No Interlocutory Appeal from Denial of Ken Paxton’s Plea to Jurisdiction in Disciplinary Case

Paxton v. Commission for Lawyer Discipline
Dallas Court of Appeals, No. 05-23-00218-CV (April 18, 2024)
Justices Nowell (Opinion, linked here), Miskel (Dissent, linked here), and Kennedy

Ken Carroll

 More fallout from failed litigation regarding purported irregularities in the 2020 presidential election. A day after one panel of the Dallas Court of Appeals unanimously affirmed summary judgment rejecting the State Bar’s disciplinary charges against Sidney Powell—largely because of the Bar’s less-than-ideal briefing at trial and on appeal—another divided panel of that same court found it lacked jurisdiction to review a trial court’s denial of Ken Paxton’s plea to the jurisdiction regarding the Bar’s disciplinary action against him.

The State Bar’s Commission for Lawyer Discipline alleged that Paxton made “‘dishonest’ representations to the Supreme Court [in his role as lead counsel for the State] in Texas v. Pennsylvania.” The Commission contended these alleged misrepresentations “constitute[d] professional misconduct and violate[d] Rule 8.04(a)(3) of the Texas Disciplinary Rules of Professional Conduct.” Paxton filed a plea to the trial court’s jurisdiction, asserting the Commission’s action violated the separation-of-powers doctrine and was barred by sovereign immunity. When the trial court denied that plea, Paxton sought appellate review pursuant to TCPRC § 51.014(a)(8), which authorizes interlocutory appeal from an order that “grants or denies a plea to the jurisdiction by a governmental unit” of the State or, by judicial extension, a plea by a State official sued in his or her official capacity. Paxton contended that, because Texas law directs only the Attorney General to “prosecute and defend all actions in which the state is interested,” the Bar Commission’s case was effectively leveled against him in his official capacity and the AG’s office itself; the denial of his plea, therefore, fell within § 51.014(a)(8).

But the Dallas Court disagreed. The Court noted that the Commission did not challenge the AG’s discretionary decision to file the Texas v. Pennsylvania lawsuit, but instead targeted specific alleged misrepresentations made by Paxton as counsel in that case. And the Commission sought no relief against the AG’s office or Paxton in his official capacity, but only against Paxton individually as an attorney licensed by the State of Texas. Therefore, the Court concluded, the trial court’s denial of Paxton’s plea to the jurisdiction did not fall within § 51.014(a)(8), and it had no jurisdiction to hear the interlocutory appeal.

Justice Emily Miskel dissented. A lot. She would have found jurisdiction for the appeal under § 51.014(a)(8) and reversed the trial court’s denial of Paxton’s plea to the jurisdiction, arguing the Commission’s action targeted Paxton in his official capacity and was barred by the separation-of-powers doctrine as well as sovereign immunity. She went on to contend the Commission’s complaint also was defective on the merits.

Last year—foreshadowing this case—the El Paso Court of Appeals rejected separation-of-powers and sovereign-immunity defenses in a similar disciplinary action brought by the Commission against First Assistant AG Brent Webster, also based on alleged misrepresentations in Texas v. Pennsylvania. Comm’n for Lawyer Discipline v. Webster, 676 S.W.3d 687 (Tex. App.—El Paso 2023). Webster filed a petition for review in the Supreme Court of Texas. The petition remains pending, with briefs on the merits having been requested and filed. So, there’s more to come in Webster and likely in the Paxton case, as well.

TRAP 24.2’s $25-million Supersedeas Cap Applies Per Judgment Debtor, Not Per Judgment

Greystar Development & Construction, LP  v. Williams

Dallas Court of Appeals, No. 05-23-01168-CV (April 10, 2024)

Justices Molberg, Carlyle, and Breedlove (Opinion, linked here)

Ken Carroll

Williams secured a judgment holding three defendants jointly and severally liable for actual damages of more than $360 million. The three defendants posted one joint bond in the total amount of $25 million—the supersedeas “security” cap prescribed by TCPRC § 52.006(b)(2) and TRAP 24.2(a)(1)(B)—contending this was sufficient to suspend execution against all three, pending appeal. Pursuant to TRAP 24.1(b)(2), however, the trial court reviewed the joint bond and found it did not comply with the statute or the rule and did not suspend enforcement of the judgment. The trial court reasoned that the $25-million cap applied to each judgment debtor, rather than to the judgment as a whole. The court directed the defendants to specify which of them would be covered by the existing bond and then to file additional bonds for the other two defendants in order to suspend execution. Defendants, who by then had commenced an appeal on the merits, filed a motion pursuant to TRAP 24.4 seeking appellate review of the trial court’s ruling. 

