Failure to Stop and Render Aid – Law History, Evolution, and Suggestions for Increased Penalties

 

By: Preston Munster and Lindsey Groos, De Leon & Washburn P.C. Legislative Affairs

 

According to the U.S. Department of Transportation, about 1,500 people die each year as a result of hit and run accidents. Eighteen percent of those accidents involve pedestrians.1  The most disappointing outcome of hit and run incidents is the victims who are hurt or killed could have received timely medical assistance, if the offender had incentives to stop and render aid. Forms of Failure to Stop and Render Aid (FTS&RA) legislation or “hit-and-run laws” have been in place in Texas since 1917, when the Legislature passed the “Highway Law”. The Highway Law has evolved over time. Most recently, the Sarah K. Thompson Act2, passed in 2007 after the tragic death of a St. Mary’s University law student, increased FTS&RA infractions to the level of a third-degree felony for cases involving a serious injury or fatality. The punishment given for third-degree felonies is maximum ten years imprisonment and/or $10,000 fine. Currently, 47 states have equal or greater penalties in place for drivers who leave a collision scene when a fatality occurs. For example, the state of Wisconsin has a penalty equal to that of a DUI and homicide combination for fatal hit and run accidents. A person charged with FTS&RA in Wisconsin could be in jail for more than 25 years.3

 

This essay aims to boost public awareness of FTS&RA and provide comprehensive information on this issue. Specific case examples are given to illustrate FTS&RA cases in recent history. We also encourage Texas legislators to amplify penalties for hit-and-run accidents in order to help protect the well-being of victims and deter offenders from leaving the scene.

 

History and Evolution of FTS&RA

 

In 1917, the Texas Legislature enacted the “Highway Law”, which governed the operation of motor vehicles on public roads. Its first application was in the 1921 case of Scott v. State4, after M.W. Scott struck and killed a person with his vehicle but did not stop to give aid to the victim. The Highway Law criminalized this neglect of duty, and Scott was charged with FTS&RA. Scott did not challenge his guilt, but instead questioned the applicability of the law under state police powers. He argued that he had not “knowingly” injured the victim in a serious way. As written, the Highway Law imposed the following duties on motorists:

 

 “Whenever an automobile strikes any person, the driver of, and all persons in control of such automobile, shall stop, and render to the person struck all necessary assistance, including the carrying of such person to a physician or surgeon for medical or surgical treatment, if such treatment be required, or if such carrying is requested by the person struck.”5

 

The defense of no knowledge of critical injury is usable, however the court did not find that defense sufficient in Scott’s case because the word “knowingly” did not appear in the statute. Scott was affirmed guilty of failing to stop and give aid to someone else involved in the crash. The court’s ruling laid a solid foundation to uphold and apply FTS&RA laws in the State of Texas.

 

Through the years, the seriousness of hit and run accidents grew and the state penalties for FTS&RA escalated. By the early 1990s, the Texas Legislature had upped the maximum sentence given for failure to stop and render aid in a motor vehicle accident involving injury or death to five years in prison and/or a $5,000 fine.  Unfortunately, even this level of punishment did not solve the problem of increasing hit and run incidents where motorists were left injured or dying.

 

However, a tragic event in 2005 to brought public attention to the issue of FTS&RA, and as a result, penalties were intensified. Sarah Thompson was a third year law student at St. Mary’s University in San Antonio when she fell victim to a hit and run accident that took her life.6 Thompson and a few classmates were crossing a street in San Antonio late one night. Thompson lagged behind the others, and was the last person crossing when her classmates saw a car approaching at high speed. They yelled for her to get out of the way, but it was too late. The vehicle struck and killed her. The driver of the vehicle did not stop, and instead fled the scene.

 

Twelve days later, police caught up with the perpetrator, Juan Carlos Vara. He was the lead suspect in the accident, but too much time had passed to determine whether Vara was intoxicated at the time of the accident. Vara pled no contest to the charge of failure to stop and render aid, which landed him the maximum sentence of five years in prison with an order to pay restitution for Thompson’s medical and burial costs.7 Had Vara remained at the scene of the crime, and found to be impaired by alcohol, Vara could have faced a second-degree felony charge for intoxicated manslaughter that likely would have sent him to jail for 20 years.

