“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
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.

SCOTx: No “Informal” Fiduciary Duty from Corporate Director to Shareholder, Regardless of Pre-Existing Relationship of Trust and Confidence

In the Matter of the Estate of Richard C. Poe

Supreme Court of Texas, No. 20-0178 (June 17, 2022)
Opinion (linked here) by Justice Huddle 

Ken Carroll

In Ritchie v. Rupe, the Texas Supreme Court held that, “[a]bsent a contractual or other legal obligation, [an] officer or director [of even a closely held corporation] has no duty to conduct the corporation’s business in a manner that suits an individual shareholder’s interests.” Instead, officers and directors owe fiduciary duties only to the corporation, itself, including “the dedication of [their] uncorrupted business judgment for the sole benefit of the corporation.” But what if a director has a relationship of trust and confidence with a shareholder that arose prior to and independent of their relationship as director and shareholder? The Supreme Court has held previously that such a relationship can give rise to an “informal fiduciary duty.” Can a director simultaneously owe both (i) conventional fiduciary duties to the corporation and (ii) an “informal” fiduciary duty to an individual shareholder, based on their pre-existing relationship? Is the latter an “other legal obligation” that is the exception to the rule as announced in Ritchie? In Poe, the Supreme Court answered, no, “a director cannot simultaneously owe these two potentially conflicting duties.”

Richard C. (“Dick”) Poe operated several car dealerships in El Paso. He consolidated control of them in PMI, a Texas corporation, which was the general partner of several limited partnerships that, in turn, owned and operated the dealerships. Poe’s son, Richard, was the sole shareholder of PMI. But Richard gave his father, Dick, an irrevocable proxy to vote those shares, and Dick was the sole director of PMI. In 2015, Dick caused PMI to issue additional shares of stock, which he bought from PMI for $3.2 million. These new shares made Dick the majority shareholder. Son Richard was not notified of these additional shares until after Dick died, shortly after the shares were issued. Richard sued Dick’s longtime accountant, his office manager, and his attorney for, among other things, conspiring with Dick to breach his fiduciary duties both to PMI and to Richard in issuing the new shares to himself. Richard contended his father’s “informal” fiduciary duty to him, arising from their longstanding relationship of trust and confidence, triggered the “other legal obligation” language of Ritchie, meaning that Dick owed fiduciary duties to Richard, individually, as well as to PMI. 

A unanimous Supreme Court of Texas disagreed, holding that 

[A]s a matter of law, a corporation’s director cannot owe an informal duty to operate or manage the corporation in the best interest of or for the benefit of an individual shareholder. A director’s fiduciary duty in the management of a corporation is solely for the benefit of the corporation. 

Because the trial court erred by allowing the jury to decide about the existence and breach of an alleged “informal” fiduciary duty from Dick to Richard, the Supreme Court reversed and (i) rendered judgment against Richard on his claims for breach of an “informal” fiduciary duty, and, (ii) because of other errors in the charge, remanded for a new trial on the remaining issues

Perfection Not Required—An Incomplete Medical Authorization May Still Toll Limitations for Healthcare Liability Claims

Gary Lew Maypole, Sr. v. Acadian Ambulance Service, Inc.
Dallas Court of Appeals, No. 05-18-00539-CV (June 10, 2022)
En Banc Opinion by Justice Molberg (linked here)
Concurrence by Justice Schenck (linked here)
After a motion for reconsideration en banc, the Dallas Court of Appeals issued a new opinion that allows the statute of limitations for healthcare liability claims to be tolled when the plaintiff serves a medical authorization form that substantially—even if not fully—complies with statutory requirements. Under the Texas Medical Liability Act, Chapter 74 of the Texas Civil Practice and Remedies Code, the statute of limitations is tolled for 75 days if the plaintiff provides defendants with a pre-suit notice of claim accompanied by an authorization for the release of the injured person’s healthcare information. The statute sets forth the form of the required authorization. As the Fifth Court of Appeals explained, the legislature’s purpose in enacting these pre-suit notice requirements is to reduce the frequency and severity of healthcare liability claims, but in a manner that does not unduly restrict a claimant’s rights. With this purpose in mind, the Court concluded that Plaintiff’s failure to list certain healthcare providers on the medical authorization form did not preclude the tolling of limitations under section 74.051(a) of the TMLA.

Gary Maypole, II suffered an anoxic brain injury while being transported by ambulance between hospitals. He later died. Gary’s father and minor children filed suit alleging medical malpractice against the critical-care transport companies. Plaintiff served Defendants with the required pre-suit notice letter and a medical records authorization, but Plaintiff did not list the names of the physicians and healthcare providers who treated Gary in the five years prior to the incident at issue. Plaintiff also did not list “none” in the section for physicians or healthcare providers excluded from the authorization. Defendants argued the medical authorization was fatally flawed, the seventy-five-day tolling period did not apply, and summary judgment should be granted because Plaintiff filed suit more than two years after the alleged malpractice. The en banc Court of Appeals disagreed for many reasons.

