Natural Gas Company Cannot Evade Anti-Indemnification Statute's Application in Dispute with Utility Locator after JJ's Restaurant ExplosionOctober 5, 2021 | Brett Simon
More than eight years after the Country Club Plaza district in Kansas City, Missouri was rocked by a gas line explosion that destroyed JJ’s Restaurant, the United States Court of Appeals for the Eighth Circuit has ruled that utility-locating company USIC has no duty to indemnify natural gas company Spire.
The explosion led to a series of lawsuits against Spire, many of which Spire settled for a collective $75 million. USIC was subsequently asked to indemnify it on the basis that the contract between the two companies placed sole financial responsibility upon USIC—regardless of who was actually at fault. To that end, Spire sought a declaratory judgment that USIC owed Spire for the amount of the prior settlements in addition to any future settlements. USIC moved for summary judgment arguing that R.S.Mo. § 434.100.1, Missouri’s anti-indemnification statute, precluded Spire’s attempt to escape financial liability.
The anti-indemnification statute generally prohibits contractual clauses which force one party to hold another party harmless and indemnify them for their own negligence. In other words, the law prevents a subcontractor from indemnifying a general contractor for any damage caused by the general contractor’s negligence. However, this statute only applies to “any contract or agreement for public or private construction work.”
Spire took the position that USIC’s services could not be considered “construction work” within the statute’s meaning. The Eighth Circuit looked to subsection 3 of the anti-indemnification statute, which defined the terms to include “construction, alteration, maintenance or repair of any . . . pipeline.” The Court easily dispensed with Spire’s argument and held that USIC’s work in locating and marking the gas line meant that USIC was preserving the lines and keeping them in a state of repair. The Court found it irrelevant that USIC did not construct something within the usual meaning of the word since the anti-indemnification statute’s definition of construction controlled the dispute.
In addition to illustrating the scope of the anti-indemnification’s statute in the construction industry, this case also teaches about litigation strategy. Here, Spire opted to pursue an “all-or-nothing approach” and appealed solely on the basis that USIC’s purported obligation to indemnify was absolute. To that end, Spire did not seek any decision on whether it was actually negligent, or whether USIC had an obligation to indemnify it for any amount less than the full cost of the settlements. In that sense, the case suggests that parties may be well-served to pursue other issues in a case, even if those issues may not lead to a full and complete victory.
Missouri Court of Appeals Finds Arbitrator Lacked Authority to Resolve Automobile Repossession DisputeSeptember 20, 2021 | John Brooks
The Missouri Court of Appeals, Western District, recently reversed a trial court decision and subsequent arbitration award in favor of an automobile repossessor. In Car Credit, Inc. v. Pitts, the Court of Appeals held that the trial court incorrectly allowed arbitration of Pitts’ claims against Car Credit. The contract at issue designated the National Arbitration Forum (“NAF”) as arbitrator of disputes arising between Car Credit and Pitts related to the vehicle purchase. At the time Pitts filed her lawsuit, the NAF was not available to serve as arbiter. Consequently, Car Credit could not resolve Pitts’ claims through arbitration.
Following Car Credit’s repossession of her vehicle in 2015, Pitts sued Car Credit and claimed breach of contract. Pitts also sought to pursue a class action lawsuit against Car Credit. Pitts alleged Car Credit engaged in a “deceptive pattern of wrongdoing . . . regarding collection of alleged deficiencies.” Car Credit moved to compel arbitration of Pitts’ claims. Pitts purchased the vehicle at issue from Car Credit in 2011 and financed the purchase. Pitts signed an arbitration agreement at the time of purchase:
You and we [Car Credit] agree that if any Dispute arises, either you or we may choose to have the Dispute resolved by binding arbitration under the rules then in effect of the Arbitration Organization shown below (if no Arbitration Organization is shown below, the Arbitration Organization shall be the National Arbitration Forum). If such rules conflict with this Arbitration Agreement, the terms of this Arbitration Agreement shall apply.
While the arbitration clause referenced an arbitration organization “listed below,” the arbitration agreement did not identify any specific organization, leaving the NAF as the applicable arbitration organization. Car Credit cited this arbitration agreement and moved to compel arbitration. Pitts correctly pointed out that the NAF was no longer available to serve as arbitrator. Pitts argued that since the NAF was the sole designated arbitration agency and was not available, the court should not compel arbitration. The NAF stopped providing arbitration services in 2009 after Minnesota’s Attorney General sued it for alleged consumer fraud, false advertising, and deceptive trade practices.
The trial court denied Car Credit’s first motion to compel arbitration. However, after Pitts moved to certify the class action claims against Car Credit, Car Credit made a renewed motion to compel arbitration. At the time, the Missouri Court of Appeals had recently held that an arbitration agreement was enforceable even though it designated the NAF as arbitrator in A-1 Premium Acceptance v. Hunter, WD79735, 2017 WL 3026917, at * 5 (Mo. App. W.D. July 18, 2017). The trial court granted Car Credit’s renewed motion and Pitts’ claims proceeded to arbitration. After the trial court granted arbitration of Pitts’ claims, the Missouri Supreme Court overruled the Court of Appeals’ decision in the separate case, A-1 Premium Acceptance v. Hunter, 557 S.W.3d 923, 929 (Mo. banc 2018), and held that separate organization could not arbitrate disputes where the NAF was unavailable.
Meanwhile, in Pitts’ case, since the NAF was unavailable, an arbitrator from the American Arbitration Association (“AAA”) reviewed Pitts’ claims. That arbitrator found in favor of Car Credit. Based on that determination, the trial court entered judgment in favor of Car Credit and decertified the class action claims. Pitts appealed.
The Court of Appeals reversed, holding that since Pitts and Car Credit agreed to resolve their disputes before the NAF, the AAA arbitrator lacked the authority to determine the validity of Pitts’ claims. The appellate Court held that the applicable federal law—the Federal Arbitration Act—does not require a court to compel arbitration when the parties agree to arbitrate only before a specified arbitrator. Furthermore, the Missouri Supreme Court’s recent decision in A-1 Premium Acceptance v. Hunter was on point. In both cases, the parties agreed that the NAF would resolve disputes: “[T]he agreement clearly provided the parties the opportunity to identify an organization other than NAF, and, with equal clarity, the parties unambiguously declined to do so . . .”
While Car Credit will have the opportunity to appeal this decision to the Missouri Supreme Court, it is likely that the recent decision in A-1 Premium Acceptance v. Hunter will result in Pitts’ claims against Car Credit, including Pitts’ class action claims, moving forward. If the applicable arbitration agreement had designated a different arbitrator from the NAF, or had provided an alternative arbitrator, Pitts’ claims likely would have been resolved through arbitration. Careless drafting was also a key factor here. Pitts entered into this agreement in 2011, nearly two years after the NAF had stopped arbitration. Had the applicable arbitration agreement been updated to remove the NAF as arbitrator and designate a different organization after Minnesota’s lawsuit in 2009, Car Credit may have been able to successfully compel arbitration. Parties seeking to resolve disputes through arbitration should be careful to ensure their agreements are up to date with the current law.
Back to Basics: Missouri Court of Appeals Highlights Importance of "Plain-Meaning" Rule in Contract InterpretationSeptember 8, 2021 | Kyra Short
The Eastern District of the Missouri Court of Appeals reversed a trial court’s grant of summary judgment in Pelopidas, LLC et al. v. Keller due to that court’s erroneous contract interpretation, and instead ordered that summary judgment be entered for the opposing party. In its ruling, the Court of Appeals underscored the basic tenets of contract interpretation and highlighted the role of the American Bar Association’s A Manual of Style for Contract Drafting as “a highly regarded authority on contract drafting.”
The case originated from a 2016 dispute concerning the management of a commercial enterprise jointly owned by ex-spouses. The parties entered into a settlement agreement in September 2019, whereby the ex-wife (Keller) agreed to transfer her 50% ownership in the business to Respondents (Pelopidas, LLC and Brown) in exchange for compensation of $8.85 million. Following the September 2019 settlement agreement, the timing of the Keller’s transfer of her Pelopidas stock became a point of contention between the parties, as the contract itself did not contain a date of transfer. Respondents sued to enforce the terms of the settlement agreement, claiming that Keller had transferred her 50% ownership interest effective as of the date of the settlement agreement; seeking to enjoin Keller from claiming she still had an ownership interest in the company; instructing the parties to finalize the settlement under which Keller was to be paid $1.1 million that Brown had placed in escrow; and awarding Respondents their reasonable attorneys’ fees. Keller counterclaimed, seeking damages for Respondents’ alleged failure and refusal to make an accelerated payment of $8.6 million pursuant to the terms of the settlement agreement.
The disputed language in the settlement agreement reads as follows: “… [Keller’s] stock shall be surrendered/sold, escrowed and pledged back to plaintiff.” Respondents argued that the language required Keller’s stock to be immediately transferred upon the date of settlement, September 30, 2019. Keller contended that, according to the settlement agreement’s language, the transfer would become effective on “some future date (i.e., whenever the parties could negotiate, draft, and execute the necessary supplemental documentation).”
The trial court granted summary judgment in favor of the Respondents, finding that “Keller surrendered, transferred, and assigned all right, title, and interest in Pelopidas, LLC effective September 20, 2019.” The trial court likewise denied Keller’s cross-motion for summary judgment, and awarded Respondents over $400,000 in attorneys’ fees.
On appeal, Keller argued that the lower court erred and that Respondents were not entitled to judgment as a matter of law because the settlement agreement “contained a promise of future performance regarding the transfer of her stock in Pelopidas to Brown.” Rather, Keller argued, she was entitled to summary judgment, ordering that payment be made at some reasonable future date. The Court of Appeals agreed with Keller.
The appellate court noted that summary judgment in contract interpretation disputes is not appropriate where the contract language is ambiguous or requires a factual determination by the court. But here, there was no dispute that the contract language required Keller to transfer her stock, and the only question at issue was when that transfer should occur. That issue, the Court of Appeals concluded, was ripe for summary disposition.
On the matter of contract interpretation, the appellate court emphasized the familiar principle that the judiciary should use the “plain, ordinary, and usual meaning of the contract’s words” in order to give effect to the intention of the contracting parties. In determining the timing of Keller’s stock transfer to Respondents, the court ruled that the use of “shall be” in the parties’ settlement agreement imposed a future obligation on Keller and did not create a requirement for immediate performance.
In its decision, the court endorsed Keller’s citations to the ABA Manual of Style for Contract Drafting, which instructs that contract drafters can select between “language of performance” and “language of obligation” among other types operative contract language. Language of performance “expresses actions accomplished by means of signing the contract itself” and is typically accompanied by use of the word “hereby.” Language of obligation “is used to state any duty a contract imposes on one or more parties and is typically accomplished by the use of the word “shall.”” The court further emphasized that because the English language does not contain a future tense, “shall and will have come to be used with future time.” The court further instructs that, even though “shall” is “now used in a variety of other ways, “in the stylized context of the language of business contracts … shall continues to serve as the principal means of expressing obligations.” The court also found that Keller’s interpretation of “shall” was consistent with dictionary definitions for the term.
Based on their findings, the appellate court reversed the trial court’s grant of summary judgment against Keller and instead directed the circuit court to enter judgment for Keller, plus interest and attorneys’ fees.
This case serves as an important reminder to go back to basics when drafting business contracts in Missouri. Drafters must pay special attention to the plain language meaning of the language they choose, to avoid ambiguity and ensure that the contract accurately reflects the intention of the parties. And they should pay special heed to the distinction between “language of performance” and “language of obligation”.
* Hannah D. Chanin assisted in the research and drafting of this post. Chanin earned her J.D. from Washington University School of Law in St. Louis this spring and is a current candidate for admission to the Missouri Bar.
Missouri Court of Appeals affirms denial of motion to compel arbitration based on contract of adhesionAugust 10, 2021 | John Brooks
The Eastern District Missouri Court of Appeals recently affirmed a trial court decision that denied Verizon’s motion to compel arbitration. In Rose v. Verizon Wireless Services, LLC, the Court of Appeals held that an arbitration provision was not enforceable because the contract at issue was an unenforceable contract of adhesion and did not match the reasonable expectations of the parties.
Plaintiff Breanna Rose sued Verizon Wireless and its employee Santiago Sabala, Jr. based on a visit to a Verizon store in St. Louis County to exchange her iPhone 6s for a newer model. Rose alleged that Sabala took her iPhone into the back of the store, purportedly to evaluate its condition for the trade in; but that four months later, she discovered Sabala sent an email from Rose’s phone to Sabala’s email address, attaching intimate photographs of Rose. Obtaining private, intimate images of a person without their consent is a felony under Missouri law. R.S. Mo § 573.110.2. Rose claimed negligent infliction of emotional distress and invasion of privacy by Sabala, and negligence and negligent hiring, retention and supervision by Verizon Wireless Services, as the employer of Sabala.
Verizon moved to compel arbitration. Verizon argued that Rose agreed to Verizon’s customer agreement when she purchased her iPhone 6s. That agreement contained a clause requiring arbitration of any customer dispute, under the Federal Arbitration Act:
ANY DISPUTE THAT IN ANY WAY RELATES TO OR ARISES OUT OF THIS AGREEMENT OR FROM ANY EQUIPMENT, PRODUCTS AND SERVICES YOU RECEIVE FROM US (OR FROM ANY ADVERTISING FOR ANY SUCH PRODUCTS OR SERVICES), INCLUDING ANY DISPUTES YOU HAVE WITH OUR EMPLOYEES OR AGENTS, WILL BE RESOLVED BY ONE OR MORE NEUTRAL ARBITRATORS . . ..
Rose argued that Verizon’s customer agreement constituted a contract of adhesion. Contracts of adhesion are typically contracts offered on a “take this or nothing basis,” as opposed to a contract where the terms are negotiated by the parties. Swain v. Auto Servs., Inc., 128 S.W.3d 103, 107 (Mo. App. E.D. 2003). Most people have experienced contracts of adhesion when scrolling through lengthy terms and conditions of service and clicking “accept,” usually without actually reading the terms and conditions. The Circuit Court agreed with Rose, and denied Verizon’s motion to compel arbitration. Ordinarily parties must wait to appeal until a final judgment is entered, but Missouri law allows an immediate appeal from an order denying an application to compel arbitration. § 435.440.1(1), RSMo. Verizon appealed.
The appellate Court ruled against Verizon and affirmed the circuit court’s decision to deny arbitration. As the appellate Court noted, contracts of adhesion can be enforceable, depending on whether the contract matches the reasonable expectations of the parties. However, the store receipt signed by Rose when she purchased her phone did not contain the above arbitration clause itself, but merely referenced the online customer agreement and arbitration, as follows (emphasis added):
I AGREE TO THE CURRENT VERIZON WIRELESS CUSTOMER AGREEMENT (WITH EXTENDED LIMITED WARRANTY/SERVICE CONTRACT, IF APPLICABLE), INCLUDING THE TERMS AND CONDITIONS OF MY PLAN AND ANY OPTIONAL SERVICES I HAVE AGREED TO PURCHASE AS REFLECTED ON THE SERVICE SUMMARY, ALL OF WHICH I HAVE HAD THE OPPORTUNITY TO REVIEW. I UNDERSTAND THAT I AM AGREEING TO AN EARLY TERMINATION FEE PER LINE, LIMITATIONS OF LIABILITY FOR SERVICE AND EQUIPMENT, SETTLEMENT OF DISPUTES BY ARBITRATION INSTEAD OF JURY TRIALS, AND OTHER IMPORTANT TERMS IN THE CUSTOMER AGREEMENT. I AM AWARE THAT I CAN VIEW THE CUSTOMER AGREEMENT ANYTIME AT VERIZONWIRELESS.COM OR IN MY VERIZON ACCOUNT.
The appellate Court noted that while the receipt Rose signed does mention settling disputes by arbitration, that reference was merely a portion of a single sentence and did not set out the full terms of arbitration, as described in Verizon’s customer agreement. The full customer agreement was a separate document from the one signed by Rose. The appellate Court also ruled that the circumstances of the transaction weighed against Verizon, in that Santiago’s alleged actions did not relate to Verizon’s telecommunications business. Because the reasonable expectations of the parties would not include arbitrating disputes related to a Verizon employee allegedly obtaining intimate photographs of a customer, the appellate Court held that Verizon was not entitled to arbitration.
Arbitration is often favored as a less expensive method of resolving disputes. Parties can forego the expense related to interviewing and selecting jurors and generally reach a quicker resolution, while trials may take months or even years. The appellate Court’s decision does not mean that all contracts of adhesion are unenforceable, or even that contracts of adhesion containing arbitration clauses are unenforceable. The Court emphasized that its decision was narrow and based on the specific allegations of misconduct by Sabala. If the allegations were different – for example, if an employee dropped and broke a customer’s phone while handling it – the appellate Court may have permitted arbitration. Likewise, if the full terms regarding arbitration were contained in the receipt signed by Rose, the appellate Court may have permitted arbitration. Parties entering into written contracts should be careful to ensure both sides fully appreciate the contractual terms they are agreeing to, especially terms requiring arbitration of disputes.
Jameson v. Still arose from an auto accident between Still’s vehicle and Jameson’s on New Year’s Eve 2018. Jameson’s counsel sent a settlement demand for $150,000 or all available coverages to Still’s insurer. Jameson’s demand was entitled “Offer to Settle Pursuant to RSMo §408.040 and RSMo §537.058.” By law, offers of settlement made pursuant to § 408.040 and § 537.058 “shall remain open” for a period of 90 days.
Section 408.040 provides that a plaintiff must comply with specific statutory requirements to recover prejudgment interest. Section 537.058 provides that a settlement demand is inadmissible in a bad faith failure to settle claim unless the demand complies with the statute. In compliance with § 408.040 and § 537.058, Jameson’s settlement demand stated the “offer to settle will remain open for ninety (90) days.” Jameson’s demand was sent on May 20, 2019 and expired on August 18, 2019.
Still’s insurer responded to Jameson’s settlement demand with an offer of settlement for $24,751 on June 21, 2019. On June 24, 2019, Jameson filed his Petition alleging negligence by Still in St. Louis County Circuit Court. Jameson’s Petition alleged, “Plaintiff’s RSMo section 408.040 offer was rejected on June 21, 2019.” On August 6, 2019 Still’s insurer offered the applicable policy limits of $100,000. On August 14, 2019 Still’s insurer re-offered the $100,000 policy limits. Then, on August 15, 2019, prior to expiration of the original time-limited demand, Still’s insurer sent a letter purporting to accept the original May 20, 2019 settlement demand. Still moved for summary judgment, alleging the parties settled the case. The trial court granted that motion. Jameson appealed.
Until 2015, Missouri’s pre-judgment interest statute contained language specifically addressing rejection of a time-limited demand: “2. Any such demand or offer shall be made in writing and sent by certified mail and shall be left open for sixty days unless rejected earlier.” § 408.040 2005 Mo. Legis. Serv. H.B. 393 (emphasis added). In 2015, the Missouri legislature amended § 408.040 and extended the time for pre-judgment settlement demands to ninety days. The amended version of §408.040 did not contain the “unless rejected earlier” language. In her brief in support of her summary judgment motion, Still argued that the removal of the “unless rejected earlier” language in the amended § 408.040 reflected the legislature’s intent that pre-suit settlement demands are not rejected by a counteroffer.
The Missouri Court of Appeals disagreed. Longstanding black letter Missouri law provides that a counteroffer operates as a rejection of a contractual offer and as a new offer. Here, Jameson’s 90-day settlement demand was a contractual offer of settlement, and Still’s June 21, 2019 offer of $24,751 modified the proposed contractual terms. The appellate Court held that in doing so, Still extended a counteroffer.
The Court noted two circumstances under Missouri law where contractual offers may be irrevocable: 1) when parties enter into an option contract - inapplicable here - and 2), when a statute mandates the offer is irrevocable. Missouri courts interpret statutes by reviewing the plain and ordinary meaning of the words contained. As the appellate Court noted, “[n]either section 408.040 nor section 537.058 use the words irrevocable or non-rejectable or their equivalents.” It thus concluded that the Missouri legislature did not intend to make time-limited settlement demands pursuant to § 408.040 and § 537.058 irrevocable.
The appellate Court reversed and remanded the case to the trial court. Still has applied to have the case transferred to the Missouri Supreme Court, and that application is still pending. Given the frequency of pre-suit settlement demands in litigation, it is possible the Missouri Supreme Court may accept transfer of this matter to resolve a question of general importance.
Parties should be aware of the consequences of time-limited demands before providing a response to a pre-suit settlement demand. While this case is not yet fully resolved, and it is possible the Missouri Supreme Court may choose to weigh in, it appears the longstanding rule that a counteroffer constitutes rejection and a new offer still applies in the context of settlement demands made pursuant to §408.040 and §537.058, RSMo. Accordingly, a response to a pre-suit settlement demand that modifies the terms - here, the amount of settlement - may function as a counteroffer. Parties who extend counteroffers to pre-suit settlement demands should carefully evaluate the potential for excess liability and a corresponding bad faith claim.
COVID Liability Bill Update - Governor Signs Legislation Shielding Healthcare Providers and Others From Most COVID-Related LawsuitsJuly 27, 2021 | John Mahon, Jr.
As discussed in ourJune 1, 2021, blog post, the Missouri Legislature passed a COVID liability bill (SB 51) that contains protections for healthcare providers, manufacturers, and other businesses from tort liability related to the COVID-19 pandemic. On July 7, Governor Parson signed the legislation, which has an effective date of August 28, 2021.
Whether COVID-19 tort liability protections are reasonable and necessary is a hotly debated topic among various stakeholders, including the Missouri Chamber of Commerce, the American Medical Association, and trial lawyer organizations. Proponents of the new law believe it is critical to the State's economic recovery and to stopping those who would seek to profit from the pandemic. Opponents argue that the law will provide blanket immunity to negligent nursing homes and others who harm innocent Missourians.
As discussed in our December 21, 2020 blog post, Governor Parson has encouraged lawmakers to author this sort of tort liability legislation since at least November 2020, when he issued a written proclamation on the topic. SB 51 passed the Missouri Senate in February 2021. A key benefit of the bill to defendants generally is protection from suits stemming from COVID-19 exposures unless a plaintiff can show clear and convincing evidence of recklessness or willful misconduct and the exposure caused personal injury.
There are protections in the bill specific to healthcare providers. In the healthcare context, the bill states that “[a]n elective procedure that is delayed for good cause shall not be considered recklessness or willful misconduct.” There is also a shortened limitations period for bringing a COVID-19 medical liability action. Such an action “may not be commenced in any Missouri court later than one year after the date of the discovery of the alleged harm, damage, breach, or tort unless tolled for proof of fraud, intentional concealment, or the presence of a foreign body which has no therapeutic or diagnostic purpose or effect.”
The bill also limits punitive damages in a COVID-19 related action to a maximum of nine times the compensatory damages. However, § 510.265, RSMo. (2005), may provide greater protection to healthcare provider defendants, in that it limits punitive damages to $500,000, or five times the net amount of the judgment awarded to the plaintiff, whichever is greater.
SB 51 comes in the wake of the filing of thousands of COVID-related lawsuits nationally. Missouri alone has seen more than 140 COVID-related suits since the start of 2020. One potential unintended consequence of this legislation could be a sharp rise in COVID-related suits filed hastily in Missouri courts during the several weeks leading up to the August 28 effective date to circumvent the new law. Should this occur, many of these suits could be meritless and lacking adequate pre-suit investigation.
Missouri will not be alone in providing COVID-19 tort liability protections. Other states have done so through executive order and/or legislative action. In addition, federal liability protections are already available under the 2005 Public Readiness and Emergency Preparedness (PREP) Act, which provides immunity to certain defendants, including healthcare provider defendants in certain situations.
We will continue to monitor the implementation of this new law and its impact on our courts.
Hey Now, You're an All Star, Get Your Punitives, Get Paid. Missouri Court of Appeals Finds Punitive Damages Cap UnconstitutionalJuly 8, 2021 | Richard Woolf
The Missouri Court of Appeals, Western District, recently held, in a case involving an employee’s breach of his duty of loyalty to his employer, that a statutory cap on punitive damages was a violation of the prevailing plaintiff’s constitutional right to trial by jury. Referring back to the establishment of the Missouri Constitution, the court of appeals reexamined the constitutionality of the punitive damages cap.
All Star Awards v. Halo involved an employee at All Star who decided to leave his employer to work for a competitor. Before leaving All Star, however, the employee poached a few clients from his former employer by telling the clients that All Star was experiencing cash flow and ownership issues. Finding this behavior reprehensible, the trial court stated that “taking business from a small mom-and-pop awards and promotions shop with supposed cash-flow issues while its sales manager was still in its employ is the definition of evil motive and reckless indifference.” The jury, like the trial court, also upset with the defendants, awarded actual damages of $512,000, and punitive damages of $5.5 million. However, the trial court reduced the punitive damages by almost half ($2,627,709) on the basis of Section 510.265, which imposed a punitive-damages cap, because All Star’s claims “were not common law claims.”
On appeal, All Star contended that the trial court misapplied the section on the punitive-damages cap, violating All Star’s right to a jury. Citing the case of Lewellen, the court of appeals stated that they would review constitutional challenges de novo, without regard to the trial court’s decision.
The Missouri Constitution states that the right to a jury trial “as heretofore enjoyed shall remain inviolate.” In other words, any changes to the rights to a jury as existed when the constitution was adopted in 1820 are unconstitutional. Halo contended that there were no claims like the breach of duty of loyalty in Missouri before the Constitution was signed and, therefore, it would not have been recognized. All Star argued to the contrary that it does not matter if Missouri recognized the cause of action in 1820, but rather whether this claim for relief existed in English common law prior to the signing of the Missouri constitution.
The Court of Appeals agreed with All Star finding these types of loyalty and tortious interference claims have been recognized under English common law since at least 1621. Therefore, the date that the Missouri courts recognized a particular common law cause of action is irrelevant. Rather, the more important question to ask is, “did the action or an analogous action exist at common law when our constitution was adopted?” Finding the answer in the affirmative here, the court found the punitive damage cap to be unconstitutional.
Although Halo raised a concern that this ruling could radically expand Lewellen, the Court disagreed, concluding that Missouri’s common law is based on the common law of England as of 1607 - the common law claims of England became a part of Missouri common law when the state constitution was adopted; and that its refusal to apply the damages cap was therefore consistent with Lewellen. In the back and forth on the application of a cap on punitive damages, this is a win for the “no-cap” folks. Whether this Court of Appeals decision is the last word on this subject remains to be seen.
* Avery Goodman, a summer law clerk in the firm's St. Louis office, assisted in the research and drafting of this post. Goodman is a rising 3L student at Washington University School of Law.
The Missouri legislature passed a bill to amend certain rules of court, including civil discovery rules 56.01, 57.01, 57.03, 57.04, 58.01, 59.01, and 61.01, in 2019, via Senate Bill 224. These particular rules relate to the scope of discovery, interrogatories, and requests for production of documents and things. The governor signed the bill on July 10, 2019. Pursuant to Article III, § 20 of the Missouri Constitution, the General Assembly’s regular session terminates on May 30 of each year. “A law passed by the general assembly takes effect ninety days after the adjournment of the session at which it is enacted.” Mo. Rev. Stat. § 1.130. This equates to August 28 of the year in which the law is passed. Accordingly, SB 224 should have become effective on August 28, 2019.
We believe that it did. However, the Missouri Supreme Court resisted the General Assembly’s amendment of the rules of civil procedure. The court initially noted that SB 224 “purports to amend” the rules, subsequently failed to acknowledge SB 224 at all, and ultimately, in March 2021, adopted its own version of the affected rules to take effect September 2, 2021. This leaves civil litigators in something of a limbo state as to what are the current versions of rules 56.01, 57.01, 57.03, 57.04, 58.01, 59.01, and 61.01. As discussed herein, the legislature had the legal authority to enact modifications to the court rules, including the rules of civil procedure, and the Missouri Supreme Court’s March 2021 order does not invalidate the General Assembly’s law under well-settled principals of the separation of powers. Indeed, the Supreme Court’s order makes no reference at all to SB 224. It is not a finding that SB 224 was enacted without authority.
The Supreme Court’s own precedent admonishes against the approach it has taken with respect to SB 224. “It is essential that the bench, the bar, and the public be clearly advised as to the procedural rules that are actually in effect at a given time.” State ex rel. K.C. v. Gant, 661 S.W.2d 483, 485 (Mo. 1983). Rather than any express order addressing the status of SB 224, the Supreme Court dropped a footnote on its rules website, designating the law as one that “purports” to amend the rules, without clearly advising the bench, the bar, or the public as to what the rules are post-SB 224 and before the effective date of the court’s own rule amendments ordered as of March 2, 2021. Indeed, there will be a two-year period between the effective date of SB 224 and the Supreme Court’s own amendment of Rules 56.01, 57.01, 57.03, 57.04, 58.01, 59.01, and 61.01, in which there is an unsettled dispute as to what the rules of civil procedure even are.
Article V, § 5 of the Missouri Constitution expressly authorizes the General Assembly to amend court rules: “The supreme court may establish rules relating to practice, procedure and pleading for all courts . . . Any rule may be annulled or amended in whole or in part by a law limited to the purpose.” Accordingly, the General Assembly had the authority to amend, in whole or in part, court rules, by a law “limited to the purpose.”
Was SB 224 “limited to the purpose” of amending the court rules? Absolutely. SB 224, in its entirety, was a bill “to amend supreme court rules 25.03, 56.01, 57.01, 57.03, 57.04, 58.01, 59.01, and 61.01, relating to discovery.” “For a statute to qualify as one ‘limited to the purpose’ of annulling or amending a rule, it ‘must refer expressly to the rule’ and be limited to the purpose of amending or annulling it.” City of Normandy v. Greitens, 518 S.W.3d 183, 201 (Mo. 2017). SB 224 expressly refers to the rules to be amended, and is limited to the purpose of amending these rules. On the face of SB 224, it addresses no matter other than changes to the listed court rules.
The counterargument on whether SB 224 was “limited to the purpose” of amending court rules is the claim that, because multiple rules were amended in one bill, the bill was not limited to the purpose of amending “any rule.” The judicial doctrine adopted by the Missouri Supreme Court in case law is simply that the bill must identify the rule to be amended and do nothing but amend the rule. No prior case has held that the constitution requires a separate bill for each rule to be amended, nor is that interpretation compelled by Article V, § 5. The only circumstances in which the Missouri Supreme Court has previously found that the General Assembly failed to properly exercise its constitutional authority to amend court rules are (1) where the bill fails to explicitly identify the rule amended, and (2) where the bill was a “massive piece of legislation” that enacted or modified statutes other than the court rules. See State ex rel. Collector of Winchester v. Jamison, 357 S.W.3d 589, 593 (Mo. 2012).
To the extent that opponents of SB 224 might argue that there was insufficient time between the signing of SB 224 and its effective date on August 28, 2019, Article V, § 5 prevents court-established rules from taking effect sooner than six months after its publication by the Supreme Court. There is no corresponding restriction in the Constitution on actions by the General Assembly to annul or amend court rules. Indeed, it would be highly impractical for this to be the case, as the General Assembly is only in general session between “the first Wednesday after the first Monday in January” and May 30. Missouri Constitution, Article III, § 20. Any bills enacted during this approximately four-month session take effect by August 28 of the same year. Mo. Rev. Stat. § 1.130.
The Missouri Supreme Court has repeatedly recognized that, in adopting procedural rules, it may be “overruled” by the General Assembly if it chooses to annul or amend the Court’s rules. See State v. Reese, 920 S.W.2d 94, 95 (Mo. 1996); Ostermueller v. Potter, 868 S.W.2d 110, 111 (Mo. 1993); see also State ex rel. Kinsky v. Pratte, 994 S.W.2d 74, 76 (Mo. App. E.D. 1999) (“the constitution did not make its grant of rule making power to the judiciary exclusive. . . . The legislature continues to have the power to establish procedures”). “The constitution does not make this power the exclusive province of the judiciary.” In re Marriage of Chastain, 1996 Mo. LEXIS 67, at *7 (Mo. Oct. 21, 1996). The court recognizes that Article V, § 5 strikes a balance between the legislature and the court, with express limitations on the court’s authority. See, e.g., Goldsby v. Lombardi, 559 S.W.3d 878, 881 (Mo. banc 2018) (recognizing that the section carves out authority for each branch).
The Constitution of 1945 introduced an innovative distribution of power between the General Assembly and this Court in the formulation of rules of practice and procedure for the courts of the state. Procedural requirements, historically, had been prescribed by statute. This Court now may adopt rules of practice and procedure, and rules so adopted, with a few exceptions not here material, may even go to the point of modifying existing statutory requirements. The apparent purpose of the new constitutional procedure is to relieve the legislature of the burden of continuous surveillance of details of judicial procedure, while preserving its ultimate authority through the power to amend or annul any rule adopted by the Court by means of "a law limited to the purpose."
State ex rel. K.C. v. Gant, 661 S.W.2d 483, 485 (Mo. 1983) (emphasis added).
“The constitutional prescription of the manner in which the General Assembly must act is of pristine importance.” Id. (emphasis added). “The constitution, therefore, in no way ‘limit[s] or constrict[s] the power of the General Assembly. Its power is plenary, so long as it follows the constitutional procedure.’” State ex rel. Collector of Winchester v. Jamison, 357 S.W.3d 589, 592 (Mo. banc 2012) (quoting Grant).
The most developed area of Missouri Supreme Court precedent is with respect to rules that it enacts that conflict with pre-existing statutes. The Supreme Court has created a doctrine whereby its rules can purportedly invalidate statutes unless the General Assembly acts to invalidate the court rule. “Where such a rule adopted by this court under the express authority of the constitution is inconsistent with a statute and has not been annulled or amended by later enactment of the legislature, the rule supersedes that statute.” State ex rel. Peabody Coal Co. v. Powell, 574 S.W.2d 423, 426 (Mo. 1978). Although this is now a decades-old common law rule, it is unclear how this approach is properly reconciled with the Missouri Constitution’s separation of powers. However, it is an acknowledgement that the legislature has the authority to countermand the Supreme Court’s rules of procedure.
It is worth noting that, while Article V, § 5 of the Missouri Constitution authorizes the Missouri Supreme Court to enact court rules, “The rules shall not change substantive rights, or the law relating to evidence, the oral examination of witnesses, juries, the right of trial by jury, or the right of appeal.” There is a branch of the Missouri government that has the authority to change substantive rights and the laws relating to evidence and competence of witnesses – the General Assembly. Indeed, unlike in many other jurisdictions, Missouri has no rules of evidence, but has many statutes pertaining to evidence and witnesses, including a statute regarding the admissibility of expert testimony. The separation of powers contemplated by the Missouri Constitution evidences an intent to temper the authority of the Missouri Supreme Court, and for the General Assembly to occupy the same sphere of power with respect to amendment of court rules.
Article II, § 1 provides:
The powers of government shall be divided into three distinct departments—the legislative, executive and judicial—each of which shall be confided to a separate magistracy, and no person, or collection of persons, charged with the exercise of powers properly belonging to one of those departments, shall exercise any power properly belonging to either of the others, except in the instances in this constitution expressly directed or permitted.
The General Assembly is expressly permitted to exercise power to amend court rules by Article V, § 5. Accordingly, it is unclear on what basis the Missouri Supreme Court’s skepticism of SB 224 has any legal force or effect. There is no provision in the Missouri Constitution for a “pocket veto” of legislation by the Missouri Supreme Court. There is no precedent for the Court to simply ignore or refuse to implement legislation without a specific order making findings that the General Assembly acted without authority.
We are of the belief, therefore, that the 2019 General Assembly amendments to Rules 56.01, 57.01, 57.03, 57.04, 58.01, 59.01, and 61.01 took effect on August 28, 2019, and will remain in effect until September 2, 2021. A redline comparison of the court rules, per the Supreme Court’s March 2, 2021 order, compared to the provisions of SB 224, can be found here.
The Eighth Circuit Court of Appeals recently reversed a District Court’s dismissal on forum non conveniens grounds, finding that the motion to dismiss was untimely. The Court of Appeals held that the Defendants undermined their own inconvenience arguments by litigating in the forum for 18 months before filing their motion.
The doctrine of forum non conveniens arose out of due process concerns that defendants from across the country (or indeed the world) can be hauled into federal court in far-flung jurisdictions having no significant connection to the case. Courts are also concerned that attractive districts will face the undue financial burden of supporting litigation of claims of no significant interest to the district. Practitioners in the Eastern District of Missouri are no doubt well-versed on these concerns.
Defendants can obtain dismissal of a lawsuit filed in an inconvenient forum. But forum non conveniens is mentioned neither in Rule 12 nor anywhere else in the Federal Rules of Civil Procedure, and courts have often held that such motions can be filed at any time, even on the day of trial. If there is no set deadline for when the motion to dismiss must be filed, how can such a motion ever be untimely?
The Court of Appeals attempted to answer that question in Hersh v. CKE Restaurants, Holdings, Inc., No. 19-2794 (Apr. 28, 2021). It held that those seeking to dismiss on forum non conveniens grounds must show that it is actually inconvenient to litigate in the current forum and such a showing should be made at a reasonably early time, lest defendants inadvertently undermine the purported “inconvenience” of litigating in the forum.
The Court of Appeals found that the District Court abused its discretion in granting a motion to dismiss on forum non conveniens grounds. To dismiss on forum non conveniens grounds, the movant must establish that an adequate alternative forum exists. This is essentially any forum in which the defendant can be served. Then the court weights private-interest factors (e.g., location of the parties, attorneys, evidence, and witnesses) and public-interest factors (e.g., choice of law issues, court resources, and strains on the jury pool) to determine whether dismissal is appropriate. The overriding goal is to ensure that the forum is convenient.
The Hersh case involved a little boy who was playing in a restaurant playground in Amman, Jordan, and was tragically electrocuted by an exposed wire. The case was filed in the Eastern District of Missouri, the restaurant holding company’s home. Yet, the Plaintiffs, several of the Defendants, and most of the witnesses were located in Jordan. Plaintiffs’ attorneys were located in Michigan. Other potential defendants to implead were located in Jordan and not subject to personal jurisdiction in Missouri. Jordanian law would govern the wrongful death claims and the standard of care. Documents and testimony would have to be translated from Arabic. On these grounds, and others, the District Court granted defendants’ motion to dismiss for forum non conveniens. At first blush, the District Court’s ruling appeared completely reasonable. However, the Court of Appeals held that the District Court abused its discretion and reinstated the case in St. Louis.
According to the Court of Appeals, 18 months was just too long to wait to file a motion to dismiss based on forum non conveniens, because all of the factors supporting dismissal were available to the defendants much earlier on in the case. In fact, virtually all of the factors identified by the District Court were apparent or ascertainable from the face of the Complaint. The Court of Appeals did not decide whether timeliness is a public- or private-interest factor, or a separate independent consideration, and did not elaborate further on what constitutes a reasonable amount of time.
The Court of Appeals cited In re Air Crash Disaster near New Orleans, 821 F.2d 1147, 1165 (5th Cir. 1987), but did not explicitly adopt its straightforward and well-articulated rule: “a defendant must assert a motion to dismiss for forum non conveniens within a reasonable time after the facts or circumstances which serve as the basis for the motion have developed and become known or reasonably known to the defendant.” Had the Court adopted this guideline, it might better serve practitioners in evaluating the timeliness of their motions.
Although most cases will not have the forum non conveniens issues set out as dramatically as in Hersh, practitioners can take a few lessons from the Court of Appeals opinion.
First, if you have considered a motion to dismiss for lack of personal jurisdiction, or if the court has personal jurisdiction only because of a long-arm statute, then you should consider forum non conveniens.
Second, evaluate how discovery is progressing early on. If you find that every interview, deposition, accident site visit, or expert consultation involves an associate flying across the country, the current forum may be inconvenient. Go ahead and file your motion now.
Third, nothing in the Court of Appeals’ opinion precludes a motion to dismiss where new information turns up in discovery. However, act quickly once new information arises.
Finally, evaluate the alternative forum. In most cases, as in Hersh, the movant is precluded from challenging jurisdiction in the new forum.
Here, the District Court’s opinion seemed quite persuasive. If not for the passage of 18 months, the Court of Appeals likely would have upheld the dismissal. However, for the Court of Appeals, by litigating in the forum for 18 months, defendants apparently proved that the forum was not inconvenient, after all.
Does an Arbitration Clause Have to Provide for Equivalent Rights and Remedies to Both Sides, in Order to Be Enforceable?April 30, 2021 | John Brooks
The Missouri Court of Appeals for the Southern District recently reversed a Circuit Court decision that denied a corporate defendant’s motion to compel arbitration, in Keeling v. Preferred Poultry Supply, LLC. Plaintiff Brandon Keeling sued Preferred Poultry Supply, alleging breach of contract, fraudulent misrepresentation, and negligent misrepresentation. Preferred Poultry and Keeling entered into a written contract in May of 2016. Preferred Poultry agreed to construct six broiler chicken buildings on Keeling’s poultry farm in Newton, Missouri in exchange for a payment of $2,048,321.00.
Following construction of the buildings, Keeling sued Preferred Poultry. Keeling alleged that he discovered defects related to the construction and repairs would cost in excess of $745,516.00. Keeling also alleged Preferred Poultry made false and misleading representations to Keeling. In response, Preferred Poultry filed a combined dispositive motion: a motion to dismiss, or in the alternative, motion to order arbitration. Preferred Poultry attached the contract between Keeling and Preferred Poultry to its motion and highlighted the arbitration clause of the contract, titled “BINDING ARBITRATION”:
All claims, disputes and matters in question arising out of or relating to this Contract or any claimed breach of this Contract shall be decided by binding arbitration in accordance with the Uniform Arbitration Act in force in Arkansas . . . . This agreement to arbitrate shall be specifically enforceable under the Federal Arbitration Act since this Contract involves interstate commerce. . . . The location of the arbitration proceedings shall be in Fayetteville, Arkansas. . . . Any award of arbitration may be entered in the Circuit Court for Washington County, Arkansas and will have the force of a judgment from that court.
The contract provided that Arkansas law would govern disputes between Keeling and Preferred Poultry. The trial court denied Preferred Poultry’s motion to compel arbitration. Preferred Poultry appealed that denial. Missouri law allows the right to an immediate appeal of an order denying a stay of proceedings relating to a matter that may be arbitrable. If Preferred Poultry had not appealed, the case would have continued in Newton County Circuit Court through the completion of a trial.
On appeal, Keeling first challenged Preferred Poultry’s appeal as premature. Typically, a party may only appeal a final judgment which disposes of all issues in a case. But Missouri law (§ 435.440.1(1), RSMo.), federal law (9 U.S.C.A. § 16(a)(1)(C)), and Arkansas law (Ark. Code Ann. § 16-108-228(a)(1)) all specifically allow an appeal from an order denying an application to compel arbitration. The appellate Court applied Missouri law and deemed the appeal timely.
Keeling also argued that his tort claims for negligent misrepresentation and fraudulent misrepresentation should not be arbitrated because under Arkansas law, tort claims are not subject to arbitration. The appellate Court disagreed. The Court cited Riley v. Lucas Lofts Investors, LLC, 412 S.W. 3d 285, 290 (Mo. App. E.D. 2013), as well as Arkansas case law, and concluded that Keeling’s claims all related to the contract with Preferred Poultry.
Even though Keeling characterized his some of his claims as tort claims, the Court determined that he could not avoid the arbitration provision. The Court noted that Keeling’s tort claims both sought damages, as opposed to rescission of the contract. Under Missouri law, when damages are sought for claims of poor workmanship, those claims are typically subject to arbitration.
Finally, the Court reviewed the arbitration clause in the contract to determine whether it was enforceable. Keeling argued that the arbitration agreement was invalid because the arbitration clause allowed Preferred Poultry to pursue all available rights under any state law, including filing a lien upon Keeling’s property. Keeling, however, was limited to arbitration as a remedy. Keeling argued this clause created a non-mutual obligation.
The appellate Court rejected this argument. The appellate Court noted that the Federal Arbitration Act does not require mutual obligations to arbitrate. Furthermore, the Court reviewed both Arkansas law and Missouri law, and noted that both states allow non-identical obligations in contracts as a whole, as long as the contract contains sufficient consideration. The appellate Court cited Eaton v. CMH Homes, Inc., 461 S.W.3d 426, 431 (Mo. banc 2015), where the Missouri Supreme Court found that the trial court erred in denying the defendant’s motion to compel arbitration. The appellate Court noted that the arbitration clause in Eaton similarly allowed only the contractor the option to pursue other remedies beyond arbitration, including foreclosure. In Eaton, as here, there was sufficient consideration on both sides: the contractor in Eaton (and Preferred Poultry) agreed to provide a building, and the buyer (and Keeling) agreed to pay a set amount for the building.
Accordingly, the appellate Court reversed and remanded the case to the trial court, with directions to refer the case to arbitration, because the parties’ arbitration agreement was valid and enforceable.
The key takeaway from the Court’s decision is that arbitration clauses are enforceable under Missouri law, even where they are more favorable to one party, provided there is consideration on both sides. Arbitration is often less expensive than a trial because the rules of evidence are more informal and there is no jury panel. A party in arbitration can spend less time preparing for trial and navigating written discovery. The appellate Court’s decision here emphasizes that when both parties agree to arbitration as the forum for resolving their disputes, that contractual agreement will ordinarily be enforced. Keeling and Preferred Poultry agreed to arbitration, and Preferred Poultry was able to successfully enforce arbitration.
Open and obvious: "both the condition and the risk are apparent to and would be recognized by a reasonable man . . . exercising ordinary perception, intelligence, and judgment."
The Missouri Court of Appeals for the Western District reversed and remanded Michael Lee v. Missouri Department of Transportation, a wrongful death lawsuit, back to the Circuit Court of Boone County, Missouri. Michael Lee appealed a dismissal by the trial court of his Third Amended Petition, alleging wrongful death claims for the death of his daughter against the Missouri Highway and Transportation Commission (MHTC).
The claims arose from a tragic accident involving Mr. Lee’s daughter and his grandchild who were ultimately unable to escape a flooded area on a road where they were driving one early morning. Mr. Lee’s granddaughter was following another vehicle just before the tragic incident, she stopped, just as the other vehicle did, to examine the flooded portion of the road, before unsuccessfully attempting to drive through the flooded area.
Mr. Lee alleged that the portion of the roadway at issue was known to MHTC as a flood hazard, that MHTC failed to provide adequate barriers or guardrails to keep vehicles from being swept off the roadway, and failed to provide adequate warnings that the road would flood.
The Court dismissed Plaintiff’s Petition, after MHTC filed a combined dispositive motion, seeking alternative forms of relief (Motion for Judgment on the Pleadings; Motion to Dismiss; Motion to Strike), arguing that that the flooded roadway was an open and obvious condition and that Mr. Lee’s daughter had a duty to exercise reasonable care for her own safety. The trial court ruled that dismissal was proper due to Plaintiff’s own pleadings and the reasonable inferences therefrom indicating that Mr. Lee’s daughter “saw the danger, examined the danger and decided to proceed anyway.”
On appeal, Mr. Lee first asserted the trial court failed to consider the facts pleaded and the reasonable inferences from the Petition in the light most favorable to Mr. Lee, as the non-moving party. The appellate Court focused on whether the Petition adequately set forth the elements to support a claim of imposing liability on a possessor of land (MHTC) for injuries sustained by an invitee (Mr. Lee’s daughter) due to conditions on that land, i.e.:
(a) MHTC knows or by the exercise of reasonable care would discover the condition, and should realize that it involves an unreasonable risk of harm to such invitees, and
(b) MHTC should expect that they will not discover or realize the danger or will fail to protect themselves against it, and
(c) Invitee (Mr. Lee’s daughter) fails to exercise reasonable care to protect them against the danger.
The ultimate question for the Court thus became whether Mr. Lee’s daughter should have realized the danger posed by the flooded condition of the roadway. The trial court ultimately concluded the cause of action fell under a case called Harris v. Niehaus, 857 S.W.2d at 224, which involved another tragic accident in which a mother lost her three children to drowning after her vehicle, parked on a sloped roadway, rolled down the street and into a lake that was plainly visible (aka open and obvious) to the mother.
The appellate Court in Lee, however, found the case to be distinguishable from Harris, concluding that evidence that needed to be considered could be presented at trial and a juror could infer whether it was reasonable or safe to cross the roadway. In other words, the Court ruled in favor of Mr. Lee on Point 1, finding that what is reasonable is for a jury to decide.
Mr. Lee’s second point on appeal focused on the trial court failing to properly construe and apply the meaning of section 343A of the Second Restatement of Torts. Specifically, he argued the Petition properly alleged that MHTC should have anticipated the harm despite any knowledge or obviousness that may have existed on the part of his daughter.
As explained by the Court, even if the flooded roadway was open and obvious, if the jury determined that MHTC should have anticipated the harm, then it would still be liable. The Court found that the Petition adequately alleged that MHTC was aware of certain issues of flooding with the roadway, as well as ingress and egress of local residents on that roadway. Agreeing with the Plaintiff, the Court found reasonable minds could differ on the facts surrounding roadway flooding, and it was up to the jury to determine whether the possessor of land should have anticipated harm to an invitee despite the open and obvious hazard.
So what does this all mean?
As defense lawyers, we are generally pleased to see successful trial court outcomes in cases of this type. Frankly, however, the Court of Appeals ruling in this case did not come as much of a surprise.
When considering a motion to dismiss in Missouri, the trial court reviews the Petition and the facts stated within its four corners in a light most favorable to the non-moving party (typically the Plaintiff), also giving all reasonable inferences in favor of the non-moving party. However, in this case, the trial court appeared to give the inferences to the defendant, ultimately finding that the open and obvious doctrine supported dismissal at the pleading stage. While we are aware of cases that were ultimately resolved in favor of the defendant based on the open and obvious doctrine, including the appellate case the trial court relied on to support dismissal, such cases typically have a greater developed factual record that has been before the Court and/or the jury.
The procedural posture of this case was somewhat unusual. The Plaintiff, Michael Lee, appears to have had two separate cases – one for his grandchild and the present case for his daughter. The case brought for the death of Michael Lee’s grandchild was dismissed (affirmed on appeal) for various reasons. Curiously, however, in this case, MHTC did not raise the open and obvious issue as an affirmative defense to prior amended Petitions, which made the same allegations. It was only when Mr. Lee amended to fix another problem with his prior Petitions that MHTC raised this argument along with other defenses. In addition, there appears to have been discovery, depositions, and more motions, but none of that was part of this appellate record, because the defendant sought to have the case disposed of via a Motion to Dismiss, rather than a Motion for Summary Judgment (which focuses on undisputed facts elicited in discovery, rather than the legal sufficiency of Plaintiff’s Petition).
In any event, Michael Lee v. Mo. Dept. of Transp. is back before the trial court, and it remains to be seen what will happen next. Unless the case is settled, a jury may well get to decide what is “open and obvious” and reasonable.
The Missouri Court of Appeals has ruled that although abandoned by Massachusetts in 2010, the “Massachusetts Rule” is still the general rule in Missouri. So what is the Massachusetts Rule? First applied in Missouri in 1954, the Massachusetts Rule is actually an exception to the general premises liability principles that apply to owners or occupiers of property. Until 1954, the rule had only applied to municipalities. Under the Massachusetts Rule, an owner or possessor of property has “no duty to remove snow or ice that accumulates naturally and is a condition general to the community.” Richey v. DP Props., LP, 252 S.W.3d 249, 251-52 (Mo. App. E.D. 2008). This is especially true when snow or ice is actively falling. That is not to say the Massachusetts Rule is absolute. As with any rule, there are exceptions and even exceptions to the exceptions. Missouri courts have recognized two exceptions to the Massachusetts Rule: 1) where the property owner or operator assumed a duty through its course of conduct or 2) assumed a duty by agreement.
The plaintiff in Colleen O’Donnell v. PNK (River City), LLC, et al. slipped and fell on a patch of ice on the sidewalk of the River City Casino during a winter ice storm. The plaintiff had arrived at the Casino before the ice storm began and fell as she was leaving. The ice on the sidewalk had not been shoveled, scraped, salted, or altered in any way by the Casino. Shortly before plaintiff fell, the Casino had been monitoring the freezing rain and had requested Total Lot Maintenance, who the Casino had a contract with for snow removal, to treat and remove the ice. The Casino even warned some customers of the ice, helped some customers to their vehicles and tried to protect others from falling before plaintiff’s fall.
The Casino filed a motion for summary judgment asserting they had no duty to remove the ice that had accumulated on its property under the Massachusetts Rule, which the trial court granted. In affirming the trial court’s ruling, the Missouri Court of Appeals revisited the Massachusetts Rule and the recognized exceptions to it. Plaintiff argued that both exceptions to the Massachusetts Rule applied to the Casino.
