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.

Rules Are Rules

 Badger Tavern LP v. City of Dallas

Dallas Court of Appeals, No. 05-23-00299-CV (April 20, 2023)

Chief Justice Burns (opinion available here) and Justices Molberg and Goldstein

Kelli Hinson

The rules authorizing interlocutory appeals are strictly construed—really strictly. Rule 168 requires that a court’s permission to appeal an otherwise unappealable order “must be stated in the appealed order.” In this case, the trial court denied a Rule 91a motion to dismiss and then later signed a separate order granting permission to appeal that denial. The Dallas Court of Appeals, relying on the plain language of the rule and similar cases out of other jurisdictions, dismissed the appeal. It held: “[b]ecause the trial court did not sign a single order that both denied appellants’ rule 91a motion to dismiss and granted permission to appeal the order, this Court has no jurisdiction over this appeal.”

No Interlocutory Appeal of Order Deferring Decision on Motion to Compel Arbitration

Builders FirstSource, Inc. v. White

Dallas Court of Appeals, No. 05-22-00724-CV (March 29, 2023)

Chief Justice Burns (Opinion, linked here) and Justices Molberg and Goldstein

Ken Carroll

Builders moved to stay White’s lawsuit against it and to compel arbitration under the Federal Arbitration Act. White responded with a motion for a jury trial on the threshold issue of arbitrability. When the trial court denied Builders’ motion and granted White’s, Builders filed an interlocutory appeal under FAA §§ 16(a)(1)(A) & (B). But the Dallas Court of Appeals dismissed for want of jurisdiction. The Court acknowledged that an order denying a motion to stay and for arbitration ordinarily is appealable under the FAA and Civil Practice & Remedies Code § 51.016. But the trial court’s order here “simultaneously granted White’s motion for a jury trial on arbitrability.” Consequently, the Court explained, “the order can only reasonably be construed as deferring a final ruling on whether to grant arbitration.” Citing decisions from several other Texas Courts of Appeals, the Dallas Court then held that an order deferring decision on the motion to compel, as opposed to “a definitive ruling on Builders’ motion to stay litigation and compel arbitration” is interlocutory and not appealable.

No Sealed Record on Appeal Without 76a Order

Orca Assets, GP, LLC v. J.P. Morgan Chase Bank, N.A.

Dallas Court of Appeals, No. 05-22-00292-CV (March 1, 2023)

Justice Molberg (Order, linked here)

Ken Carroll

In the most recent episode in this long-running saga, Orca Assets appealed from the trial court’s $2.4 million award of fees and costs against it. Because this particular aspect of the dispute had been severed years ago, Orca asked that two volumes of the sealed 12-volume clerk’s record from a 2013 substantive appeal in the main case be imported into this current fees and costs appeal. In January, Dallas Court of Appeals Justice Ken Molberg issued an order (linked here) granting that request, but noting that “the clerk’s record in [the earlier appeal] appears to have been filed under seal in accordance with an agreed protective order rather than a sealing order under Texas Rule of Civil Procedure 76a.” So, he further ordered that the imported volumes would “remain under seal only temporarily to allow the parties an opportunity to obtain a sealing order in compliance with rule 76a.” The order warned the parties that the Court would unseal those volumes unless they obtained that sealing order. They didn’t. So, Justice Molberg kept his promise and issued an order striking the sealed volumes of the record and ordering the district clerk to refile them “without seal.” Not long ago, Justice Craig Smith filed a concurrence to an en banc decision (in a different case) for the express purpose of addressing documents sealed on appeal and the application of Rule 76a. Surveying the relevant authorities, he concluded:

• Rule 76a governs the sealing of records or documents filed in the court of appeals, so the appellate record should not be sealed unless and until the trial court has entered a sealing order after following the procedures of Rule 76a.
• If the trial court has not entered a Rule 76a sealing order, the appellate court will abate the appeal or temporarily seal the filed documents only to allow the trial court to conduct a hearing to determine whether the requirements of Rule 76a have been satisfied and to make findings on whether the contents of the record should be sealed. 
• The parties may not enter a Rule 11 agreement or agreed protective order to skirt the requirements of Rule 76a.

