In re Cook
| Decision Date | 28 April 2021 |
| Docket Number | No. 05-20-00205-CV,05-20-00205-CV |
| Citation | 629 S.W.3d 591 |
| Parties | IN RE Byron Curtis COOK, Trade Rare, L.L.C., and Joel Hochberg, Relators |
| Court | Texas Court of Appeals |
629 S.W.3d 591
IN RE Byron Curtis COOK, Trade Rare, L.L.C., and Joel Hochberg, Relators
No. 05-20-00205-CV
Court of Appeals of Texas, Dallas.
Opinion Filed April 28, 2021
C. John Scheef III, Byron Kevin Henry, J. Mitchell Little, Justin R. Simmons, Scheef & Stone, L.L.P., Frisco, Kelly Mitchell Crawford, Scheef & Stone, L.L.P., Dallas, for Real Party in Interest Warren Kenneth Paxton, Jr.
Christopher Arisco, Mark Wilson Stout, Padfield & Stout, L.L.P., Fort Worth, Christopher S. Ayres, Ayres Law Office, P.C., Dallas, for Real Party in Interest Shiner Energy & Consulting Corp.
William Todd Albin, Law Offices, Plano, John Joseph Mongogna, Albin Roach, PLLC, Frisco, for Real Parties in Interest Unity Resources, L.L.C., Mark Thomas Mersman, Mark Joseph Solomon, Jr.
Alexander More, Brent Michael Rubin, Ken Carroll, Neal James Suit, Neil Ross Burger, Carrington, Coleman, Sloman & Blumenthal, LLP, Dallas, Rene O. Oliveira, Roerig Oliveira & Fisher, L.L.P., Brownsville, Terry L. Jacobson, Jacobson Law Firm, P.C., Corsicana, for Relators.
Before the En Banc Court1
EN BANC OPINION
Opinion by Justice Osborne
On relators' motion for rehearing en banc, we withdraw our opinion dated July 21, 2020, and vacate the order of that date. This is now the opinion of the Court.
Relators seek mandamus relief because the trial court denied their motion to designate a responsible third party. See TEX. CIV. PRAC. & REM. CODE § 33.004. Sitting en banc, we conclude that relators have met both the standard for mandamus relief and the standard for designating a responsible third party. Accordingly, we conditionally grant relators' petition for writ of mandamus.
THE SEALED RECORD
Two documents—relators' motion to designate a responsible third party and real party's operative petition—control our decision in this proceeding. See In re Greyhound Lines, Inc. , No. 05-13-01646-CV, 2014 WL 1022329, at *2 (Tex. App.—Dallas Feb. 21, 2014, orig. proceeding) (mem. op.) (standards of review for ruling on motion to designate responsible third party). But both of these documents, all briefing, and the entire mandamus record have been filed under seal.2 This "presents an
unusual problem" because this Court must issue a public opinion advising the parties of our decision and the basic reasons for it. Kartsotis v. Bloch , 503 S.W.3d 506, 510 (Tex. App.—Dallas 2016, pet. denied) ; TEX. R. APP. P. 52.8(d), 47.1, 47.3 ; TEX. GOV'T CODE § 552.022(a)(12).
Our decision in this proceeding turns on whether relators "plead[ed] sufficient facts" to support their motion to designate, and we cannot fulfill our responsibilities as a court of record without mentioning certain "facts concerning the alleged responsibility" of the third party relators seek to designate. See TEX. CIV. PRAC. & REM. CODE §§ 33.004(g)(1), 33.011(6) ; Greyhound Lines, Inc. , 2014 WL 1022329, at *2 ; Kartsotis , 503 S.W.3d at 510 ("[W]e must hand down a public opinion explaining our decisions based on the record.... This we cannot do without mentioning the key documents and certain specific facts."). Accordingly, similar to our approach in a previous original proceeding in the same case, In re Cook , No. 05-19-01283-CV, 2020 WL 2552881, at *1 n.2 (Tex. App.—Dallas May 20, 2020, orig. proceeding) (mandamus conditionally granted) (" Cook I "), we have "strived to preserve the confidentiality of the materials we believe the parties intended to be confidential[,] ... avoid[ing] reference to those materials where possible and making some references deliberately vague."3
BACKGROUND
As we explained in Cook I , the underlying lawsuit was filed against relators and four others in 2016. See id. at *1. Plaintiff, a limited liability company, alleged securities fraud and related claims in connection with a mineral acreage purchase transaction facilitated by defendant Unity Resources, L.L.C. ("Unity"). Id. Plaintiff contended the mineral acreage interests it purchased met the Texas Securities Act's definition of "securities"4 and thus it was owed heightened disclosure duties and other obligations not otherwise applicable. Id. According to plaintiff, Unity failed to make required disclosures and received undisclosed profits at the expense of plaintiff and other investors by engaging in self-dealing by and through its managers and related entities. Id.
