Litigation Over Commissions Under the Texas Real Estate Licensing Act

There has been significant litigation in the last few years over individuals trying to circumvent the requirements set out in the Texas Real Estate Licensing Act to recover a commission for the sale of real property in Texas. Section 1101.806(c) of the Texas Real Estate Licensing Act entitled “Liability for Payment of Compensation or Commission” is the statute of frauds provision of the Real Estate Licensing Act (hereinafter “RELA”).

Strict compliance is required with RELA and an agreement to pay a real estate commission must be in writing or it is not enforceable. Lathem v. Kruse, 290 S.W.3d 922 (Tex. App.– Dallas 2009, no pet.); see also Expo Holdings, LP v. Jacobson, 2010 Tex. App. LEXIS 6851 (Tex. App. – [14th Dist.] 2010, n.w.h.). RELA also limits the persons who can receive a commission and a person must be either a licensed real estate agent or an attorney to receive a commission for the sale of real estate in Texas. See Tex. Occ. Code 1101.806 (b).  Therefore, in order to recover for a commission, the agreement to do so must be in writing and paid to either a licensed real estate agent or attorney. Despite the plain language of the statute, creative attempts continue to pop-up around Texas to try and circumvent the requirements of RELA.

Texas courts have strictly construed RELA because of the policy to protect the public and have insisted on compliance with the RELA regardless of the types of claims made. Texas courts also look to the substance, not the form of the contract at issue to determine the applicability of the RELA. McKellar v. Marsac, 778 S.W.2d 573, 575 (Tex. App.–Houston [1st Dist.] 1989, no writ) (holding that when RELA applies and its requirements are not met, courts have denied recovery when fraud, conspiracy, deceit, quantum meruit and breach of contract have been plead); See Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631,634 (Tex. 1997) (rejecting tortious interference claim by broker against lessors because claim wholly derivative of unenforceable oral commission agreement and only translates into loss of expectancy of receiving a commission at the end of lease negotiations). Even when someone introduces a party and helps locate property and negotiate the sales transaction, they are not entitled to a commission unless they are a person entitled to recover a commission under RELA and the fee agreement is in writing and signed by the parties. See Expo Holdings, LP v. Jacobson, 2010 Tex. App. LEXIS 6851 (Tex. App. – [14th Dist.] 2010, n.w.h.).

The Texas Real Estate Licensing Act is designed to protect the public and rightfully, in my opinion, requires that any fee agreement be in writing and can only be paid to a licensed real estate agent or an attorney. The most valuable asset people own is their home and protections are necessary. The opinions in this blog are solely the author’s and any comments, suggestions and replies can be sent to john@jrjoneslaw.com. Happy Halloween!

 

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The Texas Citizens Participation Act – To SLAPP or Anti-SLAPP That is the Question?

This week’s political turmoil in Washington and the heated discussion it has caused, makes a discussion of the Texas Citizens Participation Act (“TCPA”), as set out in Chapter 27 of the Texas Civil Practice and Remedies Code, an appropriate topic. Before giving a general overview to wet your appetite, I recommend that you get a copy of the State Bar Litigation Section Report The Advocate, Volume 84, Fall 2018 as an excellent primer on the TCPA, its exemptions, and procedural hurdles. It is an excellent resource, a great place to start and the articles are exceptionally well-written.

For many years prior to the passage of the TCPA in 2011, frequent lawsuits were being filed against political participants by parties who had opposing views in order to silence the individual or group as opposed to genuinely seeking to recover for injuries caused by tying up the opposing party or group in expensive and time-consuming litigation. This litigation was called “strategic lawsuits against public participation” or SLAPP.

The TCPA, also known as the Anti-SLAPP statute, was enacted to protect the constitutional rights of persons to speak freely, associate freely and to petition and otherwise engage in government activities to the maximum extent of the law and to protect the rights of a person to file meritorious lawsuits for a demonstrable injury. It is also significant that the TCPA mandate is that it be construed liberally to effectuate its purpose and intent fully and it is very broadly construed. The TCPA has a built in Motion to Dismiss process to dismiss a SLAPP legal action filed against a person that requires the motion to dismiss to be filed no later than 60th day after the date of service of the legal action and hearing must be set the 60th day after service of the motion to dismiss. While there can be an short extension for hearing the motion to dismiss upon a showing of a crowded docket or good cause, the motion and hearing must still occur within 120 days after service of the motion to dismiss.

