Corporate fiduciary duties and Shareholder oppression

CORPORATE FIDUCIARY DUTIES AND

SHAREHOLDER OPPRESSION

JOE ESCOBEDO

Escobedo, Tippit & Cardenas, LLP

3900 N. 10th Street, Suite 950

McAllen, Texas  78501

State Bar of Texas

BUSINESS DISPUTES 2014

September 11-12

HOUSTON

Chapter 17

Table of Contents

Fiduciary Duties

Statutory and Common Law Duties

Texas common law recognizes that directors, as fiduciaries, owe three duties to a corporation:  duty of obedience, duty of loyalty (or fairness) and duty of care.  The Texas Business Organizations Code (“the Code”) does not specifically define a corporate director’s fiduciary duties. At most, various TBOC sections define the scope of the board of directors’ general responsibilities. See, e.g. TEX. BUS. ORGS. CODE ANN.  §§ 3.101; 21.401 (Vernon 2006)

Directors

Duty of Obedience

The director’s duty of obedience forbids ultra vires acts; that is, acts that are beyond the scope of the powers of the corporation as set out in the law of the state of incorporation or the corporation’s charter.  In order to impose personal liability on a director for ultra vires or illegal acts, the director must have either participated in the act or had actual knowledge of the act. Resolution Trust Corp. v. Norris, 830 F.Supp. 351, 357 (S.D. Tex. 1993). Further, the director is not personally liable for the ultra vires act unless the act in question was also illegal. Gearhart Industries, Inc. v. Smith International, Inc., 741 F.2d 707, 719-20 (5th Cir. 1984).

Duty of Loyalty

The duty of loyalty requires that a director act in good faith and not allow his personal interests to prevail over the interests of the corporation.  Gearhart, 741 F.2d at 719-20. A director violates this duty when he “makes a personal profit from a transaction by dealing with the corporation or usurps a corporate opportunity.”  Landon v. S&H Marketing Group, 82 S.W.3d 666, 672 (Tex. App. – Eastland 2002, no pet.). Transactions in which a corporate fiduciary derives personal profit are subject to the closest examination. International Bankers Life Insurance Company v. Holloway, 368 S.W.2d 567, 577 (Tex. 1963).

Whether a director is “interested” with respect to a particular transaction is a question of fact. International Bankers, 368 S.W.2d at 576-78. A director is considered “interested” if he does any of the following: (1) makes a personal profit from a transaction by dealing with the corporation or usurps a corporate opportunity; (2) buys or sells assets of a corporation; (3) transacts business in his director’s capacity with a second corporation of which he is also a director or is significantly financially associated; or (4) transacts business in his director’s capacity with a family member. Gearhart, 741 F.2d at 719-20; See also TEX. BUS. ORGS. CODE ANN. §§ 1.003, 1.004 (Vernon Supp. 2010).  The burden of proof is on the interested director to show that the action under consideration is fair to the corporation. International Bankers, 368 S.W.2d at 576.

The Texas Legislature has enacted legislation with respect to interested director transactions. See TEX. BUS. ORGS. CODE ANN. § 21.418 (Vernon Supp.2010). The statute provides three methods whereby an interested director’s contract or transaction can be validated:

Upon the affirmative, good faith vote of a majority of disinterested directors provided that the material facts of the contract or transaction is disclosed to or known by the board;

Upon the affirmative, good faith vote of the shareholders provided that the material facts of the contract or transaction is disclosed to or known by the shareholders; or

The contract or transaction is fair as to the corporation as of the time that it is authorized, approved, or ratified by the board of directors or shareholders.

Duty of Care and the Business Judgment Rule

The Fifth Circuit analyzed a director’s duty of care under Texas law in Meyers v. Moody, 693 F.2d 1196, 1209 (5th Cir. 1983); the court held that “Texas law imposes on corporate officers and directors a duty to exercise due care in the management of the corporation’s affairs.”

Then, in the Gearhart case, without mentioning the Meyers case, the Fifth Circuit applied a different standard. The Court first noted that “[u]nder the law of most jurisdictions, the duty of care requires a director to be diligent and prudent in managing the corporation’s affairs.”  Gearhart, 741 F.2d at 720.  The Court cited McCollum v. Dollar, 213 S.W. 259 (Tex. Comm’n App. 1919, holding approved) as the leading case in Texas defining a director’s standard of care.  Id.  The McCollum case held that a director must handle his corporate duties with such care as “an ordinarily prudent man would use under similar circumstances.” Id. at 261.  The Gearhart Court then cited Cates v. Sparkman, 73 Tex. 619, 11 S.W.846 (1889) as setting the following standard:

[I]f the acts or things are or may be that which the majority of the company have a right to do, or if they have been done irregularly, negligently, or imprudently, or are within the exercise of their discretion and judgment in the development or prosecution of the enterprise in which their interests are involved, these would not constitute such a breach of duty, however unwise or inexpedient such acts might be as would authorize interference by the courts at the suit of a shareholder.

Id. at 622.

The Fifth Circuit Court in Gearhart determined the following:

Even though Cates was decided in 1889, and despite the ordinary care standard announced in McCollum v. Dollar, supra, Texas courts to this day will not impose liability upon a noninterested corporate director unless the challenged action is ultra vires or is tainted by fraud…. Such is the business judgment rule in Texas.

Id. at 721.

The Gearhart opinion stated that the “business judgment rule is a defense to the duty of care” and “precludes judicial interference with the business judgment of directors absent a showing of fraud or an ultra vires act.” Id. at 723, n. 9. This would appear to protect even grossly negligent conduct but as discussed infra some courts have excluded gross negligent conduct from the protection of the business judgment rule.

After Gearhart, federal district courts have been inconsistent in the application of the rule.  Numerous courts interpreted the business judgment rule in litigation that was brought by the Federal Deposit Insurance Corporation (FDIC) and the Resolution Trust Corporation (RTC) after the savings and loan crisis of the 1980s and 1990s.  In these cases, federal district courts rejected the government’s argument that directors could be liable for acts of mismanagement that amounted to ordinary negligence but did hold that the business judgment rule did not protect gross negligence or an abdication of responsibilities resulting in a failure to exercise any judgment.  See RTC v. Norris, 830 F.Supp. 351, 356 (S.D. Tex 1993); FDIC v. Schreiner, 892 F.Supp. 869, 881-82 (S.D. Tex. 1995).  In FDIC v. Brown, 812 F.Supp. 722, 724 (S.D. Tex. 1992), the court appears to expand the business judgment rule beyond a defense:

…the business judgment rule as adopted and applied by Texas courts is not merely a defense to a claim of negligence or breach of fiduciary duty against a corporate director. It is a rule of substantive law that requires a plaintiff seeking damages on behalf of a corporation against its disinterested directors to plead and prove (1) that the conduct of the directors complained of was either ultra vires or fraudulent or (2) that the directors had a personal interest in the transactions complained of.

Despite these statements, the Court did hold that the business judgment rule would not protect directors from liability for gross negligence and would not protect directors in situations in which he abdicated his responsibility and failed to exercise any judgment.  Id. at 725-26.

One district court rejected this notion and followed the Gearhart opinion, concluding that the cases that espoused a gross negligence exception to the business judgment rule are a result of the special treatment that banks receive under Texas law.  Floyd v. Hefner, 2006 U.S. Dist. LEXIS 70922, *71-72 (S.D. Tex. 2006).

The business judgment rule has not been codified; however, the Code does provide the following:

In discharging a duty or exercising a power, a governing person, including a governing person who is a member of a committee, may, in good faith and with ordinary care, rely on information, opinions, reports, or statements, including financial statements and other financial data, concerning a domestic entity or another person and prepared or presented by:

an officer or employee of the entity;

legal counsel;

a certified public accountant;

an investment banker;

a person who the governing person reasonably believes possesses professional expertise in the matter;  or

a committee of the governing authority of which the governing person is not a member.

A governing person may not in good faith rely on the information described by Subsection (a) if the governing person has knowledge of a matter that makes the reliance unwarranted.

TEX. BUS. ORGS. CODE ANN. § 3.102 (Vernon 2006)

Legislative safe harbors have been provided relating to the duty of care as well. Section 7.001(b) provides:

The certificate of formation or similar instrument of an organization to which this section applies may provide that a governing person of the organization is not liable, or is liable only to the extent provided by the certificate of formation or similar instrument, to the organization or its owners or members for monetary damages for an act or omission by the person in the person’s capacity as a governing person.

TEX. BUS. ORGS. CODE ANN. § 7.001(b) (Vernon Supp. 2010)

Officers

An officer of a corporation is considered an agent of the corporation and owes the same duties of obedience, loyalty and care as directors.  Gearhart, 741 F.2d at 719. Courts will often address the application of these duties to both directors and officers. See e.g. Cates, 11 S.W. at 849 (“The breach of duty or conduct of officers and directors which would authorize…the court’s interference….”)

There is a similar provision in the Code that allows officers, in the discharge of their duties, to rely on materials and opinions provided by other officers, employees of the corporations, lawyers, accountants and other professionals.    See TEX. BUS. ORGS. CODE ANN. § 3.105.  (Vernon 2006)

Majority or Controlling Shareholders

Generally, a shareholder does not owe fiduciary duties to another shareholder, even shareholders in a closely held corporation. Cardiac Perfusion Services, Inc. v. Hughes, 380 S.W.3d 198, 213-214 (Tex. App. – Dallas 2012, aff’d in part,rev’d in part, remanded 2014 Tex. LEXIS 532, 57 Tex. Sup. Ct. J. 914 (Tex. 2014)).  A majority shareholder does owe some form of fiduciary duty to the actual corporation.  Hoggett v. Brown, 971 S.W.2d 472, 488, fn. 13 (Tex. App. – Houston [14th Dist.] 1997, pet. denied).  The Hoggett court further stated that a “co-shareholder in a closely held corporation does not as a matter of law owe a fiduciary duty to his co-shareholder” and “whether such a duty exists depends on the circumstances.”  Id. See also Flanary v. Mills, 150 S.W.3d 785, 794 (Tex. App. – Austin 2004, pet. denied) (“person is justified in placing confidence in the belief that another party will act in his or her best interest only where he or she is accustomed to being guided by the judgment or advice of the other party, and there exists a long association in a business relationship, as well as personal relationship.”); Redmon v. Griffith, 202 S.W.3d 225, 237 (Tex. App.–Tyler 2006, pet. denied) (the circumstances were sufficient to raise a fiduciary duty considering the extensive amount of control by the majority shareholder in the closely held corporation combined with the allegations of oppressive conduct); Allen v. Devon Energy Holdings, LLC, 367 S.W.3d 355, 389 (Tex. App. – Houston [1st Dist.] 2012, pet. granted, judgm’t vacated w.r.m.) (a controlling shareholder of a closely held corporation owes a formal fiduciary duty to a minority shareholder when the controlling shareholder or the corporation is purchasing the minority shareholder’s shares); Vejara v. Levior Int’l., LLC, 2012 Tex. App. LEXIS 8975, *12 (Tex. App. – San Antonio, Oct. 31, 2012, pet. denied) (holding that while not a majority shareholder, Vejara exhibited the same type of control and intimate knowledge of the company’s affairs as was cited in the Devon Energy case and, therefore, held that Vejara did owe an informal fiduciary duty to the company and/or the majority shareholder)

In Willis v. Donnelly, 199 S.W.3d 262, 276 (Tex. 2006), the supreme court refrained from addressing the issue of whether a majority shareholder in a closely held corporation owes a fiduciary duty to a minority shareholder. The supreme court stated that a fiduciary duty could be owed by a majority shareholder in a closely held corporation in a situation where the majority shareholder dominated control over the corporation or where the shareholders operated the business like a partnership rather than a corporation.  Id. However, the court held that the facts of the case did not support such a duty because the plaintiff (an employee) never actually became a shareholder of the corporation. Id. at 277.

In Ritchie v. Rupe, 2014 Tex. LEXIS 500, *49-50 (fn27), 57 Tex. Sup. J. 771 (Tex. 2014), the supreme court, citing the Willis case, stated that “this Court has never recognized a formal fiduciary duty between majority and minority shareholders in a closely-held corporation… and no party has asked us to do so here.” The court further stated that it has recognized that fiduciary duties are owed by the officers and directors to the corporation. Id.  The issue of a formal fiduciary duty being owed by the majority shareholder to the minority shareholder was not before the supreme court because “[no] party in this case has asked us to alter the nature of that duty.” Id. at 50.  The court made it clear that the “fiduciary duty alleged in this case is an informal fiduciary duty”, not a formal fiduciary duty. Id.

A controlling shareholder in Texas can take comfort in the fact that the Texas Supreme Court has not clearly held that he owes a fiduciary duty to a minority shareholder. However, as discussed supra, other Texas courts have recognized that such a duty can exist under certain circumstances.  Under the right circumstances, a minority shareholder can sue a controlling shareholder directly for breach of fiduciary duty. As seen infra, different rules apply to a shareholder suing a director or officer for breach of fiduciary duties. 

Derivative Actions

Since a director’s and officer’s fiduciary duties run to the corporation and not to shareholders, claims against directors and officers for breaches of these duties can generally only be brought in a shareholder’s derivative suit on behalf of the corporation. Gearhart, 741 F.2d at 721.  In a shareholder derivative suit, “the individual shareholder steps into the shoes of the corporation and usurps the board of directors’ authority to decide whether to pursue the corporation’s claims.”  In re Crown Castle Int’l Corp., 247 S.W.3d 349, 355 (Tex. App. – Houston [14th Dist.] 2008, original proceeding).

There are strict procedural requirements for bringing a derivative action. See TEX. BUS. ORGS. CODE ANN. §§ 21.551 – 21.562.  (Vernon Supp. 2010)

Section 21.553 requires a written demand and notice period for derivative actions; it provides:

A shareholder may not institute a derivative proceeding until the 91st day after the date a written demand is filed with the corporation stating with particularity the act, omission, or other matter that is the subject of the claim or challenge and requesting that the corporation take suitable action.

The waiting period required by Subsection (a) before a derivative proceeding may be instituted is not required if:

(1) the shareholder has been previously notified that the demand has been rejected by the corporation;

(2) the corporation is suffering irreparable injury; or

(3) irreparable injury to the corporation would result by waiting for the expiration of the 90-day period.

TEX. BUS. ORGS. CODE ANN. § 21.553 (Vernon Supp. 2010)

The Texas Supreme Court has made it very clear that the written demand is required in every such case. In re Harold R. Schmitz, 285 S.W.3d 451, 458 (Tex. 2009) (interpreting predecessor statute Texas Business Corporation Act. Article 5.14).  While refusing to set a bright line standard for the sufficiency of such a demand, the supreme court rejected a two-sentence demand letter. Id. The court stated that whether a demand was sufficient would depend on the circumstances of the corporation, the board and the subject complaint. Id. The Court further held that the demand cannot be made by an anonymous shareholder; the shareholder must be identified, although the demand does not have to come directly from the shareholder. Id. at 456.

The Code provides for different rules to apply to derivative actions against a “closely held corporation”.  Section 21.563 provides the following:

In this section, “closely held corporation” means a corporation that has:

fewer than 35 shareholders; and

no shares listed on a national securities exchange or regularly quoted in an over-the-counter market by one or more members of a national securities association.

Sections 21.552-21.559 do not apply to a closely held corporation.

If justice requires

a derivative proceeding brought by a shareholder of a closely held corporation may be treated by a court as a direct action brought by the shareholder for the shareholder’s own benefit; and

a recovery in a direct or derivative proceeding by a shareholder may be paid directly to the plaintiff or to the corporation if necessary to protect the interests of creditors or other shareholders of the corporation.

