“Surreptitious sampling” may be police officers’ trump card in cracking otherwise unsolvable crimes as serious as murder, arson and rape. Law enforcement officers engage in surreptitious sampling when they covertly collect DNA² samples from unsuspecting people, who inadvertently leave behind hair, skin cells, saliva or other biological materials.³ Surreptitious sampling is a terrific crime-resolution tool. It allows diligent law enforcement officers to collect proof-positive evidence of guilt or innocence without the hassle of obtaining a warrant and absent probable cause or reasonable suspicion to believe that the contributor of the biological evidence committed a crime. Provided an officer has the energy and savvy to gather a hair or other biological sample for testing, she can gather information with the potential to definitively link someone to a crime. Not even a hunch is necessary to justify the quest; yet, DNA processing technology “lets crime laboratories derive a full profile from a minute amount of biological material at relatively low cost.”⁴ Perhaps because of its effectiveness and the lack of legislative or judicial regulation of the practice, surreptitious sampling is growing in popularity. Recently, the New York Times highlighted this evidence-gathering method. According to the article, “Over the last few years, several hundred suspects have been implicated by the traces of DNA they unwittingly shed well after the crime was committed[.]“⁵

Although great for solving crime, some contend that surreptitious sampling is a tragedy for personal privacy and freedom because it threatens to expose significant amounts of intensely private information about citizens’ health, gender, race and lineage to the government.⁶ One federal district court judge remarked, “[T]he relative ease with which a DNA sample may be obtained renders questionable the ability to realistically protect any genetic privacy interest . . . .”⁷

This essay argues a middle position—that the well-established Fourth Amendment rule of “abandonment” can strike an appropriate, “reasonable” balance to serve law enforcement needs for surreptitious sampling, while simultaneously protecting citizen privacy.

I. The Query

Is surreptitious sampling constitutional? If so, are there any limits to restrict officers from capitalizing on the increasingly public nature of everyday living? Do officers act constitutionally if they blend into a crowd, bump me as I enjoy a public parade and, without my knowledge, pull several of my hairs for DNA processing? To protect our privacy, dignity and personal security from surreptitious sampling, must we live as secluded as the Unabomber?⁸

II. The Law

Although police frequently collect and use surreptitiously acquired DNA,⁹ there are still few judicial opinions on the topic and even fewer legal articles analyzing the practice.¹⁰ The Supreme Court has yet to decide under what circumstances surreptitious sampling may violate the Constitution. Thus, the handful of courts to confront challenges to evidence obtained by surreptitious sampling have usually turned to general Fourth Amendment¹¹ principles for guidance on whether or not to permit the prosecutor’s use of such evidence.¹² One legal commentator contends that “[c]onstitutional law offers virtually no protection” for those targeted for surreptitious sampling and that “existing Fourth Amendment law is ill-suited to the facts of abandoned DNA collection[,]“¹³ but this essay contends that courts are right to rely on basic Fourth Amendment concepts. Fourth Amendment principles can strike an appropriate balance, allowing the government to collect valuable evidence, while providing for reasonable boundaries to limit unduly intrusive DNA collection.¹⁴ More specifically, courts can foster both law enforcement and privacy interests by applying the Fourth Amendment principles of voluntary abandonment vigorously. I dub this test the “patent abandonment standard.”

The basic abandonment principle is found in California v. Greenwood, in which the Supreme Court explained that a person loses Fourth Amendment protection in his belongings by abandoning them.¹⁵ There, the Court held that law enforcement officers do not implicate Fourth Amendment rights when they conduct a warrantless search of opaque garbage bags left on the curb in front of a suspect’s home, reasoning that a warrantless search or seizure of “the garbage bags left at the curb outside the [suspect's] house would violate the Fourth Amendment only if [someone] manifested a subjective expectation of privacy in th[e] garbage that society accepts as objectively reasonable.”¹⁶ The Court concluded that any expectation of privacy in the contents of the opaque garbage bags at issue was not objectively reasonable because the bags were: 1) “readily accessible to animals, children, scavengers, snoops, and other members of the public”;¹⁷ 2) placed at the curb “for the express purpose of conveying it to . . . the trash collector”;¹⁸ and 3) “particularly suited for public inspection and, in a manner of speaking, public consumption, for the express purpose of having strangers take it[.]“¹⁹ In other words, when someone knowingly and intentionally leaves his garbage or his biological matter exposed to the public without exerting an effort to retain control of it, he loses all Fourth Amendment protection for that trash, biological or not.

Especially instructive to potential limits on surreptitious sampling is the Supreme Court’s use of active verbs to describe a person’s exposure of his belongings to the public. According to the Court, a person loses his expectation of privacy only by “le[aving]” the bags at the street to “convey[]” the refuse to the trash collector; by “deposit[ing]” the garbage in an area suited to public consumption;²⁰ by “knowingly expos[ing]” the bags to the public;²¹ and by “‘voluntarily turn[ing them] over to third parties.’”²² In short, the Court has concentrated on the active, volitional, “patent” abandonment of materials. Accordingly, when law enforcement officers surreptitiously gather DNA from an unsuspecting person, who unwittingly turns over his or her biological material to a third party and fails to voluntarily or actively make it “readily accessible to animals, children, scavengers, snoops, and other members of the public,” a strong argument can be made that officers exceed Fourth Amendment limits and violate reasonable expectations of privacy, unless they act with probable cause, reasonable suspicion and/or a warrant.

III. Application of the Law to Surreptitious Sampling

Because a persuasive argument can be made that the Fourth Amendment proscribes some surreptitious sampling, the government should be guided by a single dominant standard when it engages in the practice. Officers should collect biological evidence from a public place without probable cause or a warrant, only if and when someone actively, voluntarily and freely abandons the biological matter.²³ Such “patent abandonment” demonstrates that the person has relinquished any reasonable expectation of privacy he may have had in the biological and otherwise highly personal matter. Moreover, to strike the proper balance between law enforcement needs and privacy for the people, the terms “freely” and “voluntarily” must be interpreted to have their normal, colloquial meanings.²⁴ Using common-sense definitions of these terms should ensure that protection for citizens’ private information is not inadvertently lost every time someone enters civilization to buy groceries, visit a friend or work.²⁵

The government’s ability to gather intimate, biological material from its citizens and use that material as evidence in a subsequent criminal proceeding should not reduce interactions between citizens and their government to a playground game of finders keepers, losers weepers. The issue should not be whether someone unwittingly lost his skin, hair or saliva. The more appropriate query is whether the person voluntarily left such materials behind—a “patent abandonment.”

1. B.A. in Journalism magna cum laude from the University of Georgia; J.D. magna cum laude from the University of Georgia School of Law; Associate Professor at the University of Kansas School of Law in Lawrence, Kansas, teaching criminal law, criminal procedure, and evidence; Former assistant United States attorney.
2. Deoxyribonucleic Acid. See Black's Law Dictionary 516 (8th ed. 1999).
3. See Amy Harmon, Lawyers Fight DNA Samples Gained on Sly, N.Y. Times, Apr. 3, 2008, at A1, available at http://www.nytimes.com/2008/04/03/science/03dna.html.
4. Id.
5. Id. See also State v. Athan, 160 Wash. 2d 354, 362, 158 P.3d 27, 31 (2007) (en banc) (explaining how officers on Seattle's cold-case squad used a DNA sample obtained in a ruse to solve the sexual assault and murder of a 13-year-old girl that had remained unsolved for twenty years).
6. See, e.g., Elizabeth E. Joh, Reclaiming "Abandoned" DNA: The Fourth Amendment and Genetic Privacy, 100 Nw. U. L. Rev. 857, 874 (2006) (arguing that surreptitious sampling "is a backdoor to population-wide data banking").
7. United States v. Owens, No. 06-CR-72A, 2006 WL 3725547, at *6 (W.D.N.Y. Dec. 15, 2006) (unreported opinion); see also id. at *10 (noting "that physical media containing human DNA are, by their nature, regularly and involuntarily separated from the person"); California v. Ciraolo, 476 U.S. 207, 219 n.3 (1986) (Powell, J., dissenting) (noting that the privacy of a citizen is equally invaded by the type of physical entry "detested by our forbears" or by devices made feasible by science, which accomplish an intrusion from outside "private quarters").
8. Theodore J. Kaczynski, commonly called "the Unabomber," lived reclusively in a remote, 10-by-12 foot Montana cabin about 50 miles northwest of Helena, Montana, before he was arrested for mailing package bombs that killed three people and injured twenty-three more. David Johnston, On the Unabomber Track: The Overview, N.Y. Times, Apr. 4, 1996 at 1, available at http://query.nytimes.com/gst/fullpage.html?res=9A0DE2DE1339F937A35757C0A960958260. The cabin lacked both plumbing and electricity. Id. Kaczynski grew his own food and chopped his own wood for warmth. Richard Perez-Pena, On the Unabomber's Track: The Suspect, N.Y. Times, Apr. 5, 1996 at 25, available at http://query.nytimes.com/gst/fullpage.html?res=980CE2DE1339F937A35757C0A960958260. Kaczynski rarely entered civilization and did not pursue conversation when he did, taking care "to draw no attention to himself." Id. See also Edward J. Imwinkelried and D.H. Kaye, DNA Typing: Emerging or Neglected Issues, 76 Wash. L. Rev. 413, 437–38 (2001) ("The deposition of DNA in public places cannot be avoided unless one is a hermit or is fanatical in using extraordinary containment measures.").
9. See Harmon, supra note 2.
10. See infra note 11 (referencing some of the judicial decisions); Imwinkelried and Kaye, supra note 7, at 413 (noting that "courts have barely begun to focus on the legal limitations on the power of the police to obtain samples directly from suspects" and that "the permissibility of collecting DNA ‘abandoned' in public places are being litigated for the first time."). See generally D.H. Kaye, Science Fiction and Shed DNA, 101 Nw. U. L. Rev. Colloquy 62 (2006), http://www.law.northwestern.edu/lawreview/colloquy/2006/7; Joh, supra note 5; D.H. Kaye, The Constitutionality of DNA Sampling on Arrest, 10 Cornell J.L.& Pub. Pol'y 455 (2001).
11. The Fourth Amendment prohibits the government from conducting unreasonable searches and seizures. See U.S. Const. amend. IV. ("The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated . . . ."). Arguably, there are also due process limits on law enforcement officers' ability to surreptitiously sample. See, e.g., State v. Christian, No. 04-0900, 2006 WL 2419031, at *3–7 (Iowa App. 2006) (unpublished decision) (analyzing on due process grounds motion to suppress DNA evidence obtained surreptitiously); People v. LaGuerre, 29 A.D.3d 820, 822–24 (N.Y. App. Div. 2006) (same). But, the due process limits are beyond the focus of this brief essay.
12. See Commonwealth v. Bly, 862 N.E.2d 341, 349–57 & n.3 (Mass. 2007) (rejecting defendant's Fourth Amendment challenge prompted by officers' collection of three cigarette butts and a water bottle gathered from an interview room inside the Massachusetts Correctional Institution, where the defendant was incarcerated, one-half hour after the defendant left the room to call his mother, finding that defendant "fail[ed] to manifest any expectation of privacy in the items whatsoever”); State v. Athan, 158 P.3d 27, 31–34, 36 (Wash. 2007) (en banc) (rejecting a defendant’s appeal of the denial of a motion to suppress DNA evidence obtained from his saliva, although detectives posed as a fictitious law firm and sent the defendant a letter inviting him to join a fictitious class action lawsuit by returning a response letter from which officers obtained a saliva sample for testing); Christian, 2006 WL 2419031, at *3–7 (rejecting defendant’s motion to suppress DNA evidence collected by police from a water bottle and a fork the defendant “voluntarily abandoned” at the site of a job interview); Commonwealth v. Rice, 805 N.E.2d 26, 33 (Mass. 2004) (denying defendant’s motion to suppress evidence collected without a warrant, cause, or consent from DNA on defendant’s bed sheets, his inmate uniform and t-shirt collected by correction officers at the facility where defendant was held on unrelated charges, concluding that the defendant lacked a reasonable expectation of privacy in the bed sheets and uniform because they belonged to the county and that he abandoned any expectation of privacy in the t-shirt when he surrendered it for replacement by a less-worn shirt).
13. Joh, supra note 5, at 863. See also id. at 880–82 (arguing that "greater restrictions than exist now on the collection of abandoned DNA are advisable").
14. Professors Imwinkelried and Kaye appear to agree that the Fourth Amendment may protect society's interests against some surreptitious sampling. See supra note 7, at 438 ("A case can be constructed that [a reasonable] expectation [of privacy] exists” for DNA inevitably left in public.).
15. 486 U.S. 35 (1988).
16. Id. at 37–38, 40.
17. Id. at 40 (footnotes omitted).
18. Id.
19. Id. at 40–41.
20. Id. at 40.
21. Id. at 41.
22. Id. at 41 (quoting Smith v. Maryland, 442 U.S. 735, 743–44 (1979)).
23. Arguably, private spaces like the home and curtilage would require a separate analysis. See, e.g., Kyllo v. United States, 533 U.S. 27, 29 (2001) (addressing Fourth Amendment protections in the setting of scientific advancements in the form of a thermal imager that allowed law enforcement officers to collect information inside a home while remaining outside the home). In addition, while it is tempting to argue that someone must "knowingly" abandon his biological matter, it is doubtful that the average citizen knows that the government is currently using these practices; therefore, such a requirement probably tilts the balance too strongly against the government.
24. "Freely" should be construed as "without restriction or interference" or "willingly and readily." Oxford American College Dictionary 534 (2002). Similarly, "voluntarily" will mean "given . . . of one's own free will[.]” Id. at 1582.
25. Presuming that voluntary abandonment of biological material becomes "the" test for whether or not law enforcement officers act constitutionally when they surreptitiously collect biological material for testing, it will be imperative that courts remain objective when evaluating abandonment. In particularly heinous cases, the natural urge will always be to find abandonment. Therefore, to guard against subconscious leanings in favor of the government's efforts at crime resolution, judges should apply an "insurance/terrorist test." Specifically, judges should ask whether their notions of voluntary abandonment would change, if instead of government agents collecting evidence to solve a crime, an insurance company engaged in the same behavior to gather material to deny an insured's health-care coverage, or, to posit a more extreme example, if a known terrorist group collected the same biological material to identify a candidate's susceptibility to the group's influence. If the deciding court would reach the same result in all three settings and conclude that the biological matter was voluntarily and freely abandoned, then the court is ruling objectively, logically and, arguably, correctly.

