Texas Second Circuit Court of Appeals Issues Favorable Ruling

Weitz Morgan PLLC

The Texas Second Circuit Court of Appeals recently handed down its opinion in MCMC, Ltd. v. SideCars, Inc. The lawsuit involved an effort by a used car dealer in Ft. Worth, Texas to sue on a breach of contract between itself and SideCars that occurred in 2010.  MCMC did not file suit until 2016, six years after the breach, but argued that the limitations period had been tolled because there was no clear injury until after the appeal process had run its course.

The facts involved a program to allow used car dealers to self-fund their collateral protection insurance through a producer owned reinsurance company.  In 2010 the Texas Department of Insurance deemed the program unauthorized insurance because it argued that the insurance really covered the car buyer and not the dealer and therefore was simply an auto physical damage program that had been marketed by an entity unauthorized to conduct business in the State of Texas. In October 2010 a Travis County District Judge ruled in favor of the Texas Department of Insurance and against SideCars. In November the court issued a permanent injunction enjoining the future marketing of the program. The facts demonstrated only three car dealers, including MCMC, had ever used the program and all three ceased doing so in August 2010.

SideCars appealed, first to the Third Circuit Court of Appeals who affirmed the trial court, and then on Petition for Review to the Texas Supreme Court. After a full briefing on the issues, the Texas Supreme court denied the Petition for Review in October 2014.  In 2016 MCMC filed suit claiming that it was damaged in an amount of $125,000 for what it agreed to pay the Texas Office of the Consumer Credit Commission. The OCCC had filed a claim against MCMC based on the 2010 judgment asserting it should repay all of the premium it collected. Both sides filed competing summary judgment motions with Weitz Morgan arguing on behalf of SideCars that any claim was barred because MCMC’s damage was readily identifiable and accrued in 2010.

The 153 District Court in Tarrant County denied MCMC’s motion and granted SideCars’ motion dismissing MCMC’s case.  MCMC appealed. The Texas Second Circuit Court of Appeals affirmed the trial court holding that the injury to MCMC accrued in 2010, was readily identifiable, and that the appeal had not tolled the limitations period.

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