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Shah v. Remels

Court of Appeals of Texas, First District

July 23, 2019

PANKAJ SHAH, M.D., AND KRISHNA FINANCIAL, LTD., Appellants
v.
KEITH REMELS AND DOW, GOLUB, REMELS & GILBREATH, PLLC, Appellees

          On Appeal from the 152nd District Court Harris County, Texas Trial Court Case No. 2011-24016-A

          Panel consists of Chief Justice Radack and Justices Higley and Hightower.

          MEMORANDUM OPINION

          RICHARD HIGHTOWER, JUSTICE

         Appellant Pankaj Shah, M.D., and his entity, appellant Krishna Financial, Ltd. (collectively, "Shah"), sued appellees Keith Remels and Dow, Golub, Remels & Gilbreath, PLLC, [1] alleging fraud, professional negligence, and numerous other causes of action. Shah alleged that Remels, while acting as his attorney, induced him to rescind his purchase of ownership units in a hospital partnership under an unreasonably abbreviated deadline and on terms that artificially undervalued the units.

         Remels successfully moved for summary judgment on the affirmative defense of limitations, seeking dismissal of all of Shah's claims and contending that they are actually professional-negligence causes of action and that a June 2011 email chain among the interested parties conclusively establishes that limitations on Shah's claims began to run on June 17, 2011. Shah, on the other hand, alleged that the discovery rule applies to modify the usual operation of the statute of limitations and Remels bore the burden of conclusively negating the application of the discovery rule. Shah argued that the email chain-in which Shah and Remels, among others, discussed details of the rescission of the ownership units in the partnership-did not conclusively establish that Shah knew or through the exercise of reasonable care and diligence should have discovered, the nature of his injury and the likelihood that his injury was caused by Remels's wrongful acts. See Pirtle v. Kahn, 177 S.W.3d 567, 571 (Tex. App.-Houston [1st Dist.] 2005, pet. denied). Specifically, Shah asserts that nothing in the email chain referenced the rescission offer's valuation assumptions for the units or any of the circumstances that Shah alleges later showed the units to be significantly more valuable than the rescission offer represented.

         In his sole issue on appeal, Shah contends that the trial court erred in granting Remels's motion for summary judgment based on his limitations affirmative defense because Remels did not carry his burden to negate the discovery rule. Because we conclude that the email chain's contents failed to conclusively establish that Shah knew or "through the exercise of reasonable care and diligence should have discovered, the nature of his injury and the likelihood that it was caused by the wrongful acts of" Remels by the last date of the email chain in June 2011, we hold that the trial court erred in granting summary judgment in Remels's favor. We therefore reverse the part of the trial court's summary judgment dismissing all of Shah's claims against Remels on limitations grounds and remand the case for further proceedings consistent with this opinion.

         Background

         The partnership arrangement underlying Shah's claims against Remels was involved in this court's two prior opinions of Patel v. St. Luke's Sugar Land Partnership, L.L.P., 445 S.W.3d 413 (Tex. App.-Houston [1st Dist.] 2013, pet. denied), and Sonwalkar v. St. Luke's Sugar Land Partnership, L.L.P., 394 S.W.3d 186 (Tex. App.-Houston [1st Dist.] 2012, no pet.).

         I. The Partnership and the offer to rescind Class A Partnership units

         Shah was a physician-partner in "St. Luke's Sugar Land Partnership, L.L.P., which was created to own and operate a hospital in Sugar Land." See Patel, 445 S.W.3d at 414; accord Sonwalkar, 394 S.W.3d at 189. Ownership in the Partnership was divided into two classes of partnership units. Class A units were reserved for physicians, and Class B units were reserved for the Partnership's managing partner, St. Luke's Community Development Corporation-Sugar Land, which is a wholly owned subsidiary of the St. Luke's Episcopal Health System Corporation. Patel, 445 S.W.3d at 414-15; Sonwalkar, 394 S.W.3d at 189.

