T. Agenbroad v. J. McEntire ( 2014 )

Case: 14-40251 Document: 00512879625 Page: 1 Date Filed: 12/22/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
December 22, 2014
No. 14-40251
Lyle W. Cayce
Clerk
T. J. AGENBROAD; JAMES ALIBRI; MARGARETHE L. ALLEN; JOHN
ANDERSON; LANA M. ANDERSON; ET AL,
Plaintiffs - Appellants
v.
J. A. MCENTIRE; BIG ROCK PETROLEUM, INCORPORATED,
Defendants - Appellees
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:12-CV-480
Before KING, DENNIS, and CLEMENT, Circuit Judges.
PER CURIAM:*
Plaintiffs-Appellants appeal the district court’s order granting summary
judgment for Defendants-Appellees J.A. McEntire and Big Rock Petroleum,
Inc., on the grounds that the statute of limitations had run. Plaintiffs-
Appellants argue that Texas Civil Practice and Remedies Code Sections 16.063
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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and 16.064 apply to toll the limitations period as does equitable tolling. For
the reasons that follow, we AFFIRM.
I. Factual and Procedural Background
Appellants (the “Investors”) are 238 investors in an alleged oil and gas
Ponzi scheme run by Appellees, J.A. McEntire and Big Rock Petroleum, Inc.
(collectively, “Big Rock”). Investors allege that this Ponzi scheme cost them
over $24,000,000 in losses.
After the scheme was uncovered, Investors formed the Big Rock
Investors Association (“BRIA”) to bring claims on their behalf against Big
Rock. BRIA filed suit against Big Rock in state court in 2005, alleging
violations of the Texas Securities Act. In 2006, Big Rock filed a plea to the
jurisdiction, challenging BRIA’s standing and thereby also challenging the
subject matter jurisdiction of the state court. Later that year, Big Rock moved
to abate the state court proceedings, arguing that the Federal Bureau of
Investigation’s seizure of Big Rock’s records and a pending bankruptcy
proceeding prevented the adjudication of the lawsuit. The state court granted
the motion to abate.
In late 2010, the state court reactivated the suit. The next year, the state
court denied Big Rock’s still-outstanding plea to the jurisdiction; however, the
court reconsidered and granted the plea to the jurisdiction in 2012. BRIA
appealed. After some delay due to pending claims in the state trial court, the
Texas Court of Appeals affirmed the district court’s dismissal. Big Rock
Investors Ass’n v. Big Rock Petroleum, Inc., 409 S.W.3d 845, 853 (Tex. App.—
Fort Worth 2013, pet. denied).
Meanwhile, in July 2012, Investors filed the present suit in the United
States District Court for the Eastern District of Texas, two months before the
judgment in the state trial court became final. The present suit concerns the
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same claims as the state court lawsuit, but the present lawsuit was filed with
the individual investors named as plaintiffs—not BRIA.
Big Rock moved for summary judgment in the district court, arguing that
Investors’ claims were time-barred. Investors replied by asserting that the
statute of limitations should be tolled under Texas Civil Practice and Remedies
Code Sections 16.063, 16.064, and the doctrine of equitable tolling. On
recommendation of the magistrate judge, the district court rejected those
arguments and granted summary judgment. Investors timely appealed.
II. Texas Civil Practice & Remedies Code Section 16.063
We review a district court’s grant of summary judgment de novo, and
apply the same standard on appeal as applied by the district court. Rogers v.
Bromac Title Servs., L.L.C., 755 F.3d 347, 350 (5th Cir. 2014).
Investors first argue that Texas Civil Practice and Remedies Code
Section 16.063 tolls the statute of limitations. That section provides: “The
absence from this state of a person against whom a cause of action may be
maintained suspends the running of the applicable statute of limitations for
the period of the person’s absence.” Tex. Civ. Prac. & Rem. Code § 16.063.
Under Texas law, while the plaintiff bears the ultimate burden of proof at trial
to prove a tolling provision, the burden on summary judgment differs. Woods
v. William M. Mercer, Inc., 769 S.W.2d 515, 518 (Tex. 1988). On summary
judgment, once the non-movant “asserts that a tolling provision applies, the
movant must conclusively negate the tolling provision’s application to show his
entitlement to summary judgment.” Jennings v. Burgess, 917 S.W.2d 790, 793
(Tex. 1996); see also Zale Corp. v. Rosenbaum, 520 S.W.2d 889, 891 (Tex. 1975).
