in Re Houston Specialty Insurance Company ( 2019 )

IN THE SUPREME COURT OF TEXAS
444444444444
NO. 17-1060
444444444444
IN RE HOUSTON SPECIALTY INSURANCE COMPANY, RELATOR
4444444444444444444444444444444444444444444444444444
ON PETITION FOR WRIT OF MANDAMUS
4444444444444444444444444444444444444444444444444444
PER CURIAM
In this mandamus proceeding, relator Houston Specialty Insurance Co. (“HSIC”) argues that
the trial court erred by denying its Rule 91a motion to dismiss a declaratory judgment action because
the declarations sought are of nonliability for legal malpractice. See TEX. R. CIV. P. 91a.1 (“[A] party
may move to dismiss a cause of action on the grounds that it has no basis in law or fact.”). We agree
and conditionally grant relief.
HSIC insured South Central Coal Company pursuant to a commercial general liability policy
(“the Policy”). The Coal Company was sued in LeFlore County, Oklahoma by the Carters, who
alleged that the Coal Company had mined coal under their property without authorization and then
sold it for profit. Acting on the legal advice of law firm Thompson, Coe, Cousins, & Irons, LLP,
HSIC denied the Coal Company’s request for a defense and denied coverage under the Policy.
The Coal Company then filed third-party claims against HSIC in the Carter lawsuit alleging
breach of contract and breach of the duty of good faith and fair dealing. The trial court granted the
Coal Company’s motion for partial summary judgment on the issue of HSIC’s duty to defend. The
Carter lawsuit eventually ended with a settlement between the Carters and the Coal Company,
which the parties refer to as the “Carter Settlement,” and with a settlement between the Coal
Company and HSIC, which the parties refer to as the “Insurance Settlement.”
HSIC accused Thompson Coe of committing legal malpractice during its representation of
HSIC in the Carter lawsuit and specifically by advising HSIC that it did not owe a duty to defend
the Coal Company against the Carters’ claims. HSIC demanded by letter that Thompson Coe pay
more than $2.8 million—roughly the amount of the Insurance Settlement—to avoid litigation.
Thompson Coe responded by preemptively filing the underlying suit in Harris County district court.
The sole cause of action pleaded by Thompson Coe is a request for declaratory relief under
the Uniform Declaratory Judgments Act (“UDJA”). See TEX. CIV. PRAC. & REM. CODE ch. 37. Its
live petition requests the following ten declarations:
a. There is no coverage under the Policy for the claims asserted in the Carter
lawsuit;
b. There is no duty to defend owed under the Policy for the claims asserted in
the Carter lawsuit;
c. The Oklahoma District Court’s ruling that HSIC owed a duty under the
Policy was incorrect as a matter of law;
d. Thompson Coe is not liable for any erroneous judicial opinions;
e. The Carter Settlement Agreement is collusive and/or unreasonable;
f. HSIC is not bound by the Carter Settlement Agreement or the Carter
Judgment;
g. The Insurance Settlement Agreement is unreasonable;
2
h. Thompson Coe is not bound by the Carter Settlement Agreement, the Carter
Judgment or any other orders issued by the Oklahoma District Court;
i. Thompson Coe is not bound by the Insurance Settlement Agreement;
j. Thompson Coe was not negligent in issuing the Declination Letter.
HSIC filed a motion to dismiss Thompson Coe’s claims under Texas Rule of Civil Procedure
91a, arguing that they have “no basis in law”1 for several reasons, including that the suit violates the
rule of Abor v. Black, 695 S.W.2d 564 (Tex. 1985) (orig. proceeding), that a potential tort defendant
may not use the UDJA to obtain a declaration of nonliability in tort. While that motion was pending,
HSIC filed a legal malpractice suit against Thompson Coe in LeFlore County, Oklahoma, where the
Carter lawsuit was litigated. The Harris County district court denied HSIC’s Rule 91a motion, and
the court of appeals denied HSIC’s mandamus petition without addressing its merits. No. 14-17-
00928-CV, 2017 WL 6330984 (Tex. App.—Houston [14th Dist.] Dec. 12, 2017, orig. proceeding)
(per curiam) (mem. op.). After the court of appeals’ ruling, Thompson Coe filed a motion in the
Harris County case for an anti-suit injunction to preclude HSIC from pursuing litigation in
Oklahoma and a motion in the Oklahoma case to abate or dismiss HSIC’s claims. The Oklahoma
trial court granted the motion to abate; thus, that litigation is currently stayed.
