Summer 2002 Newsletter

We have made final arrangements for our FREE CONTINUING EDUCATION SEMINAR entitled "TEXAS LEGAL UPDATE FOR THE CLAIMS PROFESSIONAL" on TUESDAY, OCTOBER 22, 2002. The seminar will be held at the Crowne Plaza Hotel in Addison, Texas. The seminar starts at 8:00 a.m. and ends at 5:00 p.m. FHM is applying to the State Board of Insurance for 7 hours of CE credit, with 2 hours of credit for consumer protection. Breakfast and lunch are included. Topics include: latest updates on mold litigation, handling uninsured/underinsured motorist cases, effective use of mediation, DTPA, premises and products liability law updates, reservation of rights, and denial of coverage. We are also seeking CLE credit for attorneys who attend. SPACE IS LIMITED - RESERVE YOUR SEAT NOW! To reserve, contact Mark Dyer at or call (972) 860-0314.

We are going to a quarterly format on our newsletter and will issue a Spring, Summer, Fall, and Winter edition. We may occasionally send you an email notice on a special event - like our CE seminar. If you prefer not to receive our newsletter, please reply with the term "UNSUBSCRIBE."

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

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 evaluate cases early, work with our clients to develop a litigation plan, and execute on that plan. We believe our pretrial discovery and thorough preparation consistently translate into positive results for our clients. Some of our recent victories are summarized below.

MARK DYER and AMOS PETTIS obtained a DEFENSE VERDICT on behalf of the Addison restaurant Tokyo One, in the DALLAS COUNTY COURT AT LAW No. 1. The Plaintiff sued Tokyo One for breach of an oral contract for marketing services, seeking damages in excess of $100,000.00. FH&M counter-claimed on behalf of Tokyo One for violations of the Deceptive Trade Practices Act. The jury excused FH&M's client from paying the remaining money under the contract and found that the Plaintiff violated the DTPA.

LESLIE ECHOLS PITTS secured a FINAL SUMMARY JUDGMENT from the U.S. FEDERAL DISTRICT COURT for the Northern District of Texas, Judge Joe Fish presiding, in Essex Ins. Co. v. Bhavan, Inc. d/b/a Payless Convenience Store; Civil Action No. 3-02CV0078-G, declaring that the liability insurer had no duty to defend or indemnify its insured from the claims asserted against it in a pending state court suit involving a fatal shooting in the insured's parking lot. The court agreed that the underlying lawsuit alleged conduct precluded under the policy's "assault and battery" exclusion, thereby relieving the insurer of any duty to defend the lawsuit. The Court additionally determined that there were no facts that could be developed at a trial of the case to impose coverage thereby also relieving the insurer of any potential indemnity obligation as well.

JOSH KUTCHIN and SCOTT HUBER obtained an APPELLATE VICTORY in City of Riverview, Michigan v. American Factors, Inc.; in the FIFTH DISTRICT COURT OF APPEALS in DALLAS; Cause No. 05-01-00841-CV. In a published opinion, the Dallas Court of Appeals held that Texas did not have personal jurisdiction over FHM's client, an out of state municipality. The controversy centered on a Dallas area factoring company that had advanced a vendor of the City of Riverview accounts receivables for work the vendor had contracted to do for the City. The City responded to a letter sent to them informing the city about the arrangement, but later the account became disputed. The Plaintiff argued at the trial court level that the city's lone contact was sufficient for subjecting it to personal jurisdiction, and the trial court denied FHM's special appearance on behalf of the client. The Court of Appeals, however, found that the lone contact initiated by the Plaintiff was insufficient for proper jurisdiction in Texas, overruled the trial court, and dismissed the case for lack of personal jurisdiction.

THOMAS P. BRANDT obtained an APPELLATE VICTORY after ORAL ARGUMENT before the Fifth Circuit 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, §3, 3(a), 8, 13, 19 and 27 of the Texas Constitution; Civil Rights Act of 1966, 42 U.S.C. §§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. §§2201 and 2202; and attorney’s fees under 42 U.S.C. §1988. 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 the teacher. Plaintiff appealed and the Fifth Circuit Court of Appeals, after oral argument, AFFIRMED in favor of Defendants.

ROBERT FUGATE, GERALD LOTZER, and SCOTT HUBER obtained an APPELLATE VICTORY in Landrum v. Chewning; in the FIFTH DISTRICT COURT OF APPEALS in DALLAS; Cause No. 05-01-01875-CV, 2002 WL 1371435. In this wrongful death case, the decedent was killed by a wheel which separated from a race car. Mark Chewning owned the race track but had leased the facility to a third party, who was solely responsible for operation of the race track. FHM obtained a summary judgment for Mark Chewning on the grounds that he, as a mere lessor, owed no duty to the decedent. The Dallas court of appeals affirmed the grant of summary judgment.

1. Parsons v. Ford Motor Company, 2002 WL 1343213 (Tex. App.- San Antonio, June 21, 2002, no pet. h.).

Plaintiffs' reliance on res ipsa loquitur cannot overcome the effect of car dealer's intervening repair and replacement of the allegedly defective part.

