Expert disclosures and the property owner rule

The Dallas Court of Appeals recently issued an opinion dealing with two recurring topics: the property owner rule and timely designation of experts. In this foreclosure case, the Court addressed market value testimony by four witnesses. In doing so, the Court applied TRCP 193.6 and the property owner rule.

First, the Court addressed two expert witnesses that were designated timely pursuant to a scheduling order, but not within thirty days of service of the defendant’s request for disclosures. The Court, in an opinion by Justice Whitehill, held that the designation was untimely because TRCP 194 requires disclosure of expert information within thirty days of service. The Court stated that “[a]bsent disclosure or timely supplementation of [the experts’] mental impressions and opinions, the trial court did not err by excluding their opinions regarding the property’s value.”

Interestingly, the Court did not consider, or mention, TRCP 195.2, which expressly allows disclosure of experts, by the later of thirty days after the request is served or ninety days before the end of the discovery period, “unless otherwise ordered by the court.” It is unclear from the Court’s opinion whether the designation was untimely with respect to the end of the discovery period. As noted above, however, the Court’s opinion acknowledged that the witnesses were designated “as expert witnesses on May 10, 2013, the deadline for doing so given in the trial court’s scheduling order.” The opinion places in doubt the reasonable assumption that a trial court’s scheduling order trumps the rule.

Second, the Court addressed testimony by two additional lay witnesses under the “property owner rule.” This rule is an exception to the requirement that an expert testify as to the value of property. But the exception has it limits. As to the first witness, the Court applied the rule set forth in Reid Road Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores, Ltd., and held that one of the plaintiffs was not qualified to testify because as a limited partner he was “neither an officer nor an employee of [the property owner.]” As for the second witness, the Court held that while a witness may be “qualified” to testify as property owner, the rule still requires “the testimony meet the same requirements as any other opinion evidence.” Quoting Nat. Gas Pipeline Co. of Am. v. Justiss, the Court noted:

Because property owner testimony is the functional equivalent of expert testimony, it must be judged by the same standards. This burden is not onerous, particularly in light of the resources available today. . . . But the valuation must be substantiated; a naked assertion of ‘market value’ is not enough.”

Here, the Court held that there was “no substantiation” for the opinion on market value. Thus, the Court held that the trial court did not abuse its discretion by excluding the lay witnesses’ testimony. Accordingly, the Court affirmed the trial court’s judgment. The opinion in Grapevine Diamond, L.P. v. City Bank can be accessed here.

New Judges Reception Tuesday, October 20, 2015

The Collin County Bar Association is hosting a new judges reception on Tuesday, October 20, 2015 from 5:30-7:30pm at Seasons 52 Restaurant in the Shops at Legacy in Plano, Texas. The judges being recognized include Justices Stoddart, Whitehill, and Schenck of the Fifth Court of Appeals, along with Judges Piper McCraw and Emily Miskel of the newly created 469th and 470th District Courts in Collin County.

Food, beverages, and valet parking are complimentary thanks to Cowles & Thompson, Goranson Bain, KoonsFuller, Mosser Law, Scheef & Stone, Siebman Burg Phillips & Smith, and The Suster Law Group.

Supersedeas Bonds and Julie Andrews?

Yours truly–Mike Northrup–will be speaking to the Dallas Bar Association Appellate Law Section at noon on September 17, 2015, at the Belo Mansion.  The title of the presentation will be “Just a Spoonful of Supersedeas Makes the Judgment go Down.”  Drop in and hear the answer to what Julie Andrews and supersedeas bonds have in common, or just come by for the camaraderie and a bite to eat.

Exemplary Damages Caps Need Not Be Pleaded

The Texas Supreme Court recently resolved a split of authority among Texas courts of appeals regarding whether the exemplary damages cap in Section 41.008 of the Texas Civil Practice and Remedies Code needs to be pleaded as an affirmative defense or is simply applied as a matter of law.  Some courts (2nd, 13th, 14th) had held that the caps are in the nature of avoidance and must be pleaded under Texas Rule of Civil Procedure 94. Other courts (4th, 7th, 14th) had held that the cap need not be pleaded because the statute applies automatically to awards without the necessity of additional facts.  In an unanimous opinion authored by Justice Eva Guzman, the Court held that the exemplary damage cap need not be pleaded.

