Court Opinion

ID: 4575776
Source: CourtListenerOpinion
Date Created: 2020-10-12 07:13:45.158333+00
Date Added: 2024-06-11T08:47:24.972944
License: Public Domain

Petition for Writ of Mandamus Conditionally Granted and Memorandum
Opinion filed October 6, 2020.

                                     In The

                      Fourteenth Court of Appeals

                               NO. 14-20-00087-CV

IN RE UBS FINANCIAL SERVICES INC., DEBRA PELHAM, AND KREG
                     PEARLESS, Relators

                         ORIGINAL PROCEEDING
                           WRIT OF MANDAMUS
                              333rd District Court
                             Harris County, Texas
                       Trial Court Cause No. 2019-82010

                        MEMORANDUM OPINION

      Relators UBS Financial Services Inc., Debra Pelham, and Kreg Pearless
(collectively, “UBS”) filed a petition for writ of mandamus in this court. See Tex.
Gov’t Code Ann. § 22.221; see also Tex. R. App. P. 52. In the petition, UBS asks
this court to compel the Honorable Daryl Moore, presiding judge of the 333rd
District Court of Harris County, to set aside his January 8, 2020 order granting the
verified petition requesting deposition duces tecum before suit pursuant to Texas
Rule of Civil Procedure 202. See Tex. R. Civ. P. 202. We conditionally grant the
petition.

                                  BACKGROUND

      In September 2009 and November 2016, Fleur Holdings LLC opened two
accounts in UBS’s Yield Enhancement Strategy (“YES”), which is an options
overlay trading strategy that aims to generate investment income through the sale of
S&P 500 Index options. The agreements between Fleur Holdings and UBS include
arbitration agreements. Deneige Dooley is Fleur Holdings’ managing member.
Dooley signed the documents setting up Fleur Holdings’ accounts as managing
member.

      On September 25, 2019, Dooley’s attorney wrote UBS, advising that he was
investigating whether UBS’s actions regarding the investment of his “Client’s”
assets in YES are actionable. Dooley is referred to as the “Client” in the letter.
Dooley’s attorney requested information regarding YES in the form of 12 questions
directed to UBS and 12 categories of documents and also demanded that UBS
preserve evidence. Dooley’s attorney also requested tape-recorded interviews of
UBS employees, Debra Pelham and Kreg Pearless.

      In response, UBS’s attorney advised that UBS had no obligation to produce
discovery at that time and declined to do so. UBS further stated that, in the event
arbitration were commenced, both parties would be subject to the discovery rules
and procedures of the arbitral forum and enclosed copies of the documents signed
by Dooley on behalf of Fleur Holdings.
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      On November 11, 2019, Dooley filed a verified petition requesting
depositions duces tecum before suit, seeking to investigate facts regarding the
investment of some of Dooley’s funds in YES by deposing Pelham and Pearless.
UBS objected on the grounds that (1) Dooley lacked standing because she does not
own the potential claims; and (2) Fleur Holdings, through its managing member,
Dooley, agreed to binding private arbitration of the potential claims, precluding the
use of Rule 202

      On January 3, 2020, UBS filed an emergency motion for protection and
motion to quash Dooley’s subpoenas commanding Pelham and Pearless to appear
for deposition. The trial court held a hearing on January 6, 2020, and signed an order
granting the petition on January 8, 2020, allowing the depositions of Pelham and
Pearless, limited to three hours each, to be taken within 30 days of the order.

                                STANDARD OF REVIEW

      Ordinarily, to be entitled to a writ of mandamus, a relator must show that the
trial court clearly abused its discretion, and that relator lacks an adequate remedy by
appeal. In re Dawson, 550 S.W.3d 625, 628 (Tex. 2018) (original proceeding) (per
curiam). A trial court clearly abuses its discretion if it reaches a decision so arbitrary
and unreasonable as to amount to a clear and prejudicial error of law, or if it clearly
fails to analyze the law correctly, or apply the law correctly to the facts. In re H.E.B.
Grocery Co., L.P., 492 S.W.3d 300, 302–03 (Tex. 2016) (orig. proceeding) (per
curiam); In re Cerberus Capital Mgmt., L.P., 164 S.W.3d 379, 382 (Tex. 2005) (orig.
proceeding) (per curiam).      Mandamus review is available for orders granting
petitions for presuit depositions because appeal is not an adequate remedy. In re

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Akzo Nobel Chem., Inc., 24 S.W.3d 919, 920 (Tex. App.—Beaumont 2000, orig.
proceeding).

