Hiles v. Arnie

• Decision Date: 25 April 2013
• Docket Number: No. 14–12–00088–CV.,14–12–00088–CV.
• Citation: 402 S.W.3d 820
• Court: Texas Court of Appeals
• Parties: Marcus HILES, Appellant, v. ARNIE & COMPANY, P.C., Appellee.

402 S.W.3d 820

Marcus HILES, Appellant,

v.ARNIE & COMPANY, P.C., Appellee.

No. 14–12–00088–CV.

Court of Appeals of Texas,

Houston (14th Dist.).

April 25, 2013.

Roger D. Townsend, Houston, Michael Kevin Queenan, Carson Hebert, Arlington, for Appellant.

Richard P. Hogan, Jr., Houston, Lindsey Griffin, Dallas, James E. Doyle, Houston, Daniel D. Tostrud, Dallas, for Appellee.

Panel consists of Chief Justice HEDGES and Justices BROWN and BUSBY.

SUBSTITUTE OPINION

JEFFREY V. BROWN, Justice.

We originally issued our opinion affirming the trial court's judgment on March 14, 2013. Appellant Marcus Hiles filed a motion for rehearing. We deny the motion for rehearing, vacate our earlier judgment, withdraw our previous opinion, and issue this substitute opinion in its place. The disposition of the case remains unchanged.

Hiles appeals from a trial-court judgment incorporating a jury verdict in favor of Arnie & Company, P.C., in Arnie's suit on a sworn account. On appeal, Hiles complains that he filed suit against Arnie in Dallas County before Arnie filed suit in Harris County, and because the Dallas County court had dominant jurisdiction, the trial court erred in refusing to transfer, abate, or dismiss Arnie's suit. Hiles also contends that the trial court erred by refusing Hiles's tendered jury instruction concerning whether Arnie's prior material breach excused Hiles's performance. For the reasons explained below, we affirm.

I

Hiles is a real-estate investor and developer who lives in Fort Worth and offices in Grand Prairie. Hiles became involved in litigation arising out of a partnership dispute over a large real-estate project in Tyler known as the Cascades. Hiles believed he was losing millions of dollars on the Cascades project and suspected his partners had engaged in some kind of “funny business.” Hiles's counsel, the law firm of Coats, Rose, Yale, Ryman & Lee, L.L.P., and its partner, Bill Short, recommended retaining Arnie & Company, located in Houston, to conduct a forensic accounting review of the Cascades's records. Arnie's president, Dennis Arnie, is a CPA and certified fraud examiner. Dennis had worked with Coats Rose on many other cases.

Hiles agreed that Coats Rose could retain Arnie to assist in the Cascades litigation. Coats Rose and Hiles each signed an engagement letter Arnie drafted. Hiles also modified the letter, interlineating “and/or Hiles” at the end of the sentence “Your engagement of [Arnie] is at the will and discretion of Coats Rose.” The engagement letter set out the hourly rates for Arnie personnel, provided for an “evergreen” retainer of $20,000, and reflected that Hiles was “solely liable for any fees incurred in this matter.” The engagement letter also included a venue-selection clause specifying that the venue of any litigation or arbitration “SHALL LIE SOLELY AND EXCLUSIVELY IN HARRIS COUNTY, TEXAS[,] UNLESS MANDATORY VENUE RULES OR LAWS PROVIDE THAT VENUE MUST LIE IN ANOTHER COUNTY.”

Arnie personnel conducted an extensive review of the Cascades's records and determined, as Hiles suspected, that his partners were committing fraud. The damage model amounted to about $10 million. But Coats Rose and Hiles disagreed on the best way to make use of Arnie's work. Short did not want Arnie to prepare a report, preferring instead to surprise the adverse parties with Arnie's opinions at trial; Hiles, however, instructed Dennis to prepare a report that Hiles could use as leverage at mediation. On April 29, 2010, Dennis met with Hiles at his office to discuss the details of the report and to drop off some unpaid invoices. Dennis also gave Hiles the option of either a short report highlighting a few significant transactions or a detailed report describing every allegedly fraudulent transaction discovered.

Hiles did not immediately decide which report he wanted, but the next day he left Dennis a voicemail directing him to preparethe detailed report. In the voicemail, which Dennis transcribed, Hiles also communicated an understanding that the additional work needed to compile the report would be minimal, requiring only “a little extra staff time” to type up the report and attach the exhibits. On May 4, Hiles confirmed in an email that he wanted Dennis to complete the “full written report” by May 12. According to Dennis, he never told Hiles that preparing the report would be simply a matter of administrative time, although he did not recall specifically correcting any misunderstanding on Hiles's part.

On May 12, Dennis delivered a draft of the report, titled “Analysis of Economic Damages and Related Events,” to Hiles.¹ The report totaled twenty-three pages and was supported by over 400 pages of attached documentation. Hiles was pleased with the report, and he instructed Short to distribute copies of the report to all opposing counsel in the Cascades litigation. The Cascades litigation was ultimately resolved.

