Volume II, No. 8

August 17, 2001

The Texas Supreme Court evidently started their vacation in July as they did not render any decisions last month. As a result, we are providing you with summaries of opinions from the San Antonio and Dallas Courts of Appeals. In State Farm Lloyd's v. Mireles, the San Antonio Court of Appeals held that the trial court should not have allowed the plaintiff's expert to testify in a foundation case where the expert did not have a factual basis for his opinions. In Rios v. Texas Department of Mental Health and Mental Retardation, the San Antonio Court concluded that a defense attorney does have a right to engage in an ex parte discussion with a plaintiff's treating physician. Finally, in Tillery & Tillery, Edwards & Tillery v. Zurich Insurance Company, the Dallas Court held that a law firm that did not have a signed contingent fee interest contract with an insurance carrier could not recover a contingent fee.

HUMOR IN THE LAW?

As we pointed out in our last newsletter, we have received requests to try and "spice up" our reports on opinions. In short, people have said that we need to add some humor to what is often considered a dull and humorless profession. Our initial response was to simply make excuses for the fact that most appellate opinions are not funny. We have therefore searched for something humorous to increase your interest.

Fortunately, Ed Barker's brother, who is a justice on the Tennessee Supreme Court, provided us with the following bit of comic relief, which we are quoting in the same form as we received it, complete with grammatical and syntax errors:

The association of US oil and gas producers were having their annual convention in Houston and invited as their keynote speaker the professor who taught oil and gas law at the University of Texas, and who was a famous expert on the oil depletion allowance. He was such a wonderful speaker, and put the producers in such a good light, that they decided to have him go around the country and give the same speech. So they got him a fine car, and a chauffeur in a nice uniform, with a little chauffeur's cap and set him out across the country, giving his speech to great acclaim, mainly in college towns.

After about six months of this, and as they were approaching a college town in Oklahoma for another speech, the chauffeur turned and said, "You know professor, life just ain't fair. Here you are giving the same speech over and over and making ten times what I do. I've got that speech memorized myself and could give it lots better than you can."

And the professor said, "Well, my good man, there's lots more to giving a speech than just reciting it but I'll tell you what: Pull over and let's change clothes so you can be the professor and I'll be the chauffeur and I'll watch you make a fool out of yourself."

So that's just what they did. They pulled over at a gas station and changed clothes and then drove into the college town, with the professor behind the wheel and the chauffeur in the back wearing the Armani suit. The crowd was already gathered, 20,000 people in the football stadium, all waiting to hear the speech by the famous professor. So the chauffeur got up and gave a rousing speech, much better then the real professor ever had. And when he'd finished, the people stood and cheered for five minutes, the speech was so good.

And then the chancellor stood up and said, "We all enjoyed this wonderful speech so much, that maybe some of you have some questions you'd like to ask our speaker." One intelligent-looking man jumped up and said, "I've got a question for the professor, and here it is. Suppose, professor, that fifty million years ago an eleven ton dinosaur died and was buried under the earth, with a p.s.i. of seventeen tons until a drill bit went into his fossilized remains. My question is: what is the name of the strata in which that dinosaur's remains would be found and how much oil would his body have produced?" Everything got real quiet, and they both just stood there looking at each other. You could hear a pin drop.

And finally the fake professor said, "My good man, in all my years of teaching that's about the dumbest question I've ever heard. I can't believe that a great school such as this one would allow anybody to ask such a dumb question and to show how dumb it is, my chauffeur is sitting there on the back row, and I'm going to let him answer it."

I. FOUNDATION EXPERT'S MIGRATION OF MOISTURE THEORY CAUSING REMOTE HEAVING EXCLUDED UNDER GAMMILL AS UNRELIABLE:

In State Farm Lloyd's v. Mireles, (decided August 8, 2001), the San Antonio Court of Appeals concluded that the plaintiff's foundation expert's opinion that migration of moisture caused heaving was unreliable and reversed a jury verdict in favor of the homeowners because there was no evidence of causation to support the judgment. To be admissible, expert testimony must be "relevant" and "reliable." "Relevance" must bear a relationship to the issue in the case to aid the jury. "Reliability" requires evidence grounded in scientific method and procedure such that it amounts to more than subjective belief or unsupported speculation. A trial court may not admit opinion evidence even if connected to existing data if it is merely "just because an expert said so." The court must consider whether there is too great of an "analytical gap" between the data and the expert's opinion. Therefore, the Mireles' foundation expert, although qualified by education, training and experience in foundation design, could not testify about migration of moisture causing heaving remote from a plumbing leak because such opinion was based only on subjective belief and unsupported speculation.