                                       ANALYSIS

       In its petition, UBS raises the following two issues: (1) Dooley lacks standing
to request such discovery because Fleur is the owner of the accounts; and (2) the
claims for which discovery is sought are subject to compulsory arbitration. We
address the first issue because it is dispositive. We do not reach the second issue.

       Rule 202.1 provides for the taking of an oral deposition or deposition on
written questions in one of two following circumstances: (1) to perpetuate or obtain
a person’s own testimony or that of any other person for use in the anticipated suit;
or (2) to investigate a potential claim or suit. Tex. R. Civ. P. 202.1. Presuit
depositions are available only if the trial court finds that (1) allowing the petitioner
to take the requested deposition may prevent a failure or delay of justice in an
anticipated suit; or (2) the likely benefit of allowing the petitioner to take the
requested deposition to investigate a potential claim outweighs the burden or
expense of the procedure. Id. 202.4(a).

       A Rule 202 petition must “state the subject matter of the anticipated action, if
any, and the petitioner’s interest therein.” In re DePinho, 505 S.W.3d 621, 623 (Tex.
2016) (orig. proceeding) (per curiam) (quoting Tex. R. Civ. P. 202.2(e)). Presuit
discovery “is not an end within itself; rather, it is in aid of a suit which is anticipated
and ancillary to the anticipated suit.” In re Wolfe, 341 S.W.3d 932, 933 (Tex. 2011)
(orig. proceeding) (per curiam) (internal quotations marks omitted). To prevent an
end-run around discovery limitations that would govern the anticipated suit, Rule
202 restricts discovery in depositions to “the same as if the anticipated suit or
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potential claim had been filed.” Id. (quoting Tex. R. Civ. P. 202.5). Rule 202
depositions are not now and have never been intended for routine use. In re Jorden,
249 S.W.3d 416, 423 (Tex. 2008) (orig. proceeding).

      It is well-settled that the trial court must have subject-matter jurisdiction over
the anticipated action to properly order a presuit deposition. DePinho, 505 S.W.3d
at 623; In re City of Dallas, 501 S.W.3d 71, 73 (Tex. 2016) (orig. proceeding) (per
curiam).    This limitation on presuit discovery is due to a court’s inherent
jurisdictional limitations: “a court cannot grant relief when it lacks jurisdiction of
the subject matter,” so “[i]t would make no sense to insist that a court ordering
discovery to perpetuate testimony for a later-filed suit to be one . . . [without] subject-
matter jurisdiction.” DePinho, 505 S.W.3d at 623 (quoting In re Doe (Trooper), 444
S.W.3d 603, 607–08 (Tex. 2014)). “Indeed, allowing courts to authorize Rule 202
depositions for potential suits over which they lack jurisdiction would untether
presuit discovery from the suit it purports to be in aid of.” Id.

      “Standing is implicit in the concept of subject-matter jurisdiction, and subject-
matter jurisdiction is essential to the authority of a court to decide a case.” In re
Abbott, 601 S.W.3d 802, 807 (Tex. 2020) (orig. proceeding) (per curiam); see also
Farmers Tex. Cty. Mut. Ins. Co. v. Beasley, 598 S.W.3d 237, 240 (Tex. 2020) (stating
that standing is component of subject matter jurisdiction). Standing is specific to
each individual plaintiff and to each of the plaintiff’s individual claims. Abbott, 601
S.W.3d at 807. Standing requires a concrete injury to the plaintiff and a real
controversy between the parties that will be resolved by the court. Meyers v.
JDC/Firethorne, Ltd., 548 S.W.3d 477, 484 (Tex. 2018). Questions of standing are
reviewed de novo. Farmers Tex. Cty. Mut. Ins. Co., 598 S.W.3d at 240.

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      UBS maintains that the trial court did not have jurisdiction to grant Dooley’s
Rule 202 petition because Dooley does not have standing to bring the Rule 202
proceeding or, if suit is ultimately brought, to pursue the claims for which discovery
is sought. Specifically, UBS contends that the undisputed evidence shows that Fleur
Holdings owns the YES accounts and Dooley is merely the managing member of
Fleur Holdings, with no ownership interest in the accounts.

