Court administrator’s email stating findings are not findings

D&D

In Baxter & Associates, LLC v. D&D Elevators, Inc., No. 05-16-003300-CV (Feb. 15, 2017), the plaintiff appealed from the denial of a temporary injunction against former employees and the company they formed. The plaintiff alleged that the former employees took trade secrets, namely a list of builders with projects potentially including elevators, in violation of their fiduciary duties and the Texas Uniform Trade Secrets Act (“TUTSA”).

After a two-day hearing, the parties received a signed order denying the request for temporary injunction, which was attached to an email from the court administrator stating, “The Court makes the following rulings: … I do find that trade secret as to existing jobs or bids was obtained… [but] there is an adequate remedy at law….” The plaintiff requested findings of fact and conclusions of law, and filed a motion for reconsideration based on its argument that it did not need to show no adequate remedy at law under TUTSA to obtain injunctive relief. The trial court did not sign any findings of fact or conclusions of law, and the plaintiff appealed without filing a notice of past due findings and conclusions of law.

The first issue addressed by the court was procedural—whether the statement contained in the court administrator’s email stating the existence of trade secrets was a finding of fact. The Court of Appeals held it was not, in part because at a subsequent hearing the trial court stated that it had not made such a finding. Although the plaintiff formally requested findings of fact and conclusions of law, it failed to file a notice of past due findings and conclusions of law pursuant to Rule 297. Thus, the Court of Appeals held there were no findings of fact or conclusions of law, that any error for the failure to make such findings was not preserved, and implied a finding that the plaintiff had not shown the existence of a trade secret.

The Court went on to hold that there was evidence that would have allowed the trial court to conclude that the list of projects was not a trade secret because the information could be publicly identified, and therefore would not “derive[] independent economic value, actual or potential, from not being generally known….”

Baxter & Associates, LLC v. D&D Elevators, Inc., No. 05-16-003300-CV (Feb. 15, 2017)

Mandatory venue for injunctions: what’s your primary purpose?

Alphabet Soup

In In re FPWP GP LLC, et al. (January 25, 2017), the Dallas Court of Appeals conditionally granted a writ of mandamus for the district court’s failure to transfer venue under the mandatory venue provision of Section 65.023 of the Civil Practice & Remedies Code, which provides that “a writ of injunction against a party who is a resident of this state shall be tried in … the county in which the party is domiciled.” Courts have struggled at times to apply Section 65.023 because it does not apply to all suits seeking an injunction, but instead only to suits in which the relief requested is “purely or primarily injunctive.” So, if the primary form of relief is something else, e.g. damages, then the mandatory venue provision does not apply. The opinion gave examples of the exception, such as when injunctive relief is simply to maintain the status quo pending litigation or when there is no request for a permanent injunction. But in the case at hand, the plaintiff sought only a declaratory judgment that was effectively a mirror image of the permanent injunctive relief requested. Holding the injunction “was a means to the same end” as the declaratory judgment, the Court held that the primary purpose of the lawsuit was injunctive and that transfer to the county of domicile of the defendants was mandatory under Section 65.023.

In re FPWP GP LLC, et al. (January 25, 2017)

When is a fraud claim subject to a 2-year limitations period? When it’s not a fraud claim.

Negligence is not fraud

In Parsons v. Queenan, et al., No. 05-15-01375-CV (January 23, 2017), the Dallas Court of Appeals affirmed summary judgment in favor of the defendants on limitations grounds. The suit was Parsons’ third in a series of malpractice suits against different attorneys that represented him since the death of his wife in a plane crash more than two decades earlier.

