Preview
Filed
13 April 1 A9:00
Gary Fitzsimmons
District Clerk
Dallas District
CAUSE NO. DC-13-00571
JANE DOE AND JOHN DOE, § IN THE DISTRICT COURT OF
§
Plaintiffs, §
§
vs. § DALLAS COUNTY, TEXAS
§
DEBORAH HUG, et. al §
§
Defendants. § 68th JUDICIAL DISTRICT
DEFENDANT DEBORAH HUG’S TRCP 166a (i)
NO-EVIDENCE MOTION FOR PARTIAL SUMMARY JUDGMENT
TO THE HONORABLE JUDGE OF SAID COURT:
COMES NOW, Deborah Hug (Hug) and pursuant to TRCP 166a (i) files this her No-
Evidence Motion for Partial Summary Judgment and would show as follows:
I. Statement of Facts:
1. On August 25, 2010 the Plaintiffs in this case, John and Rebecca Budd, filed a lawsuit
against both Adoption Access, Inc. and Deborah Hug individually. A copy of that complaint is
attached hereto as Exhibit 1. In their original complaint the Plaintiff pled the following causes
of action against Hug:
a. Count II: Negligence/Negligent Supervision/Negligent Hiring
b. Count III: Negligence Per Se
c. VI. Alter Ego.
2. The Alter Ego claim against Hug stated as follows:
“55. Upon information and belief there is such a unity between Hug and AA that the
separateness of AA and Hug has ceased to exist such that holding only AA liable for
Plaintiff’s damages would result in an injustice.
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56. Upon information and belief
- AA is organized and operated as mere tool or business conduit of Hug;
- Hug used the corporate fiction to evade existing legal obligations of AA;
- Hug used the corporate fiction as a sham to perpetuate a fraud;
- Hug inadequately capitalized AA with the effect of creating an injustice.”
3. Thereafter, Plaintiff proceeded to litigate the case including conducting extensive
discovery. In its requests for production served on October 25, 2010 [Exhibit 5] Plaintiffs made
inquiry into and requested documents for the following:
- Deborah Hug’s calendar for 2007-2008
- All lawsuits of AA in the last ten years
- All audited and unaudited and unaudited financial statement
- All articles of incorporation for AA
- All By Laws of AA
- All minutes of shareholders meetings of AA
- All minutes of Board of Directors meetings
All of these requests go directly to the issue of whether or not AA was a properly formed and
operating corporation or was in fact nothing but the alter ego of Deborah Hug. In addition,
Plaintiffs had a virtually limitless opportunity to request any documents of Hug or AA relating to
the claim that AA was a sham or that there was no distinction between her and AA. Plaintiffs
did not do so. If Plaintiffs now contend, “we did not have QuickBooks,” or we did not have any
specific document, a review of Exhibit 5 reveals they did not have it because they did not ask for
it despite a clear claim of alter ego that would have supported a complete investigation into the
financial affairs of the Defendants, both Adoption Access and Hug. (See In Re Williams,328
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S.W. 3d 103 (Tex. App.—Edinburg, 2010) where the Plaintiffs properly asserted an alter ego
claim thus allowing discovery as to personal assets). If Plaintiffs contend they asked but it was
not produced, there is no record in the court file of Cause No. 10-10653 of any motion to compel
filed between August 25, 2010 and October 1, 2012.
4. In addition, Plaintiffs also responded to Defendants’ discovery requests. On December 2,
2010 Plaintiffs responded to Defendants’ Requests for Disclosure as to their legal theories and
responded in part as follows:
(vii) Alter Ego:
Upon information and belief there is such a unity between Hug and AA that the
separateness of AA and Hug has ceased to exist such that holding only AA liable for
Plaintiff’s damages would result in an injustice. Upon information and belief:
- AA I organized and operated as mere tool or business conduit of Hug;
- Hug used the corporate fiction to evade existing legal obligations of AA;
- Hug used the corporate fiction as a sham to perpetuate a fraud;
- Hug inadequately capitalized AA with the effect of creating an injustice.
Thereafter, Plaintiffs amended their disclosure responses repeatedly and on April 5, 2012
Plaintiffs filed their Third Amended Responses to Defendants’ Request for Disclosure [Exhibit
7]. In every amendment, including the April 5, 2012 amendment the identical alter ego theory
remained part of their case [see Exhibit 7, pp 5]. The last amendment came after discovery was
complete, the Plaintiffs had deposed Deborah Hug, pleadings were closed and trial was a month
away.
5. Deborah Hug was deposed both in her corporate capacity and her individual capacity and
separate notices were provided for her in both capacities [Exhibit 6]. Her deposition took place
on April 4, 2011 at the offices of attorney Dave Cole. In that deposition the Plaintiffs made it
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clear that Hug was being deposed as both in individual and a corporate representative. At that
time the alter ego basis of recovery was still a part of Plaintiffs’ live pleadings and under the
Texas Rules of Civil Procedure allowed the Plaintiff to inquire into any area reasonably
calculated to lead to the discovery of admissible evidence. Plaintiffs served Adoption Access
with a list of areas of inquiry and yet despite the opportunity to inquire as to any area appropriate
under an alter ego claim, the only area they inquired into was “corporate structure and
governance.” After be explicit that Hug was being deposed in her individual capacity, the
Plaintiff’s inquired about her travel to and form California and the way it was expensed. Again,
with a pending alter ego claim every area of inquiry now being alleged [Exhibit 8] was equally
accessible at that time. After almost 18 months to conduct discovery and having taken Hug’s
deposition in her personal capacity, the Plaintiffs continued to assert their alter ego claim and did
so even after the deadline for amend pleadings had passed.
6. On or about April 3, 2012, Defendants filed their Motion for Summary Judgment seeking
to have all of Plaintiffs’ claims dismissed as a matter of law. Among the claims it sought to
dismiss was the Plaintiffs’ alter ego claim. The Defendant would ask the Court to take judicial
notice of Defendants’ Motion for Summary Judgment. Without seeking leave of court and over
a month past the deadline for amending pleadings, on April 16, 2012 the Plaintiffs filed their
First Amended Complaint. A copy of that complaint is attached hereto as Exhibit 2. At the time
the amendment was filed trial was set for May 8, 2012. Among other things, the Plaintiffs
completely dropped their alter ego claim, yet continued to pursue Hug individually. Defendants
supplemented their motion to reflect the fact that the alter ego claim had been dropped.
7. Ultimately the May 8, 2012 setting was continued and on May 7, 2012 Plaintiffs filed
their Second Amended Complaint a copy of which is attached hereto as Exhibit 3. This would
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be the pleading upon which the case would be tried on October 1, 2012. Absent from the
Plaintiffs’ final complaint was any alter ego claim, yet they continued to pursue Hug individually
on claims of negligence, fraud, and fraud in the inducement. As the Court is aware, the case was
tried to completion before a jury on all claims and the jury returned a verdict against Adoption
Access, Inc. Despite factual findings against Hug on three counts, the jury found no monetary
damage attributable to Hug and the judgment, signed on October 28, 2012, makes it clear that the
Plaintiffs “take nothing against Deborah Hug.”
8. On or about January 16, 2013 the Plaintiffs filed this case against Deborah Hug. There
was only one count and it read as follows:
“15. Upon information and belief there is such a unity between Hug and AA that the
separateness of AA and Hug has ceased to exist such that holding only AA liable for
Plaintiff’s damages set forth in the final judgment would result in an injustice.
