Posted by Rich Phillips, Melissa Davis, Stephanie Dooley Nelson, Emily Fitzgerald, and Connor Bourland
On April 12, the Texas Supreme Court issued decisions in four argued cases:
No. 17-0095, Tarrant Regional Water Dist. v. Johnson — In this case, the Court addressed whether the discretionary function exception in the Texas Tort Claims Act preserved the Tarrant Regional Water District’s governmental immunity from wrongful death claims brought by the Johnsons when their daughter drowned after slipping off a dam maintained by the District. The District argued that the discretionary function exception shielded the District from liability arising from discretionary decisions related to the design of the dam. The district court denied the plea; the Fort Worth Court of Appeals reversed in part, finding that most of the Johnsons’ claims were barred, but that the claim relating to the possibility of a “hydraulic boil” was based on the District’s alleged failure to maintain the dam and that the discretionary function exception did not apply to claims based on “failure to maintain.” In an opinion by Justice Blacklock, the Supreme Court reversed, finding that the discretionary function exception applied to Johnsons’ remaining claim and that the District was immune from suit. The Court found that the court of appeals’ distinction between design and maintenance ran afoul of the statute’s textual distinction between discretionary and non-discretionary government decisions. The purpose of the statute, the Court noted, is the “preservation of the government’s discretionary decision-making authority.” With that in mind, the Court found that the potential “hydraulic boil” was the result of intentional design decisions and discretionary decisions about how to maintain the dam and that the Court has “never held that decisions about how to conduct maintenance on a public work can never rise to the level of a [discretionary decision] protected by section 101.056.”
No. 17-0509, Tex. Outfitters Ltd., LLC v. Nicholson — In this oil and gas case, the Court examined the scope of the duty of utmost good faith and fair dealing that the holder of the executive right to lease a mineral estate owes to non-participating interest owners when the executive refuses to lease in contravention of the non-executive’s wishes. Texas Outfitters owned the surface estate, a 4.16% mineral interest, and executive rights to a 45.84% mineral interest on an approximately 1,000 acre tract. The Carter family owned the other rights related to the 45.84% interest. In 2010, the owners of the other 50% mineral interest leased their interest to El Paso Oil Exploration & Production Company for $1,750-per-acre bonus and a 25% royalty. El Paso made the same offer to Texas Outfitters for the remaining 50% mineral interest. The Carter family wanted to accept the offer, but Texas Outfitters refused. The evidence showed both that Texas Outfitters “wanted to see how the play matured and try to get more money,” and that Texas Outfitters “planned not to lease because of [its] business of a hunting lease for bringing in hunters.” Texas Outfitters subsequently received two offers to lease with higher bonuses, but both offers were withdrawn by the lessees after learning of El Paso’s existing lease. Texas Outfitters eventually sold the surface, free of any mineral lease. The Carters brought a claim against Texas Outfitters for breaching its executive duty. In a majority opinion by Justice Lehrmann, the Court agreed with Texas Outfitters that an executive generally does not breach the duty by declining a lease in honest anticipation of obtaining better terms for all. But the Court held that legally sufficient evidence supports the trial court’s finding that Texas Outfitters took a gamble knowing that the pool of potential lessees had diminished and that refusing the lease benefited Texas Outfitters’ surface interest to the Carters’ detriment. The Court specified that “we cannot and do not say that an executive primarily interested in the surface necessarily breaches his duty by engaging in conduct that benefits the surface but not the mineral estates, we conclude that legally sufficient evidence supports the trial court’s finding that Texas Outfitters did so in this case.” The Court reiterated that whether the plaintiff proved that the defendant engaged in self-dealing that unfairly diminished the value of the plaintiff’s non-executive interest remains a fact-dependent inquiry.
No. 17-0552, Tex. Dept. of Criminal Justice v. Levin — In this case, the Court considered whether the public’s right to information under the Texas Public Information Act (PIA) is subject to reasonable limitations when disclosure of the information may lead to physical harm to an unknown target. Levin sought disclosure of the identity of the pharmacy that supplied drugs used in state executions by lethal injection. The Department resisted, contending that the information was excepted from disclosure under the Cox physical-safety exception set forth in Texas Department of Public Safety v. Cox Texas Newspapers, LP, 343 S.W.3d 112, 114–15, 118 (Tex. 2011). Under Cox, information is excepted from disclosure “if, under the specific circumstances pertaining to the [government] employee or officer, disclosure of the information would subject the employee or officer to a substantial threat of physical harm.”
In a unanimous opinion by Justice Green (Justice Guzman and Justice Blacklock did not participate in this case), the Court first held that the Cox physical-safety exception applies even if the potential target was unknown. While Cox involved threats to a known target (then-Governor Rick Perry), in this case, the target of the threats was unknown because the Department had kept the identity of the pharmacy secret. The Court clarified that the issue is whether the fact that the public knows that “the Department is receiving lethal injection drugs from some source, whoever it might be, is enough to conclude that a substantial threat of physical harm will come to bear on the source of the drugs,” if its identify is revealed.
