December 5, 2001We want to take this opportunity to wish our clients a happy holiday season and a peaceful and prosperous New Year. We obviously could not have been successful without your continued support. We are pleased to announce that Polly M. Pruneda, formerly with the Texas Attorney General's Office, and Colleen M. McClure, formerly with the Department of Human Services, have joined our firm as associates. In November the Supreme Court in Reeder v. Daniel held that no social host liability exists for serving alcohol to social guests under the age of eighteen. In a writ of mandamus opinion, In re Van Waters and Rogers Inc., the Court articulated discovery guidelines for trial courts handling mass tort cases. The Court in American Motors Insurance Company v. Fodge held that a worker's compensation claimant must exhaust his or her administrative remedies before filing suit. Finally, in Churchill Forge, Inc. v. Brown, the Court held that a landlord can contractually obligate its tenants to be responsible for payment of damages caused by the tenant. I. NO SOCIAL HOST LIABILITY EXISTS FOR SERVING ALCOHOL TO GUESTS UNDER EIGHTEEN YEARS OF AGE: The Court reaffirmed its conservative nature in Reeder v. Daniel (decided on November 8, 2001) and refused to find a "...social host cause of action for making alcohol available to guests under eighteen." In so holding, the Court pointed out that it had previously refused to recognize a cause of action against a social host who either served adult guests who become inebriated or who served guests from the ages of eighteen to twenty who became inebriated. The Court therefore did not see any reason why it should create a cause of action against a social host for serving alcohol to anyone under eighteen years of age.
The suit was brought by Andrew Daniel who sustained serious injuries when he got into a fight with Jeff Lawson at a party held at Tyler Reeder's home. Andrew Daniel, Jeff Lawson, and Tyler Reeder were all under eighteen years of age. As one might expect, the party in question was held when Tyler Reeder's parents were out of town. The Court noted that while there was no evidence that Tyler Reeder supplied alcohol, he was certainly aware that Jeff Lawson had brought several cases of beer to Tyler's home. The party started soon after the beer arrived. It appears that the problem between Lawson and Daniel resulted from a long standing feud. When Daniel arrived uninvited at the party, Lawson confronted Daniel. Lawson had consumed at least twelve beers at this point. In the ensuing dispute, and fortified by the beer that he had consumed, Lawson punched Daniel in the face. Daniel originally sued Lawson, Tyler Reeder, and Tyler Reeder's parents (you can only the imagine the "discussions" that Tyler Reeder's parents had with young Tyler after this incident). The trial court granted summary judgment in favor of Mr. and Mrs. Reeder as well as in favor of Tyler. The court of appeals affirmed the summary judgment as to Mr. and Mrs. Reeder but reversed the summary judgment as to Tyler. The Supreme Court agreed to hear this case to determine whether social host liability exists for serving alcohol to someone under the age of eighteen.
The Court had previously held in Smith v. Merritt, 940 S.W.2d 602 (Tex. 1997) that chapter 106 of the Alcoholic Beverage Code (which makes it a crime to make alcohol available to minors), did not create a cause of action against social hosts for serving alcohol to individuals who were between the ages of eighteen and twenty. In light of that precedent, the Court found that there was no difference between Smith v. Merritt and the current case to justify creating a cause of action against a social host who served alcohol to someone under the age of eighteen. The Court pointed out that the Texas Dram Shop Act provides the exclusive cause of action for providing an alcoholic beverage to a person eighteen years of age or older. The Dram Shop Act only provides a cause of action against commercial providers for serving obviously intoxicated persons. As a result, the Court refused to find that a civil cause of action exists under the Alcohol Beverage Code for serving alcohol to individuals under the age of eighteen.
The Court reasoned that the Dram Shop Act, as originally considered by the legislature, created civil causes of action against both social hosts and commercial providers of alcohol. However, as the Act was ultimately passed, the liability of a social host was deleted from the provisions of the Act. The court concluded that the deletion of social host liability was evidence of the legislative intent not to create a civil cause of action against a social host for serving alcohol to minors of any age. The Court therefore declined to extend or create such a common law cause of action.
The Court has now clearly held that no common law or statutory cause of action exists against a social host for serving alcohol to anyone. As a result, the only cause of action that exists for providing alcohol applies to commercial providers of alcohol who sell to individuals who are obviously intoxicated. II. TRIAL COURTS MUST FOLLOW GUIDELINES IN LIMITING DISCOVERY IN MASS TORT CASES: The Texas Supreme Court in In re Van Waters and Rogers Inc., et al. (decided on Nov. 8, 2001) found that a Hidalgo County judge who issued a blanket abatement of discovery in a 448 plaintiff mass tort case abused his discretion and ordered that the judge permit the relators (defendants) to proceed with discovery. Additionally, the Supreme Court found an abuse of discretion by the trial court in allowing the grouping of plaintiffs for trial in twenty plaintiff groups because the trial court did not follow the factors in In re Ethyl Corp. and In re Bristol-Myers Squibb Co. in selecting the groups of plaintiffs to be tried.
