ADDING MORE ARROWS TO THE QUIVER: TEXAS STATUTES AND PROCEDURAL RULES THAT ARE HELPFUL, BUT NOT WELL KNOWN
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1 ADDING MORE ARROWS TO THE QUIVER: TEXAS STATUTES AND PROCEDURAL RULES THAT ARE HELPFUL, BUT NOT WELL KNOWN DBA BUSINESS LITIGATION SECTION MEETING May 10, 2016 Belo Mansion Dallas, TX MODERATOR: Hon. Bonnie Lee Goldstein 44 th Judicial District Court PANELISTS: Ladd Hirsch Diamond McCarthy LLP Britta Stanton Lynn Pinker Cox & Hurst, LLP Craig Stokley Palter Stokley Sims PLLC Chris LaVigne Greenberg Traurig, LLP
2 LADD HIRSCH 2711 N. Haskell Ave., Suite 3100 Dallas, Texas (214)
3 MOTIONS FOR PARTIAL SUMMARY JUDGMENT Many practitioners think of motions for summary judgment as all or nothing but consider: Texas Rule of Civil Procedure 166a expressly permits motions for partial summary judgment: o o o (e) Case Not Fully Adjudicated on Motion. If summary judgment is not rendered upon the whole case or for all the relief asked and a trial is necessary, the judge may at the hearing examine the pleadings and the evidence on file, interrogate counsel, ascertain what material fact issues exist and make an order specifying the facts that are established as a matter of law, and directing such further proceedings in the action as are just (a) For Claimant. A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory judgment may, at any time after the adverse party has appeared or answered, move with or without supporting affidavits for a summary judgment in his favor upon all or any part thereof. A summary judgment, interlocutory in nature, may be rendered on the issue of liability alone although there is a genuine issue as to amount of damages. (b) For Defending Party. A party against whom a claim, counterclaim, or cross-claim is asserted or a declaratory judgment is sought may, at any time, move with or without supporting affidavits for a summary judgment in his favor as to all or any part thereof.
4 MOTIONS FOR PARTIAL SUMMARY JUDGMENT Motions for partial summary judgment can be used to submit surgical strikes to court: o To extinguish one of several claims. See, e.g., Hall v. Douglas, 380 S.W.3d 860 (Tex. App. Dallas 2012) (affirming grant of partial summary judgment on fraud claim in action alleging fraud, breach of fiduciary duty, and breach of contract). o To assert an affirmative defense. See, e.g., Nanda v. Huinker, No. 12- cv , 2015 WL (Tex. App. Corpus Christi Edinburg Sep. 24, 2015) (affirming grant of partial summary judgment on statute of frauds affirmative defense to breach of contract claim).
5 MOTIONS FOR PARTIAL SUMMARY JUDGMENT Motions for partial summary judgment (continued): o To narrow a claim. For example, if during discovery on a fraud claim plaintiff reveals that certain alleged misrepresentations were immaterial, defendant should move for partial summary judgment with regard to those specific misrepresentations. The same strategy can be used to narrow the scope of contractual claims. See, e.g., Pinnacle Anesthesia Consultants, P.A. v. Fischer, 309 S.W.3d 93 (Tex. App. Dallas 2010) (plaintiff brought action for unlawful termination and moved for partial summary judgment with regard to thirteen out of sixteen termination-for-cause grounds in the employment agreement). o To ascertain material fact issues for trial. Texas Rule of Civil Procedure 166a(e) permits partial summary judgment, directing the trial court to make an order specifying the facts that are established as a matter of law, and directing such further proceedings in the action as are just. Id. at 104 (quoting Tex. R. Civ. P. 166a(e)).
6 MOTIONS FOR PARTIAL SUMMARY JUDGMENT Motions for partial summary judgment by definition, do not ask for complete relief play to the compromising aspects of human nature and, as a result, are probably more likely to be granted. Procedural considerations o An order for partial summary judgment is interlocutory, and an appellate court lacks jurisdiction to hear an appeal. See, e.g., Penson v. Auto Care Am., No. 01-cv , 2010 WL (Tex. App. Houston [1st Dist.] April 15, 2000) (dismissing appeal of motion for partial summary judgment for lack of jurisdiction). o Filing a motion to sever before appealing can cure this jurisdictional defect. See, e.g., Lemer v. Coggins, No. 13-cv , 2012 WL , at *3 (Tex. App. Corpus Christi Edinburg Oct. 4, 2012) ( Lemer also filed a motion to sever. The trial court granted this motion and severed the fraud claims from the remaining claims. Thus, the [partial] summary judgment became final [and appealable] as to the fraud claims. ).
