September 2012

Are your liability release contracts sufficient to sustain a successful motion for summary judgment? Texas courts generally hold releases of liability to fairly high standards. Release cases are very fact specific, and often come down to extremely technical points about the contents of the release document. As such, the proper drafting of these contracts is a must. A recent case gives us a glimpse into how Texas courts interpret liability releases.

A man by the name of Revel Thom decided to ride the mechanical bull while he was hanging out at Rebel’s Honky Tonk, a country bar on 5th Street in Austin. Before riding the bull, Mr. Thom signed a document entitled “PARTICIPANT AGREEMENT, RELEASE AND ASSUMPTION OF RISK.” The release had Thom acknowledge the risks of riding the mechanical bull, disclose any pre-existing health conditions, and release and indemnify Rebel’s and related parties. 

Unless you’re Ty Murray, don’t expect to stay on one of these things…especially if you’ve been drinking!

However, Mr. Thom failed to inform the mechanical bull operator that he had suffered from chronic back pain for four to five years requiring him to receive annual epidurals to numb the pain. Mr. Thom fractured his T-12 and L-1 vertebrae in his back as a result of being bucked off the mechanical bull. Thom subsequently sued Rebel’s Honky Tonk for his injuries. 

The honky tonk filed a motion for traditional summary judgment, arguing that they conclusively established the affirmative defenses of release and assumption of the risk. The honky tonk also sought a no-evidence summary judgment on Thom’s claims of negligence and negligent supervision. The trial court granted the honky tonk’s motion for summary judgment without stating the basis for its ruling.

Overruling all of Thom’s points of error, the Austin Court of Appeals affirmed the trial court’s dismissal of Thom’s case on summary judgment. 

The court of appeals found Thom’s argument that he did not read the release to be unconvincing, stating,

It is well established that one is presumed to know the contents of the contract that they are signing and are bound by its legal effects.

The court of appeals also found that the release language was sufficiently conspicuous, because the release was contained in a stand-alone document, was not written in minuscule font, and contained bolded and underlined warnings.

The language listing Rebel’s Honky Tonk and its “owners” as released parties was upheld by the court of appeals to be specific enough to release additional defendants Rainbow Cattle Company, Inc. (the honky tonk’s owner) and Zack Truesdell (Rainbow’s president). The court found the the case cited by Thom inapplicable, as the release at issue in that matter purported to release an “unlimited, general class of potential defendants.”

Hat tip to Nick Farr over at Abnormal Use for the heads up on this case.

Case Information:

Thom v. Rebel’s Honky Tonk, No. 03-11-00700-CV, 2012 WL 3793181 (Tex. App.—Austin, Aug. 30, 2012, no pet. h.)

Last Friday, the Supreme Court of Texas denied Brenda Young’s petition for review. The 14th Court of Appeals’ holding that Chapter 87 can immunize defendants against suits brought by independent contractors will stand. 

The Court’s notice regarding the denial of the petition for review can be downloaded here.

The Supreme Court did not give a reason for denying the petition. One reason could have been that the Court found no reversible error in the 14th Court’s opinion. As such, the denial may be yet another indication that the Supreme Court agrees with me and other practitioners who believe Chapter 87 applies to suits brought by workers (both independent contractors and employees), subject to its exceptions.

As far as I know, no court of last resort in any state has ever taken up the issue of whether an equine or farm animal immunity statute applies to suits brought by workers.

Related Posts:

Young v. McKim Appealed to Supreme Court of Texas

Texas Supreme Court May Be Inclined to Grant Chapter 87 Immunity to Employers

Another Appellate Court Holds Chapter 87 Immunity Act Applies to Suits Brought by Independent Contractors

Do you withhold payroll taxes from your farm help’s wages? A recent tax case illustrates the bad things than can happen when a horse business incorrectly calls its farm workers “independent contractors”, and fails to withhold payroll taxes from their wages.

Are your farm workers really independent contractors?