Plaintiff first argued that the Casino assumed a duty based on its conduct leading up to her fall, pointing to the fact that the Casino was aware of the accumulating ice and was monitoring the conditions, that they specifically warned other customers of the ice, even assisted some patrons to their vehicles, and also requested Total Lot Maintenance treat the ice. However, the Casino’s knowledge of the condition and warning and assisting its customers was not enough to trigger the exception. For the exception to apply in Missouri, the condition must be altered in some way by the landowner (or occupier), such as by shoveling, spreading salt or by some other means.
As a practical matter, although Missouri courts require willful action to alter the condition of the snow or ice to trigger the exception, Missouri courts have found that active removal of snow or ice in a different area of the premises from where an incident occurred is at least enough to preclude summary judgment and may be enough to trigger the exception. Otterman v. Harold’s Supermarkets, Inc., 65 S.W.3d 553, 555 (Mo. App. W.D. 2001). The take away is, if the snow or ice has changed in some way since it first accumulated naturally, the exception is likely triggered and the landowner (or occupier) must then exercise ordinary care to remove the snow or ice and make the area reasonably safe. Willis v. Springfield General Osteopathic Hosp., 804 S.W.2d 416, 419 (Mo. App. S.D. 1991).
The Court of Appeals also rejected plaintiff O’Donnell’s argument that the Casino assumed the duty to remove the ice by virtue of its agreement with Total Lot Maintenance because plaintiff did not put forth evidence of the contract or its terms. Of note, the Court of Appeals did confirm that the mere existence of a snow removal policy is not enough to trigger the exception.
The trial court granted a similar motion for summary judgment filed by Total Lot Maintenance. However, the Court of Appeals reversed, noting an issue of fact existed as to whether the assumed by agreement exception was triggered. The agreement required Total Lot Maintenance to clear snow and ice at the Casino after a certain amount of accumulation and the Court of Appeals found that this, coupled with the fact that the Casino had contacted them twice to remove the ice called into question whether their duty had been triggered.
Importantly, the Missouri Court of Appeals rejected plaintiff’s argument that the Massachusetts Rule should be abrogated entirely or, at a minimum, should not apply to hotel owners and operators. In Missouri, while hotel owners and operators may owe a heightened duty of care to its guests to warn of dangerous conditions in certain circumstances, this does not allow for circumvention of the Massachusetts Rule. The Rule is applied broadly and encompasses hotel owners and operators. Richey, 252 S.W.3d at 251.
The Court of Appeals did acknowledge that the Massachusetts Rule in certain circumstances could incentivize owners and occupiers of property to not address dangerous conditions of snow or ice. However, they declined to void the rule, stating that is for the Missouri Supreme Court to decide.
U.S. Supreme Court Asked to Review Issue of Jurisdiction for Non-Resident Plaintiffs in Products CasesMarch 12, 2021 | Noemi Donovan
Johnson and Johnson (“J&J”) has asked the United States Supreme Court to overturn the $2.1 billion verdict entered against it in Ingham, et al. v. Johnson & Johnson, et al., a talcum powder class action filed in Missouri that included numerous non-resident plaintiffs. If review is granted, the Supreme Court will rule on just how far the “arise out of or relate to” prong of the test for specific jurisdiction extends with respect to the claims of a nonresident plaintiff.
The inconsistent way differing jurisdictions determine the existence of specific jurisdiction for non-resident plaintiffs is readily apparent. And the litigation involving the talcum powder products at issue in this case is a perfect example of this type of inconsistency. Two courts, one in Missouri and the other in New Jersey, reached two very different conclusions regarding the exercise of personal jurisdiction over the same claims involving non-resident plaintiffs. Missouri found that its exercise of jurisdiction was proper, while New Jersey did not. This did not come as a shock to Missouri practitioners, because Missouri courts have long welcomed and been a favorite for out-of-state plaintiffs.
Following the United States Supreme Court’s decision in Bristol-Myers Squibb Co. v. Superior Court,137 S.Ct. 1773 (2017), this practice of forum shopping was curtailed. However, the Missouri Court of Appeals for the Eastern District re-opened the door for a non-resident plaintiff to bring a cause of action in Missouri for alleged damages based upon the use of a product that he did not purchase or use in Missouri, nor suffer damages in Missouri. See Ingham, et al. v. Johnson & Johnson, et al., 608 S.W.3d 663 (Mo.App. E.D. 2020), trans. denied, 2020 Mo. LEXIS (Nov. 3, 2020). However, the holding in Ingham regarding the exercise of specific jurisdiction is the diametric opposite of the decision of the United States District Court for the District of New Jersey deciding the same jurisdictional issue on the very same facts in the same week. See Hannah v. Johnson & Johnson Inc., 2020 U.S. Dist. LEXIS 113284 (D.N.J. June 29, 2020).
In Ingham, plaintiffs sought recovery against two defendants: Johnson & Johnson Consumer Companies Inc. (“JJCI”) and its parent company, J&J. Twenty-two plaintiffs alleged they developed ovarian cancer after continued use of two of the defendants’ products: Johnson’s Baby Powder and Shower to Shower Shimmer Effects (“Shimmer”). The parties agreed that defendants were not subject to general jurisdiction in Missouri because they are incorporated and headquartered in New Jersey. Five plaintiffs lived, purchased and used Johnson’s Baby Powder and/or Shimmer, and developed ovarian cancer in Missouri (“Missouri Plaintiffs”). Jurisdiction over JJCI with respect to the Missouri Plaintiffs was not disputed.
Jurisdiction was disputed with respect to the other seventeen plaintiffs who lived, purchased and used Johnson’s Baby Powder and/or Shimmer and developed ovarian cancer outside Missouri (the “Non-Resident Plaintiffs”). Two of these Non-Resident Plaintiffs only used Baby Powder, while the remaining Non-Resident Plaintiffs used Shimmer or used both Shimmer and Baby Powder.
The Non-Resident Plaintiffs alleged that defendants were subject to specific jurisdiction in Missouri because JJCI had two long-term contractual relationships with Pharma Tech Industries, a Missouri corporation for the manufacturing, packaging and supply of Shimmer and Johnson’s Baby Powder. Fifteen of the Non-Resident Plaintiffs asserted that jurisdiction was proper in Missouri because they used Shimmer, which was manufactured, labeled and packaged by Pharma Tech Industries’ sister company, Pharma Tech Union, located in Union, Missouri, under defendants’ direction and control. The other two Non-Resident Plaintiffs claimed the defendants were subject to specific jurisdiction in Missouri because they used Johnson’s Baby Powder that was manufactured, labeled and packaged by Pharma Tech Industries’ sister company, Pharma Tech Royston, located in Royston, Georgia, under Pharma Tech Industries’ direction and control.
Trial Court’s Findings on Jurisdiction
The trial court held that it could exercise specific jurisdiction over defendants on the Non-Resident Plaintiffs’ claims because their alleged conduct satisfied the Missouri long-arm statute. Specifically, the court opined that defendants transacted business in Missouri, allegedly committed a tortious act in Missouri, owned real estate in Missouri, and contracted with Pharma Tech Industries in Missouri to manufacture packaging materials and to manufacture, label and package both products. The trial court further found that these activities constituted sufficient minimum contacts to subject defendants to specific jurisdiction in Missouri.
On appeal, the defendants did not challenge the trial court’s finding that the long-arm statute extended to them. Instead, with respect to jurisdiction, the defendants only appealed whether they established sufficient minimum contacts with Missouri that enabled the trial court to exercise specific jurisdiction over them.
The Missouri Court of Appeals recognized that it can only assert specific personal jurisdiction over the defendants if the defendants had certain minimum contacts with Missouri and if plaintiffs’ cause of action arose from those alleged minimum contacts. Because of this requirement, the question of whether specific jurisdiction exists must be determined separately for each individual plaintiff’s claims.
The Missouri Court of Appeals’ Holding Regarding Jurisdiction over the Non-Residents’ Claims Related to the Use of Shimmer
Citing the United States Supreme Court decision in Bristol-Myers Squibb Co. (“BMS”), the Missouri Court of Appeals held that the trial court properly exercised specific jurisdiction over JJCI for the claims of the Non-Resident Plaintiffs associated with Shimmer because JJCI “engaged in a host of significant activities in Missouri related to the Non-Resident Plaintiffs’ use of Shimmer.” Specifically, JJCI contracted with Missouri-based Pharma Tech to manufacture, package and label Shimmer pursuant to JJCI’s specification at Pharma Tech’s facility in Missouri.
Defendants argued that its contract with a Missouri corporation alone was insufficient to subject defendants to personal jurisdiction in Missouri. For as the United States Supreme Court’s held in BMS, “[a] defendant’s relationship with a third party, standing alone, is an insufficient basis for jurisdiction… The bare fact that BSM contracted with a California distributor is not enough to establish personal jurisdiction in this State.” 137 S.Ct. at 1783. (citations omitted.)
However, the Missouri Court of Appeals, apparently realizing that JJCI’s contract with Pharma Tech was insufficient to confer jurisdiction over JJCI, stretched further to justify its exercise of personal jurisdiction over JJCI in Missouri. To do this, the appellate court held that JJCI’s contacts constituted more than a “mere contractual relationship with a third party.” Because JJCI engaged in activities related to the manufacture, packaging and labeling of Shimmer in Missouri, the Court of Appeals found that it was reasonable to require JJCI “to submit to the burdens of litigation” in Missouri. Instrumental in this finding is that the Non-Resident Plaintiffs’ claims alleged negligent manufacture, production, packaging and labeling of Shimmer. Therefore, according to the Court of Appeals, JJCI’s activities with Pharma Tech in Missouri were a “direct link in the production chain of Shimmer’s eventual sale to the public … [and] … firmly connect JJCI’s activities in Missouri to the specific claims of the Non-Resident Plaintiffs” related to Shimmer.
This decision is in stark contrast to holding in Hannah. In Hannah, the United States District Court for the District of New Jersey held that it could not exercise jurisdiction over the J&J defendants for the claims of the non-Missouri residents because J&J’s contracts with Pharma Tech “to produce some of its products does not confer jurisdiction.” 2020 U.S. Dist. LEXIS 113284, at * 103 (D.N.J. June 29, 2020). As the District Court explained:
While those contacts might well constitute purposeful availment of the benefits and protections of the State of Missouri in a contract action, these contacts are irrelevant in this products liability action. Indeed, Plaintiffs have not demonstrated that their injuries in any way arise out of those specific agreements. In other words they neglect to allege a connection between their injuries and those specific distribution agreements.
Id. (citations omitted).
The Missouri Court of Appeals’ Holding Regarding Jurisdiction over the Non-Residents’ Claims Related to the Use of Johnson’s Baby Powder
The Court of Appeals, however, found that the trial court erred in exercising specific jurisdiction over JJCI on the claims of the two Non-Resident Plaintiffs who only used Johnson’s Baby Powder because the Petition “did not sufficiently allege JJCI engaged in significant activities in Missouri related to their use [of] Johnson’s Baby Powder.” Non-Resident Plaintiffs argued that because Pharma Tech in Missouri controlled and directed the manufacturing, processing, bottling, labeling and distribution of Johnson’s Baby Powder in Georgia from its headquarters in Union, Missouri, JJCI was subject to jurisdiction in Missouri for the claims involving Johnson’s Baby Powder.
The court rejected the Non-Resident Plaintiffs’ claims. Specifically, the Court of Appeals explained that the “record is devoid of evidence that JJCI engaged in any activities related to Johnson’s Baby Powder, beyond the executing of … [the contracts] with a Missouri-based corporation, in Missouri.” Therefore, the contract JJCI executed with Pharma Tech in Missouri regarding Johnson’s Baby Powder was not sufficient to confer jurisdiction over JJCI in Missouri for the claims solely related to Johnson’s Baby Powder. This part of the decision by the Missouri Court of Appeals is in line with the Supreme Court’s holding in BMS because “contracting with an out-of-state party alone cannot automatically establish sufficient minimum contacts in the out-of-state party’s forum.”
To the surprise of many observers, the Missouri Supreme Court declined to review the Court of Appeals ruling, which upheld an historically large verdict, in a case that seemed to collide rather sharply with the U.S. Supreme Court decision in Bristol-Myers Squibb. The Missouri Court of Appeals holding in Ingham allows a court to exercise jurisdiction over a company that contracts with a third party to make a product according to the company’s specifications. According to the Ingham court, jurisdiction in this situation is based on more than a mere contractual relationship. However, this reasoning was squarely rejected by the United States District Court for the District on New Jersey in Hannah. Should the United States Supreme Court grant review, it should follow the sound reasoning of BMS and Hannah and hold that Missouri courts cannot exercise jurisdiction over the claims of non-resident plaintiffs when they did not purchase, use or suffer injury in the State of Missouri.
A statute of repose is a law that cuts off a right of action after a specified time period has elapsed, regardless of when the cause of action accrues. Most states have such statutes, but they vary widely as to limitation periods, what is covered, and whom the statute protects. A statute of repose differs from a statute of limitation in that a time period specified in a statute of limitations usually does not begin to run until the injury or damage actually occurs, irrespective of when the product was sold.
Missouri took an important first step in creating a statute of repose for product liability claims by debating Senate Bill #7 in committee at the end of January. If it passes the Legislature and is signed by the governor, Senate Bill # 7 would place Missouri among the many states with some type of statute of repose for product liability claims.
The proposed bill sets a statute of repose of fifteen years and would bar claims for personal injury, property damage, wrongful death, or economic loss. The time period would begin to run when the product is first sold or leased to any person or otherwise placed in the stream of commerce. The catchall of “otherwise placed into the stream of commerce” will be an important for component parts manufacturers and suppliers along with those who sell their products to distributors as it could cut off claims at an earlier date than when the plaintiff first purchased the product.
There are some significant exceptions built into the proposed bill. First, it would not apply to any product that is real property or an improvement to real property. However, Section 516.097, which has a shorter statute of repose, may bar some of those claims. The proposed statute would also not bar any claims for negligent servicing or negligent maintenance of a product.
Second, if the defective or unsafe condition was knowingly concealed or negligence in the construction, manufacture, sale or distribution was knowingly concealed, those claims are not barred. However, the concealed defective or unsafe condition or the concealed negligence must directly result in the claims asserted. Similarly, if the product was subject to a government mandated product recall related to consumer safety, the statute of repose would not bar those claims if the reason for the recall and the subject of the claims are the same.
The bill would also exempt any product that has an expected useful life exceeding fifteen years. This exception would only apply if the useful life is stated by the manufacturer, seller or lessor in a written warranty or in an advertisement to the public. However, the bill would cut off claims two years after the stated useful life. If a claim arose during the potential useful life of a product, a jury may, in determining whether the product’s useful safe life has expired, consider the amount of wear and tear, deterioration from natural causes including storing conditions, normal practices regarding the product’s use, repairs, renewals and replacements, any stated useful safe life by the manufacturer or modifications made to the product.
Finally, the statute would impact toxic tort claims. The statute would not apply to any claims where a defective or unsafe condition allegedly caused a respiratory or malignant disease with a latency of more than fifteen years. However, it does bar claims against the sellers of any such products unless the seller is also the manufacturer.
The proposed bill would have a significant impact on product liability claims in Missouri. The bill would apply to all civil actions commenced on or after August 28, 2021, or to any new causes of action asserted in civil actions pending on or after that date. The proposal also provides a safe harbor provision that any claims that would be barred by the statute that accrued on or before August 28, 2021, must be brought no later than August 21, 2022.
The bill recently passed the Government Accountability and Fiscal Oversight Committee. If the bill passes the full Senate, it will then be sent to the Missouri House of Representatives for potential amendment. If the bill passes both chambers, it will be sent to the governor for signature. We will continue monitoring the bill’s progress through the legislative process and provide updates.
Little about 2020 was normal, and the number of trials in the Kansas City area was no exception. Data released by the Greater Kansas City Jury Verdict Service shows that the total number of jury trials in the Kansas City area was down over 65% in 2020 when compared to 2019.
In 2020, 29 trials were reported, compared to 86 trials in 2019, and 104 in 2018. The numbers were significantly impacted by the fact that many Kansas City area courts, especially state courts, had to postpone civil jury trials due to the Coronavirus.
The Percentage of Jury Verdicts Favoring Defendants Remained Constant from 2019
In the Kansas City area, juries decided a total of 29 cases in 2020. Within those 29 cases, the Jury Verdict Service reports on the number of claims in each case which totaled 73 overall claims. Of the verdicts reported on the 73 claims, 41% (30 out of 73 claims) resulted in some amount of recovery to the plaintiff(s), while 59% (43 out of 73 claims) were defense verdicts. Similarly, in 2019 41% (75 out of 181 claims) of claims resulted in some amount of recovery for the plaintiff, while 59% (106 out of 181 claims) were defense verdicts. This put an end to a recent upward trend in defense verdicts, from 51% in 2017, to 52% in 2018, to 59% in 2019.
The Overall Average Monetary Award for Plaintiff Verdicts Drastically Decreased
In 2020, when plaintiffs were awarded damages by juries, the awards were significantly smaller than in recent years. The overall average of plaintiff verdicts in the Kansas City area in 2020 was $502,261, which included two outlier trials resulting in larger verdicts of $4.9 million and $7 million. In 2019 the average Plaintiff verdict was $2,255,380; however, this was due to one outlier verdict of $117,921,154. 2018’s average Plaintiff’s verdict was $1,810,693; however, there was an outlier verdict that year of $76,000,000.
When the outliers from each year were set aside the average jury award for 2018 was $882,500. 2019’s average was $692,000. And 2020’s average was $45,000. In 2020, 77% of jury awards were below $100,000, with an average jury award of approximately $45,000. Despite this, the proportion of six-figure jury awards to plaintiffs held steady at about 16% (12 out of 73 claims in 2020, compared to 31 out of 181 claims in 2019, and 29 out of 168 claims in 2018). Nonetheless, the average jury verdict awarded in 2020 decreased sharply from the previous years.
Juries in Missouri Federal Courts Prove Most Generous in 2020
To add to the anomalies of 2020, juries in Federal Courts accounted for all five of the jury verdicts in excess of $1,000,000 in 2020. The U.S. District Court for the Western District was responsible for one of these verdicts, and the other four came out of U.S. District Court for the District of Kansas. In 2019 there were 10 verdicts that exceeded $1 million, 30% of which originated in federal courts. In 2018 there were 14 verdicts over $1 million, 14% of which originated in federal courts.
The number of state court trials fell dramatically in 2020 while the percentage of federal court trials greatly increased. In 2020 state court verdicts accounted for 53% of claims, whereas federal court verdicts accounted for 47% of claims. This was a stark change from 2019 and 2018 where state court claims accounted for 83% of verdicts, and federal court claims accounted for 17% of verdicts in both years.
The likely explanation is that federal courts continued conducting civil trials throughout most of the year, while state courts postponed numerous trials due to the ongoing pandemic. Once state courts begin to conduct civil jury trials again that will likely reverse the current trend, and restore the old adage that federal courts are better for Defendants, and state courts more hospitable toward Plaintiffs.
Related Services: Aerospace, Automotive, Construction, Food & Beverage, Banking, Healthcare, Hospitality & Leisure, Insurance, Pharmaceutical & Medical Device, Retail, Trucking, Art, Entertainment & Fashion, Railroad, Propane, Recreational Transportation, Commercial, COVID-19 (Coronavirus), Cyber Liability, Privacy & Data Breach, Employment & Labor, Financial Services Litigation, Medical Malpractice, Personal Injury Defense, Premises Liability, Product Liability, Professional & Management Liability and Toxic/Mass Tort & Environmental
Attorneys: Joanna Orscheln
City of St. Louis and Multiple Illinois Counties Again Distinguish Themselves as "Judicial Hellholes"January 20, 2021 | Lisa Larkin
The 2020/2021 “Judicial Hellholes Report” from the American Tort Reform Foundation has arrived and certain Missouri and Illinois jurisdictions again find themselves on this infamous list. The City of St. Louis comes in at #7 on the list while the trio of Cook, Madison, and St. Clair Counties in Illinois wins the #8 spot. The silver lining? Both of these rankings are down from the previous slots of #5 and #7 held by these counties, respectively, in the previous Judicial Hellholes Report.
Since 2002, the American Tort Reform Foundation has identified and documented places “where judges in civil cases systematically apply laws and court procedures in an unfair and unbalanced manner, generally to the disadvantage of defendants.” The stated goal of the Foundation’s program is “to shine a light on imbalances in the courts and thereby encourage positive changes by the judges themselves and, when needed, through legislative action or popular referenda.”
Coming in at #7 on the list, the City of St. Louis, Missouri, is singled out as being notorious for blatant forum shopping and excessive punitive damage awards, helping to earn Missouri the “Show-Me-Your-Lawsuit” nickname. The report also asserts that the court fails to ensure that cases are guided by sound science, citing instances where Plaintiff’s experts, whose testimony has been determined to not be based in science by other state court, have been permitted to testify in City of St. Louis courts. The report does see some hope for the City and the State of Missouri in general with the 2020 legislative enactment of several reforms intended to curb unreliable expert testimony and reduce litigation tourism, but cautions that true future success is contingent on the City of St. Louis Court’s compliance with the new statutes. The report notes that “some St. Louis judges have a history of ignoring both state law and U.S. Supreme Court precedent with regard to expert evidence standards, personal jurisdiction and venue, and damage awards.”
Number 8 on the list is the grouping of Cook, Madison and St. Clair Counties in Illinois. The report singles out these three counties as continuing to be preferred jurisdictions for plaintiffs’ lawyers “thanks to no-injury lawsuits, plaintiff-friendly rulings in asbestos litigation, and the promise of a liability-expanding legislative agenda each and every year.” The report calls Illinois ground zero for no-injury lawsuits, thanks in large part to the Biometric Information Privacy Act and the numerous expansive judicial interpretations of that law. The report finds some encouraging news in the Illinois Supreme Court’s June 2020 ruling in Rios v. Bayer Corp., where the court dismissed the claims of out-of-state plaintiffs for lack of jurisdiction because Bayer is not located in Illinois and does limited business there, the product was not manufactured in Illinois, and the plaintiffs experienced their injuries outside of Illinois.
The report also gives a dishonorable mention to the Missouri Court of Appeal thanks to a recent opinion addressing Section 537.065. This section permits a defendant to allow a plaintiff to obtain a judgment against it in court so long as the plaintiff agrees to only seek to collect the award from the defendant’s insurer. The Missouri legislature amended Section 537.065 in 2017 to require that parties give notice to the insurer that they have entered such an agreement so that the insurer can intervene and protect its interests, if needed. The report interprets a Missouri appellate court decision from 2020 as limiting an insurer’s ability to contest the policyholder’s liability or the plaintiff’s damages when it intervenes after the entry of arbitration award.
Parson's Pandemic Protections for Providers - Governor Parson Encourages Tort Liability Legislation During COVID-19 State of EmergencyDecember 21, 2020 | John Mahon, Jr.
On November 12, Governor Parson issued a written proclamation encouraging lawmakers to author new tort liability legislation insulating defendants from lawsuits arising out of the COVID-19 state of emergency that has existed since March. This effort is designed to allow these individuals and entities to continue to serve the public without threat of unnecessary and frivolous litigation. We have since learned that the Missouri legislature is not likely to address this issue until early 2021. Governor Parson seems to have reconsidered the timing for the agenda and directed the legislature to address this, not during the ongoing special session, but during the regular January session. The bill will be titled SB1.
In the statement, the Governor explained one of the main purposes of this action is to assist healthcare providers who have gone well beyond normal duty to provide exceptional care to Missourians despite great personal risk to their own health and well-being by amending and expanding upon § 44.045, RSMo, to afford liability protections for healthcare workers who provide necessary care during a declared state of emergency. Though not dealt with here, the Governor’s proclamation also identifies other organizations instrumental to COVID-19 response efforts, including product manufacturers and premises owners like schools and churches that provide fundamental societal functions. This potentially includes a new Section in Chapter 537, RSMo, to provide products liability protection for product manufacturers, designers, distributors, and sellers involved in bringing products to market in direct response to a state of emergency. It also potentially includes a new section to provide premises liability protection for exposure claims arising from a declared state of emergency.
Why Is This Necessary?
The threat of COVID litigation is real. There have been an estimated 10,000 COVID-related lawsuits filed nationally. This includes hundreds of healthcare specific suits and is almost certain to continue well into the next year and beyond.
The risk to healthcare workers is real too. As of December 21, there were almost 17.8 million COVID cases and more than 315,000 deaths in the U.S. Healthcare workers make up a significant portion of nationwide COVID-19 infections. As of July, there were 100,000 cases of COVID-19 infecting healthcare workers. By September 2020, more than 1,700 U.S. healthcare workers had died from COVID-19. Per the CDC, healthcare workers make up approximately 6% of adults hospitalized with COVID-19. Among those, 36% were in the nursing field, and 28% were admitted to an ICU. Sixteen percent required invasive mechanical ventilation, and 4% died.
None of this is surprising considering healthcare workers are on the frontline of battling this global pandemic and, in doing so, expose themselves to great personal risk each shift providing exceptional care for their communities. They must deal with the challenge not only of exposing themselves to the virus, but also observing terrible suffering and outcomes of their patients, and doing this with limited resources, equipment and healthcare staff. The author of this blog believes prudent legislative action is necessary under the circumstances and likely to be helpful in mitigating some litigation risk for healthcare professionals.
A National Approach to Liability Protections
Missouri is not the only state to consider such liability protections. Other states have provided this through executive order and/or legislative action. For example, the neighboring states of Arkansas, Iowa, Illinois, Kansas, Kentucky, and Oklahoma have already passed COVID liability protections. Many of these states’ protections afford immunity from civil damages for licensed healthcare providers but carve out exceptions for injuries or death caused by gross negligence, willful and criminal misconduct and intentional infliction of harm, and fraud.
Although there was much discussion during negotiations for a federal COVID-19 relief package as to whether it would include liability protections for healthcare providers and other businesses, in the end, no such provision was included in the $900 billion program. Though not dealt with in detail here, federal liability protections are already available under the 2005 Public Readiness Emergency Preparedness (PREP) Act, which authorizes the Secretary of the US Department of Health and Human Services to issue a declaration in response to a public health emergency. On March 10, 2020, Secretary of HHS Alex Azar issued such a declaration, effective February 4, 2020, which provides immunity to “covered persons,” such as healthcare providers, using certain “covered countermeasures,” including masks, respirators, and vaccines, that are necessary to combat the public health emergency.
The Missouri Chamber of Commerce and industry stakeholders overwhelmingly support these protections. The American Medical Association has pushed for states to pursue liability protections for healthcare professionals during the COVID-19 emergency. However, this is not without criticism, with some suggesting such policies would protect irresponsible businesses from accountability and fail to protect the public.
It is important to note that the anticipated liability protections parallel “good Samaritan” laws that have existed throughout the country for decades and afford qualified immunity from civil liability for healthcare professionals who volunteer their services as a generous compassionate act unless they engage in willful or intentional misconduct.
We will continue to follow this issue and look for activity during the January 2021 general legislative session.
Missouri defendants will welcome several recently enacted changes to the manner in which punitive damages can be sought and awarded in most civil actions. SB 591 raises the bar for both pleading and proving punitive damages and provides additional protections to employers who might otherwise have been exposed to punitive damages for the unlawful conduct of low-level employees.
Most damages in civil lawsuits are intended to compensate plaintiffs for their losses, whether economic or noneconomic. But punitive damages, also called “exemplary damages” in Missouri, are different in that they are intended to punish civil wrongdoing and to serve as a deterrent to others who may be tempted to engage in similar conduct. SB 591, which became law on August 28, 2020, significantly changes how these damages can be awarded in Missouri.
Most notably, punitive damages in most cases now must be based on “clear and convincing evidence that the defendant intentionally harmed the plaintiff without just cause or acted with a deliberate and flagrant disregard for the safety of others.” This is a heightened standard from previously existing Missouri law, which required a showing of “complete indifference or conscious disregard for the safety of others.” Under the new standard, punitive damages are appropriate only if the defendant intentionally injured the plaintiff or did so by deliberately and flagrantly disregarding risk of injury.
The new law also bars plaintiffs from seeking punitive damages in their initial pleadings, a change intended to curb premature or frivolous punitive damages allegations. Instead, a party seeking to assert a claim for punitive damages now must first file a motion for leave to do so, which will be granted only if the judge finds that admissible evidence exists upon which a jury could reasonably conclude that the punitive damages standard has been met. This roughly mirrors the procedures for asserting punitive damages in Kansas and Illinois state courts.
Employers are also protected under the bill from liability for punitive damages arising out of the conduct of their employees. Where plaintiff seeks to hold an employer vicariously liable for the wrongful acts of an employee or other agent, punitive damages will be awarded against the employer only if: (1) the employer authorized both the wrongful act and the manner in which it was done; (2) the employee was unfit to such a degree that it was reckless for the employer to hire and/or retain the employee; (3) the employee alleged to have committed the wrongful act held a management position and was acting within the scope of his or her managerial duties; or (4) the employer ratified or approved the wrongful act after it was committed.
The Missouri Merchandising Practices Act was originally intended to protect Missouri consumers from businesses that employ unfair and deceptive commercial practices. But thanks to Missouri courts’ expansive interpretation of statutory language that was often vague to begin with, the MMPA has been misused and stretched far beyond its original purpose. SB 591 makes a number of changes designed to reverse those trends.
Some of the changes are simple. For example, to prevail on MMPA claims, plaintiffs now must prove that they acted “as a reasonable consumer” would have acted under similar circumstances. Additionally, all MMPA claimants (or, in the case of class actions, all class representatives) must support their claimed damages with evidence that is “sufficiently definitive and objective” to allow their losses to be calculated to a reasonable degree of certainty. These changes—which should be part of any consumer protection statute—should provide at least some level of protection to businesses by deterring the assertion of frivolous claims and by offering a path to dismissal when those claims are filed.
The amendments also provide that any award of attorneys’ fees must “bear a reasonable relationship to the amount of the judgment” awarded to an MMPA claimant. Prior to SB 591, the act allowed prevailing plaintiffs to recover their attorneys’ fees, even where their recovery was nominal and any actual harm suffered was trivial. This allowed MMPA claimants to use the threat of ballooning attorney fees to deter defendants from litigating in earnest and to extract settlements wildly disproportionate to their actual losses (if any). This change looks to curb those abuses of the MMPA.
The amendments also expressly exclude certain types of claims that are intended to be governed by other bodies of law. For example, the amended MMPA excludes claims arising out of the rendering or failure to render healthcare services, a change intended to stop the assertion of medical malpractice claims under the guise of this consumer protection statute. Similarly, a new provision in the law excludes certain new home warranties from the definition of “merchandise,” so long as the warranty documents contain and prominently display specified disclaimer language.
The changes enacted under SB 591—both to punitive damages claims and to the MMPA—will apply only to cases governed by Missouri law and filed after August 28, 2020. Any case filed before that date will be subject to the previously existing standards. We will continue to monitor how these important changes are implemented and interpreted by Missouri courts.
Related Services: Aerospace, Automotive, Construction, Food & Beverage, Banking, Healthcare, Hospitality & Leisure, Insurance, Pharmaceutical & Medical Device, Retail, Trucking, Art, Entertainment & Fashion, Railroad, Propane, Recreational Transportation, Commercial, Complex, Class Action & MDL, Employment & Labor, Medical Malpractice, Personal Injury Defense, Premises Liability, Product Liability, Professional & Management Liability and Toxic/Mass Tort & Environmental
Attorneys: Douglas Hill
Where There Has Been No Genuine Opportunity to Conduct Relevant Discovery, a Motion for Summary Judgment is PrematureOctober 8, 2020 | Martha Charepoo and Malika Baker
The Missouri Court of Appeals recently held that a trial court abused its discretion when it granted summary judgment to the defendants before the plaintiff deposed a witness whose testimony could not be secured by affidavit. The appeals court in Traweek v. Smith disagreed with a trial court’s dismissal of the plaintiff’s amended petition only two weeks after leave had been granted to add a claim for reformation, and before the plaintiff could present evidence to oppose the defendants’ motion for summary judgment. Having complied with Rule 74.04(f)’s requirement of presenting an affidavit specifying the discovery that was needed and why it was needed, the appeals court held that two weeks was not enough time for the plaintiff to conduct the discovery specified in the affidavit and reversed the trial court’s decision.
Traweek involved an automobile accident in which the plaintiff was injured while riding in a vehicle driven by someone else. The plaintiff spent two months in a coma and suffered severe head trauma, loss of memory, and loss of cognitive skills. The plaintiff entered an out-of-court policy limits settlement with the fault driver then filed suit against the driver and owner of the other vehicle involved in the accident. In exchange for a policy limits payment, the plaintiff executed a release prepared by the fault driver’s insurer.
The defendants moved for summary judgment on the basis of the release which contained language releasing the fault driver, its insurer, “and all other persons, firms or corporations liable, or who might be claimed to be liable.” The defendants argued that the plaintiff’s claims against them were barred because she had already released them from any claims arising out of the accident. In opposition, the plaintiff invoked Rule 74.04(f) and argued that summary judgment would be premature because she had just been granted leave to amend the petition to add a claim for reformation of the release. The plaintiff presented evidence that she did not intend to release the defendants and that the fault driver’s insurance adjuster had admitted to her lawyer that the insurer intended to release only the fault driver. On this basis, the plaintiff argued that there was a mutual mistake that warranted reformation of the release to reflect the parties’ true intent. However, because the adjuster was unwilling to sign an affidavit attesting to that, the plaintiff contended that she needed to take his deposition to elicit this information.
The appeals court acknowledged that a trial court generally has discretion to either permit or deny additional time to conduct discovery before ruling on a pending summary judgment motion, but ruled that granting summary judgment only two weeks after allowing the plaintiff to add a claim for reformation of the settlement agreement was an abuse of discretion because the plaintiff had met Rule 74.04(f)’s requirement.
For a trial court to consider a request under Rule 74.04(f), the party requesting time to conduct discovery must present an affidavit specifying the additional evidence sought and explain how it will support the existence of a factual dispute. In Traweek, the plaintiff’s lawyer filed an affidavit detailing his contacts with the insurance adjuster and the adjuster’s unwillingness to cooperate to correct the release. The affidavit also stated that the plaintiff intended to depose the adjuster to elicit this information and how it pertained to the plaintiff’s argument that there was a mutual mistake in the release. Also, the appeals court noted there was evidence in the record that the plaintiff did not intend to release the defendants from liability by entering a settlement with the fault driver. Taken together, the adjuster’s testimony and the evidence already in the record would create a genuine dispute of fact on the existence of mutual mistake which would justify reformation of the release. Accordingly, the appeals court found that the trial court acted hastily in entering summary judgment, and the case was remanded to the trial court to allow the plaintiff enough time to depose the adjuster.
While questions remain under Missouri law as to whether and under what circumstances the presumption of “logo liability” for motor carriers applies, and is rebuttable, the Missouri Court of Appeals recently affirmed that the doctrine only applies when there is evidence that the motor carrier operates as a carrier-lessee.
The plaintiffs in Hearns v. ABF Freight System, Inc., were involved in a motor vehicle accident with a tractor trailer displaying the ABF signage. The tractor-trailer failed to stop following the accident and left the scene. The driver of the truck was never identified.
At trial, the plaintiffs moved for a directed verdict under the logo liability doctrine. They contended that the only evidence in the case proved the accident truck displayed ABF signage. ABF contested the motion by arguing logo liability was inapplicable because it did not use leased drivers—all of its drivers are employees. ABF contended the traditional agency and vicarious liability principles applied. The Court treated plaintiffs’ motion as one for summary judgment and denied the motion.
The issue returned during the instruction conference when plaintiffs tendered instructions based on logo liability. The Court rejected the instructions and found that there was no evidence in the case that a carrier-lessee relationship existed. The Court instructed the jury that in order to find for the plaintiffs, it must first find that the driver was acting in the course and scope of his employment with ABF. The jury returned a defense verdict.
The Missouri Supreme Court identified the elements for logo liability under Missouri law as requiring: (1) that a sign or identifying legend was furnished by the carrier in connection with a lease; (2) that the sign was on the truck at the time of the accident; and (3) the truck was hauling regulated freight at the time of the accident. Johnson v. Pac. Intermountain Express Co., 662 S.W.2d 237, 245 (Mo. banc. 1983).
At issue in Hearns is the first element. The trial court, in rejecting plaintiffs’ proposed jury instruction on logo liability, determined that there was no evidence supporting that the unidentified driver was a leased driver. In fact, the only evidence demonstrated that all of ABF’s drivers were employees.
The plaintiffs argued the jury should have been instructed on logo liability. The Court of Appeals noted the application of logo liability would have shifted the burden of proof. Under logo liability, it would be ABF’s burden to prove that unidentified driver was on a personal mission not connected to hauling regulated freight. However, under vicarious liability, plaintiffs bear the burden of proving the unidentified driver was acting in the course and scope of his employment with ABF. The Court of Appeals found the record was completely devoid of any evidence that ABF ever operated as carrier-lessee.
Plaintiffs asserted logo liability is not limited to carrier-lessee situation and applies in any situation when a commercial vehicle is displaying a motor carrier’s placard. The Court of Appeals rejected this argument. It noted plaintiffs’ failure to cite any Missouri case in which logo liability had been applied in cases where a lease was not at issue. It refused to extend the doctrine to cases where there was no evidence that the motor carrier operated using leased drivers. It r-iterated the first element of logo liability, as directed by the Missouri Supreme Court, required the plaintiffs to prove the placards were provided in connection with a lease.
The Court also discounted plaintiffs’ public policy arguments that applying logo liability only in carrier-lessee situations runs counter to the reasons the doctrine was created. Plaintiffs asserted the doctrine was designed to address motor carriers attempting to avoid liability by hiring independent contractors to haul freight. The Court held:
Without question, the public policy supporting the creation of the logo-liability doctrine stemmed from a concern over a very specific issue that had arisen—and not to supplant the general rules of vicarious liability as developed under common law.
In affirming the defense verdict, the Court of Appeals confirmed that the mere presence of a motor carrier’s placard on a vehicle alone is insufficient to invoke logo liability. Plaintiffs must satisfy all of the required elements of logo-liability including that the placard was furnished in connection with a lease. Without evidence demonstrating the motor carrier utilized some leased drivers, plaintiffs cannot rely on logo liability.
While questions remain whether the presumption created by logo liability is truly rebuttable, and if so, what evidence is sufficient to rebut the presumption, motor carriers now have excellent case law barring the application of the doctrine when the only evidence is that the motor carrier’s placard was on the accident truck. The Court of Appeals affirmed that the doctrine applies only if there is evidence that the motor carrier operated as a carrier-lessee.
In the recent decision of State Ex rel. Woodco, Inc. v. Phillips, the Missouri Supreme Court upheld the long-standing principle that joinder of all tortfeasors in a single suit is not required under Missouri’s compulsory joinder rule. On a writ of prohibition, the Supreme Court considered the application of Missouri’s compulsory joinder rule, Mo. R. Civ. P. 52.04, in a construction defect case arising from the construction of a senior living facility. In the underlying case, the general contractor sued all but one of the subcontractors for breach of contract and negligence. The circuit court allowed the other subcontractors to add the subcontractor that had not been sued by the plaintiff. But the Supreme Court ruled that Rule 52.04 did not require the addition of unnamed subcontractor, and prohibited the circuit court from allowing the defendants to join as a defendant the subcontractor that had not been sued by the plaintiff.
The lawsuit came about as a result of a settlement reached between the project’s general contractor and owner after discovering defects in the construction of the project. Pursuant to the settlement agreement, the project owner assigned its claims against the subcontractors to the general contractor. Subsequently, the general contractor filed suit against the project’s architect, structural engineer, construction company, supplier, and framer, asserting breach of contract and tort claims, but did not include the masonry company. The architect, structural engineer, and construction company moved to join the masonry company as a defendant, arguing that its joinder was required under Rule 52.04, which the trial court allowed.
The general contractor sought a writ of prohibition to direct the trial court to remove the masonry company from the action, which the Court of Appeals denied. The case proceeded to the Supreme Court, where the general contractor argued that Rule 52.04 did not require that the masonry company be added as a party defendant to the lawsuit. This time, the general contractor’s writ was granted, and the Supreme Court directed the trial court to remove the masonry company as a defendant.
Missouri’s compulsory joinder rule, found in Rule 52.04, requires joinder of a party in either of two situations: when complete relief for parties to the action cannot otherwise be obtained, or when either the absent party’s interest would be prejudiced or when the parties before the court would be subject to inconsistent obligations due to the absent party’s claimed interest. The subcontractor defendants argued that the masonry company’s joinder was required under Rule 52.04 because complete relief for the other parties was not possible in its absence, and there would be a risk of inconsistent obligations to the existing parties without the masonry company. The Supreme Court disagreed.
The Supreme Court found that joinder of the masonry company was not required under either scenario set forth in Rule 52.04. First, the masonry company was not a party to any of the contracts upon which the general contractor was suing the other defendants. Thus, although the contractual disputes at issue might concern work performed by the masonry company, the masonry company would not be affected by the outcome and the breach of contract claims could be fully resolved among the existing defendants.
* Hannah Chanin, Summer Law Clerk in the St. Louis office of Baker Sterchi, assisted in the research and drafting of this post. Chanin is a rising 3L student at the Washington University St. Louis School of Law.
Let's Be Specific About Personal Jurisdiction: Missouri and Illinois Address Bristol-Myers Squibb v. Superior Court of CaliforniaJuly 27, 2020
The Supreme Courts of Missouri and Illinois have recently addressed the constitutional limitations on the exercise of specific personal jurisdiction. In both states, the Courts held that due process prohibits the exercise of specific personal jurisdiction over out-of-state defendants in cases where the defendant does not have sufficient minimum contacts with the forum state and in cases where the alleged injury does not arise from those contacts.
In State ex rel. LG Chem, Ltd. v. The Hon. Nancy Watkins Laughlin, 2020 Mo. LEXIS 193 (Mo. banc June 2, 2020), Plaintiff Peter Bishop brought suit against Defendant LG Chem, a Korean company, in St. Louis County Circuit Court. Bishop alleged he was injured when a lithium-ion battery manufactured by LG Chem exploded in his pocket. Bishop also alleged LG Chem sold the battery to an intermediate distributor, which independently sold the battery to a retailer of electronic cigarettes in Missouri from whom Bishop purchased the battery.
LG Chem moved for dismissal based on lack of personal jurisdiction. In opposing LG Chem’s motion, Bishop relied on Bristol-Myers Squibb Co. v. Superior Court of California, 137 S. Ct. 1773 (2017). In Bristol-Myers, the United States Supreme Court held that a state court could not exercise specific personal jurisdiction over an out-of-state defendant unless there was “an affiliation between the forum and the underlying controversy, principally…an occurrence that takes place in the forum state.” Id. at 1781. Bishop argued there was a sufficient “affiliation” between Missouri and the underlying controversy to justify the exercise of specific personal jurisdiction over LG Chem because the battery had made its way to Missouri through the third-party distributor and caused injury in Missouri. LG Chem’s motion to dismiss was denied. Ultimately, the Missouri Supreme Court found Bishop’s application of Bristol-Myers to be overbroad and held the actions of a third party, standing alone, cannot be used to satisfy the due process requirement of the specific personal jurisdiction analysis. Since the subject battery had been sold to the Missouri retailer by an independent third party, the Court directed the circuit court to vacate its order overruling LG Chem’s motion to dismiss for lack of personal jurisdiction.
Two days later, the Supreme Court of Illinois also issued an opinion addressing the exercise of personal jurisdiction over an out-of-state defendant, but unlike the Missouri case, the case involved claims brought by out-of-state plaintiffs. In Rios v. Bayer Corp., 2020 IL 125020 (June 4, 2020), the Court held that due process did not allow Illinois courts to exercise specific personal jurisdiction over an out-of-state defendant as to the claims of out-of-state plaintiffs for personal injuries suffered outside of the state from a device manufactured outside of the state. At issue were two cases, both filed in Madison County, Illinois, in which 180 women from more than twenty states alleged injuries related to the use of a permanent birth control device called Essure. The out-of-state plaintiffs had not had the Essure device prescribed or implanted in Illinois and had not sought treatment for their alleged injuries in Illinois. Bayer moved for dismissal of the out-of-state plaintiffs’ claims based on lack of personal jurisdiction. In response to Bayer’s motion, the out-of-state plaintiffs argued the trial court could exercise specific personal jurisdiction over Bayer for their claims because Bayer had developed, labeled, marketed and worked on gaining regulatory approval for Essure in Illinois, and the plaintiffs’ claims arose, in part, from those “minimum contacts” between Bayer and the State of Illinois.
While Bayer’s motion was pending in the trial court, the United States Supreme Court issued its opinion in Bristol-Myers. Despite the new guidance provided in Bristol-Myers, the trial court denied Bayer’s motion, relying on M.M. v. GlaxoSmithKline LLC, 2016 IL App (1st) 151909, wherein the Illinois Court of Appeals had found the exercise of personal jurisdiction over an out-of-state defendant did not violate the due process clause in product liability cases brought by out-of-state plaintiffs where clinical trials had been conducted in Illinois. Bayer appealed. The appellate court held the exercise of personal jurisdiction over Bayer by the trial court was constitutional because the out-of-state plaintiffs’ claims arose, at least in part, from Bayer’s marketing, clinical trials and physician accreditation programs related to Essure in Illinois.
Ultimately, the Illinois Supreme Court reversed the appellate and trial courts. The Court determined Bristol-Myers had foreclosed the plaintiffs’ theory of specific personal jurisdiction and concluded that the out-of-state plaintiffs’ claims did not arise out of Bayer’s activities in Illinois; therefore, due process did not allow the trial court’s exercise of specific personal jurisdiction over Bayer as to the out-of-state plaintiffs’ claims.
These cases represent the first application of the limitations on specific personal jurisdiction expressed in Bristol-Myers by each state’s Supreme Court. The conclusion reached by both Courts emphasizes the importance of conducting a comprehensive evaluation of a defendant’s contacts with the forum state immediately upon service of the summons in every instance.
Do you have a valid and enforceable arbitration agreement? Is your arbitration provision unconscionable? Have you waived your right to arbitration? Missouri litigants may have the right to submit these threshold legal questions to an arbitrator.
In TD Auto Finance, LLC v. Bedrosian, the Missouri Court of Appeals, Eastern District, reversed the circuit court’s denial of a motion to compel arbitration, finding that the threshold issues of arbitrability were delegated to an arbitrator under the parties’ agreement and the circuit court erred in finding a lack of consideration for the arbitration agreement.
Bedrosian purchased a vehicle from a Missouri dealership. In seeking to finance her purchase, Bedrosian executed a Credit Application through TD Auto Finance, LLC (“TD Auto”). Bedrosian ultimately defaulted on her loan payments. TD Auto repossessed and sold the vehicle and then sued Bedrosian to the collect the deficiency. Bedrosian answered and filed a counterclaim. TD Auto moved to compel arbitration.
The credit application contained a section titled: “IMPORTANT CONTRACT OF ARBITRATION.” (Capitalized text in original) The arbitration provisions that provided “If any of us chooses, any dispute between or among us will be decided by arbitration and not in court” and “Any claim or dispute, whether in contract … (including any dispute over the interpretation, scope, or validity of this Important Contract of Arbitration or the arbitrability of any issue)… shall, at the election of any of us… be resolved by neutral, binding arbitration and not by a court action.”
Bedrosian opposed arbitration claiming: (1) the purported arbitration agreement was never formed or concluded because it lacked mutual promises and thus lacked consideration; (2) even if the arbitration agreement had been formed, the agreement was unconscionable; and (3) event if the agreement was valid and enforceable TD Auto had waived its right to arbitration by repossessing the vehicle and initiating a lawsuit against her. The trial court agreed with all three points raised by Bedrosian and denied the motion to compel arbitration.
On appeal, TD Auto contended: (1) the claims addressed by the circuit court were reserved for an arbitrator to decide, including the threshold issues of arbitrability; and (2) the court erred in finding a lack of consideration because the arbitration provision was part of the credit application which did have mutual obligations.
The Court of Appeals found that the circuit court erred in evaluating separate consideration for the arbitration provision because under Eaton v. CMH Homes, Inc., mutuality of the whole agreement satisfies the consideration for an arbitration provision.
The Court of Appeals also found that like arbitration in general, the question of who decides threshold arbitrability questions is a matter of contract and that the parties can agree by contract that an arbitrator will resolve threshold arbitrability questions as well as the underlying disputes.
The Court of Appeals thus concluded that threshold questions of arbitrability, concerning unconscionability and waiver by litigation were “reserved for the arbitrator. The circuit court should not have ruled on these matters.”
As employees slowly begin to return to work in “the new normal” following mandatory stay-at-home orders across the country, employers in Illinois and Missouri are busy establishing policies in compliance with opening orders and guidelines. To mitigate the risk of potential workers’ compensation claims, employers should be aware of possible changes to workers’ compensation laws due to COVID-19 exposure in the workplace.
On April 13, 2020, the Illinois Workers Compensation Commission passed an emergency rule in response to the COVID-19 pandemic. This rule created a rebuttable presumption of compensability in favor of employees classified as first responders and essential front-line workers during the COVID-19 state of emergency. For those individuals, the rule imposed a rebuttable presumption that the individual’s exposure arises out of and in the course of employment and is causally connected to their employment.
In response, the Illinois Manufacturers Association and Illinois Retail Merchants Association requested a Temporary Restraining Order, which was granted on April 24, 2020. The emergency rule was thereafter withdrawn by the IWCC. COVID-19 may still be considered a compensable occupational disease under the Illinois Workers’ Compensation Act, but there is no longer a rebuttable presumption of compensability following withdrawal of the rule.
In Missouri, Governor Mike Parson directed the Department of Labor and Industrial Relations to implement an emergency rule that will provide workers compensation benefits to first responders who contract COVID-19. On April 7, 2020, the Department of Labor and its Division of Workers’ Compensation filed an emergency rule creating a presumption that First Responders infected by or quarantined due to COVID-19 are deemed to have contracted a contagious or communicable occupational disease arising out of and in the course of the performance of their employment. “First Responders” include law enforcement officers, firefighters or an emergency medical technicians.
The presumption created by the rule is rebuttable in the event a subsequent medical determination establishes by clear and convincing evidence that (1) the First Responder did not actually have COVID-19, or (2) the First Responder contracted or was quarantined for COVID-19 resulting from exposure that was not related to the First Responder’s employment.
The Labor and Industrial Relations Commission voted unanimously to approve the emergency rule on April 8, 2020, with an effective date of April 21, 2020. However, the rule is retroactive. The full text of 8 CSR 50-5.005 can be found here.
Unlike the emergency rule attempted in Illinois, only First Responders are provided with a presumption of an occupational disease under the Missouri emergency rule. To date, no further amendments have been introduced to expand the presumption created by the emergency rule to non-First Responders, however, as more and more businesses slowly open following the lifting of the stay-at-home orders issued through Missouri, employers may find themselves receiving COVID-19-related workers’ compensation claims. COVID-19 has been classified as a communicable disease by the State of Missouri and communicable diseases are included in the definition of “occupational disease” under Missouri Workers’ Compensation Law.
As in all states, laws and regulations related to the COVID-19 pandemic are ever-changing in Illinois and Missouri. The area of workers’ compensation is no exception and additional changes and expansions to the current laws are possible. Employers in both states should remain aware of those changes in order to better anticipate potential claims, mitigate risk and create workplaces that protect employees from exposure to the best of their ability.
Got a problem? Go to the source. Got a product problem? Go to its origin.
At least that is what Plaintiff Timothy Farkas, and his expert, should have done to avoid dismissal of Farkas’ product liability claims.
In Farkas v. Addition Manufacturing Technologies, LLC, the U.S. Court of Appeals for the Eighth Circuit affirmed an Eastern District of Missouri judgment, finding that Farkas failed to establish that the product at issue, a tube-end forming machine, was inherently defective or dangerous. The Court’s ruling centered on Farkas’ failure to provide evidence of a defect that existed when the product entered the stream of commerce.
Farkas sued Addition Manufacturing after his fingers were severely injured by a tube-end forming machine, which uses a hydraulic clamp to crimp metal tubes. Addition was the machine designer’s successor. The predecessor company sold the machine in 1992 with a point-of-operation guard, which prevented the operator’s fingers from fitting in the clamps that went around the tube to shape the end of the tube when there was a tube in the machine. The specific guard present at the time of sale, however, only applied to a single size of tubing, which was specified by the original customer. The machine, however, was technically capable of crimping multiple sizes of tube.