The first issue was whether the breach of fiduciary duty and fraud claims were subject to a 2-year statute of limitations for negligence or a 4-year statute of limitations for fraud or breach of fiduciary duty. The Dallas Court held that the 2-year limitations period applied under the anti-fracturing rule, which prevents legal malpractice plaintiffs from “opportunistically transforming a claim that sounds only in negligence into other claims” to avail themselves of longer limitations periods, less onerous proof requirements, or other tactical advantages. For the anti-fracturing rule to apply, the gravamen of the complaint must focus on the quality or adequacy of the attorney’s representation. The Dallas Court concluded that the fraud and breach of fiduciary duty claims asserted by Parsons were claims for professional negligence as a matter of law.

In the second issue, the Dallas Court held that the 2-year limitations period began to run on the date of the denial of the motion for reconsideration by the Texas Supreme Court in the underlying litigation, not the date mandate was issued. Under Hughes v. Mahaney & Higgins, 821 S.W.2d 154 (Tex. 1991), “the statute of limitations on the malpractice claim against the attorney is tolled until all appeals on the underlying claim are exhausted.” Id. at 157. The Dallas Court held that appeals are exhausted when a motion for rehearing with the Texas Supreme Court is denied because that is the last action of right that can be taken in the underlying case.

Parsons v. Queenan, et al., No. 05-15-01375-CV (January 23, 2017)

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Claims to stop payment to Paxton prosecutors moot and still not ripe—no jurisdiction.

Paxton Mug Shot

The Dallas Court of Appeals was pulled into one of the wide-ranging disputes concerning the prosecution of Texas Attorney General Ken Paxton, this one concerning the payment of private attorneys appointed to prosecute Paxton. The Dallas Court determined that it lacked jurisdiction because the claims were moot and were not yet ripe.

Attorneys were appointed to prosecute Paxton after the Collin County Criminal District Attorney recused his office. The appointed attorneys were to be paid $300 per hour, which was more than fixed $1000 for most court appointed attorneys for indigent defendants under the Collin County local rules, which also apply to appointed prosecutors. However, the local rules also provided “Payment can vary from the fee schedule in unusual circumstances or where the fee would be manifestly inappropriate because of circumstances beyond the control of the appointed counsel.”

On December 11, 2015, the appointed prosecutors sought an interim payment of $254,908.85 from Collin County. Three weeks later, Collin County taxpayer Jeffory Blackard sued seeking a temporary restraining order and injunction preventing payment, asserting that as a taxpayer he had standing to seek to enforce the local rules fixing most fees at a flat $1000. The Collin County judge recused himself, and the taxpayer suit was assigned to County Court at Law No. 5 in Dallas County.

A week after Blackard filed his taxpayer suit, the presiding judge over the criminal prosecution, a Tarrant County judge, approved the payment of the request for interim fees and ordered that the fees be presented to the Collin County Commissioner’s Court for payment. The next day, Blackard filed a supplemental application for temporary restraining order in the Dallas County taxpayer suit, which was denied one day later. Three days after that, only one month after the initial request for interim fees was made, the Collin County Commissioners Court voted to pay. Blackard then filed an amended petition seeking injunctive relief preventing any future requests for attorney’s fees by the appointed prosecutors. The County Court at Law determined that it lacked jurisdiction and granted the defendants’ pleas to the jurisdiction. Blackard appealed.

The Dallas Court began its analysis by noting that mootness and ripeness are threshold issues that implicate subject matter jurisdiction. Rendering opinions under either circumstance violates the prohibition against rendering advisory opinions because such cases present no justiciable controversy.

The Dallas Court held that Blackard’s claims relating to the interim fees were moot because the fees had already been paid and, under Texas law, taxpayers have standing only to seek to enjoin future payments, not to recover funds that have already been paid. Blackard asserted on appeal that his claims fell within the exception to mootness for claims “capable of repetition, yet evading review” because the appointed attorneys stipulated that they anticipated submitting future invoices. But the Dallas Court rejected that exception, which “applies only in rare circumstances.” It noted that the exception had previously only been used to challenge unconstitutional acts performed by the government, and held that the process by which fees would be requested in the future provided sufficient time for Blackard to seek judicial review prior to payment, pointing to the month between the initial request for interim fees and payment.

