Manfred Fink v. Joann D. Anderson, Betty Bailey, Doug Bird, Ann Brown, Brad Bullock, M.D., Jim Byron, Mike Clann, Claire Crowder, Evan Quiros, Paul Fulmer, M.D., Eric Geibel, Mark Griffin, Steve Gerguis, Stacey Harvey, Bill Henderson, Allen Holt, Linda Hudson ( 2015 )

ACCEPTED
01-14-00990-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
4/23/2015 11:52:38 AM
CHRISTOPHER PRINE
CLERK
NO. 01-14-00990-CV
FILED IN
1st COURT OF APPEALS
IN THE COURT OF APPEALS FOR THE HOUSTON, TEXAS
FIRST DISTRICT OF TEXAS 4/23/2015 11:52:38 AM
CHRISTOPHER A. PRINE
Clerk
MANFRED FINK,
Appellant,
v.
JOANNA D. ANDERSON, ET AL.,
Appellant.
ON APPEAL FROM THE 152ND JUDICIAL DISTRICT COURT
HARRIS COUNTY, TEXAS
CAUSE NO. 2014-22740
APPELLEES’ BRIEF
Wade T. Howard
State Bar No. 00787725
Michael P. Cash
State Bar No. 03965500
Alma F. Gomez
State Bar No. 24069800
Liskow & Lewis
1001 Fannin Street, Suite 1800
Houston, Texas 77002-6756
(713) 651-2900 (Telephone)
(713) 651-2908 (Facsimile)
Email: wthoward@liskow.com
Email: mcash@liskow.com
Email: afgomez@liskow.com
ATTORNEYS FOR APPELLEES
Oral Argument Requested
TABLE OF CONTENTS
I. Statement of the Case ...................................................................................... 6
II. Statement Regarding Oral Argument .............................................................. 6
III. Statement of Facts............................................................................................ 7
IV. Standard of Review.......................................................................................... 9
V. Summary of Argument .................................................................................. 10
VI. Argument ....................................................................................................... 11
A. Scope of Employment ......................................................................... 11
B. Appellant Was Not Acting Within the Course and Scope
of His Employment as a Physics Professor With the
University When He Committed Fraud in Connection
With His Attempts to Solicit Investments For IsoSpec. ..................... 16
1. Soliciting Investments for a Private Company and
Committing Fraud in the Course of Such
Solicitations is Entirely Unrelated to and Exceeds
the Scope of Appellant’s General Duties as a
Physics Professor for the University. ........................................ 17
2. Assuming Appellant’s Scope of Employment with
the University Could be Expanded by the Patent
Licensing Agreement Between the University and
IsoSpec, Such Expanded Scope is Limited by the
Terms of the Agreement. .......................................................... 22
C. A Fact Issue Exists as to Whether Appellant Was Acting
Within the Scope of His Employment. ............................................... 24
D. Appellant Cannot Establish That Appellees’ Suit Could
Have Been Brought Against the University Under the
Tort Claims Act. .................................................................................. 27
VII. Conclusion ..................................................................................................... 30
i
INDEX OF AUTHORITIES
Cases
Alexander v. Walker, 435 S.W.3d 789 (Tex. 2014) .................................................29
Anderson v. Bessman, 365 S.W.3d 119 (Tex. App.—Houston [1st Dist.] 2011, no
pet.)................................................................................................................ 16, 28
Bagg v. Univ. of Texas Med. Branch, 726 S.W.2d 582 (Tex. App.—Houston [14th
Dist.] 1987, writ ref’d n.r.e.) ................................................................................14
Camacho v. Samaniego, 954 S.W.2d 811 (Tex. App.—El Paso 1997, pet. denied)
..............................................................................................................................14
City of Lancaster v. Chambers, 883 S.W.2d 650 (Tex. 1994) ................................12
Clark v. Univ. of Tex. Health Science Ctr., 919 S.W.2d 185 (Tex. App.—Eastland
1996, writ denied) ......................................................................................... 13, 16
Cobb v. Harrington, 190 S.W.2d 709 (Tex. 1945) ..................................................15
Davis v. Klevenhagen, 971 S.W.2d 111 (Tex. App.—Houston [14th Dist.] 1998, no
pet.).......................................................................................................................15
Durand v. Moore, 879 S.W.2d 196 (Tex. App.—Houston [14th Dist.] 1994, no
writ) ......................................................................................................................15
Franka v. Velasquez, 332 S.W.3d 367 (Tex. 2011) .................................... 11, 13, 29
Griffin v. Hawn, 341 S.W.2d 151 (Tex. 1960) ........................................................14
Kelemen v. Elliot, 260 S.W.3d 518 (Tex. App.—Houston [1st Dist.] 2008, no pet.)
..............................................................................................................................16
Kelly v. Galveston Cnty., 520 S.W.2d 507 (Tex. App.—Houston [14th Dist.] 1975,
no writ) .................................................................................................................13
Kersey v. Wilson, 69 S.W.3d 794 (Tex. App.—Fort Worth 2002, no pet.).............15
Lenoir v. Moore, Cause No. 01-13-01034-CV, 2014 Tex. App. LEXIS 12703 (Tex.
App.—Houston [1st Dist.] November 25, 2014, no pet.) ....................................15
ii
Millan v. Dean Witter Reynolds, Inc., 90 S.W.3d 760 (Tex. App.—San Antonio
2002, pet. denied) .......................................................................................... 14, 16
Mission Consol. Indep. Sch. Dist. v. Garcia, 235 S.W.3d 653 (Tex. 2008)29, 30, 31
Molina v. Alvarado, 441 S.W.3d 578 (Tex. App.—Texarkana Apr. 23, 2014, pet.
filed). ............................................................................................................. 12, 25
Phelan v. Norville, No. 07-13-00040-CV, 2014 Tex. App. LEXIS 10560 (Tex.
