Kirk Pittard of Kelly Durham & Pittard, LLP will be speaking on "Trends in Rulings by the Texas Courts of Appeals" at the May meeting of the Dallas Bar Association Appellate Law Section. The meeting will be at noon on Thursday, May 17th at the Belo Mansion. One hour of CLE credit is available.
The El Paso Court of Appeals has become the most recent appellate court to weigh in on the issue of whether the judgment that is being appealed should be included on a balance sheet insofar as determining an appellant's net worth for supersedeas bond purposes.
In Business Staffing Inc. v. Jackson Hot Oil Service, Jackson obtained a joint and several judgment against four defendants. Each of the four defendants filed affidavits of net worth showing a negative balance and each affidavit included the amount of the judgment as a liability on the balance sheets. Jackson filed a contest to the affidavits, which the trial court sustained. The trial court then set bond amounts as 50% of the net worth of each defendant as calculated after elimination of the judgment as a liability. The four defendants/appellants sought review of the trial court's order from the court of appeals.
The court of appeals first observed that "net worth" is calculated as assets minus liabilities, as determined by generally accepted accounting principles. In spite of this observation, the court pointed out that the appellants had not cited any legal authority for inclusion of the judgment in the net worth calculation. The court then cited two other opinions for the proposition that the judgment--a contingent liability--should not be included in the net worth calculation. Although the appellants presented an expert CPA, the court of appeals observed that the expert testified only that the judgment should be included on the balance sheet and not that the judgment was part of the net worth calculation. Applying an abuse of discretion standard, the court holds that the trial court did not abuse its discretion because the court did not act without reference to guiding rules and principles. The court's opinion may be found here.
Issues practitioners may want to watch for: (1) Is the issue of whether the judgment is a liability one that requires expert testimony, as some courts have held, or is it a question of law for the court, as other courts have held? (2) This is one of only two opinions of which I am aware where the appellants presented unrebutted expert testimony supporting inclusion of the judgment as a liability under GAAP principles, but the trial court and appellate court rejected the testimony. (3) Is GAAP the only means by which an appellant may establish net worth (particularly if the appellant uses another accepted method of accounting)?
The Dallas Court of Appeals recently decided an interesting issue involving whether evidence that attorney's fees are reasonable under the Arthur Anderson v. Perry factors is required in a breach of contract case between attorney and former client. Here, a law firm brought suit against its former client for non-payment of fees pursuant to a contract and attached its unpaid invoices to its motion for summary judgment. The firm did not introduce or establish the agreement at issue. However, the summary judgment evidence did support that the client owed the fees represented by the invoices. The trial court granted summary judgment to the law firm and the client appealed.
The court of appeals framed the issue as: "[T]he unique situation of deciding whether a party must prove its attorneys' fees are reasonable and necessary under the Andersen factors when there has been no showing of a breach of an underlying contract." The court held that "under the unique facts of this situation, we conclude that the Anderson factors apply in determining the reasonableness of attorneys' fees." Without a contract, the court continued, "it only seems prudent that we employ some gatekeeping function to ensure attorneys' fees are reasonable under Texas Rule of Professional Conduct 1.04." Accordingly, the court reversed the grant of summary judgment and remanded to the trial court. The opinion in Ashton Grove, L.C. v. Jackson Walker L.L.P. can be found at this link.
There are a couple of Appellate Continuing Legal Education opportunities on the horizon that I will call out for you.
First, on May 31st and June 1st, the 22nd Annual UT Conference on State and Federal Appeals will be held at the Four Seasons Hotel in Austin, Texas. The program for registration may be found here.
And if you can't make that seminar, there's another one June 21st and 22nd at the Hyatt Regency Hotel in Cambridge, Massachusetts. The Defense Research Institute will be holding its Appellate Advocacy Seminar on those dates in June. The program for registration at this seminar may be found here.
The Tyler Court of Appeals has held that a trial court has no authority to extend the deadline for a party to respond to an offer of settlement made under Texas Civil Procedure Rule 167. In In re Complete Rx, Ltd., Good Shepherd Hospital sued Complete Rx for an accounting. Complete RX invoked Rule 167 and Chapter 42 of the Civil Practice and Remedies Code to make a settlement offer, and establised a deadline by which the offer had to be accepted. Good Shepherd filed a motion to modify the deadline until after a court-appointed auditor had rendered his final report. The trial court granted the motion and extended the deadline. Complete Rx filed a petition for writ of mandamus to challenge the order extending the deadline for response to the settlement offer.
Tthe court of appeals relied upon the fact that Rule 167.5 allows for modification of only two deadlines--the time for filing a declaration under Rule 167.2(a), and the time for making an offer. Good Shepherd pointed out that while Rule 167 did not explicity refer to extending the deadline for responding to offers, the legislation authorizing adoption of Rule 167 does. The court of appeals rejected this argument, pointing out that it has no authority to modify the existing rule of procedure, and that recognition of any authority permitting extension of this deadline would be "tantamount to amending established rules of procedure," which is something only the Supreme Court of Texas may do. Because Complete Rx had no adequate remedy by appeal to challenge the trial court's order, the court of appeals granted the petition for mandamus. The court's opinion may be found here.
