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.

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.

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.

Splitting with Sister Courts, the Dallas Court of Appeals Holds Post-Judgment Interest Applies to Judgments Confirming Arbitration Awards

Bluestone Resources, Inc. v. First National Capital, LLC

Dallas Court of Appeals, No. 05-20-00776-CV (April 29, 2022)

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

Robert Fountain

First National secured an award in arbitration against Bluestone. When First National sought confirmation of the award, it requested post-judgment interest under the Finance Code. The trial court issued a final judgment confirming the award and ordering post-judgment interest on all sums awarded in the judgment. On appeal, Bluestone argued the trial court’s award of post-judgment interest was an impermissible modification of the arbitration award.

The Dallas Court of Appeals held chapter 304 of the Finance Code requires post-judgment interest on a judgment confirming an arbitration award. The Court cited section 304.003, which states that post-judgment interest accrues on any “money judgment of a court of this state.” Because the trial court’s judgment confirming First National’s arbitration award was a “money judgment of a court of this state,” First National was entitled to post-judgment interest.

The Court acknowledged that its decision departed from a line of cases holding that a court may award post-judgment interest only if the arbitrator awards it. The Court observed that those cases failed to differentiate between post-award interest (accruing from the date of the arbitration award) and post-judgment interest (accruing from the date of final judgment). Post-award interest ordered by a trial court but not the arbitrator amounts to an impermissible modification of an arbitration award. Post-judgment interest, on the other hand, accrues automatically under the Finance Code even if a court’s judgment does not specifically reference it. Awarding post-judgment interest in this context, therefore, is completely consistent with the general rule that courts may not modify arbitration awards, because the post-judgment interest applies to the judgment and not the award.

Given the split among the courts of appeals, and absent reconsideration en banc, the availability of post-judgment interest in arbitration confirmation proceedings appears bound for the Texas Supreme Court. Until then, Bluestone clarifies it’s available (and mandatory) in the Fifth District.

Don’t Sleep on Mandamus in Dallas

In re Ruff, No. 05-21-00886-CV (Tex. App.—Dallas February 15, 2022) Justices Molberg, Reichek (Opinion, linked here), and Garcia

In re Perez-Merino, No. 05-22-00082-CV (Tex. App.—Dallas February 14, 2022) Justices Schenck, Reichek (Opinion, linked here), and Carlyle

In re Tekin & Associates, LLC, No. 05-21-00219-CV (Tex. App.—Dallas February 9, 2022) Justices Osborne, Pedersen, III (Opinion, linked here), and Goldstein

Ken Carroll

There is no hard and fast deadline for filing a mandamus petition. But, although mandamus is not technically “an equitable remedy,” it is guided by principles of equity—including laches. And in the last week alone, the Dallas Court of Appeals has summarily denied three mandamus petitions for what it deemed to be excessive delays in filing. In each opinion the Court said, “[A]n unexplained delay of four months or more can constitute laches and result in denial of mandamus relief,” citing Rivercenter Associates v. Rivera, 858 S.W.2d 366 (Tex. 1993) (orig. proceeding), and decisions from the Dallas Court of Appeals and others to the same effect. With these three short, substantially identical opinions in a single week, the Court would seem to be signaling that, absent a good explanation, a delay of four months in filing for mandamus relief can (will?) trigger denial of a petition irrespective of the merits. Moral of the story: if you’re considering filing a mandamus in the Dallas Court of Appeals, get on with it.

Party Has No Standing to Appeal Sanctions Against Its Attorneys

On Deck Capital, Inc. v. CWO Designer Landscapes LLC

Dallas Court of Appeals, No. 05-20-00471-CV (February 10, 2022)

Justices Reichek (opinion available here), Nowell, and Carlyle

Kelli Hinson

When the day of trial arrived, the plaintiff had not timely responded to or supplemented its discovery responses. It became clear that, if trial proceeded, the court would exclude much of plaintiff’s anticipated evidence because of that failure to respond or supplement. When the trial court refused the plaintiff’s request for a continuance in order to supplement its discovery, the plaintiff filed a motion for non-suit. The parties disagreed about whether the non-suit should be with or without prejudice and whether discovery sanctions should be issued. Ultimately, the trial court dismissed the case without prejudice, but ordered discovery sanctions against the plaintiff’s law firm, “not the client.” The plaintiff appealed.

The Court of Appeals dismissed for lack of jurisdiction, holding that the plaintiff/appellant had no standing to appeal the sanctions order because the sanctions were imposed against the law firm, not the plaintiff. “An appellant is not harmed when sanctions are imposed solely against the appellant’s attorney” the Court explained, “and does not have standing to challenge an order imposing sanctions solely upon his attorney.”

Whose Card Is It Anyway?

American Express National Bank v. Sherwood

Dallas Court of Appeals, No. 05-20-00153-CV (January 27, 2022)

Justices Osborne (opinion available here), Reichek, and Carlyle

Kelli Hinson

American Express brought suit against Christopher Sherwood to collect amounts it alleged were due on two credit card accounts. The trial court entered a take-nothing judgment against American Express, finding the bank had failed to prove it owned the accounts at issue. American Express appealed.

