TESCO Corporation (US) v. Steadfast Insurance Company

Opinion

ACCEPTED 01-13-00091-CV FIRST COURT OF APPEALS HOUSTON, TEXAS 2/18/2015 1:13:42 PM CHRISTOPHER PRINE CLERK

NO. 0l-13-00091-cv

FILED IN IN TI{E 1st COURT OF APPEALS HOUSTON, TEXAS FIRST COTIRT OF APPEALS 2/18/2015 1:13:42 PM AT HOUSTON, TEXAS CHRISTOPHER A. PRINE Clerk

TESCO CORPORATTON (US) Appellant

V

STEADFAST INSURANCE COMPANY Appellee

APPEALED FROM TFIE I2TI'JUDICIAL DISTRICT COURT I{ARRIS COLINTY, TEXAS

TESCO CORPORATION (US)'S MOTION FOR REHEARING

TO TI{E HONORABLE FIRST COURT OF APPEALS:

coMES Now, Appellant TESCO coRpoRATIoN (us) (',Tesco,'), and

files this, its Motion for Rehearing and in support thereof, Tesco would

respectfully show unto the Court as follows:

ARG NT AND AUTH ORITIES

This case originates from cross motions for summary judgment filed in the

Trial Court on whether a general liability policy of insurance issued by Steadfast

4829-58'12-0226.v1 Insurance Company ("Steadfast") covered the punitive damage portion of a

judgment entered against Tesco in a Colorado personal injury lawsuit.

Originally, this Court entered an opinion in this declaratory action holding

that the Trial Court erred in granting summary judgment in favor of Steadfast

Insurance Company ("Steadfast") and against Tesco and remanded this case back

to the Trial Court for further consideration. Subsequently, Steadfast filed a motion

for rehearing asserting that, given the resolution of the underlying personal injury

lawsuit prior to the entry of this Court's opinion in favor of Tesco, this appeal was

moot and that the Court of Appeals lacked jurisdiction to render its original

opinion.

Tesco responded to Steadfast's motion by pointing out to the Court that

Tesco had requested attorney's fees at the trial court and that Tesco had asserted

throughout this appeal fhat, in the event Tesco was successful, the case must be

remanded to the Trial Court for a determination of an award of attorney's fees.

Tesco's response also addressed two additional points: (l) Steadfast's mootness argument by arguing that this case falls under the collateral consequences exception to the mootness doctrine; and (2) that, in the event this Court vacates its

opinion, then it must also enter an order that vacates the Trial Court opinion and

judgment.

4829-5812-0226.v1 This Court issued its Opinion on February 3, 2015 addressing only

Steadfast's mootness argument and Tesco's first point under Section A of its response-that the appeal is not moot and that the dispute concerning attorney's

fees was preserved as a live controversy. In doing so, this Court relied on Farmers

Tex. Cnty. Mut. Ins. Co. v. Grffin,868 S.w.2d 861,870 (Tex. App.-Dallas 1993,

writ denied) in arriving at the conclusion that there is not a live issue of attomey's

fees keeping this case "alive." For the following reasons, there still remains a case

or controversy between Tesco and Steadfast, and Grffin is factually

distinguishable, and this Court did not address Tesco's two remaining points in

opposing Steadfast' s mootness argument.

A. Grffin is Factuatly Distinguishable And Steadfast Never Objected To Attorney's Fees At the Trial Court or On Appeat Grffin is clearly distinguishable. First, in Grffin, Farmers requested that the

Court award it, as a prevailingparty following reversal of the trial court's declaratory

judgment in favor of Griffin, costs and attorneys' fees. Grffin,868 S.W.2d at 870. The

appellate court found that Farmers had not raised the attorneys' fees issue in its pleadings

or motions for summary judgment invoking the attorneys' fees provision under Chapter

37 of the Texas Civil Practice and Remedies Code. Id. Additionally, Farmers had not presented a point of error attacking the trial court's order denying Farmer's demand attorneys' fees. Id.

4829-5812-0226.v1 Here, Tesco filed suit seeking judicial declaration on whether Steadfast had a duty

under the relevant policies to pay the punitive damages award in the phathong Lawsuit.l Tesco also sought the recovery of reasonable attorneys' fees and costs

pursuant to Section 37.009 as are equitable and just. Tesco's pafüal summary judgment

addressed only the issues that Texas law applied to the policies, that under Texas law,

punitive damages are covered unless excluded, that Steadfast waive its right to assert

non-coverage of the punitive damages and Steadfast is estopped from asserting non- coverage given its failure to issue a reservation of rights letter on that point until after the

Phathong Verdict was entered. Tesco's motion left for later determination the issue of attorneys' fees under Section 37.009.