         Many of the Partnership's operations and activities were to be governed by a Governing Board. Patel, 445 S.W.3d at 415. Although certain decisions could be made for the Partnership by the holders of an outright majority of Partnership units, an affirmative vote of Board members controlling greater than 50% of the "Voting Interest" was required for all Board decisions. Patel, 445 S.W.3d at 415; Sonwalkar, 394 S.W.3d at 190-91. Beyond that, certain major actions, including making capital calls, could be taken only by an affirmative vote of 75% of the Voting Interest. Patel, 445 S.W.3d at 415; Sonwalkar, 394 S.W.3d at 191. The Class A physician Board members were to "collectively control forty-nine (49%) of the Voting Interest." Patel, 445 S.W.3d at 415; Sonwalkar, 394 S.W.3d at 191.

         In April 2011, Dr. Patel, another physician-partner and Class A unit-holder, sued the Partnership. He alleged that he was not receiving the "healthy returns" that he had been promised when he bought his units. Patel, 445 S.W.3d at 415; Sonwalkar, 394 S.W.3d at 191. Shortly after that lawsuit began, the Partnership sent a "Rescission Offer" to all Class A unit-holders, purportedly to mitigate the risk that they might, like Patel, bring claims against the Partnership. Sonwalkar, 394 S.W.3d at 191. The letter accompanying the rescission offer provided each recipient thirty days to choose whether to rescind his or her purchase of Class A units. Id. A rescinding unit-holder would be paid his or her original purchase price plus six percent interest from the date of purchase. Id. But, Shah asserts, Remels and the Partnership represented that if a unit-holder did not agree to rescind, then the remaining Class B-related Voting Interest on the Board would have the power to make capital calls irrespective of any dissenting vote by non-rescinding Class A Board members. This could lead to a forced dilution of the Class A voting power, which would even further solidify the Class A Board members' inability to resist Class B unilateral control. See Patel, 445 S.W.3d at 415; Sonwalkar, 394 S.W.3d at 191.

         II. The June 2011 email chain between Remels, Shah, and others

         Remels was an attorney for the Partnership, and he emailed the rescission offer to Shah on June 10, 2011, starting the email chain that is central to this appeal. On June 16, Shah responded to Remels and included other Board members and St. Luke's representatives on the email. Shah told them that, earlier that day, the Securities Group had contacted him. The Securities Group had helped the Partnership initially sell Class A units to physicians. The Securities Group told Shah that he had until the next day, June 17, and not actually thirty days from June 10, to accept the rescission offer, because Texas securities law imposes a five-year statute of repose on a securities purchaser's ability to rescind the purchase. In his email, Shah asked Remels to "clarify" when the actual deadline to accept the rescission offer was and asked for his answer "ASAP."

         Remels then called Shah, and they talked. Remels summarized their call in a reply in the email chain, stating: "I advised you that I am not your attorney and that you should seek independent counsel regarding your rights under the offer of rescission" and "any consequence for delaying" in accepting the offer.

         Shah emailed back. He reasserted his understanding that Remels was also Shah's attorney, called Remels "the Class A partner legal representative," and demanded from him "a more clear and defined answer than what you have given me so far, because I am a Class A partner." Shah explained that he was confused about the deadline for accepting the rescission offer, referring to Remels's June 10 email transmitting the offer as "say[ing] in black and white that we have 30 days, till July 11, 2011 to accept. I intended to use the full amount of time so I may have a proper attorney review of the rescis[s]ion offer. I believe you are familiar with my attorneys."

         Remels emailed a reply, reiterating that he did not represent Shah and represented the Partnership only. Shah then emailed in reply:

Your threats about "consequences," your refusal to give the proper specific date, your refusal to shed any light on the 5[-]year securities statute of limitations, and your misrepresentation about our agreement to give a release to the partners[] speaks volumes about who you represent, and your failure to fulfill your responsibility to the partnership, which includes me.

         A representative of St. Luke's, also on the email chain, then emailed with his view that Remels did not represent Shah and that Shah should seek his own attorney regarding the rescission offer.

         Shah emailed again in reply and referred once more to the rescission offer's thirty-day period "so I may have a proper and thorough attorney review of the rescission offer. Mr. Remels is very familiar with my attorneys from their prior dealings, and perhaps that is why he has pulled this bait and switch."

Shah summed up his position in the email chain:
Based on your actions and threats, I have no choice but to accept the rescission under duress, but am noting the following for the record:
1- I am accepting this rescission as a result of your non-responsiveness and threats[.]
2- I do not believe that Mr. Remels who is also supposed to be representing my interests as a board member and a part of the partnership has fulfilled his fiduciary ...

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