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)


Invoices and contracts – four years – oh my.

6501602_origIf ever a case illustrated a trap for the unwary, it is IDA Engineering v. PBK Architects, in which the plaintiff sued exactly four years after the termination of its contractual relationship. Unfortunately, the invoices upon which its damage claim relied were issued before the contract termination, and the contracts contained this language about payment: “Invoices will be issued monthly, per TexasBarToday_TopTen_Badge_VectorGraphicpercentage of completion or per phase and will be due upon issuance date.” (emphasis added). Accordingly, the claim was barred by limitations.  No. 05-15-01418-CV (Oct. 4, 2016) (mem. op.)

Professional negligence claims against tax advisors do not age well.

I literally cannot wait

In J.A. Green Development Corp. v. Grant Thornton, LLP, et al., the Dallas Court of Appeals held that limitations begin to run for claims arising from professional negligence in an IRS administrative proceeding as soon as the client learns the IRS disagrees with the advice.

The allegations were that Green hired Grant Thornton and Akin Gump in an IRS audit concerning Green’s participation in a “distressed debt strategy” that was sold to Green by prior advisors. Green alleged that Grant Thornton and Akin Gump told Green that the strategy was likely to be upheld as legal, causing Green to reject a settlement offer by the IRS. In December 2008, the IRS disagreed and issued a report disallowing the loss and imposing substantial penalties. Green alleged that Grant Thornton and Akin Gump then backed away from their prior advice. Six months later, Green sued the original advisors who sold it the tax strategy, but Green continued to retain Grant Thornton and Akin Gump to handle the appeal of the IRS decision. When it later became clear the appeal of the IRS decision would go poorly, Green settled with the IRS for more than the offer it rejected. It then sued Grant Thornton and Akin Gump.

The Dallas Court of Appeals affirmed summary judgment in favor of the defendants. The question was whether limitations started running in December 2008, when the IRS issued its first report indicating that the loss would be disallowed, or in November 2009, when it became clear the appeal of the IRS decision would fail. “[A] cause of action accrues when a wrongful act causes some legal injury, even if the fact of injury is not discovered until later, and even if all resulting damages have not yet occurred.” Green had to concede that it was first injured when it was sold the tax strategy because it had sued the promoters of the strategy before the administrative appeal failed. Green claimed the injury caused by Grant Thornton and Akin Gump was distinct from that caused by the original advisors, but the Court of Appeals held that Green suffered a single continuous injury that Green knew of when it received the IRS report disallowing the claimed loss. The Court of Appeals also held that the Hughes Tolling Rule, which tolls limitations in legal malpractice cases arising from litigation until the litigation is resolved, does not apply to administrative proceedings.

Congratulations to 600commerce’s own David S. Coale, who argued the case on appeal for Akin Gump, and to Trey Cox and Chris Patton, who were trial counsel.

JA Green Development v Grant Thornton


Court closed to survivor and wrongful death claims: Claims arising from young girl’s death were already barred by limitations months before her death.

Locked Doors

In Durham v. Children’s Medical Center of Dallas, the Dallas Court of Appeals decided an issue of first impression: If a 12-year-old receives medical treatment and dies more than two years after that treatment because of the negligence of the health care providers, does the Texas Constitution’s Open Courts Clause prevent the running of limitations for survival and wrongful death claims? The Dallas Court of Appeals concluded that the answer is no because the Open Courts Clause does not apply to statutorily created claims.

The facts are plainly tragic. A 12-year-old girl was injured in a car accident in Hawaii. During treatment, the doctors also diagnosed a dilation of the ascending aorta, which apparently was not related to the accident itself. The doctors recommended a follow-up with a cardiologist. The girl was transferred to Children’s Medical Center of Dallas for a short time before then being transferred to Scottish Rite, where she was treated for her injuries resulting from the accident. Unfortunately, there was not a follow-up on the information about her enlarged aorta. A little more than two years later, the girl died because her aorta ruptured. She was only 15 years old. The girl’s mother and the administrator of her estate brought wrongful death and survival claims. Summary judgment was granted based on the 2-year statute of limitations.

The Dallas Court of Appeals affirmed. It held that Civil Practice and Remedies Code § 74.251 applied, which requires claims to be filed within 2 years of the treatment that is the subject of the claim unless the child is younger than 12. Because the girl was 12 at the time of treatment, the exception did not apply and limitations began to run on the date of treatment for statutory causes of action, including wrongful death and survival claims. The Court then distinguished the Texas Supreme Court’s decision in Weiner v. Wasson, which held that limitations are unconstitutional as applied to minors under the Open Courts Clause of the Texas Constitution because they would cut off the minor’s cause of action before he reaches majority. The Dallas Court of Appeals held that the Open Courts Clause and Weiner v. Wasson could not save the survival and wrongful death claims because the Open Courts Clause does not apply to statutory claims, which include survival and wrongful death claims. As a result, the survival and wrongful death claims arising from the girl’s death were already barred by limitations months before her death.

