As you probably have read or heard in the news, we currently are in a seller’s residential real estate market. There is often a bidding frenzy over a home as soon as it is listed, and buyers frequently waive provisions in the standard real estate form contract hoping that their bid will be accepted. The case of Hall v. Rogers shows why buyers may want to think twice before getting caught up in this frenzy. 01-19-00408-CV, 2021 WL 2653736, at *2 (Tex. App.—Houston [1st Dist.] June 29, 2021, no pet. h.).

Procedural history. The Buyers sued the Sellers for failing to disclose known defects in the house the Buyers purchased from the Sellers. The residential real estate contract signed by the parties stated that the Buyers accepted the property “in its present condition.” As a result, at the close of the evidence at the jury trial, the trial court judge entered a directed verdict in favor of the Sellers that the Buyers take nothing. The Buyers appealed and, as explained below, the Court of Appeals affirmed this decision.

Background. A few months after the Buyers purchased the home in question, they discovered multiple sink holes under the deck of the home. Subsequently, the Buyers learned that the Sellers had removed a collapsed retaining wall and replaced it with underground piers. The Sellers did not disclose this in any of the contract documents. More specifically, the Sellers answered no to the question in the Sellers Disclosure Notice as to whether they were aware of any drainage problems, water issues, or structural repairs regarding the property. They also answered no as to whether they were aware of any items, equipment or systems in need of repair.

The Buyers sued for breach of contract, fraud and deceptive trade violations based upon the Sellers’ failure to disclose material facts regarding the condition of the property. The primary defense of the Sellers was that the Buyers’ agreement to “accept the property in its present condition” was an agreement to accept the property “as is.” This barred the Buyers’ claims against the Sellers. The Sellers contended that this was true even though they did not disclose anything about removal of the retaining wall.

Findings by Court of Appeals. In addressing the applicable law, the Court of Appeals stated:

When buyers contract to buy something “as is,” they agree to make their own appraisal of the bargain and to accept the risk that they may be wrong. Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995); Van Duren v. Chife, 569 S.W.3d 176, 185 (Tex. App.—Houston [1st Dist.] 2018, no pet.). The sellers give no express or implied assurances as to the value or condition of the thing sold. Prudential, 896 S.W.2d at 161. An enforceable as-is clause thus negates the elements of causation and reliance on claims relating to the sale. Id.; see Williams v. Dardenne, 345 S.W.3d 118, 124 (Tex. App.—Houston [1st Dist.] 2011, pet. denied).

Hall v. Rogers, supra, *5.

The Court of Appeals discussed that there are exceptions the enforceability of an “as is” clause when a seller makes false representations or conceals material information about the value or condition of the property. Here the Sellers testified at trial that the retaining wall had been completely removed from the property several years before the sale. The Sellers installed beams underground to manage the slope of the property. This was done for aesthetic purposes rather than at the recommendation of an engineer. The Court found that this did not show that the Sellers made misrepresentations or conceal material information about the condition of the property.

The Court also found that the Buyers failed to present evidence to the contrary. The evidence presented by the Buyers included that of a civil engineer who testified that the property had a steep grade, his inspection of the property indicated that that a fill material had been added under the deck because of soil erosion. There was also evidence presented that the homebuilder’s engineer recommended installation of the retaining wall during the construction of the home. However, the court found that this did not show that the Sellers were ever aware of the conditions, i.e. soil erosion, leading to the sink holes. Therefore all of the Buyers claims were barred by the “as is” provisions in the contract.

Conclusion. This case shows the difficulty of overcoming an “as is” clause in a real estate purchase contract. Anyone who has ever bought a home can understand how easy it is to get caught up in the emotion of owning a new home. That is why it is important to consult with a competent real estate agent or attorney before signing a real estate purchase agreement.

In Texas, the owner of a farm animal is immune from liability for injuries caused by the animal to third parties if the Farm Animal Act applies, as shown by Lobue v. Hanson, 14-19-00175-CV, 2021 WL 1567731, at *1 (Tex. App.—Houston [14th Dist.] Apr. 22, 2021, no pet.). In this case, the Defendant owned 56 acres that he rented as a wedding venue. There were cattle and 2 horses on the property. The Plaintiff in this case was a bridesmaid attending a wedding being held on the property. The Plaintiff walked over to pet one of the two horses–Shiloh–who was roaming in the area enclosed for the patrons. “When she moved to pet the other horse, Shiloh disagreed, and grabbed her by the arm, shook her, and tossed her on the ground.” Id. at *1. The Houston Court of Appeals held that the Farm Animal Act protected the Defendant horse and property owner from liability.

The Plaintiff sued under theories of premises liability and negligence, claiming that the Defendant owner failed to warn the Plaintiff about the vicious tendencies of the horse and that by leaving the horse lose, the Defendant breached his duty as the owner of the facility to keep the property in a reasonable safe condition and was negligent.

Defendant filed a motion for summary judgment and requested that the court rule as a matter of law that he was protected from liability under the Farm Animal Act.