The Dallas Court of Appeals affirmed the trial court’s decision. The Court noted a split of authority about whether the $25-million cap was to be applied per judgment or per judgment debtor. In Huff Energy Fund, LP v. Longview Energy Co., a divided panel of the San Antonio Court had held the cap applied to the judgment as a whole. The Tyler Court, however, came to the opposite conclusion in John M. O’Quinn, PC v. Wood. The Tyler court reasoned that the Civil Practice and Remedies Code defines “security” to mean “a bond or deposit posted … by a judgment debtor to suspend execution of the judgment during appeal of the judgment.” 

The Dallas Court found the reasoning of the Tyler Court persuasive and adopted its resolution, “hold[ing] that the $25-million cap in § 52.006 of the Texas Civil Practice and Remedies Code [and TRAP 24.2] applies per judgment debtor and not per judgment."

  

  

State Bar of Texas - Appellate Section: Nominations to the Texas Appellate Hall of Fame

 

 State Bar of Texas – Appellate Section

 Nominations to the Texas Appellate Hall of Fame 

A few years ago, CCSB co-founder and appellate legend Marvin Sloman was inducted into the Texas Appellate Hall of Fame. The recognition was richly deserved and a great honor for Marvin and the firm.

Now it’s your opportunity to nominate a worthy practitioner to join Marvin and others in the Hall. The Appellate Section will honor new Hall of Fame inductees at a presentation and ceremony during this year’s Advanced Civil Appellate Practice course and Section meeting, scheduled for September 5-6, 2024. 
Guidelines for nominating someone, as well as a link for submitting your nomination, are found here. Nominations should be submitted no later than Thursday, May 30, 2024.

Judicial Admissions: Be Careful What You Plead, and How

Advantage Aviation Technologies, Inc. v. Axcess Aviation Maintenance Services, Inc.

Dallas Court of Appeals, No. 05-23-00344-CV (December 27, 2023)

Justices Molberg (Opinion, linked here), Pedersen III, and Smith

Ken Carroll

Axcess secured judgment against Advantage Aviation for breach of two contracts. Advantage challenged that judgment on appeal by arguing that it had no contracts with Axcess and that the contracts on which the judgment was based were between Axcess and a different party. Problem was, in the trial court Advantage had counterclaimed, unsuccessfully, for breach of the very same contracts that it tried to deny on appeal. And it had done so “without equivocation and not in the alternative,” alleging it sustained damages of more than $90,000 from Axcess’s breach of those contracts. Oops.

Citing its prior opinion in Murphy v. Killer Ridez, Inc., No. 05-13-00035-CV, 2014 WL 428987, the Dallas Court of Appeals summarily rejected Advantage’s appeal and affirmed, saying: 

Assertions of fact, not pleaded in the alternative, in the live pleadings of a party are regarded as formal judicial admissions. … A judicial admission that is clear and unequivocal is conclusive upon the party making it; it relieves the opposing party of the burden of proving the admitted fact and bars the admitting party from disputing it.

No Double Dipping: Court of Appeals Slashes Damages Award for Breach of Construction Contract

Joy & Yoo Properties, Inc. v. Roeder Holdings, LLC

Dallas Court of Appeals, No. 05-22-00699-CV (November 28, 2023)

Justices Pedersen (Opinion, linked here), Garcia, and Kennedy

Brent M. Rubin

MDK owned a tract of land in Burleson, Texas. In 2009, Joy & Yoo Properties purchased one of the lots on the tract and agreed to construct improvements on the entire tract (not just its lot), including fire lanes, access drives, sewers, and water lines. But the property was never developed according to the agreement. In 2011, the bank foreclosed on MDK’s property, and the bank sold the property to Roeder in 2017. In 2019, Roeder demanded that Joy & Yoo complete the improvements required under the contract with MDK. Roeder sued Joy & Yoo and obtained summary judgment on liability for breach of contract.

