American Zurich Insurance Company v. Daniel Samudio

ACCEPTED

01-15-00478-CV

FIRST COURT OF APPEALS

HOUSTON, TEXAS

12/18/2015 10:19:04 AM

CHRISTOPHER PRINE

CLERK

No. 01-15-00478-CV

FILED IN

1st COURT OF APPEALS

In the First District Court of Appeals HOUSTON, TEXAS

Houston, Texas 12/18/2015 10:19:04 AM

________________ CHRISTOPHER A. PRINE

Clerk

AMERICAN ZURICH INSURANCE COMPANY,

Appellant,

v.

DANIEL SAMUDIO,

Appellee.

________________

ON APPEAL FROM THE 127TH JUDICIAL DISTRICT COURT

OF HARRIS COUNTY , TEXAS

TRIAL COURT CAUSE NO . 2006-18753

________________

BRIEF OF APPELLEE

________________

DOYLE LLP KEELING & DOWNES, P.C.

Michael P. Doyle Byron C. Keeling

State Bar No. 06095650 State Bar No. 11157980

mdoyle@doylelawfirm.com bck@keelingdownes.com

Patrick M. Dennis Anna E. Williams

State Bar No. 24045777 State Bar No. 24088638

pdennis@doylelawfirm.com aew@keelingdownes.com

2402 Dunlavy Street, Suite 200 1500 McGowen, Suite 220

Houston, Texas 77006 Houston, Texas 77004

Telephone: (713) 571-1146 Telephone: (832) 214-9900

Facsimile: (713) 571-1148 Facsimile: (832) 214-9908

Attorneys for Appellee Keith Morris,

as the administrator of the Estate of Daniel Samudio

IDENTITY OF PARTIES AND COUNSEL

Appellant:

American Zurich Insurance Company

Appellate and Trial Counsel:

Robert D. Stokes

David Owen Cluck

Greg D. Solcher

FLAHIVE, OGDEN & LATSON

P.O. Drawer 201329

Austin, Texas 78720

Telephone: (512) 435-2150

Facsimile: (512) 867-1705

Appellee:

Keith Morris, as Administrator of the Estate of Daniel Samudio

Appellate and Trial Counsel:

Byron C. Keeling Michael P. Doyle

Anna E. Williams Patrick M. Dennis

KEELING & DOWNES, P.C. DOYLE LLP

1500 McGowen, Suite 220 2402 Dunlavy Street, Suite 200

Houston, Texas 77004 Houston, Texas 77006

Telephone: (832) 214-9900 Telephone: (713) 571-1146

Facsimile: (832) 214-9908 Facsimile: (713) 571-1148

Brief of Appellee i

TABLE OF CONTENTS

Page

Index of Authorities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Reference Citation Guide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix

Statement Regarding Oral Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x

Statement of the Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi

Issues Presented.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xii

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Statement of Facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Summary of Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Standard of Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

I. The Trial Court Correctly Ruled that Dr. Machado’s 20%

Impairment Rating Conformed With the AMA Guides. . . . . . . . . . . 11

A. The Evidence of Samudio’s Impairment Supports

Dr. Machado’s 20% Impairment Rating. . . . . . . . . . . . . . . . . 12

B. The Trial Court Had No Discretion to Adopt Any

Impairment Rating Other Than Dr. Machado’s 20%

Rating. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

C. Zurich’s Attacks on Dr. Machado’s 20% Impairment

Rating for Samudio Are Irrelevant.. . . . . . . . . . . . . . . . . . . . . 19

Brief of Appellee ii

TABLE OF CONTENTS (cont’d)

Page

II. The Trial Court Did Not Err in Declining to Formally

Remand Samudio’s Impairment Rating to the DWC for a

New Determination.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

A. The Trial Court Had No Basis for Remanding

Samudio’s Impairment Rating to the DWC After

Samudio Died. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

B. The Trial Court Had No Basis for Remanding

Samudio’s Impairment Rating to the DWC After

Samudio Received All of His Benefits. . . . . . . . . . . . . . . . . . 31

III. The Trial Court Correctly Ordered Zurich to Pay Samudio’s

Reasonable and Necessary Attorney’s Fees. . . . . . . . . . . . . . . . . . . . 34

A. Samudio Was the Prevailing Party on the Issue for

Which Zurich Sought Judicial Review. . . . . . . . . . . . . . . . . . 36

B. Samudio is Entitled to Recover Attorney’s Fees for His

Counsel’s Work in Defending Against Zurich’s First

Appeal.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

C. Samudio is Entitled to Recover Attorney’s Fees for His

Counsel’s Work in Defending the Trial Court’s Fee

Awards. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Certificate of Service.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Certificate of Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Brief of Appellee iii

INDEX OF AUTHORITIES

Cases Page(s)

American Zurich Ins. Co. v. Samudio,

370 S.W.3d 363 (Tex. 2012).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

Arthur Andersen v. Perry Equip. Corp.,

945 S.W.2d 812 (Tex. 1997).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Austin v. Weems,

337 S.W.3d 415 (Tex. App.—Houston [1st Dist.] 2011, no pet.). . . . . . . . 20

Ballard v. Arch Ins. Co.,

No. 14-14-00647-CV, 2015 WL 6560531

(Tex. App.—Houston [14th Dist.] Oct. 29, 2015, no pet. h.).. . . . . 18, 19, 20

Cervantes v. New Hampshire Ins. Co.,

No. 04-12-00722-CV, 2013 WL 3486824

(Tex. App.—San Antonio July 10, 2013, pet. denied). . . . . . . . . . . . . . . . . 31

City of Tyler v. St. Louis S.W. Ry. Co.,

405 S.W.2d 330 (Tex. 1966).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Commissioner v. Jean,

496 U.S. 154 (1990). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Dean Foods Co. v. Anderson,

178 S.W.3d 449 (Tex. App.—Amarillo 2005, pet. denied). . . . . . . 36, 37, 40

Discover Prop. & Cas. Ins. Co. v. Tate,

298 S.W.3d 249 (Tex. App.—San Antonio 2009, pet. denied). . . . . . . . . . 40

Entergy Gulf States, Inc. v. Summers,

282 S.W.3d 433 (Tex. 2009).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Fin. Ins. Co. v. Ragsdale,

166 S.W.3d 922 (Tex. App.—El Paso 2005, no pet.).. . . . . . . . . . . . . . . . . 34

Brief of Appellee iv

INDEX OF AUTHORITIES (cont’d)

Cases Page(s)

FM Properties Operating Co. v. City of Austin,

22 S.W.3d 868 (Tex. 2000).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

G & H Towing Co. v. Magee,

347 S.W.3d 293 (Tex. 2011).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Helfman Motors, Inc. v. Stockman,

616 S.W.2d 394 (Tex. App.—Fort Worth 1981, writ ref’d n.r.e.). . . . . . . . 38

In re Estate of Pilkilton,

No. 05-11-00246, 2013 WL 485773

(Tex. App.—Dallas Feb. 6, 2013, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . 20

In re Gallardo,

No. 13-14-00203-CV, 2015 WL 730920

(Tex. App.—Corpus Christi Feb. 19, 2015, no pet.). . . . . . . . . . . . . . . . . . 33

Insurance Co. of the State of Pa. v. Orosco,

170 S.W.3d 129 (Tex. App.—San Antonio 2005, no pet.). . . . . . . . . . . . . 36

Liberty Mut. Ins. Co. v. Adcock,

412 S.W.3d 492 (Tex. 2013).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26, 27

Liberty Mut. Ins. Co. v. Montana,

49 S.W.3d 599 (Tex. App.—Fort Worth 2001, no pet.).. . . . . . . . . . . . . . . 38

Lumbermens Mut. Cas. Co. v. Portillo,

No.13-10-00470-CV, 2011 WL 2976869

(Tex. App.—Corpus Christi July 21, 2011, no pet.). . . . . . . . . . . . . . . . . . 34

Nauslar v. Coors Brewing Co.,

170 S.W.3d 242 (Tex. App.—Dallas 2005, no pet.). . . . . . . . . . . . . . . . . . 34

OHBA Corp. v. City of Carrollton,

203 S.W.3d 1 (Tex. App.—Dallas 2006, pet. denied). . . . . . . . . . . . . . . . . 32

Brief of Appellee v

INDEX OF AUTHORITIES (cont’d)

Cases Page(s)

Old Republic Ins. Co. v. Rodriguez,

966 S.W.2d 208 (Tex. App.—El Paso 1998, no pet.).. . . . . . . . . . . . . . . . . 14

Old Republic Ins. Co. v. Stafford,

No. Civ. A. 3:03-CV-1611, 2005 WL 2026853

(N.D. Tex. Aug. 22, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Phillips v. Bramlett,

407 S.W.3d 229 (Tex. 2013).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Public Util. Comm’n v. City Pub. Serv. Bd.,

53 S.W.3d 368 (Tex. 2001).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Rodriguez v. Service Lloyds Ins. Co.,

997 S.W.2d 248 (Tex. 1999).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Russell v. Russell,

No. 14-13-01100-CV, 2015 WL 5723109

(Tex. App.—Houston [14th Dist.] Sept. 29, 2015, no pet. h.). . . . . . . . . . . 28

State Bar of Tex. v. Gomez,

891 S.W.2d 243 (Tex. 1994).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

State Office of Risk Mgmt. v. Joiner,

363 S.W.3d 242 (Tex. App.—Texarkana 2012, pet. denied).. . . . . . . . 12, 17

State Office of Risk Mgmt. v. Ramirez,

No. 04-09-00541-CV, 2010 WL 2601667 (Tex. App.—San Antonio

June 20, 2010, pet. denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Texas Dep’t of Ins., Workers’ Comp. Div. v. De Los Santos,

446 S.W.3d 800 (Tex. App.—San Antonio 2014, no pet.). . . . . . . . . . . . . 33

Texas Dept. of Ins., Div. of Workers’ Comp. v. Lumbermens Mut. Cas. Co.,

212 S.W.3d 870 (Tex. App.—Austin 2006, pet. denied). . . . . . . . . . . . . 9, 10

Brief of Appellee vi

INDEX OF AUTHORITIES (cont’d)

Cases Page(s)

Texas Dep’t of Parks & Wildlife v. Miranda,

133 S.W.3d 217 (Tex. 2004).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Texas Mun. League Intergovernmental Risk Pool v. Burns,

209 S.W.3d 806 (Tex. App.—Fort Worth 2006, no pet.).. . . . . . . . . . . 42-43

Texas Nat. Res. Comm’n v. Lakeshore Util. Co.,

164 S.W.3d 368 (Tex. 2005).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Texas Workers’ Comp. Comm’n v. Texas Builders Ins. Co.,

994 S.W.2d 902 (Tex. App.—Austin 1999, pet. denied). . . . . . . . . . . . . . . 32

Texas Workers’ Comp. Comm’n v. Garcia,

893 S.W.2d 504 (Tex.1995). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim

Transcontinental Ins. Co. v. Crump,

274 S.W.3d 86 (Tex. App.—Houston [14th Dist.] 2008),

rev’d on other grounds, 330 S.W.3d 211 (Tex. 2010). . . . . . . . . . . . . . . . . 42

Twin City Fire Ins. Co. v. Vega-Garcia,

223 S.W.3d 762 (Tex. App.—Dallas 2007, pet. denied). . . . . . . . . . . . . . . 36

Statutes

28 TEX. ADMIN CODE § 130.1 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . . . . 24, 29

TEX. LABOR CODE ANN. § 401.011 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . . . . 7

TEX. LABOR CODE ANN. § 403.006 (Vernon Supp. 2015). . . . . . . . . . . . . . . . 31, 33

TEX. LABOR CODE ANN. § 408.041 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . . . 33

TEX. LABOR CODE ANN. § 408.083 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . . . 32

TEX. LABOR CODE ANN. § 408.122 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . . . . 3

Brief of Appellee vii

INDEX OF AUTHORITIES (cont’d)

Statutes Page(s)

TEX. LABOR CODE ANN. § 408.123 (Vernon Supp. 2015). . . . . . . . . . 24, 25, 29, 30

TEX. LABOR CODE ANN. § 408.124 (Vernon Supp. 2015). . . . . . . . . . . . . . . passim

TEX. LABOR CODE ANN. § 408.143 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . . . 33

TEX. LABOR CODE ANN. § 408.147 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . . . 33

TEX. LABOR CODE ANN. § 408.221 (Vernon Supp. 2015). . . . . . . . . . . . . 35, 38, 41

TEX. LABOR CODE ANN. § 410.209 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . . . 31

TEX. LABOR CODE ANN. § 410.210 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . . . 31

TEX. LABOR CODE ANN. § 410.302 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . . . . 8

TEX. LABOR CODE ANN. § 410.306 (Vernon Supp. 2015). . . . . . . . . . . . . . . . . 9, 18

Other

American Medical Association Guides to the Evaluation

of Permanent Impairment § 2.1 (4th ed. 1993). . . . . . . . . . . . . . . . . . . . . . 25

Div. Workers’ Comp., Appeal No. 061713-s, 2006 WL 3064080

(Oct. 20, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Div. Workers’ Comp., Appeal No. 061940, 2006 WL 3187285

(Oct. 25, 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Tex. Workers’ Comp. Comm’n, Appeal No. 042108-s, 2004 WL 2421582

(Oct. 20, 2004). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Tex. Workers’ Comp. Comm’n, Appeal No. 051587, 2005 WL 2507672

(Aug. 22, 2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Brief of Appellee viii

REFERENCE CITATION GUIDE

The Parties

This Brief may refer to the parties as follows:

Appellant American Zurich Insurance

Company “Appellant” or “Zurich”

Appellee Keith Morris, as the

administrator of the

Estate of Daniel Samudio “Appellee” or “Samudio”

The Record on Appeal

This Brief will refer to the record as follows:

Clerk’s Record “CR __”

First Supplemental Clerk’s Record “I Supp. __”

Reporter’s Record “RR __”

Zurich’s Brief of Appellant “App’t Br. at __”

Brief of Appellee ix

STATEMENT REGARDING ORAL ARGUMENT

Appellee Keith Morris, as the administrator of the Estate of Daniel Samudio,

respectfully submits that oral argument is unnecessary in this case. This case presents

no novel issues of law or fact, and this Court may easily resolve the case on the briefs

and the record. Nonetheless, if the Court sets the case for oral argument, Appellee

would request the opportunity to participate in the oral argument.

Brief of Appellee x

STATEMENT OF THE CASE

Nature of the Case: This case is a judicial review of an impairment

rating that the Division of Worker’s Compensation

assigned to Samudio in 2006. (CR 129).

Trial Court: The Honorable R.K. Sandill, 127th Judicial District

Court, Harris County, Texas.

Course of Proceedings: The trial court originally entered a judgment in

Samudio’s favor back in 2008. This Court affirmed

the trial court’s judgment, but on June 29, 2012, the

Texas Supreme Court reversed this Court’s

judgment and remanded the case back to the trial

court. Samudio passed away on August 7, 2013, and

Appellant continued the case against Keith Morris,

the administrator of Samudio’s estate. (CR 18, 21).

On December 12, 2013, Appellant filed a motion for

summary judgment. (CR 10). On May 22, 2014,

Samudio filed a cross-motion for summary

judgment. (CR 845).

Trial Court’s Disposition: On October 7, 2014, the trial court signed an order

granting Samudio’s cross-motion for summary

judgment and implicitly denying Appellant’s motion

for summary judgment. (CR 922) (attached at Tab

A). After the parties agreed to submit the issue of

attorney’s fees to the trial court, the trial court

signed a final judgment in Samudio’s favor. The

trial court’s judgment awarded attorney’s fees to

Samudio under Section 408.221 of the Texas Labor

Code. (CR 1346) (attached at Tab B).

Brief of Appellee xi

ISSUES PRESENTED

Pursuant to Rule 38.2(a) of the Texas Rules of Appellate Procedure, Samudio

objects to Appellant’s characterization of the issues presented in this appeal.

Samudio identifies the following issues:

1. Did the trial court correctly comply with this Court’s mandate of August

21, 2012, on remand from the Texas Supreme Court?

2. Did the trial court correctly grant Samudio’s motion for summary

judgment and deny Appellant’s cross-motion for summary judgment?

3. Did the trial court correctly order Appellant to pay Samudio’s

reasonable and necessary attorney’s fees under Section 408.221 of the

Texas Labor Code?

Brief of Appellee xii

No. 01-15-00478-CV

In the First District Court of Appeals

Houston, Texas

________________

AMERICAN ZURICH INSURANCE COMPANY,

Appellant,

v.

DANIEL SAMUDIO,

Appellee.

