IN THE SUPREME COURT OF TEXAS

IN THE SUPREME COURT OF TEXAS

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No. 04-0452

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Robert Low, D.O. and = Stephen=20 Smith, M.D., Petitioners,

Thomas J. Henry and = The Law=20 Offices of Thomas J. Henry, Respondents

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On Petition for Review from = the

Court of Appeals for the Thirteenth = District of=20 Texas

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Argued February=20 15, 2005

Justice Wainwright delivered = the opinion=20 of the Court.

Texas follows=20 a =93fair notice=94 standard for pleading, in which courts assess the = sufficiency of=20 pleadings by determining whether an opposing party can ascertain from = the=20 pleading the nature, basic issues, and the type of evidence that might = be=20 relevant to the controversy. See Tex. Dep=92t of Parks & Wildlife = v.=20 Miranda, 133 S.W.3d 217, 230 (Tex. 2004); Horizon/CMS Healthcare = Corp. v.=20 Auld, 34 S.W.3d 887, 896-97 (Tex. 2000); Boyles v. Kerr, 855 = S.W.2d=20 593, 601 (Tex. 1993); see also Tex. R. Civ. P. 47(a). = However, the=20 actual facts and evidence of a specific case limit this relatively = liberal=20 standard. Chapter 10 of the Texas Civil Practice and Remedies Code = requires a=20 pleading=92s signatory to certify that he or she conducted a reasonable = inquiry=20 into the allegations and concluded that each allegation or other factual = contention in the pleading has or is likely to have evidentiary support. = Because=20 the attorney who filed the petition in this case obtained and directed = the=20 review of evidence that disproved some of the allegations pled against = some of=20 the defendants, the trial court correctly found that the attorney = violated=20 Chapter 10. However, we hold that the trial court abused its discretion = in not=20 providing a sufficient basis to support the imposition of a $50,000 = penalty. We=20 reverse the court of appeals=92 judgment and remand the case to the = trial court=20 for proceedings consistent with this opinion.

I. Factual and Procedural Background

On = November=20 20, 1999, Henry White was admitted to Columbia North Bay Hospital after=20 suffering a stroke. Dr. Stephen Smith treated White in the emergency = room for=20 less than one hour. Dr. Robert Low cared for him for four days before = White was=20 transferred to another hospital. White was comatose at the time of the = transfer.=20 He died in December 1999.

On = January=20 31, 2002, Joyce White (both individually and as representative of her = husband=20 Henry White=92s estate) sued the alleged manufacturers, designers, and=20 distributors of the drug known as Propulsid,[1] Coastal Bend = Hospital, Inc.=20 d/b/a Columbia North Bay Hospital, eight physicians,[2] and nurse = Donna=20 McMahon for damages flowing from Henry White=92s death. Although most of = the=20 claims involved the drug Propulsid, some alleged that the physicians and = hospital were negligent in Henry White=92s medical treatment.

Attorney=20 Thomas J. Henry represented Joyce White when he filed the petition. His = office=20 received copies of Henry White=92s medical records months before he = filed the=20 petition. Henry filed a motion to withdraw as counsel on the same day he = filed=20 the petition. Henry continued to represent Joyce White until the trial = court=20 granted the motion to withdraw on May 6, 2002.

On = May 28,=20 2002, Dr. Smith filed a motion for sanctions against Joyce White and = Henry for=20 alleged violations of Texas Rule of Civil Procedure 13 and chapters 9 = and 10 of=20 the Texas Civil Practice and Remedies Code. Dr. Low filed the same = motion.[3] Both physicians = argued that=20 none of the medical records from the hospital at which the physicians = treated=20 White contained any reference to either doctor having prescribed or = provided=20 Propulsid to White. On June 10, Joyce White nonsuited the case. The = physicians=92=20 motions for sanctions remained pending.

