Thursday, September 24, 2015

Read Before Signing: You Should Not Rely Upon What the Other Side Tells You a Document Says

Under Texas law, if I have a written contract with someone, they tell me what the terms are, and later I find out that what I was told differs from the written terms, are the written terms enforceable?

Generally, the written terms will be enforceable.  In a recently decided case (National Prop. Holding, L.P. v. Westergren, 453 S.W.3d 419 (Tex. 2015), the Texas Supreme court stated that: “Texas courts have repeatedly held, a party to a written contract cannot justifiably rely on oral misrepresentations regarding the contract's unambiguous terms. See, e.g.,  Thigpen v. Locke, 363 S.W.2d 247, 251 (Tex. 1962) (‘In an arm's-length transaction the defrauded party must exercise ordinary care for the protection of his own interests . . . . [A] failure to exercise reasonable diligence is not excused by mere confidence in the honesty and integrity of the other party.’) (citation omitted). This is particularly true when the party had a reasonable opportunity to review the written agreement but failed to exercise ordinary care to do so. See Tex. & Pac. Ry. Co. v. Poe, 131 Tex. 337, 115 S.W.2d 591, 592 (1938) (holding that evidence was legally insufficient to support a finding of fraud where party who relied on oral statement that release was receipt had an opportunity to read the document which plainly identified itself as a release); see also Thigpen, 363 S.W.2d at 251.  Instead of excusing a party's failure to read a contract when the party has an opportunity to do so, the law presumes that the party knows and accepts the contract terms.  It is not the courts' role ‘to protect parties from their own agreements.’ El Paso Field Servs., L.P. v. MasTec N. Am., Inc., 389 S.W.3d 802, 810-11 (Tex. 2012).  As the [United States] Supreme Court explained long ago: ‘It will not do for a man to enter into a contract, and, when called upon to respond to its obligations, to say that he did not read it when he signed it, or did not know what it contained.  If this were permitted, contracts would not be worth the paper on which they are written.  But such is not the law. A contractor must stand by the words of his contract; and, if he will not read what he signs, he alone is responsible for his omission.’  Upton v. Tribilcock, 91 U.S. 45, 50, 23 L. Ed. 203 (1875).”

Wednesday, September 23, 2015

Time Limitations for Filing Claims Against a Partner in a Texas General Partnership

If I have a claim against a Texas general partnership and one of its partners, is the time period in which I must file suit (i.e., the limitations period) the same for both?

Generally, no.  Because a partnership is a separate entity from its partners and because there is a statutory prerequisite to proceeding against a partner (the judgment against the partnership must go unsatisfied for ninety days before a creditor may proceed against a partner), a plaintiff’s cause of action against a partner does not accrue until the expiration of the ninety-day statutory satisfaction period against the partnership.  See Am. Star Energy & Minerals Corp. v. Stowers, 457 S.W.3d 427, 431 (Tex. 2015).

Monday, August 17, 2015

Expert Reports Required for Malpractice Claims Against Professional Engineers

Is an expert’s report necessary before one can sue a professional engineer for malpractice?

Generally, Texas law does require that a person claiming malpractice against a professional engineer must also file an “expert report.”  The Texas Legislature passed the following statute that gives professional engineer’s this added “defense”:

Sec. 150.002. Certificate of Merit.    
(a) In any action or arbitration proceeding for damages arising out of the provision of professional services by a licensed or registered professional, the plaintiff shall be required to file with the complaint an affidavit of a third-party licensed architect, licensed professional engineer, registered landscape architect, or registered professional land surveyor who:

(1) is competent to testify;
(2) holds the same professional license or registration as the defendant; and
(3) is knowledgeable in the area of practice of the defendant and offers testimony based on the person's:
(A) knowledge;
(B) skill;
(C) experience;
(D) education;
(E) training; and
(F) practice.

(b) The affidavit shall set forth specifically for each theory of recovery for which damages are sought, the negligence, if any, or other action, error, or omission of the licensed or registered professional in providing the professional service, including any error or omission in providing advice, judgment, opinion, or a similar professional skill claimed to exist and the factual basis for each such claim. The third-party licensed architect, licensed professional engineer, registered landscape architect, or registered professional land surveyor shall be licensed or registered in this state and actively engaged in the practice of architecture, engineering, or surveying.