16. Upon information and belief
- AA I organized and operated as a mere tool or business conduit of Hug;
- Hug used the corporate fiction to evade existing legal obligations of AA;
- Hug used the corporate fiction as a sham to perpetuate a fraud;
- Hug inadequately capitalized AA with the effect of creating an injustice.”
In every respect except the phrase “set forth in the final judgment” this claim is the identical
claim filed on August 25, 2012 and maintained by the Plaintiff for almost 18 months. During
that time Plaintiffs performed discovery with alter ego as a live claim and had the opportunity to
perform even more extensive discovery. Hug was deposed on the claim and in the face of
Defendants’ motion for summary judgment the claim was dropped.
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9. On February 7, 2013 Plaintiffs’ amended their complaint [Exhibit 4] to add claims under
Tex. Bus. Comm. Code §24.001, but retained the alter ego claim which is now Count II. In
every respect it is identical to Count I in the January 16, 2013 Original Complaint. It is as to the
Count of Alter Ego that Defendant Hug seeks summary judgment.
II. Summary of Motion
10. It is Defendant’s contention that regardless of the facts upon which the Plaintiffs based
their first claim of alter ego in 2010 and their second claim for alter ego in 2013, the causes of
action are identical and as such alter ego should have been litigated in Cause No. 10-10653 and
was not. The res judicata test does not ask whether the Plaintiff has new facts or has documents
that it did not have in the prior suit. It asks the simple question: could have or should have the
claim now being asserted been litigated in the first case. If the answer is “yes” the claim is
barred. Plaintiff pled an alter ego claim and was entitled to ask the exact same questions then that
it seeks to ask now in terms of discovery to support its claims. The reality is that despite the
opportunity to do so, the Plaintiff did not have certain documents they now have because they
did not request them, or if they requested them and did not receive them, they did not press the
issue. Plaintiff had every opportunity to litigate and conduct discovery on the alter ego claim
and simply failed to diligently pursue the claim. Thereafter they either non-suited or abandoned
their alter ego claim in Cause No. 10-10653 and once a final judgment was rendered in that suit,
res judicata precludes the re-litigation of the alter ego claim.
III. Summary Judgment Evidence
11. The Defendant relies on the following summary judgment evidence:
Exhibit 1: August 25, 2010 Plaintiff’s Original Complaint Cause No. 10-10653 in the 68th
Judicial District Court of Dallas County.
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Exhibit 2: April 16, 2012 Plaintiff’s First Amended Complaint Cause No. 10-10653 in the
68th Judicial District Court of Dallas County.
Exhibit 3: May 7, 2012 Plaintiff’s Second Amended Complaint Cause No. 10-10653 in the
68th Judicial District Court of Dallas County.
Exhibit 4: February 7, 2012 Plaintiff’s Original Complaint Cause No. 13-10571 in the 68th
Judicial District Court of Dallas County.
Exhibit 5: Plaintiff’s Request for Production Cause No. 10-10653 in the 68th Judicial District
Court of Dallas County.
Exhibit 6: Excerpts and exhibits from Plaintiffs’ deposition of Adoption Access, Inc. and
Deborah Hug Cause No. 10-10653 in the 68th Judicial District Court of Dallas County.
Exhibit 7: Plaintiffs’ Third Amended Responses to Request for Disclosures in Cause No. 10-
10653 in the 68th Judicial District Court of Dallas County.
Exhibit 8: Requests for Production propounded to Defendant Deborah Hug in Cause No. 13-
0571 in the 68th Judicial District Court of Dallas County.
All of the Defendant’s evidence is either a pleading in either Cause No. 10-10653 or Cause No.
13-00571 [Exhibits 1-4] both of which are cases currently pending in this very Court or discover
conducted in both cases. The Court can take judicial notice of pleadings pursuant to TRE 201
(b-d) because the pleadings and their contents are generally known within the territorial
jurisdiction of the trial court and are (2) capable of accurate and ready determination by resort to
sources whose accuracy cannot reasonably be questioned, in this instance the trial court files.
Movant requests the Court take judicial notice of Exhibits 1-4. As for the discovery propounded
or responded to in either case [Exhibit 5-8 ] those documents are easily authenticated. [see
Mark Weitz Affidavit attached hereto].
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IV. Argument and Authorities
A. Standard of Review:
12. TRCP 166a (i) provides:
No-Evidence Motion. After adequate time for discovery, a party without presenting
summary judgment evidence may move for summary judgment on the ground that there
is no evidence of one or more essential elements of a claim or defense on which an
adverse party would have the burden of proof at trial. The motion must state the elements
as to which there is no evidence. The court must grant the motion unless the respondent
produces summary judgment evidence raising a genuine issue of material fact.
It is Defendant’s position that as to this issue no discovery is required because the resolution is
based on the prior and present pleadings and the discovery requests in the two suits. Factual
discovery as to whether Defendant is or is not the alter ego of the corporation, or visa versa, is
unnecessary and irrelevant to the issue here of whether the Plaintiff can even bring the claim in
the second suit.
13. A no-evidence summary judgment is essentially a pretrial motion for a directed verdict.
Therefore, courts apply the same legal sufficiency standard in reviewing a no-evidence summary
judgment as they apply in reviewing a directed verdict. King Ranch, Inc. v. Chapman, 118
S.W.3d 742, 750-51 (Tex. 2003); Wal-Mart Stores, Inc. v. Rodriguez, 92 S.W.3d 502, 506 (Tex.
2002). The test for legal sufficiency is "whether the evidence at trial would enable reasonable
and fair-minded people to reach the verdict under review." City of Keller v. Wilson, 168 S.W.3d
802, 827 (Tex. 2005). A Court must determine whether the non-movant produced any evidence
of probative force to raise a fact issue on the material questions presented. Rodriguez, 92 S.W.3d
at 506; Woodruff v. Wright, 51 S.W.3d 727, 734 (Tex. App.--Texarkana 2001, pet. denied).
While the movant need not present evidence of its own, it is not precluded from doing so.
14. It is well settled that a trial court cannot grant a summary judgment motion on grounds
not presented in the motion. Brewer & Pritchard, P.C., 73 S.W.3d at 204; Science Spectrum, Inc.
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v. Martinez, 941 S.W.2d 910, 912 (Tex. 1997). The no-evidence summary judgment rule
similarly requires that the moving party identify the grounds for the motion. In this case the
grounds for the non-evidence summary judgment is that the Plaintiff cannot produce even a
scintilla of evidence that the alter ego claim brought by it and pursued for 17 months in the first
lawsuit, is not res judicata to that same claim in the present lawsuit.
B. Res Judicata: General Principles:
15. "Res judicata" is also known as claim preclusion. Barr v. Resolution Trust Corp., 837
S.W.2d 627, 628 (Tex. 1992). Claim preclusion, or traditional res judicata, precludes re-litigation
of claims that have been finally adjudicated, or that arise out of the same subject matter and
could have been litigated in the prior action. Amstadt v. U.S. Brass, 919 S.W.2d 644, 652 (Tex.
1996). It requires proof of: (1) a prior final judgment on the merits by a court of competent
jurisdiction, (2) an identity of parties or those in privity with them, and (3) a second action based
on the same claims as were raised or could have been raised in the first action. Id. Texas follows
the transactional approach to res judicata barring claims arising out of the transaction or
occurrence that is the subject matter of the first suit. State & Cnty. Mut. Fire Ins. Co. v. Miller,
52 S.W.3d 693, 696 (Tex. 2001). As the Texas Supreme Court has explained, “[m]odern rules of
procedure obviate the need to give parties two bites at the apple … to ensure that a claim
receives full adjudication.” Barr, 837 S.W.2d at 631. The key is diligence, what could you have
discovered, what could you have prosecuted?
