FANNING, HARPER & MARTINSON, P.C.

NEWS

APRIL 2002

* * * CLAIMS PROFESSIONALS SEMINAR -- SEPTEMBER 2002 * * *

FHM is sponsoring a FREE CONTINUING EDUCATION SEMINAR for claims professionals during the month of September 2002. Details on location and date to be announced. The seminar will be a full day seminar and include required topics, such as consumer protection. WE WANT YOUR INPUT ON TOPICS THAT WOULD INTEREST YOU. Potential topics include common law bad faith (or lack thereof), coverage update, employment law, municipal and school law update, mold litigation, products liability, class actions, reservation of rights, premises liability, "advertising injury", additional insureds issues, and negligent security on premises issues. PLEASE EMAIL YOUR REQUESTED TOPICS TO US OR CALL YOUR FHM CONTACT.

We have also summarized recent cases as a continuing service for our clients. Legal topics include:

EMPLOYMENT LAW UPDATE,

INSURANCE LAW UPDATE,

MUNICIPAL LAW UPDATE,

PREMISES LIABILITY UPDATE,

CLASS ACTIONS UPDATE, and

PRODUCTS LIABILITY UPDATE.

For convenience, each of these topics is presented as a separate category. These abbreviated summaries are provided for information only, and are not intended as legal advice.

At Fanning, Harper, & Martinson, we use every method available to achieve success for our clients. Of course, this includes winning jury trials. Success also comes by successfully pursuing

summary judgment motions, dismissals in federal court, and by appealing judgments that we believe were wrongfully entered. Some of our recent victories are summarized below.

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RECENT SUCCESSES

STEPHEN D. HENNINGER obtained an APPELLATE VICTORY in Billy Donnell Heath v. Duncan Thomas, et. al.; In the FIFTH CIRCUIT COURT OF APPEALS in NEW ORLEANS; Cause No. 01-10296. FHM represented HUNT COUNTY’s District Attorney, Hunt County’s District Clerk and a detective from the Hunt County Sheriff’s Department. Defendants were sued by Plaintiff for alleged violations of civil rights and wrongful prosecution. Plaintiff further sought to compel production of documents from Plaintiff’s criminal trial. FHM filed a motion to dismiss. The district court dismissed all of Plaintiff’s causes of action. On appeal, the Fifth Circuit Court of Appeals AFFIRMED the trial court’s dismissal.

THOMAS P. BRANDT is scheduled for ORAL ARGUMENT before the Fifth Circuit Court of Appeals in New Orleans on May 7, 2002 in Cause No. 1-40776, Gloria Stephens v. Denton Independent School District, Mark Baker, Julia Christman, Carl Stocker Nancy Stoker, Rick Woolfolk and Timothy S. Morrissy. FHM represents Denton Independent School District, Rick Woolfolk, a board member and Mark Baker a teacher. Plaintiff, a choir teacher, who was transferred to another school, alleged she was targeted, discriminated and retaliated against on the basis of race. She sued Defendants for Title VII discrimination and retaliation violations; conspiracy; libel and slander; tortious interference with a contract; intentional infliction of emotional distress; violations of Article I, sections 3, 3(a), 8, 13, 19 and 27 of the Texas Constitution; Civil Rights Act of 1966, 42 U.S.C. sections 1981, 1983, 1985, and 1986; the First, Fifth, and Fourteenth Amendments of the United States Constitution; the Federal Declaratory Judgment Act, 28 U.S.C. sections 2201 and 2202; and attorney’s fees under 42 U.S.C. section1988. The United States District Court Judge Paul Brown in Sherman granted Summary Judgment thereby dismissing all of Plaintiff’s claims against the school district, the board member and teacher. Plaintiff appealed.

THOMAS P. BRANDT and STEPHEN D. HENNINGER will be presenting a seminar on April 27, 2002 to architects, urban planners, city managers and public officials on requirements of the Americans with Disabilities Act as these relate to the design and construction of public facilities.

