In re Murrin Brothers 1885, Ltd.
Supreme Court of Texas, No. 18-0737 (December 20, 2019)
Opinion by Justice Blacklock (linked here)
“Gone are the days when a family feud over a dance hall and saloon in the Fort Worth Stockyards would be solved by six-shooters. These days, we use lawyers instead of lead.” Still, the process can be unpleasant, if not deadly, for the lawyers as well as the parties.

Almost by definition, a derivative lawsuit pits a group of stakeholders who do not control an entity against other stakeholders or officers who do. Frequently, especially during the early rounds of these complex cases, the same lawyers are engaged to represent both the “inside” stakeholders and the entity itself—which is named as a plaintiff but also joined as a “nominal defendant” in such cases. In this particular derivative case—arising from a struggle for control of Billy Bob’s, the legendary Fort Worth honkytonk—the Texas Supreme Court was asked to decide whether attorney-conflicts rules and public policy prohibit a law firm from pursuing such a dual representation of both the entity and the controlling insiders. Its answer? Dual representation is okay this time, the Court decided, but maybe not in every case.

The Texas Supreme Court announced “no categorical rule governing dual representation in derivative litigation,” even though some jurisdictions have done so. The mere labels applied to the entity as both plaintiff and nominal defendant are not determinative, the Court said. Instead, the Supreme Court held “the proper inquiry is to look to whether the substance of the challenged representation requires the lawyer to take conflicting positions or to take a position that risks harming one of his clients”—i.e., a case-specific, functional analysis to decide “[w]hether a company and the individual defendants are ‘opposing parties’ for purposes of [Disciplinary] Rule 1.06(a).” This lawsuit, the Court observed, “is a fairly straightforward case about which ownership group controls the company’s decisions.” The true adversity, therefore, was between the “warring ownership factions,” rather than between either faction and the entity, so there was no disqualifying conflict. In fact, the Court said, in situations like this, involving a closely held entity, a trial court could simply treat the case “as a direct action” brought by one stakeholder against another, leaving the entity out of the conflicts equation entirely. Of course, if the derivative allegations in a case raised true questions of injury to the corporation purportedly caused by the insiders (for example, allegations of self-dealing or stripping corporate assets), the analysis of the propriety of dual representation of the entity and insiders might yield a different outcome. But that’s a question for another day.


Town of Shady Shores v. Swanson
Supreme Court of Texas, No. 18-0413 (December 12, 2019)
Opinion by Justice Lehrmann (linked here)
Sarah Swanson sued the Town of Shady Shores for wrongfully terminating her employment as town secretary in retaliation for her having reported violations of the Texas Open Meetings Act (TOMA) and Public Information Act. The Town filed a plea to the jurisdiction asserting governmental immunity, and Swanson amended her petition to add claims for declaratory judgment and constitutional free-speech violations. The Town then amended its plea and filed traditional and no-evidence motions for summary judgment. The trial court dismissed some of Swanson’s claims on jurisdictional grounds, but denied summary judgment on other claims, including her claim for declaratory judgment.

The Town filed an interlocutory appeal on the jurisdictional issues. The Fort Worth Court of Appeals affirmed in part and reversed in part. Specifically, the court held: (1) the trial court correctly denied the Town’s no-evidence motion for summary judgment because that was not a proper procedural vehicle to challenge jurisdiction; (2) the Uniform Declaratory Judgment Act (UJDA) does not “provide a general waiver of immunity,” but TOMA waives immunity with respect to Swanson’s request for declarations on certain statutory violations; (3) the Town’s jurisdictional evidence did not “negate” jurisdiction, so its traditional summary judgment motion was properly denied; (4) TOMA did not waive immunity on Swanson’s claim for back pay; and (5) Swanson failed to alleged viable constitutional claims so the Town was immune from those claims.

Swanson did not seek supreme court review of the dismissal of her claims for back pay or constitutional violations. The Town filed a petition for review of other rulings, which the Supreme Court granted. After confirming its jurisdiction, the Court reversed the appellate court’s ruling on two issues and remanded for resolution of remaining issues.

First, resolving a split among the lower courts, the Court held jurisdiction could properly be determined on a no-evidence summary judgment motion, provided the nonmovant was accorded “adequate time for discovery” and other safeguards provided by the rule.

