CHAPTER 2 Standards of Review and Scope of Review

• Jurisdiction: United States

CHAPTER 2

Standards of Review and Scope of Review

2-1 Introduction

"[A] standard of review is more than just words; rather, it embodies principles regarding the amount of deference a reviewing tribunal accords the original tribunal's decision."¹

Knowing the appropriate standard of review is critical to deciding whether to appeal and to crafting a persuasive appellate argument. For example, a de novo standard of review is often better for appellants because the court of appeals will take a completely fresh look at the issue. Conversely, appellees benefit from the abuse-of-discretion standard of review, which requires substantial deference to the opinion of the lower court.

Courts also appreciate parties framing their arguments within the appropriate standard of review because it helps them decide the appeal correctly. Even when the standard of review makes winning the appeal difficult, it is more persuasive to frame the argument within the standard of review rather than to ignore the limits on the appellate court's authority to review a matter.

The scope of review is often part of the same discussion and is sometimes confused with the standard of review, though it is important to distinguish them. While the standard of review provides the framework for the decision, the scope of review determines which parts of the appellate record the reviewing court is to consider when applying the standard of review.²

This chapter will define standards of review that arise in appellate practice in the Texas state courts, and when they are most commonly applicable. It will also discuss the scope of review when the case law has addressed those parameters.

2-2 De Novo Standard of Review

The de novo standard of review is perhaps the easiest to understand and apply. "When conducting a de novo review, the reviewing tribunal exercises its own judgment and redetermines each issue of fact and law. In such a review, the reviewing tribunal accords the original tribunal's decision absolutely no deference."³ Generally, appellate courts use a de novo standard to review a lower court's decision on a matter of law and the application of law to facts.

2-2:1 Substantive Matters Always Reviewed De Novo

The de novo standard of review applies to the following substantive determinations:

2-2:1.1 Determination of an Ambiguous Contract

The question of whether a contract is ambiguous is a matter of law for the court and is subject to de novo review.⁴ An ambiguity exists when there are two or more reasonable interpretations of a contract, such that determining the intent of the parties becomes a fact issue.⁵ "A contract is not ambiguous if the contract's language can be given a certain or definite meaning."⁶

The scope of review encompasses the entire contract and the surrounding circumstances: an appellate court determines whether a contract is ambiguous "by looking at the contract as a whole in light of the circumstances present when the contract was entered."⁷ While the surrounding circumstances are relevant, parol evidence is outside the scope of review and may not be considered to create an ambiguity.⁸ The parole evidence rule prohibits even surrounding circumstances evidence when the contract "by its terms, plainly and clearly discloses the intention of the parties or is so worded that it is not fairly susceptible of more than one legal meaning or construction."⁹ If one party's interpretation is not reasonable under these rules, then the contract is not ambiguous and its interpretation is a question of law.

2-2:1.2 Construction of an Unambiguous Contract

If a court determines that a contract is unambiguous, then it will determine the meaning of the contract as a matter of law.¹⁰ Because the construction of an unambiguous contract is a question of law for the court, it is reviewed de novo by an appellate court.¹¹ The reviewing court will examine the entire contract, with the goal of harmonizing and giving effect to each provision so that none is rendered meaningless and none is given controlling effect.¹² Words are given their "plain and ordinary meaning unless the instrument indicates the parties intended a different meaning."¹³ The contract must be construed "from a utilitarian standpoint, bearing in mind the particular business activity sought to be served."¹⁴

The scope of review is limited to the language of the contract itself whenever possible.¹⁵ But evidence of the facts and circumstances surrounding the execution of a contract may also be considered as an aid in the construction of the contract's language.¹⁶

All types of contracts are interpreted de novo on appeal, but specific kinds of documents have been singled out and specifically held to present questions of law subject to de novo review, including:

