Case Updates

By Andrew Nelson, Wright & Close, LLP; Andrew Raber, Watt, Thompson, & Henneman LLP

FIRST COURT OF APPEALS

Guam Indus. Res., Inc. v. Dresser-Rand Co., No. 01-15-00842-CV, 2016 WL 3964672 (Tex. App.—Houston [1st Dist.] July 21, 2016, no pet. h.)

Consent to arbitrate in Texas does not constitute consent to litigate in Texas.

Dresser-Rand sued Guam Industrial Resources, Inc. (“Guam”) for failing to pay it for work it did pursuant to a contract. The contract contained an arbitration clause in which the parties agreed to arbitrate in either Buffalo, New York, or Houston. The parties also consented to the jurisdiction of those courts for purposes of the entry of judgment upon an arbitration award. However, Dresser-Rand filed suit rather than moving for arbitration.

Guam filed a special appearance. The trial court denied Guam’s special appearance on the grounds that Guam consented to jurisdiction when it agreed to the arbitration clause. Guam appealed. During the pendency of the appeal, Dresser-Rand moved to compel arbitration in the trial court, and the trial court granted the motion. However, the First Court stayed that order pending its resolution of the interlocutory appeal.

The court began by noting that ruling on jurisdictional issues usually requires an examination of a defendant’s contacts with Texas; however, that is not the case when a defendant contractually consents to jurisdiction in Texas. Instead, review focuses on whether the trial court properly applied the clause.

The court noted that an arbitration clause is a type of forum-selection clause. In construing forum-selection clauses, the court applies principles of contract interpretation. In this case, the court focused on only one issue: whether Guam consented to be sued in Houston.

The court held that Guam did not consent to be sued in Houston. Guam’s agreement to arbitrate in Houston subjected it to Texas jurisdiction for the limited purpose of confirming any award against it or for compelling arbitration, but not for being sued in Texas in the first instance. The court noted that its holding was in line with a number of federal courts. And, under normal minimum contacts principles, jurisdiction over Guam in Texas was not proper. Thus, the trial court erred in denying the special appearance.

Finally, the court considered what to do with the trial court’s order compelling arbitration entered after denying the special appearance. The court held that the granting of the motion to compel arbitration could not cure the court’s error in denying the special appearance. Special appearances must be judged based on the pleadings before the court at the time of the hearing. After-filed documents cannot be considered. Therefore, the court reversed the trial court’s judgment and rendered judgment granting the special appearance and dismissing the case for lack of personal jurisdiction.


Addo v. Am. Tank & Vessel, Inc., No. 01-15-00688-CV, 2016 WL 3662652 (Tex. App.—Houston [1st Dist.] July 7, 2016, no pet. h.)

Failure to include a complete clerk’s record when challenging a trial court’s summary judgment ruling will lead to affirmance of the summary judgment.

Addo sued American Tank and Vessel, Inc. (“ATV”) for breach of contract. ATV moved for summary judgment, attaching 91 exhibits to its motion for summary judgment. The trial court granted the summary judgment and also granted equitable fee forfeiture and death penalty sanctions against Addo. Addo appealed.

Addo filed a request for documents to be included in the clerk’s record; however, he only requested four of the 91 summary judgment exhibits for inclusion in the record. ATV argued that the court of appeals must presume the missing exhibits support the judgment and affirm the summary judgment.

Addo argued that the omitted evidence was not “pertinent” because the only issue in the case was who breached the contract first, and the evidence that he attached was supposedly all the court needed to answer that question. The court rejected that argument. The court held that it was not up to the parties to determine which evidence is pertinent; rather, the parties must include a full clerk’s record so that the court can make that determination. Because Addo did not do so, the court presumed that the omitted exhibits supported the summary judgment, and affirmed. It is worth noting that the court specifically stated that it was significant that the omission of the exhibits was not accidental, but was intentional.

The court also upheld the trial court’s granting of death penalty sanctions. The trial court’s judgment specifically stated that it relied on evidence presented at several hearings on the motions. Under the presumption of regularity of judgments, the court of appeals noted that it must presume that the trial court did in fact rely on the evidence as it stated. However, Addo only included a partial reporter’s record that did not include transcripts of all the hearings in which the court received evidence. The court of appeals pointed out that while Rule 34.6(c) permits a party to prosecute an appeal with a partial reporter’s record, that rule also requires the party to specifically state the issues to be considered on appeal, and the appeal will then be limited to those issues. When a party does not file such a statement, the court of appeals must affirm the judgment. Because Addo did not file a statement, the court presumed the missing record supported the judgment and affirmed.



FOURTEENTH COURT OF APPEALS

Sharp v. Kroger Texas L.P., No. 14-15-00784-CV, 2016 WL 3965113 (Tex. App.—Houston [14th Dist.] July 21, 2016, no pet.)

When Plaintiff files suit, but does not serve Defendant until after the expiration of the statute of limitations, Plaintiff must demonstrate due diligence in effectuating service from the moment petition was filed, not the moment the statute of limitations expired.

