TWO YEARS from date of substantial completion of the Work.
This warranty is valid only for those named above while they occupy the address below and provided normal cleaning and maintenance procedures are followed, and excludes changes due to wear, tear, normal weathering and defects that result from characteristics common to the materials used. Other limitations apply as indicated on the back of this document. By signing below you declare you have read the reverse side and both understand and accept these limitations.
Any guarantees, warranties, understandings, or representations made by (or expressed by) any employee, subcontractor or supplier not set forth specifically in this document is NOT to be considered an extension of this warranty.
Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.
For the Fifth Circuit__________________________________________
No. 98-60224
Summary Calendar
_________________________________________
SANDRA F. WALKER
Plaintiff – Appellant,
VERSUS WAL-MART STORES, INC.
Defendant – Appellees.
__________________________________________
On Appeal from the United States District Court for the Southern District of Mississippi
__________________________________________
November 18, 1998
Before REYNALDO G. GARZA, JOLLY, and WIENER, Circuit Judges.
PER CURIAM:
FACTUAL AND PROCEDURAL BACKGROUND
In January of 1990, Sandra Walker (“Walker”) was employed by Wal-Mart Stores Inc. and was a member of the Wal-Mart Associates Group Health Plan (“the Plan”), which provided Walker with medical and dental benefits. The Plan is governed by the Employee Retirement Income Security Act (“ERISA”).
Beginning January 18, 1990, through January 25, 1990, Walker underwent dental treatment by Dr. Van R. Simmons, a dentist in Mississippi. On January 7, 1992, Walker initiated a malpractice action in state court against Dr. Simmons for dental malpractice. She alleged that he propped her mouth open excessively, thus causing her to undergo three inpatient surgeries for repair of her right and left temporomandibular joints.
Walker’s medical expenses totaled $41,598.59 and were paid by the Plan. On June 19, 1996, Walker agreed to release Dr. Simmons of all claims in exchange for a settlement agreement of $12,500.
On December 13, 1996, Walker instituted a declaratory judgment action in the Circuit Court of Pike County, Mississippi. Walker argued that she was entitled to the whole of the settlement proceeds received in the underlying malpractice action. On January 21, 1997, the Plan removed the case to federal court on the basis of federal question jurisdiction.
On March 31, 1998, the United States District Court for the Southern District of Mississippi granted the Plan’s Motion for Summary Judgment and ordered the entirety of the $12,500 be paid to the Plan as reimbursement for its medical expenses. Walker appealed the lower court’s decision.
II. STANDARD OF REVIEW
In Firestone Tire and Rubber Co. v. Bruch , 489 U.S. 101, 115 (1989), the Supreme Court established that courts must apply a de novo standard of review in actions brought by ERISA plan participants who challenge the denial of benefits. However, if the plan vests the plan administrator with discretionary authority to make eligibility determinations or construe the plan’s terms, the appropriate standard of review is for abuse of discretion. Id .
This Court has held Bruch’s principles applicable not only to benefit determinations brought by plan participants, but also to plans’ assertions of purported reimbursement and subrogation rights. Sunbeam-Oster Company, Inc. Group Benefits Plan for Salaried and Non-Bargaining Hourly Employees v. Whitehurst , 102 F.3d 1368, 1373 (5th Cir. 1991). In Whitehurst , we applied a de novo standard of review because the parties agreed that the administrator had not been vested with discretionary authority to interpret the Plan at the time of the plaintiff’s injuries. Id . Had we found that the administrator had possessed discretionary authority at the time of the injury, the appropriate standard of review would have been for abuse of discretion.
Like in Whitehurst , the Plan herein is asserting its reimbursement and subrogation rights over the plaintiff’s monetary recoveries from the tortfeasor. In this case, however, the issue on whether the administrator was vested with discretionary authority has not been settled and we must look at the Plan’s language to determine if any of its provisions vested the administrator with such authority. The relevant provision, for determining this issue, reads as follows:
The PLAN herein expressly gives the ADMINISTRATIVE COMMITTEE discretionary authority to resolve all questions concerning the administration, interpretation or application of the PLAN, including without limitation, discretionary authority to determine eligibility for benefits or to construe the terms of the PLAN in conducting the review of the appeal. . . .
This provision clearly vested the Administrative Committee with the discretionary authority to interpret the terms of the Plan, therefore, the proper standard of review in this case is for abuse of discretion.
III. DISCUSSION
There are two issues presented in this case. First, whether the Plan’s language unambiguously speaks to this dispute and sufficiently provides for the distribution of settlement proceeds of the type paid in this case. Second, whether the plaintiff’s attorney is entitled to deduct his fees and expenses prior to the Plan being reimbursed under his own reimbursement contract with the plaintiff.
Walker’s argument, for right of possession over the settlement money, is three-fold. First, she argues that the Plan chose not to participate or finance the lawsuit and should therefore be barred from recovering any of the settlement money. Second, Walker maintains that the language of the Plan never contemplated partial recovery by a participant nor did it ever consider the issue of attorneys’ fees. Third, Walker contends that there is no proof that the settlement sum paid was a result of any malpractice by the tortfeasor and therefore the reimbursement provision does not apply.
The Plan argues that it is entitled to the right of subrogation and recovery of all amounts paid. The Plan points out that it expended $41,498.59 for Walker’s medical treatment and that the plain language of the Plan gives it the right to recover benefits that it has previously paid to the extent of any payments resulting from settlement, regardless of how the parties chose to designate those payments.
The Plan asserts that the relevant provisions are unambiguous. Walker, however, claims that they are insufficient for determining the distribution of the settlement proceeds. The provisions read as follows:
The PLAN shall have the right to reduce benefits otherwise payable by the PLAN or recover benefits previously paid by the PLAN to the extent of any and all of the following:
A. Any payments resulting from a judgement orsettlement, or other payment or payments,made or to be made by any person or personsconsidered responsible for the conditiongiving rise to the medical expense or bytheir insurers, regardless of whether the payment is designated as payment for suchdamages including, but no limited [,] to painand/or suffering, loss of income, medical benefits or any other specified damages; orany other damages made or to be made by anyperson . . .
Congress expressly intended for ERISA Plans to be “written in a manner calculated to be understood by the average plan participant,” and need only be “sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan. Title 29 U.S.C. § 1022(a)(1). In light of this statute, we have previously held that ERISA plans should not be held to the same standard that an insurance contract purchased in an open market is held to. Jones v. Georgia Pacific Corp. , 90 F.3d 114, 116 (5th Cir. 1996). Such a contract is purposefully drafted with greater particularity because courts usually construe plan terms strictly in favor of the insured. ERISA, on the other hand, expressly guards against boilerplate language in its plans and we must therefore interpret ERISA plans’ provisions as they are likely to be “understood by the average plan participant,” consistent with ERISA’s statutory drafting requirements.
We hold that the Plan’s language is unambiguous and that the administrators’ interpretation of the Plan did not constitute an abuse of discretion. We agree with the district court in holding that the “any and all” language plainly means the first dollar of recovery (any) and 100% recovery (all) of the funds received by the plaintiff in the settlement, up to full amount of the benefits paid. The Plan’s unambiguous language does not include a provision for reduction of its subrogation lien for payment of attorneys’ fees or costs. Interpreting the provisions to provide for attorneys’ fees and expenses would have been wholly improper by the district court. Furthermore, the fact that the provisions do not specifically mention attorneys’ fees or set out detailed distribution procedures, does not constitute silence or ambiguity on behalf of the Plan. Whitehurst , 102 F.3d at 1375. This Court has firmly held that an ERISA plan should not be penalized for lack of technical precision or verbosity by labeling the Plan “silent” or “ambiguous” when it is simply using the direct language mandated by ERISA. Id .
IV. CONCLUSION
In sum, we conclude that the administrator’s interpretation of the plan was legally correct and that the language of the Plan’s subrogation and reimbursement provisions are clear and unambiguous. Furthermore, in the absence of any expressly selected alternative standard, the Plan Priority norm vested the Plan with unconditional reimbursement for the full amount of the medical benefits paid to Walker. Therefore, her attorneys are not entitled to deduct their fees or expenses.
We find that there was no abuse of discretion by the Administrative Committee and AFFIRM the district court’s decision to grant the Plan’s Motion for Summary Judgment.
Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.
Tutle Trucking v EOG Resources, Inc.Court of Appeals of Texas, Waco.Opinion delivered and filed November 15, 2012
From the 18th District Court Johnson County, Texas Trial Court No. C2010–0679
Before Chief Justice Gray, Justice Davis, and Justice Scoggins
(Chief Justice Gray dissenting)
REX D. DAVIS Justice
O P I N I O N
In one issue, Appellant Tutle & Tutle Trucking, Inc. complains about a summary judgment granted in favor of Appellee EOG Resources, Inc. In its summary-judgment order, the trial court concluded that, based on language contained in a Master Services Contract (MSC) between Tutle and EOG, Tutle owes duties to defend and indemnify EOG and its contractor, Frac Source Services, Inc., in the underlying personal-injury lawsuit. We will affirm.
I. BACKGROUND
This dispute arose after Archie Henderson, a Tutle employee, sued Tutle and Frac Source to recover damages for injuries that he allegedly sustained on the job. FN1 Henderson alleged:
FN1. In its summary-judgment motion, Tutle acknowledged that Henderson works for Tutle and that the injuries were suffered while working on the project as an employee for Tutle, though the project was supervised by EOG.
On or about September 5, 2007, Plaintiff ARCHIE HENDERSON, an employee of Defendant TUTLE & TUTLE, was, in the course and scope of his employment, assisting FRAC SOURCE personal [sic] unloading sand from a FRAC SOURCE “Sand King” to a truck. The Sand King being used as [sic] the time of the incident was owned, operated, and controlled by Defendant FRAC SOURCE. As Plaintiff was assisting with unloading sand from the Sand King and as FRAC SOURCE personnel operated the Sand King, Plaintiff HENDERSON was struck by a falling conveyor that was part of the Sand King. This incident caused Plaintiff HENDERSON to suffer severe and permanent head, shoulder, and back injuries. Upon information and belief, Defendant FRAC SOURCE had modified or removed a safety device from the Sand King, thus rendering the equipment unreasonably dangerous. In addition, Defendant FRAC SOURCE employees failed to properly utilize the Sand King conveyor’s secondary safety system.
After learning that it was sued in the Henderson suit, Frac Source made a demand on EOG to defend and indemnify it under a separate master service contract between EOG and Frac Source. EOG then made a demand on Tutle for defense and indemnity in the Henderson suit, even though Henderson did not sue EOG.
In asserting that Tutle has a duty to defend and indemnify it, EOG relied on several provisions contained in the MSC. Those relevant provisions are:
6A. CONTRACTOR [Tutle] AGREES TO PROTECT, DEFEND, INDEMNIFY AND HOLD COMPANY [EOG], ITS PARENT, SUBSIDIARY AND AFFILIATED COMPANIES AND ITS AND THEIR CO–LESSEES, PARTNERS, JOINT VENTURERS, CO–OWNERS, AGENTS, OFFICERS, DIRECTORS AND EMPLOYEES (HEREINAFTER COLLECTIVELY REFERRED TO AS “COMPANY GROUP”) HARMLESS FROM AND AGAINST ALL DAMAGE, LOSS, LIABILITY, CLAIMS, DEMANDS AND CAUSES OF ACTION OF EVERY KIND AND CHARACTER, INCLUDING COSTS OF LITIGATION, ATTORNEYS’ FEES AND REASONABLE EXPENSES IN CONNECTION THEREWITH, WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF, INCLUDING BUT NOT LIMITED TO STRICT LIABILITY OR THE UNSEAWORTHINESS OR UNAIRWORTHINESS OF ANY VESSEL OR CRAFT, OR THE NEGLIGENCE OF ANY PARTY, INCLUDING BUT NOT LIMITED TO THE SOLE OR CONCURRENT NEGLIGENCE OF THE COMPANY GROUP, ARISING IN CONNECTION HEREWITH IN FAVOR OF CONTRACTOR’S AGENTS, INVITEES AND EMPLOYEES, AND CONTRACTOR’S SUBCONTRACTORS AND THEIR AGENTS, INVITEES AND EMPLOYEES ON ACCOUNT OF DAMAGE TO THEIR PROPERTY OR ON ACCOUNT OF BODILY INJURY OR DEATH.
6B. COMPANY AGREES TO PROTECT, DEFEND, INDEMNIFY AND HOLD CONTRACTOR, ITS AGENTS, OFFICERS, DIRECTORS AND EMPLOYEES (HEREINAFTER COLLECTIVELY REFERRED TO AS “CONTRACTOR GROUP”) HARMLESS FROM AND AGAINST ALL DAMAGE, LOSS, LIABILITY, CLAIMS, DEMANDS AND CAUSES OF ACTION OF EVERY KIND AND CHARACTER, INCLUDING COSTS OF LITIGATION, ATTORNEYS’ FEES AND REASONABLE EXPENSES IN CONNECTION THEREWITH, WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF, INCLUDING BUT NOT LIMITED TO STRICT LIABILITY OR THE UNSEAWORTHINESS OR UNAIRWORTHINESS OF ANY VESSEL OR CRAFT, OR THE NELIGENCE OF ANY PARTY, INCLUDING BUT NOT LIMITED TO THE SOLE OR CONCURRENT NEGLIGENCE OF THE CONTRACTOR GROUP, ARISING IN CONNECTION HEREWITH IN FAVOR OF COMPANY’S AGENTS, INVITEES AND EMPLOYEES, COMPANY’S CONTRACTORS (OTHER THAN CONTRACTOR) AND THEIR AGENTS, INVITEES AND EMPLOYEES, AND SUCH CONTRACTORS’ SUBCONTRACTORS, OR THEIR AGENTS, INVITEES OR EMPLOYEES ON ACCOUNT OF DAMAGE TO THEIR PROPERTY OR ON ACCOUNT OF BODILY INJURY OR DEATH.
The language contained in paragraphs 6A and 6B of the MSC between EOG and Tutle is set forth in all capital letters and in an apparently slightly larger font than the rest of the contract. Another relevant provision of the MSC—paragraph 6E—was not capitalized or differentiated using an apparently larger font. Paragraph 6E provides:
6E. The terms and provisions of this Paragraph 6 shall have no application to claims or causes of action asserted against Company or Contractor by reason of any agreement of indemnity with a person or entity not a party to this Agreement in those instances where such contractual indemnities are not related to or ancillary to the performance of the work contemplated under the Agreement or are indemnities uncommon to the industry. The terms and provisions of this Paragraph 6 shall expressly apply to claims or causes of action asserted against Company or Contractor by reason of any agreement of indemnity with a person or entity not a party to this Contract where such contractual indemnities are related to or ancillary to the performance of the work contemplated under the Agreement and or Company’s project and are indemnities not uncommon in the industry.
When demanding that Tutle defend and indemnify it in the Henderson suit, EOG relied on paragraphs 6A and 6E of the MSC.
After receiving EOG’s demands for defense and indemnity, Tutle filed a declaratory-judgment action against EOG, Frac Source, and Tutle’s insurer, Carolina Casualty Company, seeking a declaration that Tutle owed no defense or indemnity obligation to EOG in the Henderson suit. In the alternative, Tutle sought a declaration that Tutle’s insurance policy with Carolina covered any indemnity obligation that Tutle owed to EOG as an “insured contract.” EOG counterclaimed for a declaratory judgment that it was entitled to defense and indemnity from Tutle in the Henderson suit based on the MSC and because Henderson was an employee of Tutle who was furnishing services to EOG at the time of the accident. EOG also made a demand upon Tutle for indemnity that EOG owes to Frac Source under the “pass through” provision (paragraph 6E) of the MSC. In addition, EOG sought a declaration that Carolina owed a duty to EOG as its primary liability policy as a matter of law.
EOG moved for partial summary judgment, arguing that: (1) Tutle breached its contract with EOG; (2) Carolina had a contractual obligation to provide a defense and indemnity to EOG and Frac Source with regard to the claims asserted in the Henderson suit; (3) Tutle had a contractual obligation to provide a defense and indemnify EOG and Frac Source with regard to the claims asserted in the Henderson suit; and (4) Tutle and/or Carolina have a contractual obligation “to pay all costs, expenses, and reasonable attorney’s fees incurred by or on behalf of EOG/Frac Source in the defense of the Underlying Lawsuit from at least April 2, 2008 through the present date and for all such future costs, expenses, and attorney’s fees.”
Tutle filed its own motion for summary judgment, asserting that, as a matter of law, it owed no contractual duty to defend or indemnify Frac Source under the MSC because the applicable provisions did not satisfy Texas law’s “fair-notice” requirements—the express-negligence test and conspicuousness. Tutle also contended that it did not owe a duty to defend or indemnify EOG under the MSC for obligations that EOG owed to Frac Source in the Henderson suit.
The trial court denied Tutle’s motion and granted EOG’s motion. In granting EOG’s motion, the trial court specifically declared that Tutle: (1) breached the MSC it had with EOG; (2) has a contractual duty to defend and to indemnify EOG and Frac Source in the underlying Henderson suit; and (3) owes EOG reimbursement for all defense costs, expenses, and indemnity incurred in the Henderson suit. Thereafter, the trial court granted EOG’s motion to sever all claims brought against EOG into a separate cause number, and this appeal followed.
II. STANDARD OF REVIEW
We review the grant or denial of a traditional motion for summary judgment de novo. See Creditwatch, Inc. v. Jackson, 157 S.W.3d 814, 816 n.7 (Tex.2005). To be entitled to summary judgment, the movant must demonstrate that no genuine issues of material fact exist and that it is entitled to judgment as a matter of law. See TEX.R. CIV. P. 166a(c); Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex.1997). When both parties move for summary judgment and the trial court grants one motion and denies the other, we review the summary-judgment evidence presented by both sides, determine all questions presented, and render the judgment the trial court should have rendered. Tex. Workers’ Compensation Comm’n v. Patient Advocates of Tex., 136 S.W.3d 643, 648 (Tex.2004).
III. THE FAIR–NOTICE DOCTRINE
In its sole issue, Tutle contends that the trial court erred in granting summary judgment in favor of EOG because the provisions in the MSC that EOG relies on do not meet the fair-notice requirements established by the Texas Supreme Court for interpreting the validity and enforceability of a contractual-indemnity obligation. And, because the MSC provisions allegedly do not meet the fair-notice requirements, Tutle asserts that the trial court erred in concluding that Tutle breached the contract and owes EOG and Frac Source duties to defend and indemnify them in the underlying Henderson suit. EOG counters that the provisions meet the fair-notice requirements and that Tutle judicially admitted that they did in the trial court.
Indemnity provisions are valid and enforceable if they satisfy two fair-notice requirements. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex.1993); see Storage & Processors, Inc. v. Reyes, 134 S.W.3d 190, 192 (Tex.2003). One fair-notice requirement, the express-negligence doctrine, requires that the intent of the parties be specifically stated within the four corners of the document. Reyes, 134 S.W.3d at 192; see Dresser, 853 S.W.2d at 508 (noting that, under express-negligence doctrine, a party’s intent to be released from all liability caused by its own future negligence must be expressed in unambiguous terms within contract’s four corners).
The other requirement, conspicuousness, requires that something appear on the face of the contract to attract the attention of the person looking at it. Reyes, 134 S.W.3d at 192. Language may satisfy the conspicuousness requirement by appearing in larger type, contrasting colors, or otherwise calling attention to itself. Id. The purpose of the conspicuousness requirement is to protect the buyer from surprise and an unknowing waiver of his or her rights. Littlefield v. Schaefer, 955 S.W.2d 272, 275 (Tex.1997). Whether an agreement meets the conspicuousness requirement is a question of law. Dresser, 853 S.W.2d at 509.
Indemnity agreements are construed under the normal rules of contract construction. Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex.2000). The primary goal is to determine the parties’ intent. Id.