The case went to a jury trial on damages, and the jury awarded two measures of damages: $618,718.07, the cost to construct the improvements, and $480,000, the lost value of Roeder’s land without the improvements. The trial court entered a judgment that included both damages measures, totaling $1,098,718.07. Joy & Yoo appealed.

Joy & Yoo argued that the trial court awarded Roeder overlapping measures of damages, resulting in an improper double recovery, and the appeals court agreed. The Court explained that there are two measures of damages for breach of a construction contract: (1) remedial damages, which assess the cost to complete or to repair the subject of the contract; and (2) difference-in-value damages, which assess the difference between the value with the improvements as constructed versus the value had the improvements been constructed according to the contract. Remedial damages are appropriate when the contractor has substantially performed. The difference-in-value measure applies when the contractor has not substantially complied with the contract terms.

The Court of Appeals concluded that remedial damages and difference-in-value damages are alternative measures and held that allowing a party to recover both would be an improper double recovery. Roeder argued that it was proper for the judgment to include both measures of damages, because the remedial damages were direct damages whereas the difference-in-value damages were consequential damages. The Court rejected this argument, concluding the difference-in-value damages are direct damages and noting that Roeder did not plead for consequential damages.

The appeals court therefore vacated the damages award. Because undisputed evidence showed that Joy & Yoo had not substantially performed, the Court remanded to the trial court and instructed it to enter a $480,000 judgment based on the difference-in-value measure and to recalculate interest based on the reduced damages award.

Penny Wise But Pound Foolish. Serving as Your Company’s Registered Agent Can Be Costly in the Long Run

Huffman Asset Management, LLC v. Colter

Dallas Court of Appeals, No. 05-22-00779-CV (November 8, 2023)

Justices Partida-Kipness (Opinion, linked here), Reichek, and Breedlove

Brent M. Rubin

Entities that do business in Texas, like corporations and limited liability companies, must “designate and continuously maintain” a registered agent and a registered office to be served with process. For around $100 annually, an entity can hire a company to serve as its registered agent and provide an address for its registered office. A business owner who faces ever-increasing expenses may be tempted to save costs by personally serving as his or her business’s registered agent and listing the business’s current address as its registered office. But this decision can prove perilous, as it did in this case.

The Colters claimed their apartment was infested by insects and sued their landlord, Prairie Capital, LLC, and its property management company, Huffman Asset Management, LLC. Both entities listed Douglas Huffman as their registered agent. Public filings for Prairie Capital listed a house in Highland Village as its registered office, and Huffman Management’s filing listed an office in Dallas as its registered office. But when the Colters tried to serve Huffman at these addresses, a bank occupied the address listed for Huffman Management and their process server was told Huffman had sold the Highland Village house.

Unable to serve Huffman, the Colters served the Secretary of State, as Texas law allows when a registered agent cannot be located at the registered office. The Secretary of State must then send notice to the “most recent address of the entity on file with the secretary of state” via certified mail. Tex. Bus. Orgs. Code § 5.253. The Secretary of State issued certificates confirming that it forwarded the documents the Colters served to the Highland Village house for Huffman Management and the Dallas office for Prairie Capital and that it later received the documents back “Return to Sender.”

The Colters then obtained a default judgment. The trial court sent a Notice of Default Judgment to the defendants at a Dallas address on San Jacinto Street, which the Colters listed as the defendants’ last known mailing address but was not either defendant’s registered office. The defendants appeared and moved for a new trial. The trial court denied the motion, and the defendants appealed.

On appeal, the defendants argued the Colters’ service on the Secretary of State was invalid because they gave the Secretary of State “bad” addresses. They argued the Colters knew the San Jacinto address was the defendants’ “most recent … address on file with the secretary of state.” Tex. Bus. Orgs. Code § 5.253. The defendants pointed to public information reports filed with the Secretary of State listing the San Jacinto address as each company’s principal place of business. The court of appeals rejected this argument, reasoning that the purpose of § 5.253 and related provisions is to effect service on the designated registered agent at the designated office. The Secretary of State, according to the court, should not have to ignore an entity’s filings about its registered agent and office in favor of a more recent filing not related to service of process.

A $100 annual fee gets a company a registered agent and registered office consistently available during normal business hours at an address that will not change. While this might seem like an easy expense to eliminate because a principal of the business can serve as the registered agent, a company faces a real risk of a default judgment if its registered agent is not actually available for service or if it fails to keep its registered agent information updated with the Secretary of State.