7 TEXAS REVIVAL STATUTE Texas Civil Practice & Remedies Code (Counterclaim or Cross Claim) allows a party to assert an otherwise time-barred counterclaim or cross claim that arises out of the same transaction or occurrence as an action asserted against it: o o (a) If a counterclaim or cross claim arises out of the same transaction or occurrence that is the basis of an action, a party to the action may file the counterclaim or cross claim even though as a separate action it would be barred by limitation on the date the party s answer is required. (b) The counterclaim or cross claim must be filed not later than the 30th day after the date on which the party s answer is required. This rule is grounded in principles of fairness: Section (a) is intended to prevent a party from waiting until an opponent s valid claim, arising out of the same transaction or occurrence, is time-barred before asserting its own claim. Holman St. Baptist Church v. Jefferson, 317 S.W.3d 540, 545 (Tex. App. Houston [14th Dist.] 2010).
8 TEXAS REVIVAL STATUTE Note that the rule is triggered only where the opposing party has sought affirmative relief. See, e.g., Holman St. Baptist Church, 317 S.W.3d at 545. o For example, if a plaintiff files an action seeking only a declaration that the defendant would be barred by a statute of limitations if it chose to bring a particular cause of action, the defendant could not use Section to then bring the otherwise time-barred cause of action. Id. at 546. o In Holman, Jefferson sued Holman Street Baptist Church in 2006 seeking a declaratory judgment that he was entitled to the return of stock given to Holman as collateral on a 1992 promissory note because the statute of limitations had run. Because Jefferson requested affirmative relief i.e., the return of the stock and not just a declaration of his rights, however, Holman was able to invoke Section and raise its claim for collection on the note despite running of the statute of limitations.
9 TEXAS REVIVAL STATUTE Courts have construed party to mean defendant. So, for example, Section does not apply to cross claims asserted between co-plaintiffs. See, e.g., Ellard v. Ellard, 441 S.W.3d 780, (Tex. App. San Antonio 2014). Section applies only to claims arising out of the same transaction. Courts apply a logical relationship test examining whether the same facts are significant and logically relevant to both claims to determine whether claims arise out of the same transaction. See, e.g., Pitts & Collard, L.L.P. v. Schechter, 369 S.W.3d 301, 324 (Tex. App. Houston [1st Dist.] 2011).
10 BRITTA ERIN STANTON 2100 Ross Avenue, Suite 2700 Dallas, Texas (214)
11 SPOLIATION PRE BROOKSHIRE BROTHERS Trevino v. Ortega (1) duty to preserve (2) negligently or intentional destruction (3) prejudice
12 BROOKSHIRE BROTHERS V. ALDRIDGE Slip and fall case at a Brookshire Brothers grocery store Brookshire Brothers retained only eight minutes of surveillance video, from when Aldridge entered the store to shortly after his fall.
13 THE TEXAS SUPREME COURT USES BROOKSHIRE BROTHERS TO DRAMATICALLY CHANGE SPOLIATION PRACTICE Texas Supreme Court decided that trial courts were too willing to allow spoliation issues to predominate over the merits. Modern technology has so dramatically increased the opportunities for parties to spoliate.
14 FRAMEWORK Trial court decides whether a party spoliated evidence. If the trial court determines there was spoliation, it assesses the appropriate remedy. Generally, nothing is decided by jury.
15 REMEDY Remedy must be proportionate when weighing: Culpability of spoliating party; and Prejudice to non spoliating party
16 SPOLIATION INSTRUCTION Intentional spoliation: the party acted with the subjective purpose of concealing or destroying discoverable evidence; and Less severe remedy would be insufficient to correct for the prejudice caused by spoliation. Negligent spoliation: Non spoliating party has been irreparably deprived of any meaningful opportunity to present a claim or defense; and There is some evidence of what the destroyed evidence would have shown.
17 ATTORNEYS FEES UPDATE W. Craig Stokley Palter Stokley Sims PLLC Preston Commons East 8115 Preston Road, Suite 600 Dallas TX Direct:
18 RECOVERY OF ATTORNEYS FEES UNDER TEX. CIV. PRAC. & REM. CODE TEX. CIV. PRAC. &REM. CODE ANN : A person may recover reasonable attorney s fees from an individual or corporation, in addition to the amount of a valid claim and costs, if the claim is for: rendered services; performed labor; furnished material; freight or express overcharges; lost or damaged freight or express; killed or injured stock; a sworn account; or an oral or written contract.