To obtain mandamus relief here, HSIC must establish that (1) the trial court abused its
discretion by denying HSIC’s Rule 91a motion to dismiss, and (2) HSIC has no adequate remedy
by appeal. In re Essex Ins. Co., 450 S.W.3d 524, 526 (Tex. 2014) (orig. proceeding). The first test
1
“A cause of action has no basis in law if the allegations, taken as true, together with inferences reasonably
drawn from them, do not entitle the claimant to the relief sought.” TEX. R. CIV. P. 91a.1.
3
is easily met because the trial court’s denial of HSIC’s Rule 91a motion is a clear abuse of discretion
under Abor v. Black.
The issue there was “whether a potential defendant in a negligence action can choose the
time and forum for trial by beating the potential plaintiff to the courthouse and filing suit seeking
a declaration of non-liability under [the UDJA].” Abor, 695 S.W.2d at 565. After her daughter died
from being injected with the wrong drug during a chemotherapy session, Abor filed a wrongful death
action in Harris County district court against the drug’s manufacturer, the hospital where the
injection occurred, and several hospital staff members. Id. The case was removed to federal court
but then remanded for lack of diversity jurisdiction. Id. Before the case was redocketed in Harris
County, the defendants filed a declaratory judgment action in Bell County seeking a declaration of
nonliability. Id. Abor filed a plea in abatement in the Bell County suit, arguing that the defendants’
claims were improper under the UDJA. Id. The Bell County trial court denied the plea. Id.
We stated that “[b]ecause [the UDJA] appears to give the courts jurisdiction over
declarations of non-liability of a potential defendant in a tort action, . . . the Bell County District
Court had jurisdiction over the suit.” Id. at 566. But we went on to hold—in no uncertain terms and
consistent with the rule in other jurisdictions—“that the trial court should have declined to exercise
such jurisdiction because it deprived the real plaintiff of the traditional right to choose the time and
place of suit.” Id.
Five years later, in BHP Petroleum Co. v. Millard, 800 S.W.2d 838 (Tex. 1990) (orig.
proceeding), we commented on Abor’s significance, explaining that we had “eschewed use of a
declaratory judgment action to ‘deprive the real plaintiff of the traditional right to [choose] the time
4
and place of suit.’” Id. at 841 (quoting Abor, 695 S.W.2d at 566). In the years since, we have never
recognized any exception or nuance to the rule that a potential tort defendant may not seek a
declaration of nonliability in tort. Cf. MBM Fin. Corp. v. Woodlands Operating Co., 292 S.W.3d
660, 668 (Tex. 2009) (declining to extend the rule of Abor to breach-of-contract cases and
explaining that “[t]he ‘real’ plaintiff in a tort action is the injured party,” whereas in a contract case,
“each party [usually] claims the other breached”).
Two of Thompson Coe’s requested declarations, (d) and (j), expressly seek a declaration of
nonliability, and each of the others is relevant only to a potential claim of legal malpractice by HSIC.
Thompson Coe concedes as much but argues that trial courts have discretionary jurisdiction over
a declaratory judgment action seeking declarations of nonliability in tort, and further, that a trial
court may retain such an action if the tortfeasor–plaintiff also requests declarations that do not
expressly ask for a determination of liability. For these propositions it relies on a lone case,
Hernandez v. Abraham, Watkins, Nichols, Sorrels & Friend, 451 S.W.3d 58 (Tex. App.—Houston
[14th Dist.] 2014, pet. denied).