The Farm Animal Act precludes liability against “any person, including a farm animal activity sponsor, farm animal professional, livestock producer, livestock show participant, or livestock show sponsor,” for “property damage or damages arising from the personal injury or death of a participant in a farm animal activity or livestock show if the property damage, injury, or death results from the dangers or conditions that are an inherent risk of a farm animal activity or the showing of an animal on a competitive basis in a livestock show.”

Id at *3.

Under the Act, the Court stated that the Defendant was  required to prove that 1) the Defendant qualified as a person entitled to seek protection, 2) the Plaintiff was a “participant”, 3) the Plaintiff participated in a “farm animal activity”, and 4) the Plaintiff’s injuries resulted from an “inherent risk.”

Not surprisingly, the Court found that the Defendant owner fell within the class of protected persons under the Act. Somewhat surprisingly, the Court readily found that being injured from petting a horse was an “inherent risk” under the Act. Most of the Court’s analysis focused on whether the Plaintiff was a “participant” in a “farm animal activity.” The Court found that since the definition of a “farm animal activity” under the act includes “handling” a farm animal, then the Plaintiff participated in a farm animal activity by petting the horse. Thus, the Court concluded that the Defendant was protected from liability under the Act.

I am not sure that I would have guessed the outcome of this one. Having grown up around horses, I would not have considered being grabbed by a horse and thrown to the ground an inherent risk in petting the horse. Further, it seems a stretch to find that petting a horse is considered “handling” a farm animal. However, this case does seem to indicate that the courts are willing to apply the Farm Animal Act broadly to protect owners from liability for injuries caused by their farm animals and livestock.

Introduction.  In this case, the widow and family of Mr. Deol (deceased) sued a truck driver, Defendant Gregory, and her employer, Defendant New Prime, for negligently causing Deol’s wrongful death, in a multi-vehicle  trucking accident. Gregory v. Chohan, 615 S.W.3d 277, 295 (Tex. App.—Dallas 2020, no pet. h.)]. The trial court entered judgment for  $17 million in favor of the widow and Deol’s  family based upon the jury’s verdict. The Dallas Court of Appeals affirmed the judgment.

Background. Defendant Gregory lost control of her truck that she was operating for her employer, Defendant New Prime, when she braked on ice because she saw brake lights ahead. Gregory’s truck jackknifed blocking the road. Gregory left the truck and did not put on the emergency flashers or take other action to warn oncoming vehicles.  Subsequently, multiple vehicles crashed around Gregory’s truck. Four people were killed including Deol.

Prior to his death, Deol was operating a tractor-trailer and managed to steer it around Gregory’s jackknifed truck. Deol’s truck was clipped by another tractor-trailer and Deol stopped his truck on the shoulder. Subsequently, additional vehicles crashed in the area. Apparently,  Deol got out of his truck and was subsequently killed when one of the vehicles involved in the accident struck a van causing it to run over Deol.

The Deol family sued multiple parties including Gregory and her employer, New Prime. The case against Gregory and New Prime proceeded to trial resulting in the jury awarding almost $17 million to Deol’s estate and family. The award to Deol’s estate included $500,000 for Deol’s mental anguish he sustained in the accident before he died. The verdict in favor of Deol’s family members included an award of over $16 million including for their loss of past companionship, loss of future companionship, past mental anguish, and future mental anguish.

The appeal. On appeal, Defendants Gregory and New Prime challenged the jury’s findings  that the evidence showed that Gregory was negligent and that the negligence proximately caused Deol’s death. The court found that multiple facts existed to support the jury’s findings that Gregory was negligent. These included that:

  • Gregory was already driving in the snow before the accident.
  • Gregory had difficulty seeing because of problems with the windshield wiper fluid and in turn was having difficulty seeing through the windshield because of ice.
  • After Gregory stopped to address the windshield wiper problems, Gregory failed to obtain updates on the weather reports which included a winter weather advisory warning of snow, sleet and freezing rain.
  • Gregory was traveling 58 miles per hour in these extreme weather conditions and she applied a hard stop on the ice.
  • Expert testimony showed that Gregory was traveling too fast and that Gregory did not correctly apply her brakes in ice.
  • After Gregory jackknifed the truck, she failed to activate any warning systems.

Thus, the court of appeals found that there was sufficient evidence to support the jury’s finding of negligence.

The court of appeals then addressed whether the negligence of Gregory proximately caused Deol’s death. In that regard, the court stated:

Proximate cause has two sub-elements, cause-in-fact and foreseeability. W. Invs., Inc. v. Urena, 162 S.W.3d 547, 551 (Tex. 2005). Negligence is a cause-in-fact of an injury if (1) the injury would not have occurred without the negligence and (2) the negligence is a substantial factor in causing the injury. Miller v. Lone Star HMA, L.P., No. 05-17-00954-CV, 2018 WL 3991191, at *2 (Tex. App.—Dallas Aug. 21, 2018, pet. denied) (mem. op.). Foreseeability requires that the negligent actor, as a person of ordinary intelligence, anticipate, or should have anticipated, the danger their negligence created for others.”

