By James C. Marrow, Hogan & Hogan and Andrew C. Nelson, Wright & Close LLP
FIRST COURT OF APPEALS
Guillory v. Seaton, LLC, No. 01-14-00379-CV, 2015 WL 4735694 (Tex. App.—Houston [1st Dist.] Aug. 6, 2015, no pet. h.)
The Texas Supreme Court had authority to promulgate Texas Rule of Civil Procedure 91a.
Rule 91a is constitutional.
Guillory was injured while operating a baler on a jobsite. One of the defendants he sued, Seaton, filed a Rule 91a motion to dismiss, which the trial court granted. Guillory appealed the judgment in favor of Seaton. Among other things, Guillory challenged both the authority of the Supreme Court to promulgate the Rule, as well as the constitutionality of the Rule.
First, Guillory argued that the Court lacked the authority to promulgate Rule 91a because it conflicts with Chapter 10 of the Texas Civil Practice and Remedies code. Chapter 10 limits the Supreme Court’s ability to issue sanctions rules. Guillory argued that Rule 91a was a sanctions rule because it awards attorney’s fees and court costs to the prevailing party. He argued that as a “sanctions rule,” the rule violated Chapter 10.
The First Court began its examination by determining that Rule 91a is not a sanctions rule. It does not punish bad conduct; rather it shifts the economic risks of litigation. Rule 91a does not reference the culpability of any party. Rule 91a is, therefore, a risk-shifting mechanism as found elsewhere in Texas law.
The court noted that even if Rule 91a was a sanctions rule, the Texas Legislature has mandated fee shifting in Rule 91a by passing Section 30.021 of the Texas Civil Practice and Remedies Code, in which the Legislature explicitly authorized the motion to dismiss procedure. To the extent Section 30.021 conflicts with Chapter 10, Section 30.021 prevails because it is more specific and was passed after Chapter 10. The court upheld the Supreme Court’s authority to promulgate Rule 91a.
Next, the court addressed Guillory’s arguments that Rule 91a is unconstitutional on its face and as applied. The court considered and rejected Guillory’s challenge that Rule 91a violates the open courts provision of the Texas Constitution. The court noted that Rule 91a would violate the open courts provision if the requirement is an unreasonable financial barrier to access to the courts. The court held it was not for several reasons. First, Rule 91a is not a “pay-to-play” rule—shifting litigation-cost risk is fundamentally different from requiring actual payment as a prerequisite to judicial review. Second, the court held that fee-shifting does not chill the filing of all claims. In most cases, it will not. Third, the court ruled that Rule 91a limits a plaintiff’s potential risk by requiring a defendant to file the motion early in the litigation. A plaintiff will therefore only be liable for a few months of litigation costs, not a few years. Fourth, Rule 91a provides a 21-day window for a plaintiff to nonsuit or amend the petition if desired in an attempt to avoid the fee-shifting mechanism.
For many of the same reasons, the court also turned away Guillory’s constitutional challenges based on free speech, due process, and equal protection. Finally, the court ruled that Guillory could not succeed on his as-applied challenge. The court upheld the validity of Rule 91a.
S.C. Maxwell Family P’ship, Ltd. v. Kent, No. 01-15-00245-CV, 2015 WL 4624026 (Tex. App.—Houston [1st Dist.] Aug. 4, 2015, no pet. h.)
When an alleged contract contains an arbitration agreement, and one party challenges the alleged contract on the basis that a contract was never formed, the validity of the contract is for the court, not the arbitrator, to decide.
Thomas and Nancy Kent received a letter from the S.C. Maxwell Family Partnership (the “Partnership”) informing them that the Partnership considered a partnership agreement between them to be invalid. In response, the Kents filed a declaratory judgment seeking a declaration that the agreement was valid.
The Partnership answered by attacking the formation and validity of the partnership agreement on multiple grounds, including the defenses of fraud, fraud in the inducement, failure of consideration, and lack of consideration. The Partnership then filed a motion to compel arbitration based on an arbitration clause in the agreement. The Kents opposed the motion. The trial court denied the motion to compel arbitration.
