Case Update for October, November, and December 2017

By Andrew Nelson, Wright & Close, LLP, and Jill Schumacher, 14th Court of Appeals

FIRST COURT OF APPEALS

In re Wagner, No. 01-15-00744-CV, 2017 WL 6374549 (Tex. App.—Houston [1st Dist.] Dec. 14, 2017, orig. proceeding)

An order granting a new trial must state a legally appropriate reason for its issuance, and the record must support the trial court’s rationale; otherwise, an appellate court may issue mandamus to correct the error.

Jenny Wagner was injured during a fire that took place at a residential-care facility for disabled adults. The fire was started by another resident at the facility, Esperanza Arzola. Wagner, through her guardian, filed suit against Anthonia Uduma and Four J’s, the operators of the facility. The jury found that: Four J’s was 60% liable for Wagner’s injuries, Uduma was 40% liable, and Arzola’s negligence did not cause Wagner’s injuries. The jury awarded more than $8 million in damages. Uduma and Four J’s filed a motion for new trial, which the trial court granted. The trial court explained that the jury’s failure to find negligence by Arozla—who was the “cause-in-fact” of the fire—was so against the great weight of the evidence as to be clearly wrong and manifestly unjust. Wagner filed a petition for writ of mandamus seeking to have the new trial order overturned.

The court of appeals began its analysis by noting that, in granting a new trial, the trial court must state a reason for doing so. Moreover, that stated reason must be (1) “legally appropriate,” articulating a “well-defined legal standard” or a “defect that probably resulted in an improper verdict,” and (2) “specific enough to indicate that the trial court did not simply parrot a pro forma template, but rather derived the articulated reason from the particular facts and circumstances from the case at hand.” After the court examines the order to see if it meets that two-part test, it may still conduct a merits review and grant mandamus relief if “the record does not support the trial court’s rationale for ordering a new trial.”

Examining the order before it, the court held that the order was sufficiently specific, in that it pointed to evidence that Arzola started the fire in question. However, the court held that the order did not meet the first prong of the test, because the evidence that Arzola was the “cause-in-fact” of the fire did not undermine the jury’s finding. Negligence requires a showing of proximate cause, i.e., cause-in-fact and foreseeability. Cause-in-fact is only one component of that analysis. Accordingly, the new trial order was defective on its face.

Nevertheless, the court went on to conduct a full review of the record and found that the order was also defective because the record did not support the trial court’s conclusion. The court of appeals conditionally granted the writ of mandamus.

Eichner v. Jester, No. 01-16-00956-CV, 2017 WL 4638295 (Tex. App.—Houston [1st Dist.] Oct. 10, 2017, no pet. h.)

In a breach of contract action involving a contract that provides for the payment of interest, the pre- and post-judgment interest rate is 18%, and a judgment ordering the lower 5% rate may be reformed on appeal to state the correct rate.

Kenneth Eichner, P.C. (“Eichner”), a law firm, obtained a default judgment against a former client. The retainer agreement between Eichner and the client stated that interest would accrue on any unpaid amounts at the rate of 18% per annum or the maximum legal rate, whichever is less. The trial court awarded 5% pre- and post-judgment interest on its award. Eichner appealed for the narrow purpose of challenging the interest rate, which he contended should have been 18%.

The court of appeals explained that when a contract provides for interest, the pre- and post-judgment interest rate is not 5%, but rather is the lesser of the rate stated in the contract, or 18%. The court stated that the trial court does not have discretion in awarding prejudgment interest—it may not order more than allowed by law, but it also may not order less. Because the contract provided for the maximum legal rate or 18% as interest, the court held that the award should have been 18%, rather than 5%, which was awarded under the wrong section of the Finance Code.

Rather than remand the case for the correction of the interest rate, the court modified the judgment, inserting “18%” for “5%” throughout the judgment. As modified, the court approved the judgment.

FOURTEENTH COURT OF APPEALS

In re the Williams Cos., 14-17-00701-CV, 2017 WL 5196239 (Tex. App.—Houston [14th Dist.] Nov. 9, 2017, orig. proceeding)

A Rule 11 agreement calling for focused discovery on agreed search terms did not require the parties to produce privileged or irrelevant documents.

North American Polypropylene ULC (“NAPP”) sued The Williams Companies, Inc. and other defendants (“Williams Parties”) asserting claims for fraud and negligent misrepresentation.

The Williams Parties filed a motion to dismiss, arguing that the trial court was an improper forum for litigation. Another defendant corporation filed a special appearance. NAPP served the Williams Parties with a discovery request for documents relating to a particular project. The Williams Parties objected that the discovery requests were overly broad, burdensome, and irrelevant to forum and jurisdictional discovery. NAPP moved to compel discovery. At the hearing on NAPP’s motion to compel, the trial court orally instructed the parties to conduct discovery relating to forum and jurisdictional issues, but the trial court signed an order directing the Williams Parties to produce all of the documents NAPP had requested.

Afterward, the Williams Parties and NAPP entered into a Rule 11 agreement defining the scope of discovery. In the Rule 11 agreement, the parties agreed that their obligations under the order are to undertake “focused discovery” on issues related to jurisdiction and forum. The Rule 11 agreement stated that the parties would agree on search terms.

The Williams Parties conducted a search pursuant to the agreed search terms, but they withheld all documents that they determined were privileged or irrelevant to the forum and jurisdictional issues. NAPP filed a motion to compel arguing that under the Rule 11 agreement, the Williams Parties were required to turn over all of the documents found under the search terms. The trial judge granted NAPP’s motion and ordered the parties to turn over all documents found under the search terms.

The Williams Parties filed a petition for writ of mandamus, arguing that the trial court abused its discretion by incorrectly interpreting the Rule 11 agreement to require production of the entire pool of documents, without regard to relevance.

