Features for February 2013

Welcome to the February 2013 edition of the Appellate Lawyer --
the newsletter of the HBA Appellate Section.

Chief Justice James T. Worthen: Judge, Student, Traveler, Author by Justice Wanda Fowler (Ret.)
Chief Justice Jim R. Wright: A West Texan Through and Through by Justice Kem Thompson Frost

Justice Bill Boyce, 14th Court of Appeals, discusses the use of slang and other informal language in formal legal writing.

DID YOU KNOW . . . ?
by JoAnn Storey

Derek D. Bauman explains how to research early statehood (and before) statutes.

Case updates for the First and Fourteenth Courts of Appeals
by John Barnes, Attorney at Law, and Andrew Nelson and Bradley Snead, Wright & Close, LLP

Chief Justice James T. Worthen: Judge, Student, Traveler, Author

by Hon. Wanda McKee Fowler (Ret.), Wright & Close, LLP

Not many people can say they’re from Big Sandy, Texas. Fewer still can say they live in Big Sandy and have been to all seven of the world’s continents. But Chief Justice Jim Worthen of the Tyler Court of Appeals, a seventh-generation Texan, can claim both. As you can imagine, traveling has been a big part of his life. But don’t assume that he is just another run-of-the-mill jet setter. He is far from that.

Chief Justice Worthen was born in Conroe and lived there until middle school, but his family moved to Big Sandy (named for an Indian Chief) when he was a teenager. Almost all of his family—his mother, two of his brothers, his sister, and Chief Justice Worthen and his family—still live there on the same road.

Although Big Sandy is not “big,” and could have been considered provincial when Chief Justice Worthen was a teen and a young man, the ideas that sprung from his home were “big” and very unprovincial. He is “from a successful family of entrepreneurs.” His father had the greatest impact on him with the example he set for how to live life. He was a “great businessman and had a strong character. Chief Justice Worthen says he was fortunate to have grown up with a family business; his siblings started and still run a successful chain of health-food stores. His father also had a lasting impact on chief Justice Worthen in another way. The family traveled quite a bit, a love that has remained with him throughout his life. As he says “it broadens one’s perspectives.”

In college he was accepted for a spot on an archaeological dig next to the temple Mount in Jerusalem. The dig was in a layer from “the Herodian period, right before the Romans sacked Jerusalem in 70 A.D.” As an adult, he continued his travels. He’s traveled to over 40 countries—to China twice and Australia three times. In 2003 he and his wife visited their seventh continent—Antarctica—which they had the privilege of seeing through the eyes of the son of the great explorer Sir Edmund Hillary. Being there allowed them to see the life cycle in its entirety, from the krill—one of the smallest forms of life—to the whale, at the top of the food chain.

His mother instilled in him his love for education and learning. Before he graduated from high school, he had read Sir Winston Churchill’s six-volume set on World War II . . . . twice. He graduated with a B.S. degree from the University of Texas at Tyler in 1978, and a J.D. from South Texas College of Law in 1980. Almost twenty years later—while practicing law—he obtained his master of arts in interdisciplinary studies from his undergraduate alma mater. And finally, in 2004—while Chief Justice on the Tyler Court of Appeals—he obtained his masters of law in judicial process from the University of Virginia. He was a member of the final graduating class of the school’s three-year program for judges. His thesis for that program—The Organizational and Structural Development of Intermediate Appellate Courts in Texas 1892–2003—was published in the South Texas Law Journal in 2004.

Chief Justice Worthen’s progression into law was straightforward once he realized that he would make very little money pursuing his first love, sports journalism. He was a political science major, but near the end of college he took a business law class and found it fascinating. He then went to law school and upon graduation from law school in 1980, he began practicing real estate law with Bain and Files in Tyler (which later became Bain, Files, Worthen, and Jarrett, P.C.), but soon much of his client base filed for bankruptcy. Naturally, he followed his clients and became a specialist in bankruptcy law, first representing debtors and then creditors. In 1986 he became board certified in bankruptcy. He says, “a bankruptcy practice is the perfect preparation for being an appellate justice because you have to be a generalist.”

He had always been interested in the intellectual side of the law, including the history of law, but had not considered being an appellate judge until he met with Bill Bass, who was appointed by then Governor White to the Tyler Court of Appeals. Justice Bass suggested that Chief Justice Worthen would enjoy being on the court of appeals. Eleven years later the opportunity presented itself. He decided to run against an incumbent democrat, but unfortunately for him, the incumbent foresaw that democrats would not fare well that election cycle and switched parties. Chief Justice Worthen lost that election but ran again successfully in 1999. In May of 2002, after the primary election, then Chief Justice Leonard Davis was confirmed as a federal district judge for the Eastern District of Texas. The Republican County Chairs in the 18 counties that comprise the Tyler court’s judicial district nominated Chief Justice Worthen to be the Republican candidate for the spot. He ran in the general election and won.

Chief Justice Worthen likes most the intellectual side of being a judge: studying the law and writing about it. For those about to argue before him, he had the following useful comments.
  • Bench Exhibits – He discourages bench briefs. “If you want the court to see something, attach it to your brief.” He’s never known bench briefs or exhibits to work out well during argument; “they tend to distract either the lawyers or the justices.”
  • Oral Arguments – As a general rule, oral argument isn’t useful, “although it is one of the most fun things [we] do.” But lawyers beware. He states that oral argument can be a useful tool when the court is confronted with a lawyer who wrongly thinks he is going to win his case. In this situation the judges will bring the lawyer in and “help him understand why his case isn’t strong.”
    Jury arguments are not effective at oral argument. Also ineffective are lawyers who “don’t understand where their case fits in the pantheon of the law.” The most effective arguments are those given by seasoned, skilled lawyers who are willing to concede weak points and emphasize their strong points. “A lawyer enhances his credibility when he is able to acknowledge the weaknesses in his case.”
  • Cases of First Impression – When Chief Justice Worthen is sitting on a case of first impression, he focuses on “how the case fits into the framework of the law.” “We now have 1000 years of common law. How does this case fit into that continuum or into the statutory framework?”
  • Judicial Philosophy – His judicial philosophy is “restrained.” He “likes to decide cases as narrowly as possible.”
When he is not on the bench, Chief Justice Worthen most likely is traveling, reading, doing additional public service with one of the numerous law-related committees on which he serves, or golfing. Currently his handicap is in the high teens.

Chief Justice Jim R. Wright: A West Texan Through and Through

by Kem Thompson Frost, Fourteenth Court of Appeals

Eastland, a boomtown in the 1920’s, is home to the Eleventh Court of Appeals of Texas. The court’s Chief Justice Jim R. Wright lives just outside of town at Lake Leon. The three-time gubernatorial appointee has served as the Court’s Chief Justice since 2005, when Governor Rick Perry appointed him to fill the vacancy created when Chief Justice W. G. Arnot III left the bench.

