Jun 13, 2014 | Diana Faust

2013-2014 Texas Supreme Court Update

By: Diana Faust 


     With three quarters of its 2013-2014 term completed, the court has issued numerous substantive and procedural cases of interest, including matters of first impression.  We offer a summary of the holdings in only a few of those here.


Waiver of Right to Arbitration

     In Kennedy Hodges, L.L.P. v. Gobellan, No. 13-321, ___ S.W.3d ___ (Tex. May 16, 2014) (per curiam), the supreme court held that a law firm did not waive its right to arbitrate a fee dispute with former clients by litigating with a former associate who left the firm and took certain matters with him, but promised to work out the fee arrangements with the firm.  The firm sued former clients and the associate over client contingency fees.  The firm had no arbitration agreement with the former associate, and its litigation with the associate neither prejudiced the former clients nor substantially invoked the litigation process with them.  As a result, no waiver of the right to arbitration contained in the agreements between the firm and the former clients occurred.

Federal Arbitration Act – Evident Partiality & Partial Disclosure

     In Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, No. 12-0789, ___ S.W.3d ___ (Tex. May 23, 2014), the supreme court held that under the Federal Arbitration Act, the arbitrator’s partial disclosure of information that might yield a reasonable impression of the arbitrator’s partiality to an objective observer constituted ground for vacating the arbitrator’s award, and further, because the party making the evident partiality challenge was unaware of the undisclosed information, it did not waive the claim by proceeding with the arbitration.  The court rejected the request to adopt an intent-based approach to evident partiality, and the request to heighten the evident partiality standard, and reaffirmed the standard applied in Burlington Northern Railroad Co. v. TUCO, Inc., 960 S.W.2d 629 (Tex. 1997), that a neutral arbitrator exhibits evident partiality “if the arbitrator does not disclose facts which might, to an objective observer, create a reasonable impression of the arbitrator’s partiality.”  The court noted that the Texas Arbitration Act also requires courts to vacate arbitration awards if there has been “evident partiality by an arbitrator appointed as a neutral arbitrator.” 


Fee-Shifting Provisions of Texas Property Code

     In City of Laredo v. Montano, 414 S.W.3d 731 (Tex. 2013), the supreme court held that the fee-shifting provision found in Texas Property Code § 21.019(c), allowing for reasonable and necessary attorney’s fees, does not require that fees be determined under a lodestar method, as in El Apple I, Ltd. v. Olivas.  But because the landowner followed the lodestar method in proving fees, the court applied the method in reviewing the fees.  The record evidence failed to show how the attorney arrived at his “conservative” estimate of hours spent on the case, and evidence based on nothing more than generalities did not meet the El Apple specificity required under lodestar.   

Specificity of Evidence Under Lodestar

     In Long v. Griffin, No. 11-1021, ___ S.W.3d ___ (Tex., April 25, 2014), the supreme court considered the evidence supporting attorney’s fees awarded under the lodestar method, and like Montano, the court concluded that the evidence offered only generalities.  The court explained that without any evidence of the time spent on specific tasks, the trial court had insufficient information to meaningfully review the fee request.  The court noted that even though contemporaneous billing evidence may not exist, the attorneys may reconstruct their work to provide the trial court with sufficient information to allow the court to perform the meaningful review of the fees application.  The court also held that under the contingency fee method of proof, which may not require supporting evidence as required under the lodestar method, without any award of monetary relief, there is no right to contingency fees.


Home Equity Loans

     In Sims v. Carrington Mortgage Services, L.L.C., No. 13-0638, ___ S.W.3d ___  (Tex., May 16, 2014) the supreme court answered a question certified from the United States Court of Appeals for the Fifth Circuit: the restructuring of a home equity loan that involves capitalization of past-due amounts owed under the terms of the initial loan and a lowering of the interest rate and the amount of installment payments, but does not involve the satisfaction or replacement of the original note, an advancement of new funds, or an increase in the obligations created by the original note, is not a new extension of credit that must meet the requirements of the Texas Constitution, art. XVI, § 50.


Certificate of Merit

     In Crosstex Energy Services, L.P. v. Pro Plus, Inc., No. 12-0251, ___ S.W.3d ___ (Tex. March 28, 2014), the supreme court examined the contours of section 150.002 of the Texas Civil Practice and Remedies Code, and specifically, the “good cause” extension provision of 150.002(c).  The court held that the good cause exception did not stand alone, but rather, is contingent on (1) filing of the petition within ten days of the expiration of limitations and (2) alleging that such time constraints prevented the preparation of the affidavit.  Thus, a claimant who files suit outside the ten-day window cannot claim protection of the good-cause exception.  The court further held that the certificate of merit requirement is not jurisdictional but is mandatory, and thus, the remedies for failure to file the certificate may be waived by a defendant.  The court concluded in this case, the defendant’s general denial, participation in discovery under a docket control order, joining a motion for continuance, and entering into a Texas Rule of Civil Procedure 11 agreement did not constitute waiver of the right to dismissal.  The court also held that the defendant was not required to file special exceptions regarding the omitted certificate because the failure to file is not curable by amendment under the statute.  Finally, the court held that a rule 11 agreement concerning dates for a docket control order, and the docket control order itself did not operate to extend the deadline for filing the certificate of merit where that deadline was not expressly mentioned within the order.             