In Hernandez, another legal malpractice case, the potential tort plaintiffs challenged the law
firm’s declaratory judgment action through an unsuccessful motion to dismiss. Id. at 61. Responding
to the potential tort plaintiffs’ argument that the trial court lacked jurisdiction over the law firm’s
suit under Abor, the court of appeals characterized our opinion as “confirm[ing]” that a trial court
has jurisdiction to hear a declaratory judgment action seeking a declaration of nonliability in tort and
also as teaching that a “trial court [has only] limited discretion to refuse to hear [such] a declaratory
judgment action.” Id. at 64 (citing Abor, 695 S.W.2d at 566). The Hernandez court went on to hold
5
that the trial court had not abused its discretion in that case because the law firm had “requested
declaratory relief [that] went beyond a declaration of non-liability for a tort”—specifically,
declarations on the discoverability of documents. Id.
The Hernandez court got Abor backwards, and we disapprove of the court’s opinion to the
extent of the conflict. Our comment in Abor that the UDJA “give[s] the courts jurisdiction over
declarations of non-liability” in tort, 695 S.W.2d at 566, meant only that the issue raised by Abor
was not one of jurisdiction; the issue was whether Texas law recognizes a request for a declaration
of nonliability in tort as a valid claim. Cf. Archer v. Anderson, 556 S.W.3d 228, 229 (Tex. 2018)
(“hold[ing] that there is no cause of action in Texas for intentional interference with inheritance”).
Our opinion makes this clear by characterizing the defendants’ attempted suit as “an unauthorized
use of the Declaratory Judgment Act,” Abor, 695 S.W.2d at 565, and by relying on caselaw from
federal and other state courts that had rejected the use of a declaratory judgment action to seek a
declaration of nonliability in tort, see id. at 566. A legally invalid claim cannot be saved by
accompanying claims that may be valid.
Here, each of Thompson Coe’s requested declarations are aimed at establishing a defense
to a potential legal malpractice claim by HSIC. Under Abor, they are legally invalid, have “no basis
in law,” and should have been dismissed. TEX. R. CIV. P. 91a.1; see In re Essex Ins. Co., 450 S.W.3d
at 527–28 (holding that the trial court erred by denying Essex’s Rule 91a motion to dismiss because
the declaratory judgment requested by the plaintiff violated Texas’ “no direct action” rule, which
prohibits an injured party from suing a tortfeasor’s insurance company before liability has been
established).
6
The only question remaining is whether a traditional appeal after final judgment provides
HSIC an adequate remedy. See In re Essex Ins. Co., 450 S.W.3d at 526 (stating the two-pronged test
for mandamus relief). We hold that it does not.
In Abor itself we declined to grant relief despite the trial court’s error “because the law in
Texas was not settled” when the trial court ruled and to remain consistent with precedent instructing
that mandamus should not issue in an abatement case unless one of the trial courts involved had
enjoined the other from proceeding. 695 S.W.2d at 567. We eventually clarified that this stringent
standard had been abrogated by subsequent case law2 and confirmed that “mandamus relief is
appropriate to ‘spare private parties and the public the time and money utterly wasted enduring
eventual reversal of improperly conducted proceedings.’” In re Essex Ins. Co., 450 S.W.3d at 528
(quoting In re John G. & Marie Stella Kenedy Mem’l Found., 315 S.W.3d 519, 523 (Tex. 2010)
(orig. proceeding)). A legally invalid lawsuit that “deprive[s] the real plaintiff of the traditional right
to choose the time and place of suit,” Abor, 695 S.W.2d at 566, satisfies this test. See In re J.B. Hunt
Transp., Inc., 492 S.W.3d 287, 299 (Tex. 2016) (orig. proceeding) (explaining that “a
case[’s] . . . . proceed[ing] in the wrong court necessarily” satisfies the adequate-remedy test).
2
See In re J.B. Hunt Transp., Inc., 492 S.W.3d 287, 299 (Tex. 2016) (orig. proceeding) (holding that In re
Prudential Ins. Co., 148 S.W.3d 124 (Tex. 2004) (orig. proceeding), “abrogate[d] Abor’s inflexible understanding of
an adequate remedy by appeal”).
7
Therefore, pursuant to Texas Rule of Appellate Procedure 52.8(c), and without hearing oral
argument, we conditionally grant mandamus relief directing the trial court to grant HSIC’s Rule 91a
motion to dismiss Thompson Coe’s claims. Our writ will issue only if the court fails to comply.
Opinion delivered: January 25, 2019
8