Court Reverses “Death Penalty Sanctions” Against WC Subscriber

The Dallas court of appeals has ordered the reversal of the judgment of a trial court that had ordered the imposition of “death penalty sanctions” against a subscribing employer under the Texas Workers’ Compensation Act.

In In Re: JH Walker Inc., 05-14-01497-CV (Tex. App.—Dallas, Jan. 15, 2016, pet. filed), the court considered a case in which Derwin Scott Graham had been driving an eighteen-wheeler within the course and scope of his employment with Walker Trucking, when the tractor-trailer travelled off the road into a ditch and hit a concrete cistern. Graham died in the accident.
Graham’s children and their mother filed suit against Walker Trucking alleging negligent maintenance of the tractor and gross negligence. The beneficiaries also alleged Walker Trucking intentionally and purposefully destroyed the tractor and some maintenance records immediately after the incident in an attempt to hide and eliminate evidence. They sought wrongful death damages, survival damages, and punitive damages.

Walker Trucking filed a traditional and no evidence motion for partial summary judgment in which it argued the beneficiaries could not maintain claims for wrongful death and survival damages because Walker Trucking was a workers’ compensation subscriber. Thus, it alleged the beneficiaries could recover punitive damages only upon a showing of Walker Trucking’s intentional act or omission or gross negligence. The trial court granted Walker Trucking’s motion for partial summary judgment because “Walker Trucking had a valid worker’s compensation policy covering decedent Derwin Scott Graham in full force and effect on the date of the accident and is therefore entitled to the benefits and protections of Tex. Lab.Code § 408.001.”

Later, the beneficiaries filed a motion for sanctions against Walker Trucking for spoliation of evidence and asked the court to award the fullest extent of sanctions allowed under statutory and common law, including striking Walker Trucking’s pleadings and defenses.

Ultimately, the trial court signed a spoliation order against Walker Trucking that struck Walker Trucking’s pleadings, vacated the partial summary judgment rendered in favor of Walker Trucking as to its workers’ compensation defense, and rendered default judgment on liability as to the beneficiaries’ negligence and gross negligence claims. Walker Trucking sought to vacate the trial court’s sanctions order through a petition for writ of mandamus to the court of appeals.
Walker Trucking contended that it had no duty to preserve the truck because it believed any negligence or related claims would be paid by its workers’ compensation insurance policy, and at the time it destroyed the tractor, it had no reason to believe it might be accused of gross negligence. The court rejected the argument:

However, a subjective belief that it is not liable does not relieve a party of its duty to preserve evidence; rather, we apply an objective standard in making the determination whether a party should have reasonably anticipated litigation. See Brookshire Bros., 438 S.W.3d at 20 (applying a “reasonable person” standard to duty determination); see also IQ Holdings, Inc. v. Stewart Title Guar. Co., 451 S.W.3d 861, 868 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (concluding insurer’s subjective belief that no substantial chance of a lawsuit existed because relatively few claim denials resulted in litigation each year did not relieve its duty to preserve evidence). Thus, Walker Trucking’s subjective belief that any claims brought would be compensable under only the workers’ compensation statute is irrelevant.

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Thus, while we agree some of the trial court’s findings are not supported by evidence, we nevertheless conclude based on the record as a whole, Walker Trucking had a duty to preserve the tractor. Specifically, because of the severity of the crash, Walker’s years of experience in the industry, his previous dealings with obtaining police reports, and his awareness to preserve the ECM, an objective party in Walker Trucking’s position would know or “reasonably should know that there is a substantial chance that a claim will be filed and that evidence in its possession or control will be material and relevant to that claim.” Brookshire Bros., 438 S.W.3d at 20. Under these facts, litigation was “more than merely an abstract possibility or unwarranted fear.” Id. As such, Walker Trucking had a duty to preserve the tractor.

Next, the court considered whether the trial court had abused its discretion by striking Walker Trucking’s defense under the workers’ compensation statute and entering a default judgment as to its liability for negligence. The court found that the trial court erred in striking the employer’s exclusive remedy defense.

Texas Labor Code section 408.001(a) provides that “Recovery of workers’ compensation benefits is the exclusive remedy of an employee covered by workers’ compensation insurance coverage . . . for the death of or a work-related injury sustained by the employee.” TEX. LABOR CODE ANN. § 408.001(a). However, the statute does not prohibit the recovery of exemplary damages by the surviving spouse or heirs of a deceased employee whose death was caused by “an intentional act or omission of the employer or by the employer’s gross negligence.” Id. § 408.001(b). Thus, the only cause of action Graham may seek against Walker Trucking is gross negligence, as the statute specifically bars negligence claims.

The remedial purpose underlying the imposition of a spoliation remedy is to “restore the parties to a rough approximation of their positions if all evidence were available.” Brookshire Bros., 438 S.W.3d at 21; Wal-Mart Stores, 106 S.W.3d at 721. Here, the trial court has put Graham in a better position by allowing her to pursue a cause of action to which she is not statutorily entitled. By denying Walker Trucking the protections of the workers’ compensation defense and deeming it liable for negligence, the trial court provided Graham with a remedy the legislature has explicitly barred. As such, the trial court’s sanction is excessive.

Finally, with regard to the gross negligence claim, which is not barred by the exclusive remedy doctrine, the court of appeals concluded that the trial court erred in failing to consider the availability of lesser sanctions, and “in all but the most exceptional cases, actually test the lesser sanction.” The court of appeals conditionally granted Walker Trucking’s petition for writ of mandamus and ordered the trial court to vacate it’s sanction order and consider appropriate sanctions only in the gross negligence case against the employer.