In re Cook, 629 S.W.3d 591, 608 (Tex. App.—Dallas 2021, orig. proceeding) (en banc). Justice Molberg’s orders in Orca Assets follow the path mapped out by Justice Smith. They confirm parties cannot be casual about complying with Rule 76a on appeal.

Gone, But Not Forgotten: Broker Entitled to Commission After Its Listing Terminated

Ebby Halliday Real Estate, Inc. v. Giambrone

Dallas Court of Appeals, No. 05-22-00386-CV (February 28, 2023)

Justices Reichek, Nowell, and Garcia (Opinion, linked here)

Brent M. Rubin

On September 2, 2020, Giambrone and Ebby Halliday Real Estate executed an exclusive listing agreement that provided Halliday a 6% commission if Giambrone’s property sold. After five months, Giambrone had not received any serious offers, so Giambrone and Halliday entered into a “Termination Agreement.” The Termination Agreement provided, in pertinent part, that 3% of the sales price would go to Halliday if Giambrone sold the property by December 31, 2021.

In June 2021, Giambrone had Compass list the property, and it promptly sold. Giambrone refused to pay Halliday the 3% fee prescribed in the Termination Agreement—$167,250. Halliday sued for breach of contract. The parties filed cross-motions for summary judgment. The trial court granted Giambrone’s motion. Halliday appealed.

The Court of Appeals reversed and rendered judgment, holding Halliday was entitled to the 3% fee. The appeal focused largely on the “producing cause” doctrine. This doctrine, which dates back to the Texas Supreme Court’s decision Goodwin v. Gunter, 185 S.W. 295, 296 (Tex. 1916), provides that a broker’s entitlement to a commission vests by procuring the sale. Here, Compass, not Halliday, found the buyer. But the producing cause doctrine is only a default rule, and parties can displace it through the terms of their agreement.

After observing that it is “not uncommon” for a broker to receive a commission by agreement after having its listing terminated, the Court of Appeals concluded the Termination Agreement overrode the producing cause doctrine. Because the termination agreement provided Halliday a 3% fee if Giambrone agreed to “sell or lease the Property” to “anyone” on or before December 31, 2021, Halliday did not need to procure the sale to receive the fee. Therefore, the Court of Appeals rendered a $167,250 judgment for Halliday and remanded for the trial court to determine Halliday’s attorneys’ fees on its breach-of-contract claim.

Thou Shalt Not Delay Trial for Appeal of a Temporary Injunction

Bienati v. Cloister Holdings, LLC

Dallas Court of Appeals, No. 05-22-00324-CV (February 10, 2023)

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

Ken Carroll

Appellate courts often say the most efficient way to deal with a trial court’s decision granting or denying a temporary injunction is just to promptly go to trial. The Dallas Court of Appeals recently put teeth into that admonition.

Bienati and others pursued an interlocutory appeal from a temporary injunction. Although it had set a trial date in the injunction order, the district court first continued the trial and then abated the case entirely pending resolution of the temporary injunction appeal. Appellant’s counsel explained that the case was abated “because the probable right to recovery issue could impact the merits of the entire case, [and so] the trial court ‘abated it until this Court [of Appeals] weighed in on the merits of the temporary injunction and whether there’s a probable right to recovery.’”

The appeals court did not take kindly to that. Invoking Rule 683’s directive that “the appeal of a temporary injunction shall constitute no cause for delay of the trial,” the Dallas Court dismissed the appeal without addressing the merits. “The proceedings in the trial court have been stayed in an effort to obtain an advisory opinion from this Court,” it explained. “Judicial economy dictates that we not reward this behavior.”

