AGAR CORPORATION, INC., PETITIONER, v. ELECTRO CIRCUITS INTERNATIONAL, LLC AND SURESH PARIKH, RESPONDENTS
No. 17-0630
IN THE SUPREME COURT OF TEXAS
April 5, 2019
Argued January 23, 2019
ON PETITION FOR REVIEW FROM THE COURT OF APPEALS FOR THE FOURTEENTH DISTRICT OF TEXAS
JUSTICE
JUSTICE BUSBY did not participate in the decision.
In this summary-judgment appeal we must determine what statute of limitations applies to a claim of civil conspiracy. Following its own precedent, the court of appeals applied the two-year statute generally applicable to torts, including trespass, and affirmed the trial court‘s summary judgment concluding that the civil conspiracy claims were indeed barred by limitations. 565 S.W.3d 12, 18 (Tex. App.—Houston [14th Dist.] 2016) (mem. op.) (citing
Because civil conspiracy is a derivative tort that “depends on participation in some underlying tort,” we conclude that the applicable statute of limitations must coincide with that of the “underlying tort for which the plaintiff seeks to hold at least one of the named defendants liable.” See Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex. 1996) (describing the nature of a civil conspiracy claim). And because at least one of the underlying torts asserted as the basis for the conspiracy claims here may not be barred by its applicable statute of limitations, we reverse the court of appeals’ judgment in part and affirm it in part.
I. Background
Agar Corporation designs, manufactures, and sells measuring devices for use in the oil and gas industry. Agar sued more than a dozen individuals and entities, including Sanjay Shah and Pandurang Nayak, who they alleged sold Agar‘s technology in the scheme to produce the knock-off products. Electro Circuits and its owner Suresh Parikh (collectively “Electro“) were subsequently implicated in the scheme and added to Agar‘s lawsuit in November 2011. Electro once manufactured circuit boards for Agar, and its alleged role in the conspiracy was that it used Agar‘s proprietary information to manufacture circuit boards for the knock-off products.
In its seventh amended petition filed on February 10, 2012, Agar asserted claims against Electro for tortious interference, breach of fiduciary duty, aiding and abetting breach of fiduciary duty, fraud, fraud by non-disclosure, misappropriation of trade secrets, violations of the Texas Theft Liability Act, conversion, and civil conspiracy and asserted similar claims against the other defendants. Electro answered and, as pertinent here, filed a counterclaim against Agar seeking attorney‘s fees under the Texas Theft Liability Act.
Electro later filed a traditional motion for summary judgment based on the statute of limitations and a no-evidence motion that attacked the elements of Agar‘s various claims. See
Agar appealed, complaining about that part of the summary judgment that barred its civil conspiracy claims because of limitations and the subsequent summary judgment that awarded Electro attorney‘s fees. Agar argued that the trial court should not have applied a two-year statute of limitations to its conspiracy claims and thereby erred in concluding that such claims were barred by limitations. Agar also contended that the Texas Theft Liability Act did not provide for the award of fees to Electro, the defendant. The court of appeals rejected Agar‘s arguments and affirmed the summary judgments for Electro. 565 S.W.3d at 26. In a concurrence to the denial of rehearing en banc, Chief Justice Frost explained that the courts of appeals have uniformly applied
II. Statute of Limitations
The statute of limitations is an affirmative defense that serves to “establish a point of repose and to terminate stale claims.” Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex. 1990). Statutes of limitations vary from claim to claim as determined by the Legislature. See generally
None of the statutes of limitations mention civil conspiracy by name. Rather than apply the residual limitations period, the courts of appeals that have considered the issue have held civil conspiracy falls under the two-year statute of limitations applied to suits for trespass in
In civil conspiracy, the plaintiff seeks to hold the defendant liable for an injury caused by a third party who has acted in combination with the defendant for a common purpose. Chu v. Hong, 249 S.W.3d 441, 444–45 (Tex. 2008); Carroll v. Timmers Chevrolet, Inc., 592 S.W.2d 922, 925 (Tex. 1979). Agar therefore submits that the applicable statute of limitations for a civil conspiracy claim should be that of the underlying tort because that limitations period more accurately reflects civil conspiracy‘s status as a vicarious liability theory that hinges on an underlying tort.
