Penny Wise But Pound Foolish. Serving as Your Company’s Registered Agent Can Be Costly in the Long Run

Huffman Asset Management, LLC v. Colter

Dallas Court of Appeals, No. 05-22-00779-CV (November 8, 2023)

Justices Partida-Kipness (Opinion, linked here), Reichek, and Breedlove

Brent M. Rubin

Entities that do business in Texas, like corporations and limited liability companies, must “designate and continuously maintain” a registered agent and a registered office to be served with process. For around $100 annually, an entity can hire a company to serve as its registered agent and provide an address for its registered office. A business owner who faces ever-increasing expenses may be tempted to save costs by personally serving as his or her business’s registered agent and listing the business’s current address as its registered office. But this decision can prove perilous, as it did in this case.

The Colters claimed their apartment was infested by insects and sued their landlord, Prairie Capital, LLC, and its property management company, Huffman Asset Management, LLC. Both entities listed Douglas Huffman as their registered agent. Public filings for Prairie Capital listed a house in Highland Village as its registered office, and Huffman Management’s filing listed an office in Dallas as its registered office. But when the Colters tried to serve Huffman at these addresses, a bank occupied the address listed for Huffman Management and their process server was told Huffman had sold the Highland Village house.

Unable to serve Huffman, the Colters served the Secretary of State, as Texas law allows when a registered agent cannot be located at the registered office. The Secretary of State must then send notice to the “most recent address of the entity on file with the secretary of state” via certified mail. Tex. Bus. Orgs. Code § 5.253. The Secretary of State issued certificates confirming that it forwarded the documents the Colters served to the Highland Village house for Huffman Management and the Dallas office for Prairie Capital and that it later received the documents back “Return to Sender.”

The Colters then obtained a default judgment. The trial court sent a Notice of Default Judgment to the defendants at a Dallas address on San Jacinto Street, which the Colters listed as the defendants’ last known mailing address but was not either defendant’s registered office. The defendants appeared and moved for a new trial. The trial court denied the motion, and the defendants appealed.

On appeal, the defendants argued the Colters’ service on the Secretary of State was invalid because they gave the Secretary of State “bad” addresses. They argued the Colters knew the San Jacinto address was the defendants’ “most recent … address on file with the secretary of state.” Tex. Bus. Orgs. Code § 5.253. The defendants pointed to public information reports filed with the Secretary of State listing the San Jacinto address as each company’s principal place of business. The court of appeals rejected this argument, reasoning that the purpose of § 5.253 and related provisions is to effect service on the designated registered agent at the designated office. The Secretary of State, according to the court, should not have to ignore an entity’s filings about its registered agent and office in favor of a more recent filing not related to service of process.

A $100 annual fee gets a company a registered agent and registered office consistently available during normal business hours at an address that will not change. While this might seem like an easy expense to eliminate because a principal of the business can serve as the registered agent, a company faces a real risk of a default judgment if its registered agent is not actually available for service or if it fails to keep its registered agent information updated with the Secretary of State.

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

Topletz v. Choice

Dallas Court of Appeals, No. 05-22-00781-CV (August 22, 2023)

Justices Carlyle (Opinion, linked here), Goldstein, and Kennedy

Brent M. Rubin

Topletz owns roughly 225 rental houses. The City of Dallas sued Topletz for various code violations. Several Topletz tenants intervened in 2016, asserting claims individually and on behalf of a class, alleging, among other things, that Topletz’s standard lease omitted certain language about tenant remedies required by Texas Property Code § 92.056(g) and improperly shifted certain repair duties from Topletz to the tenants in violation of § 92.006 of the Property Code. In a lengthy order, the trial court certified a class, and Topletz brought an interlocutory appeal.

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

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

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

Ebby Halliday Real Estate, Inc. v. Giambrone

Dallas Court of Appeals, No. 05-22-00386-CV (February 28, 2023)

Justices Reichek, Nowell, and Garcia (Opinion, linked here)

Brent M. Rubin

On September 2, 2020, Giambrone and Ebby Halliday Real Estate executed an exclusive listing agreement that provided Halliday a 6% commission if Giambrone’s property sold. After five months, Giambrone had not received any serious offers, so Giambrone and Halliday entered into a “Termination Agreement.” The Termination Agreement provided, in pertinent part, that 3% of the sales price would go to Halliday if Giambrone sold the property by December 31, 2021.

