December 19, 2002
We would like to take this time to wish all of our clients a Merry Christmas, Happy Hanukkah, and a Happy New Year. We also would like to announce that Vada Staha has been made a partner with our firm.
Those of you that have followed our newsletter this year have noticed that because 2002 was an election year, the Texas Supreme Court did not issue many opinions. Further, the opinions that were issued had “mixed signals” as to which way the Court was leaning. The Court generally continued its conservative trend in its rulings, but issued some “liberal” rulings expanding the rights of Plaintiffs. The opinions issued in October and November reflect this ambiguity in the Court’s philosophical position.
The Texas Supreme Court generally continued its conservative trend by restricting the liability of a general contractor in Dow Chemical vs Bright and in restricting the liability of a landowner under the Texas Recreational Use Statute in The City of Bellmead vs Torres. However, in Texas HomeManagement, Inc. vs Peavey, the Court held that a facility for mentally retarded persons does have a duty to control the behavior of a resident on an unsupervised visit. Finally, in Henry Schein, Inc. vs Stromboe, the Court continued to curtail the use of class actions.
I. THE LIABILITY OF A GENERAL
In Dow Chemical Co. vs Bright (October 21, 2002), the Court limited the liability of a general contractor in suits brought by employees of a sub-contractor.
A. FACTS OF ACCIDENT
Larry Bright was a carpenter who was employed by Gulf States, Inc. to perform construction work at the Dow Chemical facility in Freeport. Mr. Bright was injured when an overhead pipe fell on him while he was removing plywood forms from a concrete pier. A Gulf State’s employee had improperly placed and secured the pipe that ultimately fell on Mr. Bright. Suit was brought by Mr. Bright against Dow, alleging that Dow had a duty to keep the premises under its control in a safe condition. The Supreme Court held in favor of Dow Chemical, holding that Dow did not have sufficient control over the work of its subcontractor to create any liability against Dow.
B. THE DUTIES OF A GENERAL CONTRACTOR FOR PREMISES DEFECTS ON A CONSTRUCTION SITE
The Court first reiterated that in determining whether a general contractor owes a duty to its sub-contractor’s employees in a premises defect case, the first point of analysis is to identify the type of defect that caused the plaintiff’s injury. Under Texas law, two separate types of defects are considered in evaluating the liability of a general contractor:
(1) Defects existing on the premises when the subcontractor entered the premises; and
(2) Defects the subcontractor created by its own work.
This case involved a defect that the subcontractor created by its own work. As such, the general rule is that a general contractor does not owe a duty to its subcontractor’s employees for defects created by the subcontractors work activities. However, if a general contractor does exercise some control over the subcontractor’s work, then the general contractor might be liable. The degree of control needed to establish liability on behalf of the general contractor is proven in one of two ways: “first, by evidence of a contractual agreement that explicitly assigns the premises owner (the general contractor) a right to control; and second, in the absence of the contractual agreement, by evidence that the premises owner (the general contractor) actually exercised control over the manner in which the independent contractor’s work was performed.”
C. CONTRACTUAL RIGHT OF CONTROL
The contract between Dow and Gulf States provided:
RESPONSIBILITIES---CONTRACTOR shall be an independent contractor under this contract and shall assume all of the rights, obligations and liabilities, applicable to it as such independent contractor hereunder and any provisions in this contract which may appear to give Dow the right to direct CONTRACTOR as to details of doing the work herein covered or to exercise a measure of control over the work shall be deemed to mean that CONTRACTOR shall follow the desires of Dow in the results of the work only.
The Court held that this provision proved that the subcontractor was indeed an independent contractor which retained the right to control its work. The Court concluded that pursuant to this contractual provision, no duty of care was imposed upon Dow. More importantly, Dow did not have the right to control the “. . .means, methods, or details of Gulf State’s work. . . .” pursuant to this contractual provision.
D. ACTUAL EXERCISE OF CONTROL
Having failed to establish that Dow had a contractual right to control the work activities of the subcontractor, the Court then turned to the factual dispute of whether Dow actually exercised control over the subcontractor’s work activities. The Court concluded that Dow did not exercise actual control over the subcontractor’s work activities despite the facts that:
(1) Dow could have stopped the
subcontractor’s work had it known of a safety hazard;
(2) Dow’s representative could have refused to issue a safe work permit which would have prohibited the subcontractor from working on the premises;
(3) Dow had a safety representative on the job site;
(4) Dow could have issued a safety rule that might have prevented this accident. In this regard, the Court stated that even though Dow might have been able to issue a safety rule, that no liability is created against the general contractor unless the safety rules promulgated by the general contractor unreasonably increase the probability of an injury to a subcontractor’s employees;
(5) Dow required the subcontractors to report the names of any employees fined for a safety infraction;
(6) Dow required the subcontractor’s employees to attend safety meetings;
(7) Dow had a safety incentive program that rewarded those who had achieved a safe work program.
