In re Haynes & Boone, LLP

• Decision Date: 26 July 2012
• Docket Number: No. 01–12–00341–CV.,01–12–00341–CV.
• Citation: 376 S.W.3d 839
• Parties: In re HAYNES AND BOONE, LLP and Patrick L. Hughes, Relators.
• Court: Texas Court of Appeals

376 S.W.3d 839

In re HAYNES AND BOONE, LLP and Patrick L. Hughes, Relators.

No. 01–12–00341–CV.

Court of Appeals of Texas,

Houston (1st Dist.).

July 26, 2012.

David Beck, Douglas Pritchett Jr., Michael E. Richardson, Alex Benjamin Roberts, Beck Redden & Secrest, Craig Smyser, Smyser, Kaplan & Veselka L.L.P., Houston, TX, for Relators.

Vincent L. Marable, III, Paul Webb, P.C., Wharton, TX, Williams F. Hagans, Hagans, Burdine, Montgomery & Rustay, P.C., Joseph D. Jamail, Jamail & Kolius, Houston, TX, for Real Party in Interest.

Panel consists of Justices MASSENGALE, BROWN, and HUDDLE.

OPINION

MICHAEL MASSENGALE, Justice.

This original proceeding concerns a legal malpractice claim relating to the handling of an antitrust matter.¹ The relators, Haynes and Boone, LLP and Patrick L. Hughes, are defendants in the malpractice suit. The real parties in interest, Rx.com, Inc. and its founder Joe S. Rosson, filed the suit alleging that the relators (and others) harmed them by failing to timely file an antitrust suit within the limitations period.

The relators contend that the suit presents embedded federal issues in the form of Sherman Act claims which must be proved to prevail on the malpractice cause of action and thus constitute a “case within the case.” These federal issues are the basis for relators' invocation of exclusive federal subject-matter jurisdiction over the malpractice claim. They thus argue that Texas state courts lack subject-matter jurisdiction to entertain such claims. These arguments were presented in a plea to the jurisdiction, which the trial court denied. The relators then filed a petition for writ of mandamus to seek review of that ruling.

We conclude that the trial court correctly denied the plea and that Texas courts may exercise jurisdiction over legal malpractice claims related to antitrust matters. Accordingly, we deny the petition.

Background

Prior to the filing of the malpractice suit at issue in this original proceeding, Rx.com filed an antitrust complaint in federal district court against various pharmacy benefit manager defendants. In addition to state-law claims that were later abandoned, the complaint included three causes of action under the Sherman Act: agreement in restraint of trade in violation of Section 1; conspiracy to monopolize in violation of Section 2; and attempted monopolization in violation of Section 2. See15 U.S.C. §§ 1, 2. The antitrust suit was dismissed on limitations grounds, and the Fifth Circuit Court of Appeals affirmed that judgment on appeal. See Rx.com v. Medco Health Solutions, Inc., 322 Fed.Appx. 394 (5th Cir.2009).

The real parties in interest sued Rx.com's former lawyers, including the relators, for legal malpractice in connection with the failure to timely file the antitrust suit. The petition was originally filed in a Texas state district court. The defendants removed the case to federal court, arguing that federal-question jurisdiction applied to the legal malpractice claims because of embedded federal questions relating to the original antitrust claims. See RX.com, Inc. v. O'Quinn, 766 F.Supp.2d 790, 793 (S.D.Tex.2011). The federal district court analyzed the question of whether the legal malpractice claims were ones “arising under” federal law, 28 U.S.C. § 1331, applying the standard articulated by the United States Supreme Court in Grable & Sons Metal Products, Inc. v. Darue Engineering & Manufacturing, 545 U.S. 308, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005), and considering whether the malpractice claims “necessarily raise a stated federal issue [that is] actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities.” RX.com, 766 F.Supp.2d at 794 (quoting Grable, 545 U.S. at 314, 125 S.Ct. at 2368). Relying in significant measure upon the Fifth Circuit's application of the Grable standard to a legal malpractice claim in Singh v. Duane Morris LLP, 538 F.3d 334 (5th Cir.2008), the federal court concluded that two of the necessary elements—a substantial federal interest and a lack of disruption to the balance of federal and state judicial responsibilities—were not present. Accordingly, the federal district court found that federal-question jurisdiction did not exist, and the case was remanded to state court. See RX.com, 766 F.Supp.2d at 797.