In addition, the Dallas Court held that claims relating to future invoices were not yet ripe. While it was stipulated that additional fees would be requested, it was not stipulated that the additional requests would be for $300 an hour or otherwise would be inconsistent with the Collin County fee schedule. So the Dallas Court concluded there was no live controversy concerning future requests for fees.

Blackard v. Attorney Pro Tem Kent A. Schafer, et al.

The first rule of confidential settlements is: we don’t talk about confidential settlements

its-a-secret

GDL Masonry Supply, Inc. v Lopez and Rapid Masonry Supply, Inc. (November 2, 2016) is a handy opinion to hand your clients after they sign a settlement agreement requiring confidentiality.  It is a risk too many clients do not take seriously enough (see, e.g., “Girl costs father $80,000 with ‘SUCK IT’ Facebook post“).

In GDL, the Dallas Court of Appeals affirmed summary judgment in favor of Rapid, the plaintiff, who refused to pay under a settlement agreement because GDL failed to satisfy the confidentiality requirements of the agreement.  The facts were too common.  GDL brought suit against Rapid, which settled by way of an agreement that required confidentiality and Rapid to make a series of $10,000 payments totaling $60,000 to GDL.  GDL then told a third party that Rapid had stolen from it, that GDL won the lawsuit, and that Rapid owed GDL money as a result. When Rapid discovered what GDL said about their litigation, it sued asserting that it had no obligation to make the remaining settlement payments and also seeking attorney’s fees for breach of the confidentiality language.  The trial court granted summary judgment to Rapid, holding that the confidentiality provision was breached, that Rapid had no obligation to make further payments, and awarding attorney’s fees.

GDL’s argument on appeal did not deny the disclosure of the settlement, but instead challenged the materiality of the confidentiality provision.  The Dallas Court of Appeals made swift work in rejecting this argument, noting that the settlement agreement itself stated that the confidentiality paragraph “is a material provision of this Agreement and that any breach of the terms and conditions of [the paragraph] shall be a material breach of this Agreement.”  The Court held that the contract’s language was binding.

GDL Masonry Supply, Inc. v Lopez and Rapid Masonry Supply, Inc.

Stopping time: invoking lack of notice to preserve post-judgment relief

stop-the-time

In In re: Douglas D. Halofitis, No. 05-16-01047-CV (Sept. 27, 2016) (mem. op.), the Fifth Court gives a helpful roadmap for parties who seek to challenge a judgment of which they were given late notice.  We know that trial courts usually lose plenary jurisdiction over a judgment within 30 days after the court signs the judgment, which is also the deadline for filing an appeal. But what if you don’t receive notice of the judgment?

Under Rule 306a, when a party does not receive notice or acquire actual knowledge of judgment within twenty days, the deadlines begin to run not from the signing of the judgment, but instead from the sooner of the date the party received notice or acquired actual knowledge of the judgment or 90 days after the judgment was signed. A few pointers to keep in mind:

  1. the 306a motion must be sworn and must establish the date of first notice or knowledge of the judgment and that this date was more than 20 days after the judgment was signed;
  2. the 306a motion, including any evidentiary supplements necessary to satisfy the procedural requirements of 306a(5), must be filed within the court’s plenary period as calculated from the date of first notice or knowledge of the judgment;
  3. the movant should seek an immediate evidentiary hearing on the 306a motion and obtain a finding of fact of the date of first notice or actual knowledge of the judgment;
  4. in no event will the periods begin to run more than 90 days after the judgment is signed, meaning that if you receive notice more than 90 days after the judgment is signed, your only avenue may be a restricted appeal or bill of review; and
  5. the 306a motion should be coupled with a post-judgment motion, e.g. motion for new trial, motion to reinstate, or motion to modify judgment. If you wait for a decision on your 306a motion, your post-judgment motion may end up being untimely even if your Rule 306a motion is successful because post-judgment motions must still be filed within 30 days of the date found to be the date of first notice or actual knowledge of the judgment.

