060 Transportation Insurance Company v. Moriel

Friday, September 4th, 2015

Richard F. Brown

 
The following is not a legal opinion. You should consult your attorney if the case may be of some significance to you.
 
Transportation Insurance Company v. Moriel, 37 Tex. S. Ct. J. 450 (Feb. 2, 1994) is not an “oil and gas” case, but it appears to be something of a landmark decision for Texas concerning punitive damages. Because punitive damages are frequently the wild card in evaluating the risk presented by an oil and gas dispute, the decision will be important.
 
The typical remedy in a civil case is an award of money damages sufficient to compensate the injured plaintiff. Punitive (or exemplary) damages are levied against a defendant to punish the defendant for intentional, malicious, fraudulent or grossly negligent conduct. Punitive damages become a private windfall and, in fact, are treated as income for tax purposes.
 
In most cases it is relatively easy to develop the liability facts and to calculate the probably compensatory money damages in advance of trial. It is very difficult to predict in advance of trial what liability facts will move a jury to assess punitive damages, and it is impossible to predict the amount of those punitive damages. This uncertainty has been the source of much of the criticism of the Texas civil justice system.
 
In the Moriel case, the Texas Supreme court makes it clear that punitive damages are proper only in the most exceptional cases. In the context of gross negligence as the conduct justifying punitive damages, the Court says the evidence must show both that the conduct was likely to result in serious harm and that the defendant was consciously indifferent to the risk of harm. “Conscious indifference” requires proof that the defendant had actual subjective knowledge of an extreme risk of serious harm. These somewhat esoteric definitions have the effect of narrowing the number of cases that could possibly result in the imposition of punitive damages.
 
The Court also announced two procedural changes which may bring more certainty and predictability into the law as to punitive damages. It is an established part of our law that a defendant’s net worth is evidence relevant to the imposition of punitive damages. Evidence of net worth may prejudice a jury and result in adverse findings on liability issues, which then support punitive damages. After Moriel, any case involving punitive damages may be bifurcated. That is, evidence relevant only to the amount of punitive damages will not even be presented to the jury unless the jury has first found liability for punitive damages (i.e., gross negligence). A second procedural change is to require the Courts of Appeal to expressly detail the relevant evidence supporting or which does not support punitive damages.
 
The procedural changes are clearly something new. On the substantive law, the Court is emphasizing that the conservative opinions from the Supreme Court for the last two or three years mean what they say. Justice Doggett wrote a fiery opinion attacking the conservative bent of the Court, and then he resigned to run for Congress. The uncertain political wheel continues to turn as Justice Gonzalez is challenged by the wife of the President of the Texas Trial Lawyers Association.