Introduced Bill Would Allow Substituted Service via Facebook

Last week, the Texas Legislature introduced H.B. No. 1989 which, if enacted, would allow substituted service through social media websites in certain circumstances. 

Under the proposed bill, if a court authorizes substituted service under the Texas Rules of Civil Procedure, the court may order service via an electronic communication sent to the defendant through a social media website. The court must find: 

  1. the defendant maintains a social media page on that website; 
  2. the profile on the social media page is the profile of the defendant; 
  3. the defendant regularly accesses the social media page account; and 
  4. the defendant could reasonably be expected to receive actual notice if the electronic communication was sent to the defendant's account. 

The bill has been referred to the Judiciary & Civil Jurisprudence committee for further action. 

The bill was introduced by Rep. Jeff Leach (profile) who represents District 67 (map). The entire text of H.B. 1989 can be found here.

Michael H. Bernick

 

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Strict Compliance Required for Default Judgment

In Bailey’s Furniture, Inc. v. Graham-Rutledge & Co., No. 05-11-00710-CV, the Fifth District Court of Appeals reaffirmed the long standing rule that strict compliance with Texas Rule of Civil Procedure 106(b) is necessary to establish proper service on a defaulting defendant.   

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Texas Supreme Court to Determine if Arbitration Clause in Trust is Enforceable

 

 

 

In Rachal v. Reitz, 347 S.W.3d 305 (Tex. App.--Dallas 2011, pet. filed), a beneficiary of a trust (the “Beneficiary”) sued the trustee (the “Trustee”), alleging failure to provide an accounting and breach of fiduciary duties.  The Trustee filed a motion to compel arbitration and to stay litigation, arguing that the Beneficiary must arbitrate his claims against the Trustee pursuant to a provision contained in the trust document.  The arbitration clause at issue stated:

Arbitration.  Despite anything herein to the contrary, I intend that as to any dispute of any kind involving this Trust or any of the parties or persons concerned herewith (e.g. beneficiaries, trustees), arbitration as provided herein shall be the sole and exclusive remedy....

The trial court denied the Trustee’s motion, and the Trustee appealed.

The existence of an arbitration agreement is based on Texas contract law. The sole evidence presented to support the Trustee’s motion—the trust document—expressed the settlor's intent that disputes involving the trust be resolved by arbitration.  The court of appeals held that the Trustee did not establish how the settlor's expression of intent satisfied all of the required elements of a contract or how this expression of the settlor's intent transformed the trust provision into an agreement to arbitrate between the Beneficiary and the Trustee. Accordingly, the court of appeals held that the arbitration provision in the trust document was not enforceable as an agreement to arbitrate.

The Texas Supreme Court agreed to review the appellate court's decision and is expected to issue a ruling in this case of first impression next year.

 

Top Ten Reasons to Plan Your Estate Now - Number Three

If you have a special needs child, do you have a plan in place that will allow your child to receive government assistance if something were to happen to you? Or would your child inherit assets that would disqualify him or her from receiving government assistance?

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Foreclosing on Residential Property under the Protecting Tenants at Foreclosure Act of 2009

 

In response to the housing collapse in 2009, the United States Congress enacted the Protecting Tenants at Foreclosure Act of 2009 (the “Act”) to protect tenants who live in residential properties that are being foreclosed from abruptly losing their homes. Lenders foreclosing on residential properties must comply with the obligations presented by the Act before filing a forcible detainer action against certain tenants residing in the properties. The Act was originally set to expire on December 31, 2012; however, the Dodd-Frank Wall Street Reform and Consumer Protection Act extended the Act to December 31, 2014. 

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Tenth Court of Appeals Rules City is Immune From Suit

On November 1, 2012, the Tenth Court of Appeals held that the City of Bruceville-Eddy was immune from being sued in a declaratory judgment action brought by Daniel Ferguson, former Chief of Police.  See City of Bruceville-Eddy v. Daniel Ferguson, No. 10-12-00109-CV. The trial court had previously denied the City’s motion to dismiss for lack of jurisdiction.  The City argued that it is immune from a suit for money damages and that immunity has not been waived by the Uniform Declaratory Judgments Act  (“UDJA”).