The Dallas Court of Appeals carefully reviewed the evidence presented by American Express to determine whether it conclusively proved its right to recover on the two accounts. Although American Express put on testimony from a custodian of records that the outstanding account balances were owed on accounts opened by Sherwood and owned by American Express, many questions remained. For example, there was no evidence explaining why the account number on one of the cards changed from one ending in 62009 to one ending in 61001. Despite the bank witness’s testimony that he was “one hundred percent” confident the two accounts were for the same card, there was no documentation showing the reason for the change in account numbers. The other card had originated with Citibank. The bank witness testified that American Express “took over the Citibank Hilton portfolio,” but there was no documentation of any transfer or assignment of the account at issue. In addition, there was a balance due when the account was allegedly transferred from Citibank to American Express, and American Express did not have any documentation of the Citibank charges that resulted in that balance. Even though Sherwood testified at trial and did not deny those charges were his, the Court held “Sherwood’s silence does not provide affirmative evidence that was otherwise lacking.”

In the end, American Express could not connect all the dots proving its right to collect on either card, and the take-nothing judgment was affirmed.

Finality Bites

In re Woods Capital Enterprises, LLC

Dallas Court of Appeals, No. 05-21-00188-CV (November 8, 2021)

Justices Molberg, Reichek, and Smith (Opinion, linked here)

Ken Carroll

Beware Mother Hubbard, the source of unintended consequences—in this case, a loss of jurisdiction.

        

Woods Capital sued DXC Technology in Collin County, alleging DXC had breached a contract to sell it a parcel of real property. Woods Capital also filed a notice of lis pendens on that property. DXC moved to dismiss Woods Capital’s claims under the TCPA and to expunge the lis pendens. The trial court granted the motion to expunge and set a separate hearing on DXC’s TCPA motion and its request for fees relating to expunction of the lis pendens. During that hearing, counsel for DXC “asked the trial court to ‘table the motion for attorneys’ fees [on lis pendens] at this time because it may be double work that’s unnecessary based on how the Court handles the TCPA motion.’” The trial court granted DXC’s TCPA motion and awarded it fees under the TCPA. It did not expressly rule on the “tabled” lis pendens fee application. Thereafter, the court entered final judgment that included familiar Mother Hubbard language: “all other relief heretofore requested by any party, but not expressly granted by an Order of the Court, is DENIED. This Order finally disposes of all remaining claims and parties, and is appealable.”

The court of appeals reversed the trial court’s TCPA ruling, including the award of fees under that statute, and remanded. Woods Capital promptly nonsuited its claims and re-filed in Dallas County. DXC then attempted to assert a counterclaim for its lis pendens fees in the original Collin County case. Woods moved to dismiss for lack of jurisdiction, but the trial court denied that motion. Woods Capital sought mandamus relief, which the Dallas Court of Appeals granted.

DXC argued that Woods Capital’s nonsuit had no effect on its lis pendens fees claim. But the Court of Appeals concluded that claim had been dismissed by the recitation in the final judgment that “all other relief heretofore requested by any party, but not expressly granted by an Order of the Court, is DENIED,” and was therefore no longer pending after the appeal. “Had DXC believed the trial court erred by denying its lis pendens fee application,” the appeals court said, “it needed to file a cross appeal in the TCPA case.” It did not. So, when the appeals court remanded, the only claims left in the trial court were those asserted by Woods Capital. And when Woods nonsuited, that divested the trial court of jurisdiction.

The moral: Be careful with Mother Hubbard. She may not behave as you expect.

Abandoning Prior Acceleration Avoids Statute of Limitations on Foreclosure

Florey v. U.S. Bank, N.A.

Dallas Court of Appeals, No. 05-20-00306-CV (June 22, 2021)

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

Ken Carroll

        Where a borrower defaults on a loan secured by real estate and the noteholder accelerates that loan, foreclosure must occur within four years after acceleration—unless the noteholder abandons that acceleration, which resets the limitations clock.

        The Floreys defaulted on their home equity loan. Nationstar Mortgage, the holder of the note, sent the Floreys a notice of default and then a notice accelerating the debt, both in 2013. But for many months after those notices, Nationstar said nothing further about acceleration and continued to send the Floreys monthly mortgage statements seeking only the current and past due amounts rather than the full amount of the loan, and even offering them the option to pay off the loan with no “prepayment penalty.” Those monthly notices made no reference to the acceleration. In August 2017, Nationstar filed an application for expedited foreclosure under Tex. R. Civ. P. 736, expressly relying on the 2013 notice of default, but not the notice of acceleration. But the trial court denied that application, and Nationstar then sold the note to U.S. Bank, which in 2019 sent the Floreys a new notice of default and acceleration and again sought to pursue expedited foreclosure under Tex. R. Civ. P. 736. The Floreys opposed that request and sought to quiet title, arguing that “U.S.Bank’s attempt to foreclose the lien was not timely brought within the four-year limitations period” and “[b]ecause the limitations period had expired, … the lien was no longer valid.” The trial court, however, granted summary judgment to U.S. Bank and the Court of Appeals affirmed. 