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We assume without deciding that the Texas summary judgment standard
applies in this case, as doing so does not affect our decision. 1
Investors, relying on Kerlin v. Sauceda, 263 S.W.3d 920 (Tex. 2008), and
Ashley v. Hawkins, 293 S.W.3d 175 (2009), argue that section 16.063 applies
here, because Big Rock—who is a non-resident—was absent from the state
during the limitations period. In Kerlin and Ashley, the Texas Supreme Court
held that a non-resident is “present” within the state under section 16.063
whenever he is amenable to service of process through the Texas long-arm
statute and has sufficient contacts with Texas to create personal jurisdiction.
Kerlin, 263 S.W.3d at 927; Ashley, 293 S.W.3d at 179. As such, as long as the
defendant is subject to the long-arm statute and the Texas courts have
personal jurisdiction over him, he is not absent from the state under 16.063
and the limitations period is not tolled. Kerlin, 263 S.W.3d at 927; Ashley, 293
S.W.3d at 179. Investors argue as follows: Big Rock’s assertions at prior stages
of this litigation that Texas did not have personal jurisdiction over it estop it
from disputing its “absence” from the state for purposes of section 16.063.
Investors assert that, given those prior assertions, the statute of limitations
was tolled for the duration of Big Rock’s absence from Texas.
1 We note that the precedent in this circuit is in conflict on the issue of whether to
apply the Texas “conclusively negate” summary judgment standard or the federal standard,
which would not impose that burden on the moving party. Compare Fed. Deposit Ins. Corp.
v. Shrader & York, 991 F.2d 216, 220 (5th Cir. 1993) (applying the federal summary judgment
rule), and John G. Mahler Co. v. Klein Karoo Landboukooperasie DPK, No. 94-10635, 1995
WL 371037, at *3 n.2 (5th Cir. June 5, 1995) (unpublished) (same), with Bridges v. Metabolife
Int’l, Inc., 119 F. App’x 660, 664 (5th Cir. 2005) (applying the Texas summary judgment rule),
Texas Soil Recycling, Inc. v. Intercargo Ins. Co., 273 F.3d 644, 649 (5th Cir. 2001) (same),
Geraghty & Miller, Inc. v. Conoco, Inc., 234 F.3d 917, 932 (5th Cir. 2000), abrogated on other
grounds by Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599 (2009), Harbor
Ins. Co. v. Urban Constr. Co., 990 F.2d 195, 200 (5th Cir. 1993) (same), and Saenz v. Keller
Indus. of Tex., Inc., 951 F.2d 665, 667 (5th Cir. 1992).
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Yet Section 16.063 generally does not apply to non-residents of Texas.
Jackson v. Speer, 974 F.2d 676, 678–79 (5th Cir. 1992). There are, however,
two exceptions to that general rule. Id. at 679. First, the tolling provision
applies to non-residents who were present in Texas when they contracted for
the debt sued upon. Id. Second, the provision applies to non-residents who
were present in Texas when the cause of action sued upon accrued. Id. Neither
Kerlin nor Ashley abrogated the general rule that section 16.063 does not apply
to non-residents; rather, Kerlin and Ashley speak to when non-residents—who
meet one of the two exceptions—are “present” in or “absent” from the state for
tolling purposes. See Kerlin, 263 S.W.3d at 927–28; Ashley, 293 S.W.3d at 179;
see also Medina v. Tate, 438 S.W.3d 583, 589 (Tex. App.—Houston [1st Dist.]
2013, no pet.) (noting that Kerlin and Ashley “involved nonresident defendants
who had committed acts in Texas forming the basis of the suits against them”).