• arbitration agreements; ¹⁷

• oil and gas leases; ¹⁸

• property deeds; ¹⁹ and

• settlement agreements. ²⁰

The interpretation of an insurance policy is also a question of law, reviewed de novo,²¹ but special rules apply in the insurance context. When the dispute involves a standard-form policy whose terms have been dictated by a state regulatory agency, then the court's goal is not to determine the intent of the parties to the contract, but the "ordinary, everyday meaning of the words to the general public."²² But when a non-standard policy is at issue, or a provision that was individually negotiated, then the court must "determine and enforce the mutual intent of the parties to the contract."²³

2-2:1.3 Application of Statute of Frauds

"Whether an agreement falls within the statute of frauds is a question of law."²⁴ That determination is therefore reviewed de novo.²⁵

2-2:1.4 Interpretation of a Statute

Statutory construction is a question of law that is reviewed de novo on appeal.²⁶ The court explains the standard of review this way:

When interpreting a statute, our primary objective is to ascertain and give effect to the Legislature's intent without unduly restricting or expanding the Act's scope. We seek that intent first and foremost in the plain meaning of the text. Undefined terms in a statute are typically given their ordinary meaning, but if a different or more precise definition is apparent from the term's use in the context of the statute, we apply that meaning. However, we will not give an undefined term a meaning that is out of harmony or inconsistent with other terms in the statute. Therefore, even if an undefined terms has multiple meanings, we recognize and apply only the meanings that are consistent with the statutory scheme as a whole.²⁷

The court will depart from the "plain and common" meaning of the statute's words if that construction "leads to absurd or nonsensical results."²⁸ The court must read all words and phrases "in context" and construe them "according to the rules of grammar and common usage."²⁹ The court will also apply well-recognized rules of construction, such as the doctrine of ejusdem generis, which teaches that where specific items are followed by a generic catchall, like "other," "the latter must be limited to things like the former."³⁰

Unlike ambiguous contracts, ambiguous statutes are also interpreted as a matter of law and subject to de novo review.³¹ If a statute is ambiguous, the court will defer to agency interpretations of the statute, "provided that the agency's interpretation is reasonable and does not conflict with the plain language of the statute."³²

In determining the legislative intent behind a statute, the court must consider the entire Act, not just isolated provisions.³³ An appellate court's scope of review may also include evidence of the following matters:

• the object sought to be attained;

• the circumstances under which it was enacted;

• the legislative history;

• the common law and prior statutes;

• the consequences of a particular construction;

• the construction of the statute by administrative agencies; and

• the title or preamble of the statute, plus any emergency provisions. ³⁴

The scope of review also includes the additional aids to construction that the legislature has included in the Code Construction Act. Thus, the appellate court may consider the legislature's definition of words like "shall," "person," and "property," even though those words are not defined in the statute at issue in the appeal.³⁵

2-2:1.4a Tax-exemption Statutes

A party claiming a tax exemption must "clearly show" he or she falls within the exemption.³⁶ While the usual, de novo statutory standard of review applies, any doubts must be resolved in favor of the taxing authority and against the claimant.³⁷

2-2:1.5 Constitutional Concerns

The Supreme Court applies a de novo standard of review to question of whether a statute is constitutional.³⁸ In conducting that analysis, the court indulges a presumption that statutes are constitutional and places a high burden on parties claiming otherwise.³⁹

A party making an as-applied, substantive due course challenge to the constitutionality of an economic-regulation statute has the burden to demonstrate either: "(1) the statute's purpose could not arguably be rationally related to a legitimate governmental interest; or (2) when considered as a whole, the statute's actual, real-world effect as applied to the challenging party could not arguably be rationally related to, or is so burdensome as to be oppressive in light of, the governmental interest."⁴⁰ The standard of review for such a challenge must consider "whether the statute's effect as a whole is so unreasonably burdensome that it becomes oppressive in relation to the underlying governmental interest."⁴¹

2-2:2 Litigation Issues Reviewed De Novo

Many of the determinations a trial court makes during litigation present questions of law subject to a de novo standard of review. Several examples follow.

2-2:2.1 Existence of Subject-Matter Jurisdiction

The ruling on any plea that questions the trial court's subject-matter jurisdiction raises a question of law that is reviewed de novo.⁴² There may be...