Various companies bought and sold the machine over the years. In 2014, Farkas’ employer purchased the machine, whose guard was still configured only for a single size of tubing. Because Farkas’ employer wanted to process multiple sizes of tubing, it hired a company to alter the guard, to accommodate multiple sizes of tube. Farkas was subsequently injured when he used the machine to crimp a piece of tube that was smaller than the guard.
Farkas brought his lawsuit against Addition for strict liability for the product’s design defect and failure to warn about the defect and for negligently manufacturing the product. Addition, as the legal successor to the manufacturer who made the machine in its original configuration, moved for summary judgment on the grounds that Farkas was required to and failed to provide evidence that the original guard on the machine was inadequate at the time of the machine’s initial sale.
To succeed on the strict liability claim for product defect, Farkas had to offer proof that:
- The machine was in an unreasonably defective condition when put to a reasonably anticipated use;
- The machine was used in a manner reasonably anticipated; and
- The machine was damaged as a direct result of such defective condition as existed when the product was sold.
To succeed on a strict liability failure-to-warn claim, Farkas had to prove that:
- Addition sold the machine in question in the course of its business;
- The machine was unreasonably dangerous at the time of sale when used as reasonably anticipated without knowledge of its characteristics;
- Addition did not give adequate warning of the danger;
- The machine was used in a reasonably anticipated manner; and
- Farkas was damaged as a direct result of the machine being sold without an adequate warning.
The common link? Both claims require Farkas to go back to the machine’s (and the guard’s) beginnings. Farkas’ expert, however, relied on the wrong guard on the machine. Indeed, the expert relied on the guard present at the time of the injury, not the guard present at the time Addition’s predecessor sold the machine in 1992. As such, there was no evidence of the original guard’s appropriateness and relevant industry standards.
In other words, Farkas was required to offer proof that the machine was defective or dangerous at the time of sale by the predecessor of Addition to the original customer – not at the time of the sale to Farkas’ employer or the time of Farkas’ injury. However, Farkas’ failure to go back to the machine’s origin cost him his lawsuit and his appeal.
In an update to our below post, Senate Bill 591 (which seeks to impose stricter standards for the application of punitive damages) cleared the Missouri House on May 12, 2020 in a 98-51 vote. The Bill, now on its way to Governor Parson for his signature, will likely go into effect on August 28, 2020. Governor Parson is expected to sign the measure without veto.
Missouri Senate Approves Stricter Standard for Punitive Damages Claims
March 20, 2020 | Jonathan Benevides
A bill that would impose stricter standards for the application of punitive damages was swiftly advanced by the Missouri Senate late last month. Senate Bill 591 would establish new procedural and substantive restrictions on punitive damages. Currently, to recover punitive damages in Missouri, a plaintiff must show by clear and convincing evidence that the defendant acted with either “indifference to or conscious disregard for the safety of others.” Schroeder v. Lester Cox Medical Center, Inc., 833 S.W.2d 411, 413 (Mo. Ct. App. 1992). Senate Bill 591, would increase the plaintiff’s burden of proof and require a plaintiff to prove that the defendant either “intentionally harmed the plaintiff without just cause” or acted with “deliberate and flagrant disregard for the safety of others.”
In addition to increasing the plaintiff’s burden of proof, the Bill also changes the procedure for prosecuting punitive damages claims. Under current Missouri law, a plaintiff may seek punitive damages in his/her initial pleading. Senate Bill 591 would prohibit a plaintiff from including a claim for punitive damages in his/her initial pleading, and require that the plaintiff first seek leave of court to assert a claim for punitive damages. The court shall grant leave only if it concludes that based on the evidence to be admitted at trial, the trier of fact could “reasonably conclude, based on clear and convincing evidence, that the standards for a punitive damages award … have been met.”
According to Senate Majority Leader and Columbia Republican, Caleb Rowden, “the punitive damages legislation is the top priority for Republicans among various proposals targeting liability lawsuits.” The Bill’s sponsor, Republican Bill White stated, “the Bill is intended to prevent punitive damage claims from being used as leverage to get bigger settlements from businesses in cases that might involve negligence but not intentionally malicious actions.”
A recent opinion from the U.S. Court of Appeals for the Eighth Circuit reminds practitioners that federal jurisdiction is born from the substance of the claims made and relief sought, not by the titles given to each cause of action. In Wullschleger v. Royal Canin U.S.A., Inc., 2020 U.S. App. LEXIS 8038 (8th Cir., March 13, 2020), the plaintiffs sought to represent a class of Missouri plaintiffs who purchased prescription pet foods at premium prices from defendants Royal Canin and Purina PetCare. Plaintiffs alleged they were deceived into believing the products were approved by the United States Food and Drug Administration. The U.S. District Court for the Western District of Missouri remanded the case to the Jackson County, Missouri, Circuit Court, finding it lacked subject matter jurisdiction. The Eighth Circuit granted defendants’ petition for review of the order of remand, limiting its review to the issue of federal question jurisdiction. Upon review of the plaintiff’s Petition, the court concluded federal question jurisdiction in fact did exist and vacated the district court’s remand order.
The case involved the defendants’ “prescription” pet foods, which require the purchaser to consult with a veterinarian and obtain a prescription before purchase. The defendants represented that the pet foods are therapeutic formulas for specific health issues and may not be tolerated by all pets. Defendants did not, however submit these pet foods for evaluation by the FDA and, as such, a prescription is not required by law. Plaintiffs’ Jackson County Petition alleged only state law claims, including violations of the Missouri Merchandising Practices Act, Missouri antitrust laws, and Missouri unjust enrichment law.
On review, the Eighth Circuit noted that federal jurisdiction exists only when a federal question is presented on the face of a plaintiff’s properly pleaded complaint. In this way, a plaintiff controls whether federal jurisdiction exists, and he may avoid federal question jurisdiction by relying exclusively on state law. Plaintiffs here argued they merely asserted claimed violations of federal law as elements of their state causes of action, which the United States Supreme Court in Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 814 (1986), has held insufficient on its own to confer federal question jurisdiction.
The appellate court disagreed with plaintiffs. While the Merchandising Practices Act claim, as alleged, could likely be resolved without depending on federal law, plaintiffs chose to premise their Missouri antitrust and unjust enrichment claims on violations and interpretations of federal law. Plaintiffs alleged that defendants violated the Federal Drug and Cosmetics Act and were non-compliant with FDA guidance. The antitrust and unjust enrichment claims, therefore, cannot be adjudicated without reliance on and explication of federal law. The court also noted that plaintiffs’ prayer for relief requires the interpretation and application of federal law. Specifically, plaintiffs prayed for judgment finding defendants violated both state and federal law and compelling them to comply with all federal and Missouri provisions applicable to pet food as a “drug.” In this way, according to the court, the face of the plaintiffs’ Petition gave rise to federal question jurisdiction, and plaintiffs’ isolated focus on their state law claims was nothing more than an apparent attempt to avoid federal jurisdiction.
The opinion underscores a plaintiff’s power to avoid federal question jurisdiction through his or her own pleadings. It also serves to remind defendants seeking removal of the importance of looking beyond the presence of purely state law claims to find allegations which might support federal question jurisdiction.
Timing is Everything: Missouri Appellate Court Reminds Us Evidence Cannot be Excluded as "Subsequent Remedial Measures", Where the Remedies Preceded the AccidentApril 15, 2020
In Patricia Watson v. City of St. Peters, the plaintiff alleged she was riding her bicycle along a stretch of sidewalk in the City of St. Peters, Missouri in late August 2014 where she had never ridden before. After cresting a hill the plaintiff testified she saw “something bizarre in the middle of the sidewalk” which turned out to be a sump inlet designed to funnel storm water from the street into a storm sewer at the bottom of the hill. The inlet extended into the sidewalk, creating an opening and narrowing the traversable portion of the sidewalk.
At the same time, a witness happened to drive past plaintiff as she rode down the hill and also saw the inlet jutting into the sidewalk. The witness later testified that he was concerned that the plaintiff might not see the opening in the sidewalk and thus checked his rearview mirror. When he did, the witness saw the front wheel of the plaintiff’s bicycle go into the inlet, causing her to flip head-first onto the sidewalk and resulting in multiple facial fractures. The plaintiff subsequently sued the City of St. Peters for negligence, alleging the inlet was an unreasonably dangerous condition that was not open and obvious, and sought monetary damages for her personal injuries.
At trial, the City introduced evidence that the traversable portion of the sidewalk was four feet wide and that it had been constructed in compliance with local and state requirements, as well as the federal Americans with Disabilities Act.
In response, the plaintiff sought to introduce evidence of a 2012 bicycle accident involving a sump inlet in a sidewalk at a different location in the City and the City’s resulting program to retrofit or bridge all of the sump inlets to make the City’s sidewalks safer. Outside of the hearing of the jury, a representative of the City testified the City began retrofitting its sump inlets after learning of the 2012 bicycle accident and before the plaintiff’s accident in 2014. He also confirmed the City had planned to retrofit all the sump inlets citywide, but had not erected any warning signs or painted the curbs around the sump inlets while the retrofitting was ongoing.
The trial court subsequently refused plaintiff’s offer of proof and excluded evidence of the 2012 bicycle accident and the City’s sump inlet retrofitting program. The trial court also excluded references in a written statement from the witness describing the inlet as extending “extremely” into the sidewalk and constituting a “hazard,” while admitting a prior inconsistent statement attributed to the plaintiff from a police report that she had ridden on the stretch of sidewalk “every day”. The jury returned a verdict attributing one hundred percent of the fault to the plaintiff and finding in favor of the City.
On appeal, the plaintiff asserted the trial court erred by excluding evidence that the City had notice of a problem with the sump inlets and had taken steps to make the design safer before the plaintiff’s accident.
The Missouri Court of Appeals for the Eastern District agreed with the plaintiff and held that the trial court abused its discretion in excluding as subsequent remedial measures the evidence that the City had notice of a problem with the sump inlets and had taken steps to make the design safer before the plaintiff’s accident. The Appellate Court commented that the public-policy rationale for the general rule excluding post-accident remedial measures did not apply to a defendant like the City who was aware of a problem and had already proposed remedial measures before an accident like the one at issue had occurred.
The appellate court further noted that the exclusion of the “clearly material and probative evidence” of the City’s retrofitting program prejudiced the plaintiff by hindering her ability to prove an essential element of the case regarding the City’s knowledge of the condition. Thus, the appellate court reversed the trial court’s exclusion of the evidence and remanded the case for a new trial.The appellate court’s decision in Watson was limited to the specific facts of the case concerning the defendant’s knowledge and actions before the accident. While it did not abrogate the longstanding rule in Missouri that a trial court should exclude evidence of subsequent remedial measures in a negligence case, defense counsel should remain wary of efforts to cite the decision in future cases to avoid application of the rule under dissimilar circumstances.
In Revis v. Bassman (ED107663), Missouri’s Eastern District Court of Appeals recently reversed and remanded the trial court’s ruling barring Plaintiff from cross examining the defense expert on his tort reform activity.
In the underlying case, Revis alleged Dr. Bassman was medically negligent in delaying surgery for her fractured heel. At trial, Plaintiff made an offer of proof that Dr. Bassman’s orthopedic surgery expert, Dr. Brett Grebing, served as the President of the Madison County Medical Society from 2012 to 2013, during which time he advocated for enforcement of Illinois’ statute of limitations for certificates of merit and reinstating damage caps. Plaintiff further showed that, despite Dr. Grebing’s prior deposition testimony where he testified it was “fair to say” he had engaged in tort reform activities, Dr. Grebing would deny such activities at trial. This discrepancy could have impacted his credibility with jurors. Plaintiff argued this evidence was necessary to show Dr. Grebing’s general and personal bias against plaintiffs in medical malpractice cases. The trial court barred the evidence, but the appellate court ruled this was an abuse of discretion.
Missouri law is well-settled that jurors are entitled to information that might affect witness credibility and the weight of witness testimony. Missouri courts have consistently held that the bias or interest of a witness is never irrelevant and cross-examination on such issues, while within the discretion of the court, should generally be permitted.
The Court of Appeals relied on Koelling v. Mercy Hospitals East Communities, in which the trial court barred the cross-examination of a defense expert about his prior deposition testimony regarding his anger, frustration, and bias against medical malpractice claims, arising from his personal experience of being sued in medical malpractice suits, and a judgment against him. 558 S.W.3d 543 (Mo. App. E.D. 2018). The Koelling trial court barred the evidence, which the appellate court ruled was an abuse of discretion because it showed the expert’s bias against medical malpractice claims.
Here, the appellate court was unconvinced that any factual differences between Revis and Koelling were consequential. The Court reasoned that Dr. Grebing’s denial of tort reform activities, despite earlier deposition testimony to the contrary, may have impacted his credibility with the jury. Additionally, his advocacy as a medical professional in favor of damage caps could be viewed by jurors as a direct financial interest in medical malpractice reform. Jurors could thus conclude Dr. Grebing’s efforts to limit monetary awards against all doctors could play a role in his testimony in this case.
The Eastern District Court of Appeals ultimately held the trial court abused its discretion in barring Plaintiff’s cross examination of Dr. Grebing regarding his tort reform activities because it should have been up to jurors to determine if his tort reform efforts were a source of potential bias or prejudice.
The Revis ruling was not unanimous. In his dissent, Judge Odenwald wrote that the factual distinction between Revis and Koelling was important. The evidence at issue in Koelling was of a personal nature. In Revis, Plaintiff was allowed to thoroughly cross examine Dr. Grebing regarding his personal litigation history. The issue on appeal was the questioning of Dr. Grebing regarding his professional activities, which the trial court found was simply too tangential and remote to show bias and could confuse the jury, was well within the trial court’s discretion.The Eastern District Court of Appeals may provide further clarification and parameters on this issue in future cases. Until that time, counsel may deem it prudent to consult with their current and future experts regarding their feelings related to personal litigation experience and tort reform activities to avoid any surprises at trial.
Data released by the Greater Kansas City Jury Verdict Service about jury trials in 2019 shows that results are broadly trending in favor of defendants. Defendants prevailed on almost 60% of the claims decided by KC-area juries last year, representing an improvement over their win rate in 2018. Calendar year 2019 also saw a drop of nearly 30% in the number of verdicts over $1,000,000, despite a modest increase in the total number of claims decided by juries.
Defendants Are Trying More Claims & Winning More Often
86 different juries in the Kansas City area decided a total of 181 claims in 2019 (with some cases involving multiple claims). 75 of those 181 verdicts (41%) resulted in some amount of recovery to the plaintiff(s), while 106 (59%) ended in defense verdicts.
Compared to 2018, this represents an increase of about 8% in the total number of verdicts handed down. Despite taking more claims to juries, defendants’ win rate improved by about 7% from the prior year, when roughly 52% of jury verdicts were for the defendant(s). This continues a trend from 2017, when defendants won roughly 51% of jury verdicts. From 2014-2016, plaintiffs’ win rate had been on the rise.
Big Verdicts Continue to Fall
The data contained other encouraging news for KC-area defendants and defense attorneys. When juries did award damages last year, the figures were generally smaller than they have been in recent years.
Last year saw 10 only verdicts of $1,000,000 or more in the Kansas City area, compared to 14 in 2018—a decrease of roughly 29%. In terms of percentages of all verdicts, million-dollar awards fell from 8.3% in 2018 to 5.5% in 2019. The proportion of six-figure jury awards held steady at about 17% (31 out of 181 verdicts in 2019, compared to 29 out of 168 in 2018). Awards of less than $100,000 accounted for about 19% of all verdicts in 2019.
Although the Average Amount Awarded Increased, Initial Impressions are Misleading
Although the value of the average plaintiffs’ verdicts grew by almost 25% ($2.26 million in 2019, compared to $1.81 million in 2018), a closer examination reveals that figure to be fundamentally misleading; the increase is entirely attributable to a single verdict of nearly $118 million handed down in a federal-court commercial dispute. While 2018 also had just one very large verdict, 2019’s outlier was roughly $42 million more than the 2018’s ($76 million). When each year’s lone outlier is set aside, the average amount awarded fell by 22%, from roughly $882,500 in 2018 to about $692,000 in 2019.
Keep in mind, too, that the figures above include only claims in which the verdict resulted in some amount of recovery for the plaintiff(s). When defense verdicts are factored into the equation, the average result for all claims decided by area juries in 2019 was an award of $934,000, compared to $873,000 in 2018 (a 7% increase). Once again setting aside each year’s single highest verdict, the average award for all claims decided by area juries in 2019 drops to just $284,624, compared to $423,150 in 2018 (a 32% decrease).
Juries in Missouri State Courts Prove Most Generous
State courts awarded 7 of the 10 million-dollar verdicts in 2019, most of which originated on the Missouri side of the state line: 4 in Jackson County, MO (Kansas City); 1 in Clay County, MO; 1 in Platte County, MO; 1 in Johnson County, KS; 2 in Missouri federal court (W.D. Mo.); and 1 in Kansas federal court (D. Kan.).
Of the 31 six-figure verdicts in the Kansas City area in 2019, 19 came from Jackson County, Missouri—7 in Kansas City and 12 in Independence. The remaining 12 were spread among Clay County, MO (5); Missouri federal court (W.D. Mo.) (3); Johnson County, KS (2); and Kansas federal court (2).
This tracks with the general feeling among local practitioners that Jackson County is by far the most plaintiff-friendly venue in the area, and that state courts tend to hand out bigger verdicts than federal courts.
Supreme Court of Missouri Overturns $2.3 Million Negligent Credentialing Verdict but Grants New TrialFebruary 25, 2020
In a case of first impression, the Supreme Court of Missouri, in Thomas E. Tharp, et al. v. St. Luke’s Surgicenter-Lee’s Summit, LLC, overturned a $2.3M verdict and granted a new trial after the unusual step of holding a rehearing and vacating an earlier opinion.
In February 2019, the Court overturned a jury verdict in favor of a patient and his wife against a surgery center because there was no proof the surgery center negligently granted staff privileges to a surgeon. Though other Missouri courts had recognized the existence of a negligent credentialing cause of action, this opinion was the first from the Supreme Court of Missouri to address the essential elements of such a claim.
At the rehearing, the plaintiffs claimed they possessed additional evidence which, if presented upon retrial, would allow them to make a submissible case of negligent credentialing. This purportedly includes evidence of low scores the surgeon received on continuing medical education exams, thus suggesting an inability to retain essential knowledge necessary to competently perform surgery. This also purportedly includes evidence of the surgeon's litigation history showing he was sued more frequently as he aged, and expert witness testimony regarding the significance of the statistics. The Court did not take a position on the admissibility of this proffered new evidence, or its probative value (which is for a jury to decide), but the Court found this sort of evidence could possibly support a finding that the surgeon was incompetent or generally careless, which is the required standard for a negligent credentialing claim.
The Court said it decided to hold a rehearing and order a new trial because it would be manifestly unfair to deny the plaintiffs a new trial when they did not know and could not have known what evidence the Court would require to make a submissible case. Legal precedent requires remand for a new trial if the plaintiff's legal failure was caused not by a strategic decision, avoidable or invited error, but by an extrinsic factor outside the plaintiff's control. One such extrinsic factor is ignorance of the evidence necessary to support a cause of action when there is no statute or binding appellate precedent setting forth same. As mentioned above, though other Missouri courts have recognized the existence of a negligent credentialing cause of action, no court had addressed the essential elements or evidence required. Thus, the Court found the plaintiffs’ legal failure justifiable and not punishable in the absence of guidance from the Court.
This is the first ruling of its kind to provide guidance to Missouri lower courts and practitioners prosecuting or defending a negligent credentialing claim. These claims are difficult to prove, as they require proof beyond that which is required to support a direct medical negligence claim. Absent credible evidence of a physician’s incompetence generally, and the negligent failure of a healthcare facility to discover the incompetence and act accordingly, courts should dispose of these claims via dispositive motion. Further, it is not enough to prove that but for the credentialing, the physician could not have performed the conduct that produced the injury. Rather, a plaintiff must prove the injury was the natural and probable consequence of the physician’s incompetence.This opinion did not address whether the negligent credentialing theory conflicts with V.A.M.S. § 538.210.4 (2017), which provides, in part, that “[n]o health care provider whose liability is limited by the provisions of this chapter shall be liable to any plaintiff based on the actions or omissions of any other entity or individual who is not an employee of such health care provider . . . .” Negligent credentialing liability necessarily depends on negligent actions or omissions of a non-employee physician. In the event this argument is raised, it is unclear how the Court would address the apparent conflict of law.
City of St. Louis falls to 5th on the Judicial Hellhole list with Madison and St. Clair Counties, Illinois close behind ranking 7th.February 12, 2020
Thanks to “junk science,” the “Show-Me-Your-Lawsuit” state remains within the top 10 of judicial hellholes throughout the country. St. Louis is home to the largest talc verdict to date thanks to a July 2018 City of St. Louis verdict awarding $550 million in actual damages and $4.14 billion in punitive damages to a group of 22 plaintiffs. Not only are there forum shopping concerns with regards to the talc litigation, there is concern that St. Louis City judges allow plaintiffs’ lawyers to introduce “junk science” as evidence. Specifically, plaintiffs’ experts have been allowed to tell jurors that talcum powder causes ovarian cancer, even though research is mixed and biased as to increased risk, if any, with the use of talcum powder. Nonetheless, the City of St. Louis continues to allow this “junk science” to be heard in their courtrooms, which can result in big verdicts.
The Missouri legislature, however, has taken steps toward addressing the plaintiff-friendly forum, resulting in the City of St. Louis seeing a decline from 4th to 5th in the judicial hellhole rankings this year. But it has a long way to go, as do Madison and St. Clair Counties in Illinois.
In Madison and St. Clair Counties, the plaintiffs’ bar continues to push pro-plaintiff agendas. For example, pro-plaintiff legislation eliminating the statute of repose for asbestos-related occupational disease has been passed, along with legislation which essentially eliminates the power of special interrogatories. The ATRF Report also puts the blame for these judicial hellholes on the Illinois Supreme Court.
The American Tort Reform Foundation (“ATRF”) Report attributes “no-injury” lawsuits as overburdening Illinois businesses, and the Illinois Supreme Court helped open those floodgates when it issued its decision in Rosenbach v. Six Flags Entertainment, 2019 IL 123186. In Rosenbach, the court found that the plaintiff need not have suffered actual harm to maintain and win a lawsuit filed under the Illinois Biometric Information Privacy Act (“BIPA”), 740 Ill. Comp. Stat. 14 (2008). Since this decision, the ATRF Report indicates that more than 250 lawsuits have been filed with BIPA at the forefront of the issues in those suits, making businesses vulnerable to massive potential liability in the State of Illinois.
Moreover, according to the ATRF Report, Madison and St. Clair Counties continue to remain the preferred jurisdiction in the United States for plaintiffs’ lawyers to file asbestos lawsuits. The Report further notes that the Gori Law Firm (formerly known as Gori, Julian & Associates, P.C.), “one of the top asbestos filers in the nation,” was able to “stack” [sic] the deck higher when Barry Julian, co-founding partner of Gori Julian, was appointed to the Madison County bench in January 2019. The ATRF Report claims the “plaintiff-friendly reputation, low evidentiary standards, and judges’ willingness to allow meritless claims to survive” make Madison and St. Clair Counties a flocking ground for asbestos litigation.
Until the legislature in both Missouri and Illinois decide to create meaningful reforms, these three counties are likely to continue to rank high on ATRF Report’s Judicial Hellholes list.
The Missouri Court of Appeals (Western District) recently reversed a defense verdict because the trial court’s verdict directing instruction, taken from the Missouri Approved Instructions (MAI), didn’t accurately state the law applicable to Plaintiff’s claim.
In Gary Miller v. Norfolk Southern Railway Company, Plaintiff Miller sued his railroad employer based on the Federal Employer’s Liability Act (“FELA”). Miller claimed to have sustained cumulative injuries caused by defective locomotive cab seats. Specifically, he claimed that the railroad’s cab seats were “loose and wobbly” and they failed to protect him from excessive shock, jarring and vibration. This negligence caused him to suffer back injuries. The jury was instructed on two theories of recovery for Miller under the FELA: general negligence and negligence per se for violation of the Locomotive Inspection Act (“LIA”, 49 U.S.C. s. 20701 et seq.). The jury found for the railroad on both theories.
On appeal, Miller asserted that the trial court erred by refusing his proffered verdict director relating to his negligence per se theory, and by submitting an instruction that did not properly state the law applicable to his claim. The Court of Appeals agreed.
The Court of Appeals observed that the LIA supplements the FELA by imposing on railroads an absolute duty to provide safe locomotives. The LIA provides that railroads may only use locomotives that “are in proper condition and safe to operate without unnecessary danger of personal injury”. Pursuant to the LIA, the Federal Railroad Administration (“FRA”) promulgated regulations governing standards of care for locomotives, including cab seats. These regulations include 49 C.F.R. s. 229.119(a) which states that cab seats “shall be securely mounted and braced”.
The Court further noted that a railroad can violate the LIA by breaching the broad statutory duty to provide locomotives that are “safe to operate without unnecessary danger of personal injury” (the general statutory duty) or by failing to comply with regulations issued by the FRA (a specific regulatory duty).
Miller requested a verdict directing instruction on his negligence per se theory based on the railroad’s failure to comply with the specific regulatory duty, i.e. 49 C.F.R s. 229.119(a). He intended to forgo a verdict director based on the general statutory duty, i.e. 49 U.S.C. s. 20701. The approved instruction for an FELA claim based on an LIA violation tracks the language of the LIA’s general statutory duty. There is no approved instruction that tracks a specific regulatory duty. The trial court refused Plaintiff’s proffered instruction and instead gave Defendant’s instruction that was based on MAI.
The Court of Appeals concluded that the difference between proceeding under a theory that the railroad violated a specific regulatory duty - as opposed to the general LIA statutory duty - is significant. A violation of the general statutory duty required Plaintiff to prove that the railroad’s cab seats were not “safe to operate without unnecessary danger of personal injury”. This proof is not required when a railroad allegedly violates a specific regulatory duty because regulations promulgated by the FRA pursuant to the LIA have already been supported by a finding that the regulation is necessary to eliminate unnecessary danger of personal injury.
The Court added that the lack of an approved instruction based on the specific regulatory duty didn’t bar Miller from submitting his theory to the jury, nor did this relieve the trial court of its duty to accurately instruct the jury on applicable regulatory standards.
On October 29, 2019, the Supreme Court of Missouri, in State ex rel. Key Insurance Company v. Roldan, held Missouri courts may exercise personal jurisdiction over a foreign corporation when the corporation has made at least one contact with Missouri and Plaintiff’s tortious cause of action arises out of that contact.
Plaintiff Phillip Nash, a resident of Missouri, was involved in a motor vehicle collision with Josiah Wright in Jackson County, Missouri. Defendant Key Insurance Company, a Kansas corporation, insured Nash’s vehicle, through its policy issued to Nash’s daughter, a Kansas resident. Key Insurance denied Nash’s claim for coverage. Wright sued Nash in Jackson County and was later awarded $4.5 million in arbitration. Jackson County Circuit Court confirmed the award as a final judgment. Nash then sued Key Insurance in Jackson County Circuit Court to collect insurance proceeds in a classic § 537.065 agreement. (See our July 2017 blog on amendments to § 537.065, and how these agreements work.) Nash specifically alleged that Key Insurance committed the tort of bad faith refusal to settle. Key Insurance moved to dismiss Nash’s claim for lack of personal jurisdiction. The trial court denied the Motion to Dismiss. Key Insurance thereafter petitioned the Missouri Court of Appeals for a Writ of Prohibition, which was denied. But in January 2019, Key Insurance petitioned the Supreme Court of Missouri, and the Supreme Court surprisingly issued a Preliminary Writ of Prohibition, agreeing to hear defendant’s claim of lack of jurisdiction.
Key Insurance argued that the Circuit Court usurped its jurisdiction on two grounds: (1) Key
Insurance’s alleged conduct did not fall within Missouri’s long-arm statute, and (2) Key Insurance did not have sufficient minimum contacts with Missouri to satisfy the requirements and protections of the Due Process Clause.
The Missouri Supreme Court held that Missouri’s long-arm statute gives Missouri courts personal jurisdiction over a foreign corporation that commits a tortious act within Missouri. The Court found that Nash made a prima facie showing as to his tort claim against Key Insurance. In so finding, Key Insurance’s alleged conduct – its alleged bad faith refusal to settle - did fall within Missouri’s long-arm statute. The Court reasoned that because Nash’s cause of action arose out of a contract to insure property at risk in Missouri, Nash’s claim was proper under Missouri’s long-arm statute. Additionally, Nash resided in Jackson County, Missouri, and the $4.5 million judgment against Nash was confirmed by the Jackson County Circuit Court.
The Supreme Court also held that one contact with Missouri – the contact being the tortious act itself – is sufficient to satisfy constitutional due process protections. The Court reasoned that because Nash’s claim arose out of Key Insurance’s tortious contact with Missouri, Key Insurance’s contact was sufficient alone to satisfy constitutional due process.
The Supreme Court of Missouri therefore concluded that Key Insurance was not entitled to a Writ of Prohibition, and that the trial court had personal jurisdiction over the Kansas insurer. The Supreme Court quashed its preliminary writ of prohibition, allowing Nash to proceed to trial, and pursue damages against Key Insurance for bad faith refusal to settle.
Insurers and insureds alike take notice of these cases and the protections and pitfalls afforded under RSMo. § 537.065. Even with the recent statutory changes and additional requirements of a valid § 537.065 agreement, insurers should be wary and cautious in coverage determinations and any cases where § 537.065 could be properly exercised by the insured defendant.
In Eoff v. McDonald, the Supreme Court of Missouri upheld a St. Louis County circuit judge’s refusal to allow plaintiffs’ counsel additional time during jury selection to ask the “insurance question”, after counsel forgot to do so earlier when it was his turn to question potential jurors. The decision hinged on the determination that the right to ask the question is not absolute and must follow a procedure designed to balance the plaintiff’s right to ask the question to ensure a fair and impartial jury with potential prejudice to the defense by unduly highlighting the insurance issue.
It is common practice for Missouri plaintiff counsel, consistent with the holding in Ivy v. Hawk, 878 S.W.2d 442 (Mo. banc 1994) (reversing and ordering new trial where trial court failed to allow plaintiffs’ counsel to ask prospective jurors the preliminary insurance question), to question potential jurors whether they have a financial interest in the defendant’s malpractice insurer. Ivy is one in a long line of Missouri cases holding a trial court must permit this even though evidence of a defendant’s liability insurance is inadmissible under the collateral source rule. The Ivy opinion explains the proper procedure: (1) obtain the court’s approval outside the jury panel’s presence; (2) ask only one "insurance question;" and, (3) do not ask it first or last in a series of questions so as to avoid unduly highlighting it. The form of the question is at the trial court's discretion – it generally encompasses whether any members of the panel or their families work for or have a financial interest in the named insurance company.
The Eoff plaintiffs sued a physician and her employer for the alleged wrongful death of their daughter during delivery at birth. During discovery, the physician disclosed the identity of her medical malpractice insurer, a small insurance company located nearly 300 miles from St. Louis County. At trial, Plaintiffs’ counsel submitted to the court in writing his proposed insurance question for jury selection. Defense counsel did not object, and counsel proceeded with lengthy jury selection, covering 173 pages of trial transcript. Plaintiffs’ counsel concluded his questioning without asking the insurance question, apparently forgetting to do so. After realizing his mistake, Plaintiffs’ counsel sought the court’s permission for additional time to ask the question after defense counsel’s final question. Plaintiffs’ counsel indicated he would ask the question as the second of three additional questions. The trial judge denied the request because she believed the risk of prejudice to the defense by unduly highlighting the insurance issue outweighed any prejudice to plaintiffs, especially considering the insurance company was small and located across the state.
After a six-day jury trial resulting in a defense verdict, the trial judge denied the plaintiffs’ motion for new trial. The plaintiffs appealed, and the Missouri Court of Appeals, Eastern District, reversed and remanded for a new trial based on the trial judge’s refusal to allow Plaintiffs’ counsel to ask the insurance question. The Supreme Court of Missouri accepted the case for review.
The Supreme Court of Missouri disagreed with the Court of Appeals, and affirmed the trial court’s decision and jury verdict. The Supreme Court held that Ivy neither affords plaintiff counsel the unqualified right to ask the insurance question nor divests a trial court’s discretion to control the timing and sequence of jury selection. The Eoffs’ counsel failed to follow the procedure set forth in Ivy, and therefore waived the right to ask the insurance question. Under Ivy, a new trial is warranted only if a trial court denies the right to ask a proper insurance question. Here, it was not incumbent on the trial court to permit the Eoffs’ counsel a second chance.
The Eoff opinion breathes new life into a mainstay of the jury selection process for many Missouri medical negligence jury trials. The holding confirms the right to ask the insurance question. But it also emphasizes both the importance of following proper procedure, and the trial court’s discretion in conducting jury selection and balancing the right to ask the question with the risk of potential prejudice. Eoff serves as a stark warning to trial counsel to remember to ask the insurance question, and to do so at the appropriate time.
Missouri courts have long held that when an agent for another makes a contract with a third party without disclosing the agency, the individual will be bound by the contract and the third party may hold the agent or the undisclosed principal responsible at his election. On September 24, 2019, the Missouri Court of Appeals, Western District, in Alpha Petroleum Company vs. Hani Daifallah, et al. applied this principle, and held that agents who did not properly disclose the agency relationship when entering into a business relationship with a third party were personally liable for the ensuing transactions.
The case involved the lease of a convenience store with gasoline services, between Plaintiff Alpha Petroleum’s sister company, A.J. Partnership, and the Defendants. Under the lease agreement, Defendants were required to purchase gasoline products from Alpha Petroleum. In the regular course of the dealing between the parties, Alpha Petroleum would ship the fuel to the convenience store location and subsequently invoice the Defendants. After Alpha Petroleum advised the Defendants that it was terminating the lease of the convenience store, the parties agreed to a six month extension to allow Defendants additional time to vacate the premises. Before the premises were vacated, Defendants received two more fuel deliveries, both of which went unpaid. Alpha Petroleum sued, seeking damages for nonpayment on account and unjust enrichment. Defendants contended that a separate entity, Zik Moe, Inc., a corporation owned in part by Defendant Mohammed Daifallah, operated the convenience store and was therefore liable for any debt owed to Alpha Petroleum. The trial court entered a judgment against Defendants, jointly and severally, for the entirety of the unpaid balances.
On appeal, Defendants argued that (1) there was no substantial evidence in the record to support the trial court’s conclusion that Defendants were personally liable for the debt owed by Zik Moe, and (2) the trial court misapplied the law by piercing the corporate veil to find Defendant’s personally liable for the debt owed to Alpha Petroleum. The Court of Appeals affirmed the ruling below. It noted that to prevail on a substantial evidence challenge, a defendant must demonstrate that there was no evidence in the record tending to prove a fact necessary to sustain the trial court’s judgment as a matter of law. But here, the trial court record contained evidence that the Defendants failed to disclose they were purported agents of a corporation during the five years they had done business with Alpha Petroleum, which was sufficient for the trial court to conclude that Defendants were personally liable for the unpaid invoiced, based on their failure to disclose an alleged agency relationship. Having upheld the judgment in favor of the Plaintiff on the first point, the Court of Appeals concluded it did not need to consider whether the trial court properly found Defendants personally liable for the debt Alpha Petroleum by piercing Zik Moe’s corporate veil.
The ruling reinforces the need for agents to be fastidious in disclosing the agency relationship, and in ensuring that the existence and identity of the principal are known, in order to avoid potential personal liability for future misdeeds of their principal.
In 2008, Chad Franklin became a party to several lawsuits related to the “Drive for Life” promotion at his used car dealership, Chad Franklin National Auto Sales North, LLC. A full explanation of the details of the “Drive for Life” promotion can be found within a previous BSCR blog post here. At the time, Franklin was insured by Universal Underwriters Ins. Co. (“Universal”). Universal denied defense and coverage for the claims. Franklin filed suit for wrongful denial of coverage for the “Drive for Life” claims which were eventually settled in 2010 for $900,000. This $900,000 settlement would eventually trigger another round of litigation.
Soon thereafter, Lewellen filed suit against Franklin alleging fraudulent misrepresentation and violations of the MMPA, resulting in a 2012 award of $25,000 in actual damages and $1 million in punitive damages against Chad individually for his fraudulent misrepresentation, and $25,000 in actual damages and $500,000 in punitive damages against Chad Franklin National Auto Sales North, LLC for a violation of the MMPA. Lewellen was also awarded attorneys’ fees totaling $82,810. In 2013, Lewellen sued Universal and Franklin, alleging that the $900,000 settlement between Universal and Franklin was fraudulent. The Clay County Circuit Court entered the following in that action, which were appealed to the Western District:
- Denial of insurance coverage on the Lewellen’s claim that Franklin committed fraudulent misrepresentation in the sale of a vehicle;
- Awarding insurance coverage under Lewellen’s policy with Universal for the actual and punitive damages on the Lewellen’s MMPA claim against Franklin;
- Summary judgment in favor of Universal on Lewellen’s claims that the settlement agreement was a civil conspiracy to commit a fraudulent transfer and violated the MMPA;
- Denial of Lewellen’s claim for tortious interference with a business expectancy;
- Striking Franklin’s pleadings after several alleged discovery violations and entering default judgment on Lewellen’s fraudulent transfer and MMPA claims against him.
After Franklin’s pleadings were stricken, a jury awarded Lewellen $266,370in actual damages and $450,000 in punitive damages on each of her two claims. The court merged the actual damages on the two claims but granted the total amount of punitive damages and awarded Lewellen $189,060 in attorneys’ fees.
1. The Court of Appeals upheld the denial of insurance coverage for Lewellen’s claim that Franklin committed fraudulent misrepresentation in the sale of a vehicle.
Lewellen contended the court erred in denying insurance coverage for the damages awarded on her fraudulent misrepresentation claim against Franklin. The Western District appellate court disagreed, and found that the policy’s exclusion of dishonest and fraudulent acts was valid, rejecting Lewellen’s contention that the language was ambiguous. The court also held that the definition of “occurrence” in Franklin’s Universal policy did not provide insurance coverage for damages on Lewellen’s fraudulent misrepresentation claim.
2. The Court of Appeals reversed the finding of insurance coverage under Lewellen’s policy with Universal for the actual and punitive damages on the Lewellen’s MMPA claim against Franklin.
Universal argued on appeal that the trial court erred in finding Franklin’s policy covered Lewellen’s MMPA claim, asserting that the fraud exception and the policy definition of “occurrence” noted above should preclude coverage. Lewellen argued that not only did Franklin’s policy afford coverage to her MMPA claim, but the coverage of that claim triggered the concurrent proximate cause rule granting coverage to her extinguished fraudulent misrepresentation claim.
The appellate court first turned to the policy definition of “loss” which was defined as “all sums the INSURED legally must pay as DAMAGES because of INJURY to which this insurance applies caused by an OCCURRENCE.” The court held that the conduct underlying Lewellen’s fraudulent misrepresentation and MMPA claim was the same conduct. Because the Court had already determined that Franklin’s actions were intentional and, therefore, not an “occurrence” under the policy, it found the same for the MMPA claims. The Court reversed summary judgment in Lewellen’s favor and denied coverage for the MMPA claims. In reaching this decision, the Court found that the concurrent proximate cause rule did not apply to Lewellen’s claims.
3. The Court of Appeals affirmed summary judgment in favor of Universal on Lewellen’s claims that the settlement agreement was a civil conspiracy to commit a fraudulent transfer and violated the MMPA.
Lewellen contended the trial court erred in granting Universal’s motion for summary judgment on her claims that Universal’s settlement agreement with Franklin amounted to a civil conspiracy to commit a fraudulent transfer with Franklin. In granting summary judgment in Universal’s favor, the trial court noted that the “[f]acts that may cause the bad faith settlement payments to Tiffany Franklin to appear suspicious (or even if arguably fraudulent) do not offset” the common law requirement that without a lien, a mere general creditor does not have a sufficient right or interest in his debtor’s property to give him standing to maintain a suit against a third person converting the debtor’s property with the intent to defraud the debtor's creditors. Lewellen argued that the Missouri Uniform Fraudulent Transfer Act (“UFTA”) removed the common law rule that a lien was a condition precedent for standing to maintain a lawsuit against a third party.
After a lengthy discussion of the language of the UFTA and analysis of opinions rendered in other jurisdictions on the issue, the Court adopted the majority viewpoint that absent a proper lien, a claim of civil conspiracy against a third party cannot be maintained under the UFTA.
4. The Court of Appeals affirmed denial of Lewellen’s claim against Universal for tortious interference with a business expectancy.
Lewellen argued that the circuit court erred in granting Universal’s motion for summary judgment on her claim that Universal tortiously interfered with a business expectancy. The appellate court affirmed the trial court’s finding that there was no authority for the proposition that a plaintiff in a lawsuit possesses “a valid business expectancy” in the future collection of a judgment either before or after a judgment is entered.
5. The Court of Appeals upheld the trial court’s entry of default judgment against Franklin after several alleged discovery violations.
Franklin claimed that striking his pleadings as a discovery sanction was inappropriate because Lewellen was not prejudiced by his failure to appear at his scheduled deposition, which the appellate court rejected. The Court of Appeals noted that even with threats of sanctions, Franklin still failed to make appearances and it was not until later that his counsel learned that he was in a rehabilitation center. Additionally, Franklin claimed that the circuit court abused its discretion by improperly considering and taking judicial notice of his discovery violations in other cases. The court of appeals found that the circuit court had not its discretion because the other cases were related, and even consolidated, with the current case at issue. Furthermore, the court reasoned that Franklin was an experienced businessman who was “no stranger” to the legal system, and who knew or should have known of the dire consequences of disappearing, without notice, during pretrial proceedings.
6. The Court of Appeals reversed the jury’s award of punitive damages.
Franklin argued that the trial court committed instructional error by providing a damage instruction and verdict director that removed the threshold finding of outrageousness for an award of punitive damages. The Court of Appeals agreed, holding that the modification of 10.01 removing the requirement that the jury find that Franklin’s conduct was outrageous was “unnecessary and improper” and materially affected the merits and the outcome of the case. The appellate court also agreed with Franklin that the trial court erred in the exclusion of evidence as to the nature and structure of the settlement with Universal. The case was remanded for a new determination of punitive damages.
Lewellen v. Universal Underwriters Insurance Company et al., WD81171.
* Kelly M. “Koki” Sabatés, Summer Law Clerk, assisted in the research and drafting of this post. Sabatés is a rising 3L student at the University of Missouri-Columbia.
In May, the House passed the venue and joinder bill (Senate Bill 7) by a 100-46 vote. The bill primarily aims to restrict non-Missouri plaintiffs from joining their claims, in the same lawsuit, with those of a Missouri resident, where the non-residents’ claims have no legal nexus to Missouri. Read more here and here. Senate Bill 7, however, was still waiting for the Governor’s signature to become law in May.
In case you missed the news (again), look no further…..
Governor Mike Parson has officially signed Senate Bill 7 (along with three other tort reform bills) into law on July 10, 2019. This move was anticipated based on prior, favorable statements he made about the bill.
Opponents of the bill continue to believe that the passage of this bill “will harm state citizens by favoring corporations over individuals.” Proponents of the bill, now law, believe that this move will make Missouri “a pro-business state.”
From the East to the West, Does Arbitration in Missouri Reign Best? Missouri Courts Uphold and Invalidate Arbitration AgreementsJune 25, 2019
This past May, the Missouri Supreme Court, Missouri Court of Appeals, and both United States District Courts in Missouri analyzed the validity and enforceability of arbitration provisions. Three key concepts have emerged from these recent decisions:
(1) A challenge to the delegation clause in an arbitration agreement (one that says the arbitrator gets to decide who decides whether the dispute is fit for arbitration) must be pleaded separately from a challenge to the contract
(2) Incorporation of the AAA rules in an arbitration agreement generally constitutes clear and unmistakable evidence of the parties’ intention to arbitrate.
(3) Under long-standing Missouri law, an employee’s continued employment, without more, does not in and of itself constitute adequate consideration for an agreement to arbitrate.
Consideration for the Entire Contract is Separate from Consideration for the Delegation Provision
Newberry v. Jackson, 2019 WL 2181859 (Mo. banc. 2019)
The Missouri Supreme Court affirmed, en banc, the circuit court’s motion to compel arbitration and stay court proceedings. Employees brought discrimination and retaliation claims against their former employer, Dollar General. The employer responded with Motions to Compel Arbitration and Stay Further Proceedings, to which the employees responded that there was no consideration for the arbitration agreements. More specifically, the employees claimed that the delegation provisions were unconscionable and there was no clear and unmistakable evidence of the parties’ intent to incorporate them. Although the employees admitted to signing the documents and knew they would be bound to arbitration, they did not necessarily understand the documents. Nevertheless, the circuit court sustained the motions to compel arbitration and stay the proceedings under the Missouri Supreme Court’s Pinkerton decision (which upheld a delegation clause in an arbitration agreement), and alternatively held the arbitration agreements valid because they were not unconscionable on their face and supported by consideration by mutuality of enforcement and continued at-will employment.
The Missouri Supreme Court accepted the case for review, and affirmed its earlier Pinkerton decision, which it found to be consistent with the U.S. Supreme Court decision in Rent-A-Ctr v. Jackson. The court found the employee’s allegations of unconscionability to be inadequate because they challenged the entire contract—not the delegation provision, specifically. Under Rent-A-Center, the “delegation clause must be treated as a separate contract within the larger arbitration contract and must be challenged on an additional ground or basis beyond the fact it is contained in an arbitration contract that the party also contends is invalid.” The court found that because the lack of consideration that the employees assert is the same lack of consideration they claim should invalidate the overall arbitration agreements, “they do not raise a unique challenge to the delegation clauses. Accordingly, the delegation provisions are valid,” and the employer “did not have a burden in the circuit court to show legally sufficient consideration.”
Incorporation of AAA Rules Is Clear and Unmistakable Evidence of Intent to Arbitrate
Hughes v. Ancestry.com, 2019 WL 2260666 (Mo. App. Ct. W.D. May 28, 2019) (not officially published)
Although Missouri state courts have consistently held that continued at-will employment alone does not constitute consideration for an arbitration agreement, they continue to hold that the incorporation of the AAA rules in an arbitration agreement shows clear and unmistakable evidence of intent to arbitrate. In this consumer action, the Missouri Court of Appeals for the Western District reversed the trial court’s denial of a motion to compel arbitration. Consumers brought an action against Ancestry.com for allegedly releasing their private health information to third parties without their expressed permission. The company responded with a Motion to Compel Arbitration and Stay Litigation which was subsequently denied by the circuit court. The Court of Appeals reversed and remanded because the consumers failed to separately contest the validity of the delegation provision.
The court reviewed the case de novo because arbitrability is a matter of contractual interpretation, which is a question of law. The court had to first determine whether the parties’ agreement contained a provision that clearly and unmistakably delegated threshold issues of arbitrability to the arbitrator. The provision in the agreement incorporated the AAA rules, which has been held to constitute clear and unmistakable evidence of the parties’ intent to arbitrate. The court then had to determine the validity of the provision. The Missouri Court of Appeals also reasoned that under Rent-A-Center, the validity of the delegation provision must be challenged separately from a challenge against the agreement, as a whole.
Hobby Lobby Stores, Inc. v. Bachman, 2019 WL 2331006 (E.D. Mo. May 23, 2019)
In this employment discrimination case, the United States District Court of Missouri for the Eastern District had to determine if the Mutual Arbitration Agreement was valid and enforceable in order to grant the employer’s Petition to Compel Arbitration. For the reasons discussed above, the court held that because the Mutual Arbitration Agreement incorporated the AAA rules and the employees had not challenged the delegation provision specifically, the agreement was, indeed, enforceable.
Continued At-Will Employment and Presentation of Agreement Does Not Manifest Mutual Assent
Wilbur v. Securitas Security Services USA, Inc. 2019 WL 1980703 (W.D. Mo. May 3, 2019)
In this employment discrimination case, the United States District Court for the Western District of Missouri had to determine if there was a valid arbitration agreement and if the dispute fell within the terms of the agreement. As the party seeking to compel arbitration, the employer bore the burden of proving the existence of the valid and enforceable arbitration agreement. The “Dispute Resolution Agreement Acknowledgment” stated, inter alia, that all claims against the parties must be solved by Arbitration instead of in a court of law. The employee signed and printed his name; however, the lines for the employer representative signature and printed name were left blank. The employer argued that even though the agreement lacked their signature, the presentation of the agreement, the employee’s acceptance of the agreement, and their continued employment provided adequate consideration and gave rise to mutual assent. The court cited Missouri state court precedent, in Baier v. Darden Restaurants, in holding that an “acknowledgment” of this type was not adequate evidence of mutual assent to arbitrate, and that continued employment, without more, did not constitute adequate legal consideration for an agreement to arbitrate.
Missouri has continued to hold that incorporation of the AAA Rules is clear and unmistakable evidence of the parties’ intent to engage in arbitration. When challenging arbitration, the delegation provision must be challenged separately from a challenge to the whole contract. Presentation of an arbitration agreement to an employee, the employee’s acknowledgement of receipt, and the employee’s continued at-will employment are not enough to form an enforceable arbitration agreement. An employer should always obtain the employee’s expressed assent - i.e., a signature agreeing to the terms of the arbitration provision, and not merely acknowledging its receipt. Additionally, an employer should always specifically express its agreement in order to avoid a mutual assent challenge.
* Kelly M. “Koki” Sabatés, Summer Law Clerk, assisted in the research and drafting of this post. Sabatés is a rising 3L student at the University of Missouri-Columbia.
Negligent References- Is there a duty in Missouri to refrain from making a negligent recommendation to a prospective employer?June 12, 2019
In recent years, the plaintiffs’ employment bar has continued to explore new and more creative avenues to state claims in Missouri. In Doe v. Ozark Christian College, Plaintiff filed a negligence action against Ozark Christian College, claiming the college negligently recommended a prospective employee to the employer church, which directly resulted in the employee then injuring Plaintiff after two years. The employee in question had been a student at Ozark Christian College from 1982 to 1989. The employer, a church, contacted Defendant for recommendations on filling an open position. Plaintiff alleged that based upon Defendant’s positive recommendation, the church hired the employee in 2004. Plaintiff further alleged that as a result of that employment, employee then sexually abused Plaintiff from 2006 through 2010.
The Southern District of the Missouri Court of Appeals, however, affirmed the trial court’s ruling that Missouri has not defined or recognized a duty to make recommendations to a prospective employer, whether such a recommendation is done appropriately, or as alleged here, negligently. The Court of Appeals found that while some other states like California, New Mexico and Texas have permitted a “negligent job reference” cause of action, Missouri had not yet done so. The Court of Appeals reasoned that a whether a duty exists is purely a question of law, either imposed by a controlling statute, ordinance, contract, or by common law. While Plaintiff conceded there was no established case law or statutory authority for such a duty in Missouri, he argued that Missouri should recognize this duty because: Defendant assumed the duty under Section 324A of the Restatement Second of Torts; Section 311 of the Restatement Second of Torts imposes a duty and liability for negligent misrepresentation involving risk of physical harm; other states have recognized this as a duty of common law; and public policy facts support an imposition of this duty upon the Defendant. In a case of first impression, the arguments were ultimately struck down.
The Court of Appeals found that Plaintiff’s arguments contemplated the declaration of a new common-law duty rather than supporting the existence of a current duty. The threshold application of Section 324A is whether a defendant assumed an obligation or intended to render services for the benefit of an employer. Because Plaintiff lacked proper pleadings to support this legal conclusion, there could be no finding regarding Defendant’s undertaking to render services to the employer and therefore application of Section 324A was not appropriate.
The Court also held that there is no precedent in Missouri jurisprudence to allow the application of Section 311, where Plaintiff had failed to identify any controlling duty that exists under Missouri common law. While Plaintiff provided case law from New Mexico, Texas, and California in support of his arguments, the Court found numerous contrary cases in Indiana, Kentucky, Washington, Illinois, and New York. The Court of Appeals further stated that it is an error-correcting court, whereas the Supreme Court of Missouri is a law-declaring court and therefore declaration of a new duty is not properly within the Court of Appeals’ purview.
While numerous jurisdictions, like Missouri, that have declined to recognize a duty related to employment recommendations and prospective employers, the rise of these new theories of liability have caused great concern among employers who face a variety of challenges for giving a good reference, a bad reference or an incomplete reference. For this reason, many employers uniformly follow a policy that if asked for a reference for a former employee, they will provide only the person’s dates of employment and positions held. Because the law in this area varies from state to state, employers with blanket policies of referrals need to reconsider and make sure that each such request is reviewed using common criteria and guidelines. Questions regarding hiring and employment procedures and policies can always be directed to counsel.
