Arbitration: Where's the Agreement with the Plaintiff?

Fox v. The Rehabilitation & Wellness Centre of Dallas, LLC, et al.

Dallas Court of Appeals, No. 05-21-00904-CV (June 5, 2023)

Justices Molberg (Opinion), Partida-Kipness, and Carlyle

Neil R. Burger

Roger Fox brought wrongful death and survivor claims on behalf of his deceased wife, Karen. Defendants moved to compel arbitration based on an agreement signed by Roger—not Karen. The trial court granted Defendants’ motion to compel arbitration and dismissed all claims.

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

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

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

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

In re Briseno

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

Before Justices Myers, Nowell (Opinion), and Goldstein 

Neil R. Burger

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

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

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

Mandamus: If Not Now, When?

In re Holland

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

Before Justices Myers, Nowell (Opinion), and Goldstein

Neil R. Burger

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

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

What's so Special for a Special Master?

In re Alford

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

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

Neil R. Burger

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

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

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

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

Neil R. Burger

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.

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.

SCOTX COVID-19 ORDER DOES NOT GRANT COURTS POWERS THEY HAVE LOST

Quariab v. El-Khalili

Dallas Court of Appeals, No. 05-20-00979-CV (March 15, 2021)

Chief Justice Burns (Opinion) and Justices Molberg and Goldstein

Neil R. Burger

Questioning its own jurisdiction on appeal, the Dallas Court of Appeals analyzed the power that the Supreme Court of Texas granted to courts to “modify or suspend” deadlines in the many emergency orders the Supreme Court issued in response to the COVID-19 pandemic. The Dallas Court held that the emergency orders do not give a trial court the ability to revive its plenary power once it had expired after a final judgment.

Pursuant to a settlement agreement, the trial court dismissed the underlying case. Five months later, the court reinstated the case based on a claimed breach of the settlement, and entered the injunction orders forming the basis of the appeal.

After asking for jurisdictional briefing, the appeals court determined that the COVID-19 orders presuppose a “pre-existing power or authority over the case or the proceedings,” something the trial court lacked after the expiration of its plenary power. There was, simply, nothing for the court to “modify or suspend.” Therefore, the orders reinstating the case and granting the injunction were void. The Court vacated them and dismissed the appeal for want of jurisdiction.

NO FORMAL PLEADING REQUIRED FOR ATTORNEYS’ FEES IN ARBITRATION

Ninety Nine Physician Services, PLLC v. Brian Murray

Dallas Court of Appeals, No. 05-19-01216-CV (February 22, 2021)

Justices Schenck (Opinion), Osborne, and Partida-Kipness (Concurring)

Neil R. Burger

In Ninety Nine Physician Services, the Dallas Court of Appeals reversed the judgment of the trial court and enforced an arbitrator’s award of attorneys’ fees even though there was no pleading in the arbitration seeking such an award.

The parties’ arbitration agreement provided that all disputes would be governed by the AAA’s Commercial Rules, but it was silent about any award of attorneys’ fees. The AAA rules permit an arbitrator to award fees in three circumstances: (1) if all parties request fees, (2) if fees are authorized by law, or (3) if fees are authorized by the agreement.

Appellant did not assert a claim that supported an award of attorneys’ fees as a matter of law. Nor did it formally plead for fees. But both Appellant and Appellees filed post-hearing submissions, including expert affidavits, seeking an award of fees. The panel majority agreed that this post-hearing briefing was sufficient for the arbitrator to conclude that all parties had requested their fees, despite the absence of any formal pleading on the issue. The AAA rules therefore authorized the arbitrator to award them.

In a concurring opinion, Justice Partida-Kipness would have concluded that awarding attorney’s fees in the absence of a pleading for such an award violated Texas’s fair notice requirements. Nevertheless, she concluded that the arbitrator’s award was a mistake of law, which would not constitute grounds to vacate the award.

