In case you missed it, or if you just hate reading Twitter in real time, Law360 has kindly posted a transcript (twitscript?) of Wednesday afternoon’s discussion on the Texas Supreme Court’s recent term. Please don’t expect too much analysis in 140 characters or less, but it’s a nice way to check in on some big developments you might have missed by not obsessively checking the opinions at 9:05 am every Friday. Thanks very much to Law360 for the invitation to participate. Now back to our regularly-scheduled programming.
At noon on Wednesday, @600Commerce will be participating in a #Law360Chat on Twitter with @Law360 and some excellent attorneys to discuss the 2013-14 Supreme Court of Texas term. Regular Twitter followers will get our comments in their feed, of course, but you can follow the whole event via the hashtag above. Drop on by for plenty of very short takes on some of the more important cases of the term.
In this memorandum opinion, the Court directed the trial court to vacate its order disqualifying defense counsel. Although the plaintiff argued that the counsel for defendant should be disqualified because he was a potential witness, the Court of Appeals found no evidence establishing what was “essential” about his testimony or how the plaintiff would be prejudice if he were not permitted to testify.
In this decision, the Court of Appeals found that the plaintiffs’ claims were barred by the doctrine of res judicata because those claims should have been litigated in a prior lawsuit brought by one of the plaintiff against the same defendants. Although one of the plaintiffs in the second suit was not a party to the initial litigation, the Court nevertheless applied res judicata to both plaintiffs because the “new” plaintiff was a one person professional association populated entirely by the previous plaintiff. Thus, the parties were in privity with one another, and res judicata barred the claim.
In this memorandum opinion, the court found insufficient the sheriff’s affidavit of service, because the affidavit merely stated that the recipient “was served.” According to the Court, “[b]ecause the return does not state the manner of service, it does not strictly comply with [TRCP] 107, which requires the officer’s return state ‘the manner of delivery of service.'”
During the course of this case, the defendant made numerous changes to his deposition testimony post hoc. Ultimately, it was discovered that the defendant’s counsel had drafted the changes and told their client to adopt them. The trial court judge, outraged at this behavior, forced the defendant to disclose emails reflecting that conduct (on the theory that they fell under the crime/fraud exception to attorney-client privilege). Not surprisingly, the plaintiff had a field day attacking the defendant’s credibility at trial, leading to a multi-million dollar verdict in its favor, including substantial punitive damages.
After trial the plaintiff moved for sanctions based on the plaintiff’s conduct, which the trial court awarded. On appeal, the Court of Appeals reversed, because the motion for sanctions should have been brought before trial and because, even under the trial court’s inherent power to sanction, the Court concluded that allowing the plaintiff’s counsel to use emails between the defendant and his counsel for cross examination was “enough to make the point” and further sanctions were excessive.
For the second time this month, the Court of Appeals has decided that Oncor Electric Delivery Company was not responsible for causing a fire that damaged a plaintiff’s property. In this instance, Schepp’s Dairy alleged that Oncor’s negligence led to a fire starting with a transformer at Schepp’s facility. At trial, three different electrical engineering experts variously testified that the fire was caused on either Schepp’s side or Oncor’s side of the transformer. The jury specifically rejected the conclusions of two of those experts, leaving only one expert for Schepp’s. In a highly fact-specific opinion, the Court of Appeals held that the last expert’s opinion was unreliable. Among other problems, the witness had failed to exclude other possible causes of the fire, and he had only testified as to Oncor’s negligent maintenance of the transformer without opining as to what was the direct cause of the fire. Without that testimony, Schepp’s had no evidence of causation, and the judgment against Schepp’s was therefore reversed.
Oncor Elec. Deliv. Co. LLC v. So. Foods Gp. LLC, No. 05-12-01223-CV
In a case of first impression, the Court of Appeals ruled that if a court determines that a mechanic’s lienholder has a perfected statutory mechanic’s lien and is entitled to recover damages for unpaid labor and materials, the court must issue a judgment of foreclosure and order the sale of the property.
In the specific case in front of the Court, the lienholder sought to foreclose on its lien, but the trial court refused to order a foreclosure, noting that the language of the statute (Texas Property Code 53.154) provides that mechanic’s liens “may be foreclosed only on judgment of a court of competent jurisdiction.” The Court of Appeals, reversing the trial court’s decision, noted that the use of the passive voice implied a meaning that mechanic’s liens may be enforced by the lienholder, thus giving the lienholder–not the court–the discretion.
Last December, the Court of Appeals issued an interim opinion vacating a trial court order that almost quadrupled the supersedeas amount to be paid by TierOne Converged Networks during the appeal of a judgment evicting it and its equipment from the water towers of Lavon Water Supply Corp. Now, the Court has reversed and rendered judgment in favor of TierOne on the merits of the forcible detainer case. The Court agreed with TierOne that it had validly exercised its contractual option to renew the lease of the property for an additional five-year term. Because the lease did not require notice of any renewal, TierOne’s continued occupation of the property and payment of the monthly rent following the expiration of the initial term was sufficient to constitute an election to renew.
