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Oistad v. Baker Hostetler

Court of Appeals of Texas, First District, Houston
Mar 2, 2006
No. 01-05-00493-CV (Tex. App. Mar. 2, 2006)

Summary

holding appellants waived their complaint that trial court erred in granting severance by not raising that objection in the trial court

Summary of this case from Gammill v. Fettner

Opinion

No. 01-05-00493-CV

Opinion issued March 2, 2006.

On Appeal from 215th District Court, Harris County, Texas, Trial Court Cause No. 2003-64277A.

Panel consists of Justices TAFT, HIGLEY, and BLAND.


MEMORANDUM OPINION


In addressing the four points of error raised in this appeal, we determine whether appellants have demonstrated that the trial court abused its discretion when it struck, dismissed, and then severed the following claims brought against appellees, Baker Hostetler, L.L.P., Strasburger Price, L.L.P., and Ivan Wood: (1) the counterclaims of appellants Chad Oistad, D.C., Timothy McKinley, D.C., Eric Juntunen, D.C. and (2) the pleas in intervention of appellants James Wildermuth, D.C. and Troy Clark, D.C. Because no abuse of discretion has been shown, we affirm the judgment of the trial court.

The counterclaims and the pleas in intervention were brought by appellants individually and on behalf of DWM, P.L.L.C.

Background

DWM, P.L.L.C. is a provider of chiropractic services. Appellants, who are chiropractors, entered into agreements with DWM to supply chiropractic services, the terms of which agreement are unknown. In November 2003, DWM sued Oistad, McKinley, and Juntunen. Though the record does not contain DWM's petition, the parties agree that DWM sued Oistad, McKinley, and Juntunen, at least in part, for breaching the chiropractic services contracts that each had with DWM.

On September 17, 2004, Oistad, McKinley, and Juntunen, joined by new parties, Wildermuth and Troy (sometimes referred to collectively as "the chiropractors"), filed a "Third-Party Petition," impleading Marion Danna, D.C. as a third-party defendant. The chiropractors also named, as third-party defendants, attorney Ivan Wood, Wood's former law firm, Baker Hostetler, L.L.P., and Wood's current firm, Strasburger Price, L.L.P. (sometimes referred to collectively as "the attorneys").

The chiropractors claimed that they and Danna had agreed to share ownership and management of DWM. The chiropractors alleged that, over the years, Danna had acted as the "the de facto Managing Member" of DWM. The chiropractors claimed that Danna had, while acting in this capacity, engaged in unauthorized conduct to divest them of their respective ownership interests in DWM, embezzled company funds, and breached his fiduciary duties.

The chiropractors asserted that Wood was DWM's "general counsel." The chiropractors sought to hold Wood, Baker Hostetler, and Strasburger Price liable based on allegations that Wood was aware of Danna's wrongful conduct. They claimed that Wood had not only failed to inform them of Danna's conduct, but had assisted him in his wrongful acts.

The attorneys filed motions to strike the chiropractors' third-party petition, contending that the chiropractors had not complied with Texas Rule of Civil Procedure 38. Rule 38 allows a defending party to sue a person not a party to the action who is or may be liable to him or to the plaintiff for all or part of the plaintiff's claim against him. The rule requires leave of court when filing a third-party action, unless the third-party petition is filed within 30 days of the third-party plaintiff's original answer.

See Tex. R. Civ. P. 38.

Id.

Id.

In support of the motions to strike, the attorneys asserted that the chiropractors' claims did not comply with Rule 38 in three respects. First, the chiropractors did not seek contribution and indemnity from the attorneys for DWM's claims against them, but instead asserted independent causes of action and sought independent damages. Second, the chiropractors had filed their third-party petition more than 30 days after DWM had served its original answer, without obtaining leave of court. Third, Wildermuth and Clark could not file a third-party claim because neither were a "defending party."

The chiropractors then filed "Defendants, Oistad, McKinley, and Juntunen's First Amended Answer and Counterclaim and Intervenors, Wildermuth and Clark's Petition in Intervention" ("the counterclaim/intervention"). The chiropractors each asserted that they were acting individually and on behalf of DWM in filing the counterclaim/intervention. They also asserted that the earlier third-party petition had been mistitled and that the counterclaim/intervention "amends and supercedes" the earlier third-party petition.

The counterclaim/intervention was substantively similar to the third-party petition. The chiropractors again asserted that Danna had acted to cheat them out of their ownership rights and profits and that the attorneys had not only failed to disclose Danna's conduct, but had assisted him.