YOU SHOULD PROBABLY RESPOND TO A RULE 194 REQUEST FOR DISCLOSURE

F 1 Construction, Inc. v. Phillip W. Bantz and Marcos Gutierrez

Dallas Court of Appeals, No. 05-19-00717-CV (January 20, 2021)

Justices Schenck, Smith, and Garcia (Opinion)

Neil R. Burger

In F 1 Construction, the Dallas Court of Appeals affirmed the trial court’s take nothing judgment against the plaintiff for its failure to respond to a Rule 194 request for disclosure, specifically the failure to disclose the amount and method of calculating damages.

Both defendants included a Rule 194 request for disclosure in their original answers. But F 1 Construction never responded. The day before trial, one defendant filed a motion to exclude evidence of damages, and the other defendant orally joined the motion at trial. The court granted the motion, excluded evidence of damages, and entered a take nothing judgment.

On appeal, F 1 Construction characterized the ruling as a death penalty sanction under Rule 215. But the Court of Appeals viewed it otherwise. The Court held this case was governed by Rule 193.6, which governs the failure to respond to discovery, rather than Rule 215 and case law construing it. Under Rule 193.6, exclusion of evidence not disclosed in response to a proper discovery or disclosure request is mandatory and automatic absent a showing of (1) good cause or (2) lack of unfair surprise or (3) unfair prejudice. F 1 Construction’s “inadvertence” excuse was not good enough. Therefore, the trial court did not err in excluding F 1’s damages evidence.

Notably, F 1 Construction did not move for a continuance in the trial court, and defendants did not file a brief in the Court of Appeals. Litigants: respond to a request for disclosure or have your evidence barred at trial.

Also of note: Effective January 1, 2021, the Texas Rules of Civil Procedure were amended to match Federal Rule 26(a) to require parties to make initial disclosures without waiting for a request.

CHALLENGING PERSONAL JURISDICTION? DECIDE FAST

Aaron Kaufman v. AmeriHealth Laboratory, LLC

Dallas Court of Appeals, No. 05-20-00504-CV (October 30, 2020)

Justices Molberg, Carlyle, and Browning (Opinion, linked here)

Neil R. Burger

Does an attorney’s appearance and participation in a TRO hearing and entrance into a Rule 11 agreement constitute a general appearance? Yes, under certain circumstances.

AmeriHealth Laboratory executed a consulting agreement with Final Inch, a Florida corporation, which was signed by Final Inch’s CEO, Aaron Kaufman, a Florida resident. AmeriHealth later sued both Kaufman and Final Inch. It also sought a TRO.

The trial court granted the TRO the same day the lawsuit was filed, after a non-transcribed hearing. However, Kaufman’s attorney appeared at the hearing, did not limit his appearance on Kaufman’s behalf, and actively argued against the entrance of the TRO by challenging the underlying facts concerning his client’s personal liability.

After the hearing, the trial court ordered the parties to confer concerning expedited discovery. The parties reached an agreement, which the court orally entered into the record. The Rule 11 agreement also extended the TRO. Kaufman’s attorney confirmed the agreement, making one modification to the discovery requests. He also agreed with AmeriHealth’s request for the trial court to order compliance with the parties’ agreement.

Kaufman filed his special appearance a week later, arguing that the court lacked personal jurisdiction over him. The trial court denied the special appearance, and the Dallas Court of Appeals affirmed, finding that his attorney’s actions on the day the lawsuit was filed constituted a general appearance and waived the grounds asserted in the special appearance.

A party makes a general appearance if, without limitation, the party “(1) invokes the judgment of the court on any question other than the court’s jurisdiction, (2) recognizes by its acts that an action is properly pending, or (3) seeks affirmative relief from the court.”

While noting that simply appearing at an ancillary hearing, such as on a TRO application, does not always waive jurisdictional objections, the Court of Appeals found the attorney’s level of active participation here did. Kaufman’s attorney was not an “observer or silent figurehead.” He challenged the underlying facts supporting the TRO, and he “sought and obtained affirmative relief” in the Rule 11 agreement. These activities prior to filing a special appearance distinguished the conduct from other cases holding that an appearance on matters that are “prior to the main suit” do not constitute a general appearance.

The lesson to be learned: if you plan to challenge personal jurisdiction, those words should be the first ones out of your mouth. And they should be on the record.

