The Tort Times

January 2010
Volume 182

WRONGFUL DEATH BENEFICIARIES ARE BOUND BY THE DECEASED’S

In re Labatt Food Serv., 52 Tex. Sup.Ct.J. 352. Labatt Food Service contracts with its employees to provide an “occupational injury plan.” The contract between Labatt and its employees contains an arbitration clause, and an indemnify provision.

Mr. Dancy was a Labatt employee. He died while on the job and his parents and children filed a wrongful death suit.

Labatt filed a motion to compel arbitration. It asserted that the plan’s arbitration clause applied to these wrongful death claims by third parties. Mr. Dancy’s family members argued that they were not bound by the plan’s arbitration clause because they had not signed the contract. Additionally, they took the position that the entire agreement was void because the indemnity clause was a pre-injury waiver in violation of the Texas Labor Code.

The trial court denied Labatt’s motion. Labatt sought a writ of mandamus from the Court of Appeals, but the application was denied.

The Texas Supreme Court reviewed the case. It noted that the arbitration agreementwas silent about who is to determine whether particular persons are bound by the agreement. The Court believed that the courts, not the arbitrator, should determine the issue.

The Supreme Court commented that statutory wrongful death beneficiaries placed themselves in the exact legal shoes of the deceased, and they are subject to the same defenses to which the deceased would have been subject. The Court went on to say that the legislature created an entirely derivative cause of action when it enacted the wrongful death act, and Mr. Dancy’s beneficiaries are bringing an entirely derivative claim. Thus, even though Mr. Dancy’s family members are seeking compensation for their own personal loss, they still stand in Mr. Dancy’s legal shoes and are bound by an agreement.

The Supreme Court also examined the claim that the entire contract was void because of its indemnity clause. It said that a challenge to the validity of the contract as a whole, and not specifically to the arbitration clause, must be decided by the arbitrator. The question of a contract’s validity is for the arbitrator and not for the courts.

The Supreme Court granted the petition for writ of mandamus and ordered the trial court to compel arbitration.

In this issue. . .

Wrongful Death Beneficiaries Are Bound By The Deceased’s Contract 1

Extrinsic Evidence Not Allowed To Invoke Coverage In Favor Of Insured Party 1

Significant Sexual Harassment Verdict Awarded Against Waffle House 2

A Cliff Is An Obviously Dangerous
Thing 2

Competing Law Firms Fight Over City 2-3

Property Owner Not Liable For Execution Style Murder 3

Competing Law Firms Fight Over City Contract 3
At-Will Employees Win Claim For Bonus 3

EXTRINSIC EVIDENCE NOT ALLOWED TO INVOKE COVERAGE IN FAVOR OF INSURED PARTY

Pine Oak Builders, Inc. v. Great Am. Lloyds Ins. Co., 52 Tex.Sup.Ct.J. 348. Old American Lloyds Insurance Company issued a commercial general liability policy of insurance to a homebuilder called Pine Oak Builders.

  Pine Oak was sued by home purchasers in five lawsuits. All of the suits alleged that improper installation of a synthetic stucco product known as Exterior Insulation and Finish Systems (EIFS) had caused water damage to their homes.

  The EIFS had not been installed by Pine Oak. It had been installed by subcontractors at the request of Pine Oak. Four of the lawsuits alleged this fact. One of them, the Glass case, did not. In the Glass petition, the Plaintiff alleged only that Pine Oak had improperly installed the EIFS.

  The policy of insurance in question excluded defective construction unless the work had been done by a subcontractor. Pine Oak wanted Great American to defend all five cases. Great American took the position that it should not be required to defend the Glass case because it did not allege that the work had been done by subcontractors. A declaratory judgment suit resulted.

  Pine Oak wanted to introduce evidence into the declaratory judgment suit that the work had been done by a subcontractor so as to invoke coverage. When both sides moved for summary judgment, the trial court found in favor of Great American and the Court of Appeals affirmed.

  The Texas Supreme Court reviewed the case and affirmed the decision of the two lower courts. It reminded the parties of the “eight corner rule.” The four corners of the Plaintiffs’ petition alleged in the Glass case that the work had been done by Pine Oak builders. The four corners of the policy said that it did not cover claims for defective work by Pine Oak Builders. The Court found that the extrinsic evidence that Pine Oak wanted to offer would contradict the facts alleged in the Glass suit.

SIGNIFICANT SEXUAL HARASSMENT VERDICT AWARDED AGAINST WAFFLE HOUSE

  Waffle House Inc. v. Williams, 52 Tex.Sup.Ct.J. 340. Ms. Williams worked at a Waffle House restaurant for several years. She complained numerous times to several different managers of sexual harassment by a fellow employee.

