Vice Principals, the Fifth Amendment, and Negative Inferences

 Lurks v. Designer Draperies and Floors, Inc. 

 Dallas Court of Appeals, No. 05-21-00908-CV (July 27, 2022)

 Justices Schenck (Opinion, linked here), Osborne, and Smith 

 Ken Carroll 

While Lurks was attending to a disabled car in the right lane of the I-20 frontage road, Heitzman struck that car from behind, seriously injuring Lurks. Heitzman failed a field sobriety test at the scene, was arrested, and then tested well above the legal limit for blood alcohol. Lurks sued Designer Draperies and Floors (“DDF”), arguing that when Heitzman became intoxicated and decided to drive anyway, he was acting as a “vice principal” of DDF. “In other words, Lurks urge[d] that DDF step[ped] into the shoes of Heitzmann and is, therefore, directly liable for Lurks’s injuries.” 

The trial court, however, granted summary judgment to DDF, and the Court of Appeals affirmed. There was some evidence—and potential inferences from Heitzman’s invocation of his Fifth Amendment rights in his deposition—that Heitzman “consum[ed] alcoholic beverages at DDF’s workplace, that he was drinking with employees of DDF, and, perhaps, that someone encouraged him to drive.” But none of this was sufficient even to raise a fact question that Heitzman’s conduct was “referable to DDF’s business,” which the Court ruled was essential to a “vice principal” theory of liability against DDF. 

Along the way, the Court assumed, without deciding, that “a jury would be allowed to draw negative inferences regarding Heitzmann’s assertion of his Fifth Amendment privilege.” Because of the Court’s determination that Lurks had failed to adduce any evidence that Heitzman’s alleged misconduct was “referable to DDF’s business,” indulging this assumption didn’t matter. But it wades into murky waters. Heitzman was not a party to the lawsuit, even though his actions were a focus of the case. The question whether a witness’s invoking the Fifth will give rise to a negative inference against someone else is difficult, to say the least. The answer may differ depending on whether the issue arises in Texas or federal court, and whether the witness can be said to have been acting for the other party such that his or her invocation of privilege can be attributed to that party as his words would have been under Tex. R. Evid. 801(e)(2)(D). Compare, e.g., P.C. as next friend of C.C. v. E.C., 594 S.W.3d 459, 461-65 (Tex. App.—Fort Worth 2019, no pet.), with Wil-Roye Inv. Co. II v. Washington Mut. Bank, FA, 142 S.W.3d 393, 403-07 (Tex. App.—El Paso 2004, no pet.).

Duty Not to Distract a Driver Applies Only to Others in the Vehicle?

Gamble v. Anesthesiology Associates, P.S.C.

Dallas Court of Appeals, No. 05-20-01024-CV (July 21, 2022)

Justices Schenck, Osborne, and Smith (Opinion, linked here)

Ken Carroll

While driving on I-35 with her cruise control set to 80, Blain struck and killed two people who had stopped on the side of the highway to change a tire. At the time, Blain was engaged in a 20-minute hands-free cellphone conversation with Richter, a friend who had called Blain from Kentucky to tell her he was retiring. Blain and her employer—she was on a business trip at the time—settled. But Richter and his employer secured summary judgment against the various theories of direct, vicarious, and joint liability asserted against them. The Court of Appeals ultimately reversed and remanded on a joint-enterprise theory of liability—not on the merits, but because Richter and his employer had not moved for summary judgment on that particular issue. See Tex. R. Civ. P. 166a(c). But it was the Court’s ruling on another ground that stands out.

Plaintiffs claimed Richter was negligent because he distracted Blain while he knew she was driving. But the appeals court agreed with Richter that he “had no duty to exercise reasonable care to avoid distracting Blain once he realized she was driving.” The Court acknowledged a “recognized legal duty that a person must exercise reasonable care to avoid distracting a driver while [that driver is] operating a vehicle.” But it determined that duty applies only to passengers in the vehicle, or perhaps to others in “close proximity” like those in an adjacent vehicle. “A remote cellphone caller” like Richter, the Court held, “owes no duty to the general public to control the conduct of the call recipient as a matter of law.” The appeals court therefore affirmed summary judgment on that score.

One has to wonder how far this principle extends. What if the caller asked the driver to “FaceTime” or to “Zoom” or engage in other conduct that the caller knew or reasonably should know would have the driver focus on his or her phone instead of the road? What if, instead of a call, the defendant had engaged the driver in a text or instant-message exchange, or had sent a photo or a video with the message, “You gotta see this!”—all while knowing the recipient was driving? None of these situations were present in Gamble, of course. But it’s hard to see why a “remote cellphone user” who contacts someone, knowing that other person is driving (as Richter did here), should owe any less “duty to the general public” not to distract the driver than a backseat passenger who similarly asks the driver to look at a text, photo, video or otherwise knowingly draws the driver’s attention away from the road.