The = trial=20 court held a hearing on the physicians=92 motions on July 30, 2002. = Henry did not=20 attend or testify but appeared through counsel. On July 31, 2002, the = trial=20 court granted the motions and ordered Henry to pay $25,000 in sanctions = on each=20 motion, for a total of $50,000. On August 2, 2002, the trial court = entered a=20 revised judgment that incorporated findings of fact and conclusions of = law. On=20 August 26, 2002, Henry filed a motion for new trial and a motion to = vacate,=20 modify, correct, or reform the sanctions order. On September 23, 2002, = Henry=20 filed a supplemental motion. On October 15, 2002, the trial court held a = hearing=20 on Henry=92s motions. After hearing more testimony, including Henry=92s, = the trial=20 court ultimately denied admission of all additional evidence and denied = Henry=92s=20 motion to modify the judgment. Henry filed a motion to reconsider, = challenging=20 the adequacy of the trial court=92s findings of fact and conclusions of = law for=20 the first time. The trial court denied this motion and rejected as = untimely all=20 arguments not contained in the original motion for new trial and motion = to=20 vacate, modify, correct or reform the judgment as untimely. Henry = appealed.

An = en banc=20 court of appeals reversed, holding that because the allegations against = the=20 physicians were made in the alternative, sanctions under chapter 10 of = the Texas=20 Civil Practice and Remedies Code were inappropriate. 132 S.W.3d 180, = 187. The=20 court also held that the physicians=92 motions did not support sanctions = under=20 Chapter 10 for unrelated prior litigation and that the = trial court=92s order=20 failed to meet the specificity requirements of Chapter 10. Id. at = 187=9688.=20 The dissenting justices argued that the trial court did not abuse its = discretion=20 and that Henry waived his other complaints. Id. at 190=9691. The = physicians=20 petitioned this Court for review.

II. Applicable Law and Standard of Review

We = review the=20 imposition of sanctions here under the same standard we review sanctions = under=20 Rule 13=97abuse of discretion. See Am. Flood Research, Inc. v. = Jones, 192=20 S.W.3d 581, 583 (Tex. 2006); Cire v. Cummings, 134 S.W.3d 835, = 838 (Tex.=20 2004). An appellate court may reverse the trial court=92s ruling only if = the trial=20 court acted without reference to any guiding rules and principles, = such=20 that its ruling was arbitrary or unreasonable. Cire, 134 S.W.3d = at=20 838-39. To determine if the sanctions were appropriate or just, the = appellate=20 court must ensure there is a direct nexus between the improper conduct = and the=20 sanction imposed. Spohn Hosp. v. Mayer, 104 S.W.3d 878, 882 = (Tex.=20 2003) (citing TransAmerican Natural Gas Corp. v. Powell, 811 = S.W.2d 913,=20 917 (Tex. 1991)). Generally, courts presume that pleadings and other = papers are=20 filed in good faith. GTE Commc=92ns Sys. Corp. v. Tanner, = 856 S.W.2d=20 725, 730 (Tex. 1993). The party seeking sanctions bears the burden of = overcoming=20 this presumption of good faith. Id. at 731.

Chapters 9=20 and 10 of the Texas Civil Practice and Remedies Code and rule 13 of the = Texas=20 Rules of Civil Procedure allow a trial court to sanction an attorney or = a party=20 for filing motions or pleadings that lack a reasonable basis in fact or = law.=20 Chapter 9 of the Texas Civil Practice and Remedies Code only applies in=20 proceedings in which neither Rule 13 nor Chapter 10 applies. Tex. Civ. Prac. & Rem. Code = =A7=20 9.012(h). Rule 13 authorizes the imposition of the sanctions listed in = Rule=20 215.2(b), which only provides for a monetary penalty based on expenses, = court=20 costs, or attorney=92s fees. Because the trial court ordered Henry to = pay $50,000=20 in penalties not based on expenses, court costs, or attorney=92s fees, = and because=20 the trial court=92s written order specifically orders the penalty = pursuant to=20 chapter 10 of the Texas Civil Practice and Remedies Code, we review the = trial=20 court=92s order in light of chapter 10. Chapter 10 provides that:

The=20 signing of a pleading or motion as required by the Texas Rules of Civil=20 Procedure constitutes a certificate by the signatory that to the = signatory=92s=20 best knowledge, information, and belief, formed after reasonable = inquiry:

(1)=20 the pleading or motion is not being presented for any improper purpose,=20 including to harass or to cause unnecessary delay or needless increase = in the=20 cost of litigation;

(2)=20 each claim, defense, or other legal contention in the pleading or motion = is=20 warranted by existing law or by a nonfrivolous argument for the = extension,=20 modification, or reversal of existing law or the establishment of new = law;

(3)=20 each allegation or other factual contention in the pleading or motion = has=20 evidentiary support or, for a specifically identified allegation or = factual=20 contention, is likely to have evidentiary support after a reasonable = opportunity=20 for further investigation or discovery; and

(4)=20 each denial in the pleading or motion of a factual contention is = warranted on=20 the evidence or, for a specifically identified denial, is reasonably = based on a=20 lack of information or belief.

Tex. Civ. Prac. & Rem. Code = =A7=20 10.001. Under Section 10.001, the signer of a pleading or motion = certifies that=20 each claim, each allegation, and each denial is = based on=20 the signatory=92s best knowledge, information, and belief, formed after = reasonable=20 inquiry. The statute dictates that each claim and each allegation be=20 individually evaluated for support. Id. The fact that an = allegation or=20 claim is alleged against several defendants=97so-called =93group = pleadings=94=97does not=20 relieve the party from meeting the express requirements of Chapter 10. = Each=20 claim against each defendant must satisfy Chapter 10.

Likewise,=20 alternative pleading under Texas Rule of Civil Procedure 48 does not = excuse=20 noncompliance with Chapter 10. Pleading in the alternative allows = multiple=20 allegations, which may even conflict, to be alleged against a defendant, = but=20 there still must be a reasonable basis for each alternative allegation. = Pleading=20 in the alternative does not permit alleging a claim with no reasonable = basis in=20 fact or law =93in the alternative=94 of a claim that does have support. = That is=20 simply not permitted by Texas law. See Tex. Civ. Prac. & Rem. Code=20 =A7 10.001. Each allegation and factual contention in a = pleading or=20 motion must have, or be likely to have, evidentiary support after a = reasonable=20 investigation. Id.

The = language=20 of section 10.001 of the Texas Civil Practice and Remedies Code tracks = much of=20 the language in Federal Rule of Civil Procedure 11(b):

Representations=20 to Court. By presenting to the court (whether by signing, filing, = submitting, or=20 later advocating) a pleading, written motion, or other paper, an = attorney or=20 unrepresented party is certifying that to the best of the person=92s = knowledge,=20 information, and belief, formed after an inquiry reasonable under the=20 circumstances,-- &nb= sp; &nbs= p;=20 (1) it is not being presented for any improper purpose, such as to = harass or to=20 cause unnecessary delay or needless increase in the cost of = litigation;

(2)=20 the claims, defenses, and other legal contentions therein are warranted = by=20 existing law or by a nonfrivolous argument for the extension, = modification, or=20 reversal of existing law or the establishment of new law;

(3)=20 the allegations and other factual contentions have evidentiary support = or, if=20 specifically so identified, are likely to have evidentiary support after = a=20 reasonable opportunity for further investigation or discovery; and

(4)=20 the denials of factual contentions are warranted on the evidence or, if=20 specifically so identified, are reasonably based on a lack of = information or=20 belief.

Although the=20 text of Rule 11 does not specify that each claim, allegation, and = denial=20 be based on the signatory=92s best knowledge, information, and belief, = formed=20 after reasonable inquiry, Federal Rule of Civil Procedure 8(e), which = allows=20 pleading in the alternative, specifically subjects all such pleadings to = the=20 requirements of Rule 11. See Osborn v. Haley, __ U.S. __, __ n.6 = (2007)=20 (noting that =93subject to Rule 11 obligations, parties may plead claims = or=20 defense [sic] =91alternately or hypothetically=92=94). Neither Rule 8 = nor Rule 11=20 permits a plaintiff =93to intentionally ignore relevant evidence in = order to=20 assert unfounded claims.=94 Tibor Mach. Prods., Inc. v. = Freudenberg-NOK Gen.=20 P=92ship, 967 F. Supp. 1006, 1014 (N.D. Ill. 1997).

