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By: Robert Chadwick
In Texas state courts, legal counsel are generally asked to draft proposed orders and judgments for execution by district and county court judges. A February 10, 2023 per curiam opinion by the Supreme Court of Texas in Patel v. Nations Renovations, LLC, is a cautionary tale of why it is important for legal counsel to be precise in drafting such proposed orders and judgments.
After a favorable arbitration award against Huntley Construction, Nations Renovations, LLC moved to enforce the award in state district court. In furtherance of its effort to collect the award, Nations added new defendants in the same suit with alter ego and fraudulent transfer allegations.
In support of its motion to enforce the arbitration award, Nations’ legal counsel drafted and submitted a proposed order to the district court. This proposed order erroneously stated it was “a final judgment and appealable.” The proposed order also stated that “all relief not granted herein is denied”, and that Nations had “all writs and processes to aid in the execution of this judgment.” The district court executed the proposed order as drafted.
It was only a matter of time before the problem created by the erroneous order came to light. After all, Texas law provides that a final judgment necessarily resolves all claims for all parties to a suit. Effectively, the language of the order made it determinative not only as to the arbitration award, but also as to the defendants added to the suit. Unfortunately for Nations, that time came approximately a year and a half later.
Even after such an extended time, Nations still moved the district court to modify the order to clarify that it was not truly a “final judgment” but was merely interlocutory. Nations claimed the order was intended to be final as to Huntley, but not the other defendants from which it was still ostensibly attempting to collect the award. The district court granted the motion.
Upon a writ of mandamus, however, the Supreme Court of Texas found the judgment was final as to all parties and all claims and started the clock for when the district court lost its plenary power over the suit – its jurisdiction to revise the judgment. By the time Nations moved to modify the judgment, this plenary power had long passed. Accordingly, the Supreme Court held the district court’s order modifying the judgment to be void.
In explaining its decision, the Supreme Court opined:
“A judgment cannot be ‘partially final’ or ‘sometimes final and sometimes not.’ Chaos would follow from such a rule, in which a supposed final judgment in a single case turns out, years later, to have been interlocutory all along. That would be the consequence if the judgment was final as to some parties or some claims. The judgment is either final or it is not. [emphasis in original].”
The Court also explained: “If the order contains a ‘clear and unequivocal’ finality phrase disposing of the entire case, the order is final, and the failure to actually dispose of all claims renders the order erroneous but not interlocutory.”
Nations’ efforts to collect a successful arbitration award ultimately fell victim to an unforced error. The lesson of Patel is a plain one; careful attention must be paid by legal counsel to the language of proposed orders and judgments submitted for signature by Texas judges.
For more information on this topic, contact Robert Chadwick or your local FMG attorney.