App.—Amarillo Sept. 22, 2014, no pet.) .............................................................16
Ross v. Marshall, 426 F.3d 745 (5th Cir. 2005) ......................................................21
Russell v. Edgewood Indep. School Dist., 406 S.W.2d 249 (Tex. Civ. App. San
Antonio 1966) ......................................................................................................13
State Bar of Tex. v. Heard, 603 S.W.2d 829 (Tex.1980).........................................11
State ex rel. State Dep’t of Hwys & Pub. Transp. V. Gonzalez, 82 S.W.3d 322
(Tex. 2002) ...........................................................................................................11
Telthorster v. Tennell, 92 S.W.3d 457 (Tex. 2002) .................................................12
Tex. Adjutant General’s Office v. Ngakoue, 408 S.W.3d 350 (Tex. 2013) .............27
Wallace v. Moberly, 947 S.W.2d 273 (Tex. App.—Fort Worth 1997, no writ)......13
Weaver v. McKeever, No. 01-12-00851-CV, 2014 Tex. App. LEXIS 2092 (Tex.
App.—Houston [1st Dist.] Feb. 25, 2014) ...........................................................29
Welch v. Milton, 185 S.W.3d 586 (Tex. App.—Dallas 2006, pet. denied) .............12
Zarzana v. Ashley, 218 S.W.3d 152 (Tex. App.—Houston [14th Dist.] 2007, no
pet.).......................................................................................................... 14, 16, 21
Statutes
Tex. Civ. Prac. & Rem. Code § 101.001(5)...................................................... 12, 23
Tex. Civ. Prac. & Rem. Code § 101.003 .................................................................29
Tex. Rev. Civ. Stat. art. 581-29 ........................................................................ 21, 30
Tex. Rev. Civ. Stat. art. 581-4 .................................................................................30
iii
Texas Civil Practices and Remedies Code § 101.106(f) ................................. passim
Other Authorities
Texas Pattern Jury Charge 10.6 (2014) ...................................................................27
iv
RECORD REFERENCES
The single volume of the clerk’s record is cited by page number: C.R. 14
v
NO. 01-14-00990-CV
IN THE COURT OF APPEALS FOR THE
FIRST DISTRICT OF TEXAS
MANFRED FINK,
Appellant,
v.
JOANNA D. ANDERSON, ET AL.,
Appellant.
ON APPEAL FROM THE 152ND JUDICIAL DISTRICT COURT
HARRIS COUNTY, TEXAS
CAUSE NO. 2014-22740
APPELLEES’ BRIEF
To the Honorable Court of Appeals:
Plaintiffs Joanna D. Anderson, Betty Bailey, Doug Bird, Ann Brown, Brad
Bullock, M.D., Jim Byron, Mike Clann, Claire Crowder, Evan Quiros, Paul
Fulmer, M.D., Eric Geibel, Mark Griffin, Steve Gerguis, Stacey Harvey, Bill
Henderson, Allen Holt, Linda Hudson, Cullen Kappler, Ralph Kirkland, Sam Lo,
M.D., Thomas Lu, M.D., Gail Miller Holt, Mary Quiros, Larry Sams, Bob Solberg,
Lynn Whitt, and Clarissa Willis, M.D.’s (“Appellees”) file this Brief in response
to Defendant Manfred Fink, Ph.D.’s (“Appellant”) Brief.
Oral Argument Requested
I. Statement of the Case
Nature of the Case: This is a securities fraud dispute arising
out of the sale of limited partnerships in
IsoSpec Technologies, L.P. (“IsoSpec”)
based on the fraudulent
misrepresentations and/or omissions
regarding the alleged existence of a fully
functioning Raman spectrometer
prototype named ANDRaS.
Course of Proceedings: Appellees filed this lawsuit on April 24,
2014. (C.R. 4-8) Appellees subsequently
filed a First Amended Petition on June
3, 2014 and a Second Amended Petition
on July 9, 2014. (C.R. 53-60) On
November 6, 2014, Appellant filed a
Motion to Dismiss Based on
Governmental Immunity, alleging that
he is entitled to immunity pursuant to
Section 101.106(f) of the Texas Civil
Practice and Remedies Code because his
conduct occurred within the scope of his
employment as a physics professor at
the University of Texas at Austin (the
“University”). (C.R. 70-81)
Trial Court Disposition: On December 11, 2014, the trial court
signed an order denying Appellant’s
Motion to Dismiss Based on
Governmental Immunity. (C.R. 313)
This order is interlocutory and does not
dispose of all parties and claims.
II. Statement Regarding Oral Argument
This is a straightforward case in which Appellees do not see the need for
oral argument: the facts before the trial court were not complicated and the impact
-7-
of the case is limited to the parties. However, if the Court grants oral argument to
Appellant, Appellees request the opportunity to participate. For these reasons,
Appellees request oral argument.
III. Statement of Facts
Appellees filed this lawsuit against Defendants Dr. Manfred Fink, Ph.D. and
Dr. Rainer Fink, Ph.D. (“Defendants”), alleging Defendants committed fraud,
violated the Texas Securities Act, and aided, abetted and conspired with others to
commit fraud and violate the Texas Securities Act. Specifically, Appellees believe
that in late 2010, Defendants developed a scheme to defraud Appellees and other
investors of more than a million dollars.
Defendants and others in the Senior Management Team and Science and
Engineering Team (the “Founders”) created IsoSpec, a company located in
Houston, Texas, which purported to specialize in developing highly advanced,
patented, Raman Spectroscopy technology platforms. As one of the co-inventors
on the Science and Engineering Team and as part of the Senior Management
Team, Appellant and his son, Defendant Dr. Rainer Fink, respectively, were
involved in the development and issuance of a Private Placement Memorandum
(“PPM”) in an effort to get investors, including Appellees, to purchase limited
partnership interests in exchange for financial contributions. (C.R. 208-300) A
-8-
true and correct copy of the PPM is attached here as Tab 1 in Appellees’
Appendix.
