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 ...