The = physicians argue that by filing the pleading in this case, Henry = certified that=20 to the best of his knowledge, information, and belief, the factual = contentions=20 in the pleading had or were likely to have evidentiary support. A = reasonable=20 inquiry into the allegations would have proven otherwise. See = Tex. Civ. Prac. & Rem. = Code=20 =A7 10.001(3). White=92s medical records, which were in Henry=92s = possession=20 before he filed the lawsuit, indicated that neither physician ever = prescribed or=20 administered the drug to White. The physicians argue that Henry violated = Chapter=20 10 by alleging that they prescribed and administered Propulsid in spite = of the=20 information to the contrary in White=92s medical records. We agree with = the=20 physicians.

Undeniably,=20 the petition focuses on Propulsid, a drug used to treat gastric reflux. = The=20 first sentence of the fact section of the petition summarizes, =93The = Plaintiffs=20 are victims of the Defendants=92 decision to manufacture, market, = design, promote,=20 and/or distribute [Propulsid].=94 The petition claims that Johnson & = Johnson,=20 Janssen Pharmaceutica, and Janssen Research Foundation were negligent, = negligent=20 per se, and strictly liable for the defective design, marketing, = manufacture,=20 and distribution of the drug and for the violation of specified statutes = and=20 regulations. The petition also includes fraud and misrepresentation = claims=20 against Johnson & Johnson, Janssen Pharmaceutica, and Janssen = Research=20 Foundation regarding the safety and efficacy of the drug. The petition = further=20 alleges that collectively the =93defendants=94 breached implied and = express=20 warranties. Finally, the petition makes the following sixteen = allegations of=20 negligence against the =93Defendant Physicians and Hospital=94=97eight = physicians and=20 a hospital:

a. =20 In failing to weigh the substantial risks involved in prescribing the = drug=20 against its potential benefits, if any;

b. =20 In failing to try alternate treatments such as antacids and gastric acid = reducing agents before prescribing the drug;

c. =20 In failing to advise the Plaintiffs about changes in lifestyle before=20 prescribing the drug;

d. =20 In failing to obtain a careful history of the Plaintiffs and in = prescribing the=20 drug in the presence of underlying cardiac conditions and other = conditions or=20 family history that would preclude the use of the drug;

e. =20 In failing to determine the Plaintiffs=92 medications and in prescribing = the drug=20 along with contraindicated medications;

f. =20 In failing to perform ECG monitoring at baseline and in failing to refer = to=20 prior ECGs performed on the Plaintiffs;

g. =20 In failing to warn or adequately warn the Plaintiffs concerning the=20 contraindications, warnings; precautions, adverse reactions, and drug=20 interactions associated with the use f [sic] the drug;

h. =20 In failing to advise the Plaintiffs concerning any significant changes = in the=20 patient package inserts and Physicians=92 Desk Reference;

i. =20 In failing to advise the Plaintiffs concerning the contents of FDA = warnings and=20 =93Dear Doctor=94 letters;

j. =20 In failing to advise the Plaintiffs concerning the reasons for = withdrawal of the=20 drug from the market;

k. =20 In failing to warn the Plaintiffs concerning abnormal EGGs [sic] and = prolonged=20 QTC intervals;

l. =20 In failing to properly diagnose the cardiac conditions caused by the = drug;

m. =20 In failing to properly read and interpret the Plaintiffs=92 ECGs;

n. =20 In failing to administer the proper treatment for the cardiac conditions = caused=20 by the drug;

o. =20 In failing to discontinue the drug; or

p. =20 In failing to continue to monitor the Plaintiffs, including ECG = monitoring,=20 electrolyte monitoring, prescription drug monitoring, and cardiac = condition=20 monitoring.

In six=20 places=97paragraphs a, b, c, d, e, and o=97the petition alleges that = Drs. Low and=20 Smith provided or prescribed the drug to White. The other paragraphs = allege=20 negligent conduct other than prescribing or providing Propulsid to = White.