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.

Evidence Required at the Threshold for Direct Access to Opponent’s Electronic Device

In re Cooley

Dallas Court of Appeals, No. 05-21-00445-CV (February 2, 2022)

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

Ken Carroll

Cooley sued Methodist Richardson Medical Center, alleging she was injured while a patient there. Cooley and her housemate took photos of her injuries. Methodist sought production of the photos and the associated metadata. Cooley produced a CD with the photos and what she contended was all metadata. Methodist disagreed that all metadata had been produced, and sought direct access to the electronic devices on which the photos were taken to pursue the metadata it contended was missing. After a non-evidentiary hearing, the trial court granted Methodist’s motion to compel the requested direct access.

Applying the Supreme Court’s decision in In re Weekley Homes, L.P., 295 S.W.3d 309 (Tex. 2009), the Dallas Court of Appeals granted mandamus and ordered the trial court to vacate its order that Cooley gave Methodist direct access to her electronic devices. The Dallas Court noted the admonition in Weekley that “ordering examination of a party’s electronic storage device is particularly intrusive and should be generally discouraged.” To justify direct access to an opponent’s electronic device, the Court said, “[t]he procedural protections identified in Weekley Homes require that the requesting party show that the responding party has defaulted in its obligation to search its records and produce the requested data, that the responding party’s production has been inadequate, and that a search of the opponent’s electronic device could recover relevant materials.” What’s more, this is a “threshold” evidentiary requirement. Where, as here, the requesting party does not put forth the required evidence, its request for direct access must be denied—or, in this case, vacated on mandamus.

It’s Still the Law: Incorporating the AAA Rules Delegates Determination of Arbitrability to the Arbitrator

Holifield v. Barclay Properties, Ltd.

Dallas Court of Appeals, No. 05-21-00239-CV (October 5, 2021)

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

Ken Carroll

        Barclay built and sold a home to the Holifields. When construction defects allegedly cropped up, the Holifields sent notice of those defects not only to Barclay, but also to others with which Barclay was hoping to do business. Because of that, Barclay sued the Holifields for tortious interference. But the contract between Barclay and the Holifields contained a broad arbitration provision, in which the parties agreed that “any controversy or claim … arising out of or relating to … this Contract [or] … the construction and/or sale of the Property” would be “submitted to binding arbitration with the AAA.” When the Holifields moved to compel arbitration of Barclay’s tortious interference claim, however, the trial court denied that motion. The Dallas Court of Appeals reversed, ruling that “it is for the arbitrator to decide whether Barclay must arbitrate its claim against the Holifields.”

        In addition to being broad in scope, the parties’ arbitration agreement provided that disputes would be arbitrated “in accordance with the Construction Industry Arbitration Rules of the AAA.” AAA Construction Rule 9 dictates that the arbitrator “has the power ‘to rule on his or her own jurisdiction.’” As a result, the Court said, the issue of arbitrability was entrusted to the arbitrator, not the trial court. “When, as here, the parties agree to a broad arbitration clause and explicitly incorporate rules empowering the arbitrator to decide issues of arbitrability, the incorporation serves as clear and unmistakable evidence of the parties’ intent to delegate such issues to an arbitrator.” In fact, the Court said, “Where the parties’ contract clearly and unmistakably delegates the arbitrability question to the arbitrator, the court possesses no power to decide the arbitrability issue.”

        Barclays argued that in Jody James Farms v Altman, 547 S.W.3d 624 (Tex. 2018), the Supreme Court of Texas had rejected the principle that incorporation of the AAA rules constituted “clear and unmistakable evidence of the parties’ intent to delegate” the determination of arbitrability to the arbitrator. Not so, said the Dallas Court. The Supreme Court in Jody James rejected that principle only in the context of an arbitrability dispute between a party that was a signatory to the arbitration agreement and another party that was not. It did not rule on the issue in the context presented here, where both parties had agreed to delegate arbitrability to the arbitrator under the AAA rules.

Dallas Court Affirms 9-Figure Judgment Against Toyota Even Though Toyota Complied With All Applicable Safety Regulations

Toyota Motor Sales, U.S.A., Inc. v. Reavis

Dallas Court of Appeals, No. 05-19-00075-CV (June 3, 2021)

Justices Partida-Kipness and Nowell (opinion available here); Justice Schenck dissenting (here)

Kelli Hinson

The Reavis family was involved in a violent car accident in their Lexus, which resulted in the parents being propelled into the back seat, where they crashed into their small children, who suffered skull fractures and traumatic brain injuries as a result. The family sued Toyota, asserting design and marketing defects. Even though the vehicle complied with all applicable safety standards, the jury found against Toyota, awarding $242 million in damages, including $144 million in exemplary damages. Toyota appealed.