(c) The contemporaneous filing requirement of Subsection (a) shall not apply to any case in which the period of limitation will expire within 10 days of the date of filing and, because of such time constraints, the plaintiff has alleged that an affidavit of a third-party licensed architect, licensed professional engineer, registered landscape architect, or registered professional land surveyor could not be prepared. In such cases, the plaintiff shall have 30 days after the filing of the complaint to supplement the pleadings with the affidavit. The trial court may, on motion, after hearing and for good cause, extend such time as it shall determine justice requires.

(d) The defendant shall not be required to file an answer to the complaint and affidavit until 30 days after the filing of such affidavit.

(e) The plaintiff's failure to file the affidavit in accordance with this section shall result in dismissal of the complaint against the defendant. This dismissal may be with prejudice.

(f) An order granting or denying a motion for dismissal is immediately appealable as an interlocutory order.

(g) This statute shall not be construed to extend any applicable period of limitation or repose.

(h) This statute does not apply to any suit or action for the payment of fees arising out of the provision of professional services.

Tex. Civ. Prac. & Rem. Code § 150.002.

Sunday, August 16, 2015

The Economic Loss Rule

What is the Economic Loss Rule?

“[T]here is not one economic loss rule broadly applicable throughout the field of torts, but rather several more limited rules that govern recovery of economic losses in selected areas of the law.” Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d  407, 415 (Tex. 2011)(citations omitted). Generally, “the prevailing rule in America [is that] a plaintiff may not recover for his economic loss resulting from bodily harm to another or from physical damage to property in which he has no proprietary interest.”  See, e.g., Fleming James, Jr., Limitations on Liability for Economic Loss Caused by Negligence: A Pragmatic Appraisal, 25 Vand. L. Rev. 43, 43 (1972)   “In actions for unintentional torts, the common law has long restricted recovery of purely economic damages unaccompanied by injury to the plaintiff or his property - a doctrine we have referred  to as the economic loss rule. The rule serves to provide a more definite limitation on liability than foreseeability can and reflects a preference for allocating some economic risks by contract rather than by law. But the rule is not generally applicable  in every situation; it allows recovery of economic damages in tort, or not, according to its underlying principles.”  Lan/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234, 235 (Tex. 2014)(footnotes omitted).  One of "[t]he underlying purpose[s] of the economic loss rule is to preserve the distinction between contract and tort theories in circumstances where both theories could apply."  Lan/STV, 435 S.W.3d at 240 (citing Vincent R. Johnson, The Boundary-Line Function of the Economic Loss Rule, 66 ash. & Lee L. Rev. 523, 546 (2009)(footnotes omitted) (quoting Stewart I. Edelstein, Beware the Economic Loss Rule, Trial, June 2006, at 42, 43 (2006))).  “The economic loss rule is a doctrine that limits the recovery of purely economic damages in an action for negligence.  Lan/STV v. Martin K. Eby Constr. Co., 435 S.W.3d 234, 235 (Tex. 2014) ("In actions for unintentional torts, the common law has long restricted recovery of purely economic damages unaccompanied by injury to the plaintiff or his property[.]"); see also Sharyland Water Supply Corp. v. City f Alton, 354 S.W.3d 407, 415 (Tex. 2011)("[P]arties may be barred from recovering in negligence or strict liability for purely economic losses.").  Texas courts have generally applied the economic loss rule in cases involving defective products and in cases involving the failure to perform a contract.”  Clark v. PFPP, Ltd. Partnership, 455 S.W.3d 283, 288 (Tex. App. – Dallas 2014, no pet.).

Friday, May 29, 2015

Texas Uniform Trade Secrets Act and Recovery of Attorney’s Fees

May attorneys’ fees be recovered on a claim that trade secrets were stolen?

Under the Texas Uniform Trade Secrets Act, a court may award attorney’s fees to the prevailing party.  “The court may award reasonable attorney’s fees to the prevailing party if: (1) a claim of misappropriation is made in bad faith; (2) a motion to terminate an injunction is made or resisted in bad faith; or (3) wilful and malicious misappropriation exists.”  Tex. Civ. Prac. & Rem. Code § 134A.005.

Thursday, May 28, 2015

Texas Statute of Limitations for Fraudulent Inducement of a Contract

Is there a time limit within which one must file a lawsuit if he enter into a contract based upon another person’s intentional misrepresentations?

Generally, under Texas law, a person who wants to get out of a contract because he entered into it based upon the intentional misrepresentations (fraud) of someone else must file suit within four years of when he discovered, or should have discovered, the fraud.  See Tex. Civ. Prac. & Rem. Code § 16.004(a)(4); see also Hooks v. Samson Lone Star, Ltd. Partnership, 58 Tex. Sup. J. 252 (Tex. 2015).