Electro responds that civil conspiracy is not a vicarious liability theory but rather an independent cause of action in the nature of a trespass to which
A. Civil Conspiracy in Texas as a Vicarious Liability Theory
In most jurisdictions, civil conspiracy is a vicarious liability theory that imparts joint-and-several liability to a co-conspirator who may not be liable for the underlying tort. See, e.g., Mackey v. Compass Mktg., Inc., 892 A.2d 479, 485 (Md. 2006); Upah v. Ancona Bros. Co., 521 N.W.2d 895, 901 (Neb. 1994), disapproved on other grounds, Welsch v. Graves, 582 N.W.2d 312, 316 (Neb. 1998); Granewich v. Harding, 985 P.2d 788, 792 (Or. 1999); Dunn v. Rockwell, 689 S.E.2d 255, 269 (W. Va. 2009). Liability depends on injury from the underlying tort, not the conspiracy itself. Mackey, 892 A.2d at 485. By contrast, a minority of states treat civil conspiracy as an independent claim where defendants may be held liable for damages caused by the conspiracy itself, even in the absence of an unlawful act. See, e.g., Allegro, Inc. v. Scully, 791 S.E.2d 140, 144 (S.C. 2016). Our case law on civil conspiracy leaves Texas‘s position on the debate arguably unclear. Although we have not expressly said whether a civil conspiracy claim is in the nature of a vicarious liability theory or an independent tort, we have at various times used language implying that it was one or the other.
We have said a proven civil conspiracy means “each of [the] defendants in error is responsible for all acts done by any of the conspirators in furtherance of the unlawful combination.” State v. Standard Oil Co., 107 S.W.2d 550, 559 (Tex. 1937). This is a statement of vicarious liability. See Carroll, 592 S.W.2d at 925–26 (citing Standard Oil while describing civil conspiracy as a theory of vicarious liability).2 We have repeatedly called civil conspiracy
These cases clearly describe civil conspiracy as a theory of vicarious liability and establish that in Texas, civil conspiracy requires some underlying wrong.
In other cases, we have described civil conspiracy as a “recognized tort” or a “cause of action.” See, e.g., Juhl v. Airington, 936 S.W.2d 640, 644 (Tex. 1996); Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983). A cause of action is simply “a factual situation that entitles one person to obtain a remedy.” Cause of Action, BLACK‘S LAW DICTIONARY (10th ed. 2014). Likewise, in modern usage a tort is simply a “civil wrong, other than breach of contract, for which a remedy may be obtained.” Tort, BLACK‘S LAW DICTIONARY (10th ed. 2014). When used as a theory of vicarious liability, civil conspiracy is part of the factual situation that permits a remedy against coconspirators. Without it, there would be no grounds for recovery against co-conspirators who did not commit the underlying unlawful act. So it is not inconsistent to say civil conspiracy is a vicarious liability theory while also recognizing that it is a kind of cause of action. Indeed, it is not uncommon for courts to characterize vicarious liability itself as a cause of action when sorting through plaintiffs’ various claims. E.g., Sky View at Las Palmas, LLC v. Mendez, 555 S.W.3d 101, 105 n.2 (Tex. 2018) (including vicarious liability in a list of the plaintiff‘s causes of action alongside malpractice, negligence, and breach of contract); N.P. v. Methodist Hosp., 190 S.W.3d 217, 225 (Tex. App.—Houston [1st Dist.] 2006, pet. denied) (“[Plaintiff] nonetheless has a viable cause of action for vicarious liability under principles of respondeat superior.“). None would take this usage to mean vicarious liability is an independent cause of action. See Crooks v. Moses, 138 S.W.3d 629, 637 (Tex. App.—Dallas 2004, no pet.) (explaining that vicarious liability is not an independent cause of action). Likewise, characterizing civil conspiracy as a cause of action does not mean it is an independent tort.
