Texas Causes of Action & Affirmative Defenses

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Monday, July 25, 2011

Settled claims and governmental immunity: Can governments be held to their agreements upon settling a case


Can a governmental unit settle a claim against it and then assert immunity to avoid performing the terms of the settlement, and defeat the plaintiff's cause of action for breach of settlement agreement based on governmental immunity?


City Hall - City of Houston
GOVERNMENTAL IMMUNITY - WAIVERS -  AND SETTLEMENT OF CLAIMS NOT BARRED BY IMMUNITY

City of Houston v. Rhule    

EXCERPT FROM 14TH COURT OF APPEALS OPINIONS
  
Governmental immunity has two components—immunity from liability and immunity from suit. Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006). A unit of state government is immune from suit and liability unless the state consents. Tex. Dep’t of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999). Immunity from suit defeats a trial court’s subject matter jurisdiction and is properly asserted in a plea to the jurisdiction. Id. at 639. Immunity from liability protects the state from money judgments even if the Legislature has expressly given consent to sue. Tex. Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 853 (Tex. 2002).

B. Waiver of Immunity

By entering into a contract, a governmental entity waives its immunity from liability for breach of the contract, "but does not, merely by entering into a contract, waive immunity from suit." Tex. A&M Univ.–Kingsville v. Lawson, 87 S.W.3d 518, 520 (Tex. 2002); Gen. Servs. Comm’n v. Little-Tex Insulation Co., 39 S.W.3d 591, 594 (Tex. 2001). When a state contracts, it is liable on contracts made for its benefit as if it were a private person. Little-Tex Insulation Co., 39 S.W.3d at 594 (citing Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 405 (Tex. 1997)). However, a plurality of the supreme court has held that "when a governmental entity is exposed to suit because of a waiver of immunity, it cannot nullify that waiver by settling the claim with an agreement on which it cannot be sued." Lawson, 87 S.W.3d at 521. Thus, "enforcement of a settlement of a liability for which immunity is waived should not be barred by immunity." Id.

Here, by entering into the agreement settling Rhule’s worker’s compensation claim, the City has waived its immunity from liability under that agreement. See id. at 520. Furthermore, the Legislature’s waiver of the City’s immunity from suit for the purposes of Rhule’s original worker’s compensation claim also waives the City’s immunity from suit for Rhule’s suit to enforce the Settlement Agreement. Id. at 521; see also City of La Porte v. Barfield, 898 S.W.2d 288, 294 (Tex. 1995) (recognizing legislature’s "express waiver" of governmental unit’s immunity from liability and suit for worker’s compensation benefits claims).

However, the City argues that this waiver of immunity from suit is limited and that "[t]he scope of the waiver in connection with a breach of the [Settlement Agreement] should be limited to the initial scope of the waiver. Specifically, the waiver provided by the [Worker’s Compensation] Act." Thus, the City argues that its liability should be limited to the benefits that were authorized by the Worker’s Compensation Act and that the trial court lacked subject matter jurisdiction over Rhule’s claims for damages falling outside those limits.

The City cites Reata Construction v. City of Dallas to support its claim. See 197 S.W.3d 371 (Tex. 2006). However, Reata Construction is distinguishable from the present case as it involved the City of Dallas’s waiver of its immunity by seeking affirmative relief. See id. at 373. This case is more analogous to cases interpreting the effect of limitations on breach of contract damages under section 271.153 of the Local Government Code. In City of Mesquite v. PKG Contracting, Inc., the Dallas Court of Appeals concluded that "statutory limitations on PKG’s recoverable damages do not deprive the trial court of subject matter jurisdiction to adjudicate PKG’s breach of contract claims." 263 S.W.3d 444, 448 (Tex. App—Dallas 2008, pet. denied); see also Kirby Lake Dev. Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 840 (Tex. 2010) ("The purpose of section 271.153. is to limit the amount due by a governmental agency on a contract once liability has been established, not to foreclose the determination of whether liability exists."); City of Houston v. S. Elec. Servs., Inc., 273 S.W.3d 739, 744 (Tex. App.—Houston [1st Dist.] 2008, pet. denied) (holding pleadings alleged sufficient facts to establish waiver of immunity from suit and to defeat plea to jurisdiction and declining to determine plaintiff’s damage claim through plea to jurisdiction).

As we have already discussed, in the instant case, Rhule established that the City waived its immunity from suit on his claim for breach of the Settlement Agreement. See Jones, 8 S.W.3d at 638–39; S. Elec. Servs., Inc., 273 S.W.3d at 744. Any alleged limitations on Rhule’s recoverable damages did not deprive the trial court of subject matter jurisdiction to adjudicate Rhule’s breach of contract claims. See PKG Contracting, 263 S.W.3d at 448. Thus, the trial court had subject matter jurisdiction over the entirety of the suit and it did not err in denying the City’s plea to the jurisdiction.

We overrule the City’s first issue.

SOURCE: Houston Court of Appeals - 01-09-01079-CV - 7/21/11

MAJORITY OPINION

["Firefighter" substituted for Appellee's name]  

In 1990, appellant, the City of Houston (“the City”), and appellee, Christopher Rhule ["Firefighter"], a former firefighter for the Houston Fire Department, entered an agreed judgment settling their dispute regarding Firefighter’s worker’s compensation claim. The City subsequently breached the settlement agreement, and Firefighter filed suit to enforce it. The City now appeals the jury verdict in Firefighter’s favor for damages of $127,500 for the City’s breach of the settlement agreement.

In four issues, the City argues that (1) the trial court lacked subject matter jurisdiction over Firefighter’s damages to the extent that the requested damages exceeded remedies allowed by the Worker’s Compensation Act, and, thus, the trial court erred in denying the City’s plea to the jurisdiction; (2) the trial court erred in submitting a question to the jury that allowed it to award Firefighter damages for physical pain as a result of the City’s breach of the settlement agreement; (3) the trial court erred in entering judgment on the jury’s award of damages for mental anguish because there was no evidence of Firefighter’s propensity for mental anguish at the time the parties entered into the settlement agreement; and (4) the trial court’s award of attorney’s fees was erroneous because Firefighter failed to establish any damages that would support an award of attorney’s fees, or, alternatively, Chapter 38 of the Civil Practice and Remedies Code does not authorize an award of attorney’s fees against a municipality.


We modify the judgment of the trial court and affirm as modified.


Background


Firefighter’s back was injured in 1988 while he was acting within the course and scope of his duties with the Houston Fire Department. A dispute about his workers’ compensation benefits was handled through the administrative process in place at that time. The City appealed the results of the administrative proceedings to the 281st District Court of Harris County in cause number 89-26686.


The parties reached a settlement agreement in which the City agreed to pay Firefighter $36,000 and reasonable and necessary medical care for his lifetime for the injuries he had sustained in exchange for Firefighter’s release of all claims against the City (the “Settlement Agreement”). The trial court entered an agreed judgment to this effect for cause number 89-26686 on August 31, 1990 (the “Agreed Judgment”). The Agreed Judgment set aside the final award made in the administrative proceedings and reflected that Firefighter was to receive $36,000 and that the City was discharged and released from any claim Firefighter might have for worker’s compensation benefits or for other claims arising from his injury, “except that CHRISTOPHER A. FIREFIGHTER shall receive lifetime open reasonable and necessary medical [expenses] for the injuries made the basis of this claim as provided by the Texas Worker’s Compensation Act with a mutually agreed upon doctor beginning as of the date of execution of Mr. Firefighter’s Affidavit.”


More than a decade later, Firefighter and the City again began to disagree regarding Firefighter’s entitlement to payment for his medical care related to his 1988 injury. Specifically, the City determined that the pain pump and other medications and treatments sought by Firefighter and his physician were not reasonable, necessary, and related to the 1988 work injury.


Firefighter eventually filed a second suit against the City in the 281st District Court of Harris County, cause number 2005-79440. Firefighter alleged a breach of contract action against the City, seeking damages for “out-of-pocket expenses, incidental expenses, loss of the ‘benefit of the bargain,’ cost of reasonable medical care and treatment in the past, cost of medical care and treatment which will in all reasonable medical probability be required in the future, physical pain and suffering in the past . . . , mental anguish damages . . . , nominal damages, attorney’s fees necessary to bring and prosecute this action, [and] costs of court.” Alternatively, Firefighter sought specific performance of the Agreed Judgment and actual damages, costs of court, and attorney’s fees. Firefighter also sought a declaratory judgment to clarify his rights under the existing agreement between himself and the City, specifically including his right to ongoing lifetime medical expenses relating to his injury. Firefighter also specifically sought attorney’s fees under Chapters 37 and 38 of the Civil Practice and Remedies Code.