16. The fact that a party argues that its claim was not “mature” in a previous suit has been
held to be unpersuasive to avoid the effects of res judicata. The point is illustrated in Zurita v.
Lambada 322 S.W. 3d 463 (Tex. App.—Ho [14th], 2010) where the Zuritas tried to avoid a res
judicata application contending that their claims in their first lawsuit were immature claims that
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only accrued post-judgment and could therefore be asserted in a second suit. The Zuritas did not
raise this argument in response to the appellees' summary-judgment briefing, but the Court held
that even had they done so their argument ignored the fact that the letter forming the basis of the
claims in their second lawsuit is the same letter alleged as the basis of his nearly identical claims
in the original lawsuit. Thus, even if the issue had been properly raised below, the claims were in
fact mature during the pendency of the original case. See also Weiman v. Addicks-Fairbanks
Road Sand Co., 846 S.W.2d 414 (Tex.App.-Houston [14th Dist.] 1992, writ denied) (rejecting
appellant's contention that claims in second suit were not mature at time of first suit when claims
were almost identical to those raised and non-suited in first suit); see also A & P Transp. Co.,
Inc., No. 14-09-00729-CV, 2009 WL 3365841, at *2 (Tex.App.-Houston [14th Dist.] Sept. 10,
2009, no pet.) (mem. op.).
C. Res Judicata and Non-Suited and/or Abandoned Claims
16. Res judicata is also applied to bar claims a party filed but failed to diligently pursue. In
Weiman v. Addicks-Fairbanks Road Sand Co., 846 S.W.2d 414 the appellant contended res
judicata did not bar her claims in a second lawsuit because she was granted a non-suit without
prejudice on similar claims in the earlier lawsuit. Id. at 421. The court disagreed, and held that
the rules of procedure nevertheless applied and her claims in the second suit were barred by the
compulsory-counterclaim rule. Id. Although Weiman dealt with a counterclaim by a Defendant
as opposed to a main claim by the Plaintiff, such as the alter ego claim in this suit, the principle
applies with equal weight. As set out in Exhibits 5 and 6 hereto, the Plaintiff’s had every
opportunity to inquire into the exact same matters they now seek in the present suit Exhibit 8.
Even if the alter ego claim in the first suit was not formally non-suited the principle of res
judicata works to prohibit re-litigation of “abandoned” causes of action. Casto v. Arkansas-
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Louisiana Gas Co., 597 F.2d 1323, 1326 (10th Cir.1979); Clark v. Yosemite Community College
Dist., 785 F.2d 781, 786 (9th Cir.1986). Whether a plaintiff has abandoned a cause of action may
be implied from a plaintiff's action or omissions. Casto, 597 F.2d at 1325. In this case the
Plaintiff amended its claims in the face of a summary judgment challenge after the deadline to
amend had passed and did not include the alter ego claim. Whether that omission is deemed a
non-suit or an abandonment of its claim, the res judicata effect is the same.
D. Plaintiff’s Alter Ego Claim:
17 It would be difficult to find a case that fits more squarely into the definition of res
judicata in Texas than this case. If each element is applied to the prior case and this case, it is
impossible to argue claim preclusion does not apply. First, there is clearly a prior, final
judgment on the merits by a court of competent jurisdiction. In fact this Court tried the prior
case and now sits on this case. Second, privity is a complete non-issue. The parties in this case
are identical to the parties in the prior case. The Plaintiffs are identical and Defendant Hug is
sued in her individual capacity just as she was in the prior case. Finally, the present action is
based on the identical theory or claim, alter ego, that both could have been raised, was raised
and in fact was arguably actually litigated in the first suit. This last point makes the application
of res judicata in this case virtually inescapable. Even applying the Texas transactional approach,
the alter ego claim in the first suit flows from the identical set of facts as in the second suit.
18. One of the issues that sometimes confronts courts occurs where a shareholder is sued for
fraud or some other tort, and after the judgment is taken, a plaintiff seeks to hold the shareholder
liable on some kind of alter ego theory because the corporation cannot satisfy the judgment. See
Gulf Reduction Corp. v. Boyles Galvanizing & Plating Co. et. al 456 S.W. 2d 476 (Tex. App-Ft.
Worth, 1970). Such a situation forces Courts to determine if suing the shareholder for other
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claims aside from alter ego puts the alter ego claim into the realm of a claim that was made or
“could have been made.” In Gulf Reduction Corp. the Court barred a subsequent alter ego claim
at the post judgment collection stage based on res judicata after the analysis of whether the claim
could have, and therefore should have, been brought in the first suit, stating:
A litigant is not entitled to have a second trial of an issue that was determined in a
former suit merely because in the second suit he has a different purpose in view and seeks
other relief; * * *. Nor will advancement of new and different reasons for the granting of
the relief prayed for change the situation, since the applicability of the plea depends on
the identity of the cause of action or matter of defense in issue, and not on the identity or
similarity of the points or grounds urged to support or maintain the action or matter of
defense. It is recognized that otherwise litigation would end only when the ingenuity of
counsel could not suggest additional grounds in support of the issue. So long as the
grievance or wrong complained of is the same, the cause of action is the same, and the
judgment in the first suit stands as a bar to further examination of the matter.' 34
Tex.Jur.2d, Judgments, Section 495, page 554.Gulf Reduction Corp. v. Boyles
Galvanizing & Plating Co. et. al 456 S.W. 2d 476, 480
19. The rule set out in Gulf Reduction Corp has even greater force in this case. In Gulf
Reduction Corp the Plaintiffs sued the corporation and the individual shareholders personally but
not on an alter ego theory. They prevailed against the corporation but not the individuals. In the
second suit they then asserted an alter ego against the two individuals. In this case the Plaintiffs
actually sued Hug for alter ego with the exact same allegations as in the present suit. In the first
suit the jury found factually that Hug may have been liable under certain claims, but found no
money damages and the judgment was take nothing as to Hug. The fact that now the Plaintiffs
purpose may be different as to how they wish to use the alter ego claim makes no difference to
the application of res judicata. The reason they seek to now use the alter ego is irrelevant, the
claim itself is exactly the same as the claim in the first suit and thus the application of res
judicata applies because as the Court stated in Gulf Reduction Corp:
'It is well settled that the decision of a court of competent jurisdiction is conclusive,
not only as to the subject matter determined, but as to every other matter which the
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parties might have litigated in the case and which they might have had decided. * * * Or,
as differently expressed, "the plea of res judicata applies not only to points upon which
the court was actually required to pronounce judgment, but to every point which properly
belonged to the subject of litigation, and which the parties, by exercising reasonable
diligence, might have brought forward at the time" citing Metropolitan Life Ins. Co. v.
Pribble, 130 S.W.2d 32, 336 (Fort Worth Tex. Civ. App., 1939, writ ref.).
In this case we know the alter ego claim properly belonged in the first case because the Plaintiffs
brought the claim, pursued it for seventeen months, and performed extensive discovery [Exhibits
5 & 6]. At the close of the pleading stage alter ego remained a claim [Exhibits 1 & 7] and only
in the face of a challenge at the summary judgment stage was it relinquished. Whether omitting
the claim from subsequent pleadings is deemed a non-suit or an abandonment does not matter.
