Posted by Rich Phillips and Connor Bourland
With apologies for the delay, here are the summaries of the Texas Supreme Court opinions issued on June 7, June 14, and June 21, 2019. With these opinions issued, the Court has five cases argued but not decided. If the Court follows its recent practice, those opinions will all be issued on Friday, June 28.
June 7
No. 18-1099, JCB, Inc. d/b/a Conveying & Power Transmission Solutions v. The Horsbugh & Scott Co. — In this case, the Court addressed two questions of Texas law certified by the Fifth Circuit concerning Business and Commerce Code section 54.004, which allows a sales representative to recover treble damages and attorney’s fees when its principal fails to comply with a provision of a contract governed by the Texas Sales Representative Act. JCB, Inc. was a commissioned sales representative for The Horsburgh & Scott Company. Horsburgh failed to pay JCB’s commission and JCB filed suit. While the case was pending, Horsburgh paid the remaining commissions plus interest. Horsburgh then moved for summary judgment, arguing that because section 54.004 applies only to unpaid commissions, its payment of the remaining commissions plus interest eliminated JCB's rights under the section. The district court granted Horsburgh’s motion. The Fifth Circuit certified two questions: (1) “What timing standard should courts use to determine the existence of any ‘unpaid commissions due’ under … § 54.004(1)?” and (2) “May a plaintiff recover reasonable attorney’s fees and costs … if the plaintiff does not receive a treble damages award under … § 54.004(1), and under what conditions?”
In an opinion by Justice Blacklock, the Court noted that the statue itself did not answer the timing question: nothing in the statute directed courts to look at a specific time to determine whether commissions were unpaid. JCB argued that because the commissions were unpaid at the initiation of the suit, Horsburgh should be liable for treble damages. The Court disagreed, turning to the common law principle that damages can be mitigated and should reflect an amount required to compensate the non-breaching party at the time of the verdict or judgment. The Court thus answered the first question by holding that “the time for determining the existence and amount of ‘unpaid commissions due’ … is the time the jury or trial court determines the liability of the defendant.”
On the issue of attorney’s fees, JCB argued that the plain language of section 54.004 allows attorney’s fees where a principal fails to comply with a provision of the contract and does not depend on an award of treble damages. Conversely, Horsburgh argued that, without an award of treble damages, JCB could not be a prevailing party. The Court sided with JCB, reasoning that nothing in the statute ties the payment of attorney’s fees to an award of treble damages. The only limitation on the award of attorney’s fees is that they must be reasonable—an issue for the district court to decide.
June 14
No. 16-0966, LaLonde v. Gosnell — The Court considered whether the defendants waived application of Texas Civil Practice and Remedies Code Chapter 150 by waiting over 1,200 days after the case was filed to seek dismissal based on the plaintiffs' failure to include a certificate of merit with their original petition. In an opinion by Justice Guzman (joined by Justice Green, Justice Lehrmann, Justice Devine, Justice Brown, and Justice Busby), the Court concluded that the defendants' conduct waived the application of Chapter 150. The Court first rejected the defendants' argument about the standard for determining waiver. The defendants argued that it should not be measured by the "totality of the circumstances" but by the "traditional test." The Court rejected the idea that these are two separate tests. Instead, the Court held that "the universal test for implied waiver by litigation conduct is whether the party’s conduct—action or inaction—clearly demonstrates the party’s intent to relinquish, abandon, or waive the right at issue—whether the right originates in a contract, statute, or the constitution." The Court also noted that where the facts are not disputed, the application of waiver is a question of law. Finally, the Court reviewed the defendants' conduct and found that they impliedly waived application of Chapter 150. The Court noted that while all litigation conduct is inconsistent with the right to seek dismissal, not all litigation conduct is sufficiently inconsistent with Chapter 150 to show an intent to waive its application. The Court then examined the defendants' litigation conduct in detail and concluded that it was sufficiently inconsistent with their rights under Chapter 150 to waive those rights.