Following the remand to state court, two new opinions were issued in other cases, which the relators contend provided supervening authority to support their contention that the case belongs in federal court. In USPPS, Ltd. v. Avery Dennison Corp.—a case in which federal subject-matter jurisdiction was apparently undisputed due to the diversity of the parties—the Fifth Circuit applied the Grable test to determine that a state-law legal malpractice claim arose under federal patent law so as to invoke the exclusive appellate jurisdiction of the Federal Circuit.² Accordingly, the USPPS appeal was transferred to the Federal Circuit. ³

Then the Supreme Court of Texas held, in Minton v. Gunn, that the federal courts have exclusive subject-matter jurisdiction over a malpractice claim arising out of legal representation in a patent infringement action. See355 S.W.3d 634, 646 (Tex.2011), petition for cert. filed, No. 11–1118 (U.S. Mar. 9, 2012). The Minton case originated in state court and was dismissed on a motion for summary judgment. See id. at 638. However, in addition to granting federal jurisdiction over cases arising under federal patent law, 28 U.S.C. § 1338(a) also specifically prohibits state courts from exercising jurisdiction over the same category of cases.⁴ The claimant thus raised a subject-matter jurisdiction objection on appeal, and that argument was ultimately vindicated by the Supreme Court, which concluded, “based upon the specific facts of this case,” ⁵ that the embedded federal question “triggered exclusive federal patent jurisdiction,” requiring dismissal of the case without considering its merits. Minton, 355 S.W.3d at 646–47.

Relying primarily on USPPS and Minton, the relators re-urged their arguments in the trial court by filing a plea to the jurisdiction. As part of the argument presentedto the trial court, the relators contended that “determining whether Rx.com would have prevailed will entail litigation of the full panoply of factual and legal issues attending to a Sherman Act claim.” The trial court denied the plea,⁶ and the relators filed their mandamus petition, seeking relief from the trial court's continuing exercise of subject-matter jurisdiction over the case.

Analysis

A party requesting mandamus relief must meet two requirements. First, it must show that the trial court clearly abused its discretion. In re Prudential Ins. Co., 148 S.W.3d 124, 135 (Tex.2004) (orig. proceeding). Second, it must show that it has no adequate remedy by appeal. Id. at 135–36. The relators carry the burden of demonstrating their right to mandamus relief. See Canadian Helicopters Ltd. v. Wittig, 876 S.W.2d 304, 305 (Tex.1994) (orig. proceeding).

We will focus our analysis on the relators' contention that the trial court has abused its discretion by exercising subject-matter jurisdiction over this legal malpractice case. The relators' arguments rely on USPPS and Minton, as well as other cases involving legal malpractice in the patent-law context,⁷ as precedents for applying the Grable standard to determine when a state-law cause of action “arises under” federal law because of an embedded federal issue.

As explained below, the relators' argument wrongly assumes the relevance in this circumstance of the “arising under” standard as applied in Grable and its progeny. Because there is no nexus between the “arising under” standard and the question of whether federal courts have exclusive jurisdiction over the embedded federal antitrust issues, we reject relators' suggestion that the Grable standard provides the appropriate frame of analysis. Instead, applying the standard of Gulf Offshore Co. v. Mobil Oil Corp., 453 U.S. 473, 101 S.Ct. 2870, 69 L.Ed.2d 784 (1981), we conclude that the legal authorities establishing federal jurisdiction to decide federal antitrust claims do not preclude state courts from exercising jurisdiction over state-law malpractice claims with embedded federal antitrust issues.

I. Grable and its specific application relating to patent law

In Grable, the United States Supreme Court analyzed whether the claim presented in that case was one “arising under the Constitution, laws, or treaties of the United States” for purposes of federal-question jurisdiction as provided in 28 U.S.C. § 1331. The claim at issue was a suit to quiet title originally filed in state court, and it was subsequently removed to federal court on the grounds that the case presented a question of federal tax law. Grable, 545 U.S. at 311, 125 S.Ct. at 2366. If the case could have been originally brought in federal district court, then removal of the case from state court to federal court was proper under 28 U.S.C. § 1441(a). See id. at 312, 125 S.Ct. at 2366. Under Grable, in order for a state-law claim with an embedded federal question to “aris[e] under the Constitution, laws, or treaties of the United States” such that federal courts have subject-matter jurisdiction over that claim pursuant to section 1331, the state-law claim must (1) raise a stated federal issue that is (2) actually disputed and (3) substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities. See id. at 314, 125 S.Ct. at 2368.

Because Grable is an application of the “arising under” standard of 28 U.S.C. § 1331, the rule articulated in that case has special application with respect to patent cases, as federal courts have exclusive jurisdiction over all cases “arising under” patent law pursuant to 28 U.S.C. § 1338(a), and the “arising under”...