Not only could the Plaintiffs have litigated alter ego in the first case, for purposes of res judicata
they in fact did so.
20. Gulf Reduction Corp has been modified over time but never overturned. The legal
authority for the proposition that a subsequent alter ego claim is not barred by res judicata
involves facts so clearly different than this case, or any typical res judicata case, that the
distinction is easily ascertained. In Matthews Construction Company, Inc. v. Harry Rosen and
Houston Pipe Supply Co., Inc. 796 S.W. 692 (Tex. 1990) the Texas Supreme Court declined to
allow an individual defendant shareholder to assert res judicata and the statute of limitations to a
post-judgment suit against him personally to collect a judgment originally taken against his
company. In Matthews the individual shareholder defendant advanced the disingenuous
argument that because he and his corporation had been found to be the same entity by the jury in
the second case, that the alter ego claim should have been brought in the first case where only the
corporation was a party. However, the Court held that the alter ego claim in the post-judgment
suit against Rosen did not collaterally attack the judgment against Houston Pipe. In short,
limitations and res judicata failed because alter ego was a post-judgment recovery tool under
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circumstances where the shareholder against who it was used was not a party to the first suit.
Matthews Construction Company, Inc. v. Harry Rosen and Houston Pipe Supply Co., Inc. 796
S.W. 692, 694. The facts in Matthews did not fit the definitional requisites of res judicata and
the Court properly rejected the argument. There was no privity and there was no way to assert
the alter ego claim should have been brought in the same suit where the alleged alter ego was not
even a party.
21. Subsequent case law citing Matthews clearly sets out the distinction between the facts in
that case and those in this one and in Guflcoast Reduction. In JNS Aviation, Inc. v. Nick Corp
418 B.R. 819 (N.D. Tex. 2009) the bankruptcy court confronted a situation where a judgment
was obtained for breach of contract in a law suit against the corporation only and thereafter, in an
effort to collect, the Plaintiff sued under an alter ego theory to pierce the corporate veil. In
allowing the veil piercing claim based upon an alter ego theory the Court stated:
To hold that the plaintiff could not bring a second suit asserting veil-piercing claims to
collect their judgment would protect individuals who fraudulently transfer assets from a
corporation to avoid judgments against them. It would also create a catch-22 for plaintiffs
in situations such as the one above. A plaintiff would be barred from bringing the second
suit because the veil-piercing claim was not asserted in the first suit; however, the
plaintiff could not bring the veil-piercing claim in the first suit because at that time,
there was no cause to bring the claim. This would be an unjust result (emphasis
added).
That is not the case here. In this case not only could the Plaintiff raise the claim of alter ego to
pierce the corporate veil in its first suit, it did so, thereafter dropped the claim and allowed the
subsequent judgment to go final.
22. The Court in In Re Flores, Jr Case No. 07-52684 (Bankr W.D. 2008) addressed a similar
issue and came to the same conclusion. In Flores the debtor argued that any new claim was
barred by res judicata based on an arbitration award (and the order confirming that award). The
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Court held that the "new claims" asserted by the plaintiff in her complaint could not be barred by
res judicata because they could not have been asserted in the prior arbitration proceeding stating:
The court is well aware that the issues litigated in the prior arbitration proceeding may be
factually similar to the plaintiff's allegations in the present complaint. Factual similarity,
however, is not sufficient to apply res judicata. See Petro-Hunt, 365 F.3d at 396. ("As the
United States correctly points out, these observations of factual similarity, although
potentially relevant for purposes of collateral estoppel, are not relevant to res judicata.").
For true res judicata to bar the plaintiff's claims in this action, the court must find that the
plaintiff asserted, or could have asserted, the same claims in the prior action. See id.
Because the debtor did not file bankruptcy until after the conclusion of the arbitration
proceeding, the claims asserted in this adversary proceeding — relating to the debtor's
discharge — could not have been asserted in the prior litigation. Accordingly, res
judicata does not apply.
In Flores as in JNS Aviation and Matthews the subsequent alter ego theory was allowed because
there had been no “first bite” at the apple. In all three cases, either the second party against
whom the alter ego claim was being asserted had not been a party, had been a party but the alter
ego claim was not or could not have been brought, or both. That is not the case here and the alter
ego claim to hold Deborah Hug liable for the judgment against Adoption Access, Inc. is barred.
23. In other cases since 1990 where Matthews has been cited with regard to the issue of res
judicata the case has either sought relief different than collection or involved the assertion of
alter ego for the first time against a party in a second suit who was not a party in the first suit and
therefore factually the doctrine of res judicata did not apply. McCarroll v. My Sentinel , No. 14-
08-01171-CV.( Tex. App.—Ho. [14th District] Memorandum Opinion filed December 10,
2009). Walker v. Anderson, 232 S.W.3d 899, No. 05-06-00025-CV (Tex. App.—Dallas, 2007);
Coleman v. Carpenter, 132 S.W.3d 109 (Tex. App.-- Beaumont. 2004); Estate of Lynch, No. 04-
11-00731-CV (Tex. App.-- San Antonio, 2012. Neither Matthews nor the cases citing it since
1990 stands for the proposition that a plaintiff can sue a corporate officer or shareholder
personally in a first suit, actually allege an alter ego theory to hold that person or entity
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responsible for the judgment, and then maintain the same claim in a second suit after dismissing
it in the first when the first case went to final judgment and was not appealed.
24. In all the cases cited above, the issue has never been whether alter ego as a claim or
theory of recovery is subject to res judicata, but whether under the facts of that particular case res
judicata should be applied as a bar to asserting alter ego. In this case it clearly should. The
subsequent alter ego pleading is a clear effort to collaterally attack a prior judgment where alter
ego was or should have been asserted. The evidence is clear that any documents the Plaintiff now
has it had the ability, exercising any real diligence, to acquire those same documents in the first
suit. If Hug was actually using Adoption Access, Inc. as an alter ego it did not start on October
16, 2012 or November 28, 2012. Hug was deposed on April 4, 2011 and the discovery deadline
in cause no. 10-10653 did not run until March 30, 2012. Using any level of due diligence the
Plaintiff could have litigated and prosecuted the alter ego claim against Hug that it filed and
maintained for almost the entire lawsuit. The discovery available to the Plaintiffs would have
required supplementation literally up to the day of trial in October 2012.
WHEREFORE PREMISES CONSIDERED, Defendant Hug prays that Plaintiffs take
nothing by their claims, that after notice and hearing that Defendant’s Motion for Summary
Judgment be granted and that Plaintiffs’ claims based on alter ego be dismissed and that
Defendant Hug be granted any and all other relief whether at law or in equity to which the
Defendant is entitled.
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Respectfully Submitted,
/S/ Mark A. Weitz__________
Mark A. Weitz
SB# 21116500
Weitz Morgan PLLC
100 Congress Avenue, Suite 2000
Austin, Texas 78701
512-394-8950
512-852-4446 (facsimile)
CERTIFICATE OF SERVICE
The undersigned does hereby certify that a true and correct copy of the foregoing
Defendant Deborah Hug’s Motion for Partial Summary Judgment was served upon the following
parties on April 1, 2013 by electronic service and/or facsimile transmission and/or first class
mail:
Mark L. Johansen
Christopher J. Simmons
Gruber Hurst Johansen Hail & Shank, L.L.P.