Justice Boyd filed a dissenting opinion (joined by Chief Justice Hecht and Justice Blacklock). The dissenters frame the right under Chapter 150 not as "early dismissal" but as the right to seek dismissal at any time. In light of this framing, the dissenters would not have found that the defendants' litigation conduct was sufficient to waive the right.
No. 18-0329, Worsdale v. The City of Killeen — In this case, the Court considered whether the Texas Tort Claims Act waived governmental immunity for the City of Killeen when two motorists were killed when their vehicle struck an unbarricaded dirt mound blocking an unlit country road. The decedents’ survivors sued the City under the Tort Claims Act. As a jurisdictional prerequisite to suit, section 101.101 of the Act requires plaintiffs to give a prompt and formal notice of a claim against the governmental entity unless the entity has “actual notice that death has occurred, that the claimant has received some injury, or that the claimant’s property has been damaged.” Because the survivors did not file a prompt notice of their claim, the City filed a plea to the jurisdiction, which the trial court denied. The court of appeals reversed, finding that the post-accident report as a routine safety investigation was insufficient to provide actual notice to the City to excuse the lack of a prompt notice of claim. The survivors appealed.
In an opinion by Justice Guzman, the Supreme Court reversed and held that the City had actual notice of the claim. Actual notice, the Court noted, requires evidence that establishes the City’s subjective awareness of its responsibility for the accident as ultimately alleged by the survivors. The Court found that the evidence showed that the City was subjectively aware (1) of allegations that the unbarricaded dirt mound and lack of warnings were contributing factors and (2) that the City was responsible for maintaining the road. The eventual investigation into the accident, the Court noted, was not a typical accident investigation; it entailed determining who owned and had responsibility for maintaining the road and led to the City removing the dirt mound after determining that the road was its responsibility. These facts, the Court held, amounted to actual notice of the City’s subjective awareness of its fault as alleged by the survivors. The Court distinguished the facts in the case from the facts in Cathey v. Booth, 900 S.W.2d 339 (Tex. 1995), in which the Court held that mere knowledge of a death through medical records did not amount to actual notice and that knowledge of the death, the governmental unit’s alleged fault, and the identity of the parties involved. The Court also distinguished City of Dallas v. Carbajal, 324 S.W.3d 537 (Tex. 2010) and City of San Antonio v. Tenorio, 543 S.W.3d 772 (Tex. 2018), because the facts in those cases did not show actual subjective awareness that the claimant alleged the city was at fault. The Court emphasized that the awareness at issue is "subjective awareness connecting alleged governmental conduct to causation of an alleged injury to person or property in the manner ultimately asserted." The standard does not require an adjudication of liability or confession of responsibility.
Justice Boyd concurred (joined by Justice Blacklock), but reasoned that the majority, having found that the City had actual notice as required by the statute and Cathey, should have abstained from “unnecessarily and improperly” wading into deciding whether Cathey should have been overruled. The concurrence noted that the Court should wait to decide the fate of Cathey “in a case in which that decision matters” as opposed to a case in which the discussion is “mere dicta.” Having dissented in the Court’s previous case concerning the actual notice exception, City of San Antonio v. Tenorio, Justice Boyd reiterated his reasons for overruling Cathey; namely that Cathey presumed an unexpressed legislative purpose and imposed additional requirements on the statutory waiver of immunity. Nevertheless, Justice Boyd concluded that he, too, would reverse the court of appeals, but “would do so because the evidence establishes that the City had all the actual notice section 101.101(c) actually requires.”
