CITY EMPLOYEE CAN’T SUE RISK POOL FOR DENYING CANCER TREATMENT

Stegall v. TML Multistate Intergovernmental Employee Benefits Risk Pool, Inc.
Dallas Court of Appeals, No. 05-18-00239-CV (October 2, 2019)
Justices Whitehill, Pedersen (Opinion linked here), and Partida-Kipness (Dissent linked here)
The Dallas Court of Appeals, in a 2-1 decision, held a municipal risk pool providing health benefits for city employees cannot be sued for wrongfully denying medical treatment.

Joe Stegall was the CFO for Royse City, and participated in the city’s medical-benefits plan provided through the TML Risk Pool. When Mr. Stegall was diagnosed with liver cancer, TML refused to authorize the use of a specific drug prescribed by his oncologist, and threatened to terminate coverage entirely if he used the drug without its authorization. Although TML later reversed its position, Mr. Stegall died several weeks later. His widow sued TML for “wrongful denial of medical benefits and additional acts of interference with the decedent’s access to prescribed chemotherapy.” TML filed a plea to the jurisdiction asserting governmental immunity from suit, which the trial court granted, dismissing the case. The Dallas Court of Appeals affirmed.

Writing for the Court, Justice Pedersen described the case as “an emotional and tragic scenario,” but held Texas law granted TML immunity from suit. The Court first determined TML was a distinct governmental entity, “an intergovernmental self-insurance risk pool that operates under the Interlocal Cooperation Act,” Government Code chapter 791. It then rejected the argument that TML’s “claims-adjusting” involved “proprietary,” not “governmental” functions, which would have meant immunity did not attach. Municipalities are immune from suit when exercising their governmental functions, but not when the actions are proprietary, i.e., discretionary actions that can be, and often are, performed by private parties. The Court held, however, the distinction did not apply to TML, which, like other political subdivisions created by the legislature for public purposes, performs only governmental functions.

In dissent, Justice Partida-Kipness argued the governmental-proprietary distinction applied to TML, and that although creating and participating in the risk pool was a governmental function, claims adjusting and coverage decisions were proprietary functions not subject to immunity. She criticized the majority opinion as reaching “an absurd result—the removal of logic and humanity from application of the law.”

COURT CAN’T PUT OFF HOLDING HEARING ON TCPA MOTION

In re Herbert
Dallas Court of Appeals, No. 05-19-01126-CV (September 19, 2019)
Justices Whitehill (Opinion available here), Partida-Kipness, and Pedersen, III
The Dallas Court of Appeals granted mandamus relief and ordered the trial court to conduct a hearing on the movant’s TCPA motion to dismiss by the statutory deadline—a deadline that expires the day after the appellate court’s decision. The Relator, Aaron Herbert, filed a TCPA motion to dismiss counterclaims brought against him for defamation and invasion of privacy. Although he tried several times to get the trial court to schedule a hearing on the motion before the 60-day deadline (August 21) or to acknowledge the crowded docket conditions and schedule a hearing within 90 days (September 20), the court would not do so. The trial court’s staff informed him that (1) the court wanted the parties to mediate before conducting a hearing; (2) the court only heard dispositive motions on Fridays; and (3) the earliest hearing date available was October 18.

Herbert sought mandamus relief, which the Dallas Court granted. It held that, although trial courts generally have the discretion to schedule hearings within a “reasonable time,” the trial court must set a TCPA motion to dismiss for hearing within the applicable statutory deadline if the movant makes reasonable efforts to obtain a timely hearing. If the movant does not receive a timely hearing, he is deprived of his rights under the TCPA. And because a failure to hold a hearing is not subject to interlocutory appeal, the movant lacks an adequate remedy on appeal. So on September 19, the Court ordered the trial court to conduct a hearing on the TCPA motion “no later than September 20.”

