Knowledge is power

Statutes that demand “actual knowledge” in order to hold a defendant liable can be the bane of a plaintiff’s lawyer’s existence.  What prompted this particular thought was the Fourteenth Court of Appeals’ decision in Oiltanking Houston v. Delgado, a wrongful death case stemming from a plant explosion.  Javier Delgado died when hydrocarbons inside a pipe he was welding exploded.  At the time, Delgado was a contractor hired by the owner of an oil storage facility near the Houston ship channel.  Delgado’s family sued and won a multi-million dollar judgment.

That judgment was based on three different factual theories–negligent undertaking, premises liability, and negligent activity.  A negligent undertaking means you set out to do something that you didn’t necessarily have a duty to do and did it badly. Premises liability means there was a defect on your property that you needed to either fix or warn about. And negligent activity means you did something carelessly.  In all three instances, someone got hurt.

Now I’ve written before about how Texas law protects industrial landowners a great deal, and the Texas Supreme Court has reinforced that protection a number of times in the last year.  The Fourteenth Court’s Delgado decision was largely driven by the high court’s holding in Abutahoun v. Dow Chemical, last year. Abutahoun interpreted Chapter 95 of the Texas Civil Practice and Remedies Code, a statute that protects landowners from suits by contractors that “arise from the condition or use of an improvement to real property where the contractor or sub-contractor constructs, repairs, renovates, or modifies the improvement.”  Based on that language, you’d think Chapter 95 is mostly just about premises conditions (and thus, premises liability), but the high nine held otherwise in Abutahoun.  Reasoning that it doesn’t really matter what you call a claim if it stems from an improvement to the property, SCOTX held that Chapter 95 applies to negligent activity, as well. It was the “or use” language of “condition or use” that decided it.  The Fourteenth cited this in Delgado, and it was bad news for the plaintiff.

Because Chapter 95 permits liability against a landowner only when there is “actual knowledge” of a danger on the premises, and, despite a record showing that Oiltanking Houston–the landowner in question–was just about as sloppy as sloppy could be, there was no evidence that it actually knew there were hydrocarbons still in the pipe Delgado was welding.  The evidence showed that Oiltanking knew what had been pumped through the pipe within a day of Delgado’s work, that a supervisor for Oiltanking issued a “hot work permit” certifying that the site of Delgado’s work was safe without inspecting it, and that the equipment cited by Oiltanking as showing that the site was safe demonstrated it hadn’t even been used that day until over an hour after the explosion.  Based on what the Court cited, it’s not hard to see why a jury would slam Oiltanking pretty hard.  But even so, the Court held that it was no evidence of “actual knowledge.”  And that decided the case.

As difficult as it often is to show actual knowledge of just about anything in an industrial environment, SCOTX’s broadened application of Chapter 95 would seem to bar just about any action brought by a contractor against an industrial or business landowner.  But a ray of hope may exist in Abutahoun and in a much-criticized and marginalized opinion from the Fourteenth Court, itself, and authored by Justice Jeffrey Brown, then of the Fourteenth, now of the Texas Supreme Court.

In Abutahoun, the Supreme Court took pains to note that Chapter 95’s limitation on liability does not apply to all negligence claims an injured contractor may assert. When a claim does not “arise from a condition or use of an improvement to real property where the contractor or subcontractor modifies the improvement,” Chapter 95 does not apply.  The issue hinges on how broadly “improvement” is defined.  If a contractor working on any part of a structure is said to be modifying the “improvement” that is the entire structure, Chapter 95’s applicability will be extremely broad and likely bar any action. But if the “improvement” is narrowly defined–say, the air conditioning unit that a contractor is repairing, instead of the entire building where it is housed–the applicability will be much smaller.

It is an issue that Justice Brown–in a one-man “plurality” opinion–addressed in the case of Hernandez v. Brinker International, adopting the narrower view of an “improvement,” some seven years ago.  The case has been widely criticized by other courts as out of step with the law, but, given the trend of Supreme Court jurisprudence, Justice Brown’s opinion may just have been prescient and may demand another look. Indeed, it may be the only way contractors can bring any sort of claim successfully, in future. But, if Justice Brown was wrong–and SCOTX has not said anything definitive, either way–the current state of the law does virtually nothing to encourage safe practices.