However, Drs.=20 Low and Smith presented undisputed evidence at the trial court that = neither=20 doctor ever prescribed or administered Propulsid to White and that a = pre-suit=20 review of White=92s medical records would have confirmed that fact. Dr. = Low filed=20 an affidavit with his motion for sanctions swearing that =93[a]t no time = during=20 [his] involvement with this patient did [he] ever prescribe, provide, = administer=20 or order Propulsid for Mr. White.=94 Dr. Smith filed an affidavit making = the same=20 statement with his motion. At the July 30, 2002 hearing on the motions, = the=20 physicians again testified that they did not administer or prescribe = Propulsid.=20 The testimony established that Dr. Smith was White=92s doctor for less = than an=20 hour in the emergency room, and Dr. Low, an internal medicine doctor at = Columbia=20 North Bay, provided care to White for four days after he arrived at = Columbia=20 North Bay and before his transfer to a facility in Corpus Christi. Dr. = Low also=20 confirmed that =93anyone familiar with reviewing a medical record could = easily=20 have confirmed [Dr. Low=92s] testimony and the fact that [Dr. Low] had = nothing to=20 do with Propulsid had they simply reviewed the record.=94 Dr. Smith = testified that=20 White=92s medical record contains no reference to Dr. Smith=92s ever = prescribing or=20 administering Propulsid to White. In fact, Henry does not dispute Dr. = Low=92s=20 testimony that White had not been taking Propulsid approximately two = weeks=20 before his treatment by the physicians. Dr. Smith similarly testified = that he=20 was informed that White had not been taking Propulsid =93for some = time=94 before his=20 arrival at the Columbia North Bay emergency room and his subsequent = treatment by=20 Drs. Low and Smith.

The = evidence=20 at the hearing supports the trial court=92s conclusion that:

Based upon=20 the totality of the evidence admitted during the hearing on the Motions = for=20 Sanctions, each and all of the allegations brought against Drs. Low and = Smith,=20 and therefore the lawsuit brought against these physicians, did not, on = January=20 31, 2002, and do not now, have evidentiary support; nor were they on = January 31,=20 2002, likely to have evidentiary support after a reasonable opportunity = for=20 further investigation . . . .

Under chapter=20 10 of the Texas Civil Practice and Remedies Code, the physicians were = not=20 required to specifically show bad faith or malicious intent, just that = Henry=20 certified he made a reasonable inquiry into all of the allegations when = he did=20 not and that he certified that all the allegations in the petition had=20 evidentiary support, or were likely to have evidentiary support, when = some=20 allegations did not. We conclude that the trial court did not abuse its=20 discretion in concluding that Henry failed to meet the standard in = Chapter=20 10.

III. Notice

Henry argues=20 that the trial court violated his rights to due process and due course = of law=20 because he was given inadequate notice of the subject matter of the = hearing on=20 the physicians=92 motions for sanctions. First, he argues that he only = received=20 notice of the hearing six days before the hearing. Second, he argues = that he had=20 no notice that sanctions under chapter 10 of the Texas Civil Practice = and=20 Remedies Code were being sought and that his conduct in other cases = could be at=20 issue at the hearing. Finally, Henry complains that the trial court=92s = findings=20 were insufficient to support sanctions under chapter 10 of the Civil = Practice=20 and Remedies Code. We overrule Henry=92s complaints.

Section=20 10.003 of the Texas Civil Practice and Remedies Code requires a court to = provide=20 the subject of a sanctions motion with =93notice of the allegations and = a=20 reasonable opportunity to respond.=94 Both physicians=92 motions = specifically based=20 sanctions on Chapter 10 and contain a certificate of service stating = that the=20 motions were sent to Henry in accordance with the Texas Rules of Civil = Procedure=20 on May 29, 2002. Henry did not object, made no argument, and provided no = evidence that he did not receive the physicians=92 motions for sanctions = at the=20 July 30, 2002 hearing. Only later, at a hearing on Henry=92s motion for = new trial=20 and motion to vacate, modify, correct, or reform the order does Henry = suggest=20 that he did not receive adequate notice of the July 30, 2002 hearing. In = Henry=92s=20 brief to the court of appeals, he admits that he received notice of the = hearing=20 six days before the hearing. Even assuming that six-day notice was the = first=20 notice he received, the proper method to preserve his notice complaint = was to=20 bring the lack of adequate notice to the attention of the trial court at = the=20 hearing, object to the hearing going forward, and/or move for a = continuance.=20 Although Henry was represented by counsel at the July 30, 2002 hearing, = he made=20 no such complaint or motion but participated in the hearing. Even if = Henry had=20 preserved his notice complaint, see Tex. R. App. P. 33.1(a)(1), = he had a=20 reasonable opportunity to respond under section 10.003 of the Texas = Civil=20 Practice and Remedies Code.

