored on the computer data that the former B&G employee and current Ashley employee had purportedly found in the dumpster. B&G subsequently appealed.

The Court Of Appeals’ Ruling

The Court of Appeals noted two flaws in the trial court’s reasoning. First, it found that B&G’s TRO did not include an admission of any duty to give notice under the Texas identity theft statute. Second, in the absence of such admissions, Ashley had not submitted evidence sufficient to support class certification. The Court of Appeals noted that a trial court must “apply a rigorous analysis to determine if class certification requirements have been satisfied.” Id. at *15. In this case, the evidence before the trial court did not “affirmatively demonstrate commonality or typicality of claims.” Id. This failure was largely due to the fact that Ashley had refused to turn over the materials that B&G sought, so there was “no evidence about the members of the proposed class, or about their circumstances, their information compromised, or their possible injury.” Id.

In addition, the Court of Appeal found that Ashley’s own claims were not typical of the potential class and that he could not adequately represent the class. This was because “one of the issues to be resolved by the fact finder is how the alleged missing data came to be in Ashley’s hands.” Id. at *16. B&G alleged in the original suit that Ashley himself ordered his current employee, the former head of IT at B&G, to remove the computer materials from the dumpster. In other words, Ashley himself may be “the one responsible for the information falling into third parties’ hands.” Id. 

Implications For Employers

Texas is not considered a friendly jurisdiction for class actions in the first instance, but this case demonstrates that state courts will not hesitate to apply the same “rigorous” analysis to certification sought under the state rules that federal courts apply in actions under Rule 23 of the Federal Rules of Civil Procedure.