The State of Texas, appearing by and through the Office of the Attorney General, Consumer Protection and Public Health Division, Public Agency Representation Section; and Cities of Dickinson, Friendswood, La Marque, League City, Lewisville and et al. v. Public Utility Commission of Texas, represented by the Office of the Attorney General, Natural Resources Division; and Texas Industrial Energy Consumers , No. 03-06-00503-CV (Tex.App.- Austin Jan. 25, 2008)(Opinion by Justice Patterson) (Before Justices Patterson, Pemberton and Waldrop)
FROM THE DISTRICT COURT OF TRAVIS COUNTY, 53RD JUDICIAL DISTRICT
NO. D-1-GN-05-003499, HONORABLE SCOTT H. JENKINS, JUDGE PRESIDING
O P I N I O N BY JUSTICE PATTERSON
This appeal arises from the district court's judgment affirming the final order of the Public Utility Commission in the true-up proceeding to finalize "stranded costs" for Texas-New Mexico Power Company, First Choice Power, Inc., and Texas Generating Company, L.P. (collectively "TNMP") under section 39.262 of the Public Utility Regulatory Act ("PURA") (1) and PUC Substantive Rule 25.263. Because we conclude the Commission's final order was consistent with the plain language of the relevant statutes and was supported by substantial evidence, we affirm the judgment of the district court affirming the Commission's final order.
FACTUAL AND PROCEDURAL BACKGROUND
In 1999, the legislature enacted Senate Bill 7 ("SB 7"), which amended the PURA to restructure and partially deregulate the Texas retail electric power industry. See Act of May 27, 1999, 76th Leg., R.S., ch. 405, 1999 Tex. Gen. Laws 2543; see also CenterPoint Energy Houston Electric, LLC v. Gulf Coast Coalition of Cities, No. 03-05-00557-CV, 2007 Tex. App. LEXIS 9919, at *3-*18 (Tex. App.--Austin Dec. 20, 2007, no pet. h.) (describing statutory framework for transition to competitive retail electric market) (hereafter "CenterPoint"). As part of the transition from regulation to retail competition, the legislature authorized each electric utility to recover "all of its net, verifiable, nonmitigable stranded costs incurred in purchasing power and providing electric generation service." Tex. Util. Code Ann. § 39.252(a) (West 2007). The term "stranded costs" is defined in section 39.251 of the PURA (2) but, generally speaking, stranded costs represent prudently incurred expenditures made by the utilities in a regulated environment--previously recoverable over time through regulated rates paid by consumers--that have become unrecoverable in a competitive market. See Reliant Energy, Inc. v. Public Util. Comm'n, 101 S.W.3d 129, 132 (Tex. App.--Austin 2003), rev'd on other grounds, CenterPoint Energy, Inc. v. Public Util. Comm'n, 143 S.W.3d 81 (Tex. 2004) (op. on reh'g). Recovery of stranded costs is one of the final steps in the transition from traditional cost-of-service regulation to retail competition.
TNMP filed an application with the Commission seeking to recover $266,487,442 in total stranded costs. TNMP also sought recovery of $106,573,973 for the capacity auction true-up. See Tex. Util. Code Ann. §§ 39.153, .262(d) (West 2007). As a preliminary matter, the Commission determined that TNMP was not entitled to a capacity auction true-up as a matter of law. See id. § 39.153; PUC Subst. R. 25.381(d). (3) Thereafter, the Commission referred TNMP's application to the State Office of Administrative Hearings for a contested case hearing.
After conducting a hearing and reviewing the evidence submitted by the parties, the administrative law judges issued a proposal for decision on May 28, 2004, including findings of fact and conclusions of law. The Commission adopted the PFD in part and modified the ALJs' findings with respect to the following issues: 1) whether the sale of TNP One--TNMP's sole generating plant--was a bona fide, third-party transaction under a competitive offering; (4) 2) whether TNMP pursued commercially reasonable efforts to mitigate stranded costs; 3) the gross-up of stranded-cost disallowances; and 4) the interest rate for calculating carrying costs on TNMP's final fuel balance.
The Commission rejected the ALJs' recommendation and determined that TNMP's sale of its TNP One generating plant was not a bona fide, third-party transaction under a competitive offering within the meaning of section 39.262(h) of the PURA. The Commission concluded that TNMP failed to comply with section 39.262(h) and failed to carry its burden of proving the market value of TNP One. Based on the evidence in the record, the Commission determined that the market value of TNP One was $180 million. The Commission used this market value to determine what it referred to as TNMP's primary stranded cost balance.
Alternatively, the Commission found that, even if it accepted the ALJs' recommendation that TNMP's sale of TNP One was a bona fide, third-party transaction under a competitive offering within the meaning of section 39.262(h), TNMP failed to use commercially reasonable means to mitigate its stranded costs as required under section 39.252(d). Under this alternative finding, the Commission adopted the ALJs' proposed market valuation of TNP One and the ALJs' proposed adjustments, with modifications, to TNMP's book value to reflect the lack of commercial reasonableness. Using this approach, the Commission determined what it referred to as TNMP's alternative stranded cost balance.
Less than two months after the Commission rendered its final order, the Texas Supreme Court issued its opinion in CenterPoint Energy, Inc. v. Public Utility Commission, 143 S.W.3d 81 (Tex. 2004) (hereafter "CenterPoint Energy"). In its opinion, the supreme court held that interest on stranded costs must accrue from January 1, 2002, not from the date of the utility's final true-up case as provided in PUC Substantive Rule 25.263(l)(3). Id. at 84. Accordingly, the Commission granted rehearing and remanded the case to SOAH for the ALJs to recalculate and quantify the interest due TNMP in light of the supreme court's opinion.
The ALJs issued a Remand PFD on March 11, 2005, and recommended interest in the amount of $41,736,027 on the Commission's primary stranded cost balance and $45,304,441 on the Commission's alternative stranded cost balance. In its final order, entitled "Second Order on Rehearing," the Commission adopted the Remand PFD in part, modified the ALJs' findings with respect to the appropriate interest rate to be applied to TNMP's stranded cost balance, and recalculated the total interest due TNMP.
After recalculating the interest amount due, the Commission approved a primary stranded cost balance of $128,820,365. This amount was further offset by TNMP's final fuel balance of $41,504,474 and carrying costs on the additional TNP One depreciation, plus interest due on stranded costs of $39,166,214. The net amount of stranded cost recovery authorized by the Commission was $110,603,855. (5)
Several parties sought judicial review in the Travis County District Court of the Commission's Second Order on Rehearing as permitted under section 2001.171 of the Administrative Procedure Act. See Tex. Gov't Code Ann. § 2001.171 (West 2000). The district court consolidated all of these appeals into one proceeding and rendered judgment affirming the Commission's order in all respects on July 24, 2006. TNMP, as well as the Cities of Dickinson, Friendswood, La Marque, League City, and Lewisville (collectively "Cities"), and the State of Texas, on behalf of all state entities and institutions that are electricity consumers ("State Agencies"), appeal from the district court's judgment.
DISCUSSION
On appeal, the parties raise various issues challenging the Commission's final order. The Cities and State Agencies argue that the Commission erred in determining the market value of TNMP's assets when TNMP failed to carry its burden of proof on this issue. (6) In two additional issues, the Cities argue that the Commission erred in failing to effectuate TNMP's prior agreement to reduce stranded costs and in calculating the interest owed on TNMP's final true-up balance. For its part, TNMP raises three issues on appeal, arguing that the Commission erred in denying TNMP's capacity auction true-up, in "grossing up" disallowances for alleged federal income tax benefits, and in reducing the net book value of TNMP's assets for investment tax credits. The Commission responds that there was no error in its final order and the order was supported by substantial evidence.
Standard of Review
In their challenges to the Commission's final order, the parties have raised a variety of issues, which we review under different standards of review. We briefly summarize these different standards. As a general matter, we review the Commission's final order under the substantial evidence rule. See Tex. Util. Code Ann. § 15.001 (West 2007); Tex. Gov't Code Ann. § 2001.174 (West 2000). Under the substantial evidence rule, we give significant deference to the agency in its field of expertise. Railroad Comm'n v. Torch Operating Co., 912 S.W.2d 790, 792 (Tex. 1995); Texas Health Facilities Comm'n v. Charter Med.-Dallas, Inc., 665 S.W.2d 446, 452 (Tex. 1984). We presume that the agency's order is valid and that its findings, inferences, conclusions, and decisions are supported by substantial evidence. City of El Paso v. Public Util. Comm'n, 883 S.W.2d 179, 185 (Tex. 1994); Charter Med., 665 S.W.2d at 452. The complaining party has the burden to overcome this presumption. City of El Paso, 883 S.W.2d at 185; Hammack v. Public Util. Comm'n, 131 S.W.3d 713, 725 (Tex. App.--Austin 2004, pet. denied). In conducting a substantial evidence review, we evaluate the entire record to determine whether the evidence as a whole is such that reasonable minds could have reached the conclusion the agency must have reached in order to take the disputed action. Texas State Bd. of Dental Exam'rs v. Sizemore, 759 S.W.2d 114, 116 (Tex. 1988); Suburban Util. Corp. v. Public Util. Comm'n, 652 S.W.2d 358, 364 (Tex. 1983). We may not substitute our judgment for that of the agency on the weight of the evidence on questions committed to the agency's discretion. Tex. Gov't Code Ann. § 2001.174; Charter Med., 665 S.W.2d at 452; H.G. Sledge, Inc. v. Prospective Inv. & Trading Co., 36 S.W.3d 597, 602 (Tex. App.--Austin 2000, pet. denied).
Under a substantial evidence review, the issue for the reviewing court is not whether the agency's decision was correct, but whether the record demonstrates some reasonable basis for the agency's action. Charter Med., 665 S.W.2d at 452; Central Power & Light Co. v. Public Util. Comm'n, 36 S.W.3d 547, 561 (Tex. App.--Austin 2000, pet. denied). The evidence in the record may preponderate against the decision of the agency and nevertheless amount to substantial evidence. Charter Med., 665 S.W.2d at 452; Meier Infinity v. Motor Vehicle Bd., 918 S.W.2d 95, 98 (Tex. App.--Austin 1996, writ denied). We will sustain the agency's order if the evidence is such that reasonable minds could have reached the conclusion that the agency must have reached in order to justify its action. Charter Medical, 665 S.W.2d at 453; Suburban Util. Corp., 652 S.W.2d at 364. We will reverse the agency's order if the decision is not reasonably supported by substantial evidence, in violation of a constitutional or statutory provision, in excess of the agency's statutory authority, made through unlawful procedure, affected by other error of law, arbitrary or capricious, or characterized by an abuse of discretion. See Tex. Gov't Code Ann. § 2001.174(2)(A)-(F).
Several issues raised by the parties involve questions of statutory construction, which we review de novo. When construing a statute, our primary goal is to determine and give effect to the legislature's intent. City of San Antonio v. City of Boerne, 111 S.W.3d 22, 25 (Tex. 2003). To determine legislative intent, we look to the statute as a whole, as opposed to isolated provisions. State v. Gonzalez, 82 S.W.3d 322, 327 (Tex. 2002). We begin with the plain language of the statute at issue and apply its common meaning. City of San Antonio, 111 S.W.3d at 25. Where the statutory text is unambiguous, we adopt a construction supported by the statute's plain language, unless that construction would lead to an absurd result. Fleming Foods of Tex., Inc. v. Rylander, 6 S.W.3d 278, 284 (Tex. 1999). We give serious consideration to an agency's interpretation of the statutes it is charged with enforcing, so long as that interpretation is reasonable and consistent with the statutory language. Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex. 1993); Steering Comms. for the Cities Served by TXU Elec. v. PUC, 42 S.W.3d 296, 300 (Tex. App.--Austin 2001, no pet.). This is particularly true when the statute involves a complex subject matter. Steering Comms. for Cities, 42 S.W.3d at 300. Courts, however, "do not defer to administrative interpretation in regard to questions which do not lie within administrative expertise, or deal with a nontechnical question of law." Rylander v. Fisher Controls Int'l, Inc., 45 S.W.3d 291, 302 (Tex. App.--Austin 2001, no pet.).
Additionally, several issues raised by the parties challenge the Commission's authority. The Public Utility Commission "is a creature of the Legislature and has no inherent authority." Public Util. Comm'n v. GTE-SW Corp., 901 S.W.2d 401, 407 (Tex. 1995). Like other state administrative agencies, the Commission "has only those powers that the Legislature expressly confers upon it" and "any implied powers that are necessary to carry out the express responsibilities given to it by the Legislature." Public Util. Comm'n v. City Pub. Serv. Bd., 53 S.W.3d 310, 316 (Tex. 2001). It is not enough that the power claimed by the Commission be reasonably useful to the Commission in discharging its duties; the power must be either expressly conferred or necessarily implied by statute. The agency may not "exercise what is effectively a new power, or a power contradictory to the statute, on the theory that such a power is expedient for administrative purposes." Id.
The statutory scheme
Before addressing the issues raised by the parties, we provide a brief overview of the statutory scheme allowing for recovery of stranded costs. See also CenterPoint, 2007 Tex. App. LEXIS 9919, at *3-*18 (for discussion of statutory framework). In 1999, the legislature determined it was in the public interest to partially deregulate the electric power industry. See generally Tex. Util. Code Ann. §§ 39.001-.910 (West 2007). When the legislature mandated the transition from traditional cost-of-service regulation to retail competition, it recognized that many utility companies had made very large investments to build power generation plants and that while the costs of these power plants might be recoverable from ratepayers in a regulated environment, these same costs "might well become uneconomic and thus unrecoverable in a competitive, deregulated power market." CenterPoint Energy, 143 S.W.3d at 82; see also City of Corpus Christi v. Public Util. Comm'n, 51 S.W.3d 231, 237-38 (Tex. 2001). The legislature called these uneconomic assets "stranded costs." CenterPoint Energy, 143 S.W.3d at 82; see also Tex. Util. Code Ann. §§ 39.001(b)(2), .251(7). As part of the transition to retail competition, the legislature made an express finding that it was in the public interest to allow utility companies to recover their stranded costs. See Tex. Util. Code Ann. § 39.001(b)(2). The legislature thus "set forth a comprehensive scheme for estimating, finalizing, and recovering those costs." CenterPoint Energy, 143 S.W.3d at 83; see Tex. Util. Code Ann. §§ 39.201, .251-.254, .256-.265, .301-.313 (West 2007).
The legislature provided a mechanism in section 39.262 of the PURA for each utility to recover its stranded costs. See Tex. Util. Code Ann. § 39.262. This mechanism requires each transmission and distribution utility, its affiliated retail electric provider, and its affiliated power generation company to jointly file an application with the Commission to finalize stranded costs. (7) Id. § 39.262(c). The legislature provided a formula to calculate the utility's stranded costs. Id. § 39.251(7). Under this formula, a utility's stranded costs equal the excess amount of the net book value of generation assets minus the market value of those assets--i.e., SC = NBV - MV. Id.
Each utility has the burden of quantifying its stranded costs using one of four statutory methods. Id. § 39.262(h). These methods are sale-of-assets, stock valuation, partial stock valuation, or exchange of assets. Id. § 39.262(h)(1)-(4). TNMP chose to establish its stranded costs using the sale-of-assets method. Under this method, TNMP was required to demonstrate that it sold its generating assets in a "bona fide third-party transaction under a competitive offering." Id. § 39.262(h)(1). Once this showing has been made, the total net value realized from the sale will establish the market value of the generation assets sold. Id.
The legislature recognized, however, that during the transition from regulation to retail competition, utilities would not have a business incentive to reduce their potential stranded costs. Accordingly, the legislature provided a statutory incentive--the legislature required each utility to "pursue commercially reasonable means to reduce its potential stranded costs, including good faith attempts to renegotiate above-cost fuel and purchased power contracts or the exercise of normal business practices to protect the value of its assets." Id. § 39.252(d). The legislature also required the Commission to consider each utility's efforts to mitigate potential stranded costs when determining the utility's final stranded cost balance. Id. In addition, the legislature required the Commission to ensure that each utility does not overrecover stranded costs. Id. § 39.262(a); see also CenterPoint Energy, 143 S.W.3d at 98-99. With this statutory scheme in mind, we turn to the parties' complaints regarding the Commission's determination of
TNMP's stranded costs.
The Commission's determination of TNMP's stranded costs
Through various issues asserted on appeal, the parties raise two general challenges to the Commission's final order. First, the Cities and State Agencies attack the Commission's determinations regarding the market value of TNMP's generation assets. Second, the Cities and TNMP challenge certain calculations and adjustments to the book value of TNMP's generation assets. In addition to these general challenges, the Cities argue that the Commission erred in its calculation of interest on TNMP's stranded cost balance. TNMP also complains that the Commission erroneously denied its capacity auction true-up and that the Commission erred in "grossing up" disallowances to capture alleged federal income tax benefits.