        “The pivotal issue,” the appeals court said, was “whether the 2013 acceleration of the Floreys’ note [by Nationstar] was abandoned.” If it was, then “the contract [was] restored to its original condition, including restoring the loan’s original maturity date and resetting the statute of limitations.” “Once a debt has been accelerated, the note holder may unilaterally waive or abandon the acceleration so long as the borrower neither objects to the abandonment nor detrimentally relied on the acceleration. … Abandonment can occur either expressly through a clear repudiation of the right, or impliedly through conduct inconsistent with a claim to the right.” Where the facts are undisputed, whether acceleration has been abandoned is a question of law. Here, Nationstar’s repeated monthly notices, sent after its notice of acceleration, that sought only monthly payments and made no mention of acceleration—and in fact, were inconsistent with acceleration—were sufficient to establish Nationstar’s abandonment of the 2013 acceleration. The foreclosure limitations clock, therefore, was re-set and didn’t start ticking again until U.S. Bank served its own notices of default and acceleration in 2019. U.S. Bank’s foreclosure, therefore, was not time-barred.

COURT REINS IN RUNAWAY INJUNCTION

Retail Services WIS Corp. d/b/a Product Connections v. Crossmark, Inc.

Dallas Court of Appeals, No. 05-20-00937-CV (May 4, 2021)

Justices Schenck, Reichek, and Carlyle (Opinion linked here)

Lyndon Bittle

The Dallas Court of Appeals vacated for lack of specificity several provisions of a temporary injunction against a company’s former employees and its competitor (their new employer). The court affirmed other provisions of the order, and remanded to the trial court.

Crossmark and Product Connections compete for business providing “in-store consumer experience” services to large retailers. In a familiar scenario, Crossmark sued Product Connections and three former Crossmark employees for misappropriating trade secrets and improperly soliciting Crossmark employees and clients. Following an evidentiary hearing, the trial court entered a temporary injunction with nineteen separate provisions (in twelve paragraphs) prohibiting certain conduct and a “Device Turnover Order” (DTO) requiring defendants to produce all laptops and other digital storage devices to Crossmark’s counsel for forensic inspection. Defendants filed an accelerated interlocutory appeal.

The appeals court first rejected appellants’ arguments that Crossmark had not established a probable right to relief or irreparable injury. The court found Crossmark adduced sufficient evidence “to raise a bona fide issue as to its right to ultimate relief” and noted the misuse of confidential information “has been described as ‘the epitome of irreparable injury.’”

Turning to the specific relief granted by the order, the court applied the requirements of Texas Rule of Civil Procedure 683 that a temporary injunction “state the reasons for its issuance, be specific in terms, and describe in reasonable detail … the act or acts sought to be restrained.” The court concluded the order adequately explained the reasons underlying the prohibitive provisions, but did not justify the mandatory DTO.

The court then reviewed each of the prohibitions and found that eleven of the nineteen provisions failed to satisfy Rule 683’s specificity requirements, primarily because some material terms were not defined. For example, while the order adequately defined Crossmark’s “Confidential Information and Trade Secrets” for some provisions, other provisions enjoined conduct using terms that were not clearly defined, such as “confidential,” “proprietary,” and “business information.” Nor did the order adequately identify “Covered Clients and Customers.”

The DTO likewise failed the specificity test by failing to define “Crossmark information” or “other digital storage devices,” which gave another ground for reversing that part of the order. The court rejected, however, appellants’ argument that ordering turnover of digital devices without following the procedures governing pretrial discovery of “electronic or magnetic data” is always improper because it circumvents the protections provided by Rules 192-196 and In re Weekley Homes, 295 S.W.3d 311 (Tex. 2005). According to the court, neither the discovery rules nor Weekley precludes an injunction mandating turnover of electronic devices—provided the order complies with Rule 683.

THE CONTRACT MEANS WHAT THE CONTRACT SAYS

Anubis Pictures, LLC v. Selig

Dallas Court of Appeals, No. 05-19-00817-CV (March 3, 2021)

Justices Pedersen, III and Reichek (Opinion, available here)*

Kelli Hinson

This case arises out of Anubis Pictures’ attempted financing of a film based on a screenplay written by the late Stanley Kubrick. When the deal fell through, Anubis sued its would-be business partner for, among other things, violation of an NDA and letter of intent. The trial court granted summary judgment against Anubis on all claims, and Anubis appealed.

Anubis argued the trial court should not have granted summary judgment on its NDA claims because fact issues existed regarding whether the defendant had misused confidential information provided to her. The Court of Appeals disagreed. The NDA required that, for written material to be considered confidential, it must be marked confidential on its face. None of the emails or other materials at issue had been explicitly marked confidential when sent to the defendant, and a later email stating “Please do not forward the script” did not retroactively protect the script as confidential.

