Medical Discount Pharmacy, L.P., Lifechek Rosenberg GP, Inc., LifeChek, Inc. and Bruce v. Gingrich, Individually v. State of Texas ( 2015 )

Opinion issued July 7, 2015.
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-13-00963-CV
———————————
MEDICAL DISCOUNT PHARMACY, L.P., LIFECHEK ROSENBERG GP,
INC., LIFECHEK, INC. AND BRUCE V. GINGRICH, INDIVIDUALLY,
Appellants
V.
THE STATE OF TEXAS, Appellee
On Appeal from the 434th District Court
Fort Bend County, Texas
Trial Court Case No. 12-DCV-196841
MEMORANDUM OPINION
This is an appeal from a judgment imposing civil sanctions, injunctive relief,
and attorney’s fees based on violations of the Texas Food, Drug, and Cosmetic
Act. We reverse in part and affirm in part.
BACKGROUND
The parties
This case was brought by the Texas Attorney General, at the request of the
State Commissioner of Health, against several related defendants for violations of
the Texas Food, Drug, and Cosmetic Act [TFDCA]. See TEX. HEALTH & SAFETY
CODE ANN. §§ 431.001–431.415 (West 2010). Medical Discount Pharmacy, L.P. [MDP]
is a licensed wholesale distributor of prescription drugs, and Bruce Gingrich is its
president. Gingrich is also a licensed pharmacist who owns 29 Lifechek pharmacies. He
formed MDP in 2008 to streamline the purchase of pharmaceuticals for his stores, and the
pharmacies obtain a portion of their drugs directly from MDP. Typically, MDP
purchases prescription drugs from other licensed prescription drug wholesalers, and the
transaction is negotiated by a drug representative from the wholesaler. MDP pays the
wholesaler, not the drug representative. MDP would then sell the drugs to Gingrich’s
Lifechek pharmacies or other small pharmacies in the area.
Lifechek Rosenberg, G.P. Inc. [Lifechek Rosenberg] is the general partner of
MDP, and Lifechek, Inc., is its sole shareholder.
The theft
In 2009, 25,000 units of the prescription inhaler Advair were stolen from
Glaxoklinesmith Pharmaceutical’s warehouse in Richmond, Virginia. The thieves
cut a hole in the roof of the warehouse, rappelled down, deactivated the alarm, and
2
loaded $5 million worth of Advair onto tractor trailer rigs, before disappearing for
several months.
Stolen units purchased by MDP
Approximately nine months after the theft, Bruce Gingrich, the president of
MDP, was approached by Alex Oria, who offered to sell him Advair. The Advair
was short-dated, or about to expire, and was being offered at 30% off the
wholesale price. Gingrich knew Oria, had done business with him in the past, and
knew that Oria and his company were not licensed to distribute prescription drugs
in Texas. Gingrich accepted Oria’s offer, and shortly thereafter Oria personally
delivered at least 330 units of Advair to MDP’s warehouse in Rosenberg, Texas.
Gingrich was personally present when Oria delivered the Advair. Gingrich
testified that Oria told him that the Advair came from Mercer Pharmaceuticals,
which is a licensed Texas drug wholesaler, but Gingrich never received an invoice
from Mercer, nor did Gingrich ever attempt to verify Oria’s claim that Mercer
supplied the Advair. Indeed, there is no evidence that Gingrich paid Mercer
anything, but there was a cashier’s check made out to Oria personally. Gingrich
claimed that the check was not for the Advair, that he did not purchase the Advair
from Oria, and that he believed that Oria was merely acting as a broker for Mercer.
3
MDP/Gingrich ship the Advair to numerous pharmacies
Shortly after Oria delivered the Advair, Gingrich directed Renae Clement, a
receptionist for Lifechek, Inc., to ship an unknown number of the Advair units to
22 Lifechek pharmacies throughout Texas. Clement, on Gingrich’s instruction,
sent the stolen Advair to the 22 Lifechek pharmacies with a note that the shipment
was “per Bruce.” When one of the pharmacies asked about an invoice, Clement
followed-up with an email, using her signature block as receptionist for Lifechek,
Inc., in which she explained that she was filling in for Allyn Ross Eder, the
manager of MDP’s warehouse, and that the invoices would be sent the following
week.
Shortly thereafter, Gingrich negotiated a transaction between MDP and
Medicine Chest Pharmacy for the sale of 152 units of the Advair. An employee of
Medicine Chest wanted to make sure that the units he purchased were not part of
the stolen Advair, so he gave Gingrich the lot numbers of the stolen units.
Gingrich claimed that this was the first time he had heard about any stolen Advair.
He testified that he immediately asked MDP’s warehouse manager, Eder, to check
to make sure the units were not stolen before shipping them to Medicine Chest.
Eder testified that she checked the numbers on two boxes and, when they did not
match the stolen units, she completed the shipment to Medicine Chest, along with
an invoice for $31,972,29.
4
The FDA gets involved
Shortly thereafter, a Medicine Chest representative informed Gingrich that
the shipment it received from MDP contained stolen Advair. Medicine Chest and
Gingrich reported the stolen Advair to the FDA. FDA representatives went to
Medicine Chest and confiscated 152 units of Advair, which it matched by lot
numbers to that stolen from Glaxosmithkline.
Gingrich then contacted the 22 Lifechek pharmacies and attempted to
retrieve the remaining stolen Advair. The fax stated:
Per Bruce, please send back the shorted Advair (exp. 2010) that you
received from this office in late May. Bruce needs these to help fulfill
an order for a customer by Wednesday June 30th.
The fax did not tell the pharmacies that the Advair was stolen or that the FDA was
involved. Gingrich claimed that Eder drafted the fax, and that he never saw it.
Gingrich testified that the pharmacies returned 170 units of Advair. At least
one unit had been sold to the public, because one customer returned a unit that was
not working, and when the pharmacist called to report the defective unit, it was
identified as stolen. There is no evidence how many more units had been sold
because there was no record of how many units MDP sent to the pharmacies to
begin with.
5
On July 6, 2010, the FDA arrived at MDP and confiscated the 170 units
Gingrich had retrieved from the pharmacies. The FDA also seized a receipt for a
cashier’s check to Alex Oria from Bruce Gingrich in the amount of $15,600.
State inspectors also visit MDP
Several weeks after the FDA had confiscated the 152 units from Medicine
Chest and 170 units from MDP, inspectors from the State Health Department
arrived at MDP. Gingrich initially denied possessing any Advair, but when
confronted with it, he said that one of the pharmacies was late in returning its
stolen Advair, and that he was holding it for the FDA. The department seized an
additional 8 units of stolen Advair.
In all, MDP had sold at least 330 units of stolen Advair to pharmacies (152
to Medicine Chest + 170 to Lifechek pharmacies + 8 found in MDP warehouse by
state inspectors). It is possible that more units were sold to the public before
Medicine Chest identified the Advair as stolen.
Oria is arrested
After the stolen Advair was confiscated from MDP, Gingrich assisted in the
investigation of Oria by wearing a wire and allowing a tap on his cell phone. In
July 2010, two months after delivering stolen Advair to MDP, Alex Oria was
arrested in Florida and indicted for trafficking in contraband drugs, fraud, and
money laundering. In 2012, he was arrested and charged by the U.S. Attorney in
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New York for conspiracy to commit mail fraud, healthcare fraud, and money
laundering.