________________

ON APPEAL FROM THE 127TH JUDICIAL DISTRICT COURT

OF HARRIS COUNTY , TEXAS

TRIAL COURT CAUSE NO . 2006-18753

________________

BRIEF OF APPELLEE

________________

TO THE HONORABLE JUSTICES OF THE FIRST COURT OF APPEALS:

Appellee Keith Morris, as the administrator of the Estate of Daniel Samudio,

respectfully files this Brief of Appellee in support of his request that this Court affirm

the trial court’s final judgment in Cause No. 2006-18753, American Zurich Insurance

Company v. Daniel Samudio, in the 127th Judicial District Court of Harris County,

Texas. The trial court correctly granted summary judgment in Samudio’s favor and

properly awarded attorney’s fees to Samudio.

Brief of Appellee xiii

INTRODUCTION

This case — an action seeking judicial review of an impairment rating for a

workers’ compensation claimant — has a long procedural history. In a prior appeal,

the Texas Supreme Court remanded the case to the trial court with instructions that

the trial court determine whether a valid impairment rating had ever been presented

to the DWC and, if not, that it send the case back to the DWC for a new impairment

rating.

On remand, the trial court granted summary judgment in Samudio’s favor,

agreeing with Samudio that while the DWC’s designated doctor may have used an

improper methodology to calculate a 20% impairment rating for Samudio, the

doctor’s 20% rating was nonetheless a valid rating. Other evidence presented to the

DWC showed that Samudio had suffered a compression fracture of greater than 50%,

and such an injury requires a 20% rating.

And by the time the case reached the trial court on remand, it was no longer

possible to remand the case to the DWC. Samudio passed away on August 7, 2013.

The DWC cannot assess a new impairment rating on a dead claimant.

Because Samudio and his counsel prevailed on the issue for which Zurich

sought judicial review, Samudio was entitled to recover his reasonable and necessary

attorney’s fees, which the trial court properly awarded. This Court should affirm the

trial court’s judgment in Samudio’s favor.

Brief of Appellee 1

STATEMENT OF FACTS

Pursuant to Rule 38.2(a)(1)(B) of the Texas Rules of Appellate Procedure,

Samudio offers the following Statement of Facts:

The Injury

On October 16, 2001, Samudio fell backwards from a ladder in the course of

a job that he was performing for his employer, HC Beck, Ltd. (CR 654). Samudio

suffered injuries to his head, back, and left arm. (CR 660, 556). His back injuries

were especially severe. (CR 654).

On October 27, 2001, Samudio underwent an MRI, which revealed that he had

suffered a compression fracture at his L1 and L2 discs. (CR 556). Samudio was later

diagnosed with lumbar radicular syndrome, post-traumatic instability at his L1 to L3

discs, and spinal stenosis from his T11 to L3 discs. (CR 556-557). Over the next two

years, Samudio had four surgeries to repair his injured back, including a laminectomy

and a multilevel spinal fusion. (CR 557-558).

DWC Proceedings

Because of his extensive injuries, Samudio sought workers’ compensation

benefits. (CR 31-33). The Division of Workers’ Compensation (“DWC”) appointed

a designated doctor, Dr. Gaston Machado, to determine the extent of Samudio’s

Brief of Appellee 2

injuries, and Dr. Machado assigned Samudio a 20% impairment rating. (CR 33).1

Zurich never evaluated Samudio, nor did it go through any of the steps necessary to

create a viable, alternative impairment rating for Samudio. (CR 33). Consistent with

Dr. Machado’s findings, the DWC ruled that Samudio had suffered a 20% impairment

rating and ordered that Zurich pay benefits accordingly. (CR 33).

The Ensuing Litigation

Zurich filed the present action on March 22, 2006. (CR 129). In Zurich’s

Original Petition, Zurich asked the trial court to set aside the DWC’s decision in

Samudio’s favor, asserting that Dr. Machado’s 20% impairment rating violated the

AMA Guides to the Evaluation of Permanent Impairment and was therefore invalid.

Zurich requested that the trial court either hold that Samudio had no impairment

rating at all or determine that Samudio’s impairment rating was 10% rather than 20%.

(Id.).

On August 7, 2007, Samudio filed a motion to dismiss Zurich’s lawsuit for lack

of jurisdiction. Samudio argued that Zurich’s claims raised no justiciable controversy

because (i) the Texas Labor Code required a court to adopt one of the impairment

ratings that the parties had presented to the DWC and (ii) the only rating that any

1

Effective September 1, 2005, the operations of the former Texas Workers’ Compensation

Commission became the responsibility of the Texas Department of Insurance Division of Workers’

Compensation. TEX . LABOR CODE ANN . § 402.001(b) (Vernon Supp. 2015). Any reference in the

Texas Labor Code to the former TWCC is presumed to refer to the current DWC. Id. § 401.025.

This brief will use DWC to refer both to the former TWCC and the current DWC.

Brief of Appellee 3

party had ever presented to the DWC was Dr. Machado’s impairment rating. The trial

court signed an order granting Samudio’s motion to dismiss. (See CR 6). This Court

affirmed the trial court’s order.2

On June 29, 2012, the Texas Supreme Court reversed this Court’s judgment

and remanded the case back to the trial court. (CR 891).3 The supreme court stated:

While [the Texas Labor Code] limits the evidence that a trial court may

consider in reviewing an impairment rating assigned by the Division and

precludes the court from assigning a rating that was not presented to the

agency, it does not prevent the court from setting aside an invalid rating

and remanding to the Division for further proceedings.

(CR 896). The supreme court directed the trial court to determine on remand whether

any of the parties had presented to the DWC an impairment rating consistent with the

AMA Guides to the Evaluation of Permanent Impairment and, if not, to remand the

case to the DWC for a new impairment determination. (Id.).

Procedural History on Remand

Daniel Samudio died on August 7, 2013. (CR 18). After Samudio’s counsel

filed a suggestion of death, Zurich amended its pleadings to assert its claims against

Keith Morris, the administrator of Samudio’s estate. (CR 21).

2

American Zurich Ins. Co. v. Samudio, 317 S.W.3d 336, 349 (Tex. App.—Houston [1st Dist.]

2010), rev’d, 370 S.W.3d 363 (Tex. 2012).

3

American Zurich Ins. Co. v. Samudio, 370 S.W.3d 363, 369 (Tex. 2012).

Brief of Appellee 4

Subsequently, both Zurich and Samudio filed motions for summary judgment.

(CR 10, 845). The trial court granted Samudio’s motion for summary judgment. (CR

922).

The parties agreed to submit the issue of Samudio’s reasonable and necessary

attorney’s fees to the trial court. (CR 1346). On February 27, 2015, the trial court

signed a final judgment awarding $80,519.53 in trial fees, $49,000.00 in appellate

fees for the first appeal, and up to $60,000 in appellate fees for Zurich’s current

appeal. (Id.).

SUMMARY OF ARGUMENT

The trial court correctly granted Samudio’s motion for summary judgment.

The Texas Supreme Court directed the trial court on remand to determine whether the

parties had presented to the DWC an impairment rating that conformed with the AMA

Guides. Consistent with the supreme court’s mandate, the trial court determined that

even though the DWC’s designated doctor, Dr. Gaston Machado, had improperly

relied on DWC advisories in calculating his 20% impairment rating for Samudio, Dr.

Machado’s 20% impairment rating nonetheless conformed with the AMA Guides

because evidence that the parties presented to the DWC was sufficient to show that

Samudio had suffered a compression fracture of greater than 50% — an injury that

warrants a 20% rating under the AMA Guides.

Brief of Appellee 5

Moreover, the trial court correctly ordered Zurich to pay Samudio’s reasonable

and necessary attorney’s fees. Under Section 408.221(c) of the Labor Code, an award

of attorney’s fees is mandatory to a claimant who prevails on an issue for which a

carrier sought judicial review. Zurich sought judicial review of the DWC’s decision

holding that Samudio had a 20% impairment rating. Samudio was the prevailing

party on that issue. And because Section 408.221 permits a prevailing claimant to

recover the fees that he incurs “as a result” of a carrier’s unsuccessful judicial review

proceeding, a claimant may recover all of the fees that he incurs “as a result” of a

carrier’s appeal from a DWC decision, including those fees necessary to enforce his

right under Section 408.221 to recover his attorney’s fees.

Zurich’s arguments in this appeal have no merit. Accordingly, this Court

should affirm the trial court’s judgment in Samudio’s favor.

STANDARD OF REVIEW

Zurich and Samudio filed competing motions for summary judgment. “When

both sides move for summary judgment and the trial court grants one motion and

denies the other, the reviewing court should review both sides’ summary judgment

evidence and determine all questions presented.” FM Properties Operating Co. v.

City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). “The reviewing court should render

the judgment that the trial court should have rendered.” Id. If the trial court’s

summary judgment does not specify the grounds for its judgment, “the reviewing

Brief of Appellee 6

court must affirm summary judgment if any of the summary judgment grounds are

meritorious.” Id.

ARGUMENT

A claimant, like Samudio here, may receive impairment income benefits from

his employer’s workers’ compensation carrier if he continues to have an impairment

even after reaching maximum medical improvement. TEX. LABOR CODE ANN. §§

401.011(24), 408.124 (Vernon Supp. 2015). The amount of the claimant’s benefits

will depend on his “impairment rating,” a percentage which expresses the extent to

which the claimant’s injury permanently impaired his body. Id. § 408.124. “The

greater this percentage, the greater the amount the employee receives as impairment

income benefits.” Rodriguez v. Service Lloyds Ins. Co., 997 S.W.2d 248, 253 (Tex.

1999).

The DWC will typically assign a “designated doctor” to examine the claimant

and calculate the claimant’s impairment rating. TEX. LABOR CODE ANN. § 408.124

(Vernon Supp. 2015). The claimant and the carrier may retain their own respective

physicians to examine the claimant and calculate an impairment rating. Texas

Workers’ Comp. Comm’n v. Garcia, 893 S.W.2d 504, 513 (Tex. 1995). Whether it

comes from a designated doctor or from one of the parties’ physicians, any

impairment rating must comply with the requirements of the AMA Guides to the

Brief of Appellee 7

Evaluation of Permanent Impairment. TEX. LABOR CODE ANN. § 408.124(c) (Vernon

Supp. 2015).

The DWC has exclusive jurisdiction to resolve any dispute over the proper

impairment rating for a claimant. Id. § 408.124. In a contested case hearing that

raises such a dispute, the designated doctor’s impairment rating carries presumptive

weight. Id. § 408.125(c). The claimant or carrier may try to rebut this presumption

by offering an impairment rating from one of their own physicians. The DWC may

not arbitrarily assess an impairment rating for the claimant. If the preponderance of

medical evidence is contrary to the designated doctor’s impairment rating, the DWC

must adopt one of the impairment ratings that it receives from “one of the other

doctors.” Id. See Garcia, 893 S.W.2d at 514.

A party may seek judicial review of an impairment rating. Under Section

410.303 of the Labor Code, a party who seeks judicial review of an impairment rating

bears the burden of proving his challenge by a preponderance of the evidence. TEX.

LABOR CODE ANN. § 410.303 (Vernon Supp. 2015). The trial court in such a judicial

review proceeding must review a DWC’s impairment rating for a claimant under a

modified de novo standard. Garcia, 893 S.W.2d at 528. The modified de novo

standard in Section 410.303 of the Labor Code restricts the factfinder’s discretion to

decide the relevant fact issues. Id.

Brief of Appellee 8

Specifically, the trial court, like the DWC, may not arbitrarily assess an

impairment rating for a claimant. The trial court — or, as appropriate, a jury as the

finder of fact — must adopt one of the impairment ratings that the designated doctor

or one of the parties’ physicians actually presented to the DWC. Id. § 410.306(c).

As the Texas Supreme Court explained in Garcia:

[T]he jury is required to adopt the specific impairment rating arrived at

by one of the physicians in the case. . . . For example, if three doctors

testify, respectively opining that the claimant is 10, 14, and 20 percent

impaired, the jury must return one of those three numbers as its verdict.

It may not consider the entirety of the testimony to find, for example, an

impairment rating of 16 percent.

Garcia, 893 S.W.2d at 528.

Here, the only impairment rating in evidence at the contested case hearing was

Dr. Machado’s 20% impairment rating. (CR 32).

Both then and now, the DWC required that physicians use the fourth edition

of the AMA Guides to calculate an impairment rating. See TEX. LABOR CODE ANN.

§ 408.124(c) (Vernon Supp. 2008). Because the medical community had expressed

concerns about how to apply the AMA Guides to patients who had undergone spinal

fusion surgery, the DWC issued two bulletins, Advisories 2003-10 and 2003-10b,

recommending that physicians assign Category DRE IV — equivalent to a 20%

impairment rating — to any patients who received a multilevel fusion.4 At the time,

4

See Texas Dep’t of Ins. v. Lumbermens Mutual Cas. Co., 212 S.W.3d 870 (Tex. App.—

Austin 2006, pet. denied) (discussing the history of the advisories).

Brief of Appellee 9

Dr. Machado was required to — and therefore did — consider the advisories in

calculating his impairment rating for Samudio. (CR 32).5

After the DWC issued its opinion finding that Samudio had a 20% impairment

rating, and after Zurich filed this lawsuit seeking judicial review, the Austin Court of

Appeals held that the DWC had acted outside its authority in issuing Advisories

2003-10 and 2003-10b. Texas Dep’t of Ins. v. Lumbermens Mutual Cas. Co., 212

S.W.3d 870 (Tex. App.—Austin 2006, pet. denied). The court in Lumbermens ruled

that the advisories were invalid. Id. at 877. Subsequently, on July 18, 2007, the

DWC issued a bulletin stating that Advisories 2003-10 and 2003-10b “shall no longer

be used in determining impairment ratings.” Commissioner’s Bulletin B-0033-07,

July 18, 2007.

When the present case reached the Texas Supreme Court, the supreme court

ruled that the trial court could properly exercise jurisdiction over Zurich’s judicial

review proceeding even though Dr. Machado’s 20% rating was the only impairment

rating in evidence before the DWC. American Zurich Ins. Co. v. Samudio, 370

S.W.3d 363, 364 (Tex. 2012). The supreme court directed the trial court on remand

to determine whether any impairment rating in conformance with the fourth edition

5

The DWC required that a certifying physician consider the advisories in calculating an

impairment rating for a claimant who had undergone a multilevel spinal fusion. See, e.g., Div.

Workers’ Comp., Appeal No. 061940, 2006 WL 3187285, *2 (Oct. 25, 2006); Div. Workers’ Comp.,

Appeal No. 061713-s, 2006 WL 3064080, *5 (Oct. 20, 2006); Tex. Workers’ Comp. Comm’n,

Appeal No. 051587, 2005 WL 2507672, *1 (Aug. 22, 2005); Tex. Workers’ Comp. Comm’n, Appeal

No. 042108-s, 2004 WL 2421582, *2 (Oct. 20, 2004).

Brief of Appellee 10

of the AMA Guides was presented to the DWC and, if not, to remand the matter to

the DWC for a new impairment determination. Id. at 369.

On remand, the trial court correctly determined that even though Dr. Machado

considered Advisories 2003-10 and 2003-10b in calculating his impairment rating for

Samudio, Dr. Machado’s 20% impairment rating nonetheless conformed with the

fourth edition of the AMA Guides.

I. The Trial Court Correctly Ruled that Dr. Machado’s 20% Impairment

Rating Conformed With the AMA Guides

The trial court on remand did exactly what it was supposed to do under the

Texas Supreme Court’s mandate. Under the supreme court’s mandate, the trial court

was to determine whether a “rating made in conformance with the Guides was

presented to the agency.” Samudio, 370 S.W.3d at 369. On May 22, 2014, Samudio

filed a motion for summary judgment arguing, among other things, that the evidence

conclusively established that Dr. Machado’s 20% impairment rating conformed with

the fourth edition of the AMA Guides. (CR 845). The trial court granted Samudio’s

motion, effectively determining that Dr. Machado’s rating, which was indisputably

presented to the DWC, conformed with the AMA Guides. (CR 922).

Zurich argues that because Dr. Machado considered Advisories 2003-10 and

2003-10b in calculating his impairment rating for Samudio, Dr. Machado’s 20%

impairment rating is necessarily invalid. See App’t Br. at 16. But the fact that Dr.

Brief of Appellee 11

Machado relied upon the advisories in calculating his impairment rating does not

mean that his 20% rating is inconsistent with the AMA Guides. The advisories relate

to spinal fusions. There are other conditions besides multilevel fusions that may give

rise to a 20% impairment rating under the AMA Guides. As Samudio noted in his

motion for summary judgment, “it is undisputed that a vertebral compression fracture

greater than 50% (i.e., 50.0000001% or greater) entitles a workers’ compensation

claimant to a 20% impairment rating.” (CR 845-46).6

The summary judgment evidence shows that Samudio suffered a vertebral

compression fracture of greater than 50%. Thus, the trial court correctly ruled that

Dr. Machado’s 20% impairment rating conformed with the AMA Guides.