A. Conspicuousness
On appeal, Tutle complains that paragraph 6—the section of the MSC at issue in this case—is not conspicuous as a matter of law. To analyze this complaint, we must examine the entire MSC. It provides that Tutle was a contractor on EOG’s project. Paragraphs 6A and 6B, as shown above, outline the parties’ duties to defend and indemnify “AGAINST ALL DAMAGE, LOSS, LIABILITY, CLAIMS, DEMANDS AND CAUSES OF ACTION OF EVERY KIND AND CHARACTER, INCLUDING COSTS OF LITIGATION, ATTORNEYS’ FEES AND REASONABLE EXPENSES IN CONNECTION THEREWITH….” Compared to the remainder of the MSC, the language in paragraphs 6A and 6B is capitalized and appears to be a larger font size. Paragraph 6, however, contains three additional sections that further clarify the indemnity provisions. In demanding that Tutle defend and indemnify EOG regarding Frac Source’s alleged liability, EOG relies heavily on paragraph 6E. This paragraph is not capitalized, and the font size is similar to the remainder of the MSC, though the numbering for it—6E—and its location in the MSC indicate that its purpose is to clarify the duties outlined in paragraph 6. Tutle admits that paragraphs 6A and 6B are conspicuous, but it argues that paragraph 6E, the “pass through” provision, is not conspicuous. FN2
FN2. EOG asserts that Tutle waived its conspicuousness argument with respect to paragraph 6E. We disagree. A review of Tutle’s motion for summary judgment shows that Tutle argued that paragraph is inconspicuous because the font is not bolded, capitalized, or otherwise written in such a way “that would capture the attention of a reasonable person.”
Although the Business and Commerce Code defines “conspicuous” to include language in which both the heading and text are in larger or contrasting type, it does not require both the heading and the text to be in larger or contrasting type. See TEX. BUS. & COMM.CODE ANN. § 1.201(10) (West 2009). Further, the Business and Commerce Code specifically provides that a contractual provision is “conspicuous” if it is written, displayed, or presented in such a way that a reasonable person ought to have noticed it. See id. Case law echoes that statute. See Reyes, 134 S.W.3d at 192; Dresser, 853 S.W.2d at 509, 511; see also Sydlik v. REEIII, Inc., 195 S.W.3d 329, 332–33 (Tex.App.—Houston [14th Dist.] 2006, no pet.).
We conclude that paragraph 6E is sufficiently conspicuous to provide fair notice. The numbering for the “pass through” provision is capitalized and is different from other provisions in the MSC. And, perhaps more importantly, the location of paragraph 6E, being numerically linked to paragraphs 6A and 6B, is such that a reasonable person ought to have noticed it. Paragraph 6E is not buried within the contract or located away from paragraphs 6A and 6B, which establish the defense and indemnification duties. In fact, paragraph 6E is on the same page as the last couple of lines of paragraph 6B, which, as stated earlier, is written in all-capital letters and in apparently slightly larger font. It is not the case that the complained-of language appeared in small, light type on the back of a form and was surrounded by unrelated terms. See, e.g., Dana Corp. v. Microtherm, Inc., No. 13–05–00281–CV, 2010 WL 196939, at *6–7 (Tex.App.—Corpus Christi Jan. 21, 2010, pet. granted, judgm’t vacated w.r.m.) (mem.op.) (concluding that liability-limiting provision was inconspicuous because statement on front of document, “REFER TO REVERSE SIDE FOR TERMS AND CONDITIONS OF SALE,” does not suggest liability-limiting provision was on reverse side); Am. Home Shield Corp. v. Lahorgue, 201 S.W.3d 181, 185 (Tex.App.—Dallas 2006, pet. denied) (concluding that indemnity provision was not conspicuous because it appeared “on the back of the contract in a series of numbered, uniformly printed and spaced paragraphs without headings or contrasting type”); Safway Scaffold Co. v. Safway Steel Prod., Inc., 570 S.W.2d 225, 228 (Tex.Civ.App.—Houston [1st Dist.] 1978, writ ref’d n.r.e.) (determining that indemnity provisions were not conspicuous because they were located on back of document among series of numbered paragraphs without headings or contrasting type and not specifically identified as indemnity provisions on front of document); see also Enserch Corp. v. Parker, 794 S.W.2d 2, 9 (Tex.1990) (concluding that indemnity provision was sufficiently conspicuous to afford fair notice of its existence when entire contract appeared on one page and language was on front side of contract, not hidden under separate heading or surrounded by unrelated terms). Accordingly, we reject Tutle’s assertion that paragraphs 6A–6E do not satisfy the conspicuousness requirement.
B. The Express–Negligence Doctrine
Tutle also argues that paragraphs 6A and 6E fail to meet the express-negligence test and thus do not obligate Tutle to indemnify EOG for EOG’s contractual obligation to indemnify Frac Source. Specifically, Tutle asserts that paragraph 6E “is vague, ambiguous, and if enforced, violates the express [-]negligence test where there is nothing within [p]aragraph 6E that indicates that Frac Source is seeking to be indemnified by Tutle from the consequences of its own negligence.” EOG counters that the express-negligence doctrine does not apply when an indemnitee does not seek indemnity for its own negligence and that the “pass through” indemnity provision in paragraph 6E is neither vague nor ambiguous.
As stated earlier, the express-negligence test states that if a party intends to be released from its own future negligence, it must express that intent in clear, unambiguous terms within the four corners of the contract. Reyes, 134 S.W.3d at 192; Sydlik, 195 S.W.3d at 333. The purpose of “the express [-]negligence rule is to require scriveners to make it clear when the intent of the parties is to exculpate” a party for that party’s own negligence. Quintana v. Crossfit Dallas, L.L.C., 347 S.W.3d 445, 450 (Tex.App.—Dallas 2011, no pet.) (quoting Atl. Richfield Co. v. Petroleum Personnel, Inc., 768 S.W.2d 724, 726 (Tex.1989)).
Several courts, however, have stated that the express-negligence doctrine does not apply when an indemnitee, such as EOG here, does not seek indemnity for its own negligence. See Paragon Gen. Contractors, Inc. v. Larco Constr., Inc., 227 S.W.3d 876, 889 (Tex.App.—Dallas 2007, no pet.) (citing MAN GHH Logistics GMBH v. Emscor, Inc., 858 S.W.2d 41, 43 (Tex.App.—Houston [14th Dist.] 1993, no writ)); Transcon. Gas Pipeline Corp. v. Texaco, Inc., 35 S.W.3d 658, 669 (Tex.App.—Houston [1st Dist.] 2000, pet. denied). FN3 In this case, EOG seeks indemnity from Tutle for Frac Source’s alleged negligence. Thus, EOG argues that the express-negligence doctrine does not apply in this case.
FN3. In Transcontinental Gas Pipeline Corp. v. Texaco, Inc., the First Court of Appeals noted the following with respect to the express-negligence doctrine:
Transco asks this Court to expand the express[-]negligence doctrine to cover any indemnity provision that is ambiguous, despite the obvious refusal of our sister courts to expand the doctrine. The Texas Supreme Court declined to extend the express[-]negligence doctrine to an insurance-shifting provision. Getty Oil Co. v. Insurance Co. of N. Am., 845 S.W.2d 794, 806 (Tex.1992). More recently, the Texas Supreme Court held that the express-negligence doctrine applies to releases that relieve a party of its own negligence, but the court expressly limited its holding. Dresser Indust., Inc., 853 S.W.2d at 509. “It is important to note that our discussion … is limited solely to those types of releases which relieve a party in advance of liability for its own negligence.” Id. at 507. Furthermore, it is not extraordinary or unjust to shift the risk of economic damages resulting from a breach of contract, particularly when both parties are experienced contractors and familiar with industry customs regarding risk shifting. Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 387 (Tex.1997).
Tutle responds that paragraph 6E constitutes an extraordinary transfer of risk to which the express-negligence doctrine applies. See, e.g., Reyes, 134 S.W.3d at 193; Green Int’l v. Solis, 951 S.W.2d 384, 386 (Tex.1997) (“We held that such extraordinary risk-shifting clauses must meet certain fair notice requirements.”). Both parties acknowledge that there is scant Texas case law addressing the fair-notice requirements as it relates to a “pass through” provision such as the one in this case. Nevertheless, assuming that Tutle is correct, we do not believe that the language of the provision is vague and ambiguous as to violate the express-negligence doctrine.
In arguing that paragraph 6E is neither vague nor ambiguous, EOG relies heavily on EOG Resources, Inc. v. Badlands Power Fuels, L.L.C., 677 F.Supp.2d 1143 (D.N.D.2009). In this case, the North Dakota federal district court analyzed a “pass through” identical to the one in this case. Id. at 1146. Also, the facts in Badland Power Fuels are substantially similar.
EOG, the owner and operator of the Zacher Oil Well in Mountrail County, North Dakota, entered into identical master service contracts with its contractors, Petroleum Experience, B.O.S. Roustabout & Backhoe Service, Inc., and Badlands Power Fuels. Id. at 1145. The federal court included the relevant language of the master service contracts in its opinion, and the contracts are virtually identical to the MSC in this case. Id. at 1145–46. EOG’s contractors were performing a flow-back operation on the Zacher Oil Well. Id. at 1145. During this operation, a fire occurred and injured Badlands Power Fuels employee Ted Seidler and employees of another contractor. Id. Seidler sued, and Petroleum Experience and B.O.S. tendered their defenses and requested indemnification from EOG. Id. at 1146–47. Similar to the case at hand, EOG tendered its defense and request for indemnification to Badlands Power Fuels, the employer of the injured employee, arguing that the “pass through” provision in the master service contract (also paragraph 6E) required that Badlands Power Fuels defend and indemnify EOG in the Seidler suit. Id. After applying Texas law, the federal court granted EOG’s summary-judgment motion and held that “Badlands Power Fuels must also defend and indemnify EOG under paragraph 6E of its master service contract from claims that Petroleum Experience and BOS have made against EOG for the claims that Ted Seidler has made against them.” FN4 Id. at 1155.
FN4. We recognize that the federal court in Badlands Power Fuels did not analyze the “pass through” provision under the Texas fair-notice doctrine, but we are persuaded by the fact that the federal court, by granting summary judgment in favor of EOG and concluding that Badlands Power Fuels has a duty to defend and indemnify EOG under the “pass through” provision, implicitly concluded that the “pass through” provision was not vague or ambiguous. See 677 F.Supp.2d at 1155. Furthermore, the federal court’s ruling indicates that such a “pass through” provision is not uncommon in the oil and gas industry. See id.
Thus, at least one court has approved the “pass through” provision at issue. See id. Furthermore, we do not believe that the “pass through” indemnity provision of the MSC was required to have the specificity that Tutle suggests or else run the risk of being deemed vague and ambiguous. Tutle and EOG, both sophisticated business entities, entered into a contract in which Tutle agreed to defend and indemnify EOG under paragraph 6E, which required the duties of defense and indemnification with regard to non-parties to the MSC for claims or causes of action “related to or ancillary to the performance of the work contemplated under the Agreement and[/]or Company’s project and are indemnities not uncommon in the industry.” We conclude that the language of paragraph 6E is neither vague nor ambiguous.
As a final argument, Tutle asserts that EOG did not tender sufficient evidence demonstrating that the MSC is applicable to the facts of the Henderson suit. In particular, Tutle contends that the record contains no evidence indicating that Henderson was injured while “transporting dry bulk commodity,” as stated in the MSC. For several reasons, we disagree with Tutle’s interpretation.
First, the MSC states in paragraph 1:
This Agreement shall control and govern all work performed by Contractor for the Company, under subsequent verbal and/or regular work orders, and any agreements or stipulations in any such work order, delivery ticket, or other instrument used by Contractor not in conformity with the terms and provisions hereof shall be null and void.
Tutle judicially admitted in its summary-judgment motion that Henderson was injured while working for Tutle on EOG’s project.
Second, in making its argument that the MSC does not apply to Henderson’s injuries, Tutle relies on the recital in the MSC stating that Tutle is in the business of “transporting dry bulk commodity.” Texas courts have held that recitals in a contract will not control the operative clauses thereof unless the latter are ambiguous. See City of The Colony v. N. Tex. Mun. Water Dist., 272 S.W.3d 699, 722 (Tex.App.—Fort Worth 2008, pet. dism’d); see also Beckham Res., Inc. v. Mantle Res., L.L.C., No. 13–09–00083–CV, 2010 WL 672880, at *9 (Tex.App.—Corpus Christi Feb. 25, 2010, pet. denied) (mem.op.). Paragraph 1 is an operative clause describing the extent of the agreement, while the provision relied upon by Tutle merely describes Tutle’s business and its intent to work as an independent contractor for EOG from time to time. See, e.g., Enter. Leasing Co. v. Barrios, 156 S.W.3d 547, 549 (Tex.2004) ( “Although we recognize that in certain cases, courts may consider the title of a contract provision or section to interpret a contract, ‘the greater weight must be given to the operative contractual clauses of the agreement.’ ”) (quoting Neece v. A.A.A. Realty Co., 159 Tex. 403, 322 S.W.2d 597, 600 (1959). Based on the record, we conclude that Henderson’s injuries are within the scope of the MSC.
Based on the foregoing, we conclude that the trial court did not err in declaring that the MSC covers the injuries sustained by Henderson. Furthermore, we hold that the MSC satisfies the fair-notice doctrine. The trial court did not err in granting EOG’s summary-judgment motion. Accordingly, we overrule Tutle’s sole issue and affirm the judgment of the trial court.
[CV06]
No. 10–11–00062–CV
TUTLE & TUTLE TRUCKING, INC., Appellant
v.
EOG RESOURCES, INC., Appellee
From the 18th District Court Johnson County, Texas Trial Court No. C2010–0679
TOM GRAY Chief Justice
Dissenting opinion delivered and filed November 15, 2012
DISSENTING OPINION
After studying this several different times, I have concluded that, based on what is briefed, I would have to reverse due to lack of evidence to conclusively establish the second predicate fact, that the indemnity agreement is common to the industry (which may include which industry, oil and gas, or sand and gravel). The only basis the Court relies upon to support this factual determination is that the provision appears in one other reported case, a federal case from North Dakota (see Maj. Op. footnote 4). But that case involved the same party, EOG. Contrary to the Court’s conclusion, I think the fact that this type provision shows up nationally in only one other case and that case involved the same company is a clear indication the provision is not widely used in the industry.
I also think EOG, and the Court, has misapplied the concept of a judicial admission to the other predicate fact needed for the concept to apply. A statement in a pleading is an admission, but it can be controverted. It is a binding judicial admission only if it is a factual allegation in a live pleading and there is no unobjected-to evidence contrary to the allegation in the summary judgment record.
In any event, it appears that conflicting evidence may have been offered on the issue of whether the employee was injured in the process of transporting bulk dry material.
For either of these reasons, the result would at least be a reverse and remand for fact development.
But I have some issue with paragraph 6E, the pass through provision, as well. I think the issue here is very wide open, especially in Texas. If 6E has to meet the Express Negligence or the fair notice doctrine – it fails; particularly since the pass through provision EOG is relying upon is buried at the end of a provision that does nothing to highlight it and addresses another topic as well.
Further it seems to be a very unusual provision in that it essentially provides “you agree to indemnify me for anything I have agreed with another contractor for which to indemnify them.” You probably cannot bury another company’s agreement to indemnify for an act of negligence much deeper than that.
But I am not at all sure that the doctrine applies, because it is an indemnity of contractual indemnity, which may include a negligence claim but at the pass through level is only a contract claim.
This case also seems to potentially have some huge policy implications in it that I do not understand. Specifically, how workers compensation coverage and limits on recovery will be implicated, if at all. Does this now pit a workers compensation carrier against a general liability carrier?
For the foregoing reasons, I respectfully dissent to the judgment of the Court to the extent it does not reverse the trial court’s judgment and remand the proceeding to the trial court for further development. FN1
FN1. Recognizing that I have not garnered a second vote for my position, I have provided this quite informal dissent rather than delay the ultimate disposition of this proceeding. See In the Interest of S.A.P., 135 S.W.3d 165, 177 (Tex.App.—Waco 2004) (Gray, C.J., dissenting), rev’d and remanded, 156 S.W.3d 574 (Tex.2005)
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(a) False, misleading, or deceptive acts or practices in the conduct of any trade or commerce are hereby declared unlawful and are subject to action by the consumer protection division under Sections 17.47, 17.58, 17.60, and 17.61 of this code.(b) Except as provided in Subsection (d) of this section, the term “false, misleading, or deceptive acts or practices” includes, but is not limited to, the following acts:(1) passing off goods or services as those of another;(2) causing confusion or misunderstanding as to the source, sponsorship, approval, or certification of goods or services;(3) causing confusion or misunderstanding as to affiliation, connection, or association with, or certification by, another;(4) using deceptive representations or designations of geographic origin in connection with goods or services;(5) representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has a sponsorship, approval, status, affiliation, or connection which he does not;(6) representing that goods are original or new if they are deteriorated, reconditioned, reclaimed, used, or secondhand;(7) representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another;(8) disparaging the goods, services, or business of another by false or misleading representation of facts;(9) advertising goods or services with intent not to sell them as advertised;(10) advertising goods or services with intent not to supply a reasonable expectable public demand, unless the advertisements disclosed a limitation of quantity;(11) making false or misleading statements of fact concerning the reasons for, existence of, or amount of price reductions;(12) representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which are prohibited by law;(13) knowingly making false or misleading statements of fact concerning the need for parts, replacement, or repair service;(14) misrepresenting the authority of a salesman, representative or agent to negotiate the final terms of a consumer transaction;(15) basing a charge for the repair of any item in whole or in part on a guaranty or warranty instead of on the value of the actual repairs made or work to be performed on the item without stating separately the charges for the work and the charge for the warranty or guaranty, if any;(16) disconnecting, turning back, or resetting the odometer of any motor vehicle so as to reduce the number of miles indicated on the odometer gauge;(17) advertising of any sale by fraudulently representing that a person is going out of business;(18) advertising, selling, or distributing a card which purports to be a prescription drug identification card issued under Section 4151.152, Insurance Code, in accordance with rules adopted by the commissioner of insurance, which offers a discount on the purchase of health care goods or services from a third party provider, and which is not evidence of insurance coverage, unless:(A) the discount is authorized under an agreement between the seller of the card and the provider of those goods and services or the discount or card is offered to members of the seller;(B) the seller does not represent that the card provides insurance coverage of any kind; and(C) the discount is not false, misleading, or deceptive;(19) using or employing a chain referral sales plan in connection with the sale or offer to sell of goods, merchandise, or anything of value, which uses the sales technique, plan, arrangement, or agreement in which the buyer or prospective buyer is offered the opportunity to purchase merchandise or goods and in connection with the purchase receives the seller’s promise or representation that the buyer shall have the right to receive compensation or consideration in any form for furnishing to the seller the names of other prospective buyers if receipt of the compensation or consideration is contingent upon the occurrence of an event subsequent to the time the buyer purchases the merchandise or goods;(20) representing that a guarantee or warranty confers or involves rights or remedies which it does not have or involve, provided, however, that nothing in this subchapter shall be construed to expand the implied warranty of merchantability as defined in Sections 2.314 through 2.318 and Sections 2A.212 through 2A.216 to involve obligations in excess of those which are appropriate to the goods;(21) promoting a pyramid promotional scheme, as defined by Section 17.461;(22) representing that work or services have been performed on, or parts replaced in, goods when the work or services were not performed or the parts replaced;(23) filing suit founded upon a written contractual obligation of and signed by the defendant to pay money arising out of or based on a consumer transaction for goods, services, loans, or extensions of credit intended primarily for personal, family, household, or agricultural use in any county other than in the county in which the defendant resides at the time of the commencement of the action or in the county in which the defendant in fact signed the contract; provided, however, that a violation of this subsection shall not occur where it is shown by the person filing such suit he neither knew or had reason to know that the county in which such suit was filed was neither the county in which the defendant resides at the commencement of the suit nor the county in which the defendant in fact signed the contract;(24) failing to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed;(25) using the term “corporation,” “incorporated,” or an abbreviation of either of those terms in the name of a business entity that is not incorporated under the laws of this state or another jurisdiction;(26) selling, offering to sell, or illegally promoting an annuity contract under Chapter 22, Acts of the 57th Legislature, 3rd Called Session, 1962 (Article 6228a-5, Vernon’s Texas Civil Statutes), with the intent that the annuity contract will be the subject of a salary reduction agreement, as defined by that Act, if the annuity contract is not an eligible qualified investment under that Act or is not registered with the Teacher Retirement System of Texas as required by Section 8A of that Act; or(27) taking advantage of a disaster declared by the governor under Chapter 418, Government Code, by:(A) selling or leasing fuel, food, medicine, or another necessity at an exorbitant or excessive price; or(B) demanding an exorbitant or excessive price in connection with the sale or lease of fuel, food, medicine, or another necessity.(c)(1) It is the intent of the legislature that in construing Subsection (a) of this section in suits brought under Section 17.47 of this subchapter the courts to the extent possible will be guided by Subsection (b) of this section and the interpretations given by the Federal Trade Commission and federal courts to Section 5(a)(1) of the Federal Trade Commission Act [15 U.S.C.A. Sec. 45(a)(1)].(2) In construing this subchapter the court shall not be prohibited from considering relevant and pertinent decisions of courts in other jurisdictions.(d) For the purposes of the relief authorized in Subdivision (1) of Subsection (a) of Section 17.50 of this subchapter, the term “false, misleading, or deceptive acts or practices” is limited to the acts enumerated in specific subdivisions of Subsection (b) of this section.Added by Acts 1973, 63rd Leg., p. 322, ch. 143, Sec. 1, eff. May 21, 1973. Amended by Acts 1977, 65th Leg., p. 601, ch. 216, Sec. 2, 3, eff. May 23, 1977; Acts 1977, 65th Leg., p. 892, ch. 336, Sec. 1, eff. Aug. 29, 1977; Acts 1979, 66th Leg., p. 1327, ch. 603, Sec. 3, eff. Aug. 27, 1979; Acts 1987, 70th Leg., ch. 280, Sec. 1, eff. Sept. 1, 1987; Acts 1993, 73rd Leg., ch. 570, Sec. 6, eff. Sept. 1, 1993; Acts 1995, 74th Leg., ch. 414, Sec. 3, eff. Sept. 1, 1995; Acts 1995, 74th Leg., ch. 463, Sec. 1, eff. Sept. 1, 1995; Acts 2001, 77th Leg., ch. 962, Sec. 1, eff. Sept. 1, 2001; Acts 2001, 77th Leg., ch. 1229, Sec. 27, eff. June 1, 2002; Acts 2003, 78th Leg., ch. 1276, Sec. 4.001(a), eff. Sept. 1, 2003.Amended by: Acts 2005, 79th Leg., Ch. <a target=”new” href=”http://www.legis.state.tx.us/tlodocs/79R/billtext/html/HB02018F.HTM”>728</a>, Sec. 11.101, eff. September 1, 2005.Acts 2007, 80th Leg., R.S., Ch. <a target=”new” href=”http://www.legis.state.tx.us/tlodocs/80R/billtext/html/HB02427F.HTM”>1230</a>, Sec. 26, eff. September 1, 2007. – See more at: http://codes.lp.findlaw.com/txstatutes/BC/2/17/E/17.46#sthash.VeJ9xYEm.dpuf
– See more at: http://codes.lp.findlaw.com/txstatutes/BC/2/17/E/17.46#sthash.VeJ9xYEm.dpuf
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IN THE SUPREME COURT OF TEXAS
════════════
NO. 14-0279
════════════
FARM BUREAU COUNTY MUTUAL INSURANCE COMPANY,
PETITIONER,
v.