In March 1997, Plaintiffs asked their car dealer to replace the ignition switch on their 1989 Lincoln Town Car as Ford had advised them in a recall letter. Thereafter, on August 19, 1997, the car spontaneously burst into flames while in Plaintiffs' garage. The fire destroyed the car, the garage and Plaintiffs' home. Plaintiffs filed suit against the car dealer and Ford and expressly pleaded the doctrine of res ipsa loquitur.

To apply the doctrine of res ipsa loquitur, a party must prove: (1) the character of the injury is such that it would not have occurred in the absence of negligence and (2) the instrumentality which caused the injury is shown to have been under the sole management and control of the defendant. The district court found that the evidence presented to prove res ipsa loquitur was not sufficient to raise a genuine issue of material fact and granted Ford's motion for summary judgment. The court of appeals affirmed. Because the dealer changed the ignition switch, the court found Plaintiffs lacked any evidence that a defect existed at the time of the fire. Further, the court held that evidence of one other fire after a recall repair did not provide the level of probability necessary to ensure that liability, more likely than not, rested with Ford.

2. Volkswagen of America v. Ramirez, 2002 WL 959996 (Tex.App.- Corpus Christi, May 9, 2002, pet. filed).

Appellate court affirms trial court's judgment on the verdict awarding $17,237,664.38 and overrules all seven of Volkswagen's issues on appeal.

A Volkswagen Passat crossed a median and collided with a vehicle driven by the Plaintiff's relative and the relative's daughter. The jury found that the Volkswagen Passat involved was defective and that Volkswagen's negligence proximately caused the Plaintiff's injuries.

In Volkswagen's third point of error, it alleged that Plaintiff's expert's testimony was not reliable because his opinion on the defect was not supported by independent testing or data and that his opinions made "no sense" to Volkswagen. The Court stated that proof in a products liability claim does not require proof of how the product became defective. Further, Volkswagen's assertion that the opinions made "no sense"was an improper attack on the expert's conclusions. The proper way to exclude an expert's testimony is by an attack on his methodology.

3. Kugle v. DaimlerChrysler, 2002 WL 576396 (Tex. App.- San Antonio, April 17, 2002, no pet. h.)

Appellate court affirms $865,000 in sanctions against attorneys but reverses trial court's dismissal of underlying case.

In 1996, members of the Fabila family were involved in a one car accident which resulted in 4 deaths and other severe injuries. Attorneys Kugle, Wilson and Toscano ("Fabila's attorneys") were hired by the Fabila family to represent them in a lawsuit against DaimlerChrysler. After conducting discovery, DaimlerChrysler filed a motion for sanctions. DaimlerChrysler had discovered that after receiving a recall notice on the vehicle from Bridgett Fabila, Fabila's attorneys filed the original petition claiming the cause of the accident was caused by the part of the vehicle being recalled. DaimlerChrysler also discovered that Fabila's attorneys knew after their investigator's initial inspection of the car that the accident was not due to the recalled defect but were bluffing to get a settlement. The trial court assessed $865,000 in sanctions against Fabila's attorneys and dismissed the underlying case.

Fabila's attorneys appealed claiming that the trial court deprived them of due process by refusing to abate or stay the sanctions hearing and abused its discretion in holding the attorneys jointly and severable liable for the sanctions. The Fabilas appealed on the grounds that the evidence did not support sanctions against them and because the pleadings could have been construed as a claim for crashworthiness. The appellate court upheld the sanctions imposed on the attorneys but reversed dismissal of the underlying case, finding that inconsistent statements by Bridgett Fabila did not merit dismissal of the case.

4. Goldsmith's Inc. v. Wall Services, Inc., 2002 WL 913755 (N.D. Tex. April 30, 2002).

Texas law requires a manufacturer to provide indemnity to a seller of its products except for any loss caused by the seller's negligence, intentional misconduct, or other act or omission for which the seller is independently liable.

Goldsmith's sells office furniture and supplies. Goldsmith’s purchased modular floor-to-ceiling walls from manufacturer Wall Services, Inc. ("WSI"), which Goldsmith’s in turn sold to Scruggs Consulting ("Scruggs"). WSI installed the walls. Scruggs later sued Goldsmith's and WSI for defects in the wall panels. WSI settled with Scruggs before trial but refused to indemnify Goldsmith's. Later, Goldsmith's sought common law indemnity, statutory indemnity (under Chapter 82 of the Texas Civil Practice & Remedies Code) and indemnity under the Texas Deceptive Trade Practices Act from WSI for damages incurred in its defense against Scruggs. The district court granted Goldsmith's motion for summary judgment against WSI and found that WSI, a manufacturer under Chapter 82, must indemnify Goldsmith's, a seller under Chapter 82, for losses suffered in the underlying lawsuit with Scruggs.

5. Invman v. DaimlerChrysler Corp., No. 00-61082-3, Texas County Court at Law, Nueces County.

Texas trial court certifies nationwide class of car owners with allegedly defective seat belts.