Henry also=20 complains he did not have notice that the physicians sought sanctions = under=20 chapter 10 of the Civil Practice and Remedies code. He argues that the = sanctions=20 motions requested relief only under rule 13 of the Texas Rules of Civil=20 Procedure and chapters 9 and 11 of the Texas Civil Practice and Remedies = Code.=20 Henry maintains that because the physicians did not move for sanctions = under=20 Chapter 10, the trial court abused its discretion in considering = evidence of=20 Henry=92s filings in other lawsuits. Henry=92s counsel did not object to = the lack of=20 notice that the physicians were seeking sanctions under Chapter 10 = before or=20 during the July 30, 2002 sanctions hearing. Henry=92s first complaint = that he=20 lacked notice of the subject matter of the hearing was in his motion for = new=20 trial. This objection was untimely.

Even if this=20 objection had been timely, Henry had notice that the physicians sought = sanctions=20 under Chapter 10. The introductory paragraph of both physicians=92 = motions=20 explicitly state that the motions seek sanctions pursuant to chapter 10 = of the=20 Texas Civil Practice and Remedies Code. Further, the allegations made = and relief=20 sought are consistent with Chapter 10. Specifically, the motions request = the=20 trial court to order Henry to pay a monetary penalty to the Court, a=20 sanction available only under Chapter 10. Tex. Civ. Prac. & Rem. = Code =A7=20 10.004(c)(2); see Sterling v. Alexander, 99 S.W.3d 793, 799-800 = (Tex.=20 App.=97Houston [14th Dist.] 2003, pet. denied). Because Henry failed to = challenge=20 receipt of the motions, he cannot now deny having notice of the content = of the=20 motions. In re B.L.D., 113 S.W.3d 340, 350-55 (Tex. 2003). Thus, = neither=20 of Henry=92s notice complaints have merit.

As = to Henry=92s=20 argument that he did not receive notice that his conduct in other cases = would be=20 considered at the hearing, again, he failed to timely object. During the = testimony of other physicians who had been served with identical = pleadings=20 prepared by Henry in other cases, Henry=92s attorney objected only to = the=20 relevance of the testimony. This does not preserve a due process = complaint based=20 on lack of notice.

Moreover,=20 Henry waived any objection to the relevance of testimony about Henry=92s = conduct=20 in other proceedings by failing to establish a running exception. During = the=20 examination of Dr. Robert Mastin, a defendant doctor in a different suit = filed=20 by Henry, Henry=92s attorney objected to the relevance of the petition = in the=20 case. He requested a =93running objection as to relevance=94 without = specifying what=20 he intended the objection to cover. The trial court overruled the = objection and=20 instructed Henry=92s attorney to make objections as necessary. = Thereafter, Henry=92s=20 attorney made occasional objections to relevance but failed to object to = much of=20 the testimony about his conduct in other cases. The trial court did not = abuse=20 its discretion in denying Henry=92s request for a running objection = because his=20 attorney failed to =93plainly identif[y] the source of the objectionable = testimony, the subject matter of the witness=92s testimony and the ways = the=20 testimony would be brought before the [court].=94 Volkswagen of Am., = Inc. v.=20 Ramirez, 159 S.W.3d 897, 907 (Tex. 2004). Thus, even if the = testimony about=20 Henry=92s conduct in other cases is irrelevant, Henry waived his = objections to the=20 bulk of that evidence.