The decision turned on construction of the phrase in Rule 94 that requires “any other matter constituting an avoidance or affirmative defense” to be affirmatively pleaded. This is important because failure to comply with Rule 94 results in waiver. The Court first rejected the plaintiff’s argument that a matter in avoidance was broad and includes “new matters of law or fact outside of the plaintiff’s pleadings.” The Court reasoned that “avoidance” as used in Rule 94 was akin to “confession and avoidance.” The Court then distinguished “affirmative defense” from “confession and avoidance”:

[S]tatute of limitations is an affirmative defense, rather than a plea in confession and avoidance, because limitations defeats the plaintiff’s claim without regard to the truth of the plaintiff’s assertions. In contrast, self-defense is a confession-and avoidance plea because the defendant admits the conduct but seeks to avoid the legal effect by justifying an otherwise impermissible act.

The Court noted that in either case, “the hallmark characteristic of both categories of defenses is that the burden of proof is on the defendant to present sufficient evidence to establish the defense and obtain the requisite jury findings.” Applying this rationale, the Court observed that the cap “does not require proof of any additional fact to establish its applicability; moreover, there is no defense to it.” The Court further observed “the defendant bears no burden of establishing the cap’s applicability; it either applies or it does not.” In other words, “the statutory cap applies automatically to claims not expressly excepted.”

The Court was not convinced by the plaintiff’s argument that pleading should be required to put plaintiffs on notice and allow plaintiff to invoke a statutory exception. The Court held that the statute “in and of itself, provides sufficient notice of the types of claims that are excluded from the cap, allowing plaintiffs to structure their cases to avoid the cap when desired and possible.” Accordingly, the Court rendered judgment capping the exemplary damages at $200,000. The Court’s opinion in Zorilla v. Aypco Constr,. II, LLC can be found here.

Premature Notice of Past Due Findings and Conclusions Insufficient

The Dallas Court of Appeals recently held that a notice of past due findings of fact and conclusions of law filed prematurely is ineffective and does not preserve error. Here, the trial court issued a final judgment and the defendant timely requested findings and conclusions and past due findings. The trial court subsequently entered a modified second final judgment from which the defendant appealed. The defendant, however, did not file a new request for findings or past due findings after the second judgment. One of the issues raised on appeal was the trial court’s failure to file findings of fact and conclusions of law as requested. Based on TRCP 306c, the Court held that the defendant’s premature request for findings was effective as to the second judgment. The harder question was whether or not the prematurely-filed notice of past due findings was effective.

After reviewing the purpose of the notice of past due findings, as well as existing case authority, the Court, in an opinion by Justice Evans, held that despite Rule 306c, a prematurely-filed notice of past due findings was not effective, and, thus, did not preserve error for review. Specifically, the Court stated: “If a notice of past due findings were allowed to be prematurely filed, it would defeat the purpose of reminding the trial court that it has been requested to file findings and has not done so by the time prescribed by the rules of procedure.” The Court noted that if a party was free to file the notice of past due findings prematurely, “it would become standard practice to file such notice together with the original request for findings of fact and conclusions of law. . . .” Because the defendant failed to properly file a notice of past due findings as required by Rule 297, the issue was not preserved. Consequently, the Court affirmed the judgment. The Court’s opinion in Nisby v. Dentsply Int’l, Inc. can be found here.

Supersedeas Pendulum Swings Toward Judgment Debtors

The Supreme Court of Texas has clarified the phrase “compensatory damages” as used in the supsersedeas statute (Civil Practice and Remedies Code Section 52.006) and Appellate Rule 24.  In In re Longview Energy Company, the court held that disgorgement damages are not compensatory damages and therefore need not be superseded to stay enforcement of the judgment during an appeal.

The plaintiff in this case recovered a judgment against multiple defendant for $95.5 million dollars, for breach of fiduciary duty.  The damages apparently consisted of disgorgement of past production revenue derived from shale assets.  The defendants appealed and collectively posted a $25 million bond.  Plaintiff contended that the defendants each were required to separately post the lesser of $25 million or 50% of their net worth.  It appears that the supreme court originally took this case to address whether the caps on the amount of supersedeas are to be applied per defendant or per judgment.   Instead, the court analyzed a different question that was raised on appeal–whether disgorgement damages are “compensatory damages.”