SCOTx: Disagreement Between the Parties—or their Lawyers—Does Not Equal Ambiguity

U.S. Polyco, Inc. v. Texas Central Business Lines Corp.

Supreme Court of Texas, No. 22-0901 (November 3, 2023)

Per Curiam Opinion (linked here)

Ken Carroll

U.S. Polyco and Texas Central disputed the meaning of their land-improvement contract. The Supreme Court of Texas took that as an opportunity to reinforce its repeated admonitions that (1) a court’s “‘primary objective’ when construing private legal instruments … ‘is to ascertain and give effect to the parties’ intent as expressed in the instrument,’” and (2) “[i]n the usual case, the instrument alone will be deemed to express the intention of the parties.” These “principles of contract interpretation,” it emphasized, “are well established and of fundamental importance.”

Here, the parties disagreed about whether certain items were encompassed by the defined term, “TCP Infrastructure Improvements.” The pertinent contractual provision listed some specific items to be included within that definition, but it concluded with, “and other items in or adjacent to the Designated Areas as are agreed upon by [the parties] in writing.” The question, of course, was whether the qualifier—“as are agreed upon by [the parties] in writing”—applied to all items in the series or only to the last entry.

Both the trial court and the court of appeals considered dueling canons of construction to unravel the parties’ dispute: “the series-qualifier canon and the last-antecedent canon.” Because of the absence of a comma before the phrase “as are agreed upon by [the parties] in writing,” both courts concluded the “last antecedent canon” controlled—an analysis and conclusion with which the Supreme Court agreed. But, while the trial court then found the contract to be unambiguous and enforced its interpretation as a matter of law, the appeals court held that, “[t]he record demonstrates that the parties strongly disagree about the intent of [the contractual provision] and its application,” and it therefore “conclude[d] that [the contract] is ambiguous and cannot be construed as a matter of law.”

Without hearing oral argument, the Supreme Court granted the Petition for Review and reversed the court of appeals. “[L]ike all other considerations beyond the contract’s language and structure,” it said, “parties’ ‘disagreement’ about their intent is irrelevant to whether that text is ambiguous.” “If lawyerly disagreement about text meant that a legal instrument’s disputed meaning must be resolved as a matter of fact,” the Court warned, “it would be a poor advocate who could not obtain a jury trial to interpret the text.” Instead, “[c]oncluding that a legal instrument is insolubly ambiguous must always come after a court has exhausted all the traditional tools of interpretation and still cannot reach a definitive conclusion about the meaning conveyed by the text.”

As Long as There’s a Plan—Resolving Defenses after Class Certification

Topletz v. Choice

Dallas Court of Appeals, No. 05-22-00781-CV (August 22, 2023)

Justices Carlyle (Opinion, linked here), Goldstein, and Kennedy

Brent M. Rubin

Topletz owns roughly 225 rental houses. The City of Dallas sued Topletz for various code violations. Several Topletz tenants intervened in 2016, asserting claims individually and on behalf of a class, alleging, among other things, that Topletz’s standard lease omitted certain language about tenant remedies required by Texas Property Code § 92.056(g) and improperly shifted certain repair duties from Topletz to the tenants in violation of § 92.006 of the Property Code. In a lengthy order, the trial court certified a class, and Topletz brought an interlocutory appeal.

The Court of Appeals affirmed in part and reversed in part. Citing the Supreme Court of Texas’s recent decision in American Campus Communities, Inc. v. Berry, 667 S.W.3d 227 (Tex. 2023), the Court of Appeals held that the class could not proceed on its claims for the missing lease language under § 92.056(g) because mere failure to include the language is not actionable. But the court affirmed part of the order deciding the class could proceed on its § 92.006 claims relating to waiver of the landlord’s repair duties.

Topletz also argued that class certification was not proper because the class included members whose claims were barred by limitations. The class definition included all who signed the standard lease from 2008 to present, and Topletz claimed the four-year limitations period barred all claims that had accrued more than four years before the named plaintiffs intervened in 2016. The court disagreed, explaining that a trial court need not resolve the merits of a defense before certifying a class. Rather, a certification order must only explain how a defense will be tried. The trial court’s certification order addressed how it intended to resolve limitations after certification, and Topletz did not identify any specific defects in that part of the trial court’s certification order. Therefore, the Court affirmed certification with respect to the § 92.006 claims about waiver of repair duties.