TierOne Converged Networks v. Lavon Water Supply Corp., No. 05-13-00370-CV
In this fraud case, the Court of Appeals rejected the plaintiff’s argument that its fraud claim should survive summary judgment because the defendant failed to disclose information that it “should have known” According to the Court, a fraud claim based on a failure to disclose theory requires that the defendant actually knew the information because “[t]here is . . . no duty if a defendant fails to disclose material facts it ‘should have known.'”
A former Halliburton employee who had worked at the company designing and manufacturing wellbore plugs left and formed his own company that designed and manufactured wellbore plugs. Halliburton sued the former employee and his company. Ultimately, a jury found in Halliburton’s favor, awarding it damages, and the trial court entered an injunction barring the former employee from using Halliburton’s trade secrets for eighteen months.
Not satisfied, Halliburton appealed, seeking a permanent injunction. The Court of Appeals sided with Halliburton, holding that the trial court erred by refusing to enter a permanent injunction because the former employee failed to show that anything less than a perpetual injunction would protect Halliburton’s rights and “remove the competitive advantage obtained through the misappropriation.” Halliburton Energy Servs., Inc. v. Axis Tech. LLC, 444 S.W.3d 251 (Tex. App.-Dallas 2014, no pet.)
One year ago, the Dallas Court of Appeals held that a homeowner’s negligence claims against the company that installed the home’s plumbing were barred by the economic loss doctrine. Today, the Texas Supreme Court has reversed that ruling in a per curiam opinion. Although the plumber’s liability to the homebuilder was contractual, the negligent performance of a contract that injures a non-party’s person or property is sufficient to state a claim for negligence. The Supreme Court reiterated that the economic loss rule does not permit a party to avoid tort liability to the rest of the world simply by entering into a contract with another person.
Chapman Custom Homes, Inc. v. Dallas Plumbing Co., No. 13-0776
In an opinion that never mentions the name “Ross Perot Jr.” (a.k.a. Hillwood Investment Properties III), the Court of Appeals has affirmed summary judgment in favor of Mark Cuban (a.k.a. Radical Mavericks Management LLC) in a case alleging that Cuban spent too darned much money on payroll for the Mavs. Or, more technically speaking, that the Mavs were spending more money than they were taking in, rendering the team insolvent and requiring the appointment of a receiver. Sports fans and legal observers may recall this case as the one in which Cuban filed a particularly amusing pleading shortly after the Mavs won the 2011 NBA title. In any event, the Court of Appeals affirmed the trial court’s ruling that Hillwood had no evidence of insolvency, holding that its expert had failed to consider “third-party contributions to the Mavericks” (a.k.a. Cuban’s personal footing of the bills). The Court also affirmed the trial court’s decision to seal certain business records under Rule 76a, holding that the lower court had not abused its discretion in determining that the financial and collective bargaining documents were sufficiently sensitive to justify their sealing.
Hillwood Investment Props. III, Ltd. v. Radical Mavericks Mgmt., LLC, No. 05-11-01470-CV
In this legal malpractice case, the Court rejected the plaintiff’s expert opinion as based on invalid assumptions. The expert opined that the value of sale of an interest in certain oil and gas wells would have been $960,000 greater in April 2008, when the interest should have sold but for a law firm’s malpractice. Among other faulty assumptions, the Court noted that the expert wrongly assumed that (1) the later sale, in September 2008, was a simple asset sale, when, in fact, it involved a partial settlement of a lawsuit; (2) the projections of actual drilling costs, as opposed to actual results, were the proper measure of costs; and (3) that wells would have been drilled at a certain specified rate.
An architectural firm subcontracted with Pavecon Commercial Concrete to pour the foundation for a wedding facility in Carrollton. The architect failed to pay the last of Pavecon’s invoices, prompting Pavecon to sue the architect and the owner of the facility. The defendants counterclaimed for breach of contract and negligence, alleging that the concrete services had been performed improperly. Pavecon moved for summary judgment on the counterclaims. The trial court granted the motion and the Court of Appeals affirmed, holding that the architect had failed to submit admissible evidence of any specific pecuniary loss and that the negligence claims were barred by the economic loss doctrine. Justice Moseley dissented in part, arguing that the trial court should not have sustained Pavecon’s objection that the defendants’ summary judgment affidavit was conclusory in averring their damages.
Trebuchet Siege Corp. v. Pavecon Commercial Concrete Ltd., No. 05-12-00945-CV
Trebuchet Siege Corp. v. Pavecon Commercial Concrete Ltd. (dissent)
In this wrongful foreclosure action, plaintiffs sued the law firm handling the foreclosure, alleging, among other things, fraud. The trial court granted the law firm’s motion for summary judgment based on the attorney immunity doctrine, which generally provides that “an attorney’s conduct, even if frivolous or without merit, is not actionable as long as the conduct was part of the discharge of the lawyer’s duties in representing his or her client.”