Recently, officials at Delta Airlines announced a proposed merger between Delta Airlines and Northwest Airlines. The cumulative effect of the proposed merger would create the largest airline in the world.² Delta’s pilot union declared that “[t]he merged Delta will be a more stable, financially durable and investable airline that will provide benefit to Delta and Northwest employees, the communities we serve and, importantly, the traveling public.”³ Many, however, are not so optimistic. This article will briefly discuss: (1) airline deregulation and current market conditions in the airline industry; (2) possible antitrust ramifications; and (3) rights consumers have when “flying the friendly skies.”

I. Background

Deregulation of the airline industry in the United States commenced with the passage of the Airline Deregulation Act of 1978.⁴ Deregulation served to stimulate competition and paved the way for small, low-cost carriers to enter the market, such as Southwest Airlines and JetBlue Airlines.⁵ Deregulation also resulted in an increase in airline productivity and a reduction in costs to the consumer.⁶ However, the unintended consequence of airline deregulation has been globalization and consolidation.⁷ Many of today’s airline carriers have entered into alliances, partnerships, and, in some cases, merged with other carriers.⁸ In the past twenty years, we have seen American Airlines merge with Trans-World Airlines, the former U.S. Air merged with America West Airlines to form U.S. Airways, and numerous proposed mergers, including discussion about a potential merger between Continental Airlines and United Airlines.⁹ The airline industry, however, has always been a volatile industry characterized by numerous bankruptcy filings and government bailouts.¹⁰ In fact, we have recently seen three airlines—ATA Airlines, Aloha Airlines, Skybus, and Frontier Airlines—file bankruptcy in the months of March and April 2008.¹¹

Currently, we are seeing numerous market failures in the airline industry. Increased oversight by the Federal Aviation Administration in response to the Southwest Airlines safety inspection fiasco, increasing costs of jet fuel, increased competition for access to gates at airports, and congestion are among the many issues airlines plaguing the airline industry.¹² Airlines have revamped their business models, sought to merge business operations, filed for bankruptcy protection, and, ultimately increased airfare for consumers.¹³ As a result of these phenomena, airlines have seen a record number of cancelled flights, customer complaints, lost baggage, and other problems.¹⁴ The issues currently plaguing airlines have many airlines teetering on the cusp of bankruptcy. In fact, this has been the case for many years since deregulation.

II. Potential Antitrust Ramifications

In response to the aforementioned issues affecting the airline industry, many have invariably relied on the “healing power” of the merger process to cure their cash flow woes. What we have seen in the subsequent years to the Airline Deregulation Act of 1978 is an increase of concentration in the airline industry. Because of this concentration and for many other factors, it is likely that government regulators, particularly the U.S. Department of Justice, Antitrust Division (”DOJ”), will not endorse the proposed merger between Northwest and Delta.¹⁵ In applying the DOJ’s horizontal merger guidelines, which govern mergers between entities within the same industry, the Northwest-Delta merger would likely fail on several grounds.

After defining the relevant product and geographic markets (likely to encompass domestic air transportation and a small percentage of international air transportation), antitrust officials will likely conclude that the merger will result in a Herfindahl-Hirschman Index (”HHI”), a measure for calculating market concentration, value exceeding 1800. This value describes the defined product and geographic markets as highly concentrated and supports a presumption that the proposed merged entity possesses market, or monopoly, power in the given product and geographic markets.¹⁶

The proposed merger will likely also encounter numerous obstacles with respect to unilateral and coordinated effects analysis. The proposed merger gives the potential newly-merged entity significant incentives to phase out of planes (especially in light of the FAA’s recent increased safety oversight), reduce the number of flights flown to a specific hub, reduce the number of flights to rural areas, increase costs to the consumers to finance the merger and other costs previously borne by either Northwest or Delta, or layoff employees performing overlapping tasks. There are likely numerous other effects to consider, but these effects would likely result in decreased output and an increase in costs to the consumer. Because of the reduced output and cost increase, other carriers are likely to follow suit, given the airline industry’s competitive and price responsive nature.¹⁷ Therefore, the coordinated effects of this merger would be an all-out price war between the airlines with the newly-merged airline exerting undue influence on the market price; thus, increasing the likelihood of a dramatic rise in prices for airfare. As a result of this influence, many more airlines will likely seek to merge and further concentrate the market or file for bankruptcy protection, potentially requiring the federal government to once again step in and provide subsidies. Furthermore, we are likely to see a drastic reduction in customer service provided by the carriers because of their desire to cut costs and remain competitive. In fact, over the past twenty years, the majority of the airlines have migrated from providing passengers with meals and beverages on flights, to merely beverages and peanuts on flights, to potentially nothing at all. Moreover, airline complaint centers have experienced a historic increase in the number of complaints lodged and it will likely only get worse with further concentration in the market.¹⁸

Based on these findings alone, it is unlikely that the DOJ will approve this merger. However, in a market of rising fuel costs, increasing costs to ensure safety, and in an overall economic downturn, it is likely that many more airlines will seek to merge to further concentrate the market in an attempt to remain profitable even though many of the current carriers are horribly inefficient and a potential merging of two inefficient entities will only serve to exacerbate the inefficiencies in the airline industry. Ultimately, consumers are most likely to bear the burden of the airline industry’s inefficiencies.

III. What Can Consumers Do To Combat the Market Power of the Airlines?

In light of the current state of the airline industry, consumer rights activists have intensified their efforts to lobby state legislatures for an airline consumers’ bill of rights.¹⁹ Without a bill of rights, airline passengers are often left to their own devices to rectify a myriad of problems they encounter with the airlines. There are no laws on the books that require airlines to compensate travelers for flight delays or cancellations caused by weather or mechanical problems. Such compensation is at the discretion of the carrier, which, in current times of financial difficulty, is extremely unlikely. Airlines are, however, required to compensate passengers who have a reservation but are denied boarding, which is known as overbooking.²⁰ With respect to overbooking, federal law provides the following: (1) no compensation if alternative transportation gets a passenger to their destination within one hour of the original scheduled arrival; (2) the equivalent of the passenger’s one way fare up to a maximum of $200 for substitute domestic flights that arrive between one and two hours from the original scheduled arrival time or for substitute international flights that arrive one to four hours after the original scheduled arrival time; and (3) if the delay is more than two hours for a domestic flight or four hours for an international flight, compensation doubles to $400. In some instances, a passenger may be eligible to request a refund for the remaining part of their trip even if the trip was an otherwise nonrefundable ticket. It is also noteworthy to mention that U.S. airline passengers are entitled to a maximum of $3,000 in compensation for lost, damaged, or stolen baggage.²¹ Therefore, it is wise to not pack laptop computers, valuable jewelry or clothing, or any other items of high intrinsic value because the airlines are unlikely to provide adequate compensation to replace such items; moreover, packing such items in baggage to be checked in only increases the risk that these items will be stolen, especially considering baggage is handled by several individuals—Transportation Security Administration workers, loading and unloading by airline baggage handlers—before arriving safely at a passenger’s destination. Furthermore, airlines are not obligated by law to compensate passengers for delayed baggage.

Other than the aforementioned provisions, U.S. airline passengers are essentially left to negotiate, complain, yell, and scream at airline customer service representatives to rectify a problematic situation.²² With the airline industry struggling to remain financially solvent, problems with cancellations, delays, and lost baggage appear to only get worse. It is incumbent upon passengers to be aware of compensation of which they are entitled to and to pack their patience when traveling on U.S. airlines. Essentially, the moral of the story is that passengers must hone their negotiation skills and read the contract accompanying their purchased ticket because most of the decisions pertaining to compensation are at the discretion of the airlines.