1. Market value of TNMP's generation assets
We turn first to the Cities' and State Agencies' arguments that the Commission erred in awarding stranded costs to TNMP because TNMP failed to prove the market value of TNP One. Specifically, the Cities and State Agencies argue that the Commission erred in devising its own valuation method to quantify TNMP's stranded costs. The State Agencies further argue that because TNMP failed to prove the market value of TNP One in a "bona fide third-party transaction under a competitive offering" as required under section 39.262(h)(1) of the PURA, the Commission was not permitted to devise an extra-statutory method of stranded cost recovery and, in doing so, the Commission violated the parties' due process rights. Because we conclude the Commission acted within its statutory authority in determining the market value of TNMP's generation assets, we reject the Cities' and State Agencies' contentions.
Chapter 39 provides four specific methods that a utility may choose from to establish the market value of its generation assets. See Tex. Util. Code Ann. § 39.262(h). TNMP chose to use the "sale-of-assets" method under section 39.262(h)(1). See id. § 39.262(h)(1). Under the sale-of-assets method, the market value is defined as the total value realized from a sale if, any time after December 31, 1999, the utility sells some or all of its generation assets in a "bona fide third-party transaction under a competitive offering." Id. Having sold its only generation asset, TNP One, to Sempra Energy Resources, TNMP asserted that the $120 million sales price of TNP One established the market value of its generation assets as required in section 39.262(h)(1). The ALJs agreed with TNMP that the sales price of TNP One established the market value of that asset as required under the statute, but the Commission disagreed. The Commission concluded that TNMP failed to establish market value through the sale of TNP One because TNMP failed to prove that the sale was a "bona fide third-party transaction under a competitive offering" as required in section 39.262(h)(1). (8)
TNMP's failure to establish market value through an asset sale left the Commission with the difficult task of quantifying TNMP's stranded costs without a demonstrated, bona fide asset sale to a third party. As TNP One had been sold, it was impossible for TNMP to use another method in section 39.262(h) to value the plant. The Commission concluded, however, that denying all recovery to TNMP would be contrary to the legislature's deregulation transition plan--of which stranded cost recovery is an integral part. See Tex. Util. Code Ann. § 39.252(a) (allowing utilities to recover net verifiable, nonmitigable stranded costs). The Cities and State Agencies argue that the Commission lacked statutory authority to determine the market value of TNP One when the method selected by the utility fails to produce a proper market value. We disagree.
To determine the scope of the Commission's authority, we must read the PURA as a whole to determine the legislature's intent. State v. Public Util. Comm'n, 883 S.W.3d 190, 196 (Tex. 1994). The contemporaneous construction of a statute by the administrative agency charged with enforcing it is entitled to great weight. Id.; see also Dodd v. Meno, 870 S.W.2d 4, 7 (Tex. 1994); Tarrant Appraisal Dist., 845 S.W.2d at 823. The legislature set forth a comprehensive scheme through which it has charged the Commission with authority to determine each utility's final stranded cost balance. See generally Tex. Util. Code Ann. §§ 39.001-.910. The legislature provided that each utility "is allowed to recover all of its net, verifiable, nonmitigable stranded costs." Tex. Util. Code Ann. § 39.252(a).
In this Court's recent CenterPoint decision, we considered a similar situation. See CenterPoint, 2007 Tex. App. LEXIS 9919, at *35-*52 (discussing CenterPoint's failure to satisfy requirements of partial stock valuation method). In that case, CenterPoint attempted to establish the market value of its generation assets using the partial stock valuation method in section 39.262(h)(3). Id. The Commission determined that CenterPoint did not comply with the statutory requirements because it failed to demonstrate that at least 19% of the transferred stock had been "spun off and sold to public investors through a national stock exchange" as required in section 39.262(h)(3). Id. The Commission concluded that none of the other statutory methods could be used to determine the market value of CenterPoint's generation assets because CenterPoint did not meet the statutory requirements for any of those methods. Id. at *52-*60. Accordingly, the Commission chose to use the utilities code definition of "market value" to develop a substitute valuation method. Id. at *62-*63 (citing Tex. Util. Code Ann. § 39.251(4)). In the absence of a market valuation established under one of the prescribed methods in section 39.262(h), we upheld the Commission's implied authority to consider and use alternative methods for determining market value in order to carry out the "strong legislative mandate" of stranded cost recovery. Id. at *63-*67. In addition, we rejected claims by OPC and the customers of CenterPoint that, having failed to meet its burden of proof, CenterPoint was not entitled to any stranded cost recovery at all. Id. at *60-*62.
In this case, as in CenterPoint, the Commission determined--and none of the parties dispute--that TNMP failed to establish the market value of TNP One because it failed to meet the statutory requirements of section 39.2629(h)(1). In light of TNMP's failure to satisfy the statutory requirements, the Commission turned to the utilities code definition of "market value" in section 39.251(4) to determine the appropriate valuation of TNMP's generation assets. Section 39.251(4) defines "market value" as "the value the assets would have if bought and sold in a bona fide third-party transaction on the open market." Tex. Util. Code Ann. § 39.251(4). Based on this definition, the Commission concluded that it was proper to determine the market value TNP One would have if TNMP had initially conducted a bona fide transaction in compliance with section 39.262(h)(1).
Consistent with our decision in CenterPoint, we hold that the Commission properly considered an alternative valuation method based on the definition of market value in section 39.251(4) when TNMP failed to establish the market value of its generation assets in compliance with one of the four methods in section 39.262(h). See CenterPoint, 2007 Tex. App. LEXIS 9919, at *52-67. Likewise, we conclude that, given TNMP's failure to establish market value of TNP One using one of the four methods in section 39.262(h), the Commission did not exceed its statutory authority when it developed an alternative valuation method based on the statutory definition of market value in section 39.251(4). See id. at *62-*63.
We next consider whether the Commission's determination of market value was reasonable and supported by substantial evidence. In conducting a substantial evidence review, we must determine whether the evidence as a whole is such that reasonable minds could have reached the conclusion reached by the Commission--namely, that the market value of TNP One was $180 million. City of El Paso, 883 S.W.2d at 186; Sizemore, 759 S.W.2d at 116. The true test is not whether the agency reached the correct conclusion, but whether some reasonable basis exists in the record for the action taken by the agency. Charter Med., 665 S.W.2d at 452. When weighing the testimony, the Commission may accept or reject part or all of each witness's conclusions; it is the final judge regarding the credibility and validity of such testimony. Central Power & Light Co., 36 S.W.3d at 561; Southern Union Gas Co. v. Railroad Comm'n, 692 S.W.2d 137, 141-42 (Tex. App.--Austin 1985, writ ref'd n.r.e.).
The Commission determined that if TNMP's flawed auction process produced a sales price of
$120 million, then a bona fide sale would have produced a higher price for TNP One. The record reflects that several parties presented evidence on the value of TNP One and the sales price TNMP would have received if it had conducted a proper sale. See Tex. Util. Code Ann. § 39.251(4). In the analysis prepared by TNMP witness Patrick Bridges, and relied on by the ALJs, a recent run-up in the prices of natural gas showed an increasing value for TNP One and a potential value to bidders of approximately $174 million. The ALJs also referenced notes made by a TNMP witness, Rhonda Lenard, during the sales negotiations with Sempra where TNMP again referred to a value of $180 million for TNP One--a value that TNMP repeatedly stated it held as a reasonable value for TNP One. The record also showed that Austpro, another potential buyer for TNP One, indicated a possible bid of $188 million. Although Austpro never submitted a written bid, the Commission considered this amount to be in the upper range of prices that a bona fide sale would have produced.
Several parties also suggested alternative values for TNP One. TIEC witness, Steve Weyel, performed numerous calculations using "spark spread" discounted cash flow analysis and testified that these calculations suggested a range of $255 to $316 million. Cities witness, Lane Kollen, also provided testimony on the market value of TNP One. But these analyses also presumed a delayed sale of TNP One. The Commission rejected the testimony of Weyel and Kollen because it concluded that TNMP should not be penalized for its failure to delay the sale of TNP One. Based on the record evidence, the Commission concluded that a bona fide competitive offering would have captured the recent run-up in natural gas prices and would have produced a sales price of $180 million, net of expenses. Accordingly, the Commission determined that the appropriate market value for TNP One was $180 million.
The record before the Commission was extensive, and the Commission had ample evidence on which to base its determination of market value. The evidence regarding the market value of TNP One suggested a valuation between $174 million and $316 million. We conclude that the record contains substantial evidence to support a market value for TNP One within the range of evidence before the Commission. Given the admitted complexity of determining the market value of TNP One and the deference owed to the Commission in its area of expertise, we hold that there is a reasonable basis for the Commission, in its discretion, to select a market value for TNP One within the range of evidence presented by the parties. See City of El Paso, 883 S.W.2d at 186 (affirming agency decision to select value within range of evidence in the record). We conclude that the Commission's market valuation of TNP One is supported by substantial evidence. We further conclude that the Commission's determination of market value was consistent its statutory authority under the PURA and that the Commission did not create an extra-statutory method of stranded cost recovery. We overrule the Cities' first issue and the State Agencies' issues 1A and 1B.
2. Due Process
The State Agencies further allege that the Commission's creation of an extra-statutory method of stranded cost recovery violates Due Process. Having determined that the Commission did not exceed its statutory authority or create an extra-statutory method of stranded cost recovery, we reject the State Agencies claim that the Commission violated Due Process. We overrule the State Agencies' issue 1C.
3. Adjustments to Book Value
A) Accelerated depreciation
In their second issue, the Cities argue that the Commission failed to effectuate TNMP's prior agreement to reduce stranded costs. This issue arises from TNMP's agreement in a previous proceeding before the Commission to apply accelerated depreciation to the book value of TNP One as a means to reduce stranded costs. See Application of Texas-New Mexico Power Company for Approval of a Transition Plan and Statement of Intent to Decrease Rates, Docket No. 17751 (Tex. Pub. Util. Comm'n Nov. 4, 1998) (order on reh'g). Because we conclude the Commission's reduction to the net book value of TNP One by $19,340,031 for accelerated depreciation was reasonable and supported by substantial evidence, we reject the Cities' argument.
To understand the Cities' argument on this issue, it is necessary to examine the Commission's prior order and the stipulation agreed to by TNMP. In 1997, in anticipation of deregulation, TNMP filed an application with the Commission in Docket No. 17751 seeking approval of TNMP's plan to transition to a deregulated electric market. See id. The parties in that proceeding reached a stipulated agreement on TNMP's transition plan and submitted that stipulation to the Commission for approval. The Commission incorporated the stipulation as part of the transition plan approved in its final order. See id. Under the transition plan approved by the Commission in Docket No. 17751, TNMP was to apply a total of $75 million in accelerated depreciation to the book value of TNP One--$15 million per year from 1999 through 2002, plus an additional $15 million--to reduce stranded costs:
In addition to normal depreciation, TNMP shall recover additional depreciation on TNP One in the amount of $15,000,000 each year for the years 1999-2002. In addition, TNMP shall record additional depreciation on TNP One of up to a total cumulative amount of $15,000,000 over the years 1998-2002, based on the amount available and calculated pursuant to the earnings sharing mechanism approved in this Order.
Id.
After the Commission approved TNMP's transition plan in Docket No. 17751, the legislature passed SB 7, which deregulated the retail electric market. Chapter 39 of the utilities code differed from the stipulation agreed to by TNMP in Docket No. 17751. One of the primary differences was that retail competition began in 2002, not 2003 as contemplated by the stipulation. See Tex. Util. Code Ann. § 39.001(b)(1) (implementing customer choice on January 1, 2002). Over the ensuing years, the Commission dealt with several proceedings trying to reconcile the promises made by TNMP in Docket No. 17751 with Chapter 39. (9) In this final stranded cost true-up proceeding, the Commission again faced the need to reconcile the stipulation and transition plan approved in Docket No. 17751 with the requirements in Chapter 39.
The issue for the Commission in this case was how to reconcile TNMP's promises to apply accelerated depreciation in the transition plan with the requirement in section 39.261(c)(2) of the PURA to apply excess earnings from 1999-2001 to reduce the net book value of generation assets. See id. § 39.261(c)(2). The record reflects that TNMP had excess earnings of $40,659,969 for 1999-2001 and did not book the accelerated depreciation required under the stipulation and transition plan for these years. Based on TNMP's stipulation in Docket No. 17751, the Commission determined that TNMP should apply a total of $60 million in accelerated depreciation to reduce the net book value of TNP One, thereby reducing its stranded costs. (10) The Commission observed that if TNMP had actually booked the accelerated depreciation as required under the stipulation and transition plan approved in Docket No. 17751, TNMP would not have had $40.6 million in excess earnings for 1999-2001. Accordingly, the Commission subtracted the $40.6 million in excess earnings that TNMP already applied to reduce its stranded costs from the $60 million total, leaving $19,340,031 in additional depreciation for TNMP to apply to the net book value of TNP One. This is the adjustment that the Commission made to the net book value of TNP One.
Section 39.252(a) allows a utility to recover "all of its net, verifiable, nonmitigable stranded costs." Tex. Util. Code Ann. § 39.252(a). However, the legislature imposed a statutory duty on each utility to pursue commercially reasonable means to reduce its potential stranded costs. Id. § 39.252(d). In addition, for those utilities identified as having positive stranded costs in the Commission's 1998 ECOM Report (11) to the Texas Senate Interim Committee on Electric Restructuring, the legislature required those utilities to take additional steps to reduce the net book value of, or "accelerate" the recovery of, stranded costs by returning excess earnings to their Texas customers. Id. §§ 39.254, .257. Under section 39.254, these excess earnings "shall be applied to the net book value of generation assets." Id. § 39.254. Because TNMP was one of the utilities identified as having positive stranded costs in the 1998 ECOM Report, TNMP was required to apply its excess earnings from annual reports to reduce the net book value of its generation assets. Id.
The legislature charged the Commission with enforcing the utilities' obligations to mitigate stranded costs. In section 39.252(a), the legislature expressly provided that a utility "may not be permitted to overrecover stranded costs." Id. § 39.262(a). Thus, the Commission was required to ensure that TNMP properly applied its excess earnings to reduce the net book value of its generation assets.
The Cities complain that the Commission should not have offset TNMP's obligation to apply $60 million in accelerated depreciation with TNMP's excess earnings mitigation because there is no connection between TNMP's prior agreement to apply accelerated depreciation in Docket No. 17751 and the excess earnings mitigation requirement in Chapter 39 of the PURA. See id. §§ 39.254, .257, .261. Given the Commission's obligation to ensure that TNMP complies with its own obligation to apply excess earnings to reduce net book value and does not overrecover stranded costs, we agree with the Commission that this offset was reasonable and necessary to avoid "double counting."
The record reflects that the Commission's order in Docket No. 17751 required it to reconcile TNMP's promise to apply accelerated depreciation as a means to reduce stranded costs with the legislature's deregulation plan in Chapter 39 of the PURA. The record further reflects that if TNMP had booked the accelerated depreciation required under the stipulation and transition plan approved in Docket No. 17751, TNMP would not have had $40.6 million in excess earnings with which it could have further mitigated stranded costs as required under section 39.254 of the PURA. We therefore conclude that the Commission's decision to offset TNMP's promise to reduce stranded costs by $60 million with TNMP's $40.6 million in excess earnings for 1999-2001 was reasonable and comports with the Commission's obligation to ensure that TNMP applies its excess earnings to reduce net book value and does not overrecover stranded costs. See Tex. Util. Code Ann. §§ 39.254, .252(a), (d), .262(a); see also In re Entergy, 142 S.W.3d 316, 324 (Tex. 2004) (Commission has exclusive jurisdiction to adjudicate disputes arising from agreements incorporated into Commission orders); Public Util. Comm'n v. Southwestern Bell Tel. Co., 960 S.W.2d 116, 119-20 (Tex. App.--Austin 1997, no pet.) (Commission has discretion to formulate and award remedy necessary to effectuate parties' agreement). We overrule the Cities' second issue.
B) Investment Tax Credits
In its third issue, TNMP claims that the Commission erred in reducing TNMP's net book value by $6,490,000 for investment tax credits. TNMP claims that the Commission lacked authority to make this reduction because section 39.251(7) of the PURA--the section defining stranded costs--fails to reference investment tax credits. Because we conclude the Commission's treatment of investment tax credits was proper, we reject TNMP's claim.
