“PO” BOX DOES NOT STAND FOR “PRINCIPAL OFFICE”

Ken-Do Contracting, LP v. FA Brown’s Construction, LLC
Dallas Court of Appeals, No. 05-17-00373-CV (August 7, 2017)
Justices Francis, Brown (Opinion, linked here), and Schenck
Because venue was improper in Dallas County, Defendant Ken-Do may get a do-over on the jury trial that resulted in a judgment against it. In response to Ken-Do’s motion to transfer venue in the trial court, Plaintiff Brown argued venue was proper in Dallas County pursuant to CPRC § 15.002(a)(3) because Ken-Do’s principal office in the state is in Dallas County. Brown relied on the fact that Ken-Do maintains a post office box in Dallas. But the Dallas Court of Appeals held that a post office box does not meet the definition of principal office—the office “in which the decision makers for the organization within this state conduct the daily affairs of the organization.” The Court said, “a post office box is not a business office; it is a receptacle in a postal facility and it is under the control of the United States Postal Service.” Moreover, the company’s decision makers are not managing the company’s business from inside the box. But the Court also disagreed with Ken-Do’s assertion that its principal office was in Ellis County based only on the fact that its registered agent is there. Because neither party proved proper venue, the Court reversed and remanded for further proceedings on the issue.

EVIDENCE OF ACTUAL MONETARY LOSS IS REQUIRED WHEN CALCULATING THE EXEMPLARY DAMAGES CAP

The Goodyear Tire & Rubber Co. v. Rogers
Dallas Court of Appeals, No. 05-15-00001-CV (August 31, 2017)
Justices Lang, Brown (Dissent, linked here), and Whitehill (Opinion, linked here)
A divided Dallas Court of Appeals has ruled that a jury’s finding on “pecuniary loss” must be supported by evidence of actual monetary or financial losses in order for that finding to be used as “economic damages” for purposes of calculating the exemplary damages cap in Texas Civil Practice & Remedies Code § 41.008(b)(1).

WILL WE EVER LEARN? “FORUM” ≠ “VENUE”

In re Omnicare Pharmacy of Texas 1, LP
Dallas Court of Appeals, No. 05-17-00246-CV (August 31, 2017)
Justices Lang, Evans, and Stoddart (Opinion available here)
The parties’ Rule 11 agreement to consolidate four Texas cases into a single venue did not override the parties’ prior agreement on Delaware as the chosen forum. Omnicare and Remarkable had entered into four contracts that each contained the same forum selection clause designating Delaware state and federal courts as having exclusive jurisdiction over disputes arising under or relating to the contracts. Remarkable filed four separate lawsuits against Omnicare in four separate Texas counties. The parties agreed to consolidate the four lawsuits into the Dallas County lawsuit and signed a Rule 11 agreement to that effect. The Rule 11 agreement also stated that Omnicare agreed to “waive any objections they may have to venue over the claims against them being in Dallas County.”

Once the cases were consolidated in Dallas County, Omnicare moved to dismiss pursuant to the forum selection clauses. Remarkable argued the Rule 11 agreement superseded the forum selection clauses and that Omnicare had waived its right to object to the Texas forum. The trial court agreed and denied the motion to dismiss.

The Dallas Court of Appeals conditionally granted a writ of mandamus, holding the forum selection clauses are enforceable and are unaffected by the Rule 11 agreement on venue. The Court distinguished the two types of agreements: “A forum-selection agreement is one that chooses another state or sovereign as the location for trial, whereas a venue-selection agreement chooses a particular county or court within that state or sovereign.” The Court held that the Rule 11 agreement merely permitted consolidation of the four cases into one in order to determine the jurisdictional issues. Once the cases were consolidated in Dallas County, the trial court should have concluded that Texas is not the proper forum to determine the merits of the cases and should have dismissed the cases pursuant to the forum selection clauses.