Previous TDFCA violations by the Defendants
The Department also had a previous involvement with Gingrich and MDP in
2009. In that case, the Department sued MDP, Gingrich, and others for possessing
Abilify, which the Department alleged was counterfeit because the lot numbers on
the drugs in MDP’s possession were different from the numbers manufacturer log
numbers. Gingrich testified that he had purchased the Abilify from Ocean
Pharmed, through a transaction negotiated by Alex Oria. However, neither Ocean
Pharmed nor Alex Oria were licensed drug wholesalers in the State of Texas,
another violation of the TFDCA.
The Department, MDP, Gingrich, Lifecheck Rosenberg, Lifechek, Inc., and
others entered an agreed final judgment and permanent injunction. In the agreed
judgment, MDP was assessed a $325,000 penalty, which would be reduced to
$25,000 if MDP had the Abilify destroyed. The injunction prohibited the
defendant from (1) “purchasing or receiving prescription drugs from entities not
licensed in Texas as a wholesale drug distributor, [and], (2) “placing prescription
drugs in commerce that were obtained from entities not licensed in Texas as a
wholesale drug distributor.” The injunction did not mention Alex Oria by name,
7
but Gingrich testified that he told the department he “would not buy prescription
drugs from Alex Oria” again.
A few weeks after the agreed settlement was signed, Gingrich and Oria
negotiated and agreed to the Advair transaction that is the basis of this lawsuit.
Gingrich’s position at trial was that he did not purchase the Advair from Oria, but
that Oria merely acted as a broker for Mercer Pharmaceutical. However, there was
never an invoice from Mercer, and MDP never paid Mercer, but there is evidence a
check was made payable to Oria.
JURY QUESTION NO. 10: ADULTERATED DRUG
In Jury Question No. 10, the jury answered the following question regarding
delivery of adulterated drugs:
Did any defendant named below introduce or deliver for introduction
into commerce any Advair that was adulterated?
You are instructed that for purposes of answering this question
“adulterated drug” means a drug that has been prepared, packed, or
held under insanitary conditions whereby it may have been
contaminated with filth or whereby it may have been rendered
injurious to health.
Please answer separately in the blank next to each defendant named
with a “yes” or “no”:
(a) Medical Discount Pharmacy, L.P Yes
(b) Lifechek Rosenberg GP, Inc. Yes
(c) Lifechek, Inc. Yes
(d) Bruce V. Gingrich, Individually Yes
8
In their first issue on appeal, appellants contend there is no evidence that the
stolen Advair was “adulterated,” as that term was defined by the jury charge.
Specifically, appellants contend that there is no evidence that the Advair was
“prepared, packed, or held under insanitary conditions.”
Standard of review
When, as here, an appellant attacks the legal sufficiency of an adverse
finding on an issue for which it did not have the burden of proof, it must
demonstrate that there is no evidence to support the adverse finding. Croucher v.
Croucher, 660 S.W.2d 55, 58 (Tex. 1983). Such a no-evidence challenge will be
sustained when “‘(a) there is a complete absence of evidence of a vital fact, (b) the
court is barred by rules of law or of evidence from giving weight to the only
evidence offered to prove a vital fact, (c) the evidence offered to prove a vital fact
is no more than a mere scintilla, or (d) the evidence conclusively establishes the
opposite of the vital fact.’” King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751
(Tex. 2003) (quoting Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711
(Tex. 1997)).
In our legal-sufficiency review, “we must view the evidence in a light that
tends to support the finding of disputed fact and disregard all evidence and
inferences to the contrary.” Wal–Mart Stores, Inc. v. Miller, 102 S.W.3d 706, 709
(Tex. 2003). Nonetheless, “[t]he final test for legal sufficiency must always be
9
whether the evidence at trial would enable reasonable and fair-minded people to
reach the verdict under review. . . . [L]egal-sufficiency review in the proper light
must credit favorable evidence if reasonable jurors could, and disregard contrary
evidence unless reasonable jurors could not.” City of Keller v. Wilson, 168 S.W.3d
802, 827 (Tex. 2005).
If more than a scintilla of evidence supports the jury’s finding, “the jury’s
verdict . . . must be upheld.” Miller, 102 S.W.3d at 709. “[M]ore than a scintilla of
evidence exists if the evidence ‘rises to a level that would enable reasonable and
fair-minded people to differ in their conclusions.’” Ford Motor Co. v. Ridgway,
135 S.W.3d 598, 601 (Tex. 2004) (quoting Merrell Dow Pharms., Inc., 953
S.W.2d at 711). Conversely, evidence that is “‘so weak as to do no more than
create a mere surmise’” is no more than a scintilla and, thus, no evidence. Id.
(quoting Kindred v. Con/Chem., Inc., 650 S.W.2d 61, 63 (Tex. 1983)).
Analysis
The State argues that there is sufficient evidence that the Advair was
adulterated as a matter of law because it was stolen, and, as such, it was outside the
normal distribution chain. This, the State contends, meets the definition of
“adulterated” in the applicable statute, which provides in pertinent part:
A drug or device shall be deemed to be adulterated:
(2)(A) if it has been prepared, packed, or held under insanitary
conditions whereby it may have been contaminated with filth, or
10
whereby it may have been rendered injurious to health; or (B) if it is a
drug and the methods used in, or the facilities or controls used for, its
manufacture, processing, packing, or holding do not conform to or are
not operated or administered in conformity with current good
manufacturing practice to assure that such drugs meets the
requirements of this chapter as to safety and has the identity and
strength, and meets the quality and purity characteristics, which it
purports or is represented to possses[.]
TEX. HEALTH & SAFETY CODE § 331.111(2)(A), (B) (West 2010).
The State contends that a drug is adulterated, by virtue of the statute above, “if the
manufacturing requirements for the drug have not been met,” and Tom Brink, the
Manager of Drugs and Devices for the Texas Department of State Health Services,
testified as follows:
[The stolen Advair is] adulterated by the statute. In other words,
regardless of how any laboratory test[s] come out, the products are
adulterated by virtue of the fact that they were held under unknown
conditions for nine months.
Angie Bowles, an inspector for the State, testified that “[t]he fact that [the Advair]
came from an unlicensed source and it was stolen is enough to show that [it was
adulterated].”
We agree with the State that, had the jury been charged under subsection
(2)(B) of the statute above, evidence that the Advair was stolen and removed from
the regular distribution chain might show that the Advair was “adulterated”
because the controls used for its “manufacture, processing, packing, or holding do
11
not conform to or are not operated or administered in conformity with current good
manufacturing practice.” See TEX. HEALTH & SAFETY CODE § 331.111(2)(B).
However, the jury was only charged according to section (2)(A) of the
statute, which defined “adulterated” as drugs that “have been prepared, packed, or
held under insanitary conditions whereby it may have been contaminated with
filth, or whereby it may be been rendered injurious to health.” See TEX. HEALTH &
SAFETY CODE § 331.111(2)(B) (emphasis added). In a jury trial, a legal-
sufficiency complaint is not separable from the charge. “The sufficiency of the
evidence must be measured by the jury charge when, as here, there has been no
objection to it.” Romero v. KPH Consolidation, Inc., 166 S.W.3d 212, 221 (Tex.
2005). This is true even if the charge’s statement of the law is not correct. Wal-
Mart Stores, Inc. v. Sturges, 52 S.W.3d 711, 715 (Tex. 2001). Here, the jury
charge is not erroneous, but it does not include the subsection of the statute on
which the State now relies. See, e.g., Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex.
