Texas Supreme Court Holds Chiropractor Had a Duty to Disclose

In Felton v. Lovett, No. 11-0252, 2012 WL 5971207 (Tex. 2012), a patient, who suffered vertebral arterial dissection and stroke as a result of a neck manipulation, brought an action against a chiropractor, alleging that he failed to disclose risks associated with the neck manipulation procedure. 

The jury found in favor of the patient and awarded damages against the chiropractor.  The chiropractor appealed.

A reasonable health care provider must disclose the risks that would influence a reasonable patient in deciding whether to undergo treatment.  A health care provider may be liable for failing to disclose to a patient the risks inherent in proposed treatment. 

The issue in this case was whether the possibility that a patient would suffer a negative reaction to a procedure due to an undetectable physical condition was a risk that was inherent in the procedure.

The court of appeals concluded that because the patient’s injury would not have occurred but for his own physical condition—an unhealthy vertebral artery—the risk could not have been inherent in the chiropractor’s treatment.  The Texas Supreme Court held that the court of appeals ruling “ignores the evidence that the patient’s injury would not have occurred but for the chiropractor’s treatment, that chiropractic neck manipulation can result in vertebral artery dissection, and that dissection and stroke are known risks of chiropractic treatment that should be disclosed.”  As such, the Texas Supreme Court held that risk of vertebral artery dissection and stroke was inherent in neck manipulations, and, thus, the chiropractor had a duty to disclose the risk.

 

Texas Supreme Court to Determine if Arbitration Clause in Trust is Enforceable

 

 

 

In Rachal v. Reitz, 347 S.W.3d 305 (Tex. App.--Dallas 2011, pet. filed), a beneficiary of a trust (the “Beneficiary”) sued the trustee (the “Trustee”), alleging failure to provide an accounting and breach of fiduciary duties.  The Trustee filed a motion to compel arbitration and to stay litigation, arguing that the Beneficiary must arbitrate his claims against the Trustee pursuant to a provision contained in the trust document.  The arbitration clause at issue stated:

Arbitration.  Despite anything herein to the contrary, I intend that as to any dispute of any kind involving this Trust or any of the parties or persons concerned herewith (e.g. beneficiaries, trustees), arbitration as provided herein shall be the sole and exclusive remedy....

The trial court denied the Trustee’s motion, and the Trustee appealed.

The existence of an arbitration agreement is based on Texas contract law. The sole evidence presented to support the Trustee’s motion—the trust document—expressed the settlor's intent that disputes involving the trust be resolved by arbitration.  The court of appeals held that the Trustee did not establish how the settlor's expression of intent satisfied all of the required elements of a contract or how this expression of the settlor's intent transformed the trust provision into an agreement to arbitrate between the Beneficiary and the Trustee. Accordingly, the court of appeals held that the arbitration provision in the trust document was not enforceable as an agreement to arbitrate.

The Texas Supreme Court agreed to review the appellate court's decision and is expected to issue a ruling in this case of first impression next year.

 

A Primer on Expedited Actions Under Texas Rule of Civil Procedure 169

 

In 2011, the Texas Legislature passed House Bill 274, which called upon the Supreme Court of Texas to promulgate procedural rules and amendments for expedited civil actions. The Supreme Court formed a task force to answer the legislature’s call, and the task force proposed several modifications to the Texas Rules of Civil Procedure. On November 13, 2012, the Supreme Court adopted the final proposed rules and amendments. This primer provides a review of major portions of the expedited action process.

 

 Application of the Expedited Action Process

 

Texas Rule of Civil Procedure 169 governs expedited actions and is intended to reduce the expense and delay of litigation of cases of a certain amount-in-controversy, while maintaining the fairness to litigants. Application of Rule 169 is mandatory if a case falls within the definition of an expedited action.[1] Rule 169 applies to suits in which all claimants, other than counter-claimants, affirmatively plead that they seek only monetary relief aggregating $100,000 or less, including damages of any kind, penalties, costs, expenses, pre-judgment interest, and attorney fees.[2] Injunctive relief is not available in expedited actions.[3] An action cannot be expedited if a party in the suit has filed a claim governed by the Family Code, the Property Code, the Tax Code, or a healthcare liability claim under Chapter 74 of Texas Civil Practice & Remedies Code.[4]