Anubis also argued that, even if the documents were not marked confidential, the parties treated them as confidential, as evidenced by the defendant’s request for permission to share the script and information about the project with some of her contacts. The Court did not reach the merits of that argument because it noted that, as to the documents the defendant asked for permission to disclose, she had permission to disclose them.

Anubis also complained the trial court erred in granting summary judgment on its claim for breach of a letter of intent, but the Court rejected that argument as well. It was undisputed that the defendant never signed the letter of intent, but Anubis argued the parties had an oral agreement to proceed in accordance with the terms, regardless of whether it was signed. The Court looked back at the NDA, which was the only agreement signed by both parties. It provided that neither party was “bound to proceed with any transaction between them unless and until both parties signed a formal, written agreement setting forth the terms of such transaction.” This “No Obligation to Complete Transaction” provision prevented the formation of an oral contract on the letter of intent as a matter of law. 

*Justice Bill Whitehill participated in the oral argument and submission of this case, but not the issuance of the opinion, which occurred after the expiration of his term on December 31, 2020.

DOMINANT JURISDICTION: TRANSFER AFFECTS WHICH CASE IS “FIRST FILED”

In re Equinor Texas Onshore Properties f/k/a Statoil Texas Onshore Properties LLC

Dallas Court of Appeals, No. 05-20-00578-CV (October 7, 2020)

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

Ken Carroll

Against a convoluted factual and procedural background, the Dallas Court of Appeals announced a comparatively simple rule: When determining which of two interrelated cases is “first filed” for purposes of “dominant jurisdiction,” if one of those cases has been transferred to a different court and county, it is the date on which that case arrived in the transferee court that governs, not the date when that case was originally filed in the transferor court.

A bank, as trustee, held certain oil and gas interests in LaSalle County, Texas—an enclave of about 7,000 souls roughly halfway between San Antonio and Laredo. Equinor and Repsol together acquired lease rights to some of those interests. When a dispute arose about royalty payments, the bank filed two separate lawsuits in LaSalle County, one against Equinor and one against Repsol—even though it would later contend they were jointly and severally liable for the alleged shortfall. The case against Repsol was assigned a lower docket number than the Equinor lawsuit, even though the file-mark on the petition indicated it was filed three days later. Equinor accepted venue in LaSalle County. But Repsol challenged venue, and the case against it was transferred by agreement to Dallas County. After the transfer, the bank added Equinor to the Dallas case that had originally been filed only against Repsol. Equinor objected, moved to transfer venue, and filed a plea in abatement, asserting dominant jurisdiction lay with the LaSalle County district court in the case in which the bank had sued Equinor originally.

With respect to interrelated lawsuits, the “court in which suit is first filed acquires dominant jurisdiction to the exclusion of other coordinate courts.” In re JB Hunt Transp., Inc., 492 S.W.3d 287, 294 (Tex. 2016) (orig. proceeding). The parties did not dispute that the two suits here were interrelated. But there was considerable disagreement about which was “first filed,” given the confusion arising from the discrepancy between the file stamps and the sequence of case numbers assigned to the original Equinor and Repsol lawsuits in LaSalle County. The Dallas Court of Appeals, however, swept that confusion aside, holding that the “LaSalle County court acquired jurisdiction over the Equinor Lawsuit long before the Dallas County court acquired jurisdiction over the Repsol Lawsuit” to which Equinor was later added, and that the date and timing of the transferred Repsol lawsuit did “not relate back” to its original filing in LaSalle County. Dominant jurisdiction, therefore, lay with the LaSalle County district court in the original Equinor lawsuit. So Equinor was entitled to have the Dallas County case against it abated.

NO CONTINUANCE TO AVOID BENCH TRIAL BY VIDEO

In re John Sakyi

Dallas Court of Appeals, No. 05-20-00574-CV (August 20, 2020)

Chief Justice Burns and Justices Pedersen, III and Reichek (Opinion available here)

Kelli Hinson

The fact that you don’t want to conduct your bench trial via videoconference in order to maintain social distancing is not a valid basis for continuance. In this mandamus proceeding arising out of a divorce case, the Dallas Court of Appeals found that the trial court abused its discretion in denying the husband’s motion for continuance based on his need to conduct additional discovery into whether his purported wife was still married to another man at the time of their wedding. But the Court rejected the husband’s other basis for requesting a continuance—that he did not consent to participate in the bench trial via videoconference. He also expressed concern about his counsel’s inability to talk to him without violating social distancing recommendations.

The Court held the trial court did not abuse its discretion by overruling the husband’s objection to trial via videoconference. In its emergency orders, the Supreme Court of Texas expressly granted trial courts the discretion, “subject only to constitutional limitations” and “without a participant’s consent,” to require that all participants in hearings, depositions, “or other proceeding[s] of any kind” participate remotely, “such as by teleconferencing, videoconferencing, or other means.” Although the emergency orders do not specify bench trials, the Court held they would fall under the category of “other proceeding[s] of any kind.” The husband did not claim a bench trial by videoconference would violate any of his constitutional rights, so the trial court did not abuse its discretion in requiring him to participate in this manner.

