JUDGMENT AGAINST MEMBERS OF DEFUNCT LLC REVERSED ON RESTRICTED APPEAL

Haynes v. Gay
Dallas Court of Appeals, No. 05-17-00136-CV (February 8, 2018)
Justices Lang-Miers (Opinion linked here), Fillmore, and Stoddart
In something of a rarity, the Dallas Court of Appeals reversed and rendered judgment on a restricted appeal. Gay sued the Hayneses for breach of contract. The justice court dismissed the Hayneses, but entered judgment against Skygroup, LLC—a by-then-defunct LLC that was the party to the contract at issue, and of which the Hayneses were members. Gay appealed the Hayneses’ dismissal to the county court at law. The Hayneses did not appear for the trial de novo, and the county court rendered judgment against them. The Hayneses filed a restricted appeal under TEX. R. APP. P. 30. After observing that all the procedural boxes had been ticked for a proper restricted appeal, the Dallas Court of Appeals reversed.

In a restricted appeal, reversible error must be “apparent on the face of the record,” which includes “all papers on file in the appeal, including the clerk’s record and any reporter’s record.” Nevertheless, the “scope of review” is the same as in an ordinary appeal. It extends to “the entire case” and “includes review of legal and factual insufficiency claims.”

Here, the evidence at trial—on the face of the record—unequivocally established that Skygroup, LLC was the contracting party and that the breaches of contract occurred before Skygroup forfeited its charter. Under TEX. BUS. ORGS. CODE § 101.114, the Hayneses were not liable for the LLC’s debts and obligations incurred before its demise—including the breach of its contract with Gay. As members of the LLC, they could be liable only for its debts created or incurred after its charter was forfeited, under TEX. TAX CODE § 171.255(a). Even though Skygroup’s charter lapsed before trial and judgment, the appeals court concluded that the date of contract or breach, rather than the date of judgment, established the date of the debt at issue for purposes of §§ 101.114 and 171.255(a). So, the Court reversed and rendered judgment for the Hayneses.

READ YOUR BANK STATEMENTS. FILE A WRITTEN CLAIM. SERIOUSLY.

Horton v. JP Morgan Chase Bank, N.A.
Dallas Court of Appeals, No. 05-16-00472-CV (January 22, 2018)
Justices Lang-Miers, Brown, and Boatright (Opinion linked here)
The Dallas Court of Appeals affirmed summary judgment in favor of JP Morgan Chase because its customer failed to timely file a written claim complaining that $345,000 had been improperly withdrawn from her bank account.

Horton opened a bank account at JP Morgan Chase. Two months later, the bank received a new signature card purporting to convert the account into a joint account with her employer. After Horton was terminated several months later, her employer withdrew all the funds from the account.

At the time of the withdrawal, Horton orally complained to JP Morgan Chase, but never submitted a written complaint. Because the bank had sent written bank statements to Horton showing that the account had been converted to a joint account naming her employer, and because Horton had not filed a written notice of the error within the 30 days required under the bank’s account terms, Horton’s lawsuit—filed over a year later—was barred.

Article 4 of the UCC establishes the rights and duties of banks and their customers regarding deposits and collections. If a “bank sends or makes available to the customer an account statement that reasonably identifies the items paid, the customer must exercise reasonable promptness in examining the statement and must promptly notify the bank of relevant facts regarding any unauthorized payments due to the alteration of an item or an authorized signature.” Specific notice requirements may be set by the bank’s written terms, which here provided Horton 30 days to raise any errors an account statement, including errors in ownership or amounts paid, in writing.

Horton failed to file a written claim with the bank within 30 days of either seeing an additional account owner on her account statement or seeing the $345,000 withdrawn by her employer. Her lawsuit therefore was precluded by the UCC and the bank’s written terms.

EXPERT TESTIMONY ON “POSSIBILITIES” IS NOT HELPFUL TO THE JURY

Zamora v. Champion Cooler Corp.
Dallas Court of Appeals, No. 05-16-00577-CV (January 23, 2018)
Justices Bridges, Myers (link to opinion here), and Schenck
Plaintiff Zamora’s doctor testified his reactive airway dysfunction syndrome (“RADS”) might have been caused by asthma or by chemical exposure in the workplace. The doctor acknowledged his impression that Zamora’s condition was caused by workplace chemical exposure was “speculation … a possibility.” The trial court excluded the doctor’s causation testimony and granted the employer’s summary judgment based on no evidence of causation. Zamora appealed. The Dallas Court of Appeals affirmed.

A trial court’s decision to exclude expert-witness testimony is reviewed for abuse of discretion. When an expert is challenged, the proponent of the expert opinion has the burden to prove the reliability of each opinion. While the expert in this case testified that RADS is “an irritant-induced type of asthma,” he conceded he could not determine whether anything Zamora inhaled at his employer’s facility caused his lung condition. Zamora argued he should be allowed to present the doctor’s testimony that Zamora’s condition was caused either by asthma or workplace exposure and then put on other evidence that he had no prior history of asthma. But the Court of Appeals held the trial court acted within its discretion in concluding the expert’s “inability to tie Zamora’s injuries to his workplace-exposure to fumes and not to asthma made his testimony unhelpful to the jury on the subject of causation.” So the trial court did not abuse its discretion in excluding the doctor’s causation testimony and, without expert testimony on causation, summary judgment was appropriate.

NO RECORD OF MSJ HEARING? NO PROBLEM.

Lynch v. O’Hare
Dallas Court of Appeals, No. 05-17-00175-CV (January 18, 2018)
Justices Francis, Evans, and Boatright (Opinion linked here)
Lynch lost his personal injury claim on summary judgment. No reporter’s record was made of the summary judgment hearing. Lynch argued the absence of that record prevented him from presenting meaningful issues and arguments on appeal and entitled him to a new trial. He relied on TEX. R. APP. P. 13.1 (regarding reporters’ duties) and 34.6(f) (addressing the effect of a lost or destroyed reporter’s record). But the Dallas Court of Appeals explained that Rule 13.1 did not require a reporter’s record to be made of a summary judgment hearing. To the contrary, the Court said, “a reporter’s record is neither necessary nor appropriate to the purposes of a summary judgment hearing.” And because all parties agreed no reporter’s record had ever been prepared, none was (or could be) lost or destroyed. So, Rule 34.6(f) did not apply. Summary judgment affirmed.

PROPER SERVICE OF A MOTION TO VACATE AN ARBITRATION AWARD

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.

SECOND CHANCE ON AN EXPERT REPORT

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.

INCORPORATING IN TEXAS DOES NOT MAKE IT A CONVENIENT FORUM

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.

“NOT A PARTY YET” ≠ “NON-PARTY” WHEN IT COMES TO DOCTOR DEPOSITIONS

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.

A RARE PLAINTIFF’S WIN ON CAUSATION IN THE TEXAS SUPREME COURT

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.

FAILURE TO SECURE A HEARING DEPRIVES DEFENDANT OF ANTI-SLAPP PROTECTIONS AND INTERLOCUTORY APPEAL

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.

Print