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.

Was Evidence “Admitted” During Zoom Hearing?

Kazi v. Sohail

Dallas Court of Appeals, No. 05-20-00789-CV (October 28, 2021)

Justices Molberg, Goldstein (Opinion available here), and Smith

Kelli Hinson

        After conducting a hearing via Zoom, the trial court entered a temporary injunction against Defendants, and Defendants appealed, arguing there was no evidence to support the order. They contended that the Plaintiff had presented no live witnesses and that none of the affidavits or exhibits referred to during the hearing were actually admitted into evidence.

        The Dallas Court of Appeals disagreed and affirmed the temporary injunction. The trial court’s emergency standing order in effect at the time of the Zoom hearing—prompted by the COVID-19 pandemic—encouraged litigants to present evidence through affidavits, declarations, and depositions rather than through live testimony, when possible. The order further provided that parties wishing to admit exhibits or other evidence must electronically deliver the same to the court reporter, court coordinator, and opposing counsel prior to the hearing. Plaintiff’s counsel complied with that order and, during the hearing, referred to the evidence that was “put on the record” and stated he would consider such evidence “part of the record unless any objections arise.” Defendants’ counsel did not object to the evidence being “put on the record” and did not object to Plaintiff’s counsel referring to the evidence throughout the hearing. In the temporary injunction order, the trial court referred to the “evidence presented” during the hearing and stated that Plaintiff had “offered evidence” in support of his position.

The Court of Appeals held that, even though the trial court did not use “magic words” admitting Plaintiff’s affidavits and other electronic submissions into evidence, it was clear from the record that the trial court considered the electronically submitted evidence in determining whether to grant the temporary injunction. Under those circumstances, the Court concluded that the trial court did not abuse its discretion in granting a temporary injunction based on the electronically submitted evidence.

No Evidence? No Problem! Court Takes Judicial Notice of Property Records to Dismiss Based on Mootness

Courtney D. Alsobrook v. MTGLQ Investors, LP

Dallas Court of Appeals, No. 05-20-00400-CV (October 26, 2021)

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

Brent Rubin

        Alsobrook stopped making mortgage payments on her house, and MTGLQ, the mortgagee, gave notice that it planned to foreclose. Alsobrook obtained a temporary restraining order stopping the foreclosure sale, but she never obtained a temporary or permanent injunction stopping future foreclosure proceedings. The trial court eventually granted MGTLQ’s motion for summary judgment. Alsobrook appealed.

        In its response brief on appeal, MTGLQ argued the appeal was moot because Alsobrook’s property had been sold at a foreclosure sale after the trial court entered judgment. But MTGLQ did not file a copy of the foreclosure sale deed or any other tangible proof of the sale. Nevertheless, the Court explained that it had the power to take judicial notice, for the first time on appeal, of facts that are a matter of public record and not subject to reasonable dispute.

        Rockwall County Central Appraisal District’s online records showed that the house was conveyed away from Alsobrook by foreclosure sale and identified someone other than Alsobrook as the current owner. Therefore, the Court took judicial notice of the sale. Because the property at issue had been sold, the Court held Alsobrook’s case had become moot and dismissed the appeal without considering the merits.

Beyond Mandamus: Writ of Injunction Secures Relief from Trial Court Order Pending Appeal

In re David Mu

Dallas Court of Appeals, No. 05-21-00323 (October 12, 2021)

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

Brent Rubin

The trial court issued a protective order requiring Mu to complete a Batterer’s Intervention and Prevention Program (BIPP) no later than 30 days before the first anniversary of the order. Mu appealed and asked the trial court to stay the BIPP requirement pending that appeal, arguing that it violated his Fifth Amendment right against self-incrimination, because the course would require him to discuss his alleged bad acts before the statute of limitations had expired. The trial court denied Mu’s request to stay the BIPP requirement. So, Mu sought a writ of injunction against the BIPP requirement from the court of appeals.

An appeals court can grant writs of injunction only in limited circumstances, one being to prevent an appeal from becoming moot. Here, the Dallas Court of Appeals concluded that if Mu had to complete the BIPP course before the appeal was resolved, any relief on appeal could be ineffectual. Therefore, the court of appeals granted a writ of injunction enjoining the trial court from enforcing the BIPP requirement pending the appeal.

