Supreme Court of Texas Blog: Legal Issues Before the Texas Supreme Court
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Discovery of medical committee records related to a doctor’s claim of unfair competition (May 22, 2015)

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With this orders list, the Court issued its opinion in one pending case. It did not choose any new cases for review.

Discovery of medical peer-review […]

With this orders list, the Court issued its opinion in one pending case. It did not choose any new cases for review.

Discovery of medical peer-review committee records related to a doctor's claim of unfair competition

In this suit, a surgeon who specialized in robotic heart surgery alleges that his former hospital destroyed his professional reputation and dried up his referral sources in an effort to stave off competition from a new hospital. He brought claims for defamation, business disparagement, antitrust, and tortious interference with prospective business relations.

The question before the Court was whether his former hospital could shield certain documents from discovery under the a medical committee privilege.

The Court focused its analysis on an exception in the statute:

If a judge makes a preliminary finding that a proceeding or record of a medical peer review committee or a communication made to the committee is relevant to an anticompetitive action, or to a civil rights proceeding brought under 42 U.S.C. Section 1983, the proceeding, record, or communication is not confidential to the extent it is considered relevant. — Tex. Occ. Code §160.007(b).

The hospital argued that this exception did not apply to the documents here because the committee was not just a "peer review" committee but also a "medical committee" under Section 161.031, which does not permit a similar exception ("are confidential and are not subject to court subpoena."). The Supreme Court disagreed, noting that the exception in Section 160.007(b) had been enacted later and was more specific. Because there was no dispute that the committee was also a "peer review" committee, the Court held that the exception applies.

Regarding the scope of the exception, the Court held:

  • The exception applies to not just to pure antitrust actions but also to other claims challenging what the Court calls "conduct that could substantially lessen competition in a particular market."

  • The exception asks the trial judge to make a preliminary finding, but it does not place a burden to produce evidence (such as expert reports) on the plaintiff.

  • The exception is narrowly drawn to focus on documents that are themselves "considered relevant," not merely calculated to lead to discoverable evidence.

As applied here, the Court noted that the conduct at the heart of the doctor's claim was about anticompetitive conduct. Whether or not he could ultimately meet all the statutory requirements for a formal antitrust claim, his claim for tortious interference targeted the same conduct and thus qualified for the same exception.

The Court rejected the argument that the doctor seeking disclosure needed to already have evidence of anticompetitive conduct (or expert reports to that effect). It noted that the statute does not place such a burden on the party seeking discovery and that doing so would be a trap, "condition[ing] access to documents that could substantiate a plaintiff's claim on the plaintiff's ability to substantiate his claim without the documents' aid."

When it turned to reviewing the disputed documents, the Court observed that some of them (including affidavits prepared for the lawsuit and the committee's own bylaws) were not properly covered by the privilege at all. As for the other documents, the Court identified certain other pages that were relevant to the doctor's claims.1


  1. Because this was a sealed record, we do not have many details of how the Court applied its holding to the particular documents. The Court does observe that it was not necessary that the doctor's name appear in the documents and that certain documents could be used to test the "veracity" of statements made by the hospital, testing whether its public statements deviated from its internal conclusions about the safety of a particular procedure or a doctor's outcomes. 

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Internal investigations while a company is itself under investigation are given absolute privilege against defamation [May 15, 2015]

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Last week, I noted that the Texas Supreme Court had decided all of its September, October, and November cases, save one. With today’s orders list, […]

Last week, I noted that the Texas Supreme Court had decided all of its September, October, and November cases, save one. With today’s orders list, the Court issued its opinion in that last case from the November sitting.

Internal investigations while a company is itself under investigation are given absolute privilege against defamation

Shell conducted an internal investigation into some allegations of violations of the Foreign Corrupt Practices Act (FCPA), which pinned blame on the plaintiff here, among others. When sued for defamation, the company asserted that the statement was entitled to absolute privilege because it was made as part of a criminal proceeding.

The trial court agreed. The court of appeals reversed, concluding that Shell had not sufficiently proven that this privilege applied. (( The privilege was presented by traditional summary judgment, so the defendant had to establish it by conclusive evidence. ))

The Texas Supreme Court held that this record did, conclusively, establish a privilege that defeated any defamation claim. The analysis focused on the circumstances under which the report was made. As the Court summarized it, "Shell met with the DOJ, agreed to perform an internal investigation and report the results to the DOJ, and then did so."

This case's holding may be narrower than it first appears. The Court was careful to say that it was adhering to, and applying, the legal framework from Hurlbut v. Gulf Atlantic Life Insurance Co., 749 S.W.2d 762 (Tex. 1987), where it held a company official's voluntary statement to law enforcement made prior to that company being investigated was not afforded this same privilege.