The City filed a plea to the jurisdiction, arguing that Firefighter’s breach of contract claim and request for declaratory relief were barred. The trial court denied the plea to the jurisdiction and the parties proceeded to a trial before a jury.[1] The jury found that the City failed to comply with its settlement agreement with Firefighter, and it determined that Firefighter was entitled to $50,000 for past physical pain, $75,000 for past mental anguish, and $2,500 for out of pocket expenses. The jury also found that Firefighter was entitled to attorney’s fees in the amount of $53,000 for trial, $10,000 for an appeal to the Court of Appeals, and $20,000 for an appeal to the Texas Supreme Court.


The City filed a motion for judgment notwithstanding the verdict, asking the trial court to eliminate the award for past physical pain and past mental anguish and to enter judgment that “Firefighter recover mental anguish damages, out of pocket expenses, and attorney’s fees only.” The City argued that damages for physical pain cannot be recovered on a breach of contract claim and that Firefighter had failed to provide any evidence to show that he was entitled to mental anguish damages for breach of contract. The trial court denied the City’s motion and entered judgment on the verdict.


Plea to the Jurisdiction


In its first issue, the City argues that the trial court lacked subject matter jurisdiction over Firefighter’s damages to the extent that the requested damages exceeded remedies allowed by the Worker’s Compensation Act and that, therefore, the trial court erred in denying the City’s plea to the jurisdiction. Specifically, the City argues that its conduct in handling the medical treatment for Firefighter’s worker’s compensation injury is protected by governmental immunity and that the scope of the waiver of that governmental immunity is limited to compensation Firefighter would have been entitled to under the Worker’s Compensation Act. Thus, the City argues, the trial court erred in denying the City’s plea to the jurisdiction on Firefighter’s claims for attorney’s fees, physical pain, and mental anguish damages.


A. Standard of Review


A plea to the jurisdiction challenges the trial court’s subject matter jurisdiction to hear the case. Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000). Subject matter jurisdiction is essential to the authority of a court to decide a case and is never presumed. Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443–44 (Tex. 1993). The existence of subject matter jurisdiction is a question of law. State Dep’t of Hwys & Pub. Transp. v. Gonzales, 82 S.W.3d 322, 327 (Tex. 2002). Therefore, we review the trial court’s ruling on a plea to the jurisdiction de novo. Id.


Governmental immunity has two components—immunity from liability and immunity from suit. Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex. 2006). A unit of state government is immune from suit and liability unless the state consents. Tex. Dep’t of Transp. v. Jones, 8 S.W.3d 636, 638 (Tex. 1999). Immunity from suit defeats a trial court’s subject matter jurisdiction and is properly asserted in a plea to the jurisdiction. Id. at 639. Immunity from liability protects the state from money judgments even if the Legislature has expressly given consent to sue. Tex. Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 853 (Tex. 2002).


B. Waiver of Immunity


By entering into a contract, a governmental entity waives its immunity from liability for breach of the contract, “but does not, merely by entering into a contract, waive immunity from suit.” Tex. A&M Univ.–Kingsville v. Lawson, 87 S.W.3d 518, 520 (Tex. 2002); Gen. Servs. Comm’n v. Little-Tex Insulation Co., 39 S.W.3d 591, 594 (Tex. 2001). When a state contracts, it is liable on contracts made for its benefit as if it were a private person. Little-Tex Insulation Co., 39 S.W.3d at 594 (citing Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 405 (Tex. 1997)). However, a plurality of the supreme court has held that “when a governmental entity is exposed to suit because of a waiver of immunity, it cannot nullify that waiver by settling the claim with an agreement on which it cannot be sued.” Lawson, 87 S.W.3d at 521. Thus, “enforcement of a settlement of a liability for which immunity is waived should not be barred by immunity.” Id.


Here, by entering into the agreement settling Firefighter’s worker’s compensation claim, the City has waived its immunity from liability under that agreement. See id. at 520. Furthermore, the Legislature’s waiver of the City’s immunity from suit for the purposes of Firefighter’s original worker’s compensation claim also waives the City’s immunity from suit for Firefighter’s suit to enforce the Settlement Agreement. Id. at 521; see also City of La Porte v. Barfield, 898 S.W.2d 288, 294 (Tex. 1995) (recognizing legislature’s “express waiver” of governmental unit’s immunity from liability and suit for worker’s compensation benefits claims).


However, the City argues that this waiver of immunity from suit is limited and that “[t]he scope of the waiver in connection with a breach of the [Settlement Agreement] should be limited to the initial scope of the waiver. Specifically, the waiver provided by the [Worker’s Compensation] Act.” Thus, the City argues that its liability should be limited to the benefits that were authorized by the Worker’s Compensation Act and that the trial court lacked subject matter jurisdiction over Firefighter’s claims for damages falling outside those limits.


The City cites Reata Construction v. City of Dallas to support its claim. See 197 S.W.3d 371 (Tex. 2006). However, Reata Construction is distinguishable from the present case as it involved the City of Dallas’s waiver of its immunity by seeking affirmative relief. See id. at 373. This case is more analogous to cases interpreting the effect of limitations on breach of contract damages under section 271.153 of the Local Government Code. In City of Mesquite v. PKG Contracting, Inc., the Dallas Court of Appeals concluded that “statutory limitations on PKG’s recoverable damages do not deprive the trial court of subject matter jurisdiction to adjudicate PKG’s breach of contract claims.” 263 S.W.3d 444, 448 (Tex. App—Dallas 2008, pet. denied); see also Kirby Lake Dev. Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 840 (Tex. 2010) (“The purpose of section 271.153. is to limit the amount due by a governmental agency on a contract once liability has been established, not to foreclose the determination of whether liability exists.”); City of Houston v. S. Elec. Servs., Inc., 273 S.W.3d 739, 744 (Tex. App.—Houston [1st Dist.] 2008, pet. denied) (holding pleadings alleged sufficient facts to establish waiver of immunity from suit and to defeat plea to jurisdiction and declining to determine plaintiff’s damage claim through plea to jurisdiction).


As we have already discussed, in the instant case, Firefighter established that the City waived its immunity from suit on his claim for breach of the Settlement Agreement. See Jones, 8 S.W.3d at 638–39; S. Elec. Servs., Inc., 273 S.W.3d at 744. Any alleged limitations on Firefighter’s recoverable damages did not deprive the trial court of subject matter jurisdiction to adjudicate Firefighter’s breach of contract claims. See PKG Contracting, 263 S.W.3d at 448. Thus, the trial court had subject matter jurisdiction over the entirety of the suit and it did not err in denying the City’s plea to the jurisdiction.


We overrule the City’s first issue.

Recoverable Damages


In its second and third issues, the City argues that Firefighter was not entitled to damages for past physical pain or for mental anguish. The City argues in its second issue that the trial court erred in submitting a jury question permitting an award of damages for physical pain on Firefighter’s breach of contract claim. In its third issue, the City argues that the evidence was insufficient to support the jury’s award of mental anguish damages on Firefighter’s breach of contract claim.


The City first argues that it can only be liable for damages to the same extent it would have been liable under the worker’s compensation act in effect at the time it settled its claim with Firefighter. The City argues that this is so because the courts of this State defer to the legislature regarding waiver of immunity and the legislature waives immunity only sparingly. We acknowledge that we must defer to the legislature on the issue of waiver of immunity—in the context of a claim for a breach of contract, the legislature must have waived immunity from suit as to the claim in question by clear and unambiguous language. See TEX. GOV’T CODE ANN. § 311.034 (Vernon 2008) (providing that statute shall not be construed as a waiver of sovereign immunity unless waiver is effected by clear and unambiguous language); Tooke, 197 S.W.3d at 332–33 (requiring clear and unambiguous language to waive governmental immunity).


However, we have already determined that the legislature’s waiver of a governmental entity’s immunity from suit on a worker’s compensation claim also applies to waive immunity from suit for enforcement of a settlement of that claim. See Lawson, 87 S.W.3d at 521–22; see Barfield, 898 S.W.2d at 294. Having determined that the City was susceptible to suit on Firefighter’s breach of contract claim, we recognize that “[w]hen the state contracts, it is liable on contracts made for its benefit as if it were a private person.” Little Tex. Insulation Co., 39 S.W.3d at 594. Furthermore, the court in Lawson addressed the reasoning the City uses here. See 87 S.W.3d at 521–22. The supreme court acknowledged that “a suit for breach of a settlement agreement is separate and apart from the suit on the settled claim” and reasoned that “[a]llowing suit against the government for breach of an agreement settling a claim for which immunity has been waived does not interfere with the Legislature’s policy choices.” The supreme court further stated,


This all assumes, of course, that a governmental entity would not, in settling a suit for which immunity has been waived, undertake an obligation that exposes it to liability much greater or different than that which it faced from the original claim. But we think this assumption is a realistic one. A settlement of a claim trades unknowns—such as what the evidence will be, and how a jury will view it—for knowns—obligations that are more accurately assessable. In reaching a settlement, the government is guided by local counsel to help gauge the degree of exposure to liability and the fairness of the settlement. Once the Legislature has decided to waive immunity for a class of claims, the inclusion of settlements within the waiver is consistent with that decision. Id. at 522.


