Judicial Admissions: Be Careful What You Plead, and How

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

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

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

Ken Carroll

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

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

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

Clause Preserving “All Remedies” Does Not Conflict with Agreement to Arbitrate

Kirk v. Atkins

Dallas Court of Appeals, No. 05-21-00639-CV (February 1, 2023)

Justices Nowell, Smith, and Miskel (Opinion, linked here)

Ken Carroll

Atkins sued Kirk for breach of contract, fraudulent misrepresentation, and conversion in connection with her investment in his company. The parties’ “investor agreement” included a broad ADR provision that required “[a]ny disputes or controversies arising out of or relating to” that agreement to be resolved through AAA arbitration. That agreement also contained a fairly standard “Remedies” provision stating that, “The parties shall have all remedies for breach of this Agreement available to them provided by law or equity.” Kirk sought to compel arbitration of the parties’ dispute. In response, Atkins did not contest the validity or scope of the arbitration provision, but argued that the agreement’s express reservation of “all remedies” conflicted with the agreement to arbitrate and rendered that ADR provision ambiguous. The trial court agreed and denied the motion to compel arbitration. But the Dallas Court of Appeals reversed.

The appeals court held the ADR and “Remedies” provisions of the agreement could and should be reconciled. “The ADR paragraph, in which the arbitration clause is found, controls the process of resolving disputes between the parties,” the Court explained, “while the remedies paragraph describes the substantive relief that may flow from decisions on those controversies.” The two provisions therefore were not in conflict, the ADR provision was not ambiguous, and the motion to compel arbitration should have been granted.

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.

Court Lacked Jurisdiction to Enter Declaratory Judgment Because It Was Uncontested

In re Banigan

Dallas Court of Appeals, No. 05-22-01084-CV (January 12, 2023)

Chief Justice Burns and Justices Partida-Kipness and Smith (Opinion, linked here)

Kelli Hinson

After her husband filed for divorce in 2021, Cynthia Banigan moved to vacate a 2015 declaratory judgment establishing that the parties’ agreed partition of community property was valid and enforceable. The husband had filed the declaratory judgment action on the same day the partition agreement was signed. In her response, the wife confirmed the facts set forth in the petition and expressed her consent to entry of an order declaring the partition agreement to be valid. At the hearing, the husband testified as to the validity of the agreement, and the wife testified that she agreed with everything the husband had said.

The wife’s tune changed, of course, after the husband filed for divorce six years later. She argued that she did not voluntarily sign the partition agreement and that it was unconscionable. The trial court referred the matter to arbitration based on an arbitration provision in the partition agreement.

The wife then filed a mandamus proceeding arguing the declaratory judgment was void for lack of subject matter jurisdiction. The Dallas Court of Appeals agreed, holding there was no justiciable controversy between the parties when the trial court entered the declaratory judgment. The Uniform Declaratory Judgments Act allows a person interested under a written contract to have determined any question of construction or validity arising under the contract and to obtain a declaration of “rights, status, or other legal relations.” But a declaratory judgment is only appropriate if (1) a justiciable controversy exists as to the rights and status of the parties and (2) the controversy will be resolved by the declaration sought. Lack of a justiciable controversy results in a lack of subject matter jurisdiction. Because the wife confirmed the facts set forth in the petition, consented to the entry of the declaratory judgment, and “agreed with Husband’s position entirely” at the hearing, there was no live controversy between the parties. The trial court therefore lacked jurisdiction to enter the requested order, and so the Court of Appeals vacated the declaratory judgment as void.

Witness’s “Understandings” and Belief She Was “Deceived” Are Too Conclusory to Defeat Summary Judgment

Orange Cup Drive In LLC v. Mid-Continent Casualty Co.

Dallas Court of Appeals, No. 05-21-00448-CV (January 5, 2023)

Justices Nowell, Smith, and Rosenberg (opinion available here)

Kelli Hinson

Orange Cup Drive In lost summary judgment on its contractual coverage claims against Mid-Continent Casualty Company. Undeterred, Orange Cup tried to pursue extra-contractual claims, alleging that the insurance company took advantage of Orange Cup’s lack of expertise to misrepresent that Orange Cup had more insurance coverage than it did. The insurance company moved for summary judgment on these claims as well, and the motion was granted.