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EMPLOYMENT LAW - CASE UPDATE

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UNITED STATES SUPREME COURT CASE

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1. Hoffman Plastic Compounds, Inc. v. Nat’l Labor Relations Bd., Cause No. 00-1595 (U.S.S.C. March 27, 2002).

Employer hired employee on the basis of documents appearing to verify his authorization to work in the United States, but laid him and others off after they supported a union-organizing campaign. The National Labor Relations Board (NLRB) found that the layoffs violated the National Labor Relations Act (NLRA) and ordered backpay and other relief. At a compliance hearing the employee admitted that he had never been legally admitted to, or authorized to work in the United States. Employer appealed the NLRB’s decision awarding backpay. The Supreme Court held that the federal immigration policy as expressed by Congress in the Immigration Reform and Control Act of 1986, foreclosed the NLRB from awarding backpay to an undocumented alien who has never been legally authorized to work in the United States but has been terminated from his US job in violation of the National Labor Relations Act.

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FIFTH CIRCUIT COURT OF APPEALS CASES

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2. Price v. Federal Express Corp., Cause No 01-40161 (5th Cir. March 12, 2002).

Plaintiff, a black male, filed suit against his employer, FedEx, alleging racial discrimination in violation of Title VII after he applied for a promotion and was rejected. FedEx selected a white male for the position. After he was not selected, Plaintiff filed a discrimination charge with the EEOC. The EEOC ultimately issued a determination letter to Plaintiff, supporting his claims of discrimination. After Plaintiff filed suit against FedEx, the district court granted summary judgment in favor of FedEx. On appeal, the Fifth Circuit determined that the EEOC’s findings of racial discrimination are not dispositive in later racial discrimination suits. Further, in a case where the EEOC never conducted interviews with anyone other than the plaintiff, or compiled an investigative report, a court may properly find, based on the evidence presented, that the plaintiff cannot establish he was discriminated against by his employer.

3. Green v. Administrators of Tulane Educ. Fund, Cause No. 00-30530, 0031118 (5th Cir. March 15, 2002).

Plaintiff sued employer alleging that after a failed consensual relationship with her supervisor, her supervisor harassed her because she refused to continue having a casual sexual relationship with him. Plaintiff filed suit against her employer and supervisor alleging sexual harassment and retaliation under Title VII and other causes of action. The district court denied the employer’s summary judgment with regard to the retaliation and Title VII claims. The jury entered verdict in favor of Plaintiff.

On appeal, the Fifth Circuit held that in the Title VII context, where a supervisor’s harassment of the Plaintiff was not sexual, but occurred only after his consensual relationship with the plaintiff failed, the critical issue was whether the plaintiff was exposed to disadvantageous terms or conditions of employment to which members of the opposite sex were not. In this case, the Court concluded that there was sufficient evidence supporting the jury’s finding that the supervisor’s actions were causally related to Plaintiff’s gender. With regard to retaliation, the Court concluded that Title VII does not require that Plaintiff prove the conduct opposed was actually in violation of Title VII, but only that a charge was made, or that participation in an investigation of a violation of Title VII occurred. The jury’s verdict was affirmed.

4. Ramsey v. Henderson, Cause No. 01-30287 (5th Cir. March 29, 2002).

Plaintiff sued her employer for claims under Title VII for race discrimination and harassment. The trial court found that all but one of Plaintiff’s claims were outside the statute of limitations period. In determining whether Plaintiff met her prima facie case, the district court did not consider acts outside of the limitations period. On appeal, the Fifth Circuit held that while it was error for the district court not to consider acts of discrimination falling outside of the actionable period as relevant background information, the trial court’s determination that plaintiff failed to establish a prima facie case of hostile work environment in violation of Title VII was correct.

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INSURANCE LAW UPDATE

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TEXAS COURT OF APPEALS CASES

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1. Closner v. State Farm Lloyds, 64 S.W.3d 51 (Tex. App.- San Antonio 2001).

