October 2008 Cases Impacting Houston Appellate Lawyers

October 2008 Cases Impacting Houston Appellate Lawyers as presented at the HBA Appellate Section Luncheon on October 16, 2008

by Richard Howell, Jackson Walker, L.L.P.
edited by Jennifer Kingaard & Karlene Poll, Baker Botts LLP

SUPREME COURT OF TEXAS

Davis v. Fisk Elec. Co., No. 06-0162 (Sept. 26, 2008) (Chief Justice Jefferson)

Significance: This case reexamines Batson challenges for the first time in eleven years and demonstrates the court’s willingness to pierce multiple layers of purportedly neutral explanations to find unconstitutional strikes.

Holding: The Texas Supreme Court reversed the court of appeals and remanded the case for a new trial because at least two of Defendants’ peremptory strikes of African Americans defied neutral explanation.

Relevant Facts: Fisk Electric Company fired an African American employee, Donald Davis. Davis sued Fisk, claiming employment discrimination in part based on a supervisor’s alleged use of the “n-word.” After Fisk exercised five of its six peremptory strikes against African Americans, the trial court overruled Davis’ Batson objections. Davis appealed from a take nothing judgment based upon a defense verdict, and the Fourteenth Court of Appeals affirmed.

The court began by noting that the trial court erred by failing to permit Davis to rebut Fisk’s explanations at the hearing before ruling on the challenges. Next, the court looked to Miller-El v. Dretke, 545 U.S. 231 (2005), which held that courts reviewing Batson challenges must examine “all relevant circumstances.” The court analyzed two of Fisk’s strikes with reference to two of the five factors identified in Miller-El: statistical disparity analysis and comparative juror analysis. The court concluded that Fisk’s striking five African Americans, an 83% removal rate, was statistically remarkable. Next, the Court conducted a side-by-side comparison of black panelists struck against nonblack panelists who were not struck. One strike was found unconstitutional despite three proffered explanations – one based on nonverbal conduct and two based on the venireman’s responses to questions. Fisk’s proffered explanation about nonverbal reactions was insufficient because counsel had not questioned the venireman about his reaction, had not provided sufficient detail at the hearing about the conduct, and did not obtain a ruling from the trial court crediting his explanation. The second strike, allegedly based upon an African American venireman’s employment status and statement that the use of the “n-word” was “a real big problem,” was unconstitutional because at least four persons within the strike zone would have been more likely strikes based upon their employment status and at least two other persons who had similar reactions to the “n-word” issue. In a concurring opinion, Justice Brister, joined by Justice Medina, argued that the Texas Rules of Civil Procedure should be amended to limit or eliminate the use of peremptory strikes because modern jury venires are randomly selected and because the potential discrimination caused by peremptory strikes are not worth the benefits.

Kerlin v. Sauceda, No. 05-0653 (Oct. 10, 2008) (Justice O’Neill)

Significance: This case clarifies that a nonresident who is doing business in the state sufficient to establish jurisdiction under the general longarm statute is also present in the state under the tolling statute and, thus, limitations bar claims brought outside the applicable limitations period.

Holding: First, limitations was not tolled by fraudulent concealment because sources of information were available to Plaintiffs as royalty owners and reasonable diligence would have revealed Plaintiffs’ injury. Second, to determine whether statutory tolling applied, the court considered the interplay between the statutory tolling rule, Tex. Civ. Prac. & Rem. Code § 16.063, which suspends the running of limitations while a person is absent from the state, and the general longarm statute, Tex. Civ. Prac. & Rem. Code § 17.044. Because the longarm statute makes a nonresident amenable to service and “doing business” in Texas establishes contacts with the state sufficient to afford personal jurisdiction, the court held that by doing business in Texas, Defendant was not absent from the state. The tolling statute thus did not apply and limitations barred Plaintiffs’ claims. Concurring, Justice Brister, joined by Justices Hecht, Medina, and Willett, argued that a 1968 supreme court case addressing this issue should be directly overruled.

