TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-07-00292-CV
Richard Wagner, Individually and on behalf of Nationwide Mutual Texas Employees;
and Linda M. Wagner, Appellants
v.
Nationwide Lloyds and Douglas Robinette, Appellees
FROM THE DISTRICT COURT OF COMAL COUNTY, 274TH JUDICIAL DISTRICT
NO. C-2006-1222C, HONORABLE GARY L. STEEL, JUDGE PRESIDING
M E M O R A N D U M O P I N I O N
Appellants Richard Wagner and Linda M. Wagner appeal the trial court's dismissal
of their claims against Nationwide Lloyds and Douglas Robinette. The trial court found that the
Wagners failed to state a cause of action and that allowing the Wagners to amend their pleadings
would not cure the defect. In four points of error, the Wagners contend that the trial court erred
when it denied default judgment against Nationwide Lloyds and when it dismissed the Wagners'
breach of fiduciary duty and fraud claims against Nationwide Lloyds. For the reasons that follow,
we overrule the Wagners' points of error and affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Richard Wagner is an attorney who was employed by Nationwide Mutual Insurance
Company, and Linda Wagner is his wife. In 2006, Nationwide Mutual Insurance Company reached
a class action settlement with policyholders in a suit brought in the United States District Court of
the District of Oregon by Ruslan Razilov, Sara Lapham, and Derek Lapham (the "Settlement"). The
plaintiffs in that suit alleged that notices sent by Nationwide Mutual Insurance Company did not
satisfy the requirements of the federal Fair Credit Reporting Act. See 15 U.S.C. § 1681 (2007). The
settlement class did not include employees of Nationwide Mutual Insurance Company, and each
member of the class received approximately $200 from the Settlement. Wagner received notice of
the Settlement, but as an employee of Nationwide Mutual Insurance Company, he was not included
in the settlement class.
Wagner thereafter sued Nationwide Lloyds alleging that Nationwide Lloyds
improperly excluded him from the settlement class and failed to inform him of the pending class
action and his right to bring similar claims. He pleaded that "Nationwide Lloyds is a Lloyds insuring
company which is reinsured through Nationwide Insurance Company," but he did not address the
relationship between Nationwide Lloyds and the defendant in the class action lawsuit, Nationwide
Mutual Insurance Company. He also purported to represent a class of "Nationwide employees" who
were excluded from the settlement class and their spouses. (1) After Nationwide Lloyds filed special
exceptions, a motion to dismiss or for summary judgment, and an answer, Wagner moved for default
judgment and, by a first amended petition, added Linda Wagner as a plaintiff and Douglas Robinette
as a defendant. (2)
After hearing arguments on Wagner's motion for default judgment and Nationwide
Lloyds's special exceptions and motion to dismiss or for summary judgment, the trial court denied
the motion for default judgment and granted Nationwide Lloyds's motion to dismiss the Wagners'
claims with prejudice. The trial court concluded the Wagners failed to state a claim:
Plaintiff's Original Petition (including Plaintiffs' First Amended Petition
whether considered as an amended or supplemental petition) fails to state a claim and
that such defect cannot be cured by amendment. Defendants are therefore entitled
to dismissal with prejudice.
This appeal followed.
ANALYSIS
Denial of Default Judgment
In their first point of error, the Wagners contend that the trial court erred by not
granting default judgment against Nationwide Lloyds. We review a trial court's ruling on a motion
for default judgment under an abuse of discretion standard. See Walker v. Gutierrez, 111 S.W.3d
56, 63 (Tex. 2003); Padrino Mar. Inc. v. Rizo, 130 S.W.3d 243, 247-48 (Tex. App.--Corpus Christi
2004, no pet.). A trial court abuses its discretion when it acts in an arbitrary or unreasonable manner
without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc.,
701 S.W.2d 238, 241-42 (Tex. 1985).
A plaintiff may seek a no-answer default judgment against a defendant when the
defendant fails to answer timely. See Tex. R. Civ. P. 99b, 239. Once the defendant files an answer,
a plaintiff is no longer entitled to a no-answer default judgment. Id.; see also Davis v. Jefferies,
764 S.W.2d 559, 560 (Tex. 1989). Nationwide Lloyds timely filed its answer with the court on
December 26, and Wagner filed his motion for default judgment on December 27. Because
Nationwide Lloyds answered before Wagner filed his motion for default judgment, the trial
court correctly denied Wagner's motion for default judgment. (3) We overrule the Wagners' first point
of error.