19 CHAPTER 38 ATTORNEYS FEES To recover fees under Chapter 38, the claimant must be represented by an attorney, present the claim to the opposing party, and show that payment for the just amount owed was not tendered within thirty (30) days after the claim was presented. See id. at Presentment has been interpreted to mean simply a demand or request for payment or performance. Gibson v. Cuellar, 440 S.W.3d 150, 157 (Tex. App. Houston [14th Dist.] 2013, no pet.) (citing Jones v. Kelley, 614 S.W.2d 95, 100 (Tex. 1981)). It may be oral or written and does not have to refer to a specific amount of damages or name a specific claim or cause of action. See Panizo v. Young Men s Christian Assoc. of the Greater Houston Area, 938 S.W.2d 163, 168 (Tex. App. Houston [1st Dist.] 1996, no writ); Standard Constructors, Inc. v. Chevron Chem. Co. Inc., 101 S.W.3d 619, 627 (Tex. App. Houston [1st Dist.] 2003, pet. denied).
20 AGAINST WHOM ARE ATTORNEYS FEES RECOVERABLE UNDER ? INDIVIDUALS AND CORPORATIONS. Fleming & Assocs., L.L.P. v. Barton, 425 S.W.3d 560, (Tex. App. Houston [14th Dist.] Feb. 27, 2014, pet. denied). The Houston Court of Appeals held that, according to its plain language, Chapter 38 authorizes an award of fees only against an individual or corporation. The court concluded that a limited liability partnership was not liable for attorneys fees under Section
21 AGAINST WHOM ARE ATTORNEYS FEES RECOVERABLE UNDER ? Hoffman v. L & M Arts, No. 3:10-CV-0953-D, 2015 WL (N.D. Tex. Mar. 6, 2015). In March 2015, in a detailed opinion, Judge Fitzwater, extended the reasoning in Fleming to hold that does not authorize an award of fees against a limited liability company. Section differentiates between who may recover attorney s fees and from whom such fees may be recovered. A person may recover attorney s fees, but such fees may only be recovered from an individual or corporation. The Texas Code Construction Act broadly defines person to include a corporation, organization, government or governmental subdivision or agency, business trust, estate, trust, partnership, association, and any other legal entity. Tex. Gov t Code Ann (2) (West 2013). In specifying from whom such fees may be recovered, however, provides that attorney s fees may be recovered from an individual or corporation. Neither the Civil Practice and Remedies Code nor the Code Construction Act defines the term individual or corporation. Hoffman, 2015 WL at *5.
22 AGAINST WHOM ARE ATTORNEYS FEES RECOVERABLE UNDER ? Hoffman v. L & M Arts, No. 3:10-CV-0953-D, 2015 WL (N.D. Tex. Mar. 6, 2015). [B]ased on the plain meaning of the terms individual and corporation, the history of and its predecessor, Article 2226, and the construction given to by Texas courts of appeals and federal courts (including judges of this court), the court makes an Erie prediction that the Supreme Court of Texas would hold that an LLC is neither an individual nor a corporation within the meaning of , and that a party with a valid claim cannot recover attorney s fees from an LLC under Because it is undisputed that L & M is an LLC, Hoffman cannot recover attorney s fees and nontaxable expenses under Hoffman, 2015 WL at *10.
23 AGAINST WHOM ARE ATTORNEYS FEES RECOVERABLE UNDER ? Alta Mesa Holdings, L.P. v. Steven Ives, S.W.3d, 2016 WL (Tex. App. Houston [14 th Dist.] April 14, 2016). Appellants contend that as limited liability companies, TMRX and Acquisition Sub are excluded from the entities against which attorney s fees may be recovered under section : individuals and corporations. We agree. Applying that analysis to the present case, it appears that the question of whether an LLC is contained within the term corporation is a closer call than whether partnership is included within individual or corporation.
