BEST v. BARRERA

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Docket Number

No. 07-0028.

Attorney(S)

Anne M. Lockner, Robins, Kaplan, Miller Ciresi LLP, Minneapolis, MN, Ben A. Donnell, Clay E. Coalson, Donnell, Abernethy Kieschnick, Corpus Christi, TX, for Petitioners. Austin P. Tighe Jr., Vic Feazell, James Francis Twombly, Feazell Tighe, L.L.P., Austin, Jerry Guerra, Law Offices of Jerry Guerra, Luis A. Elizondo, David Aaron Huerta, The Huerta Law Firm, Alberto R. Huerta, Huerta Hastings, Corpus Christi, TX, Paul M. Weiss, Tod A. Lewis, William M. Sweetman, Freed Weiss, LLC, Chicago, L. Thomas Lakin, Bradley M. Lakin, Richard J. Burke, Jeffrey A.J. Millar, The Lakin Law Firm, P.C., Wood River, IL, for Respondent.

Judges

PER CURIAM.

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Smart Summary

Factual and Procedural Background

Velma Barrera purchased a radar detector from Best Buy for $199.99 plus tax. The receipt and posted store notices stated that a 15% restocking fee would be charged on returns or exchanges of certain opened electronics, including radar detectors, unless defective. Barrera returned the radar detector two days after purchase, received a return receipt reflecting the restocking fee, and was refunded the purchase price minus the $30 restocking fee. Barrera filed a class-action lawsuit against Best Buy asserting a claim for "money had and received" seeking return of the restocking fee deducted from refunds. The trial court certified a statewide class of Texas residents charged the 15% restocking fee on returns or exchanges of specified items. The court of appeals affirmed the class certification. The Supreme Court of Texas granted review to address the appropriateness of class certification under these circumstances.

Legal Issues Presented

Whether a claim for "money had and received," an equitable claim, is appropriate for class certification when individual inquiries into each class member's circumstances predominate.
Whether the predominance requirement under Texas Rule of Civil Procedure 42(b)(3) is satisfied when equitable defenses and individualized inquiries regarding knowledge and consent to the restocking fee are implicated.

Arguments of the Parties

Petitioners' (Best Buy's) Arguments

The equitable claim for "money had and received" requires individualized inquiries that will predominate over common issues, making class certification inappropriate.
Best Buy is entitled to present defenses and facts showing that the restocking fee "in equity and good conscience" belongs to the company for certain individuals based on their knowledge and consent.
Some customers were aware of and voluntarily agreed to the restocking fee, as evidenced by notices on receipts and store postings.
Some customers may have purchased merchandise intending to return it, raising an "unclean hands" equitable defense applicable on an individual basis.

Respondent's (Barrera's) Arguments

The 15% restocking fee was a uniform, automatic, and mandatory fee applied identically to all class members, making common issues predominant.
Class certification is appropriate because the sole issue is whether the restocking fee "in equity and good conscience" belongs to the class members.
Barrera disavows any unjust enrichment theory and relies solely on the "money had and received" claim to support class certification.
Barrera contends Best Buy waived individualized defenses by failing to affirmatively plead them.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Stonebridge Life Ins. Co. v. Pitts, 236 S.W.3d 201 (Tex. 2007)	Established that "money had and received" is an equitable claim; equitable defenses and individualized inquiries affect class certification; the predominance requirement must be met considering individual issues.	The court relied on Stonebridge to conclude that individualized inquiries into each class member’s knowledge and consent predominate, rendering class certification inappropriate.
BMG Direct Mktg., Inc. v. Peake, 178 S.W.3d 763 (Tex. 2005)	Equitable claims and defenses may be supplanted by an adequate legal remedy; equitable defenses raise substantive issues relevant to class certification.	Referenced to support that equitable defenses may bar recovery and require individual assessment, impacting class certification.
Funliner of Ala., L.L.C. v. Pickard, 873 So.2d 198 (Ala. 2003)	Equitable claims for "money had and received" are uncertifiable due to predominance of individual issues.	Cited as persuasive authority illustrating that equitable claims like the present one are generally unsuitable for class certification.
Smart Prof. Photocopy Corp. v. Childers-Sims, 850 So.2d 1245 (Ala. 2002)	Similar to Funliner, supports the view that equitable claims are not certifiable as class actions due to individualized inquiries.	Used to bolster the conclusion that individualized defenses defeat predominance in equitable claims.
Stoats v. Miller, 243 S.W.2d 686 (Tex. 1951)	To recover on a "money had and received" claim, the claimant must show the money belongs to them "in equity, justice and law."	Supports the principle that equitable considerations govern entitlement to recovery, requiring individualized analysis.
Gorman v. Life Ins. Co. of N. Am., 811 S.W.2d 542 (Tex. 1991)	Clarifies traditional definition of affirmative defenses versus facts related to the claimant’s case-in-chief in equitable claims.	Clarifies that the equitable inquiries here relate to the merits of the claim, not independent affirmative defenses.
Sw. Ref. Co. v. Bernal, 22 S.W.3d 425 (Tex. 2000)	Recognizes that individual differences among class members can affect equitable claims and defenses.	Supports the conclusion that individual differences defeat predominance in class certification of equitable claims.