The counterclaim/intervention also differed from the third-party petition. The counterclaim/intervention asserted, for the first time, claims against DWM for breach of contract and quantum meruit. The chiropractors also expounded on their earlier claims, asserting that Danna's and the attorneys' conduct not only amounted to a breach of their respective fiduciary duties, but that such conduct rose to fraud. The chiropractors claimed, inter alia, that Danna and the attorneys had conspired to defraud them. In the alternative, the chiropractors alleged that Danna and the attorneys had "negligently and intentionally misrepresented to [the chiropractors] the legal effect of the agreements surrounding the creation of DWM." They further alleged that Danna and the attorneys had fraudulently induced them to enter into the contracts with DWM. The chiropractors claimed the following damages: (1) loss of distributions, (2) loss of reputation, (3) loss of income, (4) mental anguish, and (5) loss of payment for services rendered. The chiropractors also pled the equitable remedy of fee forfeiture for any payments made by DWM to the attorneys.

The attorneys pursued dismissal of the chiropractors' claims, contending that the counterclaims and pleas in intervention were actually third-party claims, regardless of what the chiropractors were calling them. The attorneys reiterated that the "third-party claims" should be dismissed for noncompliance with Rule 38. In its motion to strike, Baker Hostetler also argued that the legal malpractice claims brought by the chiropractors should not be joined because whether Wood committed malpractice was "wholly irrelevant to the contract and other claims among DWM and the Chiropractors."

The chiropractors defended against the striking of the counterclaims and pleas in intervention, asserting that their claims were not third-party claims brought pursuant to Rule 38. The chiropractors specifically cited Rule 97(f) as authority to join the attorneys as additional parties to the chiropractors' counterclaims against DWM. The chiropractors argued that DWM's claims against them and their counterclaims were "inexorably intertwined" and that "[t]he evidence to support [the chiropractors'] affirmative defenses [to DWM's claims against them] is identical to the evidence to be used in support of the claims against Counter-Defendants [DWM, Danna and the attorneys]." The chiropractors contended that the petition in intervention was proper because Wildermuth and Clark's pleas in intervention were "identical to" Oistad, McKinley, and Juntunen's counterclaims.

On January 4, 2005, the trial court signed an interlocutory order granting the attorneys' motions to strike and dismissing all claims brought against Wood, Baker Hostetler, and Strasburger Price. The attorneys then filed an "Unopposed Joint Motion to Sever," seeking to have the chiropractors' dismissed claims severed from the main cause. The trial court signed an order granting the motion to sever, expressly making the January 4, 2005 order dismissing all causes of action against the attorneys final.

Though the docket sheet indicates that a hearing was held on the motions to strike, the record does not include a reporter's record from that hearing.

The chiropractors filed a motion for new trial, in which they attacked the judgment on the ground that it was improper to strike their claims against the attorneys. They argued that Rule 38, governing third-party practice, was inapplicable to their respective counterclaims and pleas in intervention. The chiropractors also contended that they had pleaded more than legal malpractice against the attorneys, asserting that they had also pleaded fraud and conspiracy to commit fraud against all counter-defendants. They asserted that "where conspiracy is alleged against all Counter-Defendants, striking one or more of the co-conspirators is improper." The chiropractors made no challenge to the severance order in the trial court.

Striking and Dismissal of Claims

In their first three points of error, the chiropractors challenge the trial court's striking and dismissal of their counterclaims and pleas in intervention.

A. Standard of Review

Trial courts generally have broad discretion in matters such as party joinder, and their decision on such procedural issues will not be disturbed on appeal absent an abuse of discretion. See Allison v. Arkansas Louisiana Gas Co., 624 S.W.2d 566, 568 (Tex. 1981); Varme v. Gordon, 881 S.W.2d 877, 882 (Tex.App.-Houston [14th Dist.] 1994, writ denied); Williamson v. Tucker, 615 S.W.2d 881, 886-87 (Tex.Civ.App.-Dallas 1981, writ ref'd n.r.e.). Thus, it follows that the proper standard of review for us to apply in determining whether the trial court properly struck and dismissed Oistad, McKinley, and Juntunen's counterclaims is abuse of discretion. See Varme, 881 S.W.2d at 882. Review of a trial court's order on a motion to strike intervention is also subject to an abuse of discretion standard. See Guaranty Fed. Savs. Bank v. Horseshoe Operating Co., 793 S.W.2d 652, 657 (Tex. 1990).