MAILING CHAPTER 74 NOTICE TO HOSPITAL IS NOT “NOTICE”

Thornton v. Columbia Medical Center of Plano Subsidiary, LP
Dallas Court of Appeals, No. 05-18-01010--CV (September 12, 2019)
Justices Myers (Opinion available here), Osborne, and Nowell
Plaintiffs in a medical malpractice case sued Columbia Medical Center of Plano Subsidiary, LP two years and sixty-two days after the patient’s death. Under Civil Practices & Remedies Code, Chapter 74, providing notice of a health care liability claim to a “physician or health care provider against whom such claim is being made” tolls the 2-year statute of limitations for 75 days. Here, plaintiffs mailed their notice to the hospital’s physical address, rather than an authorized agent for service of process.

The Dallas Court of Appeals held that a Texas limited partnership receives notice when it is served on its registered agent or a general partner. Columbia’s registered agent was CT Corporation System. The Court held that, even though the Medical Center of Plano at 3901 W. 15th Street, Plano, Texas, 75075 “was the physical place at which the treatment occurred,” “it was not the health care provider Thornton sued.” So mailing notice to “Medical Center of Plano” at the hospital’s physical address did not provide notice to Columbia, and the statute of limitations was not tolled. Summary judgment in favor of Columbia was affirmed.

WHAT’S HAPPENING WITH MY APPEAL? TCPA CASE SHEDS LIGHT ON COURT’S PROCESSES

U.S. Anesthesia Partners of Texas, P.A. v. Whitney Kelley Mahana
Dallas Court of Appeals, No. 05-18-01414 (August 27, 2019)
Justices Bridges (Dissent, linked here), Brown, and Nowell (Opinion, linked here); Dissent from Denial of En Banc Rehearing by J. Whitehill (linked here)
Mahana, a nurse anesthetist, alleged that her supervisor at U.S. Anesthesia Partners sent text messages falsely stating that she tested positive for drugs and was being fired. Mahana sued the employer for intentional infliction of emotional distress. The employer moved to dismiss under the TCPA and appealed after the trial court denied the motion.

In a split decision, the Dallas Court of Appeals concluded that because the text messages did not address Mahana’s job performance, they were not “communications related to the provision of medical services by a health care professional.” Therefore, the text messages were not an exercise of the employer’s right to free speech, which the TCPA defines to include communications on an “issue related to health or safety,” and the TCPA did not apply. Justice Bridges dissented, arguing that any drug use that could impair Mahana’s ability to do her job had a sufficient relationship to issues of health and safety, such that the TCPA applied to the text messages.

Notably, at the same time the majority opinion and dissent issued, Justice Whitehill also issued an opinion dissenting from the denial of reconsideration en banc, arguing that the majority opinion conflicted with the Court’s own precedent. Justice Whitehill’s dissent sheds light on some of the Court’s behind-the-scenes practices:

How did the opinion and the dissent from the denial of en banc reconsideration issue on the same day? Did U.S. Anesthesia Partners request en banc reconsideration before the Court issued its opinion?

No, U.S. Anesthesia Partners never moved for reconsideration en banc. TRAP 49.7 allows a “majority of the en banc court may…, with or without a motion, [to] order en banc reconsideration of a panel’s decision.” And the Court’s own Internal Operating Procedures note that it will “on occasion” sit en banc without a request from the parties. So, Justice Whitehill requested en banc consideration sua sponte.

But doesn’t the en banc process start after the opinion issues?

No, TRAP 49.7 allows en banc consideration to occur at any time the Court has plenary power. In fact, a Court can order the case to be heard en banc in the first instance. See TRAP 41.1(a), 41.2(a). For example, the Court might order en banc consideration at the outset when an appeal directly challenges binding precedent from the Court, which a panel cannot overrule.

I still don’t understand why the vote on en banc happened before the Court issued an opinion in the case. 