Our discussion of the five elements of civil conspiracy enumerated in Massey v. Armco Steel Co., 652 S.W.2d at 934, might also point to civil conspiracy being an independent claim. There, we defined the elements of civil conspiracy as: “(1) two or more persons; (2) an object to be accomplished; (3) a meeting of minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result.” Id. (citing 15A C.J.S. Conspiracy § 1(2) (1967)). These elements might be read to mean the litigated damages must only be proximately caused by the conspiracy itself, and we have sometimes described the damages element as “damages caused by the conspiracy.” E.g., Operation Rescue-Nat‘l v. Planned Parenthood of Hou. & Se. Tex., Inc., 975 S.W.2d 546, 554 (Tex. 1998). But no past decisions depend on that characterization of the damages element. Our conspiracy decisions both before and after Massey emphasize that the damages that matter come from the underlying wrongful act, not the conspiracy itself. Tilton, 925 S.W.2d at 680–81; Schlumberger, 435 S.W.2d at 856. This precedent does not contradict the Massey elements; it instead clarifies that the damages element refers not to the entire conspiracy itself but to some tortious act committed by a co-conspirator pursuant to the conspiracy. These cases thus do not contradict those that more clearly indicate that civil conspiracy is a theory of vicarious liability and not an independent tort.
B. Civil Conspiracy Limitations Tied to the Underlying Tort
Having determined that civil conspiracy is not an independent tort, it follows that the claim does not have its own statute of limitations. In fact, assigning civil conspiracy its own fixed limitations period conflicts with its nature as a derivative tort. Civil conspiracy requires an underlying tort that has caused damages. Tilton, 925 S.W.2d at 681. The cause of action for the underlying tort typically accrues as soon as the tort causes those damages. See Murphy v. Campbell, 964 S.W.2d 265, 270 (Tex. 1997) (“[A] cause of action accrues when a wrongful act causes some legal injury ....“). A fixed limitations period of two years for civil conspiracy that differs from that of its underlying tort can produce bizarre consequences. For example, why should co-conspirators who participate in a scheme to defame a person but who do not commit any defamatory acts themselves be subject to suit for a longer period than the primary tortfeasor upon whom their liability is premised? See
Equating the limitations period for civil conspiracy with that of the underlying tort also accords with the Legislature‘s statute-of-limitations scheme. The Legislature has defined different statutes of limitations for various claims, such as “suit[s] for trespass or injury,” “suit[s] on . . fraud,” “suit[s] for . . . libel” or “suit[s] for misappropriation of trade secrets.”
We are not alone in our understanding of civil conspiracy as a theory of derivative liability that shares a limitations period with that of its underlying tort. The courts of last resort in Maryland, Nebraska, Virginia, and West Virginia agree. Dunlap v. Cottman Transmission Sys., 754 S.E.2d 313, 320–21 (Va. 2014); Prince George‘s Cty. v. Longtin, 19 A.3d 859, 877 (Md. 2011); Upah v. Ancona Bros. Co., 521 N.W.2d at 902; Dunn, 689 S.E.2d at 269. Several other states’ intermediate courts have held the same.3
Next, Electro compares civil conspiracy to tortious interference with business relations to support a strict application of
interference and civil conspiracy. But we have held this is not the case. In Nath v. Texas Children‘s Hospital, we held that only a one-year statute of limitations applies to tortious interference claims where a one-year tortious act is the only grounds for the claim. 446 S.W.3d 355, 370 (Tex. 2014). So even if Electro‘s analogy between tortious interference and civil conspiracy were sound, it would not be grounds for holding
Finally, Electro argues that we should not overturn the court of appeals’ decades-long, uniform application of the two-year limitations period to civil conspiracy. But a long history of mistaken application alone is insufficient to counsel against correcting the error. See, e.g., Hubenak v. San Jacinto Gas Transmission Co., 141 S.W.3d 172, 181 & n.44, 183 & n.69 (Tex. 2004) (disapproving at least sixteen court of appeals decisions spanning over seventy years); Callejo v. Brazos Elec. Power Coop., Inc., 755 S.W.2d 73, 75 (Tex. 1988) (disapproving at least twelve decisions spanning over thirty years). Nor is the Legislature‘s inaction in the face of these appellate decisions evidence that those decisions are in line with the statutory scheme. See Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 470–71 (Tex. 2009) (refusing to make inferences about the Legislature‘s statutory intent from the Legislature‘s inaction). Because we hold civil conspiracy is not an independent tort and its statute of limitations is that of the underlying tort, we disapprove the courts of appeals’ decisions to the extent they contradict this opinion.4
Agar‘s seventh amended petition alleges Electro engaged in a civil conspiracy to commit several underlying torts including, among others, conversion, misappropriation of trade secrets, and fraud. These underlying claims are governed by separate two-, three- and four-year statutes of
limitations respectively.
