Cooke v. Karlseng
| Citation | 617 S.W.3d 570 |
| Decision Date | 14 August 2019 |
| Docket Number | No. 05-18-00206-CV,05-18-00206-CV |
| Parties | H. Jonathan COOKE, Individually and on Behalf of Escrow Partners Dallas, L.P.; Escrow Partners Dallas, Gp, Inc.; Escrow Partners Houston, L.P.; Escrow Partners Houston, Gp, Inc.; Escrow Partners Austin, L.P.; Escrow Partners Austin, Gp, Inc.; Escrow Partners San Antonio, L.P.; Escrow Partners San Antonio, Gp, Inc.; Title Partners, L.L.P.; North American Management, L.L.P.; Tj Partners I, LLC ; and Tj Partners II, LLC, Appellants v. Robert C. KARLSENG; Karlseng Law Firm, P.C. ; Ashley Brigham Patten; Patten & Karlseng Law Firm, P.C.; Jacques Yves LeBlanc; and LeBlanc, Patten and Karlseng Law Firm, P.C., Appellees Robert C. Karlseng; Karlseng Law Firm, P.C. ; Ashley Brigham Patten; Patten & Karlseng Law Firm, P.C.; Jacques Yves LeBlanc; and LeBlanc, Patten and Karlseng Law Firm, P.C., Cross-Appellants v. H. Jonathan Cooke, Individually and on Behalf of Escrow Partners Dallas, L.P.; Escrow Partners Dallas, Gp, Inc.; Escrow Partners Houston, L.P.; Escrow Partners Houston, Gp, Inc.; Escrow Partners Austin, L.P.; Escrow Partners Austin, Gp, Inc.; Escrow Partners San Antonio, L.P.; Escrow Partners San Antonio, Gp, Inc.; Title Partners, L.L.P.; North American Management, L.L.P.; Tj Partners I, LLC ; and Tj Partners II, LLC, Cross-Appellees |
| Court | Court of Appeals of Texas |
Ross Howard Parker, Munsch Hardt Kopf & Harr, PC, Dallas, TX, Kenneth J. Lambert, C. Gregory Shamoun, Brian Keith Norman, Shamoun & Norman, LLP, Farmers Branch, TX, Susan Hays, Law Office Of Susan, Austin, TX, for Appellees.
Ashley Brigham Patten, Houston, TX, pro se.
Michael Ellis, Ricardo Bonilla, Michael Vincent, David Conrad, Fish and Richardson P.C., Dallas, TX, for Appellants.
Before Justices Brown, Schenck, and Pedersen, III
This is a permissive interlocutory appeal of the trial court's February 6, 2018 Second Amended Order Granting Defendants' Motion for Summary Judgment on Defendants' Illegality and Business Judgment Rule Defenses and Amended Order on Defendants' Plea to the Jurisdiction and Traditional Motion for Partial Summary Judgment Related to the Business Entities' Claims (the Order). See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(d). The trial court granted the parties' agreed motion for this appeal, concluding that the Order "involves controlling questions of law about which there is a substantial ground for difference of opinion," id. § 51.014(d)(1), and that an immediate interlocutory appeal "may materially advance the ultimate termination of the litigation," id. § 51.014(d)(2). Those controlling questions take the form of four issues. Appellants1 contend the trial court erroneously granted summary judgment in favor of the cross-appellants on two affirmative defenses: illegality and the business judgment rule. Cross-appellants2 argue the trial court erroneously denied their plea to the jurisdiction and denied their summary judgment motion on a third affirmative defense, limitations. We reverse the trial court's Order in part, and we dismiss appellants' claims that are subject to this appeal.
In 1999, Cooke and Karlseng went into business together to provide title closing services to lenders and real estate companies. Cooke and Karlseng formed a partnership, Title Partners, L.L.P., each with a fifty-percent ownership interest, to supervise the day-to-day management of the business. Karlseng is a licensed attorney and became a licensed escrow agent; Cooke, who is not an attorney, handled marketing duties. Over the next five years, Cooke and Karlseng expanded their business operations to several Texas cities and formed other partnerships with attorneys Ashley Brigham Patten and Jacques Yves LeBlanc. The partners split profits according to the terms of the partnership agreements.
In 2004 and 2005, the Texas Department of Insurance (TDI) conducted an investigation of the partnerships to determine whether a licensed attorney was supervising the work of certain employees who were closing real estate transactions. Although appellants' counsel advised that the business relationship was legal, he also suggested that switching to a law firm structure could expedite a resolution with TDI. Thereafter, Karlseng, Patten, and LeBlanc created the defendant law firms and transferred partnership assets and business to the new firms without paying Cooke or observing the requirements of the partnership agreements when transferring these assets. The parties disputed whether Cooke was consulted on this change. The parties unsuccessfully attempted to negotiate a settlement to compensate Cooke either through a buyout or employment/consulting contract. Cooke claimed he was then fired, but appellants asserted he quit.
In March 2006, Cooke filed a lawsuit alleging appellants tortiously transferred partnership assets to new professional corporations, owned solely by the individual appellants, and falsely told Cooke that the partnerships needed to shut down due to certain state regulations. The partnership agreements provided for arbitration, and appellants filed a motion to compel arbitration. The trial court granted the motion and ordered the parties to arbitration.