Although we can’t know the precise reasons why Justice Whitehill requested en banc review when he did, a few considerations appear to be at play. First, the Court has a practice, which some Justices have mentioned but which does not appear to be formally memorialized for the public, of circulating opinions in certain cases to the entire Court before an opinion issues. This will occur, among other times, when there will be a dissent in a case heard by a three-justice panel, as occurred here. Second, the Court has an internal goal of issuing opinions in all cases that have been argued (or submitted without argument) before the start of its new fiscal year on September 1. The opinions here issued on August 27. Both of these factors could have led to the decision to address en banc review at the same time the panel was issuing its opinions.

INSURANCE COVERS DAMAGES AWARDED AGAINST MAJORITY OWNER WHO WRONGFULLY FIRED BUSINESS PARTNER

Prophet Equity LP v. Twin City Fire Ins. Co.
Dallas Court of Appeals, No. 05-17-00927-CV (August 19, 2019)
Justices Bridges, Brown, and Whitehill (Opinion linked here)
A majority partner wrongfully fired his partner, and paid the judgment entered against him. After the first $10 million of insurance coverage was exhausted, he sued an excess insurer for another $4 million. Reversing the trial court, the Dallas Court of Appeals held the excess insurer must pay the balance of the judgment and additional attorney’s fees, summing up its decision in a nifty flow chart:



LIMITATIONS: NO STANDING ON INDIVIDUAL CLAIMS = NO RELATION BACK FOR DERIVATIVE CLAIMS ADDED LATER

Cooke v. Karlseng
Dallas Court of Appeals, No. 05-18-00206-CV (August 14, 2019)
Justices Brown, Schenck, and Pedersen, III (Opinion, linked here)
In this looooong-running business dispute with a tangled and protracted procedural history, Cooke sued his ex-partners for alleged wrongs that occurred in 2005 and 2006. Originally, he asserted his claims individually, back in 2006. But the Dallas Court of Appeals concluded those claims were predicated on alleged injuries to the partnerships, rather than to Cooke directly (even though the value of his partnership interests may have been diminished in the process). Therefore, he lacked standing to bring those claims individually. But, Cooke argued, he surely had the right to assert the claims derivatively, and Tex. Bus. Org. Code § 21.563(c)(1) authorizes a court to treat a derivative claim “as a direct action” in certain circumstances. So, no problem, right? Wrong, said the Dallas Court. “Section 21.563 does not turn a derivative claim into an individual claim.” It just allows a court to treat a derivative claim like a direct claim in certain procedural respects, where appropriate. And here, even if Cooke could have brought his claims derivatively at the outset, “the fact remains he did not,” and he lacked standing to bring them as he did.

One door closed, Cooke tried another. In an amended petition he recharacterized all his claims as asserted both individually and derivatively on behalf of the partnerships. But he waited until 2014 to do that. When his ex-partners argued the newly asserted derivative claims were barred by limitations, Cooke contended (1) the derivative claims clearly arose from the same facts as the substantially identical claims he had asserted on an individual basis back in 2006, and (2) the derivative claims therefore “related back” to that original filing under Tex. Civ. Prac. & Rem. Code § 16.068. Wrong again, the Court concluded. Remember, Cooke lacked standing to pursue those claims as originally filed. “For that reason, the trial court never obtained jurisdiction over his [original] claims.” Consequently, there was nothing to which the amended, derivative claims could relate back. And so they were barred by limitations.

DEC ACTION: IS A HARASSING DEFENDANT A JUDICIABLE CONTROVERSY?

Gutman v. Richard Wayne Wells and Real Estate Arbitrage Partners, Inc.
Dallas Court of Appeals, No. 05-18-01227-CV (August 5, 2019)
Justices Whitehill (Opinion, linked here), Partida-Kipness (Dissent, linked here), and Pedersen
In a split panel decision, the Dallas Court of Appeals held that a “petition alleging that a defendant has repeatedly harassed and threatened the plaintiff because he refuses to accede to the defendant’s unlawful demands presents” a judiciable controversy under the Declaratory Judgments Act.