24 AGAINST WHOM ARE ATTORNEYS FEES RECOVERABLE UNDER ? Alta Mesa Holdings, L.P. v. Steven Ives, S.W.3d, 2016 WL (Tex. App. Houston [14 th Dist.] April 14, 2016). The history of section and its predecessor statute, article 2226 of the Texas Revised Civil Statutes, further supports the conclusion that use of the term corporation does not encompass an LLC. Article 2226 provided that any person, corporation, partnership, or other legal entity having a valid claim against a person or corporation could recover attorney s fees against the persons or corporation. See Fleming,425S.W.3dat575. Thefactthat corporation is first used in a list of entities that includes partnerships and other legal entities indicates that the term was not intended to encompass those other types of entities, because to read the term otherwise would render use of these other terms meaningless. Applying that analysis to the present case, it appears that the question of whether an LLC is contained
25 What Does This Mean For Plaintiffs? Opinions are not controlling on trial Court s except 14 th Dist. Not Against Duty of Candor to Court to make claim for fees except for 14 th Dist. Many Lawyers Don t Know About This Yet. Properly Advise Clients: Manage client expectations.
26 What Does This Mean For Defendants? Can change the dynamics of a case materially. Sworn Account Breach of Contract Determine how you want to notify the opposition of their mistake or oversight : Answer Motion for partial summary judgment Settle whether the Court will apply prohibition early. Notify opposing counsel Increase bargaining position
27 APPEAL? - PRESERVE YOUR OBJECTIONS AT TRIAL Despite the novelty of the holdings in Fleming, Hoffman, and Alta Mesa, Texas courts of appeals are not showing any leniency in the area of error preservation. To argue on appeal that Chapter 38 does not authorize the award of fees against a partnership or other non-corporate entity, you must raise and preserve this issue in the trial court. See Enzo Inv., LP v. White, No CV, -- S.W.3d --, 2015 WL , at *11 (Tex. App. Houston [14th Dist.] June 4, 2015, no pet. h.); Petrohawk Prop., L.P. v. Jones, 455 S.W.3d 753, (Tex. App. Texarkana 2015, pet. filed).
28 LEGISTATIVE FIX? NOT YET. A bill was introduced late last year to amend Chapter 38 to state that attorneys fees could be recovered from an individual, corporation, or other legal entity. See H.B. 230, 84th Reg. L.S. (2015). The bill passed the House by an overwhelming majority, but was left pending in a Senate committee at the close of the legislative session. See Texas Legislature Online, available at: &Bill=HB230
29 Christopher M. LaVigne 2200 Ross Ave., Suite 5200 Dallas, Texas (214)
30 Taxes and Litigation In life: In litigation:
31 Taxes and Litigation Traditional jury charge: In deciding damages, you are instructed not to consider the tax consequences, if any, of any award of damages.
32 Taxes and Litigation In 2003, the Legislature passed HB4, the most sweeping tort reform statute of its kind: Capped punitive damages Severely restricted medical malpractice cases Substantially reformed proportionate responsibility laws in Texas Created an offer of settlement mechanism that can be used to offset damages
33 Taxes and Litigation It also adopted of the Texas CPRC: PROOF OF CERTAIN LOSSES; JURY INSTRUCTION. (a) Notwithstanding any other law, if any claimant seeks recovery for loss of earnings, loss of earning capacity, loss of contributions of a pecuniary value, or loss of inheritance, evidence to prove the loss must be presented in the form of a net loss after reduction for income tax payments or unpaid tax liability pursuant to any federal income tax law. (b) If any claimant seeks recovery for loss of earnings, loss of earning capacity, loss of contributions of a pecuniary value, or loss of inheritance, the court shall instruct the jury as to whether any recovery for compensatory damages sought by the claimant is subject to federal or state income taxes.
34 Loss of earnings : Taxes and Litigation Earnings: Something earned, as salary or profits. Loss of contributions of a pecuniary value : Contribute: To give or supply in common with others -- contributions, n. Pecuniary: Of, consisting of, or pertaining to money Value: Material worth
35 Taxes and Litigation (a) is a substantive rule of evidence It is not discretionary, compliance is a condition precedent to admissibility Plaintiff must designate an expert to calculate the tax consequences of any covered claim, including claims for lost profits and lost investments Failure to calculate such damages should lead to dismissal of the claim for damages Opens tax returns up to being discovered?