The Court of Appeals reversed the trial court’s decision, however, because the attorney immunity doctrine does not extend to allegations of fraud.
An April 2009 wildfire that damaged nearly 400 acres in Palo Pinto County led to a lawsuit in which a developer’s insurance company ultimately sought to pin the blame on Oncor Electric Company. The insurance company’s theory of the fire was that an Oncor worker lit a cigarette and tossed it in some brush, igniting the blaze. To support this theory, the insurance company found several expert fire reconstructionists who conducted tests and re-enactments and determined that the most likely cause of the fire was “the careless disposal of a cigarette” by the Oncor worker.
The trial court excluded the experts’ opinions, pointing to the fact that they did not have any “real experience” with wildfires and did not demonstrate a proper foundation to reach their conclusions. On appeal, noting the deferential standard of review for the admission/exclusion of expert testimony, the Court of Appeals affirmed.
In this lawsuit against guarantors on promissory notes, the Court addressed, among other issues, the standard for adequate summary judgment affidavits. The appellants argued that the two affidavits supporting appellee’s motion for summary judgment demonstrated that the witness lacked personal knowledge. The majority opinion, however, found that the affidavits properly reflected the witness’ personal knowledge because the witness asserted that (1) he had personal knowledge of the matters in the affidavit; (2) his job responsibilities included “servicing and collection of indebtedness” owed by appellant; (3) he was the custodian of records familiar with appellee way of maintaining its books and records (which he had reviewed); and (4) appellee’s business records support the statements in the affidavit.
Bagwell v. Ridge at Alta Vista Investments I, LLC
The dissenting opinion pointed out that these affidavits were defective because appellee was not the original lender on the loans, and nothing in the affidavits demonstrated that he had any personal knowledge of the events occurring before the loans were acquired in January 2010.
Bagwell v. Ridge at Alta Vista Investments I, LLC (dissent)
In this commercial paper case, Jason Kang signed several checks made out to various businesses and drawn on the bank account of his business, Ever Construction. Unfortunately, the checks ended up the hands of wrongdoer Kwan Sup Choi, who was not the named payee on the checks but took and cashed them at Lee’s Check Cashing. When Kang found out that his intended payees did not receive their money, Lee’s Check Cashing was forced to bear the loss and pay them.
Lee’s, however, blamed Kang for the forgery and sued him and Ever Construction under theories of negligence and fraud. After a bench trial, the trial court awarded judgment in favor of Lee’s, and Kang and Ever Construction appealed. The Court of Appeals reversed, holding, among other things, that Kang and Ever Construction had no duty to ensure that the checks it wrote were only presented to third parties for payment by persons who were authorized to cash them.
Hurricane Ike damaged property owned by Optimum Deerbrook LLC. Optimum’s lender, ViewPoint Bank, was a loss payee on Optimum’s property insurance policy with Allied Property & Casualty. Allied paid the claim, issuing checks jointly to Optimum and ViewPoint, but Optimum endorsed and deposited the checks in its own account. As a result, ViewPoint never received any of the insurance funds. ViewPoint sued Allied for breach of the insurance contract and a claim under article 3 of the UCC. The trial court granted summary judgment for the insurer, but the Court of Appeals reversed. Citing the Texas Supreme Court’s recent decision in McAllen Hospitals, LP v. State Farm, the Court held that the insurer had not fulfilled its payment obligation by delivering the checks only to the insured, and that delivery to both payees is required because neither of them, acting alone, could enforce or negotiate the instrument. The Court also held that summary judgment should have been granted in favor of the bank on its UCC claim because the drawer of a check is not discharged from its obligation when the check is issued to nonalternative copayees and is paid without one of their necessary endorsements. However, the Court held that the bank’s attorney fees affidavit was not sufficiently detailed to support summary judgment and remanded the case for further consideration of an award of attorney fees.
ViewPoint Bank v. Allied Prop. & Cas. Ins. Co., No. 05-12-01370-CV
In this interlocutory appeal of a motion to compel arbitration, the Court held that the broad arbitration provision at issue (“[a]ny dispute, claim or controversy arising out of or relating to [the agreement] or breach, termination, enforcement, interpretation or validity thereof” must be arbitrated) required the trial court to grant the defendants’ motion to compel arbitration. Moreover, because the provision itself stated that “the determination of the scope or applicability of this Agreement to arbitrate” must be determined by an arbitrator, the Court found that the responsibility for establishing whether the provision even applies rests with the arbitration proceeding.
A pathologist and his former employer sued each other over a covenant not to compete provision in the pathologist’s employment contract. Among numerous issues before the Court of Appeals was whether the geographic scope of the non-compete provision was unreasonable. The agreement provided that the pathologist was restricted from being employed by a practice that operates within 50 miles of Dallas County.
