Tortious Interference with Inheritance Rights

The question of whether Texas recognizes a cause of action for tortious interference with inheritance rights will go before the Texas Supreme Court in February.  The Court granted the petition in a case from the Amarillo Court of Appeals on December 23, 2016.  Justice Quinn wrote the majority opinion in Jackson Walker, LLP v. Kinsel, No. 07-13-00130-CV, 2015 WL 2085220 (Tex. App.—Amarillo Apr. 10, 2015, pet. granted), a case transferred from the Fort Worth Court of Appeals.  In the Supreme Court, the case is styled Kinsel v. Lindsey, no. 15-0403.

Justice Quinn wrote that neither Amarillo nor Fort Worth have recognized the cause of action, which is described in § 774B of the Restatement (Second) of Torts and, “it is not for intermediate courts to create new causes of action.”  A dissent authored by Justice Pirtle cited cases from 12 courts of appeals that have at least mentioned the cause of action.  The dissent also stated that six intermediate appellate court cases, including two from Amarillo, had recognized the cause of action and that no court has expressly rejected the cause of action.  Disagreeing with the dissent, the majority opinion stated that no Texas appellate court had recognized the cause of action.

Almost a year after the Walker opinion, the Austin court of appeals did expressly reject the cause of action.  Archer v. Anderson, 490 S.W.3d 175 (Tex. App.—Austin 2016, pet. filed), reversed a $2.5 million judgment.  A petition is pending in this case (no. 16-0256).  Full briefing was completed in late December.  It is likely the Supreme Court will grant that petition and hear the cases together.

Whether one can even have inheritance “rights” is an issue.  The Archer opinion notes that a prospective beneficiary’s interest in receiving an inheritance is merely an “expectancy or hope.”  However, most of the other opinions have not focused on that issue.  The cases usually arise from a situation in which a decedent had a prior will specifically dividing property among individuals and changed it to exclude or dilute those individuals’ interests, allegedly because of interference by one or more of the individuals who ended up with a much greater share of the estate under the new will.

This issue has been percolating over the last two decades and is ready for Supreme Court analysis.  Stay tuned.

Jackson Walker, LLP v. Kinsel, No. 07-13-00130-CV

Anderson v. Archer, No. 03-13-00790-CV


Using Texas’ Anti-SLAPP Statute to Combat SSAPP (Strategic Sanctions Against Public Participation)

Texas, like many other states, enacted legislation to curb meritless lawsuits whose purpose lies solely in chilling a person’s right to free speech and/or to petition his or her government.  Under Texas’ Anti-SLAPP (Strategic Litigation Against Public Participation) law, a party may file a motion to dismiss a legal action which is “based on, relates to, or is in response to [his or her] exercise of the right of free speech, right to petition, or right of association.” Tex. Civ. Prac. & Rem. Code § 27.003(a).   The statute is designed to protect every person’s right to exercise his or her First Amendment communicative rights and does so by nipping SLAPP suits in the bud (at earliest stage of litigation) and by awarding to the party whose speech rights have been burdened by meritless litigation court costs, attorney fees, and other expenses incurred in defense of the meritless suit.  See Tex. Civ. Prac. & Rem. Code §§ 27.002, 27.009.

A growing tactic by defendants, which includes counter-defendants and cross-defendants, is to include in an answer to a lawsuit, counterclaim, or cross-claim, a counter-claim against the plaintiff, counter-plaintiff, or cross-plaintiff for attorney fees and other damages pursuant to Texas Civil Practice & Remedies Code Chapter 10 and Texas Rule of Civil Procedure 13.   Chapter 10 authorize a court to sanction a party for filing a pleading or motion for an improper purpose or for filing a pleading or motion which lacks factual or legal support.  Rule 13 authorizes sanctions against a party who, in bad faith or for the purpose of harassment, files any groundless document with the court.

