The Law Funder, LLC v. Munoz, Jr. et al

Filing 153

OPINION AND ORDER (Final Pretrial Conference and trial scheduling set for 6/15/2020 at 09:00 AM before Judge Micaela Alvarez)(Signed by Judge Micaela Alvarez) Parties notified.(AdrianDeLaRosa, 7)

Case 7:14-cv-00981 Document 153 Filed on 04/16/20 in TXSD Page 1 of 10
United States District Court
Southern District of Texas

ENTERED
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
MCALLEN DIVISION

April 16, 2020
David J. Bradley, Clerk

THE LAW FUNDER, LLC,

§
§
Plaintiff,
§
VS.
§ CIVIL ACTION NO. 7:14-cv-00981
§
SERGIO MUNOZ, JR., and LAW
§
OFFICES OF SERGIO MUNOZ, JR, P.C., §
§
Defendants.
§
OPINION AND ORDER
The Court now considers “Defendants’ Memorandum of Law on Right to Conduct
Discovery and Right to a Jury Trial”1 and Plaintiff’s response.2 The Court notes that both
memoranda are filed pursuant to this Court’s order.3 After considering the memoranda, record,
and relevant authorities, the Court GRANTS Defendants’ request for a jury trial and DENIES
Defendants’ request for a scheduling order to conduct discovery.
I. BACKGROUND
This 2014 case, described as a “saga” by the United States Court of Appeals for the Fifth
Circuit, has a long history already recounted by the Fifth Circuit.4 The Court will recount only
facts necessary to this order. As relevant here, this Court granted default judgment to Plaintiff
holding Defendants liable for legal malpractice under Texas law.5 The case proceeded to a bench
trial where Defendants failed to present any witnesses, and the Court granted final judgment in

1

Dkt. No. 151.
Dkt. No. 152.
3
Dkt. No. 149.
4
See Law Funder, L.L.C. v. Munoz, 924 F.3d 753, 756–58 (5th Cir. 2019).
5
Id. at 758.
2

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the amount calculated by Plaintiff’s expert.6 Upon appeal, the Fifth Circuit affirmed entry of
default

judgment

against

Defendants

but

held

that

the

Court

“erred

in

awarding Law Funder compensatory damages for attorney fees and costs that it would have
incurred regardless of Munoz’s negligence,”7 and vacated this Court’s damages award and
remanded for a new trial at which Defendants shall be allowed “to present evidence and conduct
cross-examination relevant to whether his negligence proximately caused Law Funder’s claimed
damages.”8
Now before this Court after remand, Defendants seek to conduct discovery on the issue
of damages and argue that Defendants are entitled to a jury trial. 9 The Court construes each
request as a motion to the Court. The Court will address each issue in a separate Part.
As a brief threshold matter, the Court notes Plaintiff’s memorandum10 lacks numbered
paragraphs entirely, hindering the Court’s reference to Plaintiff’s arguments. The Court cautions
Plaintiff that future submissions should consistently number each paragraph to properly comply
with the Federal Rules of Civil Procedure.11
II. MOTION TO CONDUCT DISCOVERY
Defendants request that the Court “issue a scheduling order setting forth deadlines for
discovery and pretrial submissions” because “Defendants need to conduct discovery into the
issue of whether and to what extent negligence on the part of Defendants proximately caused
Law Funder’s claimed damages.”12 Specifically, Defendants argue that the Fifth Circuit held that

6

Id.
Id. at 760.
8
Id. at 762.
9
Dkt. No. 151.
10
Dkt. No. 152.
11
FED. R. CIV. P. 7(b)(2) (“The rules governing captions and other matters of form in pleadings apply to motions
and other papers.”); FED. R. CIV. P. 10(b) (“A party must state its claims or defenses in numbered paragraphs, each
limited as far as practicable to a single set of circumstances.” (emphasis added)).
12
Id. at 2–3, ¶ 3.
7