Court of Appeals adopts and applies the "manifestation theory" in a plumbing leak to preclude coverage where insureds fail to show that they discovered damage during relevant policy period.

Insureds brought an action against their homeowners insurer to recover for damage caused by plumbing leaks. The trial court entered judgment for the insurer; insureds appealed. Noting that covered losses are deemed to occur when the damage first becomes apparent, the court of appeals held that: (1) conflicting testimony about when insureds first discovered damage justified an instruction to determine whether the damages first became apparent during the policy period alleged by the insureds; and (2) the insured's recorded statement admitting that damage occurred seven years earlier supported the conclusion that the damages did not first become apparent during the policy period.

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Fort Worth Court of Appeals holds that facts precluding any duty to defend under an auto policy also preclude any duty to indemnify.

Coverage was sought under an auto policy for allegations that plaintiffs negligently scared victim of an auto collision into entering an intersection on a red light wherein she hit a vehicle driven by a third part. Applying the test set forth by the Texas Supreme Court in Farmers Tex. County Mut. Ins. Co. v. Griffin, 955 S.W.2d 81, 83 (Tex. 1997), the court held that the same reasons negating the carrier’s duty to defend the insureds in the underlying case negated any possibility that the insurer would have a duty to indemnify against any judgment rendered therein. In short, the court found that the allegations asserted against the insureds did not arise out of an auto accident as contemplated by the policy.

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3. In re Trinity Universal Ins. Co., 64 S.W.3d 463 (Tex. App.- Amarillo 2001).

Amarillo Court of Appeals grants mandamus regarding the bifurcation of an underinsured motorist claim from Article 21.55 claims.

UIM carrier petitioned for writ of mandamus to compel trial court to sever UIM claim from claim for failure to make prompt payment. The court of appeals held that it was not an abuse of the trial court’s discretion to sever the insured’s UIM claim and Article 21.55 claims where the carrier lacked an adequate remedy at law to protect its substantial right to exclude from evidence its settlement offers and negotiations in the trial of the UIM claim.

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4. Westchester Fire Ins. Co. v. Gulf Coast Rod, Reel & Gun Club, 64 S.W.3d 609 (Tex. App. -Houston [1st Dist.] 2001, n.w.h.).

Beach erosion constituted an "occurrence" under a CGL policy, despite intentional offshore dredging activities.

Adjacent landowners' petitions against an insured gun club alleging property damage due to beach erosion over a period of time did allege an "occurrence" within the meaning of the gun club's CGL policy--thus the insurer was obligated to defend the gun club against the landowners' lawsuits. The policy defined "occurrence" as an accident, including continuous exposure to conditions that resulted in property damage neither expected or intended from standpoint of insured. The beach erosion, related to the gun club's dredging activities, was neither expected or intended from standpoint of the gun club, even though the dredging activity itself was intentional. (The dredging led to altered water currents impacting the beach, which in turn led to the beach erosion.)

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5. Texas Farm Bureau Mutual Insurance Company v. Sturrock, 65 S.W.3d 763 (Tex. App. - Beaumont 2001, n.w.h.).

Insured entitled to PIP benefits for injuries sustained while exiting pick-up truck.

The Beaumont Court of Appeals held that the term "motor vehicle accident" as contemplated by the personal injury protection ("PIP") provisions of an auto policy entitled insured to PIP benefits for injuries sustained when his foot became entangled as he exited a stationary pick-up truck. The court held that the term does not necessitate a collision or any physical impact where the facts demonstrate causation between the use of the vehicle and the accidental injury incurred by the covered person.

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6. Schaefer v. American Manufacturers Mutual Ins. Co., 65 S.W.3d 806 (Tex. App.- Beaumont 2001, n.w.h.).

Insured entitled to claim diminution of value damages under personal automobile policy where repairs following a collision could not restore the automobile to substantially the same condition and value it had before the injury.

