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TEXAS CIVIL PROCEDURE: PRETRIAL LITIGATION

FOURTH EDITION 2004 SUPPLEMENT

William V. Dorsaneo III

Chief Justice John and Lena Hickman Distinguished Faculty Fellow and Professor of Law Dedman School of Law Southern Methodist University

David Crump

Newell H. Blakeley Professor of Law and Faculty Director of Continuing Legal Education University of Houston

Elaine A. Carlson

Professor of Law South Texas College of Law Stanley J. Krist Distinguished Professor of Texas Law

Elizabeth G. Thornburg

Professor of Law Dedman School of Law Southern Methodist University

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. LexisNexis and the Knowledge Burst logo are trademarks of Reed Elsevier Properties Inc, used under license. Matthew Bender is a registered trademark of Matthew Bender Properties Inc. Copyright © 2004 Matthew Bender & Company, Inc., a member of the LexisNexis Group. All Rights Reserved. No copyright is claimed in the text of statutes, regulations, and excerpts from court opinions quoted within this work. Permission to copy material exceeding fair use, 17 U.S.C. § 107, may be licensed for a fee of 10¢ per page per copy from the Copyright Clearance Center, 222 Rosewood Drive, Danvers, Mass. 01923, telephone (978) 750-8400. ISBN#: 0-8205-6162-2

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(Pub.709)

TABLE OF CONTENTS

Page Preface to the 2004 Supplement . . . . . . . . . . . . . . . . . . . . xi

CHAPTER 1 THE PRE-LITIGATION PHASE OF A CIVIL DISPUTE . . . . . . . 1 § § 1.02 1.06 Building the Client Relationship . . . . . . . . . . . . . . Avoiding Malpractice . . . . . . . . . . . . . . . . . . . . . [B] Frequent Problems Causing Malpractice Litigation . . . . . . . . . . . . . . . . . . . . . . . . [3] Statutes of Limitation . . . . . . . . . . . . . . Notes and Questions . . . . . . . . . . . . . . . American Transitional Care Centers of Texas, Inc. v. Palacios (2001) . . . . . . . . . . . . . . Note . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1 1 1 5 11

CHAPTER 2 EMERGENCY AND INTERIM RELIEF § § 2.01 2.02

. . . . . . . . . . . . . . . . 13 13 13 13 13 13

Temporary Restraining Orders and Injunctions . . . . . Interim Relief for Secured Creditors and Other Claimants . . . . . . . . . . . . . . . . . . . . . . . . . . . [C] Self-Help Repossession by Secured Party . . . . . . The Tort of Wrongful Attachment, Garnishment, and Sequestration . . . . . . . . . . . . . . . . . . . Wrongful Use of Special Remedies . . . . . . . . . . . . . [B]

§

2.04

CHAPTER 3 THE SUBJECT MATTER JURISDICTION OF THE TEXAS TRIAL COURTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 § 3.02 Constitutional and Statutory Provisions: An Explanation . . . . . . . . . . . . . . . . . . . . . . . . . . [A] [B] [C] Justice Courts . . . . . . . . . . . . . . . . . . . . . . Constitutional County Courts District Courts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii 15 15 16 16

iv

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§

3.03

Appellate Cases Concerning Trial Court Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . [B] Competing Jurisdictional Grants: Particular Controversies . . . . . . . . . . . . . . . . . . . . . . [2] Problems With Probate Jurisdiction In re SWEPI (2002) Notes . . . . . . . . . . . . . . . . . . . .

17 17 17 17 27 29 30 30

. . . . . . . . . . . . . . . . . . . . . .

§ §

3.05 3.06

Justiciability and Related Doctrines . . . . . . . . . . . . Consequences of Lack of Jurisdiction Over the Subject Matter and Related Problems . . . . . . . . . . . . . . . . Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER 4 JURISDICTION OF PERSONS AND PROPERTY § 4.01

. . . . . . . . . 31 31 31 32 32 32 32 32 37 38 40 40 47 47 48 48 49 49

Traditional Principles Governing In Personam and In Rem Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . [B] Evolution of the "Minimum Contacts" Doctrine . . . . . . . . . . . . . . . . . . . . . . . . . Statutory Construction . . . . . . . . . . . . . . . .

§

4.02

The General Long-Arm Statute . . . . . . . . . . . . . . . [A] [B] "Arising Out of Business Done": Scope of the Texas Long-Arm Statute . . . . . . . . . . . . . . . Notes and Questions . . . . . . . . . . . . . . . . . . Riviera Oper. Corp. v. Dawson (2000) . . . . . . . . Note . . . . . . . . . . . . . . . . . . . . . . . . . . . C-Loc Retention Systems, Inc. v. Hendrix (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . [C] Interrelated Businesses and the Scope of the General Texas Long-Arm Statute . . . . . . . . . . BMC Software Belgium, N.V. v. Marchand (2002) . . . . . . . . . . . . . . . . . . . . . . . . . . .

§ §

4.03 4.04

Other Long-Arm Statutes: The Family Code . . . . . . . Notes and Questions . . . . . . . . . . . . . . . . . . . . . Service of Process . . . . . . . . . . . . . . . . . . . . . . . [B] [D] Texas' Strict Compliance Standard [2] . . . . . . . . . The Technique of Service . . . . . . . . . . . . . . . Serving Persons in Texas . . . . . . . . . . . .

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v Page

Note [3] § 4.05 [c] [A]

. . . . . . . . . . . . . . . . . . . . . . . . Alternative Service . . . . . . . . . . . . . . . . . . .

49 50 50 50 50 50 50 52 52 53 53

Proof of Service: The Return . . . . . . . . . .

Challenges to Jurisdiction by Nonresidents

The Special Appearance . . . . . . . . . . . . . . . . Notes and Questions . . . . . . . . . . . . . . . . . . GFTA v. Varme (1999) . . . . . . . . . . . . . . . . .

[B] [C]

Postjudgment Challenges by Nonresidents . . . . . Note Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Doctrine of Forum Non Conveniens . . . . . .

CHAPTER 5 PLEADINGS § 5.04

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 55 55 55 55 61

Plaintiff's Petition . . . . . . . . . . . . . . . . . . . . . . . [B] Pleading a "Cause of Action" . . . . . . . . . . . . . [7] Certification and Sanctions for Frivolous Pleadings and Motions . . . . . . . . . . . . . Skepnek v. Mynatt (1999) . . . . . . . . . . . . Note . . . . . . . . . . . . . . . . . . . . . . . .

CHAPTER 6 VENUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 § 6.01 The Basic Venue Scheme [B] . . . . . . . . . . . . . . . . . . 63 63 63 71

Defendant's Principal Office (Legal Persons) . . . . In re Missouri Pacific R. Co. (1999) . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . .

[C]

County in Which All or a Substantial Part of the Events or Omissions Giving Rise to the Claim Occurred . . . . . . . . . . . . . . . . . . . . . . . . . Chiriboga v. State Farm (2003) . . . . . . . . . . . . . . . . . . . . . . . . .

72 72 79 79 79 80

§

6.02

Exceptions to the General Rule [A] [B] [D] Types of Exceptions

. . . . . . . . . . . . . . . . . .

Mandatory and Permissive Exceptions . . . . . . . Multiple Claims and Parties . . . . . . . . . . . . .

vi

TABLE OF CONTENTS Page [3] Multiple Plaintiffs; Intervention . . . . . . . 80 81 87 87 93 93 93 94 94 106 108 112 112 113 Surgitek, Bristol-Myers Corp. v. Abel (1999) . . . . . . . . . . . . . . . . . . . . . . . Notes and Questions . . . . . . . . . . . . . . . Teco-Westinghouse Motor Company v. Gonzalez (2001) . . . . . . . . . . . . . . . . . .

§

6.03

Litigating Venue Rights . . . . . . . . . . . . . . . . . . . [B] [C] Venue Rights . . . . . . . . . . . . . . . . . . . . . . Notes and Questions . . . . . . . . . . . . . . . . . . Appellate Review of Venue Rulings . . . . . . . . . Garza v. Garza (2004) . . . . . . . . . . . . . . . . . Notes and Questions . . . . . . . . . . . . . . . . . . In re Masonite Corp. (1999) . . . . . . . . . . . . . .

§ §

6.04 6.06

Waiver of Venue Rights . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Multidistrict Litigation . . . . . . . . . . . . . . . . . . . .

CHAPTER 7 PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 § 7.03 Joinder of Claims by the Defendant . . . . . . . . . . . . [A] Counterclaims . . . . . . . . . . . . . . . . . . . . . . Ingersoll-Rand Co. v. Valero Energy Corp. (1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . § § § 7.04 7.07 7.08 Permissive Joinder of Parties by the Defendant . . . . . Compulsory Joinder of Parties . . . . . . . . . . . . . . . Class Actions . . . . . . . . . . . . . . . . . . . . . . . . . Southwestern Refining Co. Inc. v. Bernal (2000) . . . . . Compaq Computer Corp. v. LaPray (2004) . . . . . . . . 125 125 125 130 131 131 131 141

CHAPTER 8 THE EFFECTS OF PRIOR ADJUDICATION (RES JUDICATA) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 § 8.01 Res Judicata . . . . . . . . . . . . . . . . . . . . . . . . . . [A] The Doctrine of Merger and Bar (Claim Preclusion) . . . . . . . . . . . . . . . . . . . . . . . . 169 169

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vii Page

Martin v. Martin, Martin & Richards, Inc. (1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . Note . . . . . . . . . . . . . . . . . . . . . . . . . . .

169 171 172

CHAPTER 9 DISCOVERY: PURPOSES, SCOPE, AND USES . . . . . . . . . . 173 § 9.04 The Scope of Discovery: "Relevant" Information, "Not Privileged" . . . . . . . . . . . . . . . . . . . . . . . . . . . [A] The Discovery "Relevance" Standard and Information "Reasonably Calculated" to Lead to Admissible Evidence . . . . . . . . . . . . . . . . . . [1] The Relevance Test Generally . . . . . . . . . In re C.S.X. Corp. (2003) . . . . . . . . . . . . Notes and Questions . . . . . . . . . . . . . . . [B] Privileges and Other Limits on Discovery [1] . . . . . The Discovery Rule Privileges . . . . . . . . . In re Team Transport, Inc. (1999) . . . . . . . In re W & G Trucking, Inc. (1999) [2] [b] . . . . . . Other Discovery Privileges . . . . . . . . . . . Privileges Based on the Texas Rules of Evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173

173 173 173 177 177 177 178 181 183 183 183 184 185 185 192 193 203 204 205 205 205 212

ATTORNEY-CLIENT PRIVILEGE

Notes and Questions . . . . . . . . . . . . . . . . . . . . . TRADE SECRETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . In re Bridgestone/Firestone, Inc. (2003) . . . . . . . . . . [c] Healthcare Privileges . . . . . . . . . . . Memorial Hospital-The Woodlands v. McCown (1996) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . [d] [D] Other Statutory Privileges . . . . . . . . Waiver of Privileges: Failure to Assert or Prove Privilege . . . . . . . . . . . . . . . . . . . . . . . . . Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . In re E.I. Dupont de Nemours & Co. (2004) . . . . In re Carbo Ceramics, Inc. (2002) . . . . . . . . . .

viii

TABLE OF CONTENTS Page In re CI Host, Inc. (2002) . . . . . . . . . . . . . . . 220

CHAPTER 10 DISCOVERY: METHODOLOGY OF THE INDIVIDUAL DEVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 § 10.01 Discovery Devices . . . . . . . . . . . . . . . . . . . . . . . [A] Written Discovery [3] . . . . . . . . . . . . . . . . . . . Production and Inspection of Documents and Tangible Things from Parties . . . . . . . . . In re U-Haul Int'l, Inc. (2002) . . . . . . . . . Note [5] [B] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Requests for Admissions Steffan v. Steffan (2000) [2] [5] 225 225 225 225 228 228 228 231 231 231 241 241 243 244 248 248 254 254

Oral and Other Non-Written Discovery . . . . . . . Notice and Formalities for Depositions . . . . In re Alcatel USA, Inc. (2000) . . . . . . . . . Motions for Physical or Mental Examinations . . . . . . . . . . . . . . . . . . . In re Caballero (2000) . . . . . . . . . . . . . .

§

10.03 Amendment and Supplementation of Discovery Responses . . . . . . . . . . . . . . . . . . . . . . . . . . . Norfolk Southern Ry. Co. v. Bailey (2003) . . . . . . . . 10.04 Sanctions for Failure to Provide Discovery . . . . . . . . Spohn Hospital v. Mayer (2003) . . . . . . . . . . . . . . 10.05 Abatement of Discovery . . . . . . . . . . . . . . . . . . . In re Van Waters & Rogers, Inc. (2001) . . . . . . . . . .

§ §

CHAPTER 11 DISPOSITION WITHOUT TRIAL . . . . . . . . . . . . . . . . . . . 259 § § § 11.01 Judgment by Default . . . . . . . . . . . . . . . . . . . . . Notes and Questions . . . . . . . . . . . . . . . . . . . . . 11.02 Dismissal for Want of Prosecution . . . . . . . . . . . . . 11.03 Summary Judgment [A] [2] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Standards and Procedure for Granting . . . . . . . No Evidence Motions 259 259 259 260 260 260

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ix Page

Barraza v. Eureka Co. (2000) § [B]

. . . . . . . . . . . . . .

260 268 268 268 268 273

11.04 Settlement, Nonsuits, and Consent Judgments [2] [D]

The Adjudicative Effects of Settlement . . . . . . . Evolving Approaches to Settlement Problems: Which Rules Apply? . . . . . . . . .

Offers of Settlement Under Rule 167 . . . . . . . .

§

11.07 Alternative Dispute Resolution . . . . . . . . . . . . . . .

PREFACE

There have been important developments in a number of areas since this edition was first published in 1999. This Supplement incorporates those developments, particularly in the areas of personal jurisdiction, venue, discovery, and no-evidence motions for summary judgment, and the many changes brought about by the Texas Legislature in 2004. To make the cases more readable, this Supplement sometimes omits string cites and footnotes. Footnotes retain their original numbers.

May 2004 William V. Dorsaneo III David Crump Elaine A. Carlson Elizabeth G. Thornburg

xi

Chapter 1 THE PRE­LITIGATION PHASE OF A CIVIL DISPUTE

§ 1.02

Building the Client Relationship

Page 9: [Add as new Note (3)]

(3) Deficient Retention Agreements. What should be the consequence when an attorney fails to reduce a contingency fee agreement to writing as required by law? (Sanes v. Clark, 25 S.W.3d 800, 805 (Tex. App. -- Waco 2000, pet. denied) (contingency agreement not reduced to writing is voidable at the option of the client). Similarly, a contract affording retained counsel the absolute right to settle a claim without further consultation with the client violates the disciplinary rules and is voidable at the option of the client. Id.

Page 9: [In the Royden note case, delete the paragraph beginning "Thus, fee forfeiture" and substitute the following.]

Attorneys who breach their fiduciary duty to their clients may be required to forfeit all or part of the fee, even if the breach caused the client no actual damages. Burrow v. Arce, 997 S.W.2d 229, 237­240 (Tex. 1999). The Texas Supreme Court remanded for the lower courts to consider whether an assertion that the plaintiffs' attorneys reached an aggregate settlement in violation of Rule 1.08(f) of the Texas Disciplinary Rules of Professional Conduct would be the kind of violation that would warrant forfeiture of an attorney's fee.

§ 1.06

Avoiding Malpractice

[B]--Frequent Problems Causing Malpractice Litigation [3]--Statutes of Limitation

NOTES AND QUESTIONS Page 74: [In Note (2), insert the following text before the second sentence.]

In Childs, the Texas Supreme Court explained that "the discovery rule operates to defer accrual of a cause of action until a plaintiff discovers or, through the exercise of reasonable care and diligence, should discover the 1

2

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CH. 1

`nature of his injury.' . . . Thus, when the discovery rule applies, accrual is tolled until a claimant discovers or in the exercise of reasonable diligence should have discovered the injury and that it was likely caused by the wrongful act of another. But once these requirements are satisfied, limitations commences, even if the plaintiff does not know the identity of the wrongdoer."

Page 74: [Also in Note (2), omit the final sentence (beginning "Although the") and substitute the following:]

However, in the context of asbestos­related latent diseases, the Texas Supreme Court has held that neither the single action rule nor the statute of limitations bars a plaintiff who settled an asbestosis suit with one defendant from bringing suit against different defendants later for asbestos­related cancer. Pustejovsky v. Rapid­American Corp., 35 S.W.3d 643 (Tex. 2000). The new cause of action for the malignant asbestos­related condition begins "when a plaintiff's symptoms manifest themselves to a degree or for a duration that would put a reasonable person on notice that he or she suffers from some injury and he or she knows, or with reasonable diligence should know, that the malignant asbestos­related condition is likely work­related."

Page 74: [Add the following at the end of Note (4).]

In Apex Towing Co. v. Tolin, 41 S.W.3d 118 (Tex. 2001), the Texas Supreme Court held that continued representation by the allegedly malpracticing attorney is not required to toll the statute of limitation in a legal malpractice case based on the attorney's alleged malpractice in the prosecution or defense of a claim that results in litigation. The Court explained that Murphy v. Campbell, 964 S.W.2d 265 (Tex. 1997) did not modify the tolling rule announced in Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1991), which the Court reiterated as follows: "When an attorney commits malpractice in the prosecution or defense of a claim that results in ligitation, the statute of limitation on a malpractice claim against that attorney is tolled until all appeals on the underlying claim are exhausted or the litigation is otherwise finally concluded." In Underkofler v. Vanasek,53 S.W.3d 343 (Tex. 2001), the Court applied its holding in Apex to the plaintiff's malpractice claim, but held that the Hughes tolling rule does not apply to claims under the Deceptive Trade Practices Act.

Page 75: [In Note (5), delete the two paragraphs beginning "The statutory phrase" and "Although the common law discovery rule" and substitute the following.]

The statutory phrase "[n]otwithstanding any other law" purports to eliminate a number of tolling provisions that normally apply to extend the period in which suit may be filed. For example, limitations on medical malpractice claims are not tolled while the defendant is absent from the state. C.P.R.C. § 16.063. The tolling provision that applies while the

§ 1.06

THE PRE­LITIGATION PHASE

OF A

CIVIL DISPUTE

3

plaintiff is of unsound mind is also inapplicable to medical malpractice claims (C.P.R.C. § 16.001), as is the statute tolling limitations for one year or until the qualification of a personal representative of the decedent's estate for causes of action in favor of a decedent. C.P.R.C. § 16.062; see also Bala v. Maxwell, 909 S.W.2d 889, 892­893 (Tex. 1995) (medical malpractice limitation scheme rather than wrongful death limitation scheme applies). On the other hand, Civil Procedure Rule 28, which permits a party to sue and be sued under an assumed name, does apply to medical malpractice actions because Rule 28 is not a tolling provision. Chilkewitz v. Hyson, 22 S.W.3d 825 (Tex. 1999). The same facts that would delay the running of limitations under the discovery rule, or that would toll the running of limitations under a tolling statute, may operate to allow a plaintiff more time to sue under certain circumstances. The Texas Constitution contains a section known as the "open courts" provision (Article 1, Section 13), which provides that "[a]ll courts shall be open, and every person for an injury done him, in his lands, goods, person or reputation, shall have remedy by due course of law." This provision has been held to preclude the legislature from making a remedy contingent on an impossible condition, such as requiring suit to be brought when the nature of the injury could not have been discovered before limitations ran. Diaz v. Westphal, 941 S.W.2d 96, 99 (Tex. 1997). Because the "open courts" provision is different from the "discovery rule," and because its protection is constitutional, "open courts" protection is not abrogated by Section 10.01. Therefore, a claimant who could not reasonably have discovered his or her injury within the relevant two­year period has a "reasonable time" after the time the injury could reasonably have been discovered to bring suit. Nelson v. Krusen, 678 S.W.2d 918, 923 (Tex. 1984). This "reasonable time" begins to run once the plaintiff becomes aware of both the injury and the facts giving rise to the cause of action, even if the plaintiff does not yet know the precise extent of the consequences of the alleged malpractice. Hooten v. Fleckenstein, 836 S.W.2d 300, 301­302 (Tex. App.-- Tyler 1992, writ dism'd w.o.j.) (relevant date was when patient learned that doctor failed to diagnose fractured elbow, not when patient learned of loss of mobility). A person who is incompetent is not able to discover his or her injury or the facts giving rise to a cause of action. Thus, a medical malpractice suit filed by a plaintiff who has been continuously incompetent from the time of the alleged malpractice until suit is filed is not barred by limitations. Felan v. Ramos, 857 S.W.2d 113, 117­118 (Tex. App.--Corpus Christi 1993, writ denied). This protection comes from the open courts provision rather than from the tolling statute. Similarly, the open courts provision makes Section 10.01 unconstitutional as it applies to minors because it effectively abrogates their right to bring well­established common law causes of action. Weiner v. Wasson, 900 S.W.2d 316, 321 (Tex. 1995). Thus, a person who suffers medical malpractice while under the age of 18 has until his or her 20th birthday to file suit on that claim.

4

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CH. 1

The open courts provision, however, applies only to common law causes of action. Rose v. Doctors Hospital, 801 S.W.2d 841, 843 (Tex. 1990). Thus, the protection provided by the open courts provision does not apply to wrongful death and survival actions based on medical malpractice, because wrongful death and survival actions are purely statutory. A wrongful death plaintiff suing on a medical negligence theory does not have two full years from the time of death in which to sue, but rather must sue within the time allowed by Section 10.01. The tolling provision for minors does not apply to a wrongful death action brought by an adult based on the death of a child. Nor does the open courts provision apply to a minor's wrongful death action based on allegedly negligent treatment of a parent. If the decedent did not file a timely claim for medical malpractice, and that claim would have been barred by the medical malpractice statute of limitation at the time of death, no wrongful death action accrues. On the other hand, if the decedent dies after a malpractice action was timely filed, the petition may be amended to assert a wrongful death cause of action arising out of the same transaction or occurrence. The wrongful death action will relate back to the time the malpractice suit was filed.

Page 75: [Add new Note (7) and the case and Note that follow:]

(7) Medical Expert Reports. The Medical Liability and Insurance Improvement Act also contains a number of additional procedural requirements that claimants must satisfy to prosecute health care liability claims. See R.C.S. Art. 4590i § 13.01(a) (requiring claimant to file $5,000 cost bond or to establish $5,000 escrow account for each physician or health care provider named by the claimant in the action or to file an expert report for each physician or health care provider not later than the 90th day after the case is filed in court). Section 13.01 also requires plaintiffs, within 180 days of filing the lawsuit, to either "furnish counsel for each physician or health care provider one or more expert reports, with a curriculum vitae of each expert listed in the report" or to voluntarily nonsuit the action. R.C.S. Art. 4590i § 13.01(d). If the claimant fails to comply with Section 13.01(d), the trial court is directed to award sanctions against the plaintiff or her attorney. What will be the results of these provisions? In American Transitional Care Centers of Texas, Inc. v. Palacios, 46 S.W.3d 873, 879 (Tex. 2001), the Supreme Court held that the medical expert's report is not adequate if its description of the alleged malpractice is too conclusory, and that indadequacy justifies dismissal of the case. The court stated that the reports must discuss the standard of care, breach, and causation with sufficient specificity to inform the defendant of the conduct the plaintiff has called into question and to provide a basis for the trial court to conclude that the claims have merit. The Medical Liability and Insurance Improvement Act also allows cases to be dismissed when the reports are late. Consider the following case.

§ 1.06

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OF A

CIVIL DISPUTE

5

AMERICAN TRANSITIONAL CARE CENTERS OF TEXAS, INC. v. PALACIOS 46 S.W.3d 873 (Tex 2001)

HANKINSON, J. In this medical­malpractice case we determine the standards for reviewing an expert report under section 13.01 of the Medical Liability and Insurance Improvement Act. TEX. REV. CIV. STAT. ANN. art. 4590i, § 13.01. The trial court dismissed the Palacioses' medical­malpractice claims against American Transitional Care Centers, Inc., d/b/a American Transitional Hospital, because it determined that the Palacioses' expert report did not show a good­faith effort to provide a fair summary of the expert's opinions about the standard of care, breach, and causation, as required by section 13.01. See id. § 13.01(d), (e), (l), (r)(6). The court of appeals, after evaluating the trial court's decision as it would a summary­ judgment decision, reversed, holding that the report did meet the statutory requirements. We hold that a trial court's decision to dismiss a case under section 13.01(e) is reviewed for abuse of discretion. We further hold that to constitute a good­faith effort to provide a fair summary of an expert's opinions under section 13.01(l), an expert report must discuss the standard of care, breach, and causation with sufficient specificity to inform the defendant of the conduct the plaintiff has called into question and to provide a basis for the trial court to conclude that the claims have merit. In this case, the trial court did not abuse its discretion in concluding that the challenged report does not meet the statutory requirements and in dismissing with prejudice the claims against American Transitional. Accordingly, we reverse the court of appeals' judgment and dismiss with prejudice the Palacioses' claims. Teofilo Palacios suffered brain damage and other severe injuries following a two­story fall at work. After almost a year in an intensive rehabilitation program, he was transferred to American Transitional Hospital for further rehabilitation. Although Palacios at that time was able to communicate with others and respond to simple commands, he required assistance with most daily tasks. In addition, due to the severity of his brain damage, Palacios' physicians prescribed bed restraints for him. Nevertheless, while a patient at American Transitional, Palacios fell from his bed and required additional medical care for his injuries. His family claims that this fall caused him to sustain further brain injury, which impaired his ability to communicate with others and to assist them in his care.

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Palacios and his family sued American Transitional and the treating doctors, respectively, for negligently failing to prevent the fall and negligently treating him after the fall. After ninety days passed from the date the Palacioses filed suit, American Transitional, along with the other defendants, moved to require the Palacioses to file a $7,500 cost bond, as required by section 13.01(b) of the Medical Liability and Insurance Improvement Act. See TEX. REV. CIV. STAT. ANN. art. 4590i, § 13.01(b) (authorizing a trial court to order a plaintiff to file a $7,500 cost bond for each defendant physician or health­care provider if the plaintiff has not complied with the expert­report or $5,000 cost­bond requirement in section 13.01(a)); id. § 13.01(a) (requiring the plaintiff to file either an expert report or a $5,000 cost bond for each defendant physician or health­care provider within ninety days of filing suit). The trial court granted the motion, and the Palacioses filed a cost bond for each defendant. After 180 days passed from the date the Palacioses filed suit, American Transitional moved to dismiss the case against it because the Palacioses did not file an expert report and curriculum vitae, or nonsuit the claims against American Transitional, as section 13.01(d) of the Act requires. Id. § 13.01(d), (e). The Palacioses moved for an extension of time to file the report, which the trial court granted. See id. § 13.01(f), (g). The Palacioses then filed a report prepared by Dr. Catherine F. Brontke, who treated Palacios at the first rehabilitation hospital. American Transitional again moved to dismiss under section 13.01(e), claiming that the report did not satisfy the statutory requirements. See id. § 13.01(l), (r)(6). The trial court granted the motion, dismissed with prejudice the claims against American Transitional, and severed those claims to make the judgment against American Transitional final. See id. § 13.01(e). The Palacioses appealed, and with one justice dissenting, the court of appeals reversed and remanded after using summary­judgment review standards to evaluate the sufficiency of the expert report. After indulging every reasonable inference in the Palacioses' favor and eliminating any deference to the trial court's decision, the court of appeals concluded that the trial court erred in dismissing the case because the Palacioses made a good­faith effort to provide a report that met the requirements of section 13.01(r)(6). American Transitional petitioned for review challenging both the standard of review applied by the court of appeals and the sufficiency of the Palacioses' report. Texas courts have long recognized the necessity of expert testimony in medical­malpractice cases. E.g., Hart v. Van Zandt, 399 S.W.2d 791, 792 (Tex. 1966); Bowles v. Bourdon, 148 Tex. 1, 219 S.W.2d 779, 782 (Tex. 1949). "There can be no other guide [than expert testimony], and where want of skill and attention is not thus shown by expert evidence applied to the facts, there is no evidence of it proper to be submitted to the jury." Hart, 399 S.W.2d at 792. Because expert testimony is crucial to a medical­malpractice case, knowing what specific conduct the plaintiff's experts have called into question is critical to both the defendant's ability to prepare for trial and

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the trial court's ability to evaluate the viability of the plaintiff's claims. This makes eliciting an expert's opinions early in the litigation an obvious place to start in attempting to reduce frivolous lawsuits. See HOUSE COMM. ON CIV. PRAC., BILL ANALYSIS, Tex. H.B. 971, 74th Leg., R.S. (1995). Accordingly, in section 13.01, the Legislature requires medical­ malpractice plaintiffs, within 180 days of filing suit, either to provide each defendant physician and health­care provider with an expert report and the expert's curriculum vitae, or to nonsuit the claims. TEX. REV. CIV. STAT. ANN. art. 4590i, § 13.01(d). If the plaintiff fails within the time allowed either to provide the expert reports and curriculum vitae, or to nonsuit the case, the trial court must sanction the plaintiff by dismissing the case with prejudice, awarding costs and attorney's fees to the defendant, and ordering the forfeiture of any applicable cost bond necessary to pay that award. Id. § 13.01(e). If the plaintiff does timely file a report, the defendant may move to challenge the adequacy of the report, and the trial court must grant the motion if "it appears to the court . . . that the report does not represent a good faith effort to comply with the definition of an expert report." Id. § 13.01(l). The statute defines an expert report as "a written report by an expert that provides a fair summary of the expert's opinions . . . regarding applicable standards of care, the manner in which the care rendered . . . failed to meet the standards, and the causal relationship between that failure and the injury, harm, or damages claimed." Id. § 13.01(r)(6). If a trial court determines that an expert report does not meet these statutory requirements and the time for filing a report has passed, it must then dismiss with prejudice the claims against the defendant who has challenged the report. Id. § 13.01(e). American Transitional contends that a trial court's determination about the adequacy of an expert report should be reviewed under an abuse­of­ discretion standard. The Palacioses respond that whether a report meets the requirements of subsections 13.01(l) and (r)(6) is a question of law. They suggest that a trial court's decision on the adequacy of a report should be reviewed as a court would review a summary­judgment decision: that is, by indulging every reasonable inference and resolving any doubts in the nonmovant's favor, and eliminating any deference to the trial court's decision. We agree with American Transitional. The plain language of section 13.01 leads to the conclusion that abuse of discretion is the proper standard. First, the statute directs the trial court to grant a motion challenging the adequacy of an expert report if it "appears to the court" that the plaintiffs did not make a good­faith effort to meet the statutory requirements. Id. § 13.01(l). This language plainly vests the trial court with discretion. See TEX. GOV'T CODE § 312.002. ("Words shall be given their ordinary meaning."). Second, the statute states that dismissal under section 13.01(e) is a sanction: If the requirements of section 13.01(d) are not met, the court must "enter an order as sanctions" dismissing the case and granting the defendant its costs and attorneys' fees. TEX. REV. CIV. STAT. ANN. art. 4590i, § 13.01(e). Sanctions are generally reviewed

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under an abuse­of­discretion standard. Koslow's v. Mackie, 796 S.W.2d 700, 704 (Tex. 1990). And we presume the Legislature was aware of the standard of review ordinarily applied in sanctions cases when it explicitly identified a court's dismissal under section 13.01(e) as a sanction. See McBride v. Clayton, 140 Tex. 71, 166 S.W.2d 125, 128 (Tex. 1942) ("All statutes are presumed to be enacted by the legislature with full knowledge of the existing condition of the law and with reference to it."). Nevertheless, the court of appeals concluded that the usual standard of review for sanctions should not apply here. The court reasoned that the provisions of article 4590i at issue here were intended to discourage frivolous lawsuits, while sanctions, in contrast, are a response to litigation misconduct. We disagree with this distinction. Filing a frivolous lawsuit can be litigation misconduct subject to sanction. See TEX. R. CIV. P. 13 (imposing sanctions for filing groundless motions, pleadings, or other papers in bad faith or for the purposes of harassment). And one purpose of the expert­report requirement is to deter frivolous claims. HOUSE COMM. ON CIV. PRAC., BILL ANALYSIS, Tex. H.B. 971, 74th Leg., R.S. (1995). The Legislature has determined that failing to timely file an expert report, or filing a report that does not evidence a good­faith effort to comply with the definition of an expert report, means that the claim is either frivolous, or at best has been brought prematurely. See id. This is exactly the type of conduct for which sanctions are appropriate. See Transamerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 918 (Tex. 1991) (holding that "death­penalty" sanctions are appropriate when a party's discovery abuse justifies a presumption that its claims lack merit). For these reasons, we hold that an abuse­of­discretion standard of review applies to a trial court's decision to dismiss a case under section 13.01(e). We next consider whether the trial court abused its discretion in dismissing the Palacioses' claims against American Transitional. The parties disagree about how to determine a report's adequacy under section 13.01(l). American Transitional argues that the trial court must engage in a two­ step process: (1) the trial court must determine whether the report constitutes a fair summary of the expert's opinions, TEX. REV. CIV. STAT. ANN. art. 4590i, § 13.01(r)(6); and (2) if the trial court concludes that the report is not a fair summary, it must then look outside the report at the plaintiff's conduct to determine whether the plaintiff made a good­faith effort to meet the statutory requirements, id. § 13.01(l). The Palacioses, on the other hand, argue that the statute requires only one inquiry--whether the report evidences a good­faith effort to provide a fair summary of the expert's opinions. According to the Palacioses, the trial court does not have to make any factual determinations because the only relevant information is in the report itself. We agree with the Palacioses that a trial court should look no further than the report in conducting a section 13.01(l) inquiry. The issue for the trial court is whether "the report" represents a good­ faith effort to comply with the statutory definition of an expert report. Id. § 13.01(l). That definition requires, as to each defendant, a fair summary

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of the expert's opinions about the applicable standard of care, the manner in which the care failed to meet that standard, and the causal relationship between that failure and the claimed injury. Id. § 13.01(r)(6). Because the statute focuses on what the report discusses, the only information relevant to the inquiry is within the four corners of the document. Under subsections 13.01(l) and (r)(6), the expert report must represent only a good­faith effort to provide a fair summary of the expert's opinions. A report need not marshal all the plaintiff's proof, but it must include the expert's opinion on each of the elements identified in the statute. See Hart v. Wright, 16 S.W.3d 872, 877 (Tex. App.--Fort Worth 2000, pet. denied). In setting out the expert's opinions on each of those elements, the report must provide enough information to fulfill two purposes if it is to constitute a good­faith effort. First, the report must inform the defendant of the specific conduct the plaintiff has called into question. Second, and equally important, the report must provide a basis for the trial court to conclude that the claims have merit. See 4 S.W.3d at 865 (Taft, J. dissenting); Wood v. Tice, 988 S.W.2d 829, 830 (Tex. App.--San Antonio 1999, pet. denied) (noting that one of the purposes of article 4590i is to deter frivolous claims). A report that merely states the expert's conclusions about the standard of care, breach, and causation does not fulfill these two purposes. Nor can a report meet these purposes and thus constitute a good­faith effort if it omits any of the statutory requirements. See, e.g., Hart, 16 S.W.3d at 877 (holding that a report was inadequate because it stated that the patient had a heart attack and the doctor breached the standard of care, without describing the standard of care); Wood, 988 S.W.2d at 831­32 (holding that an expert report did not meet the statutory requirements because it did not name the defendants, state how the defendants breached the standard of care, demonstrate causation and damages, or include a curriculum vitae). However, to avoid dismissal, a plaintiff need not present evidence in the report as if it were actually litigating the merits. The report can be informal in that the information in the report does not have to meet the same requirements as the evidence offered in a summary­judgment proceeding or at trial. See, e.g., TEX. R. CIV. P. 166 (f) (setting out the requirements for the form and content of affidavits offered as summary­judgment proof); TEX. R. EVID. 802 (stating that most hearsay is inadmissable). American Transitional contends that Dr. Brontke's report does not meet the statutory requirements because it does not represent a good­faith effort to provide a fair summary of her opinion on the standard of care and how American Transitional breached that standard. The Palacioses respond that the following parts of Dr. Brontke's report establish these elements: Based on the available documentation I was able to conclude that: Mr. Palacios fell from his bed on 5/14/94 while trying to get out of it on his own. The nursing notes document that he was observed by nursing on the hour for two hours prior to the fall. In addition, ten minutes before the fall, the nursing notes documents [sic] the his wrist/vest restraints were on. Yet, at the time of his fall he was

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found on the floor with his vest/wrist restraints on but not tied to the bed. It is unclear how he could untie all four of the restraints from the bedframe in under ten minutes. Obviously, Mr. Palacios had a habit of trying to undo his restraints and precautions to prevent his fall were not properly utilized. . . . . All in all, Mr. Palacios sustained a second brain injury with a left subdural hematoma while he was an inpatient at [the Hospital]. . . . In my opinion, the medical care rendered to Mr. Palacios at the time of his second brain injury was below the accepted and expected standard of care which he could expect to receive. Moreover, this [sic] below the accepted standard of care extends to both the cause of the second injury as well as the subsequent treatment. . . . The Palacioses rely mostly on one sentence in the report to establish the standard of care: "Mr. Palacios had a habit of trying to undo his restraints and precautions to prevent his fall were not properly utilized." They argue that the inference can be made from that sentence, along with the statement that "it is unclear how he could untie all four of the restraints from the bed frame in under ten minutes," that Dr. Brontke believes American Transitional's staff should have tied the restraints to the bed more securely. The standard of care for a hospital is what an ordinarily prudent hospital would do under the same or similar circumstances. See Birchfield v. Texarkana Mem'l Hosp., 747 S.W.2d 361, 366 (Tex. 1987). Identifying the standard of care is critical: Whether a defendant breached his or her duty to a patient cannot be determined absent specific information about what the defendant should have done differently. "While a `fair summary' is something less than a full statement of the applicable standard of care and how it was breached, even a fair summary must set out what care was expected, but not given." 4 S.W.3d at 865 (Taft, J. dissenting). The statement the Palacioses rely upon--that precautions to prevent Palacios' fall were not properly used--is not a statement of a standard of care. Neither the trial court nor American Transitional would be able to determine from this conclusory statement if Dr. Brontke believes that the standard of care required American Transitional to have monitored Palacios more closely, restrained him more securely, or done something else entirely. "It is not sufficient for an expert to simply state that he or she knows the standard of care and concludes it was [or was not] met." See Chopra v. Hawryluk, 892 S.W.2d 229, 233 (Tex. App.--El Paso 1995, writ denied). Knowing only that the expert believes that American Transitional did not take precautions to prevent the fall might be useful if American Transitional had an absolute duty to prevent falls from its hospital beds. But as a general rule, res ipsa loquitur does not apply in medical­malpractice cases. TEX. REV. CIV. STAT. ANN. art. 4590i, § 7.01 (limiting res ipsa loquitur in medical malpractice to the limited classes of cases to which it applied as of August 29, 1977); Haddock v. Arnspiger, 793 S.W.2d 948, 951 (Tex. 1990).

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When the expert report's conclusory statements do not put the defendant or the trial court on notice of the conduct complained of, section 13.01(l) affords the trial court no discretion but to conclude, as the trial court did here, that the report does not represent a good­faith effort to provide a fair summary of the standard of care and how it was breached, as section 13.01(r)(6) requires. And because the statutory 180­day time period had passed when the trial court here made that determination, section 13.01(e) required the court to dismiss with prejudice the Palacioses' claims against American Transitional. See TEX. REV. CIV. STAT. ANN. art. 4590i, § 13.01(e). Accordingly, we reverse the court of appeals' judgment and dismiss with prejudice the Palacioses' claims.

NOTE

The Texas Supreme Court again addressed the requirements of expert reports in Bowie Memorial Hospital v. Wright, 79 S.W.3d 48 (Tex. 2002). Bowie involved a hospital's failure to diagnose a fractured right foot. The expert report stated that "if the x­rays would have been correctly read and the appropriate medical personnel acted upon these findings then Wright would have had the possibility of a better outcome." Because the report "simply opines that Barbara might have had `the possibility of a better outcome' without explaining how Bowie's conduct caused injury to Barbara," the Supreme Court rejected the report as conclusory and held that the trial court did not abuse its discretion in dismissing the case. Id. at 53­54.

Chapter 2 EMERGENCY AND INTERIM RELIEF

§ 2.01

Temporary Restraining Orders and Injunctions

Page 90: [Add the following text to the end of the Note:]

The time limits on TROs must be taken seriously. The Texas Supreme Court has recently ruled that mandamus relief is available to remedy a temporary restraining order that violates the Rule 680 time limits. In re TNRCC, 85 S.W.3d 201 (Tex. 2002).

§ 2.02

Interim Relief for Secured Creditors and Other Claimants

[C]--Self-Help Repossession by Secured Party

Page 97: [First line of section [c]. Update statutory cite: Delete "9.503" and change to "9.609"] Page 98: line 8. [Update statutory cite: Delete "9.105" and change to "9.102"]

§ 2.04

Wrongful Use of Special Remedies

[B]--The Tort of Wrongful Attachment, Garnishment, and Sequestration

Page 109: [Correct writ history of Barfield v. Brogdon to "writ ref'd n.r.e.)."]

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Chapter 3 THE SUBJECT MATTER JURISDICTION OF THE TEXAS TRIAL COURTS

§ 3.02

Constitutional and Statutory Provisions: An Explanation

[A]--Justice Courts

Page 118: [Add at the end of the subsection.]

Justice courts also have the power to hear suits to consider deed restrictions in "suits relating to enforcement of a deed restriction of a residential subdivision that does not concern a structural change to a dwelling." This power was first conferred in 1995, but only for counties with a population of 2.8 million or more. The justice courts' jurisdiction is concurrent with the district court, and "regardless of amount in controversy." The term "deed restriction" is defined as "one or more restrictive covenants contained or incorporated by reference in a properly recorded deed, map, plat, replat, declaration, or other instrument filed in the real property records, map records, or deed records of the county in which the property is located." The word "dwelling" is defined not to include "an external structure such as a carport, fence, storage building, or unattached garage." Nothing is said in the original version of the statute about injunctive relief, although the legislative history indicates that a provision allowing the granting of injunctions was deleted. Gov. C. § 27.034. In 1997, the statute was amended to delete the reference to counties with a population of 2.8 million or more, so now it applies to all counties. In 1998, the First Court of Appeals held that the justice courts did have the power to issue injunctions. It based this holding on the statutory language giving justice courts jurisdiction concurrent with the district court in this area. Malmgren v. Inverness Forest Residents Civic Club, Inc., 981 S.W.2d 875 (Tex. App.--Houston [1st Dist.] 1998, no pet.). In 1999, the legislature again amended the statute, adding a new provision that states: "Nothing in this section authorizes a justice of the peace to grant a writ of injunction." Gov. C. § 27.034(j). Because justice courts do not generally have the power to issue writs of injunction, the result is that the justice courts can hear these deed restriction cases but cannot grant injunctive relief. How, then, will they serve the purpose of providing a speedy and inexpensive method for enforcing deed restrictions? 15

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[B]--Constitutional County Courts

Page 119: [Add at the end of the first full paragraph.]

Several intermediate courts have held that there is no further appellate review following de novo review of a small claims judgment by the county court. See Tumlinson v. Gutierrez, 55 S.W.3d 673, 674 (Tex. App.--Corpus Christi 2001, no pet.); Oropeza v. Valdez, 53 S.W.3d 410, 411 (Tex. App.-- San Antonio 2001, no pet.); Woodlands Plumbing Co. v. Rodgers, 47 S.W.3d 146, 148 (Tex. App.--Texarkana 2001, pet. denied); Williamson v. A­1 Elec. Auto Serv., 28 S.W.3d 731, 732 (Tex. App.--Corpus Christi 2000, pet. dism'd w.o.j.); Howell Aviation Serv. v. Aerial Ads, Inc., 29 S.W.3d 321, 323­24 (Tex. App.--Dallas 2000, no pet.); Lederman v. Rowe, 3 S.W.3d 254, 256 (Tex. App.--Waco 1999, no pet.); Davis v. Covert, 983 S.W.2d 301, 302 (Tex. App.--Houston [1st Dist.] 1998, pet. dism'd w.o.j.); Gakill v. Sneaky Enterprises, Inc., 997 S.W.2d 296, 297 (Tex. App.--Fort Worth 1999, no pet.).

[C]--District Courts

Page 120: [Add the following paragraph before the paragraph beginning "As provided in the Texas Constitution".]

Despite hints like these, the Texas Supreme Court has not squarely addressed the issue of whether the district courts retain their $500 minimum after the 1985 recodification. The intermediate appellate courts in the state have split on this issue. For example, the Tyler Court of Appeals has held that the $500 minimum survives. Chapa v. Spivey, 999 S.W.2d 833, 835 (Tex. App.--Tyler, 1999 no pet.) (per curiam) (1985 changes were non­ substantive). The Texarkana Court, however, believes that the district court minimum is now $200.01. Arteaga v. Jackson, 994 S.W.2d 342, 342 (Tex. App.--Texarkana 1999, pet. denied) (minimum comes from Tex. Const. Art. 5 § 19 giving justice courts exclusive jurisdiction when amount in controversy is $200 or less). The confusion likely stems from the way in which the legislature structured the jurisdictional statutes: the jurisdiction of the district court is defined by reference to the jurisdiction of the other courts. Note, then, that the statute defining the jurisdiction of the legislative county courts provides that those courts have concurrent jurisdiction with the district courts when the matter in controversy "exceeds $500." Gov. C. § 25.0003(c)(1). Because the jurisdiction of the legislative county court itself begins at $200.01, the only purpose of this reference to $500 can be to confirm that the district courts' jurisdiction begins at $500. The minimum was not eliminated from the statutes; it was moved due to the legislature's odd choice to draft the statute defining the jurisdiction of the state's main general jurisdiction trial courts in a way that requires constant cross­ referencing of other statutes.

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§ 3.03

Appellate Cases Concerning Trial Court Jurisdiction

[B]--Competing Jurisdictional Grants: Particular Controversies [2]--Problems With Probate Jurisdiction

Page 133: [Insert the following Note before Seay v. Hall:]

As noted on page 125, probate jurisdiction depends heavily on the statutes for a particular county. In counties that have "statutory probate courts," additional complications arise. What is a statutory probate court? They are defined as follows in section 3(ii) of the Probate Code: "'Statutory probate court' means a statutory court designated as a statutory probate court under Chapter 25, Government Code. A county court at law exercising probate jurisdiction is not a statutory probate court under this Code unless the court is designated a statutory probate court under Chapter 25, Government Code." Chapter 25 of the Government Code, in sections dealing with particular counties, notes the existence of statutory probate courts. As of 2002, these include courts in Bexar, Collin, Dallas, Denton, El Paso, Galveston, Harris, Hidalgo, Tarrant, and Travis Counties. Statutory probate courts have far broader powers than county courts at law exercising probate jurisdiction. Section 5A(b) of the Probate Code provides a wider definition of "appertaining to estates" and "incident to estates" for these courts. In addition, section 5B of the Probate Code provides that "[a] judge of a statutory probate court, on the motion of a party to the action or on the motion of a person interested in an estate, may transfer to his court from a district, county, or statutory court a cause of action appertaining to or incident to an estate pending in the statutory probate court or a cause of action in which a personal representative of an estate pending in the statutory probate court is a party and may consolidate the transferred cause of action with the other proceedings in the statutory probate court relating to that estate." This power to transfer is also known as "pull down" authority. The following cases show the Texas Supreme Court's attempts to define "appertaining to" and "incident to" an estate, and to establish the limits of the pull down power.

Page 140: [Insert the following case before the Note:] IN RE SWEPI 85 S.W.3d 800 (Tex. 2002)

Justice RODRIGUEZ delivered the opinion of the Court, in which Chief Justice PHILLIPS, Justice HECHT, Justice ENOCH, Justice OWEN,

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Justice BAKER, Justice HANKINSON, and Justice JEFFERSON join. Justice O'NEILL did not participate in the decision. Section 5B of the Probate Code authorizes a statutory probate court to transfer to itself from a district court a cause of action "appertaining to or incident to an estate pending in the statutory probate court." Tex. Prob. Code § 5B. The issue in this mandamus proceeding is whether a suit concerning royalty payments on an overriding royalty interest owned by a partnership in which a decedent and, subsequently, her estate were former partners is appertaining to or incident to the estate such that a statutory probate court may exercise its section 5B transfer jurisdiction. In this case, the statutory probate court did just that, and the plaintiffs in the transferred case sought mandamus relief. After granting a stay and hearing oral argument, the court of appeals denied mandamus relief in an unpublished memorandum opinion. We conclude that the transferred suit is not appertaining to or incident to the pending estate and that Relators do not have an adequate appellate remedy. Accordingly, we conditionally grant the writ and direct the statutory probate court to vacate its order transferring the suit under section 5B.

I.

Margaret Bridwell Bowdle died in Wichita County, Texas, in 1976, and her will was probated there in 1977. At her death, she was a general partner in and owned an undivided one-fourth interest in Bridwell Oil Company, a partnership between her and J.S. Bridwell, her father, who owned a threefourths partnership interest. Bridwell Oil had at one time owned certain mineral leases in the McElmo Dome area of Colorado; the leases had been assigned from Gerald Bailey. In 1975, before Margaret Bowdle's death, Bridwell Oil assigned these leasehold interests to Shell Oil, reserving a 6.25% overriding royalty interest. Since then, Bridwell Oil has owned those overriding royalty interests, which will be referred to as the Shell royalty interests. In her will, Margaret Bowdle directed the executors and trustees of her estate to establish three trusts, one for each of her children, Bonnie Lynne Bowdle Whiteis, Alison Gale Bowdle, and Brian Lee Bowdle (now deceased). Each trust was to receive an undivided one-third share of all that remained of Margaret Bowdle's property, including her partnership interest in Bridwell Oil, after expenses and specific bequests. All three trusts have now terminated under their own terms, with the trust created for Margaret Bowdle's deceased son Brian having been distributed to his daughter Alicia L. Bowdle under the terms of the will. Thus, Margaret Bowdle's partnership interest in Bridwell Oil has passed to her descendants. After Margaret Bowdle's death, her estate ("the Estate") was a general partner in Bridwell Oil for a period of time. The current partners of Bridwell Oil include seven trusts created under the will of J.S. Bridwell, Margaret Bowdle's daughters Bonnie Lynn Whiteis and Allison Gale Bowdle, and the Alicia L. Bowdle Trust.

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When she died, Margaret Bowdle also separately owned in her own name certain other mineral interests in the McElmo Dome area of Colorado. After her death, the executors and trustees of her estate assigned these separate mineral interests to Mobil, reserving a 6.25% overriding royalty interest. These overriding royalty interests, which will be referred to as the Mobil royalty interests, passed through her estate and into the three trusts established for her children in her will. When the trusts later terminated under the terms of the will, the Mobil royalty interests were distributed to the beneficiaries, Bonnie Lynne Whiteis, Alison Gale Bowdle, and Alicia Bowdle. Alicia Bowdle transferred her interests into the Alicia L. Bowdle Trust. In 1982, the Colorado Oil and Gas Conservation Commission approved Shell and Mobil's proposal to unitize various tracts in and around the McElmo Dome area, subject to approval by eighty percent of the interest owners. The McElmo Dome Unit Agreement was ratified by the required percentage of interest owners, including Bridwell Oil, and production of carbon dioxide began in 1983. The project included constructing a 500-mile pipeline from Colorado to west Texas, so that carbon dioxide produced in Colorado could be transported to Texas and used in oil recovery operations there. Shell Oil Company was designated as the operator of the McElmo Dome Unit, and was subsequently succeeded by SWEPI (doing business as Shell Western E & P and formerly known as Shell Western E & P, Inc.) and Shell CO2 Company, Limited (now Kinder Morgan CO2 Company, L.P.). For ease of reference, we refer to these various entities as "Shell." In the late 1990s, several overriding royalty interest owners, including Bailey and Bridwell Oil, began questioning whether Shell and Mobil were properly calculating royalties on carbon dioxide produced from the McElmo Dome unit. They believed that Shell's and Mobil's calculations were inconsistent with a 1983 brochure proposing the unitization, and they contended that they relied on the brochure in voting to ratify the project. Because of the dispute over royalty calculations, Bailey and Bridwell Oil sued Shell in federal court in the Northern District of Texas on March 11, 1997. They claimed that Shell had underpaid them on their royalties and had filed false federal tax-related documents (Form 1099s) reflecting their royalty income. The federal court granted Shell's motion for partial summary judgment on the federal tax claim and dismissed it with prejudice. The court then declined to exercise supplemental jurisdiction over the remaining state law claims and dismissed them without prejudice. Bailey v. Shell W. E & P, Inc., No. CA-3-97-CV-0518-R, 1998 WL 185520 (N.D. Tex . Apr.14, 1998), aff'd, 170 F.3d 184 (5th Cir.1999). On June 17, 1998, Shell filed a declaratory judgment action in Harris County district court against Bailey and Bridwell Oil ("the Bailey suit"). Shell sought a declaration that it had at all times properly paid royalties to Bailey and Bridwell Oil for carbon dioxide produced from the McElmo Dome Unit. Bailey and Bridwell Oil asserted numerous counterclaims against Shell for the underpayment of royalties. The parties to the Bailey

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suit include Bailey, Bridwell Oil, and Shell. The Bailey suit concerns only the Shell royalty interests held by Bridwell Oil, not the Mobil royalty interests. On December 22, 1999, Gary Shores, Frank Gibson, and John Barfield, co-trustees of the Alicia L. Bowdle Trust, Bonnie Lynn Whiteis, and others filed a class-action lawsuit in Denton County statutory probate court. That suit, which will be referred to as the Shores class action, is a nationwide class action filed on behalf of all nongovernmental owners of overriding royalty interests from August 24, 1982 to the present in any mineral lease that became unitized in the McElmo Dome Unit, and concerns the alleged underpayment of royalties for carbon dioxide produced from the McElmo Dome Unit. The defendants in the Shores class action include various Shell defendants, Mobil defendants, and Cortez Pipeline, the owner of the gas pipeline. The Denton County probate court has certified the class. The plaintiffs' petition in the Shores class action alleges that venue is mandatory in Denton County because the action concerns trusts, including a charitable trust (the Alicia L. Bowdle Trust) and the situs of administration of the Bowdle Trust is maintained in Denton County. See TEX. TRUST CODE § 115.002(a), (c). Shell filed a motion to transfer venue and a plea to the jurisdiction, which the probate court overruled. These issues, as well as the probate court's class certification order, are not before us in this proceeding. After the Shores class action was filed, Bonnie Lynn Whiteis and Alicia Bowdle filed an application with the Wichita County Court at Law Number 2 seeking an appointment of an administrator for Margaret Bowdle's estate. The application sought to appoint Gary Shores, a named plaintiff in the Shores class action and the general manager of Bridwell Oil, as administrator of the Estate. The application further asserted that there was a "continued necessity for the administration of the Estate" because the Estate "owned" an unspecified cause of action and there were "lawsuits pending [the Bailey and Shores actions] that are appertaining to and incident to the Estate." The Wichita County court at law appointed Gary Shores as administrator on November 16, 2000. That same day, Shores filed a section 8(c)(2) motion under the Texas Probate Code, which permits probate proceedings to be transferred if it is in the best interests of the estate. Shores's motion explained to the Wichita County court at law that he "desire[d] to transfer the administration of the Estate to the nearest statutory probate court (which happens to be that in Denton County)" so that the Denton County probate court could exercise its jurisdiction under section 5B of the Probate Code. According to Shores's motion, the transfer would allow the Denton County probate court to transfer to itself the Bailey lawsuit pending in Harris County, consolidate it with the Shores class action, and try the actions together. The Wichita County court at law granted the section 8(c)(2) transfer motion that day. Shell does not dispute that transfer in this Court. In the meantime, the Bailey lawsuit had been proceeding in Harris County. Discovery was nearly complete, and the trial judge had issued a

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number of rulings on Bailey's and Bridwell Oil's counterclaims against Shell. On November 28, 2000, Gary Shores, Bonnie Lynn Whiteis, and Bridwell Oil filed a motion in the Denton County probate court to transfer the Bailey suit to the Denton County probate court, where Margaret Bowdle's estate was now pending, under section 5B of the Probate Code. They contended that the Bailey lawsuit was "appertaining to and incident to the Estate" and the transfer of the Bailey suit would promote judicial efficiency and economy and would be in the best interests of the Estate. Shell filed a response to the section 5B transfer motion, arguing that the requirements of section 5B were not met because the Estate had never been a party to the Bailey suit, no claim had been asserted by or against the Estate in the Bailey suit, the Estate was no longer a partner in Bridwell Oil, and the suit had already progressed significantly in Harris County. At the conclusion of the hearing, the probate court took the section 5B motion under advisement. The probate court delayed ruling on the 5B transfer motion until after the Harris County district court denied Shell's motion for summary judgment on the remaining fraud claims in the Bailey suit. On March 30, 2001, the Denton County probate court granted the motion and ordered the Bailey suit transferred to itself under section 5B. Shell sought mandamus relief from the Second District Court of Appeals, which denied relief, and Shell then filed this petition for writ of mandamus. We granted the petition to consider whether the Bailey suit is "appertaining to or incident to" the Estate under section 5B and whether Shell is entitled to mandamus relief.

II.

Mandamus is an extraordinary remedy, available only when a trial court clearly abuses its discretion and when there is no adequate remedy on appeal. Walker v. Packer, 827 S.W.2d 833, 840-44 (Tex.1992). Here, our first inquiry is whether the probate court clearly abused its discretion by transferring the Bailey suit under section 5B of the Probate Code. This section provides: A judge of a statutory probate court, on the motion of a party to the action or on the motion of a person interested in an estate, may transfer to his court from a district, county, or statutory court a cause of action appertaining to or incident to an estate pending in the statutory probate court or a cause of action in which a personal representative of an estate pending in the statutory probate court is a party and may consolidate the transferred cause of action with the other proceedings in the statutory probate court relating to that estate. Tex. Prob. Code § 5B. The personal representative of the Estate is not and has never been a party to the Bailey suit. Thus, we must determine whether the Bailey suit is "a cause of action appertaining to or incident to" the pending Estate. Section 5A(b) defines "appertaining to estates" and "incident to an estate" in proceedings in the statutory probate courts and district courts:

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In proceedings in the statutory probate courts and district courts, the phrases "appertaining to estates" and "incident to an estate" in this Code include the probate of wills, the issuance of letters testamentary and of administration, and the determination of heirship, and also include, but are not limited to, all claims by or against an estate, all actions for trial of title to land and for the enforcement of liens thereon, all actions for trial of the right of property, all actions to construe wills, the interpretation and administration of testamentary trusts and the applying of constructive trusts, and generally all matters relating to the settlement, partition, and distribution of estates of deceased persons. Id. § 5A(b). Thus, a cause of action is appertaining to or incident to an estate if the Probate Code "explicitly defines it as such or if the controlling issue in the suit is the settlement, partition, or distribution of an estate." In re Graham, 971 S.W.2d 56, 58 (Tex.1998); Palmer v. Coble Wall Trust Co., Inc., 851 S.W.2d 178, 182 (Tex.1992). The Bailey suit does not fall within any of the specific examples listed in section 5A(b). Therefore, we must determine whether the "controlling issue" in the suit is the settlement, partition, or distribution of the Estate. The following facts are undisputed: The Estate has made no claims in the Bailey suit, and no claims have been made against it. Bridwell Oil at all times owned the Shell overriding royalty interest at issue in the Bailey suit, and, although Margaret Bowdle and her estate were partners in Bridwell Oil in the past, neither one is currently a partner in Bridwell Oil. Margaret Bowdle never individually owned the Shell royalty interests at issue in the Bailey suit, nor did her estate. To determine whether the controlling issue in the Bailey suit is the settlement, partition, or distribution of the Estate, we look first to the pleadings in that suit. See In re Graham, 971 S.W.2d at 59. Shell's declaratory judgment petition states that it brought the action "to obtain a judicial determination of the proper way to calculate royalties payable to [Bailey and Bridwell Oil Company] by SWEPI." Specifically, the petition states, "SWEPI, which continues to pay Bailey and Bridwell overriding royalties on a monthly basis, seeks a judgment declaring that its method of calculating royalties payable to Defendants conforms to the contracts creating Defendants' overriding royalty interests and controlling law." For relief, Shell asked for a judgment declaring that it is entitled to calculate royalties in the manner it has done so since 1984, and awarding attorney's fees and costs. Bailey and Bridwell Oil filed numerous counterclaims. These include: (1) fraudulent inducement; (2) fraudulent concealment; (3) statutory real estate fraud; (4) negligent misrepresentation; (5) "breach of fiduciary duties, self-dealing, commingling, and constructive fraud and fraud per se"; (6) breach of contract; (7) declaratory judgment and accounting; (8) negligence and negligence per se; (9) violation of Texas Securities Act and Securities Fraud; (10) unjust enrichment; (11) money had and received and mutual

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and open account; (12) punitive damages; (13) civil conspiracy; and (14) attorney's fees. The relief sought includes: (1) an order that the transportation costs that Shell deducted from royalty payments made to Bailey and Bridwell Oil for the years 1984 to date were improper and that, as to all future production from the Unit, Shell shall not be permitted to deduct any transportation costs from the royalty payments made to Bailey and Bridwell Oil; (2) judgment for at least $2,057,000.00 for unpaid or underpaid overriding royalties; (3) actual, incidental, consequential, and special damages; (4) attorney's fees; (5) declaratory and legal and equitable relief, orders, constructive trusts, liens, accountings, specific performance, and other remedies; and (6) punitive damages. None of the relief sought by any party seeks to directly affect the Estate. Nevertheless, Shores contends that the Bailey suit satisfies the "controlling issue" test because the suit "has a potential collateral estoppel effect on the Estate and its claims already pending in Denton [in the Shores class action]." He continues: "In the partnership context, Texas courts have held that actions taken on behalf of a partnership adequately represent the interest of all partners in the partnership, thereby barring any subsequent litigation by individual partners of the same subject matter." Further, because "[c]laim preclusion may apply to bind a partner by virtue of a prior judgment against a partnership since the partner is in privity with the partnership, . . . [c]ollateral estoppel could impact the Estate by virtue of its former position as a partner during periods in which the claim arose and as an assignor of its interests to other partners." Thus, Shores argues, "[s]uch a ruling could eliminate all of the Estate's claims (and all of its remaining assets), obviously directly impacts the assimilation and settlement of the final claims and assets remaining in the Estate, and therefore is appertaining and incident to the Estate." According to an inventory filed with the probate court, Shores contends that the Estate owns the following: Personal property and asset represented by the claims of the Estate brought in the form of Defendant Bridwell Oil Company's counterclaims in [the Bailey lawsuit]. The value is presently undetermined and is subject to the claims of [Shell] asserted in such action against the Defendants, including Defendant Bridwell Oil Company and the Estate's interest therein for the relevant years at issue. This property and claim are owned in common with the Estate of J.S. Bridwell, Deceased, by and through its Independent Co-Executors, as tenants-in-partnership in the Texas general partnership known as Bridwell Oil Company, with the Estate owning an undivided twenty-five percent (25%) interest in such property and claim and the Estate of J.S. Bridwell, Deceased owning an undivided seventyfive percent (75%) interest in such property and claim for the relevant years at issue. Personal property and asset represented by the claims of the Estate, by and through the Administrator, as a member of the potential

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Plaintiff Class asserting claims in [the Shores class action] presently pending before [the Denton County probate court]. Thus, it appears that Shores is arguing that the Bailey suit is appertaining to or incident to the Estate because the Bailey suit has a potential collateral estoppel effect on the Estate's claims in the Shores class action and on its claims in the Bailey suit, which are represented by Bridwell Oil's claims and which it owns by virtue of its status as a former partner in Bridwell Oil. With regard to the Estate's "claims" in the Bailey suit, Shores further argues that, under the Texas Uniform Partnership Act (in effect "during the relevant time frame"), "[w]hen property is contributed to a partnership, each partner is a co-owner of each specific item of property, holding as a tenant-in-partnership[, and] . . . the Margaret Estate held a tenancy-in-partnership during the time that Shell was wrongfully charging it for transportation costs, and that interest is directly impacted by the resolution of the Bailey suit." Shores relies heavily on In re Graham, 971 S.W.2d 56 (Tex.1998), our decision construing Probate Code section 608. Section 608 is an analogous provision to section 5B that authorizes a statutory probate court to transfer to itself a matter appertaining to or incident to a pending guardianship estate. In Graham, we were asked to determine whether a wife's divorce proceeding against her husband was appertaining to or incident to the husband's guardianship estate. Id. at 59. The pleadings established that the wife requested a disproportionate share of the parties' estate, reimbursement to the community estate and to the wife's separate estate for funds used to benefit the husband's separate estate, and reimbursement to the wife's separate estate for funds used to benefit the community estate. Id. The wife also sought temporary orders awarding her exclusive control of all community property, enjoining the husband's guardian from entering, operating, or exercising control over the community property, ordering the guardianship estate to pay child support, and ordering the husband's separate estate to pay interim attorney's fees. Id. Thus, we concluded, the divorce proceeding, which involved child support to be paid from the guardianship estate, necessarily appertained to the husband's estate because it directly impacted the assimilation, distribution, and settlement of his estate. Id. Graham is easily distinguished from this case. In Graham, the relief requested in the divorce proceeding would have directly affected the guardianship estate. In contrast, no party in the Bailey suit seeks to directly affect Margaret Bowdle's estate. Rather, the parties in Bailey seek relief concerning royalty payments made to a partnership in which Margaret Bowdle and her estate are no longer partners. The Shell overriding royalty interests in dispute in Bailey were never owned by Margaret Bowdle or by her estate. Any interest of the Estate in the Bailey suit is simply in its role as a former partner in Bridwell Oil, which owned these royalty interests. Although "[a] partner is co-owner with his partners of specific partnership property holding as a tenant in partnership," under the Texas Uniform

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Partnership Act, the partner "has no right to possess such property for any other purpose [than partnership purposes]." Act of May 9, 1961, 57th Leg., R.S., ch. 158, § 25, 1961 Tex. Gen. Laws 289, 295 (expired 1999). Further, the comments to that section make clear that it "does not alter the fact that the partnership is the owner of the property." Similarly, in the Texas Revised Partnership Act, which applies to all partnerships after December 31, 1998, a partner is not a co-owner of partnership property. Tex. Rev. CIF. Stat. Ann. art. 6132b-5.01. Thus, the Estate, which is no longer a partner, has no ownership interest in the partnership property. Moreover, whatever interests Margaret Bowdle and the Estate had in the Shell royalty interests by virtue of their status as partners in Bridwell Oil have been passed to Margaret Bowdle's descendants, who are the current partners in Bridwell Oil. Thus, any recovery, or lack thereof, by Bridwell Oil in the Bailey suit will not affect the Estate. The fact that no partnership property or partnership interests are currently held by the Estate also distinguishes this case from In re Ramsey, 28 S.W.3d 58 (Tex. App. -- Texarkana 2000, orig. proceeding), on which Shores also relies. In Ramsey, Nita Hodges, heir of the estate of Kenneth Hodges, filed suit in district court to establish the existence of an oral partnership between Kenneth Hodges and Cecil Lesley and to wind up the partnership. She alleged that she had given notice to Lesley requesting that the partnership tender payment of the redemption price for Kenneth Hodges's partnership interest, and that Lesley acted in bad faith in refusing to tender payment. Lesley died shortly after Kenneth Hodges, and Ramsey and Chase Bank were appointed administrators of Lesley's estate. The probate court granted Chase's motion to transfer Hodges's suit to itself under section 5B. Hodges then filed for appointment of a receiver in the district court when she learned that Chase and Ramsey had filed a motion in the probate court seeking to lease real property that she alleged was part of the partnership property. Despite the probate court's transfer order, the district court continued with the suit, appointing a receiver and setting it for trial. Ramsey and Chase Bank petitioned for writ of mandamus against the district court. The Sixth Court of Appeals granted the writ, concluding that the partnership suit was within the probate court's jurisdiction. Although the court of appeals concluded that the transfer was proper because the personal representative of the Lesley Estate was a party to the partnership suit, it also concluded that the partnership suit was appertaining to the Lesley Estate because the partnership suit affected estate property. Specifically, the court of appeals held that because the spouse, heirs, or personal representative of a deceased partner succeed to the partner's partnership interest, a suit concerning the partnership's property affects estate property. Id. at 63. While this is true, Ramsey is distinguishable from the present case because, as the court of appeals acknowledged, "Hodges had an interest in property controlled by the estate that would be affected by the administration, [and thus] she had a pecuniary interest in the probate proceedings." Id. at 62. Thus, Hodges sought to recover property from the

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partnership, but that property was held and controlled by Lesley's estate. The resolution of the partnership suit would directly affect estate property to be distributed. In this case, the partnership interest and property rights, if any, have already passed through the Estate and have been distributed, and thus the resolution of the Bailey suit will not affect estate property. Shores also argues that the Bailey suit is appertaining to or incident to the Estate because it could potentially affect the Estate's claims in the Shores class action. Those claims appear to involve only the Mobil royalty interests. The Estate asserts its claims in Shores as a prior owner of the royalty interest, during which time it received royalty payments. But the Bailey suit does not involve the proper calculation of the Mobil royalty interests; it involves only the Shell royalty interests. Although the resolution of the Bailey suit may affect the Estate's claims through the operation of collateral estoppel, which we do not decide, the Bailey suit itself does not seek to resolve the Estate's claims in the Shores class action or otherwise affect property held or controlled by the Estate. Accordingly, the "controlling issue" in the Bailey suit cannot be said to be the settlement, partition, or distribution of the Estate. Thus, the Bailey suit is not appertaining to or incident to the Estate. Accordingly, the probate court clearly abused its discretion by transferring the suit when it lacked statutory authority.

III.

Having determined that the probate court lacked statutory authority to transfer the Bailey suit and therefore its order was a clear abuse of discretion, we next consider whether mandamus is an appropriate remedy. See Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992). Generally, mandamus relief is appropriate only upon a showing that the relators lacks an adequate remedy at law. Id. In addition, pleas to the jurisdiction will not ordinarily be reviewed by mandamus, because they are incidental trial rulings for which the relators generally has an adequate appellate remedy. Bell Helicopter Textron, Inc. v. Walker, 787 S.W.2d 954, 955 (Tex.1990). Shores contends that Shell's challenge is merely a jurisdictional challenge and thus not subject to mandamus review. Specifically, Shores argues, the probate court has the power to determine its own jurisdiction, and a court's erroneous decision may be corrected on appeal. See Brown v. Herman, 852 S.W.2d 91, 92 (Tex. App.-Austin 1993, orig. proceeding). What Shores overlooks, however, is that this case is much more than simply one in which a court has erred in concluding that it has jurisdiction. Here, the probate court not only erroneously concluded that it had jurisdiction, but also actively interfered with the jurisdiction of the Harris County court by taking jurisdiction away from that court through the transfer order. We have held that mandamus relief is appropriate when one court interferes with another court's jurisdiction. See Curtis v. Gibbs, 511 S.W.2d 263, 267 (Tex.1974) ("If the second court . . . attempts to interfere with the prior action, this court has the power to act by mandamus or other appropriate

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writ to settle the conflict of jurisdiction."); see also Perry v. Del Rio, 66 S.W.3d 239, 258 (Tex.2001) (mandamus relief appropriate when one court actively interfered with the dominant jurisdiction of another court by setting its case for trial at the same date and time); Abor v. Black, 695 S.W.2d 564, 567 (Tex.1985) (mandamus relief was proper in Curtis because one court actively interfered with the jurisdiction of the other court by enjoining the court from proceeding). Accordingly, because the probate court transferred the Bailey suit to itself without statutory authority and thereby actively interfered with the Harris County court's jurisdiction over the case, mandamus relief is appropriate.

IV

In sum, we conclude that the Bailey suit is not appertaining to or incident to Margaret Bowdle's Estate and thus the probate court lacked statutory authority to transfer the Bailey suit from Harris County to itself. Moreover, because the probate court transferred the suit without authority and interfered with the Harris County court's jurisdiction, mandamus relief is appropriate. Accordingly, we conditionally grant the writ and direct the probate court to vacate its order transferring the Bailey suit under section 5B of the Probate Code. The writ will issue only if the probate court fails to comply.

NOTES Pages 140 thru 141: [Delete the current note and substitute the following.]

(1) Statutory Repeal of Seay v. Hall for Statutory Probate Courts. In 1985, the legislature amended § 5A(b) of the Probate Court by adding a sentence that provided that "[i]n actions by or against a personal representative, the statutory probate courts have concurrent jurisdiction with the district court." This amendment was intended to overrule Seay v. Hall. This amendment was followed by a further series of amendments, each broadening the power of the statutory probate courts. Currently, section 5A(b) reads as follows: In proceedings in the statutory probate courts and district courts, the phrases "appertaining to estates" and "incident to an estate" in this Code include the probate of wills, the issuance of letters testamentary and of administration, and the determination of heirship, and also include, but are not limited to, all claims by or against an estate, all actions for trial of title to land and for the enforcement of liens thereon, all actions for trial of the right of property, all actions to construe wills, the interpretation and administration of testamentary trusts and the applying of constructive trusts, and generally all matters relating to the settlement, partition, and distribution of estates of deceased persons. All statutory probate courts may, in the exercise of their jurisdiction,

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notwithstanding any other provisions of this Code, hear all suits, actions, and applications filed against or on behalf of any heirship proceeding or decedent's estate, including estates administered by an independent executor; all such suits, actions, and applications are appertaining to and incident to an estate. . . . In situations where the jurisdiction of a statutory probate court is concurrent with that of a district court, any cause of action appertaining to estates or incident to an estate shall be brought in a statutory probate court rather than in the district court. Thus, under the current statutory language all suits filed on behalf of decedent's estates are by definition "appertaining to and incident to an estate." Seay v. Hall is therefore moot for statutory probate courts. Further, section 5A(c) gives the statutory probate court concurrent jurisdiction with the district court in all actions "by or against a person in the person's capacity as a personal representative." And section 5A(d) provides: "A statutory probate court may exercise the pendent and ancillary jurisdiction necessary to promote judicial efficiency and economy." That jurisdiction exists "whether or not the matter is appertaining to or incident to an estate." Probate Code § 5A(e). Remember, however, that these definitions apply only for "statutory probate courts," not for any court exercising probate jurisdiction. For other courts (and therefore in most counties), there is no "statutory probate court." Therefore, probate court jurisdiction will be limited to claims "appertaining to" or "incident to" an estate, and the "controlling issue" test in Seay is still the law. (2) Wrongful Death & Survival Claims. Because the last sentence of Section 5A(b) provides that when there is concurrent jurisdiction the case "shall be brought in a statutory probate court rather than in the district court," the statutory probate courts are now likely to be the proper courts for all suits filed against or on behalf of a decedent's estate, including (1) survival actions, which must be brought by the personal representative of the decedent's estate, unless administration of the estate is not necessary, and (2) wrongful death actions that can be brought by executors or administrators if the statutory beneficiaries named in the Wrongful Death Act (e.g., surviving spouse, children, and parents) do not do so. See C.P.R.C. §§ 71.004, 71.021. Thus, the Texas Supreme Court's fear in Seay v. Hall that "multiple plaintiffs, some injured and some killed in the same accident, would necessarily be forced into different courts" may become a realistic one for some counties. Sections 5A(d) and (e), however, may allow the statutory probate court to take jurisdiction over all the wrongful death and survival claims of all the properly joined plaintiffs, living and dead. Those sections provide that a "statutory probate court may exercise the pendent and ancillary jurisdiction necessary to promote judicial efficiency and economy," and it has that power "whether or not the matter is appertaining to or incident to an estate." The claims may still be tried in one court, then, but that court may be the statutory probate court. Is this a sensible result?

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(3) "Controlling Issue" Test Reaffirmed. The Texas Supreme Court recently reaffirmed the "controlling issue" test from Seay as the correct measure of whether a claim is appertaining to or incident to an estate. In re Swepi, L.P., 85 S.W.3d 800 (Tex. 2002). In an extremely complex situation involving oil and gas royalties, the Denton County probate court used section 5B to order a royalty dispute transferred to itself from district court in Harris County. The Supreme Court cited both the pull down provisions of section 5B and the definition of "appertaining to estates" and "incident to an estate" of section 5A(b). The Court noted that "a cause of action is appertaining to or incident to an estate if the Probate Code `explicitly defines it as such or if the controlling issue in the suit is the settlement, partition, or distribution of an estate.' " Since the transferred suit did not fall within any of the specific examples listed in section 5A(b), the Court applied the "controlling issue" test. It concluded that the possibility that a decision in the transferred case might have a collateral estoppel effect on other claims belonging to the decedent's estate did not satisfy the test, and that the probate court had transferred the case without authority and interfered with the Harris County court's jurisdiction. Swepi is also noteworthy in that it holds that mandamus relief is available to address a probate court's improper exercise of transfer jurisdiction. (4) Venue vs. Jurisdiction: C.P.R.C. § 15.007. Section 15.007 of the Civil Practice and Remedies Code provides that in a suit for personal injury, death, or property damage brought by or against an executor, administrator, or guardian, the venue provisions of Chapter 15 shall control over the venue provisions of the probate code. A number of court of appeals cases have considered whether this affects the pull down provisions of Probate Code sections 5B and 608. The vast majority of courts have held that the pull down provisions are jurisdictional statutes, not venue provisions that would be governed by section 15.007. See, e.g., In re Houston Northwest Partners, Ltd., 98 S.W.3d 777 (Tex. App.--Austin 2003, orig. proc.) (canvassing case law). But see Reliant Energy, Inc. v. Gonzalez, 102 S.W.3d 868 (Tex. App.--Houston [1st Dist.] 2003, pet. filed) (en banc) (holding that § 15.007 controls over § 6 of the Probate Code).

§ 3.05

Justiciability and Related Doctrines

Page 154: [Add the following after the citation to In re Luby's Cafeterias.]

The First Amendment to the federal Constitution also creates a limit on subject matter jurisdiction. Civil courts are not to intrude "into the church's governance of `religious' or `ecclesiastical' matters, such as theological controversy, church discipline, ecclesiastical government, or the conformity of members to standards of morality. Matters involving civil, contract, or property rights stemming from a church controversy can be considered, so long as they can be decided by applying neutral principles of law. Applying these principles, the Fort Worth Court of Appeals held that a case involving

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a controversy among church members should have been dismissed. Dean v. Alford, 994 S.W.2d 392, 395­396 (Tex. App.--Fort Worth 1999, no pet.) (controversy regarding whether pastor should be retained was ecclesiastical dispute; court may not intervene despite fact that independent status of congregation left church members without adequate remedy).