In applying that standard, the Court clarified that Cox’s use of the term “substantial” refers to the degree of the potential threat of harm – not the degree to which harm is likely to occur. After analyzing the Department’s summary-judgment evidence, the Court determined that the Department had met its burden to show a substantial threat of physical harm to the pharmacy if its identity were revealed. The Court therefore rendered judgment for the Department.
The Court also observed that, while this case was in the court of appeals, the Legislature had enacted an exception to the PIA that makes confidential the identity of any person or entity that provides drugs used for lethal injection to the State. Because the amendment was prospective only, it did not apply to this case.
No. 17-0901, Ferreira v. Butler — The issue in this probate dispute was whether probate of a will was barred by Texas Estate Code section 256.003(a)’s four-year limitations period or allowed by an exception applicable when “the applicant for the probate of the will was not in default in failing to” timely probate the will. Norman Ferreira’s second wife’s will left her entire estate to him, but he never probated the will and her estate was distributed intestate to her children from another marriage, Douglas and Debra Butler. After Norman died, his first wife, Linda Ferreira, found and probated (1) a will in which Norman left his estate to her and (2) Norman’s second wife’s will as a muniment of title. Under these wills, Linda claimed the property distributed to Douglas and Debra actually belonged to Norman and thus was left to her. The trial court and court of appeals agreed with Douglas and Debra that the probate of Norman’s first wife’s will was time barred under Faris v. Faris, 138 S.W.2d 830, 832 (Tex. App.—Dallas 1940, writ ref’d), which held that a devisee’s default is imputed to his own devisee. In this unanimous opinion by Justice Hecht (Justice Busby not participating), the Court overruled Faris and held that under the plain language of the statute, only the conduct of “the applicant,” in the capacity in which the application is brought, is considered in determining default. The Court expressly rejected a test applied by the Amarillo Court of Appeals that considered whether permitting late probate would work an injustice or frustrate the intent of the testator. Because Linda applied to probate Norman’s second wife’s will in her capacity as Norman’s executor, the Court held that Norman’s failure to probate his second wife’s will barred her claim. The Court recognized that if Linda could have applied to probate Norman’s second wife’s will in her individual capacity, and if she had done so, Norman’s default in failing to probate his second wife’s will would not matter. The Court declined to confer a capacity on Linda she had not pleaded, but it did remand the case to the trial court to give Linda an opportunity to amend her pleadings to apply in her individual capacity.
On April 26, the Court issued opinions in four argued cases and one per curiam opinion:
No. 16-0006, Rohrmoos Venture v. UTSW DVA Healthcare, LLP — In this landlord-tenant dispute, the Court addressed two primary issues: (1) whether any material breach of the lease by the landlord can support termination or only a breach of the implied warranty of suitability and (2) whether there was sufficient evidence to support the trial court's attorney-fee award. In a unanimous opinion by Justice Green, the Court first rejected the landlord's argument that under Davidow v. Inwood North Professional Group-Phase I, 747 S.W.2d 373 (Tex. 1988), only a breach of the implied warranty of suitability can support termination of a commercial lease by the tenant. The Court rejected the landlord's argument that Davidow stands for the proposition that a tenant's obligation to pay rent is dependent only on the implied warranty of suitability. While Davidow addressed the implied warranty of suitability, it did not restrict termination to breach of that warranty. Instead, the Court held, termination is an available remedy for any material breach of the lease by the landlord.
The Court then addressed the sufficiency of the evidence to support the trial court's attorney-fee award to the landlord. In a lengthy discussion, the Court summarized and clarified the interaction of the "lodestar" method and the Arthur Anderson factors for proving reasonable and necessary attorney's fees. The Court stated that the lodestar method is a "short hand version" of the Arthur Anderson factors and the two were never meant to be separate routes to proving fees. The Court then clarified that testimony about an attorney's experience, the total amount of the fee, and the reasonableness of the fee is not sufficient to support a fee award. Rather, the party seeking fees has the burden to prove the reasonable hours worked multiplied by a reasonable hourly rate. At a minimum, this requires evidence of (i) the services performed; (ii) who performed them; (iii) approximately when they were performed; (iv) the reasonable amount of time spent to perform them; and (v) the reasonably hourly rate for the person performing them. The Court reiterated that the reasonableness of the fee will not be dependent "solely on the contractual fee arrangement" with the prevailing lawyer. There must be evidence that the contractual fee is reasonable. The Court then held that the fee resulting from this process is presumptively reasonable and is subject to adjustment up or down only based on evidence of factors other than those already incorporated into the reasonable-fee determination. Finally, while contemporaneous billing records are not required, they are "strongly encouraged" (emphasis in original). The Court then held that the fee evidence presented by the landlord in this case was not sufficient to support the fee award and remanded the case for a redetermination of the fee.