In the PPM, Appellees were told that IsoSpec already had a functioning
prototype instrument developed, named ANDRaS, that performed measurements
using Raman Spectroscopy. (C.R. 209) Specifically, the PPM stated: “ANDRaS
is rugged, inexpensive, small and portable providing onsite analytical capabilities.
Two operating prototype instruments have proven the accuracy and operating
capabilities of ANDRaS.” (Id.) The PPM promised Appellees that next generation
instruments of ANDRaS, once fully developed and commercialized, could be used
in a variety of industries, including the medical, environmental, energy and
homeland security sectors. (Id.) It also stated: “It is believed that there is no
commercial competition for ANDRaS.” (Id.)
In addition to the statements made regarding the operational status of
ANDRaS and the commercial uses therefore, the PPM contained a Limited
Partnership Agreement and details regarding the offering being made to investors.
The PPM stated that “this financing will be used to further develop and market the
Raman Technology instruments and their applications.” (C.R. 215).
-9-
In addition to the PPM, Appellees attended numerous partnership meetings
between late 2010 and through 2012, at which Defendants1 and the Founders made
numerous misrepresentations and/or failed to disclose material facts regarding the
actual state of the equipment and the steps being taken towards developing and
commercializing ANDRaS. Appellant’s Appendix: Tab 5 (Affidavit of Bob
Solberg) at pp. 1-2; Tab 6 (Affidavit of Mark Griffin) at pp. 1-2; Tab 7 (Affidavit
of William Hightower) at pp. 1-2. (C.R.174-180)
Based on misrepresentations made in the PPM, as well as other
misrepresentations, many of which were made orally at the investment and
partnership meetings, Appellees invested their money (totaling over a million
dollars) in IsoSpec in exchange for limited partnership interests. Id.
In late 2012, Appellees began to question the validity of IsoSpec when
certain milestones towards commercializing ANDRaS were not being met as
promised in partnership memorandums. Ultimately, Appellees discovered that at
no point did any fully functioning ANDRaS prototype ever exist, contrary to
Defendants’ and the Founders’ repeated representations.
IV. Standard of Review
Appellate courts review a motion to dismiss based on Texas Civil Practices
and Remedies Code § 101.106(f) as a plea to the jurisdiction that challenges the
1
It is undisputed that Appellant attended at least one of these meetings. See Appellant’s
Appendix, Tab 3 (Affidavit of Dr. Manfred Fink) at ¶ 6.
-10-
trial court’s subject-matter jurisdiction to hear the case. State Bar of Tex. v. Heard,
603 S.W.2d 829, 833 (Tex. 1980). The existence of subject-matter jurisdiction is a
question of law that an appellate court reviews de novo. State ex rel. State Dep’t of
Hwys & Pub. Transp. V. Gonzalez, 82 S.W.3d 322, 327 (Tex. 2002).
V. Summary of Argument
The trial court did not err in denying Appellant’s motion to dismiss based on
governmental immunity. The immunity afforded governmental employees by
Section 101.106(f) of the Texas Tort Claims Act (the “TTCA”) applies only in
very limited circumstances. Specifically, the employee must prove that (1) he was
employed by the government at the time of the incident giving rise to the claim; (2)
he was acting within the course and scope of his authority or employment; and (3)
the plaintiff’s claim could have been brought against the governmental employer
under the TTCA. Tex. Civ. Prac. & Rem. Code § 101.106(f); Franka v. Velasquez,
332 S.W.3d 367, 381 (Tex. 2011). Here, Appellant is not entitled to governmental
immunity because (1) Appellant’s intentional acts or omissions which form the
basis of this lawsuit took place during a course of conduct designed to obtain
investments for IsoSpec, a private company, and thus lie outside the course and
scope of his employment with the University; and (2) Appellant’s suit could not
have been brought against the University under the TTCA. As such, the trial
court’s order dated December 11, 2014 should be affirmed.
-11-
VI. Argument
Immunity under Section 101.106 is an affirmative defense which must be
specifically pleaded, and the burden is on the employee to conclusively establish
all elements as a matter of law. Welch v. Milton, 185 S.W.3d 586, 593, 599 (Tex.
App.—Dallas 2006, pet. denied); Molina v. Alvarado, 441 S.W.3d 578, 581-582
(Tex. App.—Texarkana Apr. 23, 2014, pet. filed). The existence of a factual
dispute will preclude a dismissal or summary judgment on immunity grounds.
Welch, 185 S.W.3d at 593; Molina, 441 S.W.3d 578; 581-582; Telthorster v.
Tennell, 92 S.W.3d 457, 461 (Tex. 2002).
A. Scope of Employment
To be entitled to immunity, the governmental employee must prove that he
was acting within the course and scope of his employment or authority at the time
of the incident giving rise to the claim. Tex. Civ. Prac. & Rem. Code § 101.106(f).
“Scope of employment” is defined as “the performance for a governmental unit of
the duties of an employee’s office or employment and includes being in or about
the performance of a task lawfully assigned to an employee by competent
authority.” Tex. Civ. Prac. & Rem. Code § 101.001(5) (emphasis added). “An
official acts within the scope of her authority if she is discharging the duties
generally assigned to her.” City of Lancaster v. Chambers, 883 S.W.2d 650, 658
(Tex. 1994). If the employee is acting not as a governmental official or employee,
-12-
but instead as a private citizen, the employee is not acting within the scope of his
authority and the immunity provided by Section 101.106(f) will not apply.
Wallace v. Moberly, 947 S.W.2d 273, 277 (Tex. App.—Fort Worth 1997, no writ).
Immunity does not apply to conduct that “exceeds the legitimate bounds of
[the governmental employee’s] office.” Kelly v. Galveston Cnty., 520 S.W.2d 507,
513 (Tex. App.—Houston [14th Dist.] 1975, no writ) (interference with contract).