 

To easily identify suits subject to Rule 169, the pleading requirements of Rule 47 have been amended to require claimants to plead a specific range of the amount-in-controversy. Under Rule 47(c), the claimant’s pleading must now contain a statement that the party seeks:

 

(1)   Only monetary relief of $100,000 or less, including damages of any kind, penalties, costs, expenses, pre-judgment interest, and attorney fees; or

(2)   Monetary relief of $100,000 or less and non-monetary relief; or

(3)   Monetary relief over $100,000 but not more than $500,000; or

(4)   Monetary relief over $500,000 but not more than $1,000,000; or

(5)   Monetary relief over $1,000,000.

 

A party that does not include a Rule 47(c) statement in its pleadings may not conduct discovery until the party’s pleading is amended to comply.[5]

 

However, simply because a suit meets the Rule 167 amount-in-controversy requirement does not mean the suit must remain an expedited action. A court must remove a suit from the Rule 169 process (1) on a motion and showing of good cause by any party or (2) if any claimant, other than a counter-claimant, files a pleading or an amended or supplemental pleading that seeks any relief other than the monetary relief of $100,000 or less.[6]

 

Additional deadlines have been enacted for pleadings that would remove a proceeding from the expedited action process. Pleadings that would remove an action from the Rule 169 process may be filed without leave of court if filed before the earlier of 30 days after the discovery period is closed or 30 days before the date set for trial.[7] Leave to amend a pleading that would be subject to removal may only be granted if good cause for filing the pleading outweighs any prejudice to an opposing party.[8]

 

Discovery in Expedited Actions

 

Discovery in expedited actions is governed by Rule 190.2 (Level 1),[9] which has also been amended to be more restrictive than its former versions. The discovery period begins when the suit is filed and continues until 180 days after the date the first request for discovery of any kind is served on a party.[10] Total time for depositions is 6 hours per party, but the parties can agree to increase the total to 10 hours per party.[11] Under the new Level 1 discovery plan, each party is limited to 15 interrogatories, 15 requests for production, and 15 requests for admission.[12] In addition to the typical information available through Requests for Disclosures, a party to an expedited action may request disclosure of all documents, electronic information, and tangible items that the disclosing party has in its possession, custody, or control and may use to support its claims or defenses.[13] This request for disclosure is not considered a request for production.[14]

 

Trial of Expedited Actions

 

Living up to their title, expedited actions can be filed and tried in less than a year. On any party’s request, the court must set the case for a trial date that is within 90 days after the discovery period ends.[15] Thus, it is possible for an expedited action to go to trial 270 days after it is filed, if discovery requests are served concurrently with the petition.[16]

 

Quick trials of expedited actions are favored under Rule 169. A court cannot order an expedited action to Alternative Dispute Resolution unless the parties have agreed to engage in ADR or are required to do so by contract.[17] At trial, each side is allowed a total of five (5) hours for voir dire, opening statements, presentation of evidence, examination, cross-examination, and closing statements.[18] Time spent on objections, bench conferences, and challenges for cause are not included in the time limit.[19]

 

The Supreme Court mandated a maximum allowable recovery for expedited actions. If a suit is subject to Rule 169, no party may recover a judgment in excess of $100,000, excluding post-judgment interest.[20] Comment 3 to Rule 169 specifically precludes application of the rule from Greenhalgh v. Service Lloyds Ins. Co., 787 S.W.2d 938 (Tex. 1990), which states a “trial court must allow a trial amendment that increases the amount of damages sought in the pleadings to that found by the jury unless the opposing party presented evidence of prejudice or surprise.” The maximum recovery in an expedited action is $100,000, period.

 

Conclusion

 

It remains to be seen how the expedited action process will affect the already crowded dockets of many district courts. The process should drive attorneys to diligently prosecute their smaller cases.



[1] Tex. R. Civ. P. 169, cmt. 2.

[2] Tex. R. Civ. P. 169(a)(1).