III. Accrual
The statute of limitations begins to run when a claim accrues. Murray v. San Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex. 1990). A cause of action accrues when facts come into existence that permit a plaintiff to recover. Exxon Mobil Corp. v. Rincones, 520 S.W.3d 572, 593 (Tex. 2017). Generally, this is when a wrongful act causes an injury. Murray, 800 S.W.2d at 828.
As with the statute of limitations, we have not previously considered when a civil conspiracy claim accrues. But the above principles should apply to civil conspiracy claims as they do to other claims. Because a civil conspiracy requires an underlying tort, Tilton, 925 S.W.2d at 681, most civil conspiracy claims should accrue when the underlying tort causes harm to the plaintiff, that is, at the same time as the tort claim against the primary tortfeasor.5 But some disagreement exists about this.
The courts of other states have announced differing rules for accrual in the context of a conspiracy. See 16 AM. JUR. 2D Conspiracy § 65 (2018) (describing with citations at least four different rules for civil conspiracy accrual applied by various courts). For instance, the California Supreme Court has held the entirety of the conspiracy does not accrue until the last overt act of the conspiracy. Wyatt v. Union Mortgage Co., 157 Cal.Rptr. 392, 400 (Cal. 1979). In Arizona, by
contrast, the statute of limitations commences when the tortious act is committed on which conspiracy liability is premised. Tovrea Land & Cattle Co. v. Linsenmeyer, 412 P.2d 47, 63 (Ariz. 1966).
A. Civil Conspiracy‘s Accrual in Texas
Texas appellate courts on balance appear to agree with Arizona, treating each underlying tort of the conspiracy as having its own limitations which runs from the time the act is committed. See, e.g., Harang v. Aetna Life Ins. Co., 400 S.W.2d 810, 813 (Tex. Civ. App.—Houston [1st Dist.] 1966, writ ref‘d n.r.e.); Cathey v. First City Bank of Aransas Pass, 758 S.W.2d 818, 822 (Tex. App.—Corpus Christi 1988, writ denied). The application of this rule, however, is not always clear or consistent. See, e.g., Jeanes v. Hamby, 685 S.W.2d 695, 699 (Tex. App.—Dallas 1984, writ ref‘d n.r.e.) (holding that limitations in a civil conspiracy claim for fraud ran from the conspiracy‘s last overt act rather than with the underlying fraud claim‘s accrual). We agree with the rule as stated in Tovrea and Harang: the claim accrues when each underlying tort of the conspiracy damages the plaintiff, and limitations run separately for each such tortious act. See Tovrea, 412 P.2d at 63; Harang, 400 S.W.2d at 813. Understanding that civil conspiracy is a theory of derivative liability, it follows that a civil conspiracy claim should share both accrual and the limitations period of the underlying wrong. This also accords with the general rule that a cause of action accrues when a wrongful act causes an injury. See Murray, 800 S.W.2d at 828.
Agar contends that statute of limitations in civil conspiracy runs from the commission of the last overt act alleged to have
Agar argues Harang actually supports its suggested accrual rule, but we disagree. Harang, in fact, explicitly rejects the last-overt-act accrual rule. The plaintiff in that case sued on a 1958 conspiracy to commit defamation, and later added alleged co-conspirators to the case in 1964. Harang, 400 S.W.2d at 812. While agreeing that a two-year statute of limitations applied to his claim, the plaintiff argued limitations ran from the “last overt act” of the conspiracy, which he said was one of two meetings of the co-conspirators in 1964 and 1965. Id. at 812–14. The court of appeals disagreed, holding that limitations ran from when the injury occurred and so the conspiracy claim against the late-added co-conspirators was time-barred. Id. at 813. Under the Harang court‘s reasoning, for each tort committed under the conspiracy, “the statute of limitations begins to run when it occurs.” See id. Because the defamation injury in Harang had occurred in 1958, the court held the civil conspiracy claim accrued and limitations began to run at that time and so the claim as to the co-conspirators added in 1964 was barred to the extent it relied a tort for which the limitations period had run. See id. at 812–13.