A. The Evidence of Samudio’s Impairment Supports Dr. Machado’s 20%

Impairment Rating

In remanding this case, the Texas Supreme Court tasked the trial court with a

“purely legal” question — to determine “whether the proffered rating was made in

accordance with statutory requirements.” Samudio, 370 S.W.3d at 368. In resolving

that “purely legal” question, the trial court did not need to approve Dr. Machado’s

methodology or to agree with all of Dr. Machado’s factual or legal assumptions. See

State Office of Risk Mgmt. v. Joiner, 363 S.W.3d 242, 247 (Tex. App.—Texarkana

6

Zurich does not deny that a compression fracture of greater than 50% requires a 20%

impairment rating. Dr. Casey Cochran, one of Zurich’s experts, admitted as much in his deposition.

(CR 888).

Brief of Appellee 12

2012, pet. denied). Rather, the trial court needed only to determine whether Dr.

Machado’s 20% impairment rating for Samudio conformed with the AMA Guides.

Samudio, 370 S.W.3d at 369.

On remand, Keith Morris, as the administrator of Samudio’s estate, filed

Samudio’s motion for summary judgment in the trial court in March 2014. (CR 42,

845). Not only had Samudio died by March 2014, but so too had Dr. Machado. (CR

21, 848). In Dr. Machado’s absence, Samudio attached the affidavit of his treating

physician, Dr. Jose Rodriguez, in support of his motion for summary judgment.

Among other things, Dr. Rodriguez’s affidavit explained:

1. that the injury for which Samudio sought workers’ compensation

benefits included a compression fracture of the L1 and L2 vertebrae in

Samudio’s lumbar spine;

2. that Dr. Rodriguez himself, in reports going back to 2002, had expressed

the opinion that Samudio had suffered a compression fracture of greater

than 50%;

3. that the radiologist who had reviewed Samudio’s x-ray images

confirmed that Samudio suffered an “approximately 50% compression

deformity of L1 vertebral body;”

4. that it is normal for radiologists to provide an approximation of a

compression fracture; and

5. that a compression fracture of greater than 50% at the L1 vertebrae

would place Samudio in the DRE IV category, which is equivalent to a

20% impairment rating.

(CR 857-59).

Brief of Appellee 13

Zurich objects that Dr. Rodriguez’s affidavit is irrelevant because Samudio did

not offer Dr. Rodriguez’s testimony to the DWC. See App’t Br. at 16-20. In support

of its argument, Zurich relies on Section 410.306(c) of the Labor Code. Id. Section

410.306(c) states that except for evidence of a substantial change in the claimant’s

condition, the evidence in a judicial review proceeding of the extent of the claimant’s

impairment “shall be limited to that presented to the division.” TEX. LABOR CODE

ANN. § 410.306(c) (Vernon Supp. 2015).

But especially under circumstances like those here, Section 410.306(c) did not

bar Samudio from offering Dr. Rodriguez’s affidavit as summary judgment evidence.

See, e.g., Old Republic Ins. Co. v. Rodriguez, 966 S.W.2d 208, 210 (Tex. App.—El

Paso 1998, no pet.). Rodriguez is on point. In Rodriguez, the claimant’s physician,

Dr. Palafox, assigned the claimant a 31% impairment rating. Dr. Palafox died before

trial in the carrier’s judicial review proceeding. At trial, the claimant offered the

testimony of another physician, Dr. Moreno, to explain Dr. Palafox’s records and

findings. The claimant had not previously offered Dr. Moreno’s testimony to the

DWC. Nonetheless, the court of appeals concluded:

Dr. Moreno explained the procedures used during medical examinations

to assess impairment ratings, discussed the American Medical

Association guidelines for impairment ratings, and explained how the

guidelines are used by doctors to arrive at the percentage impairment

ratings employed in workers’ compensation cases. The statute does not

prohibit all evidence not presented to the Commission. It prohibits only

evidence of the extent of impairment not presented to the Commission.

Brief of Appellee 14

Id. at 209 (emphasis added).

The issue that the Texas Supreme Court asked the trial court to address on

remand was whether Dr. Machado’s 20% impairment rating conformed with the

fourth edition of the AMA Guides. Dr. Machado, having passed away in 2011, was

unavailable to explain how his 20% impairment rating conformed with the AMA

Guides. Relying on evidence of Samudio’s impairment presented to the DWC, Dr.

Rodriguez explained how Dr. Machado’s 20% impairment rating conformed with the

Guides. Specifically, Dr. Rodriguez attested that because Samudio had suffered a

compression fracture of greater than 50%, a 20% impairment rating was consistent

with the AMA Guides. (CR 857-60).

Dr. Rodriguez did not offer any “new” impairment rating. To the contrary, Dr.

Rodriguez confirmed the same 20% impairment rating that Dr. Machado had

previously presented to the DWC — albeit on the basis that Samudio had suffered a

compression fracture of greater than 50%, not on the basis of Advisories 2003-10 or

2003-10b. Dr. Rodriguez’s affidavit is consistent with, and necessarily arises from,

the evidence of Samudio’s impairment presented to the DWC:

• Evidence that Samudio suffered a compression fracture was presented

to the DWC. Dr. Rodriguez noted in his affidavit that the radiologist

who had reviewed the x-rays of Samudio’s back confirmed that Samudio

had suffered an “approximately 50%” compression fracture. (CR 858;

Brief of Appellee 15

see also CR 872). Dr. Machado, in a report previously presented to the

DWC, discussed at length the same radiologist’s findings and stated:

“The results showed a 50% compression deformity of the L1 vertebral

body . . . .” (CR 159). Dr. Ronald Flasner, in another report presented

to the DWC, noted that Samudio “sustained a compression fracture at L1

and L2.” (CR 678).

• Evidence that Samudio’s compression fracture was greater than 50%

was presented to the DWC. Dr. Rodriguez stated in his affidavit that

“[w]ithin reasonable medical probability, Mr. Samudio’s compression

fracture of the L1 vertebrae was more than 50%.” (CR 858).7 Dr.

Machado, in his report presented to the DWC, specifically noted that Dr.

Rodriguez, as Samudio’s treating physician in 2003, had reviewed

Samudio’s x-rays and determined that Samudio’s fracture might be even

more serious than described in the radiologist’s report. (CR 159)

(noting that “there was some splaying of the predicates at L1, which

implies that the fracture was unstable”).8 Dr. Flasner, in his report

7

Zurich protests that Dr. Rodriguez’s affidavit “contradicts the opinion of the radiologist who

read the X-ray in question.” App’t Br. at 18 (citing CR 872). The radiologist reported that Samudio

had suffered an “approximately 50% compression deformity.” (CR 872). Dr. Rodriguez noted in

his affidavit that the term “approximately 50%,” as used in the radiologist’s report, does not mean

“50% or less.” (CR 859). “That would be a distortion of the radiologist’s statement.” (Id.).

8

In a report dated November 8, 2002, Dr. Rodriguez stated: “Lateral projections confirm that

[Samudio] has more than 50% compression of the superior end plate of L1.” (CR 870).

Brief of Appellee 16

presented to the DWC, noted that Samudio’s fracture had rapidly

degenerated from the time of his injury and, by April 2002, was at 50%

and continuing to degenerate. (CR 678) (stating that as of April 24,

2002, Samudio’s compression fracture had “gone from about 10% to

20% to 50%,” and that Samudio had still not reached maximum medical

improvement”).

The question on remand to the trial court was not whether Dr. Machado’s

methodology was correct: indeed, a jury as factfinder did not need to approve Dr.

Machado’s methodology to adopt his impairment rating. Joiner, 363 S.W.3d at 247.

Rather, the question on remand was whether Dr. Machado’s 20% impairment rating

conformed with the AMA Guides. Samudio, 370 S.W.3d at 369.

Dr. Machado’s 20% impairment rating conformed with the AMA Guides.

Evidence presented to the DWC showed that Samudio suffered a compression

fracture of greater than 50%. See supra at 16-17. At a minimum, the preponderance

of the evidence presented to the DWC was not so contrary to Dr. Machado’s 20%

impairment rating that it necessarily rebutted the statutory presumption favoring his

rating. TEX. LABOR CODE ANN. § 408.124(c) (Vernon Supp. 2015). Thus, Dr.

Machado’s 20% impairment rating had a sufficient evidentiary basis from the

evidence that the parties presented to the DWC. Whether or not Dr. Machado’s

methodology was correct, his 20% impairment rating was valid; and a jury as

Brief of Appellee 17

factfinder could properly have adopted a 20% impairment rating for Samudio under

the modified de novo standard of review.

Because the evidence presented to the DWC — and provided to the trial court

as part of the summary judgment record — was sufficient to enable a factfinder to

determine that Samudio suffered a compression fracture of greater than 50%, the trial

court correctly ruled that Dr. Machado’s 20% impairment rating conformed with the

AMA Guides.

B. The Trial Court Had No Discretion to Adopt Any Impairment Rating

Other Than Dr. Machado’s 20% Rating

If, based on the evidence presented to the DWC, the jury could properly have

adopted Dr. Machado’s 20% impairment rating for Samudio, then the trial court

necessarily had to find that Samudio had a 20% impairment rating.

Under the modified de novo standard, a trial court must adopt one of the

impairment ratings that the parties actually presented to the DWC. TEX. LABOR CODE

ANN. § 410.306(c) (Vernon Supp. 2015); see Garcia, 893 S.W.2d at 528.9 If only one

impairment rating was presented to the DWC, and if the evidence presented to the

DWC is sufficient to show that the rating was valid under the AMA Guides, then the

trial court is “required to accept” that rating. Ballard v. Arch Ins. Co., No. 14-14-

9

Section 410.306(c) of the Labor Code requires that on judicial review of a DWC decision

determining a claimant’s impairment rating, the reviewing court’s rating “must match one of the

doctors’ findings,” and the only relevant fact question is “which doctor’s rating should prevail.”

Garcia, 893 S.W.2d at 528; see TEX . LABOR CODE ANN . § 410.306(c) (Vernon Supp. 2015).

Brief of Appellee 18

00647-CV, 2015 WL 6560531, *7 (Tex. App.—Houston [14th Dist.] Oct. 29, 2015,

no pet. h.).

Here, the only impairment rating in evidence at the contested case hearing in

the DWC was Dr. Machado’s 20% impairment rating. Although Dr. Machado relied

on the DWC advisories for his 20% rating, the evidence presented to the DWC was

sufficient to enable a reasonable factfinder to determine that Samudio suffered a

compression fracture of greater than 50% — an impairment that justifies a 20% rating

under the AMA Guides. See supra at 15-17. Consequently, the trial court had no

discretion to adopt any impairment rating for Samudio other than Dr. Machado’s 20%

rating.

Because the trial court could not adopt any impairment rating other than Dr.

Machado’s 20% rating, the trial court did not err in granting summary judgment in

Samudio’s favor. See Ballard, 2015 WL 6560531, at *7.

C. Zurich’s Attacks on Dr. Machado’s 20% Impairment Rating for Samudio

Are Irrelevant

Zurich complains that Dr. Rodriguez’s affidavit contradicts Dr. Machado’s

deposition testimony. See App’t Br. at 18-19. But Zurich misses the point. Any

court that reviews an impairment rating for a workers’ compensation claimant must

ask two preliminary questions:

1. What impairment ratings did the parties and the designated doctor

present to the DWC?, and

Brief of Appellee 19

2. Is there sufficient evidence presented to the DWC showing that

those impairment ratings are valid under the AMA Guides?

If there are two or more ratings presented to the DWC that find sufficient support in

the evidence presented to the DWC, then a factfinder in a judicial review proceeding

may adopt one of those ratings for the claimant. Garcia, 893 S.W.2d at 528. If only

one rating presented to the DWC finds sufficient support in the evidence presented

to the DWC, then the trial court must adopt that rating. Ballard, 2015 WL 6560531,

at *7.

What Zurich is essentially suggesting is that if its judicial review proceeding

had gone to trial, Zurich would have offered Dr. Machado’s deposition testimony to

try to persuade the factfinder not to adopt Dr. Machado’s 20% impairment rating.

Zurich’s argument might have some merit if Zurich had offered an alternative

impairment rating to the DWC. But it did not do so. Thus, Dr. Machado’s deposition

testimony is irrelevant. Because Dr. Machado’s 20% rating was the only rating

presented to the DWC, and because there was some evidence presented to the DWC

sufficient to support it, the trial court had no discretion to adopt any rating other than

Dr. Machado’s rating. Id.10

10

Even outside the workers’ compensation context, the fact that the evidence conflicts on an

issue does not mean that the evidence is insufficient to support a finding on that issue. See In re

Estate of Pilkilton, No. 05-11-00246, 2013 WL 485773, *4 (Tex. App.—Dallas Feb. 6, 2013, no

pet.) (not designated for publication); see also Austin v. Weems, 337 S.W.3d 415, 427 (Tex. App.—

Houston [1st Dist.] 2011, no pet.) (noting that the jury, as factfinder, was the judge of contradictory

evidence). Here, because there was legally sufficient evidence presented to the DWC supporting a

20% impairment rating under the AMA Guides, a fact finder could adopt a 20% rating for Samudio.

Brief of Appellee 20

Even if Dr. Machado’s deposition were arguably relevant, he hardly made any

conclusive concession in his deposition. At best, his deposition is inconclusive. Dr.

Machado testified:

Q: You gave him twenty with the advisory; is that correct?

A: Advisory, that’s correct.

Q: Okay. If you take the advisory out, what DRE category does he

fall into?

A: Well, I think he’d probably go — I still say he go IV, Category

IV.

...

A: . . . . We are talking about something that happened in 2004, an

injury that occurred in 2001. That’s six — six years ago. That’s

a long time. I’m just shooting in the dark here to tell you how

much he’s doing and how much he’s going to do in the future.

Q: So would it be fair to say that based on your knowledge today,

you can’t say that Mr. Samudio is below a twenty percent

impairment rating?

A: Well, I can’t say he’s not below, but I can’t say he’s above either.

Q: Okay. And right now, based on the information that you have and

based on your examination of Mr. Samudio and based on all of

the other things that you had to rely on, would you stand by the

impairment rating that you gave at the time that you gave it?

A: That is correct.

(CR 77-78, 93).

Brief of Appellee 21

Irrespective of Dr. Machado’s testimony, there was at least some evidence

presented to the DWC that would have justified a 20% impairment rating for Samudio

under the AMA Guides. Samudio relied on that same evidence in support of his

motion for summary judgment. Consequently, the trial court correctly ruled that Dr.

Machado’s 20% impairment rating conformed with the AMA Guides; and because

the trial court could not have adopted any rating other than Dr. Machado’s 20%

impairment rating for Samudio, the trial court properly granted summary judgment

in Samudio’s favor.

II. The Trial Court Did Not Err in Declining to Formally Remand Samudio’s

Impairment Rating to the DWC for a New Determination

The Texas Supreme Court directed the trial court to determine whether any of

the impairment ratings presented to the DWC conformed with the AMA Guides and,

if not, to remand the case to the DWC for a new impairment determination. Samudio,

370 S.W.3d at 369. Because the trial court correctly determined that Dr. Machado’s

20% impairment rating for Samudio conformed with the AMA Guides, see supra at

11-18, the trial court did not need to remand the case to the DWC for a new

impairment determination. Accordingly, this Court may affirm the trial court’s

judgment without reaching the question of whether the trial court should have — or

even could have — remanded the case to the DWC.

Brief of Appellee 22

In Samudio’s motion for summary judgment, Samudio asserted, as an

alternative basis for judgment, that “the relief sought by Zurich — remand — is not

available.” (CR 848). Samudio observed:

No such relief is available because Mr. Samudio is deceased. No

proceeding or new rating could be completed at the DWC without Mr.

Samudio. In addition, the designated doctor, Dr. Machado, who would

be instructed to perform any new rating is also deceased. Here, remand

is not available because both of the two parties that would be involved

in further proceedings are deceased.

(CR 854).

Zurich complains that the trial court, by failing to remand Samudio’s 20%

impairment rating formally to the DWC, necessarily disregarded the Texas Supreme

Court’s mandate. See App’t Br. at 28. But even aside from the fact that Dr.

Machado’s 20% impairment rating for Samudio conformed with the AMA Guides,

the trial court had two valid reasons — unknown to the Texas Supreme Court at the

time of its mandate — for concluding that it could not remand the case to the DWC:

(i) Samudio died after the supreme court released its mandate; and (ii) by the time

Samudio died, he had already received all of the benefits to which he would have

been entitled under a 20% rating.

