The Dallas Court of Appeals recently all but held that a non-resident officer and director of a Texas corporation is subejct to personal jurisdiction in Texas.  After reviewing the law on personal jurisdiction, the court decided that there was no general jurisdiction over the defendants who were California residents. 

Turning to specific jurisdiction, the court addressed whether the defendants’ ongoing business relationship between Texas and California and the dispute over control of a Texas corporation constituted doing business in Texas.  The court agreed with the reasoning of a Fourth Circuit case:

Excellent reasons exist for alowing a State to assert jurisdiction over non-resident directors of domestic corporations.  A chartering state has a strong, even compelling interest in providing a forum for redressing harm done by corporate fiduciaries, harm endured principally by a resident of that State, the corporation. . . . Given the high degree of regulation over corporate fiduciaries, the State’s interst in providing a convenient forum for a derivative suit charging malfeasance or nonfeasance of a director cannot be overemphasized.

The court hedged its bet slightly by acknowledging the lack of authority from the Texas Supreme Court or state legislature on the subject.  Thus, the court went on to find that the defendants’ other contacts were sufficient to support personal jurisdiction.  One caveat, the plaintiff in the case, as well as the other shareholders were Texas residents.  Would the analysis change if all of the shareholders, officers, and directors were non-residents?  The court’s opinion in TexVa, Inc. v. Boone can be found at this link.

Readers note:  This issue is currently before the Texas Supreme Court in the case of Kelly v. General Interior Constr., Inc.  Readers can go to Don Cruse’s Texas Supreme Court blog, or its companion site, docketdb.com and find more infornation about that case here and here.

This blog entry comes courtesy of Cowles & Thompson‘s Melinda Newman:

The Eastland Court of Appeals recently held that a trial court abused its discretion by refusing to hear a special appearance motion filed by a California corporation until after the defendant’s corporate representative appeared for deposition in Texas. In IRN Realty Corporation v. Hernandez, Vicenta Hernandez filed suit against IRN, alleging various causes of action stemming from the purchase of real estate in Nolan County. Prior to hearing its special appearance, Hernandez noticed the deposition of IRN’s corporate representative. IRN filed a motion to quash, urging the court to first rule on its special appearance and contending that it would be unjust for a Texas court without jurisdiction to require its corporate representative to appear for a deposition. The trial court granted the motion to compel, awarded monetary sanctions, and ordered IRN to present its representative for deposition before it would rule on the special hearing. After IRN ignored the court’s order and failed to present its representative for deposition, the trial court struck IRN’s pleadings.

The court observed Rule 120a’s mandate that a hearing on a special appearance be heard and determined before any other plea or pleading. It also noted, however, that the rule also specifically provides for the means of obtaining a continuance of the special appearance hearing so a deposition may be conducted: affidavits of the party opposing the special appearance. Here, Hernandez did not file any such affidavit stating that she could not present facts essential to justify her opposition to the special appearance or that she needed to depose IRN’s corporate representative regarding jurisdiction — she simply noticed IRN’s corporate deposition. Thus, while the court made clear it did not condone the actions of IRN in refusing to obey a court order, it held that the trial court abused its discretion in abating the hearing on the special appearance and striking IRN’s pleadings. The court’s opinion may be found here.  One issue that was not addressed was location: i.e., had Hernandez properly submitted an affidavit and obtained a court order allowing the deposition, could she have forced the IRN representative to come to Texas for his deposition or would she have had to depose him in California?

The Texas Supreme Court recently narrowed the right to attorney’s fees based on uncontroverted evidence.  The Court held that compentent, uncontroverted, unchallenged evidence of attorney’s fees does not entitle a party to an award of attorney’s fees as a matter of law.  Distinguishing its opinion in Ragsdale v. Progressive Voters League, the Court held that under the well-known factors set forth in Arthur Anderson & Co. v. Perry Equip. Corp., the factfinder (here a jury) was free to award a lesser amount of fees considering "the amount involved and the results obtained." 

In one bright spot for clients and counsel, the Court did note that the jury was not free to award zero attorney’s fees stating:

Although it could have rationally concluded that, in light of the amount involved and results obtained, a reasonable fee award was less that the full amount sought, no evidence supported the jury’s refusal to award any fees.

The Court remanded the case for a new trial on attorney’s fees.  No word on how much is reasonable or whether a formula taking into account the amount invovled and amount incurred should be employed.   It is also unclear why a defendant found liable should benefit from requiring a plaintiff to incur high fees to recover a small amount.  From this opinion, we know that a court may not award attorney’s as a matter of law and the jury cannot award zero attorney’s fees.  Until further notice, it seems anything in between remains in play.  The Court’s opinion in Smith v. Patrick W.Y. Tam Trust can be found here. 

The Texas Supreme Court recently held that a malpractice plaintiff may recover attorney’s fees incurred in a prior suit if those fees were proximately caused by counsel’s negligence.  In this long and complex malpractice case, the plaintiff, NDR, sued Akin Gump for malpractice.  The jury rendered a verdict for NDR and awarded damages, including damages for attorney’s fees incurred by NDR for its appeal of the underlying judgment. 