In June 2021, Giambrone had Compass list the property, and it promptly sold. Giambrone refused to pay Halliday the 3% fee prescribed in the Termination Agreement—$167,250. Halliday sued for breach of contract. The parties filed cross-motions for summary judgment. The trial court granted Giambrone’s motion. Halliday appealed.

The Court of Appeals reversed and rendered judgment, holding Halliday was entitled to the 3% fee. The appeal focused largely on the “producing cause” doctrine. This doctrine, which dates back to the Texas Supreme Court’s decision Goodwin v. Gunter, 185 S.W. 295, 296 (Tex. 1916), provides that a broker’s entitlement to a commission vests by procuring the sale. Here, Compass, not Halliday, found the buyer. But the producing cause doctrine is only a default rule, and parties can displace it through the terms of their agreement.

After observing that it is “not uncommon” for a broker to receive a commission by agreement after having its listing terminated, the Court of Appeals concluded the Termination Agreement overrode the producing cause doctrine. Because the termination agreement provided Halliday a 3% fee if Giambrone agreed to “sell or lease the Property” to “anyone” on or before December 31, 2021, Halliday did not need to procure the sale to receive the fee. Therefore, the Court of Appeals rendered a $167,250 judgment for Halliday and remanded for the trial court to determine Halliday’s attorneys’ fees on its breach-of-contract claim.

Distribution Center Deemed “Principal Office” Under Venue Statute

Deere & Co. v. Bernal

Dallas Court of Appeals, No. 05-22-00916-CV (January 17, 2023)

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

Brent M. Rubin

Bernal had a fatal accident in Comanche County, Texas while he was operating a tractor manufactured by Deere. Bernal’s next of kin sued Deere and Bernal’s employer in Dallas County. They pleaded venue was proper in Dallas County under section 15.002(a)(3) of the Civil Practice and Remedies Code, which provides for venue in a county where at least one defendant has a “principal office.” Plaintiffs alleged that Deere has a principal office in Dallas County. Deere moved to transfer venue, denying that it had a principal office in Dallas County and arguing the case should be transferred to Comanche County, where the accident occurred, or Lamar County, where Bernal’s employer purportedly had its principal office. The trial court denied the motion to transfer, and Deere brought an interlocutory appeal.

When a defendant challenges venue, the plaintiff has the burden of presenting a prima facie case that venue is proper in the county in which it brought the lawsuit. Any venue facts pleaded by the plaintiff and not specifically denied by the defendant are treated as true. As to venue facts the defendant has specifically denied, the plaintiff must submit affidavits and documents authenticated by its affidavits to support its pleaded venue facts. Deere specifically denied the plaintiffs’ pleaded venue facts, so the plaintiffs had the burden of establishing a prima facie case that Deere had a principal office in Dallas County.

The venue statute defines “principal office” as the “a principal office of the corporation … in this state in which the decision makers for the organization within this state conduct the daily affairs of the organization.” A principal office must have decision makers for the company who have at least substantially equal authority and responsibility to other company officials in Texas. The plaintiffs submitted evidence that Deere operates a 230,000-square-foot regional distribution center in Dallas County that distributes parts to dealers in several states. The manager of the distribution center supervises over fifty-five employees, including several employees who themselves have supervisory responsibilities, and the manager does not report to anyone above him in Texas. The court of appeals concluded that these facts established that the Dallas County distribution center was “a principal office” in Texas and therefore affirmed the trial court’s denial of the motion to transfer.

Fifth Court: Twenty-Plus Years of Precedent on Bankruptcy Trustee’s “Exclusive Standing” Implicitly Overruled by SCOTX

Moser v. Dillon Investments, LLC 

Dallas Court of Appeals, No. 05-21-00204-CV (August 2, 2022) 

Justices Myers (Opinion, linked here), Osborne, and Nowell 

 Brent M. Rubin 

Mason claimed that, while staying at a hotel on June 30, 2017, she was taking a shower and the bathtub floor shifted, causing her to fall and hit her head. On June 13, 2019, Mason sued the hotel in state court for negligence. But in April 2018, Mason had filed for Chapter 7 bankruptcy without listing her potential claim against the hotel on her schedule of assets. By the end of 2018, Mason had received a discharge and the bankruptcy case had terminated.

