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Things Every Associate Should Know (Because the Partner and Client May Not) Presented by: David Stockel and Kasi Chadwick BoyarMiller 713.850.7766 [email protected] [email protected] HYLA CLE Presentation October 15, 2014

BoyarMiller – Things Every Associate Should Know

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Page 1: BoyarMiller – Things Every Associate Should Know

Things Every Associate Should Know (Because the Partner and Client May Not)

Presented by:

David Stockel and Kasi Chadwick

BoyarMiller

713.850.7766

[email protected]

[email protected]

HYLA CLE Presentation October 15, 2014

Page 2: BoyarMiller – Things Every Associate Should Know

Rule 91a Motions to Dismiss

Rule 202 Depositions Before Suit and Tolling of Statutes

of Limitations

2014 Changes to the Texas Rules of Civil Procedure

(Service of Documents)

Anti-SLAPP Motions to Dismiss (TEX. CIV. PRAC. & REM.

CODE 27.001, et. seq.)

Current State of Shareholder Oppression Law in Texas

Recent Changes Surrounding Spoliation Instructions

and Sanctions

TOPICS TO COVER

Page 3: BoyarMiller – Things Every Associate Should Know

RULE 91a

MOTIONS TO DISMISS

Page 4: BoyarMiller – Things Every Associate Should Know

RULE 91a MOTIONS TO DISMISS

Under Rule 91a, a party may move to dismiss a cause

of action that has “no basis in law or fact”

– A claim has no basis in law if the allegations, taken as

true, together with any reasonable inference, “do not

entitle the claimant to relief”

– A claim has no basis in fact if “no reasonable person

could believe the facts pleaded”

Page 5: BoyarMiller – Things Every Associate Should Know

A Rule 91a movant must file their motion to dismiss within 60

days after the first pleading is filed and at least 21 days

before the hearing on the motion

Each party is entitled to at least 14 days notice of the hearing

The non-movant’s response is due 7 days before the hearing

If the non-movant amends the cause of action at issue at

least 3 days before the hearing, the movant may withdraw or

amend the motion to dismiss

If the non-movant nonsuits the challenged cause of action at

least 3 days before the hearing, the Court may not rule on

the motion

RULE 91a MOTIONS TO DISMISS

Page 6: BoyarMiller – Things Every Associate Should Know

The Court must rule on the motion (grant or deny) within

45 days after the motion is filed

No evidence may be considered – the Court must

decide based solely on the pleadings

The motion may be decided on written submissions

(Court’s discretion)

RULE 91a MOTIONS TO DISMISS

Page 7: BoyarMiller – Things Every Associate Should Know

Rule 91a contains a MANDATORY fee award for the

prevailing party

The prevailing party must be awarded all costs and

reasonable/necessary attorney’s fees incurred

The Court must consider evidence regarding costs in

deciding the amount of the mandatory fee award

RULE 91a MOTIONS TO DISMISS

Page 8: BoyarMiller – Things Every Associate Should Know

Rule 91a does not affect the order of pleadings under

the Texas Rules of Civil Procedure

By filing a Rule 91a Motion to Dismiss, a party does not

waive a special appearance or motion to transfer venue

― By filing a Rule 91a Motion, a party submits to the Court’s

jurisdiction only in proceedings on the Motion

RULE 91a MOTIONS TO DISMISS

Page 9: BoyarMiller – Things Every Associate Should Know

RULE 202 DEPOSITIONS

BEFORE SUIT AND

STATUTES OF LIMITATIONS

Page 10: BoyarMiller – Things Every Associate Should Know

RULE 202 DEPOSITIONS BEFORE SUIT

A person may petition the court for an order authorizing

the taking of a deposition on oral examination or written

questions either:

(1) to perpetuate or obtain the person’s own testimony or that of any

other person for use in an anticipated suit; or

(2) to investigate a potential claim or suit.

Tex. R. Civ. P. 202.1.

Page 11: BoyarMiller – Things Every Associate Should Know

At least one Texas Court has found that the filing of a

Rule 202 Petition can toll statutes of limitations for an

underlying cause of action

– See Lee v. GST Transp. Sys. 334 S.W.3rd 16 (Tex. App—Dallas 2008,

pet. denied)

“Relation-Back” Doctrine (Tex. Civ. Prac. & Rem. Code

§16.068)