No. 18-0443, In re Geomet Recycling, LLC — This mandamus petition arose from an appeal of the denial of a motion to dismiss under the Texas Citizens Participation Act. Texas Civil Practice and Remedies Code 51.014(b) stays all proceedings in the trial court during an interlocutory appeal from the denial of a TCPA motion. In this case, the court of appeals entered an order lifting the stay to allow the trial court to hold a hearing on the appellees' request for a temporary injunction and motion for sanctions. The appellees were seeking a temporary injunction to prevent use of alleged trade secrets and were seeking sanctions for the appellants' alleged violation of a TRO regarding use of the trade secrets. In an opinion by Justice Blacklock, the Court found that the appellate court did not have the power to lift the statutory stay. The Court noted that nothing in section 51.014(b) grants any court the power to lift the stay imposed by the statute. The Court rejected the appellees' argument that the power to lift the stay could be found in the trial court's inherent constitutional authority. The Court noted that if the appellees did not have any other avenue for relief, the Court would have to address this issue. But the Court found that because 51.014(b) stays only proceedings in the trial court, the appellees could ask the appellate court to grant the relief it wanted to seek from from the trial court. Accordingly, the Court conditionally granted mandamus relief ordering the court of appeals to vacate the order lifting the stay.
June 21
No. 17-0110, Nath v. Texas Children's Hospital — This is the second time this case has been in the Supreme Court. In 2014, the Court affirmed sanctions against Nath for bringing frivolous claims, but remanded the case for the trial court to re-evaluate the award of attorney's fees because the defendants litigated for four years before seeking sanctions. Nath v. Tex. Children's Hosp., 446 S.W.3d 355 (Tex. 2014). (We summarized that opinion here.) On remand, the trial court again awarded the full amount of the defendant's fees. In this second round of appeal, Nath argued that the defendant's fee evidence was insufficient. Relying on a line of cases from some intermediate appellate courts, the defendants argued that because they were seeking fees as sanctions, they did not have to meet the same evidentiary burden as other fee-shifting cases. In a per curiam opinion (Justice Guzman did not participate), the Court first held that even when fees are being awarded as sanctions, the same evidentiary standards apply, rejecting the line of cases that defendants relied on. The Court then reversed the fee award and remanded it for reconsideration in light of the Court's decision in Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 2019 WL 1873428 (Tex. Apr. 26, 2019) (We summarized Rohrmoos here.)
No. 18-0203, Trial v. Dragon — In this real property dispute, the Court considered whether the estoppel by deed doctrine or the Duhig rule barred petitioners from claiming a property interest they inherited from their mother. Leo Trial owned a 1/7 interest in property in Karnes County. He gifted half of his interest to his wife Ruth, giving her a 1/14 interest in the property as her separate property. The deed was recorded shortly after the gift. Several years later, Leo and the other owners of the property (except his wife) signed general warranty deeds conveying the property to the Dragons. A portion of the purchase price was financed. The deeds also contained a 15-year reservation of mineral rights. Nothing in the deeds mentioned Ruth's interest. After Leo died, the Dragons continued making payments, and Ruth accepted them. When the payments were complete, she signed the release of lien as "Leo Trial by Ruth Trial." When Ruth died, her estate passed by intestacy to her two sons. After the mineral reservation expired and the Dragons asked the oil and gas operator for a new division order, the operator discovered Ruth's sons' interests. The Dragons argued that the Duhig rule and estoppel by deed prevented Ruth's sons from claiming any interest in the property.
In an opinion by Justice Green, the Supreme Court disagreed. The Court first reiterated that the Duhig rule is extremely narrow and generally limited to its facts. The court declined to apply it because Leo did not own the interest required to remedy the breach of warranty in the deed. He had already conveyed it to his wife. The Court also rejected the application of estoppel by deed because Ruth's sons were not parties to Leo's deed to the Dragons or his privies. Instead, their claim was based on Ruth's interest, which was her separate property. The Court noted that Leo breached the warranty deed at the time of execution because he could not convey what he purported to convey. And as Leo's heirs, his sons were bound by the warranty deed to defend the Dragons' title (and therefore could be liable for damages for breach of the warranty). But neither the trial court nor the court of appeals considered whether the sons could be liable for damages (as Leo's heirs) for damages caused by their own claims (as Ruth's heirs) to the property. The Court remanded the case for consideration of that issue.
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