The hotel initially sought summary judgment, alleging Mason lacked standing to assert the claim and that she was judicially estopped from bringing the claim. The hotel argued that because Mason had not disclosed the claim in her bankruptcy schedules, the claim remained with the bankruptcy estate and was not returned to her upon the bankruptcy’s termination. Mason then filed a motion in bankruptcy court to reopen the bankruptcy to amend her schedules to add the negligence claim, which the bankruptcy court granted. 

In January 2021, Moser, the bankruptcy trustee, filed an amended petition in the state court case on behalf of Mason’s bankruptcy estate, alleging the same negligence claim against the hotel. The hotel moved for summary judgment, arguing the amended petition was filed after the two-year statute of limitations had run. The trial court granted the motion. 

Moser’s appeal centered on the relation-back doctrine. Section 16.068 of the Texas Civil Practice and Remedies Code provides that when a party initially brings a timely claim, “a subsequent amendment or supplement to the pleading that changes the facts or grounds of liability or defense is not subject to a plea of limitation unless the amendment or supplement is wholly based on a new, distinct, or different transaction or occurrence.” But the relation-back doctrine does not apply to an amended petition when the trial court lacked subject-matter jurisdiction over the original petition. 

Mason first brought her negligence claim within the two-year statute of limitations, and Moser’s amended petition on behalf of the bankruptcy estate alleged the same facts as Mason’s original petition. So, to determine whether the relation-back doctrine applied, the court of appeals considered whether the trial court had jurisdiction when Mason first sued. 

The court of appeals explained that for the trial court to lack jurisdiction based on a lack of standing, Mason had to lack “constitutional” standing. The Court noted that courts have, at times, blurred the distinction between standing and capacity—a critical if sometimes confusing distinction, because standing is jurisdictional, while capacity is not. In 1999, the Texas Supreme Court held in Douglas v. Delp that a bankruptcy trustee had “exclusive standing” to bring claims on behalf of the estate, quoting a 1994 Fifth Circuit decision that did not expressly address the question of constitutional standing. After an extensive analysis of later Fifth Circuit cases on a bankruptcy trustee’s authority to bring claims on behalf of the estate as well as later Texas Supreme Court decisions addressing the distinction between standing and capacity, the court of appeals concluded the Texas Supreme Court had implicitly overruled Douglas and the various intermediate appellate decisions—including those of the Fifth Court—that had followed it. 

 Accordingly, the Court said, Mason had standing to bring her claim in 2019; she merely lacked capacity to assert it. Therefore, the trial court had subject-matter jurisdiction in 2019, Moser’s amended petition in 2021, in his capacity as bankruptcy trustee, related back to Mason’s timely 2019 petition, and the trial court erred in granting summary judgment based on the statute of limitations.

“Taking Responsibility” ≠ Negligence as a Matter of Law

Yedlapalli v. Jaldu

Dallas Court of Appeals, No. 05-20-00531-CV (June 28, 2022)

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

Brent M. Rubin

While Yedlapalli was stopped at a stop sign, Jaldu rear-ended her. Yedlapalli testified that, from her rear-view mirror, she saw Jaldu on her cell phone and that Jaldu never slowed down. Jaldu, in contrast, claimed she was at a complete stop behind Yedlapalli and reached down to get a piece of paper on the floor, which caused her foot to slip off the brake and her car to roll forward and tap Yedlapalli’s car.

Yedlapalli sued Jaldu, claiming not only damage to her car but also bodily injury. On cross-examination, Yedlapalli’s attorney asked Jaldu if she was “taking one hundred percent responsibility for the crash.” Jaldu agreed that her car hit Yedlapalli’s when her foot slipped from the brake. Jaldu also admitted she told Yedlapalli at the scene that it was her “mistake,” making her responsible for the damage to Yedlapalli’s car. But Jaldu refused to take responsibility for Yedlapalli’s purported injuries, claiming everyone was “completely fine” immediately after the accident. Jaldu also explained to the jury that it was “fishy” that Yedlapalli sued only after Yedlapalli did not pay her medical bills.