Relators filed a motion for leave to designate Ken Paxton ("the non-party") as a responsible third party, alleging that the non-party knew about, reviewed, and approved the conduct complained of in plaintiff's petition. See id. Relators alleged that the non-party "served as counsel to and a manager and member" of Unity from 2008 through 2014 and "exercised control over the operations of Unity in general." They contended that the non-party "advised Unity on securities regulation compliance and corporate governance issues, specifically including the propriety of and disclosures regarding interested-party transactions between Unity and affiliate entities controlled by Unity's managers" but "demonstrated a lack of diligence and competence" in giving that advice. Relators alleged the non-party "structured" the complained-of scheme "[i]n his dual roles as counsel and manager for Unity." Relators also asserted that the non-party "specifically advised Unity about the adequacy
of its disclosures" for the type of transactions at issue. Relators detailed other conduct of the non-party, alleging "negligence and other violations of applicable standards" including legal malpractice, breach of fiduciary duties, violations of the Texas Securities Act, and fraud by nondisclosure. Relators concluded that the non-party "therefore caused or contributed to causing the harm for which [plaintiff] seeks recovery."
In an order dated December 16, 2019, the trial court denied relators' motion for leave to designate the non-party as a responsible third party. The trial court ruled that the motion "is fully and finally DENIED" because "Defendants have already once been given leave to replead facts providing fair notice of the basis for [the non-party's] liability to Plaintiff" after a previous denial. Relators now seek mandamus relief, asking this Court to direct the trial court to grant the motion to designate.
APPLICABLE STANDARDS
To designate a responsible third party, "notice pleading under the Texas Rules of Civil Procedure" is required. Greyhound Lines, Inc. , 2014 WL 1022329, at *2. To obtain mandamus relief, relators must show the trial court clearly abused its discretion and that relators have no adequate appellate remedy. In re Molina , 575 S.W.3d 76, 79 (Tex. App.—Dallas 2019, orig. proceeding). En banc consideration of a case is not favored but may be ordered when necessary to maintain uniformity of the Court's decisions. TEX. R. APP. P. 41.2(c) ; Chakrabarty v. Ganguly , 573 S.W.3d 413, 415–16 (Tex. App.—Dallas 2019, no pet.) (en banc) ("We will rehear a case en banc where it is necessary to secure uniformity of the Court's decisions and in other extraordinary circumstances, as we deem necessary.").
DISCUSSION
1. Designation of responsible third party
First, we conclude that relators have met the pleading requirements for designating a responsible third party under Chapter 33. See generally TEX. CIV. PRAC. & REM. CODE § 33.004 (Designation of Responsible Third Party); id. § 33.011(6) (defining "responsible third party"). "The pleading requirements for designating a responsible third party at the outset of a case are not stringent." Greyhound Lines, Inc. , 2014 WL 1022329, at *2.
Despite the voluminous mandamus record the parties have submitted, the only relief relators request or may obtain at this stage—the pleading stage—is to designate the non-party as a responsible third party. Questions regarding the non-party's liability for damages, his inclusion in the jury charge, or the propriety of summary judgment are not before us. The operative petition and the motion to designate control the inquiry. See id.
Chapter 33 defines "responsible third party" as "any person who is alleged to have caused or contributed to causing in any way the harm for which recovery of damages is sought, whether by negligent act or omission, ... by other conduct or activity that violates an applicable legal standard, or by any combination of these." TEX. CIV. PRAC. & REM. CODE § 33.011(6) (emphasis added). In Greyhound Lines, Inc. , we explained that Chapter 33 "provides a framework for apportioning percentages of responsibility in the calculation of damages in any case in which more than one person, including the plaintiff, is alleged to have caused or contributed to cause the harm for which recovery of damages is sought." Greyhound Lines, Inc. , 2014 WL 1022329, at *1. "The statute's
purpose is to hold each party responsible only for the party's own conduct causing injury." Id.
"At the pleading stage, the proportionate responsibility statute requires that the defendant seeking to designate a responsible third party ‘plead sufficient facts concerning the alleged responsibility of the person to satisfy the pleading requirement[s] of the Texas Rules of Civil Procedure.’ " Id. at *2 (quoting TEX. CIV. PRAC. & REM. CODE § 33.004(g)(2) ). The rules of civil procedure require "notice pleading." Id. "Under Texas' standards of notice pleading, the ‘fair notice’ standard for pleading is satisfied if the opposing party can ascertain from the pleading the nature and basic issues of the controversy, and what type of evidence might be relevant." Id.
Plaintiff has pleaded that it is the victim of securities fraud. It has asserted claims against seven defendants including the three relators for fraud, fraud by nondisclosure, fraud in a real estate transaction, breach of fiduciary duty, aiding and abetting breaches of fiduciary duty and fraud, fraudulent transfer, and two causes of action under the Texas Securities Act. Plaintiff also alleges conspiracy and seeks to pierce the corporate...
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