Case Update for April to June 2016

By Andrew Nelson, Wright & Close, LLP; Andrew Raber, 14th Court of Appeals

FIRST COURT OF APPEALS

Medina v. Raven, No. 01-14-00881-CV, 2016 WL 1388949 (Tex. App.—Houston [1st Dist.] Apr. 7, 2016, no pet.)

Deemed admissions may be “undeemed” upon a showing of good faith and no undue prejudice. When deemed admissions are merits-preclusive, good cause exists absent bad faith or callous disregard of the rules by the party seeking the withdrawal.


Plaintiff Medina sued Raven for injuries sustained in a car collision. Raven sent requests for admission to Medina via her counsel in February 2014. Some of the requests asked the plaintiff to admit that Raven was not at fault, admit that she was not injured in the collision, and admit that the driver of the car in which Medina rode was negligent. Although there was some uncertainty regarding whether the admissions went to counsel’s correct address, counsel ultimately received the requests and prepared responses. Counsel sent responses to Raven’s counsel, but more than thirty days after receiving the requests. Medina subsequently changed counsel.

In June 2014, Raven filed a motion for summary judgment based on the deemed admissions. Medina filed a response outlining the fact that she had responded to the requests, but did not file a motion to undeem the admissions. The trial court ultimately deemed the admissions and granted summary judgment.

Medina filed a motion for new trial asking to undeem the admissions. The trial court denied the motion.

The First Court began by noting that a trial court’s decision to permit or deny withdrawal of deemed admissions is reviewed for abuse of discretion. Raven cited another case from the First Court, Cleveland v. Taylor, 397 S.W.3d 683, 695 (Tex. App.—Houston [1st Dist.] 2012, pet. denied), for the proposition that failure to seek to undeem admissions prior to a motion for new trial constitutes waiver of the ability to challenge on appeal. The First Court distinguished that case, noting that, despite being given the opportunity to respond to the admissions, counsel refused to answer a number of requests. On the other hand, Medina did not refuse to answer the requests, but simply responded to them late.

The court next recognized that due process concerns are implicated when merits-preclusive admissions are deemed. While the Rules require a showing of good cause and no undue prejudice before admissions can be undeemed, the court noted that good cause will exist where there is no bad faith or callous disregard of the rules. In the case before it, neither Medina nor her counsel showed bad faith in responding to the admissions late. Additionally, Raven’s counsel had the admissions for several months before seeking summary judgment, so there was no unfair prejudice wrought by the late responses. Accordingly, the court held that the trial court should have granted Medina’s motion for new trial, and reversed and remanded the cause to the trial court.

Zhao v. XO Energy, LLC, No. 01-15-00937-CV, 2016 WL 2587039 (Tex. App.—Houston [1st Dist.] May 5, 2016, no pet.)

A temporary injunction ordering a defendant to deposit money into the court’s registry during the pendency of a lawsuit is not reviewable via interlocutory appeal, but is reviewable by petition for writ of mandamus.


Zhao, the defendant in an underlying lawsuit, was ordered to deposit over $500,000—funds whose ownership was being challenged in the suit—into the court’s registry during the pendency of the suit. The district court styled its order as a “temporary injunction.” Zhao filed an interlocutory appeal of the temporary injunction. When the plaintiff moved to dismiss the appeal for want of jurisdiction, Zhao filed a petition for writ of mandamus challenging the same order.

Via its motion to dismiss, the plaintiff argued that “the requirement that Appellant deposit funds in the court registry is not injunctive relief but rather attachment relief that cannot be addressed in an interlocutory appeal.” Zhao responded that, in the trial court, the plaintiff specifically sought a temporary injunction, even noting that it was not seeking a writ of attachment.

The First Court, performing its own research, noted that “most, if not all” interlocutory appeals involving challenges to deposit money into the court registry have been dismissed for want of jurisdiction, regardless of how the order is titled. The court cited a lengthy collection of case law indicating that such orders are not actually temporary injunctions, and therefore do not invoke the jurisdiction of the interlocutory appeal statute. The First Court agreed, dismissing Zhao’s appeal for want of jurisdiction.

However, the court ruled that it could review the order on mandamus. The court noted that a trial court may order money to be deposited into the registry either by issuing a writ of attachment or by using its inherent authority. The court held that the trial court’s ruling was not a writ of attachment and instead characterized the order as signed pursuant to the court’s inherent authority. The First Court held that the trial court did not abuse its discretion in finding that the funds were at risk of being lost or depleted, and denied the petition for writ of mandamus.

FOURTEENTH COURT OF APPEALS

In re DLS, L.L.C. A/K/A D&L Salvage, L.L.C., ___ S.W.3d ___, No. 14-16-00265-CV, 2016 WL 1613236 (Tex. App.—Houston [14th Dist.] April 21, 2016, orig. proceeding).

When filing suit under the Jones Act, Tex. Civ. Prac. & Rem. Code § 15.0181(e) does not limit a party to filing in the county where the party resided at the time the cause of action accrued in cases involving an out-of-state defendant.

