Hughes Tolling Rule Update

The Texas Supreme Court heard oral arguments (Case No. 18-0486) on September 26, 2019 to consider whether the Hughes tolling rule for litigation malpractice claims should be extended beyond litigation claims to transactional lawyers. See Renda v. Erikson, 547 S.W.3d 901 (Tex. App. – Amarillo 2018, petition granted). Simply put, the Hughes tolling rule holds that claims against an attorney are tolled for limitations purposes when an attorney commits malpractice in the prosecution or defense of a claim that results in litigation until all appeals on the underlying claim are exhausted. See Hughes v. Mahaney & Higgins, 821 S.W.2d 154, 157 (Tex. 1991). This special tolling rule has been very strictly and narrowly construed over in the past twenty plus years.

The underlying facts are that Renda received advice from his lawyers about transferring assets from Renda’s company to corporate creditors even though the United States government had won a judgment against Renda’s company. Under federal law, Renda’s company was required to give the federal government priority in paying the judgment and because it did not, a judgment against Renda in his individual capacity for $12 million was obtained. Renda sued Erikson and the firm, but the issue is whether the statute of limitations had run because the advice came 11 years before the government won the $12 million judgment against Renda.

Erikson’s attorneys did not argue that malpractice did not occur or that bad advice was not given. Erikson argued that because the transactional advice did not relate to prosecuting or defending a claim in litigation that the Hughes tolling rule does not apply. The whole case really centers around what is meant by “in prosecution or defense of a claim” but will have broader implications if the Supreme Court of Texas extends the Hughes tolling rule to transaction advice.

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

 

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Texas Citizens Participation Act (Texas Anti-SLAPP Statute) Changes on September 1, 2019

The Texas Citizens Participation Act (the “TCPA” and also known as the Texas Anti-SLAPP Statute) underwent a lot of changes this legislative session. See Tex. Civ. Prac. & Rem. Code 27.001 et seq. These changes were signed into law in June 2019 and are effective September 1, 2019. The purpose of the TCPA is to protect constitutional rights to free speech, right to petition and right of association. So essentially, think about First Amendment type rights. Before briefly listing some of the changes, let’s get the good news out of the way first.

In Wayne M. Klocke v. Nicholas Matthew Watson, ___ F.3d ____ (5th Cir. August 29, 2019), the United States Court of Appeals for the Fifth Circuit held that the TCPA does not apply to diversity suits in federal court. As a word of caution, this decision was based on the older TCPA, not the revised TCPA.

The Texas Legislature attempted to limit the TCPA this session and did in fact do that to some degree. Because TCPA litigation was truly getting out-of-control, the TCPA was changed to more narrowly define what constitutes a “legal action” to take out procedural actions, dispute resolution proceedings and post-judgment enforcement. Also, the exercise of the right of association section of the TCPA was limited to governmental proceedings or public concerns. Matters of public concern was also limited from a non-exclusive list to a more generalized approach of activities or statements about public officials or essentially famous people or celebrities. The new TCPA also changes the exemptions to the TCPA and specifically includes trade secret issues, family law cases and protective orders, claims under the Deceptive Trade Practices Act, grievance cases, and common law fraud cases. The TCPA also expressly states now that governmental actors, agencies, officials or employees acting in an official capacity do not qualify as someone who can invoke the TCPA.

The Anti-SLAPP motion procedure under the TCPA is now more akin to the procedures used for a motion for a summary judgment and sets out very specific deadlines for notice (21 days) and response (7 days before the hearing). It also allows parties to agree to file the Anti-SLAPP motion beyond the sixty-day limit. Also, the burden of proof is no longer by a preponderance of evidence. The new TCPA simply requires a movant to demonstrate that the legal action is covered by the TCPA.

If you have not taken a course on the TCPA, I recommend that you do so because whether you represent a plaintiff or a defendant, the TCPA is something that should be talked about upfront before the first demand is sent or pleading filed. To make things worse, and at least for the next couple of years, courts are going to have to apply the old TCPA and the revised TCPA depending on when the actions occurred.

Today’s blog does not even begin to scratch the surface. There are a number of good courses out there and most of the larger law firms have papers on their websites that discuss the TCPA. I also recommend a blog written by Sean Lemoine at Wick Phillips entitled the Texas ANTI-SLAPP Blog. It is very helpful. The opinions in this blog are solely the author’s and any comments, suggestions or replies can be sent to john@jrjoneslaw.com.