  Eventually, Ms. Williams resigned her position and sought a right to sue Waffle House from the Equal Employment Opportunity Commission and the Texas Commission on Human Rights. Both agencies granted a right to sue notice.

  Ms. Williams then sued the harassing employee and Waffle House, alleging violations of the Labor Code, assault and battery, ratification and negligent supervision and retention. She also alleged reckless indifference and willful or malicious conduct by Waffle House.

  The alleged harassing employee could not be found at the time of trial and was nonsuited.

  Following a jury trial, the trial court rendered judgment favoring Ms. Williams for $425,000 in actual damages, $57,929.69 in interest and costs, plus $3,450,000 in punitive damages, reduced by statute to $425,000.

  On appeal, Waffle House claimed that there was no evidence to support an award of punitive damages. Waffle House pointed out that there was never any corroborating evidence to support Ms. Williams’ allegations and that the alleged harasser had denied them. In other words, it was a swearing match without any evidence to corroborate either the story of Ms. Williams or the story of the alleged harasser. The Court of Appeals rejected Waffle House’s argument and affirmed the decision of the trial court.

  The Supreme Court has granted a petition for review. If the decision is published, we will report on it here.

A CLIFF IS AN OBVIOUSLY DANGEROUS THING

City of Waco v. Kirwan, 53 Tex.Sup.Ct.J. 140. Mr. McGehee fell to his death while sitting on the edge of Circle Point Cliff in Cameron Park, a city park in Waco, Texas. The city had erected a sign to prevent persons from approaching the cliff edge and had built a wall. Mr. McGehee had ignored the sign and climbed over the wall. Mr. McGehee’s mother brought a wrongful death action against the city alleging a premises defect. As many TORT TIMES readers know, governmental units are immune from suit unless that immunity has been specifically waived by the provisions of the Texas Tort Claims Act.

The city filed a plea to the jurisdiction alleging that the court did not have jurisdiction over it because the Texas Tort Claims Act did not waive immunity under this circumstance. The trial court sustained the motion. The Court of Appeals, however, reversed and remanded the case back to the trial court.

The Texas Supreme Court granted the city’s petition for review. It saw this as an opportunity to determine whether the Texas Recreational Use statute created an obligation for the city to warn or protect recreational users against the danger of naturally occurring conditions. The Court said, “It is generally unreasonable and unduly burdensome to ask a landowner to seek out every naturally occurring condition that might be dangerous and then warn of the condition or make it safe... This is not to say that the risk of harm may never outweigh the burden of imposing a duty of care on landowners to warn or protect others from the dangers of natural conditions on the land.”

The Supreme Court opined that a person could reasonably expect a cliff to impose a risk of harm. The Court said that it would be obvious to a reasonable recreational user that many cliffs have the potential to crumble. The risk of harm was therefore foreseeable, not just to the city, but also to Mr. McGehee.

The Court reversed the decision of the Court of Appeals and dismissed the case with prejudice. It said that a landowner, lessee or occupant under the Texas Recreational Use statute does not generally owe a duty to others to protect or warn against the dangers of natural conditions on the land, and therefore may not ordinarily be held to have been grossly negligent for failing to have done so. The Court said, “A barrier and a sign warning a recreational user to stay away from a dangerous natural condition generally will be sufficient to avoid a showing of ‘conscious indifference to the rights, safety and welfare of others under the statute.’ ”

COMPETING LAW FIRMS FIGHT OVER CITY

Perdue, Brackett, Flores, Utt & Burns v. Linebarger, Goggan, Blair, Sampson & Meeks, 291 S.W.3d 448 (Tex.App.–Fort Worth 2009). The Plaintiff and Defendant in this case are two law firms. They each specialize in collecting delinquent ad valorem property taxes for taxing entities across Texas. Perdue, Brackett etc. entered into a 3-year contract with the City of Fort Worth to collect delinquent ad valorem property taxes. The contract had an option for two 1-year extensions.

The city manager wanted to exercise the option to extend the contract. This issue was put on the city council’s executive session agenda. On the day of the meeting, prior to the meeting taking place, the Linebarger, Goggan etc. firm had delivered a memorandum that criticized the Perdue, Brackett firm. The memorandum accused Perdue, Brackett of providing false information to the city council and claimed that Perdue, Brackett had cost the city over $700,000 in uncollected tax revenue.

The city council voted to continue the contract month-by-month until an audit of the contract could be completed. When the audit was completed, it was critical of Perdue, Brackett for its handling of certain cases.

The city then requested new proposals for the tax collection contract. Both law firms submitted proposals and made presentations to the city council at an open meeting. Perdue, Brackett alleges that Linebarger, Goggan made additional defamatory statements at the open meeting. The city ultimately awarded the contract to Linebarger, Goggan.