Gregory v. Chohan, supra, *295.

The court of appeals found that it was Gregory’s negligence that caused Deol to take evasive action and then be struck by another tractor-trailer.

The jury in this case could readily conclude that the potential danger created by Gregory’s negligence in jackknifing the trailer and in failing to warn oncoming traffic, continued and remained active.

Gregory v. Chohan, supra, *296.

The court of appeals concluded that there was sufficient evidence to support the jury’s proximate cause finding.

The Defendants also complained on appeal that there was insufficient evidence to support the damages awarded. Defendants contended that Deol was killed instantaneously so that he could not have sustained any mental anguish before he died.

However, a witness,  who saw Deol lying in the road after being ran over by the van, testified that Deol was shaking, rolling around in pain and making verbal sounds before he died. The court of appeals found that there was sufficient evidence to support the award to the estate for Deol’s mental anguish.

Next, the court addressed the damages awarded to Deol’s widow, children and parents for their loss of companionship and mental anguish. Deol was only 45 years old at the time he was killed and his life expectancy was 78 years of age. Thus, his family members could have enjoyed the positive influence that Deol had on them for another 33 years.

The evidence showed that Deol was a loving father and husband. Deol was the primary provider for his family and they could not afford to keep their house after Deol’s death. Deol’s wife became  seriously depressed and his children became withdrawn, inactive, gained weight, and became depressed. The court examined the record in detail regarding the toll that Deol’s loss took on his family and found that there was sufficient evidence to support the multi-million dollar award for their damages.

Final thoughts. The unfortunate death of Deol  resulted  from a series of events that followed Defendant Gregory negligently jackknifing her truck. The most critical  issue addressed on appeal was probably whether Gregory’s negligence proximately caused Deol’s death. This case  shows that the foreseeability element of proximate  case does not require that each specific event leading up to the death was  predictable. Rather, it only requires showing that it was foreseeable in general that the triggering event – the jackknifed truck – resulted in injury or death.

The summary judgment personal injury case of AEP Tex. Cent. Co. v. Arredondo, 612 S.W.3d 289 (Tex. 2020) addressed in my previous blog article (previous article) made its way to the Supreme Court of Texas (SCOTX). This case  involved injuries to a landowner who stepped into a hole allegedly created when the contractor, T&D Solutions, LLC, removed a utility pole on the landowner’s property. T&D was hired by the utility company, AEP, to remove the pole. The San Antonio Court of Appeals previously found that fact issues existed as to whether both T&D and AEP were liable for the injuries caused to the Plaintiff landowner. SCOTX agreed that fact issues existed as to whether T&D (the contractor) was liable but held that as a matter of law AEP (the utility) was not liable to the Plaintiff landowner. Thus, SCOTX affirmed the San Antonio Court of Appeals decision as to T&D and reversed as to AEP.

Background. On July 1, 2012, AEP & T&D entered into a contract for T&D to provide AEP  with distribution line  construction and maintenance related services. The contract designated T&D as an independent contractor solely responsible for supervising its employees and subcontractors.

AEP issued a directive to T&D to remove a utility pole on the Plaintiff landowner’s property. T&D removed the pole and certified that the job was completed in December. Some  7 months later in July, Plaintiff was injured, while mowing her lawn, when she stepped into a 2.5’ deep hole in the area where the pole had been removed.

The Plaintiff landowner subsequently sued Defendants AEP and T&D for negligence. The trial court granted the Defendants’ motion for summary judgment finding as a matter of law that Defendants were not liable to Plaintiff. On appeal, the San Antonio Court of Appeals found that fact issues existed as to the liability of AEP and T&D and reversed the judgment of the trial court as to these parties. AEP and T&D filed a petition for review with SCOTX.

SCOTX review. On review, SCOTX first addressed whether the San Antonio Court of Appeals correctly held that fact issues existed as to T&D’s negligence. In contending that there were no fact issues, T&D relied upon the deposition testimony of its foreman stating that the crew immediately filled the hole with dirt after the pole was removed. However, the Plaintiff presented evidence that she fell into a 2.5’ hole in the location where the pole was removed. Thus, fact issues existed as to whether T&D failed  to exercise ordinary care in removing the pole. SCOTX affirmed the Court of Appeals decision in this respect.

However, SCOTX disagreed with the Court of Appeal’s decision as to AEP, the utility. AEP asserted that it owed no duty to Plaintiff to ensure that its contractor performed its work safely. The Plaintiff landowner contended, in part, that the written contract between AEP and T&D gave AEP the right to control T&D’s work so that AEP owed a duty to Plaintiff.

SCOTX recognized that it had adopted § 414 of the Restatement (2nd ) of Torts that states:

One who entrusts work to an independent contractor, but who retains the control of any part of the work, is subject to liability for physical harm to others for whose safety the employer owes a duty to exercise reasonable care, which is caused by his failure to exercise his control with reasonable care.