Thus, we conclude that the City is liable for its breach of the Settlement Agreement just as any private entity would be. See id.; Little Tex. Insulation Co., 39 S.W.3d at 594; see also Liberty Mut. Fire Ins. Co. v. Crane, 898 S.W.2d 944, 948 (Tex. App.—Beaumont 1995, no writ) (stating, in context of breach of settlement agreement of worker’s compensation claim, “This suit is based on a settlement agreement that was incorporated into an agreed judgment. Because a consent judgment is a written agreement, it should be interpreted as a contract with general rules relating to construction of contracts applicable.”).


Generally, the measure of damages for breach of contract is that which restores the injured person to the economic position he would have enjoyed if the contract had been performed. Mood v. Kronos Prods., Inc., 245 S.W.3d 8, 12 (Tex. App.—Dallas 2007, pet. denied). Consequential damages are those damages that “result naturally, but not necessarily, from the defendant’s wrongful acts.” Stuart v. Bayless, 964 S.W.2d 920, 921 (Tex. 1998) (per curiam) (quoting Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 816 (Tex. 1997)). Consequential damages are not recoverable unless the parties contemplated at the time they made the contract that such damages would be a probable result of the breach. Id. Thus, to be recoverable, consequential damages must be foreseeable and directly traceable to the wrongful act and must result from it. Id.
A. Propriety of Jury Charge on Physical Pain Damages


We review the trial court’s submission of instructions and jury questions for an abuse of discretion. Moss v. Waste Mgmt. of Tex., Inc., 305 S.W.3d 76, 81 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). A trial court abuses its discretion when it acts in an arbitrary or unreasonable manner, or if it acts without reference to any guiding rules or principles. Id. A trial court has wide discretion in submitting instructions and jury questions. Id.


Here, the City objected to the charge question allowing the jury to find an amount of damages to compensate Firefighter for his physical pain resulting from the City’s breach of the Settlement Agreement. Firefighter argues that the City’s refusal to comply with its obligation to pay for his medical expenses denied him access to the pain pump, which had been managing his pain effectively and allowing him to work and perform other day-to-day tasks. Thus, because he could not afford the pain pump on his own and was forced to rely on other, less-effective pain management treatments, he suffered unnecessary pain while he was required to wait for his dispute with the City to be resolved, and thus his physical pain was actual damage that resulted from the City’s breach of the agreement.


However, damages for physical pain are not traditionally recovered in a breach of contract suit. See Mood, 245 S.W.3d at 12 (holding that measure of damages for breach of contract is that which restores injured person to economic position he would have enjoyed if contract had been performed) (emphasis added). Thus, we conclude that the trial court abused its discretion in submitting a question to the jury allowing it to assess damages for physical pain. See Moss, 305 S.W.3d at 81.


We reverse the judgment of the trial court awarding Firefighter $50,000 for physical pain sustained as a result of the City’s breach of the Settlement Agreement.


We sustain the City’s second issue.


B. Sufficiency of Evidence Supporting Mental Anguish Damages


In its third issue, the City complains that the evidence supporting the jury’s award for mental anguish damages was insufficient, and the trial court should have granted the City’s judgment notwithstanding the verdict.


A trial court may disregard a jury verdict and render a judgment notwithstanding the verdict if no evidence supports the jury finding on an issue. TEX. R. CIV. P. 301; Tiller v. McLure, 121 S.W.3d 709, 713 (Tex. 2003). We may sustain a “no-evidence” or legal sufficiency challenge only when (1) the record discloses a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or rules of evidences from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of a vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). In determining whether there is legally sufficient evidence to support the finding under review, we must consider evidence favorable to the finding if a reasonable fact-finder could and disregard evidence contrary to the finding unless a reasonable fact-finder could not. Id. at 807, 827.


The jury charge stated, “What sum of money, if any, if paid now in cash, would fairly and reasonably compensate [Firefighter] for his damages if any, that resulted from [the City’s] failure to comply [with the Settlement Agreement]? . . . Only include such amounts for mental anguish that you find would have been within the contemplation of the City at the time the contract was made.”


The City did not object before the trial court to this portion of the charge. The City now argues on appeal that “[t]here was absolutely no evidence, or the evidence was so weak that it did nothing more than create a surmise or suspicion, the Firefighter had a particular susceptibility to emotional distress and the City knew about his particular susceptibility.” It relies on Lions Eye Bank of Tex. v. Perry, 56 S.W.3d 872 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) to support its claims. However, because the City did not object to the portion of the charge instructing the jury on mental anguish damages, we evaluate the sufficiency of the evidence based on the charge and instructions that were actually submitted to the jury.[2] See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). Thus, we must determine whether there was any evidence that would allow the jurors to conclude that mental anguish damages were within the contemplation of the City at the time it entered into the Settlement Agreement with Firefighter.


In response to the damages question, the jury answered that Firefighter was entitled to $75,000 for his mental anguish. Thus, to overturn the jury’s award, we must determine that there was no evidence that mental anguish damages would have been within the contemplation of the City at the time it entered into the Settlement Agreement with Firefighter. See City of Keller, 168 S.W.3d at 810; Tiller, 121 S.W.3d at 713; see also Osterberg, 12 S.W.3d at 55 (holding that when there is no relevant objection to jury charge, we evaluate sufficiency of evidence based on charge and instructions that were submitted to jury).


At trial, Firefighter testified, regarding the Settlement Agreement with the City, that it was important to him that he receive lifetime medical treatment for his back injury because the doctor told him that he had an ongoing problem that would require treatment for the rest of his life. Firefighter testified that when the City originally decided to file suit appealing the administrative proceeding determination that he was entitled to lifetime medical expenses, he was very concerned because the City only wanted to give him ten years’ worth of medical expenses. Firefighter testified that he eventually settled his claim with the City under the terms related in the Agreed Judgment.[3] He further testified that he relied on the payment of his medical expenses to effectively manage his pain, including the City’s approval of his first pain pump. He testified that when the City denied the replacement of the battery in his pain pump, and eventually denied other forms of treatment as well, he experienced significant pain, fear that he would never be able to adequately treat the pain he was suffering if the City did not pay his expenses, difficulty sleeping, eating and digestion problems, and other stress-related and psychological problems. Finally, Firefighter testified that he was seeking $108,000 for his mental anguish—a number he arrived at because it was “three times what they paid [him] many years ago for [his] mental anguish.”


Firefighter’s testimony and other documents indicated that the City was aware from the time of the original Settlement Agreement of the nature and severity of Firefighter’s injury and of the fact that he would require extensive treatment for his injury. We conclude, therefore, that Firefighter’s testimony that it was important to him that he receive lifetime medical treatment for his injury, that he was not willing to accept the City’s offer of ten years’ medical expenses because his doctor had already told him his back injury would require care for the rest of his life, and that he did suffer mental anguish when the City subsequently refused to pay his medical expenses, combined with the City’s awareness of the severity of his injury, is sufficient to show that mental anguish damages would have been a foreseeable consequence of the City’s breach of the Settlement Agreement that was within the contemplation of the City at the time it entered into the Settlement Agreement with Firefighter.


We overrule the City’s third issue.


Attorney’s Fees


In its fourth issue, the City argues that Firefighter was not entitled to an award of attorney’s fees. However, the City did not make any objection to the award of attorney’s fees in the trial court, and it affirmatively stated in its motion for judgment notwithstanding the verdict that the trial court should enter judgment for Firefighter awarding “mental anguish damages, out of pocket expenses, and attorney fees only.” SeeTEX. R. APP. P. 33.1; Marcus v. Smith, 313 S.W.3d 408, 417 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (“In order to preserve certain complaints regarding an award of attorney’s fees, a party must make a timely and sufficiently specific objection to such an award in the trial court.”). Therefore, the City waived any complaint regarding attorney’s fees.


We overrule the City’s fourth issue.


Conclusion


We modify the trial court’s judgment by deleting the portion of the judgment awarding Firefighter $50,000 in damages for physical pain. We affirm the judgment of the trial court as modified.
Evelyn V. Keyes


Justice

Panel consists of Justices Keyes, Sharp, and Massengale.
Justice Massengale, dissenting.