 

The Thompson family will never know if Vara was driving while intoxicated. The loss of Sarah led them to pursue higher penalties for future FTS&RA offenders, in order to give drivers an incentive to stop and give aid after an accident. At the time of Sarah’s death, there was an obvious discrepancy between punishments—FTS&RA at five years imprisonment, intoxicated assault at 10 years, and intoxicated manslaughter at 20 years. The Thompson family sought to narrow the gap.

 

They obtained assistance from David C. Courreges8 of De Leon & Washburn, P.C.9, a law firm in Austin. Courreges graduated from St. Mary’s School of Law before Sarah Thompson was a student, and their connection led him to pursue a legislative resolution. Courreges had experience as a lobbyist at the Capitol, and quickly drafted a bill known as the Sarah K. Thompson Act. This law would increase the penalty for FTS&RA to the level of a third-degree felony. State Representative Dennis Bonnen picked up the bill and helped support it through the legislative process. Courreges faced opposition from legislators who believed increased jail time for hit and run offenses would significantly contribute to overcrowding in state prisons. However, the bill was ultimately successful and passed into law. Thanks to the efforts of Courreges and Rep. Bonnen, as of September 1, 2007, it is a third-degree felony to leave the scene of an accident in which a serious injury or fatality occurs. An offender charged with FTS&RA receives a sentence of no less than two and no more than 10 years in prison, and/or a $10,000 fine.

 

Overview of Current FTS&RA Laws

 

Most state laws that criminalize leaving the scene of an automobile accident take the same approach to defining the act of FTS&RA as well as the breakdown of different categories of FTS&RA incidents. For the purpose of this article, the verbiage from the Texas Transportation Code applies when referring to hit and run laws. In their most recent form, the following duties are bestowed upon a person involved in a motor vehicle accident:

 

(a)  immediately stop the vehicle at the scene of the accident or as close to the scene as possible;

(b)  immediately return to the scene of the accident if the vehicle is not stopped at the scene of the accident;  and

(c)  remain at the scene of the accident until the operator complies with the requirements of Section 550.023.10

According to Section 550.023, in the event of an accident, persons involved are also required to give information and render aid:

Sec. 550.023. DUTY TO GIVE INFORMATION AND RENDER AID.  The operator of a vehicle involved in an accident resulting in the injury or death of a person or damage to a vehicle that is driven or

attended by a person shall:

(a) give the operator's name and address, the registration number of the vehicle the operator was driving, and the name of the operator's motor vehicle liability insurer to any person injured or the operator or occupant of or person attending a vehicle involved in the collision;

(b)  if requested and available, show the operator's driver's license to a person described by Subdivision (1);  and

(c)  provide any person injured in the accident reasonable assistance, including transporting or making arrangements for transporting the person to a physician or hospital for medical treatment if it is apparent that treatment is necessary, or if the injured person requests the transportation.11

 

There are different punishments for various levels of hit and run accidents. The appropriate duty mainly hinges on injury versus non-injury situations. If there is no injury caused by a collision, the penalty for a hit and run is much less severe. Duties are described in the Texas Transportation Code, Section 550.022. Offenders face a Class C misdemeanor if the damage to all vehicles is less than $200 or a Class B misdemeanor if the damage to all vehicles is $200 or more. The same penalties apply for hitting an unattended vehicle and not providing the information required in Section 550.024.

 

Sec. 550.022.  ACCIDENT INVOLVING DAMAGE TO VEHICLE.  (a)  Except as provided by Subsection (b), the operator of a vehicle involved in an accident resulting only in damage to a vehicle that is driven or attended by a person shall:

 

(a)  immediately stop the vehicle at the scene of the accident or as close as possible to the scene of the accident without obstructing traffic more than is necessary;

 

(b)  immediately return to the scene of the accident if the vehicle is not stopped at the scene of the accident;  and

 

(c)  remain at the scene of the accident until the operator complies with the   requirements of Section 550.023.