RULE 91a DISMISSAL: AFFIRMATIVE DEFENSE OF ATTORNEY IMMUNITY

Cherlyn Bethel v. Quilling, Selander, Lownds, Winslett & Moser, P.C.
Supreme Court of Texas, No. 18-0595 (February 21, 2020)
Opinion by Justice Devine (linked here)

Neil R. Burger

Can the affirmative defense of attorney immunity be used to dismiss a case under Rule 91a? Yes, says the Supreme Court of Texas, affirming the ruling of the Dallas Court of Appeals.

The plaintiff’s husband was killed in a car accident while towing a trailer. She first sued the trailer’s manufacturer, alleging that the brakes were faulty. The law firm representing the manufacturer, Quilling Selander, took possession of the trailer and performed testing on the brakes in conjunction with its hired expert. The testing resulted in the disassembly and ultimate destruction of allegedly key evidence against the manufacturer. The plaintiff then sued Quilling Selander under various tort theories for destruction of another’s property, the trailer.

Quilling Selander moved to dismiss under Rule 91a, arguing that all the claims were barred by the attorney-immunity doctrine because all actions it took were in connection with representing a client. The trial court granted the motion and the Dallas Court of Appeals affirmed.

The two questions presented to the Court were: (1) Can a court consider an affirmative defense in deciding a Rule 91a motion when the rule limits a court’s consideration only to “the pleading of a cause of action,” and (2) Is alleged criminal conduct categorically exempt from attorney immunity?

Rule 91a permits the dismissal of a cause of action that “has no basis in law or fact.” But, in considering the motion, the rule states the court may only consider the cause of action as pleaded, without any additional evidence. The plaintiff argued that this standard excluded the attorney-immunity doctrine from the court’s purview because such an affirmative defense was outside the “cause of action” pleaded in the petition.

The Court disagreed, making a distinction between the factual scope of the court’s consideration and the legal theories it may apply. Although the court is limited to the “allegations” supporting the cause of action, Rule 91a did not restrain the “universe of legal theories by which the movant may show the claimant is not entitled to relief based on the facts as alleged.”

After ruling that a properly pleaded affirmative defense can be considered, the Court then considered whether the trial court properly dismissed the claims based on the allegedly criminal conduct of the law firm. In Cantey Hanger, LLP v. Byrd, the Court declined to recognize fraud as an exception to the attorney immunity defense, stressing that the inquiry concerned the “kind” of conduct alleged, not the “wrongfulness” of the actions.

The same was true as to conduct alleged to be criminal in nature. The proper question to ask was: Does the attorney’s conduct involve providing legal services to represent a client? The plaintiff’s labelling of such actions as criminal was irrelevant.

Therefore, while an attorney who punches an opposing counsel would not have immunity, when Quilling Selander “examined and tested evidence during discovery” in representing its client, the law firm was immune from its opposing party’s tort claims.

DEC ACTION: IS A HARASSING DEFENDANT A JUDICIABLE CONTROVERSY?

Gutman v. Richard Wayne Wells and Real Estate Arbitrage Partners, Inc.
Dallas Court of Appeals, No. 05-18-01227-CV (August 5, 2019)
Justices Whitehill (Opinion, linked here), Partida-Kipness (Dissent, linked here), and Pedersen

Neil R. Burger

In a split panel decision, the Dallas Court of Appeals held that a “petition alleging that a defendant has repeatedly harassed and threatened the plaintiff because he refuses to accede to the defendant’s unlawful demands presents” a judiciable controversy under the Declaratory Judgments Act.

The Court considered this issue in an appeal of the trial court’s dismissal under Rule 91a. In previous lengthy litigation, Greg Gutman had obtained a judgment against one defendant, Real Estate Arbitrage Partners, LLC (“Arbitrage”) but not against the other defendant, Richard Wayne Wells. After the judgment was affirmed, Arbitrage paid the judgment, and Gutman delivered to Arbitrage a fully executed release of judgment. But Defendants wanted more. According to the petition, they repeatedly demanded an executed release of judgment against Wells, and harassed and threatened Gutman for his refusal to do so.

The majority held there was a real and substantial dispute under the Declaratory Judgments Act: “This sets out a controversy—whether Gutman must provide the requested release—that is real and not hypothetical.” And a declaratory judgment resolving that issue “will serve a useful purpose of terminating the parties’ controversy and ending the harassment and threats.” The dismissal was therefore reversed.