No. 17-0498, Medina v. Zuniga — Justice Brown wrote the Court’s unanimous opinion (Justice Busby did not participate) holding that the trial court erred by sanctioning a party who denied requests for admission of negligence during discovery but admitted negligence in opening statements at trial. The Court reversed the sanctions order, which required the defendant to pay attorney’s fees incurred by the plaintiff in proving negligence. The Court held that a party has a legal right to deny liability and should not be sanctioned for exercising that right in discovery even if he later concedes liability. The Court observed that requests for admission were designed to eliminate “uncontroverted matters or evidentiary ones like the authenticity or admissibility of documents,” not to compel a party to concede the ultimate validity of their claims or defenses. In fact, the Court stated that while merits-preclusive requests for admission are not “strictly speaking, prohibit[ed],” the “very nature of [such a] request provides the respondent ‘good reason’ for failing to admit.” The Court warned that deemed admissions that have merits-preclusive effect can amount to death-penalty sanctions, and held that the same due-process concerns are triggered when a party seeks sanctions for denying merits-preclusive requests for admissions — even when, as here, the sanctions awarded were only attorney’s fees, not disposition of a claim or defense.
The Court also held that the evidence in this case was not legally sufficient to support the jury’s gross-negligence finding. Applying existing gross-negligence standards, the Court reiterated that gross negligence must remain functionally distinct from ordinary negligence. The Court also noted that “our roads are replete with thoughtless, careless, and risky drivers,” indicating driving thoughtlessly, carelessly, and recklessly does not alone establish gross negligence.
No. 17-0563, Baylor Scott & White Hillcrest Medical Center v. Weems — In this case involving the Health Care Liability Act, the Court again addressed whether a plaintiff’s failure to timely serve an adequate expert report required dismissal of his case with prejudice. The plaintiff, Weems, was indicted for aggravated assault by shooting or striking Ernest Bradshaw. Weems sued Baylor Scott and White, Hillcrest Medical Center (the “Hospital”), alleging that Weems was indicted only because the nurse who treated Bradshaw after the incident had falsified Bradshaw’s medical records by describing Bradshaw’s injury as a “point-blank” “gunshot wound” to the head. Weems maintained that Bradshaw had not been shot, and that the nurse intentionally falsified Bradshaw’s record because the police pressured her to do so. Weems asserted a claim against the Hospital for intentional infliction of emotional distress.
The trial court held that Weems’s claim fell with the scope of the Health Care Liability Act and dismissed the case with prejudice when Weems failed to timely file an adequate expert report. The court of appeals reversed and remanded, holding that claims involving alteration and fabrication of medical records are not healthcare liability claims and therefore do not trigger the expert report requirement.
Noting that there was a split in the intermediate appellate courts on this issue, the Texas Supreme Court granted the petition and held that such claims are subject to the expert report requirement. In an opinion by Justice Guzman, after analyzing the plaintiff’s allegation and the requirements of the statute, the Court held that the gist of Weems’s petition was that Bradshaw’s medical record was inaccurate, which is contrary to accepted standards of medical or administrative services. Accordingly, the claim fell within the statutory definition of a “health care liability claim,” even though Weems had not alleged a departure from the standard of care. Nor was it relevant that Weems had alleged that the nurse’s actions were intentional, because the statute does not distinguish between departures that are intentional or negligent. The Court therefore reversed the court of appeals and rendered judgment in favor of the Hospital.
No. 18-0099, PHI, Inc. v. Tex. Juvenile Justice Dept. — In this interlocutory appeal, the Court addressed whether sovereign immunity barred a helicopter owner’s claim for damage resulting from the State’s alleged failure to act with ordinary care in maintaining and operating a van. PHI is a private company that provides medical helicopter services. PHI owned a helicopter that flew to North Texas Regional Medical Center to transfer a patient. While the helicopter crew was securing the patient and preparing for takeoff, a van owned by the Texas Juvenile Justice Department rolled down an incline from where it was parked and crashed into the elevator. PHI alleged that the driver failed to engage the emergency brake when parking the vehicle, among other allegations of the Department’s failure to maintain the van. The for the Court centered on whether the damage to the helicopter arose from the “operation or use” of the van, such that the Tort Claims Act’s waiver of sovereign immunity for damage arising from the operation or use of a motor-driven vehicle applied. In a unanimous opinion by Justice Blacklock, the Court held that the damage arose from the “operation or use” of the van, so sovereign immunity was waived under the Tort Claims Act. In rejecting arguments that damage arising after the van was parked cannot be attributable to the operation or use of the van, the Court stated that it is “self-evident that ensuring your car will not roll away after you leave it, including engagement of the emergency brake when necessary, is an integral part of the ‘operation or use’ of a vehicle.” The Court discussed its precedent addressing “operation or use” and held that this precedent is consistent with its holding here.
No. 18-0278, Barnett v. Schiro — In this per curiam opinion, the court reversed the court of appeals' judgment and remanded the case to the trial court for a redetermination of attorney's fees in light of the Court's opinion in Rohrmoos Venture (summarized above).