COLLUSION POKES HOLE IN EIGHT-CORNERS RULE

Loya Insurance Co. v. Avalos
Supreme Court of Texas (May 1, 2020)
Opinion by Justice Busby (linked here)
The Texas Supreme Court has for the first time explicitly adopted an exception to the venerable “eight-corners rule” for determining an insurer’s duty to defend.

The rule, which the Court recently reinforced in Richards v. State Farm Lloyds, mandates that a liability insurer’s duty to defend a lawsuit against its insured is determined solely by reference to the facts alleged in the underlying complaint and the terms of the insurance policy, without reliance on extrinsic evidence. (See my post on Richards here.) In Loya, the Court held the rule is nullified by deliberate collusion between an insured and a third-party plaintiff. That is, “an insurer owes no duty to defend when there is conclusive evidence that groundless, false, or fraudulent claims against the insured have been manipulated by the insured’s own hands in order to secure a defense and coverage where they would not otherwise exist.”

The facts in Loya were stark. Kara Flores Guevara was the sole insured under an auto liability policy issued by Loya Insurance. Her husband, Rodolfo Flores, who was explicitly excluded from coverage, was driving Guevara’s car when it collided with a car owned by Osbaldo Hurtado Avalos and Antonio Hurtado (the “Hurtados”). But Guevara, Flores, and the Hurtados agreed to tell the responding officer and the insurer that Guevara was driving her car at the time of the accident. The Hurtados then sued Guevara, and Loya hired an attorney to defend her. When Guevara told the attorney her husband had been driving the car, the insurer immediately withdrew its defense and denied coverage. The Hurtados obtained judgment against Guevara, who assigned them any rights she had against the insurer.

The Hurtados sued Loya for breach of the insurance policy and the usual tort and statutory claims. Loya counterclaimed and deposed Guevara, who admitted the truth about her husband’s role in the accident. The trial court concluded the Hurtados were asking the court “to ignore every rule of justice and help [them] perpetuate a fraud,” and granted summary judgment for Loya.

The Hurtados appealed, and the San Antonio Court of Appeals reversed, holding that the eight-corners rule barred reliance on extrinsic evidence of collusion. One justice concurred in the judgment, urging the Supreme Court to create a narrow exception to the rule that would encompass “undisputed fraud and collusion.”

The Supreme Court reviewed the history of the eight-corners rule and its reluctance to create exceptions, but noted it had previously indicated “that collusive fraud by the insured might provide the basis for an exception.” The Court concluded the facts of this case presented “such a circumstance,” emphasizing that the evidence conclusively established Guevara was not driving her car at the time of the accident, and the “parties to the underlying case conspired to lie about who was driving to trigger insurance coverage.”

The Court also rejected the argument that the insurer was required to obtain a judicial declaration it had no duty to defend before withdrawing its defense. While the Court encourages declaratory judgment actions to resolve such issues, it does not mandate them. This does not, however, give insurers carte blanche to abandon their insureds “where there is a real controversy regarding the duty to defend.” The Court emphasized the substantial risks of common law or statutory bad-faith liability facing an insurer who refuses to defend without seeking judicial confirmation of its position. It reversed the Court of Appeals and reinstated the trial court’s judgment.

SCOTX VACATES SANCTIONS AGAINST BREWER, FINDING NO BAD FAITH

Brewer v. Lennox Hearth Products, LLC
Supreme Court of Texas, No. 18-0426 (April 24, 2020)
Justice Guzman (opinion available here)
Justice Boyd, concurring and dissenting (available here)
The Supreme Court of Texas reversed an attorney sanctions award of over $133,000, holding there was no evidence of bad faith by the sanctioned attorney. The movants alleged that attorney Bill Brewer, as counsel for the plaintiffs in a serious personal injury matter, conducted a “push poll” shortly before trial with the intention of influencing the potential jury pool. After seven days of evidentiary hearings, the trial court did not find that Brewer violated any disciplinary rules or other applicable authority, but instead concluded that Brewer’s conduct “taken in its entirety,” including actions of his agents and subordinates, was “an abusive litigation practice that harms the integrity of the justice system and the jury trial process” and was “intentional[,] in bad faith[,] and abusive of the legal system and the judicial process specifically.” The trial court also found Brewer’s attitude in response to the sanctions motion “concerning” due to his (1) “nonchalant and uncaring” demeanor and (2) allegedly “repeatedly evasive” responses to questioning.