Clause Preserving “All Remedies” Does Not Conflict with Agreement to Arbitrate

Kirk v. Atkins

Dallas Court of Appeals, No. 05-21-00639-CV (February 1, 2023)

Justices Nowell, Smith, and Miskel (Opinion, linked here)

Ken Carroll

Atkins sued Kirk for breach of contract, fraudulent misrepresentation, and conversion in connection with her investment in his company. The parties’ “investor agreement” included a broad ADR provision that required “[a]ny disputes or controversies arising out of or relating to” that agreement to be resolved through AAA arbitration. That agreement also contained a fairly standard “Remedies” provision stating that, “The parties shall have all remedies for breach of this Agreement available to them provided by law or equity.” Kirk sought to compel arbitration of the parties’ dispute. In response, Atkins did not contest the validity or scope of the arbitration provision, but argued that the agreement’s express reservation of “all remedies” conflicted with the agreement to arbitrate and rendered that ADR provision ambiguous. The trial court agreed and denied the motion to compel arbitration. But the Dallas Court of Appeals reversed.

The appeals court held the ADR and “Remedies” provisions of the agreement could and should be reconciled. “The ADR paragraph, in which the arbitration clause is found, controls the process of resolving disputes between the parties,” the Court explained, “while the remedies paragraph describes the substantive relief that may flow from decisions on those controversies.” The two provisions therefore were not in conflict, the ADR provision was not ambiguous, and the motion to compel arbitration should have been granted.

Distribution Center Deemed “Principal Office” Under Venue Statute

Deere & Co. v. Bernal

Dallas Court of Appeals, No. 05-22-00916-CV (January 17, 2023)

Justices Pedersen (Opinion, linked here), Goldstein, and Smith

Brent M. Rubin

Bernal had a fatal accident in Comanche County, Texas while he was operating a tractor manufactured by Deere. Bernal’s next of kin sued Deere and Bernal’s employer in Dallas County. They pleaded venue was proper in Dallas County under section 15.002(a)(3) of the Civil Practice and Remedies Code, which provides for venue in a county where at least one defendant has a “principal office.” Plaintiffs alleged that Deere has a principal office in Dallas County. Deere moved to transfer venue, denying that it had a principal office in Dallas County and arguing the case should be transferred to Comanche County, where the accident occurred, or Lamar County, where Bernal’s employer purportedly had its principal office. The trial court denied the motion to transfer, and Deere brought an interlocutory appeal.

When a defendant challenges venue, the plaintiff has the burden of presenting a prima facie case that venue is proper in the county in which it brought the lawsuit. Any venue facts pleaded by the plaintiff and not specifically denied by the defendant are treated as true. As to venue facts the defendant has specifically denied, the plaintiff must submit affidavits and documents authenticated by its affidavits to support its pleaded venue facts. Deere specifically denied the plaintiffs’ pleaded venue facts, so the plaintiffs had the burden of establishing a prima facie case that Deere had a principal office in Dallas County.

The venue statute defines “principal office” as the “a principal office of the corporation … in this state in which the decision makers for the organization within this state conduct the daily affairs of the organization.” A principal office must have decision makers for the company who have at least substantially equal authority and responsibility to other company officials in Texas. The plaintiffs submitted evidence that Deere operates a 230,000-square-foot regional distribution center in Dallas County that distributes parts to dealers in several states. The manager of the distribution center supervises over fifty-five employees, including several employees who themselves have supervisory responsibilities, and the manager does not report to anyone above him in Texas. The court of appeals concluded that these facts established that the Dallas County distribution center was “a principal office” in Texas and therefore affirmed the trial court’s denial of the motion to transfer.

Court Lacked Jurisdiction to Enter Declaratory Judgment Because It Was Uncontested

In re Banigan

Dallas Court of Appeals, No. 05-22-01084-CV (January 12, 2023)

Chief Justice Burns and Justices Partida-Kipness and Smith (Opinion, linked here)

Kelli Hinson

After her husband filed for divorce in 2021, Cynthia Banigan moved to vacate a 2015 declaratory judgment establishing that the parties’ agreed partition of community property was valid and enforceable. The husband had filed the declaratory judgment action on the same day the partition agreement was signed. In her response, the wife confirmed the facts set forth in the petition and expressed her consent to entry of an order declaring the partition agreement to be valid. At the hearing, the husband testified as to the validity of the agreement, and the wife testified that she agreed with everything the husband had said.