________________________________________


[1] The record does not contain the trial court’s ruling on the plea to the jurisdiction, and it is not clear when or how the declaratory judgment claims were dropped. The case was tried on Firefighter’s breach of contract claims, and no declaratory judgment was issued.


[2] We note that mental anguish damages generally are not recoverable for breach of contract claims. Latham v. Castillo, 972 S.W.2d 66, 72 (Tex. 1998). However, the City failed to present this argument to the trial court or to this Court on appeal, and the City instead argues that the evidence of mental anguish was insufficient. In our review of the trial court’s proceedings, we are limited to considering issues objected to in the trial court and properly presented to this Court on appeal. See TEX. R. APP. P. 33.1, 38.1. This opinion should not be interpreted as attempting to expand damages typically available for breach of contract claims.

We also note that application of the traditional measure of damages for breach of contract—that which restores the injured person to the economic position he would have enjoyed if the contract had been performed—limits the damages a litigant generally can obtain in prosecuting a claim against a governmental unit for breach of a settlement agreement. See Mood v. Kronos Prods., Inc., 245 S.W.3d 8, 12 (Tex. App.—Dallas 2007, pet. denied) (providing general measure of damages). This inherent limitation on breach of contract damages addresses the dissent’s argument that our holding in this case will discourage governmental entities from settling cases with agreements to provide lifetime medical benefits due to the fear of being subjected to mental anguish and other remedies not recoverable under the statutory scheme that originally waived their liability from suit. SeeTex. A&M Univ.–Kingsville v. Lawson, 87 S.W.3d 518, 521–22 (Tex. 2002) (making “realistic” assumption that “a governmental entity would not, in settling a suit for which immunity has been waived, undertake an obligation that exposes it to liability much greater or different than that which it faced from the original claim” and holding that “when a governmental entity is exposed to suit because of a waiver of immunity, it cannot nullify that waiver by settling the claim with an agreement on which it cannot be sued”).


[3] As Firefighter’s counsel was questioning him at trial, and Firefighter began to testify regarding the circumstances surrounding the original suit and Settlement Agreement, counsel for the City interjected, “Your Honor, he’s getting into settlement negotiations which, I think, are inadmissible, 408.” Thus the City’s argument on appeal that neither Firefighter’s original attorney or the City’s original attorney testified regarding the circumstances surrounding the formation of the settlement agreement is misleading.

TTCA: No waiver of immunity for intentional torts by government officials, officers, employees

The statutory sovereign immunity waiver effected by Texas Tort Claims Act (TTCA) is limited:
 
  
INTENTIONAL TORTS AND SOVEREIGN IMMUNITY UNDER THE TTCA      
  
Because immunity from suit defeats a trial court's subject-matter jurisdiction, it may be properly asserted in a jurisdictional plea. Miranda, 133 S.W.3d at 225-26. In a suit against the government, the plaintiff must affirmatively demonstrate the court's jurisdiction by alleging facts demonstrating a valid waiver of immunity. Whitley, 104 S.W.3d at 542. "State agencies are immune from liability in Texas unless the Legislature has waived that immunity." Kerrville State Hosp. v. Fernandez, 28 S.W.3d 1, 3 (Tex. 2000).

Specifically, the TTCA waives the State's immunity for negligence arising "from the operation or use of a motor-driven vehicle" and personal injury "caused by a condition or use of tangible person or real property." TEX. CIV. PRAC. & REM. CODE ANN. § 101.021(1)-(2) (West 2011).

The TTCA expressly retains the State's sovereign immunity for claims "arising out of assault, battery, false imprisonment, or any other intentional tort," including claims for intentional infliction of emotional distress. Id. § 101.057(2); see Nueces County v. Ferguson, 97 S.W.3d 205, 223 (Tex. App.—Corpus Christi 2002, no pet.) ("[T]he Texas Tort Claims Act specifically preserves sovereign immunity as to intentional torts . . . . Thus sovereign immunity is not waived for a claim of intentional infliction of emotional distress.").

SOURCE: Corpus Christi Court of Appeals - 13-11-00091-CV - 7/21/11

  

Saturday, July 23, 2011

When is a plaintiff's lawsuit an HCLC [i.e. a med-mal claim as defined and governed by the CPRC]?

  
HEALTH CARE LIABILITY CLAIMS: STATUTORY DEFINITION
 
Tex. Civ. Prac. & Rem. Code Ann. § 74.351(a)-(b) (West 2011).

Whether a claim is a health care liability claim under section 74.351 is a question of law, which this Court reviews de novo. Tesoro v. Alvarez, 281 S.W.3d 654, 656 (Tex. App.—Corpus Christi 2009, no pet.); Gomez v. Matey, 55 S.W.3d 732, 735 (Tex. App.—Corpus Christi 2001, no pet.).

A health care liability claim is defined as:

[A] cause of action against a health care provider . . . for treatment, lack of treatment, or other claimed departure from accepted standards of medical care, or health care, or safety or professional or administrative services directly related to health care, which proximately results in injury to or death of a claimant, whether the claimant's claim or cause of action sounds in tort or contract.

TEX. CIV. PRAC. & REM. CODE ANN. § 74.001(a)(13).

When determining whether a claim is a health care liability claim, "courts are not bound by the form of the pleading." Harris Methodist Fort Worth v. Ollie, No. 09-0025, 2011 WL 1820880, at *2 (Tex. May 13, 2011); see Yamada v. Friend, 335 S.W.3d 192, 195-196 (Tex. 2010). It is the gravamen of the claim that determines whether the claim is for a departure from accepted standards of safety. Ollie, 2011 WL 1820880, at *2. "[I]f the act or omission that gave rise to the claim is so integral to the rendition of medical services by the provider to be an inseparable part of those services, it constitutes a breach of the standard of care." Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 849 (Tex. 2005). "Services that a [health care provider] provides its patients necessarily include those services required to meet patients' fundamental needs . . . and safety." Ollie, 2011 WL 1820880, at *2. Finally, whether expert medical testimony is necessary "may also be an important factor in determining whether a cause of action is an inseparable part of the rendition of medical or health care services." Diversicare, 185 S.W.3d at 848.

For purposes of section 74.001, a "health care institution []," includes "a home and community support services agency." TEX. CIV. PRAC. & REM. CODE ANN. § 74.001(a)(12)(A)(vii), (11)(E) (West 2011).

SOURCE: Corpus Christi Court of Appeals - 13-10-00633-CV - 7/21/11

Proving breach of fiduciary duty (BoFD) claim


Breach of fiduciary duty: What does it take to prevail with such a claim?
        
To prevail on a breach of fiduciary duty claim, a plaintiff must first prove the existence of a fiduciary relationship between the plaintiff and the defendant.  See Lundy v. Masson, 260 S.W.3d 482, 501 (Tex. App.—Houston [14th Dist.] 2008, pet. denied).  “[A] fiduciary duty arises out of agency law based upon a special relationship between the two parties.”  In re Bass, 113 S.W.3d 735, 743 (Tex. 2003) (orig. proceeding) (citing Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 200 (Tex. 2002)); see also Shands v. Tex. State Bank, 121 S.W.3d 75, 77 (Tex. App.—San Antonio 2003, pet. denied) (stating that an agency relationship creates a fiduciary relationship as a matter of law). 

Agency

An agent is a person who is authorized to act for another and is subject to the control of the other.  SITQ E.U., Inc. v. Reata Rests., Inc., 111 S.W.3d 638, 652 (Tex. App.—Fort Worth 2003, pet. denied) (noting that agency is generally a question of fact and that the trial court, as factfinder, was free to resolve any inconsistencies in the conflicting testimony to support its implied finding of agency).  “Texas law does not presume agency, and the party who alleges it has the burden of proving it.”  IRA Res. Inc. v. Griego, 221 S.W.3d 592, 597 (Tex. 2007); Tex. Cityview Care Ctr., L.P. v. Fryer, 227 S.W.3d 345, 352 (Tex. App.—Fort Worth 2007, pet. dism’d) (same).

SOURCE: Fort Worth Court of Appeals - 02-10-00045-CV - 7/21/11

Friday, July 22, 2011

Contract Construction as a matter of law vs. resolution of contract ambiguity

INTERPRETING WRITTEN INSTRUMENTS



The question of whether a written instrument is ambiguous is a question of law. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). “If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law.” SAS Institute, Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005).