CRISTIL ROGERS, RESPONDENT
════════════════════════════════════════════════════
ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE SIXTH DISTRICT OF TEXAS
════════════════════════════════════════════════════
PER CURIAM
This case presents the familiar issue of whether a trial court’s order, issued without a full trial and containing a Mother Hubbard clause, is final for purposes of appeal. In this declaratory judgment action involving insurance coverage, the court of appeals held that the trial court’s order denying the insurer’s motion for summary judgment is not final because the insured did not file a cross-motion for summary judgment. We agree that the order is not final, but for a different reason: it did not resolve the parties’ competing requests for attorney’s fees. We therefore affirm the court of appeals’ dismissal of this appeal.
Farm Bureau County Mutual Insurance Company filed this declaratory judgment action against its insured, Cristil Rogers, seeking a declaration that it had no duty to defend or indemnify her in an underlying tort action (the Dominguez suit)1 and requesting an award of court costs and
1 The plaintiffs in the Dominguez suit sought damages for injuries they sustained when they were thrown from their horses while riding along FM 906 in Lamar County, Texas. Their petition alleged that, as Rogers drove past them in a pickup truck, a dog leaped from the bed of the truck and charged at the horses, causing them to buck and throw the plaintiffs. The plaintiffs alleged that Rogers proximately caused their injuries by negligently failing to secure her dog. Rogers sought coverage of these claims under her automobile insurance policy with Farm Bureau.
2
attorney’s fees under the Uniform Declaratory Judgments Act (UDJA). See TEX. CIV. PRAC. & REM. CODE § 37.009 (authorizing courts in a declaratory judgment action to award “costs and reasonable and necessary attorney’s fees as are equitable and just”). Rogers answered the suit and prayed for recovery of her court costs and attorney’s fees under the Texas Deceptive Trade Practices Act (DTPA), even though she asserted no claims for relief under the DTPA.
Farm Bureau later moved for summary judgment. Rogers opposed the motion but did not file a cross-motion seeking summary judgment in her favor. After a hearing on Farm Bureau’s motion, the trial court entered an “Order Denying Plaintiff Farm Bureau[’s] . . . Motion for Summary Judgment.” The order decreed that (1) Farm Bureau “has a duty to defend [Rogers] in or as to” the Dominguez suit; (2) Farm Bureau “has a duty to indemnify [Rogers] in or as to” the Dominguez suit; (3) “[a]ll court costs are taxed against the party incurring same”; and (4) “[a]ny and all relief sought in this cause which is not expressly granted herein is DENIED.” The order did not expressly address the parties’ claims for attorney’s fees.
The court of appeals dismissed Farm Bureau’s appeal for want of jurisdiction, holding that an order denying a motion for summary judgment cannot be final and appealable unless the opposing party filed a cross-motion for summary judgment. Farm Bureau petitioned for this Court’s review. Relying on our decision in Lehmann v. Har-Con Corp., 39 S.W.3d 191 (Tex. 2001), Farm Bureau argues that the trial court’s order is a final and appealable judgment because it disposed of all parties and claims, even though Rogers did not file a cross-motion for summary judgment seeking that relief. Rogers responds by arguing that the order is not a final judgment because it did not dispose of the parties’ competing claims for attorney’s fees. In reply, Farm Bureau argues that Rogers’ request for attorney’s fees under the DTPA was defective and the trial
3
court implicitly denied both parties’ requests for attorney’s fees by expressly taxing court costs to each party and denying “[a]ny and all relief . . . which is not expressly granted herein.”2
We agree with Farm Bureau that the fact that Rogers did not file a cross-motion for summary judgment did not preclude the trial court from entering a “final” judgment. As we explained in Lehmann, “the language of an order or judgment can make it final, even though it should have been interlocutory, if that language expressly disposes of all claims and all parties.” Lehmann, 39 S.W.3d at 200. If the trial court’s intent to enter a final judgment is “clear from the order, then the order is final and appealable, even though the record does not provide an adequate basis for rendition of judgment.” Id. In that case, “the judgment is final—erroneous, but final.” Id. But we agree with Rogers that the order at issue here did not dispose of all parties and claims, because neither the language taxing court costs nor the Mother Hubbard clause disposed of the parties’ claims for attorney’s fees.
In Lehmann, we held that “a judgment issued without a conventional trial is final for purposes of appeal if and only if either [1] it actually disposes of all claims and parties then before the court, regardless of its language, or [2] it states with unmistakable clarity that it is a final judgment as to all claims and all parties.” Lehmann, 39 S.W.3d at 192–93. We explained that “[a]n order does not dispose of all claims and all parties merely because it is entitled ‘final’, or because the word ‘final’ appears elsewhere in the order, or even because it awards costs.” Id. at 205 (emphasis added). “Rather, there must be some other clear indication that the trial court intended the order to completely dispose of the entire case.” Id. Attempting to resolve decades of confusion,
2 We need not consider Farm Bureau’s argument that Rogers’ claim for attorney’s fees is defective because, even if it is, Farm Bureau’s own claim for attorney’s fees remains pending. See Barshop v. Medina Cnty. Underground Water Conserv. Dist., 925 S.W.2d 618, 637–38 (Tex. 1996) (holding that failure to “substantially prevail[ ]” on a declaratory judgment claim does not preclude recovery of attorney’s fees under the UDJA).
4
we held that “the inclusion of a Mother Hubbard clause—by which we mean the statement, ‘all relief not granted is denied’, or essentially those words—does not indicate that a judgment rendered without a conventional trial is final for purposes of appeal.” Id. at 203–04. Mother Hubbard clauses are problematic because they are open to interpretation. Id. at 204. Sometimes a Mother Hubbard clause “mean[s] only that the relief requested in the motion—not all the relief requested by anyone in the case—and not granted by the order is denied,” and sometimes it “may also have no intended meaning at all, having been inserted for no other reason than that it appears in a form book or resides on a word processor.” Id. We thus rejected the notion that a Mother Hubbard clause gives “any indicia of finality in any order not issued after a conventional trial.” Id.
After Lehmann, we confirmed that the disposition of a claim for court costs does not dispose of a claim for attorney’s fees, even when doing so would also dispose of all parties and claims. See McNally v. Guevara, 52 S.W.3d 195, 196 (Tex. 2001). In McNally, the defendants filed a motion for summary judgment but failed to request summary judgment on their counterclaim for attorney’s fees. Although the trial court’s order granted the motion and taxed court costs against the plaintiff, we concluded that “[n]othing in the trial court’s judgment, other than its award of costs to the defendants, suggests that it intended to deny the defendants’ claim for attorney fees. The award of costs, by itself, does not make the judgment final.” Id. Consistent with our statement in Lehmann, we held that the resolution of a claim for court costs did not dispose of a claim for attorney’s fees and did not serve as an indicium of finality. See id.; Lehmann, 39 S.W.3d at 205.
This case is slightly different from McNally because, although Farm Bureau failed to expressly request attorney’s fees in its motion for summary judgment, it argues that the Mother Hubbard clause, not just the disposition of court costs, effectively denied the claim for attorney’s
5
fees. However, the reasoning of Lehmann and McNally control our decision here. Interpreting Mother Hubbard clauses in the manner Farm Bureau urges would necessarily run afoul of Lehmann because it would allow such clauses to serve as indicia of finality for purposes of appeal—the very function we prohibited in Lehmann. Thus, Mother Hubbard clauses do not, on their face, implicitly dispose of claims not expressly mentioned in the order, including claims for attorney’s fees. Instead, there must be evidence in the record to prove the trial court’s intent to dispose of any remaining issues when it includes a Mother Hubbard clause in an order denying summary judgment. See Lehmann, 39 S.W.3d at 205–06; McNally, 52 S.W.3d at 196. To hold otherwise would simply resurrect the issues we put to rest in Lehmann and McNally, albeit in a slightly different form.
Like the movant in McNally, Farm Bureau failed to request an award of attorney’s fees in its motion for summary judgment or to attach evidence supporting its claim for fees. Thus, as in McNally, there is no reason to presume that the trial court considered the issue when ruling on Farm Bureau’s motion. The order’s language taxing court costs is of no import because our decision in McNally established that such language does not, alone, evince a trial court’s intent to dispose of attorney’s fees. And most importantly, the parties presented no evidence from the record suggesting that the trial court intended the Mother Hubbard clause to deny attorney’s fees to either party.3 In the absence of evidence of the trial court’s intent with respect to the parties’ claims for attorney’s fees, we find that the trial court’s order did not dispose of all parties and claims.
3 As noted above, Farm Bureau did not need to “substantially prevail[ ]” in a suit under the UDJA to receive attorney’s fees. See Barshop, 925 S.W.2d at 637–38. Thus, the trial court did not dispose of the issue simply by ruling against Farm Bureau with respect to its duty to defend and indemnify Rogers.
6
Accordingly, without hearing oral argument, we affirm the court of appeals’ judgment dismissing the appeal for want of jurisdiction. TEX. R. APP. P. 59.1.
OPINION DELIVERED: January 30, 2015
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JLG TRUCKING, LLC, PETITIONER, v. LAUREN R. GARZA, RESPONDENT
ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS
Argued February 26, 2015 JUSTICE LEHRMANN delivered the opinion of the Court. This case requires us to review the trial court’s exclusion of evidence on relevance grounds. The plaintiff was involved in two car accidents approximately three months apart. After the second accident, she sued the opposing driver in the first accident and alleged that this collision caused her injuries. The defendant sought to present two alternative defensive theories. First, the defendant presented expert testimony that the plaintiff’s injuries were degenerative and thus not trauma-related at all. Alternatively, the defendant contended that the second accident caused her injuries. On the plaintiff’s pretrial request, and because of the lack of expert testimony supporting the defendant’s alternative theory, the trial court excluded all evidence of the second accident on relevance grounds. The trial court rendered judgment on the jury’s verdict for the plaintiff, and the court of appeals affirmed. We hold that evidence of the second accident was relevant to the central issue of whether the defendant’s negligence caused the plaintiff’s damages. We further hold that the trial court committed harmful error in excluding the evidence, and particularly in refusing to allow crossexamination of the plaintiff’s expert on the subject. Accordingly, we reverse the court of appeals’ judgment and remand the case for a new trial.
I. Background On July 16, 2008, Lauren Garza was traveling south on U.S. Highway 83 in Zapata County when an 18-wheeler driven by a JLG Trucking, LLC employee rear-ended her truck. An ambulance was called to the scene but did not transport Garza to the hospital. Instead, Garza testified that her aunt took her to a nearby emergency clinic where x-rays were taken, although the record contains no medical records from the clinic regarding that visit. Five days later Garza saw an orthopedic surgeon, Dr. Guillermo Pechero, complaining of neck and back pain. An x-ray showed some straightening of the lordotic curve, which Dr. Pechero concluded was associated with muscle spasms in the neck. Dr. Pechero prescribed physical therapy, which Garza underwent for roughly eleven weeks. On October 9, 2008, shortly after ceasing physical therapy, Garza was involved in a second car accident. She was taken by ambulance from the scene of the accident to a hospital on an immobilization board with a hard collar to prevent movement in her neck. At the hospital, Garza complained of pain in her head, neck, and chest. On October 31, Garza returned to Dr. Pechero for a follow-up visit, complaining of continuous pain in her neck that radiated into her shoulders. Dr. Pechero ordered an MRI, which revealed that Garza had two herniated discs in her neck. Dr. 2 Pechero began a conservative treatment of primarily medication in hopes of avoiding surgery, but a March 2009 nerve study revealed that a nerve at the site of the herniations had become compressed, and a second MRI in August 2011 showed two additional herniated discs in her neck. Garza underwent spinal fusion surgery in January 2012. The surgerywas successful, and at the time of trial Garza was “doing well.” However, Garza lives with a scar on her neck, reduced neck mobility, the permanent presence of hardware from the surgery, and the possibility of future surgery. Garza sued JLG, alleging that the employee driver’s negligence proximately caused her injuries and seeking damages for past and future medical expenses, loss of earning capacity, physical pain, mental anguish, physical impairment, and disfigurement. Garza’s treating physician, Dr. 1 Pechero, served as her expert witness to testifythat the July2008 accident caused the herniated discs. JLG designated Dr. Bruce Berberian, a neuroradiologist, as its expert witness to testify that Garza was suffering from degeneration of her discs, and not a trauma-related injury at all. JLG also intended to introduce evidence of the October accident as an alternative cause of Garza’s injuries, although JLG did not designate an expert to testify in support of that theory. Garza filed a pretrial motion to exclude any evidence of the second accident on the grounds that such evidence was not relevant, or that its probative value was substantially outweighed by the unfair prejudice or confusion it would cause the jury, because “there is no causal connection between the injuries [Garza] is complaining of and the subsequent collision.” After a hearing, the trial court granted Garza’s motion to exclude. Garza named the employee as a defendant, but it appears that he was never served with citation. Garza also 1 asserted claims against JLG for negligent entrustment and gross negligence, but those claims were not submitted to the jury. 3 Dr. Pechero testified by deposition at trial that the July accident caused Garza’s injuries. He noted that Garza exhibited neck pain after that accident and that the October MRI revealed injuries consistent with a rear-end collision.
One portion of the deposition played to the jury contained the following exchange between Dr. Pechero and Garza’s counsel: Q. Now, up to this point in the treatment of her you took a history, correct? A. Correct. Q. And Lauren indicated to you that she had not had any or been involved in any other accidents other than the one from July — July 16th of 2008; is that correct? A. I don’t think I asked her one way or the other on that. . . . . Q. Well, you took a history, correct? A. Correct. Q. All right. And let’s take a look at the July 21st note real quick. A. Okay. Are you referring to the October note, or the July note? Q. The July note. A. Oh, okay. In the July note, she did not have any other history of injury.
Taking the position that this testimony opened the door to questions concerning the second accident, JLG renewed its objection to the exclusion of all mention or evidence of that accident. The trial court upheld its earlier exclusion ruling, and JLG submitted an offer of proof as to the testimony that would have been elicited from Dr. Pechero and the evidence that would have been presented in 4 support of the second accident as an alternative cause. JLG’s offer of proof included the police report regarding the second accident, photos of Garza’s vehicle after the second accident, medical records documenting Garza’s emergency treatment after that accident, and Dr. Pechero’s testimony that he had not reviewed those medical records. Garza responded with an offer of proof consisting of Dr. Pechero’s testimony that he had relied on Dr. Berberian’s testimony that the second accident did not cause Garza’s injuries to rule out that possibility. The jury found that JLG’s employee’s negligence proximately caused the July accident and awarded her $1,166,264.48 in damages.2 JLG appealed the trial court’s judgment on the verdict, arguing that evidence of the second accident was relevant and that its exclusion amounted to harmful error because it prevented JLG from holding Garza to her burden of proving that JLG caused her injuries. The court of appeals affirmed, holding that the trial court did not abuse its discretion in excluding evidence of the second accident because “expert testimony would be required to establish any . . . causal link between the second collision and Garza’s injuries.” __ S.W.3d __, __ (Tex. App.—San Antonio 2013). II. Analysis We review a trial court’s exclusion of evidence for an abuse of discretion. Interstate Northborough P’ship v. State, 66 S.W.3d 213, 220 (Tex. 2001). Erroneous exclusion of evidence is reversible only if it probably resulted in an improper judgment. Id.; TEX. R. APP. P. 44.1(a)(1). The jury awarded $108,135.48 for past medical expenses, $110,000.00 for future medical expenses, 2 $583,693.00 for future loss of earning capacity, $42,048.00 for past physical pain, $252,288.00 for future physical pain, $5,000.00 for past physical impairment, $57,600.00 for future physical impairment, and $7,500.00 for future disfigurement. The jury awarded $0 for past loss of earning capacity, past and future mental anguish, and past disfigurement. 5 In this case, the disputed evidence was excluded as irrelevant, and so the rules of evidence governing relevance are the starting point of our analysis. A. Evidence of the Second Accident Is Relevant to the Issue of Causation Rule 401 broadly defines relevant evidence to include “evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence.” TEX.R. EVID. 401. Evidence that is not relevant is inadmissible, while relevant evidence is admissible unless otherwise excluded by law. TEX. R. EVID. 402. Relevance also governs the scope of cross-examination in Texas, as the rules allow witnesses to be cross-examined “on any matter relevant to any issue in the case.” TEX. R. EVID. 611(b). And it is well established that “any fact which bears upon the credit of a witness would be a relevant fact, . . . whether it goes to his indisposition to tell the truth, his want of opportunity to know the truth, his bias, interest, want of memory, or other like fact.” Evansich v. Gulf, C. & Santa Fe R.R. Co., 61 Tex. 24, 28 (1884). Finally, relevant evidence “may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury.” TEX. R. EVID. 403. JLG argues that evidence of the second accident is relevant to the causation element of Garza’s negligence claim. We agree.