 

 

 

Federal and Class Action Claims Can Stay in State Court

One of the many tort reform remedies passed through the years was the Class Action Fairness Act of 2005 (“CAFA”). CAFA provides that a class action filed in state court may be removed to federal court by any “defendant” without the consent of all defendants. See 28 U.S.C. 1453(b). So is a defendant in a class action counterclaim a “defendant” under CAFA so that the claims can be removed to federal court? In Home Depot U.S.A., Inc. v. Jackson, 139 S.Ct. 1743, 204 L.Ed. 2d 34 (U.S. 2019), the United States Supreme Court answered that question with a resounding no!

In Home Depot, Citibank brought a collection action in state court against a consumer based on a Home Depot credit card which was used to purchase a water treatment system. The consumer counterclaimed and brought in Home Depot and Caroline Water Systems as third party defendants. Home Depot removed the case to federal court and the consumer filed a motion to remand that was granted. The case was sent back to state court. Home Depot appealed the remand.

The real issues in Home Depot are the wording of two removal statutes, CAFA and the general federal removal statute at 28 U.S.C. 1441(a). Both use the term defendant or the the defendants in defining the types of parties eligible to use the removal statutes but is that only to the original defendant sued by the plaintiff or does it include third party defendants? The Supreme Court ruled that Home Depot was not a “defendant” under CAFA or a “defendant or the defendants” under the general removal statute because it was a third party defendant based on the counterclaim. The general removal statute only allows removal if there is federal jurisdiction for the plaintiff’s original complaint so that the defendants who can take advantage of the general removal statute (and CAFA removal) are limited to the original defendants sued by plaintiffs.

The Home Depot opinion opens the door for many consumer counterclaims to be used as a tool to remain in state court even when raising claims that would normally go to federal court based on a federal question, such as Fair Debt Collection Act claims. Home Depot also allows consumer to bring class action counterclaims to be able to remain in state court and avoid removal. The implications of Home Depot‘s holding is very broad.

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

Be Careful What You Ask for – The Invited Error Doctrine In Texas

In preparing for a hearing recently, I kept coming up on cases citing the “invited error” doctrine. The doctrine of invited error seems pretty straight forward. It is a form of estoppel. The doctrine states that a party cannot complain on appeal that the trial court took a specific action the complaining party requested. See Tittizer v. Union Gas Corp., 171 S.W.3d 857 (Tex. 2005), citing, Ne. Tex. Motor Lines v. Hodges, 138 Tex. 280, 158 S.W.2d 487, 488 (Tex. 1942). However, there are a number of cases that discuss the doctrine and find that it does not apply. So, when does it apply? The short answer is to look carefully at the relief requested and provided by the trial court.

In Tittizer v. Union Gas Corp., Union Gas asked for a uniform date to apply to all royalty owners so that the effective date of pooling was the date of first production. The court granted a uniform date to all royalty owners but one. Because the court make a different ruling as to one royalty owner, the invited doctrine did not apply. See Tittizer v. Union Gas Corp., 171 S.W.3d 857, 862 (Tex. 2005).

In Neasbitt v. Warren, 22 S.W.3d 107 (Tex. App. – Fort Worth 2000, n.w.h.), horse owners sued their veterinarian, Warren, for a botched surgery that caused their horse to be put down. Warren filed a motion for cost bond and production of expert report as required by the Texas Medical Liability and Insurance Improvement Act (i.e. article 4590i) and Neasbitt did not comply. Warren filed a no-evidence motion for summary judgment and in response Neasbitt stated that suit was filed under Texas Medical Liability and Insurance Improvement Act and they therefore had 180 days to file an expert report. The court issued a notice of intent to dismiss and Neasbitt filed a response stating that Texas Medical Liability and Insurance Improvement Act did not apply and also, alternatively, attached a copy of the expert report but did not file a cost bond. The trial court dismissed the case for the failure to file a cost bond and Neasbitt appealed arguing that the Texas Medical Liability and Insurance Improvement Act did not apply. The trial court never ruled on the motion for summary judgment or the response filed by Neasbitt.

The Court of Appeals reversed and held that the Texas Medical Liability and Insurance Improvement Act did not apply to veterinarians and also that Nesbitt was not prohibited on appeal for raising that issue even though Neasbitt’s response to Warren’s motion for summary judgment stated that the Texas Medical Liability and Insurance Act did apply. Because the trial court never ruled on Warren’s motion for summary judgment or Neasbitt’s response, it was Warren, not Neasbitt, who brought up the issue as the basis for the motion to dismiss for want of prosecution. Therefore, the invited doctrine did not apply to Neasbitt.

While seemingly straightforward, the invited error doctrine does require a comparison, among other things, of the relief requested and granted and the party moving for and receiving the requested relief. The opinions in this blog are solely the author’s and any comments, suggestions or replies can be sent to john@jrjoneslaw.com.