Notably, a defendant’s Answer is likely not the proper place to request sanctions against another party; this is especially true with respect to Rule 13 sanctions, which must be requested by motion. See Tex. R. Civ. P. 13.  But, often the defendant does not immediately secure a hearing on the requested sanctions.  Rather, the defendant simply sits on the request for sanctions, most likely as “leverage” toward some early resolution (settlement or dismissal), or in hopes that discovery will yield some evidence of bad faith or groundlessness to later support sanctions.

This strategic use of sanctions threatens to chill a person’s right to petition his or her government, and it certainly serves as an imposition to that same right.  So, the question arises, can the Anti-SLAPP statute be used as an Anti-SSAPP (Strategic Sanction Against Public Participation) measure?  The answer may be yes.

Whenever the Chapter 10 or Rule 13 sanction is predicated on a petition or other pleading which requests legal or equitable relief, the right of the petitioner to petition his or her government is implicated.  The Act defines “exercise of the right to petition” as “a communication in or pertaining to . . . a judicial proceeding.”  Tex. Civ. Prac. & Rem. Code § 27.001(4)(A)(i).  Since both Chapter 10 and Rule 13 arise in the context of filings in a judicial proceeding, their use falls within the Act’s definition of the exercise of the right to petition.

The Act defines “legal action” as “a lawsuit, cause of action, petition, complaint, cross-claim, or counterclaim or any other judicial pleading or filing that requests legal or equitable relief.” Tex. Civ. Prac. & Rem. Code § 27.001(6).  Insofar as Chapter 10 or Rule 13 sanctions are asserted via a pleading or motion, they would qualify under the first part of this definition. But the requested sanctions under Chapter 10 or Rule 13 must also constitute a form of legal or equitable relief in order to fall under Chapter 27.  The defendant requests for attorney fees, court costs and related expenses as the appropriate sanction, is a request for legal relief.

Obviously, Chapter 10 and Rule 13 would not qualify as quintessential money damages, which fall under legal relief.  These sanctions are imposed because of the abuse of the procedural rules or injury to legal processes.  Chapter 10 and Rule 13 allow the court to sanction a party for abusing his or her right to petition, for using his or her government as a means to harm or harass a fellow citizen. These sanctions are not imposed primarily to rectify a wrong done to any other party.

However, Chapter 27 is not limited to “quintessential damages” or “quintessential claims.”  Chapter 27 has a broad purpose which would reach SSAPP practices: “to encourage and safeguard the constitutional rights of persons to petition . . . and otherwise participate in government to the maximum extent permitted by law and, at the same time, protect the rights of a person to file meritorious lawsuits for demonstrable injury.”  Tex. Civ. Prac. & Rem. Code § 27.002.

Of course, one may always, as a form of relief, move for Chapter 10 or Rule 13 sanctions in response to another’s request for Chapter 10 or Rule 13 sanctions.  Unlike Chapter 10 and Rule 13, though, it is mandatory for the court to award court costs, attorney fees, and other expenses to a successful movant under Chapter 27, and the court may order sanctions against the party employing SSAPP to deter similar future conduct.  See Tex. Civ. Prac. & Rem. Code § 27.009(a)(1)-(2).  In this manner, Chapter 27 provides a greater remedy than Chapter 10 or Rule 13 to a party exercising her right to petition her government, when she is faced with a challenge to that right via legal procedural rules.


Fort Worth Court of Appeals Considers Parental Rights of Sperm Donor

In our post-Obergefell world, it is expected that the courts will be grappling with a variety of same-sex family law issues.  One group of such issues relates to artificial reproductive technology (“ART”), medical technology used to achieve pregnancy using techniques such as surrogacy, sperm donorship, and in vitro fertilization.

In In re P.S., No. 02-16-0008-CV, 2016 Tex. App. LEXIS 11657 (Tex. App.—Ft. Worth Oct. 27, 2016, no pet. h.). the Fort Worth Court of Appeals was asked to consider the parental rights of a man who donated sperm to a woman who wanted to raise the child with her same-sex partner.