1445 Ross Avenue, Suite 2500
Dallas, Texas 75202
Attorneys for the Plaintiffs
Ryan Geddie
Martin, Disiere, Jefferson & Wisdom L.L.P.
Tollway Plaza One
16000 N. Dallas Parkway
Dallas, Texas 75248
Attorney for The Mizzel Group LLC d/b/a Tegan Digital
Thomas Currie
5906 Norway
Dallas, Texas 75230
Pro Se
/S/ Mark A.Weitz______________
Mark A. Weitz
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Filed
13 February 7 P12:00
Gary Fitzsimmons
District Clerk
Dallas District
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Filed 13 April 1 A9:00 Gary Fitzsimmons District Clerk Dallas District CAUSE NO. DC-13-00571 JANE DOE AND JOHN DOE, § IN THE DISTRICT COURT OF § Plaintiffs, § § vs. § DALLAS COUNTY, TEXAS § DEBORAH HUG, et. al § § Defendants. § 68th JUDICIAL DISTRICT DEFENDANT DEBORAH HUG’S TRCP 166a (i) NO-EVIDENCE MOTION FOR PARTIAL SUMMARY JUDGMENT TO THE HONORABLE JUDGE OF SAID COURT: COMES NOW, Deborah Hug (Hug) and pursuant to TRCP 166a (i) files this her No- Evidence Motion for Partial Summary Judgment and would show as follows: I. Statement of Facts: 1. On August 25, 2010 the Plaintiffs in this case, John and Rebecca Budd, filed a lawsuit against both Adoption Access, Inc. and Deborah Hug individually. A copy of that complaint is attached hereto as Exhibit 1. In their original complaint the Plaintiff pled the following causes of action against Hug: a. Count II: Negligence/Negligent Supervision/Negligent Hiring b. Count III: Negligence Per Se c. VI. Alter Ego. 2. The Alter Ego claim against Hug stated as follows: “55. Upon information and belief there is such a unity between Hug and AA that the separateness of AA and Hug has ceased to exist such that holding only AA liable for Plaintiff’s damages would result in an injustice. 1 56. Upon information and belief - AA is organized and operated as mere tool or business conduit of Hug; - Hug used the corporate fiction to evade existing legal obligations of AA; - Hug used the corporate fiction as a sham to perpetuate a fraud; - Hug inadequately capitalized AA with the effect of creating an injustice.” 3. Thereafter, Plaintiff proceeded to litigate the case including conducting extensive discovery. In its requests for production served on October 25, 2010 [Exhibit 5] Plaintiffs made inquiry into and requested documents for the following: - Deborah Hug’s calendar for 2007-2008 - All lawsuits of AA in the last ten years - All audited and unaudited and unaudited financial statement - All articles of incorporation for AA - All By Laws of AA - All minutes of shareholders meetings of AA - All minutes of Board of Directors meetings All of these requests go directly to the issue of whether or not AA was a properly formed and operating corporation or was in fact nothing but the alter ego of Deborah Hug. In addition, Plaintiffs had a virtually limitless opportunity to request any documents of Hug or AA relating to the claim that AA was a sham or that there was no distinction between her and AA. Plaintiffs did not do so. If Plaintiffs now contend, “we did not have QuickBooks,” or we did not have any specific document, a review of Exhibit 5 reveals they did not have it because they did not ask for it despite a clear claim of alter ego that would have supported a complete investigation into the financial affairs of the Defendants, both Adoption Access and Hug. (See In Re Williams,328 2 S.W. 3d 103 (Tex. App.—Edinburg, 2010) where the Plaintiffs properly asserted an alter ego claim thus allowing discovery as to personal assets). If Plaintiffs contend they asked but it was not produced, there is no record in the court file of Cause No. 10-10653 of any motion to compel filed between August 25, 2010 and October 1, 2012. 4. In addition, Plaintiffs also responded to Defendants’ discovery requests. On December 2, 2010 Plaintiffs responded to Defendants’ Requests for Disclosure as to their legal theories and responded in part as follows: (vii) Alter Ego: Upon information and belief there is such a unity between Hug and AA that the separateness of AA and Hug has ceased to exist such that holding only AA liable for Plaintiff’s damages would result in an injustice. Upon information and belief: - AA I organized and operated as mere tool or business conduit of Hug; - Hug used the corporate fiction to evade existing legal obligations of AA; - Hug used the corporate fiction as a sham to perpetuate a fraud; - Hug inadequately capitalized AA with the effect of creating an injustice. Thereafter, Plaintiffs amended their disclosure responses repeatedly and on April 5, 2012 Plaintiffs filed their Third Amended Responses to Defendants’ Request for Disclosure [Exhibit 7]. In every amendment, including the April 5, 2012 amendment the identical alter ego theory remained part of their case [see Exhibit 7, pp 5]. The last amendment came after discovery was complete, the Plaintiffs had deposed Deborah Hug, pleadings were closed and trial was a month away. 5. Deborah Hug was deposed both in her corporate capacity and her individual capacity and separate notices were provided for her in both capacities [Exhibit 6]. Her deposition took place on April 4, 2011 at the offices of attorney Dave Cole. In that deposition the Plaintiffs made it 3 clear that Hug was being deposed as both in individual and a corporate representative. At that time the alter ego basis of recovery was still a part of Plaintiffs’ live pleadings and under the Texas Rules of Civil Procedure allowed the Plaintiff to inquire into any area reasonably calculated to lead to the discovery of admissible evidence. Plaintiffs served Adoption Access with a list of areas of inquiry and yet despite the opportunity to inquire as to any area appropriate under an alter ego claim, the only area they inquired into was “corporate structure and governance.” After be explicit that Hug was being deposed in her individual capacity, the Plaintiff’s inquired about her travel to and form California and the way it was expensed. Again, with a pending alter ego claim every area of inquiry now being alleged [Exhibit 8] was equally accessible at that time. After almost 18 months to conduct discovery and having taken Hug’s deposition in her personal capacity, the Plaintiffs continued to assert their alter ego claim and did so even after the deadline for amend pleadings had passed. 6. On or about April 3, 2012, Defendants filed their Motion for Summary Judgment seeking to have all of Plaintiffs’ claims dismissed as a matter of law. Among the claims it sought to dismiss was the Plaintiffs’ alter ego claim. The Defendant would ask the Court to take judicial notice of Defendants’ Motion for Summary Judgment. Without seeking leave of court and over a month past the deadline for amending pleadings, on April 16, 2012 the Plaintiffs filed their First Amended Complaint. A copy of that complaint is attached hereto as Exhibit 2. At the time the amendment was filed trial was set for May 8, 2012. Among other things, the Plaintiffs completely dropped their alter ego claim, yet continued to pursue Hug individually. Defendants supplemented their motion to reflect the fact that the alter ego claim had been dropped. 7. Ultimately the May 8, 2012 setting was continued and on May 7, 2012 Plaintiffs filed their Second Amended Complaint a copy of which is attached hereto as Exhibit 3. This would 4 be the pleading upon which the case would be tried on October 1, 2012. Absent from the Plaintiffs’ final complaint was any alter ego claim, yet they continued to pursue Hug individually on claims of negligence, fraud, and fraud in the inducement. As the Court is aware, the case was tried to completion before a jury on all claims and the jury returned a verdict against Adoption Access, Inc. Despite factual findings against Hug on three counts, the jury found no monetary damage attributable to Hug and the judgment, signed on October 28, 2012, makes it clear that the Plaintiffs “take nothing against Deborah Hug.” 8. On or about January 16, 2013 the Plaintiffs filed this case against Deborah Hug. There was only one count and it read as follows: “15. Upon information and belief there is such a unity between Hug and AA that the separateness of AA and Hug has ceased to exist such that holding only AA liable for Plaintiff’s damages set forth in the final judgment would result in an injustice. 