It’s Still the Law: Incorporating the AAA Rules Delegates Determination of Arbitrability to the Arbitrator

Holifield v. Barclay Properties, Ltd.

Dallas Court of Appeals, No. 05-21-00239-CV (October 5, 2021)

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

Ken Carroll

        Barclay built and sold a home to the Holifields. When construction defects allegedly cropped up, the Holifields sent notice of those defects not only to Barclay, but also to others with which Barclay was hoping to do business. Because of that, Barclay sued the Holifields for tortious interference. But the contract between Barclay and the Holifields contained a broad arbitration provision, in which the parties agreed that “any controversy or claim … arising out of or relating to … this Contract [or] … the construction and/or sale of the Property” would be “submitted to binding arbitration with the AAA.” When the Holifields moved to compel arbitration of Barclay’s tortious interference claim, however, the trial court denied that motion. The Dallas Court of Appeals reversed, ruling that “it is for the arbitrator to decide whether Barclay must arbitrate its claim against the Holifields.”

        In addition to being broad in scope, the parties’ arbitration agreement provided that disputes would be arbitrated “in accordance with the Construction Industry Arbitration Rules of the AAA.” AAA Construction Rule 9 dictates that the arbitrator “has the power ‘to rule on his or her own jurisdiction.’” As a result, the Court said, the issue of arbitrability was entrusted to the arbitrator, not the trial court. “When, as here, the parties agree to a broad arbitration clause and explicitly incorporate rules empowering the arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable evidence of the parties’ intent to delegate such issues to an arbitrator.” In fact, the Court said, “Where the parties’ contract clearly and unmistakably delegates the arbitrability question to the arbitrator, the court possesses no power to decide the arbitrability issue.”

        Barclays argued that in Jody James Farms v Altman, 547 S.W.3d 624 (Tex. 2018), the Supreme Court of Texas had rejected the principle that incorporation of the AAA rules constituted “clear and unmistakable evidence of the parties’ intent to delegate” the determination of arbitrability to the arbitrator. Not so, said the Dallas Court. The Supreme Court in Jody James rejected that principle only in the context of an arbitrability dispute between a party that was a signatory to the arbitration agreement and another party that was not. It did not rule on the issue in the context presented here, where both parties had agreed to delegate arbitrability to the arbitrator under the AAA rules.

Law Firm Cannot Avoid Agreement to Litigate Rather Than Arbitrate

Fee, Smith, Sharp & Vitullo, LLP v. Strunk

Dallas Court of Appeals, No. 05-21-00003-CV (September 30, 2021)

Justices Myers, Partida-Kipness (opinion available here), and Carlyle

Kelli Hinson

        The law firm Fee, Smith, Sharp & Vitullo, LLP sued its former clients for payment under a contingency fee agreement. The fee agreement contained an arbitration provision, and the firm initiated an arbitration before the AAA. The clients claimed the arbitration provision was unenforceable. So the firm filed suit in Dallas County, delivered a copy of the lawsuit to the clients’ new attorneys, and asked whether the clients preferred to resolve the dispute in court or arbitration. The letter stated: “Please discuss with your clients and let us know which forum they wish to choose to address this matter. If they choose to litigate in District Court, then please advise if you will agree to accept service of the enclosed petition on behalf of all Defendants effective as of this date and assuming you agree, we will dismiss the AAA arbitration without prejudice.”

        The clients chose arbitration, but the attorney responding to the firm’s letter was not their “trial attorney” and was not authorized to accept service. The firm had the clients personally served, and the suit was underway. After the clients answered and filed a motion to transfer venue, the firm moved to compel arbitration. But what about the agreement to proceed in District Court? The firm argued that acceptance of service and maintaining the litigation in Dallas County were conditions to its offer to litigate in court, which conditions the clients did not accept. The trial court disagreed and denied the motion to compel arbitration. The firm appealed.

