Volume II, No. 3

We received several comments last month concerning the resignation by Justice Gonzalez of the Supreme Court to become White House counsel to George W. Bush. What we found out is that most people in the insurance industry do not know the names of the rest of the members of the Texas Supreme Court. In fact, we found out that more people know the names of the Baldwin brothers than know the names of the Texas Supreme Court justices. (For those of you who do not know the names of the Baldwin brothers, they are [from the oldest to the youngest]: Alec, Daniel, William, and Stephen). If you really want to know the names of the Supreme Court justices, see the end of this newsletter.

The Supreme Court did not issue any opinions of interest in February. In fact, we were beginning to wonder whether we would have any opinions for our newsletter. Fortunately (or unfortunately, depending on your point of view), the court issued two opinions on March 1, 2001, involving legal malpractice claims. As expected, the attorneys took another beating and the court ruled against the attorneys and law firms in both cases.

We've also added a review of the opinion of the Corpus Christi Court of Appeals in Sanchez v. Brownsville Sports Center, Inc. The Sanchez case is important in that the Corpus Christi Court of Appeals held that in a products liability claim the parents of a deceased child are not barred from recovering even though the combined negligence of the parents exceeded the statutory bar to permit recovery. It is anticipated that the Texas Supreme Court will review this opinion.

I. STATUTE OF LIMITATIONS IN A LEGAL MALPRACTICE CLAIM IS TOLLED UNTIL THE UNDERLYING LITIGATION IS SETTLED OR THE APPEALS ARE EXHAUSTED

Apex Towing Company, et al v. William Tolin, III, et al (decided on March 1, 2001) was a legal malpractice claim in which the attorneys claimed that the suit was barred by limitations. The Supreme Court upheld its prior holding in Hughes v. Mahaney & Higgins, 821 S.W. 2nd 154 (Tex. 1991) that in legal malpractice claims involving litigated cases the statute of limitations does not begin to run until the outcome of the underlying litigation has been concluded.

A. FACTS OF CASE

Apex Towing Company, Apex Barge Company, and Apex Oil Company hired William M. Tolin, III of the law firm of Benckenstein & Oxford as well as the Louisiana law firm of Hebert, Mouledoux & Bland, in connection with a maritime personal injury lawsuit filed in Texas. Apex contended that Tolin, as well as the Louisiana law firm, failed to timely file a maritime limitation-of-liability pleading. As a result, Apex contended that it was exposed to a judgment in excess of the value of the vessel and its freight. The underlying case was tried to a jury which resulted in a judgment in excess of any limit that could have been imposed had Tolin and the Louisiana law firm filed a timely maritime limitation pleading. Apex then hired additional counsel to handle the appeal. The case was ultimately settled on appeal. The court of appeals dismissed the appeal on May 19, 1995.

Apex originally filed a legal malpractice claim on August 31, 1995, in Louisiana. This case was dismissed without prejudice and Apex then filed a lawsuit in Texas on February 19, 1997. Tolin and the Louisiana law firm moved for summary judgment on the ground that the two year statute of limitations for Apex's malpractice claim began to run on January 27, 1995, the date that the parties in the underlying case allegedly settled the case. The trial court granted summary judgment for the attorneys, which judgment was affirmed by the court of appeals.

B. TOLLING OF LIMITATIONS IN A LEGAL MALPRACTICE CLAIM

The Supreme Court agreed to hear this case due to a conflict in opinions from the various courts of appeals as to the application of the rule in Hughes v. Mahaney & Higgins on when the statute on limitations begins to run in legal malpractice cases. The defendant attorneys in this case contended that the rule of Hughes v. Mahaney & Higgins did not apply because new counsel was hired to handle the appeal. As a result, both Tolin and the Louisiana law firm contended that the policy reasons for the Hughes v. Mahaney & Higgins do not apply when new counsel is hired to represent the party now bringing the legal malpractice claim. Specifically, in Hughes v. Mahaney & Higgins was decided the Supreme Court held that a party appealing a judgment should not be forced to take inconsistent positions in the underlying case by claiming that the party is not liable, but if it is liable, it is only liable due to the malpractice of its attorney. The court decided that it was going to follow a "bright line" rule and held that the statute of limitations in any legal malpractice claim involving a litigated case is tolled until the underlying case is settled or the appeals are exhausted.

C. ANALYSIS OF CASE

The Supreme Court has, once again, shown that it will do whatever it can to support claimants in legal malpractice cases.