Establishing causation in a personal injury case requires a plaintiff to “prove that the conduct of the defendant caused an event and that this event caused the plaintiff to suffer compensable injuries.” Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex. 1995). For example, when an accident victim seeks to recover medical expenses, she must show both “what all the conditions were” that generated the expenses and “that all the conditions 6 were caused by the accident.” Guevara v. Ferrer, 247 S.W.3d 662, 669 (Tex. 2007). Further, “expert testimony is necessary to establish causation as to medical conditions outside the common knowledge and experience of jurors.” Id. at 665. Finally, we have held that “if evidence presents ‘other plausible causes of the injury or condition that could be negated, the [proponent of the testimony] must offer evidence excluding those causeswith reasonable certainty.’” Transcontinental Ins. Co. v. Crump, 330 S.W.3d 211, 218 (Tex. 2010) (quoting Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 720 (Tex. 1997) (alteration in Crump) (emphasis in Crump omitted)); see also Harris v. Belue, 974 S.W.2d 386, 393–94 (Tex. App.—Tyler 1998, pet. denied) (rejecting the argument that the plaintiff failed to negate other probable causes of her injury in light of the lack of factual support in the record for those proposed causes). In this case, Garza sought to prove that the negligence of JLG’s employee caused the July accident. She also sought to prove by expert testimony from Dr. Pechero that this accident caused the herniated discs in her neck along with all of the associated pain, medical expenses, loss of 3 earning capacity, impairment, and disfigurement. JLG sought to undermine Garza’s theory and Dr. Pechero’s testimony by presenting evidence of the October 2008 accident as an alternative cause of those injuries. Garza argues that the record does not support a connection between the October accident and her injuries, rendering the evidence properly excluded. Garza relies in part on Farmers Texas County Mutual Insurance Co. v. Pagan, 453 S.W.3d 454 (Tex. App.—Houston [14th Dist.] 2014, no pet.). In Pagan, the plaintiff alleged that various Garza did not seek to recover medical expenses associated with her emergency treatment immediately after 3 the second accident. 7 neck and shoulder injuries were caused by a March 2008 car accident. Id. at 458. The defendant sought to introduce evidence of an April 2009 “horse incident,” which the trial court excluded. Id. 4 at 459–60. The court of appeals affirmed, holding that the trial court “could reasonably conclude that informing the jury about a horse incident with no apparent connection to the lasting injuries at issue in this case would confuse the issues and mislead the jury.” Id. at 463. The court noted in pertinent part that (1) the interrogatory response in which Pagan identified the horse incident did not mention any resulting neck or shoulder injuries, (2) the medical records associated with the incident noted only “contusions” resulting from the fall, and x-rays showed that her spine and shoulders were normal, and (3) records from Pagan’s family doctor indicating that she complained of neck and shoulder pain at a visit after the horse incident did not reference the incident itself. Id. Regardless of whetherPaganwas correctlydecided, which we need not address, the evidence of a connection between the proposed alternative cause and the plaintiff’s injuries that the court found lacking in Pagan is present in this case. JLG’s offer of proof indicates that, as a direct result of the second accident, Garza was transported to a hospital on an immobilization board and constrained with a hard c-collar around her neck, she complained of neck pain once she arrived, and she returned to Dr. Pechero three weeks later for the first time since the conclusion of her physical therapy with complaints of continuous pain in her neck radiating into her shoulder. At that time, the MRI revealed the herniated discs. The circumstances surrounding the second accident and its The evidence of the facts surrounding that incident is inconsistent. Some evidence indicates that Pagan fell 4 off a horse, other evidence indicates that she was “trampled,” and still other evidence indicates that she fell while leading the horse on foot. 453 S.W.3d at 459–60. 8 aftermath provide the necessary factual support to present the second accident as a “plausible cause” of Garza’s injuries.5 Significantly, the exclusion of the second accident curtailed JLG’s ability to probe Dr. Pechero’s conclusions about causation by asking him to explain why he discounted the second accident as an alternative cause. JLG’s offer of proof shows that, in formulating his opinion, Dr. Pechero did not review the records from Garza’s emergency treatment after the second accident, which included the statements reflecting that Garza was experiencing neck pain in its wake. According to Garza’s responsive offer of proof, Dr. Pechero’s only explanation for ruling out the second accident as the cause of the herniations was that he relied on Dr. Berberian’s testimony to that effect. But Dr. Berberian concluded that neither accident caused Garza’s injuries, calling into question the credibility of the methods underlying Dr. Pechero’s approach. Cf. E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 559 (Tex. 1995) (upholding the exclusion of expert testimony when the expert failed to “carefully consider [and rule out] alternative causes”); see also 6 TEX.R.EVID. 607 (“The credibility of a witness may be attacked by any party . . . .”). JLG could not adequatelycross-examineDr. Pechero on those methods without discussing the improperlyexcluded evidence. Certainly, expert testimony in support of the alternative cause would lend support to its plausibility. And in 5 some cases, expert testimony may in fact be necessary to elevate a proposed alternative cause from theoretically possible to plausible. But this is not that case. JLG did not move to exclude Dr. Pechero’s testimony in the trial court. We cite Robinson because it highlights 6 the significance of alternative causes when a plaintiff must prove causation by expert testimony. 9 B. The Court of Appeals Erroneously Conflated Relevance and Evidentiary Sufficiency The court of appeals held that the trial court correctly excluded evidence of the second accident because “no expert testimony was proffered to establish that the second collision caused any of Garza’s injuries.” __ S.W.3d at __.
As support for its holding, the court of appeals relied on a line of cases addressing the necessity of expert medical testimony to prove causation in the personal-injury context. As discussed below, in doing so the court of appeals conflated the concepts of relevance and evidentiarysufficiency and improperly shifted the burden of proof to the defendant.
Principal among the cases cited by the court of appeals was Guevara v. Ferrer, 247 S.W.3d 662 (Tex. 2007). That case, like this one, involved a car accident that a jury found the defendant caused. Id. at 663, 665. The plaintiff, who had a complicated medical history that included hypertension, heart disease, and kidney failure, complained of stomach pains and received emergency treatment, including abdominal surgery, immediately after the accident. Id. at 663–64. Following that surgery, he spent three-and-a-half months in the hospital, two weeks in a continuing care facility, and two more weeks in another medical facility. Id. at 664. His family sought to recover all the medical bills generated by his stays at the hospital and both facilities, which exceeded $1 million, but did not present expert medical evidence to prove that the accident caused those expenses to be incurred. Id. at 664–65. We held that, while “the evidence [was] legally sufficient to support a finding that some of his medical expenses [such as those associated with his postaccident treatment in the emergency room] were causally related to the accident,” it was “not legally sufficient to prove what the conditions were that generated all the medical expenses or that the 10 accident caused all of the conditions and the expenses for their treatment.” Id. at 669–70 (emphases added). In Guevara, we applied the well-established general rule, cited above, that “expert testimony is necessary to establish causation as to medical conditions outside the common knowledge and experience of jurors.” Id. at 665 (citing cases). And we did so in the context of considering the legal sufficiency of non-expert evidence to support a finding of causation. But we did not hold that the lack of expert testimony rendered any of the evidence irrelevant or otherwise admissible.
In fact, relevance was not at issue in Guevara. In this case, although the court of appeals was purporting 7 to analyze relevance, in effect it was improperly analyzing whether the evidence was legally sufficient to support a finding that the second accident caused Garza’s injuries. But JLG did not have the burden to prove causation; Garza did. It was Garza’s burden to prove that the first accident caused her injuries, and, as discussed above, the record in this case sufficiently demonstrates that the second accident is at least relevant to that inquiry even without an expert proponent. Further, JLG did not rule out the relevance of the second accident by presenting expert testimony that Garza’s injuries were degenerative and not trauma-induced. Parties may plead conflicting claims and defenses in the alternative so long as they have a “reasonable basis in fact [and] law.” Low v. Henry, 221 S.W.3d 609, 615 (Tex. 2007). In turn, parties may present evidence of alternative, and even inconsistent, theories of relief, leaving to the jury to “choose the theory that it believes based upon its resolution of the conflicting evidence.” Wilson v. Whetstone, No. 03-08- We did confirm in Guevara that “evidence of temporal proximity . . . between an event and subsequently 7 manifested conditions” is not irrelevant to causation, although “temporal proximity . . . does not, by itself, support an inference of medical causation.” 247 S.W.3d at 667–68. 11 00738-CV, 2010 WL 1633087, at *10 (Tex. App.—Austin April 20, 2010, pet. denied) (mem. op.) (holding that the plaintiff’s claim and evidence of the parties’ acquiescence to the alleged property boundary line were not fatal to her adverse possession claim, even assuming that the claims were mutually exclusive); see also In re Arthur Andersen LLP, 121 S.W.3d 471, 482 n.32 (Tex. App.—Houston [14th Dist.] 2003, orig. proceeding) (noting that a defendant could deny liability for conspiracy while simultaneously alleging that third parties were also liable for conspiracy). But the burden still falls on the plaintiff to establish the elements of her cause of action. In this case, as explained above, the burden was on Garza, the plaintiff, to establish both that JLG caused the July 2008 accident and that this accident caused her injuries. Part of that burden was to exclude with reasonable certainty other plausible causes of her injuries supported by the record. Crump, 330 S.W.3d at 218. JLG’s decision to present Dr. Berberian’s testimony in support of its theory that Garza’s injuries were degenerative—which the jury apparently found unpersuasive—did not relieve Garza of that burden. The defendant’s responsibility “is not that of proving, but the purely negative one of repelling or making ineffective the adversary’s attempts to prove.” James B. Thayer, The Burden of Proof, 4 HARV.L.REV. 45, 56 (1890). In its efforts to repel Garza’s attempts to prove her case, JLG was entitled to present evidence of the second accident to the jury, which was relevant to Garza’s theory of causation irrespective of Dr. Berberian’s testimony. The trial court therefore abused its discretion in excluding that evidence. C. Reversible Error The trial court’s error in excluding evidence of the second accident is reversible only if it probably caused the rendition of an improper judgment. TEX. R. APP. P. 44.1(a)(1).
We have 12 declined to establish any “specific test” for determining whether evidentiary error resulted in an improper judgment, but we have held that the appellate court must review the entire record, “considering the state of the evidence, the strength and weakness of the case, and the verdict.” Reliance Steel & Aluminum Co. v. Sevcik, 267 S.W.3d 867, 871 (Tex. 2008) (internal quotation marks and citation omitted). We explained in Sevcik that “if erroneously admitted or excluded evidence was crucial to a key issue, the error was likely harmful.” Id. at 873. “By contrast, admission or exclusion is likely harmless if the evidence was cumulative, or if the rest of the evidence was so one-sided that the error likely made no difference.” Id. In this case, the evidence of the second accident was crucial to whether JLG’s negligence caused Garza’s injuries, and the harm in its exclusion was compounded by JLG’s curtailed cross-examination of Dr. Pechero. Accordingly, we hold that the trial court’s exclusion of evidence regarding the second accident was reversible error requiring a new trial.8 III. Conclusion The trial court abused its discretion in excluding evidence of the second accident, which was relevant to whether JLG’s negligence caused Garza’s damages. Accordingly, we reverse the court of appeals’ judgment and remand the case to the trial court for a new trial in accordance with this opinion. JLG did not contest on appeal the finding that its negligence caused the first accident. It asserted only that 8 the erroneously excluded evidence tainted the findings as to the damages caused by that accident. However, because liability was contested in the trial court, both liability and damages must be remanded. Estrada v. Dillon, 44 S.W.3d 558, 562 (Tex. 2001) (per curiam) (applying TEX. R. APP. P. 44.1(b)).
OPINION DELIVERED: April 24, 2015
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IN RE BRIDGESTONE AMERICAS TIRE OPERATIONS, LLC, RELATOR
ON PETITION FOR WRIT OF MANDAMUS
Argued November 5, 2014
JUSTICE LEHRMANN delivered the opinion of the Court.
Before us once again is the Texas-resident exception to the forum-non-conveniens statute.
We consider whether the exception—which allows a plaintiff residing in Texas to maintain a lawsuit
here even when the suit would otherwise be subject to dismissal for forum non conveniens—applies
in a case in which two nonresident minors sue by a next friend who is a Texas resident. The minors
themselves reside in Mexico with their grandparents, who are the minors’ legal guardians under
Mexican law. We hold that the Texas-resident exception does not apply and that the trial court
abused its discretion in refusing to dismiss the case on forum-non-conveniens grounds. Accordingly,
we conditionally grant mandamus relief.
I. Background
This case arises from a June 2009 car accident in Mexico. Armando Alvarado was driving
a 1996 Ford Explorer on a highway near Monterrey in the State of Nuevo Leon. His wife, Maria
Isabel Rodriguez, and their two minor children were passengers. The Explorer’s left rear tire
allegedly failed, causing a rollover that killed Armando and Maria and injured the children. At the
time of the accident, the family resided in Nuevo Leon. The children’s maternal grandparents
became the children’s legal guardians by operation of Mexican law and took custody of the children
in Nuevo Leon.
Gilberto Rodriguez, a Texas resident who is the children’s maternal uncle, filed a wrongfuldeath
lawsuit “as next friend” of the children in Texas against Bridgestone Americas Tire
Operations, LLC (Bridgestone), a Delaware company that manufactured the allegedly defective tire.
Other defendants included Gutierrez Brothers, Inc., doing business as Gutierrez Auto Sales, and that
company’s individual owners, brothers Juan, Jaime, and Manuel Gutierrez.1 Gutierrez Auto Sales,
which is in Hidalgo County, Texas, had purchased the used Explorer from a New Jersey Acura
dealership through a New Jersey auction house on July 12, 2007.2 Approximately two weeks later,
Gutierrez Auto Sales sold the Explorer to wholesaler Librado Leal, a company based in Nuevo Leon,
“For Export Only.” The accident occurred almost two years later. The record does not reflect when
or where the tire at issue was put on the Explorer, and nothing in the record suggests that the tire was
manufactured in Texas.
Bridgestone filed a motion to dismiss for forum non conveniens, arguing that the case
belonged in Mexico, not Texas. The trial court denied the motion, and Bridgestone filed a petition
1 The original petition named only Bridgestone and Jaime Gutierrez d/b/a Gutierrez Auto Sales as defendants.
The operative Third Amended Petition names Gutierrez Brothers, Inc., and all three Gutierrez brothers.
2 The Explorer’s first two owners were New Jersey residents.
2
for writ of mandamus in the court of appeals. In denying relief, the court of appeals held that the
case may not be dismissed on forum-non-conveniens grounds because the plaintiff, next-friend
Rodriguez, is a Texas resident. 387 S.W.3d 840, 848 (Tex. App.—Beaumont 2012). Bridgestone
now seeks mandamus relief in this Court, arguing that the trial court abused its discretion in denying
Bridgestone’s motion to dismiss.
II. Analysis
The doctrine of forum non conveniens, which originated in the common law and is now
codified in Texas, “comes into play when there are sufficient contacts between the defendant and the
forum state to confer personal jurisdiction upon the trial court, but the case itself has no significant
connection to the forum.” In re Pirelli Tire, LLC, 247 S.W.3d 670, 675–76 (Tex. 2007). Texas’s
forum-non-conveniens statute provides:
If a court of this state, on written motion of a party, finds that in the interest of justice
and for the convenience of the parties a claim or action to which this section applies
would be more properly heard in a forum outside this state, the court shall decline to
exercise jurisdiction under the doctrine of forum non conveniens and shall stay or
dismiss the claim or action.
TEX. CIV. PRAC. & REM. CODE § 71.051(b).3 Notwithstanding this mandatory language, courts “may
not stay or dismiss a plaintiff’s claim [on forum-non-conveniens grounds] if the plaintiff is a legal
resident of this state.” Id.§ 71.051(e). This so-called Texas-resident exception “ensure[s] access to
Texas courts for Texas plaintiffs.” In re Ford Motor Co., 442 S.W.3d 265, 269 (Tex. 2014).
3 The statute applies to actions for personal injuries or wrongful death. TEX. CIV. PRAC. & REM. CODE
§ 71.051(i).
3
We have held that a trial court’s erroneous denial of a forum-non-conveniens motion cannot
be adequately remedied on appeal and therefore warrants mandamus relief. In re Gen. Elec. Co., 271
S.W.3d 681, 685 (Tex. 2008). We review the trial court’s forum-non-conveniens ruling for an abuse
of discretion. Id.
A. Application of the Texas-Resident Exception
When the Texas-resident exception outlined in subsection 71.051(e) applies, a case may not
be dismissed on forum-non-conveniens grounds no matter how tenuous its connection to Texas. In
this case, as discussed above, Texas-resident Rodriguez brought a wrongful-death suit on behalf of
two nonresident minors to recover damages for their parents’ deaths. Rodriguez may not assert a
personal cause of action under Texas’s wrongful-death statute and has sued solely in his capacity as
next friend of his nephews. See TEX. CIV. PRAC. & REM. CODE § 71.004(a) (“An action to recover
damages as provided by [the wrongful-death statute] is for the exclusive benefit of the surviving
spouse, children, and parents of the deceased.”). Bridgestone argues that Rodriguez’s Texas
residency does not foreclose dismissal for two reasons: (1) Rodriguez lacked authority to sue as the
children’s next friend because they had a legal guardian, and (2) even if the children could sue by
next friend, a next friend is not a “plaintiff” whose residency may trigger the exception. We address
these contentions in turn.
1. Next-Friend Representation
We first address whether Texas Rule of Civil Procedure 44 allowed the children to sue
through a next friend. When we analyze Texas’s procedural rules, we apply the same rules of
construction that govern the interpretation of statutes. Ford Motor Co. v. Garcia, 363 S.W.3d 573,
4
579 (Tex. 2012). That is, we look first to the rule’s language and construe it according to its plain
meaning. In re Christus Spohn Hosp. Kleberg, 222 S.W.3d 434, 437 (Tex. 2007). At the same time,
we bear in mind that the rules are given a liberal construction in order to obtain “a just, fair, equitable
and impartial adjudication of the rights of litigants under established principles of substantive law.”
TEX. R. CIV. P. 1.
Rule 44, which is derived from a statute that was originally enacted in 1893,4 governs the
institution of suit by next friend and provides:
Minors . . . who have no legal guardian may sue and be represented by “next
friend” under the following rules:
(1) Such next friend shall have the same rights concerning such suits as
guardians have, but shall give security for costs, or affidavits in lieu thereof, when
required.
(2) Such next friend or his attorney of record may with the approval of the
court compromise suits and agree to judgments, and such judgments, agreements and
compromises, when approved by the court, shall be forever binding and conclusive
upon the party plaintiff in such suit.
TEX. R. CIV. P. 44.5 The only other procedural rule to mention next friends is Rule 173, which
requires the court to appoint a guardian ad litem for a party represented by a next friend or guardian
if “the next friend or guardian appears to the court to have an interest adverse to the party” or if the
parties agree. TEX. R. CIV. P. 173.2(a). Bridgestone argues that Rule 44’s plain language allows suit
4 Act approved Feb. 11, 1893, 23d Leg., R.S., ch. 6, § 1, 1893 Tex. Gen. Laws 433 (former TEX. REV. CIV.
STAT. art. 3498u) (repealed) (“[A]ny minor having a sufficient cause of action, and who has no legal guardian, can bring
suit in any of the courts of this State by next friend.”).
5 The federal rule governing next-friend representation uses similar but not identical language: “A minor or
incompetent person who does not have a duly appointed representative [which includes a general guardian, a committee,
a conservator, and a like fiduciary] may sue by a next friend or by a guardian ad litem.” FED. R. CIV. P. 17(c).
5
by a next friend only when the minor has “no legal guardian” and that the minor plaintiffs in this case
have legal guardians: their grandparents.
The parties do not dispute that, under the law of the State of Nuevo Leon where the children
reside, the children’s grandparents automatically became the children’s legal guardians upon the
death of their parents.6 However, the court of appeals concluded that, because no Texas court had
accepted the grandparents’ guardianship established in Mexico, “the minors had no legal guardian
in Texas,” and next-friend representation was appropriate under Rule 44. 387 S.W.3d at 846.
Bridgestone contends that this interpretation improperly adds words to the rule and that “no legal
guardian” means just that: “no legal guardian.”