        The Dallas Court of Appeals sided with the clients and affirmed the trial court’s order. It concluded a novation occurred in which the parties extinguished their arbitration agreement and formed a new agreement to litigate in District Court. The Court rejected the firm’s argument that acceptance of service was a condition to accepting the proposed novation. It concluded that allowing the clients to choose the forum for resolving the fee dispute was the only material term of the offer. The sentence “If they choose to litigate in District Court, then please advise if you will agree to accept service” merely provided “alternative subsequent actions to be taken based on the [clients’] forum choice.” The Court found no indication in the letter that the clients’ forum choice was dependent on acceptance of service. This conclusion was bolstered by the fact that the firm moved forward with effecting personal service of the lawsuit. The Court also found nothing to suggest the offer was limited to litigating in Dallas County, so the clients’ attempt to transfer venue did not invalidate the agreement.

Hey, I Didn't Rob a Bank Today – Mugshots, Defamation, and the TCPA

CBS Stations Group of Texas, LLC v. Burns

Dallas Court of Appeals, No. 05-21-00042-CV (September 27, 2021)

Before Justices Molberg, Nowell (Opinion), and Goldstein

Neil R. Burger

        Unlike most of the appeals in the Fifth Court involving the Texas Citizens Participation Act (TCPA), CBS Stations Group of Texas, LLC v. Cedric Burns did not involve a dispute about whether the TCPA applied to the claims asserted—claims for defamation and intentional infliction of emotional distress (IIED) arising out of CBS’s mistaken use of Mr. Burns’s mugshot while airing a story on an armed bank robbery and subsequent high-speed chase. Instead, the issue before the Court was whether Mr. Burns had met his burden to “establish by clear and specific evidence a prima facie case for each essential element of [his] claim.”

        A Cedric Burns was arrested for bank robbery. But, it was not the Cedric Burns depicted in the mugshot provided to CBS by the Tarrant County Sheriff’s Office as it prepared to air a story on the crime. People who knew the Cedric Burns whose mugshot was displayed on TV notified him of the story, and he promptly contacted CBS about its mistake. CBS then removed all references to the story and the photograph from its digital platforms.

        Burns sued CBS for defamation and IIED. In response to CBS’s TCPA motion, Burns admitted that the story was a matter of public concern, thus making the TCPA applicable, but asserted that he had established all elements of his causes of action. The trial court apparently agreed, and denied the motion. The Dallas Court of Appeals reversed, rendered judgment granting the motion, and remanded for determination of fees and possible sanctions.

        A key issue decided by the Court was whether CBS acted with the “requisite degree of fault” for a defamation claim when it used the mugshot provided by the Sheriff. The applicable degree of fault is determined by whether Burns was a public figure. A public figure must prove malice, while a private individual must only prove negligence. Here, because Burns had nothing to do with the story, and was not otherwise widely known, the Court considered him a private individual, and therefore analyzed the evidence for CBS’s negligence.

        For broadcasters, defamation requires that the person knew or should have known that the statement at issue was false. The content must warn a reasonably prudent editor or broadcaster of its defamatory potential. Here, there was nothing in the record showing that CBS knew or should have known that the mugshot provided to it by the Tarrant County Sheriff’s Office was not the correct Cedric Burns arrested earlier in the day. The Court of Appeals found that lack of proof to be determinative, and rendered judgment dismissing the defamation claim under the TCPA.

        Likewise, the Court dismissed the IIED claim. IIED is a “gap filler” claim limited to rare circumstances when egregious conduct causes emotional harm, but no other cause of action applies. Burns’s allegations and evidence forming his IIED claim were the same as his defamation claim. Therefore, it also failed.

Preserve Error—Even in Arbitration

Alia Realty LLC, EED, Inc. v. Alhalwani

Dallas Court of Appeals, No. 05-21-00265-CV (September 23, 2021)

Justices Schenck, Smith (opinion available here), and Garcia

Kelli Hinson

        The Dallas Court of Appeals reversed a trial court’s judgment vacating the arbitration award in this case and rendered judgment confirming that award, finding that filing a motion for continuance alone was not enough to preserve error.

        Parties involved in a series of real estate investments and construction projects agreed to resolve any potential disputes in an “expedited JAMS arbitration.” The agreement required the arbitration proceeding to occur within three months of a demand for arbitration, or “as close thereto as the parties and arbitrator’s schedule allowed.” Alia Realty filed a claim for arbitration against Alhalwani on July 6, 2020, seeking over $2 million in damages. Alhalwani answered and filed counterclaims.

