in Re: Byron Curtis Cook, Trade Rare, L.L.C., and Joel Hochberg ( 2021 )

DISSENT; Opinion Filed April 28, 2021
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-20-00205-CV
IN RE BYRON CURTIS COOK,
TRADE RARE, L.L.C., AND JOEL HOCHBERG, Relators
Original Proceeding from the 417th Judicial District Court
Collin County, Texas
Trial Court Cause No. 417-04885-2016
DISSENTING OPINION
Before the En Banc Court1
Opinion by Justice Schenck
I believe the Court improvidently granted reconsideration en banc in this case
and has now erred in vacating the panel opinion and order denying relators
mandamus relief from the trial court’s order. I disagree that the trial court’s order
does (or could) constitute error, much less an abuse of discretion, or that the asserted
error would be subject to mandamus relief under this Court’s evolving understanding
of the adequacy of appellate remedies, in any case. It is unclear to me why the Court
would choose this case to convene en banc, to make new law concerning third-party-
1
Myers, J., not participating.
designation practice in the face of explicit, contrary statutory directives, or to
empower windmill-tilting defendants to delay and obstruct the course of proceedings
in the trial court with mandamus actions that have no potential to reduce that
defendant’s ultimate responsibility to the plaintiff.
Because the legislature in enacting Chapter 33 explicitly empowered trial
courts to evaluate and strike third-party designations both before and during trial,
declared the Chapter inapplicable where, as here, the absent party’s liability would
be subject to a separate statutory apportionment regime, and the defendant could not
show how its ultimate responsibility for any judgment would be reduced, why its
interest would not be protected by seeking contribution, or how any apportionment
would be binding on the absent defendant in any later action, I can see no basis for
error or abuse of discretion. Likewise, I do not believe that the relators have shown
the need for mandamus intervention. Accordingly, I dissent.
AVAILABILITY OF MANDAMUS RELIEF
Mandamus is an extraordinary remedy granted only when the relator
establishes an abuse of discretion by the trial court and an inadequate appellate
remedy. In re N. Cypress Med. Ctr. Operating Co., 559 S.W.3d 128, 130 (Tex.
2018) (orig. proceeding). A trial court abuses its discretion when it acts in an
unreasonable or arbitrary manner or, stated differently, when it acts without
reference to guiding rules and principles. In re Colonial Pipeline Co., 968 S.W.2d
938, 941 (Tex. 1998) (orig. proceeding). No specific definition captures the essence
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of what constitutes an adequate appellate remedy. See In re Garza, 544 S.W.3d 836,
840 (Tex. 2018) (per curiam) (orig. proceeding). The supreme court has consistently
held, however, that mandamus relief is not appropriate to supervise or correct
incidental rulings of a trial court when there is an adequate remedy by appeal. See
In re Entergy Corp., 142 S.W.3d 316, 320–21 (Tex. 2004) (orig. proceeding).
DISCUSSION
I. ABUSE OF DISCRETION AND APPLICATION OF CHAPTER 33,
THE PROPORTIONATE RESPONSIBILITY STATUTE
While the plaintiff may decide who it will sue, Chapter 33 allows a defendant,
under certain limited circumstances, to seek to designate an absent person or entity
as a responsible third party to potentially reduce its own “responsibility” for any
damages awarded. See TEX. CIV. PRAC. & REM. CODE ANN. §§ 33.002–33.004. The
defendant may also elect to join any absent third party who might be contingently
liable to him. TEX. R. CIV. P. 38–40.
I presume that the trial court was also aware that our Constitution would
prohibit application of any apportionment made at trial in this case to any party who
was not joined to the action. Blonder–Tongue Labs, Inc. v. Univ. of Ill., 402 U.S.
313, 328–29 (1971). Thus, relators’ only conceivable interest in the designation
would be, in keeping with the name of the act, to reduce their own initial
“responsibility” to the plaintiff. The trial court was therefore required to determine
whether Chapter 33 applied and, if so, whether relators’ designation could affect
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their ultimate responsibility.