The pathologist argued that the scope of his non-compete was overly broad because he only worked in Dallas and Collin counties and because it was actually unlimited in scope since he was restricted from working for any practice that operates in Dallas, even if he worked far from the Dallas area.
The Court rejected those arguments and held that the geographic scope of his non-compete was not unreasonable, noting that the pathologist was also part of his former employer’s management team, causing him to be responsible for pathology practices across the Dallas area. Consequently, the Court reasoned that “even if [the pathologist] were working in New York, for example, his management knowledge of and experience with appellants’ Dallas-area operations would be valuable to his new employer.”
Court Grants Mandamus Petition; Denies Plaintiffs’ Attempt to Tour and Videotape Goodyear Tire Plant
August 8, 2014In this products liability case, the plaintiffs alleged that Goodyear was grossly negligent with respect to its tire manufacturing practices at its North Carolina plant and that the design of the tire was defective because it failed to include a nylon cap ply. Ostensibly to help prove their case, the plaintiffs sought to tour and videotape parts of Goodyear’s plant in North Carolina. The trial court obliged, ordering Goodyear to allow plaintiffs’ counsel, expert witness, and a videographer to enter the facility and document the manufacturing process.
Goodyear resisted by filing a writ of mandamus challenging the trial court’s order permitting the tour. The Court of Appeals sided with Goodyear, reasoning that the main reason the plaintiffs wanted to tour the facility was to create demonstrative evidence (namely, a video to show the jury), not to discover new information. Because that is not a valid purpose to seek entry onto another party’s property, the Court granted Goodyear’s mandamus petition.
In this landlord-tenant dispute, the tenants sued the landlord for wrongfully withholding their security deposit in violation of Section 92 of the Texas Property Code. The trial court granted the tenants’ motion for summary judgment, and the landlord appealed. The Court of Appeals reversed, finding that there was a disputed issue of material fact as to whether the tenants provided the landlord with a valid forwarding address where the landlord could provide the written notice required by the statute.
In this lawsuit related to an asset purchase agreement, the Court addressed which party is entitled to the $5.7 million in escrow money when the sale failed to close. Examining the complex terms of the APA, the Court found that the contract terms at issue were ambiguous and thus summary judgment was inappropriate.
In this breach of contract action, the Court of Appeals held that nonresident limited partners who were passive investors in a Texas limited partnership were not subject to personal jurisdiction simply because the limited partnership was formed under Texas law.
Nacho Remodeling v. Calsherm Partners
Trade Secret Misappropriation: Not Sufficiently “Deviant” to Support a Derivative Cause of Action
August 7, 2014In this case, the appellee was sued for, among other things, aiding and abetting an alleged misappropriation of trade secrets. The Court of Appeals held that, even if the appellant could establish the underlying tort of trade secret misappropriation, the claim would still fail. According to the Court, a cause of action for aiding and abetting exists for a “specific and narrow purpose: to deter antisocial or dangerous behavior.” Examples of this type of behavior included “drag racing or similar conduct posing a high degree of risk to others.” The Court found that misappropriation of trade secrets does not qualify as sufficiently antisocial or “deviant” to support an aiding and abetting cause of action.
Plaintiff sued defendant for breach of a lease agreement and unpaid rent. Shortly before the hearing on the plaintiff’s motion, the defendant’s counsel filed a motion for leave to file a late response. The trial court denied the defendant’s motion and granted the plaintiff’s MSJ. The Court of Appeals affirmed the trial court’s decision, noting that the defendant did not attach any evidence to its motion and also failed to address all of the relevant factors in its argument.
In this breach of lease case, the appellant argued that the appellee’s damages expert opinion was unreliable and erroneous because it relied on a hypothetical market rent study. During trial, appellant objected to the relevance of the of the market rent study, but the trial court did not rule on the objection. The expert then testified in detail about each component of her calculation without objection from appellant about her methodology. The Court of Appeals, however, found that because the appellant had “failed to object to the expert’s testimony on the basis of improper methodology before or during trial and obtain a ruling form the court,” appellant waived any error.
Transcontinental Realty v. Wicks
In this garnishment action, the Court of Appeals permitted the appellant, as lessor, to recover past due rent under a commercial lease against a sub-lessee. Among many other issues, the Court rejected the appellee’s argument that the sub-lease was invalid because it was obtained without the landlord’s consent, as required by the lease. On this point, the court held that “this limitation is for the benefit of the landlord” and that sub-lessee “cannot take advantage of their own wrongs.”
Tenet Health Sys. Hosps. Dallas Inc. v. N. Tex. Hosp. Physicians Gp. P.A.