2000) (“[I]t is the court’s charge, not some other unidentified law, that measures
the sufficiency of the evidence when the opposing party fails to object to the
charge.”).
Thus, we review the sufficiency of the evidence to determine whether it is
legally sufficient to show that the Advair was “adulterated,” as that term was
defined in the charge, i.e., whether there was any evidence that it had been
12
“prepared, packed, or held under insanitary conditions[.]” The statute does not
define “insanitary,” so we give it its common meaning. See City of Dallas v.
Abbott, 304 S.W.3d 380, 393 (Tex. 2010). “Insanitary” is defined as “unclean
enough to endanger health: Filthy, contaminated.” Webster’s Ninth New Collegiate
Dictionary 625 (9th ed. 1983).
Here, there is no evidence that the stolen drugs were held in unclean, filthy,
or contaminated conditions. Indeed, Tom Brink testified that the Advair was “held
under unknown conditions for nine months.” On cross-examination of Gingrich
during trial, the State’s attorney asked, “We don’t know how the Advair was stored
during the nine months while it—after it was stolen from the warehouse and made
its way to your office, we don’t know that?” Gingrich responded, “Correct.”
The following exchange also took place while Brink was testifying about the
conditions under which the stolen drugs might have been kept:
[Brink]: Well, realistically in this particular case, these products were
stolen at the beginning of August, 2009 and did not hit the markets
until the following year[], so these products were held essentially by
thieves or gangs of thieves during the very hot part of the summer and
it also went through a winter cycle as well. So typically in situations
where you have stolen products like this, these gangs have no
obligation or ethical concerns about maintaining the same standards
for the product that a licensed distributer would have to comply with.
And so these products in this particular situation, nine months
elapsed before these products resurfaced and during that time we
don’t know how these products were handled that they were stolen,
presumably in tractor trailer trucks, if they were stored in those trucks
without any kind of temperature controls—
13
[Defense Counsel]: Your Honor, at this point in time, I’m going to
object to the witness speculating, he’s admitted that they don’t know
what happened to these drugs, and so for him to go now and speculate
further, we object.
[State’s Counsel]: It’s not speculation, Judge, we’ve already covered
it, it’s in the indictment that the federal prosecutors believed that this
is how these drugs were handled, that they were in trucks, they were
rental vehicles, they were storage, there were in uncontrolled
conditions, it’s already in evidence.
[Defense Counsel]: Your Honor, an indictment is not evidence.
[State’s Counsel]: it’s in the—it’s in an exhibit.
[Trial Court]: Well—sir, do you have firsthand knowledge that these
drugs were exposed to any of those things?
[Brink]: These specific, no, I do not.
[Trial Court]: Okay. Very well. I’ll sustain the objection.
All of the evidence, even that provided by the State’s witnesses, was that no one
knew the conditions under which the stolen Advair had been held. Nevertheless,
the State contends on appeal, as it did at trial, that the federal indictment1 against
Oria was some evidence that the drugs had been stored at improper temperatures.
However, an indictment is not evidence. Ex parte Dumas, 110 Tex. Crim. 1, 2, 7
S.W.2d 90, 90 (1928); Gonzales v. State, 977 S.W.2d 189, 190 (Tex. App.—Austin
1998, pet. ref’d) (“[a]n indictment or information is not evidence”).
1
The federal indictment against Oria described the practice of Oria and his co-
defendants of storing contraband drugs in “uncontrolled conditions, such as car
trunks, residences and rented storage facilities, which may not be sufficient to
maintain the medical efficacy of such drugs over time.”
14
The State also argues on appeal that one patient’s return of a stolen Advair
unit because it was not working is some evidence that the drugs were held in
insanitary conditions. However, while the record does show that one of the stolen
units was returned, it in no way links that defective unit to insanitary storage
conditions. Indeed, the record suggests that the plastic “gun” used to dispense the
drug was broken, not that there was anything wrong with the drug itself.
Because all of the witnesses—both those for the defendants and the State—
agree that no one knows the conditions under which the stolen drugs were kept
before they were delivered to MDP, we must conclude that there is no evidence
that the drugs were kept in “insanitary” conditions. As such, there is no legally
sufficient evidence to support the jury’s finding that the drugs were “adulterated,”
as that term is defined in the charge. We do not address the State’s alternative
argument that the drugs were adulterated as a matter of law under TEX. HEALTH &
SAFETY CODE § 331.111(2)(B) because it never moved for directed verdict on that
claim or to put that subsection in the jury charge.
Conclusion
We sustain appellants’ first issue on appeal. Accordingly, we reverse the
civil penalties found in Jury Question 12 that were based on the liability findings in
Jury Question 10, which we have held were not supported by legally sufficient
15
evidence. In light of our disposition of this issue, we need not address appellants’
remaining complaints regarding Jury Question 10 and decline to do so.
JURY QUESTION NO. 1: RECEIPT AND DELIVERY OF STOLEN DRUG
In Jury Question No. 1, the jury was asked the following question about the
delivery of stolen drugs:
Did any defendant named below receive any Advair that was stolen
and deliver such Advair or proffer for delivery such Advair for
payment or otherwise?
You are instructed that for purposes of answering this question that
the State is not required to prove that the Defendants knew that the
Advair was stolen.
Please answer separately in the blank next to each defendant with a
“yes” or “no”:
(a) Medical Discount Pharmacy, L.P. Yes
(b) Lifechek Rosenberg GP, Inc. Yes
(c) Lifechek, Inc. Yes
(d) Bruce V. Gingrich, Individually Yes
After answering the liability questions affirmatively, the jury found that MDA and
Gingrich had committed 330 violations and assessed each a $500,000 civil penalty.
The jury also found that Lifechek Rosenberg and Lifechek, Inc. had each
committed 178 violations and assessed civil penalties against Lifecheck Rosenberg
and Lifecheck, Inc. in the amount of $250,000 and $100,000, respectively.
In several related issues, appellants contend that (1) Lifecheck Rosenberg,
Lifechek, Inc., and Gingrich, individually, cannot be held liable for receiving
16
stolen Advair; and (2) there is no evidence that MDP delivered 330 units of stolen
Advair. We address each argument, respectively.
Multiple penalties against multiple defendants
Defendants argue that there were, at most, 330 units of stolen Advair, and
that the total violations found was 1,016. It is essentially defendants’ position that
MDP may have committed the 330 violations, but that Lifechek Rosenberg,
Lifechek, Inc., and Gingrich, individually, did not and thus no violations may be
assessed against them. The State argues that federal law interpreting a
substantially similar federal Food, Drug, and Cosmetic Act (“FDCA”) has held that
corporate officers, as well as the corporations they work for, can be held liable for
violating the FDCA. As such, the State contends that the TFDCA should be
similarly interpreted. On this point, we agree with the State.
Section 431.0585 of the TFDCA provides that an enforcement action may be
brought by the Attorney General against “a person”:
(a) At the request of the commissioner, the attorney general or a
district, county, or city attorney shall institute an action in district
court to collect a civil penalty from a person who has violated
Section 431.021
TEX. HEALTH & SAFETY CODE §431.0585(a). A “person” is defined by the Act as
including an “individual, partnership, corporation, and association.” TEX. HEALTH
& SAFETY CODE §431.002(28).
