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

Topletz v. Choice
Dallas Court of Appeals, No. 05-22-00781-CV (August 22, 2023)
Justices Carlyle (Opinion, linked here), Goldstein, and Kennedy
Topletz owns roughly 225 rental houses. The City of Dallas sued Topletz for various code violations. Several Topletz tenants intervened in 2016, asserting claims individually and on behalf of a class, alleging, among other things, that Topletz’s standard lease omitted certain language about tenant remedies required by Texas Property Code § 92.056(g) and improperly shifted certain repair duties from Topletz to the tenants in violation of § 92.006 of the Property Code. In a lengthy order, the trial court certified a class, and Topletz brought an interlocutory appeal.

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

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

Arbitration: Where's the Agreement with the Plaintiff?

Fox v. The Rehabilitation & Wellness Centre of Dallas, LLC, et al.
Dallas Court of Appeals, No. 05-21-00904-CV (June 5, 2023)
Justices Molberg (Opinion), Partida-Kipness, and Carlyle
Roger Fox brought wrongful death and survivor claims on behalf of his deceased wife, Karen. Defendants moved to compel arbitration based on an agreement signed by Roger—not Karen. The trial court granted Defendants’ motion to compel arbitration and dismissed all claims.

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

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

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

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

Davis v. Homeowners of American Insurance Co.
Dallas Court of Appeals, No. 05-21-00092-CV (May 31, 2023)
Justices Molberg (Opinion, linked here), Pedersen (Dissent, linked here), and Kennedy
A defendant insurer successfully moved to dismiss the plaintiff’s claims under Rule 91a, based on limitations. But the Dallas Court of Appeals reversed, 2-1. The problem? The insurer’s motion to dismiss relied heavily on a variety of documents submitted with that motion to establish the limitations point. Rule 91a, however, expressly provides that a “court may not consider evidence in ruling on the motion and must decide the motion based solely on the pleading of the cause of action.” “In the Rule 91a context, only the non-movant’s pleading may be looked to when determining whether the cause of action pleaded has a basis in law.” A Rule 91a motion to dismiss, the Court explained, “is not a substitute for … summary judgment,” and so “the court may not resort to evidence proffered by the movant, such as through affidavits, transcribed testimony, or documents.” The majority therefore reversed the Rule 91a dismissal, but cautioned that it was not addressing the merits of the limitations argument, which might yet succeed on summary judgment.

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

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

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

TRO Void Because the Order Failed to Comply with Rules 680, 683, 684

In re St. Mark’s School of Texas
Dallas Court of Appeals, No. 05-23-00369-CV (May 3, 2023)
Justices Partida-Kipness, Carlyle, and Garcia (Opinion, linked here)
This mandamus from a dispute about a high schooler’s AP statistics grade was marked by a number of procedural oddities—including the plaintiff high schooler, rather than his attorney, putatively signing the certificate of conference for the TRO. In directing the trial court to vacate its order, the Dallas Court of Appeals drove home a number of important reminders for those drafting proposed TROs:
  • An order that is functionally a TRO will be treated as one, regardless of its title. Here, the plaintiff filed an “Emergency Ex Parte Motion for Temporary Injunctions [sic]” and the trial court’s order was similarly styled. But because it was issued without notice or a hearing and set a further hearing about the continuation of the injunctive relief pending trial, it was functionally a TRO.

  • “Mandamus relief is available to remedy a void temporary restraining order.”

  • Rule 680 requires a trial court to explain in its TRO why the order was issued ex parte and without notice—i.e., why “immediate and irreparable injury, loss, or damage will result to the applicant before notice can be served and a hearing had thereon.” The order here did not provide an adequate explanation—and in fact plaintiff’s counsel had emailed defendant’s counsel regarding a discovery issue about an hour before the motion for ex parte relief was filed, but did not mention the soon-to-be-filed request for injunctive relief. Failure to comply with this requirement of Rule 680 rendered the order void.

  • “A TRO that does not identify the imminent, irreparable injury necessitating its issuance is void.” Tex. R. Civ. P. 683. The order here failed to explain this with the required specificity; it was therefore void for this reason, as well.

  • Finally, “[a] TRO that fails to set bond is void and unenforceable.” See Tex. R. Civ. P. 684. Here, the order provided for a bond “in the amount of $0.” The appeals court held this was the equivalent of not setting a bond at all, rendering the TRO “void and unenforceable” for a third reason.

