### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-0 7 -00 292 -CV

Ri c har d Wa gne r , I ndiv idua llyand o n be hal f of Na ti onwide M ut ualTe xa s Em plo ye e s ; and L ind a M. Wagner, A ppellan ts

v. Nationw ide Lloyd s and Douglas Robi nette , Appellees

F ROM THE DISTRICT CO URT OF COM AL COUNTY , 274TH JUDICIAL DISTRICT NO. C-20 06- 1222 C , HO NORAB LE GARY L. STEEL , JUDGE PRESIDI NG

M E M O R

A N D U M O P I N I O N Appellants Richar d Wagne r and L inda M
. Wagne r appeal t he trial court’s dismissal of their c l aims ag ainst Nationwide L loy ds and Doug las Robinette. The trial c ourt found that the W agn er s fa i l edt o s t at e aca u s e o f a ct i o nan d t h at al l o w i n g t h e W agn er s t o am en d t h ei r p l ea d i n gs would not cure the def

ect. In four points of erro r, t h e W agner s contend that the tria l court er red wh e n it de nie d d e fa

ult jud g me nt a g a ins t N a tio nw ide L loyds and wh e n it dis mis sed t

he Wag ne rs ’ brea ch of fiduciar

y duty and fra

ud claims ag ainst Nationwide L loy ds. For the re asons that follow,
we ov e rr ule the Wag ne rs ’ p oin ts o f e rr or and a ff ir m th e jud g me nt.
F ACTUAL AND P ROCEDURAL BACK GR OUND Richard Wag ner is an attorney who was e mploy ed by Nationwide Mutual Insuranc e Company , and L inda W ag ner is his wife. I n 2006, Nationwide Mutual Insuranc e Company rea chedT h e W ag ners did not see k class ce rtification. See T e x. R
. C i v . P
. 4 2
. T h e o nly c la ims 1 be fo re the tr ia l c ourt , th e re fo re , w e re the ir ind ivi du a l c la ims
. The Wag ners a dded Doug las Robinette in the firs t amended pe tition, but he wa s never 2 se rved and , the re fo re , is no t a pa rt y . In th e a me nd e d p e tit ion , th e Wag ne rs a lle g e d th a t Ro bin e tte was the pr esident of Nationwide L loy ds but, a ccor ding to Na tionwide L loy ds, he is an under writer. 2 a cla ss action settlement with policy holders in a suit broug ht in the United States District Court of the District of Ore g on by Ruslan Ra zil ov, Sara L apham, a nd Der ek L apham ( the “Settlement”)
. The plaintiffs in that suit allege d that notices sent by Nationwide Mutual Insuranc e Company did not satisfy the re quirements of the fede ral F air Cre dit Reporting Ac t. See 15 U.S.C. § 1681 (2007). The settlement class did not include employ ees of Nationwide Mutual I

nsuranc e Company , and ea ch member of the class rec eived approxi mately $200 from the Settlement. Wag ner r ece ived notice of the Settlement, but as an e mploy ee of Nationwide Mutual Insuranc e Company , he wa s not included in t he se ttl e me nt c la ss.

Wagne r there afte r sued Nationwide L loy ds alleg ing that Nationwide L loy ds imp ro pe rl y

e xclu de d h im f

ro m th e se ttl e me nt c la ss a nd fai le d to inf

or m hi m of the pe nd ingc la ss action and his rig ht to bring simil ar claims. He pleaded that “Nationwide L loy ds is a L loy ds insuring company which is reinsure d throug h Nationwide Insuranc e Company ,” but he did not address the relationship betwee n Nationwide L loy ds and the de fenda nt in the class ac tion lawsuit, Nationwide Mutual I nsuranc e Company . He also purported to r epre sent a c lass of “N ationwide employ ees” who
we re e xclu de d fr om t

he se ttl e me nt c la ss a

nd the ir sp ou se s. After

Nationwide L loy ds filed spec ial 1
e xce pti on s, a

mot ion to d ism iss or fo r su mma

ry jud g me nt, and an ans we r, Wag ne r mov e d fo r d e fa ult jud g me nt and , by a fi rs t a me nd e d pe tit ion , a dd e d L ind a Wag ne r a s a