17
In U.S. v. Dotterweich, 320 U.S. 277, 278, 64 S. Ct. 134, 135 (1943), a
corporation and its president/general manager were charged with delivering
adulterated drugs under the FDCA. The statute similarly defined a “person” as
including corporations and stated that any person who committed a violation of the
act was guilty of a misdemeanor. Dotterweich, 320 U.S. at 281, 64 S. Ct. at 136.
The Court first noted that all persons responsible for the violations were “equally
guilty.” Id. The Court noted that “[t]he offense is committed . . . by all who do
have such a responsible share in the furtherance of the transaction which the
statute outlaws, namely, to put into the stream of interstate commerce adulterated
or misbranded drugs.” 320 U.S. at 284, 64 S. Ct. at 138 (emphasis added). The
Court then determined that “[i]t would be too treacherous to define or even to
indicate by way of illustration the class of employees which stands in such a
responsible relation[,]” and that “[t]o attempt a formula embracing the variety of
conduct whereby persons may responsibly contribute in furthering a transaction
forbidden by an Act of Congress, to wit, to send illicit goods across state lines,
would be mischievous futility.” 320 U.S. at 285, 64 S. Ct. at 138. Instead, the
Court held that the jury should be allowed to determine the responsibility of the
“persons” involved, subject to a review of the sufficiency of the evidence. “[T]he
District Court properly left the question of the responsibility of Dotterweich for the
shipment to the jury, and there was sufficient evidence to support its verdict.” Id.
18
Thus, we conclude that multiple persons can be held responsible for the
same delivery of adulterated drugs if there is sufficient evidence that each held “a
responsible share in the furtherance of the transaction which the statute outlaws.”
See 320 U.S. at 284, 64 S. Ct. at 138.
Legal sufficiency of the evidence
Thus, we now review the legal sufficiency of the evidence to support the
findings of violations by each defendant.
1. Standard of review
When an appellant attacks the legal sufficiency of an adverse finding on an
issue for which it did not have the burden of proof, it must demonstrate that there is
no evidence to support the adverse finding. Croucher, 660 S.W.2d at 58. Such a
no-evidence challenge will be sustained when “(a) there is a complete absence of
evidence of a vital fact, (b) the court is barred by rules of law or of evidence from
giving weight to the only evidence offered to prove a vital fact, (c) the evidence
offered to prove a vital fact is no more than a mere scintilla, or (d) the evidence
conclusively establishes the opposite of the vital fact.” King Ranch, Inc., 118
S.W.3d at 751. “[W]e must view the evidence in a light that tends to support the
finding of disputed fact and disregard all evidence and inferences to the contrary.”
Wal–Mart Stores, Inc., 102 S.W.3d at 709.
19
2. Gingrich, individually
Appellants argue that the evidence is legally insufficient to hold Gingrich
responsible because there is no evidence (1) that he personally received the stolen
Advair, (2) that he personally delivered the stolen Advair to Medicine Chest, or (3)
that any delivery or proffer for delivery was for payment or any other kind of
remuneration to Gingrich personally and separately from MDP. Essentially,
appellants argue that Gingrich cannot be held personally liable when he was acting
on behalf of MDP.
We have already held that under U.S. v. Dotterweich, “[t]he offense is
committed . . . by all who do have such a responsible share in the furtherance of
the transaction which the statute outlaws, namely, to put into the stream of
interstate commerce adulterated or misbranded drugs.” 320 U.S. at 284, 64 S. Ct.
at 138 (emphasis added). We believe that the same is true under the Texas statute.
In tort cases, Texas courts have routinely found that “a corporate officer may not
escape liability where he had direct, personal participation in the wrongdoing, as to
be the ‘guiding spirit behind the wrongful conduct or the central figure in the
challenged corporate activity.’” Ennis v. Loiseau, 164 S.W.3d 698, 707—08 (Tex.
App.—Austin 2005, no pet.) (quoting Mozingo v. Correct Mfg. Corp., 752 F.2d
168, 174 (5th Cir. 1985)). Hence, “[i]t is the general rule in Texas that corporate
agents are individually liable for fraudulent or tortious acts committed while in the
20
service of their corporation.” Shapolsky v. Brewton, 56 S.W.3d 120, 133 (Tex.
App.—Houston [14th Dist.] 2001, pet. denied). In Texas v. Am. Blastfax, Inc.,
164 F. Supp. 2d 892, 897–98 (W.D. Tex. 2001), the court found these tort
principles applicable to a similarly worded statute with similar definitions, i.e., the
Telephone Consumer Protection Act, and held that an officer may be personally
liable under the statute if “he had direct, personal participation in or personally
authorized the conduct found to have violated the statute, and was not merely
tangentially involved.”
Here, Gingrich was not merely “tangentially involved” with the transaction.
Gingrich testified that he (1) personally negotiated the transaction with Alex Oria
to purchase the Advair; (2) was physically present when Oria delivered the Advair
to his office in Rosenberg, Texas; (3) directed someone to send the Advair to the
22 Lifechek pharmacies in Houston; (4) negotiated a sale of 152 units of the
Advair to Medicine Chest; and (5) directed someone to ship the Advair, along with
an invoice, to Medicine Chest.
Because there is legally sufficient evidence showing that Gingrich
“personally participated in the wrongdoing,” “was the guiding spirit behind the
wrongful conduct,” and was not just “tangentially involved” in the wrongful
conduct, we overrule appellants’ challenge to the liability finding against him in
21
Jury Question No. 1 and the civil penalties found against him in Jury Question No.
3.
3. Lifechek Rosenberg
Appellants also contend that there is no evidence that Lifechek Rosenberg or
Lifechek, Inc. received and delivered stolen Advair because MDP’s and Gingrich’s
actions were not authorized by either company. The State responds that Lifecheck
Rosenberg’s “liability is based upon its status as the general partner of the limited
partnership, [MDP],” and “the State was not required to present evidence of
liability against Rosenberg apart from the evidence against [MDP].” In so arguing,
the State relies on authority holding that general partners are generally liable for a
limited partners obligations. See Kao Holdings, L.P. v. Young, 261 S.W.3d 60,
63-64 (Tex. 2008).
However, here the State is not merely attempting to hold Lifecheck
Rosenberg liable for MDA’s obligations; it is attempting to hold Lifechek
Rosenberg liable in addition to MDA’s liability. We do not believe that the statute
permits the State to “double the penalty” by naming MDA and its general partner,
Lifecheck Rosenberg, unless both personally participated in the wrongdoing and
“have such a responsible share in the furtherance of the transaction which the
statute outlaws, namely, to put into the stream of interstate commerce adulterated
22
or misbranded drugs.” Dotterweich, 320 U.S. at 284, 64 S. Ct. at 138 (emphasis
added).
As we stated earlier, there is sufficient evidence that Gingrich, individually,
“participated in the wrongdoing,” when he, on behalf of MDP, negotiated the
purchase of the Advair from Oria and then ordered it delivered to Medicine Chest
and the Lifechek pharmacies. But, even though Gingrich may also be an officer of
MDP’s general partner, Lifecheck Rosenberg, there is no evidence that he was
acting on behalf of Lifechek Rosenberg, or that Lifechek Rosenberg actively
participated in the receipt and delivery of the Advair. The Advair sales to the
pharmacies, had they actually been paid, would have been paid to MDP, not to
Lifechek Rosenberg. Any benefit to Lifecheck Rosenberg would have been
indirect, at best. There is simply no evidence, other than merely being the general
partner of MDP, that Lifecheck Rosenberg “participated in the wrongdoing.”