        Section 82.008(a) of the CPRC provides a rebuttable presumption that a product manufacturer is not liable for injury caused by a product that complied with federal mandatory safety standards. The presumption can be rebutted under § 82.008(b) if the plaintiff proves that the federal standards are “inadequate to protect the public from unreasonable risk of injury” or that the manufacturer withheld or misrepresented information relevant to the federal government’s determination of adequacy of the safety standards or regulations at issue.

        Toyota first argued that § 82.008(b) is preempted by federal law because it allows a jury to reject a federal agency’s determination of safety standards, but the Court held Toyota had waived that defense in the trial court.

        The Court upheld the jury’s determination that the federal standards are inadequate to protect the public, particularly the standard regarding seat-back strength. It noted that all automakers greatly exceed the mandatory standard—in fact, the Toyota seats at issue exceeded the standard by over 700%—so the standard must be inadequate. The Court also held there was evidence to support a finding that Toyota withheld or misrepresented information relevant to the adequacy of the safety standard. In particular, the Court noted a letter from Toyota to two senators in 2016 in which it stated that Toyota had a “long and robust safety culture.” The Court found this statement misleading in light of a deferred prosecution agreement Toyota had entered into in 2014 over misrepresentations made with regard to sudden unintended acceleration in some of its vehicles. The Court also held the jury could have rationally concluded that Toyota was misleading in claiming that the NHTSA was an “effective regulator” in light of Toyota’s extensive lobbying efforts with the agency. With the § 82.008(a) presumption rebutted, the Court held the evidence was sufficient for the jury to conclude that Toyota’s design was unreasonably dangerous.

        The Court also upheld the jury’s finding that Toyota failed to warn of the car’s dangers. Although the owner’s manual “strongly recommended” that children be placed in the rear seat, it did not warn of the danger that front seat occupants might be propelled into the back seat, injuring the children, in a rear-end collision.

        Justice Schenck filed a dissent, noting that “the record reflects no evidence of any automobile that has been marketed with both the seatback strength necessary to avoid the injuries here and the proposed seatbelt changes that would protect front seat occupants.” He expressed skepticism that “every car ever marketed and sold to this point could be ‘defective’ and that their manufacturers could all be subject to exemplary damages on this basis.” He also took issue with the Court’s affirmance of a design defect without evidence that fewer injuries and deaths would result from an alternative design taking into account all potential crash scenarios, not just the rear-end collision at issue in this case. He noted that additional protections for rear-end crashes could cause additional injuries in front-end crashes. Justice Schenck would have held the plaintiffs failed to rebut the §82.008(a) presumption of no liability. He characterized the Court’s conclusion that the federal standards were inadequate as ipse dixit and noted that Toyota’s alleged misrepresentations to regulators were unrelated to seatback strength or seatbelt function and so were not relevant to the “safety standards or regulations at issue in the action” under §82.008(b)(2).

        With the money at stake and the importance of the § 82.008(a) presumption to auto manufacturers like Toyota, expect this one to go to the Supreme Court of Texas.

NO IMPLIED LIFTING OF ABATEMENT

Cruz v. Hernandez

Dallas Court of Appeals, No. 05-19-00956-CV (April 23, 2021)

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

Ken Carroll

In 2012, Cruz was appointed guardian ad litem for three minors in a personal injury case. In 2015, the trial court issued an order abating the case pending resolution of a separate lawsuit against an underinsured-motorist insurance carrier. After the case had lain dormant for about three years, the trial court set a status conference. When Cruz didn’t appear for the conference, the trial court removed him and appointed a new guardian. Months later, in May 2019, Cruz applied for compensation for his services as guardian and, two days later, the trial court signed a final judgment in the case. On Cruz’s motion, the trial court then signed an amended judgment that, among other things, awarded fees both to Cruz and to the new guardian ad litem. Cruz appealed, arguing the trial court erred in the fees it awarded to him, in appointing the new guardian, and in entering judgment—all while the case was still abated. Perhaps surprisingly, the Court of Appeals agreed.

“An abatement is a present suspension of all proceedings in a suit.” “During abatement,” the appeals court explained, “the court and the parties are prohibited from proceeding in any manner[, and] unless otherwise specified in the abatement order, any action taken by the court or the parties during the abatement is a legal nullity.” Prior decisions from the Dallas Court required that, “to end an abatement, … an order of reinstatement must be entered.” Contrary to what one might expect, the Court’s precedent “rejected implied cessation of abatement by the court’s or the parties’ conduct, such as entering a judgment or otherwise proceeding with the case.”

Because no “order of reinstatement” had been entered in this case, all the actions of the parties and the trial court after the 2015 abatement order were “a legal nullity”—even though Cruz had sought or participated in several of those actions and even though the actions logically reflected an understanding by the parties and trial court that the abatement was no longer in effect. Although it acknowledged the waste and delay entailed in its ruling, the Court of Appeals, bound by its own prior decisions, had no choice but to reverse and remand the case to the trial court.

