December 18, 2015

December 18, 2015

This week, the Supreme Court of Texas issued no opinions, but did grant oral arguments in six cases. One of these cases is of particular importance to the interpretation of the term "contractor" under Chapter 95 of the Texas Civil Practices and Remedies Code.

Additionally, on the week of December 4, 2015, the Supreme Court of Texas issued an opinion regarding the disqualification standard applicable to counsel.

First Texas Bank v. Chris Carpenter (Cause No. 15-0172)

In this case, defendant First Texas Bank appeals a decision by the Court of Appeals for the 3rd District at Austin which held that Chapter 95 of the Texas Civil Practice and Remedies Code does not apply in the absence of an actual contract between the parties. The plaintiff, Chris Carpenter, was inspecting a leak and showing hail damage on First Texas Bank's roof to an insurance adjuster when the ladder he was using collapsed causing him to fall to the ground, breaking his back.

Chapter 95 of the Texas Civil Practice and Remedies Code limits a property owner's liability for acts of independent contractors, and applies only 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." The Court of Appeals held that "the ordinary meaning of 'contractor' requires that there be an actual contract under which one party (the contractor) has agreed to perform a specific kind of work or task and be compensated therefor by another party."

The Supreme Court of Texas is presented with the following broad issues: (1) whether Chapter 95 of the Texas Civil Practice and Remedies Code applies in the absence of a written agreement; (2) whether the parties had an agreement; and (3) whether the injury arose from a condition or use of an improvement to real property.

The week of December 4, 2015, the Supreme Court of Texas issued the following opinion regarding the disqualification standard applicable to counsel.

In re RSR Corporation and Quemetco Metals Limited, Inc. (Cause No. 13-0499)

In this case, a corporation filed suit against a Chilean manufacturer for breach of contract among other things. During the course of litigation, the law firm representing the corporation met with a former finance manager of the manufacturer many times, and the former employee provided significant information and documentation accusing the manufacturer of breaching the terms of the contract at issue. Ultimately, the former employee quit consulting with the corporation's counsel and recanted his accusations, and the manufacturer sought to disqualify the corporation's counsel. Relying on the disqualification standard set forth in American Home Products, the trial court agreed with the manufacturer finding that the corporation's counsel had worked extremely closely with the former employee and that the corporation's counsel should have screened the former employee from consulting on the case. The trial court ordered the disqualification of the corporation's counsel. The court of appeals denied the corporations petition for mandamus relief.

At issue before the Supreme Court of Texas was whether the standards of American Home Products govern disqualification of counsel when counsel hired a fact witness with information about his former employer if his position with that employer existed independently of litigation and he did not primarily report to lawyers.

The Supreme Court of Texas held that the trial court applied the wrong standard and concluded that American Home Products does not apply to fact witnesses whose position with their former employers existed independently of litigation and whose primary function was not to report to lawyers. Here, the Court further found that the trial court should have applied In re Meador to determine whether the corporation's counsel would be disqualified. The Court clarified that In re Meador applies when attorneys receive the opposing side's privilege materials "outside the normal scope of discovery." Under In re Meador, relevant factors to consider in disqualification analysis include: (1) whether the attorney knew or should have known the material was privileged; (2) the promptness with which the attorney notifies the opposing side that he or she has received privileged information; (3) the extent to which the attorney reviews and digests the privileged information; (4) the significant of the privileged information; (5) the extent to which the movant may be at fault for the unauthorized disclosure; and (6) the extent to which the nonmovant will suffer prejudice from the disqualification of his or her attorney.