October 3, 2001Just in case anyone noticed, we did not publish a newsletter in September. Quite frankly, there just weren't enough published opinions to justify publishing a newsletter. Now that the Supreme Court and the various Courts of Appeals are "back in business", we will get back on schedule with our monthly newsletter. Most people in the insurance industry have been directly, if not indirectly, affected by the terrorist attack on the World Trade Center. We are sure that many of you either knew people who worked in the World Trade Center or knew of people connected to the insurance industry who worked in the Trade Center. We extend our condolences and prayers to the victims as well as families of the victims of this terrorist attack. In our newsletter this month we review the opinion of the Texas Supreme Court in McAllen Medical Center v.Cortez in which the court, once again, continued its assault on class actions. In the worker's compensation area, the Corpus Christi Court of Appeals in Bass v. Texas Association of School Boards reversed a summary judgment in which the plaintiff sued the wrong party in an appeal from a decision of the appeals panel of the Texas Worker's Compensation Commission. The San Antonio Court of Appeals in Camunes v. Frontier Enterprises, Inc. refused to expand the Sabine Pilot exception to the employment at will doctrine. In John v. Marshall Health Services, Inc. the Texas Supreme Court resolved differences among the Courts of Appeals regarding the deadline under Rule 306a(s) to file a Motion to Extend Deadline when a party was not timely notified of the signing of a final judgment. I. A NON-SETTLING PARTY CAN APPEAL A CLASS CERTIFICATION ORDER IF IT SHOWS THAT IT IS AFFECTED BY THE CLASS CERTIFICATION ORDER The Supreme Court in McAllen Medical Center v. Cortez (decided on August 30, 2001), continued its assault on the use of class actions. Further, the Court was not impressed by the attempts of the class counsel to use an alleged settlement in a class action to procure future cases against the non-settling defendant.
Plaintiff brought a class action suit against Dr. Francisco I. Bracamontes and McAllen Medical Center (hereinafter referred to as MMC) alleging that MMC had misrepresented the qualifications of the hospital's cardiac surgeons. The plaintiff reached a tentative settlement with Dr. Bracamontes. Pursuant to such settlement, Dr. Bracamontes would not be required to pay any money, but instead agreed to "cooperate" in the pursuit of the class claims against MMC. No attorney's fees were to be paid to the class counsel. The trial court originally certified a "settlement only" plaintiff class and gave preliminary approval to the settlement. A fairness hearing was then scheduled. The purpose of the fairness hearing was to simultaneously approve both the class certification and the settlement of the case against Dr. Bracamontes. MMC objected to the hearing after it received less than one day's notice of the hearing. The trial court initially questioned whether MMC had a right to contest either the certification or the settlement (otherwise known as "standing"). The trial court then gave MMC three days to file objections to the proposed class certification and the proposed settlement. MMC had objected that the proposed class did not meet the criteria for class certification. The trial court, nevertheless, entered an order that:
The class notice was not restricted to patients of Dr. Bracamontes who had cardiac surgery at MMC, but was directed to all plaintiffs who had cardiac surgery at MMC. MMC filed an interlocutory appeal. All parties agreed that the fairness hearing would be postponed pending the outcome of the appeal. The Court of Appeals dismissed the appeal, not finding any fault with the class notice. More importantly, the Court held that MMC did not have standing to complain about the class certification order or the proposed settlement, and, therefore, the Court of Appeals did not have jurisdiction to hear the appeal. The issue decided by the Supreme Court was whether MMC had suffered an injury thereby giving it a right to appeal the class certification order: "...we must decide whether the trial court's order is ripe for review and whether MMC has standing to challenge it."
The plaintiff first claimed that MMC's complaints of class certification and settlement were not "ripe". Lack of "ripeness" simply means that the complaint of injury is premature. Lack of "ripeness" prevents a party from appealing a decision about an injury that might occur in the future. The Texas Supreme Court reiterated that pursuant to its decision in Southwestern Refinery Company v. Bernal, a trial court is required determining that a case may proceed as a class action." Thus, it was improper for the trial court to simultaneously conduct a class certification hearing and a settlement fairness hearing. The Court concluded that the trial court could not preliminarily approve the class certification hearing without conducting a "rigorous inquiry" of whether the case should proceed as a class action. Because the trial court failed to conduct this "rigorous inquiry" of the propriety of the class certification, the appeal of the class certification order was ripe. MMC had sustained an injury such that the class certification order constituted an appealable decision. The Court nevertheless concluded that the preliminary approval by the trial court of the settlement did not constitute an appealable order. As the Court pointed out, the preliminary approval was tentative and as such, was not a final order that created a binding settlement.