It is clear to this author that deregulation combined with the current economic downturn and the possibility of government bailouts for the industry has created perverse incentives for airlines to operate inefficiently.²³ Given the current status of the industry, it follows that airlines will continually attempt to merge business operations or file for bankruptcy protection to remain profitable. Ultimately, airline passengers will bear the brunt of the market failures that exist in the airline industry, as airlines pass on the costs of their inefficiencies to their consumers.²⁴ The Northwest-Delta proposed merger will only serve to exacerbate the problems in the industry. Market concentration is not the answer, nor is increased prices or reduced customer service. Maybe it is time for the airline industry to rethink their business models, especially with respect to outdated reservation systems, the traditional “hub-and-spoke”²⁵ approach, and asset allocation. The down side is that no matter how the airlines conduct business, they essentially have monopoly power on long distance travel. Until a viable competitor emerges in the long-distance travel product market, i.e. high speed rail, similar to that in Europe and Japan,²⁶ and forces the airlines to streamline their processes to become more competitive, it is likely we will continue to see mergers and bankruptcy filings in the airline industry to the detriment of consumers.

1. B.B.A. (Finance) and B.A. (Economics), 2004, The University of Texas at Austin; J.D., University of Houston Law Center, 2007; Briefing Attorney in the Chambers of the Honorable Justice Dori Contreras Garza, Thirteenth Court of Appeals. The author was previously employed as an intern with the United States Department of Justice, Antitrust Division. The views expressed in this article are not purported to reflect those of the Thirteenth Court of Appeals or the United States Department of Justice, Antitrust Division.
2. Julie Johnsson, Delta-Northwest Merger to Create World's Largest Airline: Deal Paves Way for United-Continental Tie-Up, Chi. Trib., Apr. 14, 2008, available at http://www.chicagotribune.com/business/chi-080414delta,0,7488143.story.
3. Chris Isidore, Delta-Northwest Deal Faces Headwinds, CNNMoney.com, Apr. 15, 2008, available at http://money.cnn.com/2008/04/15/news/companies/delta_northwest_objections/index.htm?postversion=2008041515.
4. "In 1945, the major airlines flew 3.3 billion revenue passenger miles (RPMs). By the mid 1970s, when deregulation was beginning to develop, the major carriers flew 130 billion RPMs. By 1988, after a decade of deregulation, the number of domestic RPMs had reached 330 billion." The Airline Industry, available at http://adg.stanford.edu/aa241/intro/airlineindustry.html (last visited Apr. 27, 2008).
5. The Airline Deregulation Act of 1978 ("ADA") was enacted to ensure "‘maximum reliance on competitive market forces' [which] would best further ‘efficiency, innovation, and low prices’ as well as ‘variety [and] quality . . . of air transportation” and “[t]o ensure that the States would not undo [this] deregulation with regulation of their own.” Morales v. Trans World Airlines, 504 U.S. 374, 378, 389-91 (1992) (quoting 49 U.S.C. app. § 1302(a)(4), (9) (1988)); see also Marvin S. Cohen, Remarks at Deregulation and Expanding Antitrust Liability: A New Battleground For Private Antitrust Litigants, 53 Antitrust L.J. 221, 222 (1984) (”When I was involved with getting the airline industry deregulated, we were quite hopeful that competition would substitute for regulation and that much of the antitrust enforcement would be done by private litigation.”).
6. See Alfred E. Kahn, The Concise Encyclopedia of Economics: Airline Deregulation, available at http://www.econlib.org/library/Enc/AirlineDeregulation.html (last visited Apr. 27, 2008).
7. See The Airlines Industry, supra note 4.
8. In fact, hundreds of airlines have entered into alliances, such as marketing agreements, code-shares, franchises, and equity transfers. Id.
9. Danny Fortson, Airline Mergers Take Off, Indep., Feb. 8, 2008, available at http://www.independent.co.uk/news/business/analysis-and-features/airline-mergers-take-off-779834.html; Joshua Brockman, Airline Consolidation: Bumpy Ride for Consumers?, Nat'l Pub. Radio, Apr. 15, 2008, available at http://www.npr.org/templates/story/story.php?storyId=89661655&ft=1&f=1017.
10. See Michael Arndt, et al., An Airline Bailout—With Strings Attached, Bus. Wk., Oct. 8, 2001, available at http://www.businessweek.com/magazine/content/01_41/b3752735.htm (chronicling the federal government's bailout of $5 billion in emergency aid and loan guarantees of $10 billion after the September 11, 2001 attacks); see also Kelly Yamanouchi & Kimberly S. Johnson, Court Clears Frontier to Fly as it Regroups, Denver Post, Apr. 12, 2008, available at http://www.denverpost.com/breakingnews/ci_8889838; Asif Siddiqi, The Airline Bankruptcies of the 1980s, available at http://www.centennialofflight.gov/essay/Commercial_Aviation/Bankruptcy/Tran9.htm (last visited Apr. 27, 2008).
11. See Yamanouchi & Johnson, supra note 10.
12. See Ed Perkins, Economy Poses Problems for Airlines, Travelers, The News Trib., Apr. 16, 2008, available at http://www.thenewstribune.com/soundlife/story/316202.html; see also Robert Schroeder & Laura Mandaro, U.S. Military to Open Airspace Over Holidays, Wall St. J., Nov. 15, 2007, available at http://www.marketwatch.com/news/story/bush-says-military-free-up/story.aspx?guid=%7BF1405CCB-B4FB-43D4-BD5B-BE2D89D070D8%7D (noting that President Bush's decision to make restricted airspace along the East Coast available to commercial airline carriers over the 2007 Thanksgiving holidays would address "an epidemic of aviation delays").
13. See Kahn, supra note 6 ("The recent wave of mergers and airline failures has made the [airline] industry more concentrated at the national level than it was before deregulation.”). Kahn further comments on the “hub-and-spoke” approach used by airlines, which “tends to insulate an airline from direct competition on short trips originating or terminating at its hub.” Id. As a result of this approach “pricing may well become less competitive in the future.” Id. Therefore, the lessening of price competition will invariably result in an increase in prices for airfare.
14. Traveler complaints rose by sixty percent in 2007. Up, Up and Away: Airline Complaints Soaring, Associated Press, Apr. 7, 2008, available at http://www.msnbc.msn.com/id/23991380. Traveler complaints rose in 2007 for fifteen of the sixteen major U.S. airlines. Id. More than one-quarter of all flights arrived late, the rate of passengers bumped from overbooked flights, and bags lost, stolen, or damaged also increased in 2007. Id. I do recognize that the airlines have seen the number of passengers flying on its planes increase exponentially since the enactment of the ADA, which is one, albeit slight, explanation for the increase in customer complaints.
15. In analyzing a potential merger between two companies within the same industry, the U.S. Department of Justice ("DOJ"), typically applies its horizontal merger guidelines. The guidelines involve multiple steps, which include the following: (1) product and market definitions using the 5% SSNIP (small, but significant, non-transitory increase in price) test; (2) calculation of market shares using the Herfindahl-Hirschman Index ("HHI") for market concentration; (3) analysis of the potential lessening of competition through coordinated and unilateral effects; (4) an analysis of entry alternatives, including timeliness, likelihood, and sufficiency of entry; and (5) failing firm analysis. U.S. Dep't of Justice, 1992 Horizontal Merger Guidelines (revised Apr. 8, 1997), reprinted in John J. Flynn, et al., Antitrust: Statutes, Treaties, Regulations, Guidelines, Policies 258-289 (5th ed. 2005).
16. Monopoly power, also referred to as market power, is "the ability of a firm (or group of firms) to raise and maintain price above the level that would prevail under competition . . . . The exercise of market power leads to reduced output and loss of economic welfare." Organisation for Economic Co-Operation and Development, Glossary of Industrial Organisation Economics and Competition Law, at 57, available at http://www.oecd.org/dataoecd/8/61/2376087.pdf (last visited Apr. 27, 2008). The actual or potential exercise of market power is used to determine whether a substantial lessening of competition exists or is likely to occur. Id.
17. See Roger W. Jones, U.S. Dep't of Justice, Antitrust Division, Transportation, Energy, and Agricultural Section, Predation in the Airline Industry, June 12, 1997, available at http://www.justice.gov/atr/public/speeches/1188.htm (noting that low-cost airlines have repeatedly lowered costs to drive competitors from flying a certain route). The upshot of the DOJ's findings are that once the competitor is driven from the route there is nothing stopping the presumed low-cost airline from increasing its prices to recoup the losses sustained during the "price war" with the competitor. In addition, given all of the problems in the current market, there is a strong incentive to collude with other airlines to maintain price levels to recoup costs of high priced jet fuel and various other inefficiencies endemic to the industry.
18. See supra note 14.
19. Ed Hewitt, The Airline Passenger's Bill of Rights: Being Stuck for Hours Usually Prompts Such Talk, But This Could be Different, Feb. 16, 2007, available at http://www.msnbc.msn.com/id/17173370. In August 2007, New York became the first state to enact an airline passenger bill of rights. See Press Release, New York State, Governor Spitzer Signs Airline Passenger Bill of Rights (Aug. 2, 2007), available at http://www.state.ny.us/governor/press/0802072.html (stipulating, among other things, that "all airlines operating out of New York airports are required to provide passengers with food, water, fresh air, power, and working restrooms on any flight that has left the gate and been on the tarmac for more than three hours"). However, the Second Court of Appeals in Air Transport Association of America v. Cuomo, concluded that the substantive provisions of the New York passengers' bill of rights were preempted by the Airline Deregulation Act of 1978, specifically the following provision:

    Except as provided in this subsection, a State, political subdivision of a State, or political authority of at least 2 States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of an air carrier that may provide air transportation under this subpart.

    Cuomo, 520 F.3d 218, 221 (2d Cir. 2008) (quoting 49 U.S.C. § 41713(b)(1)). Therefore, it appears that the only way an airline passengers' bill of rights would overcome a preemption presumption would be if Congress decides to act because any action on the part of a state will likely affect the "price, route or service of an air carrier." See 49 U.S.C. § 41713(b)(1). The states are essentially rendered helpless to rectify the plight of airline consumers because of the preemption doctrine.