AEP Tex. Cent. Co. v. Arredondo, supra, *295.

The Plaintiff contended that the following contractual terms gave AEP the right to control T&D’s work so that AEP had a duty to use reasonable care in exercising this control:

• [T&D] shall have an authorized representative at the Site to whom [AEP] may give instructions at all times when Work is being performed.

• When Work is performed on private property, … [T&D] shall use its best efforts to arrange for the completion of Work to be with the least inconvenience practicable to [the owner]. Work performance on private property shall be done as expeditiously as possible and the premises restored immediately.

AEP Tex. Cent. Co. v. Arredondo, supra, *296.

SCOTX held that since neither of these provisions sets forth requirements as  to “the means, method  or details of [T&D’s] work,” then they did  not support the legal proposition that AEP owed Plaintiff a duty of care. Thus, SCOTX reversed the San Antonio Court of Appeals decision as to AEP and found as a matter of law that AEP was not liable to Plaintiff for her injuries.

Lessons learned. Drafting contracts between owners and general contractors or general contractors and subcontractors can be tricky. Owners may be tempted to include specific requirements in contracts with their general contractors retaining control over the details of the general contractor’s work. In turn, general contractors may be tempted to do the same in their contracts with their subcontractors. After all, this might help prevent injuries arising from the work. However, the flip side to retaining this control is that owners or general contractors may end up being liable for injuries negligently caused by their contractors.

An injured employee’s exclusive remedy for injuries sustained on the job  is to recover workers compensation benefits, except when the employer intentionally causes the injuries. Berkel & Co. Contractors, Inc. v. Lee, 612 S.W.3d 280 (Tex. 2020). This SCOTX case shows how exceedingly difficult it is to prove this exception.

This case involved a commercial construction project in Houston Texas. Berkel & Company Contractors was hired by the general contractor to drill foundations for a large office tower. The general contractor required Berkel to participate in the “general contractor-controlled insurance program” that “provided uniform workers’ compensation benefits to workers” on the job site. Berkel & Co. Contactors, Inc. v. Lee, supra, *282.

On the day of the accident, the Berkel crew began a new piling without sufficient grout to finish it, in contravention of company policy. The grout hardened while the crew waited for more grout to arrive, and the auger stuck in the ground. Berkel’s foreman, Mark Stacy, instructed the crane operator, Andrew Bennett, to “bump” the auger: essentially, to rock the auger back and forth to try to free it from the hardening grout. After ten minutes of unsuccessful bumping, Stacy recommended that the operation be scuttled and restarted.

Berkel’s superintendent, Chris Miller, overrode Stacy. Spewing invectives, Miller positioned himself next to the auger. He ordered Bennett to continue bumping the auger while pressuring the crane’s hoist cable to further try to loosen it. Witnesses testified that some of the crane’s rollers came off the ground, and the crane’s hydraulic lines began to spray fluid. Though Bennett testified that none of the crane’s alarms sounded, other crew members testified that they thought the situation was “a death trap,” were worried that “[s]omething [was] going to break and hurt somebody,” and prepared to protect themselves from injury. After fifteen to thirty minutes, the crane collapsed, knocking over the steel leads. Lee stood beyond the construction barrier at grade level, and one of the leads hit Lee as it fell. The lead crushed Lee’s leg, ultimately requiring that it be amputated.”

Berkel & Co. Contactors, Inc. v. Lee, *282

Lee filed an application for workers compensation benefits. He also sued Berkel for negligence. Berkel asserted that the workers compensation exclusive remedy defense barred Lee’s claims against Berkel. Lee pled that the defense did not apply because Berkel’s employee, Miller, intentionally injured Lee. The jury agreed and found in favor of Lee. The trial court entered judgment based upon the verdict and case eventually was presented to SCOTX for review.

SCOTX stated that the “Texas Workers’ Compensation Act is the exclusive remedy for a covered employee who seeks recompense for injury claims against the employer.” Berkel & Co. Contractors, Inc. v. Lee, supra, *284. However, there is an exception to this defense when the employer intentionally injures the employee.

To satisfy the intentional-tort exception, “the employer must believe that its actions are substantially certain to result in a particular injury to a particular employee, not merely highly likely to increase overall risks to employees in the workplace.”

 Berkel & Co. Contractors, Inc. v. Lee, supra, *285.

After reviewing the record, SCOTX held that there  was no evidence to support the intentional-tort exception.  Although there was testimony that someone might be injured because of Miller’s reckless conduct, there was no evidence as to who would be injured or as to how or when the injury would occur. Therefore, SCOTX reversed the trial court’s judgment in favor of Lee and rendered judgment that Lee take nothing.

Introduction. In Chambers County v. Pelco Construction Co., the general contractor unilaterally terminated its contract after the project owner stopped work for 40 days. No. 01-18-00832-CV, 2020 WL 7776078, at *1 (Tex. App.—Houston [1st Dist.] Dec. 31, 2020, no pet. h.). The general contractor made payment demands upon the owner for work performed and the owner refused to pay. The jury found in favor of the contractor on its breach of contract claim. On appeal, judgment was reversed because the general contractor failed to give 7 days notice before terminating the contact as required by its provisions.