§ 3.06

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Page 161: [Add the following new Note after the Vale case.] NOTE

The federal supplemental jurisdiction statute also contains a tolling provision of its own. "The period of limitations for any [pendent state claim] and for any other claim in the same action that is voluntarily dismissed at the same time as or after the dismissal [of the pendent state claim] shall be tolled while the claim is pending and for a period of 30 days after it is dismissed unless State law provides for a longer tolling period." Would this statute have helped the plaintiff in Vale v. Ryan?

Chapter 4 JURISDICTION OF PERSONS AND PROPERTY

§ 4.01

Traditional Principles Governing In Personam and In Rem Jurisdiction

[B]--Evolution of the "Minimum Contacts" Doctrine

Page 172: [Add the following before the discussion of Burnham.] CONSENT

Defendants may also consent to jurisdiction, even when their contacts with a forum would not have been sufficient to justify suit there. Forum selection clauses are enforceable in Texas, provided that the parties have contractually consented to submit to the exclusive jurisdiction of another state, and the other state recognizes the validity of such provisions. Forum selection clauses may be ignored when the interests of the public and potential witnesses strongly favor jurisdiction in a forum other than the one the parties selected. They may also be disregarded in tort actions alleging fraud in the inducement. Courts considering contractual forum selection clauses must consider whether the clause provides an additional forum or an exclusive one. This was the issue before the court in Southwest Intelecom, Inc. v. Hotel Networks Corp., 997 S.W.2d 322, 325 (Tex. App.--Austin 1999, pet. denied). In that case, Intelecom sued HNC, seeking money damages and declaratory relief based on allegations of fraud in the inducement, failure of consideration, and breach of contract. The contract between the parties contained the following clause: "The Parties stipulate to jurisdiction and venue in Ramsey County, Minnesota." Nevertheless, Intelecom brought suit in Texas. The trial court dismissed the case based on the jurisdiction clause, but the Austin Court of Appeals reversed, upholding the Texas court's jurisdiction. The appellate court explained, "We believe that the jurisdiction clause . . . requires that the parties submit to jurisdiction in the courts of Ramsey County, Minnesota, in the event that a suit related to the agreement is brought there. We do not, however, interpret the clause to mandate that Minnesota courts have exclusive jurisdiction. The plain language of the jurisdiction clause neither prohibits litigation in jurisdictions other than Ramsey County, Minnesota, nor provides that Minnesota courts have exclusive jurisdiction over all claims arising out of the contract." The 31

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court contrasted the language in this case with that of other forum selection clauses that have been held to be binding, e.g., "The parties hereby agree that any legal action concerning this Agreement shall be brought in a court of competent jurisdiction in the State of Oregon."

TRANSIENT JURISDICTION Page 172: [Read note on Burnham.] QUASI IN REM JURISDICTION Page 172: [Read note on Shaffer.]

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Page 174: [In C.P.R.C. § 17.045(c), the last line should read "nonresident or the nonresident's principal place of business".]

[B]--"Arising Out of Business Done": Scope of the Texas Long­Arm Statute

Page 180: [The style of case should be Guardian Royal Exch. v. English China Clays.] NOTES AND QUESTIONS Page 196: [Add the following discussion before Note (3).]

Texas courts have also had to decide whether and to what extent an internet­based presence in the state should support a finding of general jurisdiction. Read the following case, and consider what difference, if any, the internet contacts made.

RIVIERA OPERATING CORP. v. DAWSON 29 S.W.3d 905 (Tex. App.--Beaumont 2000, pet. denied)

BURGESS, J. Riviera Operating Corporation, doing business as Riviera Hotel & Casino, ("Riviera") appeals the trial court's denial of its special appearance motion

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filed in a lawsuit brought by Mary Jane Dawson ("Dawson") in Jefferson County, Texas. Dawson alleged she was injured in a slip and fall accident occurring at Riviera's hotel in Las Vegas, Nevada. After Dawson conducted special appearance discovery, the trial court heard and denied Riviera's motion. Upon Riviera's request, the trial court filed the following findings of fact and conclusions of law:

Findings of Fact

Under traditional jurisdictional analysis, the defendant's contacts with the State of Texas were not sufficiently systematic or of such a nature as to vest this Court with general jurisdiction. The defendant did, however, transact business over the internet in such a manner as to create jurisdiction in accordance with the authorities cited by plaintiff in [her] responses to defendant's Special Appearance.

Conclusions of Law

By virtue of the defendant's internet commercial transactions with the State of Texas, defendant has subjected itself to personal jurisdiction within the State of Texas. Contending generally it is not subject to personal jurisdiction in Texas and that the trial court erred in denying its special appearance motion, Riviera brings three specific issues: Issue No. 1: The evidence was insufficient to support the trial court's finding of fact that Riviera has "transacted business over the internet" with a resident or residents of Texas. Issue No. 2: The trial court erred in its conclusion of law that "by virtue of the defendant's internet commercial transactions with the State of Texas, defendant has subjected itself to personal jurisdiction within the State of Texas." Issue No. 3: The trial court erred in denying Riviera's special appearance motion because Riviera does not have the necessary "minimum contacts" with the State of Texas and the exercise of jurisdiction over Riviera does not comport with "traditional notions of fair play and substantial justice." This interlocutory appeal involves the impact of internet transactions on jurisdictional analysis, and, as such, is a case of first impression for this Court. . . .

Personal Jurisdiction

. . .

Minimum Contacts

In deciding whether Riviera established minimum contacts with Texas, we examine its intentional activities and expectations. To establish

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minimum contacts with the forum state, Riviera must have purposefully availed itself of the privilege of conducting activities within the forum state, thus enjoying the benefits and protections of its laws. See Rudzewicz, 471 U.S. at 474­75, 105 S. Ct. 2183, 85 L. Ed. 2d at 541­42. Riviera's activities must justify a conclusion that it reasonably anticipated being called into a Texas court. See Rudzewicz, 471 U.S. at 474, 105 S. Ct. at 2183, 85 L. Ed. 2d at 542; World­Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 100 S. Ct. 559, 567, 62 L. Ed. 2d 490, 501 (1980). The focus of the minimum contacts analysis differs between the two categories of personal jurisdiction--general and specific. See Schlobohm, 784 S.W.2d at 357. Specific jurisdiction exists when the nonresident defendant's contacts with the forum state arise from, or are directly related to, the cause of action. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8, 104 S. Ct. 1868, 1872, 80 L. Ed. 2d 404, 411 (1984). General jurisdiction exists when a nonresident defendant engages in continuous and systematic contacts with the forum state. Guardian Royal Exch., 815 S.W.2d at 230. The events giving rise to the cause of action need not have occurred in the forum state. See CSR Ltd. v. Link, 925 S.W.2d at 594­95. However, the minimum contacts analysis for general jurisdiction is more demanding than that for specific jurisdiction and requires a showing of substantial activities within the forum state. Schlobohm, 784 S.W.2d at 357. As Dawson does not contend that specific jurisdiction exists, we turn to the question of whether general jurisdiction has been established.

Riviera's Evidence

In support of its special appearance motion, Riviera submitted the affidavit of Duane Krohn, Secretary and Treasurer of Riviera, to establish the following facts: (1) Riviera, a Nevada corporation with its principal place of business in Las Vegas, Nevada, does not maintain a place of business in Texas; does not do business in Texas; is not a Texas resident; and has never been actively involved in a Texas business. (2) Riviera is not registered with the Secretary of State to do business in Texas and is not required to maintain and does not maintain a registered agent for service in Texas. (3) Riviera has never paid nor been required to pay taxes in Texas; has no bank accounts in Texas; has never owned or leased property located in Texas; and never had any employees in Texas. (4) Riviera has not done business and was not engaged in doing business in Texas regarding the claims and causes of action asserted by Dawson. Riviera further maintains it was not foreseeable that providing lodging and services to Dawson in Nevada would give rise to a personal injury suit filed against Riviera in Texas, and that it would be excessively burdensome for Riviera to litigate Dawson's claim in Texas. Riviera has demonstrated that it had no systematic and continuous contacts with Texas, that it did not

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purposefully direct any act toward Texas, and that it took no act within Texas that gave rise to the plaintiff's cause of action. Based on Riviera's evidence, we conclude that Riviera has carried its burden to negate all bases of personal jurisdiction. See CSR Ltd. v. Link, 925 S.W.2d at 596.

Riviera's Contacts With Texas

In opposition to Riviera's special appearance, Dawson presented evidence of Riviera's contacts with Texas. Texas residents accounted for 44,936 room nights in 1997 and 45,267 room nights in 1998. These nights do not include the number of Texas residents who gambled in Riviera's casinos or attended shows there. Further, a newsletter was sent to a total of 161,932 addresses, of which 15,174 were Texas addresses. New Year's Eve invitations issued to 3,597 persons; 270 of these went to Texas addresses. Thirty­two of the Texas addresses were on Riviera's "A" list; sixty were on the "B" list, and 178 were on the "C" list. Riviera's convention information (organized by geographic regions) includes 512 contact names in the southwest region of which Texas and fourteen other states are a part. Of these, 183 are located in Texas. Dawson also offered the depositions of two Riviera employees, chief financial officer Duane Krohn and Christine Gigante, vice president of gaming marketing. Much of Krohn's testimony was devoted to a hypothetical situation of how Riviera might establish a line of credit for a Texas customer and how Riviera might attempt to collect a debt from a Texas customer. Krohn also testified about two specific instances of Riviera's executives traveling to Texas for business reasons. In 1997, Krohn and others went to San Antonio, as well as non­Texas cities, to promote a public bond offering. In addition, Riviera's board chairman and two vice presidents joined executives from other Las Vegas hotels in meeting with Southwest Airlines executives in an effort "to convince Southwest to put some of the new airplanes they were buying in to service in Las Vegas." Gigante testified that customers who were fully "comped" (receiving complementary rooms, food, and beverages) would receive invitations approximately once a month to some special event or show at the Riviera. She also testified that customers nationwide, not excluding Texas, received the Riviera newsletter, and, if on the "A" list would receive telemarketing calls for special events such as New Year's Eve. In addition, she confirmed that customers, not excluding Texans, could make room reservations with the Riviera at its internet website, but could not obtain a line of credit there. Dawson also presents seven computer generated pages pertaining to Riviera's website. Riviera conceded it maintains an internet website accessible to anyone with internet access. The trial court first found that "under traditional jurisdictional analysis, [Riviera's] contacts with the State of Texas were not sufficiently systematic or of such a nature as to vest this Court with general jurisdiction." The

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trial court obviously refers here to the "non­internet" contacts Riviera had with Texas since its next finding states "the defendant did, however, transact business over the internet in such a manner as to create jurisdiction in accordance with the authorities cited by [Dawson's] responses to [Riviera's] Special Appearance." We agree with the trial court that the non­ internet transactions are insufficient to establish general jurisdiction over Riviera, an out of state resort. See Gardemal v. Westin Hotel Company, 186 F.3d 588, 596 (5th Cir. 1999)(no basis for exercising general jurisdiction existed where there was no evidence regarding how frequently hotel advertised in Texas or how much business was generated by advertising nor amount of business generated for hotels by Texas tourist companies); see also M.G.M. Grand Hotel, Inc. v. Castro, 8 S.W.3d at 410­11 (no basis for exercising general jurisdiction existed where there existed no evidence that MGM did anything more than solicit business and advertise in Texas, and there was no evidence of "extensive marketing campaign" directed at Texas residents; no showing that MGM relied significantly on Texas for revenues or maintained any Texas agent or representative). However, we further find that Riviera's internet transactions, whether standing by themselves or combined with the non­internet contacts, do not establish general jurisdiction.

Internet Transactions

As the San Antonio court explained, "the Internet is a global communications network that makes it possible to conduct business throughout the world entirely from a desktop." Jones v. Beech Aircraft Corp., 995 S.W.2d 767, 772 (Tex. App.--San Antonio 1999, pet. dism'd w.o.j., mand. denied). For a Texas jurisdictional analysis, we categorize internet useage on a "spectrum" or "sliding scale." See Mink v. AAAA Development LLC, 190 F.3d 333 (5th Cir. 1999); Jones, 995 S.W.2d at 772. At one end of the scale are situations in which a defendant clearly does business over the Internet by entering into contracts with residents of other states that involve the knowing and repeated transmission of computer files over the Internet. At the other end of the scale are passive web site situations. A passive web site, which solely makes information available to interested parties, is not grounds for personal jurisdiction. . . . In the middle are "interactive" web sites, which permit a user to exchange information with the host computer (the person or company maintaining the web site). In these cases, the exercise of jurisdiction is determined by examining the level of interactivity between the parties on the web site. Jones, 995 S.W.2d at 772­73 (citations omitted). Dawson provides no evidence that Riviera engaged in business transactions or entered into contracts over the internet with Texas residents, and we have found none. Moreover, Dawson's reliance on two federal district court cases is misplaced. In Park Inns Int'l v. Pacific Plaza Hotels, Inc., 5 F. Supp. 2d 762, 764 (D. Ariz. 1998), there was evidence that, unlike here, the foreign defendant actually had engaged in internet transactions with

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residents of the forum state. While the second case, Mieczkowski v. Masco Corp., 997 F. Supp. 782 (E.D. Tex. 1998), has jurisdictional facts and internet activity similar to this case, Masco is a pre­Mink decision. There, the Fifth Circuit explained the standard clearly: "Absent a defendant doing business over the Internet or sufficient interactivity with residents of the forum state, we cannot conclude that personal jurisdiction is appropriate." Mink, 190 F.3d at 337. Thus, as Riviera's non­internet contacts are insufficient to establish general jurisdiction as discussed above, and as there is no evidence that Riviera did business over the internet with Texas residents, Dawson has not satisfied the minimum contacts requirement of the due process inquiry. Consequently, personal jurisdiction over Riviera is not proper. We sustain issues one and two. We further sustain issue three regarding the error of the trial court in not finding minimum contacts to be lacking. Because Mary Jane Dawson has not satisfied the minimum contacts requirement, we need not consider the balance of issue three regarding whether the exercise of jurisdiction comports with "traditional notions of fair play and substantial justice." Accordingly, we overrule the trial court's finding of personal jurisdiction over Riviera Operating Corporation and reverse its denial of special appearance. We therefore dismiss this case for lack of personal jurisdiction over Riviera Operating Corporation.

NOTE

The Texas Supreme Court has recently endorsed a more restrictive view of general jurisdiction. In American Type Culture Collection, Inc. v. Coleman, 83 S.W.3d 801 (Tex. 2002), the court rejected a claim of general jurisdiction over a Maryland company that had sold its products to Texas residents for at least eighteen years. The company also serves as a repository for Texas researchers seeking microorganism patents and contracted with UT Southwestern Medical Center to propagate and test cell­lines. However, all of defendant's activities were performed in Maryland, and the products sold were shipped F.O.B. Maryland. Viewing these contacts as a whole, the Court concluded that defendant's contacts with Texas were not continuous and systematic.

Page 196: [Add the following at the end of Note (3).]

Does the following case rely too heavily on CMMC's "isolated occurrence" language?

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C­LOC RETENTION SYSTEMS, INC. v. HENDRIX 993 S.W.2d 473 (Tex. App.--Houston [14th Dist.] 1999, no pet.)

YATES, Justice. * Appellant, C­Loc Retention Systems, Inc., by this interlocutory appeal, complains of the trial court's denial of its special appearance under Rule 120a of the Texas Rules of Civil Procedure. The issue presented on appeal is whether the trial court erred in denying C­Loc's special appearance. We reverse the order of the trial court and dismiss the case against C­Loc. . . . . On September 7, 1994, appellee, Al Hendrix, a resident of Galveston, Texas, entered into an agreement to purchase "bulkheading materials" from C­Loc, a Michigan corporation. Hendrix paid C­Loc $3,997.55 for the materials. At the time Hendrix purchased the C­Loc materials, he and C­ Loc traded several phone calls and faxes. After Hendrix installed the C­Loc bulkheading materials on his property, he began to have problems with the materials. Hendrix informed C­Loc of his problems. In an attempt to resolve Hendrix's problems, Lawrence Berger, president and CEO of C­Loc, sent Gary Genta from Michigan to see Hendrix in Galveston. After being unable to resolve the matter, Hendrix filed suit alleging that C­Loc had violated the Texas Deceptive Trade Practices Act and the "Action Fraud Statute," and had breached the sales contract. C­Loc filed a special appearance challenging the trial court's personal jurisdiction over it. In support of its special appearance, C­Loc provided the affidavit of Berger, in which he states C­Loc is a Michigan corporation, which has never (1) advertised in any publication directed to Texas, (2) committed a tort in whole or in part in Texas, (3) recruited Texas residents for employment, (4) held a bank account in Texas, (5) paid taxes in Texas, (6) owned any real or personal property in Texas, or (7) made use of any Texas court. Berger further states, after reviewing C­Loc's records for the previous three years, he has found that no C­Loc representatives have entered Texas for business purposes. Hendrix claims, Genta, who came to see him in Galveston, is a representative of C­Loc. At his deposition, Hendrix testified that Berger represented to him that he would send a C­Loc representative or agent to address his complaints. C­Loc, on the other hand, contends Genta is not one of its representatives. In a supplemental affidavit, Berger attests that he asked Genta, a C­Loc customer who has never been on C­Loc's payroll, to act

*

Footnotes and citations omitted unless otherwise indicated.

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as a consultant to him in his capacity as president and CEO of C­Loc. Berger states he asked Genta, who had experience in installing C­Loc products for his own customers in Michigan, to travel to Galveston in his place because he was recovering from surgery. Berger asked Genta to report back to him on what he observed with regard to Hendrix's problem, but instructed Genta not to advise Hendrix about the installation of the C­Loc material. The trial court denied C­Loc's special appearance. . . . . Hendrix argues the trial court's jurisdiction over C­Loc is based on specific jurisdiction, not general jurisdiction. Therefore, we shall analyze C­Loc's contacts with Texas to determine whether the corporation is subject to the trial court's specific jurisdiction. C­Loc contends it did not perform any act in Texas in connection with the sale of its product to Hendrix. Specifically, C­Loc argues that when it delivered its product to the common carrier and Hendrix paid the cost of shipping, C­Loc completed its performance of the contract in Michigan; therefore, it performed no part of the contract in Texas. See Bus. & Com. C. § 2.401(b)(1). We do not believe the fact that the C­Loc materials were shipped free on board point of origin to be the sole determining factor. Instead, we shall also look to other facts surrounding the sale of the C­Loc materials. . . . . C­Loc's entering into a sales agreement with Hendrix in itself does not establish purposeful availment. See Burger King Corp., 471 U.S. at 478. Nor is the shipment of the materials from Michigan to Texas sufficient to justify an exercise of personal jurisdiction. Stuart v. Spademan, 772 F.2d 1185, 1193 (5th Cir. 1985) (citing Loumar v. Smith, 698 F.2d 759 (5th Cir. 1983) (holding nonresident partnership not subject to personal jurisdiction of Texas court although it sold and shipped to Texas plaintiff goods that were subject of breach of contract claim)). Moreover, . . . Hendrix initiated contact with a Michigan corporation having no other contact with Texas. There is no evidence that C­Loc advertised or directed its product to Texas. Furthermore, we do not find Genta's one trip to Texas on behalf of C­Loc, whether as an agent of the company as Hendrix asserts or as customer of the company as C­Loc asserts, to be more than an isolated occurrence in relation to Hendrix's complaint regarding an isolated sale to a resident of Texas. Single or occasional acts are not sufficient to establish jurisdiction if the nature and quality of such acts and the circumstances of their commission "create only an `attenuated' affiliation with the forum." CMMC v. Salinas, 929 S.W.2d 435, 439 (Tex. 1996) (quoting Burger King Corp., 471 U.S. at 475 n.18). We cannot conclude that the "random use of interstate commerce" to negotiate the sales agreement and "the isolated shipment of goods" to Texas at the instigation of Hendrix establish the requisite minimum contacts for the exercise of jurisdiction over C­Loc. Therefore, we find the trial court

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erred in denying C­Loc's special appearance. Accordingly, the order of the trial court is reversed and the case against C­Loc is dismissed.

Page 196: [Add new Note (4).]

(4) Can Communications Be Minimum Contacts? Two recent court of appeals cases consider whether communications with Texas will suffice to show minimum contacts. M.G.M. Grand Hotel v. Castro, 8 S.W.3d 403, 411­ 412 (Tex. App.--Corpus Christi 1999, no pet.) (embracing "solicitation plus" rule for resort hotels); In re Estate of Judd, 8 S.W.3d 436, 445 (Tex. App.--El Paso 1999, no pet.) (in rem case involving paintings taken from New York to Texas in which a demand for return by an art gallery did not subject it to a declaratory action in Texas).

[C]--Interrelated Business and the Scope of the General Texas Long­Arm Statute

Page 196: [Delete Reul v. Sahara Hotel, Products Promotion v. Cousteau, and National Industrial Sand v. Gibson. Read instead the following case.] BMC SOFTWARE BELGIUM, N.V. v. MARCHAND 83 S.W.3d 789 (Tex. 2002)

BAKER, J. This is an interlocutory appeal from the denial of a foreign corporation's special appearance. A divided court of appeals affirmed the trial court's ruling. We conclude that the foreign corporation's contacts with Texas are insufficient to create either specific or general jurisdiction. We also conclude that the trial court did not abuse its discretion in denying the plaintiff's motion to continue the special appearance hearing. We therefore reverse the court of appeals' judgment and render judgment dismissing the plaintiff's claims against the foreign corporation for want of jurisdiction.

I. BACKGROUND

Michel Marchand, a Belgian citizen, was employed by Platinum Technologies in Belgium. In March 1996, Marchand began negotiating with Gerd Ordelheide and Adri Kok for employment with BMC Software Belgium, N.V. (BMCB). Ordelheide and Kok were directors of BMCB, a wholly­owned subsidiary of BMC Software, Inc. (BMCS), a Delaware corporation headquartered in Houston.

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On March 29, 1996, Marchand and BMCB signed a letter agreement outlining the terms of Marchand's employment with BMCB, including the offer of options to purchase 20,000 shares of BMCS stock. The agreement did not specify when the options would be granted or when Marchand could exercise them. The letter agreement also referenced a "management agreement" that Marchand had apparently presented to BMCB. On June 13, 1996, BMCB and Marchand executed the management agreement between BMCB and a company called Procurement, N.V., of which Marchand was the sole officer and director. The record shows that Marchand asked BMCB to hire Procurement as a management company so that Marchand could work for Procurement as an independent contractor rather than directly for BMCB. Apparently, this arrangement enabled Marchand to reduce his Belgian tax liability. The management agreement was in German, and it stated that Belgian law applies and the court at Brussels had exclusive jurisdiction. When Marchand actually began working for BMCB is unclear. But it is clear that in July 1997, BMCB discharged Procurement and Marchand. Marchand was never granted any options to purchase BMCS stock. He sued BMCB and BMCS for breach of contract, fraud, negligent misrepresentation, and declaratory relief. Marchand alleged both specific and general jurisdiction over BMCB. BMCB filed a special appearance, which the trial court denied. BMCB appealed the trial court's interlocutory order. The court of appeals affirmed, and BMCB petitioned this Court for review. . . .

III. APPLICABLE LAW * * *

B. IN PERSONAM JURISDICTION

The Texas long­arm statute governs Texas courts' exercise of jurisdiction over nonresident defendants. See TEX. CIV. PRAC. & REM. CODE §§ 17.041­.045. That statute permits Texas courts to exercise jurisdiction over nonresident defendants [sic] that "does business" in Texas, and the statute lists some activities that constitute "doing business." TEX. CIV. PRAC. & REM. CODE § 17.042. The list of activities, however, is not exclusive. We have held that section 17.042's broad language extends Texas courts' personal jurisdiction "as far as the federal constitutional requirements of due process will permit." U­Anchor Adver., Inc. v. Burt, 553 S.W.2d 760, 762 (Tex. 1977). Thus, we rely on precedent from the United States Supreme Court and other federal courts, as well as our own State's decisions, in determining whether a nonresident defendant has met its burden to negate all bases of jurisdiction. See Guardian Royal, 815 S.W.2d at 226; U­Anchor Adver., 553 S.W.2d at 762. Personal jurisdiction over nonresident defendants is constitutional when two conditions are met: (1) the defendant has established minimum contacts with the forum state, and (2) the exercise of jurisdiction comports with

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traditional notions of fair play and substantial justice. International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 66 S. Ct. 154 (1945). A nonresident defendant that has "purposefully availed" itself of the privileges and benefits of conducting business in the foreign jurisdiction has sufficient contacts with the forum to confer personal jurisdiction. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474­76, 85 L. Ed. 2d 528, 105 S. Ct. 2174 (1985) (discussing the constitutional boundaries of personal jurisdiction). Although not determinative, foreseeability is an important consideration in deciding whether the nonresident defendant has purposefully established "minimum contacts" with the forum state. Guardian Royal, 815 S.W.2d at 227. However, a defendant should not be subject to a foreign court's jurisdiction based upon "random," "fortuitous," or "attenuated" contacts. Burger King, 471 U.S. at 475. Because of the unique and onerous burden placed on a party called upon to defend a suit in a foreign legal system, the minimum contacts analysis is particularly important when the defendant is from a different country. CSR Ltd. v. Link, 925 S.W.2d 591, 595, 39 Tex. Sup. Ct. J. 767 (Tex. 1996) (citing Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 114, 94 L. Ed. 2d 92, 107 S. Ct. 1026 (1987)). Personal jurisdiction exists if the nonresident defendant's minimum contacts give rise to either specific jurisdiction or general jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 413­14, 80 L. Ed. 2d 404, 104 S. Ct. 1868 (1984); Guardian Royal, 815 S.W.2d at 226. Specific jurisdiction is established if the defendant's alleged liability arises from or is related to an activity conducted within the forum. Guardian Royal, 815 S.W.2d at 228. In contrast, general jurisdiction is present when a defendant's contacts in a forum are continuous and systematic so that the forum may exercise personal jurisdiction over the defendant even if the cause of action did not arise from or relate to activities conducted within the forum state. Guardian Royal, 815 S.W.2d at 228; Schlobohm v. Schapiro, 784 S.W.2d 355, 357 (Tex. 1990).

IV. ANALYSIS

In his original petition in the trial court, Marchand alleged the following to support jurisdiction over BMCB: (1) BMCB is operated by and is a wholly owned subsidiary of BMCS; (2) BMCS provides support to and uses its wholly owned subsidiaries such as BMCB to jointly market BMCS's products worldwide; (3) BMCS and BMCB have the same officers; (4) BMCB has continuous and systematic contacts with BMCS; (5) BMCB uses stock in BMCS to entice employees to work for it; and (6) the stock allegedly offered to Marchand is located in Houston, Texas. The court of appeals determined that the trial court could have reasonably concluded that BMCB failed to negate all possible bases for establishing specific jurisdiction. In doing so, the court of appeals explained that the evidence shows that BMCB and BMCS officers discussed Marchand and the stock option offer in Texas. Furthermore, the court of appeals concluded

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that the record showed that BMCB had sufficient continuous and systematic contacts with BMCS and thus Texas to establish the trial court's general jurisdiction. In so concluding, the court of appeals relied upon alleged conversations in Texas about Marchand between BMCB and BMCS officers, BMCB's selling BMCS's software and services, BMCS's including its subsidiaries' financial performance on annual reports, and BMCB providing its employees BMCS stock options as part of an employee incentive plan. Because the court of appeals determined the trial court could have found specific and general jurisdiction over BMCB, it did not reach BMCB's argument that the evidence is not legally sufficient to establish that BMCB was BMCS's alter ego.

A. SPECIFIC JURISDICTION

Marchand asserts that the trial court had specific jurisdiction over BMCB because BMCB committed a tort in whole or in part in Texas. See TEX. CIV. PRAC. & REM. CODE § 17.042(2). Specifically, Marchand alleges that Ordelheide and Max Watson, BMCS's chairman and chief executive officer, discussed in Texas the stock­options offer BMCB made to Marchand and, in this conversation, they planned to defraud him. Marchand argues that the discussion Ordelheide and Watson had in Texas forms the basis of his fraud and negligent misrepresentation claims about the stock options. In response, BMCB argues that there is no evidence in the record to support the trial court's implied fact findings to support specific jurisdiction. We agree with BMCB. Here, Marchand alleges that his fraud and negligent misrepresentation claims arise from the alleged Watson­Ordelheide conversation in Texas. See Schlobohm, 784 S.W.2d at 357 ("Where the activities of a defendant in a forum are isolated or disjointed . . . jurisdiction is proper if the cause of action arises from a particular activity."). But they do not. The nature of the claims demonstrate that they can only arise from BMCB's contact with Marchand, which all occurred outside of Texas. Even assuming Watson and Ordelheide talked in Texas about Marchand's employment and the stock options, Marchand was not a party to those conversations. BMCB negotiated with Marchand about his employment, and offered the stock options to Marchand, in Europe. Moreover, Marchand accepted the employment offer in Belgium and worked in Belgium. Consequently, BMCB made no representations to Marchand in Texas, and he did not rely to his detriment on the conversation in Texas. . . . Therefore, Marchand's alleged damages arose outside of Texas. . . . There is no evidence to support the trial court's conclusion that BMCB committed a tort in whole or in part in Texas so that specific jurisdiction exists. . . . Accordingly, we conclude that the trial court lacked specific jurisdiction over BMCB.

B. GENERAL JURISDICTION

Marchand also contends that the trial court has general jurisdiction over BMCB. Marchand relies on the alleged Watson­Ordelheide conversation

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and BMCB's purchasing products from BMCS in Texas. On the other hand, BMCB asserts that these events are not enough to establish general jurisdiction. We agree and conclude that neither of the events Marchand relies upon are continuous or systematic so as to establish general jurisdiction in Texas. General jurisdiction may only be exercised when the nonresident defendant's contacts in a forum are continuous and systematic. Helicopteros, 466 U.S. at 414­15; Guardian Royal, 815 S.W.2d at 228; Schlobohm, 784 S.W.2d at 357. Though a single act may be enough to show general jurisdiction in some instances, the alleged conversation between Ordelheide and Watson in Texas is not enough here. See Guardian Royal, 815 S.W.2d at 230 n.12. We have recognized that "general jurisdiction requires a showing that the defendant conducted substantial activities within the forum, a more demanding minimum contacts analysis than for specific jurisdiction." CSR Ltd., 925 S.W.2d at 595 (citing Guardian Royal, 815 S.W.2d at 228). For the reasons discussed above, the alleged Watson­Ordelheide conversation does not constitute "substantial activities" within the forum to meet the more onerous burden of proving general jurisdiction. See Guardian Royal, 815 S.W.2d at 228. Furthermore, BMCB's purchasing products from BMCS in Texas to distribute in Europe is not enough to establish general jurisdiction. In Helicopteros, the United States Supreme Court examined a Colombian corporation's contacts with Texas to decide if Texas courts could exercise general jurisdiction. Helicopteros, 466 U.S. at 415­16. The nonresident defendant had purchased helicopters, equipment, and training services from a Texas company, sent its employees to Texas for training, and sent its chief executive officer to Houston for contract negotiation. Helicopteros, 466 U.S. at 416. The Supreme Court held that these contacts were insufficient to warrant a Texas court's exercising general jurisdiction. Helicopteros, 466 U.S. at 415­16 (reversing Hall v. Helicopteros, 638 S.W.2d 870 (Tex. 1982)). The Court noted that "mere purchases, even if occurring at regular intervals, are not enough to warrant a State's assertion of in personam jurisdiction over a nonresident corporation in a cause of action not related to those purchase transactions." Helicopteros, 466 U.S. at 418. This case is analogous to Helicopteros. Marchand's claims against BMCB do not arise from the purchases BMCB made from BMCS. To the contrary, Marchand's claims arise from his employment with BMCB in Belgium and the alleged misrepresentations BMCB made to Marchand concerning his employment. BMCB's unrelated purchases in Texas from BMCS are not the type of contacts that justify a finding that BMCB could have "reasonably anticipated being haled into court" here. World­Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297, 62 L. Ed. 2d 490, 100 S. Ct. 559 (1980); see also Helicopteros, 466 U.S. at 418. There is no evidence to support the trial court's conclusion that BMCB's contacts with Texas were continuous and systematic so that they established general jurisdiction. . . . Thus, we conclude that the trial court lacked general jurisdiction over BMCB.

§ 4.02

JURISDICTION

OF

PERSONS

AND

PROPERTY

45

C. ALTER EGO

Marchand's jurisdictional allegations in his original petition can be read to allege that the trial court has general jurisdiction over BMCB because it is BMCS's alter ego. In response, BMCB contends that there is no evidence to support a determination that it is BMCS's alter ego. Personal jurisdiction may exist over a nonresident defendant if the relationship between the foreign corporation and its parent corporation that does business in Texas is one that would allow the court to impute the parent corporation's "doing business" to the subsidiary. Hargrave v. Fibreboard Corp., 710 F.2d 1154, 1159 (5th Cir. 1983); Walker v. Newgent, 583 F.2d 163, 167 (5th Cir. 1978). The rationale for exercising jurisdiction is that "the parent corporation exerts such domination and control over its subsidiary `that they do not in reality constitute separate and distinct corporate entities but are one and the same corporation for purposes of jurisdiction." Hargrave, 710 F.2d at 1159 (citations omitted); see also Conner v. ContiCarriers & Terminals, Inc., 944 S.W.2d 405, 418 (Tex. App.­ Houston [14th Dist.] 1997, no writ). The party seeking to ascribe one corporation's actions to another by disregarding their distinct corporate entities must prove this allegation. Walker, 583 F.2d at 167; Conner, 944 S.W.2d at 418­19; see also Lucas v. Texas Indus., Inc., 696 S.W.2d 372, 375 (Tex. 1984). This is because Texas law presumes that two separate corporations are indeed distinct entities: The general rule seems to be that courts will not because of stock ownership or interlocking directorship disregard the separate legal identities of corporations, unless such relationship is used to defeat public convenience, justify wrongs, such as violation of the anti­trust laws, protect fraud, or defend crime. Bell Oil & Gas Co. v. Allied Chem. Corp., 431 S.W.2d 336, 339 (Tex. 1968) (citations omitted). To "fuse" the parent company and its subsidiary for jurisdictional purposes, the plaintiffs must prove the parent controls the internal business operations and affairs of the subsidiary. . . . But the degree of control the parent exercises must be greater than that normally associated with common ownership and directorship; the evidence must show that the two entities cease to be separate so that the corporate fiction should be disregarded to prevent fraud or injustice. . . . We conclude that there is no evidence to support any implied findings by the trial court to support that BMCB was BMCS's alter ego so that general jurisdiction exists in Texas. In Gentry, this Court held that "[a] subsidiary corporation will not be regarded as the alter ego of its parent merely because of stock ownership, a duplication of some or all of the directors or officers, or an exercise of the control that stock ownership gives to stockholders." Gentry, 528 S.W.2d at 573. Though Gentry dealt with whether a subsidiary corporation should be regarded as its parent's alter ego for purposes of service of process, the Fifth Circuit and our courts of

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appeals have relied on its alter ego rule in determining personal jurisdiction. See Walker, 583 F.2d at 167; Gutierrez v. Raymond Int'l, Inc., 484 F. Supp. 241, 253 (S.D. Tex. 1979); Conner, 944 S.W.2d at 419; 3­D Elec. Co. v. Barnett Constr. Co., 706 S.W.2d 135, 139 (Tex. App.­Dallas 1986, writ ref'd n.r.e.). Accordingly, general jurisdiction does not extend to BMCB to the extent Marchand relies on BMCB and BMCS having duplicate officers. In addition to alleging that BMCB and BMCS share the same officers, Marchand argues that the record shows the following to establish BMCB's alter­ego status: (1) BMCS's SEC documents incorporate BMCB's financial performance, and BMCS's annual report includes BMCB's financial performance on a consolidated basis; (2) BMCS gives BMCB financial assistance; (3) BMCS provides stock options for BMCB's employees; (4) BMCS treats BMCB's offices, employees, and accounts receivable as its own property; (5) BMCS personnel has offices at its subsidiary facilities; (6) BMCS performs human resources, accounting, risk management, and marketing services for BMCB; (7) BMCS recruits employees for BMCB and approves hiring and competition; (8) BMCB and BMCS use the same letterhead and use the terms "BMC" and "BMC Software" interchangeably; and (9) Watson's deposition testimony shows that BMCB is a mere BMCS operation or department. There is no evidence in the record to support Marchand's assertions that BMCB is BMCS's alter ego. There are no SEC filings in the record, and nothing in BMCB's annual report supports a reasonable inference that BMCS considered its subsidiaries' revenue as its own or that it offered BMCB financial assistance. The annual report's listing international sales figures could represent either the subsidiaries' revenue or BMCS's revenue from selling its products to those subsidiaries. Moreover, the annual report's listing Belgium as a location of both International Offices and Independent Agents fails to show that BMCS treated its subsidiaries as mere departments or offices. BMCS's referencing its subsidiaries in its annual report is a common business practice, which the Internal Revenue Service, the SEC, and generally accepted accounting principles recommend. See Calvert v. Huckins, 875 F. Supp. 674, 678­79 (E.D. Cal. 1995). Finally, the annual report's stating that BMCS engaged in hedging transactions to protect against the volatility of foreign currency exchange rates is not evidence that BMCS engaged in risk management for BMCB. Additionally, the letter agreement between Marchand and BMCB is not evidence that BMCS typically recruits, controls, and approves personnel whom BMCB employs or that BMCS typically compensates BMCB employees with stock options. And, in any event, a parent company's offering a stock option plan to a subsidiary's employees is acceptable under IRS regulations and is not evidence of abnormal control over the subsidiary. See In re Silicone Gel Breast Implants Prods. Liab. Litig. (MDL 926), 837 F. Supp. 1128, 1136 (N.D. Ala. 1993), vacated in part on other grounds by, 887 F. Supp. 1455 (N.D. Ala. 1995). Further, Watson's deposition testimony that BMCS employees were "from time to time . . . in the offices of a variety of our subsidiaries" does not

§ 4.03

JURISDICTION

OF

PERSONS

AND

PROPERTY

47

permit a reasonable inference that BMCS exerted such control over BMCB that the two entities ceased to be separate. See Hargrave, 710 F.2d at 1160; Conner, 944 S.W.2d at 418. Moreover, in discussing certain BMCS employees in his deposition, Watson identified a senior vice­president for worldwide marketing and a vice­president for human resources. But the existence of these two positions for BMCS is not evidence that BMCS performed marketing and human resources for its subsidiaries, or that, even if BMCS did perform such services, the subsidiaries were not charged for them. Similarly, BMCS and BMCB having letterhead with "BMC Software" is no evidence that the two entities do not observe corporate formalities, because both entities have "BMC Software" as part of their names. In sum, the record does not reveal any evidence to support the trial court's conclusion that BMCB was BMCS's alter ego. . . . We therefore conclude that the trial court did not have general jurisdiction over BMCB based on BMCS's "doing business" in Texas. . . .

§ 4.03

Other Long­Arm Statutes: The Family Code

NOTES AND QUESTIONS

Page 209: [Replace Note (4) with the following new Note (4).]

(4) In the Interest of S.A.V. discusses the Uniform Child Custody Jurisdiction Act (UCCJA). Virtually all jurisdictions have adopted some variant of the act, Texas doing so originally in 1983. Texas adopted a revised version, the Uniform Child Custody Jurisdiction and Enforcement Act (UCCJEA) in 1999, codified in Chapter 152 of the Family Code. The new law brings Texas law more in line with the provisions of the Parental Kidnapping Prevention Act (PKPA). The UCCJEA, codified in Family Code Section 152.201, defines the circumstances under which a Texas court has jurisdiction to make an "initial child custody determination." This happens when (1) Texas is the home state of the child on the date of the commencement of the proceeding, or was the home state of the child within six months before the commencement of the proceeding and the child is absent from Texas but a parent or person acting as a parent continues to live in Texas; or (2) a court of another state does not have jurisdiction, or a court of the home state of the child has declined to exercise jurisdiction on the ground that Texas is the more appropriate forum based on inconvenience or unjustifiable conduct and (a) the child and the child's parents, or the child and at least one parent or a person acting as a parent, have a significant connection with Texas other than mere physical presence and (b) substantial evidence is available in Texas concerning the child's care, protection, training, and personal relationships. The term "home state" means "the state in which a child lived with a parent or person acting as a parent for at least six consecutive months immediately before the commencement of a child custody proceeding. In the case of a child less than six months of age, the term means the state in which the child lived from birth with a parent or person acting as a parent. A period of temporary absence of a

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parent or a person acting as a parent is part of the period." Fam. C. § 152.102(7). Except in cases of temporary emergencies, a Texas court may not modify a child custody determination made by a court of another state unless a Texas court has jurisdiction to make an initial determination and (1) the court of the other state determines it no longer has exclusive continuing jurisdiction or that a Texas court would be a more convenient forum; or (2) a Texas court or a court of the other state determines that the child, the child's parents, and any person acting as parent do not presently reside in the other state. Fam. C. § 152.203. When a Texas court has made an initial determination or modification permitted by the sections described above, it has exclusive continuing jurisdiction until (1) a Texas court determines that neither the child, nor the child and one parent, nor the child and a person acting as a parent, have significant connection with Texas and that substantial evidence is no longer available in this state concerning the child's care, protection, training, and personal relationships; or (2) a court determines that the child, the child's parents, and any person acting as a parent do not presently reside in Texas. Section 152.106 provides that a child custody determination made by a Texas court that had jurisdiction "binds all persons who have been served in accordance with the laws of this state or notified in accordance with Section 152.108 [notice by service of process under laws of Texas or the place where served] or who have submitted to the jurisdiction of the court and who have been given an opportunity to be heard. As to those persons, the determination is conclusive as to all decided issues of law and fact except to the extent the determination is modified." This means a non­ Texas parent who has received notice is bound by the court's decision, whether or not that person would otherwise be subject to the personal jurisdiction of the Texas courts under the minimum contacts doctrine. Note, however, that if a parent has brought a child to Texas under circumstances that constitute "unjustifiable conduct," the Texas court is directed to decline to exercise its jurisdiction. Fam. C. § 152.208.

§ 4.04

Service of Process

[B]--Texas Strict Compliance Standard

Page 217: [Insert the following Note]

(2) Returns for Service on Entities. When the defendant is an entity rather than a human, the return must reflect that service was on the entity, through an appropriate person. In Benefit Planners, L.L.P. v. Rencare, Ltd., 81 S.W.3d 855 (Tex. App.--San Antonio 2002, pet. denied), citation was issued to "Benefit Partners, L.L.P., Tom Cusick, Jr. (Registered Agent)." The return of citation stated that the citation was delivered to "Tom P. Cusick, Jr., Reg. Agent." Citing other Texas cases, the San Antonio court

§ 4.04

JURISDICTION

OF

PERSONS

AND

PROPERTY

49

held that this return was defective because it did not reflect that Benefit Planners was served. "Even when a return establishes that the person served was an agent for service of process, the return is still defective if it does not establish that the corporation was served by reciting that the corporation was served by serving or through the agent." Id. at 859.

[D]--The Technique of Service [2]--Serving Persons in Texas

Page 224: [Add the following Note after the Eichel case.]

NOTE

Courts have held that claims are barred by limitations even when delays are much shorter than those in Eichel. For example, in Taylor v. Thompson, 4 S.W.3d 63, 66 (Tex. App.--Houston [1st Dist.] 1999, pet. denied), the plaintiff filed her original negligence petition on August 30, 1996, in a case arising out of a car wreck on January 16, 1995. Two days before limitations ran in January of 1997, the plaintiff requested a private process server to obtain service on the defendants. The district clerk's office issued citation a week after limitations ran and two defendants were served that same day. A third defendant was not served until almost a month after limitations ran. The court affirmed summary judgment in favor of all defendants based on limitations. The court explained, "Because [plaintiff] failed to serve citations on [defendants] within the period of limitations, she had the burden to prove that she used due diligence in procuring the subsequent issuance and service of citation upon the defendants. . . . An unexplained delay in effecting service constitutes a lack of due diligence." Because the plaintiff waited four months after filing, and until two days before limitations ran, to request a private firm to serve the defendants, the court found that she did not use due diligence. The record did not reflect any efforts to serve the defendants earlier. The court held as a matter of law there was no valid excuse and no due diligence. It further found that the defendants did not waive the running of the statute of limitations when they filed a general appearance after statute of limitations had run without asserting the affirmative defense of limitations until a later amendment to the answer. The trial court's summary judgment was affirmed, even as to the defendants who were served with process very shortly after the expiration of the statute of limitations.

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[3]--Proof of Service: The Return [c]--Alternative Service

Page 224: [Add the following paragraph at the end of the subsection.]

As with other kinds of service, substituted service requires strict compliance with service and return rules. In Bautista v. Bautista, 9 S.W.3d 250, 251 (Tex. App.--San Antonio 1999, no pet.), the plaintiff's motion for substituted service of process was granted, and the trial court ordered the defendant served by serving any person over 16 at a specified address. The return was executed and signed by a private process server, who completed the "Certificate of Delivery" at the bottom of the return, certifying that he delivered a copy of the "instrument" to Andres Salas Bautista, Sr. (the defendant's father). Unfortunately, the return was not verified. Because Civil Procedure Rule 107 requires a return of citation by a private process server to be acknowledged before a notary public, and the order for substituted service did not change that requirement, the return was defective on its face and the record did not show strict compliance with the rules. The default judgment entered based on the defective return was reversed.

§ 4.05

Challenges to Jurisdiction by Nonresidents

[A]--The Special Appearance

NOTES AND QUESTIONS Page 240: [Add to note 3:]

Non­resident defendants are generally exempt from service of process while in the state to testify in unrelated judicial proceedings. See Vega v. Davila, 31 S.W.3d 376, 379 (Tex. App.--Corpus Christi 2000, no pet.). Should immunity of service extend to non­residents who are present in the state to give deposition testimony in an unrelated proceeding?

Page 253: [Insert GFTA v. Varme following the DawsonAustin case.] GFTA v. VARME 991 S.W.2d 785 (Tex. 1999)

PER CURIAM * The issue in this case is whether a defendant consented to personal jurisdiction by including in its special appearance a challenge to the method

*

Citations omitted unless otherwise indicated.

§ 4.05

JURISDICTION

OF

PERSONS

AND

PROPERTY

51

of serving citation. GFTA . . . specially appeared to challenge the trial court's jurisdiction on multiple grounds, and the trial court sustained GFTA's motion. The court of appeals reversed and remanded the case to the trial court, holding that GFTA's challenge to the method of service converted its special appearance into a general appearance. Because GFTA's pleadings did not invoke the jurisdiction of the trial court we reverse the judgment of the court of appeals and remand to that court for consideration of issues it did not reach. Byron K. Varme and Trans­Atlantic Properties, Inc., sued GFTA and George Herrdum, among others, in district court in Texas. GFTA is a German limited partnership with its sole place of business in Switzerland. Herrdum is a German citizen. The Texas Secretary of State attempted service of process on both defendants, to a Swiss address the plaintiffs provided. Certificates for both defendants came back to the Secretary of State marked "Return to Sender." GFTA filed an instrument entitled "Verified Special Appearance and, and, Subject to Special Appearance, Its Motion to Dismiss." In this document, GFTA contested personal jurisdiction because it lacked minimum contacts with Texas consistent with due process. GFTA also argued it was not amenable to service or suit because the method of service of citation violated the Due Process and Supremacy clauses of the United States Constitution, the Hague Service Convention, Swiss law, German law, and Texas Rules of Civil Procedure. The instrument asked the trial court to dismiss the suit for want of jurisdiction. The trial court sustained the special appearance on all grounds and dismissed the suit against GFTA and Herrdum. Its order contains detailed findings of facts and conclusions of law about the defendants' lack of minimum contacts and the deficiencies of service. Relying on Kawasaki Steel Corp. v. Middleton, 699 S.W.2d 199 (Tex. 1985) (per curiam), the court of appeals held that by challenging the method of service within the special appearance, GFTA converted its special appearance into a general appearance and thereby consented to jurisdiction. The court of appeals's opinion ignores the fact that, although GFTA's motion objected to the method of service, it also challenged the court's jurisdiction because of a lack of minimum contacts. In Kawasaki, our Court distinguished the role of a special appearance under Texas Rule of Civil Procedure 120a from a motion to quash under Rule 122. We quoted with approval the following from a noted authority: The words "not amenable to process issued by the courts of this state" [in Rule 120a] can only be interpreted to mean that the special appearance is available solely to establish that the Texas Court cannot, under the federal and state constitutions and the appropriate state statutes, validly obtain jurisdiction over the person or the property of the defendant with regard to the cause of action pled. Defective service or defective process, or even an attempt to bring the defendant before the court under the wrong

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statute does not authorize the use of the special appearance. If the defendant attempts to make a special appearance to raise any of these contentions, then his appearance is a general one. . . . Kawasaki, 699 S.W.2d at 202 (quoting E. Wayne Thode, In Personam Jurisdiction: Article 2031(b), The Texas Long­arm Statute, and the Appearance to Challenge Jurisdiction in Texas and Elsewhere, 42 Tex. L. Rev. 279, 312­13 (1964). . . . [A] mere challenge to the method of service fails as a special appearance and constitutes a general appearance. However, we did not hold that a party waives a due process challenge for want of minimum contacts by challenging the method of service in the special appearance. To the contrary, although the defendant in Kawasaki had challenged the method of service in its special appearance, we did not suggest that the defendant had thereby waived its contest to jurisdiction based on minimum contacts. Instead, we carefully reviewed the record of the defendant's contacts with the forum before holding the defendant was amenable to suit. More recently, we considered whether an unsworn special appearance constituted waiver and a general appearance. See Dawson­Austin v. Austin, 968 S.W.2d 319 (Tex. 1998). We held that it did not, because the defendant neither acknowledged the trial court's jurisdiction in any way nor sought court action other than a dismissal for lack of jurisdiction. Likewise, in the present case GFTA challenged jurisdiction and did not seek the trial court's decision on any other matter. The court of appeals erred when it held that GFTA consented to suit. Accordingly, without hearing oral argument, we reverse the judgment of the court of appeals and remand to that court to consider issues not reached by that court. T.R.A.P. 59.1.

[B]--Postjudgment Challenges by Nonresidents

Page 257: [Add the following new Note after Koch Graphics.]

NOTE

The Texas courts are grappling with the problem of post­default special appearances. In Transportes Aereos de Coahuila, S.A. v. Falcon, 5 S.W.3d 712, 717 (Tex. App.--San Antonio 1999, pet. denied), the court had to determine whether the defendant, TACSA, waived its special appearance based

§ 4.05

JURISDICTION

OF

PERSONS

AND

PROPERTY

53

on the filing of an agreed motion for new trial to set aside a default judgment. The plaintiff, Falcon, brought separate but related lawsuits against TACSA. Following removal to federal court and remand to state court, TACSA inadvertently filed a special appearance in only one of the two cases. The plaintiffs moved for a default judgment in the case in which no responsive pleading had been served. However, TACSA did file a special appearance before the entry of default judgment. On realizing this, the parties filed an agreed motion for new trial, and the trial court entered an order setting aside the default judgment before ruling on the special appearance. The court of appeals rejected the claim that this waived TACSA's special appearance. "We are not convinced that [drafting the agreed motion and order and submitting it to the trial court] is sufficient to waive TACSA's special appearance. The mere filing of a motion for new trial, without a request that it be set for hearing before the hearing on the special appearance, is not a request for affirmative relief inconsistent with the assertion that the district court lacks jurisdiction." In making this decision the court distinguished the Texas Supreme Court's decision in Liberty Enterprises, Inc. v. Moore Transp. Co., Inc., 690 S.W.2d 570, 571 (Tex. 1985), in which the defendant's agreeing to the court's order reinstating the cause of action and statement that it was "ready to try this case when it is properly set for trial" constituted a general appearance.

[C]--The Doctrine of Forum Non Conveniens

NOTE Page 263: [Add the following at the end of the subsection.] Page 263: [Delete last line of note and add the following.]

In 2003, the legislature once again amended the provisions governing forum non conveniens. Tex. H.B. 4 repealed the asbestos-specific provisions of Texas's forum non conveniens statute. Thus, asbestos cases may be dismissed or stayed under the forum non conveniens doctrine by applying the same standards as are applied in any other case. See C.P.R.C. § 71.051 (as amended). Section 71.051 was revised to allow a stay or dismissal under the forum non conveniens doctrine if it is in the interest of justice and for the convenience of the parties. The six criteria already found in C.P.R.C. § 71.051 were maintained, but are merely considerations. Limitations remain preventing the dismissal of cases involving resident plaintiffs or cases in which an act that was a cause of plaintiff's injury occurred in Texas. Chapter 71 also puts additional limits on non-resident plaintiffs seeking to recover damages for personal injuries or wrongful death. In an attempt to prevent forum-shopping to avoid limitations, non-resident plaintiffs are bound by the limitation period prescribed by the state of the plaintiff's residence. See C.P.R.C. § 71.031. Residence is determined as of the time the plaintiff's cause of action accrues. See Tullis v. Georgia-Pacific Corp.,

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45 S.W.3d 118, 128 (Tex. App. -Fort Worth 2000, no pet.). Should the same approach be taken to statutes of respose?

Chapter 5 PLEADINGS

§ 5.04

Plaintiff's Petition

[B]--Pleading a "Cause of Action" [6]--The "Demand for Relief"; Prayer

Page 294: [Prejudgment Interest and the Prayer. Delete reference to "article 5069 -- 1.03" and replace with "Texas Finance Code § 304.002."]

[7]--Certification and Sanctions for Frivolous Pleadings and Motions

Page 297: [Add the following case concerning sanctions under C.P.R.C. Ch. 10 before GTE Communications v. Tanner.]

SKEPNEK v. MYNATT 8 S.W.3d 377 (Tex. App.--El Paso 1999, pet. denied)

BARAJAS, Justice. This is an appeal from an order imposing sanctions in the amount of $30,000 against attorney William J. Skepnek for the filing of a false affidavit attached to a special appearance motion. For the reasons stated below, we affirm the judgment of the trial court.

I. SUMMARY OF THE EVIDENCE

On July 16, 1997, William J. Skepnek, attorney for Raymark Corporation and Raymark Industries (collectively called "Raymark"), filed a special appearance in the 34th Judicial District Court of El Paso County, Texas, challenging personal jurisdiction in the underlying asbestos law suit. The special appearance, signed by attorney Skepnek, included the following language: 55

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In support of the Special Appearance to Present Motion Objecting to Jurisdiction is the affidavit of James Cobb, President of Raymark, which is attached as Exhibit `A' and incorporated by reference as if fully reproduced herein. The attached affidavit of James Cobb ("Cobb") contained several statements that were later determined to be false. The false statements were: 1. "Raymark does not now have, and has never maintained an office in Texas." 2. "Raymark is not now licensed to do business in Texas, and has never been licensed to do business in the State of Texas." 3. "Raymark has never located any of its employees in Texas." 4. "Every statement contained in this affidavit is within my personal knowledge and is true and correct." On August 5, 1997, after Appellant filed the special appearance, counsel for the plaintiffs in the underlying asbestos suit deposed Cobb. During the course of the deposition, Cobb was asked the following question: "Now, would it be correct, sir, that you have no personal knowledge about Raymark Industries' or Raymark Corporation's activities in the State of Texas prior to your employment there in 1994?" Cobb replied: "That's correct." The transcript of the deposition indicates that Appellant was present when the above answer was given. Then, on August 14, 1997, the deposition of Mr. Craig Smith was taken. Smith is a 49 percent shareholder in Raymark. Smith indicated that Raybestos­Manhattan, which is the company that, in 1982, changed its name to Raymark Industries, was licensed to do business in Texas when he began working for it in 1980. Smith acknowledged that after the name change, Raymark also became authorized to do business in Texas. Smith also indicated that Raymark had a bonding or re­manufacturing operation in Dallas, sold products in Texas, and had an employee who resided in Texas. Once again, the record indicates that Appellant was present at the Smith deposition. On September 5, 1997, plaintiffs' counsel submitted a response brief to Appellant's special appearance. In the response brief, the following assertions were made: Indeed, Mr. Cobb's declaration that Raymark has never been licensed to do business in Texas is untrue: Raybestos­Manhattan, Raymark's undisputed predecessor, held a certificate of authority to do business in the state of Texas from March 26, 1976, until June 28, 1982; and Raymark Industries did in fact obtain a certificate of authority to do business in Texas on July 13, 1982, which it maintained in good standing until December 10, 1990. The response brief was accompanied by a sworn statement that a copy was sent to Appellant.

§ 5.04

PLEADINGS

57

Appellant then filed his reply brief asserting that "plaintiffs have not made any showing that Cobb is not qualified to make these statements, or that he lacks personal knowledge of these facts. Therefore, Raymark has adequately established that both corporations are `non residents' of Texas." Finally, on February 17, 1998, after the Cobb and Smith depositions revealed the false nature of the Cobb affidavit, and after the false statements were brought to Appellant's attention in the plaintiffs' response to his special appearance motion, Appellant filed yet another special appearance which contained the identical false affidavit of Cobb. Three days later, on February 20, 1998, Appellee filed his motion for sanctions. On February 27, 1998, the trial court conducted a hearing on the motion for imposition of sanctions. After hearing arguments from both Appellant and Appellee, the trial court determined that Appellant knew that the information in the Cobb affidavit was false when he filed the special appearance, and that he filed the special appearance in bad faith and for purposes of harassment. Sanctions were then levied against Appellant in the amount of $25,000 pursuant to Section 10.004(c)(2) of the Texas Civil Practice and Remedies Code, and $5,000 in attorney's fees, for a total of $30,000. Appellant brings this appeal contending that the trial court abused its discretion in levying sanctions against him for his actions.

II. DISCUSSION

On review, Appellant asserts that the trial court abused its discretion in imposing sanctions. We note at the outset that "A [party] who attacks the ruling of a trial court as an abuse of discretion labors under a heavy burden." Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex. 1985) (orig. proceeding). The test for abuse of discretion is not whether, in the opinion of this Court, the facts present an appropriate case for the trial court's actions. Rather, it is a question of whether the court acted without reference to any guiding rules and principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241­42 (Tex. 1985), cert. denied, 476 U.S. 1159, 106 S. Ct. 2279, 90 L. Ed. 2d 721 (1986); Hallmark v. Hand, 885 S.W.2d 471, 475 (Tex. App.--El Paso 1994, writ denied). Another way of stating the test is whether the act was arbitrary or unreasonable. . . . The mere fact that a trial court may decide a matter within its discretionary authority in a different manner than an appellate judge in a similar circumstance does not demonstrate that an abuse of discretion has occurred. . . . A mere error of judgment is not an abuse of discretion. In Point of Error No. One, Appellant asserts that the trial court abused its discretion in levying sanctions against him because Appellee waited an unreasonable period of time before he filed his motion for sanctions and that Appellee has an improper motive. In support of this argument, Appellant notes that sanctions were not sought until "almost six months" after the Cobb and Smith depositions were taken. Appellant further argues that "the timing of the motion for sanctions confirms it was filed for the purpose of exacting revenge against William Skepnek. . . ." We disagree.

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We have examined the record in the instant case and find nothing to indicate that Appellee had an improper motive for filing his motion for sanctions. Furthermore, Chapter 10 of the Texas Civil Practice and Remedies Code proscribes no time limitation for filing such a motion, nor has Appellant identified any authority which would suggest otherwise. As noted above, Appellee filed his motion for sanctions two days after Appellant committed the sanctionable conduct for yet the second time. We hold that under these circumstances, the trial court did not act unreasonably and thus, did not abuse its discretion. Point of Error No. One is overruled. In Point of Error No. Two, Appellant asserts that the trial court abused its discretion in the imposition of sanctions pursuant to Chapter 10 of the Texas Civil Practice and Remedies Code because the chapter only governs "the signing of a pleading or motion as required by the Texas Rules of Civil Procedure. . . ." C.P.R.C. § 10.001. Appellant argues that the trial court's order specifically states that the sanctions were levied for "proffering a knowingly false affidavit. . . ." Appellant contends the trial court abused its discretion because Cobb's false affidavit, which was submitted on two separate occasions with Appellant's special appearance motion, is neither a pleading nor a motion. While we agree that sanctions may not be levied against an attorney under Chapter 10 for filing a false affidavit that had been signed by someone other than the attorney, we note that in the instant case, Appellant's proffering of a false affidavit was not the basis for the sanctions. In arguing that the trial court based the sanction award on the proffering of the false affidavit, Appellant ignores the overriding theme of the trial court's findings of facts and conclusions of law, the most pertinent of which are listed below: [1] The Special Appearance is groundless. [2] The Special Appearance was brought in bad faith. [3] The Special Appearance was presented for improper purposes, including harassment, causing unnecessary delay and needless increase in the cost of litigation. [4] Each factual contention of the Special Appearance did not have evidentiary support. [5] The denials in the Special Appearance of Raymark's amenability to this Court's jurisdiction are not warranted by the evidence. [6] The Court has considered the full range of available sanctions and has considered lesser sanctions. The sanctions imposed are limited to what is sufficient to deter repetition of the conduct or comparable conduct of those simultaneously situated. The Court finds the sanctions imposed appropriate given that Raymark Industries, Raymark Corporation and William Skepnek have committed fraud on this Court. (Emphasis added). In light of the fact that each legal conclusion drawn by the trial court included a reference to the special appearance rather than the affidavit alone, there can be no doubt that "the conduct" to which the court referred was the filing of the special appearance motion and not the mere filing of a false affidavit. Therefore, we hold that the trial court's order clearly

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indicates that the sanctioned conduct was the filing of the special appearance, not the mere filing of a false affidavit. Next, Appellant questions whether he can be sanctioned under Chapter 10 when the document containing the false information, i.e., the false affidavit, was not signed by him. Appellant contends that because the false information appeared on an affidavit which Appellant did not sign, the trial court abused its discretion in imposing Chapter 10 sanctions against him. Once again, we disagree. Rule 59 of the Texas Rules of Civil Procedure clearly states that: Notes, accounts, bonds, mortgages, records, and all other written instruments, constituting, in whole or in part, the claim sued on, or the matter set up in defense, may be made a part of the pleadings by copies thereof, or the originals, being attached or filed and referred to as such, or by copying the same in the body of the pleading in aid and explanation of the allegations in the petition or answer made in reference to said instruments and shall be deemed a part thereof for all purposes. Tex. R. Civ. P. 59 (emphasis added). The plain wording of Rule 59 indicates that Cobb's affidavit which Appellant attached to his special appearance motion became part of that motion when Appellant specifically and unequivocally wrote: "In support of the Special Appearance to the Present Motion Objecting to Jurisdiction is the affidavit of James Cobb, President of Raymark, which is attached as Exhibit " `A' " and incorporated by reference as if fully reproduced herein." The phrase "for all purposes" found in Rule 59 permits no other conclusion. Thus, the statements found in the affidavit, having been incorporated into the special appearance motion, became part of the motion, which was then signed and tendered by Appellant. Therefore, we hold that the trial court did not abuse its discretion in imposing sanctions against Appellant under Chapter 10. Appellant argues, however, that such a holding violates the rule announced in GTE Communications Systems Corp. v. Tanner, 856 S.W.2d 725 (Tex. 1993), in which the Texas Supreme Court held that an attorney could not be sanctioned under Rule 13 for filing a false affidavit that was not signed by him. We find Tanner to be readily distinguishable. In Tanner, the Texas Supreme Court made it clear that the issue before the Court was whether the false affidavit, signed by someone other than the attorney, could serve as the basis for sanctions under Rule 13. In that case it was clear that the trial court based the sanction award on the filing of the false affidavit and the other pleadings. As discussed above, in spite of the phrase, "for filing a knowingly false affidavit," emphasized by Appellant, the remainder of the trial court's order makes it clear that the sanctioned conduct was solely the filing of the special appearance motion which was signed by Appellant. Appellant's Point of Error No. Two is overruled in its entirety. In Point of Error No. Three, Appellant argues that the trial court abused its discretion in ordering him to pay $5,000 in attorney's fees under Rule

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13 of the Texas Rules of Civil Procedure because the record does not support a finding that Appellant had knowledge of the false information at the time he filed the special appearance, or that he filed the special appearance in bad faith or for purposes of harassment. Before we address this argument, we note that the trial court's order does not specifically say which statute was used to justify the imposition of the attorney's fees. Although the trial court's order adopts certain language that is also found in Rule 13, we believe that Section 10.004(c)(3) of the Texas Civil Practice and Remedies Code would justify the award. Section 10.004(c)(3) states: "A sanction may include any of the following: an order to pay to the other party the amount of the reasonable expenses incurred by the other party because of the filing of the pleading or motion, including reasonable attorney's fees." C.P.R.C. § 10.004(c)(3). Because we have already determined that the trial court did not abuse its discretion in imposing sanctions under Section 10.001, we find that the trial court did not abuse its discretion in awarding attorney's fees under Section 10.004(c)(3). Nonetheless, Appellant argues that it was an abuse of discretion to award the fees under Rule 13. Specifically, he asserts that there is no evidence which supports the trial court's findings that "William Skepnek knew that the Cobb Affidavit was false," or that "the Special Appearance was groundless and brought in bad faith, or for purposes of harassment." In support of his argument, Appellant correctly states that before Rule 13 sanctions may be levied, the trial court must have determined that the conditions justifying the imposition of sanctions (i.e., that the pleadings or motion was (1) groundless and (2) either brought in bad faith or for purposes of harassment) existed at the time the sanctioned party filed the pleading or motion. . . . When reviewing a no evidence argument, "[t]his Court considers only the evidence and inferences that support the finding, and disregards all evidence and inferences to the contrary." Miller v. Armogida, 877 S.W.2d 361, 365 (Tex. App.--Houston [1st Dist.] 1994, writ denied) (citing Weirich v. Weirich, 833 S.W.2d 942, 945 (Tex. 1992)). In this case, Appellee introduced ample evidence from which the trial court very well may have inferred pre­filing knowledge as well as bad faith or harassment. Such evidence includes: (1) the fact that Appellant filed the false pleadings for the second time, even after his client admitted in the deposition that it contained false information; (2) the fact that the information was readily available to Appellant and could have been verified with little effort; and (3) the fact that Appellant took no action to correct the false impression his pleadings left with the court after the taking of his client's deposition. These facts support the inference that Appellant had knowledge of the false nature of his special appearance at the time of filing, and that he filed the special appearance in bad faith. Thus, the trial court did not abuse its discretion in determining that both elements of Rule 13 had been established. . . . Appellant's Point of Error No. Three is overruled. Having overruled each of Appellant's points of error, we affirm the judgment of the trial court.

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Page 303: [Add the following new Note after GTE Communications v. Tanner.] NOTE

C.P.R.C. Chapter 9. The Texas legislature added a new provision to Chapter 9 of the Civil Practice and Remedies Code in 1999. New Section 9.012(h) provides that the pleading sanction provisions of Section 9.012 do not apply to any proceeding to which Section 10.004 or Civil Procedure Rule 13 applies.

Page 314: [Add the following new note (7) before heading [D]:]

(7) Jurisdictional Defects and the Right to Amend. In a related issue, the Texas Supreme Court has noted that while there is a liberal right to amend to cure pleading defects, when the face of the pleadings demonstrate that it is impossible to amend to invoke the court's jurisdiction, no such right exists. Texas Dep't of Transp. v. Ramirez, 74 S.W.3d 864 (Tex. 2002) (face of pleadings established state's sovereign immunity).

Chapter 6 VENUE

§ 6.01

The Basic Venue Scheme

[B]--Defendant's Principal Office (Legal Persons)

Page 370: [Add at the end of the subsection.]

IN RE MISSOURI PACIFIC R. CO. 998 S.W.2d 212 (Tex. 1999)

GONZALEZ, Justice. * These consolidated mandamus proceedings concern the mandatory venue statute for suits brought under the Federal Employers' Liability Act (FELA). In each case the key issue is whether the plaintiff in the underlying lawsuit sued the corporate defendant in a county where it maintains "a principal office," as defined in the venue statutes. We conclude that the plaintiffs in all of the suits failed to prove that the corporate defendant has a principal office in the county of suit, so we direct the trial courts in Jefferson County and Tarrant County to transfer the cases to a proper county.

I

These mandamus proceedings arise out of three FELA lawsuits filed in Jefferson County, and three filed in Tarrant County. Section 15.018(b) of the venue statutes gives three choices: (b) All suits brought under [FELA] shall be brought: (1) in the county in which all or a substantial part of the events or omissions giving rise to the claim occurred; (2) in the county where the defendant's principal office in this state is located; or

*

Footnotes and citations omitted unless otherwise indicated.

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(3) in the county where the plaintiff resided at the time the cause of action accrued. Subparts (b)(1) and (b)(3) do not apply here because none of the plaintiffs reside in the county of suit and none claim the cause of action arose there. All the plaintiffs in the Jefferson County cases claim damages for an injury occurring outside of Texas. Freddie Burleigh, a Louisiana resident, sued his employer, Missouri Pacific Railroad Company (Mo­Pac), for injuries he suffered in Louisiana. Terriance Spiller and Juanita Spiller, residents of Harris County, sued Mo­Pac for injuries Terriance Spiller received in Louisiana. Tamara L. Weston resides in Dalhart, Hartley County. She sued Southern Pacific Transportation Company and Mo­Pac in Jefferson County for an injury she suffered near Obar, New Mexico. Each plaintiff in the Tarrant County suits against Union Pacific Railroad alleged he suffered an injury in his home state outside Texas. Ronald E. Smirl, a resident of Oklahoma, sued for an injury suffered in Chickasha, Oklahoma. Bobby Ray Martin, a Louisiana resident, sued for an incident occurring in Shreveport, Louisiana. Willie B. Williams is a resident of Arkansas who alleges an injury in Gurdon, Arkansas. The venue challenges proceeded much the same in all the cases. The plaintiff alleged that the railroad maintained a principal office in the county of suit. The railroad denied that it had a principal office in the county of suit or that venue was proper there, and moved to transfer venue to Harris County where the railroad had principal offices in Texas. In each case the trial court denied the motion and retained venue, resulting in these mandamus proceedings.

II

Section 15.0642 of the Texas Civil Practice and Remedies Code directs appellate courts to enforce the mandatory venue statutes by mandamus: A party may apply for a writ of mandamus with an appellate court to enforce the mandatory venue provisions of this chapter. An application for the writ of mandamus must be filed before the later of: (1) the 90th day before the date the trial starts; or (2) the 10th day after the date the party receives notice of the trial setting. Section 15.0642 does not detail the scope of mandamus review of mandatory venue decisions. Traditionally, mandamus will not issue (1) unless the trial court has committed a clear abuse of discretion, (2) for which appeal is not an adequate remedy. We determined in a prior case that the usual mandamus standard of review, abuse of discretion, applies to a section 15.0642 mandamus. But we have not considered whether a party challenging a mandatory venue decision also must show that appeal is an inadequate remedy. The railroads argue that it is presumed that there is no

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adequate remedy for a failure to enforce a mandatory venue statute, . . . [because] it would undermine the purpose of section 15.0642 if a relator were forced to show inadequate remedy by appeal. We agree. We have repeatedly denied mandamus to review the merits of a venue decision because we considered it an incidental trial ruling correctable by appeal. Before 1983, venue rulings were immediately correctable by interlocutory appeal under the former plea of privilege practice. In 1983, the Legislature replaced interlocutory venue appeals with the rule that in an ordinary post­trial appeal, improper venue is not subject to harmless error analysis, virtually guaranteeing reversal. . . . 18 We reiterated in early 1995 that "Texas law is quite clear that venue determinations are not reviewable by mandamus." But a few months later, the Legislature enacted section 15.0642 authorizing parties to seek mandamus "to enforce the mandatory venue provisions," along with a timetable for seeking mandamus. The Legislature left in place the "presumed harm" rule for challenging venue in an appeal after trial. Thus, section 15.0642 poses a conundrum: venue decisions are not reviewable by mandamus because they are correctable by appeal, but section 15.0642 authorizes mandamus review of mandatory venue decisions. Either the availability of mandamus relief under the statute is largely illusory, or we must dispense with the requirement of showing inadequate appellate remedy in mandatory venue cases. Our goal in construing a statute is to carry out the Legislature's intent. The language of section 15.0642 seems to contemplate a review of the merits of the trial court's decision on mandatory venue. Yet if we still insist on a particularized showing of inadequate remedy by appeal, then a court could rarely, if ever, "enforce the mandatory venue provisions" by mandamus. . . . We do not lightly presume that the Legislature may have done a useless act. Rather, we presume the Legislature intended "a result feasible of execution." To effectuate the Legislature's intent, we conclude that adequacy of an appellate remedy is not a requisite of a mandatory venue mandamus under section 15.0642.

III

Thus, the focus of a mandamus proceeding under section 15.0642 is whether the trial court abused its discretion. The trial court has no discretion in determining the legal principles controlling its ruling or in applying the law to the facts. A trial court does not have the discretion to make an erroneous legal conclusion even in an unsettled area of law. Therefore, we review in these cases whether the trial courts failed to

18 On rare occasion we have issued mandamus to correct improper venue procedure but not to review the propriety of venue in the county of suit. See, e.g., In re Masonite, 997 S.W.2d 194 (Tex. 1999); HCA Health Serv., Inc. v. Salinas, 838 S.W.2d 246, 248 (Tex. 1992); Union Carbide Corp. v. Moye, 798 S.W.2d 792, 793 (Tex. 1990); Henderson v. O'Neill, 797 S.W.2d 905, 905 (Tex. 1990).

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analyze or apply the law correctly when they refused to transfer the cases to the defendants' chosen venue. The parties' pleading and proof limits a trial court's discretion to determine venue. A plaintiff's choice of venue stands unless challenged by proper motion to transfer venue. Once challenged, the plaintiff has the burden to present prima facie proof by affidavit or other appropriate evidence that venue is maintainable in the county of suit. The plaintiff's prima facie proof is not subject to rebuttal, cross­examination, impeachment, or disproof. However, if the plaintiff fails to discharge the burden, the right to choose a proper venue passes to the defendant, who must then prove that venue is proper in the defendant's chosen county. The controlling issue here is what the plaintiffs had to plead and prove to establish venue in "the county where the defendant's principal office in this state is located" under the FELA venue statute. The railroads contend that a foreign corporation only has one principal office under the mandatory venue statutes for FELA actions. If the FELA venue statute is read in isolation, the provision for suit "in the county where the defendant's principal office in this state is located" would indicate a company's Texas headquarters. However, that view is complicated by the general definition of "principal office" in section 15.001: In this chapter: (a) "Principal office" means a principal office of the corporation . . . in this state in which the decision makers for the organization within this state conduct the daily affairs of the organization. The mere presence of an agency or representative does not establish a principal office. The plaintiffs respond that the phrase "a principal office" indicates that there can be more than one principal office. Further, the plaintiffs argue, the "daily affairs" of these defendants consist of operating trains, so that a principal office is wherever a railroad official makes decisions about operating trains. We agree with the plaintiffs that a corporation can have more than one principal office. We are bound by the statutory definition of "principal office" as "a" principal office. Thus, when we apply the general definition of "principal office" to the FELA venue statute, we must assume a defendant company could have more than one principal office. But we reject the plaintiffs' argument that the statute clearly defines a principal office as any place where a company official makes decisions about the company's business. Such a broad definition would include agencies and representatives, which the statute expressly rejects. Agencies and representatives, as we defined them under the former venue statutes, are officials who possess broad power and discretion to act for the corporation. Thus, "decision makers" who "conduct the daily affairs" are officials of a different order than agents or representatives. Moreover, even though "a principal office" suggests there can be more than one office, the term "principal"

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indicates some sort of primacy. It is unlikely that an office clearly subordinate to and controlled by another Texas office could be "a principal office." Finally, in context, "the daily affairs" of a company cannot mean relatively common, low­level managerial decisions. Beyond these preliminary observations, the statute is not entirely clear in all its particulars. The language of the statute could support more than one reasonable interpretation and therefore is ambiguous. Because it is ambiguous, we may turn to extratextual sources such as the statute's legislative history.

IV

Sections 15.001 and 15.018 codify parts of Senate Bill 32, enacted by the 74th Legislature. The railroads contend that Senate Bill 32's legislative history supports its interpretation of the venue statutes. The plaintiffs argue to the contrary, that the bill's history supports their own interpretation. Both the House and Senate proposed changes to the venue statutes for corporations during the 74th regular session of the Legislature, House Bill 6 and Senate Bill 32. As the plaintiffs readily concede, and legislative history bears out, a major purpose of the 1995 amendments was to reduce or limit forum shopping. As initially proposed, Senate Bill 32 did not define "principal office." The Senate Committee on Economic Development added the definition of "a" principal office, but also provided that courts would determine a single county as the principal office in this state for any corporate defendant. The definition of "a principal office" remained in Senate Bill 32, but the provision for a single principal office was not included in the version the Senate adopted on April 19, 1995. The House substituted House Bill 6 with Senate Bill 32 and amended section 15.001(a) to provide that the mere presence of an agency or representative does not establish a principal office. The House passed Senate Bill 32 as amended on May 4, 1995, and the Senate concurred four days later. The railroads argue that the bill's history shows the Legislature intended to adopt the "nerve center" test to determine where a corporation has its principal office. This is the test federal courts use to decide a company's "principal place of business" for diversity jurisdictional purposes. When he introduced the bill in a meeting of the Senate Economic Development Committee, the sponsor of the bill, Senator John T. Montford, mentioned the test when he described the definition of "a principal office": [A] definition of the term principal office has been added, [to] bring focus to one location that adopts the nerve center test, used by the federal courts, to determine what constitutes a principal office, instead of having a variety of possible constructions of where a principal office could be. The railroads read too much into Senator Montford's statement. The federal court that originated the term "nerve center test" stated the test thusly:

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[A company's] principal place of business is the nerve center from which it radiates out to its constituent parts and from which its officers direct, control and coordinate all activities without regard to locale, in the furtherance of the corporate objective. The nerve­center test focuses on where the activities of the corporation are controlled or directed. However, it is but one of several tests federal courts use to determine a corporation's principal place of business. Another is the "place of operations" or "corporate activity" test, which is where the bulk of the corporation's physical operations are located. The Fifth Circuit uses either or both tests depending on the facts of the case. However, as the court of appeals for the Seventh Circuit notes, federal courts all agree that regardless of the test, a corporation has only one principal place of business for diversity purposes. We agree with the plaintiffs that Senator Montford's reference in the committee meeting to the "nerve center test" signifies only a general approach, that a court should look at how a company is run rather than corporate activity or operations. When Senate Bill 32 was presented on the floor of the Senate on April 19, 1995, Senator Teel Bivins moved to amend the bill by inserting the word "primary" before the phrase "decision makers." The Senate passed Senate Bill 32 without the proposed amendment. The Jefferson County plaintiffs argue that rejection of this amendment indicates a legislative intent to reject a nerve center test that focuses on where only "serious" or "essential" business decisions are made. However, from the debates it appears that the principal concerns with Senator Bivins' proposed amendment were that Senate Bill 32 was the product of negotiations with members of the House and others, and that the proposed amendment would limit "principal office" to only one location. The plaintiffs and the railroads cite to other statements and records from the history of Senate Bill 32 that are not particularly illuminating. However, a statement by Senator Montford on the floor of the Senate, and a similar statement by Representative Duncan on the floor of the House, made in the last debates before passage, provide some insight. Senator Montford explained the definition of "principal office" when he presented the bill on the floor of the Senate: [The definition of "principal office"] clarifies that in certain instances a business may have more than one principal office. It should apply to a very small number of businesses whose organizational structure is such that their presence in, perhaps two or three counties, is equally as strong, and thus they may have a principal office in each of those counties where they have a strong presence. Representative Duncan, the bill's sponsor in the House, made a similar statement on the third reading in the House, responding to questions by Representative Seidlits about the meaning of the definition. Seidlits: But ABC Company may have three principal offices in this state. One for North Texas, one for South, and one for West, and maybe one for East Texas. Is that right?