On July 3, 2002, Judge Hector De Pena of the Texas County Court at Law, Nueces County certified two nationwide classes in this case involving allegedly defective seat belts. The first class consisted of new car owners and lessees; the second of used car owners and lessees of certain DaimlerChrysler vehicles made between 1993 and 2002.

Judge De Pena rejected arguments that a state-by-state choice of law analysis was warranted because no one had sought to apply any specific jurisdictional law to any particular claim and because there was no proof that any specific foreign jurisdiction had any governmental interest in applying its law. Finally, Daimler did not raise this issue until halfway through the hearing on the certification motion.

Choice of Law: The court presumed in absence of a choice of law motion that the law of other jurisdictions conformed to Texas law.

Trial Plan: The trial plan contemplates that the following questions, among others will be submitted to a jury:

1. Was the failure if any to comply with a warranty a producing cause of damages?

2. Did Chrysler engage in unconscionable conduct and if so, did it engage knowingly?

The court found that there were several common questions of law and fact regarding express or implied warranties of safety of the seat belts and concerning DaimlerChrysler's conduct. The court specifically noted that resolution of common questions will resolve the controversy such that any remaining issues can be addressed through a proof of claim process.

1. Rocor Int’l, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA., 2002 WL 1058246 (Tex. May 23, 2002).

Texas Supreme Court creates a cause of action under Article 21.21 for a liability insurer’s negligent failure to settle a claim within policy limits. In the past, liability for such conduct was believed to be limited to a common law Stower’s cause of action. Under Rocor, an insured may now assert a cause of action against its insurer under Article 21.21 of the Texas Insurance Code for failing to attempt settlement of a third-party claim once liability has become reasonably clear. At issue in the case was Rocor’s right to recover defense costs allegedly incurred as a result committed by excess carrier’s alleged delay in settling certain third-party claims against it.

Looking to the familiar Stowers standard for determining an insurer’s common law duty to its insureds to settle third-party claims, the Court declares, for the first time, the proper liability standard for determining when liability has become "reasonably clear" within the statute’s meaning:

...we hold that an insurer’s liability is not reasonably clear, and liability may not be imposed under Tex. Ins. Code. art. 21.21, unless the insured shows that (1) the policy covers the claim, (2) the insured’s liability is reasonably clear, (3) the claimant has made a proper settlement demand within policy limits, and (4) the demand’s terms are such that an ordinarily prudent insurer would accept it.

2. Mid-Century Ins. Co. of Tex. v. Boyte, 45 Tex. Sup. Ct. J. 696 (Tex. May 23, 2002).

The Texas Supreme Court in a per curiam opinion holds that an insurer's common law and statutory duties of good faith and fair dealing do not extend beyond the entry of judgment in favor of the insured. Boyte, injured in an auto accident, settled with the tortfeasor's insurance company and filed an underinsured motorist claim against his own carrier, Mid-Century. Mid-Century tendered the difference between the value it placed on the claim and the previous settlement amount. Boyte sued and obtained a judgment against Mid-Century for the remaining but unpaid policy limits.

During the pendency of Mid-Century’s appeal, Boyte informed Mid-Century that he needed back surgery but could not afford it. Mid-Century offered to pay for the surgery and post-surgery therapy, the costs of which were substantially less than the judgment amount. Boyte never scheduled the surgery. Thereafter, his judgment against Mid-Century was affirmed and subsequently paid in full. Nevertheless, Boyte sued again, this time for Mid-Century’s post-judgment conduct claiming that Mid-Century was liable for common law negligence and insurance code violations in failing to effect a prompt and fair settlement of the underlying claim after liability became reasonably clear thereon.

Rejecting Boyte’s contentions, the Court explained the parties became judgment debtor and judgment creditor at the entry of the trial court’s judgment, not when all appeals are finalized, thereby extinguishing Boyte’s bad faith claims.

The Texas Supreme Court resolves a conflict among Texas’ state and federal intermediate courts and the Fifth Circuit Court of Appeals on the proper "occurrence" analysis when the insured under a standard commercial general liability policy is sued for the assault and battery its employee on a third-party. In addition to a claim of respondeat superior, the victim of the assault sued the insured employer directly for negligence in hiring, training and supervising the employee who allegedly committed the tort. In a divided opinion, the Dallas Court of Appeals held that because the negligence claims asserted against the insured employer were dependent upon the intentional conduct of its employee (i.e. the assault), no "occurrence" was alleged and thus no coverage afforded despite the policy’s "Separation of Insureds" provision. King v. Dallas Fire Insurance Company, 27 S.W.3d 117 (Tex. App. - Houston [1st Dist.] 2000, pet. rev. granted).