JURY SELECTION IN FATAL-ACCIDENT CASE SPARKS BATSON BATTLE IN APPELLATE COURT

United Rentals North America, Inc. v. Evans

Dallas Court of Appeals, No. 05-18-00665-CV (August 18, 2020)

Justices Pederson III, Reichek (Opinion linked here), and Carlyle Dissents from Denial of En Banc Reconsideration by Justices Evans (Dissent linked here) and Schenck (Dissent linked here)

Lyndon Bittle

A Dallas Court of Appeals panel unanimously affirmed a judgment for plaintiffs in a wrongful death case, overruling the defendant’s objections to the trial court’s Batson rulings in jury selection. The case apparently sparked internal controversy in the 12-member Court. On the same day the panel opinion issued, two Justices who were not on the panel filed dissents to the denial of en banc reconsideration. The competing opinions provide roadmaps for applying the Batson guidelines to civil lawsuits.

A big rig hauling an oversized “boom lift” for United Rentals struck a bridge in a highway construction zone, which caused a bridge beam to collapse on a pickup truck, killing the driver. The decedent’s mother and son brought a wrongful-death and survival suit against several defendants. Before judgment, all defendants except United Rentals settled or were dismissed. During voir dire, the court granted two of Plaintiffs’ Batson challenges to United Rentals’ use of preemptory strikes, and denied United Rentals’ competing Batson challenges. The jury found for Plaintiffs and the court entered judgment awarding $2.79 million in damages. United Rentals appealed.

Before addressing the Batson issues, the appeals court overruled United Rentals’ substantive issues, including its arguments that the negligence verdict was error because United Rentals, “as a shipper, had no duty to see that the carrier … shipped its cargo safely,” and there was insufficient evidence to support the damages awarded for the decedent’s “conscious pain and mental anguish” in the few seconds between the collision and his death. Those holdings consume over 35 pages of the panel’s opinion, and Justice Schenck’s dissent to the denial of en banc review urges the Texas Supreme Court “to establish the proper review standard to govern pain and suffering awards.” These issues could be the subject of a separate blog post.

Turning to the Batson dispute, the Court summarized United Rentals’ argument: The “trial court erred in granting appellees’ challenges to two of United Rentals’ peremptory strikes of black women while denying United Rentals’ challenges to appellees’ use of strikes on men, four of whom were white.”

The Batson rules were originally promulgated to prevent criminal prosecutors from using peremptory strikes to exclude jurors solely because they were of the same race as the defendant. See Batson v. Kentucky, 476 U.S. 79, 89 (1986). Batson has since been extended to civil trials and to other “suspect” grounds for striking potential jurors. See Edmonson v. Leesville Concrete Co., 500 U.S. 614, 618-28 (1991); Goode v. Shoukfeh, 943 S.W.2d 441, 444-45 (Tex. 1997).

Applying Batson involves a three-step process similar to the test for employment discrimination. First, the party objecting to a preemptory strike must establish a prima facie case it “was used to exclude a venire member on the basis of race or gender.” Second, the proponent of the strike must articulate “a race- or gender-neutral reason for the strike.” Finally, the party challenging the strike has an opportunity to rebut the explanation and show it is a pretext for unlawful discrimination. The standard for evaluating a strike under Batson is “whether race [or gender] was a motivating factor in counsel’s exercise of the strike.” The trial court’s rulings, often based on credibility assessments, are subject to review for abuse of discretion.

Here, Plaintiffs objected to United Rentals’ use of all five of its peremptory strikes on black women, and United Rentals objected to Plaintiffs’ striking four white men and one Hispanic man. The judge granted two of Plaintiffs’ Batson challenges, and denied all of United Rentals’ challenges. After reviewing the voir dire colloquies and arguments of counsel, the Court of Appeals held the judge did not abuse her discretion in finding that race was a motivating factor for United Rentals striking one of the two jurors. Central to the Court’s holding was that the record did not support counsel’s stated reason for striking the prospective juror. The second juror placed on the jury over United Rentals’ objection did not join in the jury’s adverse verdict, so the appeals court held any error in allowing her to serve was harmless.

As for the trial court’s denial of United Rentals’ challenge to Plaintiffs’ strikes, the appeals court rejected the argument that Plaintiffs’ counsel admitted unlawful discrimination by telling the judge, “We know from our focus groups that the African-American female is the most favorable juror for this case for whatever reason.” The court concluded counsel made this statement in the context of “explaining why they believed United Rentals’ strike of [a] particular black panelist was pretextual,” and did not evidence Plaintiffs’ “intent to seat a jury without whites or males.” And although the Court acknowledged the gender and racial “disparities suggest something more than happenstance,” they did not alone “establish that appellees’ explanations of the strikes were pretextual.” The Court then conducted a “comparative analysis” of the record relevant to each of Plaintiffs’ strikes and concluded the judge did not abuse her discretion in denying the challenges. The Court explained, “Disparate treatment is not shown where a party strikes a juror because of multiple characteristics and does not strike jurors of other races or genders who share one or more of those characteristics.”