16. Upon information and belief - AA I organized and operated as a mere tool or business conduit of Hug; - Hug used the corporate fiction to evade existing legal obligations of AA; - Hug used the corporate fiction as a sham to perpetuate a fraud; - Hug inadequately capitalized AA with the effect of creating an injustice.” In every respect except the phrase “set forth in the final judgment” this claim is the identical claim filed on August 25, 2012 and maintained by the Plaintiff for almost 18 months. During that time Plaintiffs performed discovery with alter ego as a live claim and had the opportunity to perform even more extensive discovery. Hug was deposed on the claim and in the face of Defendants’ motion for summary judgment the claim was dropped. 5 9. On February 7, 2013 Plaintiffs’ amended their complaint [Exhibit 4] to add claims under Tex. Bus. Comm. Code §24.001, but retained the alter ego claim which is now Count II. In every respect it is identical to Count I in the January 16, 2013 Original Complaint. It is as to the Count of Alter Ego that Defendant Hug seeks summary judgment. II. Summary of Motion 10. It is Defendant’s contention that regardless of the facts upon which the Plaintiffs based their first claim of alter ego in 2010 and their second claim for alter ego in 2013, the causes of action are identical and as such alter ego should have been litigated in Cause No. 10-10653 and was not. The res judicata test does not ask whether the Plaintiff has new facts or has documents that it did not have in the prior suit. It asks the simple question: could have or should have the claim now being asserted been litigated in the first case. If the answer is “yes” the claim is barred. Plaintiff pled an alter ego claim and was entitled to ask the exact same questions then that it seeks to ask now in terms of discovery to support its claims. The reality is that despite the opportunity to do so, the Plaintiff did not have certain documents they now have because they did not request them, or if they requested them and did not receive them, they did not press the issue. Plaintiff had every opportunity to litigate and conduct discovery on the alter ego claim and simply failed to diligently pursue the claim. Thereafter they either non-suited or abandoned their alter ego claim in Cause No. 10-10653 and once a final judgment was rendered in that suit, res judicata precludes the re-litigation of the alter ego claim. III. Summary Judgment Evidence 11. The Defendant relies on the following summary judgment evidence: Exhibit 1: August 25, 2010 Plaintiff’s Original Complaint Cause No. 10-10653 in the 68th Judicial District Court of Dallas County. 6 Exhibit 2: April 16, 2012 Plaintiff’s First Amended Complaint Cause No. 10-10653 in the 68th Judicial District Court of Dallas County. Exhibit 3: May 7, 2012 Plaintiff’s Second Amended Complaint Cause No. 10-10653 in the 68th Judicial District Court of Dallas County. Exhibit 4: February 7, 2012 Plaintiff’s Original Complaint Cause No. 13-10571 in the 68th Judicial District Court of Dallas County. Exhibit 5: Plaintiff’s Request for Production Cause No. 10-10653 in the 68th Judicial District Court of Dallas County. Exhibit 6: Excerpts and exhibits from Plaintiffs’ deposition of Adoption Access, Inc. and Deborah Hug Cause No. 10-10653 in the 68th Judicial District Court of Dallas County. Exhibit 7: Plaintiffs’ Third Amended Responses to Request for Disclosures in Cause No. 10- 10653 in the 68th Judicial District Court of Dallas County. Exhibit 8: Requests for Production propounded to Defendant Deborah Hug in Cause No. 13- 0571 in the 68th Judicial District Court of Dallas County. All of the Defendant’s evidence is either a pleading in either Cause No. 10-10653 or Cause No. 13-00571 [Exhibits 1-4] both of which are cases currently pending in this very Court or discover conducted in both cases. The Court can take judicial notice of pleadings pursuant to TRE 201 (b-d) because the pleadings and their contents are generally known within the territorial jurisdiction of the trial court and are (2) capable of accurate and ready determination by resort to sources whose accuracy cannot reasonably be questioned, in this instance the trial court files. Movant requests the Court take judicial notice of Exhibits 1-4. As for the discovery propounded or responded to in either case [Exhibit 5-8 ] those documents are easily authenticated. [see Mark Weitz Affidavit attached hereto]. 7 IV. Argument and Authorities A. Standard of Review: 12. TRCP 166a (i) provides: No-Evidence Motion. After adequate time for discovery, a party without presenting summary judgment evidence may move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial. The motion must state the elements as to which there is no evidence. The court must grant the motion unless the respondent produces summary judgment evidence raising a genuine issue of material fact. It is Defendant’s position that as to this issue no discovery is required because the resolution is based on the prior and present pleadings and the discovery requests in the two suits. Factual discovery as to whether Defendant is or is not the alter ego of the corporation, or visa versa, is unnecessary and irrelevant to the issue here of whether the Plaintiff can even bring the claim in the second suit. 13. A no-evidence summary judgment is essentially a pretrial motion for a directed verdict. Therefore, courts apply the same legal sufficiency standard in reviewing a no-evidence summary judgment as they apply in reviewing a directed verdict. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750-51 (Tex. 2003); Wal-Mart Stores, Inc. v. Rodriguez, 92 S.W.3d 502, 506 (Tex. 2002). The test for legal sufficiency is "whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review." City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). A Court must determine whether the non-movant produced any evidence of probative force to raise a fact issue on the material questions presented. Rodriguez, 92 S.W.3d at 506; Woodruff v. Wright, 51 S.W.3d 727, 734 (Tex. App.--Texarkana 2001, pet. denied). While the movant need not present evidence of its own, it is not precluded from doing so. 14. It is well settled that a trial court cannot grant a summary judgment motion on grounds not presented in the motion. Brewer & Pritchard, P.C., 73 S.W.3d at 204; Science Spectrum, Inc. 8 v. Martinez, 941 S.W.2d 910, 912 (Tex. 1997). The no-evidence summary judgment rule similarly requires that the moving party identify the grounds for the motion. In this case the grounds for the non-evidence summary judgment is that the Plaintiff cannot produce even a scintilla of evidence that the alter ego claim brought by it and pursued for 17 months in the first lawsuit, is not res judicata to that same claim in the present lawsuit. B. Res Judicata: General Principles: 15. "Res judicata" is also known as claim preclusion. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex. 1992). Claim preclusion, or traditional res judicata, precludes re-litigation of claims that have been finally adjudicated, or that arise out of the same subject matter and could have been litigated in the prior action. Amstadt v. U.S. Brass, 919 S.W.2d 644, 652 (Tex. 1996). It requires proof of: (1) a prior final judgment on the merits by a court of competent jurisdiction, (2) an identity of parties or those in privity with them, and (3) a second action based on the same claims as were raised or could have been raised in the first action. Id. Texas follows the transactional approach to res judicata barring claims arising out of the transaction or occurrence that is the subject matter of the first suit. State & Cnty. Mut. Fire Ins. Co. v. Miller, 52 S.W.3d 693, 696 (Tex. 2001). As the Texas Supreme Court has explained, “[m]odern rules of procedure obviate the need to give parties two bites at the apple … to ensure that a claim receives full adjudication.” Barr, 837 S.W.2d at 631. The key is diligence, what could you have discovered, what could you have prosecuted? 16. The fact that a party argues that its claim was not “mature” in a previous suit has been held to be unpersuasive to avoid the effects of res judicata. The point is illustrated in Zurita v. Lambada 322 S.W. 3d 463 (Tex. App.