In this breach of contract case, the Court of Appeals found that the defendant had not breached the stock purchase contract because the parties’ agreement required the plaintiff to tender his stock into escrow account before the defendant’s obligation to purchase the stock accrued. Since the plaintiff never placed his stock into escrow (a condition precedent according to the Court), the defendant’s obligation to perform under the contract was excused.
Mike Jabary obtained a commercial certificate of occupancy for a restaurant in Allen, Texas. As it turns out, Mr. Jabary opened a hookah bar instead of a restaurant. Consequently, the City of Allen revoked his certificate of occupancy.
Mr. Jabary sued the City, alleging both private and public takings. The City filed a motion for summary judgment on the ground that, because Mr. Jabary had not exhausted his administrative remedies by filing an appeal with the City, his claim was not ripe. The trial court granted the City’s MSJ, and Mr. Jabary appealed. On appeal, the Court of Appeals affirmed the trial court’s decision, rejecting Mr. Jabary’s argument that appealing to the city would be futile.
Alan Ritchey Materials Co., a construction materials supplier, contracted to supply materials to make concrete for a subdivision development. Ritchey provided the general contractor with over $100,000 worth of sand, but was never paid, so it filed a materialman’s lien on the property. The property owner argued that the lien was not proper because more sand was delivered to the project than was required to complete the job and, as a result, under the statute, Ritchey could not prove that it “furnished goods . . . for a specific job.” However, the Court found, among other things, that the evidence in this case established that the sand was delivered to the general contractor in connection with project and, given the liberal interpretation courts have given to the lien statute, the fact that some materials may not have been used is irrelevant to the analysis.
Addison Urban Development Partners, LLC v. Alan Ritchey Materials Co.
A trial court that dismisses a lawsuit after a motion made under the Texas Citizens Participation Act “shall award to the moving party . . . reasonable attorney’s fees . . . incurred in defending against the legal action as justice and equity may require.” Tex. Civ. Prac. & Rem. Code § 27.009(a)(1). In this case, the trial court signed its order on March 6 granting the defendant’s motion to dismiss the lawsuit, then followed it up on April 14 with an order awarding defendant $15,616 in attorney fees and sanctioning the plaintiff another $15,000. The plaintiff claimed that the April 14 award was a nullity because the March 6 order was a final judgment. The Court of Appeals disagreed, first order did not purport to dispose of the defendant’s claim for fees and costs, and both the court and the parties recognized that there had not been a final judgment because they continued to litigate the additional issues. The Court of Appeals went on to rule on several other issues, concluding among other things that the plaintiff had waived any complaint about the trial court’s failure to timely hold a hearing on the motion to dismiss by failing to object in the trial court; that the statements attributed to the defendant were not capable of being defamatory; and that the plaintiff had not pointed to any evidence of damages to support its tortious interference claim. The judgment was therefore affirmed.
American Heritage Capital LP v. Gonzalez, No. 05-12-0892-CV
The defaulting defendant in this case claimed that the plaintiff’s service through the Secretary of State was defective because the plaintiff did not establish reasonable diligence in its failed efforts to effect service via registered mail and personal delivery. The Court of Appeals found that the plaintiff exercised reasonable diligence in both of its prior attempts to carry out service. Regarding registered mail, the record established that the plaintiff paid the clerk and arranged to have the defendants served by certified mail, return receipt requested at the defendant’s registered address. When the mailing was returned with the notation that it was undeliverable and could not be forwarded, the plaintiff had sufficiently exercised reasonable diligence. Regarding personal service, the plaintiff sent a process server to defendant’s registered address, but neither plaintiff’s business nor its registered agent were there. According to the Court, this was enough since “[t]he statute does not require efforts to find the registered agent at any place other than at the entity’s registered office.”
Aamer Razi hired attorney Edwin Sigel to represent him in connection with criminal charges brought against him. Sigel, concerned that Razi would not be able to pay his bills, worked out a deal in which Razi signed a power of attorney appointing Sigel as his agent generally, including over all matters regarding his residence condominium. Sigel then transferred the condo to himself as trustee. Apparently, the parties had different understandings of this arrangement: Sigel believed it was to provide security for Razi’s legal fees, while Razi thought Sigel was just going to take care of the condo. After Razi fired Sigel and refused to pay his bills, Sigel sold the condo.
Razi then sued Sigel for breach of fiduciary duty and conversion, and moved for summary judgment, which the trial court granted. Sigel appealed, and the Court of Appeals reversed, finding that the trial court erred in granting summary judgment because fact issues existed regarding whether Sigel explained that Razi was in effect signing over his condo as collateral.
In this breach of contract case involving the sale of an apartment complex, the buyer refused to proceed to closing because the seller failed to provide it with a pamphlet from the EPA regarding lead-based paint, which was required by the contract. The seller sued the buyer, and the trial court ruled in the seller’s favor because even though the contract did require the seller to provide the pamphlet, the buyer waived that breach by failing to object in writing as required by another provision in the contract. The Court of Appeals affirmed.
After a string of missed, overpaid, refunded, and improperly credited property tax payments and a cancelled foreclosure, homeowners Peter and Natalya Shin sued Chase Home Finance under the Texas Debt Collections Practices Act. Chase moved for a no-evidence summary judgment, which the trial court granted. The Court of Appeals affirmed, holding that the plaintiffs had failed to come forward with evidence showing a violation of the Act. Among other things, the Court held that the homeowners had not shown Chase had attempted to collect unauthorized fees, because the mortgage papers provided that Chase could indeed collect the subject fees if the borrowers did not pay their property taxes on time. Since there was no question that the plaintiffs had been late in paying their property taxes, Chase’s attempt to set up and collect the funds for an escrow account was authorized under the parties’ agreement.
Shin v. Chase Home Finance LLC, No. 05-12-01634-CV
In 2005, Brad Keiller, an investor in adult entertainment clubs all over the world, came to Dallas to explore the purchase of Texas Show Girls, a club owned and operated by Curtis Wise. Following negotiations, the parties signed a share purchase agreement in which Wise warranted that Keiller could rely on Wise’s representations that, among other things: (1) the club’s lease was in good standing and not in default; and (2) the club had only one pending investigation by the Texas Alcoholic Beverage Commission. As it turned out, neither of these representations were true. The club’s lease had been terminated and the purported single pending TABC investigation was actually 12 separate charges (for, among other things, underage drinking, prostitution, lewd conduct, and drug use) consolidated into a single action that was going to result in the termination of the club’s liquor license. On appeal, the Court upheld the jury’s $704,480.45 fraud verdict based on these facts, finding that Keiller had presented sufficient evidence to establish his fraud claim.
Last November, the Texas Supreme Court reversed and remanded for further consideration in a case where the Dallas Court of Appeals had concluded that the plaintiff had sufficiently pleaded a waiver of sovereign immunity through the use of tangible property. The Supreme Court held that the plaintiff had not alleged a “use” of property for a whiteboard that fell on his head, because Dallas Metrocare had only made the board available for use by patients. On remand, the Court of Appeals had to consider the alternative question of whether the plaintiff’s claims alleged injury through a “condition” of property. The Court concluded that he had pleaded such a claim, based on the allegation that the whiteboard was in an unsafe condition because it was not properly secured. The case was therefore remanded to the trial court for further proceedings.
Dallas Metrocare Servs. v. Juarez, No. 05-11-01144-CV
Following up on last week’s decision that basically eliminated minority shareholder oppression claims (or more precisely, shareholder oppression remedies) in Texas, the state Supreme Court has reversed and remanded another such case that passed through the Dallas Court of Appeals a couple years ago. In Cardiac Perfusion Services, Inc. v. Hughes, the Court of Appeals had affirmed the trial court’s order of a $300,000 “fair value” buyout of the oppressed shareholder’s stock, holding that the majority’s oppressive conduct justified a departure from the “book value” buyout price provided for by the parties’ shareholder agreement. With court-ordered buyouts no longer a viable remedy for shareholder oppression claims, the Supreme Court vacated that portion of the judgment, but remanded the case to the trial court in the interests of justice in order to afford the minority shareholder an opportunity to try to establish liability under one or more of the alternative claims discussed last week in Ritchie v. Rupe.
Cardiac Perfusion Servs. Inc. v. Hughes, No. 13-0014
In this contract dispute, the Court of Appeals applied the standard set forth by the Texas Supreme Court in Hathaway v. General Mills, Inc., 711 S.W.2d 227 (Tex. 1986), to the modification of an at will sales representative agreement. In Hathaway, the Supreme Court stated that “to prove a modification of an at will employment contract, the party asserting the modification must prove two things: (1) notice of the change; and (2) acceptance of the change.” The notice must be unequivocal and, if so, continued employment constitutes acceptance of the change. The Court found in this case that, although the plaintiff “unequivocally denied” agreeing to or negotiating any modifications to his commission, the defendants letter outlining the modification contained no equivocation and there was no dispute that the plaintiff continued working.
Steadfast Insurance Company entered into an agreed judgment with appellants and later filed an application for turnover and appointment of a receiver in aid of judgment. Steadfast set its application for hearing but did not provide notice to appellants. At the ex parte hearing, Steadfast represented to the trial court that it had given appellants notice, and the trial court granted its application. Not surprisingly, the Court of Appeals set aside the turnover order and appointment of receiver for failure to provide notice.
In this class action concerning certain practices of a life insurance settlement company, the Court of Appeals upheld a decision to certify the case as a class action. The defendants challenged the decision on several grounds, including that the trial court purportedly failed to consider “the res judicata risks” of certifying a class action on absent class members. The Court, however, rejected this argument, pointing to facts in the record showing that the trial court considered the other pending lawsuits. The Court also pointed to the certification order which specifically limits the class to the narrow focus of the lawsuit and which directed that class members should be given notice of their right to opt out of the class.
In an attempt to collect on a $3.6 million promissory note, Graham Mortgage Corporation filed suit against several parties, including appellant Barbara Mills, who had executed a personal guaranty for up to $1.8 million (half of the total amount). Graham Mortgage successfully moved for summary judgment against Ms. Mills, and the trial court entered a judgment against her for $2.8 million plus interest and attorneys’ fees. Ms. Mills appealed, arguing that the guaranty limited her liability to $1.8 million, plus fees and expenses.
Graham Mortgage did not contest that there was an error in the amount of the judgment, but instead argued that the Court of Appeals could simply modify the amount of the judgment pursuant to Rule of Civil Procedure 46.5, which allows for voluntary remittitur. The Court disagreed, noting that Rule 46.5 “only allows voluntary remittitur after a court of appeals has reversed the trial court’s judgment because of a legal error affecting only part of the damages awarded.”
Television reporter Brett Shipp was sued for defamation by Dr. Richard Malouf, founder of the All Smiles Dental Center. Shipp broadcast a story on allegations of Medicaid fraud involving Malouf, and closed by reporting that Malouf “has yet to comment on the allegations but filed for bankruptcy and is in the process of divesting his once impressive empire.” Malouf alleged that statement was defamatory because it was All Smiles Dental Center that filed for bankruptcy, not Malouf personally. Shipp filed a plea to the jurisdiction and a motion to dismiss under the Texas Citizens Participation Act. The trial court denied both the plea and the motion, and Shipp took the matters up on interlocutory review.
The Court of Appeals affirmed the denial of the plea to the jurisdiction, but reversed and rendered based on on the TCPA. The plea to the jurisdiction claimed that the county court at law was without jurisdiction because it would deny Shipp the right to a 12-person jury. The Court quickly disposed of that issue, citing its own case law establishing that the size of the available jury does not negate subject matter jurisdiction that has otherwise been properly conferred on a court. As to the TCPA, the Court held that Shipp had met his initial burden of showing that the lawsuit arose out of his exercise of the right to free speech because the subject matter of his report as a whole — not just the statement about the bankruptcy filing — was made in connection with a matter of public concern. That shifted the burden to Malouf to come forward with a prima facie case, based on “clear and specific evidence,” for each element of his defamation claim. Malouf argued that a false accusation of personal bankruptcy was defamation per se, which would have given rise to a presumption of damages. The Court of Appeals disagreed, holding that it was not defamation per se because it did not “touch Malouf in a way that is harmful to one engaged in the profession of dentistry.” Without any other clear and specific evidence of damages, the Court held that the motion to dismiss under the TCPA should have been granted.
Shipp v. Malouf, No. 05-13-01080-CV
An employer sued its former employee for misappropriating funds from the company, alleging multiple causes of action, including breach of contract, fraud, and breach of fiduciary duty. The jury returned a verdict in favor of the employer on all counts and awarded economic and punitive damages. The trial court also awarded the employer attorneys’ fees based on its breach of contract claim.
On appeal, among other things, the employee argued that the trial court’s damages award violated the one-satisfaction rule, which limits a plaintiff who suffers a single injury to damages based on only one cause of action. The Court of Appeals agreed, noting that “when a defendant’s acts result in a single injury and the jury returns favorable findings on two or more theories of liability, the plaintiff has the right to a judgment on the theory entitling him to the greatest or most favorable relief.” Consequently, the Court set aside the attorneys’ fees and statutory damages awarded by the trial court, and awarded the employer economic and exemplary damages under its breach of fiduciary duty claim (which does not provide for the recovery of attorneys’ fees) because that result gave the employer its largest recovery.
This morning’s decision by the Texas Supreme Court in Ritchie v. Rupe raises some pretty substantial questions about the continuing viability of claims for minority shareholder oppression in Texas. By way of background, the decision arises out of a dispute over a family-owned investment business, with the wife and heir of one of the deceased owners claiming that the other owners were hostile to her and told her that she would “never get any money in this family.” Wanting out of the company, she sought to sell her shares to an outside investor, but the majority shareholders refused to meet with any prospective purchasers, make the company’s records available, or otherwise assist in a sale. The jury found that conduct to be oppressive, and the trial court ordered a buyout of the minority’s shares for $7.3 million. The Dallas Court of Appeals affirmed the oppression ruling, albeit with a remand for further consideration of the valuation of the plaintiff’s shares.
In reversing that decision, Justice Boyd’s majority opinion for the Supreme Court first analyzed the case under the receivership statute, currently codified at section 11.404 of the Texas Business Organizations Code. That statute permits a court to appoint a receiver when “the acts of the directors or those in control of the corporation are illegal, oppressive or fraudulent . . .” Construing and rejecting previous cases that have considered the meaning of “oppressive” conduct, the court today holds that directors or managers engage in oppressive conduct “when they abuse their authority over the corporation with the intent to harm the interests of one or more of the shareholders, in a manner that does not comport with the honest exercise of their business judgment, and by doing so they create a serious risk of harm to the corporation” (emphasis added). Since shareholder oppression cases have typically focused on whether the minority shareholder has been improperly harmed, the additional question of whether the majority is putting the corporation itself at risk of harm appears to be a significant shift in the law. Because the directors here had legitimate business reasons for refusing to meet with prospective buyers, there was no “serious risk of harm to the corporation,” and therefore no oppression.
Perhaps even more significant are the Supreme Court’s other two holdings in the case. Besides the refusal to cooperate with the sale of her shares, the plaintiff also alleged that the defendants had engaged in other types of oppressive conduct. The court declined to consider those other acts, however, based on its determination that the receivership statute does not authorize the remedy of a buyout of the minority’s shares. Thus, a court may order the appointment of a receiver if the corporation itself is threatened with harm, but it cannot order a buyout just because the minority shareholder is being harmed by the majority’s business decisions. Finally, because the receivership statute does not permit a buyout, the court turned to the question of whether there is a common law cause of action (and remedy) for shareholder oppression, and concluded that there is not. Although the court recognized there Texas law should protect minority shareholders from “freeze-out” or “squeeze out” tactics of the majority, it held that there are already sufficient protections with remedies such as derivative lawsuits, shareholder agreements, and common law claims such as breach of fiduciary duty and accounting. Accordingly, there was no need to recognize a common law claim for minority shareholder oppression, and it therefore could not serve as the basis to order an equitable buyout of the minority’s shares. And in fact, the Supreme Court remanded the case for further consideration of the plaintiff’s breach of fiduciary duty claim.
Going forward, the majority opinion today imposes significant restraints on shareholder oppression claims, refocusing the claim on harm suffered by the company rather than its minority shareholders and eliminating the ability of courts to order buyouts, whether at fair market value or any other price. Lawyers and clients should also make careful note of the majority’s emphasis on the utility of shareholder agreements in providing for the kinds of contractual remedies that can provide in advance for buyout provisions and other remedies that would moot the need for any shareholder oppression claim. But as Justice Guzman’s dissent correctly notes, this is a decision that puts minority shareholders in a much weakened position when their personal interests clash with the decisions of the majority.
The Court of Appeals affirmed the trial court’s grant of a no evidence motion for summary judgment in which the defendant, a lumber company, was alleged to have breached its contract to build a swimming pool for plaintiff. The Court found that, although there were cracks alleged in the built pool, nothing in the plaintiff’s affidavit identifies a contractual obligation that the defendant failed to perform.