The online docket does not reveal a request for en banc review or a vote on such a request. Nevertheless, two dissents from a denial of en banc consideration, released at the same time as the panel opinion, indicate a vote did occur. See Tex. R. App. P. 41.2(c). Justice Evans, joined by Justices Whitehill and Schenck, submitted a lengthy opinion supporting reversal and remand for a new trial on the grounds that “a race- and gender-based goal—the substantial motivation—in selecting the jury was plainly and openly stated, and 100% of the peremptory challenges were perfectly consistent with that goal.” The dissent characterized the statement of Plaintiffs’ counsel that “the African-American female is the most favorable juror for this case” as rare “direct evidence of discriminatory intent,” which, combined with evidence of the plan’s execution, “may well stand for itself and obviate any need of further analysis.” Nevertheless, the dissent reviewed in detail the record relevant to each of the jurors excluded by Plaintiffs. In addition to Plaintiffs’ stated “discriminatory goal,” the dissent found “misstatements of the record” and “pretextual reasons about which [Plaintiffs] did not ask questions.” According to the dissent, “the only possible conclusion” is that Plaintiffs “intended to strike non-black men from the jury in violation of Batson” and its progeny.

DALLAS COURT OF APPEALS CONTINUES TO REIN IN THE TCPA’S APPLICABILITY TO BUSINESS DISPUTES

Palladium Metal Recycling, LLC v. 5G Metals, Inc.

Dallas Court of Appeals, No. 05-19-00482-CV (July 28, 2020)

Justices Bridges, Molberg (Opinion, linked here), and Partida-Kipness

Woods Capital Enterprises, LLC v. DXC Technology Services, LLC

Dallas Court of Appeals, No. 05-19-00380-CV (July 29, 2020)

Justices Pedersen, III, Reichek (Opinion, linked here), and Carlyle (Concurrence, linked here)

Ken Carroll

In a pair of opinions this week, the Dallas Court of Appeals continued its trend of holding the TCPA inapplicable to many private business disputes. Palladium arose from a disagreement regarding a joint venture to acquire and re-sell scrap metals. Woods Capital grew out of a failed agreement for the sale of a large tract of commercial real estate. In each case, the Court of Appeals held the TCPA’s free-speech and right-of-association protections did not apply to communications and conduct focused on the business dealings of the parties involved. In each case, the Court referenced the stated purpose of the TCPA to protect “public participation” and drew upon the Supreme Court’s decision last year in Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC, 591 S.W.3d 127 (Tex. 2019). A sampling of the Court’s observations in the two cases:

• “The TCPA’s purpose of curbing strategic lawsuits against public participation is not furthered by a construction finding a right of association based simply on communications between parties with a shared interest in a private business transaction.”

• Rejecting a TCPA free-speech attack, the Court held the allegations targeted by the motion “lack any communications regarding matters of public concern as opposed to private pecuniary interests and thus do not implicate the TCPA’s protection of Palladium’s exercise of the right of free speech.”

• Acknowledging that the TCPA defines “matters of public concern”—the linchpin of TCPA free-speech protection—to include “issues related to health or safety; environmental, economic, or community well-being; the government; a public official or public figure; or a good, product, or service in the marketplace,” the Court cautioned that “not every communication related to one of the broad categories set out in [the statute] always regards a matter of public concern.” Because the record was “devoid of allegations or evidence that the dispute had any relevance beyond the pecuniary interests of the private parties involved,” the Court refused to find TCPA free-speech protections applicable.

• “This Court has consistently held that to constitute an exercise of the right of association under the TCPA, the nature of the communication between individuals who join together must involve public or citizen participation.”

Beyond its pronouncements on the applicability of the TCPA to business disputes, each decision also included an additional holding to which litigants should be alert. In Palladium, the Court held the TCPA movant had waived its objections to the non-movants’ evidence because it had not obtained a ruling on those objections and had not objected to the trial court’s failure to rule.

In Woods Capital, the Court ruled that the movant had “forfeited its [TCPA] motion” by failing to schedule a hearing within the period prescribed by statute. The TCPA allows the parties to delay a hearing by agreement for up to 90 days after service of the motion. A hearing may be delayed up to 120 days only if the court, upon a showing of good cause, “allows” limited discovery related to the TCPA motion. Reaffirming its ruling earlier this summer in Walker v. Pegasus Eventing, LLC, the Court held that the parties’ agreement to conduct discovery and the court’s acquiescence does not equate to “allowance” by the court that triggers the extra 30 days. Consequently, failure to schedule a hearing within the 90-day period, without court “allowance” of discovery, resulted in forfeiture of the motion.

