In a recent trial, I had occasion to encounter the issue of when an issue can be considered to have been tried by consent. The trial was an adversary proceeding in a bankruptcy court, and the issues related to the alleged nondischargeability of the debtor’s (alleged) debt to the plaintiff creditor. In its complaint, the creditor raised the sole issue of nondischargeability under 11 U.S.C. §523(a)(4). The creditor did include language in the complaint that “discharge would be improper per at least 11 U.S.C. § 523(a)(4).” (Note that specificity of pleadings is beyond the scope of this blog – which is focused exclusively on the issue of trial by consent. Therefore, for purposes of the analysis below, it is assumed that a plaintiff did not plead the issue sought to be tried).
In the pre-trial order, the creditor included language arguing in favor of additional findings related to a cause of action under §523(a)(6). We added clear language to the pre-trial order objecting to the Court’s consideration of anything other than §523(a)(4).
On closing arguments at trial, plaintiff’s counsel raised, for the very first time, the argument that a cause of action under §523(a)(6) had been tried by consent. The gist of the argument appeared to be that, because some of the evidence admitted at trial (arguably) supported a cause of action under §523(a)(6). We obviously disagreed, and more importantly disagreed that that was the appropriate standard.
Since the case was taken under advisement, I can’t make definitive statements as to how that case will come out. I can only say that the analysis that I’ve made and described herein indicates that argument is not likely to prevail.
Numerous cases have made clear that trial by consent will only be found in “exceptional” cases and have held that the standard for determining when an issue has been tried by consent, despite not being explicitly pleaded, requires that evidence of the trial of the issue, rather than merely evidence of the issue, be present on the record. See, e.g., Trinity Carton Co., Inc. v. Falstaff Brewing Corp. 767 F.2d 184 (1985); City of The Colony v. North Texas Mun. Water Dist., 272 S.W.3d 699 (Tex. App. – Fort Worth 2008) (citing Case Corp. v. Hi–Class Bus. Sys. of Am., Inc., 184 S.W.3d 760, 771 (Tex. App. – Dallas 2005, pet. denied); Hampden Corp. v. Remark, Inc. 331 S.W.3d 489, 496 (Tex. App. – Dallas 2010) (“To determine whether the unpleaded issue was tried by consent, the trial court must examine the record not for evidence of the issue, but rather for evidence the issue was tried.). A party’s unpleaded issue may be deemed tried by consent when evidence on the issue is developed under circumstances indicating both parties understood the issue was in the case, and the other party failed to make an appropriate complaint. Id.
The analysis appears to be virtually identical under both Texas and federal law.
Importantly as it relates to my situation as described above, “trial by consent is inapplicable when evidence relevant to an unpleaded matter is also relevant to a pleaded issue; in that case, admission of the evidence would not be calculated to elicit an objection, and its admission ordinarily would not demonstrate a “clear intent” on the part of all parties to try the unpleaded issue. Id. In our case, the plaintiff argued that evidence that supported the notion that the debtor has violated his fiduciary duty – which supports a cause of action under § 523(a)(4) – also supported a cause of action under § 523(a)(6) as conduct that constitutes “willful and malicious injury” under that provision. Since that evidence could have supported a cause of action under § 523(a)(4), we had no reason to object. The caselaw makes clear that the fact that evidence may also support an unpleaded cause of action is not enough to justify a finding of trial by consent.
Therefore, while it is important to be aware of and object to evidence that would support an unpleaded cause of action, the fact that evidence may have been admitted that supports an unpleaded cause of action is insufficient to warrant a finding that the issue was tried by consent.