Chief Justice Wright, then and now the most senior member of Eastland’s three-judge court, first took a seat on the appellate bench in 1995, when then-Governor George W. Bush elevated him from the trial bench, where he had served for eighteen years. A third Texas governor, Bill Clements, appointed Wright to the 91st District Court in Eastland in 1979. At the time, Wright had been in private practice only seven years, but the young lawyer must have seemed an obvious choice for Governor Clements. Wright had been a standout at Texas Tech University School of Law, where he graduated third in his class. The strong start gave Wright the momentum to become a judge very early in his legal career.

A native of Eastland, Wright developed an interest in the law at a young age. Watching lawyers in town, Wright began to imagine himself as a lawyer and always knew he wanted to go to law school, though in his youth he devoted much of his time and attention to sports. He played football, basketball, and ran track. Wright earned a B.B.A. from North Texas State University. While in college, he focused his studies on accounting, developing a strong foundation in the subject that would equip him to serve as a teaching assistant for undergraduate business law classes at Texas Tech University while attending law school. At the time, the law school’s classes were held in barracks-style temporary buildings as the fledgling law school had opened its doors for the first time only a few years before Wright arrived. “We moved into the new building mid-term my first year,” he recalled. The Chief Justice was in the academically elite ranks of the law school’s third graduating class.

After graduating Order of the Coif in 1971, Wright joined the Lubbock firm of Wagonseller and Cobb. He returned to his native Eastland in 1972, and opened his own law firm. As with most small town solo law offices, he practiced in most areas of the law. Already well grounded in the community, Wright began to play an active role in civic and professional activities. The native son of Eastland received the “Golden Deeds” award from the Eastland Chamber of Commerce, an honor bestowed on “those who have gone ‘above and beyond’ to make Eastland a better place to live.” Today, the Chief Justice and his wife, Pat, head a large blended family. Together, they are parents of seven and grandparents of fourteen.

Having lived in the law for more than four decades, Chief Justice Wright has a well-developed sense of a judge’s role. He believes judges should let the parties who come before the court know that the judge views every case as important. “The litigant’s property, liberty. or children are often at stake,” explains Wright, and “the parties deserve to know that their case matters.” The Chief Justice’s words are a powerful reminder of the importance of tailoring judicial actions, words, and responses to the public’s expectations of procedural fairness. Wright’s keen observation confirms what we all know instinctively: The process of arriving at justice reveals much about how the judicial product will be perceived.

Chief Justice Wright enjoys being an appellate judge. In this role, he has time to study and research issues in greater depth, a luxury not always available on the district bench. He also relishes working with judicial colleagues and court staff to solve the big problems and he delights in finding the right answers to the thorny issues. He explains that because healthy interplay among staff and colleagues is crucial on an appellate bench, he works hard to build and strengthen collegiality. His advice to anyone seeking to become an appellate judge is to “get all the trial experience you can” and “sharpen your writing skills.” Wright stresses that while mastering these technical proficiencies is vital to success, the most important thing to remember upon taking the bench is that “you no longer have a side – you are on the side of getting the right and just answer.” A judge, says Wright, “has no side except the law.”

The Chief Justice, who describes his judicial philosophy as bending toward strict constructionist, believes that in interpreting statutes and contracts, judges should focus on the plain text because, he explains, “words mean things.” Wright’s approach is simple. He looks first to glean meaning from the words used and then reads cases to see how others might have interpreted them. When approaching questions of first impression or in which only one other court has ruled, Wright begins by looking at the rationale for the rule and then applying a common-sense approach. He considers how the rule may have been applied in similar contexts or in other fields of law to see if it makes sense to draw analogies to the case under review. Good analysis and briefing play a weighty role in resolving cases of first impression, and the Chief Justice finds oral argument especially helpful in these cases because it allows the panel members to test the strength of the arguments.

Preparation is essential to the high calling of judging. To prepare for oral argument or conference, Wright reads briefs on an iPad, highlighting them electronically as he works up a case. He generally finds bench exhibits effective and useful, especially in cases in which getting a visual depiction is critical to understanding the facts. For example, Wright explained, in a boundary dispute, a diagram can make a cold record come alive. The most useful bench exhibit he ever received was a diagram showing the location of oil and gas wells in a real property dispute. The graphic aid enabled the panel members to visualize the problem and better understand the factual underpinnings of the parties’ legal arguments.

When it comes to oral argument, sometimes less is more. Wright recalled that the most effective oral argument ever made to him on the bench was a very brief one. The appellant’s lawyer had presented a less than stellar oral argument; counsel had come to court unprepared, had failed to answer the panel’s questions, and did not score a single point for his client. “At that point,” recalled Wright, “the case was the other side’s to lose.” The appellee’s lawyer, a former appellate judge, rose and said, “Your honors, I believe you have a firm grasp of the situation and I have nothing to add.” The appellate advocate of few words won the case.

The least effective oral argument ever made to the Chief Justice was delivered by an advocate who misstated both the law and the facts. “The lawyer lost credibility. Anything after that was suspect,” Wright concluded. The Chief Justice hastened to add that, in his court, such poor practice is seldom encountered.

Whether working on cases or managing administrative duties, Wright seems to genuinely love what he does and it shows. As if his exuberance for his daily work on the bench were not testament enough, Wright confirms it, saying, “For 33 years, I have loved coming to work.” But, the Chief Justice also enjoys his time out of the courthouse, much of which is spent fueling his passions for theology, music, and the great outdoors.

A commissioned, part-time pastor of Disciples of Christ Church, Wright has preached almost every Sunday for the last seventeen years. He is an avid reader of theology, history, and other non-fiction, and names C.S. Lewis as being among his favorite authors.

The Chief Justice is a music enthusiast, too. He has a rather eclectic taste that “runs from Bluegrass to Mozart and everything in between – rock, classical and especially 50s and 60’s.” Wright, who played trombone in his high school’s band, is at home on both the guitar and the piano, but insists he cannot read music. He has been known to impress a crowd when he is performing early country western music.

Hunting and fishing are also high on Wright’s list of favorite pastimes. Freshwater fishing with his grandkids on Lake Leon is a cherished weekend activity. The West Texas native is quick to point out that he grew up raising sheep and goats, and, as an adult, he raised cattle. This background, he muses, explains his affinity for ranching. “It was hard work,” says Wright, “but I enjoyed it.” And, he adds, “I still enjoy a good livestock show. It’s a good reason to visit the local livestock show grounds or to make a trip to Abilene or Fort Worth.”