On petition for review, the Court reversed the intermediate court’s decision, holding that the negligent hiring, training and supervision claims against the insured employer do constitute an "occurrence" as contemplated under most standard commercial general liability policies. Specifically, and quite significantly, the Court held that the policy’s "Separation of Insured" provisions create separate insurance policies for the insured and its employees, and as a result, requires that the existence of a potential "occurrence" under the policy be determined from the independent view point of each insured involved. In reaching its decision, the Court noted that jurisdictions addressing the issue are generally split, but found the line of Fifth Circuit cases on which the Dallas Court of Appeals decision was primarily based, unwarranted on the specific policy language and allegations involved. Specifically, the Court found the Fifth Circuit’s approach of imputing one insured’s intent or intentional conduct to another insured improper:

[W]hether one who contributes to an injury is negligent is an inquiry independent from whether another who directly causes the injury acted intentionally. Essentially, the actor’s intent is not imputed to the insured in determining whether there was an occurrence."

While the Court did not rule on whether the respondeat superior claims against the insured employer constitute an "occurrence," leaving the question arguably open for debate, such claims are seldom asserted without the type of accompanying negligence allegations seen in King.

4. Old American Mutual Fire Ins. Co. v. Gulf States Finance Co., 73 S.W.3d 394 (Tex. App.

A Houston Court of Appeals holds that the "loss payable clause" in the standard Texas Personal Auto Policy does not cover the loss payee when the insured entrusts the car to an excluded driver. The clause provides:

Loss or damage under Coverage for Damage to Your Auto shall be paid as interest may appear to you and the loss payee shown in the declarations. This insurance covering the interest of the loss payee shall not become invalid because of your fraudulent acts or omissions, unless the loss results from your conversion, secretion or embezzlement of your covered auto. . . .

The auto policy issued by Old American excluded the individual who was driving at the time of the accident. As a result, Old American denied coverage under the policy to both the insured and its mortgagee, Gulf States. In response, Gulf States sued under the policy for breach of contract and insurance code violations, arguing that even though the insured breached the insurance contract, its rights were greater thereunder by virtue of the subject "loss payable clause." The court of appeals disagreed holding that the loss payable clause only protects the mortgagee against fraudulent conduct by the insured and not other acts such as entrusting the car to an excluded driver.

The Fort Worth Court of Appeals affirmed a Tarrant County trial court’s judgment notwithstanding the verdict denying Garcia’s petition for bill of review to set aside a default judgment entered against her for failing to answer a lawsuit filed against her by Tenorio for damages arising out of a motor vehicle accident. Agreeing with the trial court, the court of appeals found that there was no evidence to support the jury’s verdict that Garcia’s failure to file an answer in the lawsuit was not the result of Garcia’s or her automobile liability carrier’s fault or negligence. Instead, the court of appeals affirmed the trial court’s finding that Garcia’s insurance carrier, Insurance Depot, was negligent as a matter of law in failing to file an answer on Garcia’s behalf. In reaching its decision, the court of appeals noted it is "well recognized" that a party served with citation to appear and defend a suit who then turns the matter over to an insurance company to represent her interests, relies upon the insurance company ‘"at [her] own peril or risk."

6. Scottsdale Insurance Company v. Travis, 68 S.W.3d 72 (Tex. App. - Dallas 2001, pet. denied).

The Dallas Court of Appeals reversed and remanded the trial court’s summary judgment in favor of the named insured and its officer in a declaratory judgment suit for coverage in a suit against them for the officer’s alleged wrongdoing in forming the named insured to compete with the officer’s former employer. Concluding that the damages sought in the underlying lawsuit all pertained to conduct initiated prior to the policy’s effective date, the court held that coverage was precluded for the underlying allegations under the policy’s specific terms of the insurance policy covering event occurring during the policy period and under Texas’ fortuity doctrine as a "loss in progress."

7. Associated Intern. Ins. Co. v. Blythe, 286 F.3d 780, 2002 WL 448596 (5th Cir. March 22, 2002).

Under Texas law, as predicted by the Fifth Circuit, a commercial auto liability policy which extended coverage in its omnibus clause to anyone else "while using" the covered vehicle with the named insured’s permission, covered the insured’s permittee when he negligently entrusted the vehicle to another person whose negligent operation caused an injury, even if the permittee was not present when the accident occurred. The named insured had required the permittee to find a third-party driver, and the vehicle was being used for its entrusted purpose at the time of the accident.

Under Texas law, the alleged conduct by a group of insureds who owned and managed an office building, following the termination of the building engineer, of circulating "wanted posters" of the engineer resulted from the insureds’ business activities. Therefore, the alleged conduct, which was the subject of a suit by the engineer alleging slander and invasion of privacy, was covered under the personal injury provision of the insured’s commercial general liability policy. The insured’s conduct was undertaken pursuant to a duty to protect the building’s tenants from the perceived risk of criminal acts.

Under Texas law, certificate of insurance issued by general liability insurance carrier’s "soliciting agent" which erroneously listed party plaintiff as an "additional insured" did not create such coverage where it did not otherwise exist. The "soliciting agent’s" agency agreement with the carrier prohibited it from modifying the terms of the policy. In addition, the certificate itself contained a disclaimer providing that it would not work to alter terms of the underlying policy. The court held that where issuing agent has no actual authority or apparent authority to modify the terms of the underlying policy, its mistaken designation of a party as an "additional insured" by certificate will not alter the insurance provided by estoppel or otherwise. The court also found plaintiffs’ claims for reformation of the policy for mutual mistake, as well as its claims against the defendant carrier and its agent for negligent misrepresentation, were unsupported by the evidence.