TEX. BUS. ORGS. CODE § 21.563 (Vernon Supp. 2010)

As noted supra, sections 21.552 – 21.559 are the strict procedural requirements that apply to derivative actions; as per section 21.563, these procedures do not apply to closely held corporations.  One court interpreting section 21.563(c) held that the trial court’s discretion to treat such an action as a direct action did not mean the action was no longer a derivative proceeding.  Swank v. Cunningham, 258 S.W.3d 647, 664 (Tex. App. – Eastland 2008, pet. denied).

Shareholder Oppression

It is important to note that a claim for shareholder oppression must be distinguished from a claim brought by a shareholder alleging breach of a fiduciary duty by a controlling shareholder. A shareholder oppression claim is brought without an allegation of a breach of a fiduciary duty.  However, both claims are often brought together in one action and have at times been confused by the courts. 

Patton v. Nicholas

In Patton v. Nicholas, 279 S.W.2d 848 (Tex. 1955), the supreme court dealt with a suit by a minority shareholder for an accounting and liquidation of a solvent corporation. It was alleged that the president, director and majority shareholder maliciously forced the minority shareholders to resign and suppressed the payment of dividends by the corporation. Id. at 852-53. The court found that the defendant had maliciously suppressed the payment of dividends which was a “wrong akin to breach of trust, for which the courts will afford a remedy.” Id. at 854. The Court reversed the trial court’s order of liquidation but did state that liquidation might by appropriate in “more extreme cases”. Id. at 857. It is important to note that the receivership statutes in effect at the relevant time applied only to an insolvent corporation; TEX. BUS. CORP. ACT ANN. art. 7.05 discussed infra became effective in 1955, the same year as the Patton decision but was not applicable to the case. The court indicated that the relief granted must be tailored to fit the wrongful conduct in the particular case.  Id. at 857. The minority shareholders were granted injunctive relief in the form of the corporation being required to issue reasonable dividends in the present and future. Id.

Since the court never used the term “shareholder oppression”, it cannot be said that the Patton case recognized a cause of action for shareholder oppression.  The court noted numerous times that the actions by the defendant were malicious (“malicious suppression of dividends”). Id. at 854.

Article 7.05 & Section 11.404 – the Receivership Statutes

TEX. BUS. CORP. ACT ANN. art. 7.05 (the predecessor statute to TEX. BUS. ORGS. CODE ANN. § 11.404) became effective in 1955 and provided that in an action by a shareholder, a receiver could be appointed for the assets and business of an insolvent corporation (or one that was in imminent danger of insolvency) to conserve the assets and business of the corporation and to avoid damage to parties at interest, but only if all other remedies available, either at law or in equity, were determined by the court to be inadequate. Other than insolvency, a receiver would be appointed upon proof that the “acts of the directors or those in control of the corporation [were] illegal, oppressive or fraudulent.”

Article 7.05 was codified in 2010 as TEX. BUS. ORGS. CODE ANN. § 11.404 which provides in part:

(a) Subject to Subsection (b), a court that has jurisdiction over the property and business of a domestic entity under Section 11.402(b) may appoint a receiver for the entity’s property and business if:

(1) in an action by an owner or member of the domestic entity, it is established that:

(A) entity is insolvent or in imminent danger of insolvency;

(B) the governing persons of the entity are deadlocked in the management of the entity’s affairs, the owners or members of the entity are unable to break the deadlock, and irreparable injury to the entity is being suffered or is threatened because of the deadlock;

(C) the actions of the governing persons of the entity are illegal, oppressive, or fraudulent;

(D) the property of the entity is being misapplied or wasted;  or   

(E) with respect to a for-profit corporation, the shareholders of the entity are deadlocked in voting power and have failed, for a period of at least two years, to elect successors to the governing persons of the entity whose terms have expired or would have expired on the election and qualification of their successors;

***

(b) A court may appoint a receiver under Subsection (a) only if

(1) circumstances exist that are considered by the court to necessitate the appointment of a receiver to conserve the property and business of the domestic entity and avoid damage to interested parties;

(2) all other requirements of law are complied with; and 

(3) the court determines that all other available legal and equitable remedies, including the appointment of a receiver for specific property of the domestic entity under Section 11.402, are inadequate.

TEX. BUS. ORGS. CODE ANN. § 11.404 (Vernon Supp. 2010) (emphasis added)

One of the differences from its predecessor statute is that section 11.404 applies to all “domestic entities” covered by the Code not just to corporations like Article 7.05.  A receiver appointed under the Code has the same powers and duties as provided by other laws, and as specified by the court. Id. § 11.406. The term “governing persons” includes directors but does not include officers acting in the capacity as an officer.  TEX. BUS. ORGS. CODE ANN. § 1.002(35).

Davis v. Sheerin

A key case interpreting former statute TEX. BUS. CORP. ACT ANN. art. 7.05 was Davis v. Sheerin, 754 S.W.2d 375 (Tex. Civ. App. – Houston [1st Dist.] 1988, pet. denied). In Davis, a minority shareholder sued a majority shareholder and an officer in a closely held corporation for breaches of fiduciary duties and conspiring to deprive the minority owner of his ownership interest in the corporation. Id. at 377. The trial court ordered a buy-out of the minority owner’s stock, the appointment of a receiver and the payment of future dividends. Id. at 378. Citing Patton, the defendant argued on appeal that the buy-out remedy was not available under Texas law. Id. at 379. Despite stating that Article 7.05 did not expressly provide for the remedy of a “buy-out” for an aggrieved minority shareholder, the court upheld the buy-out stating “Texas courts, under their general equity power, may decree a ‘buyout’ in an appropriate case where less harsh remedies are inadequate to protect the rights of the parties.” Id. at 380; See also Advance Marine, Inc. v. Kelly, No. 01-90-665-CV, 1991 Tex. App. LEXIS 1614, *2 (Tex. App. – Houston [1st Dist.] June 27, 1991, no writ). The Davis court further acknowledged that Article 7.05 and Texas case law did not define oppressive conduct. Davis, 754 S.W.2d at 381. Relating to proof of oppressive conduct, the Court noted that the determination of whether the defendant’s acts were oppressive is not a question of fact for the jury but rather usually a question of law for the court. Id. at 380.  The jury would, however, determine whether the acts occurred at all, assuming those facts are in dispute. Id. The Davis court adopted the following definitions of oppression:

Majority shareholders’ conduct that substantially defeats the minority’s expectations that objectively viewed, were both reasonable under the circumstances and central to the minority shareholder’s decision to join the venture; or

Burdensome, harsh, or wrongful conduct; a lack of probity and fair dealing in the company’s affairs to the prejudice of some members; or a visible departure from the standards of fair dealing and a violation of fair play on which each shareholder is entitled to rely.

Id. at 381-82; See also Willis v. Bydalek, 997 S.W.2d 798, 801 (Tex. App. – Houston [1st Dist.] 1999, pet. denied). The first definition is known as the “Reasonable Expectations” test and the Court based it on New York law.  The second is known as the “Fair Dealing” test and the court derived that test from Oregon law. 

While citing both definitions, the Davis court appeared to base its holding on the Reasonable Expectation test.  Davis, 754 S.W.2d at 382.  Further, without any explanation, the court stated that the defendant’s conduct did not “fall under the protection of the business judgment rule.”  Id. at 383.  The court upheld the trial court’s conclusion that the conspiracy to deprive the minority shareholder of his interest and the breaches of fiduciary duty constituted oppression.  Id. The Davis court further upheld the trial court’s order requiring a buyout of the minority’s interest at the amount determined by the jury to be fair value. Id.

It should be noted that the supreme court in Richie disapproved of both of these definitions and created a new definition of oppression.  Ritchie v.Rupe, 2014 Tex. Lexis at *33-34.

Ritchie v. Rupe – Dallas Court of Appeals

The Dallas Court of Appeals (“Dallas Court”) recognized a minority shareholder oppression cause of action in the Ritchie case. Ritchie v. Rupe, 339 S.W.3d 275 (Tex. App. – Dallas 2011, reversed and remanded 2014 Tex. LEXIS 500, 57 Tex. Sup. Ct. J. 771 (Tex. 2014). Given the fact that the Ritchie case is a seminal case in this area of the law, the facts of the case and the appellate court’s opinion will be discussed in depth.

The corporation at issue in this case was Rupe Investment Corporation (“RIC”), an investment holding company founded by Dallas Gordon Rupe, Jr (“Pops”) and Robert Ritchie. Id. at 280.  The minority shareholder was Ann Caldwell Rupe (“Rupe”), as trustee for the Dallas Gordon Rupe, III, 1995 Family Trust (“Buddy’s Trust”). Id. Dallas “Buddy” Gordon Rupe III was the son of the founder of RIC.  Id. at 281. Rupe sued RIC and the following directors in their individual capacities (hereafter at times referred to as “appellants”):

Paula Dennard (“Dennard”), daughter of founder Pops and chairman of RIC’s board of directors;

Lee Ritchie (“Ritchie”), son of founder Robert Ritchie and RIC’s president and director; and

Dennis Lutes (“Lutes”), RIC director and one of its attorneys.

Id. at 281-83. 

The main dispute that gave rise to the litigation was Rupe’s efforts to sell the stock owned by Buddy’s Trust to third parties. Id. at 282. Rupe hired retired capital fund manager, George Stasen, to help sell the stock. Id. Stasen met with Ritchie and Dennard and asked for their cooperation with his efforts to sell the stock. Id. Stasen testified that Ritchie told him that no member of RIC’s management would meet with prospective buyers; this testimony was backed up by a fax from Ritchie to Rupe stating that “it would be inappropriate for me or any other officer or director of [RIC] to meet with your prospects or otherwise participate in any activities relating to your proposed sale of stock.” Id. Stasen testified that it would be extraordinarily difficult to sell the stock to a third party without the ability of the prospective purchaser meeting with RIC’s management. Id.

During the trial, the court allowed Rupe to amend her petition to change the capacity in which Ritchie, Dennard and Lutes were sued from their individual capacities to their capacities as directors of RIC and trustees of the various shareholder trusts.  Id. at 283. The jury returned a verdict in Rupe’s favor, and the trial court signed a judgment ordering appellants to cause RIC to buy out the stock owned by Buddy’s trust for $7.3 million. Id.  The trial court also filed findings of fact and conclusions of law, which included its conclusions that, as a matter of law, appellants had acted oppressively towards Rupe in several respects:

Refusing to cooperate with Rupe’s attempts to sell the stock to a third party;

Causing RIC to withhold books and records from Rupe;

Making redemption offers to Rupe that were not in accordance with RIC’s policy;

Making Rupe a conditional offer to be on the board in exchange for her not pursuing legal action against another RIC shareholder; and

Causing RIC to pay some of Dennard’s personal expenses.

Id. at 283, fn. 9.

It is important to note that Dallas Court’s sole basis for its oppression finding was the “appellants’ actions in connection with [Rupe’s] efforts to sell the Stock to third parties”. Id. at 281.

The appellants’ main argument before the Dallas Court (and later before the Texas Supreme Court) was that the court-ordered buyback of the stock was not an available remedy for shareholder oppression under Texas law.  Id. at 285.  The Dallas Court disagreed relying primarily on Article 7.05 and the Patton and Davis opinions.  Relating to Article 7.05, the Dallas Court noted that the statute specifically states the receivership remedy is available “only … if all other remedies available either at law or in equity…are determined by the court to be inadequate.” Id. at 285-86 (original emphasis). The Dallas Court cited language from the Texas Supreme Court’s opinion in Patton discussing the “trial court’s discretion to fashion equitable relief in shareholder disputes.” Id. at 286. Not surprisingly, the Dallas Court relied upon the Davis opinion which recognized that a “buyout” is an available and sometimes appropriate remedy. Id. The Dallas Court noted that the Davis opinion had been followed in other cases including In re White, Hoggett, Stary v. DeBord, 967 S.W.2d 352 (Tex. 1988) (per curiam), Christians v. Stafford, No. 14-99-00038-CV, 2000 Tex. App. LEXIS 6423 (Tex. App. – Houston [14th Dist.] Oct. 26, 2000, no pet.). Id. at 287, fn. 16. As such, the Dallas Court concluded that Texas law authorizes a trial court, in an appropriate case, to order a buyout of an oppressed minority shareholder as an equitable remedy for shareholder oppression. Id. at 289.

The Appellants’ further alleged that their actions did not constitute shareholder oppression as a matter of law. Id. at 285.  Appellants argued that shareholder oppression can only be committed by a majority shareholder and that it was undisputed that there was no majority shareholder in RIC.  Id. at 290. The Dallas Court rejected this argument pointing out that Article 7.05 allow intervention when “the acts of the directors or those in control of the corporation are illegal, oppressive or fraudulent.”  Id. (original emphasis).  The Dallas Court then stated that it was “undisputed that [Dennard], Ritchie, and Lutes together control, either through direct ownership or by virtue of their positions as trustees of the shareholder trusts, 73.7 percent of the voting stock.” Id.

The Dallas Court then began its analysis of the oppression issue by stating that Article 7.05 did not define the term “oppression” but that the term is expansive and a narrow definition of it would be inappropriate. Id. at 289.  The Dallas Court then cited the Davis definitions of shareholder oppression and analyzed the conduct of the appellants under both definitions. Id. at 289.  Prior to that analysis, however, the Dallas Court did recite the business judgment balancing test pronounced in Bydalek (See Section II(J) infra) but then cited Davis for the proposition that “Courts take an especially broad view of the application of oppressive conduct to a closely held corporation, where oppression may be more easily found.”  Id.

Under the “Reasonable Expectations” definition of shareholder oppression, the Dallas Court cited Sandor Petroleum Corp. v. Williams, 321 S.W.2d 614, 717 (Tex. Civ. App. – Eastland 1959, writ ref’d n.r.e) as providing a useful illustration of the general reasonable expectations of a holder of unrestricted stock, despite the fact that it was not a case dealing with shareholder oppression. Id. at 292-93.  Relying on Sandor, the Dallas Court concluded that corporate policies that prohibit a shareholder from identifying potential buyers and providing potential buyers with sufficient information about the corporation would substantially defeat the shareholder’s “general reasonable expectation” of being able to market her unrestricted stock. Id. at 293-94. 

The Dallas Court noted that under the “fair dealings” definition the focus was more on the conduct of the directors than on the reasonable expectations of the minority shareholder. Id. at 294. The “standards of fair dealing with respect to the owner of unrestricted stock in a corporation would include a requirement that they act fairly and reasonably in connection with a shareholder’s efforts to sell the stock to a third party.” Id. The Dallas Court concluded that appellants’ refusal to meet or allow any officer or director of RIC to meet with prospective buyers was oppressive under both the reasonable expectation and fair dealings definitions. Id. at 296-97.

Lastly, the appellants argued that their conduct as directors that the trial court found to be oppressive was protected from liability by the business judgment rule.  Id. at 295.  Citing the Gearhart case, the Dallas Court noted that the “business judgment rule protects a corporation’s directors from personal liability to shareholders for their actions in operating the corporation unless their actions are ultra vires or tainted by fraud.” Id. The Dallas Court held that the business judgment rule did not apply because this was not a derivative suit for breach of duty of care owed to the corporation.  Id.  According to the Dallas Court, “the directors of RIC were not held personally liable for the shareholder oppression; nor were the directors or those controlling the corporation directed to buy the Stock themselves.” Id. at 295-96.  Therefore, the business judgment rule did not apply to this case.  Id. at 296.

The Dallas Court held that the trial court did not abuse its discretion by ordering the buyout of stock as an appropriate equitable remedy.  Id. at 309.  However, the Dallas Court did conclude the trial court erred by instructing the jury not to include discounts in determining the fair market value of the stock.  Id.

