source: Caselaw Access Project

author: Justice GARZA. Justice HINOJOSA.

license: Public Domain

text:
    MEDICAL SPECIALIST GROUP, P.A., d/b/a Saratoga Medical Center, Appellant, v. RADIOLOGY ASSOCIATES, L.L.P., et al., Appellees.
    No. 13-02-275-CV.
    Court of Appeals of Texas, Corpus Christi-Edinburg.
    Aug. 31, 2005.

      William N. Woolsey, Law Office of William N. Woolsey, PC, Corpus Christi, for appellant.
    John C. Holmgreen, Gary, Thomasson, Hall & Marks, Corpus Christi, for appel-lees.
    Before Justices HINOJOSA, YÁÑEZ, and GARZA.
   OPINION

Opinion by

Justice GARZA.

Appellant, Medical Specialist Group, P.A., d/b/a Saratoga Medical Center (“Saratoga”), sued appellees, Radiology Associates, L.L.P., and each of its individual partners (collectively “Radiology Associates”), for breach of fiduciary duty, conversion of a trade secret, and antitrust violations. Radiology Associates counterclaimed that Saratoga’s antitrust claims were groundless and brought in bad faith and requested attorney’s fees and litigation expenses. Prior to trial, Saratoga abandoned its antitrust claims. A jury found against Saratoga, and the trial court signed a take-nothing judgment. On appeal, Saratoga raises four legal and factual sufficiency issues. In a cross-appeal, Radiology Associates asserts the trial court erred in finding that Saratoga’s antitrust claims were not groundless and brought in bad faith. We affirm.

A. Factual BACKGROUND

Saratoga is owned and operated by Dr. Jairo Puentes. In June 1997, Saratoga entered into a contract with Radiology Associates to conduct and interpret radiological procedures performed at Saratoga’s facility. According to the contract, Radiology Associates had the exclusive right to read Saratoga’s MRI films during the contract term. The contract did not contain a non-compete clause, nor was such a clause ever discussed between the parties.

In early 1998, Dr. Tamara Haygood, a partner in Radiology Associates, obtained a computer printout from Saratoga’s MRI technician that included the number of MRI procedures performed by Saratoga in November and December 1997, and the names of the referring physicians. In April 1998, Radiology Associates purchased an MRI machine and started performing MRI procedures. Radiology Associates continued to perform radiological services for Saratoga until December 31, 1998, the end of the contract term.

B. Legal and Factual Sufficiency

In its second and third issues, Saratoga contends the evidence is legally insufficient to support the jury’s answers to Questions One and Three of the court’s charge, and the evidence conclusively established, as a matter of law, the alternative answers. In its first and fourth issues, Saratoga contends the jury’s answers to Questions One and Three of the court’s charge are contrary to the great weight and preponderance of the evidence and are manifestly unjust.

1. Standard of Review

When a party attacks the legal sufficiency of an adverse finding on which it has the burden of proof, the party must demonstrate on appeal that the evidence establishes, as a matter of law, all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex.2001); Pearson v. DeBoer, 99 S.W.3d 273, 275 (Tex.App.-Corpus Christi 2003, no pet.). When we review a “matter of law” challenge, we first examine the record for evidence that supports the finding and ignore all evidence to the contrary. Dow Chem. Co., 46 S.W.3d at 241; Pearson, 99 S.W.3d at 275. If there is no evidence to support the finding, we examine the entire record to determine if the contrary proposition is established as a matter of law. Dow Chem. Co., 46 S.W.3d at 241; Pearson, 99 S.W.3d at 275. The issue should be sustained only if the contrary proposition is conclusively established. Dow Chem. Co., 46 S.W.3d at 241; Pearson, 99 S.W.3d at 275.

When a party attacks the factual sufficiency of an adverse finding on an issue on which it has the burden of proof, the party must demonstrate on appeal that the adverse finding is against the great weight and preponderance of the evidence. Dow Chem. Co., 46 S.W.3d at 242; Pearson, 99 S.W.3d at 275. We must consider and weigh all of the evidence, and can set aside a verdict only if the evidence is so weak or if the finding is so against the great weight and preponderance of the evidence that it is clearly wrong and unjust. Dow Chem. Co., 46 S.W.3d at 242; Pearson, 99 S.W.3d at 275. If we set aside a verdict, we must “detail the evidence relevant to the issue” and “state in what regard the contrary evidence greatly outweighs the evidence in support of the verdict.” Dow Chem. Co., 46 S.W.3d at 242 (quoting Pool v. Ford Motor Co., 715 S.W.2d 629, 630 (Tex.1986)); Pearson, 99 S.W.3d at 275.

2. Fiduciary Relationship

Question One of the trial court’s charge asked the jury: “Did a relationship of trust and confidence exist between Jairo Puentes, M.D., and Radiology Associates before June 17, 1997 and between Sarato-ga Medical Center and Radiology Associates after said date?” The jury answered “No” to this question.

Saratoga contends the evidence presented to the jury conclusively established, as a matter of law, that Dr. Puentes held Radiology Associates in a position of trust and confidence to act in his best interests and in the best interest of Saratoga. Sara-toga also contends the jury’s answer to Question One is contrary to the great weight and preponderance of the evidence and is manifestly unjust.

Whether a confidential or fiduciary relationship exists is normally a question of fact to be decided by the jury. Procom Energy, L.L.A. v. Roach, 16 S.W.3d 377, 382 (Tex.App.-Tyler 2000, pet. denied); Hoggett v. Brown, 971 S.W.2d 472, 488 (Tex.App.-Houston [14th Dist.] 1997, pet. denied); Farah v. Mafrige & Kormanik, P.C., 927 S.W.2d 663, 675 (Tex.App.-Houston [1st Dist.] 1996, no writ). When the issue is one of no evidence or conclusive evidence, the issue is a question of law. Farah, 927 S.W.2d at 675.

If not a recognized formal fiduciary relationship, the question of whether an informal fiduciary relationship exists is to be determined from the actualities of the relationship between the persons involved. See Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex.1962); Dominguez v. Brackey Enters., Inc., 756 S.W.2d 788, 791 (Tex.App.-El Paso 1988, writ denied). Such a relationship may arise where one person trusts in and relies on another, whether the relation is a moral, social, domestic, or purely personal one. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 176 (Tex.1997); see Thigpen, 363 S.W.2d at 253. However, a fiduciary relationship is an extraordinary one and will not be lightly created; mere subjective trust does not convert an arms-length transaction into a fiduciary relationship. See Thigpen, 363 S.W.2d at 253; Schlumberger Tech. Corp., 959 S.W.2d at 177; see also Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594 (Tex.1992) (stating “the fact that one businessman trusts another, and relies upon his promise to perform a contract, does not arise to a confidential relationship”). Instead, to impose such a relationship in a business transaction, the relationship must exist prior to, and apart from, the agreement made the basis of the suit. See Schlumberger Tech. Corp., 959 S.W.2d at 177; Transport Ins. Co. v. Faircloth, 898 S.W.2d 269, 280 (1995).

Saratoga contends that the evidence presented to the jury conclusively established that a fiduciary relationship existed before, and apart from, the contract that is the basis of this suit. Specifically, Saratoga refers to a period of two and one-half years, beginning in 1988, when Dr. Puentes was the medical director of Rehabilitation Hospital of South Texas and Radiology Associates was responsible for reading images and performing radiology work for the hospital. Saratoga further references Dr. Puentes’ participation in two limited partnerships, which also included a few of the individual partners of Radiology Associates.

The first limited partnership, known as C.C. Imaging, Ltd., was created when Columbia’s Southside Hospital invited members of the hospital staff to participate in the purchase of an MRI machine. Dr. Puentes testified that he became a limited partner in C.C. Imaging, Ltd. and that C.C. Imaging, Ltd. contracted with Radiology Associates to read MRI examinations at the Southside Hospital. Dr. Puentes stated that based on his experience and knowledge from the time he arrived in Corpus Christi in 1988, he relied upon the physicians of Radiology Associates as being highly qualified and fair, candid, open, and honest in their relationship, and expected that they would place the interests of the machine’s investor above their own selfish interests.

Dr. Puentes testified that the second limited partnership, known as the Bay Area Health Care Group, Ltd., was created by Columbia when it decided to build the new Columbia hospital. The Bay Area Health Care Group, Ltd. purchased the MRI machine owned by C.C. Imaging, Ltd. Thus, a partner’s percentage interest in C.C. Imaging, Ltd. became an interest in the Bay Area Health Care Group, Ltd. Dr. Puentes testified that Drs. Cook, Hal-lerman, Strong, and Wilson, all partners in Radiology Associates, were limited partners in the Bay Area Health Care Group, Ltd. Radiology Associates read the images, wrote the reports, and directed the operation of the MRI machine at the hospital. Dr. Puentes testified that he relied on Radiology Associates with regards to the MRI machine in the same manner as he did when it was located at Southside Hospital.