Ferguson filed his suit under the UDJA, which waives immunity for certain challenges to the validity of a municipal ordinance or statute, but it is not a general waiver of immunity.  However, Ferguson did not challenge the validity of a municipal ordinance or statute.  Instead, he requested a declaration that the City violated Sections 614.022 – 614.023 of the Texas Government Code.  The appellate court held this is simply a suit for money damages, and the City is immune. There was no challenge to the validity of an ordinance or statute, and thus the City’s immunity was not waived for his suit.

The Tenth Court of Appeals reversed the trial court and rendered judgment that Ferguson’s claims be dismissed. 

Supreme Court of Texas Continues to Interpret Craddock in Favor of Defaulting Party

On October 26, 2012, the Supreme Court of Texas released a per curiam opinion in Milestone Operating, Inc. v. ExxonMobil Corporation, No. 11-0647. ExxonMobil sued Milestone Operating, Inc. (“Milestone”) for breach of contract related to an oil and gas agreement. Milestone failed to appear and ExxonMobil took a default judgment against Milestone.

 

Milestone filed a motion for new trial challenging the service on Milestone’s registered agent, Donald Harlan, as defective and arguing that Milestone met the Craddock factors to set aside the default judgment. The trial court denied the motion for new trial. The court of appeals affirmed, holding that Milestone did not establish the first Craddock factor.

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Top Ten Reasons to Plan Your Estate Now - Number Two

 2. Guardianship of Minor Children

If you have a minor child, who would care for him or her in the event that you died or became incapacitated?  Would it be someone you deem to be in the best interest of your child, or would it be someone whom a court deems to be in the best interest of your child? 

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Court Upholds Texas Open Meetings Law

 

On September 25, 2012, a federal appeals court ruled that the Texas Open Meetings Act is constitutional and that it encourages free speech and government transparency in Asgeirsson v. Abbott.

The case began in 2005, when Alpine city council members were prosecuted for discussing city business in private emails. They sued saying the law was unconstitutionally vague and discouraged free speech because it had criminal penalties for knowingly holding meeting in secret.  Violations of the law are punishable by as much as six months in jail and a $500 fine. Officials from 15 Texas cities also challenged the law in 2009. 

A U.S. district judge ruled against the city officials, holding the law was content neutral and did not violate the First Amendment.  The case was them appealed to the 5th U.S. Circuit Court of Appeals, where the appellate court upheld the district judge’s ruling, declaring the TOMA constitutional.  

 

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Texas Supreme Court Justice Resigns

Texas Supreme Court Justice Dale Wainwright announced this week that he will be resigning effective September 30.  Justice Wainwright will join Bracewell & Giuliani LLP’s Austin office.

The former Harris County district judge was elected to the Texas Supreme Court in November 2002 and is the third longest-serving justice on the Texas Supreme Court.

Gov. Rick Perry will appoint a successor to complete Justice Wainwright’s term, which ends in 2014. The appointment will be subject to Senate confirmation.

Top Ten Reasons to Plan Your Estate Now - Number One

 1.  Incompetency       

You may not be incompetent now, but do you know what would happen to you and your property if the unthinkable were to happen?

When a person becomes incompetent (by way of mental illness, mental deficiency, physical illness, etc.) a court will appoint a guardian for that person.  If a person is totally incapable of caring for himself, managing his property, operating a motor vehicle, and voting in a public election, a court may appoint a guardian of the person or the person’s property, or both.  If a person lacks some, but not all, capacity to care for himself or his property, a court can appoint a guardian with limited powers.

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Fifth Circuit - Arbitration Panel May Determine Scope of Arbitration Clause

 Petrofac, Inc. (“Petrofac”) filed a lawsuit against DynMcDermott Petroleum Operations Company (“DM”). DM had agreed to design and build a mobile degasification facility for the removal of accumulated gas from crude oil stored at petroleum reserves sites. The parties’ contract contained an arbitration clause, governed by rules promulgated by the American Arbitration Association.

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Federal Court Dumps Class-Action Claims Brought Against Match.com

A class-action lawsuit against Match.com is not over, but it is definitely on the rocks.   