Relevant Facts: In 1829, the State of Tamaulipas, Mexico, recognized the claims of Padre Nicolas Balli and Juan Jose Balli to what is now known as Padre Island. By the early 1900s, the Ballis’ interests in the island had largely disappeared through conveyances or adverse judgments. Between 1937 and 1940, Gilbert Kerlin and his uncle discussed with various Balli heirs the possibility that they may have an interest in the island based upon records that indicated that the Ballis’ initial conveyance to a third party had been rescinded. Kerlin, as trustee, obtained eleven general warranty deeds from the Ballis, each containing a reserved royalty interest. In a separate action, Kerlin later obtained a mineral interest in 1,000 acres and fee simple title to 20,000 acres of Padre Island. Shortly thereafter, Kerlin informed the Ballis that their titles were worthless. In this case, more than 275 descendants of Juan Jose Balli sued Gilbert Kerlin and his wholly owned companies, claiming that Kerlin defrauded them of oil and gas royalties and other interests in Padre Island. Among other things, Kerlin asserted that the Ballis’ claims were barred by the statute of limitations.

At trial, the jury found that Kerlin was estopped to deny the validity of the deeds, that he was not present in the state for either a two or four year period between the date he acquired the interests in Padre Island and the date the lawsuit was filed, and that he was not physically present in the state when the wrongdoing occurred that formed the basis of the Ballis’ claims. Based upon the Ballis’ motion, the court rendered judgment for the Ballis, after granting the Ballis’ motion to set aside the latter finding, concluding that Kerlin’s presence in the state when the wrongdoing occurred was established as a matter of law. The court of appeals affirmed. The supreme court addressed only the issues of fraudulent concealment and statutory tolling.

FOURTEENTH COURT OF APPEALS

In re Mem’l Herman Healthcare Sys., No. 14-08-00204-CV (Oct. 9, 2008) (Chief Justice Hedges)

Significance: This case considers whether parties subject to a civil investigative demand by the Attorney General are protected from disclosing those materials in a private suit.

Holding: Any privilege created by section 15.10(i) of the Texas Free Enterprise and Antitrust Act does not extend to civil investigative demand materials held by the defendant in private antitrust litigation.

Relevant Facts: Memorial Herman Healthcare System operates a chain of hospitals in Houston. Stealth, L.P., was formed in 2002 to operate a for-profit hospital near one of Memorial Hermann’s facilities; the hospital floundered after opening in November 2005 and closed shortly thereafter. Stealth sued Memorial Hermann, alleging that Memorial Hermann violated the Texas Free Enterprise and Antitrust Act (“the Act”) by arranging a horizontal boycott that precluded health insurance companies from contracting with Stealth’s hospital, causing it to fail. The Attorney General later opened an antitrust investigation and issued a civil investigative demand (“CID”) to Memorial Hermann. Memorial Hermann produced 87,000 pages of documents in response to the CID. Stealth requested production of the CID documents that Memorial Hermann had produced in response to the CID. Memorial Hermann produced 54,000 pages of CID materials but claimed Stealth’s requests were overbroad and that privilege under section 15.10(i) of the Act allowed it to resist production of the remaining 33,000 pages. The court ordered production and Memorial Hermann challenged the ruling by mandamus.

The court held that under the plain language of the statute, section 15.10(i) precludes the Attorney General, but no one else, from disclosing CID materials unless the producing party consents or the person seeking to examine the CID materials obtains a court order permitting access. Further, court held production was desirable based upon the purposes and policies of the Act. Finally, the court held that Stealth’s requests for production of CID materials were not facially overbroad and that Memorial Hermann had failed to demonstrate that Stealth’s request would capture irrelevant documents. Concurring, Justice Frost argued that the panel should not have considered any tool of interpretation because section 15.10 of the Act is unambiguous.