The Amarillo Court of Appeals affirmed, holding that the trial court had the authority to impose the sanctions and that the record supported the trial court’s “perce[ption] [that] Brewer’s ‘intentional and bad faith’ conduct in connection with the telephone survey” imperiled the court’s core judicial functions of “empanel[ing] an impartial jury and try[ing] a case with unintimidated witnesses.”

But the Supreme Court disagreed. First, it concluded that a court’s inherent power to sanction attorney conduct requires a finding of bad faith. It defined “bad faith” as “not just intentional conduct but intent to engage in conduct for an impermissible reason, willful noncompliance, or willful ignorance of the facts.” “Errors in judgment, lack of diligence, unreasonableness, negligence, or even gross negligence—without more—do not equate to bad faith.” Next, although the Court agreed that certain aspects of the survey were “reasonably disconcerting to the trial court,” it found “no evidence of bad faith in the attorney’s choice to conduct a pretrial survey or in the manner and means of its execution.” The Court focused on the common use of surveys in pre-trial preparation; the lack of guidelines or rules in the particular jurisdiction concerning the proper use of surveys; the use of third-party professionals in the drafting and execution of the survey; and Brewer’s limited involvement in drafting the survey questions and selecting the potential survey participants.

Finally, the Court considered whether Brewer’s demeanor and attitude during the sanctions hearing could provide an alternate basis for the sanctions. It concluded it did not, finding no evidence in the record that Brewer’s behavior interfered with the administration of justice, detracted from the trial court’s dignity and integrity, or even prolonged the hearing to any measurable degree. The Court therefore vacated the sanctions order.

In his concurring and dissenting opinion, Justice Boyd questioned how the Court could find “no evidence” of bad faith given that the “trial court entered specific fact findings after conducting a hearing over the course of seven days, and three distinguished appellate jurists—after making ‘an independent inquiry of the entire record,’ including ‘the evidence, arguments of counsel, written discovery on file, and the circumstances surrounding the party’s sanctionable conduct’—unanimously agree that some evidence supports the trial court’s findings.” But, he found it “far more important and concerning” that the Court’s requirement of “bad faith” in order for a trial court to exercise its inherent authority to sanction “unnecessarily handcuffs our state’s trial courts and undermines the very reason they possess inherent authority in the first place.”

UNDERESTIMATING WORK DOESN’T MAKE CONTRACT AMBIGUOUS

Bright Excavation, Inc. v. Pogue Construction Co., L.P.
Dallas Court of Appeals, No. 05-18-00820-CV (April 21, 2020)
Justices Myers, Osborne, and Nowell (Opinion linked here)
The Dallas Court of Appeals affirmed summary judgment for a general contractor, holding its subcontractor was bound by the contract price, even if the subcontractor underestimated the amount of work required to complete the project.
Lancaster ISD hired Pogue Construction to build two elementary schools. Pogue subcontracted the excavation work on one of the sites to Bright Excavation for $945,000. The subcontract required Bright to “excavate to the top of the tan limestone as verified by the geotechnical representative.” The bid package had instructed bidders to “assume six feet of remove and replace would be necessary.” After reviewing the initial geotechnical report of subsurface conditions, Bright estimated only between two and four feet of excavation would be required, and priced its bid accordingly. Unfortunately, this estimate proved to be inadequate, and Bright claimed it incurred over $325,000 in expenses beyond what it had projected. Pogue rejected Bright’s request for a change order increasing the contract amount, and Bright sought unsuccessfully to recover over $760,000 from Pogue’s payment bond surety, Hartford Insurance.

