Judicial Admissions: Be Careful What You Plead, and How

Advantage Aviation Technologies, Inc. v. Axcess Aviation Maintenance Services, Inc.

Dallas Court of Appeals, No. 05-23-00344-CV (December 27, 2023)

Justices Molberg (Opinion, linked here), Pedersen III, and Smith

Ken Carroll

Axcess secured judgment against Advantage Aviation for breach of two contracts. Advantage challenged that judgment on appeal by arguing that it had no contracts with Axcess and that the contracts on which the judgment was based were between Axcess and a different party. Problem was, in the trial court Advantage had counterclaimed, unsuccessfully, for breach of the very same contracts that it tried to deny on appeal. And it had done so “without equivocation and not in the alternative,” alleging it sustained damages of more than $90,000 from Axcess’s breach of those contracts. Oops.

Citing its prior opinion in Murphy v. Killer Ridez, Inc., No. 05-13-00035-CV, 2014 WL 428987, the Dallas Court of Appeals summarily rejected Advantage’s appeal and affirmed, saying: 

Assertions of fact, not pleaded in the alternative, in the live pleadings of a party are regarded as formal judicial admissions. … A judicial admission that is clear and unequivocal is conclusive upon the party making it; it relieves the opposing party of the burden of proving the admitted fact and bars the admitting party from disputing it.

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 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

Ken Carroll

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.

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

Kelli Hinson

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.”

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

Ken Carroll

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)

Ken Carroll

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.

Finality Bites—Again

JMJ Development, LLC v. Ramolia

Dallas Court of Appeals, No. 05-21-01100-CV (July 27, 2022) 

Justices Myers, Molberg (Opinion, linked here), and Garcia 

Ken Carroll 

Another appeal down the drain because of confusion about whether a judgment was final. 

Ramolia sued JMJ and Barton for breach of contract. They counterclaimed. Ramolia sought and secured summary judgment on his breach-of-contract claim. Even though Ramolia had not moved for summary judgment on JMJ and Barton’s claims against him, the court’s summary judgment order was titled “Final Judgment.” And it included the “magic” finality language blessed by the Texas Supreme Court in Lehmann v. Har-Con: “All relief requested in this case and not expressly granted herein is denied. This judgment finally disposes of all parties and claims and is appealable.” JMJ and Barton timely moved for a new trial but did not file their notice of appeal until after the deadline had expired, including the time for an extension.

Faced with the prospect that the tardy notice of appeal would bar their appeal altogether, JMJ and Barton argued the judgment was not final and appealable because Ramolia’s summary judgment motion had not sought disposition of their claims against him. Tex. R. Civ. P. 166a(c). The Court of Appeals disagreed. 

A judgment is final, the Court said, “if it actually disposes, or ‘clearly and unequivocally’ states it disposes, of all claims and all parties.” The summary judgment order did that, whether it should have or not. “A judgment that grants more relief than a party is entitled to is subject to reversal”—assuming it is timely appealed—“but it is not, for that reason alone, interlocutory,” and therefore non-appealable. “If it is clear, then the order is final and appealable, even though the record does not provide an adequate basis for rendition of the judgment.” In this case, the Court held, the judgment “was clear and unequivocal, the record is irrelevant, and further analysis is prohibited.” Because JMJ and Barton didn’t file their notice of appeal on time, therefore, the Dallas Court dismissed the appeal, and JMJ and Barton are stuck with a judgment that might have been “subject to reversal,” at least in part, had they recognized that judgment was final and filed their notice on time.

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.

Beware the TRAP: The Deadline to Appeal after Filing a Post-Judgment Motion

Nur Ali v. Spectra Bank

Dallas Court of Appeals, No. 05-21-01113-CV (April 6, 2022)

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

A to Z Wholesale Wine & Spirits, LLC, v. Spectra Bank

Dallas Court of Appeals, No. 05-21-01149-CV (April 6, 2022)

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

Ken Carroll

In substantially identical opinions in two related cases, the Dallas Court of Appeals made appellants painfully aware of an anomaly in the Texas rules. Under TRAP 26.1, a notice of appeal ordinarily must be filed “30 days after the [trial court] judgment is signed.” But if an appellant timely files a qualifying motion, such as a motion for new trial, TRAP 26.1(a) extends the deadline for the notice of appeal to “90 days after the judgment is signed”—but not to 30 days after the motion is overruled or denied, as one might expect and as is prescribed by the corresponding federal rule governing notices of appeal, FRAP 4(a)(4). This anomaly can prove especially treacherous where, as in these two cases, the post-judgment motion in the trial court is overruled by operation of law.