COURT REINS IN RUNAWAY INJUNCTION

Retail Services WIS Corp. d/b/a Product Connections v. Crossmark, Inc.

Dallas Court of Appeals, No. 05-20-00937-CV (May 4, 2021)

Justices Schenck, Reichek, and Carlyle (Opinion linked here)

Lyndon Bittle

The Dallas Court of Appeals vacated for lack of specificity several provisions of a temporary injunction against a company’s former employees and its competitor (their new employer). The court affirmed other provisions of the order, and remanded to the trial court.

Crossmark and Product Connections compete for business providing “in-store consumer experience” services to large retailers. In a familiar scenario, Crossmark sued Product Connections and three former Crossmark employees for misappropriating trade secrets and improperly soliciting Crossmark employees and clients. Following an evidentiary hearing, the trial court entered a temporary injunction with nineteen separate provisions (in twelve paragraphs) prohibiting certain conduct and a “Device Turnover Order” (DTO) requiring defendants to produce all laptops and other digital storage devices to Crossmark’s counsel for forensic inspection. Defendants filed an accelerated interlocutory appeal.

The appeals court first rejected appellants’ arguments that Crossmark had not established a probable right to relief or irreparable injury. The court found Crossmark adduced sufficient evidence “to raise a bona fide issue as to its right to ultimate relief” and noted the misuse of confidential information “has been described as ‘the epitome of irreparable injury.’”

Turning to the specific relief granted by the order, the court applied the requirements of Texas Rule of Civil Procedure 683 that a temporary injunction “state the reasons for its issuance, be specific in terms, and describe in reasonable detail … the act or acts sought to be restrained.” The court concluded the order adequately explained the reasons underlying the prohibitive provisions, but did not justify the mandatory DTO.

The court then reviewed each of the prohibitions and found that eleven of the nineteen provisions failed to satisfy Rule 683’s specificity requirements, primarily because some material terms were not defined. For example, while the order adequately defined Crossmark’s “Confidential Information and Trade Secrets” for some provisions, other provisions enjoined conduct using terms that were not clearly defined, such as “confidential,” “proprietary,” and “business information.” Nor did the order adequately identify “Covered Clients and Customers.”

The DTO likewise failed the specificity test by failing to define “Crossmark information” or “other digital storage devices,” which gave another ground for reversing that part of the order. The court rejected, however, appellants’ argument that ordering turnover of digital devices without following the procedures governing pretrial discovery of “electronic or magnetic data” is always improper because it circumvents the protections provided by Rules 192-196 and In re Weekley Homes, 295 S.W.3d 311 (Tex. 2005). According to the court, neither the discovery rules nor Weekley precludes an injunction mandating turnover of electronic devices—provided the order complies with Rule 683.

FIRST IMPRESSION: DALLAS COURT OF APPEALS HOLDS TCHRA PROHIBITS DISCRIMINATION BASED ON SEXUAL ORIENTATION

Tarrant County College District v. Sims

Dallas Court of Appeals, No. 05-20-00351-CV (March 10, 2021)

Justices Schenck (Concurring and Dissenting, here), Smith (Opinion, here), and Garcia

Ken Carroll

In the context of reviewing the denial of a plea to jurisdiction, the Dallas Court of Appeals has held the Texas Commission on Human Rights Act (TCHRA) prohibits discrimination based on a person’s sexual orientation or transgender status. It is the first court to do so. 

The Court acknowledged that “no Texas state court has addressed the issue of whether discrimination based on sexual orientation is prohibited under the TCHRA,” and the parties and trial court had in fact assumed the statute did not do so. But the appeals court noted that a stated “general purpose” of the TCHRA is to “provide for the execution of the policies of Title VII of the [federal] Civil Rights Act of 1964 and its subsequent amendments,” and so it “look[ed] to federal law for guidance.” Until very recently, federal authorities (including the Fifth Circuit) had held Title VII prohibited “sex discrimination—not sexual orientation or transgender discrimination.” But while the Sims case was on appeal, the United States Supreme Court decided Bostock v. Clayton County, Georgia, 140 S. Ct. 1731 (2020), holding that Title VII’s prohibition of discrimination “because of … sex” does extend to and prohibit discrimination based on sexual orientation or transgender status. “In order to reconcile and conform the TCHRA with federal anti-discrimination and retaliation laws under Title VII,” the Dallas Court concluded it “must follow Bostock and read the TCHRA’s prohibition on discrimination ‘because of … sex’ as [also] prohibiting discrimination based on an individual’s status as a homosexual or transgender person.”