36 Taxes and Litigation Brooks v. Mass Marketing, Ltd., 2010 WL (Tex. App. Austin 2010) (Affirming trial court s JNOV based on CPRC , but limited discussion) Cowboys Concert Hall-Arlington, Inc. v. Jones, 2014 WL (Tex. App. Fort Worth 2014) (Defendant failed to preserve error by requesting instruction) Big Bird Tree Services v. Gallegos, 365 S.W.3d 173 (Tex. App. Dallas 2012) (Defendant failed to object when evidence was offered) Interconex, Inc. v. Ugarov, 224 S.W.3d 523 (Tex. App. Houston [1 st Dist.] 2007) (Defendant failed to object to submission of damages question during charge conference)
37 Punitive Damage Caps
38 The General Rule Exemplary damages are governed by Chapter 41 of the Texas Civil Practice & Remedies Code Section caps exemplary damages at the greater of either (a) 2x the amount of economic damages plus an amount of noneconomic damages not to exceed $750,000, or (b) $200,000
39 CPRC (c)(11) Section (c) states that the exemplary damage caps do not apply to a cause of action against a defendant from whom the plaintiff seeks recovery of exemplary damages based on conduct described as a felony in the following sections of the Penal Code (11) Section (securing execution of document by deception)
40 Texas Penal Code (a) A person commits an offense if, with intent to defraud or harm any person, he, by deception: (1) causes another to sign or execute any document affecting property or service or the pecuniary interest of any person; or (b) An offense under Subsection (a)(1) is a: (3) Class A misdemeanor if the value of the property, service, or pecuniary interest is $500 or more but less than $1,500; (4) State jail felony if the value of the property, service, or pecuniary interest is $1,500 or more but less than $20,000;
41 Elements Intent to defraud or harm any person; By deception (Tex. Penal Code 31.01(1)(A)-(D)) Deception means: a. Creating or confirming by words or conduct a false impression of law or fact that is likely to affect the judgment of another in the transaction, and that the actor does not believe to be true; or b. Failing to correct a false impression of law or fact that is likely to affect the judgment of another in the transaction, that the actor previously created or confirmed by words or conduct, and that the actor does not now believe to be true. Causes another to sign or execute any document affecting property or service or the pecuniary interest of any person; The value of the property, service, or pecuniary interest is $1,500 or more.
42 The Hidden Value of Fraudulent Inducement Claims Fraudulent inducement is an exception to the economic loss doctrine, meaning a plaintiff can recover in tort its loss under the contract; Under Chapter 41, fraud entitles the plaintiff to recover punitive damages; Under (c)(11) exemplary damage caps do not apply if the value of the contract exceeds $1,500
43 This image cannot currently be displayed. Discoverability of Net Worth Information
44 Traditional Texas Rules Lunsford v. Morris, 746 S.W.2d 471 (Tex. 1988) We hold that in cases in which punitive or exemplary damages may be awarded, parties may discover and offer evidence of a defendant's net worth. Some states allowing discovery of net worth require a prima facie showing of entitlement to punitive damages before information about a defendant's net worth may be sought. Our rules of civil procedure and evidence do not require similar practices before net worth may be discovered.
45 New CPRC (a) On the motion of a party and after notice and a hearing, a trial court may authorize discovery of evidence of a defendant s net worth if the court finds in a written order that the claimant has demonstrated a substantial likelihood of success on the merits of a claim for exemplary damages. Evidence submitted by a party to the court in support of or in opposition to a motion made under this subsection may be in the form of an affidavit or a response to discovery. (b) If a trial court authorizes discovery under Subsection (a), the court s order may only authorize use of the least burdensome method available to obtain the net worth evidence. (c) When reviewing an order authorizing or denying discovery of net worth evidence under this section, the reviewing court may consider only the evidence submitted by the parties to the trial court in support of or in opposition to the motion described by Subsection (a). (d) If a party requests net worth discovery under this section, the court shall presume that the requesting party has had adequate time for the discovery of facts relating to exemplary damages for purposes of allowing the party from whom net worth discovery is sought to move for summary judgment on the requesting party s claim for exemplary damages under Rule 166a(i), Texas Rules of Civil Procedure.
46 Key Points Only applies to lawsuits filed on or after September 1, 2015; Ability to obtain net worth discovery limited; must establish substantial likelihood of success on the merits ; Scope of discovery limited to least burdensome method available ; Evidence is required, pleadings and allegations alone are insufficient; Plaintiff seeking such information waives the right to seek a continuance to any no evidence motion for summary judgment under Rule 166a(i); Net worth is now a defined term, Section (7-a) defines net worth as the total assets of a person minus the total liabilities of the person on a date determined appropriate by the trial court
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