In P.S., mother and father were friends.  Mother, who is gay, wanted to have a child, so she asked father to donate sperm.  Father collected his sperm and gave it to mother, who inseminated herself and conceived a child.  When the child was born, father signed an acknowledgement of paternity and the child’s birth certificate.

After the child was born, father lost contact with mother for a short period of time.  Mother then married her girlfriend, rescinded the acknowledgment of paternity that father had signed, and asked father to relinquish his parental rights to the child.  Father sought assistance from the Office of the Attorney General (“OAG”) because he wanted to be able to have possession of the child.

The trial court signed an order establishing the parent-child relationship between the child and father, appointed father and mother joint managing conservators, ordered father to pay child support, and set up a possession schedule for father.  Mother appealed, arguing, in pertinent part, that father should not be considered a parent because he was simply a “donor” because the Texas Family Code provides that a “donor” is not a parent of a child conceived by assisted reproduction.

The Fort Worth Court of Appeals analyzed the pertinent provisions of the Texas Family Code.  The court found that, while the Family Code does state that a “donor” is not a parent of a child conceived by means of assistive reproduction, a “donor” is defined as “an individual who provides…sperm to a licensed physician to be used for assistive reproduction.  Because father provided his sperm directly to mother and not through a licensed physician, he did not meet the statutory definition of “donor.”  Therefore, the Family Code did not prohibit him from being named as a parent.  The court of appeals affirmed the trial court.

In re P.S., No. 02-16-0008-CV, 2016 Tex. App. LEXIS 11657 (Tex. App.—Ft. Worth Oct. 27, 2016, no pet. h.)

The Interplay Between Federal Rule 56 and Daubert

The Fifth Circuit Court of Appeals’ opinion in Operaciones Tecnicas Marinas, SAS v. Diversified Marine Services, LLC illustrates the interplay between the requirements of Federal Rule of Civil Procedure 56—the summary judgment rule—and the requirements of Daubert case law that an expert adequately exclude alternative causes.

Diversified Marine Services, LLC (Diversified) was called upon to repair the engines of two vessels owned by Operaciones Tecnicas Marinas, SAS (OTM).  While the scope of the oral contract was disputed, the parties acknowledged that the initial repair estimate of $100,000-$120,000 ultimately cost OTM $345,000.  The boats were picked up and put to sea.  Four hours later the crews were forced to shut off the malfunctioning center engines.  The boats had to be towed to Columbia.

OTM filed its action alleging breach of contract, negligence and breach of warranty.  In the trial court, Diversified filed a motion for summary judgment under Rule 56, and in response OTM offered the testimony of its expert that the condition of the engines upon inspection in Cartegena was inconsistent with engines that had been recently rebuild or overhauled.  OTM concedes it had not attempted to prove the “precise cause” of the engines’ malfunction; instead it maintained that it presented sufficient evidence to create a dispute of a material fact.  The district court nevertheless granted Diversified’s motion for summary judgment.

On appeal, the Fifth Circuit reversed, holding that all OTM had to show at the summary judgment stage of the litigation is that there was a dispute of a material fact.   Because OTM’s expert saw no evidence of engine overhauls, a material fact was in dispute.  The Court thus vacated the judgment and remanded the case back to the district court for further proceedings.

Operaciones Technicas Marinas, SAS v.Diversified Marine Services, LLC, No. 15-30932 (5th Cir., Aug. 5, 2016, unpublished).

The Intersection of the Anonymous Right to Free Speech, the Texas Citizens Participation Act, and Rule 202 Pre-Suit Discovery

The Austin Court of Appeals recently considered how the Texas Citizens Participation Act (TCPA) applies to a Rule 202 petition for pre-suit discovery in a case involving anonymous online speech.  The TCPA requires a court to dismiss a legal action when a movant shows the action relates to the movant’s exercise of free speech rights.  Rule 202 of the Texas Rules of Civil Procedure permits a person to petition a court for an order authorizing depositions before a suit is filed in order to investigate a potential claim or suit.  The Austin appellate court was called upon to answer the question of how these two requirements coexist.