Finally,=20 Henry claims that the trial court=92s order, including the findings of = fact and=20 conclusions of law, was not specific enough to support sanctions under = chapter=20 10 of the Texas Civil Practice and Remedies Code. Henry first raised = this=20 complaint in his first supplemental motion to vacate, modify, correct, = or reform=20 the modified judgment, which he filed on September 23, 2002. As we held = in=20 Moritz, M.D. v. Preiss, =93[r]ead together, Rules 5, 329b(b) and = 329b(e)=20 demonstrate that an amended motion for new trial filed more than thirty = days=20 after the trial court signs a final judgment is untimely.=94 121 S.W.3d = 715, 720=20 (Tex. 2003). The trial court signed its revised order granting = sanctions,=20 including findings of fact and conclusions of law, on August 2, 2002, = fifty-two=20 days before Henry=92s complaint that the order was not sufficiently = specific to=20 support an award of sanctions under Chapter 10. Although we have = recognized that=20 =93the trial court may, at its discretion, consider the grounds raised = in an=20 untimely motion and grant a new trial under its inherent authority = before the=20 court loses plenary power,=94 the trial court in this case denied = Henry=92s motion=20 as untimely. Id. at 720. On appeal, Henry fails to challenge the = trial=20 court=92s ruling on the timeliness of his post-sanctions motions and = thus has=20 waived any complaint about the specificity of the trial court=92s order. = See=20 Tex. R. App. P. = 33.1(a).=20 Despite Henry=92s waiver, as discussed below, we conclude that Henry=92s = challenge=20 fails on the merits: the evidence and the trial court=92s order support = an award=20 of sanctions under Chapter 10.

IV. Amount of Sanction

Henry claims=20 that the $50,000 sanction, a $25,000 sanction for the petition filed = against=20 each doctor, is excessive. The amount of the sanction is limited by the = trial=20 court=92s duty to exercise sound discretion. Powell, 811 S.W.2d = at 917. A=20 trial court abuses its discretion when it acts without reference to any = guiding=20 rules or principles, not when it simply exercises that discretion in a=20 different manner than reviewing appellate courts might. Downer = v.=20 Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). = In=20 Powell we held that a sanction under rule 215 of the Texas Rules = of Civil=20 Procedure, now rule 215.2, must relate directly to the abuse found and = =93be no=20 more severe than necessary to satisfy its legitimate purpose.=94 = Powell,=20 811 S.W.2d at 917. Texas Rule of Civil Procedure 215.2 allows a trial = court to=20 disallow any further discovery; charge certain expenses, costs, or = attorney=92s=20 fees of one party against the offending party; order certain facts to be = established as true; limit a party=92s ability to defend against or = bring certain=20 claims; strike pleadings or parts of pleadings; or find a party in = contempt of=20 court. In contrast, Chapter 10 authorizes a sanction ordering the = offending=20 party to, among other things, pay a penalty into the court, as ordered = in this=20 case. Tex. Civ. Prac. & = Rem.=20 Code =A7 10.004. The only restriction on the amount of the = penalty in the=20 language of the statute is that the =93sanction must be limited to what = is=20 sufficient to deter repetition of the conduct or comparable conduct = by=20 others similarly situated.=94 Id. =A7 10.004(b); see, = e.g., Skepnek=20 v. Mynatt, 8 S.W.3d 377, 380 (Tex. App.=97El Paso 1999, pet. denied) = (upholding $25,000 sanction to be paid into registry of court under = Chapter 10).=20 The legislative history does not shed light on the question.