An ambiguity does not arise simply because the parties advance conflicting interpretations of the contract. Columbia Gas Trans. Corp. v. New Ulm Gas, 940 S.W.2d 587, 589 (Tex. 1996). If the contract is subject to two or more reasonable interpretations after applying the pertinent rules of construction, the contract is ambiguous. Id. But if after we apply the relevant rules of construction, a contract can be given a definite legal meaning, the contract is unambiguous, and we construe it as a matter of law. Frost Nat’l Bank v. L & F Distributors, Ltd., 165 S.W.3d 310, 312 (Tex. 2005).


SOURCE: Tyler Court of Appeals - 12-10-00250-CV - 7/13/11

Thursday, July 21, 2011

Partition Suit: Lawsuit to divide land have special quirks

  
PARTITION SUITS ARE PECULIAR

  
A partition case, unlike other proceedings, has two final judgments, and the first one is appealable as a final judgment. Griffin v. Wolfe, 610 S.W.2d 466, 466 (Tex. 1980).

The first decree determines the interest of each of the joint owners or claimants, all questions of law affecting the title, and appoints commissioners and gives them appropriate directions. Ellis v. First City Nat’l Bank, 864 S.W.2d 555, 557 (Tex. App.–Tyler 1993, writ denied); see also TEX. R. CIV. P. 760, 761.

The second decree approves the report of the commissioners and sets aside to the parties their separate shares. Ellis, 864 S.W.2d at 557.

In addition to determining the basic issues of partitionability in kind and the fractional interest of the parties, the trial court also has the power during the initial stage of the partition proceeding to adjust all equities between the parties. Yturria v. Kimbro, 921 S.W.2d 338, 342 (Tex. App.–Corpus Christi 1996, no writ); see also Snow v. Donelson, 242 S.W.3d 570, 572 (Tex. App.–Waco 2007, no pet.) (“The trial court applies the rules of equity in determining the broad question of how property is to be partitioned”).
Proof is made to the fact finder at trial of the existence and value of improvements to the property at the time of partition and of other equitable considerations that may warrant awarding a particular portion of the property to one of the parties. Id. The general rule is that where improvements have been made upon the property sought to be partitioned, the improved portion will be allotted to the part owner who has made the improvements if this can be done without prejudice to the other owners. Price v. Price, 394 S.W.2d 855, 858 (Tex. Civ. App.–Tyler 1965, writ ref’d n.r.e.).

SOURCE: Tyler Court of Appeals - 12-10-00270-CV - 7/13/11

Wednesday, July 20, 2011

Trade Secrets and Trade Secret Privilege in Texas


THE TRADE SECRET PRIVILEGE GENERALLY

The trade secret privilege is governed generally by Texas Rule of Evidence 507:

A person has a privilege, which may be claimed by the person or the person’s agent or employee, to refuse to disclose and to prevent other persons from disclosing a trade secret owned by the person, if the allowance of the privilege will not tend to conceal fraud or otherwise work injustice. When disclosure is directed, the judge shall take such protective measure as the interests of the holder of the privilege and of the parties and the furtherance of justice may require.

TEX. R. EVID. 507.

In the trial court, the party resisting discovery on the basis of the trade secret privilege must establish that the information is a trade secret. In re Cont’l Gen. Tire, 979 S.W.2d at 613. The burden then shifts to the requesting party to establish that the information is necessary for a fair adjudication of its claims. Id. If the requesting party meets this burden, the trial court should ordinarily compel disclosure of the information, subject to an appropriate protective order. Id. In each circumstance, the trial court must weigh the degree of the requesting party’s need for the information with the potential harm of disclosure to the resisting party. Id. In other words, when trade secret privilege is asserted as the basis for resisting production, the trial court must determine whether the requested production constitutes a trade secret; if so, the court must require the party seeking production to show reasonable necessity for the requested materials. In re Union Pac. R.R. Co., 294 S.W.3d 589, 591 (Tex. 2009) (orig. proceeding) (quoting In re Bass, 113 S.W.3d at 738).

WHAT CONSTITUTES A TRADE SECRET?

Is the information sought trade secret?

A trade secret is "any formula, pattern, device or compilation of information which is used in one’s business and presents an opportunity to obtain an advantage over competitors who do not know or use it." In re Bass, 113 S.W.3d at 739 (quoting Computer Assocs. Int’l. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex. 1994)).

Texas courts consider the following factors in determining whether the material at issue qualifies for the trade secret privilege: (1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the extent of the measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. In re Union Pac. R.R., 294 S.W.3d at 592; In re Bass, 113 S.W.3d at 739. Because trade secret materials may not always "fit neatly into each factor every time" and because other factors may also be relevant depending on the circumstances of a particular case, we will weigh the factors in the context to determine whether the materials qualify as trade secret. In re Bass, 113 S.W.3d at 740.

SOURCE: Amarillo Court of Appeals - 07-11-00066-CV - 7/19/11

Liability based on Joint Enterprise Claim

   
JOINT ENTERPRISE CLAIM / THEORY
  
Elements and Consequences
  
Parties form a joint enterprise when they (1) enter into an express or implied agreement, (2) with a common purpose, (3) a community of pecuniary interest in that purpose, and (4) an equal right to a voice in the direction of the enterprise giving each an equal right of control. Tex. Dep’t of Transp. v. Able, 35 S.W.3d 608, 613 (Tex. 2000).
  
Parties to a joint enterprise are agents of each other, and thus, liable for the negligent acts of each other. Tex. Dep’t of Transp. v. Able, 35 S.W.3d 608, 613 (Tex. 2000).
  
The elements necessary to form a binding contract are (1) an offer, (2) acceptance of the offer, (3) a meeting of the minds, (4) the parties’ consent to the terms, (5) execution and delivery with the intent that it be mutual and binding, and (6) consideration. Advantage Physical Therapy, Inc. v. Cruse, 165 S.W.3d 21, 24 (Tex. App.–Houston [14th Dist.] 2005, no pet.). Whether an agreement was reached is a question of fact. Id.
  
A common pecuniary interest is a monetary interest shared without special or distinguishing characteristics among the members of the group. See St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 531 (Tex. 2002). An equal right to a voice in the direction of the enterprise giving each an equal right of control means an authoritative voice, some right to do more than make suggestions that could be adopted or rejected. Triplex Commc’ns, Inc. v. Riley, 900 S.W.2d 716, 719 (Tex. 1995).
  
SOURCE: Tyler Court of Appeals - 12-10-00167-CV - 7/13/11

Lawyer Lingo: Anticipatory breach [of existing contract] as defense to BoC claim

ANTICIPATORY BREACH - REPUDIATION - OF A CONTRACT:

When can it be invoked as a defense?  

With regard to anticipatory breaches of a contract, it has long been the law in Texas that before there can be an anticipatory breach, there must be an unconditional declaration of an intention not to perform the contract. Pollack v. Pollack, 39 S.W.2d 853, 857 (Tex. Comm’n App. 1931, holdings approved), reh’g denied, 46 S.W.2d 292 (1932); Moore v. Jenkins, 109 Tex. 461, 211 S.W. 975, 976 (1919); Kilgore v. Nw. Tex. Baptist Educational Society, 90 Tex. 139, 37 S.W. 598, 600 (1896); McKenzie v. Farr, 541 S.W.2d 879, 882 (Tex. Civ. App.—Beaumont 1976, writ ref’d n.r.e.).

Elements of anticipatory repudiation

The repudiation must be a distinct, positive, unequivocal, and absolute refusal to perform the contract in the future. El Paso Prod. Co. v. Valence Operating Co., 112 S.W.3d 616, 621 (Tex. App.—Houston [1st Dist.] 2003, pet. denied) (citing Van Polen v. Wisch, 23 S.W.3d 510, 516 (Tex. App.—Houston [1st Dist.] 2000, pet. denied)); Jenkins v. Jenkins, 991 S.W.2d 440, 447 (Tex. App.—Fort Worth 1999, pet. denied). The party who is alleged to have committed an anticipatory breach must show a fixed intention to abandon, renounce, and refuse to perform the contract. Jenkins, 991 S.W.2d at 447.

As stated in 1896 by the supreme court in Kilgore:


But a mere assertion that the party will be unable or will refuse to perform his contract is not sufficient. It must be a distinct and unequivocal absolute refusal to perform the promise[.]

37 S.W. at 600.

SOURCE: San Antonio Court of Appeals - 04-10-00725-CV - 7/13/11

RELATED LEGAL TERMS: contract and contract defenses, breach and anticipatory breach, repudiation of contract, contractual duty to perform, prior breach by the other party to the contract as defense to BoC

Tuesday, July 19, 2011

Noise as Nuisance: How bad does it have to be before judicial relief can be granted?


  
NUISANCE DEFINED
  

What constitutes a nuisance, legally speaking?