As such, in order for Kerlin and Ashley to come into play, one of the two
exceptions to the general rule exempting non-residents from section 16.063
tolling must first apply. Investors do not argue on appeal that either exception
applies 2 or that the district court erred in failing to hold Big Rock to its burden
to conclusively negate the applicability of either of those exceptions. Rather,
their argument is only that, under Kerlin and Ashley, section 16.063 does in
fact apply to non-residents. As we conclude that is an overly broad reading of
Kerlin and Ashley, Investors’ argument fails. As such, they have failed to
demonstrate that the district court erred in ruling that, as Big Rock is a non-
resident, section 16.063 did not apply here. Sanders v. Unum Life Ins. Co. of
2 Although in their sur-reply to the motion for summary judgment below, Investors
asserted that “Section 16.063 applies to a non-resident who was present in Texas when the
cause of action arose,” they make no such argument in their brief on appeal.
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Am., 553 F.3d 922, 926 (5th Cir. 2008) (“A party waives an issue if he fails to
adequately brief it on appeal.” (internal quotations marks omitted)).
III. Texas Civil Practice & Remedies Code Section 16.064
Investors also argue that the statute of limitations should be tolled under
Texas Civil Practice and Remedies Code Section 16.064. That section provides:
(a) The period between the date of filing an action in a trial court
and the date of a second filing of the same action in a different
court suspends the running of the applicable statute of limitations
for the period if:
(1) because of lack of jurisdiction in the trial court where the
action was first filed, the action is dismissed or the judgment
is set aside or annulled in a direct proceeding; and
(2) not later than the 60th day after the date the dismissal
or other disposition becomes final, the action is commenced
in a court of proper jurisdiction.
(b) This section does not apply if the adverse party has shown in
abatement that the first filing was made with intentional
disregard of proper jurisdiction.
Tex. Civ. Prac. & Rem. Code § 16.064. Investors contend that their federal
lawsuit falls within this provision because: (1) their suit in state court was
dismissed for lack of subject matter jurisdiction, and (2) they filed this suit
within sixty days of the date the dismissal of the state court suit became final.
Big Rock replies that the statute applies only to suits that are dismissed for
lack of subject matter jurisdiction because they are filed in the “wrong court,”
not suits that are otherwise dismissed for lack of jurisdiction.
In interpreting Texas law, we begin by determining whether there is a
final decision by the Texas Supreme Court on point. Hodges v. Mack Trucks,
Inc., 474 F.3d 188, 199 (5th Cir. 2006). If there is not, as is the case here, we
must make an “Erie guess” as to how the Texas Supreme Court would resolve
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the issue. Am. Int’l Specialty Lines Ins. Co. v. Rentech Steel, L.L.C., 620 F.3d
558, 564 (5th Cir. 2010). To inform our decision, we look to:
(1) decisions of the [Texas] Supreme Court in analogous cases, (2)
the rationales and analyses underlying [Texas] Supreme Court
decisions on related issues, (3) dicta by the [Texas] Supreme Court,
(4) lower state court decisions, (5) the general rule on the question,
(6) the rulings of courts of other states to which [Texas] courts look
when formulating substantive law and (7) other available sources,
such as treatises and legal commentaries.
Id. (alterations in original) (internal quotation marks omitted). Here, there is
no Texas Supreme Court case directly on point nor is there a decision in a
sufficiently analogous case. Yet the “rationales and analyses” applied by the
Texas Supreme Court provide significant guidance in interpreting section
16.064. Id. “When we interpret a Texas statute, we follow the same rules of
construction that a Texas court would apply—and under Texas law the
starting point of our analysis is the plain language of the statute.” Forte v.
Wal-Mart Stores, Inc., 763 F.3d 421, 427 (5th Cir. 2014) (internal quotation
marks omitted).
The plain language of section 16.064 indicates that it is meant to apply
only where the plaintiff’s suit was filed in the “wrong court.” While subsection
16.064(a)(1) is ambiguous as to what is meant by a “lack of jurisdiction in the
trial court,” that ambiguity is resolved by subsection 16.064(a)(2). Subsection
(a)(2) states that the plaintiff has sixty days to refile in “a court of proper
jurisdiction.” As “proper jurisdiction” modifies “court” in that subsection, the
plain language of the statute refers to actions dismissed due to a limitation of
the jurisdiction in the first court, not situations where the action was dismissed
for lack of standing to sue, as here. Such a reading also comports with dicta
from the Texas Supreme Court. In In re United Services Automobile Ass’n, the
Texas Supreme Court noted that section 16.064 was enacted in order to
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address the “antiquated jurisdictional patchwork” of trial court subject matter
jurisdiction in Texas. In re United Servs. Auto. Ass’n, 307 S.W.3d 299, 304
(Tex. 2010). The Texas Supreme Court noted that Texas’s “court system has
been described as one of the most complex in the United States, if not the
world,” id. (internal quotation marks omitted), and outlined the varying (and
inconsistent) jurisdictional limitations of Texas’s nine different types of trial
courts, id. at 302 (“Texas has some 3,241 trial courts within its 268,580 square
miles. Jurisdiction is limited in many of the courts; it is general in others.”
