Mandamus Relief for Denial of Advancement of Defense Costs

2 minute read

In re DeMattia
Dallas Court of Appeals, No. 05-21-00460-CV (April 12, 2022)
Justices Schenck, Nowell (Opinion, linked here), and Garcia 

Mark DeMattia co-owned Restoration Specialists, LLC and served as its managing member. In 2018, he sold the company. But a few days before the closing, he allegedly copied or deleted certain files. Under its new owners, Restoration later sued DeMattia, alleging breach of fiduciary duty and misappropriation of trade secrets.
DeMattia, in turn, demanded that Restoration indemnify him and advance his defense costs, pursuant to Restoration’s corporate regulations. The Texas Business Organizations Code allows LLCs to indemnify and advance defense costs, through their organizing documents, to both current and former officials and governing persons. After Restoration denied his demand for advancement, DeMattia counterclaimed and moved for summary judgment. Restoration responded that the advancement provision in the company regulations, by its terms, did not apply to former managers like DeMattia. The trial court denied DeMattia’s motion.
DeMattia sought mandamus relief in the Dallas Court of Appeals. Applying contract interpretation principles, the Court held that the advancement provision in Restoration’s corporate regulations did cover former managers like DeMattia, so the trial court erred by denying DeMattia’s motion for summary judgment. The Court also rejected Restoration’s argument that DeMattia’s “unclean hands”—his alleged misappropriation and breach of fiduciary duty—barred advancement as a matter of public policy. The Court explained that every lawsuit involves allegations of wrongdoing, so denying advancement based mere allegations of unclean hands would render the right to advancement a nullity. Finally, the Court held DeMattia did not have an adequate remedy by appeal, a requirement for mandamus relief. The right to advancement can be satisfied only during proceedings in the trial court, so proceeding to trial without advancement, when a party is entitled to advancement, would defeat the right to advancement. Therefore, the Court ordered the trial court to vacate its denial of summary judgment and issue an order granting DeMattia’s motion.

Mandamus Relief for Denial of Advancement of Defense Costs

2 minute read

In re DeMattia

Dallas Court of Appeals, No. 05-21-00460-CV (April 12, 2022)
Justices Schenck, Nowell (Opinion, linked here), and Garcia

Mark DeMattia co-owned Restoration Specialists, LLC and served as its managing member. In 2018, he sold the company. But a few days before the closing, he allegedly copied or deleted certain files. Under its new owners, Restoration later sued DeMattia, alleging breach of fiduciary duty and misappropriation of trade secrets.

DeMattia, in turn, demanded that Restoration indemnify him and advance his defense costs, pursuant to Restoration’s corporate regulations. The Texas Business Organizations Code allows LLCs to indemnify and advance defense costs, through their organizing documents, to both current and former officials and governing persons. After Restoration denied his demand for advancement, DeMattia counterclaimed and moved for summary judgment. Restoration responded that the advancement provision in the company regulations, by its terms, did not apply to former managers like DeMattia. The trial court denied DeMattia’s motion.
DeMattia sought mandamus relief in the Dallas Court of Appeals. Applying contract interpretation principles, the Court held that the advancement provision in Restoration’s corporate regulations did cover former managers like DeMattia, so the trial court erred by denying DeMattia’s motion for summary judgment. The Court also rejected Restoration’s argument that DeMattia’s “unclean hands”—his alleged misappropriation and breach of fiduciary duty—barred advancement as a matter of public policy. The Court explained that every lawsuit involves allegations of wrongdoing, so denying advancement based mere allegations of unclean hands would render the right to advancement a nullity.
Finally, the Court held DeMattia did not have an adequate remedy by appeal, a requirement for mandamus relief. The right to advancement can be satisfied only during proceedings in the trial court, so proceeding to trial without advancement, when a party is entitled to advancement, would defeat the right to advancement. Therefore, the Court ordered the trial court to vacate its denial of summary judgment and issue an order granting DeMattia’s motion.