Justice Schenck filed a separate opinion, concurring in the result (finding jurisdiction in the trial court) but dissenting for a variety of reasons from the majority’s pronouncement extending the scope of the TCHRA. The trial court had not had the opportunity to review the issue in light of Bostock. No party or amicus before the appeals court had addressed the issue “in an adversarial posture”—i.e., after Bostock, they all agreed with the extended scope articulated by the majority. The pronouncement was unnecessary to the determination of jurisdiction, because jurisdiction clearly existed on grounds other than the TCHRA—which Sims had not expressly pleaded, given the state of the law when she filed her lawsuit. And, on the “merits,” the law of Texas in 1983 when the TCHRA was enacted—including statutes that prohibited same-sex marriage and criminalized homosexual conduct—was such that the legislature at that time could not reasonably be understood to have included discrimination on the basis of sexual orientation within the prohibitions of the TCHRA or to have envisioned or intended that a change in federal law 40 years later would have that effect on this Texas statute.

NO FORMAL PLEADING REQUIRED FOR ATTORNEYS’ FEES IN ARBITRATION

Ninety Nine Physician Services, PLLC v. Brian Murray

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

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

Neil R. Burger

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

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

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

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

YOU SHOULD PROBABLY RESPOND TO A RULE 194 REQUEST FOR DISCLOSURE

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

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

Justices Schenck, Smith, and Garcia (Opinion)

Neil R. Burger

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

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

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

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

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

JURY SELECTION IN FATAL-ACCIDENT CASE SPARKS BATSON BATTLE IN APPELLATE COURT

United Rentals North America, Inc. v. Evans

Dallas Court of Appeals, No. 05-18-00665-CV (August 18, 2020)

Justices Pederson III, Reichek (Opinion linked here), and Carlyle Dissents from Denial of En Banc Reconsideration by Justices Evans (Dissent linked here) and Schenck (Dissent linked here)

Lyndon Bittle

A Dallas Court of Appeals panel unanimously affirmed a judgment for plaintiffs in a wrongful death case, overruling the defendant’s objections to the trial court’s Batson rulings in jury selection. The case apparently sparked internal controversy in the 12-member Court. On the same day the panel opinion issued, two Justices who were not on the panel filed dissents to the denial of en banc reconsideration. The competing opinions provide roadmaps for applying the Batson guidelines to civil lawsuits.

A big rig hauling an oversized “boom lift” for United Rentals struck a bridge in a highway construction zone, which caused a bridge beam to collapse on a pickup truck, killing the driver. The decedent’s mother and son brought a wrongful-death and survival suit against several defendants. Before judgment, all defendants except United Rentals settled or were dismissed. During voir dire, the court granted two of Plaintiffs’ Batson challenges to United Rentals’ use of preemptory strikes, and denied United Rentals’ competing Batson challenges. The jury found for Plaintiffs and the court entered judgment awarding $2.79 million in damages. United Rentals appealed.

Before addressing the Batson issues, the appeals court overruled United Rentals’ substantive issues, including its arguments that the negligence verdict was error because United Rentals, “as a shipper, had no duty to see that the carrier … shipped its cargo safely,” and there was insufficient evidence to support the damages awarded for the decedent’s “conscious pain and mental anguish” in the few seconds between the collision and his death. Those holdings consume over 35 pages of the panel’s opinion, and Justice Schenck’s dissent to the denial of en banc review urges the Texas Supreme Court “to establish the proper review standard to govern pain and suffering awards.” These issues could be the subject of a separate blog post.

Turning to the Batson dispute, the Court summarized United Rentals’ argument: The “trial court erred in granting appellees’ challenges to two of United Rentals’ peremptory strikes of black women while denying United Rentals’ challenges to appellees’ use of strikes on men, four of whom were white.”

The Batson rules were originally promulgated to prevent criminal prosecutors from using peremptory strikes to exclude jurors solely because they were of the same race as the defendant. See Batson v. Kentucky, 476 U.S. 79, 89 (1986). Batson has since been extended to civil trials and to other “suspect” grounds for striking potential jurors. See Edmonson v. Leesville Concrete Co., 500 U.S. 614, 618-28 (1991); Goode v. Shoukfeh, 943 S.W.2d 441, 444-45 (Tex. 1997).

Applying Batson involves a three-step process similar to the test for employment discrimination. First, the party objecting to a preemptory strike must establish a prima facie case it “was used to exclude a venire member on the basis of race or gender.” Second, the proponent of the strike must articulate “a race- or gender-neutral reason for the strike.” Finally, the party challenging the strike has an opportunity to rebut the explanation and show it is a pretext for unlawful discrimination. The standard for evaluating a strike under Batson is “whether race [or gender] was a motivating factor in counsel’s exercise of the strike.” The trial court’s rulings, often based on credibility assessments, are subject to review for abuse of discretion.