Ritchie v. Rupe – Texas Supreme Court

The Texas Supreme Court reversed the court of appeals’ judgment relating to the oppression claim.  Ritchie, 2014 Tex. LEXIS at *2-3 (Tex. 2014).  The court began its analysis by determining the meaning of “oppressive” as the Legislature used the word in Article 7.05 and its successor section 11.404. In a footnote, the court indicated that article 7.05 was the governing statute when the trial court rendered its judgment.  Id. at *12, fn. 6.  The court noted that Rupe had actually sought a receivership to liquidate RIC, not to rehabilitate it as provided for in Article 7.05.  Id. at *11.  However, since Rupe was relying on this statute as authority for the trial court’s judgment ordering RIC to buy out her shares, the supreme court proceeded to analyze it and its successor statute. Id.

Meaning of “Oppressive” Under the Statute

The supreme court stated that the Legislature has never defined the term “oppressive” in the Business Corporation Act or the Business Organizations Code.  Id. at *19.  The court noted that two aspects of receivership statute were particularly relevant. First, both former article 7.05 and section 11.404 are not limited to closely held corporations which meant that the court must “construe the statute in a manner that is meaningful and workable not only for the peculiarities of minority shareholders in a closely held corporation, but also for shareholders and owners of other business entities.”  Id. at *23-24. Second, the statute places significant restrictions on the availability of a receivership; the court concluded that these requirements demonstrate the Legislature’s intent that receivership is a “harsh” remedy that is not readily available.  Id. at *24. 

The court noted that in addition to the statute’s three general requirements, a shareholder must also prove at least one of five specific grounds, one of which is the “illegal, oppressive or fraudulent” actions provision that Rupe relied. Id. at *25.  The court concluded that all five grounds applied to “situations that pose a serious threat to the well-being of the corporation.”  Id. at *25.  Therefore, “illegal, oppressive or fraudulent” actions must be construed in a manner consistent with these types of serious situations.  Id. at *25-26. 

In determining the meaning of “oppressive”, the court considered that the statute is limited to “directors or those in control of the corporation” engaged in oppressive conduct.  Id. at *26.  The court noted that directors owe a fiduciary duty to the corporation and this duty includes the “dedication of [their] uncorrupted business judgment for the sole benefit of the corporation.”  Id.  Thus, the meaning of “oppressive” must accommodate the exercise of that business judgment.  Id. at *27  The court, therefore, rejected the court of appeals  conclusion that the business judgment rule did not apply.  Id.

Lastly, the court noted that the Legislature grouped together three categories of conduct –actions that are “illegal,” actions that are “fraudulent,” and actions that are “oppressive.”  Id. at *30.   As such, the court concluded  that the “meaning that the Legislature contemplated for the term ‘oppressive’ must be consistent with, though not identical to, the meanings intended for the accompanying  terms ‘illegal’ and ‘fraudulent’.”  Id. 

Taking all of these factors into consideration, the supreme court concluded that neither the “fair dealing” test nor the “reasonable expectations” test sufficiently captured the Legislature’s meaning of “oppressive” actions as the term is used in article 7.05.  Id. at *33.  Cases which had found oppression based on either of these definitions alone were, therefore, disapproved of by the court.  Id. at *34-35.  The court then announced the new definition of “oppressive” for actions under former article 7.05 and section 11.404:  “a corporation’s directors or managers engage in ‘oppressive’ actions … when they abuse their authority over the corporation with the intent to harm the interests of one or more of the shareholders, in a manner that does not comport with the honest exercise of their business judgment, and by doing so create a serious risk of harm to the corporation.”  Id. at *35.  Applying this new definition, the court concluded that the refusal of RIC’s directors to meet with Rupe’s potential buyers did not constitute an “oppressive action” for which Rupe could obtain relief under former article 7.05. Id. 

Statutory Remedy for Oppression

Although the Dallas Court relied solely upon the director’s refusal to meet potential buyers, the supreme court noted that it need not consider whether other actions alleged by Rupe constituted “oppressive” conduct.   Even if the conduct was oppressive, the court held that the statute does not authorize the buy-out remedy that Rupe obtained.  Id. at *38.  The court concluded that former article 7.05 and section 11.404 create a single cause of action with a single remedy:  an action for appointment of a rehabilitative receiver.  Id. at *39.  The language in both statutes that “all other remedies available either at law or in equity…are determined by the court to be inadequate” is a restriction on the availability of the receivership, not an expansion of the remedies that the statute authorizes.  Id. at *40.  In other words, the court held that appointment of a rehabilitative receiver is the only remedy that former article 7.05 authorizes.  Id. at *58. 

No Common-law Cause of Action

While the Dallas Court based its decision solely under the receivership statute, since Rupe’s pleadings and briefs asserted a common-law claim for shareholder oppression, the supreme court analyzed whether to recognize such a cause of action.  Id. at *58-59.  The court stated that deciding whether to recognize a new cause of action requires a “cost-benefit analysis” to assure that the expansion of liability is justified.  Id. at *59. 

One of the factors of this analysis is the “foreseeability, likelihood and magnitude of potential injury.”  After reviewing the case law and other authorities, the court concluded that “the foreseeability, likelihood and magnitude of harm sustained by minority shareholders due to abuse of power by those in control of a closely held corporation is significant, and Texas law should ensure that remedies exist to appropriately address such harm.”  Id. at *64. 

Another factor considered as part of its analysis was the “existence and adequacy of other protections”.  Here, the supreme court detailed all the other statutory remedies that are available to protect against the subject conduct, including (1) declaration as a “close corporation”; (2) availability of derivative lawsuits involving a “closely held corporation”; (3) careful drafting of shareholder and buy-sell agreements and (4) the existence of various common-law causes of action which address misconduct by corporate directors and officers, including an accounting, breach of fiduciary duty, breach of contract, fraud and constructive fraud, conversion, fraudulent transfer, conspiracy, unjust enrichment and quantum meruit.  Id. at *65-72.

To test the adequacy of these “other protections”, the court went through five (5) “kinds of conduct commonly cited as justifying the creating of liability for ‘shareholder oppression’”:

Denial of Access to Corporate Books & Records

Withholding or Refusing to Declare Dividends

Termination of Employment

Misapplication of Corporate Funds/Diversion of Corporate Opportunities

Manipulation of Stock Values

Id. at *73-92.  As for the denial of access to the corporate books, the Court cited the sections of the Texas Business Organizations Code which address that shareholder’s right and provides for penalties for any violations.  Id. at *73.  As for the other four scenarios, the Court determined that each one of them could be addressed with the breach of fiduciary duty cause of action.  Therefore, the court declined to recognize a common-law cause of action for “shareholder oppression.”  Id. at *103. 

Breach of Informal Fiduciary Duties

Rupe argued that the supreme court could affirm the trial court’s buy-out order based on the jury’s finding in her favor on her breach of fiduciary duty claim.  Id.  The supreme court noted that Rupe’s fiduciary duty claim was not based on the formal fiduciary duties that directors and officers owe to the corporation but was based on an informal fiduciary relationship that existed between her and Dennard, Ritchie and Lutes.  Id. at 103-04.  Because the Dallas Court based its decision solely on the oppression finding, the supreme court remanded the case to the Dallas Court to resolve Dennard, Ritchie and Lutes’ challenges to Rupe’s breach of fiduciary duty claim.  Id. at 104.  Since the Dallas Court found that the evidence did not support the jury’s valuation of Rupe’s shares, if the Dallas Court concludes that Rupe may recover on the breach of fiduciary duty claim and that a buyout order is available as a remedy, it will need to remand the case to the trial court. The remand to the trial court would involve the redetermination of the value of Rupe’s shares and whether buyout is equitable in light of the newly determined value of the shares.  Id.

Cardiac Perfusion Services, Inc. vs. Hughes

The Dallas Court of Appeals (“Dallas Court”) notes in its opinion in this case that “[t]his case was tried and briefed before this Court issued its opinion in Ritchie [but] the parties agreed that our decision in Ritchie applies” to this case.  Cardiac Perfusion, 380 S.W.3d at 202-203. Defendant Joubran founded Cardiac Perfusion Services (CPS) and hired Hughes as his first employee in 1991.  Id. at 201.  In 1992, Hughes was offered and purchased 10% of CPS’ shares. Id. Also in 1992, Hughes entered into a Buy-Sell Agreement which required shareholders of CPS to purchase the stock of another shareholder upon “the severance of [that] shareholder’s employment relationship with [CPS],” with the purchase price to be calculated at book value of the shares.  Id.  Hughes’ employment with CPS was terminated in 2006. Thereafter, CPS and Joubran sued Hughes for breach of fiduciary duty and tortious interference with contract. Id.  Hughes counterclaimed against Joubran for oppressing him as the minority shareholder.  Id.  At the conclusion of the trial, the jury found in favor of Hughes on CPS’ and Joubran’s claims and in favor of Hughes on his minority suppression claims.  Id.  Based on the jury’s findings concerning the oppressive conduct, the trial court concluded that Joubran engaged in shareholder oppression and the most equitable remedy was to require Joubran and CPS to redeem Hughes’ shares at what the jury found the fair value to be: $300,000.  Id. at 202.

CPS and Joubran argued on appeal that trial court erred when it ordered them to redeem the shares at fair value rather than at book value, as required by the terms of a Buy-Sell Agreement entered into between CPS and Hughes.  Id.  Hughes countered that the book value of his shares was reduced by Joubran’s oppressive conduct and that he had sued for shareholder oppression, not breach of contract.  Id. at 204.  Citing the Davis case, the Dallas Court noted that the term “shareholder oppression” is expansive and covers “a multitude of situations dealing with improper conduct.”  Id. at 202. The Dallas Court reiterated the following procedural point it had highlighted in the Ritchie case:  “When the facts are in dispute, the jury determines what acts occurred, but the trial court determines whether those acts constitute shareholder oppression and exercises its equitable authority to decide the appropriate remedy.” Id.  The Dallas Court ruled against CPS and Joubran holding that “[i]n the context of a claim for shareholder oppression, courts have equitable power to order a buy-out at fair value.”  Id. at 204. The Dallas Court noted that the trial court appropriately instructed the jury to value the shares using the “enterprise value” method the Dallas court had sanctioned in the Ritchie case. Id. at 204-05.  But see Four Seasons Equip., Inc. v. White (In re White), 429 B.R. 201, 217 (Bankr. S.D. Tex. 2010) (holding that there was “little reason to substitute the Court’s own judgment as to the fair terms of the buy-out price [when] the formula was agreed to by the parties without coercion” in the shareholders’ agreement)

Cardiac Perfusion Services, Inc. vs. Hughes – Texas Supreme Court

Relying on its decision in Ritchie v. Rupe, the supreme court reversed the part of the trial court’s judgment which ordered the buy-out of Hughes shares for $300,000.  Cardiac Perfusion Services, Inc. v. Joubran, 2014 Tex. LEXIS 532, *2, 57 Tex. Sup. J. 914 (Tex. 2014).  The supreme court remanded the case in the interest of justice to provide Hughes with an opportunity to pursue a derivative action for breach of fiduciary duties. Id. at 7. The court expressed no opinion on whether Hughes could successfully pursue such a claim under the facts of the case. Id.

Argo Data v. Shagrithaya

In Argo Data Resource Corporation v. Shagrithaya, 380 S.W.3d 249 (Tex. App. – Dallas 2012, pet. denied), the Dallas Court of Appeals (“Dallas Court”) wrote its third opinion on shareholder oppression within a year and a half time period.  Unlike the Ritchie and Cardiac Perfusion opinions, in the Argo Data case, the Dallas Court reversed and rendered a verdict and judgment in favor of the plaintiff which had found shareholder oppression. Id. at 257.  ARGO, a software company, was co-founded by Martin and Shagrithaya, with Martin owing 53% of the company and Shagrithaya owning 47%.  Id. at 258.  Shagrithaya was in charge of developing the technology and Martin ran the business side.  Id.  Martin and Shagrithaya were the sole directors and officers. Id.  Their compensation was decided on a year-to-year basis and neither had a written or oral agreement for employment or compensation. Id.  Shagrithaya testified that it was his understanding that he and Martin would receive an equal salary, and for the first twenty-five years they did receive virtually equal compensation.  Id.  For more than twenty years, both men agreed not to issue dividends. Id. Thereafter, dividends were issued in 2004, 2007 and 2008, with Martin and Shagrithaya participating in these distributions in proportion to their ownership.  Id. at 269. 

In the late 1990s and early 2000s, Martin began expressing displeasure with Shagrithaya’s unwillingness to take on more responsibility for the management of ARGO.  Id. at 259.  Shagrithaya told Martin he wanted to remain in product development. Id.  In 2006, Martin met with Shagrithaya and told him the he could not justify paying him $1 million a year. Id.  Shortly after the meeting, Martin unilaterally cut Shagrithaya compensation to $300,000 for that year.  Id.  Thereafter, Shagrithaya met with Martin and told him that he was willing to “step down” from his position with ARGO.  Id.  Martin told Shagrithaya that the best option was to have ARGO buy him out and suggested that Shagrithaya retain independent counsel.  Id.  Shagrithaya’s counsel sent emails to ARGO’s legal counsel stating that his client wanted to sell all of his shares and listed three independent appraisers in order of preference.  Id.  The email also stated that it was expected that the appraisal be conducted without any minority discount so “that our clients can then negotiate a fair purchase price.” Id. at 259-60.  Martin agreed to the appraiser listed as Shagrithaya’s first choice.  Id. at 260. 

During this same time period, as a result of an audit, the IRS determined that ARGO had unreasonably accumulated earnings and profits and was assessed an accumulated earnings tax.  Id.  In response, ARGO filed a formal protest which stated that “[ARGO’s] executive management had concluded prior to June 30, 2005, that Mr. Shagrithaya’s minority stock position would likely have to be redeemed to protect the stability of [ARGO’s] business…” Id.  The letter further stated that “[t]he implementation of the phase-out of Mr. Shagrithaya began in earnest in 2003 with a restructuring of [ARGO’S] operational structure.”  Id. Shagrithaya had no knowledge of the audit or the protest letter until several months after the protest was filed. Id. The IRS ultimately agreed with ARGO that it was not retaining excessive earnings even without including a buyout of Shagrithaya’s shares as a business expense. Id.

In April 2007, Martin informed Shagrithaya of the results of the valuation prepared by the appraiser, the total value of ARGO being $216 million. Id. The appraiser applied a 35% minority discount and valued Shagrithaya’s shares at $66 million. Id. Martin agreed to have ARGO purchase Shagrithaya’s shares for this amount but Shagrithaya refused the sale because he thought the minority discount should not apply since ARGO, not a third party, would be purchasing the shares. Id. 

In November 2007, Shagrithaya requested, among other things, access to ARGO’s books and records to perform an audit which Martin provided.  Id. at 262.  As a result of the audit, it was discovered that Martin had purchased a Colorado condominium from ARGO without board approval, made payments to Martin’s wife equal to the lease payments on the Martin’s company car and had charged personal expenses to the company. Id. After ARGO conducted its own audit, Martin reimbursed ARGO in an amount greater than Shagrithaya’s auditor stated was owed.  Id.

Thereafter, Shagrithaya filed suit against Martin asserting claims for “oppressive conduct,” breach of fiduciary duty and breach of contract; the petition was later amended to include ARGO as a defendant and to assert derivative claims on behalf of ARGO for Martin’s alleged misuse of corporate funds. Id. After a six week trial, the jury found in favor of Shagrithaya on all claims submitted, finding that ARGO should issue a $65 million dividend and that Shagrithaya was owed over $2 million in back compensation. Id. at 263.  The trial court signed a judgment concluding that Martin had engaged in oppressive conduct, ordering a dividend in the amount of $85 million and awarded Shagrithaya $1.3 million for his breach of contract claim. Id. at 264.