Second, the Court held that the mandatory provisions of TOMA are enforceable only by mandamus or injunction under Government Code § 551.142, not by declaring an offending action “void” under § 551.141. The Court explained that “while the Legislature has expressly authorized a suit for declaratory judgment against the government in other statutes, it has not done so in the Open Meetings Act.” And the UDJA waives immunity only for requests to determine a “question of construction or validity arising under [a statute] and obtain a declaration of rights, status, or other legal relations thereunder.” CPRC § 37.004(a).

The Court acknowledged it had previously “affirmed or rendered declaratory judgments premised on violations” of TOMA, but noted the jurisdictional issue had not been presented or addressed in those cases. It declined to “ascribe to tacit acceptance the same significance we would give to an express consideration and analysis of the issue.”

Finally, the Court considered Swanson’s “standalone” claim under TOMA. Although she had not sought review of the appellate court’s sua sponte ruling she had not asserted such a claim, the Supreme Court held she had not waived her objection to that ruling because it was not part of the judgment. Reviewing the record, the Court held Swanson had asserted claims for mandamus and injunctive relief under TOMA that the lower court had not addressed. The case was therefore remanded for further consideration by the court of appeals.


Manning v. Jones
Dallas Court of Appeals, No. 05-18-01140-CV (December 4, 2019)
Justices Pedersen III (Opinion, linked here), Reichek, and Carlyle
Jones was appointed as Receiver in a divorce case, to take charge of, maintain, and sell a building that was part of the marital estate. When Jones ended up selling the building for far less than had been hoped, Manning, one of the divorcing parties, sued Jones for her supposed failures in managing and selling the property. The trial court, however, granted summary judgment to Jones based on “derived judicial immunity,” and the court of appeals affirmed.

Judges enjoy absolute immunity for “all judicial acts unless such acts fall clearly outside the judge’s subject-matter jurisdiction.” When a judge delegates his or her authority or appoints someone to perform services for the court, that person may have “derived judicial immunity” for performing those delegated responsibilities. A “person entitled to derived judicial immunity receives the same absolute immunity from liability as a judge acting in his or her official judicial capacity.”

Texas uses a “functional approach” to decide whether a party is entitled to derived judicial immunity. One may claim such immunity if he or she carried out duties “intimately associated with the judicial process” and “exercised discretionary judgment comparable to a judge, as opposed to ministerial or administrative tasks.” Such immunity has been extended to trustees and receivers, among others.

The acts and omissions of which Manning complained were clearly the product of discretionary judgments by Jones on matters delegated to her by the court. So, just as the NFL’s all-time leading receiver Jerry Rice (above) seemed immune from defenders seeking to hold him in check, so also was Jones immune from Manning’s attempts to hold her accountable for her actions as Receiver here.


Robinson v. Home Owners Management Enterprises, Inc.
Supreme Court of Texas, No. 18-0504 (November 22, 2019)
Opinion by Justice Guzman (linked here)
This past summer, the United States Fifth Circuit held that whether arbitration under the Federal Arbitration Act may proceed on a class rather than an individual basis is a “gateway issue” to be decided by the court and not the arbitrator, absent the parties’ “clear and unmistakable” agreement to the contrary—joining every other circuit court to have considered the issue. 20/20 Communications, Inc. v. Crawford, 930 F.3d 715 (5th Cir. 2019). Fifteen years earlier, in In re Wood, the Supreme Court of Texas had held the opposite, that “issues of class arbitration are for the arbitrator to decide.” 140 S.W.3d 367, 368 (Tex. 2004). But the ruling in Wood was predicated on language in federal cases that has been “walked back” in more recent decisions. And so, given the opportunity, the Texas Court has now recanted, overruled In re Wood, and joined the majority of courts in holding that class arbitrability is for the court to decide rather than the arbitrator, unless the parties have clearly and unmistakably agreed otherwise.

The Robinsons sued Home Owners Management Enterprises (clever acronym, “HOME”) for poor construction of their new house and for HOME’s failure to repair defects. HOME moved to compel arbitration of the Robinsons’ claims based on provisions in their home warranty. While the matter was pending in arbitration, the Robinsons attempted to add class-action allegations. The arbitrator bifurcated those class issues and proceeded to hearing on the Robinsons’ individual claims. After the arbitrator ruled in their favor on those claims, the Robinsons returned to court, asserted class claims, and demanded that HOME be compelled to arbitrate those claims on a class-wide basis. The trial court, however, held that the issue of class arbitration was for it to decide, rather than the arbitrator, and then ruled that the HOME arbitration agreement did not provide for class arbitration. The Fort Worth Court of Appeals affirmed. The appeals court duly noted that the Supreme Court of Texas previously had held in In re Wood that class arbitrability would be delegated to the arbitrator, rather than the trial court. But it went on to analyze the federal decisions that had addressed the issue after In re Wood, determined that this more recent authority “effectively abrogated the legal premise on which Wood was based,” and concluded the Court likely would now decide the issue differently. It was right.