The Beaumont Court of Appeals found that it was an issue of fact, to be decided by a jury, as to whether repairs did or could restore the automobile to substantially the same condition and value it had before the injury. If not, damages for diminution of value were held to be appropriate. The actual market value of the vehicle before injury may be considerably less than the cost of repairs plus the loss of market value; or the actual market value may be more than the cost of repairs plus the loss of market value. Accordingly, the court of appeals held that the trial court erred in granting summary judgment on the basis that as a matter of law the insured could not recover for diminished value.

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PETITIONS FOR REVIEW GRANTED

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7. Baker v. Argonaut Ins. Co., 36 S.W.3d 587 (Tex. App.- Dallas 2000, pet. granted).

Petition for review has been granted by the Texas Supreme Court on issue of first impression concerning a workers compensation carrier's right of reimbursement for sums paid.

The Dallas Court of Appeals held that the workers compensation insurance carrier was not entitled to reimbursement of the full workers compensation benefits paid to an employee injured in a vehicle accident. The accident occurred while the employee was riding in a vehicle in the course and scope of his employment. The settlement the injured employee received came from a negligence action against the driver of the other vehicle and the driver's employers. The workers compensation carrier was only entitled to reimbursement of the amount paid over the deductible amount, where workers compensation was paid under a deductible plan insurance policy, under which the employer of injured employee had to pay a $250,000 deductible.

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8. ITT Hartford Insurance Co. v. Home Depot, U.S.A., Inc., No. 01-0521 (court of appeals opinion not yet published).

Petition for review has been granted by the Texas Supreme Court on the appropriate use of extrinsic evidence in coverage determinations.

Noting a split among the justices on the issue, the Texas Supreme Court has granted the insurer’s petition for review to determine whether the "eight corners" rule prevents trial courts from considering extrinsic evidence that contradicts a plaintiff’s allegations about facts that only implicate the defendant’s insurance coverage and not the defendant’s liability.

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MUNICIPAL LAW UPDATE

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UNITED STATES SUPREME COURT CASE

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1. Porter v. Nussle, (U.S. Sup. Ct., No. 00-853, Feb. 26, 2002)

Inmates must exhaust administrative remedies before filing suit.

A state prison inmate filed suit in federal court alleging that he had been subjected to a pattern of harassment and intimidation and had been severely beaten by prison guards. However, the inmate did not file a grievance with the Connecticut Department of Correction beforehand. The district court dismissed the suit for failing to exhaust administrative remedies as required by the Prison Litigation Reform Act ("PLRA"), but the Second Circuit reversed the dismissal, ruling that the exhaustion requirement only applied to claims about general prison conditions and not specific episodes. The United States Supreme Court held that the PLRA's exhaustion requirement applies to all inmate suits about prison life, whether they involve general circumstances or particular episodes, and whether they allege excessive force or some other wrong.

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FIFTH CIRCUIT COURT OF APPEALS CASE

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2. Reyes v. City of Richmond (5th Cir., No. 01-20398, Mar. 28, 2002).

Qualified immunity not established for Police to support summary judgment.

Plaintiff, unarmed, was shot by an Officer after fleeing from Officers and during the course of a struggle with another officer. The testimony of the Plaintiff, the 2 Officers, a police witness, and a civilian witness conflicted on a number of material issues including whether warnings were given, whether Plaintiff was fighting or running when shot, the number of shots fired, and visibility. Plaintiff and his Wife sued the shooting Officer and the City for violations of his Fourth and Fourteenth Amendment rights to be free from the use of excessive force. Defendants filed a motion for summary judgment on the basis of qualified immunity. The magistrate and trial court denied summary judgment after finding the differing versions of events could lead to differing results and jury verdicts. The Fifth Circuit affirmed the denial of summary judgment since the Plaintiff's version of the events, if believed, could support a jury verdict and a finding of no qualified immunity for the Officer and City.

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TEXAS COURT OF APPEALS CASES

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3. Kersey v. Wilson (Tex. App.- Fort Worth, 2-01-226-CV, Feb. 14, 2002).