SCOTx: Statute Tolling SOL During Defendant’s “Temporary Absence From [the] State” Doesn’t Really Mean What It Says

Ferrer v. Almanza
Supreme Court of Texas, No. 21-0513 (April 28, 2023)
Opinion by Justice Huddle (linked here), Dissent by Justice Busby (here)
Civil Practice & Remedies Code § 16.063—entitled “Temporary Absence From State”—provides, “The absence from this state of a person against whom a cause of action may be maintained suspends the running of the applicable statute of limitations for the period of the person’s absence.” But what does “absence” mean, under the statute? With apologies to Inigo Montoya, a majority of the Supreme Court of Texas “does not think it means what you think it means.”

Almanza, a Texas resident, argued that limitations barred Ferrer’s claim against her. In response, Ferrer invoked § 16.063 to contend limitations had been tolled during Almanza’s temporary absence from the State to attend college in Massachusetts, bringing the assertion of Ferrer’s claim within the limitations period.

The Supreme Court sided with Almanza, affirming summary judgment on the basis of limitations. It held that, “‘absence from this state’ under Section 16.063 depends not on physical location but, rather, on whether a defendant is subject to personal jurisdiction and service. … If a defendant is subject to personal jurisdiction in Texas and amenable to service, he or she is not absent from Texas under Section 16.063.” Almanza had always been subject to personal jurisdiction and service of process even while away at school and therefore, the Court concluded, § 16.063 tolling did not apply. The majority relied heavily on two of its recent decisions—Kerlin v. Sauceda and Ashley v. Hawkins—which had reached the same result with respect to claims against nonresidents. It acknowledged that “physical location” within the state had been a requirement during much of the time § 16.063 and its predecessors had been in force, beginning back when a defendant’s physical presence within the state was necessary to the exercise of personal jurisdiction and service of process. With the advent of the “minimum contacts” analysis of International Shoe and the long-arm statutes enacted in its wake, physical presence within the state was no longer necessary. And so, the Court reasoned, defendants should be considered “absent” only when they are not amenable to personal jurisdiction or service of process.

Justice Busby dissented, unwilling to follow his colleagues’ apparent departure for the second time in a week from the Court’s longstanding adherence to a “textualist approach, which adheres to the ordinary meaning of the words enacted and leaves statutory updating to the legislative branch” and contractual drafting to the parties. The “ordinary meaning” of “absence,” he said, is the “‘fact of not being where you are usually expected to be,’ or, in a legal sense, the ‘condition of being away from one’s usual place of residence’”—a physical characteristic. “Most people who read this statute would never suspect that ‘absence’ holds the hidden meaning” engrafted by the Court, he argued. Justice Busby contended the Court’s prior rulings in Kerlin and Ashley did not control because those cases involved nonresidents who were subject to service and jurisdiction under the long-arm statute, which gave rise to their “constructive presence” in the state despite their lack of physical presence—a statute that did not apply to Almanza, as a resident. The majority rejected that argument, saying, “If the Legislature intended to limit Section 16.063’s application to Texas residents, it certainly could have said so expressly.” Of course, Justice Busby could be forgiven for thinking, on the other hand, “If the Legislature had intended § 16.063 to apply when a defendant is not ‘subject to personal jurisdiction in Texas [or] amenable to service,’ rather than when she is ‘absent from Texas,’ ‘it certainly could have said so expressly.’”

Rules Are Rules

 Badger Tavern LP v. City of Dallas

Dallas Court of Appeals, No. 05-23-00299-CV (April 20, 2023)
Chief Justice Burns (opinion available here) and Justices Molberg and Goldstein

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

SCOTx: Agreeing to Arbitrate According to the AAA Rules Constitutes “Clear and Unmistakable” Agreement to Delegate Questions of Arbitrability to the Arbitrator

TotalEnergies E&P USA, Inc. v. MP Gulf of Mexico, LLC
Supreme Court of Texas, No. 21-0028 (April 14, 2023)
Opinion by Justice Boyd (linked here), Concurrence by Justice Bland (here), Dissent by Justice Busby (here)
AAA Commercial Rule 7(a) provides that an arbitrator “shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope, or validity of the arbitration agreement or to the arbitrability of any claim or counterclaim.” Relying on that passage, the Supreme Court of Texas confirmed what most of us thought we already knew, holding that, “as a general rule, an agreement to arbitrate in accordance with the AAA or similar rules constitutes a clear and unmistakable agreement that the arbitrator,” not a court, “must decide whether the parties’ disputes must be resolved through arbitration”—i.e., questions of arbitrability. The Court buttressed its pronouncement with a comprehensive review of other courts’ decisions on the issue, which revealed that “the vast majority of federal circuit courts and other state supreme courts have reached this same conclusion.”
But the TotalEnergies arbitration agreement came with a wrinkle. It said:
If any dispute or controversy arises between the parties out of this Agreement, the alleged breach thereof, or any tort in connection therewith, … the same shall be submitted to arbitration . . . in accordance with the rules of the AAA and the provisions in this Article.
Justice Busby contended in dissent that the “if” took the agreement out of the “general rule” recognized by the majority. “As a matter of text and logic,” he argued, “the ‘if’ clause is a substantive condition precedent to arbitrators acquiring the power to decide anything at all .…, including any issues … regarding [their] jurisdiction.” At the very least, he concluded, this “if” precondition precluded a determination that the parties had “clearly and unmistakably” agreed to delegate questions of arbitrability to the arbitrators unless and until a court first found the precondition to have been met. And, as both he and the majority acknowledged, it appears the Second and Fifth Circuits agree with that analysis.

