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Texas Court of Appeals for the Fifth District (Dallas)

Justices of the Fifth District Court of Appeals (Fifth Court as it is referred to by the locals) repeatedly misapply established U.S. Supreme Court and state precedents and procedures, requiring review and reversal by the Texas Supreme Court. In the first half of 2022 alone, the Texas Supreme Court unanimously overturned five Fifth Court decisions that addressed significant civil justice issues. The Fifth Court consistently (and wrongly) sided each time with plaintiffs and expanded liability.

The Fifth Court is one of 14 appellate courts in Texas and has jurisdiction over state trial court decisions in the northeastern corner of the state, including Dallas, Collin, Grayson, Hunt, Rockwall and Kaufman counties. Composed of an elected Chief Justice and twelve justices, who serve six-year terms, the appellate court typically decides cases in three-justice panels.

PLAINTIFF-FRIENDLY DISCOVERY RULINGS

Apex Doctrine Ignored Despite Directive from State Supreme Court

Last October, the Texas Supreme Court commanded the Fifth Court to vacate its order requiring an executive at American Airlines to be deposed. The case involved a gate check agent’s alleged theft of a passenger’s personal information. The Texas Supreme Court applied the apex doctrine, which prevents plaintiffs’ lawyers from abusing the discovery system by subjecting corporate executives to depositions unless they have “unique or superior knowledge” of the relevant facts. The state high court unanimously overruled the appellate panel’s order to compel deposition, concluding that any of the executive’s knowledge could also be obtained via a “less intrusive means of discovery,” such as by questioning a company employee who has knowledge of the events at issue.

Although the Fifth Court complied with the high court’s order in the American Airlines case, it has refused to recognize the apex doctrine in subsequent appeals. For example, three top executives of a real estate company appealed a trial court’s order to compel their testimony in a suit stemming from a crane collapse on one of their properties. The executives argued that they had no personal knowledge of the accident; the company’s engineers and lower-level employees were better positioned to give testimony about what occurred. Therefore, the executives contended that reversal of the deposition order was proper under the Texas Supreme Court’s analysis of apex doctrine in American Airlines. The Fifth Court panel, however, summarily denied the petition in a 143-word opinion, finding that the executives “failed to show a clear abuse of discretion” by the trial judge.

Deference to Trial Court’s Plaintiff-Friendly Discovery Rulings

The Fifth Court has repeatedly refused to provide defendants relief in appeals challenging overbroad discovery orders by Dallas County trial courts. Moreover, as with the apex doctrine decision, the opinions denying relief are often brief and fail to assess the merits of the appeal, even when a defendant raises a reasonable concern.

For example, an appellate panel refused to vacate a discovery order that required the defendant company to produce over 1,000 documents in a case stemming from an ordinary roadside accident. The defendants argued that complying with the discovery order required the company to complete over 3,000 hours of document review and would cost the company $58,000. Despite the extensive costs to the defendant, the panel denied relief in a single-page opinion.

In another instance, the Fifth Court upheld a discovery order in a simple breach of contract case compelling a company to produce 10 years’ worth of financial, trade secrets and other confidential information regardless of whether it was related to the contract dispute. The company was not a party to the lawsuit, but a holding company for a diverse group of companies with no involvement in the dispute. The Fifth Court panel disagreed and denied the corporation relief from the discovery order in a 156-word opinion.

Requiring Prohibited and Costly Discovery in Healthcare Liability Claims

Another example of the Fifth Court leaving discovery abuse unchecked came in the context of a medical liability case. In that instance, a plaintiff attempted to compel a healthcare provider to provide copies of its policies and procedures at an early stage in the litigation, something not provided for by the Texas Medical Liability Act, and the Fifth Court allowed it. In February, the Texas Supreme Court unanimously overruled the appellate court. The high court explained that, in medical liability cases, Texas law establishes “strict limits” on pre-expert report discovery restricting it to requests for the patient’s medical records. The purpose of this law is to protect healthcare providers from costly discovery before the plaintiff takes the minimal step of obtaining an expert opinion supporting the claim that the healthcare provided did not meet the applicable standard of care. As the Texas Supreme Court observed, the expert report requirement “is intended to separate potentially meritorious health-care liability actions from frivolous ones.”

FIFTH COURT ERRORS LEAD TO UNNECESSARY DELAYS & LITIGATION COSTS

Misapplications of established law by the Fifth Court can delay a final determination in cases by years and exponentially increase litigation costs for all parties involved.