In what will certainly be seen as a landmark decision for Texas business law, the Supreme Court has issued its opinion today reversing the Dallas Court of Appeals in the case of Ritchie v. Rupe. As we noted a while back, the Court of Appeals had affirmed the trial court’s ruling that a minority shareholder was entitled to “fair market value” for her shares, including “discounts for lack of marketability and for the [s]tock’s minority position.” Today, the Supreme Court holds that it was not oppressive conduct for the majority shareholders to refuse to meet with prospective purchasers of the company, that the Business Organizations Code does not authorize courts to order a corporation to buy out a minority shareholder’s stock, and that there is no common-law cause of action for minority shareholder oppression.
Cornerstone Healthcare owns and operates a group of hospitals located in several states. It filed suit against Nautic Management VI, the general partner or manager of several private equity funds. NMVI filed a special appearance to challenge personal jurisdiction, but the trial court overruled it. On interlocutory appeal, the Court of Appeals reversed and rendered judgment dismissing NMVI from the case. Cornerstone argued that NMVI should be subject to specific personal jurisdiction in Texas because it controlled the funds whose representatives had traveled to Texas and conducted the business that got them all sued. The Court of Appeals disagreed, holding Cornerstone to its word that it was not attempting to pierce the corporate veil and therefore refusing to attribute the contacts of the funds to NMVI.
Nautic Mgmt. VI, LP v. Cornerstone Healthcare Group Holding, Inc., No. 05-13-00859-CV
The plaintiff sought a declaration that it has an easement by necessity to cross the defendant’s property to gain access to County Road 134. Property law buffs (or those studying for the bar exam) will recall that an easement by necessity is established when there is:
- unity of ownership of the dominant and servient estates prior to severance;
- necessity of a roadway; and
- existence of the necessity at the time of the severance of the two estates.
The resolution of this case turned on the third element–specifically, whether CR 134 existed when the two tracts were severed nearly 150 years ago in 1866. Because the plaintiff did not meet its burden of establishing that CR 134 was being used at that time, the Court of Appeals affirmed the trial court’s finding that the plaintiff does not have an easement by necessity across the defendant’s property to access CR 134.
Addressing the trial court’s denial of the defendant’s motion to compel arbitration, the Court of Appeals held the following language insufficient to require arbitration of this dispute over a trust agreement: “We request that any questions or disputes that may arise during the administration of this trust be resolved by mediation and if necessary, arbitration.” According to the Court, the trust agreement elsewhere established that the trust would be subject to the jurisdiction of a court if interested parties, such as the appellees, filed a legal proceeding. Thus, the Court establish that the “request” for arbitration was “precatory, not mandatory.”
Trinity Structural Towers, Inc. sued two related companies: 1) Suzlon Wind Energy Corporation (Suzlon Wind), a Delaware corporation with its principal place of business in Texas, and 2) Suzlon Energy Company (Suzlon India), Suzlon Wind’s India-based parent company. Trinity sued both defendants for breach of contract and several related claims. Suzlon India filed a special appearance, arguing that it was not subject to personal jurisdiction in Texas, which the trial court denied.
On interlocutory appeal, the Court of Appeals reversed the trial court and dismissed Suzlon India from the case for lack of personal jurisdiction. Even though one of Suzlon India’s employees signed the contract at issue, the evidence was clear that the contract was between Trinity and Suzlon Wind, not Suzlon India. The Court also rejected Trinity’s argument that Suzlon India was acting as Suzlon Wind’s agent, noting that Trinity did not meet its burden under Texas law to prove an agency relationship.
Dentist, Stephen Chu, ordered dental supplies form the plaintiff, accepted the shipment, but refused to pay the balance. The plaintiff sued Dr. Chu individually and his dental practice, Stephen Chu, DDS, MSD, PA d/b/a Smile Again Orthodontics” for breach of contract and account stated. Dr. Chu, however, declared bankruptcy and was subsequently nonsuited. The Court found that a series of invoices addressed to “Stephen Chu DDS” could not establish, on summary judgment, that ” Stephen Chu, DDS, MSD, PA d/b/a Smile Again Orthodontics” was a party to the contract.
Altus Brands II LC filed for a writ of garnishment against two officers of Swordfish Financial, Inc., seeking to enforce a $289,886 judgment from Minnesota against Swordfish. The trial court permitted Altus to execute on specific stock transferred to the officers by Swordfish in 2010, but refused to enter a money judgment against them. Altus appealed. The opinion is lengthy and exceedingly fact-specific — it’s the kind of case where dozens of findings of fact and conclusions of law get dropped into a single footnote.
Because the value of the stock had declined since the date of its transfer, the Court of Appeals held that the trial court had erred in only permitting Altus to execute on the stock, and that a money judgment was necessary to ensure that Altus’s position was not prejudiced by the fraudulent transfer. However, the amount of that money judgment was not to exceed the the value of the stock at the time of transfer, so as not to create a windfall in favor of Altus. The Court also affirmed the trial court’s findings regarding the cancellation of a $3.5 million promissory note from Swordfish to the officers, which Altus was apparently trying to use as further proof of its fraudulent transfer claim for the full amount of the Minnesota judgment.
Altus Brands II LLC v. Alexander, No. 05-13-06660-CV
In this whistleblower lawsuit, Ginger Weatherspoon alleged that the Office of the Attorney General (OAG) retaliated against her and ultimately terminated her employment after she reported that she was pressured to sign a false affidavit. According to Ms. Weatherspoon, the affidavit was going to be used to support a judicial misconduct complaint against a district judge in Dallas (apparently, Judge David Hanschen).
The OAG sought to have Ms. Weatherspoon’s case dismissed based on sovereign immunity, and moved for summary judgment on that basis. The Texas Government Code waives sovereign immunity for claims brought under the Texas Whistleblower Act, but, in order for a claim to fall within the purview of that statute, the alleged conduct must be reported to “an appropriate law enforcement authority.” The OAG argued that Ms. Weatherspoon did not make her report to an appropriate law enforcement authority because she reported the alleged conduct only to her division head in the Child Support Division of the OAG. The Court of Appeals disagreed, and upheld the trial court’s decision to deny the OAG’s Motion, because Ms. Weatherspoon’s division head was required to forward her report to the OAG’s Office of Special Investigations–an appropriate law enforcement authority.
Office of Attorney General v. Weatherspoon, No. 05-00632-CV
The Texas Supreme Court has also granted the petition for review in another case involving foreclosure sales, deficiencies, and section 51.003 of the Property Code. In Martin v. PlainsCapital Bank, the Dallas Court of Appeals reversed judgment in favor of a lender that sought to recover a deficiency because the bank had based its deficiency claim on the price it resold the property for, rather than the price it had paid over a year earlier at the foreclosure sale. Oral argument has been set at the Supreme Court for September 18.
The Texas Supreme Court has unanimously affirmed the judgment of the Dallas Court of Appeals on petition for review from the case of Interstate 35/Chisam Road L.P. v. Moayedi. As regular readers will recall, Moayedi was the first of a string of cases from Dallas holding that borrowers and guarantors had contractually waived their statutory right to offset any deficiency if the foreclosure sale resulted in a price less than the collateral’s fair market value. Justice Willett, writing for the Supreme Court, agreed with that analysis, holding that section 51.003 of the Texas Property Code creates an affirmative defense that the borrower or guarantor can validly waive through a general waiver of defenses in the lending instruments. Unless the Legislature decides to step in, businesses and individuals can expect to see such waiver clauses become standard practice in property financing transactions.
Moayedi v. Interstate 35 Chisam Road LP, No. 12-0937
A memorandum opinion teases, but does not answer, an interesting question: Does Chapter 74 of the Civil Practice & Remedies Code require a plaintiff to produce an expert report for a breach of contract claim arising out of the provision of medical services? Margaret Miller’s son placed her in a “skilled nursing resident program” at Plaza Health Services and contractually agreed to be the “responsible party” for payment. Among other things, the contract provided that the facility was a “restraint-free community,” and that no restraints of any type would “be used as punishment or as a substitute for more effective medical nursing care or for the convenience of the community staff.” After the nursing facility sued for unpaid bills, he he counterclaimed for breach of contract, DTPA, and medical negligence claims. The negligence claims were dismissed due to the failure to file a medical expert report, and the trial court granted a motion in limine to exclude evidence of restraints or straitjackets used on Ms. Miller. Unfortunately, error was not preserved on that issue due to the lack of a proper proffer of the excluded evidence. The grant or denial of a motion in limine does not preserve error by itself. If the motion is granted, the losing party must, during trial, (1) approach the bench and ask for a ruling, (2) formally offer the excluded evidence, and (3) obtain a ruling on the offer. Here, the appellants argued about the relevance of the evidence, but never actually offered it or obtained a ruling during trial on its admissibility. Accordingly, error was not preserved, and judgment for the nursing facility was affirmed.
Ferguson v. Plaza Health Servs. at Edgemere, No. 05-12-01399
In this breach of warranty case, the Court upheld the trial court’s summary judgment dismissal because the contract at issue did not contain an express warranty. Although the plaintiff argued that the contract listed the services the defendant was to provide, the Court found that “[t]he mere identification of what services are to be performed is not, without more, an express warrant that those services are to be performed to any particular standard or quality.”
Our sister blog, 600 Camp, has posted a PowerPoint presentation by Lyle Cayce, the Clerk of the United States Court of Appeals for the Fifth Circuit. For anyone who has slogged through the hyperlinking of legal authorities and record citations in an appellate brief, it’s a glimpse into the future (or as they like to call it in the Fifth Circuit, “the present”) of e-filing. As Mr. Cayce described during last week’s appellate conference in Austin, the Fifth Circuit has commissioned software that automatically converts the parties’ electronically filed briefs into fully hyperlinked e-briefs for the judges, their staffs, and even the parties themselves. As a result, every citation is automatically converted to a hyperlink that can take the reader directly to the cited material, whether it is in the record or on whichever legal research service the user prefers. Kudos to the Fifth Circuit for figuring out how to make e-filing simpler and better for everyone involved, and let’s hope that the Texas courts will be headed that way as well.
Cornerstone Healthcare Group Holding, Inc., a provider of post acute care hospital services, was pursuing acquisition opportunities of rehabilitation facilities in Texas. In the midst of these efforts, several of its executives left the company. Around the same time, New Reliant, a Delaware limited liability company, acquired a rehabilitation hospital in Texas called “Old Reliant.” Cornerstone filed suit against New Reliant and a few other entities that had indirect ownership stakes in New Reliant via a chain of subsidiaries, alleging that several of Cornerstone’s recently-departed executives had usurped a corporate opportunity from Cornerstone.
The entities with ownership stakes in New Reliant filed special appearances, asserting that the court lacked personal jurisdiction over them. Cornerstone argued that the entities were subject to jurisdiction in Texas based on their indirect ownership interest in New Reliant–a company doing business in Texas–and the fact that they held 100% of the stock of every entity involved in the purchase of the hospitals. The entities argued that they were separate companies (based in Delaware) and that their only contact with Texas was their passive, indirect ownership interests in New Reliant. The trial court granted the entities’ special appearances, and Cornerstone appealed. The Court of Appeals affirmed, rejecting Cornerstone’s argument that the subsidiaries in between the entity defendants and New Reliant should be ignored. The Court further explained that nothing in the record suggested “that the degree of control exercised by appellees is greater than that normally associated with with common ownership and directorship.”
Cornerstone Healthcare Group Holding, Inc. v. Reliant Splitter, L.P. et al., No. 05-11-01730-CV
In 2010, the Court of Appeals reversed summary judgment in favor of the lender in a collateral-disposition case, holding that the borrowers had raised a fact question as to the commercial reasonableness of the property. DMC Valley Ranch, L.L.C. v. HPSC, Inc., 315 S.W.3d 898 (Tex. App.–Dallas 2010, no pet.). On remand, the lender took the position that the defendants’ valuation expert report was correct, and again moved for summary judgment on that basis (apparently seeking to recover a smaller deficiency rather than fighting for a larger one). The trial court granted summary judgment for the lender, and also awarded attorney fees via summary judgment. The Court of Appeals affirmed on the deficiency ruling, but reversed on attorney fees. The Court held that there was a fact issue on the reasonableness and necessity of the attorney fees because the defendants’ attorney had submitted an affidavit opining that it was unreasonable to seek fees for unsuccessful appeals and motions, and that it was not appropriate to have seven lawyers on the file. The case was therefore remanded for further proceedings on attorney fees.
DMC Valley Ranch LLC v. HPSC, Inc., No. 05-11-01730-CV
The Texas Citizens Participation Act continues to be a fruitful source of appellate activity. In this instance, the Court of Appeals has reversed the trial court’s order denying a motion to dismiss in a case arising out of a bad review on Angie’s List. Barbara Young hired Perennial Properties to construct an outdoor living space at her home, but Young claimed that Perennial failed to perform its work as required. McKinney Lumber Company then filed a lien against Young’s property for $9,779 in lumber that Perennial had failed to pay for. After the lumber company sued everyone involved, Young wrote up her experience in an online review, giving Perennial an overall grade of “F” and describing Perennial’s owners as incompetent crooks. Those owners then intervened in the lawsuit in order to sue Young and her attorney for defamation and intentional infliction of emotional distress.
The Court of Appeals first held that Young had met her initial burden of showing that the online review was an exercise of her right to free speech because it was a communication made to the public in connection with a good, product, or service. That brought it within the scope of the TCPA and shifted the burden to Perennial’s owners to establish by clear and specific evidence a prima facie case for each element of their claims. That they failed to do, according to the Court of Appeals. The defamation claim failed because the owners had not provided any evidence that the allegedly false statements were defamatory (as opposed to non-actionable opinions) or that Young had been negligent in making them. The intentional infliction of emotional distress claim failed because that cause of action is only a “gap-filler” tort, and there were no different or distinguishing facts from the defamation claim to permit it to proceed separately. The Court of Appeals therefore dismissed both claims and remanded the case for further proceedings under the TCPA, presumably to consider an award of attorney fees to Young.
Young v. Krantz, No. 05-13-00853-CV
This negligence lawsuit arises from a prior medical malpractice lawsuit in which Darwin Flores sued his doctor for causing him to suffer monocular vision. This doctor hired appellees, an investigative firm, to surreptitiously record Flores to show the true extent of his injury. On the videotape, the defendants mistakenly included video of a man rollerblading (who they determined was not Flores), and informed the doctor’s counsel that it was in fact not the plaintiff. Flores lost his malpractice trial (though it’s unclear whether the rollerblading videotape was played or had anything to do with the loss). Nevertheless, he followed up by suing the investigators for creating a “misleading perception” of him. He is seeking $1 billion dollars in damages.
On appeal, the Court rejected Flores’ argument that a “private detective who conducts surveillance on an adversary owes his adversary a duty to refrain from circulating work product that the private detective knows can be used as fake evidence.” Instead, the Court pointed out the undisputed fact that there was no relationship between appellees and Flores, let alone one that would impose a duty of care.
In this breach of contract case, the defendant corporation filed an answer pro se. Because corporations must be represented by an attorney, the trial court entered an order giving the defendant notice that its pleading would be struck if it did not file a proper answer within 30 days. After it failed to do so, the plaintiffs moved to strike the pro se pleading and also filed a motion for default judgment. The trial court granted both motions, entering a default judgment in plaintiffs’ favor that included $78,000 in actual damages and over $10,000 in attorneys’ fees.
On appeal, the defendant argued that the trial court erred in striking its answer and entering a default judgment. The Court of Appeals rejected the defendant’s argument that the trial court’s action was overly harsh, but it agreed with the defendant that there was insufficient evidence in the record to enter the default judgment. The Court noted that, even if the facts in the plaintiffs’ petition were accepted as true, they had “failed to establish a breach of contract claim” against the defendant. Because the plaintiffs had not alleged sufficient facts to establish their claim, the Court set aside the default judgment and remanded the case back to the trial court.
GQ Enters. Corp. v. Rajani, No. 05-12-01353-CV
If “blogger” sounds like an unusual pastime for the son of an oil-and-gas billionaire, this colorful case may be the one for you. T. Boone Pickens and several of his children sued Michael Pickens. Michael is T. Boone’s son and a recovering drug addict who has chronicled his life and his recovery in his blog, “5 Days in Connecticut” (which is now closed to uninvited readers). The blog has not been very kind to the other members of Michael’s family, which led them to sue for invasion of privacy, defamation, and intentional infliction of emotional distress. Michael moved to dismiss based on the Texas Citizens Participation Act, our version of the “anti-SLAPP” laws that have been enacted around the country in recent years. The trial court denied the motion to dismiss, and the Court of Appeals affirmed, holding that Michael’s statements about his life and his family did not qualify for protection under the TCPA because they were not “made in connection with a matter of public concern.” Tex. Civ. Prac. & Rem. Code § 27.001(3).