The Dallas Court of Appeals recently weighed in (again?) on whether a trial court's erroneous ruling regarding designation of a responsible third party is subject to mandamus. In this case, the trial court denied relator's motion to designate a responsible third party. The trial court did not allow relator to replead. A divided panel held that it was an abuse of discretion to deny a motion to designate a responsible third party without allowing movant the opportunity to replead. The court then addressed whether relator had an adequate remedy by appeal. Citing its prior opinion in In re Oncor, the court held that "appeal is ordinarily an inadequate remedy when a trial judge erroneously denies a motion for leave to designate a responsible third party." In a footnote, the court highlighted the split of authority regarding whether an appeal is an adequate remedy for a trial court's erroneous ruling on a responsible third party issue. In dissent, Justice Murphy argued that relator should have requested permission to replead, and, by failing to do so, waived error. The court's opinion in In re Houston M. Smith can be found here and the dissent here.
The Dallas Court of Appeals granted a petition for writ of mandamus in a case in which the trial court ordered production of a personal computer hard drive and e-mail account.
Misty Jordan sued Gajekse, Inc. alleging that she was subjected to a hostile work environment and then fired for reporting it. The trial court signed an order compelling Jordan to permit Gajekse's forensics examiner to access her personal computer to look for pornagraphic material (Jordan had asserted she had never seen pornography until she became employed by Gajekse), and to examine her e-mail.
The court of appeals granted the petition for writ of mandamus, noting that the discovery order failed to comply with the Texas Supreme Court's opinion in In re Weekly Homes, LP, in several respects: (1) failure to make a specific request for the information and specify the form of production; (2) failure to demonstrate the specific characteristics of the electronic storage devices; (3) the familiarity of the expert with those characteristics; and (4) a showing of a reasonable likelihood that the search would yield the information sought. Because of the court's disposition of the case, it expressly did not address Jordan's contention that Gajekse was seeking irrelevant information. The court's opinion in In re Jordan may be found here.
The Dallas Court of Appeals has reaffirmed its opinion in Anderton v. Cauley, in which the court held that the trial court's judgment being appealed is not to be included as a liability of the judgment debtor in calculating the judgment debtor's net worth for purposes of determining the amount of an appeal bond.
In McCullough v. Scarbrough, Medlin and Assocs., the court held that the trial court did not err by refusing to allow the judgment debtor to deduct the amount of the judgment from net worth. The Appellants also argued that they would suffer substantial economic harm if required to post additional security. The court of appeals concluded that there was no abuse of discretion on the trial court's part in rejecting this argument because the court determined that there was evidence the appellants could access funds from their retirement accounts to post the supersedeas bond. This holding is significant as it would seem to suggest that funds that are otherwise exempt from execution must be included in a judgment debtor's net worth calculation. To put it another way, to avoid execution on non-exempt assets during an appeal, it appears that an appellant may have to pledge exempt assets and thereby put more at risk for the right of appeal than would otherwise be at risk had no supersedeas bond been filed. The court's opinion may be found here.
The Dallas Bar Association Appellate Law Section is having its monthly meeting Thursday, March 15, 2012, at noon at the Belo Mansion.
The speaker is Diana Faust of Cooper & Scully, P.C. She will be addressing Supersedeas Issues in State and Federal Court. One hour of CLE credit is available.
What happens when a trial court ignores the court of appeals' mandate?
Answer: The trial judge gets a little visit to the principal's office. Last year, in Elite Door & Trim, Inc. v. Tapia, the Dallas Court of Appeals held that the trial court had erred in requiring Elite Door and Trim to file an amended petition and re-serve the defendant and by refusing to hear Elite Door and Trim's motion for default judgment. Following the remand of the case to the trial court, the trial judge dismissed the case for want of prosecution. Elite Door and Trim then filed a petition for writ of mandamus, complaining that the trial judge had abused her discretion by failing to follow the appellate court's mandate. In an unusal move, the court of appeals asked the trial judge to explain the basis for the dismissal. The trial judge explained that she had re-reviewed the file, determined that the citation and return were defective, and concluded that she had no jurisdiction.
The court of appeals did not take kindly to the trial judge's dismissal. The court of appeals held that the trial judge had "no discretion to review, interpret, or enforce the mandate." The trial judge's actions on remand are "limited to the issues specified in the mandate" and the scope of the mandate is determined by referring to the opinion as well as the mandate. The court of appeals stated that in the first appeal, it had reviewed the petition, the citation, and the return of citation and determined that they were proper. Accordingly, the trial judge had no discretion to decide differently. The court therefore directed the trial judge to hold a hearing on the motion for default judgment by a date certain, AND to have the entire proceeding recorded by the court reporter. The court of appeals' opinion in In re Elite Door & Trim, Inc. may be found here.
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