Like accelerated depreciation, Congress created investment tax credits to spur economic development. See, e.g., Central Power & Light Co. v. Bullock, 696 S.W.2d 30, 31 (Tex. App.--Austin 1984, no writ); see generally Application of Normalization Accounting Rules to Balances of Excess Deferred Income Taxes and Accumulated Deferred Investment Tax Credits of Public Utilities Whose Generation Assets Cease to be Public Utility Property, 68 Fed. Reg. 10190 (IRS Mar. 4, 2003). Businesses were given tax credits for making certain capital investments. Bullock, 696 S.W.2d at 31. Such credits were viewed as benefits to the utility that must ultimately be passed on to ratepayers. See id. at 32. Because Congress wanted to ensure that public utilities would have those sums to invest, the IRS required each public utility to segregate investment tax credits into a separate account for regulatory purposes. See Application of Normalization Accounting Rules, 68 Fed. Reg. at 10191. In a process called "normalization," the IRS further required that the credit amounts be amortized for return to ratepayers over the life of the asset. (12) See id. at 10191-92.
The record reflects, at the time it filed for stranded cost recovery, TNMP held slightly more than $15 million in its investment tax credit account. The Commission concluded that this amount represented benefits received by TNMP that had yet to be passed on to ratepayers. Cities witness, Kollen, testified that TNMP's stranded costs should be reduced by the entire amount of TNMP's investment tax credit account. In contrast, Commission staff witness, Darryl Tietjen, testified that TNMP's stranded costs should only be reduced by the present value of TNMP's investment tax credit balance, or $6.49 million. The Commission adopted Tietjen's recommendation and reduced the book value of TNP One accordingly.
TNMP argues that the Commission lacked authority to make this reduction because nothing in the definition of stranded costs references "investment tax credits." See Tex. Util. Code Ann. § 39.251(7). TNMP further argues that the Commission erred in relying on section 36.059 of the PURA to support its reduction because that section does not apply to this stranded cost true-up proceeding. See id. § 36.059. Accordingly, TNMP maintains there is no legal basis in the PURA to support the Commission's reduction to book value for investment tax credits. We disagree.
In directing the Commission to finalize and determine each utility's stranded cost balance, the legislature provided that the utility shall only recover its "net, verifiable, nonmitigable stranded costs." Id. § 39.252(a). The legislature further provided that a utility shall not overrecover its stranded costs. Id. § 39.262(a). Cities witness, Kollen, testified that allowing TNMP to retain investment tax credits would allow TNMP to overrecover stranded costs. (13) Based on this testimony and the legislative mandate that utilities shall not overrecover stranded costs, we conclude that the Commission acted within its authority under Chapter 39 of the PURA to reduce the net book value of TNMP's generation assets by the present value of TNMP's investment tax credit account. We also conclude that the Commission's decision is supported by substantial evidence. (14) See id. § 39.262(a); Charter Med., 665 S.W.2d at 452; Central Power & Light, 36 S.W.3d at 561. We overrule TNMP's third issue.
4. Interest
In their third issue, the Cities dispute the Commission's calculation of interest on TNMP's final stranded cost balance. The Cities argue that the Commission acted arbitrarily and capriciously in applying different interest rates to TNMP's final fuel balance and final stranded cost balance. As a result of this alleged discrimination, the Cities argue that the Commission has allowed TNMP to overrecover stranded costs in violation of section 39.262 of the PURA. Because we conclude that the Commission's application of different interest rates to TNMP's final fuel balance and final stranded cost balance comports with the statute and Commission rules and was supported by substantial evidence, we reject the Cities' arguments.
Less than two months after the Commission issued its final order in this case, the supreme court released its opinion in CenterPoint Energy. The supreme court invalidated part of PUC Substantive Rule 25.263--the Commission's rule governing stranded cost true-up proceedings. 143 S.W.3d at 81; see 16 Tex. Admin. Code § 25.263 (2005). Specifically, the supreme court invalidated rule 25.263(l)(3), holding that carrying charges on a utility's final stranded cost balance should be calculated from January 1, 2002--the date customer choice began--instead of from the date of the final true-up order, which could be two or more years later, as provided in the rule. 143 S.W.3d at 84. In accordance with the supreme court's decision, the Commission granted rehearing and remanded this case to SOAH for additional proceedings to determine the interest due on TNMP's final stranded cost balance.
A) Interest rate for stranded costs
The Commission's rule requires the interest rate for stranded costs to be calculated based on TNMP's weighted average cost of capital ("WACC"). See 16 Tex. Admin. Code § 25.263(l)(3)(A)(i). The record reflects that the Commission applied an interest rate of 10.93% to TNMP's final stranded cost balance. This interest rate was within the range of evidence submitted by the parties. TNMP's expert witness testified that the Commission should apply an interest rate of 11.59% to TNMP's final stranded cost balance. The Cities' expert witness, Scott Norwood, testified that the Commission should apply a rate of 8.31%. The Office of Public Utility Counsel proposed an interest rate of 9.8%. And the Commission staff recommended an interest rate of 10.93%. Because the Commission's chosen interest rate of 10.93% falls within the range of evidence submitted by the parties, we conclude that there is a reasonable basis in the record to support the Commission's application of an interest rate of 10.93%. See City of El Paso, 883 S.W.2d at 186. Thus, we conclude the Commission's chosen interest rate is supported by substantial evidence.
B) Interest rate for final fuel balance
Section 25.263(h)(4) of the Commission's true-up rule governs the interest rate to be applied to a utility's final fuel balance. (15) 16 Tex. Admin. Code § 25.263(h)(4) (2005). Section 25.263(h)(4) gives two options for the Commission to use when determining the interest rate for a utility's final fuel balance. The first option requires the Commission to use the utility's WACC when the period between the issuance of the utility's final fuel reconciliation order and the date of the final true-up order is more than one year. Under the second option, the Commission must use the short-term interest rate approved in PUC Substantive Rule 25.236 if the period between the final fuel reconciliation order and the final true-up order is one year or less.
Because the Commission issued TNMP's final fuel reconciliation order on February 11, 2004, TNMP's witness estimated that the Commission's order in the stranded cost true-up proceeding would be issued within six months and proposed using the short-term interest rate of 1.17% (16) approved in PUC Substantive Rule 25.236. Although the parties disputed the interpretation of section 25.263(h)(4), the Commission agreed with TNMP and applied the short-term interest rate of 1.17%.
The Commission's determination was based upon its interpretation of rule 25.263(h)(4). As the Commission explained in its order on rehearing,
[T]he appropriate period for determining which interest rate applies is measured from the date the Commission issues its order in the final fuel reconciliation and can therefore, be different than the actual time period to which the rate applies. Otherwise, there would have been no reason to include the words "one year or less" in the rule since the period between the end of the reconciliation period and the earliest filing of the true-up was known to be two years when the rule was written.
We defer to the Commission's interpretation of its own rule unless it is plainly erroneous or inconsistent with the language of the rule. See Public Util. Comm'n v. Gulf States Utils. Co., 809 S.W.2d 201, 207 (Tex. 1991) ("Our review is limited to determining whether the administrative interpretation is plainly erroneous or inconsistent with the regulation." (internal quotation omitted)); Gulf Coast Coalition of Cities v. Public Util. Comm'n, 161 S.W.3d 706, 712 (Tex. App.--Austin 2005, no pet.). We conclude that the Commission's interpretation of section 25.263(h)(4) comports with the plain language of the rule. Under this interpretation, the Commission properly applied the short-term interest rate to TNMP's final fuel balance. We further conclude that the Commission's decision was supported by substantial evidence.
To the extent the Cities complain that the Commission applied different interest rates to TNMP's final stranded cost balance and final fuel balance to the disadvantage of TNMP's customers, we reject that complaint. The Commission's application of different interest rates was reasonable, was supported by the record, and comports with the Commission's rules. We overrule the Cities' third issue.
5. Capacity auction true-up
In TNMP's first issue, it complains that the Commission erred in summarily denying TNMP's capacity auction true-up claim for $106 million. Prior to the evidentiary hearing in this case, the Commission issued a Supplemental Preliminary Order ruling on the threshold issue of whether TNMP was entitled to a capacity auction true-up. In this order, the Commission concluded that TNMP was not entitled to a capacity auction true-up because TNMP did not conduct a capacity auction. Because we conclude that the Commission's decision was reasonable and consistent with the relevant statutes and Commission rules, we reject TNMP's complaint.
To encourage competition in the newly emerging retail market, the legislature required utilities with more than 400 megawatts of installed generation capacity to auction off 15% of their capacity prior to January 1, 2002. See Tex. Util. Code Ann. § 39.153(a); (17)
see also CenterPoint, 2007 Tex. App. LEXIS 9919, at *126-*132 (describing capacity auction process and true-up). Because TNMP had less than 400 megawatts of installed generation capacity, TNMP was exempt from the capacity auction requirement in section 39.153. See Tex. Util. Code Ann. § 39.153(a). TNMP was the only utility to fall within the statutory exemption. (18) To prevent any utility from exercising undue market power, the legislature, in section 39.156, also required certain utilities to reduce their ownership and control of installed generation capacity and file market mitigation plans with the Commission. See id. § 39.156. One of the options available to those utilities required to reduce their capacity under section 39.156 was a capacity auction. Id. § 39.156(c)(3). As part of the final proceeding to true-up stranded costs, section 39.262(d) of the PURA required the Commission to true-up the capacity auction for each utility that auctioned capacity under section 39.153 or 39.156. Id. § 39.262(d). (19)
TNMP agrees that it was exempt from the capacity auction requirement in section 39.153 and that it did not conduct a capacity auction pursuant to either section 39.153 or 39.156. Nevertheless, TNMP argues that the legislature's use of the word "shall" in section 39.262(d) is mandatory and requires the Commission to conduct a capacity auction true-up for TNMP. We disagree.
The plain language of section 39.262(d)(2) requires the Commission to reconcile the difference between "the price of power obtained through the capacity auctions under Sections 39.153 and 39.156" and the power cost projections that were employed to estimate stranded costs in the proceeding under section 39.201. See Tex. Util. Code Ann. § 39.262(d)(2) (emphasis added). The plain language of this statute also presumes that TNMP participated in the required capacity auctions. Because TNMP did not conduct a capacity auction pursuant to section 39.153 or 39.156, the Commission concluded there was nothing to reconcile in a capacity auction true-
up for TNMP.
The Commission's interpretation of section 39.262(d) is reasonable and consistent with the plain language of the statute. Because the legislature expressly exempted TNMP from the capacity auction requirement, we are unpersuaded that the legislature intended the Commission to conduct a capacity auction true-up for TNMP. (20) We overrule TNMP's first issue.
6. "Grossing up" disallowances
In its second issue, TNMP claims that the Commission erred in "grossing up" disallowances to capture tax benefits resulting from TNMP's stranded cost recovery. (21) Because we conclude that the Commission acted within its authority under the PURA to "gross up" disallowances when calculating TNMP's stranded costs, we reject TNMP's claim. Section 39.262(c) expressly requires TNMP to file its application to finalize stranded costs with the Commission. See Tex. Util. Code Ann. § 39.262(c). TNMP does not dispute the Commission's authority to calculate TNMP's final stranded cost balance. Rather, TNMP argues that the Commission lacks discretion to make adjustments to the various components that comprise TNMP's stranded cost balance.
We disagree. The legislature expressly provided that a utility may recover all of its net, verifiable, nonmitigable stranded costs, but that a utility may not overrecover stranded costs. See id. § 39.252(a), .262(a). Thus, the Commission's authority to adjust the various components comprising TNMP's stranded cost balance is grounded in its authority to ensure that TNMP does not overrecover stranded costs. See id. § 39.262(a).
In this case, as part of its request to recover stranded costs, TNMP sought to retain its account balance for accumulated deferred federal income tax (ADFIT) to cover its tax liability on its stranded cost recovery. As the Commission explained in its final order, the ADFIT account balance reflects the regulatory expectation that TNMP would eventually recover the book value of TNP One through depreciation. During the early years of accounting for certain assets, like TNP One, the ADFIT balance grows because the regulatory tax expense paid by ratepayers exceeds the utility's actual tax expense. This trend reverses in later years when the utility's actual tax expense exceeds its regulatory tax expense, and the ADFIT account balance will ultimately reach zero. Under continuing regulation, TNMP's ADFIT account balance related to depreciation would have ultimately reached zero.
But TNMP will now recover the book value of TNP One as proceeds from the sale of that asset and as stranded costs. If the entire book value is recovered, the ADFIT account will satisfy TNMP's tax burden with respect to its stranded cost recovery and will ultimately reach zero. Where, as here, the Commission made adjustments to both the book value and market value of TNP One, TNMP will not recover the entire book value of TNP One. As a result, TNMP will not incur a tax liability on the amounts not recovered, and the ADFIT account balance will never reach zero. Stated differently, without "grossing up" the disallowances made by the Commission, TNMP will retain the remaining balance in its ADFIT account and will therefore overrecover stranded costs.
Section 39.262(a) expressly precludes TNMP from overrecovering stranded costs. Tex. Util. Code Ann. § 39.262(a). Because the Commission has disallowed recovery of certain costs associated with TNP One, TNMP will not owe federal income tax on those costs, and TNMP will not need the associated ADFIT balance. Were the Commission not to "gross up" these disallowances, TNMP would overrecover stranded costs. Given the express legislative command that a utility may not be permitted to overrecover stranded costs, see Tex. Util. Code Ann. § 39.262(a), we conclude that the Commission acted within its authority to "gross up" disallowances and thereby prevent TNMP from overrecovering stranded costs. We overrule TNMP's third issue.
CONCLUSION
Having overruled the parties' issues on appeal, we affirm the judgment of the district court affirming the Commission's final order.
__________________________________________
Jan P. Patterson, Justice
Before Justices Patterson, Pemberton and Waldrop
Affirmed
Filed: January 25, 2008
1. Tex. Util. Code Ann. §§ 11.001-64.158 (West 2007).
2. Section 39.251(7) defines the term "stranded costs" as:
the positive excess of the net book value of generation assets over the market value of the assets, taking into account all of the electric utility's generation assets, any above market purchased power costs, and any deferred debit related to a utility's discontinuance of the application of Statement of Financial Accounting Standards No. 71 ("Accounting for the Effects of Certain Types of Regulation") for generation-related assets if required by the provisions of this chapter. For purposes of Section 39.262, book value shall be established as of December 31, 2001, or the date a market value is established through a market valuation method under Section 39.262(h), whichever is earlier, and shall include stranded costs incurred under Section 39.263.
Id. § 39.251(7).
3. See also Supplemental Preliminary Order, PUC Docket No. 29206 (Public Util. Comm'n Mar. 3, 2004), available at http://interchange.puc.state.tx.us/WebApp/Interchange/Documents/ 29206_156_429330.PDF.
4. TNMP sold TNP One to Twin Oaks Power, LLP, an affiliate of Sempra Energy Resources.
5. Based on its finding that TNMP failed to take commercially reasonable steps to mitigate stranded costs, the Commission approved an alternative stranded cost balance of $139,834,457. Like the primary stranded cost balance, this amount was further offset by TNMP's final fuel balance of $41,504,474 and carrying costs on the additional TNP One depreciation, plus interest due on stranded costs of $42,514,910. The net amount of stranded cost recovery authorized by the Commission under this alternative approach was $124,966,643.
6. The Texas Industrial Energy Consumers (TIEC) support the Cities and State Agencies in this issue, but TIEC did not file a separate appeal.
7. As part of the transition to retail competition, each existing utility was required to "unbundle" the services it provided and separate its business activities into three distinct units: a power generation company, a transmission and distribution utility, and a retail electric provider. Tex. Util. Code Ann. § 39.051; see City of Corpus Christi v. Public Util. Comm'n, 51 S.W.3d 231, 237 (Tex. 2001).
8. None of the parties dispute this conclusion on appeal.
9. The Commission's final order in Docket No. 17751 expressly states that TNMP's 1998 transition plan must be reconciled with any later-enacted deregulation legislation. Application of Texas-New Mexico Power Company for Approval of a Transition Plan and Statement of Intent to Decrease Rates, Docket No. 17751 (Tex. Pub. Util. Comm'n Nov. 4, 1998) (order on reh'g).
10. The Commission did not require TNMP to apply accelerated depreciation for 2002, since retail competition began January 1st of that year.
11. Public Utility Commission of Texas, Report to the Texas Senate Interim Committee on Electric Restructuring, "Potentially Strandable Investment (ECOM) Report: 1998 Update" (Apr. 30, 1998) (hereafter "1998 ECOM Report").
12. None of the parties have raised the issue of a potential normalization violation; therefore, we do not address it. Cf. CenterPoint, 2007 Tex. App. LEXIS 9919, at *105-18 (remanding Commission's final order to consider remedy for normalization violation).