The TCPA also requires the Court to dismiss a legal action against the moving party that, under a preponderance of the evidence standard, is based on, relates to or is in response to a person’s right of free speech, right to petition the government, or the right of association. If the motion to dismiss is granted, the court must award court costs and reasonable attorneys’ fees relating to defending the legal action and may also award other expenses, as justice and equity may require. Tex. Civ. Prac. & Rem. Code 27.009(a)(1). There is a flip side of the coin when filing a motion to dismiss. If the court finds that a motion to dismiss is frivolous or solely intended to delay, the court may award court costs and reasonable fees to the other side.Sullivan v. Abraham, 488 S.W.3d 294, 299 (Tex. 2016).

Our country is blessed that we are able to actively participate in our government. While things that are said may cause your blood to stir and general gnashing of your teeth, the right to participate in or make petitions to our government and for the freedom to speak and associate are amazing freedoms not enjoyed by everyone in the world. The Texas Citizens Participation Act along with the United States and Texas Constitutions help define the limits of those rights and a way to protect them when someone is trying to unlawfully silence your public participation. The opinions in this blog are solely the author’s and any comments, suggestions or replies are welcome at john@jrjoneslaw.com.

 

 

 

Texas Supreme Court Updates on Sham Affidavit Doctrine, Collateral Source and One Satisfaction Rules

The Supreme Court of Texas has been busy this year. In opinions issued earlier this year, the Supreme Court of Texas adopted the sham affidavit doctrine which was discussed in the October 31, 2017 blog post and made an important ruling clarifying the one satisfaction and collateral source rules discussed in the August 31, 2015 blog post. First the sham affidavit case.

In Lujan v. Navistar, Inc., ___ S.W.3d___, 2018 Tex. LEXIS 347 (Tex. April 27, 2018), the Supreme of Texas agreed with and adopted the majority view that a trial court’s authority to distinguish between genuine and non-genuine fact issues includes the authority to apply the sham affidavit doctrine under Texas Rule of Civil Procedure 166a (i.e. summary judgment rule) when the court is confronted with evidence that appears to be a sham designed to avoid summary judgment. In adopting the sham affidavit rule, the Supreme Court of Texas set out the elements of when the sham affidavit rule can apply as follows: When: (1) the affidavit is executed after the deposition; and (2) there is a clear contradiction; on (3) a material point;  and (4) without explanation. Further, the court held that a trial court does not abuse its discretion by concluding that no genuine issue of fact exists under such circumstances, but did state that it is a case-specific inquiry not easily amenable to a rote application of the multi-part test. The examination of the nature and extent of the differences between the prior testimony and affidavit testimony asserted must be done to determine what effect the conflict should be given on a particular case. Whether you are prosecuting or defending a summary judgment after depositions, you should read Lujan in its entirety.

In Sky View at Las Palmas v. Mendez, ___S.W.3d ___. 2018 Tex. LEXIS 515 (Tex. June 1, 2018) , the Supreme Court held that the one-satisfaction and collateral source rules allow for credit for settlements paid by the defendant’s insurer.  This opinion goes into great detail about the burden of proof each party has under the one satisfaction rule framework and how each party can meet that burden. This case also discusses the collateral source rule that generally bars a wrongdoer from offsetting his liability with insurance proceeds independently procured by the injured party. As a result, if payment falls within the collateral source rule, its prohibition of more than one recovery for the same loss is not applicable. Here, The plaintiff tried to rely on the collateral source rule but the Supreme Court held that would have led to a double recovery because the defendant procured the insurance to protect the injured party and therefore, the collateral source rule was not applicable. Sky View, like Lujan above, is a must read on these issues.

The opinions in this blog are solely the author’s and any comments, suggestions or replies are welcome at john@jrjoneslaw.com.

Reasonable Certainty and Lost (Anticipated) Profits in Texas

Proving lost profits in a case is always difficult and the proof required must be more than a bare assertion that a contract was lost because of the opposing party’s behavior. Lost profits in Texas can only be recovered when both the fact and amount of damages are proved with reasonable certainty. The good news is that lost profits can be recovered in both tort and contract cases in Texas as long as there is no double recovery. See, e.g. Waite Hill Servs., Inc. v. World Class Metal Works, Inc., 959 S.W.2d 182, 184-185 (Tex, 1998).