pla int if f a nd Do ug la s Ro bin e tte
a s a de fe nd ant. 23 After hear ing a rg uments on Wagne r’s motion for defa ult judg ment and Nationwide L loy ds’s specia l e x ceptions and motion to dism iss or for summary judgme nt, the trial court de nied the mot ion

fo r d e fa ult jud g me nt a

nd g ra nte d N a tio nw ide L loyds ’s mot ion to d ism iss the Wag ne rs ’
c la ims wi th p re

jud ic e . T he tr ia l c ourt

c on c lud e d th e Wag ne rs fa ile d to state a c la im: Plaintiff’s Orig inal Petition (i n cl uding Plaintiffs’ F irst Amended Petition whether considere d as an a

mended or

supplemental petition) fa ils to state a claim and that such def

ect c annot be c ured by

amendment. De fe n d ants are there fore entitled to dismi ssal with prejudice
. This appea l followed.
AN AL YSI S De nia l of De fa ult J udg ment I n th ei r fi rs t p o i nt of err or, the Wag ners c ontend that the trial c ourt err ed by not g ranting defa

ult judgme nt ag ainst Nationwide L loy ds. We revie w a trial court’s ruling on a motion for de fault judg ment under a n abuse of

discretion standa

rd. See W

alker v . Gutierrez , 111 S.W .3d 56 , 6 3 ( Te x. 20 03 ); Pa dr ino Ma r. In c . v . R izo , 1 30 S.W. 3d 24 3, 24 7- 48 (T e x. Ap p. —Co rp us Chr ist i 2004, no pet.). A tria l court abuses its discretion when it acts in an a rbitrar y or unre asonable manner wi tho ut r e fe re nc e to a

ny g uid ingru le s o r p ri nc ipl e s. Downer v. Aquamarine Operators, Inc ., 701 S.W .2d 238, 241-42 (Te x . 1985).

A p la in ti f f ma y s e e k a n o - an s w e r d e f

a u lt ju d g me n t a g a in s t a d e f e n d an t w h en the defe ndant fa ils to answer timely
. See Tex. R. Civ. P. 99b, 239. Once the def endant f iles an answe r,
a p l ai n t iff is no long er e ntitled to a no-answe r def ault judgme nt. Id. ; see also Dav is v. Je fferies ,De fa ult jud g me nt w a s n ot p ro pe r i n a ny e ve nt b e c a

us e Natio nw ide L loyds tim e ly fi le d it s 3 answe r. See Tex. R. Civ. P. 99b, 239. Wagne r filed his pe tition on November 22, 2006, and ser ved Nationwide L loy ds by cer tified mail on November 28. Nationwide L loy d’s answe r wa s due the da y it was filed, that is, Tue sday , Dec ember 26; the court wa s closed on Monday , Dec ember 25 for the Christmas holiday
. See Tex. R. C iv. P. 4, 99b. To state a

c la im f or b reach of

fi du c iary du ty , a pla int if f m us t pr ov e that a

fi du c iary du ty 4 exis ted, that it was bre ache d, and that the breac h proxi mately cause d damag es. Abetter Trucking Co. v. Arizpe , 1 13 S.W. 3d

50 3, 50 8 ( Te x. Ap p. —H ou sto n [14 th D ist .] 20 03 , n o p e t.) . T o s ta te a c la im for f raud, a plaintiff must prove the de fenda nt made a material re p re s entation that was f alse, the defe ndant knew the repr esentation was false or made it r eckle ssly as a positive asse rtion without any knowledg e of its truth, the def endant intende d to induce the pla intiff’s re liance on the repr esentation, a n d t h e p l a i n t i f

f a c tu a l l y a n d

j u s t i f i a b l y r e l i e d u p o nt h e r e p r e s e n t a t i o n , t h e r e b y s u f f e r i n g i n j u r y. Ernst & Y

oung, L.L.P. v. Pacific Mut. Life Ins. Co. , 51 S.W .3d 573, 577 (Tex. 2001). 4 764 S.W
. 2 d 5 5 9 , 5 6 0 ( T e x. 1 9 8 9 )
. N a ti o n w id e L lo y d s ti me ly f il e d it s an s w e r w it

h the court on De c e mbe r 2 6, a nd

Wag ne r f

ile d h is m oti on

fo r d e fa ult jud g me nt o n D e c e mbe r 2 7. B e c a us e Nationwide L loy ds answer ed bef ore Wag ner f

iled his moti on for de fault judg ment , the trial
c ourt c or re c tly de nie d Wag ne r’ s motio n for de fa ult jud g me nt. We overrule the Wag ners’ first point