(8) Dow controlled the overall timing and sequence of work, but did not control the work that the plaintiff was performing at the time of his accident.
E. ANALYSIS OF OPINION
This case establishes that in the absence of a contractual provision establishing a right of the general contractor to control the subcontractor’s work activities, a general contractor does not exercise control over the subcontractor’s work when “. . . there was no prior knowledge of a dangerous condition and no specific approval of any dangerous act.”
II. SITTING ON A SWING IS RECREATION AS CONTEMPLATED BY THE TEXAS RECREATIONAL USE STATUTE
In City of Bellmead v. Torres (October 31, 2002) the Court limited the liability of a premises owner who allows land to be used by the public for recreational purposes.
A. FACTS OF CASE
Nanette Torres was injured at the Bellmead Softball Complex after playing in a softball tournament when the swing that she was sitting on broke. Ms. Torres sued the City of Bellmead, the owner of the Complex, alleging a premises defect. The City of Bellmead defended under the Texas Recreational Use Statute. The Statute provides in pertinent part:
If an owner, lessee, or occupant of real property other than agricultural land, gives permission to another to enter the premises for recreation, the owner, lessee, or occupant, by giving the permission, does not:
(1) assure that the premises are safe for that purpose;
(2) owe to the person to whom permission is granted a greater degree of care than is owed to a trespasser on the premises; or
(3) assume responsibility or incur liability for any injury to any individual or to property caused by any act of the person to whom the permission is granted.
Under the Recreational Use Statute the duty owed to Ms. Torres was the same as that owed to a trespasser on the premises: to refrain from causing injury wilfully, wantonly, or through gross negligence. The City argued that since Torres had not alleged that the City’s actions were willful, wanton, or grossly negligent, it was entitled to summary judgment. The trial court granted summary judgment in favor of the City of Bellmead. The Court of Appeals, concluding that playing softball (the reason that Ms. Torres was at the complex) was not a recreational activity covered by the Statute, reversed the summary judgment and remanded the case for trial.
B. IN A PREMISES DEFECT CASE, THE DANGEROUS CONDITION MUST BE THE CAUSE OF THE RESULTING INJURY
The Supreme Court found that in determining whether the Recreational Use Statute applied in this case the Court of Appeals erred by reasoning that the relevant inquiry was whether softball was a recreational activity. The Court noted that in a premises defect case the dangerous condition must be a cause of the resulting injury. The Court reasoned that Torres did not allege that there was any defect in the softball field, bases, fences, or dugout. Ms. Torres instead alleged that there was a defect in the swing on which she had been sitting. The Court concluded that because Torres alleged that she was injured as a result of a defect in the swing, the controlling question in the case was whether sitting on a swing is recreation as contemplated by the Recreational Use Statute.
C. WHILE THE RECREATIONAL USE STATUTE DOES NOT SPECIFICALLY LIST SWINGING AS AN EXAMPLE OF RECREATION, IT IS WITHIN THE TYPE OF ACTIVITY ASSOCIATED WITH ENJOYING THE OUTDOORS
The Court examined the Recreational Use Statute and noted that as it existed in 1996, the Statute itemized a number of activities as recreation. The list included activities such as: hunting, fishing, swimming, boating, camping, picnicking, hiking, pleasure driving, nature study, cave exploration and water skiing. The Court stated that in 1997, the Statute was amended to include, “any other activity associated with enjoying nature or the outdoors.” The Court noted that prior to the 1997 amendment, one Texas Court of Appeals had held that swinging on a swing was recreation. Further, after the 1997 amendment other Courts of Appeal had considered playing on playground equipment recreation.
After looking at the case law which came before and after the 1997 amendment of the Recreational Use Statute, the Court focused on the specific language of the amendment. The Court found that the amendment included as recreation, “any activity associated with enjoying nature or outdoors.” The Court concluded that swinging on a swing was a recreational activity under the Recreational Use Statute. The Court reasoned that while the Statute does not specifically list swinging as an example of recreation, it certainly is within the type of activity associated with “enjoying the outdoors.”
D. ANALYSIS OF OPINION
The original purpose of the Recreational Use Statute was to encourage owners of private property to allow members of the public to enter their land for the purpose of recreation. The Statute attempted to do this by absolving the owner of liability absent conduct which was grossly negligent or which was committed with malicious intent. The Court’s holding that swinging on a swing is recreation as contemplated by the Statute is consistent with the original intent of the Statute. The opinion in this case indicates a willingness by the Court to continue to further expand the list of activities which are considered recreation in order to provide land owners with the protection which was intended by the Recreational Use Statute.