(footnotes omitted)); id. at 303 (“We have at least nine different types of trial
courts, although that number does not even hint at the complexities of the
constitutional provisions and statutes that delineate jurisdiction of those
courts.”).
Further, decisions of the Texas Court of Appeals reinforce our
understanding of section 16.064. In Clary Corp. v. Smith, the Texas Court of
Appeals held that section 16.064 did not apply to toll the statute of limitations
when, after the defendants’ counterclaims were dismissed as the damages
claimed were over the jurisdictional limit of the county court, they refiled those
same counterclaims seeking a lesser amount in damages. Clary Corp. v.
Smith, 949 S.W.2d 452, 461 (Tex. App.—Fort Worth 1997, pet. denied).
Construing the language of section 16.064, the court stated that “[t]he plain
language of both section 16.064 (‘second filing . . . in a different court’) and its
predecessor (‘commencement in the second court’) indicates that the legislature
intended the saving statute to apply only to cases refiled in a different court
after dismissal, not in the same court.” Id. at 460. Further, because the
plaintiff could have amended his pleadings to come within the court’s
jurisdiction, “the party would not be in the wrong court and would not suffer
the ‘penalty of limitation bar’ that section 16.064 is designed to protect
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against.” Id. at 461. Similarly, the Texas Court of Appeals declined to apply
section 16.064 to toll the statute of limitations where the plaintiff had
originally filed suit under sections 1983 and 1981 in federal court and, after
dismissal, filed state law tort causes of action for the same incident in state
court. Turner v. Tex. Dep’t of Mental Health & Mental Retardation, 920 S.W.2d
415, 417 (Tex. App.—Austin 1996, writ denied). In determining whether the
federal and state suits were the “same action” under section 16.064, the court
noted that “[t]he statute is designed to protect litigants who mistakenly file
their action in the wrong court.” Id. at 419. But because the plaintiff “could
not have maintained his § 1981 and § 1983 causes of action in either state or
federal court,” section 16.064 did not apply. Id. The court reasoned that
“[r]ather than mistakenly filing his action in the wrong court, Turner simply
filed the wrong cause of action, regardless of where it was filed. This mistake
is beyond the scope and purpose of the tolling provision at issue.” Id.; see also
Bell v. Moores, No. 01-94-00826-CV, 1996 WL 74099, at *5 (Tex. App.—
Houston [1st Dist.] 1996, no writ) (unpublished) (“In the present case, the trial
court in the first suit did not lack jurisdiction because Wanda had filed her
intervention in the wrong court; rather, the trial court lacked jurisdiction over
Wanda’s claim because she did not have standing to bring it.”).