Bright sued Pogue and Hartford for breach of contract, payment on the bond, and assorted torts. Pogue counterclaimed to recover its attorney’s fees under the terms of the subcontract. The trial court entered summary judgment for Pogue and awarded its fees.

On appeal, Bright argued summary judgment was improper because the subcontract was ambiguous regarding the depth to which Bright was required to excavate within the $945,000 subcontract price. The Court of Appeals summarized Texas law governing the determination of contractual ambiguity, and reviewed the terms of the subcontract and related documents on which Bright relied. The Court concluded the subcontract was not ambiguous: “Bright, not Pogue or the school district, assumed the risk of the conclusions and interpretations Bright made based on the subsurface information contained in the geotechnical report.” Absent a breach of contract, Bright’s claim on the payment bond and tort claims against Pogue also failed.

CONCLUSORY OPINIONS ARE NOT COMPETENT EVIDENCE

NexBank, SSB v. Winstead, PC
Dallas Court of Appeals, No. 05-18-01345-CV (April 21, 2020)
Justices Bridges, Partida-Kipness, and Nowell (Opinion, available here)
In this legal malpractice case, the Dallas Court of Appeals confirmed that an expert’s conclusory causation opinion cannot create a fact issue to defeat summary judgment. NexBank filed suit against its former lawyers, alleging the lawyers were negligent in connection with a loan and subsequent non-judicial foreclosure. The foreclosure resulted in a deficiency, and NexBank claimed the lawyers’ negligence prevented it from fully recovering the deficiency from the loan guarantor and forced NexBank to settle with the guarantor for less than it should have.

The lawyers filed a no-evidence summary judgment motion arguing, among other things, that NexBank had no evidence of causation. In response, NexBank offered the affidavit of an expert witness who opined that the lawyers should have taken several identified steps to ensure a valid foreclosure and that, because of the lawyers’ alleged negligence, NexBank would have lost the litigation against the guarantor had that case gone to trial. The Court of Appeals agreed with the trial court’s determination that this testimony was conclusory and constituted no evidence of causation. It held the expert did not “explain how an invalid foreclosure would have caused NexBank to lose the Guarantor Litigation had that case gone to trial.” “Instead, without linking any facts to his conclusion, he summarily announces it is more likely than not that NexBank would not have prevailed.” An expert’s “conjecture, guess, or speculation will not suffice” as proof of what would have occurred had the litigation against the guarantor proceeded to trial. Summary judgment for the lawyers, therefore, was appropriate.

BE CAREFUL: THE MANDAMUS CLOCK MAY START TICKING SOONER THAN YOU THINK


In re Yamaha Golf-Car Co.
Dallas Court of Appeals, No. 05-19-00292-CV (April 8, 2019)
Justices Bridges, Osborne, and Carlyle (Opinion, linked here)
Can a judge’s email to her court administrator start the clock on mandamus review?

Turns out, it can. In a personal-injury case, Yamaha designated the paramedics who transported the victim to the hospital as responsible third parties under Chapter 33 of the Civil Practice and Remedies Code. Plaintiffs later moved to strike that designation because Yamaha had not adduced evidence that the paramedics “engaged in willful and wanton negligence,” which Plaintiffs contended was the proper standard for assessing their conduct. After a hearing held shortly before the scheduled trial date, the judge sent an email to her court administrator, listing all the motions that had been addressed at the hearing, stating her ruling on each motion, and asking for orders to be supplied for each. The email showed the motion to strike the responsible-third-party designation as “Granted.” The administrator forwarded the email to counsel, asking them to submit proposed orders. Meanwhile, trial was postponed for about 9 months. The judge didn’t sign an order striking the responsible-third-party designation until about 7 weeks before the new trial date. Yamaha filed its mandamus petition about 4 weeks later—only 3 weeks before trial and 8 months after the email that stated the trial court’s ruling on the motion to strike.