3 of er ror.
Trial Cou rt’s Dism issal w ith Preju dice

Th e Wag ne rs c on te nd

in t he ir re ma ini ngpo int s o f e rr or that th e tr ia l c ourt

e rr e d in dis mis sin g the ir

br e a c h o f f

idu c iary du ty and fr a ud c la ims
. I n their sec ond po i n t o f error, the

4 Wagne rs contend that they should have been given an opportunity to amend their pleading s after

the trial court sustained N ationwide L loy ds’s specia l exceptions. Nationwide L loy ds in its s pecia l
e xce pti on s c on te nd e d th a t th e Wag ne rs ’ p le a din g s w e re de fe c tiv e be c a us e the y fa ile d to state a

c a us e
o f a c ti o n . See T ex . R. Civ. P . 91; Baylor Univ. v . Sonnichsen , 221 S.W .3d 632, 635 (Tex. 2007) (“The purpose of

a spec ial exception is to compel clar ification of pleading s when the ple ading s areWagne r also alleg ed in his orig inal petition that the actions of t h e d irec tors and off icer s 5
“ we re in v iol a tio n o f t

he Te xas I

ns ur anc e Cod e , the Te xas D e c e pti ve Tr a de Pr a c tic e s A c t and a lso wer e violations of common law bad faith.” The Wagne rs do not a ddress these a dditional causes of a c tio n in the ir iss ue s o r b ri e fi ng to thi s Cour t and have wa ive d a

ny e rr or on a pp e a l c on c e rn ingthe se additional cause s of ac tion. See Te x. R. A pp . P. 38 .1 (e ), (h ); Huey

v. Hue y , 200 S.W .3d 851, 854 (Tex. App.—Dallas 2006, no pe t.) (fa ilure to provide subst antive analy sis waives issue on appe al). 5 n o t cl ea r or s u ff

i ci en t l y s p ec i fi c or fa i l t o p l ea d a cau s e of ac t i o n . ”) (c i t i n g Friesenhahn v . Ryan , 960 S.W .2d 656, 658 (Tex. 1998)).

Whe n a tr ia l c ourt dis mis se s a

c a se up on sp e c ia l exce pti on s for fa ilure to s ta te a c a us e of a c tio n, we re vie w the dis mis sa l de novo
. Bu t ler W eldments Corp. v. Liberty Mut. Ins. Co. , 3 S.W .3d 654, 658 (Tex. App.—Austin 1999, no pet.). In so doing, w e ac cept “ as true a ll material fac tual alleg ations and all fac tual statements re asonably inferr ed fr om the alleg ations set forth in the responde nt’s pleading s.” Id. Gene rally , when a trial court sust ains specia l exceptions, it g ives the pleade r an oppor

tunity to amen d t o cu re the def ects. See B aylor , 221 S.W .3d at 635. When the pleadingdefe ct is of a ty

pe that ame ndment cannot cure , howeve r, a tria l court may dismiss without g iving the ple ader

an opportunity

to amend. Id
. Wagne r alleg ed in his orig inal petition that Nationwide L loy ds brea ched its fiducia ry duty by failing to inform “Nationwide employ ees” of the pe nding c lass action lawsuit and e x cluding the e mpl oy e e s f

ro m th e se ttl e me nt cla ss “ wi tho ut p ro vid ingno tic e or an o pp or tun ity to f or m a separ ate Class Ac tion or provide the same settlement off ere d to non employ ees.” He a lso alleg ed that th e of

fi c e rs and dir e c tor s of Natio nw ide L loyds “ we re fr a ud ule nt b e c a

