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.

NO HEARING, NO EVIDENCE ADMITTED

Analytical Technology Consultants, Inc. v. Axis Capital, Inc.
Dallas Court of Appeals, No. 05-16-00281-CV (June 19, 2017)
Justices Bridges, Myers (Opinion, linked here), and Brown
Axis sued Analytical Technology Consultants (“ATC”) for breach of a lease agreement, seeking past and future lease payments and the return of leased equipment. ATC answered, but did not assert any affirmative defenses. Eventually, ATC returned the leased equipment, but did not respond to or appear at the hearing on Axis’s motion for summary judgment. The trial court granted the motion, awarding Axis damages for past and future amounts due under the lease. The court also awarded Axis the right to sell the leased equipment and apply the proceeds to the money judgment.

ATC filed a motion for new trial, asserting, among other things, that the judgment miscalculated the future payments awarded under the lease agreement. In response, Axis filed an affidavit showing that it had sold the leased equipment, and applied the proceeds to reduce the outstanding judgment. The court denied the motion, and this appeal followed.

In considering the amount of future damages, the Court analyzed the provisions of the lease agreement, and determined that the evidence in the summary judgment record was insufficient to support the amount of damages awarded. Upon default, the lease agreement provided Axis two options concerning the repossessed equipment: (i) sell the equipment and credit ATC for the proceeds, or (ii) retain it, and provide a credit for the reasonable rental value for the remainder of the lease’s term.

In its motion for summary judgment, Axis provided evidence of neither. Although Axis eventually filed an affidavit showing it had chosen option (i)—to sell the equipment and apply the proceeds—that affidavit was never admitted into evidence. The Court explained that evidence filed as an exhibit to a motion for a new trial or a response thereto does not supplement the summary judgment record unless the trial court expressly grants leave to supplement or admits the evidence at a hearing on the motion for new trial. Here, there was no hearing, and the affidavit was never admitted into evidence. On appeal, the Court could not consider the affidavit concerning the sale of the equipment in reviewing the order granting summary judgment: “To constitute evidence, the attachment must be introduced at the hearing on the motion for new trial.” The Court therefore reversed and remanded the cause for further proceedings.

SCOTX PUNTS DELAWARE CORPORATE–OPPORTUNITY ISSUE

Longview Energy Co. v. The Huff Energy Fund LP
Supreme Court of Texas, No. 15-0968 (February 9, 2017)
Opinion by Justice Johnson (Opinion, linked here)
Declining an opportunity to weigh in on the Delaware corporate-opportunity doctrine, the Texas Supreme Court instead focused on the common-law remedies for a breach of fiduciary duty. The Court set aside a $95.5 million damages award and a constructive trust because there was no evidence tracing any specific mineral leases acquired by the defendant directors to the conduct the Court assumed to be a breach of fiduciary duty to the company. But because the Court took the path it did, Texas lawyers and lower courts will continue to dispute how to deal with corporate-opportunity claims governed by Delaware law.

WHEN THE PRESIDING JUDGE BECOMES A FORMER JUDGE, WHO SIGNS FINDINGS OF FACT?

Ad Villarai, LLC v. Pak
Supreme Court of Texas, No. 16-0373 (May 12, 2017)
Per Curiam (Opinion linked here)
You try your case to the court. It’s complicated and close. You win—Huzzah! But your opponent requests findings of fact under Rule 296 and, before your judge issues those findings, he leaves office, having lost in the primary or general election. Now what? In the absence of written findings, an appellate court sometimes may presume the trial court made all findings necessary to support its judgment. But when material facts are truly disputed, the “preferred remedy is for the appellate court to direct the trial court to file the missing findings.” If the trial court fails or refuses to do so, “the appellate court must reverse the trial court’s judgment and remand the case for a new trial.” When the judge who heard your trial is no longer around, who can issue those missing findings so you can avoid trying the case all over again? The original—now former—judge? His successor? No one?

In Villarai, the departing judge failed to issue the requested findings before he left office. His successor tried to remedy the situation by signing findings. But, the Supreme Court said, the successor—who heard none of the evidence—had no authority to issue those findings. Rule 18 allows a successor judge to decide pending motions when her predecessor “dies, resigns, or becomes unable to hold court.” And § 30.002(b) of the Civil Practice and Remedies Code authorizes a successor judge to file findings if her predecessor dies before making findings of his own. But a judge who leaves office because he lost an election has not died, resigned, or become disabled within the meaning of Rule 18 or § 30.002(b), and so neither Rule 18 nor § 30.002(b) grants the successor judge the power to issue the requested findings in that situation.