On appeal, the Partnership argued that the trial court erred in denying its motion. The First Court noted that while Texas law strongly favors arbitration, that presumption only arises after the court determines that a valid agreement to arbitrate exists. Under the “separability doctrine,” an arbitration provision is separable from the rest of the contract such that a challenge to the validity of the entire contract is a question for the arbitrator, while the question of a challenge specifically related to the arbitration provision is a question for the court. However, courts have distinguished between issues related to the contract’s formation and other issues impacting a contract’s validity. Specifically, when the formation of a contract is called into question, courts have authority and responsibility to decide the matter.
In the case before it, the Partnership pleaded failure of consideration and lack of consideration as defenses. Those defenses challenge the very existence of a contract. Because the Partnership raised a formation defense alleging the contract never existed, that issue was for the court to decide. As a final argument, the Partnership argued that because the Kents did not deny the existence of the agreement, the trial court should have ordered arbitration. The court rejected that argument. The court affirmed the judgment of the trial court.
Lumenta v. Bell Helicopter Textron, Inc., No. 01-14-00207-CV, 2015 WL ______ (Tex. App.—Houston [1st Dist.] Aug. 27, 2015, no pet. h.)
The court laid out the standards for review of a denial for a motion for continuance of a hearing on a forum non conveniens motion.
The plaintiff, Lumenta, sued Bell Helicopter in Houston over a fatal helicopter crash that killed her son in Indonesia. Among other things, Bell Helicopter filed a motion to dismiss Lumenta’s claims based on forum non conveniens. The trial court granted the forum non conveniens motion. Lumenta appealed.
The court engaged in a lengthy discussion of the doctrine of forum non conveniens and ultimately determined that the dismissal was proper. That discussion is not summarized here.
However, Lumenta also argued that the trial court should erred by refusing to grant her motion for continuance of hearing on the forum non conveniens motion. The First Court noted that it reviews a trial court’s denial of a motion for continuance for a clear abuse of discretion. Lumenta filed her motion for continuance on the grounds that she needed to conduct additional discovery in support of her motion. Lumenta argued that she “could not respond fully” to Bell Helicopter’s motion, but filed her response anyway.
Lumenta relied upon a case in which the court held that a trial court committed an abuse of discretion in not granting a motion for continuance of a hearing on a motion for summary judgment. However, the First Court distinguished that case on the grounds that a summary judgment is a decision on the merits. On the other hand, a motion to dismiss based on forum non conveniens is not a merits dismissal, because it is a determination that the claims should be decided elsewhere. Additionally, a forum non conveniens motion does not call for development of the whole case, as opposed to a motion for summary judgment. Because of the distinctions drawn between the different motions, the First Court affirmed the trial court’s denial of Lumenta’s motion for continuance.
FOURTEENTH COURT OF APPEALS
Saifi v. City of Texas City, No. 14-13-00815-CV, 2015 WL 1843540 (Tex. App.—Houston [14th Dist.] Apr. 23, 2015) (mem. op.).
Notwithstanding CPRC section 51.014(a)(8), an appeal from the granting of a jurisdictional plea that results in a final judgment is governed by ordinary appellate deadlines and not the accelerated appellate timetable.
Appellant Saifi sued Appellee, the City of Texas City, alleging wrongful termination of his employment with the City’s fire department. The trial court granted the City’s plea to the jurisdiction asserting governmental immunity, and Saifi appealed.
The City argued that Saifi failed to timely perfect his appeal because the appeal was taken from an order that “grant[ed] or denie[d] a plea to the jurisdiction by a governmental unit,” which is grounds for interlocutory appeal under Civil Practice and Remedies Code section 51.014(a)(8). The Court of Appeals disagreed because, although the trial court’s order did not include express language of finality, the order reflected that the City’s plea to the jurisdiction, which addressed all of Saifi’s claims, was granted “in its entirety.” Thus, under Lehmann v. Har-Con Corp., the order was a final judgment because it finally disposed of all parties and all claims. Accordingly, the Court of Appeals held that the judgment was not subject to an accelerated appellate timetable and that Saifi’s notice of appeal was timely filed.