Paraplegic who was arrested and transported in a van that was not equipped to accommodate the disabled, sued the police officials under the ADA for failing to maintain appropriate polices for arrest and transportation of person with spinal cord injuries. After a trial the jury awarded compensatory and punitive damages. The Supreme Court held that punitive damages may not be awarded in private suits brought under the ADA and Rehabilitation Act.

Corrections officers were not entitled to qualified immunity for acts of handcuffing an inmate to a hitching post, because a reasonable corrections officer would have know that such punishment was unlawful under the Eighth Amendment, based on the lack of any safety concern or emergency, and obvious cruelty inherent in such a practice.

Eleventh Amendment state immunity waived by choosing to litigate in federal court instead of state court.

A professor filed suit in state court against the University and related personnel and entities (all State entities or employees) after sexual harassment allegations were placed in his personnel file. The Defendants removed the case to federal district court and then filed for dismissal based on Eleventh Amendment immunity from suit. The U.S. Supreme Court held that a state and/or state entity waives its Eleventh Amendment immunity when they voluntarily invoke federal court jurisdiction by removing a case from state court to federal court. By filing a motion to remove the case to federal court, the state was in effect voluntarily choosing to subject itself to the jurisdiction of the court.

4. Travis County, Texas v. Pelzel & Associates, Inc., 45 Tex. Sup. Ct. J. 623 (May 9, 2002)

A county’s entitlement to governmental immunity is not waived by the presentment statute, nor is it waived by adjusting the contract price. The presentment statute merely establishes a condition precedent to suit.

5. Texas Department of Transportation v. Ramirez, 45 Tex. Sup. Ct. J. 594 (April 25, 2002).

The Texas Tort Claims Act waives governmental immunity from suit for premises defect claims. Specifically, failure to install safety features on a road may be a premises defect.

6. Texas Dept. of Transportation v. Needham, 45 Tex. Sup. Ct. J. 631 ( May 9, 2002).

Whistleblower report must be to an appropriate law enforcement authority. An employer’s power to internally discipline its own employees for an alleged violation does not make it an "appropriate law enforcement authority." An appropriate law enforcement authority is a governmental entity authorized to "regulate under or enforce the law alleged to be violated in the report." However, a good faith belief that employee is reporting to the appropriate law enforcement agency may be sufficient.

Plaintiffs were driving on an elevated and curving narrow causeway (the bridge to South Padre Island) when a large section of streetlights went out, plunging the road into darkness. Plaintiffs' truck hit the concrete median and flipped. The driver was killed when his truck was struck by oncoming traffic, and his passenger sustained personal injuries. The causeway was owned by the State, but the County was responsible for maintaining the streetlights under agreement with TxDOT. Suit was filed by the passenger and the family and estate of the deceased against the TxDOT, the County, and two individuals alleging that the causeway's condition constituted a premises defect, a special defect, or a misuse of personal property. TxDOT and the County filed pleas to the jurisdiction claiming immunity under the Texas Tort Claims Act. The trial court granted the pleas and dismissed the two governmental entities. The Texas Supreme Court reversed, finding that the Plaintiffs' allegations amounted to a claim for a premises defect which waived immunity under the Tort Claims Act. Governmental entities are not entitled to immunity for premises defects claims.

8. Texas A&M Univ.-Kingsville v. Lawson, 45 Tex. Sup. Ct. J. 857, 2001 WL 1892195 (Tex. June 20, 2002).

If government waives immunity, immunity is waived for all related proceedings as well.

State University terminated a Professor, who then sued the University for constitutional violations, interference with business relationships, and violations of the Whistleblower Act. The University filed pleas to the jurisdiction based on sovereign immunity, and the trial court dismissed all claims except the Whistleblower claims. The parties reached a settlement agreement, and the entire case was dismissed by agreement. The agreement called for the University to disclose the Professor's position as an "associate professor," but the University allegedly told another potential employer he had been an "instructor." The Professor filed suit against the University, this time for breach and enforcement of the settlement agreement. The University again moved to dismiss the claim based on sovereign immunity, but the trial court denied the plea. The Texas Supreme Court affirmed, holding that if a state entity settles a lawsuit for which it did not have immunity, the state has waived immunity for subsequent proceedings seeking to enforce the settlement agreement. The Court found that a state could not regain immunity which had previously been waived, by statute or by agreement, by settling a claim for which it could be held liable, failing to perform the settlement agreement, and then asserting immunity for such non-performance.

Governmental defendants not entitled to summary judgment or immunity from constitutional claims.