Here, Plaintiffs objected to United Rentals’ use of all five of its peremptory strikes on black women, and United Rentals objected to Plaintiffs’ striking four white men and one Hispanic man. The judge granted two of Plaintiffs’ Batson challenges, and denied all of United Rentals’ challenges. After reviewing the voir dire colloquies and arguments of counsel, the Court of Appeals held the judge did not abuse her discretion in finding that race was a motivating factor for United Rentals striking one of the two jurors. Central to the Court’s holding was that the record did not support counsel’s stated reason for striking the prospective juror. The second juror placed on the jury over United Rentals’ objection did not join in the jury’s adverse verdict, so the appeals court held any error in allowing her to serve was harmless.

As for the trial court’s denial of United Rentals’ challenge to Plaintiffs’ strikes, the appeals court rejected the argument that Plaintiffs’ counsel admitted unlawful discrimination by telling the judge, “We know from our focus groups that the African-American female is the most favorable juror for this case for whatever reason.” The court concluded counsel made this statement in the context of “explaining why they believed United Rentals’ strike of [a] particular black panelist was pretextual,” and did not evidence Plaintiffs’ “intent to seat a jury without whites or males.” And although the Court acknowledged the gender and racial “disparities suggest something more than happenstance,” they did not alone “establish that appellees’ explanations of the strikes were pretextual.” The Court then conducted a “comparative analysis” of the record relevant to each of Plaintiffs’ strikes and concluded the judge did not abuse her discretion in denying the challenges. The Court explained, “Disparate treatment is not shown where a party strikes a juror because of multiple characteristics and does not strike jurors of other races or genders who share one or more of those characteristics.”

The online docket does not reveal a request for en banc review or a vote on such a request. Nevertheless, two dissents from a denial of en banc consideration, released at the same time as the panel opinion, indicate a vote did occur. See Tex. R. App. P. 41.2(c). Justice Evans, joined by Justices Whitehill and Schenck, submitted a lengthy opinion supporting reversal and remand for a new trial on the grounds that “a race- and gender-based goal—the substantial motivation—in selecting the jury was plainly and openly stated, and 100% of the peremptory challenges were perfectly consistent with that goal.” The dissent characterized the statement of Plaintiffs’ counsel that “the African-American female is the most favorable juror for this case” as rare “direct evidence of discriminatory intent,” which, combined with evidence of the plan’s execution, “may well stand for itself and obviate any need of further analysis.” Nevertheless, the dissent reviewed in detail the record relevant to each of the jurors excluded by Plaintiffs. In addition to Plaintiffs’ stated “discriminatory goal,” the dissent found “misstatements of the record” and “pretextual reasons about which [Plaintiffs] did not ask questions.” According to the dissent, “the only possible conclusion” is that Plaintiffs “intended to strike non-black men from the jury in violation of Batson” and its progeny.

TAX-COLLECTION LAW FIRM IS NOT IMMUNE FROM VENDOR’S SUIT

Linebarger Goggan Blair & Simpson, LLP v. TinStar Title Inc.

Dallas Court of Appeals, No. 05-19-00614-CV (July16, 2020)

Justices Whitehill, Schenck, and Evans (Opinion linked here)

Lyndon Bittle

A law firm that collects delinquent tax accounts for Dallas County and other taxing entities is not protected by governmental immunity from lawsuits by its subcontractor, according to the Dallas Court of Appeals. Importantly, the case did not involve claims brought by taxpayers.

The Linebarger law firm contracted to perform tax-collection services for Dallas County and other taxing entities, and subcontracted title-abstract services to TinStar. When TinStar sued Linebarger for breach of contract and various business torts, Linebarger asserted governmental immunity in a plea to the jurisdiction. The trial court denied the plea, and Linebarger filed both an interlocutory appeal and a mandamus petition.

The Dallas Court of Appeals first held it lacked jurisdiction to consider Linebarger’s interlocutory appeal under Civil Practice and Remedies Code § 51.014(8), which authorizes interlocutory appeals from orders granting or denying a plea to the jurisdiction by a “governmental unit.” At least in the context of a private dispute between Linebarger and one of its subcontractors, the Court found Linebarger is not a “governmental unit” as that term is defined in the Tort Claims Act, CPRC § 101.003(a). The Court distinguished University of the Incarnate Word v. Redus, 518 S.W.3d 905 (Tex. 2017), in which the Supreme Court extended governmental immunity to a private university defending the actions of its police department created under express legislative authority because the “department was part of the state’s larger law enforcement system.”

The Court held it could address Linebarger’s mandamus petition under its original-proceeding jurisdiction, but denied mandamus relief. The Tort Claims Act retains governmental immunity for claims arising in connection with the assessment or collection of taxes by a governmental unit. CPRC § 101.055(1). Following Brown and Gay Eng’g v. Olivares, 461 S.W.3d 117 (Tex. 2015), however, the Court found that Linebarger’s contract with the County made Linebarger an independent contractor and that the County did not “control in any way how Linebarger used title abstractors to perform its contract with the County.” It distinguished several previous cases invoking governmental immunity, because those cases involved “taxpayers asserting claims for actions taken by the taxing authority through Linebarger as its agent”—not for the law firm’s “independent actions.”