The Dallas Court starts its analysis by stating that jurors as factfinders determine whether certain acts occurred but the determination of whether such acts constitute shareholder oppression is a question of law for the court.  Id. at 264.  The appellate court noted that it reviews questions of law de novo and that it is not obligated to give deference to the trial court’s legal conclusions. Id. The appellate court then reviewed each of the eleven acts included in the jury charge that allegedly supported Shagrithaya’s claim for shareholder oppression.  Id. at 265. 

The first act considered by the jury to be oppressive conduct was that Martin reduced Shagrithaya’s compensation by 70% without board approval.  Id. at 266.  The appellate court analyzed this claim under both the “reasonable expectations” test and “fair dealing” test set out in the Davis and Bydalek opinions. The Dallas Court held that, without an agreement pertaining to compensation, Shagrithaya’s expectation to maintain a level of compensation equal to Martin was not reasonable.  Id.  The court further concluded that the reduction in Shagrithaya’s compensation was not so burdensome, harsh or wrongful (“fair dealing” test) that it constituted shareholder oppression. Id. This action directly related to Shagrithaya’s position as an employee and not to his status as a shareholder. Id. The Dallas Court further noted that the board did eventually approve the compensation level. Id. The court cited the Patton decision for the proposition that the “inability to control board decisions is inherent in the position of a minority shareholder.”  Id. at 267. 

The next act found by the jury to be oppressive was the fact that Martin’s annual compensation had been kept at $1 million for 2 years without board approval.  The Dallas Court decided that the absence of board approval did not cause Shagrithaya any harm because the board eventually retroactively approved the compensation. Id.  The court noted that a minority shareholder can prove oppression by showing that another shareholder employed by the company is receiving compensation so far in excess of what is reasonable for his position that he is, in actuality, receiving a de facto dividend. Id. at 268. The appellate court found, however, that Shagrithaya did not present any evidence to support this type of allegation. Id.

The jury also found that Martin engaged in a plan to “retain ARGO’S earnings to buy Shagrithaya’s interest without disclosing this plan to Shagrithaya.”  Id. The Dallas Court noted that this finding related to Shagrithaya’s separately asserted cause of action for malicious suppression of dividends. Id. As to that cause of action, the court noted that it was merely a form of minority shareholder oppression under the statutory cause of action rather than a separate common law claim. Id. at 269. The court held that Shagrithaya did not have specific reasonable expectations of receiving dividends because he testified that his plan with Martin was to retain all company earnings and reap the return on their investment when they sold the company.  Id. at 270.  As for general expectations, a shareholder may expect to share proportionately in the company’s earnings but has no general expectation of receiving a dividend because Texas law does not require corporations to issue dividends.  Id.  The Dallas Court noted that Shagrithaya did receive his proportional share of the $25 million in dividends that were issued by the company. Id.  Under the fair dealings test, the court found that Martin’s suppression of dividends did not substantially defeat Shagrithaya’s expectations or prejudice his rights as a shareholder.  Id. at 271. 

The appellate court further found that Martin’s failure to disclose to the board (i.e. to Shagrithaya) that the IRS had assessed a retained earnings tax did not harm Shagrithaya’s interests in that the IRS ultimately reversed its decision.  Id. 

Next, the Dallas Court dealt with Martin’s offer for ARGO to purchase Shagrithaya’s shares for $66 million. The court noted that there are two ways to value a minority shareholder’s stock: enterprise value and fair market value.  Id.  The enterprise value is determined by assessing the value of the company as a whole and to assign to each share it’s pro rata portion of that overall value.  Id.  Enterprise value does not include a discount based on the stock’s minority status or lack of marketability. Id.  The fair market value is the price at which the stock would change hands between a willing seller and a willing buyer, with both parties having reasonable knowledge of the relevant facts. Id.  Fair market value of minority shares does include a minority discount. Courts have ordered majority shareholders to buy out a minority shareholder’s interest using enterprise value where the minority shareholder was forced to relinquish his ownership position in the company by the majority’s oppressive conduct, and absent threat of dissolution or court order, the majority was an unwilling buyer.  Id. Applying these two standards, the appellate court decided that the fair market method was appropriate here because Shagrithaya was not forced to relinquish his ownership position, in fact he still owned 47% of the company.  Id. at 271-72. 

According to the Dallas Court, the jury’s finding that Martin required Shagrithaya to report to the President of ARGO without board approval is an employment matter and did not rise to shareholder oppression.  Id. at 272.  The alleged misuse of ARGO’s corporate assets by Martin also could not support a shareholder oppression finding because Martin repaid ARGO more than the amount Shagrithaya claimed was owed, therefore, any harm to Shagrithaya was remedied before trial.  Id.  The last allegation of shareholder oppression related to Martin’s failure to disclose to the board that he had retained a law firm to challenge the IRS tax assessment.  Id.  The Dallas Court concluded that ARGO as a whole benefited from this challenge and this action did not amount to shareholder oppression.  Id. at 272-73. 

Since the $85 million dividend awarded was also based on Shagrithaya’s claim for fraud, the appellate court reviewed the court’s findings on the fraud claim.  Id. at 273.  The fraud claim was based solely on Martin’s failure to disclose his plan to buy out Shagrithaya’s shares as the purpose for retaining earnings.  Id. The court concluded that Shagrithaya did not present any evidence of how he was harmed by the withholding of this information.  Id. 

The Dallas Court held that the evidence did not support a finding of shareholder oppression (including malicious suppression of dividends) or fraud, and concluded that the trial court erred in ordering the equitable remedy of an $85 million dividend. Id. at 274.  The appellate court reversed that portion of the trial court’s judgment and rendered that Shagrithaya take nothing by these claims. Id.

On February 14, 2012, Shagrithaya filed a Petition for Review with the Texas Supreme Court. His primary arguments are that his case involves all three forms of abuse previously recognized by Texas courts as shareholder oppression.  See Petition for Review at 3. Shagrithaya also argued that the case required review because it dealt with basic questions about the role of appellate review in these cases. Id.  Specifically, Shagrithaya argued that Dallas Court of Appeals reversed the trial court’s judgment while leaving virtually all the jury’s findings either intact or unaddressed.  Id.  On June 27, 2014, the supreme court denied the petition for review.

Oppression Suits in LLCs

The Texarkana Court of Appeals dealt with an LLC “member oppression” claim in Pinnacle Data Services, Inc. v. Gillen, 104 S.W.3d 188 (Tex. App. – Texarkana 2003, no pet.). The Court cited the Davis definitions of oppression and appeared to accept that oppression lawsuits applied in the LLC context. Id. at 196. The court held, however, that the minority member failed to bring forth any evidence to support its claim in response to defendant’s no evidence motion for summary judgment.  Id.

In the Devon Energy Holdings case, Allen, a minority member of an LLC, sued the LLC and its majority owner for breach of fiduciary duties and shareholder oppression (among other causes of action).  Devon Energy Holdings, 367 S.W.3d at 365.  The LLC moved for a traditional summary judgment, which the trial court granted. Id. at 367-68.  In reviewing the breach of fiduciary duty claim, the appellate court noted that it would review cases involving closely-held corporations because “Allen relies on these cases and Chief, as a closely-held LLC, operated much like a closely-held corporation.” Id. at 389.  The appellate court held that “there is a formal fiduciary duty when (1) the alleged-fiduciary has a legal right of control and exercises that control by virtue of his status as the majority owner and sole-member-manager of a closely-held LLC and (2) either purchases a minority shareholder’s interest or causes the LLC to do so through a redemption when the result of the redemption is an increased ownership interest for the majority owner and sole manager.”  Id. at 395-96.  In relation to the shareholder oppression claim, the appellate court held that the trial court properly granted summary judgment on that claim because the complained-of actions were not similar to recognized examples of shareholder oppression. Id. at 399.  In a footnote, the appellate court noted that it did not express an opinion on whether a member of an LLC may assert a claim for shareholder oppression. Id., fn. 59. See also Bulacher v. Enowa, LLC, 2010 U.S. Dist. LEXIS 27784 *5, (N.D. Tex. March 23, 2010) (holding claims of minority owner of LLC were sufficient to state a claim for oppression under Texas law).

In Ritchie, the supreme court noted that Section 11.404 applies to any “domestic entity.” Ritchie, 2014 Tex. LEXIS at *23.  While Section 11.404 undoubtedly applies to LLCs, the limitation on the shareholder oppression cause of action detailed in the Ritchie case would also apply.

Premises liability law

PREMISES LIABILITY LAW

JOE ESCOBEDO

Escobedo, Tippit & Cardenas, L.L.P.

3900 N. 10th Street, Suite 950

McAllen, Texas  78501

Telephone: (956) 618-3357

Telecopier: (956) 618-3361

State Bar of Texas

29th ANNUAL ADVANCED PERSONAL INJURY COURSE 2013

Dallas – July 10-12

San Antonio – August 7-9

Houston – August 28-30

CHAPTER 19

TABLE OF CONTENTS

I. INTRODUCTION

II. PREMISES LIABILITY V. NEGLIGENT ACTIVITY

III. PLAINTIFF’S LEGAL STATUS

A. Invitees

1. Actual or Constructive Knowledge

2. Condition Posed an Unreasonable Risk

3. Duty to Warn or Make Safe

B. Licensees

1. Express v. Implied License

2. Actual Knowledge Only

3. Duty to Warn or Make Safe

4. CPRC 75.001 et. seq. – Recreational Use Statute

C. Trespassers

Attractive – Nuisance Doctrine

IV. CHAPTER 95

A. Common Law Duties to Independent Contractors

B. Chapter 95 Duties to Independent Contractors

Application of the Statute

2. Elements of Proof Under Chapter 95

V. STATUS OF THE DEFENDANT

A. Current and Former Owners

B. Non-Owners

VI. LIABILITY FOR CRIMINAL CONDUCT

The Timberwalk Factors – Invitees

1. Proximity

2. Recency and Frequency

3. Similarity

4. Publicity

B. Mellon Mortgage – Was the Victim Foreseeable?

C. The Del Lago Opinion

VII. CONCLUSION

TABLE OF AUTHORITIES

Andrews v. Rodeo Square Apartments

2006 Tex. App. LEXIS 6415 (Tex. App. – Houston [1st Dist.] 2006, no pet.)

Arsement v. Spinnaker Exploration Co., LLC

400 F.3d 238 (5th Cir. 2005)

Ashabranner v. Hydrochem Industrial Serv., Inc.

2004 Tex. App. LEXIS 2782 (Tex. App. – Houston [14th Dist.] 2004, no pet.)

Bendigo v. City of Houston…………………………………………………………………………

178 S.W.3d 112 (Tex. App. – Houston [1st Dist.] 2005, no pet.)

Brinker v. Evans

370 S.W. 3d 416 (Tex. App. – Amarillo, 2012, pet. denied)

Brooks v. PRH Investments, Inc.

303 S.W.3d 920 (Tex. App. – Texarkana 2010, no pet.)

Brookshire Food Stores, LLC v. Allen………………………………………………………………

93 S.W.3d 897 (Tex. App. – Texarkana 2002, no pet.)

Brookshire Grocery Co. v. Taylor

222 S.W.3d 406 (Tex. 2006)

Buffalo Mar. Serv. v. Monteau

761 S.W.2d 416 (Tex. App. – Houston [14th Dist.] 1988, no writ)

Burkett v. Welborn

42 S.W.3d 282 (Tex. App. – Texarkana, 2001, no pet.)

CMH Homes, Inc. v. Daenen

15 S.W.3d 97 (Tex. 2000)

Callahan v. Vitesse Aviation, Svcs., LLC

2013 Tex. App. LEXIS 4095 (Tex. App. – Dallas March 29, 2013, no pet. h.)

Chi Energy, Inc. v. Urias

156 S.W.3d 873 (Tex. App. – El Paso 2005, pet. denied)

City of Bellmead v. Torres

89 S.W.3d 611 (Tex. 2002)

City of San Antonio v. Rodriguez

931 S.W.2d 535 (Tex. 1999) (per curiam)

City of Waco v. Kirwan

298 S.W.3 618 (Tex. 2009)

Clayton W. Williams, Jr., Inc. v. Olivo

952 S.W.2d 523 (Tex. 1997)

Del Lago Partners v. Smith

307 S.W.3d 762 (Tex. 2010)

Dyall v. Simpson Pasadena Paper Co.

152 S.W.3d 688 (Tex. App. – Houston [14th Dist.] 2004, pet denied)

Eaton v. R.B. George, Invs.

260 S.W.2d 587 (Tex. 1953)

Entergy Gulf States, Inc. v. Isom

143 S.W.3d 486 (Tex. App. – Beaumont 2004, pet. denied)

First Financial Dev. Corp. v. Hughston

797 S.W.2d 286 (Tex. App. – Corpus Christi 1990, writ denied)

Fisher v. Lee and Chang Partnership

16 S.W.3d 198 (Tex. App. – Houston [1st Dist.] 2000, pet. denied)

Fisher Constr. Co. v. Riggs

320 S.W. 2d 200 (Tex. Civ. App. – Houston 1959)

Francis v. Coastal Oil & Gas Corp.

130 S.W.3d 76 (Tex. App. – Houston [1st Dist.] 2005, no pet.)

Gatten v. McCarely

2013 Tex. App. LEXIS 838 (Tex. App. – Dallas 2013, no pet. h.)

General Mills Rests, Inc. v. Texas Wings, Inc.

12 S.W.3d 827 (Tex. App. – Dallas, 2000, no pet.)

Gorman v. Meng

335 S.W.3d 797 (Tex. App. – Dallas 2011, no pet.)

Gowen v. Willenborg

366 S.W.2d 695 (Tex. App. – Houston 1963, writ ref’d n.r.e.)

Guadalupe-Blanco River Auth. v. Pitonyak

84 S.W.3d 326 (Tex. App. – Corpus Christi 2002, no pet.)

H.E. Butt Grocery Co. v. Resendez

988 S.W.2d 218 (Tex. 1999) (per curiam)

Herceg v. Hustler Mag., Inc.

565 F.Supp. 802 (S.D. Tex. 1983)

Hernandez v. Brinker Int’l., Inc.

285 S.W.3d 152 (Tex. App. – Houston [14th Dist.] 2009, no pet.)

Howe v. Kroger Co.

598 S.W.2d 929 (Tex. App. – Dallas 1980, no writ)

Jai Jalaram Lodging Group, LLC v. Leribeus

225 S.W.3d 238 (Tex. App. – El Paso 2006, pet. denied)

James v. Cousins Props. Tex., L.P.

2008 Tex. App. LEXIS 3966 (Tex. App. – Austin May 30, 2008, no pet.)

Jane Doe 1 v. Pilgrim Rest Baptist Church

248 S.W.3d 831 (Tex. App. – Dallas 2008, pet denied)

Jenkins v. Occidental Chemical Corp.

2013 Tex. App. LEXIS 1469 (Tex. App. – Houston [1st Dist.] February 14, 2013, no pet. h.)

Johns v. Fort Worth Power & Light Co.

30 S.W.2d 549 (Tex. App. – Fort Worth 1930, writ ref’d)

Johnson County Sheriff’s Posse, Inc. v. Endsley

926 S.W.2d 284 (Tex. 1996)

Keetch v. Kroger, Co.

845 S.W.2d 264 (Tex. 1992)

Kelly v. Lin Television of Texas, L.P.

27 S.W.3d 564 (Tex. App. – Eastland 2000, pet. denied)

Koch Refining Co. v. Chapa

11 S.W.3d 153 (Tex. 1999)

Kofahl v. Randall’s Food & Drugs, Inc…………………………………………………………….

151 S.W.3d 679 (Tex. App. – Waco 2004, pet. denied)

Kopplin v. City of Garland

869 S.W.2d 433 (Tex. App. – Dallas 1993, writ denied)

Lefmark Management Co. v. Old

946 S.W.2d 52 (Tex. 1997)

Luna v. H&A Invs.