Yedlapalli moved for a directed verdict based on Jaldu’s purportedly “taking one hundred percent responsibility” for the accident. The trial court denied the request for directed verdict. The jury later answered “no” on the question whether Jaldu’s negligence caused the occurrence in question. So, the trial court entered a take-nothing judgment against Yedlapalli.

Yedlapalli appealed, challenging the denial of the motion for directed verdict and the factual sufficiency of the evidence supporting the jury’s finding on negligence. On the directed verdict, the court of appeals explained that acceptance of responsibility, standing alone, does not establish negligence as a matter of law. The court observed that a jury could have concluded a person of ordinary prudence, sitting at a complete stop a safe distance behind Yedlapalli, could have reached down to pick up a piece of paper, as Jaldu testified. On factual sufficiency, the court similarly explained that a rear-end collision, standing alone, does not mean a jury’s failure to find negligence is not supported by sufficient evidence. The jury could have credited Jaldu’s account and concluded that a reasonably prudent person would have acted in the same way. Or, the jury could have concluded Yedlapalli failed to meet her burden of proving negligence by a preponderance of the evidence. Therefore, the court of appeals affirmed.

Not So Fast: Trial Court Cannot Compel Discovery While Plea to Jurisdiction Attacking Pleadings Is Pending

In re Dallas County, Texas and Dallas County Constable Bill Gipson

Dallas Court of Appeals, No. 05-21-01144 (May 10, 2022)

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

Brent Rubin

After Gipson was elected constable, he told deputy constables Woodard and Yarbrough that they would not be re-sworn as deputy constables after he took office. Woodard and Yarbrough sought to pursue grievances with Dallas County. But the County concluded they were not covered by the civil-service grievance system because they had been hired after August 19, 2003; it therefore denied them a grievance hearing.

Woodard and Yarbrough then sued, claiming they were denied their property rights in employment and denied equal protection because they were not allowed to access the grievance procedure available to those hired before August 19, 2003. The County and Constable Gipson answered and filed pleas to the jurisdiction based on governmental immunity. After the jurisdictional pleas were filed, Woodard and Yarbrough moved to compel discovery. The trial court ordered the County and Constable Gipson to respond to discovery requests and to appear for depositions.

The County and Constable Gipson sought mandamus relief, arguing discovery was improper while their pleas to the jurisdiction were pending.

The Court of Appeals explained that there are two types of pleas to the jurisdiction: an attack on the sufficiency of the pleadings and an evidentiary attack on the existence of jurisdictional facts. When a plea to the jurisdiction is based on evidence, a trial court has discretion to decide the plea at a preliminary hearing or later, after the case is more fully developed. If the trial court delays determination, the trial court can also allow targeted discovery on issues relevant to the plea to the jurisdiction. In contrast, when a plea to the jurisdiction is based on the pleadings alone, discovery is not proper while the plea is pending.

The Court of Appeals concluded the County’s and Constable Gipson’s pleas to the jurisdiction were based on the pleadings, so the trial court was obligated to hear and decide the pleas to the jurisdiction before compelling discovery. Further, the Court of Appeals noted that even if this were a scenario where the court could compel targeted discovery, the trial court erred by failing to confine the compelled discovery to jurisdictional issues. The Court of Appeals therefore granted mandamus relief, directing the trial court to vacate its order compelling discovery.

Mandamus Relief for Denial of Advancement of Defense Costs

In re DeMattia

Dallas Court of Appeals, No. 05-21-00460-CV (April 12, 2022)

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

Brent M. Rubin

Mark DeMattia co-owned Restoration Specialists, LLC and served as its managing member. In 2018, he sold the company. But a few days before the closing, he allegedly copied or deleted certain files. Under its new owners, Restoration later sued DeMattia, alleging breach of fiduciary duty and misappropriation of trade secrets.

DeMattia, in turn, demanded that Restoration indemnify him and advance his defense costs, pursuant to Restoration’s corporate regulations. The Texas Business Organizations Code allows LLCs to indemnify and advance defense costs, through their organizing documents, to both current and former officials and governing persons. After Restoration denied his demand for advancement, DeMattia counterclaimed and moved for summary judgment. Restoration responded that the advancement provision in the company regulations, by its terms, did not apply to former managers like DeMattia. The trial court denied DeMattia’s motion.