The court of appeals conditionally granted mandamus relief, concluding that the Rule 11 agreement unambiguously limited discovery to non-privileged documents that are relevant to forum and jurisdictional issues. The court reasoned that the Rule 11 agreement did not state that it supplanted Texas discovery rules, which limit the scope of discovery to information that is relevant or reasonably calculated to lead to the discovery of admissible evidence. The court also noted that nowhere in the Rule 11 agreement did the Williams Parties agree to waive any privileges, including attorney-client privilege.

In re Estate of Nunu, 14-16-00394-CV, 2017 WL 5196145 (Tex. App.—Houston [14th Dist.] Nov. 2, 2017, no pet. h.)

A party does not waive its right to appeal a judgment by failing to request a complete transcript. The appellate court may on its own motion order the trial court to supplement the record.

A brother lacked standing to pursue a claim for fee forfeiture of his sister’s attorney’s fees. Because the brother did not make the attorneys parties to the suit, the trial court lacked jurisdiction to render a declaratory judgment regarding fee forfeiture.

A brother and sister were beneficiaries of their mother’s estate, and the sister was the independent executor. The brother initially asserted claims against the sister relating to the administration of the estate, including an attempt to remove his sister as independent executor. The brother also filed an application to compel distribution of the estate. Ultimately, the brother nonsuited many of his claims, but continued to pursue a few claims including a request for forfeiture of the fees charged by the sister’s attorneys. The trial court denied the brother’s requests for relief, and the brother appealed.

In the court of appeals, the sister argued that the brother waived his right to appeal because he did not request a complete transcript of the trial and all pretrial hearings. In designating the clerk’s record, the brother included only 13 of the 418 entries on the docket sheet. The court rejected this argument, explaining that the Texas Rules of Appellate Procedure no longer place the burden on any party to designate items to be included in the appellate record, but instead permit any party, the trial court, or the appellate court to place them in the record. See Tex. R. App. P. 34.5. The appellate court on its own motion ordered the record supplemented to resolve appellate issues.

The court then turned to the brother’s claim for fee forfeiture. The court explained that Texas Estates Code section 404.0037(a) allows an independent executor who in good faith defends an action for the independent executor’s removal to receive reasonable attorney’s fees out of the estate’s funds. The sister used some of the estate’s funds to pay at least a portion of the attorney’s fees incurred in defending the suit brought by the brother. The brother challenged those fees by arguing that the sister’s attorneys were professionally negligent and breached fiduciary duties that they owed to the sister and the estate. Accordingly, the brother sought a declaratory judgment that the fees should be forfeited.

The court concluded that the brother could not assert his fee forfeiture claim because (1) the brother failed to make the attorneys parties to the action, and (2) the brother lacked standing to pursue claims based on the relationship between the sister and her attorneys. The court explained that the brother’s failure to make the attorneys parties to the claim meant that the attorneys would not be bound by any declaratory judgment because Texas Civil Practice and Remedies Code section 37.006 limits the reach of declaratory judgments to parties to the suit. The court concluded that any declaratory judgment would be advisory and the trial court lacked jurisdiction to render an advisory opinion.

The court ultimately remanded the case for the trial court to address whether the attorney’s fees were reasonable and necessary and for the trial court to compel distribution of the estate in accordance with the will.

Range v. Calvary Christian Fellowship, 530 S.W.3d 818 (Tex. App.—Houston [14th Dist.] 2017, no pet. h.)

Evidence supported only $167,714 of $232,000 awarded in attorney’s fees. The court suggested remittitur rather than remand because there were no outstanding questions for the trial court to resolve.

A commercial landlord rented commercial space to a tenant. The lease provided the tenant various rights of first refusal if the landlord decided to sell the property during the term of the lease. The lease also provided for reasonable attorney’s fees to any person who prevails in a legal proceeding “related to the transaction described in this lease.”

When space became available, the landlord and tenant began negotiations for the tenant to purchase the space, but the parties did not reach a sale agreement. The parties then negotiated for the tenant to lease additional space, but again, the parties were unable to reach an agreement. The tenant sued the landlord, alleging that the parties’ communications constituted an agreement to sell or lease the property. The tenant asserted claims for breach of contract and promissory estoppel, among others. A party whose interests were related to the tenant intervened.

The jury found against the tenant and intervener (collectively, “the plaintiffs”) on the breach of contract claim but in favor of the plaintiffs on the promissory estoppel claim. The jury awarded $6,350 to restore the tenant to its pre-reliance position and $5,000 to restore the intervener to his pre-reliance position. The jury also awarded $232,000 to the plaintiffs for attorneys’ fees in the trial court.

The trial court rendered judgment awarding damages on the promissory estoppel claims, but denying each side’s request for attorney’s fees. Both sides appealed the judgment.

The court of appeals rejected the plaintiffs’ argument that the evidence conclusively proved an enforceable agreement to sell the property and that the landlord breached the lease agreement. The court also concluded that the record contained no evidence of reliance damages, and the plaintiffs therefore could not recover on their promissory estoppel claims.

The court determined that the landlord is entitled to attorney’s fees under the contract provision awarding attorney’s fees to the prevailing party. The court concluded that the landlord is the prevailing party because it obtained a take-nothing judgment on the main issue in the case (whether there was an enforceable agreement for the landlord to sell or lease).

However, the court concluded that the evidence supported only $167,714.97 in attorney’s fees—not the $232,000 awarded by the jury. The court discussed examples of when it is necessary to remand for a hearing on attorney’s fees, but concluded that remand was unnecessary because its judgment did not leave any outstanding questions for the trial court. The court suggested remittitur of the excess attorney’s fees, and held that it would remand if the landlord did not accept the suggestion of remittitur.