The Chief Justice is a West Texan through and through. He grew up near the West Texas home of his maternal grandparents. “I lived in town, but they lived in the country,” and so, Wright explains, he experienced both worlds. His grandfather’s ranch was the setting for many life lessons that he carries with him to this day. “My parents as well as my maternal and paternal grandparents instilled a strong work ethic within the family. I have always appreciated the strength of that ethic,” explains Wright. But, he adds, “balance is important, too, so sometimes it is good to spend a half-day playing and a half-day working. My mom and dad always followed that practice with my sister and me. For instance, when we would go to our lake place for the weekend, we spent the first half-day or so working on the place and then we could play.”

Whether working or playing, Chief Justice Wright embraces the day with a grateful heart. He is eager to express his gratitude for faith and family, and for the law and those called to its service. He is especially grateful to have had good mentors in his life and in his career. One of his predecessors – former Chief Justice Austin McCloud – served in both roles. “I’ve known Judge McCloud since I was a child. He has always been more than a legal mentor – he has always been a friend,” explained Wright, adding that one of the things he found most admirable in mentor McCloud was that he was approachable and never pretentious.

Sometimes small events leave big impressions. Wright recounted how, as a young lawyer, he went to visit Judge McCloud to get career advice. Wright arrived at McCloud’s office during business hours and Judge McCloud greeted him in stocking feet. “That struck me as so genuine and unpretentious--I felt at ease and more than ever I wanted to be just like him,” recalled Wright. Over the years, Judge McCloud served as a valuable mentor to Wright, first during Wright’s lawyer years and later as a judicial colleague. Wright eventually succeeded his mentor as Chief Justice of the Eleventh Court of Appeals.

Rewrite This Sentence

by Justice Bill Boyce, Fourteenth Court of Appeals

Legal opinion writing is a strange hybrid.

The legal opinion must deliver a formal recitation and application of governing legal principles.  Given reliance on precedent, these principles often are expressed in stiff, verbose, or archaic language.  But legal opinions must apply formal legal principles to the particular facts of particular cases.  Frequently, these factual scenarios are brimming with references to pop culture, slang, and profanity.

This being a family-oriented appellate newsletter, I will not explore how opinions deal with this tension in the context of civil or criminal cases whose sobering circumstances necessitate detailed discussion of explicit or profanity-laced testimony.

I will focus instead on the intersection of formal legal analysis and references to pop culture or slang.

In this context, the tension sometimes results in opinions that provoke a reaction similar to the Hip Senior Citizen vein of comedy mined by performers such as Betty White.  This style of comedy tries to create laughs by juxtaposing the dignified image of an elderly, white-haired performer with a monologue containing trendy, up-to-the-nanosecond-current content usually associated with twenty-somethings.

This brings us to Already, LLC v. Nike, Inc., No. 11-982, 2013 WL 85300 (U.S. Jan. 9, 2013).  According to Westlaw, this opinion marks the first time in history that the term “Soulja Boys” has appeared in a Supreme Court opinion.

Some background might help.

Already addresses “whether a covenant not to enforce a trademark against a competitor’s existing products and any future ‘colorable imitations’ moots the competitor’s action to have the trademark declared invalid.”  Id., 2013 WL 85300 at *3.  It arose from a suit in which Nike alleged that Already infringed and diluted Nike’s trademark on its Air Force I line of athletic shoes.  Id.  Already allegedly did so by marketing shoe lines known as “Sugars” and “Soulja Boys.”  Id.  Already filed a counterclaim alleging that Nike’s Air Force I trademark is invalid.  Id.

For the uninitiated, Urban Dictionary provides a number of definitions of “soulja” including someone who has gone through hard times and fought against adversity.  The name “Soulja Boy” also has been adopted by hip hop performer DeAndre Cortez Way.

Four months after Already counterclaimed, Nike issued a “Covenant Not to Sue” in which it promised that “Nike would not raise against Already or any affiliated entity any trademark or unfair competition claim based on any of Already’s existing footwear designs, or any future Already designs that constituted a ‘colorable imitation’ of Already’s current products.”

The Supreme Court unanimously decided that Nike’s covenant mooted Already’s invalidity counterclaim because Nike could not reasonably be expected to resume its enforcement efforts.  According to Chief Justice Roberts, “The covenant is unconditional and irrevocable.”  Already, LLC, 2013 WL 85300 at *6.  “Beyond simply prohibiting Nike from filing suit, it prohibits Nike from making any claim or any demand.”  Id. (original emphasis).  “It reaches beyond Already to protect Already’s distributors and customers.”  Id.  “And it covers not just current or previous designs, but any colorable imitations.”  Id.

In a concurring opinion joined by Justices Thomas, Alito, and Sotomayor, Justice Kennedy agreed that this particular case was moot but wrote separately to “underscore that covenants like the one Nike filed here ought not to be taken as an automatic means for the party who first charged a competitor with trademark infringement suddenly to abandon the suit without incurring the risk of an ensuing adverse adjudication.”  Id. at *12 (Kennedy, J., concurring).

Chief Justice Roberts handled the opinion’s unavoidable references to “Soulja Boys” by letting them pass without comment or explication.  The Chief Justice did, however, allow himself a short riff on mythological shoes while noting the absence of evidence that Already sells shoes falling outside the covenant’s reach.  Id. at *6 (“If such a shoe exists, the parties have not pointed to it, there is no evidence that Already has dreamt of it, and we cannot conceive of it.  It sits, as far as we can tell, on a shelf between Dorothy’s ruby slippers and Perseus’s winged sandals.”).

Unless extended discussion of a slang or pop culture reference is needed for the opinion’s analysis to make sense, the approach used in Already probably is best.  No explanation was required here; the shoes are called “Soulja Boys” because that’s what Already calls them, and that’s enough to know for purposes of this opinion.

There are writing hazards to consider no matter how one approaches the issue of defining unfamiliar terms in legal opinions.  Over-definition clutters up an opinion with extraneous information that does not aid – and may in fact impede – the reader’s understanding and ability to grasp the essential legal reasoning quickly.  Under-definition may lead to confusion later.

In the context of pop culture, unnecessary inclusion and definition of slang creates an additional risk of making the opinion and the court look out-of-touch.  Sort of like the aged grandparent who provokes eyerolls at dinner by commanding, “So, tell me what you young whippersnappers do for fun these days!”  The same effect can be achieved, as I recently discovered, by asking one’s teen daughter to explain Pinterest.  Cf. Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 587 (1985) (“Aspen is a destination ski resort with a reputation for ‘super powder,’ ‘a wide range of runs,’ and an ‘active night life’ . . . .”).