—Ho [14th], 2010) where the Zuritas tried to avoid a res judicata application contending that their claims in their first lawsuit were immature claims that 9 only accrued post-judgment and could therefore be asserted in a second suit. The Zuritas did not raise this argument in response to the appellees' summary-judgment briefing, but the Court held that even had they done so their argument ignored the fact that the letter forming the basis of the claims in their second lawsuit is the same letter alleged as the basis of his nearly identical claims in the original lawsuit. Thus, even if the issue had been properly raised below, the claims were in fact mature during the pendency of the original case. See also Weiman v. Addicks-Fairbanks Road Sand Co., 846 S.W.2d 414 (Tex.App.-Houston [14th Dist.] 1992, writ denied) (rejecting appellant's contention that claims in second suit were not mature at time of first suit when claims were almost identical to those raised and non-suited in first suit); see also A & P Transp. Co., Inc., No. 14-09-00729-CV, 2009 WL 3365841, at *2 (Tex.App.-Houston [14th Dist.] Sept. 10, 2009, no pet.) (mem. op.). C. Res Judicata and Non-Suited and/or Abandoned Claims 16. Res judicata is also applied to bar claims a party filed but failed to diligently pursue. In Weiman v. Addicks-Fairbanks Road Sand Co., 846 S.W.2d 414 the appellant contended res judicata did not bar her claims in a second lawsuit because she was granted a non-suit without prejudice on similar claims in the earlier lawsuit. Id. at 421. The court disagreed, and held that the rules of procedure nevertheless applied and her claims in the second suit were barred by the compulsory-counterclaim rule. Id. Although Weiman dealt with a counterclaim by a Defendant as opposed to a main claim by the Plaintiff, such as the alter ego claim in this suit, the principle applies with equal weight. As set out in Exhibits 5 and 6 hereto, the Plaintiff’s had every opportunity to inquire into the exact same matters they now seek in the present suit Exhibit 8. Even if the alter ego claim in the first suit was not formally non-suited the principle of res judicata works to prohibit re-litigation of “abandoned” causes of action. Casto v. Arkansas- 10 Louisiana Gas Co., 597 F.2d 1323, 1326 (10th Cir.1979); Clark v. Yosemite Community College Dist., 785 F.2d 781, 786 (9th Cir.1986). Whether a plaintiff has abandoned a cause of action may be implied from a plaintiff's action or omissions. Casto, 597 F.2d at 1325. In this case the Plaintiff amended its claims in the face of a summary judgment challenge after the deadline to amend had passed and did not include the alter ego claim. Whether that omission is deemed a non-suit or an abandonment of its claim, the res judicata effect is the same. D. Plaintiff’s Alter Ego Claim: 17 It would be difficult to find a case that fits more squarely into the definition of res judicata in Texas than this case. If each element is applied to the prior case and this case, it is impossible to argue claim preclusion does not apply. First, there is clearly a prior, final judgment on the merits by a court of competent jurisdiction. In fact this Court tried the prior case and now sits on this case. Second, privity is a complete non-issue. The parties in this case are identical to the parties in the prior case. The Plaintiffs are identical and Defendant Hug is sued in her individual capacity just as she was in the prior case. Finally, the present action is based on the identical theory or claim, alter ego, that both could have been raised, was raised and in fact was arguably actually litigated in the first suit. This last point makes the application of res judicata in this case virtually inescapable. Even applying the Texas transactional approach, the alter ego claim in the first suit flows from the identical set of facts as in the second suit. 18. One of the issues that sometimes confronts courts occurs where a shareholder is sued for fraud or some other tort, and after the judgment is taken, a plaintiff seeks to hold the shareholder liable on some kind of alter ego theory because the corporation cannot satisfy the judgment. See Gulf Reduction Corp. v. Boyles Galvanizing & Plating Co. et. al 456 S.W. 2d 476 (Tex. App-Ft. Worth, 1970). Such a situation forces Courts to determine if suing the shareholder for other 11 claims aside from alter ego puts the alter ego claim into the realm of a claim that was made or “could have been made.” In Gulf Reduction Corp. the Court barred a subsequent alter ego claim at the post judgment collection stage based on res judicata after the analysis of whether the claim could have, and therefore should have, been brought in the first suit, stating: A litigant is not entitled to have a second trial of an issue that was determined in a former suit merely because in the second suit he has a different purpose in view and seeks other relief; * * *. Nor will advancement of new and different reasons for the granting of the relief prayed for change the situation, since the applicability of the plea depends on the identity of the cause of action or matter of defense in issue, and not on the identity or similarity of the points or grounds urged to support or maintain the action or matter of defense. It is recognized that otherwise litigation would end only when the ingenuity of counsel could not suggest additional grounds in support of the issue. So long as the grievance or wrong complained of is the same, the cause of action is the same, and the judgment in the first suit stands as a bar to further examination of the matter.' 34 Tex.Jur.2d, Judgments, Section 495, page 554.Gulf Reduction Corp. v. Boyles Galvanizing & Plating Co. et. al 456 S.W. 2d 476, 480 19. The rule set out in Gulf Reduction Corp has even greater force in this case. In Gulf Reduction Corp the Plaintiffs sued the corporation and the individual shareholders personally but not on an alter ego theory. They prevailed against the corporation but not the individuals. In the second suit they then asserted an alter ego against the two individuals. In this case the Plaintiffs actually sued Hug for alter ego with the exact same allegations as in the present suit. In the first suit the jury found factually that Hug may have been liable under certain claims, but found no money damages and the judgment was take nothing as to Hug. The fact that now the Plaintiffs purpose may be different as to how they wish to use the alter ego claim makes no difference to the application of res judicata. The reason they seek to now use the alter ego is irrelevant, the claim itself is exactly the same as the claim in the first suit and thus the application of res judicata applies because as the Court stated in Gulf Reduction Corp: 'It is well settled that the decision of a court of competent jurisdiction is conclusive, not only as to the subject matter determined, but as to every other matter which the 12 parties might have litigated in the case and which they might have had decided. * * * Or, as differently expressed, "the plea of res judicata applies not only to points upon which the court was actually required to pronounce judgment, but to every point which properly belonged to the subject of litigation, and which the parties, by exercising reasonable diligence, might have brought forward at the time" citing Metropolitan Life Ins. Co. v. Pribble, 130 S.W.2d 32, 336 (Fort Worth Tex. Civ. App., 1939, writ ref.). In this case we know the alter ego claim properly belonged in the first case because the Plaintiffs brought the claim, pursued it for seventeen months, and performed extensive discovery [Exhibits 5 & 6]. At the close of the pleading stage alter ego remained a claim [Exhibits 1 & 7] and only in the face of a challenge at the summary judgment stage was it relinquished. Whether omitting the claim from subsequent pleadings is deemed a non-suit or an abandonment does not matter. Not only could the Plaintiffs have litigated alter ego in the first case, for purposes of res judicata they in fact did so. 20. Gulf Reduction Corp has been modified over time but never overturned. The legal authority for the proposition that a subsequent alter ego claim is not barred by res judicata involves facts so clearly different than this case, or any typical res judicata case, that the