Nevertheless, the Court explained, there is a solution—if the former judge cooperates. Section 30.002(a) of the Civil Practice and Remedies Code provides, “If a … judge’s term of office expires … during the period for filing findings of fact and conclusions of law, the [departing] judge may … file findings of fact and conclusions of law in the case” even after leaving the bench. Timing is crucial here. If the time for filing findings expires before the departing judge leaves office, § 30.002(a) does not apply, and “there would be no judges with power to file findings.” If the clock is still running when the departing judge’s term ends, however, he may be asked to file the requested findings. And if he complies, the findings he files are effective, and the case may proceed on appeal. If the former judge fails or refuses to file findings as requested, however, now that he’s no longer on the bench, the appeals court must remand for a new trial.

NO FRACTURING? NO PROBLEM. BUT A WORD OF WARNING FOR LEGAL MALPRACTICE EXPERT WITNESSES.

Ashton v. KoonsFuller, P.C.
Dallas Court of Appeals, No. 05-16-00130-CV (May 10, 2017)
Justices Francis, Fillmore, and Stoddart (Opinion, linked here)
KoonsFuller represented Ashton in her divorce, but withdrew during the process. After the divorce was finalized, Ashton sued KoonsFuller for negligence, breach of fiduciary duty, and fraud, attacking the firm’s approach to various matters and the fees it charged along the way. KoonsFuller secured a no-evidence summary judgment against Ashton’s fraud and breach-of-fiduciary-duty claims, and the Dallas Court of Appeals affirmed. But there were some twists along the way.

First, when the trial court granted judgment against Ashton’s fraud and fiduciary-duty claims, it denied summary judgment on her negligence claim. But she nonsuited it nonetheless. We don’t know why.

Second, KoonsFuller’s “primary argument” on appeal was predictable: dismissal of the fraud and fiduciary-duty claims was appropriate because they violated the “anti-fracturing” rule in legal malpractice cases. But under Rule 166a, summary judgment can only be granted—or affirmed—on a ground specified in the motion. KoonsFuller had not raised fracturing as a ground for its summary judgment motion; it didn’t articulate the argument until its reply brief below (again, we don’t know why). So, the Court of Appeals held the anti-fracturing rule could not be considered on appeal, to support the summary judgment.

Finally, although the trial court had overruled KoonsFuller’s objections to Ashton’s summary judgment evidence, the Court of Appeals disagreed, and with apparently devastating effect. Ashton had tendered the affidavit of an expert witness, as well as excerpts from his deposition, to challenge KoonsFuller’s billings and several of the firm’s practices and decisions during the divorce proceeding. As described and quoted in the opinion, the affidavit was hardly terse or cryptic. And no defects in the witness’s experience or expertise were noted. Nevertheless, the Court found the testimony to be “conclusory and … not adequate summary-judgment evidence.” The recurring theme in this determination was the Court’s condemnation of the expert’s testimony that fees or practices were unreasonable, but his failure to articulate the other side of the coin, i.e., what “would have been reasonable.” The holding here at least implies that, to fend off a no-evidence summary judgment—much less, carry the burden of proof at trial—a plaintiff’s qualified legal malpractice expert witness must not only opine about shortcomings of the defendant attorney’s conduct, but must also explain what the proper course of conduct would have been.

TEXAS SUPREME COURT USES HURRICANE IKE CASE TO CLARIFY INSURANCE “CON-TORT” ISSUES

USAA Texas Lloyds Insurance Co. v. Menchaca
Supreme Court of Texas (April 7, 2017)
Justice Boyd’s Opinion available here
Acknowledging its own precedents had “led to substantial confusion among other courts,” the Texas Supreme Court in Menchaca attempts to clarify “the relationship between contract claims under an insurance policy and tort claims under the Insurance Code.”

Hurricane Ike hit Galveston Island in September 2008, and Gail Menchaca filed a claim under her USAA homeowner’s policy. Based on its adjusters’ findings that the damages were less than the deductible, USAA refused to pay anything under the policy. Menchaca sued, and the case went to a jury, which found (1) USAA did not fail to comply with the terms of its policy; (2) USAA did refuse to pay the claim without conducting a reasonable investigation; and (3) the amount USAA should have paid for Menchaca’s damages was $11,350. The trial court disregarded the jury’s answer to the first question, and awarded Menchaca $11,350 plus $130,000 in attorney’s fees.

USAA appealed, and the Corpus Christi Court of Appeals affirmed. The Supreme Court granted USAA’s petition for review, reversed the judgment, and remanded for a new trial. The primary purpose of the opinion, however, was to answer a question that had long been brewing in Texas insurance jurisprudence: Under what circumstances, if any, may policy benefits be recovered as actual damages for an Insurance Code violation?

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