If conspirators conspire about different underlying torts over the course of a conspiracy, then claims based thereon accrue separately according to when each tort and injury occur. A conspiracy claim based on an earlier underlying tort does not re-accrue when the co-conspirators agree to commit a second tort or make another overt act. See Cathey, 758 S.W.2d at 822 (“[A]ny act committed [outside limitations] prior to the filing of this conspiracy action would be barred by limitations and may not be recovered upon at trial.“).
Agar also relies on another decision it contends interpreted Harang to support its conspiracy-accrual rule. That case involved a civil conspiracy where an estranged husband conspired with a friend to hide a winning lottery ticket from his wife to keep lottery winnings out of the marital assets during divorce. Mayes v. Stewart, 11 S.W.3d 440, 446 (Tex. App.—Houston [14th Dist.] 2000, pet. denied). The wife sued both the friend and husband for fraud on both direct and conspiracy liability theories and won a judgment, which only the friend appealed. Id. at 447. Although the court in Mayes cited both Harang and Cathey, it rejected an argument that the conspiracy accrued with the underlying fraud and instead ties accrual to later overt acts of the conspiracy—using the last-overt-act rule that Harang rejected. Id. at 453. The court ultimately concluded, however, that the conspiracy-limitations issue was irrelevant because of the jury‘s fraud finding against the friend directly. Id.
The better rule for civil conspiracy accrual is for the statute of limitations to accrue as to each alleged underlying tort when that tort occurs. See Tovrea, 412 P.2d at 63; Harang, 400 S.W.2d at 813. Because a civil conspiracy claim is derivative of an underlying tort, the claim accrues when the underlying tort accrues. We therefore reject Agar‘s argument that we should adopt the last-overt-act accrual rule.
Agar relies on the July 2009 purchase orders as evidence of the last overt act of the conspiracy. But the discovery of additional damages does not alter the accrual of an earlier tort, nor is there evidence of an underlying tort distinct from those alleged earlier. The purchase orders may show continuing damage to Agar from earlier torts, but this does not reset the statute of limitations. Murray, 800 S.W.2d at 828. Because the July 2009 purchase order does not support a later accrual of any of Agar‘s alleged underlying torts and Agar has not offered any other accrual date, we hold Agar‘s civil conspiracy claims all accrued at the latest on April 3, 2008, when it first filed suit against Electro‘s alleged co-conspirators.
B. Discovery Rule
Agar also asserts the discovery rule, arguing its civil conspiracy claim against Electro did not accrue until March 2011, when it discovered the July 2009 sale. Agar complains that the purchase orders were not produced until March 30, 2011 although requested years earlier. Because Agar ties the accrual of its civil conspiracy claims to the July 2009 sale, it argues that the discovery rule should further toll limitations to March 2011.
The discovery rule is an exception to the general accrual rule that applies when the injury is by its nature inherently undiscoverable. Childs v. Haussecker, 974 S.W.2d 31, 36–37 (Tex. 1998). Where the discovery rule applies, the cause of action accrues when a reasonably diligent and careful plaintiff knows or should have known of the wrongful act and injury. Id. at 37.
Agar‘s contention again relies on the assumption that its civil conspiracy claim accrued with the July 2009 sale as the last overt act of the conspiracy. As we have already rejected that assumption, no basis exists for Agar‘s argument here. Agar‘s civil conspiracy claims did not accrue with the July 2009 sale regardless of when Agar discovered it.