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Ebola nurse’s injunction against THR reversed because expert testimony required to establish causation to support temporary injunction

nina-pham-1

Most people will know the origin story of this appeal. In 2014, Nina Pham was working at a nurse at Texas Health Presbyterian Hospital Dallas, a hospital in the Texas Health Resources (“THR”) hospital system. She was tasked with caring from Thomas Duncan, who was diagnosed with Ebola. Pham cared for Duncan for several days. After treating Duncan, Pham was also diagnosed with Ebola. She and her adorable dog became well known the world over, but Pham claimed that THR was negligent in its policies, allowing her to contract Ebola.

In Texas Health Resources, et al. v. Pham, (August 3, 2016), the Dallas Court of Appeals considered an interlocutory appeal of a temporary injunction prohibiting THR from moving forward in a parallel administrative proceeding in the Texas Department of Insurance to determine if Ms. Pham was an employee of THR for purposes of the workers’ compensation statute. If she was an employee of THR, then workers’ compensation would be her exclusive remedy. The trial court issued a temporary injunction barring THR from proceeding before the Texas Department of Insurance because a decision in favor of THR would deprive the trial court of jurisdiction over Ms. Pham’s claims.

The Dallas Court of Appeals reversed the temporary injunction in an opinion that focuses solely on the issue of Ms. Pham’s probable right to recovery. Ms. Pham had argued that expert testimony establishing that she contracted Ebola as a result of THR’s negligence was unnecessary at the temporary injunction stage, pointing to evidence of inadequate training and procedures relating to the treatment of Ebola. She also pointed to statements by an insurance adjuster suggesting that Ms. Pham contracted Ebola due to inadequate policies and procedures. But the Court of Appeals was not persuaded. It noted that evidence of a probable right of recovery must be evidence that “under applicable rules of law, establishes a probable right of recovery.” It held that under the circumstances presented, the “applicable rules of law” would require expert testimony establishing causation, a requirement that was not excused at the temporary injunction stage. Without expert testimony of causation, Ms. Pham could not establish a probable right of recovery necessary to support a temporary injunction, allowing the Court of Appeals to avoid deciding whether a trial court can enjoin a parallel administrative proceeding.

Texas Health Resources, et al. v. Pham, (August 3, 2016)

Second chance to make a first impression: appeal of special appearance not waived by failure to file interlocutory appeal

Second Chance

In Southampton Ltd. v. Four Horseman Auto Group (July 20, 2016), the Dallas Court of Appeals considered whether a plaintiff who fails to file an interlocutory appeal of an order granting a special appearance as to some but not all defendants may later appeal the special appearance after a final judgment. It held that interlocutory appeal is permissive and the decision not to pursue an interlocutory appeal does not waive the right to appeal the order after final judgment. There are indeed second chances.

This was an issue of first impression for the Dallas Court of Appeals. A majority of courts had reached a similar conclusion, but at least one court has reached the opposite result.

Addressing the merits, the court also concluded that the special appearances were improperly granted. Each defendant had entered into agreements with a forum selection clause designating Dallas County, Texas as the forum for all disputes. The defendants argued they did not authorize the execution of those agreements, which were signed by a director who owned a 25% interest in each of them, but the bylaws of each entity stated that a single member constituted a quorum of the directors of the companies. Moreover, that single member had effectively conducted all the business of each of the entities without any approvals from any other members. Thus, the court concluded that the executing director had apparent authority to bind the defendants.

