Stephen James Utts, M.D., Petitioner

Dennie Short, individually, and as executor of The Estate of Clifton Short, deceased, Norma L. Short, Patricia Ann Cain, and Sam Short, Respondents

Justice Owen, joined by Justice Hecht, dissenting.

I agree with one aspect of Justice Gonzales's opinion, which is that this Court's decision in Drilex Systems, Inc. v. Flores is not overruled and remains the law in factual situations like the one at issue in that case. But I cannot join in the balance of Justice Gonzales's opinion or the Court's judgment because courts must take statutes as we find them, and the statute in this case requires that all members of the Short family be considered a single "claimant" even when one member of the family settles before the case is submitted to the jury. The harsh results that could be caused by the statute in the few instances where one or more family members settle and withdraw from the case can be ameliorated by submitting those family members' claims to the jury, just as a settling defendant's liability can be submitted to a jury. I would reverse the judgment in this case and remand for a new trial so that all the Short family members' damage claims can be submitted.

I would also hold that the transaction among the Short family members in their sharing of the settlement funds was a sham designed to circumvent the statute. In order to give effect to clear legislative intent as expressed in section 33.012(b) of the Texas Civil Practice and Remedies Code, the Court should hold that when a claimant receives settlement monies either directly or indirectly, non-settling defendants are entitled to a credit for the full amount of the settlement.

For these reasons, I dissent.

Clifton Short died while under the care of Dr. James Utts at a hospital owned and operated by HCA Health Services of Texas, Inc. Short's estate, his widow Norma Short, and the Short's four children, Dennie Short, Sam Short, Patricia Short Cain, and Dorothy Short Walker, sued Utts and HCA. Before trial, Walker settled with HCA. She then non-suited her claims against Utts. Utts contends, and I agree, that he is entitled to a settlement credit equal to "the sum of the dollar amounts of all settlements" as required by Texas Civil Practice and Remedies Code section 33.012(b)(1) (emphasis added).

The starting point in construing a statute is the statute itself. Section 33.011 says that the word "claimant" as used in sections 33.011 and 33.012 includes family members in Dorothy Walker's shoes. Walker made a claim for damages for the death of another person, who was her father. She, as well as her father's estate and her mother and siblings, are considered a single claimant under the statutes at issue:

§ 33.011. Definitions

(1) "Claimant" means a party seeking recovery of damages pursuant to the provisions of Section 33.001 [proportionate responsibility], including a plaintiff, counterclaimant, crossclaimant, or third-party plaintiff seeking recovery of damages. In an action in which a party seeks recovery of damages for injury to another person, damage to the property of another person, death of another person, or other harm to another person, "claimant" includes both that other person and the party seeking recovery of damages pursuant to the provisions of Section 33.001.

Tex. Civ. Prac. & Rem. Code § 33.011(1).

Each defendant who makes a proper election is entitled to a dollar-for-dollar credit if "the claimant" has settled with one or more defendants:

(b) If the claimant has settled with one or more persons, the court shall further reduce the amount of damages to be recovered by the claimant with respect to a cause of action by a credit equal to one of the following, as elected in accordance with Section 33.014:

(1) the sum of the dollar amounts of all settlements;

Tex. Civ. Prac. & Rem. Code § 33.012(b)(1).

This means that when there is more than one person suing for an injury to or the death of another, they are considered one claimant under the statute's settlement credit procedure:

(b) If the claimant [which includes both a party who seeks damages for injury to or death of another person and that other person] has settled with one or more persons, the court shall further reduce the amount of damages to be recovered by the claimant [which includes both a party who seeks damages for injury to or death of another person and that other person] with respect to a cause of action by a credit equal to one of the following, as elected in accordance with Section 33.014:

(1) the sum of the dollar amounts of all settlements;

Tex. Civ. Prac. & Rem. Code § 33.012(b)(1).

Justice Gonzales's opinion concludes that if a settling member of a family is no longer a party to the suit at the time the case is submitted to the jury, the settling family member is no longer a component of the "claimant." Justice Gonzales's opinion thus inserts the words "at the time of the submission of the case to the trier of fact" at the end of section 33.011(1). But, when the Legislature intended to impose such temporal limitations, it said so plainly, as it did in the subsection immediately following 33.011(1):

(2) "Defendant" includes any party from whom a claimant seeks recovery of damages pursuant to the provisions of Section 33.001 at the time of the submission of the case to the trier of fact.

