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Texas Court Concludes Expert is Qualified to Testify that Electrical Transformer Started a Fire

The Texas Court of Appeals was recently asked whether a witness who had no engineering degree could provide expert testimony about the cause of a fire started by an electrical transformer and about the public utility’s duty to maintain the transformer. The Court of Appeals reversed the trial court’s decision to exclude the testimony.

Facts of the Case

Property owners in Houston sued CenterPoint Energy Houston Electric, alleging that CenterPoint’s negligence was responsible for a fire that destroyed a house and a commercial building. The property owners claimed they suffered $2 million in property damage and lost profits as a result of the fire.

CenterPoint maintained a light pole with a transformer between the two structures. The Harris County Fire Marshal determined that a spark from the transformer probably ignited vegetation that started the buildings on fire. The Fire Marshal did not determine the cause of the suspected malfunction that produced the spark.

Texas courts have held that a public utility, like every other business, has a duty to use reasonable care to avoid harming the public. The standard of care that is required is commensurate with the danger posed. Sensibly enough, more dangerous situations require greater care. Texas courts have concluded that whether a utility breached its duty to exercise reasonable care must be established by expert testimony.

To prove that CenterPoint was responsible for the fire, the property owners offered the expert testimony of Michael McGraw. CenterPoint asked the trial court to exclude McGraw’s testimony on the ground that he was not qualified by education or experience to offer opinions about the workings of the transformer, the cause of a fire, or the standards that a utility company should follow to assure the safety of the public.

The trial court agreed with CenterPoint. It excluded McGraw’s opinions and then granted summary judgment in favor of CenterPoint because, without McGraw’s opinions, the property owners could not prove that CenterPoint’s negligence caused the fire. The property owners appealed.

Qualifications of Expert

Texas judges must determine whether an expert witness has actual expertise in the subject about which the expert proposes to testify. General experience in a specialized field does not qualify a witness as an expert. Rather, Texas courts require the expert to have specialized knowledge that is relevant to the subject of the testimony.

Specialized knowledge can come from education, from practical experience, or from a study of technical works. McGraw completed extensive coursework in electrical engineering, although his Bachelor degree is in business administration. During lengthy employment with General Electric and Powercon Corporation, he was responsible for the design, development, and testing of electrical distribution equipment. He also owned and operated his own company that specialized in manufacturing medium-voltage transformers.

McGraw has worked with transformers that are similar to the one owned by CenterPoint since 1978. He has worked exclusively with transformers since 1996. He testified that the same engineering principles apply to all similar transformers.

While McGraw does not have a degree or a license in electrical engineering, the appellate court decided that his extensive knowledge and experience qualifies him to testify as an expert. The court concluded that McGraw is capable of giving relevant testimony that would assist the jury in understanding how a transformer might malfunction.

Standard of Care Testimony

McGraw concluded that at least three safety components on the transformer failed and that those failures caused or contributed to the fire. His expert report opined that a utility exercising ordinary and reasonable care would maintain its equipment in good working order to avoid a failure of those components. He also opined that none of the components that failed were likely to fail if they were installed correctly, inspected, and repaired or replaced if they began to show wear. If the components had been maintained in good working order, McGraw said, it is unlikely that they would have failed.

CenterPoint argued that, notwithstanding those opinions, McGraw was not qualified to testify about the standard of care that applies to an electrical utility. The court rejected CenterPoint’s argument that only someone who has worked in the utility industry is qualified to address the standard of care that utility companies should follow.

The court was satisfied with McGraw’s statement that he relied on industry codes and published standards in forming his opinions. He was sufficiently familiar with the utility’s duty to maintain transformers in good working order to testify that CenterPoint breached that duty.

The Court of Appeals reversed the trial judge’s exclusion of McGraw’s expert testimony. Since summary judgment in CenterPoint’s favor rested on the absence of expert proof, the Court of Appeals reversed the summary judgment. The property owners are now free to present their case to a jury, using McGraw as an expert witness.

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When Expert Opinion Amounts to Speculation

Attorneys do not often serve as expert witnesses, in part because only the judge who presides in a trial is the expert in the law that controls the case. In some cases, however, attorneys do serve as expert witnesses. They do so most often in legal malpractice cases, when they testify about the quality of representation a reasonable lawyer should provide and express opinions as to whether a particular lawyer met that standard.