The Court of Appeals ultimately reversed the trial court’s plea to the jurisdiction because Saifi’s pleadings did not reveal incurable jurisdictional defects on his breach-of-contract claim, and remanded the matter for Saifi to have an opportunity to amend his pleadings and develop the record on his contention that the City’s immunity was waived under Local Government Code section 271.152.
In re Valerus Compression Servs., LP, No. 14-14-00019-CV, 2015 WL 2169656 (Tex. App.—Houston [14th Dist.] May 7, 2015, orig. proceeding) (mem. op.).
A trial court abuses its discretion, and mandamus is appropriate, if the trial court grants a Rule 202 petition prior to ruling on the opposing party’s motion to compel arbitration.
The real parties in interest filed a Rule 202 petition, seeking to depose various representatives from relator, Valerus Compression Services, to investigate potential claims of breach of contract, breach of fiduciary duty, minority shareholder oppression, and civil conspiracy. Valerus objected to the 202 petition and filed a motion to compel arbitration pursuant to a dispute resolution in a partnership agreement among the parties. The trial court granted the Rule 202 petition but did not expressly rule on the motion to compel arbitration. Valerus filed an interlocutory appeal and mandamus proceeding.
The Court of Appeals held that mandamus, not interlocutory appeal under CPRC section 51.016, was the appropriate procedural vehicle in this instance because the trial court did not rule on the motion to compel arbitration (so as to give rise to an interlocutory appeal) but instead deferred ruling.
The Court granted mandamus relief, relying on its earlier decision in In re Bill Heard Chevrolet, No. 14-05-00744-CV, 2005 WL 2787468 (Tex. App.—Houston [14th Dist.] Oct. 27, 2005, orig. proceeding) (mem. op.). The earlier panel that decided Bill Heard had ruled that “[t]he trial court has no discretion to delay the decision on the merits of arbitrability until after discovery,” and the Court followed that precedent and reached the same conclusion. Accordingly, the panel conditionally granted mandamus relief and ordered the trial court to rule on the issue of arbitrability.
Justice McCally concurred in the outcome because the Court’s precedent dictated the same outcome. However, she wrote separately to urge the court to reconsider Bill Heard Chevrolet, reasoning that a Rule 202 trial court does not have jurisdiction to adjudicate claims or defenses to final judgment. As such, a Rule 202 trial court does not have jurisdiction to consider or rule on a motion to compel arbitration, so “we have ordered the trial court to do that which it does not have jurisdiction to do.” Instead, Justice McCally suggested that a Rule 202 trial court should consider a motion to compel arbitration as part of the benefit/burden analysis required by Rule 202, which takes into account defenses to discovery that would exist in a traditional lawsuit, and that mandamus review of the Rule 202 trial court’s ruling should be limited to examining the trial court’s balancing of the benefits and burdens of the requested pre-suit discovery.
Stamatis v. Methodist Willowbrook Hosp., No. 14-14-00492-CV, 2015 WL 3485734 (Tex. App.—Houston [14th Dist.] June 2, 2015) (mem. op.).
A trial court’s inherent power does not authorize a court to dismiss a party’s claims on the merits without a pending motion.
Appellant, Paul Stamatis, Jr., sued several health care providers for alleged medical negligence. The defendants contended that Stamatis had received “emergency medical care,” such that, under CPRC section 74.153, to recover Stamatis would have to prove the health care providers acted with willful and wanton negligence, as opposed to the traditional ordinary negligence standard.
At a pretrial conference on the eve of trial, and based on Stamatis’s pleadings and the arguments of counsel without considering any evidence, the trial court determined as a matter of law that the willful and wanton standard would apply. Stamatis had not pleaded the higher standard of care and declined to amend his pleadings. The trial court therefore signed a final judgment ordering that Stamatis take nothing on his claims against the defendants. Stamatis appealed.