The Court distinguished Hurlbut because, here, Shell actually was a target of a law-enforcement investigation at the time it made this report. The Court also emphasized that, while the company official's statement in Hurlbut had been made voluntarily, Shell making a report to the DOJ was "practically speaking, compelled." The Court noted the realities of being prosecuted under the Foreign Corrupt Practices Act (FCPA), under which the DOJ more harshly penalizes companies that do not cooperate. Because this internal-investigation report was provided to the DOJ in "serious contemplation of the possibility" of a prosecution, Shell was entitled to absolute privilege against defamation claims.

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A dozen more cases decided; no grants [May 8, 2015]

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With today’s orders list, the Texas Supreme Court issued opinions in twelve cases.

Two of today’s cases drew dissents, each on a 6-3 vote. Four […]

With today’s orders list, the Texas Supreme Court issued opinions in twelve cases.

Two of today’s cases drew dissents, each on a 6-3 vote. Four of the cases resulted in per curiam opinions. The list of opinions follows.

For those of you keeping score at home: With the burst of opinions over the past few weeks, the Court has made substantial progress on resolving the cases argued last fall. By this blog’s count, no cases from the September or October sittings remain undecided, and only one case remains open from the Court’s November sitting.

Read the list of cases

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A slip-and-fall in a hospital is not a health-care claim; two new grants [May 1, 2015]

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With today’s orders list, the Texas Supreme Court issued opinions in one case. The Court also chose two other cases for future oral argument.

Opinions A slip-and-fall […]

With today’s orders list, the Texas Supreme Court issued opinions in one case. The Court also chose two other cases for future oral argument.

Opinions

A slip-and-fall in a hospital does not qualify as a “health care liability” claim

A visitor to a hospital slipped and fell in the lobby. When she sued, the hospital moved to dismiss on the ground that she had failed to timely submit an expert report as would be required for a health-care liability claim.

The trial court agreed, dismissing the claim. The court of appeals affirmed, concluding that under TEXAS WEST OAKS HOSPITAL, LP AND TEXAS HOSPITAL HOLDINGS, LLC v. FREDERICK WILLIAMS, No. 10-0603 there need not be a connection between the safety standard in question and the actual provision of health care.

The Texas Supreme Court granted review and, now, reverses, holding that:

for a safety standards-based claim to be an HCLC there must be a substantive nexus between the safety standards allegedly violated and the provision of health care. And that nexus must be more than a "but for” relationship. That is, the fact that Ross, a visitor and not a patient, would not have been injured but for her falling inside the hospital is not a sufficient relationship .... The pivotal issue in a safety standards-based claim is whether the standards on which the claim is based implicate the defendant’s duties as a health care provider, including its duties to provide for patient safety.

The Court rooted this holding in doctrines of statutory construction that look ot the overall structure of the law ("the purpose of the statute, the context of the language at issue"). It noted, in particular, that the reading urged by the hospital would result in a situation where defendants had "a special procedural advantage [in all suits] in the guise of requiring plaintiffs to file expert reports." The Court declined to read the statute as conferring benefits based on the identity of the defendant, rather than the nature of the duty. ("We do not believe the Legislature intended the statute to have such arbitrary results.")

As for how to apply this construction, the Court listed seven "non-exclusive considerations":

  1. Did the alleged negligence of the defendant occur in the course of the defendant’s performing tasks with the purpose of protecting patients from harm;
  2. Did the injuries occur in a place where patients might be during the time they were receiving care, so that the obligation of the provider to protect persons who require special, medical care was implicated;
  3. At the time of the injury was the claimant in the process of seeking or receiving health care;
  4. At the time of the injury was the claimant providing or assisting in providing health care;
  5. Is the alleged negligence based on safety standards arising from professional duties owed by the health care provider;
  6. If an instrumentality was involved in the defendant’s alleged negligence, was it a type used in providing health care; or
  7. Did the alleged negligence occur in the course of the defendant’s taking action or failing to take action necessary to comply with safety-related requirements set for health care providers by governmental or accrediting agencies?

The Court acknowledged that "the line between a safety standards-based claim that is not a[ health-care liability claim] and one that is ... may not always be clear." On this record, as it turns out, all seven of those considerations favored the plaintiff.

The opinion of the Court does not offer explicit guidance about how lower courts should deal with a situation in which these considerations point in different directions. The concurring opinion (written by Justice Lehrmann and joined by Justice Devine) argues that, when such a situation arises, two of the considerations (the third and fifth) should be viewed as more important than the others because they focus most directly on the relationship between patient and doctor.