Tex. Civ. Prac. & Rem. Code § 33.011(2) (emphasis added).

The Legislature likewise took pains to draw the same temporal distinction in subsection (5) in defining a "settling person," which the Legislature defined to mean only a settling defendant, not a settling plaintiff, "at the time of submission":

(5) "Settling person" means a person who at the time of submission has paid or promised to pay money or anything of monetary value to a claimant at any time in consideration of potential liability pursuant to the provisions of Section 33.001 with respect to the personal injury, property damage, death, or other harm for which recovery of damages is sought.

Tex. Civ. Prac. & Rem. Code § 33.011(5).

We have previously recognized that harsh results can occur under section 33.012(b). We said in Drilex Systems, Inc. v. Flores, 1 S.W.3d 112 (Tex. 1999):

For example, the family correctly points out that some plaintiffs may recover more than the amount awarded by the jury, and some plaintiffs' awards will be reduced by settlement amounts paid to other plaintiffs. Although such results may seem harsh, they are mandated by the statutory language and are consistent with legislative intent.

Id. at 123.

In Drilex, we cited with approval a case in which the facts were analogous to those in this case. Id. at 122 (citing J. D. Abrams, Inc. v. McIver, 966 S.W.2d 87 (Tex. App.--Houston [1^st Dist.] 1998, pet. denied)). In J. D. Abrams, Lori Crane was severely injured. Her mother, Joyce McIver, sued in her individual capacity and as the guardian of Crane's estate. 966 S.W.2d at 90 n.2. Prior to trial, settlements were reached with several defendants, totaling in excess of $2,400,000. The jury subsequently awarded Crane $13,500,000, but the trial court allowed a settlement credit of only $1,782,881.20, the aggregate amount of the settlements it had allocated to Crane. The court of appeals reversed, holding that the full amount of the settlements, including the amounts paid to McIver for her individual claims, must be applied to reduce the judgment in favor of Crane. The court rejected the argument that is now made by the Short family in this case:

Crane also contends that this result would make her give a credit for money she never received, money that by court order went to another person, McIver, for McIver's own losses. While that is true, we believe the legislature intended this result in order to protect defendants from plaintiffs who would manipulate settlements among those "seek(ing) [stet] recovery of damages for injury to another person."

Id. at 97.

In Drilex, we did what courts are supposed to do, which is apply the statute's plain language unless there is an obvious drafting error: "Although such results may seem harsh, they are mandated by the statutory language and are consistent with legislative intent." 1 S.W.3d at 123.

Although section 33.012(b) can lead to anomalous results when one or more, but not all, family members settle, I submit that there is an alternative to construing the statute to mean something other than what it says, as the opinions of both Justice Gonzales and Justice Hankinson do. I would hold that when a family member settles, the remaining family members may submit issues to the jury as if the settling member were still a party to the litigation. This would be in line with section 33.012's intent that "the claimant" includes the family for all purposes. The settling family member would not be able to recover any additional compensation because of its settlement, but the full amount of damages due to "the claimant" would be fairly determined by the jury, then reduced by "the sum of the dollar amounts of all settlements" as directed by section 33.012(b)(1) (emphasis added). Utts specifically requested that this Court grant such relief. I would therefore reverse the judgment of the court of appeals and remand this case to the trial court so that "the claimant's" damages, including Walker's, could be determined by a jury, and the full amount of "all settlements" could be credited. See Tex. Civ. Prac. & Rem. Code §§ 33.011(2), 33.012(b)(1).

The Short family knowingly and intentionally structured the settlement with Walker and her subsequent "gifts" to family members to circumvent the settlement credit provisions of section 33.012(b), a fact that counsel for the Short family has proudly proclaimed in at least one continuing legal education program. Although I would not reach the "gifts" issue because Utts is, in my view, entitled to a settlement credit for the full $200,000 settlement payment, the Court should not sanction the blatant sham that has been perpetrated in this case. I would hold that, at a minimum, Utts is entitled to a credit for all amounts that any non-settling member of the Short family received, directly or indirectly, from the Walker settlement.