After reviewing the record, we hold the evidence does not establish, as a matter of law, all vital facts in support of a fiduciary relationship. Radiology Associates was not a partner in either limited partnership, and Dr. Puentes’ participation in two limited partnerships with a few of Radiology Associates’ partners is not evidence of a confidential relationship between Saratoga and Radiology Associates. Because a fiduciary relationship was not conclusively established, Saratoga’s legal sufficiency challenge must fail.

Furthermore, the evidence supporting the jury’s answer to Question One is not so weak, or against the great weight and preponderance of the evidence, that it is clearly wrong and unjust. Therefore, Sar-atoga’s factual sufficiency challenge must also fail.

3. Trade Secret

Question Three of the trial court’s charge asked the jury: “On the occasion in question, was Saratoga Medical Center’s list of referring doctors and MRI procedures a trade secret of Saratoga Medical Center?” The jury answered “No” to this question.

Saratoga contends the evidence conclusively establishes, as a matter of law, that its list of MRI referring physicians was a trade secret, and the jury’s answer to Question Three is wrong. Saratoga also contends the jury’s answer to Question Three is contrary to the great weight and preponderance of the evidence and is manifestly unjust.

It is unnecessary, however, to address these contentions because we conclude error, if any, is waived. Rule 38.1(h) of the Texas Rules of Appellate Procedure provides that an appellant’s brief “must contain a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record.” Tex.R.App. P. 38.1(h). Failure to cite authority or provide substantive analysis waives an issue on appeal. See Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 410 (Tex.1997); Tex. Dep’t of Pub. Safety v. Struve, 79 S.W.3d 796, 801 n. 6 (Tex.App.-Corpus Christi 2002, pet. denied). Because Sara-toga offers no legal analysis and fails to cite any authority supporting these specific issues, we hold that error, if any, is waived. See McIntyre v. Wilson, 50 S.W.3d 674, 682 (Tex.App.-Dallas 2001, pet. denied).

Accordingly we overrule Saratoga’s first, second, third, and fourth issues.

C. Radiology Associates’ CROSs-Appeal

Radiology Associates has filed a cross-appeal claiming that the trial court abused its discretion in denying its counterclaim for attorney’s fees and in finding that Sar-atoga’s antitrust claims were not groundless and brought in bad faith. Although the trial court denied Radiology Associates’ claims for attorney’s fees and expenses under both the Texas Free Enterprise and Antitrust Act of 1983 and rule of civil procedure 13, Radiology Associates has only appealed the court’s ruling under the Antitrust Act. The following provision of the Antitrust Act therefore governs this case:

On a finding by the court that an action under this section was groundless and brought in bad faith or for the purpose of harassment, the court shall award to the defendant or defendants a reasonable attorney’s fee, court costs, and other reasonable expenses of litigation.

See Tex. Bus. & ComlCode Ann. § 15.21(a)(3) (Vernon 2002).

In our research, we have found only one case applying the relevant provision of the Antitrust Act. See Wohlfahrt v. HCA Health Servs., No. 14-96-381-CV, 1997 WL 603010, 1997 Tex.App. LEXIS 5197 (Houston [14th Dist.] 1997, pet. denied) (not designated for publication). In Wohlf-ahrt, the Fourteenth Court of Appeals applied the supreme court’s Donwerth precedent, which interpreted a similar provision of the DTPA. Id. at *1. Donwerth v. Preston II Chrysler-Dodge, Inc., 775 S.W.2d 634, 637 (Tex.1989) (interpreting Tex. Bus. & Com.Code § 17.50(c) and rule of civil procedure 13). The DTPA provision discussed in Donwerth is similar, yet not identical, to the relevant provision of the Antitrust Act. Com/pare Tex. Bus. & Com. Code Ann. § 15.21(a)(3) (Antitrust Act) with Tex. Bus. & Com.Code § 17.50(c) (DTPA). We nevertheless find the Don-werth precedent very helpful in this context because, in it, the supreme court explained that the court, not the trier of fact, must determine the existence of ground-lessness, bad faith, and harassment, elements which are required under both the Antitrust Act and the DTPA. Donwerth, 775 S.W.2d at 637. Because there is an absence of case law under the relevant provision of the Antitrust Act and because there is well-developed authority under similar provisions of the DTPA and rule of civil procedure 13, we will use this authority to decide whether the trial court abused its discretion in denying Radiology Associates’ claim for attorney’s fees and expenses.

As stated above, a defendant may recover attorney’s fees and expenses under the Antitrust Act only if the action “was groundless and brought in bad faith or for the purpose of harassment.” Tex. Bus. & Com.Code Ann. § 15.21(a)(3). We understand this language to mean that the action must be both groundless and brought in bad faith or that the action must be both groundless and brought for the purpose of harassment. It would not be enough for an action to be merely groundless, brought in bad faith, or brought for the purpose of harassment. There must be a combination of groundlessness with either bad faith or harassment. For a better understanding of these requirements, we turn to the case law under similar provisions of the DTPA and rules of civil procedure.

In Donwerth, the supreme court stated that “groundless” as used in the DTPA has the same meaning as it does in rule of civil procedure 13: “No basis in law or fact and not warranted by good faith argument for the extension, modification, or reversal of existing law.” Donwerth, 775 S.W.2d at 637. In the context of the DTPA and rule 13, intermediate courts have held that “bad faith” is the conscious doing of a wrong for dishonest, discriminatory, or malicious purposes. Campos v. Ysleta Gen. Hosp., 879 S.W.2d 67, 71 (Tex.App.-El Paso 1994, writ denied); Elbaor v. Sanderson, 817 S.W.2d 826, 829 (Tex.App.-Fort Worth 1991, no writ). The courts have held that “bad faith” does not exist simply because a party exercises bad judgment or is negligent. Falk & Mayfield L.L.P. v. Molzan, 974 S.W.2d 821, 828 (Tex. App.-Houston [14th Dist.] 1998, pet. denied). In Donwerth, the supreme court held that, “at the very least, the requirement that the suit be brought ‘for purposes of harassment’ must mean it was brought for the sole purpose of harassment.” Donwerth, 775 S.W.2d at 638. Having reviewed other courts’ interpretations of similar provisions under the DTPA and rules of civil procedure, we proceed by applying such interpretations to the case before us.

The only evidence before the trial court regarding Radiology Associates’ claim for attorney’s fees and expenses under section 15.21(a)(3) was an affidavit from its counsel. There is no indication in the record or the briefs that the trial court held a hearing to consider the circumstances surrounding the filing of Sarato-ga’s action and the credibility and motives of Saratoga and its counsel in filing the action. Nor is there any indication anywhere in the record that Radiology Associates ever objected to the trial court’s failure to hold such a hearing. Although the court may determine whether an action is groundless based on the totality of the tendered evidence produced, the court cannot determine bad faith or harassment based solely on such evidence. See Myer, 779 S.W.2d at 808. Without hearing evidence on the circumstances surrounding the filing of the pleading and the signer’s credibility and motives, the trial court has no evidence to determine whether the party or its attorneys filed the pleading in bad faith or to harass. Davila v. World Car Five Star, 75 S.W.3d 537, 544 (Tex.App.-San Antonio 2002, no pet.); New York Underwriters Ins. Co. v. State Farm Mut. Auto. Ins. Co., 856 S.W.2d 194, 205 (Tex.App.-Dallas 1993, no writ). Accordingly, Radiology Associates’ appeal can be properly overruled on this basis alone.

Nevertheless, in recognition that the case law above interprets provisions other than the one in the antitrust act, we find it judicious to note that, even if the lack of a hearing were not fatal, the allegations of the affidavit do not establish that Saratoga acted in bad faith or for the sole purpose of harassment. The affidavit does not discuss the circumstances surrounding the action’s filing or the credibility and motives of the signer, except in an indirect, brief, and conclusory manner. It states

Saratoga Medical Center’s initial and continued assertion of these claims was groundless and brought in bad faith or for the purpose of harassment. Sarato-ga Medical Center’s defiance of the Court’s explicit order that it plead the most fundamental distinction (horizontal vs. vertical) involving its 15.05(a) claim and its explicit statement that the claims were “strategic,” plainly show that the pleadings asserting these claims were groundless and brought in bad faith or groundless and brought for the purpose of harassment. Saratoga Medical Center certainly knew the effect of its allegation of these claims, knew that they would cause the defendant to expend great resources in response.

The affidavit appears to base its assertion that Saratoga’s claim was brought in “bad faith or for the purpose of harassment” on three allegations: (1) Saratoga failed to re-plead its claims after being ordered to do so; (2) after the verdict, Saratoga’s counsel stated that the claims were “strategic”; and (3) Saratoga knew that the claims would cause the defendant to expend great resources. Having reviewed the affidavit carefully, we fail to see how these allegations warrant any finding of bad faith or harassment.

Failure to re-plead a cause of action, even following a court order to do so, does not prove that a party consciously committed a wrong for dishonest, discriminatory, or malicious purposes. See Campos, 879 S.W.2d at 71 (defining bad faith). A court order to re-plead may prove that an attorney exercised poor judgment in drafting his or her pleadings, but poor judgment does not amount to bad faith. See Molzan, 974 S.W.2d at 828. A refusal to re-plead after a court order to do so may also amount to poor judgment, especially if it results in dismissal of the claim, but again, poor judgment is not tantamount to bad faith. See id. Taken alone, such actions simply do not prove a wrong committed for dishonest, discriminatory, or malicious purposes.