DeMattia sought mandamus relief in the Dallas Court of Appeals. Applying contract interpretation principles, the Court held that the advancement provision in Restoration’s corporate regulations did cover former managers like DeMattia, so the trial court erred by denying DeMattia’s motion for summary judgment. The Court also rejected Restoration’s argument that DeMattia’s “unclean hands”—his alleged misappropriation and breach of fiduciary duty—barred advancement as a matter of public policy. The Court explained that every lawsuit involves allegations of wrongdoing, so denying advancement based mere allegations of unclean hands would render the right to advancement a nullity.

Finally, the Court held DeMattia did not have an adequate remedy by appeal, a requirement for mandamus relief. The right to advancement can be satisfied only during proceedings in the trial court, so proceeding to trial without advancement, when a party is entitled to advancement, would defeat the right to advancement. Therefore, the Court ordered the trial court to vacate its denial of summary judgment and issue an order granting DeMattia’s motion.

Court-Ordered Mediation on Appeal

Newsom, Terry & Newsom, LLP v. Henry S. Miller Commercial Co.

Dallas Court of Appeals, No. 05-20-00379-CV (February 22, 2022)

Justice Carlyle (Order, linked here)

Brent M. Rubin

In the U.S. Court of Appeals for the Fifth Circuit, it’s not unusual to get a notice that a case has been referred to the Circuit Mediation Program. When the circuit mediator has selected a case for the program, any party may opt out, which concludes mediation proceedings (at least as to that party). When the Court has referred a case to the program, the Court has discretion to grant or deny an opt-out request. Similarly, some Texas courts of appeals, like the First Court in Houston, have appellate mediation programs under which the court can order the parties to mediation.

The resources on the Fifth Court of Appeals website do not mention a formal mediation program. (One appears to have existed under a prior version of the Court’s local rules.) The Court’s current Internal Operating Procedures state that if “both parties notify the Court that they have agreed to a mediator, the Court will refer the case to mediation,” but do not speak to the Court’s ordering mediation without a request from the parties. Nonetheless, the Fifth Court has the power to order the parties to mediate under Chapter 154 of the Civil Practice and Remedies Code. The Court doesn’t frequently order parties to mediate without a request. But it just did so in Newsom, a legal malpractice case argued in November 2021.

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.

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

Courtney D. Alsobrook v. MTGLQ Investors, LP

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

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

Brent Rubin

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

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

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

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

In re David Mu

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

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

Brent Rubin

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

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

WHAT’S HAPPENING WITH MY APPEAL? TCPA CASE SHEDS LIGHT ON COURT’S PROCESSES

U.S. Anesthesia Partners of Texas, P.A. v. Whitney Kelley Mahana
Dallas Court of Appeals, No. 05-18-01414 (August 27, 2019)
Justices Bridges (Dissent, linked here), Brown, and Nowell (Opinion, linked here); Dissent from Denial of En Banc Rehearing by J. Whitehill (linked here)

Brent Rubin

Mahana, a nurse anesthetist, alleged that her supervisor at U.S. Anesthesia Partners sent text messages falsely stating that she tested positive for drugs and was being fired. Mahana sued the employer for intentional infliction of emotional distress. The employer moved to dismiss under the TCPA and appealed after the trial court denied the motion.

In a split decision, the Dallas Court of Appeals concluded that because the text messages did not address Mahana’s job performance, they were not “communications related to the provision of medical services by a health care professional.” Therefore, the text messages were not an exercise of the employer’s right to free speech, which the TCPA defines to include communications on an “issue related to health or safety,” and the TCPA did not apply. Justice Bridges dissented, arguing that any drug use that could impair Mahana’s ability to do her job had a sufficient relationship to issues of health and safety, such that the TCPA applied to the text messages.