On appeal, Orange Cup argued the trial court erred in disregarding the affidavits of one of its principals, Shanta Barua, regarding her understandings and beliefs regarding the insurance coverage purchased by Orange Cup. Barua had conducted all of the negotiations with the insurance company, and she stated in her affidavit that she “understood” and “was under the impression” that the policy would cover third-party claims against Orange Cup. She further stated the insurance company “deceive[d] me into believing that I obtained third party liability coverage for [Orange Cup].”

The Dallas Court of Appeals affirmed the trial court’s decision to disregard these statements because, without any explanation of how Barua was allegedly misled or how she came to her alleged understanding about the policy, her statements were “conclusions unsupported by any factual detail” and were not admissible. In the absence of any other evidence to support Orange Cup’s fraud and other extra-contractual claims, summary judgment was appropriate.

Primer on Proving Up Attorneys’ Fees

Canadian Real Estate Holdings, LP v. Karen F. Newton Revocable Trust

Dallas Court of Appeals, No. 05-20-00747-CV (September 29, 2022)

Justices Pedersen, III (opinion available here), Goldstein, and Smith

Kelli Hinson

The Dallas Court of Appeals provided additional guidance on proving up attorneys’ fees in this declaratory judgment action. After the trial court dismissed the plaintiffs’ claim as moot, it awarded plaintiffs $45,529.13 in incurred attorneys’ fees plus $21,000.00 in conditional attorneys’ fees on appeal. The defendant, Canadian REH, appealed, arguing plaintiffs had failed to prove the amount of reasonable and necessary attorneys’ fees.

Canadian REH first argued that plaintiffs were required to provide “hard” or “disinterested” evidence of a reasonable hourly rate, such as affidavits of other attorneys, the State Bar of Texas Hourly Rate Fact Sheet, or fees awarded in similar cases. But the Court disagreed, noting that the affidavit of plaintiffs’ counsel, who testified he was “familiar with the hourly rates and costs customarily charged in and around” Collin County, Texas, was sufficiently detailed to establish reasonable hourly rates. And his experience was sufficient to back up his assertions of familiarity. The Court noted that neither Rohrmoos nor prior Dallas Court of Appeals cases have required additional “disinterested” evidence.

Canadian REH next argued that plaintiffs failed to establish the reasonable hours worked because the billing records were heavily redacted and contained block billing. Again, the Court disagreed. It noted that attorney invoices are “routinely redacted” when offered as evidence, in order to protect the attorney-client and work-product privileges, and that such redactions do not “obscure[e] meaningful review of attorney time” as Canadian REH claimed. The Court also disagreed that plaintiffs’ counsel’s use of “block billing” was a problem, noting that no entry included more than one day’s work for a timekeeper, and many entries included related tasks charged for fractions of one hour.

Canadian REH did get some traction with its complaint about conditional appellate fees, however. Plaintiffs’ counsel did not provide any explanation for his estimated appellate fees of $14,000 in the Court of Appeals and $7,000 in the Supreme Court. The Court reiterated prior holdings that an award of conditional appellate fees must be based on testimony about the services the attorney reasonably believes will be necessary to defend the appeal and a reasonable hourly rate for those services. Counsel’s conclusory opinion provided neither. The Court therefore vacated that portion of the award.

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.

What's so Special for a Special Master?

In re Alford

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

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

Neil R. Burger

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

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

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

Standing to Challenge Zoning Decisions

City of Dallas v. Homan

Dallas Court of Appeals, No. 05-20-01111-CV (March 31, 2022)

Justices Carlyle, Smith, and Garcia (Opinion available here)

Kelli Hinson

Katherine Homan filed a declaratory judgment action claiming that an amended zoning ordinance was invalid. The City of Dallas filed a plea to the jurisdiction, arguing Homan had no standing to challenge the ordinance. The trial court disagreed, denied the plea to the jurisdiction, and granted summary judgment in favor of Homan on her declaratory judgment claim that the ordinance is invalid. The City appealed.

The Dallas Court of Appeals agreed Homan had standing to contest the ordinance. Standing to challenge a government action requires a showing that the plaintiff suffered a particularized injury apart from the general public. So, in the context of a zoning decision, a plaintiff has standing “when the zoning affects the plaintiff differently than other members of the general public.” The Court noted that the Texas Legislature has created a mechanism for parties living within 200 feet of a proposed zoning change to receive notice and have the opportunity to protest the change. The Court found this to be a recognition that property owners within 200 feet of a proposed zoning change face a greater risk of injury to the use, enjoyment, and value of their property than the general public. This is a sufficient interest in the process to confer standing.