The appellant (brother to appellee) claimed the probate court lacked personal jurisdiction over him. Appellee asserted that the appellant’s individual assistance to the parties’ quadriplegic mother in a probate matter in 2008 (the appellant’s only contact with Texas) required the court to exercise jurisdiction over her brother. The Court held, however, that at the time he assisted his mother in the prior lawsuit, the appellant was not serving as trustee of the Trust at issue in the present lawsuit, and thus his contact with the state was in a separate, individual capacity.
In this mortgage foreclosure-related lawsuit, the appellants challenged the trial court’s decision to grant summary judgment on a no-evidence basis. The Court of Appeals, however, affirmed the trial court’s decision because the appellees did not present any evidence to overcome each of the appellees’ no-evidence grounds. The Court rejected the appellant’s argument “[b]ecause they have not challenged on appeal all possible grounds upon which summary judgment could have been granted.”
The only issue before the Court in this case was whether the trial court erred in denying the defendant’s motion to compel arbitration. The plaintiffs signed up to be Independent Representatives (apparently, a type of sales rep) for the defendants. As part of the online application process, plaintiffs clicked a box confirming that they agreed to the defendant’s terms and conditions. Those terms and conditions contained a provision providing that any dispute between the parties would be resolved by binding arbitration.
It turns out that the Court recently upheld the exact same arbitration provision in a case against the same defendants. Consequently, without much substantive analysis, the Court referenced its prior opinion and reversed the trial court, holding that there was a valid agreement to arbitrate between the parties.
A builder sued the prospective buyers of a townhome for breach of contract and fraud after they backed out of the sale before closing. The Court of Appeals affirmed a jury verdict for the buyers. The seller’s first issue on appeal was simply that “the evidence demonstrates [buyers] committed fraud against [seller],” a complaint that was too broad and generic to preserve any specific error. The Court also affirmed an award of $9,675 in attorney fees to the buyers under a prevailing-party clause of the contract, holding that the seller’s briefing about that award failed to discuss the evidence concerning the fees and did not explain how the cited case law should be applied to the jury’s finding.
Davenport Meadows LP v. Dobrushkin, No. 05-12-01471-CV
The company operating the Golf Club at Castle Hills agreed to grant lifetime memberships to a number of golfers, who filed suit in order to vindicate those contracts after the course was foreclosed on and sold to defendant CAPX Realty. Although the plaintiffs continued to golf for free for the next four years, that was not enough to raise a genuine issue of material fact on the golfers’ theory that CAPX had ratified their contracts. Ratification is a theory by which a principal can affirm a contract entered into by an agent. But CAPX was not a party to the contract, and nobody was acting as CAPX’s agent in entering into the contract. Therefore, CAPX could not ratify the lifetime memberships, and summary judgment was appropriately granted.
Averett v. CAPX Realty LLC, No. 05-13-00885-CV
The Court of Appeals has issued a lengthy opinion affirming the denial of a special appearance. The appeal arises out of an apparently contentious case involving claims and counterclaims for breach of contract, fraud, and defamation. Defendant Sebastian Lombardo — an Italian citizen who lives in Belgium and works in France — challenged personal jurisdiction by invoking the fiduciary shield doctrine, which protects officers of corporations from being personally haled into court in Texas due to their contacts as representatives of the corporation. Unfortunately for Lombardo, his argument in the trial court had presented that issue as a matter of general personal jurisdiction, and the trial court had found him to be subject to specific personal jurisdiction. Having failed to present the fiduciary shield doctrine as a bar to the exercise of specific personal jurisdiction, the issue was also waived on appeal. The opinion goes on to affirm the legal and factual sufficiency of the evidence supporting the trial court’s findings of jurisdictional facts, as well as its application of the law to those facts, and therefore affirmed denial of the special appearance.
Lombardo v. Bhattacharyya, No. 05-13-01583-CV
The issue in this case was whether the trial court erred in awarding attorneys’ fees to the defendant when the plaintiff dropped its claim under the Texas Theft Liability Act (“TTLA”) a few days after the defendant filed a motion for summary judgment.
Under the TTLA, the prevailing party is entitled to recover attorneys’ fees. In this case, the plaintiff brought a TTLA claim against the defendant. When the defendant moved for summary judgment, the plaintiff must have realized that it was going to lose. Consequently, the plaintiff amended its complaint and removed the TTLA claim, effectively nonsuiting it. Thus, the plaintiff claimed that the defendant was not a prevailing party and therefore not entitled to attorneys’ fees.
The Court of Appeals affirmed the trial court’s decision to award attorneys’ fees, holding that a party is still a prevailing party if the nonsuit was taken to avoid an unfavorable ruling on the merits. This result was further cemented by the fact that at the hearing on attorneys’ fees, plaintiff’s attorney acknowledged that by filing its nonsuit the plaintiff “basically, said ‘Uncle.'”