Dorothy Walker agreed to settle with HCA, the hospital where her father was treated and died, for $200,000. But she received only $50,000 of the settlement proceeds. The balance, $150,000, was deposited in a trust account of the Short family's counsel. Walker directed counsel to pay $40,000 of the $150,000 trust account funds to her mother and siblings, which she says was a $10,000 "gift" to each of them. The remaining $110,000 went to the Short family's counsel for expenses and attorney's fees. The trial court refused to allow Utts a $40,000 settlement credit for the "gifts" to each of the claimants who pursued the suit against him, even though there is no dispute that each family member received settlement proceeds, albeit slightly indirectly, provided by HCA. This settlement scheme was a transparent sham that should not be sanctioned by the Court. The Shorts' own counsel has candidly admitted that this was a device to circumvent section 33.012(b).

Counsel for the Shorts has been eager to explain to other lawyers across the state that in many cases, there is a "black sheep" in the family, and this settlement device was hatched to skirt section 33.012(b). See Michael W. Shore, Settlement Traps: Credits, Liens, and the Empty Chair at Trial, Lecture at the 9th Annual Medical Malpractice Conference of the Texas Trial Lawyers Association (September 17-18, 1998) (transcript available from Preferred Records, Inc., Dallas, Texas). In teaching other lawyers how to duplicate this scam, counsel for the Shorts said, "[w]e have cases where sometimes you have a plaintiff you are not particularly proud of. Maybe it's the dad. Maybe it's the mom. Maybe it's one of the kids, but there is somebody that you have got a problem with." Id. Counsel then detailed how the "black sheep" would accept the settlement offer and then dole out most of the proceeds to other family members in order to deprive the remaining defendant of any settlement credit:

So let's say you have a situation like we had where you have a black sheep of the family, and you have some people coming forward and they are going to offer you some money to settle the case [for $300,000]. . . . I'm going to give $235,000 of that to the black sheep, and then I'm going to give $16,250 of that to each of the other plaintiffs, and then I'm going to non-suit the black sheep entirely from the case, including against the remaining defendants, because if he got turned [sic] $35,000 , that's going to wipe out any recovery he would get anyway because no jury is ever going to give this jerk $235,000 to begin with.

Now, before you do that, you kind of sit them down and you tell them-this needs to be well documented with your plaintiffs. You say, look, we are going to give you all this money. You are going to pay all the attorneys' fees and costs out of it, and then you are going to turn around, if you will agree to do this, and you are going to give a gift to your momma of most of the money that you got . . . . And, then, guess what? The defendant gets no settlement credit.

That's how we did it in Austin [in the Utts v. Short case]. It's held up. It works. It's valid. And if anybody needs the documents and how to document something like that, call us up. We'll send them to you.

Id.

The only reason that this farce is "valid" is because today, this Court allows it to be. Justice Gonzales's opinion concludes that there was a fact issue for the jury to determine regarding the settlement but that Utts did not put on evidence that the arrangement was a sham. What additional evidence should Utts have offered? He introduced the settlement agreement and proved how the funds were actually distributed. Justice Gonzales's opinion says that Utts must go further and prove that the settlement disbursements were not in "good faith." This is, with all due respect, inane. In the past, we have not permitted litigants to distort the operation of our legal system even if they may have been subjectively motivated by good faith. We had no difficulty in dealing with Mary Carter agreements in Elbaor v. Smith, 845 S.W.2d 240, 247-50 (Tex. 1992) (holding that Mary Carter agreements are void as a violation of public policy). Likewise, we had no difficulty in concluding that clients cannot assign legal malpractice claims against their attorneys. Zuniga v. Groce, Locke & Hebdon, 878 S.W.2d 313, 318 (Tex.App.-San Antonio 1994, writ ref'd). We recognized that in Zuniga, the assignment was merely "a transparent device to replace a judgment-proof, uninsured defendant with a solvent defendant." Id. at 317. We did not require proof that the assignment was not made in good faith. Subjective intent was irrelevant. We have also concluded that certain assignments by an insured against its insurer are invalid:

[A] defendant's assignment of his claims against his insurer to a plaintiff is invalid if (1) it is made prior to an adjudication of plaintiff's claim against defendant in a fully adversarial trial, (2) defendant's insurer has tendered a defense, and (3) either (a) defendant's insurer has accepted coverage, or (b) defendant's insurer has made a good faith effort to adjudicate coverage issues prior to the adjudication of plaintiff's claim.