20. See 14 C.F.R. §§ 250.5 (2003) (compensation amount for passengers denied boarding involuntarily); 250.8 (1984) (noting that: (1) the airline must provide a passenger eligible for denied boarding compensation with "cash or an immediately negotiable check" on the day and place the denied boarding occurs); 250.9 (2003) (criteria for denied boarding compensation). Carriers are also authorized by law to offer free or reduced rate air transportation in lieu of cash if (1) the value of the transportation exceeds the cash payment otherwise required, and (2) the carrier informs the passenger of the amount of cash compensation otherwise due. Id. § 250.5. The Code of Federal Regulations does not require the airline to provide compensation in addition to getting the passenger to his or her destination; moreover, the compensation afforded is often a mere pittance of the value of the time lost by the passenger (i.e. nonrefundable tours, business meetings that cannot be rescheduled, etc.). Id. § 250.9. Section 250.9 merely provides that "if the airline cannot arrange ‘alternate transportation' . . . for the passenger, the compensation is doubled ($400 maximum). . . . Acceptance of the compensation may relieve (name of air carrier) from any further liability to the passenger caused by its failure to honor the confirmed reservation. However, the passenger may decline the payment and seek to recover damages in a court of law or in some other manner." Id. Compare 14 C.F.R. §§ 250.5 with Commission Regulation 261/2004, arts. 4-7, 2004 O.J. (L 046), available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32004R0261:EN:HTML. European Parliament Regulation (EC) 261/2004 provides three levels of compensation for passengers who are delayed or denied boarding involuntarily: (1) in the event of long delays, typically two hours or more, passengers are entitled to free meals and refreshments, two free telephone calls, telex or fax machines, or emails; (2) if departure is delayed until the following day, passengers must be afforded hotel accommodation and transport between the airport and the hotel; and (3) when the delay lasts for longer than five hours, passengers may opt for a full refund of the ticket with a return flight to the first point of departure. See Commission Regulation 261/2004, arts. 4-7, 2004 O.J. (L 046).
21. See 14 C.F.R. § 254.4 (last amended Jan. 29, 2007).
22. Airlines are generally exempt for any state or local consumer protection laws. See Morales v. Trans World Airlines, 504 U.S. 374, 390–91 (1992); see also Letter from the Nat'l Ass'n of Attorneys General to Senators Trent Lott, Thomas Daschle, J. Dennis Hastert, and Richard A. Gephardt (Sept. 8, 2000), available at http://hasbrouck.org/documents/NAAG-8SEP2000.pdf. Essentially, the sole monitoring authority of the airlines with respect to consumers' rights is the Department of Transportation. See Morales, 504 U.S. at 390-91. On the other hand, international flights are governed by the Warsaw Convention. See generally El Al Isr. Airlines v. Tsui Yuan Tseng, 525 U.S. 155 (1999) (holding that a plaintiff's claim is governed by the Warsaw Convention, which preempts state law claims arising out of international air travel). Section 19 of the Warsaw Convention imposes liability on air carriers for damages occasioned by delay in the transportation of passengers; however, an air carrier can escape liability if it proves that it took all necessary measures to avoid the damages or that it was impossible for him or them to take such measures. See Lee v. Am. Airlines, Inc., No. 3:01-CV-1179-P, 2004 U.S. Dist. LEXIS 23380, at **5–6 (N.D. Tex. Nov. 17, 2004) (citing 49 U.S.C. § 40105, arts. 19 & 20(1)); see also Medina v. Am. Airlines, Inc., No. 02-22133, 2006 U.S. Dist. LEXIS 82805, at **5–6 (S.D. Fla. Nov. 13, 2006).
23. Record fuel costs are just one of many issues causing the airline industry to operate inefficiently. See Jeff Bailey, Fuel Costs Just Part of Airlines' List of Woes, Int'l Herald Tribune, Apr. 10, 2008, available at http://www.iht.com/articles/2008/04/10/business/10air.php?page=1; see also Cancellation Wave Latest Problem for Airlines, Associated Press, Apr. 10, 2008, available at http://www.msnbc.msn.com/id/24053397.
24. See 14 C.F.R. 223.11 (1983) ("Air carriers may charge any rate or fare for interstate and overseas air transportation.").
25. For more information on the "hub-and-spoke" approach, see 14 C.F.R. § 398.2 (1995).
26. See Europe on a Fast Track to High-Speed Rail, Business Week, June 19, 2006, available at http://www.msnbc.msn.com/id/13342790 (noting that high speed rail connects many of the major cities in the European Union and that the trains travel at speeds of 186 mph); Mary Jordan, Japan Revs Up High-Speed Train for Olympics, Wash. Post, Nov. 22, 1997, available at http://www.washingtonpost.com/wp-srv/sports/longterm/olympics1998/nagano/articles/train.htm (describing the Asama bullet train in Japan which reaches speeds in excess of 300 km/h).

Introduction

A litigator, like any other professional, sometimes finds him/herself as a defendant in a lawsuit. But sometimes, the person bringing the suit is not an unhappy former client alleging malpractice, but an unhappy former opponent alleging wrongful conduct in prior litigation. Generally, the former opponent believes that the lawyer filed a frivolous case, frivolous motions, or otherwise engaged in wrongful litigation conduct.

In this circumstance, there is a body of case law to aid in the lawyer’s defense. It is sometimes referred to as attorney immunity or the litigation privilege. If applicable, it can protect attorneys who suddenly find themselves defending a case brought by a former opponent or opposing counsel.

What is the litigation privilege?

The litigation privilege insulates an attorney from liability to (i) his opposing counsel, and (ii) his opposing party.² The privilege protects the type of conduct generally engaged in by attorneys as part of discharging duties to their clients.³

What is the policy behind the litigation privilege?

The policy behind the litigation privilege goes hand-in-hand with the adversary system and the importance of affording each party effective legal representation. “The public has an interest in . . . ‘aggressive representation by the legal profession.’”⁴ An attorney should zealously represent his client “within the bounds of the law.”⁵ In doing so, an attorney should be able to “interpose any defense or supposed defense and make use of any right on behalf of such client . . . without making himself subject to liability in damages.”⁶

A contrary policy would favor tentative rather than zealous representation and could harm clients.⁷ A party may be denied a full development of his case if his attorney is worried about potential liability to the opposing party/counsel.⁸ This would “dilute the vigor with which Texas attorneys represent their clients, which would not be in the best interests of justice.”⁹

What is the history of the litigation privilege?

The Texas litigation privilege has roots dating back almost a century.

In 1910 the Dallas Court of Civil Appeals decided Kruegel v. Murphy.¹⁰ In Kruegel, a litigant sued various opposing lawyers and judges alleging a conspiracy to defeat his appeal of a prior ruling.¹¹ In a one-sentence blurb without citing any authority, the court held that the litigant could not recover against the lawyers because “attorneys are authorized to practice their profession, to advise their clients and interpose any defense or supposed defense, without making themselves liable for damages.”¹²

In 1966, the Austin Court of Appeals relied on this language when it decided Morris v. Bailey.¹³ In Morris, a litigant sued his opposing counsel for filing numerous motions for continuance in prior litigation.¹⁴ The litigant complained that the filings were an effort to trap him in endless litigation.¹⁵ In affirming summary judgment against the litigant, the court held that the attorney filed the motions in his capacity as an attorney representing his client and was thus protected.¹⁶

In 1994, the Houston Court of Appeals relied on Morris when it decided Bradt v. West.¹⁷ The Bradt opinion better articulated the policy underlying the privilege and its scope.¹⁸ In this case, lawyers asked the court to hold their opposing counsel in contempt for violating an order in limine.¹⁹ In response, the opposing counsel sued the lawyers for a variety of causes of action stemming from such attempt.²⁰

The trial court dismissed the case on summary judgment and the Houston Court of Appeals affirmed.²¹ The Court of Appeals held that the public has an interest in aggressive representation by lawyers and that lawyers have a duty to zealously represent their clients “within the bounds of the law.”²² The court therefore concluded that, “an attorney does not have a right of recovery, under any cause of action, against another attorney arising from conduct the second attorney engaged in as part of the discharge of his duties in representing a party in a lawsuit in which the first attorney also represented a party.”²³

In 1997, in Renfroe v. Jones & Assoc., the Fort Worth Court of Appeals expressly extended the litigation privilege announced in Bradt to suits brought by opposing parties rather than just suits brought by an opposing counsel.²⁴

When does the litigation privilege apply?

The litigation privilege protects the type of conduct that attorneys generally engage in as part of discharging their duties to their clients.²⁵

The Bradt court described the privilege’s policy as protecting conduct that is “within the bounds of the law.”²⁶ Some plaintiffs have therefore argued that filing a frivolous pleading that gives rise to a cause of action is not conduct “within the bounds of the law” because it is improper. But other courts have clarified that the proper focus is not on the merits of the attorney’s conduct, but rather the type of conduct involved.²⁷ After all, if the privilege stopped at the bounds of the law, there would be no reason for a privilege.

If the conduct complained of is the type of conduct that attorneys engage in as part of discharging their duties to their client, the privilege applies regardless of the nature of the conduct.²⁸ For example, the litigation privilege protects attorneys who file frivolous motions because filing motions is the type of conduct attorneys engage in as part of discharging duties to their clients.²⁹ There are certainly consequences for filing frivolous pleadings, but civil liability to the opponent is not one of those consequences.³⁰

Courts have applied the litigation privilege, or at least cited litigation-privilege cases as authority, in the following circumstances:

• summary judgment was affirmed in favor of an attorney and against the attorney’s opposing party where the allegation was that the attorney failed to produce a document requested during discovery;³¹
• summary judgment was granted in favor of an attorney and against the attorney’s opposing party where the allegation was that the attorney manipulated facts to obtain favorable venue, which resulted in a substantial settlement;³²
• summary judgment was affirmed in favor of an attorney and against the attorney’s opposing party where the allegation was that the attorney prepared and filed an application for writ of garnishment that was later dissolved;³³
• summary judgment was affirmed in favor of an attorney and against the attorney’s opposing party (the husband in a divorce action) where the allegation was that the attorney maxed out the wife’s community credit cards in order to pay the attorney’s retainer;³⁴ and
• summary judgment was affirmed in favor of several attorneys and against the attorneys’ opposing party where the allegation was that the attorneys filed an onslaught of pleadings (some in violation of a bankruptcy stay) in an attempt to defraud the opposing party of his property and “destroy him financially, physically, mentally, and emotionally.”³⁵

When does the litigation privilege not apply?

There are instances when the privilege clearly does not apply. For example, in Miller v. Stonehenge/Fasa – Texas, JDC, L.P., the litigation privilege did not protect an attorney representing a debt collector from liability for allegedly accosting the debtor’s wife while executing a writ of execution.³⁶ The court ruled that execution of the writ did not require the training or skill of the attorney and thus the attorney’s conduct was not protected.³⁷ In that case, the threatening and invasive conduct was clearly not part of discharging legal duties on behalf of the client.

There are other instances where the privilege’s applicability is less clear. In Mendoza v. Fleming, a judgment debtor, who happened to be a judge running for office, brought a wrongful garnishment action against his opposing counsel for garnishing campaign funds that were exempt from personal creditors.³⁸

On its face, the conduct complained of – filing a garnishment procedure – would appear to be protected, as it was in Renfroe v. Jones & Assoc.³⁹ But the Corpus Christi Court of Appeals reversed the summary judgment rendered in favor of the attorney and distinguished Renfroe.⁴⁰ The court held that unlike in Renfroe, the plaintiffs alleged a malicious motive, i.e. the garnishment action was not filed to collect a debt, but was intended to interfere with the debtor’s campaign.⁴¹ In addition, there was an issue with whether the attorneys had complied with the applicable notice provisions relating to writs of garnishment.⁴²

Based on these facts, the court held that a fact question remained as to whether the attorneys’ conduct was “within the bounds of the law,” a burden the court placed on the attorney to conclusively prove in order to obtain summary judgment.⁴³

The Mendoza court did not explain how filing a pleading with an alleged malicious motive is any different than filing a frivolous pleading. Frivolous pleadings are expressly protected by the litigation privilege.⁴⁴ Merely alleging that a pleading was filed for harassment or some other malicious motive should not be enough to vitiate the privilege, nor should failing to comply with applicable notice provisions. If these allegations were all that were required to defeat the privilege, the privilege would be meaningless and the policy behind the privilege frustrated.