[3] See id.

[4] Tex. R. Civ. P. 169(a)(2).

[5] Tex. R. Civ. P. 47(d).

[6] Tex. R. Civ. P. 169(c)(1).

[7] Tex. R. Civ. P. 169(c)(2).

[8] Tex. R. Civ. P. 169(c)(3).

[9] Tex. R. Civ. P. 190.2(a)(1).

[10] Tex. R. Civ. P. 190.2(b)(1).

[11] Tex. R. Civ. P. 190.2(b)(2).

[12] Tex. R. Civ. P. 190.2(b)(3)-(5)

[13] Tex. R. Civ. P. 190.2(b)(6).

[14] Id.

[15] Tex. R. Civ. P. 169(d)(2).

[16] See id.; Tex. R. Civ. P. 190.2(b)(1).

[17] Tex. R. Civ. P. 169(d)(4).

[18] Tex. R. Civ. P. 169(d)(3)(A).

[19] Tex. R. Civ. P. 169(d)(3)(b).

[20] Tex. R. Civ. P. 169(b).

Texas Supreme Court Rules Franchise Tax is Constitutional

On October 19, 2012, the Texas Supreme Court held that the Texas franchise tax does not violate the Texas Constitution. 

Nestle USA and two Texas-based companies, Switchplace, LLC and NSMBA Relators, sued the State of Texas arguing the Texas franchise tax is unconstitutional.  The franchise tax charges one-half of one percent to wholesalers, but a full one percent to businesses engaged in manufacturing — even if all manufacturing activities are out-of-state. The petitioners claimed this distinction violated the Texas Constitution's requirement that taxes be levied in an "equal and uniform" manner. 

The Texas Supreme Court held that the legislature must have discretion in structuring tax laws. “This is especially true when the object of the tax—occupations or the privilege of doing business in the state—is not easily or exactly valued.”  The Texas Supreme Court concluded that the legislature's structuring of the franchise tax is reasonably related to its object and, as such, the “petitioners’ challenges are without merit.”

Justice Willett and Justice Lehrmann issued a dissenting opinion, asserting that the court lacks exclusive original mandamus jurisdiction in taxpayers’ constitutional challenges and that the court stretched mandamus jurisprudence beyond its constitutional limits.

Texas Supreme Court Justice Resigns

Texas Supreme Court Justice Dale Wainwright announced this week that he will be resigning effective September 30.  Justice Wainwright will join Bracewell & Giuliani LLP’s Austin office.

The former Harris County district judge was elected to the Texas Supreme Court in November 2002 and is the third longest-serving justice on the Texas Supreme Court.

Gov. Rick Perry will appoint a successor to complete Justice Wainwright’s term, which ends in 2014. The appointment will be subject to Senate confirmation.

Texas Franchise Tax Challenged

The Texas Supreme Court heard arguments this week in a case that could have significant implications on the Texas franchise tax.

Nestle USA and two Texas-based companies, Switchplace LLC and NSMBA Relators, sued the State of Texas arguing the Texas franchise tax is unconstitutional.  The franchise tax charges one-half of one percent to wholesalers, but a full one percent to businesses engaged in manufacturing. The plaintiffs claim this distinction violates the Texas Constitution's requirement that taxes be levied in an "equal and uniform" manner, as well as the U.S. Constitution's equal-protection and due-process protections.

The state of Texas argued that taxpayers can be classified differently as long as it's done reasonably and that the Texas Constitution allows the creation of separate classifications for tax purposes.

Texas has had a version of the franchise tax since the 19th century. Texas lawmakers revised the franchise tax in 2006, expanding the kinds of businesses subject to the tax.  In the first two years after the revision, the tax brought in nearly $9 billion.

 

Landowners Can Challenge the Eminent Domain Power of a Pipeline Owner

In Texas Rice Land Partners, Ltd. v. Denbury Green Pipeline-Texas, LLC, 55 Tex. Sup. Ct. J. 380, 2012 WL 695322 (Tex. 2012), the Texas Supreme Court determined whether a landowner can challenge the eminent domain power of a pipeline owner that has been granted a common-carrier permit from the Railroad Commission.