State Farm Fire and Cas. Co. v. Gandy, 925 S.W.2d 696, 714 (Tex. 1996). Again, we did not make an exception for "good faith" assignments.

Our decision in Mobil Oil Corp. v. Ellender, 968 S.W.2d 917 (Tex. 1998), does not require a defendant such as Utts to prove that a settlement scheme like the one in this case was in "good faith." Indeed, Ellender supports the conclusion that all a defendant in Utts's position must prove is the existence and amount of the settlement. We said in Ellender that a defendant should receive full credit for all settlement amounts unless the settling plaintiff proves that some or all of the settlement dollars were for punitive damages. We explained that it would be unfair to require a non-settling defendant to prove that there has been an allocation between actual and punitive damages or the terms of that allocation:

Without an allocation, Mobil, who was not a party to the settlement, had almost no ability to prove which part of the settlement amount represented actual damages. Nonsettling parties should not be penalized for events over which they have no control. When the settlement agreement does not allocate between actual and punitive damages, requiring a nonsettling party to prove the agreement's allocation before receiving a settlement credit not only unfairly penalizes the nonsettling party but also allows settling parties to abrogate the one satisfaction rule. Settling parties could prevent nonsettling parties from receiving settlement credit by refusing to allocate between actual and punitive damages in settlement agreements. The better rule is to require a settling party to tender to the trial court, before judgment, a settlement agreement allocating between actual and punitive damages as a condition precedent to limiting dollar-for-dollar settlement credits to settlement amounts representing actual damages.

Id. at 928 (citations omitted).

I would hold that when a "claimant" within the meaning of sections 33.011 and 33.012 receives settlement proceeds, either directly or indirectly, non-settling defendants are entitled to full credit for the settlement payment. Good faith should not be an issue. The claimants in this case received settlement proceeds, and that should be the end of the inquiry.

I find it remarkable, to put it mildly, that four Members of this Court advocate that we overrule Drilex to the extent that it dealt with settlement credits under Texas Civil Practice and Remedies Code section 33.012. That portion of the Drilex decision was unanimous and was issued just twelve months ago. On rehearing in Drilex, the Court had been asked to reconsider the settlement credits issues, and we did so for almost one year. We then withdrew our original opinion, but in our substituted opinion, we continued to read the statutes as their plain language requires us to do: "under the plain language of section 33.011(1), the term 'claimant' in section 33.012(b)(1) includes all of the family members." Drilex, 1 S.W.3d at 122. We continued, "[b]ecause we must view the entire Flores family as one claimant for section 33.012(b)(1) purposes, the total of all damages to be recovered by the family must be reduced by the total of all settlements received by the family." Id. Justice Hankinson's opinion does not offer any text from the statutes to support its conclusion that Drilex should be overruled in this regard, and it cannot do so.

Each of us had an extended opportunity in Drilex to consider what we all agreed at the time was the "plain language" found in sections 33.011 and 33.012. See Drilex, 1 S.W.3d at 122-23. We fully understood the import of our decision and that the statutes could, in some situations, "result in 'gross inequities.'" Id. at 123. But we unanimously recognized that such results "are mandated by the statutory language and are consistent with legislative intent." Id.

Apparently, the Justices joining Justice Hankinson's decision believe that stare decisis is only a compelling reason to abide by previous constructions of a statute in some cases but not others. Just six months ago, the same Members of the Court said in Grapevine Excavation, Inc. v. Maryland Lloyds, 43 Tex. Sup. Ct. J. 1086, 1090, 2000 WL 890386, *6 (July 6, 2000), that "stare decisis demands the result we reach here. Stare decisis has its greatest force in statutory construction cases. Adhering to precedent fosters efficiency, fairness, and legitimacy. More practically, it results in predictability in the law, which allows people to rationally order their conduct and affairs." Id. (citations omitted).

I would reverse the judgment of the court of appeals and remand this case to the trial court for a new trial. Because a majority of the Court refuses to do so, I dissent.

__________________________________________

Priscilla R. Owen

Justice

OPINION DELIVERED: December 7, 2000