Thus, government employees are generally not immune from liability for their
intentional or “individual and separate torts,” such as fraud, assault, trespass,
conversion, or intentional infliction of emotional distress, because such torts are
rarely within the scope of employment. Russell v. Edgewood Indep. School Dist.,
406 S.W.2d 249, 252 (Tex. Civ. App. San Antonio 1966); see Clark v. Univ. of
Tex. Health Science Ctr., 919 S.W.2d 185, 188 (Tex. App.—Eastland 1996, writ
denied) (dean of university would not have immunity in connection with claim of
emotional distress intentionally inflicted in dean’s unofficial capacity).
As Appellant acknowledges, the Texas Supreme Court has recognized that
“[w]hether an employee’s intentional tort is within the scope of employment is a . .
. complex issue.” Franka, 332 S.W.3d at 381 n.63. An employee’s intentional,
tortious conduct does not fall within the scope of employment when it is not of the
same general nature as or incidental to the tasks the employee was hired to carry
out. Zarzana v. Ashley, 218 S.W.3d 152, 159-60 (Tex. App.—Houston [14th Dist.]
-13-
2007, no pet.) (holding the fraudulent sale of counterfeit inspection stickers is not
“closely connected or incidental to the authorized conduct” of a car mechanic’s
work) (citations omitted); see Millan v. Dean Witter Reynolds, Inc., 90 S.W.3d
760, 768 (Tex. App.—San Antonio 2002, pet. denied) (holding that broker’s fraud
and embezzlement from client was not related to his authorized brokerage duties
and thus greatly exceeded the scope of his authority).
Likewise, an employee’s criminal acts are almost never within the scope of
employment or authority, especially where such acts are “unforeseeable
considering the employee’s duties.” Zarzana, 218 S.W.3d at 160. Thus, a
governmental employee generally does not enjoy immunity for illegal or
“wrongful unofficial acts.” Bagg v. Univ. of Texas Med. Branch, 726 S.W.2d 582,
586 (Tex. App.—Houston [14th Dist.] 1987, writ ref’d n.r.e.) (unlawful or
unauthorized actions such as ordering eavesdropping “could not have been within
the scope of [hospital employees’] official duties”). This is true because when an
“employee acts without statutory authority, then he cannot act within the course
and scope of employment.” Camacho v. Samaniego, 954 S.W.2d 811, 822 (Tex.
App.—El Paso 1997, pet. denied) (collection of unauthorized bail bond fee); see
also Griffin v. Hawn, 341 S.W.2d 151, 153 (Tex. 1960) (“The question is not
whether [the state officials] were acting on behalf of the State to accomplish a
proper governmental purpose but whether the action they were about to take is
-14-
authorized by law.”); Cobb v. Harrington, 190 S.W.2d 709, 712 (Tex. 1945) (“The
acts of officials which are not lawfully authorized are not acts of the State . . .
within the rule of immunity”).
While Appellant cites to Lenoir v. Moore, in which a state employee’s
tortious conduct was held to be within the scope of employment, that case and,
indeed, all the Texas cases in which an employee’s intentional tortious or criminal
conduct was held to be within the scope of employment involved conduct directly
arising from the performance of the employee’s authorized tasks, or which was
otherwise foreseeable given the nature of the services the employee was engaged
to perform on the employer’s behalf. See Lenoir v. Moore, Cause No. 01-13-
01034-CV, 2014 Tex. App. LEXIS 12703, *25-27 (Tex. App.—Houston [1st Dist.]
November 25, 2014, no pet.) (because the attending physician, employed by the
government, was performing a task lawfully assigned to him, he was acting within
the scope of his employment). For example, assault or false imprisonment may be
within the scope of employment of a police officer or bouncer. Kersey v. Wilson,
69 S.W.3d 794 (Tex. App.—Fort Worth 2002, no pet.) (assault during arrest was
within scope of officer’s duties); Davis v. Klevenhagen, 971 S.W.2d 111 (Tex.
App.—Houston [14th Dist.] 1998, no pet.) (police officer enjoyed immunity from
false imprisonment claim); Durand v. Moore, 879 S.W.2d 196 (Tex. App.—
Houston [14th Dist.] 1994, no writ) (bouncer’s use of force was within general
-15-
authority). Likewise, employees alleged to have committed torts in connection
with their recommendation that the plaintiffs’ employment be terminated were
acting within the scope of their duties, as their superior had asked for such
recommendations. Anderson v. Bessman, 365 S.W.3d 119 (Tex. App.—Houston
[1st Dist.] 2011, no pet.).
In contrast, acts which occur outside the performance of the employee’s
general responsibilities, exceed the employee’s authority, or are unforeseeable
given the employee’s usual duties are not subject to immunity. See, e.g., Phelan v.
Norville, No. 07-13-00040-CV, 2014 Tex. App. LEXIS 10560, at *17 (Tex.
App.—Amarillo Sept. 22, 2014, no pet.) (professor was not acting within the scope
of his employment when he slapped another professor during a meeting); Kelemen
v. Elliot, 260 S.W.3d 518, 524 (Tex. App.—Houston [1st Dist.] 2008, no pet.)
(officer was not acting within the scope of his employment when he kissed
coworker while on duty); Clark, 919 S.W.2d at 188 (immunity did not apply to
claim against supervisor for emotional distress intentionally inflicted in the
workplace); see also Zarzana, 218 S.W.3d at 159-60 (fraudulent sale of counterfeit
inspection stickers is not “closely connected or incidental to the authorized
conduct” of a car mechanic’s work); Millan, 90 S.W.3d at 768 (broker’s fraud and
embezzlement from client was not related to his authorized brokerage duties and
thus greatly exceeded the scope of his authority).
-16-
B. Appellant Was Not Acting Within the Course and Scope of His
Employment as a Physics Professor With the University When He
Committed Fraud in Connection With His Attempts to Solicit
Investments For IsoSpec.