The countervailing consideration is that undefined terms from an earlier era can lose meaning over time and lead to head-scratching among later readers.  Does anyone under 80 know what a “taxi dance hall” is?  See Young v. American Mini Theaters, Inc., 427 U.S. 50, 52 n.3 (1976).

I guess that’s why Wikipedia exists.

Did You Know . . . ?

by JoAnn Storey

To preserve the complaint that an affidavit does not meet the Government Code's definition of affidavit, you must object in the trial court. Mansions in the Forest v. Montgomery County, 365 S.W.3d 314, 317-18 (Tex. 2012) (disapproving cases to the contrary).

The Government Code defines "affidavit" as "a statement in writing of a fact or facts signed by the party making it, sworn to before an officer authorized to administer oaths, and officially certified to by the officer under his seal of office." TEX. GOV'T CODE § 312.011(1).

In Mansions in the Forest, the purported affidavit did not contain any statement in which the affiant swore to the truth of his testimony and, further, the notary’s certification stated that the affiant acknowledged, rather than swore to, his statements.

Although the court held that neither the Government Code nor the summary-judgment rule require an affidavit to contain a "jurat" (a certification by an authorized officer stating that the writing is sworn to before the officer), "the record must contain some evidence that the purported affidavit was sworn to by [the affiant] before an authorized officer." Id. at 317.

Bottom line:
1. Make sure your affidavits meet the statutory definition. Add a jurat for belt and suspenders.
2. If your opponent’s affidavit lacks any of the Government Code requirements, object in the trial court to preserve the complaint (and get a ruling).

AppellaTech: Researching Early Statehood Statutes

I start with a quick mention and a link for those who just want to get there. Hans Peter Mareus Neilsen Gammel was a gentleman kind enough to publish books of the laws of Texas before the republic, during the republic, and in early statehood. The University of North Texas is a university kind enough to make that available to us online.

You can both search and browse the statutes.


For those who enjoy a more leisurely stroll before jumping into such matters, I offer a bit of background on Mr. Gammel, courtesy of Wikipedia.  Originally born in Denmark, he moved in his adult life to the United States and eventually settled down in Austin, Texas. His notoriety (limited though it may be) started with a fire. At the time, he had set up a stand in Austin selling writing paper, bits of jewelry, lemonade, and books. I'll let Wikipedia take it from here.
In 1881, the old Texas State Capitol burned to the ground. In order to earn a little extra money to help support his growing family, Gammel took the contract to haul away the debris. Gammel gathered papers and charred documents from the debris scattered on the Capitol grounds. He loaded them in a wagon and took them to his home. He and his wife gradually dried the pages on a clotheslines and stored them with their belongings. Gammel sorted and edited the crinkled papers, then published them beginning in 1898 as the first ten volumes of Gammel’s Laws of Texas, 1822-1897.
Apparently, this was a hit. Or at least it made him enough money to convince him to keep publishing Texas statutes. Wikipedia says this continued until 1937. It also says Gammel died in 1931. While this certainly doesn't suggest the impossible, it does leave a few blanks. (If you want to learn more and find parting with $1,000 an easy thing to do, you can accomplish both at the same time.)

Before 2001, in order to research these early Texas laws, you had to (1) know they existed, (2) be extremely good friends with one of the few people who had a copy in their own personal collection, and (3) fervently hope you did not destroy the brittle pages in the process.  In 2001, the University of North Texas eliminated two of those requirements. Hopefully, this article will help eliminate the other for a few more people.

     Using the Website

As I mentioned, you can both search and browse the collection. The University of North Texas at the moment has the first twenty volumes. More precisely, it lists twenty volumes that you can browse, but its search page indicates you can search the first 31 volumes. While this certainly doesn't suggest the impossible, it does leave a few blanks.

Browsing is simple enough. Though I expect this route will mostly be for history enthusiasts, it can be entertaining. How else would you discover that the Republic of Texas passed an act whose sole purpose was to allow Erastus Smith "usually known and called 'Deaf Smith'" to pick any house of his choosing in the city of Bexar?

To browse, start at the browsing page. Click on any of the volumes that interest you. You should then get a page looking like this:

You can navigate by selecting a page from the drop down, using the buttons along the top right, or by moving your mouse to the right or left of the page and clicking there.

You can also browse Analytical Index to the Laws of Texas, 1823-1905. This was published at the same time as the first ten volumes, though it covers the first twelve volumes.

To search, go to the search page. The page includes a number of useful tips on how to maximize your search. Once you have entered your search, you should get a page like this:

From here, you must click on the volume you expect to be most promising. You will then get a page like this:

Notice the "Search inside" area near the top right. Click on 'Search' to get specific results within that volume. You will get a page like this:

From there you can select specific pages to browse. The search terms should appear highlighted on the page.

With any luck, you will never need to write a brief that depends on citing to early Texas law as your strongest legal argument. But it never hurts to know how.

Next column: A quick way to enter legal citations in Microsoft Word.

Derek Bauman
Staff attorney, First Court of Appeals

Comments, questions, and useful information are always welcome (and desperately sought). Please send them to: submissions@hbaappellatelawyer.org.

Case Updates for October 2012 to December 2012

By John Barnes, Attorney at Law, and Andrew Nelson and Bradley Snead,Wright & Close, LLP
Forum Non Conveniens: When Is Texas Residency Not Enough to Maintain Suit in the State?

In re Mantle Oil & Gas, LLC, 01-12-00437-CV, 2012 WL 5323584 (Tex. App.—Houston [1st Dist.] Oct. 25, 2012, no pet.)

Issues Presented: The court examined whether the trial court erred in refusing to dismiss plaintiffs’ claim for forum non conveniens on claims arising out of a well-blow out in Louisiana when another suit involving the same issue was already pending in Louisiana.

Relevant Facts: Twenty-three Louisiana residents (plaintiffs) seeking class certification filed suit against Mantle Oil and Gas LLC (Mantle) in Galveston County, Texas. Plaintiffs’ claims arose out of a Mantle well blow-out in Assumption Parish, Louisiana. The recovery sought by plaintiffs included damages for medical monitoring and punitive damages. Mantle moved to dismiss on the basis of forum non conveniens. Mantle argued that Louisiana was an adequate alternate forum, especially in light of the fact that there was a pending Louisiana action arising out of the same incident involving four-thousand other plaintiffs. Mantle also relied on the fact that (1) the plaintiffs were Louisiana residents (2) the blowout affected Louisiana real property and occurred in Louisiana (3) a Louisiana contractor was working on the well and (4) a majority of witnesses were beyond reach of compulsory process in Texas. The trial court denied Mantle’s motion to dismiss for forum non conveniens and Mantle appealed.