900 S.W.2d 735 (Tex. App. – Corpus Christi, 1994, no writ)

M.O. Dental Lab v. Rape

139 S.W.3d 671 (Tex. 2004)

Mass Marketing, Inc. v. Gaines…………………………………………………………………….

70 S.W.3d 261 (Tex. App. – San Antonio 2001, pet. denied)

Massie v. Copeland

233 S.W.2d 449 (Tex. 1950)

McClure v. Rich

95 S.W.3d 620 (Tex. App. – Dallas 2002, no pet.)

McMillan v. Parker

910 S.W.2d 616 (Tex. App. – Austin 1995, writ denied)

Mellon Mortgage Co. v. Holder

5 S.W.3d 654 (Tex. 1999)

Moeller v. Fort Worth Capital Corp.

610 S.W.2d 857 (Tex. App. – Fort Worth 1980, writ ref’d n.r.e.)

Moore v. Howmet Corp.

2005 U.S. Dist. LEXIS 6317 (Northern Dist. Tex. 2005)

Nagle v. Shelf

2005 U.S. Dist. LEXIS 34759 (Southern Dist. Texas 2005)

National Convenience Stores v. Erevia……………………………………………………………..

73 S.W.3d 518 (Tex. App. – Houston [1st Dist.] 2002, pet. denied)

Nixon v. Mr. Property Management Co.

690 S.W.2d 546 (Tex. 1985)

Padron v. L&M Properties

2003 Tex. App. LEXIS 1229 (Tex. App. – Eastland, 2003, no pet.)

Palacio v. AON Properties, Inc.

110 S.W.3d 493 (Tex. App. – Waco 2003, no pet.)

Peerenboom v. HSP Foods, Inc.

910 S.W.2d 156 (Tex. App. – Waco 1995, no writ)

Phillips v. Dow Chem. Co.

186 S.W.3d 121 (Tex. App. – Houston [1st Dist.] 2005, no pet.)

Pifer v. Muse

984 S.W.2d 739 (Tex. App. – Texarkana 1998, no pet.)

Redinger v. Living, Inc.

689 S.W.2d 415 (Tex. 1985)

Reliable Consultants, Inc. v. Jaquez

25 S.W.3d 336 (Tex. App. – Austin 2000, pet. denied)

Rosas v. Buddies Food Store

518 S.W.2d 534 (Tex. 1975)

Rueda v. Paschal

178 S.W.3d 107 (Tex. App. – Houston [1st Dist.] 2005, no pet.)

Sam Houston State University v. Anderson

2008 Tex. App. LEXIS 8614 (Tex. App. – Waco, Nov. 12, 2008, no pet.)

Science Spectrum, Inc. v. Martinez

941 S.W.2d 910 (Tex. 1997)

Scott & White Mem’l Hosp. v. Fair

310 S.W.3d 411 (Tex. 2010)

Shell Oil Co. v. Khan

138 S.W.3d 288 (Tex. 2004)

Sibai v. Wal-Mart Stores, Inc.

986 S.W.2d 702 (Tex. App. – Dallas, 1999, no pet.)

Spears v. Crown Central Petroleum Corp.

2005 U.S. App. LEXIS 9962 (5th Cir. 2005)

State v. Shumake

199 S.W.3d 279 (Tex. 2006)

State v. Williams

940 S.W.2d 583 (Tex. 1996)

State Dept. of Highways & Pub. Transp. v. Kitchen

867 S.W.2d 784 (Tex. 1993)

State Dept. of Hwys. & Pub. Transp. v. Payne

838 S.W.2d 235 (Tex. 1992)

Stephen F. Austin University v. Flynn

228 S.W.3d 653 (Tex. App. – Tex. 2007)

Stimpson v. Bartex Pipe Line Co.

36 S.W.2d 473 (Tex.Comm’n App. 1931, judgm’t adopted)

Strandberg v. Spectrum Office Bldg.

293 S.W.3d 736 (Tex. App. – San Antonio 2009, no pet.)

Sullivan v. City of Fort Worth

2011 Tex. App. LEXIS 3866 (Tex. App. – Forth Worth 2011, pet. denied)

Texas DOT v. Henson

843 S.W.2d 648 (Tex. App. – Houston [14th Dist.] 1992, writ denied)

Texas Real Estate Holdings, Inc. v. Quach

95 S.W.3d 399 (Tex. App. – Houston [1st Dist.] 2003, pet. denied)

Texas Utils. Elec. Co. v. Timmons

947 S.W.2d 191 (Tex. 1997)

Texas-Louisiana Power Co. v. Webster

91 S.W.2d 302 (Tex. 1936)

The Dow Chemical Company v. Abutahoun

2013 Tex. App. LEXIS 1265 (Tex. App. – Dallas Feb. 8, 2013, pet. filed)

Thornhill v. Ronnie’s I-45 Truck Stop, Inc.

944 S.W.2d 780 (Tex. App. – Beaumont 1997, writ dism’d)

Timberwalk Apartments Partners Inc. v. Cain

972 S.W.2d 749 (Tex. 1998)

Trammel Crow Central Texas Ltd. v. Gutierrez

267 S.W.3d 9 (Tex. 2008)

Univ. of Tex. – Pan Am. v. Aguilar

251 S.W.3d 511 (Tex. 2008) (per curiam)

University of Texas at Arlington v. Williams

2013 Tex. App. LEXIS 3985 (Tex. App. – Fort Worth, March 28, 2013, no pet. h.)

Wal-Mart Stores, Inc. v. Alexander

868 S.W.2d 322 (Tex. 1993)

Wal-Mart v. Chavez

81 S.W. 3d 862 (Tex. App. – San Antonio, 2002, no pet.)

Wal-Mart Stores, Inc. v. Gonzalez

968 S.W.2d 934 (Tex. 1998)

Wal-Mart Stores v. Miller

102 S.W.3d 706 (Tex. 2003)

Wal-Mart v. Reece

81 S.W.3d 812 (Tex. 2002)

Wal-Mart v. Spates

186 S.W.3d 566 (Tex. 2006)

Wal-Mart Stores, Inc. v. Diaz………………………………………………………………………

109 S.W.3d 584 (Tex. App. – Fort Worth 2003, no pet.)

Wal-Mart Stores, Inc. v. Garza

27, S.W.3d 64 (Tex. App. – San Antonio 2000, pet. denied)

Wal-Mart Stores, Inc. v. Rosa………………………………………………………………………

52 S.W.3d 842 (Tex. App. – San Antonio 2001, pet. denied)

Wal-Mart Stores v. Tinsley………………………………………………………………………….

998 S.W.2d 664 (Tex. App. – Texarkana 1999, pet. denied)

Way v. Boy Scouts of Am.

856 S.W.2d 433 (Tex. App. – Dallas 1993, writ denied)

Weaver v. KFC Mgmt., Inc.

750 S.W.2d 24 (Tex. App. – Dallas 1988, writ denied)

West v. SMG

318 S.W.3 430 (Tex. App. – Houston [1st Dist.] 2010, no pet.)

Wilson v. Patel

2004 Tex. App. LEXIS 2614 (Tex. App. – Austin 2004, no pet.)

Wright v. Wal-Mart Stores………………………………………………………………………….

73 S.W.3d 552 (Tex. App. – Houston [1st Dist.] 2002, no pet.)

Wyckoff v. George C. Fuller Contracting, Co.

357 S.W.3d 157 (Tex. App. – Dallas, 2011, no pet.)

Tex. Civ. Prac. & Rem. Code § 75.001, et seq.

Tex. Civ. Prac. & Rem. Code § 95.001, et seq.

I. INTRODUCTION

A premises liability case involves an injury allegedly caused by a condition on property as opposed to a case wherein the injury was allegedly caused by a negligent activity.  Premises liability is based on the principles of negligence, but the specific duties owed by an owner or occupier of land to an injured party is established by premises liability law. 

There are numerous issues that may arise in premises cases, including the following:

Is the case a premises case as opposed to a negligent activity?

What is the legal status of plaintiff, that is, is the plaintiff an invitee, a licensee or a trespasser?

Is the duty owed to plaintiff impacted by statute or special doctrine?

What is the status of the defendant (owner or occupier) as it relates to the property in question?

Does the case involve criminal conduct by a third party?

II. PREMISES LIABILITY V. NEGLIGENT ACTIVITY

Whenever an injury occurs on premises, the first question that should be addressed is whether the case involves premises liability or negligent activity.  While premises liability cases are negligence cases, the extent of the duty owed by the defendant generally depends on the status of the injured person at the time of the incident.  Premises liability cases have additional requirements that are not applicable to ordinary negligence cases; therefore, premises liability cases are often harder to prosecute.

The Texas Supreme Court, in Keetch v. Kroger Co., 845 S.W.2d 262, 264 (Tex. 1992), set out the differences between premises liability and negligent activity.  In Keetch, the plaintiff slipped on a substance that had been sprayed on plants in a grocery store approximately a half-hour prior to the incident.  The Court held that because there was no “ongoing activity” at the time that the plaintiff was injured, the plaintiff’s case was a premises liability case and not a negligent activity case.  Id. The plaintiff had been injured by a condition created by the spraying of the plants but was not injured by the activity of spraying. Id.  The Court noted that the key factor in determining whether the case is a negligent activity is whether the activity that caused the injury was ongoing at the time of the injury, as opposed to a condition that was caused by an activity that occurred prior to the injury.  Id.

Examples of cases found to involve negligent activity include:

Injury occurred when box was dropped on plaintiff’s head while it was being removed from the shelf. Wal-Mart Stores, Inc. v. Garza, 27 S.W.3d 64, 67 (Tex. App. – San Antonio 2000, pet. denied).

Injury occurred when employee was moving merchandise from one cart to another.  Sibai v. Wal-Mart Stores, Inc., 986 S.W.2d 702, 707 (Tex. App. – Dallas, 1999, no pet.).

Injuries arising from a condition on land can only be redressed under the theory of premises liability and this cannot be avoided through “adroit phrasing of the pleadings to encompass design defects, per se negligence or any other theory of negligence”.  Brinker v. Evans, 370 S.W.3d 416, 421 (Tex. App. – Amarillo, 2012, pet. denied).

III. PLAINTIFF’S LEGAL STATUS

In a premises liability case, the duty that the defendant owes the plaintiff depends on the plaintiff’s status at the time and place of the injury; was the plaintiff an invitee, a licensee or a trespasser?  See Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 554 (Tex. 1985).

There are circumstances in which Texas courts have found the plaintiff’s status to be irrelevant in determining the duty owed by the landowner. See Nixon, 690 S.W.2d at 549 (statute or ordinance created a duty to prevent injury to a class of persons that the injured plaintiff belonged to); Texas-Louisiana Power Co. v. Webster, 91 S.W.2d 302, 305 (Tex. 1936) (easement holder, because it does not have exclusive possession of the property, owed trespasser a duty of ordinary care); Mellon Mortgage Co. v. Holder, 5 S.W.3d 654 (Tex. 1999) (supreme court stated it was unnecessary to address status of the plaintiff, who had been abducted and taken to the parking garage, because she was an “unforeseeable victim”).

Invitees

An invitee is someone who enters the premises with the owner’s express or implied knowledge and for the mutual benefit of both parties. Rosas v. Buddies Food Store, 518 S.W.2d 534, 536 (Tex. 1975).  Invitees include business patrons, club or church members, hotel guests, owner’s employees, delivery persons, meter readers and mail carriers.

For an invitee to recover under premises liability, he must prove the following elements:

The defendant had actual or constructive knowledge of a condition on the premises that posed an unreasonable risk of harm.

The defendant failed to exercise reasonable care by both failing to adequately warn of the condition and failing to make the condition reasonably safe.

The defendant’s failure proximately caused the injury to the invitee.

Rosas, 518 S.W.2d at 536-537.

Actual or Constructive Knowledge

The actual knowledge component can be difficult to establish.  It includes what a defendant actually knows about the condition because he has seen it or has been told about it. Walmart v. Chavez, 81 S.W3d 862, 864 (Tex. App. – San Antonio 2002, no pet.)  Actual knowledge can be established through circumstantial evidence, such as proof of prior incidents.  Univ. of Tex.-Pan Am. v. Aguilar, 251 S.W.3d 511, 514 (Tex. 2008) (per curiam).  The lack of prior incidents can be used by the defendant to prove it did not have actual knowledge.  Id.  The fact that the land owner created the condition creates an inference of knowledge, but the jury must still find that the defendant knew or should have known of the dangerous condition.  Keetch, 845 S.W.2d at 265.  If an owner took precautionary measures to reduce a dangerous condition, the owner will be charged with actual notice of the condition.  See Reliable Consultants, Inc. v. Jaquez, 25 S.W.3d 336, 343 (Tex. App. – Austin 2000, pet. denied) (jury could infer actual knowledge from Defendant’s precautionary measures coupled with numerous previous instances where people had stumbled on the step).

  

Proof of constructive knowledge requires evidence that the condition existed long enough for the owner to discover it through reasonable inspection.  CMH Homes, Inc. v. Daenen, 15 S.W.3d 97, 102-103 (Tex. 2000).  This is referred to as the “time-notice rule” and is often a point of contention in cases involving constructive knowledge.  Walmart v. Spates, 186 S.W.3d 566, 568 (Tex. 2006) (per curiam) (plaintiff’s claim that a plastic soda ring was on the floor for 30-45 near a store employee was not sufficient to prove constructive knowledge).  Constructive knowledge is not proven when the evidence establishes only the possibility that the dangerous condition existed long enough to give the defendant an opportunity to discover it. Walmart v. Reece, 81 S.W.3d 812, 816 (Tex. 2002).  Further, even if it appears that the substance on the floor had been there for a long time, the plaintiff cannot establish constructive knowledge absent actual proof of the length of time.  Wal-Mart Stores, Inc. v. Gonzalez, 968 S.W.2d 934, 937-38 (Tex. 1998) (despite fact that macaroni salad on floor had cart tracks and footprints on it at the time the plaintiff was injured, plaintiff could not recover because plaintiff did not have personal knowledge of the length of time the macaroni salad had been on the floor).  In Brookshire Grocery Co. v. Taylor, 222 S.W.3d 406, 409 (Tex. 2006), the supreme court held that the grocery store did not have constructive knowledge of ice on the floor because the ice had not fully melted.

More often than not, Texas’ appellate courts have ruled that the plaintiff’s evidence was insufficient to charge the defendant with constructive knowledge. See CMH Homes, 15 S.W.3d at 103; Reece, 81 S.W.3d at 816; Wal-Mart Stores, Inc. v. Rosa, 52 S.W.3d 842, 844 (Tex. App. – San Antonio 2001, pet. denied) (discoloration of banana and proximity of store’s employees were not sufficient evidence to support constructive knowledge); Wright v. Wal-Mart Stores, 73 S.W.3d 552, 555-56 (Tex. App. – Houston [1st Dist.] 2002, no pet.) (defendant did not have constructive knowledge of food on floor simply because employee was working within 20-30 feet); Brookshire Food Stores, LLC v. Allen, 93 S.W.3d 897, 901 (Tex. App. – Texarkana 2002, no pet.) (insufficient evidence of constructive knowledge where grapes were not on floor longer than fifteen minutes because store director testified he did walk-through fifteen minutes before plaintiff fell); Wal-Mart Stores, Inc. v. Diaz, 109 S.W.3d 584, 589 (Tex. App. – Fort Worth 2003, no pet.) (no evidence that store employees inspected aisle before accident, therefore, no evidence of constructive knowledge); Bendigo v. City of Houston, 178 S.W.3d 112, 115-16 (Tex. App. – Houston [1st Dist.] 2005, no pet.) (plaintiff’s claim that trash could have been on the stairs for 10-12 hours following afternoon rush was insufficient to prove constructive knowledge);

In the following cases, the appellate courts found that there was sufficient evidence to prove constructive knowledge:  Wal-Mart Stores v. Tinsley, 998 S.W.2d 664, 669 (Tex. App. – Texarkana 1999, pet. denied) (size of puddle and fact that leaked from ceiling was sufficient evidence of longevity); Mass Marketing, Inc. v. Gaines, 70 S.W.3d 261, 264 (Tex. App. – San Antonio 2001, pet. denied) (evidence of child eating grapes in checkout aisle sufficient to charge defendant with notice because manager and cashier both saw child eating grapes and were aware of danger); National Convenience Stores v. Erevia, 73 S.W.3d 518, 523 (Tex. App. – Houston [1st Dist.] 2002, pet. denied) (self-service display held to be the subject dangerous condition and jury could infer knowledge from manager’s testimony that ice falling from display was common); Kofahl v. Randall’s Food & Drugs, Inc., 151 S.W.3d 679, 681-82 (Tex. App. – Waco 2004, pet. denied) (in appeal from granting of summary judgment, court found evidence large puddle was tacky and gummy as if starting to dry up was more than a scintilla of evidence to show constructive knowledge).