• FACTS OF CASE

Peter and Carmen Mireles filed suit against State Farm Lloyds for breach of contract and other extra-contractual claims after State Farm denied the Mireles' foundation damage claim arising from a plumbing leak. The plaintiffs hired Per Schneider as their causation expert witness. Schneider is a licensed engineer who holds a Bachelor of Science degree in Civil Engineering from the University of Texas. He has designed thousands of foundations and taught advanced foundation design at the University of Texas at San Antonio.

Schneider reviewed engineering reports, plumbing reports, geotechnical data, and level surveys of the Mireles' foundation. He also spoke with Mr. Mireles and inspected the house several years after the foundation had been repaired. Mr. Mireles advised Schneider that he saw three places where water dripped from the sewer line. However, the engineering report that Schneider reviewed showed that only under hydrostatic conditions did water leak in the kitchen, bathroom and utility lines. The report showed that none of the plumbing lines leaked under normal operating conditions (i.e. running water, flushing toilet).

Schneider testified based upon his review of the data, his expertise and experience, that the foundation shifted in the middle of the Mireles' house primarily as a result of a leak in the bathroom. There was no damage between the leak and the heave. To explain the distance between the leak and the heave, Schneider offered the following theory:

Before a foundation is poured, plumbing pipes are placed into trenches. When the soil is replaced into the trenches, it is not compacted but placed loosely. When a leak in the pipe occurs and the soil is loose, the moisture from the leak travels down the "path of least resistence" (the trenches), until the trench is filled with water. Once the soil in the trench becomes saturated, the moisture begins to move laterally into the parent soils. This can happen even if there is only vapor or moisture coming from a pipe as opposed to a dripping leak. This migration of moisture coupled with the soil's high clay content caused the heave in the Mireles' home. The lateral movement of the moisture through the clay caused the doming of the foundation that was some six to eight feet from the moisture's origination point.

Schneider could not explain how the leaks in the bathroom did not cause the soil to expand directly underneath the leak or how there was no trace of moisture in the soil or damage to the foundation near the leak. Further, Schneider did not know where in the Mireles' house the plumbing trenches were located. When asked why the heave occurred toward the center of the house rather than over the plumbing leak, Schneider responded "Only God knows." He was not able to produce any studies or data to support his migration theory. He had only seen this remote heaving from a plumbing leak without intervening damage on one other occasion.

• THE "ANALYTICAL GAP" APPROACH APPLIES RATHER THAN THE ROBINSON

State Farm contended that on the issue of reliability that the following Robinson factors applied: whether the theory has or can be tested; whether the technique relies upon the subjective interpretation of the tester; whether the theory has been subjected to peer review or publication; the technique's potential rate of error; whether the technique or underlying theory has been generally accepted by the relevant scientific community; and non-judicial uses of the technique. The plaintiffs made no attempt to meet the Robinson factors arguing that those factors did not "fit" the case. Therefore, reliability needed to be determined based on Gammill's "analytical gap" analysis. The court agreed that the Robinson factors did not apply to engineers and that the analysis would be one of whether there was an "analytical gap" between Schneider's observations and conclusions.

However, as in Gammill, Schneider left an "analytical gap" between his observations and his conclusions. He offered nothing to show that what he believed caused the damage actually did cause the damage. He was not able to adequately explain how a plumbing leak could cause a heave at a remote distance without showing signs of intervening damage other than to say "Only God knows." He did not know where the plumbing trenches were located. Furthermore, he was not able to adequately rule out other causes such as foundation settlement, tree influences, and climatic changes. He also was not able to produce studies supporting his theory. Accordingly, his analysis was simply unreliable.

• ANALYSIS OF CASE

This case is a wake up call to both the plaintiff's bar and the insurance industry. Merely selecting qualified experts will not prevent a successful challenge that prohibits the expert from testifying at trial. Even a registered engineer with degrees and significant experience, as was the case with Schneider, is not enough to allow an expert witness to testify. The investigation and data must support the opinion of the expert to bridge the "analytical gap" between that data and the opinion offered. The claims handler must be mindful of bridging this gap at the onset of the claims investigation. Whether one is dealing with a foundation case, a mold case, or a fire loss case, testing and data collection must be done by the expert to support his opinion. If a factual basis is not developed for the expert, you will suffer the consequences down the road when your expert is excluded at trial.