Although the TCPA defines “public concern” to include statements relating to “a public figure,” the Court drew a distinction between general-purpose public figures and limited-purpose public figures. To qualify as a matter of public concern under the TCPA, the speech must either relate to a general-purpose public figure (whose entire life is followed by the public) or a limited-purpose public figure (who is only followed at times, or on certain topics). If it is a limited-purpose public figure, then the defendant’s speech only qualifies as a matter of public concern if the statements relate to the subject matter that makes the person a limited-purpose public figure. Here, the Court concluded that Michael’s evidence was insufficient to show that T. Boone was a public figure for all purposes, and that he was only a public figure for the limited purpose of his opinions and activities in the energy industry. Because Michael’s statements related to T. Boone’s family life, and not the energy industry, they did not qualify as matter of public interest under the TCPA, and therefore Michael’s motion to dismiss had to be denied.
Pickens v. Cordia, No. 05-13-00780-CV
Two years ago, the Court of Appeals reinstated a $125 million arbitration award that the trial court had set aside on the basis of evident partiality, after one of the three arbitrators failed to disclose the full extent of his ties to the claimant’s attorneys. Our report on that decision is here: A Bonanza for Ponderosa. After this morning’s orders from the Texas Supreme Court, that bonanza is no more. That court has reversed the Court of Appeals’ judgment, reinstated the trial court’s order vacating the arbitration award, and will permit the case to once again be arbitrated before a new panel.
Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, No. 12-0789
The Dallas Court of Appeals continues to be a hard place for borrowers and guarantors to claim the statutory right to offset deficiencies when collateral is sold in foreclosure for less than its fair market value. In this instance, the bank sued the guarantor of a $9.5 million loan. After the apartment complex that secured the debt was sold in foreclosure for only $4 million, the bank sought to recover the deficiency. The guarantor argued that the bank should only be permitted to recover the difference between the balance of the loan and the fair market value of the property, not the price realized in the foreclosure sale. See Tex. Prop. Code § 51.003(c). The trial court granted summary judgment for the bank, and the Court of Appeals affirmed. Although the opinion does not cite to the Moayedi case that started off this line of decisions (and that is currently pending before the Texas Supreme Court after oral argument in January), the Court once again held that the parties’ contract validly waived the guarantor’s right to offset. In this particular agreement, the waiver clause referred to “any and all rights or defenses based on suretyship or impairment of collateral” and “any claim of setoff.” Both clauses, the Court held, were sufficient to waive the statutory offset rights.
Nussbaum v. OneWest Bank, FSB, No. 05-13-00081-CV
In this insurance dispute, the United States Youth Soccer Association (“USYSA”) sought coverage form its liability insurer for claims filed against it by the National Association of Competitive Soccer Clubs (“NACSC”). The NACSC alleged that USYSA had violated the bylaws of the governing board for soccer in the United States, the USSF, by discriminating against certain youth soccer players who want to play for both organizations. The Court upheld the insurers denial of coverage based on the policy exclusion that precludes coverage for claims based on a breach of contract. Employing the “eight corners” rule, the Court found that the allegations in the underlying lawsuit relate to breaches of the USSF bylaws, policies rules and regulations, which, in the Court’s view, constituted a breach of contract.
Boardwalk Motor Cars sued Imagine Automotive Group over allegations that it had bribed Boardwalk employees to obtain used cars at preferential prices for resale, and that it had outright stolen some cars from Boardwalk’s dealerships. During discovery, Boardwalk successfully moved to compel the production of certain financial records, including canceled checks and documents supporting Imagine’s claim that it had paid for the allegedly stolen vehicles. That set off a lengthy series of sanctions motions and hearings. A week before trial, the court struck Imagine’s defenses for failing to produce some of those documents, and on the third day of trial it struck all of Imagine’s pleadings when Boardwalk informed the court of Imagine’s failure to produce still other documents. The jury awarded $269,950 in damages under the Theft Liability Act. The trial court then awarded Boardwalk $389,898 for its attorney fees under the Act, plus an additional $180,000 in sanctions against Imagine for the discovery abuse. The Court of Appeals affirmed.
The Court held that the trial court had not failed to consider the availability of lesser sanctions before imposing its death penalty sanctions. Among other things, the court had previously warned that noncompliance could result in dismissal, and the sanctions order stated that the judge had considered and rejected the less intrusive remedy of reopening discovery and continuing the trial. The trial court also did not err in refusing Imagine’s attempt to put on evidence disputing causation for Boardwalk’s claimed damages, as the striking of the pleadings meant that Imagine’s theft of the cars was an established fact. Imagine could have put on evidence that the cars were worth less than Boardwalk claimed, but could not dispute they had been stolen. The Court held that the sanctions were not excessive in light of Imagine’s multiple misrepresentations and acts of discovery abuse. Finally, the Court of Appeals rejected Imagine’s argument that Boardwalk should have been required to sub-segregate its attorney fees for the Theft Liability Act claim because that claim had shrunk during the course of the litigation from 256 allegedly stolen vehicles to only 11. The Court reasoned that segregation is only required between causes of action, not within a particular cause of action.
Imagine Automotive Group v. Boardwalk Motor Cars, No. 05-11-01119-CV
The plaintiff, a licensed real estate broker, sued the vice president of a real estate property management company for tortious interference based on the defendant’s involvement in the refusal to provide the plaintiff with a commission for a property he allegedly had the exclusive right to sell. Because the promise to pay a commission was not in writing, however, the plaintiff was limited by statute to a “cause of action among brokers for interference with business relationships.” The Court of Appeals found that the defendant was not a licensed real estate broker and that the plaintiff admitted that the defendant did not act as a broker. Thus, the Court found that the plaintiff’s claim was barred under the Real Estate License Act and affirmed the trial court’s decision.
In this attorney malpractice case, a client sued his lawyer for malpractice and a number of other related causes of action. The parties settled the case at mediation and signed a settlement agreement requiring the lawyer to sign an agreed judgment to secure payment of the settlement amount. The client’s attorney prepared the agreed judgment and sent it to the lawyer’s attorney, but, after several attempts, never received a response. As a result, the trial court re-opened the case (which had been dismissed due to the settlement), set it for a bench trial, and sent notice of the trial setting to both parties.
At the bench trial, neither the lawyer nor his attorney showed up, and the trial court awarded the client damages in an amount that was more than three times the amount of the settlement. The lawyer then filed a motion for a new trial. His attorney acknowledged, however, that he had received notice of the trial but ignored it because he thought that it was an “erroneous” notice since the case had settled. The trial court found this excuse insufficient and denied the motion. On appeal, the Court of Appeals agreed, and, although it reversed some of the damages awarded to the client, held that it was within the trial court’s discretion to conclude that the lawyer and his attorney “failed to appear for trial as the result of intentional conduct or conscious indifference.”
McLeod v. Gyr, No. CC-11-02708-B
The McGonagles bought property in Granbury, Texas subject to a dedication instrument involving the city’s historic district. At closing, the McGonagles also purchased a title insurance policy. The McGonagles later tried to resell the property, but couldn’t because of the dedication instrument, so they sued the title insurance company, who had denied coverage. The Court agreed with the title insurers, holding, among other things, that a dedication does not fall with the scope of title insurance coverage because it is not a tax, assessment or lien on real property.
Soon after the Plaintiff was sued for an alleged debt, she received a letter from a lawyer soliciting her to speak with him about representing her in the lawsuit. The attorney’s letter violated a Texas law that made it a crime for lawyers to solicit clients within 31 days of a lawsuit being filed against them. The Plaintiff brought a civil action against the lawyer pursuant to the 2012 version of the Texas Civil Barratry Statute, which allowed plaintiffs to bring civil barratry claims against attorneys who violated “the laws of this state.”
The trial court granted the lawyer’s motion for summary judgment, based on its findings that the Civil Barratry Statute was unconstitutional and that liability under the statute is predicated upon a criminal prosecution or conviction. On appeal, the Court of Appeals reversed, holding that the 2012 statute does not require a criminal conviction. Additionally, the Court overturned the trial court’s holding that the statute was unconstitutional, because deciding the constitutionality of a criminal statute requires the participation of a party “with authority to enforce” the law, which in this case was the Dallas County District Attorney.
Shearer v. Reister, No. 05-12-01475-CV
Organist’s Establishment Clause Argument Fails to Invalidate Unemployment Benefits Exemption
April 28, 2014Mr. Spicer, an organist formerly employed by the Pleasant Valley United Methodist Church, challenged on constitutional grounds the statutory exemption of unemployment benefits for ex-employees of religious organizations. The Court of Appeals rejected Spicer’s arguments, holding that the religious exemptions in the Texas unemployment laws do not violate Establishment Clause because, among other things, these laws demonstrate neither sponsorship of nor hostility towards religion.
The opinion in a premises liability case has rejected a novel attempt to defeat summary judgment by invoking the special exceptions process. The plaintiff, a mother whose minor son was injured after tripping on an escalator at Amazing Jakes, argued that summary judgment should not be based on a pleading deficiency that could be cured by amendment, and that the proper procedure for doing so was to file special exceptions. The Court of Appeals disagreed, holding that Amazing Jakes had moved for traditional and no evidence summary judgment based on the facts, not on the basis that the plaintiff had failed to state a cause of action or any other pleading deficiency. The Court noted that a pleading deficiency would not be a proper basis for summary judgment unless the trial court has first given the plaintiff an opportunity to amend the pleading, except when the defect is of the type that could not be cured by amendment.
Williams v. Adventure Holdings LLC, No. 05-12-01610-CV
In an interesting case on the scope of “minimum contacts,” the Court of Appeals held that serving as the representative plaintiff in a nationwide class action (with members from Texas) against a Texas company was not sufficient to create minimum contacts for purposes of personal jurisdiction.
The case arose out of a nationwide class action that the Appellees, as class representatives, filed in Illinois against King Supply Company, LLC alleging violations of the Telephone Consumer Protection Act (TCPA). King settled the class action for $20 million, but as part of the settlement the Appellees covenanted that, except for $200,000 paid by King, their only source of payment would be King’s insurance policies. King’s Texas-based insurance companies (Appellants) then filed a declaratory action in Dallas against Appellees seeking a declaration that they had no duty to defend or indemnify King.
Appellees filed a special appearance contesting personal jurisdiction, which the trial court granted. Appellants appealed, arguing that by representing a nationwide class (12% of which were Texas residents) against a Texas company and seeking to recover funds from Texas insurance policies, Appellees’ contacts with Texas were sufficient to warrant personal jurisdiction over them. The Court of Appeals disagreed, concluding that the evidence failed to show that Appellees “purposefully availed themselves of the privilege of conducting activities in Texas, thus invoking the benefits and protections of Texas law.”
Nat’l Fire Ins. Co. v. CE Design, Ltd., No. 05-13-00720-CV
Speed Boats of Texas brought suit against Fountain Powerboats and obtained a default judgment. Fountain then filed a restricted appeal in which it sought to set aside the default judgment by arguing that the record did not establish that the secretary of state served Fountain with process. The Court of Appeals agreed. Because the record did not “affirmatively show that the secretary of state forwarded a copy of the process to the defendant,” the Court set aside the default judgment and remanded the case back to the trial court.
Fountain Powerboats v. Speed Boats of Texas, No. 05-13-006570-CV
The plaintiff in this case sought to collect on promissory notes it had obtained from a failed bank. After a bench trial that included only one witness and three exhibits, however, the trial court rendered a take nothing judgment against the plaintiff. The Court of Appeals agreed with the trial court because the only two documents indicating the amount allegedly owed under the notes were unsigned “Prenegotiation Agreements.” Moreover, these documents, even if they were signed, do not establish specific amounts due and owing; instead stating that the parties “believe” that “approximately” certain amounts are owing on the notes.
After having lost on summary judgment, the plaintiff filed an amended petition, omitting all but one defendant, and then appealed the decision. The Court of Appeal found that, because the plaintiff had omitted these parties from his amended petition, his claims against these defendants were not preserved and dismissed the appeal.
A long-running dispute between former business parties and their attorneys has resulted in a lengthy opinion affirming the trial court’s determination that it lacked subject matter jurisdiction over the case. The original dispute had been submitted to arbitration, which resulted in a large award of damages and attorney fees against the defendants. The Court of Appeals eventually set aside that award, holding that the arbitrator’s failure to disclose his personal relationship with plaintiffs’ counsel constituted “evident partiality” that, under the circumstances, required vacatur of the arbitration award. Karlseng v. Cooke, 346 S.W.3d 85 (Tex. App.–Dallas 2011, no pet.). Following that ruling, the defendants in the original arbitration filed suit against the lawyers and law firm that represented the plaintiffs, as well as the arbitrator and the arbitration agency, for fraud and other related claims. Despite the fairly complex set of facts, the Court of Appeals affirmed the dismissal of the new lawsuit for lack of subject matter jurisdiction, concluding that jurisdiction was preempted by the Texas Arbitration Act because the substance of the case was a prohibited collateral attack on the vacated arbitration award. Thus, the plaintiffs could not seek to hold the arbitrator, the arbitration agency, or the attorneys liable for the expenses they incurred in defense of the original arbitration proceeding.
Patten v. Johnson, No. 05-12-01695-CV
The plaintiff sued his former employer, El Paisano, for unpaid wages and unpaid overtime. After four unsuccessful attempts by a process server to serve El Paisano at the address of its registered agent, the plaintiff served the Texas Secretary of State, who then forwarded the process to the same address via certified mail. That attempt at service also failed, and the process was returned to the secretary of state with the notation “unclaimed.” The plaintiff then moved for a default judgment, which the trial court granted.
El Paisano eventually learned of the default judgment and sought to have it set aside. The trial court denied its motion for a new trial, and El Paisano appealed. El Paisano argued, among other things, that it was not properly served because the secretary of state did not send the process to its principal place of business. The Court of Appeals rejected that argument and upheld the default judgment, noting that the plaintiff was entitled to use substituted service on the secretary of state and that the secretary of state had no obligation to send it anywhere other than the address of El Paisano’s registered agent.
El Paisano Nw Hwy v. Arzate, No. 05-12-01457-CV
An opinion issued on an emergency motion to stay a trial court’s order unsealing alleged trade secret materials highlights a difference between Dallas and some of the other courts of appeals when it comes to obtaining temporary stays. The trial court denied the defendant’s motion to permanently seal the disputed records under TRCP 76a and ordered that the documents were to be unsealed at 5 pm last Friday. Because unsealing orders are considered to be final for purposes of appeal, the defendant perfected an appeal and moved for an emergency order to stay the unsealing of the documents. The Court of Appeals granted that request, holding that a temporary stay was necessary to preserve the rights of the parties pending appeal. The Court noted that other appellate courts have applied a more stringent standard, under which the movant must show that it would be entitled to the issuance of an injunction to protect appellate jurisdiction under section 22.221 of the Government Code. The opinion expressly states that it was not ruling on the merits of the unsealing order, and that nothing in it was intended to bind the submission panel when the appeal proceeds to the merits.
Oryon Techs. v. Marcus, No. 05-14-00446-CV
The Court of Appeals has conditionally granted mandamus relief in a divorce proceeding to vacate an order requiring a trustee to withhold distributions from the husband and pay them instead to the wife. The trust instrument included a spendthrift provision, which prevents creditors from claiming distributable money or property from the trust, as well as any assignment of a beneficiary’s interest in the trust’s distributions. The Court of Appeals held that the spendthrift provision was enforceable, and that the trial court abused its discretion by ordering the trustee to make distributions in circumvention of the trust’s terms. Because the trustee was a non-party to the divorce proceeding, it also had no adequate remedy at law, thereby justifying the grant of mandamus relief.
In re BancourpSouth Bank, No. 05-14-00294-CV
In this negligent misrepresentation and fraud case, the Court of Appeals has affirmed summary judgment for the defendant based on the statute of limitations. Collective Asset Partners LLC sued Michael Schaumburg and his architectural firm after Schaumburg informed CAP about a property for sale in Tarrant County and took a $1 million fee in the resulting sale. Half of the property turned out to be located on a floodplain, which allegedly caused CAP to be unable to develop it. Schaumburg sought and obtained summary judgment that there had been no misrepresentation because the paperwork for the sale included disclosures that identified the floodlplain. Nor could CAP show a misrepresentation based on a $10.25 million appraisal on the property, as that appraisal was only intended for use by the bank that commissioned it and could not be justifiably relied upon by third parties.
Collective Asset Partners LLC v. Schaumburg, No. 05-13-00040-CV
In this insurance coverage dispute, the plaintiff argued that he did not fall with in the policy’s exclusions because the phrase “domestic employee” was ambiguous. According to the plaintiff “domestic employee” could refer to either employees who work in a household or employees who are citizens of the United States. The court rejected this argument, holding that the language of the policy combined with the regulatory framework unambiguously establish that “domestic employee” refers to household employees.
In a case that 600 Commerce believes is the first successful attempt at a permissive interlocutory appeal since the inception of the blog, the Court of Appeals has affirmed the trial court’s application of Texas law to a personal guaranty. (Check out https://600commerce.com/?s=permissive&submit=Search to see instances where the Court declined to hear interlocutory appeals)
Coca-cola had extended credit to Robert Winspear’s business pursuant to a credit agreement and a personal guaranty from Winspear. The credit agreement contained a choice of law provision in favor of Georgia law. The guaranty was included on the same page as the credit agreement, but it did not contain a choice of law provision. After Winspear’s business defaulted, Coca-Cola sued Winspear in Texas (where he and his business were located and where the agreements were executed) on the guaranty. Winspear filed a motion seeking to apply Georgia law based on the choice of law provision in the credit agreement, but the trial court denied his motion and held that Texas law applied.