– If a filed pleading relates to a cause of action, cross action,

counterclaim, or defense that is not subject to a plea of limitation when

the pleading is filed, a subsequent amendment or supplement to the

pleading that changes the facts or grounds of liability or defense is not

subject to a plea of limitation unless the amendment or supplement is

wholly based on a new, distinct or different transaction or occurrence

RULE 202 and STATUTES OF LIMITATIONS

Page 12: BoyarMiller – Things Every Associate Should Know

Per Lee, the filing of a Rule 202 Petition triggers the

“Relation-Back” Doctrine

– Effectively tolls the statute of limitations while a potential claim is

investigated

Lee suggests that if a cause of action will be lost on

statue of limitations grounds, as long as cause of action

is not “wholly based on a new, distinct, or different

transaction or occurrence,” the filing of a Rule 202

Petition can preserve that claim

RULE 202 & THE STATUTE OF LIMITATIONS

Page 13: BoyarMiller – Things Every Associate Should Know

2014 CHANGES TO THE

TEXAS RULES OF

CIVIL PROCEDURE –

SERVICE OF DOCUMENTS

Page 14: BoyarMiller – Things Every Associate Should Know

SERVICE OF DOCUMENTS

Prior to the changes, when a document was served on

another party via fax, three days were added to the time

for that party to respond

– After the changes, three days are not added if the item is received via

fax (TEX. R. CIV. P. 4 and 21a(c))

Every pleading now requires at least one attorney’s e-

mail address in the signature block on documents that

are electronically filed (TEX. R. CIV. P. 57)

Service of documents on other lawyers is permitted via

e-mail at the e-mail address provided in the signature

block (TEX. R. CIV. P. 21a(a)(2))

– Three days are not added to the response time

Page 15: BoyarMiller – Things Every Associate Should Know

SERVICE OF DOCUMENTS

Items that are not electronically filed may also be served

via commercial delivery service (Fed-Ex, UPS, etc.)

(TEX. R. CIV. P. 21a(a)(2))

Items that are electronically filed are considered timely

when filed any time before midnight in the Court’s time

zone (TEX. R. CIV. P. 21(f)(5)

Electronic filing of documents is now required in courts

where e-filing has been mandated

– Electronic service is considered complete when the item is served on

the serving party’s electronic filing service provider

Page 16: BoyarMiller – Things Every Associate Should Know

ANTI-SLAPP MOTIONS TO

DISMISS THE TEXAS CITIZENS

PARTICIPATION ACT

Page 17: BoyarMiller – Things Every Associate Should Know

MOTIONS TO DISMISS UNDER THE TCPA

Allows a Court to dismiss a frivolously filed lawsuit that

is “based on, relate[d] to, or is in response to a party’s

exercise of the right of free speech, right to petition, or

right of association”

“[E]xercise of the right of free speech,” “right to petition,”

and “right of association” are broadly defined under the

TCPA

Page 18: BoyarMiller – Things Every Associate Should Know

“[E]xercise of the right to free speech”

– “[A] communication made in connection with a matter of public

concern”

“[E]xercise of the right of association”

– “[A] communication between individuals who join together to

collectively express, promote, pursue, or defend common interests”

“[E]xercise of the right to petition”

– “[A] communication in or pertaining to (i) a judicial proceeding…”

• When there are parallel cases going on simultaneously, one case

might be dismissed if the second cause of action is based on a

communication made in the first

MOTIONS TO DISMISS UNDER THE TCPA

Page 19: BoyarMiller – Things Every Associate Should Know

Initial burden on the TCPA movant to show that the

lawsuit was filed in response to the movant’s exercise of

her First Amendment Rights (speech, petition,

association)

Burden then shifts to non-movant to establish by “clear

and specific” evidence a prima facie case for each

essential element of her claim

Forces the non-movant to produce evidence before

discovery has been conducted

MOTIONS TO DISMISS UNDER THE TCPA

Page 20: BoyarMiller – Things Every Associate Should Know

TCPA Movant - Mandatory fee shifting when a TCPA

movant prevails on their TCPA motion

TCPA Non-Movant - Discretionary fee award if the Court

finds the TCPA motion was frivolous when brought or

brought solely for the purpose of delaying the

proceedings

MOTIONS TO DISMISS UNDER THE TCPA

Page 21: BoyarMiller – Things Every Associate Should Know

Immediate right to expedited appeal if TCPA motion to

dismiss is denied

Statute applies to counterclaims that implicate the

movant’s First Amendment rights

MOTIONS TO DISMISS UNDER THE TCPA

Page 22: BoyarMiller – Things Every Associate Should Know

CURRENT STATE

OF SHAREHOLDER

OPPRESSION CLAIMS

Page 23: BoyarMiller – Things Every Associate Should Know

SHAREHOLDER OPPRESSION IN TEXAS

The Supreme Court’s decision in Ritchie v. Rupe

dramatically changed the state of shareholder

oppression claims in Texas

The Court found there is no common law cause of

action for minority shareholder oppression

No judicially mandated, forced buy-out of the minority

shareholder's interest

Page 24: BoyarMiller – Things Every Associate Should Know

Shareholder oppression type behavior:

– failure to allow access to books and records of the corporation;

– improper declaration of dividends;

– termination of employment;