For example, a split Fifth Court panel affirmed a trial court’s decision to nullify an arbitration clause in an employment contract. The majority held that ambiguous terms in the contract made the contract, including its arbitration requirement, unenforceable. However, the Texas Supreme Court reversed the decision in March, finding that the appellate panel’s ruling was inconsistent with U.S. Supreme Court precedent. The U.S. Supreme Court has held that arbitration provisions are severable from the rest of a contract. Since the contract “clearly and unmistakably” directed the suit to arbitration, a fact even conceded by the plaintiff, the Texas Supreme Court directed that an arbiter decide the case.

The Texas Supreme Court also scolded the Fifth Court for dismissing an appeal due to a legal technicality. In that case, the defendant filed an interlocutory appeal related to a jurisdictional argument. While this appeal was pending, the trial court entered a default judgment against the defendant. Believing that the interlocutory appeal covered the jurisdictional challenge, the defendant did not appeal the final judgment.

The Fifth Court later dismissed the interlocutory appeal because the defendant did not appeal the final judgement, depriving the defendant of due process. The unanimous Texas Supreme Court reversed this ruling in March, holding that “the Rules of Appellate Procedure do not require [the defendant] to forfeit substantive constitutional rights that were timely presented to the court of appeals for review” due to a technicality.

COURT FINDS JURISDICTION WHEN PLAINTIFF DOESN’T EXIST

In July, a Fifth Court panel upheld a default judgment in a case where the plaintiff company did not formally exist. The plaintiff purported to be a Texas-based LLC, but was neither registered with the state, nor had any formal business records. On appeal, the defendant corporation argued that the trial court did not have subject matter jurisdiction to issue the default judgment because the plaintiff does not exist as a corporate entity and repeatedly falsified pleadings claiming that it was registered as an LLC in the state. However, the appellate panel denied the petition for relief in a 204-word opinion.

NUCLEAR VERDICT UPHELD BY QUESTIONABLE APPELLATE RULING VACATED BY SETTLEMENT

Last June, a panel of Fifth Court justices upheld a $194.4 million judgment against Toyota despite serious procedural and evidentiary concerns raised by the automaker.

The case arose when passengers of a 2002 Lexus sustained serious injuries upon being rear-ended on the highway. The passengers sued Toyota, claiming their car had defectively designed seatbelts. At trial, Toyota conclusively demonstrated that the seatbelts far exceeded federal vehicle safety standards when the car was manufactured. Meanwhile, the trial judge – disregarding Texas’ traditional limitations on introducing evidence of dissimilar products and injuries – allowed the plaintiffs to present “other incident” evidence. This included evidence of accidents involving different manufacturers, unrelated injuries, and even a “60 Minutes” segment on seatback collapses.

The Dallas County jury found for the plaintiff and awarded $242 million in damages, including $144 million in punitive damages against Toyota. Shockingly, the jury found the driver who rear ended the plain- tiffs only 5% liable for the injuries; Toyota was held 95% liable. The trial court subsequently granted the plaintiff’s motion to reduce the damage award to keep the verdict within state caps, reducing the award to $208 million with Toyota responsible for $194.4 million.

A three-justice panel of the Fifth Court affirmed the judgment last June. The Fifth Court subsequently denied Toyota’s motion for rehearing in a split decision. The dissenter, Justice David Schenk, noted that, he had “grave concerns regarding the many and serious evidentiary errors that permitted obviously irrelevant and distressing character evidence” to be presented to the jury, which “may have taken control of the proceedings below.”

Toyota appealed to the Texas Supreme Court. However, the parties settled the case for an undisclosed amount before the justices decided whether to hear the case. As part of the January 2022 settlement, the judgment against Toyota was vacated.

GOOD NEWS

A Fifth Court panel refused to apply a court-made “discovery rule” to extend the statute of limitations for health care liability claims. In order to protect doctors and other health care providers from the potential of being sued long after they had treated a patient, the Texas legislature adopted a statute of limitations that requires a claim to be filed within two years of “the occurrence of the breach or tort” if the date is ascertainable, or “the last date of the relevant course of treatment” or hospitalization if not. Thus, the panel held that the “discovery rule” is not viable because it conflicts with the state’s strict formulation for determining the accrual date for the statute of limitations on medical malpractice claims.