The wife’s tune changed, of course, after the husband filed for divorce six years later. She argued that she did not voluntarily sign the partition agreement and that it was unconscionable. The trial court referred the matter to arbitration based on an arbitration provision in the partition agreement.

The wife then filed a mandamus proceeding arguing the declaratory judgment was void for lack of subject matter jurisdiction. The Dallas Court of Appeals agreed, holding there was no justiciable controversy between the parties when the trial court entered the declaratory judgment. The Uniform Declaratory Judgments Act allows a person interested under a written contract to have determined any question of construction or validity arising under the contract and to obtain a declaration of “rights, status, or other legal relations.” But a declaratory judgment is only appropriate if (1) a justiciable controversy exists as to the rights and status of the parties and (2) the controversy will be resolved by the declaration sought. Lack of a justiciable controversy results in a lack of subject matter jurisdiction. Because the wife confirmed the facts set forth in the petition, consented to the entry of the declaratory judgment, and “agreed with Husband’s position entirely” at the hearing, there was no live controversy between the parties. The trial court therefore lacked jurisdiction to enter the requested order, and so the Court of Appeals vacated the declaratory judgment as void.

Witness’s “Understandings” and Belief She Was “Deceived” Are Too Conclusory to Defeat Summary Judgment

Orange Cup Drive In LLC v. Mid-Continent Casualty Co.

Dallas Court of Appeals, No. 05-21-00448-CV (January 5, 2023)

Justices Nowell, Smith, and Rosenberg (opinion available here)

Kelli Hinson

Orange Cup Drive In lost summary judgment on its contractual coverage claims against Mid-Continent Casualty Company. Undeterred, Orange Cup tried to pursue extra-contractual claims, alleging that the insurance company took advantage of Orange Cup’s lack of expertise to misrepresent that Orange Cup had more insurance coverage than it did. The insurance company moved for summary judgment on these claims as well, and the motion was granted.

On appeal, Orange Cup argued the trial court erred in disregarding the affidavits of one of its principals, Shanta Barua, regarding her understandings and beliefs regarding the insurance coverage purchased by Orange Cup. Barua had conducted all of the negotiations with the insurance company, and she stated in her affidavit that she “understood” and “was under the impression” that the policy would cover third-party claims against Orange Cup. She further stated the insurance company “deceive[d] me into believing that I obtained third party liability coverage for [Orange Cup].”

The Dallas Court of Appeals affirmed the trial court’s decision to disregard these statements because, without any explanation of how Barua was allegedly misled or how she came to her alleged understanding about the policy, her statements were “conclusions unsupported by any factual detail” and were not admissible. In the absence of any other evidence to support Orange Cup’s fraud and other extra-contractual claims, summary judgment was appropriate.

Rule 165a(3) Motion to Reinstate: "Verified" Really Does Mean What It Says

In re Briseno

Dallas Court of Appeals, Nos. 05-22-01174-CV (December 14, 2022)

Before Justices Myers, Nowell (Opinion), and Goldstein 

Neil R. Burger

Rule 165a(3) states that a motion to reinstate after dismissal for want of prosecution must be “verified by the movant or his attorney.” The Dallas Court of Appeals applied that requirement literally (and some might say harshly) in In re Briseno. There, following a dismissal for want of prosecution, plaintiff’s counsel timely filed a motion to reinstate within 30 days explaining that he failed to appear for the dismissal hearing due to a “calendaring error.” And he attached a “Verification” swearing that the facts in the motion were “true and correct.” But, the “purported verification d[id] not reflect it was made in the presence of an authorized officer such as a notary public.” Nevertheless, the trial court granted the motion and reinstated the case.