In In re Chris Elliott, No. 03-16-00231-CV (Tex. App—Austin Oct. 7, 2016),, which is registered to Chris Elliott, published an article reporting negatively about MagneGas, a Delaware technology company.  MagneGas filed a Rule 202 Petition and a Motion to Compel Elliott’s deposition to investigate a potential claim against “the authors, publishers, and distributors” of The Pump Stopper, who MagneGas alleged made false and misleading claims about the company.

John Doe 1 (“Doe”), who identified himself as an author, publisher and/or distributor who utilizes the website, filed a TCPA motion to dismiss the Rule 202 petition.  Doe argued the Rule 202 petition related to Doe’s exercise of his right to free speech and the rights of free speech of other potential defendants.

After a brief non-evidentiary hearing, the trial court ordered Elliott’s deposition.  Elliott then filed a writ of mandamus with the Austin Court of Appeals and sought emergency relief.

The court of appeals concluded that Doe’s TCPA motion to dismiss was sufficient to invoke the TCPA and to stay discovery.  The court held that the TCPA’s definition of “legal action” is broad and encompasses a Rule 202 petition, as it includes “a lawsuit, cause of action, petition, complaint, cross-claim, or counterclaim or any other judicial pleading or filing that requests legal or equitable relief.  The court noted that the TCPA’s language specifically states that although the court may allow specified and limited discovery relevant to the TCPA motion to dismiss on a showing of good cause, otherwise all discovery is suspended until the court has ruled on the motion to dismiss.  Because the district court’s order allowing Elliott’s deposition was not the specified and limited discovery contemplated by the TCPA, the appellate court held that the district court had abused its discretion by permitting the deposition before ruling on Doe’s TCPA motion to dismiss.

In re Chris Elliott, No. 03-16-00231-CV (Tex. App.–Austin Oct. 7, 2016).


Federal Subject Matter Jurisdiction is not Lost by Voluntary Dismissal of the only Claim Conferring Jurisdiction

The Fifth Circuit has reiterated the rule that federal subject matter jurisdiction is measured at the time of removal and is not destroyed by subsequent events including the voluntary dismissal of the only claim conferring federal question jurisdiction.

In GlobeRanger Corp. v. Software AG, No. 15-10121 (5th Cir. Sept. 7, 2016), the court untangled a jurisdictional knot worthy of a law school exam.  GlobeRanger sued Software AG in federal court for trade secret misappropriation.  Software AG objected claiming no federal jurisdiction so GlobeRanger dismissed and refiled in state court asserting numerous claims including conversion.  Software AG then removed the case arguing that most of the claims were preempted and barred by the federal Copyright Act.  GlobeRanger moved to remand but the district court denied the motion and dismissed the case under Rule 12(b)(6), leading to the first appeal. GlobeRanger Corp. v. Software AG, 691 F.3d 702, 709 (5th Cir. 2012) (“GlobeRanger I”) held that at least some of the factual allegations were outside the subject matter of the Copyright Act and therefore not preempted.  It also affirmed the denial of GlobeRanger’s motion to remand.  The opinion suggested that the district court could have found on remand with a more developed record that the conversion claim was not fully preempted.  But that issue was never reconsidered because GlobeRanger dropped the conversion claim, leaving only a state law claim for misappropriation of trade secrets to be tried in federal court under supplemental jurisdiction.

The jury found that Software AG had misappropriated trade secrets and awarded $15 million to GlobeRanger, leading to the second appeal.  In the second appeal the parties’ jurisdictional positions again flipped from where they were in GlobeRanger I.  Now GlobeRanger argued that there was federal jurisdiction while Software AG argued there was none.

Software AG argued that GlobeRanger was in a jurisdictional dilemma.  Either the trade secret claim was governed and preempted by federal copyright law, or it wasn’t governed by federal law and there was no federal jurisdiction.