The Dallas Court of Appeals denied the petition, finding Yamaha had “waived through delay” its right to pursue mandamus relief. The Court held that, even though no formal order was signed until months later, “the trial court’s e-mail ruling was sufficiently clear and direct to be reviewed through mandamus,” and that signing a formal order “was merely a ministerial act.” The lesson: A party concerned about a “clear and direct” adverse ruling cannot sit back and wait for a formal order before pursuing mandamus relief—particularly not until right before trial. Rule 52 does not require a formal written order before relief can be sought. It requires only “a concise description of the [trial court’s] action from which the relator seeks relief” and directs the relator to attach to its petition a “certified or sworn copy of any order complained of, or any other document showing the matter complained of.

The pain of “waiver through delay” here was perhaps softened somewhat here by an alternative ruling. The Court held that, even if the mandamus petition had been timely filed, it posed “an issue of first impression not appropriate for mandamus review.” Issues of first impression can be addressed on mandamus, but only if the principle of law on which the relator relies is “positively commanded and so plainly prescribed under the law as to be free from doubt.” The question presented here—the standard by which the paramedics’ conduct should be measured—did not rise to that level of clarity or certainty.

TEXAS SUPREME COURT REMINDS INSURERS: PAYING AN APPRAISAL AWARD MIGHT NOT SATISFY PROMPT PAYMENT ACT

Alvarez v. State Farm Lloyds
Supreme Court of Texas, No. 18-0127 (April 17, 2020)
Per Curiam opinion linked here.

Lazos v. State Farm Lloyds
Supreme Court of Texas, No. 18-0205 (April 17, 2020)
Per Curiam opinion linked here.

Biasatti v. GuideOne National Insurance Company
Supreme Court of Texas, No. 18-0911 (April 17, 2020)
Per Curiam opinion linked here.
In three per curiam opinions, the Texas Supreme Court firmly rejected the argument that by eventually paying an appraisal award, an insurer can avoid liability under the Prompt Payment of Claims Act, chapter 542 of the Texas Insurance Code.

Alvarez and Lazos both involved claims of wind and hail damage to residential property. State Farm insisted the damage did not exceed the homeowners’ deductible, so the homeowners filed suit seeking contractual and extra-contractual damages. In each case, State Farm then invoked the policy’s standard appraisal clause, the trial court ordered an appraisal that resulted in an award greater than the insurer’s initial estimate, and State Farm paid the award. The homeowners pressed for additional damages attributed to Stare Farm’s failure to pay promptly, but the trial courts and appellate courts held such damages were barred by payment of the appraisal and entered take-nothing judgments. While review of these cases was pending, the Texas Supreme Court issued two opinions clarifying USAA Texas Lloyds Co. v. Menchaca, 545 S.W.3d 479 (Tex. 2018), which set forth rules governing the relationship between contractual and extra-contractual claims. In Barbara Technologies Corp. v. State Farm Lloyds, the Court held “payment in accordance with an appraisal is neither an acknowledgment of liability nor a determination of liability for purposes of … damages under section 542.060.” 589 S.W.3d 806, 820 (Tex. 2019). Likewise, in Ortiz v. State Farm Lloyds, the Court held “an insurer’s payment of an appraisal award does not as a matter of law bar an insured’s claims under the Prompt Payment Act.” 589 S.W.3d 127, 135 (Tex. 2019). The homeowners then amended their petitions in Alvarez and Lazos to abandon all claims except for damages under the Act. The Court reversed and remanded both cases to their respective trial courts for further proceedings.