A. The Trial Court Had No Basis for Remanding Samudio’s Impairment

Rating to the DWC After Samudio Died

If, as Zurich claims, the trial court impliedly found that the remedy of

remanding Samudio’s impairment rating to the DWC was unavailable, then the trial

Brief of Appellee 23

court was undoubtedly correct in doing so. The very purpose of a remand would be

for the DWC to assign a new impairment rating for Samudio. Samudio, 370 S.W.3d

at 369. Section 408.123 of the Labor Code specifies the procedure for the DWC to

assign a new impairment rating:

After an employee has been certified by a doctor as having reached

maximum medical improvement, the certifying doctor shall evaluate the

condition of the employee and assign an impairment rating using the

impairment rating guidelines described by Section 408.124. If the

certification and evaluation are performed by a doctor other than the

employee’s treating doctor, the certification and evaluation shall be

submitted to the treating doctor, and the treating doctor shall indicate

agreement or disagreement with the certification and evaluation.

TEX. LABOR CODE ANN. § 408.123(a) (Vernon Supp. 2015); see also 28 TEX. ADMIN.

CODE § 130.1(c)(3) (2015).

Under the plain terms of Section 408.123, a physician — either the designated

doctor or the claimant’s treating doctor — must examine the claimant to be able to

assign an impairment rating for the claimant. TEX. LABOR CODE ANN. § 408.123(a)

(Vernon Supp. 2015). See State Office of Risk Mgmt. v. Ramirez, No. 04-09-00541-

CV, 2010 WL 2601667, *2 (Tex. App.—San Antonio June 30, 2010, pet. denied) (not

designated for publication) (“In assigning an impairment rating, a doctor must

perform a complete medical examination of the employee . . . .”). The supreme court

itself expressly recognized as much. See Samudio, 370 S.W.3d at 367 (acknowledging

that Section 408.123 requires that before a physician may assign an impairment rating

for a claimant, the physician must examine the claimant).

Brief of Appellee 24

Yet, that is impossible here. No one can examine Samudio now that he has

died.

1. The DWC Had No Jurisdiction to Assign a New Impairment Rating

for Samudio After He Died

Zurich argues that the trial court had no choice other than to remand Samudio’s

impairment rating to the DWC. But Zurich’s argument begs the question: Just what

was the DWC supposed to do on remand?

Zurich suggests that the DWC could have assigned a posthumous impairment

rating for Samudio. However, Zurich cites no statutory provision that would have

enabled the DWC to do so. Section 408.123 of the Labor Code requires a physical

examination. Because Samudio is dead, neither the DWC nor any new doctor can

now examine him. Only two doctors actually examined Samudio before his death:

his designated doctor, Dr. Machado, who likewise is dead; and his treating doctor, Dr.

Rodriguez, who agrees with Dr. Machado that Samudio had a 20% impairment rating.

(CR 857).

As Zurich concedes, an impairment rating must comply with the fourth edition

of the AMA Guides. The AMA Guides themselves explicitly require a medical

examination. See AMA Guides to the Evaluation of Permanent Impairment § 2.1 (4th

ed. 1993) (“According to the Guides, the first step in assessing an individual’s

impairment is gathering thorough and complete historical information on the medical

condition(s) and then carrying out a medical evaluation supported by appropriate tests

Brief of Appellee 25

and diagnostic procedures.”). Because no one can examine a deceased claimant, the

DWC has no way to assign any new impairment rating for Samudio.

Nor can the DWC arbitrarily assess any posthumous impairment rating for

Samudio other than Dr. Machado’s 20% rating. To assess any such rating, the DWC

would have to apply procedures other than those in Section 408.123 of the Labor

Code, presumably relying — if Zurich has its way — on the opinion of a doctor who

never actually examined Samudio. The Texas Workers’ Compensation Act, as

reflected in the Labor Code, “precludes the application of claims and procedures not

contained within the Act.” Liberty Mut. Ins. Co. v. Adcock, 412 S.W.3d 492, 493

(Tex. 2013).11

The DWC simply has no authority to assign a new impairment rating for a

claimant outside the requirements of Section 408.123. An agency like the DWC may

“exercise only those powers that the Legislature confers upon [it] in clear and express

language.” Texas Nat. Res. Comm’n v. Lakeshore Util. Co., 164 S.W.3d 368, 377

(Tex. 2005). See Public Util. Comm’n v. City Pub. Serv. Bd., 53 S.W.3d 310, 316

(Tex. 2001) (noting that an agency has no authority to “exercise what is effectively

a new power, or a power contradictory to the statute, on the theory such a power is

expedient for administrative purposes”).

11

Indeed, the Texas Supreme Court expressly recognized that Zurich’s expert, Dr. John

Obermiller, could not assign an impairment rating for Samudio because Dr. Obermiller “never

examined Samudio.” Samudio, 370 S.W.3d at 367.

Brief of Appellee 26

Zurich is well aware of this. At the trial court’s request, the parties scheduled

a benefit review conference with the DWC to discuss whether the DWC could assign

a new impairment rating for Samudio. (CR 918). The parties disagree about what

exactly took place at the benefit review conference. (Compare CR 915 with CR 917).

But Zurich itself reported back to the trial court:

Mr. Craddock [the DWC benefit review officer] acknowledged the

difficulty in having the claimant seen by a designated doctor for the

assignment of a new impairment rating. The original designated doctor

is dead, so a re-designation would have to occur. In addition, the

claimant is also dead, so no re-examination could occur. Mr. Craddock

agreed that the Division would have to engage in an equity measure

(essentially waiving the requirement of an examination) in order to get

Mr. Samudio a certification of MMI and impairment rating from a

second designated doctor, should that become necessary.

(CR 915) (emphasis added). Essentially, Zurich reported to the trial court that the

DWC would have to make up an entirely new procedure as an “equity measure” to

assign another impairment rating to Samudio — something the DWC has no power

to do. Adcock, 412 S.W.3d at 493.

Zurich complains that even if the DWC had no authority to assign a new

impairment rating for Samudio, the trial court nonetheless had a duty to remand

Samudio’s impairment rating to the DWC under the supreme court’s mandate. A trial

court must comply with a higher court’s mandate “in the absence of changed

circumstances,” and the power to determine those changed circumstances “lies alone

with the trial court.” City of Tyler v. St. Louis S.W. Ry. Co., 405 S.W.2d 330, 332

Brief of Appellee 27

(Tex. 1966).12 Unquestionably, the circumstances here have changed: Samudio

passed away after the supreme court issued its mandate.

The Labor Code gives the DWC only the power to assign impairment ratings

for the living, not for the dead. Because Samudio passed away in 2013, the DWC

cannot assign him a new impairment rating. The trial court did not err in declining

to remand this case for the DWC to do something that it had no power to do.

2. The Trial Court Committed No Harmful Error in Ruling that

Samudio Had a 20% Impairment Rating

As is true in any appeal, Zurich, as the appellant, must show that the trial court

committed harmful error. TEX. R. APP. P. 44.1. Proof of harm is a necessary gate

through which Zurich must pass to prevail on appeal. See, e.g., Phillips v. Bramlett,

407 S.W.3d 229, 243 (Tex. 2013); G&H Towing Co. v. Magee, 347 S.W.3d 293, 297-

98 (Tex. 2011). Zurich has not shown — and cannot show — that it has suffered any

harm. By granting summary judgment for Samudio, the trial court upheld a 20%

impairment rating for Samudio. Even if the trial court had remanded Samudio’s

impairment rating to the DWC, the only valid rating that the DWC could possibly

have assigned to Samudio is a 20% impairment rating.

12

A trial court “is given a reasonable amount of discretion to comply with the mandate.”

Russell v. Russell, No. 14-13-01100-CV, 2015 WL 5723109, *3 (Tex. App.—Houston [14th Dist.]

Sept. 29, 2015, no pet. h.).

Brief of Appellee 28

Section 408.123 of the Labor Code specifies that the first doctor to assign an

impairment rating for a claimant is the designated doctor — here, Dr. Machado, who

assigned Samudio a 20% impairment rating. TEX. LABOR CODE ANN. § 408.123(a)

(Vernon Supp. 2015). Whether a rating comes from the designated doctor or some

other physician, the claimant’s treating doctor — here, Dr. Rodriguez — must review

any impairment rating and “indicate agreement or disagreement.” Id. Dr. Rodriguez

agrees with Dr. Machado that “Mr. Samudio’s impairment rating is 20% for his work

injury of October 16, 2001.” (CR 859).

A doctor must first examine the claimant before he may assign an impairment

rating for the claimant. TEX. LABOR CODE ANN. § 408.123(a) (Vernon Supp. 2015);

see supra at 24. Besides the late Dr. Machado, Dr. Rodriguez is the only available

doctor who actually examined Samudio: Dr. Rodriguez initially examined Samudio

in November 2002, he treated Samudio from 2002 to 2006, and he performed

Samudio’s two surgeries. (CR 857-58). Consequently, Dr. Rodriguez is the only

available doctor who at this stage could possibly provide an impairment rating that

would comply with Section 408.123 of the Labor Code.

An assignment rating must be based on objective clinical or laboratory

findings. 28 TEX. ADMIN. CODE § 130.1(c)(3) (2015). Here, in agreeing that

Samudio’s impairment rating is 20%, Dr. Rodriguez relied on his own documented

clinical findings, including his initial evaluation report in November 2002 stating that

Brief of Appellee 29

Samudio had a compression fracture of “more than 50%.” (CR 857-58; see CR 870).

Dr. Rodriguez also relied on specific laboratory findings — all of the “available

diagnostic images,” including the March 2002 x-ray images of Samudio’s

compression fracture. (CR 858-59).

Zurich complains that Dr. Rodriguez’s opinion about Samudio’s impairment

rating is invalid under Section 408.122 of the Labor Code. See App’t Br. at 18.

Section 408.122, which is entitled “Eligibility for Impairment Income Benefits,” does

not apply here: it describes the procedure for a “finding of impairment” — i.e., a

determination of whether the claimant has suffered any impairment at all. TEX.

LABOR CODE ANN. § 408.122 (Vernon Supp. 2015). Zurich does not dispute that

Samudio suffered an impairment and was eligible to receive impairment income

benefits. The Texas Supreme Court explicitly acknowledged that Samudio suffered

some compensable impairment:

[N]o one presented evidence to the Division that Samudio’s impairment

rating was zero, and it is undisputed that he had suffered some

permanent impairment.

Samudio, 370 S.W.3d at 367. The only question now is the level of Samudio’s

impairment — in other words, Samudio’s impairment rating. Section 408.123, not

Section 408.122, defines the procedure for assigning an impairment rating. TEX.

LABOR CODE ANN. § 408.123(a) (Vernon Supp. 2015).

Brief of Appellee 30

Under Section 408.123, Dr. Rodriguez, who actually examined Samudio, is the

only available doctor who can assign an impairment rating for Samudio. Based on

objective clinical and laboratory findings, Dr. Rodriguez has confirmed that Samudio

suffered a compression fracture of greater than 50%, which entitles Samudio to a 20%

impairment rating.13 Thus, the trial court’s summary judgment in Samudio’s favor is

not harmful error to Zurich: even if the trial court arguably erred in failing to remand

Samudio’s impairment rating to the DWC, the only rating that the DWC could

possibly assign to Samudio is a 20% rating, which is exactly the same rating that the

trial court agreed to be conclusively established under the summary judgment

evidence.

B. The Trial Court Had No Basis for Remanding Samudio’s Impairment

Rating to the DWC After Samudio Received All of His Benefits

Not only did Samudio’s death negate any reason for the trial court to remand

Samudio’s impairment rating to the DWC, but so too did the fact that by the time of

Samudio’s death, he had already received all of the benefits to which he would have

been entitled under a 20% rating. Under Texas workers’ compensation law, a carrier

may not recover benefits back from a claimant after it has already paid those benefits

to the claimant. TEX. LABOR CODE ANN. §§ 403.006, 410.209-.210 (Vernon Supp.

13

Cf. Cervantes v. New Hampshire Ins. Co., No. 04-12-00722-CV, 2013 WL 3486824, *2

(Tex. App.—San Antonio July 10, 2013, pet. denied) (not designated for publication) (holding that

the trial court did not err in granting summary judgment upholding the designated doctor’s

impairment rating for the claimant where the designated doctor was the only doctor whose rating was

presented to the DWC).

Brief of Appellee 31

2015); see Texas Workers’ Comp. Comm’n v. Texas Builders Ins. Co., 994 S.W.2d

902, 904 (Tex. App.—Austin 1999, pet. denied). Zurich itself admits as much. See

App’t Br. at 29.

Because the DWC assessed a 20% impairment rating for Samudio back in

2005, Zurich paid impairment income benefits to Samudio based on a 20% rating.

By statute, Samudio continued to receive those benefits until June 23, 2009 — during

the pendency of the original appeal of this case. TEX. LABOR CODE ANN. § 408.083

(Vernon Supp. 2015). As of June 23, 2009, Samudio received all of the benefits that

he could possibly have received under the Texas workers’ compensation laws. In

short, he won. He received full payment of impairment income benefits based on a

20% rating; and after Zurich paid those benefits to Samudio, it could no longer get

them back from him.

Samudio asked the trial court to grant summary judgment because, among other

reasons, there was no longer any justiciable issue for the trial court to resolve. (CR

854). For a trial court to exercise subject matter jurisdiction, a case must raise a

justiciable controversy. State Bar of Tex. v. Gomez, 891 S.W.2d 243, 245 (Tex.

1994). “To constitute a justiciable controversy, there must exist a real and substantial

controversy involving a genuine conflict of tangible interests and not merely a

theoretical dispute.” OHBA Corp. v. City of Carrollton, 203 S.W.3d 1, 5 (Tex.

App.—Dallas 2006, pet. denied).

Brief of Appellee 32

Here, there is no longer any justiciable issue as between Zurich and Samudio:

even if Zurich is correct that Samudio’s impairment rating should be less than 20%,

Zurich cannot recover from Samudio any of the benefits that it already paid to him.

Zurich’s remedy at this point is solely against the Texas Subsequent Injury Fund

(“SIF”), which is authorized to reimburse carriers if they overpaid benefits to a

claimant. See TEX. LABOR CODE ANN. § 403.006(b)(4) (Vernon Supp. 2015). The

Labor Code specifies the procedures by which a carrier may recover from the SIF.

E.g., id. §§ 408.0041, 408.143, 408.147.14 None of those procedures authorizes a

carrier to continue pursuing a judicial review proceeding even after the claimant has

received full payment of benefits.

Essentially, Zurich suggests that even though it may never recover the benefits

that it fully paid to Samudio under a 20% rating, it was entitled to continue pursuing

its judicial review action against Samudio and to force Samudio’s attorneys to

continue defending the action even after they had successfully done what Samudio

had retained them to do — secure full benefits for Samudio. Zurich’s position is

particularly troubling in light of Zurich’s claim that Samudio’s attorneys are not

14

The Texas Workers’ Compensation Act is a comprehensive statutory scheme, and therefore,

it bars a court from applying or enforcing any remedies or procedures that are not specified in the

Act. In re Gallardo, No. 13-14-00203-CV, 2015 WL 730920, *8 (Tex. App.—Corpus Christi Feb.

19, 2015, no pet.) (not designated for publication); see also Texas Dep’t of Ins., Workers’ Comp. Div.

v. De Los Santos, 446 S.W.3d 800, 805-06 (Tex. App.—San Antonio 2014, no pet.) (holding that

a trial court exceeded its authority in ordering the SIF to pay benefits to a claimant where the Act did

not grant Texas courts any authority to make such an order).

Brief of Appellee 33

entitled to recover any fees for the work that Zurich forced them to do in continuing

to defend the case even after Samudio received all of the benefits that he was entitled

to receive under a 20% rating. See App’t Br. at 35-37.15

There was no longer any justiciable controversy after Samudio received full

payment of his benefits. Absent any justiciable controversy, the trial court lacked

subject matter jurisdiction over Zurich’s claims, and there was nothing for the trial

court to remand to the DWC. Accordingly, the trial court did not err in granting

summary judgment in Samudio’s favor.16

III. The Trial Court Correctly Ordered Zurich to Pay Samudio’s Reasonable

and Necessary Attorney’s Fees

A carrier that files an unsuccessful judicial review action is liable for the

claimant’s reasonable and necessary attorney’s fees. Financial Ins. Co. v. Ragsdale,

166 S.W.3d 922, 930 (Tex. App.—El Paso 2005, no pet.). Specifically, Section

408.221(c) of the Texas Labor Code provides:

15

To support its argument that it necessarily had to continue pursuing its claims against

Samudio, Zurich relies on the unpublished opinion in Lumbermens Mut. Cas. Co. v. Portillo, No.

13-10-00470-CV, 2011 WL 2976869 (Tex. App.—Corpus Christi July 21, 2011, no pet.) (not

designated for publication). But Portillo is distinguishable. The claimant in Portillo was still alive.

And nothing in Portillo suggests that the claimant had received all of the benefits he was entitled to

receive; instead, it states merely that the carrier intended to seek reimbursement for past

overpayments from the SIF rather than from the claimant. Id. at *2.