The supreme court first questioned whether the damages might be punitive because the trial court had initially signed a judgment that characterized them as such, but subsequently issued a second judgment that awarded the same damages but without the explanation as to how they were derived.  The plaintiff argued that the award was remedial, but the supreme court rejected that argument stating, “We cannot conclude that the award is compensatory when it cannot be explained.”  The court reasoned that disgorgement is an equitable forfeiture of benefits wrongfully obtained.  The court found that disgorgement is compensatory in the same sense that attorney’s fees, interest, and costs might be compensatory, but disgorgement is not damages.  Thus, the court held that the defendants were not required to post security in an amount to cover disgorgement damages.

The court went on to discuss the question of whether the the plaintiff was entitled to discovery relating to defendant Huff Energy’s operations.  The Supreme Court held that Appellate Rule 24 entitled the plaintiff to such discovery without the requirement of showing a threat of dissipation of assets.

The court’s opinion may be found here.

Employee’s assault claim barred by the TCHRA

In a short, straight-forward opinion, the Dallas Court of Appeals recently held that a common-law claim for assault is precluded by the Texas Commission on Human Rights Act. Here, the plaintiff alleged that a supervisor engaged in various sexual related conduct against her at work, including unwanted force and touching. The defendant moved for summary judgment on the basis that the TCHRA barred the claims. The trial court agreed and granted summary judgment. On appeal, the only issue was whether the TCHRA barred plaintiff’s claim for assault. The court of appeals first cited the Texas Supreme Court’s opinion in Waffle House v. Williams for the proposition that the TCHRA "forecloses common-law theories predicated on the same underlying sexual-harassment facts." Next the Court agreed with a federal district court case holding that unwelcome and offensive touching constituted both sexual harassment and assault. The Court concluded "[b]ecause the gravamen of [plaintiff’s] complaint against [defendant] is sexual harassment/sexual assault committed by her supervisor. . .her common law claim is precluded by the Act."  Consequently, the Court affirmed the trial court’s summary judgment for the defendant. The Court’s opinion in B.C. v. Steak N Shake Operations, Inc. can be found here.

Discretion to issue “superdupersedeas” against the State

The Supreme Court of Texas has recognized the discretion of a trial court judge to deny the State of Texas automatic supersedeas in cases involving non-monetary judgments pursuant to Texas Rule of Appellate Procedure 24.2(a)(3).

In In re State Board for Educator Certification, a schoolteacher challenged the State Board for Educator Certification’s revocation of his teaching certificate.  The trial court reversed the State’s revocation of the teaching certificate and issued a permanent injunction prohibiting the State from treating the certificate as having been revoked.  The State appealed, which automatically suspends the judgment under Section 6.001 of the Texas Civil Practice and Remedies Code.  In response, the teacher invoked Texas Rule of Appellate Procedure 24.2(a)(3) and filed security with the trial court as a "counter-supersedeas" (or as Justice Willett calls it, "superdupersedeas").   The trial court agreed with the teacher and declined to allow the judgment to be treated as superseded by virtue of the State’s appeal. 

The State then sought mandamus relief from the Texas Supreme Court.  The issue raised was whether the trial court has discretion to refuse to allow the State to supersede a non-monetary judgment pending appeal.  Relying upon language in its prior opinions that, until now, might have been described as dicta, the court holds that TRAP 24.2(a)(3)–in effect–trumps CPRC Section 6.001 and gives a trial court discretion to deny supersedeas. 

Interestingly, the majority makes the point that if the State’s right to supersedeas were absolute, then it would vest unchecked power in the executive branch and run afoul of the balance of power between the branches of government.  Thus, the court denies the petition for writ of mandamus.  Justice Willett’s opinion may be found here.

There is a separate concurrence authored by Justice Guzman, in which she addresses the merits of the trial court’s injunction order prohibiting the State from revoking the teacher’s certificate while appealing the judgment.  She expressed concern that the record did not show that the trial court had adequately considered potential harm to schoolchildren.  Nonetheless, she concurred in the denial of the petition for writ of mandamus because the State’s petition had limited its argument on appeal to a lack of complete discretion to grant an injunction, as opposed to an abuse of discretion it had.  The concurrence may be found here.


