L Series, L. L.C. v. Holt, 02-17-00415-CV

• Decision Date: 28 February 2019
• Docket Number: No. 02-17-00415-CV,02-17-00415-CV
• Citation: 571 S.W.3d 864
• Parties: L SERIES, L.L.C.; CKDH, L.L.C.; VUE, L.L.C.; and CKDH Investments, L.L.C., Appellants v. Conrad HOLT, Appellee
• Court: Texas Court of Appeals

571 S.W.3d 864

L SERIES, L.L.C.; CKDH, L.L.C.; VUE, L.L.C.; and CKDH Investments, L.L.C., Appellants

v.Conrad HOLT, Appellee

No. 02-17-00415-CV

Court of Appeals of Texas, Fort Worth.

Delivered: February 28, 2019

Rehearing Denied March 28, 2019

ATTORNEYS FOR APPELLANTS: ANDREW K. MEADE, D. JOHN NEESE, JR., KRISTIN K. REIS & SAMUEL B. HAREN, MEADE & NEESE LLP, HOUSTON, TEXAS.

ATTORNEYS FOR APPELLEE: DAVID J. DREZ III, JACOB T. FAIN & LAUREN K. DRAWHORN WICK PHILLIPS GOULD & MARTIN, LLP, FORT WORTH, TEXAS.

Before Kerr and Birdwell, JJ.¹

Opinion by Justice Birdwell

When an entity’s members collectively agree to provide a statutorily authorized and enforceable contractual right to the individual members in the entity’s documents, and effective enforcement of that remedy curtails the entity’s normal rights to appeal and supersedeas, whose interests should yield: the individual member’s or the entity’s? To answer that question, we examine and carefully balance the bedrock—and in this case competing—principles of freedom of contract and Texas procedural safeguards in a case of first impression for this court. Trial court plaintiffs L Series, L.L.C., CKDH, L.L.C., VUE, L.L.C., and CKDH Investments, L.L.C. (the Companies) appeal, and alternatively seek mandamus relief, from the trial court’s order requiring them to advance to defendant Conrad Holt, a member of all of the Companies, his fees and expenses pending trial of their suit against him. Because the trial court’s order is not one for which the legislature has authorized an interlocutory appeal, and because we conclude that mandamus relief is not warranted, we dismiss the appeal and deny the alternative request for mandamus relief.

I. The Companies Sue Holt, Who Obtains an Order Requiring the Companies to Advance His Fees and Expenses Pending Trial

The underlying suit arose primarily from Holt’s employment as the general manager of a group of Metroplex-area car dealerships—Arlington Saturn, Ltd., Fort Worth Saturn, Ltd., and Hurst Saturn, Ltd. (the Dealerships). Each of the Companies is a general partner of one of those Dealerships: L Series is Hurst Saturn’s general partner; CKDH is the general partner and one-percent owner of Fort Worth Saturn; and VUE is the general partner and one-percent owner of Arlington Saturn. CKDH Investments owns and leases the real estate occupied by the Dealerships. Holt has been a member of L Series, CKDH, and VUE since their formation in 2005 and a member of CKDH Investments since 2007. Holt was also a manager of CKDH Investments² and had served as the president of all of the Companies. As general manager of the Dealerships, Holt supervised salesperson Shawn Andrus.

In December 2016, the Companies and Dealerships sued Holt and Andrus,³ claiming that from around 2014–2016, both of them had engaged in numerous types of fraudulent activity and "financial abuse" toward the Companies and Dealerships: fraudulently recording sales to receive bonuses from car manufacturers, fraudulently booking sales, making unlicensed insurance sales, and engaging in various kinds of financing fraud, to name a few. The Companies and Dealerships identified their causes of action against Holt as breach of the general manager’s contract, breach of fiduciary duty, fraud, unjust enrichment, money had and received, aiding and abetting, assisting and participating, and civil conspiracy. Before suing, the Companies and Dealerships terminated Holt’s and Andrus’s employment and ordered Holt to stay away from the Dealerships' premises.

Holt answered and counterclaimed for breach of contract against all of the plaintiffs. After the Companies and Dealerships filed an amended petition adding factual allegations and a claim that Holt had breached his fiduciary duty to the Companies "due to his position as an officer/manager" of the Companies, Holt filed an amended counterclaim as well as third-party defendant claims not relevant here. In his amended counterclaim, Holt alleged that each of the Companies' Regulations entitle him to advancement of fees and expenses and indemnity for all of the claims against him. He alleged that the Companies had breached the Regulations by failing to provide him advancement and indemnity and refusing to make distributions to him. He also sought statutory indemnity and distributions. See Tex. Bus. Orgs. Code Ann. §§ 8.051(a), 101.203, 153.208(b). He further pleaded for money had and received and an accounting.