II. STATUTE OF LIMITATIONS IN A DTPA CLAIM BROUGHT IN A LEGAL MALPRACTICE ACTION BEGINS TO RUN ON THE DATE OF THE ALLEGED LEGAL MALPRACTICE

The Supreme Court in Underkofler v. Vansek (decided on March 1, 2001), held that the statute of limitations in a common law malpractice claim is tolled during the continued litigation of the underlying claim. However, the court also held that claims under the Deceptive Trade Practices Act against an attorney are not tolled during the underlying litigation.

A. FACTS OF CASE

The underlying lawsuit involved a suit on a note. Mr. Vansek hired Paul Underkofler to file a suit on a note against the maker, a limited partnership, and against its partners as guarantors. The case first proceeded to trial on June 6, 1991. After the case proceeded to trial, the court ordered the parties to mediation, which was ultimately unsuccessful. Two of the defendants then filed for bankruptcy. At that point Vansek voiced his complaints against Underkofler, who then withdrew from the case, on May 21, 1992. Vansek hired another attorney to represent him. The trial, which was originally started on June 6, 1991, was not resumed again until April 29, 1994. The case was recessed and reset several times. Vansek eventually settled with some of the defendants and then the trial court rendered a judgment against the remaining defendants, who did not appear, on September 23, 1994.

Before the parties reached the settlement agreement Vansek sued Underkofler for malpractice in which he alleged negligence, gross negligence, breach of contract, breach of implied and expressed warranties, and DTPA violations. Vansek filed his malpractice suit on April 6, 1994. Underfofler moved for summary judgment, which was granted on several grounds, including on the basis that limitations barred all of Vansek's claims.

B. LIMITATIONS IN COMMON LAW CLAIMS ARE TOLLED DURING THE PENDENCY OF THE LITIGATION BUT LIMITATIONS ON CLAIMS BROUGHT UNDER THE DTPA ARE NOT TOLLED DURING THE PENDENCY OF THE LITIGATION

The Supreme Court first re-affirmed its holding in Apex Towing Company v. Tolin that legal malpractice claims are tolled until the underlying litigation is concluded by settlement or final judgment. As such, because the final judgment in this case was not entered until September 23, 1994, Vansek's lawsuit, which was filed on April 6, 1994, was timely filed.

However, the court held that the common law "bright line" rule did not apply to DTPA claims. Applying strict construction of the DTPA statute, the court concluded that under the DTPA statute all suits must be "....commenced within two years after the date on which the false, misleading, or deceptive act or practice occurred." The court pointed out that the legislature had adopted a specific statute of limitations for DTPA claims. Under the DTPA statute of limitations, there are only two exceptions to the general rule that limitations begin to run on the date the wrong occurred. The first exception, which is more popularly known as the "discovery rule", holds that the consumer has "two years after the consumer discovered or in the exercise of reasonable diligence should have discovered the occurrence of the false, misleading, or deceptive act or practice." The other exception extends the limitations period for an additional 180 days "....if the plaintiff proves that failure to timely commence the action was caused by the defendant knowingly engaging in conduct solely calculated to induce the plaintiff to refrain from or postpone the commencement of the action."

The court then held that because Vansek made specific complaints about the quality of Underkofler's representation in the spring and fall of 1991, the lawsuit filed on April 6, 1994, was not timely filed under the DTPA.

C. ANALYSIS OF OPINION

While the DTPA was amended in 1995 to exclude claims for damages based on "the rendering of a professional service, the essence of which is the providing of advice, judgment, opinion, or similar professional skill," DTPA claims can still be maintained against professionals in limited circumstances. Nevertheless, the statute of limitations on claims brought under the DTPA begins to run on the date of the act complained of and is not tolled by pending litigation.

III. THE COMBINED NEGLIGENCE OF THE PARENTS DOES NOT BAR THEIR RECOVERY IN A WRONGFUL DEATH CLAIM FOR THE DEATH OF THEIR CHILD SANCHEZ EX REL. ESTATE OF GALVAN V. BROWNSVILLE SPORTS CENTER, INC., 2001 WL 114938, (TEX.APP.--CORPUS CHRISTI,2001).

The Corpus Christi Court of Appeals held that the percentage of liability found against both parents cannot be combined in order to bar the recovery of the parents in a products liability case. Further, the court of appeals found that in a products liability action where the product was in the stream of commerce in the State of Texas, and the injury occurred in Mexico, the law of Texas rather than Mexico should be applied. Additionally, the court upheld the dismissal of causes of action against co-defendants due to the improper conduct of counsel for the plaintiffs.

A. FACTS OF CASE

This case arose out of the death of 10 year old Hermes Hipolito Ramos after Hipolito had been riding a three-wheel all-terrain vehicle (ATV) that had been manufactured by Honda Motor Company in 1983. In February of 1995 Hipolito had been riding the ATV on his family ranch in Mexico. He was not wearing a helmet as was recommended by Honda at the time of the accident. He apparently struck a rock or other obstacle which caused him to be thrown from the ATV. Hipolito died upon impact with the ground.