John Doe v. Ozark Christian College, SD35573.
Supreme Court of Missouri Issues First-Of-Its-Kind Ruling Overturning a $2.3 Million Negligent Credentialing VerdictJune 12, 2019
The Supreme Court has overturned and granted a new trial in this case. Read our blog post on this development here.
The Supreme Court has taken the unusual step of granting rehearing in this case. We will keep you apprised of future developments.
ORIGINAL POST 03.28.2019:
In Thomas E. Tharp, et al. v. St. Luke's Surgicenter – Lee's Summit, LLC, the Supreme Court of Missouri overturned a $2.3 million jury verdict in favor of a patient and his wife against a hospital, because there was no proof the hospital negligently granted staff privileges to a surgeon. The opinion is the first from the Supreme Court of Missouri to address the requirements of a negligent credentialing claim.
The plaintiff alleged injuries stemming from a surgical procedure to remove his gallbladder. The plaintiff and his wife settled their claims with the surgeon, but went to trial against the hospital alleging it negligently granted privileges to the surgeon. At trial, plaintiffs presented evidence that the surgeon failed to disclose to the hospital all prior malpractice suits.
The hospital filed a motion for directed verdict at the close of all evidence on two grounds: (1) There was insufficient evidence to establish it had been negligent; and (2) the act of granting privileges to the surgeon was not the proximate cause of the injury. The trial court denied this motion, and the jury returned a verdict in favor of the plaintiffs. The trial court also overruled the hospital’s post trial motion for judgment notwithstanding the verdict, asserting the same arguments set forth above.
In a 6-1 decision, the Supreme Court held that a breach of the hospital’s bylaws (requiring the surgeon to report all prior malpractice suits) was not enough to support a negligent credentialing claim, and found no evidence that the grant of staff privileges to the surgeon was the proximate cause of the injury.
Addressing the nature of the relationship between a modern healthcare facility and its medical staff, the Court observed that “Physicians working under staff privileges are typically independent contractors, not hospital employees,” and that “staff privileges allow physicians to utilize a healthcare facility to admit and treat patients as independent care providers rather than as employees of the facility.” Under appropriate circumstances, a negligent credentialing claim can provide an avenue for potential liability against a hospital for injury caused by an independent contractor. The focus is whether the hospital gathered pertinent information to make a reasonable decision as to whether to grant privileges. The proper inquiry is whether the physician was competent and possessed the necessary knowledge, skill and experience to perform his job without creating unreasonable risk of injury to others.
One of the requirements in the hospital’s bylaws was full disclosure of all prior malpractice suits, and the failure to do so was grounds to automatically remove a physician from staff privilege consideration. The evidence at trial showed the surgeon failed to list on his application each suit he had defended over his career, but there was no evidence that addressed the surgeon’s qualifications to perform surgery. The plaintiff’s own expert admitted there was no “magical number” of malpractice suits that shows a surgeon is unqualified. Further, plaintiff’s expert cited a statistical study showing physician malpractice claim rates vary widely depending, in large part, on the medical specialty involved. “Even acts of repeated negligence do not support a finding a surgeon is incompetent when there is no evidence that shows a surgeon generally lacks a professional ability.” Thus, the Court found the plaintiffs failed to make a submissible case of negligent credentialing.
The Court also found the plaintiffs failed to prove the credentialing of the surgeon was the proximate cause of the injury. It was not enough to prove that but for the credentialing, the surgeon could not have performed the surgery that produced the injury. Rather, the plaintiffs needed to prove the injury was the natural and probable consequence of the surgeon’s incompetence. “Even a supremely qualified, competent, and careful physician may nevertheless injure a patient through an isolated negligent act.” Because plaintiffs failed to show the surgeon was incompetent, they could not prove the injury was the result of the surgeon’s incompetence and thus failed to make a submissible case.
In this first ruling of its kind in Missouri, the Missouri Supreme Court has provided guidance to Missouri lower courts and practitioners prosecuting or defending a negligent credentialing claim. These claims are difficult to prove, as they require proof beyond that which is required to support a malpractice claim against a physician. Absent credible evidence of a physician’s incompetence generally, and the negligent failure of a hospital to discover the incompetence and act accordingly, courts should dispose of these claims via dispositive motion.
The opinion did not address whether the negligent credentialing theory conflicts with Mo.Rev.Stat. § 538.210.4, which provides, in part, that “[n]o health care provider whose liability is limited by the provisions of this chapter shall be liable to any plaintiff based on the actions or omissions of any other entity or individual who is not an employee of such health care provider . . . .” Negligent credentialing liability necessarily depends on the negligent act or omission of a non-employee physician. In the event this argument is raised, it is unclear how the Court would address the apparent conflict of law.
In this March 18, 2019 blog post, we reported on important pending legislation that could substantially change Missouri’s venue rules. In case you missed the news, look no further….
At the beginning of May, the Missouri House passed the venue and joinder bill (Senate Bill 7) by a 100-46 vote. The bill primarily aims to restrict non-Missouri plaintiffs from joining their claims, in the same lawsuit, with those of a Missouri resident, where the non-residents’ claims have no legal nexus to Missouri. Read more here and here.
Next stop? Governor Mike Parson’s desk for signature, which will likely occur based on positive statements he has made about the bill: “[p]assing venue and joinder reform is a huge win and will provide long overdue relief to Missouri businesses that have been taken advantage of by rampant abuse of our state’s legal system….I look forward to signing these positive reforms to improve our state’s competitiveness, strengthen our legal climate, and bring fairness to our courtrooms.”
Prior to its passage, while the House did not change the Senate’s language, there was not a lack of effort by some opponents in the House. For example, the “innocent seller” provision of the bill caused a bit of an uproar with some members. This provision discourages lawsuits against a defendant whose liability is based only on its status as a seller in the stream of commerce, permitting such a defendant to seek to be dismissed from a lawsuit. Certain House members challenged this provision in light of the current law not divesting a Missouri court of venue or jurisdiction against such a defendant in the event of a dismissal that was otherwise proper at the time the lawsuit began. However, Senate Bill 7removes that protection. Opponents of the bill argued that removing the current provision could force a lawsuit naming such a protected innocent seller entity to move to another county or state. Proponents of the bill countered that this was a prudent way to prevent plaintiffs from unnecessarily suing anybody and everybody in the manufacturing and distribution chain.
The House opponents were unsuccessful, Senate Bill 7 was passed. It will officially become law once it receives the Governor’s stamp of approval.
In an effort to overhaul Missouri’s current venue and joinder laws, Missouri lawmakers introduced Senate Bill 7, aimed at restricting non-Missouri plaintiffs from joining their claims in the same lawsuit, with those of a Missouri resident, even though the non-residents’ claims have no legal nexus to Missouri. The most immediate and prominent impact of the bill, if enacted, would be upon mass tort litigation. The bill also limits the use of joinder in product liability cases, prohibiting joining claims arising out of separate purchases or separate incidents related to the same product.
Following its introduction, Senate Bill 7 was revised to adopt the February 13, 2019 Missouri Supreme Court ruling in State ex rel. Johnson & Johnson v. Burlison. The Missouri Senate subsequently passed the revised version on March 4, 2019. The Johnson & Johnson case dealt with the talcum powder litigation filed in St. Louis City Circuit Courts, involving many plaintiffs with both non-Missouri and Missouri residents, and held that plaintiffs cannot use joinder rules to establish venue in a jurisdiction where it otherwise would not exist.
Proponents of the legislation say that it will help address “a crisis” in Missouri’s courts, where out of state plaintiffs have flocked to litigate their claims in perceived plaintiff-friendly venues, such as St. Louis City (which has been dubbed a “Judicial Hellhole” by the defense bar); and Jackson County, which includes the greater Kansas City area. The Senate bill’s sponsor, Ed Emery, notes that out of the 13,252 mass tort plaintiffs involved in cases being heard in St. Louis City, only 1,035 are Missouri residents.
Proponents of the bill say that its passage will also have significant economic benefits, because Missouri taxpayers are currently paying for out of state plaintiffs to clog the Missouri courts with claims that have nothing to do with Missouri, thus taking up precious judicial resources that would better be used to adjudicate the claims of Missouri citizens. Opponents of Senate Bill 7 primarily argue that it makes sense to have groups of plaintiffs, who all purportedly suffered similar injuries, to bring their claims together in the same court and lawsuit.
The current bill contains “grandfather” provisions, making the legislation inapplicable to any action that meets two criteria: (1) the action is pending as of February 13, 2019 (when the Supreme Court decided Johnson & Johnson), and (2) the action is set for trial on or before August 28, 2019 (the date on which the new legislation is scheduled to take effect.).If enacted, this legislation may significantly alter the landscape of tort litigation in Missouri, both for litigants, and for the judiciary (especially in St. Louis City and Jackson County). Companies that do business in Missouri should follow its progress closely.
A Jackson County, Missouri, Circuit Court Judge ordered the City of Raytown - specifically its City Clerk - to pay more than $42,000 in attorney fees and civil penalties after ruling in July 2018 that the city violated Missouri’s Sunshine Law. The City Clerk denied the release of records in an apparent attempt to shield the city from litigation involving the design of one of the city’s intersections.
Several months after Plaintiff Paula Wyrick’s mother died in a vehicle crash at an intersection in Raytown. Wyrick requested records from the City about the intersection, including its design, any traffic or other diagnostic studies conducted there, and any complaints about the safety of or accidents occurring at or around the intersection. On multiple occasions, the City Clerk refused to produce the requested records, asserting all requests fell within the Sunshine Law’s litigation exception. The litigation exception protects, in part, documents related to potential legal actions or litigation involving a public governmental body.
Wyrick filed suit seeking declaratory and injunctive relief against the City Clerk. Wyrick moved for summary judgment asserting that the City Clerk, on behalf of her office, “took a position completely unheard of under Sunshine Law, namely, that a specific category of records can be closed only to Plaintiff and her lawyers, but otherwise open to anyone else. Put another way, the City Clerk has admitted that she would search for and produce records responsive to Paula Wyrick’s requests, if only the requests would come from a different person.”
The City Clerk countered that Wyrick only sought the records to use in potential litigation against the City of Raytown as a result of her mother’s death. In the face of this clear and unequivocal threat of litigation in this matter, the City Clerk argued she was justified in closing and refusing to produce the records.
In July 2018, Jackson County Circuit Court Judge S. Margene Burnett granted Wyrick partial summary judgment and ordered production of the design records and traffic studies conducted at the intersection. She ruled that while Wyrick admitted she was contemplating litigation against the City, the City Clerk’s use of the Sunshine Law as a “shield to hide behind rather than shed light on potentially inappropriate governmental activity…is precisely why the Sunshine Law was enacted.”
Initially, Judge Burnett declined to order civil penalties against the City Clerk, finding that the refusal to comply was done under an incorrect reading of Missouri law. However, the Judge reconsidered in November 2018 after hearing additional arguments, which convinced her that the city clerk’s actions rose to a knowing and purposeful violation of the Sunshine Law. The Clerk had testified that she “implemented a policy to refuse the production of any requested documents to any citizen if that citizen has filed a notice of claim against the City of Raytown, regardless of the nature of the document requested.” The Court awarded $38,550.00 in attorney fees and assessed civil penalties of $4,000.00, representing $1,000.00 for each of the four distinct violations of the Sunshine Law established by the evidence. The City filed a Notice of Appeal on February 14, 2019.
This ruling is likely to encourage municipalities to take a closer look at their open-records policies to ensure they are encouraging the spirit of openness which is embodied in the state’s Sunshine Law.Paula Wyrick v. Teresa M. Henry, in her capacity as City Clerk of the City of Raytown, No. 1716-CV-24321, Circuit Court of Jackson County, Missouri.
Missouri Court of Appeals Rules Venue Proper Only in County Where Decedent First Ingested Opioid Pain Medication and Not Where Drug PrescribedFebruary 21, 2019
In State ex rel. Mylan Bertek Pharmaceuticals, Inc. v. Vincent, the Missouri Court of Appeals, Eastern District, held that, in a case alleging wrongful death, medical malpractice, and pharmaceutical liability, venue was proper only in the county where the decedent first ingested opioid pain medication, rather than the county where a defendant prescribed it.
Decedent’s widow filed suit in St. Louis County, alleging that defendants’ negligence caused her husband to become addicted to opioid pain medication, leading to unbearable withdrawal symptoms that caused him to commit suicide. The defendants were the physician who prescribed the medication for a back injury and several pharmaceutical companies that manufactured it. The plaintiff alleged the physician defendant first prescribed opioids at his medical office located in St. Louis County and continued to do so over a period of twelve years. Later, while travelling in Florida, the decedent ran out of medication and could not refill it. Plaintiff alleged the decedent suffered intense withdrawal symptoms and, as a result, shot himself in the chest and died.
One of the pharmaceutical company defendants filed a motion to transfer venue asserting that venue was proper only in St. Charles County because that was the county where the decedent lived and first ingested the medication. Plaintiff successfully opposed the motion, arguing that St. Louis County was the proper venue because that was where he was first exposed to the physician defendant’s negligent prescribing practices in his medical office.
The appellate court analyzed § 508.010, RSMo, which sets venue in the county where the plaintiff was “first injured.” Section 508.010.14 provides that a plaintiff is “considered first injured where the trauma or exposure occurred rather than where the symptoms are first manifested.”
The court explained the alleged bodily injury to the decedent – opioid addiction, resulting pain and suffering, and ultimately death – could only have occurred when he ingested the medication. In other words, no bodily injury could have occurred at the time of prescribing, and it was not until the decedent ingested the medication that he exposed his body to the ill-effects of the drug. Under that analysis, venue was proper only in St. Charles County (where decedent first ingested the drug) and not in St. Louis County (where the physician prescribed the drug).
Accordingly, the appellate court reversed the trial court’s order, issued a writ of prohibition directing the St. Louis County judge not to proceed with the case, and remanded with instructions to transfer to St. Charles County. The court’s analysis demonstrates that: (1) under Missouri venue law, the key inquiry is the location where the injury occurred, rather than where the allegedly negligent conduct occurred; and, (2) the alleged injury and alleged negligence do not necessarily occur in the same location.
The opinion does not reference Section 538.232, which states that, in any action against a health care provider, “the plaintiff shall be considered injured by the health care provider only in the county where the plaintiff first received treatment by a defendant for a medical condition at issue in the case.” It is unclear what effect that section, if discussed, would have had on the court’s analysis.
Jury trials in the Kansas City area slightly increase in number, but jury verdicts decline in amountFebruary 6, 2019
Data from the Greater Kansas City Jury Verdict Service shows that while there were slightly more jury trials in 2018 than in 2017, the average monetary awards for Plaintiffs declined significantly. Every year, the Greater Kansas City Jury Verdict Service issues a “Summary and Statistics of Jury Verdicts” for the greater Kansas City area. The report includes verdicts from the Kansas City division of the U.S. District Court for the Western District of Missouri; the Kansas City branch of the U.S. District Court for the District of Kansas; and state courts in Jackson, Clay and Platte counties in Missouri; and Johnson and Wyandotte counties in Kansas. The statistics in 2018 indicate various shifts from 2017.
More Trials, with a Lower Percentage of Plaintiffs’ Verdicts
The Jury Verdict Service’s annual summary reported on 104 trials in 2018, compared to 97 in 2017. Previously, there were 113 trials in 2016, 110 trials in 2015, and 133 trials in 2014.
Because trials often involve multiple claims and multiple verdicts, the verdict statistics are based on the claims adjudicated, rather than simply the number of cases. The 104 trials in 2018 resulted in 168 verdicts; and the 97 trials in 2017 resulted in 193 verdicts.
While the number of jury trials slightly increased in 2018, the percentage of Plaintiffs’ verdicts decreased very slightly. In 2018, 48% of the verdicts were for Plaintiffs compared to 49% for Plaintiffs in 2017. These figures go against what had been a trend of increases in the percentage of Plaintiffs’ verdicts dating back to 2014.
Decrease in Average Monetary Awards for Plaintiffs
The overall average of monetary awards for Plaintiffs experienced a significant decrease in 2018 from 2017, but was still higher than in earlier years. In 2018, the overall average monetary award was $1,810,693, down from $4,204,501 in 2017. However, first appearances are somewhat deceiving, since the Jury Verdict Service reported that the average in 2017 was greatly inflated by two verdicts of $217.7 million and $139.8 million. In 2018, in contrast, there was only one very large verdict for $76 million. Additionally, the 2018 figure of $1,810,693 represents an increase from the figures from the years prior to 2017. In 2016, the average Plaintiff’s verdicts was $1,383,549, while the average in 2015 was $1,376,323.
Slight Increase in Number of Million-Dollar Verdicts
In 2018, there were 14 verdicts of $1 million or more, compared to 11 such verdicts in 2017. But the 14 verdicts figure is slightly lower than in 2016, when there were 16 verdicts of $1 million or more. Of the 14 verdicts of $1 million or more in 2018, 6 were in Jackson County, MO Circuit Court (1 in Kansas City and 5 in Independence), 4 were in the Circuit Court of Clay County, MO, 2 were in the Circuit Court of Platte County, MO, and 2 were in the U.S. District Court for the Western District of MO. Finally, the number of verdicts between $100,000 and $999,999 decreased slightly in 2018 (29 verdicts) from 2017 (36 verdicts).
Key Observations and Conclusion
While the percentage of Plaintiffs’ verdicts decreased ever-so-slightly in 2018, the 48% figure still remains much higher than where it stood 4 years earlier (38%). Additionally, the average Plaintiff’s verdicts ($1,810,693) – while down from the inflated figures of 2017 – continues to trend upward from the $1.3 million range of 2016 and 2015 and the low point figure of $350,730 in 2014. Almost half of the verdicts awarded in 2018 that were $1 million or more were in Jackson County, MO, which was again consistent with the view that this can be a Plaintiff-friendly forum. As we have stated in our previous Jury Verdict roundups, clients and national counsel should work with local counsel to carefully consider the forum when assessing the value of a case.
Source: Greater Kansas City Jury Verdict Service Year-End Reports 2014 -2018
Despite 2017 Amendment to Statute, Court of Appeals Holds Section 490.715 Fails to Preclude Evidence of "Charged" Amounts of Medical Expenses at TrialJanuary 29, 2019
In what was widely seen as an attempt to prevent plaintiffs from introducing evidence at trial of the full, undiscounted “amounts charged” for medical treatment, a revised version of § 490.715 was signed into law in 2017. It provides that “parties may introduce evidence of the actual cost of the medical care or treatment rendered to a plaintiff or a patient whose care is at issue.” See § 490.715(5)(1), RSMo. (emphasis added). “Actual cost” is defined as:
“a sum of money not to exceed the dollar amounts paid by or on behalf of a plaintiff or a patient whose care is at issue plus any remaining dollar amount necessary to satisfy the financial obligation for medical care or treatment by a health care provider after adjustment for any contractual discounts, price reduction, or write-offs by any person or entity. See § 490.715(5)(2) (emphasis added).
But in the recent case of Brancati v. Bi-State Development Agency, the Eastern District Court of Appeals held that evidence of the “amount charged” could still be introduced at trial, effectively rendering the revised version of § 490.715 meaningless. Brancati was a general liability case with stipulations that the “amount charged” for medical treatment totaled $77,515.48 while the actual “amount paid” to satisfy the financial obligation was $40,842.95. Before trial, Brancati filed a pre-trial Motion, arguing that the revised version of § 490.715 did not apply retroactively to this case. The trial court ruled that § 490.715.5, as amended, did not apply and that the parties could offer evidence of the value of medical treatment by allowing both the “amount charged” as well as the “amount paid” into evidence.
After a $625,000 adverse jury verdict, Bi-State appealed and argued, in part, that the revised version of § 490.715 applied retroactively to limit the evidence admissible regarding the cost of Brancati’s medical care to the “amount paid” and not the “amount charged.”
The Eastern District affirmed the trial court and held that the revised version of § 490.715 did not eliminate the ability to introduce evidence of the “amount charged” for medical bills. The Court ruled that the statute did not expressly prohibit the introduction of “amounts charged” and merely permitted parties to introduce the “actual costs” of medical treatment. It also relied on Subsection 4, which provides that evidence admissible for “another purpose” may be introduced. Notably, the decision is devoid of any discussion about what other purpose was at issue to support the admission during trial of the “amount charged.”
There are two other fundamental problems with the Eastern District’s decision, one dealing with legal and logical relevance, and the other with maxims of statutory construction. First, legal relevance requires a trial court to weigh the probative value of proffered evidence against its costs, such as unfair prejudice, confusion of the issues, misleading the jury, or wasting time. Reed v. Kansas City Missouri School District, 504 S.W.3d 235, 242 (Mo. App. W.D. 2016). Missouri courts have long held that a plaintiff may recover only those medical treatment expenses that he was liable to pay for the medical treatment, and actually incurred. See Cordray v. City of Brookfield, 88 S.W.2d 161, 164 (Mo. 1935); Zachary v. Korger, Inc., 332 S.W.2d 471, 475 (Mo. App. W.D. 1960). To allow the introduction of the full, undiscounted “amount charged” for medical expenses defies both basic principles of logical relevance (the evidence tends to make the existence of any material fact more or less probable than it would be without the evidence) and legal relevance. Evidence of the “amount charged” does not meet the litmus test of logical relevance because its introduction does not affect a plaintiff’s ability to recover the “amount paid” for medical treatment. Nor does it meet the litmus test of legal relevance because its probative value is far outweighed by the dangers of confusing the issue and misleading the jury.
Second, this decision disregards the most basic canons of statutory construction. A fundamental principle of statutory construction is that a primary role of the courts in construing statutes is to “ascertain the legislature’s intent from the language used in the statute and, if possible, give effect to that intent.” State ex rel. Koehler v. Lewis, 844 S.W.2d 483, 487 (Mo. App. W.D. 1992). Under the “Reenactment Canon,” “when the Legislature amends a statute, it is presumed that the legislature intended to effect some change in the existing law.” State v. Liberty, 370 S.W.3d 537, 561 (Mo. banc 2012). This is because “to amend a statute and accomplish nothing from the amendment would be a meaningless act, and the legislature is presumed not to undertaken meaningless acts.” Id. By continuing to allow plaintiffs to introduce evidence of the “amount charged” for medical expenses, the Brancati court appears have rendered this legislative amendment meaningless. Further, in considering the landscape prior to the 2017 amendment, specifically that both the Eastern District and Missouri Supreme Court held that the “amount charged” for medical expenses could be introduced at trial, the language used in the 2017 statute clearly evinces an attempt to eliminate this practice. See Berra v. Danter, 299 S.W.3d 690 (Mo. App. E.D. 2009); Deck v. Teasley, 322 S.W.3d 536 (Mo. banc 2010). Likewise, this decision violates the canon that courts “must examine the language of the statutes as they are written [and] cannot simply insert terms that the legislature has omitted.” Loren Cook Co. v. Director of Revenue, 414 S.W.3d 451, 454 (Mo. banc 2013).
A request that the Brancati case be transferred to the Missouri Supreme Court for review is presently pending. Whether or not the Supreme Court takes the Brancati case, we are confident that we have not seen the last of litigation on this issue.
There are two important lessons to be learned from Williams v. Medalist Golf, a recent case from the Eighth Circuit Court of Appeals, applying Missouri law. First, when a company guarantees customer satisfaction, only to leave the customer unsatisfied, it risks not only its business reputation, but also its legal right to collect payment. Second, when giving testimony about the meaning of a contract, it is almost always best to let the written document speak for itself.
Plaintiff Cane Creek Sod submitted a bid to provide almost a million square feet of grass for the construction of a new golf course at Big Cedar Lodge in Branson, Missouri. Cane Creek promised to provide premium Meyer Zoysia grass, and it offered a lower price than any other bidder. Defendant Medalist Golf, Inc., accepted the bid and provided a “Grass Supplier Agreement” for Cane Creek to sign.
The Grass Supplier Agreement provided that the seller “guarantees the quality and specification of the materials provided.” Supplier Cane Creek’s owner testified that he understood this to mean he “was guaranteeing that they were going to get Meyer Zoysia and that it would be the quality that satisfied the customer [or Cane Creek] would fix it.” The contract set a fixed price per square foot and provided an estimate of the quantity that would be need. But it also cautioned that this was “a target and not a guaranteed amount” and affirmed the parties’ understanding that the project “may use more or less than estimated quantities.”
Over the following months, Cane Creek devoted considerable time and resources to growing dozens of acres of Meyer Zoysia. Shortly before the sod was to be harvested, the golf course’s developer asked Medalist Golf to visit the sod farm to inspect the quality of the grass. After inspecting and photographing the sod, the developer decided the quality of the grass was unacceptable for the course and instructed Medalist Golf to reject it. Medalist did so, and then purchased the required grass from another bidder. Cane Creek was able to find alternative buyers for some, but not all, of what it had grown for Medalist.
The supplier sued Medalist for breach of contract, arguing that Medalist had been contractually obligated to purchase all of the grass needed for this golf course exclusively from Cane Creek. Medalist moved for summary judgment, arguing that: (1) no enforceable contract existed, and (2) even if a contract did exist, Medalist was relieved of any obligations, because Cane Creek’s sod failed to conform to the contract. The trial court granted Medalist’s motion, and Cane Creek appealed. The Eighth Circuit affirmed the summary judgment in Medalist’s favor.
The Eighth Circuit rejected Medalist’s first argument—that no enforceable contract ever existed between Medalist and Cane Creek. The “Grass Supplier Agreement” was an enforceable “requirements contract.” A requirements contract is one in which “one party promises to supply all the specific goods or services which the other party may need during a certain period at an agreed price, and the other party promises that he will obtain his required goods or services from the first party exclusively.”
The court held that imprecise estimates of the quantity to be purchased were sufficient to support such a contract, and it saw ample evidence that the parties intended for Medalist to buy all of the grass needed for this golf course exclusively from Cane Creek, at an agreed-upon price. Thus, the court concluded, there was a valid agreement upon which Cane Creek could base its breach of contract claim.
But the breach of contract claim still failed as a matter of law, because the court agreed with Medalist that the sod failed to conform to the contract. The Uniform Commercial Code as adopted in Missouri allows a buyer to reject tendered goods without payment, if they “fail in any respect to conform to the contract.” Mo. Rev. Stat. § 400.2-601. Therefore, if the sod was not of the quality that was promised, Medalist had the right to reject it and no obligation to pay for it.
The case ultimately turned on the contract’s provision that Cane Creek would “guarantee the quality and specification of the materials provided.” This language, Medalist argued, required more than just sod that was acceptable to an expert or another golf course; it required that the sod be to the customer’s satisfaction.
Notably, though, the contractual language itself only required Cane Creek to “guarantee the quality and standards” of its product. It did not specify how the sod’s “quality and standards” were to be judged. Although it conceded that Medalist did not act in bad faith, Cane Creek tried to present other evidence that the grass lived up to the “quality and standards” required by the contract, including: (1) expert testimony that the sod was high quality, (2) the results of a test finding the sod to be free of “noxious weed contaminates,” and (3) the fact that some of the same sod was subsequently sold to and used by another golf course. Cane Creek argued that this evidence at least created a genuine factual dispute as to whether Medalist wrongfully rejected the sod.
But Cane Creeks’ position was seriously undermined at its owner’s deposition, where he testified that he understood the “guarantee” to mean that he “was guaranteeing that they were going to get Meyer Zoysia and that it would be the quality that satisfied the customer, [or Cane Creek] would fix it.” This testimony arguably broadened Cane Creek’s duties under the contract. It made the customer’s judgment as to the sod’s quality—as subjective as that may be—the ultimate and final measuring stick for compliance with the contract. Unfortunately for Cane Creek, this rendered irrelevant all of its expert opinions, test results, and other evidence about the high quality of the sod. If Medalist was unsatisfied, the sod was nonconforming and could be rejected. Full stop. (Had there been evidence that Medalist rejected the goods purely out of bad faith, the court would have been obliged to consider it; but concededly, this was not the case.)
Customer satisfaction is always the goal, of course. But it is also an inherently subjective and often unpredictable concept. A customer may be dissatisfied simply because he or she is persnickety, capricious, or just misinformed. As tempting as it is to “guarantee” that a customer will be satisfied, businesses must understand the legal implications of doing so. Courts will enforce quality guarantees, and they will usually leave it to the parties to decide how quality should be measured. A guarantee of customer satisfaction may make for a good sales pitch, but it is a poor legal standard.
The 2018-2019 ATRF Judicial Hellholes Report is out, and, surprise, surprise, the “Show Me Your Lawsuit” state, specifically the City of St. Louis, landed fourth on the list—only behind California, Florida, and New York City. While it must be noted that St. Louis has moved down in the ATRF Judicial Hellhole rankings (St. Louis was ranked No. 3 in 2017-2018 and No. 1 in 2016-2017), St. Louis is still considered by many to be one of the most plaintiff-friendly courts in the nation, making it an inhospitable venue for corporate defendants, or any defendants for that matter. While the term “hellhole” may be a bit over the top, defense counsel must nonetheless be wary of this venue and advise their clients accordingly. And in-house counsel should pay particular heed when drafting jurisdiction and venue clauses in corporate agreements.
There was initial optimism from 2017 that political changes in the executive branch would aid business interests and result in certain statutory reforms. The ATRF Report bursts that balloon, reporting that optimism “quickly evaporated in 2018 as massive verdicts, blatant forum shopping, and legislative ineptitude plagued the ‘Show Me Your Lawsuit’ state.”
The ATRF Report also attributes St. Louis’ inability to become a more balanced venue to its “loose” application of procedural rules, and an unwillingness to consistently follow Missouri appellate court and U.S. Supreme Court precedent, especially as it applies to a court’s exercise of jurisdiction over out-of-state defendants. A combination of these two elements is what generally encourages forum shopping and out-of-state plaintiffs to seek out this jurisdiction, which gained national recognition in recent substantial toxic exposure verdicts.
Looking ahead to the 2019 Missouri General Assembly legislative session, the Missouri Chamber of Commerce President and CEO, Daniel P. Mehan, recently vowed to address this state’s litigious climate which he describes as a “black eye for Missouri.” He intends to push for new legislation to make Missouri’s courtrooms more balanced when the Missouri General Assembly convenes for their legislative session in January 2019. More recently, the Missouri Chamber Board of Directors has approved the organization’s 2019 Legislative Agenda which include several modifications that are aimed specifically at curtailing Missouri’s Judicial Hellhole status. These reforms contain measures that would:
1. Clarify venue and joinder laws in an effort to curb venue/forum shopping;
2. Strengthen the Missouri Merchandising Practices Act to reduce frivolous class action lawsuits;
3. Increase transparency in toxic exposure litigation to curtail fraudulent claims and ensure compensation for future claimants;
4. Strengthen Missouri’s employment arbitration climate in an effort to avoid costly litigation and resolve disputes rapidly;
5. Establish a statute of repose to stop new regulations from opening additional paths to litigation; and
6. Reforming the statutes regarding punitive damages to clarify the standard and define when an employer can be held liable for such damages.
Whether or not all of these reforms will make it to committee is still yet to be determined, especially since several of these reforms were attempted in 2018 but failed. Nonetheless, 2019 is a new year!
Over the years – and to the dismay of out-of-state defendants – state trial courts have often taken an expansive view of when they may exercise personal jurisdiction over companies with limited ties to Missouri. Recently, however, the Missouri Supreme Court made permanent a preliminary writ of prohibition in the case of State of Missouri ex rel PPG Industries, Inc. v. The Honorable Maura McShane, Case No. SC97006. Advertisement on a passive website by an out of state company is not conduct sufficient to confer personal jurisdiction under the Missouri long arm statute.
Hilboldt Curtainwall, Inc. provided materials for a Missouri construction project. Some of these materials were to be coated with a product made by PPG Industries, Inc., a Pennsylvania corporation. Hildboldt reviewed PPG’s website and identified Finishing Dynamics, LLC as an “approved applicator” of the coating product manufactured by PPG. Finishing Dynamics failed to properly apply the coating product, rendering useless the products which were coated. Hilboldt subsequently filed suit in the Circuit Court of St. Louis County, Missouri against Finishing Dynamics for breach of contract and implied warranty of merchantability. Hilboldt also sued PPG under a negligent misrepresentation theory stemming from the information obtained by Hilblodt from PPG’s website.
PPG filed a motion to dismiss Hilboldt’s negligent misrepresentation claim for lack of personal jurisdiction. PPG argued that its website advertising was insufficient conduct to confer personal jurisdiction, stating that representations on its passive website, which were not aimed specifically to Missouri consumers, were insufficient to confer personal jurisdiction. PPG had no other ties to Missouri.
Hilboldt argued that, under its negligent misrepresentation theory, PPG committed a tortious act in the state of Missouri. Hilboldt believed conduct sufficient to confer personal jurisdiction in Missouri existed because the representations on PPG’s website were received by Hilboldt in Missouri, relied upon by Hilboldt in Missouri, and caused injury to Hilboldt in Missouri.
The Circuit Court denied PPG’s motion to dismiss, and PPG filed a petition for a writ of prohibition in the Missouri Supreme Court to prevent the circuit court from taking any further action other than to dismiss PPG from the case. The Supreme Court issued a preliminary writ, and this decision followed.
PPG’s Conduct Was Insufficient to Confer Personal Jurisdiction.
The Supreme Court agreed with PPG that the passive website, visible within Missouri but not used for direct communication or negotiation, was not conduct falling under the Missouri long arm statute. The Court stated that, in light of “the broad and general nature of PPG’s website, PPG’s suit-related contacts with Missouri are not sufficient to be considered tortious acts in Missouri.”
Missouri courts apply a two part test to determine whether personal jurisdiction exists over a nonresident defendant. First, the nonresident’s conduct must fall within the Missouri long arm statute. That statute, RSMo. §506.500(3), confers personal jurisdiction upon foreign persons and firms who commit a tortious act within the state. Secondly, once it is determined that the conduct does fall under the statute, the Court must determine whether the defendant has sufficient minimum contacts with Missouri to satisfy due process.
The Court emphasized that no direct or individual communications occurred between Hilboldt and PPG, PPG did not contact any Hilboldt representative through the website and Hilboldt did not interact with any PPG representative using the website. The website was not used to complete any transaction, facilitate communication or conduct any interactions between Hilboldt and PPG. The website was merely accessible by Missouri residents, as well as residents of every other state, but PPG did not specifically target or solicit web traffic from Missouri.
Furthermore, the Court noted that the information from PPG’s website, even if false, was used by Hilboldt to enter into a contract with third-party Finishing Dynamics. The true basis for Hilboldt’s underlying claim was the mistakes made by the third-party in failing to appropriately apply PPG’s coating product, further “muddling” any connection between Hilboldt and PPG.
Because PPG’s limited conduct was found not to fall under the first prong of the Missouri personal jurisdiction analysis, the Court did not determine whether PPG’s contacts with Missouri were sufficient to satisfy due process under the second prong of the analysis.
The Supreme Court ruling establishes that a “passive website” which is used only for advertising and is not used to facilitate communication or negotiations will not provide the basis for conduct sufficient to confer personal jurisdiction against nonresident parties under the Missouri long arm statute.
Who May Challenge an Allegedly Discriminatory Property Tax Assessment? And What is the Burden of Proof?December 17, 2018
In Crowell v. David Cox, Assessor, Missouri’s Western District Court of Appeals reaffirmed that a taxpayer lacks standing to protest a property assessment made before the taxpayer owned the property. It also held that a taxpayer asserting a discrimination claim carries the burden of proving that other similarly situated properties were undervalued compared to their property, including presenting evidence of the fair market value of the similarly situated properties.
In 2014, the Crowells bought residential property in Parkville, Platte County, Missouri. As of 2006, the property had an appraised value of $48,832 (the value the assessor determined was the property’s fair market value) and an assessed value of $9,278 (a percentage of the appraised value which serves as the basis for calculating real estate tax liability). After extensive repairs and renovations, the property sold in December 2007 for $234,000. Based upon the sale, the appraised value increased in 2008 to $230,660, with the assessed value increasing to $43,825. These valuations were applied to the property for tax years 2008 through 2014 with no protests of the valuations. In October 2014, the Crowells purchased the property for $230,000.
After the purchase and after doing some research into the assessment and sales history, the Crowells engaged in informal negotiations with the assessor to have the appraised and assessed values of the property reduced. In 2015, the assessor reduced the appraised/assessed values to $210,660/$40,025. Dissatisfied with the reduction, the Crowells pursued formal review and appeal through the Platte County Board of Equalization, which affirmed, and the State Tax Commission.
Before the State Tax Commission, the Crowells argued discrimination in that their property was appraised at a higher ratio of its sale price than five other comparable properties. The five other properties were all recent sales and, unlike the Crowells’ property, none of them received an increase in assessed value based upon the sale. The Crowells also presented a chart comparing 41 other Platte County properties, as to square footage, appraised/assessed values, tax amount, and tax amount per square foot. Based on this comparison, the Crowells argued their property was assessed at a higher rate per square foot than all 41 comparison properties. The Crowells did not dispute, however, that the fair market value of their property was $210,660. Nor did they present any evidence of the fair market value of the comparison properties.
The State Tax Commission concluded the Crowells lacked standing to challenge the 2008 assessment because they did not own the property until 2014. It also found no discrimination because the Crowells failed to show that other properties in the same general class, i.e. residential, were undervalued. The Commission found the Crowells presented no evidence from which a comparison could be made between the median level of assessment of residential property in the county and the actual level of assessment of their property.
The Crowells filed a petition for review in the Circuit Court asserting disparate and discriminatory treatment because the 2008 assessment increase was based on the property’s sale price whereas none of the other properties sold in the Crowell’s neighborhood between 2008 and 2015 received an assessment increase based on the sale price. The Circuit Court affirmed the Commission’s decision and order.
On appeal, the Crowells argued two points: (1) the 2008 assessment violated Missouri law and was thus void ab initio, even if the Crowell lacked standing to challenge the assessment at the time it was imposed; and (2) the Commission had erroneously concluded that the Crowells were required to prove all other property in the same class was undervalued.
As to the challenge to the 2008 assessment, the Western District reaffirmed the long-standing rule that individual taxpayer plaintiffs lack standing to challenge other taxpayers’ property tax assessments, as they are not injured personally by others’ assessment calculations. This is true even though the allegedly legally faulty 2008 assessment in this case set in motion a chain of events which was directly and causally connected to the performance of the Crowells’ 2015 appraisal and assessment. According to the Court, a taxpayer lacks standing to challenge another taxpayer’s assessment even if the assessment results in a tax increase for the complaining taxpayer.
As to the Crowells’ discrimination claim, the Western District found the Crowells failed to meet their burden of showing that disparate treatment caused them to bear an unfair share of the property tax burden compared to the other properties. Even had the Crowells’ property been the only one reassessed based on its sale price that alone, would be insufficient. The Crowells failed to prove that the other recently sold properties were not assessed at their fair market values, and that failure was fatal to their claim.
Employees: An affirmative and purposeful reminder that the safety of your co-workers may also be your dutyDecember 7, 2018
Recently, in Brock v. Dunne, the Missouri Court of Appeals for the Eastern District affirmed a trial court judgment assessing liability against a co-employee pursuant to the 2012 Amendment to § 287.120.1 of the Missouri Workers’ Compensation Act. The appellate court held that the defendant co-employee (1) owed the injured plaintiff a personal duty of care, separate and distinct from his employer’s non-delegable duties, and (2) engaged in an affirmative negligent act that purposefully and dangerously caused or increased the risk of injury, which prevented him from claiming immunity under the statute.
The Missouri Worker’s Compensation Act immunizes employers from their employees’ tort claims for injuries that arise from workplace accidents. Generally, this immunity extends to the injured employee’s fellow employees where such co-employee’s negligence is based upon a general non-delegable duty of the employer. But a fellow employee does not have immunity where he commits an affirmative act causing or increasing the risk of injury. Specifically, the 2012 Amendment to § 287.120.1 grants immunity to co-employees except when “the employee engaged in an affirmative negligent act that purposefully and dangerously caused or increased the risk of injury.”
Here, plaintiff Brock sued his supervisor at the time of his injury, claiming the supervisor’s actions of removing a safety guard from a laminating machine and ordering plaintiff to clean the machine — while it was still running and without the safety guard equipped — constituted negligence and invoked the co-employee exception to immunity for workplace injuries under § 287.120.1. The jury returned a verdict against the supervisor co-employee, and assessed over a million dollars in damages.
Before the Missouri legislature’s 2012 modification, § 287.120.1 did not mention co-employee liability and such persons were liable to the full extent they would otherwise be under the common law. At common law, an employee is liable to a third person, including a co-employee, when he or she breaches a duty owed independently of any master-servant relationship – that is, a duty separate and distinct from the employer’s non-delegable duties. In 1982, closely following the common law, the Missouri Court of Appeals for the Eastern District initially articulated what is frequently referred to as the ‘something more’ doctrine. State ex. rel Badami v. Gaertner, 630 S.W.2d 175, 180 (Mo. Ct. App. E.D. 1982) (en banc). Under the ‘something more’ test, an employee may sue a fellow employee only for (1) affirmative negligent acts which are (2) outside the scope of an employer’s responsibility to provide a safe workplace.
While the 2012 Amendment does not expressly state that such acts must be committed outside the scope of an employer’s responsibility to provide a safe workplace for co-employee liability to attach, the appellate court in Brock v. Dunne found the Amendment did not abrogate the common law. Rather, the Amendment must be interpreted in conjunction with the common law requirement that an employee owes a duty to fellow co-employees if it is beyond the scope of an employer’s non-delegable duties.
The Supreme Court of Missouri has held that, as is the case with most common law duties, an employer’s non-delegable duties are not unlimited, but instead, are limited to those risks that are reasonably foreseeable to the employer. Conner v. Ogletree, 542 S.W.3d 315, 322 (Mo. banc 2018). Notably, one example of reasonably foreseeable actions is a co-employee’s failure to follow employer-created rules. It has also repeatedly been held that a co-employee’s creation of a hazard or danger does not fall within the employer’s duty to provide a safe workplace.
In Brock v. Dunne, not only did the supervisor violate specific safety rules created by the employer; his actions also affirmatively created the hazardous condition that resulted in plaintiff’s injury. The appellate court thus held the supervisor’s actions were not reasonably foreseeable to the employer and fell outside the scope of the employer’s non-delegable duties, because he purposefully performed affirmative negligent acts that created an additional danger which would not have been otherwise present in the workplace.
Affirmative Negligent Act
An affirmative negligent act can best be described as an act that creates additional danger beyond that normally faced in the job-specific work environment. These actions create a separate and extreme risk of injury and death, far beyond that anticipated or contemplated by the ordinary duties and responsibilities of the plaintiff’s position of employment. Affirmative negligent acts are not required to be physical acts, and, as was evident here, can be as simple as a superior directing a co-employee to perform a task.
Further, while § 287.120.1 requires that the act“purposefully and dangerously caused or increased the risk of injury[,]” the statute does not require proof the co-employee “had a conscious plan to dangerously cause or increase the risk of injury, and that he did so with awareness of the probable consequences[,]” as the defendant suggested in this case. Rather, the statute merely requires that the negligent act be conducted purposefully and intentionally (rather that inadvertently or by mistake).
The Bottom Line
For a co-employee to be liable in Missouri for a workplace injury, the plaintiff has to show BOTH:
(1) That the defendant co-employee owed a personal duty beyond the employer’s non-delegable duty to provide a safe workplace (defendant’s conduct created a job hazard beyond the foreseeable risks of the tasks assigned to the plaintiff by the employer); AND,
(2) That, in so doing, the defendant co-employee committed an “affirmative negligent act” (i.e., not a mere omission) that was purposeful and put the plaintiff in danger.
While employers are immune from civil suits due to the exclusivity of Missouri’s Worker’s Compensation Act, the same cannot be said for all employees. The duty to provide a safe workplace and safe appliances, tools and equipment for the work belongs to the employer, but employees must stay mindful that their own actions may endanger their co-workers and subject them to personal liability.
The Missouri Court of Appeals for the Eastern District recently rejected an invitation to recognize a common-law right-of-way rule for vehicles operating within a private parking lot. By operation of the fundamental principle that the law should impose tort liability on the party better able to alter their behavior to avoid harm, the court held concurrent duties of drivers to keep a careful lookout and to slow, stop, or swerve to avoid a collision better conform to Missouri’s principles of tort law.
Barth v. St. Jude Medical, Inc., involved an automobile collision on the parking lot of Mercy Hospital in St. Louis County. Defendant’s employee, who was backing out of a parking space, relied primarily upon her back-up camera because a vehicle parked to her right obscured her vision of any vehicles coming down the parking lane. Plaintiff, who was traveling down that parking lane, did not see defendant’s taillights or reverse lights. Defendant collided with the passenger side of plaintiff’s vehicle, causing plaintiff personal injury.
At trial, plaintiff tendered a disjunctive comparative-fault jury instruction which included the defendant’s failure to yield the right-of-way and an instruction defining the phrase “yield the right-of-way.” The trial court refused to submit these tendered instructions and instead submitted two comparative-fault instructions: one for assessing fault to plaintiff and the other to defendant with neither instruction hypothesizing a failure to yield the right-of-way. The jury returned a verdict for defendant.
On appeal, plaintiff asserted that the trial court erred by failing to instruct the jury on failure to yield the right-of-way. Plaintiff argued his proposed comparative fault instruction properly hypothesized a failure to yield the right-of-way under Missouri Approved Instruction 17.08, and his proposed definitional instruction was consistent with and required by the Notes on Use for that approved instruction.
The Court of Appeals found no error because the proposed definitional instruction, which it agreed was a necessary addition to any instruction hypothesizing a failure to yield the right-of-way on a public thoroughfare, did not pass muster. The Missouri pattern instructions provide eight different definitions for the phrase “yield the right-of-way.” All are patterned after statutory rules of the road, but notably, none of those statutory rules of road, applies to this case because the collision occurred on a private parking lot.
Plaintiff’s counsel argued that the statutory-based definitional instruction could be based upon a common-law right-of-way rule, even if the statutory rules did not apply. Toward this end, plaintiff proposed a definitional instruction hypothesizing “yield the right-of-way” in the context of this case means a driver backing out of a parking spot on a parking lot is required to yield to another vehicle approaching in the lane adjacent to the parking spot. As support, plaintiff cited to a statutory rule of the road setting out the definition of “yield the right-of-way” for when a vehicle enters a roadway from an alley, private road, or driveway. The court found, however, that since the statutory rules of the road did not apply to the private parking lot, it would have been error to submit a statutory right-of-way instruction for a private parking-lot accident.
Alternatively, plaintiff urged the court to recognize his proposed common-law right-of-way rule requiring vehicles backing out of parking spaces to yield to vehicles approaching in the traffic lane adjacent to the parking spot. The court declined to do so as such a rule would conflict with a fundamental principle of Missouri tort law: liability should be imposed on the party better able to alter his or her behavior to avoid the harm. Plaintiff’s proposed rule assumed that in every situation the party better able to avoid the harm is the party backing out of the parking space. This, however, may not always be the case. The court concluded that concurrent duties of the drivers to keep a careful lookout while in the parking lot and to slow, stop, or swerve to avoid a collision, consistent with the instruction the trial court gave in this case, conform to this basic principles of tort law. Any deviation from this basic principle under the circumstances of this case would have to come from the Missouri legislature.
The Missouri Supreme Court recently issued an opinion that could undercut the arbitration clauses found in many existing commercial contracts. In A-1 Premium Acceptance, Inc. v. Hunter, the court refused to name a substitute arbitration forum when the parties’ agreed-upon arbitrator—the National Arbitration Forum—suddenly and unexpectedly stopped providing arbitration services in consumer claims nationwide.
By way of background, the National Arbitration Forum was one of the nation’s largest providers of arbitration services for consumer debt collection claims. In 2008, NAF administered over 200,000 cases. But a series of lawsuits alleged unfair practices and hidden ties to the debt collection industry, culminating in a July 2009 action by Minnesota’s attorney general. Just three days after the Minnesota case was filed, NAF entered into a consent judgment compelling it to immediately stop administering consumer credit arbitrations nationwide. (NAF has since re-branded as Forum and now focuses on internet domain-name disputes.)
Meanwhile, many existing consumer credit contracts were written with language requiring binding arbitration of consumer protection claims by the borrower and expressly naming NAF as the forum for arbitration. Several such agreements existed between A-1 Premium Acceptance, a payday lender operating as “King of Kash,” and borrower Meeka Hunter. Ms. Hunter had originally taken out four loans in 2006, totaling $800. When she defaulted almost nine years later, interest had grown the total debt to over $7,000. A-1 sued on the debt, and when Ms. Hunter filed a counterclaim alleging violations of the Missouri Merchandising Practices Act, A-1 sought to enforce the arbitration clauses from the original loan agreements.
Unfortunately, those clauses provided that that consumer claims “shall be resolved by binding arbitration by the National Arbitration Forum, under the Code of Procedure then in effect.” Conceding that NAF was no longer available to arbitrate the claims, A-1 asked the circuit court to appoint a substitute arbitrator, as authorized by the Federal Arbitration Act in the event of “a lapse in the naming of an arbitrator.” The circuit court refused to do so, and A-1 appealed.
The Missouri Supreme Court affirmed the lower court’s decision on the grounds that the language from the subject arbitration clauses stated an intent to arbitrate only before NAF. The opinion distinguished this type of agreement from those that express an agreement to arbitrate generally, regardless of the availability of a named arbitrator. Noting that A-1 drafted the agreement and chose to “insist upon NAF—and only NAF—as the arbitration forum,” the Court refused to “expand the arbitration promise [A-1] extracted from Hunter” by naming someone else as a replacement arbitrator. Since arbitration before NAF was not possible, the Court held, Ms. Hunter was free to pursue her claims in Missouri state court, a much more receptive forum for consumer protection claims like these.
Notably, the arbitration clauses at issue never expressly stated that arbitration could proceed “only” or “exclusively” before NAF. Instead, the court relied primarily on three factors to conclude that the parties had agreed to arbitrate only before NAF: (1) the language mandating that claims “shall be resolved by arbitration by the National Arbitration Forum” (emphasis added by the court); (2) the fact that A-1 drafted the contract and could have included language contemplating the unavailability of its preferred arbitrator, noting that many contracts do just that; and (3) language mentioning the “Code of Procedure then in effect,” a reference to the 2006 NAF Code of Procedure, which includes a rule that only NAF can administer the Code. Combined, the court concluded, these provisions showed that the parties agreed to arbitrate “before NAF and no other arbitrator.”
The Court finished, however, by cautioning that “merely identifying an arbitrator in an arbitration agreement—without more—cannot justify refusing to name a substitute.” A substitute should still be named unless there is “a basis to conclude the parties’ arbitration agreement was limited to the specified arbitrator,” which the Court determined existed in this case.
This decision adds to a wild profusion of existing case law addressing the numerous and diverse arbitration agreements that name NAF as arbitrator. Although the result invariably depends on the language of the particular contract at issue, courts across the nation that have taken the same approach as the Missouri Supreme Court and denied applications to compel arbitration include the Second, Fifth, and Eleventh Circuit Courts of Appeals, and the New Mexico Supreme Court. But the Third and Seventh Circuits and the Supreme Courts of Arkansas and South Dakota have reached the opposite result, appointing substitute arbitrators in place of NAF. Federal district courts across the country have come down on both sides. A-1’s attorneys have expressed an intent to appeal this Missouri decision to the United States Supreme Court, hoping to bring some clarity to this recurring and divisive issue.
This case demonstrates the importance, especially in Missouri, of exercising caution when drafting arbitration clauses. This is particularly true in the context of consumer transactions, where one side typically sets the terms of the transaction. If the intent is to ensure that disputes end up in private arbitration instead of state court litigation—then naming a preferred arbitrator is fine, but it is also essential to plan for the possibility that the arbitrator is unavailable. Otherwise, as A-1 experienced here, the agreement to arbitrate may be for naught.
The Missouri Supreme Court’s opinion is available here.
The Missouri Supreme Court has firmly upheld the right of a party to present multiple expert witnesses during the trial of a medical malpractice case. Shallow v. Follwell, 554 S.W.3d 878 (Mo. banc 2018). The Supreme Court disagreed with the Court of Appeals’ decision in the case, and instead affirmed the trial court’s overruling of plaintiff’s objections that the testimony of multiple defense experts was prejudicially cumulative. In doing so, the Supreme Court affirmed the jury verdict in favor of the physician defendant.
In this wrongful death, medical malpractice action, the three adult children of decedent Saundra Beaver claimed that Dr. Follwell negligently performed decedent’s bowel surgery and then failed to recognize post-surgical problems which developed into sepsis, which caused the patient’s death. During trial, plaintiff presented one medical expert (whose specialty was not described in the opinion), and also the testimony of a treating surgeon. Dr. Follwell presented four expert witnesses and also testified on his own behalf as a fact witness and an expert witness. The jury found for Dr. Follwell.