C. Application of Accrual and Limitations to Agar‘s Civil Conspiracy Claims
Agar‘s live pleading, its seventh amended petition, alleges a civil conspiracy based on several underlying torts, including: “tortious interference with existing contracts; breach of fiduciary duty; fraud; fraud by nondisclosure; misappropriation of trade secrets; civil theft; conversion; unfair competition; trademark infringement and passing off.” Agar alleges those torts as direct claims against Electro and the other defendants and as tortious actions taken pursuant to the conspiracy. Electro argues that the civil conspiracy claim only relates to misappropriation of trade secrets, but the record does not support Electro‘s belief. Because the various civil conspiracy claims accrued when their related underlying tortious injuries occurred, Agar‘s civil conspiracy claims with respect to all alleged underlying torts accrued by April 2008 at the latest. As Agar does not allege any underlying tort related to the July 3, 2009 sale different from those previously alleged, that date is irrelevant to Agar‘s conspiracy claims.
IV. Attorney‘s Fees
Agar also asks us to reverse the trial court‘s award of $64,307.44 in attorney‘s fees to Electro under the Texas Theft Liability Act. See
In the final judgment, the trial court awarded attorney‘s fees “incurred as a result of defending the TTLA claim or the performance of discrete legal acts that were intertwined with defending the TTLA claim.” An affidavit from Electro‘s attorney supported the fees award with an attached hourly record of the fees amassed during litigation and an estimation as to how much each task involved or was intertwined with Electro‘s defense to the civil theft claim. Agar does not challenge the trial court‘s segregation of the attorney‘s fees.
Agar contends, however, that a “person who prevails” under
Agar also contends Electro has not “prevailed on the merits” of the civil theft claim because Electro only avoided liability through the statute of limitations. This argument ignores that Electro won a no-evidence summary judgment of Agar‘s
Agar next argues the affidavit supporting Electro‘s attorney‘s fees was legally defective and controverted by Agar. Agar contends the affidavit is insufficient as a matter of law because it lacks an assertion that its contents are true or made under penalty of perjury. See Humphreys v. Caldwell, 888 S.W.2d 469, 470 (Tex. 1994) (“An affidavit which does not positively and unqualifiedly represent the facts as disclosed in the affidavit to be true and within the affiant‘s personal knowledge is legally insufficient.“). We disagree. The challenged affidavit says it was taken upon the affiant‘s oath and the facts are based on his personal knowledge. An affidavit containing a statement that the affiant appeared before the notary, was duly sworn, and submitted the statement “on his oath” is legally sufficient. Ford Motor Co. v. Leggat, 904 S.W.2d 643, 645 (Tex. 1995).
Agar finally contends its attorney‘s affidavit created a fact issue on the reasonableness and necessity of the attorney‘s fees by reasoning that Electro won the case on limitations and therefore should have moved for summary judgment much earlier. But Electro did not win purely on limitations; only the civil conspiracy claims were subject to summary judgment on limitations. Electro won a no-evidence summary judgment against all of Agar‘s non-derivative tort claims, including the civil theft claim. No-evidence summary judgment is only available “[a]fter adequate time for discovery.”
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In summary, we hold that civil conspiracy is a derivative claim that takes the limitations period of the underlying tort that is the object of the conspiracy. Limitations as to both typically run simultaneously because the conspiracy and underlying tort generally accrue at the same time. As pled, the underlying torts alleged in this case all accrued by April 2008. Because Electro was not joined as a party to the conspiracy until November 2011 and no underlying tort other than those previously pled was alleged in that joinder, limitations that would bar the underlying tort claims if alleged anew similarly bar the related claims of conspiracy. Thus, any conspiracy claim based on one of the underlying torts alleged in April 2008 that shares a limitation period that expired before November 2011 is barred. Finally, we hold that the Texas Theft Liability Act‘s provision for the award of attorney‘s fees to each prevailing person applies both to plaintiffs and defendants who prevail.
We affirm the court of appeal‘s judgment as to attorney‘s fees, reverse it as to those civil conspiracy claims whose underlying tort was not barred by limitations at the time of Electro‘s addition to the litigation, and remand the cause to the trial court for further proceedings consistent with this opinion.
John P. Devine
Justice
Opinion Delivered: April 5, 2019