NEW ORLEANS (CN) - A Texas jury erred in levying $3.95 million in civil penalties against Wal-Mart because the in-store optometrists pressed to stay open longer by the retail giant could not prove they suffered economic damages, the 5th Circuit ruled.
Lead plaintiff Doris Forte filed a class action against the retailer in the Houston Federal Court in 2012, after years of discussion between the Texas Optometry Board and Wal-Mart over alleged violations of the Texas Optometry Act.
Beginning in 1992, when it first began leasing space to Texas optometrists, Wal-Mart used a standard lease agreement that required them to state a projected number of hours their offices would remain open.
Under this agreement, the retailer required optometrists to remain open for at least 45 hours per week, and levied a fine of $200 per day of violation on those who failed to do so.
In 1995, the Texas Optometry Board notified Wal-Mart that setting required hours violated the Texas Optometry Act.
Wal-Mart removed the provision from its lease, but continued to run afoul of the board. In 2003, for instance, the board notified the retailer that it had learned the store had told an optometrist that customers were requesting longer hours.
"The Board warned that, although it was aware that Wal-Mart had also stated 'the ultimate decision regarding the hours and fees for eye examinations are made by the doctors,' even informing optometrists of customer requests for longer hours violated the TOA," court documents say.
These cumulative acts ultimately led to Forte's lawsuit.
A jury later found Wal-Mart liable for "setting or attempting to influence" office hours in violation of the law and awarded $3.95 million in civil penalties. It was the maximum amount possible under the law - $1,000 per day each plaintiff operated under his or her lease.
The trial judge called the award "stunning" and "the highest verdict that's been reached in this case ... in a case that was not worthy of the highest verdict."
A three-judge panel with the 5th Circuit agreed with the jury's find of liability, but reversed and vacated the civil penalty award on August 14.
Writing for the appeals court, Judge E. Grady Jolly said the optometrists "neither suffered nor were awarded any underlying damages."
He concluded the trial judge erroneously ruled that Chapter 41 of the Texas Civil Practices and Remedies Code did not apply in refusing any of the civil penalties.
"Because civil penalties under the TOA constitute 'exemplary damages' under Chapter 41, and because the plaintiffs have acknowledged that non-nominal damages were not awarded, Chapter 41 eliminates the award of civil penalties unless some exception to Chapter 41 applies," the 13-page opinion stated.
Jolly also concluded the trial court incorrectly applied Chapter 41's lower damage cap exception.
"Chapter 41's section 41.004 caps damages for each plaintiff's claim at zero, because no plaintiff received non-nominal damages that would have in turn permitted any award of exemplary damages," he wrote. "By contrast, the TOA caps civil penalties at '$1,000 for each day of a violation.' Because the TOA does not establish a lower damage cap than Chapter 41, Chapter 41's lower damage cap exception does not apply."
However, Jolly disagreed with Wal-Mart's invoking of the common law absurdity canon, which calls for not using the plan language of the law when it "produces absurd results." Wal-Mart argued that if the TOA was applied literally, it would not be allowed to order the tenant to keep their store clean. Wal-Mart argued that, as a result, there must be a link between the "attempt to control" and an attempt to control the optometrist's professional judgment.
"Wal-Mart was on notice that the TOA prohibited setting or attempting to influence office hours," the opinion stated. "But Wal-Mart, a sophisticated party, contracted with optometrists nonetheless. Given that it was on notice of the TOA when it began contracting with optometrists, Wal-Mart's liability was not 'patently nonsensical.'" (
Randy Hargrove, Wal-Mart's Director of National Media Relations, said the company is "pleased that the court concluded no civil penalties were warranted" in this case."Wal-Mart is proud to have independent optometrists provide our customers with access to convenient and quality eye care," he said Monday. "Wal-Mart seeks to maintain a good relationship with each of those optometrists and with the Texas Board of Optometry. While we disagree that the Texas Optometry Act prohibited Wal-Mart from merely discussing hours of operation with former licensees, we stopped discussing hours of operation with Texas optometrists five years ago."