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Plaintiff is not entitled to recover as damages the total amount expended in paying for
Defendants’ legal services, and because Defendants are entitled under Federal Rule of Civil
Procedure 26 to fair notice of Plaintiff’s damages computations, Plaintiff should therefore be
“required to submit its revised claim for damages and Defendants are entitled to discovery of
same.”13 Defendants’ precise request is unclear, however, because whether Defendants are
requesting only an updated expert report or a schedule that would enable Defendants to depose
Plaintiff’s expert and exchange expert disclosures is not specified.
Plaintiff evidently interprets Defendants request as the latter, broader request. Plaintiff
argues that nothing in the Fifth Circuit’s order requires the parties to “revise and exchange expert
reports,” and Plaintiff objects to “permitting Defendants to conduct a fishing expedition.”14
Plaintiff further argues that Texas law counsels against permitting discovery and that the Court’s
discovery sanction and entry of default judgment have already resolved the discovery issue and
Defendants cannot now seek discovery or complain of surprise.15
Plaintiff’s argument would be very strong if this Court “ruled that Defendants were not
entitled to any discovery as a result of their being defaulted”16 and Defendants subsequently
failed to appeal that ruling. However, Plaintiff does not cite any order determining that
Defendants are not entitled to discovery and this Court has discovered none.17 Furthermore,
Plaintiff mischaracterizes this Court’s discovery sanction. The sanction order struck Defendants’
pleadings and imposed attorney’s fees; the order did not hold that Defendants would be
disentitled to future discovery.18

13

Id. at 4, ¶ 7.
Dkt. No. 152 at 4–5.
15
Id. at 3–5.
16
Id. at 4.
17
See Dkt. Nos. 62–63.
18
See Dkt. No. 59 at 6–7.
14

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The Court interprets Defendants’ request for discovery broadly, consistent with
Plaintiff’s interpretation and Defendants’ specific “request that the Court issue a scheduling
order setting forth deadlines for discovery and pretrial submissions.”19 Defendants also argue
they “should have time to present their own expert’s report in response to that of the Plaintiff,”
which would likely require time to prepare Plaintiff’s expert disclosure.20 The Court interprets a
“scheduling order” as that which would issue pursuant to Federal Rule of Civil Procedure 16(b)
and set forth when discovery must be completed21 and when expert disclosures must be
exchanged.22
The Court interprets Defendants’ request for the issuance of a scheduling order to
conduct discovery as a request for modification of the scheduling order this Court already issued
pursuant to Federal Rule of Civil Procedure 16(b).23 In order to contextualize Defendants’
request, the Court briefly surveys the procedural history of scheduling matters in this case. This
case was initiated on December 12, 2014.24 In March 2015, the Court issued a scheduling order
and set trial for January 2016.25 Motions and amended scheduling orders pushed discovery and
trial further and further until the pretrial conference at which trial dates would be set was moved
to April 2017.26 Defendants appeared at the conference at which the Court delineated a
scheduling order,27 and all parties received the Court’s written amended scheduling order.28 In
the course of this case, Defendants properly moved to extend a hearing set forth by the

19

Dkt. No. 151 at 2, ¶ 3.
Dkt. No. 151 at 3, ¶ 5.
21
See FED. R. CIV. P. 16(b)(1)
22
See FED. R. CIV. P. 16(b)(3)(B)(i), 26(a)(2).
23
Dkt. No. 52.
24
Dkt. No. 1.
25
Dkt. No. 11.
26
E.g., Dkt. Nos. 16, 24, 52.
27
See Minute Entry (Oct. 18, 2016).
28
Dkt. No. 52.
20

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scheduling order.29 In short, Defendants were well-aware of the controlling effect of the
scheduling order and how to seek its modification. The scheduling order provided for the close
of discovery on February 15, 2017.30 Pretrial submissions were due in February and March
2017.31 The deadlines were obviated, however, by this Court’s grant of sanctions for Defendants’
discovery abuses and the unopposed entry of default judgment against Defendants. 32 During
these two-and-a-quarter years, Defendants refused to participate in discovery or turn over
documents and asserted perfunctory objections to Plaintiff’s discovery.33 Approximately twoand-a-half years after the close of discovery, Defendants now request the court issue a
scheduling order providing for some unspecific deadlines for discovery and pretrial submissions,
as if the parties have just held their initial pretrial and scheduling conference and are now
embarking upon discovery for the first time. Defendants effectively request the Court to reset the
clock, except as to liability, and allow Defendants to “unlock the doors of discovery” to
challenge Plaintiff’s experts and damages calculations.34
To achieve this modification of the scheduling order to provide for future “discovery and
pretrial submissions,”35 Defendants must demonstrate “good cause” and receive “the judge’s
consent.”36 The parties do not point to elaboration of what would constitute “good cause” or a
standard for assessing “good cause” in this context,37 but the Court will retrofit the Fifth Circuit’s
factors for assessing good cause in the context of a motion to modify a scheduling order to
permit expert report supplementation. The evaluative factors are: (1) the explanation for the