Legal Summary: In response to Mantle’s argument that Louisiana was an adequate forum the plaintiffs alleged that Louisiana was not adequate because (1) the one year statute of limitations would bar any action in Louisiana (2) damages for medical monitoring is unavailable in Louisiana and (3) punitive damages would not be recoverable in Louisiana under these circumstances.

In concluding that Louisiana statute of limitations would not bar the plaintiffs’ claims the court relied on Louisiana Civil Code article 3462 which suspends the prescriptive period in Louisiana when a plaintiff files an action against a defendant in another court of competent jurisdiction and venue. Moreover, the court noted that under Louisiana Code of Civil Procedure article 596, upon dismissal of the suit in Texas, Louisiana provides class action plaintiffs a thirty-day “grace period” to file the claim in Louisiana. Under article 596, the Louisiana prescriptive period does not begin to run until thirty days after mailing or other notice of dismissal of the other suit.

Second, with respect the plaintiffs’ damage allegations, the court noted that there was no evidence that recovery for medical monitoring was not permitted under Louisiana law. The court also stated that even if the plaintiffs could not recover punitive damages, Louisiana allowed some recovery and the inability to recover all requested damages does not render a forum inadequate.

The court further concluded that the substantial injustice to defendant prong of forum non conveniens weighed in favor of dismissal because many witnesses were outside of the court’s compulsory service of process and Mantle was defending a suit in Louisiana arising out of the same facts. The court also concluded that both the public and private interest factors weighed in favor of dismissal. Considering all of the factors in Tex. Civ. Prac. & Rem. Code § 71.051(b), the court held that the trial court erred in denying Mantle’s motion to dismiss for forum non conveniens.

Does the Late Substitution of Counsel Require a Continuance?

McAleer v. McAleer, ---S.W.3d---, 2012 WL 5457459 (Tex. App.—Houston [1st Dist.] Nov. 8, 2012, no pet.)

Issues Presented: When does the late substitution of counsel require a continuance of trial?

Relevant Facts: Stephen McAleer’s (“Stephen”) wife Karen filed for a divorce in April 2010. Stephen answered the divorce suit. Within two months after answering, Stephen had retained and terminated two attorneys. By July 2010, Stephen retained another attorney. The new attorney’s husband unexpectedly died on September 1, 2010.

Stephen retained a new attorney on September 27, 2010. Stephen turned over a number of documents to the new attorney to produce to Karen’s attorney in discovery. The attorney became difficult to contact, did not produce the documents to Karen, and did not give the documents back to Stephen. Stephen’s new attorney had apparently been diagnosed with cancer.

Stephen then hired another attorney, who filed a motion to substitute on December 30, 2010. The new attorney filed a motion for continuance on January 14, 2011, seeking to continue the case from its February 14, 2011, trial setting. The attorney sought the continuance to be able to engage in the discovery that Stephen’s previous attorneys had not been able to conduct. The trial court denied the continuance, finding that Stephen had not properly complied with the discovery process.

Legal Summary: The court began by noting that when a motion for continuance is based on lack of counsel, the moving party must show that his failure to be represented by counsel was not due to his own fault or negligence. The court went on to hold that the fact that Stephen changed counsel five times did not support the denial of the motion for continuance because Stephen had not changed attorneys for a dilatory purpose.
In conducting its analysis of whether the denial of Stephen’s motion for continuance was an abuse of discretion, the court cited the Supreme Court decision of Villegas v. Carter, 711 S.W.2d 624, 626 (Tex. 1986). In Villegas, the Court recognized that the “right to counsel is a valuable right; its unwarranted denial is reversible error.” The Court went on to hold that when a trial court allows one attorney to withdraw and another to enter a case, it must give the party time to secure new counsel and time for the new counsel to investigate the case and prepare for trial. Applying the holding in Villegas to Stephen’s situation, the court held that the denial of Stephen’s motion for continuance was an abuse of discretion. The court noted that for nearly 30 percent of the discovery period, Stephen had an attorney with whom he could not effectively communicate. Moreover, Stephen could not communicate with Karen based on a temporary order, and Karen’s attorney could not communicate with Stephen under the Rules of Professional Conduct. Stephen had effectively been without counsel until just prior to his trial setting.
Next the court addressed Stephen’s additional ground for a continuance—he needed more time to conduct discovery. The court stated that, in considering whether to grant a motion for continuance based on the need for discovery, a court should look to 1) the length of time the case has been on file; 2) the materiality of the discovery sought, and 3) whether due diligence had been exercised in obtaining the discovery. In Stephen’s case, the court held that the discovery sought was material, the case had been on file only eight and one half months, and Stephen had used due diligence in seeking to conduct discovery. Based on Stephen’s attorney’s late substitution and the need to conduct more discovery, the court held that a continuance should have been granted and ordered a new trial.

Does a Mother Hubbard Clause Make a Partial Summary Judgment Final? What Is the Appellate Remedy When the Trial Court Erroneously Fails to Grant Relief for a Litigant’s Spoliation of Evidence?

Miner Dederick Const., LLP v. Gulf Chem. & Metallurgical Corp., No. 01-11-00325-CV, 2012 WL 6082714 (Tex. App.—Houston [1st Dist.] Dec. 6, 2012, no. pet. h.)

Issues Presented: The court examined whether a partial summary judgment was rendered final by the inclusion of a Mother Hubbard clause in the order and whether the trial court erroneously denied relief for spoliation.

Relevant Facts: Gulf Chemical & Metallurgical Corporation hired Miner Dederick Construction LLC as general contractor to construct an expansion of a waste container, including the installment of an expansion joint. Three months after Miner Dederick provided a Certificate of Guaranty to Gulf, oil began to leak from the expansion joint. Pursuant to the Guaranty, Gulf asked Miner Dederick to repair the joint. Miner Dederick responded that it would require additional money because the joint repair was not covered by the Guaranty. Although Gulf did not allow Miner Dederick to make repairs, Miner Dederick asked to review the joint before the repairs were made. Gulf refused, but proceeded to document its own findings and had a third party make repairs that permanently altered the expansion joint. Gulf filed suit against Miner Dederick for breach for contract and warranty in failing to construct the joint and repair. Miner Dederick counterclaimed for breach of contract and further alleged that Gulf spoliated evidence. In support of its spoliation motions, Miner Dederick relied on Gulf’s refusal to allow Miner Dederick to view the joint, failure to notify it of testing and the destruction of the joint in covering it with concrete in the repairs. The trial court granted Gulf’s summary judgment on Miner Dederick’s counterclaims and Gulf’s traditional motion for partial summary judgment on breach of contract. The trial court also denied Miner Dederick’s spoliation request and request for sanctions. After a jury awarded damages to Gulf, the trial court entered a final judgment based on its summary judgment rulings and the verdict and Miner Dederick appealed.

