The respondent (A.M.A.) was deprived of oxygen while his mother was in labor and was diagnosed with cerebral palsy after birth. A lawsuit ensued, and a jury awarded a substantial amount for A.MA.'s future healthcare expenses. The trial court structured the award to consist of five periodic payments to be released on A.M.A.’s fourth through eighth birthdays and a lump-sum payment of the remaining $7.3 million dollars to be paid out afterward through a special-needs trust. In the event of A.M.A.'s death, the special-needs trust mandated that any remaining principal and income in the trust revert to his heirs (his parents).
The Supreme Court granted the defendant’s petition for review of the periodic payment award.
In Columbia Valley Healthcare Sys. v. A.M.A. No. 20-0681 (Tex. 2022), the Texas Supreme Court reversed and remanded the part of the judgment dealing with the structure of the periodic payment award.
Tex. Civ. Prac. & Rem. Code § 74.503 allows a court to make an order for a damages award to be paid out in periodic payments. The statute provides that payments are to be made to the recipient of future damages at defined intervals and that such periodic payments, other than future loss of earnings, terminate on the death of the recipient (at 7).
The Texas Supreme Court noted that a trial court is not unconstrained in structuring a periodic-payment award. A trial court must rely on and point to probative evidence regarding its disposition (at 11).
The Court held that there was nothing in the lower court decisions that justified the periodic payment structure ordered by the trial court. The Texas Supreme Court identified three key and interrelated problems with the lower courts’ ordered periodic payment structure (at 11):
The Court noted that the trial court's periodic payments order contradicted the jury's verdict. By only requiring the defendant to make periodic payments up to A.M.A.'s eighth birthday, the trial court contradicted the jury findings, which awarded a far larger amount to last until his eighteenth birthday and proceeded to assume at least some expenses beyond that time (at 11-12).
The lump-sum requirement to the special needs trust violated the statute's requirement that periodic payments, other than future loss of earnings, terminate on the death of the recipient. Under the terms of the judgment, the balance of the special-needs trust would not be restored to the defendant if it is not used for A.M.A.'s medical expenses; instead, it would revert to A.M.A.'s parents (at 12).
In addition, the Supreme Court held that it was an abuse of discretion to impose a lump-sum payment without evidence supporting the need for an immediate payment of a lump-sum amount (at 13).
While the statute authorizes a trial court to order only part of the award to be paid in periodic payments, a particular kind of evidence is required to unlock that discretion. For example, such an award may be made if the record shows that a lump-sum payment is warranted to meet expenses expected soon after trial, or if there is evidence that specific amounts can be expected to occur but in irregular patterns. Here, there was no evidence in the record to justify why any amount should be extracted from the periodic-payment amounts and made payable as a lump sum (at 13).