 The Texas Constitution safeguards private property by declaring that eminent domain can only be exercised for “public use.”  Even when the Legislature grants certain private entities “the right and power of eminent domain,” the overarching constitutional rule controls: no taking of property for private use. Accordingly, the Natural Resources Code requires so-called “common carrier” pipeline companies to transport carbon dioxide to or for the public for hire. In other words, a pipeline company cannot wield eminent domain to build a private pipeline. 

 The Beaumont Court of Appeals previously held that (1) a pipeline owner can conclusively acquire the right to condemn private property by checking a box on a one-page form filed with the Railroad Commission, and (2) a landowner cannot challenge whether the proposed pipeline will in fact be public rather than private. The Texas Supreme Court overturned the Beaumont Court of Appeals’ decision, holding that “unadorned assertions of public use are constitutionally insufficient.” The Texas Supreme Court further held that for a pipeline company to qualify as a common carrier, a reasonable probability must exist that the pipeline will “serve the public by transporting gas for one or more customers who will either retain ownership of their gas or sell it to parties other than the carrier.”  As such, the Texas Supreme Court reversed the Beaumont Court of Appeals' judgment, and remanded the case to the district court.

 

Texas Supreme Court Holds Failure to Use AED Did Not Waive Governmental Immunity

On June 29, 2012, the Texas Supreme Court issued an opinion in City of North Richland Hills v. Laura Friend, et al., No. 11-0367, wherein it held that the failure of a city-owned water park to provide a defibrillator did not waive the city’s immunity, because it did not constitute the “use of tangible personal property.” See Texas Tort Claims Act section 101.021(2). 

The claim arose as the result of Sara Friend collapsing on July 14, 2004 at a city-owned water park in North Richland Hills, Texas.  The city employees responded with oxygen and air-way equipment, but did not retrieve the portable Automatic External Defibrillator (AED) device that was present at the water park.  Friend did not receive defibrillation until 21 minutes later, when the fire department arrived. Friend died shortly thereafter. 

Friend’s estate sued several defendants, including the city and some of its employees, claiming gross negligence in failing to retrieve and timely use the AED that proximately caused Friend’s death. 

The city argued that the Friends’ negligence claim does not fit within the narrow waiver of immunity provided by the Tort Claims Act. Sections 101.021 and 101.022 allow suits against governmental units only in cases involving the operation or use of motor vehicles, § 101.021(1), premises liability, § 101.022, or the “condition or use of tangible personal . . . property,” § 101.021(2).

The trial court denied the city’s plea to the jurisdiction, and the court of appeals affirmed.

The Texas Supreme Court, in limited prior decisions, has held that when a plaintiff alleges that property used by the state lacks an integral safety component, immunity is waived under section 101.021(2). See Lowe v. Texas Tech, 540 S.W.2d 297, 300 (Tex. 1976); see also Robinson v. Cent. Tex. MHMR Ctr., 780 S.W.2d 169, 171 (Tex. 1989).

However, the Texas Supreme Court has recently described these cases as representing the outer bounds of what has been defined as use of tangible personal property, and limited these particular rulings to cases in which a plaintiff alleges that a state actor has provided property that lacks an integral safety component and that the lack of this integral component led to the plaintiff’s injuries-- which was not the case in this matter.  The Court reaffirmed its prior holding that the legislature intended governmental units to be liable for negligently using harmful property, but not for failing to use it.

The Texas Supreme Court held the claim does not within the waiver of immunity, reversed the court of appeals, and dismissed the Friends’ claims.  

The Learned Intermediary Doctrine Applies to Prescription Drug Products-Liability Cases

The Texas Supreme Court recently held that a prescription drug manufacturer fulfills its duty to warn users of its product's risks by providing warnings to the intermediaries who prescribe the drug.  Once a manufacturer warns intermediaries, it has no further duty to warn the end users directly. 