The Court considered this issue in an appeal of the trial court’s dismissal under Rule 91a. In previous lengthy litigation, Greg Gutman had obtained a judgment against one defendant, Real Estate Arbitrage Partners, LLC (“Arbitrage”) but not against the other defendant, Richard Wayne Wells. After the judgment was affirmed, Arbitrage paid the judgment, and Gutman delivered to Arbitrage a fully executed release of judgment. But Defendants wanted more. According to the petition, they repeatedly demanded an executed release of judgment against Wells, and harassed and threatened Gutman for his refusal to do so.

The majority held there was a real and substantial dispute under the Declaratory Judgments Act: “This sets out a controversy—whether Gutman must provide the requested release—that is real and not hypothetical.” And a declaratory judgment resolving that issue “will serve a useful purpose of terminating the parties’ controversy and ending the harassment and threats.” The dismissal was therefore reversed.

Justice Partida-Kipness dissented. Gutman did not seek construction of a contract or any other written instrument. Justice Partida-Kipness construed Gutman’s petition as asserting a claim for civil harassment, which sounds in tort, and does not fall within the parameters of the Declaratory Judgments Act. She disagreed “with the majority’s expansion of the statute,” and would have affirmed the trial court’s dismissal.

So, this case is precedent that a dec action can be used to resolve all sorts of disputes, not just those involving contracts, deeds, wills, and other writings.

GOVERNMENTAL IMMUNITY: “A POLICE OFFICER IS ALWAYS A POLICE OFFICER”

CKJ Trucking, L.P. v. City of Honey Grove
Dallas Court of Appeals, No. 05-18-00205-CV (July 23, 2019)
Justices Partida-Kipness (Opinion, linked here), Pedersen, III, and Carlyle
In May, the Supreme Court of Texas confirmed that State statutes “explicitly contemplate[] that peace officers will, in certain circumstances, stop crime wherever it occurs” and “whenever it occurs.” Garza v. Harrison, 574 S.W.3d 389 (Tex. 2019). Because of that, the Court concluded, an off-duty police officer was acting in his official capacity when he fatally shot a suspect during the course of an attempted arrest outside the officer’s primary jurisdiction; the decedent’s parents therefore could sue only the “governmental unit” for which he worked—the City of Navasota—and not the officer, individually. Looking at the other side of that coin, the Dallas Court of Appeals has now applied Garza to deny governmental immunity to another city, Honey Grove, regarding a claim based on the off-duty acts of one of its police officers outside his primary jurisdiction.1

Williamson, a Honey Grove police officer, was driving in or near Trenton, Texas (another Fannin County town) while off duty. In the parking lot of a “liquor store attached to a gun shop,” Williamson observed suspicious activity—including a Trenton police car with its lights activated, blocked in by other cars, with no one in sight. Because he “was concerned that a crime was being committed in the parking lot,” Williamson quickly switched on the red and blue emergency lights on his squad car and made a U-turn to go back and investigate and help the missing Trenton officer, if needed. Unfortunately, his abrupt U-turn led to an accident with other vehicles traveling on that same road. The driver and owner of one of those vehicles sued the City of Honey Grove, arguing the accident was caused by the negligent acts of Williamson while operating a motor vehicle within the scope of his employment—allegations that, if true, were sufficient to bring the claims within a statutory waiver of the city’s governmental immunity under the Texas Tort Claims Act, specifically, TCPRC § 101.021(1)(A). Honey Grove filed a plea to jurisdiction, arguing that Williamson was not acting within the scope of his employment, because he was off duty, was not being paid, was outside his jurisdiction, and had not been acting pursuant to an assignment from or under the supervision of the Honey Grove police department. The trial court granted the plea to jurisdiction and dismissed Honey Grove from the case.

The Dallas Court of Appeals reversed. Applying the freshly minted reasoning of the Supreme Court in Garza, the Court ruled that because Williamson’s actions were “triggered by reasonable suspicions” of criminal activity and potential safety concerns he was bound to address as a peace officer, he was acting within the scope of his employment. Therefore, the allegations against Honey Grove fell within the statutory waiver of governmental immunity.