Notably, at the same time the majority opinion and dissent issued, Justice Whitehill also issued an opinion dissenting from the denial of reconsideration en banc, arguing that the majority opinion conflicted with the Court’s own precedent. Justice Whitehill’s dissent sheds light on some of the Court’s behind-the-scenes practices:

How did the opinion and the dissent from the denial of en banc reconsideration issue on the same day? Did U.S. Anesthesia Partners request en banc reconsideration before the Court issued its opinion?

No, U.S. Anesthesia Partners never moved for reconsideration en banc. TRAP 49.7 allows a “majority of the en banc court may…, with or without a motion, [to] order en banc reconsideration of a panel’s decision.” And the Court’s own Internal Operating Procedures note that it will “on occasion” sit en banc without a request from the parties. So, Justice Whitehill requested en banc consideration sua sponte.

But doesn’t the en banc process start after the opinion issues?

No, TRAP 49.7 allows en banc consideration to occur at any time the Court has plenary power. In fact, a Court can order the case to be heard en banc in the first instance. See TRAP 41.1(a), 41.2(a). For example, the Court might order en banc consideration at the outset when an appeal directly challenges binding precedent from the Court, which a panel cannot overrule.

I still don’t understand why the vote on en banc happened before the Court issued an opinion in the case. 

Although we can’t know the precise reasons why Justice Whitehill requested en banc review when he did, a few considerations appear to be at play. First, the Court has a practice, which some Justices have mentioned but which does not appear to be formally memorialized for the public, of circulating opinions in certain cases to the entire Court before an opinion issues. This will occur, among other times, when there will be a dissent in a case heard by a three-justice panel, as occurred here. Second, the Court has an internal goal of issuing opinions in all cases that have been argued (or submitted without argument) before the start of its new fiscal year on September 1. The opinions here issued on August 27. Both of these factors could have led to the decision to address en banc review at the same time the panel was issuing its opinions.

THE TCPA’S FINAL FRONTIER? COURT OF APPEALS DECLINES TO ADDRESS WHETHER TCPA APPLIES TO FAMILY LAW CASE

Smith v. Malone
Dallas Court of Appeals, No. 05-18-00216-CV (November 27, 2018)
Justices Myers, Evans (Opinion, linked here), and Brown

Brent Rubin

Recently, Texas courts have applied the Texas Citizens Participation Act (TCPA) to cases far afield from the defamation claims typically targeted by anti-SLAPP statutes. For instance, the TCPA has been wielded in commercial disputes to secure expedited dismissal of fraud and misappropriation-of-trade-secrets claims. In Smith v. Malone, the Dallas Court of Appeals was asked to apply the TCPA in an even more unexpected context: a family law dispute.

Malone and Smith had a son together. Several years later, Malone filed a suit requesting that both parents be named joint managing conservators of the child, with Malone having the right to designate the child’s primary residence. Smith moved to dismiss under the TCPA, alleging that Malone filed the suit in response to her request that the Texas Attorney General assist her in obtaining child support from Malone (an alleged exercise of her “right to petition,” protected by the TCPA). Smith provided text messages purporting to show that when she told Malone she was seeking child support, Malone responded that he would seek custody of their son. The trial court denied Smith’s motion, and Smith brought an interlocutory appeal, as the TCPA permits.

Although the Court of Appeals acknowledged that the TCPA does not contain an express exception preventing its application to custody proceedings or family matters (as it does for other types of claims), the Court declined to address whether the TCPA applied to Malone’s suit. Instead, the Court concluded that even if the TCPA applied, dismissal would be inappropriate because Malone established a prima facie case on the challenged claim, as the TCPA requires for a plaintiff to avoid dismissal. As the undisputed father of the child, Malone was entitled to an order determining conservatorship without proving any more. Evidence about what would be in the child’s best interest—the standard used to determine the substance of the conservatorship order—was not necessary to establish Malone’s prima facie case. The Court therefore affirmed the denial of Smith’s TCPA motion to dismiss.