Trial Court's Dismissal with Prejudice
The Wagners contend in their remaining points of error that the trial court erred in
dismissing their breach of fiduciary duty and fraud claims. (4) In their second point of error, the
Wagners contend that they should have been given an opportunity to amend their pleadings after the
trial court sustained Nationwide Lloyds's special exceptions. Nationwide Lloyds in its special
exceptions contended that the Wagners' pleadings were defective because they failed to state a cause
of action. See Tex. R. Civ. P. 91; Baylor Univ. v. Sonnichsen, 221 S.W.3d 632, 635 (Tex. 2007)
("The purpose of a special exception is to compel clarification of pleadings when the pleadings are
not clear or sufficiently specific or fail to plead a cause of action.") (citing Friesenhahn v. Ryan,
960 S.W.2d 656, 658 (Tex. 1998)).
When a trial court dismisses a case upon special exceptions for failure to state a cause
of action, we review the dismissal de novo. Butler Weldments Corp. v. Liberty Mut. Ins. Co.,
3 S.W.3d 654, 658 (Tex. App.--Austin 1999, no pet.). In so doing, we accept "as true all material
factual allegations and all factual statements reasonably inferred from the allegations set forth in the
respondent's pleadings." Id. Generally, when a trial court sustains special exceptions, it gives the
pleader an opportunity to amend to cure the defects. See Baylor, 221 S.W.3d at 635. When the
pleading defect is of a type that amendment cannot cure, however, a trial court may dismiss without
giving the pleader an opportunity to amend. Id.
Wagner alleged in his original petition that Nationwide Lloyds breached its fiduciary
duty by failing to inform "Nationwide employees" of the pending class action lawsuit and excluding
the employees from the settlement class "without providing notice or an opportunity to form a
separate Class Action or provide the same settlement offered to non employees." He also alleged
that the officers and directors of Nationwide Lloyds "were fraudulent because they did not advise
Nationwide employees of their rights to bring a claim for violations of FRCA [Fair Credit Reporting
Act] and the directors and officers received bonus based upon loss ratio goals which would have
included the additional settlement and costs." (5) Wagner attached to his original petition, as an
exhibit, a copy of the notice that he received concerning the Settlement. (6) The notice identified the
settlement class as specifically excluding employees of Nationwide Mutual Insurance Company and
further identified the defendant as Nationwide Mutual Insurance Company.
Nationwide Lloyds contends that the trial court correctly dismissed the Wagners'
breach of fiduciary duty and fraud claims because (i) the Wagners admittedly had notice of the
Settlement, (ii) Nationwide Lloyds, as a non-party, did not have a duty to assure that all potential
plaintiffs were included as adverse parties in the Settlement, and (iii) Nationwide Lloyds does
not have a legally cognizable duty to advise employees or would-be plaintiffs such as the Wagners
of possible causes of action against Nationwide Lloyds. We agree with each of Nationwide Lloyds's
contentions.
Wagner pleaded that he received notice of the Settlement. (7) The Wagners, therefore,
cannot claim lack of notice as the basis for any claim against Nationwide Lloyds. See Washington
v. City of Houston, 874 S.W.2d 791, 794 (Tex. App.--Texarkana 1994, writ denied) (party may
plead himself "out of court by pleading facts that affirmatively negate" cause of action). The
Wagners also pleaded that Nationwide Lloyds was not a party to the Settlement by including the
notice from the Settlement. The notice identified the settling defendant as Nationwide Mutual
Insurance Company, not Nationwide Lloyds, and we accept the notice as part of the Wagners'
pleadings as true. See Butler, 3 S.W.3d at 658; Washington, 874 S.W.2d at 794. As a non-party,
Nationwide Lloyds did not have legally cognizable duties concerning the Settlement. See Lucas
v. Texas Indus. Inc., 696 S.W.2d 372, 374 (Tex. 1984) ("Generally, a court will not disregard the
corporate fiction and hold a corporation liable for the obligations of its subsidiary except where it
appears the corporate entity of the subsidiary is being used as a sham to perpetuate a fraud, to avoid
liability, to avoid the effect of a statute, or in other exceptional circumstances."). (8)
The Wagners also fail to provide authority or support for their contention that a
company breaches a fiduciary duty to its employees or commits fraud by failing to inform its
employees that there is a pending class action suit with non-employees or that there are potential
causes of action against the company. The law generally requires potential plaintiffs to be
reasonably diligent about their own legal rights and does not require defendants to suggest potential
causes of action to plaintiffs. See Hodge v. Northern Trust Bank of Tex., 54 S.W.3d 518, 523
(Tex. App.--Eastland 2001, pet. denied) (a plaintiff must be "diligent in protecting his rights");
Crabtree v. Ray Richey & Co., 682 S.W.2d 727, 728 (Tex. App.--Fort Worth 1985, no writ)
(defendant has no duty to suggest potential causes of action to plaintiff). We conclude Nationwide
Lloyds owed no cognizable duty to the Wagners to notify them of the class action, to insure the
Wagners were included in the Settlement, or to advise the Wagners of possible causes of action
against Nationwide Lloyds. The Wagners cannot allege facts that support a breach of fiduciary duty
or fraud claim arising from Nationwide Lloyds's conduct concerning the Settlement, and allowing
the Wagners to amend their pleadings would not have cured this pleading defect. See Baylor,