WHEN THE CORPORATION’S SHOES ARE TOO SMALL…

Gonzalez v. Gonzalez
Dallas Court of Appeals, No. 05-16-00238-CV (August 22, 2017)
Justices Bridges, Lang-Miers, and Evans (Opinion, linked here)
In stockholder derivative cases, (A) the “individual shareholder steps into the shoes of the corporation.” In re Crown Castle Int’l Corp., 247 S.W.3d 349, 355 (Tex. App.—Houston [14th Dist.] 2008, orig. proceeding). And therefore (B), the “stockholder has no greater right in a stockholder’s derivative suit” than the corporation in whose right he is suing. Henger v. Sale, 365 S.W.2d 335, 339 (Tex. 1963). Right? Well, not exactly, says the Dallas Court of Appeals.

In Gonzalez, two stockholders of a corporation brought suit derivatively against a manager. The trial court granted summary judgment for defendant, because the corporation itself was barred from asserting those claims, having forfeited its charter, and therefore plaintiffs lacked standing to pursue the claims derivatively. The Dallas Court of Appeals reversed. The Court agreed that the corporation itself “no longer has the legal right to assert its causes of action in court,” because of the forfeiture of its charter. See TEX. TAX CODE § 171.252(1). But, it said, “when a corporation forfeits its privileges, title to its assets, including its causes of action, is birfurcated; legal title remains with the corporation and the beneficial interest is vested in its shareholders.” In that situation, the Court continued, “the shareholders holding beneficial title to the claims may assert the corporation’s causes of action as the corporation’s representatives” to protect their (the shareholders’) beneficial rights—i.e., the shareholders can step out of the shoes of the corporation and pursue such claims even if the corporation cannot.

Not addressed in the Dallas Court’s opinion or the briefing was the recent decision of the Fort Worth Court of Appeals in Carter v. Harvey, 2017 WL 2813936 (Tex. App.—Ft. Worth June 29, 2017, no pet.). There, the Fort Worth Court affirmed summary judgment dismissing derivative claims with respect to a corporation that had been dissolved for more than three years. Section 11.356 of the Business Organizations Code provides that a corporation can prosecute or defend claims only until the third anniversary of the entity’s termination. Because the claims in Carter were lodged after that third anniversary, the Fort Worth Court held they were barred not only for the corporation, but also if asserted by someone purporting to sue derivatively. “Because [claimant] derivatively stands in the shoes of” the dissolved corporation, the Court said, “he cannot bring a … claim that [the corporation] could not bring.”

Perhaps we will see one or both of these cases at the next level.

BLOGGERS BITTLE AND CARROLL INCLUDED IN THE 24TH EDITION OF THE BEST LAWYERS IN AMERICA© 2018


Congratulations to two of Sua Sponte’s bloggers, Lyndon Bittle and Ken Carroll. They were named to the 2018 Best Lawyers® Appellate Practice list, along with another of our partners, Monica Latin. Both Ken and Monica were also recognized in Commercial Litigation. To see the 16 Carrington Coleman attorneys in the 2018 Edition of Best Lawyers®, click here.




NO NEW TRIAL ON ATTORNEY’S FEES

In re BCH Development, LLC
Dallas Court of Appeals (August 15, 2017)
Justices Evans, Brown, and Schenck (Opinion here)
A homeowners’ association obtained an injunction prohibiting construction violating a deed restriction, and a jury awarded it $290,000 in attorney’s fees under the Property Code. Unhappy it did not receive the $580,000 in fees it requested, the association filed a motion for new trial solely on the fees, which the court granted. The Dallas Court of Appeals granted mandamus reinstating the jury’s verdict, holding the record did not support the trial court’s reasons for granting a new trial.

Appellate review of new-trial orders has been developing in recent years, following the Texas Supreme Court’s 2009 holding that “in the interest of justice” was an insufficient reason to justify a new trial and such an order could be remedied by mandamus. In re Columbia Medical Center, 290 S.W.3d 204 (Tex. 2009). In a series of opinions, the Supreme Court has articulated a three-part test for reviewing new-trial orders:

  1. The order must state a “legally appropriate reason” for a new trial;
  2. The stated reason must be sufficiently specific to reflect consideration of the case’s particular facts and circumstances; and
  3. If the first two “facial requirements” are satisfied, the record must support the trial court’s stated rationale.