In post-trial Motions, plaintiffs alleged the trial court had erred in: 1) allowing prejudicially cumulative testimony from Dr. Follwell and his four expert witnesses; and, 2) permitting Dr. Follwell to testify at trial to a causation opinion different than that which he had offered at his own deposition. The trial court denied plaintiff’s post-trial Motions and plaintiffs appealed.
The Eastern District Court of Appeals had admonished the trial court for having ignored its duty to properly assess whether the testimony of all five defense expert witnesses was needed, and whether it was legally relevant. That court described the four retained experts as a “chorus of the same ultimate opinions…” which “posed a substantial risk of interfering” with the jury’s ability to properly decide the case.
After taking the case on transfer, the Missouri Supreme Court affirmed the jury’s verdict after analyzing the two main points which plaintiff/appellant had put before the trial court and the Court of Appeals.
I. Testimony of Multiple Experts Was Not Cumulative
One of Dr. Follwell’s defense theories was that the patient had a complex cardiac condition which caused her bowel injury. Dr. Follwell retained four experts, all with a separate specialty, which included: 1) cardiology; 2) general surgery and critical care; 3) colorectal surgery; and, 4) vascular surgery.
In finding that the trial court had not erred in denying plaintiffs’ objections that the defense experts’ testimony was prejudicially cumulative, the court stated it had carefully reviewed the trial transcripts, which showed that Dr. Follwell and his expert witnesses had “testified about the very root of the matter in controversy”, and so the evidence was not cumulative. The court also made clear that the rule against cumulative evidence remains intact, but that evidence is prejudicially cumulative only when it relates to a matter which is already so fully and properly proven by other testimony or evidence, that it removes it from the “area of serious dispute”. (The Supreme Court also noted that it appeared no sufficient trial record was made as to the objections to the purportedly cumulative nature of the challenged testimony.)
The court also made clear that evidence can be cumulative without necessarily being prejudicial. The Court observed that at trial, Dr. Follwell’s four experts testified contrary to the expansive testimony of plaintiff’s sole retained expert witness. However, in doing so, those four experts were testifying about issues – standard of care and causation – which were at the very core of the controversy. At the same time, the Supreme Court cautioned that a trial court should be alert to the risk of having jurors resolve differences in opposing expert witness testimony simply by the sheer number of witnesses called to testify, rather than giving due consideration to the quality and credibility of each expert’s opinions. Such a circumstance could well be prejudicial.
The Supreme Court also emphasized that the Circuit Court, “enjoys considerable discretion in the admission or exclusion of evidence and, absence clear abuse of discretion, its actions will not be grounds for reversal.” Whether to exclude evidence on ground of unfair prejudice rests in the discretion of the Circuit Court. The Circuit Court is uniquely positioned to evaluate the testimony of witnesses and to determine its prejudicial impact when prompted by a timely objection. The Court found that when considering the testimony of Follwell’s multiple expert witnesses, the trial court showed careful, deliberate consideration of plaintiff’s objections.
II. Dr. Follwell Did Not Offer a New Opinion at Trial
As to the claim that Dr. Follwell was improperly permitted to offer a different opinion at trial than at his deposition, the court pointed out that the purpose of preventing witnesses from offering new opinions at trial “is to relieve a party who is genuinely surprised at trial”. This can occur when an expert suddenly has an opinion where he had none before, renders a substantially different opinion than that earlier disclosed, and/or uses facts to support or newly bases that opinion on data or facts not earlier disclosed.
The court’s opinion contains pertinent portions of Dr. Follwell’s trial and deposition testimony to support its conclusion that the trial court did not err in overruling plaintiffs’ objections to Dr. Follwell testifying as he did at trial because he did not offer a substantially different opinion than what he offered at his deposition.
Here, the court found a central issue about which Dr. Follwell testified was the cause of the patient’s ischemic, and then necrotic, bowel. In both situations (deposition and trial), Dr. Follwell testified that vascular injury could cause bowel ischemia. He had also testified that he had not seen a surgical perforation of the bowel cause a vascular injury which then led to necrotic bowel.
Follwell is an important decision for a number of reasons, perhaps chiefly because it reaffirms the right of a party to defend itself with a sufficient number of expert witnesses, even where one’s adversary has chosen to use fewer expert witnesses. Follwell also demonstrates the crucial importance of making a proper and complete record at the trial court level, so an appellate court has the ability to fully examine that record, including the objections made by trial counsel.
At Baker Sterchi Cowden & Rice, we are committed to providing our attorneys with as full an education as possible in the fine art and science of trial work. We believe this is all the more important with the opportunities for jury trial experience diminishing, due to the shrinking number of jury trials across the country.
In a recent opinion, the United States Court of Appeals for the Eighth Circuit took a hardline position as to a plaintiff’s failure to disclose information required by Rule 26 of the Federal Rules of Civil Procedure, as to non-retained experts. Vanderberg v. Petco Animal Supplies Store, Inc., ---F.3d---, 2018 WL 4779017 (8th Cir., October 2, 2018). The result, though harsh, underscores the importance of strict compliance with not only the rules of discovery, but the rules regarding sanctions for non-compliance.
Plaintiff Vanderberg suffered injuries when making a delivery to a Petco store in Sioux City, Iowa, and sued Petco for negligence and premises liability. In his initial Rule 26 disclosures, plaintiff listed his medical provider, Fox Valley Orthopedic Institute, as likely to have discoverable information. In his interrogatory answers, plaintiff provided the name of Dr. Timothy Petsche as a treating physician from Fox Valley, as well as other medical professionals, and produced 573 pages of medical records. Several of those records reflected opinions held by Dr. Petsche, including that certain of plaintiff’s conditions were related to the injury at Petco. Plaintiff did not, however, designate Dr. Petsche or anyone else as an expert witness, or provide any summaries of the facts and opinions to which such experts would testify, as is required by Rule 26(a)(2).
After the deadline for plaintiff’s expert witness disclosures, Petco’s counsel asked plaintiff’s counsel about the failure to designate any experts. Plaintiff’s counsel responded that plaintiff had no retained experts but expected the treating physicians to provide testimony. Plaintiff’s counsel also indicated that if Petco’s position was that treating physicians must be identified through expert witness certification, then it should so advise.
After the close of discovery, Petco filed a Motion for Summary Judgment on the basis that plaintiff had no produced any expert medical opinion evidence, as required by Iowa law, to show that his injuries were caused by the Petco incident. In opposition, plaintiff relied, in part, on Dr. Petsche’s notes to in an attempt to establish causation. Petco moved for sanctions for plaintiff’s failure to make the required Rule 26(a) expert witness disclosures and requested the exclusion of Dr. Petsche’s testimony.
The district court found plaintiff violated Rule 26(a)(2), and ruled that exclusion of the doctor’s statements was the appropriate sanction. Allowing the evidence to be used would almost certainly require a continuance of trial so the doctor could be deposed, and plaintiff provided no valid reason for the failure to disclose. Having excluded the only expert opinion evidence plaintiff had to establish that his injuries were caused by the fall at the Petco store the district court granted summary judgment to Petco. (Plaintiff also attempted to rely upon a report from a second undisclosed physician, but at oral argument plaintiff’s counsel conceded that exclusion of this second physician’s report was not an abuse of discretion, thus removing that issue from the case.)
The Eighth Circuit affirmed. The civil procedure rules are very clear: absent stipulation of the parties or a court order, parties must disclose the identity of non-retained experts who may testify at trial and disclose “the subject matter on which the witness is expected to present” expert opinion testimony and “a summary of the facts and opinions to which the witness is expected to testify.” Rule 26(a)(2)(C).
Rule 26’s disclosure mandates are given teeth in Rule 37. Rule 37(c)(1) provides that when a party fails to comply with Rule 26(a), “the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless.” This is a self-executing sanction for failure to make a Rule 26(a) disclosure, without need for a motion for sanctions, unless the failure was substantially justified or harmless.
The Court ruled that neither the production of hundreds of pages of medical records, nor the disclosure by plaintiff that Dr. Petsche was a treating physician and potential fact witness, satisfied plaintiff’s duty to disclose experts under Rule 26(a)(2)(A). Nor could plaintiff’s counsel’s letter stating that he expected non-retained physicians to testify on various issues save his claim. The Eighth Circuit agreed with the district court that, “[i]n essence, [plaintiff’s] counsel asked Petco if the Rules of Procedure regarding expert disclosures mean what they say.”
The Eighth Circuit also accepted the trial court’s finding that plaintiff’s failure to comply with Rule 26(a)(2) was neither substantially justified nor harmless where, although the record contained no hint of bad faith, there also was no proffered reason for noncompliance. Allowing the evidence after the close of discovery and just two months before trial would almost certainly require a continuance of trial.
Finally, the Eighth Circuit rejected the notion, espoused by the opinion’s dissent, that since the exclusion of the evidence was tantamount to dismissal, the district court should have first considered the possibility of a lesser sanction. Plaintiff never asked for a lesser sanction. The text of Rule 37(c)(1) provides that where a party violates the disclosure requirements of Rule 26(a), an alternative sanction to exclusion may be imposed by the court “on motion.” It was plaintiff’s obligation, as the party facing sanctions, to show that its failure to comply with the Rule deserved a lesser sanction.
The Court explained:
The result of Vanderberg’s failure to comply with his … disclosure requirements may seem harsh. But the burdens on parties who are not adequately appraised of an opposing party’s experts’ identity and expected testimony are also real and costly. In any event, the balance between adequately incentivizing compliance with parties’ disclosure obligations and not unfairly punishing “insignificant, technical violations” has already been struck by the drafters of Rule 37(a)(1). It is our role to conform our analysis to the text of the rule, rather than strike our preferred balance.
Food Labeling Litigation Under the Missouri Merchandising Practices Act: When the Label's Impact on Consumer Choice Doesn't Really MatterOctober 22, 2018
In a potentially problematic decision for manufacturers and sellers of consumer packaged goods, a federal judge allowed a lawsuit against Atkins snack bars to proceed under the Missouri Merchandising Practices Act (“MMPA”). Johnson v. Atkins Nutritionals, Inc., 2:16-cv-04213. The MMPA is Missouri’s consumer protection statute that has attracted a steady rise in the filing of food labeling cases in Missouri over the past few years. The lawsuit arises from a local resident’s purchase of five different Atkins-brand “low carb” snack bars found in most grocery stores. The lawsuit alleges that Atkins misrepresented the carbohydrate content of its snack bars by making statements on the wrappers such as “Only [X]g Net Carbs” and “Counting Carbs?” Atkins asked the court to dismiss the lawsuit, and while the District Court dismissed some of Plaintiff’s state common law claims, and his implied warranty claim, it allowed Johnson’s MMPA claims to move forward.
The Court allowed Johnson to proceed on his MMPA claim, on the theory that labels stating that an Atkins bar contained “Only [X]g Net Carbs” were false, misleading or deceptive because such labels may be illegal under federal law. The court also allowed Johnson’s theory that a “Counting Carbs?” label is false, misleading or deceptive concerning the effects of sugar alcohols on blood sugar. Thus, even though the court decided that claims based on the calculation method for determining net carbs were preempted by federal law, evidence of the calculation method can be introduced because it relates to the assertion that sugar alcohols have energy content and impact blood sugar. The court also decided that evidence concerning the labels would be admissible to give context to the “Counting Carbs?” labels.
In its motion for summary judgment, Atkins had asked the court to dismiss the case because Johnson testified that he purchased the products for reasons other than what was stated on the wrappers. In fact, Johnson testified that he saw but did not read the “Counting Carbs?” label on one product, and did not even look at it on another one before purchasing it. He also testified that the word “only” in the “Only 2g Net Carbs” label was meaningless, but that he purchased the bars as a part of a zero-to-low carbohydrate diet plan to cut sugar and lose weight. Atkins argued that dismissal was warranted because the labels or their contents must have actually factored into Johnson’s purchasing decision for a violation of the MMPA to have occurred. In other words, Johnson must have relied on the labels, or their contents must have been material to his decision to purchase the bars.
The court rejected this argument, citing Missouri Court case law, statutes, and regulations, stating that nothing in the MMPA indicates that there must be proof that a consumer actually relied on the allegedly unlawful practice to pursue a claim under the MMPA. The court pointed out that the definition of the three unlawful acts alleged by Johnson under the Act are intentionally broad: “The MMPA is a consumer-friendly law that is specifically designed to enable consumers to obtain relief even in those circumstances where they cannot prove fraud.” According to the court, Missouri law is well-established that materiality is an element of an MMPA claim only when the consumer alleges concealment as an unlawful practice. The proof required is that “the fact so-concealed would have been material to their purchasing decision.”
Thus, Johnson’s MMPA claim survived, with the Court concluding there was a genuine dispute of fact as to whether or not the “Only [X]g Net Carbs” label and the claim made in the “Counting Carbs?” label concealed facts that would have been a part of Johnson’s decision to purchase had he known them at the time.
Johnson’s common law claims fared differently. The court examined two product labels on five of the bars, to determine if Johnson established the elements of breach of express warranty and unjust enrichment. Breach of express warranty requires a showing that Johnson was aware of the statement made by Atkins that he is now saying is a misrepresentation. To prove unjust enrichment, there must be proof that Johnson actually relied upon the misrepresentation in making his purchase. Atkins won on both claims as to the “Counting Carbs?” label on the Peanut Butter Fudge Crips Bar and the Chocolate Peanut Butter Bars because the court found that Johnson saw the label but did not read it. The court allowed these two claims to proceed on the other three products containing the “Counting Carbs?” label and the “Only Xg Net Carbs” label — the Chocolate Chip Cookie Dough Bar, the Caramel Nut Chew Bar, and Endulge Chocolate Candies —only because there was a question of fact about whether Johnson saw and/or read the statements on those wrappers.
At the end of the day, however, this partial “victory” was not much of a victory for Atkins, because Plaintiff can seek at least as expansive remedies under the MMPA as those available under the common law theories.
There should be little doubt after Johnson v. Atkins that the MMPA means what it says when it comes to proving unlawful practices in food labeling. Food merchandisers can face liability for violation of the statute even if the contents of the label had no impact on consumer choice.
The Missouri Court of Appeals for the Western District recently confirmed the long-standing principle that a party’s failure to plead even a valid affirmative defense constitutes a waiver of that defense. Missouri trial courts have no authority to step in and remedy a defendant’s pleading error by applying such a defense sua sponte (“of its own accord”).
The case of Templeton v. Cambiano involved a series of three promissory notes issued between 2003 and 2005. The plaintiff claimed that the defendant had executed the notes in order to borrow nearly $50,000 but had then failed to make a single payment. She filed suit for the principal, plus over $75,000 in interest and late fees, in December 2015, which was just shy of ten years after the final note had been signed. The defendant filed a responsive pleading that generally denied liability for the debt, but his answer did not separately allege that the plaintiff had failed to mitigate her damages by allowing interest and late fees to accumulate for almost a decade before filing suit.
After a bench trial, the trial judge entered judgment in favor of the plaintiff, but excluded from the award all of the claimed interest and late fees, on the grounds that the plaintiff had “failed to mitigate these damages by the delay in prosecuting this action for ten years.” In her sole point on appeal, the plaintiff argued that the trial court had overstepped its authority by applying the affirmative defense of failure to mitigate damages, which the defendant had failed to plead.
The Western District Court of Appeals reversed the trial court’s judgment and remanded the case with orders to amend the judgment to include the $75,927.12 claimed as interest and late fees. This holding was based on long-standing Missouri precedent that an affirmative defense is waived if it is not either: (1) properly pleaded, according to Missouri’s fact-pleading standard, or (2) tried by the parties’ express or implied consent. Failure to mitigate damages is an affirmative defense. Seeing no evidence in the record that the issue of failure to mitigate damages had been tried by the parties’ consent, the appellate court ruled that the defendant had waived the defense when he omitted it from his answer. Regardless of how meritorious the defense might have been, the appellate court concluded, “the circuit court could not breath life back into this extinguished claim sua sponte.”
The defendant also argued that even if the trial court had relied on “a wrong or insufficient reason,” its judgment should still be affirmed because the equitable doctrine of laches would have supported the same result. Laches is an equitable doctrine that precludes claims asserted after an unreasonable delay, which has prejudiced the opposing party. The Court of Appeals was wholly unconvinced, observing that here too, Defendant had failed to raise laches as an affirmative defense. (Laches is specifically listed in Missouri Rule 55.08 as one of the affirmative defenses that must be pleaded to avoid waiver.) For good measure, the Court also concluded that in any event, the doctrine of laches would not apply even had it been properly pleaded.
The significance of this opinion for defendants in Missouri state court is twofold. First, the case stands as a potent reminder of the importance of carefully pleading all legal defenses and their supporting facts or, in the event a defense is omitted, of promptly seeking leave to amend the answer. Second, it demonstrates how a party’s failure to preserve its own legal defenses can tie the court’s hands, preventing it from crafting the remedy that it deems fair and leading to potentially severe results. Here, the pleading error was costly, ultimately increasing the defendant’s liability by about 150%.
The court of appeals opinion is available online through this link.
Missouri Criminalizes the Word "Meat": Civil Liability for the Mislabeling of Meat Substitutes as MeatSeptember 27, 2018
On August 28, 2018, with the passing of Senate Bill 627, Missouri criminalized the use of the word “meat” on labels of food products that do not come from an animal and became the first state to do so. The bill states that “[n]o person advertising, offering the sale or selling all or part of a carcass or food plan shall engage in any misleading or deceptive practices, including, but not limited to, any one or more of the following . . . misrepresenting a product as meat that is not derived from harvested production livestock or poultry.” The prohibition has been codified in Missouri Revised Statutes § 265.494(7). Violation of the prohibition is punishable as a Class A misdemeanor. Mo. Rev. Stat. § 265.496. Missouri’s meat advertising law empowers the Department of Agriculture to inspect products and make referrals to the prosecutor in the county in which they are sold. Mo. Rev. Stat. § 265.497. This poses risks not only under the newly enacted statute, but under the Missouri Merchandising Practices Act, as well.
It can be argued that the plain meaning of the statute cannot be reasonably construed to apply to non-animal products. The statute explicitly states that it applies to “person[s] advertising, offering the sale or selling all or part of a carcass or food plan.” The word “carcass” is not specifically defined in the statute. The ordinary meaning of “carcass” is the dead body of an animal. “Food plan” is “any plan offering meat for sale or the offering of such product in combination with each other or with any other food or nonfood product or service for a single price.” Mo. Rev. Stat. § 265.490(3). “Meat” means “any edible portion of livestock, poultry, or captive cervid carcass or part thereof.” Mo. Rev. Stat. § 265.300(7). Arguably, plant-based and lab grown meat substitute products do not constitute a “carcass” or “food plan”. However,it is widely believed that the amended statute will govern the marketing, sale, and offer of sale of meat substitute products that utilize the word “meat” on their packaging.
The new law is being challenged by vegan brand Tofurky and food-advocacy group Good Food Institute (GFI) in the U.S. District Court of the Western District of Missouri, in a case titled Turtle Island Foods v. Richardson. The American Civil Liberties Union of Missouri and the Animal Legal Defense Fund are also participating in the lawsuit. The petition alleges that § 265.494(7) is unconstitutional because it violates the Free Speech Clause of the First Amendment, the Dormant Commerce Clause, and the Due Process Clause. Filed on August 27, 2018, the day before the law passed, the lawsuit seeks to halt enforcement of the statute until the constitutionality of the statute can be ruled upon by the court.
However, the threat of criminal prosecution is probably not imminent. On August 30, 2018, the Missouri Department of Agriculture (“MDA”) issued a memorandum providing guidance about when the MDA will make referrals to the county prosecutor and Attorney General. The memorandum states that products whose labels contain prominent statements on the front of the packaging immediately before or after the product name that the product is “plant based”, “veggie”, “lab grown”, “lab created” or something comparable, or prominent statements that the product is made from plants or grown in a lab, will not be referred for prosecution. The Department also states that it will refrain from making any referrals for prosecution until January 1, 2019 “[t]o allow for any necessary label changes to be made.” Thus, companies should move quickly to ensure that their product labels display the required language on the primary packaging.
An additional legal threat could come from meat-eating consumers seeking relief under the Missouri Merchandising Practices Act (“MMPA”), Missouri’s consumer protection statute that has spawned a recent rising of food labeling litigation in Missouri. See our prior posts on food labeling litigation here, here, and here. The MMPA bars three types of conduct: deception, unfair practices, and concealment. Mo. Rev. Stat. § 407.020.1. The regulations that provide the definition of “unfair practice” for the statute define it as “any practice which . . . [o]ffends any public policy as it has been established by the . . . statutes or common law of this state” that “[p]resents a risk of, or causes, substantial injury to consumers.” The Missouri Supreme Court has commented on the scope of the term “unfair practice”, describing it as “unrestricted, all-encompassing, and exceedingly broad. For better or for worse, the literal words cover every practice imagine able and every unfairness to whatever degree.”
Unlike a cause of action for fraud, a consumer does not need to plead that the producer intended to dupe the consumer into thinking the product is meat and that the consumer relied on the misrepresentation to state adequately an unfair practice claim under the MMPA.See the U.S. District Court of the Western District of Missouri's Order in Michael Johnson v. Atkins Nutritionals, Inc. In addition to encompassing a broad range of merchandising practices, the appeal of the MMPA as a vehicle for consumer grievances is the availability of damages and attorney’s fees. The statute also allows for class action lawsuits.
Food products such as meat substitutes are arguably “merchandise” within the scope of the Act. Thus, a meat purchaser could bring a claim under the MMPA that a product that was mislabeled “meat” in violation of the new law is an unfair practice in violation of the MMPA. Moreover, compliance with the MDA’s labeling guidelines might not be enough to shield companies because the MMPA does not contain an exemption for conduct that complies with the MDA’s memorandum. Other jurisdictions have language in their consumer protection acts that exempt from violation labels that comply with state product labeling regulations. Currently, there is nothing similar in the MMPA that would bar an unfair practice claim brought against a meat substitute product whose label complied with the MDA’s guidelines as a matter of law. Of course, a food industry supplier could argue that a label that meets the standard established by the MDA is by definition not “deceptive” or “unfair” but there is currently no case law in Missouri addressing the merits of this contention.
The Missouri long-arm statute provides that an out-of-state defendant can be subject to personal jurisdiction in Missouri when it commits a tortious act within Missouri. See R.S.Mo. §506.500.1(3). The issue of what constitutes a tortious act within Missouri is not always evident, especially when a defendant solely acted outside of the state. A recent case decided by the Missouri Court of Appeals for the Western District squarely addressed the issue of when alleged out-of-state tortious acts give rise to long-arm jurisdiction in Missouri. In Good World Deals, LLC v. Gallagher, et al., the court held that letters or telephone calls containing fraudulent representations from an out-of-state defendant to a Missouri resident are sufficient to subject the out-of-state defendant to long-arm jurisdiction in Missouri under its tortious act provision.
In Good World, the plaintiff appealed the trial court’s finding that defendant Xcess was not subject to personal jurisdiction in Missouri. Good World, a Missouri limited liability company located in Kansas City, received an email from Xcess, an Ohio limited liability company with its principal place of business in Wooster, Ohio, regarding merchandise that Xcess had for sale.
Following the email, defendant Gallagher, on behalf of Xcess, and Good World engaged in telephone communications and text messages regarding the merchandise. Xcess represented that it had approximately 1,500 Xbox games and 200 Fitbits to offer, among other items, and that the items were overstock and could have damaged boxes. Good World informed Xcess it was interested in the merchandise because of the Xbox games and Fitbits. Following an agreement on the price, Good World arranged its own shipping and picked up the merchandise in Ohio.
Upon receipt of the merchandise and after discovering that there were fewer than 700 Xbox games, no Fitbits and many boxes were empty or contained broken items, Good World notified Xcess that the goods were nonconforming and gave them the opportunity to cure. When Xcess refused, Good World filed suit, alleging misrepresentation and breach of contract.
Xcess moved to dismiss the lawsuit, claiming it was not subject to personal jurisdiction in Missouri. The circuit court agreed. The Missouri Court of Appeals, however, reversed and remanded after employing a two-step analysis to determine if personal jurisdiction existed over Xcess. First, it examined whether Xcess’ conduct satisfied the Missouri long-arm statute and, once it determined that it did, it examined whether Xcess had sufficient minimum contacts with Missouri such that asserting personal jurisdiction over it comports with the principles of due process.
The Missouri long-arm statute vests jurisdiction in the Missouri courts when a defendant personally transacts business, makes a contract, or commits a tortious act in the state. See R.S.Mo. §506.500.1(1)-(3). It provides in relevant part as follows:
Any person or firm, whether or not a citizen or resident of this state, or any corporation, who in person or through an agent does any of the acts enumerated in this section, thereby submits such person, firm, or corporation, and, if an individual, his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of such acts:
(1) The transaction of any business within this state;
(2) The making of any contract within this state;
(3) The commission of a tortious act within this state.
Plaintiff claimed that personal jurisdiction existed over Xcess because it transacted business within Missouri, it entered into a contract in Missouri and it committed a tortious act within Missouri. Because the conduct of Xcess only needed to satisfy one of these subdivisions, the appellate court found that Good World sufficiently alleged that Xcess committed a tortious act, i.e. making false and material misrepresentations about the conformity of the merchandise, within Missouri. Since it was dispositive, the court only addressed the tortious act provision of the long-arm statute.
While Xcess denied any tortious act, it also argued that if there were alleged misrepresentations, they occurred in Ohio and not in Missouri. The Good World court therefore was faced with the issue of what constitutes the commission of a tort “within the state” for purposes of the long-arm statute. In analyzing this issue, the Good World court rejected Xcess’ argument that any such acts did not occur in Missouri because of well-established precedent holding that “‘[e]xtraterritorial acts that produce consequences in the state’ such as fraud, are subsumed under the tortious act section of the long-arm statute.” Because Good World alleged fraudulent acts of Xcess that created consequences in Missouri, the long-arm statute was satisfied and Missouri courts could exercise jurisdiction over Xcess.
Having decided that the long-arm statute was satisfied, the court turned to the second prong of the analysis, which is whether Xcess had sufficient minimum contacts with Missouri such that asserting personal jurisdiction over it comports with due process. The court recognized that the focus of such an evaluation is “whether ‘there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.’” The Court of Appeals held that plaintiff established Xcess purposefully engaged plaintiff in Missouri through emails, text messages and phone calls which contained misrepresentations about the merchandise. Citing the Missouri Supreme Court’s earlier ruling in Bryant v. Smith Interior Design Grp., Inc. 310 S.W.3d 227, 235 (Mo. banc 2010), the Court reasoned that when the actual content of communications in a forum gives rise to intentional tort causes of action, i.e. when the communications contain fraudulent content, there is purposeful availment.
The Good World holding does not limit Missouri precedent holding that communications from an out-of-state defendant to a Missouri resident alone do not amount to transacting business in the state for purposes of the long-arm statute. To the contrary, the court did not address whether Xcess transacted business in Missouri. Instead, this holding is limited to cases in which a plaintiff alleges that an out-of-state defendant sent communications into Missouri that were false and misleading, therefore satisfying the tortious act section of the Missouri long-arm statute.
Governor Parson has signed Senate Bill 608, which enacts three new sections relating to civil liability due to criminal conduct. The Bill affords Missouri business owners greater protection against liability for criminal conduct that occurs on their property.
Senate Bill 608 repealed part of Section 537.349, RSMo, which provided that a person or business owner could not be found liable for the injury or death of a trespasser if the trespasser is substantially impaired by alcohol or an illegal controlled substance, unless the person or business owner acted with negligence or willful and wanton conduct. Under the revised law, negligence is no longer a basis for liability. Now, a person or business owner may only be liable if their willful and wanton misconduct was the proximate cause of the injury or death of the substantially impaired trespasser.
Senate Bill 608 also creates what is referred to as “The Business Premises Act”, which is comprised of Sections 537.785 and 537.787, RSMo. The Act creates safeguards to businesses for third-party crimes out of the business’s control. It provides that there is no duty to guard against unpreventable criminal and harmful acts of third parties that occur on the business premises unless the business knows or has reason to know that such acts are being committed or are reasonably likely to be committed. The Act codifies three affirmative defenses available to a premises owner, should a duty be found to exist under the Act. The business will not be liable:
- if the business has implemented reasonable security measures;
- the claimant was on the premises and was a trespasser, attempting to commit a felony, or engaged in the commission of a felony; or
- the criminal acts or harmful acts occurred while the business was closed to the public.
The Act also provides that evidence of subsequent action taken by a business to provide protection to persons shall not be admissible in evidence to show negligence or to establish feasibility of the security measure. This is consistent with a wide body of Missouri law on subsequent remedial measures. In addition, the Act expressly states that all immunities and defenses to liability available to a business under Missouri law are unaffected, and it shall not be construed to create of increase the liability of a business.
The safeguards created by Section 537.349, RSMo and the Act provide clarification of the duty of businesses when third-party crimes occur on business premises and the applicable affirmative defenses, neither of which was clear under Missouri case law. We will closely follow the body of case law that develops around this statutory framework, and are optimistic that the intent of Senate Bill 608 will be realized.
The full text of SB 608, and the cited statutory provisions may be found here.
Missouri Court of Appeals Eastern District Judges Disagree Regarding Substantial Compliance and Affidavit of Merit Statute in Med Mal CaseAugust 6, 2018
In Ferder v. Scott, the Missouri Court of Appeals, Eastern District (opinion authored by Judge Robert G. Dowd, Jr.), reversed a trial court’s dismissal of a medical malpractice lawsuit for failure to comply with the affidavit of merit requirement in § 538.225, RSMo. The appellate court held the plaintiff’s affidavit, which complied with the statute in every way except that it combined related defendants into a single affidavit, substantially complied with the statute and was sufficient to avoid dismissal.
The plaintiff sued three defendants (a doctor, the doctor’s practice group, and a hospital) but filed only a single affidavit as to all defendants. The plaintiff’s claims against the corporate defendants were premised solely on vicarious liability for the doctor’s conduct as an alleged employee. The plaintiff voluntarily dismissed her claim against the hospital. Later, the two remaining defendants moved to dismiss on the grounds that the single affidavit was deficient because it did not strictly comply with the mandatory language contained in § 538.225.4, RSMo, which states: “A separate affidavit shall be filed for each defendant named in the petition . . . .” The trial court agreed and dismissed the case, without prejudice, pursuant to § 538.225.6. The plaintiff appealed.
On appeal, the plaintiff conceded the affidavit was technically deficient and did not strictly comply with the statute because there was only one affidavit and not three separate affidavits. However, plaintiff argued she substantially complied with the statute because the affidavit was otherwise compliant and timely and verified her claims were not frivolous. She also argued that because the doctor was an employee of the practice group and because she alleged only a vicarious liability claim against the group, the substance of her single affidavit satisfied the purpose and intent of the statute with respect to both defendants. In other words, the affidavit complied in all substantive ways but not in form, and a separate affidavit for the group would have been nothing more than a duplicate of the one already filed with no additional information.
The appellate court reviewed Missouri case law analyzing § 538.225. The court acknowledged no Missouri court had ever found substantial compliance with the affidavit statute, but Missouri courts had not foreclosed the possibility that a plaintiff could survive a motion to dismiss through substantial compliance under a certain situation. The court found the plaintiff’s case, under its own unique set of facts, presented that situation. The court distinguished the various Missouri appellate decisions rejecting substantial compliance arguments as factually dissimilar in that the plaintiffs in those cases failed to file a timely affidavit. Thus, the court reversed and remanded to the trial court.
Judge Kurt Odenwald authored a dissent in which he expressed sympathy towards the plaintiff’s position, and agreed the affidavit substantially complied with the statute. But he did not believe the court had the discretion to disregard the express directive of the statute and make a finding of substantial compliance. That is because the language of the statute is clear and unambiguous, and Missouri law permits substantial compliance with a statute only under a statutory directive to construe a statute liberally or under a statute that expressly allows for substantial compliance, neither of which was present. Further, construing the statute to permit only one affidavit would necessarily render section 538.225.4 meaningless, and Missouri courts are not permitted to interpret a statute in a way that renders any portion meaningless. Without a direct mandate from the Supreme Court of Missouri, Judge Odenwald was unwilling to diverge from the express language of the statute and thus dissented.
On July 11, 2018, the defendants filed an Application for Transfer to the Supreme Court of Missouri asking the Court to address the conflict between the appellate court’s novel application of the substantial compliance theory to § 538.225 on the one hand, and the legislative intent of the statute, and all prior Missouri appellate decisions, including one Supreme Court decision, on the other. The defendants also argue that the ruling destroys the bright-line nature of the statute and creates a test that will inevitably lead to vastly different applications and inconsistent opinions that will cause confusion among the courts and parties. The application is currently pending.
Medical Malpractice: Missouri's Health Care Affidavit Statute is Constitutional - Comply or Face DismissalJune 22, 2018
When will plaintiffs learn? In Hink v. Helfrich, the Missouri Supreme Court has recently added yet another to a long line of Missouri decisions upholding constitutional validity of the health care affidavit requirement for medical negligence actions, and strictly construing the mandatory statutory language. For more on this issue, see our prior post here.
Section 538.225.1 (Missouri Revised Statues) requires that a plaintiff or his counsel file an affidavit with the Court, stating that he has:
“… obtained the written opinion of a legally qualified health care provider which states that the defendant health care provider failed to use such care as a reasonably prudent and careful health care provider would have under similar circumstances and that such failure to use such reasonable care directly caused or directly contributed to cause the damages claimed in the petition.”
The Supreme Court in Hink held plaintiff’s medical malpractice case was properly dismissed for failure to file the required affidavit. In her Petition, the plaintiff challenged the constitutionality of this statute, as revised in 2005, arguing that it violated a plaintiff’s right to jury trial, Missouri’s open courts provision, and separation of powers. When the plaintiff failed to file any affidavit within the prescribed time limit (90 days, plus a 90-day extension as permitted by statute), the defendant physician filed a Motion to Dismiss. The trial court granted defendant's Motion, and plaintiff appealed.
The Supreme Court of Missouri endorsed its prior holding in Mahoney v. Doerhoff Surgical Services, Inc., 807 S.W.2d 503 (Mo. banc 1991), declaring that Section 538.225’s affidavit requirement does not violate the constitutional right of access to the courts under the Missouri Constitution, Article I, § 14, because access to the courts simply means “the right to pursue in the courts the causes of action the substantive law recognizes.” Missouri’s substantive medical malpractice law requires a plaintiff to prove by a qualified witness that the defendant deviated from an accepted standard of care. Without such testimony, the case can neither be submitted to the jury nor be allowed to proceed by the court.
The Court emphasized that Section 538.255’s affidavit requirement is consistent with this substantive law because the legislative purpose of requiring an “affidavit of merit” is to prevent frivolous medical malpractice lawsuits, when a plaintiff cannot put forth adequate expert testimony to support her claims. Thus, the requirement does not deny a fundamental right, or free access to the courts, and does not delay the pursuit of the cause in the courts. At most, it merely redesigns the framework of the substantive law to accomplish a rational legislative end of protecting the public and litigants from the cost of ungrounded medical malpractice claims.
Likewise, the Court once again (as in Mahoney) rejected the argument that Section 538.255’s affidavit requirement violates the right to trial by jury, because the statute simply reiterates existing requirements on plaintiffs: it does nothing more than “parallel” the requirement of Missouri Rule 55.03, that an attorney exercise a reasonable inquiry to ensure the suit is well grounded in fact and law. The affidavit of merit does nothing more than provide more specific guidance as to how medical malpractice plaintiffs must comply with existing pre-suit requirements rather than imposing any new requirement or other restrictions on his or her right to seek redress.
When first enacted, and at the time Mahoney was decided, Section 538.255 gave the trial court discretion on whether to dismiss, providing that if an affidavit was not filed within 90 days, “the court may, upon motion of any party, dismiss the action against such moving party without prejudice.” Mo. Rev. Stat. § 538.225.5, 1985 (emphasis added). In 2005, the statute was amended to provide the court “shall” dismiss the action if an affidavit is not filed, rather than the permissive “may.” This made it yet clear that the trial court had no option to dismiss, where no affidavit was timely filed.
Finally, the Court rebuffed plaintiff’s contention that the 2005 amendment to Section 538.255 defining “legally qualified healthcare providers” to include only those who practice in “substantially the same specialty” as the defendant, impermissibly imposes a stricter burden on the plaintiff than is required to prove a prima facie case of negligence at trial. As plaintiff Hink failed to file any affidavit, the Court held that she was not affected by the alleged deficits to Section 538.255, and therefore lacked standing to challenge its constitutionality. The Court did explain, however, that its interpretation of “substantially the same specialty” includes persons qualified by expertise rather than board certification, and that Section 538.255 does not require the affidavit to rely on only a single expert opinion for both breach of standard of care and causation.
Missouri courts could not be any clearer, Mo. Rev. Stat. § 538.225 is constitutional, mandatory, and here to stay.
The Missouri Legislature introduced bills during its most recent legislative session to curtail forum shopping of class action plaintiffs in Missouri. This anti-forum shopping legislation, while not ultimately enacted into law, would have limited out-of-state plaintiffs from joining lawsuits involving local claims against out-of-state defendants. Current statutes permit these out-of-state plaintiffs to join such claims for a nominal fee, thus allowing them to use Missouri’s court resources and taxpayer dollars to pursue out-of-state defendants for injuries that did not occur in Missouri. House Bill 1578 and Senate Bill 546 attempted to eliminate this problem by limiting both the joinder of plaintiffs and defendants in a single action.
Current Missouri law permits joinder of plaintiffs if they assert a joint right to relief or if their claims arise out of the same transaction or occurrence and if there is any question of law or fact common to all of the joined plaintiffs. Likewise, Missouri law permits joinder of defendants if a claim is asserted against the defendants jointly or if an asserted right to relief arises out of the same transaction or occurrence and there is a question of law of fact common to all of the defendants in the action. The proposed legislation sought to limit joinder by precluding joinder of out-of-state injury claims arising out of separate incidents, or purchases of the same product or service in a single action.
The bills further sought to limit joinder of two or more plaintiffs in an action to only those circumstances in which each plaintiff can establish proper venue independently, except that plaintiffs may be joined in actions in counties with populations below certain specified thresholds. Joinder of two or more defendants in a single action would likewise be prohibited under the proposed legislation unless the plaintiff could establish proper venue and personal jurisdiction as to each defendant, independent of plaintiff’s claims against other defendants. If personal jurisdiction and proper venue could not be independently established as to a particular defendant, that defendant would be deemed misjoined and could only be joined if each party to the action waived objection to the joinder. All claims against a misjoined plaintiff or defendant would have been severable from the action and either transferred to a county where proper venue exists, or if venue is not proper in any county in Missouri or personal jurisdiction does not exist, the claims would be dismissed without prejudice.
Ultimately, H.B. 1578 passed the House, but the similar Senate version, S.B. 546, after appearing on the Senate floor multiple times, failed to pass before the end of this year’s legislative session. While this legislation may be reintroduced next year, if it is enacted with the same provisions as the proposed legislation this session, it will not be retroactive and thus would not affect any lawsuits pending at the time of the legislation’s enactment.
In Jackson v. Barton, the Missouri Supreme Court was asked to decide whether unfair debt collection practices were sufficient to sustain a claim under the Missouri Merchandising Practices Act. To the surprise of many, the Court answered this question in the affirmative.
Specifically, the plaintiff received dental work and a series of oral contracts ensued in which the plaintiff was assured the amount he owed would be relatively small. Subsequently, collection efforts began for a much larger sum that had been agreed to orally. An attorney spearheaded the collection efforts, leaving a wake of collection “no-nos” in his trail. Among his many mistakes, the attorney failed to appear at trial in a collection suit he filed and later sent a demand letter for a much larger sum than was actually owed. Unsurprisingly, the Court was not impressed.
Clearly, these actions were sufficient to state a claim under the Fair Debt Collections Practices Act. There was, however, a question of whether a FDCPA claim was barred by the statute of limitations. Whether plaintiff possessed an actionable claim under the Missouri Merchandising Practices Act (MMPA) was significantly murkier. In essence, the question came down to whether the collection efforts qualified as an act “in connection with the sale” of merchandise as required under the MMPA.
The Court first compared the situation to Conway v. CitiMortgage, Inc., 438 S.W.3d 410, 414 (Mo. Banc 2014), a case in which the Court held that subsequent foreclosure proceedings are actions “in connection with the sale of merchandise” as contemplated by the MMPA. Moreover, the Court found that how a party enforces the terms of sale is in fact a continuation of the sale. With this precedent in mind, the Court turned its attention to how collections efforts should be viewed.
Collection efforts were ultimately held to be a part of or a continuation of the underlying sale of goods and services, in this case dental services. The Court found that because the dentist performed dental services while extending credit to the plaintiff, the sale of such dental services was not actually completed until final payment was received. As such, any collections efforts were made in connection with the sale of dental services in an effort to enforce the terms of the sale.
In sum, even actions that take place long after the bulk of a transaction is completed can still land a party on the wrong side of the MMPA. From a policy standpoint, the MMPA seems to be growing in scope, with Missouri courts willing to apply the Act to a wide array of situations and actions by defendants. In a world where debt collections can be a tricky area for businesses, and other statutes clearly regulate debt collection activities, the threat of running afoul of the MMPA only raises the stakes.
According to data from the Greater Kansas City Jury Verdict Service, courts in the metropolitan area experienced fewer jury trials in 2017, but the Plaintiffs’ Bar still managed to have a good year. Every year, the Greater Kansas City Jury Verdict Service issues a “Summary and Statistics of Jury Verdicts” for the greater Kansas City area. The report includes verdicts from the Kansas City division of the U.S. District Court for the Western District of Missouri; the Kansas City branch of the U.S. District Court for the District of Kansas; and state courts in Jackson, Clay and Platte counties in Missouri; and Johnson and Wyandotte counties in Kansas. The statistics in 2017 indicate a shift in various respects from 2016.
Fewer Trials, with an increased percentage of Plaintiffs’ verdicts
The Jury Verdict Service’s annual summary reported on 97 trials in 2017, compared to 113 in 2016. These numbers are down from the preceding three-year period: there were 110 trials in 2015, 133 trials in 2014, and 122 trials in 2013.
Because trials often involve multiple claims and multiple verdicts, the verdict statistics are based on the claims adjudicated, rather than simply the number of cases. The 97 trials in 2017 resulted in 193 verdicts; and the 113 trials in 2016 resulted in 199 verdicts.
While the number of trials has decreased from the preceding three-year period, the percentage of Plaintiffs’ verdicts has seen a slight increase. In 2017, 49% of the verdicts were for Plaintiffs compared to the 42% for Plaintiffs in 2016.
Increase in Average Monetary Awards for Plaintiffs
The overall average of the monetary awards for Plaintiffs experienced a significant increase from previous years. In 2016, the average of Plaintiffs’ verdicts was $1,383,549 while the average in 2015 was $1,376,323. In 2017, the average monetary award for Plaintiffs rose precipitously to $4,204,501. But most of this increase can be attributed to two hefty verdicts: $217.7 million awarded in the Syngenta Corn Litigation and $139.8 million the Time Warner Cable et al. litigation. (Friendly suggestion to Jury Verdict Service: how about reporting on the median jury verdict, as well as the average?)
Slight Decrease in Number of Large Verdicts
In 2017, the 11 verdicts that exceeded $1 million, compared to 16 such verdicts in 2016. However, both years show a large increase from the 6 verdicts in 2015 in the same monetary range. Of the eleven $1 million+ verdicts in 2017, 6 were in Jackson County, MO Circuit Court (evenly split between Kansas City and Independence), 2 were in the Circuit Court of Clay County, MO, and 3 were in the U.S. District Court for the District of Kansas. Finally, the amount of verdicts between $100,000 and $999,999 was virtually unchanged from 2016 (37 verdicts) to 2017 (36 verdicts).
Key Observations and Conclusion
Over the last four years, the percentage of Plaintiffs’ verdicts has increased. Additionally, the average amount of Plaintiffs’ verdicts has increased steadily from its low point in 2014. Over half of the verdicts awarded in 2017 that exceeded $1,000,000 were in Jackson County, MO Circuit Court, which is consistent with the view of many practitioners that this can be a Plaintiff-friendly forum. As we have stated in our previous Jury Verdict roundups, clients and national counsel should work with local counsel to carefully consider the forum when assessing the value of a case.
Source: Greater Kansas City Jury Verdict Service Year-End Reports 2013-2017
Premises liability update: Missouri Supreme Court affirms ruling on adequacy of negligence jury instructionMarch 23, 2018
We recently reported on a ruling of the Missouri Western District Court of Appeals that there was sufficient evidence to support the giving of the negligence instruction in a case where an employer was found liable for damages sustained when an employee was injured by a third party criminal act. The Missouri Supreme Court has now upheld that ruling. In Wieland v. Owner-Operator Services, Inc., Wieland was an employee of the Owner-Operator company when she alerted her employer that she felt threatened by an ex-boyfriend named Alan Lovelace. In response, the company undertook certain precautions, including disseminating a photograph of the ex-boyfriend to the reception area and informing the company’s safety team about the situation. Some two weeks later, Lovelace gained access to the employee parking lot and laid in wait in Wieland’s vehicle. After approximately an hour, Wieland and Lovelace had a confrontation and as Wieland walked away, Lovelace shot her in the back of the head. Wieland later sued the company.At trial, the circuit court judge approved a jury instruction which allowed liability for the criminal acts of a third party in instances where the defendant knew or by using ordinary care could have known that the third party was on its premises and posed a danger. In doing so, the trial court invoked an exception to the general rule that there is no duty to protect against criminal acts of third parties. Missouri courts have essentially adopted the rule established by § 344, Comment F, of the Restatement (Second) of Torts. That rule provides that since the possessor is not an insurer of the visitor safety, he is ordinarily under no duty to exercise any care until he knows or has reason to know that the acts of the third person are occurring, or are about to occur. The rule underscores that once the specter of harm to an invitee becomes apparent, the general rule insulating a premises owner from liability no longer applies. The evidence introduced at trial was that Owner-Operator had surveillance cameras that would have shown Mr. Lovelace gaining access to both parking lot and Wieland’s vehicle. However, the surveillance cameras were not monitored at the time the incident occurred.
In its appeal, the company argued the circuit court erred in submitting the jury instruction that allowed for this finding because there was not substantial evidence to let this issue go to the jury. The Supreme Court ruled that while a challenge to this verdict director was abandoned on appeal and was therefore not properly before the Court, in any event, the Plaintiff’s argument, as adopted by the trial court, did not misstate the law.
Missouri Court of Appeals Weighs in on the Breadth of Discoverable Prescription Records, Post-MortemJanuary 19, 2018
Decedent’s wife filed a lawsuit in Barton County, Missouri in 2016 after her husband was killed when a dump/bale bed manufactured by defendant Cannonball Engineering, which he was repairing at the time of the incident, crushed him. Plaintiff sued Cannonball on various negligence and product liability theories. A coroner’s two post-mortem blood samples, collected on the date of decedent’s death, revealed reportable amounts of opioid prescription pain medication.
Cannonball served discovery, seeking information on decedent’s prescription medications for about six years prior to his death. Plaintiff objected that the request was overbroad as to time and scope, and violated the decedent’s physician-patient privilege. Cannonball moved to compel the production of records.
Plaintiff argued that the only physical or medical condition identified in Plaintiff’s Petition was the crushing injury that killed decedent; that case law only entitles a defendant to medical records that relate to physical conditions put in issue by the Plaintiff’s pleading; and that any discovery in excess of this scope amounts also to a violation of the physician-patient privilege.
Cannonball argued that it was entitled the information because it was relevant to: (1) the impact the prescription pain medications may have had on decedent’s abilities around the time of his death; and (2) Cannonball’s affirmative defense of comparative fault (i.e., the decedent knew that it was unsafe to consume the medications and then operate heavy equipment, but negligently did so anyway). Cannonball also argued that the information was discoverable because Plaintiff alleged failure to warn and thereby impliedly asserted that decedent had the mental capacity to appreciate the warnings on the dump/bale at the time of the accident.
The trial judge sustained Cannonball’s Motion to Compel and ordered Plaintiff to execute the requested authorization for decedent’s prescription medications. Plaintiff applied for a writ of prohibition to block the trial court’s order.
The Missouri Court of Appeals for the Southern District granted the writ, concluding that the trial court had abused its discretion. The Court of Appeals noted that the physician-patient privilege remains intact until a plaintiff’s physical condition – as put in issue by the pleadings - is waived.The Court of Appeals held that Plaintiff’s allegations placed decedent’s cognitive function at the time of the incident at issue and waived his physician-patient privilege with respect to records that related to the issue of his mental capacity at or around the time of his death. On this basis, Cannonball, who alleged that decedent may have been cognitively impaired at the time of his death, was entitled to discover decedent’s prescription medication records at or near the event. But there was no justification for the trial court to allow discovery of nearly six years of prescription records, when decedent’s mental capacity only at or around the time of the incident was at issue.
"Reasonable Attorney's Fees" Awarded On a Missouri Merchandising Practices Act Claim May Not Be Limited By a Plaintiff's Contingency Fee Agreement With CounselJanuary 5, 2018
In Selleck v. Keith M. Evans Insurance, Inc., the Missouri Court of Appeals for the Eastern District remanded a case back to the trial court for further consideration on the reasonableness of an award of attorney’s fees, under the Missouri Merchandising Practices Act. The trial court ruling limiting plaintiff’s fees based upon his contingency fee agreement with his attorney was overturned.
Plaintiff sued his former employer in state Circuit Court for wrongful discharge, unpaid commissions under the MMPA, unjust enrichment and breach of contract. The litigation was “contentious” and “antagonistic”, with numerous discovery disputes. At trial, plaintiff requested damages for wrongful discharge in the amount of $160,000 and lost commissions in the amount of $11,709. Plaintiff presented evidence at trial that he had hired counsel on a contingency fee basis. The jury ruled for Defendant on the wrongful discharge claim, but awarded Plaintiff $10,000 for lost commissions on his MMPA claim.
Plaintiff’s counsel filed a post-trial motion seeking attorney’s fees in the amount of $221,292 under § 407.193, which states that a trial court “may award reasonable attorney’s fees and costs to the prevailing party.” Plaintiff’s counsel represented that they billed 788 hours by attorneys with hourly billing rates of $280 and $450. Noting that Plaintiff has entered into a one-third contingency fee agreement with counsel, the Court ruled that Plaintiff was entitled to reasonable attorney’s fees and awarded $3,333.33, or one-third of the $10,000 recovery. The Court found that the $221,292 claimed by plaintiff’s counsel was not reasonable and extremely excessive for the type of case involved. Plaintiff appealed.
Contingency Fee Agreement Does Not Serve as a Cap on MMPA Attorney’s Fees
Plaintiff’s single point on appeal was that the trial court erred in utilizing the contingency fee agreement to determine the award of attorneys’ fees under the MMPA. The Court of Appeals agreed. Although Missouri law does not prohibit consideration of a contingency fee agreement in making a reasonable-fee determination, it is only one of many factors that must be considered. However, the agreement cannot be used to impose an automatic ceiling on reasonable fees to be awarded. The Court must also consider other factors, including a determination of a “lodestar” amount – determined by multiplying the reasonable number of hours for the type of case by a reasonable hourly rate determined by rates customarily charged by the attorneys involved as well as other attorneys in the community offering similar services.
Concluding that the Circuit Court had used the contingency fee agreement to determine a cap on reasonable fees for Plaintiff’s counsel, the Court of Appeals reversed, and remanded the matter to the trial court for a determination of a reasonable fee based upon not only the contingency fee agreement, but also:
-the number of hours reasonably expended on the case,
-the nature and character of the services rendered,
-the degree of professional ability required,
-the nature and importance of the matter,
-the amount involved or the results obtained, and
-the vigor of the opposition.
Conclusion - Guidance for the Future
Although a contingency fee agreement may be considered in determining reasonable attorney’s fees under the MMPA, it is but one of many factors for the trial court to assess. The contingency fee provided for in the agreement cannot be used as a “cap” on MMPA attorney’s fees.
In Shallow v. Follwell, the Missouri Court of Appeals for the Eastern District of Missouri reversed and remanded a jury’s verdict for defendant Dr. Follwell, holding the trial court improperly allowed cumulative expert witness testimony that imperiled the jury’s ability to fairly consider the quality and quantity of expert witness opinions.
The case involved a surgical mesh procedure to repair decedent’s hernia. After the doctor twice within 24 hours discharged the patient from the hospital, she returned to the hospital a third time, where she was diagnosed with a severe infection in her abdominal cavity, caused by leakage of toxic and infectious bowel contents into her abdomen. She died soon thereafter.