In both Ali and A to Z the appellant timely filed a motion for new trial. In each case, the motion was overruled by operation of law 75 days after the judgment was signed, pursuant to TRCP 329b(c). Instead of filing a notice of appeal within the next 15 days—that is, within 90 days after the judgment was signed—the appellants waited until 30 days after the motions were overruled, making the notices 15 days late under TRAP 26.1(a). That still gave each appellant a last-gasp, post-deadline opportunity to seek an extension under TRAP 26.3, provided they could show their delay in filing “was not deliberate or intentional, but was the result of inadvertence, mistake, or mischance.” Trying to meet that standard, each appellant argued the delay was justified to allow for “disposition of the entire case below,” i.e., for the trial court’s plenary jurisdiction to expire under TRCP 329b(e). The Court of Appeals didn’t buy it, saying it had “repeatedly held that delay caused by waiting for the trial court to rule on a post-judgment motion or for the trial court’s plenary power to expire is unreasonable as it reflects an awareness of the deadline for filing a notice of appeal but a conscious decision to ignore it.” In other words, a “deliberate [and] intentional” decision, exactly the opposite of “inadvertance, mistake, or mischance.” In each case, therefore, the Court denied the appellant’s motion to extend time to file a notice of appeal and dismissed for want of jurisdiction.

Squashed: Probate Exception Does Not Provide Jurisdiction over Roach’s Appeal

John H. Roach. v. Patricia S. Roach

Dallas Court of Appeals, No. 05-21-00754-CV (February 15, 2022)

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

Brent Rubin

Generally, Texas law allows an appeal only from final judgments and from interlocutory orders made appealable by statute. But an exception exists for interlocutory orders in a probate proceeding if an order disposes of all parties and issues for which a particular part of a probate proceeding was brought—sometimes described as allowing “multiple” final judgments in probate. To determine whether the probate exception applies, a court may consider whether the matter disposed of in the interlocutory order could properly be severed.

John Roach filed an ancillary proceeding in a probate case against Patricia Roach and Patricia Roach Tacker alleging breach of fiduciary duty, breach of a family partnership agreement, and negligence. John also sought a declaration that the Patricias, along with the decedent’s attorney, manipulated the decedent into modifying two codicils while the decedent was cognitively impaired. The Patricias filed a motion for summary judgment alleging John’s challenge to the codicils was barred by the two-year statute of limitations applicable to will contests. The trial court granted the motion, and John appealed.

The Court of Appeals applied the severability analysis and held it lacked jurisdiction over the interlocutory order dismissing John’s declaratory judgment action. Among other things, to be severable, a claim cannot be “so interwoven” with the remaining claims “that they involve the same facts and issues.” Because the alleged scheme between the Patricias and the decedent’s attorney at the heart of the declaratory action was also significant to the remaining claims for breach of fiduciary duty, breach of the partnership agreement, and negligence, the Court concluded the declaratory action was not subject to severance and the interlocutory order dismissing the single claim was not appealable.

The Court of Appeals suggested it disagreed with In re Estate of Florence, 307 S.W.3d 887, 889 (Tex. App.—Fort Worth 2010, no pet.), a “somewhat factually similar case.” The Dallas Court explained that Florence only briefly addressed jurisdiction over the interlocutory order in a footnote without providing meaningful analysis.

Don’t Sleep on Mandamus in Dallas

In re Ruff, No. 05-21-00886-CV (Tex. App.—Dallas February 15, 2022) Justices Molberg, Reichek (Opinion, linked here), and Garcia

In re Perez-Merino, No. 05-22-00082-CV (Tex. App.—Dallas February 14, 2022) Justices Schenck, Reichek (Opinion, linked here), and Carlyle

In re Tekin & Associates, LLC, No. 05-21-00219-CV (Tex. App.—Dallas February 9, 2022) Justices Osborne, Pedersen, III (Opinion, linked here), and Goldstein

Ken Carroll

There is no hard and fast deadline for filing a mandamus petition. But, although mandamus is not technically “an equitable remedy,” it is guided by principles of equity—including laches. And in the last week alone, the Dallas Court of Appeals has summarily denied three mandamus petitions for what it deemed to be excessive delays in filing. In each opinion the Court said, “[A]n unexplained delay of four months or more can constitute laches and result in denial of mandamus relief,” citing Rivercenter Associates v. Rivera, 858 S.W.2d 366 (Tex. 1993) (orig. proceeding), and decisions from the Dallas Court of Appeals and others to the same effect. With these three short, substantially identical opinions in a single week, the Court would seem to be signaling that, absent a good explanation, a delay of four months in filing for mandamus relief can (will?) trigger denial of a petition irrespective of the merits. Moral of the story: if you’re considering filing a mandamus in the Dallas Court of Appeals, get on with it.