II. A DEFENSE ATTORNEY CAN ENGAGE IN AN EX PARTE DISCUSSION WITH THE PLAINTIFF'S TREATING PHYSICIAN:

• FACTS OF CASE

In Rios v. Texas Department of Mental Health and Mental Retardation ("MHMR") (decided July 25, 2001) the San Antonio Court of Appeals decided two issues important to insurance defense attorneys. The Court first dealt with the right of a defense attorney to engage in an ex parte communication with a treating physician. The Court held that an ex parte communication is proper but implied that a defense attorney should advise the treating physician that the physician did not have to speak with the defense attorney.

Secondly, the Court of Appeals upheld a jury verdict where the jury refused to award damages for pain and suffering but did award damages for medical expenses. By implication, the Court held that the finding by the jury of the necessity of medical expenses does not mean that a plaintiff has been injured.

The Rios lawsuit involved an automobile accident between Mr. Rios and an employee of the Texas Department of Mental Health and Mental Retardation. The accident occurred on July 23, 1993. When the case was finally tried, the jury found that Rios was 35% negligent and that the employee for MHMR was 65% negligent. While the jury awarded $5,000.00 for past medical expenses they refused to award damages for pain and suffering and furthermore refused to award Mrs. Rios loss of consortium damages.

• A TREATING PHYSICIAN CAN DISCUSS THE PLAINTIFF'S CLAIMS OF INJURIES IN AN EX PARTE DISCUSSION WITH THE DEFENSE ATTORNEY

Dr. Garza-Vale of San Antonio was one of the plaintiff's treating physicians. Dr. Garza-Vale saw the plaintiff on two occasions in 1994 for a "second opinion". Dr. Garza-Vale recommended against the plaintiff undergoing back surgery. In 1998, more than four years after suit was filed, the defense attorney for MHMR contacted Dr. Garza-Vale and asked him to review the plaintiff's subsequent medical records. The defense attorney then took Dr. Garza-Vale's deposition.

At the time that Dr. Garza-Vale's deposition was taken the plaintiff was not represented by an attorney. As a result, no one appeared at the deposition of Dr. Garza-Vale on behalf of the plaintiff. The plaintiff subsequently obtained an attorney and the trial court ordered that Dr. Garza-Vale's deposition be retaken. At trial both videotaped depositions of Dr. Garza-Vale were shown to the jury. The plaintiff's attorney attempted to exclude the testimony of Dr. Garza-Vale, claiming that the testimony constituted a violation of the physician-patient privilege.

The Court of Appeals first held that the physician-patient privilege does not exist where "...the medical communications involved are relevant to the condition upon which Rios is basing his claim for damages in this lawsuit." As a result, when a plaintiff's physical condition is the subject of the lawsuit, any medical evidence relevant to the plaintiff's alleged injuries is not protected by the physician-patient privilege.

The more significant issue decided by the court was whether the ex parte contact by the defense attorney "...with Dr. Garza-Vale was improper and should be declared impermissible because it conflicts with a physician's fiduciary duty of loyalty to his patient and invites improper influence that threatens the relationship of trust [and] confidence".

The Court of Appeals found that no Texas case grants a plaintiff the privilege to prohibit a treating physician from engaging in an ex parte discussion with a defense attorney concerning the plaintiff's medical condition as related to the personal injury lawsuit. In the absence of a rule prohibiting such contact, the Court stated that it was not going to create such a rule. The Court of Appeals nevertheless did point out in a footnote that:

"Weighing the absence of both a physician-patient privilege and a persuasive public policy ground against a discovery framework designed to be just, speedy, and inexpensive, the court concludes that ex parte communications by defense counsel with a plaintiff's treating physician are not prohibited. Prior to such a communication, however, defense counsel should inform the physician that he or she is not required to speak with defense counsel."

• A JURY CAN AWARD DAMAGES FOR MEDICAL EXPENSES BUT REFUSE TO AWARD DAMAGES FOR PAIN AND SUFFERING

The plaintiff complained that an irreconcilable conflict existed in the jury's verdict of damages in that the jury awarded past medical expenses but refused to award damages for pain and suffering. The Court of Appeals found that due to the conflicting evidence on whether Mr. Rios was in fact injured:

"The jury could find damages to compensate for the diagnostic testing and doctors' visits following a minor collision and also find that the injury sustained did not produce compensable damages for pain and mental anguish. The jury could also have considered the possibility that any pain Rios experienced was due to age-related degeneration."

The San Antonio Court of Appeal has reconciled conflicting opinions in the appellate courts concerning the ability of a jury to refuse to award damages for pain and suffering while at the same time awarded damages for past medical expenses.

• ANALYSIS OF OPINION

The Court in Rios decided that a defense attorney can properly discuss the plaintiff's medical condition with one of the plaintiff's treating physicians. The Court also upheld the right of a jury to refuse to award pain and suffering damages even though the jury award past medical expenses to the plaintiff.