Fifteen relators, defendants in a seven-year-old mass-tort suit involving 448 plaintiffs, sought relief from the trial court's order abating almost all discovery and allowing plaintiffs' counsel to pick which plaintiffs' claims would be tried first. The underlying litigation was filed on August 25, 1994, by plaintiffs who had worked at the Parker-Hannifin Corporations's O-ring seal manufacturing facility in McAllen, Texas. They alleged that they had suffered personal injuries from exposure to what they called a "toxic soup" of chemicals in the plant environment. The defendants requested discovery from the plaintiffs by various means, most of which the plaintiffs simply ignored. Eventually, most of the plaintiffs produced some information regarding their claimed injuries and the possible causative chemicals, but almost none of the information was specific enough to be meaningful. When the defendants sought to depose the plaintiffs, the plaintiffs moved to try a few of the claims first and restrict discovery to them and to non-parties. The court restricted discovery as requested by the plaintiffs but allowed the defendants to take additional depositions on a showing of "particularized need." When the defendants attempted to obtain discovery from non-parties unrelated to the twenty designated plaintiffs, the court further ordered that all discovery, whether from parties or non-parties, be limited to the twenty designated plaintiffs. A petition for mandamus was filed for relief from these orders from the court.
Litigation management in mass tort lawsuits that includes trying test cases to establish benchmark results as well as limiting needless or repetitive discovery in thousands of claims that might never be tried, is a proper tool for courts to utilize. However, the Texas Supreme Court in cases such as In re Colonial Pipeline Co. and Able Supply Co. v. Moye has been concerned with the actions of trial courts in limiting defendants from obtaining basic medical information from all the plaintiffs regardless of the number of claims so that defendants could determine whether claimed illnesses or damages could conceivably be attributable to one or more of the defendants. The Court reemphasized that each defendant is entitled to discover whether there has been a medical determination that an illness has been caused by that defendant's product. Because of the passage of time before discovery of information could be obtained under an abatement order, the Supreme Court noted that memories could fade, documents could be destroyed, and evidence lost or corrupted.
In In re Ethyl Corp. and In re Bristol-Myers Squibb Co. the Texas Supreme Court outlined factors for the trial court to consider in mass court cases in the selection of plaintiffs and claims to be tried first, including: whether the plaintiffs to be tried worked in the same place, at similar jobs, during similar time periods; whether their diseases or injuries are or were similar; whether they are living or deceased; whether they are represented by the same counsel; and the status of discovery. Another consideration is the maturity of the tort. These factors were not considered in the selection of the trial group to be tried first. The trial court could not have done so because it prevented much of the information pertinent to those factors from being adduced through discovery. This was a clear abuse of discretion.
The Texas Supreme Court reaffirmed that a trial court must be given latitude in managing both discovery and trial preparations. But, in complex mass tort cases, that latitude is not unbounded. To abate discovery for years without justification is a clear abuse of discretion. Moreover, to abate meaningful discovery and to allow the plaintiffs' counsel to select which claims would be tried is not a process "fair to all." In this case, the plaintiffs failed to show why after seven years of litigation they should not be required to provide the same basic information regarding their individual injuries and the causative chemicals as required in Able Supply and Colonial Pipeline. However, the court did make a distinction between a mass tort case where the trial court abated discovery seven months (Polaris Inv. Management Corp. v. Abascal) and the present case, which was already in its seventh year of litigation. III. FINAL DECISION ON BENEFITS PRECLUDES SUIT AGAINST COMPENSATION CARRIER: In American Motorists Insurance Company, et al v. Barbara Anne Fodge (decided on November 15, 2001), the Supreme Court examined the issue of whether a claimant can sue a workers' compensation insurance carrier for a denial of benefits without a prior determination by the Commission that benefits are due. The Court held that a claimant may not sue its carrier on matters which the Commission had not considered and made a prior determination that benefits are due. However, the Court also held that a claimant may have a cause of action against its carrier if there is a delay by the carrier in paying benefits that the Commission awarded.
Barbara Anne Fodge, an employee of Dallas Diagnostic Association, made a claim for compensation benefits for a back injury that she sustained at work on May 31, 1994. The carrier, American Motorists Insurance Company, denied Fodge's claim. Because benefits were disputed, Fodge's claim was heard in a benefit review conference on April 25, 1995. At this conference, the benefit review officer determined that Fodge was not entitled to compensation. The case was scheduled for a contested case hearing, at which the contested case hearing officer found that Fodge was injured and ordered American Motorists to pay temporary income benefits for twenty days. Fodge did not appeal this decision. Fodge then sued American Motorists, basically asserting three claims: (1) a claim for compensation benefits due under the insurance policy; (2) a claim for bad-faith denial of benefits; and (3) a claim for bad-faith delay in the payment of benefits. American Motorists filed a motion to dismiss for want of jurisdiction. The trial court dismissed all of these claims, which the Court of Appeals reinstated. The Supreme Court reversed the judgment of the Court of Appeals in favor of American Motorists.