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Duncan: This was designed for those companies who may not necessarily have a central location where the decision makers are located, but may have three or four locations or four or five locations throughout the state where the decision makers are at an equal level. We find nothing in the legislative history to dissuade us from our initial observations about the meaning of section 15.001. Rather, the legislative history supports our conclusion that: (1) a company may have more than one principal office, (2) the "decision makers" who conduct the "daily affairs" of the company are officials who run the company day to day, (3) a mere agent or representative is not a "decision maker" nor is a principal office one where only decisions typical of an agency or representative are made, and (4) a principal office is not an office clearly subordinate to and controlled by another Texas office. The debates on the floor of the House and the Senate confirm that the Legislature did not intend to limit venue to only one county where the company maintains a corporate office if the facts do not warrant it. A company may control or direct its daily affairs in Texas through decision makers of substantially equal responsibility and authority in different offices in the state. In that case each office may be a principal office of the company. Necessarily, courts must look at the corporation's structure to determine a company's principal office or offices. The titles of the company officials in a particular office are not as informative as a description of their responsibility and authority, relative to other company officials within the state. We recognize that our interpretation does not provide a precise test. But we believe the Legislature intended a flexible test to allow for the myriad forms that corporate structures can take.

V

Turning to the facts of the Jefferson County cases, Burleigh and the Spillers contend that they were not required to prove a prima facie case because the defendants failed to specifically deny that the railroad had "decision makers and other management personnel," in Jefferson County as required by Texas Rule of Procedure 87(3)(a). However, the railroads denied that they had a principal office in Jefferson County and enumerated the officers in Harris County versus those in Jefferson County. Thus the plaintiffs were required to present prima facie evidence that venue was proper in Jefferson County. The plaintiffs' evidence focused largely on the extent of operations and equipment in Jefferson County, Texas. The evidence showed that the railroad's corporate headquarters were in Omaha, Nebraska, and many of the executive and administrative decisions were made there. The evidence did little to define the role of any of the decision makers in Jefferson County relative to the rest of the company in Texas. A party cannot prove a prima

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facie case that a county has a principal office without evidence of the corporate structure and the authority of the officers in the county of suit as compared with the remainder of the state. The only company officials in Jefferson County the plaintiffs' evidence identified were a manager of train operations, a manager of yard operations, and a "maintenance and way" foreman. There was testimony that the railroads' corporate headquarters delegated some policy­making to the local level. However, there is little evidence of the kinds of decisions the Jefferson County officials could make. More importantly, there is no evidence of how the Jefferson County officials' authority compared to others statewide, so that the court could make a meaningful determination whether Jefferson County is in any sense a "principal office."

VI

The Tarrant County plaintiffs put on more extensive evidence of Union Pacific's organization structure in Texas. Union Pacific is divided into four regions. The southern region includes most of Texas and parts of Louisiana. The southern region is further divided into six divisions. In answer to interrogatories, the railroad identified the "decision makers" who office in Harris County as a general solicitor, a vice president for transportation, a general manager, two general supervisors, a chief engineer, and two division superintendents. All but the division superintendents are considered executive officers of the company. The former general solicitor stated in a deposition that "the real policy decisions and real serious operational decisions are made by persons at the level of superintendent or above." The only official the plaintiffs claim is a "decision maker" in Tarrant County is a division superintendent for the Fort Worth service unit. He testified in his deposition that his duties included coordinating the movement of trains, staffing the crews within the area, and ensuring rules compliance and discipline. The division superintendent also said that the southern region is based in Houston, and his boss is the general manager in Harris County. This evidence is sufficient to characterize a division superintendent as a decision maker under the statute. However, it fails to establish prima facie that the Tarrant County office is a principal office when compared to the responsibility and authority exercised by company officials elsewhere in Texas. The evidence shows that the division superintendent in Tarrant County is not an executive officer and has the least authority of any of the decision makers with any real discretion or authority. In contrast, there are six executive officers in Harris County. The two highest ranking officers in Texas, general solicitors, conduct the affairs of the railroad from offices in Harris County. They oversee legal affairs such as FELA litigation in Texas for the railroads. The general manager of transportation is responsible for the transportation plan for the southern region of the Company, which includes Texas and Louisiana. The general manager supervises the assistant general manager and the general superintendent. The general

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supervisor also supervises six division superintendents, two in Houston, three in other Texas offices, and one in Louisiana. The general superintendent performs the logistics for deciding train starts and yard starts. Finally, the chief engineer directs the activities of local maintenance­of­way and signal service units throughout the region.

VII

The plaintiffs failed to establish Jefferson County or Tarrant County as principal offices of the railroads. The burden shifted to the defendants to prove that Harris County is a proper venue. The venue facts bear out that Harris County is "a" principal office of the railroads, and therefore a proper venue under the mandatory FELA statute. The trial courts abused their discretion by not sustaining the motions to transfer. Accordingly, we conditionally issue writs of mandamus directing the trial courts to sustain the railroads' motions to transfer the cases to Harris County. The writs will not issue unless the trial courts fail to act in accordance with this opinion.

NOTES

(1) Mandamus Review. In addition to discussing the meaning of "principal office," this case is noteworthy for its discussion of the availability of immediate review (through mandamus) of mandatory venue rulings. We will return to this topic in Section 6.03[C]. (2) Comparison With Prior Law. Before the 1995 amendments, a corporation could often be sued in the county in which it had an "agent or representative." As under the current statute, disputes centered around the level of activity that a corporation needed to have in a county before it could be sued there. The Texas Supreme Court had held that "agency or representative" required the presence of an employee with broad discretionary powers. Ruiz v. Conoco, 868 S.W.2d 752, 759 (Tex. 1993). Do you think that the former or current requirements would be harder for a plaintiff to establish? Who do you suppose requested this legislative change?

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[C]--County in Which All or a Substantial Part of the Events or Omissions Giving Rise to the Claim Occurred

Page 370: [Change the citation to the federal venue statute to 28 U.S.C. § 1391.] Page 370: [Insert the following new case before the heading Notes.]

Texas courts have begun to interpret the new general rule, and to consider what level of activity is required for there to be a "substantial part of the events or omissions giving rise to the claim" in a particular county. Consider the following case.

CHIRIBOGA v. STATE FARM MUT. AUTO INS. CO. 96 S.W.3d 673 (Tex. App.--Austin 2003, no pet.)

YEAKEL, J. This is an appeal from an order denying a motion to transfer venue and an order dismissing the defendants' counterclaim for attorney's fees and costs without notice or a hearing. This action was brought by appellee State Farm Mutual Automobile Insurance Company ("State Farm") against its insureds, appellants Augusto Chiriboga and his son, David Augusto Chiriboga, and others to resolve a coverage dispute under an automobile policy issued to Augusto Chiriboga by State Farm. We will reverse because the district court erred in overruling the Chiribogas' motion to transfer venue.

FACTUAL AND PROCEDURAL BACKGROUND

This is a coverage dispute arising out of a vehicular collision that occurred in Hidalgo County on February 25, 1998, involving a vehicle owned by Augusto Chiriboga and driven by David Chiriboga. On May 27, 1998, both father and son were sued for negligence in Hidalgo County by those injured in the collision, who were also residents of Hidalgo County (the "Gonzalez lawsuit"). 1 The accident occurred during the coverage period of the State Farm policy insuring the Chiribogas. The Chiribogas made a demand for defense and indemnity from State Farm. State Farm tendered a qualified defense, issued a reservation of rights letter, and, on January 4, 1999, filed this declaratory­judgment action in Milam County. All defendants in the

1 The accident occurred when the Chiribogas' vehicle, a 1983 Cadillac Cimarron, collided with a vehicle driven by Oscar Trevino Gonzalez in which Janie Vela was a passenger. Both occupants of the Gonzalez vehicle were injured as a result. Gonzalez and Vela sued the Chiribogas in Hidalgo County, and were, in turn, sued by State Farm in this action because they each have a potential stake in the insurance proceeds. Gonzalez and Vela subsequently agreed to be bound by the results of this declaratory­judgment action and are not now parties to this appeal.

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declaratory­judgment action sought to transfer venue to Hidalgo County, but their motions were denied. The Chiribogas demanded a jury and filed counterclaims seeking attorney's fees and costs pursuant to the Uniform Declaratory Judgments Act. See Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (West 1997). State Farm subsequently settled the Gonzalez lawsuit. Just before trial in the Milam County suit, however, State Farm moved to dismiss all of its claims, as well as the Chiribogas' affirmative counterclaim for attorney's fees and costs. State Farm filed its motion on December 18, 2000, and without a hearing the district court signed an order granting State Farm's motion the next day. The order dismissed all claims, expressly including the Chiribogas' counterclaims.

DISCUSSION

The Chiribogas appeal the district court's refusal to transfer the case to Hidalgo County.

* * *

None of the mandatory or specific permissive venue provisions apply in this case. Venue here is governed by the general venue rule contained in section 15.002(a) of the Texas Civil Practices and Remedies Code. See Beadle, 907 S.W.2d at 471 (declaratory­judgment action governed by general venue rule). Section 15.002(a)(1) provides that venue is proper in the county where "all or a substantial part of the events or omissions giving rise to the claim occurred" or the county "of defendant's residence at the time the cause of action accrued if defendant is a natural person." Tex. Civ. Prac. Rem. Code Ann. § 15.002(a)(1), (2) (West 2002). In this case, we must determine whether there is any probative evidence to support the district court's implied ruling that "all or a substantial part of" the events giving rise to this lawsuit occurred in Milam County.

The Venue Facts

State Farm's factual basis for maintaining venue in Milam County is that Milam County is the location of State Farm's local insurance agent, Lloyd Curington, who sold the policy. When Augusto Chiriboga reported the collision to State Farm, he called Curington in Milam County. Thus, State Farm argues venue was proper under section 15.002(a)(1) because "all or a substantial part of the events . . . giving rise to the claim" occurred in that county. State Farm's coverage defense was based on a policy provision excluding from coverage automobiles owned by the insured but not scheduled on the policy. State Farm contended that the1983 Cadillac Cimarron, owned by Augusto Chiriboga and driven by David Chiriboga, was not a scheduled vehicle. Therefore, State Farm asserts, coverage for the Cimarron was excluded for any damages arising out of its operation. On the other hand,

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the Chiribogas contend that the Cimarron had been a scheduled vehicle on this policy and that Augusto Chiriboga never authorized its removal from the policy. State Farm's factual theory supporting venue in Milam County is that the removal of the Cimarron as a scheduled vehicle on the policy actually occurred in Milam County. State Farm's local agent, who was responsible for scheduling vehicles on that policy, was located in Milam County. Thus, State Farm contends, Milam County became the site of a substantial part of the facts giving rise to its coverage defense. As a basis for venue, State Farm also points to the fact that Augusto Chiriboga purchased the original policy in Milam County some fourteen years earlier. However, Augusto Chiriboga was living in Hidalgo County the last time the policy was renewed by State Farm. In addition to affidavits, depositions were taken on the issues surrounding the alleged policy change. Excerpts of the depositions were submitted as evidence both supporting and opposing the venue motions. Augusto Chiriboga testified that State Farm had been his insurance carrier for many years and that whenever he purchased a new vehicle his practice was to have the car salesman contact State Farm and request that the new vehicle be added to his auto policy. That is what happened in this instance. When he bought a new Cadillac Catera in Hidalgo County, he had the salesman at the Cadillac dealership contact State Farm in order to add the Catera to his policy. He testified that he received a letter from State Farm stating that it had received his request for a policy change and that the change would be reflected on the next billing statement. Augusto Chiriboga testified that he was unaware that his instructions were not followed until State Farm refused coverage in connection with the accident in question. State Farm does not dispute that the Cadillac salesman called on November 14, 1997, seeking to have the Catera added as a covered vehicle. The dispute is whether State Farm was also instructed to remove the Cimarron from coverage and to substitute the Catera in its place. A Curington employee, Jeanne Bailey, was the person who actually handled the policy change. She testified that the first contact she received about adding the Catera to the policy was from Augusto Chiriboga himself. Bailey said she was sure that she discussed the policy change with Augusto Chiriboga because she remembered his accent. She said that he wanted to drop the Cimarron and add the Catera. She subsequently talked to the salesman at the Cadillac dealership and obtained the vehicle identification number of the Catera. The fact that Bailey was in Milam County when she handled the policy­change transaction is State Farm's factual basis for asserting that a "substantial part" of the events giving rise to its lawsuit occurred in Milam County. It is undisputed that all defendants in this declaratory­judgment action were residents of Hidalgo County. The underlying collision occurred in Hidalgo County. The action arising out of that collision, the Gonzalez lawsuit, was filed in Hidalgo County. State Farm was called upon to defend its insureds in Hidalgo County. The Chiribogas' liability, if any, would be

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determined in Hidalgo County. State Farm's obligations under the liability policy were performable in Hidalgo County. The policy reflects that the primary area for the operation of the covered vehicles was Hidalgo County. The Chiribogas paid higher premiums to State Farm because Hidalgo County was the primary area of operation of their vehicles. The renewal policy was issued to the Chiribogas in Hidalgo County.

Suit Filed in Improper Venue

In response to the venue challenge, State Farm presented evidence that an event did occur in Milam County, but the question is whether that event amounted to "a substantial part" of the events giving rise to the lawsuit. In other words, we must assume State Farm's venue facts to be true and decide whether Milam County was the site of a substantial part of State Farm's cause of action. Nothing about State Farm's dispute against the Chiribogas is connected in a material way to Milam County. To determine whether a "substantial" portion of the facts giving rise to the claim occurred in Milam County, we examine the essential elements of State Farm's claim. See Southern County Mut. Ins. Co. v. Ochoa, 19 S.W.3d 452, 459­60 (Tex. App.--Corpus Christi 2000, no pet.); Bituminous Cas. Corp. v. Commercial Standard Ins. Co., 639 S.W.2d 25, 26­27 (Tex. App.--Tyler 1982, no writ). By this action, State Farm seeks judicial interpretation of the insurance policy and determination of its duties to defend and indemnify in light of the Gonzalez lawsuit. The legal analyses governing the independent duties of defense and indemnity under liability policies are distinct and specialized. Texas determines the duty to defend according to the "eight corners" or "complaint allegation" rule--examining only the pleadings against the insured and the insurance policy itself to determine if the pleadings allege facts that potentially come within the scope of coverage afforded by the policy. . . . The facts alleged in the claimant's petition against the insured are presumed to be true when gauging the insurer's obligation to defend. . . . A liability policy obligates the insurer to defend the insured against any claim that could potentially be covered regardless of the claim's merits. . . . The duty to indemnify, on the other hand, is determined by the actual facts surrounding the claim. . . .An insurer has no duty to pay unless the insured's liability for covered damages is established in the underlying litigation. . . . Thus, establishment of the Chiribogas' liability in the Gonzalez lawsuit is a condition precedent to the Chiribogas' entitlement to indemnity under the policy. . . . Resolution of these issues is governed by the petition against the Chiribogas in the Gonzalez lawsuit, the insurance policy, the actual facts adjudicated in the Gonzalez lawsuit, and the facts surrounding the alleged deletion of the Cimarron from the policy. Any connection between the coverage issues and Milam County is tangential and insubstantial. Neither the fact

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that Augusto Chiriboga initially purchased the coverage in Milam County nor the fact that Bailey was in Milam County when she had the telephone conversation with him regarding the vehicles establishes Milam County as the site of a "substantial part" of the events giving rise to the declaratory­ judgment action.

The Substantiality Requirement

Prior to its amendment in 1995, the general­venue law allowed venue "in the county in which all or part of the cause of action accrued or in the county of defendant's residence. . . ." Act of May 18, 1995, 74th Leg., R.S., ch. 138, § 1, 1995 Tex. Gen. Laws 978 (amended 1995) (current version at Tex. Civ. Prac. & Rem. Code Ann. § 15.002(a)(1) (West 2002)) (formerly Tex. Civ. Prac. & Rem. Code Ann. § 15.001). The 1995 amendment provided for venue "in the county in which all or a substantial part of the events or omissions giving rise to the claim occurred." Tex. Civ. Prac. & Rem. Code Ann. § 15.002(a)(1) (West 2002). The amendment narrowed the number of counties in which venue could be maintained to those with a substantial connection to the lawsuit. Id. Under the old version, suit could be maintained where any part of a cause of action accrued, no matter how unimportant the connection might be. The amendment requires that the basis for venue be a "substantial part" of the cause of action at issue. Although appellate courts are not to choose the best venue when reviewing venue challenges, they are to determine whether the venue facts satisfy the substantiality threshold provided by amended section 15.002(a)(1). The legislature's purpose in using the term "substantial part" in section 15.002(a)(1) was to curtail forum­shopping. No longer is any fact connected to the lawsuit sufficient to establish venue, as it was under the old venue scheme. . . . In Texas, the county where the insurer is called upon to defend its insured is traditionally where a "substantial part" of the events giving rise to a liability­insurance claim are considered to have occurred. See, e.g., Ochoa, 19 S.W.3d at 457­58 ("We conclude that, under the present Texas venue statute, the judgment against [the insured] in Hidalgo County was a substantial part of the events giving rise to the Ochoa's action against Trinity on the indemnity policy and thus establishes venue in Hidalgo County."); Cigna Lloyds Ins. Co. v. Bradleys' Electric, Inc., 993 S.W.2d 673, 677 (Tex. App.--Corpus Christi 1999), rev'd on other grounds, 995 S.W.2d 675, 42 Tex. Sup. Ct. J. 777 (Tex. 1999) (holding transfer of coverage case away from county where liability suit filed was error); Bituminous Cas. Corp., 639 S.W.2d at 27 (same); Millers Mut. Fire Ins. Co. v. Texoma Directional Drilling Co., 622 S.W.2d 899, 901(Tex. App.--Fort Worth 1981, no writ) (holding cause of action in coverage case arose in county where insured sued); Birkes v. Lloyds Cas. Insurer, 209 S.W.2d 438, 440 (Tex. Civ.

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App.--Austin 1948, no writ) (upholding county of suit as county of proper venue for coverage case). 5 There is also a considerable body of federal law interpreting similar language in the federal venue statute in the context of coverage disputes. We note that section 15.002(a)(1) of the Texas venue statute is virtually identical to its federal counterpart. Compare 28 U.S.C.A. § 1391(a)(2) and (b)(2) (West Supp. 2002) with Tex. Civ. Prac. & Rem. Code Ann. § 15.002(a). When the legislature adopts a statute with wording substantially similar to a federal statute, we presume that, absent some indication to the contrary, the legislature was aware of the federal courts' construction of the federal statute and intended to adopt it. City of Garland v. Dallas Morning News, 22 S.W.3d 351, 360 (Tex. 2000); Blackmon v. Hansen, 140 Tex. 536, 169 S.W.2d 962, 964­65 (Tex. 1943). In cases involving liability­insurance coverage questions, federal courts tend to look to the underlying events for which insurance coverage is sought to determine venue. See Carolina Cas. Co. v. Data Broad. Corp., 158 F. Supp. 2d 1044, 1047 (N.D. Cal. 2001); Britamco Underwriters, Inc. v. Raymond E. Wallace Special Prods., Inc., 56 F. Supp. 2d 542, 545­46 (E.D. Penn. 1999); Horihan v. Hartford Ins. Co., 979 F. Supp. 1073, 1078 (E.D. Tex. 1997); Consolidated Ins. Co. v. Vanderwoude, 876 F. Supp. 198, 199­ 202 (N.D. Ind. 1995). Federal courts have reasoned that the purpose of the "substantiality requirement" in the federal venue statute is to "preserve the element of fairness so that a defendant is not haled into a remote district having no real relationship to the dispute." Britamco Underwriters, 56 F. Supp. 2d at 544 (citing Cottman Transmission Sys. v. Martino, 36 F.3d 291, 294 (3d Cir. 1994)); see also LeRoy v. Great W. United Corp., 443 U.S. 173, 183­84, 61 L. Ed. 2d 464, 99 S. Ct. 2710 (1979). Courts look to the nature of the dispute and whether the forum has a "real relationship" to it when determining whether a particular event was a "substantial part" of a claim. Britamco Underwriters, 56 F. Supp. 2d at 544. "The creation of a contract . . . is but one event in a series of events which gave rise to this action." Id. In cases involving the duty to defend or the duty to pay under a liability policy, federal courts tend to look to the place where the loss occurred or where the underlying liability suit is filed to determine venue. . . . We are not convinced that the act of purchasing, renewing, or even requesting an addition to an auto policy over the telephone to an agent located in Milam County can be fairly characterized as an act that is "a substantial part" of the coverage dispute in this case. Based on the foregoing authorities and the record in this case, we sustain the Chiribogas' first issue

5 This interpretation of section 15.002(a) parallels the permissive venue scheme found in section 15.032, which applies to suits filed against insurance companies. Section 15.032 requires that cases filed against certain insurance companies be brought: (1) in the county where the insurer's principal office is located, (2) the county where "the loss occurred," or (3) where the policyholder resides. Tex. Civ. Prac. & Rem. Code Ann. § 15.032 (West Supp. 2003); see also American Sec. Life Ins. Co. v. M.D. Anderson Hosp. & Tumor Inst., 408 S.W.2d 155, 158 (Tex. Civ. App.--Houston [1st Dist.] 1966, writ dism'd w.o.j.) ("The county where the event occurred that gives rise to liability is the county where the loss occurred.").

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and hold that Milam County was not a county of proper venue. The district court erred in denying the Chiribogas' motions to transfer.

No Convenience Transfer for Plaintiffs

State Farm also argues that Milam County is the proper place of venue pursuant to subsection (b) of section 15.002, which allows transfers of venue for the convenience of the parties and witnesses and the interests of justice. However, section 15.002(b) does not support State Farm's position. That provision authorizes a transfer of venue for convenience only upon the motion of a defendant. See Tex. Civ. Prac. & Rem. Code Ann. § 15.002(b) (West 2002). State Farm was the plaintiff in this action and cannot rely on section 15.002(b) to maintain venue in the county of suit. The purpose of section 15.002(b) is to change venue, not to serve as a basis to maintain venue in the first instance. It certainly cannot be a basis for a plaintiff to maintain an action in a county of improper venue. The erroneous denial of a motion to transfer venue requires reversal of the judgment and remand. Hart, 917 S.W.2d at 781. We hold that the district court erred in denying the Chiribogas' motion to transfer venue because the county of suit was not the site of "all or a substantial part of the events" giving rise to the lawsuit.

CONCLUSION

For these reasons, we reverse the judgment of the district court and remand the case with instructions that it be transferred to a district court in Hidalgo County for a determination of the merits of the Chiribogas' counterclaims. Tex. R. App. P. 43.2(d).

Page 371: [Add to end of Note (2):]

One intermediate court, looking to federal precedent, suggests that a substantial part of the events or omissions giving rise to a claim may occur in more than one county. Southern County Mut. Ins. Co. v. Ochoa, 19 S.W.3d 452, 458­459 (Tex. App.--Corpus Christi 2000, no pet.).

Page 371: [Insert new notes (3 and 4):]

(3) Contract Formation. In Old American Co. Mut. Fire Ins. Co. v. Renfro, 90 S.W.3d 810 (Tex. App.--Ft. Worth 2002, no pet.), the court held that the county where a contract was made is not a "county in which all or a substantial part of the events or omissions giving rise to the claim occurred" when all other events took place elsewhere. "Certainly there could not be a suit had the contract not been formed, and thus the acts constituting contract formation are among the events giving rise to the lawsuit. However, the suit was concerned with construing the contract in light of a discrete set of events. All of these events . . . took place in Wise County." Similarly, in Levine v. Bayne, Snell & Krause, Ltd., 92 S.W.3d 1, 8 (Tex. App.--San Antonio 1999, pet. denied), the court held that the county where

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a contingency fee contract was reviewed, discussed, executed, and performed is the county in which a substantial part of the events giving rise to the claim occurred. (4) Torts: Breach vs. Injury. In Eddins v. Parker, 63 S.W.3d 15 (Tex. App.--El Paso 2001, pet. denied), the plaintiff filed suit in Harris County, alleging that the defendant doctor negligently treated her in Grayson County, but that she suffered the consequences of that negligence in Harris County. The court held that since the doctor treated the patient in Grayson County, that was "the only county in which all or a substantial part of the events or omissions giving rises to the claim occurred."

§ 6.02

Exceptions to the General Rule

[A]--Types of Exceptions

Page 372: [Complete the citation in the last paragraph as In re Continental Airlines, 988 S.W.2d 733, 735­736 (Tex. 1998) (suit for declaratory relief coupled with request for temporary, but not permanent, injunction was not primarily injunctive and so not governed by mandatory venue provision for injunctions).]

[B]--Mandatory and Permissive Exceptions

Page 374: [Add after C.P.R.C. § 15.019.]

C.P.R.C. § 15.020. Major Transactions: Specification of Venue by Agreement. (a) In this section, "major transaction" means a transaction evidenced by a written agreement under which a person pays or receives, or is obligated to pay or entitled to receive, consideration with an aggregate stated value equal to or greater than $1 million. The term does not include a transaction entered into primarily for personal, family, or household purposes, or to settle a personal injury or wrongful death claim, without regard to the aggregate value. (b) An action arising from a major transaction shall be brought in a county if the party against whom the action is brought has agreed in writing that a suit arising from the transaction may be brought in that county. (c) Notwithstanding any other provision of this title, an action arising from a major transaction may not be brought in a county if: (1) the party bringing the action has agreed in writing that an action arising from the transaction may not be brought in that county, and the action may be brought in another county of this state or in another jurisdiction; or (2) the party bringing the action has agreed in writing that an action arising from the transaction must be brought in another county of this

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state or in another jurisdiction, and the action may be brought in that other county, under this section or otherwise, or in that other jurisdiction. (d) This section does not apply to an action if: (1) the agreement described by this section was unconscionable at the time that it was made; (2) the agreement regarding venue is voidable under section 35.52, Business & Commerce Code; or (3) venue is established under a statute of this state other than this title. (e) This section does not affect venue and jurisdiction in an action arising from a transaction that is not a major transaction.

[D]--Multiple Claims and Parties [3]--Multiple Plaintiffs; Intervention

Page 380: [Replace C.P.R.C. 15.003 with amended version adopted by the Texas Legislature in 2003.] CIVIL PRACTICE AND REMEDIES CODE CHAPTER 15. VENUE SUBCHAPTER A. DEFINITION; GENERAL RULES

C.P.R.C. § 15.003 (a) In a suit in which there is more than one plaintiff, whether the plaintiffs are included by joinder, by intervention, because the lawsuit was begun by more than one plaintiff, or otherwise, each plaintiff must, independently of every other plaintiff, establish proper venue. If a plaintiff cannot independently establish proper venue, that plaintiff's part of the suit, including all of that plaintiff's claims and causes of action, must be transferred to a county of proper venue or dismissed, as is appropriate, unless that plaintiff, independently of every other plaintiff, establishes that: (1) joinder of that plaintiff or intervention in the suit by that plaintiff is proper under the Texas Rules of Civil Procedure; (2) maintaining venue as to that plaintiff in the county of suit does not unfairly prejudice another party to the suit; (3) there is an essential need to have that plaintiff's claim tried in the county in which the suit is pending; and (4) the county in which the suit is pending is a fair and convenient venue for that plaintiff and all persons against whom the suit is brought. (b) An interlocutory appeal may be taken of a trial court's determination under Subsection (a) that:

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(1) a plaintiff did or did not independently establish proper venue; or (2) a plaintiff that did not independently establish proper venue did or did not establish the items prescribed by Subsections (a)(1)-(4). (c) An interlocutory appeal permitted by Subsection (b) must be taken to the court of appeals district in which the trial court is located under the procedures established for interlocutory appeals. The appeal may be taken by a party that is affected by the trial court's determination under Subsection (a). The court of appeals shall: (1) determine whether the trial court's order is proper based on an independent determination from the record and not under either an abuse of discretion or substantial evidence standard; and (2) render judgment not later than the 120th day after the date the appeal is perfected. (d) An interlocutory appeal under Subsection (b) has the effect of staying the commencement of trial in the trial court pending resolution of the appeal.

Page 381: [Replace Bristol-Myers Squibb Co. v. Goldston with the following two cases and notes.] SURGITEK, BRISTOL­MYERS CORP. v. ABEL 997 S.W.2d 598 (Tex. 1999)

ENOCH, Justice. * This case presents several issues concerning section 15.003 of the Texas Civil Practice and Remedies Code. Section 15.003 limits when a plaintiff may join an action in a venue that would otherwise be improper for that plaintiff. Here, 104 plaintiffs who could not independently establish venue in Bexar County attempted to join two plaintiffs in a Bexar County action against makers of silicone­gel breast implants. Concluding that the 104 plaintiffs were improperly joined, the trial court granted the defendants' motion to transfer venue of those plaintiffs' claims. A divided court of appeals reversed, with one justice concurring and one justice dissenting. We conclude that: (1) the court of appeals had jurisdiction to hear the appeal; (2) a trial court may limit the scope of evidence on its section 15.003(a) joinder determination to pleadings and affidavits, but it has discretion to consider a broader range of evidence, including live testimony; (3) appellate courts should conduct a de novo review of the propriety of a trial court's section 15.003 joinder decision; and (4) the plaintiffs here did not establish an "essential need" to have their claims tried in Bexar County. Consequently, we reverse the court of appeals' judgment and reinstate the trial court's venue transfer order.

*

Footnotes and citations omitted unless otherwise indicated.

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BACKGROUND

One­hundred­six plaintiffs sued Surgitek, Bristol­Myers Squibb Co., and Medical Engineering Corp. (Surgitek) for injuries they allegedly sustained from defective breast implants. Surgitek moved to transfer venue of 104 of these plaintiffs' claims, asserting that none could establish proper venue in Bexar County and that none could establish that they were entitled to join the Bexar County suit under section 15.003. Section 15.003(a) provides: In a suit where more than one plaintiff is joined each plaintiff must, independently of any other plaintiff, establish proper venue. Any person who is unable to establish proper venue may not join or maintain venue for a suit as a plaintiff unless the person, independently of any other plaintiff, establishes that: (1) joinder or intervention in the suit is proper under the Texas Rules of Civil Procedure; (2) maintaining venue in the county of suit does not unfairly prejudice another party to the suit; (3) there is an essential need to have the person's claim tried in the county in which the suit is pending; and (4) the county in which the suit is pending is a fair and convenient venue for the person seeking to join in or maintain venue for the suit and the persons against whom the suit is brought. The trial court agreed with Surgitek that 104 plaintiffs did not establish that their joinder in the Bexar County suit was proper. The trial court transferred venue of 103 of these plaintiffs to Dallas County, Surgitek's principal place of business in Texas, and one plaintiff to Tarrant County, that plaintiff's residence. (While this action was pending in this Court, 45 plaintiffs, including the Tarrant County plaintiff, have, through settlement or nonsuit, ceased being parties to this appeal. Fifty­nine plaintiffs remain, and our opinion and judgment apply only to those parties.) The plaintiffs appealed the trial court's order to the court of appeals, which, after determining that it had jurisdiction to hear the appeal, reversed and remanded.

JURISDICTION

Ordinarily, this Court does not have jurisdiction over interlocutory appeals like this one. But here, we have jurisdiction because "the justices of the court of appeals disagree on a question of law material to the decision." The issue of the court of appeals' jurisdiction in this case is more complex. Ordinarily, appeal does not immediately lie from a trial court order transferring venue. But in section 15.003(c) the Legislature authorized any

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party aggrieved by a trial court's determination of a section 15.003(a) joinder issue to contest the decision by an interlocutory appeal: Any person seeking intervention or joinder, who is unable to independently establish proper venue, or a party opposing intervention or joinder of such a person may contest the decision of the trial court allowing or denying intervention or joinder by taking an interlocutory appeal. . . . The question presented here is whether the court of appeals had jurisdiction under section 15.003(c), given that the order appealed was a venue transfer order following a motion to transfer venue. We agree with the court of appeals that it had jurisdiction. The court of appeals reasoned that because the venue transfer order necessarily rested on the trial court's determination of the propriety of joinder under section 15.003(a), it was appealable under section 15.003(c). This functional approach to the availability of an interlocutory appeal under section 15.003(c) is in stark contrast with the holding of the Sixth Court of Appeals in Shubert v. J.C. Penney Co. In Shubert, the court adopted a formalistic approach, holding that because the order before it was a venue ruling, it was not appealable, notwithstanding the trial court's decision to transfer venue based on the propriety of joinder of six plaintiffs under section 15.003(a). We reject Shubert's formalistic approach. Section 15.003(c) contemplates that either party--plaintiff or defendant--may take an interlocutory appeal of a section 15.003(a) joinder decision. But the Shubert rule would allow defendants to dictate at the outset, simply by how they style their request for relief, whether a plaintiff could pursue an interlocutory appeal. We should not be so constrained by the form or caption of a pleading. As the court of appeals correctly noted, we look to the substance of a motion to determine the relief sought, not merely to its title. When a trial court's order necessarily determines the propriety of a plaintiff's joinder under section 15.003(a), section 15.003(c) plainly allows for either party to "contest that decision . . . by taking an interlocutory appeal." Because the trial court's venue transfer order in this case was predicated on its decision about the propriety of the plaintiffs' joinder under section 15.003(a), the court of appeals had jurisdiction over the plaintiffs' appeal. We disapprove Shubert to the extent that it conflicts with this opinion.

BURDEN OF PROOF

The parties disagree about which party has the burden of proof, and the nature of that burden, under section 15.003(a). The court of appeals concluded that the Legislature, in enacting section 15.003(a), did not intend to alter pre­existing statutory standards for venue hearings and proof. Thus, it stated that in a section 15.003(a) determination, a trial court is to look only to the pleadings and affidavits, and not to any other proof, such as live testimony. And it determined that the trial court should consider

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only whether the plaintiff presented prima facie proof that joinder under section 15.003(a) is appropriate; if so, the plaintiff has established her right to join. We disagree that a trial court is so limited in conducting a section 15.003(a) hearing and determination. The fact that section 15.003(a) appears in the venue chapter of the Civil Practice and Remedies Code informs but does not control what type of hearing or standard of proof governs a section 15.003(a) joinder determination. Ultimately, we resolve the issue of what quantum­of­proof and nature­of­proof standards are established by section 15.003(a) not just by looking at where it was placed in the Civil Practice and Remedies Code, but also by considering legislative intent as reflected in its plain language. Section 15.003(a) takes as its starting point a "person who is unable to establish proper venue." Thus, before the trial court even reaches the joinder elements, it first has to determine whether a plaintiff can independently establish proper venue. This determination, of course, is made using venue proof standards--if the plaintiff offers prima facie proof through pleadings and affidavits that venue is proper, the inquiry is over. But when a plaintiff cannot establish proper venue, section 15.003(a) expressly places the burden on the plaintiff to "establish" four elements before she can join venue for the suit. The plaintiffs urge that we construe this requirement to mean only that they must offer the same quantum of prima facie proof required to establish venue. Surgitek argues that the plaintiffs must prove the four elements by a preponderance of the evidence, and that the trial court should conduct a full evidentiary hearing as it would in a normal joinder matter. We conclude that the plain language of section 15.003(a) places the burden on the plaintiff in the first instance to offer prima facie proof of the four elements, but that it contemplates the admission, in some instances, of a broader range of evidence than would be admissible in a venue hearing. The Legislature used the same word--establish--in section 15.003(a) to describe both venue proof ("Any person who is unable to establish proper venue . . .") and joinder proof (". . . unless the person . . . establishes [the four elements.]"). Because a plaintiff need only offer prima facie proof to "establish" venue, it follows that, at least initially, a plaintiff must offer prima facie proof of each joinder element. And if the defendant offers no rebuttal evidence, the inquiry is over. But Surgitek is correct that the four elements a plaintiff must establish under section 15.003(a) do not lend themselves readily to the prima facie standard applied in venue hearings. The usual types of prima facie proof in a venue determination--pleadings and affidavits establishing places of residence, principal offices, and even where the cause of action accrued--are usually objective enough that pleadings and affidavits can fairly be said to enable the trial court to correctly decide the issue. But the section 15.003(a) elements--joinder under the Texas Rules of Civil Procedure, unfair prejudice, essential need, and fairness and convenience--are relatively subjective and not as readily susceptible to proof by affidavit or

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pleading. Thus, the defendant must be afforded the opportunity to rebut the plaintiff's prima facie proof. Accordingly, we conclude that the trial court has discretion to allow a broader range of proof in making a section 15.003(a) joinder determination than it would in a venue hearing. Specifically, a trial court may allow the parties to offer testimony, if the trial court believes it would be useful to its determination. Moreover, a trial court may order limited discovery on the joinder elements, affording the parties the opportunity to more fully develop evidence on the issues raised. To the extent that a defendant's joinder evidence rebuts the plaintiff's prima facie proof on any of the joinder elements, a trial court has discretion to consider all available evidence to resolve any disputes that the parties' proof creates. A trial court's decision to limit the scope of evidence is an abuse of discretion only if a party is materially prejudiced by its inability to offer further proof.

SCOPE AND STANDARD OF REVIEW

The court of appeals expressly limited its review in this case to the affidavits and pleadings. Its decision to do so logically followed from its conclusion that under section 15.003(a) a trial court could only consider affidavits and pleadings. But just as that determination was error, so too was the standard of review the court of appeals employed. Section 15.003(c)(1) describes the proper standard for the court of appeals to apply: The court of appeals shall . . . determine whether the joinder or intervention is proper based on an independent determination from the record, and not under either an abuse of discretion or substantial evidence standard. Construing this language, as we must, by its plain meaning, we conclude that a court of appeals should conduct a de novo review of the entire record to determine whether a trial court's section 15.003(a) joinder determination was proper. The phrase "independent determination," coupled with the admonition not to conduct an abuse of discretion or a substantial evidence review, suggests that the court of appeals should make its own determination of the propriety of joinder under section 15.003(a), with no deference to the trial court's ruling. Thus, its review of the merits of the joinder determination should be de novo. And the phrase "from the record" indicates that the court of appeals is not constrained solely to review the pleadings and affidavits, but should consider the entire record, including any evidence presented at the hearing. On the other hand, the court of appeals should employ an abuse of discretion standard to review a party's contention that it was improperly denied the opportunity to present further proof. While the plain language of section 15.003(c)(1) prevents a court of appeals from using an abuse of discretion standard when reviewing the propriety of a trial court's section 15.003(a) joinder determination, nothing in section 15.003(c)(1) precludes

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employment of that standard for reviewing the trial court's decision to limit the scope of evidence.

ANALYSIS

With the proper burden of proof and scope and standard of review in mind, we turn now to the record in this case. The evidence plaintiffs offered to establish their right to join the Bexar County litigation consisted of affidavits from the two plaintiffs who could independently establish venue in Bexar County, pleadings Surgitek filed in the multi­district federal breast implant litigation, an affidavit from the plaintiffs' counsel, and Surgitek's witness designations. The plaintiffs offered Surgitek's MDL pleadings as evidence that in another proceeding Surgitek took the position that some common questions of fact and law exist across breast implant cases, thus showing that joinder was proper under Rule 40 of the Texas Rules of Civil Procedure. Plaintiffs' counsel's affidavit reiterated the commonality of fact questions, and further stated that Surgitek designated the same expert witnesses in each case. Finally, the plaintiffs offered Surgitek's witness list to demonstrate that these witnesses were located all over the country, thus showing that no matter where the cases are tried the witnesses will have to travel. The court of appeals held that this evidence was sufficient to satisfy all four section 15.003(a) elements for joinder. We disagree. Section 15.003(a)(3) requires the plaintiff to establish that "there is an essential need to have the person's claim tried in the county in which the suit is pending." The court of appeals held that the plaintiffs established their "essential need" to try their claims against Surgitek in Bexar County "by proving the need to pool resources against common experts and issues." But that is not enough. The trial court's order in this case kept all of the remaining plaintiffs together in a single action, thereby allowing them to pool resources. Thus, if the need to pool resources were dispositive, the plaintiffs could have no complaint. We agree with Surgitek that the "essential need" element requires each plaintiff seeking joinder to demonstrate that there is an "essential need" for her claim to be tried in Bexar County. The plain language of section 15.003(a)(3) compels this result: "[the person seeking joinder must establish that] there is an essential need to have the person's claim tried in the county in which the suit is pending." Citing a legal dictionary definition of "essential," Surgitek argues that an "essential need" is one that is "indispensably necessary." Another dictionary likewise defines "essential" as "necessary, such that one cannot do without it." We recognize that this burden is very high, but the language of the statute makes it so. Here, the plaintiffs did not establish that it was "indispensably necessary" to try their claims in Bexar County. Because we conclude that the plaintiffs failed to establish this joinder element, we need not consider whether they established the other three.

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Accordingly, we reverse the court of appeals' judgment and reinstate the trial court's order transferring venue of the 59 remaining plaintiffs' claims to Dallas County.

NOTES AND QUESTIONS

(1) The "Essential Need" Requirement. Under the Texas Supreme Court's analysis, when would a plaintiff be able to show "essential need" to join a case in a particular county? Would it be enough to show that all plaintiffs are represented by the same lawyer, were treated by the same doctor, share the same medical expert witness, and live near the county of suit? That the case could go to trial quickly in the county of the plaintiff's choice but would be subject to a two­ to three­year delay in the county requested by the defendants? (2) Procedural Requirements. In addition to its holding about the meaning of "essential need," this case discusses the proper method of proving Section 15.003 venue, the availability of interlocutory review of these decisions, and the standard of review that the court of appeals should apply. We will return to these issues in Sections 6.03[B] and [C]. (3) Lower Courts follow Surgitek. In Smith v. Adair, 96 S.W.3d 700 (Tex. App.--Texarkana 2003, no pet. denied), the court rejected the following argument that a plaintiff had an essential need to join the lawsuit: "Adair's personal affidavit, for instance, states there is a substantial need for his claim to be tried in Harrison County because his lawyers will have to do twice the work and the division of labor would cause him to lose the full attention of his attorneys. Adair also stated he had a substantial need to proceed in Harrison County because his expert witnesses would have to duplicate their efforts, because his witnesses live in Harrison County, and because if this case is tried in two separate venues, the first to finish might cause collateral estoppel to apply."

TECO­WESTINGHOUSE MOTOR COMPANY v. GONZALEZ 54 S.W.3d 910 (Tex. App.--Corpus Christi 2001, no pet.)

YANEZ, Justice. This is an interlocutory, accelerated appeal under section 15.003 of the Texas Civil Practice and Remedies Code. See Tex. Civ. Prac. & Rem. Code Ann. s 15.003 (Vernon Supp.2001). Appellant, Teco--Westinghouse Motor Company ("TWMC" or "the company"), appeals from the trial court's order denying its motion to transfer venue. Appellees, Joel Gonzalez and Robert Pasciak, filed suit against TWMC, alleging retaliatory discharge in violation

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of the Texas Commission on Human Rights Act ("TCHRA") and intentional infliction of emotional distress. In two issues, appellant contends that the trial court: 1) erred in ruling that Pasciak established venue in Cameron County under section 15.003 of the civil practice and remedies code; and 2) abused its discretion in accepting appellees' response to the motion to transfer venue, which was filed the day before the venue hearing. We affirm.

Background

Appellees filed suit in Cameron County, alleging retaliation in violation of the TCHRA and intentional infliction of emotional distress. Gonzalez also alleged that the company fraudulently induced him to accept employment in Williamson County. Gonzalez, a resident of Cameron County, alleges venue is proper in Cameron County because he received a telephone call in Cameron County from a TWMC representative, who offered him employment in Williamson County. Pasciak is a resident of Williamson County. He contends that venue is proper in Cameron County pursuant to section 15.003 of the civil practice and remedies code regarding multi­plaintiff lawsuits. See Tex. Civ. Prac. & Rem.Code § 15.003 (Vernon Supp.2001). TWMC asserts that its only Texas facility is in Williamson County. On December 29, 2000, TWMC filed a motion to transfer venue to Williamson County. . . . In the response, Pasciak conceded that he cannot independently establish venue in Cameron County, but argued venue is proper there because he has established the four elements necessary for joinder set out in section 15.003(a). See Tex. Civ. Prac. &Rem.Code s 15.003(a) (Vernon Supp.2001). Following the hearing, the trial court denied the motion to transfer venue as to both appellees. This interlocutory appeal followed. Appellees do not challenge the trial court's ruling finding venue proper in Cameron County as to Gonzalez.

Standard of Review

The issue before us is whether Pasciak could properly join the lawsuit filed by Gonzalez in Cameron County. We review the propriety of a trial court's section 15.003 joinder decision by conducting an independent de novo review of the entire record. Tex. Civ. Prac. & Rem. Code s 15.003(c)(1) (Vernon Supp.2001); Am. Home Prods. v. Clark, 38 S.W.3d 92, 99 (Tex. 2000); Surgitek, Bristol--Myers Squibb Co. v. Abel, 997 S.W.2d 598, 600 (Tex. 1999); Am. Home Prods. Corp. v. Bernal, 5 S.W.3d 344, 347 (Tex.App.--Corpus Christi 1999, no pet.).

Analysis

Texas Civil Practices and Remedies Code section 15.003, which governs multi--plaintiff lawsuits, provides: (a) In a suit where more than one plaintiff is joined, each plaintiff must, independently of any other plaintiff, establish proper venue. Any person

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who is unable to establish proper venue may not join or maintain venue for the suit as a plaintiff unless the person, independently of any other plaintiff, establishes that: (1) joinder or intervention in the suit is proper under the Texas Rules of Civil Procedure; (2) maintaining venue in the county of suit does not unfairly prejudice another party to the suit; (3) there is an essential need to have the person's claim tried in the county in which the suit is pending; and (4) the county in which the suit is pending is a fair and convenient venue for the person seeking to join in or maintain venue for the suit and the persons against whom the suit is brought. Tex. Civ. Prac.--Rem.Code s 15.003(a) (Vernon Supp.2001). The plaintiff bears the burden of proof to establish proof of each joinder element. Surgitek, 997 S.W.2d at 602­03; Bernal, 5 S.W.3d at 346. The trial court has discretion to consider a broader range of evidence in making a section 15.003(a) joinder determination than it would in a venue hearing. Surgitek, 997 S.W.2d at 603; Bernal, 5 S.W.3d at 347. The court of appeals is not constrained solely to review the pleadings and affidavits, but considers the entire record, including any evidence presented at the hearing. Bernal, 5 S.W.3d at 347. Any affidavit evidence relied upon in support of venue allegations must be made on personal knowledge, set forth specific facts as would be admissible in evidence, and show affirmatively that the affiant is competent to testify. See Tex.R. Civ. P. 87(3)(a); Blalock Prescription Ctr., Inc. v. Lopez--Guerra, 986 S.W.2d 658, 662 (Tex. App.-- Corpus Christi 1999, no pet.).

. . . Joinder

We now turn to TWMC's first issue, which is whether Pasciak satisfied the four--part test set out in section 15.003(a). Because TWMC does not appeal the first element of the four--part joinder test, we do not address it. A. Unfair Prejudice We begin by addressing the second element, whether maintaining suit in Cameron County unfairly prejudices another party. Tex. Civ. Prac. & Rem.Code s 15.003(a)(2) (Vernon Supp. 2001). Pasciak argues that TWMC will not be unfairly prejudiced by defending against his lawsuit in Cameron County because regardless of the disposition of Pasciak's claim, Gonzalez's case will be tried in Cameron County and it will be necessary for TWMC to travel to Cameron County. Pasciak also contends that TWMC regularly conducts business in South Texas. Appellees offered as evidence their own affidavits, the affidavit of their attorney, and Gonzalez's discovery responses. In his affidavit, Gonzalez stated that "Teco Westinghouse regularly

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conducts business in South Texas and in Northern Mexico and regularly sends management representatives to South Texas to conduct this business." Pasciak's affidavit states that if the suit were to proceed in Travis or Williamson counties, the cost would be too high for him to pursue it. Pasciak's affidavit is silent as to whether TWMC would suffer any unfair prejudice as a result of defending against his suit in Cameron County. In his affidavit, appellees' attorney states that TWMC "is a large multi­ national corporation with unlimited resources and the maintenance of the instant action in Cameron County, Texas would hardly be an economic and personal hardship to Defendants. Furthermore, said Defendant regularly does business in South Texas." The affidavit also states that Gonzalez has established proper venue in Cameron County, and because Pasciak's claims are identical to those of Gonzalez and requires the presence of the same witnesses, TWMC would not be prejudiced by trying Pasciak's case in Cameron County. TWMC specifically denied that venue was proper as to Pasciak in Cameron County. In its amended response, TWMC further denied that Pasciak could establish joinder and stated that it would suffer an injustice if forced to defend the suit in Cameron County. Affidavits must be made on personal knowledge, shall set forth specific facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify. Tex.R. Civ. P. 87(3)(a); Blalock, 986 S.W.2d at 662. We conclude that Gonzalez's statements as to TWMC's business activities in South Texas are not made on personal knowledge and do not establish lack of prejudice. Similarly, the statement by appellees' attorney regarding TWMC's "unlimited resources" is not made on personal knowledge, is conclusory, and does not establish lack of prejudice. However, we find that because Gonzalez's lawsuit will be tried in Cameron County, TWMC's representatives and witnesses will be present at Gonzalez's trial. Because Pasciak's claims are the same as Gonzalez's and involve the same witnesses, we conclude that Pasciak has established that trying his suit in Cameron County will not unfairly prejudice TWMC. B. Essential Need Pasciak also had to establish that he had an "essential need" to have his claim tried in Cameron County. See Tex. Civ. Prac. & Rem.Code s 15.003(a)(3) (Vernon Supp.2001); Surgitek, 997 S.W.2d at 604; Bernal, 5 S.W.3d at 348; Dayco Prods., Inc. v. Ebrahim, 10 S.W.3d 80, 84 (Tex. App.-- Tyler 1999, no pet.). A plaintiff seeking joinder must show a compelling reason why he must be joined in that county, and not merely that he has an "essential need" to join with other plaintiffs in order to pool resources. Surgitek, 997 S.W.2d at 604 (holding that proving a need to pool resources is insufficient to establish essential need); Bernal, 5 S.W.3d at 348 (same). Pasciak argues he has an essential need for his case to be tried in Cameron County because: 1) Gonzalez is his main witness and is a resident of Cameron County; 2) other witnesses who can testify as to the events at issue are currently located in Cameron County; and 3) he has been unable

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to locate an attorney willing to take his case in Williamson County and is currently being represented on a contingency fee basis by Gonzalez's attorney, who is located in Cameron County. Pasciak acknowledges that both the supreme court and this Court have rejected claims that the need to pool resources is sufficient to establish essential need. See Surgitek, 997 S.W.2d at 604; Bernal, 5 S.W.3d at 348. He denies, however, that his arguments should be so characterized; he argues, instead, that his reasons demonstrate why there is an essential need for his case to be tried in Cameron County. The evidence Pasciak offered to establish his right to join the Cameron County lawsuit included his own affidavit, Gonzalez's affidavit, and the affidavit of his attorney. In his affidavit, Pasciak states he is unemployed and has no resources to pay an attorney. He also says that Gonzalez can only afford to pursue his case in Cameron County and that Gonzalez is an indispensable witness in his case. He also asserts that he contacted six or eight attorneys in Williamson and Travis counties and was unable to obtain representation. He says that if he is required to proceed in Travis or Williamson County, the cost will be too high for him to pursue it. Gonzalez's affidavit states that he is currently a resident of Cameron County and has been since before 1996. He says he is currently working in Monterrey, Mexico and that his job does not allow for travel to Williamson or Travis County. He further asserts that the cost would be too high for him to litigate his own case in Williamson or Travis counties because of the time demands and costs associated with travel. He also states that TWMC regularly conducts business in South Texas. TWMC argues that Pasciak's claim that he contacted six or eight attorneys and was unable to obtain representation does not establish that there is no Austin--area attorney willing to represent him. In addition, TWMC notes that Pasciak's current attorney could continue to represent him in Williamson County. Moreover, TWMC notes that one of the appellees' attorneys, Ms. Gina Hinojosa, is located in Austin. With regard to Pasciak's claim that there is an essential need to try his case in Cameron County because Gonzalez is an indispensable witness, TWMC notes that Pasciak has offered no proof that Gonzalez would refuse to appear as a witness in Williamson County. TWMC also argues that Pasciak has also failed to establish that the other identified witnesses would refuse or be unable to testify in Williamson County. TWMC's evidence includes the affidavit of Richard Fesmire, a TWMC senior management official, who stated, among other things, that TWMC does not have a facility in or near Cameron County. TWMC also submitted the affidavit of Josie Carlin Hernandez, a TWMC employee in the Human Resource department at the Williamson County facility, who stated that Gonzalez began working for TWMC in January 1996. Applying the principles announced in Surgitek, and considering the entire record de novo, we conclude that Pasciak established that he has an essential need to try his lawsuit in Cameron County. Gonzalez's affidavit states

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that he is an indispensable witness in Pasciak's lawsuit. It also states that the demands of his present job in Monterrey, Mexico "do not allow for travel to Williamson or Travis County." Pasciak's affidavit also states that Gonzalez is an indispensable witness in Pasciak's case. In its reply brief, TWMC argues that because it will be necessary for Gonzalez to take some time off from his job to attend his own trial, he could also take a day or two of vacation time to serve as a witness for Pasciak in Williamson County. TWMC also argues that if Gonzalez is unable to appear at Pasciak's Williamson County trial, his testimony could be presented to the jury by videotape. We acknowledge that the need to pool resources is insufficient to establish essential need. See Surgitek, 997 S.W.2d at 604; Bernal, 5 S.W.3d at 348. In Bernal, this Court interpreted the "essential need" element as enunciated by the supreme court The court pointed out that the essential need component of the test must be tied to the specific county where the suit is filed. That is, the plaintiffs seeking joinder must show a compelling reason why they must be joined in that county, and not merely that they have an "essential need" to join with the other plaintiffs in order to pool resources. Otherwise, the plaintiffs have an alternative that makes their "need" not essential: they may sue in the county of the defendants' residence. Bernal, 5 S.W.3d at 348 (emphasis supplied) (citations omitted). In Bernal, a multi--plaintiff lawsuit involving injuries allegedly arising from the use of diet drugs commonly known as "fen/phen," this Court held that the plaintiffs failed to establish an essential need to try their claims in Cameron County. Bernal, 5 S.W.3d at 347. The affidavit evidence presented in Bernal addressed the "economic benefit" derived from sharing discovery and witnesses. Id. at 347--48. None of the evidence discussed in Bernal, however, established that the plaintiffs' need was tied to the specific county where the suit was filed. Id. at 348. In contrast, the evidence in the present case establishes Pasciak's essential need to try his case in Cameron County because the testimony of Gonzalez, an indispensable witness, is only available in Cameron County. We conclude that TWMC's suggestion as to the likelihood of Gonzalez taking time off from work to attend Pasciak's trial is no more than mere speculation. In contrast, Gonzalez's affidavit states that the demands of his job do not allow for travel to Travis or Williamson County. With regard to TWMC's argument that Pasciak has the option of presenting Gonzalez's testimony by videotape, we are unable to say with confidence that a jury would give the same weight to testimony presented by videotape as it would to live witness testimony. In Blalock, which also involved a plaintiff alleging injuries arising from the use of "fen/phen," this Court found, as it did in Bernal, that the plaintiff failed to establish an essential need to maintain suit in Hidalgo County. Blalock, 986 S.W.2d at 665. In Blalock, the plaintiff's attorney stated in an affidavit that the "only way" the plaintiff could prosecute her claims was by combining resources, and if not allowed to maintain suit in Hidalgo

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County, her ability to pursue her claims would be "severely compromised." Id. In rejecting the plaintiff's claim, this Court noted that the evidence failed to tie the plaintiff's claim to a particular county. Id. We find that unlike the affidavit evidence presented in Bernal and Blalock, the evidence in the case before us establishes that Pasciak has an essential need to try his suit in Cameron County, the only county that can provide him with the availability of his indispensable witness. Accordingly, we find that Pasciak has established the essential need element of joinder. C. Fair and Convenient Pasciak also had to establish that Cameron County is a fair and convenient venue for himself and TWMC. Although Pasciak is a resident of Williamson County, his affidavit establishes that Cameron County is a fair and convenient venue for him. With respect to TWMC, Pasciak points to the same evidence that he offered to prove TWMC would not be unfairly prejudiced by trying his suit in Cameron County. We have already examined the evidence and determined that TWMC would not be unfairly prejudiced. This Court has held that the evidence establishing absence of unfair prejudice will generally establish fairness and convenience. Blalock, 986 S.W.2d at 665. Here, we conclude that venue in Cameron County for Pasciak's claim is convenient for TWMC because it will already be in Cameron County defending against Gonzalez's lawsuit. Moreover, we note that allowing Pasciak to join Gonzalez's Cameron County lawsuit serves the interest of preserving judicial and public resources. We conclude that Pasciak has met his burden to establish the second, third and fourth joinder elements under section 15.003(a). Tex. Civ. Prac. & Rem.Code s 15.003(a) (Vernon Supp.2001). Accordingly, we overrule TWMC's first issue and AFFIRM the trial court's order denying TWMC's motion to transfer venue as to Pasciak.

§ 6.03

Litigating Venue Rights

[B]--Venue Rights

NOTES AND QUESTIONS Page 392: [Add new Note (5).]

(5) Venue Hearings. Normally, the trial court is directed to make venue decisions based solely on pleadings and affidavits, and to look only to see whether the plaintiff made a prima facie case of its venue facts without resolving factual disputes. Re­read the Surgitek, Bristol­Myers Corp. case

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above. How does the evidentiary hearing described in that case differ from a normal venue hearing? Can you think of any other venue provisions for which the Texas Supreme Court might find an evidentiary hearing to be appropriate? See, e.g., C.P.R.C. § 15.002(b) (transfers based on convenience); Tex. R. Civ. P. 257­259 (transfers for impartial trial).

[C]--Appellate Review of Venue Rulings

Page 397: [Insert the following case before Note:] GARZA v. GARCIA No. 02-0300, 2004 Tex. LEXIS 442 (May 14, 2004).

JUSTICE BRISTER delivered the opinion of the court in which Justice HECHT, Justice OWEN, Justice O'NEILL, Justice SCHNEIDER and Justice SMITH joined. CHIEF JUSTICE PHILLIPS filed a dissenting opinion, in which Justice Wainwright joined as to Parts I and II. JUSTICE WAINWRIGHT filed a dissenting opinion. Justice JEFFERSON did not participate in the decision. The Legislature amended the venue statutes in 1995 to allow a trial court to transfer venue "[f]or the convenience of the parties and witnesses and in the interest of justice." CPRC § 15.002(b)). At the same time, the Legislature mandated that a trial court's order granting or denying such a transfer for convenience is "not grounds for appeal or mandamus and is not reversible error." CPRC § 15 .002(c)). In this case, a defendant filed a motion asserting both improper venue and inconvenience, which the trial court granted without specifying the grounds. Generally, we must affirm such general orders if any ground in the accompanying motion is meritorious. Because the motion here asserted convenience as one ground, and the statute precludes reversal of any ruling made on convenience grounds, we hold the court of appeals erred in considering and reversing the trial court's venue order.

I

As an initial matter, we must decide whether a motion for new trial extends appellate timetables if the requisite filing fee is never paid. Garcia timely filed a motion for new trial, but never paid the fee. She filed her notice of appeal eighty-four days after judgment C timely if her motion extended the deadlines, but too late if it did not. The defendants argue the fee-less motion was ineffective to extend appellate deadlines, making Garcia's notice of appeal untimely, and depriving the court of appeals of jurisdiction over her appeal. We disagree. A motion for new trial is "conditionally filed" if tendered without the requisite fee, and appellate deadlines run from and are extended by that date:

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[A] motion for new trial tendered without the necessary filing fee is nonetheless conditionally filed when it is presented to the clerk, and that date controls for purposes of the appellate timetable. . . . [T]he failure to pay the fee before the motion is overruled by operation of law may forfeit altogether the movant's opportunity to have the trial court consider the motion; it does not, however, retroactively invalidate the conditional filing for purposes of the appellate timetable. Although we have previously reserved ruling on a fee that was never paid, we now extend the same rule to this situation for the same reasons. We construe the Rules of Appellate Procedure liberally, so that decisions turn on substance rather than procedural technicality; nothing in those rules requires a fee to accompany a motion for new trial, or that such a fee be paid at all. Moreover, once a motion for new trial is conditionally filed and timetables extended, all litigants benefit from knowing what timetables apply even if they do not know whether the requisite fee was paid. The alternative would breed uncertainty, as the deadlines might automatically jump forward when the fee is quietly paid or revert backwards if it is not. This is not to say filing fees are irrelevant. We have held that "absent emergency or other rare circumstances" a motion for new trial should not be considered until the filing fee is paid. Here, Garcia's factual sufficiency complaint had to be presented to the trial judge, but because she never paid the $15 fee, the trial court was not required to review it. Thus, because no new trial fee was ever paid, the court of appeals correctly never addressed Garcia's factual sufficiency complaint, but correctly considered her venue complaint.

II

The record reflects that petitioner Ines Gonzalez Garcia (a resident of Hidalgo County) brought suit against J & R Valley Oilfield Services, Inc. (a business in Hidalgo County) and Ramiro Garza (a resident of either Hidalgo or Starr County) concerning an auto accident occurring in Hidalgo County. Of sixteen potential lay and expert witnesses designated by the parties, fourteen were residents of Hidalgo County, and two of Mexico. None resided in Starr County. Nevertheless, suit was brought in Starr County, based on evidence that Garza lived there. J & R's motion to transfer venue (which Garza joined) argued that Starr County was not a county of proper venue, and added "[a]lternatively, your Defendant would show that venue should be transferred to Hidalgo County for the convenience of the parties." The trial court's order stated that "after considering the motion, the pleadings, the affidavits, the responses as well as arguments of counsel and after a hearing, the Court grants Defendants' Motion to Transfer Venue." At the trial in Hidalgo County, the jury awarded Garcia $120,000. Unsatisfied, she appealed seeking automatic reversal and a new trial based on the venue transfer.

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The court of appeals reversed, refusing to presume a venue order was granted on convenience grounds unless the order specifically said so. In addition to reversing the traditional presumption applicable to all other orders, this rule would sometimes do just what the Legislature prohibited. Because the transfer order here includes no reasons, we cannot be certain on which of the two grounds it was granted; one ground was convenience, and the evidence showed most of the witnesses and all of the events took place in Hidalgo County. As the Starr County judge certainly might have intended to grant it on convenience grounds, we cannot ignore the Legislature's ban on reviewing such orders by adopting a new presumption so we can review them anyway. The court of appeals refused to imply a finding on convenience grounds because the statutory prohibition on appellate review precluded reviewing the record for evidence that might support such an implied finding. But the statute precludes review not just of the evidence, but of the order itself. As a result, it is irrelevant whether a transfer for convenience is supported by any record evidence. Hypothetically, a trial judge could state there was no evidence for a convenience transfer, but grant it nonetheless, and (except for perhaps reporting it to the Judicial Conduct Commission) there is very little we could do about it. We acknowledge the court of appeals' concern that the usual presumption in favor of nonspecific orders will make many venue orders "immune from review." But in transfer orders based on convenience, that appears to have been precisely the Legislature's intent. And even under the court of appeals' bright-line test, trial judges who are so inclined may make any venue order immune from review simply by adding "granted on convenience grounds." Nor do we believe the potential for error or injustice here justifies making an exception to the general rule that trial judges and lawyers need not detail specific findings in every order. When a defendant files a motion based on both convenience and another venue ground, a trial judge may grant the motion on the former ground and we cannot review it. Or the judge may deny both, in which case we may review only the latter. The court of appeals was concerned a trial judge might intend to deny a motion based on convenience while granting (erroneously) the motion on an alternative ground. But most venue provisions are based on notions of convenience. As the county where the parties reside or the events occurred will often be the most convenient, we decline to change our usual presumption rules to presume the opposite. Our dissenting colleagues conclude the trial court could not possibly have granted this transfer on convenience grounds, but do so only after looking beyond the motion and order to the supporting evidence and the attorneys' arguments, exactly the kind of appellate review the statute precludes. They would remand to Hidalgo County, where the case could be transferred again (using the magic words "for convenience" this time), tried again in Starr County, and appealed again. This is exactly the kind of piecemeal review and relitigation our usual presumption is intended to avoid.

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Our dissenting colleagues argue our strict construction presumes the Legislature was either naive or cynical, but they appear willing to presume most trial judges who sign a venue order without specifying the grounds are ignorant of what they are signing or playing keep-away with appellate courts. They assert we have "swallowed" the defendants' arguments based on the literal words of this statute; but in a government of separate and limited powers, it is not our role to spit out those parts of a statute we find unpalatable. Nor can we make an exception "just this once" (as our colleagues suggest) because our venue rules are peculiar and of "critical importance;" undoubtedly, some might say the same about our rules for voir dire, the jury shuffle, or "the Rule." If we begin adding our own requirements to statutes, it becomes only a matter of personal preference as to where we should stop. Finally, we do not believe the movant's convenience motion must be more specific than the one here, at least when it is part of a motion asserting other venue grounds and there is no special exception. For example, under the general venue rule in section 15.002(a), the movant must plead venue facts (and support them with affidavits if necessary) that show no individual defendant resides in the forum county, no defendant business has its principal Texas office there, and a substantial part of the events did not occur there. See Tex. Civ. Prac. & Rem. Code § 15.002(a); Tex. R. Civ. P. 86(3), 87(3)(a). While a movant has every reason to add more facts in an effort to prevail, if those reasons alone are enough to convince the trial judge that the case would be more conveniently tried elsewhere, it would be mere formalism to reverse because they were not stated under two different headings. While appellate justices may chafe at restrictions on appellate review, the Texas Constitution generally allows the Legislature to expand or limit such review as it sees fit. Nor is the restriction here unreasonable under these circumstances. Debates in the Legislature indicate the transfer for convenience statute was intended "to make sure that venue is not a game any longer" by giving trial judges some power to ensure cases were tried where they sensibly belonged, but without adding reversible error or additional delays. This case was tried four years ago, and has been on appeal ever since. The Legislature might reasonably have concluded that discretionary transfers would make litigation more convenient only if they did not have to be re-fought on appeal. Accordingly, we hold the court of appeals erred by reversing the venue order here.

III

Because the court of appeals should have affirmed the trial court's transfer order on convenience grounds, we reverse the court of appeals' judgment. Because Garcia failed to present her factual sufficiency point to the trial court (by failing to ever pay the filing fee), she has failed to preserve her remaining point, and we render judgment reinstating the trial court's judgment.

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Chief Justice PHILLIPS filed a dissenting opinion, in which Justice WAINWRIGHT joined as to Parts I and II. Justice WAINWRIGHT filed a dissenting opinion. The Court holds today that when a motion to transfer venue on several grounds includes a phrase in a sentence alleging that such transfer will be for the convenience of the parties, and the trial court grants the motion without any indication that it considered or even knew a transfer on convenience grounds was alleged, the transfer is immune from review by any appellate court. Although this result can be supported by a literal reading of the venue statute, I believe it exalts form over substance to undermine the essential purpose of the Legislature's venue scheme. Therefore, I respectfully dissent.

I

Defendant J & R Valley Oilfield Services, Inc., joined by defendant Ramiro Garza, filed a motion to transfer venue in this personal injury suit from Starr to Hidalgo County. The motion objected to "venue in Starr County . . . on the grounds that said county is not a proper county and no basis exists mandating or permitting venue in [Starr County]," because J & R is "not a resident of Starr County" and "does not have [its] principal office" or any agent in Starr County. J & R then asserted that "[v]enue is maintainable in Hidalgo County . . . because all of the events giving rise to the claim occurred in Hidalgo County, Texas, [and] Hidalgo County is the county of [J & R's] residence. . . ." At the end of the motion, J & R added this single sentence: "Alternatively . . . venue should be transferred to Hidalgo County for the convenience of the parties." In reply to J & R's motion to transfer venue, plaintiff Ines Gonzalez Garcia alleged several reasons why Garza was a resident of Starr County, where Garcia brought suit. First, he pointed to the report prepared by the state trooper following the accident that was the basis of this suit, which listed Garza's address as Rio Grande City. Second, Garza owned a home in Rio Grande City, where his wife and children resided, on which Garza paid taxes for the year the accident occurred. Finally, Garza gave the Rio Grande City address to a magistrate when he appeared in court on an unrelated Driving While Intoxicated charge. In support of these claims, Garcia attached Garza's deposition and a court document from Garza's DWI arraignment. The trial court conducted two hearings at which both parties presented live testimony. Neither party, however, introduced any argument on, or even referenced the term "convenience of the parties." The trial court granted J & R's motion, stating in its order: "[A]fter considering the motion, the pleadings, the affidavits, the responses as well as arguments of counsel and after a hearing, the Court grants Defendant's Motion to Transfer Venue." The order gave no reasons for granting the transfer, and in particular never mentioned the term "convenience of the parties."

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This case was then tried in Hidalgo County. The jury returned a verdict in favor of Garcia, awarding her $120,000 for past and future physical pain and mental anguish and for past medical care, but nothing for past and future physical impairment or disfigurement. The trial court rendered judgment on the verdict. Despite the generally favorable judgment, Garcia appealed, arguing that the trial court erred in transferring the case from Starr County to Hidalgo County. The court of appeals reversed, holding that the evidence supported venue in Starr County, where Garcia brought suit. 70 S.W.3d 362. J & R and Garza argued that the court could not reverse the transfer because section 15.002(c) prohibits appellate review of transfers for convenience. See Tex. Civ. Prac. & Rem. Code § 15 .002(c). The court of appeals refused to presume that the transfer was based on the convenience of the parties, noting that such a presumption would insulate most venue determinations from review. 70 S.W.3d at 367-68. Because venue exceptions and mandatory venue provisions have always been strictly construed, and because all venue determinations except for the transfer for convenience are subject to review, the court of appeals held: [I]n order to fall within the parameters of subsection (c), that is, in order to be exempt from appellate review, a venue order must expressly state that the cause is or is not transferred for the convenience of the parties under section 15.002(b), or the record must contain express findings of fact in accordance with section 15.002(b). Id. at 368. The court then reviewed the transfer under the general venue provision and held that the trial court erred in granting the transfer. It therefore remanded the case for the trial court in Hidalgo County to transfer the case to Starr County for a new trial. Id. at 372.