Unlike a licensee, an invitee does not have to prove that he did not have knowledge of the dangerous condition.  State Dept. of Hwys. & Pub. Transp. v. Payne, 838 S.W.2d 235, 237 (Tex. 1992). The plaintiff’s knowledge is relevant, however, to the issue of proportionate responsibility. Strandberg v. Spectrum Office Bldg., 293 S.W.3d 736, 740 (Tex. App. – San Antonio 2009, no pet.).

Condition Posed an Unreasonable Risk

An additional element of proof is that the subject condition posed an unreasonable risk of harm. Rosas, 518 S.W.2d at 537.  Given the fact that the defendant must have knowledge of the unreasonably dangerous condition, the question of what is the condition in question is often in dispute.  In the Brookshire Grocery case, the plaintiff argued that the soft drink dispenser itself, not just the ice she slipped upon, was an unreasonable dangerous condition. Brookshire Grocery, 222 S.W.3d at 407.  A grocery employee had testified that ice fell off the dispenser on a daily basis. Id. The supreme court disagreed with the plaintiff and held that the ice on the floor, not the dispenser, was the condition in question in that case.  Id. at 409.  See also H.E. Butt  Grocery Co. v. Resendez, 988 S.W.2d 218, 219 (Tex. 1999) (per curiam) (supreme court held that grape on the floor, not the display, was the subject condition); City of San Antonio v. Rodriguez, 931 S.W.2d 535, 536-37 (Tex. 1996) (supreme court held that on retrial the jury should be instructed that the allegedly dangerous condition was the water that Rodriguez claims was on the floor, not the leaky roof); Cf. National Convenience Stores, 73 S.W.3d at 523 (court held self-service display was the subject dangerous condition and jury could infer knowledge from manager’s testimony that ice falling from display was common).

Courts have determined that there are some conditions which, as a matter of law, do not pose an unreasonable risk of harm:

Icy bridge during cold rainy weather. State Dept. of Highways & Pub. Transp. v. Kitchen, 867 S.W.2d 784, 786 (Tex. 1993), (per curiam).

Mud that accumulates naturally on outdoor concrete slab. M.O. Dental Lab. v. Rape, 139 S.W.3d 671, 675 (Tex. 2004).

Naturally occurring ice that accumulates without assistance or involvement of unnatural contact.  Scott & White Mem’l Hosp. v. Fair, 310 S.W.3d 411, 414 (Tex. 2010); Callahan v. Vitesse Aviation Svcs., LLC, 2013 Tex. App. LEXIS 4095 at *22-23 (Tex. App. – Dallas March 29, 2013, no pet. h.). 

Dirt in its natural state.  See Johnson County Sheriff’s Posse, Inc. v. Endsley, 926 S.W.2d 284, 287 (Tex. 1996).

3. Duty to Warn or Make Safe

The defendant’s duty to an invitee is to use reasonable care to warn or to make the condition safe. Burkett v. Welborn, 42 S.W.3d 282, 289 (Tex. App. – Texarkana, 2001, no pet.).  As a result of the duty involving two alternative methods of making the dangerous condition safe (warning of or eliminating the danger), the plaintiff must establish that the defendant did neither to recover.  Rodriguez, 931 S.W.2d at 536 (jury instruction that stated that the City was negligent if it failed to adequately warn or make the condition reasonably safe was reversible error). See also Brooks v. PRH Investments, Inc., 303 S.W.3d 920, 925 (Tex. App. – Texarkana 2010, no pet.) (if evidence conclusively established that owner adequately warned the plaintiff of the condition, the owner cannot be found negligent as a matter of law).

As seen in Section IV infra, a defendant property owner’s duty to an independent contractor and his employees is now controlled by Chapter 95 of the Texas Civil Practices & Remedies Code.

Licensees

The critical difference between licensees and invitees is that the licensee’s presence on the property does not provide a mutual benefit to the licensee and the property owner.  The licensee is on the property with permission from the owner but for the licensee’s own convenience or on business for someone other than the property owner.  Licensees typically include social guests, loiterers, solicitors and salesmen, members of the property owner’s household, public servants performing their duty and volunteer rescuers.   

The elements of a cause of action for premises liability brought by a licensee are the following:

The defendant had actual knowledge of a condition on the premises that posed an unreasonable risk of harm and the plaintiff did not have similar knowledge.

The defendant failed to exercise reasonable care by both failing to adequately warn of the condition and failing to make the condition reasonably safe.

The defendant’s failure proximately caused the injury to the licensee.

Wal-mart Stores v. Miller, 102 S.W.3d 706, 709 (Tex. 2003).

Express v. Implied License

Usually, whether the plaintiff had permission to be on the property is not a matter in dispute; however, there are circumstances that may arise where the plaintiff is found to have an “implied license” to enter the premises.  An implied license may arise when there are prior dealings between the parties that lead the licensee to believe he is allowed to enter the property.  See Pifer v. Muse, 984 S.W.2d 739, 742 (Tex. App. – Texarkana 1998, no pet.) (holding that prior dealings establish an implied license in fact, whereas a volunteer rescuer is an implied licensee in law).  A person who would otherwise be a trespasser can be found to have an implied license when the property owner tolerates his repeated trespassing.  General Mills Rests., Inc. v. Texas Wings, Inc., 12 S.W.3d 827, 835 (Tex. App. – Dallas, 2000, no pet.).  (finding that consent will only be implied if the owner has actual knowledge that people have been entering land and fails to take reasonable steps to prevent or discourage them from entering).  A trespasser who enters property because of an emergency may be found to have an implied license.  See Buffalo Mar. Serv. v. Monteau, 761 S.W.2d 416, 420 (Tex. App. – Houston [14th Dist.] 1988, no writ) (boat owner who tied his boat to a barge during a hurricane was not a trespasser).

2. Actual Knowledge Only

Unlike a case brought by an invitee, a licensee cannot prove his case with constructive knowledge; rather, a licensee must establish that the property owner had actual knowledge of the dangerous condition on the premises.  McClure v. Rich, 95 S.W.3d 620, 624 (Tex. App. – Dallas 2002, no pet.). Evidence that establishes that the defendant created the dangerous condition is sufficient to establish actual knowledge.  Texas DOT v. Henson, 843 S.W.2d 648, 652 (Tex. App. – Houston [14th Dist.] 1992, writ denied).  Further, to recover a licensee must establish that he did not have actual knowledge of the dangerous condition on the premises.  Miller, 102 S.W.3d at 709.  A licensee has been found to have actual knowledge of the dangerous condition if the condition was perceptible to him, or he could infer the existence of the condition from facts within her present or past knowledge.  Id.

Duty to Warn or Make Safe

The defendant’s duty to a licensee is to use reasonable care to warn or to make the condition safe. State v. Williams, 940 S.W.2d 583, 584 (Tex. 1996). The duty to warn does not require the defendant to warn the licensee of conditions that are perceptible to the licensee.  Miller, 102 S.W.3d at 709. As a result of the duty involving two alternative methods of making the dangerous condition safe (warning of or eliminating the danger), the plaintiff must establish that the defendant did neither to recover.  Williams, 940 S.W.2d at 584.

CPRC 75.001 et. seq – Recreational Use Statute

Chapter 75 of the Texas Civil Practice & Remedies Code provides protection to owners of agricultural land or “other real property” from liability to social guests and licensees who are permitted on the land for recreational purposes.  TEX CIV. PRAC. & REM. CODE § 75.002. Courts have held that the defendant must be in possession (ie. control) of the land at the time of the injury. See Guadalupe-Blanco River Auth. v. Pitonyak, 84 S.W.3d 326, 340 (Tex. App. – Corpus Christi 2002, no pet.) (if Defendant had control over the bayou where injury occurred, then Defendant had right to grant or deny access and the statute would apply to limit Defendant’s liability).  However, in Stephen F. Austin University v. Flynn, 228 S.W.3d 653, 658 (Tex. App. – Tex. 2007), the supreme court decided that even though the injury occurred on an easement that the University had given for use as a recreational trail, it retained ownership, and as the owner it was protected by the statute.

The statute provides that an owner of real property is entitled to the statute’s protection when it gives “permission to another to enter for recreation”. TEX CIV. PRAC. & REM. CODE § 75.002(c).  Permission may be implied from a landowner’s knowledge of, and acquiescience in, the public’s use of its land for recreational purposes. Flynn, 228 S.W.3d at 658.

The statute covers agricultural land used for recreational use and all types of “real property other than agricultural land” used for recreational purposes. The statute does not define the types of property that are included in “real property other than agricultural land”.  However, whether the incident occurred on “agricultural land” or on “real property other than agricultural land” will have an impact on the application of the statute as follows:

Agricultural land – statute applies to those given permission (licensees) to enter the premises and those invited (social guests) to enter the premises for recreation.

Real property other than agricultural land – statute applies only to those given permission (licensee) to enter the premises for recreation.

TEX CIV. PRAC. & REM. CODE § 75.002(b), (c).  The statute does not apply to social guests invited onto “real property other than agricultural land” for recreation.  McMillan v. Parker, 910 S.W.2d 616, 619 (Tex. App. – Austin 1995, writ denied). The statutory limitation was meant as an inducement for owners of certain types of private land to allow members of the general public to use land for recreation. Id. at 618. 

The term “recreation” is defined very broadly to essentially include any activity related to enjoying nature and the outdoors.  TEX CIV. PRAC. & REM. CODE § 75.001(3).  The statutory list is not exclusive. Kopplin, 869 S.W.2d at 441.  The supreme court has held that it is not the landowner’s or the injured party’s intent for the land that matters but what the injured party was doing at the time of the injury that controls. City of Bellmead v. Torres, 89 S.W.3d 611, 614 (Tex. 2002). While recreation is defined broadly, it does not encompass the following:

An outdoor wedding. Sullivan v. City of Fort Worth, 2011 Tex.App. LEXIS 3866 (Tex. App. – Fort Worth, 2011, pet. denied);

Spectating an outdoor soccer game. University of Texas at Arlington v. Williams, 2013 Tex. App. LEXIS 3985, at *8-9 (Tex. App. – Fort Worth, March 28, 2013, no pet. h.); contra Sam Houston State University v. Anderson, 2008 Tex. App. LEXIS 8614, at *8-9 (Tex. App. – Waco, Nov. 12, 2008, no. pet.) (held that plaintiff sitting on outdoor bleachers watching a baseball game was recreation pursuant to the statute).

The statute distinguishes between private and governmental landowners.  Whether the statute applies to a private landowner is governed by three tests:

Did the private landowner charge for entry? If no, then statute applies;

If the private landowner charged a limited amount for entry, then statute applies only if total charges collected in previous calendar year for all recreational use of the entire premises are not more than 20 times the total amount of ad valorem taxes imposed on the premises for previous calendar year (the “financial-ratio test”); or,

In the case of agricultural land, did the private landowner have adequate liability insurance as described in section 75.004(a)?

TEX CIV. PRAC. & REM. CODE § 75.003(c).  The purpose of the “financial ratio” test is to prevent landowners from taking advantage of the statute by engaging in commercial recreation for profit.  McMillan, 910 S.W.2d at 619. If the defendant is a governmental landowner, the statute applies regardless of whether the plaintiff is charged a fee to enter the premises, and regardless of whether the governmental landowner has liability insurance.  Id.; See also TEX CIV. PRAC. & REM. CODE § 75.004(d). 

In State v. Shumake, 199 S.W.3d 279, 281 (Tex. 2006), the supreme court held that the recreational use statute does not reinstate immunity for premises liability claims but only raises the burden of proof by classifying a recreational user of government owned property as trespassers.

The statute protects covered owners in two distinct ways. First, the statute defines the applicable standard of care owed to recreational users of the property as essentially the same standard of care that is owed to a trespasser; that is, the plaintiff must establish that defendant breached its duty by showing the defendant acted with gross negligence. TEX CIV. PRAC. & REM. CODE § 75.002(b), (c). This standard applies both to agricultural land and “real property other than agricultural land” used for recreational purposes.  Id. Section 75.002(d) provides that the statute will not protect owners who have been grossly negligent or acted with malicious intent, or bad faith.  TEX CIV. PRAC. & REM. CODE § 75.002(d). The Texas Supreme Court recognized in Shumake that although the recreational use statute references a trespasser standard, it actually creates a specialized standard of care which dictates that landowners must refrain from gross negligence, or from acting with malicious intent or in bad faith.  Shumake, 199 S.W.3d at 286-87.

The other protection that the statute provides is a cap for damages that the recreational user can recover for injuries occurring on agricultural land used for recreational purposes that are covered under an insurance contract.  TEX CIV. PRAC. & REM. CODE § 75.004(a).  However, the statute does not place a cap on damages for injuries occurring on real property, other than agricultural land, used for recreation. 

The supreme court has distinguished between injuries cause by natural conditions and those caused by man-made conditions.  In Shumake, the supreme court stated that a landowner has no duty to warn or protect a trespasser from obvious defects and dangers such as a cliff, a rushing river or a hidden rattlesnake. Shumake, 199 S.W.3d at 288.  Then, in City of Waco v. Kirwan, 298 S.W.3d 618 (Tex. 2009), the supreme court dealt with the death of a college student caused by falling off a cliff.  Id. at 620.  To get to the cliff’s edge, the student climbed over a low rock wall constructed by the City which had a sign warning against going beyond the wall. Id.  The court held that landowners under the statute generally do not owe a duty to protect or warn against dangers of natural conditions on the land and, therefore, may not ordinarily be held to have been grossly negligent for failing to have done so. Id. at 626. The supreme court made it clear that its holding was fact-specific, and that it was not holding that a party may never be liable for gross negligence related to a natural condition.  Id. at 627.

Lastly, the statute limits the applicability of the attractive-nuisance doctrine, stating that no trespasser over the age of 16 can bring an attractive nuisance lawsuit  for injuries arising on agricultural land used for recreation.  TEX CIV. PRAC. & REM. CODE § 75.003(b).  There is no similar provision for “real property other than agricultural land”.

C. Trespassers

A trespasser is someone who enters another’s property without any lawful right, or express or implied permission and not for the performance of any duties for the owner but merely for his own purposes.  Weaver v. KFC Mgmt., Inc., 750 S.W.2d 24, 27 (Tex. App. – Dallas 1988, writ denied).  The plaintiff’s status as a trespasser usually comes up as a defense raised by the property owner when sued by a plaintiff who claims to be either an invitee or licensee.  Persons typically found to be trespassers include: subtenants who do not have permission from the owner to sublease; friends of employees without permission to be on the property; and hunters without permission.