 

Sec. 550.024.  DUTY ON STRIKING UNATTENDED VEHICLE.  (a)  The operator of a vehicle that collides with and damages an unattended vehicle shall immediately stop and:

 

(a)  locate the operator or owner of the unattended vehicle and give that person the name and address of the operator and the owner of the vehicle that struck the unattended vehicle;  or

 

(b)  leave in a conspicuous place in, or securely attach in a plainly visible way to, the unattended vehicle a written notice giving the name and address of the operator and the owner of the vehicle that struck the unattended vehicle and a statement of the circumstances of the collision.

 

As one can see, the Texas legislature has properly addressed the different circumstances involving motor vehicle accidents, with the exception being the case of FTS&RA when the victim parishes. In the next section we highlight just a small sample of recent hit-and-run accidents, each resulting in extensive damages to one or more innocent people.

 

Recent Texas Cases and Notable Incidents

 

Johnny Weldon Cates II – One early morning in December 1998, Cates ran over Brandon Smith on a dark highway near Houston. Smith’s friends had just pulled him from a burning vehicle on the side of the road, the result of their previous crash. The impact of Cates’ truck killed Smith, but Cates did not stop to render aid. Cates was convicted under the pre-2007 statute, which earned him a sentence of five years in prison and a $5,000 fine. Cates received an additional charge of using his truck as a deadly weapon to cause the death of Smith. Cates appealed the deadly weapon charge, and the court held that they could not conclude his vehicle was used in that manner because he fled the scene. Thus, there was too little evidence to support additional charges other than FTS&RA.12

 

Chasity Ann Young – Young was driving through Denton County around 3:00am on June 1, 2007 when she thought she ran over a dog. The dog was actually a person, 31-year old Autumn Rain Gaia. There were three other people in Young’s car who felt the car strike an object. They didn’t go back to see what they had hit. Young and her friends continued to their destination, and she was later charged with FTS&RA.14 Young’s incident occurred just three months before the Sarah K. Thompson Act came into effect, so she was sentenced to only five years in prison.

 

Gabrielle Nestande – On May 28, 2011, legislative staffer Nestande struck and killed a 30-year old woman in an upscale neighborhood in Austin. She did not stop to help the victim, Courtney Griffin. Nestande claims she was not intoxicated at the time of the accident. According to the arrest affidavit Nestande admitted she was the only driver of the vehicle ‘being involved in an accident, being scared and not knowing what to do.’15 No verdict has been reached, as the case has not yet gone to trial.

 

Unknown Driver - In a parking garage in Ft. Worth, Texas on August 12, 2011, 24 year-old Grant Morby was walking through the building when hit by a truck. The driver of the vehicle fled the scene, leaving a business card with a security officer in the garage. Ten minutes later, a local medical student found Morby in critical condition and had him rushed to the hospital, where he is currently in critical condition as a result of the accident (as of August 19, 2011). Morby will likely recover after a long stretch of rehabilitation, but suffered extensive damage to his liver that cannot be corrected. If found, it is probable the driver of the truck will face maximum penalties for FTS&RA.

 

These examples of hit-and-run accidents are only a few of many tragedies occurring on Texas roadways each month. If certain punishments and incentives were in place, some of these stories might have had different endings. Lives and limbs could have been spared if the driver had stopped to call EMS while aiding the victim until help arrived. In an accident, each minute is an opportunity for a seriously injured person to be saved.

 

Suggestions for New Legislation

 

To deter drivers from leaving the scene of an accident, the Texas Legislature should increase the level of FTS&RA offenses to a second-degree felony, so punishment is equal to that of intoxicated manslaughter. This would create a strong incentive for people who might be intoxicated (thus inclined to flee the scene) to stop and render aid to victims of a motor vehicle accident. Even if the driver is not impaired, the heightened penalties would further compel motorists to do the right thing. As the law stands, there is a ten year lighter penalty for fleeing the scene of an accident in which an intoxicated driver kills another motorist or pedestrian. Any rational person would understand the options if they were to find themselves intoxicated and involved in a collision. The offender could stay and help the other person. However, they would be charged with intoxicated manslaughter and go to jail for 20 years if the victim dies, or the offender could  leave the scene and go to jail for ten years if they are caught. If someone has already made the dangerous and irresponsible decision to drink or use drugs and drive, it is not hard to imagine they might again take the selfish route and hope to get away with a lesser sentence.