13. The Commission's reduction to TNMP's stranded costs is consistent with its previous decision in Docket 22349 in which the Commission first estimated TNMP's stranded costs. In that docket, the Commission also required TNMP to include investment tax credits as a reduction to book value and, therefore, to stranded costs.
14. In light of our determination that the Commission's reduction to book value for investment tax credits was within the Commission's authority under Chapter 39 of the PURA, we reject TNMP's complaint that the Commission erroneously relied on section 36.059.
15. Section 25.263(h)(4) provides:
The final fuel balance, as adjusted by paragraphs (2) and (3) of this subsection, shall include carrying costs on the positive or negative fuel balance equal to:
(A) the weighted-average cost of capital approved in the company's unbundled cost of service (UCOS) proceeding, if the period until the date of the final true-up order is greater than one year; or
(B) the rate approved in § 25.236 of this title (relating to Recovery of Fuel Costs) if the period until the date of the final true-up order is one year or less.
16 Tex. Admin. Code § 25.263(h)(4) (2005). This portion of the Commission's rule was not at issue in the supreme court's CenterPoint Energy decision. See generally CenterPoint Energy Inc. v. Public Util. Comm'n, 143 S.W.3d 81 (Tex. 2004) (invalidating PUC Subst. Rule 25.263(l)(3)).
16. This was the short-term interest rate as of the date TNMP filed its application to finalize stranded costs.
17. Section 39.153(a) provides:
Each electric utility subject to this section shall sell at auction, at least 60 days before the date set for customer choice to begin, entitlements to at least 15 percent of the electric utility's Texas jurisdictional installed generation capacity. For the purposes of this section, the term "electric utility" includes any affiliated power generation company that is unbundled from the electric utility in accordance with Section 39.051, but does not include any entity owning less than 400 megawatts of installed generation capacity.
Tex. Util. Code Ann. § 39.153(a) (emphases added).
18. The record reflects that, prior to the passage of SB 7, TNMP sought and obtained from the legislature an exemption from the capacity auction requirement. See Senate Special Comm. on Elec. Util. Restructuring, 76th Leg., R.S. 13 (Mar. 13, 1999) (transcript available from Senate Staff Services Office). This exemption was valuable to TNMP. In light of this exemption, TNMP did not have to participate in a capacity auction, and it was the only incumbent utility allowed to retain control of 100% of its capacity.
19. Section 39.262(d) provides:
The affiliated power generation company shall reconcile, and either credit or bill to the transmission and distribution utility, the net sum of:
(1) the former electric utility's final fuel balance determined under Section 39.202(c); and
(2) any difference between the price of power obtained through the capacity auctions under Sections 39.153 and 39.156 and the power cost projections that were employed for the same time period in the ECOM model to estimate stranded costs in the proceeding under Section 39.201.
Id. § 39.262(d).
20. To the extent TNMP relies on PUC Substantive Rule 25.281 to support its argument, we are likewise unpersuaded by that argument. It is axiomatic that an agency may not enact rules inconsistent with its statutory authority. See, e.g., Railroad Comm'n v. Lone Star Gas, 844 S.W.2d 679, 685 (Tex. 1992); State Bd. of Ins. v. Deffebach, 631 S.W.2d 794, 798 (Tex. App.--Austin 1982, writ ref'd n.r.e.). The language of the rule is consistent with the statute. Having thus concluded that section 39.262(d) of the PURA does not require the Commission to conduct a capacity auction true-up, we likewise conclude there is no requirement to do so under the Commission's rules.
21. TNMP does not challenge the disallowances, nor does TNMP challenge the Commission's authority to disallow certain costs when finalizing TNMP's stranded cost balance.
Saturday, January 26, 2008
Medical Malpractice Judgment resulting from 8-day jury trial affirmed by Austin Court of Appeals
Austin Periodontal Associates, Inc. f/k/a C. Leonard Dolce, D.D.S., M.S., Inc.; and Charles Leonard Dolce, D.D.S., M.S., Individually and d/b/a Periodontal Associates v. Kirsten Husak, No. 3-07-00125-CV (Tex.App.- Austin Jan. 25, 2008)(Opinion by Justice Patterson) (Before Justices Patterson, Puryear and Pemberton) (affirmed)
Appeal from 345th District Court of Travis County
M E M O R A N D U M O P I N I O N
This dental malpractice case arises from the bilateral severance of appellee Kirsten Husak's lingual nerve during a procedure to remove her third molars. (1) Appellant Charles Leonard Dolce, D.D.S., M.S., performed the procedure. Husak brought suit alleging negligence against Dr. Dolce and his employer, appellant Austin Periodontal Associates, Inc. f/k/a C. Leonard Dolce, D.D.S., M.S., Inc. (2) After an eight-day jury trial, the jury found Dr. Dolce negligent and awarded Husak damages. The trial court rendered judgment on the verdict. In five issues, appellants contend that the trial court's judgment should be reversed and that they should be granted a new trial. For the reasons that follow, we overrule their issues and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Husak's general dentist Tommy Thomson referred Husak to Dr. Dolce to have crown lengthening done on two of her teeth. (3) During the preoperative appointment, Dr. Dolce and Husak discussed and agreed that Dr. Dolce would remove her third molars at the same time.
The surgery took place in April of 2002. During the removal of her third molars, Dr. Dolce bilaterally severed Husak's lingual nerve. He also broke a burr (4) in her mouth and did not inform Husak after the surgery that he was unable to find the broken piece. From the surgery, Husak suffered infection, dry socket, and total anesthesia of the front two-thirds of her tongue. Dr. Dolce referred Husak to Dr. James Fuselier, an oral surgeon in Austin, for further treatment, including to treat her infection. Dr. Fuselier referred Husak to Dr. Donald Cohen, an oral surgeon in Houston with postsurgical training in oral and maxillofacial surgery. Dr. Cohen attempted microsurgical repair on the left side of Husak's lingual nerve in August and the right side in October, but the repairs were unsuccessful.
Husak sued Austin Periodontal alleging multiple theories of negligence in bilaterally severing her lingual nerve. Husak's theories included that the removal of her third molars was medically unnecessary and that Dr. Dolce negligently removed her third molars by his incisions or, alternatively, by his drilling. Husak alleged that Dr. Dolce's incisions were below the standard of care because they were made in an area of her mouth where the lingual nerve was known to be located and that the incisions caused her injury. (5) Alternatively, Husak alleged that Dr. Dolce improperly drilled into the area of her mouth where the lingual nerve was known to be located and that the drilling was the cause of her injury.
At trial, Husak and her former boyfriend, John McCarthy, testified concerning Husak's physical and mental condition before and after the surgery and the effect the injury has had on her. Husak also presented expert opinion testimony from Dr. Cohen, Dr. Thomson, and Dr. Robert W. Staley, Jr., D.D.S., an oral and maxillofacial surgeon from Oregon. Appellants' defensive theory to the jury was that severance of the lingual nerve was an inherent risk of the procedure, that Dr. Dolce's technique was within the standard of care, and that he severed Husak's lingual nerve during the procedure because the nerve was in anatomically aberrant locations on both sides of her mouth. Dr. James T. Mellonig, D.D.S., a periodontist and professor at the University of Texas Health Science Center in San Antonio, testified as appellants' expert.
The trial court submitted a broad form negligence question to the jury--"Did the negligence, if any, of C. Leonard Dolce, D.D.S., M.S., proximately cause the injury in question?" The jury answered, "Yes." The jury awarded the following amounts in response to the damages question: (i) $45,879.75 for medical care expenses in the past; (ii) $50,000 for physical pain and mental anguish sustained in the past; (iii) $200,000 for mental anguish that, in reasonable probability, Husak will sustain in the future; (iv) $19,500 for physical impairment sustained in the past; (v) $150,000 for physical impairment that, in reasonable probability, Husak will sustain in the future; and (vi) $6,000 for loss of earning capacity sustained in the past. (6) Based on the verdict and the trial court's ruling as a matter of law that Dr. Dolce was acting within the course and scope of his employment, the trial court entered judgment against appellants for $503,923.59, which included the damages found by the jury plus pre-judgment interest. This appeal followed.
ANALYSIS
Austin Periodontal contends that the judgment should be reversed and a new trial granted because (i) the trial court abused its discretion by excluding certain testimony by Dr. Cohen, the subsequent treating periodontist; (ii) the trial court abused its discretion by refusing to provide a "bad result" instruction in the jury charge; (iii) the evidence was legally and factually insufficient to support causation and damages; (iv) the trial court abused its discretion by ruling as a matter of law that Dr. Dolce was acting within his scope of employment when he performed the surgery; and (v) the trial court abused its discretion in redacting informed consent forms and limiting informed consent evidence.
Standard of Review
Appellants' complaints on appeal include that the trial court abused its discretion in excluding evidence and in denying a requested jury instruction. See Larson v. Downing, 197 S.W.3d 303, 304-05 (Tex. 2006) (admission or exclusion of expert evidence is a matter within the trial court's discretion); In re V.L.K., 24 S.W.3d 338, 341 (Tex. 2000) (error in the jury charge is reviewed under an abuse of discretion standard). A trial court abuses its discretion when it acts without regard to any guiding rules or principles. Downing, 197 S.W.3d at 304-05; City of Brownsville v. Alvarado, 897 S.W.2d 750, 754 (Tex. 1995).
To reverse a judgment based on a claimed error in either an evidentiary ruling or in the jury charge, a party must show that the error probably resulted in the rendition of an improper judgment. See Tex. R. App. P. 44.1(a)(1); Interstate Northborough P'ship v. State, 66 S.W.3d 213, 220 (Tex. 2001) (exclusion of evidence); Union Pac. R.R. Co. v. Williams, 85 S.W.3d 162, 166 (Tex. 2002) (error in refusing an instruction); Niemeyer v. Tana Oil & Gas Corp., 39 S.W.3d 380, 387 (Tex. App.--Austin 2001, pet. denied) (error in jury charge). To determine whether excluded evidence probably resulted in an improper judgment, we review the entire record and usually require the complaining party to demonstrate that the judgment turns on the evidence that was excluded. Interstate Northborough, 66 S.W.3d at 220; Alvarado, 897 S.W.2d at 753-54; Perez v. Embree Constr. Group, Inc., 228 S.W.3d 875, 884 (Tex. App.--Austin 2007, pet. filed) (for improper exclusion of evidence to be reversible, "erroneously excluded evidence must have been controlling on a material issue;" quoting Elliott v. Elliott, 21 S.W.3d 913, 922 (Tex. App.--Fort Worth 2000, pet. denied)). "Error in the jury charge is reversible if, when viewed in light of all the circumstances, it amounts 'to such a denial of rights of the complaining party as was reasonably calculated and probably did cause the rendition of an improper judgment.'" Niemeyer, 39 S.W.3d at 387 (quoting Howell Crude Oil Co. v. Donna Refinery Partners, Ltd., 928 S.W.2d 100, 110 (Tex. App.--Houston [14th Dist.] 1996, writ denied)).
Appellants also raise challenges to the legal and factual sufficiency of the evidence. A legal sufficiency challenge may only be sustained when the record discloses one of the following situations:
(a) a complete absence of evidence of a vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; [or] (d) the evidence establishes conclusively the opposite of the vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005) (quoting Robert W. Calvert, "No Evidence" & "Insufficient Evidence" Points of Error, 38 Tex. L. Rev. 361, 362-63 (1960)). In determining whether a finding is supported by legally sufficient evidence, we view the evidence in the light most favorable to the finding, "crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not." Id. at 807. We indulge every reasonable inference that would support the finding. Id. at 822; Tarrant Reg'l Water Dist. v. Gragg, 151 S.W.3d 546, 552 (Tex. 2004).
In reviewing the factual sufficiency of the evidence, we consider and weigh all the evidence presented at trial, including any evidence contrary to the judgment. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). We set aside a finding for factual insufficiency if it is "so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust." Cain, 709 S.W.2d at 176.
Exclusion of Deposition Excerpts from Dr. Cohen
In the first issue, Austin Periodontal complains that the trial court abused its discretion in excluding two passages from Dr. Cohen's testimony that went to his credibility. (7) Austin Periodontal complains that the jury should have been allowed to hear Dr. Cohen's testimony that he had performed only one other lingual nerve repair as a lead surgeon and that he also testified for the plaintiff in that case. In the first passage, Dr. Cohen testified that he had been involved in surgical repair of the lingual nerve in approximately seven other cases and that he worked with another surgeon on those cases. Austin Periodontal, however, agreed to exclude the first passage after Husak objected to its inclusion. In the second passage, Dr. Cohen testified that he served as the lead surgeon in one other lingual nerve repair case and that he was hired to serve as the plaintiff's expert in that case. In response to Husak's objection to the second passage's inclusion, the trial court overruled the objection except for one question and answer. (8)
Despite the favorable ruling on the second passage, Austin Periodontal did not attempt to offer the passage into evidence but made an offer of proof of both passages later in the trial. Austin Periodontal made the offer of proof during a discussion with the trial court and opposing counsel concerning how the jury would be allowed to view deposition testimony. After the parties agreed that the deposition testimony would be available for the jury to review by DVD but not accompanied by a written transcript, Austin Periodontal made the offer of proof of the two passages:
Appellants' counsel: . . . I want to make another offer of proof on Doctor Cohen's testimony. It's on page 76 line 9 through page 79 line 14 [first passage]. Page 106 line 2, page 107, line 4 [second passage].
The court: Objection or --
Appellants' counsel: Offer of proof. This is the testimony regarding that he's been the lead surgeon in two cases. And in both cases he wrote a[n] operative report, both cases hired as expert. I actually just took the [deposition] pages out. Wanted to make an exhibit so it's clear what I am offering. Your Honor I am offering defendant's exhibit 65.
The court: 65 will be admitted in the pile that doesn't go to the jury. . . .
In the discussion with the trial court, Austin Periodontal did not attempt to admit the exhibit of the passages as evidence or request a ruling from the trial court on whether the evidence should be excluded, but requested that the trial court admit the exhibit as an offer of proof. See Tex. R. Evid. 103. The trial court granted Austin Periodontal's request and admitted the exhibit as an offer of proof.
Because the trial court only excluded one question and answer out of the second passage, we limit our review to this one question and answer. See Tex. R. App. P. 33.1(a) (to preserve error for the exclusion of evidence, a party must seek to introduce the evidence during the evidentiary portion of the trial and obtain an adverse ruling); Estate of Veale v. Teledyne, 899 S.W.2d 239, 242-43 (Tex. App.--Houston [14th Dist.] 1995, writ denied). We conclude that appellants have failed to demonstrate that the judgment turned on this narrow portion of testimony. See Tex. R. App. P. 44.1(a); Interstate Northborough, 66 S.W.3d at 220; Alvarado, 897 S.W.2d at 753-54; Perez, 228 S.W.3d at 884. We overrule Austin Periodontal's first issue.
"Bad Result" Jury Instruction
In the second issue, appellants contend that the trial court abused its discretion in refusing to provide the jury their proposed "bad result" instruction:
A finding of negligence may not be based solely on evidence of bad result to the patient in question, but such a bad result may be considered by you, along with other evidence, in determining the issue of negligence; you shall be the sole judge of the weight, if any, to be given any such evidence.
The proposed instruction tracks the pattern jury charge bad result instruction for actions filed before September 1, 2003. See Texas Pattern Jury Charges--Malpractice, Premises, & Products PJC 50.7 (2006 ed.) (Evidence of Bad Result). Pursuant to the applicable statute, however, it was within the trial court's sole discretion to determine whether the instruction was reasonably applicable to the facts and whether to include it. See former Tex. Rev. Civ. Stat. Ann. art. 4590i, § 7.02(c), Act of May 24, 1989, 71st Leg., R.S., ch. 1027, § 28, 1989 Tex. Gen. Laws 4128, 4145 (repealed Sept. 1, 2003) ("Jury Instruction Authorized in Certain Cases"); (9) see also Williams v. Viswanathan, 64 S.W.3d 624, 628-29 (Tex. App.--Amarillo 2001, no pet.) (submission of bad result instruction reviewed under abuse of discretion standard).