  
 A “nuisance” is a condition that substantially interferes with the use and enjoyment of land by causing unreasonable discomfort or annoyance to persons of ordinary sensibilities.  Schneider Nat’l Carriers, Inc. v. Bates, 147 S.W.3d 264, 269 (Tex. 2004).  
  
Distinct types of nuisance claims: Excessive noise may qualify
 
Courts have divided actionable nuisance into three classifications:  (1) negligent invasion of another’s interest; (2) intentional invasion of another’s interest; or (3) other conduct, culpable because abnormal and out of place in its surroundings, that invades another’s interests.  See City of Tyler v. Likes, 962 S.W.2d 489, 503 (Tex. 1997).  

Noise, if sufficiently extreme, may constitute a nuisance.  See Schneider, 147 S.W.3d at 269; see also Kane v. Cameron Int’l Corp. 331 S.W.3d 145, 148 (Tex. App.–Houston [14th Dist.] 2011, no pet.) (nuisance may arise when person’s senses are physically assaulted).
   
A business that is lawful in and of itself may become a nuisance because of the locality in which it is carried on.  See Storey, 226 S.W.2d at 618.  A business may also be a nuisance because the place where it is located is uncongenial to that type of enterprise.  Id.   The law does not allow one to be driven from his home or compelled to live in substantial danger or discomfort even though the danger or discomfort is caused by a lawful and useful business.  Id.  The right to acquire a known property and to deal with it and use it as the owner chooses, so long as the use harms nobody, is a natural right. Spann v. City of Dallas, 235 S.W. 513, 515 (Tex. 1921).  However, it is a right that takes into account the equal rights of others, for it is qualified by the obligation that the use of the property shall not be to the prejudice of others.  Id
SOURCE: Tyler Court of Appeals - 12-09-00291-CV  -7/13/11 

When is quantum meruit recovery available even if there was a valid contract?

CONTRACT CLAIM vs. RECOVERY ON COMMON-LAW THEORY OF QUANTUM MERUIT

What is a Quantum Meruit Claim?
    
Quantum meruit is an equitable theory of recovery which is based on an implied agreement to pay for benefits received.  Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992); Iron Mountain Bison Ranch, Inc. v. Easley Trailer Mfg., Inc., 42 S.W.3d 149, 159 (Tex.App.—Amarillo 2000, no pet.). 

Elements of a viable quantum meruit claim:

To establish a claim for quantum meruit damages in Texas, a plaintiff must prove that it (1) provided valuable services or materials, (2) for the benefit of the defendant, (3) that were accepted by the defendant, and (4) the defendant had reasonable notice that the plaintiff expected compensation for the services or materials.  Heldenfels Bros., Inc., 832 S.W.2d at 41; Iron Mountain Bison Ranch, 42 S.W.3d at 159-60.

Express contract generally precludes recovery in quantum meruit, but there are exceptions    

The right to recover in quantum meruit is based upon a promise implied by law to pay for beneficial services rendered and knowingly accepted.  Davidson v. Clearman, 391 S.W.2d 48, 50 (Tex. 1965).  However, when a valid express contract covers the services or materials upon which recovery is sought, recovery in quantum meruit will not be permitted.  Truly, 744 S.W.2d at 936.  But, the existence of an express contract does not preclude recovery in quantum meruit for the reasonable value of services rendered and accepted which are not covered by the contract.  Black Lake Pipe Line Co. v. Union Constr. Co., 538 S.W.2d 80, 86 (Tex. 1976), overruled on other grounds by Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989).

SOURCE: Amarillo Court of Appeals - 07-10-00332-CV - 7/18/11

The trial court’s findings of fact make it clear that the extra work exceeded the scope of the work covered by the express contracts.  Specifically, the trial court found that the work covered by the express contracts could be performed “with the use of ‘glove bags’ that do not involve area containment and donning of hazmat suits.”  However, the extra work that was requested by Scheuerer “included removal of carpet, which did require these extra precautions.”  Appellants’ argument simply states that the express contracts covered “asbestos abatement to be conducted by Appellee” and that, because the express contracts covered asbestos abatement, AMS is precluded from recovery in quantum meruit based on the provision of any asbestos abatement services.  Appellants’ argument, however, wholly fails to address the trial court’s finding that the scope of the asbestos abatement covered by the express contracts was exceeded by the extra work as evidenced by the necessity that AMS take the specified extra precautions.  Finding that there is significant evidence in the record to support the trial court’s finding that the extra work exceeded the scope of the express contracts, we are bound by the trial court’s factual finding.  See McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986) (when a finding of fact is unchallenged, it is binding on an appellate court unless the contrary is established as a matter of law or there is no evidence to support the finding).  Consequently, we overrule appellants’ ninth issue.

SOURCE: Amarillo Court of Appeals - 07-10-00332-CV - 7/18/11

The Economic Loss Rule explained: Contract vs. Tort Claim

 

What is the significance of the economic-loss rule?

When a party's acts breach a contract and the only alleged injury is economic loss to the subject of the contract itself, the action sounds in contract alone. Sw. Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 495 (Tex. 1991); Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986); see also Mickens v. Longhorn DFW Moving, Inc., 264 S.W.3d 875, 879 (Tex. App.-Dallas 2008, pet. denied) ("When a negligence claim is made alleging the breach of the very duties encompassed in a contract between the parties, the action is for breach of contract and not tort.") (internal quotations omitted).

SOURCE: Dallas Court of Appeals - 05-10-00047-CV - 7/15/11

Although [ Appellant's ] brief includes some discussion of the economic-loss rule, its briefing consists only of an abstract discussion of the law. [ Appellant ] does not explain why its negligence, gross negligence, and fraud claims are not barred by the economic-loss rule on the particular facts of this case. See In re Estate of Miller, 243 S.W.3d 831, 840 (Tex. App.-Dallas 2008, no pet.) (holding issue waived because appellant did not analyze legal authority and made "no suggested application of it to the facts"). Nor does[ Appellant ] support its argument with any citations to the record as required by Texas Rule of Appellate Procedure 38.1(i). See In re B.A.B., 124 S.W.3d 417, 420 (Tex. App.-Dallas 2004, no pet.) ("The failure to adequately brief an issue, either by failing to specifically argue and analyze one's position or provide authorities and record citations, waives any error on appeal.").

We conclude that [ Appellant ] has effectively failed to challenge [ Appellee's ] invocation of the economic- loss rule, and so we will not disturb the summary judgment with respect to[ Appellant ]'s claims for negligence, gross negligence, and fraud. See Adams v. First Nat'l Bank of Bells/Savoy, 154 S.W.3d 859, 875 (Tex. App.-Dallas 2005, no pet.) ("[A] reviewing court will affirm the summary judgment as to a particular claim if an appellant does not present argument challenging all grounds on which the summary judgment could have been granted."); see also Jarvis v. Rocanville Corp., 298 S.W.3d 305, 313 (Tex. App.-Dallas 2009, pet. denied) (stating that a general issue challenging summary judgment must be supported by argument "negating all possible grounds upon which summary judgment could have been granted").

SOURCE: Dallas Court of Appeals - 05-10-00047-CV - 7/15/11

Monday, July 18, 2011

Challenging attorney's fee affidavit in a debt collection case

  
Beaumont Court of Appeals finds creditor's fee proof insufficient to support summary judgment where its counsel's affidavit lacked specificity as to hours and hourly rates and Defendant -- himself an attorney and as such qualified to testify on the matter -- filed a counter-affidavit challenging the reasonableness of the amount of fees sought by American Express and the lack of substantiation.   
ATTORNEYS FEES ON BREACH-OF-CONTRACT CLAIM VIA SUMMARY JUDGMENT
  
[ Credit card debt Defendant ] argues on appeal that the trial court erred in overruling his objections to Amex’s summary judgment proof "because said proof was conclusory." Specifically, [ Credit card debt Defendant ] argues the affidavit Amex submitted in support of its request for attorney’s fees is conclusory. [ Credit card debt Defendant ] argues that the affidavit is insufficient to support the award of fees because it "did not itemize the hours expended, or identify the attorney’s hourly rate."

[ Credit card debt Defendant ] further contends that the absence of an hourly rate and hours billed prevents the affidavit from being readily controvertible. Additionally [ Credit card debt Defendant ] contends that his own affidavit contradicted Amex’s affidavit in support of requested attorney’s fees.