II

The principal venue statute in Texas is section 15.002 of the Texas Civil Practice and Remedies Code. Section 15.002(a) includes four subsections for determining in what county a suit is properly brought. Tex. Civ. Prac. & Rem. Code § 15.002(a). There is no immediate appeal from an adverse ruling, but if on appeal venue is determined to have been improper, "it shall in no event be harmless error and shall be reversible error." Id. § 15.064(b). Thus, the price of an improper venue ruling is always a new trial. The Legislature, however, gives the trial court discretion to decide whether to transfer a case to another county for the convenience of the parties and in the interest of justice. Id. § 15.002(b). This discretion is broad, but not unfettered, because it can only be exercised when three conditions are met. As Section 15.002(b) states: For the convenience of the parties and witnesses and in the interest of justice, a court may transfer an action from a county of proper venue under this subchapter or Subchapter C to any other county

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of proper venue on motion of a defendant filed and served concurrently with or before the filing of the answer, where the court finds: (1) maintenance of the action in the county of suit would work an injustice to the movant considering the movant's economic and personal hardship; (2) the balance of interests of all the parties predominates in favor of the action being brought in the other county; and (3) the transfer of the action would not work an injustice to any other party. Id. In contrast to the automatic reversal for an erroneous venue determination, however, a trial court's transfer under section 15.002(b) will not be reversed if it is wrong. In fact, it is not reviewable at all on appeal or by an extraordinary pleading. Section 15.002(c) commands: "A court's ruling or decision to grant or deny a transfer under Subsection (b) is not grounds for appeal or mandamus and is not reversible error." Id. § 15.002(c). J & R and Garza contend that because their motion to transfer venue requested a transfer based on both sections 15.002(a) and 15.002(b), and the trial court's order stated only that the motion was granted, the appellate court must presume it to be a transfer for convenience that is immune from review. The court below considered and rejected this claim, but this Court swallows it without pause, pointing to our general practice in Texas that an order granting relief without specifying the grounds is presumed to have been based on all asserted grounds. ___ S.W.3d at___. The Court states that it does not "believe the potential for error or injustice here justifies making an exception to the general rule that trial judges and lawyers need not detail specific findings in every order." Id. at ___. Generally as a part of appellate review, we presume that a trial court's order, which does not specify grounds, is correct if any meritorious ground was before the court. See State Farm Fire & Cas. Co. v. S.S., 858 S.W.2d 374, 380 (Tex.1993) (summary judgment). While this is a useful construct for preventing piecemeal review and relitigation, it has the opposite effect in this case. Because section 15.002(c) precludes appellate review of convenience transfers, applying the general rule here does not facilitate appellate review, it abrogates it. The reason for the presumption is stood on its head, which ought to make us question whether the Legislature meant for it to apply. Instead, I believe the accepted rules of statutory construction suggest that the Legislature did not. Our first duty is to interpret a statute in a way that carries out the Legislature's intent. Tex. Gov't Code § 312.005; State v. Gonzalez, 82 S.W.3d 322, 327 (Tex.2002); Am. Home Prods. Corp. v. Clark, 38 S.W.3d 92, 95 (Tex.2000). When interpreting a statute we may consider the object sought to be attained, the circumstances under which the statute was enacted, the consequences of different constructions, and the statute's legislative history. Tex. Gov't Code § 311.023. In requiring a judge to "find" each of the three statutory conditions before granting a convenience

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transfer, I believe the Legislature directed the trial court to communicate in some fashion that three findings had been made so that the parties would know that the law had been followed and a reviewing court would know that it had no power of review. Venue has long been a significant issue in Texas law, which is perhaps not surprising in a diverse state with 254 counties and an elected judiciary. The venue rules in Texas may be traced to our Spanish heritage. Clarence Guittard & John Tyler, Revision of the Texas Venue Statute: A Reform Long Overdue, 32 Baylor L. Rev. 563, 564-66 (1980). The original Texas venue statute, which was enacted by the first Congress of the Republic in 1836, adopted the general Spanish rule that provided a defendant with the privilege of a trial in the county of domicile with certain exceptions. Id. at 565. Since 1836, the Legislature has amended the venue scheme multiple times. Prior to 1983, the general rule that a defendant shall be sued in the county of domicile had been modified by 34 statutory exceptions. Dan R. Price, New Texas Venue Statute: Legislative History, 15 St. Mary's L.J. 855, 857-58 (1984) (citing Tex. Rev. Civ. Stat. Ann. art. 1995 (Vernon 1964 & Supp.1982-1983)(amended 1983)). However, growing displeasure with alleged forum-shopping and plea of privilege delay led to wholesale venue reform in 1983. See Act of May 28, 1983, 68th Leg., R.S., ch. 385, §§ 1-3, 1983 Tex. Gen. Laws 2119-24. The plea of privilege was replaced with postjudgment venue appeal, subject to the guarantee of automatic appellate reversal for error. See id. at 2124. This provision was meant to "plac[e] parties at great risk if by fraud, negligence, oversight, or otherwise venue is improper in the ultimate county of suit." Price, supra at 879. I find no other instance in the laws of Texas where the Legislature has designated a preliminary determination to be so significant that it cannot be harmless error. Thus, the Legislature clearly considered proper venue to be of critical importance. Beset by continuing allegations that parties were suing nominal defendants and bringing manufactured claims to obtain more favorable forum, the Legislature again undertook comprehensive venue reform in 1995. Act of May 18, 1995, 74th Leg., R.S., ch. 138, §§ 1-6, 1995 Tex. Gen. Laws 978-81 (codified at Tex. Civ. Prac. & Rem. Code §§ 15 .001-.66). The Legislature expanded subsection 15.002(a) to include the current four provisions for proper venue, supplanting the venerable single standard, which provided that venue was proper " `in the county in which all or a part of the cause of action accrued or in the county of defendant's residence if the defendant was a natural person.' " A. Erin Dwyer, Donald Celleluori, & Thomas A. Graves, Annual Survey of Texas Law: Texas Civil Procedure, 49 SMU L. Rev. 1371, 1375-76 (1996) (quoting Tex. Civ. Prac. & Rem. Code Ann. § 15.001 (Vernon 1986)). These changes were intended "to eliminate continuing debate about where a cause of action accrued" and provide "a general rule specifying venue for all suits brought against corporations." Id. at 1376. At the same time, the venue scheme was also amended to include sections 15.002(b) and (c). Act of May 18, 1995, 74th Leg., R.S., ch. 138, § 1, 1995

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Tex. Gen. Laws 979. Proponents of the amendment described section 15.002(b) as "a meaningful reform" to promote "fairness and balance in our venue laws," giving the trial court the "ability to balance all of the competing interests that are involved in trying to find a fair place within the venue statute to try a lawsuit." An Act Relating to Venue for Civil Actions: Debate on Tex. S.B. 32 on the Floor of the House, 74th Leg., R.S. 4 (May 3, 1995) (testimony of Rep. Duncan) (transcript available at the Texas State Law Library). I refuse to believe that, by adding this provision, the Legislature intended to undermine the careful scheme it had just created in subsection (a). Was the Legislature really so cynical as to represent to litigants that a lawful venue position would be automatically vindicated on appeal, while in fact providing a "back door" method that would permit trial courts to insulate their venue transfers from any appellate review at all? Or was the Legislature really so naive as to believe that no lawyer would simply slip the words "convenience of the parties" into a transfer motion while presenting evidence and argument solely on the merits of its venue motion in hopes of luring the trial court into inadvertently making its ruling immune from appeal? I answer both questions "no." As the court of appeals noted, appellate review, and the threat of reversal, are important safeguards against venue fraud. 70 S.W.3d at 368 (citing Wilson v. Tex. Parks & Wildlife Dep't, 886 S.W.2d 259, 261 n. 3 (Tex.1994); Maranatha Temple, Inc. v. Enter. Prod. Co., 833 S.W.2d 736, 741 (Tex. App.-Houston [1st Dist.] 1992, writ denied)). While introducing some flexibility into the system, the Legislature still must have intended for the judge to make a convenience transfer only after a conscious determination, communicated to the parties, that in the court's opinion all three of the transfer requirements had been met. Otherwise the Legislature's intention that venue determinations under section 15.002(a) be automatically reversible on appeal could always be frustrated by a devious judge, clever counsel, or, as likely happened here, simply by accident. Therefore, I conclude that the Legislature required the trial judge to "find" all of these factors. For the Court, the simplicity of the general rule trumps all. The Court is not at all curious about the problems its holding creates. Instead the Court's total analysis is: We acknowledge the court of appeals' concern that the usual presumption in favor of nonspecific orders will make many venue orders `immune from review.' But in transfer orders based on convenience, that appears to have been precisely the Legislature's intent. And even under the court of appeals' bright-line test, trial judges who are so inclined may make any venue order immune from review simply by adding `granted on convenience grounds.' ___ S.W.3d at ___ (citation omitted). I agree with the court of appeals that the situation presented here is unique. Additionally, I find no other statute providing that a determination by a trial judge may be based on more than one reason, one being automatic

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error if wrong, and the other requiring a finding by the trial judge but being totally immune from appellate review. Requiring a trial court to state in its order, or otherwise include findings in the record, to establish that a granted motion to transfer venue is based on the convenience of the parties when the defendant has also sought transfer under traditional venue rules is necessary to preserve the Legislature's mandate that an erroneous section 15.002(a) ruling is automatically reversible. Because the trial court below was presented with multiple grounds for venue transfer, one of which was section 15.002(b), and the trial court did not explain in its order or otherwise that the venue transfer it made was for the convenience of the parties, nor did the trial court make section 15.002(b) findings, I would hold that the trial court's order in this case is reviewable under section 15.002(a). If the Court were to reach the merits of the venue transfer, I would agree with the court of appeals that Garcia presented prima facie proof that venue was proper in Starr County and that the trial court erred in transferring the case to Hidalgo County. I would therefore affirm the judgment of the court of appeals. Justice WAINWRIGHT, dissenting. Intending to stem venue shopping and gamesmanship, the Legislature precluded Texas appellate courts from reviewing venue transfers ordered on the basis of "convenience of the parties and witnesses and in the interest of justice." Tex. Civ. Prac. & Rem. Code § 15.002(b); see An Act Relating to Venue for Civil Actions: Debate on Tex. S.B. 32 on the Floor of the House, 74th Leg., R.S. 4 (May 3, 1995) (testimony of Rep. Duncan) (transcript available at the Texas State Law Library) [hereinafter Debate on Tex. S.B. 32 ]. Unlike any other orders issued in civil matters by state trial courts (of which I am aware), decisions to transfer venue based on convenience of the parties are by statute shielded entirely from appellate review. Tex. Civ. Prac. & Rem. Code § 15.002(c). But the Legislature raises this shield only "where the court finds" the requisite elements required for the convenience transfer. Id. § 15.002(b)-(c)(emphasis added). Notwithstanding the words of the statute, the Court decides today that trial courts need not comply with the Legislature's instructions under section 15.002(b) to find a convenience transfer with reference to the three factors set out in the statute. ___ S.W .3d ___. Now, without making the referenced finding, a trial court may sign an order that generically grants a transfer motion that recites anywhere in the motion four talismanic words B "convenience of the parties"-- and insulate the grant of the motion from appellate review for all time. Under the Court's opinion, this occurs even if 1) no arguments were presented to the trial court in the briefing or at the venue hearing in support of a convenience transfer, 2) no evidence was submitted in the briefing or at the hearing in support of the required statutory fact findings and 3) there is no indication in the record that a trial judge was even aware that signing the generic order would effect a convenience transfer. Certainly the Legislature may restrict appellate review of venue transfers upon the satisfaction of given conditions, but we should check to ensure that the

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conditions were considered by trial courts to trigger the bar on appellate review. The Court goes even further and states that a trial judge can intentionally violate the statute, without recourse, by granting the transfer even if the judge expressly states that "there was no evidence for a convenience transfer." ___ S.W.3d at ___. If this were to occur, this Court should not countenance such conduct in the Texas judicial system, much less interpret a statute in a manner that invites its violation. The Court's interpretation of this statute is inconsistent with the statute's language and is a departure from long-standing precedent that we are to give effect to all of the words in a statute. St. Luke's Episcopal Hosp. v. Agbor, 952 S.W.2d 503, 505 (Tex.1997); Simmons v. Arnim, 110 Tex. 309, 220 S.W. 66, 70 (Tex.1920). The Court should follow the express language of the statute and simply require, at a minimum, some indication in the record that the trial court transferred the case for convenience of the parties. This approach is consistent with the legislative preclusion of appellate review of convenience transfers because it does not permit factual or legal sufficiency review of the evidence supporting a transfer. Appellate courts would search the record only for some indication that the transfer was for the convenience of the parties. If such an indication is in the record, then the transfer stands and there is no appellate consideration of its merits. In this case, Ramiro Garza and J & R Valley Oilfield Services, Inc. complained that Starr County was not a county of proper venue, asserting that "Plaintiffs' cause of action, if any, did not arise in Starr County" and that "no mandatory or permissive exception authorizes the maintenance of the action in Starr County, Texas." Specifically, defendants argued that Garza was not a resident of Starr County for venue purposes. [If venue is properly established against one defendant, it is also proper against all the defendants for all claims arising out of the same occurrence. Tex. Civ. Prac. & Rem. Code § 15.005. For this reason, the parties focused their argument on the important issue of Garza's county of residence.] After arguing that venue was proper in Hidalgo County, the motion stated in the following single sentence: "Alternatively, [J & R] would show that venue should be transferred to Hidalgo County for the convenience of the parties." The motion neither cited nor referenced any supporting arguments of inconvenience or injustice to the parties. At the venue hearing, the parties did not argue that the court should transfer the case based on convenience, neither the court nor the parties even mentioned the required findings under the statute, and there is no indication in the record that the trial judge granted a convenience transfer. The court signed an order that recited, "[T]he Court grants Defendants' Motion to Transfer Venue." The parties and the trial court focused on whether the plaintiffs' chosen venue, Starr County, was a proper venue under section 15.002(a)(2) based on Garza's residence, and there was ample evidence that Starr County was defendant's residence. Venue was proper in Starr County, and this Court never suggests that it was not.

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As further justification for its ruling, the Court contends that trial judges are too busy to pay attention to such details before signing venue transfer orders. ___ S.W.3d at ___. On the contrary, it is the sworn duty of judges to uphold the law and pay careful attention to such important legal details. Only when the record indicates that trial courts effected a convenience transfer may we then be satisfied that the statutory requisites were followed while also honoring the Legislature's intent to remove the merits of such transfers from appellate review. In short, when a transfer is also sought on traditional venue grounds, it would not be onerous to require a trial court transferring a case under section 15.002(b) to indicate in some manner in the record that, after considering the statutory factors, it granted the motion to transfer venue based on convenience of the parties and witnesses. This would avoid developing jurisprudence, as the Court does today, based on a guess that the judge "might have intended to grant [the motion] on convenience grounds."___ S.W.3d at ___. Rather than guess, the Court could determine if a trial judge actually made a convenience transfer if it simply enforced the statute as written. Given a legislative instruction to trial courts to affirmatively take action to effect a convenience transfer, the Court should require some indication that the statute was followed rather than assume, without any indication in the record, that it was. But the Court contends that its decision is not based on just a guess, but also on a presumption. ___ S.W.3d at ___. Its presumption is that "[g]enerally, we must affirm a trial court's ruling if any ground in the accompanying motion is meritorious." ___ S.W.3d at ___. I question whether insertion of a few words in a motion can always raise an additional meritorious ground on appeal in motions the Court cites to support its position (e.g., summary judgments and pleas to the jurisdiction). Even assuming it can, this is also not an appropriate basis for the decision. It is inappropriate for the Court to apply an appellate presumption to trump a statutory instruction. This is especially true when the statute was enacted as part of a clear Legislative mandate, as existed here, to address venue shopping. See Debate on Tex. S.B. 32, supra (testimony of Rep. Duncan). Moreover, the Court's examples of motions to which this presumption applies are inapposite; the Legislature does not require a finding to grant a summary judgment or a plea to the jurisdiction; it does for a convenience transfer. The Court attempts to avoid this distinction by relying on a guess and a presumption. I fear that the opinion's method of interpreting this statute could open a pandora's box of unintended consequences by not enforcing the Legislature's instruction to trial courts to "find" specified factors to order a convenience transfer, when this can be accomplished without undermining the preclusion on appellate review. For these reasons, I respectfully dissent, and I join sections I and II of Chief Justice PHILLIPS's dissent. I respectfully part with Chief Justice PHILLIPS's dissent only as to his statement that the Court's opinion may be supported by a literal reading of the statute.

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NOTES AND QUESTIONS Page 397: [Change heading from "NOTES" to "NOTES AND QUESTIONS" and add the following before the first note paragraph, which should be numbered (3).]

(1) Effect of Whole Record Review. Suppose that venue in a county is based on the residence of one of multiple defendants or one of multiple claims. What happens if the claim on which venue is based is eliminated by summary judgment? If the defendant files a timely motion to transfer venue, will the elimination of the in­county claim destroy the basis for venue? See Pines of Westbury, Ltd. v. Paul Michael Constr., Inc., 993 S.W.2d 291, 294 (Tex. App.--Eastland 1999, pet. denied) (venue based on claim against defendant Hart; venue was correctly sustained at original venue hearing based on prima facie evidence presented about Hart at that time; claim against Hart eliminated on the merits by summary judgment; on appeal, court must review entire record and because of the summary judgment there is no probative evidence to support the claim and therefore no probative evidence to support the court's venue determination; reversed and remanded with directions to transfer the case as requested by defendants). (2) Review of Venue Rulings. Despite the fact that interlocutory review of venue rulings was eliminated in 1983, to avoid the waste and expense of the old system, Texas courts continue to allow immediate review under limited circumstances. Two of the 1995 statutory amendments provide for immediate review, and the court occasionally, but not usually, allows the use of mandamus review.

The court of appeals held that since the trial court's ruling at least facially relied on section 15.002(a), "section 15.003(c) cannot be the jurisdictional basis for this appeal." 999 S.W.2d at 910. The court of appeals therefore refused to consider the merits of the appeal and dismissed it for want of jurisdiction. Justice Gray dissented based on "the plain language of section 15.003." 999 S.W.2d at 911. I agree with Justice Gray and the three other courts of appeals that have considered the issue presented in this case. In a multi­plaintiff suit, appellate courts are to determine in an interlocutory appeal whether each plaintiff has established venue independently of any other plaintiff as required by section 15.003. . . . * * *

Because the Court seriously undermines the Legislature's efforts to reform the legal system, I dissent. I would reverse the judgment of the court

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of appeals and remand this case to the trial court with instructions to grant the motion to transfer.

Page 397: [Add the following paragraphs at the end of the subsection and insert the following new case.]

Re­read the Missouri Pacific Railroad case above. The Texas Supreme Court there held that the legislature intended Section 15.0642 to provide for immediate review of mandatory venue rulings. Therefore, despite the fact that the vehicle for review is "mandamus," these cases need not satisfy the normal requirement that there be no adequate remedy by appeal. The Court has also allowed the use of mandamus to provide an immediate review of a venue ruling when the trial court has used an improper procedure. Consider the following case.

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IN RE MASONITE CORP. 997 S.W.2d 194 (Tex. 1999)

ENOCH, Justice. * We are asked to mandamus a trial judge who, in the face of the plaintiffs' concession that venue was improper and the defendants' properly pleaded and proven venue transfer motions, denied the motions but then "on its own motion" transferred hundreds of claims to multiple counties none of which were forums requested in the transfer motions. We conditionally grant the writ. Hundreds of homeowners filed suit in Jim Hogg County against Masonite Corporation, Abitibi­Price Corporation, and MG Building Materials, Inc. (sometimes collectively "Masonite") alleging the defendants' use of defective building materials. (A fourth defendant, Nu­Air Manufacturing, Inc., is not a party to this proceeding.) On the same day, hundreds more plaintiffs filed a similar suit against the same defendants in Duval County. The homeowners contended that venue was proper under section 15.002 of the Texas Civil Practice and Remedies Code because the allegedly defective building materials were installed in their homes in the counties of suit. But in neither the Jim Hogg County suit nor the Duval County suit were all the homeowners residents of the respective counties. Because of this, Masonite filed motions to transfer venue of the non­ resident homeowners' claims to Dallas County, the county of its principal Texas office. Abitibi­Price and MG Building also moved to transfer venue to the counties of their principal offices or, in the alternative, to Dallas County. In response, the homeowners filed amended petitions and motions to sever, acknowledging that venue was proper in the counties of suit only for those who resided in those counties. In the Jim Hogg suit, the homeowners asserted that all homeowners were residents of either Jim Hogg or Jim Wells County. They pleaded that venue was proper in Jim Hogg County for those homeowners residing in that county, and in Jim Wells County for those residing in that county. And they asked that the trial court sever the claims, sending the non­resident homeowners to their county of residence. Similarly, in the Duval suit, the homeowners asserted that they were residents of Duval, Bee, Bexar, Brooks, Cameron, Dimmit, Hidalgo, Kleberg, Live Oak, Moore, Nueces, San Patricio, Webb, or Wilson County, that venue was proper in Duval County for the Duval County residents, and in the respective counties of residence for the homeowners residing in those counties. Again, the homeowners asked the trial court to sever these claims and send the non­resident homeowners to their respective home counties. The trial court denied both the motions to transfer venue and the motions to sever, but then "on its own motion," severed the claims of the

*

Footnotes omitted unless otherwise indicated.

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non­resident homeowners and transferred them to the counties of their respective residences. None of these counties was the county selected by Masonite. Thus, two suits with hundreds of homeowners have been divided into sixteen cases that will be tried in sixteen different counties. (We note that the same trial judge presided over both of the cases considered in this opinion, and that the orders at issue are virtually identical in all respects relevant to our disposition of this consolidated mandamus proceeding.) From this action, Masonite appealed to, and petitioned for writ of mandamus from, the court of appeals. That court consolidated and disposed of these matters in a single opinion.

. . . .

The mandamus petitions were predicated on the trial court's orders being void. The court of appeals denied the requested writs of mandamus. It held that though the trial court may have exceeded its authority by entering the orders, the subject matter of those orders was within the jurisdiction of the trial court. Consequently, the orders were not "void." Because the orders were not void, the court of appeals then looked to see whether Masonite had an adequate remedy by appeal and concluded Masonite did. But we conclude that appeal is not an adequate remedy under the exceptional circumstances created by the trial court's orders. Our mandamus standards are well­established. Mandamus is an extraordinary remedy available only when there is an abuse of discretion and no adequate appellate remedy. Generally, an appellate remedy is adequate even though it involves delay and more expense than obtaining an extraordinary writ. Accordingly, venue determinations as a rule are not reviewable by mandamus. But on rare occasions an appellate remedy, generally adequate, may become inadequate because the circumstances are exceptional. Specifically, a trial court's action can be " `with such disregard for guiding principles of law that the harm . . . becomes irreparable.' " That is the case here. Texas venue law is established. The plaintiff has the first choice to fix venue in a proper county; this the plaintiff does by filing the suit in the county of his choice. If a defendant, through a venue transfer motion, objects to the plaintiff's venue choice, the plaintiff must prove that venue is proper in the county of suit. Where there are multiple plaintiffs joined in a single suit, each plaintiff, independently of the others, must establish proper venue. With some exceptions not relevant here, "any person who is unable to establish proper venue may not join or maintain venue for the suit as a plaintiff." If the plaintiff fails to establish proper venue, the trial court must transfer venue to the county specified in the defendant's motion to transfer, provided that the defendant has requested transfer to another county of proper venue. On this point, the defendant has the burden to provide prima facie proof.

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Because the homeowners conceded venue was not proper for the non­ residents, all Masonite needed to do was to offer prima facie proof that Dallas County was a proper venue. This Masonite did. The trial court, in ordering these cases transferred to counties other than that proved to be proper venue, ignored the pleadings, the facts, and the law. This was a clear abuse of discretion. Functionally, the nonresident plaintiffs asked the trial court to fix their mistake and transfer their claims to another county of their choice, not Masonite's. The trial court had no discretion to, in effect, grant the plaintiffs a transfer of venue; the plaintiffs had the first choice, but not the second, of a proper venue. The fact that the trial court stated that it was "acting on its own motion" when it transferred venue of the nonresident plaintiffs' claims to the sixteen counties in which they respectively reside does not change, but in fact reinforces our conclusion that the trial court abused its discretion. A trial court has no discretion to transfer venue on its own motion, even to a county of proper venue. Relying on cases stating that a trial court "has no authority" to transfer venue on its own motion, Masonite argues that the trial court's venue transfer orders in this case were "void," and therefore Masonite is entitled to mandamus relief without reference to whether it has an adequate remedy on appeal. The court of appeals . . . held that the trial court's venue transfer orders were merely "voidable," not "void." The court of appeals is correct. . . . That the trial court's venue transfer orders were a clear abuse of discretion does not mean that they were "void." In any event, Masonite argues that this case presents "exceptional circumstances" that make appeal an inadequate remedy. We agree. Here, the trial court effectively treated the nonresident plaintiffs' motions to sever as motions to transfer venue and granted them. The trial court's actions showed " `such disregard for guiding principles of law that the harm . . . is irreparable.' " The effect of the trial court's disregard for the parties' pleadings, the facts, and the law is that the claims of hundreds of plaintiffs, instead of being tried in a proper forum, are now being tried in multiple improper forums--all trials with automatic reversible error. There is no reason for the resources of Texas courts and the parties to be so strained. Contrary to the dissent's charge, we do not retreat from Walker v. Packer's requirement that there be no adequate appellate remedy before mandamus will issue. The dissent views this requirement as inflexible, focusing exclusively on whether the parties alone have an adequate appellate remedy. But Walker does not require us to turn a blind eye to blatant injustice nor does it mandate that we be an accomplice to sixteen trials that will amount to little more than a fiction. Appeal may be adequate for a particular party, but it is no remedy at all for the irreversible waste of judicial and public resources that would be required here if mandamus does not issue. Nor is our holding today "directly contrary to Canadian Helicopters." There we stated that the mere fact that a trial court has committed

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reversible error is not sufficient by itself to warrant mandamus relief. But we also noted that "truly extraordinary circumstances" might exist that would render an appellate remedy inadequate. This case is different from the ordinary situation where a trial court erroneously denies a venue transfer motion. That situation involves only the resources of the errant trial court and the parties that remain. And in that case, even though the trial court has committed reversible error, we will not issue mandamus. But here the trial court has wrongfully burdened fourteen other courts in fourteen other counties, hundreds of potential jurors in those counties, and thousands of taxpayer dollars in those counties. These are "exceptional circumstances" warranting mandamus relief. The trial court abused its discretion in rendering these venue transfer orders. The extreme effects of this abuse render an appellate remedy inadequate. Accordingly, we conditionally grant mandamus. We trust that the trial court will comply with this opinion; the writ will issue only if it fails to do so. BAKER, Justice, dissenting, joined by PHILLIPS, Chief Justice, and O'NEILL, GONZALES, Justices. Today the Court holds that the trial court abused its discretion and that the circumstances in this case are so exceptional that Masonite does not have an adequate appellate remedy. I agree with the Court that the trial court abused its discretion in issuing the transfer orders on its own motion. But I cannot agree that this case involves exceptional circumstances rendering Masonite's appellate remedy inadequate and warranting mandamus relief. Accordingly, I respectfully dissent.

. . . .

The majority recognizes that, as a rule, venue determinations are not reviewable by mandamus. . . . But the Court agrees with Masonite's argument that it does not have an adequate appellate remedy and grants mandamus relief based on this conclusion. In doing so, the Court rejects precedent on this specific issue, circumvents public policy, retreats to where the law was before Walker, and reinstates a principle of law Walker specifically disapproved. The majority asserts it does not retreat from Walker's requirement that there be no adequate appellate remedy before mandamus will issue. But the majority then focuses on preserving judicial and public resources instead of the parties' rights. The majority does not explain why mandamus relief should not be granted in each case where reversible error exists, because doing so would certainly preserve judicial and public resources. Additionally, the majority expresses discomfort to being an "accomplice to sixteen trials that will amount to little more than a fiction." What if, instead of sixteen trials, there were just ten? Five? How much "waste of judicial and public resources" should be tolerated before a Court grants mandamus relief? The fallacy in the majority's decision is that the Court no longer has, nor does it provide, guidance on this issue for future cases.

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. . . . C. PUBLIC POLICY

This State's public policy is another reason why mandamus should not issue here to control the trial court's order determining the motion to transfer. Our Legislature, and indeed, this Court, has mandated that no interlocutory appeal lies from the trial court's determination of a motion to transfer. See Tex. Civ. Prac. & Rem. Code § 15.064(a); Tex. R. Civ. P. 87(6); Ogburn v. Blackburn, 697 S.W.2d 822, 823 (Tex. App.--Amarillo 1985, orig. proceeding); Hendrick Med. Center v. Howell, 690 S.W.2d 42, 45 (Tex. App.--Dallas 1985, orig. proceeding). To grant mandamus, as the majority does here, permits the very interlocutory appeal the statute was enacted and the rule was promulgated to prohibit. Ogburn, 697 S.W.2d at 823­824; Hendrick Med. Center, 690 S.W.2d at 45­46.

. . . .

I would hold that an appeal is adequate and deny mandamus relief. Because the court holds to the contrary, I respectfully dissent.

§ 6.04

Waiver of Venue Rights

NOTES

Page 404: [Change the heading from "NOTE" to "NOTES" and add the following before the first note paragraph, which should be numbered (2).]

(1) Major Transactions. A new mandatory venue provision adopted in 1999 appears to change the principle that venue is fixed by law and "any agreement or contract whereby the parties try to extend or restrict venue is void against public policy." In a new Section 15.020 of the Civil Practice and Remedies Code, the legislature has provided that in transactions worth more than $1 million, the parties may agree to venue. Such agreements are binding unless unconscionable when made, and control over other provisions of Chapter 15. They would not, however, control over the venue provisions of statutes outside of Chapter 15 of the Civil Practice and Remedies Code. Re­read Section 15.020, located in Section 6.02[B].

§ 64.02

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§ 6.06

Multidistrict Litigation

Page 409: [Delete W. Dorsaneo, Texas Litigation Guide and insert updated provision of W. Dorsaneo, Texas Litigation Guide 64.] W. Dorsaneo, TEXAS LITIGATION GUIDE 1. LEGAL BACKGROUND A. Consolidation of Cases Filed on or After September 1, 2003

§ 64.01

Overview of Texas Rule of Judicial Administration 13

[1]--Adoption and Application of Rule 13

As directed by the Texas Legislature in 2003 [see Acts 2003, 78th Leg., R.S., ch. 204, § § 3.01, 3.02, 23.02(a)], the Texas Supreme Court has adopted Texas Rule of Judicial Administration 13, effective for all cases filed on or after September 1, 2003 [Tex. R. Jud. Admin. 13.1(b); see Texas Supreme Court Order, P 1(e), Misc. Docket No. 03-9145, Aug. 29, 2003], to allow for the temporary transfer of related cases to one district court for consolidated or coordinated pretrial proceedings. The cases are to be remanded to their original courts after those pretrial proceedings are concluded. Rule 13 applies to civil actions that involve one or more common questions of fact and that were filed in a constitutional county court, county court at law, probate court, or district court on or after September 1, 2003 [Tex. R. Jud. Admin. 13.1(b)]. Rule 13 supersedes Texas Rule of Judicial Administration 11, which applies to cases filed before September 1, 2003 [Tex. R. Jud. Admin. 13.1(b); see § 64.20]. However, those cases can be treated under Rule 13 if all parties agree in writing to the application of Rule 13 [Tex. R. Jud. Admin. 11.7(b); see § 64.20[2]]. Rule 13 is promulgated under Gov. C. § 74.161 et seq. [Tex. R. Jud. Admin. 13.1(a)], creating and empowering the Judicial Panel on Multidistrict Litigation [see § 64.02], and under Gov. C. § 74.024, authorizing the Texas Supreme Court to consider the adoption of rules relating to the transfer of related cases for consolidated or coordinated pretrial proceedings [Gov. C. § 74.024(c)(10)].

§ 64.02

Judicial Panel on Multidistrict Litigation

[1]--Existence of MDL Panel

The Judicial Panel on Multidistrict Litigation, also known as the MDL Panel [see Tex. R. Jud. Admin. 13.2(a)], consists of five members designated

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from time to time by the Chief Justice of the Texas Supreme Court. The members of the panel must be active court of appeals justices or administrative judges [Gov. C. § 74.161(a)]. Panel members serve for two years, with the first term beginning July 1, 2003 [Texas Supreme Court Order, ¶ 2, Misc. Docket No. 03-9149, Sept. 9, 2003]. * * * * * *

The concurrence of three panel members is necessary to any action by the panel [Gov. C. § 74.161(b)].

[2]--Transfer of Cases by Panel [a]--Panel's Authority to Transfer Cases

Notwithstanding any other law to the contrary, the MDL Panel may transfer civil actions involving one or more common questions of fact pending in the same or different constitutional courts, county courts at law, probate courts, or district courts to any district court for consolidated or coordinated pretrial proceedings, including summary judgment or other dispositive motions, but not for trial on the merits [Gov. C. § 74.162]. A transfer may be made by the panel on its determination that the transfer will (1) be for the convenience of the parties and witnesses, and (2) promote the just and efficient conduct of the actions [Gov. C. § 74.162].

[b]--Judge's Authority to Preside in Transferred Case

Notwithstanding any other law to the contrary, a judge who is qualified and authorized by law to preside in the court to which an action is transferred under Government Code Section 74.161 et seq. may preside over the transferred action as if the transferred action were originally filed in the transferor court [Gov. C. § 74.164 ].

[3]--Rules of Practice and Procedure

The MDL Panel must operate according to rules of practice and procedure adopted by the Texas Supreme Court under Gov. C. § 74.024 [see § 64.01[1]]. The panel may prescribe additional rules for the conduct of its business not inconsistent with the law or rules adopted by the Texas Supreme Court [Gov. C. § 74.163(b)]. The panel will operate at the direction of its Chair in accordance with rules prescribed by the panel and approved by the Texas Supreme Court [Tex. R. Jud. Admin. 13.10].

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§ 64.03

Initiating Transfer to Pretrial Court

[1]--Definition of "Pretrial Court"

A reference to a "pretrial court" [see, e.g., [2][a], [3], [4], below] means a district court to which the related cases can be transferred for consolidated or coordinated pretrial proceedings under Rule 13 [Tex. R. Jud. Admin. 13.2(e)].

[2]--Transfer on Party's Motion [a]--Contents of Motion

A party in a case may move for transfer of the case and related cases to a pretrial court [see [b], below]. The motion to transfer must be in writing and must [Tex. R. Jud. Admin. 13.3(a)]: State the common question or questions of fact involved in the cases; Contain a clear and concise explanation of the reasons that transfer would be for the convenience of the parties and witnesses and would promote the just and efficient conduct of the cases; State whether all parties in those cases for which transfer is sought agree to the motion; and Contain an appendix that lists: The cause number, style, and trial court of each of the related cases for which transfer is sought; and All parties in those cases and the names, addresses, telephone numbers, fax numbers, and email addresses of all counsel.

[b]--Filing of Motion

The motion must be filed with the MDL Panel Clerk [Tex. R. Jud. Admin. 13.3(f); see Tex. R. Jud. Admin. 13.3(g) --fees]. The clerk of the Texas Supreme Court serves as the MDL Panel Clerk [Tex. R. Jud. Admin. 13.2(c)]. The MDL Panel Clerk may require that all documents also be transmitted to the clerk electronically. In addition, the moving party must send a copy of the motion to each member of the MDL Panel [Tex. R. Jud. Admin. 13.3(f)].

[c]--Service of Motion

The moving party must serve the motion on all parties in related cases in which transfer is sought. Service of the motion is governed by Appellate Rule 9.5 [Tex. R. Jud. Admin. 13.3(h); see T.R.A.P. 9.5; see also § 64.100[1][c]].

[d]--Filing of Notice in Trial Court

The moving party must file, in the trial court where the party's case is pending, a notice that the motion for transfer has been filed [Tex. R. Jud.

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Admin. 13.3(I); see § 64.102[2]--form of notice]. The form of the motion is to be prescribed by the MDL Panel [Tex. R. Jud. Admin. 13.3(I)]. * * * * * *

[e]--Effect on Proceedings in Trial Court

The filing of a motion under Rule 13 does not limit the jurisdiction of the trial court in which the moving party's case is pending or suspend proceedings or orders in that court [Tex. R. Jud. Admin. 13.4(a)]. However, the trial court or the MDL Panel may stay all or part of any trial court proceedings until a ruling is made by the MDL Panel [Tex. R. Jud. Admin. 13.4(b)].

[f]--Additional Briefing; Format Requirements

The MDL Panel may request additional briefing from any party [Tex. R. Jud. Admin. 13.3(e)]. Any document addressed to the MDL Panel must conform to the requirements of Appellate Rule 9.4 [Tex. R. Jud. Admin. 13.3(e); see T.R.A.P. 9.4; see also § 64.100[1][b]]. Without leave of the MDL panel, the parts of a motion to transfer that (1) state the common question or questions of fact involved in the cases, and (2) explain the reasons that transfer would be for the convenience of the parties and witnesses and promote the just and efficient conduct of the cases may not exceed 20 pages in length [Tex. R. Jud. Admin. 13.3(e); see Tex. R. Jud. Admin. 13.3(a)(1), (2)].

[3]--Transfer on Judge's Request

A trial court or a presiding judge of an administrative judicial region may request a transfer of related cases to a pretrial court. The request must be in writing and must list the cases to be transferred [Tex. R. Jud. Admin. 13.3(b)]. The request must be filed with the MDL Panel Clerk [Tex. R. Jud. Admin. 13.3(f)]. The clerk must cause a notice of the judge's request for transfer to be filed in the courts where the related cases are pending [see Tex. R. Jud. Admin. 13.3(i)]. The MDL Panel Clerk may designate a party or parties to serve a request for transfer on all other parties. Service of the request is governed by Appellate Rule 9.5 [Tex. R. Jud. Admin. 13.3(h); see T.R.A.P. 9.5; see also § 64.100[1][c]]. Any party in any of the related cases may file a response to the request or file a reply to a response [see § 64.04].

[4]--Transfer by MDL Panel's Order to Show Cause

The MDL Panel may, on its own initiative, issue an order to show cause why related cases should not be transferred to a pretrial court [Tex. R. Jud. Admin. 13.3(c)].

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The MDL Panel Clerk must give notice to all parties in all related cases of any order to show cause. The clerk may direct a party or parties to give the notice. The clerk may determine the manner in which notice is to be given, including that notice should be given only by email or fax [Tex. R. Jud. Admin. 13.3(n); see Tex. R. Jud. Admin. 13.2(c)--clerk of Texas Supreme Court serves as MDL Panel Clerk]. Any party in any of the related cases may file a response to the order to show cause or file a reply to a response [see § 64.04]. * * * * * *

§ 64.05

Disposition by MDL Panel

[1]--Hearing

The MDL Panel may decide any matter on written submission or after an oral hearing before one or more of its members at a time and place of its choosing. Notice of the date of submission or the time and place of oral hearing must be given to all parties in all related cases [Tex. R. Jud. Admin. 13.3(k)]. * * * * * *

[2]--Evidence

The MDL Panel will accept as true facts stated in a motion, response, or reply unless another party contradicts them. A party may file evidence with the MDL Panel Clerk only with leave of the MDL Panel. The MDL Panel may order parties to submit evidence by affidavit or deposition and to file documents, discovery, or stipulations from related cases [Tex. R. Jud. Admin. 13.3(j)].

[3]--Decision to Order Transfer [a]--Written Order With Findings

The MDL Panel may order transfer if three members concur in a written order finding that (1) related cases involve one or more common questions of fact, and (2) transfer to a specified district court will be for the convenience of the parties and witnesses and will promote the just and efficient conduct of the related cases [Tex. R. Jud. Admin. 13.3(l)].

[b]--Concurring Judges Identified

Every order of the MDL Panel must be signed by either the Chair or the clerk, and must identify the members of the MDL Panel who concurred in the ruling [Tex. R. Jud. Admin. 13.3(m)].

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[c]--Notice to Parties Required

The MDL Panel Clerk must give notice of all actions of the MDL Panel to all parties in all related cases. The clerk may direct a party or parties to give the notice. The clerk may determine the manner in which notice is to be given, including that notice should be given only by email or fax [Tex. R. Jud. Admin. 13.3(n)].

[4]--Order for Transfer to Other Pretrial Court

On its own initiative, on a party's motion, or at the request of the pretrial court, the MDL Panel may order cases transferred from one pretrial court to another pretrial court when the pretrial judge has died, resigned, been replaced at an election, requested retransfer, recused, or been disqualified, or in other circumstances when retransfer will promote the just and efficient conduct of the cases [Tex. R. Jud. Admin. 13.3(o)].

[5]--Review of MDL Panel's Orders

Orders of the MDL Panel, including orders granting or denying motions for transfer, may be reviewed only by the Texas Supreme Court in original proceedings [Tex. R. Jud. Admin. 13.9(a)]. For discussion and forms, see Ch. 152, Original Proceedings in Court of Appeals and Supreme Court.

§ 64.06

Transfer to Pretrial Court

[1]--Filing of Notice of Transfer Order

A case is deemed transferred from a trial court to the pretrial court when a notice of the MDL Panel's transfer order is filed with the trial court and the pretrial court [Tex. R. Jud. Admin. 13.5(a)]. The notice of transfer must [Tex. R. Jud. Admin. 13.5(a)]: List all parties who have appeared and remain in the case, and the names, addresses, phone numbers, and bar numbers of their attorneys or, if a party is pro se, the party's name, address, and phone number; List the parties who have not yet appeared in the case; and Have attached a copy of the MDL Panel transfer order.

Presumably, the party who requested the transfer order must prepare and file the notice [see [2][a], [3], below].

[2]--Effect on Proceedings in Trial Courts [a]--Conditional Stay

After notice of the MDL Panel transfer order is filed in a trial court [see [1], above], the trial court must take no further action in the case except

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for good cause stated in the order in which the action is taken and after conferring with the pretrial court. However, service of any process already issued by the trial court may be completed, and the return may be filed in the pretrial court [Tex. R. Jud. Admin. 13.5(b)].

[b]--Review of Trial Court's Orders

Orders and judgments of the trial court and pretrial court may be reviewed by the appellate court that regularly reviews orders of the court in which the case is pending at the time review is sought, irrespective of whether that court issued the order or judgment to be reviewed [Tex. R. Jud. Admin. 13.9(b)]. Thus, if the trial court's order made before the case is transferred to the pretrial court is not appealable until rendition of a final and appealable judgment and the pretrial court does render a final and appealable judgment, review of the trial court's order will be conducted by the appellate court to which the appeal of the final and appealable judgment rendered by the pretrial court is taken.

[3]--Transfer of Files

* * * * * *

[4]--Payment of Filing Fees and Costs

* * * * * *

[5]--Conditional Inclusion of Tag-Along Case in Pretrial Court

A "tag-along case" is a case related to the cases covered by the MDL Panel transfer order but not itself a subject of that initial order or of the motion (if any) that sought the order [Tex. R. Jud. Admin. 13.2(g)]. A tag-along case is deemed to be conditionally transferred to the pretrial court when a notice of transfer [see § 64.102[2]--form of notice] is filed in both the pretrial court and the trial court where the tag-along case is pending [Tex. R. Jud. Admin. 13.5(e)]. Within 30 days after service of the notice of transfer, a party to the tagalong case or to any of the related cases already transferred to the pretrial court may move the pretrial court to remand the tag-along case to the trial court on the ground that it is not a tag-along case. If the motion to remand is granted, the case must be returned to the trial court, and costs including attorney's fees may be assessed by the pretrial court in its remand order [Tex. R. Jud. Admin. 13.5(e)]. The order of the pretrial court may be appealed to the MDL Panel by a motion for rehearing filed with the MDL Panel Clerk [Tex. R. Jud. Admin. 13.5(e)].

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§ 64.07

Proceedings in Pretrial Court

[1]--Judges Who May Preside

The MDL Panel may assign as judge of the pretrial court any active district judge, or any former or retired district or appellate judge who is approved by the Chief Justice of the Texas Supreme Court. An assignment under Rule 13 is not subject to objection under Chapter 74 of the Government Code. The judge assigned as judge of the pretrial court has exclusive jurisdiction over each related case transferred pursuant to Rule 13 unless a case is retransferred by the MDL Panel or is finally resolved or remanded to the trial court for trial [Tex. R. Jud. Admin. 13.6(a)].

[2]--Authority of Pretrial Court

The pretrial court has the authority to decide, in place of the trial court, all pretrial matters in all related cases transferred to the court. Those matters include the following, for example [Tex. R. Jud. Admin. 13.6(b)]: Jurisdiction. Joinder. Venue. Discovery. Trial preparation (such as motions to strike expert witnesses, preadmission of exhibits, and motions in limine). Mediation. Disposition by means other than conventional trial on the merits (such as default judgment, summary judgment, and settlement).

The pretrial court may set aside or modify any pretrial ruling made by the trial court before transfer, if the trial court's plenary power over the matter would not have expired if the case had not been transferred [Tex. R. Jud. Admin. 13.6(b)].

[3]--Case Management

The pretrial court should apply sound judicial management methods early, continuously, and actively, based on its knowledge of each individual case and the entire litigation, to set fair and firm time limits tailored to ensure the expeditious resolution of each case and the just and efficient conduct of the litigation as a whole. After a case is transferred, the pretrial court should, at the earliest practical date, conduct a hearing and enter a case management order. The pretrial court should consider at the hearing, and its order should address, all matters pertinent to the conduct of the litigation, including the following [Tex. R. Jud. Admin. 13.6(c)]: Settling the pleadings. Determining whether severance, consolidation, or coordination with other actions is desirable and whether identification of separable triable portions of the case is desirable.

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Scheduling preliminary motions. Scheduling discovery proceedings and setting appropriate limitations on discovery, including the establishment and timing of discovery procedures. Issuing protective orders. Scheduling alternative dispute resolution conferences. Appointing organizing or liaison counsel. Scheduling dispositive motions. Providing for an exchange of documents, including adopting a uniform numbering system for documents, establishing a document depository, and determining whether electronic service of discovery materials and pleadings is warranted. Determining if the use of technology, videoconferencing, or teleconferencing is appropriate. Considering such other matters the court or the parties deem appropriate for the just and efficient resolution of the cases. Scheduling further conferences as necessary.

[4]--Trial Settings

The pretrial court, in conjunction with the trial court, may set a transferred case for trial at a time and date that will promote the convenience of the parties and witnesses and the just and efficient disposition of all related proceedings. The pretrial court must confer, or order the parties to confer, with the trial court regarding potential trial settings or other matters regarding remand. The trial court must cooperate reasonably with the pretrial court, and the pretrial court must defer appropriately to the trial court's docket. The trial court must not continue or postpone a trial setting without the concurrence of the pretrial court [Tex. R. Jud. Admin. 13.6(d)].

[5]--Review of Pretrial Court's Orders

Orders and judgments of the trial court and pretrial court may be reviewed by the appellate court that regularly reviews orders of the court in which the case is pending at the time review is sought, irrespective of whether that court issued the order or judgment to be reviewed [Tex. R. Jud. Admin. 13.9(b)]. Thus, if a pretrial court's order is not appealable until rendition of a final and appealable judgment and the case is remanded to the trial court, which does not render a final and appealable judgment, review of the pretrial court's order will be conducted by the appellate court to which the appeal of the final and appealable judgment is taken.

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§ 64.08

Remand to Trial Court

[1]--Pretrial Court's Power to Remand

The pretrial court may order remand of one or more cases, or separable triable parts of cases, when pretrial proceedings have been completed to such a degree that the purposes of the transfer have been fulfilled or no longer apply [Tex. R. Jud. Admin. 13.7(b)]. A case in which the pretrial court has rendered a final and appealable judgment will not be remanded to the trial court [Tex. R. Jud. Admin. 13.7(a)]. Such a final judgment and all orders which have merged into the final judgment, irrespective of whether the order was made by the trial court or the pretrial court, is subject to appellate review by the appellate court that regularly reviews judgments of the pretrial court [see Tex. R. Jud. Admin. 13.9(b)].

[2]--Transfer of Files

When a case is remanded to the trial court, the clerk of the pretrial court will send the case file to the trial court without retaining a copy unless otherwise ordered. The parties may file in the remanded case copies of any pleadings or orders from the pretrial court's master file. The clerk of the trial court will reopen the trial court file under the cause number of the trial court, without a new filing fee [Tex. R. Jud. Admin. 13.7(c)].

[3]--Effect of Pretrial Court's Orders After Remand

The trial court should recognize that to alter a pretrial court order without a compelling justification would frustrate the purpose of consolidated and coordinated pretrial proceedings. The pretrial court should recognize that its rulings should not unwisely restrict a trial court from responding to circumstances that arise following remand [Tex. R. Jud. Admin. 13.8(a)]. The trial court need not obtain the written concurrence of the pretrial court to vacate, set aside, or modify pretrial court orders regarding the admissibility of evidence at trial (other than expert evidence) when necessary because of changed circumstances, to correct an error of law, or to prevent manifest injustice. But the trial court must support its action with specific findings and conclusions in a written order or stated on the record [Tex. R. Jud. Admin. 13.8(c)]. Without the written concurrence of the pretrial court, the trial court cannot, over objection, vacate, set aside, or modify pretrial court orders, including orders related to summary judgment, jurisdiction, venue, joinder, special exceptions, discovery, sanctions related to pretrial proceedings, privileges, the admissibility of expert testimony, and scheduling [Tex. R. Jud. Admin. 13.8(b)]. If the pretrial court is unavailable to rule, for

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whatever reason, the concurrence of the MDL Panel Chair must be obtained [Tex. R. Jud. Admin. 13.8(d)].

Page 411: [Add at the end of the subsection.]

In 1999, the Texas legislature amended Government Code Section 74.094 to provide that a judge who has jurisdiction over a suit pending in one county may, unless objected to by a party, conduct any of the judicial proceedings except the trial on the merits in a different county [Gov. C. § 74.094(e)]. In addition, a pretrial judge assigned to hear pretrial matters in related cases under Rule of Judicial Administration 11 may hold pretrial proceedings and hearings on pretrial matters for a case to which the judge has been assigned in [Gov. C. § 74.094(f)]: 1. The county in which the case is pending; or 2. A county in which there is pending a related case to which the pretrial judge has been assigned.

Chapter 7 PARTIES

§ 7.03

Joinder of Claims by the Defendant

[A]--Counterclaims

Page 420: [Add the following case before Jack H. Brown & Co. v. Northwest Sign Co.] INGERSOLL­RAND CO. v. VALERO ENERGY CORP. 997 S.W.2d 203 (Tex. 1999)

ENOCH, Justice Valero sued Kellogg and Ingersoll­Rand for damages caused by malfunctioning equipment. Kellogg and Ingersoll­Rand installed the equipment during an expansion of Valero's oil refinery. Kellogg was the general contractor on the expansion, and Ingersoll­Rand was one of Kellogg's subcontractors. Both Kellogg and Ingersoll­Rand defended by asserting that certain indemnification and hold­harmless provisions in the Valero­ Kellogg contract applied. The trial court concluded that the contract's indemnification provisions were enforceable and granted interlocutory summary judgment for Kellogg and Ingersoll­Rand. The court then severed that part of the case, so that Valero could appeal the summary judgment. The court of appeals affirmed, and that judgment is now final. During that appeal, the trial court abated the remaining claims. After the abatement was lifted, Kellogg and Ingersoll­Rand moved for summary judgment, seeking attorney's fees under the indemnity provisions upheld in Valero I. Valero filed its own motion for summary judgment, asserting that Kellogg's and Ingersoll­Rand's claims for attorney's fees were compulsory counterclaims barred by res judicata and by the statute of limitations. The trial court granted Valero summary judgment. The court of appeals affirmed. The pivotal question in this case is when does an indemnitee's contractual claim for indemnification mature for purposes of the compulsory counterclaim rule. We adhere to the longstanding rule that a claim based on a contract that provides indemnification from liability does not accrue until the indemnitee's liability becomes fixed and certain. Applying this rule, we conclude that Kellogg's and Ingersoll­Rand's indemnity claims did not accrue until the trial court's rendition of summary judgment in Valero I. Accordingly, neither res judicata nor limitations bar Kellogg's and 125

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Ingersoll­Rand's claims. We reverse the court of appeals' judgment and remand to the trial court for further proceedings.

Valero I

Valero sued Kellogg in 1986 over mechanical malfunctions allegedly resulting from Kellogg's flawed installation of refinery equipment. Valero pleaded fraudulent misrepresentation, breach of contract, violations of the Texas Deceptive Trade Practices Act, breach of implied and express warranties, products liability, negligence, gross negligence, and intentional misconduct. Valero added Ingersoll­Rand as a defendant in 1989, after a piece of equipment supplied by Ingersoll­Rand exploded. The suit eventually came to include a host of cross­claims, counterclaims, and third­party claims not at issue here. Kellogg and Ingersoll­Rand answered Valero's petition, asserting that the contract's indemnity provision barred Valero's claims. . . . Valero replied that the contract's indemnity provision was unenforceable as against public policy. On this issue, each side filed competing motions for summary judgment. The trial court granted Kellogg's and Ingersoll­Rand's motions for summary judgment, denied Valero's motion, and rendered judgment that Valero take nothing on its claims against Kellogg and Ingersoll­Rand. That matter was severed, and the remaining issues were abated pending appeal. Valero appealed, and the court of appeals affirmed the trial court's judgment on June 30, 1993. This Court denied Valero's application for writ of error on April 20, 1994, and overruled its motion for rehearing of the application on June 2, 1994. That judgment is final.

Valero II

One of the remaining abated claims was Kellogg's counterclaim for attorney's fees and costs incurred in defending against Valero. Kellogg filed the counterclaim between the time summary judgment was entered and the time the severance order was entered, but more than five years after Valero first sued Kellogg. After the trial court dissolved the abatement, Ingersoll­ Rand initiated its own counterclaim against Valero for attorney's fees and costs. This claim was raised more than five years after Valero added Ingersoll­Rand as a defendant. Kellogg and Ingersoll­Rand filed a joint motion for summary judgment asserting that the contract's indemnity provision, held enforceable in Valero I, entitled each to attorney's fees, court costs, and litigation expenses incurred in Valero I. Valero responded with a motion for summary judgment, asserting two affirmative defenses: (1) Kellogg and Ingersoll­Rand's counterclaims were compulsory, had not been asserted in Valero I, and were therefore precluded by res judicata; and (2) the four­year statute of limitations for breach of contract barred the claims. Without specifying grounds, the trial court granted Valero's motion for summary judgment, and denied Kellogg and Ingersoll­Rand's motion. The

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court of appeals affirmed, holding that Ingersoll­Rand's counterclaim was compulsory and barred by res judicata, and Kellogg's claim was barred by limitations. Kellogg and Ingersoll­Rand each petitioned for review. Because resolution of the issues we consider in Ingersoll­Rand's appeal disposes of issues presented by Kellogg's appeal, we consider Ingersoll­ Rand's appeal first.

Ingersoll­Rand's Appeal

The court of appeals held that Ingersoll­Rand's claim for attorney's fees was a compulsory counterclaim that Ingersoll­Rand should have brought in Valero I; and, therefore, res judicata barred the claim in Valero II. We disagree. Res judicata prevents parties and their privies from relitigating a cause of action that has been finally adjudicated by a competent tribunal. Also precluded are claims or defenses that, through diligence, should have been litigated in the prior suit but were not. The doctrine is intended to prevent causes of action from being split, thus curbing vexatious litigation and promoting judicial economy. Res judicata, however, does not bar a former defendant who asserted no affirmative claim for relief in an earlier action from stating a claim in a later action that could have been filed as a cross­ claim or counterclaim in the earlier action, unless the claim was compulsory in the earlier action. Here, the court of appeals concluded that Ingersoll­ Rand's claim was compulsory. But a counterclaim is compulsory only if: (1) it is within the jurisdiction of the court; (2) it is not at the time of filing the answer the subject of a pending action; (3) the claim is mature and owned by the defendant at the time of filing the answer; (4) it arose out of the same transaction or occurrence that is the subject matter of the opposing party's claim; (5) it is against an opposing party in the same capacity; and (6) it does not require the presence of third parties over whom the court cannot acquire jurisdiction. A claim having all of these elements must be asserted in the initial action and cannot be asserted in later actions. To meet its summary judgment burden on the affirmative defense that Ingersoll­Rand's claim was compulsory and barred by res judicata, Valero had to prove that Ingersoll­Rand's counterclaim satisfied each element above. Ingersoll­Rand asserts that its indemnity claim for attorney's fees was not compulsory because the claim could not have become mature before the trial court's rendition of summary judgment in Valero I. A claim is mature when it has accrued. To determine the correct accrual date of an indemnity claim we look to the contract's indemnity provision. There are two types of indemnity agreements, those that indemnify against liabilities and those that indemnify against damages. Broad language, like that in this contract, that holds the indemnitee "harmless" against "all claims" and "liabilities" evidences an agreement to indemnify against liability. Such provisions entitle the indemnitee to recover when the liability

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becomes fixed and certain, as by rendition of a judgment, whether or not the indemnitee has yet suffered actual damages, as by payment of a judgment. Valero's suit presented the rather anomalous situation of an indemnitor (Valero) acting concurrently as the plaintiff seeking damages from the indemnitee (Ingersoll­Rand). The more common scenario for an indemnification dispute involves three separate and distinct parties: plaintiff (party one), indemnitee (party two), and indemnitor (party three). Despite the unusual factual setting here, we find no persuasive reason not to apply the longstanding rule that a claim under a liability indemnification clause does not accrue, and thus is not mature, until the indemnitee's liability to the party seeking damages becomes fixed and certain. When Ingersoll­Rand was added as a defendant in Valero I, it was entirely conceivable that Ingersoll­Rand might sustain extensive liabilities because of Valero's claims for damages. And Ingersoll­Rand, presumably, would have sought indemnification for all such liabilities under the contract's indemnity provision. Any claim Ingersoll­Rand could have asserted, however, could not have accrued until all of Ingersoll­Rand's potential liabilities to Valero became fixed and certain by rendition of a judgment. In Valero I, the trial court rendered summary judgment for Ingersoll­ Rand that Valero take nothing on its claims for damages. That judgment was signed on October 25, 1991. Ingersoll­Rand's liabilities became fixed and certain at zero for Valero's tort, DTPA, and contract damages plus the total amount of attorney's fees and costs incurred in defending against Valero when summary judgment was rendered in Valero I. Because Valero demonstrated no time earlier than the date of judgment in Valero I by which Ingersoll­Rand's liabilities became fixed and certain, the third element of the compulsory counterclaim rule--maturity of the claim--was not satisfied. Our reasoning is bolstered by commentary on the analogous federal rule. The Texas compulsory counterclaim rule is based on Rule 13 of the Federal Rules of Civil Procedure. In commenting on Federal Rule 13(a)'s condition that a claim must be mature in order to be compulsory, Professors Wright and Miller state: This exception to the compulsory counterclaim requirement necessarily encompasses a claim that depends upon the outcome of some other lawsuit and thus does not come into existence until the action upon which it is based has terminated. For example, . . . a claim for contribution cannot be compulsory in the action whose judgment is the subject of the contribution suit. [emphasis added] Likewise, an indemnity claim cannot be compulsory in the action whose judgment is the subject of the indemnity suit. In a suit for either contribution or indemnity the injury upon which suit might be based does not arise until some liability is established. In this case, as in a contribution claim against a joint tortfeasor, liability could not have been established until judgment was rendered.

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*

*

*

The fact that attorney's fees and costs were the only liabilities for which Ingersoll­Rand was eventually entitled to seek indemnity does not change our conclusion. It is true that a counterclaim for attorney's fees will in most cases be compulsory. We do not dispute the legal basis of such a statement because a claim for attorney's fees will generally satisfy the elements of the compulsory counterclaim rule. However, an indemnity claim based on an agreement to indemnify against liabilities has different characteristics than a simple claim for attorney's fees. The attorney's fees are certain to be incurred as soon as an attorney is retained, while liabilities covered by an indemnity agreement in any given case may never be incurred depending on the outcome of the case. This difference is significant. Consider Fidelity Mutual Life Insurance Company v. Kaminsky, [820 S.W.2d 878, 882 (Tex. App.--Texarkana 1991, writ denied)] another case upon which the court of appeals relied. In Kaminsky the court concluded that a contractual claim for attorney's fees, even though contingent on the outcome of the suit, was mature and compulsory. The contractual provision on which Dr. Kaminsky relied established his contractual right to attorney's fees contingent on the result of the suit, but it did not indemnify him against other liabilities generally. It was not an indemnification agreement. Thus, the general rule that a cause of action accrues when facts come into existence that authorize the claimant to seek a judicial remedy applied in Kaminsky. Dr. Kaminsky's claim for attorney's fees accrued when he first incurred fees. As we have explained, a specific accrual rule applies to claims for indemnification: an indemnity claim does not accrue until all of the potential liabilities of the indemnitee become fixed and certain. This specific rule is consistent with the general accrual rule. The facts that entitle an indemnitee to seek indemnification through suit come into existence when the indemnitee's liabilities become fixed and certain by judgment. While attorney's fees will almost always be a component of an indemnitee's total liabilities, we decline to hold that recovery for the attorney's fees component of an indemnitee's potential liability must be pursued before and separate from the remaining components. An indemnification claim does not accrue until all of the indemnitee's liabilities become fixed and certain. . . .

Kellogg's Appeal

Our conclusions above largely dispose of Valero's claims against Kellogg. Like Ingersoll­Rand, Kellogg's claim for attorney's fees did not accrue until summary judgment was rendered in Valero I. Consequently, Kellogg's claim was not compulsory.

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*

*

*

Conclusion

Kellogg and Ingersoll­Rand's claims for attorney's fees were not compulsory counterclaims and are not barred by res judicata. Further, the claims were filed within the applicable limitations period. Accordingly, we reverse the court of appeals' judgment and remand to the trial court for further proceedings consistent with this opinion. Justice Owen did not participate in the decision.

Page 427: [Add as new note (6)]

(6) Severance of Compulsory Counterclaim Improper. Why is the severance of a compulsory counterclaim improper? What relationship does the compulsory counterclaim rule have to res judicata principles? See Rucker v. Bank One Texas, N.A., 36 S.W.3d 649, 651 (Tex. App.--Waco 2000, pet. denied) (holding that severance of a compulsory counterclaim is an abuse of discretion).

§ 7.04

Permissive Joinder of Parties by the Defendant

Page 431: [Add as new note (9)]

(9) Responsible Third Parties: The Empty Chair Defendant. As to actions filed after July 1, 2003, Chapter 33 of the Texas Civil Practices & Remedies Code allows a defendant to designate a responsible third party in tort and deceptive trade practices claims, for purposes of submitting their percentage of responsibility to the factfinder and determining the appropriate judgment. A defendant may make this designation, on motion, without joining the responsible third party, although a claimant may seek joinder of that party as a defendant. Third party practice remains an independent basis for joinder. The granting of leave to designate a responsible third party or a finding of fault against that person does not, absent joinder as a defendant, impose liability on the responsible third party and may not be used in other proceedings, on the basis of res judicata or collateral estoppel. That is, the judgment may not be enforced or collected as to a designated responsible third party. The purpose of designation is to place before the fact finder all persons who are potentially responsible for the claimant's injuries for purposes of determining an appropriate judgment. However, existing parties to the lawsuit may seek joinder of one designated as a responsible

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third party, either as a defendant or a third party defendant, and as such, liability will be imposed in that capacity. Strategically, why would a defendant prefer to designate a responsible third party rather than join them as a defendant? What effect does the jury's liability findings as to a responsible third party have on the originally named defendant's ultimate responsibility on the judgment? How might it effect joint and several liability?

§ 7.07

Compulsory Joinder of Parties

Page 443: [Correct year of decision of Cooper v. Texas Gulf Industries to 1974.] Page 449: [Add as new note (7):]

(7) Dismissal For Failure To Join An Indispensable Party. Although the court in Cooper indicated it would be rare indeed if there were a person whose presence was so indispensable that their non­joinder would deprive the court of jurisdiction to adjudicate between the parties already joined, such instances do exist. For example, in Motor Vehicle Board of the Texas Dept. of Transp. v. El Paso Ind. Auto. Dealers Association, Inc., 37 S.W.3d 538, 540­541 (Tex. App.--El Paso 2001, pet. denied), the intermediate court dismissed the case for want of jurisdiction due to the failure to join the party responsible for enforcing a statute in an action to declare that statute unconstitutional. Should the dismissal be without prejudice?

§ 7.08

Class Actions

Page 455: [Replace Weatherly v. Deloitte & Touche with the following case.] SOUTHWESTERN REFINING CO. INC. v. BERNAL 22 S.W.3d 425 (Tex. 2000)

GONZALES, Justice The principal issue in this interlocutory appeal is the propriety of certifying a class action of 904 plaintiffs against Southwest Refining Company for alleged personal injuries arising from a refinery tank fire in Corpus Christi, Texas. The trial court certified the class and directed that the class proceed in three phases: the first to determine general liability and gross negligence; the second to determine punitive damages; and the third to determine causation and actual damages. The court of appeals modified the certification order to require determination of the class representatives' actual damages before punitive damages may be assessed for the whole class. Southwestern Ref. Co. v. Bernal, 960 S.W.2d 293 (Tex. App.--Corpus Christi 1997). Southwest filed this petition for review, contending that this Court has conflicts jurisdiction and that the common

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issues do not predominate over the individual issues. We agree with both of Southwest's contentions. Therefore, we reverse the court of appeals' judgment and remand this cause to the trial court for further proceedings consistent with this opinion.

I

On January 26, 1994, at about 7:30 a.m., a slop tank at a Southwest refinery in Corpus Christi exploded. Julia Bernal, Mary De La Garza, Anita Barrerra and Josephine Suarez, four Corpus Christi residents, sued Southwest and four other defendants for extreme fear and mental anguish caused by the sight and sound of the explosion and for personal injuries and property damages caused by toxic exposure. They allege that the explosion and ensuing fire sent a plume of toxic smoke into the air and that soot and ashes from the smoke descended on their homes in the surrounding neighborhoods. Plaintiffs claim that because of the explosion, they suffered respiratory difficulties, skin irritation, eye irritation, headaches, and nausea, and their lawns, foliage, and pets died. After an additional 900 claimants joined the lawsuit, plaintiffs moved to certify the personal injury claims as a class action consisting of all of the claimants. The trial court granted the motion, certifying the class with nineteen class representatives under Rule 42(b)(4) of the Texas Rules of Civil Procedure. TEX. R. CIV. P. 42(b)(4). And as the plaintiffs requested, the court excluded from the class all claims for property or diminution­in­ value damages. The court's order granting the motion provided for a three­ phase trial: Phase I will address the alleged liability of defendants to the named class representatives on the issues of negligence, strict liability, toxic trespass, nuisance and gross negligence. Phase I will establish whether defendants are liable for the explosion and whether the released materials were capable of causing the harm alleged by the class. If during Phase I there is a finding of gross negligence, Phase II of the trial will determine the amount to be recovered by the class as punitive damages. Phase III will determine whether the individual class members can show sufficient specific injuries or damages and whether they were proximately caused by the release due to the tank explosion. The amount of punitive damages, awarded in Phase II, if any, will be proportionately reduced by the number of individuals who can not make the requisite showing of actual damages and proximate cause in Phase III, if any. The order does not indicate whether the trial court envisioned a single jury deciding all three phases, including the 904 individual damage claims. Southwest brought an interlocutory appeal seeking to reverse the certification order. It argued that the prerequisites to class certification, most notably the requirement that common issues predominate over individual ones, were not met. It also argued that the trial court erred by splitting

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the trial into different phases, in which fault and punitive damages would be determined before causation and actual damages. The court of appeals held that the class certification satisfied the class action prerequisites. While it acknowledged that "individual issues may predominate in determination of causation and damages," it reasoned that the class was maintainable because the modified trial plan called for the individual issues to be litigated separately from the common issues. 960 S.W.2d at 299. The court suggested that these issues would not necessarily overwhelm the jury because "it remains to be seen" whether "the issues of causation and damages may be proven [expeditiously] by the use of models, formulas, and damage brochures." Id. at 297. In any event, the court suggested, separate juries could be summoned to resolve the individual issues. See id. However, in response to Southwest's arguments, the court of appeals modified the trial plan to require proof of actual damages by the nineteen class representatives before the jury may resolve punitive damages for the entire class. Under the modified trial plan, phase I remained as the trial court originally ordered, phase II would determine proximate cause and actual damages for the nineteen class representatives, phase III would determine punitive damages for the entire class, and phase IV would determine proximate cause and actual damages for the remaining 885 class members. Southwest petitions for review from this decision, arguing that the trial court's certification order was an abuse of discretion. Southwest contends that the class action is not maintainable because individual issues will predominate over common questions of law and fact. Southwest also objects to the class action as being an inferior and unmanageable method of adjudicating the controversy. Moreover, Southwest argues that liability and damage issues cannot be tried in separate phases and that punitive damages for the entire class cannot be tried until the jury determines actual damages for the entire class. Finally, Southwest maintains that the class is not so numerous that joinder is impracticable, that class counsel have a conflict of interest because they are also counsel for those members who must decide whether to opt out, and that class notice was deficient. * * *

[The opinion here discusses the basis of its jurisdiction to hear this interlocutory appeal, concluding that the court of appeals' opinion conflicts with Transportation Insurance Co. v. Moriel, 879 S.W.2d 10 (Tex. 1994) (requiring the jury to find liability and actual damages before hearing any evidence on punitive damages) and thus the interlocutory appeal can be heard by the Supreme Court under TEX. GOV'T CODE § 22.225(c).]

IV

Southwest argues that the trial court abused its discretion by certifying this case as a class action. Rule 42 of the Texas Rules of Civil Procedure

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governs class certification. TEX. R. CIV. P. 42. The rule is patterned after Federal Rule of Civil Procedure 23; consequently, federal decisions and authorities interpreting current federal class action requirements are persuasive authority. See RSR Corp. v. Hayes, 673 S.W.2d 928, 931­32 (Tex. App.--Dallas 1984, writ dism'd). All class actions must satisfy four threshold requirements: (1) numerosity ("the class is so numerous that joinder of all members is impracticable"); (2) commonality ("there are questions of law or fact common to the class"); (3) typicality ("the claims or defenses of the representative parties are typical of the claims or defenses of the class"); and (4) adequacy of representation ("the representative parties will fairly and adequately protect the interests of the class"). See TEX. R. CIV. P. 42(a). In addition to these prerequisites, class actions must satisfy at least one of four subdivisions of Rule 42(b). Plaintiffs assert this class action satisfies Rule 42(b)(4), which requires common questions of law or fact to predominate over questions affecting only individual members and class treatment to be "superior to other available methods for the fair and efficient adjudication of the controversy." TEX. R. CIV. P. 42(b)(4); see also Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 615, 138 L. Ed. 2d 689, 117 S. Ct. 2231 (1997) (discussing the kinds of class actions that can be maintained under federal rule 23(b)); Green v. Occidental Petroleum Corp., 541 F.2d 1335, 1340 (9th Cir. 1976) (observing that certification under federal rule 23(b)(1)(A), the federal counterpart to Texas's Rule 42(b)(1)(A), will ordinarily be inappropriate in an action for damages). We consider Rule 42(b)(4)'s predominance requirement first because it is one of the most stringent prerequisites to class certification. To aid a court in determining if (b)(4) certification is appropriate, the rule establishes a list of nonexhaustive factors to consider: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. TEX. R. CIV. P. 42(b)(4). Courts determine if common issues predominate by identifying the substantive issues of the case that will control the outcome of the litigation, assessing which issues will predominate, and determining if the predominating issues are, in fact, those common to the class. See Reserve Life Ins. Co. v. Kirkland, 917 S.W.2d 836, 839 (Tex. App.--Houston [14th Dist.] 1996, no writ); Amoco Prod. Co. v. Hardy, 628 S.W.2d 813, 816 (Tex. App.-- Corpus Christi 1981, writ dism'd). The test for predominance is not whether common issues outnumber uncommon issues but, as one court stated, "whether common or individual issues will be the object of most of the efforts of the litigants and the court." Central Power & Light Co. v. City of San Juan, 962 S.W.2d 602, 610 (Tex. App.--Corpus Christi 1998, writ dism'd w.o.j.); see also Glassell v. Ellis, 956 S.W.2d 676, 686 (Tex. App.-- Texarkana 1997, writ dism'd w.o.j.); Adams v. Reagan, 791 S.W.2d 284, 289

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(Tex. App.--Fort Worth 1990, no writ). If, after common issues are resolved, presenting and resolving individual issues is likely to be an overwhelming or unmanageable task for a single jury, then common issues do not predominate. Ideally, "a judgment in favor of the class members should decisively settle the entire controversy, and all that should remain is for other members of the class to file proof of their claim." Life Ins. Co. of the Southwest v. Brister, 722 S.W.2d 764, 772 (Tex. App.--Fort Worth 1986, no writ); accord Sun Coast Resources Inc. v. Cooper, 967 S.W.2d 525, 533­34 (Tex. App.--Houston [1st Dist.] 1998, pet. dism'd w.o.j.); Microsoft Corp. v. Manning, 914 S.W.2d 602, 611 (Tex. App.--Texarkana 1995, writ dism'd). Before we determine whether individual issues predominate over common ones in this class, we consider how to properly apply the predominance requirement.

V

The predominance requirement is intended to prevent class action litigation when the sheer complexity and diversity of the individual issues would overwhelm or confuse a jury or severely compromise a party's ability to present viable claims or defenses. But the predominance requirement has not always been so rigorously applied. When presented with significant individual issues, some courts have simply remarked that creative means may be designed to deal with them, without identifying those means or considering whether they would vitiate the parties' ability to present viable claims or defenses. See, e.g., Amerada Hess Corp. v. Garza, 973 S.W.2d 667, 680 (Tex. App.--Corpus Christi 1996), writ dism'd w.o.j., 979 S.W.2d 318 (Tex. 1998); Franklin v. Donoho, 774 S.W.2d 308, 313 (Tex. App.--Austin 1989, no writ) (both expressing faith that, but not suggesting how, the trial court can creatively deal with significant individual issues in a manner that will be both fair and efficient). Other courts have indulged every presumption in favor of the trial court's ruling, viewed the evidence in the light most favorable to that ruling, and frankly acknowledged that if they erred, it would be in favor of certification. See, e.g., Health & Tennis Corp. of Am. v. Jackson, 928 S.W.2d 583, 587(Tex. App.--San Antonio 1996, writ dism'd w.o.j.); Reserve Life Ins. Co. v. Kirkland, 917 S.W.2d 836, 839, 843 (Tex. App.--Houston [14th Dist.] 1996, no writ). Still others have postulated that because a settlement or a verdict for the defendant on the common issues could end the litigation before any individual issues would be raised, predominance need not be evaluated until later. See, e.g., Ford Motor Co. v. Sheldon, 965 S.W.2d 65, 72 (Tex. App.--Austin 1998), rev'd, 22 S.W.3d 444 (Tex. 2000); Union Pac. Resources Co. v. Chilek, 966 S.W.2d 117, 123 (Tex. App.--Austin 1998, pet. dism'd w.o.j.). Other courts have suggested that the predominance requirement is not really a preliminary requirement at all because a class can always later be decertified if individual issues are not ultimately resolved. See Nat'l Gypsum Co. v. Kirbyville Indep. Sch. Dist., 770 S.W.2d 621, 627 (Tex. App.--Beaumont 1989, writ dism'd w.o.j.) ("There can be no danger in this proceeding to Appellant for the trial court recognized in his order that individual issues would have to be addressed,

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and stated, `This certification, of course, may be altered, amended or withdrawn at any time before final judgment.' "); Life Ins. Co. v. Brister, 722 S.W.2d 764, 775 (Tex. App.--Fort Worth 1986, no writ) (suggesting that when predominance is in doubt, "the most efficient approach for the trial court is to allow class certification at the present time subject to a motion by the defendants after the case has developed to dissolve the class on the grounds that common questions are not predominant at trial."). We reject this approach of certify now and worry later. In Amchem Products Inc. v. Windsor, the United States Supreme Court reemphasized the importance of vigorously applying the predominance requirement in a class­action certification that sought global settlement of current and future asbestos­related claims. There the Supreme Court emphasized the importance of carefully scrutinizing the predominance standard to ensure that the proposed class is "sufficiently cohesive to warrant adjudication by representation." Amchem Prods. Inc., 521 U.S. at 623. Noting that "the predominance criterion is far more demanding" than the commonality requirement, the Court determined that the plaintiffs' shared experience of asbestos exposure might meet the commonality requirement, but failed to predominate over individual issues. Amchem Prods. Inc., 521 U.S. at 623. In effect, the exacting standards of the predominance inquiry act as a check on the flexible commonality test under Rule 42(a)(2). Courts must perform a "rigorous analysis" before ruling on class certification to determine whether all prerequisites to certification have been met. See Gen. Tel. Co. of the Southwest v. Falcon, 457 U.S. 147, 161, 72 L. Ed. 2d 740, 102 S. Ct. 2364 (1982); see also In re Am. Med. Sys., Inc., 75 F.3d 1069, 1078­79 (6th Cir. 1996). Although it may not be an abuse of discretion to certify a class that could later fail, we conclude that a cautious approach to class certification is essential. The "flexibility" of Rule 42 "enhances the usefulness of the class­action device, [but] actual, not presumed, conformance with [the Rule] remains . . . indispensable." Falcon, 457 U.S. at 160. As the Supreme Court stressed in Amchem: "Courts must be mindful that the rule as now composed sets the requirements they are bound to enforce. . . . The text of a rule . . . limits judicial inventiveness." Amchem Prods. Inc., 521 U.S. at 620; see also Gen. Motors Corp. v. Bloyed, 916 S.W.2d 949, 954 (Tex. 1996)(emphasizing "the importance of the trial court's obligation to determine that the protective requirements of Texas Rule 42 are met"). Thus it is improper to certify a class without knowing how the claims can and will likely be tried. See Castano v. Am. Tobacco Co., 84 F.3d 734, 744 (5th Cir. 1996). A trial court's certification order must indicate how the claims will likely be tried so that conformance with Rule 42 may be meaningfully evaluated. "Given the plaintiffs' burden, a court cannot rely on [mere] assurances of counsel that any problems with predominance or superiority can be overcome." Castano, 84 F.3d at 742. To make a proper analysis, "going beyond the pleadings is necessary, as a court must understand the claims, defenses, relevant facts, and applicable substantive law

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in order to make a meaningful determination of the certification issues." Castano, 84 F.3d at 744. Any proposal to expedite resolving individual issues must not unduly restrict a party from presenting viable claims or defenses without that party's consent. See TEX. R. CIV. P. 815; TEX. GOV'T CODE § 22.004(a) (stating that Texas's procedural "rules may not abridge, enlarge, or modify the substantive rights of a litigant"). If it is not determinable from the outset that the individual issues can be considered in a manageable, time­efficient, yet fair manner, then certification is not appropriate. See Gen. Motors Corp. v. Bloyed, 916 S.W.2d 949, 959 (Tex. 1996) ("The trial court [found] that `there is uncertainty as to whether a class action could be properly certified and maintained through trial because there are potentially substantial individual questions of fact and law and obstacles to the manageability of the action on a class basis.' If the trial court believed this to be the case, it should not have certified the class. . . ."). We turn to the application of the class­action device generally in personal injury cases and determine whether individual issues predominate over common ones in this class.

VI

Personal injury claims will often present thorny causation and damage issues with highly individualistic variables that a court or jury must individually resolve. See generally Amchem Prods. Inc., 521 U.S. 591, 138 L. Ed. 2d 689, 117 S. Ct. 2231. Thus, the class action will rarely be an appropriate device for resolving them. The drafters of Federal Rule 23(b)(3), the counterpart to our Rule 42(b)(4), recognized this when they observed that personal injury claims are generally inappropriate for class certification: A "mass accident" resulting in injuries to numerous persons is ordinarily not appropriate for a class action because of the likelihood that significant questions, not only of damages but of liability and defenses of liability, would be present, affecting individuals in different ways. In these circumstances an action conducted nominally as a class action would degenerate in practice into multiple lawsuits separately tried. 39 F.R.D. 69, 103 (1966). Here the causation and damages issues are uniquely individual to each class member. The proximity of the explosion to the residents' homes varied from less than one­half of a mile to almost nine miles. There is evidence that prevailing winds blew the smoke away from the residents' homes. When the tank explosion occurred, class members were scattered in locations that varied from less than one mile from the explosion to as far away as Beaumont. Some were inside their homes, others were outside; some were walking, others were driving. One representative, in fact, admitted that he did not think he was exposed to anything from the tank fire and explosion. Another representative did not even know who he was suing or what he was suing over. In his deposition, he expressed his belief

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that this lawsuit represented claims relating to a 1993 benzene release from a Coastal Corporation plant. Plaintiffs' counsel concede that there are class members who were not or who do not think they were exposed. One of the class members, for example, was in a Beaumont prison when the explosion occurred. Another was in California. Nevertheless, plaintiff's counsel insist that class members who were not or who do not think they were exposed need to be included and represented within the class so that the class can cover the whole spectrum of "less severe cases, medium cases and really good cases." We conclude that individual issues predominate over common ones in this class. The common­issues phase will establish whether Southwest is legally responsible for the explosion and whether the released materials were capable of causing the harm some members of the class allege. The answers to these questions are necessary in considering Southwest's liability, but they will not establish whether and to what extent each class member was exposed, whether that exposure was the proximate cause of harm to each class member, whether and to what extent other factors contributed to the alleged harm, and the damage amount that should compensate each class member's harm. As for these latter issues, highly individualistic variables including each class member's dosage, location, activity, age, medical history, sensitivity, and credibility will all be essential to establishing causation and damages. Rule 42(b)(4) requires class treatment to be superior for the fair and efficient adjudication of the controversy. See TEX. R. CIV. P. 42(b)(4). Here Southwest is entitled to a fair opportunity to individual determinations of causation and damages for each of the 904 plaintiffs--a difficult undertaking for any jury. Plaintiffs argue that under the trial plan a single jury in a single lawsuit can and will consider the individual issues fairly and efficiently. Plaintiffs assert that they can present their entire case--all four phases of it--in six to eight weeks. First, they plan to offer evidence on most elements of damages using medical records, summaries, and expert testimony. Second, they plan to submit a charge to the jury with damages and proximate cause issues using a matrix format. Plaintiffs urge that this strategy, coupled with the use of models, formulas, and damage brochures, will allow them to litigate phase IV expeditiously and enable the jury to sort through and deliberate each personal injury claim. With the help of models, formulas, extrapolation, and damage brochures, plaintiffs may indeed be able to present their case in an expeditious manner. Likewise, Southwest may choose to present a timely and efficient defense, making arguments and presenting evidence on only a generalized, class­wide basis. But, while Southwest may not be entitled to separate trials, it is entitled to challenge the credibility of and its responsibility for each personal injury claim individually. See generally In re Colonial Pipeline, 968 S.W.2d 938, 942 (Tex. 1998); Able Supply Co. v. Moye, 898 S.W.2d 766 (Tex. 1995) (both vindicating defendants' rights, in mass tort cases, to case­by­case discovery on basic medical and causal information).

