Justice David Schenk

Justice Ken Molberg

Judging from a series of opinions issued by the Dallas Court of Appeals late Friday afternoon, all is not well in one of the state’s most important and influential appellate court districts. The problem appears to have arisen not from a disagreement over an opinion, but with internal procedural irregularities which at least one justice views as gravely threatening to the court’s impartiality.

The underlying case, Winstead PC v. Moore (No. 05-20-00050-CV), involves the application of the Texas Citizen Participation Act (as amended in 2019) to a legal malpractice claim. Moore’s employer, Institute for Wealth Holdings, Inc. (IWH), an investment advisory firm, retained Winstead in 2017 to prepare offering statements for certain securities for submission to the Securities and Exchange Commission. The statements included an opinion letter from Winstead. Upon review, the SEC determined that the statements contained material misstatements and inaccuracies with respect to IWH and its leadership. Moore, IWH’s CEO and President, was forced to resign. In September 2019, he sued Winstead claiming negligent misrepresentation, legal malpractice, and equitable indemnification. Winstead moved to dismiss Moore’s claims under the TCPA because the offering statements constituted a communication in connection with an issue under consideration or review by a governmental body. The trial court denied Winstead’s TCPA motion. Winstead sought review on an interlocutory and expedited basis as authorized by the TCPA.

A three- judge panel consisting of Justices David Schenk, Craig Smith, and Dennise Garcia held that the TCPA applies to Moore’s legal malpractice and equitable indemnification claims but not to his negligent misrepresentation claim. Justice Schenk filed a concurring and dissenting opinion agreeing with the majority regarding the malpractice and indemnification claims but arguing that the TCPA should likewise apply to the negligent misrepresentation claim.

Sounds pretty routine, right? Far from it. Justice Ken Molberg, who was not a member of the panel, requested en banc review. When a majority of the court voted to deny his request, he filed a sharply worded dissent accusing the panel of a fundamental misreading of the TCPA “unsupported in law.” As Justice Molberg concludes, “At bottom, the panel opinion serves as an extreme departure from our Court’s prior cases and threatens to turn every pedestrian legal malpractice action involving an agency or court filing into a TCPA interlocutory appeal.”

Justice Molberg’s dissent drew a blistering response from Justice Schenk, who filed an opinion concurring in the denial of en banc review. His opinion states that he feels “compelled to write because the delay in the parties’ hearing from the Court and of the attempted change in the result between the parties at the panel reflects knowing and persistent departure from the governing rules and gives rise to a palpable due process problem.” Although the panel opinion had been prepared and ready to issue for months, “several justices who were not on the panel recorded votes to delay the release of the opinion to the parties as the opinion circulated to the full Court in late March.” According to Justice Schenk, the court violated its own internal operating procedure by holding up the panel opinion without convening for en banc consideration. He then refers to a separate pending en banc proceeding likewise stirring controversy within the court, leading the panel majority “to hold the panel opinion in order to avoid further inflaming the procedural controversy and in recognition of the non-panel members’ two-week study votes.”

So far, this may look like some inside baseball of limited interest to TCJL members. But according to Justice Schenk:

What the panel members did not know, and what one of the delaying non-panel justices did not share, was that he was separately authoring and would, on April 5, 2021, release without prior circulation to the full Court or this panel, a memorandum opinion in another case, involving the same statute but not the same legal arguments. The opinion in the other case was released with dicta coinciding with the issues actually raised in this case and so conspicuous in its presence as to cause neutral observers of the Court to comment on its presence. As civil memorandum opinions are controlling precedent, Tex. R. App. P. 47.7(b), the author of that opinion (one of the justices interceding to delay release of the opinion in this case) then asserted that the result between the parties in this case should be changed in accordance with his later unpublished decision as ostensibly a ‘prior’ panel holding.

The other case to which Justice Schenk refers is Snell v. Ellis (No. 05-20-00642-CV), a TCPA case likewise arising from a legal malpractice claim and decided on April 5, 2021 in a memorandum opinion authored by Justice Molberg. In Snell, as in his dissent in Winstead, Justice Molberg takes the position that the court’s precedent dictates that a TCPA movant’s withholding of a statement or document, or a failure to communicate, does not constitute a “communication” for purposes of the TCPA. The more controversial section of Justice Molberg’s opinion involves the interaction between the TCPA and the law of agency—exactly the issue presented in Winstead and the panel’s treatment of which Justice Molberg so strenuously objected. The dicta to which Justice Schenk refers goes as follows:

The more novel question, on the facts here, asks whether Ellis, as Snell’s attorney (and thus his agent), may rely on the notification she filed on Snell’s behalf for purposes of satisfying her burden under [the TCPA]. The plain text of [the statute], long-standing rules regarding agency, and our decisions in other contexts, suggest the answer is “no,” but because the parties have not raised it, we do not decide the question here.

No doubt that Justice Molberg has no use for lawyers raising the TCPA to shield them from their own negligence, and one might legitimately question whether the statute should be applied in that way. But Justice Schenk’s point is well taken: a non-panel justice delayed the release of a panel decision “pending his assent and efforts to secure reconsideration,” thus creating [by way of the opinion in Snell] “the very circumstances purporting to require reconsideration and a resulting change in outcome between the litigants in that other case.” This violation of the Rules of Appellate procedure and the court’s internal operating procedures “deprives the litigants of their right to a decision and judgment in accordance with them, and hence, literally due process. . . . Such efforts to obstruct the precedential effect of a panel decision, regardless of whether the Court as a whole would even agree to convene en banc, much less agree to a new result, may also be seen as an attempt to benefit a subsequent litigant or litigants, whether intended or not.” Not only did the delay here deprive the parties of a timely decision in an accelerated appeal, but it “creates more ominous prospects of potentially manipulating the result at the panel despite the lack of support from a majority of the Court.

Justice Schenk does not pull punches: “As Texas judges are subject to a self-directed, mandatory obligation not even to sit in cases where they cannot resist actions favoring a particular outcome relative to either of the parties or the subject matter, one would think the issue [of whether Justice Molberg is acting impartially] would not arise. That this issue arises in this case after and, indeed, in the midst of another en banc controversy surrounding similar delay and panel obstruction is disheartening.” Justice Schenk urges the court to overhaul its governing procedures and “to take appropriate action where we deviate from those rules more generally. These actions and changes are necessary to uphold and enforce the due process rights of every party appearing before us, ‘so that no doubts or suspicions exist as to the fairness or the integrity of the court.’ [citation].”

We rarely see the curtain around the inner workings of an appellate court in turmoil drawn back to this extent. Any conduct that creates or may create the appearance of partiality to a litigant or lawyer representing a litigant undermines public confidence in the judiciary as a whole. Here it appears that one justice is attempting to block a panel decision he doesn’t like and improperly maneuvering to get a precedent changing opinion ahead of it in the queue because he can’t get a majority of the court to go along with him. Whatever else may be happening behind the scenes remains a mystery, but it does not sound good. If we as a state are going to persist in electing judges on party label alone, we simply must have more rigorous policing of ethical standards for judges and practitioners alike. Every litigant, big or small, individual or corporate, economically privileged or not, deserves equal and impartial justice from every one of our courts, no matter the circumstances.

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