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Texas Court of Appeals for the Fifth District

Introduction

In 2024, the Texas Supreme Court overturned three noteworthy liability-expanding decisions issued by the Texas Court of Appeals for the Fifth District (otherwise known as the Fifth Court). There is a continued need for oversight of this state intermediate appellate court to ensure that it stays in line with Texas precedent and does not expand liability in the state.

The Fifth Court is located in Dallas, Texas and has jurisdiction over appeals arising from Dallas County Court as well as five other surrounding counties. The court is comprised of 13 justices, including the Chief Justice, who are elected to six-year terms.

While, fortunately, the Texas Supreme Court has addressed these erroneous decisions, the Fifth Court’s history of erroneous rulings has the practical effect of imposing unnecessary delays and costs for litigants.

ATRF will continue to keep a watchful eye on the Court and subsequent actions by the Texas Supreme Court to ensure that the Fifth District properly applies Texas law.

Expansive View of Product Liability

Statute of Repose

The Fifth Court has shown a propensity to expand liability in seemingly straightforward cases to benefit plaintiffs. One example is the court’s ruling in Parks v. Ford Motor Company. In this case, Ford sought to dismiss a product liability action filed outside the state’s statute of repose, which requires actions of this kind to be brought within 15 years of the product’s sale. Ford understood the “sale” date as the day the vehicle was released to the dealership which, in this case, fell outside the statutory period. This argument prevailed in a 2021 case before the U.S. Court of Appeals for the Fifth Circuit that arose under similar circumstances.

The Fifth Court disagreed, finding the factual record unclear as to whether a vehicle is “sold” when it is released to the dealership or when final payment from the dealership is received by the manufacturer. Even though the title to the vehicle transferred on the day the vehicle was released, the Court determined that Ford was required to provide evidence that full payment was received outside the statutory period to dismiss the suit.

Fortunately, in June 2024, the Texas Supreme Court reversed this decision. It held that proof regarding the exact date the dealer paid for the vehicle in full is not necessary for establishing the 15-year statute of repose. The opinion cited the Uniform Commercial Code as well as common law to determine that sales can be established before payment is made.

The public policy behind the statute of repose is if there is a defect in the design or manufacturing of a product then it should be revealed within fifteen years of the time of sale. After that time, a problem with the product is more likely to result from ordinary wear and tear, than a defect. A statute of repose eliminates the threat of never-ending liability for manufacturers of products that may be used for many years. The Firth Court’s strained interpretation of the time of sale detracts from the statute of repose’s usefulness as a resource for manufacturers to dispense with cases like these without engaging in costly trials.

Design Defects

In June 2024, the Texas Supreme Court overturned another expansive product liability ruling by the Fifth Court. In American Honda Motor Co. v. Milburn, the Fifth Court affirmed a $26 million nuclear verdict against the automaker. The plaintiff prevailed despite a Texas statute providing a presumption that products meeting federal safety standards are not defective. Honda appealed, arguing that the plaintiff’s expert wit- ness failed to rebut this presumption because the expert did not address whether the applicable regulations were inadequate to promote public safety, as the statute requires.

The Texas Supreme Court overturned the Fifth Court’s decision and issued a “take nothing” judgment in favor of Honda. It held that Honda was entitled to a presumption of nonliability when the seatbelt system in the vehicle, which the plaintiff claimed to be defective, indisputably complied with applicable Federal Motor Vehicle Safety Standards. Additionally, the Court held that “the presumption was not rebutted, as no evidence supports the jury’s finding that the federal safety standards failed to adequately protect the public from unreasonable risks of injury.”

Procedural Errors on Display

In Wade v. Valdetaro, the Texas Supreme Court reversed a Fifth Court decision that deprived a civil defendant of the basic due process right to be properly notified of a trial.

In that case, shareholders sued a former company CEO for breach of fiduciary duty, theft, embezzlement and fraud. The case was initially dismissed for lack of prosecution, but the court later scheduled a bench trial via Zoom. The court mailed notice of the trial to the wrong address, and the defendant did not learn of the trial until a Zoom invitation was emailed on the morning of the trial. He then appeared without counsel or evidence to present. After being berated by the judge due to complaining about the circumstances of the trial, the defendant was hit with a $21 million verdict after just an hour of deliberation.

The Fifth Court, instead of making an easy reversal due to a clerical error by the trial court, affirmed the decision.

In August 2024, the Texas Supreme Court reversed with clear reprehension towards the lower courts. The Texas Supreme Court ruled that the defendant was deprived of due process, as the rule is that “absent an agreement otherwise, notice must be effected not less than 45 days before a first setting.” Additionally, under the Texas Rules of Civil Procedure, service of notice by mail is complete when a postpaid and “properly addressed” document is deposited in the mail, which had not occurred. Even if a party mistakenly fails to update an address or correct an incorrect address that the court has on file, due process does not allow the court to effectively sanction that party by holding a trial without notice, the Texas Supreme Court ruled.

Case to Watch

In September 2024, the Texas Supreme Court granted review of the Fifth Court’s decision in Cadot Restaurant v. Myers, a case involving the state’s Dram Shop liability statute. Here the Fifth Court overturned the trial court and held Cadot Restaurant liable for overserving a patron who was involved in a car crash after leaving the establishment. The patron was arrested for driving under the influence of alcohol and had a BAC of .139 at the scene of the crash.

At trial, Cadot testified that they were not aware the patron was intoxicated while at the restaurant and that he did not exhibit any obvious signs. The Fifth Court reasoned that the trial court relied too much on Cadot’s testimony, finding that the statute does not require evidence that the provider of alcohol witnessed intoxicated behavior for liability under the state statute.

The Fifth Court’s decision directly conflicts with a Houston Court of Appeal’s ruling in a very similar case, and if allowed to stand, the Fifth Court’s ruling would significantly expand liability for establishments that serve any amount of alcohol.