In re Emp. Funding of Am.

Decision Date05 April 2022
Docket Number13-21-00420-CV
PartiesIN RE EMPLOYEE FUNDING OF AMERICA, LLC
CourtTexas Court of Appeals

On Petition for Writ of Mandamus.

Before Justices Hinojosa, Tijerina, and Silva

MEMORANDUM OPINION

JAIME TIJERINA JUSTICE. [1]

Relator Employee Funding of America, LLC (Employee Funding), filed a petition for writ of mandamus raising numerous issues including, inter alia, the contentions that the trial court erred by sealing the record in the underlying case and by failing to rule on Employee Funding's pending motions.[2] We conditionally grant the petition for writ of mandamus in part and deny it in part.

I. Background

Real parties in interest Martin Phipps, acting individually and on behalf of Martin Phipps PLLC and Phipps Anderson Deacon LLP and Clayton Clark, acting individually and on behalf of Clark, Love & Hutson; and Peter Flowers, acting individually and on behalf of Meyers & Flowers, initiated the underlying proceeding in the 23rd District Court of Wharton County, Texas. They sought to administer the distribution of attorney's fees and expenses through the establishment of a qualified settlement fund (QSF) relating to a multi-district litigation case (the Syngenta MDL) regarding genetically modified corn products in the United States District Court for the District of Kansas, as provided in a joint venture agreement between the real parties in interest.

The trial court entered an order approving the QSF, appointed ARCHER Systems, LLC (ARCHER) as fund administrator, and appointed attorney Gregory Gowan as a special master. In January 2021, Employee Funding, which had a security interest in the attorney's fees payable to Martin Phipps and the Phipps entities in the Syngenta MDL, became aware that a QSF had been established and began communicating with ARCHER to obtain information about the fund. In February, Phipps notified ARCHER that he had assigned his rights to the Syngenta MDL funds in the QSF to Employee Funding.

On March 10, 2021, the trial court issued an order distributing the QSF to the real parties. Employee Funding received $2.5 million in fees as a result of that order, although it had expected a greater sum comprising approximately one-third of the common benefit fees, less deducted expenses. Employee Funding requested ARCHER and Gowen to provide information regarding the distribution but failed to receive any information from either regarding the division of fees and costs.

On May 17, 2021, Employee Funding intervened in the underlying trial court proceeding asserting its interest in the case through a credit agreement with Phipps. Employee Funding sought access to the case file; however, the clerk's office denied Employee Funding any access to that file pursuant to instructions from Gowen. Gowen asserted that the trial court had entered an order providing that no one could access the court file without a court order.

After further efforts to obtain access to the file were unsuccessful, on May 21, 2021, Employee Funding filed a "Motion to Modify Standing Order to Allow Access to Case File." In June 2021, counsel for real parties allegedly agreed to provide access to the file, but ultimately reneged. On June 4, 2021, the Syngenta MDL court issued an order allocating $60.4 million in fees for individually retained private attorneys. On June 7, 2021, Employee Funding filed an "Emergency Motion to Stay Disbursement of Funds," requesting the trial court to stay any further distribution of proceeds from the QSF until Employee Funding was allowed to examine the case file and determine whether previous and impending distributions were made in compliance with the parties' contracts.

The trial court set a hearing on Employee Funding's motions to be held on June 14, 2021. On June 9, 2021, the parties filed an agreed order which granted, in part, Employee Funding's motion for access to the case file; however, the trial court did not sign that order. Beginning on June 25, 2021, Employee Funding asked for a hearing date on its motions. A hearing was ultimately scheduled to be held on August 4, 2021; however, that hearing was passed because counsel for other parties had conflicting schedules. On August 2, 2021, the trial court notified the parties that it would set these motions to be heard by submission due to continued difficulty in scheduling. On October 13, 2021, Employee Funding emailed the court coordinator to request the status of the pending motions, to ask if there was anything further required to obtain rulings, and to request the court to rule on its motions. Nevertheless, the trial court did not thereafter issue rulings on these motions.

