LEGAL TRENDS

Court Sanctions Attorney for Making ‘Group’ Allegations in Petition

By Nancy J. Brown

The Texas Supreme Court reinstated the trial court’s finding of a sanctionable violation of Chapter 10 of the Texas Civil Practice and Remedies Code in Low v. Henry, 221 S.W.3d 609, 50 Tex. Sup. Ct. J. 606(Tex. April 20, 2007), because before the attorney filed his petition he failed to reasonably evaluate whether each claim and allegation he made in his petition was appropriate against each defendant. Instead, he made improper “group” allegations against all defendants.

In the underlying suit, a widow sued manufacturers, designers, and distributors of Propulsid, a drug used to treat gastric reflux, and also sued a hospital and eight doctors. The petition made various “group” allegations and allegations in the alternative. One section of the petition began with an allegation that the hospital and eight doctors were negligent, followed by 16 verb phrases separated by semicolons with the final pair separated by the word “or.” Some of the specific acts of negligence related to Propulsid and some related to the treatment of decedent after the stroke he sustained a month before he died. Two of the doctors (one had treated decedent in an ER immediately after the stroke and the other had treated him during his subsequent hospitalization) filed motions for sanctions against plaintiff’s attorney, arguing that they had never prescribed Propulsid to the decedent.

The trial court awarded $50,000 in sanctions against plaintiff’s attorney. The Corpus Christi appeals court reversed, reasoning that the petition did not implicate every physician in every allegation. The Texas Supreme Court reversed the appeals court and affirmed the trial court’s finding of violation of Chapter 10, but remanded to allow the trial court to reconsider the amount.

Significantly, plaintiff’s lawyer had the decedent’s medical records before he filed the suit and those records showed that neither of the doctors seeking sanctions had prescribed Propulsid. The court held that Chapter 10 requires that each claim and each allegation against each defendant must be individually evaluated for evidentiary support. Pleading in the alternative does not excuse compliance. Sanctions under Chapter 10 do not require a showing of bad faith or malicious intent. Sanctions here were authorized because the attorney certified that he had made a reasonable inquiry into all of the allegations when he had not, and he certified that all the allegations in the petition had evidentiary support, or were likely to have evidentiary support, when some allegations did not. The court recognized that in some cases a party may not have evidence that proves each specific factual allegation at the time a lawsuit is filed and that the law does not require proof of a case without reasonable time for discovery. However, this does not excuse the filing of claims against parties when the attorney filing the lawsuit possesses information negating some of the claims made.

‘Some’ is No Longer Enough in Texas Toxic Tort Cases

By John S. Gray

All too often in toxic tort cases, the best evidence that a plaintiff can provide that he or she was injured while working on a defendant’s property or while using a defendant’s product, is that the plaintiff inhaled “some” fumes, fibers or other physical/chemical agent. While this may be sufficient in an acute exposure case involving a single product at a single premise, more often than not, toxic tort cases involve many exposures to a toxic substance from many products occurring at many premises over many years – often dating back to the 1950s, 1960s and 1970s. So how does a plaintiff prove causation as memories dim and co-workers die or move away? How does he establish exposure to a defendant’s product when records regarding the type and nature of materials used at a workplace are incomplete or missing? Often, plaintiffs’ counsel argued what is known as the “one-molecule” or “one-fiber” theory. Under this theory, any exposure to a toxic substance, however slight, is a causal fact in producing disease because the harmful effects are “indivisible” and the alleged exposures are “cumulative.” In the context of asbestos-related claims, they argued that liability could be imposed if a defendant supplied any of the asbestos to which a plaintiff was exposed, or if the plaintiff was exposed to any asbestos at a particular premise.

 The Texas Supreme Court rejected this expansive theory on June 8, 2007, when it issued its unanimous opinion in Borg-Warner Corp. v. Flores, __ S.W.3d __, 2007 WL 1650574, 50 Tex. Sup. Ct. J. 851 (June 8, 2007). To separate the speculative from the probable, the court adopted the “substantial factor” test for causation. Under this test, plaintiffs must provide defendant-specific evidence showing the “approximate” dose to which the plaintiff was exposed. They must also show that the dose was a “substantial factor” in causing the injury – and, most importantly, the evidence must be specific regarding each defendant’s product or premises that allegedly caused the harm. Borg-Warner,2007 WL at *7. Hence, evidence that a plaintiff merely had “some” exposure to asbestos is legally insufficient to prove causation, even if the plaintiff is able to identify a specific defendant’s product.

The court also adopted the Lohrmann v. Pittsburgh Corning Corp., 782 F.2d 1156 (4th Cir. 1986), standard of proving causation in toxic tort cases. The court agreed that Lohrmann’s “frequency, regularity and proximity” test is appropriate, but stated that the test, by itself, did not “capture the emphasis our jurisprudence has placed on causation as an essential predicate to liability.” The court held that “[p]roof of mere frequency, regularity, and proximity is necessary but not sufficient” since “it provides none of the quantitative information necessary to support causation under Texas law.” Thus, in addition to the Lohrmann factors, the court instructed trial courts to also determine whether the “[toxic substance] in the defendant’s product was a substantial factor in bringing about the plaintiff’s injuries.” Borg-Warner,2007 WL at *4.