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The class action is a procedural device intended to advance judicial economy by trying claims together that lend themselves to collective treatment. It is not meant to alter the parties' burdens of proof, right to a jury trial, or the substantive prerequisites to recovery under a given tort. . . . Although a goal of our system is to resolve lawsuits with "great expedition and dispatch and at the least expense," the supreme objective of the courts is "to obtain a just, fair, equitable and impartial adjudication of the rights of litigants under established principles of substantive law." TEX. R. CIV. P. 1. This means that "convenience and economy must yield to a paramount concern for a fair and impartial trial." In re Ethyl Corp., 975 S.W.2d at 613. And basic to the right to a fair trial--indeed, basic to the very essence of the adversarial process--is that each party have the opportunity to adequately and vigorously present any material claims and defenses. If Southwest chooses to challenge the credibility of and its responsibility for each personal injury claim individually, then what may nominally be a class action initially would degenerate in practice into multiple lawsuits separately tried. We therefore conclude that Rule 42(b)(4)'s requirement that class treatment be superior to other available methods for a fair and efficient adjudication has not been satisfied. Some commentators have urged that courts relax their commitment to individualized treatment of causation and damages in the mass tort context. See, e.g., David Rosenberg, Class Actions for Mass Torts: Doing Individual Justice by Collective Means, 62 Indiana L. J. 561, 567 (1987) (arguing that "bureaucratic justice implemented through class actions provides better opportunities for achieving individual justice than does the tort system's private law, disaggregative processes"); Samuel Issacharoff, Administering Damage Awards in Mass­Tort Litigation, 10 Rev. Litig. 463, 493 (1991) ("The legal system is now beginning to confront the conflict between idealized forms of case­by­case adjudication and the reality of injured parties' regularly dying before the litigation of their claims. Against this backdrop of justice routinely denied, proposals for rough­ cut justice dispensed on a mass scale must be taken seriously."). Indeed, under intense pressure to manage their mass­tort dockets, some trial courts have dispensed with proof requirements for certain elements and sharply limited defendants' rights to contest plaintiffs' claims, only to be reversed on appeal. See Roger H. Transgrud, Mass Trials in Mass Tort Cases: A Dissent, 1989 U. Ill. L. Rev. 69, 84­85 (illustrating how mass trials create incentives for improper behavior and decisions by trial judges). For example, in Cimino v. Raymark Industries, Inc., 151 F.3d 297, 304 (5th Cir. 1998), the trial court certified a class of 2,298 asbestos cases and implemented a trial plan in which the trial court planned to award damages for 2,128 cases based on an extrapolation of jury awards for 160 sample cases. Moreover, the trial court refused to allow defendants to contest exposure or causation for the 160 sample cases. See Cimino, 151 F.3d at 304­05 & n.16. Instead, the trial court instructed the jury to assume that each plaintiff had sufficient exposure to be a producing cause of an asbestos­ related injury. See Cimino, 151 F.3d at 304­05 & n.16. In short, defendants were not permitted to

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contest individual exposure or causation issues for any of the 2,288 nonrepresentative class members and the 160 sample cases. On an appeal from a judgment rendered in 159 of the cases, the Fifth Circuit reversed, holding that the trial plan violated defendants' Seventh Amendment rights and violated Texas's substantive law. See Cimino, 151 F.3d at 311­321; see also Leverence v. PFS Corp., 193 Wis. 2d 317, 532 N.W.2d 735, 739­40 (Wis. 1995) (reversing judgment in which trial court, over defendants' objections, used aggregative procedures on issues of cause, contributory negligence, and damages in place of individualized jury determination). Aggregating claims can dramatically alter substantive tort jurisprudence. Under the traditional tort model, recovery is conditioned on defendant responsibility. The plaintiff must prove, and the defendant must be given the opportunity to contest, every element of a claim. By removing individual considerations from the adversarial process, the tort system is shorn of a valuable method for screening out marginal and unfounded claims. In this way, "class certification magnifies and strengthens the number of unmeritorious claims." Castano, 84 F.3d at 746; see also John A. Siliciano, Mass Torts and the Rhetoric of Crisis, 80 Cornell L. Rev. 990, 1010­11 (1995); Francis E. McGovern, Looking to the Future of Mass Torts: A Comment on Schuck and Siliciano, 80 Cornell L. Rev. 1022, 1023­24 (1995) (both observing that mass tort cases have a tendency to attract many unmeritorious claims). If claims are not subject to some level of individual attention, defendants are more likely to be held liable to claimants to whom they caused no harm. Finally, plaintiffs contend that denial of class treatment is, in reality, the complete denial of legal redress for many of the 904 plaintiffs, because many of their claims are simply too small to justify the cost of individual litigation. At oral argument, plaintiffs' counsel stated that "we have injuries that probably do not exceed, for any of the plaintiffs on an individual basis, a thousand dollars." Plaintiffs urge that the most compelling reason to certify a class action is the existence of a "negative value" suit, in which the cost of litigating each individual claim would surpass any potential recovery. See Gen. Motors Corp. v. Bloyed, 916 S.W.2d 949, 953 (Tex. 1996); Castano v. Am. Tobacco Co., 84 F.3d 734, 748 (5th Cir. 1996). We do not second­guess plaintiffs' contention that, from a financial perspective, some claims may not be worth pursuing if class­action treatment is denied. But proceeding as a class action may very well cost more in the long run, if, as can be expected here, the class must ultimately be dissolved because there is no manageable way, fair to both parties, to resolve the individual issues. And "there is no right to litigate a claim as a class action. Rather, Rule 42 provides only that the court may certify a class action if the plaintiff satisfies the requirements of the rule." Sun Coast Resources, Inc. v. Cooper, 967 S.W.2d 525, 529 (Tex. App.--Houston [1st Dist.] 1998, pet. dism'd w.o.j.); accord Weatherly v. Deloitte & Touche, 905 S.W.2d 642, 647 (Tex. App.--Houston [14th Dist.] 1995, writ dism'd w.o.j.); Vinson v. Texas Commerce Bank­Houston N.A., 880 S.W.2d 820, 825 (Tex.

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App.--Dallas 1994, no writ). This class certification does not satisfy those requirements.

VII

When properly applied the class action device is unquestionably a valuable tool in protecting the rights of our citizens. As the United States Supreme Court has stated: the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone's (usually an attorney's) labor. Amchem Prods. Inc. v. Windsor, 521 U.S. 591, 617, 138 L. Ed. 2d 689, 117 S. Ct. 2231 (1997) (quoting Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (7th Cir. 1997)). But fairness and justice to all concerned require adherence to certification standards before a court may allow a case to proceed as a class action. See Gen. Motors Corp. v. Bloyed, 916 S.W.2d 949, 954 (Tex. 1996). We hold that the trial court's certification order was an abuse of discretion because common issues do not predominate. Because of this conclusion we need not consider Southwest's other objections to the class action or trial plan. We reverse the judgment of the court of appeals and remand this cause to the trial court for further proceedings consistent with this opinion. [Justice Baker, joined by Justice Hecht, concurred with the Court's opinion but wrote separately to address the issue of whether separate juries can try different elements of a personal injury claim in separate phases. Justice Enoch dissented, arguing that the Court did not have jurisdiction of this interlocutory appeal under its traditional narrow view of "conflicts" jurisprudence.]

The Texas Supreme Court has extended its skepticism toward class actions to commercial cases. Consider the following case:

COMPAQ COMPUTER CORP. v. LAPRAY 47 Tex. Sup. Ct. J. 522 (Tex. 2004)

JEFFERSON, Justice Chief Justice PHILLIPS did not participate in the decision. Plaintiffs Hal Lapray, Tracy D. Wilson, Jr., and Alisha Seale Owens, on behalf of themselves and all others similarly situated, sued Compaq

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Computer Corporation alleging that Compaq sold them computers containing defective floppy disk controllers ("FDCs"). The trial court certified a nationwide class under Rule 42(b)(2) and (b)(3), 1 Tex. R. Civ. P., and the court of appeals affirmed. For the reasons set forth below, we reverse the court of appeals' judgment and remand this case to the trial court for further proceedings consistent with this opinion.

I Factual Background

Plaintiffs allege that the affected computers, some thirty-seven models of Compaq Presario computers, contain defective FDCs. FDCs control the transfer of data (broken down into individual characters called "bytes") between a computer's memory and a floppy disk. Plaintiffs claim that, in certain circumstances, computer system "latencies" 2 can lead the FDC to fail to identify that data has been written incorrectly to the floppy disk--a condition called an "underreported underrun"--resulting in the loss of a byte of data. The plaintiffs allege that the FDCs failed to meet industry standards adopted by Compaq and that Compaq identified the FDC problem as a "failure" of a "main feature" but elected to sell the computers anyway. Plaintiffs assert that the defective FDCs breached Compaq's limited warranty, which promised that the computers would be free from defects in materials or workmanship under normal use during the warranty period and that Compaq would repair or replace defective parts. Lapray et al. sued Compaq, first in federal court then, after the federal court dismissed the claims without prejudice, 3 in the 60th judicial district court in Jefferson County. Having abandoned their other causes of action, the plaintiffs allege only that Compaq breached its express warranty. The plaintiffs seek a declaration that (I) Compaq breached its express warranty, (ii) Compaq breached its obligation to repair, replace, or refund, (iii) the

1 Actually, the trial court (by order dated July 23, 2001) certified the class pursuant to Rule 42(b)(2) and (b)(4 ). Effective January 1, 2004, however, subparagraph (b)(3) was deleted from Rule 42, and former subparagraph (b)(4)--with minor changes not pertinent to our decision--is now (b)(3). Compare Tex .R. Civ. P. 42 and Tex .R. Civ. P. 42 General Commentary--2003 ("Subparagraph (b)(3) is omitted as unnecessary.") with Tex. R. Civ. P. 42, 553­554 S.W.2d (Tex.Cases) XXXVI-XXXVIII (1977, amended 2004). For ease of reference, we will refer herein to (b)(3), and those references will include former subparagraph (b)(4). As amended, Rule 42(b)'s subsections are now numbered the same as Federal Rule of Civil Procedure 23(b). See Fed. R. Civ. P. 23(b). We note too that, on remand, the trial court proceedings will be governed by the amended rule. See Ex Parte Abell, 613 S.W.2d 255, 260­61 (Tex.1981).

A "latency" in this context is a delay: the amount of time it takes a byte of data to travel from one point to another on the computer motherboard.

3 The federal district court granted Compaq's motion for summary judgment on plaintiffs' sole federal claim, holding that none of the three named plaintiffs met the $5,000 minimum damage requirement to state a claim under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. Thurmond v. Compaq Computer Corp., 171 F.Supp.2d 667, 684 (E.D.Tex.2001). That court then declined to exercise supplemental jurisdiction over the remaining state claims and dismissed those claims without prejudice to refiling in state court. Id.

2

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FDC defect is covered by Compaqs express warranty, and (iv) class members have a right to seek relief under the warranty. In the alternative, they seek damages, either in the form of a refund, the difference in value between a computer without the FDC defect and the computer as purchased, or damages for breach of the duty to repair or replace. Plaintiffs explicitly disclaim consequential damages from loss or corruption of data. After a hearing on the plaintiffs' motion for class certification, the trial court certified a national class consisting of some 1.8 million computer buyers, including: All residents and citizens of the United States, other than those excluded below, who purchased from Compaq or from an authorized Compaq reseller any Compaq computer model that contains a SiS 6801 or ITE 8661 FDC, which are identified as being Presario desktop model numbers 2266, 2275, 2281, 2285V, 2286, 2412ES, 2416ES, 5070, 5184, 5185, 5301, 5304, 5304b, 5340, 5345, 5360, 5365, 5410, 5440, 5441, 5451, 5452, 5460, 5461, 5465, and 5710, Presario laptop model numbers 17XL2, 17XL266, 17XL274, 17XL264, 17XL266, 17XL260, 17XL261, 17XL262, 17XL275, 17XL265, and 1700T[CTO]. The following persons are excluded from the class: All government entities, bodies and agencies of any character, federal, state, or local, and their employees (in that capacity only); the presiding judge(s) and other court personnel, the Named Defendants and their employees. Finding that the requirements of both Rule 42(b)(2) and (b)(3) were met, the trial court certified the class under both subsections. Additionally, the trial court concluded that it would "likely" apply Texas law to all class members' claims but deferred a final choice-of-law determination. The lengthy certification order includes findings of fact and conclusions of law, as well as a trial plan for the (b)(3) claims. The court of appeals affirmed the trial court's certification order. 79 S.W.3d 779, 794. The court analyzed the trial court's certification of a(b)(2) class and held that declaratory relief was appropriate. The court of appeals then concluded that "[b]ecause the trial court certified the class under Rule 42(b)(2), and only alternatively certified the class under Rule 42(b)[(3)], and having found the trial court did not abuse its discretion in certifying a(b)(3) [sic] class, it is unnecessary to address issues five and six challenging the requirements of predominance and superiority." Id. at 791.

II Jurisdiction

Because this is an interlocutory appeal from an order certifying a class action and there was no dissent in the court of appeals, this Court has jurisdiction only when the court of appeals "holds differently from a prior

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decision of another court of appeals or of the supreme court." Tex. Govt Code §§ 22.225(b)(3),(c), 22.001(a)(2). 4 Compaq argues that the court of appeals' failure to analyze predominance and superiority conflicts with Southwestern Refining Co. v. Bernal, 22 S.W.3d 425 (Tex.2000). We agree. In Bernal, we held that "[c]ourts must perform a `rigorous analysis' before ruling on class certification to determine whether all prerequisites to certification have been met." Id. at 435 (emphasis added). Rule 42(b)(3) requires that the trial court find that "questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and a class action is superior to other available methods for the fair and efficient adjudication of the controversy." Tex. R. Civ. P. 42(b)(3) (emphasis added). Predominance and superiority analyses are vital to a determination of whether to certify a (b)(3) class. Indeed, predominance is "one of the most stringent prerequisites to class certification." Bernal, 22 S.W.3d at 433. The court of appeals stated that "the trial court certified the class under Rule 42(b)(2), and only alternatively certified the class under Rule 42(b)[(3)], and having found the trial court did not abuse its discretion in certifying a(b)(3) [sic] class, it is unnecessary to address issues five and six challenging the requirements of predominance and superiority." 5 79 S.W.3d at 791. Thus, the court of appeals addressed only the (b)(2) issues but then affirmed the trial court's order (which certified both (b)(2) and (b)(3) classes) in its entirety. Id. at 794. The effect of the court of appeals' decision is to affirm the (b)(3) class without reviewing predominance and superiority. The class would be entitled to seek damages under the (b)(3) certification--as affirmed by the court of appeals--without any court ever having rigorously analyzed predominance and superiority. This directly conflicts with Bernal--a conflict that is apparent from the face of the court of appeals' opinion--and would operate to overrule it had the opinion issued from our court. See Coastal Corp. v. Garza, 979 S.W.2d 318, 319­20 (Tex.1998); Hill

4 In 2003, the Legislature amended Government Code sections 22.001 and 22.225, but those changes do not govern this appeal. See Tex. Govt Code §§ 22.001, 22.225 historical note (Vernon 2004) [Act of June 11, 2003, 78th Leg., R.S., ch. 204, §§ 1.05, 23.02(a) and (d), 2003 Tex. Gen. Laws 850, 898­99 ("H.B.4")]. 5 This statement is itself inaccurate. In fact, the trial court certified both a(b)(2) and a(b)(3) class. The class certification order states that: "[e]ach of the certification elements under both TRCP 42(b)(2) and TRCP 42(b)[(3)] are satisfied"; "the request to certify a(b)(2) class is granted"; "the Court finds that the requirements for (b) [(3)] certification are met in this case and certifies a(b)[(3)] class"; "it is appropriate to certify both a 42(b)(2) and a 42(b)[(3)] class"; and "[t]he Court finds that a national class of all affected models is certifiable under both TRCP (b)(2) and TRCP 42(b)[(3)]." Moreover, the trial court noted that the two classes were substantively different: "the damages claim for breach [the (b)(3) class] does not overlap the claim for declaratory relief [the (b)(2) class]." The court further explained that if it were to grant summary judgment on the damages claim, "such a ruling would not dispose of Named Plaintiffs' claim for declaratory judgment." (Emphasis in original.) Contrary to the court of appeals statement, however, nowhere does the trial court state that it is certifying the (b)(3) class only in the alternative. Plaintiffs admitted as much in their court of appeals' brief: "What the trial court did is certify the whole case and all remedies under both 42(b)(2) and TRCP 42(b) [(3)]."

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v. Miller, 714 S.W.2d 313, 315 (Tex.1986). Accordingly, we have jurisdiction over this interlocutory appeal.

III (b)(2) versus (b)(3) Class Actions

The parties devote much energy and attention to whether this class properly falls under subsection (b)(2) or (b)(3) of rule 42, Tex. R. Civ. P. Compaq argues that the breach of warranty declaratory judgment claim is merely a predicate to a claim for damages and an attempt to "shoehorn" a damages claim into a(b)(2) claim for declaratory relief. Plaintiffs respond that (b)(2) certification is proper because they have disclaimed consequential damages and primarily seek a declaration that the FDC is defective and falls within Compaq's limited warranty. Rule 42(b)(2) provides that: An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition: the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole. . . . (Tex. R. Civ. P. 42(b)(2). The Texas rule derives from its federal parallel, Rule 23(b)(2), and reads identically. Tex. R. Civ. P. 42 historical note (Vernon 1979) ("Subdivision (b)(2) is copied from revised federal rule 23(b)(2)."). "Subdivision (b)(2) was added to [the federal rules] in 1966 primarily to facilitate the bringing of class actions in the civil rights area." Kincade v. Gen. Tire & Rubber Co., 635 F.2d 501, 506 n. 6 (5th Cir.1981) (quoting 7A Charles Alan Wright & Arthur C. Miller, Federal Practice & Procedure § 1972 at 470­71 (2d ed.1986)) "Before its adoption, the rules made no explicit reference to class actions involving injunctive or declaratory relief, and `there was some uncertainty whether a class action seeking one of those remedies was an appropriate device for vindicating civil rights.' " In re Monumental Life Ins. Co., ___ F.3d ___, ___ n. 16 (5th Cir.2004) (quoting Wright & Miller, supra, § 1775, at 470 (2d ed.1986)). Commentators have observed: Much of the popularization of the Rule 23(b)(2)-type class action was accomplished in the late 1960s and early 1970s by legal services and other government and foundation-subsidized public interest attorneys, who sought to utilize this type of action as an inexpensive and powerful tool to provide representation for large numbers of indigent and minority persons who previously could secure little effective redress under the legal system. More recently, private counsel have been filing Rule 23(b)(2) class actions with increasing

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frequency in employment, civil rights, antitrust, environmental, securities, and other types of class litigation. Alba Conte and Herbert B. Newberg, 2 Newberg on Class Actions 62-66 (2003) (citations omitted). There are procedural distinctions between (b)(2) and (b)(3) class actions. While individual notice is required for classes certified under (b)(3), (b)(2) does not mandate individual notice. Additionally, rule 42(c)(2) provides that class members in a(b)(3) class are entitled to an opportunity to exclude themselves from the class and the preclusive effect of any judgment by "opting out" of the lawsuit. Tex. R. Civ. P. 42(c)(2); see also Eubanks v. Billington, 110 F.3d 87, 92 (D.C. Cir.1997). The rule has no comparable provision for (b)(1) and (b)(2) classes. These distinctions have resulted in much legal wrangling over whether a class is appropriately certified under (b)(2) or (b)(3). As the Fifth Circuit noted, "plaintiffs may attempt to shoehorn damages actions into the Rule 23(b)(2) framework, depriving class members of notice and opt-out protections. The incentives to do so are large. Plaintiffs' counsel effectively gathers clients--often thousands of clients--by a certification under (b)(2). Defendants attempting to purchase res judicata may prefer certification under (b)(2) over (b)(3)." 7 Bolin v. Sears, Roebuck & Co., 231 F.3d 970, 976 (5th Cir.2000)(footnote omitted). The rule is silent on whether damages are available in a(b)(2) class. The Federal Rules Advisory Committee apparently contemplated the possibility and stated that (b)(2) "does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages." Fed .R. Civ.P. 23(b)(2) advisory committee's note (1966 amendment). The "predominantly" requirement (not to be confused with (b)(3)'s "predominance" requirement) has engendered some debate. The Fifth, Seventh, and Eleventh Circuits have held that claims for monetary relief predominate over equitable claims unless the monetary relief sought is incidental to the requested injunctive relief. See Murray v. Auslander, 244 F.3d 807, 812 (11th Cir.2001); Jefferson v. Ingersoll Int'l, Inc., 195 F.3d 894, 898 (7th Cir.1999); Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir.1998). On the other hand, the Second and Ninth Circuits have rejected this approach in favor of an ad hoc balancing to determine whether (b)(2) certification is appropriate under the circumstances. Molski v. Gleich, 318 F.3d 937, 949­50 (9th Cir.2003); Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 164 (2d Cir.2001). The United States Supreme Court has not yet decided whether a(b)(2) mandatory class can include claims for monetary relief. Since 1966, when the Advisory Committee penned its note, the Supreme Court regularly has emphasized the importance of allowing affected persons to opt out of representative suits. See Ortiz v. Fibreboard Corp., 527 U.S. 815, 847­48, 119 S. Ct. 2295, 144 L.Ed.2d 715 (1999); S. Cent. Bell Tel. Co. v. Alabama, 526

7 Still another motivation for seeking (b)(2) certification, addressed below, may be the perception that (b)(2) class representatives need not satisfy Bernal's "rigorous analysis" requirements.

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U.S. 160, 167­68, 119 S. Ct. 1180, 143 L.Ed.2d 258 (1999); Richards v. Jefferson County, 517 U.S. 793, 799­802, 116 S. Ct. 1761, 135 L.Ed.2d 76 (1996); Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811­12, 105 S. Ct. 2965, 86 L.Ed.2d 628 (1985); see also Jefferson, 195 F.3d at 897. In recent years, it has demonstrated growing concern regarding the certification of mandatory classes when monetary damages are involved. See Ortiz, 527 U.S. at 844­48; Ticor Title Ins. Co. v. Brown, 511 U.S. 117, 121, 114 S. Ct. 1359, 128 L.Ed.2d 33 (1994). In fact, the Supreme Court has stated that there is "at least a substantial possibility" that actions seeking monetary damages are certifiable only under (b)(3), which provides class members notice and the right to opt-out. Ticor Title, 511 U.S. at 121. The Fifth Circuit "recognize[d] that the Supreme Court's decision in [Ticor Title ] casts doubt on the proposition that class actions seeking money damages can be certified under Rule 23(b)(2)" and stated that "[w]ere we writing on a clean slate, we might give further consideration to the extent to which monetary relief is available at all in 23(b)(2) class actions. However, in the absence of a clearer statement by the Supreme Court or en banc reconsideration of the issue, this panel is bound by circuit precedent." Allison, 151 F.3d at 411 n. 3; see also Coleman v. GMAC, 296 F.3d 443, 447 (6th Cir.2002) (expressing doubt that damages can be awarded in a(b)(2) class but declining to decide the issue). The Seventh Circuit noted that, in Ortiz, "[t]he Supreme Court stressed that proper interpretation of Rule 23, principles of sound judicial management, and constitutional considerations (due process and jury trial), all lead to the conclusion that in actions for money damages class members are entitled to personal notice and an opportunity to opt out." Jefferson, 195 F.3d at 898. The D.C. Circuit recently examined the development of (b)(2) class actions and whether notice and opt-out are appropriate in such cases: [A]s one commentator has noted, "as has become increasingly apparent since 1966, these amendments [authorizing injunctive and declaratory relief] created an awkward mismatch between the subdivisions under which class actions are certified and the procedural protections to which a class is entitled." George Rutherglen, Better Late Than Never: Notice and Opt Out at the Settlement Stage of Class Actions, 71 N.Y.U. L.REV. 250, 260 (1996). This commentator has observed that "the Advisory Committee foresaw neither the surge in filings of Title VII class actions nor decisions that award individual compensatory relief based on findings of classwide discrimination." George Rutherglen, Notice, Scope and Preclusion in Title VII Class Actions, 69 VA. L.REV. 11, 25 (1983). Consequently, this commentator concludes, the Advisory Committee did not address the need for notice in Title VII class actions seeking compensatory as well as injunctive relief. Id.; see also WRIGHT, supra, § 1776, at 495. The Advisory Committee's lack of foresight in this regard may also explain Rule 23's failure to address the possible need for opt-out rights in non-(b)(3) actions. Several commentators have suggested that, despite the absence of any such

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requirement in Rule 23, where class members seek individual compensatory relief in addition to broad classwide injunctive relief, it is appropriate for a court to afford them the procedural protections of notice and an opportunity to opt out. NEWBERG & CONTE, supra, § 4.15, at 4­51 to 4­52; Rutherglen, Notice and Opt-Out, supra, 71 N.Y.U. L.REV. at 274. Eubanks v. Billington, 110 F.3d 87, 93 (D.C. Cir.1997). Perhaps as a result of these concerns, recent decisions seem almost to conflate the (b)(2) and (b)(3) subsections. For example, the Seventh Circuit, noting that "[i]t is an open question in this circuit--and in the Supreme Court--whether rule 23(b)(2) ever may be used to certify a no-notice, no opt-out class when compensatory or punitive damages are in issue," has announced three alternatives to a straight (b)(2) certification for cases that combine equitable or declaratory relief with money damages. Jefferson, 195 F.3d at 898. First, the trial court may certify the class under (b)(3) for all proceedings. Id. at 898. Second, the trial court could make a "divided certification," certifying a(b)(2) class for the equitable portion of the case and a(b)(3) class for the damages portion. Under that scenario, the court noted that the Seventh Amendment right to a jury trial would require adjudication of the (b)(3) claims before the (b)(2) claims, "even if adjudication of these claims decides the equitable claims as well." Lemon v. Int'l Union of Operating Eng'rs, 216 F.3d 577 (7th Cir.2000) (citing Jefferson, 195 F.3d at 898). The third option discussed in Jefferson is that the trial court might certify the class under (b)(2) for both monetary and equitable remedies but exercise its plenary authority to require individual notice and opt-out, "as though the class was certified under Rule 23(b)(3)." Id. In a similar vein, the D.C. Circuit has noted, in the context of a Title VII claim, "cases seeking individual monetary damages as well as classwide injunctive relief may be equally amenable to certification as (b)(3) actions, and `the arguments supporting certification exclusively under subdivision (b)(2) are surprisingly weak.' " Eubanks, 110 F.3d at 93 n. 9 (quoting George Rutherglen, Notice, Scope and Preclusion in Title VII Class Actions, 69 VA. L.REV. 11, 24 (1983)). Under each of these scenarios, the net effect is that notice and opt-out would be provided to class members, thereby satisfying due process requirements. Once notice and opt-out are provided, however, (b)(2) classes become virtually indistinguishable from (b)(3) classes. 9 The Fifth Circuit recently recognized as much, noting that arguing over whether certification is proper under (b)(2) versus (b)(3) is a waste of resources. In re Monumental Life Ins. Co., ___ F.3d ___ (5th Cir.2004). In that case, African-American policyholders sued three life insurance companies, alleging that the companies discriminated against them in the sale and administration of low-value life insurance policies. The plaintiffs moved for class certification under

9 As discussed more fully below, (b)(2)'s cohesiveness requirement parallels the predominance and superiority requirements of (b)(3).

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Rule 23(b)(2). Finding that plaintiffs' claims for monetary relief predominated over their claims for injunctive relief, the district court held that (b)(2) certification was inappropriate and refused to certify the class. The Fifth Circuit reversed, noting "the futility of the district court's and the dissent's inquiry as to whether the `prime goal' of the class is injunctive or monetary relief": The rule 23(b)(2) predominance requirement, by focusing on uniform relief flowing from defendants' liability, "serves essentially the same functions as the procedural safeguards and efficiency and manageability standards mandated in (b)(3) class actions." Allison, 151 F.3d at 414­15. Therefore, to deny certification on the basis that the damage claims would be better brought as a rule 23(b)(3) class serves no function other than to elevate form over substance. Indeed, interests of judicial economy are best served by resolving plaintiffs' claims for injunctive and monetary relief together. Id. at ___. The court then concluded that (b)(2) and (b)(3) "may work in tandem," noting that "[r]ule 23(b)(2) was adopted to facilitate the use of injunctive relief, not to compartmentalize claims for damages under rule 23(b)(3)." Id. at ___, ___ n. 16 (citing Wright & Miller, supra, § 1775, at 470­71). Thus, the court reversed the trial court's order denying class certification and remanded the matter for further proceedings, noting that "[u]nder our precedent, should the class be certified on remand, class members must be provided adequate notice, and the district court should consider the possibility of opt-out rights." Id. at ___. Accordingly, rather than focus on whether monetary relief predominates, or whether injunctive or declaratory relief will be necessary at some point, we hold that trial courts considering certification under (b)(2) must consider, and due process may require, individual notice and opt-out rights to class members who seek monetary damages under any theory. This conforms to United States Supreme Court guidance and discourages parties from artful pleading to circumvent what are perceived as stricter certification requirements under (b)(3). We recognize that (b)(2) played--and still plays--a valuable role in class action litigation. As used initially, primarily to stop classwide illegal treatment in the civil rights arena, (b)(2) filled a void that (b)(3) did not. With the evolution of the caselaw, the acceptance of the idea that injunctive or declaratory relief is available even under (b)(3), and the United States Supreme Court's growing concern about mandatory classes that include damages, however, a mandatory (b)(2) consumer class may deprive its members of due process rights. In this case, the trial court certified a(b)(2) declaratory relief class "which, if granted, would lead to enforcement of the remedies permitted by the written warranty (of repair, replacement or refund)." The court then separately certified under (b)(2) "the counts for declaratory relief and breach of warranty that Compaq argues could become a predicate for money damages outside the four corners of the written warranty (money damages for, alternatively, breach by sale and breach by failure to repair)." As to

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the second (b)(2) class, the trial court noted that it understood that there was "the prospect for recovery of money damages within a TRCP 42(b)(2) class" but that "the declaratory relief sought . . . is not mere incidental baggage to the claim for money damages. . . ." The trial court also certified both the declaratory relief and the damage claims under (b)(3). Thus, all claims and all remedies were certified under both (b)(2) and (b)(3). While the (b)(3) class would be automatically entitled to notice and optout, the trial court failed to even examine the possibility of notice and optout for the (b)(2) class. 11 In light of the concerns outlined above, we are reluctant to affirm a(b)(2) class that includes claims for damages without the concomitant protections afforded by notice and opt-out, and we cannot do so without knowing whether class members will be provided these protections. This is particularly true when, as here, the class has disclaimed consequential damages. If, in fact, some purchasers suffered such damages, their inclusion in a mandatory class may be improper; that is, due process may require that they be given notice of the class action and an opportunity to opt out and preserve their claims. In this case, the trial court wholly failed to address notice and opt-out rights for (b)(2) class members. 12 Because notice and opt-out must be determined before the parties can ascertain what their respective rights will be, an appellate court cannot effectively review a certification order that does not state how, if at all, these rights will be provided. While we cannot say that no (b)(2) class can be certified absent notice and opt-out rights to class members, we can state that, if damage claims are implicated, constitutional considerations will likely mandate such protections. The difficulty of reviewing a(b)(2) class that does not address notice and opt-out is evident when examining the first of the (b)(2) classes certified by the trial court. With regard to that class, we must consider whether declaratory relief, to the exclusion of damages, is appropriate in this case. The Fifth Circuit recently reversed certification of a(b)(2) class in a case involving breach of warranty, fraud, and negligent misrepresentation claims alleged against a motor home manufacturer by a putative class of motor home purchasers. See McManus v. Fleetwood Enters., 320 F.3d 545 (5th Cir.2003). The purchasers alleged that the manufacturer misrepresented that the motor home could safely tow 3,500 pounds when, in fact, supplemental brakes were required to safely tow that weight. The purchasers alleged breach of express and implied warranty claims, as well as

11 At the time the class was certified, rule 42 (unlike its federal counterpart) required individual notice to members of (b)(2) classes. Compare Tex. R. Civ. P. 42(c)(2), 553­554 S.W.2d (Tex.Cases) XXXVI-XXXVII (1977, amended 2004), with Fed. R. Civ. P. 23(c)(2) (individual notice required only for (b)(3) classes). Rule 42 was recently amended to conform more closely to federal rule 23 and no longer mandates individual notice for (b)(2) classes. See Tex. R.. Civ. P. 42(c)(2)(A) ("For any class certified under Rule 42(b)(1) or (2), the court may direct appropriate notice to the class.") (emphasis added). 12 The court of appeals appears to have been confused on this point. Although purportedly affirming only the (b)(2) class, that court held that individuals who suffered consequential damages would not be bound by the class judgment: "those parties can opt out of the class action and pursue their claims for data loss." 79 S.W.3d at 793.

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violations of California's consumer protection statute. They sought injunctive relief under (b)(2) to compel Fleetwood to provide supplemental brakes and accurate information about the towing limitations. In the alternative, the purchasers sought damages under (b)(3). The district court certified a Texas-only subclass, and Fleetwood appealed. The Fifth Circuit first examined the history of (b)(2) and then noted that: Here, unlike Bolin and Allison, the district court certified the class under both (b)(2) and (b)(3), and the plaintiffs seek injunctive relief and damages as alternative remedies. Thus, Allison and Bolin are slightly off the mark. We need not ask whether damages "predominate"; we ask only whether injunctive relief, to the exclusion of damages is appropriate under Rule 23(b)(2). We conclude that it is not. . . . The McManuses lawsuit is markedly different from the paradigm Rule 23(b)(2) class action. First, the ordinary relief for their lawsuit would be money damages, not injunctive relief. . . . Second, Fleetwood sold its motor homes over a limited period of time to a limited number of purchasers and does not have an ongoing relationship with its purchasers. Third, Fleetwood would have to provide individual relief, based on the various models of motor homes, to each individual plaintiff having purchased a motor home between 1994 and 1999, as opposed to a "uniform group remedy." . . . These sharp differences make the class-wide injunctive relief contemplated under Rule 23(b)(2) inappropriate to this case. We could find no case where injunctive relief was awarded under comparable circumstances. This result is unsurprising because damages would be the superior remedy especially considering that some class members may already own, or have no need for, supplemental brakes. We emphasize that otherwise inappropriate injunctive relief does not become appropriate for class treatment merely because the more permissive Rule 23(b)(2), as opposed to (b)(3), contemplates injunctive relief. The district court abused its discretion in allowing the Rule 23(b) classifications to inform the appropriate remedy, instead of vice versa. 320 F.3d at 553­54 (emphasis in original) (citations omitted). Finally, the court concluded: Moreover, permitting this lawsuit to continue as a Rule 23(b)(2) class would undo the careful interplay between Rules 23(b)(2) and (b)(3). That is, the class members would potentially receive a poor substitute for individualized money damages without the corresponding notice and opt-out benefits of Rule 23(b)(3); and defendants would potentially be forced to pay what is effectively money

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damages, without the benefit of requiring plaintiffs to meet the rigorous Rule 23(b)(3) requirements. We conclude that the district court abused its discretion in certifying the class under Rule 23(b)(2). Id. at 554 (citation omitted). We share the same concerns about plaintiffs' claims for declaratory relief--to the exclusion of damages--in this case. The ordinary remedy for a breach of warranty claim is damages, not declaratory relief like that sought here. See, e.g., TEX. BUS. & COM. CODE § 2.714(b) ("The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount."). Plaintiffs' expert witnesses testified variously that: "the instant case . . . is a commercial case asserting at bottom damages for breach of an express warranty"; "this is a garden variety, plain vanilla consumer class action for modest damages per unit"; and "[t]his is a classic `consumer' class action in which the claimed injuries are economic in scope." Similarly, Compaq sold the thirty-seven affected Presario models to the purchasers but, in all likelihood, does not have an ongoing relationship with them. Thus, relief would have to be individualized, at least to some extent. Purchasers who bought the affected computers may no longer own them. Like the Fifth Circuit in Fleetwood, "we could find no case where injunctive relief was awarded under comparable circumstances." Fleetwood, 320 F.3d at 554. Rather, as to the (b)(2) claims for declaratory relief to the exclusion of damages, it appears the plaintiffs have tried to "shoehorn" their damages action into the "(b)(2) framework, depriving class members of notice and opt-out protections ." Bolin, 231 F.3d at 976. We note, however, that these concerns will become largely irrelevant if, on remand, the trial court orders notice and opt-out for the (b)(2) class members.

IV Cohesiveness v. Predominance and Superiority

We now turn to whether parties may evade Bernal by seeking (b)(2) certification. Put simply, they may not. Although (b)(2) does not explicitly require predominance and superiority as (b)(3) does, (b)(2) does require a rigorous analysis of "cohesiveness." See, e.g., Barnes v. Am. Tobacco Co., 161 F.3d 127, 143 (3d Cir .1998)(noting that "[w]hile 23(b)(2) class actions have no predominance or superiority requirements, it is well established that the class claims must be cohesive"). Generally, (b)(2) classes are premised on an assumption of homogeneity. See Allison, 151 F.3d at 413 ("[B]ecause of the group nature of the harm alleged and the broad character of the relief sought, the (b)(2) class is, by its very nature, assumed to be a homogeneous and cohesive group with few conflicting interests among its members."). They are presumed to be cohesive, hence notice and opt-out

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are not mandated by the rules. See Holmes v. Contl Can Co., 706 F.2d 1144, 1155 n. 8 (11th Cir.1983) ("At base, the (b)(2) class is distinguished from the (b)(3) class by class cohesiveness. . . . Injuries remedied through (b)(2) actions are really group, as opposed to individual injuries. The members of a(b)(2) class are generally bound together through `preexisting or continuing legal relationships' or by some significant common trait such as race or gender.") (quoting Note, Notice in Rule 23(b)(2) Class Actions for Monetary Relief: Johnson v. General Motors Corp., 128 U. PA. L.REV. 1236, 1252­53 (1980) (footnotes omitted)). "[T]he predomination requirement of Rule 23(b)(2) serves essentially the same functions as the procedural safeguards and efficiency and manageability standards mandated in (b)(3) class actions." Allison, 151 F.3d at 414­15; see also Coleman, 296 F.3d at 448; Shaw v. Toshiba Am. Info. Sys., Inc., 91 F.Supp.2d 942, 955 (E.D.Tex.2000) (predomination "protects absent plaintiffs' rights to due process by showing that a class is cohesive"). We disagree, therefore, with the trial court's statement that "[n]amed Plaintiffs are not required to show predominance, superiority, or manageability in order to certify a class under TRCP 42(b)(2)." (Emphasis in original.) Similarly, parties cannot evade the "rigorous analysis" requirement by seeking (b)(2) certification. In Bernal, we held that "[c]ourts must perform a `rigorous analysis' before ruling on class certification to determine whether all prerequisites to certification have been met." Bernal, 22 S.W.3d at 435 (quoting Gen. Tel. Co. of the Southwest v. Falcon, 457 U.S. 147, 102 S. Ct. 2364, 72 L.Ed.2d 740(1982)) (emphasis added). All prerequisites means all prerequisites. This includes all four elements of rule 42(a) as well as one of several elements of rule 42(b). If (b)(2) certification is sought, therefore, the trial court must rigorously analyze cohesiveness. We recognize that "[c]lass cohesion is not a self-defining concept. How much cohesion is needed logically should depend on whether the class member has a right to exit." John C. Coffee, Jr., Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation, 100 COLUM. L.REV. 370, 435 (2000). In many cases, this analysis will be identical to the "predominance and superiority" directive undertaken by trial courts certifying (b)(3) classes. See, e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 594, 117 S. Ct. 2231, 138 L.Ed.2d 689 (1997) (predominance "tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation") (emphasis added). However, "a more rigorous definition of class cohesion should apply in the case of the mandatory class action where the class member is essentially being coerced into participation." Coffee, supra, at 435. As the Third Circuit has noted, in such cases a(b)(2) class "may require more cohesiveness than [a] (b)(3) class. This is so because in [a] (b)(2) action, unnamed members are bound by the action without the opportunity to opt out." Barnes, 161 F.3d at 142­43; see also Coffee, supra, at 435 (noting that the Barnes court's cohesiveness "logic not only makes good normative sense, but it supplies the necessary deterrent to prevent the misuse of Rule 23(b)(1) and (b)(2) class actions as a means of evading the greater procedural protections built

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into Rule 23(b)(3)"). Of course, if a trial court determines that notice and opt-out should be provided in the (b)(2) setting, the cohesiveness required in a (b)(2) class need not be greater than the predominance and superiority necessary for a class certified under (b)(3). In this case, in addition to the notice and opt-out issues identified above, the trial court did not rigorously analyze cohesiveness. For these reasons, we reverse that part of the court of appeals' judgment affirming certification of the (b)(2) class. Because the court of appeals also affirmed certification under (b)(3), we now turn to those allegations.

V Choice of Law

Although we review the trial court's order for abuse of discretion, we do not indulge every presumption in its favor, as compliance with class action requirements must be demonstrated rather than presumed. Schein, 102 S.W.3d at 691. We also must evaluate "the claims, defenses, relevant facts, and applicable substantive law." Bernal, 22 S.W.3d at 435. In so doing, trial courts must abandon the practice of postponing choice-of-law questions until after certification, as courts can hardly evaluate the claims, defenses, or applicable law without knowing what that law is. See Tracker Marine, L.P. v. Ogle, 108 S.W.3d 349, 351­52 (Tex. App.-Houston [14th Dist.] 2003, no pet.); see also Spence v. Glock, 227 F.3d 308, 313 (5th Cir.2000) (holding that "[t]he district court is required to know which law will apply before it makes its predominance determination"). As more fully set forth above, the trial court's order--which came after Bernal but before Schein--stated that "no Texas Supreme Court case requires this Court to make a choice of law determination at this time." Accordingly, the trial court identified "the choice of law rulings that it likely will make based on the disputed certification record." The trial court stated that it "believe[d] that it can properly apply Texas law to all claims covered by this nationwide class action" but concluded that it would revisit the issue if Compaq sought to litigate an issue on which Texas law differed from other jurisdictions. We rejected this "certify now and worry later" approach in Bernal. Bernal, 22 S.W.3d at 435. Instead, when ruling on motions for class certifications, trial courts must conduct an extensive choice of law analysis before they can determine predominance, superiority, cohesiveness, and even manageability. Thus, we proceed first to an analysis of the choice of law. Compaq challenges the trial court's belief that Texas law governs all class members' claims. Generally, the issue of which state's law applies is a question of law we resolve by reviewing the record de novo. Minn. Mining & Mfg. Co. v. Nishika, Ltd., 955 S.W.2d 853, 856 (Tex.1996); see also Brainard v. State, 12 S.W.3d 6, 30 (Tex.1999) ("In applying [abuse of discretion] standard, we defer to the trial court's factual determinations if they are supported by the evidence and review its legal determinations de

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novo."). In the context of a nationwide class action, the determination of the applicable substantive law is of paramount importance. If the court does not know which states' laws must be applied, it cannot determine whether variations in the applicable laws would defeat predominance in a(b)(3) class action or destroy the cohesiveness of a(b)(2) class. See, e.g., In re Propulsid Prods. Liab. Litig., 208 F.R.D. 133, 146 (E.D.La.2002) ("The need for manageability at trial which has been clearly recognized by the Fifth Circuit and other circuits in (b)(3) actions also exists in (b)(2) actions. The application of multiple state laws to a class makes manageability more difficult in both (b)(3) and (b)(2) class actions."). If the laws of fifty-one jurisdictions apply in this class action, the variations in the laws of the states and District of Columbia "may swamp any common issues and defeat predominance." Castano v. Am. Tobacco Co., 84 F.3d 734, 741 (5th Cir.1996). The threshold question for this Court, therefore, is whether the trial court conducted a proper choice of law analysis and correctly decided that Texas law controlled. Spence, 227 F.3d at 311; Castano, 84 F.3d at 741. In reviewing the trial court's decision, we must first decide whether Texas law conflicts with the laws of other interested states, as there can be no harm in applying Texas law if there is no conflict. The class representatives bear the burden of establishing the prerequisites for class treatment, so they must present an extensive analysis of state law evaluating any differences. See Spence, 227 F.3d at 313. A court may not accept "on faith" a party's assertion that no variations in state laws exist; plaintiffs, as class action proponents, must show that it is accurate. Castano, 84 F.3d at 741. The trial court found that it could apply Texas law to all claims in part because "no real conflict between Texas law and the law of any other jurisdiction with equally substantial connections to this dispute is currently presented." The trial court reached this conclusion after a cursory analysis of the law of other jurisdictions. While the court accurately noted that both parties submitted extensive choice-of-law research, expert reports, and summaries of the law, the trial court did not analyze the laws of the various jurisdictions, concluding instead in one sentence that "this Court finds that any variations in the law of the affected jurisdictions do not render the case unmanageable." Its only support for this statement was its criticism of Compaq's position, noting that "Compaq seems to think that it can forestall a class action by finding a conflict of law with respect to any issue that could conceivably arise in hypothetical warranty litigation." The trial court then noted that Compaq's corporate representative had testified that warranty claims were not affected by the state in which the consumer lived. For those reasons, the trial court held that there was no real variation in the law of the affected jurisdictions on the legal theories alleged but stated that it would "revisit the matter, and with it the predominance inquiry, if and when Compaq actually seeks to litigate an issue concerning which Texas law conflicts with the law of some other state with contacts to this dispute that rival those of Texas." See Castano, 84 F.3d at 742­43 (criticizing the district court for "a cursory review of state law variations and

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[giving] short shrift to the defendants' arguments concerning variations"). Thus, "[n]othing in the record demonstrates that the court critically analyzed how variations in state law would affect predominance." Id. at 743. The court of appeals also failed to undertake the critical analysis necessary to a proper choice-of-law determination. 79 S.W.3d at 791­92. On the choice-of-law issue, the court of appeals held only that federal cases relied on by Compaq were inapposite and that, under Microsoft Corp. v. Manning, 914 S.W.2d 602 (Tex. App.-Texarkana 1995, writ dism'd), Texas would recognize a warranty claim for a so-called "unmanifested defect." Id. at 792. Thus, despite the extensive choice-of-law analysis presented by both sides, neither the trial court nor the court of appeals analyzed the differences, if any, of the laws of other states. Accordingly, "we do not have the benefit of an analysis of those differences by the lower courts." Schein, 102 S.W.3d at 697. As "guardian[s] of absent claimants' rights, courts have an independent duty to determine uniformity sua sponte, even if neither party raises it." Gen. Motors Corp. v. Bloyed, 916 S.W.2d 949, 954 (Tex.1996); see also Stirman v. Exxon Corp., 280 F.3d 554, 563 n. 7 (5th Cir.2002). The lower courts erred by failing to conduct a state-by-state analysis of the questions of law presented. Those courts never assessed the substance of other states' laws but instead concluded that the theory was sound under Texas law. A proper review would have analyzed the relevant law of each state and the variations among states. Stirman, 280 F.3d at 564­66. Below, we outline some of the differences in various states' laws, "to demonstrate the inquiry the [lower courts] failed to make." Castano, 84 F.3d at 743. While this case involves a Uniform Commercial Code breach of express warranty claim, it seems that "the Uniform Commercial Code is not uniform." Walsh v. Ford Motor Co., 807 F.2d 1000, 1016 (D.C.Cir.1986) (citing J. White & R. Summers, Uniform Commercial Code 7 (2d ed.1980)).

A. Notice

Section 2-607 of the UCC addresses notice of breach. The provision has been adopted verbatim by all states except Maine and South Carolina. Maine does not require notice "where the remedy is for personal injury resulting from any breach." Me. Rev. Stat. Ann. tit. 11, § 2-607(7) (West 1995). South Carolina does not require "notice of injury to the person in the case of consumer goods." S. C. Code Ann. § 36-2-607(3) (Law. Co-op 1976). Even discounting these differences, however, cases from different jurisdictions interpret the notice requirement differently. Some states require that notice of a warranty claim against a remote manufacturer be given directly to that entity. See The Church of the Nativity of Our Lord v. Watpro, Inc., 474 N.W.2d 605, 609 (Minn.Ct.App.1991) ("jurisdictions are divided on the issue . . . whether a buyer must also notify the manufacturer in order to sue the manufacturer for breach of warranties."); Halprin v. Ford Motor Co., 107 N. C. App. 423, 420 S.E.2d 686, 688 (N.C.Ct.App.1992) ("the jurisdictions are split on whether this notice provision of the Code requires

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notice to the remote manufacturer"). For example, in Wilcox v. Hillcrest Memorial Park of Dallas, the court held that section 2.607(c)(1) "requires that a buyer notify any seller, including a remote seller such as the manufacturer, of the product's alleged defect within a reasonable time of discovering the defect and that failure to do so bars the buyer from any remedy for breach of warranty under the Texas Business & Commerce Code." Wilcox, 696 S.W.2d 423, 424­25 (Tex. App.-Dallas 1985, writ ref'd n.r.e.); accord U.S. Tire-Tech, Inc. v. Boeran, B.V., 110 S.W.3d 194, 199 (Tex. App.-Houston [1st. Dist.] 2003, pet. denied) (requiring notice to manufacturer); Western Equip. Co. v. Heridan Iron Works, Inc., 605 P.2d 806, 810­11 (Wyo.1980) (same). Conversely, the Colorado Supreme Court has held that: [T]he language of section 4-2-607(3)(a) is unambiguous: it requires a buyer to give notice of a defective product only to the `seller.' See 2 Anderson, Uniform Commercial Code § 2.607:24. The General Assembly has not elected to require advance notice to a manufacturer of litigation for breach of the manufacturer's warranty of a product, and we find no compelling reason to create such a condition precedent judicially in the context of commercial litigation. Cooley v. Big Horn Harvestore Systems, Inc., 813 P.2d 736, 741 (Colo.1991) (noting that Maryland courts reached a similar result but Alaska, Illinois, and Wyoming did not); see also Cipollone v. Liggett Group, Inc., 683 F. Supp. 1487, 1497­98 (D.N.J.1988) (predicting that New Jersey Supreme Court would require notice to immediate seller only); Owens v. Glendale Optical Co., 590 F. Supp. 32, 36 (S.D.Ill.1984) ("Illinois law holds that notification of a breach need only be given to the immediate seller"); Firestone Tire & Rubber Co. v. Cannon, 53 Md. App. 106, 452 A.2d 192, 198 (Md.Ct.Spec.App.1982) ("seller" in 2-607 means only the immediate seller); Seaside Resorts, Inc. v. Club Car, Inc., 308 S.C. 47, 416 S.E.2d 655, 663 (S.C.Ct.App.1992) (section 2-607 "requires a retail buyer to notify only the retail seller who tendered the goods to him, not wholesalers, distributors, manufacturers, or others who sold the goods further up the chain of commerce"). Still other states have softened or eliminated the notice requirement altogether in cases involving consumer transactions. Firestone, 452 A.2d at 197 ("it is not difficult to imagine the injustice that would be caused to consumers from requiring notice to each person in the chain"); Fischer v. Mead Johnson Labs., 41 A.D.2d 737, 341 N.Y.S.2d 257, 259 (N.Y.App.Div.1973) (timely notice requirement should be overlooked in case involving user of prescription drug). These differences are significant. In this case, the parties dispute whether the notice requirement has been satisfied. Compaq denies that it received pre-suit notice from most of the putative class members; conversely, one of the named plaintiffs claims to have met the notice prerequisite by giving Compaq written notice on behalf of the entire uncertified class. This issue may be critical. If, for example, a putative class member lived in a state

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that required notice only to the immediate seller (and not the manufacturer), and that class member notified the immediate seller of the product defect, that class member should be deemed to have satisfied the notice requirement even if the manufacturer was not specifically advised of the claim. On the other hand, if that class member lived in a state that required notice to the manufacturer, failure to give that notice could bar the claim.

B. Reliance

Section 2-313 of the UCC addresses the creation of express warranties. That section incorporates a reliance element, providing that a seller's statement that is "part of the basis of the bargain" creates an express warranty. U.C.C. § 2-313. This provision has been adopted verbatim by all states except Maine, Michigan, and South Carolina, which adopted the section with minor changes. South Carolina added language to section 2313(1)(a), so that it reads: "Any affirmation of fact or promise, including those on containers or labels, made by the seller to the buyer, whether directly or indirectly, which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods conform to the affirmation or promise." S. C. Code Ann. § 36-2-313(1)(a) (Law.Coop.1976) (emphasis added to show additions). Although the official comments to section 2-313 provide that "no particular reliance on such statements need be shown in order to weave them into the fabric of the agreement," U.C.C. § 2-313 cmt. 3 (1989), it appears that this suggestion is not uniformly followed. Like the notice requirement, state courts have interpreted this reliance element differently. See McManus v. Fleetwood Enters., Inc., 320 F.2d 545, 550 (5th Cir.2003) ("There is a split of authority as to whether [the "basis of the bargain"] wording . . . is meant to dispense with the common law's requirement of reliance in express warranty cases.") (citing Charles A. Heckman, "Reliance" or "Common Honesty of Speech": The History and Interpretation of Section 2-313 of the Uniform Commercial Code?, 38 CASE W. RES. L.REV. 1 (1987)). Some courts have concluded that reliance by a buyer on a seller's statements (even those contained in a warranty) remains an essential element of a breach of express warranty claim under the basis of the bargain test as set forth in the UCC. See, e.g., Speed Fastners, Inc. v. Newsom, 382 F.2d 395, 397, 399­400 (10th Cir.1967) (sale of stud fasteners; plaintiff not entitled to recover in breach of express warranty where no evidence that plaintiff's employer relied on statements in seller's pamphlet before purchase); DeIenno v. Libbey Glass Div., Owens-Ill., Inc., 668 F. Supp. 373, 376 (D.De.1987) (reliance required to assert express warranty claim under Delaware UCC); Global Truck & Equip. Co. v. Palmer Mach. Works, Inc., 628 F. Supp. 641, 651­52 (N.D.Miss.1986) (buyer could not recover for breach of express warranty absent proof that buyer relied on statements prior to or contemporaneously with sale); Hagenbuch v. Snap-On Tools Corp., 339 F. Supp. 676, 680 (D.N.H.1972) (sale of hammer; plaintiff not entitled to recover for breach of express warranty where no evidence that

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buyer relied on statements in seller's catalogue); Ciba Geigy-Corp. v. Alter, 309 Ark. 426, 834 S.W.2d 136, 147 (Ark.1992) ("When a buyer is not influenced by the statement in making his or her purchase, the statement is not a basis of the bargain."); Stamm v. Wilder Travel Trailers, 44 Ill.App.3d 530, 3 Ill. Dec. 215, 358 N.E.2d 382, 385 (Ill.App.Ct.1976) ("cases under the [Illinois] Commercial Code require a reliance by the buyer upon the promise, affirmation or description."); Scaringe v. Holstein, 103 A.D.2d 880, 477 N.Y.S.2d 903, 904 (N.Y.App.Div.1984)(same); Thomas v. Amway Corp., 488 A.2d 716, 720 (R.I.1985) (plaintiff must prove reliance in an express warranty action). Other courts hold that under the UCC, reliance is no longer required and a buyer may recover on an express warranty even if the buyer never actually received a copy of the warranty and was unaware of its existence. See, e.g., Lutz Farms v. Asgrow Seed Co., 948 F.2d 638, 645 (10th Cir.1991) (seed brochure; reliance not required under Colorado law); Winston Indus., Inc. v. Stuyvesant Ins. Co., 55 Ala. App. 525, 317 So.2d 493, 497 (Ala.Civ.App.1975), cert. denied, 294 Ala. 775, 317 So.2d 500 (Ala.1975) (sale of mobile home; unnecessary to show "any particular reliance" by purchaser even though purchaser did not physically receive written copy of the warranty and was unaware of its existence); Torres v. Northwest Eng'g Co., 86 Hawaii 383, 949 P.2d 1004, 1013 (Haw.Ct.App.1997) ("reliance is not an essential element of a breach of express warranty claim under the UCC"); Hawkins Constr. Co. v. Matthews Co., 190 Neb. 546, 209 N.W.2d 643, 654­55 (Neb.1973) (sale of scaffolding; express warranty created even if buyer did not rely on statements in seller's brochure), overruled on other grounds by Nat'l Crane Corp. v. Ohio Steel Tube Co., 213 Neb. 782, 332 N.W.2d 39 (Neb.1993); Daughtrey v. Ashe, 243 Va. 73, 413 S.E.2d 336, 338­39 (Va.1992) ("basis of the bargain" does not establish "a buyer's reliance requirement"; "We conclude from the language used in Code § 8.2313 and the Official Comment thereto that the drafters of the Uniform Commercial Code intended to modify the traditional requirement of buyer reliance on express warranties."). Still other states have not decided whether reliance is required, nor what the "basis of the bargain" actually means. See James J. White, Freeing the Tortious Soul of Express Warranty Law, 72 TUL. L.REV. 2089, 2099­2102 (June 1998) ("The great majority of cases [surveyed regarding § 2-313] had no explicit statement on whether basis of the bargain did or did not require reliance, but one might draw inferences about courts' views based upon what was said and what was left unsaid in the opinions. . . . Many of the cases that do not explicitly mention basis of the bargain as a reliance requirement nevertheless are careful to point out that the plaintiff in that case did rely. Others merely reiterate the basis of the bargain language."). Under Texas law, we have said that "[r]eliance is . . . not only relevant to, but an element of proof of, plaintiffs' claims of breach of express warranty (to a certain extent). . . ." Schein, 102 S.W.3d at 686. In an earlier case, we held:

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Though not a fraud-based claim, an express warranty claim also requires a form of reliance. The Uniform Commercial Code provides that an express warranty is created when "[a]ny affirmation of fact or promise [is] made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain." Tex. Bus. & Com. Code § 2.313(a)(1) (emphasis added). "Basis of the bargain" loosely reflects the common-law express warranty requirement of reliance. American Tobacco Co. v. Grinnell, 951 S.W.2d 420, 436 (Tex.1997) (citing in part Southwestern Bell Tel. Co. v. FDP Corp., 811 S.W.2d 572, 575 & n. 2 (Tex.1991) and Shamrock Fuel & Oil Sales Co. v. Tunks, 416 S.W.2d 779, 786 (Tex.1967)). Another difference among states is the timing of reliance and, specifically, whether warranties not relied on prior to the sale can form the basis of an express warranty claim. Compare Downie v. Abex Corp., 741 F.2d 1235, 1238 n. 1, 1240 (10th Cir.1984) (under both Utah and California law, UCC "clearly contemplates that warranties made after the sale may become a basis of the bargain"), and Autzen v. John C. Taylor Lumber Sales, Inc., 280 Or. 783, 572 P.2d 1322, 1326 (Or.1977) (post-sale survey of a used boat can create an express warranty if it "induce[d] and [was] intended by the Seller to induce Buyer's satisfaction with the agreement just made"), with DeIenno, 668 F. Supp. at 376 (express warranty claim failed where there was no evidence plaintiff saw the warranty before making her purchase), Ciba-Geigy Corp., 834 S.W.2d at 147 (breach of express warranty claim failed when plaintiff did not recall reading the express warranty before making his purchase), Schmaltz v. Nissen, 431 N.W.2d 657, 661 (S.D.1988) (language on seed bags could not have been basis of the bargain, when purchasers did not read the language until after the sale was completed), Cuthbertson v. Clark Equip. Co., 448 A.2d 315 (Me.1982) (owner's manual not seen prior to sale could not be part of "basis of the bargain"), and Anderson v. Heron Eng'g Co., 198 Colo. 391, 604 P.2d 674, 676 (Colo.1979) (brochure must have been seen or relied on at time of purchase).

C. Remedies

Finally, we examine the remedies available under the various states' laws. Section 2-714 of the UCC provides: (1) Where the buyer has accepted goods and given notification (subsection (3) of Section 2-607) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable. (2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount.

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(3) In a proper case any incidental and consequential damages under the next section may also be recovered. This provision has been adopted verbatim by all states except Alabama, which adds that this section shall not limit a seller's liability for personal injury damages involving consumer goods. Ala. Code § 7-2-714 (2004). The UCC official comment explains: "The `non-conformity' referred to in subsection (1) includes not only breaches of warranties but also any failure of the seller to perform according to his obligations under the contract." U.C.C. § 2.714, cmt. 2. Of primary import here is whether plaintiffs can recover on express warranty claims based on so-called unmanifested defects. Compaq argues that most states do not allow breach of warranty claims for products that have not malfunctioned. The plaintiffs respond that, under the UCC, all they must prove is a non-conformity of tender to recover "benefit of the bargain damages." The law on this particular subject does not appear to be well developed in any jurisdiction. Compaq cites a few cases, some of which involve express warranty claims and some of which do not, for the proposition that most states reject such a claim. Chief among these is In re Bridgestone/Firestone, Inc., 288 F.3d 1012 (7th Cir.2002). In that case, plaintiffs sued Bridgestone/ Firestone, alleging that the tires on their vehicles were defective. Plaintiffs moved for class certification, and the district court certified two nationwide class actions. Bridgestone/Firestone appealed. The Seventh Circuit Court of Appeals reversed, noting: Plaintiffs describe the injury as financial rather than physical and seek to move the suit out of the tort domain and into that of contract (the vehicle was not the flawless one described and thus is not merchantable, a warranty theory) and consumer fraud (on the theory that selling products with undisclosed attributes, and thus worth less than represented, is fraudulent). It is not clear that this maneuver actually moves the locus from tort to contract. If tort law fully compensates those who are physically injured, then any recoveries by those whose products function properly mean excess compensation. As a result, most states would not entertain the sort of theory that plaintiffs press. See, e.g., Briehl v. General Motors Corp., 172 F.3d 623, 628 (8th Cir.1999) (Mississippi, New York, Pennsylvania, and Texas law); Angus v. Shiley, Inc., 989 F.2d 142, 147­48 (3d Cir.1993) (Pennsylvania law); Willett v. Baxter International, Inc., 929 F.2d 1094, 1099­1100 (5th Cir.1991) (Louisiana law); Carlson v. General Motors Corp., 883 F.2d 287, 298 (4th Cir.1989) (South Carolina law); American Suzuki Motor Corp. v. Superior Court, 37 Cal.App.4th 1291, 44 Cal.Rptr.2d 526 (Ct.App.1995); Ford Motor Co. v. Rice, 726 So.2d 626, 627, 631 (Ala.1998); Yu v. IBM Corp., 314 Ill.App.3d 892, 732 N.E.2d 1173, 247 Ill. Dec. 841 (1st Dist.2000); Capital Holding Corp. v. Bailey, 873 S.W.2d 187, 192 (Ky.1994). 288 F.3d at 1017 (footnote omitted).

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We note, however, that the Bridgestone/Firestone court did not address the plaintiffs' express warranty claim. Moreover, the tires in that case had already been recalled and replaced, possibly satisfying any express warranty requirements. Many of the cases relied on by the Seventh Circuit did not involve express warranty claims but instead involved implied warranty and tort claims. See, e.g., Angus v. Shiley, Inc., 989 F.2d 142, 147­48 (3d Cir.1993) (intentional and negligent infliction of emotional distress); Willett v. Baxter Int'l, Inc., 929 F.2d 1094, 1098­1100 (5th Cir.1991) (failure to warn); Carlson v. General Motors Corp., 883 F.2d 287, 298 (4th Cir.1989) (implied warranty); Ford Motor Co. v. Rice, 726 So.2d 626, 627, 631 (Ala.1998) (fraudulent suppression); Capital Holding Corp. v. Bailey, 873 S.W.2d 187, 192 (Ky.1994) (negligence and intentional infliction of emotional distress); Am. Suzuki Motor Corp. v. Superior Court, 37 Cal.App.4th 1291, 44 Cal.Rptr.2d 526, 528 (Ct.App.1995) (implied warranty). Conversely, however, there is a dearth of caselaw recognizing such claims in the express warranty context. The Fifth Circuit Court of Appeals recently examined whether, under Texas and Florida law, a boat purchaser had stated a claim against a boat manufacturer, who had allegedly represented a hybrid plywood/fiberglass boat to be all fiberglass. Coghlan v. Wellcraft Marine Corp., 240 F.3d 449 (5th Cir.2001). The district court dismissed the case pursuant to Rule 12(b)(6), Fed. R. Civ. P., concluding that the plaintiffs had failed to allege any real damages. On appeal, the Fifth Circuit noted that "[t]he only damage sought by the [purchasers] is the benefit of their bargain . . . or the difference in value between what they were promised, an all fiberglass boat, and what they received, a hybrid wood-fiberglass boat." 240 F.3d at 452. The court continued: Along with the "out of pocket" damages formula, which measures the difference between what the plaintiff paid in consideration and what he actually received, "benefit of the bargain" is a standard method for measuring damages in fraudulent representation and certain contract cases. The benefit of the bargain measure of damages is neither novel nor exotic. . . . As the Coghlans contend, Texas and Florida permit recovery of benefit of the bargain damages in certain contexts. Id. at 452­53 (citations omitted). The court then concluded that both Texas and Florida permitted recovery of such damages for fraud, DTPA, and breach of contract claims (no express warranty claim was alleged), and Florida also recognized such damages in negligent misrepresentation cases. The court noted: While we share the district court's implicit concern over the rise of `no-injury' product liability lawsuits, the district court acted prematurely in dismissing this case sua sponte on the pleadings: the determination that there has been no injury in this case must be an evidentiary one, since the relevant state jurisdictions recognize benefit of the bargain damages for the claims that the Coghlans

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allege. Id. at 454 (footnote omitted). In a footnote, the court explained the distinction: The key distinction between this case and a "no injury" product liability suit is that the Coghlans' claims are rooted in basic contract law rather than the law of product liability: the Coghlans assert they were promised one thing but were given a different, less valuable thing. The core allegation in a no-injury product liability class action is essentially the same as in a traditional products liability case: the defendant produced or sold a defective product and/or failed to warn of the product's dangers. The wrongful act in a no-injury products suit is thus the placing of a dangerous/defective product in the stream of commerce. In contrast, the wrongful act alleged by the Coghlans is Wellcraft's failure to uphold its end of their bargain and to deliver what was promised. The striking feature of a typical no-injury class is that the plaintiffs have either not yet experienced a malfunction because of the alleged defect or have experienced a malfunction but not been harmed by it. Therefore, the plaintiffs in a no-injury products liability case have not suffered any physical harm or out-of-pocket economic loss. Here, the damages sought by the Coghlans are not rooted in the alleged defect of the product as such, but in the fact that they did not receive the benefit of their bargain. It is worth noting that the no-injury approach to product litigation has been rejected in several recent decisions. 240 F.3d at 455 n. 4 (citations omitted). Thus, to the extent they have squarely analyzed (and very few have) whether to permit express warranty claims for unmanifested defects, courts reach different results. While the law of some states appears to conflict, the law in most states (including Texas) is unclear. 15 Some states may recognize such claims, but we cannot say that all fifty-one jurisdictions would. In Schein, we cautioned against class certification in which judges and lawyers had to guess, "What is the law of Michigan, or Arkansas, or Guam, as applied to this problem?" Schein, 102 S.W.3d at 700 (quoting Bridgestone/Firestone, 288 F.3d at 1020) (emphasis in original); see also Tracker Marine, 108 S.W.3d at 363 (noting that "[t]he novelty and complexity of these issues counsels against any sort of mass trial until some of them are settled"). The conflicts on this and the other issues outlined above are substantial. Nor is mention of these conflicts, as the trial court suggested, necessarily

15 We do not reach the issue in this case but note that, in varying contexts, our courts of appeals have reached different conclusions on whether parties may recover damages for unmanifested defects. Compare Tracker Marine, 108 S.W.3d at 362 (noting that benefit of the bargain damages for unmanifested defects "look[ ] suspiciously like a claim for fear of future injury to property, which Texas has rejected") (citation omitted) with Microsoft Corp. v. Manning, 914 S.W.2d 602, 609 (Tex. App.-Texarkana 1995, writ dism'd) (recognizing breach of warranty claim for unmanifested defect: "We believe that, if appellees prove that an individual defect exists in all original MS-DOS 6.0 software, it is not necessary for the purchasers to actually suffer a loss of data as a result of that defect for them to suffer damage. They have received less than they bargained for when they acquired the product.").

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an attempt to "forestall a class action by finding a conflict of law with respect to any issue that could conceivably arise in hypothetical warranty litigation." Each of the issues outlined above impacts either an element of, or a condition precedent to, a UCC-based express warranty claim. See, e.g., Schein, 102 S.W.3d at 686 ("[r]eliance is . . . an element of proof of, plaintiffs' claims of breach of express warranty (to a certain extent)"); U.S. Tire-Tech, 110 S.W.3d at 200 (collecting cases from multiple jurisdictions holding that notice is a condition precedent to a breach of express warranty claim). We cannot, therefore, affirm the application of Texas law on the basis that the law of all jurisdictions is identical. Instead, to review how the class claims will be tried, we must first review which law will apply. See Tracker Marine, 108 S.W.3d at 354­55.

D. Most Significant Relationship

The Due Process Clause limits the extent to which one state's law can be applied to claims that arise in many states. See Shutts, 472 U.S. at 821­22. Absent a contractual choice-of-law provision, express warranty claims in Texas may be governed by Texas law if the "transaction[s] bear[s] an appropriate relation to this state." Tex. Bus. & Com. Code § 1.301(a). In this case, the parties have asserted, and the trial court applied, the Restatement's "most significant relationship" test. Accordingly, we will examine the contacts under that standard. Section 188 of the Restatement (Second) of Conflict of Laws delineates the general principles that inform a choice of law determination on a contract issue. They include: (1) the place of contracting; (2) the place of negotiation; (3) the place of performance; (4) the location of the contract's subject matter; and (5) the domicile, residence, place of incorporation and place of business of the parties. See Restatement (Second) of Conflict of Laws § 188. The trial court found that "Compaq is headquartered in Texas and incorporated here." The trial court then listed Compaq's Texas contacts and noted: Compaq's only possible response to this analysis is the argument that each buyer's domicile determines the law that must be applied to that buyer's claim. This is in fact what Compaq asserts. On this disputed record, the Court does not find that argument supported by the record. In Schein, we stated that "Texas . . . does not apply the law of the state where a defendant is headquartered to every claim for economic damages that can be alleged. . . ." Schein, 102 S.W.3d at 698. In the DTPA context, one court has commented that "Texas courts have usually applied our statute to consumer complaints that arose here regardless of the defendant's headquarters." Tracker Marine, 108 S.W.3d at 355. The Seventh Circuit has termed a district court's application of the law of the manufacturer's domicile to all consumer complaints "a novelty." Bridgestone/ Firestone, 288 F.3d at 1016.

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The putative class members are domiciled in the fifty states and the District of Columbia. All these fifty-one relevant jurisdictions are likely to be interested in ensuring that their consumers are adequately compensated for a breach of warranty. See Spence, 227 F.3d at 314. Texas law may not provide sufficient consumer protection in the view of the other states; indeed, as the home state of the manufacturer, Texas's "policies might tend to favor those interests over consumers." Id. (analyzing Georgia's interest). The place of contracting would presumably be the place of purchase; the location of performance and the location of the subject matter of the contract would be the place where the computer is used; and the place of negotiation would not apply. Id. at 314 n. 9 (noting that "[r]elated state policies of all the interested states would also, of course, need to be examined for a thorough approach to this issue"); see also Bridgestone/Firestone, 288 F.3d at 1016­17 (in a lex loci delicti state, "[i]f recovery for breach of warranty . . . is possible, the injury is decidedly where the consumer is located, rather than where the seller maintains its headquarters") (emphasis in original). Thus, while Texas law will apply to claims by most of those who bought computers in this state, the class representatives have failed to demonstrate it will apply to the claims of out-of-state class members. Tracker Marine, 108 S.W.3d at 359. The differences in state law outlined above cannot be concealed in a throng. Schein, 102 S.W.3d at 693. The trial court abused its discretion, therefore, in holding that Texas law bore the most significant relationship to, and therefore governed, all class members' claims.

VI Conclusion

We conclude that Rule 42(b)(3)'s predominance requirement is not satisfied. Accordingly, we need not consider Compaq's additional challenges to the other certification prerequisites. We reverse the court of appeals' judgment affirming the trial court's certification order and remand the case for further proceedings consistent with this opinion. Tex. R. App. P. 60.2(d).

Page 465: [Add as new note (5):]

(5) Strict Scrutiny of Class Certifications. As one legal commentator has observed: "Under the new approach of the Triad, [Intratex, Ford, and Bernal Texas Supreme Court decisions] trial courts must: (1) assign a precise class definition to the putative class before moving forward in the court's certification determination, (2) perform a "rigorous analysis" to determine if necessary class prerequisites, most importantly the predominance inquiry, are present to avoid abuse of discretion, (3) indicate the claims likely determination before issuing a certification ruling, and (4) in mass­tort personal injury situations, deny certification if highly individualistic variables are involved. As a result, the days of trial courts' "certify now and worry later" approach seem to be in Texas's past." (citations omitted). Russell T. Brown, Class Dismissed: The Conservative Class Action Revolution of the Texas Supreme Court, 32 St. Mary's L.J. 499, 466--467 (2001).

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(6) Lower Court Reaction to Schein. The Fourteenth Court of Appeals in Houston has already had an opportunity to apply Schein to a consumer class action. In Tracker Marine, L.P. v. Ogle, 108 S.W.3d 349 (Tex. App.-- Houston [14th Dist.] 2003, no pet.), the court noted that the Supreme Court's new attitude toward class certification conflicts "with several earlier opinions in which this Court applied different standards. Clearly, the Supreme Court's opinion in Schein requires us to abandon our previous practice of indulging presumptions in favor of certification. It also requires us to abandon our practice of postponing choice­of­law questions until after certification, as we can hardly evaluate the claims, defenses, or applicable law (as Schein requires) without knowing what that law is." The court accordingly reversed the certification of a class of 74,000 purchasers of pontoon boats manufactured by Tracker Marine that allegedly rotted when exposed to water.

Page 465: [Add new Notes (7) and (8):]

(7) Recent Changes to Texas Rule of Civil Procedure 42. As directed by the Legislature in House Bill 4, the Texas Supreme Court amended Rule 42 governing class actions. Some of the more noteworthy changes: a) Shareholder Derivative Suits. The provisions pertaining to derivative suits was eliminated. The comment to the rule explains: "The second paragraph of subdivision (a) regarding derivative suits has been deleted because it is redundant of Article 5.14 of the Business Corporation Act, which sets forth detailed procedures for derivative suits." b) The Timing of Certification. The trial court is directed to determine whether to certify an action as a class action "at an early practicable time" tracking the changes to Federal Rule 23. The comment to Rule 42 clarifies: "The amended language is not intended to permit undue delay or permit excessive discovery unrelated to certification, but is designed to encourage good practices in making certification decisions only after receiving the information necessary to decide whether certification should be granted or denied and how to define the class if certification is granted." c) The Standards for Certification. The former rule 42(b)(3) standard for certification was deleted and former rule 42(b)(4) (the predominance standard) was renumbered as Rule 42(b)(3). d) The Certification Order. The trial court order granting or denying certification under Rule 42(b)(3) (the predominance standard) must define the class, claims, issues, defenses, and demonstrate that certification requirements have been met, thereby implementing the "trial plan" requirements of Bernal. (e) Notice to the Class. The trial court "may" direct appropriate notice to the members of a class certified under Rule 42(b)(1) or (2), but "must" direct notice to members of a Rule 42(b)(3) class. This notice must be "the best notice practicable under the circumstances, including individual

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notice to all members who can be identified with reasonable effort." The notice must inform "when and how members may elect to be excluded" and "the binding effect of a class judgment on class members." Further, the trial court may not approve a settlement "unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so." Class members may object to any proposed settlement. (f) Class Counsel-Qualifications and Fees. Rule 42(g) sets forth the requirements and factors the court should consider in appointing class counsel. An attorney appointed to serve as class counsel must fairly and adequately represent the interest of the class. The court, in appointing class counsel must consider the work counsel has done in identifying or investigating potential claims in the action; counsel's experience in handling class actions, other complex litigation, and claims of the type asserted in the action; counsel's knowledge of the applicable law; and the resources counsel will commit to representing the class In addition, the court may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class. The legislature has placed certain restrictions on the recovery of attorney's fees recoverable by class counsel, that are incorporated in Rule 42(i). For actions filed after September 1, 2003, the trial court must first determine a "lodestar figure" by multiplying the number of hours reasonably worked times a reasonable hourly rate. The attorney fees award must be in the range of 25% to 400% of the lodestar figure. In making these determinations, the court must consider the factors specified in Rule 1.04(b) of the Texas Disciplinary Rules of Professional Conduct. Further, "if any portion of the benefits recovered for the class are in the form of coupons or other noncash common benefits, the attorney fees awarded in the action must be in cash and noncash amounts in the same proportion as the recovery for the class." (8) Appellate Review of Class Action Certification Orders. Class certification orders are subject to immediate interlocutory review and may be reviewed by the Texas Supreme Court on petition for review. Civil Practice & Remedies Code § 51.014(a)(3). An interlocutory appeal of a certification ruling stays not only the trial but "also stays all other proceedings in the trial court."

Chapter 8 THE EFFECTS OF PRIOR ADJUDICATION (RES JUDICATA)

§ 8.01

Res Judicata

[A]--The Doctrine of Merger and Bar (Claim Preclusion)

Page 475: [Add the following case before the Notes.] MARTIN v. MARTIN, MARTIN & RICHARDS, INC. 989 S.W.2d 357 (Tex. 1998)

PER CURIAM. * The primary question presented is whether a dismissal with prejudice of a suit to declare a contract valid bars an action for a breach occurring after the dismissal. In the circumstances of this case, we answer no, contrary to the court of appeals, and therefore reverse and remand the case to that court for further proceedings. Gary Martin sold his stock in Martin, Martin & Richards, Inc. to its other two shareholders, Roneal Martin and Floyd Richards. Under their written contract ("the contract"), Gary was to be paid $200,000 for his interest in MMR and $1.3 million for consulting services. Payments were to be made in equal bimonthly installments over ten years. Several years later, Roneal and MMR sued Floyd to dissolve their business relationship. Gary was not named as a party. Although MMR had paid Gary all but one installment due up to that point under the contract, he was concerned that Roneal and Floyd might attempt to restructure their relationship so as to evade their contractual obligations to him. Consequently, Gary intervened in the suit to obtain a declaration that the contract was a binding obligation on MMR and that it and any transferees of its assets as a result of the business dissolution would remain liable to Gary for all payments due. Gary also sought to impose a constructive trust on MMR's assets to secure its contractual obligations to him. Roneal and Floyd settled, and Roneal became the sole shareholder of MMR. Although Gary did not take part in the settlement, he approved a proposed order reciting that "all parties . . . desire to dismiss the claims which they had, each against the other, with prejudice". This order, perhaps by mistake,

*

Footnotes omitted unless otherwise indicated.