The facts in Bisatti were similar, except that the damaged property was commercial (and State Farm was not involved). The wrinkle was that the appraisal clause in GuideOne’s policy was “unilateral”—it could be invoked only by the insurer, which had refused to do so when the policyholder requested it before the lawsuit. This distinction did not affect the viability of the policyholder’s claim under the Prompt Payment Act. The Supreme Court held, however, that its previous cases had not resolved “whether payment of an appraisal award under a unilateral clause would have the same effect” as to claims of breach of contract or bad faith. It, therefore, remanded that issue for consideration by the trial court, along with the prompt payment claim.

“BOILERPLATE” IN JUDGMENTS HAS CONSEQUENCES

B.C. v. Steak N Shake Operations, Inc.
Supreme Court of Texas, No. 17-1008 (March 27, 2020)
Per Curiam Opinion (linked here)
We’ve all included something like this in our proposed orders, submitted to the trial court at a summary judgment hearing: “After considering the pleadings, evidence, and arguments of counsel, the Court finds that the motion should be granted.” Standard. Professional. But innocuous, right? Not really, the Supreme Court tells us.

B.C., who worked at a Steak ‘n Shake, alleged her supervisor sexually assaulted her. Steak ‘n Shake moved for summary judgment, urging both traditional and no-evidence grounds. B.C. submitted a response (with over 400 pages of evidence attached) for electronic filing on the day it was due, but said “her filing was rejected ‘because one of the exhibits was not formatted for optical character recognition.’” She corrected the technical glitch and re-filed the next day—one day after the deadline, without seeking leave to file late. Steak ‘n Shake filed a reply and objected to the late filing. The trial court granted summary judgment to Steak ‘n Shake. Its summary judgment order made no mention of Steak ‘n Shake’s objection to the late-filed response and evidence, but did contain the broad recitation quoted above, that the court had “consider[ed] the pleadings, evidence, and arguments of counsel.” The court of appeals affirmed summary judgment for Steak ‘n Shake, concluding in the process that the trial court had not considered B.C.’s late-filed response and evidence, and that it could not do so on appeal.

But the Supreme Court disagreed, reversed, and remanded. The Court acknowledged that, where there is nothing in the record to indicate the trial court granted leave for a summary judgment response and evidence to be filed late, it is presumed leave was not granted and that the tardy filing was not considered by the court. But, the Court said, an appeals court should review the record thoroughly for any “affirmative indication that the trial court permitted [and considered] the late filing.” Here, it held, “the trial court’s recital that it considered the ‘evidence and arguments of counsel,’ without any limitation, is an ‘affirmative indication’ that the trial court considered B.C.’s response and the evidence attached to it.” The Court analogized to its longstanding approach when considering late-filed amended pleadings in advance of a summary-judgment hearing. Like the situation here, the rules prohibit amendment of pleadings, without leave, within seven days of a summary-judgment hearing. But “leave of court is presumed when a summary judgment [order] states that all pleadings were considered, and when, as here, the record does not indicate that an amended pleading was not considered, and the opposing party does not show surprise.” So, be careful with “boilerplate” language in proposed orders.

One more thing. You may be thinking: Was B.C.’s filing really late at all? Shouldn’t the filing of B.C.’s response simply have related back to the day before, the deadline day, when she submitted the technically defective e-filing? Unfortunately, that was not standard practice back in 2014 when B.C. attempted her e-filing. And both the Supreme Court and court of appeals ruled B.C. waived that argument because she didn’t assert it until her motion for rehearing en banc in the appeals court.

EIGHT-CORNERS RULE LIVES ON

Richards v. State Farm Lloyds
Supreme Court of Texas (March 20, 2020)
Opinion by Justice Blacklock (linked here)
The “eight-corners rule” for determining the duty to defend is well entrenched in Texas law: A liability insurer’s duty to defend a lawsuit against its insured is determined solely by reference to the facts alleged in the underlying complaint and the terms of the insurance policy, without reliance on extrinsic evidence. See, e.g., GuideOne Elite Ins. Co. v. Fielder Road Baptist Church, 197 S.W.3d 305, 308 (Tex. 2006). Efforts to weaken the rule’s grip, however, have continued unabated. Answering a question certified by the Fifth Circuit, the Texas Supreme Court in Richards held the eight-corners rule applies even where the operative insurance policy does not expressly promise a defense “even if the allegations of the suit are groundless, false or fraudulent.”