In a novel issue regarding section 15.0181(e)’s construction, the Fourteenth Court of Appeals examined dueling interpretations of the mandatory venue statute to determine whether venue was appropriate in Harris County, where the suit was filed, or Montgomery County, where the plaintiff resided.

Real party-in-interest Daniel Foret sued relator DLS, LLC in Harris County under the Jones Act for injuries allegedly incurred in Louisiana inland waters. DLS filed a petition for writ of mandamus seeking to transfer venue of the case to Montgomery County and vacate the trial court’s order denying DLS’s motion to transfer venue. Foret argued that venue was proper in Harris County because Foret did not reside in Galveston County when the cause of action accrued. The parties disagreed as to the proper construction of section 15.0181(e), which provides:

(e) if all or a substantial part of the events or omissions giving rise to the claim occurred on inland waters outside this state . . . , the suit shall be brought:
(1) in the county where the defendant’s principal office in this state is located if the defendant’s principal office in this state is located in a coastal county;
(2) in Harris County unless the plaintiff resided in Galveston County at the time the cause of action accrued;
(3) in Galveston County unless the plaintiff resided in Harris County at the time the cause of action accrued; or
(4) if the defendant does not have a principal office in this state located in a coastal county, in the county where the plaintiff resided at the time the cause of action accrued.

Foret argued that subparagraphs (1) through (4) are independent options within a mandatory venue statute, (e)(2) and (4) are both available to him to select, and that he properly selected (e)(2). DLS argued that (e)(1) through (3) apply where the defendant has a principal office in Texas located in a coastal county and only (e)(4) applies where a defendant has no such office.

Although the court agreed that DLS’s reasoning made sense, it concluded that the organization of the statute favored Foret’s interpretation and the court was not at liberty to correct the work of the Legislature. By rejecting DLS’s interpretation of the statute, the court also rejected the San Antonio Court of Appeals’ interpretation of the statute. See In re Atlantic Sounding Co., Inc., No. 04-15-00407-CV, 2015 WL 8386363, at *3 (Tex. App.—San Antonio Dec. 9, 2015, orig. proceeding). The Court reasoned that the San Antonio Court of Appeals’ interpretation was incorrect because it impermissibly added language to subsection (e)(2)’s unambiguous terms. The phrase “if the defendant does not have a principal office in this state in a coastal county” does not appear in subsections (e)(1)-(3). Section 15.0181(e)(2)’s plain language allows a plaintiff to establish venue in Harris County regardless of whether the defendant has a principal office in this state located in a coastal county. The court, therefore, denied DLS’s petition for writ of mandamus.

Pablo Rion y Asociados, S.A. de C.V. v. Dauajare, No. 14-15-00611-CV, 2016 WL 2744749 (Tex. App.—Houston [14th Dist.] May 10, 2016, no pet. h.).

A trial court has the discretion whether to include a “return-jurisdiction provision,” allowing the plaintiff to reinstate the case in the original forum if the foreign forum becomes unavailable, when setting the terms and conditions of an order dismissing a case on forum non conveniens grounds.

In another case of first impression, the Fourteenth Court of Appeals examined whether a trial court is required to include a return-jurisdiction provision in an order dismissing a case under the equitable doctrine of forum non conveniens. Including such a provision would allow the plaintiff to reinstate the case in the original forum should the foreign forum become unavailable.

Pablo Rion y Asociados, S.A. de C.V. (“PRA”) initiated a lawsuit in Fort Bend County by suing the Dauajares for breach of contract, quantum meruit, and fraud. The allegations focused primarily on the breach of an agreement that was negotiated and expected to be performed in Mexico. The Dauajares moved to dismiss the case on the basis that Mexico was a more convenient forum, but the trial court denied their motion. The Dauajares sought relief through a petition for writ of mandamus. The appellate court conditionally granted the petition and ordered the trial court to dismiss the case on forum non conveniens grounds.

When the parties returned to the trial court, the Dauajares moved for entry of an order dismissing the case. PRA requested the trial court to include a return-jurisdiction provision, but the trial court denied PRA’s request. PRA appealed, claiming the omission of a return-jurisdiction provision constitutes an abuse of discretion per se.

Although no Texas courts had spoken on this issue, the Texas Supreme Court had at least acknowledged the existence of return-jurisdiction provisions. In re Pirelli Tire, L.L.C., 247 S.W.3d 670 (Tex. 2007) (orig. proceeding) (plurality). In its analysis of Pirelli, the Court of Appeals noted the Supreme Court’s choice of the permissive word “authorizes,” which indicates the provision is discretionary, rather than mandatory.

The analysis did not end with Pirelli, however, as that case involved a statutory application of forum non conveniens, rather than the common law. And because no Texas court has ever held as a matter of Texas common law whether return-jurisdiction provisions are discretionary or mandatory, the court looked to the approaches taken by federal courts.