221 S.W.3d at 635. We overrule the Wagners' second point of error.
In their third and fourth points of error, the Wagners contend that the trial court erred
in dismissing their breach of fiduciary duty claims with prejudice because Nationwide Lloyds
breached its fiduciary duty "by failing to disclose pertinent financial information for use in
determining whether or not to reject uninsured motorist coverage," and by the "failure to disclose
discriminatory practices by [Nationwide Lloyds] in its use of credit for underwriting insurance
policies." To preserve error, an appellant must raise and properly present the claim to the trial court.
See Tex. R. App. P. 33.1. The Wagners failed to plead or raise their claims concerning uninsured
motorist coverage and discriminatory practices in the use of credit scoring for underwriting insurance
policies. Because the Wagners in their third and fourth points of error raise new claims that they did
not plead or present to the trial court, we may not consider the claims on appeal. Id. We overrule
the Wagners' third and fourth points of error.
CONCLUSION
Because the Wagners failed to state a cause of action and such defect could not be
cured by amending their pleadings, the trial court did not err in dismissing the Wagners' claims with
prejudice. We overrule the Wagners' points of error and affirm the trial court's judgment.
__________________________________________
Jan P. Patterson, Justice
Before Justices Patterson, Puryear and Pemberton
Affirmed
Filed: February 27, 2008
1. The Wagners did not seek class certification. See Tex. R. Civ. P. 42. The only claims
before the trial court, therefore, were their individual claims.
2. The Wagners added Douglas Robinette in the first amended petition, but he was never
served and, therefore, is not a party. In the amended petition, the Wagners alleged that Robinette
was the president of Nationwide Lloyds but, according to Nationwide Lloyds, he is an underwriter.
3. Default judgment was not proper in any event because Nationwide Lloyds timely filed its
answer. See Tex. R. Civ. P. 99b, 239. Wagner filed his petition on November 22, 2006, and served
Nationwide Lloyds by certified mail on November 28. Nationwide Lloyd's answer was due the day
it was filed, that is, Tuesday, December 26; the court was closed on Monday, December 25 for the
Christmas holiday. See Tex. R. Civ. P. 4, 99b.
4. To state a claim for breach of fiduciary duty, a plaintiff must prove that a fiduciary duty
existed, that it was breached, and that the breach proximately caused damages. Abetter Trucking Co.
v. Arizpe, 113 S.W.3d 503, 508 (Tex. App.--Houston [14th Dist.] 2003, no pet.). To state a claim
for fraud, a plaintiff must prove the defendant made a material representation that was false, the
defendant knew the representation was false or made it recklessly as a positive assertion without any
knowledge of its truth, the defendant intended to induce the plaintiff's reliance on the representation,
and the plaintiff actually and justifiably relied upon the representation, thereby suffering injury.
Ernst & Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001).
5. Wagner also alleged in his original petition that the actions of the directors and officers
"were in violation of the Texas Insurance Code, the Texas Deceptive Trade Practices Act and also
were violations of common law bad faith." The Wagners do not address these additional causes of
action in their issues or briefing to this Court and have waived any error on appeal concerning these
additional causes of action. See Tex. R. App. P. 38.1(e), (h); Huey v. Huey, 200 S.W.3d 851, 854
(Tex. App.--Dallas 2006, no pet.) (failure to provide substantive analysis waives issue on appeal).
6. The Wagners also filed a "First Amended Petition." The trial court states in its order of
dismissal that it specifically considered both the original and amended petitions. The Wagners
asserted breach of fiduciary duty in their amended petition, but did not assert the other causes of
action that they included in the original petition. Consistent with the trial court, we consider both
petitions.
7. In response to Nationwide Lloyds's motion to dismiss or for summary judgment, Wagner
provided an affidavit. He averred that he received notice of the class action and that the federal court
did not allow him to intervene:
I received a Notice to be included in the Ruslan Razilov Class Action lawsuit
and sent a letter to the Nationwide attorneys requesting further information regarding
the class. I subsequently accepted Class certification, but later Nationwide rescinded
based upon the fact that I was a Nationwide employee. I requested the Federal
District Court to allow me to intervene, however, I was not allowed to do so.
8. The Wagners failed to address the relationship between Nationwide Lloyds and Nationwide
Mutual Insurance Company.