Unlike in Grffin, Tesco did raise in its pleading the issue of attorneys' fees

pursuant to Section 37.009. Further, unlike in Grffin, the issue of attorneys' fees was not

before the Trial Court in Tesco's motion for partial summary judgment. The fact that

Tesco did not raise the issue of attorneys' fees in its motion for partial summary

judgment does not mean that the issue is not "live" or that Tesco is initiating the issue for

the first time on remand.

When the declaratory relief has been determined by summary judgment, the issue

of whether attorney's fees are reasonable and necessary is a question of fact for the jury

to determine when the jury is the trier of fact. City of Garland v. Dallas Morning News,

22 S.W.3d 351,367 (Tex. 2000). Tesco's claim for attorney's fees under Section 37.009

t Von J. Phatong et ux v, Tesco Corporation (US), Case No. I0-CV-00780-MSK-MJW, in the United States District Court of Colorado

4829-5812-0226.v1 remains pending despite the fact that substantive declaratory relief may have purportedly

become moot during the pendency of this appeal. Hansen v. JP Morgan Chase Bank,

N.4.,346 s.w.3d 769,774-75 (Tex. App.-Dallas 2011, no pet.) (,,[A] case under the

Declaratory Judgments Act remains a live controversy, even if all requests for substantive

declaratory relief become moot during the action's pendency, as long as a claim for

attorney's fees under the Act remains pending.") As noted in Tesco's Motion for partial

Summary Judgment, the determination of attorneys' fees was specifically left to be

addressed by the Trial Court following the Appellate Court's reversal of the judgment in

favor of steadfast and the granting ofjudgment in favor of Tesco.

Additionally, Steadfast, in its opposition to Tesco's Motion for Partial Summary

Judgment and Cross-Motion for Summary Judgment, did not address the attorneys' fees

issue. Since attorney's fees under Section 37.009 are not limited to a "prevailing party:'

Steadfast had the opportunity to object in its dispositive motion at the Trial Court level to

any award of attorneys' fees in favor of Tesco. Steadfast did not do so, nor did it move

for such fees in its favor. Although the Trial Court granted Steadfast's Cross-Motion for

Summary Judgment, the issue of attorneys' fees in favor of Tesco pursuant to Section

37 '009 remained alive because the statute does not require a finding that a party prevailed

in the action. Bocquet v. Herring,972 S,w.2d 19,20 (Tex. l99s); See Tpx. Clv. pnnc.

& RsN4. Coos 37.009.

Moreover, having failed to obtain a ruling on attorney's fees-in favor of Steadfast and/or objecting to such award in favor of Tesco--Steadfast had not preserved

4829-5812-0226.v1 an objection to attorney's fees pursuant to Rule 33.1 of the Texas Rules of Appellate

Procedure. Tex. R. App. P.33.1(a). "As a general rule, a complaint is preserved for

appellate review only if the record establishes the complaint was made known to the trial

court in a timely manner and the trial court ruled on the complaint." Franco v. Slavonic

MuL Fire Ins. Ass'n, r54 s.w.3d 777,794 (Tex. App.-Houston [14th Dist.] 2004, no pet.) (citing Tnx. R. App. P. 33.1(a)); see also Trayis v. City of Mesquite,830 S.W.2d 94,

100 (Tex. 1992) ("In an appeal from a summary judgment, issues to be reviewed by the

appellate court must have been actually presented to and considered by the trial court."). Steadfast failed to meet its obligation in this regard and has failed to preserve

for appeal any complaints it may have regarding Tesco's ultimate award of attorneys'

fees under Section 37 .009.

Thus, the conduct of the parties affîrmatively indicates that there remains for

determination by the fact finder the amount of reasonable and necessary attorneys' fees to

award pursuant to Section 37.009. The issue remains alive and is unaffected by an Order

Vacating the Trial Court's Opinion and Judgment or the withdrawal of this Court's

Opinion and Judgment in this matter.

B. The Appeal is Not Moot Based on the Collateral Consequences Exception to the Mootness Doctrine. As an alternative basis for its argument that the case is not moot, Tesco analyzed

in its response the application of the collateral consequences exception. The issue was

not addressed by this Court in its February 3,2015 Memorandum on Rehearing.

4829-5812-0226.vt The collateral consequences exception is invoked when vacating the

underlying judgment will not cure the adverse consequences suffered by the party seeking to appeal that judgment. Marshall v. Hous. Auth. of City of San Antonio,

198 S.W.3d 782, 789 (Tex. 2006), The circumstances which exist for the

exception to apply are (1) the concrete disadvantages have in fact occurred, are

imminently threatened to occur, or are imposed as a matter of law; and (2) the

concrete disadvantages will persist even after the judgment is vacated. Id. (cíting Gen. Land office v. oxY U.S.A., Inc.,7B9 S.w.2d 569, 571 (Tex. 1990)) (noting

the collateral consequences exception is invoked only when prejudicial events have

occurred whose effects will continue to stigmatize after dismissal of the case as

moot).