An attorney’s fraud or conspiracy to defraud may defeat the privilege.

Courts can be reluctant to apply the privilege when the conduct complained of is an opposing attorney’s actual fraud or conspiracy to defraud a third party. But the facts of each case have to be carefully scrutinized because merely labeling conduct as “fraudulent” should not automatically defeat the privilege.

In Poole v. The H. & T.C. Ry. Co., the Texas Supreme Court held that an attorney, accused of conspiring with his client to defraud a shoe supplier, could not shield himself from liability by claiming that he was merely acting as an attorney because fraudulent acts are “entirely foreign to the duties of an attorney . . . .”⁴⁵

The Houston Court of Appeals relied on Poole when it decided Likover v. Sunflower Terrace II, Ltd.⁴⁶ In Likover, the Houston court upheld a judgment against an attorney accused of conspiring with his client to defraud a third party in the sale of an apartment complex.⁴⁷ The attorney argued that he was not liable because he was merely acting as his client’s attorney and owed no duty to the non-client third party.⁴⁸ The court disagreed. The court acknowledged that an attorney is authorized to practice his profession without making himself liable for damages, but held that an attorney has no right to engage in fraudulent conduct or enter into a conspiracy to defraud a third person.⁴⁹

Neither Poole nor Likover dealt with an attorney in active litigation, but courts and plaintiffs cite both as authority for the so-called “fraud exception” to the litigation privilege.⁵⁰ Is it really an exception? And can merely labeling conduct as fraudulent automatically defeat the privilege? There is case law addressing these issues.

For example, in Querner v. Rindfuss, the San Antonio Court of Appeals reversed summary judgment in favor of an attorney accused by a beneficiary of defrauding the estate he represented in highly contested probate litigation.⁵¹ The lawyer claimed an absolute privilege because the acts were taken during litigation.⁵² But the court, citing Poole and Likover, held that there is no global privilege for all actions taken during litigation and if an attorney engages in fraudulent conduct or acts in furtherance of some other conspiracy, he can be held liable.⁵³

But the facts in Querner are distinguishable from most cases where the litigation privilege arises. First, the attorney in Querner apparently held himself out as owing some duties to the beneficiary,⁵⁴ which is unlike the typical litigation situation where no duty is owed to an opposing party. Second, the allegations in Querner appear to have centered on the lawyer’s possible involvement in misappropriating estate funds (stealing), which clearly is not protected conduct.⁵⁵

In other cases, the line is less clear. Take, for example, the attorney who conspires with his client to refuse disclosure of harmful documents, which then results in an lopsided settlement in the client’s favor. Is the lawyer’s failure to disclose, in the face of an arguable duty to disclose via discovery and ethical rules, enough to label the conduct as fraudulent and vitiate the privilege? Several courts say “no.”⁵⁶

In Lewis v. Am. Exploration Co., the issue was whether a law firm could be held liable to an opposing party for allegedly providing false discovery responses about the existence of certain documents and assisting its client in providing false deposition testimony regarding same.⁵⁷ The court acknowledged the Querner decision, but distinguished it by differentiating between (i) an estate lawyer who held himself out as owing some duties to the beneficiary and who was alleged to have participated in converting estate assets, and (ii) a law firm that neither owed, nor held itself out as owing duties to its opponent and whose lawyers were alleged to have provided false discovery responses.⁵⁸ The court held that the latter conduct was protected because answering discovery responses is the type of conduct that lawyers engage in as part of discharging their duties to their clients.⁵⁹ As such, the conduct was protected.

The bottom line is that merely labeling conduct as fraudulent will not defeat the privilege if the underlying conduct is protected, i.e. the type of conduct that attorneys engage in as part of discharging duties to their clients.⁶⁰

Is the litigation privilege an affirmative defense?

Texas courts are currently in conflict on whether the litigation privilege is an affirmative defense that must be proved by the defendant attorney or simply a legal principal that no duty is owed to an opposing party.

In Bradt v. West, one of the most-cited cases for the litigation privilege, the Houston Court of Appeals held that “an attorney does not have a right of recovery, under any cause of action against another attorney arising from conduct the second attorney engaged in as part of the discharge of his duties in representing a party in a lawsuit in which the first attorney also represented a party.”⁶¹ This language suggests that the privilege is not an affirmative defense, but rather a reiteration that an attorney owes no duty to his opposing party/counsel.

But in Mendoza v. Fleming, the Corpus Christi Court of Appeals referred to the Bradt decision as “attorney immunity,” an affirmative defense which must be proved by the attorney.⁶²

In Mitchell v. Chapman, the Dallas Court of Appeals referred to the Bradt opinion when it held that an attorney simply owes no legal duty to his opposing counsel/party.⁶³

And in White v. Bayless, the San Antonio Court of Appeals also referred to the Bradt opinion when it held that an attorney owes no legal duty to his opposing party.⁶⁴

In IBP, Inc. v. Klumpe, the Amarillo Court of Appeals did not clear up the confusion when it held, “[p]leading and asserting that an act is privileged is not the same as asserting that no cause of action exists in favor of the plaintiff on the basis that the defendant owed no duty to the plaintiff.”⁶⁵ The Klumpe court tried to distinguish Mitchell from other litigation-privilege cases by indicating that Mitchell was not decided on the basis of privilege, but on whether a duty was owed.⁶⁶ But the court failed to acknowledge that the Mitchell opinion cited the same litigation-privilege cases as authority for its decision.

Whether the privilege is an affirmative defense or whether no cause of action exists due to the lack of a duty has procedural implications. For example, if no cause of action exits, a special exception may be warranted, followed by dismissal if the plaintiff fails to adequately plead facts giving rise to a duty. But for an affirmative defense, a summary-judgment motion is likely required with proof that conclusively establishes the defense.

Is pending litigation a prerequisite to applying the litigation privilege?

At least one court has held that pending litigation is not a prerequisite to the privilege’s applicability.⁶⁷

In Hanna v. Niemann, frustrated condominium purchasers hired an attorney after the seller allegedly recorded a different declaration than what was provided to the purchasers during negotiations.⁶⁸ The attorney filed a document in the deed records that arguably clouded future condominium titles.⁶⁹ A subsequent condominium purchaser discovered his clouded title and sued the attorney.⁷⁰

Despite the absence of pending litigation, the Austin Court of Appeals affirmed summary judgment in favor of the attorney based on the litigation privilege.⁷¹ The court held that “an attorney’s qualified privilege relates to her representation of a client, regardless of whether the conduct is in the context of pending litigation.”⁷² In this case, the attorney filed the complained-of document as part of her representation of her clients and was thus protected.⁷³

Conclusion

Texas lawyers should not hesitate in providing their best representation to their clients. This goal can be compromised if a lawyer begins to worry about whether his/her actions might create some exposure to an opponent for civil liability. The litigation privilege exists because sometimes the public’s interest in aggressive representation by our legal community outweighs a disgruntled opponent’s interest in suing his opposing counsel.⁷⁴

If an attorney finds him/herself served with a lawsuit, an important first step is to determine whether the litigation privilege might apply. While there are some open questions regarding the privilege, it provides attorneys with a strong defense to claims brought by non-clients.

1. Ryan Squires is an associate at Scott, Douglass & McConnico, LLP in Austin, Texas, specializing in the areas of general and commercial litigation, products liability, and professional malpractice defense. J.D. 2004, cum laude, Baylor University School of Law.
2. Bradt v. West, 892 S.W.2d 56, 71–72 (Tex. App.—Houston [1st Dist.] 1994, writ denied) (holding that the privilege protects attorneys from liability to opposing counsel); see also Renfroe v. Jones & Assoc., 947 S.W.2d 285, 288 (Tex. App.—Fort Worth 1997, writ denied) (holding that the privilege protects attorneys from liability to opposing parties).
3. See Bradt, 892 S.W.2d at 72.
4. Id. at 71 (quoting Maynard v. Cabellero, 752 S.W.2d 719, 721 (Tex. App.—El Paso 1988, writ denied)).
5. Id.
6. Id. (quoting Morris v. Bailey, 398 S.W.2d 946, 947 (Tex. Civ. App.—Austin 1966, writ ref'd n.r.e.)).
7. Id. at 72.
8. Id. at 71 (quoting Morris, 398 S.W.2d at 947).
9. Id. at 72.
10. 126 S.W. 343 (Tex. Civ. App.—Dallas 1910, writ ref'd).
11. Id. at 344.
12. Id. at 345.
13. 398 S.W.2d 946, 948 (Tex. Civ. App.—Austin 1966, writ ref'd n.r.e.).
14. Id. at 948.
15. Id. at 947.
16. Id. at 947–48.
17. 892 S.W.2d 56, 71 (Tex. App.—Houston [1st Dist.] 1994, writ denied).
18. Id. at 71–72.
19. Id. at 65, 72.
20. Id. at 65.
21. Id. at 71.
22. Id. at 71.
23. Id. at 71–72 (emphasis added).
24. 947 S.W.2d 285, 288 (Tex. App.—Fort Worth 1997, writ denied).
25. See Bradt, 892 S.W.2d at 72.
26. Id. at 71 (indicating that an attorney has the duty to zealously represent his clients within the bounds of the law).
27. Id. at 72.
28. Id.
29. Id.
30. Id.
31. See Mitchell v. Chapman, 10 S.W.3d 810, 811–12 (Tex. App.—Dallas 2000, pet. denied); see also Lewis v. Am. Exploration Co., 4 F.Supp.2d 673, 679–80 (S.D. Tex. 1998) (dismissing case in favor of law firm accused of withholding documents responsive to opponent's discovery requests).
32. Taco Bell Corp. v. Cracken, 939 F.Supp. 528, 532–33 (N.D. Tex. 1996).
33. Renfroe v. Jones & Assoc., 947 S.W.2d 285, 286–88 (Tex. App.—Fort Worth 1997, writ denied).
34. Lackshin v. Spofford, No. 14-03-00977-CV, 2004 WL 1965636, at *3–5 (Tex. App.—Houston [14th Dist.] Sept. 7, 2004, pet. denied) (mem. op., not designated for publication).
35. White v. Bayless, 32 S.W.3d 271, 273 & 274–76 (Tex. App.—San Antonio 2000, pet. denied).
36. 993 F.Supp. 461, 465 (N.D. Tex. 1998).
37. Id.
38. 41 S.W.3d 781, 783 (Tex. App.—Corpus Christi 2001, no pet. h.).
39. Renfroe v. Jones & Assoc., 947 S.W.2d 285, 286–88 (Tex. App.—Fort Worth 1997, writ denied).
40. Mendoza, 41 S.W.3d at 787.
41. Id.
42. Id. at 788.
43. Id. at 787–88.
44. See Bradt v, West, 892 S.W.2d 56, 72 (Tex. App.—Houston [1st Dist.] 1994, writ denied).
45. Poole v. The H. & T.C. Ry. Co., 58 Tex. 134, 137 (Tex. 1882).
46. 696 S.W.2d 468, 472 (Tex. App.—Houston [1st Dist.] 1985, no writ h.)
47. Id. at 472–73.
48. Id. at 472.
49. Id.
50. See e.g. Lackshin v. Spofford, No. 14-03-00977-CV, 2004 WL 1965636, at *4 (Tex. App.—Houston [14th Dist.] Sept. 7, 2004, pet. denied) (mem. op., not designated for publication).
51. 966 S.W.2d 661, 666–68 (Tex. App.—San Antonio 1998, pet. denied).
52. Id. at 666.
53. Id.
54. Id. at 667–68.
55. Id. at 666–68.
56. See Mitchell v. Chapman, 10 S.W.3d 810, 811–12 (Tex. App.—Dallas 2000, pet. denied); see also Lewis v. Am. Exploration Co., 4 F.Supp.2d 673, 679–80 (S.D. Tex. 1998).
57. See Lewis, 4 F.Supp.2d at 675.
58. Id. at 679–80.
59. Id. at 680.
60. Id. (holding that each claim must be considered in light of the actions shown to have been taken by the attorney in order to determine whether the attorney can be liable for such actions).
61. 892 S.W.2d 56, 71–72 (Tex. App.—Houston [1st Dist.] 1994, writ denied) (emphasis added).
62. 41 S.W.3d 781, 787 (Tex. App.—Corpus Christi 2001, no pet. h.).
63. 10 S.W.3d 810, 811–12 (Tex. App.—Dallas 2000, pet. denied).
64. 32 S.W.3d 271, 276 (Tex. App.—San Antonio 2000, pet. denied).
65. 101 S.W.3d 461, 471 (Tex. App.—Amarillo 2001, pet. denied).
66. Id.
67. Hanna v. Niemann, No. 03-98-00708-CV, 1999 WL 394894, at *3 (Tex. App.—Austin June 17, 1999, pet. denied) (not designated for publication).
68. Id. at *1.
69. Id. at *1–2.
70. Id. at *2.
71. Id. at *3.
72. Id.
73. Id. at *4.
74. Mitchell v. Chapman, 10 S.W.3d 810, 812 (Tex. App.—Dallas 2000, pet. denied) (holding that a party's interest in bringing suit against an opposing counsel for withholding documents requested during discovery is outweighed by the public's interest in loyal, faithful, and aggressive representation by attorneys employed as advocates).