In Centocor, Inc. v. Hamilton, No. 10-0223, 2012 WL 2052783 (Tex. 2012), a patient, Patricia Hamilton (“Hamilton”) developed a side effect from treatments with a drug manufactured by Centocor, Inc. (“Centocor”), a subsidiary of Johnson & Johnson and a prescription drug manufacturer.  Centocor marketed directly to Hamilton.  Hamilton brought an action against Centocor, alleging failure to warn, fraud, and negligence.  Centocor argued that the learned intermediary doctrine applied and it had no duty to warn Hamilton directly of the risks and potential side effects associated with the drug. 

This is the first time the Texas Supreme Court has considered a case that presents the applicability of the learned intermediary doctrine within the context of prescription drug products-liability cases.   The Texas Supreme Court held that “because patients can obtain prescription drugs only through their prescribing physician or another authorized intermediary and because the ‘learned intermediary’ is best suited to weigh the patient's individual needs in conjunction with the risks and benefits of the prescription drug,” the learned intermediary doctrine applies and limits the drug manufacturer's duty to warn only the prescribing physician.  The Texas Supreme Court further held that the learned intermediary doctrine is not a common-law affirmative defense, which would shift the burden on drug manufacturers to “plead, prove and request jury findings” on the doctrine.  Rather, the Texas Supreme Court held that it is “more akin to a common-law rule.”  The Texas Supreme Court held that Hamilton had the burden to prove that Centocor's warning to the prescribing doctors was inadequate.

Objections to Affidavit for Lack of Jurat Must be Objected to at Trial Court

 In The Mansions in the Forest, L.P. v. Montgomery County, 10-0969, 2012 WL 1370867 (Tex. Apr. 20, 2012), the Texas Supreme Court considered whether the lack of a jurat - a clause stating that a writing was sworn to before an authorized officer - in an affidavit opposing a motion for summary judgment is a defect that must have been objected to before the trial court ruled on the motion in order to preserve error.

The Beaumont Court of Appeals had previously held that omission of a jurat was a substantive defect under both the Texas Government Code and Texas Rule of Civil Procedure 166a, and that such a defect could be raised for the first time on appeal.  However, the Texas Supreme Court disagreed, holding that that neither the Government Code nor Texas Rule of Civil Procedure 166a requires such an affidavit to contain a jurat. However, to meet the definition of an “affidavit” under the Texas Government Code Section 312.011, the record must indicate the affidavit was sworn to. In this case, there was no such evidence in the record; therefore, the written statement did not meet the requirements of an affidavit.

Furthermore, because no objection to the affidavit was made in the trial court about the purported affidavit's failure to satisfy the requirements of the Texas Government Code, the defect was waived and was not preserved for appeal. 

Texas Supreme Court Affirms Property Rights of Shoreline Owners

On March 30, 2012, the Texas Supreme Court, in Severance v. Patterson, affirmed the private property rights of shoreline property owners. In doing so, the Court ruled the public’s right of access to state beaches is not guaranteed in the event of a hurricane or storm reshaping the coastline.

This ruling is thought to limit the state’s ability to enforce the Open Beaches Act, a 53 year old law that has in the past been used to compel landowners to raze or move structures that intrude on the public right of way due to storm erosion. The opinion focuses on the "dry beach," which runs from the high tide mark to the vegetation line and may be privately owned, as opposed to the “wet beach” which  runs from the high tide mark to the water, which is public land.

In so ruling, Justice Wainwright stated:

The public may have a superior interest in use of privately owned dry beach when an easement has been established on the beachfront. But it does not follow that the public interest in the use of privately owned dry beach is greater than a private property owner’s right to exclude others from her land when no easement exists on that land.

This 5-3 ruling is the result of a controversy that began after Hurricane Rita moved the vegetation line behind Carol Severance’s properties on Galveston Island, and she was ordered to raze or move her structures.

Texas Cities Have Additional Clarification on Takings Cases

On January 27, 2012, the Texas Supreme Court withdrew its prior opinion and issued a new opinion in City of Dallas v. Stewart, 2012 WL 247966, ––– S.W.3d –––– (Tex. 2012).  In its prior decision on July 1, 2011, the Texas Supreme Court upheld the jury’s award of $75,000 in a case where Stewart argued that the city improperly took and demolished her house.  Stewart had previously fought and lost the demolition order in the municipal board meetings, and she then timely appealed the decision to state district court, where she prevailed and was awarded damages.