        The deadline for designating expert witnesses was September 1, 2020, and the deadline for supplemental or rebuttal expert reports was September 18. Arbitration was set for October 13-15, 2020. On September 23, Alhalwani filed a motion for continuance, arguing he had attempted in good faith to meet the scheduling order deadlines but needed more time to examine the “thousands upon thousands” of accounting transactions at issue in the suit and present an expert report. The arbitrator denied the continuance, but gave Alhalwani until October 2, 2020 to file a supplemental expert report. Alhalwani met the new deadline, and the parties proceeded to arbitration as scheduled.

        After the arbitrator found against Alhalwani and awarded over $500,000 to Alia Realty, Alhalwani filed a motion to vacate the award in district court, arguing the arbitrator violated Civil Practice & Remedies Code § 171.088(a)(3)(B) by refusing to postpone the arbitration. The trial court agreed and vacated the award.

        The Dallas Court of Appeals reversed and rendered, confirming the arbitration award. It found that Alhalwani failed to preserve his complaint about the arbitrator’s denial of a continuance. The Court first noted that the preservation requirements of TRAP 33.1 apply to arbitrations. Alhalwani’s filing of a motion for continuance was not sufficient to preserve error as to the timing of the arbitration because, in response to that motion, the arbitrator granted Alhalwani additional time to file a supplemental expert report, which seemed to be Alhalwani’s primary reason for requesting the continuance. The Court held that, once Alhalwani was permitted to and did file a supplemental expert report and then proceeded to arbitration without further complaint, he left the arbitrator with the impression he was ready to proceed with the evidence he had obtained. The Court also noted that it was Alhalwani’s burden to prove error and, without a transcript from the continuance hearing, it was impossible to know who suggested moving the expert deadline or whether the parties agreed with the decision at the time. Because Alhalwani also failed to provide a transcript of the arbitration hearing itself, he had no evidence that he objected to going forward with the arbitration after being given additional time to submit an expert report. “Counsel’s statements in post-arbitration briefing and briefing in this Court concerning what occurred is not a substitute for a record of those proceedings.” Therefore, Alhalwani failed to preserve the alleged error.

First Things First: Due Order of Hearings for Special Appearances

Jayco Hawaii, Inc. v. Viva Railings, LLC

Dallas Court of Appeals, No. 05-20-00528-CV (August 25, 2021)

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

Ken Carroll

Most lawyers know and carefully observe the “due-order-of-pleadings” requirement for a special appearance. That is, under Rule 121a(1), a special appearance must be filed “prior to a motion to transfer venue or any other plea, pleading or motion.” Otherwise, the challenge to personal jurisdiction is waived. But Rule 120a(2) embodies a “due-order-of-hearings” requirement, as well, directing that a special appearance “shall be heard and determined before a motion to transfer venue or any other plea or pleading may be heard.” Failure to follow that “due-order” requirement can be fatal to any determination taken out of turn, before the special appearance is resolved.

        Jayco initiated an arbitration in Dallas County pursuant to an arbitration agreement that specified venue in that locale. Viva prevailed in the arbitration and filed suit in a Dallas County District Court to confirm the award. Jayco responded with a special appearance, arguing it was not subject to personal jurisdiction in Texas, and set a hearing on that special appearance. But Viva obtained an earlier setting on its motion to confirm the arbitration award, at which the court granted the motion to confirm and entered judgment for Viva. The Dallas Court of Appeals reversed and remanded, however, because “[t]he rules of civil procedure give a trial court no discretion to hear a plea or pleading, including a motion to confirm an arbitration award, before hearing and determining a special appearance.” Viva argued that Jayco had waived any objection to personal jurisdiction by, among other things, contractually agreeing to a Dallas County venue for the arbitration. But, the appeals court said, “Whether a party has waived its challenge to personal jurisdiction is an issue to be decided by the trial court in connection with that party’s special appearance.” Because the trial court had not conducted a hearing on the special appearance or ruled on it, the Court of Appeals had “no authority to determine the merits of Viva’s waiver arguments” in the first instance. The Court declined Viva’s invitation to construe the order confirming the arbitration award as implicitly overruling Jayco’s special appearance, because Jayco was given no notice that its special appearance would be addressed at the confirmation hearing, “thus depriving Jayco [of] the opportunity to put forth evidence in support of its special appearance.”