Legal Summary: On appeal, Miner Dederick argued that the trial court lacked jurisdiction to sign the final order. Miner Dederick argued that the language in trial court’s July 16, 2010 order granting summary judgment on Miner Dederick’s counterclaims and the July 2, 2010 order granting Gulf’s partial motion for summary judgment were final appealable orders. As result, the trial court lacked jurisdiction to enter a final judgment after the trial on March 7, 2011. In rejecting this argument the First Court explained that neither the title of the order granting “final” summary judgment nor the language in the order that “all relief not expressly granted herein is denied” made the order a final judgment. The court stated that a Mother Hubbard clause cannot be a determining factor in the finality of a judgment when there had been no trial on the merits. The intent to dispose of all claims must be expressed in the order itself, and in this case additional claims were pending when the trial court signed the order.

In response to Miner Dederick’s claims that the court erroneously granted summary judgment as to its counter claims, the court stated that because the trial court did not state on which grounds it granted summary judgment and Miner Dederick only challenged two of the three grounds presented, the court must uphold the summary judgment because not every ground was challenged on appeal.

With respect to spoliation, the court concluded that Gulf had a duty to preserve evidence. Moreover, the court found it was undisputed that the evidence was material and, because parts of the expansion joint were removed and it was covered in cement, it was altered from its original condition. The court further found that the spoliation prejudiced Miner Dederick by depriving it of the opportunity to gather evidence to re but the evidence offered by Gulf and to develop its affirmative defenses. The court therefore held that the trial court abused its discretion and the judgment must be reversed.

As for the the appropriate remedy, the Court of Appeals decided to remand for further proceedings rather than render a take-nothing judgment because the evidence introduced by Gulf at trial tended to support its right to relief. The appropriate remedy for spoliation, the court held, would be left to the trial court’s discretion on remand.

Are Findings of Fact Accorded Probative Value When They Are Improperly Recited in the Judgment?

James J. Flanagan Shipping Corp. v. Del Monte Fresh Produce N.A., Inc., No. 01-11-00525-CV, 2012 WL 6086936 (Tex. App.—Houston [1st Dist.] Dec. 6, 2012, no pet. h.)

Issues Presented: Whether the trial court’s findings of fact, which were recited in the judgment in violation of Rule 299a rather than a separate document, should be accorded probative value; and whether the trial court properly fond that the plaintiff’s recovery was barred by settlement credits and the economic loss rule.

Relevant Facts: Between 1997 and 2007, Del Monte Fresh Produce hired James J. Flanagan Shipping Corp. to provide stevedoring services with ships importing fresh produce for Del Monte arriving in Galveston. In 2007, Del Monte was unsatisfied with Flanagan’s services and allegedly conspired with a Flanagan employee, Richard Bradford, to provide Flanagan’s confidential cost and price information to a competitor, Pacific Stevedoring, to help that competitor secure the Del Monte contract instead of Flanagan. After Del Monte awarded Pacific the contract in 2008, Flanagan sued Bradford, Del Monte, and others for breach of fiduciary duty, conspiracy, knowing participating in a breach of fiduciary duty, and unfair competition.

All defendants except Del Monte settled, and Flanagan tried its claims against Del Monte to the court. After trial, the court signed a judgment that included the court’s findings of facts and conclusions of law. The court found that Del Monte engaged in unfair competition, knowingly participated in Bradford’s breach of his fiduciary duties, and acted with malice. The court further found that awards of actual and punitive damages were justified. Nevertheless, the trial court entered a take-nothing judgment, holding that the economic loss rule and settlement credits barred any recovery.

Legal Summary: Before addressing the settlement credit and economic loss rule issues, the Court of Appeals examined, as a threshold issue, the propriety of the trial court’s findings of fact, which were recited in the judgment rather than in a separate document. Texas Rule of Civil Procedure 299a provides, in part: “Findings of fact shall not be recited in a judgment. If there is a conflict between findings of fact recited in a judgment . . . and findings of fact pursuant to Rules 297 and 298, the latter findings will control for appellate purposes.”

Del Monte argued that, because the findings of fact were recited in the judgment and not in a separate document, they should be ignored and the court should imply all findings in support of the take-nothing judgment. The court of appeals agreed that the trial court erred by reciting its findings of fact in the judgment. However, because the record contained no other findings of fact, there was nothing with which the trial court’s findings could conflict. Accordingly, in the absence of any conflict, the trial court’s findings would be accorded probative value.

The Court of Appeals then held that the economic loss rule did not apply because Del Monte was found to have violated tort duties that did not arise out of a contract, and that the provisions for settlement credits in Chapter 33 of the Texas Civil Practice and Remedies Code did not apply to awards of punitive damages. Therefore, the court reversed the take-nothing judgment and rendered judgment for the amount of punitive found by the trial court.

An Appraisal Award Under A Commercial Insurance Policy Does Not, By Itself, Support Judgment Against An Insurer.

Security National Insurance Co. v. Waloon Investment, Inc., d/b/a Ramada Limited, No. 14-11-00130-CV (Tex.App.—Houston [14th Dist.] October 9, 2012)

Issue Presented: Does the issuance of an appraisal award support the entry of judgment against an insurer for breach of contract?

Relevant Facts: Appellee Waloon Investment, Inc., d/b/a Ramada Limited (“Waloon”) owned and operated a Ramada Inn located in Houston (“the Property”). Appellant Security National Insurance Co. (“Security”) issued a commercial insurance policy that covered the Property. That policy was in effect when Hurricane Ike struck Houston in September 2008, during which the Property sustained damage. Waloon submitted a proof of loss to Security and invoked the policy’s appraisal provisions. The policy contained two appraisal provisions, under which either party could invoke an appraisal of the loss in the event of a disagreement as to the amount thereof. Under the policy, in the event that an appraisal occurred, Waloon retained its right to bring suit, and Security retained its right to deny the claim. However, the appraisal award would be binding as to the amount of the loss.

Security subsequently filed a declaratory judgment action against Waloon, and Waloon counterclaimed for breach of the policy. After the court ordered the parties to proceed with the appraisal process provided in the policy, Waloon sought a judgment against Security for the amount of the appraisal award. The trial court granted Waloon’s request, entering a judgment against Security for breach of the insurance policy and awarding the amount of the appraisal.

Outcome/Holding: The Court held that the appraisal award, without more, was insufficient to support a judgment against Security for breach of contract. Waloon sought to liken the appraisal award to an arbitration award, but the Court distinguished the two, stating that, while an arbitration award is a finding on the merits of the parties’ claims and/or defenses, an appraisal award is merely a determination of the amount of loss and does not resolve other issues, such as liability. The Court held that the only way to support a judgment under the circumstances was by summary judgment and found that the Waloon had failed to present sufficient evidence to support a summary judgment on liability. Accordingly, it reversed and remanded.