Bridgestone’s argument has appeal, but it leaves out a very important inquiry. The
significance of a minor’s having a legal guardian in the context of Rule 44 is that, when a minor
already has a guardian who may sue on his behalf, the minor does not need next-friend representation
in order to litigate his claims. For Rule 44 to make sense, it must be construed to enable minors to
prosecute their claims—through a next friend—when they otherwise could not through a legal
guardian. It follows that, if a legal guardian has been appointed or recognized in another jurisdiction,
6 At oral argument, Rodriguez’s attorney asserted that the grandparents had executed an affidavit renouncing
their status as guardians for health reasons. That affidavit was executed on December 12, 2011—seven months after the
underlying lawsuit was filed—and is a bit unclear. The grandparents aver that they have custody of the children and
“have provided them with all care required for the welfare of the children,” but also that they “are in total agreement”
that Rodriguez “take charge” of the children. Nothing in the record suggests that the children have ever lived with
Rodriguez or that Rodriguez has petitioned any court for guardianship. Further, Bridgestone’s Mexican-law expert
testified without opposition that the grandparents would be required to petition a competent court to be excused from
their guardianship duties, and the record does not reflect that such action was taken. Finally, we note that Rodriguez
submitted, with a post-submission brief, copies of two federal tax returns purporting to show that he claimed the children
as dependents in 2009 and 2010. We grant Bridgestone’s motion to strike this evidence, which is not in the mandamus
record.
6
but that guardian lacks authority to sue on the minor’s behalf in Texas and has no legal basis for
obtaining such authority, the minor may sue by next friend under Rule 44.7 In this case, then,
whether the children could sue by next friend turns on whether their grandparents could have filed
suit in Texas on the children’s behalf as their guardians. If they could not, Rule 44 steps in.
Bridgestone summarily argues that the grandparents’ guardian status entitled them (and only
them) to bring the underlying suit, but Bridgestone fails to address the potential limitations on a
guardian’s authority outside the jurisdiction in which he was appointed or otherwise designated. The
U.S. Supreme Court recognized long ago that “[t]he authority of a guardian, like that of an executor
or administrator, appointed by a court of one state, is limited to that state, and he cannot sue in a
court . . . held within any other state, except so far as authorized to do so by its laws.” Morgan v.
Potter, 157 U.S. 195, 197 (1895) (noting that “[t]he statutes of Kansas do authorize executors or
administrators appointed in another state to sue and be sued as such in Kansas,” but “they confer no
such general authority upon guardians appointed in another state”); cf. Faulkner v. Reed, 241 S.W.
1002, 1007 (Tex. Comm’n App. 1922, holding approved) (“An administrator, appointed by the
courts of Ohio, could not, by virtue of said appointment sue or be sued in the courts of Texas, or in
any way act as a legal representative of said estate in Texas. An administrator is the agent solely of
the court appointing him, clothed with authority to administer only such assets as are within the
jurisdiction of the court making such appointment.”).
7 Nothing in the rule prevents the foreign guardian and the next friend from being the same person.
7
Our courts of appeals have recognized this principle over the years in addressing challenges
to next-friend representation, starting with Bonner v. Ogilvie, 58 S.W. 1027 (Dallas 1900, no writ).
In that case, a child’s mother appointed as his legal guardian in Louisiana sued on his behalf in her
capacity as guardian. Id. at 1028. The court held that the mother’s appointment as guardian in
Louisiana “would not give her authority to sue as such guardian in Texas, but it would not deprive
her of the power to sue in this state as next friend.” Id.
As Bridgestone points out, Bonner was decided before this Court adopted the Texas Rules
of Civil Procedure. However, Rule 44’s “no legal guardian” language tracks the 1893 statute from
which the rule is derived, and courts have relied on Bonner to interpret Rule 44. In Henderson v.
Shell Oil Co., for example, a guardian appointed by a Missouri court sued in Texas on behalf of his
ward, also a Missouri resident, regarding a tract of land in Texas that the ward owned. 179 S.W.2d
386, 386 (Tex. Civ. App.—Fort Worth), rev’d on other grounds and dismissed for want of
jurisdiction, 182 S.W.2d 994 (Tex. 1944). The court noted that “the only capacity in which [the
Missouri guardian] could be recognized as having the right to bring the suit is that of ‘next friend.’”
Id. at 388. This conclusion was reiterated in Herrin v. Falcon, in which the court of appeals held
that a father appointed by a Louisiana court to be his minor son’s guardian properly brought suit in
Texas “as next friend” where no ancillary or original guardianship proceeding had been brought in
Texas. 198 S.W.2d 117, 122 (Tex. Civ. App.—Beaumont 1946, writ ref’d n.r.e.).
8
Evaluating these decisions requires an examination of the Texas Guardianship Code, which
includes provisions governing guardians’ authority to file suit on behalf of their wards.8 In Texas,
the term “guardian” encompasses both a “guardian of the person” and a “guardian of the estate” of
a minor or other incapacitated person. TEX. EST. & G’SHIP CODE § 1002.012(b). “A guardian of the
estate of a ward appointed in this state” has authority to sue for damages on the minor’s behalf. Id.
§ 1151.104(a)(1) (emphasis added). However, like the Kansas statute at issue in Morgan, Texas’s
guardianship statutes confer no such general authority on guardians appointed or recognized in other
jurisdictions. In limited circumstances in which a nonresident ward owns property in Texas, the
Code provides a mechanism by which a guardian appointed in another jurisdiction may “be
appointed and qualified as guardian or coguardian” of the ward’s estate located here. Id.
§§ 1252.051–.053. But a nonresident guardian of a nonresident ward with no connection to Texas
beyond a possible lawsuit simply has no authority to sue on behalf of the ward in Texas in his
capacity as guardian.9
8 The Legislature recently amended and recodified Texas’s guardianship statutes, which were formerly housed
in the Probate Code but, effective January 1, 2014, are now contained in the Estates and Guardianships Code. Act of
June 17, 2011, 82d Leg., R.S., ch. 823, § 1.02, 2011 Tex. Gen. Laws 1917. Because the amendments do not affect our
analysis, we will cite the current versions of the statutes in this opinion.
9 We note that we disagree with Bonner and Herrin to the extent they hold that a child’s parent is not a legal
guardian qualified to sue on his child’s behalf in that capacity. Under Texas law, a parent has the right to represent his
child in legal proceedings and the duty to manage the child’s estate unless a guardian of the estate has been appointed.
TEX. FAM. CODE § 151.001(a)(4), (7). A parent thus typically qualifies as a legal guardian for purposes of Rule 44, and
his minor child may not sue by next friend. See In re KC Greenhouse Patio Apartments LP, 445 S.W.3d 168, 172 (Tex.
App.—Houston [1st Dist.] 2012, orig. proceeding); see also R.H. v. Smith, 339 S.W.3d 756, 759, 764 (Tex.
App.—Dallas 2011, no pet.) (holding that a father had no right to represent his minor child in a lawsuit when the child’s
grandparents had been appointed the minor’s managing conservators).
9
Accordingly, in this case, although the children’s grandparents are recognized as the
children’s guardians under the law of Nuevo Leon where they reside, they have no authority to sue
in that capacity on the children’s behalf in Texas. To avoid depriving the children of the ability to
pursue their claims before they turn eighteen, Rule 44 allows them to do so by next friend.
Accordingly, we agree with the court of appeals that, for purposes of Rule 44, the children could sue
by next friend. We therefore turn to whether Rodriguez, as a next friend, qualifies as a “plaintiff”
who may take advantage of the forum-non-conveniens statute’s Texas-resident exception.
2. Status of Next Friend
As noted above, a plaintiff’s claim may not be stayed or dismissed on forum-non-conveniens
grounds if the plaintiff is a legal resident of Texas. TEX. CIV. PRAC. & REM. CODE § 71.051(e). In
determining whether Rodriguez is a plaintiff for purposes of this provision, we focus on the specific
statutory definition of “plaintiff,” but we also consider that definition in the context of the entire
forum-non-conveniens statute and chapter 71 as a whole. See CHCA Woman’s Hosp. v. Lidji, 403
S.W.3d 228, 232 (Tex. 2013) (“We analyze statutory language in context, considering the specific
section at issue as well as the statute as a whole.”). We presume the Legislature enacted the statute
“with complete knowledge of the existing law and with reference to it.” Acker v. Tex. Water
Comm’n, 790 S.W.2d 299, 301 (Tex. 1990).
The forum-non-conveniens statute defines the term “plaintiff” as follows:
“Plaintiff” means a party seeking recovery of damages for personal injury or
wrongful death. In a cause of action in which a party seeks recovery of damages for
personal injury to or the wrongful death of another person, “plaintiff” includes both
that other person and the party seeking such recovery. The term does not include a
counterclaimant, cross-claimant, or third-party plaintiff or a person who is assigned
10
a cause of action for personal injury, or who accepts an appointment as a personal
representative in a wrongful death action, in bad faith for purposes of affecting in any
way the application of this section.
TEX. CIV. PRAC. & REM. CODE § 71.051(h)(2). In the context of this case, we consider whether
Rodriguez, as a next friend, qualifies as “a party seeking recovery of damages for personal injuries
or wrongful death.” We hold that he does not.
The status of a next friend under Texas law is well settled. “In a suit by a ‘next friend,’ the
real party plaintiff is the child and not the next friend.” Gracia v. RC Cola–7-Up Bottling Co., 667
S.W.2d 517, 519 (Tex. 1984); accord Safeway Stores of Tex. v. Rutherford, 111 S.W.2d 688, 689
(Tex. 1938). Indeed, we long ago stated that “the next friend is not a party to the suit instituted by
a minor by his aid.” Martin v. Weyman, 26 Tex. 460, 468 (1863) (citation omitted); see also Gulf,
C. & S. F. Ry. Co., 1 S.W. 161, 163 (Tex. 1886) (“When it appears with certainty . . . that the action
[by next friend] is based on the right of the minor; that the relief sought is such as the minor alone
would be entitled to on the facts pleaded, and that this is sought for the use and benefit of the minor;
then we are of the opinion that the minor is the real plaintiff, whatsoever may be the formula used.”).
The U.S. Supreme Court has similarly stated:
It is the infant, and not the next friend, who is the real and proper party. The next
friend, by whom the suit is brought on behalf of the infant, is neither technically nor
substantially the party, but resembles an attorney, or a guardian ad litem, by whom
a suit is brought or defended in behalf of another.
Morgan, 157 U.S. at 198. This is consistent with our longstanding recognition that a minor’s lack
of capacity to sue, unlike standing, is not a jurisdictional defect and that a challenge to capacity may
be waived. Austin Nursing Ctr. v. Lovato, 171 S.W.3d 845, 849 (Tex. 2005).
11
In light of this well-settled law, we cannot conclude that a next friend is “a party seeking
recovery of damages for personal injury or wrongful death.” TEX. CIV. PRAC. & REM. CODE
§ 71.051(h)(2). That description fits the persons who are authorized to bring a wrongful-death action
under section 71.004, but not the person serving as a conduit when the ones authorized to bring the
action are minors. As such, a next friend’s legal residency in Texas does not trigger the forum-nonconveniens
statute’s Texas-resident exception. So interpreted, the statute’s plain language serves
its purpose of “ensur[ing] access to Texas courts for Texas plaintiffs.” In re Ford Motor Co., 442
S.W.3d at 269. Texas courts have no responsibility to protect the interests of next friends, who
themselves must protect and advance the interests of the minors suing through them. That is, next
friends have no interest in keeping a case in Texas beyond the interests of the minors they represent.
If the minors whose wrongful-death claims are being prosecuted are not Texas residents, their right
to access Texas courts does not trump a defendant’s right to dismissal for forum non conveniens.
The court of appeals interpreted the statute differently, relying principally on the language
excluding personal representatives appointed in bad faith from qualifying as plaintiffs. The specific
language at issue states: “The term [plaintiff] does not include . . . a person . . . who accepts an
appointment as a personal representative in a wrongful death action, in bad faith for purposes of
affecting in any way the application of this section.” TEX. CIV. PRAC. & REM. CODE § 71.051(h)(2).
The court concluded, and Rodriguez argues, that this exclusion demonstrates that the Legislature
intended a next friend to qualify as a plaintiff for purposes of the Texas-resident exception unless
the defendant shows the next friend was appointed in bad faith. We disagree.
12
Considering this language in the context of chapter 71 as a whole, as we must, we read this
exclusion to apply to the prosecution of a wrongful-death action by an executor or administrator
under subsection 71.004(c). Section 71.004 provides:
(a) An action to recover damages [for wrongful death] is for the exclusive benefit of
the surviving spouse, children, and parents of the deceased.
(b) The surviving spouse, children, and parents of the deceased may bring the action
or one or more of those individuals may bring the action for the benefit of all.
(c) If none of the individuals entitled to bring an action have begun the action within
three calendar months after the death of the injured individual, his executor or
administrator shall bring and prosecute the action unless requested not to by all those
individuals.
An executor or administrator thus has express statutory authority to bring an action that wrongfuldeath
beneficiaries could have brought but chose not to. When that happens, the executor or
administrator—i.e., the personal representative—is the only possible party plaintiff.10 See In re Ford
Motor Co., 442 S.W.3d at 281 (noting that a personal representative qualifies as a party “seek[ing]
recovery of damages for personal injury to or the wrongful death of another person” (quoting TEX.
CIV. PRAC. & REM. CODE § 71.051(h)(2))). In turn, the bad-faith exclusion precludes such a plaintiff
from taking advantage of the Texas-resident exception when he accepted the appointment “in bad
faith for purposes of affecting in any way the application of this section.” Id. § 71.051(h)(2).
10 Section 71.012 is also instructive. Entitled “Qualification of Foreign Personal Representative,” section 71.012
provides that, when an executor or administrator of a nonresident’s estate “is the plaintiff” in a wrongful-death action,
that “foreign personal representative” need not apply for letters testamentary “to bring and prosecute the action” so long
as he has complied with the statutory requirements for the probate of a foreign will. TEX. CIV. PRAC. & REM. CODE
§ 71.012. This lends further support to our interpretation of “personal representative,” as used in the Texas-resident
exception, to apply to executors or administrators exercising their authority to sue under subsection 71.004(c). See also
TEX. EST. & G’SHIP CODE § 22.031(a) (defining “personal representative” to include: an executor and independent
executor; an administrator, independent administrator, and temporary administrator; and their successors).
13
The court of appeals’ overly broad reading of the bad-faith exclusion stretches the definition
of plaintiff beyond the breaking point. If the term “personal representative” as used in section
71.051 were broad enough to include a next friend, we see no principled reason why it would not
also include a guardian ad litem, an attorney ad litem, or an amicus attorney.11 See Morgan, 157 U.S.
at 198 (noting that a next friend resembles a guardian ad litem). Yet it would be absurd to classify
a guardian ad litem as a plaintiff, and, for the reasons discussed above, it makes no more sense to
so classify a next friend. We note that, had the children at issue been adults when suit was filed, the
Texas-resident exception clearly would not have applied. Allowing them to take advantage of the
exception and maintain a suit in Texas merely because they are minors who lack capacity to
represent themselves in litigation defies logic as well as the statute’s plain language and purpose.
In sum, we hold that the Texas-resident exception does not foreclose dismissal of this action
for forum non conveniens. Accordingly, we turn to whether the forum-non-conveniens factors
mandate dismissal.
B. Application of Forum-Non-Conveniens Factors
As noted above, the forum-non-conveniens statute mandates the stay or dismissal of a
personal-injury or wrongful-death action when the court “finds that in the interest of justice and for
the convenience of the parties [the action] would be more properly heard in a forum outside this
state.” TEX. CIV. PRAC. & REM. CODE § 71.051(b). In short, the statute requires dismissal of a case
11 Next friends generally are not appointed. They simply act on behalf of the minor unless and until the court
steps in to protect the minor in the event of a conflict of interest. TEX. R. CIV. P. 44, 173; see also Saldarriaga v.
Saldarriaga, 121 S.W.3d 493, 498 (Tex. App.—Austin 2003, no pet.) (noting that Rule 44 “does not provide for any
kind of procedure for the appointment of a next friend,” but “merely gives minors and incapacitated persons the ability
to sue and appear by a representative”).
14
that “has no significant connection to the forum.” In re Pirelli Tire, LLC, 247 S.W.3d 670, 675–76
(Tex. 2007).
The statute lists six factors for consideration in evaluating a forum-non-conveniens motion.
Specifically, the court must consider whether:
(1) an alternate forum exists in which the claim or action may be tried;
(2) the alternate forum provides an adequate remedy;
(3) maintenance of the claim or action in the courts of this state would work
a substantial injustice to the moving party;
(4) the alternate forum, as a result of the submission of the parties or
otherwise, can exercise jurisdiction over all the defendants properly joined to the
plaintiff’s claim;
(5) the balance of the private interests of the parties and the public interest of
the state predominate in favor of the claim or action being brought in an alternate
forum, which shall include consideration of the extent to which an injury or death
resulted from acts or omissions that occurred in this state; and
(6) the stay or dismissal would not result in unreasonable duplication or
proliferation of litigation.
Id. § 71.051(b)(1)–(6). Our decision in Pirelli Tire guides the application of these factors to this
case.
The facts of the two cases are strikingly similar. Pirelli Tire involved an alleged tire failure
leading to a rollover accident in Mexico that caused the death of a Mexican resident who was in the
truck at the time of the accident. 247 S.W.3d at 673. Two years before the accident, a Texas
dealership had purchased the truck at an auction in another state and sold it eleven days later to a
Mexican citizen who imported it into Mexico the same day, where it was used and serviced until the
15
accident. Id. The tire was not manufactured in Texas, and the tire’s manufacturer, Pirelli Tire, was
not formed in Texas, nor did it maintain its principal place of business here. Id. The decedent’s
family sued Pirelli Tire for negligence and strict liability in designing and manufacturing the tire.
Id. Pirelli Tire filed a motion to dismiss for forum non conveniens, which the trial court denied. Id.
Applying the factors listed above, we granted Pirelli Tire’s petition for writ of mandamus.
We held that Pirelli Tire had demonstrated the availability of an adequate forum by stipulating that
it would submit to personal jurisdiction in Mexico and would not assert a statute-of-limitations
defense, and that Mexico was not rendered an inadequate forum merely because its laws may have
been “less favorable” to the plaintiffs. Id. at 677–78. We also held that private-interest factors
favored a Mexican forum, noting that “key evidence and witnesses concerning damages [were] in
Mexico,” including a witness to the accident, the accident investigators and medical personnel,
witnesses most likely to be familiar with the condition and maintenance of the truck and the tire, the
truck’s owner, and the accident scene itself. Id. at 678–79. We also noted that evidence concerning
the tire’s design and manufacture was in Georgia or Iowa, not Texas. Id. at 679. Finally, we held
that the public interests involved “strongly favor[ed] Mexico,” as Mexico has a “paramount” interest
in seeing that its citizens are compensated for their injuries as well as interests in the safety of
Mexican highways and products within its borders. Id. We concluded that “it is unfair to impose
upon the citizens of [the Texas forum county] the cost and administrative burden of a complex
products-liability suit with no significant connection to Texas.” Id.
Like Pirelli Tire, this case involves: Mexican citizens and residents involved in a car accident
in Mexico; an alleged failure of a tire manufactured in the United States, but not in Texas; and brief
16
ownership of the subject vehicle by a Texas dealership approximately two years before the accident,
followed by ownership and maintenance of the vehicle in Mexico. Also like Pirelli Tire, key
evidence and witnesses relating to the accident, the vehicle, the tire, and damages are in Mexico, and
the evidence concerning the tire’s design and manufacture may be in the United States, but it is not
in Texas. These similarities would seem to render Pirelli Tire dispositive of the forum-nonconveniens
analysis.12 However, Rodriguez argues that this case is distinguishable from Pirelli Tire
because of the presence of Texas defendants in the suit. As noted above, in addition to Bridgestone,
the plaintiffs sued the Texas dealership—and its individual owners—that had owned the Explorer
for two weeks in 2007 before selling it to a wholesaler for export to Mexico.13 The petition alleged
that the dealership was liable for selling the vehicle with a recalled tire.
Rodriguez asserts that Mexico’s courts lack personal jurisdiction over these defendants—one
of whom has affirmatively stated that he will not submit to such jurisdiction—rendering Mexico an
inadequate alternate forum. See TEX. CIV. PRAC. & REM. CODE § 71.051(b)(4) (requiring
consideration of whether “the alternate forum, as a result of the submission of the parties or
otherwise, can exercise jurisdiction over all the defendants properly joined to the plaintiff’s claim”).