In this case, neither the plaintiff nor the defendants brought any claim against
Ken Paxton. Instead, relators sought to designate him as a potentially responsible
third party under Chapter 33. In doing so, relators asserted he served as counsel to
and as a manager and member of Unity Resources, L.L.C. (“Unity”) and that he
advised Unity on securities-regulation compliance and the adequacy of disclosures
for the transaction at issue, and, thus, caused or contributed to the harm for which
the real party in interest seeks to recover.
As the majority notes, the real party in interest has pleaded that it is the victim
of securities fraud in connection with its purchase of a mineral interest from Unity.
The real party in interest seeks to hold relators liable for “aiding and abetting”2 Unity
in the alleged fraudulent scheme. The trial court has determined that the mineral
interest at issue in this case is a security. Thus, the real party in interest’s claims fall
within the purview of the Texas Securities Act. The trial court was presumably
aware of this when, pursuant to section 33.004(g), it sustained the real party in
interest’s objection to relators’ designation of Paxton under Chapter 33.
2
The Texas Supreme Court has refused to recognize “aiding and abetting” as its own cause of action
in tort. Juhl v. Airington, 936 S.W.2d 640, 644 (Tex. 1996). And, more recently the court has confirmed
that a “civil conspiracy” is “not an independent tort.” Agar Corp. v. Electro Circuits, 580 S.W.3d 136,
141–42 (Tex. 2019). Rather, it is a theory for imputing joint and several liability for the underlying claim.
Id. Thus, this claim, to the extent it exists, is a procedural derivative of the alleged violation of the Texas
Securities Act. Cohen v. NewBiss Prop., L.P., No. 01-19-00397-CV, 2020 WL 6878414 *4 (Tex. App.—
Houston [1st Dist.] Nov. 24, 2020, no pet.) (mem. op.). I accordingly agree with the majority that the claims
here arise under the Texas Securities Act.
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A. The Trial Court Was Not Obliged to Deny the Objection as a Matter of
Law
In reaching its conclusion the trial court abused its discretion in denying
relators leave to designate Paxton as a potentially responsible third party, the
majority focuses on the pleading requirements and buries consideration of the
applicability of the proportionate responsibility statute in the first instance. Chapter
33 does not apply to all claims based in tort, however. In fact, Chapter 33 clearly
does not to apply to statutory tort claims where the governing statute contains its
own separate and conflicting legislative fault-allocation scheme. See Sw. Bank v.
Info. Support Concepts, Inc., 149 S.W.3d 104, 111 (Tex. 2004) (concluding
proportionate responsibility statute does not apply to conversion claims under article
3 of the Uniform Commercial Code because article 3 has its own loss-allocation
scheme); Challenger Gaming Sols., Inc. v. Earp., 402 S.W.3d 290, 296–97 (Tex.
App.—Dallas 2013, no pet.) (concluding proportionate responsibility statute does
not apply in fraudulent transfer cases because the Uniform Fraudulent Transfer Act
contains comprehensive statutory scheme for recourse).
Like article 3 of the Uniform Commercial Code and the Uniform Fraudulent
Transfer Act, the Texas Securities Act contains its own comprehensive loss-
allocation scheme. See TEX. REV. CIV. STAT. ANN. art. 581-33(F). That scheme
provides for joint and several liability for aiders and abettors, which appears to be at
least potentially, if not directly, in conflict with Chapter 33’s apportionment
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scheme.3 Certainly, until this mandamus decision, no authority of this Court or the
Texas Supreme Court had even suggested that the legislature’s decision to attribute
full financial accountability on “aiders and abettors” in the Texas Securities Act left
open the contrary prospect of lesser responsibility under Chapter 33.
Consequently, as a matter of law, the trial court did not, indeed could not,
abuse its discretion in granting the real party in interest’s objection to relators’
designation of Paxton as a potentially responsible third party.
B. The Trial Court’s Decision Could Not Result in an Improper Judgment or
Amount to an Abuse of Discretion in Any Event
The Texas Securities Act imposes liability on sellers or issuers of securities
and, separately, provides for joint and several liability for any person who “directly
or indirectly” “controls” a seller or issuer of a security that violated the Texas
Securities Act. TEX. REV. CIV. STAT. ANN. art. 581-33(F)(1). Further, as noted,
“aiders and abettors” are also jointly and severally liable where they aided another
person in violating the Texas Securities Act with intent to deceive or defraud or with
reckless disregard for the truth or the law. Id. art. 581-33(F)(2).