One of the strongest proponents of abandoning the eight-corners rule for most cases has been federal district judge John McBryde, now Senior Judge in the Fort Worth Division of the Northern District of Texas. He has relied on extrinsic evidence to negate coverage since at least 1991. In 2006 he held that the eight-corners rule arose from, and is dependent on, “groundless, false or fraudulent” language of older (pre-1996) CGL policies, and therefore does not apply to newer policies omitting that language. B. Hall Contracting, Inc. v. Evanston Ins. Co., 447 F.Supp.2d 634, 645 (N.D. Tex. 2006), rev’d on other grounds, 273 F.App’x 310 (5th Cir. 2008). The Fifth Circuit reversed the judgment in that case without mentioning the lower court’s holding on the eight-corners rule. Judge McBryde has reprised his B. Hall analysis in subsequent cases and expanded his discussion of the rule’s demise, most recently in Richards. That case arose out of the death of a ten-year-old boy in an ATV accident and a negligent-supervision lawsuit by his mother against his paternal grandparents. State Farm, which provided homeowner’s insurance to the grandparents, filed suit seeking a declaratory judgment that it had no duty to defend or indemnify them because the accident did not occur on their property and the claim triggered an “insured v. insured” exclusion. Judge McBryde granted summary judgment for State Farm, admitting and relying on extrinsic evidence over the insureds’ objections.

On appeal, the Fifth Circuit acknowledged that neither it nor the Texas Supreme Court had recognized the district court’s view of the eight-corners rule, and certified this question to the Texas court: “Is the policy-language exception to the eight-corners rule articulated in B. Hall … a permissible exception under Texas law?” The Texas Supreme Court’s answer was a resounding “No.” The Court confirmed that “parties can contract around the eight-corners rule,” but held State Farm did not do so merely by omitting the promise to “defend claims ‘even if groundless, false or fraudulent.’’’ The Court insisted the rule “is not a judicial amendment to the parties’ agreement,” but is grounded in the promise “to defend the policyholders if ‘a claim is made or a suit is brought against an insured because of bodily injury … to which this coverage applies.’” Moreover, the Court said “Texas courts have long interpreted contractual duties to defend” by applying the eight-corners rule, and noted, “If any party is familiar with the overwhelming precedent to that effect, it is a large insurance company.”

Finally, the Court acknowledged that the Fifth Circuit and some Texas courts have applied a more narrow exception to the eight-corners rule, which allows reliance on extrinsic evidence that “concerns discrete and independent coverage issues and does not touch on the merits of the underlying suit.” This exception traces its roots to dicta in Northfield Ins. Co. v. Loving Home Care, Inc., 363 F.3d 523, 531 (5th Cir. 2004). The viability and scope of the so-called Northfield exception has been the subject of numerous cases and commentaries over the years, but, as it has done in several previous cases, the Court again declined to resolve that controversy. “The Fifth Circuit did not ask for our opinion on that practice, so we express none.”

Stay tuned.

