in Re: CTMI, LLC Mark Boozer And Jerrod Raymond
05-16-01078-CV
| Tex. App. | Dec 8, 2016Background
- Parties entered a 2011 Rule 11 settlement resolving part of a business-sale dispute; the agreement required CTMI to fund an escrow held by attorney Wesley Holmes with 15% of certain gross receipts pending appeal, to be paid to the ultimate appellate winner.
- After appeals, the Texas Supreme Court ruled in favor of Ray Fischer; the mandate issued February 19, 2016, making Fischer entitled to the escrowed 15% (Ray Fischer v. CTMI, 479 S.W.3d 231 (Tex. 2016)).
- CTMI claims it deposited all required funds into Holmes’s escrow, but later discovered Holmes had misappropriated the monies.
- On March 7, 2016 CTMI filed a declaratory-judgment action in Tarrant County to resolve rights under the settlement after learning funds were missing; Fischer parties filed suit in Dallas County on May 3, 2016 alleging breach and damages.
- CTMI moved to abate the Dallas action under the first-filed/dominant-jurisdiction rule; the Dallas trial court denied the plea, finding CTMI engaged in inequitable conduct to obtain priority.
- The appellate court conditionally granted mandamus, holding the record did not support a finding of inequitable conduct or prejudice sufficient to defeat the first-filed rule and ordering the Dallas court to grant the plea unless it vacated its order.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the first-filed/dominant-jurisdiction rule require abatement of the later Dallas suit? | CTMI: Tarrant County action was filed first; dominant jurisdiction applies; Dallas suit should be abated. | Fischer: Exceptions apply; CTMI engaged in inequitable conduct so Dallas need not abate. | Court: First-filed rule applies; Dallas court abused discretion by denying plea absent proven exception. |
| Did CTMI engage in inequitable conduct that prevents reliance on the first-filed rule? | Fischer: CTMI misled them (e.g., said funds forthcoming) and delayed their filing to gain forum advantage. | CTMI: Had no knowledge funds were missing before February 24 email; filed quickly after discovery to protect its interests. | Court: Record does not support inequitable conduct; no evidence CTMI knew funds were stolen or intentionally delayed Fischer. |
| Was there prejudice/delay caused by CTMI sufficient to invoke the inequitable-conduct exception? | Fischer: They would have sued earlier had they known true escrow balance; CTMI’s representations caused delay. | CTMI: No evidence Fischer delayed filing because of CTMI; CTMI had right to promptly sue after discovering theft. | Court: Inequitable conduct alone is insufficient; must show prejudice/delay—Fischer failed to show prejudice. |
Key Cases Cited
- Curtis v. Gibbs, 511 S.W.2d 263 (Tex. 1974) (establishes general first-filed/dominant-jurisdiction principle)
- Perry v. Del Rio, 66 S.W.3d 239 (Tex. 2001) (describes exceptions to first-filed rule)
- In re J.B. Hunt Transp., 492 S.W.3d 287 (Tex. 2016) (inequitable-conduct exception requires proof of prejudice/delay)
- Ray Fischer and Corporate Tax Mgmt., Inc. v. CTMI, L.L.C., 479 S.W.3d 231 (Tex. 2016) (underlying appellate decision awarding Fischer entitlement to escrowed funds)
- Russell v. Taylor, 49 S.W.2d 733 (Tex. 1932) (early example applying inequitable-conduct estoppel to first-filed rule)
- Johnson v. Avery, 414 S.W.2d 441 (Tex. 1966) (inequitable conduct can estop first-filer when opposing counsel induced delay)
- Grimes v. Harris, 695 S.W.2d 648 (Tex. App.—Dallas 1985) (party’s silence about related proceedings can create inequitable conduct defeating first-filed rule)