February 27, 2015

After hearing arguments this week in Tyler, Texas, today the Texas Supreme Court released the 2 opinions discussed below.

American Star Energy & Minerals Corp. v. Stowers, Case No. 13-0484

http://www.txcourts.gov/media/872912/130484.pdf

In this case, the Court was asked to determine when a cause of action accrues for statute of limitations purposes in a claim to collect an insolvent partnership's debt against an individual partner. A judgment creditor attempted to collect a debt from a partnership after litigating a contract claim for over a decade only to discover that the partnership was insolvent. The creditor then sued the individual partners to collect the debt. The trial court determined that the limitations period against the partners began when the underlying cause of action accrued. Because of the length of time of the underlying suit, the trial court held the limitations period had passed for the individual partners to be sued. A divided panel of the Amarillo Cour of Appeals affirmed the trial court's holding that the limitations began when the underlying breach of contract claim against the partnership accrued.

The Texas Supreme Court reversed and remanded. The Texas Supreme Court reasoned that the legislature provided specific and significant guidance under the Texas Revised Partnership Act for when an individual partner can be held liable for the debts of a partnership. The Court found the trial court and court of appeals erred by failing to recognize the legislature's specific guidance as to the liability of individual partners versus the partnership when those courts applied the general statute of limitations jurisprudence on when a contract claim "accrues." Relying upon the Legislature's recognition that a partnership's legal existence is distinct and separate from that of its partners-although recognizing the Legislature did not provide specific legislative guidance on when a claim against a partner for the partnership's debts accrues-the Texas Supreme Court determined that the cause of action against a partner for an insolvent partnership does not accrue until after a final judgment against the partnership is entered.

In re Crawford & Company et al, Case No. 14-0256

http://www.txcourts.gov/media/872913/140256.pdf

In this case, the Court provided additional guidance on what, if any, bad-faith-related claims can be brought against workers' compensation insurers, adjusters and agents arising from workplace injuries covered under the Texas Workers' Compensation Act ("the Act"). Plaintiff suffered injuries while working at an industrial facility. A workers' compensation claim was submitted that ultimately worked its way through the administrative procedures of the Act concluding in the parties' filing a suit for independent judicial review that is still pending. Separate from the administrative proceedings, the plaintiff and his wife in the workers' compensation proceedings filed suit against his employers workers' compensation insurer, claims services contractors, and their employee/adjuster asserting tort claims (negligence, gross negligence, negligent, fraudulent, and intentional misrepresentations, fraud, fraud by non-disclosure, fraudulent inducement, intentional infliction of emotional distress, malicious prosecution, and conspiracy), contract claims (breach, quantum meriut, and breach of the duty of good faith and fair dealing) and violations of the Texas Insurance Code and Texas DTPA alleging that the insurers and their agents, instead of fairly adjusting and resolving the claim, "resorted to combat tactics to wreak havoc on [Plaintiffs'] lives." Relators filed a plea to the jurisdiction and motion for summary judgment relying upon the Texas Supreme Court's relatively recent opinion in Texas Mutual Ins. Co. v. Ruttiger, 381 S.W.3d 430 (Tex. 2012) arguing that all these claims arise out of the workers' compensation claims handling process and are within the exclusive jurisdiction of the TDI's Division of Workers' Compensation. The trial court denied both and the court of appeals affirmed.

The Texas Supreme Court found the lower courts read Ruttiger too narrowly. The Court found that Ruttiger's holding is not based upon the types of causes of action claimed or the remedies sought by the Plaintiffs. The Court found that all of the claims asserted related to the conduct in the handling and adjusting of the workers' compensation claim, governed by the exclusive jurisdiction granted by the Act. The Court recognized that in Ruttiger it held that claims related to misrepresentations about the workers' compensation policy itself are not within the Act's exclusive grant of jurisdiction. However, in this case, all of the alleged misrepresentations arose in the context of the claims administration process and not representations about the policy itself-thus these claims were not in the exception to the rule articulated in Ruttiger. The Court also found that the claims of the employee's wife-who was not employed by her husband's employer-were also within the Act's exclusive grant of jurisdiction as all of her claims also arise out of the Relator's conduct in investigating, handling, and settling her husband's claim for workers' compensation benefits.

Having determined the lower courts erred in determining that jurisdiction existed for these claims, the Court also found mandamus appropriate as Plaintiffs failed to exhaust their administrative remedies before filing the suit at issue and the trial court should have dismissed it. The Court ordered the trial court to withdraw its prior order and dismiss the Plaintiffs' claims for lack of subject-matter jurisdiction.

Conclusion:

This week's decisions provide important guidance in terms of application of statute of limitations to individual claims against partners for debts of insolvent corporations and the full reach of the Ruttiger case for traditionally "bad faith" type claims against a workers' compensation insurer and adjusters. We hope these cases are of interest to you and useful in your practice.

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