Plaintiffs, former constables who had resigned, alerted the district attorney and a television station of alleged wrong-doing by a constable. After the station aired a report criticizing the constable, Plaintiffs were stopped at gunpoint, arrested, and prosecuted for deadly conduct (they were later acquitted by a jury). Plaintiffs filed suit against 2 constables and Bexar County asserting sec. 1983 claims for retaliation for exercising 1st amendment rights and for denial of due process and equal protection. The trial court granted summary judgment in favor of all defendants. The Fifth Circuit reversed in part, holding that the conduct alleged by the Plaintiffs could constitute First Amendment retaliation. The Plaintiffs had also alleged facts sufficient to show malicious prosecution. Furthermore, the Court held that the constables had not established qualified immunity for themselves since several issues of fact needed to be determined by a jury. Plaintiffs had waived their arguments regarding due process and equal protection by not preserving its error. Lastly, the Court affirmed summary judgment in favor of the County since the constables were not policy-makers.

In June 1997, Plaintiffs were injured in an automobile collision in Bastrop when a truck proceeded through the intersection and struck Plaintiffs' vehicle. The intersection was designed in 1964, and by 1995 numerous accidents at the intersection had caused State employees to request re-grading of the intersection and installation of a flashing warning light. The upgrade was approved in 1998 and construction began in July 1998. Plaintiffs sued the State and Texas Department of Transportation (TxDOT), contending that the government built an intersection with poor visibility because of a steep incline on the approach, set speed limits that were too high for the conditions, and failed to install warning signs even after getting notice of the dangerousness of the intersection. Plaintiffs' claims were based on premises liability, negligence, gross negligence, failure to warn, and failure to timely implement approved safety changes. The State and TxDOT filed a plea to the jurisdiction, which the trial court granted. Plaintiffs appealed from the dismissal of their claims against the State. The Austin court affirmed the dismissal. Such a decision by the governmental entity regarding the timing of the installation of a warning sign is protected by sovereign immunity, so Plaintiffs' claims were barred.

11. Texas Department of Criminal Justice v. Simons, 74 S.W.3d 138 (Tex.App.--Beaumont 2002, pet. filed).

Governmental entity had actual notice of Plaintiff's claim to satisfy Texas Tort Claims Act.

Plaintiff, an inmate, sustained fractures and lacerations to his face and lost an eye while his inmate work crew was using a tractor with a mechanical posthole digger to mount a guard rail. An offense report shows that Plaintiff was charged with refusing or failing to obey an order to stand clear of the digger; safety officers interviewed Plaintiff at the hospital (where he repeatedly stated that he believed that no one was at fault for the accident). Plaintiff sued the Texas Department of Criminal Justice (TDCJ) for negligence. The TDCJ argued it had no notice of the claim because its investigation revealed that the accident was Plaintiff's fault and it had no actual notice that it caused the injury.

The TDCJ appealed from the trial court's denial of its plea to the jurisdiction based on its assertion that it did not have actual notice of Plaintiff's claim within 6 months, as required by the Texas Tort Claims Act. The formal written notice requirement of the Act does not apply if the governmental unit has actual notice of the claim against it. The Beaumont Court was concerned only with the TDCJ's realization of its possible culpability, i.e., whether it realized that it could be accused of negligence arising from the accident. The court concluded that the TDCJ had actual notice of Plaintiff's claim under the Texas Tort Claims Act

12. Dept. of Mental Health and Retardation v. Rodriquez, 63 S.W.3d 475 (Tex. App. –San

The Court of Appeals refused to adopt the "ultimate employment decisions" test for use in whistleblower cases. The Court held that the Whistleblower Act includes lesser acts of retaliation, such as reprimands and warnings, when it prohibits retaliatory "personnel action." Therefore, an employer’s reprimand, poor evaluation and transfer, are all actions that could be the basis for a lawsuit if motivated by retaliatory intent.

An EEOC complaint need not be verified to be considered a "charge" for limitations purposes.

In this unanimous decision, the U.S. Supreme Court held that employers may deny a job to disabled workers who face serious risks to their own health and safety.

Employer terminated employee, who suffered a miscarriage and missed more than three days of work during the employee’s 90 day probationary period. The employer’s policy did not distinguish between pregnancy absences and non-pregnancy absences. Court held pregnant employee was not entitled to preferential medical leave.

4. Green v. Administration of Tulane Educational Fund, 284 F.3d 642 (5th Cir.2002).

Employee was not entitled to punitive damages because employer showed good faith effort to comply with Title VII.

5. Davis v. Educational Serv. Ctr., 62 S.W.3d 890 (Tex. App.–Texarkana 2001, no pet.)

Employee filed a charge of discrimination with the EEOC and the TCHR. Later she brought a retaliation suit against her employer. Employee did not file a complaint with the EEOC or the TCHR regarding her retaliation claim. Court held that employee failed to exhaust her administrative remedies with regard to her retaliation claim.

6. City of Houston v. Fletcher, 63 S.W.3d 920 (Tex. App. –Houston [14th Dist.] 2002, no pet.)

A person claiming employment discrimination must exhaust all administrative remedies prior to bringing a civil action in the district court. Exhaustion occurs when the complainant files a timely charge with the commission and waits 181 days to file suit. An employee need not request a right to sue letter from the TCHR prior to filing suit.