A contested arbitration hearing was held in December 2007. The arbitrator ruled in Cooke's favor and awarded him more than $22 million. The trial court affirmed the arbitration order, but this Court vacated the award and remanded the cases for further proceedings. Karlseng v. Cooke , 346 S.W.3d 85, 100 (Tex. App.—Dallas 2011, no pet.).
Over subsequent years, the case has been litigated in depth. Claims and defenses have been added, and a number of legal theories have been raised in response. This permissive appeal turns on four of those theories.
(1) Cross-appellants moved for summary judgment contending that Cooke's claims were barred because the partnership agreements structuring the operations of the Business Entities called for Cooke to share in the profits of the enterprise. According to title insurance law and regulations, sharing profits with a party not licensed as an escrow agent or an attorney is illegal. The trial court granted the motion. In their first issue, appellants challenge that ruling.
(2) Cross-appellants also moved for summary judgment arguing that Cooke's claims were barred because the attorney-partners' decision to move the illegal operation to one operating legally within law firms was protected by the Business Judgment Rule. The trial court granted this motion as well. Appellants' second issue challenges that ruling.
(3) Cross-appellants filed special exceptions and a plea to the jurisdiction arguing that all claims within Cooke's Second Amended Petition, which were pleaded as his own individual claims, belonged to the Business Entities. Thus, they contended, Cooke lacked standing to bring the claims. The trial court granted the special exceptions and allowed Cooke to replead. His Third Amended Petition added the twelve Business Entities as plaintiffs and—for each of Cooke's pleaded claims—stated that the claim was now being brought individually and derivatively on behalf of the Business Entities. Cross-appellants filed a second plea to the jurisdiction, again arguing that Cooke lacked standing to pursue his individual claims. The trial court denied this second plea, and that ruling underlies cross-appellants' first issue.
(4) Cross-appellants moved for summary judgment arguing that all of the Business Entities' claims were barred by their respective statutes of limitation.4 The trial court denied this motion; cross-appellants' second issue challenges that ruling.
After some time, the parties agreed to request this permissive appeal, and the trial court granted their motion. Following jurisdictional briefing, this Court concluded that it had jurisdiction to hear the appeal.
We begin with cross-appellants' issues because the plea to the jurisdiction addresses the threshold issue of standing and the limitations issue addresses which parties are properly before the trial court.
"A plea to the jurisdiction challenges the court's authority to decide a case." Heckman v. Williamson County , 369 S.W.3d 137, 149 (Tex. 2012). Cross-appellants' specific challenge was to Cooke's standing, which is a question of law that we review de novo. Id. at 150. Standing is a constitutional prerequisite to suit, and a court has no jurisdiction over a claim made by a plaintiff who lacks standing to assert it. Id. A party's standing to sue is not presumed; it must be proved. Linegar v. DLA Piper LLP (US) , 495 S.W.3d 276, 279 (Tex. 2016). The plaintiff bears the burden of affirmatively demonstrating the trial court's jurisdiction. Heckman , 369 S.W.3d at 150.
The test for standing in Texas requires "a concrete injury to the plaintiff and a real controversy between the parties that will be resolved by the court." Id. at 154. Our analysis begins by determining the nature of the alleged wrong. Linegar , 495 S.W.3d at 279. We assess standing on a claim-by-claim basis. Id. The plaintiff must plead facts demonstrating that he suffered the injury alleged. Heckman , 369 S.W.3d at 155.
Cross-appellants' plea to the jurisdiction was directed at the individual claims brought by Cooke in his 2006 original petition and expanded in his amended petitions. The plea alleged that Cooke's individual claims pleaded only an injury to the Business Entities and thus did not belong to him individually. Cooke was a limited partner of the partnerships in 2006, but "[a] limited partner does not have standing to sue for injuries to the partnership that merely diminish the value of that partner's interest." Hall v. Douglas , 380 S.W.3d 860, 873 (Tex. App.—Dallas 2012, no pet.).
In this Court, Cooke acknowledges that his original claim for breach of fiduciary duty—as well as his later-added claims for breach of contract, conversion, shareholder oppression, unjust...
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Moser v. Dillon Invs., LLC
...transaction or occurrence.Id. The relation-back doctrine cannot create jurisdiction where none existed. Cooke v. Karlseng , 617 S.W.3d 570, 578 (Tex. App.—Dallas 2019) ( Cooke I ), rev'd on other grounds , 615 S.W.3d 911 (Tex. 2021) (per curiam). Thus, if the trial court lacked subject-matt......
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...injury was to the partnerships even though "[w]e [did] not question that Cooke felt the economic impact of the losses he alleges." Cooke I, 617 S.W.3d at 576. We then concluded that Cooke's later-filed claims and the claims filed in the name of the partnerships did not relate back to the or......
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Cooke v. Karlseng
...the trial court's denial of their plea to the jurisdiction and their motion for summary judgment based on limitations. 617 S.W.3d 570, 573 (Tex. App.—Dallas 2019). Cooke challenged the trial court's order granting the defendants' motion for summary judgment on the defenses of illegality and......