Thus, in this case, if relators are found to be liable, whether as “control
persons,” “issuers,” “sellers,” or for “aiding and abetting,” the legislature
3
Relators claim the Houston First District Court of Appeals held Chapter 33 applies to Texas Securities
Act claims in Villarreal v. Wells Fargo Brokerage Services, LLC, 315 S.W.3d 109, 125 (Tex. App.—
Houston [1st Dist.] 2010, no pet.). Relators’ reliance on Villarreal for this proposition is misplaced as the
court reached that conclusion only based upon the defendants’ failure to argue in their summary judgment
motion that the subject statutes contained a separate and conflicting legislative fault allocation scheme. Id.–6–
consciously and separately decreed that they would be responsible for all damages
the jury awards. Within the comprehensive terms of the Texas Securities Act, the
legislature could thus readily be understood to have intended that all involved with
a fraudulent securities scheme should be fully responsible to the plaintiff victim with
any claim for contribution or indemnity preserved. In all events, any defendant
found liable under the Texas Securities Act would be fully liable to the plaintiff in
the original action. Relators cite no authority approving, much less requiring, a trial
court to allow a third-party designation that could not possibly reduce the
designating party’s ultimate liability to the plaintiff. See Bounds v. Scurlock Oil,
730 S.W.2d 68, 72 (Tex. App.—Corpus Christi–Edinburg 1987, writ ref’d n.r.e.)
(failure to submit apportionment question cannot possibly result in rendition of
improper judgment unless it could affect the judgment).
Moreover, and regardless of whether the law here so clearly called for the
application of Chapter 33 as to warrant mandamus intervention, even that
proportionate responsibility statute allows the trial court discretion to strike the
designation at the objection stage of the designation process. TEX. CIV. PRAC. &
REM. CODE ANN. § 33.004(g). The majority holds it was an abuse of discretion for
the trial court to strike relators’ designation at the objection stage, but it does not say
why. Instead, the majority focuses on the notice pleading standard and punts the
ultimate determination of the efficacy of the designation down the road by noting
there are additional channels for contesting the designation, including an objection
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to the non-party’s inclusion in the jury charge.
I recognize that a trial court might later decline to submit a question
concerning a third party’s responsibility, but this begs the question of why the
legislature would specifically authorize the trial court to exercise that same
discretion earlier by striking the designation upon objection of a party. If sustaining
the objection at that stage is too early, as the majority seems to believe, and thus
constitutes an abuse of discretion subject to interlocutory mandamus correction,
what discretion would the trial court be left with in considering an objection pursuant
to the proportionate responsibility statute?
I believe the trial court should be able to exercise its discretion to strike the
designation at the objection stage when the moving party fails to show either the
clear applicability of Chapter 33 or that the designation could lead to any conceivable
reduction in the movant’s ultimate responsibility to the plaintiff. Because relators
failed to make either showing, our intervention and finding of abuse of discretion at
this stage appear improper to me.
II. ADEQUATE REMEDY BY APPEAL
Had the trial court abused its discretion in denying relators leave to designate
Paxton as a responsible third party, relators would be required to demonstrate that
they lack an adequate remedy by appeal. As discussed below, the Texas Supreme
Court has recognized mandamus as appropriate in other cases involving third-party
designations, but its decision is hardly on all fours with our posture and cannot be
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read to unvaryingly disallow a trial court to strike an improper designation on
account of the ability to do so later. Moreover, the result in this case seems at odds
with our own more recent jurisprudence with respect to the harm a defendant must
show relative to its damages case at trial in order to warrant the conclusion that a
subsequent appeal will be inadequate. See In re Parks, No 05-19-00375-CV, 2020
WL 774107, at *2 (Tex. App.—Dallas Feb. 18, 2020, orig. proceeding [mand.
pending]) (mem. op.).
As noted, a jury’s findings as to the relators’ liability would (or at least may)
not be impacted by any apportionment of responsibility to Paxton due to the Texas
Securities Act’s explicit and comprehensive selection of a joint and several liability
scheme—and certainly not so clearly as to warrant a finding of abuse of discretion
at this stage. Having elected not to join him as a party here, relators would also have
no right to employ any of the jury’s finding as to Paxton’s accountability. On appeal
from a final judgment, relators would thus be in same position they are today and
would have suffered no cognizable harm. The only difference would be they would
be able to present a complete record and the potential for the appeal to be mooted if
relators prevail at trial.
