Low v. Henry

• Decision Date: 20 April 2007
• Docket Number: No. 04-0452.,04-0452.
• Citation: 221 S.W.3d 609
• Parties: Robert LOW, D.O. and Stephen Smith, M.D., Petitioners, v. Thomas J. HENRY and the Law Offices of Thomas J. Henry, Respondents.
• Court: Texas Supreme Court

221 S.W.3d 609

Robert LOW, D.O. and Stephen Smith, M.D., Petitioners, v. Thomas J. HENRY and the Law Offices of Thomas J. Henry, Respondents.

No. 04-0452.

Supreme Court of Texas.

Argued February 15, 2005.

Decided April 20, 2007.

Carlos Villarreal, Brian Charles Miller, Robert J. Seerden and J. Kevin Oncken, for Petitioners.

Paul D. Andrews, Keith Matthew Gould and Paul D. Andrews, for Respondents.

John C. Marshall, III, Marshall & McCracken, Melanie Sky Breedlove, Lanette Lurleen Lutich, Cooper & Scully, P.C., Houston, Michael L. Hurst, Hermes Sargent & Bates, Michael Berry, Thompson & Knight, John A. Scully, Cooper & Scully, P.C., Dallas, Jennifer P. Henry, Thompson & Knight, Fort Worth, for Other.

Donald P. Wilcox, Susan G. Taylor, Austin, for Amicus Curiae.

Justice WAINWRIGHT delivered the opinion of the Court.

Texas follows a "fair notice" standard for pleading, in which courts assess the sufficiency of pleadings by determining whether an opposing party can ascertain from the pleading the nature, basic issues, and the type of evidence that might be relevant to the controversy. See Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 230 (Tex.2004); Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 896-97 (Tex.2000); Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex.1993); see also TEX.R. CIV. P. 47(a). However, the actual facts and evidence of a specific case limit this relatively liberal standard. Chapter 10 of the Texas Civil Practice and Remedies Code requires a pleading's signatory to certify that he or she conducted a reasonable inquiry into the allegations and concluded that each allegation or other factual contention in the pleading has or is likely to have evidentiary support. Because the attorney who filed the petition in this case obtained and directed the review of evidence that disproved some of the allegations pled against some of the defendants, the trial court correctly found that the attorney violated Chapter 10. However, we hold that the trial court abused its discretion in not providing a sufficient basis to support the imposition of a $50,000 penalty. We reverse the court of appeals' judgment and remand the case to the trial court for proceedings consistent with this opinion.

I. Factual and Procedural Background

On November 20, 1999, Henry White was admitted to Columbia North Bay Hospital after suffering a stroke. Dr. Stephen Smith treated White in the emergency room for less than one hour. Dr. Robert Low cared for him for four days before White was transferred to another hospital. White was comatose at the time of the transfer. He died in December 1999.

On January 31, 2002, Joyce White (both individually and as representative of her husband Henry White's estate) sued the alleged manufacturers, designers, and distributors of the drug known as Propulsid,¹ Coastal Bend Hospital, Inc. d/b/a Columbia North Bay Hospital, eight physicians,² and nurse Donna McMahon for damages flowing from Henry White's death. Although most of the claims involved the drug Propulsid, some alleged that the physicians and hospital were negligent in Henry White's medical treatment.

Attorney Thomas J. Henry represented Joyce White when he filed the petition. His office received copies of Henry White's medical records months before he filed the petition. Henry filed a motion to withdraw as counsel on the same day he filed the petition. Henry continued to represent Joyce White until the trial court granted the motion to withdraw on May 6, 2002.

On May 28, 2002, Dr. Smith filed a motion for sanctions against Joyce White and Henry for alleged violations of Texas Rule of Civil Procedure 13 and chapters 9 and 10 of the Texas Civil Practice and Remedies Code. Dr. Low filed the same motion.³ Both physicians argued that none of the medical records from the hospital at which the physicians treated White contained any reference to either doctor having prescribed or provided Propulsid to White. On June 10, Joyce White nonsuited the case. The physicians' motions for sanctions remained pending.