Arresting DPS officer had immunity from suit alleging intentional torts.

A DPS officer stopped the driver of a tractor-trailer for failing to drive in a single lane and subsequently arrested the driver for failure to produce his record of duty status (or "logbook") as required by law. The driver contended that he suffered burns and aggravation of prior injuries when the officer put the driver on the hood of the patrol car during the arrest. The driver sued the DPS officer for assault, negligence, gross negligence, false imprisonment, and intentional infliction of mental and emotional distress. The trial court granted summary judgment in favor of the officer on the basis of official immunity. The Fort Worth Court affirmed the summary judgment, holding that (1) arresting the driver was a discretionary act and not ministerial, and (2) official immunity applies to allegations of intentional torts. The officer consequently had immunity from suit under the common-law affirmative defense of official immunity, which protects government employees and officers from personal liability arising from performance of discretionary duties in good faith within the scope of their authority.

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4. Kistner v. Pfannstiel (Tex. App. - San Antonio, 04-01-00784-CV, Mar. 13, 2002).

Police Officer failed to prove that he acted in good faith and lost immunity from Plaintiff's claims.

After a traffic stop and apprehending the fleeing Plaintiff, Police Officer testified: He found two open bottles of wine, he smelled alcohol on Plaintiff's breath. Plaintiff admitted drinking earlier in the day. However, these and other material facts (such as Plaintiff's performance on sobriety test and whether Plaintiff was shouting obscenities) were disputed by Plaintiff. Plaintiff was arrested and subsequently sued Police Officer for malicious prosecution, false arrest, libel, and slander. The trial court denied summary judgment based on official immunity. The court of appeals affirmed the denial of summary judgment, finding that, although the arrest was the result of personal deliberation and was therefore discretionary, the Officer failed to conclusively establish that a reasonable officer could have concluded his action were justified, and thus failed to prove his good faith in arresting and charging Plaintiff.

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5. Hayes v. Patrick, (Tex. App.- Fort Worth, 2-01-256-CV, Mar. 07, 2002).

Game Warden entitled to immunity against Plaintiff's claims from a boating accident.

Plaintiff was injured in a collision between Plaintiff's jet ski and Game Warden's patrol boat on Lake Weatherford. Game Warden was attempting to make an investigatory water traffic stop of Plaintiff. Plaintiff sued the Game Warden and Texas Parks & Wildlife Department. The trial court denied both Defendants' motion for summary judgment, and appeal followed. The Fort Worth court reversed and rendered summary judgment in favor of Defendants on grounds of official immunity and sovereign immunity. The evidence supported that the Game Warden acted in good faith and as a reasonably prudent game warden would have under the same or similar circumstances.

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6. Beaumont State Center v Kozlowski (Tex. App.- Beaumont, 09-01-315-CV, Feb. 14, 2002).

Patient could sue state mental health facility for negligence.

Mental health patient in a state facility alleged to have sustained personal injuries and damages proximately caused by the negligence of the facility. This interlocutory appeal followed the trial court's refusal to dismiss the suit. The Court of Appeals rejected the facility's contention that Tex. Health & Safety Code Chapter 321 applies only to private mental health facilities. The Beaumont court held that the statute applies equally to private and state facilities, and the legislature has afforded all such patients a right to sue for money damages.

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7. Lowry v. Pearce (Tex. App.- Waco, 10-01-231-CV, Mar. 06, 2002).

State School employees had immunity from liability for death of a resident.

Plaintiff, the mother of a resident of the Mexia State School, sued the School, its Superintendent, current and former employees, and the Texas Department of Mental Health and Mental Retardation ("MHMR") after the death of her Son. Plaintiff claimed her Son died after ingesting medication he allegedly removed for an employee's coat which was left in the Son's room. Suit was for negligence, negligent supervision, and under the Patient's Bill of Rights. The School, MHMR, Superintendent, and current Employee filed pleas to the jurisdiction alleging official immunity, which were all denied by the trial court. In a separate appeal and reported decision, the appellate court reversed and rendered judgment granting the pleas to the School and MHMR finding governmental immunity. The Superintendent and current Employee also filed a motion for summary judgment. In this decision, the San Antonio Court held that the Superintendent and current Employee had also established their defenses of immunity and were therefore entitled to summary judgment.