Grants

Do leave-of-absence policies bar workers compensation retaliation claims?

KINGSAIRE, INC. D/B/A KINGS AIRE, INC. v. JORGE MELENDEZ, No. 14-0006

Chosen for future argument by order issued May 1, 2015

An injured employee, absent from work, was classified by his employer as being on FMLA leave. According to the employer’s company policy, that type of family and medical leave cannot last longer than 12 weeks. When the employee did not return at the end of that period, the employer immediately fired them.

When the employee sued for retaliatory discharge under Chapter 451 of the workers’ compensation law, the employer argued that its company leave-of-absence policy was uniformly applied and, thus, legally barred a claim for retaliatory discharge. Alternatively, the employer argued that the jury hearing that retaliation claim should have been asked about this defense or given an instruction about the legal effect of its leave-of-absence policy.

The trial court sided with the employee. The court of appeals affirmed, holding that the company’s leave-of-absence policy did not create a legal presumption. The Supreme Court has granted the employer’s petition and will consider the issue.

Are loss-of-use or lost-profit damages available when a business vehicle is totaled?

J&D TOWING, LLC v. AMERICAN ALTERNATIVE INSURANCE CORPORATION, No. 14-0574

Chosen for future argument by order issued May 1, 2015

The case involves a tow truck that was rendered a total loss by a vehicle accident. The truck was the sole vehicle used by a small towing company. The towing company reached a settlement with the other driver that would compensate it for the market value of the lost truck, but that driver’s policy limits ($25,000) did not permit recovery for additional damages. The towing company then sued its own insurance carrier, arguing that its uninsured/underinsured motorist protection should also cover the company’s damages from loss-of-use of the truck.

The district court ruled in favor of the towing company, rendering a judgment of $22,500 in additional damages. The court of appeals reversed, concluding that Texas law bars any recovery for this type of consequential loss-of-use damages when a piece of property is damaged beyond repair.

The towing company filed a petition for review, arguing that there is a split in Texas law on this question. The Texas Supreme Court has now granted the petition.

Comments Off on A slip-and-fall in a hospital is not a health-care claim; two new grants [May 1, 2015]Tags: Order Lists

Thirteen cases decided; no grants [Apr. 24, 2015]

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With this week’s orders list, the Texas Supreme Court released opinions in thirteen pending cases.

For those of you keeping score at home:

Justice Lehrmann’s four majority […]

With this week’s orders list, the Texas Supreme Court released opinions in thirteen pending cases.

For those of you keeping score at home:

  • Justice Lehrmann’s four majority opinions today puts her in the lead on this Term’s leaderboard.

  • The one separate opinion issued today — an opinion concurring in judgment authored by Justice Hecht — brings the Court’s total to eight such opinions this Term. If the pattern holds from last Term, the bulk of the divided cases will be resolved in the summer. (I would have said “the most divided cases,” but they may not be able to top UNIVERSITY OF TEXAS AT ARLINGTON v. SANDRA WILLIAMS AND STEVE WILLIAMS, No. 13-0338 , issued in March.)

  • Three of today’s cases led to affirmances.

When issue summaries are ready, they will appear on this page. You can also follow the links below to reach each opinion:

When the State condemns land containing a billboard, what compensation is due?
The most current summary describes this event:
Set to be argued on September 17, 2014

In this case, the State (supported by some local governments) challenges how billboards were valued in condemnation. The landowners contend that the installed billboards are part of the realty warranting compensation for their lost income. The State argues that they should, instead, be seen as a type of personal property that can be relocated away from the property being condemned.

Previously:
Previously:
  • Three opinions, one grant (June 16, 2014)
  • Compounding pharmacies under the health-care-liability act
    The most current summary describes this event:
    Set to be argued on January 14, 2015

    This is a claim against a compounding pharmacy based on an antioxidant supplement. The supplement was provided to a doctor's office, which then provided it to patients. The pharmacy argued that this was a health-care-liability claim and, accordingly, should be dismissed because no expert report was timely filed. The plaintiff argues that filling what the response calls a "bulk" order for these supplements is not filling a prescription and does not fit the statute.

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    Two opinions: Texas’s limits on arbitration clauses in medical contracts struck down; the duty of good faith within oil and gas royalty interests [Mar. 6, 2015]

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    With today’s orders list, the Supreme Court issued two substantive opinions, two per curiam reversals (applying one of today’s more substantive opinions), and formally accepted […]

    With today’s orders list, the Supreme Court issued two substantive opinions, two per curiam reversals (applying one of today’s more substantive opinions), and formally accepted a certified question from the Fifth Circuit about exemplary damages.