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.

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.

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.

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.

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.

DALLAS COURT OF APPEALS CONTINUES TO REIN IN THE TCPA’S APPLICABILITY TO BUSINESS DISPUTES

Palladium Metal Recycling, LLC v. 5G Metals, Inc.

Dallas Court of Appeals, No. 05-19-00482-CV (July 28, 2020)

Justices Bridges, Molberg (Opinion, linked here), and Partida-Kipness

Woods Capital Enterprises, LLC v. DXC Technology Services, LLC

Dallas Court of Appeals, No. 05-19-00380-CV (July 29, 2020)

Justices Pedersen, III, Reichek (Opinion, linked here), and Carlyle (Concurrence, linked here)

Ken Carroll

In a pair of opinions this week, the Dallas Court of Appeals continued its trend of holding the TCPA inapplicable to many private business disputes. Palladium arose from a disagreement regarding a joint venture to acquire and re-sell scrap metals. Woods Capital grew out of a failed agreement for the sale of a large tract of commercial real estate. In each case, the Court of Appeals held the TCPA’s free-speech and right-of-association protections did not apply to communications and conduct focused on the business dealings of the parties involved. In each case, the Court referenced the stated purpose of the TCPA to protect “public participation” and drew upon the Supreme Court’s decision last year in Creative Oil & Gas, LLC v. Lona Hills Ranch, LLC, 591 S.W.3d 127 (Tex. 2019). A sampling of the Court’s observations in the two cases:

• “The TCPA’s purpose of curbing strategic lawsuits against public participation is not furthered by a construction finding a right of association based simply on communications between parties with a shared interest in a private business transaction.”

• Rejecting a TCPA free-speech attack, the Court held the allegations targeted by the motion “lack any communications regarding matters of public concern as opposed to private pecuniary interests and thus do not implicate the TCPA’s protection of Palladium’s exercise of the right of free speech.”

• Acknowledging that the TCPA defines “matters of public concern”—the linchpin of TCPA free-speech protection—to include “issues related to health or safety; environmental, economic, or community well-being; the government; a public official or public figure; or a good, product, or service in the marketplace,” the Court cautioned that “not every communication related to one of the broad categories set out in [the statute] always regards a matter of public concern.” Because the record was “devoid of allegations or evidence that the dispute had any relevance beyond the pecuniary interests of the private parties involved,” the Court refused to find TCPA free-speech protections applicable.

• “This Court has consistently held that to constitute an exercise of the right of association under the TCPA, the nature of the communication between individuals who join together must involve public or citizen participation.”

Beyond its pronouncements on the applicability of the TCPA to business disputes, each decision also included an additional holding to which litigants should be alert. In Palladium, the Court held the TCPA movant had waived its objections to the non-movants’ evidence because it had not obtained a ruling on those objections and had not objected to the trial court’s failure to rule.

In Woods Capital, the Court ruled that the movant had “forfeited its [TCPA] motion” by failing to schedule a hearing within the period prescribed by statute. The TCPA allows the parties to delay a hearing by agreement for up to 90 days after service of the motion. A hearing may be delayed up to 120 days only if the court, upon a showing of good cause, “allows” limited discovery related to the TCPA motion. Reaffirming its ruling earlier this summer in Walker v. Pegasus Eventing, LLC, the Court held that the parties’ agreement to conduct discovery and the court’s acquiescence does not equate to “allowance” by the court that triggers the extra 30 days. Consequently, failure to schedule a hearing within the 90-day period, without court “allowance” of discovery, resulted in forfeiture of the motion.

GOVERNMENT HOSPITAL NOT IMMUNE FROM SUIT FOR MISPLACED SURGICAL SPONGE

University of Texas Southwestern Medical Center v. Rhoades

Dallas Court of Appeals, No. 05-19-00445-CV (June 30, 2020)

Justices Molberg, Partida-Kipness (Opinion linked here), and Bridges (Concurring and Dissenting Opinion linked here)

Lyndon Bittle

A divided Dallas Court of Appeals panel held the University of Texas Southwestern Medical Center (UTSW) does not have governmental immunity in a lawsuit arising from a medical team’s failure to remove a sponge during surgery.