The majority, however, rejected that argument. Just as an arbitration provision is “severable” and to be evaluated separately from the overall contract in which it appears, so also, the Court said, should a delegation clause be considered severable and evaluated separately from the overall arbitration agreement. Viewed through this lens, the delegation clause here—incorporating the AAA rules—was absolute and not subject to the “if” precondition. Consequently, the Court held, even under the language of the TotalEnergies arbitration agreement, the parties “clearly and unmistakably” delegated questions of arbitrability to the arbitrator.

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

Builders FirstSource, Inc. v. White
Dallas Court of Appeals, No. 05-22-00724-CV (March 29, 2023)
Chief Justice Burns (Opinion, linked here) and Justices Molberg and Goldstein
Builders moved to stay White’s lawsuit against it and to compel arbitration under the Federal Arbitration Act. White responded with a motion for a jury trial on the threshold issue of arbitrability. When the trial court denied Builders’ motion and granted White’s, Builders filed an interlocutory appeal under FAA §§ 16(a)(1)(A) & (B). But the Dallas Court of Appeals dismissed for want of jurisdiction. The Court acknowledged that an order denying a motion to stay and for arbitration ordinarily is appealable under the FAA and Civil Practice & Remedies Code § 51.016. But the trial court’s order here “simultaneously granted White’s motion for a jury trial on arbitrability.” Consequently, the Court explained, “the order can only reasonably be construed as deferring a final ruling on whether to grant arbitration.” Citing decisions from several other Texas Courts of Appeals, the Dallas Court then held that an order deferring decision on the motion to compel, as opposed to “a definitive ruling on Builders’ motion to stay litigation and compel arbitration” is interlocutory and not appealable.

No Sealed Record on Appeal Without 76a Order

Orca Assets, GP, LLC v. J.P. Morgan Chase Bank, N.A.
Dallas Court of Appeals, No. 05-22-00292-CV (March 1, 2023)
Justice Molberg (Order, linked here)
In the most recent episode in this long-running saga, Orca Assets appealed from the trial court’s $2.4 million award of fees and costs against it. Because this particular aspect of the dispute had been severed years ago, Orca asked that two volumes of the sealed 12-volume clerk’s record from a 2013 substantive appeal in the main case be imported into this current fees and costs appeal. In January, Dallas Court of Appeals Justice Ken Molberg issued an order (linked here) granting that request, but noting that “the clerk’s record in [the earlier appeal] appears to have been filed under seal in accordance with an agreed protective order rather than a sealing order under Texas Rule of Civil Procedure 76a.” So, he further ordered that the imported volumes would “remain under seal only temporarily to allow the parties an opportunity to obtain a sealing order in compliance with rule 76a.” The order warned the parties that the Court would unseal those volumes unless they obtained that sealing order. They didn’t. So, Justice Molberg kept his promise and issued an order striking the sealed volumes of the record and ordering the district clerk to refile them “without seal.” Not long ago, Justice Craig Smith filed a concurrence to an en banc decision (in a different case) for the express purpose of addressing documents sealed on appeal and the application of Rule 76a. Surveying the relevant authorities, he concluded:
  • Rule 76a governs the sealing of records or documents filed in the court of appeals, so the appellate record should not be sealed unless and until the trial court has entered a sealing order after following the procedures of Rule 76a.
  • If the trial court has not entered a Rule 76a sealing order, the appellate court will abate the appeal or temporarily seal the filed documents only to allow the trial court to conduct a hearing to determine whether the requirements of Rule 76a have been satisfied and to make findings on whether the contents of the record should be sealed. 
  • The parties may not enter a Rule 11 agreement or agreed protective order to skirt the requirements of Rule 76a.
In re Cook, 629 S.W.3d 591, 608 (Tex. App.—Dallas 2021, orig. proceeding) (en banc). Justice Molberg’s orders in Orca Assets follow the path mapped out by Justice Smith. They confirm parties cannot be casual about complying with Rule 76a on appeal.

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

Ebby Halliday Real Estate, Inc. v. Giambrone
Dallas Court of Appeals, No. 05-22-00386-CV (February 28, 2023)
Justices Reichek, Nowell, and Garcia (Opinion, linked here)
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.
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