Justice Partida-Kipness dissented. Gutman did not seek construction of a contract or any other written instrument. Justice Partida-Kipness construed Gutman’s petition as asserting a claim for civil harassment, which sounds in tort, and does not fall within the parameters of the Declaratory Judgments Act. She disagreed “with the majority’s expansion of the statute,” and would have affirmed the trial court’s dismissal.

So, this case is precedent that a dec action can be used to resolve all sorts of disputes, not just those involving contracts, deeds, wills, and other writings.

LACHES IN THE CYBER AGE: WHEN THE JUDGE SAYS “GRANTED” BY EMAIL, CAN YOU WAIT FOR A SIGNED ORDER BEFORE PURSUING MANDAMUS?

In re Yamaha Golf-Car Co.
Dallas Court of Appeals, No. 05-19-00292-CV (April 8, 2019)
Justices Bridges, Osborne, and Carlyle (Opinion, linked here)

Neil R. Burger

In this mandamus proceeding, the Dallas Court of Appeals held that the relator waived its right to pursue mandamus relief by failing to timely challenge a trial court ruling contained in an email to the parties, even though no signed, written order was issued until months later.

The underlying lawsuit involved injuries to a child caused by a golf-car accident. The defendant, Yamaha, moved to designate emergency medical care providers as responsible third parties under Chapter 33. Plaintiffs filed a motion to strike, asserting that Yamaha had failed to meet the pleading and proof requirements of Chapter 74 concerning medical-care providers in emergency situations.

A month after the court held a hearing on that and other motions, the Judge sent an email to the court administrator stating that she needed “the following orders,” and listing the pending motions with an indication as to the court’s ruling on each, including that the motion to strike was “Granted.”  The court administrator forwarded the Judge’s email to all counsel, and requested orders be submitted.

The court did not sign a formal order denying the motion to strike for another seven months. Yamaha filed its mandamus petition one month after that, only three weeks before trial. Without considering the merits of the order striking the designation, the Court of Appeals determined that Yamaha’s mandamus was barred by laches because it had waited eight months after the Judge’s email announcing her decision before seeking mandamus relief. The Court rejected Yamaha’s argument that the Judge’s email was not sufficiently specific, and found that “signing the order was merely a ministerial act.”

So, the next time a court announces a ruling orally, in an email, or in some other informal fashion, think twice about waiting for a signed, written order before pursuing mandamus.

FORUM NON CONVENIENS: AFGHAN FAMILY BUSINESS DISPUTE BELONGS IN AFGHANISTAN AND PAKISTAN

Rasul v. Rasul
Dallas Court of Appeals, No. 05-17-00612-CV (December 17, 2018)
Justices Stoddart, Whitehill, and Boatright (Opinion, linked here)

Neil R. Burger

Abdul Rahman Rasul founded a business in Afghanistan owning and managing more than thirty properties. Later, he moved to Pakistan and started a successful tire-import business. After his death, two of his sons sued their brothers in Texas concerning the businesses. Based on the extensive evidentiary record, including expert testimony on the laws and procedures of the courts in Afghanistan and Pakistan, the district court dismissed the suit based on forum non conveniens, finding there were available, adequate, and convenient legal forums in the foreign countries. The Dallas Court of Appeals, reviewing for abuse of discretion, affirmed.

READ YOUR BANK STATEMENTS. FILE A WRITTEN CLAIM. SERIOUSLY.

Horton v. JP Morgan Chase Bank, N.A.
Dallas Court of Appeals, No. 05-16-00472-CV (January 22, 2018)
Justices Lang-Miers, Brown, and Boatright (Opinion linked here)

Neil R. Burger

The Dallas Court of Appeals affirmed summary judgment in favor of JP Morgan Chase because its customer failed to timely file a written claim complaining that $345,000 had been improperly withdrawn from her bank account.

Horton opened a bank account at JP Morgan Chase. Two months later, the bank received a new signature card purporting to convert the account into a joint account with her employer. After Horton was terminated several months later, her employer withdrew all the funds from the account.