Additionally, Investors’ reliance on Brown v. Fullenweider, 135 S.W.3d
340 (Tex. App.—Texarkana 2004, pet. denied), Long Island Trust Co. v. Dicker,
659 F.2d 641 (5th Cir. Unit A Oct. 1981), and Griffen v. Big Spring Independent
School District, 706 F.2d 645 (5th Cir. 1983), is misplaced. While Brown
certainly rejected the so-called “wrong court” interpretation of section 16.064,
Brown, 135 S.W.3d at 345–46, we find the opinion unpersuasive in light of the
plain language of the statute and the Texas Supreme Court’s recent dicta in
United Services, as discussed supra. Further, Dicker is wholly distinguishable
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from this case. In Dicker, we held that the predecessor to section 16.064
applied to an action dismissed for lack of personal jurisdiction in another state,
then refiled within sixty days in federal court in Texas. Dicker, 659 F.2d at
647. Dicker therefore does not speak to situations where, as here, the first
lawsuit was dismissed for lack of standing, and jurisdiction would not have
been proper in any court. As to Griffen, the plaintiff’s claims there were
dismissed in the state court action because of a failure to exhaust state
administrative remedies before the plaintiff filed his constitutional claims in
federal court. Griffen, 706 F.2d at 648. Here, by contrast, Investors made a
strategic decision to use an unconventional litigation vehicle to bring their
claims—a strategic decision that carried a risk of a dismissal for lack of
standing. The failure of that strategy is not the type of dismissal for which
section 16.064 provides a remedy. See Hotvedt v. Schlumberger Ltd. (N.V.),
942 F.2d 294, 297 (5th Cir. 1991) (“But for counsel’s tactical decision,
prematurely and voluntarily to dismiss the California suit, the Hotvedts could
have proceeded to press their claims against STC in South America, or indeed,
could have appealed to the higher California courts for relief. It is clear,
however, that errors in such tactical decisions were not meant to be remedied
by the savings statute.”).
As such, section 16.064 does not operate to toll the statute of limitations.
Investors elected to proceed in the state court by suing through BRIA, and they
elected not to bring suit individually prior to the running of the statute of
limitations. Proceeding with that strategy involved a calculated risk that
BRIA may be held not to have standing. The problem with Investors’ first
lawsuit was therefore not the jurisdiction of the Texas courts; rather, it was
the lack of standing of the plaintiff-association. As such, section 16.064 does
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not toll the statute of limitations in this case, and we affirm the district court’s
grant of summary judgment as to that section.
IV. Equitable Tolling
Lastly, the district court did not err in declining to apply equitable
tolling. We review a district court’s decision regarding equitable tolling for
abuse of discretion. Granger v. Aaron’s, Inc., 636 F.3d 708, 712 (5th Cir. 2011).
Equitable tolling is to be applied only in “rare and exceptional circumstances.”
Harris v. Boyd Tunica, Inc., 628 F.3d 237, 239 (5th Cir. 2010) (internal
quotation marks omitted). Additionally, “[a] petitioner’s failure to satisfy the
statute of limitations must result from external factors beyond his control;
delays of the petitioner’s own making do not qualify.” In re Wilson, 442 F.3d
872, 875 (5th Cir. 2006). Further, we are “reluctant to apply equitable tolling
to situations of attorney error or neglect, because parties are bound by the acts
of their lawyer.” Granger, 636 F.3d at 712.
Investors make two arguments that equitable tolling should apply in this
instance. First, they argue that equitable tolling applies because they filed
their claims within the limitations period and diligently pursued their claims
thereafter. Second, they argue that extraordinary circumstances prevented
them from pursuing their claims within the statutory period. Neither
argument persuades us that the district court abused its discretion here.
To support their first argument, Investors rely on Burnett v. New York
Central Railroad Co., 380 U.S. 424 (1965), and Granger. Burnett is inapposite,
as it turned on consideration of the congressional policies underlying FELA
and the necessity of a uniform rule governing tolling in FELA cases. See
Burnett, 380 U.S. at 432–33. Granger is similarly unavailing. In Granger, the
plaintiff had mistakenly believed that filing a complaint with one federal
agency was sufficient to begin its lawsuit—in reality, the plaintiff had filed his
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claim with the wrong agency. Granger, 636 F.3d at 710. By the time the
mistake was corrected, the limitations period had expired. Id. This court held
that the district court did not abuse its discretion in tolling the statute of
limitations, because the plaintiff had brought a claim, albeit a defective one,
within the statutory period and exercised diligence thereafter. Id. at 713. This
is, however, an altogether different case. The delay in filing claims in the
names of the individual plaintiffs was the result of a calculated litigation
strategy—to employ an unincorporated association as the vessel for
vindicating Investors’ claims. They were aware that their strategy was being
challenged in the state court almost from the beginning. Yet Investors chose
not to bring a lawsuit naming Investors individually as plaintiffs until after
the associational standing issue had been resolved in the state court system.
That it was the risk of their strategy that came to fruition—and not the
reward—does not mandate the intervention of equity to revive their claims.
We also reject Investors’ second argument for equitable tolling.