The circuit court began with the preemption question, whether the misappropriation of trade secrets claim was equivalent to the anti-copying principle of federal copyright law.  It agreed with GlobeRanger that state law prevents acquisition through a breach of a confidential relationship or improper means and thus involves an extra element not found in copyright law.  “Because trade secret law protects against not just copying but also any taking that occurs through breach of a confidential relationship or other improper means, all ten circuits that have considered trade secret misappropriation claims have found them not preempted by the Copyright Act.”

The court then considered Software AG’s alternative argument that no federal question jurisdiction existed (the only asserted basis for federal jurisdiction) so the case should have been remanded to state court.  The opinion started with the “fundamental principle” that jurisdiction is determined at the time of removal, citing Pullman Co. v. Jenkins, 305 U.S. 534, 537 (1939).  A dismissal of some claims does not undo an initial determination of jurisdiction.  It does create a question whether the remaining state law claims should be retained as a discretionary exercise of the court’s supplemental jurisdiction, but Software AG never asked the district court to exercise that discretion and thus waived the issue.

Ironically, GlobeRanger’s federal judgment was saved by its dismissed conversion claim.  The court found that the original complaint alleged conversion of only intangible property, which is preempted by federal copyright law and thus supported federal question jurisdiction at the time of removal.  Even though the conversion claim was later dismissed, the district court continued to have supplemental jurisdiction over the state law misappropriation of trade secrets claim.  So by asserting a claim that was preempted and barred by federal law, GlobeRanger was able to retain a federal court verdict and judgment over a purely state law claim.

GlobeRanger Corp. v. Software AG, No. 15-10121 (5th Cir. Sept. 7, 2016)


If you are defense counsel in a personal injury suit, you may be accustomed to receiving an affidavit concerning cost and necessity of services from plaintiff’s counsel immediately or shortly following your answer to the suit. In many cases you may not know whether the case warrants hiring an expert to controvert the affidavit within Texas Civil Practice and Remedies Code Section 18.001’s thirty-day time frame.  To avoid possible exclusion of controverting evidence, you will need to file a motion for leave with the court or secure a Rule 11 agreement with plaintiff’s counsel to file a controverting affidavit.

But what if you receive notice of a deposition on written questions by plaintiff’s counsel to the plaintiff’s medical service providers and subsequently have the responses served on you? If those written questions include whether the costs of those services were reasonable and the services necessary, could plaintiff’s counsel use the deposition on written questions to prove the reasonableness and necessity of costs and services under Section 18.001?

Defense counsel must be prepared to respond appropriately. So the question arises: Is there any meaningful difference between an affidavit and a deposition that would prevent the application of Section 18.001 to the latter?

Black’s Law Dictionary distinguishes between an “affidavit” and a “deposition.” An affidavit is defined as a “voluntary declaration of facts written down and sworn to by a declarant.” Affidavit, Black’s Law Dictionary (10th ed. 2014).  A “deposition” is defined as a “witness’s out-of-court testimony that is reduced to writing for later use in court or for discovery purposes.” Deposition, Black’s Law Dictionary (10th ed. 2014).

On their face, these definitions look similar, but affidavits and depositions are different in practice:

“Definition of the term ‘Deposition’ (Depositio). In the civil law it meant simply the testimony of a witness. In very old English practice, simply the written testimony of a witness. In modern practice it means the testimony of a witness given or taken down in writing, under oath or affirmation, before a commissioner, examiner, or other judicial officer, in answer to interrogatories and cross interrogatories, and usually subscribed by the witness. A deposition is therefore distinguished from an affidavit, which is always an ex parte statement drawn up in writing without any formal interrogation, and signed and sworn to by the party making it, although in affidavits the party making it is constantly called a deponent, and said to depose.”

Deposition, Black’s Law Dictionary (10th ed. 2014).

Section 18.001 requires a party to serve an “affidavit.” A strict reading of the statute would exclude a deposition on written questions. After all, a deposition on written questions to a non-party, like a medical service provider, employs the coercive power of a court to require the non-party to answer. See Tex. R. Civ. P. 200, 205.  This is not present with affidavits.  Also, unlike with affidavits, another party may object to the written questions and serve cross-questions “on all other parties,” and the other parties may subsequently serve “redirect questions on all other parties.” See Tex. R. Civ. P. 200.