DOCTORS’ DISPUTE IS NOT A “HEALTH CARE LIABILITY CLAIM”

Baylor Scott & White Health v. Roughneen

Dallas Court of Appeals, No. 05-18-00966-CV (June 9, 2020)

Justices Whitehill, Schenck, and Pedersen, III (Opinion, available here)

Kelli Hinson

Not all claims involving doctors and hospitals are health care liability claims subject to the procedural protections of TEX. CIV. PRAC. & REM. CODE Chapter 74. Roughneen involves a long-running dispute among various doctors and other health care providers. In 1999, Dr. Roughneen joined a group of physicians practicing cardiology, cardiothoracic surgery, and vascular surgery (CSANT). Dr. Roughneen left CSANT in 2005, and the following year he filed suit against the practice. The litigation ended in a settlement, with the CSANT physicians agreeing that “they would voluntarily recuse themselves from any voting, deliberation and/or decision-making relating to any peer review matters involving [Dr.] Roughneen.” Years later, when the doctors worked together at Heart Hospital and Baylor Grapevine, the CSANT doctors participated in purportedly “sham peer review proceedings” against Roughneen in alleged violation of their settlement agreement. Other disputes followed, resulting in claims and counterclaims for breach of contract, tortious interference, improper restraint of trade, and other causes of action. The CSANT parties filed a motion to dismiss under Chapter 74, arguing that Roughneen’s claims were health care liability claims and that he had failed to timely serve an expert report as required by the statute.

The trial court and the Dallas Court of Appeals both held that the claims were not health care liability claims under the statute and so the expert report requirement did not apply. The CSANT parties argued that all of Roughneen’s claims arose out of the peer review process and that “credentialing activities are an inseparable part of the medical services” a patient receives. The Court disagreed, noting that “at their heart, appellees’ complaints do not relate to how any patient was treated, but to how Dr. Roughneen was treated in the business of practicing medicine.” The Court distinguished a prior opinion holding that a claim that a faulty peer review process caused harm to a patient is a covered health care liability claim. In contrast, Dr. Roughneen’s causes of action did not involve any specific patient-physician relationship and were not rooted in the care and treatment of any patient. When claims against a health care provider “do not directly relate to any patient’s medical care, treatment, or confinement,” those claims are not health care liability claims. The motion to dismiss was, therefore, appropriately denied. 

COMPANY MANAGER PERSONALLY LIABLE FOR CONTRACT BREACH

PMC Chase, LLP v. Turnbow
Dallas Court of Appeals, No. 18-01383 (January 28, 2020)
Justices Myers, Schenck, and Carlyle (opinion linked here)

Lyndon Bittle

This is a cautionary tale for anyone who signs contracts or purchase orders for their company: Unless you want to be personally responsible for performing the contract, be sure the document clearly indicates you’re signing as the company’s representative.

BSS contracted to perform structural steel construction at PMC’s business. The one-page contract was directed to “Attention: Steve Turnbow,” and Turnbow, PMC’s manager, signed it. After substantial completion, BSS sent its invoice to Turnbow at PMC’s address. When it did not receive payment, BSS sued both Turnbow and PMC for breach of contract and (alternatively) quantum meruit. At trial, BSS abandoned its contract claim against PMC, insisting “the contract was with just Mr. Turnbow individually.” BSS retained its quantum-meruit claim against PMC.

PMC and Turnbow argued Turnbow acted only as an agent for PMC and was not, therefore, individually liable for any breach. After a bench trial, the court entered judgment against Turnbow for breach of contract and against PMC for quantum meruit, awarded the same damages and attorney’s fees for both causes of action, and held the defendants jointly and severally liable. The Dallas Court of Appeals affirmed the judgment.

Citing the “well-settled [principle] that the law does not presume agency,” the Court of Appeals held that because the contract “bears Mr. Turnbow’s signature and does not mention PMC Chase or indicate representative capacity in any way … it unambiguously shows it is the obligation of Mr. Turnbow personally.” This conclusion could not be altered, the Court held, by parol evidence of the parties’ intent, including both signatories’ testimony “that they understood Turnbow to have signed the contract for PMC Chase.”

The Court also affirmed the quantum-meruit judgment against PMC, holding that “appellants’ position that ‘there can be no recovery under quantum meruit where the same transaction is covered by a valid contract’ is contrary to established construction contract law,” citing Gentry v. Squires Construction, Inc., 188 S.W.3d 396, 402-03 (Tex. App.—Dallas 2006, no pet.). Finally, the Court noted that the judgment imposing joint and several liability for the same damages under the two causes of action precluded a double recovery.