Wednesday, May 27, 2015

Remedies for Misappropriation of Trade Secrets

What remedies are available if trade secrets have been misappropriated?

Under Texas law, a claimant who prevails on a claim for misappropriation of trade secrets may be entitled to injunctive relief as well as damages.  “Damages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss.”  Tex. Civ. Prac. & Rem. Code § 134A.004(a).  Alternatively, “damages caused by misappropriation may be measured by imposition of liability for a reasonable royalty for a misappropriator’s unauthorized disclosure or use of a trade secret.”  Tex. Civ. Prac. & Rem. Code § 134A.004(a).  Additionally, “if wilful and malicious misappropriation is proven by clear and convincing evidence, the fact finder may award exemplary damages in an amount not to exceed twice any award” described above.  Tex. Civ. Prac. & Rem. Code § 134A.004(b).

Texas Statute Defines What are Trade Secrets

What are “Trade Secret” in Texas?

The Texas Uniform Trade Secrets Act states that:

“Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers that:

(A) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

See Tex. Civ. Prac. & Rem. Code section 134A.002(6).

Friday, February 20, 2015

The Fiduciary Shield Doctrine and Personal Jurisdiction over Non-resident Employees

Should an individual who resides in another state be subject to a Texas Court’s jurisdiction for his work done in Texas when his work was done solely on behalf of his employer?

Generally, an out-of-state resident who is working on behalf of an employer would not be individually liable in Texas because of the “fiduciary shield doctrine.”  The “fiduciary shield doctrine” protects nonresident employees from the jurisdiction of Texas courts when all of the employee’s contacts with Texas were made on behalf of his employer.  Nichols v. Tseng Hsiang Lin, 282 S.W.3d 743, 750 (Tex. App.–Dallas 2009, no pet.)  This doctrine is consistent with the Texas Supreme Court’s holding that an out-of-state employee, in his individual capacity, cannot be subject to Texas personal jurisdiction based solely on the activities of his employer.  Siskind v. Villa Found. for Educ., Inc., 642 S.W.2d 434, 437-38 (Tex. 1982).  For example, a Texas court should not exercise personal jurisdiction over a Colorado resident who traveled to a Texas office every few months to conduct business on behalf of his employer.  See Urban v. Barker, 2007 Tex. App. LEXIS 1633, at *21 (Tex. App.–Houston [14th Dist.], March 6, 2007).

The fiduciary shield doctrine does not apply to an officer’s or employee’s tort’s  committed in Texas.  See Ennis v. Losieau, 164 S.W.3d 698, 707 (Tex. App.–Austin 2005, no pet.)  This rule is not based on an exception to the fiduciary shield doctrine, but rather on the well-established principal that "a corporate officer is primarily liable for his own torts."  Morris v. Kohls-York, 164 S.W.3d 686, 695 (Tex. App.–Austin 2005, no pet.).

Thursday, February 19, 2015

The Discovery Rule as an Exception to Statutes of Limitation

Can I pursue a lawsuit for a wrongful act even though the limitations period has expired?

Generally, No.  In certain limited circumstances however, Texas courts apply the “discovery rule” as an exception to the statutory limitations period.

The discovery rule delays the accrual of a cause of action until the plaintiff knows, or by the exercise of reasonable diligence, should have known of the facts giving rise to his cause of action.  See Baker v. Eckman, 213 S.W.3d 306, 311-312 (Tex. 2006).  In order for the discovery rule to apply, the nature of the injury must be inherently undiscoverable and objectively verifiable.  HECI Exploration Co. v. Neel, 982 S.W.2d 881, 886 (Tex. 1998).  When applied, the discovery rule tolls the running of limitations until the plaintiff (1) discovers the wrongful act that causes an injury or (2) acquires knowledge of facts that would lead to the discovery of the wrongful act.  S.V. v. R.V., 933 S.W.2d 1, 4 (Tex. 1996).  Similarly, a defendant cannot avoid liability for his actions by purposefully concealing the wrongdoing until the statute of limitations has run.  Id. at 6.

A party trying to rely upon the discovery rule must both plead and prove that the rule applies.  See Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 518 (Tex. 1988).

Texas Statute of Limitations for Unfair Claims Settlement Practices Under the Texas Insurance Code

Is there a time limit within which one must file claims under the Texas Insurance Code for unfair claims settlement practices?