7. Supreme Beef Packers Inc. v. Maddox, 67 S.W.3d 453 (Tex. App. –Texarkana 2002, pet. filed).

OSHA regulations that require employer to exercise judgment and discretion when determining what measures are possible and practicable to achieve the desirable goal of dry working conditions did not establish mandatory standard of conduct, the violation of which would be negligence per se.

1. Bd. of Educ. of Indep. Sch. Dist. No 92 of Pottawatomie County v. Earls, 122 S.Ct. 2559 (2002)

A school district policy, requiring students participating in extracurricular activities to consent to drug testing, reasonably furthers the district’s important interest in preventing and deterring drug use by students, and does not violate the Fourth Amendment.

A program giving educational choices and aid to certain students attending both religious and non-religious public and private schools, enacted for the valid secular purpose of providing educational assistance to poor children, is one of true "private choice" and does not offend the First Amendment’s Establishment Clause.

3. Vela v. Waco Ind. Sch. Dist., 69 S.W.3d 695, (Tex. App.–Waco 2002, pet. filed)

School principal who was terminated filed a charge with the EEOC and TCHR. After the TCHR issued a right to sue letter, employee filed suit. The court held that the employee was not also required to exhaust administrative remedies under the education code.

1. Wal-Mart Stores, Inc. v. Reece, 45 Tex. Sup. Ct. J. 863, 2002 WL 1338068 (Tex. 2002)

In a premises action, the Plaintiff must offer some evidence of the length of time that a dangerous condition has existed before holding the premises owner liable.

Reece, a Wal-Mart customer, purchased food at the store's snack bar. Before leaving the snack bar area, Reece slipped and fell on a puddle of clear liquid. Shortly before Reece fell, a Wal-Mart employee walked by the area and did not see the liquid but returned to the area and noticed the spill immediately after Reece fell. Reece offered no evidence of the origin of the liquid or how long it had been there. The trial court rendered judgment for Reese, and the Court of Appeals affirmed. The Supreme Court, however, reversed, holding that the plaintiff in a premises liability slip and fall case must offer some proof of how long the hazard had been in place before holding the premises owner liable for failing to discover and rectify or warn of the dangerous condition.

2. Beach Bait & Tackle, Inc. v. Bull, 2002 WL 1283882 (Tex.App. --San Antonio 2002, no pet. h.)

Evidence that a dangerous condition was created by a leaking roof and that the owner was aware of some of the leaks is sufficient evidence that the owner had actual or constructive knowledge of the condition which lead to plaintiff’s injury, although the owner disputed knowledge of the specific leak leading to the injury.

Bull, an employee of Beach Bait, fell and injured her ankle while walking to the back of the storeroom to use a time clock. While there was a great deal of testimony regarding water leaking into the building after rains, there was also some dispute as to whether anyone had seen water located at the place where Bull fell. The jury found Beach Bait liable for the premises condition, and Beach Bait appealed. The Court of Appeals affirmed the trial court's judgment and held that the owner’s knowledge that water leaked into the building and collected at various places was sufficient to put Beach Bait on notice of the condition that caused Bull's injury.

3. Wal-Mart Stores, Inc. v. Chavez, 2002 WL 864275 (Tex.App. --San Antonio 2002, no pet. h.) (Opinion not released for publication and is subject to withdrawal).

In addition to proving a dangerous condition exists on the premises, the Plaintiff in a premises liability case must show that the premises owner did not exercise reasonable care in attempting to remedy the condition.

Chavez, a Wal-Mart customer, slipped and fell in Wal-Mart due to spilled cooking oil. Almost immediately after Chavez fell, a Wal-Mart employee, who was coming to the area to clean up the spill reported by another customer, arrived. The employee had been on another aisle of the store cleaning up a separate spill with another employee, and took, in his words, 10 to 15 seconds to get to the area where Chavez slipped. The trial court granted a judgment in favor of Chavez, but the Court of Appeals reversed, holding that while Wal-Mart had actual notice of the condition that caused Chavez's injury, the evidence was legally insufficient to show that Wal-Mart did not exercise reasonable care to reduce or eliminate the risk of harm.

1. Compaq Computer Corp. v. LaPray, No. 09-01-368-CV, 2002 WL 1339905 (Tex. App.-- Beaumont, June 20, 2002, no pet. h.).

Appeals court upholds certification of class of purchasers of Compaq computers with allegedly defective floppy disc controllers.

Plaintiffs brought suit against Compaq alleging the floppy disc controller in their computers was defective. Their causes of action were declaratory judgment, breach of contract, and breach of warranty. The class was certified under Texas Rule of Civil Procedure 42(b)(2), the rule dealing with declaratory relief. Specifically, 42(b)(2) allows certification if a Defendant has acted or refused to act on grounds generally applicable to the class making appropriate final injunctive relief or declaratory relief appropriate. Compaq argued that Texas law prohibited bringing a declaratory judgment action to settle issues and rights of all parties in a pending suit. The court found that the cases Compaq cited were unpersuasive.