Beware the TRAP: The Deadline to Appeal after Filing a Post-Judgment Motion

2 minute read

Nur Ali v. Spectra Bank

Dallas Court of Appeals, No. 05-21-01113-CV (April 6, 2022)
Chief Justice Burns, Justice Molberg (Opinion, linked here), and Justice Goldstein
A to Z Wholesale Wine & Spirits, LLC, v. Spectra Bank
Dallas Court of Appeals, No. 05-21-01149-CV (April 6, 2022)
Chief Justice Burns, Justice Molberg, and Justice Goldstein (Opinion, linked here)

In substantially identical opinions in two related cases, the Dallas Court of Appeals made appellants painfully aware of an anomaly in the Texas rules. Under TRAP 26.1, a notice of appeal ordinarily must be filed “30 days after the [trial court] judgment is signed.” But if an appellant timely files a qualifying motion, such as a motion for new trial, TRAP 26.1(a) extends the deadline for the notice of appeal to “90 days after the judgment is signed”—but not to 30 days after the motion is overruled or denied, as one might expect and as is prescribed by the corresponding federal rule governing notices of appeal, FRAP 4(a)(4). This anomaly can prove especially treacherous where, as in these two cases, the post-judgment motion in the trial court is overruled by operation of law.

In both Ali and A to Z the appellant timely filed a motion for new trial. In each case, the motion was overruled by operation of law 75 days after the judgment was signed, pursuant to TRCP 329b(c). Instead of filing a notice of appeal within the next 15 days—that is, within 90 days after the judgment was signed—the appellants waited until 30 days after the motions were overruled, making the notices 15 days late under TRAP 26.1(a). That still gave each appellant a last-gasp, post-deadline opportunity to seek an extension under TRAP 26.3, provided they could show their delay in filing “was not deliberate or intentional, but was the result of inadvertence, mistake, or mischance.” Trying to meet that standard, each appellant argued the delay was justified to allow for “disposition of the entire case below,” i.e., for the trial court’s plenary jurisdiction to expire under TRCP 329b(e). The Court of Appeals didn’t buy it, saying it had “repeatedly held that delay caused by waiting for the trial court to rule on a post-judgment motion or for the trial court’s plenary power to expire is unreasonable as it reflects an awareness of the deadline for filing a notice of appeal but a conscious decision to ignore it.” In other words, a “deliberate [and] intentional” decision, exactly the opposite of “inadvertance, mistake, or mischance.” In each case, therefore, the Court denied the appellant’s motion to extend time to file a notice of appeal and dismissed for want of jurisdiction.

Standing to Challenge Zoning Decisions

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City of Dallas v. Homan

Dallas Court of Appeals, No. 05-20-01111-CV (March 31, 2022)
Justices Carlyle, Smith, and Garcia (Opinion available here)

Katherine Homan filed a declaratory judgment action claiming that an amended zoning ordinance was invalid. The City of Dallas filed a plea to the jurisdiction, arguing Homan had no standing to challenge the ordinance. The trial court disagreed, denied the plea to the jurisdiction, and granted summary judgment in favor of Homan on her declaratory judgment claim that the ordinance is invalid. The City appealed.

The Dallas Court of Appeals agreed Homan had standing to contest the ordinance. Standing to challenge a government action requires a showing that the plaintiff suffered a particularized injury apart from the general public. So, in the context of a zoning decision, a plaintiff has standing “when the zoning affects the plaintiff differently than other members of the general public.” The Court noted that the Texas Legislature has created a mechanism for parties living within 200 feet of a proposed zoning change to receive notice and have the opportunity to protest the change. The Court found this to be a recognition that property owners within 200 feet of a proposed zoning change face a greater risk of injury to the use, enjoyment, and value of their property than the general public. This is a sufficient interest in the process to confer standing.

Monica Latin Adds ‘Best Lawyer Hall of Fame’ to Her Professional Accolades

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Congratulations to Carrington Coleman managing partner Monica Latin for her selection to the inaugural class of D Magazine’s Best Lawyers Hall of Fame based on her Business/Commercial Litigation work.

To be considered for the Hall of Fame, an attorney must have been named to the annual peer-selected Best Lawyers in Dallas listing a minimum of 15 times. Only 50 attorneys were selected to the 2022 class, which will be featured in the March edition of D Magazine.

“Monica has always been a guiding force for her clients and everyone in our firm, and one of the most highly regarded attorneys in Dallas. Now we can add ‘Hall of Famer’ to her many distinctions,” says Executive Committee member Mike Birrer.

