NEW ORLEANS – The Fifth Circuit Court of Appeals has partly affirmed and partly reversed a district court’s decision regarding Wal-Mart's regulation of its optometry doctors’ hours.
The dispute was centered on the Texas Optometry Act (TOA), which prohibits any company from “controlling the practice of an optometrist by attempting to influence the hours” in which they practice. After being notified in 1995 by the Texas Optometry Board that its requirement for in-store optometrists to remain open for 45 hours per week was in violation of the act, Wal-Mart eliminated the condition from its contract, and revised it so that optometrists could set their own hours in each contract.
However, the board continued to oppose even this restriction, claiming that any contract that even mentioned a regulation of hours violated the TOA.
Eventually in 2007, Doris Forte sued Wal-Mart for the alleged violation. She initially attempted to file a class-action lawsuit including 400 other optometrists; however, the district court found only four plaintiffs, Bridget Leesang, David Wiggins, and John Boldan.
The case was tried before a jury in August 2010. Wal-Mart argued that because the provision was not enforced, it should not be considered part of the lease. The plaintiffs argued that the hours outlined in the contract were indeed enforced by Wal-Mart, and were “binding.” The jury did not accept Wal-Mart’s argument, and awarded the maximum civil penalty of $3,953,000 and attorneys’ fees of $763,854 to the plaintiffs. The district court reduced the total award to $1,396,400.
Wal-Mart then filed a motion for the reversal and vacation of the judgment, and after the district court denied its request, the appeal followed.
On appeal, Wal-Mart argued that applying the Optometry Act in its plain text would produce “absurd” results. According to Wal-Mart, if taken in its plain meaning, the TOA ‘s ban on exerting “control” over an optometrist could potentially prohibit someone from making an optometrist keep his or her store clean.
The appellate court rejected this argument, referencing the court’s preference for the plain meaning of legislation, and that the “absurdity clause” is reserved for “truly exceptional cases.”
Affirming the district court’s decision, the Fifth Circuit ruled that a “reasonable jury” could have found that Wal-Mart’s leases were an attempt to control the optometrists’ matter of practice.
However, the court then ruled against the plaintiff, reversing the district court’s award of civil penalties. According to the decision, Chapter 41 of the Texas Civil Practices and Remedies Code eliminates the potential for civil penalties to be awarded in this case.
The Court ruled that the civil penalties awarded to the plaintiffs constituted as “exemplary damages,” which it defined as “any damages awarded as a penalty or by way of punishment, but not for compensatory purposes.” According to Chapter 41, these exemplary damages may only be awarded if damages other than nominal damages are awarded. Because the plaintiffs did not claim any damages for substantial injury or loss, the district court did not award any compensation for anything other than nominal damages. Thus, according to the Civil Practice Code, the plaintiffs were entitled to a maximum penalty of $0.
Although the Optometry Act established a higher maximum compensation amount than $0, the Civil Practices Code says that, when “another law establishes a lower maximum of damages” the court must use the lowest damage cap. Citing this exception, the Fifth Circuit decided that the district court erred in capping the damage amount as anything other than $0.
The appellate court reversed and vacated the district court’s judgment regarding civil penalties.
The case was heard by Chief Judge Carl E. Stewart, Judge E. Grady Jolly and Judge Jerry E. Smith.
Case no. 12-40854.