In analyzing the legal sufficiency of Plaintiff’s claim in Borg-Warner, the Court rejected the plaintiff’s argument that he met his burden of proof when he provided evidence that Borg-Warner supplied some of the asbestos that he claims injured him. The Court held that “any” evidence of working around defendant’s product will not suffice; rather a plaintiff must prove that the defendant’s product was a substantial factor in causing the alleged harm. Id. at *6. The Court stated that there is no question that mechanics, such as Mr. Flores, could be exposed to respirable asbestos fibers, but in this case, there was no evidence in the record as to how much asbestos he might have been exposed to or what percentage of asbestos might have originated in Borg-Warner products.  The Court also noted that the literature Mr. Flores relied upon as evidence of causation did “not cite epidemiological studies showing a doubling of the risk in brake mechanics” and therefore it “does not provide evidence of causation.” Id. at *8 n.14  Accordingly, there was insufficient testimony to establish that Borg-Warner brake pads were a substantial factor in causing Flores’s illness.

In this opinion, the Texas Supreme Court bolstered Havner and re-emphasized that in Texas, causation is an “essential predicate to liability” – one which requires presentation of reliable scientific evidence of a defendant-specific dose sufficient to cause the illness alleged.  The Court also rejected the single-fiber theory, and by proxy the single-molecule theory, which teaches that exposure to a single fiber of a toxic substance can cause disease; if this were true, then everyone would be susceptible. No longer will the concepts of “cumulative dose” or “indivisible injury” be sufficient to sustain causation. Instead, plaintiffs must demonstrate the causal responsibility of each defendant individually. Exactly what type of proof will suffice to show an “approximate” dose sufficient to cause an asbestos-related disease remains to be decided.  However, the Court did note that the proof of causation may differ depending on the product, but a plaintiff must prove that the particular defendant’s product was a substantial factor in causing the alleged harm.

UPDATE

Shortly after the Texas Supreme Court issued Borg-Warner, the 1st Court of Appeals in Houston weighed in on the opinion’s scope and breath in Georgia Pacific v. Stephens, ___ S.W.3d ___, 2007 WL 2137801 (Tex. App.--Hous. [1st Dist.] July 26, 2007). On the issue of whether the holdings in Borg-Warner are limited to the causation evidence of the particular disease at issue in that case (asbestosis) or should be interpreted broadly, the 1st Court of Appeals said that Borg-Warner does apply broadly, including to cases of mesothelioma (a very rare and deadly form of cancer related to asbestos). As a result, it reversed a large award and rendered a decision for the defendant.  

Contract Language Trumps Equity in Insurance Case

By J. James Cooper

In a surprising decision, the Texas Supreme Court decided that the equitably-based “made whole” doctrine must yield to specific language in an insurance policy when that language provided the insurer with broad subrogation rights. Fortis Benefits v. Cantu, ___ S.W.3rd ____, 50 Tex. Sup. Ct. J. 965 (June 29, 2007).

After suffering severe injuries in an auto accident, Ms. Cantu brought suit against multiple parties. Her medical insurer, Fortis Benefits, intervened, claiming subrogation rights under the policy. Cantu’s medical expenses totaled $378,500 (of which Fortis had paid roughly $247,000), and her future medical expenses were estimated in excess of $1.7 million. The case settled for $1.445 million, far less that Cantu’s past and future medical expenses. Cantu argued that, under the “made whole” doctrine – which provides that an insurer is not entitled to subrogation if the insured’s loss is in excess of amounts recovered from the insurer and the third party causing the loss – Fortis is precluded from recovering any of the settlement proceeds. The court of appeals agreed with Cantu. The Texas Supreme Court did not.

The Supreme Court at first conceded that Cantu would be right if this were an equitable subrogation case. For over 25 years, Texas insureds have operated under a simple rule: “when ‘either the insurer or the insured must to some extent go unpaid, the loss should be borne by the insurer for that is the risk the insured has paid it to assume.’” Ortiz v. Great Southern Fire and Cas. Ins. Co., 597 S.W.2d 342, 344 (Tex. 1980). In other words, the insured is “made whole” before the insurance company. But this rule does not apply when the insurance policy addresses subrogation rights directly. “[C]ontract-based subrogation rights should be governed by the parties’ express agreement and not invalidated by equitable considerations that might control by default in the absence of an agreement.” In reaching this holding, the court overruled a 1995 Austin court of appeals decision that refused to allow an express provision in the parties’ insurance contract to supersede the equitable “made whole” doctrine. See Esparza v. Scott and White Health Plan, 909 S.W.2d 548 (Tex. App. – Austin 1995, writ denied).

The court then examined the specific language of the Fortis Benefits policy. Under a section of the policy titled “Subrogation Rights,” Fortis provided the following right to recovery: “Upon payment of benefits, We [Fortis] will be subrogated to all rights of recovery a Covered Person [Cantu] may have against any person or organization.” The provision continues: “Such right extends to the proceeds of any settlement or judgment; but is limited to the amount of benefits We have paid.” The Court determined that this language was good enough to allow Fortis first recovery from any settlement proceeds. By reserving to itself “all rights of recovery,” and by not suggesting that Cantu must first be “made whole” for Fortis to recover, Fortis had retained an “unfettered right” to be made whole before Cantu.

Nowhere does the policy expressly provide that Fortis shall be paid first in the event of a recovery. Instead, the Supreme Court interpreted the “all rights” language to include the right of first recovery. In doing so, the Court read the Fortis Benefits policy broadly in favor of the insurer. Surprisingly, the Court did not address whether the “all rights” provision is ambiguous, and thereafter apply its own precedent adopting the construction most favorable to the insured when a policy is subject to more than one reasonable interpretation. See State Farm Fire & Cas. Co. v. Vaughan, 968 S.W.2d 931, 933 (Tex. 1998). The result is a favorable ruling for insurers: “all rights” language in the policy will now trump the insured’s equitable right to be made whole.

J. James Cooper is a partner at Gardere Wynne Sewell LLP and co-chair of  Gardere’s Policyholder Insurance Practice Group.

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