In 2016, the Supreme Court acknowledged it had not resolved the scope of an appellate court’s authority “to re-weigh evidence considered by the trial court in determining whether there is insufficient evidence to support a jury’s finding.” In re Bent, 487 S.W.3d 170, 173 (Tex. 2016).

In BCH Development, the Dallas Court held the trial court had satisfied the two facial requirements, by articulating facially valid reasons for granting a new trial and tying its ruling to specific facts and circumstances. The court’s reasons included: (1) violations of limine orders; (2) improper jury arguments; and (3) factual and legal insufficiency of the evidence supporting the amount of fees awarded.

The appellate court then conducted a “merits review” of the record, and determined none of the trial court’s articulated reasons met the test of factual sufficiency. Neither the asserted limine violations nor jury arguments justified a new trial, and the jury’s determination of reasonable and necessary fees was “well within the range supported by the evidence.” Consequently, the trial court’s ruling was an abuse of its discretion for which mandamus was an appropriate remedy.

ATTORNEY’S FEES: THE ANSWER TO A PRAYER

VSDH Vaquero Venture, Ltd. v. Gross
Dallas Court of Appeals, No. 05-16-01041-CV (August 9, 2017)
Justices Lang, Myers (Opinion, linked here), and Stoddart
Many a prayer at the end of a petition, counterclaim, or even answer includes a generic request for attorney’s fees along with the ubiquitous plea for “all other relief to which [the party] is entitled.” Turns out, that can be sufficient to support a fee award.

The Grosses asserted claims for fraud and breach of contract against VSDH, Hickok, and Shaw based on a sales contract for a new home. The contract provided that “the prevailing party in any legal proceeding related to this contract is entitled to recover reasonable attorney’s fees.” The jury found against the Grosses on all issues at trial, with the parties having stipulated the court would handle the issue of attorney’s fees separately. The trial court entered a take-nothing judgment in favor of VSDH, Hickok, and Shaw, but awarded them no attorney’s fees. So, they appealed, arguing they were “prevailing parties” under the contract and therefore entitled to recover their fees. The Dallas Court of Appeals left the judgment intact as to Hickok and Shaw, finding they were not parties to the contract. But it reversed for VSDH.

The Grosses argued on appeal that the appellants’ live pleadings at trial did not support an award of attorney’s fees because the only mention of fees was in the prayers for relief, which contained no reference to the contract or its “prevailing party” provision. The prayers simply asked that the Grosses “take nothing by their claims, and that [the party] be discharged with costs of court, attorney’s fees, and such other and further relief to which [the party] may be entitled [both in law and in equity].” But that was enough. The appeals court held that a “general prayer for relief (i.e., ‘such other and further relief at law or in equity’) might not support an award of attorney’s fees,” but a specific request for fees—even one that does not identify the basis—can suffice. That was particularly true here, the Court noted, where the Grosses themselves had pleaded for an award of fees related to the contract, and all parties had stipulated (albeit somewhat ambiguously) to having “the attorney’s fees issue” decided by the trial court rather than the jury. Under these circumstances, the Court said, “the Grosses cannot argue there was no fair notice to them that appellants sought attorney’s fees.”

$500 MILLION JUDGMENT REVERSED—NO PARTNERSHIP WHEN CONDITIONS NOT SATISFIED OR WAIVED

Enterprise Products Partners, L.P. v. Energy Transfer Partners, L.P.
Dallas Court of Appeals (July 18, 2017)
Justices Myers (Opinion here), Stoddart, and Whitehill
ETP convinced a jury it had formed a partnership with Enterprise to develop a pipeline to transport oil from Cushing, Oklahoma to Houston, and that Enterprise had breached its duty of loyalty by contracting with another company on a similar pipeline project. The trial court entered judgment awarding ETP over $500 million in damages, interest, and disgorgement. The Dallas Court of Appeals held no partnership was formed because conditions stated in the parties’ agreement had not been satisfied or waived. So it reversed and rendered a take-nothing judgment.