Effect of International Relocation on Orders Affecting the Parent-Child Relationship And the Permissible Scope of Injunctive Relief Under TEX. FAM. CODE Ch. 153.

Sylvia Yolanda Arredondo v. Antonio A. Betancourt, Jr., No. 14-11-00742-CV (Tex.App.—Houston [14th Dist.] October 11, 2012)

Issues Presented: (a) Does TEX. FAM. CODE Ch. 156 authorize the modification of a custodial order where the primary managing conservator moves to a foreign country, taking the child with her?; (b) Does TEX. FAM. CODE CH. 153 authorize the imposition of an injunction barring travel by the parent?; and (c) does a defending party have to object to the trial court’s failure to conduct a jury trial on attorney’s fees to preserve that complaint for appeal?

Relevant Facts: Appellant Sylvia Yolanda Arredondo (“Sylvia”) married Appellee Antonio A. Betancourt, Jr. (“Antonio”) in January 2001, giving birth to their son in April of that year. The couple divorced in September 2002. As part of their agreed divorce decree, Sylvia and Antonio were designated joint managing conservators of their child, though Sylvia was awarded the exclusive right to establish the primary residence of the child without regard to geographic location. She subsequently married Miguel Arredondo (“Miguel”), and the two of them had a son together.

On November 1, 2009, Sylvia drove to Mexico with Miguel and the two boys. Two days later, she sent a text message and e-mail to Antonio, in which she informed him that she and their son were in Mexico. The parties disputed whether this was the first time Antonio was informed that the boy would be taken to Mexico. Thereafter, Sylvia refused to allow the child to travel by plane to Houston because she “didn’t trust the airline.” The evidence showed that this had the effect of denying Antonio his Christmas visitation rights under the divorce decree.

After Sylvia and Miguel returned to Texas, Antonio filed a petition to modify the parent-child relationship, asking that he be awarded the exclusive right to determine the child’s residence, as well as child support from Sylvia, together with a temporary restraining order to compel the return of the child to Harris County. Sylvia returned the child to Harris County and, consistent with interlocutory orders entered by the trial court, voluntarily surrendered both her own passport and the child’s. After a jury trial, the trial court entered a judgment awarding Antonio control over the child’s residence, with a geographic restriction to Harris County, and further enjoined Sylvia from traveling outside the continental United States without Antonio’s prior written consent. The trial court also denied Sylvia’s post-trial motion for the return of her passport and, based on post-trial submissions, awarded Antonio $34,000 in attorney’s fees.

Outcome/Holding: The Court determined that Sylvia’s transport of the child to Mexico, as well as her “disenrollment” of the child from his school in Harris County, without any prior notice to Antonio, coupled with her refusal to allow the child to travel by plane to Houston, constituted a material and substantial change of circumstances, justifying Antonio’s requested modification of the parent-child relationship under TEX. FAM. CODE § 156.101(a)(1)(A). Accordingly, the award of the exclusive right to determine the child’s residence and the geographic restriction to Harris County were affirmed. However, because the trial court’s travel injunction applied to Sylvia, whether or not she traveled with the child, and would have prohibited travel to non-continental regions of the United States (e.g., Hawaii) in addition to foreign countries, the Court held that the injunction was overbroad and violated Sylvia’s constitutional right of interstate travel. Finally, the Court held that Sylvia failed to preserve her complaint on appeal that Antonio failed to present evidence and obtain a jury finding on the amount of his attorney’s fees because the trial court had announced that it would decide the amount of attorney’s fees, not the jury, and she failed to timely object to that ruling. Accordingly, the trial court judgment was affirmed in part and reversed in part, with the injunction dissolved.

It Matters Who Signs: Limiting the Persons Subject To Sanctions Under TEX. R. CIV. P. 13 and Ch. 10, TEX. CIV. PRAC. & REM. CODE.

Citibank N.A. and Allen L. Adkins v. Don M. Estes, No. 14-11-00918-CV (Tex.App.—Houston [14th Dist.] October 30, 2012)

Issues Presented: Is the counsel of record subject to sanctions for motions and pleadings signed and filed, albeit on behalf of his client, by a colleague?

Relevant Facts: Appellant Citibank N.A. (“Citibank”) sued to collect delinquent outstanding balances on two credit card accounts held by Appellee Don M. Estes (“Estes”). Appellant Allen L. Adkins was Citibank’s counsel of record.

After numerous attempts to serve Estes, Citibank moved for an order authorizing substitute service under Tex. R. Civ. P. 106, and submitted a proposed order describing the method of service requested. The trial court granted the 106 motion, but entered its own order.The Court’s order added requirements not contained in Citibank’s proposed order. The process server never obtained a copy of the trial court’s order, and assumed that the trial court had entered the proposed order. Neither Citibank nor Adkins (nor his office) obtained a copy of the Court’s order, so they operated under the same incorrect assumption. As a result, the process server served Estes in accordance with the proposed order, not the Court’s order. This service did not comport with the requirements of the Court’s order.

Thereafter Adkins’ colleague moved for a default judgment on behalf of Citibank. The process server’s affidavit attached to the motion was defective. The trial court denied the motion. Thinking that the defective affidavit was the cause of the trial court’s denial, the process server filed a corrected affidavit, and Adkins’ colleague filed a second motion for default. The trial court again denied the motion, and admonished Citibank to cease filing groundless motions for default or face sanctions. Continuing to believe that the cause of the trial court’s denials was a defect in the supporting affidavit, the process server filed a second corrected affidavit and Adkins’ colleague filed a third motion for default. The trial court again denied the motion, and entered an order dismissing the underlying case and sanctioning Adkins $500.00.

The sanction order did not specify the grounds for the entry of sanctions, nor did it indicate whether lesser sanctions had been attempted first to secure compliance with the trial court’s prior order. Adkins subsequently obtained a copy of the trial court’s Rule 106 order and discovered the defect in the prior service. Citibank and Adkins appealed.

Outcome/Holding: The Court determined that the sanctions were inappropriate, both as to Citibank and as to Adkins. As to Citibank, because neither the trial court’s sanction order nor the remainder of the record indicated that lesser sanctions had been attempted, the “death penalty” sanction of dismissal was not available. The sanctions also were not appropriate as to Adkins because he had not signed any of the offending pleadings. Both TEX. R. CIV. P. 13 and TEX. PRAC. & REM. CODE Ch. 13 provide for sanctions only against the signatory of a groundless or frivolous pleading or motion or his client.