We need not address whether a showing that the Mexico courts lack jurisdiction over the Gutierrez
12 We found that the trial court had abused its discretion in Pirelli Tire even though the applicable version of
the forum-non-conveniens statute permitted, but did not require, the trial court to dismiss for forum non conveniens when
it found no significant connection to Texas under the enumerated factors. See Act of May 27, 1997, 75th Leg., R.S., ch.
424, § 1, sec. 71.051, 1997 Tex. Gen. Laws 1680, 1680, amended by Act of June 2, 2003, 78th Leg., R.S., ch. 204,
§ 3.04, sec. 71.051, 2003 Tex. Gen. Laws 847, 854. As amended in 2003, the current version of the statute requires
dismissal upon such a finding. TEX. CIV. PRAC. & REM. CODE § 71.051(b).
13 The plaintiffs in Pirelli Tire initially sued both Pirelli and the Texas dealership that had briefly owned the
vehicle. 247 S.W.3d at 673 n.1. However, the plaintiffs nonsuited the dealer in exchange for Pirelli Tire’s agreement
not to remove the case to federal court. Id. The dealer thus played no role in our forum-non-conveniens analysis.
17
defendants would be dispositive of the forum-non-conveniens analysis because the only record
evidence on the subject is that such jurisdiction exists.14 Bridgestone’s Mexican-law expert testified
that the Mexico courts would have jurisdiction over all defendants, both because Bridgestone had
agreed to submit to Mexico’s jurisdiction and because the “denial of justice” doctrine allows a
Mexico court to “seize jurisdiction” if a foreign court has rejected a case on forum-non-conveniens
grounds. Rodriguez did not designate an expert to counter these conclusions and thus presented no
evidence to support his interpretation of Mexican law. Accordingly, the presence of the Texas
defendants does not meaningfully distinguish this case from Pirelli Tire for purposes of evaluating
the adequacy of the alternate forum as part of the forum-non-conveniens analysis.15
As they did in Pirelli Tire, the forum-non-conveniens factors “clearly and overwhelmingly
favor a Mexican forum for resolution of this dispute.” 247 S.W.3d at 679. Accordingly, we hold
that the trial court abused its discretion in denying Bridgestone’s motion to dismiss.
14 Factually, Rodriguez’s inclusion of claims against the dealership does not provide much of a distinction from
Pirelli Tire. Notably, neither the New Jersey dealer that sold the Explorer to the Texas dealership nor the wholesaler
that imported the car to Mexico were sued, even though it is unclear when the tire at issue was put on the Explorer. The
principal claims in the case involve the allegedly defective design and manufacture of the failed tire. As in Pirelli Tire,
“[t]he happenstance that the truck was in Texas for [less than a month] before it was sold and imported to Mexico is
simply insufficient to provide Texas with any interest in this case.” Id. at 679.
15 To the extent Rodriguez claims Mexico is an inadequate forum because the defendants have not waived any
limitations defenses, we agree with Bridgestone that the record does not support this assertion. Leaving aside that
Rodriguez did not make this argument in the trial court, nothing in the record suggests that Mexican law differs from
Texas law on the running of limitations on a minor’s claim. TEX. CIV. PRAC. & REM. CODE § 16.001(a)(1), (b) (stating
that the statute of limitations on a minor’s claims does not begin to run until the minor turns eighteen). While we do not
necessarily presume that the laws of Mexico and Texas are identical, at best the absence of evidence in the record renders
us unable to evaluate Rodriguez’s implied assertion that statute-of-limitations issues affect the forum-non-conveniens
analysis.
18
III. Conclusion
We hold that Texas law allows minors to sue by next friend when they have a legal guardian
who is not authorized to sue in Texas in that capacity. We also hold that a next friend is not a
plaintiff for purposes of the forum-non-conveniens statute’s Texas-resident exception. Finally, we
hold that application of the forum-non-conveniens factors mandates dismissal of this case as a matter
of law. Accordingly, we conditionally grant Bridgestone’s petition for writ of mandamus and order
the trial court to vacate its order denying Bridgestone’s motion to dismiss. We further order the trial
court to “set terms and conditions for . . . dismissing [this] action . . . as the interests of justice may
require, giving due regard to the rights of the parties to the claim or action,” in a manner that is
consistent with this opinion. TEX. CIV. PRAC. & REM. CODE § 71.051(c). The writ will issue only
if the trial court fails to comply.
_________________________________
Debra H. Lehrmann
Justice
OPINION DELIVERED: April 24, 2015
Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 08-11052
AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE CO.,
Plaintiff-Appellant,
v.
RENTECH STEEL LLC; PRESTON TEEL; LESA CROSSWHITE;
JENNINGS TEEL,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Texas (Abilene Division)
Before KING, BARKSDALE, and ELROD, Circuit Judges.
JENNIFER WALKER ELROD, Circuit Judge:
This case addresses whether an insurance policy that excludes coverage
for an “obligation” incurred under “any workers’ compensation law” bars
coverage for a judgment that an employee recovers in a negligence action against
a Texas employer that does not subscribe to the Texas workers’ compensation
system. Because the Texas Workers’ Compensation Act (“TWCA”) imposes no
obligation on a nonsubscriber to compensate an employee for injuries sustained
due to the employer’s own negligence, we find that the exclusion is not
applicable. Accordingly, we AFFIRM the district court’s summary judgment in
favor of defendants-appellees.
United States Court of Appeals
Fifth Circuit
F I L E D
September 21, 2010
Lyle W. Cayce
Clerk
Case: 08-11052 Document: 00511239102 Page: 1 Date Filed: 09/21/2010
No. 08-11052
I.
Plaintiff-Appellant American International Specialty Lines Insurance Co.
(“AISLIC”) appeals from the district court’s summary judgment in favor of
defendants, holding that AISLIC’s umbrella insurance policy (“the AISLIC
policy”), issued to Rentech Boiler Systems, Inc., covered the negligence claims
that Preston Teel, Lesa Crosswhite, and Jennings Teel (“the Teels”) asserted
against Rentech Steel, L.L.C. in the underlying litigation and the resulting
judgment. Rentech Steel, Rentech Boiler Systems, Inc., and Renz Family
Partnership, Ltd. are entities under the control of or owned by a common
owner/entity. Rentech Steel, a nonsubscriber to the Texas workers’
compensation insurance system, maintained both a primary indemnity policy,
which is not implicated in this case, and the AISLIC Policy. Rentech Steel
shared the AISLIC Policy with Rentech Boiler Systems, a subscriber to the
workers’ compensation system, but they maintained separate primary policies
due to their differing statuses in relation to the workers’ compensation system.
The underlying litigation commenced when sixteen-year-old Preston Teel
sustained severe injuries while working at Rentech Steel’s manufacturing
facility in Abilene, Texas. Following the incident, the Teels sued Rentech Steel
in state court for gross negligence, negligence, and negligence per se. Lexington
Insurance Company, Rentech Steel’s primary insurer, initially defended Rentech
Steel in the litigation. But after Lexington Insurance denied further coverage,
AISLIC assumed Rentech Steel’s defense as the umbrella insurer. A few weeks
before trial was to begin, AISLIC sought a declaratory judgment that it had no
obligation to defend or indemnify Rentech Steel in the lawsuit. On the first day
of trial, Rentech Steel entered Chapter 7 bankruptcy. According to Rentech
2
Case: 08-11052 Document: 00511239102 Page: 2 Date Filed: 09/21/2010
No. 08-11052
Steel, the bankruptcy was necessary because AISLIC would not pay for the suit.
The bankruptcy court, however, lifted the stay and permitted the case to proceed
to trial on the condition that any recovery would be limited to the proceeds of the
AISLIC insurance policy.
The jury found for the Teels on their negligence and negligence per se
claims, but it did not find gross negligence on the part of Rentech Steel. The
court then entered a judgment against Rentech Steel for $12,470,000 in actual
damages, which was reduced to $10,570,000 after applying a settlement credit.
Rentech Steel has appealed the judgment, and AISLIC has continued to defend
Rentech Steel under a reservation of rights during the appeal. As a consequence
of the state-court judgment, the Teels became proper claimants to Rentech
Steel’s insurance policy.
Shortly after the state court entered its judgment, AISLIC filed a
declaratory judgment action in federal court seeking to establish that it had no
duty to either defend Rentech Steel in the underlying state-court lawsuit or to
indemnify Rentech Steel for the judgment because the AISLIC policy’s “Various
Laws” exclusion excluded coverage for any “obligation of the Insured under . . .
any workers’ compensation, disability benefits, or unemployment compensation
law, or any similar law.” AISLIC moved for summary judgment, arguing that
a negligence claim filed against a nonsubscribing employer is an obligation
arising under the TWCA, not state common law, so the Teels’ judgment against
Rentech Steel was necessarily an “obligation” under Texas’s workers’
compensation law—an obligation explicitly excluded from coverage under the
“Various Laws” exclusion. The Teels and Rentech Steel opposed AISLIC’s
motion.
3
Case: 08-11052 Document: 00511239102 Page: 3 Date Filed: 09/21/2010
No. 08-11052
The district court denied AISLIC’s summary-judgment motion, holding
that the judgment against Rentech Steel did not fall within the Policy’s “Various
Laws” exclusion. The order explained that, although the TWCA deprives
appellees of the right to assert a common-law negligence or negligence per se
claim against a subscribing employer, the Act imposed no “obligation” on a
nonsubscribing employer to compensate an employee for injuries resulting from
the employer’s negligence, but merely limited an employer’s defenses against an
employee’s common-law claims. Alternatively, the court held that, because the
“Various Laws” exclusion was ambiguous, Texas law required that the exclusion
be interpreted against AISLIC and in favor of coverage where appellees’
interpretation of the exclusion was reasonable.
Following the district court’s denial of AISLIC’s motion for summary
judgment, appellees filed for summary judgment on the ground that the AISLIC
policy’s “Various Laws” exclusion did not bar coverage of the judgment against
Rentech Steel, which the district court granted. This appeal followed.
II.
We review a district court’s summary judgment de novo, applying the same
legal standards that the district court applied, viewing the evidence in the light
most favorable to the nonmoving party. Am. Int’l Specialty Lines Ins. Co. v.
Canal Indem. Co., 352 F.3d 254, 259–60 (5th Cir. 2003). We affirm “only if
there is no genuine issue of material fact and one party is entitled to prevail as
a matter of law.” Cedyco Corp. v. PetroQuest Energy, LLC, 497 F.3d 485, 488
(5th Cir. 2007) (citations omitted). Where, as here, parties have filed crossmotions
for summary judgment, each motion must be considered separately
because each movant bears the burden of showing that no genuine issue of
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material fact exists and that it is entitled to a judgment as a matter of law.
Shaw Constructors v. ICF Kaiser Engr’s, Inc., 395 F.3d 533, 538–39 (5th Cir.
2004).
III.
At issue in this case is whether an employee’s negligence action against an
employer that does not subscribe to the Texas workers’ compensation system is
an “obligation” under the TWCA, such that it is excluded under the AISLIC
Policy’s “Various Laws” exclusion. The AISLIC Policy’s “Various Laws”
exclusion provides:
This insurance does not apply to any obligation of the Insured
under any of the following:
1. the Employee Retirement Income Security Act of 1974
(including amendments relating to the Consolidated
Omnibus Budget Reconciliation Act of 1985), or any
amendment or revision thereto, or any similar law; or
2. any workers’ compensation, disability benefits or
unemployment compensation law, or any similar law.
Because Texas law governs this claim, we employ the principles of Texas
contract construction in interpreting the “Various Laws” exclusion. Texas law
provides that insurance policies are construed according to common principles
governing the construction of contracts, and the interpretation of an insurance
policy is a question of law for a court to determine. New York Life Ins. Co. v.
Travelers Ins. Co., 92 F.3d 336, 338 (5th Cir. 1996). Limiting our inquiry to the
four corners of the underlying complaint and the four corners of the insurance
policy, we interpret the contract to discern the intention of the parties from the
language expressed in the policy. See Amerisure Ins. Co. v. Navigators Ins.
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Co., 611 F.3d 299, 309 (5th Cir. 2010). “No single provision taken alone will be
given controlling effect; rather, all the provisions must be considered with
reference to the whole instrument.” See Coker v. Coker, 650 S.W.2d 391, 393
(Tex. 1983) (citations omitted). Where, as here, the disputed provision is an
exclusion, the insurer bears the burden of establishing that the exclusion
applies. Guaranty Nat’l Ins. Co. v. Vic Mfg. Co., 143 F.3d 192, 193 (5th Cir.
1998).
Whether a contract is ambiguous is a question of law. Kelley-Coppedge,
Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998). An ambiguity does
not arise simply because the parties present conflicting interpretations; it “exists
only if the contractual language is susceptible to two or more reasonable
interpretations.” Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex.
2003) (citation omitted). “If policy language is worded so that it can be given a
definite or certain legal meaning, it is not ambiguous,” and the court construes
it as a matter of law without admitting evidence for the purpose of creating an
ambiguity. Id.; see Univ. C.I.T. Credit Corp. v. Daniel, 243 S.W.2d 154, 157 (Tex.
1951). But if the policy language is ambiguous, we construe it “strictly against
the insurer and liberally in favor of the insured,” Barnett v. Aetna Life Ins. Co.,
723 S.W.2d 663, 666 (Tex. 1987), and an “even more stringent construction is
required” where the ambiguity pertains to an “exception or limitation on [the
insured’s] liability under the policy,” Gulf Chem. & Metallurgical Corp. v.
Associated Metals & Minerals Corp., 1 F.3d 365, 369 (5th Cir. 1993).
Consequently, we must adopt the “construction of an exclusionary clause urged
by the insured as long as that construction is not itself unreasonable, even if the
construction urged by the insurer appears to be more reasonable or a more
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accurate reflection of the parties’ intent.” Glover v. Nat’l Ins. Underwriters, 545
S.W.2d 755, 761 (Tex. 1977).
Employing these principles, we find no ambiguity in the language of the
“Various Laws” exclusion. The exclusion plainly excludes from coverage only
those legal obligations imposed by “any workers’ compensation . . . law.” This
provision is straightforward. If Texas’s workers’ compensation law imposes a
duty upon Rentech Steel to compensate the Teels for the injuries Preston Teel
incurred due to Rentech Steel’s negligence, the exclusion applies and bars
coverage. Hence, the only question before the court concerns the proper
interpretation of Texas law: does the TWCA obligate a nonsubscribing employer
to compensate an employee for injuries sustained as a result of the employer’s
own negligence, or is such compensation a duty under Texas common law? 1
IV.
AISLIC and appellees disagree on two fundamental aspects of Texas law:
(1) whether an employee’s negligence claim against a nonsubscribing employer
arises under the TWCA or common law, and (2) if it arises under the TWCA,
whether the TWCA imposes an “obligation” upon a nonsubscriber to compensate
an employee for injuries caused by its own negligence. AISLIC contends that the
provision of the TWCA addressing negligence actions against nonsubscribers,
codified at section 406.033 of the Texas Labor Code, wholly supplanted the Texas
common-law claim with a statutory claim. According to AISLIC, because the
TWCA creates the cause of action under which the Teels sued Rentech Steel for
Although AISLIC challenges both its duties to indemnify and defend Rentech Steel, 1
which are separate duties creating separate causes of action under Texas law, see Amerisure,
611 F.3d at 309–10, the parties agree that the applicability of the “Various Laws” exclusion
is determinative of whether AISLIC owes both duties.
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negligence, the TWCA necessarily imposes an obligation on Rentech Steel to pay
the Teels’ judgment. AISLIC premises its theory on the fact that section 406.033
deprives nonsubscribing employers of certain defenses available at common law
and sets out an employee’s burden of proof in negligence cases. Tex. Labor Code
§ 406.033 (b), (c).
Appellees contend that AISLIC can prove neither that the TWCA creates
the cause of action for negligence against a nonsubscriber, nor that section
406.033 imposes any “obligation” on a nonsubscriber to pay a judgment to an
employee for injuries caused by negligence. According to appellees, rather than
displacing the common law, section 406.033 “simply leaves the common law
intact with one modification: as a carrot-and-stick incentive to participate in the
compensation program, the TWCA deprives nonsubscribers of some traditional
common-law defenses.” But regardless of what law creates the cause of action,
appellees argue that section 406.033 is devoid of any language creating an
“obligation” for nonsubscribing employers to compensate employees for accidents
resulting from negligence, so the exclusion does not apply.
Where, as here, the proper resolution of the case turns on the
interpretation of Texas law, we “are bound to apply [Texas] law as interpreted
by the state’s highest court.” Barfield v. Madison Cnty., Miss., 212 F.3d 269,
271–72 (5th Cir. 2000). Because the Texas Supreme Court has never ruled on
whether the Texas Workers’ Compensation Act “obligates” a nonsubscribing
employer to compensate an employee for injuries sustained due to employer
negligence, we must make an “Erie guess” as to how the Texas Supreme Court
would rule upon the issue based on
(1) decisions of the [Texas] Supreme Court in analogous cases, (2)
the rationales and analyses underlying [Texas] Supreme Court
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decisions on related issues, (3) dicta by the [Texas] Supreme Court,
(4) lower state court decisions, (5) the general rule on the question,
(6) the rulings of courts of other states to which [Texas] courts look
when formulating substantive law and (7) other available sources,
such as treatises and legal commentaries.
Hodges v. Mack Trucks, Inc., 474 F.3d 188, 199 (5th Cir. 2006) (quoting
Centennial Ins. Co. v. Ryder Truck Rental, Inc., 149 F.3d 378, 382 (5th Cir.
1998)).
Turning first to the text of section 406.033, nothing in the text indicates
that the Texas Legislature intended to impose a legal “obligation” on a
nonsubscriber to compensate an injured employee. The statute simply specifies
that, “[i]n an action against an employer who does not have workers’
compensation insurance coverage to recover damages for personal injuries or
death sustained by an employee in the course and scope of employment,” the
defendant employer is deprived of certain defenses available at common law,
though other defenses remain available. § 406.033(a), (b). It also clarifies that
the common-law negligence standard continues to apply: “the plaintiff must
prove negligence of the employer or of an agent or servant of the employer acting
within the general scope of an agent’s or servant’s employment.” § 406.033(c).
Although we believe that this statute, on its face, does no more than
modify the defenses available at common law, and does not create a cause of
action that usurps the common-law cause of action, we “are emphatically not
permitted to do merely what we think best; we must do that which we think the
[Texas] Supreme Court would deem best.” Jackson v. Johns-Manville Sales
Corp., 781 F.2d 394, 397 (5th Cir. 1986) (en banc). Thus, we consider the
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relevant authorities to determine how the Texas Supreme Court would interpret
section 406.033.
A. Texas Cases
In making our Erie guess, we look first to those Texas Supreme Court
cases that, while not deciding the issue, provide guidance as to how the Texas
Supreme Court would decide the question before us. Our preeminent Erie-guess
authorities, language and decisions from the Texas Supreme Court, suggest that
the court would find that a negligence claim against a nonsubscriber is a
common-law claim, and that section 406.033 imposes no “obligation” upon
Rentech Steel to pay the Teels’ judgment. The Texas Supreme Court in Kroger
Company v. Keng, 23 S.W.3d 347, 349 (Tex. 2009), indicated in dicta that a
negligence claim against a non-subscriber is modified by the TWCA, but remains
a claim at common law. In that case, the court addressed whether Chapter 33
of the Texas Civil Practice and Remedies Code required the district court to
submit a comparative-responsibility question to the jury in a negligence action
against a nonsubscriber, or alternatively, whether section 406.033 prevented the
jury from considering comparative responsibility. The Texas Supreme Court
explained in dicta that the TWCA
allow[s] injured workers, whose employers subscribed to workers’
compensation insurance, to recover without establishing the
employer’s fault and without regard to the employee’s negligence.
In exchange, the employees received a lower, but more certain,
recovery than would have been possible under the common law.
Employers were, however, allowed to opt out of the system, resulting
in their employees retaining their common-law rights. 2
The Texas Supreme Court went on to explain that the purpose of enacting section 2
406.033 was to discourage employers from choosing to opt out by depriving them of certain
traditional common-law defenses to an employee’s negligence action. Kroger, 23 S.W.3d at
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Id. at 349–50 (emphasis added). This suggests that the right to bring a claim
against a nonsubscriber for negligence remains what it has always been—a right
arising under common law.
