Appeals Court Eliminates Walmart’s $1.4 Million Penalty in Case Brought by Texas Optometrists

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NEW ORLEANS—In a case that goes back to 1992, when Walmart first began leasing space to Texas optometrists, the U.S. Court of Appeals for the Fifth Circuit decided Thursday, Aug. 14, 2014, to eliminate a $1.4 million penalty that had been levied against the retailing giant for encouraging optometrists to extend their business hours. A jury in a previous hearing found Walmart liable for “setting or attempting to influence . . . office hours of an optometrist,” according to court documents.

“The jury returned a civil penalty award, which the district judge called ‘stunning’ and ‘the highest verdict that’s been reached in this court . . . in a case that is not worthy of the highest verdict.’” As a result, the appeals court, in last week’s decision, stated, “that Texas’s rule on exemplary damages requires us to reverse and vacate the civil penalty awards inasmuch as the plaintiffs neither suffered nor were awarded any underlying damages.”

Since it began leasing space to optometrists in 1992, Walmart used a lease agreement that required optometrists to be open for at least 45 hours per week or risk being fined $200 per day for not doing so. In 1995, the Texas Optometry Board notified Walmart that setting required hours violated the Texas Optometry Act (TOA), which prohibits “control[ling] . . . the practice of an optometrist” by “attempting to influence the . . . office hours of an optometrist,” according to court documents.

Walmart then eliminated the 45-hour requirement and revised its lease to read “[t]he following is the licensee’s representation of the weekly hours of coverage to the patients,” which was followed by a table in which the optometrists could handwrite their hours. The lease further provided that Walmart “shall retain no control whatsoever over the manner and means by which the licensee performs his/her work.”

In 1998, after Walmart revised its lease, the Texas Optometry Board stated in a newsletter addressed to the public at large that leases that even referenced hours violated the TOA. In 2007, the dispute culminated in this suit when Doris Forte, OD, sued Walmart in the United States District Court for the Southern District of Texas for alleged violations of the TOA. In 2009, while the suit was pending, Walmart deleted the hours representation provision from its leases and sent a letter to Texas lessees stating that it would not enforce this provision. The suit, however, went to a jury in August 2010 and the judge instructed the jury that the plaintiffs “do not claim they have suffered any physical or economic damages [and] only seek to recover civil penalties.”

The jury sided with the plaintiffs, awarding them $3,953,000 in civil penalties, the maximum possible under the TOA. The plaintiffs were also awarded $763,854 in attorneys’ fees. Post-verdict, Walmart renewed its motion for a judgment as a matter of law. The district court denied the motion with respect to liability but reduced the civil penalty to $1,396,400, to which the plaintiffs consented.

In the appeal decided last week, a three-judge panel with the Fifth Circuit agreed with the jury’s finding of liability, but reversed and vacated the civil penalty stating that the optometrists “neither suffered nor were awarded any underlying damages.”

Walmart, in a statement following this most recent Aug. 14 decision, said, “Walmart is proud to have independent optometrists provide our customers with access to convenient and quality eyecare. Walmart seeks to maintain a good relationship with each of those optometrists and with the Texas Board of Optometry. We are pleased that the court concluded no civil penalties were warranted. While we disagree that the Texas Optometry Act prohibited Walmart from merely discussing hours of operation with former licensees, we stopped discussing hours of operation with Texas optometrists five years ago.”

One of the attorneys for the plaintiffs, Mark Burgess of Burgess Law Firm PLLC, told VMail: “We’re glad that the court found that Walmart violated the law, but we plan to file a motion to ask the court to reconsider the decision that the doctors are not entitled to any penalties.”