The trial court held a hearing on the physicians' motions on July 30, 2002. Henry did not attend or testify but appeared through counsel. On July 31, 2002, the trial court granted the motions and ordered Henry to pay $25,000 in sanctions on each motion, for a total of $50,000. On August 2, 2002, the trial court entered a revised judgment that incorporated findings of fact and conclusions of law. On August 26, 2002, Henry filed a motion for new trial and a motion to vacate, modify, correct, or reform the sanctions order. On September 23, 2002, Henry filed a supplemental motion. On October 15, 2002, the trial court held a hearing on Henry's motions. After hearing more testimony, including Henry's, the trial court ultimately denied admission of all additional evidence and denied Henry's motion to modify the judgment. Henry filed a motion to reconsider, challenging the adequacy of the trial court's findings of fact and conclusions of law for the first time. The trial court denied this motion and rejected as untimely all arguments not contained in the original motion for new trial and motion to vacate, modify, correct or reform the judgment as untimely. Henry appealed.

An en banc court of appeals reversed, holding that because the allegations against the physicians were made in the alternative, sanctions under chapter 10 of the Texas Civil Practice and Remedies Code were inappropriate. 132 S.W.3d 180, 187. The court also held that the physicians' motions did not support sanctions under Chapter 10 for unrelated prior litigation and that the trial court's order failed to meet the specificity requirements of Chapter 10. Id. at 187-88. The dissenting justices argued that the trial court did not abuse its discretion and that Henry waived his other complaints. Id. at 190-91. The physicians petitioned this Court for review.

II. Applicable Law and Standard of Review

We review the imposition of sanctions here under the same standard we review sanctions under Rule 13 — abuse of discretion. See Am. Flood Research, Inc. v. Jones, 192 S.W.3d 581, 583 (Tex. 2006); Cire v. Cummings, 134 S.W.3d 835, 838 (Tex.2004). An appellate court may reverse the trial court's ruling only if the trial court acted without reference to any guiding rules and principles, such that its ruling was arbitrary or unreasonable. Cire, 134 S.W.3d at 838-39. To determine if the sanctions were appropriate or just, the appellate court must ensure there is a direct nexus between the improper conduct and the sanction imposed. Spohn Hosp. v. Mayer, 104 S.W.3d 878, 882 (Tex. 2003) (citing TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991)). Generally, courts presume that pleadings and other papers are filed in good faith. GTE Commc'ns Sys. Corp. v. Tanner, 856 S.W.2d 725, 730 (Tex.1993). The party seeking sanctions bears the burden of overcoming this presumption of good faith. Id. at 731.

Chapters 9 and 10 of the Texas Civil Practice and Remedies Code and rule 13 of the Texas Rules of Civil Procedure allow a trial court to sanction an attorney or a party for filing motions or pleadings that lack a reasonable basis in fact or law. Chapter 9 of the Texas Civil Practice and Remedies Code only applies in proceedings in which neither Rule 13 nor Chapter 10 applies. TEX. CIV. PRAC. & REM.CODE § 9.012(h). Rule 13 authorizes the imposition of the sanctions listed in Rule 215.2(b), which only provides for a monetary penalty based on expenses, court costs, or attorney's fees. Because the trial court ordered Henry to pay $50,000 in penalties not based on expenses, court costs, or attorney's fees, and because the trial court's written order specifically orders the penalty pursuant to chapter 10 of the Texas Civil Practice and Remedies Code, we review the trial court's order in light of chapter 10. Chapter 10 provides that:

The signing of a pleading or motion as required by the Texas Rules of Civil Procedure constitutes a certificate by the signatory that to the signatory's best knowledge, information, and belief, formed after reasonable inquiry:

(1) the pleading or motion is not being presented for any improper purpose, including to harass or to cause unnecessary delay or needless increase in the cost of litigation;

(2) each claim, defense, or other legal contention in the pleading or motion is warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) each allegation or other factual contention in the pleading or motion has evidentiary support or, for a specifically identified allegation or factual contention, is likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) each denial in the pleading or motion of a factual contention is warranted on the evidence or, for a specifically identified denial, is reasonably based on a lack of information or belief.

TEX. CIV. PRAC. & REM.CODE § 10.001. Under Section 10.001, the signer of a pleading or motion certifies that each claim, each allegation, and each denial is based on the signatory's best knowledge, information, and belief, formed after reasonable inquiry. The statute dictates that each claim and each allegation be individually evaluated for support. Id. The fact that an allegation or claim is alleged against several defendants — so-called "group pleadings" — does not relieve the party from meeting the express requirements of Chapter 10. Each claim against each defendant must satisfy Chapter 10.

Likewise, alternative pleading under Texas Rule of Civil Procedure 48 does not excuse noncompliance with Chapter 10. Pleading in the alternative allows multiple allegations, which may even conflict, to be alleged against a defendant, but there still must be a reasonable basis for each alternative allegation. Pleading in the alternative does not permit alleging...