EYE OF THE BEHOLDER: DOMINANT JURISDICTION AND PRIMARY VS. ANCILLARY RELIEF

In re Ahmed Zidan

Dallas Court of Appeals, No. 05-20-00595-CV (July 15, 2020)

Justices Bridges (Dissent, linked here), Osborne (Opinion, linked here), and Reichek

Ken Carroll

Ahmed Zidan and his uncle Alex had a falling out about their joint business venture. Ahmed sued Alex in Collin County. A couple months later, Alex sued Ahmed in Harris County. The Collin County court directed the parties to brief whether that court or the Harris County court had dominant jurisdiction. Ahmed argued Collin County acquired dominant jurisdiction because that case was first filed and venue was proper there. Alex responded that first-filed rules didn’t apply because venue was mandatory in Harris County and Ahmed lacked a bona fide intent to prosecute the Collin County suit. The Collin County trial court sided with Alex and abated and administratively closed that case. On mandamus, however, a divided panel of the Dallas Court of Appeals agreed with Ahmed that dominant jurisdiction lay with the Collin County Court.

The appeals court explained, “When two inherently interrelated suits are pending in two counties, the court in which suit is first filed generally acquires dominant jurisdiction to the exclusion of other courts if venue is proper there.” The Court had no difficulty concluding the two lawsuits were logically and “inherently interrelated,” because “the same facts will be dispositive in both suits.” It also brushed aside Alex’s argument that the “first-filed” rule should not apply because Ahmed had engaged in “inequitable conduct” and had no “bona fide intention to prosecute the [Collin County] suit.” Ahmed had excercised ample diligence in pursuing his lawsuit, the Court held, and brief delays in seeking citation and effecting service did not show otherwise.

The major point of contention was venue. In his Collin County action, Ahmed had sought injunctive relief against Alex, a Harris County resident, as well as the appointment of a receiver for the businesses, one of which allegedly was domiciled in Harris County, albeit ostensibly to protect real estate held by the company in Collin County. Section 65.023 of the Civil Practice and Remedies Code—regarding injunctions—and sections 11.401 and 11.402(b) of the Business Organizations Code—regarding receiverships—would seem to make venue in Harris County mandatory for such claims. But, the panel majority said, those mandatory venue provisions do not apply unless the request for injunctive or receivership relief is the “primary” focus of the lawsuit. Here, it reasoned, because Ahmed’s live pleadings sought a receiver only with respect to real property in Collin County and that and his request for injunctive relief were “simply to maintain the status quo pending resolution of the lawsuit,” those requests were “ancillary” and not the “primary” relief sought. Venue therefore was not mandatory in Harris County.

The dissent took a different view of Ahmed’s pleadings and requests for relief. It argued that Ahmed’s live pleading expressly sought permanent as well as temporary injunctive relief, and that the request for a receivership, even if focused on Collin County real property, extended to the Harris County entity that apparently owned that property. Neither request for relief, therefore, could be regarded as “ancillary,” the dissent contended, and therefore the statutes mandating venue in Harris County applied, supporting the trial court’s decision and rendering mandamus relief inappropriate.

DENTIST IS QUALIFIED TO TESTIFY REGARDING CAUSE OF CARDIAC INFECTION

Bell v. Markham
Dallas Court of Appeals, No. 05-19-00041-CV (January 30, 2020)
Justices Molberg, Reichek, and Evans (Opinion, available here)

Kelli Hinson

In this dental malpractice case, the Dallas Court of Appeals confirmed a dentist may be qualified to offer expert opinions regarding the cause of a cardiac infection. To fulfill their obligations to serve Defendants with a qualifying expert report under Chapter 74, Plaintiffs proffered the report of Robbie Henwood, DDS. Defendants objected to the report, arguing that, as a “general dentist,” Henwood was not qualified to render an expert opinion that a bacterial infection in a person’s mouth caused a cardiac infection.

The Dallas Court disagreed, noting that Chapter 74 provides that “a dentist or physician” may provide the causation testimony in a professional liability case against a dentist, if the witness is qualified to do so under the rules of evidence. Here, Henwood’s report addressed his “knowledge, skill, experience, training or education” regarding the specific issue before the court—how an infection in the mouth developed into endocarditis. The Court also focused on the fact that, in addition to being a dentist, Henwood obtained additional training and expertise in doctoral pharmacology studies and teaches premedical students cardiovascular physiology. Additionally, Henwood testified that he had provided patients with treatment plans to prevent the spread of streptococcus mitis, the bacterium at issue in this case. In his report, Henwood provided a detailed explanation of how streptococcus mitis can spread from an infected tooth to the heart and cause endocarditis. Accordingly, the Court rejected Defendants’ argument that Henwood needed a medical degree or other specialization in treating infections to qualify as an expert witness on causation.

RECEIVER ENTITLED TO “DERIVED JUDICIAL IMMUNITY”

Manning v. Jones
Dallas Court of Appeals, No. 05-18-01140-CV (December 4, 2019)
Justices Pedersen III (Opinion, linked here), Reichek, and Carlyle

Ken Carroll

Jones was appointed as Receiver in a divorce case, to take charge of, maintain, and sell a building that was part of the marital estate. When Jones ended up selling the building for far less than had been hoped, Manning, one of the divorcing parties, sued Jones for her supposed failures in managing and selling the property. The trial court, however, granted summary judgment to Jones based on “derived judicial immunity,” and the court of appeals affirmed.