In this challenge to an arbitration award, the Court of Appeals rejected the losing party’s attempt to vacate the arbitration award on grounds of “manifest disregard” for the law or “gross mistake” by the arbitrators because the appellant failed to submit a record of the arbitration proceedings. According to the Court, “without a record of the arbitration proceedings showing the evidence or the law that was presented to the arbitrators, we cannot conclude the arbitrators manifestly disregarded the law or committed a gross mistake.”
The developer of a condominium project in Fort Worth sued the general contractor it had hired to construct a rooftop pool and deck. Inevitably, the general filed third party claims and cross-claims against various other participants, including engineers and subcontractors, seemingly all of whom filed claims, cross-claims, and counterclaims against everyone else. Two of the defendants moved to dismiss some of third party claims on the basis that the claimants had not complied with the certificate of merit requirement for suits against licensed architects, engineers, and surveyors. See Tex. Civ. Prac. & Rem. Code § 152.002. Applying recent authority from the Texas Supreme Court, the Court of Appeals held that a certificate of merit is only required to initiate suit, not for defendants or third-party defendants who assert claims for relief within a lawsuit. However, the Court also ordered the dismissal of the plaintiffs’ fifth amended petition as to one of the two defendants on the basis that they had failed to attach a certificate of merit to the amended petition before the deadline.
Hydrotech Engineering, Inc. v. OMP Dev., LLC, No. 05-13-00713-CV
Mr. and Mrs. Carpenter hired the law firm of Shaw & Lemon to represent them in a lawsuit against Holmes Builders. The Carpenters agreed to pay Shaw & Lemon 40% of any recovery. Shaw & Lemon, in turn, hired attorney Daniel Hagood to assist with the case. In exchange for Mr. Hagood’s assistance, Shaw & Lemon agreed orally to pay him 25% of their 40% contingency fee.
Ultimately, the Carpenters obtained a judgment against Holmes for more than $2 million. Rather than pay the judgment, however, Holmes filed for bankruptcy protection. By this time, Mr. Shaw and Mr. Lemon had experienced a falling out and had parted ways (and sued each other). Mr. Lemon, on his own, was then retained by the bankruptcy trustee to recover assets for Holmes’ bankruptcy estate, for which he would receive 34% of any assets recovered. Significantly, as part of this arrangement, Mr. Lemon, on behalf of himself and his firm, waived any right to payment from the Carpenters.
It turns out that Mr. Lemon was fairly successful at recovering assets for the estate, as he recovered over $1 million. As a result, the Carpenters received nearly $600,000 for their claim. Once the Carpenters were paid, Mr. Hagood sought his cut of their recovery based on the agreement he had with Lemon and Shaw.
In this opinion, the Court of Appeals addressed several issues, one of which was whether Hagood had a valid breach of contract claim against Lemon. Lemon argued that since neither he nor his now-defunct firm received any payment from the Carpenters, Hagood had no claim. The Court rejected that argument, noting that “one who prevents or makes impossible the performance of a condition precedent upon which his liability under a contract is made to depend cannot avail himself of its nonperformance.” Here, the Court noted that Lemon’s waiver of his firm’s right to recover from the Carpenters made impossible the performance of the condition precedent to Lemon’s liability under the agreement with Hagood, because “[a] duty to cooperate is implied in every contract in which cooperation is necessary for performance of the contract.”
Providence Bank sued for a deficiency judgment after the bank foreclosed on one of the borrower’s properties. The parties agreed to settle that claim, and so the bank filed a notice of nonsuit by mail. But on the same day the bank mailed in the nonsuit, the borrower filed brand new counterclaims against the bank on other properties. So the question became whether the bank’s nonsuit terminated the entire case before the filing of the counterclaims. The Court of Appeals answered that question in the negative. Although TCRP 5 deems a document to be filed on the date it is mailed, that rule only applies to documents that have to be filed by a particular deadline. By contrast, a nonsuit under Rule 162 can be filed at any time before the close of the plaintiff’s evidence. Accordingly, the nonsuit was not deemed filed at the time of mailing, and by the time it arrived at the courthouse for filing, the borrower’s counterclaims were already part of the lawsuit and could move forward as part of the case.
FP Asset Group, LP v. Providence Bank, No. 05-12-01728-CV
This breach of contract case addressed a loan guarantor’s contractual duty to defend the lender in a fraud lawsuit. The Court was asked to interpret a duty to defend provision that conditioned the duty on the “occurrence” of fraud, when the pending lawsuit at issue had to this point only raised “allegations” of fraud. According to the Court, the duty to defend is a contractual duty depending on the precise terms of the contract. Thus, the Court refused to rewrite the section at issue to replace the word “occurrence” with “allegation.” Because the pending fraud claim only involved fraud “allegations” at this point, the defendant owed no duty to defend.
