United States District Court, W.D. Texas, Austin Division
GREGORY S. MILLIGAN, Chapter 7 Trustee for Westech Capital Corporation and on behalf of Tejas Securities Group, Inc., Plaintiff/Appellant,
GREG SALAMONE; GREENBERG TRAURIG, LLP; and ROBERT W. HALDER; Defendant/Appellee.
PITMAN UNITED STATES DISTRICT JUDGE.
the Court is Appellee Greenberg Traurig's
(“Greenberg”) Motion for Rehearing Pursuant to
Federal Rule of Bankruptcy Procedure 8022. (Dkt. 20).
Greenberg seeks rehearing of this Court's order affirming
in part and vacating in part the Bankruptcy Court's order
dismissing a set of claims against Greenberg pursuant to
Federal Rule of Civil Procedure 12(b)(6). (Dkt. 18). In this
Court's order, it found that the Appellant Gregory
Milligan (“Milligan”) had stated a claim against
Greenberg for knowingly participating in another's breach
of fiduciary duty under Texas law. (Id. at 14-17).
motion for rehearing, Greenberg argues for the first time
that Milligan's knowing-participation claim is no more
than an aiding-and-abetting claim, and the Fifth Circuit has
held that a federal court sitting in diversity may not
recognize an aiding-and-abetting claim under Texas law.
(Mot., Dkt. 20, at 5-6 (citing In re DePuy Orthopaedics,
Inc., Pinnacle Hip Implant Prod. Liab. Litig., 888 F.3d
753, 782 (5th Cir. 2018)). New arguments are not properly
presented in a motion for rehearing under Rule 8022.
Sharif, 09-BK-05868, 2017 WL 4310538, at *6
(N.D.Ill. Sept. 28, 2017); In re Soundview Elite
Ltd., 14-CV-7666 JPO, 2015 WL 1642986, at *1 (S.D.N.Y.
Apr. 13, 2015), aff'd, 646 Fed.Appx. 1 (2d Cir.
2016). Nonetheless, the rule does permit a Court to
“restore the case to the calendar for reargument or
resubmission.” Fed.R.Bankr.P. 8022(a)(4)(B). In light
of DePuy, the Court found that reargument was
appropriate and ordered the parties to file responsive
briefing to Greenberg's motion. (Order, Dkt. 21). The
parties then timely filed responsive briefs. (Dkts. 22, 23).
Having considered those briefs, along with Greenberg's
motion, the Court finds that the motion should be denied.
true that in DePuy, the Fifth Circuit found that the
district court in that case “exceeded its circumscribed
institutional role” by recognizing a cause of action
for aiding-and-abetting under Texas law. 888 F.3d at 781. In
that decision, the court held that the defendant was entitled
to judgment as a matter of law because “no such
claim” as aiding-and-abetting “exists in
Texas.” Id. at 782.
reaching that conclusion, the court expressly distinguished
an aiding-and-abetting claim under Texas law from a claim
seeking to hold a joint tortfeasor liable for knowingly
participating in another's breach of fiduciary duty.
Id. (quoting Kinzbach Tool Co. v.
Corbett-Wallace Corp., 160 S.W.2d 509, 514 (Tex. 1942))
(describing Kinzbach Tool as “applying
‘settled . . . law of [Texas] that where a third party
knowingly participates in the breach of duty of a
fiduciary, such third party becomes a joint
tortfeasor'”) (emphasis and alteration in
DePuy). It is this latter claim- knowing
participation in another's breach of fiduciary duty-that
Milligan asserts against Greenberg, not a generalized
aiding-and-abetting claim. (3d Am. Compl., Dkt. 12-3, at 55).
And it is this latter claim that the Court found Milligan to
have plausibly stated against Greenberg, not a generalized
aiding-and-abetting claim. (Order, Dkt. 18, at 14-17). The
Court did not cite Kinzbach Tool to extend that
case's “settled . . . law” to support the
existence of an unsettled aiding-and-abetting cause of
action; rather, it cited Kinzbach Tool in
recognition of the knowing-participation cause of action
whose existence is in fact settled law. (Id. at 15).
Indeed, Texas appellate courts have routinely recognized the
existence of a cause of action for knowing participation in
the breach of fiduciary duty. See Westergren v.
Jennings, 441 S.W.3d 670, 680 (Tex. App.-Houston [1st
Dist.] 2014, no pet.) (citing Kinzbach Tool, 160
S.W.2d at 514); Wooters v. Unitech Int'l, Inc.,
513 S.W.3d 754, 763 (Tex. App.-Houston [1st Dist.] 2017, pet.
denied) (“Texas has recognized a cause of action for
conspiracy to breach a fiduciary duty in transactions in
which a third party knowingly participates in an
employee's breach of fiduciary duty during his employment
and the third party improperly benefits from it.”)
(citing Kinzbach Tool, 160 S.W.2d at 514);
Darocy v. Abildtrup, 345 S.W.3d 129, 138 (Tex.
App.-Dallas 2011, no pet.) (“When a defendant knowingly
participates in the breach of a fiduciary duty, he becomes a
joint tortfeasor and is liable as such.”) (citing
Kinzbach Tool, 160 S.W.2d at 514).
the Fifth Circuit has repeatedly recognized the existence of
a cause of action for knowing participation in the breach of
a fiduciary duty. D'Onofrio v. Vacation Publications,
Inc., 888 F.3d 197, 216 (5th Cir. 2018) (reciting the
elements of such a claim) (citing Kinzbach Tool, 160
S.W.2d at 514); Hunn v. Dan Wilson Homes, Inc., 789
F.3d 573, 581 (5th Cir. 2015) (“[W]here a third party
knowingly participates in the breach of duty of a fiduciary,
such third party becomes a joint tortfeasor with the
fiduciary and is liable as such.”) (citing Kinzbach
Tool, 160 S.W.2d at 514); Meadows v. Hartford Life
Ins. Co., 492 F.3d 634, 639 (5th Cir. 2007) (reciting
the elements of such a claim) (citing Kinzbach Tool,
160 S.W.2d at 514). It is these cases, not Depuy,
that control here. DePuy's discussion of
aiding-and-abetting claims does not mention these cases, much
less purport to overrule them. In re DePuy, 888 F.3d
at 781-82. It is clear from DePuy's
express distinction between an aiding-and-abetting claim and
the knowing-participation claim recognized in Kinzbach
Tool that, contrary to Greenberg's position, the two
claims are not interchangeable, and DePuy's
pronouncement that one does not exist says nothing about the
existence of the other. And because Greenberg's motion
for rehearing rests on the application of DePuy to
Milligan's knowing-participation claim, that motion must
IT IS ORDERED that Greenberg's motion
for rehearing, (Dkt. 20), is DENIED.
 Even if the panel in DePuy
had purported to overrule the set of Fifth Circuit decisions
acknowledging the existence of a knowing-participation claim
under Texas law, the rule of orderliness would preclude it
from doing so. See Gahagan v. United States Citizenship
& Immigration Servs., 911 F.3d 298, 302 (5th Cir.
2018) (“[T]hree-judge panels . . . abide by a prior
Fifth Circuit decision until the decision is overruled,
expressly or implicitly, by either ...