After reviewing the more recent federal authority for itself, the Supreme Court overruled In re Wood and held, “with the benefit of a more full-bodied jurisprudential debate,” that class arbitrability is “not a procedural question presumptively for the arbitrator,” but, instead—
“(1) arbitrability of class claims is a ‘gateway’ issue for the court unless the arbitration agreement ‘clearly and unmistakably’ expresses a contrary intent;
(2) ‘[a] contract that is silent on a matter cannot speak to that matter with unmistakable clarity’; and
(3) an agreement to arbitrate class claims cannot be inferred from silence or ambiguity—an express contractual basis is required.”
The HOME arbitration agreement did not provide for delegation of arbitrability to the arbitrator or even mention class arbitration. And the Court rejected the Robinsons’ argument that the “broad and sweeping” language of the agreement’s arbitration clause was sufficient to support an inference of intent to delegate. The Court therefore could not infer the parties “clearly and unmistakably” intended to entrust such issues to the arbitrator, and affirmed the lower courts’ rulings on this issue, as well. 

The Supreme Court left two issues unresolved, or at least unaddressed. First, the Robinson decision, like the federal cases it found persuasive, dealt with arbitration under the FAA, because the HOME agreement specifically referenced that statute. The Court did not discuss whether the same result would follow under the Texas Arbitration Act. But there is little reason to think it would not. Second, the Court noted that many courts have found “clear and unmistakable” intent to delegate threshold issues to the arbitrator where the agreement expressly incorporates the broad AAA arbitration rules. The HOME agreement however, neither referenced nor incorporated the AAA rules. So, the question whether incorporation of those rules would demonstrate the necessary “clear and unmistakable” intent to delegate arbitrability to the arbitrator was “not presented here,” and the Supreme Court declined to address it.


Mitchell v. City of Dallas
Dallas Court of Appeals, No. 05-18-01208-CV (November 20, 2019)
Chief Justice Burns and Justices Molberg and Reichek (Opinion, linked here)
A defendant can attack a default judgment through a bill of review after it’s too late to appeal or move for a new trial. Ordinarily, to secure bill-of-review relief, a party must prove (i) he has a meritorious defense (ii) that he was prevented from making because of fraud, accident, or a wrongful act by the opposing party (iii) through no fault or negligence of his own. If the defendant wasn’t served with process, however, that by itself entitles him to relief. But there’s a catch: An officer’s return of service is prima facie proof of service “that cannot be rebutted by the uncorroborated proof of the moving party.”

Here, a private “certified process server” filed a return of service stating he personally served Mitchell at a specified time and place. Mitchell didn’t answer and was defaulted. At trial of the bill of review, Mitchell testified he had not been served. But no other competent evidence corroborated that testimony. Mitchell offered affidavits from two other witnesses that might have cast doubt on service as reported, but those affidavits were properly excluded as hearsay. Consequently, the trial court denied the bill of review. The Dallas Court of Appeals affirmed, because “the testimony of a bill of review plaintiff alone, without corroborating evidence, is insufficient to overcome the presumption [from the return of service] that the [bill-of-review] plaintiff was served.”


Commission for Lawyer Discipline v. Cantu
Supreme Court of Texas, No. 18-0879 (October 25, 2019)
Per Curiam (opinion available here)
Judge Isgur was the primary witness against attorney Mark Cantu at the disciplinary trial that resulted in Cantu’s disbarment. Judge Isgur had presided over Cantu’s personal bankruptcy proceeding. He denied a bankruptcy discharge because of misconduct by Cantu during that proceeding and prepared a 72-page Memorandum Opinion explaining his decision, which he forwarded to the State Bar. Based on the conduct outlined in the Opinion, the Commission for Lawyer Discipline brought a disciplinary action against Cantu, and Judge Isgur testified at the trial. “Judge Isgur’s testimony was relatively brief but certainly damaging to Cantu.” Among other things, Judge Isgur testified that Cantu: “displayed a pattern of omission, obfuscation and noncompliance”; “had given false oaths in the bankruptcy court”; “improperly concealed and transferred assets”; “refused to comply with lawful Court orders”; “failed to keep adequate records” as required by the Bankruptcy Code; and “withheld information from the trustee.” The jury found against Cantu, and he was disbarred.