Judges enjoy absolute immunity for “all judicial acts unless such acts fall clearly outside the judge’s subject-matter jurisdiction.” When a judge delegates his or her authority or appoints someone to perform services for the court, that person may have “derived judicial immunity” for performing those delegated responsibilities. A “person entitled to derived judicial immunity receives the same absolute immunity from liability as a judge acting in his or her official judicial capacity.”

Texas uses a “functional approach” to decide whether a party is entitled to derived judicial immunity. One may claim such immunity if he or she carried out duties “intimately associated with the judicial process” and “exercised discretionary judgment comparable to a judge, as opposed to ministerial or administrative tasks.” Such immunity has been extended to trustees and receivers, among others.

The acts and omissions of which Manning complained were clearly the product of discretionary judgments by Jones on matters delegated to her by the court. So, just as the NFL’s all-time leading receiver Jerry Rice (above) seemed immune from defenders seeking to hold him in check, so also was Jones immune from Manning’s attempts to hold her accountable for her actions as Receiver here.

NO BACK-UP = NO BILL OF REVIEW

Mitchell v. City of Dallas
Dallas Court of Appeals, No. 05-18-01208-CV (November 20, 2019)
Chief Justice Burns and Justices Molberg and Reichek (Opinion, linked here)

Ken Carroll

A defendant can attack a default judgment through a bill of review after it’s too late to appeal or move for a new trial. Ordinarily, to secure bill-of-review relief, a party must prove (i) he has a meritorious defense (ii) that he was prevented from making because of fraud, accident, or a wrongful act by the opposing party (iii) through no fault or negligence of his own. If the defendant wasn’t served with process, however, that by itself entitles him to relief. But there’s a catch: An officer’s return of service is prima facie proof of service “that cannot be rebutted by the uncorroborated proof of the moving party.”

Here, a private “certified process server” filed a return of service stating he personally served Mitchell at a specified time and place. Mitchell didn’t answer and was defaulted. At trial of the bill of review, Mitchell testified he had not been served. But no other competent evidence corroborated that testimony. Mitchell offered affidavits from two other witnesses that might have cast doubt on service as reported, but those affidavits were properly excluded as hearsay. Consequently, the trial court denied the bill of review. The Dallas Court of Appeals affirmed, because “the testimony of a bill of review plaintiff alone, without corroborating evidence, is insufficient to overcome the presumption [from the return of service] that the [bill-of-review] plaintiff was served.”

THE “WISPINESS”—OR NOT—OF THE TCPA

Erdner v. Highland Park Emergency Center, LLC
Dallas Court of Appeals, No. 05-18-00654-CV (May 22, 2019)
Justices Whitehill (Concurrence/Dissent, linked here), Molberg (Opinion, linked here), and Reichek

Ken Carroll

Highland Park Emergency Center, LLC (“HPEC”) sued one of its doctor-members for breach of fiduciary duty. HPEC claimed Erdner usurped an opportunity to expand its freestanding-emergency-room (“FSER”) business to new locations. Contending HPEC’s claim was based on or related to his exercise of his rights of association and free speech—specifically, his communications with other investors about forming a new company to pursue FSER locations—Erdner moved to dismiss under the Texas Citizens Participation Act. The trial court denied the motion and, in a split decision, the Dallas Court of Appeals affirmed, holding the TCPA does not apply to the communications at issue.

The panel majority explained that prior Dallas Court decisions had held that, for a communication to qualify as an exercise of the right of association protected by the TCPA, that communication must be “between individuals who join together” and “must involve public or citizen’s participation.” And a TCPA-protected exercise of free speech requires a “communication made in connection with a matter of public concern.” The majority then held the communications in issue satisfied neither test. They were “private communications relating to establishing a business,” not “public [communications] or citizens’ participation,” and therefore not protected exercises of the right of association. The majority acknowledged that, under Texas Supreme Court precedent, a communication need have no more than a “tangential relationship” to a matter of public concern to be protected as free speech under the TCPA. But, the majority said, “A private communication made in connection with a business dispute is not a matter of public concern under the TCPA.” Relying heavily on a federal district court opinion from the Southern District of Texas, the majority held that “a communication cannot have a ‘tangential relationship’ to a matter of public concern that does not yet exist”—in this case, the FSER facilities that might, or might not, be built in the future.

Writing separately, Justice Whitehill concurred in—but disagreed with—the holding on the right of association, but dissented on free speech. Whitehill acknowledged that prior decisions from the Dallas Court had imposed a “public or citizen’s participation” requirement for protection of the right of association under the TCPA, and that this panel was bound to follow them. But, he said, “those controlling precedents were wrongly decided,” because the statute itself says nothing about such an additional requirement. Dissenting on the free-speech issue, Justice Whitehill noted that a “tangential” relationship to a matter of public concern, all the Supreme Court has found to be required under the TCPA, “is a very broad” standard, one that “conjures wispiness.” He would have found the communications at issue, regarding potential FSERs, to be sufficiently “tangentially related to” a matter of public concern—health and community well-being—to be covered by the TCPA.