Mr. and Mrs. Ramos filed a cause of action against various Honda entities, Brownsville Sports Center, Inc., and Leon James, who apparently sold the ATV to the Ramos family. Mr. and Mrs. Ramos bought the ATV from Mr. James as a used vehicle. The trial court dismissed any causes of action against Brownsville Sports Center and Leon James due to plaintiffs' counsel action in visiting the Brownsville Sports Center a few days before trial and essentially conducting discovery without the presence of defendants' counsel. The court of appeals upheld the dismissal of these causes of action finding that the conduct of plaintiffs' counsel was egregious.

Trial was held against the remaining Honda defendants. A verdict was reached finding that Mr. and Mrs. Ramos were each 33% negligent (presumably for failing to adequately supervise their son in riding the ATV and in failing to provide protective head gear). Additionally, the jury found that the Honda defendants (which were listed collectively as "Honda") were also 33% negligent (these percentages total 99% - - the court of appeals never explained what happened to the missing 1% of liability). Nonetheless, the jury awarded Mr. and Mrs. Ramos $15 million dollars each for a combined verdict of $30 million dollars. The trial court found that because Mr. and Mrs. Ramos' percentage of negligence added together was 66% that they were barred from recovering anything from Honda. The Ramos' appealed their take nothing judgment to the court of appeals.

B. WHEN PARENTS ARE FOUND INDIVIDUALLY LIABLE FOR THE DEATH OF THEIR CHILD, THEIR PERCENTAGE OF NEGLIGENCE ATTRIBUTABLE TO THAT DEATH CANNOT BE COMBINED IN ORDER TO MEET THE CONTRIBUTORY NEGLIGENCE BAR AND PREVENT THEM FROM RECOVERING

The court of appeals found that under the Texas Civil Practice and Remedies Code Chapter 33 the responsibility of the parents cannot be combined in order to overcome the contributory negligence bar in a case (in this case, as it was a products liability action, the contributory negligence bar had to be more than 60%). Further, the plaintiffs tried to argue that their recovery in this case should be $10 million each, which would be two-thirds of the amount originally awarded to them by the jury less their percentage of responsibility. However, the court found that given the fact that Honda was found equally responsible as to each of the parents, the parents should only recover 50% of the amount awarded to them. The court found that each parent was entitled to recover $7.5 million. The court also found that the Honda defendants were jointly and severely liable for the $7.5 million each.

C. IN A PRODUCTS LIABILITY ACTION WHERE A PRODUCT WAS IN THE STREAM OF COMMERCE IN TEXAS AND THE ACCIDENT HAPPENED IN MEXICO THE COURT WILL APPLY THE LAW OF TEXAS RATHER THAN THE LAW OF MEXICO

The Honda defendants argued to the court of appeals in their sole point of error that the trial court should have applied the law of Mexico in this cause of action given the fact that the accident happened in Mexico and that the Plaintiffs were from Mexico. The appellate court noted, however, that at some point the Honda ATV had been in the stream of commerce in the State of Texas. The court found that Texas had a clear interest in protecting its consumers in regulating the quality of products in its stream of commerce. Consequently, the court found that it should apply Texas law as it relates to strict liability. Under Mexico law, the plaintiffs in a product liability case can only recover compensation for 3,000 days of salary, four months of salary for funeral expenses and any medical expenses incurred before death. Obviously, Texas law provides for a greater recovery for plaintiffs. The court of appeals noted that Texas maintains an interest in protecting its citizens from and compensating them for injuries resulting from defective products. The court further held that the Texas system of tort liability for defective products serves as an incentive to encourage safer designs and to induce corporations to control more carefully their manufacturing processes. The court found that the interest of Texas would be furthered by applying Texas law.

D. ANALYSIS OF CASE

In conclusion, in products liability cases, the percentage of negligence found against plaintiffs cannot be combined to reach the contributory negligence bar and therefore prevent their recovery in a products liability action. Additionally, in determining the amount of recovery for a plaintiff, the percentages found against the plaintiffs are not necessarily the sole determinative factor. Rather, the award for recovery of plaintiffs may be reduced by their pro rata share of responsibility with the defendants. Lastly, in a products liability action where a product was in the stream of commerce in the State of Texas and an accident happened in Mexico, the law of Texas will apply.

For those of you interested, the current members of the Supreme Court are:

Thomas R. Phillips - Chief Justice
James A. Baker
Nathan L. Hecht
Greg Abbott
Craig T. Enoch
Deborah G. Hankinson
Priscilla R. Owen
Harriet O'Neill

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.