On Friday, the Third Court of Appeals issued an opinion in an accelerated appeal of a trial court’s denial of a special appearance, finding that the appellants in question did not have, in their individual capacities, sufficient contacts with the State of Texas to be subject to a Travis County District Court’s personal jurisdiction. The case involved a California corporation’s breach of a commercial lease of some Austin office space. The corporation, which provided PR services to what the Court refers to as “dot.com” companies, closed its doors in June 2001. The landlord sued not only the company, which was a party to the lease, but also the individual officers of the California company, who lived and worked solely in California. The individual defendants filed special appearances, claiming that Texas lacked personal jurisdiction over them because (1) all actions regarding the Cedar Bridge lease were performed in their corporate capacities, (2) all payments from NWR to them occurred in California, and (3) they did not know and should not be expected to have known that the dot.com industry would crash in January 2001, meaning that they did not accept their biannual bonus with any intent to defraud NWR’s creditors. Niehuas, Ryan, and Wong each attached affidavits swearing to these facts. Appellants’ pleadings and affidavits also negated the standard jurisdictional facts, such as not having a residence, maintaining an agent, a place of business, a bank account, real or personal property, personal employees, or a mailing address in Texas; not committing a tort or entering a contract in Texas; and not paying taxes in Texas. The landlord, in response, asserted that certain bonus payments the company made to the individual defendants at the end of 2000 constituted fraudulent transfers, as the company and its officers ought to have known that the “dot.com” industry was about to crash (or was in the process of crashing). The Court of Appeals, however, stated that even if the bonus payments were fraudulent transfers to the detriment of the company’s creditors, even the fraudulent transfer scheme occurred solely in California, so it could not provide a basis for personal jurisdiction over the individual officers. Edwin Niehaus, William Ryan and Carrie Wong v. Cedar Bridge, Inc., Cause No. 03-05-003340CV Technorati Tags: litigation, Third Court of Appeals, law

This past Friday, the Third Court of Appeals issued an opinion in a post-divorce fraud case which sets forth a nice statement of the law on collateral attacks in Texas. In 1993, a Timothy Chambers and his father created a Texas partnership to develop a piece of real estate. They hired attorneys to draft the paperwork, which established that Mr. Chambers’ interest was to be his separate property, a gift from his parents. In 1997, Mr. Chambers and his wife divorced, and during the divorce, the wife argued that Mr. Chambers “had attempted to defraud [wife] out of her share of community property by fraudulently recharacterizing community property as his separate property.” Nonetheless, a property settlement was reached, and the Final Decree of Divorce awarded Mr. Chambers all of the interest in the partnership. In 2001, however, Mr. Chambers’ ex-wife subsequently sued Mr. Chambers’ father and the law firm that did the partnership work for fraud. Judge Meurer granted the defendants’ motion for summary judgment on the basis that the ex-wife’s claims were an impermissible collateral attack on the divorce judgment, and the Third Court of Appeals affirmed. The opinion explains in detail the difference between intrinsic and extrinsic fraud in collateral attack analysis. Henderson v. Chambers, et al., Cause No. 03-04-00599-CV The Court also issued a lengthy opinion in a workers’ comp case involving a dispute about which of two companies employed two workers injured in a trucking accident. One of the companies owned the truck, and the other owned the DOT license. They jointly operated the truck under a written lease agreement. Texas Prop. & Cas. Guar. Assoc. v. National Amer. Ins. Co., Cause No. 03-05-00401-CV Technorati Tags: litigation, Third Court of Appeals, law

This morning, the Third Court of Appeals issued an opinion in a fascinating case, from a procedural perspective. Jeffrey Kendziorski obtained a judgment for fraud from a Comal County justice court against a Robert Marshall. The $2,760.50 judgment was for compensatory damages and court costs, but not for exemplary damages. Mr. Marshall appealed the judgment de novo to the Comal County Court at Law and posted a $5,521.00 surety bond (Rule 571 requires that an appellate bond of twice the judgment be posted in justice court appeals). One of the sureties was a Don Saunders. On appeal, the Country Court at Law awarded Kendziorski $1,334 in compensatory damages, $1,399.44 in court costs, and $5,000.00 in exemplary damages. In other words, more than the justice court had ordered. After the judge announced the judgment in open court, but before it was actually reduced to judgment, Mr. Marshall, the defendant, passed away. Unable to collect from Mr. Marshall’s widow, Kendziorski came after the surety. Mr. Marshall resisted, and Kendziorski sued Marshall on the bond. Marshall answered and assorted a whole host of legal defenses. The Court, on motion for summary judgment, ordered that Mr. Saunders was liable for the compensatory damages, but not the exemplary damages, and Kendziorski appealed. The Court’s opinion is actually quite an interesting discussion of the interpretation of surety bonds and the various legal defenses that can be made against any breach of contract claim, such as unconscionability, unilateral mistake and ambiguity. The Court also examines the law pertaining to collateral attacks on judgments. Saunders, the surety, argued that the Court at Law impermissibly issued a punitive damages award against an estate, and so he, the surety, cannot be liable for it. The Court of Appeals found this to be an impermissible collateral attack on the judgment against the Estate of Mr. Marshall. The Court did, however, allow Mr. Saunders to attack the underlying judgment on the basis that it exceeded the limits of a justice court’s jurisdiction. All in all, it’s quite an interesting opinion, from a procedural perspective, despite the fact that only $5000 was at stake, and the Court never tells us anything about the underlying facts, that is, what Mr. Marshall did to defraud Mr. Kendziorski in the first place. Jeffrey A. Kendziorski v. Don Saunders, Cause No. 03-04-00334-CV Technorati Tags: litigation, Third Court of Appeals, law

This morning, the Third Court of Appeals issued an opinion clearly setting forth the extent to which a division of the state waives sovereign immunity when it sues a private party. In this case, the State of Texas sued a traffic light manufacturer for breach of contract, breach of warranty and quantum meruit. The traffic light company counterclaimed for business disparagement, and the State filed a plea to the jurisdiction with respect to the counterclaim, asserting sovereign immunity. The trial court (Judge Billy Ray Stubblefield in Williamson County) denied the plea, and this interlocutory appeal followed. The State made a number of arguments as to why it should have immunity against counterclaims in a lawsuit it initiated, but ultimately they all failed. The bottom line, according to the Third Court of Appeals, is that when the State files a lawsuit, the defendant has the right to assert any and all germane defenses, even counterclaims. Since the company’s business disparagement tort claims involve the same issues as the State’s breach of contract claims, the state waived its immunity when it brought the contract claims. The opinion, written by Justice Puryear, does a good job of laying out general sovereign immunity analysis and provides a thorough review of the cases on this specific issue, that is when and how the State waives immunity by filing suit. State of Texas v. Precision Solar Controls, Inc., Cause No. 03-04-00632-CV Technorati Tags: litigation, Third Court of Appeals, law