A person can enter the property as an invitee or licensee and become a trespasser by making an unforeseen departure from one part of the premises to another without invitation. Peerenboom v. HSP Foods, Inc., 910 S.W.2d 156, 161-62 (Tex. App. – Waco 1995, no writ) (holding that off-duty employee raped by off-duty co-employee in dumpster enclosure was a trespasser).  An invitee or licensee does not become a trespasser if the owner can reasonably foresee that the invitee or licensee will use part of the premises without permission, or for a purpose other than the one permitted.  See Fisher Constr. Co. v. Riggs, 320 S.W. 2d 200, 205-06 (Tex. Civ. App. – Houston 1959) rev’d on other grounds, 325 S.W. 2d 126 (Tex. 1959) (general contractor should reasonably anticipate that employees of its subcontractors might take a shortcut through vacant store space). 

The property owner only owes a trespasser the duty not to injure him willfully, wantonly or through gross negligence.  Texas Utils. Elec. Co. v. Timmons, 947 S.W.2d 191, 193 (Tex. 1997).

Attractive-Nuisance Doctrine

Under the attractive-nuisance doctrine, when a young child trespasses because the premises are attractive to the child, the law implies an invitation to enter the property.  Timmons, 947 S.W.2d at 193.  When the doctrine applies, the property owner owes a trespassing child the same duty it owes an invitee. Id. The elements of a cause of action for premises liability under the attractive nuisance doctrine are the following:

The defendant knew or should have known there was an artificial condition on the premises and children were likely to trespass in that area.

The defendant knew or should have known the artificial condition posed an unreasonable risk of death or serious bodily harm to children.

The plaintiff, because of his youth, did not discover the artificial condition, realize the risk involved in meddling with it, or realize the risk involved in coming within the area made dangerous by the condition.

The utility to the defendant of maintaining the artificial condition and the burden of eliminating the danger were slight compared to the risk to the children.

The defendant’s failure to exercise reasonable care to eliminate the danger or otherwise protect the plaintiff proximately caused the plaintiff’s injury.

Timmons, 947 S.W.2d at 193-194. 

The attractive-nuisance doctrine applies only to artificial conditions, not to natural conditions. Gowen v. Willenborg, 366 S.W.2d 695, 697 (Tex. App. – Houston 1963, writ ref’d n.r.e.)  The following artificial conditions have been found to be attractive nuisances:

Open caliche pit. Massie v. Copeland, 233 S.W.2d 449, 451, (Tex. 1950).

Billboards. Gowen, 366 S.W.2d at 697.

Transmission towers. Timmons, 947 S.W.2d at 192.

Large irrigation pipes. Luna v. H&A Invs., 900 S.W.2d 735,737 (Tex. App. – Corpus Christi, 1994, no writ).

Cattle dipping vats. Eaton v. R.B. George, Invs., 260 S.W.2d 587,589-90 (Tex. 1953)

As a matter of law, the following man-made conditions did not subject the land owner to liability under the attractive nuisance doctrine:

Playground equipment. Kopplin v. City of Garland, 869 S.W.2d 433, 441 (Tex. App. – Dallas 1993, writ denied).

Advertisements. Way v. Boy Scouts of Am., 856 S.W.2d 230, 238 (Tex. App. – Dallas 1993, writ denied.

Magazines. Herceg v. Hustler Mag., Inc., 565 F.Supp. 802, 803 (S.D. Tex. 1983)

The element that is most often litigated is whether the injured child had the requisite lack of understanding of the condition and its risk as a result of his youth.  Whether the injured person was of such youth and immaturity to render him unable to appreciate the dangerous condition is a question of law.  Massie, 233 S.W.2d at 454. The following factors have been held to be relevant in making this determination:  whether the child had a mental incapacity; whether the child was unusually bright or slow for her age; and whether the condition involved a hidden, concealed or latent danger.  Entergy Gulf States, Inc. v. Isom, 143 S.W.3d 486, 492 (Tex. App. – Beaumont 2004, pet. denied); Kopplin, 869 S.W.2d at 441.  Age alone is not determinative; children as young as six-years old have been found capable of appreciating the risk.  Stimpson v. Bartex Pipe Line Co., 36 S.W.2d 473, 477 (Tex.Comm’nApp. 1931, judgm’t adopted).  On the other hand, a fifteen-year old was found not to appreciate the danger of climbing a ladder to an electrical tower that did not have barricades or warnings.  Johns v. Fort Worth Power & Light Co., 30 S.W.2d 549, 557 (Tex. App. – Fort Worth 1930, writ ref’d).  However, the great majority of cases applying the doctrine involved children younger than twelve years.  Timmons, 947 S.W.2d at 196.  In Timmons, the Texas Supreme Court concluded that even without a warning sign, a 14 year old boy should have known that electrical wires should be avoided. Id. at 194.

The Recreational Use Statute described supra provides an age limit for persons who can bring an attractive nuisance claim falling within the scope of the statute.

IV. CHAPTER 95

A. Common Law Duties to Independent Contractors

The general rule in Texas is that a premises owner

is not subject to liability for injuries to an independent contractor because the premises owner does not owe a duty to assure that the independent contractor performs his work in a safe manner.  Redinger v. Living, Inc., 689 S.W2d 415, 417-18 (Tex. 1985).  This general rule is subject to two exceptions both arising from the owner’s failure to keep the premises safe:  (1) claims arising from a premises defect; and (2) claims arising from a negligent activity on the premises.  Id.  Relating to the first exception, a premises owner can only be liable where the dangerous condition was in existence prior to the independent contractor entering the premises and was not created by the activity of the contractor. Id. As for the second exception, a property owner who exercised control over the independent contractor’s work could be subject to liability for negligence.

Under the common law, an independent contractor hired to perform work on the property owner’s premises would be classified as an invitee.  As such, the independent contractor (or his employees) in a premises liability case would have to prove that the property owner knew or should have known of the dangerous condition.  Further, control would not have been an issue in a premises liability suit brought by an independent contractor against a premises owner prior to Chapter 95.

As detailed below, Chapter 95 is a departure from the common law because it eliminates the constructive knowledge element in what would otherwise be a case involving an invitee and requires the exercise of control by the property owner.

B. Chapter 95 Duties to Independent Contractors

Application of the Statute

Chapter 95 applies to a claim:

against a property owner, contractor, or subcontractor for personal injury, death or property damage to an owner, a contractor, or a subcontractor or an employee of a contractor or subcontractor; and

that arises from the condition or use of an improvement to real property where the contractor or subcontractor constructs, repairs, renovates or modifies the improvement.

TEX CIV. PRAC. & REM. CODE § 95.002.

If the claim falls within the scope of section 95.002, the statute provides that the property owner is not liable for claims for injury, death or property damage to a contractor or subcontractor (or their employees) arising from the failure to provide a safe workplace unless:

the property owner exercises or retains some control over the manner in which the work is done, other than the right to stop or start work or to inspect progress or receive reports; and

the property owner had actual knowledge of the danger or condition resulting in the injury and failed to adequately warn.

TEX CIV. PRAC. & REM. CODE § 95.003.

Courts have held that when Chapter 95 applies it is the plaintiff’s exclusive remedy and applies to all causes of action sounding in tort. Francis v. Coastal Oil & Gas Corp., 130 S.W.3d 76, 88 (Tex. App. – Houston [1st Dist.] 2005, no pet.). 

Section 95.001(3) defines “property owner” as a person or entity that owns real property primarily used for commercial or business purposes. See e.g. Padron v. L&M Properties, 2003 Tex. App. LEXIS 1229, at *7-8 (Tex. App. – Eastland, 2003, no pet.) (Chapter 95 applied to contractor injured while repairing a satellite dish at a single family residence used as a rental property by a property management company). Courts have interpreted property owners under the statute to include:

Property management companies. Id.

Leasehold owners and owner/operators of oil and gas wells. Chi Energy, Inc. v. Urias, 156 S.W.3d 873, 874-75 (Tex. App. – El Paso 2005, pet. denied); Francis, 130 S.W.3d at 80.

Chapter 95 does not apply to a property owner’s injured employee’s claim.  Whether the injured person is an employee of the property owner or an independent contractor will be decided based upon the common law’s definition of an independent contractor.  See Wilson v. Patel, 2004 Tex. App. LEXIS 2614 at *2-3 (Tex.App. – Austin, 2004, no pet.) (right of control determinative of issue based upon factors including the independent nature of the worker’s business; whether he furnished his own tools and supplies; worker’s right to control the work’s progress, other than the end result; time for which worker is employed; and whether he is paid by the job or by a unit of time).

Chapter 95 is limited to claims arising “from the condition or use of an improvement to real property”. This limitation has not prevented courts from broadly applying the statute.  The courts have found the following to be improvements to real property:

Mineral and oil wells. Francis, 130 S.W.3d at 85; Nagle v. Shelf, U.S. Dist. LEXIS 34759 at *14 (Southern Dist. Texas 2005).

A satellite dish. Padron, 2003 Tex.App. LEXIS at *7.

A television tower. Kelly v. Lin Television of Texas, L.P., 27 S.W.3d 564, 570 (Tex. App. – Eastland 2000, pet. denied).

Air conditioner units. Fisher v. Lee and Chang Partnership, 16 S.W.3d 198, 202 (Tex. App – Houston [1st Dist.] 2000, pet. denied).

Another limitation is that the plaintiff’s injuries must arise from the contractor’s construction, repair, renovation or modification of the improvement.  While the plaintiff’s injuries must relate to the work being performed, the injury-producing defect does not have to be the object of the plaintiff’s work.  The latter standard has all but eclipsed the former.  In Fisher, the plaintiff was injured when he fell from an allegedly defective ladder while climbing onto a roof to fix an air conditioner unit.  Id. at 200.  The court stated that sections 92.002 and 92.003 must be read together to give proper effect to the statute, and held that although the ladder was not the object of plaintiff’s work, the ladder was part of defendant’s unsafe workplace. Id. at 201. See also Francis, 130 S.W.3d at 80 (“failure to provide a safe workplace” language led court to hold that the injury-producing defect need not be the object of the plaintiff’s work); James v. Cousins Props. Tex., L.P., 2008 Tex. App. LEXIS 3966, at *2 (Tex. App. – Austin May 30, 2008, no pet.) (mem. op.) (chapter 95 applied when truck driver who delivered materials to contractor was injured when portable toilet rolled off the loading dock); The Dow Chemical Company v. Abutahoun, 2013 Tex. App. LEXIS 1265, *26-27 (Tex. App. – Dallas Feb. 8, 2013, pet. filed) (section 95.002 does not require that it must be the independent contractor who precipitates the harm); Spears v. Crown Central Petroleum Corp., 2005 U.S. App. LEXIS 9962 (5th Cir. 2005) (Chapter 95 applied where plaintiff injured by tripping on hoses after finishing work and leaving the unit in which his work was performed); contra Hernandez v. Brinker Int’l. Inc., 285 S.W.3d 152, 159 (Tex. App. – Houston [14th Dist.] 2009, no pet.) (Chapter 95 not applicable when air condition repairman fell through the roof because the plaintiff was not repairing or modifying the roof).

In addition to Hernandez, at least one federal district court has refused to apply Chapter 95. In Moore v. Howmet Corp., 2005 U.S. Dist. LEXIS 6317, (Northern Dist. Tex. 2005), the federal court held that Chapter 95 did not apply to the plaintiff who was hired to perform janitorial tasks like vacuuming, cleaning windows and dusting.  Id. at *8-9. The court reasoned that Chapter 95 applies only in those cases where the property owner hires someone with some expertise to repair or renovate an improvement on property. Id.

The defendant has the burden of proving that Chapter 95 applies; once it is determined that Chapter 95 applies, the plaintiff has the burden of proving the control and actual knowledge elements. Dyall v. Simpson Pasadena Paper Co., 152 S.W.3d 688, 699 (Tex. App. – Houston [14th Dist.] 2004, pet. denied); see also Rueda v. Paschal, 178 S.W.3d 107, 111 (Tex. App. – Houston [1st Dist.] 2005, no pet.).  Whether Chapter 95 applies can be raised at any time, including for the first time on appeal. Gorman v. Meng, 335 S.W.3d 797, 803 (Tex. App. – Dallas 2011, no pet.) (citing Arsement v. Spinnaker Exploration Co., LLC, 400 F.3d 238, 246 (5th Cir. 2005)).  Since Chapter 95 governs if it is applicable, it does not require an affirmative pleading.  Arsement, 400 F.3d at 246.

Elements of Proof Under Chapter 95

Control is the first element that a plaintiff must prove in order to recover under Chapter 95.  The control must be more than a general right to order the work to start or stop, a right to inspect or to receive progress reports. Koch Refining Co. v. Chapa, 11 S.W.3d 153, 155 (Tex. 1999).  Control can be proven by evidence of an agreement in a contract that gives the property owner a right to control or evidence that the property owner actually exercised control over the independent contractor’s work.  Id. at 159.  A contractual right of control is generally a question of law for the court.   Chi Energy, 156 S.W.3d at 879.  Absent a contractual provision, the plaintiff must prove that the property owner actually controlled the “operative details” of the work and there must be a nexus between the control exercised and the resulting injury. Id. The mere implementation of safety regulations by the premises owner does not prove that the premises owner controlled the manner and means of the independent contractor’s work. Ashabranner v. Hydrochem Industrial Serv., Inc., 2004 Tex.App. LEXIS 2782 (Tex. App. – Houston [14th Dist.] 2004, no pet.); Dyall, 152 S.W.3d at 702 (actual control requires the property owner impose a safety regulation that actually causes or contributes to causing the injury).

Assuming the plaintiff is able to prove control, the plaintiff must also prove that the premises owner had actual knowledge of the danger or condition which caused the injury and failed to adequately warn against it.  Phillips v. Dow Chem. Co., 186 S.W.3d 121, 134-135 (Tex. App. – Houston [1st Dist.] 2005, no pet.).  Constructive knowledge is not sufficient under the statute. Id.

V. STATUS OF THE DEFENDANT

The owner or occupier of the subject property at the time of the injury owes the duties imposed by premises liability.  Clayton W. Williams, Jr., Inc., v. Olivo, 952 S.W.2d 523, 527 (Tex. 1997).  An occupier is considered to be the person in control of the property; control is the key issue.  Thornhill v. Ronnie’s I-45 Truck Stop, Inc., 944 S.W.2d 780,788 (Tex. App – Beaumont 1997, writ dism’d). Control can be established by contract, ie. a lease, or by conduct.  Shell Oil Co. v. Khan, 138 S.W.3d 288, 292 (Tex. 2004).  A general contractor is under the same duty as the owner to keep the premises in a safe condition.  Olivo, 952 S.W.2d at 527.

Current and Former Owners

A current owner who does not have control over the property is not liable for premises liability. Khan, 138 S.W.3d 293. Generally speaking, a prior owner is not liable for a person’s injuries that occur on the premises after the sale of the property.  Kelly, 27 S.W.3d at 571.  A few Texas courts of appeals have relied upon the Restatement (Second) of Torts Section 353 to determine whether a former owner of property can be held liable for premises liability.  See First Financial Dev. Corp. v. Hughston, 797 S.W.2d 286, 290-91 (Tex. App. – Corpus Christi 1990, writ denied); Moeller v. Fort Worth Capital Corp., 610 S.W.2d 857, 861 (Tex. App. – Fort Worth 1980, writ ref’d n.r.e.).  In order to hold a former owner liable under Section 353, the plaintiff must establish that the former owner failed to disclose the dangerous condition or actively concealed it, and that the new owner did not know or have reason to know of the dangerous condition.  First Financial Dev., 797 S.W.2d at 290-91.  In Lefmark Management Co. v. Old, 946 S.W.2d 52, 54 (Tex. 1997), the Texas Supreme Court held that Section 353 did not apply to the circumstances of that case and left open the issue of whether it would adopt the Restatement view.