Winspear sought a permissive interlocutory appeal based on his contention that if Georgia law applied to the guaranty, it would be unenforceable and thus dispose of the entire case. Although the Court agreed to hear the interlocutory appeal, it ultimately affirmed the trial court’s decision because the choice of law provision in the credit agreement did not apply to the separate guaranty.
Winspear v. Coca Cola, No. 05-13-00712-CV
The Court of Appeals has issued its first-ever (so far as 600 Commerce is aware) decision in a case with its own Wikipedia page. The City of Carrolton annexed a portion of a privately owned airfield, then issued a new ordinance to regulate it. The city then ordered the airport to be closed based on violations of the ordinance, which led the nearby homeowners to sue the city in an attempt to invalidate the ordinance and the closure order, plus an additional lawsuit against the owners of the airport for failing to bring it into compliance with the ordinance. The homeowners prevailed on both summary judgment and in a jury trial, and the Court of Appeals largely affirmed, albeit on a modified basis.
Among other things, the Court’s 48-page opinion held that the ordinance was not a valid exercise of the city’s police power because it did not require notice to the homeowners whose easements burdened the airport property, thereby depriving them of due process. The ordinance was also determined to be unconstitutionally vague, as its use of the term “owner” was ambiguous and its reference to TXDOT’s Model Rules and Regulations did not provide sufficient guidance to tell the “owner” of the airport how it should be operated. The owners of the airport also could not escape judgment on the jury’s verdict merely because the judge retired after the trial and his successor issued the final judgment, nor were they successful in their attempt to inject the Noer-Pennington antitrust doctrine into breach of contract and fiduciary duty claims. The Court remanded the case to the district court for consideration of additional issues based on the Court’s modifications of the trial court’s rulings.
Noell v. City of Carrolton, No. 05-11-01377-CV
In this negligent misrepresentation case, Guarantee Company of North America sued Weaver and Tidwell LLP for issuing negligent audit reports on which Guarantee relied when issuing performance bonds. The central issue on appeal was whether the two-year statute of limitations for negligent misrepresentation actions barred Guarantee’s claim. The Court held that “a person suffers legal injury from faulty professional advice when the advice is taken.” Thus, the claim in this suit accrued as soon as Weaver’s alleged misrepresentation induced Guarantee to act; that is, when Guarantee issued its first bond in reliance on the faulty audit, which was more than two years before it filed suit. While Guarantee argued that the discovery rule applied to toll the statute of limitations, the Court refused to apply the discovery rule here because Guarantee did not obtain findings on when it knew or should have known of the facts that gave rise to its cause of action.
In this inverse condemnation action, the City of Dallas claimed that the case against it should be dismissed for lack of subject matter jurisdiction. The Court of Appeals held that fact issues precluded dismissal because the plaintiff had alleged, among other things, that the City has: (1) prevented him from developing his property in order to reduce the City’s cost of acquiring that property in the future; (2) closed a street near his property, potentially reducing the plaintiff’s investment-backed expectation; and (3) refused to act on plaintiff’s application to build a privately funded bridge to connect to his property.
City of Dallas v. Millwee-Jackson JV
Southwestern Christian College fired its track coach after he allowed two ineligible athletes to run in a meet. Later, when the college’s track program got audited, the athletic director chose not to respond and accepted a ban from that year’s national championship, because the penalty for running ineligible athletes would have been worse than the penalty for failing to respond to an audit request. The athletic director then told the track team that the reason they could not compete in the national championship meet was because the coach ran ineligible athletes. The coach disputed that explanation. He claimed that the audit and resulting ban were due to the athletic director’s failure to submit certain forms.
The coach sued the college, the athletic director, and the college’s president, alleging, among other things, that the athletic director and college president had made slanderous statements that tarnished his reputation in the track and field community and prevented him from getting another job. The trial court granted the defendants’ motion for summary judgment and dismissed all of the coach’s claims. The Court of Appeals, however, reversed the trial court’s dismissal of the coach’s slander claims against the college and the athletic director, finding that the coach had raised a material fact issue as to the truth of the athletic director’s statements to the track team.
Porter v. Southwestern Christian College, No. 05-12-01737-CV
The Court of Appeals has reversed and rendered a trial court judgment in favor of the victim of a serious softball injury. Coleman and Dunagan were teammates on a slow-pitch softball team, but Coleman also had experience as a high school baseball player. While warming up to pitch the first game of the season, Coleman threw a couple of overhand curveballs to Dunagan at the catcher’s position, followed by an overhand fastball that smashed Dunagan in the mouth and caused significant injury. The jury returned a verdict in favor of the plaintiff on his claim for ordinary negligence, also finding that Coleman’s conduct had been reckless.
Citing its own precedent in Connell v. Payne, 814 S.W.2d 486 (Tex. App.–Dallas 1991, writ denied), the Court of Appeals held that a showing of mere negligence was insufficient for an injury occurring as a result of participation in a sports activity — instead, the defendant must have acted recklessly or intentionally. The Fourteenth Court of Appeals in Houston has adopted a nominally different standard for sports-related liability, holding that there is no negligence duty if the risk is one that is inherent to the sport, but that non-inherent risks are still subject to the duty of ordinary care. See Chrismon v. Brown, 246 S.W.3d 102 (Tex. App.–Houston [14th Dist.] 2007, no pet.). However, the Court here did not view the two cases as establishing fundamentally different standards. Since being struck by a thrown ball is an inherent risk of the sport of softball, simple negligence alone could not justify a judgment for the plaintiff. And while the trial court had submitted the issue of recklessness to the jury, the Court of Appeals held that there was legally insufficient evidence to support that finding. As the Court noted, “inaccuracy is to be expected in every sport,” and nothing in the record showed that Coleman was aware his fastball created an unreasonable risk of harm that was substantially greater than mere negligence.
Given the novelty of the issue and the possibly different standards adopted by the intermediate appellate courts, this case could be a good candidate for review by the Texas Supreme Court. If the plaintiff takes it up to that Court, 600 Commerce will keep an eye on it.
Dunagan v. Coleman, No. 05-12-00171-CV
The DFW Airport Board sought to incentivize taxicabs powered by natural gas by giving them “head of the line” privileges at DFW. In 2009, the Airport Board passed a resolution to that effect, and the Association of Taxicab Operators (the “Association”) brought suit, seeking a declaration that the resolution was void. The trial court ultimately sided with the Association and declared the resolution as passed void. The Airport Board did not appeal that ruling.
Instead, in 2012, the Airport Board passed a second, similar resolution, which gave “head of the line” privileges to “taxicab operators who invest in a CNG operated taxicab.” Once again, the Association challenged the resolution, and again the trial court declared the resolution void. This time, the Airport Board appealed. The Court of Appeals reversed the trial court’s ruling, holding that the Airport Board has the exclusive power to operate DFW Airport, which includes the power to manage the flow of ground transportation. The Court also rejected the Association’s argument that the trial court’s ruling on the first resolution was binding in this case under the doctrine of collateral estoppel. Because the court’s ruling on the first resolution only applied to that resolution as passed, it did not determine whether the second resolution was valid.
DFW Airport Bd. v. Ass’n of Taxicap Ops., No. 05-12-00777-CV
A pair of attorneys sued each other for breach of contract and breach of fiduciary duty, with the plaintiff also asserting a claim for violation of the Texas Theft Liability Act. The jury found both attorneys at fault and awarded no damages. The defendant moved for an award of attorney fees as the prevailing party on the Theft Liability Act claim, but the trial court denied the motion. The Court of Appeals affirmed, holding that the defendant’s failure to plead a claim for recovery of attorney fees under the Act precluded him from recovering his costs of defense. Pleading for recovery of fees under the breach of contract counterclaim and in special exceptions was not sufficient to invoke a claim for recovery under the Theft Liability Act, even though that statute provides for a mandatory award of attorney fees to the prevailing party.
The Court also affirmed on the plaintiff’s cross-appeal, which challenged the trial court’s disqualification of him from personally conducting the examination of his computer forensics expert. Under Disciplinary Rule 3.08, an attorney is generally prohibited from appearing as both an advocate and a witness. However, the defendant failed to meet his burden of showing he would have been prejudiced by having his opposing party conduct the examination, so the trial court did abuse its discretion by ordering the disqualification. Nevertheless, the error was deemed harmless because the plaintiff failed to advise the trial court that his attorney was not prepared to question the witness and he did not point to any specific testimony that the attorney had failed to elicit from the expert. The Court also affirmed the trial court’s rulings on a pair of evidentiary issues and on special exceptions to the Theft Liability Act claim.
Shaw v. Lemon, No. 05-12-00903-CV
In 2003, Wayne Brown opened a brokerage account at Southwest Securities. He listed his step-mother as the co-applicant on the account, and he selected “Joint Tenancy with Right of Survivorship” as the type of account. After Wayne’s death, his wife brought a lawsuit against Wayne’s step-mother, challenging her right of survivorship and seeking the funds in the account. The trial court granted summary judgment in favor of the step-mother, and the Court of Appeals affirmed, holding that Wayne and his step-mother owned the account as joint tenants with a right of survivorship. Specifically, the Court held that parties are not required to use the exact language from the Texas Probate Code (now called the Texas Estates Code) to create a valid right of survivorship. Instead, “[a]ll that is required to make an interest ‘survive’ to another party is a word or phrase expressing that the interest of the deceased party will survive to the surviving party.”
Mims-Brown v. Brown, No. 05-12-01132-CV
Former NBA point guard Allen Iverson (aka “the answer“) was sued for breach of contract because he failed to show up to an all-star game party in Dallas at which he had allegedly agreed to make an appearance. Iverson filed a pro se answer asserting a general denial and various affirmative defenses, but failed to show up for trial. The trial court rendered a default judgment. On appeal, the Court made clear that, because Iverson had answered, the plaintiff had to prove each element of its claim. The Court then found that the plaintiff failed to establish the existence of a contract because it did not produce an actual written contract or provide any substantive testimony about the contract’s formation.
Deadlines in the Texas appellate courts can often be forgiving, with extensions of time routinely and even retroactively granted. A new memorandum opinion illustrates one of the limits to those generally flexible deadlines. James Polk’s notice of appeal was due on November 4, but it was not actually filed until November 18. That was within the 15-day permitted for an extension of time to file the notice of appeal, so the Court of Appeals directed the appellant to file a motion under Rule 26.3 that set forth a reasonable explanation of the need for the extension. When that motion was filed, however, it explained that the original deadline had been missed due to Polk’s need to determine whether to appeal at all, including whether it made economic sense to do so. Because that response showed that Polk had consciously ignored the November 4 deadline, rather than missing it inadvertently, the Court of Appeals denied the extension and dismissed the appeal.
Polk v. Dallas County, No. 05-13-01731-CV
The Court of Appeals had granted mandamus relief to a witness who had been ordered to submit to a Rule 202 pre-suit deposition. The trial court abused its discretion because the movant failed to offer any evidence at the hearing on the motion, with the result being that it failed to meet the burden of showing that the likely benefit of the deposition outweighed the burden or expense of the discovery. The Court declined to uphold the Rule 202 deposition on the basis of the verified petition alone, holding instead that the findings required by the rule could not be implied from the record.
In re Noriega, No. 05-14-00307-CV
In this breach of contract claim, the plaintiff moved for summary judgment and establish its standing in an affidavit from one of its employees concerning the acquisition of the lease at issue. The defendant objected to the affidavit, arguing that it did not reflect the employees personal knowledge. The Court of Appeals rejected the defendant’s argument and upheld the trial court’s grant of summary judgment because, according to the court, the plaintiff’s affidavit satisfied the personal knowledge requirements by stating that the affiant (1) was responsible for negotiating the acquisition of the lease; (2) reviewed the “books, records and documents” of the company from which the plaintiff acquired the lease; (3) affirmed that he verified the accuracy of those records after the sale; and (4) incorporated the records concerning of the acquired lease (from the previous owner) into the plaintiff’s records.
Early last year, the Texas Supreme Court granted four petitions for review out of the Dallas Court of Appeals on the same day. Today, the Supreme Court issued opinions in two of those cases, reversing them both. In Kia Motors Corp. v. Ruiz, the Supreme Court affirmed the Court of Appeals’ holding that the manufacturer was not entitled to a presumption against liability due to the vehicle’s compliance with federal crashworthiness standards. However, the Court reversed and remanded for a new trial because the trial court should not have admitted a spreadsheet containing summaries of many different warranty claims on vehicle airbag circuitry, most of which were dissimilar to the plaintiffs’ claimed defect. And in Bioderm Skin Care v. Sok, the Supreme Court reversed the Court of Appeals’ holding that the victim of a botched laser hair removal procedure was not required to submit an expert report, holding that the claim was indeed subject to the Texas Medical Liability Act because the laser could only be purchased by a licensed medical practitioner and required extensive training to operate. The case was therefore remanded for consideration of the defendants’ attorney fees and costs.
A Dallas doctor brought lawsuits against UT Southwestern and Parkland Hospital, alleging that they retaliated against him after he raised concerns that some of their billing practices were running afoul of Medicaid laws. The trial court granted the defendants’ plea to the jurisdiction and dismissed both lawsuits on the basis of sovereign immunity. In affirming, the Court of Appeals rejected the doctor’s argument that the defendants had waived sovereign immunity, and held that a state entity cannot waive sovereign immunity by its conduct. The Court specifically noted that “the Texas Supreme Court has never ruled that a doctrine of waiver of sovereign immunity by conduct exists.”
Gentilello v. UTSW, 05-13-00149-CV
Gentilello v. DCHD, 05-13-00150-CV
A habeas corpus case arising out of an underlying divorce proceeding helps to illustrate the limits of a court’s authority to imprison a litigant for contempt. The trial court ordered the wife to pay her former husband $40,000 secured by a lien on a residence awarded to her in the divorce, to be paid six months after the decree. After that date came and went without payment, the husband moved for contempt, and the trial court sentenced her to confinement in the Hunt County jail until she tendered payment. The Court of Appeals ordered her to be released, citing the Texas Constitution’s provision that “No person shall ever be imprisoned for debt.” Tex. Const. art I, §18. Although the trial court could have jailed the wife for failing to comply with a court order to turn over specified property or funds (e.g., “the $40,000 in Wife’s savings account”), that authority did not extend to the failure to pay a pure debt to the other spouse. The Court therefore granted habeas corpus and ordered that the wife be unconditionally released.
In re Kinney, No. 05-14-00159-CV
Although the non-competition agreement at issue in this case contained a choice-of-law provision designating that Texas law would apply, the trial court applied California law to determine the plaintiff’s claims. The Court of Appeal, however, reversed the trial court’s decision on this point, because Texas did, in fact, have a “substantial relationship to the parties or the transaction” at issue. Specifically, although the defendant, a former executive of plaintiff (a Texas company) moved to California after being hired, the evidence established that he (1) had an office in Texas at which he often worked; (2) negotiated the contract, at least in part, in Texas; and (3) performed the contract (in part) in Texas.
Thomas Ellis owned a unit in The Renaissance on Turtle Creek. He sued the condominium association after it had fined him numerous times for playing loud music and harassing his upstairs neighbors. The condominium counterclaimed to recover the $13,405 dollars he owed and to foreclose on the continuing assessment lien it held on Ellis’ unit. The trial court granted the condominium’s summary judgment motion, and the Court of Appeals upheld this decision on appeal because “no fact issue was raised by Ellis’s arguments in his summary judgment response.”
Seib Family GP and Richard Seib purchased a limited liability company that owned a 60-acre tract in a warehouse district adjoining the Trinity River levee in Dallas. Two years later, Seib sued the bank that held the note on the property, alleging that it was liable under the Texas Securities Act because it had failed to disclose its knowledge that the levee was “in jeopardy” and “being decertified” by the Corps of Engineers. The trial court granted traditional summary judgment for the bank, and the Court of Appeals affirmed. To the extent that Seib alleged direct seller liability by the bank, that claim failed because the bank was only a lender, not a seller of the LLC. Nor could the bank be liable under the TSA for secondary liability, as the evidence demonstrated — and Seb did not contest — that the bank did not and could not exercise control over the operation of the purchased LLC.
Seib Family GP, LLC v. Bank of the Ozarks, No. 05-12-01171-CV
After Charles Reese was terminated two years into his five-year term as pastor for the Faith Cumberland Presbyterian Church, he brought suit against his former employer for breach of contract and intentional infliction of emotional distress seeking, among other things, lost wages, punitive damages and attorney’s fees. Citing the U.S. Supreme Court’s recent holding in Hosanna-Tabor Evangelical Lutheran Church v. EEOC, 132, S. Ct. 694 (2012), the Court of Appeals upheld the trial court’s dismissal of the suit on First Amendment grounds. Quoting Hosanna-Tabor, the Court found that if it were to “second guess the Church’s decision to terminate Reese it would deprive the Church of its right to shape its own faith and mission by imposing an unwanted minister.”
