United States District Court, E.D. Texas, Sherman Division
FRANKLIN D. AZAR & ASSOCIATES, P.C., Plaintiff,
JERRY L. BRYANT, ET AL., Defendants.
MEMORANDUM ADOPTING REPORT AND RECOMMENDATION OF
UNITED STATES MAGISTRATE JUDGE
L. MAZZANT UNITED STATES DISTRICT JUDGE.
for consideration the report of the United States Magistrate
Judge in this action, this matter having been heretofore
referred to the Magistrate Judge pursuant to 28 U.S.C. §
636. On July 30, 2019, the report of the Magistrate Judge
(the “Report”) (Dkt. #327) was entered containing
proposed findings of fact and recommendations that Defendant
Richard Schwartz and Associates, P.A.'s
(“Schwartz”) Motion for Summary Judgment (Dkt.
#184) and Defendant Foy & Associates, P.C.'s
(“Foy”) First Amended Motion for Summary Judgment
(Dkt. #217) be denied.
Franklin D. Azar & Associates, P.C.
(“Plaintiff”) filed an objection to the Report
(Dkt. #343), and Defendants Foy and Schwartz (together, the
“Law Firm Defendants”) filed a response (Dkt.
#354). The Court has made a de novo review of the
objections (the “Objections”) raised by Plaintiff
and is of the opinion that the findings and conclusions of
the Magistrate Judge are correct and the Objections are
without merit as to the ultimate findings of the Magistrate
filed suit seeking to collect an underlying judgment issued
by the M-298th Judicial District Court of Dallas County,
Texas, on April 3, 2012 (the “Judgment”).
See Dkt. #175 at 6. Plaintiff alleges the Law Firm
Defendants aided and abetted Defendant Jerry Bryant's
breach of fiduciary duty to PI Advertising by assisting Jerry
Bryant in diverting income from PI Advertising to other
entities, which would have otherwise been collectible in
connection with the Judgment. See id. at 39-40.
Firm Defendants each filed a Motion for Summary Judgment
(Dkts. #184, #217) (together, the “Motions for Summary
Judgment”). In the Report, the Magistrate Judge
recommended the Motions for Summary Judgment be denied
because “[m]uch of the evidence attached to the Motions
and the subsequent responses takes the form of affidavits
submitted by interested parties, ” and therefore,
“determination of what Foy and Schwartz knew
necessarily requires a credibility determination as to the
honesty and accuracy of each declarant[; t]he Court must
refrain from making credibility determinations.”
See Dkt. #327 at 7-9 (citing EEOC v. LHC Group,
Inc., 773 F.3d 688, 694 (5th Cir. 2014)). Neither
Schwartz nor Foy filed objections to the Report. Further,
“Plaintiff does not object to the Magistrate
Judge's ultimate recommendation that the Law Firm
Defendants' motions for summary judgment should be
denied.” Dkt. #343 at 1.
sole objection is to the Report's finding “relating
to the quantum of knowledge required to establish the Law
Firm Defendants aided and abetted a breach of fiduciary
duty.” See Dkt. #343 at 1-2. Plaintiff argues
that in order to prevail on its claim for aiding and abetting
breach of fiduciary duty against the Law Firm Defendants, it
need not prove the Law Firm Defendants acted with actual
knowledge, merely “awareness.” See id.
review, the Court finds no error in the Report's
conclusions. As stated in the Report, to establish the claim
for knowingly participating in a breach of fiduciary duty
under Texas law, “a plaintiff must assert: (1) the
existence of a fiduciary relationship; (2) that the third
party knew of the fiduciary relationship; and (3) that the
third party was aware that it was participating in the breach
of that fiduciary relationship.” See Dkt. #327
at 4. Further, the Court finds no error in the Report's
holding that in order to establish the third element,
Plaintiff must prove that the Law Firm Defendants had
“actual awareness, at the time of the conduct”
of: (1) the fiduciary duty owed by Jerry Bryant to PI
Advertising; and (2) of Jerry Bryant's breach of that
fiduciary duty. See id. at 6 (citing Seven Seas
Petroleum, Inc. v. CIBC World Markets Corp., 2013 WL
3803966, at *14 (S.D. Tex. July 19, 2013); JSC
Neftegas-Impex v. Citibank, N.A., 365 S.W.3d 387, 411
(Tex. App.- Houston [1st Dist.] 2011, review denied));
see also Milligan, Tr. For Westech Capital Corp. v.
Salamone, 2019 WL 1208999, at *9 (W.D. Tex. Mar. 14,
2019) (“To have known that it was participating in
Halder and Salamone's breach of fiduciary duty, Greenberg
would have to have known that their actions were fraudulent,
taken in bad faith, or constituted self-dealing.”);
Joe N. Pratt Ins. v. Doane, 2009 WL 3157335, at *2
(S.D. Tex. Sep. 25, 2009) (Liability under derivative theory
of torts requires knowledge by the third party that the
primary defendant was engaging in tortious or fraudulent
conduct.) (citing Meadows, 492 F.3d at 639).
Court further finds no error in the Magistrate Judge's
ultimate conclusion that the credibility determinations
raised by the Motions for Summary Judgment “are
unsuitable for summary judgment.” See Dkt.
#327 at 10. Plaintiff's objection is
foregoing reasons, the Court finds no error in the Magistrate
Judge's recommendations, and Plaintiffs Objection is
IS THEREFORE ORDERED that Defendant Richard Schwartz
and Associates, P.A.'s (“Schwartz”) Motion