The general rule in Texas is that recovery of lost profits as damages will be allowed where it is shown that a loss of profits is the natural and probable consequence of the act or omissions complained and and the amount is shown with sufficient certainty. See Horizon Healthcare Corp. v. Acadia Healthcare Co., 520 S.W.3d 848 (Tex. 2017). The phrase “sufficient certainty” is the problem and the Supreme Court in Horizon Healthcare focuses on the specificity required to show reasonable certainty in a case where a party seeks lost anticipated profits.

The issue before the Supreme Court in Horizon Healthcare was whether the evidence was sufficient to uphold the award of future lost profits in a case that was based on an assumption that the plaintiff would have won the underlying contract had defendants not committed the underlying wrongdoing. According to the Supreme Court of Texas, anticipated profits cannot be recovered where they are dependent upon uncertain and changing conditions, such as market fluctuations, or the chances of business. Horizon Healthcare Corp. v. Acadia Healthcare Co., 520 S.W.3d 848 (Tex. 2017), citing, Tex. Instruments, Inc. v. Teltron Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994). The Supreme Court also held that “the law is wisely skeptical of claims of lost profits from untested ventures or in unpredictable circumstances, which in reality are little more than wishful thinking.” Healthcare Corp. v. Acadia Healthcare Co., 520 S.W.3d 848, 860 (Tex. 2017), citing, Phillips v. Carlton Energy Group, LLC, 475 S.W.3d 265, 280 (Tex. 2015).

When the evidence supporting a claim for lost anticipated profits is largely speculative or a mere hope for success, the Supreme Court has consistently held that the reasonable certainty standard has not been met.Horizon Healthcare Corp. v. Acadia Healthcare Co., 520 S.W.3d 848 (Tex. 2017), citing, Tex. Instruments, Inc. v. Teltron Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994). A business owner’s testimony, by itself, is generally insufficient unless he can specify which specific contracts were lost, how many contracts were lost, how much profit they would have received from the contracts and evidence that the contracting party would have entered into the contract with them as opposed to some other party but for the defendants misconduct. Healthcare Corp. v. Acadia Healthcare Co., 520 S.W.3d 848, 861 (Tex. 2017), citing, Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992).

Texas courts will grant an award of damages for lost profits in Texas, but the evidence must be detailed, reasonably certain and very specific. Early on in the discovery phase, a party really needs to focus on what is going to be needed to obtain the evidence to show the loss of profits with certainty. Counting on the business’ owner’s testimony alone to do the trick will not be enough. The opinions in this blog are solely the author’s and any comments, suggestions or replies should be sent to john@jrjoneslaw.com.

 

Supreme Court Holds Out-of-State Sellers Can be Held Responsible for Sales Tax Without Physical Presence in State

Today’s blog is going to deviate from normal trial issues and discuss yesterday’s decision by the United States Supreme Court in South Dakota v. Wayfair, Inc., 585 U.S. ____(2018) (“Wayfair”). Almost everyone now buys goods or services through the internet. So the Wayfair decision will affect everyone who shops on the internet at such websites as Wayfair, Ebay, and Amazon and will allow States to increase annual revenue by billions of dollars that can then be used for local and state-wide projects and funding.

Before Wayfair, the United States Supreme Court held, in Quill Corp. v. North Dakota, 504 U.S. 298 (1992), that a seller had to have a physical presence in the state to have liability to collect and remit sales tax. Not surprisingly many states were unhappy with this holding because it meant that they were going to be deprived of billions of dollars in sales tax revenue that could be used to fatten up state coffers. Also, brick-and-mortar retailers were unhappy with the Quill opinion because it gave online retailers without a physical presence a cost advantage over the brick-and-mortar businesses.  Recognizing that Quill was hopelessly out-of-date in the e-commerce world we live in where purchases are made online or through a mobile device, the Supreme Court decided to reconsider Quill.