 

Conclusion

 

Texas should attempt to decrease the number of victims injured or killed by drivers who leave the scene of an accident without stopping to render aid. One way to make a significant difference in a safety of our roadways entails bringing FTS&RA offenses to the same level as intoxicated manslaughter. The public should be educated about the severity of such crimes. To discourage driving under the influence, simple acts of heightening penalties and creating awareness are the next logical steps. We owe it to the citizens of our state and country to set a strong example that hit-and-run crimes do not pay.

Works Cited:
1)      http://www.articlealley.com/information-and-statistics-about-hit-and-run-cases-950713.html
2)      http://www.dwlawtx.com/sarahkthompsonact.html.
3)      http://www.bestattorney.com/hitnrunreward/hit-run-accident-statistics.html
4)      Scott v. State. 233 S.W. 1097. Court of Criminal Appeals of Texas. No. 5965. Oct. 5, 1921.
5)      Id.
6)      http://www.chron.com/disp/story.mpl/metropolitan/4976557.html
7)      http://www.4thcoa.courts.state.tx.us/opinions/htmlopinion.asp?OpinionId=20803
8)      http://www.dwlawtx.com/attorneys/davidccourreges.html
9)      http://www.dwlawtx.com
10)   http://www.statutes.legis.state.tx.us/docs/TN/htm/TN.550.htm
11)   Id.
12)   http://www.cca.courts.state.tx.us/opinions/042102.htm
13)   http://www.kvue.com/news/local/Dell-Valle--99266954.html
14)   http://www.dentonrc.com/sharedcontent/dws/drc/localnews/stories/DRC_Woman_charged_0601.2e87438.html
15)   http://www.kxan.com/dpp/news/deadly-traffic-accident-in-west-austin-exposition-boulevard-enfield-road-db

 

Lauren Schoenbaum, Fall 2011

After the long, stressful process of litigating your claim, you have finally received a judgment in your favor allowing you to recover against the opposing party.  Theoretically, this is the last you will see of the courtroom.  In reality, you may have another fight ahead: collecting on your judgment.  Debtors can be deceitful and attempt to hide their assets so they do not have to turn them over to you.  While some of the debtor’s property will be protected, there are tools available to help you collect on your judgment.

Whether you have recently received a default judgment on your claim or you received a judgment several years ago that you have failed to collect, one valuable option for judgment creditors in Texas is to invoke what is commonly known as the “turnover statute.”  The turnover statute provides court assistance to reach property.  The purpose of the turnover statute is to provide judgment creditors a procedural device to reach assets of a debtor that are “otherwise difficult to attach or levy on by ordinary legal process” by allowing a court to “reach assets owned and subject to the control of a judgment debtor.”[1]

The turnover statute, found in Tex. Civ. Prac. & Rem. Code § 31.002, provides:

(a)        A judgment creditor is entitled to aid from a court of appropriate jurisdiction through injunction or other means  in order to reach property to obtain satisfaction on the judgment if the judgment debtor owns property, including present or future rights to property, that:

 

(1)               cannot readily be attached or levied on by ordinary legal process;  and

 

(2)               is not exempt from attachment, execution, or seizure for the satisfaction of liabilities.

 

(b)       The court may:      

                                                     

(1)              order the judgment debtor to turn over nonexempt property that is in the debtor's possession or is subject to the debtor's control, together with all documents or records related to the property, to a designated sheriff or constable for execution;

 

(2)              otherwise apply the property to the satisfaction of the judgment;  or 

 

(3)              appoint a receiver with the authority to take possession of the nonexempt property, sell it, and pay the proceeds to the judgment creditor to the extent required to satisfy the judgment.

Three Key Observations on the Turnover Statute

Judgment creditors may use the turnover statute to collect the entirety of the original award—actual damages, prejudgment interest, exemplary damages, interest, court costs, and attorney’s fees. Here are three important things to know about utilizing the turnover statute as a judgment creditor.

1.      Creditor Must Follow Proper Procedure

            The Turnover Statute requires the judgment creditor show the writ of execution was returned nulla bona, and that the debtor’s assets are not subject to ready attachment or levy by the ordinary legal process.[2]  The creditor may then file a turnover application with the court which includes a description and some evidence of the non-exempt property thought to be held by the judgment debtor. When these initial measures are followed, the open-ended nature of the turnover statute allows the court to exercise its own discretion to consider property owned and controlled by a debtor that would not be available to the creditor under any other circumstance. 