29

Dkt. No. 71
Dkt. No. 52 at 1.
31
Id. at 1–2.
32
See Dkt. Nos. 62–63.
33
Dkt. No. 59.
34
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009).
35
Dkt. No. 151 at 2, ¶ 3.
36
FED. R. CIV. P. 16(b)(4).
37
See Dkt. No. 151 at 4; Dkt. No. 152 at 5.
30

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failure to conduct timely discovery, (2) the importance of the discovery, (3) potential prejudice in
allowing the discovery, and (4) the availability of a continuance to cure such prejudice.38
Importantly, the justifications for modifying the schedule must be strong. “District judges have
the power to control their dockets by refusing to give ineffective litigants a second chance to
develop their case.”39 The Court will reject last-minute attempts at modification that would
disrupt trial dates.40 Furthermore, the Court does not possess unlimited discretion to allow
umpteen extensions.41 As William Gladstone and the Fifth Circuit powerfully put it, “justice
delayed is justice denied.”42
As detailed in this Court’s rulings, Defendants have no explanation for their failure to
conduct timely discovery during the two-and-a-quarter years between this case’s initiation and
the close of discovery.43 Defendants also do not detail the importance or expected impact of the
significant discovery they request. The only specific discovery Defendants seek is one expert
report that Defendants assert “needs to be revised so that Defendants are on notice as to what
legal fees and costs Plaintiff alleges it is entitled to recover as damages proximately caused by
Defendants.”44 However, Defendants have long been on notice as to what fees Plaintiff asserts it
is entitled to recover, and Defendants are equally as capable as Plaintiff to assess the impact of
the Fifth Circuit’s opinion on Plaintiff’s expert reports and claims for damages. Furthermore, the
potential prejudice to Plaintiff is immense if the Court issues a new scheduling order and grants
discovery, as Plaintiff has already proceeded to the close of discovery and expended legal fees to
compel Defendants to respond to discovery and deposition requests and filed subsequent motions
38

See Reliance Ins. Co. v. La. Land & Expl. Co., 110 F.3d 253, 257 (5th Cir. 1997) (quoting Geiserman v.
MacDonald, 893 F.2d 787, 791 (5th Cir. 1990)).
39
Id. at 258.
40
See id. at 257–58.
41
Cf. In re United States ex rel. Drummond, 886 F.3d 448, 450 (5th Cir. 2018).
42
Id.
43
E.g., Dkt. No. 59.
44
Dkt. No. 151 at 3, ¶ 5.

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responsive to Defendants’ default. Defendants’ request to now reopen discovery on damages
would moot much of Plaintiff’s work and expenditures in connection with the scheduled
discovery and would exacerbate the delay and expense already suffered by Plaintiff.45
Defendants’ attempt to moot Plaintiff’s expenditures is part of Defendants’ pattern of behavior
that gave rise to this suit.46 The Court will not cause Plaintiff to suffer additional delay and
expenditures, and will not grant Defendants a second bite at discovery to develop their
arguments on damages that should have been addressed during scheduled discovery; in short,
Defendants had their chance and will find no recourse in their failure to take it. Among other
things, the purpose of the Federal Rules of Civil Procedure is to secure the “speedy” conclusion
of civil actions.47 Although the Court will allow Defendants “to present evidence and conduct
cross-examination relevant to whether [Defendants’] negligence proximately caused Law
Funder’s claimed damages,”48 Defendants’ request for a scheduling order setting forth new
deadlines for discovery and pretrial submissions is DENIED.
However, Defendants’ argument that Plaintiff must meet the requirements articulated in
the Federal Rules of Civil Procedure is well-taken.49 To the extent that any proceedings (whether
in this Court or the Fifth Circuit) require supplementation of Plaintiff’s discovery disclosures or
expert reports under Federal Rules of Civil Procedure 26(a)(2)–(4) or 26(e), Plaintiff is
ORDERED to comply with Rule 26 no later than May 18, 2020.

45

See Law Funder, L.L.C. v. Munoz, 924 F.3d 753, 757 (5th Cir. 2019) (affirming this Court’s order that
Defendants’ discovery disobedience prejudiced Plaintiff, that continuance would exacerbate the harm, and the
Defendants had unreasonably and systematically prolonged the case).
46
See id. at 756 (describing that Plaintiff expended almost $2 million in attorney fees when Defendants’ conflict of
interest was discovered which led to nullifying the purpose of the expenditures).
47
FED. R. CIV. P. 1.
48
Law Funder, 924 F.3d at 762.
49
Dkt. No. 151 at 4, ¶ 7.