In overruling Quill and holding that it was unsound and incorrect, the United States Supreme Court, relying on the Commerce Clause, held that state taxes will be found to not violate the Commerce Clause so long as they (1) apply to an activity with a substantial nexus with the taxing state, (2) are fairly apportioned, (3) do not discriminate against interstate commerce, and (4) are fairly related to the services the state provides. The Supreme Court also stated that Quill was flawed and incorrect and “further removed from economic reality and results in significant revenue losses to the States.” South Dakota v. Wayfair, Inc., 585 U.S. ____(2018). According to the Supreme Court, Quill’s holding also distorted the market and imposed an arbitrary, formalistic distinction that cut against the Commerce Clause because it imposed different results on economically identical actors for arbitrary reasons. Finally, the Supreme Court acknowledged that modern e-commerce does not align with a test that relies on a physical presence and ignores substantial virtual connections to the State. South Dakota v. Wayfair, Inc., 585 U.S. ____ (2018).

Wayfair is a landmark decision and I wonder if it is the first step to significant changes in state and national legal issues (i.e. scope of personal jurisdiction for one) as a result of e-commerce and a person’s virtual presence in a state without a physical presence. The opinions in this blog are solely the author’s and any comments, replies, or suggestions can be sent to john@jrjoneslaw.com.

The Continuing Saga to Reduce Forum-Shopping in Patent Litigation

Texas lawyers and their clients for many years have been dragged, kicking and screaming, to the United States District Court for the Eastern District of Texas for patent litigation. While it rarely made sense for the litigation to be in East Texas, once the case was filed there, getting the case transferred to a proper venue was practically impossible. You only had to drive through Marshall, Texas to see the cottage legal services industry that sprang up from the ground to see what patent litigation had done to the community.  The real problem was that Plaintiff’s in patent litigation would come up with nearly any excuse or connection to make sure the patent litigation was filed in East Texas.

That all changed with the United States Supreme Court’s decision in TC Heartland LLC v. Kraft Foods Group Brands, LLC., 137 S. Ct. 1514, 1521, 197 L.Ed. 2d 816 (2017). TC Heartland held that under 28 U.S.C. 1400(b) a domestic defendant corporation resides only in its state of incorporation. A recent case clarified TC Heartland and reduced forum-shopping in patent litigation a step further when it was faced with the issue of whether a domestic corporation incorporated in a state having multiple judicial districts “resides” for the patent-specific venue statute in each and every district in that state under 28 U.S.C. 1400(b). In re BigCommerce, Inc., 2018 U.S. App. LEXIS 12591, *7 (Fed. Cir. May 15, 2018). Holding that a corporation does not reside in each and every judicial district of the state, the Federal Circuit looked at the plain language of Section 1400(b).

Section 1400(b) states that that “Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” According to the Court, a plain reading of “the judicial district” speaks to venue in only one particular judicial district in the state. In re BigCommerce, Inc., 2018 U.S. App. LEXIS 12591, *7 (Fed. Cir. May 15, 2018), citing, NLRB v. Canning, 134 S.Ct. 2550, 2561, 189 L.Ed2d 538 (2014) and Rumsfeld v. Padilla, 542 U.S. 426, 434, 124 S.Ct. 2711, 159 L.Ed.2d 513 (2004) (holding the consistent use of the definite article indicates that there is generally one one proper respondent.”); see also Hertz Corp. v. Friend, 559 U.S. 77, 93, 130 S.Ct. 1181, 175 L.Ed.2d 1029 (2010) (holding that because “place” in the phrase “principal place of business” in 28 U.S.C. 1332 is singular, it must be a single place). The court also went on and held that it was evident from the general venue rules that if Congress wanted venue to potentially lie in multiple districts, it said so clearly.  In re BigCommerce, Inc., 2018 U.S. App. LEXIS 12591, *8 (Fed. Cir. May 15, 2018).

While the Federal Circuit acknowledged that it is sometimes difficult to determine where a principal place of business is located in a state, it held that “a universally recognized foundational requirement of corporate formation” is the designation of a registered office that will serve as a physical presence within the state for a newly formed corporation. In the absence of an actual principal place of business, the public is entitled to rely on the designation of the registered office as the place where the corporation resides.

As a result, the Federal Circuit held that, under 28 U.S.C 1400(b), in a state with multiple judicial districts, a corporate defendant shall be considered to “reside” only in a single judicial district within that state where it maintains its “principal place of business. or, failing that, the judicial district in which its registered office is located.  In re BigCommerce, Inc., 2018 U.S. App. LEXIS 12591, *16 (Fed. Cir. May 15, 2018). Besides the impact on patent litigation and venue, the In re BigCommerce, Inc. case is a continuing trend to enforce venue statutes strictly and to reduce forum shopping even more than courts and legislatures have already done so.