In determining whether the trial court abused its discretion, we review the record in the light most favorable to the trial court's actions. Varme, 881 S.W.2d at 882; Cellular Mktg., Inc. v. Houston Cellular Tel. Co., 838 S.W.2d 331, 333 (Tex.App.-Houston [14th Dist.] 1992, writ denied). Under this standard, we also indulge every legal presumption in favor of the trial court. Phillips Akers, P.C. v. Cornwell, 927 S.W.2d 276, 279 (Tex.App.-Houston [1st Dist.] 1996, no writ). The trial court abuses its discretion if it acts without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). If we are able to find any authority to support the trial court's actions, then we may conclude that the court did not abuse its discretion. Varme, 881 S.W.2d at 882.

B. Application of Texas Rule of Civil Procedure 38

The chiropractors frame their first issue as follows: "The trial court erred to the extent that it treated Appellants' claims as third-party claims." The chiropractors emphasize that, because they did not assert third-party claims, they were not subject to the provisions of Rule 38 in filing their counterclaims and pleas in intervention, as advocated by the attorneys. See Tex. R. Civ. P. 38 (allowing defending party to sue person who is not a party to action who is or may be liable to him or to plaintiff for all or part of plaintiff's claim and requiring leave of court when filing third-party action, unless third-party petition is filed within 30 days of third-party plaintiff's original answer).

We agree that the chiropractors' claims were not third-party claims as contemplated by Rule 38. A third-party action is not an independent cause of action, but is derivative of the plaintiff's claim against the responsible third party. Goose Creek Consol. Indep. School Dist. v. Jarrar's Plumbing, Inc., 74 S.W.3d 486, 492 (Tex.App.-Texarkana 2002, pet. denied). Here, the chiropractors did not claim that the attorneys were liable for the chiropractors' alleged liability to DWM. That is, as pled, the attorneys' alleged liability to the chiropractors was not derivative of the liability claimed by DWM against the chiropractors.

Notwithstanding non-application of Rule 38, the chiropractors have not met their appellate burden to show that the trial court abused its discretion by treating their claims as third-party claims. Because they are the appellants, the chiropractors have the burden on appeal to show that the trial court abused its discretion by striking and dismissing their claims based on non-compliance with Rule 38. See Clade v. Larsen, 838 S.W.2d 277, 280 (Tex.App.-Dallas 1992, writ denied) (concluding that appellant had burden on appeal to show that trial court abused its discretion in not allowing amendment of petition to add new cause of action); see also Simon v. York Crane Rigging Co., Inc., 739 S.W.2d 793, 795 (Tex. 1987) (reaffirming that party that complains of abuse of discretion has burden on appeal to bring forth record showing such abuse). The record does not reflect the basis or legal theory on which the trial court struck and dismissed the chiropractors' claims. As framed, the chiropractors' argument that the trial court "erred to the extent that it treated [their] claims as third-party claims," without further argument or support in the record, does not show that the trial court abused its discretion in this respect.

We overrule the first point of error.

C. Adding New Parties Pursuant to Texas Rule of Civil Procedure 97(f)

In their second point of error, the chiropractors attack the striking and dismissal of Oistad, McKinley, and Juntunen's counterclaims against the attorneys. In support of this point, the chiropractors rely on Texas Rule of Civil Procedure 97(f), which, with respect to counterclaims, permits the joining of a non-party to a previously or contemporaneously filed counterclaim. See Tex. R. Civ. P. 97(f). The rule provides as follows: "Additional Parties. Persons other than those made parties to the original action may be made parties to a third party action, counterclaim or cross-claim in accordance with the provisions of Rules 38, 39 and 40." Id. The chiropractors advocate that joinder of their counterclaims against the attorneys was proper under both Rule 39 and Rule 40.

Rule 39, as it is entitled, governs the "Joinder of Persons Needed for Just Adjudication." Tex. R. Civ. P. 39. In their brief, the chiropractors set forth the provisions of Rule 39. They do not assert that Rule 39 governed the counterclaims against the attorneys, but instead aver that, "if" Oistad, McKinley, and Juntunen's counterclaims against the attorneys fall under this rule, then the trial court abused its discretion in striking and dismissing those claims. The chiropractors offer no substantive argument to show that the trial court abused its discretion because the counterclaims against the attorneys were required to be joined to their counterclaims against DWM pursuant to Rule 39. Thus, the chiropractors have not met their appellate burden to show an abuse of discretion in this manner. See Clade, 838 S.W.2d at 280; see also Williamson, 615 S.W.2d at 887 (recognizing that appellant had to show that trial court abused its discretion in not allowing joinder under Rule 39, even if joinder was proper).