For similar reasons, failure to re-plead also does not prove that the action was brought for the sole purpose of harassment. See Donwerth, 775 S.W.2d at 637 (defining harassment). Failure to re-plead tells very little, if anything, about why the action was originally filed. It certainly does not eliminate all reasons other than harassment.

Radiology Associates argues that Sara-toga’s failure to re-plead should be considered along with its statement that the claims were “strategic” and its knowledge that the claims would be costly to defend, but these considerations do not change our view of the evidence. First, the word “strategic” is not very helpful. The record does not reveal the context in which the word was used. The affidavit states that counsel for Saratoga used it during a post-verdict argument, but the affidavit fails to specify how it was used. Apparently, Radiology Associates would like the word “strategic” to be understood in the worst sense possible, implying dishonesty, discrimination, or malice or that the action was brought for the sole purpose of harassment. Such an inferential leap can be supported by no more than speculation and results-oriented logic. The word “strategic” alone simply cannot establish bad faith or harassment, even if it is used to describe claims that were later dropped or never re-plead.

Second, the affidavit provides no basis for this Court to conclude that Saratoga knew the claims “would cause the defendant to expend great resources in response.” Nowhere in his affidavit does counsel for Radiology Associates establish that he had personal knowledge or was otherwise qualified to testify to Saratoga’s knowledge of his client’s litigation costs. Counsel’s statement is purely conelusory on that point.

Even if it were established that Sara-toga knew its action “would cause the defendant to expend great resources in response,” such knowledge would be insufficient to prove that Saratoga wrongfully filed its action for dishonest, discriminatory, or malicious purposes or that it did so solely for the purpose of harassment. Essentially, Radiology Associates argues that Saratoga acted in bad faith or for the sole purpose of harassment because it filed expensive claims against Radiology Associates and later dropped them in favor of other claims. We are unwilling to draw such a conclusion based on the tenuous arguments and speculative evidence before this Court. Apparently, the trial court was equally reluctant to do so, and we believe its ruling was far from an abuse of discretion.

In sum, Radiology Associates failed to establish that Saratoga brought its claims in bad faith or for the sole purpose of harassment. Thus, even if Radiology Associates had put on sufficient evidence to prove the claims were groundless, it was not entitled to attorney’s fees and expenses under the Antitrust Act. We therefore hold that the trial court did not abuse its discretion in denying Radiology Associates’ claim for attorney’s fees and expenses.

The dissent suggests that the outcome of this case should be different solely because Radiology Associates was the only party to produce evidence regarding Sara-toga’s bad faith. The dissent’s basis for this conclusion is a misapplication of Rags-dale v. Progressive Voters League, 801 S.W.2d 880, 881-82 (Tex.1990) (per cu-riam), a case involving the amount of attorney’s fees and not bad faith or harassment

In Ragsdale, the Texas Supreme Court reviewed whether the trial court abused its discretion by awarding only $150 in attorney’s fees when the uncontroverted evidence presented at trial showed that the attorney’s fees totaled $22,500. Id. The supreme court noted that the amount of attorney’s fees was an issue for the court as the trier of fact and listed several factors that the court should take into account in making its determination. See id. at 881.

As a preliminary matter, the court stated the general rule that “the testimony of an interested witness, such as a party to the suit, though not contradicted, does no more than raise a fact issue to be determined by the jury.” Id. at 882. It then articulated an exception to the general rule: “[Wjhere the testimony of an interested witness is not contradicted by any other witness, or attendant circumstances, and the same is clear, direct and positive, and free from contradiction, inaccuracies, and circumstances tending to cast suspicion thereon, it is taken as true, as a matter of law.” Id. The court noted that the present case fell within the exception to the general rule and proceeded to award attorney’s fees in the amount of $22,500. See id.

The dissent would use Ragsdale to establish bad faith “as a matter of law” because Saratoga failed to produce evidence to controvert the affidavit submitted by Radiology Associates. This stretches the Ragsdale precedent beyond its original context, which was the amount of reasonable attorney’s fees. Even in the Ragsdale opinion, the supreme court acknowledges the limited applicability of its precedent, cautioning that it did “not mean to imply that in every case when un-contradicted testimony is offered it mandates an award of the amount claimed.” Id. (emphasis added). Indeed, the court’s subsequent invocation of Ragsdale has been limited to issues regarding the amount, rather than the availability of, attorney’s fees. See, e.g., Brown v. Bank of Galveston, N.A., 963 S.W.2d 511, 515-16 (Tex.1998). We are unaware of any case in which supreme court has used Ragsdale to establish the existence of bad faith or harassment.

The intermediate courts have mostly restricted their application of Ragsdale to the limited issue of whether the uncontested evidence established reasonable and necessary attorney’s fees, an issue which is entirely distinct from whether attorney’s fees are available because of bad faith or harassment. Although some intermediate courts have applied Ragsdale outside the context of attorney’s fees, these instances have been relatively rare and typically involved questions for the trier of fact such as the amount of damages, not issues for the court, such as bad faith and harassment. See Donwerth, 775 S.W.2d at 637 (explaining that the court, not the trier of fact, must determine the existence of groundlessness, bad faith, and harassment).

Even if the applicability of Ragsdale were not limited to the amount of attorney’s fees, the supreme court never intended for the limited exception to apply in all instances where evidence is uncon-tradicted. As the supreme court explained in Ragsdale, “[E]ven though the evidence might be uncontradicted, if it is unreasonable, incredible, or its belief is questionable, then such evidence would only raise a fact issue to be determined by the trier of fact.” Ragsdale, 801 S.W.2d at 882. The dissent ignores this caveat entirely, choosing instead to accept the affidavit unconditionally because Saratoga did not present contradictory evidence and because the affidavit “is clear, direct and positive evidence.” But that is not enough even under Ragsdale, which requires that the testimony of an interested witness not only be uncontradicted by any other witness but also uncontradicted by “attendant circumstances.” Id. Ragsdale also mandates that the uncontradicted testimony be not only clear, direct, and positive but also “free from contradiction, inaccuracies, and circumstances tending to cast suspicion thereon.” Id. The dissent glosses over these requirements and ultimately fails to discuss or apply them in suggesting that the affidavit established Saratoga’s bad faith as a matter of law. The dissent would thus turn the limited exception articulated in Ragsdale into a complete reversal of the general rule by holding that uncontradicted evidence from an interested party which is clear, direct, and positive should always be accepted as true as a matter of law. We will not endorse such an interpretation of supreme court precedent.

The judgment of the trial court is affirmed.

Concurring and Dissenting Opinion by Justice FEDERICO G. HINOJOSA.

Concurring and Dissenting Opinion by

Justice HINOJOSA.

I concur with that portion of the majority’s opinion overruling Saratoga’s four issues on appeal. However, I respectfully dissent from that portion of the majority’s opinion holding that Radiology Associates is not entitled to attorney’s fees and expenses under the Texas Free Enterprise and Antitrust Act of 1983 (“the Act”) because I conclude that Radiology Associates produced sufficient evidence to establish that Saratoga’s antitrust claims were both (1) groundless and (2) brought in bad faith or for the sole purpose of harassment. Accordingly, I would sustain Radiology Associates’ cross-appeal and would render judgment for the amount of attorney’s fees and expenses that Radiology Associates incurred in defending against Saratoga’s antitrust claims.

I agree with the majority that the only evidence before the trial court regarding Radiology Associates’ claim for attorney’s fees and expenses under section 15.21(a)(3) of the Texas Business and Commerce Code is an affidavit from its counsel. The majority notes that there is no indication that the trial court held a hearing to consider the circumstances surrounding the filing of Saratoga’s action and the credibility and motives of Saratoga and its counsel, and furthermore, there is no indication that Radiology Associates ever objected to the failure to hold such a hearing. However, I note the record shows that at the end of the ninth day of a ten-day trial, the following exchange occurred between counsel for Radiology Associates and the trial court:

Counsel: Your honor, the reason that I rested subject to that other evidence, is that, we do have a counterclaim for attorney’s fees. There’s specifically a counterclaim under the Texas Free Enterprise and Anti-Trust Act, and it’s gonna require the Court to hear evidence, because the finding is to be made by the Court and not by the jury-
The Court: Very well.
The Court: Well, since those are going to be matters for the Court, and I can hear those matters later on and any objections at that time.

The record is devoid of any reason why the requested hearing was not held, but only supplies us with Radiology Associates’ “Offer of Proof in Form of Affidavit of John C. Holmgreen, Jr. in Support of Counterclaim for Attorneys’ Fees and Expenses.”