Non-owners

As noted above, a non-owner who exercises control over the premises can be liable under premises liability.  These “occupiers” include tenants, lessees and general contractors. Whenever a lessee is sued for premises liability, the court will review the lease to determine whether the lessee has control of the premises where the injury occurred. See Howe v. Kroger Co., 598 S.W.2d 929, 931 (Tex.App. – Dallas 1980, no writ) (pursuant to lease, store did not control area where injury occurred, therefore, had no duty to repair or warn). However, in Wal-Mart Stores, Inc., v. Alexander, 868 S.W.2d 322, 324 (Tex. 1993), the court found the lessee responsible for a ramp in front of defendant’s store despite the fact that the area was not part of the leased premises because the defendant exercised control over the ramp.

A person who creates a dangerous condition on property may owe a duty under premises liability even though he is not in control of the premises when the injury occurred.  Science Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 912 (Tex. 1997).  Further, a person who agrees to make safe a known dangerous condition on real property owes a duty of due care once he has undertaken the assignment.  Lefmark, 946 S.W.2d at 54.

At least one court has extended the premises liability duty to non-owners even without evidence of control. See Wyckoff v. George C. Fuller Contracting, Co., 357 S.W.3d 157 (Tex. App. – Dallas, 2011, no pet.). In Wyckoff, a visitor at a home sued the homeowner and homebuilder after she fell on the home’s steps. Id. at 164. She asserted a premises liability claim against the homeowner and a general negligence claim against the homebuilder. Id. Although the plaintiff did not contend that the homebuilder owned, occupied or controlled the home at the time of the injury, the court held that the homebuilder owed her the same duty that the homeowner did. Id.; contra Jenkins v. Occidental Chemical Corp., 2013 Tex. App. LEXIS 1469 at *55-56 (Tex. App. – Houston [1st Dist.] Feb. 14, 2013, no pet. h.)

VI. LIABILITY FOR CRIMINAL CONDUCT

The Timberwalk Factors – Invitees

The general rule in Texas is that a property owner does not have a legal duty to protect another from the criminal acts of third parties.  However, there is an exception to this rule which provides that a person who controls the premises does have a duty to use ordinary care to protect invitees from the criminal acts of third parties if he knows or has reason to know of an unreasonable and foreseeable risk of harm to the invitee.  Lefmark Mgmt. Co. v. Old, 946 S.W.2d 52, 53 (Tex. 1997). The Texas Supreme Court’s opinion in Timberwalk Apartments Partners, Inc. v. Cain, 972 S.W. 2d 749, 751 (Tex. 1998) sets out factors to consider in determining whether the criminal conduct should have been forseen.  In that case, a tenant was sexually assaulted in her apartment, and she sued the owner of the apartments for failing to provide adequate security.  Id.  There was no evidence of prior assaults at the apartment complex. Id. at 752.  The supreme court held that a premises owner owes a duty to those who may be harmed by criminal acts on the premises when the risk of criminal conduct is so great that it is both unreasonable and foreseeable. Id. at 756.  The factors that courts should consider in determining whether the criminal conduct was foreseeable are:

Whether any criminal conduct previously occurred on or near the property (proximity)?

How recently it occurred (recency)?

How often it occurred (frequency)?

How similar the conduct was to the conduct on the property (similarity)? and

What publicity was given the occurrences to indicate that the owner knew or should have known about them (publicity)?

Id. at 759.  After an examination of the evidence relating to these factors, the supreme court concluded that the Defendant did not have a duty due to the lack of forseeability. Id.

General allegations as to the nature of the risk posed, the foreseeability of the result, and the likelihood of the injury will not suffice. Gatten v. McCarley, 2013 Tex. App. LEXIS 838, *12-14 (Tex. App. – Dallas 2013) (affirmed trial court’s dismissal for failure to state a claim due to general allegations).

Proximity

Relating to proximity, it has been held that it is necessary to examine criminal activity in “narrow geographic areas in analyzing the foreseeabililty of criminal conduct. Texas Real Estate Holdings, Inc. v. Quach, 95 S.W.3d 395, 399 (Tex. App. – Houston [1st Dist.] 2003, pet. denied). Evidence of a report from the police department that covered nine square miles was not such a narrow geographic area. Id. A census tract covering 3.5 square miles was appropriate and it showed little crime in the vicinity. Id.

Recency and Frequency

Recency and frequency are often examined in tandem. Trammell Crow Central Texas Ltd. v. Gutierrez, 267 S.W.3d 9, 15 (Tex. 2008). The Supreme Court ruled on the recency factor in Mellon Mortgage Co., 5 S.W.3d at 657. The Court held that a sexual assault was foreseeable when it took place in an area that had witnessed 190 violent crimes in two years, or one violent crime every four days. Id. at 657.  It should be noted that the supreme court ruled the victim was not foreseeable because she had been taken to the subject premises from another location. Id.; See infra at Section VI(B). In Trammell Crow, the Court noted that there had been 10 violent crimes committed over a two-year period, which amounted to one violent crime every 69 days.  Trammell Crow, 267 S.W.3d at 15.  The court stated this was a relatively low rate of violent criminal activity.  Id.

The lack of frequency was one of the issues that led to a reversal of a judgment against a motel owner in Jai Jalaram Lodging Group, LLC v. Leribeus, 225 S.W.3d 238 (Tex. App. – El Paso 2006, pet. denied). While there was a rise in criminal activity over the 2 years prior to the subject armed robbery, the court stated that there was no notable frequency. Id. at 244-45.

Similarity

To find a landowner liable for criminal conduct on his premises, the previous crimes must be sufficiently similar to the subject crime but they do not have to be identical.  Trammel Crow, 267 S.W.3d at 16.  Further, some crimes can make the risk of other crimes foreseeable. Id.  For example, robberies and assaults may make other violent crimes like rape and murder foreseeable. Timberwalk, 972 S.W.2d at 758. However, property crimes like vandalism probably does not make violent crimes foreseeable. Id.  Fights that occurred in the gym did not make a sexual assault in the gym bathroom foreseeable.  Jane Doe 1 v. Pilgrim Rest Baptist Church, 248 S.W.3d 831, 835-36 (Tex. App. – Dallas 2008, pet. denied).

If the plaintiff was a victim of a targeted attack as opposed to a random crime, one court has held that targeted attacks are not the type of conduct that a premises owner should owe a duty to protect against. Palacio v. AON Properties, Inc., 110 S.W.3d 493, 499 (Tex. App. – Waco 2003, no pet.).  Other courts have held that if the crime was random, then only evidence of random crimes should be considered and vice versa. Andrews v. Rodeo Square Apartments, 2006 Tex. App. LEXIS 6415, *15 (Tex. App. – Houston [1st Dist.] 2006, no pet.) (targeted crimes); Texas Real Estate Holdings, Inc. v. Quach, 95 S.W.3d 395, 399-400 (Tex. App. – Houston [1st Dist.] 2002, pet. denied) (random crimes).

Publicity

In determining publicity, the court must determine whether the earlier crimes were widely publicized.  Timberwalk, 972 S.W.2d at 758.  The more publicity the past crimes received, the more likely that a premises owner has notice of them. Id.  This does not mean that a premises owner has a duty to regularly inspect criminal records. Id. at 759.

B. Mellon Mortgage – Was the Victim Foreseeable?

In Mellon Mortgage, the Texas Supreme Court addressed the following question: What role does foreseeability play when someone other than an invitee sues a premises owner for liability based upon a third party’s criminal conduct?  In that case, a police officer stopped a woman, Holder, at night for a traffic violation and instructed her to follow him to a parking garage where he raped her.  Mellon Mortgage, 5 S.W.3d at 654. Holder sued the owner of the parking garage; the trial court granted summary judgment in favor of the parking garage owner and the court of appeals reversed. Id. In a plurality opinion joined by three justices, the supreme court rendered a judgment that Holder take nothing from the parking garage owner; two other justices wrote concurring opinions and three justices joined in the dissent. Id. 

Citing the Timberwalk case, the supreme court noted that in this case the focus would be on the “foreseeability” of the risk. Id. at 655. The supreme court stated that “[f]or most premises liability cases, the foreseeability analysis will be shaped by determining whether the plaintiff was an invitee, a licensee, or a trespasser.” Id.  Holder’s status at the time of the crime was the subject of much debate. In his concurring opinion, Justice Enoch concluded that Holder was a trespasser. Id. at 661-62 (Enoch, J., concurring). The dissenters concluded that she was a licensee. Id. at 673 (O’Neill, J., dissenting).  The plurality opinion written by Justice Abbott and a concurring opinion by Justice Baker addressed liability without determining Holder’s status. Id. at 655 (plurality opinion); see also Id. at 662 (Baker, J. concurring). The plurality noted that because the plaintiff was an “unforeseeable victim regardless of her status,” it was not necessary to determine into which category she fell. Id.  In a footnote, the supreme court stated that this “analysis is complementary, not contradictory, to the traditional premises liability categories.”  Id. fn. 3. 

The plurality opinion applied a threshold foreseeablilty analysis divided into two prongs: the foreseeabililty of the crime and the foreseeability of the victim. Id. at 655. The court applied the Timberwalk factors to determine the first prong, and determined that “it was not unforeseeable as a matter of law that a rape might occur in the parking garage.”  Id. at 657.  The court then considered whether Holder was situated such that the garage owner could foresee that she would be the victim of this third-party criminal act.  Id. Given the fact that the plaintiff was pulled over several blocks away and led to the garage, the supreme court held that she was not a foreseeable victim. Id. at 658.

The Del Lago Opinion

In Del Lago Partners v. Smith, 307 S.W.3d 762, 766 (Tex. 2010), the plaintiff was injured when a fight erupted in the bar of the Del Lago resort between members of a fraternity reunion and a wedding party.  As soon as the members of the wedding party entered the bar, there were confrontations between the two groups.  Id. at 765. Bar employees testified that the men were very intoxicated and that several confrontations between the two groups occurred, including shoving, cursing and yelling. Id. at 765-66.  These altercations continued for nearly 90 minutes, at which time a brawl erupted when the bar employees attempted to close down the bar.  Id. at 766.  The bar employees attempted to “funnel” the men towards a single exit when “all heck broke loose”.  Id. The plaintiff was injured when he was thrown up against the wall.  Id. The plaintiff brought suit alleging premises liability and negligent activity, but the trial court only submitted the premises question to the jury.  Id. at 775.  The jury found in favor of the plaintiff.  Id. at 767.

The supreme court went out of its way to attempt to limit the Del Lago holding to its facts: “We do not announce a general rule today.”  Id. at 770.  The Court cited Timberwalk but noted that the Timberwalk factors should be used where the premises owner has no direct knowledge that criminal conduct is imminent. Id. at 768.  The Court held that because the defendant and its employees were aware of the unreasonable risk of harm to its patrons that night, they had actual knowledge of imminent criminal acts and, therefore, had a duty to reduce or eliminate the risk.  Id. at 769.

Despite the Court’s attempt to limit the application of the Del Lago holding, at least one court has cited the case as standing for the following:  “ a property owner with actual and direct knowledge that violence is imminent has a duty to protect an invitee from imminent assaultive conduct by a fellow patron.”  West v. SMG, 318 S.W.3d 430, 439-42 (Tex. App. – Houston [1st Dist.] 2010, no pet.) (holding that the crime was not foreseeable under Timberwalk and Defendant was not liable under Del Lago because there was no evidence that Defendant had actual knowledge that assault was imminent). 

The current state of the law appears to be that generally, a premises owner has no duty to protect another person from the criminal acts of a third party. Timberwalk, 972 S.W.2d at 756.  When a premises owner has actual and direct knowledge that a crime is imminent, based upon immediately preceding conduct, the premises owner has a duty to reduce or eliminate the risk. Del Lago, 307 S.W.3d at 769.  When the premises owner has no direct knowledge of imminent criminal conduct, the unreasonableness of the risk arising from the conduct will be judged by the Timberwalk factors. Timberwalk, 972 S.W.2d at 757. In circumstances similar to the Mellon Mortgage case, where the victim is not an invitee of the defendant, it appears that the foreseeability of the victim is also considered, as well as the foreseeability of the crime. Mellon Mortgage, 5 S.W.3d at 657.

VII. CONCLUSION

A premises liability case is a negligence action brought by someone who claims to have been injured by some condition on property.  Premises liability shares the elements of duty, breach of duty and proximate cause with negligence but has its own particular requirements that make these cases harder to prove. Therefore, the first question that must be asked is whether the case can be brought under a negligent activity theory. If not, then the status of the injured person will control the duty owed absent a statute or doctrine.  If the plaintiff is an independent contractor (or his employee), then Chapter 95 of the Texas Civil Practices & Remedies Code must be consulted.  In cases involving licensees, the Recreational Use Statute will downgrade the licensee to a trespasser if the statute applies. The attractive-nuisance doctrine may be relevant in cases dealing with trespassing children. The status of the owner of the property must also be determined; control of the property is the determinative factor.  If the allegations involve criminal activity by a third person, the foreseeability of the risk will be the issue and the Texas Supreme Court’s opinions in Timberwalk, Mellon Mortage and Del Lago will be key.

        

Joe Escobedo Jr.

Partner

BBVA Compass Bank Tower

3900 N. 10th Street, Suite 950

McAllen, Texas  78501

Telephone: (956) 618-3357

Telecopier: (956) 618-3361

E-mail:   jescobedo@etclaw.com

Website: www.etclaw.com

AREAS OF PRACTICE

Products Liability and Tort Law

Commercial Litigation

Mediation and Alternative Dispute Resolution

EDUCATION

Pan American University, BA 1986

University of Texas, JD 1989

Certified Mediator, The Center for Public Policy Dispute Resolution, The University of Texas School of Law 2007

ADMISSIONS

Admitted to Texas State Bar 1989

Admitted to practice before the U.S. Court of Appeals, Fifth Circuit

Admitted to practice before the U.S. District Court, Northern and Southern Districts of Texas

Joe Escobedo has devoted his practice to the representation of corporate and individual clients in complex tort and commercial litigation matters. In addition to his trial practice, Joe is a certified mediator.

AWARDS AND ACHIEVEMENTS

Board Certified in Personal Injury Trial Law by the Texas Board of Legal Specialization

Texas Super Lawyers 2006-2013

AV Rated by Martindale-Hubbell

The College of the State Bar of Texas

Litigation Counsel of America

PROFESSIONAL MEMBERSHIPS & ACTIVITIES

State Bar of Texas

Hidalgo County Bar Association

Texas Bar CLE

American Board of Trial Advocates (ABOTA)

The College of the State Bar of Texas

Texas Minority Counsel Program (TMCP)

PUBLICATIONS AND SPEAKING ENGAGEMENTS

Policy Limits Demands: Strategies, Tactics and Practical Considerations, Advanced Personal 

Pharmaceutical Litigation, Corpus Christi Personal Injury Seminar, Corpus Christi Bar Assn., 2006

Accident Investigations & Preservation of Evidence, Prosecuting or Defending a Trucking Case, Texas Bar CLE, San Antonio, 2007

The Dos & Don’ts of the Civil Trial Practice, Today’s Law Practice: An Attorney Workshop.  Hidalgo County Bar Association, 2009

Case Law Update, Civil Trial Conference 2012, Hidalgo County Bar Association

Paid or Incurred Update, Fifth Judicial Region Judges’ Meeting, 2012

Paid or Incurred Update Webcast, Texas Bar CLE, 2012

Premises Liability and Chapter 95, Advanced Personal Injury Law Course 2013

Director and Officer Liability and Shareholder Oppression, Business Disputes 2013