us e the y did no t a dv ise Nationwide e mploy ees of their rig hts to bring a claim for violations of F RCA [ Fa ir Credit Reporting Act] and the direc tors and off i ce rs rec eived bonus ba sed upon loss ratio g oals which would have included the additional settlement and c osts.” Wagne r attac hed to his orig inal petition, as an 5The Wag ners a lso filed a “F irst Amended Petition.” The tria l court states in its order of 6 dismiss al th a t i t s p e c if

ic a ll y c o n s id e r e d

b o th th e o r ig in a l a

n d a me n d e d p e ti ti o n s . T h e Wa g n ers asser ted bre ach of

fiduciar y duty in their amende d petition, but did not asser t the other c auses of a c tio n th a t th e y

inc lud e d in

the or ig ina l pet iti on . Con sis te nt wit h the tr ia l c ourt , w e c on sid e r b oth pe tit ion s. I n response to Nationwide L loy ds’s motion to dismiss or for summary judgme nt, Wagne r 7 provided a

n aff idavit. He averr ed that he rec eived notice of the c lass action and that the fede ral c ourt did not allow him to i nterve ne:

Ire c e ive d a

No tic e to b e inc lud e d in the Rus lan Razil ovCla ss A c tio n la ws uit and sent a letter to the Nationwide attorney s reque sting further information re g arding the class. I subsequently acc epted Cl ass certification, but later N ationwide re scinded based upon the fac t that I was a Nationwide employ ee. I reque sted t h e F ed eral District Court to allow me to intervene , howeve r, I was not allowe d to do so. 6 e xhibi t, a c op y of the no tic e that he re c e ive d c on c e rn ingthe Se ttl e me nt. The notice identified the 6 settlement class as specific ally excluding employ ees of Nationwide Mutual I nsuranc e Company and f u rt h e r i d e n t i f i e d t h e d e f e n d an ta s N a t i o n w i d e M u tu a l In s u r an c e C o mp an y. Natio nw ide L loyds c on te nd s th a t th e tr ia l c ourt c or re c tly dis mis se d th e W agn e rs ’ brea ch of f

iduciary duty and fr aud cla i m s b ec ause ( i) the Wag ners a dmittedly had notice of

the Settlement, (ii) Nationwid e L loy ds, as a non- party , did not have a duty to assure that all potential plaintiffs we re i n cl u d ed as a dverse parties in the Settlement, and ( iii) Nationwide L loy ds does not have a

leg ally cog nizable duty

to advise employ ees or

would-be pla intiffs such as the Wag ners of possible ca

uses of action ag ainst Nationwide L loy ds. We ag ree with eac h of Nationwide L loy ds’s
c on te nti on s. Wag ne r p le a de d th a t he re c e ive d n oti c e of the Se ttl e me nt. The Wag ners, ther efor e, 7 cannot c laim lack of notice as the basis for a ny claim ag ainst Nationwide L loy ds. See W ashington v. City of Houston , 874 S.W .2d 791, 794 (Tex. A p p . — Texarkana 1994, writ denied) (par

ty mayT h e W agn er s fa i l edt o ad dre s s t h e r el at i o n s h i p b et we en Na t i o n wi d e Llo y d s and Na tionwide 8 M u tu a l In s u r an c e C o mp an y. 7 plead himself “ out o f co u rt by pleadingfac ts that affirma tively neg ate” cause of ac tion). The Wag n e r s a ls o p le a d e d th a t N a ti o n w id e L lo y d s w a s n o t a p arty to th e Se tt le me n t b y inc luding the notice fr om the Settlement. The noti ce identified the settling defe ndant as Nationwide Mutual I ns ur an c e C o mp an y , n o tN a t i o n w i d e L l o y d s , an d w e a c c e p tt h e n o t i c e a s p arto f t h e Wag ne rs ’ pleading s as true. See B utler , 3 S.W. 3d a t 65 8; W

ashington , 8 7 4 S
. W
. 2 d a t 7 9 4
. A s a n o n - p a r t y, Nationwide L loy ds did not have leg ally cog nizable duties conce rning the Settlement. S ee Lucas v. Texas I ndus. Inc ., 696 S.W .2d 372, 374 (Tex. 1 984) (“ Gene rally , a cour t will not di sreg ard the
c or po rate fi c tio n a