The Court of Appeals ruled that the trial court’s order granting the motion to reinstate was void for lack of jurisdiction because it was not properly verified and did not extend the court’s plenary power beyond 30 days of the judgment. A verification must be sworn to before an authorized officer. In addition, the “verification” here did not meet the requirements of an unsworn declaration under CPRC § 132.001, such as containing the declarant’s birthdate and address. Accordingly, the Court granted mandamus relief and ordered the trial court to set aside the case’s reinstatement.

Morale of the story: Follow the rules, especially when dismissal is on the line.

Primer on Proving Up Attorneys’ Fees

Canadian Real Estate Holdings, LP v. Karen F. Newton Revocable Trust

Dallas Court of Appeals, No. 05-20-00747-CV (September 29, 2022)

Justices Pedersen, III (opinion available here), Goldstein, and Smith

Kelli Hinson

The Dallas Court of Appeals provided additional guidance on proving up attorneys’ fees in this declaratory judgment action. After the trial court dismissed the plaintiffs’ claim as moot, it awarded plaintiffs $45,529.13 in incurred attorneys’ fees plus $21,000.00 in conditional attorneys’ fees on appeal. The defendant, Canadian REH, appealed, arguing plaintiffs had failed to prove the amount of reasonable and necessary attorneys’ fees.

Canadian REH first argued that plaintiffs were required to provide “hard” or “disinterested” evidence of a reasonable hourly rate, such as affidavits of other attorneys, the State Bar of Texas Hourly Rate Fact Sheet, or fees awarded in similar cases. But the Court disagreed, noting that the affidavit of plaintiffs’ counsel, who testified he was “familiar with the hourly rates and costs customarily charged in and around” Collin County, Texas, was sufficiently detailed to establish reasonable hourly rates. And his experience was sufficient to back up his assertions of familiarity. The Court noted that neither Rohrmoos nor prior Dallas Court of Appeals cases have required additional “disinterested” evidence.

Canadian REH next argued that plaintiffs failed to establish the reasonable hours worked because the billing records were heavily redacted and contained block billing. Again, the Court disagreed. It noted that attorney invoices are “routinely redacted” when offered as evidence, in order to protect the attorney-client and work-product privileges, and that such redactions do not “obscure[e] meaningful review of attorney time” as Canadian REH claimed. The Court also disagreed that plaintiffs’ counsel’s use of “block billing” was a problem, noting that no entry included more than one day’s work for a timekeeper, and many entries included related tasks charged for fractions of one hour.

Canadian REH did get some traction with its complaint about conditional appellate fees, however. Plaintiffs’ counsel did not provide any explanation for his estimated appellate fees of $14,000 in the Court of Appeals and $7,000 in the Supreme Court. The Court reiterated prior holdings that an award of conditional appellate fees must be based on testimony about the services the attorney reasonably believes will be necessary to defend the appeal and a reasonable hourly rate for those services. Counsel’s conclusory opinion provided neither. The Court therefore vacated that portion of the award.

Vice Principals, the Fifth Amendment, and Negative Inferences

 Lurks v. Designer Draperies and Floors, Inc. 

 Dallas Court of Appeals, No. 05-21-00908-CV (July 27, 2022)

 Justices Schenck (Opinion, linked here), Osborne, and Smith 

 Ken Carroll 

While Lurks was attending to a disabled car in the right lane of the I-20 frontage road, Heitzman struck that car from behind, seriously injuring Lurks. Heitzman failed a field sobriety test at the scene, was arrested, and then tested well above the legal limit for blood alcohol. Lurks sued Designer Draperies and Floors (“DDF”), arguing that when Heitzman became intoxicated and decided to drive anyway, he was acting as a “vice principal” of DDF. “In other words, Lurks urge[d] that DDF step[ped] into the shoes of Heitzmann and is, therefore, directly liable for Lurks’s injuries.” 

