A federal court has asked the Texas Supreme Court to clarify whether Texas’s statute restricting exemplary damages also limits statutory civil penalties.The federal case is Forrte v. Wal-Mart Stores, Inc., No 12-40854 (5th Cir.). That panel has now withdrawn its prior opinion — which held that Texas’s general statute about exemplary damages (Chapter 41 of the Civil Practice and Remedies Code) barred the recovery of specific statutory penalties under the Texas Optometry Act. The conduct that led to the penalty was Wal-Mart signing optometrists to leases that specified certain hours of operation, in violation of Texas law. The maximum statutory civil penalty for this is $1000 per day, which led to the multimillion-dollar penalty awarded here. (( In a strange symmetry, the lease contract also had a “per day” penalty. An optometrist who failed to adhere to the agreed hours might be subjected, under the lease terms, to $200 per day in liquidated damages. ))
The panel has issued a new opinion further explaining the tension it sees in this area of Texas law. The panel’s original opinion had concluded that these statutory civil penalties could not be imposed unless a plaintiff also met the more general requirements of Chapter 41 covering exemplary damages. Here, the plaintiffs did not attempt to show damages flowing from specific injuries but, instead, focused only on civil penalties. The panel originally held that this was barred under Chapter 41, which bars “exemplary damages” disconnected from at least some actual damages.That opinion has now been withdrawn. In its new opinion certifying this question to the Texas Supreme Court, the panel suggests two paths that might lead to the opposite result. First, it speculates that a plaintiff’s claim for civil penalties alone might not be a claim for “damages” that would fit within Chapter 41. Second, it speculates that perhaps statutory civil penalties are not “exemplary damages” within the meaning of Chapter 41.I would expect the Texas Supreme Court to accept the certified questions and hear oral argument this fall.H/T: David Coale’s 600 Camp blog, which also covered the earlier opinion in this case in August: “Civil penalties capped at — zero”.