Pre-Suit Contractual Waivers of Statute of Limitations in Texas

It has long been the law in Texas that an agreement to waive or not plead the statute of limitations was void as against public policy. See Simpson v. McDonald, 179 S.W.2d 239 (Tex. 1944). Texas courts that have interpreted Simpson have allowed contractual waivers of the statute of limitations if the waiver is “specific and for a reasonable time.” See, e.g., Am. Alloy Steel, Inc. v. Armoco, Inc., 777 S.W.2d 173, 177 (Tex. App. – Houston [14th Dist.] 1989, no writ). Sounds clear cut doesn’t it? However, the Supreme Court of Texas in Godoy v. Wells Fargo Bank, N.A., 2019 Tex. LEXIS 443 (May 10, 2019) muddied the waters up and a more detailed analysis is now required.

Godoy guaranteed a loan and Wachovia nka Wells Fargo foreclosed on the loan secured by real property in Texas. The guaranty contained a section entitled “Guarantor’s Waivers” that waived any and all rights or defenses by reason of (A) any “one action” or “anti-deficiency” law” that would prevent Wells Fargo from bringing a deficiency suit. The Guaranty also had a savings clause that stated that if any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or public policy. Godoy v. Wells Fargo Bank, N.A., 2019 Tex. LEXIS 443, *2 (May 10, 2019). The guaranty did not contain any language that set out a specific and for a reasonable time on the statute of limitations waiver.

Wells Fargo filed suit three and one-half years after the foreclosure and Godoy replied that Wells Fargo’s claim was barred by the Texas Property Code Section 51.003 two-year statute of limitations to bring an action for a deficiency. Godoy moved for summary judgment based on the two-year statute of limitations and Wells Fargo filed a partial motion for summary judgment claiming that Godoy waived section 51.003’s two-year statute of limitation when he signed the guaranty agreement. The trial court denied Godoy’s motion and granted Wells Fargo’s motion who then moved for and received a final summary judgment on its deficiency claim. The court of appeals affirmed.

The Supreme Court of Texas reaffirmed the principles of Simpson v. McDonald as modified by the various courts to include that a pre-suit contractual waiver of the statute of limitations may be effective if it is specific and for a reasonable time.Godoy v. Wells Fargo Bank, N.A., 2019 Tex. LEXIS 443, *12-13 (May 10, 2019).  The Supreme Court then clarified that Simpson was not an absolute bar on contractual waivers of statutes of limitations. Citing to Am. Alloy Steel, Inc. v. Armoco, Inc., the Texas Supreme Court held that blanket pre-dispute waivers of all statutes of limitations are unenforceable, but waivers of a particular limitations period for a defined and reasonable amount of time may be enforced. Godoy v. Wells Fargo Bank, N.A., 2019 Tex. LEXIS 443, *13 (May 10, 2019). But how to get there when the guaranty did not contain any language specifying a defined and reasonable amount of time?

To overcome that hurdle, the Supreme Court of Texas waved its magic wand and held that the two-year anti-deficiency statute was waived by Section (A) of the guaranty but it was enforceable because the law (but not the contract or guaranty) provided a reasonable four-year statute of limitations that applied to suits on a debt. When read with the savings clause of the guaranty, the Supreme Court of Texas held that Section (A) was effectively an an agreement to move the two-year anti-deficiency statute of limitations to the four-year statute of limitations period to collect a debt and affirmed the Court of Appeals on that sole point. Godoy v. Wells Fargo Bank, N.A., 2019 Tex. LEXIS 443, *1-19 (May 10, 2019). It was a key fact that the lawsuit was filed before the four-year debt statute of limitations period had expired.

Creative lawyers are going to have a field day with this opinion and trial courts (unfortunately) will be grappling with this decision for the foreseeable future. Despite the lack of any language in the guaranty contract providing a specific and reasonable time on the pre-suit waiver of the statute of limitations, contracts can now be opened up based on a savings clause and any law on the books to backstop the claim. There is also no reason why this analysis could not be applied to other contractual provisions that contain the same apparent lack of clarity as long as there is a good savings clause. There was really no reason at all for the Supreme Court of Texas to reach this result as the legislature had made it pretty clear that deficiency claims had to be brought within two-years.

The opinions in this blog are solely the author’s and any comments, replies or suggestions can be sent to john@jrjoneslaw.com. A late Happy Mother’s Day to all the mothers.

 

Limitations on Civil Conspiracy in Texas is Not What You Thought?