In early June, Arnie sent Hiles the bill for its work during the month of May in the amount of $76,199.74. Less than two weeks later, Hiles responded to Arnie's bill by filing suit against Arnie in Dallas, alleging breach of contract and seeking declaratory relief.²

On July 8, 2010, after Arnie was served with Hiles's suit, Arnie filed suit against Hiles in Houston for unpaid bills totaling $364,502.00 on a sworn-account theory. After substituted service of citation was ordered in September, Hiles answered Arnie's suit subject to a motion to transfer venue. ³ On December 16, the trial court denied Hiles's motion to transfer venue. On January 21, 2011, Hiles filed a motion to abate Arnie's Harris County suit, and re-urged his motion to abate in September 2011.⁴ The trial court denied the motion to abate and the case proceeded to trial.

At the end of the trial, the jury returned a verdict in Arnie's favor. On October 7, 2011, the trial court rendered judgment on the jury's verdict, awarding Arnie actual damages of $364,502.41 and attorney's fees in excess of $200,000. This appeal followed.

II

In his first issue, Hiles contends that the trial court erred in refusing to transfer, abate, or dismiss the Harris County suit. Hiles makes three primary arguments: (1) the venue-selection clause in Arnie's engagement letter is unenforceable; (2) Hiles filed suit first in a proper venue and therefore the Dallas County court had dominant jurisdiction; and (3) no exception to dominant jurisdiction applies.

A

Section 15.002(a)(1) of the Civil Practices and Remedies Code provides that venue for an action is proper in the county in which “all or a substantial part of the events or omissions giving rise to the claim occurred.” Tex. Civ. Prac. & Rem.Code § 15.002(a)(1). Venue may be proper in more than one county under the venue rules. See Wilson v. Tex. Parks and Wildlife Dep't, 886 S.W.2d 259, 260 (Tex.1994); Moveforfree.com, Inc. v. David Hetrick, Inc., 288 S.W.3d 539, 542 (Tex.App.-Houston [14th Dist.] 2009, no pet.). In general, plaintiffs are allowed to choose venue first, and when the county in which the plaintiff files suit is at least a permissive venue and no mandatory provision applies, the plaintiff's venue choice should not be disturbed. KW Constr. v. Stephens & Sons Concrete Contractors, Inc., 165 S.W.3d 874, 879 (Tex.App.-Texarkana 2005, pet. denied); Chiriboga v. State Farm Mut. Auto. Ins. Co., 96 S.W.3d 673, 678 (Tex.App.-Austin 2003, no pet.). Thus, “[t]he court in which suit is first filed generally acquires dominant jurisdiction to the exclusion of other courts if venue is proper in the county in which suit was first filed.” Gonzalez v. Reliant Energy, Inc., 159 S.W.3d 615, 622 (Tex.2005) (emphasis in original) (citing Wyatt v. Shaw Plumbing Co., 760 S.W.2d 245, 248 (Tex.1988)).

Filing a plea in abatement is the proper method for drawing a court's attention to another court's possible dominant jurisdiction. In re Puig, 351 S.W.3d 301, 305 (Tex.2011) (per curiam); Wyatt, 760 S.W.2d at 247–48;Curtis v. Gibbs, 511 S.W.2d 263, 267 (Tex.1974). Generally, the plea in abatement must be granted when an inherent interrelation of the subject matter exists in the two pending lawsuits. Perry v. Del Rio, 66 S.W.3d 239, 252 (Tex.2001); Wyatt, 760 S.W.2d at 247. Abatement of a suit due to the pendency of a prior suit is based on the principles of comity, convenience, and the necessity for an orderly procedure in the trial of contested issues. Miles v. Ford Motor Co., 914 S.W.2d 135, 138 (Tex.1995) (per curiam); Wyatt, 760 S.W.2d at 248.

But exceptions to this “first-filed” rule may apply when its justifications fail, as when the first court does not have the full matter before it, when conferring dominant jurisdiction on the first court will delay or even prevent a prompt and full adjudication, or “when the race to courthouse was unfairly run.” Perry, 66 S.W.3d at 252. Thus, a plaintiff who filed the first suit may be estopped from asserting the dominant jurisdiction of the first court if it is found that he is guilty of inequitable conduct. Wyatt, 760 S.W.2d at 248;V.D. Anderson Co. v. Young, 128 Tex. 631, 101 S.W.2d 798, 800 (1937).

Texas courts have found parties guilty of inequitable conduct and applied the estoppel exception to the first-filed rule when the plaintiffs in the first-filed suit (1) filed suit merely to obtain priority, without a bona fide intention to prosecute the suit; or (2) prevented their adversaries from filing the subsequent suits more promptly by fraudulently representing that they would settle. In re Henry, 274 S.W.3d 185, 191 (Tex.App.-Houston [1st Dist.] 2008, pet. denied). Courts have also found inequitable conduct when the plaintiffs in the first-filed suit affirmatively represented to the court in the second-filed suit that it had jurisdiction, Howell v. Mauzy, 899 S.W.2d 690, 698 (Tex.App.-Austin 1994, writ denied), or manipulated the courts by sitting in silence while sister courts issued conflicting orders regarding the same subject matter. Grimes v. Harris,...