I also find the majority’s reliance on Davila v. World Car Five Star, 75 S.W.3d 537, 544 (Tex.App.-San Antonio 2002, no pet.) and New York Underwriters Ins. Co. v. State Farm Mut. Auto. Ins. Co., 856 S.W.2d 194, 205 (Tex.App.-Dallas 1993, no writ), for the proposition that “without hearing evidence on the circumstances surrounding the filing of the pleading and the signer’s credibility and motives, the trial court has no evidence to determine whether the party or its attorneys filed the pleading in bad faith or to harass,” to be misplaced. Although Davila is a case applying the similar DTPA provision, I note that the San Antonio court cited New York Underwriters for this proposition. However, New York Underwriters is a case applying Rule 13 sanctions, see New York Underwriters Ins. Co., 856 S.W.2d at 205, and as the Dallas court pointed out, Rule 13 requires the trial court to hold an evi-dentiary hearing to make the necessary factual determinations about the motives and credibility of the person signing the groundless petition. See Tex.R. Crv. P. 13. By contrast, section 15.21(a)(3) has no such requirement. See Tex. Bus. & Com.Code Ann. § 15.21(a)(3) (Vernon 2002).

Finally, I disagree with the majority’s conclusion that the allegations of the affidavit do not establish that Saratoga acted in bad faith or for the sole purpose of harassment. The affidavit evidence shows that in its original petition, Saratoga generally alleged violations of sections 15.05(a), (b), (c), (d), and (I) of the Act. Radiology Associates filed special exceptions to Saratoga’s original petition and requested that it specifically identify whether its claims under the Act involved a “horizontal or vertical” conspiracy. Subsequently, on May 10, 2001, Saratoga filed a first amended petition and omitted its antitrust claims. However, on June 11, 2001, Saratoga filed a second amended petition and reasserted its antitrust claims. Radiology Associates again filed special exceptions on the same grounds it had asserted against Saratoga’s original petition. On June 27, 2001, the trial court ordered Saratoga to specifically plead whether it was asserting a horizontal or vertical trade restraint. Saratoga never complied with the trial court’s order.

The evidence shows that the case was set for trial, and Radiology Associates continued with discovery. Also, Radiology Associates filed a motion for summary judgment on both traditional and no-evidence grounds, regarding Saratoga’s claims under the Act. The trial court heard the motion on the eve of trial. At the hearing, Saratoga informed the trial court that it no longer intended to pursue its claims under the Act and abandoned them.

The record shows that Saratoga presented no evidence during the trial that Radiology Associates had violated any portion of the Act. Even though it had abandoned its antitrust claims and had presented no evidence of any violation of the Act, Saratoga submitted a proposed jury charge that included questions regarding its abandoned antitrust claims. At a post-verdict hearing, Saratoga argued that its invocation and subsequent abandonment of antitrust claims was strategic.

In his affidavit, Radiology Associates’ counsel also set forth his qualifications, his opinion regarding reasonable attorney’s fees, and the basis for his opinion. He testified that his fees for the defense of the case totaled $460,087.00, and approximately forty percent of these fees were directly related to Saratoga’s antitrust claims. Therefore, attorney’s fees directly related to Saratoga’s antitrust claims totaled $184,034.80. Evidence was also presented that $4,000.00 of the fees of Radiology Associates’ economic expert were devoted to defend the antitrust claims and constituted litigation expenses.

The record reflects that Saratoga did not respond or controvert any of the evidence presented by Radiology Associates regarding their claim that Saratoga’s antitrust claims were groundless and brought in bad faith or for the purpose of harassment. The general rule is that the testimony of an interested witness, such as a party to a suit, though not contradicted, does no more than raise a fact issue to be determined by the jury. Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 881-82 (Tex.1990). However, there is an exception to this rule — where the testimony of an interested witness is not contradicted by any other witness, or attendant circumstances, and the same is clear, direct and positive, and free from contradiction, inaccuracies, and circumstances tending to cast suspicion thereon, it is taken as true, as a matter of law. Id. The exception is especially true where the opposing party has the means and opportunity to disprove the testimony, if it is not true, and fails to do so. Id. (citing Anchor Cas. Co. v. Bowers, 393 S.W.2d 168, 169-70 (Tex.1965)).

The affidavit from Radiology Associates’ counsel was the only evidence tendered to the trial court. See Splettstosser v. Myer, 779 S.W.2d 806, 808 (Tex.1989); see also Donwerth v. Preston II Chrysler-Dodge, Inc., 775 S.W.2d 634, 637 (Tex.1989). Because Saratoga did not present any contradictory evidence, and the evidence presented by Radiology Associates is clear, direct and positive evidence, I conclude that Sar-atoga’s antitrust claims were groundless and brought in bad faith. Because section 15.21(a)(3) provides that upon finding that a party’s antitrust claims are groundless and brought in bad faith, the court “shall” award a reasonable attorney’s fee, court costs, and other reasonable expenses of litigation, I would hold that the trial court abused its discretion in denying Radiology Associates its reasonable attorney’s fees, court costs, and litigation expenses. See Tex. Bus. & Com.Code Ann. § 15.21(a)(3) (Vernon 2002).

For these reasons, I respectfully dissent.

      . See Tex. Bus. & Com.Code Ann. ch. 15 (Vernon 2002).


text:
    Rickie AKERS Appellant, v. PIKE COUNTY BOARD OF EDUCATION; Hon. Richard Joiner, Administrative Law Judge; and Workers’ Compensation Board Appellees.
    No. 2004-SC-0631-WC.
    Supreme Court of Kentucky.
    June 16, 2005.
    Ordered Published Aug. 25, 2005.

      Miller Kent Carter, Pikeville, KY, for Appellant.
    Terri Smith Walters, Jones & Walters, PLLC, Pikeville, KY, for Appellee.
   OPINION OF THE COURT

The claimant filed an application for benefits more than four years after the termination of voluntary income benefits following his injury. An Administrative Law Judge (ALJ) noted the claimant’s credible testimony that he did not receive a letter informing him of his right to prosecute a claim or of the applicable statute of limitations but determined that the employer and Department of Workers’ Claims had complied with KRS 342.040(1); therefore, the claim must be dismissed. The claimant appealed, but the Workers’ Compensation Board (Board) and the Court of Appeals rejected arguments that KRS 342.135 required the Department to use registered mail and that the evidence was insufficient to prove it had complied with KRS 342.040(1). We affirm.

It is undisputed that the claimant sustained a work-related injury on August 18, 1998, and gave timely notice. It is also undisputed that the employer paid voluntary temporary total disability (TTD) benefits until October 11, 1998, and then notified the Department of Workers’ Claims that they were terminated. Finally, it is undisputed that the claimant’s mailing address at all relevant times was: 311 Ha-rolds Branch, Pikeville, KY 41501. The record contains a certified copy of the October 16, 1998, letter from the Department’s commissioner to the claimant at that same address, informing him of his right to prosecute a claim under Chapter 342 within two years after the termination date. He filed an application for benefits on December 11, 2002, more than four years later; whereupon, the employer raised a limitations defense.

The claim was bifurcated. At the hearing regarding limitations, the claimant was shown a copy of the Department’s October 16, 1998, letter. He testified that he had never received it. On cross-examination, he acknowledged that it was addressed correctly.

KRS 342.040(1) places certain obligations on the Department when it is notified that a worker’s income benefits have been terminated. The employer deposed Joe Dale Peters, who had been the individual responsible for processing the Department’s “statute letters” electronically and mailing them since 1995. He identified a copy of the October 16, 1998, letter the Department sent to the claimant and testified that the Department sends “statute letters” (also known as WC-3 letters) by regular mail rather than by registered mail. He stated that letters are occasionally returned to the Department as undeliverable. When that occurs, the proce-dux’e is to record the date the letter is received on the letter, itself, and to do additional research in an attempt to find a more current address to send the letter. If none is found, the letter is placed in the case file. Peters testified that he had reviewed the claimant’s file and that it contained no returned letter. He acknowledged that he had no way to know if a “statute letter” was delivered to an incorrect address.

The claimant asserted that the employer failed to meet its burden of proving that both it and the Department had complied with KRS 342.040(1). He maintained that KRS 342.135 required the Department to send its letter via registered mail, that it had failed to do so, and that the proof was inadequate to show the Department actually mailed the letter that KRS 342.040(1) requires, to show that it was delivered to him, or to show that he received it. The employer maintained that it folly complied with its obligations under Chapter 342 and the applicable regulations. It also asserted that KRS 342.135 was inapplicable to the Department’s obligation under KRS 342.040(1) and that there was substantial evidence the Department complied with its obligation.

The ALJ determined that both the employer and the Department complied with their obligations under KRS 342.040(1). Although noting the claimant’s credible testimony that he did not receive the Department’s letter, the ALJ was convinced that statute did not provide for such evidence to toll the period of limitations and that to do so would open the door to false testimony that would, for the most part, be irrefutable. The ALJ concluded, therefore, that the claim was untimely and must be dismissed.