        In other words, first things first: No hearing on the special appearance, no discretion to jump ahead and rule on the merits.

HIGHLAND PARK IMMUNE FROM SUIT FOR DEATH OF OFFICER PERFORMING EXTRA-DUTY SECURITY SERVICE AT PRIVATE RESIDENCE

Town of Highland Park v. McCullers

Dallas Court of Appeals, No. 05-19-01431-CV (June 29, 2021)

Chief Justice Burns (Dissent linked here), and Justices Pedersen, III (Opinion linked here) and Goldstein (Concurrence linked here)

Lyndon Bittle

               The Town of Highland Park cannot be sued by the survivors of an off-duty police officer killed in a flash flood while providing security at a private residence through an arrangement coordinated by the Town, according to a divided Dallas Court of Appeals panel. 

        SMU police officer Calvin Marcus McCullers accepted an assignment offered by the Highland Park Department of Public Safety to provide after-hours security, at a property owner’s expense, for a private residence then under construction. A little more than two hours after he arrived at the property in his personal car, a torrential downpour flooded the area where he was parked and swept him and his car over an embankment into Turtle Creek. His body was discovered several weeks later on the banks of the Trinity River more than three miles downstream. 

        Officer McCullers’s survivors sued Highland Park and others for negligence and other torts. Asserting governmental immunity from such claims, Highland Park filed a plea to the jurisdiction, which the trial court denied after the parties conducted limited discovery. On interlocutory appeal, the core issue was whether coordinating a program to provide security services to private residences by off-duty police officers is an exercise of “police protection” and thus a governmental function for which the Town is generally immune from suit, or a “proprietary” function to which immunity does not apply. 

        The distinction between governmental and proprietary functions, which applies only to municipalities, is codified in the Texas Tort Claims Act, chapter 101 of the Civil Practice and Remedies Code. The TTCA defines proprietary functions as those “that a municipality may, in its discretion, perform in the interests of the inhabitants of the municipality”—but not including the list of 36 functions expressly identified as governmental functions. The first item on this list is “police and fire protection and control.” Justices Pedersen and Goldstein, in separate opinions, held “the Town’s coordination of Officer McCullers to provide law enforcement services” at the residence was an exercise of “the governmental function of police protection.” Justice Goldstein’s concurrence, elaborating on the statutory analysis, cited precedent that plaintiffs “may not split various aspects of a city’s operation into discrete functions and recharacterize certain of those functions as proprietary.” She concluded her opinion by noting “the ongoing struggle associated with judicial analysis and application of the governmental-proprietary dichotomy” and other aspects of governmental immunity. She urged the Legislature to provide “more certainty” on these issues for Texas citizens and governmental bodies. 

        Chief Justice Burns, dissenting, said his “colleagues rely on labels instead of function.” He denied that coordinating “private security services for private property owners,” so that an off-duty officer was “essentially functioning as a night-watchman for one citizen,” fits within the statutory meaning of “police protection.” Instead, applying the factors articulated by the Texas Supreme Court for breach-of-contract claims in Wasson Interests, Inc. v. City of Jacksonville (1998), he concluded that “in providing private security services” Highland Park “was acting in a proprietary role.” 

        One final note: finding the program is a governmental function does not necessarily end the immunity analysis. Under the TTCA, governmental immunity is waived in circumstances involving “personal injury or death caused by a condition or use of tangible personal or real property”—if the plaintiff complies with statutory notice requirements or the governmental entity has “actual notice” of the injuries and its potential liability. Justice Pedersen, extensively describing the record and controlling precedent, concluded plaintiffs failed to provide timely notice and rejected plaintiffs’ argument that Highland Park had actual subjective knowledge of its alleged fault in causing or contributing to the officer’s death. Justice Goldstein concurred in a footnote, while identifying the “actual subjective awareness” test as ripe for review by the Legislature. Chief Justice Burns did not mention this issue.