Ms. Latin’s practice focuses on a broad range of commercial and employment litigation, including injunctions, trials, arbitrations, and appeals. She is a frequent lecturer on litigation issues and is a longtime leader in the litigation section of the American Bar Association. Her work has led to multiple honors and recognitions, including Chambers USA; Texas Super Lawyers’ Top 100 Attorneys in Texas, Top 50 Women Lawyers, and Top 100 Attorneys in Dallas/Fort Worth; Best Lawyers in America; Dallas Top Women in Legal from the National Diversity Council; and D CEO’s Dallas 500.

Must-Read Opinion Regarding Return-of-Service Affidavits

2 minute read

Mesa SW Management, LP v. BBVA USA

Dallas Court of Appeals, No. 05-20-01091-CV (February 24, 2022)
Justices Myers, Osborne, and Nowell (Opinion available here)

Hanging on to a no-answer default judgment is hard. And it may have just gotten harder. In this restricted appeal, the appellants sought reversal of the default judgments against them, arguing BBVA failed to strictly comply with multiple requirements governing service of process. The Dallas Court of Appeals agreed. In particular, the Court took issue with the Affidavit of Service regarding each appellant. The affidavits provided in relevant part:

The Court held the affidavits failed to comply with Rule 105, which states: “The officer or authorized person to whom process is delivered shall endorse thereon the day and hour on which he received it, and shall execute and return the same without delay.” By its language, the rule requires the same person to whom process is delivered to then execute and return the process without delay. Because the affidavits indicated that Austin Process LLC received the process and Roger Bigony served it, the affidavits did not strictly comply with Rule 105. Failure to show strict compliance with Rule 105 renders attempted service invalid and of no effect. So the default judgments were reversed, and the case was remanded back to the trial court. The Court did not reach appellants’ other complaints about service, including whether an entity such as Austin Process LLC is an “authorized person” to receive the process under the rules.

Post-Petition Developments Derail Mandamus

2 minute read

In re Am Re Syndicate, Inc.

Dallas Court of Appeals, No. 05-21-00358-CV (February 23, 2022)
Justices Myers (Opinion, linked here), Partida-Kipness, and Carlyle

Ordinarily, an appeal or mandamus is decided on the basis of the record before the trial court at the time it issued the order challenged in the appellate court. But not always.

Plaintiff TEXCAZ sued Am Re and its CEO, Barder, alleging breach of contract, fraud (for entering into a contract they didn’t intend to perform), tortious interference, and conspiracy. Am Re and Barder moved to dismiss, because the contract at issue specified that the forum for determining “any controversy arising out of this Agreement, or any breach thereof, shall be in Oklahoma County, Oklahoma.” Am Re and Barder were not parties to that contract—Am Re’s principal, GIC, was—but Am Re and Barder contended TEXCAZ was estopped to deny it was bound by the Oklahoma forum-selection clause by virtue of its claims of breach of the contract containing that provision and fraud regarding the lack of intent to perform that contract. The trial court denied the motion to dismiss. Am Re and Barder sought mandamus to enforce the forum-selection clause.
Several months after Am Re and Barder filed their mandamus petition, TEXCAZ amended its petition in the trial court to drop its claims for breach of contract and fraud. In addition, GIC revoked Am Re’s agency authority. Based on these post-petition developments, the Dallas Court of Appeals concluded “that the controversy does not arise out of the contract and that relators lack capacity and standing to assert the forum- or venue-selection clause.” It therefore denied mandamus.

Court-Ordered Mediation on Appeal

2 minute read

Newsom, Terry & Newsom, LLP v. Henry S. Miller Commercial Co.

Dallas Court of Appeals, No. 05-20-00379-CV (February 22, 2022)
Justice Carlyle (Order, linked here)

In the U.S. Court of Appeals for the Fifth Circuit, it’s not unusual to get a notice that a case has been referred to the Circuit Mediation Program. When the circuit mediator has selected a case for the program, any party may opt out, which concludes mediation proceedings (at least as to that party). When the Court has referred a case to the program, the Court has discretion to grant or deny an opt-out request. Similarly, some Texas courts of appeals, like the First Court in Houston, have appellate mediation programs under which the court can order the parties to mediation.