KRS 342.040(1) provides, in pertinent part, as follows:

(1) Except as provided in KRS 342.020, no income benefits shall be payable for the first seven (7) days of disability unless disability continues for a period of more than two (2) weeks, in which case income benefits shall be allowed from the first day of disability.... If the employer’s insurance carrier or other party responsible for the payment of workers’ compensation benefits should terminate or fail to make payments when due, that party shall notify the commissioner of the termination or failure to make payments and the commissioner shall, in writing, advise the employee or known dependent of right to prosecute a claim under this chapter. (emphasis added).
KRS 342.135 provides as follows:
Any notice required to be given under this chapter shall be considered property given and served when deposited in the mail in a registered letter or package properly stamped and addressed to the person to whom notice is to be given at his last known address and in time to reach him in due time to act thereon. Notice may also be given and served like notice in civil actions. Any notice given and served as provided in this section to the consular representative of the nation of which any nonresident dependent of a deceased employee is a citizen or subject, or to the authorized agent or representative of any such official residing in this state, shall be deemed to have been properly given and served upon such dependent.

KRS 342.135 describes two methods for giving “notice” under Chapter 342, the first of which is by registered mail. It also indicates that notice may be given and served like notice in a civil action, presumably referring to service of notice under CR 5.02. The word “notice” is a legal term of art. See Black’s Law Dictionary 1087 (7th ed.1999). KRS 342.040(1) requires an employer to “notify” the commissioner of the termination or refusal to pay income benefits. It requires the commissioner to “advise” the worker of the right to prosecute a claim. We presume that the legislature had a reason for its choice of words. See KRS 446.080(4). Therefore, we conclude that KRS 342.135 is inapplicable to the Department’s obligation under KRS 342.040(1).

KRS 342.040(1) places an affirmative duty on an employer to notify the Department of its refusal to pay TTD benefits after a worker misses more than seven days of work due to a work-related injury. It places on the Department an obligation to advise the worker of the right to file a claim and the applicable period of limitations. KRS 342.990 provides both civil and criminal penalties for a failure to comply with KRS 342.040, but neither it nor any other statute provides a remedy for workers whose rights are affected by the failure to comply. Hence, the courts have turned to equitable principles in order to protect them. See Newberg v. Hudson, 838 S.W.2d 384, 389 (Ky.1992). Absent extraordinary circumstances such as were present in Newberg v. Hudson, supra, an employer’s failure to strictly comply with KRS 342.040(1) estops it from raising a limitations defense, without regard to whether the failure is attributable to bad faith or misconduct. The rationale is that if the Department does not receive an employer’s notice of termination or refusal, it cannot perform its obligation to the affected worker. See H.E. Neumann Co. v. Lee, 975 S.W.2d 917, 921 (Ky.1998); Colt Management Co. v. Carter, 907 S.W.2d 169 (Ky.App.1995); and Ingersoll-Rand Co. v. Whittaker, 883 S.W.2d 514 (Ky.App.1994).

Under the doctrine of equitable estoppel, certain conduct by a party is viewed as being so offensive that it precludes the party from later asserting a claim or defense that would otherwise be meritorious. See McDonald v. Burke, 288 S.W.2d 363 (Ky.1956); P.V. & K. Coal Co. v. Kelly, 301 Ky. 180, 191 S.W.2d 231 (1945). In other words, it serves to offset the benefit that the offending party would otherwise derive from the conduct. See Edmondson v. Pennsylvania National Mutual Casualty Insurance Co., 781 S.W.2d 753, 755 (Ky.1989). An equitable estoppel is permitted when the estopped party is aware of material facts that are unknown to the other party and then engages in conduct, such as acts, language, or silence, amounting to a representation or concealment of the material facts. The conduct is performed with the intention or expectation that the other party will rely upon it, and the other party does so to his detriment. See Howard v. Motorists Mutual Insurance Co., 955 S.W.2d 525 (Ky.1997); Gray v. Jackson Purchase Production Credit Association, 691 S.W.2d 904 (Ky.App.1985).

It is undisputed that the employer complied with KRS 342.040(1), and Mr. Peters’ testimony together with the certified copy of the Department’s October 16, 1998, letter provided substantial evidence that the Department also complied with the statute. Although the claimant stated that he did not receive the Department’s letter, his testimony did not compel a favorable result. Grider Hill Dock v. Sloan, 448 S.W.2d 373 (Ky.1969). The circumstances were not such as to warrant an equitable remedy; therefore, the ALJ did not err in dismissing the claim as untimely.

The decision of the Court of Appeals is affirmed.

All concur.


author: TAYLOR, Judge.

text:
    Joseph HUTSON, Appellant, v. COMMONWEALTH of Kentucky, Appellee.
    No. 2002-CA-001603-MR.
    Court of Appeals of Kentucky.
    Aug. 26, 2005.

      Elizabeth R. Stovall, Assistant Public Advocate, Department of Public Advocacy, LaGrange, KY, for Appellant.
    Albert B. Chandler, III, Attorney General of Kentucky, Brian T. Judy, Assistant Attorney General, Frankfort, KY, for Ap-pellee.
    Before SCHRODER and TAYLOR, Judges; HUDDLESTON, Senior Judge.

      . Senior Judge Joseph R. Huddleston sitting as Special Judge by assignment of the Chief Justice pursuant to Section 110(5)(b) of the Kentucky Constitution and Kentucky Revised Statutes (KRS) 21.580.

   OPINION

TAYLOR, Judge.

This matter is before the Court on remand by the Kentucky Supreme Court per order dated September 16, 2004. The Supreme Court vacated our opinion entered October 31, 2003, and ordered us to reach the merits of the above-styled appeal. After having considered the merits, we reverse and remand.

On July 23, 1998, appellant was indicted upon the charge of first-degree sodomy. He was arraigned on August 18, 1998, and entered a plea of not guilty. Appellant was then indicted on November 12, 1998, for being a persistent felony offender in the second degree. Appellant was never arraigned nor did he enter a plea upon the second-degree felony offender charge.

On December 10, 1998, a jury convicted appellant of first-degree sexual abuse. The court then proceeded to the persistent felony offender (PFO) stage of the trial. At this time, appellant’s trial counsel “objected” to going forward and stated that he was unaware of a PFO charge. He also stated appellant was never arraigned on the PFO charge and argued such omission was fundamentally unfair to appellant. The court “overruled” appellant’s “objection.” Appellant was eventually adjudicated a second-degree persistent felony offender, and his sentence was enhanced from five years’ imprisonment to 'ten years’ imprisonment. This appeal follows.

Appellant argues the trial court’s failure to formally arraign him and to accept a plea on the PFO charge constitutes reversible error. Although this appears to be an issue of first impression in this Commonwealth, we are persuaded that an arraignment and the taking of a plea are essential requirements of a valid conviction, except where defendant waives these requirements or refuses to enter a plea. See White v. People, 79 Colo. 261, 245 P. 349 (Colo.1926); Burkus v. State, 204 Ind. 467, 184 N.E. 409 (Ind.1933); State v. Alston, 236 N.C. 299, 72 S.E.2d 686 (N.C.1952); Fuller v. State, 70 Okla.Crim. 408, 106 P.2d 832 (Okla.Crim.App.1940); Ditto v. State, 898 S.W.2d 383 (Tex.App.1995); and State v. Wester, 204 N.W.2d 109 (N.D.1973). A waiver of the right to an arraignment and entry of plea may be express or implied; implied waiver arises from conduct that demonstrates an intent to waive. 22 C.J.S. Criminal Law § 359 (1989). In this case, it is uncontroverted that appellant was not arraigned and did not enter a plea; consequently, our inquiry necessarily focuses upon whether appellant waived his right to arraignment and plea.

At the beginning of the trial proceeding, both indictments were read by number only. The indictment numbers were read together without any separation and were specifically called as “98CR429270.” The PFO charge was not separately and distinctly referenced until the start of the sentencing phase of the trial. At this time, appellant immediately “objected” and stated that he had not been arraigned. Based upon these facts and the unique procedural requirements of a PFO proceeding, we believe appellant timely objected and did not waive his right to arraignment and plea.

In sum, we now hold that an arraignment and taking of a plea are necessary to a valid conviction. Appellant was not arraigned and did not enter a plea upon the charge of being a second-degree persistent felony offender. Upon the facts of this case, we are of the opinion that appellant did not waive his right to arraignment and plea. Accordingly, we are constrained to conclude the trial court committed reversible error by failing to arraign appellant and to take his plea upon the charge of being a second-degree persistent felony offender.

We consider appellant’s remaining allegations of error to be moot.

For the foregoing reasons, the judgment of the Campbell Circuit Court is reversed and this cause remanded for proceedings not inconsistent with this opinion.

ALL CONCUR.

      . It must be pointed out that no mention of the persistent felony offender enhancement may be made during the guilt phase of the trial. KRS 532.080. This bifurcation is to avoid any possible prejudicial effect on the jury.


author: BUCKINGHAM, Judge.

text:
    Sidney VANNOY, Appellant, v. Dr. Joseph A. MILUM, M.D. and Multicare Specialists, P.S.C., Appellees.
    No. 2004-CA-001073-MR.
    Court of Appeals of Kentucky.
    Aug. 26, 2005.