In this breach of contract case, the defendant asserted that the plaintiff lacked standing to pursue its claim because the plaintiff’s owner filed for bankruptcy individually. According to the defendant, the bankruptcy trustee would have been the only party with standing to prosecute the claim. The Court rejected this argument, however, because the lawsuit was filed two years before the plaintiff filed for bankruptcy and, more importantly, the plaintiff (a coroporation) never itself filed for bankruptcy. Thus, the plaintiff could establish standing.
A pair of California residents sought to set aside a default judgment by means of a restricted appeal. The defendants claimed that the trial court lacked jurisdiction due to defective service of process, which had been accomplished through the Secretary of State. The Secretary of State’s certificate of service stated that process for both defendants had been “Unclaimed.” After the defendants failed to appear, the trial court entered default judgment for $612,500 in damages and another $13,258.27 in attorney fees. The Court of Appeals affirmed. Although the process server had listed the date of execution as taking place the month before he received the citation, that apparent typographical error was not enough to invalidate the return of service, particularly where the other service documents demonstrated the correct date of service. Substitute service through the Texas Secretary of State was also proper, the Court held, because the petition alleged that they were doing business in Texas by entering into a promissory note and guaranty with a Texas company, with the note also secured by real property located in Kaufman County. Nor did the “Unclaimed” notations demonstrate that the citations had not been served. Instead, the Court followed previous cases holding that it indicated only that the defendants had refused or failed to claim the citations from the Secretary of State’s mailings, not that service had not been accomplished.
Dole v. LSREF2 APEX 2, LLC, No. 05-12-01683-CV
The Court of Appeals has affirmed summary judgment for the lenders in a foreclosure dispute. Anil and Sheela Das sued Deutsche Bank and others to prevent them from foreclosing on their home. The Dases claimed that DB was not an owner or holder of the note. However, an affidavit from an analyst of the loan servicing company established that the note had been transferred to DB, and that the servicer maintained the original of the note on behalf of DB. Copies of the original instruments were also attached to the affidavit, and that uncontradicted evidence was enough for the Court of Appeals to determine that Deutsche Bank had met its summary judgment burden on the issue. The Court also rejected the borrowers’ argument that the bank was judicially estopped from relying on that copy of the note, as its use of an earlier, unendorsed copy of the note during prior bankruptcy proceedings was not clearly inconsistent with a later copy that included the subsequent endorsement.
Das v. Deutsche Bank Nat’l Trust Co., No. 05-12-01612-CV
A franchise agreement between Applebee’s and Gator Apple (a Florida franchisee) prohibits the franchisee from soliciting or hiring anybody from another franchisee who was employed by that other franchisee within the previous six months, states that other franchisees are third party beneficiaries of the franchise agreement, and provides for liquidated damages equal to three times the employee’s annual salary. A Texas franchisee, Apple Texas, sued Gator Apple under that provision after Gator Apple hired five of Apple Texas’ current or former employees and executives. The trial court granted summary judgment for Apple Texas, awarding it liquidated damages in excess of $1.2 million. The Court of Appeals affirmed. After determining that the franchise agreement was governed by Kansas law due to its choice of law provision, the Court upheld the award of liquidated damages under Kansas law. The Court also rejected Gator Apple’s argument that a fact issue existed on its affirmative defense of waiver, as none of the waivers it relied on authorized Gator Apple (as opposed to other franchisees or Applebee’s corporate) to solicit Apple Texas’ employees.
Gator Apple, LLC v. Apple Texas Restaurants, Inc., No. 05-12-01369-CV
HSBC Bank foreclosed on a residential property in Cedar Hill, but failed to pay assessments on the property to the local homeowners association. The HOA foreclosed on its assessment lien, and the property was purchased out of foreclosure by Khyber Holdings, LLC. HSBC sought to redeem the property as permitted by § 209.011 of the Texas Property Code. However, when the bank’s attorney sent the required notice to Khyber, the letter incorrectly identified Countrywide Home Loans as the owner seeking to redeem the home. The attorney testified that the error had occurred because he represented the servicer for both HSBC and Countrywide, and that Khyber had purchased lots owned by both lenders during the same foreclosure sale. HSBC sued for a declaratory judgment that it was entitled to redeem the property. When Khyber responded with a letter that stated the redemption price would be $80,000, the attorney responded with an $80,000 check and a letter that once again named Countrywide as the owner, although the redemption deed correctly identified HSBC as the grantee of the redemption sale. Khyber refused to allow redemption, the case proceeded to trial, and the jury returned a verdict in favor of HSBC. The Court of Appeals affirmed, concluding that only substantial compliance is required to fulfill the notice requirements of § 209.011, and that the series of back-and-forth exchanges between the parties was sufficient proof that the notice requirements had been fulfilled. The Court also affirmed the jury’s award of damages for trespass, concluding that HSBC was entitled to recover for lost rents during the period of time the property was improperly retained by Khyber.
Khyber Holdings, LLC v. HSBC Bank USA, N.A., No. 05-12-01212-CV
The Court of Appeals has affirmed summary judgment in favor of the defendant in a libel and business disparagement case. The case arises out of statements made by OAC Senior Living in an administrative waiver proceeding initiated by a competitor, Senior Care Resources. The allegedly defamatory statements were made to the Texas Department of Aging and Disability Services, a state agency designated to administer and monitor human services programs, including Medicaid. If that sounds like the sort of thing that would be absolutely privileged under defamation law, the Court of Appeals agrees with you. Although DADS is not a court, it was exercising quasi-judicial power in determining whether to grant Senior Care’s requested waiver. The Court’s opinion provides a lengthy analysis of when it is proper for a court to conclude, as a matter of law, that such a proceeding qualifies as quasi-judicial for purposes of the absolute privilege defense.
Senior Care Resources, Inc. v. OAC Senior Living, LLC, No. 05-12-00495-CV
The Texas Whistleblower Act prohibits a governmental entity from taking an adverse personnel action against an employee who in good faith reports a violation of law to an appropriate law enforcement authority. Tex. Gov’t Code § 554.002(a). Those elements are jurisdictional, and a plaintiff who fails to adequately plead facts supporting the claim can have his claim dismissed. The Court of Appeals did just that in an appeal from a $400,000 judgment against the Dallas Independent School District. The plaintiff alleged that he had been terminated for reporting that his supervisor had directed him to perform three gas tests in a single day, which he claimed was unsafe. But the plaintiff’s petition did not allege that any actual violation of law had taken place, just that he had been pressured to do something that might be unsafe. As a result, the employee failed to state a claim in his petition, and the trial court therefore had no jurisdiction over his claim.
Dallas Indep. Sch. Dist. v. Watson, No. 05-12-00254-CV
The Court of Appeals has issued a lengthy opinion affirming the confirmation of a take-nothing arbitration award, but reversing the trial court’s grant of a $10,000 sanction award against the attorney who challenged the award. The case arose out of the sale and subsequent foreclosure on a mineral lease in California. The lender alleged that it had been defrauded because it had not known about a $500,000 finder’s fee paid to the principal of the company that bought the mine for $2 million. The arbitrator rejected that position, finding that the lender’s chief witness was not credible in his allegations that he had not known about the finder’s fee. The opinion disposes of multiple grounds for vacating the award, including arguments that the arbitrator exceeded his authority and manifestly disregarded the law or committed a gross mistake in his award. The Court also denied the lender’s argument that the trial judge should have been disqualified due to her and her husband’s authorship (before she became a judge) of a paper praising arbitration and her husband’s continuing service as an arbitrator. But while the Court of Appeals found no merit to the lender’s challenges, it concluded that the trial court had abused its discretion in sanctioning the lender’s attorney. The largely generic facts alleged in the attorney’s pleading were supported by the record, and his legal contentions, even if not ultimately meritorious, could not serve as a basis for sanctions under Chapter 10 of the Civil Practice & Remedies Code. The Court remanded the case to the trial court for further consideration of alternative grounds for sanctions that the trial court had not ruled upon.
Humitech Dev. Corp. v. Perlman, No. 05-12-00857-CV
Mark Palla filed suit against a group of defendants for breach of contract and tortious interference arising out of the breach of a sales commission agreement. The jury returned a verdict for $278,718 on the contract claim against Bio-One, Inc., and exactly $100,000 for tortious interference against Aydemir Arapoglu and Transtrade LLC. Palla argued that the tortious interference damages should have been the same as the breach of contract award and that each of the defendants should be jointly and severally liable for the entire amount. The trial court disagreed, entering judgment against Bio-One for $178,718 and against all three of the defendants, jointly and severally, for an additional $100,000. Palla appealed, but the Court of Appeals affirmed. Although generally the measure of damages for tortious interference is the same as the measure of damages for the breach of the contract, a tortious interference defendant is only liable for damages that are proximately caused by the interference. Thus, the question on appeal was whether there was any evidence that the defendants’ interference had only caused a portion of Palla’s damages. But Palla had not brought forward any record of the trial proceedings, due to the belief that he was entitled to the full amount of contract damages as a matter of law. Since the Court of Appeals could not determine whether the evidence supported only a partial damage award for tortious interference, Palla could not demonstrate that the trial court had erred by refusing to disregard the jury’s finding.
Palla v. Bio-One, Inc., No. 05-12-01657-CV
In a contentious trade secret case, a district judge sat through the deposition of Pendragon Transportation’s corporate representative in order to rule on the objections and instructions offered by Pendragon’s attorney. That same day, the trial court sua sponte appointed a special master to attend future depositions and make rulings on the attorneys’ objections. Two months later, Pendragon filed an objection to the special master order, and the trial court overruled that objection a month later. Three months after that ruling, and only 11 days before trial, Pendragon filed its mandamus petition with the Court of Appeals. Given Pendragon’s six-month delay in seeking mandamus to challenge the appointment of the special master, and its failure to disclose that trial was only two weeks away at the time of its filing, the Court concluded that Pendragon had slept on any right it may have had to complain about the special master. However, the Court did grant Pendragon limited relief, holding that the trial court abused its discretion by ordering the company to pay the special master’s expenses in advance. That ruling was contrary to Rule 143, which only permits the court to require security to be posted for costs, not their actual payment prior to entry of a final judgment.
In re Pendragon Transp. LLC, No. 05-13-01749-CV
The Court of Appeals has reiterated that mandamus relief is available when the trial court erroneously denies a defendant’s motion for leave to designate a responsible third party. In this instance, the trial court had denied Greyhound’s attempt to join the owner of a crane truck that had been involved in a collision with a bus. The plaintiff was a passenger in the crane truck, and Greyhound alleged that the truck’s poor condition had proximately caused the accident. Following its own precedent of In re Oncor Elec. Delivery Co., 355 S.W.3d 304, 306 (Tex. App.—Dallas 2011, no pet.), the Court held that Greyhound had met its pleading requirements for naming the responsible third party, and that the improper denial of leave could not be adequately addressed by appeal. Permitting the case to be tried without the third party “would skew the proceedings, potentially affect the outcome of the litigation, and compromise the presentation of Relators’ defense in ways unlikely to be apparent in the appellate record.” The Court therefore conditionally granted mandamus.
In re Greyhound Lines, Inc., No. 05-13-01646-CV
In KingVision Pay-Per-View, Ltd. v. Dallas County, the Court affirmed the county’s plea to the jurisdiction because a statute only authorized suit against a constable and his sureties for failing to execute on the plaintiff’s judgment. And in City of Sachse v. Wood, the Court reversed the trial court’s denial of a plea to the jurisdiction, holding that the plaintiff had failed to establish a violation of the Whistleblower Act because the he reported the alleged misconduct to fire department personnel, not an “appropriate law enforcement authority.”
Family law and medical malpractice aren’t usually our things here at 600 Commerce, but a wrongful death opinion case illustrates a principle of standing that may be of interest to commercial litigators in their own tort and family law-related cases. At issue was whether the plaintiff had standing to sue for wrongful death after her former husband died of cardiac arrest. Husband and wife were formally divorced at the time of his death, but the wife claimed that they had an “informal” or common law marriage even after the divorce. The trial court granted summary judgment for the defendants, and the Court of Appeals affirmed. The wrongful death statute required the plaintiff to have been a surviving spouse. The evidence showed that the divorce had really only happened because the couple wanted to protect their assets from potential creditors, and that they had continued to live together and hold themselves out as husband and wife. Although the couple here held themselves out to be husband and wife and lived together as such after the divorce, the wife had failed to show that they had actually agreed to be married — i.e., that they had a present, immediate, and permanent intent to be married as husband and wife. Instead, the widow testified that they had intended to “legalize the marriage again” only when the couple’s creditors were paid off. Thus, without the required element of a present intent to be married, the plaintiff could not demonstrate the existence of a common law marriage, and she had no standing to sue under the wrongful death statute.
Malik v. Bhargava, No. 05-13-00384-CV
The owners and occupants of a medical office building sued TDI, the company that installed the plumbing system, alleging a number of defects that caused mold and “brown water.” TDI filed a motion to dismiss based on the plaintiffs’ failure to file a certificate of merit, which is required when the plaintiff’s claims arise out of the provision of professional services by certain types of licensed or registered professionals, including engineers and architects. See Tex. Civ. Prac. & Rem. Code § 150.002. The trial court denied the motion to dismiss, and the Court of Appeals affirmed on interlocutory review. The only evidence TDI had offered to show it was a “licensed or registered professional” was a printout of search results from a government registry of engineering firms, and that printout showed nothing regarding TDI’s alleged status as a licensed or registered engineering firm. Based on that evidence, the trial court did not abuse its discretion in concluding that TDI had failed to meet its burden of showing itself to be a licensed or registered professional, and the certificate of merit requirement therefore did not apply.
TDIndustries v. My Three Sons, Ltd., No. 05-13-00861-CV
A Collin County divorce case turned into a temporary injunction proceeding involving claims of assault and terroristic threats by an attorney in the middle of a deposition. The plaintiff, Barry Wells, alleged that his wife’s attorney became angry when Wells told him to calm down and commented that May’s daughter had probably committed suicide due to the attorney’s supposed anger issues. The lawyer allegedly made multiple death threats in the course of throwing Wells out of the building. Five days later, Wells filed a petition seeking injunctive relief to prevent the attorney from coming within 300 feet of him. The trial court granted an ex parte TRO, but the attorney quickly moved to dissolve the order and to impose sanctions for filing a groundless, bad faith pleading. After a hearing, the trial court dissolved the TRO and entered sanctions against Wells by striking his petition and dismissing the case with prejudice.
The Court of Appeals affirmed the dissolution of the TRO, but reversed the sanctions order. The ruling on the TRO was moot, and therefore non-appealable, because the order would have expired after 14 days in any event. As to the sanctions order, the deposition transcript revealed that Wells had been the instigator of the confrontation with the defendant, and that his comment about the attorney’s daughter was outrageous, the transcript also showed that the attorney had indeed threatened to kill Wells if he did not leave or if he ever returned. Thus, even though though Wells’ pleading presented an inaccurate account of what had transpired, the threat of imminent bodily injury meant that the claims of assault and terroristic threat were not groundless. The order striking the petition was therefore reversed, and the case was remanded for further proceedings.
Wells v. May, No. 05-12-01100-CV
The Court of Appeals has conditionally granted mandamus relief to the wife of a judgment debtor after she became entangled in the creditor’s efforts to collect on the judgment against her husband. Wells Fargo alleged that Catherine Karlseng did not do any actual work for her husband’s law firm, that she only received wages by virtue of her husband’s work at the firm, and that the money was not exempt from execution as wages because her husband was really an independent contractor of the firm. The trial court entered a turnover order. The Court of Appeals held that as a third party to the underlying judgment, Mrs. Karlseng had no adequate remedy at law because she could not supersede the judgment to prevent execution and because the turnover order prevented her from paying her living expenses. The trial court had also abused its discretion, the Court held, because the turnover statute cannot be used to adjudicate third-party ownership claims. As a non-party to the underlying judgment, Mrs. Karlseng would have to be made a party to the proceeding before she could be required to turn over property in which she claimed an ownership interest.
In re Karlseng, No. 05-14-00049-CV
Gary Cooper thought he was dealing with an authorized representative of Lawyers Title Company when he deposited $1.8 million in escrow for the purchase of property in Fort Worth. In reality, Jason Chumley was an independent contractor working for an attorney for Lawyers Title. But the Fort Worth project never developed, and Chumley and two of Cooper’s business associates instead applied the money to pay off four liens on a McKinney Avenue property in Dallas. That transaction led to federal indictments for wire fraud, as well as a lawsuit by Cooper against numerous parties in an effort to recover the $1.8 million. The trial court granted summary judgment for Cooper on his claims for bailment, conversion, and money had and received, while denying Lawyers Title’s cross-motion. Those claims were then severed from the rest of the case, thereby enabling an immediate appeal. The case turned largely on whether Lawyers Title had ever received Cooper’s funds, as they had been wired to an account maintained by the title company’s attorney. There was conflicting evidence on whether Lawyers Title actually controlled that account, which was a genuine issue of material fact and required reversal of summary judgment on all three quasi-contract claims.