Len Rao filed suit against his former employer, David Weekley Homes. Weekley moved to abate the lawsuit and initiated an arbitration proceeding with the AAA. The trial court denied the motion to compel arbitration, and the Court of Appeals — after first granting an emergency motion to stay the proceedings — ultimately affirmed the denial of arbitration. After the case moved back to the trial court, however, Rao added new claims against the AAA, which responded with a plea to the jurisdiction based on the doctrine of arbitral immunity. The trial court granted the plea, and the Court of Appeals affirmed. Arbitral immunity, the Court held, extends not only to arbitrators themselves, but also to the association that administers their proceedings.
Rao v. Am. Arbitration Ass’n., No. 05-13-00462-CV
In this age discrimination employment claim, the Court of Appeals reversed the trial court’s grant of summary judgment for the defendant. According to the Court, there was conflicting evidence about the defendant’s reason for firing the plaintiff. Although the defendant claimed that the downturn in the economy forced them to fire the plaintiff, the plaintiff argued that, at the time of his termination, he was working on projects that would have required another year to complete. This conflict created a sufficient fact issue for the plaintiff to survive summary judgment.
Court Rejects Defendant’s Attempt to Use Declaratory Judgment Act as a Vehicle to Recover Attorneys’ Fees
July 16, 2014Among several issues on appeal in this dispute between a commercial landlord and tenant, the Court of Appeals considered whether the defendant could recover attorneys’ fees pursuant to the declaratory judgments act. After the plaintiff sued the defendant for breach of contract for failing to construct ramps in compliance with the ADA, the defendant responded by requesting a declaratory judgment that he had no duty to pay for the ramps. Because the defendant’s counsel admitted at trial that the issues raised in his declaratory judgment action would be resolved by the plaintiff’s breach of contract lawsuit, the court rejected the defendant’s attempt to recover attorneys’ fees, noting the rule that “a party cannot use the declaratory judgments act merely as a vehicle to obtain otherwise impermissible attorney’s fees.”
Addressing a motion to compel arbitration, the Court of Appeals found that a provision in the defendant’s employee handbook did not require arbitration because that provision stated, in part, that “[b]inding arbitration requires the employee and [defendant] to commit to resolution of all eligible issues and be bound by the decision of the arbitrator.” According to the Court, this language established that the parties had not already agreed to arbitrate, but rather that they must still make the decision if a dispute arises in the future.
In this dispute between neighbors over a poorly placed fence, the victorious neighbors appealed the trial court’s decision denying them their court costs. The case had already been up to the Court of Appeals once before, where the Court reversed the trial court and remanded the case “for entry of judgment consistent with our opinion and for consideration of the [successful neighbors’] request for attorney’s fees.” On remand, the trial court refused to award court costs because the mandate from the Court of Appeals only referenced attorneys’ fees and made no mention of court costs.
The Court of Appeals again reversed the trial court, holding that the prevailing neighbors were entitled to recover their trial court costs pursuant to Rule 131 of the rules of civil procedure. Although court costs were not specifically mentioned in the Court’s previous mandate, “the trial court retains its constitutional jurisdiction to perform duties collateral to and consistent with” that mandate.
In a follow-up from an opinion issued a few months ago, the Court of Appeals has affirmed summary judgment in favor of the financiers of a development project in Fort Worth. For essentially the same reason that the buyer could not recover against the architect who had referred the deal in the first place — namely, that the paperwork for the sale fully disclosed the fact that the property was partially situated on a 100-year floodplain. Because the architect’s summary judgment motion had conclusively negated any possibility that he was personally responsible for any fraudulent misrepresentations, the buyer could not recover for fraud against the finance he was allegedly representing in the transaction.
Collective Asset Partners, LLC v. Pana, No. 05-13-00552-CV
The Texas Supreme Court today affirmed the Dallas Court of Appeals’ judgment in a wrongful death/asbestos case, which had vacated an $11.6 million plaintiff’s verdict. The majority opinion disagreed with the Court of Appeals’ holding that the plaintiff had to prove that the decedent would not have contracted mesothelioma but for his exposure to the defendant’s own product. Nevertheless, applying the “substantial factor” test for causation, the majority held that the plaintiff had still failed to provide legally sufficient evidence that the defendant’s product had caused the victim’s illness.
Bostic v. Georgia-Pacific Corp. (majority)
Last month, we noted an opinion that teased, but did 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? The Court of Appeals has now issued an amended opinion in that same case that addresses that very issue. While still holding that the defendant/counterclaimant had failed to preserve error by failing to make a proffer of the excluded evidence — namely, that his mother had been placed in a straitjacket despite the assisted-living facility’s contract stating that it was a “restraint-free community” — the revised opinion adds a new section on the expert report issue. The Court now concludes that even if the evidentiary issue had not been waived, the trial court still properly excluded that evidence because it was still a healthcare liability counterclaim that required the defendant to produce a Chapter 74 expert report. Since the defendant failed to do so, the trial court did not abuse its discretion in excluding evidence of the resident being placed in restraints.