In its opinion, the Dallas Court of Appeals reversed the attorney’s fees award citing the "American Rule" and a line of cases categorically barring recovery of attorney’s fees incurred in a prior suit as damages.  The Texas Supreme Court disagreed and held that the American Rule did not apply because NDR was not seeking attorney’s fees incurred in prosecuting its malpractice claim, a claim for which fees were not provided by contract or statute.  Instead, NDR was seeking its fees incurred in a prior suit that it would not have incurred but for Akin Gump’s alleged negligence. 

After briefly discussing cases in which courts have disallowed recovery of fees as damages, the Court stated: "The better rule, and the rule we adopt today, is that a malpractice plaintiff may recover damages for attorney’s fees paid in the underlying case to the extent the fees were proximately caused by the attorney’s negligence."  The Court did not address whether the new rule alters the general rule outside the context of legal malpractice cases, but the holding does not appear to extend beyond legal malpractice cases.  The Court’s opinion in Akin Gump. Strauss, Hauer & Feld, L.L.P. v. Nat’l  Devel. & Research Corp. can be found at this link.

In Aquaplex, Inc. v. Rancho La Valencia, Inc., the Texas Supreme Court appears to have equated intent with causation in a fraud case.  Aquaplex sued Rancho for fraud.  Aquaplex asserted that it lost the sale of a piece of real property due to Rancho having filed a lis pendens on the property.  On appeal following an adverse verdict, Rancho argued that there was no evidence as to why Aquaplex lost the sale of the property and therefore there was no evidence of causation between the alleged fraud and Aquaplex’s damages.  In its per curiam opinion, the Supreme Court holds that there was legally sufficient evidence because both parties knew of the offer for the property and Rancho testified it filed the lis pendens to prevent the sale. 

It is unclear how this holding fits with prior precedent holding that evil motive or intent does not necessarily establish a cause of action.  This opinion should give concern to those who file lis pendens. The purpose of lis pendens is give initial notice of a claim to property.  According to the Aquaplex decision, the filing of a lis pendens might well constitute a complete claim for fraud.

For appellate practitioners, there’s another holding in Aquaplex that may be of interest.  The court holds that a Respondent need not raise an alternative ground for affirmance as a cross-point in response to the Petition for Review.  Rather, to request that the Supreme Court consider alternative grounds for affirmance raised in the court of appeals but not decided by that court, the respondent may raise those issues in the petition, the response to the petition, the reply, any brief, or a motion for rehearing.  Here, Rancho preserved a cross-point by raising it in its brief on the merits for the first time.

The court’s opinion may be found here.

 

A recent Dallas Court of Appeals case, MRT, Inc. v. Vounckx, provides some insights on electronic discovery in Texas.

The case essentially involves two main entities: MRT, Inc. and Inter-University Micro-Electronics Center ("IMEC"), though several other related parties and entities were involved.  Basically, IMEC through its agent, Roger Vounckx, persuaded MRT and the several related individuals and entities to invest in a new technology, PhotonLink, which purportedly provided faster and more efficient computer chip communication.

When the investment proved unsuccessful, MRT sued IMEC for fraud, negligent misrepresentation, and breach of fiduciary duty.  During the litigation, MRT served IMEC with requests for production, but did not confer with IMEC beforehand to ascertain how it stored its information electronically.  The requests sought any computer generated or stored information relevant to the lawsuit. 

At depositions, MRT’s counsel learned that IMEC had some computer back up tapes it had not produced.  These tapes were apparently used for retrieval if the data base became corrupted and not for archival preservation.  Because IMEC delayed producing the tapes, MRT filed a motion to compel.  IMEC objected to production because: (1) extracting information from the tapes was too burdensome given there was no indication relevant information was stored on the back up tapes, which would take hours to search; and (2) IMEC had destroyed the back up tapes related to the relevant time period after MRT had sued it.

The trial court denied MRT’s request for a continuance to review the backup tapes and it denied its spoliation motion.  MRT lost at trial and appealed.

Did IMEC improperly withhold the backup tapes?  Did IMEC spoliate evidence when it destroyed the backup tapes after MRT filed the lawsuit?  Read the extended entry to learn what the court decided.  Or if you would rather read the opinion, you can get it HERE.

 

Continue Reading Electronic Discovery: Duty to Preserve and Produce Electronic Documents

The Appellate Law and Family Law Sections of the Dallas Bar Association are hosting a luncheon to honor outgoing Fifth District Court of Appeals Chief Justice Linda Thomas.  The luncheon will be Wednesday, November 4, 2009, at Noon at the Belo Mansion.   Those desiring to attend should RSVP to Alicia Hernandez at the Dallas Bar Association.

The next meeting of the Appellate Law Section of the Dallas Bar Association is scheduled for Thursday, November 19, 2009, at Noon, at the Belo Mansion.  The scheduled speaker is Kendall Gray who will speak on the subject of "Being Excellent–More Ethics than You Require."  This presentation has been approved for 1 hour of ethics credit.

At least since the Texas Supreme Court’s 1994 opinion in Transportation Insurance Company v. Moriel, questions of the right to discovery of a defendant’s net worth information, the definition of "net worth", and the scope of information relating to net worth have been simmering in the district courts and in the courts of appeals.  The latest opinion on the subject has been issued by the Fourteenth District Court of Appeals and the concurring opinion makes case for why it’s time for the Texas Supreme Court to address these thorny issues.  The majority’s opinion in In re Jacobs may be found here.  The concurring opinion may be found here.

Continue Reading Discovery of Net Worth Continues to Simmer