III. INTERMEDIATE CARE FACILITY
FOR MENTALLY RETARDED PERSONS MUST ESTABLISH THAT IT HAD NO DUTY TO CONTROL A RESIDENT TO AVOID LIABILITY TO A THIRD PERSON
In Texas Home Management, Inc. v. Peavy (decided October 31, 2002), the Court held that Texas Home Management (“THM”) failed to establish that their facility had no duty to control the behavior of a mentally retarded resident on an unsupervised visit and failed to establish that their facility should not have recognized the foreseeable risk of danger that their resident presented to others.
A. FACTS OF CASE
Anthony Tyrone Dixon lived with his mother in Houston until he was fourteen. While living with his mother, charges of criminal mischief, evading arrest, theft, and burglary had been filed against Dixon. In lieu of prosecution, juvenile authorities referred Dixon to the Mental Heath and Mental Retardation Authority (“MHMR”) of Harris County for evaluation. MHMR determined that Dixon was mildly retarded, but not a danger to himself or to others. The District Court agreed with MHMR’s evaluation and ordered Dixon into MHMR’s custody. MHMR placed Dixon in Lakewood House, in Nacogdoches. Lakewood House is an intermediate care facility for mentally retarded persons that is owned and operated by Texas Home Management (“THM”). THM operates Lakewood House through a contract with the State of Texas. Under this contract, THM agreed to train, treat, care for and control Dixon.
Dixon lived at Lakewood House from 1991 to 1994 while he attended public school. Dixon was involved in seven separate assaults at school. While at Lakewood, THM permitted Dixon to make unsupervised visits to his mother in Houston. During Dixon’s visits, he was charged with burglary of a habitation, aggravated assault, breaking and entering, and shoplifting. Dixon’s mother asked THM to suspend her son’s unsupervised visitation due to his behavior. On the weekend of May 15, 1994, while on an unsupervised leave, Dixon shot and killed Elizabeth Ann Peavy at a Houston convenience store.
The Peavys sued THM for negligence and gross negligence, alleging that THM breached its duty to supervise and control Dixon. THM moved for summary judgment, asserting that it had no duty to prevent Dixon’s criminal conduct. The trial court granted the summary judgment; the Court of Appeals reversed and remanded, holding that a special relationship existed between THM and Dixon sufficient to impose a duty on THM to control Dixon’s behavior. The Court of Appeals further held that fact questions had been raised about THM’s duty to use reasonable care in determining whether Dixon should be allowed to continue unsupervised home visits.
A. A FACILITY FOR THE MENTALLY RETARDED HAS A DUTY TO CONTROL THE UNSUPERVISED BEHAVIOR OF A RESIDENT
The first issue before the Texas Supreme Court was whether an intermediate care facility for mentally retarded persons owed a duty of care to control the unsupervised behavior of a resident. The Court explained that generally there is no duty to control the conduct of others. However, the general rule does not apply when a special relationship exists between the actor and another which imposes upon the actor a duty to control the other’s conduct.
THM argued that their facility did not have sufficient control over Dixon to create a special relationship. THM further argued that it did not contractually agree to assume responsibility for Dixon’s behavior. THM asserted that their facility could not have foreseen that Dixon would murder someone while visiting his mother in Houston. THM further argued that Dixon did not present a foreseeable risk of harm because the district court found in 1991 that Dixon was not a danger to himself or others when the Court granted custody to MHMR.
The Court noted that THM contracted with the State and took charge of Dixon. A right to control arose from THM’s contract with the State, which incorporated applicable state and federal regulations and standards. These standards, which THM voluntarily contracted to follow, gave THM the right to control Dixon and thus a special relationship existed.
A. FACTS OF CASE
Henry Schein, Inc. and two subsidiaries, Easy Dental Systems, Inc. and Dentisoft, Inc., were sued by the plaintiff dental offices as purchasers of Schein’s Dental Office Management software throughout the nation. The petitions alleged that the plaintiffs, in reliance on recommendations from Schein, purchased the software programs which contained numerous defects. The Plaintiffs also complained of misrepresentations concerning support for the software.
After a lengthy hearing, the trial court certified the plaintiff class and determined that the issues common to the class were whether members experienced any of the operational problems which were listed; whether advertisements and other communications were false, misleading, or deceptive; whether class members received the benefit of their bargain; and whether they suffered damages in reliance on Schein's misrepresentations. The Court also found that questions of law regarding essentially all of the legal theories asserted were common to the class. The Court found that since Defendants had sold software all across the country, the only way to individually adjudicate the claims of the class members would be to impanel juries in every state. The risk of varying adjudications would be present, with no clear standard of conduct created for Defendants.