Generally, a=20 sanction cannot be excessive nor should it be assessed without = appropriate=20 guidelines. See Powell, 811 S.W.2d at 917.[4] Although this = Court has not=20 specifically identified factors for a trial court to consider when = assessing=20 penalties under Chapter 10, see Altus Commc=92ns., Inc. v. Meltzer = &=20 Martin, Inc., 829 S.W.2d 878, 883 (Tex. App.=97Dallas 1992, no = writ), the=20 absence of an explanation of how a trial court determined that amount of = sanctions when those sanctions are especially severe is inadequate. For = example,=20 in Cire v. Cummings, we held the trial court was required to = explain that=20 it considered lesser sanctions before imposing severe, =93death=20 penalty=94 sanctions. 134 S.W.3d at 842. In Powell, we held = that the=20 dismissal of plaintiff=92s case with prejudice for failing to = appear for a=20 deposition was an excessive sanction under Texas Rule of Civil Procedure = 215.=20 811 S.W.2d at 918-19. Because we held that the death penalty sanction at = issue=20 was =93manifestly unjust,=94 we did not identify specific factors for = determining=20 appropriate sanctions. Id. at 917 n.6, 919. In his concurrence, = Justice=20 Gonzalez recognized that the American Bar Association cumulated relevant = factors=20 useful to this type of analysis. Id. at 920-21 (Gonzalez, J.,=20 concurring).[5] Although we do = not require=20 a trial court to address all of the factors listed in the report to = explain the=20 basis of a monetary sanction under Chapter 10, it should consider = relevant=20 factors in assessing the amount of the sanction. In addition, the = determination=20 of the amount of a penalty to be assessed under Chapter 10, which is not = limited=20 to attorney=92s fees and costs, should nevertheless begin with an = acknowledgment=20 of the costs and fees incurred because of the sanctionable conduct. This = provides a monetary guidepost of the impact of the conduct on the party = seeking=20 sanctions and the burdens on the court system.

The = trial=20 court found that the claims brought against the doctors did not meet the = evidentiary support requirement in Chapter 10. The trial court also = concluded=20 that the lawsuit was groundless, as defined in Texas Rule of Civil = Procedure 13.=20 The trial court=92s order stated that Henry =93has consistently engaged = in a similar=20 pattern of conduct.=94

Dr. = Low=20 testified that he felt that Henry harassed him by filing the lawsuit. He = testified that he lost a day and a half from the office because of the = lawsuit=20 but does not quantify this expense and identifies no other out-of-pocket = expenses. Dr. Smith testified that he believed Henry felt =93bad will = toward [him]=20 personally=94 because Henry filed a suit with no basis in fact against = him. Two=20 other physicians, Drs. Mastin and Canterbury, testified that Henry had = named=20 them in lawsuits in which they had never treated the plaintiff patients. = Both=20 testified about the impact of the lawsuits and intent to sue letters on = their=20 malpractice insurance rates: Dr. Mastin testified that his group=92s = rates=20 increased by 68% due in part to three groundless suits filed by = Henry=92s clients;=20 Dr. Canterbury also testified that her practice group faced increased = insurance=20 premiums due to groundless pleadings like Henry=92s.

Although we=20 conclude that the trial court was within its discretion to award = sanctions under=20 Chapter 10, we cannot determine the basis of the $50,000 penalty on this = record.=20 Given the severity of the sanction, therefore, we remand this case in = the=20 interest of justice to allow the parties to present evidence responsive = to our=20 guidelines, if necessary, and to allow the trial court to consider the = amount of=20 the penalty imposed in light of the guidelines in this opinion. See = Tony=20 Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 314-15 (Tex. 2006) = (remanding=20 because evidence of attorneys fees for entire case is some evidence of = what=20 amount of segregated fees would be).

V. Conclusion

We = recognize=20 that in some cases, a party may not have evidence that proves each = specific=20 factual allegation at the time a lawsuit is filed. Certainly, the law = does not=20 require proof of a case without reasonable time for discovery. However, = this=20 does not excuse the filing of claims against parties when the attorney = filing=20 the lawsuit possesses information that a reasonable inquiry would have=20 determined negated some of the claims made. We affirm the trial = court=92s=20 determination that chapter 10 was violated but hold that the trial court = abused=20 its discretion in not more specifically identifying the basis for = imposing a=20 $50,000 penalty under chapter 10 of the Texas Civil Practice and = Remedies Code.=20 We reverse the judgment of the court of appeals and remand the case to = the trial=20 court for proceedings consistent with this opinion.

________________________________________

J. = Dale=20 Wainwright

Justice

OPINION=20 DELIVERED: April 20, 2007