Debtors often go to extreme measures to attempt to protect and hide their assets, and Texas law makers have responded accordingly to help creditors collect on their judgments. For example, in World Fuel Services Corp. v. Moorehead, the court permitted turnover relief for the creditor’s $4.4 million debt, finding the debtor had pledged or assigned assets to third parties such that he had “systematically liquidated, transferred and encumbered assets in six months following judgment, including stock and receivables, going from stated net worth of $34 million to point where he maintained he lacked sufficient unencumbered assets to pay judgment.”[3]

2.      The Debtor has the Burden to Show Property is Exempt

While the creditor must initially identify the property at issue, if the judgment debtor asserts the asset is exempt from turnover, it is the judgment debtor’s burden to prove the exemption.[4]  Importantly, multiple courts have found that the “mere fact that assets have been pledged to third parties does not necessarily mean that they are not owned by or subject to control of debtor.”[5]  Property that may be included in turnover relief includes property outside Texas, secreted property and intangible property rights.[6] Negotiable instruments, rental income, interest income, and cash in a judgment debtor’s possession or control are also subject to the turnover statute.[7] While the court will decide what property may be exempt from turnover, the judgment debtor’s personal property under Texas Property Code §§ 42.001 and 42.002 will not be subject to turnover.

3.      Collection Includes Attorney’s Fees

Plaintiffs are entitled to recover all reasonable and necessary attorneys’ fees and court costs in connection with a turnover motion.[8]  In fact, Texas courts have found the award of attorney fees and costs is mandated under the turnover statute where the party has successfully obtained turnover relief.[9]  If the judgment creditor is unsuccessful in seeking recovery via the turnover statute, no attorney’s fees are awarded. 

Not only are judgment creditors entitled to attorney’s fees for the turnover action itself, but when attorney’s fees are awarded in an underlying action, judgment creditors are eligible to collect those fees as well using the turnover statute. In the 2009 case, Haden v. David J. Sacks, P.C., Haden challenged an award of $90,000 for attorney’s fees accrued as part of bankruptcy proceedings incident to the turnover relief obtained by the law firm.[10] The court found it was undisputed that the law firm in the case was a judgment creditor, and a proper party under Tex. Civ. Prac. & Rem. Code § 31.002(e).[11] Looking at the plain language of the turnover statute, the court ruled the trial court did not abuse its discretion by interpreting § 31.002(e) to allow for the full award of attorney’s fees and costs to the law firm.[12]

The turnover statute is by no means a guarantee that a judgment creditor will be able to collect on its judgment from the debtor, but it is a key tool available to all creditors and should certainly be considered when a debtor is trying to hide or manipulate assets to avoid paying a judgment.

Have a question about whether the turnover statute could help you collect on a prior judgment?

Contact lschoenbaum@dwlawtx.com

 

By George B. Ward, De Leon & Washburn, P.C.

In a perfect world, the relationship between employers and employees would always remain pleasant and free of disputes.  Hiring would occur quickly, on agreeable terms.  Firing would be regrettable and respectful, but necessary for the health of the company.  Professionals could transition from one company to another on smoothly negotiated terms.  And so on…

Of course, experience tells us that the modern business world is not perfect.  As an employment attorney and litigator, I routinely encounter employment disputes at various stages of their development.  Some disputes are driven primarily by business concerns, while others are more personal and emotional.   Some disputes can be resolved with goodwill, while others have already passed the tipping point.  Regardless of the nature of an individual dispute, there is one key document that must be unearthed and addressed: the employment agreement. 

The idea that the employment agreement is important may seem obvious, but in reality employment agreements exist in the background during the majority of an employment relationship.  Often, an employer or employee does not truly analyze the contents of their employment agreement until a dispute arises.  Many employment agreements are based on outdated forms or boilerplate language that has not been tailored to suit the specific situation.  Each employment situation is unique, and each dispute has its own distinct facts and quirks. It is possible, however, to identify some commonly disputed provisions of a typical employment agreement.  With the rest of this article, I will highlight five of the most commonly disputed provisions.  (Of course, some scenarios lack a written agreement.  This scenario, along with the “implied contract exception”, will be discussed in a later post.)