      Daniel N. Thomas, Hopkinsville, KY, for appellant.
    C. Thomas Miller, James A. Sigler, Pa-ducah, KY, for appellee.
    Before BUCKINGHAM, JOHNSON, and MINTON, Judges.
   OPINION

BUCKINGHAM, Judge.

Sidney Vannoy appeals from a summary judgment entered by the Hopkins Circuit Court dismissing his medical malpractice complaint against Dr. Joseph A. Milum and Multicare Specialists, P.S.C. The issue concerns whether the circuit court correctly ruled as a matter of law that the one-year statute of limitations had expired pri- or to Vannoy filing his complaint. More specifically, the issue involves the applicability of the discovery rule and when Van-noy’s cause of action accrued. Because we conclude that the circuit court correctly awarded summary judgment to Dr. Milum and Multicare Specialists, we affirm.

Dr. Milum was employed by Multicare Specialists, P.S.C., and he served for a period of time as Vannoy’s treating physician. In April 1998, Vannoy was hospitalized for a foot infection. In order to treat what was diagnosed as a foot ulcer, Dr. Milum, after consulting with other physicians, elected to prescribe the antibiotic gentamicin. The gentamicin therapy was initiated during Vannoy’s hospitalization, and he continued with it through a home health care provider after being discharged.

Throughout the treating period, lab tests were done to provide figures on the various chemical levels within Vannoy’s body. The results of these tests were forwarded to various physicians, including Dr. Milum, in order to allow them to monitor the effect the gentamicin had on Van-noy.

On May 26, 1998, Vannoy suffered dizziness while at physical therapy at the hospital. He was immediately taken to the hospital emergency room, and the emergency room physician called Dr. Milum to inform him of the problem. Dr. Milum saw Vannoy three days later for an office visit, and he elected to continue the gen-tamicin therapy. Vannoy was allowed to stop the therapy on June 10, 1998, after a determination was made that the foot ulcer had been resolved.

Vannoy continued to suffer thereafter from dizziness and balance problems. In following up on these symptoms, he underwent tests that established he had vestibular damage to his middle ear. Dr. Milum, as well as several specialists to whom Van-noy was referred, attributed the harm, at least in part, to the use of gentamicin. Throughout the remainder of 1998, Vannoy consulted with various physicians in an attempt to resolve his continued problems from the vestibular damage.

During late 1998 and early 1999, Vannoy obtained copies of his medical records from the various places at which he had received treatment. In the spring of 1999, he had his wife contact a Madisonville attorney, Wendell Holloway, and in April 1999 Vannoy’s medical records were given to Holloway for his review. When asked why they took the records to Holloway, Vannoy’s wife stated in her deposition that:

I am not sure how to answer that; like I said, I just — I didn’t — I just — I didn’t know if we even had a case about — from anybody, no claim for nothing. I wanted him to just look into all these medical records and just see if he can come up with anything that would help us showing that — that any — that the medicine was wrong, or anything was wrong.

Vannoy met with Holloway on September 10, 1999. While the Vannoys characterized the meeting as being focused on Vannoy’s Social Security disability claim, Holloway testified that he specifically remembered discussing the costs of medical experts if a lawsuit were pursued. Holloway further testified that he felt the Vannoys wanted, but did not receive, any encouragement from him concerning a possible lawsuit. Subsequently, Vannoy’s medical records were picked up from Holloway’s office.

In April 2001, Vannoy’s daughter discovered a website for persons suffering from vestibular damage. The Vannoys followed up on the information their daughter had discovered, and they contacted Lynn Brown of Pell City, Alabama. Brown had developed vestibular damage as a result of gentamicin therapy, and she recommended them to Jerry Campbell, an attorney in Vicksburg, Mississippi, whom she had assisted in a separate gentamicin case.

The Vannoys got in touch with Campbell later that month, and on April 30, 2001, Campbell informed the Vannoys that in his opinion Vannoy had a medical malpractice claim against Dr. Milum and Multicare Specialists. On March 4, 2002, Vannoy filed a civil complaint in the Hopkins Circuit Court against Dr. Milum and Multi-care Specialists.

Following the completion of discovery, including depositions, Dr. Milum and Mul-ticare Specialists filed a motion for summary judgment, arguing that the statute of limitations barred Vannoy’s claims. On May 19, 2004, the circuit court granted the summary judgment motion. The court stated, “The Court concludes as a matter of law that at least by that date, September, 1999, a reasonable person would be under the obligation to inquire as to the poor result from the gentamicin therapy which would include the medical care provided by Dr. Milum. The complaint in this case, filed March 11, 2002, was thus not timely.”

In reaching this conclusion, the court noted it was undisputed that Vannoy was aware by the summer of 1998 that the source of his harm was related to the gentamicin therapy. Further, the court noted that Vannoy had gathered his medical records and taken them to Holloway for review to determine, in the words of Vannoy’s wife, “if the medicine was wrong.” Vannoy then timely appealed from the entry of the summary judgment order by the circuit court.

In Kentucky, summary judgment “shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, stipulations, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” CR 56.03. “The record must be viewed in a light most favorable to the party opposing the motion for summary judgment and all doubts are to be resolved in his favor.” Steelvest, Inc. v. Scansteel Serv. Ctr., Inc., 807 S.W.2d 476, 480 (Ky.1991). “Even though a trial court may believe the party opposing the motion may not succeed at trial, it should not render a summary judgment if there is any issue of material fact.” Id.

“The standard of review on appeal of a summary judgment is whether the trial court correctly found that there were no genuine issues as to any material fact and that the moving party was entitled to judgment as a matter of law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky.App.1996). “There is no requirement that the appellate court defer to the trial court since factual findings are not at issue.” Id.

KRS 413.140(l)(e) provides that there is a one-year statute of limitations for the filing of negligence or malpractice claims against physicians. In connection with the one-year statute of limitations, there is a discovery rule which addresses when the cause of action shall be deemed to have accrued. That statute states:

In respect to the action referred to in paragraph (e) of subsection (1) of this section, the cause of action shall be deemed to accrue at the time the injury is first discovered or in the exercise of reasonable care should have been discovered; provided that such action shall be commenced within five (5) years from the date on which the alleged negligent act or omission is said to have occurred.

KRS 413.140(2).

Relying on the discovery rule, Vannoy argues that the one-year statute of limitations did not begin to accrue until April 30, 2001. That was the date his attorney, Campbell, told him he had an actionable claim against Dr. Milum. Vannoy acknowledges that he knew his dizziness was caused, at least in part, by the gentamicin therapy, but he claims that he did not know his dizziness was caused by Dr. Mi-lum’s failure to properly monitor the gen-tamicin medication after receiving notice from the emergency room doctor of Van-noy’s reaction and Dr. Milum’s failure to deviate from the gentamicin therapy thereafter. Vannoy argues that this knowledge was required to trigger the statute of limitations, and he relies on the cases of Wiseman v. Alliant Hosps., Inc., 37 S.W.3d 709 (Ky.2000) and Imes v. Touma, 784 F.2d 756 (6th Cir.1986).

Dr. Milum and Multicare Specialists counter by asserting that the knowledge required under the Wiseman and Imes cases is not that a person has an actionable negligence claim. Rather, they argue that the statute of limitations began to accrue once Vannoy knew, or by acting with reasonable care should have known, that he had been harmed and that Dr. Milum’s conduct may have caused that harm. They note that it is undisputed that Van-noy knew in mid-1998 that his vestibular damage was caused, at least in part, by the gentamicin therapy. In addition, they note that it is undisputed that by the spring of 1999, Vannoy had gathered all his medical records and had taken them to an attorney (Holloway) for review. Finally, Dr. Milum and Multicare Specialists argue that it is undisputed that in September 1999 the Vannoys met with Holloway to see if the medicine was wrong. Based on these undisputed facts, they argue that the one-year statute of limitations began to accrue no later than September 1999.

Vannoy’s argument that the statute of limitations does not begin to accrue until he learned he had an actionable claim is without merit. In Conway v. Huff, 644 S.W.2d 333 (Ky.1982), the Kentucky Supreme Court, in a legal malpractice case, analogized the facts in that case to facts in a hypothetical medical malpractice case as follows:

Does the statute start to run when the surgery patient discovers the sponge or when an attorney tells the patient that legal action lies against the surgeon? Obviously the answer must be with the discovery that a wrong has been committed and not that the party may sue for the wrong. This conclusion is supported by the holdings in Tomlinson v. Siehl, Ky., 459 S.W.2d 166 (1970); Hackworth v. Hart, Ky., 474 S.W.2d 377 (1971); and Louisville Trust Co. v. Johns-Manville Products, Ky., 580 S.W.2d 497 (1979).

Id. at 334. Likewise, in Graham v. Harlin, Parker & Rudloff, 664 S.W.2d 945 (Ky.App.1983), overruled on other grounds by Alagia, Day, Trautwein & Smith v. Broadbent, 882 S.W.2d 121 (Ky.1994), this court held in a legal malpractice case that “[t]he knowledge that one has been wronged and by whom starts the running of the statute of limitations for professional malpractice, not the knowledge that the wrong is actionable.” Id. at 947, citing Conway, supra. In short, based on the Conway and Graham cases, we reject Vannoy’s argument that the one-year period did not begin to accrue until he learned he had an actionable claim.