Lawyers Title Co. v. J.G. Cooper Dev,, Inc., No. 05-11-01537-CV
Brian Vodicka and Steven Aubrey provided nearly $1 million for a loan to fund a real estate development. The loan was only secured by a subordinate lien, and Vodicka and Aubrey lost their entire investment after the borrower defaulted. They sued North American Title, which had served as the escrow agent for the loan, alleging a variety of fraud, negligence, and fiduciary duty claims. The Court of Appeals affirmed summary judgment for the title company. The Court held that the trial court had not erred in striking the plaintiffs’ summary judgment evidence. The trial court had not abused its discretion in sustaining the defendant’s objection to a spreadsheet because the plaintiffs had failed to file it under seal as required by the court’s protective order. The plaintiffs also waived their complaint about their summary judgment affidavit because their appellate briefing failed to address several of the objections the defendant had asserted before the trial court. Those rulings meant that the plaintiffs were left with literally no evidence to respond to North American Title’s no-evidence motion, and the trial court’s grant of summary judgment was therefore affirmed.
Vodicka v. N. Am. Title Ins. Co., No. 05-13-00126-CV
Clint Simon applied for a “Termite & Pest Control General Liability” insurance policy for his d/b/a, Sherlock Pest. The application included a “WDI Exclusion,” which excluded liability for claims or losses arising out of inspections for Wood Destroying Insects. That exclusion, in somewhat different form, was included in a pair of endorsements to the policy that was subsequently issued, as well as a later renewal policy. When a homeowner sued Simon for performing an improper inspection, the insurer invoked the WDI Exclusion to deny coverage. Simon sued, but the insurer obtained summary judgment on all claims. The Court of Appeals affirmed, holding that Simon could not have justifiably relied on a coverage certificate the insurer had filed with the Texas Department of Agriculture, which had not mentioned any exclusion in Simon’s insurance policy. Because the application, the initial policy, and the renewal policy all contained the WDI Exclusion, a reasonable person could not have relied on the coverage certificate as a representation that there was actually insurance coverage for WDI inspections. The Court also rejected Simon’s argument that the trial court should have granted a continuance to permit him to conduct more discovery, as his appellate brief failed to explain how the additional discovery would have allowed him to respond to the summary judgment motion.
Simon v. Tudor Ins. Co., No. 05-12-004430CV
The Court of Appeals has affirmed a judgment in favor of the plaintiff in a breach of contract case. Defendant Cody Murphy had taken his truck to Killer Ridez, Inc. and asked that they make his 1983 Chevy pickup “look showroom new.” When Murphy went to pick up the truck, the shop informed him of everything they had and had not done, noting in particular that they had followed Murphy’s instruction by not replacing the carburetor. As a result, the truck did not run well, and Murphy put a stop payment order on the final check he had issued to the shop. On appeal, Murphy challenged the evidence supporting the existence and validity of the parties’ contract, but that issue was negated by Murphy’s own pleading, which had specifically pleaded (and not in the alternative) the existence of a contract to restore the pickup. The Court also affirmed the trial court’s fact findings in support of the breach of contract claim, including the sufficiency of the evidence establishing that Killer Ridez had performed more $28,000 worth of work but was still owed approximately $6000 by Murphy.
Murphy v. Killer Ridez, Inc., No. 05-13-00035-CV
To settle a previous lawsuit, TST Impreso agreed to make a series of payments to Overveen General Trading. After TST was failed to make the first scheduled payment, Overveen demanded that TST cure the default. Instead, TST sued Overveen for a declaratory judgment seeking to avoid its payment obligations. The Court of Appeals held that the term “security interest” was not ambiguous, TST could not successfully invoke a contract term regarding security interests by pointing to several judgments entered against an entity related to Overveen. Judgments, the Court held, are not security interests, particularly where they have not been reduced to a lien against specific property of the judgment debtor. Moreover, the judgments against Overveen’s corporate sibling did not relate to the settlement funds owed by TST, so there was no possibility that any judgment creditors could seek to enforce their judgments against the settlement payments. The Court of Appeals therefore affirmed the trial court’s grant of summary judgment in favor of Overveen, including its award of liquidated damages against TST.
TST Impreso, Inc. v. Asia Pulp & Paper Trading (USA), Inc., No. 05-12-01551-CV
The Court of Appeals has affirmed in part and reversed in part a summary judgment in favor of a law firm in a suit to recover attorney fees from its former clients. The opinion is quite lengthy and covers a number of topics. The first issue is evidentiary, as the Court decided that the trial court did not abuse its discretion in striking the affidavit of one of the defendants, in which he averred that the defendants did not owe the fees because they were not “reasonable and necessary” to the engagement. The engagement letter provided that the law firm was to perform “[r]easonable and necessary legal services . . . which [the firm] and [the clients] decide are reasonable and necessary to perform the Engagement.” Nevertheless, the affiant was not an attorney and was therefore not qualified to offer an opinion on the reasonableness or necessity of the fees. The Court also affirmed the summary judgment ruling in favor of the law firm’s cause of action for sworn account, as the defendants had failed to answer it with a verified affidavit that disputes the specific facts on which such a claim is based. The Court further affirmed that the defendants had not produced any evidence of recoverable damages on their counterclaims, since the only harm they had shown was having to incur attorney fees to defend themselves in this lawsuit. However, the Court reversed that portion of the judgment that held the president of one defendant jointly and severally liable for payment of the debt owed by one of the corporate defendants, and remanded the case to the trial court for further consideration of the attorney fees that had been assessed against that individual.
Woodhaven Partners, Ltd. v. Shamoun & Norman, L.L.P., No 05-11-01718-CV
Two and a half years ago, Charlene Taggert obtained the reversal of a declaratory judgment ordering that certain retirement accounts of her late husband belonged to his estate, not to her. The probate court had awarded attorney fees to the executors, so the Court of Appeals remanded to that court for further consideration of the attorney fees now that Charlene had become the prevailing party. On remand, the probate court awarded Charlene $18,000 for fees incurred at trial, and an additional $5,000 for the appeal. Both sides appealed the $5,000 award for the first appeal. The Court of Appeals rejected the executors’ claim that appellate fees could only be awarded on a conditional basis (i.e., “if the appeal is successful”), rather than for an appeal that has already been successful. The Court noted that “[o]n remand, the parties stand in the position they held before judgment was entered.” Likewise, the Court rejected Charlene’s argument that the probate court should have permitted her to offer new evidence of her actual appellate fees, rather than relying on the estimated fees presented during the original trial of the case. Relying on the Texas Supreme Court’s opinion in Varner v. Cardenas, 218 S.W.3d 68 (Tex. 2007), the Court held that retrial of a party’s attorney fees on remand is only necessary when the evidence offered at trial is no longer relevant.
Tigert v. Tigert, No. 05-12-01282-CV
After accepting a $1500 settlement for damage to his truck, David Lynd allegedly began to harass various executives and employees of Bass Pro Shop, threatening them and demanding additional money. Bass Pro responded by filing a motion to enforce the releases in the settlement agreement and seeking injunctive relief. The trial court granted temporary and permanent injunctions, ordering Lynd not to contact Bass Pro personnel and to stay at least 100 feet away from Bass Pro’s locations and the homes of its directors, officers, and employees. Lynd — appearing pro se — asserted an impressive 33 issues on appeal. The Court of Appeals affirmed. The Court was unwilling to consider the errors Lynd claimed from the original lawsuit, which had not been appealed and could only be attacked on bill of review. The Court rejected Lynd’s attempts to argue that the settlement had been procured by fraud, as well as his complaint that he had been “betrayed by own counsel” in that lawsuit. More notably, the Court affirmed the trial court’s injunction, holding that Lynd’s pattern of harassment demonstrated imminent harm that could not be remedied by an award of damages. An injunction was proper, the Court held, because Lynd’s demands for additional money were in violation of his settlement agreement with Bass Pro, in which he had released all his claims concerning his truck, including all claims against the company’s personnel.
Lynd v. Bass Pro Outdoor World, Inc., No. 05-12-00968-CV
A memorandum opinion demonstrates the downside of failing to respond to a discovery request. Alfredo Cornejo sued Anthony Jones for causing a multi-vehicle accident. Jones filed a general denial and alleged that someone else’s negligence proximately caused the collision. Cornejo served Jones with basic contention interrogatories, but Jones never answered them. Cornejo did not move to compel, but instead sought to exclude Jones’ testimony at trial. The trial court allowed Jones to testify, and the jury returned a verdict for the defense, apparently crediting Jones’ testimony — contrary to the police report of the incident — that he had been the victim of a rear impact that spun him into the other lanes of traffic. The Court of Appeals reversed and remanded, holding that the testimony should have been excluded under Rule 193.6(a) because Jones had failed to answer the contention interrogatories and could not show either good cause for that failure or lack of unfair surprise or prejudice to Cornejo. Contrary to the trial court’s ruling, a motion to compel is not a prerequisite to the exclusion of evidence under Rule 193.6(a), which provides for automatic exclusion if the proponent of the evidence did not answer the discovery and cannot establish those two exceptions to the exclusionary rule.
Cornejo v. Jones, No. 05-12-01256-CV
The Court of Appeals has once again reiterated that the sole issue in a forcible detainer case is the right to immediate possession of the property. Both the justice court and the county court at law sided with Wells Fargo, which had purchased the home in foreclosure. On appeal, the borrowers argued that Wells Fargo had not shown itself to be an assignee of the original deed of trust, and that notice of the foreclosure sale had not been properly recorded. Because those issues alleged defects in the bank’s title and the foreclosure process, and not the right to immediate possession, they could not be addressed in a forcible detainer action. The Court of Appeals therefore affirmed the lower courts’ rulings awarding possession to Wells Fargo.
Noye v. Wells Fargo Bank, N.A., No. 05-12-00997-CV
In a products liability and wrongful death lawsuit, Fisher & Paykel Appliances was ordered to produce three reports it had made to the Consumer Product Safety Commission regarding the safety of its gas clothes dryers. F&P objected to the discovery based on Texas Rule of Evidence 502, which states that reports required by law to be made are privileged “if the law requiring it to be made so provides.” The Court of Appeals denied mandamus relief to F&P. The Court rejected application of the Rule 502 privilege because the Consumer Product Safety Act does not provide for any privilege for reports mandated under the statute. The Court rejected F&P’s attempt to have it recognize a more general “self-critical analysis privilege,” holding that such privileges can only be created by statute. The Court also considered the “selective waiver doctrine,” under which the federal Eighth Circuit has held that the privilege for attorney work product is not waived when the material is turned over to a government agency pursuant to subpoena. Noting that most courts around the country have rejected that rule, the Court of Appeals held that “documents transmitted to a regulator as part of an entity’s mandatory reports are not protected from disclosure simply because an attorney chooses which documents or other materials to produce to the regulator or because an attorney prepares or compiles portions of the report to the regulator.”
In re Fisher & Paykel Appliances, Inc., No 05-13-01498-Cl
In this oil and gas case, a pair of working interest owners sued to recover alleged overcharges made by the operator to the joint account. The trial court found that the joint operating agreement was ambiguous and submitted the matter to a jury, which ruled in favor of the operator. The Court of Appeals affirmed. The contract provision at issue was from a pre-printed form, but included a typewritten addition at the end. The form language permitted the operator to allocate a portion of its overhead and charge it to the joint account, while the typewritten insert provided for flat-rate monthly charges. The working interest owners believed that the flat rate in the inserted language was all the operator could charge to the joint account, while the operator believed it could charge both its overhead and the per-well rate. The Court of Appeals held that the contract was ambiguous because both proffered interpretations were reasonable, and therefore affirmed the jury’s finding in favor of the operator’s interpretation.
MCS Minerals, Ltd. v. Plains Explor. & Prod. Co., No. 05-12-01309-CV
The Court of Appeals has reversed and remanded a summary judgment ruling obtained by Minyard Food Stores. The trial court ruled that Minyard was entitled to a setoff against North Central Distributors’ receivable. The receivable was originally owned by NCD Acquisition, an entity formed by members of the Minyard family to acquire the assets of North Central. After NCD Acquisition defaulted on its note, North Central foreclosed on NCD’s assets, including the Minyard Food Stores receivable. But in the meanwhile, NCD Acquisition also breached a sublease agreement with Minyard. NCD and Minyard settled that dispute with the lessor, but reserved its right of offset against NCD. Minyard contended that it was a buyer in the ordinary course of business for the goods underlying the NCD Acquisition receivable, but the evidence on that point was disputed. There was also conflicting evidence as to the proper date for the offset, as some of the unpaid rent may have accrued after Minyard received notice of North Central’s foreclosure on NCD’s receivable, and much of the claimed offset appeared to be for future rent payments. In light of these disputed fact issues, the Court of Appeals reversed and remanded the case to the trial court.
N. Central Distribs., Inc. v. Minyard Food Stores, Inc., No. 05-12-00418-CV
In 1986, Summers Electric Company extended credit to Stuart Electric, Inc., which backed its credit application with the personal guaranty of its owners, Barry and Zac Stuart. The guaranty was in favor of Summers or its assigns, for all money that may come to be due to Summers by Stuart Electric. Although Summers’ ownership and name changed over the years, Stuart continued to do business with the company. In 2008, Barry and Zac sold Stuart Electric. The new ownership group continued to purchase materials from Summers, but failed to pay up. Summers turned to the Stuarts to make good on their 22-year-old written guaranty, which they refused. Summers then filed suit, obtaining a default judgment against Stuart Electric and a summary judgment against Barry and Zac.
On appeal, the Court of Appeals first sustained the trial court’s decision not to strike the Stuarts’ affidavits, in which they testified that Summers’ employees had told them they were no longer on the company’s account and were not responsible for any purchases made by Stuart Electric. Although the Stuarts were interested witnesses, their affidavits were still admissible because they were sufficiently “clear, positive, and direct, free from contradictions or inconsistencies, and could have been readily controverted.” Tex R. Civ. P. 166(a)(c). That affidavit testimony also supported each of the elements of the Stuarts’ promissory estoppel defense, which precluded the trial court’s grant of summary judgment against them. The Court therefore reversed and remanded for further proceedings.
Stuart v. Summers Group, Inc., No. 05-12-00489-CV
In this derivative suit, the plaintiff sought a temporary injunction stopping officers of the defendant company who had each been granted a promissory note in lieu of salary (which note was then in default) giving them the right to foreclose. Although the trial court granted the temporary injunction, the Court of Appeals held that the mere existence of unexercised contractual rights does not give rise to the “imminent harm” required to sustain a temporary injunction, reversing the trial court’s decision.
The Court of Appeals has granted mandamus to prevent three depositions sought by a homebuyer seeking to avoid an arbitration agreement. The trial court granted the builder’s motion to compel arbitration, but had not yet ruled whether the buyer’s claims against two individual employees of the builder were also arbitrable. While their motion was pending, the trial court granted a motion to compel the depositions of the employees and the company to explore whether they had engaged in any fraudulent or criminal conduct. The Court of Appeals held that order was an abuse of discretion. Under In re Kaplan Higher Education Corp., 235 S.W.3d 206 (Tex. 2007), agents who are nonsignatories to their principal’s arbitration agreement may still invoke equity to compel arbitration unless the claimant can demonstrate the agents had unclean hands in the formation of the arbitration provision. In this instance, the buyer alleged only that the individuals had unclean hands in the performance of the contract, not the formation of the arbitration clause. Accordingly, the issue of their unclean hands was an issue for the merits of the case that had to be determined in arbitration, making discovery of those facts inappropriate for a judicial proceeding. The Court therefore directed the trial court to stay the case so that all of the parties could proceed to arbitration. The Court also wrote separately to summarily deny the buyer’s mandamus petition challenging the arbitration order for her claims against the company.
In re Susan Newell Custom Home Builders, Inc., No. 05-13-01474-CV
Dan Lopez sues RS Clark & Associates for violating the Debt Collection Practices Act, the Texas Debt Collection Practices Act, and the DTPA. The dispute apparently arose out of a $54.34 cleaning charge assessed and turned over to the collections agency by Lopez’s former apartment complex. Lopez based his case on four unanswered phone calls the agency made to his residence during daytime hours, as well as its failure to inform credit reporting services that Lopez disputed the debt. The collections agency counterclaimed for sanctions and attorney fees, alleging that Lopez’s suit was groundless and brought in bad faith. The trial court granted summary judgment for the collections agency and, after a bench trial, awarded it attorney fees as a sanction against Lopez. On appeal, the Court of Appeals held that Lopez had failed to establish that he gave the collections agency written notice he no longer wished to communicate with them, as his letter only directed them not to call his cell phone or work number. With respect to his home phone, the letter stated only that it was “inconvenient” for them to call him at home. The letter also did not dispute the validity of the debt, stating instead that he just did not want it reported to the credit agencies. The Court of Appeals therefore affirmed.