– improper use of corporate funds and diversion of corporate

opportunities; and/or

– manipulation of stock values

SHAREHOLDER OPPRESSION IN TEXAS

Page 25: BoyarMiller – Things Every Associate Should Know

Supreme Court’s existing remedies and protections

– TBOC states that shareholders can initiate proceedings to enforce

close corporation provisions, seek appointment of a provisional

director, or appoint a custodian. See Tex. Bus. Orgs. Code §§21.701-.732, 21.751-.763

– Section 21.563 reduces the burden on shareholders in closely held

corporations to bring a shareholder derivative suit

– Contract claims based on the shareholder agreements

– Common-law actions: (1) an accounting, (2) breach of fiduciary duty,

(3) breach of contract, (4) fraud and constructive fraud, (5) conversion,

(6) fraudulent transfer, (7) conspiracy, (8) unjust enrichment, and (9)

quantum meruit

SHAREHOLDER OPPRESSION IN TEXAS

Page 26: BoyarMiller – Things Every Associate Should Know

Aside from denying the existence of a common law

cause of action for oppression, the Court acknowledged

significant hurdles to establish a shareholder

oppression action

– Business judgment rule

– Elements of intent and actual risk of harm into “oppression”

– Receivership only allowed if no other adequate remedy exists

• Receivership can be expensive and time-consuming; likely not a

favorable outcome for a minority shareholder

SHAREHOLDER OPPRESSION IN TEXAS

Page 27: BoyarMiller – Things Every Associate Should Know

Implications

– Minority shareholders in a close corporation would do well to protect

themselves on the front end with contractual protections built into the

shareholder agreements

• E.g., buyout provisions

SHAREHOLDER OPPRESSION IN TEXAS

Page 28: BoyarMiller – Things Every Associate Should Know

CHANGES IN THE LAW

SURROUNDING SPOLIATION

INSTRUCTIONS AND SANCTIONS

Page 29: BoyarMiller – Things Every Associate Should Know

SPOLIATION INSTRUCTION & SANCTIONS

In Brookshire Brothers v. Aldridge, 2014 Tex. LEXIS 562

(July 3, 2014), Supreme Court changed framework

under which a spoliation instruction may be issued

Aldridge slip and fell in a Brookshire Brothers Store and

store had fall on videotape

Brookshire Brothers retained the requested portion of

video footage of the plaintiff's fall, but allowed additional

footage to be automatically erased

Supreme Court found a spoliation instruction was not

warranted here using the two step analysis it developed

Page 30: BoyarMiller – Things Every Associate Should Know

Two basic frameworks:

Justice Baker’s concurring opinion in Trevino v. Ortega

– A party may be entitled to a remedy for the opposing party’s

spoliation of evidence if:

• the party who destroyed or failed to produce evidence had a

duty to preserve it;

• the party either negligently or intentionally breached that duty

by destroying the evidence or rendering it unavailable; and

• the breach prejudiced the nonspoliating party.

Wal-Mart Stores, Inc. v. Johnson

– Spoliation instructions are permitted if:

• a party deliberately destroys relevant evidence; or

• the party fails to produce relevant evidence or explain its

nonproduction

BEFORE BROOKSHIRE BROTHERS

Page 31: BoyarMiller – Things Every Associate Should Know

Texas Supreme Court holds that spoliation analysis

involves a two step process:

– the trial court must determine, as a question of law, whether a party

spoliated evidence; and

– if spoliation occurred, the court must assess an appropriate remedy.

Evidentiary hearing must be outside jury’s presence

AFTER BROOKSHIRE BROTHERS

Page 32: BoyarMiller – Things Every Associate Should Know

Did the spoliating party have a duty to reasonably preserve

evidence?

– Yes, if the party knew or reasonably should know there is a substantial

chance that a claim will be filed and that evidence in its possession or

control will be material and relevant to the litigation

Did the spoliating party intentionally or negligently breach that duty

by failing to preserve material and relevant evidence?

DID A PARTY SPOLIATE EVIDENCE?

Page 33: BoyarMiller – Things Every Associate Should Know

The remedy must have a direct relationship to the act of spoliation

and may not be excessive

– Award of attorney’s fees or costs

– Exclusion of evidence

– Striking a party’s pleadings

– Dismissing a party’s claims

– Any other remedy the trial court deems appropriate

• Culpability vs. Prejudice

REMEDY FOR SPOLIATION

Page 34: BoyarMiller – Things Every Associate Should Know

A party must intentionally spoliate evidence in order for a spoliation

instruction to constitute an appropriate remedy

Caveat: If the act of spoliation, although merely negligent, so

prejudices the nonspoliating party that it is irreparably deprived of

having any meaningful ability to present a claim or defense, a

spoliation instruction may not be excessive

– E.g., there is no other way for a party to present their case without the

spoliated evidence

Generally, evidence of spoliation is not admissible

WHEN IS A SPOLIATION INSTRUCTION AN

APPROPRIATE REMEDY?

Page 35: BoyarMiller – Things Every Associate Should Know

Questions?

David Stockel and Kasi Chadwick

BoyarMiller

[email protected][email protected]