Craig v. Southwest Securities, Inc.
Dallas Court of Appeals, No. 05-16-01378-CV (December 18, 2017)
Justices Lang-Miers, Brown (Opinion linked here), and Boatright
When an arbitration is conducted pursuant to the Federal Arbitration Act, that Act applies to the substantive rules of decision, but Texas law—specifically, the Texas Arbitration Act—governs procedure. Failure to observe and comply with this division of authority can be fatal to a challenge to an arbitration award.

Craig’s claims against Southwest Securities and one of its brokers were denied in an arbitration governed by the FAA. That Act requires a party who challenges an arbitration award governed by the FAA to serve “notice” of the motion to vacate or other proceeding within three months after the award is filed or delivered. Craig filed a motion to vacate the adverse arbitration decision in a state district court well within the three-month window. But he purported to serve notice of the motion only by emailing it to his opponents’ counsel, as one might do when serving a motion under Texas Rule of Civil Procedure 21a. Several weeks later, outside the three-month window, he filed a supplemental motion. This time he requested citations and served his opponents with process. The district court dismissed Craig’s motion for failure to provide the required notice within the three-month window established by the FAA, and the Dallas Court of Appeals affirmed.

The appeals court explained that, while the FAA established the three-month substantive deadline or limitations period for challenging an arbitration award, the method for serving notice of that challenge was procedural and therefore governed by the TAA. The Texas Act— specifically, § 171.094 of the Civil Practice & Remedies Code—“requires service of process to initiate a court proceeding to vacate an arbitration award,” process and service “in the form and includ[ing] the substance required for process and service on a defendant in a civil action in a district court.” Because Craig did not request citation or service of process until he filed his supplemental motion, well beyond the three-month deadline, his motion to vacate the arbitration award was dismissed. His earlier purported email service of the original motion was not effective to commence the proceeding or provide the required notice under the Texas statute.


Wheeler v. Methodist Richardson Medical Center
Dallas Court of Appeals, No. 05-17-00332-CV (December 7, 2017)
Justices Lang-Meirs (opinion linked here), Brown, and Boatright
The standard for allowing a medical malpractice plaintiff a second chance to submit a qualifying expert report is “minimal” and “lenient.” Chapter 74 of the Civil Practice & Remedies Code requires a medical malpractice plaintiff file a qualifying expert report within 120 days after the defendant’s answer is filed. Plaintiffs in this case submitted their expert reports on time, but the defendants objected, arguing the reports were insufficient under the statute because they failed to address causation. They argued the reports were so insufficient as to constitute “no report at all.” Plaintiffs requested a 30-day extension under §74.351 to cure the alleged deficiency and submitted an amended expert report in an effort to prove the deficiency was curable. The trial court found that, because the original reports completely omitted an essential element, they were so deficient as to constitute “no report.” It therefore denied the extension and dismissed plaintiffs’ claims with prejudice.

The Dallas Court of Appeals disagreed. It held the trial court should err on the side of granting an extension under §74.351 and must grant the extension if the deficiencies in the report are curable. The trial court therefore abused its discretion in dismissing the plaintiffs’ claims.


Grynberg v. Grynberg
Dallas Court of Appeals (November 28, 2017)
Justices Bridges, Fillmore, and Stoddart (Opinion here)
A family dispute over control of a Texas corporation erupted in two competing lawsuits, one in Texas followed by another in Colorado, where all the parties resided. The Texas action was dismissed on forum-non-conveniens grounds, and the Dallas Court of Appeals affirmed.

Jack Grynberg incorporated Pricaspian in Texas in 1993 to hold and invest in mineral-related assets. He also caused Grynberg Production Corporation (GPC), his wholly-owned entity, to assign to Pricaspian the rights to his valuable oil and gas projects in Kazakhstan. He later assigned shares in Pricaspian to his wife and three adult children, who became directors of the company and (according to Jack) received approximately $160 million over a twenty-year period. In 2015, the board of directors began to strip Jack of his authority, replaced him as president, and ultimately removed him from the board. In response, Jack and GPC filed a declaratory judgment action in Texas to confirm revocation of the previous assignments of the Pricaspian shares to Jack’s wife and children. The defendants filed a forum-non-conveniens motion to dismiss the Texas lawsuit, and initiated a competing lawsuit in Colorado.

