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Friday, November 15, 2019

Sanctions reversed against homeowner in Hurricane Harvey damages case

State Court

By Charmaine Little | Jul 29, 2019

Justice Sherry Radack

HOUSTON -- A three-panel judge for the Texas First District Court of Appeals reversed on July 16 sanctions against a man who had sued his insurance company after his home was damaged during Hurricane Harvey.

Justice Laura Carter Higley authored the opinion. Justices Sherry Radack and Richard Hightower concurred.

Thomas Phillips sued American Bankers Insurance Company of Florida for allegedly breaking his the homeowner’s policy. ABIC filed a motion to dismiss, which was granted in a lower court. Roughly 30 days later, ABIC then filed a motion to change the judgment. The fees would go toward ABIC attorney fees incurred by the insurer for its attorney to go to the examination under oath (EUO) when Phillips and his lawyer did not appear.

While this was denied, the trial court did grant $3,954.12 in sanctions against Phillips and his attorney. Phillips filed an appeal, stating that the lower court didn’t have plenary power to even grant the sanctions. He also said the lower court abused its discretion in ordering sanctions against him to begin with.

The appeals court backed Phillips’ argument about the lower court abusing its discretion but disagreed with his argument about the lower court lacking plenary power. Considering this, the court reversed the sanctions judgment but affirmed the rest of the lower court’s decisions.

The appeals court pointed out that a lower court keeps jurisdiction for a case 30 days after the final judgment is signed. Within those 30 days, the trial court does have plenary power to change its judgment but loses it once the 30 days has passed. Still, the plenary power can be extended with a post-judgment motion, like a motion to modify a judgment being filed within 30 days after the lower court signs the final order. In that case, a trial court’s jurisdiction can increase to 75 days at most. 

In this case, the lower court signed judgment Jan. 18, 2018. ABIC filed its motion to modify Feb. 13, 2018, within the initial 30 days. Considering this, the lower court had 75 days from Jan. 18, 2018 (which ended April 3, 2018) to rule on the motion.

“The trial court overruled the motion to modify and signed the order awarding sanctions against Phillips on Feb. 22, 2018, well within its plenary power,” said the court as it shot down Phillip’s argument.

Still, the court pointed out ABIC had no legal basis for the sanctions. “ABIC abandoned its claim for sanctions at the hearing on the motion to dismiss,” the appeals court ruled. “In addition, the trial court’s order shows that the sanctions were assessed based on Phillips' failure to appear at the EUO, not based on frivolous or groundless pleadings.”

The only other possibility for the lower court to have legal grounds to back the sanctions is the court’s inherent authority, which the lower court would have in a bad faith abuse case, even if the behavior isn’t protected ina. Rule or statute. The appeals court determined Phillips' decision not attend the EUO wasn’t enough to violate the lower court’s “traditional core functions.” 

On top of that, ABIC didn’t even request for Phillips to go to the EUO until after the lawsuit was already tossed out. Since the EUO wasn’t a vital portion of the judicial process, the lower court didn’t have inherent authority to impose sanctions on Phillips for not attending, the appeals panel ruled.

On top of that, while the lower court used the Disciplinary Rules of Professional Conduct to back the reason it imposed sanctions, the appeals court said, “in any event, a violation of the disciplinary rules by Phillips' attorney cannot be attributed to Phillips, his non-lawyer client.”

Ultimately, the appeals court said the lower court had no legal grounds to impose sanctions simply because Phillips didn’t go to the EUO.

It added, “We conclude that sanctioning Phillips was unjust because the records show him not to be the ‘true offender’ with respect to the sanctionable conduct.”

The appeals court reversed the sanctions but affirmed the remaining portion of the lower court’s verdict.

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