The chiropractors primarily focus on Rule 40, asserting that the rule "permits" the counterclaims against the attorneys. Rule 40, which governs the permissive joinder of parties, provides, in relevant part, as follows:

All persons may join in one action as plaintiffs if they assert any right to relief jointly, severally, or in the alternative in respect of or arising out of the same transaction, occurrence, or series of transactions or occurrences and if any question of law or fact common to all of them will arise in the action.

Tex. R. Civ. P. 40(a).

The chiropractors contend that it was improper for the trial court to strike Oistad, McKinley, and Juntunen's counterclaims against the attorneys because (1) Oistad, McKinley, and Juntunen had alleged that Danna and the attorneys "co-conspired to defraud them of their membership in and the profits of DWM;" (2) overlap existed between "essential elements" of Oistad, McKinley, and Juntunen's affirmative defenses to DWM's claims and their counterclaims; and (3) DWM's claims against Oistad, McKinley, and Juntunen and their claims against the attorneys arose out of "a singular contractual relationship." The chiropractors conclude that "[t]he Court cannot properly separate these issues and to do so would invite inconsistent and contradictory results."

"It is not enough that we cannot see how the court's exercise of discretion can be justified. We must be able to see that it cannot be justified." Williams v. Moers, 240 S.W.2d 336, 342 (Tex.Civ.App.-Galveston 1951, writ ref'd n.r.e.). This we cannot see. Though it may have been proper for the trial court to have allowed the counterclaims to be maintained, Rule 40 is permissive rather than mandatory. Seay v. Hall, 663 S.W.2d 468, 472-73 (Tex.App.-Dallas 1983), aff'd in part, rev'd in part on other grounds, 667 S.W.2d 19 (Tex. 1984). That is, the plain language of the rule did not require the trial court to maintain the counterclaims against the attorneys. Undeniably, all of the claims arise from the same general constellation of facts, and a review of the pleadings reveals an overlap between some affirmative defenses asserted by the chiropractors to DWM's claims and the counterclaims pled against the attorneys. Nonetheless, the relationship alleged between the chiropractors and the attorneys and the nature of the counterclaims asserted against the attorneys are distinct from the relationship between the chiropractors and DWM and the counterclaims brought against DWM. Notwithstanding the commonalities among the various claims, allowing the counterclaims against the attorneys would engraft the distinct and nascent claim of legal malpractice onto what is essentially a business dispute over the ownership of DWM. At the same time, no showing has been made that the trial court's striking and dismissal of the counterclaims against the attorneys destroyed Oistad's, McKinley's, and Juntunen's rights to pursue their surviving counterclaims against DWM and Danna.

Shortly before the submission of this appeal, the attorneys filed a "Motion to Take Judicial Notice of Filing of New Lawsuit By Appellants." Attached to the motion is a certified copy of an original petition filed by the chiropractors against the attorneys on November 3, 2005 in the Harris County District Clerk's Office, while this appeal was pending. In the original petition, the chiropractors assert essentially the same claims as they asserted in their counterclaims against the attorneys in the instant suit. To be the proper subject of judicial notice, a fact must be "capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned." Tex. R. Evid. 201(b)(2). Judicial notice is mandatory if "requested by a party and [the court is] supplied with the necessary information." Tex. R. Evid. 201(d). A court of appeals has the power to take judicial notice for the first time on appeal. Office of Pub. Util. Counsel v. Pub. Util. Com'n of Tex., 878 S.W.2d 598, 600 (Tex. 1994). Because the attorneys have supplied us with the necessary information, we take judicial notice that the chiropractors filed suit against the attorneys on November 5, 2005. However, we do not find it necessary to take this filing into consideration in resolving the issues presented in this appeal.

We also note that there is dearth of case law regarding the scope of Rule 97(f). We can, however, look to federal case law interpreting the federal counterpart to Rule 97(f), Federal Rule of Civil Procedure 13(h). See Monroe v. Grider, 884 S.W.2d 811, 817 (Tex.App.-Dallas 1994, writ denied) (discussing federal case law interpreting Federal Rule of Civil Procedure 11 to aid in interpreting Texas counterpart: Rule of Civil Procedure 13). Regarding the scope of Rule 13(h), one federal appellate court has concluded,

Rule 13(h) provides: "Joinder of Additional Parties. Persons other than those made parties to the original action may be made parties to a counterclaim or cross-claim in accordance with the provisions of Rules 19 and 20." Fed.R.Civ.P. 13(h).

Rule 13(h) only authorizes the court to join additional persons in order to adjudicate a counterclaim or cross-claim that already is before the court or one that is being asserted at the same time the addition of a nonparty is sought. This means that a counterclaim or cross-claim may not be directed solely against persons who are not already parties to the original action, but must involve at least one existing party.