We now turn to consider whether the circuit court correctly applied Kentucky’s discovery rule to the undisputed facts of this case. In the Wiseman case, the Kentucky Supreme Court once again defined the discovery rule when it stated that “[t]he statute begins to run on the date of the discovery of the injury, or from the date it should, in the exercise of ordinary care and diligence, have been discovered.” 37 S.W.3d at 712, quoting Hackworth v. Hart, 474 S.W.2d 377, 379 (Ky.1971). See also KRS 413.140(2). The discovery rule in cases such as this was refined by the Kentucky Supreme Court in Louisville Trust Co. v. Johns-Manville Prods. Corp., 580 S.W.2d 497 (Ky.1979). Therein, the court stated that “[a] cause of action will not accrue under the discovery rule until the plaintiff discovers or in the exercise of reasonable diligence should have discovered not only that he has been injured but also that his injury may have been caused by the defendant’s conduct.” Id, at 501, quoting Raymond v. Eli Lilly & Co., 117 N.H. 164, 371 A.2d 170,174 (1977). In the Imes case, the court noted that the rule as adopted in Louisville Trust applies to cases “when an injury does not manifest itself immediately!.]” 784 F.2d at 758.

It is undisputed that Vannoy knew both of his harm, vestibular damage and its associated symptoms, as well as the fact that the gentamicin therapy was, at least in part, the cause of that harm. In addition, he had knowledge of Dr. Milum’s role in prescribing and continuing the gentami-cin therapy. Vannoy, upon obtaining his records, had in his hands all relevant facts upon which he now rests his present claim of negligence.

Vannoy’s knowledge is similar to that of the claimants in the Hazel, Gregory, and Michals cases. In Hazel, the claimant knew both of the extent of his injuries and the fact that they were due to a fuel-fed fire derived from the ruptured fuel tank. 863 F.Supp. at 437. In Gregory, the claimant knew the result of the medical procedure immediately upon waking in the recovery room. At that point in time, he was aware of the harm and the fact that it was the result of the doctor’s actions. 862 F.Supp. at 172. Finally, in Michals, the court noted that the claimant knew of the harm she had suffered as a result of the silicone breast implants manufactured by Baxter’s predecessor. Further, the court found it could be inferred that she attributed that harm to the implants based on the fact she had them replaced. 289 F.3d at 404.

In each of the above cases, the court found it was sufficient that the claimant knew both the harm and the cause of that harm. By knowing the cause of the harm in these cases, the claimant then knew, or should have known, of the relationship of the defendant’s actions to the cause of that harm. Such is the case herein. Vannoy concedes that he knew by the summer of 1998 both the harm he had suffered and the cause of that harm. By obtaining his medical records and by considering the content of those records in light of Dr. Milum’s role in prescribing the drug, Van-noy knew, or should have known, of Dr. Milum’s role in relationship to the gentam-icin therapy.

Further, Vannoy’s knowledge was not as limited as that possessed by the claimants in the Louisville Trust, Imes, and Wise-man cases. In Louisville Trust, the claimant knew of his exposure to asbestos dust and fibers long before he was diagnosed with the resulting cancer. It was not until he knew of both the resulting harm and the cause of that harm that the statute of limitations was triggered. 580 S.W.2d at 498. In Imes, the claimant knew of the harm before he knew of the cause of that harm. He knew the metal plate had snapped, accompanied by the resulting fracture of his femur. However, it was not until he later obtained medical records that he became aware of the fact that the harm was due to “inadequate solidarity” from the first medical procedure. 784 F.2d at 756-57. Likewise, in Wise-man, the claimant knew immediately following the 1989 procedure that she suffered from unexplained pain. However, it was not until the piece of uterine probe was discovered and removed in 1996 that she knew the cause of that pain was related to the 1989 procedure. 37 S.W.3d at 710-11. In each of these cases, the claimant lacked information related either to the harm or to the cause of that harm.

The lack of information relating to one of the two necessary factors present in the Louisville Trust, Imes, and Wiseman cases is not present in this case. Vannoy did not have a latent injury that developed over time well after the defendant’s actions had taken place. Nor is there any dispute in this case as to Vannoy’s knowledge that the gentamicin therapy was, at least in part, a cause of his vestibular damage. In addition, Vannoy knew of Dr. Milum’s role in prescribing and continuing the gentami-cin therapy. Further, it is undisputed that Vannoy possessed this knowledge no later than September 1999, well before his claim was filed in March 2002.

Finally, Vannoy argues that the issue of when he knew or should have known the required factors is a question of fact for the jury. While the issue may be a question of fact subject to a jury’s determination in some cases, we disagree that a genuine issue of material fact exists in this case. Vannoy possessed the requisite knowledge to trigger the one-year statute of limitations by no later than September 1999. As he did not file his complaint in the circuit court until March 2002, the circuit court correctly ruled that the complaint should be dismissed as untimely.

The judgment of the Hopkins Circuit Court is affirmed.

ALL CONCUR.

      . Kentucky Rules of Civil Procedure.

      . Kentucky Revised Statutes.

      . The principle in the Conway and Graham cases has been followed by federal courts interpreting and applying Kentucky's discovery rule. These cases include Drake v. B.F. Goodrich Co., 782 F.2d 638 (6th Cir.1986); Imes v. Touma, 784 F.2d 756 (6th Cir.1986); Gregory v. Poor, 862 F.Supp. 171 (W.D.Ky.1994); Hazel v. General Motors Corp., 863 F.Supp. 435 (W.D.Ky.1994); Blanton v. Cooper Indus., Inc., 99 F.Supp.2d 797 (E.D.Ky.2000); Michals v. Baxter Healthcare Corp., 289 F.3d 402 (6th Cir.2002).


author: COMBS, Chief Judge.

text:
    K.M.R., a Minor Child, by and Through her Mother Next Friend, Michelle Ray, Appellant, v. FOREMOST INSURANCE GROUP, Appellee.
    No. 2004-CA-000859-MR.
    Court of Appeals of Kentucky.
    Sept. 2, 2005.

      J. Todd P’Pool, Madisonville, KY, for appellant.
    Zack N. Womack, Henderson, KY, for appellee.
    Before COMBS, Chief Judge; BUCKINGHAM and KNOPF, Judges.
   OPINION

COMBS, Chief Judge.

K.M.R., and her mother, Michelle Ray, appeal from the final judgment of the Hopkins Circuit Court which upheld an exclusion in a homeowner’s policy issued by the appellee, Foremost Insurance Group (Foremost). Foremost claimed that its policy excluded from coverage the acts of sexual molestation complained of by K.M.R. in an underlying lawsuit. The court agreed and also concluded that Foremost was not required to defend its insureds, Tommy Glenn Conrad and Elizabeth M. Conrad, who were named as defendants in the underlying action. Finding no error in the trial court’s interpretation of the policy, we affirm.

The material facts are not in dispute. Elizabeth Conrad is KM.R.’s paternal grandmother; Elizabeth’s husband, Tommy Conrad, is KM.R.’s step-grandfather. On November 20, 2002, K.M.R., by and through her mother, filed a lawsuit in which she alleged that she was sexually molested by Tommy during a visit with the Conrads on June 8, 2002. At the time of the assault, K.M.R. was less than twelve years of age. Following a criminal investigation of KM.R.’s allegations, Tommy pled guilty to two counts of sexual abuse in the first degree.

In her underlying complaint, K.M.R. also sought to hold Elizabeth accountable for her injuries arising from Tommy’s sexual misconduct. She alleged that Elizabeth was aware of Tommy’s extensive criminal history and of his “deviant sexual and aggressive propensity”; that Elizabeth failed to provide adequate supervision over her or to protect her from Tommy; and that Elizabeth failed to warn her or her mother of the risks inherent in associating with Tommy.

Invoking the personal liability provisions of their homeowner’s policy, the Conrads demanded that Foremost provide legal representation to defend the claims lodged against them by the child. KM.R.’s attorney demanded that Foremost provide coverage for her client’s injuries. Foremost filed a petition for a declaration of rights. Citing several specific exclusions to the liability coverage afforded by the policy, Foremost argued that it had no duty to defend or to indemnify the Conrads.

The issues of coverage and Foremost’s duties to its insureds were submitted to the trial court on cross-motions for summary judgment. In its final order of April 19, 2004, the Hopkins Circuit Court concluded that because of the intentional nature of Tommy’s acts, Foremost was absolved of any liability to defend Tommy or Elizabeth or to provide coverage for K.M.R.’s injuries pursuant to the “intentional acts” exception in the policy. The Conrads have not appealed.

In her appeal, K.M.R. does not challenge the ruling of the trial court with respect to Tommy. However, she notes that the homeowner’s policy contains a severability provision. Therefore, she contends that the exclusion pertaining to bodily injury caused by intentional acts should not absolve Foremost of its duty to defend Elizabeth nor should it be able to avoid liability for coverage based on Elizabeth’s arguably unintentional, negligent omissions to protect the child.