16

A trial court may properly grant summary judgment if it lacks subject matter jurisdiction

over an action. Texas Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004).

Even if a trial court dismisses a case for lack of subject matter jurisdiction, it retains jurisdiction to

grant attorney’s fees to the prevailing party. “A trial court’s dismissal for lack of subject-matter

jurisdiction does not prevent the concurrent award of attorney’s fees under [a] mandatory award

provision.” Nauslar v. Coors Brewing Co., 170 S.W.3d 242, 257 (Tex. App.—Dallas 2005, no pet.).

Brief of Appellee 34

An insurance carrier that seeks judicial review under Subchapter G,

Chapter 410, of a final decision of the appeals panel regarding

compensability or eligibility for, or the amount of, income or death

benefits is liable for reasonable and necessary attorney’s fees as

provided by Subsection (d) incurred by the claimant as a result of the

insurance carrier’s appeal if the claimant prevails on an issue on which

judicial review is sought by the insurance carrier . . . .

TEX. LABOR CODE ANN. § 408.221(c) (Vernon Supp. 2015) (emphasis added).

Zurich sought judicial review of a single issue, “What is claimant Samudio’s

impairment rating?” After years of protracted litigation, the trial court ruled that

Samudio was the prevailing party on this issue, agreeing with the DWC that

Samudio’s impairment rating was 20%. (CR 922). Applying Section 408.221(c) of

the Labor Code, the trial court awarded $80,519.53 in fees and expenses in the trial

court, $49,000.00 in fees for the first appeal, and up to $60,000.00 in fees for the

present appeal. (CR 1346-47).

Zurich raises three objections to the trial court’s fee award. First, Zurich

contends that Samudio was not the prevailing party on Zurich’s claims. Second,

Zurich contends that Samudio is not entitled to recover any fees for the first appeal.

Third, Zurich contends that Samudio is not entitled to recover any fees for the work

that Zurich necessarily forced Samudio’s attorneys to do in defending the trial court’s

fee awards. Each of Zurich’s three objections to the trial court’s fee award lacks

merit.

Brief of Appellee 35

A. Samudio Was the Prevailing Party on the Issue for Which Zurich Sought

Judicial Review

Zurich argues that Samudio “is not entitled to recover attorneys’ fees in this

case because he has not proved that he is a prevailing party under the act.” App’t Br.

at 32. Curiously, Zurich does not cite any definition for the term “prevailing party.”

Although Section 408.221(c) does not itself define the term, courts have ruled that a

“prevailing party is one who is vindicated by the trial court’s judgment.” Insurance

Co. of the State of Pa. v. Orosco, 170 S.W.3d 129, 134 (Tex. App.—San Antonio

2005, no pet.); see also Dean Foods Co. v. Anderson, 178 S.W.3d 449, 454 (Tex.

App.—Amarillo 2005, pet. denied) (holding that a party “prevails” if he “successfully

prosecutes the action or successfully defends against it, prevailing on the main issue,

even though not to the extent of its original contention”) (emphasis added).

The purpose of Section 408.221(c) is to place the burden of the claimant’s fees

on the carrier in the event that the carrier chooses to file an unsuccessful judicial

review action. Twin City Fire Ins. Co. v. Vega-Garcia, 223 S.W.3d 762, 768 (Tex.

App.—Dallas 2007, pet. denied). As the Amarillo Court of Appeals has explained:

In enacting that statute, it appears that the intent of the legislature was

to ensure that if the insurance carrier appealed an award, thereby

delaying the payment of benefits to an injured worker, it ran the risk of

having to pay the claimant’s attorney’s fees if its appeal was not well

taken. Additionally, there is another valid reason for the statute and the

apparent legislative intent. While a worker is not required to have an

attorney to represent him or her in TWCC proceedings, in an appeal to

the district court, the worker must obtain an attorney or run the risk of

Brief of Appellee 36

representing himself or herself with the pitfalls that may await a non-

legally trained participant in a court of record.

Dean Foods Co., 178 S.W.3d at 454-55.

Zurich filed this action asking the trial court to set aside the DWC’s final

decision approving Dr. Machado’s 20% impairment rating for Samudio. (CR 129).

The Texas Supreme Court remanded this action for the trial court to resolve that

specific issue. Samudio, 370 S.W.3d at 368. The trial court granted Samudio’s

motion for summary judgment and found that Samudio had a valid 20% impairment

rating. (CR 922). Consequently, Samudio was the prevailing party on Zurich’s

judicial review action: he successfully defended against Zurich’s request that the trial

court set aside the DWC’s final decision. Because Samudio was the prevailing party,

the trial court correctly awarded attorney’s fees to Samudio.

B. Samudio is Entitled to Recover Attorney’s Fees for His Counsel’s Work

in Defending Against Zurich’s First Appeal

Zurich argues that the trial court’s fee award to Samudio improperly includes

$49,000.00 in fees for the work that Samudio’s attorneys performed in defending

against Zurich’s first appeal. See App’t Br. at 33. In short, Zurich contends that even

though Samudio ultimately was the prevailing party, Samudio may not recover any

fees for what Zurich characterizes as an “unsuccessful” appeal. Id. Under Zurich’s

argument, a trial court must parse an attorney’s fee statements, and even if the

attorney ultimately secured a successful judgment, the court must eliminate any fees

Brief of Appellee 37

for work that the attorney may have performed in pursuing unsuccessful motions or

arguments.

While Zurich’s argument might describe the rule in federal court, it has never

been the rule in Texas state court. The Andersen factors for a fee award emphasize

the ultimate “results obtained,” not the success of an attorney’s work on individual

tasks. Arthur Andersen v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). See

Helfman Motors, Inc. v. Stockman, 616 S.W.2d 394, 399 (Tex. App.—Fort Worth

1981, writ ref’d n.r.e.) (affirming an attorney’s fee award even though it included fees

for an injunction that became moot); see also Liberty Mut. Ins. Co. v. Montana, 49

S.W.3d 599, 604 (Tex. App.—Fort Worth 2001, no pet.).

Section 408.221 of the Labor Code, which incorporates the Andersen factors,

requires that a trial court consider “the benefits to the claimant that the attorney is

responsible for securing.” TEX. LABOR CODE ANN. § 408.221(d)(6) (Vernon Supp.

2015). Although tailored to a judicial review proceeding, this language — consistent

with the Andersen factors — emphasizes the ultimate result of an attorney’s work, not

the success of an attorney’s work on individual tasks. Here, Samudio’s attorneys

secured all of the benefits that Samudio was entitled to receive from Zurich under a

20% impairment rating, and the trial court confirmed that Samudio’s 20% impairment

rating was valid. See supra at 31-32.

Brief of Appellee 38

Zurich cannot validly complain that the work of Samudio’s attorneys on the

first appeal was “unnecessary.” The ruling that prompted the first appeal was the trial

court’s order dismissing Zurich’s claims because Dr. Machado’s 20% impairment

rating was the only rating presented to the DWC. Zurich appealed the trial court’s

order, and Zurich’s appeal necessitated the work of Samudio’s attorneys. This Court

affirmed the trial court’s order. Significantly, the Texas Supreme Court did not

reverse and render judgment in Zurich’s favor; it reversed and remanded the case for

the trial court to determine whether Dr. Machado’s 20% rating conformed with the

AMA Guides. The trial court on remand confirmed that Dr. Machado’s 20% rating

conformed with the AMA Guides.

The work of Samudio’s attorneys in the first appeal did not go to waste.

Because some evidence presented to the DWC shows that Dr. Machado’s 20% rating

is proper under the AMA Guides, then — as Samudio’s attorneys argued in the first

appeal — the trial court had no choice other than to assess a 20% impairment rating

for Samudio. The circumstances here are no different than a situation where a trial

court initially denies a motion for summary judgment but later grants a directed

verdict on similar arguments. Counsel’s work on an unsuccessful summary judgment

motion (or a first appeal) is not “unnecessary” if the same or similar arguments are

later vindicated through additional development of the evidence.

Brief of Appellee 39

The trial court did not err in awarding $49,000 in fees for Samudio’s first

appeal. Accordingly, this Court should affirm the trial court’s award of attorney’s

fees to Samudio.

C. Samudio is Entitled to Recover Attorney’s Fees for His Counsel’s Work

in Defending the Trial Court’s Fee Awards

Zurich argues that Samudio is not entitled to recover allegedly “improper ‘fees-

for-fees.’” App’t Br. at 35-36 (citing Discover Prop. & Cas. Ins. Co. v. Tate, 298

S.W.3d 249, 260 (Tex. App.—San Antonio 2009, pet. denied)). Of course, Zurich

was the party who originally sought judicial review of Samudio’s impairment rating.

(CR 129). Zurich named Samudio as a defendant in the lawsuit. (Id.). Zurich filed

the first appeal. (CR 6). And Zurich has now filed the present appeal. Zurich has

continually pursued litigation against Samudio, and Samudio was entitled to defend

himself, as the Labor Code provides. Because Zurich has failed in its litigation, the

Labor Code entitled Samudio to recover fees for having to defend against Zurich’s

failed litigation.

Zurich’s argument defeats the very purpose of Section 408.221, which among

other things was intended to ensure that injured workers have the ability to secure

adequate legal representation in a judicial review proceeding. Dean Foods Co., 178

S.W.3d at 454-55. Attorneys will be less likely to represent injured workers if those

attorneys must themselves bear the costs of pursuing an award of attorney’s fees.

Brief of Appellee 40

The present case is a perfect example: Zurich takes the position that Samudio’s

attorneys cannot recover any fees for any work after June 23, 2009, even though

Zurich continues to press its claims against Samudio. See App’t Br. at 36.17 Under

Zurich’s position, Samudio’s attorneys must defend Zurich’s continued claims pro

bono — exactly the result that the Texas Legislature sought to avoid in amending

Section 408.221 to ensure that the carrier, and not the claimant, assumed the risk of

paying the claimant’s attorney’s fees in the event of an unsuccessful judicial review

proceeding.

Moreover, Zurich’s argument is contrary to the plain terms of the statute.

Section 408.221(c) states that a carrier which unsuccessfully seeks judicial review of

a DWC decision is liable for the attorney’s fees “incurred by the claimant as a result

of the insurance carrier’s appeal.” TEX. LAB. CODE ANN. § 408.221(c) (Vernon Supp.

2015) (emphasis added). By its plain terms, Section 408.221(c) contains both a

condition (“if the claimant prevails. . . .”) and a consequence (“[a]n insurance carrier

. . . is liable for reasonable and necessary attorney’s fees . . . incurred by the claimant

as a result of the . . . appeal”). If the condition occurs, then the consequence logically

17

Significantly, the federal government took a similar — and unsuccessful — position with

respect to the Equal Access to Judgment Act, arguing that it does not permit a prevailing claimant

to recover “fees for fees.” Commissioner v. Jean, 496 U.S. 154, 162 (1990). The Supreme Court

ruled that if the government could impose the cost of litigating fee disputes on prevailing claimants,

then “the financial deterrent that the EAJA aims to eliminate would be resurrected.” Id. at 164.

Brief of Appellee 41

follows — the claimant may recover all of the reasonable and necessary fees he incurs

as a result of the carrier’s judicial review proceeding.

Zurich relies on the San Antonio Court of Appeals opinion in Tate, neglecting

to mention the contrary opinion of this Court’s sister court, the Fourteenth Court of

Appeals, in Transcontinental Ins. Co. v. Crump, 274 S.W.3d 86 (Tex. App.—

Houston [14th Dist.] 2008), rev’d on other grounds, 330 S.W.3d 211 (Tex. 2010).

Interpreting the “as a result of” language in Section 408.221(c), the court of appeals

in Crump stated:

[I]f the claimant successfully performs the predicate — prevailing on an

issue on which the carrier sought judicial review — the claimant is

entitled to attorney’s fees incurred as a result of the appeal. Here,

appellee, through her attorneys, was required to prepare and submit

written evidence to the trial court supporting her request for attorney’s

fees. . . . In addition, because the parties could not agree on the amount

of appellee’s reasonable and necessary attorney’s fees, her attorney was

required to set and attend a trial court hearing on that matter. We hold

appellee incurred these attorney’s fees as a result of appellant’s appeal.

Crump, 274 S.W.3d at 104 (emphasis added).

Other courts have reached similar results. See, e.g., Old Republic Ins. Co. v.

Stafford, No. Civ. A. 3:03-CV-1611, 2005 WL 2026853, *7 (N.D. Tex. Aug. 22,

2005) (“[T]he Court finds that Stafford is entitled to recover attorney’s fees for time

spent on preparing his fee application. … The preparation of a fee application for fees

that are specifically provided for by [Section 408.221(c)] necessarily result[s] from

the carrier’s appeal.”) (emphasis added); Texas Mun. League Intergovernmental Risk

Brief of Appellee 42

Pool v. Burns, 209 S.W.3d 806, 819-20 (Tex. App.—Fort Worth 2006, no pet.)

(affirming an award of attorney’s fees resulting from a carrier’s appeal).

Zurich argues that whether it “owes fees to Samudio’s attorneys is not a matter

involving entitlement to or eligibility for benefits.” App’t Br. at 36. But Zurich’s

argument effectively changes the language of Section 408.221(c) to say that it permits

a claimant to recover only those fees incurred in defense of the carrier’s judicial

review proceeding, as opposed to those fees incurred as a result of the carrier’s

proceeding. Zurich’s argument thus fails to comply with one of the most basic rules

of statutory construction — that a court must give effect to the plain terms of Section

408.221(c) as they are written. See Entergy Gulf States, Inc. v. Summers, 282 S.W.3d

433, 443 (Tex. 2009).

The trial court correctly awarded attorney’s fees for the fees that Samudio’s

attorneys incurred as a result of Zurich’s judicial review proceeding, including the

fees that Samudio’s attorneys necessarily incurred in pursuit of an award of attorney’s

fees. Accordingly, this Court should affirm the trial court’s judgment.

CONCLUSION

Zurich’s arguments have no merit. The trial court correctly found that Dr.

Machado’s 20% impairment rating for Samudio conformed with the AMA Guides;

and because Samudio was the prevailing party on Zurich’s claims, the trial court

correctly awarded reasonable and necessary attorney’s fees to Samudio. Samudio

Brief of Appellee 43

respectfully requests that this Court affirm the trial court’s judgment in Samudio’s

favor and grant Samudio all such further and additional relief to which he may show

himself to be justly entitled.

Respectfully submitted,

KEELING & DOWNES, P.C.

/S/ Byron C. Keeling

By:__________________________________

Byron C. Keeling

State Bar No. 11157980

bck@keelingdownes.com

Anna E. Williams

State Bar No. 24088638

aew@keelingdownes.com

1500 McGowen, Suite 220

Houston, Texas 77004

Telephone: (832) 214-9900

Facsimile: (832) 214-9908

DOYLE LLP

Michael P. Doyle

State Bar No. 06095650

mdoyle@doylelawfirm.com

Patrick M. Dennis

State Bar No. 24045777

pdennis@doylelawfirm.com

2402 Dunlavy Street, Suite 200

Houston, Texas 77006

Telephone: (713) 571-1146

Facsimile: (713) 571-1148

COUNSEL FOR APPELLEE

DANIEL SAMUDIO

Brief of Appellee 44

CERTIFICATE OF SERVICE

I hereby certify that on the 18th day of December, 2015, the foregoing

document was forwarded to the following via electronic service:

Mr. Robert D. Stokes

Mr. Gregory D. Solcher

Mr. David Owen Cluck

Flahive, Ogden & Latson

P.O. Box 201329

Austin, Texas 78720

Telephone: (512) 435-2150

Facsimile: (512) 241-3305

Counsel for Appellant

American Zurich Insurance Company

/S/ Byron C. Keeling

____________________________

Byron C. Keeling

Brief of Appellee 45

CERTIFICATE OF COMPLIANCE

The undersigned certifies that this Brief of Appellee complies with the typeface

requirements in Tex. R. App. P. 9.4(e) because it has been prepared in a conventional

typeface no smaller than 14-point for text and 12-point for footnotes.

Additionally, the undersigned certifies that this brief complies with the word-

count limitations of Tex. R. App. P. 9.4(i )(2) because, excluding all parts exempted

under Tex. R. App. P. 9.4(i)(1), the brief contains 10,796 words.

/S/ Byron C. Keeling

________________________________

Byron C. Keeling

Brief of Appellee 46

APPENDIX

A Order, Oct. 7, 2014 (CR 922);

B Judgment, Feb. 27, 2014 (CR 1346).