Lopez v. RS Clark & Asscos., Inc., No. 05-12-00868-CV
In this whistleblower suit against Dallas County, the County filed a plea to the jurisdiction based on sovereign immunity. The plaintiff, a former deputy constable, complained of illegal activity and retaliation in his employment division to the Dallas County Commissions Court. The County contended, however, that this entity does not fall within the confines of the Whistleblower Act and, therefore, the plaintiff did not have an objective good faith belief that he was reporting the misdeeds to an appropriate law enforcement body. While the Court found that “an appropriate law enforcement authority must be actually responsible for regulating under or enforcing the law allegedly violated,” it nevertheless remanded the proceedings to the trial court because the record did not show that evidence was presented about the plaintiff’s good faith belief that the Commissioners Court was the appropriate body. This was particularly true given that some of the County’s jurisdictional arguments were newly raised on appeal.
Raymundo Rico was fired after being accused of sexually assaulting a co-worker at L-3 Communications. He was acquitted on the criminal charges, and subsequently brought suit against L-3 and his accuser for intentional infliction of emotional distress and malicious prosecution. The trial court granted summary judgment for the defendants, and the Court of Appeals affirmed. The Court rejected Rico’s claim that he should receive the benefit of an adverse presumption due to the defendants’ alleged failure to preserve security videos, as he had not moved to compel any discovery on those tapes. On the malicious prosecution claim, the Court concluded that there was no evidence in the summary judgment record to negate the legal presumption that a person who reports a crime does so in good faith and with probable cause. Likewise, the Court held that there was no evidence of extreme and outrageous conduct for the intentional infliction of emotional distress claim because Rico did not have evidence that the complainant had not honestly believed she had been a victim of assault when she reported it to the police.
Rico v. L-3 Communications Corp., No. 05-12-01099-CV
One of the legacies of Texas consumer protection laws was Article XVI, Section 50 of the Texas Constitution, which effectively prohibited home equity lending. In 1997, voters approved amendments to that section to permit home equity loans, but only under certain conditions. Among other restrictions, the loan cannot exceed 80% of the value of the equity in the home, and the lender must cure any violation of the constitutional requirements within 60 days of the date the borrower gives notice. If those requirements are not met, the lender forfeits all principal and interest and loses its lien on the property.
Lonzie Leath obtained a $340,000 home equity loan in 2005, and signed an acknowledgment that his home’s fair market value was $425,000. In 2008, the servicer sought to foreclose on the property, and Leath responded by alleging that the loan was illegal because it had actually exceeded 80% of the value of the home at the time it was made. The jury found that the property’s fair market value had been only $421,400, a finding that placed the principal of the loan barely over the 80% limit. The trial court therefore entered judgment forfeiting the principal and interest and invalidating the lender’s lien.
Although the servicer claimed that Leath had failed to provide notice of the alleged constitutional deficiency, the Court of Appeals agreed with Leath that his pleadings had given notice and started the clock on the lender’s 60-day cure period. The Court also held that the jury’s valuation finding was adequately supported by the evidence, including the admission of the servicer’s appraisal expert that he had not accounted for $3,600 of electrical work that needed to be performed at the time of the loan. The Court of Appeals therefore affirmed the judgment in favor of the borrower, leaving the lender without principal, interest, or the right to foreclose.
Wells Fargo Bank, N.A. v. Leath, No. 05-11-01425
In 2005, Dibon Solutions acquired 100% of RTS’s common stock. In 2006, the Texas Secretary of State ordered the forfeiture of RTS’s charter or certificate of authority for failure to comply with the tax code. In 2007, Martinair contracted with RTS for use of RTS’s profit optimization products and related services. Martinair later terminated its agreement with RTS, and RTS sued Martinair for breach of contract, identifying the plaintiff as RTS, “a corporation organized under the laws of the State of Texas.”
Martinair filed a motion for summary judgment against RTS, arguing RTS’s forfeiture of its corporate existence in 2006 deprived it of legal authority and capacity under Texas law to enter into the Agreement upon which it sued Martinair, which the trial court granted in part. The trial court also struck RTS’s amended petition, which had purported to substitute RTS’s parent corporation, Dibon, as the plaintiff. On appeal, Dibon argued the trial court erred in striking its amended petition. The Court of Appeals disagreed, and affirmed the trial court’s ruling. Rule 28 permits a partnership doing business under an assumed name to file suit in that name. However, Dibon failed to make a showing that it actually conducted business under the name RTS, thus its amended petition was improper.
Dibon Solutions, Inc. v. Martinair Holland N.V., No. 05-11-01586-CV
In November 2012, a Union Pacific train collided with a flatbed trailer carrying veterans and their spouses during a Veteran’s Day parade in Midland, Texas. The plaintiffs filed their personal injury/wrongful death suit in Dallas County. Union Pacific moved to transfer venue back to Midland County because its principal place of business in Texas is not in Dallas, but rather Harris County and, thus, the only proper venue is in Midland where the accident occurred. The trial court denied Union Pacific’s motion to transfer. The Court of Appeals disagreed, however, holding that Union Pacific’s “principal office” in Texas was not in Dallas because, although some management occurred in that office, the plaintiffs failed to establish that the Union Pacific employees in the Dallas office had “comparable authority” to the executives in Harris County.
The Lavon Water Supply Corp. sued TierOne Converged Networks to evict TierOne and its equipment from Lavon’s water towers. TierOne superseded the eviction by depositing $10,800 — one year of rent — into the registry of the court. Lavon then moved to increase the bond to $40,500, basing the increase on the offer of a competing company to lease the space for $3,375 per month. The trial court granted the request to increase the bond, but the Court of Appeals set aside that order on motion for review.
In setting the supersedeas bond in an eviction suit, the court must consider the reasonable value of the rents likely to accrue during appeal. Although the testimony of Lavon’s witnesses established the amount of rent that TierOne’s competitor proposed to pay, there was no evidence that $3,375 was a reasonable rental rate for space on Lavon’s water towers. In addition, TierOne had offered to waive the exclusivity provision in its lease, and the testimony established that TierOne’s competitor was willing to lease space from Lavon with TierOne’s equipment still in place. Thus, there was no evidence that Lavon was being deprived of any increased rents, and the order increasing the supersedeas bond was vacated.
TierOne Converged Networks, Inc. v. Lavon Water Supply Corp., No. 05-13-00370-CV
Kelly Hawkins obtained a default judgment in his home state of Kansas against Texas attorney Lloyd Ward and his firms. Hawkins then brought suit in Dallas to enforce the Kansas judgment. Ward contended that the Kansas judgment was ineffective because that state lacked personal jurisdiction over him. The Court of Appeals disagreed. The Kansas court had found jurisdiction based in part on the allegation that the defendants had operated as a joint venture in entering into their representation of Hawkins, and Ward failed to negate that conclusion by clear and convincing evidence. Ward also failed to negate Hawkins’ allegations of the defendants’ contacts with Hawkins in Kansas during the course of the representation. The Court of Appeals therefore affirmed the trial court’s denial of Ward’s motion to vacate the Kansas judgment.
Ward v. Hawkins, No. 05-12-00712-CV
In this memorandum opinion, the Court held that the plaintiff failed to effect service on the defendant because the proof of service on the Secretary of State’s return stated that “no such number” existed. This, according to the Court, was prima facie evidence that the defendant was not served.
A roofer died after falling from the rooftop on one of his jobs. His estate sued the general contractor for negligence, claiming that the general contractor maintained a duty to ensure the roofer operated with all proper safety equipment. The Court of Appeals upheld the trial court’s grant of summary judgment in the general contractor’s favor because it found that the general contractor did not owe the roofer, a sub-contractor, a duty to ensure he performed his job safely. According to the Court, “a general contractor’s duty of reasonable care is commensurate with the control it retains over the subcontractor.” Because the general contractor here did not maintain either contractual or actual control over how the roofer performed his job, it did not owe him any duty to ensure his safe work habits.
The Court of Appeals affirmed the trial court’s ruling that appellees lacked sufficient contacts with Texas in their individual capacities to support the exercise of personal jurisdiction over them. Appellants argued that appellees were subject to specific jurisdiction in Texas because the tortious interference and related conspiracy claims against appellees directly relate to and arise from appellees’ purposeful contacts with Texas. According to the Court, any alleged jurisdictional contacts in furtherance of tortious interference made by appellees in their capacity as corporate officers are subject to the fiduciary shield doctrine and do not constitute contacts with Texas in their individual capacities because there was no proof such contacts were motivated solely by appelees’ personal interest. Accordingly, the Court found appellees’ evidence that none of their contacts with Texas were in their individual capacities, combined with the fact that appellees could not be liable in their individual capacities for their conduct on behalf of out of state entities, negated appellant’s jurisdictional allegations.
The Court of Appeals has once again denied a permissive interlocutory appeal. Respondents sued petitioners for injuries they sustained after a bus accident in Mexico. The bus ticket stated that the passenger accepted “the validity and application of the authority and jurisdiction of the applicable Mexican Law and Regulations…” The trial court denied petitioner’s motion to apply the laws of Mexico, ruling instead that Texas law applied. Petitioners appealed. The Court found that although petitioners claim they will have to do additional discovery without a decision from the Court of Appeals on the choice of law issue, petitioners failed to show the appeal would materially advance the ultimate termination of the litigation.
The Court of Appeals has granted mandamus in another discovery dispute. This time, it regards a trial court’s order for an expert witness to turn over all documents reflecting discussions with the plaintiff and its counsel, as well as all documents relating to the plaintiff’s claims and defenses. But the expert had also performed services for the plaintiff in a capacity that brought him within the scope of the attorney-client privilege, and the Court held that it was an abuse of discretion for the trial court to compel the production of privileged materials and items outside the scope of the rules providing for expert disclosures.
In re Segner, No 05-13-01414-CV
Tecore, Inc. purchased equipment from AirWalk Communications and integrated the equipment into its own cellular network products. Tecore originally bought the equipment under an agreement that did not include any arbitration clause, but AirWalk elected to terminate that contract and proposed a new one instead. The proposed contract included an arbitration clause, but the parties were never able to finalize a new agreement. Nevertheless, Tecore sought to purchase additional equipment from AirWalk, and AirWalk’s quotation for that equipment attached and incorporated its own terms and conditions, including an arbitration provision. Tecore sent back a purchase order that made no reference to AirWalk’s terms, and AirWalk responded with a “Purchase Order Acceptance” form that again stated the sale was subject to the same terms attached to its previous quote. When the sale subsequently fell apart, AirWalk filed a demand for arbitration. Tecore objected to the arbitrator’s jurisdiction, but the case proceeded and an award was ultimately entered in favor of AirWalk. The district court confirmed the arbitration award, and the Court of Appeals affirmed.
Tecore argued that AirWalk’s arbitration provision had never become part of their agreement, but the Court of Appeals disagreed. Reviewing the issue de novo, the Court first disposed of Tecore’s claim that the sale had been made subject to the continuing terms of the original sales contract. Tecore also argued that it had not accepted the terms attached to AirWalk’s quote because its purchase order had not complied with the quote’s instruction to reference both the quotation number and the terms and conditions attached to the quote. However, the Court of Appeals did not read that instruction as mandating a particular form of acceptance for the formation of a contract, and even if it had been a requirement, AirWalk’s subsequent assent to Tecore’s defective acceptance confirmed that a contract had still been formed, including AirWalk’s arbitration clause.
Tecore, Inc. v. AirWalk Communications., Inc., No. 05-12-00130-CV
Miller Global Properties worked with Marriott International to build a resort and golf club in the Hill Country outside San Antonio. They entered into a series of agreements for planning and budgeting the resort, but the final contract by which Miller purchased the report included an “as-is” sale provision. In that clause, Miller acknowledged and agreed that Marriott had not made any representations, and went on to “specifically negate and disclaim any representations.” A related contract regarding the construction of the property also contained a merger clause. The cost to build the resort proved to be $90 million higher than the budget, and Miller sued Marriott on con-tort claims, alleging that Marriott had misrepresented that the plans and specifications for the resort were essentially complete and that the budget would be adequate to complete construction.
The trial court granted summary judgment for Marriott, which argued that the contracts negated the element of reliance necessary to support Miller’s tort claims. The Court of Appeals affirmed, holding that the as-is provision negated and disclaimed the extrinsic representations Marriott was alleged to have made to Miller. That met the standard set by Italian Cowboy Partners, Ltd. v. Prudential Ins. Co., 341 S.W.3d 323 (Tex. 2011), which had permitted a misrepresentation case to proceed where the parties’ contract only disclaimed the existence of representations about the subject matter of the contract, without also disclaiming reliance on any representations made outside the contract. Because the contracts negotiated between Miller and Marriott disclaimed both the existence of additional representations and any reliance on them, Miller’s claims were barred.
Miller Global Props., LLC v. Marriott Int’l, Inc., No. 05-12-0822-CV
The plaintiff in a personal injury suit sought to compel the deposition of the defendants’ outside counsel, who had also served as the parent company’s secretary. The trial court granted the motion in part, ordering the attorney to testify on certain business-related matters and his investigation of the collision that had injured the plaintiff. The Court of Appeals held that communications and materials provided to the attorney in his capacity as secretary were not privileged, but that information provided to or collected by him as the defendants’ attorney was necessarily privileged and therefore outside the proper scope of discovery. The Court of Appeals conditionally granted mandamus to exclude privileged information from the scope of the business-related topics, and to deny entirely the plaintiff’s attempt to obtain discovery regarding the attorney’s investigation of the accident.
In re Southpak Container Corp., No. 05-13-01457-CV
The Court of Appeals has granted mandamus relief in a discovery dispute over the scope of a corporate representative’s deposition. The underlying lawsuit was for damage to the plaintiffs’ property incurred in the course of moving from Texas to the United Arab Emirates. The plaintiffs sought deposition testimony on two topics that the Court of Appeals held were beyond the proper scope of discovery. First, the Court ruled that the plaintiffs were not entitled to discovery of the defendant’s gross revenues for 2009-13, as the relevant issue for purposes of exemplary damages is the defendant’s current net worth, not its past and present revenues. Second, the Court rejected the plaintiffs’ request for the witness to identify the defendants’ production documents and explain why they had been produced. On that issue, the Court cited In re Exxon Corp., 208 S.W.3d 70, 76 (Tex. App.-Beaumont 2006, orig. proceeding), for the proposition that “discovery regarding the methods of document collection and production invades the work-product privilege.” The opinion does not explain just how far that principle reaches, but attorneys and clients should keep it in mind the next time they are writing or responding to a corporate rep notice.
In re Arpin Am. Moving Sys., LLC, No. 05-13-01446-CV
In 2007, LG Auto Laundry sold a .8-acre tract to Shammy Man Auto Wash, with Shammy Man purchasing the land by means of a mortgage from Millennium State Bank. At the same time, LG and Shammy signed a ground lease permitting LG to possess .06 acres of the property containing a cell phone tower. LG and Millennium signed a Subordination, Non-Disturbance and Attornment Agreement (SNDA) providing that, in the event of foreclosure, LG’s possession of the leased property would not be disturbed. Shammy defaulted, but before Millennium could foreclose, the FDIC took over Millennium and transferred the assets to the State Bank of Texas. The plaintiff purchased the property from the State Bank of Texas and filed this lawsuit to establish that the foreclosure extinguished LG’s ground lease.
Although a valid foreclosure on a lien terminates leases, here the ground lease specifically stated that it was subordinate to Millennium’s deed, but the SNDA provided that LG’s possession would survive the foreclosure. However, because the FDIC took over Millennium, federal law prohibited LG from enforcing the SNDA. As a result, the Court found that the plaintiff acquired the land free and clear of LG’s lease.
In this slip-and-fall litigation, the defendant moved for an order declaring the plaintiff a vexatious litigant, which the trial court granted. The Court of Appeals held that the trial court abused its discretion in finding the plaintiff vexatious because, while he had, indeed, brought a number of prior lawsuits (thus satisfying one prong standard), the plaintiff could establish a reasonable probability of success in the pending litigation. Thus, the defendants could not satisfy the second prong of the two-prong test.
After Brown missed at least twenty-five mortgage payments, the Bank sent Brown notice of default and he failed to cure. The Bank sought a declaratory judgment authorizing a non-judicial foreclosure sale of the property, and obtained summary judgment. Brown appealed, and the Court affirmed. First, the Court found that Brown’s attacks on the admissibility or competency of the Bank’s summary judgment evidence were largely inadequately briefed. Second, the Court rejected Brown’s argument that the trial judge erred by denying Brown a continuance of the summary judgment hearing because (1) Brown’s motion for continuance did not mention the summary-judgment hearing, (2) Brown failed to preserve error because there was no ruling on his motion, and (3) Brown failed to submit evidence demonstrating the materiality of the purportedly previously unavailable summary-judgment evidence. Finally, the Court held that Brown failed to show reversible error due to the clerk’s late filing of the record on appeal.