The parties’ affidavits and other evidence established that Pricaspian’s Texas incorporation was the lawsuit’s only connection to the state. Pricaspian’s offices, corporate records, shareholders, officers, and directors were all located “within a twenty-mile radius of Denver, Colorado,” as were the relevant documents and potential witnesses. Although the “internal affairs” of Pricaspian would be governed by Texas law, that is a conflict-of-laws principle, not a matter of subject-matter jurisdiction, so did not require adjudication by a Texas court. Plaintiffs’ choice of forum was given little deference, since they were not Texas residents. And both the public- and private-interest “Gulf Oil” factors heavily favored Colorado as the more convenient forum for resolving the dispute. The trial court therefore did not abuse its discretion in dismissing the Texas action.


In re Jeffrey S. Sandate, M.D.
Dallas Court of Appeals, No. 05-17-00871 (October 19, 2017)
Justices Lang, Evans (opinion linked here), and Stoddart
Chapter 74 of the Texas Civil Practice & Remedies Code provides protections for healthcare providers in healthcare liability claims, including a ban on most discovery until the providers have been served with a qualifying expert report. The pre-report discovery allowed includes “discovery from nonparties under Rule 205.” Comaneche Turner, a malpractice plaintiff, tried to take advantage of this exception to take the deposition of Dr. Sandate, but it didn’t work.

Turner filed suit and served an expert report on Methodist Hospitals of Dallas. She did not sue Dr. Sandate, but sought his deposition as a “non-party” under Rule 205 so she could “determine if he should be joined in the lawsuit.” The trial court ordered Dr. Sandate to appear for deposition, but the Dallas Court of Appeals put on the brakes. In In re Jorden, the Texas Supreme Court had ruled that a potential malpractice plaintiff cannot do an end run around the protections of Chapter 74 by noticing a doctor for a Rule 202 pre-suit deposition. In so holding, it rejected the very argument Turner made here, concluding that Chapter 74 and Rule 205 make a “distinction between those who are third parties to a dispute and those directly threatened by it.”

Applying that logic to the case at hand, the Dallas Court held that, because Turner had announced she wished to depose Dr. Sandate in order to decide whether or not to sue him, he was “directly threatened by” the suit and was not a “non-party” from whom depositions are allowed by Rule 205. Accordingly, Turner cannot take his deposition unless and until she serves him with a qualifying expert report.


Bustamonte v. Ponte
Texas Supreme Court, No. 15-0509 (September 29, 2017)
Opinion by Justice Green (linked here)
The Texas Supreme Court revived a large jury verdict in this medical malpractice case, holding the Dallas Court of Appeals erred in holding the Plaintiffs’ expert did not sufficiently establish causation. The minor Plaintiff, D.B., was born premature and was at risk to develop retinopathy of prematurity (ROP), a retinal disorder that afflicts premature infants with low birth weights. Plaintiffs alleged that the negligence of the baby’s two doctors in failing to timely schedule follow-up appointments and corrective surgery caused lost vision in one eye and severely diminished vision in the other. The jury found for the Plaintiffs and awarded damages of just over $2.1 million. The Dallas Court of Appeals reversed, holding the physician experts had not established causation to a reasonable degree of medical certainty.

The Texas Supreme Court disagreed. It held that, given the joint responsibility of the two doctors in scheduling follow-up appointments and caring for the child, the court of appeals improperly applied a stringent but-for causation requirement when it should have applied the substantial-factor test. The Court noted that “essentially all of the evidence at trial was that the screening, diagnosis, and treatment of ROP is a collaborative effort between the neonatologist and the ophthalmologist, implicating the substantial-factor test.”

In addition to applying the wrong standard, the appellate court erred in ignoring the statistical evidence presented by Plaintiffs based on the standards in Merrell Dow Pharmaceuticals, Inc. v. Havner. The Court found that, unlike in Havner, where a statistical survey was used to establish “general causation,” i.e., that a toxic substance generally has the ability to cause a certain outcome, the statistical survey in this case was just one factor relied on by the physician experts in concluding what the likely outcome would have been for this particular patient in the absence of negligence. The experts also relied on their own clinical experience and their examination of the patient and her medical records.