FDIC v. Bathgate, 27 F.3d 850, 873 (3d Cir. 1994) (quoting 6 Wright, Miller, Kane, Federal Practice and Procedure § 1435, at 270-71 (2d ed. 1990)). Furthermore, the court elaborated that the "in order to adjudicate a counterclaim" language means that "the presence of additional parties is either necessary or close to necessary to the resolution of the counterclaims." Id. n. 13 (emphasis added). Thus, at least under federal authority, the relevant inquiry to determine whether the addition of the counterclaims against the attorneys was proper was not whether such counterclaims were necessary or close to necessary to resolve DWM's original claims against Oistad, McKinley, and Juntunen, or whether the counterclaims against the attorneys were necessary or close to necessary to resolve the counterclaims against Danna; rather, the inquiry was whether the counterclaims against the attorneys were necessary or close to necessary to resolve the originating counterclaim, i.e., the counterclaim made by Oistad, McKinley, and Juntunen against DWM.

As worded in the counterclaim/intervention, the counterclaim against DWM appears to have been based on breach of contract and quantum meruit, while the counterclaims against the attorneys were based on legal malpractice, fraud, and conspiracy. As pled, the trial court could have concluded that the counterclaims against the attorneys were not necessary or close to necessary to resolve the original counterclaims made by Oistad, McKinley, and Juntunen against DWM.

We hold that the chiropractors have not shown that the trial court abused its discretion in striking and dismissing the counterclaims against the attorneys.

We overrule the second point of error.

D. Striking and Dismissal of Pleas in Intervention

In their third point of error, the chiropractors contend that the trial court "erred in that it struck and dismissed Intervenors' [Wildermuth and Clark's] claims." The chiropractors cite Rule 60, which provides that any party may intervene by filing a pleading, subject to the pleading being struck by the court on the motion of any party. Tex .R. Civ. P. 60. They argue that the trial court prohibited Wildermuth and Clark from "joining this matter." However, the trial court did not strike, in toto, Wildermuth's and Clark's intervention in this case. Rather, the trial court struck and dismissed all claims against the attorneys, including those of intervenors Wildermuth and Clark. By implication, Wildermuth and Clark's pleas in intervention against DWM and Danna survived.

In their brief, the chiropractors assert that the "claims in Intervention are identical to those counterclaims filed by Oistad, McKinley, and Juntunen." We have held that the trial court did not abuse its discretion in striking and dismissing Oistad, McKinley, and Juntunen's counterclaims against the attorneys. Wildermuth and Clark offer no additional argument or authority to show why it was an abuse of discretion for the trial court to strike and to dismiss their claims against the attorneys. That is, Wildermuth and Clark have made no showing why it was an abuse of discretion for the trial court to strike their pleas in intervention against the attorneys when it was not an abuse of discretion to strike and dismiss Oistad's, McKinley's, and Juntunen's counterclaims against the attorneys.

We overrule the chiropractors' third point of error.

Severing of Claims

In their fourth point of error, the chiropractors claim that it was an abuse of discretion for the trial court to sever their claims against the attorneys. We agree with the attorneys that this complaint was waived by the chiropractors because it was not raised in the trial court. To preserve a complaint for appellate review, the complaining party must have presented a timely objection, motion, or request to the trial court. Tex.R.App.P. 33.1(a)(1). The record does not show that the chiropractors raised the severance complaint in the trial court. Thus, it is waived. See Shank, Irwin, Conant, Williamson v. Durant, Mankoff, Davis, Wolens Francis, 748 S.W.2d 494, 501 (Tex.App.-Dallas 1988, no writ) (holding that complaint that trial court abused its discretion in severing indemnity action was not preserved on appeal when it had not been raised in trial court).

We overrule the chiropractor's fourth point of error.

Conclusion

We affirm the judgment of the trial court.


Summaries of

Oistad v. Baker Hostetler

Court of Appeals of Texas, First District, Houston
Mar 2, 2006
No. 01-05-00493-CV (Tex. App. Mar. 2, 2006)

holding appellants waived their complaint that trial court erred in granting severance by not raising that objection in the trial court

Summary of this case from Gammill v. Fettner

noting wide discretion of trial court in ruling on joinder

Summary of this case from Cheatham v. Pohl
Case details for

Oistad v. Baker Hostetler

Case Details

Full title:CHAD OISTAD, D.C., TIMOTHY McKINLEY, D.C., ERIC JUNTUNEN, D.C., JAMES…

Court:Court of Appeals of Texas, First District, Houston

Date published: Mar 2, 2006

Citations

No. 01-05-00493-CV (Tex. App. Mar. 2, 2006)

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