1 The website of the City of Honey Grove reports how the town supposedly got its name: “According to legend, in 1836 as Davy Crockett was traveling to join the Texas Army at San Antonio, he camped in a grove just west of the present town square, on the bank of Honey Grove Creek. In letters he wrote to Tennessee, he told of the ideal place where he had camped, the ‘honey grove.’ It was so named due to the abundance of honey in the hollow trees.”

MANDAMUS: NO TEXAS DIVORCE FOR COSTA RICAN RESIDENT HERE ON B1/B2 VISA

In re Peter Swart
Dallas Court of Appeals, No. 05-19-00015-CV (July 9, 2019)
Justices Brown, Schenck (Opinion, linked here), and Reichek
The Texas Family Code provides that a divorce proceeding cannot be maintained in Texas “unless at the time the suit is filed either the petitioner or the respondent has been … a domiciliary of this state for the preceding six-month period.” Nina Morales, a Bolivian citizen and resident of Costa Rica, sought to divorce Peter Swart, also a resident of Costa Rica but a Dutch citizen, in a Dallas family court—seemingly doing so because similar proceedings in Costa Rica weren’t going her way. Swart lodged a special appearance, arguing that neither he nor Morales fulfilled the statutory requirements for a divorce here. The district court denied the special appearance, but the Dallas Court of Appeals disagreed.

As a threshold matter, the appeals court held for the first time that mandamus review is available when a special appearance is denied in a case filed under the Family Code—joining other Texas appeals courts in that stance. Absent such review, the Court explained, “jurisdictional and other like issues … would be rendered effectively meaningless.” Of course, TCPRC 51.014(a)(7) authorizes interlocutory appeal of the grant or denial of a special appearance in a civil case, but it expressly carves Family Code cases out of that authorization, creating the need for mandamus review here.

On the merits, the Court observed that, to establish domicile, Morales had to demonstrate both an objective element and a subjective element: physical presence in Texas for the statutory period, and the intent to make Texas her principal place of residence. Morales’s case foundered on the subjective element of intent, because at present she is precluded by law from relocating permanently to Texas. To obtain her B1/B2 visa, Morales was required to represent to the State Department (1) that she was entering the United States temporarily, (2) that she planned to remain only for a specific period, and (3) that she maintained a residence and other ties outside the United States that would ensure her departure. So, the Court explained, “it is precisely Morales’s representation that Texas is not the place she intends to make her permanent home that explains her presence” in Texas. And it defeated her attempt to pursue a divorce here.

The Dallas Court’s holding, rejecting domiciliary status on the basis of Morales’s temporary visa and the representations she made to secure it, sets up an apparent conflict with the decision of the Austin Court of Appeals in Palau v. Sanchez—a conflict the Dallas Court acknowledged. So, there may yet be another chapter in this story.

“EXPRESS WRITTEN CONSENT” MEANS EXPRESS WRITTEN CONSENT—NO MORE, NO LESS

Barrow-Shaver Resources Co. v. Carrizo Oil & Gas, Inc.
Supreme Court of Texas, No. 17-0332 (June 28, 2019)
Opinion by Justice Green (linked here); Concurring and dissenting opinion by Justice Guzman (linked here); Dissenting opinion by Justice Boyd (linked here)
Last Friday, the Supreme Court of Texas delivered a reminder that when drafting contracts, you should say what you mean and mean what you say. The Court also reaffirmed that reliance on oral representations directly contrary to the terms of a written agreement between sophisticated parties is not justifiable.

The case considered a farmout contract between Barrow-Shaver Resources Company and Carrizo Oil & Gas for Barrow-Shaver to build a well on a lease held by Carrizo in exchange for an interest in the mineral rights. The contract contained a consent-to-assign provision prohibiting Barrow-Shaver from assigning its rights under the agreement “without the express written consent of Carrizo.” During negotiations, Barrow-Shaver reportedly raised concerns about the consent-to-assign provision and sought to add language that would prohibit Carrizo from withholding consent unreasonably. But Barrow-Shaver relented when Carrizo’s representative in the negotiations allegedly offered assurances that Carrizo would work cooperatively with Barrow-Shaver in the event assignment became an issue.