Court's Reasoning and Analysis

The Court recognized that a claim for "money had and received" is equitable and that defendants may raise any facts or defenses that negate the claimant's right to recovery or show that in equity and good conscience the claimant should not recover. The Court emphasized that this requires individualized inquiry into each class member's knowledge and consent regarding the restocking fee. Evidence such as notices on receipts and store postings may show some class members were aware and agreed to the fee, while others may have defenses such as unclean hands. These individualized issues predominate over common questions because the determination of who is entitled to recover depends on equitable considerations unique to each class member's circumstances. The Court relied heavily on its prior decision in Stonebridge, where similar equitable claims were found unsuitable for class certification due to the predominance of individual issues. The Court concluded that Barrera failed to demonstrate that the predominance requirement under Texas Rule of Civil Procedure 42(b)(3) was met, as individual inquiries would overwhelm common issues, rendering class certification inappropriate.

Holding and Implications

The Court reversed the court of appeals’ judgment affirming class certification, decertified the class, and remanded the case to the trial court for further proceedings consistent with this opinion.

The direct effect of this decision is that the class-action certification is removed, requiring individual claims to be addressed separately or by other procedural means. The Court did not establish new precedent altering the substantive law of "money had and received" claims but clarified the application of the predominance requirement in class certification contexts involving equitable claims with individualized defenses.

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BEST BUY CO., and Best Buy Stores, L.P., Petitioners, v. Velma V. BARRERA, Indi

PER CURIAM.

Consumers brought this class-action suit for "money had and received" to recover a restocking fee that was deducted from refunds made on certain returned merchandise. The trial court certified a statewide class, and the court of appeals affirmed. 214 S.W.3d 66, 71. We conclude that individualized inquiry will predominate over common issues of proof, making the claim inappropriate for class certification. Accordingly, we decertify the class and remand the case to the trial court for proceedings consistent with this opinion.

A claim for "money had and received" is equitable in nature. Stonebridge Life Ins. Co. v. Pitts, 236 S.W.3d 201 (Tex. 2007). In certain contexts, some equitable claims or defenses may be supplanted if an adequate legal remedy exists. Id. (citing BMG Direct Mktg., Inc. v. Peake, 178 S.W.3d 763, 770 (Tex. 2005) ("Like other equitable claims and defenses, an adequate legal remedy may render equitable claims of unjust enrichment and equitable defenses of voluntary-payment unavailable.")). In this case, the trial court certified a "money-had-and-received" class, and we will presume without deciding the availability of such a claim in the context presented.

On January 23, 2003, Velma Barrera purchased a radar detector from Best Buy for $199.99 plus tax. Barrera was given a receipt for the purchase which contained a statement notifying her that "[a] 15% restocking fee will be charged on returns or exchanges of any opened: notebook computer, camcorder, digital camera or radar detector, unless defective." The same notice was posted in the store. Two days after her purchase, Barrera returned the detector. Best Buy accepted the return and issued Barrera a receipt, which she signed. The return receipt reflected the restocking charge and bore the same re-stocking-fee notice that appeared on her original purchase receipt. The receipt also stated that Barrera had "read and agreed to all return and refund policies printed on the back of this receipt and posted in the store," although Barrera denied reading the receipt. Best Buy subsequently refunded Barrera the purchase price less a $30 restocking fee.

Barrera brought this class-action suit against Best Buy Co., Inc. and Best Buy Stores, L.P. (collectively "Best Buy") alleging a cause of action for "money had and received/unjust enrichment" and seeking return of the restocking fee. See id. After a hearing, the trial court certified the following class: "All Texas residents who were charged a 15% Restocking Fee when they returned or exchanged an opened notebook computer, camcorder, digital camera or radar detector." The court of appeals affirmed the trial court's certification order. Id. Barrera here disavows an un-just-enrichment theory of recovery and relies solely upon her claim for "money had and received" to support class certification. Best Buy contends resolution of an equitable claim for "money had and received" will inevitably turn on individual issues that will predominate at trial, and therefore, under Texas Rule of Civil Procedure 42(b)(3), class certification is inappropriate. Barrera responds that common issues will predominate because the 15% restocking fee is a uniform, automatic, mandatory fee that was charged in the exact same way to each member of the class, regardless of his or her individual circumstances. According to Barrera, class certification is appropriate because the only issue to be decided is whether the 15% restocking fee "in equity and good conscience" belongs to the class members, and Best Buy's liability will turn exclusively on the answer to that question. Following our reasoning in Stonebridge Life Insurance Co. v. Pitts, 236 S.W.3d 201 (Tex. 2007), we agree with Best Buy.

