© 2015 The Texas Lawbook.
By Mark Curriden
(Jan. 19) – The Fifth District Court of Appeals has tossed a $10.7 million jury verdict in a civil case in which a North Dallas neurologist accused a fellow physician and a business associate of breaching their fiduciary duties in their joint ownership and operation of two medical imaging centers in Plano.
The Dallas appeals court ruled that the trial judge made critical errors during the trial that unfairly and negatively impacted the jury’s decision against them.
Dr. Erwin Cruz accused two co-investors – Dr. Michael Taba and Mehrdad Ghani – of negligence and fraud in the management and eventual dissolution of two medical facilities, including North Dallas Medical Imaging. Cruz claimed his partners kept information from him about the dire financial situation of the centers.
Leaders in the medical and legal communities have closely monitored the litigation because, they say, there are scores of similar business disputes pending throughout Texas that pit doctors against doctors when their jointly-owned private medical centers struggle financially.
In 2012, a Dallas jury ruled in favor of Cruz, awarding him $2.9 million in actual damages and $7.8 million in punitive damages. The judge, citing state laws capping punitive damages, later reduced the entire judgment to $4.7 million.
Ghani and Taba appealed and asked for a new trial.
The appeals court, in a 19-page opinion issued last week, said the judge wrongly told jurors that as a matter of state law Cruz should be considered a partner – not just an investor – in the business. The appellate judges said such a decision was a question of fact that should have been decided by the jury – not the judge.
“If the jury finds that Cruz was not a partner, it eliminates most of his monetary claims in the case,” said Strasburger & Price partner Michael Jung, who represents Ghani.
“We find that more than a scintilla of probative evidence shows Cruz actively participated in the decision to dissolve NDMI, with knowledge of facts concerning the challenges facing outpatient imaging centers,” Justice Molly Francis wrote for the unanimous court.
“The trial court’s ruling precluded the jury from considering whether Cruz’s actions waived any breach of fiduciary duty related to NDMI’s dissolution,” Justice Francis said. “We conclude the error was harmful.”
Jung said his client looks forward to the opportunity to present his side of the case to a new judge and jury.
“We think there is plenty of evidence that Cruz knew exactly what was happening,” Jung said. “He had access to all the books and went to all the meetings. These two issues or mistakes infected all the other aspects of the trial.”
“We are pleased that the court of appeals reversed the erroneous trial court judgment and appropriately recognized the trial court’s pivotal legal error – improperly construing key terms of a partnership agreement – infected the entire trial process,” Mesches said in a written statement. “As the court of appeals observed, improper oral instructions to the jury and a defective jury charge based on this ruling limited cross-examination, impacted the case presentation, and shaped the evidence the jury heard.”
The Texas Lawbook was unsuccessful in obtaining a comment from the lawyers for Cruz.
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