Arbitration: Where's the Agreement with the Plaintiff?

Fox v. The Rehabilitation & Wellness Centre of Dallas, LLC, et al.

Dallas Court of Appeals, No. 05-21-00904-CV (June 5, 2023)

Justices Molberg (Opinion), Partida-Kipness, and Carlyle

Neil R. Burger

Roger Fox brought wrongful death and survivor claims on behalf of his deceased wife, Karen. Defendants moved to compel arbitration based on an agreement signed by Roger—not Karen. The trial court granted Defendants’ motion to compel arbitration and dismissed all claims.

The issue before the Court was simple: Did Defendants “meet their initial evidentiary burden to prove the existence of a valid, enforceable arbitration agreement?” No, they did not.

The Court noted that the trial court did not hold an evidentiary hearing, did not consider any affidavits, and did not admit any evidence into the record. Instead, the only items before it were unauthenticated documents attached to the filings. Although the parties apparently ignored this evidentiary problem in both the trial court and on appeal, which would have been dispositive had he raised it, the Court recognized another fundamental problem: there was no evidence that Roger signed the agreement on Karen’s behalf. Therefore, even assuming the contract had been authenticated and admitted, Defendants did not meet their burden under principles of contract law and agency, which require the agent’s (Roger’s) authority to be established through the principal’s (Karen’s) conduct. Roger’s signature, accompanied by language in the agreement purportedly stating Roger was acting as Karen’s agent, did not suffice.

The Court thus reversed the order compelling arbitration and remanded the case to the trial court for further proceedings.

Rule 91a: “Just the Facts Pleadings, Ma’am” … Even if It’s Not Briefed?

Davis v. Homeowners of American Insurance Co.

Dallas Court of Appeals, No. 05-21-00092-CV (May 31, 2023)

Justices Molberg (Opinion, linked here), Pedersen (Dissent, linked here), and Kennedy

Ken Carroll

A defendant insurer successfully moved to dismiss the plaintiff’s claims under Rule 91a, based on limitations. But the Dallas Court of Appeals reversed, 2-1. The problem? The insurer’s motion to dismiss relied heavily on a variety of documents submitted with that motion to establish the limitations point. Rule 91a, however, expressly provides that a “court may not consider evidence in ruling on the motion and must decide the motion based solely on the pleading of the cause of action.” “In the Rule 91a context, only the non-movant’s pleading may be looked to when determining whether the cause of action pleaded has a basis in law.” A Rule 91a motion to dismiss, the Court explained, “is not a substitute for … summary judgment,” and so “the court may not resort to evidence proffered by the movant, such as through affidavits, transcribed testimony, or documents.” The majority therefore reversed the Rule 91a dismissal, but cautioned that it was not addressing the merits of the limitations argument, which might yet succeed on summary judgment.

Seems straightforward, right? So, why a dissent? Well, said Justice Pedersen, the plaintiff did not preserve error in the trial court. More specifically, the plaintiff did not object to the trial court’s considering the movant-insurer’s proffered documentary evidence, choosing instead to argue the merits of the insurer’s argument and the “evidentiary value” of the documents on which it relied. “Issues not timely preserved for appeal are waived,” and the procedural misstep identified by the majority wasn’t objected to or otherwise preserved in the trial court here.

Compounding the problem, the plaintiff-appellant did not raise the Rule 91a pleadings/evidence issue on appeal. That, argued Justice Pedersen, also should have precluded the majority’s decision. Per the Texas Supreme Court in Pike v. Texas EMC Management, “Our adversary system of justice generally depends ‘on the parties to frame the issues for decision and assign[s] to courts the role of neutral arbiter of matters the parties present.’” 610 S.W.3d 763, 782 (Tex. 2020) (quoting Greenlaw v. United States, 554 U.S. 237, 243 (2008) (discussing the “party presentation principle”)). “A court of appeals may not reverse a trial court judgment on a ground not raised” on appeal. Id. “Accordingly,” said Justice Pedersen, “this Court’s precedent … prohibits our panels from reversing trial court judgments on unassigned, nonfundamental error”—as he contended the majority did here.

Curiously, the majority opinion does not respond to the dissent’s preservation and waiver arguments.