Ferguson v. Plaza Health Servs. at Edgemere (amended opinion), No. 05-12-01399-CV
In this restricted appeal, the defendant argued that the trial court erred in entering a default judgment against it in the absence of evidence establishing mental anguish damages. Because the trial court received testimony of the plaintiffs physical injuries form a slip and fall, and no testimony on mental anguish, and because there was no way to distinguish between the award of mental anguish damages and those awarded for past physical pain, the judge’s award of $20,000 constitutes error on the face of the record.
In this forcible detainer action, the trial court dismissed American Homes 4 Rent’s (AH4R) attempt to evict the defendant because AH4R could not prove that it had title to the property at issue. Specifically, the trial court based its dismissal on the defendant’s argument that she had filed bankruptcy the day before AH4R bought the property and thus its purchase was void because it had violated the automatic stay. The Court of Appeals reversed the trial court’s dismissal, because to prevail in a forcible detainer action, “a plaintiff is not required to prove title, but is only required to show sufficient evidence of ownership to demonstrate a superior right to immediate possession.”
In this breach of settlement action, the plaintiff won almost $10,000 in damages, but the trial court awarded him zero dollars in attorneys’ fees. On appeal, the Court found that attorneys’ fees were proper under section 38.001(8), so the trial court had no discretion to deny them. The Court noted that one of the factors in determining the reasonableness of attorneys’ fees is the amount of damages awarded, and remanded the determination to the trial court.
Hidden within this seemingly straightforward post-foreclosure forcible detainer action is an interesting evidentiary issue. After purchasing the Martins’ home at a foreclosure sale, Fannie Mae sought to have them evicted by filing a forcible detainer action in County Court at Law. The trial court ruled in favor of Fannie Mae, and the Martins appealed, arguing, among other things, that Fannie Mae did not introduce evidence to establish that it owned the property.
That issue turned on whether the substitute trustee’s deed (which showed that Fannie Mae owned the property) was admitted into evidence. Apparently, when Fannie offered the substitute trustee’s deed into evidence, the Martins’ attorney objected to the second page of the document on the basis of hearsay and the trial court sustained his objection. Later, however, Fannie’s attorney discussed and summarized the relevant provisions of the deed and made arguments about the deed as if it had been admitted into evidence. Notably, the Martins’ attorney never objected to these statements, leading the Court of Appeals to conclude that the substitute trustee’s deed was, “for all practical purposes,” admitted into evidence. Accordingly, the Court affirmed the trial court’s ruling.
We depart from our usual fare of commercial litigation to spotlight a candidate for inclusion in future family law textbooks (or at least study materials for the Texas Bar Exam). To establish a common law or “informal” marriage, the claimant has to prove (1) the couple agreed to be married, (2) after that agreement they lived together in Texas as husband and wife, and (3) they represented to others that they were married. After Joseph Marek died intestate, Deborah Anderson intervened in the probate of his estate, claiming she and Marek had an informal marriage. The probate court sided with Anderson. Marek’s sister appealed, challenging the sufficiency of the evidence that the couple had an agreement to be married and represented to others that they were married.
The Court of Appeals conducted a detailed review of the evidence and affirmed the trial court’s judgment. The proof that Marek and Anderson had held themselves out as married was conflicting, but the trial court was entitled to resolve that conflicting evidence in favor of Anderson. The seemingly closer issue was whether Marek and Aderson actually had an agreement to be married. Anderson testified that agreement came when she returned to Marek’s house (colorfully, from an illegal gambling parlor) after a period of separation. Anderson testified that Marek asked her “Are you here for good, Babe?” and she responded “Yes.” The Court held that this testimony alone was not specific enough to establish anything more than an agreement to cohabitate. Nevertheless, it was still circumstantial evidence that, combined with all the evidence that the couple had actually lived their lives as husband and wife (including six years of “Married, Filing Jointly” tax returns), served to establish an agreement to be married. Thus, it appears that evidence of a couple acting as if they are married, and representing themselves to be married, can also establish the required element of an actual agreement to be married.
In re Estate of Marek, No. 05-13-01008-CV
After a dispute arose between the owner of an apartment complex and the contractor hired to renovate it, the owner sent the contractor checks totaling more than $8,000 with a letter stating that it was “full and final payment” for all amounts owed. The contractor cashed the check, but subsequently filed a lien and sought to recover an additional $14,000 in unpaid invoices. The trial court granted judgment for the defendant, and the Court of Appeals affirmed. Although the contractor’s owner testified that he had not “knowingly and affirmatively” agree to an accord and satisfaction, the trial judge was entitled to disregard that evidence as not believable. Luckily, however, the apartment owner conceded that the $14,000 awarded on its own counterclaim was erroneous, and so the Court of Appeals vacated and rendered that portion of the judgment, with a remand for further consideration of the attendant attorney fees.
Contemporary Contractors v. Centerpoint Apt. Ltd., No. 05-13-00614-CV
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