nd ho ld a c or

po ratio n lia

ble fo r t he ob lig a tio ns of

its su bs idi ary e xce pt w he re it
a pp e ars the c or

po rate e nti ty

of the su bs idi ary is b e ingus e d a s a

sh a m to pe rp e tuate a

fr a ud , to a vo id liability , to avoid the ef

fec t of a statute, or

in other exceptional circ umstances.” ). 8 Th e W a g n e r s a l s o f

a i l t o p r o v i d e a

u t h o r i t y o r s u

p p o rt f o r t h e i r c o n t e n t i o n t h a t a
c omp any br e a c he s a fi du c iary du ty to its e mpl oy e e s or c omm its fr a ud by fa ili ng to inform i ts employ ees that there is a pe nding c lass action suit with non-emp l o y ees or that there are potential
causes o f action aga inst the company . The lawg ener ally require s potential plaintiffs to be
rea sonably

diligent a bout the ir own leg al rig hts a nd does not requir e def

endants to sug g est potential
cause s of ac tion to plainti ffs. S e e H o d g e v . No r th e rn Trust Bank of T ex ., 54 S.W .3d 518, 523 (Tex. App.—Eastland 2001, pet. de nied) (a plaintiff must be “dilig ent in protec t i n g his rights” ); Crabtree v. Ray

Richey & Co. , 6 82 S.W. 2d 72 7, 72 8 ( Te x. Ap p. —F or t Wor th 1 98 5, no wr it) (def endant ha s no duty

to sugg est potential ca

uses of a ction to plaintiff). We conc lude Nationwide8

L loy ds owed no c og ni z ab l e d u t y t o the Wag ners to notify them of the c lass action, to insure the Wagne rs wer e included in the Settlement, or to advise the Wag ners of possible causes of ac tion
a g a ins t N a tio nw ide L loyds
. Th e Wag ne rs c ann ot al le g e fa c ts tha t supp or t a br e a c h o f f

idu c iary du ty or fr aud cla im arising f

rom Nationwide L loy ds’s conduct conce rning the Settlement, and allowing t h e W agn ers to amend their plea dings w ould not have cur ed this pleading defe ct. S e e B a y lor , 221 S.W .3d at 635. We overr ule the Wag ners’ second point of e rror . I n their t hird and fourth points of error, the Wagne rs contend that the trial court e rre d in dismi ssing their

brea ch of f

iduciary duty claims with preju d i ce b ec ause Nationwide L loy ds br e a c he d it s f

idu c iary du ty “ by fa ili ngto di scl os e pertin e nt f ina nc ia l in fo rm a tio n f

or us e in de te rm ini ngwh e the r o r n ot t o r e je c t un insur e d mo tor ist

c ov e ra g e ,” and

by the “ fa ilure to d isc los e discrim inatory

prac tices by

[Nationwide L loy ds] i n its use of cre dit for under writing insurance po lic ie s. ” To pr e se rv e e rr or , a n a pp e lla nt m us t r a ise and pr op e rl y pr e se nt t he c la im t o th e tr ia l c ourt
. See Tex. R. App. P . 33.1. The Wag ners f ailed to plead or raise their claims conc erninguninsured motorist covera g e and dis c r im in a to r y p r actice s in the use of c redit scor ing f or under writing insurance po lic ie s. B e c a

us e the Wag ne rs in the ir thi rd and fo ur th poi nts of e rr or ra ise ne w c la ims tha t th e y did not plead or pr esent to the trial court, we may not consider the c laims on appea l. Id . We ov e rr ule the Wag ners’ third and four th points of error
.

CO NC LU SION Be cause the Wag ners f

ailed to state a

cause of ac tion and such def ect co u l d n o t be
c ur e d b y a me nd ingthe ir

ple a din g s, the tr ia l c ourt

did no t e rr in dis mis sin g the Wag ne rs ’ c la ims wi th pr e jud ic e . We ov e rr

ule the Wag ne rs ’ p oin ts o f e rr or and a ff ir m th e tr ia l c ourt ’s jud g me nt.9 __________________________________________ J an P. Patterson, J ustice Be fore J ustices Patterson, Pury ear and Pember

ton Affir med Filed: F ebrua

ry 27, 2008