Background. Chambers County awarded Pelco a $565,000 contract to rebuild a fire station destroyed by Hurricane Ike. The day before Pelco submitted its second payment application, Dannenbaum, the architect and designated representative for Chambers County, ordered Pelco to stop work while administrative paperwork was being reviewed and approved by FEMA. After 40 days, Dannenbaum instructed Pelco to resume working. Pelco refused and provided notice that it was terminating the contract effective immediately. Pelco also demanded payment for work performed and submitted a 3rd payment application in the amount of $52,243.50. Dannenbaum did not issue a certificate of payment for this 3rd application. Pelco filed suit for breach of contract and Chambers County countersued for breach.

The jury found in favor of Pelco and against Chambers on the breach of contract claims. The jury awarded Pelco $52,243.50 for work performed, $35,667 in lost profits  and made findings entitling Pelco to recover attorney fees. The trial court entered judgment in favor of Pelco based upon the verdict.

On appeal, Chambers contended that the court erred in entering judgment in favor of Pelco on its breach of contract claim because Pelco failed to give notice as required by the contract. The provisions of the contract entitled Pelco to terminate the contract if work had been stopped for 30 days due to no fault of Pelco. The contract further stated that in this event:

the Contractor may, upon seven days’ written notice to the Owner and Architect, terminate the Contract and recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery, including reasonable overhead, profit and damages.

Chambers County v. Pelco Constr. Co., supra, *9.

Holding. The court of appeals held that this language required Pelco to give 7 days’ advance notice to Chambers before terminating the contract. Since Pelco failed to comply with this condition precedent, Pelco was not entitled to recover for breach of contract. The court of appeals reversed the trial court’s judgment and rendered that Pelco take nothing.

Lessons learned. Texas has a strong history of strictly enforcing the written provisions in a contract. Thus, a party who terminates a contract without complying with corresponding notice provisions does so at its peril. Always give the required notice before terminating a contract, especially in Texas.  See Multi-Million Dollar Fraud Verdict Reversed.

Introduction. In this rear-end 18 wheeler collision case, the trial court entered judgment in favor of injured motorist Patterson for over $30 million against FTS International Services, LLC  and $26 million against FTS employee, Acker. The Appellate Court overturned the judgment because, amongst other reasons, the noneconomic damages awarded were excessive. The Appellate Courted remanded the case for new trial. FTS Int’l Services, LLC v. Patterson, 12-19-00040-CV, 2020 WL 5047913, at *1 (Tex. App.—Tyler Aug. 26, 2020, no pet. h.).

Background. According to the record, Acker was driving an FTS truck while in the course and scope of his employment for FTS. Acker negligently permitted the truck he was operating to drift into the lane of the vehicle being operated by Patterson. Acker’s truck collided into the right rear bumper and fender of Patterson’s vehicle.

Police were called to the scene and Patterson reported he was not injured. The officer cited Acker for failure to control speed and Acker later pleaded guilty. Acker was then able to drive his vehicle to his destination. FTS required Acker to take a drug test which was “positive for marijuana along with amphetamine and methamphetamine metabolites.” FTS Int’l Services, LLC v. Patterson, supra, *1.

That evening Patterson experienced pain and the  next day he obtained medical treatment. The treating doctor diagnosed Patterson with neck strain and provided medication. Subsequently, Patterson followed up for care with a chiropractor. Patterson was later referred to a pain specialist who performed epidural injections in Patterson’s neck and other procedures. Patterson’s symptoms continued and he was referred to a surgeon who performed surgery.

Patterson sued Acker for negligence and FTS on the grounds that it was vicariously liable for Acker’s negligence and for negligently hiring, training supervising, and retaining Acker.

The jury awarded damages to Patterson as follows: (1) $131,191.96 and $612,578.80 in respective past and future medical expenses; (2) $67,066.33 and $1,500,000 in past and future lost earning capacity; (3) $2,000,000 and $8,000,000 in past and future physical pain; (4) $2,000,000 and $4,000,000 in past and future mental anguish; (5) $3,000,000 and $5,000,000 in past and future physical impairment; and (6) $500.00 in past disfigurement. The jury also found that the harm to Patterson resulted from the gross negligence of Acker and FTS and assessed $75,000,000 and $50,000 in exemplary damages respectively against FTS and Acker.”

FTS Int’l Services, LLC v. Patterson, supra, *2.

Based upon the jury’s verdict, the trial court awarded judgment, jointly and severally, for over $30 million against FTS and $26 million against Acker. FTS and Acker appealed.