An attorney was allowed to testify in a Texas malpractice case involving a technology company and its patent lawyers. The Texas Court of Appeals recently ruled, however, that the expert’s testimony was based on speculation rather than facts. Since the testimony failed to establish that the plaintiff was harmed by the alleged malpractice, the plaintiff could not prevail.

Lawsuit Background

Axcess International markets radio frequency identification (RFID) products and services. Axcess improved its technology by creating a “dual-frequency RFID system.” It hired Baker Botts, a Texas law firm, to act as its intellectual property counsel. Baker Botts began filing patent applications for Axcess in 1999. A year later, Axcess’ chief competitor, Savi Technologies, hired Baker Botts to seek patents of its own dual-frequency RFID system.

In 2002, when Savi announced the release of its new product, the Axcess employee who developed its dual-frequency RFID system thought that the Savi product might be using the same technology that Axcess had patented or that pending applications were seeking to patent. Axcess asked its Baker Botts attorney for advice. Axcess alleges that Baker Botts failed to provide the requested assistance.

Axcess then hired a new firm, Haynes and Boone, which wrote to Savi and suggested that Savi might need to license the patents that had been issued to Axcess in order to avoid infringing upon that patent. Savi forwarded the letter to its attorney at Baker Botts, who realized that Baker Botts had represented Axcess in its patent applications. Since a conflict of interest existed, Baker Botts told Savi it would need to have a different firm represent it in the case. Represented by new counsel, Savi advised Axcess that it was not infringing the Axcess patents and therefore would not license them.

A third competitor in the RFID industry, AeroScout, later challenged the validity of Savi’s patents. It based its challenge in part on the claim that Baker Botts should have disclosed Axcess’ patent applications to the patent office when it applied for patents on behalf of Savi.

Apparently in response to AeroScout’s contentions, Axcess hired yet another firm to sue Savi for patent infringement. Savi responded by asking the Patent Office to invalidate Axcess’ patent on the ground that the patented technology had already been patented by others. The Patent Office agreed and Axcess lost its patent. Axcess then sued Baker Botts, alleging that Baker Botts committed legal malpractice and that it breached its fiduciary duty to Axcess during its dual representation of Savi and Axcess.

Expert Evidence on Causation

To win its case, Axcess needed to prove not just that Baker Botts committed malpractice or breached a duty of loyalty, but that its alleged misconduct caused harm. The Texas Court of Appeals held that Axcess introduced no competent evidence to prove that it was harmed by Baker Botts.

Axcess relied on the expert testimony of a patent attorney to establish causation. The attorney testified that if Baker Botts had disclosed to Axcess that it was pursuing patents on behalf of its competitor Salvi, Axcess would have hired counsel that did not have a conflict of interest. The attorney then testified that, with new counsel, Axcess would have initiated an interference proceeding with the Patent Office. Under the law in effect at that time, the party that first invented something (rather than the party that first filed for a patent) was entitled to patent it. An interference proceeding resolves conflicts about entitlements to patents.

The attorney testified that a successful interference proceeding would have caused Salvi’s patent rights to shift to Axcess, placing Salvi’s lucrative government contracts that relied on the patents at risk. That would have placed Axcess in a stronger position to negotiate a resolution with Salvi, which would have benefitted Axcess.

According to the appellate court, the attorney’s expert opinion as to causation rested on (1) his belief that Axcess would have prevailed in its interference proceeding, and (2) his belief that Salvi would have negotiated a resolution to the dispute that would have benefitted Axcess. The court concluded that the attorney’s beliefs amounted to speculation rather than factual evidence.

The court decided that the attorney had no basis for deciding how the patent office would have responded to the interference proceeding. He pointed to no facts, such as similar disputes that the Patent Office had decided, to support his opinion that the Patent Office would have ruled in Axcess’ favor. The fact that the Patent Office ruled in Salvi’s favor with regard to another patent suggested that the attorney’s opinion was not grounded in the specific facts that separate a reasonable conclusion from conjecture.

In addition, the court decided that the attorney’s opinion as to what Salvi would have done if, in fact, Axcess had prevailed in the interference proceeding was entirely speculative. His testimony about what Salvi might have done was, in the court’s view, a conclusory opinion that was not based on fact.

Since Axcess needed expert evidence to prove that it was harmed by the actions of Baker Botts, and since the evidence it produced was based on speculation rather than facts, Axcess was not entitled to prevail. The case is a reminder that no matter how knowledgeable or qualified an expert might be, an expert’s opinion must still be grounded in demonstrable facts before a court will rely upon it.