Durham v. Children’s Medical Center of Dallas

When does limitations run on a contract claim?

Plaintiffs sought damages for losing a telecommunication contract with DISD.  The defendants argued that, in the absence of any evidence of acts of fraudulent concealment, limitations should run from 2006 when Plaintiffs received their last payment.  The Fifth Court agreed, rejecting Plaintiffs’ counterargument that limitations did not begin to run until the federal agency overseeing the contract had completed its investigation of the situation. Lazo Technologies v. Hewlett-Packard, No. 05-14-01060-CV (Jan. 7, 2016) (mem. op.)

Fraud claims affirmed for “dream home” gone wrong

hale v bishop house 2The Hales sued their homebuilder for fraud and violation of the DTPA, alleging serious problems with the foundation of their Rockwall home (right).  They substantially succeeded at trial, and the Dallas Court of Appeals affirmed in large part in Bishop Abbey Homes, Ltd. v. Hale, No. 05-14-00137-CV (Dec. 16, 2015) (mem. op.)  In particular, the Court affirmed as to limitations – a significant issue in this long-simmering dispute – noting that “each time the Hales raised a concern about the foundation, they were assured by one of appellants’ experts that the foundation was not the cause of the problems the Hales observed.”  The court also affirmed as to sufficiency challenges to liability, several claims of improper closing argument, and a challenge to the the basis of the exemplary damages award based on constitutional and Kraus factors. The court requested a remittitur as to (a) mental anguish damages (for sufficiency reasons) above $208,856 per plaintiff; and (b) a portion of the additional/exemplary damages award, based on the applicable cap and the conclusion that the total award “exceeds the guidelines set forth in [Bennett v. Reynolds, 315 S.W.3d 867 (Tex. 2010)] and [Tony Gullo Motors I, LP v. Chapa, 212 S.W.3d 299 (Tex. 2006)] for the type of harm suffered by the Hales as a result of appellants’ conduct.”

It’s an Open Question Whether This Post Is Signed

Clyde Parks signed a $10,000 promissory note, bearing 15% interest and secured by Super Bowl tickets, in favor of Scott Seybold. Parks defaulted on the note, but did make some sporadic payments before limitations expired. When Seybold demanded payment after the limitations period had expired, Parks responded with emails stating that he was working to get the note paid and that he was not ignoring it. That was enough for both the trial court and the Dallas Court of Appeals to conclude that the claim was not barred by limitations, because the debtor had acknowledged the debt, in writing, as a current obligation. See Tex. Civ. Prac. & Rem. Code § 16.065. The Court of Appeals rejected Parks’ argument that he had not “signed” the emails pursuant to the Texas Uniform Electronic Transactions Act, affirming the trial court’s finding that the “Thank you, Clyde” salutation in each email was intended to be Parks’ signature. Notably, the Court of Appeals pointed out that it was expressing no opinion on whether the automatically-generated name and contact information block at the end of each email could constitute an electronic signature.

Parks v. Seybold, No. 05-13-00694-CV

Statute of Limitations Not Tolled in Negligent Appraisal Lawsuit

In this action for negligent appraisal, the Court of Appeals found that the two-year statute of limitations for negligence actions had not been tolled by the discovery rule because the homebuyer knew, before closing, of information indicating the value of the property was much less than what he had offered to pay for it.  Specifically, the appraiser had indicated that the house was worth $295,000 (or $10,000 less than what the plaintiff had offered to pay for it).  More importantly, Zillow.com showed that the property was $100,000 less than what the buyer had offered.  Despite these two indications that should cause a reasonable person to investigate further, the plaintiff did not bring suit until three years later, when he had hired another appraiser to provide an estimate of the property’s value and found out that the property was, in fact, worth much less than he had paid.

Bruning v. Hollowell


Note Not Negotiable

In this suit to collect on a promissory note, the Court of Appeals found that the six-year statute of limitations to sue on a “negotiable instrument” did not apply because the note at issue was not, in fact, negotiable.  According to the Court, because the note represented a revolving line-of-credit, permitting the borrower to prepay all or any portion of the amount due without incurring any prepayment penalty, the note did not contain an unconditional promise to pay a sum certain for a fixed amount and was therefore non-negotiable.  Thus, the Court found that the six-year statute of limitations for negotiable instruments did not apply and affirmed the trial court’s decision.

Bank of Am., N.A. v. Alta Logistics, Inc.


Delayed Service Leads to Dismissal on Limitations Grounds

In this car accident case, the defendant moved for summary judgment on statute of limitations grounds.  While the plaintiff claimed that a typo in the original petition precluded the process server from locating the defendant before the limitations period expired, the Court of Appeals found that the plaintiff had no explanation for the delay in serving the defendant because the defendant’s correct address, telephone number, driver’s license number, and license plane number were available in the police report describing the accident that is the basis for the lawsuit.

Quezada v. Fulton