The Court of Appeals reversed, holding that the trial court was not permitted to enter judgment without a case-dispositive motion by the defendants. The Court noted that the Rules provide several procedural vehicles that may be used to resolve a dispute, including trial on the merits, motions for summary judgment, and agreements by the parties to compromise some or all of their claims. The Court continued, “[w]here an extensive system is in place governing procedures applicable to a situation, trial courts do not, in the absence of some extraordinary reason to depart from those procedures, have the inherent authority to create their own ad hoc procedures. Inherent power does not permit a trial court to dismiss a party’s claims on the merits without a pending motion.”
Menon v. Water Splash, Inc., ___ S.W.3d ___, No. 14-14-00012-CV, 2015 WL 3982547 (Tex. App.—Houston [14th Dist.] June 30, 2015).
The Hague Convention prohibits plaintiffs from serving process on Canadian citizens living in Canada by mail but instead requires service through a central authority or “directly through the judicial officers, officials, or other competent persons of the State of destination.”
Appellee, Water Splash, sued Menon, among others, in Galveston, Texas for unfair competition, conversion, tortious interference with business relations, and conspiracy. Menon is a citizen of Canada and resides in Quebec. Water Splash requested, and the trial court approved, alternative service of process on Menon through Rule 108a, specifically, first class mail, certified mail, and Federal Express to Menon’s address and email to each of Menon’s known email addresses.
Menon did not file an answer or otherwise appear. Water Splash moved for default judgment, arguing that service was accomplished by sending a letter to Menon’s Quebec address through certified mail, return receipt requested, and first class mail. The trial court granted the motion for default judgment against Menon and awarded actual and exemplary damages and attorneys’ fees. Menon moved for a new trial. Her motion was denied, and she appealed.
Menon argued that the Hague Service Convention applied, that it specified the only acceptable means of service, and that service by mail was not sufficient under the Convention. Water Splash responded that Rule 108a was an acceptable form of alternative service.
The Court of Appeals held that the Hague Service Convention applied and defined the relevant issue as the interpretation of Article 10(a) of the Convention. Article 10(a) generally provides for “the freedom to send judicial documents . . . directly to persons abroad” and “the freedom . . . to effect service of judicial documents directly through the judicial officers, officials, or other competent persons of the State of destination.” The question presented was whether Article 10(a) allows service of process by mail. This question has not yet been answered by the United States Supreme Court, Texas Supreme Court, or the Fourteenth Court of Appeals.
Menon argued that, by using the word “send” in relation to judicial documents generally, but “service” elsewhere, the drafters did not intend to allow service of process by mail. The majority of the Court of Appeals agreed with Menon and held that the Convention prohibited service of process by mail. The majority reasoned that, because the Convention provides elsewhere for service of process through a central authority or through diplomatic channels, it was “unlikely that the drafters would have put in place these methods of service . . . while simultaneously permitting . . . service by mail.” The majority also noted that other federal district courts in Texas, and at least two Texas state courts (including the First Court of Appeals), had reached the same conclusion. Therefore, the panel majority reversed the default judgment and remanded to the trial court for further proceedings.
Justice Christopher dissented, noting that the “majority rule” in the U.S. interpreted Section 10(a) as allowing service of process by mail. She further noted that, as a treaty, the Convention is not legislation and is supposed to be construed more liberally than a private contract to secure equality and reciprocity among the participating countries, that is, in a manner “consistent with the shared expectations of the contracting parties.” Justice Christopher further observed, among other things, that the Executive Branch—to which interpreting courts are to accord “great weight”—has “unwaveringly interpreted Article 10(a) as permitting service by mail” and that other countries have not drawn a distinction between the words “send” and “service” in Section 10(a). Accordingly, Justice Christopher would hold that Article 10(a) of the Convention permits service by mail in Canada.