Husak contends that the statute does not apply because Dr. Dolce did not present evidence that he was a physician and Austin Periodontal Associates, Inc. did not present evidence that it was a hospital. (10) We agree. The former statute is expressly limited to jury trials "involving a health care liability claim against a physician or hospital." See former Tex. Rev. Civ. Stat. Ann. art. 4590i, § 7.02(a). Dr. Dolce testified that he was a dentist and periodontist and that he practiced his profession through Austin Periodontal Associates, Inc. A physician is defined as a "person licensed to practice medicine in this state" or a professional association or other legal entity organized by an individual physician or group of physicians. See Tex. Civ. Prac. & Rem. Code Ann. § 74.001(23) (West 2005); former Tex. Rev. Civ. Stat. Ann. art. 4590i, § 1.03(8), Act of June 16, 1977, 65th Leg., R.S., ch. 817, § 1.03, 1977 Tex. Gen. Laws 2039, 2041 (repealed Sept. 1, 2003). A hospital is defined as a duly licensed public or private institution as defined in chapter 241 of the health and safety code or licensed under chapter 577 of the health and safety code. See Tex. Civ. Prac. & Rem. Code Ann. § 74.001(16) (West 2005); former Tex. Rev. Civ. Stat. Ann. art. 4590i, § 1.03(5) (repealed Sept. 1, 2003). In these circumstances, we conclude that the trial court did not abuse its discretion in denying appellants' proposed instruction. See Louisiana-Pacific Corp. v. Knighten, 976 S.W.2d 674, 676 (Tex. 1998) (trial courts have great latitude and considerable discretion to determine necessary and proper jury instructions). We overrule Austin Periodontal's second issue.
Sufficiency of the Evidence
In the third issue, Austin Periodontal contends that the evidence was legally and factually insufficient to support the jury's judgment and damage award. Specifically, Austin Periodontal contends that the evidence was legally and factually insufficient to support the jury's finding of negligence because there was no evidence or insufficient evidence of (i) cause in fact, and (ii) the jury's findings on damages for physical pain and mental anguish sustained in the past, for future mental anguish, and for future physical impairment. We first consider whether the evidence was legally and factually sufficient to support the jury's finding of cause in fact.
1. Cause In Fact
Cause in fact is a component of proximate cause in a negligence action. See IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex. 2004). (11) Cause in fact is not established "where the defendant's negligence does no more than furnish a condition which makes the injuries possible." Id. at 799. Cause in fact is established "when the act or omission was a substantial factor in bringing about the injuries, and without it, the harm would not have occurred." Id. The "causal connection" must be "based upon 'reasonable medical probability,' not mere conjecture, speculation or possibility." Bradley v. Rogers, 879 S.W.2d 947, 954 (Tex. App.--Houston [14th Dist.] 1994, writ denied) (quoting Duff v. Yelin, 751 S.W.2d 175, 176 (Tex. 1988)). "Reasonable medical probability" means the injury "was more likely than not" a result of the negligent action. Id. at 954. To prove reasonable medical probability, reasonable inferences are permissible, and a plaintiff is not required to exclude every other reasonable hypothesis. Id.
Austin Periodontal contends that there is a lack of evidence of the location of Husak's lingual nerve when it was severed and of what actually caused the nerve's severance. Although Dr. Staley and Dr. Cohen testified Husak's injuries occurred from Dr. Dolce's actions that fell below the standard of care, Austin Periodontal contends that neither expert testified definitively to the actual action that caused the severance--whether it was the incision, the drilling, or some other action--or to the precise location that Husak's lingual nerve was severed on either side of her mouth. We conclude that the record contains more than a scintilla of evidence to support the jury's finding of cause in fact. See City of Keller, 168 S.W.3d at 810; Gragg, 151 S.W.3d at 552.
Dr. Cohen testified that in his opinion, based upon reasonable medical probability, Dr. Dolce's technique caused Husak's permanent damage. Dr. Cohen testified that Husak's injuries were caused by Dr. Dolce's procedures that fell below the standard of care, including the incisions that he made "straight back," his retraction of the lingual flap, the burring and the removal of bone on the lingual side, and traumatizing the tissue. Dr. Cohen testified that the line of scar tissue on the left side of Husak's mouth, the first side that he attempted to repair, was not consistent with a standard lateral incision and that the standard lateral approach should have avoided even the "most odd of anatomical variations." According to Dr. Cohen, the lingual nerve is in the same area in everyone's mouth but there are individual variations within that area and that the standard lateral incision is designed to avoid the known areas. The standard lateral incision is made over bone, goes back from the second molar, and curves toward the cheek or buccal to avoid the known areas. Dr. Cohen also testified that Dr. Dolce's injection of anesthesia made during the procedure and Husak's subsequent infection did not cause Husak's injuries to her lingual nerve.
On cross-examination, Dr. Dolce testified that he caused the severance of the nerve bilaterally during the procedure to remove Husak's third molars:
Q: And in the opening of this case a couple of days ago, your attorney stated that you never disputed that you caused Mrs. Husak's lingual nerve injury; is that correct?
A: Right.
Q: And do you agree?
A: I agree.
Q: And you agree that you did something that caused her injuries, correct?
A: Yes.
Dr. Mellonig also testified that Dr. Dolce's surgical instruments caused Husak's injury and that the lingual nerve was probably severed by the "blade of the knife" in the initial incision. He testified that was the only way to sever the nerve because "the nerve is very--very tough, so it had to be cut." Husak was not required to disprove every reasonable hypothesis of the cause in fact of the severance. See Bradley, 879 S.W.2d at 954. Husak also was not required to choose between alternative theories of how Dr. Dolce severed the nerve. See Webb v. Jorns, 488 S.W.2d 407, 410-11 (Tex. 1972) (plaintiff proved prima facie negligence case by evidence that cardiac arrest caused by overdose or lack of proper oxygenation of the patient). It was for the jury to resolve inconsistencies of any one witness to determine the cause of the injury. See McGilliard v. Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986); Webb, 488 S.W.2d at 411. We conclude the evidence was legally sufficient to support the jury's finding of cause in fact.
Reviewing all the evidence presented at trial, we also conclude that the evidence on cause in fact was not "so contrary to the overwhelming weight of the evidence as to be clearly wrong or unjust." See Cain, 709 S.W.2d at 176. Dr. Dolce testified on cross-examination that his sole defense was that Husak's injury occurred in the absence of negligence because Husak's nerve was in an aberrant location on both sides of her mouth:
Q: Now, you're claiming in this suit, as your only defense to you slicing through her nerves, that her nerves were aberrant on both sides. Correct?
A: Yes.
To support the aberrant location defense, appellants relied on Dr. Dolce's testimony and Dr. Cohen's surgery report from the attempted repair of the left side of Husak's mouth. Dr. Dolce testified that the body generally mirrors itself between the right and left side, and appellants contend that Dr. Cohen in his report found Husak's lingual nerve in an aberrant location on the left side--within the third molar socket. Based on the nerve's location within the third molar socket on the left side then, appellants contend that the location of Husak's lingual nerve on the right side also was in an aberrant location, and that the nerve was severed because it was in an aberrant location on both sides, not because Dr. Dolce was negligent. None of the experts, however, were aware of another case in which a patient's lingual nerve was severed bilaterally. The testimony also was disputed regarding the interpretation and implications of Dr. Cohen's statement in his report regarding the nerve's location in the scar tissue when he performed the subsequent repair. Dr Cohen testified that when he attempted the repair on the left side, he did not find an abnormal course of Husak's lingual nerve:
Q: When you dissected her nerve, did you find any abnormal course of her nerve on the left side?
A: No.
Dr. Cohen further provided extensive testimony that the procedure for removing third molars is designed to avoid all known aberrations. Dr. Staley also testified that the procedure is designed to avoid the lingual nerve, that the lingual nerve has never been demonstrated to be in the location Dr. Dolce claimed, and that if Husak's nerve was in that location, Husak would have been aware of the presence of the nerve because she would have experienced pain and discomfort in a manner inconsistent with her actual history. (12)
It was within the jury's province to conclude that Husak's nerve was located in a known area and to credit the expert opinion testimony that it was Dr. Dolce's procedures that fell below the standard of care that caused the injury. See Bronwell v. Williams, 597 S.W.2d 542, 546-47 (Tex. Civ. App.--Amarillo 1980, writ ref'd n.r.e.) (fact issue for jury's resolution whether common duct in normal or abnormal location); see also Grider v. Naaman, 83 S.W.3d 241, 245-46 (Tex. App.--Corpus Christi 2002), rev'd on other grounds, 126 S.W.3d 73, 74-75 (Tex. 2003) (judgment for defense in medical malpractice suit reversed because no evidence to support sole defense that patient had abnormal anatomy). The jury heard a range of expert testimony concerning the cause of Husak's injury. It was within the province of the jury to weigh the expert opinion testimony and to determine which expert witness should be credited. See Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003) (jury remains sole judge of witnesses' credibility and the weight to be given their testimony); McGilliard, 722 S.W.2d at 697 (jury can choose to believe one witness over other witnesses or resolve inconsistencies in their testimony). We conclude the evidence was legally and factually sufficient to support a finding of cause in fact. We next consider whether the evidence was legally and factually sufficient to support the jury's findings on damages.
2. Damages
Austin Periodontal contends that the evidence was legally and factually insufficient to support the damages award of $50,000 for physical pain and mental anguish sustained in the past, $200,000 for mental anguish that in reasonable probability Husak will sustain in the future, and $150,000 for physical impairment that in reasonable probability Husak will sustain in the future. Austin Periodontal's theory to the jury was that, although Husak suffered a severe injury, she has recovered and is now maintaining a lifestyle similar to that before her injury. Austin Periodontal contends that Husak does not intend to seek counseling for the injury, that she has regained some sensation and taste in her tongue after the surgery, that her eating habits are back to normal, that she took a course in conversational Japanese, and that she has decided to pursue a graduate degree. We conclude that the evidence is legally and factually sufficient to support the damages awarded.
As to the award of damages for physical pain, a jury is given considerable discretion in awarding amounts appropriate for such damages; there are no objective guidelines to assess the monetary equivalent of pain and suffering resulting from physical injury. See Living Ctrs. of Tex., Inc. v. Penalver, 217 S.W.3d 44, 54 (Tex. App.--San Antonio 2006, pet. dism'd). As to the award of damages for mental anguish, evidence of "'the nature, duration, and severity'" of a plaintiff's mental anguish and the substantial disruption of a plaintiff's daily routine support an award of damages for mental anguish. See Fifth Club, Inc. v. Ramirez, 196 S.W.3d 788, 797 (Tex. 2006) (evidence found legally sufficient to support damages for mental anguish; quoting Parkway Co. v. Woodruff, 901 S.W.2d 434, 444 (Tex. 1995)).
The award of $50,000 for past pain and mental anguish represents approximately $11,000 per year for the four and one-half years from the surgery to the time of trial. During that period, Husak had two subsequent operations to attempt the repair of her lingual nerve. Husak testified to her depression, pain, and anxiety during this period. She testified that she was unable to eat, sleep or open her mouth for weeks after the surgery and that she could not speak correctly for months despite having a job that required her to make presentations. Husak testified what it was like for her to eat after the surgery (13)--that she has no taste, that she cannot tell hot from cold, and that she has had to avoid many foods because, in trying to chew them, she cannot feel when she bites her tongue. She testified what it has been like for her to talk--that when she gets tired, she has a hard time enunciating words, and she bites her tongue and does not know it, causing blood to pool in her mouth. McCarthy testified about his observations of Husak's physical and mental condition before and after the surgery, and his testimony was consistent with Husak's. Based on this evidence, we conclude there was more than a scintilla of evidence to support the damage finding for past pain and mental anguish. See City of Keller, 168 S.W.3d at 810; Gragg, 151 S.W.3d at 552.
Reviewing all the evidence, we also conclude that the jury's finding is not "so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust." See Cain, 709 S.W.2d at 176. Austin Periodontal presented evidence that Husak stated during her treatment that she thought that her senses in her tongue were improving and that she has continued to lead an active life. Dr. Cohen, however, explained Husak's sensations during her treatment as "phantom." Husak's activities after her injury, including pursuing a graduate degree and taking conversational Japanese, do not negate the pain and the mental anguish that Husak experienced from her injury. We conclude the evidence was legally and factually sufficient to support the jury's damage award for past pain and mental anguish. (14)
As to the jury award of $200,000 for future mental anguish, the jury heard evidence that at the time of the trial, Husak was expected to live an additional 44.5 years. The amount awarded for future mental anguish represents approximately $4,500 per year for the remainder of her life. Dr. Staley testified that he tested Husak's sense of touch at the time of trial by blindfolding her and then sticking a needle in her tongue and that she did not flinch. Dr. Dolce witnessed the test and confirmed that she did not flinch. Dr. Cohen testified that the attempted repairs were unsuccessful, that Husak's injury was permanent, and what Husak's life will be like:
It's--it's just losing a part of your body. It's like if you don't have any feeling in your hand, and that--which most people could--I mean, like, if--when your hand falls asleep, it's pretty disconcerting that you look over and you touch it and you feel you touch it, but you don't feel that it's there. Well, how would that be if it was like that all the time.
Husak testified to her continued depression and anxiety. Husak testified that she is depressed by the smell of food, miserable and embarrassed and that "it's never going to end."
Because the injury is permanent, there was evidence that Husak's daily routine will remain disrupted and that she will continue to have mental anguish in the future, including from the broken burr that remains in her mouth. On this record, we conclude there is more than a scintilla of evidence to support the damage finding for future mental anguish. See City of Keller, 168 S.W.3d at 810; Gragg, 151 S.W.3d at 552. Although Austin Periodontal provided evidence that Husak does not intend to seek counseling, we conclude that the damage award for future mental anguish from Husak's injury is not "so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust." See Cain, 709 S.W.2d at 176.
As to the jury's award for future physical impairment of $150,000, this amount represents approximately $3,400 per year for the remainder of Husak's life. To recover damages for physical impairment, a plaintiff must show that the effect of the physical impairment is "substantial and extend[s] beyond any pain, suffering, mental anguish, lost wages, or diminished earning capacity." See Patlyek v. Brittain, 149 S.W.3d 781, 786 (Tex. App.--Austin 2004, pet. denied) (quoting Golden Eagle, 116 S.W.3d at 772). Recoverable damages for physical impairment include damages for the loss of a plaintiff's former lifestyle or "loss of enjoyment of life." See id. at 785 (quoting Golden Eagle, 116 S.W.3d at 764-65, 772). The focus is on a plaintiff's ability to engage in specific non-work related activities--whether the impediments are obvious or whether the plaintiff presented evidence of non-work activities that the plaintiff can no longer perform. Id. at 787.
Husak's impediments are obvious and substantial. After the surgery, Husak lost the ability to use her tongue for cleaning and for taste or to identify things in her mouth. At the time of trial, Husak testified that she continues to have difficulty eating and communicating. Husak also presented evidence that she no longer engages in non-work related activities that she participated in before her injuries. Husak and McCarthy described Husak's life prior to the severance of her lingual nerve as socially active, including her hobbies of going out to eat with friends, gourmet cooking, and strenuous exercise and bicycling. Husak testified that she no longer enjoys or participates in these hobbies. McCarthy testified that Husak's only hobby after the surgery is reading. We conclude that there is more than a scintilla of evidence to support the finding of damages for future physical impairment. See City of Keller, 168 S.W.3d at 810; Gragg, 151 S.W.3d at 552. Although Austin Periodontal provided evidence that Husak is pursuing a graduate degree and taking a conversational class in Japanese, we conclude that the damage award for future physical impairment is not "so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust." See Cain, 709 S.W.2d at 176.
Having found the evidence legally and factually sufficient to support the jury's finding of cause in fact and the amount of damages awarded, we overrule Austin Periodontal's third issue.
Scope of Employment
In the fourth issue, Austin Periodontal alleges that the trial court abused its discretion by ruling as a matter of law that Dr. Dolce was within the course and scope of his employment when he extracted Husak's third molars.
When reviewing a directed verdict on a material question presented, we determine whether there is any evidence of probative force that raises a fact issue. See Szczepanik v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex. 1994). We consider all the evidence in the light most favorable to the party against whom the verdict was directed, disregarding all contrary evidence and inferences and giving the party the benefit of all reasonable inferences created by the evidence. Id. If there is any conflicting evidence of probative value, the directed verdict is improper and the case must be reversed and remanded for jury determination of that issue. Id.
Husak sued Austin Periodontal Associates, Inc. as the legal entity vicariously liable for Dr. Dolce's negligent acts. Under the theory of respondeat superior, an employer may be vicariously liable for the negligent acts of its employee if the employee's actions are within the course and scope of employment. See Baptist Mem. Hosp. Sys. v. Sampson, 969 S.W.2d 945, 947 (Tex. 1998). During cross-examination, Dr. Dolce testified that he was employed by C. Leonard Dolce, D.D.S., Inc., at the time he performed the procedure on Husak, and that he was acting within the scope of his employment:
Q: Were you within the scope and employment of the corporation at the time?
A: Scope and employment? Yes. The corporation--I mean, I'm practicing my profession in the corporation.