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PREMISES LIABILITY UPDATE

1. F.F.P. Operating Partners, LP v. Duenez, 2002 WL 238474 (Tex. App. - Corpus Christi 2002, no pet. h.) (Opinion not released for publication in permanent law reports).

Convenience store defendant in a Dram Shop Act suit was vicariously liable for injuries caused by drunk driver and was not entitled offset its liability by drunk driver’s percentage of liability.

Drunk driver had been drinking all afternoon and purchased additional alcohol at a convenience store owned by the defendant. After leaving the store, the drunk driver’s vehicle collided with the plaintiffs’ vehicle causing injuries to plaintiffs. Plaintiffs sued the convenience store under the Dram Shop Act. The Corpus Christi Court held the convenience store was not entitled to an offset of liability based on the comparative negligence of the intoxicated person.

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2. Harwood v. Hines Interests Limited Partnership, 2002 WL 437289 (Tex. App.- Houston [1st Dist.] 2002 no pet. h.) (Opinion has not been released for publication in permanent law reports).

Property owner is on constructive notice of dangerous condition of parking lot where some curbs or other potential hazards are clearly marked and others are not.

A shopper slipped and fell and was injured in the parking garage owned and operated by the defendant. The shopper fell as she crossed over a curb which was not marked and could not be seen since several lights in the garage were out. Defendant had an unwritten policy and practice of inspecting the garage’s lighting and condition, but there was no evidence that the policy was followed. The Court held that a reasonable inference could be drawn that the condition of the curb (similar in color as to the rest of the floor, poor lighting, etc.) could have proximately caused the shopper’s fall, and this was sufficient to give the owner actual or constructive knowledge that the curb was inadequately marked. The court thus reversed the trial court’s granting of summary judgment for the owner.

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CLASS ACTION UPDATE

There are no class action cases to report this month.

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PRODUCTS LIABILITY UPDATE

1. Hanus v. Texas Utilities Co., 2002 WL 398699 (Tex. App.- Fort Worth, March 14, 2002).

Utility company had no duty to warn home owner of dangers associated with power lines buried under the home owner's property.

Hanus sued TU individually and on behalf of her husband's estate for strict products liability. Her husband died digging in the backyard when he hit an electrical cable. The Court stated that converted electricity is a product for strict products liability purposes and considered the claim based on TU's alleged failure to warn.

The court held that the same analysis should be applied to buried electric cable as to overhead power lines. Specifically, the duty to warn arises when an electric company: (1) fails to comply with applicable code or (2) has reason to anticipate that the lines would be dangerous to plaintiff. The court affirmed TU's summary judgment, holding that TU had no special duty to warn because the danger was both obvious and commonly known.

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2. ASI Technologies v. Johnson Equipment Co., 2002 WL 340589 (Tex. App.- San Antonio, March 6, 2002).

Seller waived statutory right to indemnity by signing agreement with manufacturer.

ASI ("Manufacturer") and Johnson Equipment ("Seller") were sued for products liability by William and Martha Crawford (the "Crawfords"). During the trial, the parties executed a high-low settlement agreement whereby Manufacturer and Seller agreed to pay the Crawfords a maximum of $900,000 and a minimum of $300,000 depending on the jury's verdict. Manufacturer and Seller executed a separate agreement whereby they apportioned the amount each would pay the Crawfords.

The jury found no liability on the part of Seller and the Seller moved for judgment on its cross claim for statutory indemnity. The court held that Seller waived its right for statutory indemnity by signing the agreement with Manufacturer.

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© Fanning, Harper & Martinson, P.C., April 22, 2002.

Fanning, Harper & Martinson, P.C.

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