      A limited liability company is a separate entity from a member or manager of
the company. Sherman v. Boston, 486 S.W.3d 88, 94 (Tex. App.―Houston [14th
Dist.] 2016, pet. denied); Spates v. Office of Att’y Gen., Child Support Div., 485
S.W.3d 546, 550–51 (Tex. App.―Houston [14th Dist.] 2016, no pet.); Geis v.
Colina Del Rio, LP, 362 S.W.3d 100, 109 (Tex. App.―San Antonio 2011, pet.
denied). A member of a limited liability company does not have an interest in any
specific property the company owns. Tex. Bus. Orgs. Ann. § 101.106.

      A member of a limited liability company may be a party in an action brought
by or against the company action if the action is brought to enforce the member’s
right against or liability to the company. Tex. Bus. Orgs. Ann. § 101.113. Therefore,
a member of a limited liability company lacks standing to assert claims individually
when the cause of action belongs to the company. Siddiqui v. Fancy Bites, LLC, 504
S.W.3d 349, 360 (Tex. App.—Houston [14th Dist.] 2016, pet. denied); Sherman,
486 S.W.3d at 94.

      In the September 25, 2019 letter, Dooley’s counsel advised UBS that he had
been hired to represent Dooley in investigating UBS’s actions in managing Dooley’s
YES account and requested documents related to Dooley’s YES account. Dooley is

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named as the petitioner, and the petition repeatedly refers to Dooley’s YES
investment, even though Fleur Holdings owns the YES accounts.

      In her response to UBS’s petition for writ of mandamus, Dooley asserts that
the doctrine of misnomer is applicable here where Dooley was named as petitioner
instead of Fleur Holdings. “[A] ‘misnomer occurs when a party misnames itself or
another party, but the correct parties are involved.’” Exxon Mobil Corp. v. Rincones,
520 S.W.3d 572, 594 (Tex. 2017) (quoting In re Greater Houston Orthopaedic
Specialists, Inc., 295 S.W.3d 323, 325 (Tex. 2009) (orig. proceeding) (per curiam));
see also Cybiz, Inc. v. Gaskill, No. 14-16-00405-CV, 2017 WL 1015560, at *2 (Tex.
App.―Houston [14th Dist.] Mar. 14, 2017, no pet.) (mem. op.) (“A plaintiff
misnaming itself generally is a misnomer.”). Generally, courts allow parties to
correct a misnomer if it is not misleading. Exxon Mobil Corp., 520 S.W.3d at 594.

      This case does not involve a misnomer. A similar situation was addressed by
the San Antonio Court of Appeals. See Barrera v. Cherer, No. 04-13-00612-CV,
2014 WL 1713522 (Tex. App.―San Antonio Apr. 30, 2014, no pet.). (mem. op.).
In Barrera, the member of a limited liability company brought a forcible detainer
action in his own name even though the company owned the property. Id. at *1.
The trial court awarded the member possession of the property. Id. On appeal, the
defendants contended that the member lacked standing in the forcible detainer action
because the cause of action belonged to the company. Id. The member responded
that this was an issue of misnomer. Id. The court rejected the member’s misnomer
argument because the member did not have standing to assert claims individually
where the cause of action belonged solely to the company. Id. at *2.

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      Here, Dooley, as managing member, does not have individual standing to
maintain claims against UBS for actions it may or may not have taken with regard
to its management of the YES accounts owned by Fleur Holdings. Therefore there
has been no misnomer because Dooley has never been the correct party to request
the Rule 202 depositions.

      The trial court abused its discretion by granting Dooley’s petition for the Rule
202 depositions. UBS also does not have an adequate remedy by appeal. See Akzo
Nobel Chem., Inc., 24 S.W.3d at 920 (stating that mandamus review is available for
orders granting petition for presuit depositions because appeal is not adequate
remedy).

                                     CONCLUSION

      Having held that UBS has shown that the trial court abused its discretion and
UBS does not have an adequate remedy by appeal, we conditionally grant UBS’s
petition for writ of mandamus and direct the trial court to vacate its January 8, 2020
order granting Dooley’s request to take the presuit depositions of UBS’s employees.
The writ will issue only if the trial court fails to act in accordance with this opinion.
We also lift our stay entered on January 31, 2020.

                                         /s/       Ken Wise
                                                   Justice

Panel consists of Justices Wise, Jewell, and Poissant.

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