At the time of the withdrawal, Horton orally complained to JP Morgan Chase, but never submitted a written complaint. Because the bank had sent written bank statements to Horton showing that the account had been converted to a joint account naming her employer, and because Horton had not filed a written notice of the error within the 30 days required under the bank’s account terms, Horton’s lawsuit—filed over a year later—was barred.

Article 4 of the UCC establishes the rights and duties of banks and their customers regarding deposits and collections. If a “bank sends or makes available to the customer an account statement that reasonably identifies the items paid, the customer must exercise reasonable promptness in examining the statement and must promptly notify the bank of relevant facts regarding any unauthorized payments due to the alteration of an item or an authorized signature.” Specific notice requirements may be set by the bank’s written terms, which here provided Horton 30 days to raise any errors an account statement, including errors in ownership or amounts paid, in writing.

Horton failed to file a written claim with the bank within 30 days of either seeing an additional account owner on her account statement or seeing the $345,000 withdrawn by her employer. Her lawsuit therefore was precluded by the UCC and the bank’s written terms.

NO HEARING, NO EVIDENCE ADMITTED

Analytical Technology Consultants, Inc. v. Axis Capital, Inc.
Dallas Court of Appeals, No. 05-16-00281-CV (June 19, 2017)
Justices Bridges, Myers (Opinion, linked here), and Brown

Neil R. Burger

Axis sued Analytical Technology Consultants (“ATC”) for breach of a lease agreement, seeking past and future lease payments and the return of leased equipment. ATC answered, but did not assert any affirmative defenses. Eventually, ATC returned the leased equipment, but did not respond to or appear at the hearing on Axis’s motion for summary judgment. The trial court granted the motion, awarding Axis damages for past and future amounts due under the lease. The court also awarded Axis the right to sell the leased equipment and apply the proceeds to the money judgment.

ATC filed a motion for new trial, asserting, among other things, that the judgment miscalculated the future payments awarded under the lease agreement. In response, Axis filed an affidavit showing that it had sold the leased equipment, and applied the proceeds to reduce the outstanding judgment. The court denied the motion, and this appeal followed.

In considering the amount of future damages, the Court analyzed the provisions of the lease agreement, and determined that the evidence in the summary judgment record was insufficient to support the amount of damages awarded. Upon default, the lease agreement provided Axis two options concerning the repossessed equipment: (i) sell the equipment and credit ATC for the proceeds, or (ii) retain it, and provide a credit for the reasonable rental value for the remainder of the lease’s term.

In its motion for summary judgment, Axis provided evidence of neither. Although Axis eventually filed an affidavit showing it had chosen option (i)—to sell the equipment and apply the proceeds—that affidavit was never admitted into evidence. The Court explained that evidence filed as an exhibit to a motion for a new trial or a response thereto does not supplement the summary judgment record unless the trial court expressly grants leave to supplement or admits the evidence at a hearing on the motion for new trial. Here, there was no hearing, and the affidavit was never admitted into evidence. On appeal, the Court could not consider the affidavit concerning the sale of the equipment in reviewing the order granting summary judgment: “To constitute evidence, the attachment must be introduced at the hearing on the motion for new trial.” The Court therefore reversed and remanded the cause for further proceedings.

LAWYERS—WE’RE BASICALLY FUNGIBLE, RIGHT?

Estate of David Anthony Toarmina, Deceased
Dallas Court of Appeals, No. 05-15-00073-CV (June 13, 2016)
Justices Lang, Brown (Opinion), and Whitehill

Neil R. Burger

This appeal examined whether a party’s new attorney could testify about attorney’s fees when the only witness designated on the issue was the party’s former attorney. The party had requested attorney’s fees from the onset of the litigation and timely designated his original attorney to testify in support of that request. After the original attorney was replaced shortly before trial, there was no unfair surprise under Texas Rule of Civil Procedure 193.5(a), and therefore no abuse of discretion by the trial court, when the new attorney was allowed to testify about attorney’s fees at trial, despite never having been disclosed by name as an expert witness.