In Robinson v. Match.com, L.L.C., No. 3:10-CV-2651-L, the Northern District of Texas dismissed two of the three claims brought by a class of plaintiffs against the online-dating website, Match.com, and the plaintiffs’ remaining claim is on life support.

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Governmental Immunity Waived in Whiteboard Injury Case

In Dallas Metrocare Service v. Juarez, No. 05-11-01144-CV, the Dallas Court of Appeals affirmed the trial court’s denial of a plea to the jurisdiction. The case involved a plaintiff who was injured when a large whiteboard fell on him while he was seated at a table. The plaintiff was at Dallas Metrocare receiving out-patient mental health care treatment. The plaintiff sued Dallas Metrocare and alleged it was negligent for failing to property secure the whiteboard and creating an unreasonably dangerous condition.

Dallas Metrocare filed a plea to the jurisdiction asserting governmental immunity, specifically that the claim did not involved the “use” of tangible personal property and the plaintiff did not state a claim for premises liability because he did not allege Dallas Metrocare had actual knowledge of the dangerous condition.

The Tort Claims Act provides a limited waiver of immunity for injuries caused by (1) the operation or use of publicly owned vehicles or equipment, (2) a condition or use of tangible personal or real property, and (3) premises defects. Tex. Civ. Prac. & Rem. Code Ann. §§ 101.021, 101.025(a), § 101.022.

The court noted that while the whiteboard was not being used at the time of the injury, it was on display and was available for use as a visual aid.  The appellate court concluded that the plaintiff had, in fact, alleged a negligence claim involving the condition or use of tangible personal property, and thus affirmed the trial court’s order denying Dallas Metrocare’s plea to the jurisdiction.

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Commercial Tenant's Rights Against Landlord for Latent Defects

You signed a building lease to operate your business. After moving in, you notice problems with the premises that were not apparent before signing the lease. The problems with the premises interfere with your ability to serve your customers and run a profitable operation. You complain to the landlord, but the problems are not corrected. Under Texas law, are you allowed to withhold rent payments until the landlord remedies your complaints? Are you entitled to get out of the lease?

 
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Protecting Your Family With A Buy/Sell Agreement

Daniel Palmer will be speaking to the Estate Planning Council of the Emerald Coast on Tuesday, July 24, 2012 in Destin, Florida.  His presentation is entitled “Protecting Your Family Business with a Buy/Sell Agreement.”

Here is a link to Mr. Palmer’s seminar materials: Protecting Your Family Business with a Buy/Sell Agreement.

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5th Circuit Declares Texas Open Beaches Act Partly Unconstitutional

On May 21, 2012, the 5th U.S. Circuit Court of Appeals ruled the enforcement of the Texas Open Beaches Act, as it applies to a property on Galveston Island in the case Carol Severance v. Jerry Patterson, et al., was an unreasonable seizure of property.  This ruling echoed the Texas Supreme Court ruling (discussed here) regarding a property that was ordered to be moved or razed after Hurricane Rita moved the vegetation line behind her property.  The Texas Supreme Court answered the 5th Circuit’s certified questions as follows:

Texas law does not recognize a “rolling easement” created by avulsive events affecting the dry beach of Galveston's West Beach.  

The 5th Circuit Court of Appeals reversed and remanded the case back to Houston federal district court for retrial, with a few issues left to be decided.  Chief Judge Edith Jones, Judge Edith Clement and Judge Jacques Wiener were on the panel, with Wiener dissenting.

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Objections to Affidavit for Lack of Jurat Must be Objected to at Trial Court

 In The Mansions in the Forest, L.P. v. Montgomery County, 10-0969, 2012 WL 1370867 (Tex. Apr. 20, 2012), the Texas Supreme Court considered whether the lack of a jurat - a clause stating that a writing was sworn to before an authorized officer - in an affidavit opposing a motion for summary judgment is a defect that must have been objected to before the trial court ruled on the motion in order to preserve error.