Southampton Ltd. v. Four Horseman Auto Group (July 20, 2016)

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No take backs: trial court reversed for initially allowing supplemental affidavit and then granting summary judgment before supplemental affidavit is filed

giphy (2)

In KLZ Diamond Tools, Inc. v. TKG General Agency, Inc. (July 18, 2016), the Dallas Court of Appeals considered an appeal of summary judgment granted in favor of TKG, the insurer defendant, against KLZ, the plaintiff insured. KLZ claimed that the insurer failed to pay the full amount owed under a policy relating to approximately $400,000 in stolen merchandise. The insurer advanced half, but requested additional documentation relating to the merchandise. KLZ contended that the request was just stalling, and after the insurer failed to pay the full amount of the claim, sued for breach of contract, insurance code violations, deceptive trade practices, among other claims. The insurer filed a motion for summary judgment. The district court struck KLZ’s responsive summary judgment evidence due to the failure to properly prove up the attached documents and said at the hearing that it had no choice but to grant summary judgment in the absence of responsive evidence. The district court did tell KLZ’s counsel that it would allow KLZ to supplement. But the district court entered an order granting summary judgment before the deadline it gave to KLZ for the supplement, which was timely filed.

The first issue on appeal was whether the trial court erred by orally stating that KLZ was permitted to supplement an affidavit but then granting summary judgment before the deadline given. Recognizing that the summary judgment rule anticipates a party’s summary judgment evidence may not initially be properly presented and allows supplementation, the Dallas Court of Appeals held that it was an abuse of discretion to grant summary judgment without waiting for the supplemental affidavit and without explaining its ruling after having initially granting leave to supplement. Considering the supplemental evidence, the Court further concluded that summary judgment was improper because KLZ had offered summary judgment evidence creating a question of fact as to whether the insurer had improperly refused to pay the entire claim.

KLZ Diamond Tools v TKG General Agency (July 18, 2016)

Not so long arm of the law: no personal jurisdiction over out-of-state attorney who joint ventures with Texas counsel

Short Arms

In Mitchell v. Freese & Goss, PLLC (July 15, 2016), the Dallas Court of Appeals considered an appeal of the denial of a special appearance by Mitchell, a Mississippi attorney sued in Dallas County by a Texas law firm, Freese & Goss. Mitchell and Freese & Goss had a joint venture to represent Mississippi clients in litigation in Mississippi. After the cases settled, there was a dispute over attorney’s fees. Mitchell sued Freese & Goss in Mississippi and Freese & Goss brought this suit in Dallas County alleging wrongful conduct by Mitchell adversely affecting the joint venture. Mitchell filed a special appearance, which was denied. Mitchell then filed an interlocutory appeal.

On appeal, Freese & Goss asserted that the trial court had personal jurisdiction over the claims against Mitchell because the dispute arose out of Mitchell’s contacts with Texas. Specifically, Mitchell had a business relationship with Freese & Goss for the purpose of litigating the Mississippi claims, Mitchell participated in meetings and phone calls with Freese & Goss, the suit concerned payments to be made by Freese & Goss, Mitchell solicited clients to sue Freese & Goss, and those acts were specifically directed toward causing injury to appellees in Texas.

The Dallas Court of Appeals reversed and rendered a judgment that the Court lacked personal jurisdiction over the claims asserted against Mitchell. It held that merely contracting with Freese & Goss, a Texas resident, is insufficient for jurisdictional purposes. The relationship focused on activities in Mississippi, where the litigation was to be conducted, and Freese & Goss’s unilateral activities in Texas were not relevant to the analysis. Nor did the fact that some of the clients eventually moved to Texas render Mitchell susceptible to suit in Texas because “the mere existence of an attorney-client relationship unaccompanied by other sufficient contacts with the forum, does not confer personal jurisdiction….” Finally, the fact that Mitchell might have caused their shared clients to sue Freese & Goss did not confer jurisdiction because his alleged activities took place in Mississippi, and it is not enough that the effects of a tort will be felt in Texas to confer personal jurisdiction. Because Mitchell did not purposefully avail himself the privilege of doing business in Texas, the Dallas Court of Appeals reversed and rendered judgment.

Mitchell v. Freese & Goss, PLLC (July 15, 2016)