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.

Finality Bites

In re Woods Capital Enterprises, LLC

Dallas Court of Appeals, No. 05-21-00188-CV (November 8, 2021)

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

Ken Carroll

Beware Mother Hubbard, the source of unintended consequences—in this case, a loss of jurisdiction.

        

Woods Capital sued DXC Technology in Collin County, alleging DXC had breached a contract to sell it a parcel of real property. Woods Capital also filed a notice of lis pendens on that property. DXC moved to dismiss Woods Capital’s claims under the TCPA and to expunge the lis pendens. The trial court granted the motion to expunge and set a separate hearing on DXC’s TCPA motion and its request for fees relating to expunction of the lis pendens. During that hearing, counsel for DXC “asked the trial court to ‘table the motion for attorneys’ fees [on lis pendens] at this time because it may be double work that’s unnecessary based on how the Court handles the TCPA motion.’” The trial court granted DXC’s TCPA motion and awarded it fees under the TCPA. It did not expressly rule on the “tabled” lis pendens fee application. Thereafter, the court entered final judgment that included familiar Mother Hubbard language: “all other relief heretofore requested by any party, but not expressly granted by an Order of the Court, is DENIED. This Order finally disposes of all remaining claims and parties, and is appealable.”

The court of appeals reversed the trial court’s TCPA ruling, including the award of fees under that statute, and remanded. Woods Capital promptly nonsuited its claims and re-filed in Dallas County. DXC then attempted to assert a counterclaim for its lis pendens fees in the original Collin County case. Woods moved to dismiss for lack of jurisdiction, but the trial court denied that motion. Woods Capital sought mandamus relief, which the Dallas Court of Appeals granted.

DXC argued that Woods Capital’s nonsuit had no effect on its lis pendens fees claim. But the Court of Appeals concluded that claim had been dismissed by the recitation in the final judgment that “all other relief heretofore requested by any party, but not expressly granted by an Order of the Court, is DENIED,” and was therefore no longer pending after the appeal. “Had DXC believed the trial court erred by denying its lis pendens fee application,” the appeals court said, “it needed to file a cross appeal in the TCPA case.” It did not. So, when the appeals court remanded, the only claims left in the trial court were those asserted by Woods Capital. And when Woods nonsuited, that divested the trial court of jurisdiction.

The moral: Be careful with Mother Hubbard. She may not behave as you expect.

Was Evidence “Admitted” During Zoom Hearing?

Kazi v. Sohail

Dallas Court of Appeals, No. 05-20-00789-CV (October 28, 2021)

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

Kelli Hinson

        After conducting a hearing via Zoom, the trial court entered a temporary injunction against Defendants, and Defendants appealed, arguing there was no evidence to support the order. They contended that the Plaintiff had presented no live witnesses and that none of the affidavits or exhibits referred to during the hearing were actually admitted into evidence.

        The Dallas Court of Appeals disagreed and affirmed the temporary injunction. The trial court’s emergency standing order in effect at the time of the Zoom hearing—prompted by the COVID-19 pandemic—encouraged litigants to present evidence through affidavits, declarations, and depositions rather than through live testimony, when possible. The order further provided that parties wishing to admit exhibits or other evidence must electronically deliver the same to the court reporter, court coordinator, and opposing counsel prior to the hearing. Plaintiff’s counsel complied with that order and, during the hearing, referred to the evidence that was “put on the record” and stated he would consider such evidence “part of the record unless any objections arise.” Defendants’ counsel did not object to the evidence being “put on the record” and did not object to Plaintiff’s counsel referring to the evidence throughout the hearing. In the temporary injunction order, the trial court referred to the “evidence presented” during the hearing and stated that Plaintiff had “offered evidence” in support of his position.

The Court of Appeals held that, even though the trial court did not use “magic words” admitting Plaintiff’s affidavits and other electronic submissions into evidence, it was clear from the record that the trial court considered the electronically submitted evidence in determining whether to grant the temporary injunction. Under those circumstances, the Court concluded that the trial court did not abuse its discretion in granting a temporary injunction based on the electronically submitted evidence.

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.

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.

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.

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.