Chapter 74 Statute of Limitations Trumps Chapter 33 Extension

The San Antonio Court of Appeals recently held that the two-year statute of limitations for health care liability claims in section 74.251 of the Civil Practice and Remedies Code cannot be extended by any other law, including section 33.004(e).  The Court focused on the unambiguous language of section 74.251 that the two-year statute applies "notwithstanding any other law."  Obviously, section 33.004(e) constitutes another law.  Consequently, the Court held that section 33.004(e) cannot be used to extend the two-year statute of limitations on health care liability claims.

Justice Simmons concurred and noted in her opinion that this ruling, while statutorily correct, creates an imbalance in the third-party designation practice created by the legislature and implored the legislature to correct the problem.  Justice Simmons' concerns are well-founded, especially since a defendant does not have to designate responsible third parties until very late in the case under section 33.004(a) (sixty days prior to trial date).  Assuming a plaintiff filed suit within one year of injury, a defendant's deadline to designate responsible third parties would almost certainly be later than two years after the plaintiff's injury.  As a result, claims against a designee joined by the plaintiff would be subject to the two-year statute  of limitations for health care liability claims.  As her concurrence explains:

The designation of responsible third parties within the proportionate responsibility framework developed by the Legislature was balanced. The defendant was given more latitude to designate time-barred responsible third parties and the claimant was given a counterbalancing right to join the designees in the suit. The application of section 74.251 to remove the plaintiff’s ability to join the designated responsible third party results in an imbalance in the framework. There is no deterrent to designating as many time-barred responsible third parties as possible, and no incentive for such designees to vigorously contest responsibility. In essence, the plaintiff is left in the position of having to prove the liability of the party defendant while at the same time defending the empty chair designees. The Legislature developed the proportionate responsibility framework with checks and balances to preclude such an unfair result, but it may not have considered the impact of section 74.251 which bars plaintiff’s statutory right to join a time-barred responsible third party in a health care liability case. Unfortunately for proportionate responsibility, without further clarification from the Legislature, there is no check and the balance is gone.

The Court's opinion in Kimbrell v. Molinet can be found at this link.  Justice Simmons' concurrence can be found at this link.

Determining Diversity of Jurisdiction for Limited Liabililty Corporations

For the purpose of determining diversity jurisdiction, is a limited liability company a citizen of the state where it is organized or is it a citizen of the states of which its members are citizens? 

In an issue of first impression, the Fifth Circuit, in Harvey v. Grey Wolf Drilling Co., held that a limited liability company, for diversity jurisdiction purposes, depends on the citizenship of its members.

In Grey Wolf, the plaintiffs, Louisiana residents, sued Grey Wolf in the Eastern District of Louisiana on diversity jurisdiction grounds. Grey Wolf was a Texas LP with members that included an LLC with members in Texas and Nevada, but was organized in Louisiana. The district court applied 28 U.S.C. § 1332(c), a statute governing citizenship of corporations, to the LLC, and held that (1) an LLC's citizenship is determined by where it is organized; and (2) that the parties lacked diversity jurisdiction.

The Fifth Circuit reversed the district court's opinion because:

·          Every Circuit Court that had dealt with the issue held that citizenship would be determined by the LLC’s members;

·          The district court's holding was inconsistent with Supreme Court jurisprudence;

·          The district court’s opinion conflicted with § 1332(c)(1)’s language;

·          Louisiana law clearly distinguished LLCs from Corporations.

*For more insight on the district court's reasoning, see Debra R. Cohen’s article "Limited Liability Company Citizenship: Reconsidering an Illogical and Inconsistent Choice", 90 Marq. L. Rev. 269 (2006).