The Supreme Court in Texas issued an opinion on April 5, 2019 that effectively changes the statute of limitations analysis on civil conspiracy claims in Texas. See Agar Corporation, Inc. v. Electro Circuits International LLC, 2019 Tex. LEXIS 351 (April 5, 2019). The Supreme Court of Texas also clarified its position on whether a civil conspiracy claim is an independent tort or a theory of vicarious liability and held that it was  theory of vicarious liability and a derivative claim that depends on some underlying tort or illegal act.  Because a civil conspiracy requires an underlying tort, most civil conspiracy claims should accrue when the underlying tort claim causes harm to the plaintiff, that is, the same time as the tort claim against the primary wrongdoer. Further, limitations run separately for each such tortious act.

Agar was a summary judgment appeal. The trial court granted summary judgment on various tort claims based on the general two-year statute of limitations generally applicable to torts at section 16.003 of the Texas Civil Practice and Remedies Code. Included in the grant of summary judgment were various civil conspiracy claims. The court of appeals affirmed the trial court’s decision and the issue before the Supreme Court of Texas was what statute of limitations applies to a claim of civil conspiracy. Texas. See Agar Corporation, Inc. v. Electro Circuits International LLC, 2019 Tex. LEXIS 351, *1.

The Supreme Court of Texas held that it did not agree that section 16.003 of the Texas Civil Practice and Remedies Code universally applies to claims of civil conspiracy. Because civil conspiracy is a derivative tort that “depends on participation in some underlying tort,” the Supreme Court held that the applicable statute of limitations on a civil conspiracy claim must coincide with that of the underlying tort for which the plaintiff seeks to hold at least one of the named defendants liable.” See Agar Corporation, Inc. v. Electro Circuits International LLC, 2019 Tex. LEXIS 351, *1-2, citing, Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996). Because one of the claims in Agar may not be barred by the applicable statute of limitations, the decision of the court of appeals was reversed in part and affirmed in part.

The Agar opinion has a lot of meat on it and if you are considering adding a civil conspiracy claim to your pleadings, it is a must read as it also sets out the elements of civil conspiracy and discusses what other jurisdictions have decided and why the court reached the opinion it did. The Supreme Court also goes through an analysis and finds that while civil conspiracy is a cause of action, it is not an independent tort.See Agar Corporation, Inc. v. Electro Circuits International LLC, 2019 Tex. LEXIS 351, *9. The court finally goes to great pains to point out that damages come from the underlying wrongful act, not the conspiracy itself. See Agar Corporation, Inc. v. Electro Circuits International LLC, 2019 Tex. LEXIS 351, *9, citing, Tilton v. Marshall, 925 S.W.2d 672, 680-681 (Tex. 1996).The opinions in this blog are solely the author’s and any comments, suggestions, or replies can be sent to john@jrjoneslaw.com.

 

 

Nonjudicial Foreclosures and the Fair Debt Collection Practices Act

The United States Supreme Court’s unanimous opinion in Obduskey v. McCarthy & Holthus LLP, Case No. 17-1307, 2019 U.S. LEXIS 2090, ___U.S. ___ (March 20, 2019) held that a business engaged in no more than a nonjudicial foreclosure proceeding is not a “debt collector” under the Fair Debt Collection Practices Act (“FDCPA”), except for the limited purposes of Section 1692f(6) dealing with the enforcement of security interests.  The opinion also continues the shift into a more mechanical and textual analysis and approach used by the current United States Supreme Court.

The facts of this case are straight forward. Obduskey defaulted on his mortgage and in 2014, McCarthy & Holthus, on behalf of its client, sent a notice initiating a nonjudicial foreclosure. The notice complied with the mandatory notice under Colorado law and once received by Obduckey, Obduskey responded demanding validation of the debt as allowed under the FDCPA. McCarthy & Holthus did not respond and simply initiated a new nonjudicial foreclosure in 2015. Obduskey then sued McCarthy & Holthus under the FDCPA. The issue before the courts was very limited.

As restated by Justice Breyer, the question before the court was “Does it mean that one principally involved in the enforcement of security interests is not a debt collector (except for the purposes of section 1692f(6))? If that is true, then numerous other provisions of the FDCPA do not apply or does it simply reinforce the fact that those principally involved in enforcement of security interests are also subject to the other provisions of the FDCPA? Strictly reading the statute, Justice Breyer, writing for an unanimous court, held that the last sentence does (with its section 1692f(6) exception) place those whose principal purpose is the enforcement of security interests outside the scope of the primary debt collector definition at section 1692a(6), where the business is engaged in no more that a nonjudicial foreclosing like the one before the court.

This is an important opinion in Texas as Texas is one of the states that allows for nonjudicial foreclosures on real property loans. However, it can also be a trap for the unwary as it is an extremely narrow decision and only deals with situations when a nonjudicial foreclosure action simply meets the minimum requirements of state law and does not do more. Additional actions by McCarthy & Holthus could have easily tipped the scale to where the Supreme Court could have gone the other way on this decision and found that other sections of the FDCPA applied to any additional actions.

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