The Beaumont Court of Appeals had previously held that omission of a jurat was a substantive defect under both the Texas Government Code and Texas Rule of Civil Procedure 166a, and that such a defect could be raised for the first time on appeal.  However, the Texas Supreme Court disagreed, holding that that neither the Government Code nor Texas Rule of Civil Procedure 166a requires such an affidavit to contain a jurat. However, to meet the definition of an “affidavit” under the Texas Government Code Section 312.011, the record must indicate the affidavit was sworn to. In this case, there was no such evidence in the record; therefore, the written statement did not meet the requirements of an affidavit.

Furthermore, because no objection to the affidavit was made in the trial court about the purported affidavit's failure to satisfy the requirements of the Texas Government Code, the defect was waived and was not preserved for appeal. 

Fall 2012 Issue of The Advocate Will Tackle Social Media and The Law

The Advocate is a quarterly publication of the Litigation Section of the State Bar of Texas.  Every publication addresses hot topics and trends in litigation in the State of Texas.  The Fall 2012 issue will be no different when it addresses Social Media and The Law. 

The editoral board did a great job lining up experienced authors on a topic that is very relevant today in Texas, and the nation, for that matter.  Just to give you a sample of a few of the topics that will be discussed, the Fall 2012 issue will address discovery, evidence and ethics issues (for both lawyers and judges) as they relate to the use of social media, as well as, how social media can effect jury trials (both the use of social media by lawyers to learn about the background of potential jurors and the use of social media by jurors during trials).  It really should be a great issue.

Changes to Chapter 53, Mechanic's & Materialman's Liens

          The 2011 Legislative Session resulted in a number of changes to Chapter 53 of the Texas Property Code (addressing Mechanic's, Contractor's, or Materialman's Liens).  Included below are the revisions to Chapter 53, along with brief commentary regarding these revisions.

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Avoiding Illusory Arbitration Clauses

     In Carey v. 24 Hour Fitness, USA, Inc., 10-20845, 2012 WL 205851 (5th Cir. Jan. 25, 2012), the United States Court of Appeals for the Fifth Circuit found an arbitration agreement to be illusory because one party to the agreement retained the unilateral right to modify or terminate the arbitration provision at any time.

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Quick Review: The Automatic Stay

     This post discusses the basics of the “automatic stay” that is in place when a customer files for bankruptcy.  This post also includes a discussion of the potential pitfalls that creditors face for violations of the automatic stay.

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Texas Supreme Court Rules on Noncompete Agreement's Enforceability

 The Texas Supreme Court has once again affirmed its decision to make non-compete agreements more easily enforceable by employers against their employees.  The Court was asked to consider whether a covenant not to compete signed by a valued employee in consideration for stock options, designed to give the employee a greater stake in the company’s performance, is unenforceable as a matter of law because the stock options did not give rise to an interest in restraining competition.

In the summer of 2011, the Texas Supreme Court issued its opinion in Marsh USA Inc. v. Cook, No. 09-0558 (Tex. June 24, 2011), holding that, under the terms of the Covenants Not to Compete Act, a covenant not to compete signed by an employee in consideration of stock options was enforceable because the company’s provision of stock options was reasonably related to the employer’s interest in protecting its goodwill. This was deemed a business interest worthy of protection, thus the noncompete agreement was not unenforceable on that basis. A motion for rehearing was thereafter filed, and the Court recently withdrew its prior opinion and substituted a new opinion in Marsh USA Inc. v. Cook, No. 09-0558 (Tex. Dec. 16, 2011) 

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City Employee is Limited to Workers' Compensation Benefits, Despite Issuance of Uninsured/Underinsured Automobile Insurance Policy

In Smith v. City of Lubbock, 07-10-0466-CV, 2011 WL 4478494 (Tex. App.--Amarillo Sept. 26, 2011, pet. granted), the Amarillo Court of Appeals held that workers’ compensation  laws barred additional recovery against an employer who is a subscriber to workers’ compensation.  In this case, the additional recovery is based upon the existence of an uninsured/underinsured auto policy (the “UM Policy”) acquired by the City from St. Paul Fire and Marine Ins. Co. (“St. Paul”). 