distinction is easily ascertained. In Matthews Construction Company, Inc. v. Harry Rosen and Houston Pipe Supply Co., Inc. 796 S.W. 692 (Tex. 1990) the Texas Supreme Court declined to allow an individual defendant shareholder to assert res judicata and the statute of limitations to a post-judgment suit against him personally to collect a judgment originally taken against his company. In Matthews the individual shareholder defendant advanced the disingenuous argument that because he and his corporation had been found to be the same entity by the jury in the second case, that the alter ego claim should have been brought in the first case where only the corporation was a party. However, the Court held that the alter ego claim in the post-judgment suit against Rosen did not collaterally attack the judgment against Houston Pipe. In short, limitations and res judicata failed because alter ego was a post-judgment recovery tool under 13 circumstances where the shareholder against who it was used was not a party to the first suit. Matthews Construction Company, Inc. v. Harry Rosen and Houston Pipe Supply Co., Inc. 796 S.W. 692, 694. The facts in Matthews did not fit the definitional requisites of res judicata and the Court properly rejected the argument. There was no privity and there was no way to assert the alter ego claim should have been brought in the same suit where the alleged alter ego was not even a party. 21. Subsequent case law citing Matthews clearly sets out the distinction between the facts in that case and those in this one and in Guflcoast Reduction. In JNS Aviation, Inc. v. Nick Corp 418 B.R. 819 (N.D. Tex. 2009) the bankruptcy court confronted a situation where a judgment was obtained for breach of contract in a law suit against the corporation only and thereafter, in an effort to collect, the Plaintiff sued under an alter ego theory to pierce the corporate veil. In allowing the veil piercing claim based upon an alter ego theory the Court stated: To hold that the plaintiff could not bring a second suit asserting veil-piercing claims to collect their judgment would protect individuals who fraudulently transfer assets from a corporation to avoid judgments against them. It would also create a catch-22 for plaintiffs in situations such as the one above. A plaintiff would be barred from bringing the second suit because the veil-piercing claim was not asserted in the first suit; however, the plaintiff could not bring the veil-piercing claim in the first suit because at that time, there was no cause to bring the claim. This would be an unjust result (emphasis added). That is not the case here. In this case not only could the Plaintiff raise the claim of alter ego to pierce the corporate veil in its first suit, it did so, thereafter dropped the claim and allowed the subsequent judgment to go final. 22. The Court in In Re Flores, Jr Case No. 07-52684 (Bankr W.D. 2008) addressed a similar issue and came to the same conclusion. In Flores the debtor argued that any new claim was barred by res judicata based on an arbitration award (and the order confirming that award). The 14 Court held that the "new claims" asserted by the plaintiff in her complaint could not be barred by res judicata because they could not have been asserted in the prior arbitration proceeding stating: The court is well aware that the issues litigated in the prior arbitration proceeding may be factually similar to the plaintiff's allegations in the present complaint. Factual similarity, however, is not sufficient to apply res judicata. See Petro-Hunt, 365 F.3d at 396. ("As the United States correctly points out, these observations of factual similarity, although potentially relevant for purposes of collateral estoppel, are not relevant to res judicata."). For true res judicata to bar the plaintiff's claims in this action, the court must find that the plaintiff asserted, or could have asserted, the same claims in the prior action. See id. Because the debtor did not file bankruptcy until after the conclusion of the arbitration proceeding, the claims asserted in this adversary proceeding — relating to the debtor's discharge — could not have been asserted in the prior litigation. Accordingly, res judicata does not apply. In Flores as in JNS Aviation and Matthews the subsequent alter ego theory was allowed because there had been no “first bite” at the apple. In all three cases, either the second party against whom the alter ego claim was being asserted had not been a party, had been a party but the alter ego claim was not or could not have been brought, or both. That is not the case here and the alter ego claim to hold Deborah Hug liable for the judgment against Adoption Access, Inc. is barred. 23. In other cases since 1990 where Matthews has been cited with regard to the issue of res judicata the case has either sought relief different than collection or involved the assertion of alter ego for the first time against a party in a second suit who was not a party in the first suit and therefore factually the doctrine of res judicata did not apply. McCarroll v. My Sentinel , No. 14- 08-01171-CV.( Tex. App.—Ho. [14th District] Memorandum Opinion filed December 10, 2009). Walker v. Anderson, 232 S.W.3d 899, No. 05-06-00025-CV (Tex. App.—Dallas, 2007); Coleman v. Carpenter, 132 S.W.3d 109 (Tex. App.-- Beaumont. 2004); Estate of Lynch, No. 04- 11-00731-CV (Tex. App.-- San Antonio, 2012. Neither Matthews nor the cases citing it since 1990 stands for the proposition that a plaintiff can sue a corporate officer or shareholder personally in a first suit, actually allege an alter ego theory to hold that person or entity 15 responsible for the judgment, and then maintain the same claim in a second suit after dismissing it in the first when the first case went to final judgment and was not appealed. 24. In all the cases cited above, the issue has never been whether alter ego as a claim or theory of recovery is subject to res judicata, but whether under the facts of that particular case res judicata should be applied as a bar to asserting alter ego. In this case it clearly should. The subsequent alter ego pleading is a clear effort to collaterally attack a prior judgment where alter ego was or should have been asserted. The evidence is clear that any documents the Plaintiff now has it had the ability, exercising any real diligence, to acquire those same documents in the first suit. If Hug was actually using Adoption Access, Inc. as an alter ego it did not start on October 16, 2012 or November 28, 2012. Hug was deposed on April 4, 2011 and the discovery deadline in cause no. 10-10653 did not run until March 30, 2012. Using any level of due diligence the Plaintiff could have litigated and prosecuted the alter ego claim against Hug that it filed and maintained for almost the entire lawsuit. The discovery available to the Plaintiffs would have required supplementation literally up to the day of trial in October 2012. WHEREFORE PREMISES CONSIDERED, Defendant Hug prays that Plaintiffs take nothing by their claims, that after notice and hearing that Defendant’s Motion for Summary Judgment be granted and that Plaintiffs’ claims based on alter ego be dismissed and that Defendant Hug be granted any and all other relief whether at law or in equity to which the Defendant is entitled. 16 Respectfully Submitted, /S/ Mark A. Weitz__________ Mark A. Weitz SB# 21116500 Weitz Morgan PLLC 100 Congress Avenue, Suite 2000 Austin, Texas 78701 512-394-8950 512-852-4446 (facsimile) CERTIFICATE OF SERVICE The undersigned does hereby certify that a true and correct copy of the foregoing Defendant Deborah Hug’s Motion for Partial Summary Judgment was served upon the following parties on April 1, 2013 by electronic service and/or facsimile transmission and/or first class mail: Mark L. Johansen Christopher J. Simmons Gruber Hurst Johansen Hail & Shank, L.L.P. 1445 Ross Avenue, Suite 2500 Dallas, Texas 75202 Attorneys for the Plaintiffs Ryan Geddie Martin, Disiere, Jefferson & Wisdom L.L.P. Tollway Plaza One 16000 N. Dallas Parkway Dallas, Texas 75248 Attorney for The Mizzel Group LLC d/b/a Tegan Digital Thomas Currie 5906 Norway Dallas, Texas 75230 Pro Se /S/ Mark A.Weitz______________ Mark A. Weitz 17 Filed 13 February 7 P12:00 Gary Fitzsimmons District Clerk Dallas District