The trial court, however, granted summary judgment to DDF, and the Court of Appeals affirmed. There was some evidence—and potential inferences from Heitzman’s invocation of his Fifth Amendment rights in his deposition—that Heitzman “consum[ed] alcoholic beverages at DDF’s workplace, that he was drinking with employees of DDF, and, perhaps, that someone encouraged him to drive.” But none of this was sufficient even to raise a fact question that Heitzman’s conduct was “referable to DDF’s business,” which the Court ruled was essential to a “vice principal” theory of liability against DDF. 

Along the way, the Court assumed, without deciding, that “a jury would be allowed to draw negative inferences regarding Heitzmann’s assertion of his Fifth Amendment privilege.” Because of the Court’s determination that Lurks had failed to adduce any evidence that Heitzman’s alleged misconduct was “referable to DDF’s business,” indulging this assumption didn’t matter. But it wades into murky waters. Heitzman was not a party to the lawsuit, even though his actions were a focus of the case. The question whether a witness’s invoking the Fifth will give rise to a negative inference against someone else is difficult, to say the least. The answer may differ depending on whether the issue arises in Texas or federal court, and whether the witness can be said to have been acting for the other party such that his or her invocation of privilege can be attributed to that party as his words would have been under Tex. R. Evid. 801(e)(2)(D). Compare, e.g., P.C. as next friend of C.C. v. E.C., 594 S.W.3d 459, 461-65 (Tex. App.—Fort Worth 2019, no pet.), with Wil-Roye Inv. Co. II v. Washington Mut. Bank, FA, 142 S.W.3d 393, 403-07 (Tex. App.—El Paso 2004, no pet.).

Fifth Court: Twenty-Plus Years of Precedent on Bankruptcy Trustee’s “Exclusive Standing” Implicitly Overruled by SCOTX

Moser v. Dillon Investments, LLC 

Dallas Court of Appeals, No. 05-21-00204-CV (August 2, 2022) 

Justices Myers (Opinion, linked here), Osborne, and Nowell 

 Brent M. Rubin 

Mason claimed that, while staying at a hotel on June 30, 2017, she was taking a shower and the bathtub floor shifted, causing her to fall and hit her head. On June 13, 2019, Mason sued the hotel in state court for negligence. But in April 2018, Mason had filed for Chapter 7 bankruptcy without listing her potential claim against the hotel on her schedule of assets. By the end of 2018, Mason had received a discharge and the bankruptcy case had terminated.

The hotel initially sought summary judgment, alleging Mason lacked standing to assert the claim and that she was judicially estopped from bringing the claim. The hotel argued that because Mason had not disclosed the claim in her bankruptcy schedules, the claim remained with the bankruptcy estate and was not returned to her upon the bankruptcy’s termination. Mason then filed a motion in bankruptcy court to reopen the bankruptcy to amend her schedules to add the negligence claim, which the bankruptcy court granted. 

In January 2021, Moser, the bankruptcy trustee, filed an amended petition in the state court case on behalf of Mason’s bankruptcy estate, alleging the same negligence claim against the hotel. The hotel moved for summary judgment, arguing the amended petition was filed after the two-year statute of limitations had run. The trial court granted the motion. 

Moser’s appeal centered on the relation-back doctrine. Section 16.068 of the Texas Civil Practice and Remedies Code provides that when a party initially brings a timely claim, “a subsequent amendment or supplement to the pleading that changes the facts or grounds of liability or defense is not subject to a plea of limitation unless the amendment or supplement is wholly based on a new, distinct, or different transaction or occurrence.” But the relation-back doctrine does not apply to an amended petition when the trial court lacked subject-matter jurisdiction over the original petition. 

Mason first brought her negligence claim within the two-year statute of limitations, and Moser’s amended petition on behalf of the bankruptcy estate alleged the same facts as Mason’s original petition. So, to determine whether the relation-back doctrine applied, the court of appeals considered whether the trial court had jurisdiction when Mason first sued. 