Limitations on the Availability of The Offensive Use Doctrine to Waive Attorney-Client Privilege in Post-Settlement Suits for Indemnification.

In re Exxon Mobil Corporation, Nos. 14-12-00697- CV (Tex.App.—Houston [14th Dist.] November 8, 2012)

Issue Presented: Does the offensive use doctrine waive the attorney-client privilege for purposes of discovery of settlement documents, communications and information in a subsequent suit for indemnification by one of the settling parties?

Relevant Facts: Relator Exxon Mobil Corporation (“Exxon”), f/k/a Exxon Corporation sold certain real property in Louisiana to Trade Exploration Corporation (“TEC”), Duer Wagner, III and James Finley (collectively, “the Wagner Group”) in 1994. As part of the sales agreement, the Wagner Group agreed to defend and indemnify Exxon.

Twelve years later, three property owners sued Exxon in separate actions in Louisiana state court, alleging environmental damage and seeking restoration and remediation of the land. Exxon requested defense and indemnification from the Wagner Group in each of the cases, which the Wagner Group declined to provide. The first of the suits against Exxon to go to trial was M.J. Farms, LTD v. Exxon Mobil Corp., et al. in Louisiana’s Seventh Judicial District Court (“the M.J. Farms case”). The M.J. Farms plaintiffs and Exxon settled during trial, and Exxon then sued the Wagner Group for indemnification in the 189th Judicial District Court in Harris County, Texas.

The Wagner Group subsequently sought production of “all documents relating to Exxon’s or Exxon’s Litigation Counsel’s evaluation of all or part of the [M.J. Farms] litigation”; “all files of Exxon’s Litigation Counsel relating to all or part of the [M.J. Farms] litigation”; all communications with and analyses of jury consultants; and any outlines prepared by Exxon’s counsel for use in connection with witness examinations during the M.J. Farms trial. In support of this discovery, the Wagner Group argued that its defense of the indemnity claim requires production of (a) settlement documents and information relating to the settlement agreement; (b) settlement communications and negotiations; (c) communications between Exxon and its counsel regarding Exxon’s potential liability to the M.J. Farms plaintiffs; (d) the settlement amount; and (e) communications regarding the cost of remediation of the real property, in order to determine whether the M.J. Farms settlement was reasonable and made in good faith.

Exxon objected to the discovery and resisted the subsequent motion to compel by invoking the attorney-client privilege. The Wagner Group argued in response that Exxon waived its privilege under the offensive-use doctrine. Based on Exxon’s privilege log, the documents at issue were communications between Exxon’s in-house counsel and other Exxon attorneys and corporate representatives. After a hearing, the trial court concluded that Exxon had waived the attorney-client privilege by offensive use and ordered the documents produced. Exxon filed a petition for writ of mandamus.

Outcome/Holding: The Court granted Exxon’s petition, concluding that the offensive-use doctrine did not waive Exxon’s privilege in the withheld documents. After reciting the three-prong test for the offensive use doctrine delineated by the Supreme Court in Republic Ins. Co. v. Davis, 856 S.W.2d 158, 163 (Tex. 1993)((1) the party asserting the privilege must be seeking affirmative relief; (2) the privileged information must be such that, if believed by the fact finder, it would probably be outcome determinative of the cause of action asserted; and (3) disclosure of the confidential information must be the only means by which the aggrieved party may obtain the evidence), the Court first focused on the second prong. In particular, the Court analyzed whether the indemnification standard was objective or subjective, in order to determine whether the withheld communications would, solely in and of themselves, have the potential to determine the indemnity claim. Relying primarily upon the Court’s prior holding in Amerada Hess Corp. v. Wood Group Prod. Tech., 30 S.W.3d 5, 11 (Tex.App.—Houston [14th Dist.] 2000, pet. denied), as well as the Southern District’s opinion in Interspan Distrib. Corp. v. Liberty Ins. Underwriters, Inc., CIV.A. H-07-1078, 2009 WL 2605314 at *34 (S.D.Tex. Aug. 21, 2009), the Court held that the reasonableness/good faith standard required for indemnity was objective, rather than subjective, as the trier of fact would necessarily have to rely upon expert testimony as to whether the settlement in the M.J. Farms case was reasonable and made in good faith. Therefore, the communications sought would not be outcome determinative, and the second prong of the offensive use doctrine was not satisfied.

Damage To Real Property Need Not Be Physical In Order to Support Recovery.

Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch, No. 14-10-01006-CV (Tex.App.—Houston [14th Dist.] November 15, 2012)

Issue Presented: Is a party seeking recovery for injury to real property required to demonstrate permanent physical injury to the property in order to prevail or is it enough that a stigma attached to the property because of environmental contamination that was later remediated?

Relevant Facts: Appellant Houston Unlimited, Inc. Metal Processing (“HUI”) operates a metal-processing facility in Washington County, Texas. The facility is across Highway 290 from real property owner by Appellee Mel Acres Ranch (“Mel Acres”). A culvert flows downhill from HUI’s property, under the highway, and into a stock tank (“the large pond”) on Mel Acres’ property. Mel Acres’ property also contains two “background” ponds, which are not hydraulically connected to HUI’s property and could not be affected by HUI’s conduct.

A dispute arose between HUI and Mel Acres concerning alleged contamination of the culvert and the large pond with various chemicals and metals in amounts exceeding state action levels. After numerous examinations of water samples taken from Mel Acres’ property, and complaints filed with the Texas Commission on Environmental Quality (“TCEQ”), Mel Acres sued HUI for trespass, nuisance and negligence, seeking recovery of permanent damage, as measured by diminution in the market value of Mel Acres’ property.

At trial, Mel Acres produced testimony by an environmental expert and a licensed real estate appraiser, both of whom testified to the reduction in market value caused by former, albeit fully remediated, environmental contamination of real property. The jury found that HUI did not create a permanent nuisance on the property or commit trespass. However, the jury did find that HUI’s negligence proximately caused the occurrence or injury in question, i.e. a reduction in the market value of Mel Acres’ property. HUI appealed, arguing that Mel Acres could not recover because it had not shown that HUI had caused permanent physical injury to its property.

Outcome/Holding: A divided panel affirmed the trial court’s judgment. It found no existing authority requiring permanent physical damage as a prerequisite to recovery of lost market value, and declined to make such a holding, as it would deprive property owners of any means of recovery for various types of residual damages to their property. The Court therefore concluded that the creation of a permanent stigma fully satisfied the requirement of a permanent injury.

Dissent: The dissenting justice, Justice Boyce, would not have reached the issues regarding valuation because the expert’s valuation opinion of the property was unreliable.