Once the Supreme Court found that the class certification order was ripe, the Court then had to decide whether MMC had standing to appeal the class certification order. "An issue is ripe when it presents a fully developed controversy, while standing requires that the controversy adversely affect the party seeking review." The Court of Appeals had concluded that MMC, as a non-settling defendant, could not complain about the settlement. According to the Court of Appeals, MMC did not have standing to complain about the class certification order. The Supreme Court disagreeing, held: ...that a non-settling defendant has standing to contest certification of a settlement class if a non-settling defendant can show that the certification adversely affects it. Determining adverse affect necessarily requires a case-specific inquiry. We conclude that, in this case MMC has shown sufficient adverse effect to confer standing to appeal the certification order. In reviewing the facts of the case the Supreme Court pointed out that the proposed class was not limited to plaintiffs who were treated by Dr. Bracamontes but also included anyone who had cardiac surgery at MMC from December 1, 1993 to May 21, 1999. As a result, the Court was concerned that the class notice would be used as an attempt by class counsel to "drum up business" on individual claims against MMC, regardless of whether a class was certified against MMC. The Court found that the attempt of class counsel to procure the cooperation of Dr. Bracamontes against MMC through the class settlement adversely impacted MMC, giving MMC standing to appeal the ruling.
While MMC's petition for review was pending before the Supreme Court the plaintiffs filed a fourth amended petition. The original plaintiff (Ramiro Cortez, Jr.) only sought to represent a class against Dr. Bracamontes. The amended petition added four new plaintiffs who sought to represent a class against MMC only. The plaintiffs then requested that the trial court sever their claims such that the "Cortez class" would proceed against Bracamontes while the new plaintiffs would proceed against MMC. The trial court granted severance; however, the Supreme Court stayed the order of severance. The Supreme Court concluded that the order of the trial court in severing the claims, "..clearly impairs the effectiveness of the relief MMC seeks." The Supreme Court concluded the trial court was attempting to circumvent the relief sought by MMC. As a result, Supreme Court held that the severance order was improper and vacated the order.
It was clear to the Supreme Court that the class counsel in this case was "playing fast and loose" with class certification procedures in an attempt to develop a class action claim against MMC. Further, the Court held that the class certification hearing and the fairness hearing on a proposed settlement cannot be conducted simultaneously. II. COURTS DISAGREE ON EXPANDING SABINE PILOT EXCEPTION TO THE EMPLOYMENT-AT-WILL DOCTRINE The San Antonio Court of Appeals in Camunes v. Frontier Enterprises, Inc. declined to follow the decision of the Corpus Christi Court of Appeals in Johnson v. Del Mar Distributing Co., Inc. which held that an employee who in good faith attempts to find out if a requested act was illegal could not be fired. Del Mar had expanded the narrow exception to the employment-at-will doctrine articulated in Sabine Pilot Service, Inc. v. Hauck, that an employee cannot be discharged for refusing to perform an illegal act.
Patrick and Josie Camunes were employed by Frontier Enterprises, Inc. for 20 years when Frontier terminated their employment. The Camunes' subsequently brought suit for damages, alleging, inter alia, that the sole reason that they were fired was in retaliation for their inquiry as to whether they would be committing illegal acts by following Frontier's orders.(The nature of the "orders" was not specified in the court's opinions) Frontier moved for summary judgment which was granted by the trial court. The Camuneses appealed.
Texas courts have adhered to the traditional employment-at-will doctrine for over a century. That doctrine left to the discretion of either the employer or the employee the employee's term of service that could be terminated at will and without cause.
Under Sabine Pilot, a plaintiff employee in a wrongful termination action must prove by a preponderance of the evidence that the sole reason for his or her discharge is the refusal to perform an illegal act. This is the only exception that the Texas Supreme Court has allowed to the employment-at-will doctrine.
Under the Del Mar expansion, the plaintiff employee need only prove by a preponderance of the evidence that he or she made a good-faith inquiry as to whether a requested act might be illegal. This expansion has not been addressed by the Texas Supreme Court.