  Perdue, Brackett sued Linebarger, Goggan for defamation, tortious interference, business disparagement, and conspiracy, alleging that statements Linebarger, Goggan made in the memorandum and the city council meeting were false and defamatory and had caused the city council to not exercise its extension option in favor of Perdue, Brackett.

  Linebarger, Goggan moved for summary judgment, claiming that the allegedly defamatory statements were absolutely privileged under the doctrine of quasi-judicial immunity. The trial court granted summary judgment and Perdue, Brackett appealed.

  Two requirements must be met in order for the absolute privilege under the doctrine of quasi-judicial immunity to apply. First, a governmental entity must have the power and authority to investigate and decide the issue, that is, quasi-judicial power. Second, the communication must bear some relationship to a pending or proposed quasi-judicial proceeding. The Fort Worth Court of Appeals believed that quasi-judicial immunity was present in this case and, therefore, the allegedly defamatory statements were absolutely privileged. It affirmed the decision of the trial court.

PROPERTY OWNER NOT LIABLE FOR EXECUTION

Trammell Crow Cent. Texas, Ltd. v. Gutierrez, 51 Tex.Sup.Ct.J. 1355. Trammell Crow owns a 53-acre shopping mall in San Antonio called The Quarry Market. Mr. Gutierrez, a police informant who had allegedly been threatened by robbers he had identified, was shot four times in the back and head while at The Quarry Market by a man wearing a ski mask.

  Mr. Gutierrez’s wife and other survivors then brought this action against Trammell Crow alleging negligent failure to provide adequate security.

  At trial, the Plaintiffs’ security expert testified that three off-duty police officers employed by Trammell Crow were not conspicuous enough which, in his opinion, would have prevented the execution-style murder from taking place until after Mr. Gutierrez had left the premises. In that expert’s opinion, Mr. Gutierrez would have been murdered anyway, but elsewhere, had the security been more conspicuous.

  The jury reached a verdict in favor of the Plaintiffs for more than $5 million.

  The Court of Appeals rejected Trammell Crow’s arguments that the murder was not foreseeable and that it had breached no duty of care to the Plaintiffs. It affirmed the judgment of the trial court.

  The Supreme Court reversed the decision of the two lower courts and rendered judgment that the Plaintiffs take nothing.

  The Court thought the murder was not foreseeable. It said that landowners are not the insurers of crime victims. The foresee-ability requirement protects the owners and controllers of land from liability for crimes that are so random, extraordinary, or otherwise disconnected from them that they could not reasonably be expected to foresee or prevent the crimes.

  This is a case in which the shooting was going to take place somewhere. It was personally motivated and not a simple crime of opportunity because of inadequate security.

AT-WILL EMPLOYEES WIN CLAIM FOR BONUS

  Vanegas v. American Energy Servs., 53 Tex.Sup.Ct.J. 204. American Energy Services employed Mr. Vanegas and others as at-will employees. The employees alleged that American Energy told them that if they would continue working for it, they would collectively receive a bonus of 5% of the proceeds received in the event American Energy Services was merged with another company or sold.

  It was claimed that American Energy merged with another company, but the employees did not get a bonus. The employees sued American Energy and its shareholders seeking to enforce the alleged contract.

  The trial court granted summary judgment in favor of American Energy and the shareholders. The Court of Appeals said that the alleged promise to pay the bonus was illusory. It ruled that performance of an act called for in an illusory promise cannot create a binding agreement. It affirmed the judgment of the trial court.

The Texas Supreme Court studied the case. It pointed out the difference between a bilateral contract and a unilateral contract. A bilateral contract is one in which there are mutual promises between the two parties. A unilateral contract is created by a promissor promising a benefit if the promisee performs. The unilateral contract becomes enforceable when the promisee performs. A unilateral contract occurs when there is only one promissor and the other party accepts, not by mutual promise, but by actual performance or forbearance.

The Supreme Court went on to say that whether the promise was illusory at the time it was made is irrelevant. The Court said that what matters is whether the promise became enforceable by the time of the alleged breach. It observed that almost all unilateral contracts begin as illusory promises.

The Court decided that the judgment of the Court of Appeals should be reversed and the case should be remanded to the trial court for further proceedings consistent with its opinion. The Court said that the employees claimed that American Energy made an offer to split 5% of the proceeds of the sale or merger. Assuming that allegation to be true, the employees accepted this offer by remaining employed for the requested period of time. At that point, American Energy’s promise became binding. American Energy then breached its agreement with the employees by failing to pay the 5% bonus.

NOTICE

The Tort Times is not a substitute for legal counsel and does not presume to constitute legal opinion. We urge you to consult legal counsel on specific matters.