PRESIDENT’S DIRECTION DID NOT SURVIVE MOTION TO SHOW AUTHORITY

Candle Meadows Homeowners Ass’n v. Jackson
Dallas Court of Appeals, No. 05-17-01227-CV (November 27, 2018)
Justices Lang-Miers, Fillmore (Opinion linked here), and Myers

Lyndon Bittle

You are hired by an organization to investigate claims against certain parties, and the organization’s president later directs you to file a lawsuit on those claims. Do you have authority to file suit? Maybe not, a recent case reveals.

The Board of Directors of Candle Meadows Homeowners Association voted to retain a lawyer to investigate certain expenditures by former board members. The HOA’s president later told the lawyer the board had voted to file suit against the former directors, and directed him to proceed. After the lawsuit had been pending about a year, the defendants filed a Motion to Show Authority under Rule 12 of the Texas Rules of Civil Procedure. At a hearing on the motion, the president testified the board had voted to authorize the lawyer to file the lawsuit, but he could not recall the date of the meeting and had no minutes documenting such an action. The other directors confirmed they had discussed the claims, but there was no formal vote on the matter. They were, however, aware of the suit after it was filed and did not seek to have it dismissed. Finding the board had not authorized the litigation, the trial court granted the motion and struck the HOA’s pleadings.

The Dallas Court of Appeals affirmed. Although the lawyer apparently received authorization from the HOA’s president, there was no evidence the board had delegated that authority to the president. The Court deferred to the trial court’s assessment of the conflicting testimony of the president and the directors. Additionally, the absence of any notice to HOA members, agenda, or minutes of a meeting reflecting official action complying with the Open Meetings Act was dispositive. The Court rejected the argument that the board had “ratified” the president’s decision “by acquiescence” (i.e., failing to take action after learning of the suit) because there was no evidence the board had been given “all material facts.”

For lawyers, the lesson is: Be sure you have the necessary authority before filing a lawsuit on behalf of an entity, especially one that may be subject to the Open Meetings Act. And for directors and officers of such an organization, the lesson is: Follow the procedures required by statute and the organization’s bylaws.

PROPER SERVICE OF A MOTION TO VACATE AN ARBITRATION AWARD

Craig v. Southwest Securities, Inc.
Dallas Court of Appeals, No. 05-16-01378-CV (December 18, 2017)
Justices Lang-Miers, Brown (Opinion linked here), and Boatright

Ken Carroll

When an arbitration is conducted pursuant to the Federal Arbitration Act, that Act applies to the substantive rules of decision, but Texas law—specifically, the Texas Arbitration Act—governs procedure. Failure to observe and comply with this division of authority can be fatal to a challenge to an arbitration award.

Craig’s claims against Southwest Securities and one of its brokers were denied in an arbitration governed by the FAA. That Act requires a party who challenges an arbitration award governed by the FAA to serve “notice” of the motion to vacate or other proceeding within three months after the award is filed or delivered. Craig filed a motion to vacate the adverse arbitration decision in a state district court well within the three-month window. But he purported to serve notice of the motion only by emailing it to his opponents’ counsel, as one might do when serving a motion under Texas Rule of Civil Procedure 21a. Several weeks later, outside the three-month window, he filed a supplemental motion. This time he requested citations and served his opponents with process. The district court dismissed Craig’s motion for failure to provide the required notice within the three-month window established by the FAA, and the Dallas Court of Appeals affirmed.

The appeals court explained that, while the FAA established the three-month substantive deadline or limitations period for challenging an arbitration award, the method for serving notice of that challenge was procedural and therefore governed by the TAA. The Texas Act— specifically, § 171.094 of the Civil Practice & Remedies Code—“requires service of process to initiate a court proceeding to vacate an arbitration award,” process and service “in the form and includ[ing] the substance required for process and service on a defendant in a civil action in a district court.” Because Craig did not request citation or service of process until he filed his supplemental motion, well beyond the three-month deadline, his motion to vacate the arbitration award was dismissed. His earlier purported email service of the original motion was not effective to commence the proceeding or provide the required notice under the Texas statute.

JOINT DALLAS/FORT WORTH APPELLATE SEMINAR – Thursday, November 5

The biennial Joint Appellate Seminar, sponsored by the Appellate Sections of the Dallas and Fort Worth Bar Associations, will be held next Thursday afternoon, November 5, from 2 to 5 p.m. at Old Red. The program includes presentations by Justices and Staff Attorneys of the Dallas and Fort Worth Courts of Appeals, and a special conversation with the current and two most recent Chief Justices of the Supreme Court of Texas. Three hours of MCLE credit, including three-quarters of an hour of ethics. And there’s a reception afterward that includes food and craft beers from Fort Worth and Dallas. Click here for the details.


Register NOW by sending a $20 check, payable to the DBA Appellate Section, to Rich Phillips, Thompson & Knight LLP, 1722 Routh Street, Suite 1500, Dallas, TX 75201. Reference “Joint Appellate Seminar.” Early Registration ends Monday, November 2. Registration at the door will be $25, check or cash. Registration is complimentary for the Justices and Staff Attorneys of the Courts of Appeals.