Although the Texas Supreme Court has not considered the Del Mar expansion, it has continually emphasized the narrowness of the exception articulated in Sabine Pilot. Moreover, other courts of appeals have explicitly rejected Del Mar as an unlawful expansion of Sabine Pilot. The Camunes court held that any decision to expand Sabine Pilot was better left to the Texas Supreme Court or the legislature. Therefore, the court elected to follow the other courts and rejected Del Mar. Accordingly, the Court affirmed the trial court's granting of the summary judgment. There is a conflict between the Corpus Christi Court of Appeals (which decided Del Mar) and other courts in this state. It will be interesting to see if the Texas Supreme Court decides to accept this case in light of the conflicting positions among the courts of appeals. III. STATUTE OF LIMITATIONS CAN BE TOLLED IN A WORKER'S COMPENSATION LAW SUIT BY THE DOCTRINE OF MISIDENTIFICATION In Bass v. Texas Association of School Boards, (decided September 6, 2001) the Thirteenth Court of Appeals held that the statute of limitations can be tolled by the doctrine of misidentification in a case appealing a decision by the worker's compensation board.
Margaret Bass was an employee of Flour Bluff Independent School District ("FBISD"). She sustained an on the job injury and filed a worker's compensation claim. After going through the entire administrative process she filed suit in district court to appeal the commission's decision. Pursuant to §410.252 of the Texas Labor Code, the plaintiff had forty days after the date of the appeals panel decision in order to file suit. The plaintiff filed suit within the designated forty days, but sued the Texas Association of School Boards (TASB). Since FBISD was self-insured, it was the worker's compensation carrier, and the proper party to the law suit. TASB was not the insurance carrier for FBISD. The plaintiff did not file an amended petition suing the FBISD until well over a year after the filing of her original petition. After suit had been pending for approximately a year and a half, TASB and FBISD filed a joint motion for summary judgment. The trial court granted the motion and entered a take nothing judgment against Bass.
TASB's ground in the motion for summary judgment was that it was the incorrect party and therefore the trial court had no jurisdiction to entertain the suit against it. The Court of Appeals agreed with its position, and upheld the summary judgment granted in favor of TASB. The theory advanced by FBISD was that the plaintiff had failed to timely sue the school district, and as a result, the court did not have jurisdiction over the case. The Court of Appeals disagreed with this position. It held that the doctrine of misidentification serves to toll the statute of limitations and bars the proper defendant from asserting the statute of limitations as a defense. In doing so it relied upon the case of Ealey v. Insurance Co. of North America, 660 S.W.2d 50(Tex. 1983). In Ealey, the insurance carrier appealed a decision from the worker's compensation appeals panel. To the embarrassment of the insurance company, the name of the wrong insurance company was used in filing the district court suit. The Supreme Court held that because the erroneous naming of the insurance carrier did not mislead the claimant or place the claimant at a disadvantage, the filing of the original petition tolled the running of the statute of limitations. Id at 53. From Ealey, the Court of Appeals gleaned three principles. First, the statutory time limit under the Texas Labor Code should be treated as a general statute of limitations, subject to tolling doctrines. Second, when a petition is timely filed, but a party incorrectly named, the standard should be whether the petition gives "fair notice of the appeal to the opposing party." Id at 52. Finally, the petition should be construed as favorably as possible for the appealing party. Additionally, the Court of Appeals reviewed a line of cases which addressed the issue of whether the proper defendant was placed at a disadvantage by the late filing of the lawsuit. The Court looked at whether the appropriate defendant was placed at a disadvantage in obtaining relevant evidence to defend itself, whether a business relationship existed between the two defendants, whether the proper defendant was fully cognizant of the facts in the law suit, and whether the defendant could have been misled as to the basis of the law suit.
Based upon these principles, the Court of Appeals found that a fact issue existed as to whether the Flour Bluff Independent School District was prejudiced by the pleading error and reversed the summary judgment.
This case reiterates the standard of proof necessary to secure summary judgment on the basis of limitations in a misidentification case in the worker's compensation context. IV. THERE IS NO SET DEADLINE IN WHICH TO FILE RULE 306a MOTION TO DETERMINE DATE OF NOTICE OF JUDGMENT In Christopher Leigh John V. Marshall Health Services, Inc., 2001 WL1095316 (Texas Supreme Court decided on September 20, 2001), the Supreme Court found that a judgment was final in a case which involved multiple defendants, three of whom had settled but apparently had not been nonsuited or severed from the underlying case. Further, the court concluded that Texas Rule of Civil Procedure 306a(5), which provides for an extension of time for filing a Notice of Appeal or a Motion for New Trial when a party has not been notified of a judgment, does not provide for a time period in which to file the motion.