AISLIC, however, argues that this case supports exactly the opposite
conclusion: that such a claim is an obligation arising under the TWCA because
the TWCA “governs” the negligence cause of action. AISLIC reads Kroger as
“unequivocally stat[ing] that the [TWCA] governs an employee’s personal-injury
claim against a nonsubscribing employer,” as the Texas Supreme Court there
explained that
Labor Code § 406.033, which is part of the Workers’ Compensation
Act, governs an employee’s personal-injury action against his or her
employer, when the employer is a nonsubscriber under the Act.
. . . .
In enacting section 406.033 and its predecessors, the
Legislature intended to delineate explicitly the structure of an
employee’s personal-injury action against his or her nonsubscribing
employer. Section 406.033(a) prescribes the defenses that are
unavailable to a nonsubscriber; section 406.033(c) dictates the
defenses that implicate the employee’s conduct and on which an
employer may rely; and section 406.033(d) provides the employee’s
burden of proof . . . .
23 S.W.3d 347, 349–51 (Tex. 2000). Thus, according to AISLIC, because the
TWCA governs an employee’s negligence claim against a nonsubscriber, it also
provides an obligation for the nonsubscriber to compensate the injured employee.
Not so. We agree that this language in Kroger indicates that a negligence
claim against a nonsubscriber must proceed within the parameters delineated
in section 406.033. But it does not follow that simply by virtue of governing the
350.
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claim, the TWCA also “obligates” Rentech Steel to pay the Teels’ judgment.
Many common-law claims are “governed” by statutes of limitations, but those
statutes neither give rise to the cause of action they govern, nor do they obligate
any party to pay a judgment arising from a governed claim. See Texas Civ. Prac.
& Rem. Code § 16.003(a), (b) (providing a two-year statute of limitations for such
common-law claims as trespass, injury to the estate or property of another,
conversion of personal property, taking or detaining the personal property of
another, personal injury, and forcible entry and detainer); Porterfield v. Ethicon,
Inc., 183 F.3d 464, 467 (5th Cir. 1999) (citing section 16.003(a) for the premise
that “a two-year statute of limitations governs personal injury actions.”
(emphasis added)). Because it is clear that AISLIC’s chain of logical
assumptions is missing a key link, we must conclude that Kroger provides no
support for AISLIC’s theory.
Moreover, in Kroger, the Texas Supreme Court explicitly declined to adopt
the appellate court’s reasoning, favorable to AISLIC, that a suit against a
nonsubscriber is “‘an action to collect workers’ compensation benefits under the
workers compensation laws of this state.’” See Kroger, 23 S.W.3d at 352 (quoting
Texas Civ. Prac. & Rem. Code § 33.002(c)(1)). The court reserved that question
for another day, and instead affirmed the appellate court’s decision that no
comparative-responsibility jury instruction was required on the ground that no
such jury instruction was possible because section 406.033 precludes a finding
of comparative responsibility. Id. Thus, we do not read Kroger to suggest that
the TWCA imposes an obligation on Rentech Steel to compensate the Teels for
Preston’s injuries.
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Further, the Texas Supreme Court’s decision in Fairfield Insurance Co. v.
Stephens Martin Paving, L.P., demonstrates that, even where the TWCA sets
certain parameters on an employee’s claim against a nonsubscriber, it does not
necessarily transform the claim into an obligation under the TWCA. 246 S.W.3d
653, 659 (Tex. 2008). In Fairfield, the Texas Supreme Court held that the
standard-form employers’ liability policy—the same policy AISLIC issued to
Rentech Steel, containing the very same “Various Laws” exclusion—did not
exclude coverage for claims of gross negligence against nonsubscribers. See id.
This holding is significant because Texas Labor Code section 408.001(b), the
provision of the TWCA governing gross-negligence claims against
nonsubscribers, specifies the employee’s burden of proof in that action: the
employee must prove that the employee’s “death was caused by an intentional
act or omission of the employer or by the employer’s gross negligence.” Tex. 3
Lab. Code § 408.001(b). Fairfield thus belies AISLIC’s contention that section
406.033 subsumed the common law because it “specif[ies] the employee’s burden
of proof and the defenses available to the employer.” Where the TWCA provides
the employee’s burden of proof for both gross-negligence and negligence claims,
and the former are unquestionably covered by the insurance policy, the statute’s
provision of the employee’s burden of proof cannot provide the basis for a
contrary result here.
Though the decisions and dicta of the Texas Supreme Court weigh more
heavily in our Erie analysis, we also consider those decisions of Texas appellate
courts in determining how the Texas Supreme Court would rule on this issue.
Further, section 408.001 goes on to define “gross negligence” as “the meaning assigned 3
by Section 41.001, Civil Practices and Remedies Code.” Tex. Lab. Code § 408.001(c).
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AISLIC invites us to follow Robertson v. Home State County Mutual Insurance
Company, —S.W.3d—, 2010 WL 2813488 (Tex. App.—Ft. Worth, 2010, no pet.),
which held that the employee’s judgment for damages against his
nonsubscribing employer was an “obligation” under workers’ compensation law,
excluded from coverage by the “Various Laws” exclusion in his employer’s
liability policy. We decline this invitation, as Robertson is inconsistent with 4
both the relevant Texas Supreme Court caselaw and the plain reading of section
406.033. See Warfield v. Byron, 436 F.3d 551, 558 (5th Cir. 2006) (finding that,
where authorities were split, the Texas Supreme Court would adopt the view
that was most consistent with the “plain reading” of the statute).
We consider Robertson to be unpersuasive because it conflates “governs”
with “obligates,” and because it fails to account for the Texas Supreme Court’s
decision in Fairfield. See Robertson, 2010 WL 2813488, at *5. The Robertson
court grounded its holding that no coverage existed on the statute’s provision of
the plaintiff’s burden of proof, id. at *7. This conflicts, however, with Fairfield’s
holding that the standard employers’ liability policy covered claims for gross
negligence, though the TWCA sets the standard of proof for those claims as well,
See Fairfield, 246 S.W.3d at 657. We are convinced by the plain language of
section 406.033 and by Fairfield that the Texas Supreme Court would not follow
Robertson, so we do not defer to it. Mem’l Hermann Healthcare Sys., Inc., v.
Eurocopter Deutschland, GMBH, 524 F.3d 676, 678 (5th Cir. 2008) (explaining
that we need not defer to an intermediate state appellate court decision where
we are “convinced by other persuasive data that the highest court of the state
But see In re Autotainment Partners, 183 S.W.3d 532, 537 (Tex. App.—Houston [14th 4
Dist.] 2006, no pet.) (holding that a negligence claim against a nonsubscriber for workers’
compensation benefits does not arise under the TWCA).
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would decide otherwise.”); see also Warfield, 436 F.3d at 558 (holding that the
Texas Supreme Court would follow those decisions that were most consistent
with the “plain reading” of the statute).
B. Decisions From Other Courts
Although Texas cases provide greater guidance for our Erie analysis, we
may likewise “consider, among other sources, treatises, decisions from other
jurisdictions, and the ‘majority rule.’” SMI Owen Steel Co. v. Marsh USA, Inc.,
520 F.3d 432, 437 (5th Cir. 2008) (citation omitted); see also Amerisure Ins. Co.
v. Navigators Ins. Co., 611 F.3d 299, 311 (5th Cir. 2010). Here, we have the
benefit of a number of federal cases interpreting the TWCA, and we consider 5
these cases in determining whether the Texas Supreme Court would conclude
that section 406.033 imposes an obligation on Rentech Steel to pay the Teels’
judgment.
We generally consider decisions from other states to the extent they are relevant, but 5
the decisions AISLIC submits are largely inapposite because, unlike most other states, Texas
grants employers the right to choose whether to participate in the workers’ compensation
system. In AISLIC’s cases, the courts considered how nonsubscribers were acting illegally
under state law, but Rentech Steel is not similarly situated. See Indian Harbor Ins. Co. v.
Williams, 998 So. 2d 677, 678–79 (Fla. Ct. App. 2009); Weger v. United Fire & Cas. Co., 796
P.2d 72, 74 (Colo. Ct. App. 1990); Hanover Ins. Co. v. Ramsey, 539 N.E.2d 537, 538 (Mass.
1989); Florida Ins. Guar. Ass’n v. Revoredo, 698 So. 2d 890, 892–93 (Fla. Ct. App. 1997);
Tri-State Constr., Inc. v. Columbia Cas. Co., 692 P.2d 899, 903 (Wash. App. 1984); cf. Liberty
Mut. Ins. Co. v. United Nat’l Ins. Co., 731 P.2d 167, 168–70 (Haw. 1987) (addressing a different
issue).
In states where employers are compelled to participate in the workers’ compensation
system, there is a stronger argument that employers who fail to participate in the mandatory
system are nevertheless “obligat[ed]” by law to compensate injured employees. See 21 Eric
Mills Holmes & Mark S. Rhodes, Holmes’ Appleman on Insurance 2d, § 132.5 (Lexis Nexis ed.
2002) (“The [policy] exclusion excludes ‘any obligation’ of the insured under a workers’
compensation, disability benefits, or unemployment compensation, or any similar law.
Including the word ‘obligation’ means that no coverage applies when (1) an insured has
statutory coverage and it applies to a loss or (2) an insured should have obtained the statutory
protection that applies to a loss.”).
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We begin this analysis by considering Middleton v. Texas P&L Co., a
Supreme Court decision examining the TWCA only a few years following its
1913 enactment. 249 U.S. 152 (1919). The TWCA withstood constitutional
challenge in the Texas Supreme Court in 1916, but with United States Supreme 6
Court review imminent, the Texas Legislature amended the Act while the appeal
was pending to allow workers to forego workers’ compensation remedies and
thereby retain their common-law rights of action. See Ferguson v. Hosp. Corp.
Int’l, 769 F.2d 268, 271 (5th Cir. 1985). In 1919, the Supreme Court affirmed
the Texas Supreme Court and held that the statute was constitutional.
Middleton, 249 U.S. at 155. In describing the Act, the Court explained that the
TWCA shielded employers from common-law suits, but “[e]mployers who do not
become subscribers are subject as before to suits for damages based on
negligence.” Id. (emphasis added). Negligence suits preceding the enactment of
the TWCA were unquestionably suits under common law. Therefore, the
Supreme Court’s statement leaves little doubt that it interpreted the TWCA as
not fundamentally changing the characterization of common-law negligence
claims against nonsubscribers.
We are also guided by those federal decisions that have considered the
question whether an action against a nonsubscriber arises under common law
or the TWCA. Rentech Steel argues that we should follow Pyle v. Beverly
Enters.-Tex., 826 F. Supp. 206, 209 (N.D. Tex. 1993), holding that negligence
Middleton v. Texas P. & L. Co., 185 S.W. 556, 561-62 (1916) (rejecting an employee’s 6
challenge that the statute’s requirement that he accept compensation under his employer’s
compensation policy in lieu of common-law damages constituted a deprivation of property
without due process in violation of the Fourteenth Amendment).
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claims against nonsubscribers exist independently of the TWCA. In that well- 7
reasoned opinion, Judge Fitzwater considered whether the plaintiff’s negligence
suit against her nonsubscribing employer arose under the TWCA, such that it
was not preempted by ERISA. The court held that they were not so preempted
because the plaintiff’s
state court petition does not seek recovery pursuant to the TWCA.
It clearly alleges common law claims of negligence, intentional
infliction of emotional distress and breach of duty of good faith and
fair dealing. These are not causes of action that are created by the
TWCA; they exist independently. Moreover, the fact that the TWCA
deprives employers of certain defenses to negligence claims does not
mean that claims by employees against nonsubscribing employers
are brought pursuant to the TWCA. See Eurine v. Wyatt Cafeterias,
Inc., 1991 WL 207468 at *2 (N.D. Tex. Aug. 21, 1991) (Sanders, C.J.)
(“A cause of action does not arise under workers’ compensation laws
merely because the workers’ compensation statute deprives the
defendant of certain defenses to the cause of action.”).
Id.
This approach, we believe, is consistent with the Texas Supreme Court’s
approach in Kroger v. Keng, 23 S.W.3d 347 (Tex. 2000), and with the history of
the TWCA, see Nunez, 771 F. Supp. at 167–68 (“When the Texas Legislature put
a workers’ compensation law into effect in 1917 it, for all practical purposes,
abolished the right of an employee to bring a common-law action against an
employer having workers’ compensation insurance coverage. However, the
Legislature preserved the common law right of action for the employees of an
See also Nunez v. Wyatt Cafeterias, Inc., 771 F. Supp.165, 167–68 (N.D. Tex. 1991) 7
(holding that by bringing a cause of action against his nonsubscribing employer, the plaintiff
had “but exercised his common law rights, as those rights have been enhanced by the workers’
compensation laws of Texas”).
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employer who elected not to carry workers’ compensation insurance, and
enhanced those rights by a statutory provision that prevented an employer in
such an action from asserting defenses that theretofore had been available to
employers.”).
AISLIC, however, contends that we must consider those district-court
decisions holding that claims against nonsubscribers are not removable to
federal court under 28 U.S.C. § 1445(c), the federal statute addressing
“nonremovable actions,” because such claims “arise” under the TWCA. See
Figueroa v. Healthmark Partners, 125 F. Supp. 2d 209, 210 (S.D. Tex. 2000); see
also Smith v. Tubal-Cain Indus., Inc., 196 F. Supp. 2d 421, 423 (E.D. Tex. 2001);
Dean v. Tex. Steel Co., 837 F. Supp. 212, 214 (N.D. Tex. 1993). But see Eurine
v. Wyatt Cafeterias, Inc., No. 3-91-0408-H, 1991 WL 207468, at *2 (N.D. Tex.
Aug. 21, 1991) (unpublished) (holding that, for the purposes of section 1445(c),
a negligence action against a nonsubscriber is a common-law claim that does not
arise out of the TWCA). We find these cases to be of limited value because
section 1445(c) does not require the court to determine whether the TWCA
imposes an “obligation” on a nonsubscriber to pay a judgment to an employee
injured as a result of the employer’s negligence. It provides only that “a civil
action in any State court arising under the workmen’s compensation laws of such
state may not be removed to any district court of the United States.”
Further, even if we assume arguendo that a claim that “arises under” the
TWCA becomes an “obligation” under that law, the section 1445(c) cases
nevertheless remain an imperfect litmus test for how the Texas Supreme Court
would resolve the case before us. This is because of the deference courts afford
to the congressional intent behind the removal statute, which is not applicable
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here. As the district court explained in Figueroa, “Section 1445(c) denotes an
effort by Congress to restrict the district courts’ diversity jurisdiction in order to
relieve the collectively overburdened docket of the federal courts. Courts have
therefore construed section 1445(c) broadly in order to further this purpose.”
Figueroa, 125 F. Supp 2d. at 211 (internal citations omitted). This broad
construction was also apparent in Smith, where the court found that a
negligence claim “aro[se] under” the TWCA simply because “[n]egligence actions
against nonsubscribing employers are expressly contemplated by Texas workers’
compensation law; indeed, several common-law defenses have been eliminated
by statute.” Smith, 196 F. Supp. 2d at 423 (citation omitted). We do not
comment on whether the TWCA’s mere “contemplat[ion]” of a cause of action
provides sufficient justification to deny removal under section 1445(c), but it is
no proof at all that the TWCA actually “obligate[s]” a nonsubscriber to
compensate an employee for negligence-induced injury.
Likewise, Illinois National Insurance Co. v. Hagendorf Construction Co.,
337 F. Supp. 2d 902 (W.D. Tex. 2004), is similarly unpersuasive. In that case,
the court held that a policy exclusion, similar to the one considered here,
excluded coverage for an employee’s negligence claim against a nonsubscriber
because the claim arose under the TWCA. See id. at 905. We are disinclined to 8
follow this decision for four reasons. First, though the Texas appellate court in
Kroger followed the reasoning that the federal district court would later apply
in Hagendorf, the Texas Supreme Court expressly declined to adopt that
reasoning, and decided the case on other grounds. Kroger v. Keng, 23 S.W.3d
The exclusion in Hagendorf excluded “[a]ny obligation for which the insured or the 8
insured’s insurer may be held liable under any workers compensation, disability benefits or
unemployment compensation law or any similar law.” Hagendorf, 337 F. Supp. 2d at 904.
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No. 08-11052
347 (Tex. 2000). This inspires little confidence that the court would opt to follow
that decision in this instance. Second, Hagendorf’s holding is grounded on
Figueroa, Smith, and Dean—decisions that were decided using a broad
construction of the term “arising under,” a construction that we do not apply
here. Illinois Nat’l, 337 F. Supp. 2d at 905 (citing Figueroa,125 F. Supp. 2d 209;
Smith, 196 F. Supp. 2d 421; Dean, 837 F. Supp. 212). Third, just as in the
removal cases, Hagendorf held that the exclusion applied because the negligence
claims were “commenced pursuant” to the TWCA, but this reasoning does not
hold water. The text of the exclusion does not purport to exclude claims
“commenced pursuant” to any workers’ compensation law. The language
required the court to determine whether the TWCA actually imposed an
obligation on the nonsubscriber to compensate an employer for injuries caused
by negligence. The court did not do so.9
Finally, we find Hagendorf unreliable because the three decisions upon
which the court premised its holding—Figueroa, Smith, and Dean—derive their
respective holdings, at least in part, from a misreading of Foust v. City Insurance
Co, 704 F. Supp. 752 (W.D. Tex. 1989) (Gee, J., sitting by designation). These
courts interpreted Foust’s language—that employers “depart the general
common-law tort system” upon hiring workers regardless of whether they choose
to subscribe to the workers’ compensation system—as implying that the
common-law claims had been extinguished. Id. at 753; see also Figueroa, 125 F.
Supp. 2d at 211 (quoting Foust, 704 F. Supp. at 753); Smith, 196 F. Supp. 2d at
423 (same); Dean, 837 F. Supp. at 214 (same). This interpretation conflicts with
For these same reasons, we 9 are not persuaded by Markel Insurance Company, Inc. v.
Spirit of Texas Cheer & Gymnastics, No. 4:08-CV-758-Y, 2010 WL 3283051 (N.D. Tex. Aug. 19,
2010), which followed Hagendorf. See id. at *6.
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Foust’s language just sentences later: depending on whether an employer
subscribed to the workers’ compensation system, the TWCA either “admitted
[the employer] to the worker’s compensation system or removed its defenses and
relegated it to Texas common law, shorn of [its] defenses.” Foust, 704 F. Supp.
at 753 (emphasis added). Accordingly, we hold that a negligence claim against
a nonsubscriber is not an “obligation” imposed by the TWCA.
V.
Alternatively, assuming arguendo that the “Various Laws” exclusion is
ambiguous, summary judgment for appellees would still be proper if their
interpretation of the exclusion is reasonable. See Amerisure 10 Ins. Co. v.
Navigators Ins. Co., 611 F.3d 299, 309 (5th Cir. 2010) (explaining that we must
adopt the “interpretation of the exclusionary clause urged by the insured if it is
‘not itself unreasonable,’ even if the insurer’s interpretation seems ‘more
reasonable or a more accurate reflection of the parties’ intent.’” (citation
omitted)). The district court stated in its alternative holding that the phrase
“any obligation . . . under any workers’ compensation . . . law” could be
We reject AISLIC’s argument that the district court was prohibited from finding 10
ambiguity sua sponte, as we have previously held that “[t]he interpretation of the contract and
determination of ambiguity, however, is a matter of law, and the court ‘may conclude that a
contract is ambiguous even in the absence of such a pleading by either party.’” In re Newell
Indus., Inc., 336 F.3d 446, 449 n.5 (5th Cir. 2003) (quoting Sage St. Assocs. v. Northdale
Constr. Co., 863 S.W.2d 438, 445 (Tex. 1993)). As this court has observed, this scenario rarely
presents itself. Brooks, Tarlton, Gilbert, Douglas & Kressler v. U.S. Fire Ins. Co., 832 F.2d
1358, 1365 (5th Cir. 1987) (citations omitted) (“An allegation of ambiguity. . . is of pivotal
importance. Moreover, ‘[a]s necessity is the mother of invention, so is ambiguity the father of
multiple reasonable constructions, and where lawyers are involved, one never lacks an eager
parent of either gender.’ . . . It is interesting, therefore, that the allegation of ambiguity in this
case came, not from the parties, but from the district court.”).