Almost a month after filing his amended counterclaim, Holt moved for partial summary judgment seeking a court order requiring the Companies to reimburse him for all fees and expenses he had already incurred in the suit and to pay him for future fees and expenses in the suit, in advance, on a monthly basis, in accordance with the Companies' Regulations. Holt alleged that the Companies and Dealerships had sued him because of his "position as president, manager, general manager, and/or officer," thus triggering the Companies' advancement obligations under the Regulations. According to Holt, that those advancement obligations were "neither dependent on the merits nor negated by [the Companies'] allegations of wrongdoing."

After a nonevidentiary hearing, the trial court granted Holt’s motion and ordered the Companies to pay Holt’s past "reasonable attorney fees and expenses" through November 1, 2017, and his "future reasonable attorney fees and expenses" on a monthly basis thereafter upon the submission of "summary invoices." The Companies filed a notice of interlocutory appeal, citing civil practice and remedies code section 51.014(a)(4), which permits an interlocutory appeal of an order granting or denying a temporary injunction. Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4). After we questioned our jurisdiction over the appeal, the parties briefed the jurisdictional issue, which we carried with the appeal. If we determine that we do not have jurisdiction over the appeal, the Companies alternatively seek a writ of mandamus ordering the trial court to vacate its advancement order.

II. No Interlocutory Appeal Lies From the Advancement Order

We have jurisdiction only over final judgments that dispose of all parties and issues in a case unless a statute authorizes review of a particular type of interlocutory order. See Lehmann v. Har-Con Corp. , 39 S.W.3d 191, 195 (Tex. 2001) ; Wyrick v. Jayson , No. 02-18-00104-CV, 2018 WL 3385870, at *3 (Tex. App.—Fort Worth July 12, 2018, no pet.) (mem. op.). Civil practice and remedies code section 51.014 lists certain types of interlocutory orders from which a party may immediately appeal; among these is a trial court’s order granting or refusing a temporary injunction. Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(4). The Companies contend that the trial court’s order is a temporary injunction order—albeit an invalid one—appealable under section 51.014(a)(4) because it (1) is immediately effective during the pendency of the underlying litigation and (2) commands the Companies to take certain actions. Although Holt argues that the Companies waived this argument by not raising it in the trial court, we are required to determine whether we have jurisdiction over an appeal and always have jurisdiction to do so. Freedom Commc'ns, Inc. v. Coronado , 372 S.W.3d 621, 624 (Tex. 2012) ; Houston Mun. Emps. Pension Sys. v. Ferrell , 248 S.W.3d 151, 158 (Tex. 2007).

The advancement order does not comport with rules of civil procedure 683 and 684.⁴ Tex. R. Civ. P. 683, 684. But according to the Companies, this lack of compliance does not mean that the order does not function as a temporary injunction, only that the order is an improper attempt to create an enforceable temporary injunction.

The Companies rely on the supreme court’s opinion in Qwest Communications Corp. v. AT&T and other cases holding that an order functions as a temporary injunction when it compels certain conduct and "is made effective immediately so that it operates during the pendency of the suit." 24 S.W.3d 334, 336–37 (Tex. 2000) ; Tatum v. Wells Fargo Home Mortg. , No. 01-13-00855-CV, 2014 WL 7474074, at *11–12 (Tex. App.—Houston [1st Dist.] Dec. 30, 2014, no pet.) (mem. op.); Helix Energy Sols. Grp. v. Howard , 452 S.W.3d 40, 41 (Tex. App.—Houston [14th Dist.] Nov. 13, 2014, no pet.) ; In re Robinson Family Entities , No. 11-12-00258-CV, 2014 WL 4347838, *4 (Tex. App.—Eastland Aug. 29, 2014, no pet.) (mem. op.); CLST Holdings, Inc. v. Red Oak Partners, LLC , No. 05-10-00237-CV, 2010 WL 716490, at *1 (Tex. App.—Dallas Mar. 3, 2010, no pet.) (mem. op.). The Companies also distinguish In re Aguilar , 344 S.W.3d 41, 43–45 (Tex. App.—El Paso 2011, orig. proceeding), a mandamus proceeding in which the El Paso Court of Appeals granted relief from an order refusing to enforce a contractual right to advancement of fees and expenses pending trial.

In Qwest , AT&T sued for damages to its fiber optic cables and also sought a temporary restraining order ( TRO) and temporary injunction. 24 S.W.3d at 335. Although the trial court granted a TRO, the parties resolved their pretrial issues at the temporary injunction hearing and read their agreement into the record. Id. That agreement (1) obligated Qwest to notify AT&T in advance of any construction operations within thirty feet of an AT&T underground facility and to electronically monitor the location of Qwest’s drill borehead, (2) dissolved the TRO, and (3) left any damages claims pending. Id. The agreement expired after three years unless extended by the parties. Id. The trial court signed an order "following the terms recited into the record at the temporary injunction hearing." Id.

Qwest appealed the interlocutory order, but the court of appeals dismissed the appeal for want of jurisdiction, reasoning that the order was not a temporary injunction because (1) it did not preserve the status quo, require a bond, set a trial date, or require the clerk to issue a writ of injunction and (2) the order was not limited in...