I. Introduction

With the repeal of Prohibition, the right of Texas citizens to vote on the sale of alcoholic beverages has been found in the Texas Constitution. But how our citizens vote is, as often is the case under our constitution, left to the Texas Legislature. And that is always a dangerous thing.

In 2006, the largest electoral petition drive in Texas history drew more than 100,000 petition signatures calling for a local option election to legalize the sale of alcoholic beverages in Justice Precinct Three of Dallas County. As required by Texas’ Election Code, Dallas County’s Elections Administrator checked signature qualifications and certified them, thus placing the call for the election on the Dallas County Commissioners Court’s Agenda. And under the Election Code, once an election petition is certified by the Election Administrator, the Commissioners Court has no option except to call the election. Yet no election was called.

No election was called because the Commissioners Court didn’t know what to do. Under the Texas Constitution, citizens in a justice precinct are entitled to vote on the sale of alcoholic beverages. Under the Election Code, that election is called by obtaining the necessary signatures of qualified voters within the justice precinct. But under the Alcohol and Beverage Code, if a precinct had ever voted in the past on the sale of alcoholic beverages, and its boundaries had changed, then the citizens in the original territory of the precinct must vote in any new election affecting any part of the original territory. How does that work?

In re Davis¹ presents this conundrum to the Texas Supreme Court. Argument was held on December 5, 2007, and the matter is pending the Court’s decision.

II. The Law

Texas’ alcoholic beverage laws are, as one commentator put it, “some of the strangest in the nation.”² Take the City of Houston for instance: “Drive from Fourth Street in Houston to Fourth Street in Deer Park via the Washburn Tunnel and it goes something like this: dry, wet, dry, wet, dry.”³ The confusion largely stems from the fact that, after Prohibition ended, political subdivisions were generally “dry” by default, meaning the sale of alcoholic beverages was prohibited.⁴ From that point forward, the legalization of the sale of alcoholic beverages would be by local determination using a petition-driven election process.⁵

Despite the confusion arising from the lack of uniformity of local alcohol laws, Texas law is clear when it comes to the absolute right of its citizens to vote on whether to legalize the sale of alcoholic beverages. Article XVI, Section 20 of the Texas Constitution, states: “(b) The Legislature shall enact a law or laws whereby the qualified voters of any county, justice’s precinct or incorporated town or city, may, by a majority vote of those voting, determine from time to time whether the sale of intoxicating liquors for beverage purposes shall be prohibited or legalized.”⁶ Thus, under the constitution, qualified voters have the right to determine whether the sale of alcoholic beverages shall be legalized in a county, justice precinct, town, or city.

Logically, this raises the question, “who are the qualified voters?” The answer seems simple enough, but the analysis is not quite complete. The constitution also directs that if the sale of alcoholic beverages in the area is prohibited as a result of a local option election that occurred before Section 20, Article XVI took effect, the local option status of the county, justice precinct, town or city can only be changed by the majority vote of the qualified voters within that county, justice precinct, town, or city.⁷

Another unanswered question is “what steps must be taken in order to have a local option election placed on a ballot?” Under the Election Code, one must successfully apply for a petition;⁸ the petition must be signed by the requisite number of eligible voters;⁹ and the voter registrar must check the signatures to determine whether the minimum number of qualified voters signed the petition.¹⁰ If the petition requirements are met, the registrar must certify to the commissioners court the number of qualified voters signing the petition.¹¹ Once this step has been completed, “proper petition” has been made and “the commissioners court shall order a local option election.”¹²

While the Election Code determines whether and when a local option election will be called, the Alcoholic Beverage Code affects the territory within which the election will be held. Section 251.80 of the Alcoholic Beverage Code provides:

Whenever a local option status is once legally put into effect as the result of the vote in a justice precinct, such status shall remain in effect until the status is changed as the result of a vote in the same territory that comprised the precinct when such status was established.¹³

Section 251.80 also provides a mechanism to allow votes to change the status:

If the boundaries of the justice precinct have changed since such status was established, the commissioners court shall, for purposes of a local option election, define the boundaries of the original precinct. A local option election may be held within the territory defined by the commissioners court as constituting such original precinct.¹⁴

Under the Alcoholic Beverage Code, once an election has been certified, the Commissioners Court must define the historical boundaries of the justice precinct where a previous local option election had been held and order a local option election in that precinct.¹⁵

At the heart of this case is the issue of what one must do to have an election called in an historical area that does not fall completely within a modern precinct, yet at the same time satisfy the petition requirements in the Election Code that apply to modern precinct boundaries. This is the question the Supreme Court of Texas is poised to answer in the case of In re Davis.¹⁶

III. The Facts

Large portions of Dallas County remain dry today. In 2006, more than 100,000 Dallas County citizens petitioned for a local option election to allow the sale of beer and wine for off-premises consumption in Dallas County Justice Precinct Three.¹⁷ As required by the Election Code, the process began when at least ten qualified voters of Justice Precinct Three applied for local option election petitions. Based on the Election Code and considering Dallas County voting records for Justice Precinct Three, at least 58,901 valid signatures from Precinct Three were required for a local option election to be called.

The response to the petition drive was overwhelming. In less than two months, more than 102,000 petition signatures in favor of the local option election were collected—a number reflecting more than sixty percent of the voters in the precinct who had voted in the last gubernatorial election. The Elections Department, after certifying that the minimum number of required signatures had been submitted, requested a local option election to be held on May 12, 2007.

The local option election item was placed on the Commissioners Court’s agenda for its February 13, 2007 meeting.¹⁸ The item stated:

To approve order approving the Dallas County Elections Department’s request to order a local option election to be held on May 12, 2007 for ‘The legal sale of beer and wine for off-premise consumption only’ in the Justice of the Peace, Precinct 3 within the boundaries as established by Commissioners Court.¹⁹

At its meeting, the Commissioners Court considered that under Alcoholic Beverage Code, Section 251.80, if a precinct had held a local option election, then the precinct’s historical boundaries were required to be reestablished in order to allow the voters living in the historic area to vote in the local option election.²⁰ Viewing historical maps, the Commissioners Court discovered a large part of the northern area of Justice Precinct Three was once in a historical precinct two, which voted “dry” in 1877, and a smaller, southeastern part of Justice Precinct Three had been in a historical precinct three, which voted “dry” in 1878.

Though it was able to isolate the historical precincts, the Commissioners Court ultimately refused to call any local option election, essentially interpreting Texas law in a way that results in a classic Catch-22. The Secretary of State and the Dallas County Elections Department won’t certify petitions for an election unless the petitions are issued, circulated and certified based on modern precinct boundaries. Yet the Commissioners Court won’t call an election unless the petitions are issued, circulated and certified based on non-current, historical precinct boundaries. It is this stalemate the Supreme Court has been asked to resolve.

IV. The Commissioners Court’s Argument

The Commissioners Court’s objection is based on its belief that the petition must identify the boundaries of the historical precinct, and the voters who sign the petition must be voters within that historical precinct.²¹ Because the petition in the instant case was issued for circulation in a modern precinct, was signed by voters of the modern precinct, and called for an election within the modern precinct, the Commissioners Court believed it had no authority to call an election satisfying the requirement of section 251.80.²²

V. The Relators’ Argument

Relators have argued the Commissioners Court’s position imposes impossible requirements, ones not expressly imposed by the relevant statutes, which statutes should not be construed in a manner that effectively prohibits Texans from voting on local option status.²³ Rather the statutes can be read in a manner that empowers voters and preserves the right to vote on local option status.²⁴ Although the local option election process begins with the petition process, this first step is but a legislative threshold generally imposed on all ballot initiatives to assure there is sufficient interest in a proposed ballot issue and to avoid voter confusion and ballot overcrowding.²⁵ In the instant case, the petition requirement for modern precinct three was satisfied when the Elections Department called for a local option election to be held on May 12, 2007.²⁶ Notably, neither the Texas Constitution nor section 251.80 says anything about signatures or petitions. Certainly, there is no inherent need for the petition territory to encompass more area than an existing precinct in which the election is to be called.