At trial, Dr. Follwell – designated as a fact and expert witness on his own behalf – did not dispute that decedent’s bowel was perforated, leaked, and caused the septic condition that led to her death. He denied that he caused the hole in her bowel, however, and presented his alternative theory that decedent suffered from undiagnosed atrial fibrillation, which caused a blood clot to form, restricted the blood flow to that section of decedent’s bowel, and ultimately weakened and perforated the bowel wall. Four other retained experts testified for Dr. Follwell: (1) a critical care specialist; (2) a cardiologist and internist; (3) a vascular surgeon; and (4) a colorectal surgeon.
While there is no “bright line” rule as to how many expert witnesses a party may utilize to prove or defend its case, Missouri trial courts are charged with admitting evidence that is both logically and legally relevant. The concept of legal relevance includes whether the evidence may, among other things, pose a danger of unfair prejudice, be a waste of time, and amount to the needless presentation of cumulative evidence. Missouri courts have expressed concern that excessive cumulative evidence risks invading the jury’s ability to resolve the case on the merits and evaluate the quality and credibility of expert opinions. Cumulative expert opinions may instead result in the jury simply “counting heads.” The Shallow v. Follwell court held that the trial court abused its discretion in failing to properly determine when cumulative evidence should stop.
It was not just the number of defendant’s experts that caused the Court of Appeals to reach its conclusion. Rejecting the defendant’s claim that each expert’s testimony was limited to his own area of medical expertise - cardiology, internal medicine, critical care, the vascular system, and the gastrointestinal system - the Court of Appeals ruled that what actually happened was that each expert presented his expert opinion in his own area of expertise, but also repeated the sum and substance of the defense’s alternative theory of causation, in testimony that extended beyond the expert’s specialty. The jury therefore heard the same opinions multiple times – essentially a “chorus of the same ultimate opinions” – which impeded its duty and ability to fairly weigh the evidence on each side.
In returning the case to the Circuit Court for a new trial, the Court of Appeals chastised the trial court for “ignoring its duty to properly assess whether the testimony was needed,” and reminded the trial court “to adhere to the principles and standards set forth in this opinion and elsewhere in Missouri law for determining the admissibility of cumulative evidence.”
Candy manufacturers nationwide are increasingly finding themselves in Missouri state court, facing class action allegations that their use of over-sized packaging misleads consumers into believing the package contains more product than is actually present. A recent Eighth Circuit decision in a “slack-fill” case suggests that when a corporate defendant removes to federal court under the Class Action Fairness Act (CAFA), it may face a stiff challenge when the plaintiffs move to remand the case to state court, on the grounds that the value of their claims total less than $5 million.
In Waters v. Ferrara Candy Co., people who bought Red Hot candies initiated claims against the candy company for violation of the Missouri Merchandising Practices Act (“MMPA”) based on under-filled or “slack-filled” cardboard boxes of the candies. The consumers filed suit in the City of St. Louis Circuit Court. Presumably seeking a less plaintiff-friendly venue, the candy company removed the case to the federal court for the Eastern District of Missouri, under CAFA, arguing that the total value of the consumers’ claims exceeded $5 million, the minimum amount required for the district court’s jurisdiction under that statute. The candy company based its calculation on what the consumers could potentially recover as compensatory damages (total sales in Missouri for the past five years), attorney’s fees (at 40% of compensatory damages), and punitive damages (at 5 times compensatory and punitive damages), and the cost of changing its packaging processes to eliminate slack-fill.
The consumers moved to remand the case back to the City of St. Louis, arguing that the $5 million threshold was not met. In opposition, the candy company submitted affidavits from executives attesting to the total retail sales of all Red Hots products for the previous five years and how much it would cost to change its packaging processes to eliminate slack-fill, if it were compelled to do so.
The district court considered each category of potential recovery by the consumers and concluded that taken together or separately, the value of the consumers’ claims did not meet the $5 million threshold and ordered the case back to the City of St. Louis. The court concluded that compensatory damages and attorney’s fees added up to less than $1 million, and that punitive damages should not be included in the calculation, because the consumers had not adequately pled punitive damages in their petition and, therefore, punitive damages would not be recoverable in this case. That left the value of injunctive relief. In deciding how to calculate the value of injunctive relief, the court followed “longstanding Eighth Circuit tradition” and looked at it from the consumers’ point of view, rejecting the “either viewpoint” test, which compares the value of injunctive relief to consumers to the cost to the manufacturer and taking the more expensive of the two. The candy company urged adoption of the “either viewpoint” test but presented no evidence of the value of injunctive relief from the consumers’ point of view, so the court disregarded this factor as well.
The court went on to criticize the efficacy of the candy company’s affidavits to establish the cost of injunctive relief from the manufacturer’s point of view. The CEO’s affidavit addressed the cost of changing its packaging to eliminate slack-fill based on an estimated cost to upgrade its packing equipment. The court found this to be speculative because it did not specify what injunctive relief would actually require the manufacturer to do -- add more candy to the existing package size, shrink the package size to more closely fit the current weight of actual candy, or modify every Red Hots candy production line. As a result, the court found the proposed cost to be too speculative to allow the consumers’ to rebut it.
The candy company appealed this decision, challenging (among other things) the district court’s adoption of the “plaintiff’s viewpoint” test. The Eighth Circuit Court of Appeals was unmoved. The appeals court found it unnecessary to rule on whether the district court should have applied the “plaintiff’s viewpoint” or the “either viewpoint” test, because it found that under either standard, the candy company failed to prove by a preponderance of the evidence that the amount in controversy exceeded $5 million. The appeals court agreed with the district court that the two affidavits did not adequately quantify what it would cost the company to comply with an injunction.
Given another chance, the Eighth Circuit might decide that the “plaintiff’s viewpoint” test determines the value of injunctive relief for establishing the jurisdictional amount under CAFA. Thus, a reasonable and conservative strategy to keep a slack-fill class action in federal court would be to present evidence from the consumers’ point of view and be as specific as possible about the method and cost of eliminating slack-fill. This is a calculus that can be accomplished before deciding to remove, and if neither of these amounts can be supported with specific evidence to establish a finding of at least $5 million, it might be more cost effective to just stay in state court.
Counsel should also keep in mind that in cases where plaintiffs have adequately pled punitive damages in their state court petition (which did not occur in the Waters case), it is not uncommon for punitive damages to total up to 10 times the amount of compensatory damages, and this can be a critically important factor in determining whether the CAFA threshold has been met.
Western District Court of Appeals Expounds on Attorney Duty of "Reasonable Investigation" of Juror Litigation HistoryOctober 24, 2017
Attorneys typically rejoice when courts provide further definition of previously established rules, standards, and legal terms; and that is exactly what the Western District Court of Appeals did in King v. Sorenson. We have previously chronicled Missouri’s adoption of Rule 69.025, which obligates a litigant to investigate the backgrounds of potential jurors. Specifically, if a litigant has failed to conduct a “reasonable investigation” of prospective jurors’ litigation history, he has waived the right to seek relief from an adverse judgment, based on juror non-disclosure. Before King v. Sorenson, lawyers knew that the definition of a “reasonable investigation” required review of Case.net before the jury is sworn, but there was no further guidance as to the required extent of a “reasonable search,” nor any accepted protocol to ensure that a search of venireperson’s litigation history is conducted properly.
King v. Sorenson was a wrongful death and lost chance of recovery case, in which the trial court provided both parties with a list of sixty-five randomly selected names of potential jurors. One of potential jurors was listed at “J. Paul Willis,” and this was confirmed by a separate juror questionnaire where the venireperson provided the name of “(John) Paul Willis.” At no time did the venireperson represent that Paul was his functional first name, and Plaintiff’s counsel solely conducted Case.net searches using “J” or “John” as the litigant’s first name, “P” or “Paul” as the middle name, and “Willis” as the last name. These searches revealed no collections cases involving the prospective juror.
In voir dire, Plaintiff’s counsel emphasized the importance of prospective juror honesty, candor, and how the lack thereof could cause the same issues to be re-tried and re-litigated. When the panel was questioned about collection cases that have been brought against them, Mr. Willis remained silent. Mr. Willis ultimately was seated on the jury, and participated in its defense verdict, signing the verdict form as “Paul Willis.”
Contrary to Willis’ representations on his juror questionnaire and during voir dire, it was later discovered that he was a defendant in a collection case where he was sued for an alleged breach of contract styled Champion Trim, Inc. v. Paul Willis, et al. Because Willis never provided “Paul” as his first name, Plaintiff’s counsel had not searched Case.net for matters involving a “Paul Willis.”
Plaintiff moved for a new trial based on the juror non-disclosure of litigation history. But the trial court denied the motion, and ruled that Plaintiff’s counsel “mistakenly used the incorrect first name” when conducting a Case.net search, and the search was therefore unreasonable. The Western District Court of Appeals disagreed and held that “where a litigant has performed a Case.net search by inserting the names as provided to counsel by the trial court, such a search simply cannot be deemed anything but ‘reasonable.’”
The appellate court remanded the case to the trial court, to determine if a new trial was warranted. It held that “if the trial court finds that Juror Willis’s nondisclosure was intentional, bias and prejudice must be presumed and a new trial ordered. If the trial court finds that the nondisclosure was unintentional, it must undertake an analysis as to whether Plaintiffs were prejudiced, in such a fashion necessitating a new trial, by Juror Willis’s nondisclosure of the 1991 lawsuit.”
Courts are often asked by plaintiffs’ counsel to admit evidence of other similar incidents (OSI) in order to show a defendant’s knowledge of an alleged defect, and/or causation. Plaintiffs have used this approach to tap into the power of strength in numbers and will typically seek to introduce evidence of as many “similar” incidents as a trial court will allow. Although the law allows for the introduction of this type of evidence, a trial court must carefully balance the relevancy of this evidence versus the prejudicial effect. The Eighth Circuit in Adams v. Toyota Motor Corp., recently examined the admissibility of evidence of other similar instances in an automotive “unintended acceleration” case. Plaintiff Koua Lee was driving his 1996 Toyota Camry on the highway. While exiting the highway, the car continued to accelerate, failing to stop as he pressed on the brake. Lee rear ended a car stopped at a red light, killing three of the five passengers in the stopped car and severely injuring others, including passengers in his own car. The Court of Appeals, in upholding the trial court’s decision to admit this evidence, affirmed that evidence of substantially similar incidents can be admitted in appropriate circumstances, and that the trial court is in the best position to determine whether or not this evidence is a distraction to jurors or is otherwise unduly prejudicial.
Weighing in favor of admissibility, OSI evidence can be relevant in that it can show a party had notice of defects. It may also be used to demonstrate the magnitude of the danger and the product’s lack of safety for its intended uses. But there are limitations to the use of OSI evidence. The prior incidents must be “substantially similar” to the incident in the case at hand. And the probative nature of the evidence must outweigh its potential for prejudice.
Here, the Court explained that there are no hard and fast rules to determine if the evidence is substantially similar. It is a case by case determination, and the court must focus on all the circumstances surrounding the OSI evidence and the facts of the case. When OSI evidence is admitted, a defendant is free to argue to the jury the evidence is not persuasive by pointing out the dissimilarities between the purported “similar” incident, and the incident presently being litigated.
In determining that there was no abuse of discretion in admitting this evidence, the Court stated the trial court properly looked at the circumstances surrounding the OSI evidence and that evidence was similar to what happened to plaintiff. Each witness drove a 1996 Camry with over 100,000 miles. Each witness testified that the Camry accelerated or maintained speed when his foot was removed from the gas pedal and the brakes were ineffective. Testimony from these three witnesses was very similar to testimony from the plaintiff. Additionally, an expert witness reviewed the OSI evidence and testified that he considered the three witnesses’ experiences to be similar to the plaintiff’s experience. The appellate court also approved of the trial court’s exercise of cautious discretion in limiting the OSI testimony to three witnesses.
There is a risk of admitting OSI evidence. As the Court noted, it can lead to a confusion of issues or be more prejudicial than useful. However, the trial court is in the best position to make sure that this does not occur. As long as the trial court does not abuse its discretion, the admittance of OSI evidence will be upheld.
“Dogs are not our whole life, but they make our lives whole.”
Animal-Welfare Advocate Roger Caras
(quoted by Court of Appeals Judge Lawrence E. Mooney)
I am an unabashed dog-person. Thus, a recent opinion out of Missouri’s Eastern District Court of Appeals, which entangled a dog’s adoption story with the law, immediately had me hooked.
Other than what I read in the Court’s opinion, I do not personally know Mack the Dog, nor the other dramatis personae in this case, and I am not here to provide commentary or an opinion on any of them. So I will limit my discussion to the Court’s legal analysis, and its potential implications for future cases.
If you are still reading, you likely are also a dog-person and/or would like to know more about the dog-gone contract at issue.
In Patterson v. Rough Road Rescue, Inc., the Court of Appeals affirmed a trial court’s decision to return a dog named Mack to, according to the Court, its rightful owner, plaintiff Patterson.
The trial court had found in favor of Plaintiff who made a claim for replevin, a civil remedy and “possessory action to obtain property that is in the defendant’s possession,” after Defendant Rough Road Rescue would not return the dog. Mack had previously been adopted from the rescue shelter by Patterson and had been picked up in town and returned to the shelter after wandering off from Plaintiff’s yard. To succeed on such a claim of replevin, a plaintiff must show:
- The plaintiff owned the property or was entitled to possess it;
- The defendant took possession of the property with the intent to exercise some control over it; and
- The defendant, by exercising such unauthorized control over the property, deprived the plaintiff of his right to possession.
On appeal, Defendants argued that the trial court erred in its decision because 1) the adoption was not governed by the UCC in that “the adoption was not a ‘sale’ and because they are not ‘sellers’ or ‘merchants’ as defined by the code, 2) the terms of the contract, under which Patterson adopted Mack, provide a reversionary interest in the dog permitting defendants to retake and retain the dog when the terms of the Animal Adoption Contract were breached, and 3) the $2500 bond posted, which was due to an individual defendant’s failure to comply with the trial court’s order to return Mack, was grossly excessive.
The Court of Appeals’ affirmation of the trial court’s decision, finding replevin was properly granted due to the adopter (Plaintiff) being the rightful owner, came after a de novo review of Plaintiff’s claim to possession of Mack based on Rough Road Rescue’s Animal Adoption Contract. Unlike the trial court, the Court of Appeals focused not on whether a dog was actually a “good” under the UCC and/or whether the adoption was a “sale” contemplated by the UCC, but rather on the interpretation of the Contract. Personally, as one who has always considered my dogs as family, I felt uneasy about the trial court’s label of the dog as a “good” and thought that there needed to be a discussion about that label and the law, but perhaps the Court wanted no dog in that fight, for now.
Plaintiff’s claim was based on the Contract; thus, the issue presented was of contract interpretation. “A cardinal principle of contract interpretation is to ascertain the intention of the parties and to give effect to that intent.” The Court honed in on five specific “conditions” set forth in the Contract. The first, third, and fourth addressed fairly standard conditions, setting a timeline for the adopted pet to be spayed/neutered, providing the adopted pet with humane care, and complying with all laws and ordinances applicable to the adopted pet where the adopter lives. The tenth was an additional, handwritten requirement that the adopter agreed to provide a fenced yard for the adopted pet by a certain date.
Where there is ambiguity within the four corners of a contract – i.e., the language used “is reasonably susceptible to two or more interpretations” - then the Court looks at such external factors as the relationship of the parties, circumstances of the execution of the contract and its subject matter, acts of the parties, and circumstances which may shed light on the intent of the parties. A court “construes the ambiguity and interpret the contract in the light most favorable to the party who did not draft the contract.”
In this case, the Court found at least some portions of the Contract ambiguous, largely within the language of the ninth condition, which stated:
9. Any noncompliance of this adoption contract by the above mentioned owner, may void this contract. And could immediately give a representative of Rough Road Rescue, Inc. the authority to take possession of said animal. (emphasis added)
Since the contract was drafted by Rough Road Rescue, the Court construed the contract, including the ninth provision above, against Rough Road Rescue and in favor of Plaintiff. Also, of note, is that Rough Road’s own personnel, who were involved in the drafting of the Contract, even disagreed about the meaning of many of its terms, such as adoption, providing further support of the Contract’s ambiguity.
The use of the words “may” and “could” were central to the Court’s analysis. In interpreting condition #9, the Court reasoned that “‘may’ and ‘could’ are conditional words as to what might occur, rather than what must result.” This repossession provision also clearly stated that the adopter was the owner, which implied that the adopter obtained ownership (full and exclusive rights), not just possession (which can be temporary and/or partial) of the adopted animal, therefore, the Court concluded that the Contract did in fact grant Plaintiff ownership of Mack and rejected what it found to be an unreasonable result if Rough Road Rescue was permitted to keep such a long leash on the potential repossession of Mack.
Lessons learned from this dog-gone contract? First, use assertive, mandatory language, such as “shall void” (not “may void”) and “must” (not “could”) if you want a stronger argument of a right to repossession of property. Second, make sure those who draft your contract are all in agreement with what those contractual terms mean (perhaps you want to get that agreement in writing too). Third, be cognizant and purposeful with the language that you use in your contracts, to avoid a “ruff” result.
"Slack Fill" Litigation under the Missouri Merchandising Practices Act: Save it for Summary JudgmentAugust 30, 2017
In two consecutive nearly identical opinions, a Missouri federal court ruling on food merchandisers’ motions to dismiss indicates that food labeling protections in Missouri strongly favor consumers, including in slack fill cases. (The term “slack fill” refers to the alleged use of over-sized packaging that could mislead a consumer into believing the package contains more product than is actually present.) In Bratton v. The Hershey Company and White v. Just Born, Inc., the Western District of Missouri refused to dismiss claims against candy manufacturers for selling under filled boxes of Reese’s Pieces and Whoppers (Hershey) and Hot Tamales and Mike and Ike’s (Just Born), thereby allowing both class actions to proceed to the discovery stage. Hershey and Just Born are among several food merchandisers that have recently found themselves in court over claims by consumers that they are being cheated by slack filling.
In both cases, the plaintiffs allege deceptive packaging in violation of the Missouri Merchandising Practices Act (MMPA), in that the candies they purchased came in opaque, rigid, cardboard boxes containing slack-filled space, making plaintiffs think that they were a better value than smaller packages. The plaintiffs argue that consumers spend an average of 13 seconds making purchasing decisions, and that such a decision is heavily based on the product’s packaging. The lawsuits allege that between 29 to 41 percent of the candy boxes are empty, but nothing prevents the candy companies from reducing the box size or adding more candy. The plaintiffs also contend that slack-filled space serves no practical purpose and that they would not have purchased the products or would have paid less for them had they known the boxes were under filled. The plaintiffs seek “benefit of the bargain” damages, measured by the difference between the actual value of the products versus their value as represented.
In each case, the candy company asked the court to dismiss the plaintiff’s MMPA claim, arguing that these allegations are not enough to show that they violated the MMPA or that the plaintiff suffered an “ascertainable loss”, as required by the statute. The candy companies contended that a reasonable consumer would readily realize the candy boxes are not filled to the top because their contents “audibly rattle.” The candy companies also said that it is common knowledge that most packaged goods contain some empty space, which is “necessary for efficient manufacturing and distribution.” The candy companies argued that consumers are not misled because information about the net weight of the contents, the number of pieces of candy per serving, and the number of servings in the box are clearly listed on the box.
These arguments did not persuade the court that the cases were subject to immediate dismissal. The court stated that whether a reasonable consumer would notice rattling in the 13 seconds it typically takes to make a purchase, and then be able to determine the amount of slack fill, are questions of fact that cannot be resolved before there has been fact discovery on these issues. In both opinions the court relied on the Missouri Court of Appeals decision in Murphy v. Stonewall Kitchen, LLC (see prior post) involving muffin mix labeled as “all natural” while disclosing in the ingredient list that it contained sodium acid pyrophosphate. There, the Missouri Court of Appeals said a reasonable consumer would expect the ingredient list to comport with the packaging. The court stated that the same reasoning could apply in both of these cases. Thus, the court decided that it cannot conclude at this stage of the litigation that the packaging is not misleading.
The message of these decisions is that reasonableness under the MMPA is an issue of fact that should be saved for summary judgment or trial.
In Caplinger v. Rahman, the Missouri Court of Appeals for the Southern District of Missouri reversed and remanded the trial court’s dismissal without prejudice of plaintiff’s medical malpractice action based upon its holding that plaintiff’s R.S.Mo. § 538.225 affidavit was insufficient.
The statute requires that, in a medical malpractice action, a plaintiff or plaintiff’s attorney file an affidavit stating that he or she has obtained the written opinion of a “legally qualified health care provider” who opines that the defendant failed to use such care that a reasonably prudent healthcare provider would have used under similar circumstances and that such failure caused or contributed to plaintiff’s damages. A “legally qualified health care provider” is one who is licensed in the same profession as the defendant and is either actively practicing, or is within five years of retirement from actively practicing, “substantially the same specialty as defendant.”
A defendant may challenge the plaintiff’s affidavit by requesting that the court conduct an in camera inspection of the written opinion. If the court determines that the written opinion does not meet the requirements of R.S.Mo. § 538.225, then the court shall conduct a probable cause hearing to determine whether there exists at least one competent health care professional to testify that plaintiff was injured due to defendant’s alleged medical negligence. If the court fails to find probable cause, plaintiff’s petition shall be dismissed.
In Caplinger, the defendant applied a biologic bone-growth stimulant during spinal surgery, which plaintiff alleged caused exacerbated bone growth, complications, and which was done in a non-approved manner and without plaintiff’s informed consent. Plaintiff’s counsel filed a § 538.225 affidavit, stating that he had obtained the written opinion of a Board Certified physician in General Surgery, who actively practices laparoscopic, general, and weight loss surgery.
The trial court’s in camera inspection left it unpersuaded that the physician practiced the same specialty or had the requisite experience to stand as a “legally qualified health care provider.” At the subsequent probable cause hearing, plaintiff provided the trial court with the additional testimony of a practicing neurosurgeon, who opined that defendant violated the standard of care and caused plaintiff’s injury. Plaintiff represented that this neurosurgeon would so testify at trial. But the trial court dismissed plaintiff’s petition on grounds that the first physician was not a legally qualified health care provider, and ruled that an expert identified and found qualified at a probable cause hearing must be the same person(s) identified in plaintiff’s § 538.225 affidavit.
On review, the Missouri Court of Appeals for the Southern District agreed that the first physician did not practice substantially the same specialty as defendant, but held that the probable cause hearing remedy provided for in Section 7 of R.S.Mo. § 538.225 was meant to allow a plaintiff to cure deficiencies in his affidavit, through subsequent testimony. The Court reasoned that every provision of a statute must be given some meaning, and if Section 6 (requiring dismissal without prejudice for the failure to file an affidavit containing the information mandated by Sections 1-5) were the end of the analysis, there would be no purpose for Section 7 (providing for a probable cause hearing if the court finds the affidavit to be insufficient).
Reversing the Greene County Circuit Court’s dismissal, the Court of Appeals held that the first physician’s failure to qualify as a “legally qualified health care provider” was not fatal to plaintiff’s case, where a fully qualified second physician testified at the probable cause hearing that defendant failed to exercise the appropriate level of care. The Court of Appeals also expressly rejected the trial court’s finding that at least one of the health care professionals who testifies at a probable cause hearing must be the same person previously identified in plaintiff’s R.S.Mo. § 538.225 health care affidavit.
U.S. Supreme Court Says it Again: Arbitration Agreements Should be Honored, and Not Singled Out for Negative Treatment by State CourtsAugust 10, 2017
For years, the U.S. Supreme Court has made two fundamental principles crystal-clear:
- Under the Federal Arbitration Act, arbitration agreements are “valid, irrevocable, and enforceable”, except where grounds exist that could invalidate any type of contract (such as fraud, duress, or lack of consideration).
- As explained by the Supreme Court in its 2011 landmark Concepcion decision, though a court may invalidate an arbitration agreement based on “generally applicable contract defenses,” it may not do so based on legal rules that “apply only to arbitration or that derive their meaning from the fact that an agreement to arbitrate is at issue.” The FAA thus preempts any state rule that discriminates on its face against arbitration or that covertly accomplishes the same objective by disfavoring contracts that have the defining features of arbitration agreements. Arbitration agreements must stand on an “equal footing” with other contracts.
Unfortunately, some state courts have failed to get the message. And the Supreme Court’s recent 7-1 decision in Kindred Nursing Centers L.P. v Clark, 137 S. Ct. 1421 (2017),forcefully drives home the point that contrived state court attempts to explain why a rule is not impermissibly targeted at arbitration agreements will be viewed dimly
In Kindred, the Kentucky Supreme Court adopted a “clear statement” rule, under which a general power of attorney that was otherwise valid to authorize the execution of contracts in general, would not validly authorize execution of an arbitration agreement unless the power of attorney expressly addressed that topic. Thus, when family members holding a power of attorney agreed to arbitrate claims regarding the care of their loved ones in a Kindred nursing home, the arbitration agreement was deemed invalid, because the family members’ power of attorney did not “clearly state” that they had the power to waive the right to a jury trial. The state court opined that “the divine God-given right” to a jury trial could not be contractually waived, absent “an explicit statement before an attorney-in fact” that could “relinquish that right on another’s behalf.”
Justice Kagan, writing pointedly for the 7-member majority, would have none of that. She wrote that beyond the FAA “prohibiting outright the arbitration of a particular type of claim”, the law likewise prohibits “any rule that covertly accomplishes the same objective by disfavoring contracts that (oh so coincidentally) have the defining features of an arbitration agreement.” To the Kentucky court’s suggestion that its rule “could also apply when an agent endeavored to waive other ‘fundamental constitutional rights held by a principal’,” the Court responded: “But what other rights, really? No Kentucky court, so far as we know, has ever before demanded that a power of attorney explicitly confer authority to enter into contracts implicating constitutional guarantees.” Justice Kagan further noted the absence in Kentucky law of explicit authorization requirements as to settlement agreements or consents to a bench trial, both of which relinquish the right to a jury trial.
The Court further rebuffed Plaintiffs’ argument that the FAA applied only to contract enforcement, and not to contract formation, which was at issue in this case, emphasizing that:
- This argument was squarely contrary to the FAA’s text and case law; and
- “Adopting the respondents’ view would make it trivially easy for States to undermine the Act—indeed, to wholly defeat it. As the respondents have acknowledged, their reasoning would allow States to pronounce any attorney-in-fact incapable of signing an arbitration agreement—even if a power of attorney specifically authorized her to do so. . . . (After all, such a rule would speak to only the contract’s formation.) And why stop there? If the respondents were right, States could just as easily declare everyone incompetent to sign arbitration agreements. (That rule too would address only formation.) The FAA would then mean nothing at all—its provisions rendered helpless to prevent even the most blatant discrimination against arbitration.”
The Supreme Court’s message in support of the enforceability of arbitration agreements seems unmistakable. But a number of states’ courts (including Missouri, California, and others), while routinely accepting arbitration agreements governing commercial disputes, still seem to bristle at enforcing arbitration agreements between consumers and manufacturers or retailers; or between employees and their employer. State courts that look for reasons not to place all arbitration agreements on an “equal footing” with other contracts in general, do so at their peril.
"Jurisdictional Discovery" Is Not a Magical Incantation to Ward Off Timely Dismissal of a Case Filed in the Wrong ForumJuly 14, 2017
In the wake of Bristol-Myers-Squibb and other game-changing personal jurisdiction decisions from the U.S. Supreme Court and the Missouri courts this year, plaintiffs are chanting “jurisdictional discovery” as if it is a magical incantation to ward off the timely and necessary dismissal of claims improperly filed in the wrong forum. Few if any could even identify what information they believe they could obtain through such discovery that would save their doomed cases, and the courts should curtail the needless, expensive, and harassing discovery proposed by forum shoppers who should never have gained access to the forum in the first place.
Limited jurisdictional discovery” seems so enticing to judges, as if it is fair or proper to allow forum-shopping plaintiffs to continue to subject non-resident defendants to the burden and expense of discovery in the wrong forum. The “primary concern” in assessing personal jurisdiction, however, is “the burden on the defendant.” Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773, 198 L.Ed.2d 395, 403 (2017). Subjecting a non-resident defendant to futile discovery in a case filed in the wrong forum simply prolongs the burden on the defendant in a case in which the forum state lacks authority to act. Definitive rulings in BMS, BNSF v. Tyrrell, and Dolan should not permit months of pointless discovery in cases that must, under the law, be dismissed for lack of personal jurisdiction.
I. PLEADING JURISDICTION IS PLAINTIFF’S BURDEN, AND JURISDICTIONAL DISCOVERY IS UNNECESSARY IF ADEQUATE FACTS (NOT CONCLUSIONS) SUPPORTING JURISDICTION HAVE BEEN PLED
As an initial matter, it is plaintiff’s burden to plead personal jurisdiction. Conway v. Royalite Plastics, Ltd., 12 S.W.3d 314, 318 (Mo. banc 2000); Dever v. Hentzen Coatings, Inc., 380 F.3d 1070, 1072 (8th Cir. 2004). In many instances, jurisdictional allegations in these cases are entirely lacking in any facts, whether pled with knowledge or upon information and belief, that would establish personal jurisdiction under the applicable legal standards, and these complaints and petitions are therefore subject to dismissal on the pleadings, without conducting any discovery.
A plaintiff who has failed to meet her pleading burden should certainly not be granted permission to conduct discovery, as she has not properly invoked the jurisdiction of the court. “In order to be entitled to discovery, plaintiff is required to have alleged facts in the petition which, if true, establish jurisdiction.” Mello v. Giliberto, 73 S.W.3d 669, 674 (Mo. App. E.D. 2002). “In the absence of such alleged facts, plaintiff is not entitled to discovery.” Id. Legal conclusions are not sufficient, actual facts are required. Id.
Furthermore, under Fed. R. Civ. P. 11 and the Missouri equivalent, Mo. R. Civ. P. 55.03, a plaintiff must have a factual basis, formed after reasonable inquiry, for all allegations in the complaint or petition, including her jurisdictional allegations. The allegations are required to have “evidentiary support,” or to be specifically identified as being made upon information and belief. See Fed. R. Civ. P. 11(b)(3); Mo. R. Civ. P. 55.03(c)(3). Moreover, the attorney is certifying that the claims “and other legal contentions” (including contentions as to the existence of personal jurisdiction) are warranted by existing law or a non-frivolous argument for the modification of existing law. Fed. R. Civ. P. 11(b)(2); Mo. R. Civ. P. 55.03(c)(2).
From the outset, then, a plaintiff who suggests the need to conduct “jurisdictional discovery” is generally admitting either that she failed to plead sufficient jurisdictional facts (in which case she is not entitled to discovery) or that she lacked a basis for making such allegations in the complaint or petition, in which case she has violated Rule 11. Plaintiffs should not be caught flat-footed and at a loss to defend their choice of forum, they should have had sufficient grounds to withstand a motion to dismiss for lack of jurisdiction before the petition or complaint was filed. Other jurisdictions have recognized this:
Complaints should not be filed in matters where plaintiffs intend to find out in discovery whether or not, and against whom, they have a cause of action. Absent exigent circumstances, plaintiffs’ counsel should not file a complaint until sufficient information is obtained, and plaintiffs’ counsel believes in good faith that each plaintiff has an appropriate cause of action to assert against a defendant in the jurisdiction where the complaint is to be filed. To do otherwise is an abuse of the system, and is sanctionable.
Harold’s Auto Parts, Inc. v. Mangialardi, 889 So.2d 493, 494 (Miss. 2004) (emphasis original).
A plaintiff does not need jurisdictional discovery if she has alleged sufficient facts, even upon information and belief, that, if true, would be sufficient to establish the jurisdiction of the trial court to proceed. See State ex rel. Deere & Co. v. Pinnell, 454 S.W.2d 889, 893 (Mo. 1970). In virtually every case, to establish personal jurisdiction a plaintiff must allege the occurrence of specific conduct by the defendant within the forum state that gives rise to the plaintiff’s cause of action. As discussed more fully below, it would be rare for the plaintiff to be unable to allege such conduct, even upon information and belief, if there were a good-faith basis under the established law to support personal jurisdiction. In actuality, plaintiffs seeking “jurisdictional discovery” are generally seeking to buy time to concoct a plausible theory for jurisdiction, or to leverage settlement.
This highlights the murky legal justification for “jurisdictional discovery” – if there are sufficient factual allegations that, if true, would establish jurisdiction, then a motion to dismiss must be denied, as there is no need for plaintiff to adduce evidence to meet her pleading burden. “[T]his court is limited to deciding whether the pleadings are sufficient to survive the motion to dismiss.” Hollinger v. Sifers, 122 S.W.3d 112, 115 (Mo. App. W.D. 2003). If, on the other hand, plaintiff has failed to plead sufficient factual allegations to establish personal jurisdiction, she has failed to meet her pleading burden and is not entitled to discovery. See Mello, 73 S.W.3d at 674. Discovery is not a panacea to cure pleading defects, particularly not where a party is expressly permitted to plead upon information and belief.
II. THE BASIS, IF ANY, FOR CONTACT-BASED SPECIFIC PERSONAL JURISDICTION IS ALMOST ALWAYS WITHIN THE KNOWLEDGE OF PLAINTIFF
In nearly all circumstances, personal jurisdiction must be founded upon some conduct by the defendant within the forum state that gave rise to the plaintiff’s cause of action. The exercise of personal jurisdiction over non-residents is called “long-arm” jurisdiction. The Missouri courts’ authority to exercise long-arm jurisdiction is constrained by the Missouri statutes and the U.S. Constitution. Missouri’s long-arm statute expressly affords contact-based specific jurisdiction over the person of non-resident defendants. See Shouse v. RFB Const. Co., Inc., 10 S.W.3d 189, 193 (Mo. App. W.D. 1999). Specific jurisdiction is called “contact-based” because such jurisdiction only exists for a cause of action “arising from” certain specified conduct by the defendant within the forum state. See Mo. Rev. Stat. § 506.500.1. “In order for a court to exercise specific jurisdiction over a claim, there must be an ‘affiliation between the forum and the underlying controversy, principally, [an] activity or an occurrence that takes place in the forum State.’” Bristol-Myers Squibb, 198 L.Ed.2d at 404. “For specific jurisdiction, a defendant’s general connections with the forum are not enough. As we have said, ‘[a] corporation’s ‘continuous activity of some sorts within a state . . . is not enough to support the demand that the corporation be amenable to suits unrelated to that activity.’” Id.
Missouri’s long-arm jurisdiction statute provides:
Any person or firm, whether or not a citizen or resident of this state, or any corporation, who in person or through an agent does any of the acts enumerated in this section, thereby submits such person, firm, or corporation, and, if an individual, his personal representative, to the jurisdiction of the courts of this state as to any cause of action arising from the doing of any of such acts:
(1) The transaction of any business within this state;
(2) The making of any contract within this state;
(3) The commission of a tortious act within this state;
. . . .
Mo. Rev. Stat. § 506.500.1 (emphasis added). The three types of conduct listed here are the most common bases for asserting specific jurisdiction against a non-resident defendant.
When plaintiffs press for “jurisdictional discovery,” they should be required to identify specifically what information they seek that would tend to establish one of these bases for the exercise of specific personal jurisdiction. Moreover, plaintiffs should be required to plausibly establish that this information would be uniquely within the knowledge of the defendant – not public information, and not already known to the plaintiff. Otherwise, there is no need for the non-resident defendant to be subjected to the burden and expense of formal discovery.
The long-arm statute’s grant of personal jurisdiction based upon the “transaction of any business within the state” is intended to confer jurisdiction over nonresidents “who enter into various kinds of transactions with residents of Missouri.” Capitol Indemn. Corp. v. Citizens National Bank of Fort Scott, N.A., 8 S.W.3d 893, 904 (Mo. App. W.D. 2000) (emphasis added). That transaction must be “the transaction sued upon.” Id. (emphasis added). It is difficult to imagine how plaintiff would be unable, after reasonable inquiry prior to filing her complaint or petition, to identify the Missouri resident with whom the non-resident defendant was doing business in a transaction out of which the plaintiff’s own claim arises. If plaintiff has a theory of how the defendant engaged in wrongful conduct, she must have enough information to plausibly allege facts identifying the Missouri business partner with whom the defendant was engaging in such conduct.
Similarly, for the Court to exercise jurisdiction of the non-residents because of their contracting in the State of Missouri, plaintiff’s claims against the non-residents must arise out of a contract that was entered into in the State of Missouri. See Mo. Rev. Stat. § 506.500.1(2). The plaintiff’s claim must arise out of that specific contract. How can plaintiff not know enough to identity the contract, and the Missouri contracting party, if she alleges she was damaged as a direct result of the contract?
In order to rely upon the “tortious act” provision of the long-arm statute, a plaintiff is required to show that the non-resident defendant committed a tort in Missouri and that this specific tortious conduct caused the plaintiff’s injuries. Hollinger v. Sifers, 122 S.W.3d 112, 116 (Mo. App. W.D. 2003). To invoke personal jurisdiction under the “tortious conduct” prong of the Missouri long-arm statute, then, plaintiff is alleging that she was directly injured as a result of tortious conduct by the defendant within the forum state. Plaintiff knows where she was prescribed the medication. She knows where her treating physician is located. She knows where she purchased the product at issue. If the defendant has a manufacturing plant within the state, plaintiff can meet her pleading burden by alleging, even upon information and belief, that the product was defectively manufactured at that plant. Given the standards of Rule 11 and Missouri Rule 55.03, how can plaintiff be unable to allege, even upon information and belief, what allegedly wrongful conduct by the defendant occurred in Missouri? How could she, or her counsel, have conducted a minimally sufficient inquiry under Rule 11 or Missouri Rule 55.03 into the claim before filing it and not have some basis to allege facts identifying tortious conduct by the defendant within the forum state?
It is difficult to conceive of a circumstance in which a plaintiff would legitimately need “jurisdictional discovery” to establish contact-based specific personal jurisdiction, because her cause of action arises out of the defendant’s conduct within the forum state and should be known to plaintiff. Plaintiffs attempt to cloud these issues in an aura of mystery, when in fact there is rarely anything mysterious to the person who alleges that she was harmed by the conduct about where the conduct occurred.
In fact, in actual practice “jurisdictional discovery” is nearly always a fishing expedition directed at discovering corporate organization, sales, employees, office locations, and other matters that relate to general jurisdiction. As general jurisdiction almost never applies, discovery on these issues is rarely appropriate, and, therefore, “jurisdictional discovery” is rarely appropriate. At a minimum, under the Dolan and BMS tests, a plaintiff seeking such discovery should be required to identify whether she seeks to establish specific or general personal jurisdiction, and what colorable basis she has to believe that discovery would reveal facts that would establish one of these ground for personal jurisdiction.
III. GENERAL JURISDICTION IS EXCEPTIONALLY LIMITED AND RARELY APPLICABLE
As to individuals, “general jurisdiction” applies only to the state in which the individual is domiciled. Daimler AG v. Bauman, 134 S. Ct. 746, 760 (2014). Accordingly, allegations of general jurisdiction over non-resident individual defendants (often employees or other representatives of corporate defendants) are utterly frivolous under settled law.
“A court normally can exercise general jurisdiction over a corporation only when the corporation’s place of incorporation or its principal place of business is in the forum state.” State ex rel. Norfolk S. Ry. v. Dolan, 512 S.W.3d 41, 46 (Mo. banc 2017); Daimler, 134 S. Ct. at 760 & 761 n.19; see BNSF Ry. Co. v. Tyrrell, 137 S. Ct. 1549, 1554 (May 30, 2017). The U.S. Supreme Court just this term again held that the mere fact that a defendant conducts in-state business is not sufficient to permit the exercise of general jurisdiction over claims that are unrelated to the forum state. See Tyrrell, 137 S. Ct. 1549. Of course, Bristol-Myers-Squibb (
Only an “exceptional case” will escape this rule. Daimler, 134 S. Ct. at 760 & 761 n.19. This is where the corporate is “essentially at home” in a state where it is not incorporated and does not have a principal place of business. See id. To be a “home state,” the forum state must be a “nerve-center” of activities of the company. Dolan, 512 S.W.3d. at 48. Initially, it is difficult to imagine how a forum state could be a “nerve center” of a business and not be the business’s principal place of business, unless perhaps the business is a foreign-based company with a substantial U.S. presence in a particular state. At a minimum, “nerve center” suggests that something close to the majority of the business’s activities within the U.S. must occur within the forum state.
An allegation of “substantial, continuous and systematic contacts” with the forum state is facially insufficient to plead general jurisdiction.
The Supreme Court observed that finding a corporation at home wherever it does business would destroy the distinction between general and specific jurisdiction, for “[a] corporation that operates in many places can scarcely be deemed at home in all of them. Otherwise, ‘at home’ would be synonymous with ‘doing business’ tests framed before specific jurisdiction evolved in the United States.” Id. For this reason, when “a corporation is neither incorporated nor maintains its principal place of business in a state, mere contacts, no matter how ‘systematic and continuous,’ are extraordinarily unlikely to add up to an ‘exceptional case.’” Brown, 814 F.3d. at 629.
Dolan, 512 S.W.3d at 48 (emphasis added); see also Tyrrell, Slip Op. at 11.
Many of the reported cases show that the courts often accept, uncritically, incantations of the magic of “jurisdictional discovery.” “Discovery is often necessary because jurisdictional requirements rest on facts that can be disputed, for instance, the domicile of the parties.” Pudlowski v. St. Louis Rams, LLC, 829 F.3d 963, 964-65 (8th Cir. 2016). As to corporate defendants, it seems unlikely that there would be any legitimate factual dispute about domicile, however – the company’s state of incorporation is a matter of public record, and corporate registration records generally also reflect the company’s principal place of business, and a corporate defendant sophisticated enough to have multiple options for domicile will usually have a web presence identifying its headquarters. Courts that are authorizing jurisdictional discovery should take seriously their obligations to enforce Rule 11 or its local equivalent, and to the extent that any discovery is permitted, limit it to facts that are plausibly in dispute and that can only be proven through discovery of the defendant.
For a defendant that has raised an objection to the court’s personal jurisdiction, there are considerable expenses and burdens associated with discovery in a forum in which the action is, in all likelihood, improperly filed. A plaintiff seeking such discovery should be required to articulate what jurisdictional facts are “in dispute” before discovery can be permitted. Texas, at least nominally, applies this standard:
[A]ppellant’s counsel told the trial court, “I can’t plead specific facts until I have the facts. I can only get the facts through discovery.” However, appellant was required to provide the court with a colorable basis or reason to believe that discovery would reveal sufficient minimum contacts. Barron v. Vanier, 190 S.W.3d 841, 849-50 (Tex. App.—Fort Worth 2006, no pet.); Haferkamp v. Grunstein, No. 11-10-00194-CV, 2012 Tex. App. LEXIS 3706, at *25 (11th App. May 10, 2012).
For example, if the defendant has stated, by reference to public filings or by affidavit, that it maintains no offices within the state, then surely plaintiff must be required to make a non-frivolous showing that discovery would disprove this fact. It cannot be enough that defendant alleges or affirms that “x” is a fact, and plaintiff is permitted to engage in discovery merely to “ask about x” – the relevant, quite permissive standard set out by the Eighth Circuit still requires that the fact be subject to dispute, and, moreover, it must be subject to dispute under the Rule 11 standard. Courts that do police these standards recognize that a plaintiff seeking “jurisdictional discovery” should be required to identify what facts she seeks to establish in discovery, and some colorable basis to believe that such facts do exist.
IV. DEPOSING AFFIANTS IS RARELY WARRANTED
In some cases, particularly with respect to allegations of general jurisdiction, a defendant may supply an affidavit from a corporate representative regarding quantification of the defendant’s business within or other contacts with the forum state. This, predictably, triggers a plaintiff’s request to depose the affiant. These depositions are generally improper under Rule 11 and Missouri Rule 55.03, are usually futile, and tend to harass the defendant rather than provide plaintiff with any useful information to save her case.
Initially, a motion to dismiss for lack of personal jurisdiction may be decided upon affidavits supplied by the defendant. In ruling on a motion to dismiss for lack of personal jurisdiction, a trial court may consider affidavits. Chromalloy American v. Elyria Found, 955 S.W.2d 1, 3 n.3 (Mo. banc 1997); Mello, 73 S.W.3d at 674. “[T]he motion is not addressed to the merits of the underlying action, but only to the limited question of personal jurisdiction.” Mello, 73 S.W.3d at 674. An affidavit is not a self-serving attempt by a defendant to gain an unfair advantage, it is a valid procedural tool to support a motion to dismiss for lack of personal jurisdiction, and courts should not reflexively permit depositions of affiants without good cause to disbelieve the sworn testimony contained in the affidavit. This is particularly true where jurisdiction is in question, because the court is obligated to ensure that the defendant’s due process rights to be subject to only lawful authority are safeguarded and that any encroachment upon such rights is as minimally invasive as necessary to resolve a legitimate factual dispute as to jurisdiction.
Defendants supplying affidavits in support of a motion to dismiss for lack of general personal jurisdiction are often in an untenable, Catch-22 situation. Usually, plaintiff has failed to meet her pleading burden under the Daimler, BMS, and/or Dolan standards. She should not be permitted to even conduct jurisdictional discovery. Plaintiff is required to plead facts establishing that the defendant is incorporated in the forum state, has its principal place of business there, or is “essentially at home” in the forum. It is plaintiff’s burden to plead jurisdiction, not defendant’s burden to offer evidence to disprove jurisdiction. However, the case law entertains this “quantum of business in the forum state” mathematical analysis that invites defendants to submit affidavits to disprove general jurisdiction. And the supplying of such affidavits should be legally sufficient – a motion to dismiss may be decided upon affidavits.
But plaintiffs will seemingly always assert a supposed need to depose the affiant. Such depositions are improper and usually intended to harass and inconvenience the defendant. Plaintiffs, who have failed to meet their burden to plead jurisdiction, are suggesting that non-resident corporate defendants would lie in an affidavit regarding jurisdictional facts, and courts are indulging plaintiffs in this absurd and offensive innuendo. A plaintiff confronted with an affidavit from a corporation with an international presence, stating that its sales in Missouri comprise a single-digit share of its overall revenues, should not be permitted to subject the non-resident defendant to “jurisdictional discovery” without a colorable basis to dispute the affidavit as being a lie.
V. A MOTION OR MOTION RESPONSE SEEKING JURISDICTIONAL DISCOVERY IS SUBJECT TO RULE 11
Rule 11 provides that, by signing any pleading or motion or other paper presented to the court, an attorney “certifies” that “it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation.” Fed. R. Civ. P. 11(b)(1). The Missouri rule is functionally identical, though by its terms more stringent even than the federal rule in encompassing “any argument” within the matters presented to the court that are certified not to be for any improper purpose. Mo. R. Civ. P. 55.03(c)(1).
It is impermissible for a plaintiff to file a motion or motion response seeking “jurisdictional discovery” as a means of treading water and keeping the case alive, where plaintiff’s position is not supported by evidentiary facts or justification under existing law. Where the highest courts have just, within the last few months, spoken on jurisdictional issues, it is difficult to imagine how a party could make a good-faith, non-frivolous argument to change the law on jurisdiction.
Although the 2017 session of the Missouri legislature was not geared to comprehensive tort reform, several key bills were passed that will bring significant changes to civil litigation in Missouri. These include changes to the collateral source rule and evidence of discounted medical bills, the adoption of the Daubert standard, and restraints on insurance bad faith claims.
I. COLLATERAL SOURCE RULE
On July 5, 2017, Governor Greitens signed Missouri Senate Bill 31, bringing needed changes to the collateral source rule. The collateral source rule generally prohibits a defendant from introducing evidence that part of a plaintiff’s loss was paid for by a party independent of the defendant, such as the plaintiff’s insurer or a public benefits program. Deck v. Teasley, 322 S.W.3d 536, 538 (Mo. banc 2010). However, this rule has been twisted to allow plaintiffs to offer evidence of full-price or “sticker price” medical bills, without regard to contractual adjustments for health insurance or limits on reimbursement established by public payors, on the premise that defendants should not benefit from discounting of the full-price medical bills. The counter-argument, of course, is that plaintiffs are then permitted to recover a windfall that far exceeds both their actual liability for medical care and the costs of health insurance premiums they have paid, and are permitted to present evidence of damages that is merely a legal fiction.
By way of background, older Missouri cases held that, if the evidence establishes that the plaintiff is not liable for payment, medical expenses have not been “incurred,” and plaintiff cannot recover for their value. See Morris v. Grand Ave. Ry. Co., 46 S.W.170 (Mo. 1898). In the workers’ compensation context, Missouri courts have determined that an employee is not entitled to compensation for healthcare provider write-offs. Mann v. Varney Construction, 23 S.W.3d 231, 233 (Mo. App. 2000) (employee not entitled to compensation for Medicaid write-off amounts when the total amount submitted to Medicaid will never be sought from claimant); accord, Lenzini v. Columbia Foods, 829 S.W.2d 482, 487 (Mo. App. 1992). “Implicit in both decisions is the requirement of actual liability [for the medical bills] on the part of the employee.” Farmer-Cummings v. Personnel Pool of Platte County, 110 S.W.3d 818, 821 (Mo. 2003). However, the Missouri courts have been reluctant to follow this approach outside the realm of workers’ compensation.
As part of the 2005 Missouri tort reform, Mo. Rev. Stat. § 490.715 was amended to include a new subsection 5 that addressed valuation of the medical expenses, including a provision that there was a rebuttable presumption that the “value” of medical treatment is “the dollar amount necessary to satisfy the financial obligation to the health care provider.” Plaintiffs were not permitted to introduce evidence of medical expenses that exceeded the reasonable “value” of medical care and treatment. See id.
Missouri cases, however, significantly undermined this statutory tort reform, by allowing evidence of “sticker price” bills to get to the jury upon a very low showing of the “reasonableness” of the full-price bills, which can be made by affidavits or the testimony of the health care providers. See Deck v. Teasley, 322 S.W.3d 536 (Mo. banc 2010). The bar to rebut the presumption was so low in practice that the statutory reform failed to have the desired effect.
With the passage of SB 31, laudable carve-outs from the collateral source rule have been made. As to payments by or on behalf of the defendant, the statute used to provide that the defendant could offer evidence that these medical expenses had been paid, but not by whom. The new law clearly provides that, where the defendant or the defendant’s insurer or representative have paid a portion of plaintiff’s medical expenses, these sums are “not recoverable from” the defendant. Although this statute should provide a basis for motions in limine to exclude evidence of medical expenses paid by defendant, the revised statute also provides that, if a claim for these expenses is made at trial, the defendant is entitled to a credit against the judgment.
Critically, SB 31 changes § 490.715’s reference to the “value” of medical expenses, using instead the “actual cost” of medical care and treatment. The “actual cost of the medical care or treatment” is now defined as “a sum of money not to exceed the dollar amounts paid by or on behalf of a plaintiff or a patient whose care is at issue plus any remaining dollar amount necessary to satisfy the financial obligation for medical care or treatment by a health care provider after adjustment for any contractual discounts, price reduction, or write-off by any person or entity.” SB 31 (emphasis added).
II. ADOPTION OF THE DAUBERT STANDARD
House Bill 153, signed by Governor Greitens on March 28, 2017, adopts the Daubert standard for admission of expert opinion testimony. In State Board of Reg. v. McDonagh, 123 S.W.3d 146 (Mo. banc 2003), the Missouri Supreme Court held that Mo. Rev. Stat. § 490.065, not Frye or Daubert, controlled the admission of expert opinion testimony in civil cases. The opinion does, however, hold that federal cases applying Daubert are relevant to interpreting the Missouri statute. Citing Missouri Church of Scientology v. State Tax Commission, 560 S.W.2d 837, 839 (Mo. banc. 1977), the McDonagh Court held that “to the extent that Section 490.065 mirrors FRE 702 and FRE 703 . . . the cases interpreting those federal rules provide relevant and useful guidance.” McDonagh, 123 S.W.3d at 155.
The Court also noted that Section 490.065 contains language not present in the analogous federal rules of evidence, most particularly Section 490.065.3, which requires that the facts or data on which an expert bases and opinion or inference “must be of a type reasonably relied upon by experts in the field in forming opinions or inferences upon the subject” and that these facts and data “must be otherwise reasonably reliable.” Id. at 152-153 (emphasis added). The McDonagh court construed this slight language difference to require an expert in a state court proceeding to establish that the facts and data on which she relied are reasonably relied upon by experts in that particular field. The Court contrasted its holding with Daubert’s interpretation of the slightly different language in the federal rule that an expert testifying in federal court need not necessarily identify the relevant scientific community or field in which the data and facts were accepted.