In an appeal from the trial court’s grant of summary judgment in favor of defendant Kroger Texas LP, the Fourteenth Court of Appeals examined whether the plaintiff exercised due diligence in procuring citation and effectuating service of process on Kroger. Plaintiff filed suit before the statute of limitations expired, but did not request citation or effectuate service on Kroger for over five months, after the statute of limitations expired. Plaintiff therefore had the burden of demonstrating due diligence as to “every period of delay” in order for the date of service to relate back to the date of filing.

Justice Jamison, writing for the majority, focused on the applicable time period in which to judge “every period of delay.” Plaintiff argued that due diligence is measured from the expiration of the statute of limitations and not from the date the lawsuit was filed. The court of appeals disagreed, holding that the measure of diligence begins from the time the suit is filed and explanation is needed for every period of delay thereafter. See Proulx v. Wells, 235 S.W.3d 213, 216 (Tex. 2007); Gant v. DeLeon, 786 S.W.2d 259, 260 (Tex. 1990).

The plaintiff also attributed the delay in procuring citation and effecting service on the parties’ ongoing effort to resolve the case. This argument did not persuade the court either. The court concluded that unilaterally waiting to serve a defendant during settlement negotiations is not due diligence. The court affirmed the trial court’s judgment.

In the concurring opinion, Justice Christopher addressed the issue of due diligence before the statute of limitations has run. Although Justice Christopher agreed that the plaintiff failed to exercise due diligence in serving her lawsuit, she wrote separately to recommend that courts examine the delay that occurs before the running of limitations differently from delay that occurs after the running of limitations. In Justice Christopher’s opinion, it was reasonable for the plaintiff to delay serving her lawsuit while attempting to settle the case, and courts should not discourage such practice. Further, because the court has never held that a plaintiff has a duty to file a suit as soon as possible, plaintiffs often wait until the last minute to file. Accordingly, she noted “it seems incongruous to fault a plaintiff with five months of delay in attempting service when that same plaintiff could have waited those same five months without filing at all, filed three days before the expiration of limitations, and served a defendant after limitations had run.”


Universal MRI & Diagnostics, Inc. v. Medical Lien Management Inc. D/B/A Bridgewell, No. 14-15-00420-CV, 2016 WL 4204049 (Tex. App.—Houston [14th Dist.] Aug. 9, 2016, no pet. h.)

A party may choose to use the lodestar method to establish the amount of reasonable and necessary attorneys’ fees, but must provide evidence of the time spent on specific tasks and identify which attorney or paralegal performed those tasks.

In 2012, the Texas Supreme Court’s El Apple I decision clarified the proof required to demonstrate the reasonableness of attorneys’ fees using the lodestar method. El Apple I, Ltd. v. Olivas, 370 S.W.3d 757 (Tex. 2012). The lodestar method is a two-step process used to ensure the amount of attorneys’ fees awarded to a party are reasonable. The method involves determining the base fee (i.e., lodestar) and then adjusting that amount up or down based on the complexity of the work. To determine the base fee, the party requesting attorneys’ fees must establish the number of hours reasonably spent on the case. Id. at 762–64. The rule requires proof documenting the performance of specific tasks, the time required for those tasks, the person who performed the work, and his or her specific rate. Id. at 764.

Following El Apple I, however, the Supreme Court and some courts of appeal (including the Fourteenth Court of Appeals) have been inconsistent in when and how to apply the lodestar method when reviewing awards of attorneys’ fees. See Mark E. Steiner, Will El Apple Today Keep Attorneys' Fees Away?, 19 J. Consumer & Com. L. 114, 118–19 (2016) (providing a full explanation of the El Apple I decision and the lower courts’ application of the decision when reviewing awards of attorneys’ fees under the lodestar method).

In the most recent “lodestar case,” the Fourteenth Court of Appeals applied the lodestar method to a case involving claims for fraud and breach of contract. The court first determined whether the party intended to use the lodestar method by considering the following evidence:
MLM submitted the affidavit of K. Bo Wilson as evidence of its attorneys’ fees. In the affidavit, Wilson states MLM agreed to compensate his firm “based on the hourly fee of $100.00 to $350.00.” He then states that “based on the Firm’s fee agreement, MLM incurred reasonable and necessary attorney [and paralegal] fees in the amount of $44,008 in preparing and drafting MLM’s pleadings and motions, discovery, compiling exhibits, and taking other necessary actions to perform the Firm’s legal services properly.”
The court concluded that the party’s references to the agreed hourly rate and the total amount of fees incurred based on the agreement demonstrated its intent to use the lodestar method.

The court then examined whether the evidence supported the trial court’s award of attorneys’ fees using the lodestar method. Citing El Apple I, the court reviewed the record for evidence “of the services performed, who performed them and at what hourly rate, when they were performed, and how must time the work required.”

Because the party provided only a range of hourly rates and generally listed the types of tasks that were performed, the court concluded that the trial court could not have meaningfully reviewed the fee request and therefore the evidence was not sufficient to meet the El Apple I standard. The court of appeals reversed the portions of the trial court’s judgment awarding the party attorneys’ fees and remanded the case for further proceedings regarding the attorneys’ fees.