Schein appealed the class certification order. The Court of Appeals dismissed Schein's argument that reliance was not a common issue and affirmed the certification order. Schein then filed a petition for review in the Texas Supreme Court.
B. IN ORDER TO COMPLY WITH BERNAL AND TEXAS RULE OF CIVIL PROCEDURE 42 A COURT’S CLASS CERTIFICATION ORDER MUST STATE HOW IT WILL TRY THE ISSURES OF THE CASE AND BE EXPLICIT IN ITS ANALYSIS OF EACH OF THE FACTORS SUPPORTING THE CERTIFICATION OF A CLASS ACTION
After a lengthy discussion of its jurisdiction to hear the appeal, the Court determined that there was jurisdiction because the trial court’s certification order was in direct conflict with their decision in Bernal. The Court then focused its analysis on two main considerations under Bernal and T.R.C.P 42. First, under Bernal, the Court stated that it “is improper to certify a class without knowing how the claims can and will likely be tried. A trial court's certification order must indicate how the claims will likely be tried so that conformance with Rule 42 may be meaningfully evaluated.” The trial court’s certification order preceded the decision in Bernal and did not include any real indication of how the case would be tried. The Supreme Court easily determined the certification order was insufficient on this ground.
Next, the Court analyzed the court’s order under the Bernal requirement that “[c]ourts must perform a ‘rigorous analysis’ (on the predominance requirement) before ruling on class certification to determine whether all prerequisites to certification have been met.” Schein again argued that individual questions regarding reliance, damages, and the applicable law predominated. The Court examined each of these categories separately.
The Court noted that reliance was an element of the plaintiffs' causes of action. The Court stated
the 20,000 class members in the present case are “held to the same standards of proof of reliance--and for that matter all the other elements of their claims--that they would be required to meet if each sued individually.” The Court determined that the trial court did not explain in its certification order how the plaintiffs could avoid individual proof of reliance or why the necessity for such proof would not defeat the predominance requirement for certification as required by Bernal.
Further, the Court stated that the Plaintiffs’ claims for consequential damages would, by their nature, have to be determined class member by class member. Unlike the plaintiffs’ claims for restitution of amounts paid for the software, the value of each plaintiff’s claim for loss of business and wasted time cannot readily be ascertained, and Schein would be entitled to cross- examine each plaintiff on the subject. On this analysis the Court then held that the plaintiffs failed to show how common issues predominate if consequential damages are to be proved, and whether a class excluding consequential damage claims could or should be certified was not explored in the trial court.
Next, the Court found that even if the plaintiffs could and would “concede individual consequential damages without impairing the superiority of a class action, they had given no indication that they would also be willing to concede exemplary or statutory damages.” While recognizing that class-wide proof may be possible, the Court found that plaintiffs failed to show how proof of malice could be made outside the context of class members' individual circumstances over time. Further, the Court found that any finding of the amount of exemplary damages must take into consideration the amount of actual damages. For these reasons the Court held that the plaintiffs failed to show that common fact questions regarding damages predominate over the individual.
Finally, the Court concluded that the plaintiffs did not demonstrate that "a class action is superior to other available methods for the fair and efficient adjudication of the controversy.” The Court found that the Court of Appeals did not discuss whether a class action is superior to the pursuit of individual claims. Given the fact that the software cost between $5,000-$8,000 for each plaintiff and that exemplary damages and reasonable attorney fees could be recoverable, the Court found nothing to indicate that many individual claims are not worth pursuing. More importantly, the Court stated the reason why the plaintiffs failed to satisfy the superiority requirement of Rule 42(b)(4) was that they failed to show that a class action is either more fair or more efficient in these circumstances. The Texas Supreme Court then reversed and remanded the certification order with the explicit statement that it had not determined whether or not a class certification order is proper in this case, but merely that the trial court’s certification order was insufficient based on the foregoing analysis.
B. ANALYSIS OF OPINION
It is clear that the Texas Supreme Court is aligning itself with the decisions in the 5th Circuit limiting the availability of the class action device where there are questions of individual harm or reliance. While stating that it does not determine the question of whether individual reliance issues completely preclude class certification in this, it will probably not be long before a decision doing so will be in place. This decision and its precursor Bernal are going to present immense difficulty for both plaintiffs and the trial court to certify nearly any of the former typical class actions. In addition, this case creates a new standard of review for the trial court’s certification order. While calling it an abuse of discretion standard, the Court then states it will not review class certification orders with the presumption that the Court has acted properly. In essence the Court has created a de novo abuse of discretion standard for class certification orders.
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.