The next step required by the Alcoholic Beverage Code is to determine whether any part of Justice Precinct Three had once been part of a historical justice precinct that had held a local option election. If so, the Commissioners Court is required to draw the historical precinct boundaries for that territory and order the local option election, including that territory. Significantly, under Section 501.021 of the Election Code, “[o]n proper petition by the required number of voters of a . . . justice precinct . . ., the commissioners court shall order a local option election in the political subdivision to determine whether the sale of alcoholic beverages of one or more of the various types and alcoholic contents shall be prohibited or legalized in the political subdivision.”²⁷

Moreover, under the Alcoholic Beverage Code, it is not the Election Department’s responsibility to draw historical precinct boundaries for the purpose of issuing petitions. Rather, it is the Commissioners Court who must draw the boundaries of the historical precinct after the election is called.²⁸ The Alcoholic Beverage Code specifically charges the Commissioners Court with this responsibility, stating: “[i]f the boundaries of the justice precinct have changed since such status was established, the commissioners court shall, for purpose of a local option election, define the boundaries of the original precinct.”²⁹

VI. Can the Constitution and Statutes be Reconciled?

Notably, nothing in Texas law prohibits including voters from historic territories on the vote to change the status of a portion of that territory. To the contrary, it appears Texas law intends for those persons to be included. Here is how such an election could work:

The qualified voters in a local option election would be the persons residing within the precinct in which the election was called. In addition the qualified voters would include persons residing within the historical boundaries of a territory that had previously voted in a status election and any part of which currently falls within the precinct holding the election. Including voters in the entire territory of historical precincts to have a say on whether territory within the modern precinct changes its wet/dry status is consistent with the constitution, the legislative intent underlying the petition requirements, and both the Election Code and the Alcoholic Beverage Code. Perhaps most importantly, this interpretation prevents voter disenfranchisement because this method ensures that the voters of each historical district maintain maximum control over the wet/dry status of their respective territories while honoring the right of citizens in justice precincts to vote on the sale of alcoholic beverages.³⁰

VII. Conclusion

Elections are held to ascertain the will of the people³¹ and the right to vote is “one of the most treasured of all American heritages guaranteed by the Constitution and Bill of Rights.”³² Election laws exist not to thwart the right to vote, but to protect the purity of the ballot so that the will of the majority of qualified voters will prevail.³³ Accordingly, statutes regulating the right to vote should be liberally interpreted in favor of the right to vote because “[t]he right to vote is so fundamental in our form of government that it should be as zealously safeguarded as are our natural rights.”³⁴ In this case, the Commissioners Court has created a conflict in election laws where none exists. How the Texas Supreme Court will resolve this conundrum remains to be seen.

1. No. 07-0147 (Tex. argued Dec. 5, 2007).
2. J.R. Labbe, You May Need a Drink to Understand Our Liquor Laws. Fort Worth Star-Telegram, May 16, 2004 at E3.
3. Mark Babineck, Why Are Alcohol Rules in Texas So Different from Place to Place? Houston Chronicle, August 5, 2007 at B1.
4. See Texas Secretary of State Phil Wilson, Local Option Liquor Elections – Questions and Answers, http://www.sos.state.tx.us/elections/laws/liquorelections.shtml (last visited Feb. 24, 2008).
5. Id.
6. Tex. Const. art. XVI §§ 20(a)–(b) (emphasis added).
7. Id. § 20(c).
8. Tex. Elec. Code Ann. § 501.023 (Vernon Supp. 2007).
9. Id. §§ 501.031–32.
10. Id. § 501.031.
11. Id. §§ 501.031–32.
12. Id. § 501.021 (emphasis added).
13. Tex. Alco. Bev. Code Ann. § 251.80 (Vernon Supp. 2007).
14. Id.
15. See id.
16. In re Davis, No. 07-0147 (Tex. argued Dec. 5, 2007).
17. This effort began with identifying areas within Dallas County that were "dry" and inquiring of the Dallas County Elections Department the area from which signatures would have to be obtained in order to call for an election to sell beer and wine in those areas. The Elections Department determined the areas were in Justice Precinct 3 and that petitions would have to be circulated in and signed by qualified voters from Justice Precinct 3. This decision was based on advice received from the Director of Elections for the Elections Division of the Office of the Secretary of State, Ann McGeehan—advice subsequently confirmed by the legal section of the Elections Division. Under Section 31.004 of the Election Code, the Secretary of State is required to maintain an informational service for answering inquiries of election authorities relating to the administration of the election laws or the performance of their duties. Tex. Elec. Code Ann. § 31.004 (Vernon 2003).
18. Petition for Writ of Mandamus at 2–3, In re Davis, No. 07-0147 (Tex. filed Feb. 26, 2007).
19. Id.
20. Tex. Alco. Bev. Code Ann. § 251.80 (Vernon Supp. 2007).
21. Respondent's Brief on the Merits at 6, In re Davis, No. 07-0147 (Tex. filed July 13, 2007).
22. Id. at 8.
23. Relators' Brief on the Merits at 20, In re Davis, No. 07-0147 (Tex. filed June 13, 2007).
24. Relators' Brief on the Merits at 17–18, In re Davis, No. 07-0147 (Tex. filed June 13, 2007).
25. See Atkinson v. Carter, 785 S.W.2d 449, 454 (Tex. App.—Houston [14th Dist.] 1990), mand. granted on other grounds, Carter v. Fourteenth Court of Appeals, 789 S.W.2d 260 (Tex. 1990).
26. Relators' Brief on the Merits at 4, In re Davis, No. 07-0147 (Tex. filed June 13, 2007).
27. Tex. Elec. Code Ann. § 501.021 (Vernon Supp. 2007) (emphasis added).
28. See Tex. Alco. Bev. Code Ann. § 251.80 (Vernon Supp. 2007).
29. Tex. Alco. Bev. Code Ann. § 251.80 (Vernon Supp. 2007).
30. See Quick v. City of Austin, 7 S.W.3d 109, 127 (Tex. 1998) (Enoch, J., concurring).
31. Dickson v. Strickland, 114 Tex. 176, 265 S.W. 1012, 1016 (1924).
32. See Wooley v. Sterett, 387 S.W.2d 734, 738 (Tex. Civ. App.—Dallas 1965, no writ) ("The right to free exercise of intelligent choice at the polls is surely one of the most treasured of all American heritages guaranteed by the Constitution and Bill of Rights.").
33. Davis v. State, 75 Tex. 420, 12 S.W. 957, 962 (1889).
34. Thomas v. Groebl, 147 Tex. 70, 212 S.W.2d 625, 630 (1948).

The adoption of Section 41.0105 drastically changed the face of tort litigation by limiting plaintiffs’ recovery of medical expenses to only those expenses that were actually paid or incurred as a result of any negligence.² The first courts have recently construed section 41.0105, giving litigators some guidance on how section 41.0105 impacts parties in tort litigation.³ Though these recent opinions give guidance as to which expenses are recoverable under the statute, little guidance is available for what evidence of medical expenses is admissible at trial in light of section 41.0105.

I. Background of Texas Civil Practice & Remedies Code § 41.0105

Section 41.0105 sets forth new law regarding the recovery of medical bills.⁴ This new law limits the recovery of medical and health care expenses to those expenses that are actually paid or incurred by or on behalf of the claimant.⁵ Section 41.0105 provides:

In addition to any other limitation under law, recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.⁶

This new law changes a claimant’s potential recovery. Recognizing this change, the Texas Pattern Jury Charge (”PJC”) for personal injury damages was amended to address recovery of past medical expenses in cases filed after September 1, 2003. If there is an issue about whether past medical expenses were paid or incurred, section 8.2 of the PJC offers the following damages element: “Medical care expenses in the past actually paid or incurred by or on behalf of Paul Payne.”⁷

Litigants often disagree about the meaning of “actually paid or incurred.”⁸ Defendants argue that the section limits recoverable medical bills to only those expenses actually paid or actually incurred by the claimant or his insurer. In other words, write-offs or adjustments are not recoverable. Plaintiffs respond that this interpretation violates the collateral source rule. Instead, plaintiffs argue that the disjunctive “or” in the phrase means a claimant may recover either what he actually paid or what he was charged.

II. Recent Case Law Interpreting Section 41.0105

A. Mills v. Fletcher: Limitation of Recoverable Medical Expenses

This year, the San Antonio Court of Appeals interpreted the statute to preclude a plaintiff from recovering expenses that have been adjusted or written-off.⁹ In Mills v. Fletcher, Fletcher recovered $1,551.00 from Mills for past medical expenses arising out of a personal injury lawsuit.¹⁰ Mills argued that Fletcher’s award should be reduced because some of the expenses were written-off pursuant to an agreement with Fletcher’s insurance company.¹¹ So, Mills argued, the adjusted amounts were neither “actually paid” nor “actually incurred” as required by the statute.¹² Fletcher responded that he “incurred” the full amount of his medical bills regardless of whether he ultimately had to pay the full amount.¹³

Using principles of statutory construction, the court determined that because the statute used the word “incurred” twice,¹⁴ and the second “incurred” was modified by “actually,” the Legislature intended for the second “incurred” to mean something different than the first “incurred.”¹⁵ The court determined that by using “actually” to modify the second “incurred,” the Legislature intended to expressly limit medical expenses.”¹⁶ In other words, the phrase “medical or healthcare expenses incurred” addresses the global idea of a claimant’s medical expenses generally whereas the phrase “actually incurred” addresses the smaller idea of those expenses incurred after adjustments.¹⁷ Accordingly, the court concluded that a plaintiff is unable to recover expenses that have been adjusted or written-off.¹⁸

Much of the pre-Mills commentary centered on the legislative history of the statute. However, the court noted that given the plain meaning of the language in the statute, it did not need to consider the legislative history in its construction.¹⁹

Mills argued that the court’s interpretation contradicts the collateral source rule.²⁰ Certainly, adjustments and write-offs are a benefit a patient receives only as a result of obtaining insurance; and denying the plaintiff these costs clearly gives the defendant the benefit of the plaintiff’s insurance.²¹ Although the court recognized that its interpretation violated the collateral source rule; it also noted that the Legislature has the power to enact a statute that abrogates this rule.²²

B. Goryews v. Murphy Exploration: Adopting Mills and Negating the Collateral Source Rule

The Southern District of Texas adopted the holding in Mills.²³ In Goryews v. Murphy Exploration & Prod. Co., the plaintiff was awarded $181,870.24 for past medical expenses for injuries sustained while working on defendant’s offshore oil platform.²⁴ The court agreed with the San Antonio Court of Appeals’ statutory interpretation and reduced plaintiff’s past medical expenses to those actually paid or incurred.²⁵

The plaintiff in Goryews argued, as did the plaintiff in Mills, that this interpretation violated the collateral source rule.²⁶ The Goryews court reasoned that while under its interpretation, a defendant clearly benefits from adjustments by plaintiff’s insurer, the policy behind tort damages is to make a plaintiff whole.²⁷ A plaintiff is never obligated to pay expenses that have been written-off or adjusted.²⁸ Accordingly, if he is allowed to recover those expenses, he receives the windfall, thus undermining the “make-whole principle.”²⁹

III. Admissibility and the Lingering Problem With the Courts’ Interpretation

Although litigators now have guidance from the courts about what expenses are recoverable under the statute, an unsettled problem remains — what evidence of medical bills is admissible? Both Mills and Goryews dealt with the situation where a plaintiff was awarded the full amount of past medical expenses and the defendant sought to have those expenses reduced pursuant to the statute.³⁰ But defendants who have sought to have these unrecoverable expenses excluded in the first place are sometimes met with opposition from the courts.

