Stewart A. Feldman and the Feldman Law Firm LLP v. KPMG LLP, KPMG LLP (Canada), Paul Ziff, Ziff Energy Group, Ltd., and Ziff Energy Management Corp.
438 S.W.3d 678
| Tex. App. | 2014Background
- The Ziffs sued KPMG LLP (Canada) in Canada for accounting malpractice; KPMG (Canada) third‑partied Feldman in Canada and obtained a default when Feldman did not appear.
- After default in Canada, Feldman sued in Harris County seeking a UDJA declaratory judgment that he could not be held liable in the foreign suit.
- KPMG (Canada) and the Ziffs moved to dismiss the Texas declaratory action because the Canadian suit involving the same parties and issues was pending; KPMG (Canada) later nonsuited its counterclaim after settling in Canada.
- The Texas trial court dismissed Feldman’s declaratory claims for lack of jurisdiction (plea to the jurisdiction), then later tried the limited issue of whether the Ziffs should recover attorney’s fees under the UDJA.
- A jury awarded $36,952 in fees to the Ziffs; Feldman appealed challenging dismissal and the fee award.
Issues
| Issue | Plaintiff's Argument (Feldman) | Defendant's Argument (Ziffs/KPMG) | Held |
|---|---|---|---|
| Whether Texas court should hear UDJA claim while same dispute pending in Canadian court | Texas district court is general jurisdiction and may declare rights; declaratory relief proper to assert non‑liability | Declaratory action is a defensive, mirror‑image suit filed after a pending foreign action and should be dismissed to avoid depriving plaintiffs of chosen forum | Dismissal affirmed — Texas declines jurisdiction where same parties and issues pending in another court (comity/first‑filed concerns) |
| Whether MBM Financial permits defensive non‑liability declaratory judgment here | MBM allows non‑liability declarations in contract cases | MBM is distinguishable: MBM involved no prior filed adversary suit; here a prior foreign suit exists and the declaratory claim mirrors that suit | MBM distinguished; first‑filed/mirror‑image rule controls; dismissal proper |
| Whether trial court could award attorney’s fees under UDJA after dismissal for lack of jurisdiction | Court lacked jurisdiction to award fees after dismissal | Section 37.009 authorizes fees in any UDJA proceeding and courts may award fees even if declaratory relief dismissed | Court had jurisdiction under Section 37.009 to award equitable and just fees; award permissible |
| Whether the fee award was proper (equitable/just, jury nudging, prevailing party, segregation) | Award was improper because court dismissed case, jury was steered, Feldman prevailed by getting releases, fees not segregated | Fees must be reasonable/necessary and equitable/just; trial court has discretion; evidence supported that fees related solely to defending the declaratory action | Fee award upheld — no abuse of discretion: court could find Feldman forum‑shopped, rulings did not impermissibly push jury, Feldman was not prevailing party for this purpose, segregation unnecessary |
Key Cases Cited
- MBM Fin. Corp. v. Woodlands Operating Co., L.P., 292 S.W.3d 660 (Tex. 2009) (declaratory non‑liability appropriate in some contract contexts)
- Abor v. Black, 695 S.W.2d 564 (Tex. 1985) (courts should generally decline declaratory relief that would deprive a plaintiff of choice of forum in tort suits)
- Texas Liquor Control Bd. v. Canyon Creek Land Corp., 456 S.W.2d 891 (Tex. 1970) (declaratory actions ordinarily not entertained when another proceeding exists that may adjudicate same issues)
- In re BP Oil Supply Co., 317 S.W.3d 915 (Tex. App.—Houston [14th Dist.] 2010) (deference to earlier filed action; MBM did not displace first‑filed rule for mirror‑image suits)
- Space Master Int’l, Inc. v. Porta‑Kamp Mfg. Co., 794 S.W.2d 944 (Tex. App.—Houston [1st Dist.] 1990) (dismissal of declaratory suit appropriate to avoid forum shopping where same issues pending elsewhere)
- Bocquet v. Herring, 972 S.W.2d 19 (Tex. 1998) (UDJA attorney’s fees are discretionary; fees must be reasonable, necessary and also equitable and just)
- Barshop v. Medina Cnty. Underground Water Conservation Dist., 925 S.W.2d 618 (Tex. 1996) (fee award under UDJA not dependent on being a prevailing party)