1.         Length or Term of Employment

Many employment agreements are “at will”, meaning an employment contract of indefinite duration that can be terminated by either the employer or the employee at any time for any reason.  Employment agreements can also be a contract for a set period of time or "term" of employment.  An example of a term would be “18 months” or “5 years.”  Agreements for a term can provide comfort for the employer or employee, and are often useful for attracting talented professionals.  Understanding whether an employment agreement is for a term is crucial because the rights of the parties to the agreement can vary greatly as a result of the analysis.  Often it is fairly easy to ascertain from the language of an agreement whether a term of employment was intended, but not in every case.  For example, consider the following: an employment agreement for a 9-year term that can be terminated by either party with 6-months’ notice.  Is this employment at-will or for a term?  If it is a term agreement, what is the length of the term, 9 years or 6 months?   The analysis is not always simple, but it is always important. 

2.         Noncompetition Clause, or the “Noncompete”

Some employment agreements contain a clause prohibiting a contracting party from engaging in similar employment for a specified period of time within a certain geographical area.  In legal terms, this is known as a “restrictive covenant”, or more colloquially as a “noncompete clause.”   Noncompete clauses arise from the notion that an employer who invests significant time and capital in an employee would like the comfort of knowing that the employee will not leave the company and quickly begin using the new-found skill set to benefit a competitor.  Employees are often willing to agree to the noncompete clause because they are landing a desirable job.  An enforceable noncompete clause must be limited to a reasonable geographic area.  When examining the geographic area, the courts often look at where a company is doing business.  With this in mind, I think it is interesting to consider the impact of mobile technology and the virtual office on a court’s geographic analysis.  Consider the example of a Chicago company, with customers in the Midwest, which employs a project manager who works remotely from San Francisco.  Is the Chicago company “doing business” in San Francisco simply because that is where the project manager logs in to his computer?  (This topic will be explored further in a later post).  Noncompete clauses can be heavily contested and controversial.  Regardless of one’s view on noncompete clauses, and regardless of one’s position as employer or employee, every noncompete clause must be carefully structured and analyzed in order to prevent costly disputes. 

3.         Compensation Description

Most employment agreements will indicate the amount of compensation and the manner in which that compensation will be delivered.  In a simple scenario, an employment agreement will provide for an annual salary of “x” dollars to be paid in equal sums at end of each month.  This is clear enough, but the realities of modern business mean that the total amount received by an employee is likely to include some elements from the following list: a bonus, deferred compensation, profit sharing, equity distribution, stock options, merit raises, health and other insurance benefits, and many others.  Due to the increasing number of compensation options, clear and decisive language is crucial when the parties are describing the compensation program.  In a surprising number of cases, the parties to an employment agreement ultimately discover that they do not agree on the total amount the employee was owed under the agreement. 

4.         Arbitration Provision

Litigation is usually expensive and time consuming, regardless of the issue that is being disputed.  To hedge against the burdens of litigation, an employer and employee will often agree to resolve any dispute related to the employment agreement through arbitration.  The goal of a typical arbitration provision is simple: get both parties to firmly commit to waive their right to proceed directly to litigation and agree on using arbitration.  Despite this seemingly simple goal, arbitration provisions are often challenged after a dispute has arisen between the parties to an employment agreement.  The challenges typically occur because one of the parties perceives that the arbitration provision will work to the advantage of the other party.  Arbitration provisions are often upheld by the courts, particularly if a provision was clearly identified in the employment agreement.  Occasionally, a court will modify an arbitration provision to include more context or details, which brings me to an observation.  I have noticed that many arbitration provisions are lacking in detail.  The details that are sometimes omitted include: 1) whether the arbitration will be binding, 2) where the arbitration will occur, 3) what rules will apply, 4) who will bear the costs, and 5) how the costs will be allocated.   These details deserve careful consideration, as they can add clarity to an arbitration provision and decrease the likelihood of a costly dispute over the terms of the agreement. 