YES, THE TCPA PROTECTS LAWYERS’ SPEECH, TOO

Youngkin v. Hines
Supreme Court of Texas, No. 16-0935 (April 17, 2018)
Justice Lehrmann (Opinion, linked here)

Brent Rubin

During trial in a property dispute, Youngkin, an attorney, negotiated a settlement between his clients, the Scotts, and Hines. Youngkin recited the terms of the settlement into the court record as prescribed by Texas Rule of Civil Procedure 11. Hines later argued the settlement entitled him to full ownership of a tract of land but that the Scotts deeded him only partial ownership. Hines sued the Scotts for fraud and breach of the settlement agreement. Hines also sued Youngkin for participating in the Scotts’ allegedly fraudulent scheme by, among other things, entering into the Rule 11 agreement on the Scotts’ behalf while purportedly knowing the Scotts had no intent to comply.

Youngkin moved to dismiss under the Texas Citizens Participation Act, Texas’s anti-SLAPP statute. The trial court and the court of appeals denied Youngkin’s request, but the Supreme Court of Texas disagreed, finding the claims against Youngkin should be dismissed. The Legislature enacted the TCPA for the purpose of “safeguard[ing] the constitutional rights of persons to petition, speak freely, [and] associate freely.” The TCPA applies when a claim is based on or related to the exercise of one of those rights. Once a court determines that the TCPA applies, a plaintiff must put forward prima facie evidence of each element of its claim to avoid dismissal. Alternatively, a defendant can obtain dismissal by establishing a defense by a preponderance of the evidence.

The TCPA defines the exercise of the right to petition to include “a communication in or pertaining to ... a judicial proceeding.” Hines argued that Youngkin was merely speaking for his clients and was thus not exercising any personal First Amendment right entitled to protection under the TCPA, pointing to the purposes provision of the statute. The Court disagreed. It explained that the TCPA’s application is not restricted to activities protected by the First Amendment because the portion of the statute defining the “exercise of the right to petition” contains no such limitation. The Court ruled that under the plain language of the TCPA, Youngkin’s recitation of the Rule 11 agreement in open court was an exercise of the right to petition triggering application of the TCPA.

The Court then concluded Youngkin was entitled to dismissal because he established the affirmative defense of attorney immunity under the Court’s 2015 decision in Cantey Hanger, LLP v. Byrd. In Cantey Hanger, the Court held that an attorney’s liability to non-clients is limited to conduct outside the scope of his or her representation of his or her client or for conduct foreign to the duties of a lawyer. At bottom, the dispute between Hines and the Scotts turned on a disagreement over the substance of the settlement agreement. Youngkin’s negotiation of and subsequent advocacy for a favorable interpretation of that agreement in the service of his clients—“even if done improperly”—fell within the scope of his representation and thus afforded him attorney immunity and dismissal under the TCPA.

LESS ONEROUS NOTICE REQUIREMENTS APPLY TO RULE 202 PETITION WHEN SUIT IS NOT “ANTICIPATED”

Glassdoor, Inc. v. Andra Group, LP
Dallas Court of Appeals, No. 05-16-00189-CV (March 24, 2017)
Justices Francis, Stoddart, and Whitehill (Opinion, linked here)

Brent Rubin

Glassdoor operates a website that allows users to post anonymous reviews of their employers. Andra discovered negative reviews posted on Glassdoor’s site and filed a Rule 202 petition seeking a pre-suit deposition from Glassdoor. In the petition, Andra asserted it did not anticipate claims against Glassdoor. Rather, Andra desired to learn the identities of the anonymous reviewers to investigate potential defamation and business disparagement claims against the reviewers.

Rule 202 permits a deposition before a lawsuit is filed for two purposes: (1) “to perpetuate or obtain . . . testimony . . . for use in an anticipated suit” and (2) “to investigate a potential claim or suit.” Before the petition is heard, notice must be given to the proposed deponent, and if suit is “anticipated,” notice must also be given to persons expected to be adverse to the petitioner in the anticipated suit. Notice can be given to unnamed persons by publication.

Andra gave notice to Glassdoor but failed give notice to the anonymous reviewers. The trial court concluded Andra’s petition sought to investigate a “potential” claim, not an “anticipated” claim, such that the reviewers need not be given notice. The court of appeals held this was not an abuse of discretion. The petition largely tracked the language of the “potential claim” portion of Rule 202. The Court also questioned whether a Rule 202 petition filed solely to identify anonymous reviewers seeks “testimony” within the meaning of the rule.