The Texas Workers' Compensation Act provides that the TWCC has exclusive jurisdiction over disputes regarding income benefits. Tex. Lab. Code Ann § 401.001, 409.021. Under the Act, parties in a disputed benefits case are required to attend a benefit review conference. Id. § 410.021. If there is no resolution at this conference, the officer recommends that the case be set for a contested case hearing. A decision by a contested case hearing officer is final unless the decision is appealed. Id. § 410.169. ANALYSIS AND CONCLUSION OF CASE The Supreme Court explained that if a claim is not within the trial court's jurisdiction, then the claim must be dismissed. The Commission has exclusive jurisdiction over disputed income benefits. In this case, a final determination of benefits was made by the contested case hearing officer on Fodge's injury. Fodge received an award of temporary income benefits that was paid by American Motorists. Fodge was not awarded any other benefits with respect to this claim. This decision became final and binding upon Fodge. At the trial court, Fodge presented claims to the court regarding compensation benefits, which only the Commission may consider and determine. The Supreme Court held that the trial court properly dismissed Fodge's claims because the court could not adjudicate claims on matters that were in the exclusive jurisdiction of the Commission. Accordingly, the Court held that Fodge did not have a cause of action against her carrier. The Court also held that a claimant may have a cause of action against its carrier if there is a delay by the carrier in paying benefits that the Commission awarded. IV. MAKING TENANTS PAY FOR DAMAGE THEY CAUSED TO AN APARTMENT COMPLEX IS ALLOWED: In Churchill Forge, Inc. v. Brown (decided on November 15, 2001), the Supreme Court reversed a summary judgment granted in favor of a tenant on the issue of whether or not a tenant can be held liable for damages to an apartment.
JoAnn Brown co-signed a lease with her adult son, Carl Jeffrey. Carl was living in an apartment complex owned by Churchill Forge, Inc. Carl allegedly caused a fire that caused extensive damage to the apartment complex. Churchill Forge, Inc. brought suit against Brown asserting that the lease she had co-signed required her to pay for damages resulting from her son's negligence. It is unclear from the opinion if Brown was a tenant of the apartment complex, but it does not appear that she was.
Brown claimed as a defense that the Texas Property Code prohibited Churchill Forge, as a commercial landlord, from contractually requiring her to pay for the alleged damages. She also alleged that the common law in the state of Texas also prohibited a commercial landlord from shifting the cost of repair to a tenant. She further alleged that the fair notice doctrine prohibited the apartment complex from contractually requiring her to pay the alleged damages.
The Supreme Court analyzed the defenses under the Texas Property Code. Although competent parties in Texas will generally have the utmost liberty in entering into contracts, there are some limitations on the right to contract under the Texas Property Code. Nonetheless, the Court pointed out that under Subchapter A, §92.006(e), a landlord and tenant may agree for a tenant to repair or remedy conditions on the premises. In order for the parties to be allowed to make such an agreement there are certain conditions which must be met:
In order to be enforceable the lease must be in writing and meet the following conditions:
The Supreme Court also looked at §92.006(f) of the Texas Property Code, which allowed a commercial landlord to shift the cost of repairs to the tenant for three specific types of conditions. Those are (1) wastewater stoppages caused by foreign or improper objects in a line that goes only to the tenant's apartment; (2) damage to doors, windows, or screens; (3) damage from windows or doors left open. Subsection (f) does not require any proof of causation in order to receive reimbursement. As a result, the Supreme Court determined that the landlord was under no duty to bear the cost of repairing the damage allegedly caused by Brown's son. The Supreme Court held that the apartment complex could pursue its lawsuit seeking recovery from Brown.
The Supreme Court went on to note that there was no common law principle which would absolve the defendant from paying damages negligently caused by somebody in control of the premises with her consent. The Supreme Court further noted that there was nothing extraordinary or unjust in making a tenant reimburse a landlord for damages negligently caused by the tenant or a tenant's guest.
The Supreme Court then addressed the defendant's assertion that the Fair Notice Doctrine prevented Churchill Forge, Inc. from seeking reimbursement from her for the damages allegedly caused by her son. The Fair Notice Doctrine relates to contractual provisions relieving a party in advance for its own negligence. It requires that such provisions must be unambiguous and conspicuous. The doctrine applies only when a party seeks a release or indemnity from the consequence of its own negligence. Since in the instant case the landlord was not seeking to shift any of its own negligence to the tenant, the Fair Notice Doctrine did not apply.
This opinion makes it clear that apartment complexes can in fact include provisions within their lease agreements requiring tenants and co-signers of leases to be liable for damages caused to the apartment and the complex. Unwary tenants and co-signers can be held responsible for damages in excess of anything they anticipated at the time they entered into a lease agreement. Please feel free to call any of our partners or associates with any questions that you may have at 361-881-9217 or fax us at 361-882-9437. |
- Insurance Defense and Litigation
- Commercial Trucking Accidents Defense and Litigation
- Professional Malpractice
- Healthcare Malpractice
- Employment Law
- Constitutional Torts and Civil Rights
- Environment and Toxic Torts - Medical Devices
- Construction Defects
- Oilfield and Offshore Platform Accidents
- Business and Commercial Litigation
Volume II, No. 10
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