More than a decade after the passage of the controversial 2003 tort reform law, litigants are still struggling over how to properly invoke the so-called loser pays provision, as shown by a recent Texas Supreme Court decision.
Texas Rule of Civil Procedure 167 was part of the omnibus 2003 H.B. 4 tort reform law passed by the Texas Legislature that authorizes a party to recover litigation costs if an opponent rejects a settlement offer and recovers less money at trial.
The high court considered Rule 167 most recently in its May 9 decision in Amedisys, Inv. d/b/a Amedisys Texas v. Kingwood Home Healthcare, d/b/a Heath Solutions Home Health. The background to the case, according to the decision, is as follows.
Amedisys sued Kingwood in a business dispute. Kingwood alleged that Amedisys repeatedly stated that it would not accept anything less than a “six-figure” settlement offer. Believing that amount was significantly more than Amedisys could recover at trial, Kingwood invoked Texas Rule of Civil Procedure 167, which authorizes the recovery of litigation costs in connection with a rejected settlement offer and subsequent recovery of less at trial. Kingwood delivered a written offer in which it offered to pay Amedisys $90,000 within 14 days or the settlement offer would be “deemed rejected,” and that settlement offer would serve as the basis for litigation cost recovery under Rule 167.
Ten days after the offer, both parties had submitted their expert witnesses. On the 14th day after the offer, “apparently to Kingwood’s surprise,” Amedisys sent a letter to Kingwood accepting the $90,000 offer.
“As it turns out, Kingwood did not want Amedisys to accept the offer and made it only because Amedisys said it would not accept an offer under six figures. Instead, Kingwood made the offer merely to trigger a right to recover its litigation costs under Rule 167,” according to the decision.
Ultimately, Amedisys moved to enforce the settlement and amended its pleadings to assert a breach of contract claim to its petition and moved for summary judgment. Kingwood opposed the summary judgment and argued that the settlement was unenforceable because Kingwood had withdrawn its consent to settle the case, among other things.
The trial court granted Amedisys’ summary judgment motion without stating its grounds for doing so. Kingwood appealed. A divided 14th Court of Appeals reversed the trial court’s decision, concluding that no settlement agreement existed because Amedisys had not accepted all of the offer’s material terms. Amedisys appealed the decision to the high court.
Offer and Acceptance
To reach its conclusion, the Supreme Court looked at Kingwood’s settlement offer and Amedisys’ acceptance letter. Kingwood offered $90,000 to settle “all claims asserted or which could have been asserted” by Amedisys. Amedisys’ letter stated that it accepted the offer to settle “all monetary claims asserted” against Kingwood for $90,000, according to the decision.
Kingwood argued on appeal that Amedisys did not accept Kingwood’s offer because the letter did not agree to settle claims that “could have been asserted” against Kingwood.
Writing for the court, Justice Jeff Boyd agreed with Amedisys that Amedisys had accepted the offer.
“Amedisys’ failure to reference claims ‘that could been asserted’ is not material under these circumstances. There is no evidence in this summary judgment record that Amedisys has or had any claims or potential claims against Kingwood other than those that it asserted in this lawsuit,” Boyd wrote.
Boyd concluded that Amedisys’ letter constituted a “clear intent” to accept Kingwood’s offer. The Supreme Court reversed and remanded the case to the 14th Court for further consideration.
S. Shawn Stephens, a partner in Baker & Hostetler in Houston who represents Amedisys, believes “the Texas Supreme Court recognized the sanctity of contracts, any contract, including, in this case, a settlement agreement.”
Steve Williard, of Houston’s The Williard Law Firm, who represents Kingwood, is not pleased with the decision. He believes that the high court “was playing fact finder, and that should be done in the lower court,” he said.
“The offeree should learn that you have to accept what’s offered—right, wrong or indifferent,” Williard said of the implications of the decision. “And here the offer had stuff in it that was outside of Rule 167. It said, ‘In all monetary claims both asserted and nonasserted.’ In Rule 167 it’s just ‘monetary claims asserted,’ period.”