Bruington v. Pedernal: Texas Supreme Court rules dismissal with prejudice not required after failure to include certificate of merit.
On April 28, 2017, the Texas Supreme Court resolved a conflict among several Texas appellate courts in holding that trial courts are not required to dismiss with prejudice suits for failure to include a so-called “Certificate of Merit” affidavit under Chapter 150 of the Civil Practice and Remedies Code.
Section 150.002 of the Texas Civil Practice and Remedies Code requires a plaintiff to file an expert affidavit along with the first-filed petition in a lawsuit arising out of the provision of professional architecture and engineering services. If a plaintiff fails to file the expert affidavit (aka a “certificate of merit”), Section 150.002(e) of the statute provides that the trial court shall dismiss the lawsuit and the dismissal may be with prejudice. The purpose of a dismissal under this section is “is a sanction . . . to deter meritless claims and bring them quickly to an end.” See CTL/Thompson Texas, LLC v. Starwood Homeowner’s Ass’n, Inc., 390 S.W.3d 299, 301 (Tex. 2013). The statute also has a “contemporaneous filing requirement” that generally mandates dismissal if the plaintiff fails to file the certificate of merit with its first-filed petition. Texas courts have struggled to reconcile the trial court’s discretion to dismiss without prejudice, with the contemporaneous filing requirement’s prohibition against correcting deficiencies with the first-filed petition. At least one court had held that the failure to file a certificate of merit with the first-filed petition could not be corrected, mandating dismissal with prejudice (meaning the plaintiff could not refile its claims). Others had held that the trial court had discretion to dismiss the case without prejudice, thereby allowing the plaintiff to refile.
The Texas Supreme Court resolved the appellate disagreement in Pedernal Energy, LLC v. Bruington Engineering, Ltd., –S.W.3d–, 2017 WL 1737920 (Tex. 2017). In that case, Pedernal Energy sued Bruington Engineering alleging that Bruington provided substandard engineering services in connection with a gas well fracing operation. Pedernal failed to attach a certificate of merit to its petition. After Bruington filed a motion to dismiss under Chapter 150, Pedernal non-suited and then re-sued Bruington through an amended petition with a certificate of merit. Bruington filed a motion to dismiss, which was denied. On appeal, the appellate court remanded with instructions to the trial court to determine whether the dismissal should be with or without prejudice. The trial court held an evidentiary hearing and made findings of fact that Pedernal’s claims had merit and Pedernal’s failure to file a certificate of merit was neither intentional nor done with conscious indifference—and accordingly dismissed without prejudice. Bruington then filed a second appeal alleging that the trial court’s failure to dismiss the claim with prejudice was an abuse of discretion. Bruington reasoned that dismissal of an amended complaint without prejudice would allow a plaintiff to avoid an unfavorable ruling on the first complaint by non-suiting it and refiling with a certificate of merit. The Fourth Court of Appeals agreed, holding that Section 150.002(e) required the claims to be dismissed with prejudice.
The Texas Supreme Court reversed the judgment of the court of appeals and reinstated the judgment of the trial court, holding that 150.002(e) required dismissal of the claims but afforded the trial court with broad discretion to decide whether the dismissal should be with or without prejudice to refiling. The Court reasoned that the statute’s permissive word “may” implied an exercise of discretion and that the Legislature must have intended to allow a dismissal without prejudice. The Court rejected the argument that permitting a dismissal without prejudice in this case would encourage lax attitudes towards the statute’s contemporaneous filing requirement and thus defeat the purpose of the statute, deciding instead that that possibility was consistent with the statute’s discretionary language.
The Texas Supreme Court also discussed what standard should govern the trial courts in determining whether to dismiss with or without prejudice. First, the Court declined to adopt a “good cause” standard for section 150.002 that would require trial courts to dismiss claims without prejudice if the failure to comply with the statutory certificate of merit requirements was not intentional or a result of conscious indifference. Instead, the Court held that the proper standard to consider was whether the lawsuit had merit. Since the trial court had determined that the lawsuit was meritorious from the alleged failures listed in the later-filed certificate of merit, the trial court did not abuse its discretion in dismissing without prejudice.
This holding clarifies that a dismissal under Chapter 150 is not required to be with prejudice. The holding provides broad discretion to a trial court to decide whether a claim is meritorious enough to permit a dismissal without prejudice. It should be considered a victory for owners and other plaintiffs, who will not be punished with an automatic dismissal with prejudice (sometimes called a “death penalty” sanction) for failure to comply with Chapter 150. That being said, the Court did not foreclose the use of a dismissal with prejudice when the trial court determines that a claim lacks merit. Additionally, this case did not address the necessity of a dismissal since Pedernal conceded that a dismissal without prejudice was proper. Post-Bruington, it would be prudent for an affiant to set forth, in detail, the failures of the defendant design professional in the certificate of merit to avoid the possibility that an appellate court could conclude that a trial court abused its discretion in finding that a claim had merit.