A. Getting to Show the Jury What You Did Not Pay For

Of course, evidence that is not relevant is not admissible.³¹ Evidence of damages that are not recoverable is not relevant. Adjusted and written-off medical expenses are not recoverable.³² Accordingly, it would seem clear that this evidence is inadmissible.

The few courts to date to address this issue, however, have allowed unredacted medical bills to go to the jury.³³ In Coppedge v. KBI, Inc., the plaintiff’s minor child was injured while skeet shooting.³⁴ Plaintiff sued the shotgun manufacturer.³⁵ Defendant filed a motion in limine requesting the court prohibit plaintiff from introducing evidence of medical expenses except for those expenses that were actually paid or incurred, and also to allow defendant to introduce evidence showing the amounts actually paid or incurred by plaintiff.³⁶

The court focused its holding on what evidence of past medical expenses was admissible.³⁷ The court held that “[s]ection 41.0105 speaks not to the admissibility of medical records, but to the recovery of plaintiff . . . .”³⁸ The court further opined that introducing adjusted bills might infer the existence of insurance, which is inadmissible.³⁹ Accordingly, the court allowed the plaintiff to admit evidence of the unrecoverable medical expenses. The court stated that if plaintiff ultimately prevailed and was awarded expenses that were unrecoverable, defendant could move for a reduction pursuant to the statute.⁴⁰

In a subsequent case out of the Eastern District of Texas, Judge Schell adopted the court’s holding in Coppedge and denied defendant’s motion to exclude evidence of medical expenses not actually paid or incurred.⁴¹

B. Allowing Unredacted Medical Bills Invites Reversible Error

On its face, the option given to the defendant in Coppedge seems to be the easiest way to deal with paid vs. incurred. The Coppedge court recognized the potential problem with redacting bills and giving those bills to a jury. Obviously, bills reflecting an adjusted-down number could infer the existence of insurance.⁴² However, this solution does not address the bigger problem of what might happen if the jury is given the entire bill.

1. How Error Occurs

Imagine, for example, a plaintiff has two medical bills. Bill A totals $40,000, but only $20,000 was actually paid or incurred. Bill B also totals $40,000, but only $20,000 was actually paid or incurred. The jury receives unredacted bills totaling $80,000.

Section 41.0105 is easy to apply if the jury awards $80,000 for past medical expenses. The court needs only reduce the award to the recoverable amount of $40,000. But what happens if the jury awards $40,000 in past medical expenses? Now the court is faced with having to guess why the jury made the award it did. Either the jury decided the plaintiff should only recover half of each bill, or the jury decided the plaintiff should only recover all of Bill A or all of Bill B. When a court has to guess at the intent of the jury, the potential for harmful error is present.

This situation is analogous to the presumption of harm when a jury answers affirmatively to broad form questions that are based on a mixture of valid and invalid legal theories.⁴³ In the hypothetical, the jury could have based its award on proper damage amounts (those actually paid or incurred) or on improper amounts (all expenses in Bill A). The court has no way of knowing and cannot determine if the appropriate award should be $20,000 or $40,000.

Like in Crown Life Insurance Co. v. Casteel, the jury award could be based on valid or invalid legal theories, and defendant has no way to demonstrate harm because he cannot prove that the award was based on invalid legal theories.⁴⁴ Accordingly, an appellate court would have to presume harm thus requiring a new trial.

2. Avoiding Error

This harmful scenario should never be an issue. In light of the case law interpreting section 41.0105, adjusted or written-off medical expenses are unrecoverable. At some point, the court is going to have to decide the maximum a plaintiff can recover pursuant to the statute. The better practice is to make that decision before submitting the case to the jury. This way, a jury never has the opportunity to base its decision on improper damage amounts. There is no potential for harmful error.

To avoid error, a defendant should file a motion in limine requesting the court to prohibit plaintiff from offering evidence of medical expenses not actually paid or incurred because this evidence is irrelevant and the damages are unrecoverable.

Parties can overcome the inference of insurance by simply redacting all amounts on a bill and putting one final dollar amount at the bottom of each bill. This practice is common in situations where some expenses on a medical bill are recoverable and some are not. For example, a plaintiff is hospitalized as a result of injury and while in the hospital she receives her regularly scheduled diabetes medicine. This particular expense is not related to her injuries and thus is not recoverable.

Plaintiff would simply submit the redacted bills to the jury and then regardless of the amount awarded, the court never has to guess at whether the jury considered improper damages in making its award.

IV. Conclusion

Section 41.0105 limits a plaintiff’s recovery to those expenses actually paid or actually incurred by or on behalf of the claimant.⁴⁵ Those amounts that are adjusted down or written-off as a result of agreements between a medical care provider and an insurance company or worker’s compensation carrier are not recoverable.⁴⁶ Because these amounts are unrecoverable, they are irrelevant and should be inadmissible.

In order to avoid potential harmful error, the best practice is for courts to limit plaintiff’s evidence of damages to that amount actually recoverable under the statute. This insures that a jury will not rely on improper damage amounts when making its decision in a case.

1. David R. Iler is a partner in Fulbright & Jaworski's Houston office. Mr. Iler is a member of the firm's health litigation practice group and the pharmaceutical and medical device litigation practice group. Mr. Iler received his law degree from Baylor University in 1985. Nicole Mitchell is an associate in Fulbright & Jaworski's Houston office. Ms. Mitchell is a member of the firm's health litigation practice group. Ms. Mitchell received her law degree from Baylor University in 2006.
2. Tex. Civ. Prac. & Rem. Code Ann. § 41.0105 (Vernon 2008).
3. Mills v. Fletcher, 229 S.W.3d 765, 769–70 (Tex. App.—San Antonio 2007, no pet.); Coppedge v. K.B.I., Inc., No. 9:05-CV-162, 2007 WL 1989840, at *1–3 (E.D. Tex. July 3, 2007); Goryews v. Murphy Exploration & Prod. Co., No. V-06-01, 2007 WL 2274400, at *3–5 (S.D. Tex. Aug. 8, 2007).
4. Tex. Civ. Prac. & Rem. Code Ann. § 41.0105 (Vernon 2008).
5. Id.
6. Id.
7. Comm. on Pattern Jury Charges, State Bar of Tex., Texas Pattern Jury Charges: General Negligence & Intentional Personal Torts PJC 8.2 (2006).
8. See generally Jim M. Perdue, Jr., TTLA Submission: Maybe It Depends on What Your Definition of "Or" Is?—A Holistic Approach to Texas Civil Practice and Remedies Code § 41.0105, the Collateral Source Rule, and Legislative History, 38 Tex. Tech L. Rev. 241 (2006); see also Chris C. Miller, Reduction of Medical Expense Damage Award, Houston Law., July/Aug. 2007, available at http://www.thehoustonlawyer.com/aa_july07/page50.htm.
9. 229 S.W.3d 765, 768–70 (Tex. App.—San Antonio 2007, no pet.)
10. Id. at 767.
11. Id.
12. Id.
13. Id. at 767–68.
14. The section states: "In addition to any other limitation under law, recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant." Tex. Civ. Prac. & Rem. Code Ann. § 41.0105 (Vernon 2008) (emphasis added).
15. Mills, 229 S.W.3d at 768.
16. Id.
17. Id.
18. Id. at 769.
19. Id. at 769.
20. Id.
21. Id. at 769, n.3.
22. Id.
23. No. V-06-01, 2007 WL 2274400, at *4 (S.D. Tex. Aug. 8, 2007).
24. Id. at *1.
25. Id. at *4.
26. Id. at *5.
27. Id.
28. Id.
29. Id.
30. Id.; Mills v. Fletcher, 229 S.W.3d 765, 767 (Tex. App.—San Antonio 2007, no pet.).
31. Tex. R. Evid. 402.
32. Mills, 229 S.W.3d at 769.
33. Coppedge v. K.B.I., Inc., No. 9:05-CV-162, 2007 WL 1989840, at *3 (E.D. Tex. July 3, 2007). To be fair, it appears that the defendant did not make a relevance argument, but focused its argument on inadmissibility based solely on section 41.0105.
34. Id. at *1.
35. Id.
36. Id. at *2.
37. Id. at *3.
38. Id.
39. Id.
40. Id.
41. Del Carmen Contreras v. KV Trucking, Inc., No. 4:04-CV-398, 2007 U.S. Dist. LEXIS 70140, at *5–6 (E.D. Tex. Sept. 21, 2007).
42. Id.
43. Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 388 (Tex. 2000) ("Accordingly, we hold that when a trial court submits a single broad-form liability question incorporating multiple theories of liability, the error is harmful and a new trial is required when the appellate court cannot determine whether the jury based its verdict on an improperly submitted invalid theory.")
44. See id.
45. Tex. Civ. Prac. & Rem. Code Ann. § 41.0105 (2008).
46. Mills v. Fletcher, 229 S.W.3d 765, 769–70 (Tex. App.—San Antonio 2007, no pet.)

The Fifth Circuit recently issued two rulings concerning class certification in securities class actions.² Both cases involved Basic Inc. v. Levinson’s fraud-on-the-market (FOM) presumption. These rulings will fundamentally change how securities fraud class actions are certified. In Basic the Supreme Court adopted the FOM theory for securities fraud class actions.³ By FOM, plaintiffs obtain a rebuttable presumption of reliance on a misrepresentation, if they can establish that the market for the security traded in an efficient market.⁴ The Fifth Circuit in Regents held that plaintiffs must show defendants owe a duty to investors in order to presume reliance, while Oscar held that plaintiffs must prove the market was efficient at the class certification stage.

I. No Scheme Liability Exists for Securities Fraud Class Actions

In Regents of University of California v. Credit Suisse First Boston (USA), Inc., the plaintiffs relied on scheme liability to certify a class of shareholders against several defendant banks.⁵ The district court certified the class. However, the Fifth Circuit reversed and remanded, stating that the conduct alleged were not acts on which an efficient market could presume reliance.⁶

Enron’s financial fraud is infamous. The defendant banks engaged in a series of transactions with Enron that allowed the Company to take liabilities off its books and to book revenue from the transactions, which, in actuality, caused it to incur debt. However, these acts did not permit Enron investors to take advantage of the fraud-on-the-market presumption, as set forth in the Supreme Court’s Basic decision, for purpose of class wide reliance and obtaining certification of a proposed investor class in their lawsuit against these banks. Because Enron is a judgment proof defendant, the banks were the main source of settlement revenue for the Enron investors. ⁷

Central Bank of Denver v. First Interstate Bank of Denver was the crux of the opinion.⁸ This ruling provides that plaintiffs “may not bring a 10b-5 suit against a defendant for acts not prohibited by the text of § 10b.”⁹ The Court held that Rule 10b-5 “does not include giving aid to a person who commits a manipulative or deceptive act.” ¹⁰ The Fifth Circuit in Regents focused on the meaning of the term “deceptive act” in § 10b, and found that