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Jones v. Wells Fargo Bank, N.A.

United States Court of Appeals, Fifth Circuit

June 1, 2017

RICHARD DONALD JONES, JR., Plaintiff-Appellee Cross-Appellant,
WELLS FARGO BANK, N.A., Defendant-Appellant Cross-Appellee, JPMORGAN CHASE BANK, N.A., Formerly Known as Chase Bank of Texas National Association, Defendant-Appellee.

         Appeals from the United States District Court for the Northern District of Texas

          Before SMITH and HAYNES, Circuit Judges, and JUNELL, District Judge. [*]

          JERRY E. SMITH, Circuit Judge:

         Wells Fargo Bank, N.A. ("Wells Fargo"), and JPMorgan Chase Bank, N.A. ("JPMorgan"), served as trustees of trusts of which Richard Jones, Jr., was a beneficiary. Jones sued both banks for breach of fiduciary duty. The district court dismissed all but one of Jones's claims, as to which a jury, finding a breach, awarded actual and exemplary damages. Wells Fargo seeks to set aside the verdict. On cross-appeal, Jones hopes to revive some of the claims that were dismissed. We find in favor of the banks on all issues.


         Jones is the grandson of Sweetie Boyle, who died in 1996. Until 2010, Jones had beneficial interests in four trusts that were funded with assets from Boyle's estate. JPMorgan and its predecessors in interest[1] served as trustee of three of the trusts from their creation until 2001, when Wells Fargo became the trustee after acquiring JPMorgan's trust department. Wells Fargo remained the trustee until the trusts were terminated on December 31, 2010. A fourth trust was created in 2003, with Wells Fargo serving as trustee until the trust's termination on December 31, 2010.

         The litigation surrounding these trusts dates back to 1999, when JPMorgan filed two actions in state court. In the first, it sought a final accounting of Boyle's estate and a discharge from any further duties to the beneficiaries, including Jones. In the second, it sought to resign as trustee of the Boyle trusts. Jones filed counterclaims in both cases, alleging that JPMorgan had mismanaged the trusts in various ways. Both matters were ultimately dismissed.

         Meanwhile, another case, brought in a different state court, concerned the Richard Donald Jones, Jr. 1994 Family Trust (the "House Trust"). In 1995, Jones asked the then-trustee, JPMorgan, to purchase a specific house in Bas-trop County, Texas, and hold it in the House Trust for his benefit. The trustee purchased the house, and for a time Jones lived there. According to Jones, however, the house had so many flaws-including broken appliances, electrical issues, and water leaks that eventually caused a mold problem-that it was uninhabitable, and he had to move out. In 1999, JPMorgan sued the inspector it had hired to perform a pre-purchase house inspection (hereinafter the "House Suit").[2]

         By the mid-2000s, it was clear that the House Trust did not have enough cash to pay for all of the necessary repairs. Wells Fargo concluded that Jones would be better off if the House Trust were dissolved. In 2007, Wells Fargo sued in state court to terminate the House Trust (hereinafter the "Termination Suit"). The state court ruled against Wells Fargo, keeping the trust alive.

         At some point, Wells Fargo also concluded that it would lose the House Suit if it took the case to trial. Settlement negotiations fell apart. Wells Fargo tried to assign the claim to Jones, who refused to accept the assignment. In 2009, Wells Fargo nonsuited the House Suit.

         The present case is four years old. In March 2013, Jones sued JPMorgan and Wells Fargo in state court on a number of claims. Wells Fargo and JPMorgan removed to federal court and moved for summary judgment. The district court dismissed all of the claims except for the claim that, by nonsuiting the House Suit instead of proceeding to trial, Wells Fargo had breached its fiduciary duty to Jones, had breached the trust contract, and had violated the Texas Property Code.

         The nonsuit claim went to trial. During his closing argument, Jones's lawyer introduced a new theory: that Wells Fargo had breached its fiduciary duty to Jones not by nonsuiting the case in April 2009, but by not nonsuiting it earlier, when it became clear that Wells Fargo would not prevail. Although Jones had not pleaded that theory, Wells Fargo did not object during trial.[3]Wells Fargo instead raised its objection repeatedly in its post-trial briefing, including in its renewed motion for judgment JML, and its responses to Jones's motions to enter judgment and for leave to amend the complaint. The district court, however, ruled that, because Wells Fargo was on notice of this potential theory of liability, it had waived any objection to the adequacy of the pleadings by not objecting in its first motion for JML.

         The jury seems to have relied on this new theory. It concluded that Wells Fargo had breached its fiduciary duty by nonsuiting and that the harm to Jones was the result of "gross negligence or malice." At the same time, the jury pegged Jones's likely recovery from the lawsuit, had it not been nonsuited, at "$0.00." The jury awarded Jones $171, 780.57 in exemplary damages, $33, 658.66 in attorneys' fees, and $4, 440.94 in disgorged trustee fees. The court denied Wells Fargo's renewed motion for JML and granted Jones's motion for entry of final judgment.

         Wells Fargo appeals. It claims that (1) the evidence was not sufficient to support a finding of breach of fiduciary duty, (2) the evidence was not sufficient to support a finding of actual damages, (3) the evidence was not sufficient to support a finding of exemplary damages, (4) the court erroneously shifted the burden of proof, (5) Wells Fargo did not waive its objection to Jones's introduction of his frivolous-litigation theory, (6) Jones should have presented expert testimony, and (7) Jones's claim is time-barred.

         Jones cross-appeals. He asserts that the district court improperly dismissed several claims against Wells Fargo as well as his claim that JPMorgan failed to convey mineral interests.


         Wells Fargo asks this court to set aside a jury verdict. "Although we review denial of a motion for [JML] de novo, we note that 'our standard of review with respect to a jury verdict is especially deferential.'"[4] "[W]hen evaluating the sufficiency of the evidence, we view all evidence and draw all reasonable inferences in the light most favorable to the verdict."[5] Nevertheless, we will not sustain a jury verdict based on a "mere scintilla" of evidence.[6]

         In Texas, "[t]he elements of a claim for breach of fiduciary duty are (1) a fiduciary relationship between the plaintiff and the defendant, (2) a breach by the defendant of his fiduciary duty to the plaintiff, and (3) an injury to the plaintiff or a benefit to the defendant as a result of the breach."[7] Both sides agree that a fiduciary relationship existed. Jones claims that Wells Fargo breached its fiduciary duty when it nonsuited the case instead of taking it to trial. In doing so, Jones says, Wells Fargo deprived him of a potential recovery and rendered any trust resources spent on attorneys' fees to have been wasted. Alternatively, Jones claims that Wells Fargo breached its duty by wasting trust resources litigating a meritless suit.

         With respect to the claim actually tried-that nonsuiting the suit was a breach of fiduciary duty-Jones failed to persuade the jury of that theory, as evidenced by its conclusion that the lawsuit had a value of zero at the time of nonsuit. Tellingly, Jones refused to accept an assignment of the House Suit claim. Thus, the only theory on which the jury ...

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