Glassdoor argued suit was “anticipated” because Andra already had the negative reviews and only sought the identity of the reviewers. The Court disagreed. Even if Andra learned the reviewers’ identities, suit would not inevitable. Andra would then need to learn more about the reviewers and their relationship with the company to evaluate certain defenses, such as substantial truth, before deciding whether to file suit.

SCOTX REMINDS PLAINTIFFS TO CHECK ALL THE BOXES BEFORE FILING A CLAIM AGAINST AN ARCHITECT

Levinson Alcoser Associates, L.P. v. El Pistolón II, Ltd.
Supreme Court of Texas, No. 15-0232 (February 24, 2017)
Justice Brown (Opinion, linked here); Justice Boyd (Concurring)

Brent Rubin

El Pistolón sued Levinson, its architect, after it became dissatisfied with Levinson’s services on a commercial retail project. In a suit concerning professional services rendered by an architect (or certain other licensed professionals), Chapter 150 of the Civil Practice and Remedies Code requires a plaintiff to submit a sworn certificate of merit. The certificate of merit must be prepared by a third-party professional who (a) has the same professional license as the defendant; (b) is licensed in Texas; (c) is actively engaged in practice; and (d) is knowledgeable in the defendant’s area of practice.

El Pistolón submitted an affidavit from Payne, an actively practicing Texas-licensed professional architect. But the affidavit was silent as to Payne’s knowledge of Levinson’s practice area, shopping centers and similar commercial construction. After the trial court denied Levinson’s motion to dismiss, Levinson brought an interlocutory appeal. The court of appeals affirmed, but the Supreme Court did not. The Court recognized that an architect’s knowledge may be established outside the affidavit, but concluded there was no record evidence that could satisfy the knowledge requirement. So the Court remanded to the trial court with instructions to dismiss, leaving it to the trial court to decide whether the dismissal should be with or without prejudice.

“ANALYTICAL GAP” TEST, NOT ROBINSON FACTORS, APPLIES TO TESTIMONY OF FORENSIC PSYCHIATRIST

Texas Capital Bank v. Asche
Dallas Court of Appeals, No. 05-15-00102-CV (February 17, 2017)
Justices Bridges, Francis, and Whitehill (Opinion, linked here)

Brent Rubin

In this will contest, the jury found that Asche lacked capacity to execute a series of wills, codicils, and trusts and that his wife, Sallie, exerted undue influence over him. These jury findings were supported by the expert testimony of Clayton, a forensic psychiatrist.

Clayton’s testimony was challenged on reliability grounds. Courts tasked with evaluating the reliability of expert testimony often apply a list of non-exclusive factors from the Texas Supreme Court’s decision in E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549 (Tex. 1995). These factors focus on the scientific testing and methodology underlying the opinion. But the Robinson factors are not appropriate in every case. In certain situations, courts apply the “analytical gap test.” This test considers whether the expert’s field is legitimate, whether the testimony falls within that field, and whether the testimony properly relies on the data and the principles involved in the field.

The court of appeals characterized psychiatric testimony as a “soft science”—that is, experts in the field rely on experience or training to reach their opinions rather than on a particular scientific methodology. Therefore, the analytical gap test, not the Robinson factors, was properly used to evaluate Clayton’s testimony. After applying the analytical gap test—i.e., evaluating “whether there is too great an analytical gap between the data and the opinion proffered for the opinion to be reliable”—the court of appeals concluded the trial court did not abuse its discretion in admitting Clayton’s psychiatric testimony.

“IF YOU COME AT THE KING, YOU BEST NOT MISS”—SCOTX REFINES ULTRA VIRES EXCEPTION TO SOVEREIGN IMMUNITY

Hall v. McRaven
Supreme Court of Texas, No. 16-0773 (January 27, 2017)
Justice Devine (Opinion linked here); Justice Willett (Concurring); Justice Guzman (Concurring); Justice Lehrmann (Concurring); Justice Brown (Concurring)

Brent Rubin

In the context of a squabble within the University of Texas administration, the Supreme Court of Texas sought to clarify the ultra vires exception to sovereign immunity. The Court first explained how to determine whether a subordinate or higher official should be named as a defendant. The Court also held an official’s misinterpretation of a particular law is not ultra vires if the official has unconstrained discretion to interpret that law.