Health Care Liability Claim

     In Bioderm Skin Care, LLC v. Sok, 426 S.W.3d 753 (Tex. 2014), the supreme court addressed the issue of whether the claim for injuries resulting from laser hair removal is a health care liability claim governed by Chapter 74 of the Texas Civil Practice and Remedies Code. Sok alleged that an intensity setting caused burns and scars on her legs during the course of her laser hair removal treatment. The court concluded that the health care liability claim presumption applied based on Sok’s allegations, and further, that Sok failed to rebut this presumption because expert health care testimony is necessary to prove or refute her claim. The court reasoned that that under federal regulations, the laser used by the defendants may only be purchased by a licensed medical practitioner for supervised use in her medical practice, and that testimony concerning whether its operation departed from accepted standards of health care must come from a licensed physician. The court also reasoned that the use of the laser, a “medical instrument which requires extensive training and experience for proper use,” is not a matter plainly within the common knowledge of laymen. Of importance is that the record showed the defendant physician trained laser operators for at least six months on the variables associated with patients and equipment, and he determined the laser’s intensity setting for the specific treatment at issue in the case.  Because Sok failed to serve defendants with an expert report, her claims were dismissed pursuant to section 74.351.

     Following Bioderm, the court reached the same conclusion in Rio Grande Valley Vein Clinic, P.A. v. Guerrero, No. 12-0843, ___ S.W.3d ___ (Tex. April 25, 2014) (per curiam).  The court concluded that expert health care testimony was required to prove or refute the claim that the laser hair removal procedure was done improperly, as alleged, and that without rebuttal of the presumption recognized in Bioderm, the failure to serve an expert report required dismissal pursuant to section 74.351.

Hospital Lien Statute

     In McAllen Hospitals, L.P. v. State Farm County Mutual Insurance Company, No. 12-0983, ___ S.W.3d ___ (Tex. May 16, 2014), the supreme court held that a hospital’s charges were not “paid” under the Hospital Lien Statute and the Uniform Commercial Code where the settlement check was made jointly payable to the hospital and the patients but was deposited without the hospital’s endorsement, and where the hospital never received notice that settlement funds had been delivered to the patients and was not reimbursed for treatment costs.


CGL - Contractual Liability Exclusion

     In Ewing Construction Co., Inc. v. Amerisure Insurance Company, 420 S.W.3d 30 (Tex. 2014), the supreme court considered the contractual liability exclusion in determining the duty to defend.  On certified question from the United States Court of Appeals for the Fifth Circuit, the court held that a general contractor that enters into a contract in which it agrees to perform its work in a good and workmanlike manner, without more specific provisions enlarging this obligation, does not “assume liability” for damages arising out of the contractor’s defective work so as to trigger the Contractual Liability Exclusion found in a Commercial General Liability Policy.  Ewing and a school district entered into an American Institute of Architects (AIA) contract providing for Ewing to serve as general contractor to renovate and build additions to a school, including constructing tennis courts.  The district claimed that the tennis courts crumbled, cracked, and were rendered unusable for their intended purpose and sued for damages against Ewing under contractual and negligence theories.  Ewing’s carrier, Amerisure, contended the contractual liability exclusion excluded the district’s claims based on Ewing’s contractual assumption of liability (1) where Ewing’s liability for damages would not exist absent the contract and (2) where the contract is an insured contract.  The court examined its prior holding in Gilbert Texas Construction, L.P. v. Underwriters at Lloyd’s London, and clarified that for the exclusion to be triggered, the insured must assume liability for damages that exceed the liability it would have under general law.  The court held that the district’s allegations that Ewing failed to perform in a good and workmanlike manner were substantively the same, under Texas law, as its claims that Ewing negligently performed under the contract because they contained the same factual allegations and alleged misconduct.  As a result, Ewing did not enlarge its duty to exercise ordinary care in fulfilling its contract to perform in a good and workmanlike manner, and did not “assume liability” for damages arising out of its defective work so as to trigger the exclusion.


Appellate Procedure – Factual Sufficiency Review

     In In re A.B., No. 13-0749, ___ S.W.3d ___ (Tex. May 16, 2014) (original proceeding) (per curiam) the supreme court held the current standard appellate courts must adhere to in conducting a clear and convincing factual sufficiency review in a termination case protects the fundamental interests at stake.  Thus, the court refused to extend the requirement that the court of appeals must detail all the relevant evidence in its opinion and clearly state why the evidence is factually sufficient to support the jury’s verdict.