Interpretation of an insurance policy is a question of law which we review de novo. Cinelli v. Ward, 997 S.W.2d 474, 476 (Ky.App.1998); Snow v. West American Insurance Company, 161 S.W.3d 338 (Ky.App.2004). In undertaking our review, we are mindful of two cardinal principles pertinent to our task:

(1) the contract should be liberally construed and all doubts resolved in favor of the insureds; and (2) exceptions and exclusions should be strictly construed to make insurance effective.

Kentucky Farm Bureau Mutual Insurance Co. v. McKinney, 831 S.W.2d 164, 166 (Ky.1992), quoting Grimes v. Nationwide Mutual Insurance Co., 705 S.W.2d 926 (Ky.App.1985) and Tankersley v. Gilkey, 414 S.W.2d 589 (Ky.1967).

A liberal interpretation is not synonymous with a strained one. We must construe clear and unambiguous terms in a contract according to their “plain and ordinary meaning.” Nationwide Mutual Insurance Company v. Nolan, 10 S.W.3d 129, 131-32 (Ky.1999).

Policies should be interpreted according to the parties’ mutual understanding at the time they entered into the contract and “[s]uch mutual intention is to be deduced, if possible, from the language of the contract alone.”

Id., quoting Simpsonville Wrecker Service, Inc. v. Empire Fire and Marine Insurance Company, 793 S.W.2d 825, 828-829 (Ky.App.1990).

The pertinent portions of the Con-rads’ homeowner’s policy provide as follows:

If a claim is made or a suit brought against you for damages because of bodily injury or property damages, caused by an accident to which this coverage applies, we will:
1. Pay up to the Limit of Liability [$50,000] for the damages for which you are legally liable.
2. Provide a defense at our expense by attorneys of our choice. (Emphasis in original.)

This broad coverage is followed by a series of exceptions, several of which relate to the claims filed against the Conrads by K.M.R. The trial court based its judgment on the exception for intentional acts, which seeks to exclude coverage for bodily injury:

2. Resulting from any act or omission that is intended by any of you to cause any harm or that any of you could reasonably expect to cause harm. (Emphasis added.)

Foremost points to additional, even more specific exclusions in support of the trial court’s judgment. These provisions exclude coverage for bodily injury:

3. Resulting from an act committed by any of you in the course of or in furtherance of any crime or offense of a violent nature.
10. Arising out of:
b. The negligent supervision by any of you of any person;
15. Arising out of any sexual act, sexual molestation, corporal punishment, or physical or mental abuse.
16. Arising out of the illegal or unlawful acts of any of you or any of your guests. (Emphases added.)

K.M.R. argues that the exclusions do not pertain to Elizabeth based on the following severability clause:

The Limit of Liability for Coverage E— Personal Liability will not exceed the limit shown on the Declarations Page regardless of the number of people insured or claims made.
The insuring of more than one person by this policy does not increase our limits of liability.

K.M.R. argues that the insuring agreement contemplates separate coverage for each of the two named insureds. Thus, she contends that the trial court erred in denying coverage for Elizabeth’s negligent acts which were independent of Tommy’s intentional sexual assault. She contends that when read in conjunction with the “expected or intentional acts” exclusion, the severability clause renders the policy ambiguous. In so reasoning, K.M.R. relies on Northwestern National Insurance Company v. Nemetz, 135 Wis.2d 245, 400 N.W.2d 33 (1986), a case in which Mr. Nemetz intentionally started a fire on property owned by him and his wife. The fire destroyed an adjacent piece of property. Consequently, the Nemetzes, who were insured under two separate policies, were sued for the damage to their neighbor’s property. The insurers claimed that they owed no coverage for the loss pursuant to the “expected or intended” exclusion in the insurance contracts. However, Nemetz held that Mrs. Nemetz, an innocent party, was entitled to the coverage afforded by the policies.

We conclude that this contract is ambiguous because the severability clause creates a reasonable expectation that each insured’s interests are separately covered, while the exclusion clause attempts to exclude coverage for both caused by the act of only one.... We cannot release an insurer from a risk that may have been excluded through more careful contract drafting.

Id. at 38.

The language employed in the policies of the Nemetz case differs significantly from that used in the exclusions in the case before us. In Nemetz, the policy exclusions absolved the insurer from liability for damages “expected or intended by an insured” and damages “intended or expected by the insured.” Id., 400 N.W.2d at 37, n. 2. (Emphasis original.) In contrast to a generalized approach, the intentional acts exclusion in the Foremost policy addresses the insureds more precisely and more directly, excluding coverage for damages that are “intended by any of you to cause any harm or that any of you could reasonably expect to cause harm.” (Emphasis added.) It denies protection to an innocent actor who is tainted by association with an intentional wrongdoer.

This more expansive distinction was observed and noted to be critical in Taryn E.F. v. Joshua M.C., 178 Wis.2d 719, 505 N.W.2d 418 (1993). In that case, the insureds were sued for injuries related to a sexual assault committed by their son. Citing Nemetz, the parents/insureds claimed that the severability clause in their homeowner’s liability policy provided them with coverage because they had not intended any harm to their son’s victim. The intentional acts provision at issue in Taryn, similar to the exclusion in the instant ease, excluded insurance coverage for injury:

attributable to a willful, malicious, wanton or otherwise intentional act of the “insured” or performed at an “insured’s” direction or for any outrageous conduct on the part of any “insured” consisting of any intentional, wanton, malicious acts, or, in addition, any act that would constitute wanton disregard for the rights of others. (Emphasis added.)

Id. at 178 Wis.2d at 723, 505 N.W.2d 418. In interpreting this clause, the Court of Appeals of Wisconsin declined to expand its holding in Nemetz and concluded:

This language unambiguously denies coverage for all liability incurred by each and any insured as a result of certain conduct by any of the persons insured by the policy.... We noted in Nemetz that by using the terms “an insured,” and “the insured” in their exclusionary provisions, the insurers failed to adequately draft the policy to exclude coverage for both insureds based on the excludable acts of one insured. [Citation omitted.] Thus, we held that the exclusionary clauses precluded coverage for the insured who committed the ex-cludable acts, but not for the innocent insured. Id. Here, the exclusionary clause precludes coverage under the policy based on the excludable acts of any insured. Even when read with the sev-erability clause, this exclusion unambiguously operates to preclude coverage to all insureds for liability attributable to the excludable acts of any one of the insureds. Unlike the insurers in Nem-etz, Little Black [Mutual Insurance Company] drafted its policy more carefully to exclude this risk. (Emphasis in original.)

Id., at pp. 724-25, 505 N.W.2d 418.

The reasoning of the Wisconsin court in Taryn is consistent with Kentucky precedent. In Kentucky, a clearly worded exclusion is not treated as ambiguous or rendered unclear by the mere existence of a severability provision.

The purpose of severability clauses ... is not to negate bargained-for exclusions which are plainly worded. See American National Bank and Trust Co. v. Hartford Accident & Indemnity Co., 442 F.2d 995 (6th Cir., 1971), which held that unambiguous and clearly drafted exclusions which are not unreasonable or against public policy are enforceable.

National Insurance Underwriters v. Lexington Flying Club, Inc., 603 S.W.2d 490, 492 (Ky.App., 1980). Foremost’s exclusion denies coverage to each of its insureds for damages intentionally caused by any one of them. Within the context of liability insurance, Tommy’s acts of sexual molestation were intentional as a matter of law. See, Goldsmith v. Physicians Insurance Company of Ohio, 890 S.W.2d 644 (Ky.App.1994) and Thompson v. West American Insurance Company, 839 S.W.2d 579 (Ky.App.1992).

Foremost apparently followed the admonition of the Nemetz court and more carefully drafted its exclusionary clauses. We hold that the trial court correctly applied the intentional acts exclusion in concluding that Foremost owed no duty to defend or to indemnify either of the Conrads for the act of one of them.

Other plainly worded provisions also support the court’s judgment in applying the exclusion so as to deny coverage to Elizabeth. Specifically, the policy excludes coverage for “negligent supervision” (the essence of KM.R.’s complaint against her grandmother) committed by “any insured” or “any person.” The policy also excludes damages for bodily injury “[a]rising out of any sexual act, sexual molestation, corporal punishment, or physical or mental abuse.” (Emphasis added.) In drafting this exclusion, Foremost did not limit the exclusion to acts committed by its insureds. Rather, the exclusion removed from coverage an entire category of injuries; i.e., those arising out of sexual acts and physical or mental abuse. This plainly worded exclusion should dispel any expectation of the Conrads that either was entitled to be defended or indemnified by Foremost against a claim arising from sexual molestation — regardless of the identity of the actual perpetrator of the sexual offense.

Finding no error, we affirm the judgment of the Hopkins Circuit Court.

ALL CONCUR.

      . "You” is defined in the policy as meaning the named insureds and family members. Both Elizabeth and Tommy Conrad are named insureds.