Plaintiff John sued six Defendants, three of whom are referred to as the "Trinity defendants" and the others are referred to as the "Marshall defendants." John alleged fraud, breach of contract, and tortious interference. The Marshall defendants were granted partial summary judgment on the breach of contract claim and went to trial on the remaining claims for fraud and tortious interference. The Trinity defendants reached a preliminary settlement with John. When it came time for trial, the Trinity defendants moved for a continuance on the grounds that there was some uncertainty regarding the settlement. The trial court denied the Motion for Continuance, and the case proceeded against the Marshall defendants only. After a mistrial, the court granted a directed verdict in favor of the Marshall defendants, and a judgment was entered in their favor. The final judgment in favor of the Marshall defendants was signed on September 8. The judgment contained a "Mother Hubbard" clause which stated that "all other relief not expressly granted in this judgment is denied." John did not receive notice of the judgment until September 30. He filed a Motion for New Trial on October 13, more than thirty days after the judgment was originally signed. However, pursuant to Texas Rule of Civil Procedures 306a(5) the deadline for filing a Motion for New Trial and/or Notice of Appeal is extended when a party has not been notified of the judgment. The deadlines are extended from the date the party finds out about the judgment. John filed a motion under Rule 306a(5) on December 10, requesting that the court find that John was not timely advised of the judgment and therefore deadlines were extended. The Court of Appeals found that the judgment was final against all the Defendants and therefore was appealable. Further, the Court of Appeals found that John did not timely file his Motion to Extend Deadline under Rule 306a(5) and dismissed his appeal for want of jurisdiction. John appealed both issues, contending that (1)the judgment was not final as the judgment did not address the three Trinity defendants; (2) Rule 306a(5) does not provide a specific deadline in which to file a Motion to Extend Deadlines.
The Supreme Court held that the judgment from which John sought to appeal was final, given the fact that John did not move for a separate trial against the Trinity defendants and instead went to trial against the Marshall defendants only. John's failure to seek any relief from the Trinity defendants and/or move for a separate trial was akin to a nonsuit of the Trinity defendants. Therefore, the judgment entered on September 8 was a final judgment which could be appealed.
Rule 306a(1) provides that the periods within which parties may file various post-judgment motions and trial courts may exercise their plenary jurisdiction all run from the date the judgment is signed. Rule 306a(4) provides the following exception to Rule 306a(1): If within twenty days after the judgment or other appealable order is signed, a party adversely affected by it or his attorney had neither received the notice required by paragraph (3) of this rule nor acquired actual knowledge of the order, then with respect to that party all the periods mentioned in paragraph (1) shall begin on the date that such party or his attorney received such notice or acquired actual knowledge of the signing, whichever occurred first, but in no event shall such periods begin more than ninety days after the original judgment or other appealable order signed. Rule 306a(5) prescribes the procedure for claiming this exception: In order to establish the application of paragraph (4) of this rule, the party adversely affected is required to prove in the trial court, on sworn motion and notice, the date on which the party or his attorney first either received a notice of the judgment or acquired actual knowledge of the signing and that this date was more than twenty days after the judgment was signed. The rules do not set a deadline for filing a motion under Rule 306a(5). Nevertheless, the Court of Appeals held that such a motion must be filed within thirty days of the date a party or his attorney first either receives the clerk's notice of a judgment or acquires actual knowledge that the judgment was signed. Three other courts had reached the same conclusion, but two courts had concluded that Rule 306a(5) does not prohibit a motion from being filed at any time within the trial court's plenary jurisdiction measured from the date determined under Rule 306a(4). The Supreme Court held that the latter courts were correct: Rule 306a imposes no deadline, and none can be added by decision, other than the deadline of the expiration of the trial court's jurisdiction. The Court disapproved the cases that had reached a contrary result. Because the trial court found that John did not have notice of the judgment until September 30, more than twenty days after it was signed, time periods based on the signing of the judgment ran from that date. Thus, under Rule 329b(a) the plaintiff had thirty days to file a motion for new trial, and he did so. Because the trial court did not rule on the motion it was overruled by operation of law on the seventy-fifth day after September 30, which was December 14. The trial court's plenary jurisdiction did not expire until thirty days later, on January 13, 2000. The plaintiff's notice of appeal was due ninety days from September 30, which was December 29, and was therefore timely when filed on December 13. Therefore, the court found that the Court of Appeals improperly dismissed the appeal and the Supreme Court remanded the appeal back to the Court of Appeals.
This case is important because the Supreme Court resolved the dispute among the Courts of Appeals and held that when a party receives no notice of the signing of a final judgment until after the elapse of twenty days from the date the judgment was signed, Rule 306a(5) extends, the deadlines for filing a Motion for New Trial. However, the Motion to Extend Deadline to file Motion for New Trial must be filed within the trial court's plenary power, which would necessarily be extended by the motion itself. 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. |
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Volume II, No. 9
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