Accordingly, we sustain appellants’ second issue challenging the liability
finding against Lifechek Rosenberg in Jury Question No. 1 and the civil penalties
found against it in Jury Question No. 3.
4. Lifechek, Inc.
Regarding Lifechek, Inc., the State points out that there is evidence of
Lifechek, Inc’s direct involvement with the stolen Advair because its receptionist,
Renae Clement, shipped the Advair to the Lifechek pharmacies and followed up
23
that shipment with an email with her Lifechek, Inc. signature block stating that the
shipment was sent “per Bruce.” However, the undisputed evidence shows that
Clement was “filling in” for Allyn Ross Eder, the manager of MDP’s warehouse,
who was on vacation, and as such, represented MDP, not Lifechek, Inc., when she
forwarded the shipments to the pharmacies. Clement sent the shipments to the
pharmacies at Gingrich’s instruction, and we have already held that Gingrich was
acting on behalf of MDP.
Here, the evidence shows only that Lifechek, Inc. is a shareholder of
Lifechek Rosenberg, the general partner of MDP. That relationship alone, without
further evidence that Lifechek, Inc. “participated in the wrongdoing,” is
insufficient to hold Lifechek, Inc. liable for violating the statute.
Accordingly, we sustain appellants’ second issue challenging to the liability
finding against Lifechek, Inc. in Jury Question No. 1 and the civil penalties found
against it in Jury Question No. 3.
5. MDP
Appellants do not challenge the sufficiency of the evidence to show that
MDP received and delivered the stolen Advair, but they do contend there is legally
insufficient evidence to show that there were 330 violations. We disagree.
The evidence shows that MDP sent 152 of the stolen units to Medicine Chest
and the FDA subsequently retrieved those units from Medicine Chest. The
24
evidence also shows that MDA sent an undetermined number of the stolen units to
the 22 Lifechek pharmacies, which Gingrich asked the pharmacies to return via an
email drafted by Eder, which stated:
Please send back the short dated Advair expiration 2010 that you
received from the office in late May. Bruce needs these to help fulfill
an order for a customer by Wednesday, June 30th. To insure that your
inventory is not depleted of products, please reorder the Advair today
or tomorrow and send back the short dated Advair to the corporate
office on Monday, via 2nd day mail.
The Lifechek pharmacies then returned the Advair at issue, and when the FDA
subsequently inspected MDP, it seized 170 units whose lot numbers matched those
of the stolen Advair. The jury could have reasonably concluded that the 170
stolen units recovered from MDP were the same units that MDP had sent, then
retrieved, from the Lifecheck pharmacies.
In addition, when state inspectors went to one of the Lifechek pharmacies,
they seized another 8 units of the stolen Advair. These totals (152+170+8) exactly
equals 330, the number of violations found against MDP. And, even though
MDP’s manager, Allyn Eder, testified that she found at least two boxes of Advair
whose lot numbers were not among those stolen, the jury was entitled to disbelieve
her testimony. The jury is free to believe or disbelieve a witnesses’ testimony in
whole or in part. Miller v. Kendall, 804 S.W.2d 933, 939 (Tex. App.—Houston
[1st Dist.] 1990, no writ). The jury is entitled to disbelieve a witness even though
that witness is neither impeached nor contradicted. Murphy v. Texas Farmers Ins.
25
Co., 982 S.W.2d 79, 85 (Tex. App.—Houston [1st Dist.] 1998), aff’d, 996 S.W.2d
873 (Tex. 1999). In light of the 330 units of stolen Advair recovered from MDP,
Medicine Chest, and the Lifechek pharmacy, the jury had legally sufficient
evidence to support its finding that MDP committed 330 violations of the Act.
Accordingly, we overrule appellants’ challenge to the liability finding
against MDP in Jury Question No. 1 and the civil penalties found against it in Jury
Question No. 3.
Alternative claim—Fatal conflict in jury charge
As an alternative to its legal sufficiency claims, appellants argue that the
jury’s answers in Jury Question No. 1 are in fatal conflict because all of the
defendants cannot have committed the same violations. Therefore, appellants
request that, even if we do not reverse and render a take-nothing judgment based
on legal insufficiency, we should at least reverse and remand. However, as stated
above, all persons responsible for the violations were “equally guilty.” See
Dotterweich, 320 U.S. at 281, 64 S. Ct. 134 at 136.
Conclusion
We reverse the portion of the judgment against Lifechek Rosenberg and
Lifecheck, Inc. based on the liability findings against those entities in Jury
Question No. 1 and the civil penalties found against them in Jury Question No. 3.
We affirm the portion of the judgment against MDP and Gingrich, individually,
26
based on the liability findings against them in Jury Question No. 1 and the civil
penalties found against them in Jury Question No. 3.
JURY QUESTION NO. 4: FAILURE TO MAINTAIN PEDIGREE
In Jury Question No. 4, the jury was asked the following question and given
the following instructions regarding violations of the statute for failing to maintain
a required pedigree for the Advair at issue in this case:
Did any defendant named below fail to obtain, maintain, or provide a
required pedigree for the Advair?
You are instructed for purposes of answering this question as follows:
“Pedigree” means a document or electronic file containing
information that records each wholesale distribution of a
prescription drug, from sale by a manufacturer, through
acquisition and sale by any wholesale distributor or repackager,
until final sale to a pharmacy or other person dispensing or
administering the prescription drug.
A pedigree must include all necessary identifying information
concerning each sale in the product’s chain of distribution from
the manufacturer through acquisition and sale by a wholesale
distributor until final sale to a pharmacy or other person
dispensing or administering the drug.
At a minimum, the chain of distribution information must
include: i) the name, address, telephone number, and, if
available, the e-mail address of each person who owns the
prescription drug and each wholesale distributor of the
prescription drug; ii) the name and address of each location
from which the product was shipped, if different from the
owner’s name and address; iii) the transaction dates; and iv)
certification that each recipient has authenticated the pedigree.
27
Each pedigree statement must be i) maintained by the purchaser
and the wholesale distributor for at least three years; and ii)
available for inspection and photocopying not later than the
second business day after the date a request is submitted by the
department or a peace officer in this state.
You are instructed that a person who is engaged in the
wholesale distribution of a prescription drug, shall provide a
pedigree for each prescription drug for human consumption that
leaves or at any time has left the normal distribution channel
and is sold, traded, or transferred to any person.
You are instructed that “wholesale distribution” means the
distribution of prescription drugs to someone other than a
consumer or patient. That terms does not include intracompany
sales of prescription drugs, which means transactions or
transfers or prescriptions drugs between division, subsidiary,
parner, or affiliated or related company that is under common
ownership and control, or any transaction or transfer between
co-license holders of a co-licensed product.
You are instructed that a “wholesale distributor” means a
person engaged in the wholesale distribution of prescription
drugs, including, but not limited to a manufacturer, repackager,
own-label distributor, private-label distributor, jobber, broker,
manufacturer warehouse, distributor warehouse, or other
warehouse, manufacturer’s exclusive distributor, authorized
distributor of record, drug wholesaler or distributor,
independent wholesale drug trader, specialty wholesale
distributor, third-party logistics provider, retail pharmacy that
conducts warehouse wholesale distribution, and pharmacy
warehouse that conducts wholesale distribution.