Compaq also argued that the certification contravened Texas’ prohibition on rendering advisory opinions and piece meal litigation. The court found that conducting a class action by itself does not render a declaratory judgment an advisory opinion where it will result in piece meal litigation. Id. at *3. Finally, the court found that this case was somewhat distinguishable in that damages were not the only relief that Plaintiffs sought. First, the Plaintiffs in this case were seeking relief under the warranty to repair, replace or refund the floppy disc control. Damages were only sought in the event of a breach of this warranty. Here, in addition, the warranty expressly excluded seeking relief by way of damages. Finally, on the 42(b)(2) ground, Compaq claims that there was a failure to show that Compaq had acted or refused to act on grounds generally applicable to the class. However, the trial court found that Compaq had denied its floppy disk controller was defective and that class members were entitled to any remedies. In sum, there were sufficient findings to support a record that Compaq had acted or refused to act on grounds generally applicable to the class.

TRIAL PLAN. Significantly, this appears to be one of the few cases addressing a trial plan’s sufficiency pursuant to the requirements of the Bernal case. Compaq contended that the trial plan here precluded it from presenting individual defenses. Disappointingly, the opinion does not go into the specifics of the trial plan. It merely states that the trial court’s order thoroughly addresses each issue Compaq claims it is entitled to contest individually and finds otherwise and therefore there was no abuse of discretion on this point.

ADEQUACY OF REPRESENTATION. The court concluded that the class representatives need not understand why the class had dropped certain claims or fully comprehend legal terms and theories to be adequate. It, moreover, concluded that qualifications and experience of class counsel were of greater consequence then knowledge of class representatives. Id. at *10. Specifically, although certain claims were abandoned by the class, class members had the ability to opt-out.

2. Samuelson v. United Healthcare of Texas, Inc., No. 2-01-407-CV, 2002 WL 1291832 (Tex. App. -- Fort Worth, June 13, 2002, no pet. h.).

Appellate court affirms denial of class certification in breach of contract case.

In this case a class of healthcare providers brought suit against United Healthcare after they signed a physician contract setting forth a fee schedule. United Healthcare made a unilateral change in the contract which allowed providers only the lesser of 80% of their actual charge or the revised fee schedule amount. The contract did, however, allow United Healthcare to unilaterally change the fee schedule. In spite of that, the class brought a suit for breach of contract. The trial court denied class certification and the appellate court upheld that denial. Specifically, the trial court (after two days of evidence and making 101 findings of fact), found Rule 42(b)(4) was not satisfied. In part, the predominance requirement was not met because non-common issues such as whether each class member received a notice of the change of fee schedule, whether each class member rejected or accepted the notice, and whether each class member suffered any damage or benefit were all atypical issues. Moreover, the court stated that only a detailed claim-by-claim analysis could accurately calculate damages because there was no class-wide actuarial method of calculating damages. That was in part due to different factors affecting each healthcare provider.

The court found that Samuelson was not an adequate representative because he was a relatively low volume provider whose claim history was not representative of the majority of physicians in United Healthcare’s network.

The court also heard evidence with regard to Rule 42(b)(4) requirements from Professor Charles Silver for the plaintiffs and Professor Linda Mullenix for the defendants. The trial court found that Professor Mullenix made a thorough review and convincingly opined that the few common issues would be overcome by individual facts.

3. In the Matter of Bridgestone/Firestone, Inc., No. 02-1437, 2002 WL 831990 (7th Cir. May 2, 2002).

Seventh Circuit reverses certification of buyers of Ford Explorers equipped with faulty tires.

In this class action, the U.S. District Court for the Southern District of Indiana certified a nationwide class of SUV owners and lessees, and tire owners and lessees. The class was comprised of those that had bought SUVs that were equipped with tires that had abnormally high failure rates but which had not experienced tire failure. The class sued under breach of warranty and consumer fraud theories, seeking to recover for risk of failure.

On appeal the Seventh Circuit reversed, holding that under Indiana choice of law principles the 50 states in which the SUVs were purchased would apply rather than only the law of the state where the SUV's were manufactured. Therefore, the commonality and superiority elements were not met; specifically the court cited to previous Seventh Circuit decisions holding that similar cases involving warranty, fraud, or products-liability suits could not proceed as nationwide classes.

Perhaps most notably, the Seventh Circuit went one step further and held that the case was not manageable as a class action even on a statewide basis. Id. at *3. The court’s ruling anticipated that its decision would be followed by a multitude of state-based class actions and pointed out that even if class actions were limited to one state, there were several case-specific questions to each claim. For example, the tires were recalled at different times, some SUVs were resold and others were not, some owners may have been advised to over or under inflate their tires, and temperature and mileage were other factors to be considered.

If you have any questions about any of these cases or would like copies of specific cases, please contact Mark Dyer ( ) , Tom Brandt ( ) or Robert Fugate ( ).

The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

Copyright © by Fanning Harper & Martinson P.C.. All rights reserved. You may reproduce materials available at this site for your own personal use and for non-commercial distribution. All copies must include this copyright statement.

This FirmSite® is designed and hosted by FindLaw®, a service of West Group, Eagan, Minnesota.