A claim for "money had and received" is equitable in nature. Stonebridge, 236 S.W.3d at 203 n. 1. In defending against such a claim, a defendant may present any facts and raise any defenses that would deny the claimant's right or show that the claimant should not recover. Id. at 205. "Equitable defenses raise important substantive issues that may have a significant effect on class-action litigation." Id. at 206; see BMG Direct Mktg., 178 S.W.3d at 777. In order to determine which individuals should recover the restocking fee, then, Best Buy is entitled to present "facts or defenses that tend to show the [restocking fee] `in equity and good conscience' belong[s] to the company under the particular circumstances of each case." See Stonebridge, 236 S.W.3d at 207.

As we noted in Stonebridge, "[a]t least one court has concluded that equitable claims for `money had and received' are uncertifiable for this very reason." 236 S.W.3d at 207 (citing Funliner of Ala., L.L.C. v. Pickard, 873 So.2d 198, 211 (Ala. 2003); Smart Prof. Photocopy Corp. v. Childers-Sims, 850 So.2d 1245, 1250 (Ala. 2002)).

In Stonebridge, which also involved certification of a "money-had-and-received" class, we examined the evidence that would be relevant to determining "equity and good conscience" in the context of a uniform, allegedly misleading, telemarketing scheme. Id. at 207. Factors relevant to that assessment, we said, included individual class members' knowledge that they were being charged, their desire for the product irrespective of how the charge was made, and whether individual class members knowingly consented to the charge. Id. at 206. We held that the defendant was entitled to inquire into individual class members' knowledge and understanding about the disputed charge in order to demonstrate in whose favor the equities weighed. Id. at 206. Because the class representatives failed to prove at the outset that individual issues could be considered in a fair, manageable, and time-efficient manner on a class-wide basis, we held that the predominance requirement had not been met. Id. at 205.

Like the defendant in Stonebridge, Best Buy seeks an individualized inquiry into each class member's actual knowledge regarding the restocking fee. Specifically, Best Buy claims the notice of the restocking charge that appeared on customer receipts and the posting of signs announcing the restocking policy demonstrate that at least some class members were aware of the restocking policy and voluntarily agreed to it. Best Buy also asserts that, inevitably, some customers purchase merchandise with the intention of returning it after use, presenting an equitable "unclean hands" defense with respect to some class members. As in Stonebridge, equitable defenses like these demonstrate that "the vast majority of the litigation could be spent trying to determine which individuals should recover their [restocking fees] under the equities presented and which should not." See id. at 206.

Barrera asserts that Best Buy waived these individualized defenses by failing to affirmatively plead them. But even if Best Buy failed to adequately plead actual knowledge or unclean hands as Barrera contends and Best Buy disputes, such issues in a claim for "money had and received" are not matters of avoidance but relate to the equities necessary to determine liability in the first instance. To recover, the class members must demonstrate that the restocking fee "in equity, justice and law" belongs to them. Stoats v. Miller, 150 Tex. 581, 243 S.W.2d 686, 687 (1951). And Best Buy "may present any facts and raise any defenses that would deny the claimant's right or show that in equity and good conscience the claimant should not recover." Stonebridge, 236 S.W.3d at 205. Because "equity and good conscience" govern resolution of the class claims, the individualized inquiry Best Buy seeks relates directly to Barrera's case-in-chief and does not present an independent affirmative defense as this Court has traditionally defined that term. See Gorman v. Life Ins. Co. of N. Am., 811 S.W.2d 542, 546 (Tex. 1991).

We recognize that the claim Barrera asserts involves issues that are common to the class; presumably, the restocking fee was uniformly calculated and applied when consumers returned the specified items. But just as in Stonebridge, there are "inescapably individual differences between each class member's experience . . . that could determine in whose favor the equities weigh in resolving their claims." 236 S.W.3d at 206 (citing Sw. Ref. Co. v. Bernal, 22 S.W.3d 425, 435-36 (Tex. 2000)). We conclude that Barrera failed to prove at the outset that individual issues governing a class claim for "money had and received" can be considered in a fair, manageable, and time-efficient manner on a class-wide basis, and thus failed to satisfy Rule 42(b)(3)'s predominance requirement.

Accordingly, without hearing oral argument pursuant to Rule 59.1 of the Texas Rules of Appellate Procedure, we reverse the court of appeals' judgment and remand the case to the trial court for further proceedings consistent with this opinion.