APPEALING A NO-EVIDENCE SUMMARY JUDGMENT? DON’T DO THIS.

Sung Sik Choi v. Juggernaut Transportation, Inc.
Dallas Court of Appeals, No. 05-16-01386-CV (June 26, 2017)
Justices Frances, Brown (Opinion, linked here), and Schenck
Plaintiffs suffered a no-evidence summary judgment in the trial court. On appeal, Plaintiffs argued they’d produced sufficient evidence to create a fact issue. The problem? Plaintiffs didn’t designate their summary judgment response for inclusion in the record on appeal. The appeals court, therefore, was required to presume that the omitted evidence supported the trial court’s judgment, rather than undermined it. Plaintiffs argued that the response should be considered because they included it in the appendix to their opening brief on appeal. But they took no action to supplement the record, and placing something in the appendix to one’s brief “is not formal inclusion in the appellate record.” Plaintiffs also asked the appeals court to take judicial notice of their summary judgment response. But the Court declined this invitation, explaining it would “not [be] an appropriate use of judicial notice and would render the rules and case law regarding designation of the appellate record meaningless.” So, the no-evidence summary judgment was affirmed. The moral? Be sure all necessary items are designated for inclusion in your record on appeal. And if you discover an omission, formally supplement under TEX. R. APP. P. 34.5(c); don’t try alternative shortcuts.

SABINE PILOT: SOLE MEANS SOLE

Watkins v. Rolling Frito-Lay Sales, LP
Dallas Court of Appeals, No. 05-16-00367-CV (June 21, 2017)
Justices Evans, Stoddart (Opinion, linked here), and Boatright
The Sabine Pilot exception to Texas’s employment-at-will doctrine holds that, at-will or not, an employee can’t lawfully be fired if “the sole reason [is] that the employee refused to perform an illegal act.” But “an employer who discharges an employee both for refusing to perform an illegal act and for a legitimate reason or reasons cannot be liable for wrongful discharge.”Texas Dep’t of Human Services v. Hinds, 904 S.W.2d 629, 633 (Tex. 1995). And that’s where Watkins’s lawsuit ran aground.

Watkins alleged he was terminated from his job as a route sales representative for a Frito-Lay distributor because he refused his supervisor’s directive to “short” or falsify his delivery manifest—to say that fewer products were delivered to him than were actually received—a practice Watkins characterized as theft under Texas Penal Code § 31.03(a). After a protracted back-and-forth with the employer dealing with Watkins’s accusations against the supervisor and some of Watkins’s own arguable failures to comply with company policy—and a lengthy suspension with pay—the company gave Watkins an ultimatum: return to work by a date certain, subject to a disciplinary agreement, or be terminated under the company’s “no-show policy.” Watkins rejected the ultimatum as “unfair,” did not return to work, and was fired.

Watkins sued, invoking Sabine Pilot. But the trial court granted a directed veridct against him at the close of his evidence at trial, and—emphasizing that Sabine Pilot is a “very narrow [public policy] exception to the employment-at-will doctrine”—the Dallas Court of Appeals affirmed.

There was “indisputable evidence” that Watkins failed to return to work, which gave the employer cause to fire him. So, the Court said, it didn’t matter whether the supervisor’s directive would’ve amounted to theft, because Watkins’s refusal to follow that directive was not the “sole” cause for his termination. The Court rejected Watkins’s argument that his failure to report was a mere excuse or pretext, finding it to be a legitimate, independent reason for termination. It also declined to find he had been constructively discharged earlier, because the constructive-discharge doctrine—which may operate to preserve a Sabine Pilot claim when an employee feels compelled to resign rather than wait to be formally discharged—did not apply to the facts here, since Watkins testified he continued to be employed after raising the illegal-conduct issue, did not resign, and was paid even during his suspension.

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