As a breast reconstruction operation neared conclusion, the medical staff reported one of the surgical sponges used to absorb blood during the operation was missing. After a visual search of the surgical field did not reveal the location of the sponge, the doctor ordered x-rays with a portable x-ray machine. The missing sponge did not appear on x-rays of the chest and abdomen. The patient’s position did not allow x-rays of the pelvic area, but the doctor was confident the sponge would not have been there, and concluded the sponges must have been miscounted. The surgery was concluded and the patient was sent to intensive care for recovery. The search for the missing sponge added several hours to what normally would have been a six-hour surgery.

While the patient was recovering, an x-ray of her pelvic region revealed the missing sponge, which was then removed in a second surgery. The patient developed post-operative complications that required four additional surgeries. The patient sued UTSW for medical negligence. UTSW filed a plea to the jurisdiction on the grounds that as a governmental hospital, it is immune from the patient’s suit. The trial court denied the plea, finding immunity was waived under the Texas Tort Claims Act. UTSW appealed.

On appeal, the dispositive issue was whether UTSW’s governmental immunity was waived because the alleged injuries were caused by the negligent “use of tangible personal … property” under the TTCA, TEX. CIV. PRAC. & REM. CODE §101.021(2). Two separate items were at issue—the surgical sponge and the x-ray machine. UTSW argued that the claims “arise from the surgeons’ allegedly negligent medical judgment, for which immunity is not waived.” The Court affirmed the trial court’s holding as to both items, after a painstaking review of cases applying the “use of personal property” waiver of immunity, including University of Texas M.D. Anderson Cancer Center v. McKenzie, 578 S.W.3d 506 (Tex. 2019). Justice Partida-Kipness’s majority opinion, rejecting UTSW’s argument, emphasized that the doctor’s “erroneous decision to call off the search and close the remaining incisions followed the allegedly negligent use of the sponge.” Likewise, according to the majority, immunity was waived by the allegation and jurisdictional evidence that “UTSW used the machine negligently by failing to x-ray the entire surgical field.”

Justice Bridges joined the majority’s conclusion that UTSW waived immunity “for negligent use of the sponge during the operation.” He dissented, however, from the holding concerning use of the x-ray machine, arguing that the majority improperly expanded the Texas Supreme Court’s holding in McKenzie “to create jurisdiction where none exists.” Offering a detailed rebuttal to the majority’s review of the case law, Justice Bridges concluded the “negligence claims alleging misuse of the x-ray machine are artfully pleaded complaints about UTSW surgeons’ and radiology staff’s medical judgments, rather than use or misuse of tangible personal property.”

ONCE MORE, WITH FEELING: BUSINESS ENTITIES MUST BE REPRESENTED IN COURT BY A LICENSED ATTORNEY

R2Go Transport LLC a/k/a Ready 2 Go Transport LLC v. Xellex Corp.
Dallas Court of Appeals, No. 05-19-01246-CV (March 18, 2020)
Chief Justice Burns (Opinion, linked here), and Justices Molberg and Nowell

Ken Carroll

The Dallas Court of Appeals reminded us today that business entities in the State of Texas cannot appear in court pro se or through non-lawyer employees or members. Generally, except for the performance of ministerial tasks (like posting bond), only a licensed attorney may represent a business entity in a Texas court. The rule originated with respect to corporations in Kunstoplast of America, Inc. v. Formosa Plastics Corp., U.S.A., 937 S.W.2d 455 (Tex. 1996). It now extends to virtually all “fictional legal [business] entities,” including partnerships and limited liability companies. See, e.g., Sherman v. Boston, 486 S.W.3d 88, 95-96 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). “Allowing a non-attorney to present a company’s claim would permit the unlicensed practice of law.” Id. (trial evidence presented for LLC by non-lawyer “had no legal effect” and was “legally insufficient to support a judgment”). The rule applies in all courts, trial and appellate—other than small claims courts, for which there is an express statutory exception. Tex. Gov’t Code § 28.003(e) (“A corporation need not be represented by an attorney in small claims court.”).

Here, R2Go’s counsel was allowed to withdraw from the appeal. When the LLC did not obtain replacement counsel, despite having been warned and ordered to do so, the Dallas Court dismissed its appeal, because it could not proceed with its appeal without being represented by a licensed attorney.