Brief of Appellee 47

TAB A

5/22/2014 12:59:28 PM

Chris Daniel • District Clerk

Harris County

Envelope No: 1338367

By: CABRERA, VALERY C

f.\

CAUSE NO. 2006-18753

AMERICAN ZURICH INSURANCE § IN THE DISTRICT COURT

SYSTEM §

§

VS. §

§

§

HARRIS COUNTY, TEXAS

ttL

DANIEL SAMUDIO § 127fH JUDICIAL DISTRICT

ORDER ON DEFENDANT'S AMENDED MOTION FOR SUMMARY

JUDGMENT

Came to be heard Defendant's Amended Motion for Summary Judgment,

and the Court is of the opinion that the motion should be and hereby is

GRANTED.

Signed this z.y o£Clct-. . 2014.

~-=:::

DISTRICT JUDGE

922

TAB B

FILED

Chrla Danlel

-£

Dlatrlot Cieri<

FEB 2 7 201S...

CAUSENO 2006-18753 .._

tlerr1t Co___:_

AMERICAN ZURICH INSURANCE § IN THE Drsrrud'toot<t l>D""1

COMPANY §

§

vs § HARRIS COUNTY, TEXAS

§

§

DANIBL SAMUDIO § 127™ JUDIOAL DISI'RICT

FINAL JUDGMENT

On October 7, 2014, tlus Court Granted Defendant's Amended Mohon for

Summary Judgment~ fmdang that Defendant 1s the prevmhng party on ail 1SSues

Subsequently, the parties sbpulated that the issue of reasonable and necessary

attorneys" fees would be subnutted to the Court on written evidence, and a hearing

was held on February 13, 2015

Havmg considered the evidence and bnefs submitted by the parties, the

Court fmds that the following fees are reasonable and necessary fees incurred m the

defense of tlus matter through October 7, 2014

a Doyle Rai.zner LLP Fees $69,140 50

b Doyle Raizner LLP Expenses $5;175 03

c Blackwell & H aag, P C Fees $3,334 00

d Tonya D Carter & Associates $2,570 00

e Keeling & Downes, PC (flrst appeal) $49,000 00

Defendant has also requested reunbursement of attorneys' fees should

Plamh.ff ftle a second appeal of tlus matter

a In the event of an appeal to the Court of Appeals $30,000 00

1346

b In the event of a Petition to the Texas Supreme Court $10,000 00

c In the event that a Petihon for Review is Granted $20,000 00

IT IS THEREFORE ORDERED, ADJUDGED AND DECREED by the Court

that Plamhff pay the amounts set for above Tlus ts a final order and is

appealable

Signed thls 27th day of February, 2015

DISTRICT JUDGE

2

1347

HYPERLINKED MATERIALS

Clerk’s Record Excerpts

Tab A (Appendix) CR 922

Tab B (Appendix) CR 1346-47

Tab C CR 857-60

Cases

Tab 1 American Zurich Ins. Co. v. Samudio, 370 S.W.3d 363 (Tex. 2012)

Tab 2 Arthur Andersen v. Perry Equip. Corp., 945 S.W.2d 812 (Tex. 1997)

Tab 3 Ballard v. Arch Ins. Co., No. 14-14-00647-CV, 2015 WL 6560531 (Tex.

App.—Houston [14th Dist.] Oct. 29, 2015, no pet. h.)

Tab 4 City of Tyler v. St. Louis S.W. Ry. Co., 405 S.W.2d 330 (Tex. 1966)

Tab 5 Dean Foods Co. v. Anderson, 178 S.W.3d 449 (Tex. App.—Amarillo

2005, pet. denied)

Tab 6 Insurance Co. of the State of Pa. v. Orosco, 170 S.W.3d 129 (Tex.

App.—San Antonio 2005, no pet.)

Tab 7 Liberty Mut. Ins. Co. v. Adcock, 412 S.W.3d 492 (Tex. 2013)

Tab 8 Old Republic Ins. Co. v. Rodriguez, 966 S.W.2d 208 (Tex. App.—El

Paso 1998, no pet.)

Tab 9 Old Republic Ins. Co. v. Stafford, No. Civ. A. 3:03-CV-1611, 2005 WL

2026853 (N.D. Tex. Aug. 22, 2005)

Tab 10 Public Util. Comm’n v. City Pub. Serv. Bd., 53 S.W.3d 368 (Tex. 2001)

Tab 11 State Office of Risk Mgmt. v. Joiner, 363 S.W.3d 242 (Tex.

App.—Texarkana 2012, pet. denied)

Tab 12 State Office of Risk Mgmt. v. Ramirez, No. 04-09-00541-CV, 2010 WL

2601667 (Tex. App.—San Antonio June 20, 2010, pet. denied)

Tab 13 Texas Nat. Res. Comm’n v. Lakeshore Util. Co., 164 S.W.3d 368 (Tex.

2005)

Tab 14 Texas Workers’ Comp. Comm’n v. Garcia, 893 S.W.2d 504 (Tex.1995)

Tab 15 Transcontinental Ins. Co. v. Crump, 274 S.W.3d 86 (Tex.

App.—Houston [14th Dist.] 2008), rev’d on other grounds, 330 S.W.3d

211 (Tex. 2010)

Tab 16 Twin City Fire Ins. Co. v. Vega-Garcia, 223 S.W.3d 762 (Tex.

App.—Dallas 2007, pet. denied)

Texas Labor Code

Tab 17 TEX. LABOR CODE ANN. § 408.122 (Vernon Supp. 2015)

Tab 18 TEX. LABOR CODE ANN. § 408.123 (Vernon Supp. 2015)

Tab 19 TEX. LABOR CODE ANN. § 408.124 (Vernon Supp. 2015)

Tab 20 TEX. LABOR CODE ANN. § 408.221 (Vernon Supp. 2015)

Tab 21 TEX. LABOR CODE ANN. § 410.306 (Vernon Supp. 2015)

TAB C

From 7137815712 Pa.ge· 215 Date· 5/1312014 11 :06:29 AM

Fmm: 71:i-671-1148 To Jo~e RQdnguel MO P<19~ ?.121 Oa1e· 5112/2014 :131'33 PM

CAUSll NO. Z006·lS7$3

AMERICAN WR£CH fNSURANCE IN THE DISTRICT COURT

SYSTEM

vs. HARRIS G'OU'.\ITY, TEXAS

DANfeL SAMUDIO l27n1 .IUDICIAL DISTRICT

Af?FlDA VIT OF JOSF.. RODRIGL"F..Z, M. D.

r, .lo,~ Rmlrigiitr1~ M .I)., bc:ing fin;I duly ll"VOm upon my o;1tn, d"po~ and lltLY tnitlc:r JX.'lllllt.y

of perjury under the laws of the United St11tcs of Amcric1,1. :m.d St11tc ofl exns durt 1he following is

true and con ect·:

I. My nmne ill Jose Rodrigue:r. M.D. [nm of sound mind nud e<1pnblc ofmnking this n.flidtwif.

I hrwo peroo1rnJ knowledge ofthe .fuotlS contnincd in this nllidn.vit, nnd I mtcst that the facts nrc tr\le

a11d nccunua.

2. l am physicim1, licensed to pr:ictice medicine in the State ofTcXll~ since 1989 1 s"-«if.l!ize

in Oi'thopaooic ;md Spine SurgeJ)' llnd b:wc been bD'JJ'Cl certified m Ort11opacdic Surgery since 1992

a1'd Spino Surgery sinc.e 1998. ln my ye1u·s of practice, I bnv~ .lcted as tlle ptitnruy tre~ting

physician imd ~urgeon ror hundrcdi; of pu1ient's like Dunicl Samudio. I am ulso the uuthor of various

pnbHca1ions m 1he a.reu of orlhopnodic surgery (1md other areas of medicine), have acted as a

member of 1be faculty of The University of Tex:is Health Science Ccn1er at llcm1nnn Hospital., and

hold hospital privileges at n number ofhospitnh in tlic Houston Mcdicnl Con11;r. A tl'Ue 11.nd con·uc.t

copy of my cuniculum vitllo is attached ns Exhibit A·l to 1his affidavit E..'d!ibit A-I is a fair iu1d

~ocurt1tc sn11w1aiy oftny1ruining. eduC11tio11, nnd background in the field ofmodiciuc.

3, All of the opinions thnt· 1 nm offcifog in this mntter. aa set fonh below. nro being given with

reasonable medical probability. I Willi the treating onhopodisl of D1micl S11m udio for n work injury

1mff:ered OJ1 or :Lbout October 16, 200J , My 11'\lllllllCJI.% of Ml'. Sruuudio ~punned froni npprc;i.;\imntcly

NOV'Wlbe.· 8, 2002 through upproxinrnl-ely 2006. My t.rcal!Ucnt included surgcl'ies, inelnding on

1

EXHIBIT "A" 857

From 713781!i71 2 Page· 31ii Date· !ill 312014 11:06:29 AM

From: 713-"571-1148 To: Jose Red1[9uez ~ID Pa,ge 4/21 ~~ !l/12/2014 2:31 :33PM

August 4, 2003 111td Ap1iJ 22. 2004. P:utofruy treatment nlso mctudtxl a ~\'lt!-W of th~ di11gno!llic

imngiug lnkcu of Mr. Srunudio's spine.. My opiJ1i-0m; in thi~ c:1~~. which Arc :ill offered \vithin

rc:ison11ble medical p1-ob;1t~li1y, are based upon my h~,'11men1 of Mr. Sanutdio, the surg.er1es I

performed on Mr. Somudio1 1-oview Qf'lhe di11gnt't.l.1ic im111~ \\ 1md 0\16f two dccade11 of experience u

im ()11hopac.'\tic ~Ul:g\-"Q?I.

4. Mr. Samudro's work inj tny ofOcrober 16, 2001, included a compression frl1ch1rc oflllc Lt

mtd L2 vortcbrne in l1is lurubor spine. The 0~1ubi:r JG, 2()01 work injury wu lh.<i produciug c~usa

1111d ii s1.1bsll1Dt(al foctor in b1'ittgjng 11bo11t 0\1.: V<l!nprtiS~ion jhctw'l!I at LI rmd L2 in Mr. Sr.ruudio's

Jumb:ir ~pine 11nd witboi..1 the October 16, 200 I work Ji,jury the coinrnt>.ssion fracturc'l\1 Ll 11.nd L2

would not ho.vc OC()tmcd. At my iuili<ll evnh1n!i¢11 of Mr. S11mt1diQ, <lll ~rwen11ltlr &, 2002, I

revi~ed nil or 1hc 11v:1il;1blc dingnl)5tic im1tg!$, including di1Lsnu~Lic imagas faken on 01· abo11t

Mttrch 20~ 2002. M~ t'C!\liow of these inlilge!I ex111fim1ed Iha.I M1'. Ssmud;o hod 11 001nprcssio1l

fmotlll'C of"mon: thi111 50%" offhc LI vc:rt¢broc. TI1is is sttll my opinrnn tO\itLy. A true and ootn,i:.t

copy of ncy November&. 2002 rcporl is ott~\ch~d iiS Exhibit A.2 10 thi:; :1ffitlllvitr. E..'1lihi1 A-2 i~ a

record lhnl wns compiled rind mru11cni11od by me in the regular cours:~ cit' bu!rina.q~ a.od it w.11s the

l'egufar course of business of my medicnl pra¢ticc for on cmployoc or 1'0pre~11talivl) 1;>,r 1k.>cte>r wi!h

personal knowledge of the act cvc:nJ. conditiou. opinion, ur <lia,gno~is 1'ClCOrded in 1hl11 1ecord w

r~rs<1nally milkc this record. E~hibit A-2 Wll8 mnu~ ul QT11t:ilr ~he lime of the act, event, oondi1$ t,

opioi-011, or d.ia1~nosis recorded thcroin.

5. Wi1hin rcasonnbk mcdic:il probability, .tvll'. Srunudfo's oompr~i;.Sio1i frocttn'\l of 1hti Ll

Y::rtobnic w a.i; more than 50%. My rcnsunnblc apprnis11l, within l\\.t~-on11ble ittedical p1•ohallili1y, <ir

the si7,c of the coinpl'Cssion fhtctu1'C al U in Mr. Samudio's spine is belw~o ~1% 1t11cl 60%.. 111is

opinion is bnsed upon ruy review of lhc clingoostic inlltge~ my clinie;1l ..ivnhrnlion and physiMl

c-x11mi11ti.ti1'111 of him, 1md my direct \liew ()fMr. Sanmdio ·1: J,t verteb1·ae Ill th~ 1ime oftbc SUl'gGi'ie~ I

porforrucd. In 11ddition, ruy oli1tic11l cv~~ untion md phy~icnl ~-uuninaJ.fon ofMr. S1u1tudio tuve:ll<:.tl

llml there wo.s insh1b.ility in his hllllb11r spine (ti U1e L1 leve:l . 1h~ dtgi·~ of instability th~t I ~aw i1l

2

EXHIBIT "A" 858

from 7137815712 Page· 415 Date 5/1312014 11 :06:29 AM

;: OM' 713-571-11<& To· Jose Rod'nguei MO Page 5121 Dale· 511212014 '2:31'3.1 PM

my lrontm~ut of Mr. Smnutho w:u; coosiMOllt v.ith a compression frnctun: ofLl llrnl wu11 more than

.SO%. It \vrt$ fo1· that reason that I dc1cmlincd Ihm the wrgery pl.'1:fom1ed on August 4, 2003 WM

1-casonablc and 11oceBsary1o1rell1'1he October t6, 200t +1~ny.

6. At the time of my review of the di11g11ostic imngcs, l nlM> nnltd th.at !lie radiologist who

rcvil)wOO ~t. $11mudio's Ma1>0h 20, 2002 ima~s also confinutxl ''nppmx(mutdy 50% IX'llllprcs~oo

defoirnity of LI vcnchral body." His opinion nppom-s to h¢ ctlll~i~ldl\I with mine: however. ! look

effort~ to flrrthcr dcfioe the omouLlt oflhc Cl'llllprcsfiion frncture ·1ho r(!asnn that I took such cffo11~

i1' b~ause I was !he treating phytriciun nnd wn~ t:tskcd wilh dc!it~nnimng the nc~ssity of und

pcrfom1iog spi.nnl surgery. It is nom1ctl for mdiologj~tt, liku l)r. R:uuan Mocharia, who 111£0 t'C!ld

thu M:iroh 20, 2002 im flge11, to pl'<lYidc 1111 npproxim111ion or ll tomprcs..qon fractul'e :ind 1101 10

provide a moru solid qun11tiflcation a~ I did in my Novcmb1:r S, 2002 medical record aud am dl~ins

hctc n5 well. However, under no circmustnnocs sho1.1ld n rndiologi~t·s stat...mei11of "approx:imfrtcly

$00.4> oompres~lon.. be 11scd to &llSSC6t that a compression fra<:furc i!i SO% or les.'I. That would be a

th~! orlicm ()fth(;) raclio!og,i!<t's 111ntc::ncnt.

7 A O< Kn pre.~i:ion fracturo ofmore d1nn 50% ur tl1c LI VCJ'lcbr:ic purs Mr'. Sn11nitl.in in the ORR

IV oaleg.ory under 010 Am~ri Cll.ll Me<lm1l ARsoeintion Guides to Ll1u Evalu~tion of PcnnRnent

lmpninnent, fourlh Edition. The DRE IV cat<..'gOl)' conJinu~ within re.1oom1ble medical

probability, tl1:it Mr. Samudio 's impillrnrnnt rating is 2()% for bts work injury ofOctobet lb, 2001.

8 Fionllv. l onderstnnd thnt Dt. John 01'8mliller and Dr. Cnscv Cochrnn h:we olferetl

impairment 1'11.hnS orin ion~ in thi~ niattet'. ~ci1hcr of t11csc two physiciani: ever ext1m1n~ Mr.

Snniui!io, as I have douu. And more importantly. neitller of tbe5c phy~1emns t~icwod the:

tlint;aorue Un(lgei;, inclutling th~ Mardi 20, 2002 i11111g,cs. 11s I hove done. Tberafore, it would

nppen1· lhat nelll1or of tl"'1n hus any p..irsoua! ktlowicdtc of the pcrcenLlge of Iha cvinpN~~<>n

fhti11t1~ ot J .I in Mr. Saruu<lio'is spine. As sttch, I di&'lgi~ \\ith ony impairment raliflg offei'Od by

thcst! ph)~\JCl#l'IS ht:cituS(: 1t i8 um;uppo1ted.

I, J1>~c Rodtig11e:t, M.D., declare under llellnlty or pe1jury under lhe1 l~ws of the l;l\ited

3

EXHIBIT "A" 859

From 7137815712 Page: 515 Date: 5113/2014 11 :06:29AM

From: 713-571 -1148 To: Jose Rodriguez MO P11ge: 6121 Date· 5112/2014 :2:31 ;33 PM

States and the Stnte of Texas that the foregoiug is true :111d correct.