No Governmental Immunity For Charter Schools Under Texas Whistleblower Protection Act
November 27, 2013Kimberly Ball-Lowder brought suit against Pegasus for wrongful discharge under the Texas Whistleblower Protection Act. Pegasus filed a plea to the jurisdiction, asserting that Ball-Lowder’s claims must be dismissed because the Whistleblower Protection Act is not applicable to a Texas open-enrollment charter school. The Court held that the Act applies to an open-enrollment charter school, and affirmed the trial court’s order denying the plea to the jurisdiction. Government immunity is waived for a “local government entity” respecting claims under the Act. The Court concluded that the Whistleblower Protection Act’s definition of “local government entity” must be interpreted to include an open-enrollment charter school to be consistent with the Texas Supreme Court’s decision in LTTS Charter School, Inc. v. C2 Construction III, 342 S.W.3d 73 (Tex. 2011).
In a rare en banc opinion, the Court of Appeals has clarified the standards for asserting a no-evidence motion for summary judgment. The owners of Gloria’s restaurants sued one of their long-time managers and his business partner after the manager left to start a new restaurant, Mario Sabino’s. The new restaurant served similar food, and Gloria’s claimed that the defendants had misappropriated trade secret recipes and tortiously interfered by recruiting Gloria’s employees. The defendants filed a motion for summary judgment that asserted Gloria’s had no evidence of “one or more” of the elements of Gloria’s claims. The motion listed all the elements of each of the claims, but failed to specifically identify which of those elements were being challenged. Gloria’s therefore attempted to respond with evidence of each element of its entire case, but the trial court granted the defendants’ motion on all claims.
The majority opinion rejected that shotgun approach to summary judgment practice. Rule 166a(i) and its supporting comments require the movant to specifically state which elements of a claim are being challenged, and the defendants’ invocation of “one or more” of the elements of Gloria’s case failed to meet that threshold. The Court declined to interpret “one or more” as meaning “each and every,” as the defendants argued on appeal. The Court also stressed that a no-evidence motion is intended to assess the proof of an element that the movant believes in good faith to be unsupported by evidence. In seeking to challenge every aspect of Gloria’s claims, the defendants sidestepped the specificity requirement of Rule 166a(i) and improperly forced Gloria’s to prove up its entire case.
The majority also rejected the defendants’ argument that Gloria’s had waived its complaint by responding to the motion in its entirety, following a line of cases that permit a party to challenge the legal sufficiency of a summary judgment motion for the first time on appeal. Justice Evans O’Neill dissented based on that waiver point, arguing that the motion met the “fair notice” pleading standard, that Gloria’s attempt to meet all the elements of its case demonstrated it understood what was being challenged, and that Gloria’s should have objected or specially excepted to the motion in order to raise the issue and preserve it for appeal.
Jose Fuentes Co., Inc. v. Alfaro, No. 05-11-00228-CV (majority)
The Shops at Legacy filed suit against Fine Autographs & Memorabilia for breach of their lease agreement. On the day of trial, TSAL filed a motion for continuance, which was denied. Fine Autographs then filed a motion for sanctions based on alleged discovery abuse by TSAL, apparently relating to its failure to produce copies of checks and a document related to the lease. The trial court granted the motion and dismissed TSAL’s claim with prejudice as a “death penalty” sanction. Although the court’s order recited that it had considered, and rejected, the possibility of lesser sanctions, nothing in the record of the sanctions hearing actually demonstrated the consideration of lesser sanctions. Because a court must consider the availability of lesser sanctions before dismissing a party’s case, the Court of Appeals reversed and remanded the case for further proceedings.
The Shops at Legacy (Inland) L.P. v. Fine Autographs & Memorabilia Retail Stores, Inc., No. 05-12-00864-CV
Benica Brown’s former employer, Digital Intelligence Systems (“DIS”) sued her in Dallas county, where she was employed in DIS’s Dallas office, even though Brown’s employment agreement with DIS (which DIS drafted) specified Virginia as the exclusive forum to resolve any disputes between the parties. The Court conditionally granted mandamus relief, holding that the trial court abused its discretion when it refused to dismiss the action based on the forum selection clause in the employment agreement. The Court specifically rejected DIS’s argument that Virginia would be an inconvenient forum because DIS “certainly could have foreseen that it would be required to litigate against Brown in Virginia, especially given that it drafted the employment agreement containing that requirement and required Brown to sign it.”
Last year, the Dallas Court of Appeals held that a plaintiff had properly alleged a waiver of sovereign immunity for a government body’s use or condition of tangible personal property, based on the allegation that an improperly secured whiteboard had fallen on the plaintiff. Dallas Metrocare Services v. Juarez, ___ S.W.3d ___ (Tex. App.–Dallas 2012). The Texas Supreme Court has now reversed that decision, citing its more recent decision in Rusk State Hospital v. Black, 392 S.W.3d 88 (Tex. 2012), for the proposition that the Court of Appeals should have considered Metrocare’s argument on appeal — not raised before the trial court — that the injury did not arise from the “condition” of the property. The Supreme Court also held that there was no waiver of immunity by Metrocare’s “use” of the whiteboard, since it had simply made the board available for use by patients. The case will now be remanded to the Court of Appeals for further consideration.
Dallas Metrocare Services v. Juarez, No. 12-0685
The Texas Supreme Court has also granted the petition for review in another case from the Dallas Court of Appeals. In Ponderosa Pine Energy, LLC v. Tenaska Energy, Inc., 376 S.W.3d 358 (Tex. App.–Dallas 2012, pet. granted), the Court of Appeals reinstated a $125 million arbitration award that had been vacated by the trial court. The Court of Appeals concluded that the defendant had waived its ability to challenge the “evident partiality” of one of the arbitrators by failing to investigate the arbitrator’s disclosures until after the panel had made its award. Oral argument at the Supreme Court has been set for January 7.
Readers of the blog will probably be familiar with our “Waive Goodbye” series of posts on the Dallas Court of Appeals’ recent line of cases holding that borrowers and guarantors can contractually waive their statutory right to offset any deficiency if foreclosed property is sold for less than its fair market value. The Texas Supreme Court has now granted the petition for review in the first of those cases, Interstate 35/Chisam Road L.P. v. Moayedi, 377 S.W.3d 791 (Tex. App.–Dallas 2012, pet. granted). Oral argument has been set for January 8, and we will continue to keep our eyes on the issue.
The Court of Appeals has issued a lengthy opinion in a breach of contract case. Defendant Richard Berryman and his company, Berryman South Fork, claimed that J. Baxter Brinkmann International Corp. had constructively terminated the contract and owed them $160,000 in unreimbursed expenses. JBBI got to the courthouse first, however, and claimed that Berryman had breached the contract by failing to continue his performance. The trial court granted summary judgment in favor of JBBI and awarded it more than $500,000 in damages, attorney fees, and interest.
Among many other issues, the Court of Appeals held that JBBI could not recover approximately $290,000 in breach of contract damages for payments it made to Berryman during the months following his attempted repudiation of the contract. That holding flows from the 88-year-old case of Osage Oil & Ref. Co. v. Lee Farm Oil Co., 230 S.W.2d 518 (Tex. Civ. App.–Amarillo 1921, writ ref’d). In that case, the court held that when a party is served with notice that the other party is repudiating their contract, the first party cannot continue to perform it and thereby increase the damages to which it would otherwise be entitled. However, that principle apparently does not extend beyond the breach of contract claim, as the Court’s opinion affirmed JBBI’s award of even greater damages for money had and received. The opinion also includes multiple discussions regarding the preservation of issues for appeal, including through pleadings, evidentiary objections, and briefing on appeal.
Berryman’s South Fork, Inc. v. J. Baxter Brinkmann Int’l Corp., No. 05-12-00492-CV
Innovate Technologies LP entered into a contract with another information technology firm, Youngsoft, Inc., to provide IT services on a project for one of Innovate’s clients. The job did not go well. Youngsoft sued Innovate for nonpayment, and Innovate counterclaimed for breach of warranty and breach of contract. The trial court granted summary judgment and directed verdict against Innovate’s counterclaims, based on a limitation of liability clause that provided Youngsoft “shall not be liable for any incidental, ancillary, direct, indirect, special or consequential damages, including but not limited to lost profits, whether in tort or contract, and based on any theory of liability.” Elsewhere in the contract, however, Youngsoft expressly agreed to indemnify Innovate from “all claims, damages and judgments . . . arising out of or relating to any breach of this Agreement.” The Court of Appeals reconciled those apparently conflicting provisions — which threatened to render the entire agreement illusory and unenforceable — by agreeing with Innovate that the limitation of liability clause applied to claims brought against Youngsoft by third parties, not to claims brought by its counter-party, Innovate. The Court therefore reversed the trial court’s rulings and remanded the case for a new trial.
Innovate Tech. Solutions, L.P. v. Youngsoft, Inc., No. 05-12-00658-CV
As the Court held in a similar case two weeks ago, the recitals in a trustee’s deed fall into an exception to the hearsay rule and should be admitted into evidence because the recitals are “relevant to the purpose of the document.”
Although the contract at issue in this breach of contract matter included an arbitration provision, the defendant went ahead and actively litigated the case by, among other things, filing a motion for summary judgment, propounding affirmative discovery, deposing expert witnesses and attending mediation. Then, after 19 months of active litigation (and 4 months before trial), the defendant invoked the arbitration provision in the agreement and moved to compel arbitration. The Court found that the defendant had waived arbitration by substantially invoking the judicial process.
Pattie and Warren Gilbert were married in 1959. During the course of the marriage, Pattie inherited investment assets from her parents and uncle, and in 1993 she rolled those assets into a trust for the benefit of the couple’s daughter. The following year, Pattie and Warren entered into a post-nuptial agreement that defined their separate and community property, including Pattie’s separate interest in the trust assets. Shortly thereafter, Beal Bank obtained a judgment against Warren for default on a note. In 2008, the bank sued Pattie and Warren, seeking to set aside the transfer of Pattie’s inherited assets to their daughter’s trust as a fraudulent transfer. The parties filed cross-motions for summary judgment, and the trial court ruled in favor of the Gilberts. The Court of Appeals affirmed.
Property acquired during the course of a marriage is presumed to be community property, and the bank sought to take advantage of that presumption in collecting on its judgment against Warren. In this case, however, the undisputed evidence established that Pattie had inherited the assets in the trust, and that made them her separate property. The Court of Appeals also rejected the bank’s argument that interest and dividends on those assets were community property that became commingled with the separate property in the trust account. The earnings from Pattie’s separate property might have been community property, but they were “sole management” community property, and that meant they were not subject to any non-tortious liability of her spouse. Because the bank was only a creditor of Warren, and not Patttie, her transfer of those assets to the trust was not a fraudulent transfer as to the bank.
Beal Bank v. Gilbert, No. 05-12-00692-CV
Donald and Ida Mae Card owned the headstone that once marked the grave of Lee Harvey Oswald. During the 1980s, the Cards gave the headstone to Ida Mae’s sister and brother-in-law for safekeeping. The Cards, in turn, gave the marker to their son, Johnny Ragan. Donald and Ida Mae died, and ownership of the Oswald gravestone passed to their children, who demanded it back from the Ragans. As it turns out, the Ragans had sold it to an Illinois resident, Wayne Lensing, who had arranged for its exhibition at a museum in Illinois. The Card children sued to get the headstone back. Lensing filed a special appearance challenging the court’s personal jurisdiction. The Court found that the plaintiffs had sufficiently alleged jurisdiction because they established that Lensing had committed several relevant acts in Texas, including flying to Fort Worth to take possession of the headstone. Accordingly, the Court upheld the trial court’s finding of personal jurisdiction.
In this forcible detainer case, the defendant objected to the entry into evidence of the deed at issue. While stipulating to the deed’s existence, the defendant argued that the court should exclude the deed’s recitals because they were hearsay. The Court of Appeals rejected this argument and pointed to Texas Rule of Evidence 803(15), which provides a hearsay exception to “a document purporting to establish or affect an interest in property.” Because the Court found that the recitals were “germane to the purpose of the document,” it affirmed the trial court’s decision to admit the deed in its entirety.
The court of appeals conditionally granted mandamus relief after the trial court issued a TRO preventing relators from terminating Greg Marquez’s employment. The TRO stated that Marquez’s injury was irreparably because the loss of his job would result in the loss of health insurance benefits for him and his family, and that he would be unable to obtain medical treatment. The Court of Appeals held that Marquez’s injury was not irreparable because the cost of medical treatment is compensable through monetary damages. Consequently, the trial court abused its discretion by granting the TRO.
In re Southern Foods Group, LLC
The Court subsequently withdrew its opinion and vacated its order in In re Southern Foods Groups. The Court found that because the trial court had orally denied the real party in interest’s request for a temporary injunction, the issues relating to the TRO were moot.
Among other claims, the Olmsteads sued the Goldmans for breach of contract to purchase residential real estate. The trial court rendered judgment in favor of the Olmsteads and awarded them damages and attorney fees; the Goldmans appealed. The Court of Appeals partially reversed, holding that the Olmsteads take nothing on their claims and remanded the issue of attorneys’ fees. The Court found that the trial court erred by awarding the Olmsteads damages based on the carrying costs of the house after the Goldmans breached the contract until the house was sold. The proper measure of damages was the difference between the contract price and the market value of the house on the date the Goldmans breached the contract, which was zero. The court reasoned that non-breaching sellers should not be awarded the post breach costs of ownership because it could “incent the seller to hold the property indefinitely while waiting for market conditions to change, or for a purchaser willing to pay a specific price.”
Unaware that the law prohibited the creation of a professional association between doctors and non-doctors, the plaintiff, Andrew Small (a medical doctor) formed a joint practice with the Parker brothers (two chiropractors). The association operated for several years, but ended in 2003. After the relationship ended, Small sought to establish that he should have been paid more under the the entity’s articles or association, so he brought suit. The Court of Appeals, however, rejected Small’s claim because, under Texas law, it is illegal for a doctor to jointly own a professional association with non-doctors. Accordingly, the Court voided the contract on the ground that “a contract to do a thing which cannot be performed without violation of the law is void.”
A short mandamus opinion from the Dallas Court of Appeals highlights a limit on the ability of courts to interfere with arbitration. In this case, the trial court stayed the arbitration and ordered the relator to dismiss it because the parties did not have an agreement to arbitrate. But the Texas Arbitration Act only authorizes a court to stay arbitration, not to order that it be dismissed. The Court of Appeals therefore directed the trial court to vacate the dismissal order, but leaving the stay in place while the litigation apparently moves forward in the trial court.
In re Seven Hills Commercial, LLC, No. 05-13-01340-CV
In 1977, Bullough married Hundley because she told him she was pregnant with his child – Dale Jr. – who was born the following year. In 2004, the parties divorced after a two-day trial, and the trial court made a division of the parties’ marital estate. More than six years later, Bullough learned that Dale Jr. was not his biological son through DNA testing. A few months later, the Will Slip 2011 Trust was created for the benefit of Bullough and the children of Dale Jr. Bullough then assigned his claims against Hundley to the Trust, and seventeen days later, the Trust filed suit.
The essence of the Trust’s claims was that Hundley deceived Bullough into marrying her by lying about the paternity of Dale Jr., and continued to lie throughout the marriage. As damages, the Trust sought the value of the support Bullough provided Hundley during more than 20 years of marriage, the value of the assets Hundley received as part of the divorce, and the parties’ art collection. The trial court found that the 2004 final divorce decree barred the Trust’s claims and granted Hundley’s motion to dismiss and motion for summary judgment. The Court of Appeals affirmed, holding that because the Trust’s claims arise out of facts that could have been litigated in the divorce, they were barred by res judicata.
Plaintiff Shabaz Din was born in Pakistan, where he became a doctor and specialized in ophthalmology. After emigrating to the United States in the 1990s, Din took a job training medical assistants with ATI Career Training Center. When the position of Medical Assistants Program Director came open, Din applied for it. ATI chose to go with a doctor of osteopathy instead. That doctor was soon replaced by a different candidate with only a vocational degree, followed by yet another new hire who had not graudated from college. Din filed a complaint with the EEOC, and ATI fired him shortly thereafter. Din sued for national origin discrimination and retaliation, and the jury awarded him damages for back pay, emotional pain and suffering, and punitives.
The Court of Appeals took up several issues in its determination of the case. First, it dismissed Din’s cause of action for retaliation because he had not raised that issue in the underlying administrative proceeding as required by Chapter 21 of the Texas Labor Code (formerly, the Texas Commission on Human Rights Act). As to the damages, the Court held that there was no evidence that Din had suffered any compensible emotional pain and suffering due to the failure to promote, and it therefore vacated that portion of the judgment. The Court did find that there was evidence of back-pay damages, but nowhere near enough to sustain the jury’s award of $83,000, leading to a remand for additional proceedings on both liability and damages for the back-pay issue. Finally, the Court of Appeals reviewed the evidence supporting the jury’s finding of malice or reckless indifference and found it was legally insufficient to support an award of punitive damages. Although there was evidence that the ATI manager had intended to cause Dim “some harm” in denying his promotion, that evidence did not show an intent to cause “substantial injury or harm” because the promotion would have resulted in only a small raise in Dim’s hourly salary.
ATI Enters., Inc. v. Din, No. 05-11-01522-CV
