RGOI ASC, Ltd. v. Humana Ins. Co., W.L. 4661517; LEXIS 83427 (S.D. Tex. 2008)

Doctors’ DTPA Claims Against Health Insurer for Implied Representations Concerning Reimbursement Practices Were Dismissed for failure to State an Actionable Misrepresentation of Fact: The doctors sued Humana when Humana changed its reimbursement practices and stopped paying for their ambulatory surgery center services for arthroscopic operations for knee and shoulder injuries. The doctors were out-of-network providers who had no contract or agreement with defendant Humana. Nevertheless, Humana had been routinely reimbursing the doctors for treating Humana patients at the rate of approximately $16,000.00 per operation. Humana then abruptly and without notice began reimbursing the plaintiff doctors for less than $1,000.00 per operation. The doctors claimed that Humana’s prior reimbursement practices amounted to a material misrepresentation to the doctors themselves as to the coverage available under Humana’s policies. No other affirmative statements or representations were alleged. Held: The court disagreed and granted Humana summary judgment on the plaintiffs’ DTPA claims, concluding that Humana’s previous reimbursement decisions were not representations of fact and Humana had no affirmative duty to disclose the change in its reimbursement rate to the plaintiff doctors. Note: For a recent non-DTPA case finding of fraud by silence, see Springs Window Fashions Design, Inc. v. The Blind Maker, Inc., 184 S.W.3d 840 (Tex. App.Austin 2006, pet. Granted) without referring to the merits, and it was remanded for settlement.

Forest Oil Corp. v. McAllen, 268 S.W.3d 51 (Tex. 2008)

Reliance and Waiver of Reliance: In Non-DTPA Case, Contractual Waiver of Reliance Clause in Settlement Agreement Was Sufficient to Bar Fraudulent Inducement Claim: The Texas Supreme Court, in a non-DTPA case, addressed the effect of a written statement in a contract specifically disclaiming reliance as a bar to a claim that the plaintiff was fraudulently induced--by verbal assurances during settlement negotiations--to enter the settlement contract. There, the waiver-of-reliance provision stated, among other things, “Each of the Plaintiffs and Intervenors expressly warrants and represents and does hereby state and represent that no promise or agreement which is not herein expressed has been made to him, her, or it in executing the releases contained in this Agreement, and that none of them is relying upon any statement or any representation of any agent of the parties being released hereby. . . .” In holding the waiver-of-reliance provision was a bar to plaintiffs’ fraudulent inducement claims, the Court identified five factors which justified the result: “(1) the terms of the contract were negotiated, rather than boilerplate, and during negotiations the parties specifically discussed the issue which has become the topic of the subsequent dispute; (2) the complaining party was represented by counsel; (3) the parties dealt with each other in an arm’s length transaction; (4) the parties were knowledgeable in business matters; and (5) the release language was clear.” The Court stopped short of stating that all five of these factors are required to be present for a waiver-of-reliance clause to bar a fraudulent inducement claim. Thus, it seems likely that the Court would give similar effect to a waiver-of-reliance clause where one or more of these factors was absent.

Wuertz v. Nationwide Life Ins. Co., W.L. 1331860; LEXIS 3334 (Tex. App.Houston [1^st Dist.] 2009) (mem. op.)

Justifiable Reliance: No Justifiable Reliance On Oral Representations Specifically Contradicted by Written Insurance Policy and Application: The plaintiff purchased a variable life insurance policy with a death benefit of $5,500,000.00 and an annual premium of $300,000.00. The plaintiff alleged that the life insurance agent misrepresented that the insurance policy would require only a single payment of $300,000.00 and that no further premiums would be required to obtain the stated benefit. However, both the written application signed by the plaintiff and the policy itself stated that the $300,000.00 premium was due “annually.” Held: The Court concluded that justifiable reliance was a necessary element to the plaintiffs’ common law fraud and fraudulent inducement claims, and that claimed reliance upon an oral representation that was directly contradicted by the express, unambiguous terms of a written agreement was not justifiable as a matter of law. Quoting DRC Parts & Accessories, LLC v. VM Motori, S.P.A., 112 S.W.3d 854, 858 (Tex. App.Houston [14^th Dist.] 2003, pet. den’d). The court threw out the plaintiff’s DTPA claims, finding that the plaintiff waived any error in dismissing his DTPA claims by failing to brief them on appeal. As such, whether the element of reliance in a DTPA case must also be “reasonable” or “justifiable” was not addressed by the Court.

