Reverse and Render : Texas Appellate Lawyer & Attorney : Cowles & Thompson Law Firm : Court of Appeals, Texas Supreme Court

A party seeking summary judgment must raise all its grounds in the motion itself; raising a ground for summary judgment at the summary judgment hearing will not support the summary judgment if the judgment is attacked on appeal.

In Ritchey v. Pinnell, Brenda Ritchey brought suit against Steven and Amy Pinnell after Ritchey purchased a home from the Pinnells and learned that she could not get a certificate of occupancy because many of the home improvements made by the Pinnells did not meet code requirements.  Ritchey asserted claims for breach of contract and real estate fraud.  The contract for purchase contained an "as is" clause. 

The Pinnells sought summary judgment against Ritchey's claims.  With respect to the fraud claim, the motion asserted that there was no evidence Steve Pinnell knew the alleged misrepresentations were false and there was no evidence the misrepresentations induced the sale.  As to the breach-of-contract claim, the Pinnells argued that the "as is" clause defeated the claim.  At the summary judgment hearing, the argument arose that the "as is" clause defeated causation as to the fraud claim.  The trial court granted the Pinnells' motion on all claims and Ritchey appealed. 

On appeal, the Texarkana Court of Appeals holds that the "as is" clause cannot be used to support the summary judgment on the fraud claim since that ground was not raised in the motion for summary judgment.  The court otherwise holds that statutory fraud does not require that the declarant know that the misrepresentation was false and that there was some evidence the false representation induced the sale.  Thus, the court reversed the summary judgmetn on the fraud claim.  However, the court held that the "as is" clause defeated the breach of contract claim and the court affirmed the summary judgment on that claim.  The court's opinion may be found at this link.

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The Corpus Christi Court of Appeals recently held that the learned intermediary doctrine does not apply to a drug manufacturer that advertises its products to consumers.  In doing so, the court affirmed the plaintiff's multi-million dollar judgment against the drug manufacturer.

The court's opinion is rather lengthy and traces the origins of the learned intermediary doctrine in Texas.  Basically, the court found:

• that the drug manufacturer has a duty to warn consumers about known dangers concerning its product;
• the learned intermediary doctrine provides an alternate means of fulfilling this duty;
• other court have recognized exceptions to the doctrine; and
• the Restatement contemplates situations where the doctrine would not apply.

These factors, coupled with the drastic change by which drugs are marketed, led to this holding:

In sum, the premises underlying the doctrine are unpersuasive when considered in light of direct marketing to patients.  The situation presented is more similar to the recognized exceptions to the doctrine, where courts considering the issue have found it unreasonable to for a manufacturer to rely on an intermediary to convey a warning, given that direct advertising and changes in the provision of healthcare impact the doctor's role and promote more active involvement by the patient.  Under these circumstances, we hold that when a pharmaceutical company directly markets to a patient, it must do so without fraudulently misrepresenting the risks associated with its product.

This opinion raises a number of questions.  One question is why the court considered the doctor's role and responsibility diminished, as opposed to increased, in light of direct marketing of drugs to consumers.  The court relied in part on the fact that doctors spend less time with patients as a result of managed care to justify its holding.  Second, what is the impact of telling manufacturers that publishing some of the side effects, as opposed all conceivable side effects, constitutes fraud supporting punitive damages?   Are drug manufacturers better off publishing no side effects and leaving that information to doctors?  Is the public better off?  The court noted that the advertisement counseled consumers to consult with their healthcare provider, visit the website for more information, and stated that the advertisement should not be used as a substitute for talking to your doctor.

The court's opinion in Centocor, Inc. v. Hamilton can be found at this link.

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In Aquaplex, Inc. v. Rancho La Valencia, Inc., the Texas Supreme Court appears to have equated intent with causation in a fraud case.  Aquaplex sued Rancho for fraud.  Aquaplex asserted that it lost the sale of a piece of real property due to Rancho having filed a lis pendens on the property.  On appeal following an adverse verdict, Rancho argued that there was no evidence as to why Aquaplex lost the sale of the property and therefore there was no evidence of causation between the alleged fraud and Aquaplex's damages.  In its per curiam opinion, the Supreme Court holds that there was legally sufficient evidence because both parties knew of the offer for the property and Rancho testified it filed the lis pendens to prevent the sale. 

It is unclear how this holding fits with prior precedent holding that evil motive or intent does not necessarily establish a cause of action.  This opinion should give concern to those who file lis pendens. The purpose of lis pendens is give initial notice of a claim to property.  According to the Aquaplex decision, the filing of a lis pendens might well constitute a complete claim for fraud.

For appellate practitioners, there's another holding in Aquaplex that may be of interest.  The court holds that a Respondent need not raise an alternative ground for affirmance as a cross-point in response to the Petition for Review.  Rather, to request that the Supreme Court consider alternative grounds for affirmance raised in the court of appeals but not decided by that court, the respondent may raise those issues in the petition, the response to the petition, the reply, any brief, or a motion for rehearing.  Here, Rancho preserved a cross-point by raising it in its brief on the merits for the first time.

The court's opinion may be found here.

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The United States Court of Appeals for the Fifth Circuit has reiterated the pleading standards applicable in federal court for securities fraud and for common-law fraud in Flaherty & Crimrine Preferred Income Fund Inc. v. TXU Corp.

Federal Rule of Civil Procedure 9(b) requires a pleader to state with particularity the circumstances constituting fraud or mistake.  The Fifth Circuit strictly interprets this requirement, and demands that a plaintiff specify (1) the statements alleged to be fraudulent, (2) the speaker, (3) when the statement was made, (4) where the statement was made, and (5) why the statement was fraudulent.  In Flaherty, the court reminds us that a plaintiff cannot satisfy the pleading requirements with global or group allegations such as "all defendants" made the fraudulent statement.  Flaherty further appears to impose a requirement of delineating whether the statement alleged is an affirmative misrepresentation or an omission.  Flaherty also discusses the type of evidence necessary to plead intent in a securities fraud case, which is a higher standard than common law fraud, but still subject to Rule 9(b).

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