The Court also disagreed with the Court of Appeals’ conclusion that the experts’ testimony was conclusory. The Court reiterated the long-standing rule in Texas that a physician expert cannot simply opine that the alleged negligence caused the patient’s injury but must also, to a reasonable degree of medical probability, explain how and why the negligence caused the injury. The Court then went through the experts’ testimony in great detail and concluded they did, in fact, adequately explain the “how and why.” The experts testified that, if the defendant physicians had not delayed the screening examinations for four weeks, Dr. Llamas would have identified the baby’s ROP at a time when it was less aggressive and would have treated it earlier, and D.B. would have enjoyed a sighted life. The Court’s analysis was highly fact-specific and should not be read as a loosening of the standards for expert testimony in medical malpractice cases.


Braun v. Gordon
Braun v. Haley
Dallas Court of Appeals, Nos. 05-17-00176-CV and 05-17-00086-CV (September 26, 2017)
Justices Francis (Haley Opinion, here), Myers (Gordon Opinion, here), and Whitehill
Under this state’s anti-SLAPP statute, the Texas Citizens Participation Act, a hearing on a motion to dismiss ordinarily “must be set not later than the 60th day after the date of service of the motion …, but in no event shall the hearing occur more than 90 days after service of the motion” (unless the court allows discovery on the motion, which can push the hearing deadline to 120 days). TEX. CIV. PRAC. & REM. CODE § 27.004. The trial court then must rule on the motion “not later than the 30th day following the date of the hearing.” Id. § 27.005(a). If it doesn’t, “the motion is considered to have been denied by operation of law and the moving party may appeal.” Id. § 27.008(a). But, what happens when no hearing occurs within the time prescribed by statute? Nothing good for the movant, says the Dallas Court of Appeals in two related opinions.

In Gordon and Haley, Braun timely filed motions to dismiss under the TCPA. But she did not get a hearing set within the statutory deadline in either case. Nevertheless, shortly after 120 days had elapsed since the filing of her motion in each case—the 120 days apparently comprising the passing of both the 90-day hearing deadline of § 27.004 and the 30-day deadline for a ruling in §§ 27.005(a) and 27.008(a)—Braun filed a notice of appeal, arguing her motion had been denied by operation of law. But the Dallas Court of Appeals disagreed and dismissed both appeals for want of jurisdiction, citing the absence of an appealable order. The Court explained that denial by operation of law under § 27.008(a), and the corollary right of appeal, are expressly predicated on the lapse of time after a hearing on the motion. No hearing, no denial by operation of law, and therefore no appeal, said the Court.

Braun argued that would lead to absurd results in two respects. First, she said, it would allow a trial court to effectively deny a motion to dismiss without actually ruling and therefore without appeal—creating a giant loophole in the statute. But the Court of Appeals reminded her that the burden rests on the movant to obtain a hearing. Failure to do that, like failure to timely file a motion in the first place, forfeits the movant’s right to the statute’s protections, including the right of interlocutory appeal. Braun protested that she had tried to get hearings set within the statutory deadline, but that the trial court would not accommodate her requests. The appeals court, however, found nothing in the record to reflect her purported attempts to obtain a hearing or the trial court’s lack of cooperation. So, those allegations could not be considered on appeal. The Court did not say whether the outcome might have been different if the record on appeal had confirmed that Braun did seek a timely hearing, and that the trial court ignored or denied such requests. It did note, but expressly reserved for another day, the question whether a movant could seek mandamus to compel a timely hearing if a trial court refused to set one.

Second, Braun argued the Court’s ruling left the parties in limbo in the trial court. Under the TCPA, the filing of a motion to dismiss suspends discovery. If there is no denial by operation of law in these circumstances, does that mean the parties and the case are simply frozen in place? No, said the Court. The better reading of the statute, again, is that the movant’s failure to carry his or her burden to obtain a timely hearing forfeits the statutory stay of discovery, just like all other statutory protections.


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.


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).


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.


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.