The Corpus Christi Court of Appeals reversed, however, finding that the trial court committed reversible error by allowing Judge Isgur to testify. The appellate court relied heavily on the Texas Supreme Court’s precedent in Joachim v. Chambers, in which the Court disapproved of the admission of expert testimony by a judge in a legal malpractice case. The Supreme Court disagreed with this application of Joachim. It distinguished the Cantu situation from that present in Joachim, because Judge Isgur was testifying as a fact witness regarding conduct he personally observed, as opposed to the judge in Joachim who had no involvement in the underlying trial and was testifying as a retained expert. The Court noted that nothing in the case law or the Texas Code of Judicial Conduct prevents a judge from testifying as a fact witness in a case. And disallowing such testimony in disciplinary proceedings would “place judge-initiated grievances at an artificial disadvantage relative to other grievances in which the complainant may freely testify.” Judges have an ethical responsibility to report instances of attorney misconduct, and it would not make sense to then prevent the complaining judge from testifying at the disciplinary proceeding. So the Court reversed the Court of Appeals decision and remanded the case for consideration of Cantu’s other arguments.


Stegall v. TML Multistate Intergovernmental Employee Benefits Risk Pool, Inc.
Dallas Court of Appeals, No. 05-18-00239-CV (October 2, 2019)
Justices Whitehill, Pedersen (Opinion linked here), and Partida-Kipness (Dissent linked here)
The Dallas Court of Appeals, in a 2-1 decision, held a municipal risk pool providing health benefits for city employees cannot be sued for wrongfully denying medical treatment.

Joe Stegall was the CFO for Royse City, and participated in the city’s medical-benefits plan provided through the TML Risk Pool. When Mr. Stegall was diagnosed with liver cancer, TML refused to authorize the use of a specific drug prescribed by his oncologist, and threatened to terminate coverage entirely if he used the drug without its authorization. Although TML later reversed its position, Mr. Stegall died several weeks later. His widow sued TML for “wrongful denial of medical benefits and additional acts of interference with the decedent’s access to prescribed chemotherapy.” TML filed a plea to the jurisdiction asserting governmental immunity from suit, which the trial court granted, dismissing the case. The Dallas Court of Appeals affirmed.

Writing for the Court, Justice Pedersen described the case as “an emotional and tragic scenario,” but held Texas law granted TML immunity from suit. The Court first determined TML was a distinct governmental entity, “an intergovernmental self-insurance risk pool that operates under the Interlocal Cooperation Act,” Government Code chapter 791. It then rejected the argument that TML’s “claims-adjusting” involved “proprietary,” not “governmental” functions, which would have meant immunity did not attach. Municipalities are immune from suit when exercising their governmental functions, but not when the actions are proprietary, i.e., discretionary actions that can be, and often are, performed by private parties. The Court held, however, the distinction did not apply to TML, which, like other political subdivisions created by the legislature for public purposes, performs only governmental functions.

In dissent, Justice Partida-Kipness argued the governmental-proprietary distinction applied to TML, and that although creating and participating in the risk pool was a governmental function, claims adjusting and coverage decisions were proprietary functions not subject to immunity. She criticized the majority opinion as reaching “an absurd result—the removal of logic and humanity from application of the law.”


In re Herbert
Dallas Court of Appeals, No. 05-19-01126-CV (September 19, 2019)
Justices Whitehill (Opinion available here), Partida-Kipness, and Pedersen, III
The Dallas Court of Appeals granted mandamus relief and ordered the trial court to conduct a hearing on the movant’s TCPA motion to dismiss by the statutory deadline—a deadline that expires the day after the appellate court’s decision. The Relator, Aaron Herbert, filed a TCPA motion to dismiss counterclaims brought against him for defamation and invasion of privacy. Although he tried several times to get the trial court to schedule a hearing on the motion before the 60-day deadline (August 21) or to acknowledge the crowded docket conditions and schedule a hearing within 90 days (September 20), the court would not do so. The trial court’s staff informed him that (1) the court wanted the parties to mediate before conducting a hearing; (2) the court only heard dispositive motions on Fridays; and (3) the earliest hearing date available was October 18.

Herbert sought mandamus relief, which the Dallas Court granted. It held that, although trial courts generally have the discretion to schedule hearings within a “reasonable time,” the trial court must set a TCPA motion to dismiss for hearing within the applicable statutory deadline if the movant makes reasonable efforts to obtain a timely hearing. If the movant does not receive a timely hearing, he is deprived of his rights under the TCPA. And because a failure to hold a hearing is not subject to interlocutory appeal, the movant lacks an adequate remedy on appeal. So on September 19, the Court ordered the trial court to conduct a hearing on the TCPA motion “no later than September 20.”