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only allocated costs of suit and did not dismiss the case. In a later order not approved by Gary, the district court dismissed with prejudice "all causes of action which were brought, or which could have been brought, by Plaintiffs, Defendants, and Intervenor". Throughout the litigation MMR had continued to pay Gary installments under the contract as they became due, but a month after the settlement, it ceased payments. Gary immediately sued MMR and later amended his pleadings to name Roneal as a defendant, claiming past installments due and unpaid, as well as future installments based on anticipatory breach. The events of this lawsuit were quite complex, and we describe them only insofar as they are material to the issues now before us. Defendants moved for summary judgment, and four days later, without notice to Gary and before he had filed a response, the district court signed an order granting summary judgment for defendants. Two days after the order was signed, Gary filed a response to defendants' motion. Eleven days later the court issued another order stating that Gary's response had been "received and considered for all purposes, with respect to Defendants' Summary Judgment . . ., and that, after having considered [the response], the Court's prior determination that [defendants' motion] should be granted remains correct in all respects." The court of appeals dismissed Gary's appeal, holding that the order granting summary judgment was interlocutory. Before the judgment was made final in the trial court, Gary died, and his independent executrix, Jan Martin, was substituted as a party in his stead. Defendants' motion for summary judgment was based on numerous grounds, and the district court did not specify the basis for its ruling. Accordingly, on appeal Martin has attacked all of the grounds in defendants' motion. The court of appeals held that defendants were entitled to summary judgment on one ground--res judicata--and therefore did not consider the other grounds raised by defendants. "Res judicata, or claims preclusion, prevents the relitigation of a claim or cause of action that has been finally adjudicated, as well as related matters that, with the use of diligence, should have been litigated in the prior suit." The court of appeals reasoned that Gary's intervention in the prior suit raised the same issues regarding the validity of the contract and the obligation owed under it that he attempted to litigate in this action. We have not had occasion to consider whether or to what extent a judgment dismissing a claim for declaratory relief should be given preclusive effect. Forty years ago in Cowling v. Colligan we stated that a "judgment is res adjudicata only of present and not of future conditions." More recently, in Marino v. State Farm Fire & Casualty Insurance Co., we reiterated that "a judgment in one suit will not operate as res judicata to a subsequent suit . . . `where, in the interval, the facts have changed, or new facts have occurred which may alter the legal rights or relations of the parties.' " But these broad pronouncements provide little guidance in resolving the issue in this case. Section 33 of the Restatement (Second) of Judgments states:

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A valid and final judgment in an action brought to declare rights or other legal relations of the parties is conclusive in a subsequent action between them as to the matters declared, and, in accordance with the rules of issue preclusion, as to any issues actually litigated by them and determined in the action. 7 The rule as stated does not address what, if any, preclusive effect should be given to a judgment that simply denies declaratory relief without determining the matters presented, although comment c to this section suggests that such a judgment should not preclude subsequent claims or issues. We need not resolve this broad issue here. We decide only that, as a general matter, a judgment dismissing with prejudice a claim for a declaration that a contract is valid does not amount to a declaration that the contract is invalid and does not preclude an action for subsequent breaches. Here, Gary does not appear to have sued for the one installment that had gone unpaid before the judgment in the prior suit, or on grounds that had arisen before that judgment. Thus, we need not decide whether such claims might have been merged in the judgment or otherwise barred. . . . . Accordingly, we grant Martin's application for writ of error, and without hearing oral argument, reverse the judgment of the court of appeals and remand the case to that court for consideration of other issues not previously addressed.

NOTES Page 475: [Add new Notes (4) and (5).]

(4) Declaratory Judgments. What is the nature of a declaratory judgment? Why should the preclusive effect of such a judgment differ from that of ordinary judgments? Would the court's decision in Martin have been different if all of the plaintiff's claims had matured prior to the first lawsuit? (5) Merger Doctrine. Res judicata can affect a plaintiff who won as well as one who lost. If the plaintiff fails to bring additional claims arising out of the same cause of action, they are "merged" into the judgment and the plaintiff loses the chance to recover on those claims in a later case. For example, if a plaintiff sues a defendant for negligence and recovers a judgment, the plaintiff cannot later decide to sue for an intentional tort and punitive damages arising out of the same cause of action. The punitive

7 Restatement (Second) of Judgments § 33 (1982); see also Annotation, Extent to which principles of res judicata are applicable to judgment in actions for declaratory relief, 10 A.L.R.2d 782 (1950).

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damages claim is "merged" into the first judgment. However, this rule does not apply to preclude claims against different defendants. In Quinney Electric, Inc. v. Kondos Entertainment, Inc, 988 S.W.2d 212, 214 (Tex. 1999) (per curiam), the plaintiff had prevailed in a bankruptcy proceeding against an entity called V­Ball. The plaintiff brought suit in state court against two other defendants for money still owing and related to the V­Ball claim. The Texas Supreme Court (although it confusingly uses the term "collateral estoppel") held that the plaintiff was not precluded from bringing its claim against defendants Kondos Entertainment and Jay Snyder. The court correctly stated that the plaintiff was not collaterally estopped on claims that had not in fact been litigated, and that there were no findings of fact barring the plaintiff's claim, because it prevailed in the bankruptcy court. It is also true that res judicata would not cause the plaintiff's claims to be merged into the claim against V­Ball, because Kondos and Snyder were neither parties to the bankruptcy case nor in privity with V­Ball. The trial court correctly credited Kondos and Snyder with the amount of the debt already paid by V­Ball.

Page 478: [Add at the end of Note (2):]

Offensive collateral estoppel is urged by a plaintiff seeking to estop a defendant from relitigating an issue the defendant previously litigated and lost in a suit involving another party. Defensive collateral estoppel may be urged against a plaintiff who previously litigated and lost an issue against another defendant. See Johnston v. American Medical Intel., 36 S.W.3d 572, 577 (Tex. App.--Tyler 2000, pet. denied).

Page 480: [Add as new Note (5):]

(5) Collateral Estoppel Based on finding in Criminal Proceeding. Should a jury determination of facts in a criminal proceeding serve as the basis for collateral estoppel in a civil action? See Tex. Dep't. of Public Safety v. Petta, 44 S.W.3d 575, 577 (Tex. 2001) (applying collateral estoppel when the facts necessarily found in the criminal action are identical to an issue in the civil proceeding).

Page 480: [C.P.R.C. § 31.004. Correct spelling of "Adjudication."] Page 499: [After the case insert the following new Note:] NOTE

The Texas Supreme Court explained in Briscoe v. Goodmark, 102 S.W.3d 714 (Tex. 2003), that the law of the case doctrine is discretionary, and not to be applied when clearly erroneous.

Chapter 9 DISCOVERY: PURPOSES, SCOPE, AND USES

§ 9.04

The Scope of Discovery: "Relevant" Information, "Not Privileged"

[A]--The Discovery "Relevance" Standard and Information "Reasonably Calculated" to Lead to Admissible Evidence [1]--The Relevance Test Generally

Page 527: [The citation to In re American Optical Corporation is 988 S.W.2d 711.] Page 529: [Add the following case after In re American Optical Corp., immediately preceding the NOTES AND QUESTIONS.] IN RE C.S.X. CORP. 124 S.W.3d 149 (Tex. 2003)

PER CURIAM. Relators filed a petition for writ of mandamus to challenge the trial court's discovery ruling in the underlying negligence litigation. Relators complain that certain interrogatories are overbroad and irrelevant. We agree and conditionally grant mandamus relief. Real party in interest, Donald Ward, worked periodically as a mechanic, tankerman, and seaman from 1958 to 1998. He worked at National Marine Services for part of 1958 and from 1972 to 1977. In 1998, American Commercial Barge Line acquired National Marine Services. Ward sued American Commercial Barge Line and its subsidiaries--American Commercial Lines, CSX Corporation, National Marine, Inc., and Vectura Group--in 2002. Ward claims that exposure to benzene and other carcinogenic chemicals throughout his career caused him to contract refractory anemia/ myelodysplastic syndrome. During discovery, Ward served interrogatories on all defendants that included the following: (16) For the time period 1973 to present, please identify and give last known address and telephone number for all persons in the safety and/or 173

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industrial hygiene department who had any responsibility for the safety and/or industrial hygiene and/or assessment of the hazards of benzene for this Defendant. (17) For the time period 1970 to present, please identify and give last known address and telephone number for all safety department workers employed by Defendant. (18) For the time period 1970 to present, please identify and give last known address and telephone number for all corporate physicians employed by this Defendant. Relators CSX Corporation, National Marine, Inc., and Vectura Group objected to these interrogatories on the grounds that they are "overbroad, harassing, and seek information that is not relevant and will not lead to the discovery of admissible evidence." Ward then moved the trial court to compel Relators to answer the interrogatories. After a hearing, the trial court modified Interrogatory 17 to exclude purely clerical safety workers. Subject to this modification, the trial court ordered Relators to answer Interrogatories 16, 17, and 18. The court of appeals denied Relators' petition for mandamus relief. Relators complain that these interrogatories are overbroad for two reasons. First, Relators never employed Ward. They are subsidiaries of American Commercial Barge Line, which also never directly employed Ward, but acquired Ward's former employer, National Marine Services. Therefore, the identity of relators' managerial safety and hygiene personnel and corporate physicians is not relevant to Ward's claims. Second, the requested time period extends twenty-five years beyond the time Ward was employed by American Commercial Barge Line's predecessor in interest, National Marine Services. Mandamus relief is appropriate only if a trial court abuses its discretion, and there is no adequate appellate remedy. Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992); CSR Ltd. v. Link, 925 S.W.2d 591, 596 (Tex.1996). The burden of establishing an abuse of discretion and an inadequate appellate remedy is on the party resisting discovery, and this burden is a heavy one. Canadian Helicopters Ltd. v. Wittig, 876 S.W.2d 304, 305 (Tex.1994). A clear abuse of discretion occurs when an action is "so arbitrary and unreasonable as to amount to a clear and prejudicial error of law." CSR, 925 S.W.2d at 596. Generally, the scope of discovery is within the trial court's discretion. Dillard Dep't Stores, Inc. v. Hall, 909 S.W.2d 491, 492 (Tex.1995). However, the trial court must make an effort to impose reasonable discovery limits. In re American Optical, 988 S.W.2d 711, 713 (Tex.1998). The trial court abuses its discretion by ordering discovery that exceeds that permitted by the rules of procedure. Texaco, Inc. v. Sanderson, 898 S.W.2d 813, 815 (Tex.1995). Our procedural rules define the general scope of discovery as any unprivileged information that is relevant to the subject of the action, even

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if it would be inadmissible at trial, as long as the information sought is "reasonably calculated to lead to the discovery of admissible evidence." Tex. R. Civ. P. 192.3(a); see also Eli Lilly & Co. v. Marshall, 850 S.W.2d 155, 160 (Tex.1993). Also, a party may obtain discovery of the name, address, and telephone number of persons who have or may have knowledge of any discoverable matter. Tex. R. Civ. P. 192.3(c). Although the scope of discovery is broad, requests must show a reasonable expectation of obtaining information that will aid the dispute's resolution. American Optical, 988 S.W.2d at 713. Thus, discovery requests must be "reasonably tailored" to include only relevant matters. Id. Ward argues that Relators have not shown the trial court's order was so arbitrary and unreasonable as to constitute a clear abuse of discretion. See Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1985). According to Ward, the information these interrogatories seek is within the scope of permissible discovery. Ward contends that relevant evidence is not limited to what National Marine Services's employees knew. Ward also argues that employees from Relator's subsidiaries may have information about barge industry custom that is relevant to a negligence claim. See Boatland of Houston, Inc. v. Bailey, 609 S.W.2d 743, 748 (Tex.1980) (in negligence cases, evidence of industry custom at the time of manufacture is admissible to compare the defendant's conduct with industry custom). We do not find Ward's argument persuasive. Discovery orders requiring document production from an unreasonably long time period or from distant and unrelated locales are impermissibly overbroad. See American Optical, 988 S.W.2d at 713; Dillard, 909 S.W.2d at 492; Texaco, 898 S.W.2d at 815. For example, in American Optical, an asbestos-litigation case, the trial court ordered the defendant to turn over every document ever produced relating to asbestos. American Optical, 988 S.W.2d at 713. We held the order was overbroad, because "ordering a defendant to produce virtually all documents regarding its products for a fifty-year period is an abuse of . . . discretion." Id. In Dillard, we held the trial court's order was overly broad, because it required Dillard to produce every incident report filed between 1985 and 1990 in all 227 Dillard stores nationwide. Dillard, 909 S.W.2d at 492. The Court explained that "requests for document production may not be used simply to explore." Dillard, 909 S.W.2d at 492 (citing Loftin v. Martin, 776 S.W.2d 145, 148 (Tex.1989)). Finally, in Texaco, the plaintiffs claimed injurious workplace exposure to benzene and requested all safety and toxicology documents written by the corporate safety director, including those documents regarding other employees' exposure and plants where the plaintiffs never worked. Texaco, 898 S.W.2d at 814. The request also extended into a time period during which the plaintiffs did not work with the company. Id. This Court held the request was overbroad, because it was "not merely an impermissible fishing expedition; it [was] an effort to dredge the lake in hopes of finding a fish." Id. at 815. A central consideration in determining overbreadth is whether the request could have been more narrowly tailored to avoid including tenuous

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information and still obtain the necessary, pertinent information. See American Optical, 988 S.W.2d at 713. A request to identify all safety employees who worked for Relators over a 30-year period, even though Ward never worked for Relators or for their parent company for that length of time, qualifies as the kind of "fishing expedition" this Court has repeatedly struck down. See, e.g., Texaco, 898 S.W.2d at 815. Accordingly, the discovery request at issue here is overly broad. Ward additionally argues that the cases involving requests for document production are distinguishable, because such requests are characteristically more burdensome than providing a list of names and addresses. But, as Relators note, this Court has not identified different standards for evaluating various discovery methods. See K Mart Corp. v. Sanderson, 937 S.W.2d 429, 431 (Tex.1996) (relying on cases involving document production requests to reverse a trial court's order compelling K-Mart to answer interrogatories). In K Mart, we "reject[ed] the notion that any discovery device can be used to `fish.' " Id. Finally, Ward claims he needs the identities of thirty years' worth of safety and industrial hygiene employees, as well as the names of corporate physicians, because they might have information on barge industry custom from the applicable time period. See Bailey, 609 S.W.2d at 748. Although Ward may discover evidence of industry custom at the time Ward was employed, the interrogatories at issue here impermissibly request information for twenty-five years beyond the applicable time period. See Texaco, 898 S.W.2d at 815 (rejecting plaintiff's argument that an overbroad discovery request lacking appropriate limitations as to time, place, or subject matter was relevant to establish defendant's "corporate strategy to ignore safety laws"). If a reviewing court concludes that a trial court's discovery order is overbroad, the trial court has abused its discretion, and the order must be vacated if there is no adequate remedy on appeal. See American Optical, 988 S.W.2d at 713; see also Walker, 827 S.W.2d at 840. Here, no adequate appellate remedy exists. We have said that where a discovery order compels production of "patently irrelevant or duplicative documents," as this order undoubtedly does, there is no adequate remedy by appeal because the order "imposes a burden on the producing party far out of proportion to any benefit that may obtain to the requesting party." Walker, 827 S.W.2d at 843; see also General Motors Corp. v. Lawrence, 651 S.W.2d 732, 734 (Tex.1983). Ward's request could easily be narrowly tailored to obtain information pertinent to the time period during which Ward was employed by National Marine Services. As written, interrogatories 16, 17, and 18 are overbroad. The interrogatories lack reasonable limitations as to time and subject matter. See Texaco, 898 S.W.2d at 815. Accordingly, without hearing oral argument, we conditionally grant mandamus relief and direct the trial court to vacate its order compelling CSX Corporation, National Marine, Inc. and Vectura Group to answer interrogatories 16, 17, and 18. Tex. R. App. P. 59.1. The writ will issue only if the trial court fails to act promptly in accord with this opinion.

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NOTES AND QUESTIONS Page 530: [Add new Note (4).]

(4) Objecting to Relevance. Can a discovery request be irrelevant on its face? Consider In re Union Pacific Resources Co., 22 S.W.3d 338 (Tex. 1999) (per curiam). In that case, the Texas Supreme Court held that evidence may not always be necessary to support an objection based on relevance. The Court found that the non­relevance of the amount of settlement in a separate lawsuit could be determined from the face of the pleadings and existing discovery.

Page 531: [Add the following at the end of Note (3), Settlement Agreements]

The Corpus Christi Court of Appeals recently considered whether a settlement agreement in a related case was relevant. It held that when a settlement agreement might disclose whether plaintiff has already been compensated for his injuries under the "one satisfaction" rule, it is relevant for purposes of discovery. The court further noted that this is true even if the discovering party has not yet pleaded its entitlement to a settlement credit. In re Frank A. Smith Sales, Inc., 32 S.W.3d 871 (Tex. App.--Corpus Christi 2000, orig. proc.).

Page 531: [Insert the following text at the end of note (1), Net Worth:]

The United States Supreme Court has recently downplayed the importance of net worth information in considering punitive damages. In State Farm Mut. Auto Ins. Co. v. Campbell, 123 S. Ct. 1513 (2003), the majority noted, "The wealth of a defendant cannot justify an otherwise unconstitutional punitive damages award." The more important factor is the degree of reprehensibility of defendant's conduct. However, the Court did not hold that net worth was irrelevant to the amount of punitive damages.

[B]--Privileges and Other Limits on Discovery [1]--The Discovery Rule Privileges

Page 543: [Add the following three cases after National Tank, immediately preceding the NOTES AND QUESTIONS.]

Before 1999, "witness statements" were protected from discovery. These were generally understood to be substantially verbatim statements of the witness signed or otherwise adopted by the witness. In federal court, they

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were protected as a type of work product. The definition was used primarily in discussing a witness's right to receive a copy of his or her own statement. Under the 1999 amendments, the rules and comments provide that "witness statements" are not privileged, even if taken in anticipation of litigation. The rule drafters intended to make statements signed or adopted by the witness discoverable, but not to make attorneys' notes concerning witness interviews discoverable. As you read the courts' opinions in Team Transport and W&G Trucking consider the following questions. What is a "witness statement"? Did the courts get it right? What if the statement is given to an attorney (as opposed to a non­attorney investigator)? What if the statement is given to the witness' attorney? Does the discoverability of "witness statements" trump even the attorney­client privilege? See In re Fontenot, 13 S.W.3d 111 (Tex. App.--Fort Worth 2000, orig. proceeding). What if the investigator taking the statement is hired by the attorney?

IN RE TEAM TRANSPORT, INC. 996 S.W.2d 256 (Tex. App.--Houston [14th Dist.] 1999, orig. proc.)

WITTIG, Justice. This mandamus proceeding involves a discovery dispute arising out of a personal injury lawsuit. Relator, Team Transport, Inc., complains the trial court clearly abused its discretion by ordering relator to produce a certain letter from relator to its insurance carrier. Finding the trial court was within its discretion to order production of the letter, we deny the petition for writ of mandamus.

BACKGROUND

On December 1, 1998, the real party in interest, Samuel Martinez, filed a personal injury lawsuit against the relator and Michelin North America, Inc. Martinez alleges that on or about October 20, 1998, relator's employee negligently dumped a container full of tires on him at the Michelin tire facility. On April 21, 1999, Martinez filed a motion to compel certain responses to his requests for production of documents. In particular, Martinez sought to compel a response to request number six seeking all investigative reports. Five days later, relator filed a response asserting that several of the documents were protected by the work product privilege. See Tex. R. Civ. P. 192.5. Among the documents identified, was a letter dated October 26, 1998, sent by an employee and a company officer to relator's insurance carrier. This letter was subsequently submitted in camera to the trial court and to this court. The first paragraph of the letter contains a description of the accident by Johnnie McIlveen, relator's allegedly negligent employee and a witness to the accident. The second paragraph of the letter contains comments by relator's Vice­President, Robert Eagleton, on procedures used at the Michelin warehouse, as those procedures related to the accident. Relator supported its response with several affidavits and

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correspondence showing the documents were prepared "in anticipation of litigation." On April 27, 1999, the trial court held a hearing on the motion to compel and orally ruled in favor of Martinez. The following day, relator filed a motion for reconsideration. On May 3, 1999, the trial court signed an order compelling relator to produce the October 26, 1998, letter as a witness statement. In its order, the court specifically found this letter was prepared in anticipation of litigation, however, it ordered production of the letter as a witness statement. See Tex. R. Civ. P. 192.3(h). Relator was required to comply with the court's order by 5:00 p.m. on May 6, 1999, unless it filed a petition for writ of mandamus. On the same date it signed the discovery order, the trial court also signed an order denying relator's motion for reconsideration. On May 6, 1999, relator filed this petition for writ of mandamus. See Gov. C. § 22.221. The following day, Martinez filed a letter response.

WITNESS STATEMENT V. WORK PRODUCT

Mandamus relief is available if the trial court violates a duty imposed by law or clearly abuses its discretion, either in resolving factual issues or in determining legal issues, when there is no adequate remedy at law. See Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992). A trial court abuses its discretion by making an arbitrary and unreasonable decision that amounts to a clear and prejudicial error of law. See Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex. 1985). Here, relator complains the trial court clearly abused its discretion in compelling the production of a privileged document. Because the erroneous disclosure of privileged information will materially affect relator's rights and thus, cannot be remedied by appeal, relator's complaint is appropriate for mandamus. . . . As we described, the trial court found the October 26, 1998 letter was prepared in anticipation of litigation, but ordered production of the letter as a witness statement. Under Rule 192.3(h), "a party may obtain discovery of the statement of any person with knowledge of relevant facts--a `witness statement'--regardless of when the statement was made." (emphasis added). Thus, the court's ruling was correct provided the letter is a witness statement. Relator all but concedes the first paragraph of the letter prepared by Johnnie McIlveen is a witness statement. However, relator argues the second paragraph of the letter prepared by Robert Eagleton is not a witness statement, but work product. Thus, relator argues the trial court should not have ordered production of the entire letter or should have ordered production of a redacted version of the letter. "Work product" is defined as follows: (1) "materials prepared or mental impressions developed in anticipation of litigation or for trial by or for a party or a party's representative, including the party's attorneys, consultant, sureties, indemnitors, insurers, employees, or agents;" or (2) "a communication made in anticipation of litigation or for trial between a party and the party's representatives or among a party's representatives

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including the party's attorney's, consultants, sureties, indemnitors, insurers, employees or agents." See Tex. R. Civ. P. 192.5(a). The work product privilege protects "core work product," which includes the attorney's "mental impressions, opinions conclusions or legal theories." See Tex. R. Civ. P. 192.5(b)(1). It also protects "other work product" unless the party seeking discovery shows a "substantial need" for the materials and "undue hardship" in obtaining the substantial equivalent of the materials by other means. See Tex. R. Civ. P. 192.5(b)(2). "Witness statements" are not work product, however, even if made or prepared in anticipation of litigation or trial. See Tex. R. Civ. P. 192.5(c)(1). Relator argues the trial court should not have ordered production of the October 26, 1998, letter because the Eagleton paragraph is a privileged communication between its agent and its insurer and because Martinez has not shown substantial need or undue hardship. As to the latter contention, relator has not provided the reporter's record of the motion to compel hearing. As the party seeking relief, relator had the burden of providing this court with a sufficient record to establish its right to mandamus relief. See Walker, 827 S.W.2d at 837. As to the former contention, based upon our review of the Eagleton paragraph, we find no abuse of discretion by the trial court. Eagleton relates the normal procedures for warehousemen such as Martinez, used at the Michelin warehouse. Because those procedures pertain to the accident, they were included as a follow­up to McIlveen's witness statement. They are part and parcel of that statement. Without citation of authority, relator argues the Eagleton paragraph could not be a witness statement because Eagleton was not a witness to the accident. The rules do not mandate such a requirement. A person with knowledge of relevant facts need not have personal knowledge of the facts. See Tex. R. Civ. P. 192.3(c). Further, the statement of any person with knowledge of relevant facts is discoverable. See Tex. R. Civ. P. 192.5(h) (emphasis added). Thus, we cannot say the trial court committed a clear and prejudicial error of law by concluding that the Eagleton paragraph was a witness statement.

APPLICATION OF THE NEW RULES OF CIVIL PROCEDURE

Relator argues the application of the new rules of civil procedure to this case is unduly prejudicial and violates its due process rights under the Federal and State Constitutions. See U.S. Const. Amend. V, XIV § 1; Tex. Const. art. I, §§ 19, 29. This case was filed in December 1998. Rule 192 became effective on January 1, 1999. See Supreme Court Order of August 4, 1998, Misc. Docket No. 98­9136, 61 Tex. Bar. J. 752 (Sept. 1998), modified by Supreme Court Order of November 8, 1998, Misc. Docket No. 98­9196, 61 Tex. Bar. J. 1140 (Dec. 1998), corrected by Supreme Court Order of December 31, 1998, Misc. Docket No. 98­9224, 62. Tex. Bar. J. 115 (Feb. 1999). Paragraph 5 of the Supreme Court's November 9, 1998, order, approving the new rules, provides in part that application of the new rules to pending cases "must be subject to Rule 1 of the Rules of Civil

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Procedure" and "must be without undue prejudice to any person on account of the transition from the prior rules." Rule 1 states in part, "the proper objective of the rules of procedure is to provide a just, equitable and impartial adjudication of the rights of litigants under established principles of substantive law." Relator asserts the trial court's discovery order does not follow these guidelines, is unfair and arbitrarily permits discovery that would otherwise have been protected under former Rule 166b. We disagree. As a general rule, procedural rules apply to suits filed before the effective date of the rules, provided no vested right is impaired. See In re W & G Trucking, Inc., 990 S.W.2d 473(Tex. App. Beaumont 1999, orig. proceeding). In W & G Trucking, the court held that application of new Rule 192 to a witness statement obtained by relators' insurance investigator prior to the effective date of the new rules did not deprive relator of a defense or other substantive right. See id. We likewise conclude the application of Rule 192 to the underlying case does not deprive relator of a defense or substantive right. Like in W & G Trucking, relator could not be assured the October 26, 1998, letter would be privileged under former Rule 166b. Under the new rules, work product replaces the "attorney work product" and "party communication" discovery exemptions from former Rule 166b. See Tex. R. Civ. P. 192 cmt. 8. Under former Rule 166b, the letter in question would not have qualified as "attorney work product." See Tex. R. Civ. P. 166b(3)(a) repealed by Supreme Court Order of November 8, 1998, Misc. Docket No. 98­9196, 61 Tex. Bar. J. 1140 (Dec. 1998); see also Occidental Chem. Corp. v Banales, 907 S.W.2d 488, 490 (Tex. 1995). Even as a party communication, the letter could have been discoverable under the substantial need and undue hardship exception. See Tex. R. Civ. P. 166b(3)(e). Therefore, we hold the application of the new rules to the underlying case did not cause relator undue prejudice or deprive relator of due process. Accordingly, we deny mandamus relief.

IN RE W & G TRUCKING, INC. 990 S.W.2d 473 (Tex. App.--Beaumont 1999, orig. proc.)

FARRIS, Justice. * The question presented in this mandamus proceeding is whether the trial court clearly abused its discretion by compelling the defendants to produce the written statement of a defendant given to an insurance investigator before suit was filed. The relators contend that the trial court did because

*

Footnotes omitted unless otherwise indicated.

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the statement was a privileged communication under Tex. R. Evid. 503 and the trial court improperly relied upon a newly adopted discovery rule to destroy a privilege existing under the former rules. We reject both contentions and deny relators' prayer for relief because the statement did not involve a client under Rule 503 and the application of the new discovery rules to this case did not violate Tex. R. Civ. P. 1 or cause the relators undue prejudice. Relators, W & G Trucking, Inc. and John Jamison are the owner and driver, respectively, of a logging truck that collided with a car driven by Jamaal Reshad Meyers. Meyers was killed in the collision and his survivors have sued the relators. On April 17, 1999, two days after the collision, an insurance investigator obtained Jamison's statement at the request of W & G's insurer. According to the affidavit of Lonnie Grissom, vice­president of W & G, he told W & G's insurance agency of the accident after he learned that first an investigator and later an attorney from the same law firm had gone to the home of Meyer's mother. The affidavit of an officer of the agency relates that Grissom called him and reported that Meyer's mother had contacted an attorney. From this information and his experience as an insurance agent he concluded that suit would probably be filed. Both affidavits assert that all statements were obtained with the knowledge that a suit would be filed. On December 29, 1998 the trial court entered an order requiring relators to produce Jamison's statement on or before January 8, 1999. The trial court intended its order to require the production of Jamison's statement under Rule 192.3(h) permitting the discovery of the statement of any person with knowledge of relevant facts.

TEXAS RULE OF EVIDENCE 503

Relators contend that Jamison's statement is privileged because it was a confidential communication between a client and his representative for the purpose of facilitating the rendition of professional legal services to the client. We reject that contention because it is not supported by the facts. While the affidavits may make the case that W & G and its insurance agency had reason to anticipate litigation, the record does not establish that Jamison was a "client," that the agent represented Jamison, or that the agent took Jamison's statement to facilitate rendering him legal services.

APPLICATION OF NEW DISCOVERY RULES

In their petition relators argued that applying the new rule would cause them undue prejudice violating paragraph five of the Supreme Court's order adopting the new discovery rules. Paragraph five required that the application of the new rules to pending cases was subject to Tex. R. Civ. P. 1. Rule 1 identified the objective of the rules of procedure to be a just, fair, equitable, and impartial adjudication of the rights of litigants under

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established principles of substantive law. Paragraph five also required the application of the new rules to pending cases must be without undue prejudice to any person on account of the transition from the former rules. Relators contended that because the investigator obtained Jamison's statement believing that it was and would remain privileged under former Rule 166b(3)(c), Rule 192 should not be applied to "this transition case." During argument the court pointed out that the collision occurred in April 1998 and suggested that the real party in interest could nonsuit and file a new case that would not be a transition case. In response to this suggestion, relators argued that, regardless of when suit was filed, Rule 192 should not be applied to permit discovery of Jamison's statement because the investigator obtained it before the effective date of the rules. Relators insisted that the old rules would protect a statement obtained before 1999 from discovery even in a hypothetical case where suit would be filed more than a decade after adoption of the new discovery rules. As a general rule procedural rules apply to suits filed before the effective date of the rules, provided no vested right is impaired. In this instance the repeal of Rule 166b and the adoption of Rule 192 have not deprived relators of a defense or other substantive right. Even under the old rules, the investigator was not assured that the statement would not be subject to discovery because Rule 166b allowed trial courts to disregard its exemptions upon a showing of substantial need and undue hardship. Accordingly, we hold that Rule 192 is applicable to cases pending on January 1, 1999 and that its application in this case has neither violated nor caused relators undue prejudice. Writ denied.

[2]--Other Discovery Privileges [b]--Privileges Based on the Texas Rules of Evidence

Page 552: [Before the first full paragraph on this page, insert the following heading:] ATTORNEY­CLIENT PRIVILEGE Page 552: [Insert the following text prior to the paragraph that begins "The Texas Supreme Court has recently bolstered . . ."]

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NOTES AND QUESTIONS

(1) Breadth of Protection Afforded Corporations. How broad a protection does the new attorney­client privilege provide for corporate communications? Do you believe that application of the new test will be predictable? (2) Satisfaction of Confidentiality Requirement. Consider the requirement that communications be "confidential." The Texarkana court rejected a privilege claim due to lack of confidentiality. Counsel prepared a videotape that consisted of questions by counsel to current and former employees and used it to present factual information to opposing parties during mediation. Since the tape was not made to facilitate the rendition of legal services and was not a confidential communication, the court held that it was discoverable. In re Learjet, Inc., 59 S.W.3d 842 (Tex. App.--Texarkana 2001, orig. proc.). The court also noted that materials used in mediation are discoverable if they are discoverable independent of the mediation procedure, citing C.P.R.C. § 154.073. (3) Public Policy Issues. As a matter of public policy, how broad do you think the corporate attorney­client privilege should be? Compare Fried, The Lawyer as Friend: The Moral Foundation of the Lawyer­Client Relation, 85 YALE L.J. 1060 (1976) with Thornburg, Sanctifying Secrecy: The Mythology of the Corporate Attorney­Client Privilege, 69 NOTRE DAME L. REV. 157 (1993). (4) Exceptions to Attorney Client Privilege. Attorney­client communications are not privileged if they fall within certain exceptions, set out in Texas Rule of Evidence 503(d). The most litigated exception is the crime­ fraud exception. There is no privilege if the services of counsel were sought or obtained to enable or aid anyone to commit or plan to commit what the client knew or reasonably should have known to be a crime or fraud. The crime­fraud exception applies only when a prima facie case is made of contemplated fraud. In addition, there must be a relationship between the document for which the privilege is challenged and the prima facie proof offered. Granada Corp. v. First Court of Appeals, 844 S.W.2d 223, 227­228 (Tex. 1992).

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TRADE SECRETS Page 559: [Insert the following new case immediately after General Continental Tire:] IN RE BRIDGESTONE/FIRESTONE, INC. 2003 Tex. LEXIS 63 (Tex. 2003)

HECHT, J. The plaintiffs in some 150 cases alleging Firestone tire tread separations and Ford Explorer roll­overs seek discovery of Firestone's skim stock formulas, which they concede in this Court are trade secrets. Although the plaintiffs contend that they can prove their tires were defective without knowing the skim stock formulas, they nevertheless argue that disclosure of the formulas is necessary for a fair adjudication of their claims. The pretrial judge assigned to the cases agreed, but in this original mandamus proceeding we conclude that the plaintiffs have failed to show, as they acknowledge they must, how access to Firestone's skim stock formulas is necessary for a fair adjudication of their claims. Accordingly, we conditionally grant mandamus relief. A large number of similar cases have been filed in Texas, as in other states, alleging that certain Firestone tires are defective. In seven of nine administrative judicial regions in this State, the regional presiding judge assigned a pretrial judge for the cases in the region. These seven pretrial judges must consult with each other in ruling on pretrial matters. The original proceeding now before us involves a challenge to one such ruling by one of the pretrial judges in which all have joined. Relator, Bridgestone/ Firestone, Inc., is a defendant in the cases before the pretrial judges. The real parties in interest are the plaintiffs in those cases. The plaintiffs claim that "the defect with the Firestone tires is a skim stock deficiency which causes a lack of adhesion between the steel belts in the tires and separation of the tread and steel belts." Skim stock is a specially formulated rubber compound that coats the steel belts in a steel­ belted radial tire and through vulcanization holds them together. In the pending cases, the plaintiffs requested discovery of the formulas and specifications for the skim stock Firestone used to produce ATX, ATXII, and Wilderness AT tires at its Decatur plant. Firestone responded that two skim stock formulas were used in manufacturing the specified tires, that both were used at all its plants, that one was still in use, and that its skim stock formulas are trade secrets privileged from discovery under Rule 507 of the

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Texas Rules of Evidence. Firestone presented evidence that it goes to great lengths to guard its skim stock formulas from its competitors, and that skim stock formulas are regarded as trade secrets throughout the tire manufacturing industry. Because skim stock is chemically altered by vulcanization, its components cannot be determined from the finished tire. The plaintiffs countered that the skim stock formulas they sought could not be of interest to Firestone's competitors, given the problems Firestone has had with its tires. Firestone answered that disclosing the formulas would reveal the approach Firestone has taken to engineering its tires. After a hearing, the pretrial judge found that Firestone had established its trade secret privilege. The burden then fell upon the plaintiffs to establish that the information is necessary or essential for a fair adjudication of their claims. In re Continental Gen. Tire, Inc., 979 S.W.2d 609, 610­613 (Tex. 1998). The pretrial judge found that the plaintiffs had met this burden and ordered Firestone to produce the requested information. The judge ordered that the information be provided only to three attorneys for the plaintiffs named in the order and one expert to be designated by the Texas Plaintiffs' Steering Committee. The judge ordered that the information not be disseminated further and that it be provided on paper that cannot be photocopied. Firestone sought relief by mandamus from the court of appeals, which that court denied. Firestone then petitioned this Court for relief. We have previously considered whether a tire manufacturer's skim stock formula is privileged from discovery in In re Continental General Tire, Inc. There, as here, the plaintiffs alleged a tire tread separation caused by a defect in the skim stock. In both cases the plaintiffs conceded in this Court that a skim stock formula is a trade secret. In Continental General Tire we held that for the plaintiffs to obtain discovery they were required to establish that the information was necessary or essential to the fair adjudication of the case, weighing the requesting party's need for the information against the potential of harm to the resisting party from disclosure. We concluded that the plaintiffs had failed to make this showing. We noted that the uncontroverted evidence from the defendant's expert was that "the physical properties of a tire cannot be determined from an examination of a compound formula; rather, the finished tire itself must be tested." Thus, there was no evidence that a defect in skim stock could be proved using the formula for its components. We also noted that the plaintiffs had no other manufacturer's formula to compare to the defendant's formula. One could not tell from the formula itself whether it was better or worse than any other formula. Finally, we stated that the plaintiffs had offered no evidentiary support for their theory that the skim stock formula would show whether sulfur found on the defective tire was a component of the skim stock or had been improperly introduced during manufacture. We did not attempt to state conclusively what would or would not be considered necessary for a fair adjudication, indicating instead that the

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application of the test would depend on the circumstances presented. In the present case, Firestone argues that the test should be applied to preclude discovery of trade secret information unless the requesting party cannot prevail without it. While it would certainly be unfair to allow a party to prevail solely by withholding such information, our decision in Continental General Tire cannot be read so narrowly. It may be theoretically possible for a party to prevail without access to trade secret information and yet be unfair to put him to much weaker proof without the information. Obviously, the degree to which information is necessary in a case depends on the nature of the information and the context of the case. While it is difficult to be more specific about the test to be applied, except by demonstrating how it is properly applied in particular cases, we can say with certainty that the test cannot be satisfied merely by general assertions of unfairness. The words "fair" and "unfair" are prone to indefinite use. Just as a party who claims the trade secret privilege cannot do so generally but must provide detailed information in support of the claim, so a party seeking such information cannot merely assert unfairness but must demonstrate with specificity exactly how the lack of the information will impair the presentation of the case on the merits to the point that an unjust result is a real, rather than a merely possible, threat. The plaintiffs' evidence and argument before us fall far short of this standard. The plaintiffs do not challenge Firestone's assertion that a tire's physical properties can be tested without knowing the recipe for the skim stock compound. Indeed, the plaintiffs tell us that even without the skim stock formulas they have "presented evidence of a serious, pervasive deficiency with the skim stock manufactured by the Decatur plant". This is the same kind of evidence, the parties agree, that has been used in countless numbers of defective tire cases. This strongly suggests that the plaintiffs will not be hampered in their proof by not knowing Firestone's skim stock formulas. The plaintiffs concede that skim stock components are chemically changed in the vulcanization and curing process so that it may not be possible to know from the recipe of components how the finished tire will perform. In other words, tests on a finished tire are more probative of defect than its skim stock formula would be. The plaintiffs also acknowledge that, like the plaintiffs in Continental General Tire, they have no other skim stock formulas to compare. Indeed, neither Firestone nor the plaintiffs are able to point to a single case, other than those before us, in which a court has ordered disclosure of a skim stock formula. Plaintiffs offered in support of their discovery request the affidavits of two experts, who both stated that "the best way to be able to determine what is supposed to be in the tire is to know the compounds, formulas, and specifications for the tire". But this statement, which we assume to be true, is virtually tautological: the best way to determine what ingredients are supposed to be in a tire is to know what ingredients are supposed to be in a tire. The experts' statement does not indicate whether or how knowing a tire's specified ingredients will show whether the finished tire was

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defective. This is especially problematic when there is no question that a tire's ingredients are altered during the curing process. Moreover, the experts assert without knowing the skim stock formulas that there is proof the tires were defective. The plaintiffs' experts' assertions that the defective tires can be traced to one of several Firestone plants strongly suggest that the manufacturing process, and not the skim stock formulas that were used to manufacture the same tires at all plants, is the source of any defect. The plaintiffs argue that there are cases in which the allegedly defective tires have been destroyed and therefore cannot be tested. But the plaintiffs have offered no evidence relating to such cases, nor have they shown that their proof of defect is weaker in any such cases. Even if they had, the plaintiffs have not explained how knowledge of the skim stock formula can be used to prove defect. The plaintiffs have alleged that (i) skim stock contamination may have caused tread separations; (ii) Firestone may have used over­aged rubber compounds in its Decatur plant; (iii) the defective tires had a high sulfur content; (iv) excessive heat in the manufacturing process or oxidative aging made the rubber surfaces of Decatur tires more susceptible to fracture and tear; and (v) Firestone used inferior rubber compounds. The plaintiffs have not shown how knowledge of Firestone's skim stock formula is even linked to these allegations, let alone necessary to their fair adjudication. The plaintiffs contend that they need the skim stock formula to rebut Firestone's contention that tread separations were caused by factors other than skim stock deficiencies. Again, however, the plaintiffs have not shown how they will be able to trace a tire defect to the formula, especially when they have no other formulas to compare with Firestone's. The plaintiffs argue that Firestone may point to their lack of knowledge of the skim stock formula to undercut their arguments at trial. Of course, it would be unfair for Firestone to argue that a plaintiff's case is impaired by lack of evidence that Firestone has itself withheld, but Firestone strenuously asserts that it has made no such argument and will not do so. If Firestone were to attempt to take advantage of the plaintiffs in this way, the plaintiffs would have a much stronger argument for discovery of the skim stock formula, but this is merely a possibility of unfairness that can be addressed if it ever materializes. The mere possibility of unfairness is not enough to warrant disclosure of the information. Finally, the plaintiffs argue that discovery of Firestone's skim stock formulas is necessary to protect the general public's health and safety, given the extent of the problems with its tires. But the number of complaints does not show whether discovery of skim stock formulas is necessary for their fair adjudication when the plaintiffs contend there is already ample evidence of defect; if anything, the large number of claims suggests some defect irrespective of skim stock formulas. In sum, the plaintiffs' evidence of unfairness in this case is essentially no different than the evidence in Continental General Tire. Accordingly, for the same reasons we direct respondent Pretrial Judge Michael Mayes to

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vacate his orders of September 17, 2001, and September 20, 2001, regarding skim stock discovery. We are confident he will promptly comply. Our writ will issue only if he fails to do so. JUSTICE O'NEILL filed a concurring opinion, in which JUSTICE SCHNEIDER joined. The Court directs the seven designated pretrial judges who ordered discovery of the skim­stock formula used at Firestone's Decatur plant to vacate their order because "the plaintiffs' evidence of unfairness . . . is essentially no different than the evidence in Continental General Tire." While I agree that the plaintiffs in this case did not meet their burden to establish that the skim­stock formula's disclosure was necessary to fairly adjudicate their claims and that Firestone is entitled to mandamus relief, I cannot join the Court's opinion because it fails to fairly treat the plaintiffs' contentions and offers little useful guidance to the bench and bar. Accordingly, I concur.

I

This case presents the Court with the opportunity to build on the foundation laid in Continental General Tire, in which we first described how trial courts should apply Rule 507 of the Rules of Evidence. There, we held that the party resisting discovery must establish that the information is a trade secret. The burden then shifts to the requesting party to establish that the information is necessary for a fair adjudication of its claims. If the requesting party meets this burden, the trial court should ordinarily compel disclosure of the information, subject to an appropriate protective order. In each circumstance, the trial court must weigh the degree of the requesting party's need for the information with the potential harm of disclosure to the resisting party. In re Cont'l Gen. Tire, Inc., 979 S.W.2d 609, 613 (Tex. 1998) (footnote omitted). The Court should use the case before us to expand on that decision and further explain when discovery of a trade secret is "necessary for a fair adjudication." I recognize that the concept of "necessity" in this context must be somewhat fluid; its application will vary depending upon the circumstances presented. But determining what evidence is necessary for a fair adjudication should be more than ad hoc, as the Court's opinion suggests. Courts in other jurisdictions have provided guidance on the subject, and some general principles can be distilled from those decisions. Any analysis of the necessity of trade secret information to a fair adjudication must begin by examining the relationship between the trade secret information sought and the material elements of the parties' claims and defenses. See Bridgestone/Firestone, Inc. v. Superior Court, 7 Cal. App. 4th 1384, 9 Cal.Rptr.2d 709, 714­15 (Cal. Ct. App. 1992); Coca­Cola Bottling Co. v. Coca­Cola Co., 107 F.R.D. 288, 289 (D. Del. 1985). In the

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often­cited Coca­Cola Bottling Co. case, for example, the district court considered whether to allow discovery of the formula for Coca­Cola, "one of the best­kept trade secrets in the world." Coca­Cola Bottling Co., 107 F.R.D. at 289. The plaintiffs, various bottlers, had sued Coca­Cola alleging that the company was contractually obligated to sell them syrup for the newly introduced diet Coke under the same terms as their contracts covering regular Coke syrup. The bottlers essentially complained that the two products were so similar that the syrup for diet Coke was "bottler's syrup" within their contracts' terms, while Coca­Cola contended that Coke and diet Coke were separate and distinct products. Id. at 296. The court noted, first, that the formula was relevant to the issue of product identity, "one of the primary issues" in the case. Id. Production of the formula was necessary for a fair adjudication, the court reasoned, to allow the plaintiffs "to address the product identity issue by comparing the ingredients of the various soft drinks involved," and to allow them to "respond to the assertions of defendant's experts that diet Coke and Coca­Cola are two products." Id. at 298. Plaintiffs could not fully cross­examine Coca­Cola's experts without the formula, nor could they prove product identity without disclosure of the secret ingredients. Id. at 297­98. Furthermore, the information was available from no other source, and no adequate substitute existed. Id. at 298. Similarly, in Compaq Computer Corp. v. Packard Bell Electronics, Inc., 163 F.R.D. 329, 338­39 (N.D. Cal. 1995), a district court allowed Packard Bell to discover information about another computer company's use of recycled components in computers marketed as "new." Packard Bell defended its use of recycled components on the ground that the practice was standard within the industry. The court reasoned that other manufacturers were not likely to voluntarily disclose information about a potentially controversial practice. Id. Thus, unless the court ordered disclosure, Packard Bell's expert testimony about industry practice would be based on nothing "more than mere surmise." Id. Likewise, in a patent infringement case the Federal Circuit affirmed a district court order that denied discovery of the alleged infringer's confidential sales data because the party seeking discovery already had access to nonconfidential sales data that would serve the same purpose. Am. Standard, Inc. v. Pfizer, Inc., 828 F.2d 734, 742­43 (Fed. Cir. 1987). We can derive several guiding principles from these cases. First, trade secret information is generally discoverable when not allowing discovery would significantly impair a party's ability to establish or rebut a material element of a claim or defense. A party's ability is significantly impaired when the information is unavailable from any other source and no adequate alternative means of proof exist. Discovery is also necessary when the party seeking trade secret information could not knowledgeably cross­examine opposing witnesses without it, or when the party's experts would be unable to formulate opinions supported by an adequate factual foundation. On the other hand, information that is merely cumulative is not necessary for a fair adjudication.

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II

Applying these principles, I agree with the Court that the plaintiffs have not demonstrated that disclosure of Firestone's skim­stock formula is necessary for a fair adjudication of the claims and defenses in this case. I disagree, however, that the evidence in this case "is essentially no different than the evidence in Continental General Tire." The plaintiffs here assert, among other claims, that Firestone's tires were defectively manufactured. 1 In order to establish a manufacturing defect, the plaintiffs must prove that "the finished product deviates, in terms of its construction or quality, from the specifications or planned output in a manner that renders it unreasonably dangerous." Am. Tobacco Co., Inc. v. Grinnell, 951 S.W.2d 420, 434 (Tex. 1997). Unlike in Continental General Tire, where we specifically left the question open because plaintiffs had provided no evidence to support the theory, . . . the plaintiffs here offered evidence attempting to establish that disclosure of Firestone's skim­stock formula was necessary to prove that the finished tires deviate from specifications, either because of skim­ stock contamination during the manufacturing process or because ingredients were used in proportions that deviate from the formula. Robert Ochs, a former Michelin engineer with extensive experience in tire­failure analysis, testified by affidavit: I believe there is a rubber compounding problem with the Firestone ATX and Wilderness tires. I would like to obtain these compound formulas to compare the substances which are supposed to be in the tire against those which are actually found in the tire. The best way to be able to determine what is supposed to be in the tire is to know the compounds, formulas, and specifications for the tire; one can then compare the recipe with what is actually in the tire. . . . The compounds and formulas for the tire components are highly probative and relevant in that they allow for a comparison between the actual, individual substances found in the failed tires and the combinations called for in the manufacturer's formula. While the tire curing process will chemically change some of the ingredients, a comparison can still be made to determine the propriety of the materials actually detected in the cured tire. (Emphasis added). The plaintiffs provided a similar affidavit from another engineer, Dennis Carlson. The Court quotes only a fraction of the evidence presented and characterizes it as "tautological." Fairly read, the affidavits offer a compelling necessity for discovery that is not so easily dismissed. But while the plaintiffs here presented a stronger case for disclosure than in Continental General Tire, they nevertheless did not establish that

1 Although the plaintiffs also apparently assert defective design claims, the trial court's comments at the hearing on Firestone's motion to quash indicate that the trial court considered the trade secret information necessary to their manufacturing defect claim:" "One thing that -- I'm reading as you're talking, and it just jumps out at me, is how -- the plaintiffs make the argument here that . . . how could they ever make an argument of manufacture defect if they don't really know what the design intent was in the first place?"

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disclosure of the skim­stock formula is necessary for a fair adjudication of their manufacturing defect claims. First, the plaintiffs have not alleged that the skim­stock formula comparison method is necessary, or is even the superior way, to establish their manufacturing defect claim; rather, the plaintiffs have produced evidence that the formula would be "highly probative and relevant." Trade secret information cannot be subject to disclosure based on mere relevance without rendering Rule 507 of the Texas Rules of Evidence meaningless. Cont'l Gen. Tire, 979 S.W.2d at 611 (citing Bridgestone/Firestone, 9 Cal.Rptr.2d at 712). Second, although proving that finished tires contain material different from that called for in the skim­stock formula would be one way to prove a manufacturing defect, plaintiffs could also establish a defect by showing that the composition of tires manufactured at Firestone's Decatur plant differed from that of tires manufactured at its other plants. See Bridgestone/Firestone, 9 Cal.Rptr.2d at 714 (citing Barker v. Lull Eng'g Co., 573 P.2d 443, 454 (Cal. 1978)). Moreover, the record contains evidence that Ford, without access to the skim­stock formula, was able to determine that the manufacturing process at Firestone's Decatur plant produced flaws that contributed to tire failures. The plaintiffs also have evidence from Firestone's own internal investigation of the tire failures that the manufacturing process at the Decatur plant allowed contamination that caused reduced cohesion between the tire's components. Finally, Firestone's motion to reconsider the trial court's discovery order specifically admitted that the manufacturing process at the Decatur plant resulted in contamination of the skim stock. The plaintiffs did not argue here or in the trial court that the discovery was necessary to fairly adjudicate their defective design claims, or any other claims they have asserted.

III

For these reasons, I concur in the Court's holding that the plaintiffs did not meet their burden to establish that the skim­stock formula was necessary to fairly adjudicate their manufacturing defect claim. JUSTICE WAINWRIGHT did not participate in the decision.

Page 559: [Delete Notes and Questions]

[c]--Healthcare Privileges

Following heading [c], insert the following text: A number of discovery privileges belong to patients or to health care providers, be they individual doctors or entities such as hospitals or blood banks. This section sets forth some of the most common of these privileges.

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Page 559: [Delete Notes and Questions. Change heading [c] from "Other Privileges" to "Healthcare Privileges."] Medical Peer Review Committee Privileges MEMORIAL HOSPITAL­THE WOODLANDS v. MCCOWN 927 S.W.2d 1 (Tex. 1996)

OWEN, Justice In these original proceedings, we must determine whether documents and files generated for and by a hospital credentialing committee in its investigation and review of a physician's initial application for staff privileges are protected from discovery. The trial court concluded that the documents at issue were discoverable, and the parties objecting to production requested mandamus relief from this Court. Because we conclude that the documents are protected from discovery under section 5.06 of Texas Revised Civil Statute article 4495b and section 161.032 of the Texas Health and Safety Code, we conditionally grant writs of mandamus.

I

In 1993, Dr. Bruce Leipzig sued CBS, Inc. and KTBC­TV, Inc. (collectively, "CBS") for libel and false light invasion of privacy after CBS aired a 48 Hours program containing a segment entitled "Bad Medicine." In the broadcast, CBS reported that Leipzig's staff privileges had been revoked by a hospital in Arkansas, that a complaint had been filed with the Arkansas Board of Medical Examiners seeking to revoke his license for gross negligence or malpractice, and that Leipzig had then moved to Texas, where he is practicing medicine today, instead of renewing his license in Arkansas. In the course of Leipzig's defamation action, CBS served subpoenas duces tecum on several Texas hospitals at which Leipzig had previously practiced or sought staff privileges. The hospitals include Memorial Hospital­The Woodlands, Brownwood Regional Medical Center, HIT Doctors Hospital, and Medical Center Hospital (collectively, the "Hospitals"). The subpoenas requested the Hospitals to produce all documents in their administrative and credentialing files concerning Leipzig, including "nonprivileged" documents regarding Leipzig's application for staff privileges. The Hospitals filed motions for protective orders, claiming that their files were privileged and exempt from discovery under sections 161.031 and 161.032 of the Texas Health and Safety Code and sections 5.06(g) and (j) of the Medical Practice Act, Texas Revised Civil Statute article 4495b. The Hospitals submitted the affidavits of their respective medical staff coordinators in support of the claimed privileges and tendered several categories of documents to the trial court for in camera inspection. The trial court denied the Hospitals' motions for protective orders and ordered the documents produced. In a letter to the parties regarding its

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rulings, the trial court expressed its view that the documents at issue were privileged under section 5.06 of article 4495b, and were confidential under section 161.032 of the Health and Safety Code, but concluded that it was bound by decisions to the contrary from a court of appeals and a federal district court, citing McAllen Methodist Hospital v. Ramirez, 855 S.W.2d 195 (Tex. App.--Corpus Christi 1993, orig. proceeding); Family Medical Center, U.T. v. Ramirez, 855 S.W.2d 200 (Tex. App.--Corpus Christi 1993, orig. proceeding); and Manthe v. Vanbolden, 133 F.R.D. 497 (N.D. Tex. 1991). The trial court stayed its rulings to allow the Hospitals an opportunity to seek mandamus relief, which was denied by the court of appeals. In separate mandamus proceedings, the Hospitals now petition this Court. We consolidated the cases for oral argument along with two other original proceedings concerning the statutes at issue. We have issued a separate opinion today in the latter proceedings, Irving Healthcare System v. Brooks, 927 S.W.2d 12 (Tex. 1996).

II

Generally speaking, statutes such as section 5.06 of the Medical Practice Act and sections 161.031­161.033 of the Texas Health and Safety Code are based on two premises: first, that exacting critical analysis of the competence and performance of physicians and other health­care providers by their peers will result in improved standards of medical care; and second, that an atmosphere of confidentiality is required for candid, uninhibited communication of such critical analysis within the medical profession. See Griffith & Parker, With Malice Toward None: The Metamorphosis of Statutory and Common Law Protections for Physicians and Hospitals in Negligent Credentialing Litigation, 22 TEX. TECH L. REV. 157, 158­59 (1991); Creech, Comment, The Medical Review Committee Privilege: A Jurisdictional Survey, 67 N.C. L. REV. 179, 179 (1988). Although they vary widely in scope, as of 1988, statutes to protect the work of medical review committees had been enacted in at least forty­six states. Creech, supra, 179­80. All parties agree that the records of and communications to a medical peer review committee are generally privileged and confidential if they were generated in connection with a review of whether a physician already on staff should retain those privileges. The question before us is whether the exemptions from discovery and the confidentiality afforded by the Texas statutes at issue apply to the initial credentialing process. We conclude that they do. With limited exceptions, it was the intent of the Legislature in enacting section 5.06 of article 4495b to protect from discovery in a suit for damages the reports and records received, maintained, or developed in connection with a physician's initial application for staff privileges. TEX. REV. CIV. STAT. ANN. art. 4495b, § 5.06(g), (j), (s)(3) (Vernon Supp. 1996). The express provisions of section 5.06 of article 4495b make this clear, as does the context in which the present form of section 5.06 was enacted. When

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section 5.06 was amended in 1987 to include the provisions at issue, Acts 1987, 70th Leg., R.S., ch. 596, § 18, 1987 Tex. Gen. Laws 2333, there was a nationwide movement to disseminate information to peer review committees and state medical boards about physicians who have had adverse actions taken against them for their lack of professional competence. A comprehensive federal act, the Health Care Quality Improvement Act, was passed by Congress in 1986. 42 U.S.C. §§ 11101­52 (1994). Among other provisions, the federal Act not only encourages hospitals considering a physician's initial application for staff privileges to consult the national databank created under the Act, but also requires the hospital to do so. 42 U.S.C. § 11135(a)(1). It is apparent from the federal Act that the initial credentialing process is a critical juncture in improving the quality of medical care and that peer review should occur at that point. See, e.g., 42 U.S.C. §§ 11101(1); 11151(1), (9), (10)(A). Article 4495b was enacted in this climate. Indeed, Texas chose to "opt in" to the federal Act's coverage at an early effective date. See article 4495b, § 5.06(a); see also 42 U.S.C. § 11111(c)(2)(A). We further hold that the confidentiality provision of section 161.032 of the Texas Health and Safety Code extends to initial credentialing by medical committees. We first consider article 4495b in greater detail.

III A

Where a statute is unambiguous, a court must seek the intention of the Legislature as found in the plain and common meaning of the words and terms used. Republic Bank Dallas, N.A. v. Interkal, 691 S.W.2d 605, 607 (Tex. 1985). The express provisions of the Medical Practice Act lead us to the conclusion that initial credentialing is within the scope of section 5.06. The opening declaration of the Medical Practice Act provides: (1) the practice of medicine is a privilege and not a natural right of individuals and as a matter of policy it is considered necessary to protect the public interest through the specific formulation of this Act to regulate the granting of that privilege and its subsequent use and control. Art. 4495b, § 1.02(1). One of the Legislature's means of implementing this policy was to establish a reporting system and confidentiality requirements, as well as privileges from discovery in civil damage suits. The specific confidentiality provisions at issue state: (g) Except as otherwise provided by this Act, all proceedings and records of a medical peer review committee are confidential, and all communications made to a medical peer review committee are privileged. . . . .

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(j) Unless disclosure is required or authorized by law, records or determinations of or communications to a medical peer review committee are not subject to subpoena or discovery and are not admissible as evidence in any civil judicial or administrative proceeding without waiver of the privilege of confidentiality executed in writing by the committee. Art. 4495b, § 5.06(g), (j) (emphasis added). Another instructive provision is subsection (s)(3) of section 5.06: (3) In no event may . . . reports and records received, maintained, or developed by the board, by a medical peer review committee, or by a member of such a committee, or by a health­care entity be available for discovery or court subpoena or introduced into evidence in a medical professional liability suit arising out of the provision of or failure to provide medical or health­care services, or in any other action for damages. Art. 4495b, § 5.06(s)(3). Thus, subject to certain exceptions, all communications to a "medical peer review committee" are privileged and are not subject to discovery by virtue of the explicit wording of the statute. The question in this case is whether a hospital committee that is considering a physician's initial application for staff privileges is a "medical peer review committee" within the scope of article 4495b. The statute answers this question. One of the enumerated functions of a medical peer review committee is the "denial of membership or privileges in a health­care entity." Art. 4495b, § 5.06(i). 1 Upon denial of staff privileges, the physician is entitled to a written copy of the recommendation of the medical peer review committee and a copy of the final decision, including a statement of the basis for decision. Id. The statutory definitions in section 1.03 of article 4495b do not lend themselves to the restrictive reading of the scope of a medical peer review committee's activities under section 5.06 urged upon us by the real parties in interest. A "medical peer review committee" is a committee of a health­ care entity operating pursuant to approved, written bylaws that is "authorized to evaluate . . . the competence of physicians." Art. 4495b, § 1.03(a)(6). 2 Further, under the terms of article 4495b, "medical peer

1

Section 5.06(i) provides:

Disclosure of confidential peer review committee information to the affected physician pertinent to the matter under review shall not constitute waiver of the confidentiality provisions in this Act. If a medical peer review committee takes action that could result in censure, suspension, restriction, limitation, revocation, or denial of membership or privileges in a health­care entity, the affected physician shall be provided a written copy of the recommendation of the medical peer review committee and a copy of the final decision, including a statement of the basis for the decision. Art. 4495b, § 5.06(i)(emphasis added).

2

Section 1.03(a)(6) provides:

(6) "Medical peer review committee" or "professional review body" means a committee of

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review" includes the "evaluation of the qualifications of health­care practitioners." Id. § 1.03(a)(9). The credentialing process involves collecting, reviewing, and evaluating information concerning the professional competence of physicians applying for staff privileges. One function of a hospital credentialing committee is to collect and review information "on the professional competence and ethical practice of all applicants for medical staff privileges" and to recommend "approval or denial of staff privileges to the executive committee of the medical staff." Butler, Records and Proceedings of Hospital Committees Privileged Against Discovery, 28 S. TEX. L. REV. 97, 100 (1987) (citing JOINT COMMISSION ON ACCREDITATION OF HOSPITALS, ACCREDITATION MANUAL FOR HOSPITALS 73­75 (1985 ed.)). The initial credentialing process inherently requires peer review because a "physician's qualifications, competence, and ethics all are called into question when a medical staff committee is requested to review his application for staff privileges." Creech, supra, 179 n.4 (quoting Hall, Hospital Committee Proceedings and Reports: Their Legal Status, 1 AM. J.L. & MED. 245, 254 (1975)). A judicial interpretation that excluded the initial credentialing process as part of the activities protected under article 4495b would be at odds with the purposes of the statute and its express provisions.

B

[In this section the Court finds support for its argument in its analysis of federal legislation regarding peer review committees. The court concludes: "It is implausible that the scope of the Texas statute does not extend to initial credentialing while the federal statute does."]

C

We reject the argument that documents relating to the initial credentialing process are "records made or maintained in the regular course of business" within the meaning of section 161.032(c) of the Health and Safety Code. That statute was amended in 1993 to include a reference to section 5.06 of the Medical Practice Act. Acts 1993, 73rd Leg., R.S., ch. 625, § 6, 1993 Tex. Gen. Laws 2347, 2350. If we were to conclude that records relating to initial credentialing within the meaning of section 5.06 were business records, we would in effect be destroying all privileges afforded

a health­care entity, the governing board of a health­care entity, or the medical staff of a health­care entity, provided the committee or medical staff operates pursuant to written bylaws that have been approved by the policy­making body or the governing board of the health­care entity and authorized to evaluate the quality of medical and health­care services or the competence of physicians, including those functions specified by Section 85.204, Health and Safety Code, and its subsequent amendments. Such a committee includes the employees and agents of the committee, including assistants, investigators, intervenors, attorneys, and any other persons or organizations that serve the committee in any capacity. Art. 4495b, § 1.03(a)(6).

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under section 5.06. There is no basis under the express wording of section 5.06 to treat "denial of membership or privileges" any differently from "suspension, restriction, limitation, [or] revocation" of a physician's license. See art. 4495b, § 5.06(i). If documents generated under one type of proceeding or action are business records, documents relating to all of the other types of proceedings or actions are likewise business records. The Legislature did not intend to repeal the confidentiality and privilege provisions of section 5.06 by the amendment to section 161.032 of the Health and Safety Code. See part IV. * * *

We next consider the applicability of section 161.032 of the Texas Health and Safety Code.

IV

The Hospitals rely on section 161.032 of the Texas Health and Safety Code in addition to section 5.06 of article 4495b in asserting that the documents generated in connection with Dr. Leipzig's requests for staff privileges are confidential and not subject to discovery. The statute is straightforward, simple, and direct: "The records and proceedings of a medical committee are confidential and are not subject to court subpoena." TEX. HEALTH & SAFETY CODE § 161.032(a). The term "medical committee" is broadly defined. 5 The real parties in interest contend that our decision in Barnes v. Whittington, 751 S.W.2d 493 (Tex. 1988), forecloses any reliance on section 161.032. We disagree. We do not read Barnes so expansively. Moreover, there has been a significant statutory change since our decision in Barnes.

A

The controversy centers around the "regular course of business" provision in section 161.032. Section 161.032, like its predecessor, section three of former Texas Revised Civil Statute article 4447d, originally provided that

5

The definition of "medical committee" is found in section 161.031, which provides: (a) In this subchapter, "medical committee" includes any committee, including a joint committee, of: (1) a hospital;

(2) a medical organization; (3) a university medical school or health science center; (4) a health maintenance organization licensed under the Texas Health Maintenance Organization Act . . . ; or (5) an extended care facility. (b) The term includes a committee appointed ad hoc to conduct a specific investigation or established under state or federal law or rule or under the bylaws or rules of the organization or institution. TEX. HEALTH & SAFETY CODE § 161.031.

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the section "does not apply to records made or maintained in the regular course of business by a hospital, health maintenance organization, or extended care facility." Acts 1989, 71st Leg., R.S., ch. 678, § 1, 1989 Tex. Gen. Laws 2230, 2390. As of September 1, 1993, the Legislature amended section 161.032 to add that section 5.06 of article 4495b also does not apply to records made or maintained in the ordinary course of business. Acts 1993, 73rd Leg., R.S., ch. 625, § 6, 1993 Tex. Gen. Laws 2347, 2350. We are urged to hold, based on our decision in Barnes, that documents relating to the initial credentialing process are records made or maintained in the regular course of business and thus are not confidential. In Barnes, the Court construed the scope of the statutory privilege afforded under section three of former Texas Revised Civil Statute 4447d. 6 751 S.W.2d at 496. Our decision in Barnes was arguably subject to more than one interpretation. Barnes does state that requests for information about two doctors during the initial credentialing process were "routine administrative records, prepared by the hospital in the ordinary course of business." 751 S.W.2d at 496. It could be argued from this language that initial credentialing records are business records and therefore beyond the scope of the privilege in section 161.032. However, the Court explained that the statutory privilege attaches to an investigation, review, "or other deliberative proceeding" of a medical committee. 751 S.W.2d at 496 (emphasis added). We concluded in Barnes that there was no evidence that the documents at issue were requested or submitted in connection with a "deliberative process." Id. (emphasis added). This is not tantamount to holding, as the real parties in interest contend, that documents relating to the initial credentialing process are inevitably business records and therefore could never come within the scope of former article 4447d, section 3. The debate over the reach of Barnes is quelled in any event by directives from the Legislature. The legislative intent in article 4495b is clear that initial credentialing of physicians is viewed as part of the critical peer review process. It is not a "routine administrative" matter and should be

6

Section three of former article 4447d provides: The records and proceedings of any hospital committee, medical organization committee or extended care facility committee established under state or federal law or regulations or under the by­laws, rules or regulations of such organization or institution shall be confidential and shall be used by such committee and the members thereof only in the exercise of the proper functions of the committee and shall not be public records and shall not be available for court subpoena; provided, however, that nothing herein shall apply to records made or maintained in the regular course of business by a hospital or extended care facility. No physician, hospital, organization, or institution furnishing information, data, reports, or records to any such committee with respect to any patient examined or treated by such physician or confined in such hospital or institution shall, by reason of furnishing such information, be liable in damages to any person. No member of such a committee shall be liable in damages to any person for any action taken or recommendation made within the scope of the functions of such committee if such committee member acts without malice and in the reasonable belief that such action or recommendation is warranted by the facts known to him . . . (codified without substantive change as TEX. HEALTH & SAFETY CODE §§161.031­.033).

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a "deliberative proceeding," within the meaning of Barnes, under either section 161.032 of the Texas Health and Safety Code or section 5.06 of article 4495b. None of the cases this Court decided prior to Barnes excludes initial credentialing from the scope of former article 4447d. In Texarkana Memorial Hospital, Inc. v. Jones, 551 S.W.2d 33 (Tex. 1977), the plaintiffs sued two hospital staff doctors and the hospital in which their infant son was treated. 551 S.W.2d at 34. They sought the minutes of various meetings of different hospital committees, including the minutes of all Pediatric and General Staff meetings over a four­year period. Id. It is unclear from the Court's opinion whether any of the committee meetings at issue concerned the credentialing of the doctors sued by the plaintiff. See id. In concluding that the minutes of all the meetings were protected from discovery, we held: The purposes of medical research and education, and the improvement of medical treatment, in any particular hospital or medical care facility is served by the free and uninhibited discussion of all events and experiences within the hospital or facility. The Legislature by this amendment [the 1969 amendment to section 3] must have intended to protect and encourage open and thorough review and investigation by making the records and proceedings of any such committee confidential and by expressly providing that they "shall not be available for court subpoena." Id. at 35. We further held that the minutes were not records made or kept in the regular course of business of the hospital even though they were kept in the same manner as other hospital records. Id. Construing the "regular course of business" exception in such a manner would be "self­defeating." Id. The Legislature could not have meant to forbid the discovery of committee proceedings and then immediately allow their discovery because they were ordinary business records. Id. Rather, we held that the statutory language "records made or maintained in the regular course of business" meant "records kept in connection with the treatment of [a hospital's] individual patients as well as the business and administrative files and papers apart from committee deliberations." Id. Finally, we noted that the privilege did not prevent discovery of material that had been presented to a hospital committee if it were otherwise available and "offered or proved by means apart from the record of the committee." Id. at 36. In Jordan v. Fourth Court of Appeals, 701 S.W.2d 644 (Tex. 1985), we again construed former article 4447d, section 3, and held that the language "records and proceedings" included "those documents generated by the committee in order to conduct open and thorough review" and extended "to documents that have been prepared by or at the direction of the committee for committee purposes." 701 S.W.2d at 647­48. Protection did not extend to documents "gratuitously submitted to a committee" or "created without committee impetus and purpose." Id. at 648. We concluded in Jordan that although some of the documents at issue were privileged, the hospital had

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failed to carry its burden of demonstrating that the privilege was not waived when the documents at issue were presented to a grand jury. Id. at 649. But see art. 4495b, § 5.06(d) (containing a post­Jordan requirement that medical peer review committees and any physician in this state report relevant information to the State Board of Medical Examiners if the acts of a physician pose a continuing threat to the public welfare); § 5.06(j) (containing a post­Jordan provision that "providing access to otherwise privileged communications or records in cooperation with law enforcement authorities in criminal investigations is not [a waiver of] any privilege established under this Act."). In sum, it cannot be said that any of our decisions holds that documents submitted to or created by an initial credentialing committee are business records, per se.

B

Even were we to agree with the real parties in interest that Barnes held that initial credentialing records are business records under all circumstances, which we do not, the 1993 amendment to section 161.032 of the Texas Health and Safety Code would dispense with the continued validity of such a holding. Effective September 1, 1993, section 161.032(c) provides: (c) This section and Section 5.06, Medical Practices Act (Article 4495b . . . ), do not apply to records made or maintained in the regular course of business by a hospital, health maintenance organization, medical organization, university medical center or health science center, or extended care facility. TEX. HEALTH & SAFETY CODE § 161.032(c). As considered at some length in part III, section 5.06 of article 4495b expressly encompasses the initial credentialing process. Further, section 5.06 is tied to federal statutes that include the initial credentialing process within their reach. See, e.g., 42 U.S.C. § 11133. It is inconceivable that the Legislature would totally nullify a significant part of section 5.06 by declaring in another statute that records relating to the initial credentialing process are business records. However, we do think it significant that section 161.032(c) was amended to include a reference to section 5.06. As discussed, records maintained by a peer review committee in connection with the credentialing process are expressly privileged under section 5.06 and are not routine business records. The reference to section 5.06 in section 161.032 is a clear signal that records should be accorded the same treatment under both statutes in determining if they are made "in the regular course of business."

V

CBS asserts that it has a constitutional right to gather and broadcast news about matters of public concern, such as the quality of medical care Leipzig provides to his patients. Because truth is a defense to an action for damages resulting from such a broadcast, CBS argues, it is entitled to

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the documents that the Hospitals claim are privileged in order to defend itself against Leipzig's defamation claim. Moreover, CBS asserts that the statute's explicit provision that allows only individuals participating in the peer review process to use otherwise privileged information in their defense in an action arising out of participation in peer review violates its rights of due process and equal protection because it is not afforded the same opportunity. See art. 4495b, § 5.06(o). 7 CBS fails to cite a single case or other authority in support of the argument that its constitutional rights would be violated. On the limited record before us, we find no constitutional impediment to applying the statute. CBS did not participate in any peer review process and stands on different footing than someone who did. Allowing CBS to pierce the veil of confidentiality afforded by the statute would not further the statute's purpose.

VI

The documents that the Hospitals claim are privileged can be grouped into three primary categories: (1) minutes and recommendations from the meetings of various medical committees considering Dr. Leipzig's application, (2) inquiries about Dr. Leipzig from the Hospitals to a wide variety of sources and the corresponding responses, and (3) communications between the Hospitals and Leipzig, including Leipzig's initial staff applications and subsequent correspondence between Leipzig or his attorney and the Hospitals. All of the Hospitals tendered the affidavits of their respective medical staff coordinators, who swore that they had personal knowledge of the affidavits' contents. The affidavits outline the structures of the Hospitals and their various committees, including the bylaws under which the committees have been formed. Copies of those bylaws are attached as exhibits. The affidavits state that the committees (1) operate pursuant to written bylaws approved by the governing boards of the Hospitals and (2) are authorized to perform evaluations of medical and health­care services, including the evaluation of the qualifications of professional health­care practitioners. The purpose of the committees, the affidavits aver, is to improve the quality of patient care. The affidavits further provide that one of the evaluation processes that the committees are authorized to perform involves the determination to grant or deny staff privileges. Each affidavit specifically details the hospital's initial credentialing process established

The relevant portion of section 5.06(o) provides: A medial peer review committee, a person participating in peer review, or a health­care entity named as a defendant in any civil action filed as a result of participation in peer review, may use otherwise confidential information obtained for legitimate internal business and professional purposes, including use in its or his own defense. Such a use does not constitute a waiver of the confidential and privileged nature of medical peer review committee proceedings. Art. 4495b, § 5.06(o).

7

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under the authority of the hospital bylaws. The affidavits include lists of the documents required in a physician's initial application and the process through which the committee authorizes and obtains further documentation and verifies references, licenses, or other qualifications. The affidavits then detail the evaluation and recommendation processes of the committees leading to an ultimate determination on the application. The affidavits summarize and categorize the documents that the Hospitals produced in response to CBS's subpoenas. The affidavits state that, pursuant to the procedures previously outlined, the documents were prepared or requested by the committees of the Hospitals authorized to evaluate the qualifications of health­care practitioners. The affidavits further provide that the documents were used by the committees to investigate the qualifications and competence of the applicant. Finally, the affidavits provide that the documents are confidential and that only the various committees and their authorized representatives have access to them. They state that the committees' files are kept apart from the Hospitals' patient and financial records. We conclude that the detailed affidavits, together with the documents tendered in camera, satisfy the Hospitals' burden of proving that the three categories of documents outlined above are privileged under section 5.06 of article 4495b from discovery by CBS. It is well settled that an erroneous order requiring the production of privileged documents leaves the party claiming privilege without an adequate remedy by appeal. Walker v. Packer, 827 S.W.2d 833, 843 (Tex. 1992). We conditionally grant writs of mandamus and direct the trial court to vacate its order requiring production of the documents tendered in camera.

NOTES

Following the heading NOTES, insert the following:

Page 559: [Delete note (1), and renumber notes (2) through (4) as (1) through (3).] Page 561: [At the end of note (3) [formerly note (4)], insert the following text:]

The medical records of non­parties were held to be discoverable within the Rule 509(d)(4) exception in In re Whiteley, 79 S.W.3d 729 (Tex. App.-- Corpus Christi 2002, orig. proc.). Defendant doctor based his defense on his extensive success with the procedure performed on plaintiff, thus making the records of those other patients relevant. This is a good example

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of a situation in which the records become discoverable even though the patient has not personally placed the condition at issue and in which the patient is not a party to the litigation.

Page 561: [Following Note (3), insert the following as new notes (4) and (5).]

(4) Waiver of Peer Review Committee Privilege. The Supreme Court in The University of Texas Health Care Center, 33 S.W.3d 822 (Tex. 2000), considered a claim that the Health Care Center had waived its privilege by answering an interrogatory in a way that included the recommendations of the peer review committee. The Supreme Court rejected this argument, noting that section 5.06 of the Medical Practice Act provided that only a committee may execute a waiver, and the waiver must be in writing. Therefore, "the voluntary production of information about the [Committee's] recommendations in response to a discovery request does not waive the privilege that protects the documents received, maintained, or developed by the committee from discovery." Id. at 827.

Page 561: [Add to the end of Note (4):]

The federal Health Insurance Portability and Accountability Act of 1996 ("HIPAA") restricts the ability of a health providers to disclose protected health information, absent a statutory exception or express permission of the patient. (5) Codification of Medical Practice Act. Effective September 1, 1999, the Medical Practice Act contained in article 4495b was repealed and recodified as Title 3 of the Texas Occupations Code.

Page 561: [Before the note on Lobbying Activities, insert a new heading, and the following text:]

[d]--Other Statutory Privileges

Page 561: [Re-number the Notes that follow as (1) through (3) and add new note (4).]

(4) Electronic Communications Privacy Act. Plaintiffs in this case sought production of a copy of computer backup tapes belonging to defendant CI Host, Inc. The trial court had ordered CI Host to produce the tapes over CI Host's objection that the ECPA protected the information. At the first discovery hearing, CI Host presented no evidence to support its objection. At a second hearing, it presented only summary affidavits and conceded that some information on the tapes were not protected by the ECPA. The trial court therefore did not abuse its discretion in overruling the objection and ordering the tapes produced. Because the discovery dispute involved potentially private information, the Texas Supreme Court remanded the case to the trial court to consider how to best address the privacy of CI Host's customers. In re CI Host, Inc., 92 S.W.2d 514 (Tex. 2001).

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[D]--Waiver of Privileges: Failure to Assert or Prove Privilege

NOTES Page 565: [Add new Note (11) and the E.I. Dupont De Nemours Carbo and CI Host cases at the end of the subsection.]

(11) Procedures Under the New Rules. The following cases discuss the proper procedures for litigating discovery disputes under the new rules.

IN RE E.I. DUPONT DE NEMOURS & CO. No. 03-0464, 2004 Tex. LEXIS 445 (May 14, 2004).