On the other hand, the purpose of the statute was to save time and expenses to litigants and inconvenience to medical providers by providing a simple procedure to prove up the reasonableness and necessity of medical expenses.  Were one to look at the purpose of the statute, he or she may conclude that form should not be put before substance, so that either an affidavit or deposition on written questions may be used so long as the information included in the latter satisfies Section 18.001.  This conclusion would be especially compelling if an opposing party chose to forego serving or failed to serve objections and cross-questions in response to the notice of deposition on written questions by the plaintiff.

For defense counsel, pending some clarification by the legislature or the courts, the best practice would be to treat a deposition on written questions as if it satisfies Section 18.001. Depending on when the notice of deposition on written questions to a plaintiff’s medical service provider is served, you may not be in a position to serve (meaningful) objections and cross questions in response.  File a controverting-affidavit within the statutory time frame or file a motion for leave to do so.  If for some reason you did not file a controverting affidavit, or if you filed a motion for leave which was denied, then object in your pretrial materials—for example in a motion in limine—and in trial to the use of a deposition on written questions as a means to prove the reasonableness and necessity of costs and services.


Texas Nuisance Law Gets A Face-Lift

The Supreme Court of Texas clarified the Texas nuisance doctrine in Crosstex N. Tex. Pipeline, L.P. v. Gardiner.  Justice Boyd opened by noting that Dean Prosser declared nuisance as the law’s “garbage can.”  He proceeded to clean up this area of the law.

The Court said “nuisance” refers not to a defendant’s conduct or to a cause of action, but to a type of legal injury involving interference with the use and enjoyment of real property.  A defendant can be liable for causing a nuisance if it intentionally causes it, negligently causes it, or—in limited circumstances—causes it by engaging in abnormally dangerous or ultra-hazardous activities.

Crosstex operates a natural-gas pipeline.  It purchased a tract along the pipeline’s path in rural Denton County to use for a compressor station.  The Gardiners own an undeveloped 95-acre ranch across the road.  Crosstex installed “hospital-grade” mufflers on the compressor-station engines, which it believed sufficient to eliminate unreasonable noise levels.  It was not.  One neighbor said the noise was like “an engine of a locomotive sitting on [his] driveway.”  Another said the noise was like “standing in the middle of an airport with jet airplanes taking off all around.”  Crosstex tried multiple mitigation efforts, but a Crosstex representative admitted the building needed to be fully enclosed and Crosstex didn’t have the money.

The Gardiners complained that the compressor station greatly diminished their ranch’s value and ruined both their financial investment and their ability to use and enjoy their land.  The trial court submitted intentional-nuisance and negligent-nuisance claims to the jury, which found Crosstex had not intentionally created a nuisance, but it had negligently created a nuisance that was permanent and reduced the ranch’s fair market value by over $2 million.

Justice Boyd’s unanimous opinion confirmed the trial court’s submitted definition.  A ‘nuisance’ is a condition that substantially interferes with the use and enjoyment of land by causing unreasonable discomfort or annoyance to persons of ordinary sensibilities attempting to use and enjoy it.  The court said the term “nuisance” does not refer to the “wrongful act” or to the “resulting damages,” but only to the legal injury—the interference with the use and enjoyment of property—that may result from the wrongful act and result in the compensable damages.  To qualify as a legal injury, the interference must be “substantial,” in light of all the circumstances.  The “unreasonableness” inquiry focuses on the interference’s effect on the plaintiff’s comfort or contentment, not on the defendant’s conduct.  It is based upon an objective standard of persons of ordinary sensibilities, not on the subjective response of the plaintiff.  The “substantial” and “reasonableness” inquiries require balancing of the following factors:

  •  the character and nature of the neighborhood, each party’s land usage, and social expectations;
  •  the location of each party’s land and the nature of that locality;
  • the extent to which others in the vicinity are engaging in similar use of their land;
  •  the social utility of each property’s usage;
  • the likelihood that the defendant’s conduct will interfere with the plaintiff’s use and enjoyment of their land;
  • the magnitude, extent, degree, frequency, or duration of the interference and resulting harm;
  • the relative capacity of each party to bear the burden of ceasing or mitigating the usage of their land;
  • the timing of each party’s conduct or usage that creates the conflict;
  • the defendant’s motive in causing the interference; and
  • the interests of the community and the public at large.