You are instructed that those who engage in intracompany sales
of prescriptions drugs, which means transactions or transfers of
prescription drugs between a division, subsidiary, parent, or
affiliated or related company that is under common ownership
and control are not required to obtain a wholesale license.
28
You are instructed a retail pharmacy or a pharmacy warehouse
is required to provide a pedigree only if the pharmacy engages
in the wholesale distribution of a prescription drug
You are instructed that “pharmacy warehouse” means a location
which a person holds a wholesale drug distribution license
under this subchapter, that serves as a central warehouse for
drugs or devices, and from which intracompany sales or
transfers of drugs or devices are made to a group of pharmacies
under common ownership or control.
A person who is engaged in the wholesale distribution of a
prescription drug, including a repackager, but excluding the
original manufacturer of the finished form of a prescription
drug, and who is in possession of a pedigree for a prescription
drug must verify before distributing the prescription drug that
each transaction listed on the pedigree has occurred.
In Jury Question No. 4, the jury found that MDP, Lifechek Rosenberg, and
Gingrich had violated this provision, but Lifechek, Inc. had not. In Jury Question
No. 5, the jury found 1 violation each for MDP, Lifechek Rosenberg, and
Gingrich. And, in Jury Question No. 6, the Jury assessed a $25,000 civil penalty
against each MDP, Lifechek Rosenberg, and Gingrich.
Sufficiency of the pleadings
On appeal, appellants contend there was no pleading to support submitting
the pedigree questions to the jury. A trial court abuses its discretion when it
submits a jury question that is neither supported by the pleadings nor tried by
consent. Webb v. Glenbrook Owners Ass’n, 298 S.W.3d 374, 380 (Tex. App.—
Dallas 2009, no pet.) (citing Stephanz v. Laird, 846 S.W.2d 895, 902 (Tex. App.—
29
Houston [1st Dist.] 1993, writ denied)). Here, the issue of pedigree was not tried
by consent because appellants objected, see id., thus the issue is whether it was
supported by the pleadings.
In the absence of special exceptions,2 pleadings are to be liberally construed.
Lloyd’s, U.S. Corp. v. Landis, 777 S.W.2d 470, 473 (Tex. App.—El Paso 1989,
writ denied). When the question is whether plaintiffs have stated a cause of action,
the trial court looks to the intent of the pleader and may uphold the pleading and
the judgment rendered even if some element of the cause of action has not been
specifically alleged. Lloyd’s, 777 S.W.2d at 473. Rule 45 of the Texas Rules of
Civil Procedure requires that pleadings give fair notice of the claim or defense
asserted. The purpose of the fair notice requirement is to provide the opposing
party with enough information to prepare a defense or answer to the defense
asserted. See Paramount Pipe & Supply Co. v. Muhr, 749 S.W.2d 491, 494 (Tex.
1988); Roark v. Allen, 633 S.W.2d 804, 810 (Tex. 1982). Pleadings are sufficient if
a cause of action or defense may be reasonably inferred from what is specifically
stated. See Boyles, 855 S.W.2d at 601; Gulf, Colorado & Santa Fe Ry. Co. v. Bliss,
368 S.W.2d 594, 599 (Tex. 1963).
2
Here, appellants did file special exceptions, but did not obtain a ruling on them
before trial. Thus, their special exceptions are waived. See Tri-State Ass’n of
Credit Men v. Hinson, 136 Tex. 1, 4, 144 S.W.2d 881, 882 (Tex. 1938).
30
The State’s Second Amended Petition, the operative pleading on the first
day of trial, alleged:
Defendants, as alleged above and detailed below, have committed or
caused to be committed the following acts prohibited and declared to
be unlawful by Section 431.021 of the TFDCA:
....
D. Failure to obtain and maintain records for receipt and distribution
of prescription drugs and to permit inspection and copying of these
records by TDSHS inspectors in violation of TFDCA §§431.021(g),
(bb), (gg), and (hh)[.] (Emphasis added).
Subsections (gg) and (hh) alleged in the pleading above are set forth in Section
431.021 of the TFDCA, which provides as follows:
Sec. 431.021. PROHIBITED ACTS. The following acts and the
causing of the following acts within this state are unlawful and
prohibited:
....
(gg) failing to maintain or provide pedigrees as required by Section
431.412 or 431.413;
(hh) failing to obtain, pass, or authenticate a pedigree as required by
Section 431.412 or 431.413[.]
Sections 431.412 and 431.413, which are referenced in subsections (gg) and (hh),
describe the pedigree requirements. Given the Second Amended Petition’s specific
reference to subsections (gg) and (hh) as prohibited acts under section 431.021 that
appellants were alleged to have committed, and that the State alleged generally that
31
defendants failed “to obtain and maintain records[,]” we conclude that Jury
Questions 4, 5, and 6 were supported by the pleadings.
Sufficiency of the evidence
Appellants do not contest the sufficiency of the evidence to support the
pedigree findings and penalties against MDP, but they do contend the evidence is
insufficient to find Gingrich and Lifechek Rosenberg liable, again arguing that
only one defendant can be liable for each violation.
For the reasons we discussed above in relation to the receipt and delivery of
stolen Advair, we similarly conclude that Gingrich can be held liable under the
pedigree finding because there is legally sufficient evidence showing that he
“personally participated in the wrongdoing,” “was the guiding spirit behind the
wrongful conduct,” and was not just “tangentially involved” in the wrongful
conduct. Accordingly, we overrule appellants’ challenge to the liability finding
against Gingrich in Jury Question No. 4 and the civil penalties found against him
in Jury Question No. 6.
Previously, we held that Lifechek Rosenberg could not be held liable for
other violations because there was no evidence, other than merely being the
general partner of MDP, that Lifecheck Rosenberg “participated in the
wrongdoing.” The same is true for the pedigree violation. Accordingly, we
32
sustain appellants’ challenge to the liability finding against Lifechek Rosenberg in
Jury Question No. 4 and the civil penalties found against it in Jury Question No. 6.
Conclusion
We reverse the portion of the judgment against Lifechek Rosenberg based
on the liability findings against that entity in Jury Question No. 4 and the civil
penalties found against it in Jury Question No. 6. We affirm the portion of the
judgment against MDP and Gingrich, individually, based on the liability findings
against them in Jury Question No. 4 and the civil penalties found against him in
Jury Question No. 6.
JURY QUESTION NO. 7: AIDING AND ABETTING
In Jury Question No. 7, the jury was asked the following question and given
the following instructions regarding violations of the statute for aiding and abetting
an unlicensed wholesale distributor:
Did any of the defendant aid or abet an unlicensed wholesale
distributor in engaging in the wholesale distribution of Advair?
You are instructed that a “wholesale distributor” means a
person engaged in the wholesale distribution of prescription
drugs, including, but not limited to a manufacturer, repackager,
own-label distributor, private-label distributor, jobber, broker,
manufacturer warehouse, distributor warehouse, or other
warehouse, manufacturer’s exclusive distributor, authorized
distributor of record, drug wholesaler or distributor,
independent wholesale drug trader, specialty wholesale
distributor, third-party logistics provides, retail pharmacy that
conducts warehouse wholesale distribution, and pharmacy
warehouse that conducts wholesale distribution.
33
You are instructed that “wholesale distribution” is the
distribution of prescription drugs to someone other than a
consumer or patient.