PER CURIAM In the suit underlying this petition for mandamus, nearly 400 plaintiffs sued E.I. DuPont de Nemours ("DuPont") and over 100 other defendants for alleged asbestos-related injuries from 1935 to the present. In response to the plaintiffs' discovery request, DuPont asserted claims of attorneyclient and/or work product privilege with respect to 607 documents. On May 12, 2003, the trial court issued an order requiring DuPont to turn over most of the documents, ruling that DuPont had not made a prima facie showing of privilege. A divided court of appeals declined to grant mandamus relief. ___ S.W.3d ___. DuPont now seeks relief from this Court. DuPont contends that the trial court abused its discretion by holding a hearing on the plaintiffs' global challenge to all of the documents identified in its privilege log. DuPont further argues that the trial court abused its discretion by finding that DuPont had not made a prime facie showing of privilege for the documents at issue and refusing to conduct an in camera inspection of the documents before rejecting its privilege claims. The court of appeals declined to grant DuPont mandamus relief. We agree with the court of appeals that the trial court did not abuse its discretion in holding a hearing on the plaintiffs' global challenge to DuPont's privilege claims. However, we conditionally grant the writ insofar as we conclude that DuPont made a prima facie showing of privilege for many of the approximately 530 documents that the trial court ordered produced without conducting an in camera review. In response to plaintiffs' requests for production, DuPont produced over 55,000 pages of documents that go back more than 60 years. However, DuPont stated that it was withholding 607 documents, citing the attorneyclient privilege found in Texas Rule of Evidence 503 and the work-product

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privilege set forth in Texas Rule of Civil Procedure 192.5. After the plaintiffs requested a privilege log, 1 DuPont timely served the log describing the documents withheld. The plaintiffs then requested a hearing challenging DuPont's privilege claims for all of the documents. In response, DuPont filed an affidavit from its paralegal Walter Connor in support of its privilege claims and tendered the documents listed on the privilege log to the court for in camera inspection. In his affidavit, Connor stated, in relevant part: I have reviewed all names listed on the DuPont-Brignac privilege log that are identified as "DuPont Legal." I compared each "DuPont Legal" name for each document on the privilege log with a DuPont human resources database for the legal department. Each name that is identified as "DuPont Legal" on the privilege log is a name of a person who was, at the time indicated on the document, a DuPont attorney or DuPont paralegal as confirmed by the comparison with the human resources database. Connor further averred: I have reviewed and am familiar with the definitions of client, representative of client, lawyer, representative of a lawyer, and confidential as defined in Rule 503 of the Texas Rules of Evidence. Based on my review of the DuPont human resources database for the legal department, the documents listed on the DuPont-Brignac privilege log, and the definitions in Rule 503, all the documents on the DuPont-Brignac privilege log with "DuPont Legal" names associated with a claim of attorney-client privilege indicate a lawyer or a representative of a lawyer engaging in confidential communications with a client or a representative of a client regarding professional legal services, or a lawyer or representative of a lawyer rendering professional legal services or performing a requested task for a client or a representative of a client involving the rendering of professional legal services. Finally, Connor also stated:

A "privilege log" is the commonly used term for a response pursuant to Texas Rule of Procedure 193.3(b) that: "1) describes the information or materials withheld that, without revealing the privileged information or otherwise waiving the privilege, enables other parties to assess the applicability of the privilege, and 2) asserts a specific privilege for each item or group of items withheld." The dissenting court of appeals opinion noted: The log is sufficiently detailed for the real parties in interest to assess the applicability of the specific privilege being asserted. See Tex. R. Civ. P. 193.3(b). For example, "DUP Bates Range 09034843484, Date 741029," a document from "Austin RE (DuPont Legal)" to "Mfg Environmental Committee," copied to "Bonczek RR (DuPont Legal); Galloway WR; Helmers EN; Hildrew JC; Meany DM; Reichert RJ; Schmutz JF (DuPont Legal), and Sebree DB (DuPont Legal)," is a "Memo between DuPont counsel requesting legal advice and comments re: proposed amendments to regulations concerning national emissions standards for hazardous air pollutants." ___ S.W.3d ___. Neither the trial court nor the court of appeals majority opinion concluded that the log inadequately described the documents and the plaintiffs do not so argue in this court.

1

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I have reviewed and am familiar with the definition of "work product" as defined in Rule 192.5 of the Texas Rules of Civil Procedure. Based on my review of the DuPont human resources database for the legal department, the documents listed on the DuPont-Brignac privilege log, and the definitions in Rule 192.5, all the documents on the DuPont-Brignac privilege log with "DuPont Legal" names associated with a claim of work product indicate material prepared or mental impressions developed in anticipation of litigation or for trial by or for DuPont or its representatives, or a communication in anticipation of litigation or for trial between DuPont and its representatives or among its representatives. On April 29, 2003, the court conducted a hearing on DuPont's assertions of privilege. The court overruled DuPont's claims of privilege except as to 76 documents, which were ordered to be delivered for in camera review. The trial court excepted those 76 documents listed on the privilege log that were associated exclusively with members of "DuPont Legal," meaning that the author, recipient, and all parties that received copies of the document were members of "DuPont Legal." The trial court ordered DuPont to produce the remainder of the documents, consisting of: 1) documents with no "DuPont Legal" names associated, and 2) documents with both "DuPont Legal" and non-"DuPont Legal" names associated. The parties do not dispute that mandamus relief is generally available in this type of case. Mandamus relief is appropriate "to correct a clear abuse of discretion or the violation of a duty imposed by law when there is no other adequate remedy by law." Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1985). "[A] clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion and may result in appellate reversal by extraordinary writ." Walker v. Packer, 827 S.W.2d 833, 839 (Tex.1992). Mandamus is proper when the trial court erroneously orders the disclosure of privileged information because the trial court's error cannot be corrected on appeal. Id. at 843. As DuPont would lose the benefit of the privilege if the documents at issue are disclosed, even if its assertions of privilege were later upheld on appeal, we conclude that this Court may provide mandamus relief in this case. The party who seeks to limit discovery by asserting a privilege has the burden of proof. Jordan v. Fourth Court of Appeals, 701 S.W.2d 644, 648­ 649 (Tex.1985). However, if a party asserting privilege claims makes a prima facie showing of privilege and tenders documents to the trial court, the trial court must conduct an in camera inspection of those documents before deciding to compel production. Arkla, Inc. v. Harris, 846 S.W.2d 623, 631 (Tex. App.-Houston [14th Dist.] 1993, orig. proceeding); Shell Western E & P, Inc. v. Oliver, 751 S.W.2d 195, 196 (Tex. App.-Dallas 1988, orig. proceeding). We have recognized: Generally, a trial court conducts an in camera inspection to determine if a document is in fact privileged. If it is not privileged, then it may become evidence that the factfinder may consider. If the

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document is privileged, it is not subject to discovery and may not be considered by the factfinder, even when the factfinder is the trial court. Goode v. Shoukfeh, 943 S.W.2d 441, 448 (Tex.1997). The trial court abuses its discretion in refusing to conduct an in camera inspection when such review is critical to the evaluation of a privilege claim. State v. Lowry, 802 S.W.2d 669, 673­74 (Tex.1991); Loftin v. Martin, 776 S.W.2d 145, 148 (Tex.1989); Thibodeaux v. Spring Woods Bank, 757 S.W.2d 856, 860 (Tex. App.-Houston [14th Dist.] 1988, no writ); Shell Western E & P, 751 S.W.2d at 196. The prima facie standard requires only the "minimum quantum of evidence necessary to support a rational inference that the allegation of fact is true." Tex. Tech Univ. Health Scis. Ctr. v. Apodaca, 876 S.W.2d 402, 407 (Tex. App.-El Paso 1994, writ denied). The documents themselves may constitute sufficient evidence to make a prima facie showing of attorneyclient or work product privilege. Weisel Enters., Inc. v. Curry, 718 S.W.2d 56, 58 (Tex.1986). The plaintiffs argue that Connor's affidavit is lacking in specificity. However, an affidavit, even if it addresses groups of documents rather than each document individually, has been held to be sufficient to make a prima facie showing of attorney-client and/or work product privilege. See In re Toyota Motor Corp., 94 S.W.3d 819 (Tex. App.-San Antonio 2002, orig. proceeding); In re Monsanto Co., 998 S.W.2d 917 (Tex. App.-Waco 1999, orig. proceeding); In re Valero Energy Corp., 973 S.W.2d 453 (Tex. App.Houston [14th Dist.] 1998, orig. proceeding); Shell Western E & P, 751 S.W.2d at 196. In Monsanto, the affidavit of the corporate representative asserted that a log of 117 documents involved "in-house and/or outside attorneys for Monsanto, or other Monsanto employees, representatives or agents." In re Monsanto Co., 998 S.W.2d at 927. The court of appeals held that this representation constituted a prima facie showing of the attorney-client and work product privilege. Id. In Toyota, the affidavit submitted by the defendant stated that one group of documents consisted of "[c]ommunications to Toyota counsel for the purpose of requesting legal advice or facilitating the rendition of professional legal service." In re Toyota Motor Corp., 94 S.W.3d at 821. This representation was also found to be sufficient to establish a prima facie case of privilege. Id. at 823­24. In Shell Western E & P, Shell established a prima facie case of attorney-client privilege where a Shell affiant swore that the "documents . . . were written by a lawyer to a client" and "consist of communications from a client to a Shell . . . lawyer. . . ." Shell Western E & P, 751 S.W.2d at 196. However, an affidavit is of no probative value if it merely presents global allegations that documents come within the asserted privilege. Ryals v. Canales, 767 S.W.2d 226, 229 (Tex. App.-Dallas 1989, orig. proceeding). The plaintiffs contend that the affidavit at issue here is not probative because it is conclusory. The plaintiffs maintain that Connor's affidavit is indistinguishable from the affidavit found

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insufficient to support attorney-client privilege in In re Temple-Inland, Inc., 8 S.W.3d 459 (Tex. App.-Beaumont 2000, orig. proceeding). However, the affidavit in Temple-Inland that was found to be conclusory merely stated that production "would violate the attorney-client privilege." Id. at 462. Connor's affidavit more closely resembles the affidavits in Monsanto and Toyota, as it sets forth the factual basis for the applicability of the attorneyclient and/or work product privileges to the documents at issue. Additionally, while Connor did not attest to the specific contents of each of the 607 documents at issue, the plaintiffs are unable to identify any such legal requirement and do not dispute that the log submitted by DuPont contains a summary of each document. Thus, we find that the specificity of Connor's affidavit and the log taken together are reasonably adequate to establish a prima facie case of privilege given that the documents at issue go back more than 60 years. The plaintiffs also contend that Connor's affidavit is not probative because it is not based on personal knowledge. For an affidavit to have probative value, an affiant must swear that the facts presented in the affidavit reflect his personal knowledge. Humphreys v. Caldwell, 888 S.W.2d 469, 470 (Tex.1994). Connor swore that his statements were based on his "personal knowledge of the facts stated in the affidavit." Even though Connor later explained that his determinations were "[b]ased on [his] review of the DuPont human resources database for the legal department," an affiant's acknowledgment of the sources from which he gathered his knowledge does not violate the personal knowledge requirement. See Grotjohn Precise Connexiones Int'l v. JEM Fin., Inc., 12 S.W.3d 859, 866 (Tex. App.-Texarkana 2000, no pet.). Therefore, we hold that Connor's affidavit satisfies the personal knowledge requirement. Three discrete categories of documents are in dispute. First, there are the documents which have only "DuPont Legal" names associated with them. The trial court ordered an in camera review of these 76 documents. Second, there are those documents that have both "DuPont Legal" and other names associated with them. The trial court denied DuPont's claim of privilege with respect to these documents without ordering an in camera review. Finally, there are those documents which do not have any "DuPont Legal" name associated with them. The trial court also rejected DuPont's claim of privilege concerning these documents. We conclude that the trial court did not abuse its discretion in sustaining DuPont's privilege claims with respect to the first category of documents. The log submitted by DuPont combined with Connor's affidavit clearly make a prima facie case that those documents with only "DuPont Legal" names associated with them are covered by the attorney-client and/or work product privileges. Consequently, the trial court correctly determined that DuPont was entitled to at least an in camera review of those documents. We also conclude that DuPont established a prima facie case of privilege with respect to the second category of documents, which contained both "DuPont Legal" and other names. Thus, we find that the trial court

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erroneously rejected DuPont's privilege claim as applied to these documents without at least subjecting them to an in camera review. There is no presumption that documents are privileged, and there is no presumption that a party listed on the privilege log is an authorized person under the rule governing the privilege. Cigna Corp. v. Spears, 838 S.W.2d 561, 565­66 (Tex. App.-San Antonio 1992, orig. proceeding). Nevertheless, Connor provided sufficient indication of the relationship between the "DuPont Legal" and the non-"DuPont Legal" persons on the privilege log to establish a prima facie case of privilege. In his description of the allegedly privileged documents, Connor identified the non-"DuPont Legal" persons on the privilege log as authorized parties for purposes of attorney-client and/or work product privilege. Connor swore that the documents allegedly privileged as attorney-client materials "indicate a lawyer or representative of a lawyer engaging in communication . . . or performing a requested task . . . for a client or representative of a client." The implication of this statement is that, whatever the relationship between the "DuPont Legal" and the non-"Dupont Legal" parties listed on the privilege log, it was a relationship within the scope of the attorney-client and/or work product privilege. In light of the tests for demonstrating attorney-client and work product privilege 3 and the fact that the hundreds of documents at issue span more than 60 years, this statement combined with the log summarizing each document is sufficient to establish at least a prima facie case of privilege that is then subject to in camera review. 4 Because DuPont has

3 Connor did not specifically assert that each recipient was a DuPont supervisor. However, for attorney-client privilege, the subject matter test has replaced the control group test pursuant to the amendment of Rule of Evidence 503. Tex R. Evid. 503(a)(2) & cmt; Nat'l Tank Co. v. Brotherton, 851 S.W.2d 193, 197­98 (Tex.1993). The subject matter test is met where "the employee makes the communication at the direction of his superiors in the corporation and where the subject matter upon which the attorney's advice is sought by the corporation and dealt with in the communication is the performance by the employee of the duties of his employment." Nat'l Tank, 851 S.W.2d at 198. As such, the attorney-client privilege may apply to communications between attorneys and employees who are not executives or supervisors. The plaintiffs point out that Connor's affidavit does not exclude the possibility that some of the recipients of documents within the second group were not DuPont employees. However, the work product privilege is not necessarily waived by disclosure to a non-employee, as there are numerous other classes of individuals who can qualify. "Work product" is defined as: (1) material prepared or mental impressions developed in anticipation of litigation or for trial by or for a party or a party's representatives, including the party's attorneys, consultants, sureties, indemnitors, insurers, employees, or agents; or (2) a communication made in anticipation of litigation or for trial between a party and the party's representatives or among a party's representatives, including the party's attorneys, consultants, sureties, indemnitors, insurers, employees, or agents. Tex. R. Civ. P. 192.5(a). 4 Evidence corroborating or rebutting a prima facie case of privilege could be found upon in camera review. The documents themselves may contain evidence indicating the positions held by the non-"DuPont legal" recipients and the extent to which their duties relate to the matters upon which legal advice is being given. Plaintiffs are also entitled to put on their own evidence on privilege issues. See Tex. R. Civ. P. 193.4. For example, plaintiffs could submit interrogatories seeking additional information about the individuals listed as authors or recipients of disputed documents.

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established a prima facie case of privilege as to the second category of documents, which bear both "DuPont Legal" and non-"DuPont Legal" designations, we conclude that it was entitled to an in camera review before being required to produce these documents. Finally, we agree with the trial court that DuPont has not established a prima facie case of privilege with respect to the third category of documents containing no "DuPont Legal" names. Connor's affidavit offers no evidence to justify privilege assertions concerning these documents. Connor's affidavit attested to the privileged nature of "[a]ll the documents on the DuPont-Brignac privilege log with "DuPont Legal" names associated with a claim of attorney-client privilege" and "[a]ll the documents on the DuPont-Brignac privilege log with "DuPont Legal" names associated with a claim of work product privilege." The affidavit was silent as to any claim of privilege regarding the documents that do not bear a "Dupont Legal" name. Accordingly, we agree with the appeals court that the trial court did not abuse its discretion in ruling that DuPont failed to make a prima facie case of privilege with respect to those documents containing no "Dupont Legal" names. DuPont also argues on appeal that the plaintiffs' global challenge to their privilege claims was not sufficient to place those claims at issue. DuPont contends that the trial court abused its discretion by allowing a hearing based on the plaintiffs' global challenge to DuPont's entire privilege log. DuPont maintains that, prior to the hearing, the plaintiffs should have been required to particularize their objections to specific documents in the privilege log. DuPont cites two cases in support of its argument. First, DuPont references In re Carbo Ceramics, Inc., 81 S.W.3d 369 (Tex. App.-Houston [14th Dist.] 1988, orig. proceeding), but this case is inapposite. In Carbo, the court found that the plaintiff "did not challenge the privileged nature of all privileged documents," but instead placed only one letter at issue. Id. at 375. Carbo is distinguishable because it is not disputed here that the plaintiffs challenged the privileged nature of all documents in the log. DuPont also relies on Monsanto, which held in part: When the party asserting a privilege has made a prima facie case for its claim, the requesting party has the burden to point out to the court which specific documents or groups of documents it believes require inspection. Otherwise, trial judges will be required to inspect untold numbers of documents. The requesting party should be in a position to do so based upon (1) the contents of the privilege log, (2) other discovery and documents, (3) discovery specifically designated to test the claim of privilege, and (4) the evidence at the hearing. In re Monsanto Co., 998 S.W.2d at 925. It is clear that Monsanto stands only for the proposition that the party seeking discovery must specify its challenges to the privilege log after the party asserting privilege claims has made a prima facie case. The discovery rules provide that any party may request a hearing on a claim of privilege

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and the party asserting the privilege must present any evidence necessary to support the privilege. Tex. R. Civ. P. 193.4(a). This provision does not contain a requirement that the party seeking discovery specify their rationale for objecting to each document before requesting a hearing. 5 Accordingly, the trial court did not abuse its discretion by holding a hearing on the plaintiffs' objection to DuPont's privilege log, which challenged whether DuPont had established a prima facie case of privilege for all of the documents it withheld. For the foregoing reasons, we conditionally grant DuPont's petition for mandamus relief from the trial court ruling insofar as the ruling denied DuPont's privilege claim without conducting an in camera review with respect to the documents containing both "DuPont Legal" and non-"DuPont Legal" names. Accordingly, pursuant to Texas Rule of Appellate Procedure 52.8 and without hearing oral argument, we direct the trial court to vacate in part its May 12, 2003 order and to conduct further proceedings consistent with this opinion. We are confident that the trial court will promptly comply, and our writ will issue only if it does not.

IN RE CARBO CERAMICS INC. 81 S.W.3d 369 (Tex. App.--Houston [14th Dist.] 2002, orig. proc.)

GUZMAN, J. Relator, Carbo Ceramics Inc., ("Carbo") seeks a writ of mandamus ordering respondent, the Honorable Sharolyn Woods, to vacate her order requiring that Carbo produce privileged documents. We conditionally grant the writ in part and deny the writ in part.

Factual and Procedural Background

The underlying suit involves claims that Carbo tortiously interfered with existing and prospective contractual relations, between real party in interest, Proppant Technology, Ltd. ("Prop Tech"), and Mineracao Curimbaba Ltd. ("Curimbaba"), a Brazilian company. Trial was set for October 2, 2001. On September 17, 2001, Carbo filed an amended discovery response designating Stephen Shalen, one of Carbo's attorneys, as a potential witness with knowledge about the drafting and revision of proposed agreements between Carbo and Curimbaba. On September 30, 2001, and on October 1, 2001, Carbo produced a copy of a letter from Carbo to Shalen with an attachment. The attachment was a term sheet, a version of which

5 We hold simply that the trial court did not abuse its discretion by holding a hearing. We do not suggest that a trial court would abuse its discretion by requiring, at such a hearing or otherwise, that the proponent of the discovery request state their objection to the claimed privilege specifically as to each document on the privilege log. Where large numbers of documents are at issue, such an approach may promote judicial economy by focusing in camera review on those documents where there is a genuine dispute as to the application of the privilege and by clarifying the nature of the dispute so the court can hone in on the probative content of each document.

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had been previously produced by Carbo to Prop Tech. The Shalen letter and the attachment were jointly labeled as Defendant's Exhibit 54 and included on Carbo's exhibit list. 1 On October 1, 2001, after receiving the Shalen letter, Prop Tech's counsel sent Carbo a letter asserting that Carbo was attempting to selectively waive the attorney­client privilege and that the Shalen letter directly contradicted affidavits Carbo had previously filed with the trial court. Within several hours, Carbo responded to Prop Tech's letter, claiming it had inadvertently produced the Shalen letter and did not intend to call Shalen as a witness. On the same day, Prop Tech filed a "Motion to Conduct Hearing on Claimed Privilege and to Compel Production." In this motion, Prop Tech requested that Carbo prove its claim that the Shalen letter was privileged and alleged several waiver grounds. Within the "Brief History" portion of the motion, Prop Tech claimed that it was entitled to production of the Shalen letter "as well as all other documents listed on Carbo's privilege log. . . ." In the prayer paragraph of the motion, Prop Tech asked that Carbo be ordered to produce the Shalen letter and, in the same sentence, Carbo requested "all other exhibits previously withheld on the grounds of attorney­client privilege. . . ." Prop Tech also submitted the Shalen letter to the trial court in camera. On October 4, 2001, the trial court held a hearing on pretrial motions. Carbo announced it was not prepared to respond to Prop Tech's motion to compel and asked to submit briefing. The court approved a submission date of October 10, 2001. At the October 4th hearing, Prop Tech urged in its motion in limine that Carbo be precluded from presenting testimony about reliance on the advice of counsel as justification for its actions. During this hearing, Carbo advised the judge that it intended to rely on the advice of counsel as a defense, but it did not intend to offer the substance of that advice because that would waive its privilege. The trial judge, however, stated: "Based on the fact that the defendant [Carbo] does intend to rely on the advice of counsel and that's their defense . . . I think that the defendant has to know that by its assertion here that that privilege is waived." On October 10, 2001, Carbo filed its response to Prop Tech's motion to compel. In its response, Carbo stated its understanding that no one disputed the privileged nature of the Shalen letter. Accordingly, Carbo only addressed the waiver grounds asserted in the motion to compel. On October 25, 2001, Prop Tech filed a reply to Carbo's response and asserted, as an additional ground for compelling production of the privileged document, Carbo's statement at the October 4th, hearing that it intended to rely on the advice of counsel defense. Carbo responded on November 14, 2001, that

1 The Shalen letter (Exhibit 54) that was produced to Prop Tech was bates­stamped CCPT001497 and CCPT001498. Prop Tech states in its motion to compel that Carbo had previously claimed this document was privileged and had listed it on its May 30, 2000 Index to Privileged Documents twice, but with different bates numbers: CCPT000923­924 and CCPT000939­940.

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it never intended to waive the attorney­client privilege and unequivocally stated it would not assert the advice of counsel defense at trial and would comply with Prop Tech's motion in limine. The record contains no transcript or reference to an oral hearing on the motion to compel. On January 3, 2002, the trial judge signed an order granting Prop Tech's motion to compel and ordered Carbo to produce the Shalen letter and "all other documents previously withheld on the ground of attorney­client privilege." On January 4, 2002, the trial court signed a supplemental order, stating it had signed an order on January 3rd "with regard to the October 4, 2001, hearing" and had conducted an in camera review of documents. The only document tendered to the trial court for in camera review was the copy of the Shalen letter produced to Prop Tech. . . .

I. Proof of Privilege

Prop Tech's motion was entitled, in part, "Motion to Conduct Hearing on Claimed Privilege." On page 5 of this motion, Prop Tech asserted that it requested the court to hear Carbo's claim that the first page of Exhibit No. 54, the Shalen letter, was privileged. Prop Tech further asserted that "Carbo bears the burden to establish that the document at issue [the Shalen letter] is privileged. . . ." The discovery rules provide that any party may request a hearing on a claim of privilege and the party asserting the privilege must present any evidence necessary to support the privilege. TEX. R. Civ. P. 193.4(a). This is consistent with case law holding that the party seeking to avoid production bears the burden of proving the privilege. Nat'l Union Fire Ins. Co. v. Hoffman, 746 S.W.2d 305, 308 (Tex. App.­Dallas 1988, orig. proceeding). Proof of the privilege may consist of testimony presented at a hearing or affidavits. TEX. R. Civ. P. 193.4(a). If the court determines that an in camera review of documents is necessary, the objecting party must produce the documents to the court in a sealed wrapper in a reasonable period of time after the hearing. Id.

A. Shalen Letter

Although Carbo asserted in its response that Prop Tech conceded the privileged nature of the Shalen letter, Prop Tech's motion does not concede, but instead seeks to compel Carbo to prove the privileged nature of the Shalen letter. Carbo did not present any affidavits as proof of the privilege with respect to the Shalen letter; however, the document itself, submitted in camera to the trial judge, can serve as proof of the privilege. See Weisel Enter., Inc. v. Curry, 718 S.W.2d 56, 58 (Tex. 1986); Markowski v. City of Marlin, 940 S.W.2d 720, 727 (Tex. App.­Waco 1997, pet. denied). Prop Tech submitted the Shalen letter and its attachment to the trial court for in camera inspection. Rule of Evidence 503 defines the scope of the attorney­client privilege. TEX. R. EVID. 503. Under this rule, a client has a privilege to refuse to

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disclose confidential communications between the client and his attorney made for the purpose of facilitating the rendition of professional legal services to the client. Id. at 503(b)(1). The privilege applies not only to legal advice but also to communications between client and counsel. GAF Corp. v. Caldwell, 839 S.W.2d 149, 151 (Tex. App.­Houston [14th Dist.] 1992, orig. proceeding). The subject of the information communicated between the attorney and client is of no concern in determining whether the privilege is applicable to the documents. Id. The Shalen letter was prepared by Carbo and delivered to its attorney, Stephen Shalen. The letter's contents reveal it was intended to be confidential and was written for the purpose of rendition of legal services. Thus, the Shalen letter falls within the scope of Rule 503. To the extent the trial court's ruling was based on a failure to prove, the document was privileged, the ruling was an abuse of discretion.

B. "All Other Documents"

The trial court's ruling requiring production of "all other documents previously withheld on the ground of attorney­client privilege" cannot be upheld for failure to prove the privilege. The motion to compel did not specifically challenge the privilege as to any documents other than the Shalen letter. Indeed, Prop Tech states in the motion to compel: "Under Tex. R. Civ. P. 193.4, Prop Tech has requested that the Court hear Carbo's claim that the first page of Exhibit No. 54 [the Shalen letter] is covered by the attorney­client privilege. Carbo bears the burden to establish that the document at issue is privileged. . . ." Thus, when specifically requesting a hearing on Carbo's privilege claim, Prop Tech only mentions the Shalen letter. Furthermore, Prop Tech essentially concedes the privileged nature of "all other documents." Within the factual portion of the motion, Prop Tech states: For the . . . reasons set out at the beginning of this motion, Prop Tech is now entitled to production of the first page of that document [the Shalen letter] as well as all other documents listed on Carbo's privilege log. . . . By seeking these other documents on grounds that the privilege was waived, Prop Tech conceded the privileged nature of "all other documents." Cf. TEX. R. EVID. 511. This request for "all other documents," when viewed in context, refers only to additional copies of the Shalen letter listed on Carbo's privilege log. In the final prayer paragraph of the motion, Prop Tech asks the court to "order . . . that Carbo be ordered to produce to Prop Tech all other exhibits previously withheld on the grounds of attorney­client privilege. . . ." As unlikely as it seems that a party would list privileged documents as trial exhibits, Carbo in fact listed the Shalen letter on its exhibit list. The record reflects that the Shalen letter is the only document which

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had been both designated as privileged on a privilege log and also listed on Carbo's exhibit list. Accordingly, the request for "all other exhibits" previously withheld as privileged relates to other copies of the Shalen letter listed on Carbo's privilege log. This is confirmed by Prop Tech's discussion on page 2 of its motion to compel where Prop Tech asserts that the Shalen letter was claimed as privileged and listed on the privilege log twice with different bates numbers. The two listings on the privilege log have different bates numbers than the copy of the Shalen letter that was produced to Prop Tech. Thus, we conclude that the request in the motion to compel for "all other exhibits" logically refers to the other two Shalen letters listed on the privilege log. Even if Prop Tech's request for "all other exhibits" could be interpreted to request exhibits other than the Shalen letter, we could not find that this request challenges Carbo's claim of privilege. Prop Tech did not specifically identify in its motion which exhibits, other than the Shalen letter, were previously withheld on the ground of attorney­client privilege. Absent a specific challenge to the privileged nature of any document other than the Shalen letter, we hold that Carbo was not required to prove its privilege with respect to any document other than the Shalen letter. Thus, because Prop Tech did not challenge the privileged nature of all privileged documents, we conclude that Carbo was not required to provide proof of privilege for all other documents previously withheld on the ground of privilege.

II. Waiver by Voluntary Production

In its motion to compel, Prop Tech argued that the attorney­client privilege had been waived because (1) Carbo's production of the document was not inadvertent; and (2) Carbo voluntarily produced a significant portion of the privileged material by previously producing a version of the attachment to the Shalen letter. A person waives the privilege if she voluntarily discloses any significant part of the privileged matter unless such disclosure is itself privileged. TEX. R. EVID. 511. A claim of privilege is not defeated by disclosure that was compelled erroneously or without opportunity to claim the privilege. TEX. R. EVID. 512. Before institution of the new discovery rules, case law regarding inadvertent disclosure applied Rule 511 and discussed the voluntariness of production. . . . [This case--Granada--was] overruled in part, however, by Rule 193.3(d), which states that a party who produces information without the intent to waive a claim of privilege does not waive the privilege if, within ten days of discovery of the disclosure, the party identifies the information produced and states the privilege asserted. TEX. R. CIV. P. 193.3(d). Thus, under Rule 193.3(d), a showing of involuntariness is not required. Granada also addressed the issue of whether the determination of inadvertent disclosure was a factual or legal inquiry. Although waiver is ordinarily a question of fact, Tenneco, Inc. v. Enterprise Prods. Co., 925 S.W.2d 640, 643, 39 Tex. Sup. Ct. J. 907 (Tex. 1996), and the resolution

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of fact issues by the trial court are conclusive and not reviewable by mandamus, Osborne v. Johnson, 954 S.W.2d 180, 183 (Tex. App.­Waco 1997, orig. proceeding), the supreme court in Granada held that a determination under Rule of Evidence 511 is a legal issue for which mandamus review is permitted. 844 S.W.2d at 226. Because this portion of the Granada opinion does not conflict with Rule 193, it is not overruled. Mandamus is therefore a proper method for determining whether waiver is intended or unintended under Rule 193.

A. Shalen Letter

The issue is whether Carbo produced the Shalen letter without intending to waive its claim of attorney­client privilege. See TEX. R. Civ. P. 193.3(d). Although Carbo claims the production of the Shalen letter was inadvertent and, therefore, it did not intentionally waive the privilege, Carbo's conduct before the alleged inadvertent production does not support its position. Two weeks before producing the Shalen letter, Carbo supplemented its interrogatory responses and designated Stephen Shalen as a witness having "knowledge about the drafting and revision of proposed agreements between Carbo and Curimbaba." On the eve of trial, Carbo supplemented its request for production and produced the Shalen letter and its attachments as part of it supplementation. Carbo also listed the Shalen Letter as Exhibit 54 on its exhibit list and described it in detail. Carbo then faxed a copy of the letter to Prop Tech as part of its supplementation and also faxed another copy of the letter as a trial exhibit. The following day, when Prop Tech received a hand­delivered copy of the Shalen letter, Prop Tech sent a letter by fax to Carbo asserting its belief that production of the Shalen letter was an attempted selective waiver of the attorney­client privilege and that the letter contradicted prior affidavits of two Carbo representatives filed with the trial court. Prop Tech also contended that the late production of the Shalen letter deprived Prop Tech of the opportunity to conduct discovery relevant to that document. After receiving this letter from Prop Tech's counsel, Carbo apparently changed its strategy. Carbo's counsel immediately responded with its letter claiming the Shalen letter was inadvertently produced and informing Prop Tech that it did not intend to call Shalen as a witness. Despite the statement in its October 1st letter that Carbo did not intend to call Shalen as a witness, Carbo's counsel asserted in the hearing on October 4, 2001, that it intended to rely on the advice of counsel defense. Although Carbo's counsel argued that the assertion of this defense would not waive the attorney­client privilege, the trial judge disagreed. Based on these facts, the trial court could have determined, in her discretion, that Carbo intended to waive its claim of attorney­client privilege with respect to the Shalen letter when it produced it to Prop Tech. Accordingly, we find no abuse of discretion by the trial judge in ordering production of the copies of the Shalen letter listed on Carbo's privilege log.

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B. "All Other Documents"

Although the trial court was within its discretion to determine that Carbo waived its claim of attorney­client privilege when it voluntarily disclosed the Shalen letter, this implied waiver as to the Shalen letter is not an automatic blanket waiver of the privilege for all other documents withheld on the basis of attorney­client privilege. See Marathon Oil Co. v. Moye, 893 S.W.2d 585, 592 (Tex. App.­Dallas 1994, orig. proceeding); National Union Fire Ins. Co. v. Hoffman, 746 S.W.2d 305, 311 (Tex. App.­Dallas 1988, orig. proceeding). Carbo did not disclose any documents other than the Shalen letter. Prop Tech's request in the "history" portion of its motion for "all other documents listed on Carbo's privilege log," when viewed in the context of the paragraph in which it is located, seeks the two other copies of the Shalen letter listed on Carbo's privilege log. The request found in the prayer portion of the motion, for "all other exhibits `previously withheld' was not a request for all other documents previously withheld on the ground of attorney­client privilege. Indeed, as previously discussed, this request also seeks the other versions of Exhibit 54, the Shalen letter. In requiring production of all other documents previously withheld as privileged, rather than "exhibits previously withheld as privileged," or "all other documents listed on Carbo's privilege log," the trial court's January 3rd order goes well beyond the relief requested in the motion to compel. See National Union Fire Ins. Co. v. Hoffman, 746 S.W.2d 305, 311 (Tex. App.­Dallas 1988, orig. proceeding) (trial court's blanket determination of waiver as to "all communications, knowledge and opinions which underlie the matters addressed in the letter" went well beyond requesting party's claim of waiver with respect to the letter). See also Marathon Oil Co. v. Moye, 893 S.W.2d 585, 590 (Tex. App.­ Dallas 1994, orig. proceeding)(waiver by voluntary disclosure does not automatically allow disclosure of all privileged material). Moreover, the trial court's order does not limit the production of privileged documents to specific issues; rather, the order imposes a blanket requirement of production of all privileged documents. To the extent the trial court's order requiring production of these "other documents" was based on waiver by voluntary disclosure, it was an abuse of discretion. . . .

Conclusion

Because we have found the trial court's order compelling production of all copies of the Shalen letter may be upheld on the ground of waiver by voluntary production, we deny relator's petition for writ of mandamus as it concerns the portion of the order compelling production of the Shalen letter bearing bates numbers CCPT 000923­924 and CCPT 000939­940. Because this portion of the order remains effective, another portion of the order that remains effective is the portion of the order stating that "Prop Tech shall be allowed to conduct discovery concerning the circumstances surrounding the creation of Exhibit 54 [the Shalen letter] and the creation of the affidavits earlier submitted to this Court, and Prop Tech shall be

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afforded an opportunity to prepare and file such appropriate motions for sanctions and/or contempt of this Court as may be appropriate in light of the discovery to be conducted." Having found no ground to support the order compelling production of "all other documents previously withheld on the ground of attorney­client privilege," we conditionally grant the writ of mandamus only as to this portion of the order. We are confident the trial court will vacate the portion of its order of January 3, 2002, that compels production of "all other documents previously withheld on the ground of attorney­client privilege." If the trial court fails to do so, the writ will issue. YATES, J., CONCURRING AND DISSENTING I agree with the majority's decision to deny mandamus relief with respect to production of the Shalen letter. However, I would also conclude Carbo did not establish that the trial court abused its discretion in ordering production of other withheld documents because Carbo failed to present evidence to the trial court supporting its claim that those documents are protected by the attorney­client privilege. Accordingly, I would deny relator's requested relief in its entirety. In addition to ordering production of the Shalen letter, the trial court's order requires production of all other documents withheld by Carbo under the attorney­client privilege. As the party seeking mandamus relief, Carbo had the burden of providing this court with a sufficient record to establish its right to relief. Walker v. Packer, 827 S.W.2d 833, 837 (Tex. the privilege "must present any evidence necessary to support the . . . privilege." TEX. R. CIV. P. 193.4(a); see also Barnes v. Whittington, 751 S.W.2d 493, 494 (Tex. 1988) (orig. proceeding) ("The party claiming the privilege bears the burden of producing evidence to support such an exception by showing that the documents in question qualify for the privilege as a matter of law."). The record in this case does not establish that Carbo produced evidence to the trial court supporting its claim of privilege as to documents other than the Shalen letter. Therefore, I would deny Carbo's writ as to these documents as well. The majority concludes that Carbo was not required to present evidence supporting its privilege claim as to documents other than the Shalen letter because Prop Tech did not "specifically challenge the privilege" as to those documents. I disagree. In the body of its motion, Prop Tech plainly requested that the trial court order production of the Shalen letter "as well as all other documents listed on Carbo's privilege log." Prop Tech's prayer requests production of the Shalen letter and "all other exhibits previously withheld on the grounds of attorney client privilege." Although the prayer uses the word "exhibits" rather than "documents," Prop Tech's use of the modifier "previously withheld" immediately after "exhibits" makes sense only if Prop Tech's request is interpreted as referring to all documents withheld as privileged. Furthermore, Prop Tech's reply makes clear that it was seeking production of all documents on which Carbo was claiming the attorney­client privilege, based on Carbo's assertion of reliance on counsel as a defense. Nevertheless, the majority somehow concludes that

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the phrases "all other documents" and "all other exhibits previously withheld" refer only to additional copies of the Shalen letter. Even if this interpretation was reasonable, it is certainly not the only reasonable interpretation. Accordingly, Carbo has not demonstrated an abuse of discretion by the trial court necessary to justify mandamus relief. . . . The majority further concludes that, even if Prop Tech requested production of documents other than the Shalen letter, Carbo was not required to support its privilege claim as to those documents because Prop Tech's request was based on waiver and not a "specific challenge to the privileged nature of any document." However, nothing in the language of Rule 193.4 suggests that the burden on the party asserting the privilege applies only when the other party attacks the underlying basis of the privilege claim. Nor does the rule require that the party opposing the privilege claim identify each individual document for which production is sought. Prop Tech filed a motion requesting production of all documents withheld as privileged and requested a hearing. Accordingly, under Rule 193.4, Carbo was required to present to the trial court evidence to support its privilege claim as to those documents. Because Carbo apparently did not present any evidence with respect to documents other than the Shalen letter, Carbo has not demonstrated the trial court abused its discretion in ordering production of those documents. The court's order in this case is easily distinguishable from that in National Union Fire Insurance Co. v. Hoffman, 746 S.W.2d 305 (Tex. App.­ Dallas 1988, orig. proceeding). In Hoffman, the court determined that a finding of waiver as to "all communications, knowledge and opinions" was unworkable, and thus an abuse of discretion. Id. at 311. Here, however, the court's order is limited to "documents previously withheld on the grounds of attorney client privilege." The scope of the trial court's order is clear, and it conforms to the relief requested by Prop Tech. Accordingly, I would deny relator's petition for mandamus relief. Because the majority grants relief in part, I respectfully dissent.

IN RE CI HOST, INC. 92 S.W.3d 514 (Tex. 2002)

HANKINSON, J. In this mandamus proceeding, the plaintiffs seek production of a copy of certain computer backup tapes belonging to defendant CI Host, Inc. The trial court ordered CI Host to produce the tapes over CI Host's objection that section 2702 of the federal Electronic Communications Privacy Act

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(ECPA), 18 U.S.C. §§ 2510­2522, 2701­2711, 3121­3127, protects the information stored on the tapes in its entirety. Because CI Host failed to produce evidence in the trial court that only the type of information protected from disclosure by section 2702 exists on the backup tapes, it failed to support its objection to the requested discovery of the tapes, as Texas Rule of Civil Procedure 193.4 requires. The trial court therefore did not abuse its discretion in ordering CI Host to produce the tapes. However, because the parties agreed at argument before this Court that the tapes do contain some information protected from disclosure by the ECPA, and because the privacy interests of third parties may be implicated if the tapes are produced without an appropriate protective order in place, we deny CI Host's requested mandamus relief without prejudice to CI Host's reurging its objection to the trial court in light of this opinion. CI Host is a web­hosting company based in Bedford, Texas, that hosts approximately 50,000 separate websites. The plaintiffs, Tom Speer, Henri Boll, and Limits Unknown, Inc., are three former CI Host customers who sued the company as putative class representatives claiming breach of contract, negligence, and violations of the Deceptive Trade Practices Act. The plaintiffs allege that CI Host's server crashed on December 28, 1999, and remained inoperative for ten days. They claim that because of this crash, their businesses were interrupted, they lost data, and they suffered harm to their business reputations. The plaintiffs assert that CI Host failed to keep guarantees that its hosting services would be operational 99.9% of the time. Moreover, they assert that CI Host did not back up its customers' website data daily, as promised. On March 10, 2000, the plaintiffs obtained a temporary injunction ordering CI Host, among other things, to refrain from deleting or disposing of critical information pertaining to its web­ hosting activities, including "e­mails, billing data and other internal memoranda." The trial court also ordered CI Host to preserve backup tapes made on March 1, 2000. On June 30, 2000, the plaintiffs requested production of a copy of the March 1st backup tapes. CI Host objected that the request was overbroad and demanded confidential information, trade secrets, and information beyond the scope of discovery. CI Host further objected that "this Request . . . is a violation of Title 18 of the United States Code and Defendants are prohibited from releasing any of this information relating to third parties." At the first of two discovery hearings, CI Host specifically argued that 18 U.S.C. § 2702, which prohibits disclosure of "the contents of a communication while in electronic storage," protects all the information on the backup tapes. The plaintiffs argued that except for e­mails, the information on the tapes is not "contents" as that term has been defined in the ECPA and interpreted by the federal courts. And moreover, they argued, section 2702 protects only e­mails that remain in temporary, intermediate storage, before they are received by the intended recipient. The plaintiffs further contended that the tapes contain technical information relevant to their

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claims including CI Host's customers' names, indexes, directories, and websites, which would reveal the extent of CI Host's failure to properly back up customer data, breaches of customer agreements, and poor website maintenance. CI Host offered no evidence to support its ECPA objection or any of its other objections at the hearing. The trial court overruled the objections and ordered production of the tapes. The trial court later conducted a second hearing to allow CI Host to develop an additional record for mandamus review. CI Host offered an affidavit from Christopher Faulkner, its chief executive officer. Faulkner described the nature of CI Host's business and stated summarily that the backup tapes contained information such as customers' e­mails, trade secrets, and business documents. CI Host also offered testimony from its attorney, John Harvey, who testified that he had seen customer lists and customer indexes and directories on two of the March 1st tapes. At the hearing's conclusion, the trial court affirmed its earlier order. Nonetheless, the parties agreed that production could wait until the conclusion of any mandamus proceedings. The court of appeals denied CI Host mandamus relief. CI Host now petitions this Court for mandamus relief from the trial court's order directing it to produce copies of the March 1st backup tapes. The extraordinary writ of mandamus issues only to correct a clear abuse of discretion by a lower court when no adequate remedy at law exists. In re Alford Chevrolet­Geo, 997 S.W.2d 173, 176, 42 Tex. Sup. Ct. J. 756 (Tex. 1999); Walker v. Packer, 827 S.W.2d 833, 839, 35 Tex. Sup. Ct. J. 468 (Tex. 1992). In this case, we first decide whether the trial court abused its discretion by ordering CI Host to produce the backup tapes in their entirety. We emphasize that only one objection to one request for production to CI Host is before us. CI Host argues that section 2702 of the ECPA precludes it from disclosing the information on the backup tapes. With respect to CI Host's other objections, the parties agreed that the original discovery request was overbroad, and CI Host obtained a protective order forbidding disclosure of any trade secrets stored on the tapes. Without addressing the merits of CI Host's ECPA objection, we conclude that the trial court did not abuse its discretion in ordering the tapes produced because CI Host did not meet its burden to support its objection under our rules of civil procedure governing discovery. To object to a discovery request, the responding party must make a timely objection in writing and "state specifically the legal or factual basis for the objection and the extent to which the party is refusing to comply with the request." TEX. R. CIV. P. 193.2(a). A party is also required under the rules to produce what is discoverable when it asserts that only part of a request is protected. TEX. R. CIV. P. 193.2(b). Any party making an objection or asserting a privilege must present any evidence necessary to support the objection or privilege. TEX. R. CIV. P. 193.4(a). The trial court should then determine whether an in camera inspection is necessary; if so, the party seeking protection must segregate and produce to the court the materials it seeks to protect from disclosure. Id.

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In accordance with rule 192.3(b), which permits discovery of electronic recordings, data, and data compilations, the plaintiffs specifically requested the March 1st backup tapes. CI Host objected that it would violate Title 18 of the United States Code if it released the tapes, and therefore it withheld the tapes in their entirety. At the first discovery hearing, CI Host had the burden to present evidence supporting its objection, see TEX. R. CIV. P. 193.4(a), but did not present any evidence to the court. At the second hearing, CI Host offered CEO Faulkner's affidavit generally describing the nature of CI Host's business and stating summarily that the backup tapes contained information such as customers' e­mails, trade secrets, and business documents. It also offered testimony from its attorney, John Harvey, that he had seen customer lists and customer indexes and directories on two of the March 1st tapes. None of this general testimony provides the factual basis to sustain CI Host's objection that all of the information on the tapes is "the contents of a communication" or is "in electronic storage" on the tapes and thus protected from disclosure by the ECPA. See 18 U.S.C. § 2702. Moreover, CI Host agreed at argument before this Court that the tapes do contain some noncontent information, which CI Host agrees is not protected by the ECPA, and that at least some of this information could be segregated from protected information. Thus, in light of CI Host's failure to produce evidence to support its ECPA objection or to segregate and produce the information it has now admitted is not protected by the ECPA, we cannot conclude that the trial court abused its discretion in overruling that objection and ordering the tapes produced. However, we are mindful that resolution of this discovery dispute may affect more than the immediate parties to this litigation. The possibility exists that the rights of CI Host's customers and others may be detrimentally affected or even abrogated by disclosure of some information on the tapes; these third parties may have other legal bases for objecting to disclosure of the information on the tapes. Our discovery rules do not require notice to third parties so that they might have an opportunity to be heard on their own objections. Yet, we are loath to allow CI Host to unilaterally waive its customers' privacy rights by its failing to adhere to the discovery rules. Cf. Eli Lilly & Co. v. Marshall, 850 S.W.2d 155, 160, 36 Tex. Sup. Ct. J. 507 (Tex. 1993) (taking into account compelling public interests in determining scope of discovery in products­liability suit). It therefore falls upon the trial court to give serious consideration to these interests. A protective order forbidding disclosure of any trade secrets on the tapes is already in place, and we are confident that the trial court will give due consideration to any other privacy interests at stake as this case progresses. Without expressing an opinion on the merits of CI Host's ECPA objection, we conclude that the trial court did not abuse its discretion by ordering production of the tapes on the record before it. CI Host failed to meet its burden under the discovery rules to support its objection with evidence demonstrating that all of the information on the tapes falls within the scope of the ECPA. Mandamus is therefore not appropriate. However, because

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the parties have acknowledged that: the tapes contain both protected information and nonprotected information; some information, including e­ mails, may be considered confidential by CI Host's customers; and the different categories of information can be segregated and an appropriate protective order entered if necessary, we deny the writ of mandamus without prejudice to allow the parties and the trial court to address these considerations as the case proceeds.

Chapter 10 DISCOVERY: METHODOLOGY OF THE INDIVIDUAL DEVICES

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Discovery Devices

[A]--Written Discovery

Page 578: [Add to the list of matters that may be requested through a request for disclosure:]

(12) The name, address, and telephone number of any person who may be designated as a responsible third party.

[3]--Production and Inspection of Documents and Tangible Things From Parties

Page 583: [Insert after Loftin v. Martin:]

In addition to issues regarding drafting specificity, courts must also decide whether a party has sufficient "possession, custody, or control" to require it to produce particular documents. The following case discusses that issue.

IN RE U­HAUL INTERNATIONAL, INC. 87 S.W.3d 653 (Tex. App.--San Antonio 2002, orig. proc.)

PER CURIAM (Justices Duncan, Green and Marion) This mandamus proceeding arises from a discovery dispute between relator, U­Haul International, Inc. ("UHI"), which is a defendant in an underlying lawsuit, and the real parties in interest, who are the plaintiffs below. We conditionally grant UHI's petition for writ of mandamus.

BACKGROUND

The plaintiffs sued UHI and three others for injuries arising from an accident involving a tow dolly, which the plaintiffs alleged was designed and manufactured by UHI. A second defendant was towing a car with the tow dolly when the accident occurred. Plaintiffs contended a third defendant owned the tow dolly. The plaintiffs alleged (1) the tow dolly had not been materially altered by the second defendant, (2) the tow dolly was defective and unreasonably dangerous when it left UHI's possession and entered the stream of commerce, and (3) UHI knew that using a loaded tow dolly behind 225

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a 1988 Ford LTD would result in an accident that could produce serious death and injury. After a series of discovery disputes, the trial court issued an order directing UHI to produce any documents, accident reports, and petitions that relate to "tow dollies involved in incidents where the tow dolly was said to fish­tail, swerve, weave, whip, sway, jackknife, or any other means of describing the tow dolly or tow dolly/tow vehicle combination becoming unstable or uncontrollable" for years 1996 through 2001. The trial court ordered UHI to obtain the documents "from any and all corporations, companies, affiliates, subsidiaries, or other entities within the U­Haul system or U­Haul chain of companies." The order set a deadline of February 27, 2002 at 5:00 p.m., and stated that failure to comply would result in a sanctions hearing set for February 28, 2002. UHI and UHI's insurer, Republic Western Insurance Company ("Republic"), are wholly­owned subsidiaries of Americo, and are, therefore, companies "within the U­Haul system." UHI filed a motion to reconsider in which it contended that it could not produce records not within its control. Specifically, UHI asserted that Republic had custody and control of accident claims files and other documents, and that it (UHI) could not force Republic to respond to plaintiffs' discovery request. Plaintiffs did not request documents directly from Republic pursuant to Texas Rule of Civil Procedure 205 until February 27th. On February 28th, the trial court heard evidence on plaintiffs' motion for sanctions. Plaintiffs argued that UHI and Republic are not independent companies, and UHI could obtain the requested documents from Republic. Plaintiffs asserted that UHI had "defied" the court's order; thus, sanctions under either Texas Rule of Civil Procedure 215.2(b)(3) or (5) were appropriate. Plaintiffs also asked for attorney's fees under subsection (b)(8). UHI presented evidence that it had produced all the documents in its possession; that it had asked Republic for the responsive documents, but Republic refused the request; and it could not force Republic to produce documents because Republic was an independent company. Following the hearing, the court sanctioned UHI, ordering that the following matters were "established": (1) the design of the tow dolly in question was defective, (2) the tow dolly was unreasonably dangerous, and (3) UHI had notice of the defect. The court also ordered UHI to pay attorney's fees in the amount of $10,400 for failure to comply with its prior orders. On May 7th, UHI filed a petition for writ of mandamus, complaining of the sanctions order. This court requested a response from the respondent and real parties in interest, and stayed the trial court's sanction order.

ANALYSIS

[The court first decided that the requirements for mandamus were met.] UHI asserts the trial court abused its discretion by sanctioning it for not fully responding to a document request that UHI contends should have been addressed to Republic. A party is required to produce only those documents

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within its "possession, custody, or control." TEX. R. CIV. P. 192.3(b). The plaintiffs had the burden of proving UHI had constructive possession or the right to obtain possession of the requested documents from Republic. See GTE Communications Sys. Corp. v. Tanner, 856 S.W.2d 725, 729 (Tex. 1993). We conclude that the plaintiffs have not met that burden. Plaintiffs rely on Home Indemnity Company v. Giles, 392 S.W.2d 568, 569 (Tex. Civ. App.--Austin 1965, no writ) for the proposition that an insured has the right to obtain its claims file information. However, UHI presented evidence that it had requested the information from Republic, but Republic refused to honor the request. Thus, even if UHI has the right to the files, plaintiffs were still required to prove UHI had the ability to compel Republic to turn over its claims files. Plaintiffs contend UHI and Republic are sibling­ companies, and share similar officers and directors; therefore, UHI has the ability to compel Republic to provide the responsive documents. For the purposes of legal proceedings, subsidiary corporations and parent corporations are separate and distinct "persons" as a matter of law and the separate entity of corporations will be observed by the courts even where one company may dominate or control, or even treat another company as a mere department, instrumentality, or agency. Valero South Texas Processing Co. v. Starr County Appraisal Dist., 954 S.W.2d 863, 866 (Tex. App.-- San Antonio 1997, pet. denied). Courts are willing to disregard the corporate form when it is used as part of an unfair device to achieve an inequitable result, such as when a corporation is organized and operated as a mere tool or business conduit of another corporation, or when the corporate fiction is resorted to as a means of evading an existing legal obligation. Castleberry v. Branscum, 721 S.W.2d 270, 271­72 (Tex. 1986). Under the "single business enterprise" doctrine, when corporations are not operated as separate entities, but rather integrate their resources to achieve a common business purpose, each constituent corporation may be held liable for the debts incurred in pursuit of that business purpose. Old Republic Ins. Co. v. Ex­Im Servs. Corp., 920 S.W.2d 393, 395­396 (Tex. App.--Houston [1st Dist.] 1996, no writ). Even if UHI and Republic are closely related, the plaintiffs have not met their burden of proving that UHI and Republic form a single business enterprise. There is no evidence that UHI treats Republic like "a mere department" or that the two companies "integrate their resources to achieve a common business purpose." We hold that because the plaintiffs did not meet their burden of establishing that UHI has "possession, custody, or control' " of the responsive documents, the trial court abused its discretion in sanctioning UHI as it did.

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NOTE

Not all courts have required an alter­ego finding in order to conclude that a party has "possession, custody, or control." The more common test is whether the party has "right to possession of the item that is equal or superior to the person who has physical possession of the item."

[5]--Requests for Admissions

Page 588: [Add the following case after Stelly v. Papania.] STEFFAN v. STEFFAN 29 S.W.3d 627 (Tex. App.--Houston [14th Dist.] 2000, pet. denied)

FOWLER, Justice Richard John Steffan, appellant, appeals from a final decree entered in the divorce proceedings between himself and his former wife, Asther Steffan. Raising three issues, he complains that (1) requests for admission served on him as a non­answering party could not be deemed admitted by operation of law; (2) the trial court abused its discretion in not allowing these deemed admissions to be withdrawn, and (3) Asther was judicially estopped from receiving at retrial more property than that which she testified on a default basis was just and right. We affirm. In August of 1996, Asther filed divorce proceedings against appellant Richard, and included notice of a show cause hearing for temporary orders. Richard appeared pro se at the hearing and signed agreed temporary orders, but did not file a formal answer to the lawsuit. Over eight months later, Asther served requests for admission and other discovery on Richard. Richard did not respond to the discovery or answer the requests for admission, and in July of 1997, Asther obtained a default judgment against him. Richard immediately retained counsel, filed a motion for new trial, and was granted a retrial. In October of 1997, the case proceeded to trial on the merits, at which time Richard complied with the discovery requests and asked the court to allow him to withdraw the deemed admissions. The trial

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court denied the motion, and precluded Richard from presenting any evidence that conflicted with his deemed admissions. The trial court divided the marital estate and entered a final decree of divorce, from which Richard now appeals. By his first issue, Richard complains that inasmuch as he was a non­ answering party at the time, Asther could not serve him with requests for admission; because he could not be served with the admissions, they were a legal nullity, and could not be deemed admitted. Appellant does not cite any case law holding that requests for admission served on a non­ answering party are a nullity, nor does he deny that he is a party, rather, he refers us to Rule 169 of the Texas Rules of Civil Procedure as it existed at the time of these proceedings: 1. Requests for Admission. At anytime after commencement of the action, a party may serve upon any other party a written request for the admission, for purposes of the pending action only, of the truth of any matters. . . . Whenever a party is represented by an attorney of record, service of a request for admissions shall be made on his attorney unless service on the party himself is ordered by the court. . . . Each matter of which an admission is requested shall be separately set forth. The matter is admitted without necessity of a court order unless, within thirty days after service of the request . . . the party to whom the request is directed serves upon the party requesting the admission a written answer or objection addressed to the matter, signed by the party or his attorney, but, unless the court shortens the time, a defendant shall not be required to serve answers or objections before the expiration of fifty days after service of the citation and petition upon the defendant. 2. Effect of Admission. Any matter admitted under this rule is conclusively established as to the party making the admission unless the court on motion permits withdrawal or amendment of the admission. . . . Richard further refers us to Rule 21a, which provides that pleadings and matters required to be served on a party (other than an original citation of service) may be served by delivering a copy to the party to be served (by specified methods such as hand delivery, certified mail and registered mail), or the party's duly authorized agent or attorney of record. Richard contends that neither of these rules provides for service of requests for admission on a non­answering party, and that they imply a requirement that the party being served has filed pleadings designating himself or a representative as properly before the court for purposes of accepting notice. He further contends that just as a plaintiff cannot obtain additional relief on default without having an amended petition served on a non­answering defendant, see Weaver v. Hartford Accident & Indem. Co., 570 S.W.2d 367, 370 (Tex. 1978), it follows that admissions cannot be deemed against a non­answering defendant without service by citation as well. For two reasons, we disagree. First, nothing in either Rule 169 or 21a requires that the party being served must first file a responsive pleading with the court or otherwise

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make a general appearance before requests for admission or other discovery can be propounded upon him, nor do these rules require that discovery be served on a non­answering party by service of citation versus certified mail. To the contrary, the plain language of Rule 169 states that requests for admission may be served on a party any time after commencement of the action, and that they may be served by complying with Rule 21a. The plain language of Rule 21a provides that any notice, pleading or other form of request required to be served under Rule 21a, may be served by certified mail; the only specified exclusion is service of the original citation. Under Rule 22, a lawsuit is commenced by the filing of a petition, not upon the filing of a responsive answer or the making of a general appearance to the lawsuit. Asther complied with Rule 169 by serving Richard with the requests for admission after commencement of her suit, and served him with such requests by certified mail as provided under Rule 21a. Second, the requirement found in Weaver, that an amended petition must be served on a non­answering party, does not apply here. In Weaver, and the other cases holding that an amended petition must be served on the non­answering defendant, the amended petition prayed for a more onerous judgment. See id. at 370; Payne & Keller v. Word, 732 S.W.2d 38, 42 (Tex. App.--Houston [14th Dist.] 1987, writ ref'd n.r.e.). That issue is not present here. Thus, Richard was properly served with the requests for admission. It is immaterial whether he was an answering or non­answering party at the time he received the requests, and we need not reach Richard's argument that his appearance at the show cause hearing was not a general appearance. In short, as Richard was properly served with the requests for admission and he did not timely answer or object to the requests, they were deemed admitted by operation of law. See TEX. R. CIV. P 169. Richard's first issue is overruled. Richard's second issue is intertwined with his first, and argues that as he was a non­answering party at the time he was served with the requests, the trial court abused its discretion in not allowing him to withdraw the deemed admissions. Underlying this issue is Richard's position that discovery served on a non­answering party is a legal nullity. As we have already stated, we find this position untenable. Richard argues in the alternative, however, that, assuming discovery can be served on a non­answering party, he met the three criteria under Rule 169(2) for setting aside deemed admissions, such that the trial court abused its discretion in allowing the deemed admissions to stand. Under the rule, deemed admissions may be ordered withdrawn "upon a showing of good cause for such withdrawal . . . if the court finds that the parties relying upon the responses . . . will not be unduly prejudiced and that the presentation of the merits of the action will be subserved thereby." The burden is on the party seeking withdrawal to establish good cause by proving that he did not intentionally or consciously disregard his obligation to timely answer. See N. River Ins. Co. v. Greene, 824 S.W.2d 697, 699­700 (Tex.

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App.--El Paso 1992, writ denied). The failure to answer must have been accidental or the result of mistake, rather than intentional or the result of conscious indifference. See Stelly v. Papania, 927 S.W.2d 620, 622 (Tex. 1996). A trial court has broad discretion to allow or deny the withdrawal of deemed admissions. See Employers Ins. v. Halton, 792 S.W.2d 462, 464 (Tex. App.--Dallas 1990, writ denied). An appellate court should set aside the trial court's ruling only if, after reviewing the entire record, the trial court clearly abused its discretion by acting without reference to guiding rules or principles, or acted arbitrarily or unreasonably. See Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241 (Tex. 1985). Here, Richard states that he showed "good cause" because he was a pro se litigant at the time the requests were served on him, and he did not know or understand the consequences of failing to timely answer. However, we note that a pro se litigant must comply with the applicable laws and rules of procedure. See Mansfield State Bank v. Cohn, 573 S.W.2d 181, 185 (Tex. 1978). Moreover, the requests for admission had the legal consequences of non­compliance written on their face--the requests stated that they would be deemed admitted unless sworn to, answered and delivered to Asther within thirty days after service. Richard has not shown that his alleged ignorance of the law rendered his non­compliance an accident or a mistake, rather than intentional or the result of conscious indifference. We find no abuse of discretion by the trial court in denying Richard's request to withdraw the deemed admissions, and overrule the second issue. [The court also rejects Richard's third argument regarding estoppel.]

[B]--Oral and Other Non­Written Discovery [2]--Notice and Formalities for Depositions

Page 597: [Add the following case after Crown Central Petroleum.] IN RE ALCATEL USA, INC. 11 S.W.3d 173 (Tex. 2000)

ABBOTT, Justice, delivered the opinion of the Court, in which PHILLIPS, Chief Justice, and HECHT, OWEN, GONZALEZ, Justices, join. *

*

Footnotes and citations omitted unless otherwise indicated.

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The issue in this mandamus proceeding is whether the trial court abused its discretion by allowing DSC Communications 1 to take the apex depositions of two high­level Samsung executives. The court of appeals conditionally granted mandamus relief, concluding that DSC failed to prove that the executives had "unique or superior knowledge that is unavailable through less intrusive means." We hold that DSC failed to present any evidence that arguably shows that the executives have unique or superior personal knowledge of discoverable information. Thus, the court of appeals did not err in conditionally granting the writ of mandamus because the trial court abused its discretion by overruling Samsung's 2 motion to quash the depositions. We therefore deny Alcatel's request for mandamus relief.

I

DSC filed this suit alleging that Samsung engaged in a plan to steal a new DSC telecommunication technology known as "intelligent network" and "next generation switching" systems. DSC asserts that Samsung identified and lured a team of engineers away from DSC and then specifically assigned them to develop the same type of product they had developed at DSC. DSC claims that Samsung's actions were the direct result of a plan engineered at the highest level of Samsung's executive structure, and that highest­level Samsung executives were involved in the plan's execution at all stages. DSC noticed the depositions of two high­level Samsung executives, Jin­Ku Kang and Kun­Hee Lee. Kang served as Chairman of defendant Samsung Electronics Co., Ltd. (SEC) during the earliest events giving rise to this case and is currently Chairman Emeritus of that corporation. Lee is currently Chairman and CEO of SEC and formerly served as the Chairman of the Samsung Chaebol 3 during the earliest events at issue in this case. DSC and Samsung agree, and therefore we assume, that the Kang and Lee depositions qualify as apex depositions. Samsung moved to quash both depositions. At the first evidentiary hearing on the issue, the special discovery master assigned to the case deferred ruling until after the deposition of Mr. K. H. Kim, the former President and CEO of SEC at all times relevant to this matter. 4 After Kim's deposition, DSC renewed its request for the Kang and Lee depositions and moved to compel both. After holding another evidentiary

1 In September 1998, DSC Communications Corporation merged with and changed its name to Alcatel USA, Inc. We refer to Relator throughout this opinion as DSC, as it was referenced in the trial court and the court of appeals. 2 The real parties in interest are James L. Bunch, Michael Bray, David Fox, Kevin Gallagher, Bhushan Gupta, Nancy Korman, James Olivier, Leo Putchinski, Martin Wu, Samsung Electronics Corp., Samsung Electronics Co., Ltd., and Samsung Telecommunications America, Inc. They are collectively referred to as "Samsung." 3 A chaebol is a Korean conglomerate in which subordinates are extremely deferential to their hierarchical superiors. 4 Mr. Kim currently serves as the CEO and Chairman of Samsung Americas.

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hearing, the special discovery master denied Samsung's motion to quash and ordered that both depositions proceed. Samsung appealed the special discovery master's order to the trial court. The trial court reviewed the transcripts of these hearings and conducted a third hearing. The trial judge denied Samsung's appeal and affirmed the special discovery master's order. Samsung moved for reconsideration. After a fourth hearing on Samsung's motion to reconsider, the trial judge denied the motion. Samsung filed a petition for writ of mandamus with the court of appeals. Basing its decision on Crown Central Petroleum Corp. v. Garcia, 904 S.W.2d 125 (Tex. 1995), the court of appeals held that DSC had failed to prove that it was entitled to take the apex depositions and conditionally granted mandamus relief. DSC filed a petition for writ of mandamus in this Court, arguing that the court of appeals abused its discretion by granting the writ because the trial court did not abuse its discretion. . . . .

III

This Court first adopted the apex deposition guidelines in Crown Central Petroleum Corp. v. Garcia, 904 S.W.2d 125 (Tex. 1995). We held that the apex deposition guidelines apply "when a party seeks to depose a corporate president or other high level corporate official." A party initiates the Crown Central guideline proceedings by moving for protection and filing the corporate official's affidavit denying any knowledge of relevant facts. The trial court evaluates the motion first by deciding if the party seeking the deposition has "arguably shown that the official has any unique or superior personal knowledge of discoverable information. . . . If the party seeking the deposition cannot show that the official has any unique or superior personal knowledge of discoverable information, the trial court should" not allow the deposition to go forward without a showing, after a good faith effort to obtain the discovery through less intrusive means, "(1) that there is a reasonable indication that the official's deposition is calculated to lead to the discovery of admissible evidence, and (2) that the less intrusive methods of discovery are unsatisfactory, insufficient or inadequate." . . . . In this case, when Samsung moved for the protective orders the parties had already engaged in significant discovery, including more than 300 hours of depositions. At this stage of discovery, nothing in Crown Central precluded the trial court from considering whether DSC had attempted to gain the information by less intrusive means and otherwise satisfied the second Crown Central test. The parties argued both Crown Central tests in the trial court, and both the discovery master and trial judge denied the requested protective orders without specifying the reasons. Accordingly, mandamus is not appropriate if the trial court's order can be sustained under either Crown Central test. We consider first whether DSC arguably showed that Lee or Kang have unique or superior personal knowledge of discoverable information.

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LEE

The most comprehensive discussion of Kun­Hee Lee's knowledge as it relates to this lawsuit is found in a document submitted by DSC titled: "Kun­Hee Lee's Significance and Connection to This Lawsuit." In that document, DSC urges several reasons why Lee's deposition is necessary. First, under the heading "Kun­Hee Lee Sets Samsung's Course," DSC claims that (1) Lee is the leader of the Samsung Chaebol, (2) Lee sets the overall vision for the Samsung companies, and (3) Samsung's goal is to be one of the world's top five telecommunications companies by 2005. Second, under the heading "Kun­Hee Lee's Ties To The Lead Defendant, Samsung Electronics Co., Ltd.," DSC states that Lee (1) was the chief executive officer and president of SEC, (2) was a long­standing director of SEC, and (3) is the largest single owner of Samsung and its subsidiaries. Evidence tending to support these allegations does not satisfy the first Crown Central test; it merely demonstrates that Lee is a long­time company leader who sets the company vision with lofty goals. Virtually every company's CEO has similar characteristics. Allowing apex depositions merely because a high­level corporate official possesses apex­level knowledge would eviscerate the very guidelines established in Crown Central. Such evidence is too general to arguably show the official's knowledge is unique or superior. In AMR Corp. v. Enlow, 926 S.W.2d 640 (Tex. App.--Fort Worth 1996, no writ), the Second Court of Appeals addressed a somewhat similar argument. In AMR Corp., an American Airlines passenger became intoxicated on his flight and later had a traffic accident with the plaintiff. The plaintiff sued AMR Corp. and American Airlines under the Dramshop Act. The plaintiff sought the apex deposition of Robert Crandall, AMR's president, CEO, and chairman of the board, and American Airlines, Inc.'s CEO and chairman of the board, arguing that he "wished to depose Robert Crandall in order to determine where the authority lies within the organization for making those [alcohol service and flight attendant training] policy decisions so that Plaintiffs can understand how and why those policy decisions were made and what precisely the policies in place were." The court of appeals held that "this testimony amounts to nothing more than the simple, obvious recognition that the highest­ranking corporate officer of any corporation has the ultimate responsibility for all corporate decisions and falls far short of the [Crown Central] standard." We agree with the AMR Corp. court of appeals. Testimony that a corporate executive possesses knowledge of company policies does not, by itself, satisfy the first Crown Central test because it does not show that the executive has unique or superior knowledge of discoverable information. See In re El Paso Healthcare Sys., 969 S.W.2d 68, 74 (Tex. App.--El Paso 1998, no writ) ("A generalized claim that a corporate president has ultimate responsibility for all corporate decisions or has knowledge of corporate policy is insufficient to establish that the corporate president has unique or superior personal knowledge of discoverable information.").

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Under the heading "The Samsung Project At Issue In This Case Smacks Of Chairman­Level Importance," DSC claims that (1) the "technology at issue in this case involved huge investments and expected revenue," (2) "SEC's commitment to technology in this case is significant to execution" of its plan to be in the top five companies in its industry, (3) "the significance of the project is illustrated by the claims made in this case," and (4) "Kun­ Hee Lee has been involved with Samsung's telecommunications business." Proof of the importance of the project to Samsung, combined with the allegation that the issue in this case "smacks of chairman­level importance," at most tends to show that the chairman­level official whose deposition is sought may possess discoverable information. It does not, however, arguably show that the official's knowledge is unique or superior. Consequently, the first prong of the Crown Central guidelines has not been satisfied with regard to Lee.

KANG

J. K. Kang served as Chairman of defendant SEC during the earliest events that gave rise to this case and is currently Chairman Emeritus of that corporation. DSC contends that Kang's unique or superior personal knowledge is arguably shown by the deposition testimony of Dr. Joo Hyung Lee, an SEC manager who personally oversaw the establishment of Samsung's Dallas laboratory. Contrary to DSC's contention, Joo Hyung Lee's deposition conveys that Kang may have been made aware of information contained in reports prepared by others, but still does not show why Kang's knowledge may be unique or superior. In his deposition, Joo Hyung Lee testified that he prepared a status report of the next­generation switching system and presented it to, among others, Song, the Samsung executive in charge of telecommunications, and Kang. Joo Hyung Lee characterized the report as an overview that did not last very long--it was "kind of a simple thing." He further testified that, other than that single presentation, he had no other communication with Kang concerning the next­generation switching system. Further probing by DSC during Joo Hyung Lee's deposition indicated that none of the project's details were conveyed to Kang by Joo Hyung Lee; instead, it was Joo Hyung Lee and Song who were involved in the details: Q: And I believe section 1.3 [of the document entitled "The Current Status of the Next-Generation Switch System"] provides the time line for the next­generation system as you [Joo Hyung Lee] contemplated it at that time? A: Yes, that's right. Q: And if you turn to the next page, I believe this page addresses the--what is called a progress report, and Section 2.1 addresses employment status; is that right? A: Yes, that's correct.

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Q: And the--the box is indicating the number of people that you had interviewed as well as the response to your advertisements, things like that; is that correct? A: That's correct. Q: And at that time, you were indicating to Chairman Kang that you had 15 total people that you were engaged in employment contract negotiations with? A: Well, I'm thinking, you know, again, that this and the subsequent stuff, you know, I don't think we necessarily made a report on that to the chairman. Q: Are you saying that the items in part two, you're uncertain whether they were presented to the chairman? A: I'm thinking that we probably did not specifically make a report on this to him. I mean, this is, you know, all too detailed a level for it to be, you know, reported to the chairman. . . . . Q: Did you discuss this with Mr. Song? A: Yeah, because that's a matter of the progress, just in a simple fashion. Q: With respect to item three of the document, which I believe concerns the status report on the facilities or the buildings that you were considering, did you discuss that with Chairman Kang? A: I don't recall that I did. Q: Did you discuss it with Mr. Song? A: Yes. We just kind of briefly told him about how there was something like this. Q: And would you turn to the fourth matter in the document on the last page? A: Yes. Q: Which I believe is addressing proposed matters; is that correct? A: Well, proposed, well, basically I, you know, kind of presented my opinions during this time of the--the report. Q: And that was my question. Were these matters presented to Chairman Kang during the presentation? A: No. I don't think there--that would have been necessary vis­a­vis the chairman. Q: Would these have been discussed with Mr. Song? A: Yes. Additionally, DSC claims that an index of computer files produced by Samsung contains numerous listings of computer files identified as reports

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to J. K. Kang on Samsung's next generation switching system. One of these reports that Kang apparently received a copy of was titled "Action Plans for the Development of the Next Generation Telecommunication System." This evidence arguably shows that Kang may have discoverable information. But the first Crown Central guideline requires more; it requires that the person to be deposed arguably have "unique or superior personal knowledge of discoverable information." This requirement is not satisfied by merely showing that a high­level executive has some knowledge of discoverable information. If "some knowledge" were enough, the apex deposition guidelines would be meaningless; they would be virtually indistinguishable from the scope of general discovery. Although Crown Central did not elaborate on what character of knowledge makes it unique or superior, there must be some showing beyond mere relevance, such as evidence that a high­level executive is the only person with personal knowledge of the information sought or that the executive arguably possesses relevant knowledge greater in quality or quantity than other available sources. At most, DSC's evidence establishes that Kang received information related to the underlying facts of this case. A recipient's knowledge of the contents of a report is not unique or generally superior to the author's, of course. The record shows that Joo­Hyung Lee's and Song's knowledge of the reports to Kang is comparable, if not superior, to the knowledge possessed by Kang. Although both Joo­Hyung Lee and Song were deposed by DSC, the record does not show that Kang possessed information not possessed by Lee and Song and does not show that Kang had relevant knowledge that was greater in quantity or quality than Lee or Song. Combined with other factors, receipt of such a report could arguably support that Kang had unique or superior knowledge. But evidence that an apex official received information requires something more to establish that the apex has unique or superior knowledge of discoverable information.

IV

DSC seeks to distinguish business­related cases like this from tort­ related cases like Crown Central and AMR Corp. DSC contends that the trial court, in allowing the depositions to proceed, considered that "this litigation involves two giant international multinational corporations suing each other over trade secrets and corporate direction, policy and defamation." DSC argues that, "in contrast to cases like . . . Crown Central, this is the very kind of lawsuit in which high­level executives would be expected to participate." The special discovery master apparently agreed with this reasoning by stating: This is not the same situation as in Crown Central or the Wal­Mart case, the original apex deposition case. Mr. Lee appears to be the one person at the very top of the chain at Samsung, and it may very well be that he does not know anything that's relevant to this case, and that can be determined very quickly. But I think that DSC ought to have an opportunity to test that.

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(Emphasis added). Even if a lawsuit concerns a business dispute rather than a tort claim, and regardless of whether high­level executives would be expected to participate in a decision relevant to the dispute, the Crown Central prerequisites must still be met. Business disputes provide no greater license than any other kind of suit to explore by apex deposition whether a high­level executive knows anything relevant to the case. It may well be true that many tort claims arise without the knowledge or involvement of a high­ level officer. Conversely, it may also be true that many business disputes directly involve the decisions or actions of a high­level officer. Regardless of the truth, vel non, of these suppositions, the fact remains that the Crown Central guidelines must be applied.

V

Because DSC failed to arguably show that either Kang or Lee possesses unique or superior knowledge of discoverable information, the trial court's order cannot be supported under the first Crown Central test. Nevertheless, DSC argues that it has pursued less intrusive means and therefore is entitled to the depositions under Crown Central's second guideline: If the party seeking the deposition cannot show that the official has any unique or superior personal knowledge of discoverable information, the trial court should grant the motion for protective order and first require the party seeking the deposition to attempt to obtain the discovery through less intrusive methods. . . . After making a good faith effort to obtain the discovery through less intrusive methods, the party seeking the deposition may attempt to show (1) that there is a reasonable indication that the official's deposition is calculated to lead to the discovery of admissible evidence, and (2) that the less intrusive methods of discovery are unsatisfactory, insufficient or inadequate. If the party seeking the deposition makes this showing, the trial court should modify or vacate the protective order as appropriate. . . . If the party seeking the deposition fails to make this showing, the trial court should leave the protective order in place. Crown Cent., 904 S.W.2d at 128. From the record before us, DSC has not shown that it attempted to obtain the information it sought from Kang through less intrusive methods. DSC based its contention that Kang has unique or superior knowledge largely on his presence at a written and oral presentation concerning the next generation switching system. But, DSC was allowed to depose Joo­Hyung Lee, who presented the report to Kang and Song. Also, DSC deposed Song, the Samsung executive in charge of telecommunications, who also attended the presentation. Yet, DSC has failed to identify any relevant information that it seeks from Kang that it attempted and failed to obtain from either Joo­Hyung Lee or Song.