LIMITATIONS: NO STANDING ON INDIVIDUAL CLAIMS = NO RELATION BACK FOR DERIVATIVE CLAIMS ADDED LATER

Cooke v. Karlseng
Dallas Court of Appeals, No. 05-18-00206-CV (August 14, 2019)
Justices Brown, Schenck, and Pedersen, III (Opinion, linked here)

Ken Carroll

In this looooong-running business dispute with a tangled and protracted procedural history, Cooke sued his ex-partners for alleged wrongs that occurred in 2005 and 2006. Originally, he asserted his claims individually, back in 2006. But the Dallas Court of Appeals concluded those claims were predicated on alleged injuries to the partnerships, rather than to Cooke directly (even though the value of his partnership interests may have been diminished in the process). Therefore, he lacked standing to bring those claims individually. But, Cooke argued, he surely had the right to assert the claims derivatively, and Tex. Bus. Org. Code § 21.563(c)(1) authorizes a court to treat a derivative claim “as a direct action” in certain circumstances. So, no problem, right? Wrong, said the Dallas Court. “Section 21.563 does not turn a derivative claim into an individual claim.” It just allows a court to treat a derivative claim like a direct claim in certain procedural respects, where appropriate. And here, even if Cooke could have brought his claims derivatively at the outset, “the fact remains he did not,” and he lacked standing to bring them as he did.

One door closed, Cooke tried another. In an amended petition he recharacterized all his claims as asserted both individually and derivatively on behalf of the partnerships. But he waited until 2014 to do that. When his ex-partners argued the newly asserted derivative claims were barred by limitations, Cooke contended (1) the derivative claims clearly arose from the same facts as the substantially identical claims he had asserted on an individual basis back in 2006, and (2) the derivative claims therefore “related back” to that original filing under Tex. Civ. Prac. & Rem. Code § 16.068. Wrong again, the Court concluded. Remember, Cooke lacked standing to pursue those claims as originally filed. “For that reason, the trial court never obtained jurisdiction over his [original] claims.” Consequently, there was nothing to which the amended, derivative claims could relate back. And so they were barred by limitations.

NO, YOU CANNOT USE A TEMPORARY INJUNCTION TO SEQUESTER FUNDS UNRELATED TO YOUR CLAIM JUST SO YOU CAN COLLECT A POTENTIAL FUTURE JUDGMENT.

RWI Construction, Inc. v. Comerica Bank
Dallas Court of Appeals, No. 05-18-00265-CV (April 12, 2019)
Justices Brown, Schenck (Opinion, linked here), and Pedersen, III

Derrick R. Ward

Comerica Bank sued Lone Star, a private equity fund, and several of its portfolio companies after those portfolio companies failed to pay a loan guaranteed by Lone Star. The accounts receivable, inventory, equipment, fixtures, and other personal property of the portfolio companies served as collateral for the loan. Because the portfolio companies were insolvent and did not have assets adequate to cover the balance of the loan, Comerica sought and obtained a temporary injunction preventing Lone Star from dissipating funds received from a recent capital call to prevent those funds from becoming unavailable to satisfy Comerica’s claim on the loan and guarantee. On appeal, Lone Star argued the district court had abused its discretion because Comerica had not established it would suffer irreparable injury for which it had no adequate remedy at law.

The Dallas Court of Appeals held the lower court had abused its discretion by failing to follow established precedent prohibiting trial courts from issuing injunctions to freeze defendants’ assets simply to assure payment of future judgments. The Court echoed concerns expressed by the United States Supreme Court that allowing for such injunctions would create a race to the courthouse among creditors where insolvent or nearly insolvent debtors were concerned—with the fastest creditor “licensing himself, as first hog to the trough, to all of its contents.” Further, the Court said, such a practice would render obsolete statutory remedies like garnishment, attachment, and receivership.

The Court distinguished this general rule, however, from instances in which “there is a logical and justifiable connection between the claims alleged and the acts sought to be enjoined, or where the plaintiff claims a specific contractual or equitable interest in the assets it seeks to freeze.” Of the millions Comerica sought to sequester, $800,000 was an accounts receivable payment received by one of the insolvent portfolio companies, which Lone Star had then transferred to itself and refused to turn over to Comerica. Because that money was collateral for the loan in question, the Court found it was logically and justifiably connected to Comerica’s breach-of-contract claim. It therefore affirmed the trial court’s temporary injunction with respect to that amount.

Finally, the Court rejected Lone Star’s argument that the trial court’s failure to find it insolvent prevented Comerica from demonstrating an inadequate remedy at law. While insolvency can be sufficient to show an inadequate remedy, the Court explained, it is not necessary. Inadequacy might be shown, as in this case, by a defendant’s limited resources and an unwillingness to pay.