The opinions in this blog are solely the author’s and any comments, replies or suggestions can be sent to john@jrjoneslaw.com.

Tie-In Statutes, Limitations and the Deceptive Trade Practice Act

One of the issues that arises in litigation involving the Texas Deceptive Trade Practices-Consumer Protection Act (“DTPA”) is what is the statute of limitations for other statutory claims that allow a violation of a particular statute (for example, see Texas Finance Code Sec. 392.404(a)) to be a deceptive trade practice and allowable as a DTPA claim also. These types of claims are tie-in claims that allow a plaintiff to use the DTPA and its lower causation standard to file a lawsuit and recover damages. One of the questions that arise initially is whether the two-year statute of limitations of the DTPA applies or does another statute of limitations apply based on the underlying nature of the other statutory claim? Fortunately, the United States District Court in Vine v. PLS Fin. Servs., 2018 U.S. Dist, LEXIS 7019 (W.D. Tex. 2018) provides a good framework for this issue and an excellent analysis of what it means to be a “consumer” under the DTPA.

The operative facts in Vine occurred in 2012 and the lawsuit was filed in 2015. The loan brokers were given post-dated checks and allegedly assured the Plaintiffs that the checks would not be cashed and took possession of the checks solely to verify financial information. Needless to say, the loan brokers cashed the checks, the checks bounced and then the loan brokers turned the Plaintiffs over to the District Attorney’s office for prosecution. Not surprising, Plaintiffs filed a lawsuit alleging violations of the DTPA, fraud, violations of Sections 392 and 393 of the Texas Finance Code and malicious prosecution. Defendant Loan Brokers filed a motion for summary judgment on the claims brought by borrowers who defaulted on the payday loans alleging among other things that the claims were barred by the the two-year statute of limitations under the DTPA.

The District Court granted summary judgment on the specific statutory DTPA claims because they were time-barred. However, the claims under the Texas Finance Code that tied-in to the DTPA required a different analysis. As a general rule, when a statutory claim arises under a Texas statute and then the express language of that statute, such as the Finance Code, states that a violation of the Texas Finance Code is also a violation of the DTPA, a party must analyze whether the two-year DTPA limitation period applies. In Vine, the Court looked at the claims under Texas Finance Code Section 392 and determined that the two-year statute of limitations applied because there was no limitations period specifically stated in Texas Finance Code Section 392.The Court, following precedent from other courts, held that when statutes that do not have a specific limitations are tied into the DTPA, the two-year limitations period is the applicable default limitations. Vine v. PLS Fin. Servs., 2018 U.S. Dist, LEXIS 7019 *25-26 (W.D. Tex. 2018).

However, the claims under Texas Finance Code Section 393 were not barred because even though they were plead as a tie-in to the DTPA, Texas Finance Code Section 393 had its own specific four-year limitations period. When a specific statute with its own limitations is enacted, it controls over the general statute of limitations on the same subject. Vine v. PLS Fin. Servs., 2018 U.S. Dist, LEXIS 7019 *26-27  (W.D. Tex. 2018). As a result, Plaintiff’s claims under Texas Finance Code Section 393 were not barred because the limitations period in Texas Finance Code Section 393 was passed legislatively after the enactment of the DTPA. Therefore, Courts must assume that “Congress passed each subsequent law with full knowledge of the existing legal landscape.” Vine v. PLS Fin. Servs., 2018 U.S. Dist, LEXIS 7019 (W.D. Tex. 2018), citing, In re Nw. Airlines Corp., 483 F.3d 160, 169 (2d Cir. 2007) (citing Miles v. Apex Marine Corp., 498 U.S. 19, 32, 111 S. Ct. 317, 112 L. Ed. 2d 275 (1990)). Accordingly, the Court denied the motion for summary judgment on the Texas Finance Code Section 393 claim based on alleged limitations.

Tie-in claims under the DTPA are not utilized as much as they should be in my opinion. However, when they are used, both parties should look at the specific limitations period applicable to other statutory claims brought through the DTPA. As a side note, the Vine case should also be reviewed for Judge Martinez’ excellent analysis of incidental services and standing under the DTPA to determine if a person is a consumer and can bring a DTPA claim. The opinions in this blog are solely the author’s and all comments, replies or suggestions can be sent to john@jrjoneslaw.com.