Executed in May J_)-, 2014, a1 Houston, Texa

BEFORE ME, the undersigned authority in and for snid couuty and state, on this dny

pcrsom11ly appeared ~t:-e~, i"t,1.t!C?.J1!1JO proved to me through a cuirent ideutiflcAtion

care or other document issued by tbe~·lederal govemmcnt containing his/her photograph :md

signature 1·0 be the person whose nnrne ls imbscribe<l to tills ;iffidavil', who, being by me duly

swom, deposed as follows:

df 'J .Q

GIVEN UliDER MY HAND A.'0 SEAL OF OFFICE doi, lhe

20 14.

tti, of

. ·onlnC)

...~·:;;~ tUCY C. l OZANO

{1."LJ:J.~\ No1orv Putllle. SIOlil or Te~o$

i•'.,~.~~1 My Commlssk>O Expires

\":i~;?,i.~f.~S Aprll 2 4, 2017

4

EXHIBIT "A" 860

TAB 1

American Zurich Ins. Co. v. Samudio, 370 S.W.3d 363 (2012)

55 Tex. Sup. Ct. J. 1028

KeyCite Yellow Flag - Negative Treatment

Distinguished by Liberty Mut. Ins. Co. v. Adcock, Tex., August 30, 2013

370 S.W.3d 363

Supreme Court of Texas.

AMERICAN ZURICH INSURANCE COMPANY, Petitioner,

v.

Daniel SAMUDIO, Respondent.

No. 10–0554. | Argued Jan. 10, 2012. | Decided June 29, 2012.

Synopsis

Background: Workers' compensation insurer filed petition for judicial review of decision of the Department of Insurance

Division of Workers' Compensation, finding that claimant had a 20% impairment rating. The 127th District Court, Harris

County, 2007 WL 5527082, Sharolyn P. Wood, J., dismissed petition and awarded claimant attorney fees. Insurer appealed.

The Houston Court of Appeals, 317 S.W.3d 336, affirmed. Insurer sought further review, which was granted.

Holdings: The Supreme Court, Lehrmann, J., held that:

[1] Workers' Compensation Act did not deprive trial court of subject matter jurisdiction to review impairment rating, and

[2] Act permitted trial court to reverse impairment rating and remand to Division.

Reversed and remanded.

West Headnotes (6)

[1] Workers' Compensation Record

Workers' Compensation Act section limiting evidence in an appeal to the trial court of the Department of Insurance

Division of Workers' Compensation's impairment rating determination to evidence of impairment that was presented

to the agency did not deprive trial court of subject matter jurisdiction to review impairment rating; while section

did not allow a reviewing court to consider impairment evidence that was not before the Division, or to award an

impairment rating that was not presented to the agency, it did not limit the trial court's subject matter jurisdiction.

V.T.C.A., Labor Code § 410.306(c).

6 Cases that cite this headnote

[2] Courts Jurisdiction of Cause of Action

Subject matter jurisdiction limits speak to the power of courts to decide a particular type of controversy, not to the

evidence that courts may consider or the scope of the remedy they can afford in a particular case.

Cases that cite this headnote

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

American Zurich Ins. Co. v. Samudio, 370 S.W.3d 363 (2012)

55 Tex. Sup. Ct. J. 1028

[3] Workers' Compensation Remand in general

Workers' Compensation Act section limiting evidence in an appeal to the trial court of the Department of Insurance

Division of Workers' Compensation's impairment rating determination to evidence of impairment that was presented

to the agency permitted trial court to reverse impairment rating and remand to the Division; in considering whether

an impairment rating submitted to the Division was valid, a reviewing court was not making a determination of

impairment, rather the court was deciding the purely legal question of whether the proffered rating was made in

accordance with statutory requirements. V.T.C.A., Labor Code § 410.306(c).

6 Cases that cite this headnote

[4] Statutes Intent

The Supreme Court's fundamental purpose in construing statutes is to determine and give effect to the legislature's

intent.

8 Cases that cite this headnote

[5] Statutes Language and intent, will, purpose, or policy

The words the legislature employed are the best indicators of legislative intent.

5 Cases that cite this headnote

[6] Statutes Other Statutes

When interpreting a statute, the Supreme Court may be aided by the interpretive context provided by the surrounding

statutory landscape.

1 Cases that cite this headnote

Attorneys and Law Firms

*364 Robert D. Stokes, Gregory D. Solcher, Flahive, Ogden & Latson PC, Austin TX, for American Zurich Insurance

Company.

Byron C. Keeling, Ruth B. Downes, Keeling & Downes, P.C., Michael P. Doyle, Doyle Raizner LLP, David Q. Haag II,

Blackwell & Haag, P.C., Houston TX, for Daniel Samudio.

Nicholas Canaday III, Office of the Attorney General, Austin, TX, for Amicus Curiae Texas Department of Insurance Division

of Workers' Compensation.

Marcos Benjamin Guerra, Assistant Attorney General, for Amicus Curiae State Office Risk Management.

Opinion

Justice LEHRMANN delivered the opinion of the Court.

Under the Texas Workers' Compensation Act, an injured worker's impairment income benefits are determined in part by the

impairment rating assigned by the Texas Department of Insurance's Division of Workers' Compensation. TEX. LAB.CODE §

408.121(a)(1). In an appeal to the district court of the Division's impairment rating determination, unless there is evidence of a

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

American Zurich Ins. Co. v. Samudio, 370 S.W.3d 363 (2012)

55 Tex. Sup. Ct. J. 1028

substantial change in the worker's condition, the court may consider only evidence of impairment that was presented *365 to

the agency, and may only adopt an impairment rating assigned by a doctor in the administrative proceedings. TEX. LAB.CODE

§ 410.306(c). We must decide whether a reviewing court lacks subject matter jurisdiction to resolve an impairment rating appeal

if the only rating presented to the agency was invalid. We hold that the absence of a valid impairment rating does not deprive

the court of jurisdiction. Consequently, we reverse the court of appeals' judgment and remand to the trial court.

I. Background

Daniel Samudio suffered a back injury during the course of his employment that was compensable under the Texas Workers'

Compensation Act. See TEX. LAB.CODE § 401.11. He eventually had four surgeries to rectify the injury, including a spinal

fusion and a laminectomy. His physicians did not order preoperative flexion or extension x-rays, which would have provided

evidence of any loss of motion segment integrity, a factor in determining the level of impairment. See Am. Home Assur. Co. v.

Poehler, 323 S.W.3d 626, 631 (Tex.App.-Tyler 2010, pet. pending). Petitioner Zurich American Insurance Company provided

workers' compensation coverage to Samudio's employer.

After Samudio filed a claim for medical benefits under the Act, the Division appointed Dr. Gaston Machado as the designated

doctor in the case to determine the date Samudio reached maximum medical improvement and his impairment rating

under section 408.123 of the Act. An injured worker who suffers a permanent functional or anatomical impairment after

reaching maximum medical improvement is entitled to impairment income benefits, the duration of which depend on the

assigned impairment rating. TEX. LAB.CODE §§ 408.123, 408.121(a)(1). The impairment rating represents “the percentage of

permanent impairment of the whole body resulting from a compensable injury.” Id. § 401.011(24). Impairment income benefits

equal seventy percent of the worker's average weekly wages; the benefits are paid for three weeks for each percentage point

of impairment. Id. §§ 408.121(a)(1); 408.126. An impairment rating of more than fifteen percent may entitle the worker to

supplemental income benefits after impairment income benefits would otherwise expire. Id. § 408.142(a)(1).

Section 408.123 of the Act provides that an impairment rating “must be based” upon the fourth edition of the Guides to the

Evaluation of Permanent Impairment, published by the American Medical Association. 1 The methodology for determining

impairment ratings recognized in that edition of the Guides used objectively verifiable evidence to place injured workers into one

of eight diagnosis-related estimate (DRE) categories. In cases where spinal fusion surgery like Samudio's had been performed,

the Guides called for the impairment rating to be based upon pre-operative flexion and extension x-rays. At the time of the

administrative proceedings to determine Samudio's impairment rating, however, the Division had implemented two advisories,

Advisory 2003–10 and Advisory 2003–10B, which attempted to provide an alternative standard for establishing an impairment

rating when no preoperative flexion or extension x-rays had been performed. Under the advisories, a physician could consider

evidence of spinal *366 fusion surgery of the type Samudio had in assigning a DRE. In his initial report to the Division, Dr.

Machado concluded that Samudio's impairment rating was twenty percent based on a Category IV DRE. He initially asserted

that the rating was based upon the Guides, but later submitted a letter clarifying that he had relied on the advisories in light of

the absence of the pre-operative flexion or extension x-rays called for in the Guides. Under the advisories, Machado included

Samudio's spinal fusion surgery as a factor in calculating the impairment rating.

1 Although as originally enacted, section 408.124 required use of the third edition of the Guides, in 1999, the Legislature authorized

the Commissioner of Workers' Compensation to adopt the fourth edition of the Guides. Act of May 30, 1999, 76th Leg., R.S., ch.

1426, § 12, 1999 Tex. Gen. Law 4865, 4869 (codified at TEX. LAB.CODE § 408.124(c)).

American Zurich disputed the impairment rating, and the Division commenced a contested case hearing. At the hearing, the

carrier submitted a letter from Dr. John Obermiller. Although he opined that Samudio's impairment rating would be properly

calculated at ten percent, Obermiller never examined Samudio, and expressly stated that he was not providing an impairment

rating. Instead, he explained that his purpose was to show that Machado's analysis did not conform to the Guides. After the close

of the hearing, the hearing examiner issued a decision finding that Samudio had an impairment rating of twenty percent. The

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American Zurich Ins. Co. v. Samudio, 370 S.W.3d 363 (2012)

55 Tex. Sup. Ct. J. 1028

examiner also specifically found that only one impairment rating was offered during the contested case proceeding. American

Zurich appealed the examiner's decision to the appeals panel. In February 2006, the Division notified the parties that the hearing

officer's decision was final.

American Zurich then appealed to the district court. It contended that the impairment rating the Division assigned was invalid,

and that Samudio had either no impairment rating, or that the correct rating was ten. While the appeal was pending, the Austin

court of appeals decided Texas Department of Insurance Workers Compensation Division v. Lumbermens Mutual Casualty Co.,

212 S.W.3d 870 (Tex.App.-Austin 2006, pet. denied). In that case, the court ruled that the advisories were inconsistent with the

Guides and thus invalid, and enjoined their further use. Id. at 876–77. 2 After the Lumbermens decision, Samudio filed a plea

to the jurisdiction contending that the trial court lacked subject matter jurisdiction because the trial court was not empowered to

provide the relief American Zurich sought. Samudio argued that American Zurich's petition presented no justiciable controversy

because the trial court was only empowered to award an impairment rating that was presented to the agency, and the only rating

before the agency was the twenty percent rating advocated by Machado. The trial court granted Samudio's plea and dismissed

the case, awarding Samudio $29,246.40 in attorney's fees under section 408.221(c) of the Act. The court of appeals affirmed.

317 S.W.3d 336, 348.

2 The Division issued Bulletin B–0033–77 providing that the advisories would no longer be used after we denied the Division's petition

for review in Lumbermens. Albert Betts, Tex. Dep't of Ins., Comm'r's Bll. No. B–0033–07 (July 18, 2007), http://www.tdi.texas.

gov/bulletins/2007/cc34.html.

II. Jurisdiction

In an appeal of an injured worker's entitlement to impairment income benefits, the Legislature has provided for a modified trial

de novo. Tex. Workers' Comp. Comm'n v. Garcia, 893 S.W.2d 504, 515 (Tex.1995); TEX. LAB.CODE § 410.306(c). Under that

standard, the trier of fact is informed of the impairment rating assigned by the Division. TEX. LAB.CODE § 410.304. Unless

there has been a substantial change in the worker's condition, id. §§ 410.306(c), 410.307, evidence of the extent of impairment is

limited to that *367 presented to the Division, and the trier of fact “shall adopt one of the impairment ratings under Subchapter

G, Chapter 408.” Id. § 410.306(c). In affirming the trial court's dismissal for lack of subject matter jurisdiction, the court of

appeals reasoned that only one impairment rating, Machado's, had been presented to the Division. 317 S.W.3d at 348. The court

concluded that the trial court could not, therefore, grant American Zurich any relief, even assuming that the rating presented

to the agency was invalid under Lumbermens. Id. at 348–49.

A. Section 410.306(c) is not a jurisdictional limit

[1] In Garcia, we rejected the contention that section 410.306(c) of the Act violated injured workers' right to trial by jury.

893 S.W.2d at 528–30 (Tex.1995). We equated the provision with procedural rules barring the presentation of witnesses or

information that was not timely disclosed in a civil trial. Id. at 528 (citing TEX.R. CIV. P. 215.5). Section 410.306(c) shaped

the manner of submitting the impairment issue to the jury and the scope of the permissible remedy. Id. at 528–529. But because

the provision still left the determination of impairment within the jury's hands, it did not violate the right to trial by jury. Id. at

530. At no point did we suggest that section 410.306(c) could be seen as a limit on trial courts' subject matter jurisdiction.

[2] Subject matter jurisdiction limits speak to the power of courts to decide a particular type of controversy, not to the evidence

that courts may consider or the scope of the remedy they can afford in a particular case. See Dubai Petroleum Co. v. Kazi,

12 S.W.3d 71, 74–75 (Tex.2000). In the case the court of appeals primarily relied upon, for example, State Bar of Texas v.

Gomez, 891 S.W.2d 243 (Tex.1994), we concluded that the district court lacked subject matter jurisdiction in a case in which

the plaintiffs sought to require Texas attorneys to provide pro bono legal services. Id. at 246. We noted that the case fell within

our exclusive administrative power to regulate the bar. Id. The district court could not grant relief because it “would ... be cast

in the impermissible role of effectively promulgating policies and regulations governing Texas lawyers.” Id. American Zurich's

appeal of the impairment rating the Division assigned Samudio is the type of case for which judicial review is available under

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American Zurich Ins. Co. v. Samudio, 370 S.W.3d 363 (2012)

55 Tex. Sup. Ct. J. 1028

the Act, so long as the appealing party has exhausted its administrative remedies. TEX. LAB.CODE §§ 410.251, 410.301.

While section 410.306(c) does not allow a reviewing court to consider impairment evidence that was not before the Division, or

to award an impairment rating that was not presented to the agency, it does not limit the trial court's subject matter jurisdiction.

The court of appeals' decision was driven largely by its conclusion that the trial court was not empowered to set aside the

impairment rating assigned by the division in the absence of a competing rating that was presented to the agency. See 317

S.W.3d at 349. We agree with the court that the trial court could not have awarded Samudio a rating of zero or, alternatively,

of ten percent. While Obermiller opined that an appropriate impairment rating for Samudio would be ten percent, he never

examined Samudio, as section 408.123 requires, and expressly disclaimed an intent to assess an impairment rating. Further, no

one presented evidence to the Division that Samudio's impairment rating was zero, and it is undisputed that he had suffered some

permanent impairment. We disagree with the court of appeals, however, that the trial court was left with *368 no alternative

but to leave in place a putatively invalid impairment rating.

B. Remand to the agency

[3] Samudio contends that the trial court properly dismissed this case because section 410.306(c) deprived it of any power to

set aside the impairment rating assigned by the Division, even if the rating was invalid. American Zurich and amicus curiae

Texas Department of Insurance Workers' Compensation Division disagree. They maintain that, if the trial court concluded that

the assigned rating was invalid, it could reverse the Division's decision and remand to the agency. 3 We agree with American

Zurich and the Division.

3 Amicus curiae State Office of Risk Management agrees that section 410.306(c) does not preclude a reviewing court from setting

aside an impairment rating, but disagrees that the court could remand to the agency. It contends that a remand is unnecessary because

the parties could reinitiate the case at the agency if an impairment rating is invalidated.

[4] [5] [6] Our fundamental purpose in construing statutes is to determine and give effect to the Legislature's intent. LTTS

Charter Sch., Inc. v. C2 Constr., Inc., 342 S.W.3d 73, 75 (Tex.2011). The words the Legislature employed are the best indicators

of that intent. Id. And we may be “aided by the interpretive context provided by ‘the surrounding statutory landscape.’ ” Id. at

75 (quoting Presidio Ind. Sch. Dist. v. Scott, 309 S.W.3d 927, 929–30 (Tex.2010)). The application of these principles lead us

to conclude that a trial court may remand to the Division to allow it to determine a valid impairment rating if the court concludes

that no valid impairment rating was presented to the agency in the underlying contested case.

First, under section 410.306(c) the trier of fact, “in its determination of the extent of impairment, shall adopt one of the

impairment ratings under Subchapter G, Chapter 408.” As the Division argues, if a rating does not comport with the Guides, as

section 408.124 requires, it is not adopted “under subchapter G.” To the contrary, such an impairment rating would be invalid

precisely because it was not adopted in compliance with section 408.124(b). Moreover, in considering whether an impairment

rating submitted to the Division is valid, a reviewing court is not making a “determination of impairment.” Instead, the court is

deciding a purely legal question: whether the proffered rating was made in accordance with statutory requirements.