The Court first concluded that the statute does not require all healthcare providers to be identified for the tolling provision to apply. The Court relied heavily on the fact that Defendants made no attempt to obtain Maypole’s records from the providers listed on the authorization and were not harmed by the lack of information. It rejected several of Defendants’ technical arguments and “the notion that a ‘virtually perfect’ authorization” is required for tolling, holding that the statute was not intended “to be a game of legal ‘gotcha’” to deny access to the judicial system. The record here distinguished this case from others in which the plaintiffs did not provide authorizations with their notices. Here, the Plaintiff listed the two relevant hospitals as providers, and Defendants already had medical records in their possession that listed Maypole’s treating physician, list of prior health issues, and list of medications. The Court concluded the authorization was sufficient to toll limitations, and therefore, reversed the summary judgment and remanded to the trial court for further proceedings. The Court also noted that abatement, not dismissal, is the appropriate remedy when a defendant demonstrates that an incomplete authorization hinders its ability to investigate, evaluate, and negotiate prior to the parties joining issue in a lawsuit.

Justice Schenck concurred, but would have held the statute is procedural and when notice (whether defective or not) is given, the limitations period is tolled for 75 days and fixed. Any defects in the authorization can be cured by various forms of legal relief, short of dismissal of the plaintiff’s claims on limitations grounds, based on the court’s discretionary assessment of the form’s deficiency.

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
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.

No Standing for Taxpayer Challenging Removal of Statue

Robinson v. Scripps
Dallas Court of Appeals, No. 05-21-00349-CV (May 19, 2022)
Justices Carlyle, Smith (Opinion, available here), and Garcia
    Eugene Robinson filed suit against the City of Dallas and Jennifer Scripps, its Director of the Office of Cultural Affairs, alleging the City was in the process of disassembling a Confederate War memorial even though its Certificate of Demolition (CD) had expired. The trial court denied Robinson’s application for temporary restraining order, and the Court of Appeals denied mandamus. By that time, the monument had already been removed and placed in archival storage, and the contractor had been paid for the work. The defendants therefore filed a plea to the jurisdiction on the grounds that Robinson’s case was moot. The trial court agreed and dismissed the suit. Robinson appealed.

        In order to have standing to pursue a claim, a plaintiff must allege facts that affirmatively demonstrate the court has jurisdiction to hear the case. As a general rule, a taxpayer does not have standing to contest government decision-making because “[g]overnments cannot operate if every citizen who concludes that a public official has abused his discretion is granted the right to come into court and bring such official’s public acts under judicial review.” However, a taxpayer does have standing to sue to enjoin the illegal expenditure of public funds, and that was Robinson’s hook. He claimed the City could not expend public funds for the disassembly, removal, and transfer of the monument if it did not have a valid CD. By the time the City filed its Plea, however, the work had already been done and the money had been spent. Once the government has spent the funds the taxpayer seeks to enjoin, there is no longer a case or controversy between the parties, and the case becomes moot.

        The Court of Appeals rejected Robinson’s argument that the City’s payment of storage fees created a continuing controversy between the parties, because such fees were not alleged to be “illegal” given that they were unrelated to the expired CD. It also rejected Robinson’s argument that the “capable of repetition, yet evading review” exception to the mootness doctrine applied, finding there was no evidence the City routinely demolishes or removes property without a valid CD. The Court therefore affirmed the dismissal based on lack of jurisdiction.

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
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.

Not So Fast: Trial Court Cannot Compel Discovery While Plea to Jurisdiction Attacking Pleadings Is Pending

In re Dallas County, Texas and Dallas County Constable Bill Gipson
Dallas Court of Appeals, No. 05-21-01144 (May 10, 2022)
Justices Myers, Partida-Kipness (Opinion, linked here), and Carlyle
After Gipson was elected constable, he told deputy constables Woodard and Yarbrough that they would not be re-sworn as deputy constables after he took office. Woodard and Yarbrough sought to pursue grievances with Dallas County. But the County concluded they were not covered by the civil-service grievance system because they had been hired after August 19, 2003; it therefore denied them a grievance hearing.

Woodard and Yarbrough then sued, claiming they were denied their property rights in employment and denied equal protection because they were not allowed to access the grievance procedure available to those hired before August 19, 2003. The County and Constable Gipson answered and filed pleas to the jurisdiction based on governmental immunity. After the jurisdictional pleas were filed, Woodard and Yarbrough moved to compel discovery. The trial court ordered the County and Constable Gipson to respond to discovery requests and to appear for depositions.