Q: Right. And what I'm trying to get at is that you weren't doing something that you weren't supposed to be as an employee of the corporation at the time that you removed her teeth.
A: No.
Appellants did not offer contradictory evidence that Dr. Dolce was doing something other than practicing dentistry in the furtherance of his employer's business when he performed the procedure on Husak. (15) We conclude that the trial court did not abuse its discretion in ruling as a matter of law that Austin Periodontal Associates, Inc. was vicariously liable for Dr. Dolce's negligence. We overrule Austin Periodontal's fourth issue.
Informed Consent
In the fifth issue, Austin Periodontal contends that the trial court abused its discretion in refusing to admit the informed consent forms of Dr. Cohen and Dr. Dolce and evidence that Dr. Dolce provided Husak with an informed consent form before the procedure to extract her third molars. The consent forms included damage to nerves and numbness as inherent and potential risks. Austin Periodontal contends that this evidence was relevant to the issue of whether Husak's injury could have occurred in the absence of negligence.
But, Austin Periodontal was allowed to offer evidence of Husak's informed consent and the consent forms. The jury heard testimony from Dr. Dolce that Husak signed his consent form. The redacted consent forms of Dr. Cohen and Dr. Dolce were also admitted as exhibits, and the admitted portions of the forms included the listed risks. Dr. Dolce's redacted form included in the listed "Principle Risks and Complications" that the patient could have "transient but occasional permanent numbness of the . . . tongue." Similarly, Dr. Cohen's redacted form provided:
Dr. Cohen has explained to me that there are certain inherent and potential risks in any treatment plan or procedure, that may include, but not necessarily be limited to . . . [i]njury to the nerves of the jaw resulting in numbness or tingling of the lip, chin, gums, cheek, teeth and/or tongue on the operated side; this may persist for several weeks, months, or in remote instances permanently.
The record confirms that appellants were allowed to present this evidence (16) on informed consent and inherent risks to the jury to support their defensive theory that the injury could have occurred in the absence of negligence. (17)
We also cannot conclude that the trial court abused its discretion by redacting the consent forms of Dr. Dolce and Dr. Cohen or that any excluded evidence on informed consent was controlling on a material issue to support a finding that the exclusion probably resulted in an improper judgment. See Perez, 228 S.W.3d at 884. Husak's theories of recovery did not include that Dr. Dolce failed to inform her of the risks of the procedure. The controlling issue was not whether she received information about the risks of the procedure, but whether Dr. Dolce's negligence caused the severance of her lingual nerve. Austin Periodontal was allowed to present to the jury the language from both consent forms that a possible risk was permanent numbness to the tongue. We overrule Austin Periodontal's fifth issue.
CONCLUSION
Having overruled appellants' issues, we affirm the judgment.
__________________________________________
Jan P. Patterson, Justice
Before Justices Patterson, Puryear and Pemberton
Affirmed
Filed: January 25, 2008
1. According to the testimony at trial, the lingual nerve provides the sense of taste and touch to the anterior two-thirds of the tongue and is located on the tongue side of the lower third molars on both sides of the mouth. Third molars are commonly referred to as wisdom teeth and are the last tooth of the full set on each half of the jaw. Unless otherwise specified, we draw on trial testimony for technical/medical definitions and explanations.
2. We refer to appellants Austin Periodontal Associates, Inc. f/k/a C. Leonard Dolce, D.D.S., M.S., Inc. and Charles Leonard Dolce, D.D.S., M.S., individually and d/b/a Periodontal Associates collectively as "Austin Periodontal" or "appellants." We refer to appellant Charles Leonard Dolce, D.D.S., M.S., as "Dr. Dolce."
3. The crown lengthening did not involve Husak's third molars but two of her other teeth. Crown lengthening is a procedure that is designed to provide more tooth structure above the gum line before placing a crown on a tooth.
4. A burr is the rotary cutting portion of the drill.
5. The lingual nerve's location varies from person to person, but there are areas in the mouth where the lingual nerve is known to be located. The experts at trial agreed that the procedure for removing third molars is specifically designed to avoid the known areas.
6. The jury did not award any amount for disfigurement sustained in the past.
7. Dr. Cohen's testimony was presented by video deposition.
8. The question and answer that the trial court excluded concerned the other lingual nerve damage case in which Dr. Cohen was the lead surgeon:
Q: And you went further and said that you believe that the original treating, whether it be dentist or oral surgeon, was actually negligent in--
A: From what I--you know, from what I recall--because I know that case was involved in litigation also. I can't specifically tell you what I dictated into the operative report at that time or what my findings were or my records because it was quite a while ago.
9. The former statute read:
Sec. 7.02. JURY INSTRUCTION AUTHORIZED IN CERTAIN CASES.
(a) In a jury trial involving a health care liability claim against a physician or hospital for injury to or death of a patient in which the court determines that the following instruction is reasonably applicable to the facts, the court shall provide the following instruction in the court's charge to the jury:
"A finding of negligence may not be based solely on evidence of a bad result to the patient in question, but such a bad result may be considered by you, along with other evidence, in determining the issue of negligence; you shall be the sole judges of the weight, if any, to be given to any such evidence."
(b) Nothing in Subsection (a) of this section shall affect the existing law regarding the applicability or nonapplicability of the doctrine of res ipsa loquitur to a health care liability claim.
(c) The determination of whether the instruction authorized by Subsection (a) of this section is reasonably applicable to the facts shall be made by the trial court in its sole discretion, and such determination by the trial court shall be reviewable by an appellate court only for an abuse of such discretion.
Act of May 24, 1989, 71st Leg., R.S., ch. 1027, § 28, 1989 Tex. Gen. Laws 4128, 4145 (repealed Sept. 1, 2003) ("Jury Instruction Authorized in Certain Cases").
Because Husak filed suit prior to September 1, 2003, former article 4590i of the Medical Liability and Insurance Improvement Act governs. See Act of June 2, 2003, 78th Leg., R.S., ch. 204, § 23.02(d), 2003 Tex. Gen. Laws 847, 899 (prior law remains in effect for actions filed before September 1, 2003). Under the current statute, a trial court on "any action on a health care liability claim that is tried by a jury" must include a "bad result" instruction. See Tex. Civ. Prac. & Rem. Code Ann. § 74.303(e)(2) (West 2005).
10. Husak also argued to the trial court that a bad result instruction should not be given because the court had refused her requested res ipsa locutor instruction. She does not make this same argument on appeal.
11. The elements of a negligence cause of action are the existence of a legal duty, breach of that duty, and damages proximately caused by the breach. IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex. 2004). The two elements of proximate cause are cause in fact and foreseeability. Id. The proximate cause instruction to the jury read:
"Proximate cause," when used with respect to the conduct of C. Leonard Dolce, D.D.S., M.S., means that cause which, in a natural and continuous sequence, produces an event, and without which cause such event would not have occurred. In order to be a proximate cause, the act or omission complained of must be such that a dentist using ordinary care would have foreseen that the event, or some similar event, might reasonably result therefrom. There may be more than one proximate cause of an event.
12. Dr. Staley testified:
And the nerve is not a small nerve. It's about the size of a piece of spaghetti. It's not like it's a fine hair of a nerve. If it happened to be in that area the patient would know it. Every time they chewed something hard back there; piece a crust, or something. And they happen to push on that they would feel a[n] electric shock on the tongue. The patient would know that. . . . The nerve has never been demonstrated to loop back there. It can be high. It can be low. Or it can be out this way, but it never comes up here. That's specifically the reason why the surgery for the incision part of it, has been designed to make the incision out there.
13. Husak testified as to her diet after the surgery:
Q: This may sound strange, but some people may think this is a neat diet. Can you tell me what kind of diet you think this is?
A: This is a forced diet for the rest of my life. I didn't need to lose any weight, and I have. And I don't have a choice now. I can't go off this diet. It's going to last forever.
Q: Can you tell me what tomatoes taste like?
A: They taste wet.
Q: What about bread?
A: Well, I can't even eat chunky bread, like French bread, because I run the risk of chomping on my tongue. But, in any case, there's no taste to it. It's just lumps.
Q: What about milk?
A: Milk tastes exactly the same as water.
Q: What about Diet Coke?
A: Tastes like bubbles.
Q: What about carrots?
A: Well, I have to chop them up very small, again, to make sure I'm not chomping on my tongue. I get some sort of a muted memory of a taste of them, but not--nothing like what it used to be.
* * *
Q: Do you order pizza anymore?
A: No.
Q: Why not?
A: There's a possibility of burning myself with the hot cheese, and I can't taste the cheese anyway. I can't taste the toppings properly. There's--there's just--it's too depressing. It's--there's no point.
* * *
Q: Would you tell the jury what it's like to live with a numb tongue, not able to tell hot or cold with your tongue, and not ever able to taste your food normally?
A: It's really miserable because I know that when I get older and my other senses aren't working so well, I'll get no pleasure out of my food. I get no pleasure out of it now. It's embarrassing to talk to people about, and it's never going to end.
14. In closing arguments, appellants' counsel suggested to the jury an award of $50,000 for past pain and mental anguish assuming a finding of negligence.
15. Dr. Dolce testified that he changed the entity that he practiced his profession through from C. Leonard Dolce, D.D.S., Inc. to Austin Periodontal Associates, Inc. shortly after Husak's operation. From his testimony, the entity at the time the procedure was performed was C. Leonard Dolce, D.D.S., Inc., and, at the time of trial, the entity was Austin Periodontal Associates, Inc. Appellees do not contend that Husak sued the incorrect employer.
16. To the extent appellants complain about the exclusion of other evidence on informed consent, we conclude that they failed to preserve error. See Tex. R. App. P. 33.1(a). During the motion in limine hearing, the trial court granted Husak's motion regarding evidence of informed consent, but rulings on motions in limine do not preserve error for appellate review. See Acord v. General Motors Corp., 669 S.W.2d 111, 116 (Tex. 1984). To preserve error, appellants were required to seek to admit the evidence during the evidentiary portion of the trial and to obtain an adverse ruling. See Tex. R. App. P. 33.1(a). This appellants did not do.
17. Appellants contend the trial court compounded its error on informed consent evidence during Dr. Cohen's testimony. Because Dr. Cohen referred to informed consent, appellants contend that the trial court erred by not allowing their request to introduce evidence that would have explained Dr. Cohen's references. But, the trial court stated that it would allow appellants to provide evidence to prevent the jury from being "left with the impression that Dr. Dolce did something wrong in not giving a consent form."
Appeal from 345th District Court of Travis County
M E M O R A N D U M O P I N I O N
This dental malpractice case arises from the bilateral severance of appellee Kirsten Husak's lingual nerve during a procedure to remove her third molars. (1) Appellant Charles Leonard Dolce, D.D.S., M.S., performed the procedure. Husak brought suit alleging negligence against Dr. Dolce and his employer, appellant Austin Periodontal Associates, Inc. f/k/a C. Leonard Dolce, D.D.S., M.S., Inc. (2) After an eight-day jury trial, the jury found Dr. Dolce negligent and awarded Husak damages. The trial court rendered judgment on the verdict. In five issues, appellants contend that the trial court's judgment should be reversed and that they should be granted a new trial. For the reasons that follow, we overrule their issues and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Husak's general dentist Tommy Thomson referred Husak to Dr. Dolce to have crown lengthening done on two of her teeth. (3) During the preoperative appointment, Dr. Dolce and Husak discussed and agreed that Dr. Dolce would remove her third molars at the same time.
The surgery took place in April of 2002. During the removal of her third molars, Dr. Dolce bilaterally severed Husak's lingual nerve. He also broke a burr (4) in her mouth and did not inform Husak after the surgery that he was unable to find the broken piece. From the surgery, Husak suffered infection, dry socket, and total anesthesia of the front two-thirds of her tongue. Dr. Dolce referred Husak to Dr. James Fuselier, an oral surgeon in Austin, for further treatment, including to treat her infection. Dr. Fuselier referred Husak to Dr. Donald Cohen, an oral surgeon in Houston with postsurgical training in oral and maxillofacial surgery. Dr. Cohen attempted microsurgical repair on the left side of Husak's lingual nerve in August and the right side in October, but the repairs were unsuccessful.
Husak sued Austin Periodontal alleging multiple theories of negligence in bilaterally severing her lingual nerve. Husak's theories included that the removal of her third molars was medically unnecessary and that Dr. Dolce negligently removed her third molars by his incisions or, alternatively, by his drilling. Husak alleged that Dr. Dolce's incisions were below the standard of care because they were made in an area of her mouth where the lingual nerve was known to be located and that the incisions caused her injury. (5) Alternatively, Husak alleged that Dr. Dolce improperly drilled into the area of her mouth where the lingual nerve was known to be located and that the drilling was the cause of her injury.
At trial, Husak and her former boyfriend, John McCarthy, testified concerning Husak's physical and mental condition before and after the surgery and the effect the injury has had on her. Husak also presented expert opinion testimony from Dr. Cohen, Dr. Thomson, and Dr. Robert W. Staley, Jr., D.D.S., an oral and maxillofacial surgeon from Oregon. Appellants' defensive theory to the jury was that severance of the lingual nerve was an inherent risk of the procedure, that Dr. Dolce's technique was within the standard of care, and that he severed Husak's lingual nerve during the procedure because the nerve was in anatomically aberrant locations on both sides of her mouth. Dr. James T. Mellonig, D.D.S., a periodontist and professor at the University of Texas Health Science Center in San Antonio, testified as appellants' expert.
The trial court submitted a broad form negligence question to the jury--"Did the negligence, if any, of C. Leonard Dolce, D.D.S., M.S., proximately cause the injury in question?" The jury answered, "Yes." The jury awarded the following amounts in response to the damages question: (i) $45,879.75 for medical care expenses in the past; (ii) $50,000 for physical pain and mental anguish sustained in the past; (iii) $200,000 for mental anguish that, in reasonable probability, Husak will sustain in the future; (iv) $19,500 for physical impairment sustained in the past; (v) $150,000 for physical impairment that, in reasonable probability, Husak will sustain in the future; and (vi) $6,000 for loss of earning capacity sustained in the past. (6) Based on the verdict and the trial court's ruling as a matter of law that Dr. Dolce was acting within the course and scope of his employment, the trial court entered judgment against appellants for $503,923.59, which included the damages found by the jury plus pre-judgment interest. This appeal followed.
ANALYSIS
Austin Periodontal contends that the judgment should be reversed and a new trial granted because (i) the trial court abused its discretion by excluding certain testimony by Dr. Cohen, the subsequent treating periodontist; (ii) the trial court abused its discretion by refusing to provide a "bad result" instruction in the jury charge; (iii) the evidence was legally and factually insufficient to support causation and damages; (iv) the trial court abused its discretion by ruling as a matter of law that Dr. Dolce was acting within his scope of employment when he performed the surgery; and (v) the trial court abused its discretion in redacting informed consent forms and limiting informed consent evidence.
Standard of Review
Appellants' complaints on appeal include that the trial court abused its discretion in excluding evidence and in denying a requested jury instruction. See Larson v. Downing, 197 S.W.3d 303, 304-05 (Tex. 2006) (admission or exclusion of expert evidence is a matter within the trial court's discretion); In re V.L.K., 24 S.W.3d 338, 341 (Tex. 2000) (error in the jury charge is reviewed under an abuse of discretion standard). A trial court abuses its discretion when it acts without regard to any guiding rules or principles. Downing, 197 S.W.3d at 304-05; City of Brownsville v. Alvarado, 897 S.W.2d 750, 754 (Tex. 1995).
To reverse a judgment based on a claimed error in either an evidentiary ruling or in the jury charge, a party must show that the error probably resulted in the rendition of an improper judgment. See Tex. R. App. P. 44.1(a)(1); Interstate Northborough P'ship v. State, 66 S.W.3d 213, 220 (Tex. 2001) (exclusion of evidence); Union Pac. R.R. Co. v. Williams, 85 S.W.3d 162, 166 (Tex. 2002) (error in refusing an instruction); Niemeyer v. Tana Oil & Gas Corp., 39 S.W.3d 380, 387 (Tex. App.--Austin 2001, pet. denied) (error in jury charge). To determine whether excluded evidence probably resulted in an improper judgment, we review the entire record and usually require the complaining party to demonstrate that the judgment turns on the evidence that was excluded. Interstate Northborough, 66 S.W.3d at 220; Alvarado, 897 S.W.2d at 753-54; Perez v. Embree Constr. Group, Inc., 228 S.W.3d 875, 884 (Tex. App.--Austin 2007, pet. filed) (for improper exclusion of evidence to be reversible, "erroneously excluded evidence must have been controlling on a material issue;" quoting Elliott v. Elliott, 21 S.W.3d 913, 922 (Tex. App.--Fort Worth 2000, pet. denied)). "Error in the jury charge is reversible if, when viewed in light of all the circumstances, it amounts 'to such a denial of rights of the complaining party as was reasonably calculated and probably did cause the rendition of an improper judgment.'" Niemeyer, 39 S.W.3d at 387 (quoting Howell Crude Oil Co. v. Donna Refinery Partners, Ltd., 928 S.W.2d 100, 110 (Tex. App.--Houston [14th Dist.] 1996, writ denied)).