Addressing the first category of potential liability, intentional nuisance, the court said the evidence must establish that the defendant intentionally caused the interference that constitutes the nuisance, not just that the defendant intentionally engaged in the conduct that caused the interference.  The effects of the substantial interference must be unreasonable.  The defendant’s conduct must not be unreasonable.  However, a defendant’s reasonable conduct could still be actionable if it was negligent.

Addressing the second category of potential liability, the court said a defendant can be liable for “negligently” causing a “nuisance” if the plaintiff proves “the existence of a legal duty, a breach of that duty, and damages proximately caused by the breach.”  A nuisance may result from “a failure to take precautions against a risk apparent to a reasonable man.”

The third category, strict-liability nuisance, includes claims based on conduct that invades another’s interests and is culpable because abnormal and out of place in its surroundings.  The court did not affirmatively endorse a strict liability claim based on a nuisance injury, but said that to the extent such a claim exists, it arises only out of conduct that constitutes an “abnormally dangerous activity” or involves an abnormally “dangerous substance” that creates a “high degree of risk” of serious injury.

            Three remedies are available for a private-nuisance claim: damages, injunctive relief, and self-help abatement.  The decision to enjoin the defendant’s conduct is a discretionary decision for the judge after the case has been tried and the jury discharged.  When an injunction or abatement is inappropriate, the claimant may recover damages.  Generally, when a nuisance is temporary, the landowner may recover only lost use and enjoyment that has already accrued.  If the nuisance is permanent, the owner may recover lost market value.

Crosstex N. Tex. Pipeline, L.P. v. Gardiner, No. 15-0049.


Texas Anti-SLAPP Commercial Speech Exemption does not apply to Blogger’s Statements about Wedding Photographer

The Texas Citizens Participation Act (“TCPA”) provides for expedited dismissal and interlocutory appeal from a court’s denial of  a motion to dismiss a suit that is based on, relates to, or is in response to a party’s exercise of the right of free speech, right to petition, or right of association.  Tex. Civ. Prac. & Rem. Code § 27.002.  There are four exemptions from the application of the TCPA.  Under the “commercial speech exemption,” the TCPA does not apply to an action against a person primarily engaged in selling or leasing of goods or services if the statement arises out of the sale or lease of goods or services or a commercial transaction in which the intended audience is an actual or potential buyer or customer.

In Moldovan v. Polito, No. 05-15-01052-CV (Tex. App.—Dallas Aug. 2, 2016), the Dallas Court of Appeals considered the limits of the commercial speech exception.  Newlyweds Neely Moldovan, a blogger, and Andrew Moldovan had a dispute with Andrea Polito and her company over the wedding photography package they purchased.  The dispute went “viral” after the Moldovans discussed their complaints on television and social media.  Polito and her company brought suit against the Moldovans for defamation per quod, defamation per se, business disparagement, tortious interference with prospective contracts, and civil conspiracy.

The trial court denied Moldovans’ motion to dismiss under the TCPA, finding that the commercial speech exemption applied and that Polito and her company proved by clear and specific evidence a prima facie case of each element of their claims while the Moldovans failed to prove their defenses.  In their interlocutory appeal, the Moldovans argued there was no evidence the commercial speech exception applied and the trial court erred by permitting live testimony at the hearing on the motion to dismiss.  With respect to the commercial speech exception, Polito contended the commercial speech exemption applied because Ms. Moldovan’s statements arose out of the marketing of her blogging and social media services and, by publicizing the dispute, Ms. Moldovan sought to increase her number of readers so she could charge more.