    The Court granted a request to reschedule oral argument in BCCA APPEAL GROUP, INC. v. CITY OF HOUSTON, TEXAS, No. 13-0768 , which had been set for March 25. The new argument date has not yet been set.

    Opinions

    Duties between participants in an oil-and-gas royalty interest

    A summary will be added in the next few days

    Previously:
  • A day for certified questions (September 26, 2014)
  • Statute that limits doctors from using arbitration clauses is preempted

    In the past decade, it only seemed that the Texas Supreme Court had already decided every permutation of health-care liability claim and every challenge to an arbitration clause. What happens when one case presents both — a challenge to the Texas law that restricts doctors and other health-care providers who might try to insert arbitration clauses in their contracts?

    The Texas statute is Section 74.451 of the CIvil Practice and Remedies Code, which imposes some strict requirements on any arbitration clause between a health-care provider and a patient. There was no dispute in this case that the defendant nursing home (Fredericksburg) failed to meet those requirements, so if the Texas law applied, the arbitration clause it demanded of patients would be unenforceable. On its side, the Federal Arbitration Act generally preempts state laws such as this one that impose heightened requirements on the validity of arbitration clauses, at least for contracts involving interstate commerce.1

    The wrinkle here is that Congress has generally permitted states, not the federal government, to take the lead in regulating insurance. Within the upside-down world of insurance, the doctrine of federal preemption yields (by virtue of the McCarran-Ferguson Act or "MFA") so that insurance-specific state laws can, in that limited sphere, be supreme over a generally applicable federal law.

    The Texas Supreme Court's opinion focused, therefore, on whether Section 74.451 was a law that fit within the MFA. The question is whether it was a "law enacted by [the] State for the purpose of regulating the business of insurance." 15 U.S.C. §1012(b). If so, it could survive preemption. If not, it would be preempted.

    The bulk of the Court's analysis focuses on legislative "purpose." Looking at the statute as a whole, the Court concluded that its purpose is not direclty related to the relationship between insurance companies and their insureds ("the business of insurance"). The Court acknowledged that one of the broader goals was to lower health-care costs by, among other things, lower premiums for malpractice insurance. But the Court concluded that was too attenuated to satisfy the U.S. Supreme Court's test. (The U.S. Supreme Court has distinguished the "business of insurance" from the "business of insurance companies," which basically asks whether the regulation is about paperwork or profits. If the goal is to reduce an insurer's costs and maybe get a trickle-down reduction in premiums, then it's the latter category and too attenuated.) And even zooming to focus just on Section 74.451, the picture would be the same. That provision says nothing about insurance directly but instead talks about the relationship between doctor and patient.

    Section 74.451 is, the Court held, preempted by the Federal Arbitration Act for any health-care contracts that affect interstate commerce.

    So, does a health-care provider now have to choose between demanding arbitration and the procedural protections they fought so hard for in 2003 (with mandatory expert reports and interlocutory appeals)? Maybe not. With this new hybrid category of arbitration and health-care liabilty appeals, a whole new world of permutations beckons. Who will be the first defendant to wait for the expert report deadline, file an interlocutory appeal challenging its adequacy, and after losing that appeal, demand arbitration — perhaps triggering a second interlocutory appeal?


    1. That may be nearly every defendant of any size, in our era of third-party-payor health care. As the Court explains, even accepting Medicare payments can bring a provider within the bounds of the FAA. 

    The Court also issued short per curiam opinions in two related cases, in each reversing based on today’s opinion in THE FREDERICKSBURG CARE COMPANY, L.P. v. JUANITA PEREZ, VIRGINIA GARCIA, PAUL ZAPATA..., No. 13-0573 :

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    Two opinions, including one about whether limitations bars suing a partner over partnership debts [Feb. 27, 2015]

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    With today’s orders list, the Texas Supreme Court issued opinions in two pending cases. It did not select any new cases for oral argument.

    Among […]

    With today’s orders list, the Texas Supreme Court issued opinions in two pending cases. It did not select any new cases for oral argument.

    Among the orders, the Court granted the State’s request to appear as amicus curiae to argue in MIRTA ZORRILLA v. AYPCO CONSTRUCTION II, LLC AND JORGE LUIS MUNOZ, No. 14-0067 , a case about the exemplary damages provisions in Chapter 41.