Thornton v. Columbia Medical Center of Plano Subsidiary, LP
Dallas Court of Appeals, No. 05-18-01010--CV (September 12, 2019)
Justices Myers (Opinion available here), Osborne, and Nowell
Plaintiffs in a medical malpractice case sued Columbia Medical Center of Plano Subsidiary, LP two years and sixty-two days after the patient’s death. Under Civil Practices & Remedies Code, Chapter 74, providing notice of a health care liability claim to a “physician or health care provider against whom such claim is being made” tolls the 2-year statute of limitations for 75 days. Here, plaintiffs mailed their notice to the hospital’s physical address, rather than an authorized agent for service of process.

The Dallas Court of Appeals held that a Texas limited partnership receives notice when it is served on its registered agent or a general partner. Columbia’s registered agent was CT Corporation System. The Court held that, even though the Medical Center of Plano at 3901 W. 15th Street, Plano, Texas, 75075 “was the physical place at which the treatment occurred,” “it was not the health care provider Thornton sued.” So mailing notice to “Medical Center of Plano” at the hospital’s physical address did not provide notice to Columbia, and the statute of limitations was not tolled. Summary judgment in favor of Columbia was affirmed.


U.S. Anesthesia Partners of Texas, P.A. v. Whitney Kelley Mahana
Dallas Court of Appeals, No. 05-18-01414 (August 27, 2019)
Justices Bridges (Dissent, linked here), Brown, and Nowell (Opinion, linked here); Dissent from Denial of En Banc Rehearing by J. Whitehill (linked here)
Mahana, a nurse anesthetist, alleged that her supervisor at U.S. Anesthesia Partners sent text messages falsely stating that she tested positive for drugs and was being fired. Mahana sued the employer for intentional infliction of emotional distress. The employer moved to dismiss under the TCPA and appealed after the trial court denied the motion.

In a split decision, the Dallas Court of Appeals concluded that because the text messages did not address Mahana’s job performance, they were not “communications related to the provision of medical services by a health care professional.” Therefore, the text messages were not an exercise of the employer’s right to free speech, which the TCPA defines to include communications on an “issue related to health or safety,” and the TCPA did not apply. Justice Bridges dissented, arguing that any drug use that could impair Mahana’s ability to do her job had a sufficient relationship to issues of health and safety, such that the TCPA applied to the text messages.

Notably, at the same time the majority opinion and dissent issued, Justice Whitehill also issued an opinion dissenting from the denial of reconsideration en banc, arguing that the majority opinion conflicted with the Court’s own precedent. Justice Whitehill’s dissent sheds light on some of the Court’s behind-the-scenes practices:

How did the opinion and the dissent from the denial of en banc reconsideration issue on the same day? Did U.S. Anesthesia Partners request en banc reconsideration before the Court issued its opinion?

No, U.S. Anesthesia Partners never moved for reconsideration en banc. TRAP 49.7 allows a “majority of the en banc court may…, with or without a motion, [to] order en banc reconsideration of a panel’s decision.” And the Court’s own Internal Operating Procedures note that it will “on occasion” sit en banc without a request from the parties. So, Justice Whitehill requested en banc consideration sua sponte.

But doesn’t the en banc process start after the opinion issues?

No, TRAP 49.7 allows en banc consideration to occur at any time the Court has plenary power. In fact, a Court can order the case to be heard en banc in the first instance. See TRAP 41.1(a), 41.2(a). For example, the Court might order en banc consideration at the outset when an appeal directly challenges binding precedent from the Court, which a panel cannot overrule.

I still don’t understand why the vote on en banc happened before the Court issued an opinion in the case. 

Although we can’t know the precise reasons why Justice Whitehill requested en banc review when he did, a few considerations appear to be at play. First, the Court has a practice, which some Justices have mentioned but which does not appear to be formally memorialized for the public, of circulating opinions in certain cases to the entire Court before an opinion issues. This will occur, among other times, when there will be a dissent in a case heard by a three-justice panel, as occurred here. Second, the Court has an internal goal of issuing opinions in all cases that have been argued (or submitted without argument) before the start of its new fiscal year on September 1. The opinions here issued on August 27. Both of these factors could have led to the decision to address en banc review at the same time the panel was issuing its opinions.