Amex submitted the affidavit of its counsel of record in support of its request for attorney’s fees. Counsel averred that he was attorney of record for Amex in the underlying suit and that the statements set forth therein were based on his personal knowledge. Counsel further stated that he was familiar with the fees charged by attorneys for work of the type performed in this case and stated the following in support of Amex’s request for $2,100 in attorney’s fees:



Prior counsel and I have represented Plaintiff in its pursuit of collection [of] the indebtedness which is the subject of this cause. Prior counsel and I have reviewed the documentation provided by Plaintiff regarding the indebtedness, prepared pleadings, performed necessary and appropriate research, prepared appropriate discovery requests, and prepared a Motion for Summary Judgment and appropriate supporting affidavit(s).

All the work done in this cause has been necessary. It is my opinion that Plaintiff is entitled to recover its attorney fees in accordance with the terms of the Agreement and Texas law, in the sum of $2,100.00 in view of the work performed to date in order to collect the judgment.

In this affidavit filed with his response motion, [ Credit card debt Defendant ] stated:


. . I am a licensed attorney in the State of Texas. I am familiar with the usual and customary rates charged by attorneys in Texas. I have reviewed the attorney’s fee affidavit attached to Plaintiff’s motion for summary judgment. The affidavit does not contain the hourly rate being charged by the attorney’s billing nor does it contain the number of hours billed. In addition, the affidavit does not discuss any of the Arthur Anderson factors. As such, the attorneys’ fees are not readily controverted.
In reviewing the facts supplied by Plaintiff to recover attorney’s fees, it is my opinion that the fees sought are unnecessary and not reasonable. The entire lawsuit could have been avoided had Plaintiff supplied the necessary information previously requested. It is my expert opinion that the attorney fees Plaintiff’s attorney claims are not necessary or reasonable.
    

The reasonableness of attorney’s fees is generally a question of fact. Smith v. Patrick W.Y. Tam Trust, 296 S.W.3d 545, 547 (Tex. 2009); Tesoro Petroleum Corp. v. Coastal Ref. & Mktg., Inc., 754 S.W.2d 764, 767 (Tex. App.—Houston [1st Dist.] 1988, writ denied).

However, an attorney’s affidavit may be sufficient to conclusively establish the reasonableness of attorney’s fees for purposes of summary judgment. Basin Credit Consultants, Inc. v. Obregon, 2 S.W.3d 372, 373 (Tex. App.—San Antonio 1999, pet. denied). "[A]n affidavit filed by the movant’s attorney that sets forth his qualifications, his opinion regarding reasonable attorney’s fees, and the basis for his opinion will be sufficient to support summary judgment, if uncontroverted." In re Estate of Tyner, 292 S.W.3d 179, 184 (Tex. App.—Tyler 2009, no pet.) (citing Basin Credit Consultants, 2 S.W.3d at 373).

To establish that attorney’s fees are reasonable as a matter of law, uncontroverted testimony of an interested witness must (1) be capable of ready contradiction if untrue; (2) be clear, direct, and positive, and (3) be free of circumstances tending to discredit or impeach the testimony. Rosenblatt v. Freedom Life Ins. Co. of Am., 240 S.W.3d 315, 321 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (citing Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 882 (Tex. 1990)).

We conclude the affidavit submitted by Amex fails to satisfy its summary judgment burden. See Tex. R. Civ. P. 166a(c). Though counsel for Amex states that allwork performed on the case was necessary, on its face, the affidavit filed by Amex does not state an opinion that the requested fees were reasonable or otherwise provide basic objective criteria to substantiate the amount of attorney’s fees requested. It is unclear from Amex’s supporting affidavit whether the requested fees were based on an hourly rate for the work performed or based on a percentage of the judgment. [ Credit card debt Defendant ] ’s affidavit challenges the sufficiency of Amex’s supporting affidavit and states his opinion that the requested fees are not reasonable. We note that an affidavit that merely criticizes the fees sought by the movant as unreasonable without setting forth the affiant’s qualifications or the basis of his opinion will not be sufficient to defeat conclusive summary judgment evidence of reasonable fees. See Basin Credit Consultants, 2 S.W.3d at 373. However, the evidence presented by Amex is not conclusive evidence of reasonable fees.

Additionally, while [ Credit card debt Defendant's ] affidavit appears conclusory, it controverts the evidence presented by Amex on attorney’s fees. Under these circumstances, we find the trial court erred in granting summary judgment on attorney’s fees. See Rosenblatt, 240 S.W.3d at 320-21; see also Gen. Elec. Supply Co. v. Gulf Electroquip, Inc., 857 S.W.2d 591, 601-02 (Tex. App.—Houston [1st Dist.] 1993, writ denied) (holding summary judgment on attorney’s fees is improper when conflicting affidavits from opposing attorneys are presented).

We sustain issue three in part. We sever the issue of attorney’s fees from the judgment, reverse the award of attorney’s fees, and remand for further proceedings on attorney’s fees. We affirm the remainder of the trial court’s judgment. See id. at 602.

  
SOURCE: Beaumont Court of Appeals - 09-10-00166-CV - 7/14/11 (Summary judgment for American Express in credit card debt suit affirmed except for attorney fee award) 
  
RELATED LEGAL TERMS: reasonableness of attorney's fees, evidence of reasonableness of legal fees, proving up attorney's fees claim based on breach of contract, expert fee testimony  


Friday, July 15, 2011

TCPA: Debt collection robocalls to wrong cell-phone customer cost collector dearly



Dallas Court of Appeals affirms six-figure judgment against debt collector in suit complaining of use of automated dialing equipment to harrass cell phone customer with reassigned number who was not the person who owed the debt.  

First National Collection Bureau, Inc. [FNCB] v. Walker,
No. 05-10-00129-CV (Tex.App. - Dallas Jul. 14, 2011) (Opinion by Justice Lang)
[hot links are not part of the opinion as released by the court]

OPINION 

Appellee Daniele Walker filed suit against appellant First National Collection Bureau, Inc. (“FNCB”) alleging automated debt collection calls were made to her cell phone number in violation of the federal Telephone Consumer Protection Act (“TCPA”) and section 35.47(f) of the Texas Business and Commerce Code, which was in effect at that time. See 47 U.S.C.A. § 227 (West, Westlaw through July 14, 2011); Tex. Bus. & Com. Code Ann. § 35.47(f) (repealed 2007). See Footnote 1

Following a jury verdict in favor of Walker and some additional findings by the trial court, a judgment was rendered for Walker in the amount of $147,000 against FNCB. In five issues See Footnote 2 on appeal, FNCB (1) contends the trial court erred by not applying Texas law and, alternatively, applying the TCPA incorrectly and (2) challenges the sufficiency of the evidence to support the jury's verdict and the trial court's findings.

We decide against FNCB on its five issues. The trial court's judgment is affirmed.

I. FACTUAL AND PROCEDURAL BACKGROUND

FNCB, a third party debt collector, assists other entities in collecting payment on delinquent accounts. In January 2008, FNCB began collection efforts on an account owed by an individual who is not a party to this litigation. However, the telephone number that “came with” that account had been reassigned to Walker's cell phone. During a period of approximately six months, FNCB and two of its vendors, Global Connect and TCN, made multiple calls to Walker's cell phone number in connection with attempts to collect that debt.

Walker filed this lawsuit on June 30, 2008. In her live pleading, Walker contended FNCB made calls to her cell phone using an “automatic telephone dialing system and/or an artificial or prerecorded voice” in violation of the TCPA. According to Walker, such violations entitled her to statutory damages of $500 per call pursuant to the TCPA and section 35.47(f), which provided for a cause of action by “[a] person who receives a communication that violates [the TCPA].” Further, Walker asserted that because FNCB had committed such violations “knowingly,” she was entitled to increased damages of up to $1,500 per violation pursuant to those statutes. FNCB filed a general denial answer.

Among the documents admitted into evidence at trial were business records of FNCB. Also, Walker and Scott Carroll, FNCB's vice president of operations and business development, testified. At the charge conference held after the presentation of evidence, the trial court refused all jury questions and instructions submitted by FNCB and overruled FNCB's objections to the charge. See Footnote 3 The charge of the court submitted to the jury contained the following three questions:

QUESTION NO. 1:

Were calls made to [the phone number in question] using an automatic telephone dialing system or an artificial voice or a prerecorded voice without the prior express consent of the called party?
. . . .
QUESTION NO. 2:

How many calls were made by [FNCB] or on its behalf to [the phone number in question] using an automatic telephone dialing system or an artificial voice or a prerecorded voice?
. . . .
QUESTION NO. 3:


Did [FNCB] willfully and knowingly make or cause to be made calls to [the phone number in question] when an automatic telephone dialing system or an artificial voice or a prerecorded voice was used?