Sierra Assoc. Group, Inc. v. Hardeman, W.L. 416465; LEXIS 1181 (Tex. App.Austin 2009) (mem. op.)

Reliance; Independent Investigation: Element of Reliance in Common Law Fraud Claims Negated as a Matter of Law Where Buyer Relied Upon His Own Attorney and Real Estate Agent to Conduct Investigation: The plaintiff bought a lot on Lake Travis and was soon disappointed when he learned, subsequent to closing, that he could not build a boat dock where he wanted. The plaintiff sued, claiming common law fraud, statutory fraud and negligent misrepresentation because the sellers listed the property as “water front” property and failed to disclose the restrictions against building a boat dock on the water front. Held: Affirming a summary judgment granted in favor of the defendants, the Court found that the element of reliance in the plaintiff’s common law and statutory fraud claims was negated as a matter of law for at least two reasons: First, the plaintiff testified in his deposition that he asked his real estate attorney and his real estate agent to look into the deed restrictions to see if there was anything to prevent a boat dock and that he relied upon his advice in going forward with the purchase. On this, the Austin Court stated, “One cannot secure redress for fraud when he or she has acted in reliance on his or her own judgment derived from an independent investigation or the advice of his or her own agents.” Secondly, the Court observed that the restrictions against the boat dock desired were a matter of public record and on file with the Travis County deed records. According to the court, had the plaintiff exercised reasonable care and diligence, he would have learned of these restrictions. The court therefore held that this constructive knowledge likewise negated the element of reliance as a matter of law. As in Wuertz, the court disposed of the plaintiff’s DTPA claims on a separate basis: The transaction size was greater than the $500,000 transactional limit imposed by DTPA § 17.49(g). Thus, the authority of these two cases have authority for negating the issue of reliance as a matter of law under the DTPA was limited.

Stack v. Richman, W.L. 659101; LEXIS 1787 (Tex. App.Dallas 2009)

In Lot Size Misrepresentation Case, “As Is” Clause and “Independent Investigation” Did Not Negate Reliance as a Matter of Law: The plaintiffs were home buyers who sued the sellers alleging a misrepresentation of the lot size as being 1.64 acres when in fact it was only 1.165 acres. There was summary judgment evidence that the plaintiffs obtained a survey and a plat map of the lot prior to closing. The sellers therefore argued that the plaintiffs’ “independent investigation” into the lot size negated the element of reliance as a matter of law. Held: While the trial court agreed and granted summary judgment, the Court of Appeals disagreed, noting that neither the survey nor the plat map showed the true acreage of the property and any “investigation” was therefore insufficient to disclose the true facts. The court also held that the “as is” clause in the standard TREC real estate sales contract did not negate reliance as a matter of law, citing the fraudulent inducement and concealment exceptions articulated in Prudential Ins. Co. v. Jefferson Assoc., Ltd., 896 S.W.2d 156, 162 (Tex. 1995).

CA Partners v. Marshall Spears and Citifinancial, Inc., 274 S.W. 3d 51 (Tex. App.Houston [14^th Dist.] 2008, pet. den’d)

