In a dispute between PlainsCapital and a group of individuals who signed a guaranty to repay a $29.5 million loan from the bank in the event of a default, another fight has arisen: whether the case should be transferred from Dallas’ Fifth Court of Appeals to the new Fifteenth Court of Appeals.
In the underlying case, parties on both sides of the dispute — PlainsCapital Bank is the plaintiff; the defendants are Louisiana businessmen Jerry Webb, Craig Webb and Stephen Herbel and a Dallas lawyer who died during the pendency of litigation, Patrick Mulligan — claim to have been the victims of a Ponzi scheme perpetrated by David DeBerardinis, a Shreveport businessman currently serving time in prison for wire fraud who PlainsCapital gave a loan.
The Dallas County jury that decided the case in May 2023 determined a breach of the agreement occurred when the guarantors failed to pay, but also found the failure to comply with the guaranty was excused for fraud by misrepresentation and omission, negligent misrepresentation, mutual mistake and prior material breach.
No damages were awarded in the case where PlainsCapital was seeking about $52 million for the loan and the legal work to recoup those funds, but the jurors did award the bank $2.5 million in attorney fees and costs. The judge entered a take nothing judgment.
This case is among the first, if not the first, where a permissive transfer to the new Fifteenth Court of Appeals is being sought by one party and opposed by the other.
A main point of contention in the briefing is whether the dispute centers on a bank loan — which would deprive the Fifteenth Court of Appeals of exclusive jurisdiction over the case under Texas Government Code section25A.001(14) — or if it centers on a guaranty agreement.
Kyle D. Hawkins of Lehotsky Keller Cohn, who is lead counsel for PlainsCapital in this case, said in a statement to The Texas Lawbook that this is exactly the kind of dispute that the new appellate court should decide.
“The Supreme Court held last month that the Fifteenth Court has general statewide jurisdiction to hear important appeals from any trial court,” he said. “We’re asking the Supreme Court to grant permissive transfer here, because this type of high-stakes business dispute carries statewide implications for many industries that go beyond these specific parties.”
Scott Luedke, executive vice president and general counsel of PlainsCapital Bank, echoed that sentiment in his statement.
“The predictable enforceability of unambiguous guaranty contracts is critical to a variety of business transactions in Texas, and the Fifteenth Court was created to resolve high-stakes business disputes like this one,” he said.
Jeffrey M. Tillotson of Tillotson Johnson and Patton, who represents the guarantors, told The Lawbook in his view, PlainsCapital’s argument is based on “semantics.”
“Of course those are different documents,” he said of a loan agreement and a guaranty agreement. “But it’s a guaranty for a loan. You have to prove there was a loan and that it’s in default before you can ever get to the guaranty.”
“They’ve invented this in their mind to try and get away from the Dallas Court of Appeals,” he said. “It’s kind of shameful because it really does undermine the Fifteenth Court of Appeals. It makes it look very results oriented, like, if I can get there I can win.”
In a brief in opposition to the transfer request filed Monday, the guarantors argue that after eight years of litigation in Dallas, and “after having failed to prevail at trial and apparently having concerns about its ability to prevail before the Dallas Court of Appeals, PlainsCapital Bank now wants the appeal decided somewhere else.”
The Fifth Court of Appeals issued an order Tuesday abating the case.
“Before the Court is appellant/cross-appellee’s September 10, 2024 motion seeking to transfer this appeal to the Fifteenth Court of Appeals. Subject to an exception not applicable here, only the supreme court has the authority to transfer this appeal,” Chief Justice Robert D. Burns III wrote. “Accordingly, we have referred the motion to transfer to the supreme court.”
Chief Justice Burns also sent a letter to the clerk of the Texas Supreme Court on Tuesday.
“Because appellant/cross-appellee has failed to show good cause to transfer this appeal, we do not agree with its request to transfer,” he wrote. “However, should the Texas Supreme Court determine transfer is appropriate, this court does not object to the transfer of the case. We have abated this appeal pending disposition of the motion to transfer.”
PlainsCapital has argued in briefing that the case is not about a “transaction involving a [bank] loan,” but instead is “about enforcing an absolute and unconditional guaranty agreement — not a loan — and Texas courts have long recognized the difference.”
“That the guaranty is related to a loan no more deprives the Business Court of jurisdiction in this matter than bank financing as part of a merger agreement would deprive the Business Court of jurisdiction to hear a dispute about that merger,” the bank argues.
PlainsCapital also argues that the case should be transferred because it is “extraordinarily important to the business community.”
“Summed up, this case thus presents the Supreme Court with an important opportunity to establish conclusively that certain cases presenting uncommonly high stakes and issues of statewide importance should be resolved by the appellate court created by the Legislature to decide cases presenting uncommonly high stakes and issues of statewide importance,” PlainsCapital told the court in a brief filed Wednesday. “The court should take that opportunity. This case should be transferred to the Fifteenth Court.”
In a response filed Monday, the guarantors argued the facts of the case clearly deprive the Fifteenth Court of Appeals of exclusive jurisdiction.
“Had DeBerardinis paid the loan back to PlainsCapital Bank or had PlainsCapital Bank not made or extended the loan, this case wouldn’t exist,” they argue. “Indeed, the damages PlainsCapital Bank sought at trial were the very amounts it claimed it was due on the loan balance. Thus, there can be no question that this case arises from a transaction ‘involving’ a loan by PlainsCapital Bank.”
PlainsCapital is also represented by Andrew B. Davis and Leah F. Bower of Lehotsky Keller Cohn and Tom Melsheimer, Geoff Harper and John Sullivan of Winston & Strawn.
The guarantors are also represented by Jonathan R. Patton, J. Austen Irrobali and Stephani A. Michel of Tillotson Johnson & Patton.
The case number is 05-24-00572-CV.