Mandamus Developments at the Dallas Court of Appeals

As most appellate lawyers around Dallas know, the Fifth Court of Appeals has a reputation (well-earned) for disposing of petitions for mandamus in, let’s say, a summary fashion. Specifically, the mandamus denials, with few exceptions, have consisted of three-sentences memorandum opinions, two of which were reserved for the standard introduction ("The facts are well known to the parties") and the standard conclusion ("Accordingly, we deny Relator’s petition for writ of mandamus."). I have been on the "short" end of these opinions a number of times. These "opinions" make it difficult for lawyers to explain to their clients what happened, and virtually impossible to advise clients on whether or not to take the case to the Supreme Court of Texas. But those days seem to be over.

In what I see as one of the most marked improvements by the court of appeals in my time as an appellate lawyer, the Court has begun issuing a number of substantive mandamus denials. (Here, here, and here, for example). The trend even included denials for failing to comply with procedural requirements, such as here. After I noticed the phenomenon earlier this year, I began tracking mandamus denials by the Court on a daily basis, and was surprised to see that a majority of the denials were by opinions with substantive analysis, usually three to four pages, and by different justices. I was reluctant to comment on this development for fear of jinxing it. But the trend has continued to the point where I am comfortable now calling it a practice. I found only one summary denial issued in the entire month of October. And last week there were three substantive denials in one day, here, here, and here. So kudos to the Court for making this improvement in response to the bar at a time when budgets are shrinking and caseloads are increasing. As appellate attorneys here, we are fortunate to practice before the Fifth Court of Appeals. This development is another reason why we should be equally proud to do so.

Dallas weighs in on no-evidence summary judgment procedure

The Dallas Court of Appeals has written a couple of recent significant opinions addressing no-evidence summary judgment practice.

In the first opinion, the en banc court considered a no-evidence motion that listed the elements of the claim at issue and then asserted that there was no evidence of "one or more" elements of the plaintiff’s claim.  A majority of the court held that this motion was legally insufficient and could not support summary judgment as a matter of law.  The majority reasoned that Rule 166a(i) does not authorize general no-evidence motions and this motion did not specify which elements were being challenged.  The majority also held that no objection to the adequacy of the motion was necessary to preserve the challenge for appeal.  Notably, the majority distinguished this motion from one that asserts that there is no evidence of "each and every element."  Three dissenting justices (O’Neill, Lang, and Lang-Meiers) argued that the motion gave "fair notice" and that non-movant should have objected to the motion and gotten a ruling in order to preserve the complaint for appeal.  The majority opinion in Jose Fuentes Co. v. Alfaro may be found here, and the dissent here.  Notably, a petition for review has been filed in this case with the Texas Supreme Court.

In a more recent opinion, in Coleman v. Prospere, a divided panel disagreed as to whether a no-evidence motion was adequate to challenge a specific element in a breach of contract case.   The opinions also disagree regarding the adequacy of briefing and practitioners may want to take note of the liberal reading the majority gives to the Appellant’s brief.  With regard to the motion for summary judgment, the movant filed a no-evidence motion that asserted in relevant part: "There is no evidence of Breach of Contract – [Appellant’s] cause of action for Breach of Contract against [appellee] is not supported by credible evidence.  [Appellee] did not engage in Breach of Contract…"

The majority opinion, authored by Justice Evans and joined by Justice Fillmore, holds that the no-evidence motion fails to challenge or even mention a single element and rules that the no-evidence grounds are legally insufficient to support the summary judgment.  Justice FitzGerald  dissented.  He opined that if the sum total of the motion for summary judgment had asserted only that there was no evidence of the cause of action for breach of contract, then he would agree with the majority.  However, he argues that the first and third sentences specifically identify the breach element.  Accordingly, Justice FitzGerald would have affirmed the summary judgment.  The majority opinion may be found here.  The dissent may be found here.

As a practitioner, the lesson from these opinions is to clearly and distinctly identify the elements of the cause of action you are challenging.  And if you are the non-movant, you might be wise to object to any lack of clarity.