You are instructed that “wholesale distribution” means the
distribution of prescription drugs to someone other than a
consumer of patient. The terms does not include intracompany
sales of prescription drugs, which means transactions or
transfers or [sic] prescriptions [sic] between division,
subsidiary, parent, or affiliated or related company that is under
common ownership and control, or any transaction or transfer
between co-license holders of a co-licensed product.
You are instructed that those who engage in intracompany sales
of prescription drugs, which means transactions or transfers of
prescription drugs between a division, subsidiary, parent, or
affiliated or related company that is under common ownership
and control are not required to obtain a wholesale license.
You are instructed that “aid or abet” means to intentionally,
knowingly, actively and substantially aid, promote, assist,
pursue, take part in, further by cooperation in, lend air to or act
in concert with a common plan.
In Jury Question No. 7, the jury found that MDP and Gingrich had violated
this provision, but Lifechek Rosenberg and Lifechek, Inc. had not. In Jury
Question No. 8, the jury found 1 violation each for MDP and Gingrich. And, in
Jury Question No. 9, the Jury assessed a $25,000 civil penalty against each MDP
and Gingrich.
Appellants contend “[t]here is no evidence that either MDP or Gingrich
knew that the unlicensed wholesale distribution of prescription of drugs would
occur if MDP delivered the Advair to Medicine Chest or the Lifechek pharmacies,”
34
and, “[a]t best, the evidence shows MDP may have inadvertently aided Oria in the
wholesale distribution of the Advair.” Specifically, Gingrich contends that he had
no intent to aid Oria in the wholesale distribution of Advair because he did not
know that Oria was acting as an unlicensed whole distributor.
Gingrich testified at trial that he was aware that Oria was not a Texas-
licensed wholesale distributor, and he admitted that he had previously told the
department inspectors that he “would not buy prescription drugs from Alex Oria.”
He further testified that he thought that Oria was a broker for Mercer, which was a
Texas-licensed wholesale distributor, and that he was purchasing the Advair from
Mercer, not Oria. However, the jury was entitled to disbelieve Gingrich’s
testimony that he believed that Oria was merely a broker, especially in light of
testimony from other witnesses who testified that brokers merely facilitate sales,
but do not themselves deliver drugs, as Oria did here. See Miller, 804 S.W.2d at
939 (stating jury is free to believe or disbelieve witnesses’ testimony in whole or in
part).
The evidence shows that (1) Gingrich personally negotiated the transaction
with Oria to purchase the Advair; (2) was personally present when Oria himself
delivered the stolen Advair; and (3) directed his employees to ship the stolen
Advair to Medicine Chest and the Lifecheck pharmacies. After receiving the
Advair directly from Oria, Gingrich received no paperwork or invoice from
35
Mercer, nor did he take any steps to verify Oria’s story that Mercer was the source
of the Advair. Finally, there was evidence from which the jury could have
concluded that Gingrich paid Oria directly, via a $15,600 cashier’s check. Such a
direct payment to Oria undermines Gringrich’s claim that Oria was merely acting
as a broker, not an unlicensed wholesale distributer. As such, we conclude that
there is legally sufficient evidence to support the jury’s findings against MDP and
Gingrich in Jury Question No. 7.
Gingrich also argues that the jury findings against him in Jury Question 7
cannot stand, again arguing that only MDP can be liable for the violation. For the
reasons we discussed above, we again conclude that Gingrich can be held liable
under the aiding and abetting finding because there is legally sufficient evidence
showing that he “personally participated in the wrongdoing,” “was the guiding
spirit behind the wrongful conduct,” and was not just “tangentially involved” in the
wrongful conduct.
Conclusion
Accordingly, we overrule appellants’ challenge to the liability finding
against MDP and Gingrich in Jury Question No. 7 and the civil penalties assessed
against them in Jury Question No. 9.
36
INJUNCTIVE RELIEF
In the final judgment, the trial court granted injunctive relief to the State as
follows:
The Court further ORDERS that a permanent injunction be issued,
restraining and enjoining Defendant MEDICAL DISCOUNT
PHARMACY, L.P.; LIKECHEK ROSENBERG GP, INC.;
LIFECHEK, INC., and BRUCE V. GINGRICH, individually, their
successors, assigns, officers, agents, servants, employees, attorneys,
and any other person in active concert or participation with
Defendants from engaging in the following acts or practices:
a. Receiving in commerce any drug that is stolen and the
delivery or proffered delivery of such drug for payment or
otherwise;
b. Failure to maintain records for receipt and distribution of
prescription drugs, as required by law, and
c. Holding for sale or dispensing stolen drugs.
This injunction was sought and obtained by the State pursuant to Section 43.047 of
the Health & Safety Code, which provides in part:
(a) The commissioner, an authorized agent, or a health authority may
petition the district court for a temporary restraining order to
restrain a continuing violation of Subchapter B or a threat of a
continuing violation of Subchapter B if the commissioner,
authorized agent, or health authority finds that:
(1) a person has violated, is violating, or is threatening to
violate Subchapter B; and
(2) the violation or threatened violation creates an immediate
threat to the health and safety of the public.
(b) A district court, on petition of the commissioner, an authorized
agent, or a health authority, and on a finding by the court that a
37
person is violating or threatening to violate Subchapter B shall
grant any injunctive relief warranted by the facts.
****
(d) The commissioner and the attorney general may each recover
reasonable expenses incurred in obtaining injunctive relief under this
section, including investigative costs, court costs, reasonable attorney
fees, witness fees, and deposition expenses. . . .
TEX. HEALTH & SAFETY CODE ANN. § 431.047 (West 2010).
On appeal, appellants contend that “injunctive relief was not authorized
because there was no ongoing or threatened violation of Subchapter B of the Act.”
The State contends that this complaint about the trial court’s permanent injunction,
made for the first time on appeal, has been waived. Appellants concedes that it did
not object to the injunction at trial, but argues that lack of subject-matter
jurisdiction can be raised for the first time on appeal,3 and that, absent a finding of
a continuing or threatened violation, the Health & Safety Code does not authorize
the trial court to issue an injunction.
However, appellants confuse subject-matter jurisdiction, which involves a
court’s power to act, with its duty to decide correctly. Appellants’ complaint here
is that the trial court erred in granting injunctive relief absent evidence of “an
ongoing or threatened” violation of the statute. This is an argument that the trial
court erred, but not an argument that the trial court lacked subject-matter
3
See Mapco, Inc. v. Carter, 817 S.W.2d 686, 687 (Tex. 1991) (holding that lack of
subject-matter jurisdiction is fundamental error that may be raised for first time at
appellate level).
38
jurisdiction over the cause, the power to act as a court, the power to enter a
judgment at all, or the capacity to act as a court. See Hesser v. Hesser, 842 S.W.2d
759, 764 (Tex. App.—Houston [1st Dist.] 1992, writ denied) (“Just because the
judge had the duty to deny the motion does not mean that he had no jurisdiction to
grant it. Jurisdiction is the power to adjudicate, that is, to grant or deny relief. Lack
of subject matter jurisdiction is the absence of power to make any ruling at all.”);
see also Decker v. Lindsay, 824 S.W.2d 247, 249 (Tex. App.—-Houston [1st Dist.]