Case Background:

Twin Rivers Farm, Inc., a Tennessee S Corporation, was engaged in the business of raising, training, and showing horses for anticipated sale or lease.

Twin Rivers hired Adam Lopez Morales and Nallhelyo Ruiz (workers) to work on the property where it ran its horse business. Morales and Ruiz lived in a trailer on the property and did not pay rent during the three years at issue in the case.

Morales and Ruiz’s primary job duties included: cleaning stalls, the barn area, the barn offices, the restroom, and the tack room; grooming horses; watering the horses; and moving the horses between pastures. The workers also occasionally fixed fence and mowed.  The equipment Morales and Ruiz used to perform their job duties was owned by Twin Rivers.

Twin Rivers paid both workers by check, with Morales receiving $300 per week, and Ruiz receiving $150 per week. With respect to the years at issue, Twin Rivers did not make deposits of employment tax, nor did it file Forms 1099 with respect to the workers.

Holding:

Over farm owner Diana Militana’s objections, the court found that Morales and Ruiz were employees of the farm and not independent contractors. As a result of the farm’s misclassification of the employees, the court found Militana liable for approximately $30,000 in unpaid employment taxes and penalties for a three year period.

Case Info

Twin Rivers Farm, Inc. v. Commissioner; T.C. Memo 2012-184; Docket No. 14074-10 (July 2, 2012)

Related Posts:

Employee v. Independent Contractor: Pitfalls of Misclassification (Part 1)

Employee v. Independent Contractor: Pitfalls of Misclassification (Part 2)

A Lubbock County district court held that approximately 130 head of horses it allocated to the husband in a divorce action were worth $520,000. The husband disagreed.

The husband, Robert “Greg” Collier, objected to the court’s valuation at trial and in two separate appeals of the divorce decree. According to Greg, the trial court’s allocation of $520,000 worth of divorce assets to him in the form of the horses was an abuse of discretion, because the horses were actually worth far less than that amount. Despite Greg’s objections, the Amarillo Court of Appeals did not find that the trial court abused its discretion with respect to its valuation of the horses.

When the honeymoon’s over, can you prove the value of your horses with reasonable certainty?

According to the court of appeals, the trial court seems to have based its valuation on an "appraisement and inventory" proffered by the wife, Leanne Farrell Collier. Leanne alleged that Greg possessed "approximately" 130 head of quarter horses that could sell for between $200 at a livestock auction to $7,500, if sold privately with a little training put into the horse. 

The trial court apparently multiplied the number of horses (130) by one of Leanne’s estimates of what the horses could be sold for ($4,000) to arrive at the $520,000 figure.

Though the court of appeals noted that Greg’s testimony was more specific and “would support a different valuation”, Greg’s testimony was similar to Leanne’s in that it was full of estimates and guesses. At the end of the day, the evidence Greg used to support his objections to Leanne’s valuation was not specific enough for the trial court.

Because neither party provided the trial court with specific information regarding the number of horses owned by Greg, the trial court was left in a position of assessing the credibility of the parties’ estimated values. 

How could Greg have avoided this dilemma? The parties could have kept better books and records with respect to the number of horses owned by the couple and related business entities. Furthermore, Greg might have retained a professional equine appraiser to determine the true value of the herd.  A well-researched independent third-party appraisal is typically given more weight than the estimates and guesses of interested parties.

Well-founded appraisals are invaluable not only in divorce matters, but in any lawsuit where a horse’s value is at issue.

Related Cases:

In the Matter of the Marriage of Leanne Farrell Collier and Robert Greg Collier and in the Interest of R.C.C., a Child, No. 07-12-00084-CV, 2012 WL 3762475 (Tex. App.—Amarillo, Aug. 30, 2012, no pet. h.)

In the Matter of the Marriage of Leanne Farrell Collier and Robert Greg Collier and in the Interest of R.C.C., a Child, No. 07-09-00146-CV, 2011 WL 13504 (Tex. App.—Amarillo, Jan. 4, 2011, no pet.)