The County and Constable Gipson sought mandamus relief, arguing discovery was improper while their pleas to the jurisdiction were pending.

The Court of Appeals explained that there are two types of pleas to the jurisdiction: an attack on the sufficiency of the pleadings and an evidentiary attack on the existence of jurisdictional facts. When a plea to the jurisdiction is based on evidence, a trial court has discretion to decide the plea at a preliminary hearing or later, after the case is more fully developed. If the trial court delays determination, the trial court can also allow targeted discovery on issues relevant to the plea to the jurisdiction. In contrast, when a plea to the jurisdiction is based on the pleadings alone, discovery is not proper while the plea is pending.

The Court of Appeals concluded the County’s and Constable Gipson’s pleas to the jurisdiction were based on the pleadings, so the trial court was obligated to hear and decide the pleas to the jurisdiction before compelling discovery. Further, the Court of Appeals noted that even if this were a scenario where the court could compel targeted discovery, the trial court erred by failing to confine the compelled discovery to jurisdictional issues. The Court of Appeals therefore granted mandamus relief, directing the trial court to vacate its order compelling discovery.

Going Paperless in a Spoliating World

Power v. Power
Dallas Court of Appeals, No. 05-19-01557-CV (May 3, 2022)
Justices Molberg, Nowell (Opinion), and Goldstein
In Power v. Power, the Fifth Court confronted a spoliation jury instruction given after a company went paperless and destroyed a decade’s worth of invoices central to the fiduciary duty claims in the lawsuit. Finding error, the Court reversed and remanded the case for a new trial.

Brothers Craig Power and Braden Power developed real estate together. Craig operated the business, and Braden designed and oversaw the business’s construction activities. In 2013, Craig decided the company would adopt a paperless recordkeeping system and authorized the destruction of ten boxes of invoices dating back to 2003. The brothers later sued each other over finances and distributions.

At trial, the court admitted evidence that Craig gave permission for a payroll employee to shred old invoices when they converted to electronic billing. Braden’s counsel also stated in opening and closing arguments that Craig ordered the destruction of the documents and that that “alone is a breach of fiduciary duty.” The trial court subsequently instructed the jury on spoliation without naming the offending party:
Invoices and documents which would demonstrate or reflect expenses relating to Craig Power and Braden Power [sic] real estate transactions have been destroyed.
You may consider that the invoices, documents, and records destroyed would have been unfavorable to the party who destroyed the invoices, documents, and records on the issues of whether the party complied with the party’s legal duties and the failure to properly account for money under the party’s care and control.
The jury returned a verdict in favor of Braden awarding damages against Craig. This appeal followed.

The Court first addressed whether the jury charge constituted a spoliation instruction when it did not name the party responsible for the destruction of documents. It did. There was no evidence or argument that Braden had destroyed evidence, while Braden’s counsel put on testimony and made arguments that Craig had. Therefore, not naming Craig as the spoliating party was “not determinative.”

Next, the Court analyzed whether the “severe spoliation sanction” of a jury instruction was an abuse of discretion that probably caused the rendition of an improper judgment. It was and it did. To sanction a party for spoliating evidence, the trial court must, outside the presence of the jury, find that (1) the spoliating party had a duty to preserve evidence, and (2) the party intentionally or negligently breached that duty. The trial court did not do that here. Because of the closely contested nature of the issues at trial, the emphasis Braden’s counsel placed on spoliation, and the harshness of a spoliation instruction, the Court of Appeals found harm, reversing and remanding for a new trial.

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
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.

PSA—Ask for Permission, Not Forgiveness!

In re D.M.
Dallas Court of Appeals, No. 05-21-00185-CV (April 21, 2022)
Justice Goldstein (Concurring Opinion linked here)
In a public service announcement to the bar, written to “draw attention to a disturbing trend,” Justice Goldstein pleaded for Texas lawyers to file timely notices of appeal rather than wasting their time and the courts’ resources with after-the-fact motions for extension. This “pattern and practice of the legal profession to seek forgiveness rather than permission is one that cannot stand without comment and caution.” Justice Goldstein noted that a “notice of appeal is not labor intensive, extensive, or in-depth.” Nevertheless, too often, lawyers miss the deadline to file “what is essentially a rote, perfunctory notice” and then have to file a much longer motion for extension of time, which requires the Court “to consider a myriad of excuses to determine whether the motion’s rationale meets the generous latitude mandated by the Texas Supreme Court.” Justice Goldstein’s advice: “if you file a timely motion for new trial, a two-sentence notice of appeal should follow shortly thereafter.”
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