Whereas the Fifth Circuit adopted a bright-line rule that requires the inclusion of a return-jurisdiction clause, the Ninth and Tenth Circuits chose not to create a mandatory requirement. Those circuits adopted a discretionary approach that allows the trial court discretion to determine whether including the clause is necessary.

The Court of Appeals concluded that the discretionary approach was warranted because the plaintiff can still receive adequate protections that the defendant will cooperate in the foreign forum. For example, the trial court can order the defendant to submit to personal jurisdiction in the foreign forum, to waive limitations defenses, to agree to discovery, and to agree to the enforceability of the foreign judgment. Because the trial court in this case was given no justifiable reason to doubt that the case could be resolved fairly in Mexico, the Court of Appeals held that the trial court did not abuse its discretion by refusing to include a return-jurisdiction provision that would enable PRA to reinstate its case in Texas.

Auzenne v. Great Lakes Reinsurance, PLC, ___ S.W.3d ___, No. 14-15-00159-CV, 2016 WL 2758615 (Tex. App.—Houston [14th Dist.] May 10, 2016, no pet. h.).

A party must obtain a judgment establishing the insured’s liability before bringing an action directly against the insurer to recover no-fault medical expense insurance benefits.

This case involves a matter of first impression in Texas regarding a party’s ability to sue an insurer as a third-party beneficiary to recover no-fault medical expenses without first obtaining a judgment against the insured.

Auzenne alleged in his petition that he slipped and fell at a Snowflake Donuts store and his injuries caused him to incur several thousand dollars in medical expenses. Snowflake Donuts was insured under a commercial policy with Great Lakes Reinsurance, PLC at the time. Auzenne alleged that Snowflake Donuts’ policy includes a “medical payments clause” that requires Great Lakes to pay medical expenses of anyone who is injured on the property regardless of fault. Auzenne proceeded to send his medical bills and records directly to Great Lakes and requested Great Lakes reimburse him under the insurance policy. After Great Lakes refused to reimburse Auzenne’s medical expenses, he filed suit, alleging, among other claims, breach of contract.

Great Lakes filed a motion to dismiss the lawsuit under Tex. R. Civ. P. 91a. In his response, Auzenne argued that as a third-party beneficiary, he has standing to sue without first obtaining a determination of Snowflake Donuts’ liability. The trial court granted Great Lake’s motion to dismiss, and Auzenne appealed.

The Fourteenth Court of Appeals analyzed whether the prohibition on direct actions by an injured third party against an insurer applies to claims brought under a “medical payments” provision in an insurance policy requiring the insurer to pay medical expenses of anyone injured on the subject property regardless of fault.

The majority first addressed the no-direct-action rule, which generally prohibits suit against the insurer until the liability of the insured has been established. See Farmers Ins. Exch. v. Rodriguez, 366 S.W.3d 216, 223 (Tex. App.—Houston [14th Dist.] 2012, pet. denied). The majority rejected Auzenne’s argument that claims under a no-fault medical payments coverage clause should be treated differently. Citing Texas courts’ consistent refusal to make exceptions to the rule based on the types of claim brought or the status of the parties bringing them, the majority concluded that there is no authority indicating that the medical payments coverage clause negates the applicability of the general rule.

The majority also rejected Auzenne’s third-party beneficiary argument. Auzenne argued that as a third-party beneficiary of the insurance policy, he was not required to obtain a judgment establishing Snowflake Donuts’ liability before bringing an action directly against the insurer. Taking as true the allegation in Auzenne’s petition that the insurance policy contained such a clause, the majority concluded that Auzenne did not overcome the bar to direct actions against the insurer. The court also found that Auzenne failed to rebut the strong presumption against a finding of third-party beneficiary status. The majority affirmed the trial court’s order granting Great Lakes’ motion to dismiss.

In her dissent, Justice Jamison concluded that dismissal under Rule 91a was inappropriate. In her view, the majority held that Auzenne must obtain a liability finding against Snowflake Donuts, even though, as pleaded, Auzenne was not required to establish liability to be entitled to recoup medical expenses under the insurance policy. Justice Jamison distinguished the cases relied on by the majority, stating that none of the cases involved a medical payments provision in an insurance policy. Under this provision, the issue is not whether the property owner was liable, but whether the claimant is a third-party beneficiary of the policy.

Justice Jamison cited a line of cases from various jurisdictions holding that a plaintiff’s right to directly sue the insurer rests not on whether the state authorized direct actions against a tortfeasor’s insurer, but rather on whether the plaintiff was a third-party beneficiary of the contract providing for medical payment benefits—in other words, a contract-based, rather than tort-based remedy. Justice Jamison concluded that, taking the allegations in his petition as true, Auzenne did not fail to state a cause of action. He, therefore, should have had the opportunity to establish his third-party beneficiary status and his right to sue the insurer directly in contract, as opposed to bringing a lawsuit to recover damages for the insured’s negligence.

Auzenne has filed a motion for en banc reconsideration.