Appellant did not satisfy his burden of proving that the fraudulent
misrepresentations and omissions made by him in the PPM and during various
IsoSpec investor and partnership meetings in connection with his efforts to solicit
or assist in soliciting investments for IsoSpec occurred within the scope of his
employment as a physics professor with the University. To the contrary, as the
record demonstrates, Appellant’s participation in IsoSpec’s solicitation activities
and, specifically, his fraudulent conduct which took place during such solicitations
deviated from and greatly exceeded (1) the scope of his duties as a physics
professor and (2) the scope of the University’s licensing agreement with IsoSpec.
Further, his actions benefitted the financial interests of his son, Dr. Ranier Fink,
who was an owner and officer of IsoSpec. See Appellees’ Appendix, Tab 1 (PPM)
at “Executive Summary, p. 1. (C.R. 209) Thus, Appellees’ suit does not fall
within the limited immunity afforded government employees under Section
101.106(f), and the trial court did not err in denying Appellant’s motion.
-17-
1. Soliciting Investments for a Private Company and
Committing Fraud in the Course of Such Solicitations is
Entirely Unrelated to and Exceeds the Scope of Appellant’s
General Duties as a Physics Professor for the University.
An examination of all of the jurisdictional evidence in the record reveals that
Appellant’s conduct which forms the basis of this lawsuit does not fall within the
duties generally assigned to him at the University, despite the fact that he makes
the self-serving assertion that his “assistance to IsoSpec was entirely related to his
employment as a UT physics professor”2 and allegedly believed he was acting in
the scope of his employment with the University. Appellant’s Appendix, Tab 3 at
pp. 1-3. Appellant is employed by the University as a physics professor. In
addition to teaching, his duties include conducting research. Id. at p. 2. These
duties, however, cannot be expanded to include his participation in seeking
investments for a private company, especially when Appellant presented no
evidence that soliciting such investments was part of his regular duties as a
professor at the University or that his usual scope of employment had been
expanded by orders from his employer to actively solicit or assist in soliciting such
investments on behalf of IsoSpec. While Appellant claims that he was not
involved in helping IsoSpec acquire money from investors, he admits to attending
2
While Appellant improperly seeks to now attach an affidavit from the University’s Vice-
President for Research, this affidavit was filed with or presented to the trial court.
Appellant’s Appendix, Tab 10. For these reasons, the Court cannot now consider it upon
appeal because it is not part of the record considered by the trial court.
-18-
a meeting which potential investors attended, and the affidavits from Appellees
demonstrate that these meeting were clearly for the purpose of soliciting
investments. Id.; Appellant’s Appendix: Tab 5 at pp. 1-2; Tab 6 at pp. 1-2; Tab 7
at pp. 1-2. (C.R. 174-180) Simply put, Appellant was in no way carrying out the
tasks for which he, as a physics professor, was hired to perform for the benefit of
the University when he assisted IsoSpec and his son, Defendant Dr. Ranier Fink,
the CTO of IsoSpec, in their efforts to obtain funding.
Further, even assuming arguendo Appellant’s interactions with IsoSpec in
sharing technical knowledge and expertise on research and inventions may have
been within the scope of his employment, his interactions with Appellees and other
targeted investors were not in any way authorized or required by the University
and were not otherwise in the course and scope of his employment as a physics
professor. When Appellant attended investment meetings, he was no longer
serving the University’s interests or acting on behalf of the state or in furtherance
of the state’s interests. Appellant has introduced no evidence of any orders given
to him by the University to assist IsoSpec in fundraising or showing that his
attendance at these meetings was at the behest of the University. Instead,
Appellant concedes that his attendance at the one meeting he admits attending3 was
3
Contrary to Appellant’s assertions, Appellees contend Appellant attended multiple
investment meetings. Appellant’s Appendix: Tab 5, pp. 1-2; Tab 6, pp. 1-2; Tab 7, pp. 1-
2. (C.R. 174-180)
-19-
at the request of Jack McCrary, the owner of IsoSpec, and not at the request or
demand of the University. Appellant’s Appendix, Tab 3 at p. 3. At that particular
meeting, marketing materials, including the PPM, were handed out to third parties,
including Appellees, and the strengths of IsoSpec and ANDRaS were discussed at
length, as well as the details of the investment opportunity (for instance, the
number of partnership units that could be obtained, the total amount of investment
capital being sought and what the investment money would be used for).
Appellant’s Appendix: Tab 5 at pp. 1-2; Tab 6 at pp. 1-2; Tab 7 at pp. 1-2. (C.R.
174-180). It is simply inconceivable that Appellant lacked an understanding that
the obvious purpose of that and other meetings he attended was to pitch investment
opportunities. Id.
Indeed, IsoSpec’s own marketing materials make clear that Appellant’s
relationship with IsoSpec is something more than merely tangentially related to his
employment with the University of Texas. For example, in the PPM, Appellant is
listed under the IsoSpec “company profile” as a member of IsoSpec’s Science and
Engineering Team and as a member of IsoSpec’s Technology and Business
Advisory Group. See Appellees’ Appendix, Tab 1 (PPM) at “Executive
Summary,” p. 1 and p. 7 of 25. (C.R. 207 and C.R. 216) In addition, IsoSpec itself
asserted that Appellant was acting within the scope of his employment with
IsoSpec when he made any misrepresentations to Appellees. See Appellant’s
-20-
Appendix, Tab 8 (IsoSpec Technologies’ Petition in Intervention) (“any and all
representations made by either father or son Fink were done within the course and
scope of their relationship with [IsoSpec]. . . . [IsoSpec] owes a duty of indemnity
to any honest and faithful person who acts in the authorized and legitimate
furtherance of its business.”) (emphasis added).
Further, Appellees have alleged that Appellant committed intentional torts
and criminal conduct. Tex. Rev. Civ. Stat. art. 581-29 (criminalizing fraudulent
conduct in connection with the sale of securities). Under Texas law, an agent’s
intentionally tortious or criminal acts are almost never within the scope of
authority granted by the principal. Zarzana, 218 S.W.3d at 160 (citing Ross v.