Guilbot v. In the Estate of Gonzalez Y Vallejo, No. 14-07-00047-CV (Sept. 30, 2008) (Justice Yates)

Significance: This case clarifies the recusal procedure in cases where multiple recusal motions are filed against multiple judges.

Holding: When faced with a recusal motion, a judge has two options: grant the motion or refer the motion to another judge. Thus, a judge errs when he or she denies a motion to recuse brought against himself or herself. Further, a third recusal motion only triggers Tex. Civ. Prac. & Rem. Code § 30.016 (which provides that a judge may continue to preside over the case after a third motion for recusal is filed) if all three motions are filed against the same judge. If a judge denies his or her own recusal motion, any subsequent orders are void.

Relevant Facts: A cofounder of a large family enterprise died, and litigation ensued among family members after the decedent’s will was probated. Following multiple resettings, the Harris County Statutory Probate Court set the case for trial. Shortly thereafter, appellants removed the case to federal court, but the federal judge remanded the case and awarded costs to appellees, finding no reasonable basis for removal. Despite the general rule prohibiting appeals from a remand order, appellants appealed to the Fifth Circuit. While this federal appeal was pending, appellants filed a motion to recuse presiding probate court Judge Wood, who referred the recusal motion to Judge Herman, presiding judge of the statutory probate courts. Judge Herman assigned the motion to Judge Burwell. Appellants then filed motions to recuse Judges Herman and Burwell. Judge Herman heard and denied all three motions and assessed sanctions, finding the motions frivolous. After a bench trial, Judge Wood rendered judgment against appellants.

FIRST COURT OF APPEALS

In re David Henry, No. 01-07-00601-CV (October 2, 2008) (Justice Hanks)

Significance: This case confirms that anti-suit injunctions based on dominant jurisdiction do not have to establish the probable right to relief on the merits that might be required of other types of injunctions.

Holding: The court of appeals affirmed the temporary injunction and denied mandamus relief, holding that the trial court did not abuse its discretion in finding that the first-filed suit acquired dominant jurisdiction with proper venue, giving rise to a legitimate basis for enjoining duplicative litigation in a subsequently filed suit in another county.

Relevant Facts: McMichael and Henry were joint owners of Girard Holdings, with an agreement providing that, if one died, the other could purchase his stock for the book value. When McMichael died, Henry tried to purchase his stock for the book value of $140,000. McMichael’s wife refused to sell, saying that the book value was artificially law, and did not reflect the actual $2-4 million value of the stock. This dispute led to dueling court actions in different counties.

McMichaels’ executors filed a preemptive suit in Brazoria County, where he had resided at death, claiming that the agreement was not enforceable. Henry filed a motion to abate and to transfer venue to Harris County. Henry followed with a suit in Harris County for breach of the stock purchase agreement. McMichaels argued that the first-filed action in Brazoria County had dominant jurisdiction over the later-filed action. Both courts refused to abate the actions. After Henry sought summary judgment in Harris County, the Brazoria County court found that it had dominant jurisdiction, and issued a temporary injunction precluding Henry from proceeding in the Harris County action. Henry filed a petition for writ of mandamus from the denial of the abatement and filed an interlocutory appeal of the temporary injunction.

The court of appeals began by noting that the rule of dominant jurisdiction applies only if the first suit is filed in a county of proper venue. Applying the prima facie standard for venue facts, the court upheld affidavit allegations that, in fixing the stock price, Henry had met with McMichaels on numerous occasions at his nursing home in Brazoria County. The court that these facts supported venue in Brazoria County and could not be rebutted or impeached under the prima facie standard. The court next rejected the argument that the first litigation had been inequitably filed to prevent Henry from seeking relief first. Finally, the court resolved Henry challenges of the injunction from an evidentiary basis. Henry argued that an anti-suit injunction, just like any other injunction, required McMichaels to show evidence of a probable right of recovery. The court held that this merits-based factor does not apply to anti-suit injunctions, where the injunction is based on the trial court’s equitable powers to protect its own jurisdiction to fashion effective relief.