CHOICE-OF-LAW PROVISION IN EMPLOYMENT AND NON-COMPETE AGREEMENT DISREGARDED

Merritt, Hawkins & Associates, LLC v. Caporicci
Dallas Court of Appeals, No. 05-15-00851-CV (May 2, 2016)
Justices Bridges, Francis (Opinion), and Myers

Neil R. Burger

This permissive appeal considered whether California law governed contract and tort claims against California-based former employees who signed employment agreements containing a choice-of-law clause stating that Texas substantive law would apply. Applying the applicable provisions of the Restatement (2d) of Conflicts, the Dallas Court of Appeals affirmed the trial court’s ruling that California law would apply to the claims for breach of the non-competition provision and related tort claims, because of California’s more significant relationship to the dispute and because application of Texas law would contravene a fundamental policy of California.

EXTRAMARITAL AFFAIR AN EXPENSIVE—BUT NOT A FIDUCIARY—RELATIONSHIP

John and Debra Markl v. Leake
Dallas Court of Appeals, No. 05-15-00455-CV (November 2, 2015)
Justices Fillmore (Opinion), Stoddart, and O’Neill

Neil R. Burger

Husband and wife sued the husband’s girlfriend of ten years to prevent the girlfriend from selling real property that husband had contributed money and effort to purchase, refurbish, and maintain. They claimed the now-former girlfriend, having become “involved” with the husband’s nephew, owed both of them an informal fiduciary duty based on the confidential relationship between the husband and his then-girlfriend that included mutual life insurance policies, the girlfriend’s executing a will with husband as her beneficiary, husband’s putting the girlfriend on his company’s payroll, and numerous cash payments to the girlfriend. The trial court denied the husband and wife’s request for a temporary injunction, and the Court of Appeals affirmed, finding that no fiduciary relationship existed. As to the wife’s claim, the Court found no authority that recognized “a fiduciary relationship between the wife of a husband involved in an extramarital affair and the woman with whom the husband is carrying on the affair.” In addition, the husband did not “cite any case, and [the Court] found none, declaring the existence of a fiduciary duty based on an extramarital affair.” The Court concluded that husband and girlfriend were simply in a dating relationship, and their relationship consisted of “a legally married man and his mistress,” not a fiduciary relationship with heightened duties owed to one another.

CLAIM ABANDONED BEFORE SUMMARY JUDGMENT HEARING CANNOT BE REVIVED BY AN AMENDED PLEADING AFTER THE HEARING UNLESS LEAVE TO FILE IS OBTAINED

McConnell v. Coventry Health Care National Network
Dallas Court of Appeals, No. 05-13-01365-CV (July 30, 2015)
Justices Stoddart (Opinion), Bridges, and Myers

Neil R. Burger

McConnell, a medical doctor, brought suit alleging he was wrongfully terminated as a provider under a workers’ compensation network, asserting various causes of action including breach of contract, tortious interference, and conspiracy. Prior to the hearing on the defendants’ motion for summary judgment, McConnell filed an amended petition dropping the claim for breach of contract. After the hearing, the court took the motion under advisement. Five months later, McConnell filed an amended petition, without leave of court, reasserting the breach of contract claim. McConnell subsequently filed, again without leave, two more amended petitions also asserting claims for breach of contract. The court ultimately granted the defendants’ summary judgment motion and dismissed all of McConnell’s claims with prejudice. On appeal, McConnell argued the Court had granted more relief than requested by dismissing all of his claims because the claim for breach of contract was not before the court at the time the summary judgment was heard. The Dallas Court of Appeals rejected this position.

Rule 63 provides that leave must be granted to amend pleadings within seven days of trial. A hearing on a motion for summary judgment is a “trial” for purposes of Rule 63. Although when amended pleadings are filed within seven days before a summary judgment hearing, leave is presumed to have been granted, the same presumption does not exist when the pleading is amended after the hearing. Accordingly, if the amended pleading is filed after the summary judgment hearing and before judgment is rendered, the record must show the trial court granted leave or the amended pleading will not be considered. Here, McConnell amended his pleadings to reassert the breach of contract claim after the hearing on the motion for summary judgment. That revived claim was not properly before the court at the time of the hearing because McConnell had not obtained leave to file it, and could not be freely asserted afterward. Therefore, the trial court properly granted final summary judgment that McConnell take nothing on all of his claims.