    Opinions

    Plaintiffs suing a partnership can wait until after judgment to seek recovery from individual partners

    When a plaintiff sues a partnership, must they immediately join the individual partners as defendants or risk having no recourse if the partnership entity turns out to be insolvent?

    The underlying contract claim was brought against the partnership itself and, after about a decade of litigation, resulted in a judgment of liability that exceeded the partnership's own assets. The plaintiffs then turned to the individual partners for satisfaction, under the principle that they are jointly and severally liable for the partnership entity's debts. The partners invoked limitations, arguing that the clock had expired years before when they were not joined in the original action.

    The Court held that limitations did not bar this post-judgment claim by a judgment creditor against individual partners.

    It noted that the plaintiff could have sued the partners at the outset. And it acknowledged the general principle that a claim "accrues" when it could be brought. But, as the Court explained, the structure of this claim warranted a different result. The Court looked to the provisions of the Texas Revised Partnership Act, which makes this kind of liability contingent on there being a judgment entered against the partnership entity and on the entity failing to pay for 90 days. These features, the Court held, made this kind of statutory claim against individual partners more akin to indemnification than more typical tort or contract claims. Thus, the Court held, the claims were not barred by limitations.

    When does this limitations clock start to run? Is it at the time judgment is entered against the partnership, when any appeal of that judgment is complete, or at some other time? This case did not require finely tuning that answer. The Court suggests that the limitations clock actually begins to run only when the judgment can be collected against an individual partner, which might mean 90 days after the judgment can be executed. So, a supersedeas filing may, it appears, have the side effect of extending the limitations period for collection claims against individual partners.

    The Workers' Comp statute precludes courts from addressing causes of action related to claims handling, even if framed as tort or statutory claims

    A claimant for workers' compensation benefits brought a separate lawsuit against the carrier and some of its employees, contending that the way they had handled his claims independently violated tort and statutory duties, for which he sought damages.

    The Division of Workers' Compensation has exclusive jurisiction over the underlying claim for workers' compensation benefits. Does that exclusive grant of jurisdiction extend to these other claims, which might fall outside of its ability to grant relief?

    The Court held that it does. It explained that its previous decision in TEXAS MUTUAL INSURANCE COMPANY v. TIMOTHY J. RUTTIGER, No. 08-0751 established a broad field of preemption for workers compensation, including challenges to the "investigation, handling, and settling" of claims for these benefits. The Court explained that Ruttiger was not to be read narrowly and, thus, that the claims here fell within the agency's exclusive jurisdiction.

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    The Fifth Circuit asks whether Texas’s civil penalty statutes are covered by its limits on exemplary damages

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    A federal court has asked the Texas Supreme Court to clarify whether Texas’s statute restricting exemplary damages also limits statutory civil penalties.The federal case is […]

    A federal court has asked the Texas Supreme Court to clarify whether Texas’s statute restricting exemplary damages also limits statutory civil penalties.The federal case is Forrte v. Wal-Mart Stores, Inc., No 12-40854 (5th Cir.). That panel has now withdrawn its prior opinion — which held that Texas’s general statute about exemplary damages (Chapter 41 of the Civil Practice and Remedies Code) barred the recovery of specific statutory penalties under the Texas Optometry Act. The conduct that led to the penalty was Wal-Mart signing optometrists to leases that specified certain hours of operation, in violation of Texas law. The maximum statutory civil penalty for this is $1000 per day, which led to the multimillion-dollar penalty awarded here.1

    The panel has issued a new opinion further explaining the tension it sees in this area of Texas law. The panel’s original opinion had concluded that these statutory civil penalties could not be imposed unless a plaintiff also met the more general requirements of Chapter 41 covering exemplary damages. Here, the plaintiffs did not attempt to show damages flowing from specific injuries but, instead, focused only on civil penalties. The panel originally held that this was barred under Chapter 41, which bars “exemplary damages” disconnected from at least some actual damages.That opinion has now been withdrawn. In its new opinion certifying this question to the Texas Supreme Court, the panel suggests two paths that might lead to the opposite result. First, it speculates that a plaintiff’s claim for civil penalties alone might not be a claim for “damages” that would fit within Chapter 41. Second, it speculates that perhaps statutory civil penalties are not “exemplary damages” within the meaning of Chapter 41.I would expect the Texas Supreme Court to accept the certified questions and hear oral argument this fall.H/T: David Coale’s 600 Camp blog, which also covered the earlier opinion in this case in August: “Civil penalties capped at — zero”.

    1. In a strange symmetry, the lease contract also had a “per day” penalty. An optometrist who failed to adhere to the agreed hours might be subjected, under the lease terms, to $200 per day in liquidated damages. []

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