The court of appeals stated even if Polito’s assertions were true, she still must prove the statements arose out of a “commercial transaction in which the intended audience is an actual potential buyer or customer.”  Ms. Moldovan’s potential buyers or customers are those who wish to purchase social media reviews of their products, not blog readers.  The court recalled cases in which courts held that reviews by entities such as the better business bureau are communications made in connection with a matter of public concern, not commercial speech.  For the commercial speech exception to apply, “the statement must be made for the purpose of securing sales in the goods or services of the person making the statement.”  While Ms. Moldovan’s statements may have had the effect of increasing sales, the posts were about Polito and her company, not about Ms. Moldovan’s business.  Therefore, the commercial speech exception did not apply.  However, because Polito and her company met their burden to establish a prima facie case for each element of their claims and because the Moldovans did not establish each essential element of a defense, the trial court did not err by denying the Moldovans’ motion to dismiss.

Moldovan v. Polito, No. 05-15-01052-CV (Tex. App.—Dallas Aug. 2, 2016)


Fraudulent Transfers Made With Actual Intent to Hinder, Delay or Defraud Creditors Permit Piercing the Corporate Veil for Contract Debts

Texas law greatly restricts the use of alter ego or fraud to pierce the corporate veil and hold shareholders liable for a corporation’s contract debts.  A shareholder may only be held personally liable

if the obligee demonstrates that the holder, beneficial owner, subscriber, or affiliate caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee primarily for the direct personal benefit of the holder, beneficial owner, subscriber, or affiliate.

Tex. Bus. Orgs. Code § 21.223(b).

In the long running saga of Husky Int’l Elecs., Inc. v. Ritz (In re Ritz), No. 14-20526 (5th Cir. Aug. 10, 2016), Chrysalis Manufacturing sold products to Husky International without any misrepresentations.  Daniel Ritz, who had financial control of Chrysalis, then drained Chrysalis of assets by transferring Chrysalis funds to other entities Ritz controlled.  Husky sued Ritz seeking to hold him personally liable under Section 21.223(b).  Ritz then filed for Chapter 7 bankruptcy.  Husky objected to the discharge of Ritz’s debt under 11 U.S.C. § 523(a)(2)(A) (excepting from discharge “any debt . . . for money, property, services, or an extension, renewal, or refinancing of credit, to the extent obtained by . . . false pretenses, a false representation, or actual fraud.”).

On appeal the Fifth Circuit faced two issues, first whether fraudulent transfers in violation of the Texas Uniform Fraudulent Transfer Act (TUFTA) would support an alter ego claim for personal liability under Texas Business Organizations Code Section 21.223(b).  The second was whether a debt incurred without a misrepresentation would support an objection to discharge of the debt under U.S Code Section 523(a)(2)(A).

In its first opinion the circuit court did not reach the alter ego issue but held that the absence of a misrepresentation precluded an objection to discharge.  The U.S. Supreme Court reversed, holding that fraudulent transfers could support an objection to discharge.  Husky Int’l Elecs., Inc. v. Ritz, 136 S. Ct. 1581 (2016).  On remand, despite the absence of state court holdings on the issue, the Fifth Circuit held that fraudulent transfers committed with actual fraud can support an alter ego claim for personal liability:

We hold today, however, that establishing that a transfer is fraudulent under the actual fraud prong of TUFTA is sufficient to satisfy the actual fraud requirement of veil-piercing because a transfer that is made “with the actual intent to hinder, delay, or defraud any creditor,” Tex. Bus. & Com. Code Ann. § 24.005(a)(1), necessarily “involves ‘dishonesty of purpose or intent to deceive.”

“Although no Texas court has previously reached the same holding, looking to the sources this court considers when making an Erie guess, we are convinced that the Supreme Court of Texas would arrive at the same conclusion as we do here.”

Husky Int’l Elecs., Inc. v. Ritz (In re Ritz), No. 14-20526 (5th Cir. Aug. 10, 2016).