This case arose when Smith, an employee of the City of Lubbock (the “City”) was struck by an intoxicated driver while Smith was in the course and scope of his duties for the City. Smith took the position that Texas workers’ compensation laws did not bar an employee from suing his employer on the UM Policy. The City obtained the UM Policy for its employees.  As a result of his injuries, Smith received workers’ compensation benefits; however, he also sought benefits pursuant to the UM Policy. Those benefits were denied, and Smith filed suit against the City and St. Paul. The trial court granted summary judgment on behalf of both the City and St. Paul; however, St. Paul has since conceded that it was not entitled to the granting of a summary judgment.  

 

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Southern District of Texas Rejects Insureds' Demand for Appraisal Under Flood Policy

The Southern District of Texas recently provided additional clarification regarding what flood claims under an Standard Flood Insurance Policy (“SFIP”) were subject to the appraisal clause when there are pricing issues as well as potential coverage issues involved. Ultimately, the Court ruled that because the dispute involved whether a particular item was actually covered under the SFIP, the appraisal clause was not applicable to the flood claim at issue. 

Sidney and Bettie Jean Sam (“Plaintiffs”) were insured under a SFIP issued by National Lloyds Insurance Company (“National Lloyds”) pursuant to the National Flood Insurance Program (“NFIP”).  Plaintiffs’ apartment building was damaged by flood waters following Hurricane Ike.  National Lloyds sent an adjuster to the property in question, and later paid the Plaintiffs $100,622.67 for the loss.  

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Waco Court of Appeals Upholds Actual and Punitive Damages Related To Non-Compete Agreement

The Waco Court of Appeals recently upheld a damages award and permanent injunction regarding the breach of a non-compete agreement in favor of Chris Christensen Systems, Inc. (CCS), a dog product manufacturer and distributor against its former employee, Eric Salas. 

The Court of Appeals upheld the default judgment and all damages and held that the non-compete agreement with a  five year duration and a broadly defined industry exclusion, as opposed to a geographic exclusion, was enforceable. 

Salas had been hired as a VP of Sales and Education Director for CCS and signed a non-compete and confidentiality agreement (the "Agreement") upon commencing his employment.  He was then provided with extensive confidential and trade secret information by his employer.  After leaving his employment in September 2009, Salas almost immediately began competing against CCS, in violation of the Agreement.  

In January 2010, CCS filed suit against Salas seeking a temporary injunction and seeking actual and exemplary damages.  The trial court granted the temporary injunction in favor of CCS. Interestingly, Salas filed an answer and appeared at the temporary injunction hearing via telephone with an individual who purported to be an attorney licensed in Florida, but it was later found to not be a licensed attorney in any state.  The temporary injunction was granted, and the matter was set for trial. 

 

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Dr Pepper Sues Dublin Bottler

Dr Pepper Snapple Group, Inc. (NYSE: DPS) has filed a lawsuit against Dr Pepper Bottling Co. of Dublin, Texas in the U.S. District Court in the Eastern District of Texas, alleging that the Dublin bottling company has violated its license agreement by selling Dublin Dr Pepper ouside of a six-county territory.  Dr Pepper Snapple has also alleged the unauthorized use of the term “Dublin Dr Pepper” on packaging and on merchandise.  The relief sought by Dr Pepper Snapple includes restricting sales of "Dublin Dr Pepper" on the Dublin Dr Pepper website and toll-free number.  Dr Pepper Snapple additionally seeks attorneys' fees.

 

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Debate On Liability Damage Caps As Part of Health Care Reform Rages On

For the last several months, national health care reform has been debated on television (nearly 24 hours a day), at town hall meetings, and at dinner tables across this country.  Whether you favor  national health care reform or not, a part of the debate includes a discussion about whether or not liability damage caps for doctors and hospitals should be included in any legislation that is ultimately passed by Congress and signed by President Obama.  Historically, the debate about liability damage caps has been left to the States to decide.  Now, however, we may see federal liability damage caps for doctors and hospitals for the first time in our country's history.

Recently, in the Atlanta-Journal Constitution, Randolph W. Pate and C. Andrew Childers laid out the Pros and Cons of liability damage caps for doctors and hospitals.  You can read their article by clicking here.