The city appealed the trial court’s decision, and this case eventually made it to the Texas Supreme Court. In July 2011, the Texas Supreme Court issued its opinion affirming the underlying court’s decision.  

However, the city was concerned that the Texas Supreme Court’s July 1, 2011 decision would potentially open the door for many persons to bring similar takings cases against cities all over Texas, and therefore filed a motion for new hearing.  Chief Justice Jefferson wrote: “[The cities] argue that failing to accord administrative nuisance determinations preclusive effect will open the floodgates for takings claims. Because takings claims have a ten-year statute of limitations, they contend, parties will now sue to challenge demolitions that occurred any time in the past ten years.”

The Texas Supreme Court denied the motions for new hearings, but issued a new opinion.  In its new opinion, the Texas Supreme Court expressly stated that property owners must exhaust all administrative remedies and timely appeal any adverse decision to the proper court within the 30-day window set by the municipality and be subject to paying the municipality’s legal fees and court costs if they lose. The Texas Supreme Court further held that cities do not have to institute court proceedings to abate every nuisance—rather, “they only must defend the appeals of nuisance determinations and takings claims asserted in court by property owners who lost before the agency.”

Therefore, under this recent ruling, the cities would not be subject to liability for alleged takings claims by property owners who failed to exhaust their administrative remedies and failed to file an appeal to state district court.  This decision should provide additional clarification and protection for cities and municipalities who follow the proper procedures in condemnation matters and not expose them to liability for those matters whose appellate time tables have long since expired.   

Texas Supreme Court Limits Discovery of Computer Hard Drives

On August 28, 2009, in In re Weekley Homes, L.P., a unanimous Texas Supreme Court rejected a plaintiff's discovery request to perform a forensic examination on certain defendant's employee's computer servers and hard drives in an effort to discover emails the plaintiff believed had previously been deleted by the defendant's employees.  Specifically, the plaintiff in the underlying case sought to "search for any emails stored on servers or back up tapes or other media, [and] any email folders in the email accounts of [the Employees]."  The plaintiff sought to perform this forensic exam after it believed the defendant had not produced everything that still may have been on the employees' hard drives. 

According to the Court, the plaintiff "relied primarily upon discrepancies and inconsistencies in Weekley's production" in support of its argument for the forensic exam.  In sum, the plaintiff simply did not believe the defendant had produced everything that may be responsive to its discovery requests.  The defendant, Weekley Homes, L.P., objected to the proposed forensic exam on a number of grounds, including the invasive nature of the procedure proposed by the plaintiff and the possibility of confidential, privileged and trade-secret information being disclosed.

While the Court did not say a forensic exam of a party's servers and hard drives is impermissble, the Court did (for the first time) set forth the standard trial court's should follow when deciding whether or not to order such a forensic exam.  Specifically, a party must now essentially make a "good cause" showing before a trial court should order a forensic exam of a party's servers and hard drives.  The Court said that "providing access to information by ordering examinatino of a party's electronic storage device is particularly intrusive and should  be generally discouraged", absent a showing of good cause.

So, what is "good cause"?  According to the Court, a party seeking to perform a forensic exam of a party's servers and hard drives would need to show (1) an expert proposed by the party seeking the forensic exam is qualified to perform the exam; (2) the expert is familiar with the particularities of the computer drives sought to be examined; and (3) the proposed methodology for searching the computer drives is "reasonably likely" to yield the information sought.  Because the record did not support the foregonig requirements, the Court held the trial court abused its discretion in allowing the forensic exam.

There are several other interesting aspects to this case, including a discussion of the In re Honza opinion from the Waco Court of Appeals, which was the first case in Texas to discuss the procedures that may be used by trial court's in ordering forensic exams of computers. Given the amount of email and other electronic information that parties rely upon every day for the business and practice, the In re Weekley Homes, L.P. case is a must read for Texas litigation counsel.

See In re Weekley Homes, L.P., 2009 WL 2666774 (Tex. Aug. 28, 2009)