Appellants also raise challenges to the legal and factual sufficiency of the evidence. A legal sufficiency challenge may only be sustained when the record discloses one of the following situations:
(a) a complete absence of evidence of a vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; [or] (d) the evidence establishes conclusively the opposite of the vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005) (quoting Robert W. Calvert, "No Evidence" & "Insufficient Evidence" Points of Error, 38 Tex. L. Rev. 361, 362-63 (1960)). In determining whether a finding is supported by legally sufficient evidence, we view the evidence in the light most favorable to the finding, "crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not." Id. at 807. We indulge every reasonable inference that would support the finding. Id. at 822; Tarrant Reg'l Water Dist. v. Gragg, 151 S.W.3d 546, 552 (Tex. 2004).
In reviewing the factual sufficiency of the evidence, we consider and weigh all the evidence presented at trial, including any evidence contrary to the judgment. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). We set aside a finding for factual insufficiency if it is "so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust." Cain, 709 S.W.2d at 176.
Exclusion of Deposition Excerpts from Dr. Cohen
In the first issue, Austin Periodontal complains that the trial court abused its discretion in excluding two passages from Dr. Cohen's testimony that went to his credibility. (7) Austin Periodontal complains that the jury should have been allowed to hear Dr. Cohen's testimony that he had performed only one other lingual nerve repair as a lead surgeon and that he also testified for the plaintiff in that case. In the first passage, Dr. Cohen testified that he had been involved in surgical repair of the lingual nerve in approximately seven other cases and that he worked with another surgeon on those cases. Austin Periodontal, however, agreed to exclude the first passage after Husak objected to its inclusion. In the second passage, Dr. Cohen testified that he served as the lead surgeon in one other lingual nerve repair case and that he was hired to serve as the plaintiff's expert in that case. In response to Husak's objection to the second passage's inclusion, the trial court overruled the objection except for one question and answer. (8)
Despite the favorable ruling on the second passage, Austin Periodontal did not attempt to offer the passage into evidence but made an offer of proof of both passages later in the trial. Austin Periodontal made the offer of proof during a discussion with the trial court and opposing counsel concerning how the jury would be allowed to view deposition testimony. After the parties agreed that the deposition testimony would be available for the jury to review by DVD but not accompanied by a written transcript, Austin Periodontal made the offer of proof of the two passages:
Appellants' counsel: . . . I want to make another offer of proof on Doctor Cohen's testimony. It's on page 76 line 9 through page 79 line 14 [first passage]. Page 106 line 2, page 107, line 4 [second passage].
The court: Objection or --
Appellants' counsel: Offer of proof. This is the testimony regarding that he's been the lead surgeon in two cases. And in both cases he wrote a[n] operative report, both cases hired as expert. I actually just took the [deposition] pages out. Wanted to make an exhibit so it's clear what I am offering. Your Honor I am offering defendant's exhibit 65.
The court: 65 will be admitted in the pile that doesn't go to the jury. . . .
In the discussion with the trial court, Austin Periodontal did not attempt to admit the exhibit of the passages as evidence or request a ruling from the trial court on whether the evidence should be excluded, but requested that the trial court admit the exhibit as an offer of proof. See Tex. R. Evid. 103. The trial court granted Austin Periodontal's request and admitted the exhibit as an offer of proof.
Because the trial court only excluded one question and answer out of the second passage, we limit our review to this one question and answer. See Tex. R. App. P. 33.1(a) (to preserve error for the exclusion of evidence, a party must seek to introduce the evidence during the evidentiary portion of the trial and obtain an adverse ruling); Estate of Veale v. Teledyne, 899 S.W.2d 239, 242-43 (Tex. App.--Houston [14th Dist.] 1995, writ denied). We conclude that appellants have failed to demonstrate that the judgment turned on this narrow portion of testimony. See Tex. R. App. P. 44.1(a); Interstate Northborough, 66 S.W.3d at 220; Alvarado, 897 S.W.2d at 753-54; Perez, 228 S.W.3d at 884. We overrule Austin Periodontal's first issue.
"Bad Result" Jury Instruction
In the second issue, appellants contend that the trial court abused its discretion in refusing to provide the jury their proposed "bad result" instruction:
A finding of negligence may not be based solely on evidence of bad result to the patient in question, but such a bad result may be considered by you, along with other evidence, in determining the issue of negligence; you shall be the sole judge of the weight, if any, to be given any such evidence.
The proposed instruction tracks the pattern jury charge bad result instruction for actions filed before September 1, 2003. See Texas Pattern Jury Charges--Malpractice, Premises, & Products PJC 50.7 (2006 ed.) (Evidence of Bad Result). Pursuant to the applicable statute, however, it was within the trial court's sole discretion to determine whether the instruction was reasonably applicable to the facts and whether to include it. See former Tex. Rev. Civ. Stat. Ann. art. 4590i, § 7.02(c), Act of May 24, 1989, 71st Leg., R.S., ch. 1027, § 28, 1989 Tex. Gen. Laws 4128, 4145 (repealed Sept. 1, 2003) ("Jury Instruction Authorized in Certain Cases"); (9) see also Williams v. Viswanathan, 64 S.W.3d 624, 628-29 (Tex. App.--Amarillo 2001, no pet.) (submission of bad result instruction reviewed under abuse of discretion standard).
Husak contends that the statute does not apply because Dr. Dolce did not present evidence that he was a physician and Austin Periodontal Associates, Inc. did not present evidence that it was a hospital. (10) We agree. The former statute is expressly limited to jury trials "involving a health care liability claim against a physician or hospital." See former Tex. Rev. Civ. Stat. Ann. art. 4590i, § 7.02(a). Dr. Dolce testified that he was a dentist and periodontist and that he practiced his profession through Austin Periodontal Associates, Inc. A physician is defined as a "person licensed to practice medicine in this state" or a professional association or other legal entity organized by an individual physician or group of physicians. See Tex. Civ. Prac. & Rem. Code Ann. § 74.001(23) (West 2005); former Tex. Rev. Civ. Stat. Ann. art. 4590i, § 1.03(8), Act of June 16, 1977, 65th Leg., R.S., ch. 817, § 1.03, 1977 Tex. Gen. Laws 2039, 2041 (repealed Sept. 1, 2003). A hospital is defined as a duly licensed public or private institution as defined in chapter 241 of the health and safety code or licensed under chapter 577 of the health and safety code. See Tex. Civ. Prac. & Rem. Code Ann. § 74.001(16) (West 2005); former Tex. Rev. Civ. Stat. Ann. art. 4590i, § 1.03(5) (repealed Sept. 1, 2003). In these circumstances, we conclude that the trial court did not abuse its discretion in denying appellants' proposed instruction. See Louisiana-Pacific Corp. v. Knighten, 976 S.W.2d 674, 676 (Tex. 1998) (trial courts have great latitude and considerable discretion to determine necessary and proper jury instructions). We overrule Austin Periodontal's second issue.
Sufficiency of the Evidence
In the third issue, Austin Periodontal contends that the evidence was legally and factually insufficient to support the jury's judgment and damage award. Specifically, Austin Periodontal contends that the evidence was legally and factually insufficient to support the jury's finding of negligence because there was no evidence or insufficient evidence of (i) cause in fact, and (ii) the jury's findings on damages for physical pain and mental anguish sustained in the past, for future mental anguish, and for future physical impairment. We first consider whether the evidence was legally and factually sufficient to support the jury's finding of cause in fact.
1. Cause In Fact
Cause in fact is a component of proximate cause in a negligence action. See IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex. 2004). (11) Cause in fact is not established "where the defendant's negligence does no more than furnish a condition which makes the injuries possible." Id. at 799. Cause in fact is established "when the act or omission was a substantial factor in bringing about the injuries, and without it, the harm would not have occurred." Id. The "causal connection" must be "based upon 'reasonable medical probability,' not mere conjecture, speculation or possibility." Bradley v. Rogers, 879 S.W.2d 947, 954 (Tex. App.--Houston [14th Dist.] 1994, writ denied) (quoting Duff v. Yelin, 751 S.W.2d 175, 176 (Tex. 1988)). "Reasonable medical probability" means the injury "was more likely than not" a result of the negligent action. Id. at 954. To prove reasonable medical probability, reasonable inferences are permissible, and a plaintiff is not required to exclude every other reasonable hypothesis. Id.
Austin Periodontal contends that there is a lack of evidence of the location of Husak's lingual nerve when it was severed and of what actually caused the nerve's severance. Although Dr. Staley and Dr. Cohen testified Husak's injuries occurred from Dr. Dolce's actions that fell below the standard of care, Austin Periodontal contends that neither expert testified definitively to the actual action that caused the severance--whether it was the incision, the drilling, or some other action--or to the precise location that Husak's lingual nerve was severed on either side of her mouth. We conclude that the record contains more than a scintilla of evidence to support the jury's finding of cause in fact. See City of Keller, 168 S.W.3d at 810; Gragg, 151 S.W.3d at 552.
Dr. Cohen testified that in his opinion, based upon reasonable medical probability, Dr. Dolce's technique caused Husak's permanent damage. Dr. Cohen testified that Husak's injuries were caused by Dr. Dolce's procedures that fell below the standard of care, including the incisions that he made "straight back," his retraction of the lingual flap, the burring and the removal of bone on the lingual side, and traumatizing the tissue. Dr. Cohen testified that the line of scar tissue on the left side of Husak's mouth, the first side that he attempted to repair, was not consistent with a standard lateral incision and that the standard lateral approach should have avoided even the "most odd of anatomical variations." According to Dr. Cohen, the lingual nerve is in the same area in everyone's mouth but there are individual variations within that area and that the standard lateral incision is designed to avoid the known areas. The standard lateral incision is made over bone, goes back from the second molar, and curves toward the cheek or buccal to avoid the known areas. Dr. Cohen also testified that Dr. Dolce's injection of anesthesia made during the procedure and Husak's subsequent infection did not cause Husak's injuries to her lingual nerve.
On cross-examination, Dr. Dolce testified that he caused the severance of the nerve bilaterally during the procedure to remove Husak's third molars:
Q: And in the opening of this case a couple of days ago, your attorney stated that you never disputed that you caused Mrs. Husak's lingual nerve injury; is that correct?
A: Right.
Q: And do you agree?
A: I agree.
Q: And you agree that you did something that caused her injuries, correct?
A: Yes.
Dr. Mellonig also testified that Dr. Dolce's surgical instruments caused Husak's injury and that the lingual nerve was probably severed by the "blade of the knife" in the initial incision. He testified that was the only way to sever the nerve because "the nerve is very--very tough, so it had to be cut." Husak was not required to disprove every reasonable hypothesis of the cause in fact of the severance. See Bradley, 879 S.W.2d at 954. Husak also was not required to choose between alternative theories of how Dr. Dolce severed the nerve. See Webb v. Jorns, 488 S.W.2d 407, 410-11 (Tex. 1972) (plaintiff proved prima facie negligence case by evidence that cardiac arrest caused by overdose or lack of proper oxygenation of the patient). It was for the jury to resolve inconsistencies of any one witness to determine the cause of the injury. See McGilliard v. Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986); Webb, 488 S.W.2d at 411. We conclude the evidence was legally sufficient to support the jury's finding of cause in fact.
Reviewing all the evidence presented at trial, we also conclude that the evidence on cause in fact was not "so contrary to the overwhelming weight of the evidence as to be clearly wrong or unjust." See Cain, 709 S.W.2d at 176. Dr. Dolce testified on cross-examination that his sole defense was that Husak's injury occurred in the absence of negligence because Husak's nerve was in an aberrant location on both sides of her mouth:
Q: Now, you're claiming in this suit, as your only defense to you slicing through her nerves, that her nerves were aberrant on both sides. Correct?
A: Yes.
To support the aberrant location defense, appellants relied on Dr. Dolce's testimony and Dr. Cohen's surgery report from the attempted repair of the left side of Husak's mouth. Dr. Dolce testified that the body generally mirrors itself between the right and left side, and appellants contend that Dr. Cohen in his report found Husak's lingual nerve in an aberrant location on the left side--within the third molar socket. Based on the nerve's location within the third molar socket on the left side then, appellants contend that the location of Husak's lingual nerve on the right side also was in an aberrant location, and that the nerve was severed because it was in an aberrant location on both sides, not because Dr. Dolce was negligent. None of the experts, however, were aware of another case in which a patient's lingual nerve was severed bilaterally. The testimony also was disputed regarding the interpretation and implications of Dr. Cohen's statement in his report regarding the nerve's location in the scar tissue when he performed the subsequent repair. Dr Cohen testified that when he attempted the repair on the left side, he did not find an abnormal course of Husak's lingual nerve:
Q: When you dissected her nerve, did you find any abnormal course of her nerve on the left side?
A: No.
Dr. Cohen further provided extensive testimony that the procedure for removing third molars is designed to avoid all known aberrations. Dr. Staley also testified that the procedure is designed to avoid the lingual nerve, that the lingual nerve has never been demonstrated to be in the location Dr. Dolce claimed, and that if Husak's nerve was in that location, Husak would have been aware of the presence of the nerve because she would have experienced pain and discomfort in a manner inconsistent with her actual history. (12)
It was within the jury's province to conclude that Husak's nerve was located in a known area and to credit the expert opinion testimony that it was Dr. Dolce's procedures that fell below the standard of care that caused the injury. See Bronwell v. Williams, 597 S.W.2d 542, 546-47 (Tex. Civ. App.--Amarillo 1980, writ ref'd n.r.e.) (fact issue for jury's resolution whether common duct in normal or abnormal location); see also Grider v. Naaman, 83 S.W.3d 241, 245-46 (Tex. App.--Corpus Christi 2002), rev'd on other grounds, 126 S.W.3d 73, 74-75 (Tex. 2003) (judgment for defense in medical malpractice suit reversed because no evidence to support sole defense that patient had abnormal anatomy). The jury heard a range of expert testimony concerning the cause of Husak's injury. It was within the province of the jury to weigh the expert opinion testimony and to determine which expert witness should be credited. See Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003) (jury remains sole judge of witnesses' credibility and the weight to be given their testimony); McGilliard, 722 S.W.2d at 697 (jury can choose to believe one witness over other witnesses or resolve inconsistencies in their testimony). We conclude the evidence was legally and factually sufficient to support a finding of cause in fact. We next consider whether the evidence was legally and factually sufficient to support the jury's findings on damages.
2. Damages
Austin Periodontal contends that the evidence was legally and factually insufficient to support the damages award of $50,000 for physical pain and mental anguish sustained in the past, $200,000 for mental anguish that in reasonable probability Husak will sustain in the future, and $150,000 for physical impairment that in reasonable probability Husak will sustain in the future. Austin Periodontal's theory to the jury was that, although Husak suffered a severe injury, she has recovered and is now maintaining a lifestyle similar to that before her injury. Austin Periodontal contends that Husak does not intend to seek counseling for the injury, that she has regained some sensation and taste in her tongue after the surgery, that her eating habits are back to normal, that she took a course in conversational Japanese, and that she has decided to pursue a graduate degree. We conclude that the evidence is legally and factually sufficient to support the damages awarded.
As to the award of damages for physical pain, a jury is given considerable discretion in awarding amounts appropriate for such damages; there are no objective guidelines to assess the monetary equivalent of pain and suffering resulting from physical injury. See Living Ctrs. of Tex., Inc. v. Penalver, 217 S.W.3d 44, 54 (Tex. App.--San Antonio 2006, pet. dism'd). As to the award of damages for mental anguish, evidence of "'the nature, duration, and severity'" of a plaintiff's mental anguish and the substantial disruption of a plaintiff's daily routine support an award of damages for mental anguish. See Fifth Club, Inc. v. Ramirez, 196 S.W.3d 788, 797 (Tex. 2006) (evidence found legally sufficient to support damages for mental anguish; quoting Parkway Co. v. Woodruff, 901 S.W.2d 434, 444 (Tex. 1995)).