1992, orig. proceeding) (holding that void order must exceed court’s authority to
act and not be merely erroneous); State ex rel. Latty, 907 S.W.2d at 485 (setting
out what renders judgment void); In re State, 159 S.W.3d 203, 207 (Tex. App.—
Austin 2005, orig. proceeding) (holding “trial court’s jurisdiction to act does not
simply dissolve if an appellate court later disagrees with that court’s determination
that the [declaratory] relief was necessary and proper.”).
Here, the statute clearly gave the trial court the power to act, i.e., it had
subject matter jurisdiction to issue the injunction. Appellants’ claim that the trial
court acted erroneously in its application of the statute is not jurisdictional, and, as
such, cannot be raised for the first time on appeal. TEX. R. APP. P. 33.1.
Because it was not preserved in the trial court, we overrule appellants’
challenge to the trial court’s grant of injunctive relief.
39
ATTORNEY’S FEES
Pursuant to Section 431.047(d) of the Health & Safety Code, as set forth in
the opinion above, the final judgment awarded the State reasonable and necessary
fees and costs in the amount of $129,677.76. On appeal, appellants argue that “the
attorney’s fees award should be reversed because the Department was not entitled
to injunctive relief.” However, we overruled appellants’ challenge to the trial
court’s grant of injunctive relief. For the same reason, we overrule appellants’
challenge to the attorney’s fees on this ground.
Appellants also argue that there is no evidence to support the judgment’s
award of attorney’s fees and expenses because the State’s evidence on attorney’s
fees was too general to apply the lodestar method in a meaningful manner.
Specifically, appellant’s contend that “the department offered only information
about general categories of work[,]” and “identified no specific tasks and
apportioned the time its lawyers purportedly spent only among general categories.”
In El Apple I, Ltd. v. Olivas, the supreme court explained that generalities
about tasks performed provide insufficient information for the fact finder to
meaningfully review whether the tasks and hours were reasonable and necessary
under the lodestar method. 370 S.W.3d 757, 763 (Tex. 2012). Sufficient evidence
includes, at a minimum, evidence “of the services performed, who performed them
and at what hourly rate, when they were performed, and how much time the work
40
required.” Id. at 764. Because the testimony in El Apple only included the total
number of hours worked and generalities about discovery and the length of trial,
the court remanded for a redetermination of attorney’s fees. Id. at 765. In so
holding, the court stated:
In this case, neither attorney indicated how the 890 hours they spent
in the aggregate were devoted to any particular task or category of
tasks. Neither attorney presented time records or other documentary
evidence. Nor did they testify based on their recollection of such
records. The attorneys instead based their time estimates on
generalities such as the amount of discovery in the case, the number
of pleadings filed, the number of witnesses questioned, and the length
of the trial. While all this is relevant, it provides none of the
specificity needed for the trial court to make a meaningful lodestar
determination. The court could not discern from the evidence how
many hours each of the tasks required and whether that time was
reasonable. Without at least some indication of the time spent on
various parts of the case, a court has little basis upon which to conduct
a meaningful review of the fee award.
Id. at 763.
The supreme court revisited the specificity requirements of evidence to
support attorney’s fees under the lodestar method in Long v. Griffin, 442 S.W.3d
253 (Tex. 2014). In Long, the supreme court characterized the attorney affidavit at
issue as “only offer[ing] generalities”:
It indicates that one attorney spent 300 hours on the case, another
expended 344.50 hours, and the attorneys’ respective hourly rates.
The affidavit posits that the case involved extensive discovery, several
pretrial hearings, multiple summary judgment motions, and a four and
one-half day trial, and that litigating the matter required understanding
a related suit that settled after ten years of litigation. But no evidence
accompanied the affidavit to inform the trial court the time spent on
41
specific tasks. See El Apple, 370 S.W.3d at 763. The affidavit does
claim that 30% of the aggregate time was expended on the assignment
claim (part of which the Griffins prevailed on) and that the assignment
issue was inextricably intertwined with matters that consumed 95% of
the two attorneys' time on the matter. But without any evidence of the
time spent on specific tasks, the trial court had insufficient
information to meaningfully review the fee request. [City of Laredo
v.] Montano, 414 S.W.3d [731,] 736–37 [Tex. 2013)]; El Apple, 370
S.W.3d at 764.
Id. at 255.
In Boyaki v. John M. O’Quinn & Assocs., PLLC, No. 01-12-00984-CV,
2014 WL 4855021, at *15 (Tex. App.—Houston [1st Dist.] Sept. 30, 2014, pet.
filed) (memo. op.), the attorney fee evidence provided:
[S]ince September 15, 2009, I have attended [several hearings],
prepared a Motion for Temporary Injunction, prepared for the hearing.
I have reviewed various drafts of letters and email correspondence to
opposing counsel. I have communicated to my client, The O’Quinn
Law Firm, the status of implementation of the settlement agreement,
reviewed Texas cases on the enforcement of Rule 11 settlement
agreements, reviewed Plaintiffs' First Amended Original Petition,
reviewed Plaintiffs’ Motion for Summary Judgment to Enforce Rule
Settlement with supporting affidavits. I have also had a number of
additional conferences with representatives of my client and co-
counsel. Accordingly, since September 15, 2009, I have spent at least
98 hours in rendering the above-described necessary legal services . . .
in enforcement of the mediated Rule 11 Settlement Agreement.
This Court held that the attorney’s affidavit suffered the same deficiencies as
those in El Apple and Long because it described the attorney’s work “in
generalities.” Id.
42
The attorney’s fees evidence in this case is much more detailed than that
provided in El Apple, Long, or Boyaki. The State presented expert testimony
regarding its attorney’s fees, including the reasonableness and necessity of the
work done on the case, the hours spent, the experience and qualifications of the
timekeepers for the State, and the prevailing hourly rates of each. The State also
submitted an affidavit, a summary of the hours worked and prevailing rates, and a
computer-generated summary of the time records of all of the State’s timekeepers
who worked on the case. The computer generated time summery, entitled
“Summary of Services Provided,” identifies the case by name, each timekeeper by
name and title, a description of each activity, and the hours devoted to that activity
by each timekeeper. The activities are divided into categories such as
“attend/appear at hearing,” “drafting/revising pleadings,” and
“reviewing/researching law.”
Appellants’ claim, however, that the attorney’s fee evidence is nonetheless
insufficient because it does not say which hearings were attended, which pleadings
were revised, and what law was researched. However, nothing in El Apple, Long,
or Boyaki requires such detail. Indeed, El Apple faulted the evidence in that case
because “neither attorney indicated how the 890 hours they spent in the aggregate
were devoted to any particular task or category of tasks.” El Apple, 370 S.W.3d at
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763. Here, the State’s attorney’s fees evidence complies with El Apple by
indicating how long each person spent working on particular categories of tasks.
As such, the State presented sufficient evidence for the trial court to conduct
a meaningful review of the number of hours spent on the case by the State and to
properly apply the lodestar method.
We overrule appellants’ challenge to the attorney’s fees awarded in the
judgment.
CONCLUSION
We reverse the judgment against Lifechek Rosenberg and Lifecheck, Inc.
and render judgment that the State take nothing against them. We also reverse the
judgment against all appellants on the State’s claim for receiving and delivering
adulterated drugs, and render judgment that the State take nothing against any of
the defendants on that claim. We affirm the judgment as to MDP and Gingrich,
individually, except as hereinabove reversed and rendered. We remand the case
for entry of judgment in accordance with this opinion.
Sherry Radack
Chief Justice
Panel consists of Chief Justice Radack and Justices Brown and Lloyd.
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