More importantly, the general statutory scheme laid out by the Legislature compels a remand to allow the Division to determine

Samudio's impairment rating as of April 7, 2004, the date the parties stipulated he reached maximum medical improvement,

if the trial court finds that Samudio's twenty percent rating is invalid. The Legislature established a detailed, very specific

process for the assignment of impairment ratings and the resolution of ratings disputes. See TEX. LAB.CODE §§ 408.122–.125,

410.021–.209. And the Legislature unequivocally mandated that impairment ratings be determined according to the Guides. Id.

§ 408.124(b) (“For determining the existence and degree of an employee's impairment, the division shall use [the Guides]”).

The regulatory scheme as a whole illustrates an intent that impairment ratings be determined by the Division, subject to limited

de novo review. Id. § 410.306(c); Garcia, 893 S.W.2d at 515. Furthermore, no language in the Act prohibits a reviewing court

from remanding to the agency. Instead, while a reviewing court cannot assign an impairment rating that was not presented to

the Division, the statute is silent as to the court's power to remand. Accordingly, *369 section 410.306(c) does not preclude

a trial court from remanding to the Division when the only impairment rating offered is invalid. To the contrary, a remand is

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American Zurich Ins. Co. v. Samudio, 370 S.W.3d 363 (2012)

55 Tex. Sup. Ct. J. 1028

the course most consistent with the overall process established by the Legislature. The court of appeals erred in affirming the

trial court's judgment dismissing American Zurich's appeal.

III. Attorney's fees

Finally, American Zurich contends that, to the extent the court of appeals erred in affirming the trial court's judgment, it also

erred in awarding fees under section 408.221 of the Act. We agree. In light of our reversal, it is no longer true that Samudio

prevailed on an issue on which judicial review was sought by the carrier. See TEX. LAB.CODE § 408.122(c).

IV. Conclusion

While section 410.310(c) limits the evidence that a trial court may consider in reviewing an impairment rating assigned by the

Division and precludes the court from assigning a rating that was not presented to the agency, it does not prevent the court from

setting aside an invalid rating and remanding to the Division for further proceedings. We therefore reverse the court of appeals'

judgment and remand to the trial court. If the trial court determines that no rating made in conformance with the Guides was

presented to the agency, it should remand to the Division for a new impairment determination.

All Citations

370 S.W.3d 363, 55 Tex. Sup. Ct. J. 1028

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 6

TAB 2

Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (1997)

40 Tex. Sup. Ct. J. 591

KeyCite Yellow Flag - Negative Treatment

Declined to Extend by McGee v. Deere & Co., Tex.App.-Austin, March 24, 2005

945 S.W.2d 812

Supreme Court of Texas.

ARTHUR ANDERSEN & CO., Petitioner,

v.

PERRY EQUIPMENT CORPORATION, Respondent.

No. 95–0444. | Argued March 19, 1997. | Decided May 16, 1997.

Purchasing corporation sued accounting firm, alleging violations of Deceptive Trade Practices Act (DTPA) in connection with

firm's preparation of audited financial statements of acquired corporation. The 55th District Court, Harris County, Kathleen

S. Stone, J., entered judgment for purchasing corporation, and the Houston Court of Appeals, First District, 898 S.W.2d 914,

affirmed. On writ of error, the Supreme Court, Cornyn, J., held that: (1) purchasing corporation was “consumer” under DTPA

although it did not pay for audit; (2) failure to instruct jury on proper measure of direct damages was reversible error; and (3)

award of attorney fees under DTPA had to be dollar amount, not percentage of judgment.

Reversed and remanded.

West Headnotes (19)

[1] Antitrust and Trade Regulation Accountants and tax preparers

For purposes of Deceptive Trade Practices Act (DTPA) claim against accounting firm, purchasing corporation was

a “consumer,” although it did not pay for audit, where purchasing corporation insisted as condition of sale that

acquired corporation provide audited financial statements, acquired corporation hired accounting firm for that purpose,

purchasing corporation then relied on those statements in reaching its decision to purchase acquired corporation, and

accounting firm was aware that purchasing corporation had required audit and would rely on its accuracy and knew

specific purpose for which it was conducted. V.T.C.A., Bus. & C. § 17.45(4).

23 Cases that cite this headnote

[2] Antitrust and Trade Regulation Consumers, purchasers, and buyers; consumer transactions

In determining whether plaintiff is consumer under Deceptive Trade Practices Act (DTPA), focus is on plaintiff's

relationship to transaction. V.T.C.A., Bus. & C. § 17.45(4).

19 Cases that cite this headnote

[3] Antitrust and Trade Regulation Measure and amount

Under Deceptive Trade Practice Act (DTPA), amount of actual damages recoverable is total loss sustained as result

of deceptive trade practice. V.T.C.A., Bus. & C. § 17.50(b)(1).

2 Cases that cite this headnote

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (1997)

40 Tex. Sup. Ct. J. 591

[4] Antitrust and Trade Regulation Grounds and Subjects

Under Deceptive Trade Practices Act (DTPA), actual damages are those damages recoverable under common law,

either direct or consequential. V.T.C.A., Bus. & C. § 17.50(b)(1).

16 Cases that cite this headnote

[5] Damages Direct or indirect consequences

Direct damages are necessary and usual result of defendant's wrongful act; they flow naturally and necessarily from

the wrong.

50 Cases that cite this headnote

[6] Damages Direct or indirect consequences

Direct damages compensate plaintiff for loss that is conclusively presumed to have been foreseen by defendant from

his wrongful act.

22 Cases that cite this headnote

[7] Damages Proximate or Remote Consequences

Consequential damages result naturally, but not necessarily, from defendant's wrongful acts; under common law, they

need not be usual result of the wrong, but they must be foreseeable, and must be directly traceable to wrongful act

and result from it.

68 Cases that cite this headnote

[8] Antitrust and Trade Regulation Reliance; causation; injury, loss, or damage

Foreseeability is not an element of producing cause under Deceptive Trade Practices Act (DTPA). V.T.C.A., Bus.

& C. § 17.50(b)(1).

1 Cases that cite this headnote

[9] Antitrust and Trade Regulation Grounds and Subjects

Under Deceptive Trade Practices Act, if damages are too remote, too uncertain, or purely conjectural, they cannot be

recovered. V.T.C.A., Bus. & C. § 17.50(b)(1).

10 Cases that cite this headnote

[10] Fraud Difference between actual and represented value

Fraud Difference between value and price paid

Under common law, direct damages for misrepresentation are measured either by out-of-pocket damages, which

measure difference between value buyer has paid and value of what he has received, or by benefit-of-the-bargain

damages, which measure difference between value as represented and value received.

44 Cases that cite this headnote

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Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (1997)

40 Tex. Sup. Ct. J. 591

[11] Antitrust and Trade Regulation Measure and amount

Under Deceptive Trade Practices Act (DTPA), plaintiff may recover under damage theory that provides greater

recovery, either out-of-pocket damages or benefit-of-the-bargain damages. V.T.C.A., Bus. & C. § 17.50(b)(1).

25 Cases that cite this headnote

[12] Antitrust and Trade Regulation Measure and amount

Under Deceptive Trade Practices Act(DTPA), both out-of-pocket and benefit-of-the-bargain measure of damages are

determined at time of sale. V.T.C.A., Bus. & C. § 17.50(b)(1).

29 Cases that cite this headnote

[13] Antitrust and Trade Regulation Instructions

Appeal and Error Failure or refusal to charge

Failure to instruct jury on proper measure of direct damages on purchasing corporation's claim under Deceptive Trade

Practices Act (DTPA) regarding accounting firm's audit of acquired corporation was reversible error, where jury

was not asked to find direct damages at time of sale as well as consequential damages attributable to accounting

firm's misrepresentations, but was simply asked to consider purchase price as part of overall damages, and purchasing

corporation did not establish how much of its loss was attributable to accounting firm. V.T.C.A., Bus. & C. § 17.50(b)

(1).

17 Cases that cite this headnote

[14] Antitrust and Trade Regulation Grounds and Subjects

Under Deceptive Trade Practice Act, losses subsequent to time of sale are recoverable only if misrepresentation is

producing cause of loss. V.T.C.A., Bus. & C. § 17.50(b)(1).

Cases that cite this headnote

[15] Fraud Reliance on Representations and Inducement to Act

Basis of a misrepresentation claim is that defendant's false statement induced plaintiff to assume risk he would not

have taken had truth been known.

1 Cases that cite this headnote

[16] Antitrust and Trade Regulation Grounds and Subjects

Plaintiff's recovery of damages under Deceptive Trade Practices Act (DTPA) is limited not only by his own evidence,

but also by defendant's evidence of plaintiff's failure to reasonably mitigate losses or evidence of intervening causes.

4 Cases that cite this headnote

[17] Attorney and Client Construction and Operation of Contract

Attorney contingency fee contracts allow plaintiffs who cannot afford to pay a lawyer up-front to pay lawyer out

of any recovery, and, because they offer potential of greater fee than might be earned under hourly billing method,

compensate attorney for risk that attorney will receive no fee whatsoever if case is lost.

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40 Tex. Sup. Ct. J. 591

151 Cases that cite this headnote

[18] Antitrust and Trade Regulation Proceedings to impose; evidence

Party's contingent fee agreement should be considered by fact finder, and is therefore admissible in evidence, but that

agreement cannot alone support award of attorney's fees under Deceptive Trade Practices Act (DTPA). V.T.C.A.,

Bus. & C. § 17.50(d); State Bar Rules, V.T.C.A., Government Code Title 2, Subtitle G App., Art. 10, § 9, Rules of

Prof.Conduct, Rule 1.04(b)(8).

136 Cases that cite this headnote

[19] Antitrust and Trade Regulation Attorney fees

Antitrust and Trade Regulation Proceedings to impose; evidence

To recover attorney's fees under Deceptive Trade Practices Act (DTPA), plaintiff must prove that amount of fees

was both reasonably incurred and necessary to prosecution of case, and must ask jury to award fees in specific dollar

amount, not as percentage of judgment. V.T.C.A., Bus. & C. § 17.50(d); State Bar Rules, V.T.C.A., Government

Code Title 2, Subtitle G App., Art. 10, § 9, Rules of Prof.Conduct, Rule 1.04.

229 Cases that cite this headnote

Attorneys and Law Firms

*813 Ben Taylor, Dallas, Thomas C. Godbold, Houston, for Petitioner.

Christopher B. Allen, Michael P. Cash, James W. Paulsen, Houston, for Respondent.

Opinion

CORNYN, Justice.

We withdraw our opinion of January 10, 1997, and substitute the following in its place. The parties' motions for rehearing

are overruled.

*814 In this accounting malpractice case, Perry Equipment Corporation (PECO) sued the accounting firm of Arthur Andersen

for a faulty audit, which PECO relied on to purchase another company, Maloney Pipeline Systems. The audit favorably reported

Maloney's financial condition when, in fact, the company was suffering substantial losses. Fourteen months after the sale,

Maloney filed for bankruptcy. PECO sued for violations of the Deceptive Trade Practice Act, fraud, negligence, negligent

misrepresentation, gross negligence, and breach of implied warranty. Based on the jury's verdict, the trial court rendered

judgment for PECO. The court of appeals affirmed. 898 S.W.2d 914.

We address three issues presented by Arthur Anderson's application for writ of error. First, Arthur Andersen challenges PECO's

consumer status because Maloney, rather than PECO, actually paid for the audit. Second, Arthur Andersen claims that the trial

court failed to instruct the jury on the correct measure of damages. Third, Arthur Andersen contests the attorney's fees award,

arguing that the percentage of recovery method is not a proper measure of attorney's fees under the DTPA, and that even if such

fees were recoverable, no evidence supports the award. For the reasons discussed below, we reverse the judgment of the court

of appeals and remand this case to the trial court for further proceedings.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4

Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (1997)

40 Tex. Sup. Ct. J. 591

I

When PECO, a successful manufacturer of oil filters used in compressors for gas pipelines, decided to expand its business into

the gas metering field, it looked into acquiring Maloney Pipeline Systems, one of three United States companies in the liquid

metering market. In the mid–1980s, PECO began negotiating with Maloney's owner, Ramteck II. As a condition of the sale,

PECO required an audit of Maloney's financial statements. Maloney retained Arthur Andersen to conduct the audit. Maloney

eventually provided PECO financial statements audited by Arthur Andersen. The statements showed Maloney to be a profitable

business. Relying upon this information, on August 23, 1985, PECO purchased the Maloney stock from Ramteck II, Inc. for

$4,088,237.

Soon after the purchase, Maloney began to show signs of serious financial decline. For example, three months after the sale,

Maloney ran out of cash and required a $400,000 advance from PECO to continue operating. PECO also attempted other

emergency financial measures, but to no avail. Fourteen months after the sale, Maloney filed bankruptcy. PECO presented

uncontradicted evidence at trial that the purchase price for Maloney was a total loss from which PECO realized no return and

which PECO wrote off.

PECO's experts testified that Arthur Andersen's audit contained serious errors and otherwise failed to follow acceptable auditing

procedures. One of the most significant errors, the evidence showed, was the failure to verify that contracts Maloney reported

as complete were in fact complete or that Maloney's estimates of costs and percentage of completion for ongoing contracts

were accurate. Maloney later incurred substantial losses on these contracts. One expert testified that the audit was one of the

worst he had ever seen. Another expert, an auditing professor, stated that if a student submitted the work, he would have given

the student a failing grade.

The jury found Arthur Andersen 51 percent at fault and PECO 49 percent at fault. The jury also found that Arthur Andersen

had committed fraud, DTPA violations, and breach of warranty, but that it was not liable for negligent misrepresentation or

gross negligence. The jury assessed damages of $5,449,468, including the $4,088,237 PECO paid for Maloney and $1,361,231

for other expenses incurred by PECO in its attempt to salvage the company. PECO elected to recover under the DTPA. The

trial court credited Arthur Andersen with the two million dollars that Ramteck II had already paid PECO in settlement, and

then awarded PECO a total of $9,297,601.20, including damages, prejudgment interest, DTPA additional damages, attorney's

fees, and costs.

*815 II

[1] [2] Arthur Andersen first contends that PECO is not a “consumer,” a prerequisite to recovery under the DTPA. The DTPA

defines a consumer as one “who seeks or acquires by purchase or lease, any goods or services.” TEX. BUS. & COM.CODE §

17.45(4). In determining whether a plaintiff is a consumer, our focus is on the plaintiff's relationship to the transaction. Amstadt

v. United States Brass Corp., 919 S.W.2d 644, 650 (Tex.1996). As a condition of sale, PECO insisted that Maloney provide

audited financial statements. Maloney hired Arthur Andersen for this specific purpose. PECO then relied on those statements

in reaching its decision to purchase Maloney. Under these circumstances, we hold that PECO sought and acquired Arthur

Andersen's services.

The next question is whether PECO sought and acquired these services by purchase or lease, inasmuch as it did not pay for

the audit. Our decision in Kennedy v. Sale, 689 S.W.2d 890 (Tex.1985), controls this issue. There, we held that the DTPA does

not require the consumer to be an actual purchaser or lessor of the goods or services, as long as the consumer is the beneficiary

of those goods or services. Id.

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Arthur Andersen & Co. v. Perry Equipment Corp., 945 S.W.2d 812 (1997)

40 Tex. Sup. Ct. J. 591

The Texas Society of Certified Public Accountants, as amicus curiae, argues that a stock purchaser should not be considered

a consumer simply because the corporation paid for an audit for the purchaser's benefit because virtually every external audit

benefits third parties. Thus, any stock purchaser who reviews audited financial statements could bring a DTPA claim against

the auditor. 1 Our holding is not so broad. In this case, the audit was rendered in connection with the sale of Maloney and was

specifically required by PECO and intended to benefit PECO. Arthur Andersen was aware that PECO had required the audit

and would rely on its accuracy and knew the specific purpose for which it was conducted. We accordingly hold that PECO

is a consumer under the DTPA.

1 After PECO brought this action, the Legislature amended the DTPA to preclude consumers from suing under the DTPA for

professional negligence or for claims arising from transactions involving consideration of more than $500,000. TEX. BUS. &

COM.CODE § 17.49(c) & (g).

Arthur Andersen also urges us to reject PECO's consumer status based on the decision in Hand v. Dean Witter Reynolds Inc.,

889 S.W.2d 483 (Tex.App.—Houston [14th Dist.] 1994, writ denied). In Hand, the plaintiff alleged that her stock broker failed

to purchase certain commodity option contracts after she requested that he do so. Id. at 487–88. After decidi

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