Steadfast's attempt to vacate an opinion by a settlement and stipulation after

the matter had been on appeal for over seventeen (17) months would have multiple

adverse consequences and practical effects to Tesco including: (1) Tesco would

lose its right to recover attorney's fees and costs because the Trial Court judgment

would become a final, non-appealable judgment; (2) Tesco and this Court would

have wasted considerable time and effort in reaching a decision on significant legal

issues and matters of public policy for Texas insureds; (3) vacating this Court's

opinion leaves an erroneous Trial Court judgment in place, which will cause other

parties and other Texas courts to spend more time and effort re-litigating these

4829-5812-0226.v1 same issues and will allow Steadfast to argue this Court's well-reasoned opinion is

of no force and effect; and (4) Steadfast, by its own strategic settlement and stipulation in the Colorado District Court case, has been able to wait and see this

Court's opinion and then file these Motions.

Steadfast waited more than thirty (30) days to tell this Court or Coats Rose I

that it had entered into a stipulation that would allegedly moot this court's issuance

of its opinion. Steadfast, knowing the Trial Court was about to lose jurisdiction and this Court's decision could be moot, delayed the Motion to Vacate until after

this Court's opinion was released. Steadfast has laid behind the law to seek an

advantage. Proper and adequate notice would have allowed actions to be taken to

extend the Colorado Court's jurisdiction or to issue this Court's opinion. Hence,

this case is also not moot under the collateral consequences exception to the

mootness doctrine.

C. Vacate One, Vacate All

In its response, Tesco also posited that, in the event this Court vacates its

Opinion, then it must also enter an order that vacates the Trial Court Opinion and

Judgment. Thompson v. Rícardo,269 S.w.3d 100, 103-04 (Tex. App.-Houston

(The appellate court must vacate the judgment of the trial court and dismiss the

underlying case if there ceases to be a controversy between the litigating parties.);

Gen. Land office v. oxY U.S.A., hnc.,789 S.w.2d 569,570 (Tex. 1990) (stating if 8

4829-5812-0226.v1 no controversy continues to exist between the parties, the appeal is moot and the

court must dismiss the cause); Reule v. RLZ Investments, 4ll S.V/.3d 31,32 (Tex.

App.-Houston [14th Dist.] 2013, no pet.) (stating if a case is found to be moot on

appeal, all previous orders and judgments must be set aside and the case dismissed). To instruct otherwise would allow Steadfast to attempt to use an

erroneous Trial Court judgment in future disputes with Texas insureds on the issue

of punitive damages and choice of law.

CON USION

This Court should leave its current Opinion and Judgment intact and remand

the case to the Trial Court for a determination of attorney's fees to which Tesco is

entitled through that date. There is a continuing legal and equitable dispute as to

attorney's fees and costs to which Tesco is entitled given the extensive effort

expended correcting an effoneous Trial Court decision. This is especially

appropriate in this case where this Court has previously remanded this case for that

very determination. Steadfast should not be rewarded for its stipulation that

attempts to destroy this Court's jurisdiction. To do otherwise would result in the

waste of judicial resources and have significant adverse practical effects on Tesco

and other Texas insureds.

Alternatively, to the extent this Court finds that the case is moot and that no

live controversy regarding attorney's fees remained pending, it should not only

4829-5812-0226.v1 withdraw its Opinion and Judgment, but also enter an order that vacates the Trial

Court Opinion and Judgment.

PRAYER

For the reasons stated above, Appellate Tesco Corporation (US) requests

that this Court grant its Motion for Rehearing, leave its current Opinion and

Judgment intact, remand this case to the Trial Court for further proceeding, and

award all other relief in which Appellate shows it is justly entitled.

Respectfully submitted,

COATS, ROSE, YALE, RYN4AN &.LEE, P.C.

B S.L State Bar Number 725825 atsrose.corn Daniel F. Shank State Bar Number 18090400 dshank@coatsrose.com 9 Greenway Plaza, Suite 1100 (713) 65 1-01 I 1 (telephone) (7 13) 6 5 I -0220 (facsimile)

ATTORNEYS FOR APPELLANT, TESCO CORPORATTON (US)

t0

4829-5812-0226.v1 CERTIFICÄTE OF SERVICE As required by Texas Rule of Appellate procedure 6.3 and 9.5(b), (d), (e), I certiff that I have served this Response to Steadfast Insurance Company's Motion for Rehearing and Motion to Vacate Opinion and Judgment on Appellee's attorneys of record on the 18th day of February, z0l5, as follows:

Blair Dancy bdan cvlôbddsl .com Rebecca DiMasi rdi (Ò.bddpla .com BucuaNaN DrMasr DANCv & GnaeousKr, LLp 9600 Great Hills Trail, Suite 300 West Austin, Texas 78759

By email

DaV1 Date: February 1 015

4829-5812-0226.v1