This original proceeding ensued on December 1, 2021. By petition for writ of mandamus, Employee Funding raises eight issues:

1. Did the trial court improperly seal or otherwise improperly deny public access to the court's file in this case? Did the trial court improperly seal the file without a written, publicly available motion and order, as Texas Rule of Civil Procedure 76a requires?
2. Did the trial court improperly prevent Relator-a party to the case- from accessing the court's file? Can a party be denied access to a court's file?
3. Did the trial court improperly appoint a special master and thereby abuse its discretion? Under Texas Rule of Civil Procedure 171, was the court required to: (1) find the case presented exceptional circumstances before appointing a special master and (2) sign a written order appointing the special master and make the order available to the parties?
4. Did the trial court abuse its discretion in failing to rule on Employee Funding's request for access to the pleadings and all other matters on file with the district court in this case since Employee Funding intervened as a holder of a security interest in part of the funds deposited with the court?
5. The Clark/Phipps/Flowers group executed a joint venture agreement by which they agreed that their award of Syngenta common benefit fees would be split by them one-third each. The Wharton County District Court's distribution order reveals that common benefit fees were not split between Clark, Phipps, and Flowers in accordance with their agreement. Did the trial court abuse its discretion in awarding a different division of common benefit fees than directed in the lawyers' joint venture agreement?
6. The Syngenta MDL Court awarded the Clark/Phipps/Flowers group $38, 120, 902.25 as total common benefit fees and only $7, 143, 837.45 for total common benefit expenses. But the Wharton County District Court awarded the Clark/Phipps/Flowers group only $20, 766, 740.67 as total common benefit fees and $20, 508, 241.80 for total common benefit expenses. Thus, the Wharton County District Court awarded the Clark/Phipps/Flowers group much less in total common benefit fees and much more in total common benefit expenses than the Syngenta MDL Court directed be given. As the Wharton County District Court acknowledged in one of its orders, the Syngenta MDL Court retained exclusive jurisdiction over its awards in the Syngenta litigation. Did the Wharton District Court have the authority to alter the total awards the Syngenta MDL Court ordered and if not, did it abuse its discretion in altering them?
7. Did the trial court abuse its discretion in failing to rule on Employee Funding's request to stay disbursement of funds? Does the trial court's failure to rule amount to a denial of the motion given that other funds remain in the QSF and other funds will be disbursed to a subaccount in the QSF while Employee Funding's motion to stop such disbursement is still pending?
8. Does Employee Funding have an adequate remedy at law for any of its complaints?

This Court granted Employee Funding's request for an emergency stay and requested the real parties to file a response to the petition for writ of mandamus. Clark, Love & Hutson, PLLC and Meyers & Flowers, LLC filed a response to the petition, and Employee Funding filed a reply thereto.

II. Standard of Review

Mandamus is an extraordinary and discretionary remedy. See In re Allstate Indem. Co., 622 S.W.3d 870, 883 (Tex. 2021) (orig. proceeding); In re Garza, 544 S.W.3d 836, 840 (Tex. 2018) (orig. proceeding) (per curiam); In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 138 (Tex. 2004) (orig. proceeding). The relator must show that (1) the trial court abused its discretion, and (2) the relator lacks an adequate remedy on appeal. In re USAA Gen. Indem. Co., 624 S.W.3d 782, 787 (Tex. 2021) (orig. proceeding); In re Prudential Ins. Co. of Am., 148 S.W.3d at 135-36; Walker v. Packer, 827 S.W.2d 833, 839-40 (Tex. 1992) (orig. proceeding). "The relator bears the burden of proving these two requirements." In re H.E.B. Grocery Co., 492 S.W.3d 300, 302 (Tex. 2016) (orig. proceeding) (per curiam); Walker, 827 S.W.2d at 840.

III. Sealed Record

In its first two issues, Employee Funding contends that the trial court improperly sealed or otherwise improperly denied public access to the court's file in this case without a written, publicly available motion and order as required by Texas Rule of Civil Procedure 76a and improperly prevented Employee Funding, a party to the case, from accessing the court's file.

Texas Rule of Civil Procedure 76a delineates the substantive standard and applicable procedure for sealing court records. See Tex. R. Civ. P. 76a; HouseCanary, Inc. v. Title Source, Inc., 622 S.W.3d 254, 259 (Tex. 2021). The rule provides, in relevant part, that:

Court records may not be removed from court files except as permitted by statute or rule. No court order or opinion issued in the adjudication of a case may be sealed. Other court records, as defined in this rule, are presumed to be open to the
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