Marshall, 426 F.3d 745, 764-56 & n. 85 (5th Cir. 2005)). Appellant’s fraudulent
misrepresentations and omissions taking place during his solicitation of
investments for a private company could not have occurred within the performance
of his official duties or within the scope of his employment as a physics professor,
as this conduct is so far removed from and entirely unrelated to the general duties
encompassed by such a position. Even assuming Appellant made truthful
statements (which is denied), Appellant’s failure to correct others’
misrepresentations at the potential investor meetings constituted tortious conduct
outside the scope of his employment. Appellant’s Brief at p. 5; Appellant’s
Appendix: Tab 5 at pp. 1-2; Tab 6 at pp. 1-2; Tab 7 at pp. 1-2. (C.R. 174-180)
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As Appellant’s motion makes clear, his job duties entailed teaching and
researching at a state university; not soliciting investments for a private company,
and certainly not making fraudulent statements in pursuit of such investments.
Unlike a police officer’s or a bouncer’s commission of assault in connection with
an arrest or in controlling admission to a club, a physics professor’s commission of
fraud in connection with a sale of stock or in solicitation of investments for a
private company of which his son is an owner is entirely unrelated to the duties
lawfully assigned to professors (i.e., teaching and researching). Soliciting
investments and making fraudulent statements or omissions in connection with
such solicitations is not conduct of the same general nature as or incidental to the
conduct professors are authorized to engage in, and such actions are not
foreseeable given the duties assigned to professorship positions.
In short, Appellant’s participation in pitching investment opportunities was
for the benefit IsoSpec, a private company, and was not for the purpose of
accomplishing the duties for which he was employed by the University. Appellant
should not enjoy governmental immunity for the fraudulent acts he committed
against private citizens while acting on behalf of a private company and his son.
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2. Assuming Appellant’s Scope of Employment with the
University Could be Expanded by the Patent Licensing
Agreement Between the University and IsoSpec, Such
Expanded Scope is Limited by the Terms of the Agreement.
Even assuming some of Appellant’s involvement with IsoSpec could have
been in performance of his duties as a professor for the University by virtue of the
Patent Licensing Agreement between IsoSpec and the University, the scope of his
employment in that regard is limited by the terms of the licensing agreement, a true
and correct copy of which is attached hereto as Tab 2 in Appellee’s Appendix.
The scope of an employee’s duties may be defined by an employment contract, and
the Tort Claims Act defines “scope of employment” as “the performance of a task
lawfully assigned to an employee by competent authority.” Tex. Civ. Prac. &
Rem. Code § 101.001(5) (emphasis added). Thus, even if Appellant’s “lawfully
assigned” duties extended beyond his general teaching and researching activities to
some involvement with IsoSpec, the only actions which could possibly fall within
the scope of his employment with the University are those acts which were
undertaken to satisfy the University’s obligations and responsibilities, as defined
by the licensing agreement.
The licensing agreement, however, does not impose any obligation on the
University or its employees to obtain or assist IsoSpec in obtaining funding or
investments (or any other obligation, for that matter). In fact, the agreement
unambiguously provides exactly the opposite:
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[IsoSpec] by itself . . . will use diligent efforts to make Licensed
Products or Licensed Services commercially available. . . .
[IsoSpec] will (a) maintain a reasonably funded, ongoing and
active research, development, manufacturing, regulatory,
marketing or sales program required to make License Products or
Licensed Services commercially available, and (b) fulfill the
[funding] milestone events specified in Section 2.4 of the Patent
License Agreement. . . . If the obligations under this Section 2.4 are
not fulfilled, [the University] may treat such failure as a breach. . . .
Appellees’ Appendix, Tab 2 at Exhibit A, Sec. 2.4 (emphasis added). Indeed, the
licensing agreement places the obligation to commercialize and obtain funding
entirely on IsoSpec—“by itself”—and gives the University the right to treat the
failure of IsoSpec to obtain funding as a breach of the agreement. Id. Thus, not
only did the University—and, consequently, its employees—have no affirmative
obligations under the agreement whatsoever, the agreement expressly places the
obligation to commercialize and obtain funding on IsoSpec alone.
Appellant cannot possibly contend that his conduct of actively soliciting or
assisting IsoSpec in soliciting investments were within the scope of his
employment with the University even though the scope of the University’s
involvement with IsoSpec was limited to the granting of a license and even though
the University expressly disclaimed any requirement to assist in fundraising. To
the contrary, Appellant’s conduct greatly exceeded the scope of the limited
engagement between IsoSpec and the University and in fact directly contributed to
fulfilling the obligations the agreement placed exclusively on IsoSpec.
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C. A Fact Issue Exists as to Whether Appellant Was Acting Within
the Scope of His Employment.
Even if the Court cannot conclude as a matter of law that Appellant was not
acting within the scope of his employment with the University in connection with
his solicitation efforts for IsoSpec, the Court must nevertheless affirm the denial of
Appellant’s motion because (1) the burden is on Appellant to conclusively
establish that he was in fact acting within the scope of his employment, which he
has failed to do, and (2) at the very least, a fact issue has been raised.
Whether an employee was acting within the scope of employment as
required by Section 101.106(f) is a question of fact, and the existence of a fact
issue as to what conduct the employee engaged in and/or whether such conduct fell
within the scope of employment precludes the granting of a dismissal or summary
judgment on immunity grounds. Molina, 441 S.W.3d 578 (holding the existence
of a fact issue concerning whether the officer was acting within the scope of his
employment and whether he was under the influence of alcohol precluded a grant
of summary judgment).