III. CONTINGENCY FEE CONTRACTS MUST BE IN WRITING AND SIGNED BY BOTH PARTIES:

In Tillery & Tillery, Edwards & Tillery v. Zurich Insurance Company (decided July 25, 2001), the Dallas Court of Appeals held that Tillery & Tillery was not entitled to recover $47,873.65 in attorney's fees for filing a petition in intervention.

• HOW IT ALL BEGAN

Zurich Insurance Company contacted Dale Tillery to retain his services in a medical malpractice action. Zurich felt that various medical providers had mishandled the medical treatment of a Zurich worker's compensation claimant. Zurich asked Tillery to handle the medical malpractice case on a contingent fee basis.

During the discussions concerning representation it was determined that Zurich's insured had already filed two products liability actions in Texas to recover damages for his injuries. Tillery agreed to pursue a medical malpractice claim and to intervene in the products liability cases to recover Zurich's subrogation claim. On July 2, 1993, Tillery sent Zurich a letter agreement setting out the terms of the representation. In the letter Tillery stated, in part, "that his law firm was being retained to pursue an intervention claim for subrogation and a medical malpractice claim." The letter went on to state that Zurich was to assign one third (1/3) of any recovery as a result of the third party medical malpractice claim or the intervention claim as attorney's fees for services rendered. Zurich conceded that it received the letter but never responded to the letter.

Tillery then filed both a medical malpractice suit and a petition in intervention in the products liability cases. Three months after the filing of the petition in intervention Zurich decided to use its in-house counsel, Herman Veness, to handle the interventions. Although it never told Tillery it was terminating his representation of it in the intervention claim, Zurich did advise Tillery to take no further action on the interventions. Tillery spoke with Veness and agreed that Veness would be responsible for all of the discovery in the intervention cases. From that point on Tillery rendered no legal services in the intervention cases and confined his work to the malpractice law suit.

In addition to the malpractice claim and the two products liability claims in Texas, the plaintiff filed a products liability case in Arkansas. Zurich hired a different attorney to intervene on Zurich's behalf in the Arkansas case. The products cases ultimately settled and Zurich recovered $143,620.96 on its interventions. Zurich lost its medical malpractice suit by way of Summary Judgment. Zurich did not recover any money in the medical malpractice case. Nonetheless, Zurich reimbursed Tillery for the court costs and litigation expenses associated with the malpractice case. Tillery then sent a written demand to Zurich for one third (1/3) of the amount recovered under its intervention, or $47,873.65. Zurich refused to pay and Tillery sued Zurich.

• CONTINGENCY FEE CONTRACTS MUST BE IN WRITING

Tillery alleged that there was a binding agreement with Zurich and that Zurich breached the agreement. In reviewing the case the Court of Appeals noted that §82.065 of the Texas Government Code requires that any contingent fee contract for legal services must be in writing and signed by the attorney and the client. The letter agreement Tillery sent to Zurich did not meet the requirements, since Zurich never signed the agreement.

A contingent fee contract that does not meet the requirements of §82.065 of Tex. Government Code is voidable by the client. In the instant case the trial court found that Zurich had expressed its intent to void the contract by advising Tillery not to take any further action on the interventions.

• PURSUING IS DIFFERENT FROM FILING

The trial court found, at Tillery's request, that Tillery had filed interventions in the pending Texas law suits and had filed the medical malpractice case. Tillery argued that the positive findings on those issues entitled him to the contingent fee. In doing so, Tillery overlooked the trial court's finding that Tillery agreed to pursue the two cases on Zurich's behalf in order to recover a contingent fee. As such, the Court of Appeals found that the filing of the original petitions was not full performance under the terms of the agreement. The Court of Appeals found that there was nothing unconscionable in refusing to pay Tillery a contingent fee for a case in which he only filed original pleadings.

• EXCUSING PERFORMANCE

Tillery also argued that Zurich's instructions prohibiting him from doing any additional work on the intervention excused his performance. Tillery therefore claimed that he was entitled to recover his fees. The Court of Appeals disagreed and found that Zurich's instruction to stop the work did not excuse Tillery's performance but instead voided the agreement Tillery was attempting to rely upon. As a result, the agreement was unenforceable because it was voided before Tillery had completely performed the obligation of the agreement.

• ANALYSIS OF OPINION

The effect of this case is to reaffirm that §82.065 of the Tex. Gov't. Code means what it says. In order to enforce a contingent fee contract, the contract must be signed by both of the parties. The failure of a party to sign the agreement makes the agreement voidable by the party who did not sign the 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.