Investors argue that the FBI’s seizure of Big Rock’s records, and the resulting
abatement of the state court action, is an extraordinary circumstance
mandating equitable tolling. Yet the FBI’s seizure of the records only affected
the resolution of the plea in abatement challenging BRIA’s associational
standing. It did not prevent Investors from bringing suit individually.
Equitable tolling is not an insurance policy for the risks that accompanied
Investors’ “wait-and-see” approach to BRIA’s standing.
V. Conclusion
For the foregoing reasons, the judgment of the district court is
AFFIRMED.
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EDITH BROWN CLEMENT, Circuit Judge, concurring in part and concurring
in the judgment:
I concur with the majority as to Parts I and III-V and in the judgment. I
write separately because I disagree with the majority’s reasoning in Part II
and would affirm the district court on different grounds.
As the majority explains, Tex. Civ. Prac. & Rem. Code § 16.063 does not
generally apply to non-residents. This general rule is subject to two exceptions.
See supra pp. 4-5. The majority states that “Investors does not argue on appeal
. . . that the district court erred in failing to hold Big Rock to its burden to
conclusively negate the applicability of either of those exceptions.” Id. I
respectfully disagree.
Under Texas law, once Investors asserted that section 16.063 applied,
the burden shifted to Big Rock to conclusively negate the provision’s
application. See supra note 1 and accompanying text. 1 In their appellate brief,
Investors argues that Big Rock “had the burden to conclusively negate
Appellants’ reliance on Section 16.063,” and that they “failed to carry this
burden.” [Appellant’s Br. 12] Reading Investors’ brief in light of Texas law, it
asserts precisely the argument that the majority states is missing.
Nevertheless, I would dismiss Investors’ appeal as to section 16.063
because Investors failed to present the questions argued on appeal to the
1 At least one Texas case holds that, when a party asserts that a tolling statute applies,
but fails to allege that one of the non-resident exceptions applies, the other party is not
required to conclusively negate the application of the tolling provision. See Guardia v. Kontos,
961 S.W.2d 580, 585 (Tex. App.—San Antonio 1997, no pet.) (“Guardia did not assert in her
summary judgment response that Kontos, the executor and appellee, was present in the state
when the accident occurred, and Kontos was not required to negate an issue that
Guardia could have raised.”). But Big Rock never referred us to Guardia or argued that it
did not bear the burden to conclusively negate the application of section 16.063.
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district court. Investors makes two arguments as to section 16.063. They argue
that Big Rock failed to carry its burden to conclusively negate the application
of section 16.063, and that the district court erred when it held that section
16.063 does not apply to non-residents. [Appellant’s Br. 12]
Big Rock argues that Investors waived these arguments because they
failed to present them to the district court. I agree. Investors never presented
the burden of proof issue to the district court. While Investors mentioned the
issue in passing in their summary judgment briefs and objections to the
magistrate judge’s report and recommendation, their arguments focused on
Big Rock’s burden to negate the application of the discovery rule. Accordingly,
the district court addressed the burden of proof issue only as to the discovery
rule. [R. at 2396–97.] Investors also failed to present the non-resident issue to
the district court. The magistrate judge held that section 16.063 does not
generally apply to non-residents like Big Rock. [R. at 2345 (noting same and
citing Medina v. Tate, 438 S.W.3d 583, 588–89 (Tex. App.—Hous. [1st Dist.]
2013, no pet.))] Investors never challenged this holding, and the district court
affirmed without specific comment.
“It is well settled in this Circuit that the scope of appellate review on a
summary judgment order is limited to matters presented to the district court.”
Keelan v. Majesco Software, Inc., 407 F.3d 332, 339 (5th Cir. 2005). “If a party
wishes to preserve an argument for appeal, the party ‘must press and not
merely intimate the argument during the proceedings before the district
court.’” Id. (quoting N.Y. Life Ins. Co. v. Brown, 84 F.3d 137, 141 n.4 (5th Cir.
1996)). “An argument must be raised ‘to such a degree that the district court
has an opportunity to rule on it.’” Id. (quoting N.Y. Life, 84 F.3d at 141 n.4).
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I would hold that Investors failed to present the questions on appeal to
the district court. Accordingly, I would affirm the district court’s judgment as
to section 16.063.
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