Issues on Appeal.    FTS and Acker raised several issues on appeal and the Appellate Court found that:

  • The law and evidence supported Patterson’s claims against FTS for negligent hiring, training, supervising and retention of Acker. The court found that this cause of action is recognized by Texas jurisprudence. The evidence supporting liability against FTS included that Acker’s accurate driving record showed that Acker’s traffic violations exceeded the permissible number to be eligible for hire under FTS policies. Acker had four incidents in his FTS truck while on duty, FTS placed Acker on probation for this, and Acker was on probation at the time of the accident.
  • There was sufficient evidence to show that Patterson’s injuries were caused by the accident.
  • However, the jury awarded excessive damages against FTS and Acker.

Not only must there be evidence of the existence of compensable noneconomic damages such as pain and suffering, mental anguish, and physical impairment, there must also be evidence to justify the amount awarded.

FTS Int’l Services, LLC v. Patterson, supra, *12.

  • This accident involved a minor impact. There was conflicting and conclusory evidence regarding the severity of Patterson’s noneconomic damages. The court concluded that when you couple this with the improper jury argument by Patterson’s attorney, including that defendants spoliated evidence, the award for noneconomic damages was excessive.

Disposition by Appellate Court. The Appellate Court reversed the trial court’s judgment and remanded the case for new trial.

Conclusion. The Appellate Court found that the award of noneconomic damages was excessive. According to the Court, this accident involved a relatively minor impact, even if caused by an 18 wheeler. Further, there was conflicting and conclusory testimony offered to support these damages. The Court also found that Plaintiff’s counsel made improper jury argument including allegations that Defendants spoliated evidence. A closer reading of the case also shows that the Court was troubled by the ratio of economic to noneconomic damages. Thus, in the end the Court ordered that justice required the jury verdict be overturned and the case be remanded for new trial.

Introduction. In this case, Valley Builders Supply, Inc., a manufacturer of concrete blocks, sued its competitor, Innovative Block of South Texas, Ltd,  for defamation and business disparagement. At the conclusion of the trial, Valley Builders chose only to submit questions to the jury for defamation. Based upon the jury’s verdict, the trial court entered judgment in favor of Valley Builders for $1,803,528 in compensatory damages and $937,056 in punitive damages. The parties later entered into a partial settlement of the punitive damages award. Innovative Block appealed the compensatory damages award and it was upheld by the court of appeals. Innovative Block subsequently filed a petition for review with the Texas Supreme Court which rendered a take nothing judgment against Valley Builders. Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., 603 S.W.3d 409 (Tex. 2020).

Background. Both Valley Builders and Innovative Block manufactured and sold concrete blocks and pavers in the Rio Grande Valley. Valley Builders started its business in 1940 and Innovative Block began its business in 2006. Valley apparently went out of business in 2010. It blamed its failure upon false and disparaging statements allegedly made by Innovative Block regarding Valley’s products.

Valley filed suit against Innovative for business disparagement and defamation. In general, the four statements made by Innovative that Valley complained about were: 1) “That is what their block looked like[,] and they’re making an inferior block.” 2) “Valley was producing bad product[,] and they used bad materials.” 3) “Valley Block uses low[-] quality aggregates to manufacture pavers.” 4)“Valley Block received a load of bad aggregate.” Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *415. These statements were allegedly made by Innovative to Valley’s customers and one of its suppliers.

Valley presented expert testimony at trial that it sustained $93,528 in lost profits resulting from the statement about the load of bad aggregate. Valley also presented expert testimony that it sustained damages between $1.5 and $1.66 million, in general to its reputation, because of Innovative’s alleged defamatory statements.

Valley elected to only submit its defamation claim to the jury. It did not submit the business disparagement claim. The jury awarded Valley $1.8 million in compensatory damages for reputational injury and $93,528 for lost profits. The jury also awarded $10 million in punitive damages which were reduced because of statutory caps. The resulting judgment entered by the trial court judge was for $1,803,528 in compensatory damages and $937,056 in punitive damages.

The parties settled the punitive damages portion of the judgment, and Innovative appealed the compensatory damages award. The court of appeals upheld the trial court verdict, finding that there was sufficient evidence to support the defamation findings and damages awarded. Innovative filed a petition for review with the Texas Supreme Court (SCOTX).

The primary issue before SCOTX was whether the evidence supported an action for defamation or business disparagement. In that regard, SCOTX stated:

To state a defamation claim, a plaintiff must show (1) the publication of a false statement of fact to a third party, (2) that was defamatory concerning the plaintiff, (3) with the requisite degree of fault, at least amounting to negligence, and (4) damages, in some cases. Id. at 593. A defamatory statement is one that “tends [ ] to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him.” Restatement (Second) of Torts § 559 (Am. L. Inst. 1977); see also Hancock v. Variyam, 400 S.W.3d 59, 63 (Tex. 2013) (defining defamation “as the invasion of a person’s interest in her reputation and good name”).

In contrast, the tort of business disparagement encompasses falsehoods concerning the condition or quality of a business’s products or services that are intended to, and do in fact, cause financial harm. See Restatement (Second) of Torts § 629. Its elements are more stringent than those of defamation because business disparagement protects against pecuniary loss. Hurlbut v. Gulf Atl. Life Ins., 749 S.W.2d 762, 766 (Tex. 1987). The publication of a disparaging statement concerning the product of another is actionable when (1) the statement is false, (2) published with malice, (3) with the intent that the publication cause pecuniary loss or the reasonable recognition that it will, and (4) pecuniary loss does in fact result.

Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *417.

The court then turned to the expert testimony regarding damages because in order for Valley to be entitled to recover on its defamation cause of action it had to show injury to its reputation. Here, the jury awarded “$1.8 million for the harm to Valley’s reputation caused by Innovative’s  remarks about [Valley’s] products.” Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *420. The only evidence submitted by Valley in support of this harm was expert testimony. Unfortunately for Valley, SCOTX found that this testimony was not based upon reliable data and should have been excluded.

That left only the expert testimony that Valley sustained $93,528 in lost profits “caused by Innovative’s false statement about “a load of bad aggregate.” Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *425. Innovative’s position was that these lost profits were not recoverable special damages for defamation. Although, they might have been recoverable under a business disparagement cause of action, this was not submitted to the jury. Therefore, Valley was not entitled to recover any compensatory damages.

In this regard, the Court stated:

But as we have already determined, disparaging a plaintiff’s goods or services is not defamatory per se because commercial disparagements do not necessarily impugn character or reputation. This distinction has long been observed: “[I]f the statement impugns the integrity or credit of a business, there is an action for defamation, but if merely the quality of a business’ goods or services are criticized, only disparagement will lie.”

Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *425.

Here, the statement allegedly causing the pecuniary loss is that Valley received a load of bad aggregate. The receipt of bad aggregate does not imply reprehensible conduct or a lack of integrity on Valley’s part. Although criticisms concerning the quality of a business’s goods or services may be actionable as commercial disparagement, they are not, without more, an indictment of the business’s integrity or character.

Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *426.

Conclusion. SCOTX went on to hold that there was  no evidence to support an award of general damages based upon defamation or harm to Valley’s reputation. That left the issue of whether the statement about the receipt of bad aggregate was defamatory. Although, this statement might have supported an award for business disparagement it did not support an award for defamation. Since no questions based upon business disparagement were submitted to the jury, SCOTX reversed the court of appeals and rendered that Valley take nothing.

Lessons learned. Defamation and business disparagement are complicated and confusing areas of the law. Further, SCOTX has a fairly long history of closely scrutinizing the evidence submitted at trial, including expert witness testimony, upon which the underlying judgment is based. That is why it is important to always retain experienced litigation counsel, retain highly competent experts, and carefully research the law supporting the jury charge well in advance of trial. This is also why litigation tends to be so costly.

Introduction. TPI Cloud Hosting, Inc. (“TPI”) and Keller Williams Realty Inc. (“KW”) entered into an arrangement for TPI to develop a mobile app for KW’s real estate agents’ business. The alleged price tag to develop this app was $1.8 million. TPI sent a $600,000 invoice for payment to KW which KW refused to pay on the basis that the invoice lacked sufficient detail. The alleged agreement between the parties was never put into writing. TPI eventually sued KW for breach of contract, misappropriation of trade secrets, and fraud. KW filed a motion for summary judgment on the grounds that there were no genuine issues of material fact as to any of these claims so that judgment should be entered by the trial court as a matter of law in favor of KW. The Court denied KW’s motion for summary judgment. TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., A-19-CV-00808-JRN, 2020 WL 4708713, at *1 (W.D. Tex. June 18, 2020).

Background and analysis. In 2015, TPI, a software  application developer, entered into discussions with KW to develop a mobile app for KW’s real estate agency business. These discussions resulted in TPI developing a prototype of a mobile app for KW. The parties subsequently entered into discussions for TPI to develop a complete version of the app. TPI sent invoices to KW totaling $600,000 and KW refused to pay them because the invoices lacked sufficient detail. One of the disputed issues between the parties was whether an agreement was reached since it was never put into writing.

Breach of contract claim. KW asked the court to find as a matter of law that there was no agreement between the parties because there were essential terms open for future negotiations. However, TPI presented evidence that KW agreed to pay TPI $1.8 million to develop the app, evidence from its CEO regarding specific features of the app that the parties agreed upon, and evidence of continuous conversations between the executives of the parties pertaining to the app’s development. The court found that there were material facts in dispute so that it was ultimately up to the jury to decide whether a contract existed. Therefore, the trial court denied KW’s motion for summary judgment as to this claim.

Trade secret claim.  KW also requested the court  to enter judgment in its favor as a matter of law as to TPI’s trade secret claim.

TPI alleges that KW misappropriated the “ideas, plans, and prototypes for [the] integrated software application TPI provided to KW.” (Resp., Dkt. 68, at 12). KW argues that TPI provided only two sources from which trade secrets could even theoretically be stolen: a “wireframe” PDF mockup of what the app could look like and a prototype that TPI’s CEO James Cashiola showed to various KW executives on his cell phone. (Mot., Dkt. 67, at 12–13). KW argues that (a) these displays are not trade secrets, (b) they are premised on broad concepts that are known by the general public, (c) they lack economic value because they are readily ascertainable, and (d) TPI took no effort to protect them, even if they were trade secrets.

TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *2.

However, the Court found that there were genuine dispute as to what information TPI actually provided to KW and that the trade secret claim was disputed by competent expert testimony. Thus, the court denied KW’s request for summary judgment relief as to this claim. TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *3.

 Fraud claim. KW also moved for summary judgment as to TPI’s fraud claim.

TPI alleges that KW made a “knowingly false representation of future performance with no intention of performing its promise because KW had no intention of making” the $1.8 million payment until it “extracted additional intellectual property from TPI.” (Compl., Dkt. 1, at 6). KW argues that the fraud claim is preempted by the Texas Uniform Trade Secrets Act (“TUTSA”), Tex. Civ. Pract. [sic] & Rem. Code § 134A.001, et seq.

TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *3.

The trial court found that TUTSA did not preempt the fraud claim. “Here, however, the alleged fraud could have taken place even without trade secret misappropriation. For instance, if KW intended to delay payment until it extracted trade secret information, but never received that information, the fraud claim could still be valid.” Therefore, this fraud claim is not dependent upon the misappropriation of trade secrets, so it is not barred by TUTSA’s preemption clause.” TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *3.

Thus, the trial court also denied KW’s motion for summary judgment as to the fraud claim.

Conclusion and lessons learned. This case shows why it is important for parties to memorialize their agreements in writing. By doing so, this allows parties to avoid costly legal disputes and to more easily resolve disputes that arise under the contract. This case also shows how the effective use of experts in trade secret claims can help a plaintiff avoid being defeated by a motion for summary judgment. Lastly, just because there is some overlap between trade secret and fraud allegations doesn’t meant that the fraud allegations are preempted by the Texas Uniform Trade Secret Act. The fraud allegations will survive as long as the plaintiff can show that the fraud could have taken place even without the trade secret misappropriation.

Introduction. In this tragic case involving interesting legal issues, a ranch hand was killed when he was trampled by cattle while working for a ranch. The ranch hand’s surviving parents and children sued the ranch for wrongful death and survival claims. The ranch was a nonsubscriber under the Texas Workers Compensation Act. However, the trial court tossed the family’s case on summary judgment under an obscure statute known as the Texas Farm Animal Activity Act. The Supreme Court of Texas (SCOTX) held that the Act did not apply and affirmed the appellate court’s decision to overturn the trial court’s judgment. This will allow the family to have their day in court. Waak v. Rodriguez, 603 S.W.3d 103 (Tex. 2020)

Background and analysis. In October 2013, the ranch owners asked the ranch hand to move 20 head of cattle. After moving the cattle, the ranch hand called the owners to confirm that he should move the 3 remaining cattle in the barn– a 2,000 pound bull, a cow and a calf. The owners confirmed that this should be done. When the owners returned home, they found the ranch hand lying dead and the cattle were still in the barn. The medical examiner found the cause of death to be “blunt force and crush injuries” resulting from force like being trampled by a large animal. The trial court granted the owner’s motion for summary judgment against the ranch hand’s family on the grounds that the Farm Animal Activity Act barred the family’s claims. The court of appeals reversed and SCOTX granted petition for review to make a final determination.

In discussing the Act in question, SCOTX stated:

The Texas Farm Animal Activity Act1 limits liability for injury to “a participant in a farm animal activity or livestock show” that results from an “inherent risk” of such activities,2 “whether the person is an amateur or professional or … pays … or participates … for free”.3 A divided court of appeals held that the Act does not apply to ranchers and ranch hands.4 We agree and affirm the court’s judgment.”

Waak v. Rodriguez, 603 S.W.3d 103, 104 (Tex. 2020).

 SCOTX went on to discuss the history of the Act and found that it did not apply to a ranch hand injured while working in the normal course and scope of employment for his ranch employer.

SCOTX also discussed the ranch’s failure to purchase workers compensation insurance.

The workers’ compensation system throughout the country strikes a balance between employers’ and employees’ respective interests in compensating workplace injuries. The employee cannot sue the employer on common law claims, thereby relieving the employer of defending and paying them, but in return, the employer must pay the employee standardized insurance benefits regardless of fault.49 Each pays or receives something, though perhaps more or less than under the common law.”

Waak v. Rodriguez, 603 S.W.3d 103, 110 (Tex. 2020).

Since the ranch owners chose not to provide workers compensation benefits to the ranch hand and his family, the ranch was not afforded protection from liability under the Texas Workers Compensation Act.

Conclusion and lessons learned. SCOTX found that the court of appeals correctly concluded that the Farm Animal Act does not apply in this case. This cleared the way for the family to have their day in court for the loss of their son and father. As discussed in previous blog articles, a business owner who fails to purchase workers compensation insurance proceeds at his or her own peril. Not only does this open the door for an injured employee to sue the business owner for on the job injuries, but under Texas law the owner waives the right to assert any common law defenses to the on the job injury claims.