ONCE MORE, WITH FEELING: BUSINESS ENTITIES MUST BE REPRESENTED IN COURT BY A LICENSED ATTORNEY

R2Go Transport LLC a/k/a Ready 2 Go Transport LLC v. Xellex Corp.
Dallas Court of Appeals, No. 05-19-01246-CV (March 18, 2020)
Chief Justice Burns (Opinion, linked here), and Justices Molberg and Nowell
The Dallas Court of Appeals reminded us today that business entities in the State of Texas cannot appear in court pro se or through non-lawyer employees or members. Generally, except for the performance of ministerial tasks (like posting bond), only a licensed attorney may represent a business entity in a Texas court. The rule originated with respect to corporations in Kunstoplast of America, Inc. v. Formosa Plastics Corp., U.S.A., 937 S.W.2d 455 (Tex. 1996). It now extends to virtually all “fictional legal [business] entities,” including partnerships and limited liability companies. See, e.g., Sherman v. Boston, 486 S.W.3d 88, 95-96 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). “Allowing a non-attorney to present a company’s claim would permit the unlicensed practice of law.” Id. (trial evidence presented for LLC by non-lawyer “had no legal effect” and was “legally insufficient to support a judgment”). The rule applies in all courts, trial and appellate—other than small claims courts, for which there is an express statutory exception. Tex. Gov’t Code § 28.003(e) (“A corporation need not be represented by an attorney in small claims court.”).

Here, R2Go’s counsel was allowed to withdraw from the appeal. When the LLC did not obtain replacement counsel, despite having been warned and ordered to do so, the Dallas Court dismissed its appeal, because it could not proceed with its appeal without being represented by a licensed attorney.

RULE 91a DISMISSAL: AFFIRMATIVE DEFENSE OF ATTORNEY IMMUNITY

Cherlyn Bethel v. Quilling, Selander, Lownds, Winslett & Moser, P.C.
Supreme Court of Texas, No. 18-0595 (February 21, 2020)
Opinion by Justice Devine (linked here)
Can the affirmative defense of attorney immunity be used to dismiss a case under Rule 91a? Yes, says the Supreme Court of Texas, affirming the ruling of the Dallas Court of Appeals.

The plaintiff’s husband was killed in a car accident while towing a trailer. She first sued the trailer’s manufacturer, alleging that the brakes were faulty. The law firm representing the manufacturer, Quilling Selander, took possession of the trailer and performed testing on the brakes in conjunction with its hired expert. The testing resulted in the disassembly and ultimate destruction of allegedly key evidence against the manufacturer. The plaintiff then sued Quilling Selander under various tort theories for destruction of another’s property, the trailer.

Quilling Selander moved to dismiss under Rule 91a, arguing that all the claims were barred by the attorney-immunity doctrine because all actions it took were in connection with representing a client. The trial court granted the motion and the Dallas Court of Appeals affirmed.

The two questions presented to the Court were: (1) Can a court consider an affirmative defense in deciding a Rule 91a motion when the rule limits a court’s consideration only to “the pleading of a cause of action,” and (2) Is alleged criminal conduct categorically exempt from attorney immunity?

Rule 91a permits the dismissal of a cause of action that “has no basis in law or fact.” But, in considering the motion, the rule states the court may only consider the cause of action as pleaded, without any additional evidence. The plaintiff argued that this standard excluded the attorney-immunity doctrine from the court’s purview because such an affirmative defense was outside the “cause of action” pleaded in the petition.

The Court disagreed, making a distinction between the factual scope of the court’s consideration and the legal theories it may apply. Although the court is limited to the “allegations” supporting the cause of action, Rule 91a did not restrain the “universe of legal theories by which the movant may show the claimant is not entitled to relief based on the facts as alleged.”

After ruling that a properly pleaded affirmative defense can be considered, the Court then considered whether the trial court properly dismissed the claims based on the allegedly criminal conduct of the law firm. In Cantey Hanger, LLP v. Byrd, the Court declined to recognize fraud as an exception to the attorney immunity defense, stressing that the inquiry concerned the “kind” of conduct alleged, not the “wrongfulness” of the actions.

The same was true as to conduct alleged to be criminal in nature. The proper question to ask was: Does the attorney’s conduct involve providing legal services to represent a client? The plaintiff’s labelling of such actions as criminal was irrelevant.

Therefore, while an attorney who punches an opposing counsel would not have immunity, when Quilling Selander “examined and tested evidence during discovery” in representing its client, the law firm was immune from its opposing party’s tort claims.

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