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No. 08-11052
interpreted to incorporate only workers’ compensation benefits, not a judgment
in a negligence suit. It explained that
the “Various Laws”exclusion could be interpreted as only excluding
claims already covered by workers’ compensation benefits rather
than excluding all claims of employees, whether filed to collect
workers’ compensation benefits or damages by common-law. In such
a case, there is more than one plausible interpretation of the
“Various Laws” exclusion. Thus, applying the provisions of the
“Various Laws” exclusion to the dispute before the Court produces
an uncertain or ambiguous result, and the exclusion will be
interpreted against AISLIC and in favor of coverage.
We agree with the district court that an “obligation” under “workers’
compensation law” could be interpreted to refer only to benefits paid by the
workers’ compensation system, as the meaning of the term obligation has “many,
wide, and varied meanings” that depends on the context in which the word is
used. See Black’s Law Dictionary (9th ed. 2009). Where negligence claims
against nonsubscribers, at least traditionally, have been recognized as arising
under common law, we conclude that it is reasonable to interpret the “Various
Laws” exclusion to exclude only mandatory benefit payments.
CONCLUSION
In summary, AISLIC has failed to meet its burden of proving that the
“Various Laws” exclusion bars coverage of the Teels’ claims and the judgment
against Rentech Steel. AISLIC has not shown that the Texas Supreme Court
would conclude either that a negligence claim against a nonsubscriber arises
under the TWCA rather than common law, or that Texas Labor Code section
406.033 imposes any obligation upon Rentech Steel to pay the Teels’ judgment.
For these reasons, we AFFIRM the judgment of the district court.
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Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.
In Continental Casualty Company v. Downs, 81 S.W.3d 803 (Tex. 2002), the Texas Supreme Court held that taking some action within seven days is what entitles the IC to a 60-day period to investigate or deny compensability. In Southwestern Bell Telephone Company L.P. v. Mitchell, 276 S.W.3d 443 (Tex. 2008), the Texas Supreme Court noted that less than nine months after Downs was decided the Legislature amended the statute to make clear that an IC who failed to comply with Section 409.021(a) did not waive the right to contest the compensability of the injury, and overruled the Downs case. Therefore, the determination of IC wavier based on a seven-day waiver period is error and must be reversed. Prior APDs applying the seven-day waiver period have been overruled by the Mitchell case. Any APDs cited within this manual that discuss a seven-day waiver period are not cited for that proposition.
An IC is liable for accrued benefits if it fails to dispute compensability of the injury within 15 days after receiving written notice of the claimed injury. Section 409.021; Section 124.3(a)(1). If the IC disputes compensability of the claimed injury after 15 days, but within 60 days of receiving written notice of the claimed injury, the IC is liable for all accrued benefits up until the time of dispute. Section 124.3(a)(2). Once the IC files a dispute with the Division, before the 60th day after receiving written notice of the injury, the IC is no longer liable for further benefits unless the Division determines that the injury is in fact compensable.
If the IC fails to dispute compensability of the claimed injury within 15 days of receiving written notice, but does successfully dispute compensability within 60 days of receiving written notice, and if the IW is being treated in a network as provided for in House Bill 7, Section 8.016, the IC’s maximum liability for accrued medical benefits prior to the dispute is limited to $7,000.00. Texas Insurance Code Section 1305.153. The $7,000.00 limit is effective for claims with a DOI on and after the date of the contract establishing the certified network.
If the IC does not dispute the claimed injury within 60 days after it received written notice of the claimed injury, the IC waives the right to dispute the compensability of the claimed injury unless the IC can prove that there is newly discovered evidence that could not have reasonably been discovered earlier. Section 409.021(d). An IC that contests compensability of the claimed injury after 60 days on the basis of newly discovered evidence is liable for, and must continue to pay, all benefits due until the Division has made a finding that the evidence could not have been reasonably discovered earlier. Section 124.3(c)(2).
Defense Waived. If the IC waives the right to contest compensability of the claimed injury due to its failure to take the action required by Section 409.021, at a minimum the IC waives:
1. The exceptions (IC defenses) listed in Section 406.032. These include:
(A) The right to assert that the injury occurred while the IW was in a state of intoxication. APD 030663-s.
(B) The right to assert that the injury occurred by the IW’s willful attempt to injure himself or to unlawfully injure another person. APD 992365.
(C) The right to assert that the injury was caused by a third person due to personal animosity. APD 992365.
(D) The right to assert that the injury arose out of voluntary participation in an off-duty recreational, social, or athletic activity that did not constitute part of the IW’s work-related duties.
(E) The right to assert that the injury arose out of an act of God.
(F) The right to assert the IW’s horseplay was a producing cause of the injury.
2. The right to assert that no injury occurred in the course and scope of employment. Cont’l Cas. Ins. Co. v. Williamson, 971 S.W.2d 108 (Tex. App.-Tyler 1998, no pet.); Zurich Am. Ins. Co. v. Gill, 173 S.W.3d 878 (Tex. App.-Fort Worth 2005, pet. denied); Alexander v. Lockheed Martin Corp., 188 S.W.3d 348 (Tex. App.-Forth Worth 2006, pet. denied); Lopez v. Zenith Ins. Co., 229 S.W.3d 775 (Tex. App.-Eastland 2007, pet. denied); State Office of Risk Mgmt. v. Peeples, No. 07-04-0408-CV, 2006 Tex. App. LEXIS 6511 (Amarillo July 25, 2006, pet. denied)(mem. op.); APD 041065; APD 032610. However, Williamson held that if the HO finds there was no injury and that finding is not against the great weight and preponderance of the evidence, the IC’s waiver cannot create an injury as a matter of law.
In Zurich American Insurance Company v. Gill, 173 S.W.3d 878 (Tex. App.-Fort Worth 2005, pet. denied), the IW had suffered from allergy problems since childhood; however, in June 2000 she began suffering increased problems. The IW discovered tiles in the office she worked in contained stachybotrys mold, and the IW was medically diagnosed with allergic rhinitis and maxillary sinusitis. She filed a worker’s compensation claim, and although the IC received notice of the IW’s claim in May 2001 it did not contest compensability of the alleged injury until January 8, 2002. The HO found, among other things, that the IW sustained injuries that were ordinary diseases of life – specifically, chronic allergic rhinitis and maxillary sinusitis – and that these injuries were not an occupational disease. The court noted that Continental Casualty Insurance Company v. Williamson, 971 S.W.2d 108 (Tex. App.-Tyler 1998, no pet.), which held that if the IW does not have an injury the IC’s failure to contest compensability cannot create an injury, did not apply to the facts of this case because the HO found that the IW sustained an injury. Williamson is limited to situations where there is a determination that the IW did not have an injury as opposed to cases where there is an injury that was determined by the HO not to have been causally related to the employment. Here the IW’s condition met the definition of “injury”, so she did sustain an injury, a key finding in the determination of whether the IC was liable for benefits when it did not meet the deadline for contesting compensability. The court held that although the IW’s condition was an ordinary disease of life, not incident to a compensable injury or occupational disease, her condition was an “injury” under Section 401.011(26). The court concluded that the IW had an injury, the IC did not contest the compensability of the injury, and thus the IC owes medical benefits to the IW.
In Alexander v. Lockheed Martin Corporation, 188 S.W.3d 348 (Tex. App.-Forth Worth 2006, pet. denied) the IW had a pre-existing condition but filed a workers’ compensation claim asserting an injury occurred on October 17, 2002. The IC paid benefits within the seven-day waiver period but did not contest the compensability of the claimed injury within the 60-day waiver period set forth in Section 409.021(c). The IC later filed a dispute claiming that it should be able to reopen the issue of compensability because it had newly discovered evidence of a pre-existing condition which the IC did not receive until after the 60-day waiver period. The HO found that the IW had an injury but that the injury did not occur in the course and scope of employment. The HO also determined that the IC waived its right to contest compensability. The IC only appealed the waiver and disability determinations. The court held that the IC waived its right to contest compensability of the injury despite the HO’s finding that the injury did not occur in the course and scope of employment.
In Lopez v. Zenith Insurance Company, 229 S.W.3d 775 (Tex. App.-Eastland 2007, pet. denied) the HO held that the IW did not sustain a compensable injury in the course and scope of employment on March 21, 2003, and that the IC did not waive the right to contest compensability because the IW did not have a compensable injury. The AP reversed because Continental Casualty Insurance Company v. Williamson, 971 S.W.2d 108 (Tex. App.-Tyler 1998, no pet.) applies when there is a finding of no injury but not when there is a finding of no compensable injury. Medical records showed the IW had an injury. The court agreed with the interpretation that there is a distinction between an injury and a compensable injury, at least in part to effectuate the legislative intent behind Section 409.021. The court pointed out that the statute requires an IC to make a prompt initial decision and creates an incentive for ICs to initially pay benefits if there is any question about the compensability of a claim. The court stated that pre-existing conditions are not normally compensable and the effect of a waiver holding is to require an IC to pay benefits for an injury that may be a non-compensable, pre-existing condition, however, the court noted that in Alexander v. Lockheed Martin Corporation, 188 S.W.3d 348 (Tex. App.-Forth Worth 2006, pet. denied) and Zurich American Insurance Company v. Gill, 173 S.W.3d 878 (Tex. App.-Fort Worth 2005, pet. denied) and in this case the medical records indicated that the IW had an injury, whereas in Williamson a doctor noted that there was no injury. The court further noted that the language of Section 409.021 does not support a construction that exempts medical issues from this process. The appeals court held that the trial court erred when it held that as a matter of law the HO’s finding of no injury in the course and scope of employment prohibited the application of the waiver provision.
In State Office of Risk Management v. Peeples, No. 07-04-0408-CV, 2006 Tex. App. LEXIS 6511 (Amarillo, July 25, 2006, pet. denied)(mem. op.), the court noted that the IW had been medicated for pre-existing back problems at the time of the April 1, 2002 incident. The court stated that the HO made reference to his medications and to a diagnosis of a degenerative disc made by the IW’s TD. The TD’s report described the IW’s “history of chronic low back pain” and commented that he exhibited all the classical findings of spinal stenosis. The court disagreed with the IC that the HO’s finding that on April 1, 2002, during the course and scope of employment the IW did not injure himself or cause harm to his body was a determination that the IW had no injury. The court agreed with the AP that Continental Casualty Insurance Company v. Williamson, 971 S.W.2d 108 (Tex. App.-Tyler 1998, no pet.) did not apply.
3. The right to assert that the IW failed to give timely notice of the claimed injury in accordance with Section 409.002. Zurich Am. Ins. Co. v. Gill 173 S.W.3d 878 (Tex. App.-Fort Worth 2005, pet. denied); APD 022027-s.
4. The right to assert that the IW failed to timely file a claim for compensation in accordance with Section 409.004. Southern Ins. Co. v. Brewster, 249 S.W.3d 6 (Tex. App.-Houston [1st Dist.] 2007, pet. denied); APD 022091-s.
5. The right to assert that the IW has made an election of remedies. APD 030793-s.
Determination of Waiver. [Cross reference. Issue Not Previously Raised (P01)]. Whether an IC has waived the right to contest compensability pursuant to Section 409.021 is a distinct issue which must be properly raised. In evaluating a Section 409.021 waiver case, the fact finder must consider and resolve the following:
1. Was the issue timely and properly raised, and if not, does good cause exist to add the issue:
a. The IW raised the issue of IC waiver for the first time in his appeal of the HO’s CCH decision. There was no evidence that the issue of IC waiver was raised at the BRC, or that the parties consented to adding the issue, or that good cause existed for not properly raising the issue. The AP refused to consider the issue because it was raised for the first time on appeal. APD 011436.
b. The HO resolved the disputed issues by determining that the IC did not waive the right to contest compensability of the claimed injury, but further determined that the IW sustained a compensable injury and had resulting disability. The IC appealed the injury and disability determinations to the AP. The IW did not file a response to the appeal, nor did she appeal the HO’s waiver determination. The AP reversed the HO’s injury and disability determinations, and rendered a decision that the IW did not sustain a compensable injury and, therefore, did not have disability. The IW filed a petition in district court seeking judicial review and asserted that the IC had waived the right to contest compensability. The IC filed a motion for summary judgment asserting that the IW was barred from raising the waiver issue because she failed to raise it before the AP. The district court granted summary judgment in favor of the IC. The IW appealed and the court of appeals affirmed the district court’s ruling. Judicial review is limited to the issues decided by the AP. A party may not raise an issue in the trial court which was not raised before the AP. Krueger v. Atascosa County, 155 S.W.3d 614 (Tex. App.-San Antonio 2004, no pet.).
c. At the CCH on remand the issues before the HO were (1) who is the correct IC for the DOI and (2) does the IC have liability for benefits prior to the date the IC filed notice of denial pursuant to Section 124.3. The IW requested to add an issue of IC waiver of the claimed injury but the attorney representing both ICs at the CCH objected on the grounds that an IC waiver issue had not previously been raised. The HO declined to add the issue, and determined the correct IC and that the correct IC waived the right to contest compensability of or liability for the claimed injury because the IC failed to file a denial within 60 days of receiving first written notice of the injury. The IC appealed and argued that the HO decided an issue not before her by incorporating IC waiver in her decision. The AP disagreed, noting that Section 124.3 covers both IC liability for accrued benefits for failure to dispute by the 15th day after receiving first written notice of the claimed injury as well as IC waiver of the right to contest compensability of the claimed injury if not disputed on or before the 60th day after receiving first written notice of the claimed injury pursuant to Section 124.3(b). APD 081665-s. [Cross-reference: Other Procedural Issues (P00)]
2. When did the IC receive its first written notice of the claimed injury, thereby triggering the start of the period of time to contest compensability of the claimed injury:
a. When an IW asserts that the IC has waived the right to contest compensability, the IW has the burden to prove when the IC received the first written notice of injury; once that is done, the burden shifts to the IC to prove that it timely filed a dispute. APD 051656.
i. Self-insured. For a claim for workers’ compensation benefits based on a compensable injury that occurs on or after September 1, 2003, written notice to a certified self-insured occurs only on written notice to the qualified claims servicing contractor designated by the certified self insurer under Section 407.061(c). Section 409.021(f) (added by Acts 2003, 78th Leg., ch. 939, Section 1). See also Section 409.021(f)(1) (added by Acts 2003, 78th Leg., ch. 1100, Section 1)
ii. Political subdivision self-insured individually or collectively. For a claim for workers’ compensation benefits based on a compensable injury that occurs on or after September 1, 2003, written notice to a political subdivision that self-insures, either individually or collectively through an interlocal agreement as described by Section 504.011, occurs only on written notice to the intergovernmental risk pool or other entity responsible for administering the claim. Section 504.002(d); APD 070912. See also Section 409.021(f)(2) (added by Acts 2003, 78th Leg., ch. 1100, Section 1).
b. Written notice to the IC does not have to be contained on an Employer’s First Report of Injury. Written notice can be established by showing that the IC received any communication, regardless of its source, that fairly informs the IC of the IW’s name, DOI, identity of the employer, and information asserting the injury was work related. Section 124.1(a); APD 032668.
c. If the IC receives an unwritten notice of injury which contains all of the information required by Section 124.1(a), the IC must immediately create a written record. Section 124.1(d).
3. On what date did the IC properly dispute compensability of the claimed injury:
a. Once it is established when the IC received the first written notice of injury, the IC has the burden to prove that it timely filed a proper dispute. APD 051656.
b. A dispute must be filed with the Division and the IW, and must contain the following information:
i. The IC must use plain language notices with language and content prescribed by the Division;
ii. Notice that the IW has the right to request a BRC and include the means for the IW to obtain additional information from the Division regarding the IW’s claim;
iii. The notice must contain a full and complete statement describing the IC’s actions and its reasons for such actions; and
iv. The statement must contain sufficient claim-specific information to enable the IW to understand the IC’s position or action taken. Sections 409.022, 124.2, and 124.3.
c. To determine whether the IC’s dispute is specific enough to comply with Sections 409.022 and 124.2(f), the AP will look at a fair reading of the reasoning listed to determine if the contest is sufficient. No magic words are required. The key point to be determined is whether, when read as a whole, any of the reasons listed by the IC would be a defense to compensability that could prevail in a subsequent proceeding and whether the grounds listed, when considered together, encompass a controversion or dispute on the basic issue that an injury was not suffered within the course and scope of employment. APD 022145. Whether an IC’s dispute is sufficiently specific is a question of fact for the HO to resolve. APD 971404.
d. The grounds for denial of the claim specified in the IC’s dispute constitute the only basis for the IC’s defense on the issue of compensability in a subsequent proceeding, unless the defense is based on newly discovered evidence that could not reasonably have been discovered at an earlier date. Section 409.022(b).
An issue at the CCH was whether the IC is relieved of liability because the IW failed to file a claim within one year after the DOI as required by Section 409.003. The IC denied benefits in a Notice of Denial of Compensability/Liability and Refusal to Pay Benefits (PLN-1); however, the IC did not contest compensability of the claim based on the IW’s failure to file a claim within one year. The HO found that although the IW contended at the CCH the IC had waived the defense of the IW’s untimely filing by not raising that defense in its PLN-1, that issue was not contained in the BRC report, was not requested in a response to the BRC report to be added as an issue at the CCH, and was not actually litigated at the CCH. The AP found evidence that the issue had been actually litigated by the parties and therefore addressed it. The HO determined that the IC is relieved of liability under Section 409.004 because the IW failed to file a claim within one year of the DOI. The AP reversed the HO’s determination and rendered a decision that the IC is not relieved of liability under Section 409.004 because, under Section 409.022(b), the IC waived the right to contest based on failure to file a claim within one year. APD 060631-s.
For injuries occurring on or after September 1, 2003, an IC may file as many disputes as it wishes within the initial 15-day period, and does not have to prove that there was newly discovered evidence for the additional filings within that time period.
e. A dispute of benefit entitlement is not a dispute of compensability/liability.
The IC filed a Notice of Disputed Issue(s) and Refusal to Pay Benefits (PLN-11) within 15 days of receiving written notice of injury disputing entitlement to TIBs. The IC filed a Notice of Denial of Compensability/Liability and Refusal to Pay Benefits (PLN-1) after the 15th day but before the 60th day after receipt of written notice of the injury. The HO held that the IC’s defense on compensability was limited to the disability defense listed on the PLN-11 filed within 15 days of receiving written notice of injury. The AP reversed and rendered a new decision that the IC’s defense on compensability is not limited to the disability defense listed on the PLN-11 filed with the Division within 15 days of written notice. The dispute of benefit entitlement is not a dispute of compensability/liability, and in filing a dispute of benefit entitlement, the IC retains the right to contest compensability and liability of a claim within the 60-day period, subject to Section 124.3. APD 072002-s.
4. If the IC did not dispute compensability of the claimed injury within the waiver period, did the IC present newly discovered evidence that could not reasonably have been discovered earlier, which would allow the IC to reopen the issue of compensability?
a. An IC that has accepted an IW’s claimed injury, either expressly or, for injuries that occurred on or after September 1, 2003, by failure to dispute within the 60-day time period, may still dispute compensability of the claim if the IC can prove that the dispute is based on evidence that could not reasonably have been discovered earlier with the exercise of due diligence. Section 409.021(d); APD 94224.
b. A two-prong test is used to determine whether an IC may reopen the issue of compensability. First it must be determined whether the IC exercised due diligence in obtaining the evidence. Second it must be determined whether the IC exercised due diligence in contesting compensability upon discovering the new evidence. Whether the IC should be allowed to re-open the issue of compensability pursuant to Section 409.021(d) is a question of fact for the HO to resolve. APD 002920.
5. Extent of injury disputes:
In State Office of Risk Management v. Lawton, 2009 Tex. LEXIS 629 (Tex. August 28, 2009), the Texas Supreme Court held that the 60-day period for challenging compensability of an injury does not apply to a dispute over the extent of injury if the basis for the extent of injury dispute could have been discovered by a reasonable investigation within the 60-day waiver period. Therefore, a determination that an IC has waived an extent of injury because that injury or condition was reasonably discoverable within the 60-day waiver period is error and must be reversed. Any prior APDs ruling that an IC has waived an extent of injury because the IC could have discovered that injury or condition by a reasonable investigation during the 60-day waiver period are overruled by the Lawton case, and future decisions will apply Lawton.
Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.
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