“Willfully and knowingly” means that [FNCB] knew or should have known that it was violating the federal [TCPA] when it called or caused to be called [the phone number in question]. A finding that [FNCB] acted “willfully or knowingly” does not require a finding of bad faith, but only that [FNCB] had reason to know, or should have known, that its conduct would violate federal law.
The jury answered “yes” to questions number one and number three. The jury's response to question number two was “98.” Then, additional argument was presented by the parties and the following additional question was submitted to the jury:

What sum of money, if any, in addition to statutory damages should be awarded against [FNCB] because [FNCB]'s conduct was committed willfully and knowingly?

Please award an additional dollar amount per telephone call made. You may award between $0 and $1000 in additional damages per telephone call. Answer in dollars and cents.
The jury answered “$1000.00 per telephone call.”

FNCB filed motions for judgment notwithstanding the verdict and new trial. At a hearing on those motions, FNCB argued in part that the jury's finding as to whether additional damages should be awarded based on “willful and knowing” conduct of FNCB was immaterial because only the trial court had authority to make that decision. The trial court, over objection by Walker and without a jury present, “accepted” additional testimony offered by FNCB regarding the determination of additional damages. The trial court declined to rule at that time as to whether such additional damages were to be determined at the trial court's discretion or by the jury. After taking the matter under advisement, the trial judge proceeded to decide the issues as to additional damages and a final judgment was rendered that ordered that Walker recover $49,000 in statutory damages pursuant to the TCPA and “$98,000 in damages pursuant to the [TCPA] for willful and knowing violations,” plus court costs and interest. Additionally, the trial court denied FNCB's motions for judgment notwithstanding the verdict and new trial.

FNCB filed (1) a motion to modify, correct, or reform the judgment and (2) a request for findings of fact and conclusions of law respecting, inter alia, “[t]hose portions of the case decided by the court.” Then, Walker filed proposed findings of fact and conclusions of law pertaining to the additional damages awarded by the trial court for “willful and knowing” violations of the TCPA. FNCB filed a request for additional findings of fact and conclusions of law as to whether FNCB acted “knowingly or intentionally” pursuant to section 35.47(f). After the trial court signed findings of fact and conclusions of law pertaining to the additional damages, See Footnote 4 this appeal timely followed.

II. FNCB'S ISSUES

A. Standard of Review

[omitted]

B. Applicable Law


1. Telephone Consumer Protection Act

The TCPA provides in relevant part that it shall be unlawful for any person within the United States “to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice . . . to any telephone number assigned to a . . . cellular telephone service.” 47 U.S.C.A. § 227(b)(1)(A)(iii). Further, in subparagraph (b)(3)(B) of that same section, the act states “[a] person or entity may, if otherwise permitted by the laws or rules of court of a State, bring in an appropriate court of that State . . . an action to recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation, whichever is greater.” Id. § 227(b)(3)(B). If a court finds that a defendant “willfully or knowingly” violated subsection (b) or the regulations prescribed under that subsection, “the court may, in its discretion, increase the amount of the award to an amount equal to not more than 3 times the amount available under [subparagraph (b)(3)(B)].” Id. Subsection (e) of the TCPA, titled “Effect on State Law,” provides in relevant part that, with certain exceptions not at issue here, the TCPA and regulations prescribed thereunder shall not “preempt any State law that imposes more restrictive intrastate requirements or regulations on, or which prohibits . . . the use of automatic telephone dialing systems . . . [or] the use of artificial or prerecorded voice messages.” Id. § 227(e)(1).

2. Texas Business and Commerce Code

According to section 35.47(f) of the business and commerce code, which the parties do not dispute was in effect at the time of the events at issue,

A person who receives a communication that violates 47 U.S.C. Section 227, a regulation adopted under that provision, or this section may bring an action against the person who originates the communication in a court of this state for an injunction, damages in the amount provided by this subsection, or both. A plaintiff prevailing in an action for damages under this subsection is entitled to the greater of $500 for each violation or the person's actual damages, except that the court may increase the amount of the award to not more than the greater of $1,500 for each violation or three times the person's actual damages if the court finds that the defendant committed the violation knowingly or intentionally. Tex. Bus. & Com. Code Ann. § 35.47(f).

3. Supremacy Clause

According to the Supremacy Clause of the United States Constitution, “[t]his Constitution, and the Laws of the United States . . . shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any state to the Contrary notwithstanding.” U.S. Const. art. VI, cl.2. The United States Supreme Court has stated

[T]he Constitution and laws passed pursuant to it are as much laws in the State as laws passed by the state legislature. The Supremacy Clause makes those laws “the supreme Law of the Land,” and charges state courts with a coordinate responsibility to enforce that law according to their regular modes of procedure.

Howlett v. Rose, 496 U.S. 356, 367 (1990). Thus, it is generally true that states may not decline to recognize or enforce federal law. Id. at 371; see The Chair King, Inc. v. GTE Mobilnet of Houston, Inc., 184 S.W.3d 707, 712 (Tex. 2006). Further, “the federal law that states are required to enforce must be applied according to its terms.” Chair King, 184 S.W.3d at 712. State laws that conflict with federal law are generally without effect. Maryland v. Louisiana, 451 U.S. 725, 746 (1981).

4. Statutory Construction

In matters of statutory construction, courts must give effect to the unambiguously expressed intent of the legislature. See Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984); Galbraith Eng'g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009). Under settled principles of statutory construction, we must first determine whether statutory text is plain and unambiguous. Carcieri v. Salazar, 555 U.S. 379, 129 S.Ct. 1058, 1063 (2009) (citing U.S. v. Gonzales, 520 U.S. 1, 4 (1997)); see also N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 655 (1995) (in determining congressional intent, analysis begins with interpretation of statutory text and “move[s] on, as need be, to the structure and purpose of the Act in which it occurs”). If it is, we must apply the statute according to its terms. Carcieri, 129 S.Ct. at 1064 (citing Dodd v. U.S., 545 U.S. 353, 359 (2005)); see also Mitchell Energy Corp. v. Ashworth, 943 S.W.2d 436, 438 (Tex. 1997) (in construing statute, court's primary objective is to give effect to legislature's intent by considering plain meaning of enactment). “A fundamental canon of statutory construction is that, unless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning.” Perrin v. U.S., 444 U.S. 37, 42 (1979); see also Tex. Gov't Code Ann. § 311.011 (West 2005) (“[w]ords and phrases shall be read in context and construed according to the rules of grammar and common usage”).

State courts have the authority to render binding decisions based on their interpretation of federal law unless a federal statute provides for exclusive federal jurisdiction. See ASARCO, Inc. v. Kadish, 490 U.S. 605, 617 (1989); In re Devon Energy Corp., 332 S.W.3d 543, 549 (Tex. App.-Houston [1st Dist.] 2009, orig. proceeding). Texas state courts interpret federal law independently, though “we typically seek guidance from among the decisions of the lower federal courts.” Hassan v. Greater Houston Transp. Co., 237 S.W.3d 727, 731 (Tex. App.-Houston [1st Dist.] 2007, pet. denied) (citing Kiefer v. Cont'l Airlines, Inc., 882 S.W.2d 496, 502 (Tex. App.-Houston [1st Dist.] 1994), aff'd, 920 S.W.2d 274 (Tex. 1996)). Although decisions of the federal courts of appeals do not bind Texas courts, we receive them “with respectful consideration.” Id.; see also Christus Health Gulf Coast, Inc. v. Aetna, Inc., 237 S.W.3d 338, 343 n.8 (Tex. 2007).

5. Preservation of Error

[omitted]


 C. Analysis

1. Applicability of TCPA and Section 35.47(f) to Debt Collection Calls

We begin with subpart (a) of FNCB's first issue and subpart (a) of FNCB's second issue, which we address together. In those two points, FNCB contends (1) “Texas law does not apply the [TCPA] to debt collection activities” and (2) “[t]he TCPA does not apply to debt collection calls.” Walker asserts, in part, that FNCB has failed to preserve these points for appeal because FNCB made no objections during the charge conference challenging the applicability of the TCPA and section 35.47(f) to debt collection activities. We agree.

The record shows FNCB made no objection on such grounds during the charge conference. In its motions for new trial and to modify, correct, or reform the judgment, FNCB challenged the application of both statutes to debt collection calls. However, those challenges came too late. See Tex. R. Civ. P. 272 (any charge objections not presented before charge is read to jury “shall be considered as waived”); Kirkpatrick v. Mem'l Hosp. of Garland, 862 S.W.2d 762, 769 (Tex. App.-Dallas 1993, writ denied) (“Objections to the charge in a motion for new trial are untimely and preserve nothing for review.”); see also Tex. R. App. P. 33.1(a). Accordingly, we conclude FNCB has not preserved error as to subpart (a) of its first issue or subpart (a) of its second issue.

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