The court of appeals explained that for the trial court to lack jurisdiction based on a lack of standing, Mason had to lack “constitutional” standing. The Court noted that courts have, at times, blurred the distinction between standing and capacity—a critical if sometimes confusing distinction, because standing is jurisdictional, while capacity is not. In 1999, the Texas Supreme Court held in Douglas v. Delp that a bankruptcy trustee had “exclusive standing” to bring claims on behalf of the estate, quoting a 1994 Fifth Circuit decision that did not expressly address the question of constitutional standing. After an extensive analysis of later Fifth Circuit cases on a bankruptcy trustee’s authority to bring claims on behalf of the estate as well as later Texas Supreme Court decisions addressing the distinction between standing and capacity, the court of appeals concluded the Texas Supreme Court had implicitly overruled Douglas and the various intermediate appellate decisions—including those of the Fifth Court—that had followed it. 

 Accordingly, the Court said, Mason had standing to bring her claim in 2019; she merely lacked capacity to assert it. Therefore, the trial court had subject-matter jurisdiction in 2019, Moser’s amended petition in 2021, in his capacity as bankruptcy trustee, related back to Mason’s timely 2019 petition, and the trial court erred in granting summary judgment based on the statute of limitations.

Refresher: To Get Judgment on a Rule 11 Agreement, Plead Breach of Contract

Patel v. Gonzalez Hotels, LLC

Dallas Court of Appeals, No. 05-20-01020-CV (July 7, 2022)

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

Ken Carroll

A little reminder is welcome and helpful every now and then—although it’s often less fun for the parties who are being reminded.

Mahesh Patel sued Mehulkumar Patel, Chirag Patel, and Jayson Patel for breach of fiduciary duty, theft, and other claims relating to Gonzalez Hotels, LLC, of which they were all co-owners. After a mediation, the parties entered into a Rule 11 agreement in which Mehulkumar, Chirag, and Jayson “consented to the entry of an agreed judgment making them liable for half of Mahesh’s past and future contributions to the company.” Mahesh promptly filed a motion to enforce that agreement. But Mehulkumar, Chirag, and Jayson withdrew their consent before the trial court could act on that motion. Mahesh then filed a motion for summary judgment, “the stated goal of [which] was to obtain an agreed judgment to enforce the terms of the agreement.” The trial court granted the motion and entered judgment for Mahesh, but the Dallas Court of Appeals reversed.

“Written settlement agreements may be enforced as contracts even if one party withdraws consent before judgment is entered on the agreement,” the Court acknowledged. But, as the Texas Supreme Court explained in Ford Motor Co. v. Castillo, 279 S.W.3d 656, 663 (Tex. 2009) and elsewhere, “[w]hen consent is withdrawn [before the trial court renders judgment], the agreed judgment that was part of the settlement may not be entered. The party seeking enforcement of the settlement agreement must pursue a separate claim for breach of contract, which is subject to the normal rules of pleading and proof.” Here, Mahesh had not asserted a claim for breach of the agreement, and neither his motion to enforce nor his MSJ could substitute for that required pleading. The Court of Appeals therefore reversed and remanded to the trial court, where Mahesh no doubt will now plead breach and take a second swing at enforcing the agreement.

“Taking Responsibility” ≠ Negligence as a Matter of Law

Yedlapalli v. Jaldu

Dallas Court of Appeals, No. 05-20-00531-CV (June 28, 2022)

Justices Myers, Partida-Kipness (Opinion, linked here), and Carlyle

Brent M. Rubin

While Yedlapalli was stopped at a stop sign, Jaldu rear-ended her. Yedlapalli testified that, from her rear-view mirror, she saw Jaldu on her cell phone and that Jaldu never slowed down. Jaldu, in contrast, claimed she was at a complete stop behind Yedlapalli and reached down to get a piece of paper on the floor, which caused her foot to slip off the brake and her car to roll forward and tap Yedlapalli’s car.