5.         Termination Provision

An employment agreement is often being analyzed because someone has been, or is about to be, terminated.  As discussed above, many employment agreements are “at will” and can be terminated for any reason or for no reason at all.  These employment agreements will often contain only a brief statement explaining that the employee “may be terminated at any time for any reason, with or without cause.”  In some situations, an employer or employee will want to include additional rules or prerequisites regarding an “at will” termination.  For example, an employer and employee may wish to agree that notice of the termination must be in writing with 20 days’ notice.  In contrast to employment that is purely “at will”, some employment agreements will contain a termination provision that sets forth the grounds that are necessary for termination, commonly referred to as “good cause.”  A full discussion of termination for cause would require many more pages, but one point that should be clear is that adding conditions to the termination provision often adds avenues for disputes.  Whether one is addressing a termination provision or any of the provisions discussed above, it is important to consider whether the language clearly captures the agreement of the parties without creating costly confusion. 

* George B. Ward’s practice areas include employment law, commercial litigation, and insurance law.  

On August 8, 2011, the law firm of De Leon & Washburn, PC secured an early victory for an international corporate client facing multiple claims.  The case was handled by the litigation team of George B. Ward, Lauren Schoenbaum, and Ben De Leon.  The suit presented complicated issues relating to venue, personal jurisdiction, and removal to federal court.  The corporate client, who specializes in providing financial and tax consulting services, was initially sued in a Texas state court. After a thorough jurisdiction analysis, attorneys Ward, Schoenbaum, and De Leon quickly removed the case to federal court, where briefing commenced on the substantive issues.

The Plaintiff challenged the removal to federal court, asserting that the amount in controversy did not meet the criteria for removal. After responding to Plaintiff's argument, the De Leon & Washburn attorneys filed a motion to dismiss.  Following a substantial amount of further briefing, the federal court dismissed the entire action against the client. The court held that Plaintiff's claims were indeed barred by  the contractual venue provision and notions of jurisdiction.  The quick victory, obtained less than six months from the initial filing of the lawsuit, allowed the client to avoid the costly and protracted litigation that so often occurs in complex corporate matters.

* George B. Ward:    employment law  --  commercial litigation  --  insurance and corporate regulatory law

* Ben De Leon:     administrative law  --  arbitration  --  insurance and corporate regulatory law

* Lauren Schoenbaum:    administrative law  --  insurance and corporate regulatory law  --  commercial law

 

By: Ben De Leon, De Leon & Washburn, P.C.

Many individuals who have matters pending before administrative agencies do not understand the potential ramifications of going to a contested haring at the State Office of Administrative Hearings (“SOAH”), much less the subsequent misnamed standard of review (the “substantial evidence rule”) the district court gives to administrative agencies’ final orders based on the recommendations of SOAH. Under the substantial evidence rule, found at Section 2001.174 of the Texas Government Code, a reviewing court may not substitute its judgment for the judgment of the agency on the weight of the evidence on questions committed to agency discretion.[1] Indeed, the evidence may actually preponderate against the agency’s finding and the court must still uphold it if enough evidence suggests the agency’s determination was within the bounds of reasonableness (i.e., if substantial evidence supports the agency’s determination).[2] For that reason, the substantial evidence rule might be better named the little or no evidence rule.

While a contested hearing at SOAH is less formal than those in state and federal courts, it is well established that the rule regarding the standard of proof for any administrative agency finding can never be less than a preponderance of the evidence.[3] Accordingly, an Administrative Law Judge’s (“ALJ”) findings of fact must also be supported by a preponderance of the evidence. The preponderance of evidence standard is without meaning unless it is applied by the ALJ hearing the agency matter at SOAH, and enforced by the reviewing courts. However, the reviewing court may not determine the correctness of the agency’s finding, and therefore enforce the preponderance of evidence standard. The preponderance of the evidence standard of proof for agency findings at the SOAH level is altogether different from the substantial-evidence scope of review applied by reviewing courts to agency findings.[4] A court that is reviewing purely factual administrative findings may determine only whether substantial evidence supports those findings; it may not review such findings for legal error.[5] It is for the above reason that, perhaps, the better name for the substantial evidence rule is the little or no evidence rule. Nevertheless, a party may challenge a finding for lack of substantial evidentiary support at the reviewing court level in two ways. First, the party may argue the findings of underlying fact stated in the order do not fairly support the agency’s ultimate finding of fact. Second, the party may argue the findings of underlying fact do not have reasonable support in the evidence adduced at the evidentiary contested hearing at SOAH.[6] The arguments of the appealing party provide the reviewing court the opportunity to utilize the substantial evidence rule to enforce the preponderance of evidence standard, which is required at the SOAH level. If the above were done, there truly would be a review of the agency action based on the substantial evidence at the SOAH level.