The notion that every potential error in striking a designation of a responsible
third party is subject to mandamus correction ignores the fact that trial courts, no
less than appellate courts, are obliged to analyze cases on an individual basis and if
no potential harm has occurred, as is the case here, the matter should be at an end,
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because no relief will be warranted below or here–—whether by mandamus or
appeal. See In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 137 (Tex. 2004).
The majority relies on an earlier panel opinion, In re Molina, which, in turn,
applies the holding of In re Coppola, 535 S.W.3d 506, 509–10 (Tex. 2017) (orig.
proceeding), that an erroneous denial of a motion for leave to designate a responsible
third party potentially affects the litigation’s outcome and ordinarily renders the
appellate remedy inadequate. 575 S.W.3d 76, 79 (Tex. App.—Dallas 2019, orig.
proceeding). Of course, Coppola also provided that mandamus relief is not available
unless there is a clear abuse of discretion, which does not exist here. Coppola, 535
S.W.3d at 508. Molina was a personal injury case arising from a multi-vehicle
collision. Coppola involved a claim of fraud in connection with the sale of real
estate. Chapter 33 thus clearly applied in both cases, and the third-party designations
presented the relators with at least some possibility of reducing the named
defendants’ ultimate liability to the plaintiffs. Such is not the case here, and
certainly in my view, not so clearly as to warrant our intervening on a request for
mandamus relief.
In all events, the majority’s conclusion concerning the inadequacy of a remedy
on appeal in this case—where the defendants remain fully able to resist any damages
sought and to pursue contribution from others—is difficult to square with this
Court’s contrary determination in In re Parks—that a defendant who is completely
disabled from offering any evidence on the amount of damages he will be required
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to pay—could be adequately addressed on appeal.4 In re Parks, 2020 WL 774107,
at *2.
III. Access to Court Proceedings and Records
I appreciate and generally share the concerns Justice Smith raises in his
concurrence. I agree that we should be ever-mindful of the public’s right of access
to judicial proceedings, not just those of the trial courts. I would note, however, that
this right is grounded in the public’s interest in understanding the basis for judicial
decisions and assuring their fidelity to the rule of law. Nixon v. Warner Commc’ns,
Inc., 435 U.S. 589, 598 (1978). That interest, as the Supreme Court has stressed, is
paramount in any subsequent question of the scope of the right of access, see Gentile
v. State Bar of Nevada, 501 U.S. 1030, 1052 (1991) (citing Seattle Times Co. v.
Rhinehart, 467 U.S. 20 (1984)), and would thus apply to materials filed with the
court insofar as they might have played a role in a judicial decision. In re Policy
Mgmt. Sys. Corp., Nos. 94-2254 and 94-2341, 1995 WL 541623, at *4 (4th Cir. Sept.
13, 1995); Wilk v. Am. Med. Ass’n, 635 F.2d 1295, 1299 n.7 (7th Cir. 1980).
Thus, the public right of access generally does not apply to “raw fruits” of
discovery that have neither been filed with the court, Seattle Times, 467 U.S. at 33
n.19, nor simply deposited with the clerk, but that could not have been considered
by the court in arriving at a decision. Policy Mgmt. Sys. Corp., 1995 WL 541623,
4
I note I did not agree with that conclusion and issued a dissenting opinion from the denial of en banc
reconsideration in that case. See In re Parks, 603 S.W.3d 454 (Tex. App.—Dallas 2020, orig. proceeding)
(Schenck, J., dissenting).
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at *4. In all events, I believe the issue is best left at this stage to the trial court or the
supreme court.
CONCLUSION
I do not believe this case warranted en banc reconsideration as the panel
opinion did not depart from the mandamus standards. Moreover, in my view, the
majority has reached incorrect conclusions with respect to the controlling questions
of whether the trial court abused its discretion and of the adequacy of the remedy by
subsequent appeal. Accordingly, I dissent from the decision to grant en banc
reconsideration of this case and from the majority’s decision.
/David J. Schenck/
DAVID J. SCHENCK
JUSTICE
200205DF.P05
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