Appellate Review of Orders Granting New Trial

     In Whataburger Restaurants, LP, No. 11-0037, ___ S.W.3d ___ (Tex. April 25, 2014) (original proceeding) (per curiam), the supreme court reviewed an order granting new trial based on a juror’s failure to disclose information during voir dire, even though there was no evidence that the nondisclosure probably caused injury.  A new trial based on juror misconduct requires that the movant establish the misconduct occurred, it was material, and it probably caused injury. There is no showing of probable injury when the evidence is such that, even without the misconduct, the jury would in all probability have rendered the same verdict that it rendered with the misconduct.  The court concluded that evidence the party would have struck the juror had the information been disclosed was speculative evidence without evidentiary foundation.  The order granting new trial was reversed and the jury’s verdict reinstated.

     In In re Health Care Unlimited, Inc., No. 12-0410, ___ S.W.3d ___ (Tex. April 25, 2014) (original proceeding) (per curiam), the supreme court reviewed the order granting new trial based on a juror’s communications with a party’s representative though there was no evidence the communication probably caused injury.  A new trial based on juror misconduct requires that the movant establish the misconduct occurred, it was material, and it probably caused injury.  The court held that without evidence the communication probably caused injury, the trial court’s stated reason for granting the new trial was not legally correct, and the trial court improperly granted a new trial.

Discovery of Expert Witness Bias

     In In re Ford Motor Company, No. 12-1000, ___ S.W.3d ___ (Tex. March 28, 2014) (original proceeding) (per curiam) the supreme court concluded that discovery of an expert witness’s bias can be achieved through the methods set out in Rule 195 of the Texas Rules of Civil Procedure.  Rule 195 does not permit the discovery sought (depositions of a corporate representative of each expert’s employer) to expose potential bias.  The court explained that in Walker v. Packer, more broad discovery of bias was permitted, where extrinsic evidence was discovered after the expert’s deposition that put his credibility in doubt.  Rule 195 (establishing disclosures, expert reports, and oral depositions as the permissible methods for expert discovery) was adopted after Walker, and assuming this aspect of the holding in Walker survived the adoption of rule 195, Walker was distinguishable because neither expert’s credibility had been impugned in this case.    

Postjudgment Interest Accrual

     In Long v. Castle Texas Production Limited Partnership, 426 S.W.3d 73 (Tex. 2014),  the supreme court held the accrual of postjudgment interest began on the date of the judgment rendered after the trial court reopened the record, on remand for the taking of additional evidence, not from the date of the original, erroneous judgment.  The court distinguished the situation from that where a court of appeals renders the judgment the trial court should have rendered.  In that instance, postjudgment interest accrues from the date of the original, erroneous judgment.

Settlement Offers

     In Amedysis, Inc. v. Kingwood Home Health Care, No. 12-0839, ___ S.W.3d ___ (Tex. October 10, 2013), the supreme court held that a dispute concerning the validity of the acceptance of a settlement offer under chapter 42 of the Civil Practice and Remedies Code and Rule 167 of the Texas Rules of Civil Procedure was governed by contract law principles, rather than interpretation of chapter 42 and rule 167.     


Design Defect and Statutory Presumption of Nonliability

     In Kia Motor Company v. Ruiz, No. 11-0709, ___ S.W.3d ___ (Tex. March 28, 2014), the supreme court held that a manufacturer was not entitled to the statutory presumption of nonliability under section 82.008 of the Civil Practice and Remedies Code, where the standards or regulations at issue failed to govern the product risk that allegedly caused the harm, rather than the particular defect claimed.  The Ruizes claimed that in a head-on collision, a Kia Spectra’s passenger-side air bag deployed such that the passenger suffered only minor injuries, but the driver’s-side air bag failed to deploy, killing the driver.  Kia asserted that a federal motor vehicle standard which specified certain performance requirements for the protection of vehicle occupants in crashes, and required vehicles to have front driver’s-side and passenger’s-side air bags (FMVSS 208) applied to trigger the presumption of nonliability.  The court agreed that the FMVSS 208 was a safety standard and that safety standards could trigger the presumption.  But, the court held that compliance with FMVSS 208 did not address the “product risk” alleged by the Ruizes – that an air bag will fail to deploy because of defective circuitry.  The Ruizes alleged that the air bag’s defectively designed wiring harness rendered it prone to open circuits and the air bag’s corresponding failure to deploy when it should have.  FMVSS 208 requires vehicles to be equipped with frontal air bags and seats, and specifies the maximum amount of force and acceleration that dummy occupants may encounter during a frontal-crash test.  The court concluded FMVSS 208 measures how well the vehicle’s air bags and other restraint systems protect occupants, but presumes the air bag will deploy.  Because it did not measure or apply air bag failure rates, and it is that risk at issue – the risk of occupant injury due to the failure of the air bag to reliably activate and deploy – that arises from the alleged defect at issue, the court held that FMVSS 208 did not trigger the presumption of nonliability in section 82.008.