Under the prior standard, “the circuit court is responsible for determining (1) whether the expert is qualified; (2) the expert’s testimony will assist the trier of fact; (3) the expert’s testimony is based upon facts or data that are reasonably relied upon by experts in the field; and (4) the facts or data on which the expert relies are otherwise reasonably reliable.” Kivland v. Columbia Orthopaedic Group, LLP, 331 S.W.3d 299, 311 (Mo. banc 2011). Whether an expert’s opinion is supported by sufficient facts and evidence is a question of law for the Court. Vittengl v. Fox, 967 S.W.2d 269, 280-82 (Mo. App. W.D. 1998).
The amended statute retains the stricter “in the field” language from the prior iteration, requiring that “experts in the particular field would reasonably rely on those kinds of facts or data in forming an opinion on the subject.” Where the amendment gives the statute teeth is in setting standards for the expert’s methodology.
III. INSURANCE BAD FAITH REFORMOn July 5, 2017, Governor Greitens signed the Senate Substitute for the Senate Committee Substitute for the House Committee Substitute for House Bills 339 and 714, enacting significant insurance bad faith reform. We previously blogged about these bills here.
In Kesler v. The Curators of the University of Missouri, et al., the Court of Appeals for the Western District of Missouri has provided a refresher course on the defense of res judicata.
Plaintiff was a former assistant professor at the University of Missouri. While he was in the process of tenure review, he simultaneously faced university disciplinary proceedings for “plagiarism and other misconduct.” Although he prevailed on the plagiarism charge, plaintiff was found to have engaged in “other unacceptable behavior.” Plaintiff was ultimately denied tenure, and given a one year terminal contract. In September 2014, he sued MU and various University officials (Kesler I), seeking writs of prohibition and mandamus compelling the University to provide various items of relief, including new tenure review proceedings. Kesler I was premised on the University officials’ alleged improper conduct during the tenure and disciplinary proceedings. After extensive litigation, the trial court ruled against plaintiff and in favor of the university.
Soon after losing Kesler I, plaintiff filed another lawsuit against MU and the same University officials (Kesler II). In Kesler II, plaintiff sought recovery on various tort theories which were not asserted in Kesler I. However, the factual basis for Kesler II was the same as before – once he again he complained of the University officials’ alleged improper conduct during the tenure and disciplinary proceedings. Defendants were granted summary judgment on the basis of collateral estoppel and res judicata. Plaintiff appealed, apparently arguing in part that res judicata did not apply because he sought to advance different legal theories in Kesler I and Kesler II.
The Western District affirmed, holding that for res judicata to apply, four “identities” must be present: identity of (1) the things sued for, (2) the cause of action, (3) the persons and parties to the action, and (4) the person for or against whom the claim is made. For res judicata purposes, “[s]eparate legal theories are not to be considered as separate claims[.]” Instead, analysis of the “identity of the things sued for” and “identity of the cause of action” must focus on the underlying facts, and “[f]or a subsequent claim on the same transaction to be considered separate, there must be new ultimate facts, as opposed to evidentiary details, that form a new claim for relief.” Citing Kesterson v. State Farm Fire & Cas. Co., 242 S.W.3d 712, 715 (Mo. banc 2008).
Kesler reminds practitioners that, when performing a res judicata analysis, a new legal spin on an old set of facts is generally insufficient to overcome the defense. If the facts are the same, then new labels will not resurrect a dead claim.
Missouri Court of Appeals Upholds Acceptance Doctrine to Absolve General Contractor of Premises LiabilityApril 21, 2017
In the case of Wilson v. Dura-Seal and Stripe, the Missouri Court of Appeals for the Eastern District held that the “acceptance doctrine” is still valid law in Missouri, and bars liability against a construction contractor for the injury of a third party after the owner of the premises has accepted the work. Citing prior case law, the Court explained the law as follows: “After an owner accepts a structure, the general rule is that a general contractor is not liable to persons with whom he did not contract....In the absence of formal acceptance, constructive or practical acceptance will suffice....Acceptance of the work is attended by the presumption of the owner … made a reasonably careful inspection of the work, knows of its defects, and so accepts the defects and the negligence that caused them as his own.”
In Wilson, plaintiff brought suit against general contractor Dura-Seal for injuries she sustained when she tripped and fell in the gutter area of new asphalt, which had been applied by Dura-Seal at a public school. Wilson claimed that she fell as a result of the height differential between the gutter area and the new asphalt installed by Dura-Seal. Wilson filed a premises liability claim against the owner of the premises who then in turn added Dura-Seal as a third party defendant. Dura-Seal moved for summary judgment, stating that the owner had accepted their work and therefore bore the premises liability due to the acceptance doctrine. The plaintiff argued that there was no evidence that the owner had accepted the work.
It was undisputed that Dura-Seal had not performed any work on the drive lane for at least two months before the plaintiff’s injury and that the owner had paid Dura-Seal for all of the work. It was undisputed that the owner also had exclusive possession and use of the premises rather than the contractor. The Court of Appeals affirmed summary judgment and found that the undisputed facts showed that Dura-Seal was neither in control of the premises, nor had the right to control the premises at the time of the plaintiff’s injury.
The Court of Appeals also analyzed the “imminently dangerous” exception to the acceptance doctrine. This exception operates to impose liability on a contractor, even after the owner has accepted the contractor’s work, under the following conditions: “Where the structure was so defectively constructed as to be essentially and imminently dangerous to the safety of others; the defects are so hidden and concealed that a reasonable and careful inspection would not have disclosed them, and these things are known to the defendants but not to those who accepted them.” Here, the undisputed facts showed that the drive lane and the gutter area where Dura-Seal worked were in plain view and therefore was easily discoverable by the owner. The Court thus declined to apply the exception, and ruled in Dura-Seal’s favor, holding that plaintiff had accepted the work when it was completed and payment in full was made.
Missouri construction contractors and their counsel should be well aware of the dimensions of the acceptance doctrine, and the “imminently dangerous” exception, when defending cases of this type.
Earlier this week, Governor Eric Greitens signed Missouri HB 153 into law. HB 153, which supplants Missouri’s existing expert witness standard with that set forth in Federal Rules of Evidence 702, 703, 704 and 705, effectively submits expert testimony in most civil and criminal case to the analysis set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993).
Until now, R.S.Mo. 490.065 has set forth the requirements for admission of expert testimony in Missouri state courts. In its present form, the language of the statute has varied significantly from the familiar expert witness standard set forth in the Federal Rules of Evidence and the rules of numerous sister states that track the federal rules. The standard for applying the requirements of R.S.Mo. 490.065 has been nebulously outlined in Missouri case law. Missouri appellate decisions have noted on occasion that Daubert and its progeny could provide “guidance” where the federal rules and the Missouri rules match up. See, e.g. State Bd. of Registration for the Healing Arts v. McDonagh, 123 S.W.3d 146, 155-156 (Mo. 2003) (Wolff, J, concurring in part and dissenting in part), and Goddard v. State, 144 S.W.3d 848, 852-853 (Mo. App. S.D. 2004) . On other occasions, however, Missouri courts have plainly stated that Daubert did not govern the admissibility of expert testimony in Missouri cases. See, e.g., McGuire v. Seltsam, 138 S.W.3d 718, at fn. 3 (Mo. 2004). As one Supreme Court Justice noted in a concurrence to McDonagh, supra:
“Forget Frye. Forget Daubert. Read the statute. Section 490.065 is written, conveniently, in English. It has 204 words. Those straightforward statutory words are all you really need to know about the admissibility of expert testimony in civil proceedings. Section 490.065 allows expert opinion testimony where "scientific, technical or other specialized knowledge will assist the trier of fact…" McDonagh, supra at 160.
Things have not proven so straightforward, and with no definitive standard, trial judges understandably have had a difficult time sorting the wheat from the chaff, allowing some questionable “expert” testimony to slip through the cracks and into the jury box. When HB 153 takes effect, in August 2017, and Daubert unquestionably sets the standard for admissible expert testimony, this risk will be considerably lessened. In federal courts, Daubert has for decades proven a fair and effective standard for assessing the admissibility of expert testimony. Its introduction into Missouri law will be a welcome change.
Rule 55.27(a) Means What It Says: Summary Judgment Rules Apply to Motions to Dismiss That Rely on Matters Outside of the PleadingsMarch 14, 2017
In Schnurbusch v. West Plains Regional Animal Shelter et al., after a trial court had dismissed a case for failure to state a claim, the Court of Appeals reversed and remanded the case, because the trial court dismissed the case based on evidence outside of the pleadings without having before it a fully developed summary judgment-type record.
Schnurbusch initially arose from claims by a landscaping company and its owners against a city for failing to enforce its zoning laws against an animal shelter and the resulting alleged nuisance. The dispute with the city involved a protracted court battle spanning several years, a jury trial, and an appeal, and the filing of a separate lawsuit against the animal shelter. The parties filed many motions and cross-motions, including a motion to dismiss by the animal shelter which attached three exhibits. The trial court granted the motion and dismissed the petition, relying on the exhibits attached to the motion.
The plaintiffs appealed the trial court’s decision to dismiss their petition arguing that Rule 55.27(a) required that it treat the animal shelter’s motion like a summary judgment motion under Rule 74.04. The Court of Appeals agreed in clear and forceful terms, relying on well-established precedent that once a trial court considers materials outside of the pleadings in ruling on a motion to dismiss, it automatically gets converted into a motion for summary judgment. Thus, the trial court erred by failing to compel the parties to comply with the procedural requirements of Rule 74.04. The Court of Appeals also reiterated that the procedural requirements of Rule 74.04 are strict and must be followed, which was not done in this case. Here, there was no statement of uncontroverted material facts or legal memorandum explaining why summary judgment should be granted. Indeed, the Court of Appeals found no evidence that the trial court gave the plaintiffs a chance to present additional materials facts to controvert the exhibits presented by the animal shelter. Thus, the Court found there was no Rule 74.04 record for its review, and sent the case back to the trial court for further proceedings under Rule 74.04.
The lesson of Schnurbusch is clear: the procedure of Rule 55.27(a) for handling a motion to dismiss that brings in matters outside of the pleadings is not discretionary with the trial court, and a trial court’s failure to require the parties to comply with the procedure of Rule 74.04 as stated in that rule will result in reversal.
Jury Panel Investigation in Missouri Revisited: Waiver of the Issue of Juror Non-Disclosure Remains Limited to the Litigation HistoryMarch 6, 2017
With the constant evolution of technology, the Missouri Constitution’s guarantee of the right to a fair and impartial jury of 12 has simultaneously become easier and more difficult to attain. As internet outlets and social media platforms rapidly multiply, prospective jurors have more opportunities to express or “post” beliefs and reveal biases on topics involved in litigation. In the best case scenario, this provides a litigant ample opportunity to corroborate or dispute the information provided by a prospective juror during voir dire. On the other hand, it has become increasingly difficult to uncover all of a prospective juror’s internet persona to discover whether a juror may, or may not, be impartial in a particular case.
As outlined in a blog post published in 2013, Missouri was one of the first states to obligate a litigant to investigate the backgrounds of potential jurors. In 2010, the Supreme Court of Missouri, in Johnson v. McCullough, affirmed a lower court’s grant of a new trial when plaintiff’s counsel, through research after trial, discovered that a juror failed to disclose their prior “litigation history.” Although the Supreme Court agreed that a new trial was appropriate, it also put litigants on notice that they should not expect to succeed on such motions in future if they wait until after a verdict is returned to perform juror research.
In 2011, the Missouri Supreme Court approved Rule 69.025 which codified the duty of litigants to research prospective jury members. Notably, it cautioned litigants that “a party waives the right to seek relief based on juror nondisclosure if the party fails to do either of the following before the jury is sworn: (1) Conduct a reasonable investigation; or (2) if the party has reasonable grounds to believe a prospective juror has failed to disclose that he or she has been a party to litigation, inform the court of the basis for the reasonable grounds. Mo. R. Civ. P. 69.025(e). For the purposes of the rule, “reasonable investigation” constitutes a search of Case.net, at minimum. Mo. R. Civ. P. 69.025(b).
The Southern District Court of Appeals recently addressed this rule in Spence v. BNSF Ry. Co. Despite the exponential growth of technology and online outlets in the past four years, the Court held the applicability of Rule 69.025 was limited to the subject of a venireperson’s “litigation history.” Spence involved a fatal car accident in which a BNSF train struck the decedent’s truck. Before the panel of potential jurors were seated, the parties conducted pretrial Case.net searches based on a list tendered by the Court. However, around the time the panelists were seated for voir dire, it was discovered that Juror Cornell’s last name was misspelled (“Carnell”). The parties did not conduct another Case.net search using Juror Cornell’s correctly spelled name before questioning.
As voir dire unfolded, BNSF’s counsel asked potential jurors whether or not they, or a close family member, had been involved in a motor vehicle accident. Counsel did not, however, question the panel about their “litigation history” involving motor vehicle accidents. Juror Cornell, whose son died in an auto accident, remained silent and said nothing in response to BNSF counsel’s question seeking information about those involved in motor vehicle accidents. Juror Cornell ultimately made the jury and assisted in awarding $19 million dollars to the decedent’s wife.
BNSF appealed the trial court’s rejection of their juror non-disclosure claim regarding Juror Cornell’s failure to truthfully answer the questions regarding her family’s history with automobile accidents. In response, plaintiff argued that another Case.net search using Juror Cornell’s correctly spelled name would have revealed the juror’s lawsuit for her son’s death and that Mo. R. Civ. P. 69.025 should operate to cause waiver of the complaint that the juror failed to disclose pertinent information.
The appellate court held that Mo.R.Civ.P. 69.025 pertained exclusively to juror non-disclosure of “litigation history.” In this case, Juror Cornell failed to advise the litigants that her son had died in an auto accident, not whether or not she had been involved in litigation relating to an accident. As a result, the majority was compelled to find that Mo.R.Civ.P. 69.025 could not be invoked to cause BNSF’s waiver of the right to complain about the disclosure. The Court ordered a new trial as a result.
In a well-reasoned dissent, Judge Rahmeyer argued that Rule 69.025 was much broader in its application than as narrowly construed by the majority. The judge believed that the claim by BNSF counsel relating to juror non-disclosure was “exactly the type of claim that Rule 69.025 was enacted to curtail, i.e. an after-trial complaint of juror non-disclosure of a matter that would have been discovered had defendant used due diligence by searching Case.net.” Plaintiff has asked the Missouri Supreme Court to review the case; the Court has not yet decided whether to do so.
However, reports that hail this decision as the death-knell to “litigation tourism” are likely premature. Parker does good things to curtail litigation tourism. Among these are rejection of the notion that out-of-state defendants consent to personal jurisdiction by maintaining a registered agent in Missouri, and adoption of the Daimler and Goodyear cases regarding general jurisdiction.
The rejection of the doctrine of consent jurisdiction is a significant and much-needed development. Missouri courts have long improperly conflated the ability to serve a defendant with obtaining personal jurisdiction over the defendant. Although Parker cites only out-of-state cases for this proposition, as a practical matter Missouri practitioners have found that designation of a registered agent for service in Missouri has been universally viewed by the state’s trial courts as consent to personal jurisdiction. The Missouri Supreme Court’s only prior opinion involving this issue ultimately declined to decide whether service upon an in-state registered agent was sufficient to confer personal jurisdiction over a non-resident defendant. See State ex rel. K-Mart Corp. v. Holliger, 986 S.W.2d 165, 167-68 (Mo. banc 1999). However, Holliger was frequently cited for the proposition that a registered agent, plus “sufficient” contacts with the state, was sufficient to confer personal jurisdiction. Id. at 168-69.
The lack of guidance afforded by Holliger has opened the door to some of the “litigation tourism” problem, allowing trial courts to rule that an out-of-state defendant has consented to personal jurisdiction by appointing a registered agent to accept service and registering to do business within the state. See, e.g., Order dated Sept. 6, 2016, Kologenski v. The Adel Wiggins Group, et al., Case No. 1622-CC00427 (22nd Judicial Circ., City of St. Louis, Div. 29); Gracey v. Janssen Pharmaceuticals, Inc., Case No. 4:15-CV-407 (CEJ), 2015 U.S. Dist. LEXIS 57990, 2015 WL 2066242 (E.D. Mo. May 4, 2015). In Kologenski, a City of St. Louis trial court found that it was unnecessary to perform a “minimum contacts” constitutional due process analysis where the defendant maintains a registered agent in the state, because it has consented to personal jurisdiction. Order at 3.
Parker holds that registration statutes, including designation of a registered agent for service, does not alone equal consent to personal jurisdiction over non-resident defendant companies. “[T]he registration statute does not provide an independent basis for broadening Missouri’s personal jurisdiction to include suits unrelated to the corporation’s forum activities when the usual bases for general jurisdiction are not present.” Slip. Op. at 18.
The explicit adoption of federal precedent regarding general jurisdiction, including Daimler and Goodyear, is also good, particularly the acknowledgement that these cases change Missouri law. The attempt to quantify how much contact a defendant must have with a forum before that contact is “systematic and continuous,” however, is likely a mixed blessing for defendants.
While Norfolk Southern can account for only approximately 2% of its track and employees within the state of Missouri, the mathematical formula approach in Parker will likely prove more frustrating for defendants whose Missouri contacts comprise a more significant portion of their overall business. We can foresee considerable post-Parker litigation over the location of the mathematical threshold for “continuous and systematic” contacts, which is not consistent with the intent of Daimler and Goodyear. Is the threshold crossed when a defendant’s Missouri contacts constitute a double-digit percentage of its overall business? Is it greater than 50%? Parker introduces what will likely prove to be an unwieldy math problem with little practical guidance as to where the line is drawn. By contrast, Daimler and Goodyear signaled that the very notion of general jurisdiction was of such dubious and exceptionally limited application that it would virtually never apply, and this essential premise was not well-adopted in Parker.
Furthermore, Parker does not address the multi-plaintiff problem that is at the core of litigation tourism in Missouri. In the “mini MDLs” proliferating in the state, particularly in the context of pharmaceutical, medical device, and asbestos cases, usually at least one plaintiff can establish personal jurisdiction over the defendants. Typically, a Missouri resident who sustained injury in Missouri is included, and who could establish jurisdiction under the long-arm statute for commission of a tort in the state or conducting business in the state.
The problem is allowing other non-resident plaintiffs to bootstrap their unrelated claims. Parker helps when there is a single forum-shopping plaintiff, but does not clearly address the problem of “pendent” or “supplemental” personal jurisdiction. The argument that numerous unrelated out-of-state plaintiffs may be joined under Missouri’s Rule 52.05 with one plaintiff who properly asserts personal jurisdiction is a type of “pendent” or “supplemental” theory of specific personal jurisdiction. See, e.g., Liggins v. Abbvie Inc. (In re Testosterone Replacement Therapy Prods. Liab. Litig.), 164 F. Supp. 3d 1040, 1048 (N.D. Ill. 2016).
Federal courts have plainly held that “[t]here is no such thing as supplemental specific personal jurisdiction; if separate claims are pled, specific personal jurisdiction must independently exist for each claim and the existence of personal jurisdiction for one claim will not provide the basis for another claim.” Seiferth v. Helicopteros Atuneros, Inc., 472 F.3d 266, 275 n.6 (5th Cir. 2006). “Permitting the legitimate exercise of specific jurisdiction over one claim to justify the exercise of specific jurisdiction over a different claim that does not arise out of or relate to the defendant’s forum contacts  violate[s] the Due Process Clause.” Id.
This is the crux of the problem with “litigation tourism” in Missouri. Because Parker is a single plaintiff case, the pernicious misapplication of the law evidenced by the “supplemental personal jurisdiction” fallacy remains untested in Missouri. While it appears likely that the Missouri Supreme Court would be receptive to ruling that the theory is not viable, it has not done so in Parker. Multi-plaintiff litigation tourism likely lives to fight another day.
State ex rel. Norfolk Southern Railway Company v. The Honorable Colleen Dolan, 2017 WL 770977, No. SC95514 (February 28, 2017)
In a recent opinion, the Missouri Supreme Court continued the U.S. Supreme Court’s trend toward limiting personal jurisdiction over a non-resident defendant.1 In State ex rel. Norfolk Southern Railway Co. v. Dolan, the Court held Norfolk’s substantial and continuous business in the state of Missouri was insufficient to establish general personal jurisdiction over Norfolk.
Plaintiff Russell Parker, an Indiana resident, filed suit in St. Louis County against his employer, Norfolk, pursuant to the Federal Employer’s Liability Act. Norfolk is a Virginia corporation with its principal place of business in Virginia. Plaintiff alleged cumulative trauma injury sustained over the course of his years of employment with Norfolk, all occurring in Indiana. Plaintiff never worked for Norfolk in Missouri.
Noting there seems to be continued confusion regarding how personal jurisdiction may be established, the Supreme Court explained that personal jurisdiction over a corporation may be general (when a state exercises jurisdiction over a defendant in a suit not arising out of or related to the defendant’s contacts with the state) or specific (when the suit arises out of or relates to the defendant’s contacts with the forum).
The Court also explained that a court normally may exercise general jurisdiction over a corporation only when the corporation’s place of incorporation or its principal place of business is in the forum state. In “exceptional cases,” however, general jurisdiction may be found to exist if the corporation’s activities in that other state are “so substantial and of such a nature as to render the corporation at home in that State.”
In an effort to show Norfolk conducted continuous and systematic business in Missouri, the Plaintiff presented evidence that Norfolk owns or operates approximately 400 miles of track in the state of Missouri, generates approximately $232 million in revenue, employs approximately 590 people in Missouri, and has a registered agent in the state. However, these numbers represent only about 2% of its total tracks across the country, its total revenue, and its total workforce. Norfolk generates greater revenue in 11 other states, has track in 22 states and has more employees in 13 other states.
Based on this evidence, the Court held Norfolk’s contacts are insufficient to establish general jurisdiction over Norfolk in Missouri. While in “exceptional cases” a state may have general jurisdiction over a corporation neither incorporated nor operating its principal place of business there, such exceptional cases only exist where the forum state can be said to be a surrogate for the place of incorporation or the home office, such that the corporation is essentially at home in that state. Citing to cases from the U.S. Supreme Court, the Court noted this showing requires apprising in their entirety the corporation’s activities in the forum state and its activities in other states and countries. Being “essentially at home” in a state is not the same as “doing business” in a state, such that mere contacts, no matter how systematic and continuous, are unlikely to support an “exceptional case” in and of themselves.
As to specific jurisdiction, the Court emphasized that it requires consideration of the relationship between the defendant, the forum, and the litigation. The Court noted that, while Norfolk had purposefully availed itself of the opportunity to do business in Missouri, it would be subject to specific jurisdiction in Missouri on that basis only as to claims that are related to business contacts it has made in the state. The suit at issue, however, was unrelated to its Missouri contacts so it can be brought only if Missouri has general jurisdiction over Norfolk. That Norfolk engages in its railroad business in Missouri and the alleged injuries arose from the railroad business it conducts in Indiana is insufficient. There is no support for the notion that if a company is a national company that does the same “type” of business in the forum state, then essentially it can be used anywhere, otherwise the notion of specific versus general jurisdiction would be rendered meaningless.
Finally, the Court rejected the notion that Norfolk consented to personal jurisdiction over any case filed in Missouri by complying with Missouri’s foreign corporation registration statute. A broad inference of consent based on registration would allow national corporations to be sued in every state and, again, render the notion of specific versus general jurisdiction pointless.
1. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846 (2011); J. McIntyre Machinery Ltd. v. Nicastro, 131 S.Ct. 2780 (2011); Daimler AG v. Bauman, 1345 S.Ct. 746 (2014); and Walden v. Fiore, 134 S.Ct. 1115 (2014).
Premises Liability: The Responsibility of a Business Owner to Act When a Foreseeable Danger is Posed to an InviteeFebruary 13, 2017
In Missouri, business owners generally have no duty to protect invitees from criminal acts of third persons. But there is an important exception to this general rule known as the specific harm exception. As explained and applied in a recent Missouri Court of Appeals case titled Wieland v. Owner Operator Services, Inc., “a duty of care arises when a business owner realizes, or should realize, through special facts within his knowledge that criminal acts of a third party are occurring or about to occur on the premises.”
In Wieland, the jury returned a verdict in favor of plaintiff-employee for $3.25 million for an injury she sustained - inflicted by a third party - while she was on her employer’s premises. The employee had expressed safety concerns to her employer regarding a former domestic partner. Her employer had issued and implemented certain safety protocols to handle situations such as this. Just weeks after alerting her employer, the employee’s former partner entered company parking lot, hid in the employee’s car, and ultimately shot her in the back of her head when she tried to return to the company office building after discovering him in her car.
On appeal, the company argued that the trial court had improperly instructed the jury that it should find for plaintiff if “defendant knew or by using ordinary care could have known that [the assailant] was in the parking lot and posed a danger to plaintiff.” The company argued that the specific harm exception to the general premises liability rule does not apply unless the premises owner has actual knowledge of the third party’s entrance on its premises; and that it therefore had no duty to take action until it knew that the assailant was on its property. The Court of Appeals disagreed and sustained the jury verdict, holding that the “special facts and circumstances” exception is premised on foreseeability, not actual knowledge. It was therefore proper for the jury to consider the company’s pre-existing knowledge, and the actions it should have taken in the exercise of ordinary care, in determining when the company could have known of the third party criminal’s arrival. The evidence at trial, which the jury properly considered, included the company’s own security protocols, the presence of security cameras, and the availability of extra police patrols had they been requested.
This opinion emphasizes the need for an employer or other business owner to stay actively involved and abreast of its invitee’s safety concerns. Upon receiving information that may lead to the “foreseeability of harm” to an invitee, it is imperative that businesses follow internal safety protocol to assure the safety of its employees or customers. The foreseeability of a dangerous third-party’s presence triggers the duty to act; actual knowledge of a dangerous third-party’s presence is not required. Here, had the company offered the employee a closer parking spot, an escort to her car, and routinely checked the parking lot surveillance footage, the resulting injury might have been averted.
The calendars said the years were different, but data from the Greater Kansas City Jury Verdict Service shows that 2016 and 2015 were nearly the same in many respects. Every year, the Greater Kansas City Jury Verdict Service issues a “Summary and Statistics of Jury Verdicts” for the greater Kansas City area. The report includes verdicts from the U.S. District Courts in the Western District of Missouri as well as Jackson, Clay and Platte counties in Missouri and Johnson and Wyandotte counties in Kansas. The statistics in 2016 were remarkably similar to those in 2015.
Comparable Number of Trials and Plaintiffs’ Verdicts
The Jury Verdict Service’s annual summary reported on 113 trials in 2016 compared to 110 in 2015. These numbers are down from the preceding two-year period: there were 133 trials in 2014, and 122 trials in 2013.
Because trials may involve multiple claims and multiple verdicts, the verdict statistics are based on the claims and not the cases. For the 113 trials in 2016, there were 199 verdicts for claims and for the 110 cases in 2015, there were 178 verdicts for claims.
Although the number of trials has decreased from 2013 and 2014, the percentage of plaintiff verdicts is little changed. In both 2015 and 2016, 42% of the verdicts were for plaintiffs compared to 38% for plaintiffs in 2014 and 40% in 2013. These numbers are down from the 55% of the verdicts for plaintiffs in 2012.
Comparable Average Monetary Awards
The overall average of the monetary awards for plaintiffs’ verdicts also remained almost the same in 2016 as they were in 2015. In 2016, the average of plaintiffs’ verdicts was $1,383,549 while the average in 2015 was $1,376,323. Both of those averages are over $1 million more than the average plaintiffs’ verdict in 2014, which was $350,730. While each of these figures is far below the $5,577,689 average verdict in 2013 and somewhat lower than the $1,772,469 average in 2012, the 2013 numbers were skewed by a single $400 million verdict that inflated the 2013 average.
Fluctuating Number of Large Verdicts
Although the average plaintiff’s verdict was similar in 2016 compared to 2015, the number of verdicts exceeding $1 million more than doubled in 2016. There were 16 verdicts of $1 million or more in 2016 and only six such verdicts in 2015. The number of million dollar or more verdicts has fluctuated over the last five years. In 2012, there were 19 such verdicts but only five in 2013 and then ten in 2014, the recent year with the lowest average monetary award in plaintiffs’ verdict matters.
Juries in the following venues awarded million dollar or more verdicts over the last five years.
- Over the last four years, the percentage of defense verdicts on plaintiffs’ claims has consistently hovered around 60%.
- When money has been awarded, the average verdict amounts over the last two years were nearly identical.
- Half of the seven-figure jury awards over the last five years have occurred in Jackson County, Missouri state court .
Although every case is different, information regarding verdict percentages and jury award amounts in the specific venues can help assess the values of cases and claims. For instance, recent data confirms the received wisdom among experienced practitioners that juries in Jackson County, Missouri, are more likely to assess million dollar or more awards on plaintiffs’ claims than juries in Platte County, Missouri. As always, clients, as well as national counsel who are working with local counsel, should carefully consider the forum when assessing the value of a case.
Source: Greater Kansas City Jury Verdict Service Year-End Reports 2012-2016
Merchants Beware: Ingredient List Is Not Necessarily a Defense and Losing the Benefit-Of-The-Bargain Counts as an Ascertainable Loss Under the MMPANovember 16, 2016
In a recent decision, a unanimous three-judge panel of the Missouri Court of Appeals sided with consumers asserting deceptive labeling practice claims against merchants under the Missouri Merchandising Practices Act (MMPA). In Daniel Murphy v. Stonewall Kitchen, LLC, the Court rejected the notion that clearly identifying an ingredient on a product label automatically defeats a claim under the MMPA. In doing so, the Court settled a split of opinion about the efficacy of the so-called “ingredient list” defense used by food merchandisers to defeat a fraud claim under the MMPA. The Court also confirmed that consumers can establish damages by pleading that the deceptive labeling made it possible for the product to be sold for more than what it was really worth.
The “ingredient list” defense has arisen in the context of challenges to the integrity of food labels containing the words “all natural” where one or more ingredients are alleged to be anything but natural. The issue is whether a food label bearing the words “all natural” is deceptive even if the ingredient list clearly discloses all of the ingredients, including the “unnatural” ones. Federal district courts in Missouri considering the issue have rendered conflicting opinions which Murphy resolved. Murphy involved a class action against a high-end specialty foods merchandiser known for its homemade food items. The plaintiffs alleged that the label on Stonewall Kitchen’s cupcake mix was false, deceptive, and misleading because it stated “all natural” but listed sodium acid pyrophosphate (“SAPP”) as an ingredient. SAPP is an artificial chemical leavening agent found in commercial baking powders. The merchandiser moved to dismiss the petition for failure to state a claim because the label clearly disclosed SAPP as one of the ingredients, citing the Western District of Missouri’s decision in Kelly v. Cape Cod Potato Chip Co., 81 F. Supp. 3d 745 (W.D. Mo. 2015). The trial court adopted Kelly and dismissed the petition, reasoning that the disclosure of SAPP on the label made it unlikely that a consumer would be tricked into thinking that the cupcake mix was “all natural”, and that the terms “natural” and “all natural” were inherently ambiguous and not subject to a generally accepted meaning.
The Court of Appeals reversed the trial court, rejecting Kelly and instead adopting the Eastern District of Missouri’s decision in Thornton v. Pinnacle Foods Group LLC, No. 4:16-CV-00158 JAR, 206 WL 4073713 (E.D. Mo. Aug. 1, 2016). The Court acknowledged that the term “all natural” is subjective and ambiguous but decided that a deceptive labeling claim could not be dismissed before discovery could be conducted because a reasonable consumer’s understanding of whether a food label is misleading or deceptive is a question of fact and cannot be determined as a matter of law. The Court explained that the ingredient list could be relevant to the merchandiser’s defense, but its presence cannot automatically defeat an MMPA claim, especially since the FDA requires an ingredient list anyway, manufacturers are in a superior position to know the ingredients, and a reasonable consumer can expect that representations on the packaging accurately reflect the ingredients. Accordingly, an ingredient list will not prevent a deceptive labeling claim from moving forward through discovery to summary judgment or trial.
In reversing the trial court’s dismissal, the Court also upheld state court precedent suggesting that an MMPA claimant’s “actual damages” are not the purchase price paid for the item, but instead are a measure of diminished value. To satisfy the actual damages element under the MMPA, a plaintiff must show that it has suffered an “ascertainable loss” as a result of the defendant’s unlawful conduct. The Court recognized the applicability of the “benefit of the bargain rule” to assessing actual damages under the MMPA. The “benefit of the bargain” rule compares the value of the item received to its worth as represented at the time of the transaction. It is a measure of damages used in common law fraud cases which the Court found applicable to MMPA claims as well. The Court agreed with prior case law that the “benefit of the bargain” is an ascertainable loss under the MMPA. This means that a plaintiff adequately pleads the damages element of an MMPA claim by stating facts showing that the deceptive labelling made it possible for the product to be sold for more than its actual value at the time of sale.
In Walker v. Kelley, the Missouri Court of Appeals for the Western District recently upheld a jury verdict awarding $1.00 to a personal injury plaintiff.
The case involved a garden variety rear-end car accident which occurred in 2009. Following the accident, plaintiff received a few rounds of routine medical treatment, and did not receive any additional treatment until the eve of trial in September 2015. At trial, there was evidence that plaintiff had performed numerous physical jobs since the date of his injury, that he had a pre-existing back condition, and that he had visited a chiropractor for back pain prior to the accident. A joint trial exhibit set forth two different amounts of medical bills – the “amount incurred with a total sum of $25,895.97,” and the “amount necessary to satisfy plaintiff’s obligation for medical with a total sum of $11,279.62.”
During opening and closing, counsel for defendant argued to the jury that the $11,279.62 had been “incurred and resolved.” And on cross examination, defense counsel asked plaintiff if the $11,279.62 had been paid, to which plaintiff responded yes. Counsel for plaintiff never posed an objection to any of this, despite the obvious implications for collateral source issues.
During deliberations, the jury first asked the court how the medical bills were paid, to which the court responded with the standard admonition that it was to be guided by the evidence. Not long thereafter, the jury sent another question to the judge, this time asking whether it could “find for the plaintiff and not award money.” The court sent back another standard admonition, telling the jury that it must be guided by the instructions. After some further hiccups, including a finding of liability and an award of $0.00, the jury finally returned with a verdict in favor of plaintiff, assessing damages at $1.00. The court accepted the jury’s verdict and entered judgment. Plaintiff appealed, arguing that the award of $1.00 demonstrated juror bias, passion, misconduct or prejudice.
The court of appeals affirmed the circuit court’s judgment for two reasons. First, there was evidence from which the jury could find that plaintiff’s damages were “negligible,” i.e. that there was evidence from which the jury could conclude that plaintiff’s alleged injuries were due to pre-existing conditions, or simply weren’t that bad. Second, the jury could have found that plaintiff was “fairly and reasonably compensated,” i.e. that it had based its decision upon the un-objected to collateral source evidence.
There are two lessons to take from this case. First, if defense attorneys cover all of their bases and give the jury enough evidence to hang its hat on, a nominal award of damages can survive on appeal despite a finding of liability. Second, be careful to avoid collateral source issues when talking about the amount of medical billing under R.S.Mo. 490.715. It is clear that the appellate court thought this was a big issue. Had plaintiff’s counsel objected during trial, it seems likely that defense counsel’s good work would have been undone.
Missouri Court of Appeals Holds Plaintiff Cannot Use Savings Statute to Revive Dismissed Lawsuit Brought by Improper PlaintiffNovember 8, 2016
Love v. Piatchek, No. 103690 (November 8, 2016)
The Missouri Court of Appeals, Eastern District, affirmed a trial court’s dismissal of a lawsuit as being time-barred. The court held that the plaintiff could not rely on an earlier lawsuit and Missouri’s “savings” statute because the earlier suit was brought by an improper plaintiff who lacked standing.
In the first lawsuit, a grandmother sued for the wrongful death of her grandson. On the eve of trial, the grandmother dismissed the lawsuit, without prejudice. Four months later, the decedent’s mother filed a second wrongful death lawsuit. The defendant moved to dismiss the suit as being time-barred because it was filed after the expiration of the applicable statute of limitations. The mother argued the suit was timely filed, under the savings statute, because it was filed within one year of the voluntary dismissal of the first wrongful death suit. The trial court dismissed the case, and the mother appealed.
On appeal, the court noted that, as long as both lawsuits are brought by proper plaintiffs with standing, a suit may be timely re-filed within the one-year savings period allowed under the savings statute, and the second suit will relate back to the filing of the first suit. However, in this case, the first lawsuit was not legally viable because the grandmother was not eligible to bring a wrongful death lawsuit under Missouri law and therefore lacked standing. Thus, the mother could not file a second suit and have it relate back to the grandmother’s non-viable first suit under the savings statute.
Presiding Judge Lisa Van Amburg authored a concurring opinion pointing out the numerous unsuccessful attempts of the decedent’s father, an incarcerated felon, to join the lawsuit as a pro se plaintiff. Had the father been named a plaintiff, as was his right, the first lawsuit would have been viable, and the mother’s subsequent suit would have been timely under the savings statute.
Missouri Court of Appeals Holds Ingredient List Label on Product Not an Absolute Defense to Claim for Deceptive Merchandising PracticesNovember 8, 2016
Murphy v. Stonewall Kitchen, LLC, No. 104072 (November 8, 2016)
The Missouri Court of Appeals, Eastern District, reversed a trial court’s order dismissing an action on the grounds that an ingredient list label was a complete legal defense to a claim for deceptive merchandising practices because the consumer could not reasonably be deceived or misled by the packaging. The court held that the presence of an ingredient list label on a product is not an absolute defense, though it may be used as evidence in support of a defense at trial. This decision may be of interest to product manufacturers and their counsel, as well as to consumers.
The defendant sold a cupcake mix in a package that described the product as being “all-natural” when, in fact, it contained a certain chemical used in commercial baking. The plaintiff filed suit for false, deceptive, and misleading practices under the Missouri Merchandising Practices Act (MMPA). The defendant filed a motion to dismiss, arguing the packaging was not deceptive because the chemical was specifically listed as an ingredient on the package label (often referred to as the “ingredient list defense”). The trial court granted the motion, relying on Missouri federal court precedent and reasoning that the presence of the label identifying the chemical as an ingredient made it implausible a reasonable consumer would believe the “all-natural” representation on the product. The plaintiff appealed the dismissal.
On appeal, the court noted a second decision from another Missouri federal court reaching the opposite result and followed that rationale. The court found that how a reasonable consumer would interpret the term “all-natural”, whether a reasonable consumer would actually read the ingredient list, and whether the defendant’s labeling practice was deceptive were all fact questions for the jury. Though the presence of the ingredient list might be relevant to the defense at trial, the court held that the ingredient list cannot, as a matter of law, defeat an MMPA claim.
In Missouri, it has long been held that a party waives the protections of the work product doctrine by disclosing his expert’s opinions, analysis or conclusions. However, the mere act of designating an expert pursuant to Missouri Rule 56.01 “does not, standing alone, irrevocably waive the protections afforded by the work product doctrine,” according to a new decision of the Missouri Supreme Court.
In Malashock v. Jamison, the plaintiff sued for injuries allegedly resulting when his utility terrain vehicle (UTV) overturned. The plaintiff designated four expert witnesses to testify at trial. The designation for one of the experts stated that the expert would testify regarding the UTV’s “performance” at various speeds, the “forces” involved in the accident, and the “performance and factors impacting the performance” of the UTV. However, the designation did not disclose the expert’s analysis or conclusions regarding any issues in the case.
Not long after designating experts, the plaintiff “de-endorsed” one expert. Following the withdrawal of this expert, the defendant filed a motion to permit the deposition of the withdrawn expert. The trial court granted the motion to depose the withdrawn expert “on the grounds that Plaintiff had waived the protections afforded by the work product doctrine by designating” the expert.
The plaintiff filed a writ of prohibition, and the Missouri Supreme Court reversed the trial court’s decision. The Malashock court explained that the initial designation of an expert “begins a process of waiving privilege,” but that waiver is not complete “until there is a ‘disclosing event.’” The court then announced that the “disclosing event” is “the actual disclosure of the expert’s opinions and conclusions, not simply the designation of the expert as a trial witness.”
Because the waiver is not complete until the disclosure of the expert’s opinions and conclusions, the court reasoned that “when counsel rescinds the designation, the attorney can claim work product protection as to that retained expert, since the expert will not be called for trial.” Because the plaintiff in Malashock rescinded the designation before disclosing the expert’s opinions or conclusions, the Supreme Court held that the plaintiff did not waive the work product doctrine protections.
Experienced litigators know that cases evolve over time. A party may not need all of the experts originally designated. The Malashock decision stands for the proposition that parties can withdraw experts without the risk of waiving the attorney work product doctrine as to that expert as long as the party rescinds the designation of the expert before disclosing the expert’s “opinions and conclusions.”
Supreme Court of Missouri Holds No Waiver of Work Product Privilege When Party Rescinds Designation of Expert Witness Without Disclosing the Expert's Analysis or ConclusionsNovember 1, 2016
State ex rel. Jason H. Malashock v. The Honorable Michael T. Jamison, SC 95606 (November 1, 2016)
The Supreme Court of Missouri reversed a trial court’s order permitting the deposition of a plaintiff expert witness on the grounds that, by designating the expert, the plaintiff had waived the work product privilege. The Court held that designating an expert witness pursuant to Rule 56.01 does not, standing alone, irrevocably waive the work product privilege. The case provides guidance to trial practitioners on the concept of waiving work product privilege protection of expert witness opinions.
The personal injury plaintiff was injured when his utility terrain vehicle overturned. Plaintiff filed suit, alleging the vehicle’s roof failed, causing his injuries. He designated four expert witnesses expected to testify at trial. The designation of one of the experts stated he would testify regarding the vehicle’s performance and the forces involved in the accident. The designation did not disclose the expert’s analysis or conclusions.
Approximately two weeks later, plaintiff’s counsel sent an e-mail to defense counsel stating “We have de-endorsed” the expert witness. In response, the defendant filed a Motion to allow a deposition of the expert. The trial court sustained the Motion on the grounds that, by designating the expert, the plaintiff had waived the work produce privilege. Plaintiff appealed this decision.
On appeal, the Supreme Court of Missouri discussed the nature of the protections afforded by the work product privilege and the concept of waiver. Because the plaintiff did not actually disclose the expert’s opinions and conclusions, the Court found the plaintiff did not waive the work product privilege, even though he had endorsed, and later dis-endorsed the expert.
The Court found support for its holding in Rule 56.01 and case law. Rule 56.01(b)(4)(b) authorizes discovery of expert witness opinions via deposition. Even though a designated expert is subject to discovery, it does not follow that the act of designation in and of itself irrevocably waives the work product privilege. Instead, the designation of an expert merely begins a process of waiving privilege that is not complete unless and until there is a disclosing event, which is the actual disclosure of the expert’s opinions and conclusions. Because the plaintiff withdrew the expert’s designation before disclosure of the expert’s opinions and conclusions, there was no disclosing event that waived the work product privilege.
On October 18, 2016, the Supreme Court held that when personal jurisdiction and subject matter jurisdiction are established, venue is proper in any county in Missouri in the absence of an express provision in RSMo § 508.010 restricting venue. In State of Missouri ex rel. Heartland Title Services, Inc., the Missouri Supreme Court was presented with an issue of first impression - does the absence of an express provision in the venue statute prescribing a specific venue dictate that venue is proper in (1) any county in Missouri or (2) no county in Missouri?
Plaintiff title company filed a two-count petition alleging professional malpractice claims against an attorney and his law firm. Defendants filed a motion to dismiss Count II of Plaintiff’s Petition for lack of venue, arguing that the tort alleged occurred outside of Missouri. Defendants further argued that RSMo § 508.010 limited venue to either the county in Missouri where a corporate defendant’s registered agent is located or where an individual defendant’s principal place of residence is located; and since neither was present in this case, the case could not be filed in any Missouri court.. The Circuit Court agreed with Defendants and dismissed Count II of Plaintiff’s Petition. Heartland sought relief by preliminary writ of prohibition, which was made permanent by the Missouri Supreme Court.
The Court found that RSMo § 508.010 was not intended to deny Missouri venue in all situations not provided for by the statute. Rather, the purpose is to provide a “convenient, logical, and orderly forum for resolution of disputes.” It rejected Defendant’s argument that this interpretation was likely to encourage forum shopping - citing (1) the reality that both subject matter and personal jurisdiction are prerequisites to proceeding in Missouri courts; (2) limited liability companies and corporations are required to register an agent in Missouri if conducting business in the state; and (3) the doctrine of interstate forum non conveniens is not abolished. And while the State does not recognize intrastate forum non conveniens, Missouri circuit courts have a “ministerial duty” to transfer a case to a county where venue is proper.
The Court held that without an express prescription of a particular venue, venue can be proper in any Missouri county.
On September 8, 2016 the U.S. Court of Appeals for the 8th Circuit affirmed a motion to dismiss granted by the U.S. District Court for the Eastern District of Missouri in the case of Alex Braitberg, on behalf of himself and others similarly situated, v. Charter Communications, Inc. No. 14-1737. The Court of Appeals applied a recent U.S. Supreme Court decision establishing that plaintiffs alleging a statutory violation must also establish a “concrete” injury, not just a statutory violation, to have standing.
Plaintiff filed the lawsuit against Charter in the U.S District Court for the Eastern District of Missouri, and sought class certification on behalf of himself and others similarly situated. The Complaint alleged that defendant Charter Communications, Inc. inappropriately retained personally identifiable customer information for too long a period of time, in violation of the Cable Communications Act, 47 U.S.C. § 551(e). Plaintiff alleged that Charter inappropriately retained his personal identifying information -- including his address, telephone number and social security number – after he canceled his services with Charter. Charter’s information retention policy was to retain identifying customer information “indefinitely.” There was apparently no evidence that Charter made any use or disclosure of the information, but was merely retaining the records.
Plaintiff claimed that Charter’s retention of the information damaged plaintiffs in two ways: first, via a “direct invasion of federally protected privacy rights,” and, secondly, by depriving plaintiffs of the “full value of the services they purchased from charter.” Charter’s motion to dismiss attacked Plaintiff’s standing under Article III of the Constitution, standing under the Cable Act and alleged that Plaintiff’s Complaint failed to state a claim because no damages were stated. Plaintiff’s claim was dismissed without prejudice, and the class certification was denied as moot.
Plaintiff Failed to Show an Injury in Fact.
The Court of Appeals agreed with the District Court and affirmed the ruling on Charter’s motion to dismiss, ruling that Plaintiff failed to properly allege an “injury in fact,” and therefore a controversy sufficient to establish jurisdiction did not exist for this matter. The Court noted that, to establish standing, a Plaintiff bears the burden at the pleading stage of alleging an injury adequate to establish jurisdiction. This injury must be both “concrete and particularized.”
Plaintiff argued, in line with prior 8th Circuit decisions, that the statutory violation by Charter in retaining his information constituted a sufficient injury in fact to establish standing under Article III, and that he need not allege an actual injury. During the pendency of Plaintiff’s appeal, the Supreme Court handed down a new decision in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016) superseding the 8th Circuit decisions. The Spokeo decision establishes that a mere statutory violation does not automatically establish the “injury in fact” requirement for a plaintiff by virtue of the violation. There must still be a “real,” “existing injury” that is not “abstract.”
Based upon the Supreme Court ruling, the 8th Circuit ruled that Plaintiff did not adequately establish standing, and hence jurisdiction, in this matter. The statutory violation alleged by Plaintiff established only that a “bare procedural violation” had occurred, and this violation was apparently “divorced from any concrete harm.” The Court indicated that Charter’s mere retention of the information, without evidence of any real harm (i.e. disclosure), was insufficient to establish an injury
In an attempt to get by the “concrete injury” requirement, Plaintiff argued that he suffered an economic injury stemming from a “diminution in the value of cable services” provided to him. Plaintiff asserted that he placed value on the protection of his private information from access and use by unauthorized parties, including retention of his information in violation of the act. The Court disregarded this argument stating that “without a plausible allegation that Charter’s mere retention of that information caused any concrete and particularized harm to the value of the information, Plaintiff has not adequately alleged that there was any effect on the value of the services that he purchased from Charter.”
Conclusion -- Guidance for the Future
The Supreme Court and 8th Circuit rulings establishing that plaintiffs must establish a “concrete and particularized injury” to have standing may help chill future lawsuits proposing damages for statutory violations with only abstract or hypothetical damages. Going forward, plaintiffs will need to meet this standard to establish standing for controversies involving statutory violations. Merely establishing that a statute has been violated may not suffice.
— S.W.3d —, 2016 WL 6090816 (Mo. banc October 18, 2016)
In a matter of first impression, the Missouri Supreme Court recently clarified that Missouri’s venue statute must be read to allow venue (referring to the locale where the trial in a case can be held) in any Missouri county when requirements for both subject matter and personal jurisdiction are met.
Plaintiffs filed a claim for legal malpractice against an attorney and his law firm in Jackson County, Missouri, arising from the provision of legal services in a case filed in Kansas. The defendants filed a motion to dismiss for lack of venue, arguing that since the alleged malpractice occurred in Kansas, no Missouri county was a proper venue for the action pursuant to Missouri’s general venue statute, § 508.010.5.
Section 508.010.5 RSMo NonCum. Supp. 2014, limits venue to either the Missouri county where a corporate defendant’s registered agent is located or the county of an individual’s principal residence. In this case, the defendant attorney did not live in Missouri and the law firm did not have a registered agent in Missouri. The defendants argued that the trial court must dismiss the claim because no Missouri county constitutes a proper venue under § 508.010.5. The plaintiffs argued that, since no specific Missouri county qualified under that section, then any Missouri county would be a proper venue. Thus, the question presented to the Missouri Supreme Court was whether absent an express provision in § 508.010.5 prescribing a specific venue, venue is proper in any Missouri county or no Missouri county.
In holding that the plaintiff could bring the claim in any Missouri county, the Supreme Court found it important that the Jackson County Circuit Court had both subject matter jurisdiction over the claim (referring to the court’s authority to render judgment in a particular category of cases) and personal jurisdiction over the defendants (referring to the power of a court to require a party to respond to a legal proceeding). The Court noted that to interpret § 508.010’s silence as barring venue in any Missouri county in which the circuit court’s jurisdiction is not contested would lead to the absurd result of precluding any forum to a party in which a Missouri court has subject matter jurisdiction of the case and personal jurisdiction of the defendant. Thus, if personal and subject matter jurisdiction are established, venue is proper in any county in Missouri in the absence of an express provision by the General Assembly restricting venue.
In June 2016, the Missouri Supreme Court issued its opinions in Peters v. Wady Indus., Inc. and Parr v. Breeden, holding that co-employees may be liable at common law for injuries caused to fellow co-employees by negligent actions if the plaintiff-employee shows that the defendant-employee breached a personal duty of care separate from the employer’s non-delegable duty to provide a safe workplace. In August 2016, the Missouri Court of Appeals for the Eastern District applied Peters and Parr to Fowler v. Phillips, a co-employee liability case involving plaintiff’s claim for injuries sustained as a result of defendant’s alleged reckless driving in the Avis Budget Group, Inc. car wash and parking lot.
An employer has non-delegable duties for which it always remains liable, including (1) the duty to provide a safe workplace; (2) the duty to provide safe appliances, tools, and equipment; (3) the duty warn of dangers for which an employee might reasonably be expected to remain in ignorance; (4) the duty to provide a sufficient number of suitable co-employees; and (5) the duty to promulgate and enforce rules for the conduct of employees to ensure workplace safety. If plaintiff establishes that a defendant/co-employee’s negligent or reckless act falls outside the employer’s non-delegable duties, the co-employee may be liable, regardless of whether he or she was performing his or her job when the injury occurred.
In Fowler, plaintiff, who was struck and seriously injured by an automobile, alleged co-employee liability for defendant Phillips, who acted recklessly when she failed to keep a careful lookout, failed to yield the right of way, and violated traffic signals while driving the employer’s car on the employer’s parking lot. Applying Peters and Parr, the Eastern District held that plaintiff’s allegations charged defendant with actions outside the employer’s non-delegable duties. Therefore, the trial court’s grant of summary judgment was improper. The case was remanded for a determination as to whether plaintiff’s allegations were supported by sufficient evidence for a finding of co-employee liability.
This case is currently on remand to the district court, and we will monitor to provide updates.
During the course of litigation, unfavorable interlocutory court rulings (i.e. rulings that are not final for purposes of an immediate appeal) may be temporary hiccups in the preparation of a party’s case or may threaten a party’s overall litigation strategy and chance of ultimate success. Until final resolution of all parties and issues, there may be nothing a party can do about those unfavorable rulings. In some instances, however, a party may have success with interlocutory appellate review of a court ruling. Not all unfavorable rulings can or should be considered for interlocutory review, but here are some factors to consider when deciding whether one can or should seek such review.