Assignment did become an issue, and when Barrow-Shaver approached Carrizo about assigning its rights to another company, Carrizo refused and instead offered to allow Barrow-Shaver to buy its rights to the lease for $5 million, thereby removing the need to have its consent. Barrow-Shaver sued, claiming fraud, breach of contract, and tortious interference, and ultimately obtained a $26-million-dollar jury verdict. The Court of Appeals relied on evidence of contract negotiations excluded by the trial court to conclude that Carrizo was within its rights to withhold consent as a matter of law, because the consent-to-assign provision was unambiguous. The court also rejected Barrow-Shaver’s fraud claim on the basis that oral promises could not justifiably be relied upon when the parties had a written agreement. A divided Texas Supreme Court affirmed that result.

Considering the breach-of-contract claim first, the Supreme Court read the term “consent” as it is traditionally defined, to mean simply “approval.” It rejected Barrow-Shaver’s argument that Carrizo’s right to withhold that approval or consent was somehow qualified or constrained.

The Court then distinguished between material terms to a contract, which might be supplemented or made more precise to ensure enforceability, and immaterial terms, which may not. The Court found all material terms in both the farmout agreement and the consent-to-assign provision were present and sufficiently definite to determine the parties’ rights and obligations. With respect to the consent-to-assign provision specifically, the Court viewed the obligations of each party as clear: “Barrow-Shaver has the right to assign its rights under the farmout agreement, but Barrow-Shaver must first satisfy its obligation to obtain Carrizo’s express and written consent; Carrizo has no obligation.” In the Court’s view, terms related to withholding consent did not require supplementation.

Both parties also sought to have extrinsic evidence considered alongside the language of the contract. Carrizo urged consideration of the prior drafts, which showed that a limitation on Carrizo’s ability to withhold consent had been considered and rejected. Barrow-Shaver proffered expert testimony on industry usage and custom, which it argued could explain the contract’s silence regarding circumstances in which consent could and could not be withheld. Citing the parol evidence rule, the Court declined to consider the earlier drafts of the contract because it found the agreement was unambiguous. The Court also declined to consider the expert testimony regarding industry usage because ‘“express written consent’ within a contract is clear, is not susceptible to more than one meaning, and is not industry or vocation specific.” It further explained that allowing a jury to consider such testimony would invite the creation of ambiguity where none exists.

Because the Court ultimately concluded the consent-to-assign provision “unambiguously allowed Carrizo to refuse its consent for any reason,” Carrizo’s refusal to consent to the assignment could not constitute a breach of contract as a matter of law.

Rejecting Barrow-Shaver’s fraud claim, the Court found Barrow-Shaver was not justified in relying on the oral statements of Carrizo’s contract negotiator. The Court cited long-standing principles requiring that a party take reasonable diligence in protecting his affairs and interests, as well as precedent holding that reliance on oral promises that are directly contradicted by an unambiguous written agreement is not reasonable as a matter of law. The Court viewed Carrizo’s agent’s promises that Carrizo would provide consent to be directly contradicted by the plain language of the consent-to-assign provision, such that Barrow-Shaver could not have reasonably relied upon them.

Justice Guzman, writing for herself, Justice Hecht, and Justice Busby, dissented from the court’s holding on the breach of contract claim and argued forcefully that use of trade usage and custom evidence considered by the jury was appropriate and that the majority was wrong to reject it and the conclusions the jury reached from hearing it. The three Justices would have reached the same outcome on the fraud claim, but for different reasons. Justice Boyd dissented to argue for the inclusion of both custom and usage evidence and evidence of the contract negotiations and would have remanded for a new trial including both types of evidence.

While this case arose in an oil and gas context, the Supreme Court’s opinion underscores the importance of insuring that any agreement reflects the actual intent of the parties. As Barrow-Shaver found out the hard way, often if it isn’t in the written contract, it isn’t part of the deal.

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