The award of $50,000 for past pain and mental anguish represents approximately $11,000 per year for the four and one-half years from the surgery to the time of trial. During that period, Husak had two subsequent operations to attempt the repair of her lingual nerve. Husak testified to her depression, pain, and anxiety during this period. She testified that she was unable to eat, sleep or open her mouth for weeks after the surgery and that she could not speak correctly for months despite having a job that required her to make presentations. Husak testified what it was like for her to eat after the surgery (13)--that she has no taste, that she cannot tell hot from cold, and that she has had to avoid many foods because, in trying to chew them, she cannot feel when she bites her tongue. She testified what it has been like for her to talk--that when she gets tired, she has a hard time enunciating words, and she bites her tongue and does not know it, causing blood to pool in her mouth. McCarthy testified about his observations of Husak's physical and mental condition before and after the surgery, and his testimony was consistent with Husak's. Based on this evidence, we conclude there was more than a scintilla of evidence to support the damage finding for past pain and mental anguish. See City of Keller, 168 S.W.3d at 810; Gragg, 151 S.W.3d at 552.
Reviewing all the evidence, we also conclude that the jury's finding is not "so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust." See Cain, 709 S.W.2d at 176. Austin Periodontal presented evidence that Husak stated during her treatment that she thought that her senses in her tongue were improving and that she has continued to lead an active life. Dr. Cohen, however, explained Husak's sensations during her treatment as "phantom." Husak's activities after her injury, including pursuing a graduate degree and taking conversational Japanese, do not negate the pain and the mental anguish that Husak experienced from her injury. We conclude the evidence was legally and factually sufficient to support the jury's damage award for past pain and mental anguish. (14)
As to the jury award of $200,000 for future mental anguish, the jury heard evidence that at the time of the trial, Husak was expected to live an additional 44.5 years. The amount awarded for future mental anguish represents approximately $4,500 per year for the remainder of her life. Dr. Staley testified that he tested Husak's sense of touch at the time of trial by blindfolding her and then sticking a needle in her tongue and that she did not flinch. Dr. Dolce witnessed the test and confirmed that she did not flinch. Dr. Cohen testified that the attempted repairs were unsuccessful, that Husak's injury was permanent, and what Husak's life will be like:
It's--it's just losing a part of your body. It's like if you don't have any feeling in your hand, and that--which most people could--I mean, like, if--when your hand falls asleep, it's pretty disconcerting that you look over and you touch it and you feel you touch it, but you don't feel that it's there. Well, how would that be if it was like that all the time.
Husak testified to her continued depression and anxiety. Husak testified that she is depressed by the smell of food, miserable and embarrassed and that "it's never going to end."
Because the injury is permanent, there was evidence that Husak's daily routine will remain disrupted and that she will continue to have mental anguish in the future, including from the broken burr that remains in her mouth. On this record, we conclude there is more than a scintilla of evidence to support the damage finding for future mental anguish. See City of Keller, 168 S.W.3d at 810; Gragg, 151 S.W.3d at 552. Although Austin Periodontal provided evidence that Husak does not intend to seek counseling, we conclude that the damage award for future mental anguish from Husak's injury is not "so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust." See Cain, 709 S.W.2d at 176.
As to the jury's award for future physical impairment of $150,000, this amount represents approximately $3,400 per year for the remainder of Husak's life. To recover damages for physical impairment, a plaintiff must show that the effect of the physical impairment is "substantial and extend[s] beyond any pain, suffering, mental anguish, lost wages, or diminished earning capacity." See Patlyek v. Brittain, 149 S.W.3d 781, 786 (Tex. App.--Austin 2004, pet. denied) (quoting Golden Eagle, 116 S.W.3d at 772). Recoverable damages for physical impairment include damages for the loss of a plaintiff's former lifestyle or "loss of enjoyment of life." See id. at 785 (quoting Golden Eagle, 116 S.W.3d at 764-65, 772). The focus is on a plaintiff's ability to engage in specific non-work related activities--whether the impediments are obvious or whether the plaintiff presented evidence of non-work activities that the plaintiff can no longer perform. Id. at 787.
Husak's impediments are obvious and substantial. After the surgery, Husak lost the ability to use her tongue for cleaning and for taste or to identify things in her mouth. At the time of trial, Husak testified that she continues to have difficulty eating and communicating. Husak also presented evidence that she no longer engages in non-work related activities that she participated in before her injuries. Husak and McCarthy described Husak's life prior to the severance of her lingual nerve as socially active, including her hobbies of going out to eat with friends, gourmet cooking, and strenuous exercise and bicycling. Husak testified that she no longer enjoys or participates in these hobbies. McCarthy testified that Husak's only hobby after the surgery is reading. We conclude that there is more than a scintilla of evidence to support the finding of damages for future physical impairment. See City of Keller, 168 S.W.3d at 810; Gragg, 151 S.W.3d at 552. Although Austin Periodontal provided evidence that Husak is pursuing a graduate degree and taking a conversational class in Japanese, we conclude that the damage award for future physical impairment is not "so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust." See Cain, 709 S.W.2d at 176.
Having found the evidence legally and factually sufficient to support the jury's finding of cause in fact and the amount of damages awarded, we overrule Austin Periodontal's third issue.
Scope of Employment
In the fourth issue, Austin Periodontal alleges that the trial court abused its discretion by ruling as a matter of law that Dr. Dolce was within the course and scope of his employment when he extracted Husak's third molars.
When reviewing a directed verdict on a material question presented, we determine whether there is any evidence of probative force that raises a fact issue. See Szczepanik v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex. 1994). We consider all the evidence in the light most favorable to the party against whom the verdict was directed, disregarding all contrary evidence and inferences and giving the party the benefit of all reasonable inferences created by the evidence. Id. If there is any conflicting evidence of probative value, the directed verdict is improper and the case must be reversed and remanded for jury determination of that issue. Id.
Husak sued Austin Periodontal Associates, Inc. as the legal entity vicariously liable for Dr. Dolce's negligent acts. Under the theory of respondeat superior, an employer may be vicariously liable for the negligent acts of its employee if the employee's actions are within the course and scope of employment. See Baptist Mem. Hosp. Sys. v. Sampson, 969 S.W.2d 945, 947 (Tex. 1998). During cross-examination, Dr. Dolce testified that he was employed by C. Leonard Dolce, D.D.S., Inc., at the time he performed the procedure on Husak, and that he was acting within the scope of his employment:
Q: Were you within the scope and employment of the corporation at the time?
A: Scope and employment? Yes. The corporation--I mean, I'm practicing my profession in the corporation.
Q: Right. And what I'm trying to get at is that you weren't doing something that you weren't supposed to be as an employee of the corporation at the time that you removed her teeth.
A: No.
Appellants did not offer contradictory evidence that Dr. Dolce was doing something other than practicing dentistry in the furtherance of his employer's business when he performed the procedure on Husak. (15) We conclude that the trial court did not abuse its discretion in ruling as a matter of law that Austin Periodontal Associates, Inc. was vicariously liable for Dr. Dolce's negligence. We overrule Austin Periodontal's fourth issue.
Informed Consent
In the fifth issue, Austin Periodontal contends that the trial court abused its discretion in refusing to admit the informed consent forms of Dr. Cohen and Dr. Dolce and evidence that Dr. Dolce provided Husak with an informed consent form before the procedure to extract her third molars. The consent forms included damage to nerves and numbness as inherent and potential risks. Austin Periodontal contends that this evidence was relevant to the issue of whether Husak's injury could have occurred in the absence of negligence.
But, Austin Periodontal was allowed to offer evidence of Husak's informed consent and the consent forms. The jury heard testimony from Dr. Dolce that Husak signed his consent form. The redacted consent forms of Dr. Cohen and Dr. Dolce were also admitted as exhibits, and the admitted portions of the forms included the listed risks. Dr. Dolce's redacted form included in the listed "Principle Risks and Complications" that the patient could have "transient but occasional permanent numbness of the . . . tongue." Similarly, Dr. Cohen's redacted form provided:
Dr. Cohen has explained to me that there are certain inherent and potential risks in any treatment plan or procedure, that may include, but not necessarily be limited to . . . [i]njury to the nerves of the jaw resulting in numbness or tingling of the lip, chin, gums, cheek, teeth and/or tongue on the operated side; this may persist for several weeks, months, or in remote instances permanently.
The record confirms that appellants were allowed to present this evidence (16) on informed consent and inherent risks to the jury to support their defensive theory that the injury could have occurred in the absence of negligence. (17)
We also cannot conclude that the trial court abused its discretion by redacting the consent forms of Dr. Dolce and Dr. Cohen or that any excluded evidence on informed consent was controlling on a material issue to support a finding that the exclusion probably resulted in an improper judgment. See Perez, 228 S.W.3d at 884. Husak's theories of recovery did not include that Dr. Dolce failed to inform her of the risks of the procedure. The controlling issue was not whether she received information about the risks of the procedure, but whether Dr. Dolce's negligence caused the severance of her lingual nerve. Austin Periodontal was allowed to present to the jury the language from both consent forms that a possible risk was permanent numbness to the tongue. We overrule Austin Periodontal's fifth issue.
CONCLUSION
Having overruled appellants' issues, we affirm the judgment.
__________________________________________
Jan P. Patterson, Justice
Before Justices Patterson, Puryear and Pemberton
Affirmed
Filed: January 25, 2008
1. According to the testimony at trial, the lingual nerve provides the sense of taste and touch to the anterior two-thirds of the tongue and is located on the tongue side of the lower third molars on both sides of the mouth. Third molars are commonly referred to as wisdom teeth and are the last tooth of the full set on each half of the jaw. Unless otherwise specified, we draw on trial testimony for technical/medical definitions and explanations.
2. We refer to appellants Austin Periodontal Associates, Inc. f/k/a C. Leonard Dolce, D.D.S., M.S., Inc. and Charles Leonard Dolce, D.D.S., M.S., individually and d/b/a Periodontal Associates collectively as "Austin Periodontal" or "appellants." We refer to appellant Charles Leonard Dolce, D.D.S., M.S., as "Dr. Dolce."
3. The crown lengthening did not involve Husak's third molars but two of her other teeth. Crown lengthening is a procedure that is designed to provide more tooth structure above the gum line before placing a crown on a tooth.
4. A burr is the rotary cutting portion of the drill.
5. The lingual nerve's location varies from person to person, but there are areas in the mouth where the lingual nerve is known to be located. The experts at trial agreed that the procedure for removing third molars is specifically designed to avoid the known areas.
6. The jury did not award any amount for disfigurement sustained in the past.
7. Dr. Cohen's testimony was presented by video deposition.
8. The question and answer that the trial court excluded concerned the other lingual nerve damage case in which Dr. Cohen was the lead surgeon:
Q: And you went further and said that you believe that the original treating, whether it be dentist or oral surgeon, was actually negligent in--
A: From what I--you know, from what I recall--because I know that case was involved in litigation also. I can't specifically tell you what I dictated into the operative report at that time or what my findings were or my records because it was quite a while ago.
9. The former statute read:
Sec. 7.02. JURY INSTRUCTION AUTHORIZED IN CERTAIN CASES.
(a) In a jury trial involving a health care liability claim against a physician or hospital for injury to or death of a patient in which the court determines that the following instruction is reasonably applicable to the facts, the court shall provide the following instruction in the court's charge to the jury:
"A finding of negligence may not be based solely on evidence of a bad result to the patient in question, but such a bad result may be considered by you, along with other evidence, in determining the issue of negligence; you shall be the sole judges of the weight, if any, to be given to any such evidence."
(b) Nothing in Subsection (a) of this section shall affect the existing law regarding the applicability or nonapplicability of the doctrine of res ipsa loquitur to a health care liability claim.
(c) The determination of whether the instruction authorized by Subsection (a) of this section is reasonably applicable to the facts shall be made by the trial court in its sole discretion, and such determination by the trial court shall be reviewable by an appellate court only for an abuse of such discretion.
Act of May 24, 1989, 71st Leg., R.S., ch. 1027, § 28, 1989 Tex. Gen. Laws 4128, 4145 (repealed Sept. 1, 2003) ("Jury Instruction Authorized in Certain Cases").
Because Husak filed suit prior to September 1, 2003, former article 4590i of the Medical Liability and Insurance Improvement Act governs. See Act of June 2, 2003, 78th Leg., R.S., ch. 204, § 23.02(d), 2003 Tex. Gen. Laws 847, 899 (prior law remains in effect for actions filed before September 1, 2003). Under the current statute, a trial court on "any action on a health care liability claim that is tried by a jury" must include a "bad result" instruction. See Tex. Civ. Prac. & Rem. Code Ann. § 74.303(e)(2) (West 2005).
10. Husak also argued to the trial court that a bad result instruction should not be given because the court had refused her requested res ipsa locutor instruction. She does not make this same argument on appeal.
11. The elements of a negligence cause of action are the existence of a legal duty, breach of that duty, and damages proximately caused by the breach. IHS Cedars Treatment Ctr. of DeSoto, Tex., Inc. v. Mason, 143 S.W.3d 794, 798 (Tex. 2004). The two elements of proximate cause are cause in fact and foreseeability. Id. The proximate cause instruction to the jury read:
"Proximate cause," when used with respect to the conduct of C. Leonard Dolce, D.D.S., M.S., means that cause which, in a natural and continuous sequence, produces an event, and without which cause such event would not have occurred. In order to be a proximate cause, the act or omission complained of must be such that a dentist using ordinary care would have foreseen that the event, or some similar event, might reasonably result therefrom. There may be more than one proximate cause of an event.
12. Dr. Staley testified:
And the nerve is not a small nerve. It's about the size of a piece of spaghetti. It's not like it's a fine hair of a nerve. If it happened to be in that area the patient would know it. Every time they chewed something hard back there; piece a crust, or something. And they happen to push on that they would feel a[n] electric shock on the tongue. The patient would know that. . . . The nerve has never been demonstrated to loop back there. It can be high. It can be low. Or it can be out this way, but it never comes up here. That's specifically the reason why the surgery for the incision part of it, has been designed to make the incision out there.
13. Husak testified as to her diet after the surgery:
Q: This may sound strange, but some people may think this is a neat diet. Can you tell me what kind of diet you think this is?
A: This is a forced diet for the rest of my life. I didn't need to lose any weight, and I have. And I don't have a choice now. I can't go off this diet. It's going to last forever.
Q: Can you tell me what tomatoes taste like?
A: They taste wet.
Q: What about bread?
A: Well, I can't even eat chunky bread, like French bread, because I run the risk of chomping on my tongue. But, in any case, there's no taste to it. It's just lumps.
Q: What about milk?
A: Milk tastes exactly the same as water.
Q: What about Diet Coke?
A: Tastes like bubbles.
Q: What about carrots?
A: Well, I have to chop them up very small, again, to make sure I'm not chomping on my tongue. I get some sort of a muted memory of a taste of them, but not--nothing like what it used to be.
* * *
Q: Do you order pizza anymore?
A: No.
Q: Why not?
A: There's a possibility of burning myself with the hot cheese, and I can't taste the cheese anyway. I can't taste the toppings properly. There's--there's just--it's too depressing. It's--there's no point.
* * *
Q: Would you tell the jury what it's like to live with a numb tongue, not able to tell hot or cold with your tongue, and not ever able to taste your food normally?
A: It's really miserable because I know that when I get older and my other senses aren't working so well, I'll get no pleasure out of my food. I get no pleasure out of it now. It's embarrassing to talk to people about, and it's never going to end.
14. In closing arguments, appellants' counsel suggested to the jury an award of $50,000 for past pain and mental anguish assuming a finding of negligence.
15. Dr. Dolce testified that he changed the entity that he practiced his profession through from C. Leonard Dolce, D.D.S., Inc. to Austin Periodontal Associates, Inc. shortly after Husak's operation. From his testimony, the entity at the time the procedure was performed was C. Leonard Dolce, D.D.S., Inc., and, at the time of trial, the entity was Austin Periodontal Associates, Inc. Appellees do not contend that Husak sued the incorrect employer.
16. To the extent appellants complain about the exclusion of other evidence on informed consent, we conclude that they failed to preserve error. See Tex. R. App. P. 33.1(a). During the motion in limine hearing, the trial court granted Husak's motion regarding evidence of informed consent, but rulings on motions in limine do not preserve error for appellate review. See Acord v. General Motors Corp., 669 S.W.2d 111, 116 (Tex. 1984). To preserve error, appellants were required to seek to admit the evidence during the evidentiary portion of the trial and to obtain an adverse ruling. See Tex. R. App. P. 33.1(a). This appellants did not do.
17. Appellants contend the trial court compounded its error on informed consent evidence during Dr. Cohen's testimony. Because Dr. Cohen referred to informed consent, appellants contend that the trial court erred by not allowing their request to introduce evidence that would have explained Dr. Cohen's references. But, the trial court stated that it would allow appellants to provide evidence to prevent the jury from being "left with the impression that Dr. Dolce did something wrong in not giving a consent form."
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