Perhaps the most obvious consideration is whether an interlocutory appeal of the ruling is permissible as of right. While some states permit interlocutory appeals in only the most limited of circumstances, other states and the federal courts allows them in more expansive and often well-defined ways. For example, the Illinois Supreme Court Rules provide for three categories of interlocutory appeals: those by permission of the appellate court, those as of right, and those upon certified question of the trial court. See Illinois Supreme Court Rules 306, 307 and 308. It may be, therefore, that your particular adverse ruling is one which falls into an “as of right” category and is worth a closer look on that basis alone.
Alternatively, an adverse ruling may fall into a permissive category which the appellate court may, for a number of reasons, believe merits closer look on an interlocutory basis. Using Illinois again as an example, interlocutory appeals by permission in that state include, among other things, orders granting a new trial, orders allowing or denying a motion to dismiss on the grounds of forum non conveniens, orders denying a motion to dismiss on the basis of lack of personal jurisdiction, and orders granting a motion to disqualify the attorney for any party. Illinois Supreme Court Rule 306.
Even if the adverse ruling does not fall into an “as of right” category or a recognized “permissive” category, interlocutory review on a purely discretionary basis may still be possible. It is useful if the issue is one which is of importance to not only the parties to the current litigation, but one which has general interest and importance to other litigants. It also may be useful if the ruling is one which, though interlocutory, may affect the future course of the litigation in a way that speeds its resolution. For example, rulings regarding venue or assertions that the trial court is acting in gross excess of its jurisdiction may, under the right factual circumstances, be attractive for interlocutory review. Cited factors for such discretionary review often include whether the ruling is one of first impression, whether irreparable harm to a party may result if interlocutory review is not allowed, and whether the trial court’s abuse of discretion is alleged to be particularly egregious. There may also be circumstances where the interlocutory order turns on a question of law where there is substantial ground for difference of opinion and where an immediate appeal may materially advance the ultimate termination of the litigation. See 28 U.S.C. § 1292(b).
Although review of non-final orders is rare, it is not impossible. This extraordinary relief may be available in some cases where review might not otherwise be available until entry of a final judgment. The place to start is with an examination of your jurisdiction’s laws as to interlocutory review, the facts of your particular case, and then with an assessment of whether pursuing interlocutory review will benefit your overall litigation strategy. Appellate counsel also may be of assistance in the determination of whether a particular case may benefit from seeking interlocutory review.
- A clause titled (in large bold capital letters) “RELEASE OF LIABILITY”:
- The ensuing paragraph, stating in large bold capitals:
Last month, I noted recent media reports raising patient privacy concerns due to health care providers’ use of social media in the workplace [The Potentially Dangerous Intersection of Healthcare and Social Media]. It appears the Centers for Medicare & Medicaid Services (“CMS”) has also taken note of media reports on this topic. CMS has issued new guidance to state survey agency directors in an effort to safeguard patient privacy and prevent abuse related to photos or audio/visual recordings by nursing home staff.
In S&C: 16-33-NH (August 5, 2016), CMS focuses on patients’ right to privacy and confidentiality, and to be free from abuse, including mental abuse. CMS is pushing for facilities to implement written policies and procedures prohibiting all forms of abuse, including the taking or using of photos or recordings in any manner that would humiliate a resident, or to distribute such materials on social media. According to CMS, facilities should provide training on abuse prevention policies, as well as oversight and supervision of staff in order to ensure compliance. The new CMS guidance also discusses the duties to report and investigate allegations of abuse, and to take corrective action when warranted. CMS has issued instructions to state survey agency surveyors to request and review facility policies and procedures for compliance.
This new CMS guidance shows that regulators are taking these new types of privacy concerns seriously. The abuse of patient privacy and confidentiality rights by healthcare providers is being increasingly scrutinized. Healthcare providers should be mindful of the recent CMS guidance, as well as other efforts by the healthcare industry to address the challenges posed by this important issue.
Lately, there have been numerous reports in the media raising patient privacy concerns due to healthcare providers’ use of social media in the workplace. A few examples include:
- An ER nurse posting to Instagram a photo of a bloodied trauma room taken just after treating a patient who had been hit by a subway train – causing the hospital to take action against the nurse and terminate her employment;
- A young St. Louis obstetrician who took to Facebook to air complaints about a chronically tardy patient, who had suffered a stillbirth – which was reposted and drew hundreds of angry comments and led to a reprimand of the physician by the hospital where she worked;
- A Northwestern University physician posting photos of a student admitted to a Chicago hospital for extreme intoxication – leading to a $1 million lawsuit for invasion of privacy and infliction of emotional distress;
- A Chicago ER nurse sharing information on Twitter about a gunshot patient, including insulting tweets and a photo of the bloodied trauma room where the medical staff tried to save him – leading to a lawsuit against the nurse and the hospital for negligence and emotional distress seeking more than $100,000;
- Reports of abuse of elderly residents of nursing homes and senior care facilities in California, Colorado and Iowa, including the posting of nude and other humiliating photos to Facebook, Instagram and Shapchat – leading to termination, license suspension, and even criminal prosecution.
These and other examples demonstrate that patients, employers, regulators and even law makers and law enforcement are taking very seriously these new types of privacy concerns spawned by emerging and evolving social media platforms, and they are becoming more aggressive in pursuing such cases. Some employers and industry groups are undertaking efforts to revamp internal policies and procedures and training methods to address issues unique to the ever-changing landscape of social media technology. There is no way to tell what the future might bring in terms of patient privacy issues and social media, but it seems likely that these challenges will continue to plague the healthcare industry.
In many ways, referring to a lawyer with extensive experience practicing in appellate courts as an “appellate” lawyer is misleading. An appellate lawyer is practiced generally in legal research, writing and analysis and is skilled at approaching matters from a detached, academic perspective. These are skill sets that can bring value to all stages of litigation.
Not all litigation will benefit from the early, pre-appeal involvement of an “appellate” lawyer. But, there are cases which may benefit from the insight which appellate counsel may bring to the table long before an appeal. Here are some things to consider as to when a matter may benefit from an appellate lawyer’s input and perspective.
- Perhaps the most obvious consideration is one of record preservation. Issues, arguments, and objections in the trial court generally are waived on appeal if not properly preserved in the court below. Appellate counsel could assist with proper preservation. Early insight into building and preserving the record could save time and money later when it comes to actually preparing and submitting the record on appeal.
- Appellate counsel could assist at the pleadings stage in evaluating whether the law supports the claims made and what evidence might need to be developed for a later dispositive motion. This might include early identification and analysis of issues for potential interlocutory review.
- Appellate counsel might also be a benefit in the actual drafting and presentation of dispositive motions, such as a Motion to Dismiss or a Motion for Summary Judgment or with other complex motions likely to be at issue in any eventual appeal. If such a dispositive motion is successful, the matter is likely to be appealed, and the early involvement of appellate counsel may go a long way toward putting matters in the best position for an appellate court to affirm a favorable result.
- Instructional error is a part of many appeals. Appellate counsel may assist in drafting and arguing the proposed jury instructions and in making a clear record for later review. This may prove especially important a party tenders a non-approved or non-pattern instruction.
- Post-trial, appellate counsel may assist in strategy for and preparation of a Motion for New Trial or other post-trial motions to preserve trial court errors and best posture the case for appeal. This is also, in most instances, the last chance to make sure the record below is complete and all arguments properly preserved.
Essentially, appellate counsel can assist at any stage of litigation – long before the notice of appeal is filed – with a focus on legal issues and with what can be a detached and objective legal analysis of the case.
On appeal, Defendants asserted both instructional error as to Jury Instruction No. 8, and juror misconduct – but the Supreme Court decided only the former issue. Defendants argued that Jury Instruction No. 8 was improperly submitted, because the instruction submitted alternative theories of recovery and there was not substantial evidence to support each theory of recovery. Jury Instruction No. 8 read:
First, [D]efendants discharged [Ross-Paige] or gave [her] a negative write up or assigned [her] with unfavorable shifts or denied [her] paid time off to attend training or failed to allow [her] to apply for the sergeant’s exam or unjustly refused or delayed [her] disability claim or created a severe and pervasive hostile work environment for [Ross-Paige], and
Second, [Ross-Paige’s] complaint of sexual harassment or refusal to submit to sexual advances was a contributing factor in such discriminatory acts, and
Third, as a direct result of such conduct, [Ross-Paige] sustained damage.
The Court held that Jury Instruction No. 8’s disjunctive verdict-directing nature - alleging seven different types of adverse employment actions - required that each alternative theory presented must be supported by substantial evidence, in order to go to the jury. Defendants argued that the instruction did not meet the substantial evidence standard.
The trial is over. Things did not go as had been hoped, and an adverse judgment has been entered. An appeal is a given, right? Not necessarily. Although in most civil cases, there is an automatic right to an appeal from an adverse judgment or other final order, that does not necessarily mean an appeal is the right choice in every case. Here are some points to consider.
- What is the realistic chance of success on appeal? This analysis should begin with a look at the applicable standard of review. For example, in Missouri evidentiary issues typically receive review only for abuse of the trial court’s discretion, and the trial court will be afforded considerable discretion in such matters. Review of an order granting summary judgment will be de novo, which essentially means the appellate court will look at the case with a fresh set of eyes. These are very different standards, and there are others which may apply to other issues in any given case. Knowing the standard of review to be applied will help in the assessment of chances of success.
- What fees and costs will likely be incurred? Like the amounts for fees and costs incurred in litigating a case through trial, fees and costs on appeal can vary widely depending on the facts of the case and its procedural posture. The preparation of a record on appeal for a case involving multiple days of trial testimony and thousands of pages of documentary evidence is likely to be considerably more expensive than preparation of a record on appeal of an order granting a Motion to Dismiss. Likewise, the complexity and number of issues to be raised in the appellate briefing are likely to affect the overall amount of fees and costs incurred. An appeal bond, if one is required, can be costly if a large verdict must be bonded. Having an estimate of likely fees and costs such as these will assist in making the determination if the appeal is worth the effort given whatever has been determined to be the realistic chance of success on appeal.
- What time and effort will be involved? Appeals can take a long time, even upwards of 9 to 12 months or more, to complete. Post-judgment interest may or may not be accruing. A party’s other interests may or may not be affected by either or both the diversion of time or of money. As with all phases of litigation, these considerations should be weighed in the decision on whether to proceed.
- Is the record on appeal solid? On appeal, the parties are pretty much stuck with the facts as they appear in the record. The time for development of facts or discovery on issues is, for the most part, over. This is both good news and bad news. The bad news is that, once on appeal, if certain evidence was not presented to the trial court, it is generally too late to do so. The good news is that this may also mean a more accurate assessment of the merits of the case can be made. At any rate, whether the trial court record contains all that might be needed for a successful appeal should be considered in an overall assessment of the appeal’s strength.
- Is there some strategic advantage to be gained with an appeal? If an appeal is otherwise justified and non-frivolous, a consideration may be whether or not filing an appeal provides some leverage toward settlement of the case.
For an aggrieved party, an appeal absolutely may be the right choice but should not be entered into blindly. An appellate practitioner, whether or not also involved at the trial court level, can assist in a thoughtful and reasoned evaluation of the case to make an informed decision on whether or not to pursue appellate review.
The Missouri Supreme Court recently issued an amended opinion for Dodson v. Ferrara, Mercy Clinic Heart and Vascular, LLC. BSCR’s first post discussing the Court’s original opinion can be found here.
In Dodson, the Missouri Supreme Court heard, en banc, an appeal by both Plaintiffs and Defendants from the circuit court of St. Louis County. The case originates from a wrongful death action, brought by the family of Shannon Dodson against Defendant health care providers Dr. Robert Ferrara and Mercy Clinic Heart and Vascular, LLC, after Shannon Dodson died from a dissection of her left main coronary artery during a cardiac catheterization. The original jury verdict totaled $1,831,155 for economic damages and $9 million for noneconomic damages, but the trial court reduced the noneconomic damages to $350,000 pursuant to Mo.Rev.Stat. §538.210. On appeal, Plaintiffs argued that the statutory cap on noneconomic damages does not apply in wrongful death cases per Watts v. Lester E. Cox Medical Ctr., 376 S.W. 3d 633 (Mo. banc 2012) and that the cap violated constitutional rights of the right to trial by jury, equal protection or separation of powers provisions under both the Missouri and United States Constitutions. The Missouri Supreme Court ultimately held that noneconomic damages cap in Mo.Rev.Stat. §538.210 is, in fact, constitutional as applied in wrongful death cases, discussing the distinction of a common law claim for personal injury as opposed to a statutory claim for wrongful death.
The Court’s original opinion held that the statutory cap in Mo.Rev.Stat. §538.210 does not violate those rights provided by equal protection. Plaintiffs argued that the statutory damages cap “impacts a fundamental right because it impermissibly restricts the right to a jury trial” or, alternatively, their claims must be placed under a rational basis review to determine if the law was justified inasmuch as it was rationally related to a legitimate state interest. The Court rejected plaintiff’s first argument and, analyzing their claims under a rational basis review, found that not only was the damages cap found to be rationally related to a legitimate state interest (i.e. “reduce perceived rising medical malpractice premiums and prevent physicians from leaving ‘high risk’ medical fields”; See also Adams v. Children’s Mercy Hospital, 832 S.W.2d 898 (Mo. banc 1992), but also that the equal protection concerns presented by the plaintiffs did not apply to the outcomes stemming from the Court’s rulings (“Plaintiffs cite no cases holding that equal protection analysis is appropriate in judicial determinations.”).
In the revised opinion, which was prompted by plaintiffs’ counsel’s attempted request for a rehearing (which was denied), while the outcome of the case remained the same, the Missouri Supreme Court slightly expanded upon its original equal protection discussion. It still recognized that plaintiffs had not actually challenged the Missouri constitutional provision itself (article I, section 22(a)), but rather plaintiffs had challenged the Court’s interpretation of the provision-an argument that does not properly raise an equal protection challenge.
However, the Court replaced an existing footnote (FN 12 on p. 24 of the revised opinion), elaborating on its previous footnote that had briefly discussed the concept that an analysis of equal protection could apply to a court functioning in its administrative capacity. The revised footnote further distinguishes between common law causes of action and those created by statute, while also supporting its decision that the Mo.Rev.Stat. §538.210 damages cap did not present an equal protection violation. The new footnote states as follows: “In any event, plaintiffs whose family member was killed by medical negligence are not similarly situated to plaintiffs who – themselves – were injured by medical negligence. The former have no common law cause of action, the latter do. It is this distinction which accounts for the differences between Watts, on one hand, and Sanders and the present case on the other. Because the two classes of plaintiffs are not similarly situated with respect to Missouri’s constitutional right to a jury trial, there can be no equal protection violation either in the constitutional provision or this Court’s application of it.”
While the Court’s revised opinion does not affect the outcome of the case, the further distinction between common law and statutory causes of action could have an effect on future court discussions on the constitutionality and applicability of caps on damages. Also unchanged is the possibility of more change to non-economic damages caps through the legislature in the future, which, for now, remain constitutional in the context of a claim for wrongful death.
Recent BSCR Blog Posts Related To Statutory Caps:
March 2015 - Possibility of statutory caps making a comeback through Senate Bill No. 239.
May 2015 - Both the Senate and House Bill had passed, which limited non-economic damages in medical negligence claims to $350,000, reflecting and supporting the later Dodson decision.
May 2016- Original Dodson opinion discussed.
A summary of the Dodson case can also be found here.
Missouri Appeals Court Rules "Continuing Duty Doctrine" Applies to Deposition Testimony of a Party's RepresentativeJune 1, 2016
Rule 56.01(e) of the Missouri Rules of Civil Procedure requires parties to a litigation to supplement responses to interrogatories, requests for production, and requests for admission “if the party learns that the response is in some material respect incomplete or incorrect and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing.” This has come to be known as the “continuing duty doctrine”.
The rule does not mention deposition testimony, and there is no other rule that creates a duty to supplement deposition testimony. But a recent decision of the Missouri Court of Appeals suggests that the “continuing duty doctrine” applies to the deposition testimony of a party’s representative.
In Burlison v. Dep’t of Public Safety, the Southern District considered an appeal and cross appeal from an award of the Labor and Industrial Relations Commission in a worker’s compensation case. 478 S.W.3d 577 (Mo. App. S.D. 2016). The cross appeal came from the employer who sought review of the Commission’s adoption of the Administrative Law Judge’s (ALJ) decision to exclude two surveillance videos of the former employee’s activities at the worker’s compensation hearing. During discovery, the former employee deposed the employer’s representative, and the deposition notice included a request for production, including any surveillance videos taken of her.
At his deposition, the employer’s representative testified that there had been no surveillance video taken of the former employee. However, sometime after the deposition, the employer hired an investigator to conduct surveillance of the former employee, and took video of her activities on two occasions. At the hearing, the employer attempted to cross examine the former employee using the two videos. The former employee objected on the grounds that the videos had not been disclosed prior to the hearing. The ALJ sustained the objection, finding that the videos were not admissible because the employer had a duty to supplement its representative’s testimony under Rule 56(e) but failed to do so. The Southern District affirmed the Commission’s award, agreeing that the employer had committed a discovery violation and that the surveillance videos were properly excluded by the ALJ.
The Court of Appeals relied on two older appellate decisions interpreting an earlier but similar version of Rule 56(e). One was Crompton v. Curtis-Toledo, Inc. in which the Eastern District Court of Appeals applied the continuing doctrine duty to preclude introduction of a fact witness at trial by a party who failed to supplement deposition testimony involving the identity of that witness. 661 S.W.2d 645, 650 (Mo. App. E.D. 1983). In Crompton, the court acknowledged that the rules say nothing about supplementation of deposition testimony, but cited to the spirit of the discovery rules “that the rules of discovery were designed to eliminate, as far as possible, concealment and surprise in the trial of law suits to the end that judgment therein be rested upon the real merits of the causes and not upon the skill and maneuvering of counsel.” The other case relied upon by the Southern District was Gassen v. Woy in which the Western District applied the continuing duty doctrine to the deposition testimony of an expert where the expert witness changed their opinion before trial. 785 S.W.2d 601, 603-04 (Mo. App. W.D. 1990).
The lesson of Burlison is that if you want to use something at trial, you have to disclose it during discovery, even if it means supplementing your client’s deposition testimony.
Missouri Court of Appeals Again Rules That Police Officer Testimony as to Fault of Party to Accident is InadmissibleMay 23, 2016
In Ritchie v. State Farm Mutual Automobile Insurance Co., the trial court had allowed an investigating officer to testify that the Plaintiff’s motorcycle had left the roadway in a straight line and that he had found no evidence of another vehicle forcing the Plaintiff off the road. Over objection, he was permitted to testify that, in his opinion, the cause of the accident was inattention by the Plaintiff. The jury then returned a verdict in favor of the Defendant and Plaintiff Ritchie appealed. The Court of Appeals reversed and held that “Missouri courts have uniformly held that a police officer, especially if he or she did not witness the accident, cannot offer an opinion as to the fault of the accident.” Khan v. Gutsgell, 55 S.W.3d 440, 443 (Mo. App. E.D. 2001). This is because a jury will likely give undue weight to an officer’s assessment of fault in a traffic accident. Id. This rule applies regardless of whether the officer is testifying as an expert witness or not. Stucker v. Chitwood, 841 S.W.2d 816, 819-20 (Mo. App. S.D. 1992). The appellate Court held that the officer’s opinions and conclusions were not fact testimony of what he personally observed at the scene. The Court also found that the testimony materially affected the outcome of the trial, as the case law recognizes an officer’s opinion testimony and fault in an accident will likely be given undue weight and to significantly influence the jury’s resolution on the issue of liability. Khan, 55 S.W.3d at 443; Stucker, 841 S.W.2d at 820.
Plaintiffs Valerie Hawkins and Janice Patterson brought suit against the Community Bank of Raymore, in the U.S. District Court for the Western District of Missouri. Both women were married to members of PHC Development, LLC, and they each were required to sign as personal guarantors in order for their husbands’ business to obtain approximately $2 million in commercial loans. PHC defaulted under the loans, and Community Bank of Raymore sought to enforce the terms of the agreements, including seeking remedies against the spousal guarantors. Hawkins and Patterson filed suit, alleging that the bank violated the Equal Credit Opportunity Act (ECOA), which makes it unlawful for a creditor to discriminate against a credit applicant, with respect to any aspect of a credit transaction, on the basis of race, color, religion, national origin, gender, age, or marital status.
The bank required Hawkins and Patterson to sign as guarantors in order for PHC to obtain the loans. For that reason, Hawkins and Patterson claimed that the bank discriminated against them based upon their marital status, as they would not have been required to sign as guarantors had they not been married. The bank argued that the ECOA only protects credit applicants, and since the guarantors had not applied for credit in their individual capacities, they were not protected under the Act. The federal district court agreed with the Bank’s rationale, granting summary judgment in its favor. The 8th Circuit Court of Appeals upheld that decision, and the U.S. Supreme Court granted review.
Court observers expecting a definitive ruling on whether a spousal guarantor has standing to sue under the ECOA, and whether the definition of “applicant” under the ECOA should be broadened to include non-borrowing guarantors, were disappointed. With Justice Antonin Scalia’s chair still vacant, the even-numbered Supreme Court issued a concise, 4-4 split Opinion, thus affirming the Court of Appeals decision in favor of Community Bank of Raymore. Had the decision been reversed, Missouri lenders could have expected increased litigation under the ECOA, and credit may have become less accessible to small business owners without the lenders’ added protection and security through obtaining spousal guarantors for loans.
The decision issued by the Supreme Court may be found here.
In Dodson v. Ferrara, Mercy Clinic Heart and Vascular, LLC, the Missouri Supreme Court heard an appeal by both Plaintiffs and Defendants from the circuit court of St. Louis County. The wrongful death action was brought by the family of Shannon Dodson against defendant health care providers, Dr. Robert Ferrara and Mercy Clinic Heart and Vascular, LLC, after Shannon Dodson died from a dissection of her left main coronary artery during a cardiac catheterization. The original jury verdict totaled $1,831,155 for economic damages and $9 million for noneconomic damages. The trial court reduced the noneconomic damages to $350,000, pursuant to Mo.Rev.Stat. §538.210.
On appeal, Plaintiffs argued that the statutory cap on noneconomic damages does not apply in wrongful death cases under Watts v. Lester E. Cox Medical Ctr., 376 S.W. 3d 633 (Mo. banc 2012), and that the cap violated constitutional rights of the right to trial by jury, equal protection or separation of powers provisions under both the Missouri and United States Constitutions. In holding the noneconomic damages cap in Mo.Rev.Stat. §538.210 is constitutional, as applied in wrongful death cases, the Missouri Supreme Court discussed the distinction between a common law claim for personal injury and a statutory claim for wrongful death.
The Court majority reasoned that Watts was not controlling because the personal injury claim asserted by plaintiff in Watts was recognized at common law and “not subject to legislative limits on damages” in 1820. Thus, in Watts, the statutory cap did violate right to trial by jury in the medical malpractice actions alleging common law personal injury claims. But in Dodson, the Plaintiffs brought a claim for wrongful death, which was not a claim recognized at common law in 1820 in Missouri, but was instead a statutory creation subject to statutory caps and limitations. See Sanders v. Ahmed, 364 S.W.3d 195 (Mo. banc 2012).
The Missouri Supreme Court also held that the statutory cap does not violate equal protection, because the damages cap in Mo.Rev.Stat. §538.210 has been found to be rationally related a legitimate state interest (i.e. “reduce perceived rising medical malpractice premiums and prevent physicians from leaving ‘high risk’ medical fields”). See also Adams v. Children’s Mercy Hospital, 832 S.W.2d 898 (Mo. banc 1992). Moreover, the statutory cap does not violate the separation of powers as required by Article II, section 1 of the Missouri Constitution, because the legislature created and had the authority to create the wrongful death cause of action and the cap does not “impinge on the judicial power of remitter.”
The dissenting judges questioned whether the statutory damages cap was, in fact, rationally related to a legitimate interest, and would have held that the constitutional right to a jury trial includes statutory wrongful death actions, due to the analogous nature of a wrongful death claim to those recognized at common law.
In March of 2015, BSCR discussed the possibility of statutory caps making a comeback through Senate Bill No. 239. BSCR then informed readers, in May of 2015, that both the Senate and House Bill had passed, which limited non-economic damages in medical negligence claims to $350,000. This reflects and supports the Dodson Court’s decision. However, while non-economic damages for wrongful death claims may be capped and constitutional today, there is always the possibility that future legislation could once again alter the cap landscape.
A summary of the Dodson case can also be found here.
Supreme Court of Missouri Holds Patient's Family Could Not Sue Physician for Wrongful Death, but Patient's Personal Representative Could Have Brought Action for Medical NegligenceApril 19, 2016
Mickels, et al. v. Raman Danrad, M.D., 436 S.W.3d 327 (Mo.banc April 19, 2016)
The Supreme Court of Missouri vacated a trial court’s grant of summary judgment in favor of a physician and remanded the case, because the allegations in the petition stated a cause of action for medical negligence that would have been actionable under § 537.020, RSMo (Missouri’s “survivorship” statute) if brought by the patient’s personal representative.
The deceased patient’s family members brought a wrongful death action against Dr. Danrad, alleging Dr. Danrad failed to timely diagnose a brain tumor that was both terminal and incurable. After undergoing surgery, the patient died of the brain tumor on June 12, 2009, approximately four months after diagnosis. The plaintiffs alleged, had Dr. Danrad timely diagnosed the tumor two months sooner, the patient would not have died on June 12, 2009. The plaintiffs’ oncology expert testified at trial that the patient would have lived an additional six months on average had the tumor been diagnosed two months sooner.
Dr. Danrad moved for summary judgment on the ground that the plaintiffs had not pleaded, and could not prove, facts showing that his alleged negligence resulted in the patient’s death, as a required by § 537.080 (Missouri’s wrongful death statute). The trial court agreed, entering judgment dismissing the petition. The plaintiffs appealed.
On appeal, the Supreme Court of Missouri agreed that the patient’s death was not caused by Dr. Danrad’s negligence, and that the plaintiffs could not sue for wrongful death under § 537.080. After reviewing cases from several state supreme courts outside of Missouri, the Court found that every court to address the issue reached the same conclusion.
Despite finding the plaintiffs could not maintain an action for wrongful death, the Court found that Dr. Danrad’s alleged negligence may have injured the patient, and thus the alleged negligence was actionable under § 537.020 (Missouri’s “survivorship” statute). This statute provides that causes of action, other than those resulting in death, “survive” the decedent’s demise, and may be brought by the decedent’s personal representative. This is not to be confused with a claim for “lost chance of survival”, which the Court found did not apply because all parties conceded the patient would not have survived the brain tumor regardless of Dr. Danrad’s alleged negligent failure to timely diagnose.
In reaching its holding, the Court stated that its approach “keeps the question of the time and date of the decedent’s death out of the causation analysis, and confines it to the damages analysis where it belongs.” The Court vacated the trial court’s judgment and remanded the case.
In his dissent, Judge Richard Teitelman disagreed with the concept that a terminally ill person can never suffer a wrongful death. He found this concept inconsistent with the purpose of the wrongful death statute, which is to provide compensation to bereaved plaintiffs for their loss, ensure that tortfeasors pay for the consequences of their actions, and deter negligent acts that may lead to death. He found the result of the majority’s opinion is to effectively immunize tortfeasors from wrongful death liability when they kill the terminally ill. Judge Teitelman stated: “There is nothing in the plain language of the wrongful death statute that compels the conclusion that a physician who negligently causes the premature death of a patient is immunized from wrongful death liability because, by a stroke of perverse luck, the patient also suffers from a terminal illness.” Judge Teitleman also disagreed with the majority opinion’s reliance on cases from the states of Florida, Ohio and Iowa that were decided 30-83 years earlier.
This case provides potentially important considerations for medical negligence cases involving an alleged failure to timely diagnose disease in the terminally ill. The distinction between remedies (wrongful death statute vs. survivorship statute) is important because there are significant differences between the two in terms of who may sue, the applicable statute of limitations, the damages available, and possibly other considerations as well.
Appellate briefing requirements in Rule 84.04 are mandatory and any failure to follow them may lead to dismissal. Appellant Steele’s brief lacked any legal argument to support her claim of reversible error, as required by Rule 84.04(d)-(e). The brief failed to cite even a single case and “completely fail[ed] to show how the principles of law interact with the facts of the case.” As such, appellee was left to infer and guess as to what Steele’s legal claims actually were. Identifying this practice as “unacceptable,” the Court stated that it was unwilling to attempt to decipher and supplement her arguments; doing so would place the Court in the position of being Steele’s advocate. Steele’s appeal was therefore dismissed. Sharon E. Steele v. Schnuck Markets, Inc., Case No. ED102653 (Mo.App. April 12, 2016).
Bottom line: follow the Rules.
In Woods v. Cory, plaintiffs filed an action alleging injuries from an auto accident. Defendant moved for summary judgment and argued the motion on February 18, 2003. The court ordered that if the case was not settled by March 5, 2003, it would rule on the pending motion. Three days later, plaintiffs’ attorney asked for a settlement offer from Defendant. On February 25, 2003 Defendant faxed a written offer of $35,000 to settle. The letter contained no time limit for acceptance of the offer.
On February 28, 2003, the court entered summary judgment in favor of defendants on all claims. All parties received a copy of the court’s order on March 3, 2003. On March 12, 2003, plaintiffs’ attorney accepted the defendant’s settlement offer. Later that same day, defendant’s counsel faxed a letter stating defendant was no longer interested in settlement.
Plaintiffs’ counsel moved to enforce the settlement. In enforcing the settlement, the court explained the basics of contract law, as applied to settlements:
Inherent in the offeror's power as master of his offer is the power to insist that the offer may terminate upon the occurrence of a condition and that it may only be accepted in accordance with the conditions stated by it. When an offer is made and no time limit is specified as to the time to accept the offer and the duration of the power of acceptance is not stated, then it is deemed that the offer is open for a reasonable period of time. The resolution of what is a reasonable time is a question of fact to be determined by the trier of fact. There is no contract until acceptance of an offer is communicated to the offeror. An offeror may withdraw his offer at any time before acceptance and communication of that fact to him. To be effective, revocation of an offer must be communicated to the offeree before he has accepted.
Woods, 192 S.W.3d at 459 (internal citations omitted). The court held that because defendant’s offer to settle did not contain any condition that it be accepted before the trial court ruled on Defendant’s pending motion or that it be accepted within any particular period of time, acceptance occurred on March 12, 2003. Thus, the court enforced the parties’ settlement agreement.
 192 S.W.3d 450 (Mo.App.S.D. 2006).
In Lackey, the respondent learned this lesson the hard way. The trial court had granted summary judgment in favor of a school district and a teacher who were sued for negligence by a student who injured his wrist in gym class. The student appealed. The Court of Appeals affirmed the grant of summary judgment to the school district, agreeing with the trial court that the evidence presented by the student on summary judgment was not enough to establish waiver of sovereign immunity.
But the outcome was different for the teacher. In support of his summary judgment motion, the teacher submitted a two-page statement of uncontroverted facts pursuant to Rule 74.04(c), but cited facts found outside of that document to establish his immunity defense. The Court of Appeals found that these facts were not part of the summary judgment record, and, therefore refused to consider them. Thus, based on the limited record submitted by the teacher, the Court found inadequate support for the teacher’s immunity defense, and reversed the trial court’s grant of summary judgment.
The lesson for practitioners is clear: when filing a motion for summary judgment, open the rule book to Rule 74.04(c), and follow it explicitly.
Missouri Senator Ron Richard (R) has introduced Senate Bill 793 which, if passed, would heighten the requirements for a claimant under the Missouri Merchandising Practices Act, Mo. Rev. Stat. § 407.025, et seq. (the MMPA). In its current text, the MMPA has allowed courts broad discretion in qualifying certain transactions under the act and in awarding seemingly excessive damages for MMPA claims. The proposed change to the law adds a heightened threshold for causation and proof of damages.
Currently, the MMPA states, in pertinent part:
“Any person who purchases or leases merchandise primarily for personal, family or household purposes and thereby suffers an ascertainable loss of money or property, real or personal, as a result of the use or employment by another person of a method, act or practice declared unlawful by section 407.020, may bring a private civil action in either the circuit court of the county in which the seller or lessor resides or in which the transaction complained of took place, to recover actual damages. The court may, in its discretion, award punitive damages and may award to the prevailing party attorney's fees, based on the amount of time reasonably expended [ . . . ].”
Among the most problematic aspects of the MMPA for companies doing business in Missouri are its lax causation requirements (e.g., a plaintiff need not show that he relied on a misrepresentation in order to state a claim), and the availability of punitive damages that are limited only by Missouri’s general tort cap on punitive damages and constitutional due process considerations.
SB793 adds the following requirements in order to assert a civil action for recovery under the MMPA:
“A person seeking to recover damages shall demonstrate that he or she acted reasonably in light of all the circumstances and establish his or her individual damages with sufficiently definitive and objective evidence to allow the loss to be calculated with a reasonable degree of certainty. The damages shall be measured by the person’s out-of-pocket loss, which shall be defined as an amount of money equal to the difference between the amount paid by the consumer for the good or service and the actual market value of the good or service that the consumer actually received. In order to recover damages under this section, each person shall be required to prove that the method, act, or practice declared unlawful by section 407.020 caused him or her to enter into the transaction that resulted in his or her damages.”
The revised statute would also set a more certain accrual date for a cause of action under the MMPA, which is significant, since a claimant under the MMPA enjoys a five year statute of limitations. The proposed legislation further sets forth that “a cause of action under this section accrues on the date of the purchase or lease described in the first sentence of this section.” Thus, the only actions taken by a business that would give rise to a claim under the MMPA would be actions taken during or before the initial purchase, agreement, or transaction.
Another significant aspect of the bill is that class action plaintiffs would no longer be able to assert a claim for punitive damages under the MMPA.
While, on its face, the bill does not appear drastically different than the current law, the legislation could significantly limit the scope of the MMPA as well as the prospective damages for such a claim. Financial institutions would no longer face a never-ending threat of MMPA litigation in connection with their continued servicing or collection of a loan, as any claim arising more than five years after the initial transaction would be time-barred. Further, the proposed legislation would add the “reasonable reliance” requirement of many jurisdictions’ comparable consumer protection laws, requiring a claimant to demonstrate a connection between the defendant’s purported misrepresentation or omission and some action on the claimant’s part, to his or her detriment.
Identical legislation was proposed in Missouri in 2015, but the bill never made it out of committee. Providers of consumer goods and services in Missouri, as well as their counsel, should stay tuned for updates in this proposed legislation, which would help protect such businesses from frivolous litigation and disproportionate verdicts. Missouri consumers may be held to a standard of reasonableness, once and for all.
On appeal, the Missouri Court of Appeals, Western District, first discussed the nature of third-party harassment claims and the MHRA. Under the MHRA, only an employer, which is defined as “any person employing six or more persons within the state, and any person directly acting in the interest of an employer,” can be held liable for an unlawful employment practice that discriminates on the basis of sex. An employer can be held liable under either a theory of vicarious liability (i.e. when the harasser is a supervisor of the harassed employee) or under a theory of negligence in allowing a hostile work environment to grow (i.e. a non-supervisory employee or third-party is the harasser).
In this case, Plaintiff sued on the second theory, negligence in allowing a hostile work environment to grow, which, as the Court pointed out, turns the analysis to “evaluating the adequacy of the employer’s response” once the employer is made aware of the harassment. The Court also recognized that an employer has a duty under both Title VII and the MHRA to maintain a discrimination-free work environment and breaches this duty if the employer knows or should have known of the discrimination and fails to take remedial action. When a plaintiff brings suit based on this second theory under the MHRA, punitive damages may also be assessed if he or she provides clear and convincing proof of a wanton, willful, or outrageous mental state or reckless disregard so that an evil motive may be inferred.
The Court agreed with Defendants that AutoZone, Inc. had no liability because it was not Plaintiff’s employer for purposes of the MHRA. The Court discussed Missouri’s multi-factor test, the modified economic realities test, which is used in the context of an MHRA claim to determine whether an entity may be properly considered an employer under the MHRA. The factors of this test are as follows:
- Who was responsible for establishing policies and training employees concerning harassment?
- Who was responsible for receiving, investigating, and responding to harassment complaints?
- Who had the power to discipline employees who may have failed to comply with anti-harassment policies?
However, the Court of Appeals did find that Plaintiff made a submissible case for sexual harassment, because she established that:
- She was a member of a protected class;
- She was subjected to unwelcome sexual harassment (at least two customers sexually harassed her);
- The harassment was based on her sex;
- This harassment affected a term, condition or privilege of employment in a manner sufficiently severe to create an abusive work environment; (i.e. the repeated harassment created an intimidating, hostile, or offensive working environment); and
- Defendant AutoZoners, LLC (the employer) knew or should have known of the harassment and failed to take proper remedial action (Plaintiff told two supervisors multiple times about the harassment, as well as HR, but to no avail).
- The trial court did not err in failing to submit vicarious liability as an element in jury instructions, because Plaintiff’s claim was under the second theory of negligence for allowing a hostile work environment to grow rather than the first theory of vicarious liability.
- The trial court did not err in refusing to reduce the award of compensatory damages, because the award was supported by ample and sufficient evidence of both tangible and intangible (i.e. emotional harm) damages.
- Punitive damages were appropriate against AutoZoners, LLC and did not violate Due Process, because Plaintiff met her burden of providing clear and convincing proof of a culpable mental state or reckless disregard evidencing evil motive on the part of the employer and the award was not “grossly excessive” under the BMW of N. Am., Inc. v. Gore factors. Furthermore, the punitive damages award did not exceed the statutory cap provided by Mo. Rev. Stat. 510.265.
Appeals Court Affirms Summary Judgment in Favor of Landowner on Premises Liability Claim, Allows Negligence Claim to go ForwardNovember 30, 2015In Woodall v. Christian Hospital N.E., the Missouri Court of Appeals for the Eastern District affirmed that a landowner does not owe a duty to prevent injury to invitees when the landowner relinquishes possession and control of the premises to an independent contractor during a period of construction. The court held (reaffirming the case of Matteuzzi v. Columbus Partnership L.P., 866 S.W.2d 128, 132(Mo. banc. 1993)) that under such circumstances where a landowner has permitted a contractor to take over the land/property, the landowner is no longer considered the possessor of the land and is therefore relived of potential liability for injuries caused to invitees.
However, the court allowed a traditional negligence claim to go forward against landowner Christian Hospital based on the theory that thy were negligent in allowing a handrail to be removed, causing Woodall to fall and become impaled on an exposed handrail support bracket. “Whether [Christian Hospital’s] conduct breached a duty of care to Woodall is a question of fact.” Thus, Woodall could pursue his claim against Christian Hospital for negligence, but the hospital was relieved of premises liability claims. The court stated that the claims of general negligence arose out of the hospital’s alleged negligent conduct in removing the handrail and thus summary judgment is inappropriate where there are unresolved issues of material fact affecting liability.
In Owens v. Missouri State Board of Nursing, the Missouri Court of Appeals for the Western District determined that the Missouri State Board of Nursing should not have revoked Jeannie Owens’ nursing license because driving while intoxicated was not a crime of moral turpitude or a crime reasonably related to her ability to practice as a nurse. Because no Missouri court had yet to answer this question, the Western District based its decision on rulings from courts in Alabama, Vermont, Tennessee, California, South Carolina, Texas and Indiana. After analyzing the reasoning of the courts in those other states, the Western District found “persuasive [those] cases holding that driving while intoxicated is not a crime of moral turpitude, especially when dealing with a first offense and a conviction as a misdemeanor.”
FACTS OF THE CASE
On May 14, 2009, contrary to the prescription instructions, Jeannie Owens took two muscle relaxer pills and an antibiotic before driving to work. When she pulled into the parking lot, she began to feel dizzy and hit another car. According to the police report, the responding officer found Ms. Owens’ car parked “on top of” the other vehicle and noted that Ms. Owens’ clothes were on inside out and backwards and that she was confused and unable to understand questions. On January 4, 2011, Ms. Owens pled guilty to one Class B misdemeanor count of “driving while intoxicated – drug intoxication.” Ms. Owens’ guilty plea was her first conviction for driving while intoxicated.
Over two-and-half years later, the Missouri State Board of Nursing filed a complaint against Ms. Owens. Following a hearing, the Board issued its Findings of Fact and Conclusions of Law. The Board determined that the guilty plea was sufficient cause to take disciplinary action and that “[a] nurse in an impaired condition is a danger to herself and her patients.” The Board concluded that the “appropriate level of discipline for Owens was revocation of her nursing license ‘in order to safeguard the health of the public.’” Shortly thereafter, Ms. Owens filed a petition for judicial review of the Board’s decision. The Circuit Court reversed the Board’s decision, and then the Board appealed that reversal.
REASONING OF THE COURT OF APPEALS
Under Missouri law, the Board is empowered to determine discipline for a licensed nurse if the Board possesses certified records for an offense involving the qualifications, functions, or duties of a nurse or for an offense involving moral turpitude. MO.REV.STAT. § 335.066.16(1)(a). In reaching the decision to revoke Ms. Owens’ license, the Board concluded that her DWI “was an offense involving moral turpitude and involving the qualifications, functions, and duties of a nurse.”
On appeal, the Western District noted that the definition of “moral turpitude” is “an act of baseness, vileness, or depravity in the private and social duties which a” person owes to society. After examining the definition of the phrase, the court concluded that “driving while intoxicated is irresponsible,” there was nothing “in this case that suggests that Owens committed an act of ‘baseness, vileness or depravity.” The court also determined that “nothing within the offense of driving while intoxicated relates to or is connected or linked to the qualifications, functions, or duties of a nurse.” Thus, the court concluded that the Board overstepped its authority when it revoked Ms. Owens’ license.
Although the Owens court declared that driving while intoxicated is not a crime of moral turpitude, it nonetheless left open the possibility that driving while intoxicated could still be grounds for the Board to revoke a nurse’s license. The court specifically noted that such an offense could implicate other provisions of MO.REV.STAT. § 335.066.2.
Additionally, the court noted that Ms. Owens was a first time offender and that hers was a misdemeanor conviction. The Owens court did not make any pronouncements about whether a felony conviction or repeated convictions could qualify as crimes of moral turpitude. Thus, the court left open the possibility that a felony conviction or a conviction for repeated DWI offenses might qualify as a crime of moral turpitude.
In 2005, the Missouri legislature revised Mo. Rev. Stat. § 538.225 in an effort to reform Missouri’s tort laws. Since 2005, the statute has required a court to dismiss a lawsuit if a plaintiff fails to file the required affidavit with his or her petition. Section 1 of the statute directs a plaintiff, who brings a medical malpractice lawsuit for damages for personal injury or death, to file an affidavit advising the court that the plaintiff has sought and obtained a written opinion from a qualified health care provider regarding the lawsuit. That affidavit must further contain an opinion from the legally qualified health care provider stating its belief that the defendant health care provider breached the applicable standard of care for a reasonably prudent and careful health care provider, resulting in the damage set forth in the plaintiff’s petition.
In their original lawsuit, Plaintiffs in Lang v. Goldsworthy previously filed the required health care affidavit, but they voluntarily dismissed that case after more than two years of litigation. But curiously, when the Plaintiffs later re-filed the same case in the same court, they failed to attach the health affidavit pursuant to Mo. Rev. Stat. § 538.225. In that second case, Plaintiffs acknowledged their failure to file the affidavit, but challenged the statute as an unconstitutional bar to their access to the courts, a violation of their right to a trial by jury, and as an impermissible special law. The trial court granted the Defendants’ motion to dismiss for failure to file the health care affidavit. Although the trial court dismissed the second case without prejudice, the Plaintiffs were barred from re-filing the case in a third lawsuit in that court due to the running of the three-year statute of limitations for wrongful death claims set forth in the savings provision of Mo. Rev. Stat. § 537.100. Plaintiffs therefore appealed.
On appeal, rather than assessing the constitutional validity of the statute, the Missouri Supreme Court in Lang v. Goldsworthy declined Plaintiffs’ invitation and instead honed in on the real issue before the court: Plaintiffs’ own failure to attach the required health care affidavit to their petition. In a 5-2 opinion, the Court made clear that Plaintiffs could have avoided a dismissal of their second lawsuit by diligently ensuring that they were complying with the law. Two dissenting judges argued that the majority should have addressed the plaintiffs’ constitutional arguments against the statute, in that it restricted their access to the courts to seek compensation for the alleged wrongful death of their family member.
The Supreme Court decision, on its face, appears to clearly put an end to plaintiffs’ claims in this matter. Yet, Plaintiffs’ attorney claims there is still an open door for Plaintiffs to refile the case, on the theory that neither Plaintiffs nor the Court, at the time of dismissal of the second case, knew of any authority preventing Plaintiffs from refiling the case. But it seems highly unlikely that the courts will allow these plaintiffs a third bite at the apple.
Lang v. Goldsworthy, 2015 WL 5936587 (Mo.banc. October 13, 2015)
The Supreme Court of Missouri affirmed a trial court’s decision to dismiss a wrongful death action premised on medical malpractice because the plaintiffs failed to file the health care affidavit required by § 538.225, RSMo.
The plaintiffs were several family members who filed a wrongful death action alleging the negligent chiropractic services of the health care provider defendants caused the death of their relative. In the first lawsuit, the plaintiffs timely filed a health care affidavit pursuant to § 538.225. After two and one half years of litigation, the plaintiffs voluntarily dismissed the case.
The plaintiffs timely re-filed an identical petition in the same court, but failed to attach the health care affidavit to their new petition. The defendants filed a motion to dismiss the second case for failure to file the health care affidavit. In response, the plaintiffs acknowledged they had not filed the health care affidavit in the second case, but argued that § 538.225 unconstitutionally barred their access to the courts, violated their right to a trial by jury, and constituted an impermissible special law. The trial court dismissed the action, without prejudice. Due to the passage of time and the three-year statute of limitations governing wrongful death claims, the plaintiffs were prohibited from re-filing their claims in a third suit. Therefore, they appealed.
On appeal, the plaintiffs asked the Supreme Court of Missouri to determine the constitutional validity of § 538.225. Interestingly, the Supreme Court side-stepped the constitutional challenge to § 538.225, because it found plaintiffs’ own inaction, rather than § 538.225, prevented the plaintiffs from re-filing a third petition.¹That is because the plaintiffs could have avoided dismissal had they stapled the affidavit already in their possession to their petition in the second case. Further, it was the one-year savings provision of § 537.100, rather than § 538.225, that was a procedural bar to the re-filing, and the plaintiffs did not challenge the constitutional validity of that section.
Section 538.225 requires plaintiffs to file a health care affidavit in every medical negligence action, without exception. Because the plaintiffs failed to re-file the affidavit in the second case, they failed to comply with the statute. Therefore, the Supreme Court affirmed the trial court’s dismissal.
This case is significant for health care provider defendants in Missouri because it demonstrates the mandatory nature of the statutory health care affidavit requirement for medical negligence actions and the courts’ willingness to uphold it.
¹The Supreme Court noted it previously upheld a prior version of § 538.225 against a constitutional challenge (the legislature amended the statute in 2005 to require mandatory dismissal for failure to file the health care affidavit).
Just a few short years ago, the Missouri Supreme Court upheld the wrongful death damage cap of $350,000 in noneconomic damages in medical malpractice cases. Sanders v. Ahmed, 364 S.W.3d 195 (Mo. 2012). The Court found that the Missouri legislature’s sweeping 2005 “Tort Reform” bill met constitutional muster in this context because it was modifying a statutory provision that was created in 1855, years after the Missouri constitution was adopted in 1820. As such, the legislature was free to change the scope of the statute as it saw fit.
Shortly after the Sanders ruling, the Missouri Supreme Court largely abrogated the medical malpractice damage cap in other medical negligence cases that were based on common law principles. Watts v. Cox Medical Centers, 376 S.W. 3d 633 (Mo. 2012). The court found its justification in the Missouri Constitution’s guarantee of a “right of trial by jury”. The court interpreted this guarantee to bar the legislature from imposing limits on common law claims that existed when the Missouri Constitution was adopted in 1820.
Although a cursory reading of these two cases, decided within months of each other, shows a logical basis for the seemingly inequitable results, yet another wrongful death case has been transferred to the Missouri Supreme Court for clarification. In Dodson et al. v. Mercy Hospitals East Community et al., ED100952, the Eastern District Court of Appeals transferred the appeal of a $10.8 million wrongful death verdict which contained a non-economic damages component of $9 million. Despite the Eastern District’s rejection of any argument that Watts somehow overruled Sanders, the court was concerned about possible violation of state and federal equal protection guarantees.
This transfer is even more intriguing in light of the new Missouri noneconomic damage caps that are set to begin on August 28, 2015. This bill was intended to “restore” a version of the 2005 caps, but with changes that would allow the bill to withstand judicial scrutiny. The new caps will have a two-tiered system. The first tier of damage caps is $400,000, which would apply to a typical medical negligence case. In cases that are either “catastrophic” or led to a patient’s death (wrongful death actions), the cap rises to $700,000. In addition, the caps would grow by 1.7% each year.
The Missouri Supreme Court’s decision in Dodson will soon provide additional clarity regarding the legislature’s right to modify causes of action created by statute. Although it may not give much guidance as to the constitutionality of the new damage caps, we can all be assured that a new case will come along that will again allow the court to tackle this hotly contested issue.
The Missouri Court of Appeals Upholds a Significant Award of Punitive Damages in an Employment Discrimination CaseJuly 28, 2015
In Ellison v. O’Reilly Automotive Stores, Inc., 2015 Mo. App. Lexis 318, the Missouri Court of Appeals, Western District, upheld a $2 million punitive damages award against an employer in a disability discrimination case brought under the Missouri Human Rights Act. Plaintiff sued O’Reilly Automotive Stores, Inc. as a result of a demotion from Store Manager to Parts Specialist. Plaintiff claimed his disability, myotonic dystrophy, was a contributing factor in the demotion.
After 11 years with O’Reilly, Plaintiff was promoted to Store Manager, a position he held for two years. During that time, Plaintiff’s store produced strong sales numbers and Plaintiff achieved a passing score on an annual audit geared towards evaluating a store manager’s operational leadership.
Nonetheless, Plaintiff received a performance review from his district manager with an overall rating of “needs improvement.” Plaintiff was subsequently disciplined several times including being issued a letter of concern and being placed on a 90-day probation period. The stated reasons for the negative review and subsequent disciplinary actions varied, but included concerns in areas like team member appearance, goal achievement, leadership, commercial sales, employee training compliance, customer service, and store appearance.
Among complaints that the District Manager made about perceived flaws in Plaintiff’s job performance, he also discussed Plaintiff’s disability. He noted that Plaintiff has been falling down in the store and customers have complained that they cannot understand Plaintiff’s speech. Thereafter, Plaintiff’s performance and “medical issues” were discussed between upper-level managers and with human resource personnel.
Plaintiff was ultimately demoted to a parts specialist position in October 2010. After the demotion, Plaintiff took a Fitness for Duty medical test and was cleared to perform any tasks that needed to be done in the store. Plaintiff filed suit and was awarded $200,000 in compensatory damages and $2 million in punitive damages. O’Reilly appealed.
The first issue on appeal was whether Plaintiff made a submissible case for punitive damages. Noting that to make a submissible case for punitive damages, a claimant is required to establish clear and convincing evidence of an intentional act with wanton, willful, or outrageous conduct, or with reckless disregard for the consequences of the act, the court found that Plaintiff met his burden. The court found it persuasive that each O’Reilly representative involved in the decision to demote Plaintiff knew of Plaintiff’s disability and considered it during discussions surrounding Plaintiff’s discipline and subsequent demotion. During trial, representatives of O’Reilly testified that they knew it was illegal to treat disabled employees differently regarding the terms or condition of their employment and that Plaintiff’s disability did not prevent him from performing his job duties as store manager. In fact, the position of a parts specialist was more physically demanding than the position of a store manager.
The court further held that O’Reilly’s stated reason for demotion being performance related was pretext, citing the employer’s changing reasons for taking action almost each time Plaintiff was disciplined, his store’s good sales results, and the fact that Plaintiff’s performance reviews were similar to the reviews of other store managers who were not demoted.
The second issue on appeal was whether the trial court erred in denying O’Reilly’s motion for a new trial. The trial in this case was bifurcated. In the first stage, the jury was to determine the liability for and amount of compensatory damages as well as whether liability existed for punitive damages. If the jury determined that liability existed for punitive damages in the first stage, then in the second stage, the jury would have to determine the amount of punitive damag