Yedlapalli sued Jaldu, claiming not only damage to her car but also bodily injury. On cross-examination, Yedlapalli’s attorney asked Jaldu if she was “taking one hundred percent responsibility for the crash.” Jaldu agreed that her car hit Yedlapalli’s when her foot slipped from the brake. Jaldu also admitted she told Yedlapalli at the scene that it was her “mistake,” making her responsible for the damage to Yedlapalli’s car. But Jaldu refused to take responsibility for Yedlapalli’s purported injuries, claiming everyone was “completely fine” immediately after the accident. Jaldu also explained to the jury that it was “fishy” that Yedlapalli sued only after Yedlapalli did not pay her medical bills.

Yedlapalli moved for a directed verdict based on Jaldu’s purportedly “taking one hundred percent responsibility” for the accident. The trial court denied the request for directed verdict. The jury later answered “no” on the question whether Jaldu’s negligence caused the occurrence in question. So, the trial court entered a take-nothing judgment against Yedlapalli.

Yedlapalli appealed, challenging the denial of the motion for directed verdict and the factual sufficiency of the evidence supporting the jury’s finding on negligence. On the directed verdict, the court of appeals explained that acceptance of responsibility, standing alone, does not establish negligence as a matter of law. The court observed that a jury could have concluded a person of ordinary prudence, sitting at a complete stop a safe distance behind Yedlapalli, could have reached down to pick up a piece of paper, as Jaldu testified. On factual sufficiency, the court similarly explained that a rear-end collision, standing alone, does not mean a jury’s failure to find negligence is not supported by sufficient evidence. The jury could have credited Jaldu’s account and concluded that a reasonably prudent person would have acted in the same way. Or, the jury could have concluded Yedlapalli failed to meet her burden of proving negligence by a preponderance of the evidence. Therefore, the court of appeals affirmed.

Mandamus: If Not Now, When?

In re Holland

Dallas Court of Appeals, Nos. 05-22-00368-CV, -00369-CV, and -00378-CV (May 27, 2022)

Before Justices Myers, Nowell (Opinion), and Goldstein

Neil R. Burger

In three identical rulings, the Dallas Court of Appeals rejected three identical petitions for writs of mandamus as having been filed prematurely. The petitions complained that the trial court had not ruled on motions to compel discovery in three criminal cases concerning the same incarcerated individual. The convicted defendant “filed his motions on January 7, 2022, reminded the trial court that they were pending by letter dated March 7, 2022, and filed his petition[s] seeking mandamus relief on April 20, 2022.” The Court denied all three petitions, saying the Relator had not “shown he is entitled to mandamus relief after such a short period of time.”

Although it is not clear that a hearing on the motions was ever requested or set, we now have guidance that 103 days from filing a motion without getting a ruling is not long enough to warrant mandamus relief compelling the trial court to rule.

What's so Special for a Special Master?

In re Alford

Dallas Court of Appeals, No. 05-22-00240-CV (May 16, 2022)

Before Justices Osborne (Opinion), Partida-Kipness, and Smith

Neil R. Burger

In re Alford concerns the sua sponte appointment of a Special Master to determine a pending plea to the jurisdiction and rule on future discovery disputes. Concluding that the appointment was not supported by findings from the trial court that “good cause” existed or that the case was “exceptional” under Texas Rule of Civil Procedure 171, the Fifth Court of Appeals conditionally granted the petition for writ of mandamus.

Without a request or consent from the parties, the trial court appointed a Special Master under Rule 171. The Order required the parties to compensate the Special Master at $500 per hour, and granted him broad authority, including the ability to have ex parte communications with the court, parties, and witnesses. Although the Order stated that “good cause exists in this exceptional case” for a Special Master, it did not specify facts or circumstances in support.

The Court of Appeals determined that the appointment did not meet the requirements of Rule 171. There were no pending discovery disputes. In addition, the record did not demonstrate that the case was “unusually complicated” or required “special knowledge.” As such, without the consent of the parties, the appointment of the Special Master was a clear abuse of discretion, and mandamus relief was warranted.