The resources on the Fifth Court of Appeals website do not mention a formal mediation program. (One appears to have existed under a prior version of the Court’s local rules.) The Court’s current Internal Operating Procedures state that if “both parties notify the Court that they have agreed to a mediator, the Court will refer the case to mediation,” but do not speak to the Court’s ordering mediation without a request from the parties. Nonetheless, the Fifth Court has the power to order the parties to mediate under Chapter 154 of the Civil Practice and Remedies Code. The Court doesn’t frequently order parties to mediate without a request. But it just did so in Newsom, a legal malpractice case argued in November 2021.

Squashed: Probate Exception Does Not Provide Jurisdiction over Roach’s Appeal

2 minute read

John H. Roach. v. Patricia S. Roach

Dallas Court of Appeals, No. 05-21-00754-CV (February 15, 2022)
Justices Molberg, Goldstein (Opinion, linked here), and Smith

Generally, Texas law allows an appeal only from final judgments and from interlocutory orders made appealable by statute. But an exception exists for interlocutory orders in a probate proceeding if an order disposes of all parties and issues for which a particular part of a probate proceeding was brought—sometimes described as allowing “multiple” final judgments in probate. To determine whether the probate exception applies, a court may consider whether the matter disposed of in the interlocutory order could properly be severed.

John Roach filed an ancillary proceeding in a probate case against Patricia Roach and Patricia Roach Tacker alleging breach of fiduciary duty, breach of a family partnership agreement, and negligence. John also sought a declaration that the Patricias, along with the decedent’s attorney, manipulated the decedent into modifying two codicils while the decedent was cognitively impaired. The Patricias filed a motion for summary judgment alleging John’s challenge to the codicils was barred by the two-year statute of limitations applicable to will contests. The trial court granted the motion, and John appealed.
The Court of Appeals applied the severability analysis and held it lacked jurisdiction over the interlocutory order dismissing John’s declaratory judgment action. Among other things, to be severable, a claim cannot be “so interwoven” with the remaining claims “that they involve the same facts and issues.” Because the alleged scheme between the Patricias and the decedent’s attorney at the heart of the declaratory action was also significant to the remaining claims for breach of fiduciary duty, breach of the partnership agreement, and negligence, the Court concluded the declaratory action was not subject to severance and the interlocutory order dismissing the single claim was not appealable.
The Court of Appeals suggested it disagreed with In re Estate of Florence, 307 S.W.3d 887, 889 (Tex. App.—Fort Worth 2010, no pet.), a “somewhat factually similar case.” The Dallas Court explained that Florence only briefly addressed jurisdiction over the interlocutory order in a footnote without providing meaningful analysis.

Don’t Sleep on Mandamus in Dallas

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In re Ruff, No. 05-21-00886-CV (Tex. App.—Dallas February 15, 2022) Justices Molberg, Reichek (Opinion, linked here), and Garcia

In re Perez-Merino, No. 05-22-00082-CV (Tex. App.—Dallas February 14, 2022) Justices Schenck, Reichek (Opinion, linked here), and Carlyle
In re Tekin & Associates, LLC, No. 05-21-00219-CV (Tex. App.—Dallas February 9, 2022) Justices Osborne, Pedersen, III (Opinion, linked here), and Goldstein

There is no hard and fast deadline for filing a mandamus petition. But, although mandamus is not technically “an equitable remedy,” it is guided by principles of equity—including laches. And in the last week alone, the Dallas Court of Appeals has summarily denied three mandamus petitions for what it deemed to be excessive delays in filing. In each opinion the Court said, “[A]n unexplained delay of four months or more can constitute laches and result in denial of mandamus relief,” citing Rivercenter Associates v. Rivera, 858 S.W.2d 366 (Tex. 1993) (orig. proceeding), and decisions from the Dallas Court of Appeals and others to the same effect. With these three short, substantially identical opinions in a single week, the Court would seem to be signaling that, absent a good explanation, a delay of four months in filing for mandamus relief can (will?) trigger denial of a petition irrespective of the merits. Moral of the story: if you’re considering filing a mandamus in the Dallas Court of Appeals, get on with it.