Yes.  Under the Texas Insurance Code, a person must bring an action within two years of (1) the date the unfair or deceptive act or practice occurred; or (2) the date the person discovered or, by the exercise of reasonable diligence, should have discovered that the unfair or deceptive act or practice occurred.  Tex. Ins. Code. § 541.162(a)(1-2).  This two year limitations period may be extended for 180 days if the plaintiff proves that the failure to bring the action within the two year period was caused by  the defendant’s attempt to induce the plaintiff to refrain or postpone bringing the action.  Tex. Ins. Code. § 541.162(b).

A cause of action under the Insurance Code for unfair claims based on denial of insurance coverage accrues on the date that the insurer denies coverage.  See Celtic Life Ins. Co. v. Coats, 885 S.W.2d 96, 100 (Tex. 1994).

Wednesday, February 18, 2015

Statute of Limitations for an Insurer’s Breach of the Duty of Good Faith and Fair Dealing

If my insurance company cancelled my insurance policy without a reasonable basis or denied payment of a claim when it was required to pay, is there a limited time within which I have to file a lawsuit against the insurance company?

Yes.  Claims against an insurer for breach of the duty of good faith and fair dealing must be brought not later than two years from the date the claim accrued.  See Tex. Civ. Prac. & Rem. Code § 16.003(a); Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 827 (Tex. 1990).  The “accrual date” (the date when the two year limitations period begins to run) is the day the insurer wrongfully denied coverage.  See Murray, 800 S.W.2d at 828.  The fact that damage may continue to occur for a period after the denial date does not prevent the statute of limitations from starting to run.  Id.  However, if the insurance company “strings the insured along” without denying or paying the claim, then the accrual date may be tolled.  See, e.g., Murray, 800 S.W.2d at 829 n.2.

Wednesday, February 11, 2015

Texas Court’s have “All Purpose” Jurisdiction if a Company is “At Home” in Texas

Does a Texas court have general (i.e., “all-purpose”) jurisdiction over a foreign corporation for alleged injuries that took place entirely outside of Texas?

Generally, the Due Process Clause of the Fourteenth Amendment does not permit a Texas court to exercise general jurisdiction over a foreign corporation for alleged injuries that took place entirely outside of Texas unless the corporation’s affiliations with Texas are so constant as to render it essentially “at home” in Texas.  See Daimler AG v. Bauman, 134 S. Ct. 746, 748 (2014).

General jurisdiction (or all-purpose jurisdiction) is appropriate only when a foreign corporation’s continuous corporate operations within Texas are so substantial that its activity justifies jurisdiction over dealings entirely different from its activities in Texas.  See International Shoe Co. v. Washington, 236 U.S. 310, 318 (1945).  The proper test for general jurisdiction is whether a foreign corporation’s affiliations with a state are so continuous and systematic as to render it essentially at home in the state.  See Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S.Ct. 2846 (2011).  A company’s place of incorporation and principal place of business are normally where a corporation is “at home” and that is the state in which a corporation may normally be sued.  See Daimler AG, 134 S. Ct. at 760.  In Daimler, the Supreme Court noted that it is possible for general jurisdiction to exist in a state other than where its formal place of incorporation or principal place of business is, but such a such a case would have to be exceptional and the company’s operations in the state would have to be substantial.  See Daimler AG, 134 S. Ct. at 760.

Web Sites and Texas Court Jurisdiction

If my company is not incorporated in Texas and does no business in Texas, will its merely having a web site nevertheless subject it to the jurisdiction of a Texas court?

Generally, a company that is neither incorporated in Texas nor does business in Texas, will not be subject to a Texas court’s jurisdiction just because of its web site. See Monkton Ins. Servs. v. Ritter, 768 F.3d 429, 432 (5th Cir. 2014).  The Supreme Court recently held that the proper test for general jurisdiction is whether the defendant’s affiliations with a state are so continuous and systematic as to render it “at home” in the state.  Daimler AG v. Bauman, 134 S. Ct. 746, 760 (2014).  For corporations, it is therefore “incredibly difficult to establish general jurisdiction in a forum other than the place of incorporation or principal place of business.”  Monkton Ins. Servs., 768 F.3d at 432.

Generally, a foreign corporation’s website, at most, shows that the corporation conducts business with the forum state, not in the forum state.  Id.   An interactive website is not enough to render a defendant “at home” and general jurisdiction is therefore improper. Id.  Even evidence that the foreign corporation communicated with other residents of the forum state through its website would not be enough for general jurisdiction.  Monkton Ins. Servs., 768 F.3d at 434.