"Tort Reform On Steroids"?
By John Council, Texas Lawyer05/16/2005
When Steve Wolens left his Texas House of Representatives office for the last time in January 2005, he thought he might never return to the state Capitol building. But a few weeks ago, there he was again.
The reason for his hasty return was the committee substitute for S.B. 237, a bill he believes would have changed the law retroactively. Although the bill, which dealt with funeral home regulation, was scuttled, it would have significantly threatened the viability of a class-action suit Wolens filed three years ago, he says.
So the Baron & Budd partner, who spent 24 years as a Democrat in the Texas House, became an impromptu lobbyist.
"I walked the halls of the Senate and the House side," Wolens says. "I sat on all the hard chairs and waited my turn to explain what was going on."
Wolens fears that his late-April visits to the Capitol won't be his last. What he calls "tort reform on steroids" may become a new front in litigating some plaintiffs' cases, he says _ protecting clients' suits in the courthouse as well as in the state House.
"It's one thing to change the rules and have caps and make it difficult to get into the courtroom. It's another to undo the law," Wolens says.
In general, funeral homes offer customers packages that include items such as flowers, placement of newspaper obituaries and musicians (known as cash-advance items), which the funeral home obtains from third parties. By state and federal law, funeral homes are required to disclose to purchasers the markup value they charge for those items obtained from third parties.
What the committee substitute for S.B. 237 does is change the definition of cash-advance items, leaving less interpretation as to what qualifies. The new definition lists specific items and makes state law the same as the Federal Trade Commission (FTC) rules on cash-advance items. The bill inserts that new language into 651.001 of the Texas Occupations Code.
Wolens filed Hijar, et al. v. SCI Texas Funeral Services Inc. in 2002 on behalf of three plaintiffs. In Hijar, the plaintiffs allege that SCI-owned funeral homes obtained what the plaintiffs consider cash-advance items (third-party services) and re-sold those services to the plaintiffs at a higher rate without disclosing the funeral home's markups to the plaintiffs, as required by 651.001 of the Texas Occupations Code and Federal Trade Commission Regulation 42260. On April 15, Javier Alvarez, judge of El Paso County Court-at-Law No. 3, certified Hijar as a class action. Wolens also has a similar class action pending in California.
A lobbyist representing SCI, the company Wolens' clients sued in El Paso County Court-at-Law No. 3, maintains that the funeral industry's support of S.B. 237 will not affect the suit filed by Wolens' clients. It is not retroactive and does nothing more than "clarify" the law, the lobbyist says.
"It [the bill] didn't have anything to do with his lawsuit," says Johnnie B. Rogers, an Austin lobbyist who represents SCI. "It simply made it abundantly clear what the law is and what it always has been."
Although Wolens says the bill changes the definition of cash-advance items retroactively, Rogers maintains that the funeral home industry is not trying to kill his suit by pushing the committee substitute for S.B. 237.
"We weren't trying to decide his lawsuit," Rogers says. "It's common sense that you cannot impact a pending lawsuit with legislation. That's unconstitutional on its face, and nobody understands that better than the Legislature."
Cash-Advance Items
But there's no dispute that Hijar and S.B. 237 tackle the same controversy: What constitutes "cash-advance items" _ materials and goods that a funeral home obtains from a third party and sells to customers at a marked up price as part of a funeral plan?
Section 651.001 of the Texas Occupations Code and Federal Trade Commission Regulation 42260 are laws put in place to protect the interests of consumers who have a short time to make up their minds about funeral plans and are in the process of grieving, Wolens says.
Last year, Judge Alvarez granted summary judgment in favor of the plaintiffs in Hijar by finding that the defendant had violated the disclosure rules set out in the Texas Occupations Code and the FTC regulation.
Joe Hood, a partner in El Paso's Scott, Hulse, Marshall, Feuille, Finger & Thurmond who is defending SCI in Hijar, says his client has done nothing wrong. And he believes Alvarez got the law wrong in his ruling _ a decision that troubles SCI and many of their competitors.
"Judge Alvarez has misconstrued the Texas rule as well as the Federal Trade Commission rules," Hood says.
That's why SCI is advocating a change to the Occupations Code to ensure that such a decision doesn't happen again. Hood says he even went to Austin to testify at a Senate Business and Commerce Committee hearing in support of S.B. 237.
"The existing legislation was intended to really say, "This is what the law is _ we're not changing it _ but this is what the law is,' " Hood says.
Hood says that items such as a casket _ which is one of the items the plaintiffs claim is a cash-advance item _ were never supposed to be considered cash-advance items.
"Funeral homes get lots of things from third parties; they're not manufacturers," Hood says. "If they chose to sell things at retail, the good is simply not a cash-advance item."
What the committee substitute to S.B. 237 did was change what the "original intent" of the Legislature was to the definition of "cash advance items" _ which was passed in 1987, Wolens says. Items such as flowers would be cash-advance items under the bill's proposed definition, but caskets would not be.
Changing the legislative intent is a very clever way to make the law retroactive, Wolens says.
"I've never seen someone try to establish, 20 years after the fact, the intent of the Legislature," Wolens says.
The committee substitute to S.B. 237 also lists a new definition of what cash-advance items are, Wolens says. The bill makes some sections of the legislation effective on Sept. 1, 2005, but not the new definition of "cash-advance items," Wolens says.
Hood doesn't believe the bill is retroactive. "It may impact the litigation, and it might not," Hood says. "But people in the industry need certainty."
Pulled Down
Before state Sen. John Carona, R-Dallas, introduced the committee substitute to S.B. 237 on the floor of the Senate on May 5, Wolens had already spoken with many senators about his concerns that the bill was retroactive.
So Carona's first move in introducing the bill on the floor was damage control.
"We have an amendment that will . . . take out any hint of retroactivity," Carona said during the floor debate on the bill.
But by then, many of the senators were already angry, because they felt they'd been misled by the bill's supporters.
Some, such as state Sen. Leticia Van De Putte, D-San Antonio, a member of the Senate Business & Commerce Committee, felt she was deceived by lobbyists who told her the bill was not retroactive and they didn't "deserve to have their issue up on the Senate floor."
State Sen. Rodney Ellis, D-Houston, was also offended during the floor debate.
"Just the idea that the industry brought this bill forward under the pretense of trying to clean up the industry when I really think they were trying to clean up a lawsuit, I just think this bill ought to stay in the graveyard," Ellis said.
Carona subsequently pulled the bill down from consideration. He did not return a telephone call seeking comment before presstime on May 12.
But in an interview after the debate, Van De Putte says the funeral home issue was close to her heart, as she had just participated in making funeral arrangements for her sister-in-law and her father-in-law weeks earlier. Both of the funeral homes she dealt with were upfront about the costs her family would be charged and seemed to follow the law, she says.
"I know what families go through," Van De Putte says.
Van De Putte and other senators listened to Wolens and his concerns about the industry-backed bill.
"And my feeling was, if they were misrepresenting the facts to a Senate committee under oath, what must they have done to consumers?" Van De Putte says.
Van De Putte says she gathered 11 signatures of senators who opposed the bill _ enough to block its consideration for any further floor debate.
"We've had a funeral on 237," Van De Putte says. "It's done."