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In addition, DSC failed to establish that it attempted to obtain the information that it sought from Lee through less intrusive methods. DSC argued that Lee has unique and superior knowledge regarding Samsung's policies. But the special master allowed DSC to depose Kim, the president and CEO of SEC during the relevant time. Yet, DSC failed to ask Kim any questions about Samsung's "vision" for telecommunications or any of the other issues DSC now contends justify an apex deposition of Lee. DSC also did not issue interrogatories, requests for admissions, or any other forms of discovery to Samsung regarding its corporate policies. The record simply does not show that the information sought from Lee was sought by less intrusive means or that the information sought was unobtainable from other sources. Absent a showing that an executive arguably has unique or superior personal knowledge, a court has no discretion to allow an apex deposition unless the party seeking the deposition establishes that it has attempted to obtain the information through less intrusive methods. The special master provided DSC with the opportunity to depose other Samsung executives who at least arguably possessed the information DSC seeks. Yet, DSC either failed to take advantage of that opportunity or failed to preserve its attempts in the record. Thus, the trial court abused its discretion in overruling Samsung's motion to quash the depositions of Kang and Lee. . . . . We agree with the court of appeals' conclusion that the trial court abused its discretion when it refused to quash the depositions of Kang and Lee because it failed to properly apply the guidelines set forth in Crown Central v. Garcia. Accordingly, we deny the mandamus relief requested by DSC. ENOCH, Justice, joined by BAKER and O'NEILL, Justices, dissenting. This Court has held that the proper place to amend or promulgate a rule is through rulemaking, not judicial fiat. Yet today, from mere guidelines intended to aid a trial court's decision to allow or prevent apex depositions in the context of discovery harassment, the Court effectively forges an apex deposition rule--one, significantly, not found in our recently promulgated discovery rules. This new rule erects an improperly high barrier, imposing a special protection for corporate officials. . . . . Despite the Court's concerns . . . litigants continued to seek the depositions of highest ranking executives of large corporations in what appeared to be nothing more than an effort to harass or pressure settlement by needlessly increasing the costs of litigation. Deciding that it was appropriate to alert courts to such undue discovery burden and harassment, we established parameters to guide a trial court's discretion. While I strongly support the protection from harassment that our apex deposition guidelines provide, I do not countenance a de facto rule, unavailable to any other potential deponent, that extends a privilege to corporate officials to avoid depositions by virtue of their position. . . . I disagree with the court of

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appeals' conclusion in this case protecting Kang from being deposed, but agree that Lee cannot be deposed. I would therefore conditionally grant mandamus in part against the court of appeals, and allow the Kang deposition to proceed. . . . . The mandamus record reflects that the special discovery master, Judge Andrews, sat through more than thirty hearings on more than sixty discovery motions. The record also reflects that Judge Andrews understood that this was not a case in which the facts driving the litigation are extremely remote from the CEO and trickle up the corporate structure. Here, corporate policy and directives may have pushed the events driving this litigation down the corporate hierarchy. Inevitably, the policies driving corporate action and personal knowledge of actions taken in pursuit of such policies intersect. One federal court has held that at this intersection, "when the motives behind corporate action are at issue, an opposing party usually has to depose those officers and employees who in fact approved and administered the particular action." While it is not this Court's role to say whether Kang arguably was at the intersection of Samsung's corporate policy and the events driving this litigation, given the evidence before it, the trial court did not abuse its discretion by doing so. Only after an exhaustive review of the evidence DSC presented did the trial court conclude that Kang arguably had unique or superior personal knowledge of discoverable information. DSC offered evidence that Kang was directly involved in Samsung's next generation switching system project and had been specifically informed of Samsung's efforts to obtain DSC technology. There was also evidence that Kang received a written and oral presentation in 1996 about the status of Samsung's next generation switching system project in the United States, and that numerous reports were provided to Kang on the same project around the time of the events giving rise to this suit. One of the reports apparently contained an organizational chart for Samsung's telecommunication project that contained the names of DSC employees--who were still with DSC at the time. When asked why he made the presentation to Kang, a lower­level Samsung official responded "because [Kang] had a lot of interest in the information telecommunications side of the business." While this evidence shows Kang's personal knowledge of relevant information, the question Crown Central requires the trial court to consider before allowing the deposition is whether DSC arguably showed that the knowledge was unique or superior. Substituting its judgment for the trial court's, the Court concludes that Kang could not be deposed because DSC did not arguably show that Kang's knowledge of discoverable information was unique or superior. As evidence that Kang did not reach this level of knowledge, the Court offers Dr. J.H. Lee's deposition testimony that: (1) the report was a simple thing that did not last long; (2) outside of the report, Dr. Lee had no other communication on the next­generation network switch system with Kang; and (3) Dr. Lee conveyed no project details to Kang. In support of its conclusion, the Court

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announces the new apex deposition rule that a party must make a showing beyond mere relevance with evidence "such as . . . that "(1) a high­level executive is the only person with personal knowledge of the information sought or (2) the executive arguably possesses relevant knowledge greater in quality or quantity than other available sources." Relying on this new rule, the Court surmises that Kang cannot be deposed because, at best, Dr. Lee's deposition "conveys that Kang may have been made aware of information contained in reports prepared by others, but still does not show why Kang's knowledge may be unique or superior." This new rule and its rationale are problematic. The Court's conclusion is problematic because it would require a litigant seeking to depose a CEO regarding a board­level decision, about which all present at the board meeting have the same information, to depose a lower­ level board member and not the CEO. Why should a litigant be forced to depose the least qualified witness when it could depose the most qualified if they have the same information? While the CEO and a lower­level official may have the same information, they have different levels of knowledge. As one federal court has concluded, an apex official's knowledge may be deemed unique and the deposition allowed, even if other corporate officials possess similar knowledge. Moreover, the Court's opinion treats "knowledge" as though it were only the bare facts communicated to Kang and nothing more. But knowledge is more than mere information. The Court ignores the role that Kang's, or any apex official's, position within the corporation plays on the information received. When the policies driving corporate action and personal knowledge of actions taken in pursuit of such policies intersect, a new level of knowledge arises. When the motives behind corporate action are at issue, arguably the knowledge created at that intersection is unique to the corporate officer. And certainly that level of knowledge is "greater in quality" than the level possessed by the individual who communicated only the bare facts. . . . .

[5]--Motions for Physical or Mental Examinations

Page 606: [Insert the following case following Coates v. Whittington.] IN RE CABALLERO 36 S.W.3d 143 (Tex. App.--Corpus Christi 2000, orig. proc.)

DORSEY, Justice

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In this mandamus action, San Juana Caballero, Petitioner, seeks to set aside a trial court's order compelling her to submit to a gynecological examination. We hold that the trial court abused its discretion in ordering the petitioner to submit to such an examination, and conditionally grant the writ of mandamus. San Juana Caballero brought suit against J.C. Penney Company, Payless Shoe Stores and IPC International for injuries she sustained as a result of being falsely accused of shoplifting from the J.C. Penney's store at Amigoland Mall in Brownsville, Texas. One of her claims was that the mental anguish resulting from this event caused her to begin to bleed vaginally. The bleeding continued for some time until she eventually underwent a hysterectomy. On November 2, 2000, the trial court ordered Caballero to submit to a gynecological examination requested by the defendants. She petitioned this court for mandamus relief from this order. * * *

Texas Rule of Civil Procedure 204.1(c) states that a court may issue an order compelling a party to submit to a physical or mental examination "only for good cause and only . . . when the . . . condition . . . is in controversy." TEX. R. CIV. P. 204.1(c) (formerly TEX. R. CIV. P. 167a). "Courts have demonstrated a reluctance to allow such examinations without a discriminating application by the district court of the limitations prescribed by the rule." . . . In Coates v. Whittington, the Texas Supreme Court set forth a test for when the trial court may compel a party to undergo a mental examination. Coates, 758 S.W.2d 749, 751 (Tex. 1988). The court stated that the rule "places an affirmative burden on the movant to meet a two­pronged test: (1) the movant must show that the party's mental condition is `in controversy'; and (2) the movant must demonstrate that there is `good cause' for a compulsory mental examination." Id. "In the absence of an affirmative showing of both prongs of the test, a trial court may not order an examination." Id. The court also stated that "the movant must demonstrate that the information sought is required to obtain a fair trial and therefore necessitates intrusion upon the privacy of the person he seeks to have examined." Id. While the rule has seldom been litigated with regard to physical, as opposed to mental examinations, at least in the context of an examination as invasive as a gynecological examination, the same standard for "good cause" should apply. Under Coates, "good cause" requires an affirmative showing of three components: (1) that an examination is relevant to issues that are genuinely in controversy in the case; (2) that a reasonable nexus exists between the condition in controversy and the examination sought; and (3) that it is not possible to obtain the desired information through means that are less intrusive than a compelled examination. Coates, 758

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S.W.2d at 753. Here, the movants made no attempt to show that it is not possible to obtain the desired information through less intrusive means. They have not deposed the plaintiff's doctors, nor have they attempted to obtain copies of Caballero's medical records. Additionally, movants did not produce any evidence regarding why this particular examination is "relevant to issues that are genuinely in controversy" in that they are unable to articulate why an examination such as this would shed any light on the bleeding condition that existed prior to the hysterectomy. Without making some affirmative showing on each prong of the Coates "good cause" test, we hold that a trial court abuses its discretion in ordering a party to submit to a gynecological examination. Because the movants failed to make the requisite showing, we conditionally grant the petition for writ of mandamus. The trial court is directed to vacate its November 2nd order compelling Caballero to submit to a gynecological examination. The writ will issue only in the event that respondent fails to comply. * * *

§ 10.03

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Page 616: [Add the following at the end of Note (6):]

See also Forest v. Estate of Walters, 21 S.W.3d 495, 504 (Tex. App.--San Antonio 2000, pet. denied) (expert may refine calculations and perfect reports through the time of trial); Mares v. Ford Motor Co., 53 S.W.3d 416, 419 (Tex. App.--San Antonio 2001, no pet.) (minor refinements in expert testimony do not require exclusion of expert testimony).

Page 616: [Add the following as new Notes (7) through (10):]

(7) Non­Party Identification. Is the trial court empowered to prohibit testimony of a fact witness who is identified in response to a request for disclosure but whose connection to the case is not revealed? See Beam v. A.H. Chaney, Inc., 56 S.W.3d 920, 922­923 (Tex. App.--Fort Worth 2001, pet. denied) (responding party's failure to disclose witness' connection to case, absent a showing of good cause or lack of surprise or prejudice triggers automatic exclusion under Rule 193.6). How automatic is the sanction? Is it necessary to object to the defective response? See F&H Investments, Inc. v. State, 55 S.W.3d 663, 671 (Tex. App.--Waco 2001, no pet.) ("A party has no duty to remind anther party to abide by the Rules of Civil Procedure."). Must the requesting party first file a pretrial motion to compel discovery before attempting to invoke the automatic exclusion of non--disclosed testimony or evidence at trial? (8) Time to Designate Experts. How soon after retaining a testifying expert must the expert be identified in response to a request for disclosure? May counsel wait until he or she knows what the expert's opinion will be before

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a duty to supplement and disclose arises? See Snider v. Stanley, 44 S.W.3d 713, 716­717 (Tex. App.--Beaumont 2001, pet. denied) (upholding exclusion of expert trial testimony because expert was not designated "reasonably promptly." The court noted the current rules define a testifying expert as one who may be called to testify at trial and not necessarily a witness who a party expects to call as a witness at trial, and held that the obligation under Rule 195 to supplement and identify arises when an expert is retained, employed, or otherwise is in control of party.) (9) "Reasonably Promptly." What does Rule 193.5 mean when it says that an amended or supplemental response must be made reasonably promptly after the party discovers the necessity for such a response? We know there is a presumption that supplementation made less than 30 days before trial was not made reasonably promptly. Tex. R. Civ. P. 193.5(b). The Corpus Christi Court of Appeals rejected an argument that a reverse presumption also exists: that supplementation made more than 30 days before trial is timely. Thus a delay of nine months after certain witness statements became discoverable demonstrated that the supplemental production was not reasonably timely. See Matagorda County Hosp. Dist. v. Burwell, 94 S.W.3d 75 (Tex. App.--Corpus Christi 2002, pet. filed). (10) Supplementation of Expert Depositions. Rule 195.6 requires a party to supplement an expert witness's deposition testimony with regard to the expert's mental impressions or opinions and the basis for them. In State Farm Fire & Cas. Co. v. Rodriguez, 88 S.W.3d 313 (Tex. App.--San Antonio 2002, pet. denied), the court of appeals affirmed the trial court's decision to strike the testimony of an expert witness when defendant had failed to produce the PowerPoint presentation used with the expert's testimony despite numerous requests from plaintiff. The presentation also contained information not previously disclosed as a basis for the expert's testimony. Consider also the following case.

NORFOLK SOUTHERN RY. CO. v. BAILEY 92 S.W.3d 577 (Tex. App.--Austin 2002, no pet.)

PATTERSON, J. In this personal injury action by appellee James Allen Bailey against appellant Norfolk Southern Railway Company, we address whether certain evidentiary rulings by the district court led to the rendition of an improper judgment. In two issues, Norfolk Southern contends that the district court erred in denying its motion to strike part of the testimony of an expert witness and in failing to exclude evidence of Bailey's fear of contracting cancer. Having concluded that the district court acted within its discretion in the evidentiary rulings at issue and, in any event, that the rulings did not lead to the rendition of an improper judgment, we affirm the judgment of the district court.

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FACTUAL AND PROCEDURAL BACKGROUND

Bailey is a seventy­four­year­old man who was exposed to asbestos while working for Norfolk Southern in the 1940s and 1950s. In 1997, Dr. Dennis Darcey diagnosed Bailey with asbestosis with no evidence of impairment, based on a pulmonary test performed around the same time. In July 1998, shortly before the original trial setting, Dr. Darcey testified in his deposition that Bailey had mild asbestosis with no evidence of impairment. The case was reset for trial in late 1999 and again in October 2001. In the summer of 2001, Bailey had another pulmonary test, which showed that the asbestosis had progressed to "mild impairment." Bailey produced this pulmonary test to Norfolk Southern in early August 2001, approximately two months before trial. The week before trial began, Dr. Darcey gave a second deposition in which he revised Bailey's diagnosis to asbestosis with mild impairment. At a hearing before trial, Norfolk Southern moved to strike Dr. Darcey's testimony about his revised diagnosis on the ground that Bailey failed to timely supplement his discovery responses to reflect the change in Dr. Darcey's opinion. The district court denied the motion to strike the testimony with the caveat that "if we were dotting all our i's and crossing our t's, this should have been taken care of in supplementing opinions and mental impressions." The district court concluded that Norfolk Southern would have the opportunity on cross­examination to point out any discrepancies in Dr. Darcey's testimony. . . . The jury returned a verdict in favor of Bailey. It found that Bailey had sustained an asbestos­related disease and that Norfolk Southern caused the disease. The jury then awarded Bailey a total of $500,000 in damages ($25,000 for past pain, suffering, and mental anguish; $315,000 for future pain, suffering, and mental anguish; $10,000 for past physical impairment; and $150,000 for future physical impairment). The district court rendered a final judgment for $428,910.03 in compensatory damages, plus post­ judgment interest, after an offset for settlements. Norfolk Southern filed a motion for new trial and motion for remittitur, which the district court denied. Norfolk Southern appeals from the final judgment of the district court.

ANALYSIS

Norfolk Southern contends that the district court erred in evidentiary rulings by . . . failing to strike portions of the testimony of Dr. Darcey because Bailey did not timely supplement his discovery responses to include Dr. Darcey's revised diagnosis. . . When seeking to reverse a judgment based on an improper evidentiary ruling, a complaining party "need not prove that but for the error a different judgment would necessarily have been rendered, but only that the error

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probably resulted in an improper judgment." Alvarado, 897 S.W.2d at 753; accord Malone, 972 S.W.2d at 43. To prevail, the party must demonstrate that "the judgment turns on the particular evidence excluded or admitted." Alvarado, 897 S.W.2d at 753­54. We review the entire record to determine whether a party has met this burden. Id. at 754. If any legitimate basis exists to support a district court's evidentiary ruling, then we must uphold the court's decision. Malone, 972 S.W.2d at 43; State Bar v. Evans, 774 S.W.2d 656, 658 n.5, 32 Tex. Sup. Ct. J. 506 (Tex. 1989) (citing McCormick on Evidence § 52, at 131 (3d ed. 1984)). In its first issue, Norfolk Southern argues that the district court erred in denying its motion to strike part of the testimony of Dr. Darcey. In its motion to strike, Norfolk Southern sought to exclude Dr. Darcey's revised diagnosis, changed from "asbestosis with no impairment" to "asbestosis with mild impairment," because Bailey did not timely supplement his discovery responses to reflect the revised diagnosis. When a party fails to supplement a discovery response in a timely manner, the evidence may be excluded. Tex. R. Civ. P. 193.6(a); see also Alvarado v. Farah Mfg. Co., 830 S.W.2d 911, 914, 35 Tex. Sup. Ct. J. 570 (Tex. 1992). The remedy is mandatory and automatic unless the court finds that there was good cause for the failure to amend or supplement, or the failure will not unfairly surprise or prejudice the other party. Tex. R. Civ. P. 193.6(a); Morrow v. H.E.B., Inc., 714 S.W.2d 297, 297­98, 29 Tex. Sup. Ct. J. 546 (Tex. 1986). The burden of establishing good cause or lack of unfair surprise is on the party seeking to introduce the evidence. Tex. R. Civ. P. 193.6(b). The trial court has discretion to determine whether the offering party has met its burden of showing good cause. Aluminum Co. of Am. v. Bullock, 870 S.W.2d 2, 3, 37 Tex. Sup. Ct. J. 402 (Tex. 1994). The record must support a finding of good cause or lack of unfair surprise. Tex. R. Civ. P. 193.6(b). In some instances, the change in an expert's opinion does not require supplementation. For example, an expert may refine calculations or perfect a report up until the time of trial. Exxon Corp. v. West Tex. Gathering Co., 868 S.W.2d 299, 304, 36 Tex. Sup. Ct. J. 1206 (Tex. 1993). An expert also may change an opinion without supplementation if the opinion is an "expansion of an already disclosed subject." Navistar Int'l Transp. Corp. v. Crim Truck & Tractor Co., 883 S.W.2d 687, 691 (Tex. App.--Texarkana 1994, writ denied). However, a party may not present a material alteration of an expert's opinion at trial that would constitute a surprise attack. See West Tex. Gathering, 868 S.W.2d at 305. The purpose of requiring timely disclosure of a material change in an expert's opinion is to give the other party an opportunity to prepare a rebuttal. See id. at 304. Bailey's counsel acknowledged at oral argument that he should have supplemented the discovery responses with Dr. Darcey's revised diagnosis. We agree. It would have been the better practice for Bailey to timely supplement his discovery responses; nevertheless, the record supports the district court's ruling to admit the revised diagnosis.

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First, the record shows that Norfolk Southern was not unfairly surprised by the revised diagnosis. Norfolk Southern received a copy of the later pulmonary test in early August 2001, almost two months before trial. It was logical that Dr. Darcey would base his trial testimony on the newer pulmonary test, given that the earlier pulmonary test figured prominently in his original diagnosis. Because asbestosis is a progressive disease, see, e.g., Robinson v. Global Marine Drilling Co., 101 F.3d 35, 36 (5th Cir. 1996); Pustejovsky v. Rapid­American Corp., 35 S.W.3d 643, 646, 44 Tex. Sup. Ct. J. 89 (Tex. 2000), it should have been no surprise to Norfolk Southern that Bailey's condition might worsen between the original diagnosis in early 1997 and the trial over four years later in October 2001. The results of the later pulmonary test were admitted into evidence without objection. Additionally, Norfolk Southern had the opportunity to point out discrepancies in Dr. Darcey's testimony on cross­examination, which was a factor in the district court's ruling. Second, although we find no cases directly on point about admitting a change in testimony based on the progression of asbestosis, Dr. Darcey's revised diagnosis falls somewhere between a refinement in calculations, see West Tex. Gathering, 868 S.W.2d at 304, and an expansion of an already disclosed subject, see Navistar, 883 S.W.2d at 691, both of which are admissible without the need for supplementation. We therefore conclude that the district court acted within the bounds of its discretion when it denied Norfolk Southern's motion to strike Dr. Darcey's testimony about his revised diagnosis. Even if the district court admitted Dr. Darcey's testimony in error, Norfolk Southern has failed to show how the admission of Dr. Darcey's revised diagnosis led to the rendition of an improper judgment, especially in light of other evidence in the record reflecting Bailey's medical impairment. We overrule Norfolk Southern's first issue.of Dr. Darcey's second deposition. The record shows, however, that it objected to Dr. Darcey testifying about an increased risk of cancer, not about a fear of cancer. The district court overruled Norfolk Southern's objection. . . .

CONCLUSION

The district court acted within the bounds of its discretion in the evidentiary rulings that Norfolk Southern disputes. Furthermore, the rulings at issue did not lead to the rendition of an improper judgment in this case. Having overruled Norfolk Southern's issues, we affirm the judgment of the district court.

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§ 10.04

Sanctions for Failure to Provide Discovery

Page 621: [Add the following after Transamerican Natural Gas v. Powell.] SPOHN HOSPITAL v. MAYER 104 S.W.3d 878 (Tex. 2003).

PER CURIAM In this medical negligence case, the parties appealed portions of the trial court's judgment following a jury trial. The jury found the defendant Spohn Health System Corporation d/b/a Spohn Hospital liable and awarded damages to the plaintiffs, Karen Mayer and Sandra Hilbrich, individually and as representatives of the estate of their deceased father, Raymond Hilbrich. . . . We decide only the discovery issues in this opinion, and hold that the sanctions imposed by the trial court do not comport with the standards we established in TransAmerican Natural Gas Corporation v. Powell, 811 S.W.2d 913, 34 Tex. Sup. Ct. J. 701 (Tex. 1991). We further conclude that the trial court's abuse of discretion in ordering these sanctions probably caused the rendition of an improper judgment. Accordingly, we reverse the court of appeals' judgment and remand the case to the trial court. Plaintiffs Mayer and Hilbrich alleged that the negligence of Spohn's staff resulted in the death of their father. Mr. Hilbrich was admitted to Spohn on August 1, 1995. He was 86 years old, suffering from heart problems, and experiencing confusion and disorientation. On August 3, a nurse observed Mr. Hilbrich attempting to get out of his hospital bed for the third time. In response, Spohn moved him to the telemetry floor of the hospital in a room that was near the nurses' station. On the telemetry floor, he was able to call for a nurse by pressing a button that activated a call light at the nurses' station, and he was fitted with a medical monitoring device that relayed his vital signs to a monitoring station near the nurses' station. A telemetry technician at the monitoring station kept track of the patient's vital signs and was to notify the medical staff of any noteworthy changes in these signs. As a further precaution, Mr. Hilbrich was restrained with a Posey vest, which is a cloth device designed to limit a patient's ability to get out of bed. Gary Schmidt, the telemetry technician on duty at the hospital the night of August 4, 1995, noted in his witness statement that Mr. Hilbrich made four calls after 11:00 p.m. requesting a nurse's assistance. Schmidt further indicated that the nursing staff did not respond to

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the calls. The evidence established that at approximately 12:01 a.m., Mr. Hilbrich's telemetry monitor indicated that he was suffering from ventricular fibrillation. A nurse ran to Mr. Hilbrich's room and found him beside his bed with the Posey vest caught on the bed and wrapped around his neck. The nurse removed the vest to free Mr. Hilbrich, but, despite resuscitation efforts, he was pronounced dead a short time later. Mayer and Hilbrich sued Spohn on August 31, 1995. While preparing for trial, Spohn interviewed and took written statements from Schmidt, Aurora Silva, and some of the other nurses who had been on duty while Mr. Hilbrich was in the hospital. In April 1999, the plaintiffs propounded requests for disclosure on Spohn, including a request for disclosure of witness statements, as provided in Texas Rules of Civil Procedure 192.3(h). ("A party may obtain discovery of the statement of any person with knowledge of relevant facts--a `witness statement'--regardless of when the statement was made.") In June 1999, Spohn responded to the request for witness statements by producing the statements of two nurses. Spohn did not produce the statements of Schmidt, Aurora Silva, a nurse on duty the night Mr. Hilbrich died, or two other nurses, but stated in its response that documents were being withheld based on the attorney work­product doctrine. Mayer and Hilbrich threatened to file a motion to compel, but never did. On December 10, 1999, 31 days before trial, Spohn voluntarily produced the statements of Schmidt, Silva, and the two other nurses. At that time, Spohn stated that it had withheld the statements believing them to be exempt from discovery but that recent case law had convinced Spohn that the statements were now discoverable. Mayer and Hilbrich moved for sanctions, arguing that Schmidt's and Silva's written statements had a direct bearing on the issue of breach of the standard of care and that Spohn's late production of the statements prejudiced the plaintiffs' case. Schmidt's witness statement indicated that immediately prior to Mr. Hilbrich's death, Mr. Hilbrich called for a nurse four times. Schmidt stated that he either informed the nurses of each call, or had a nurse's aide inform them, but the nurses ignored the calls. Plaintiffs called Schmidt as a witness at the sanctions hearing, and his testimony was generally consistent with his written statement. Silva's witness statement concerned her actions the night of Mr. Hilbrich's death. When these events occurred, she was acting as the charge nurse, or the supervisor, of the 3:00 p.m. to 11:00 p.m. shift. She gave the instructions to move Mr. Hilbrich to a room near the nurses' station and place him in the Posey vest. In her statement she says that it "never occurred to her" that "she had not written the physicians' order" regarding the Posey vest restraint in Mr. Hilbrich's medical charts. Her statement did not say that Mr. Hilbrich was placed in the restraint without a physician's order. Silva testified at trial, but Schmidt did not. The trial court granted the plaintiffs' motion for sanctions and ordered that facts in Schmidt's and Silva's written statements be taken as

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established, pursuant to Rule 215.2(b)(3). The court instructed the jury, pursuant to its order of January 6, 2000, that: The following facts are to be taken as established in this case: Number one, that immediately prior to midnight on the date of his death, Raymond Hilbrich made four requests for assistance using the nurse's call button, spaced five minutes apart, each of which was noted and each of which was ignored by the nursing staff; and, two, Raymond Hilbrich was placed in the Posey vest, a physical restraint, without physician's order, either written or telephonic. At trial, in response to questioning by the plaintiffs, Spohn's nurses acknowledged that a failure to answer four calls from a patient would violate the standard of care. Spohn filed two bills of exceptions containing testimony from two other nurses on duty the night of Mr. Hilbrich's death. The two nurses would have testified that Schmidt never called them, contrary to his statement and to the court's instruction. Spohn contends that the nurses could not have appeared at trial to contradict the statements because the jury was required to take Schmidt's testimony as true. There was also evidence presented at trial from a representative of the Posey vest manufacturer and from a legend on the package for the vest indicating that federal law requires a physician's order to use a Posey vest. Although the trial court instructed the jury that Mr. Hilbrich was restrained with a Posey vest without a physician's order, Mr. Hilbrich's treating physician testified at trial that he approved the decision to place Mr. Hilbrich in the restraint. The jury returned a verdict for Mayer and Hilbrich and awarded damages, which, after the application of the cap on medical malpractice awards pursuant to the Medical Liability and Insurance Improvement Act, totaled $1,369,000. Of that amount, the jury awarded $780,000 to Karen Mayer, $1,140,000 to Sandra Hilbrich, and $66,150 to Mr. Hilbrich's estate. The trial court added pre­judgment interest and rendered judgment on the jury's verdict. The court of appeals affirmed, but modified the judgment to exclude the award of pre­judgment interest. We consider whether the trial court abused its discretion in ordering the sanctions under Rule 215.2(b)(3) against Spohn. The Rule states, in relevant part: (b) If a party . . . fails to comply with proper discovery requests . . . the court in which the action is pending may, after notice and hearing, make such orders in regard to the failure as are just, and among others the following: . . . . (3) an order that the matters regarding which the order was made or any other designated facts shall be taken to be established for the purposes of the action in accordance with the claim of the party obtaining the order.

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TEX. R. CIV. P. 215.2(b)(3) (emphasis added). Paragraph (b) explicitly requires that any sanction under that rule be "just." In TransAmerican Natural Gas Corporation v. Powell, 811 S.W.2d 913, 34 Tex. Sup. Ct. J. 701 (Tex. 1991), we defined the requirements for discovery sanctions to be "just" under Rules 215.2(b)(5) and 215.2(b)(3), which were in effect at that time. Because the relevant language in the revised Rule 215.2(b) and in the prior Rule 215.2(b) is identical, we apply the tenets of TransAmerican. TransAmerican set out a two­part test for determining whether a particular sanction is just. First, there must be a direct nexus among the offensive conduct, the offender, and the sanction imposed. See TransAmerican, 811 S.W.2d at 917. A just sanction must be directed against the abuse and toward remedying the prejudice caused to the innocent party, and the sanction should be visited upon the offender. Id. The trial court must attempt to determine whether the offensive conduct is attributable to counsel only, to the party only, or to both. Id. Second, just sanctions must not be excessive. Id. In other words, a sanction imposed for discovery abuse should be no more severe than necessary to satisfy its legitimate purposes, which include securing compliance with discovery rules, deterring other litigants from similar misconduct, and punishing violators. Id.; Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 849, 36 Tex. Sup. Ct. J. 76 (Tex. 1992). We require courts to consider less stringent sanctions and whether such lesser sanctions would fully promote compliance. TransAmerican, 811 S.W.2d at 917; Chrysler Corp., 841 S.W.2d at 849. We reiterate that "case determinative sanctions may be imposed in the first instance only in exceptional cases when they are clearly justified and it is fully apparent that no lesser sanctions would promote compliance with the rules." GTE Communications Sys. Corp. v. Tanner, 856 S.W.2d 725, 729, 36 Tex. Sup. Ct. J. 1212 (Tex. 1993). This is not an exceptional case. Spohn contends that the sanctions imposed were not "just" because a direct nexus did not exist between the alleged offensive conduct and the sanctions. Spohn argues that the sanctions were not directed against the purported abuse and toward remedying any prejudice caused to the plaintiffs. Rather, Spohn asserts, the sanctions gave the plaintiffs an overwhelming and unwarranted advantage at trial by having crucial facts deemed established without offering any evidence in support of them. Mayer and Hilbrich argue that the sanctions were a just and measured response to the specific harm caused to an innocent party by Spohn's discovery abuse. They further assert that Spohn was not prevented from offering to the jury alternative explanations for Mr. Hilbrich's death. Mayer and Hilbrich contend that the sanctions order did not establish all the elements of their suit because other witnesses were required to testify that the conduct described in the established facts violated the applicable standard of care. Instead, Mayer and Hilbrich argue that the sanctions simply prevented the jury from rejecting the established facts. We agree with Spohn that the trial court did not adhere to either prong of the TransAmerican test. The first prong requires a direct nexus among

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the conduct, the offender, and the sanction imposed. Transamerican, 811 S.W.2d at 917. Although the sanctions were generally "directed against" the alleged abuse, the record contains no evidence that the sanctions were "visited on the offender." In fact, neither the trial court nor the court of appeals discusses whether counsel or their clients were responsible for the discovery abuse. The second prong of TransAmerican mandates that the trial court consider less stringent measures before settling on severe sanctions. Id.; Chrysler Corp., 841 S.W.2d at 849. This Court has noted that the record should contain some explanation of the appropriateness of the sanctions imposed. See Chrysler Corp., 841 S.W.2d at 852­53; see also GTE Communications, 856 S.W.2d at 729; Otis Elevator Co. v. Parmelee, 850 S.W.2d 179, 181, 36 Tex. Sup. Ct. J. 479 (Tex. 1993). In this case, the record is silent regarding the consideration and effectiveness of less stringent sanctions. 4 Discovery sanctions that are so severe as to inhibit presentation of the merits of a case should be reserved to address a party's flagrant bad faith or counsel's callous disregard for the responsibilities of discovery under the rules. TransAmerican, 811 S.W.2d at 918. Sanctions such as the one imposed here are the type which inhibit the presentation of a party's claim. See Braden v. Downey, 811 S.W.2d 922, 929, 34 Tex. Sup. Ct. J. 721 (Tex. 1991). The trial court's order states that the sanctions were imposed because of "Spohn's late production of witness statements in response to a Request for Disclosure." This is insufficient to justify the severity of the sanctions imposed. They were excessive. Therefore, since the trial court did not comply with the required procedural and substantive standards in imposing sanctions, we hold that the trial court abused its discretion in ordering that the specified portions of the witness statements be taken as established facts at trial. The trial court's abuse of discretion resulted in harmful error. The trial court instructed the jury to take the substance of the witness statements as established facts, and the jury was not at liberty to disbelieve them. The record in this case shows that the facts "established" by the court's order were quite effective before the jury and likely determinative. Before the presentation of evidence, the judge read the instructions from the order to

4 For example, the trial court could have ordered a trial continuance to allow the witnesses to be deposed or re­deposed. In that scenario, Mayer and Hilbrich could have obtained the testimony in an admissible form for trial, and the trial court could have considered re­ allocating the costs of the depositions. These and other measures could have been considered or utilized prior to, or perhaps in lieu of, the severe sanctions ordered. See, e.g., Occidental Chem. Corp. v. Banales, 907 S.W.2d 488, 490, 38 Tex. Sup. Ct. J. 880 (Tex. 1995) (per curiam) (conditionally granting writ of mandamus vacating trial court's order compelling production of attorney's notes from interviews with witness as a remedy for discovery abuse because there was no showing why less severe sanctions--including ordering the examination of the witnesses--would not have cured the abuse); In re Dynamic Health Inc., 32 S.W.3d 876, 885­86 (Tex. App. ­ Texarkana 2000, no pet.) (holding that trial court was warranted in imposing death penalty sanctions after finding that lesser sanctions imposed failed to compel compliance with discovery requests).

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the jury. Plaintiffs' counsel used the trial court's instruction during voir dire to question potential jurors on their ability to "accept" the court's instructions, during opening statement to emphasize that the hospital "failed in its duty" by ignoring Mr. Hilbrich when he called four times for help, during testimony of their expert to challenge the assertion that the hospital had met the standard of care, and during closing argument to assert that Spohn was inviting the jury to "violate the instructions that Her Honor" had given them. In addition, the court's instruction misstated facts from Silva's written statement. Silva did not indicate that no physician had given the order to restrain Mr. Hilbrich in a Posey vest. She simply stated that it "never occurred to her" that she had not written the physician's order. The trial court thus ordered the jury to accept an important fact in Silva's statement as true, when the fact was not in her statement at all. Further, a review of the record reveals no other evidence admitted at trial regarding the specific events from Schmidt's statement that were the subject of the court's order. Rather, according to Spohn's bills of exceptions, two witnesses--both of whom were nurses on duty the night of Mr. Hilbrich's death--would have given testimony contrary to Schmidt's. Even if admitted, the jury would have been unable to believe the two nurses' testimony and also comply with the trial court's instruction to presume the veracity of the established facts. The statements at issue essentially proved that Spohn breached its duty to Mr. Hilbrich. We conclude that the instructions regarding the established facts "probably caused the rendition of an improper judgment." TEX. R. APP. P. 61.1(a). Accordingly, we grant Spohn's petition for review, and without hearing oral argument, reverse the court of appeals' judgment, order the trial court to vacate its order of January 6, 2000, and remand this case to the trial court for a new trial and further proceedings consistent with this opinion. See TEX. R. APP. P. 59.1

Page 623: [Add at the end of Note (2):]

While ordinarily a trial court is "required to test the effectiveness of lesser sanctions by actually implementing and ordering each sanction that would be appropriate to promote compliance" a trial court's order analyzing the available sanctions and offering a reasoned explanation as to the appropriateness of death penalty sanctions was held to be sufficient, without the actual "testing" of the lesser sanctions. Cire v. Cummings, S.W.3d, 47 Tex. Sup. Ct. J. 465 (Tex. 2004).

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Page 624: [Add as new note (8):]

(8) Death Penalty Sanctions. Death penalty sanctions commonly consist of striking pleadings or rendering default judgment, but may include any sanction that is case determinative. See Adkins Services, Inc. v. Tisdale Co., Inc., 56 S.W.3d 842, 845 (Tex. App.--Texarkana 2001, no pet.) (trial court's exclusion of testimony that supported the assignment of the right to pursue lawsuit constituted a death penalty sanction because it precluded assignee's ability to recover). Thus, lesser sanctions must first be tested.

§ 10.05

Abatement of Discovery

Page 624: [Add as new section 10.05:] Under what circumstances is it proper for the trial court to abate discovery? IN RE VAN WATERS & ROGERS, INC. 62 S.W.3d 197 (Tex. 2001)

PER CURIAM The fifteen relators in this original mandamus proceeding are defendants in a seven­year­old mass­tort suit involving 448 plaintiffs. Relators seek relief from the trial court's orders abating almost all discovery and allowing the plaintiffs' counsel to pick which plaintiffs' claims will be tried first. Many of the relators and other defendants who have since settled sought the same relief more than three years ago in mandamus petitions first to the court of appeals, which denied relief without opinion, and then to this Court. We denied relief "without prejudice" to give the trial court "the opportunity to reconsider the abatement order" in light of our then­ recent opinion in In re Colonial Pipeline Co. [968 S.W.2d 938 (Tex.1998)]. Relators immediately moved the trial court for such reconsideration, but after the trial court delayed ruling on their motion for a year, relators again petitioned the court of appeals for mandamus relief. While relators' petition was pending there, the trial court denied relators' motion. The court of appeals conditionally granted partial relief, and relators have now returned here. We grant additional relief. The underlying litigation was filed on August 25, 1994, by 454 plaintiffs (a few of whose claims have since been dismissed) who had worked at the Parker­Hannifin Corporation's O­ring seal manufacturing facility in McAllen. They alleged that they had suffered personal injuries from exposure to what they called a "toxic soup" of chemicals in the plant environment, chemicals they claimed were made by or supplied to the plant by the 55 defendants originally named in the suit. After the case was removed to federal court and remanded, the defendants requested discovery from the plaintiffs by various means, most of which the plaintiffs simply ignored. Eventually, most of the plaintiffs produced some information regarding

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their claimed injuries and the possibly causative chemicals, but almost none of the information was specific enough to be meaningful. For example, in response to the following interrogatory-- Please state the name and address of each and every doctor, physician or other medical practitioner who has attributed your alleged injury made the basis of this lawsuit to exposure to the defendants' products, including the dates of treatment or examination of each such doctor, physician or other medical practitioner, and the name or identity of the product to which your alleged injury is attributed. --the plaintiffs uniformly answered they did not recall. When the defendants sought to depose the plaintiffs, the plaintiffs moved to try a few of the claims first and restrict discovery to them. On November 20, 1997, the trial court ordered the plaintiffs' counsel to select twenty plaintiffs to go to trial and limited discovery to them, to persons designated by them as having knowledge of relevant facts, and to non­parties. The court also permitted the defendants to take additional depositions on a showing of "particularized need", which it did not define. When the defendants attempted to obtain discovery from non­parties unrelated to the twenty designated plaintiffs, the court on December 23, 1997, ordered that all discovery, whether from parties or non­parties, be limited to the twenty designated plaintiffs. The defendants petitioned for relief from these orders, and while their petition was pending in this Court, we held in In re Colonial Pipeline Co. that a similar abatement of discovery was a clear abuse of discretion. There, over three thousand plaintiffs sued three defendants alleging that they had been injured when four pipelines ruptured releasing hazardous substances. Concerning the trial court's nearly complete abatement of discovery, we wrote: In this case, relators are precluded from obtaining even the most basic information from 3,265 plaintiffs until after the claims of the initial trial group of ten are resolved. Given that three and a half years have already passed since the incident underlying this case occurred, it could be many months or even years before any discovery is available. Unfortunately but inevitably, memories fade with time and evidence may be lost or corrupted. Documents may be destroyed in compliance with document retention programs. More importantly, there were four different pipelines with different substances involved. Certain illnesses or damage may conceivably be attributable to one but not all of the substances involved. The defendants have not been provided, among other things, with descriptions of the plaintiffs' alleged injuries, the names of treating physicians, or the names of the substances that caused the alleged injuries. Without discovery of basic medical information from all the plaintiffs, each defendant is put in the position of preparing to defend itself against claims that may not involve the substance that was contained in its pipeline. While we encourage trial courts to manage litigation actively, to try test cases to establish

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benchmark results, and to prohibit needless or repetitive discovery in thousands of cases that might never be tried, "[e]ach defendant is entitled to discover whether there has been a medical determination that an illness has been caused by that defendant's product." Able Supply Co. v. Moye, 898 S.W.2d 766, 770 (Tex.1995). We therefore conclude that the trial court's order abating all discovery from such a large group of parties constitutes an abuse of discretion. Rather than review the similar abatement of discovery in this case, which was ordered without benefit of our views in Colonial Pipeline, we denied relators' petition for mandamus to allow the trial court to reconsider its rulings On October 23, 1998, eight days after our opinion issued, relators moved the trial court for such reconsideration. The court held several hearings on that motion and others that were filed, and allowed the plaintiffs' counsel to designate a new group of twenty­five plaintiffs to go to trial, only one of whom was included in the first twenty. But the court did not rule on relators' motion for reconsideration despite relators' multiple requests that it do so. Nearly a year passed, and relators again sought relief by mandamus. At oral argument in the court of appeals, relators' counsel was handed the trial court's November 4, 1999 order denying the motion to reconsider. The order recited that defendants had been afforded more discovery than the defendants in Colonial Pipeline, and that additional discovery could delay trial-- which, of course, had already been delayed five years with almost no discovery. The court of appeals concluded that the trial court had clearly abused its discretion by refusing to require the plaintiffs to answer the interrogatory quoted above, which requested essentially the same information that we required the plaintiffs to provide in Moye and Colonial Pipeline. But the court of appeals refused to direct the trial court to permit any further discovery, concluding: We do not believe the supreme court in Colonial Pipeline intended to prohibit trial courts from selecting small groups of trial plaintiffs to serve as test cases while abating discovery as to the remaining plaintiffs in order to manage mass tort cases. Indeed, the supreme court has previously recognized the importance of allowing trial courts to manage their own dockets in such a manner. See Polaris Inv. Management Corp. v. Abascal, 892 S.W.2d 860, 861 (Tex.1995). The court of appeals refused to disturb the trial court's orders abating other discovery and allowing the plaintiffs' counsel to pick claims to go to trial without judicial oversight or meaningful input from the defendants. Relators here argue that the trial court has simply refused to follow our decision in Colonial Pipeline and has unduly delayed reconsidering its orders as we requested. We agree. Neither the trial court, nor the plaintiffs as the real parties in interest, have suggested any basis for this delay. Furthermore, as the court of appeals concluded, the plaintiffs have failed to show why after seven years of litigation they should not be required to provide the same basic information regarding their individual injuries and

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the causative chemicals that we required in Moye and Colonial Pipeline. But in refusing to direct the trial court to permit additional discovery, the court of appeals misread our opinion in Polaris. There we held that a trial court's abatement of discovery for seven months in a mass­tort case would not be reviewed by petition for mandamus. Nothing in our opinion suggests that an improper abatement of discovery can never be reviewed, even after seven years. While it is certainly true that a trial court must be given latitude in managing discovery and preparing a case for trial, especially a case as complex as this, that latitude is not unbounded. Here, as in Colonial Pipeline, the parties now face the very real threat that after seven years evidence will be destroyed, witnesses will die or disappear, and memories will be impaired. A blanket abatement of discovery cannot be justified by the goal of an orderly trial process when not one plaintiff has yet gone to trial. To abate discovery for years without justification is a clear abuse of discretion. Furthermore, in denying relators relief from the trial court's order allowing the plaintiffs' counsel to select the claims to be tried first, the court of appeals failed to follow our opinions in In re Ethyl Corp., 975 S.W.2d 606 (Tex.1998), and In re Bristol­Myers Squibb Co, 975 S.W.2d 601 (Tex.1998). In those cases we recognized that in mass­tort cases the plaintiffs' claims may be tried a few at a time, but we set out factors for trial courts to consider in determining what claims to consolidate for trial, including: whether the plaintiffs to be tried together worked in the same place, at similar jobs, during similar time periods; whether their diseases or injuries are or were similar, and they are living or deceased; whether they are represented by the same counsel; and the status of discovery. Another consideration is the maturity of the tort. We admonished trial courts to be "very cautious both in choosing the cases that are initially set and in proceeding with the actual trial to ensure that the process remains fair to all." In the present case, the trial court did not consider the factors we prescribed; indeed, it could not have done so because it has prevented much of the information pertinent to those factors from being adduced through discovery. While its order permitted the defendants to object to the plaintiffs selected for trial, their bases for doing so have been restricted by their limited access to discovery. To abate meaningful discovery and allow the plaintiffs' counsel to select what claims will be tried, as the trial court has done, is not a process "fair to all". As in Colonial Pipeline, the trial court's discovery order denies defendants "discovery that goes to the heart of the litigation." Moreover, the continued abatement of the discovery process after seven years of litigation threatens that evidence critical to the claims made will become unavailable before discovery can be conducted. For these reasons we conclude as we did in Colonial Pipeline that relators do not have an adequate remedy by appeal. 20

20 968 S.W.2d at 942 (citing Walker v. Packer, 827 S.W.2d 833, 843 (Tex.1992) (stating that "a denial of discovery going to the heart of a party's case may render the appellate remedy inadequate").

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To avoid further delay, we direct the trial court to: vacate its orders of November 20, 1997, December 23, 1997, and November 4, 1999, within five days of the date of this opinion; permit relators to proceed with discovery from the plaintiffs under the Rules of Civil Procedure without delay; and determine, after adequate discovery, following the procedures we have laid out in Ethyl and Bristol­Myers, how the plaintiffs' claims should proceed to trial. The writ will issue only if the trial court fails to comply. Tex.R.App. P. 59.1.

Chapter 11 DISPOSITION WITHOUT TRIAL

§ 11.01

Judgment by Default

NOTES AND QUESTIONS

Page 656: [Add new Notes (4) and (5).]

(4) Evidence of Damages. Can the plaintiff use affidavits rather than live testimony to prove up unliquidated damages at a default judgment hearing? The Texas Supreme Court says yes. In Texas Commerce Bank v. New, 3 S.W.3d 515, 516­517 (Tex. 1999) (per curiam), the Court held that bank officers' affidavits identifying the total amount owed (as a consequence of the defendants' check­kiting scheme) supported a default judgment as to damages, and an affidavit from the bank's general counsel supported the award of attorneys' fees. To the extent that the affidavits were hearsay, they still supported the judgment because they were admitted without objection. (5) Notice of Default Judgment Hearing. Is the Plaintiff required to give the Defendant notice of the default judgment hearing? Should notice be required? Cont'l Carbon Co. v. Sea-Land Serv., Inc., 27 S.W.3d 184, 189 (Tex. App.-Dallas 2000, pet. denied) (Plaintiff is not required to provide notice of the default judgment hearing to a non-answering defendant before the trial court renders the default judgment.) See Julia Pendery, Shawn M. McCaskill, & Hilaree A. Casada, Dealing With Default Judgments, 35 St. Mary's L. J. 1 (2003), for a comprehensive treatment of the subject.

§ 11.02

Dismissal for Want of Prosecution

Page 658: [Add to the end of Note (4):]

A party's right to a hearing prior to a trial court dismissal for want of prosecution may be satisfied if the trial court holds a hearing on a motion to reinstate affording the dismissed party the opportunity to present evidence concerning the propriety of the dismissal. Franklin v. Sherman I.S.D., 53 S.W.3d 398, 402--403 (Tex. App.--Dallas 2001, pet. denied.). However, the trial court must give notice of the specific grounds upon which a dismissal is based. Johnson­Snodgrass v. KTAO, Inc., 75 S.W. 3d 84 (Tex. App.--Fort Worth 2000, no pet.) (holding that a dismissal notice indicating only that the case was subject to dismissal for noncompliance with the supreme court time standards, did not support dismissal after a hearing on a motion to reinstate based upon the court's inherent powers.). 259

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§ 11.03

Summary Judgment

[A]--Standards and Procedure for Granting [2]--No Evidence Motions

Page 669: [Correct petition history of Moore v. K Mart Corp., to "pet. denied."] Page 674: [Add the following case after Moore v. K Mart Corp.] BARRAZA v. EUREKA CO. 25 S.W.3d 225 (Tex. App.--El Paso 2000, pet. denied)

CHEW, J. This is an appeal from a grant of summary judgment in a nonsubscriber negligence suit. Lorenza Barraza sued her employer claiming that she suffered an on­the­job injury, between June and September of 1995, in the course and scope of her employment. Appellee filed a combined motion for traditional and no­evidence summary judgment on September 23, 1998, claiming that Barraza could not produce evidence of a breach of a duty of care or proximate cause. The trial court signed an order granting Eureka's motion for summary judgment on November 9, 1998. Barraza brings two issues before this Court: (1) that the trial court erred in granting Eureka's motion for summary judgment because Barraza presented more than a scintilla of probative evidence that raised a genuine issue of material fact on all elements of Barraza's negligence claim; and (2) that the trial court erred in striking portions of Barraza's summary judgment evidence. Eureka brings a cross­issue that the trial court erred in denying its motion to strike the affidavit of Barraza's expert. We will affirm the judgment of the trial court. Lorenza Barraza had been employed by Eureka as a molding machine operator since December of 1994. She worked on several different types of molding machines during her term of employment, but believes that working on a furniture guard molding machine caused her injuries. The furniture guard molding machine was a "manual" machine, meaning that Barraza had to place a piece of plastic in the machine and close the door of the machine. A furniture guard was then molded to the machine. Barraza would then open the machine and remove the finished piece. She said it was often difficult to remove the finished piece, and she would have to pull repeatedly on the piece until it came loose from the machine. In June of 1995, she began experiencing pain in her wrists and hands. In September of 1995, she filed an incident report with her employer. We will address Barraza's issues in reverse order. In her second issue, she contends that the trial court erred in striking a portion of her summary

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judgment evidence. We agree. In her response to Eureka's motion for summary judgment, Barraza attached various documents as evidentiary support for her negligence claim. These included portions of her own deposition, portions of the depositions of six of her coworkers, incident reports of two of her coworkers, and the affidavit of Thomas McLean, her expert witness in the field of industrial engineering. Barraza made specific reference to some of these documents in her response to Eureka's motion for summary judgment. Eureka filed a motion to strike, as far as we can tell, all of Barraza's summary judgment evidence, arguing that the unreferenced portions did not meet the requirements of Rule 166a(d) of the Rules of Civil Procedure, the referenced portions were inadmissible hearsay, that Barraza's expert was not qualified, and that the expert's affidavit contained only legal conclusions, and therefore was of no probative force. The trial court granted the motion to strike all the unreferenced discovery, and denied the motion in all other respects. On appeal, Barraza argues that the trial court's decision to strike the evidence was "inequitable." Rulings concerning the admission or exclusion of summary judgment evidence are reviewed under an abuse of discretion standard. See Ho v. University of Texas at Arlington, 984 S.W.2d 672, 680 (Tex.App.--Amarillo 1998, pet. denied); Sanders v. Shelton, 970 S.W.2d 721, 727 (Tex.App.--Austin 1998, pet. denied). A trial court abuses its discretion if it acts without any reference to any guiding rules or principles. See E.I. du Pont de Nemours and Co., Inc. v. Robinson, 923 S.W.2d 549, 558 (Tex. 1995); Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241­42 (Tex. 1985), cert. denied, 476 U.S. 1159, 106 S. Ct. 2279, 90 L. Ed. 2d 721 (1986). We will construe this issue as a contention that the trial court abused its discretion in striking the summary judgment evidence. On appeal, Eureka does not reassert its claim that portions of the evidence are inadmissable hearsay, thus we will not consider this contention. Eureka contends that under Rule 166a(d) of the Rules of Civil Procedure and Texas case law, the trial judge was correct to strike the summary judgment evidence. Rule 166a(d) provides in relevant part, that: Discovery products not on file with the clerk may be used as summary judgment evidence if copies of the material, appendices containing the evidence, or a notice containing specific references to the discovery or specific references to other instruments are filed and served on all parties. . . . TEX.R.CIV.P. 166a(d). Eureka contends that "in order to meet the requirements of Rule 166a(d), Texas Courts have consistently held that the party is required to identify the specific evidence in the deposition on which it relies." [Emphasis in original]. Under Eureka's interpretation of the rule, the trial court can disregard all evidence the proponent does not specifically bring to the attention of the court. We do not believe this is the meaning of the rule. Rule 166a(d) provides three methods to present unfiled discovery before the trial court. First, a party may file the discovery with the trial court.

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Second, a party may file an appendix containing the evidence. Finally, a party may simply file a notice with specific references to the unfiled discovery. Nowhere does the rule require that the proponent of the evidence provide specific references to the discovery, if the actual documents are before the trial court, in order for the trial court to consider it. The Texas Supreme Court has held that the "notice of intent" requirement is fulfilled when the proponent attaches copies of the discovery as support. See McConathy v. McConathy, 869 S.W.2d 341, 342 n.2 (Tex. 1994). Eureka contends however, that the holdings in Salmon v. Miller, 958 S.W.2d 424, 428 (Tex. App.--Texarkana 1997, pet. denied), FIdelity & Guaranty Co., 850 S.W.2d 621, 623 (Tex.App.--Corpus Christi 1993, writ denied) support its contention that "the party is required to identify the specific evidence in the depositions on which it relies." All three of these cases are distinguishable. In Salmon, the proponent of the evidence was the movant and the appellee on appeal. See Salmon, 958 S.W.2d at 426. The movant filed a notice of intent to use unfiled discovery as summary judgment evidence. See Salmon, 958 S.W.2d at 427 n.3. The notice did not contain any specific references to the unfiled discovery. Additionally, the actual documents relied upon were not before the trial court until one month after summary judgment was rendered. See Salmon, 958 S.W.2d at 427. The issue before the Texarkana Court was not whether the trial court could strike all evidence not specifically referenced in the summary judgment motion, but rather, could the trial court consider evidence the movant only alleged to have in its possession. See Salmon, 958 S.W.2d at 428. The Texarkana Court concluded that the party that wished to rely on the unfiled discovery must convey to the trial judge the substance of the evidence. See id. This could be done by filing copies of the evidence or by citing specific language from the discovery to the trial court. See id. In any case, "'it is incumbent upon the party relying on unfiled summary judgment evidence to show by a record that the substance of unfiled discovery was presented to the trial court before it ruled on a motion for summary judgment.' " Salmon, 958 S.W.2d at 428­29, citing E.B. Smith, 850 S.W.2d at 624. The proponent of the evidence in E.B. Smith also filed a motion with specific references to unfiled discovery, but failed to file the discovery or present any specific language from the discovery to the trial court. See E.B. Smith, 850 S.W.2d at 623. The Corpus Christi Court held that the evidence was not before the judge, and could not be considered on appeal. See id. at 624. Both E.B. Smith and Salmon concern a situation we do not have in this case: specific references to unfiled discovery that is not before the trial court. Here, it is undisputed that the trial court had the unfiled discovery before it; it was attached to Barraza's response. In Guthrie, the First Court of Appeals considered a situation more analogous to this case. The proponent of the evidence attached a 500­page deposition to his response to a motion for summary judgment. See Guthrie, 934 S.W.2d at 825. He failed to make any reference to the deposition in

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his response, and the trial court refused to consider the deposition as summary judgment evidence. See Guthrie, 934 S.W.2d at 826. The court of appeals upheld the trial court's decision, reasoning that "the trial court should not be compelled to sift through a 500­page deposition to search for evidence supporting the contestants' contentions." Id. The court of appeals relied on the Supreme Court's holding in Rogers v. Ricane Enterprises, Inc., 772 S.W.2d 76, 81 (Tex. 1989), that general references to a voluminous record do not direct trial courts and parties to evidence on which the movant relies. See id. Again, the Guthrie case is distinguishable. First, Barraza did not attach a "voluminous" record. She attached only portions of depositions and other documents that total 278 pages. This does not come near the 500­page deposition in Guthrie. Additionally, Barraza provides specific references to parts of this evidence she believes particularly support her claim, about twenty references in all. We believe this is not a Rogers' situation, and the trial court abused its discretion in striking the unreferenced portions of Barraza's evidence. We sustain Barraza's Issue Two. This does not end our inquiry, however, because summary judgment is a question of law. We can examine the evidence that the trial court should have considered to determine if summary judgment was proper even if the trial court had not struck part of Barraza's evidence. First, however, we must examine the cross­issue that Eureka raises. Eureka contends that the trial court erred in denying its motion to strike the affidavit of Thomas McLean, Barraza's expert. In his affidavit, McLean bases his opinion on his review of the depositions of Barraza and six of her coworkers, Eureka's Employees Handbook, New Employee Safety Orientation, Occupational Injury Benefit Program, and Eureka's OSHA Form 2000. He concludes that Eureka knew the hazards associated with the manual furniture guard molding machine because of the employees' complaints of injuries associated with use of the machine. He avers that Eureka knew Barraza was hurt, but they "did nothing," and this was negligence on their part. He then summarizes the testimony of one of Barraza's coworkers, that the coworker's wrist became sore when using the manual furniture guard molding machine, and that others also testified that a person was more likely to get a sore wrist when working with a manual machine compared with an automatic machine. He then concludes that Eureka knew the manual machines were "more dangerous" than the automatic machines, and that Eureka was negligent in continuing to use the manual machines. In the final paragraph, he avers that three other employees have sustained repetitive motion injuries because of working with the manual furniture guard molding machines. Finally, he concludes that the continual use of the manual machines and the risk they presented to the employees amounted to negligence and this negligence was the proximate cause of Barraza's injury. Eureka objected to this affidavit on two grounds, arguing first that the portions stating that Eureka was negligent and this negligence was the proximate cause of Barraza's injuries are legal conclusions, and are of no probative force. Second, Eureka argued that as an industrial engineer,

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McLean was not qualified to render a medical opinion as to what caused Barraza's injuries. We agree. The affidavit is rife with conclusions. Legal conclusions of an expert are not of probative force to establish proximate cause. He must link his conclusions to the facts. See Earle v. Ratliff, 998 S.W.2d 882, 890 (Tex. 1999); Life Ins. Co. of Virginia v. Gar­Dal, Inc., 570 S.W.2d 378, 381­82 (Tex. 1978). The trial court could have struck McLean's affidavit on this ground alone. The trial court should have struck the affidavit for another reason as well. Barraza failed to carry her burden of proof to establish that McLean was qualified to offer his opinion on the cause of her injuries. Under the holding in Robinson, once a party objects to the expert's testimony, the party offering the expert testimony has the burden of proof to establish that the testimony is admissible. See Robinson, 923 S.W.2d at 557. Barraza failed to file a response to Eureka's motion to strike. A legitimate question exists whether McLean is qualified, as an industrial engineer, to render a medical opinion as to the cause of Barraza's injuries. He claims to have studied repetitive motion injuries in the garment industry, but fails to link this to the work Barraza was performing and the alleged resulting injuries. Generally, causation in a case such as this would have to be established by a medical doctor. See Gammill v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 719 (Tex. 1998); Broders v. Heise, 924 S.W.2d 148, 153 (Tex. 1996). Because Barraza failed to carry her burden to prove that McLean was qualified, and because the affidavit is no more than legal conclusions that are of no probative force, we conclude that the trial court abused its discretion in denying Eureka's motion to strike the affidavit of Dr. McLean. In her Issue Two, Barraza contends that the trial court erred in granting summary judgment because she presented evidence that raised a genuine issue of material fact on each element of her negligence claim. Eureka moved for summary judgment on both traditional and no­evidence grounds, and the trial court did not specify upon which ground he granted the motion. We can uphold the judgment of the trial court on either ground, and will address the no­evidence summary judgment standard first. Under the "no­evidence summary judgment" rule, the movant may move for summary judgment if, after adequate time for discovery, there is no evidence of one or more essential elements of a claim or defense on which the nonmovant would have the burden of proof at trial. TEX.R.CIV.P. 166a(i). The motion must state the elements as to which there is no evidence. See id. The reviewing court must grant the motion unless the nonmovant produces summary judgment evidence raising a genuine issue of material fact. See id. Under the no evidence summary judgment standard, the party with the burden of proof at trial will have the same burden of proof in a summary judgment proceeding. See, e.g., Esco Oil & Gas, Inc. v. Sooner Pipe & Supply Corp., 962 S.W.2d 193, 197 n.3 (Tex.App.--Houston [1st Dist.] 1998, pet. denied) (commenting that under Rule 166a(i) "the plaintiff as the nonmovant [has] the burden to raise a triable issue on each element essential to the plaintiff's case against each defendant.").

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Two recent opinions issued by the San Antonio Court of Appeals state the applicable standard of review for no­evidence summary judgments: " `A no­evidence summary judgment is essentially a pretrial directed verdict,' and we apply the same legal sufficiency standard in reviewing a no­ evidence summary judgment as we apply in reviewing a directed verdict. . . ." Taylor­Made Hose, Inc. v. Wilkerson, 1999 Tex. App. LEXIS 1218, No. 04­97­01025­ CV, 1999 WL 90021, at *2 (Tex.App.--San Antonio Feb. 24, 1999, no pet.h.)(op. on reh'g), quoting Moore v. K Mart Corp., 981 S.W.2d 266, 269 (Tex.App.--San Antonio 1998, pet. denied); see also Hon. David Hittner & Lynne Liberato, Summary Judgments in Texas, 34 HOUS.L.REV. 1303, 1356 (1998)(no­evidence summary judgment is essentially pretrial directed verdict). A no­evidence summary judgment is properly granted if the nonmovant fails to bring forth more than a scintilla of probative evidence to raise a genuine issue of material fact as to an essential element of the nonmovant's claim on which the nonmovant would have the burden of proof at trial. See TEX.R.CIV.P. 166a(i); Merrell Dow Pharmaceuticals, Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997), cert. denied, 523 U.S. 1119, 118 S. Ct. 1799, 140 L. Ed. 2d 939 (1998). If the evidence supporting a finding rises to a level that would enable reasonable, fair­minded persons to differ in their conclusions, then more than a scintilla of evidence exists. Havner, 953 S.W.2d at 711. Less than a scintilla of evidence exists when the evidence is "so weak as to do no more than create a mere surmise or suspicion . . ." of a fact, and the legal effect is that there is no evidence. Kindred v. Con/ Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983); Taylor­Made Hose, Inc., 1999 Tex. App. LEXIS 1218, *6­7, 1999 WL 90021, at *2. An employer is not an insurer of its employees' safety at work; however, an employer does have a duty to use ordinary care in providing a safe work place. See Leitch v. Hornsby, 935 S.W.2d 114, 117 (Tex. 1996); I.M. Werner v. Colwell, 909 S.W.2d 866, 869 (Tex. 1995). For decades, Texas courts have recognized that this duty is an implied part of the employer­employee relationship. See Missouri, K. & T. Ry. Co. of Texas v. Hannig, 91 Tex. 347, 43 S.W. 508, 510 (1897). Thus, we will assume Eureka had a duty to Barraza. In a negligence case, a plaintiff must plead and prove that the defendant's negligence is the proximate cause of his injury. Proximate cause consists of cause in fact and foreseeability. See Leitch, 935 S.W.2d at 118­119, citing Farley v. M.M. Cattle Co., 529 S.W.2d 751, 755 (Tex. 1975). We will assume for the purposes of argument only that it was foreseeable that Barraza could sustain an injury due to repeated use of the manual furniture guard molding machine. As to cause in fact, we believe this case is strikingly similar to the Leitch case. In Leitch, the plaintiff did not have medical testimony establishing a link between the injury and the alleged negligence. See Leitch, 935 S.W.2d at 119. The Supreme Court held that expert testimony was required to establish this link. See Leitch, 935 S.W.2d at 119. Barraza argues that the holding in Leitch is limited to the facts of that case,

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and that common sense and general experience lead to the conclusion that Barraza's injury was caused by the negligence of Eureka. Specifically, she argues, "it does not take a doctorate degree or keen scientific knowledge to discern that Defendant's failure to remove a manual furniture guard molding machine from Plaintiff's workplace and requiring Plaintiff to use this machine caused Plaintiff's injuries." We disagree. If expert knowledge is required to establish that proper lifting equipment could have prevented the injury in Leitch, then it is certainly required here to establish that a different type of machine would have prevented Barraza's injuries. In support of proximate cause, Barraza offered her testimony, the testimony of her coworkers, and the affidavit of Thomas McLean, Ph.D., an industrial engineer. The testimony of Barraza and her coworkers as to the cause of her injury is conjecture, and cannot support a finding of proximate cause. For the reasons stated in addressing Eureka's cross­issue, the affidavit of Dr. McLean does not establish proximate cause either. However, because the trial court refused to strike the affidavit, it should not have granted Eureka's motion for summary judgment. The affidavit was more than a scintilla of evidence of a breach of the duty of care, and of proximate cause. If a trial court agrees to accept an expert's opinion, that opinion constitutes more than a scintilla of evidence that defeats a no­ evidence summary judgment motion. This principle is illustrated in Frazier v. Yu, 987 S.W.2d 607 (Tex.App.-- Fort Worth 1999, no pet.h.). In Frazier, the movant objected to the plaintiff's affidavits on several grounds, and urged the trial court to rule that the affidavits were not competent summary judgment evidence. See Frazier, 987 S.W.2d at 609. The trial court never explicitly ruled on the motion to strike, but granted the motion for summary judgment against the plaintiffs. See Frazier, 987 S.W.2d at 609. The trial court's order stated that it had considered all "competent" summary judgment evidence. See id. at 610. The court of appeals held that because the trial court granted summary judgment, it had implicitly struck the affidavits, otherwise they would constitute competent summary judgment evidence. See id. This case is the converse of the Frazier case. Because the trial court refused to strike McLean's affidavit, it accepted the evidence as competent summary judgment evidence, which was more than a scintilla of evidence, and it should not have granted summary judgment in favor of Eureka. However, because we have found that McLean's affidavit should have been struck because it was not competent summary judgment evidence, and because the other evidence Barraza presented was not probative evidence of either breach of duty or proximate cause, summary judgment was proper in this case. We sustain Barraza's first issue, but uphold the grant of summary judgment and affirm the judgment of the trial court.

Page 675: [Add as new notes (3) and (4):]

(3) Adequate Time for Discovery. A no evidence summary judgment is not proper until adequate time for discovery has been afforded. Whether a non­ movant has had adequate time for discovery is a case specific inquiry. An

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adequate time for discovery is determined by the nature of the cause of action, the nature of the evidence necessary to controvert the motion, and the length of time the case has been active in the trial court. Tempay, Inc. v. TNT Concrete & Construction, Inc., 37 S.W.3d 517, 522 (Tex. App.-- Austin, 2001, pet. denied). Lawsuits presenting only questions of law will ordinarily require no or minimal discovery, while a case dependent upon factual determinations may require extensive discovery. A non­movant asserting it has not had sufficient time for discovery, must, before a summary judgment hearing, "file either an affidavit explaining the need for further discovery or a verified motion for continuance." McClure v. Attebury, 20 S.W.3d 722, 728 (Tex. App.--Amarillo, 1999, no pet.). (4) Hybrid Motions. Is it proper to seek a traditional summary judgment and a no evidence summary judgment in the same motion? The better practice is to file two separate motions clearly delineating the type of summary judgment being urged. However, Rule 166a(i) does not prohibit that combination and the fact that evidence may be attached to a traditional money does not foreclose a party from also asserting that there is no evidence with regard to a particular element. Similarly, if a no evidence summary judgment motion has evidence attached to it, that evidence should not be considered, unless it creates a fact question, but the motion should not be disregarded or treated as a traditional summary judgment motion. Binur v. Jacobo, 47 Tex. Sup. Ct. J. 514 (May 7, 2004).

Page 681: [Add at the end of Note (1):]

If the grounds for a summary judgment are unclear or ambiguous, a party should specially except to the motion to preserve that complaint for appellate review. See Clement v. The City of Plano, 26 S.W.3d 544, 550 (Tex. App.--Dallas 2000, no pet.).

Page 682: [Insert the following new note:]

(8) Motion for New Trial following Summary Judgment. The Texas Supreme Court reviewed the denial of a motion for new trial following a summary judgment in Carpenter v. Cimarron Hydrocarbons Corp., 98 S.W.3d 682 (Tex. 2002). The nonmovant had notice of the hearing and discovered its failure to respond before the hearing. The Court held that under those circumstances, a motion to allow a late­filed summary judgment response should be granted when a litigant establishes good cause for failure to timely respond by showing: 1) the failure to respond was not intentional or the result of conscious indifference, but the result of accident or mistake; and 2) allowing the late response will not cause undue delay or otherwise injure the party seeking summary judgment. The trial court's ruling denying leave to file a late response was held not to be an abuse of discretion under this standard, as the nonmoving party offered no explanation for the failure to timely respond to the summary judgment motion. The Court did not address what standard should apply when a nonmovant does not discover its failure to respond until after the summary judgment hearing or rendition of judgment.

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§ 11.04

Settlement, Nonsuits, and Consent Judgments

[B]--The Adjudicative Effects of Settlement [2]--Evolving Approaches to Settlement Problems: Which Rules Apply?

Page 693: [Add as new final paragraph:]

Actions filed after July 1, 2003, are governed by amended Chapter 33 of the Civil Practice and Remedies Code. The statute applies to "any cause of action based on tort in which a defendant, settling person, or responsible third party is found responsible for a percentage of the harm for which relief is sought." TEX. CIV. PRAC. & REM. CODE § 33.002(a). A "responsible third party" may now include "any person who is alleged to have caused or contributed to causing in any way the harm for which recovery of damages is sought, whether by negligent act or omission, by any defective or unreasonably dangerous product, by other conduct or activity that violates an applicable legal standard, or by any combination of these." TEX. CIV. PRAC. & REM. CODE § 33.011(6). The general rule is that a defendant may be liable to a claimant "only for the percentage of damages found by the trier of fact equal to the defendant's percentage of responsibility with respect to the . . . harm for which damages are allowed." TEX. CIV. PRAC. & REM. CODE § 33.013(a). However, a designated responsible third party who is not joined is not liable on the judgment. Specifically, the 2003 amendments provide that a finding of fault: "(1) does not by itself impose liability on the person; and (2) may not be used in any other proceeding, on the basis of res judicata, collateral estoppel, or any other legal theory, to impose liability on the person." TEX. CIV. PRAC. & REM. CODE § 33.004(i). A defendant who is jointly and severally liable and pays more than its proportionate share of liability may seek contribution. As to settling defendants, the 2003 amendments eliminated the election of the nonsettling defendant to take a dollar for dollar settlement credit in most cases and provides only a percentage credit.

Page 700: Add new section 11.04 [D] immediately after Notes and Questions.

[D]--Offers of Settlement Under Rule 167.

Overview

The Texas Legislature has adopted an Offer of Settlement statute as a part of House Bill 4 (and as new Chapter 42 of the Civil Practices and Remedies Code), that will significantly affect settlement strategies and potentially the ultimate judgment rendered in Texas civil suits. It provides

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for shifting of certain "litigation costs" when an offer to settle is rejected and the ultimate judgment is less favorable to the offeree, by a 20 percent margin. The litigation expenses to be shifted and imposed on the party who "unreasonably" rejected an offer (even though they may win the case), include post-rejection costs, reasonable attorney's fees, and fees for two expert witnesses. Recently, the Texas Supreme Court promulgated Rule 167 of the Texas Rules of Civil Procedure implementing this new fee shifting mechanism.

Applies to Suits Filed After January 1, 2004 Involving Monetary Claims

Rule 167 governs all civil cases involving monetary claims filed after January 1, 2004, except it does not apply to: (1) a class action; (2) a shareholder's derivative action; (3) an action by or against a governmental unit (defined as "the state, a unit of state government or a political subdivision of the state"); (4) an action brought under the Family Code; (5) an action to collect workers' compensation benefits under Subtitle A, Title 5, Labor Code; or (6) an action filed in a justice of the peace court. It should be noted that Rule 167 does not apply to any offer made in a mediation or arbitration proceeding.

Putting Fee Shifting in Play-The Defendant's Declaration

While the offer of settlement statute is a Atwo way" provision that allows both Plaintiffs and Defendants to shift litigation costs when an offer is "unreasonably" rejected, before the offer of settlement rule is operative a "defendant" must file a declaration that the "settlement procedure allowed by this chapter is available in the action." In a multi-defendant case, the declaration by one defendant does not inure to the benefit of the other: "If there is more than one defendant, the settlement procedure allowed by this chapter is available only in relation to the defendant that filed the declaration and to the parties that make or receive offers of settlement in relation to that defendant." It should be noted that a "defendant" that may file the declaration and put fee shifting in play includes "a person from whom a claimant seeks recovery on a claim, including a counterdefendant, cross-defendant, or third party defendant." CPRC § 42.002(c) Thus, a plaintiff, as a counterdefendant, for example, may file the declaration and invoke potential fee shifting. Rule 167.2 (a) allows that declaration to be filed not later than 45 days before the case is set for a conventional trial on the merits. Rule 167 affords the trial court discretion to amend this time limit on motion, and for good cause.

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CH. 11

The Offer of Settlement

Rule 167 provides that an offer of settlement may not be made: (1) before a defendant's declaration is filed; (2) within 60 days after the appearance in the case of the offeror or offeree, whichever is later; (3) within 14 days before the date the case is set for a conventional trial on the merits, except that an offer may be made within that period if it is in response to, and within seven days of, a prior offer. Rule 167.2 (b) directs that the offer: (1) be in writing; (2) state that it is made under Rule 167 and Chapter 42 of the Texas Civil Practice and Remedies Code; (3) identify the party or parties making the offer and the party or parties to whom the offer is made; (4) state the terms by which all monetary claims C including any attorney fees, interest, and costs that would be recoverable up to the time of the offer C between the offeror or offerors on the one hand and the offeree or offerees on the other may be settled; (5) state a deadline C no sooner than 14 days after the offer is served C by which the offer must be accepted; (6) be served on all parties to whom the offer is made. Extreme caution must be taken in adding any additional conditions to the offer to settle as some conditions will invalidate the opportunity for fee shifting. The rule admonishes: "An offer may be made subject to reasonable conditions, including the execution of appropriate releases, indemnities, and other documents. An offeree may object to a condition by written notice served on the offeror before the deadline stated in the offer. A condition to which no such objection is made is presumed to have been reasonable. Rejection of an offer made subject to a condition determined by the trial court to have been unreasonable cannot be the basis for an award of litigation costs under this rule." An offer of settlement is served by the offeror upon the offeree. It is not filed with the court. While HB 4 is silent as to its admissibility, Rule 167 expressly provides that the offer of settlement is inadmissible except for purposes of enforcing a settlement agreement or obtaining litigation costs. Note that an offer to settle may be made under Rule 167, with potential "fee shifting" consequences or outside the rule with no fee shifting potential.

Withdrawal of Offer

An offer may be withdrawn before it is accepted. Withdrawal is effective when written notice of the withdrawal is served on the offeree. Once an

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unaccepted offer has been withdrawn, it cannot be accepted or be the basis for imposing litigation expenses under this rule.

Successive Offers

Rule 167 allows for successive offers. An offeror faced with an unaccepted offer, may want to improve its chances of recovery of its costs and attorneys' fees by improving the offer which further enhances the chances of settlement, thereby fulfilling the objective of the rule. Specifically, Rule 167 provides, "A party may make an offer after having made or rejected a prior offer. A rejection of an offer is subject to imposition of litigation expenses under this rule only if the offer is more favorable to the offeree than any prior offer.

Offer "Void" Upon Subsequent Joinder of Parties

Chapter 42 mandates that A[i]f the offering party joins another party or designates a responsible third party after making the settlement offer, the party to whom the settlement offer was made may declare the offer void." Rule 167 requires a timely objection within 15 days after service of the offeror's pleading (that joins another party) or designation.

Acceptance of Offer of Settlement

Rule 167 provides, "An offer that has not been withdrawn can be accepted only by written notice served on the offeror by the deadline stated in the offer. When an offer is accepted, the offeror or offeree may file the offer and acceptance and may move the court to enforce the settlement." Presumptively, the acceptance must mirror the offer.

Rejection of Offer of Settlement

An offer that is not withdrawn or timely accepted is rejected. The date of rejection is important because if fee shifting is warranted, the date of rejection is the "starting" date for computing the fees to be shifted.

Consequences of Rejection of Offer B Triggering the Fee Shifting Event

Shifting of certain litigation expenses is mandated when an offeree rejects a settlement offer made under Rule 167 and the judgment rendered is significantly less favorable than the rejected offer. A judgment is significantly less favorable to the rejecting party than is the settlement offer when: The offeree is a claimant and the judgment would be less than 80 percent of the offer; or The offeree is a defendant and the judgment would be more than 120 percent of the offer.

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Litigation Expenses Shifted

The litigation costs that may be recovered by the offering party are limited to those litigation costs "actually made and the obligations actually incurred-directly in relation to the claims covered by a settlement under this rule" by the offering party after the date the rejecting party rejected the settlement offer and run "from the time the offer was rejected to the time of judgment." The litigation expenses recoverable include: 1) court costs; 2) reasonable fees for not more than two testifying expert witnesses; and 3) reasonable attorney fees. The reasonableness of the fees to be shifted is determined by the trial court. Rule 167.5 (b) provides that when litigation costs are to be awarded against a party, the party, on motion and for good cause shown, may be allowed to conduct discovery in relation to the reasonableness of those costs. However, if the court determines that the litigation costs are reasonable, "it must order the party requesting discovery to pay all attorneys fees and expenses incurred by other parties in responding to such discovery." It would seem that discovery would be timely once the amount of the monetary award is determined, as that award will determine whether fees are to be shifted. There is a cap on the litigation expenses that may be shifted that is tied to the Plaintiff's recovery. Specifically, Chapter 42 provides: (d) The litigation costs that may be awarded under this chapter may not be greater than an amount computed by: (1) determining the sum of: (A) 50 percent of the economic damages to be awarded to the claimant in the judgment; (B) 100 percent of the noneconomic damages to be awarded to the claimant in the judgment; and (C) 100 percent of the exemplary or additional damages to be awarded to the claimant in the judgment; and (2) subtracting from the amount determined under Subdivision (1) the amount of any statutory or contractual liens in connection with the occurrences or incidents giving rise to the claim. Chapter 41 of the Civil Practices and Remedies Code defines "economic damages" as "compensatory damages intended to compensate a claimant for actual economic or pecuniary loss." "Noneconomic damages" are defined as "damages awarded for the purposes of compensating a claimant for physical pain and suffering, mental or emotional pain or anguish, loss of consortium, disfigurement, physical impairment, loss of companionship and society, inconvenience, loss of enjoyment of life, injury to reputation and all other nonpecuniary losses of any kind other than exemplary damages." "Exemplary damages" means Aany damages awarded as a penalty or by way of punishment but not for compensatory purposes."

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If the claimant is responsible for litigation costs in an amount less than the claimant's recovery, "those litigation costs shall be awarded to the defendant in the judgment as an offset against the claimant's recovery from that defendant." Presumably, if the defendant is responsible for litigation costs, the recovery of those costs becomes a part of the judgment. May a prevailing Plaintiff under the Offer of Settlement rule double recover fees incurred after the Defense rejects the offer when the Plaintiff obtains a more favorable judgment and an independent statutory basis exists to recover fees? No, Rule 167.4(e) prohibits double recovery of litigation costs: A party who is entitled to recover attorney fees and costs under another law may not recover those same attorney fees and costs as litigation costs under this rule. May a defending party utilize the offer of settlement scheme to attempt to cut off the plaintiff's right to recover statutory or contractual attorney's fees from the date of refusal to the date of judgment? Yes. Rule 167.4 (f) expressly provides that : A party against whom litigation costs are awarded may not recover attorney fees and costs under another law incurred after the date the party rejected the settlement offer made the basis of the award.

Trial Court Discretion To Deny Fee Shifting Is Very Limited

It appears that Chapter 42 of the Civil Practice & Remedies Code makes the award of litigation costs mandatory once a "significantly less favorable judgment is entered" as defined by the statute. The effect is a nonrebuttable presumption of unreasonableness where the party rejecting the settlement offer suffers a less favorable judgment by a 20 percent margin from the offer.

§ 11.07

Alternate Dispute Resolution

Page 719: [Following J.B.J. Distributors, insert a new heading­NOTE­and add the following new note (1):]

(1) Mediation. While the trial court may order parties to mediate their claims, the court lacks authority to order the parties to mediate in good faith. Such an order is void. In re Acceptance Ins. Co., 33 S.W.3d 443, 452 (Tex. App.--Fort Worth 2000, orig. proc.). Further, communications made by a participant during mediation are confidential. Tex. Civ. Prac. & Rem. Code Ann. section 154.073 (Vernon Supp. 2003).

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