Here, Appellant has created a fact issue by denying engaging in tortious
conduct or making any misrepresentations, and by directly contradicting the
material facts alleged by Appellees’ to have taken place. See Plaintiff’s Second
Amended Petition (C.R. 51-60); Appellant’s Appendix: Tab 5 at pp. 1-2; Tab 6 at
pp. 1-2; Tab 7 at pp. 1-2 (C.R 174-180). Specifically, Appellant asserts he only
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attended one IsoSpec meeting, that he did not know the purpose of such meeting
was to obtain investments or that those in attendance were potential investors, and
that he did not participate in drafting the PPM and was not otherwise involved in
soliciting investors. Appellant’s Appendix, Tab 3 at p. 3. Appellant also offers the
affidavit of Dr. Phillip Varghese that contains the conclusory statement that both
he and Appellant were acting in the scope of their employment with the University
when assisting IsoSpec.4 Nevertheless, Appellees contend precisely the opposite
and have attached counter-affidavits which show Appellant was actively involved
in the solicitation of investments for IsoSpec and in fact attended multiple
meetings, the obvious purpose of which was to pitch investment opportunities. See
Plaintiffs’ Second Amended Petition; Appellant’s Appendix: Tab 5 at pp. 1-2; Tab
6 at pp. 1-2; Tab 7 at pp. 1-2. Further, the contrary contention of IsoSpec that
Appellant was in fact acting within the scope of his relationship with IsoSpec and
in furtherance of IsoSpec’s business supports Plaintiffs’ position and also raises a
4
Appellant also contends that a travel payment voucher submitted by Phillip Varghese,
showing payment for mileage to and from IsoSpec Technologies for a meeting where Dr.
Varghese met with Jack McCrary, somehow confirms that both he and Appellant were
acting in the scope of their employment with the University. Appellant’s Appendix, Tab
4. (C.R. 305-312) However, the specific purpose of this meeting is vague. The voucher
only states the purpose of the meeting was to “discuss commercializ[ing] their
technology.” Id. Dr. Varghese suggests in his affidavit that this meeting was to meet
with representatives of IsoSpec, but the payment of an expense by a University is hardly
evidence that the reimbursement was in fact proper payment for some expenses falling
within the scope of the employment of the Dr. Varghese. Moreover, payment for
expenses associated meeting representatives of IsoSpec is hardly sufficient evidence that
Appellant was at all times acting in the course and scope of his employment for the
University when he met with potential investors. Id.
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fact issue. See IsoSpec Technologies Petition in Intervention (“any and all
representations made by either father or son Fink were done within the course and
scope of their relationship with [IsoSpec] . . . in the authorized and legitimate
furtherance of its business”) (emphasis added).
While Appellant has certainly come up with some new and creative
arguments in its appellate brief,5 such arguments, if anything, only serve to further
highlight the existence of these disputed fact issues. These disputed fact issues
which directly relate to a necessary element of Appellant’s defense preclude
dismissal under Section 101.106(f). The resolution of these fact issues and the
larger question of whether these facts, once established, prove that Appellant was
acting within the scope of his employment is for the jury to decide. Tex. Adjutant
General’s Office v. Ngakoue, 408 S.W.3d 350, 365 (Tex. 2013) (Boyd, J.,
dissenting) (“There may be fact issues that a jury must resolve to establish whether
the conduct at issue was within the scope of employment.”); see Texas Pattern Jury
Charge 10.6 (2014) (“Scope of Employment”).
In short, Appellant’s subjective belief that he was acting within the scope of
his employment is insufficient to establish his entitlement to dismissal under
Section 101.106(f). Appellees’ counter-affidavits, at a minimum, are sufficient to
5
Notably, Appellant’s motion to dismiss at the trial court level was only seven pages in
substance, but Appellant has now come up with thirty-one pages of briefing to attempt to
convince this Court that Appellant is entitled to governmental immunity as a matter of
law.
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raise a fact issue as to whether Appellant engaged in the disputed conduct and/or
was acting within the course and scope of his employment when he did so.
Because it would be inappropriate and premature to dismiss Appellant from this
suit on immunity grounds, the denial of his motion should be affirmed.
D. Appellant Cannot Establish That Appellees’ Suit Could Have
Been Brought Against the University Under the Tort Claims Act.
Appellant has also failed to prove the third element of Section 101.106(f)’s
immunity defense: that Appellees’ suit could have been brought against his
governmental employer, the University, under the Tort Claims Act. First, as
shown above, suit could not have been brought against the University because an
employer is not vicariously liable for the conduct of its employees occurring
outside the scope of employment. See Anderson, 365 S.W.3d at 126 (concluding
in part that because the employees were acting within the scope of their
employment, suit “could have been brought” against the governmental unit under
the Act).
In addition, even assuming Appellant was acting within the scope of his
employment when he made fraudulent misrepresentations or omissions while
soliciting investments for IsoSpec (which is expressly denied), Appellees’ claim
under the Texas Securities Act is not a common-law tort action which “could have
been brought under this chapter [i.e., under the Tort Claims Act] against the
governmental unit.” See Tex. Civ. Prac. & Rem. Code § 101.106(f) (emphasis
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added). In addition to their common-law claims, Appellees have sued Appellant
under the Texas Securities Act, which provides an independent statutory remedy
for fraud, distinct from the common-law tort of fraud and the Tort Claims Act. See
Franka, 332 S.W.3d at 379 (“The rule [is] that a tort suit against the government,
as distinct from a statutory claim, is brought ‘under’ the [Tort Claims] Act for
purposes of section 101.106”) (emphasis added); Alexander v. Walker, 435 S.W.3d
789, 792 (Tex. 2014) (holding common-law tort claims could have been brought
against the government under the TTCA); Weaver v. McKeever, No. 01-12-00851-
CV, 2014 Tex. App. LEXIS 2092 (Tex. App.—Houston [1st Dist.] Feb. 25, 2014)
(construing Franka as holding that “all common-law tort theories alleged against a
governmental unit are assumed to be ‘under’ the Tort Claims Act for purposes of
section 101.106”) (emphasis added); see also Tex. Civ. Prac. & Rem. Code §
101.003 (“The remedies authorized by this chapter are in addition to any other
legal remedies.”).
Appellant’s interpretation of Section 101.106(f) would effectively erase the
phrase “under this chapter” from the statute. Mission Consol. Indep. Sch. Dist. v.