It is imperative that individuals understand that, more often than not, if they go to a contested hearing at SOAH, they fight a substantial uphill battle from the start because rarely is the preponderance of evidence standard applied to the evidence. And, more often than not, reviewing courts will uphold the agency’s findings under the substantial evidence rule because it’s such a low standard to satisfy.[7] Also, it presents less of a challenge to than actually reviewing the SOAH record to determine if the preponderance of evidence standard was applied to the evidence presented at the SOAH level.

Administrative agencies are created by statute and have no inherent authority.[8] Therefore, they may only exercise those specific powers the law confers upon them in clear and express language.[9] An agency may also exercise powers necessarily implied from the statutory authority granted or the duties expressly given or imposed.[10] However, the agency may not, on a theory of necessary implication from a specific power, function, or duty expressly delegated, erect and exercise a new or additional power or power that contradicts the statute.[11] Nor may it exercise a new power solely for administrative purposes of expediency.[12] If the agency action implicates the express authority conferred upon the agency by the clear and express language of statute, this is a more viable opportunity to challenge the action taken by the agency.

Regulatory authority is not going away; in fact it’s only going to increase given the recent situations with Enron, Fannie Mae, Lehman Brothers and BP, to name a few. De Leon & Washburn, P.C. has close to 80 years of collective experience navigating the arcane and ever-changing administrative waters in the context of the substantial evidence rule. While we strive to achieve the most efficient and cost-effective solution for our clients, we also know that contested hearings and litigation are inevitable in some circumstances and administrative agencies must be held accountable – particularly in those situations where the substantial rights of a party have been prejudiced because the administrative agency findings, inferences, conclusions, or decisions are: in violation of a constitutional or statutory provision; in excess of the agency’s statutory authority; made through unlawful procedure; affected by other area of law; not reasonably supported by substantial evidence considering the reliable and probative evidence in the record as a whole; or arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.[13] Administrative law is challenging because of the substantial evidence rule and the tendency of reviewing courts to defer to the action taken by state agencies, but there are instances where a balanced well planned response to an agency action includes going to SOAH and pursuing an appeal from an unfavorable agency decision.

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[1] Tex. Gov’t Code § 2001.174 (West 2008).

[2] Southwestern Pub. Serv. Co. v. Public Util. Comm’n, 962 S.W.2d 207, 215 (Tex. App.—Austin 1998, pet. denied).

[3] Id. at 213.

[4] Id.

[5] Id. at 215 (emphasis in original); see also Lauderdale v. Texas Dep’t of Agriculture, 923 S.W.2d 834, 836-37 (Tex. App.—Austin 1996, no writ) (clarifying that the reviewing court measures agency findings of fact against evidence; the court review’s agency’s legal conclusions for legal error or for statutory authority).

[6] Southwestern Pub. Serv. Co., 962 S.W.2d at 215.

[7] See, e.g., id. (citing Texas Health Facilities Comm’n v. Charter Medical-Dallas, Inc., 665 S.W.2d 446, 452 (Tex. 1984); Railroad Comm’n v. Shell Oil Co., 161 S.W.2d 1022, 1028-29 (Tex. 1942)) (“In fact the court is prohibited from substituting its judgment for the agency’s as to the weight of the evidence on questions committed to agency discretion.”) (emphasis in original).

[8] Ford Motor Co. v. Motor Veh. Bd. of Tex. Dept. of Transp./Metro Ford Truck Sales, Inc., 21 S.W.3d 744, 764 (Tex. App—Austin 2000, pet. denied).

[9] Id.

[10] Id.

[11] Id.

[12] Id.

[13] Tex. Gov’t Code § 2001.174(2) (West 2008).