Debt Buyer Tagged for Mental Anguish and Additional Damages in DTPA Tie-In of Texas Debt Collection Practices Act Case: The homeowner had contracted for remodeling work in 1990 and executed a promissory note and deed of trust to secure payment for the remodeling services. However, the deed of trust misidentified his property as “Lot 84" when in fact the homeowner’s home was located on Lot 85. The last payment on the note was due in 2000, but the homeowner had stopped making regular monthly payments well before then. After acquiring the note in 2005, the defendant debt collector foreclosed on the plaintiffs’ home on Lot 85 and commenced eviction proceedings against him. When the error in the trustee’s deed was discovered, the eviction action was dismissed, but not until after the plaintiff homeowner had been mentally traumatized by the debt collector’s wrongful foreclosure and eviction. In a bench trial, the trial court awarded the homeowner plaintiff $2,500.00 in actual damages, $25,000.00 in mental anguish damages, $55,000.00 in additional damages and $124,450.00 in attorney’s fees against a debt buyer in a debt. Held: While the Court of Appeals remanded the trial court’s determination of attorney’s fees for failure to segregate, the Court affirmed the awards of damages to the homeowner plaintiff on his DTPA claim for violation of the tie-in Texas Debt Collection Practices Act. The debt collector was unable to show that his actions were “the result of a bona fide error that occurred notwithstanding the use of reasonable procedures adopted to avoid the error,” a defense under the Texas Act. See Tex. Finance Code § 392.401. Obviously, neither the trial court or the Court of Appeals were very sympathetic to the debt collector who tried to collect a debt otherwise barred by the statute of limitations.

McGee v. Caulfield, W.L. 1161819; LEXIS 2999 (Tex. App.Houston [1^st Dist.] 2009) (mem. op.)

Contract-for-Deed Case: 2005 Legislature’s Reduction in Civil Penalty for Seller’s Failing to Provide Annual Statement to Buyer Was Retroactive: As enacted in 2001, Property Code 〈5.077 imposed a penalty of $250.00 for each day after January 31 that the contract-for-deed seller fails to provide the annual statement with no maximum amount for the penalty. In 2005, the Legislature reduced this penalty to only $100.00 per year for sellers who conducted less than two or more contract for deed transactions in a twelve-month period, and capped the total penalty at the value of the house. In McGee, the trial court entered interlocutory orders on April 7, 2005 and June 15, 2005 awarding daily statutory civil penalties to the plaintiff totaling $5,789.60, but did not incorporate those interlocutory orders into a final judgment until December 19, 2006. It appears undisputed that the seller conducted less than two “contract for deed” transactions in the applicable twelve-month period, and so, under the 2005 amendment to Section 5.077, her penalty would be only $100.00 per year. Held: The Court of Appeals concluded that the 2005 legislation, which took effect on September 1, 2005, applied retroactively to transactions which occurred prior to September 1, 2005. Because the trial court’s interlocutory orders had not yet been finalized as of September 1, 2005, the Court of Appeals reduced the civil penalty from $5,789.60 to just $300.00 ($100.00/year x 3 years).

GuideOne Lloyds, Inc., Co. v. First Baptist Church of Bedford, 268 S.W. 3d 822 (Tex. App. Ft. Worth 2008)

Insurance Code Chapter 542, Subchapter B (former Art. 21.55) Penalty of 18% Accrued On Difference Between Actual Recovery and Amount Tendered: This case shows how the 18% penalty in the Prompt Payment Act is calculated when there was an unconditional, but late, offer of payment. The plaintiff church and its property insurer disagreed over the extent of repairs needed to the church’s roof after it received hail damage. After almost two years, the insurer, for the first time, made an unconditional tender of $155,000.00 to the church on its roof claim. At trial, the jury found the roof claim should have been paid in the amount of $286,596.63. Held: Based upon findings of when the claim amount should have been paid (75 days after the claim was reported), the Court of Appeals applied the 18% statutory penalty on the entire amount of the church’s contract damages ($286,596.63) up to the date that the insurer unconditionally tendered a payment (approximately 20 months after the payment was due). The Court also calculated prejudgment interest at 8.25% on the entire amount until the tendered payment to be $39,966.26. That left the question of how to calculate the 18% penalty in light of the tendered payment of $155,000.00. For that , the court first credited the tendered payment of $155,000 towards prejudgment interest and then towards the amount determined to be due under the policy, leaving a net difference of $171,562.89 on which the 18% statutory penalty was applied from the date of tender until the date of the judgment (approximately 8 more months). In the end, the total 18% penalty awarded was $153,735.12, more than half of the amount due under the policy.