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III. MOTION FOR JURY TRIAL
Defendants request the court “order a jury trial as to damages in this case.”50 Defendants
point out that both parties have filed a jury demand.51 Defendants argue that Texas law applies to
this diversity case and that Texas law entitles a party to a jury trial on a legal malpractice claim.52
Plaintiff responds that Defendants’ request for a jury trial “is abrogated by the striking of the
answer,” that Plaintiff is willing to waive its request for a jury trial, that the Court already
rejected Defendants’ jury trial demand and such is the law of this case, and that Defendants’
citation to Texas law is inapposite.53
The law of the case doctrine does not resolve this issue. At the Court’s bench trial,
“Defendants demanded a jury trial on damages, which the Court denied with citation to Fifth
Circuit precedent.”54 Defendants did not appeal that ruling, and it is now the law of the case. The
Court construes Defendants’ Memorandum as a motion for reconsideration of that ruling.
Although the law of the case doctrine enshrines the concept that an issue cannot be relitigated
once judicially decided, the doctrine “is an exercise of judicial discretion, not a limit on judicial
power.”55 Because the Court ordered briefing on the jury trial issue,56 the Court exercises its
discretion to consider whether to grant a jury trial de novo.
Similarly, the Court’s striking of Defendants’ answer does not resolve this issue. Plaintiff
is correct that “once the court strikes the defendant's answer as a discovery sanction, the

50

Id. at 5.
Id. at 4, ¶ 8 (citing Dkt. No. 1 at 8, Dkt. No. 148).
52
Id. at 5, ¶ 9.
53
Dkt. No. 152 at 5–7.
54
Minute Entry (Sept. 12, 2017).
55
United States v. Castillo, 179 F.3d 321, 326 (5th Cir. 1999), rev’d on other grounds, 530 U.S. 120 (2000).
56
Dkt. No. 149.
51

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defendant is placed in the same legal position as if he had filed no answer at all.”57 The result of
this was Defendants’ default.58 The answer is inapposite to the jury issue.
Instead, Federal Rule of Civil Procedure 38 resolves this issue. When this case was
initiated, Plaintiff in its complaint “request[ed] a jury trial under Federal Rules [sic] of Civil
Procedure 38.”59 Although Plaintiff is now “willing to waive its request for a jury trial,”60
Plaintiff has not and cannot do so under Federal Rule of Civil Procedure 38(d).61 “[O]nce a party
has demanded a jury trial, the demand cannot be withdrawn without the consent of both
parties.”62 “Moreover, a general demand will be deemed to extend to all issues in the case triable
to a jury. Thus, the jury demand in this case extends to . . . the recovery of compensatory or
punitive damages.”63 “When plaintiff has demanded a jury trial, and subsequently has a default
entered, ‘it is the better practice, if not actually compelled, that the issue as to damages be
submitted to the jury.’”64 Plaintiff is not entitled to change its mind with respect to a jury trial
some four-and-three-quarters years after Plaintiff’s initial demand without Defendants’ consent.
This finding is consistent with Defendants’ jury trial right under Texas law.65 Accordingly,
Defendants’ request that the Court order a jury trial as to damages in this case is GRANTED.

57

In re Gober, 100 F.3d 1195, 1204 (5th Cir. 1996).
See Dkt. Nos. 62–63.
59
Dkt. No. 1 at 8, ¶ 56.
60
Dkt. No. 152 at 6.
61
FED. R. CIV. P. 38(d) (“A party waives a jury trial unless its demand is properly served and filed. A proper
demand may be withdrawn only if the parties consent.”).
62
Allison v. Citgo Petroleum Corp., 151 F.3d 402, 423 (5th Cir. 1998).
63
Id. (citation omitted).
64
10A MARY KAY KANE, CHARLES ALAN WRIGHT, ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE
§ 2688 n.20 (4th ed.) (quoting Barber v. Turberville, 218 F.2d 34, 37 (D.C. Cir. 1954)); see also Bass v. Hoagland,
172 F.2d 205, 209–10 (5th Cir. 1949) (requiring implementation of a Plaintiff’s jury demand upon Defendants’
default for issues triable by jury).
65
See TEX. CONST. art. 5, § 10 (“In the trial of all causes in the District Courts, the plaintiff or defendant shall, upon
application made in open court, have the right of trial by jury; but no jury shall be empaneled in any civil case unless
demanded by a party to the case . . . .”).
58

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The parties are ORDERED to appear for a final pretrial conference and trial scheduling
on June 15, 2020, at 9:00 a.m.
IT IS SO ORDERED.
DONE at McAllen, Texas, this 16th day of April 2020.
___________________________________
Micaela Alvarez
United States District Judge

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