Garcia, 235 S.W.3d 653, 659-60 (Tex. 2008) (“Since we give effect to all words in
a statute, ‘under this chapter’ must operate to make the scope of [TTCA Section
101.106] (a), (c), (e), and (f) different from that of (b).”). Thus, Section
101.106(f)’s “could have been brought” element refers to only common-law tort
-29-
claims, as opposed to statutory claims, such as Appellees’ claim under the Texas
Securities Act. Id. (stating that the phrase “under this chapter” was a “limiting
phrase” which refers to only common-law tort claims).
Further, even if Section 101.106(f)’s phrase “under this chapter” could be
construed as applying to statutory claims unless such statute contains a waiver of
governmental immunity, the Texas Securities Act clearly and unambiguously
contains such a waiver. The Texas Securities Act prohibits “[a]ny person” from
engaging in fraud in connection with a sale of securities. Tex. Rev. Civ. Stat. art.
581-29. “Person” is defined by the Securities Act as including “a government, or a
political subdivision or agency thereof.” Tex. Rev. Civ. Stat. art. 581-4. In
Mission, the Texas Supreme Court considered whether a claim brought under the
Texas Commission on Human Rights Act (“TCHRA”), which prohibited an
“employer” from engaging in certain acts, “could have been brought” under the
Tort Claims Act for purposes of Section 101.106. Mission, 235 S.W.3d at 660.
The Court construed the TCHRA’s definition of “employer,” which included “a
county, municipality, state agency, or state instrumentality,” as operating as a
“clear[] and unambiguous[] waive[r] [of] immunity.” Id. Thus, the Court held that
a claim under the TCHRA could not have been brought under the Tort Claims Act.
Id.
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Likewise, Appellees’ claim under the Texas Securities Act is not one which
“could have been brought under the [Tort Claims] Act,” because, like the statute at
issue in Mission, the Securities Act’s definition of “person” as including a
government and its agencies is a clear and unambiguous waiver of governmental
immunity. See id. at 659 (“Claims against the government brought pursuant to
waivers of sovereign immunity that exist apart from the Tort Claims Act are not
‘brought under [the Tort Claims Act].”). Therefore, the Court properly denied
Appellant’s motion to dismiss because he could not satisfy the third element of his
immunity defense as he cannot prove that Appellees’ claim under the Texas
Securities Act could have been brought against the University under the Tort
Claims Act.
VII. Conclusion
For the factual and legal reasons set forth above, this Court should overrule
all of the Appellant’s points of errors, affirm the trial court’s order of November
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21, 2014 denying Appellant’s motion to dismiss, and remand the case back to the
trial court for a full trial on the merits of the case.
Respectfully submitted,
LISKOW & LEWIS
By: /s/ Wade T. Howard
Wade T. Howard
State Bar No. 00787725
Michael P. Cash
State Bar No. 03965500
Alma F. Gomez
Texas State Bar No. 24069800
1001 Fannin, Suite 1800
Houston, Texas 77002
Telephone: (713) 651-2900
Telecopier: (713) 651-2908
ATTORNEYS FOR APPELLEES
CERTIFICATE OF COMPLIANCE
I hereby certify that Appellees’ Brief was produced on a computer using
Microsoft Word and contains 5767 words, as determined by the word-count feature
of the word processing software, excluding the sections of the documented listed in
Tex. R. App. 9.4(i)(1).
/s/ Wade T. Howard
Wade T. Howard
-32-
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of Appellees’ Brief was served
on all counsel of record by email on this the 23rd day of April 2015:
William B. Mateja, Esq. Timothy M. McDaniel, Esq.
John C.C. Sanders, Jr., Esq. IRELAN MCDANIEL, PLLC
FISH & RICHARDSON P.C. 440 Louisiana Street
1717 Main Street, Suite 5000 Suite 1800
Dallas, Texas 75201 Houston, Texas 77002
Tel. 214-747-5070 Tel. 713-222-7666
Fax. 214-747-2091 Fax. 713-222.7669
Via Email: mateja@fr.com Via Email :
Via Email: jsanders@fr.com tmcdaniel@imtexaslaw.com
Attorneys for Defendant Dr. Manfred Fink, Attorneys for Defendant Dr.
Ph.D Rainer Fink, Ph.D
H. Melissa Mather Andrew R. Harvin, Esq.
Assistant Attorney General Peter Wells, Esq.
Office of the Attorney General DOYLE, RESTREPO, HARVIN &
for the State of Texas ROBBINS, LLP
Financial Litigation, Tax, and Charitable The Lyric Centre
Trusts Division 440 Louisiana, Suite 2300
P.O. Box 12548 Houston, TX 77002
Austin, TX 78711-2548 Tel: 713-228-5100
(512) 475-2540 – direct Fax: 713-228-6138
(512) 475-2994 - fax Via Email:
Via Email aharvin@drhrlaw.com
H.Melissa.Mather@texasattorneygeneral.gov Via Email:PWells@drhrlaw.com
Attorneys for Defendant Dr. Manfred Fink, Attorneys for Third-Party
Ph.D Defendant William Hightower
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Arnold Anderson “Andy” Vickery, Esq. Paul Flack
Fred H. Shepherd, Esq. PRATT & FLACK, LLP
THE VICKERY LAW FIRM 1331 Lamar Street
Park Laureate Building Four Houston Center, Suite 1250
10000 Memorial Drive, Suite 750 Houston, Texas 77010
Houston, Texas 77024 Tel: (713) 936-2401
Tel. 713-526-1100 Fax: (713) 481-0231
Fax. 713-523-5939 Via Email:
Via Email: andy@justiceseekers.com pflack@prattflack.com
Via Email: fred@justiceseekers.com Attorneys for Third-Party
Via Email: karin@justiceseekers.com Defendant UBS
Attorneys for IsoSpec Technologies, L.P.
/s/ Wade T. Howard
Wade T. Howard
4178307v1_doc.
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