Frivolous Appeal, Part II

Following up on an opinion issued last month that ruled an interlocutory appeal from the denial of a special appearance was frivolous, the Court of Appeals has now awarded the appellee sanctions of $9,650 in attorney fees and $191.25 in expenses as damages from the frivolous appeal. The Court shaved off $2,325 from the appellee’s fee application because some of her attorney’s billing entries either did not relate to the appeal or consisted of block billing that contained a mix of appellate and non-appellate activities.

Estate of Ardyce Deuel-Nash, Deceased (II), No 05-14-00128-CV

Frivolous Appeal

A special appearance in a probate case has led to the exceedingly rare grant of a motion for sanctions for the filing of a frivolous appeal. In this instance, the appellant managed to make a general appearance in the case before filing the special appearance — a fact that the appellant had failed to even address in response to the appellee’s briefing in the probate court. On top of that, the appellant had failed to preserve his argument on appeal that the special appearance was somehow severable from the motion to show cause in which he entered his general appearance, nor had the appellant objected (and thereby preserved error) when the probate judge overruled the special appearance without holding a separate hearing on it. Although the appellee had not submitted any evidence of her damages to support the award of sanctions, the Court of Appeals granted her leave to file such evidence within ten days of the opinion.

Estate of Ardyce Deuel-Nash, Deceased, No. 05-14-00128-CV

Sanctions Procedures

The day before trial, the attorney for the defendant in a car wreck case stipulated to her client’s liability. The next day, the plaintiff moved for sanctions under Rules 13 and 215, based on the allegedly late stipulation. After securing a $44,591 jury verdict, the plaintiff re-urged the sanctions issue, which the trial court granted in the form of a $5,000 award of attorney fees. The Court of Appeals affirmed the jury verdict, but reversed and rendered on the sanctions. The Court held that the sanctions could not be justified for discovery abuse under Rule 215 because that rule requires a party who is aware of possible discovery abuse to obtain a ruling prior to trial. As to Rule 13, that rule requires particularized findings of good cause, which were not included in the trial court’s judgment here.

Hernandez v. Hernandez, No. 05-13-01219-CV

Defendant Dodges Sanctions But Pays Plenty

During the course of this case, the defendant made numerous changes to his deposition testimony post hoc.  Ultimately, it was discovered that the defendant’s counsel had drafted the changes and told their client to adopt them.  The trial court judge, outraged at this behavior, forced the defendant to disclose emails reflecting that conduct (on the theory that they fell under the crime/fraud exception to attorney-client privilege).  Not surprisingly, the plaintiff had a field day attacking the defendant’s credibility at trial, leading to a multi-million dollar verdict in its favor, including substantial punitive damages.

After trial the plaintiff moved for sanctions based on the plaintiff’s conduct, which the trial court awarded.  On appeal, the Court of Appeals reversed, because the motion for sanctions should have been brought before trial and because, even under the trial court’s inherent power to sanction, the Court concluded that allowing the plaintiff’s counsel to use emails between the defendant and his counsel for cross examination was “enough to make the point” and further sanctions were excessive.

Cherry Petersen Landry Albert LLP v. Cruz

Death Penalty Sanctions and a Creative Attorney Fees Argument

Boardwalk Motor Cars sued Imagine Automotive Group over allegations that it had bribed Boardwalk employees to obtain used cars at preferential prices for resale, and that it had outright stolen some cars from Boardwalk’s dealerships. During discovery, Boardwalk successfully moved to compel the production of certain financial records, including canceled checks and documents supporting Imagine’s claim that it had paid for the allegedly stolen vehicles. That set off a lengthy series of sanctions motions and hearings. A week before trial, the court struck Imagine’s defenses for failing to produce some of those documents, and on the third day of trial it struck all of Imagine’s pleadings when Boardwalk informed the court of Imagine’s failure to produce still other documents. The jury awarded $269,950 in damages under the Theft Liability Act. The trial court then awarded Boardwalk $389,898 for its attorney fees under the Act, plus an additional $180,000 in sanctions against Imagine for the discovery abuse. The Court of Appeals affirmed.

The Court held that the trial court had not failed to consider the availability of lesser sanctions before imposing its death penalty sanctions. Among other things, the court had previously warned that noncompliance could result in dismissal, and the sanctions order stated that the judge had considered and rejected the less intrusive remedy of reopening discovery and continuing the trial. The trial court also did not err in refusing Imagine’s attempt to put on evidence disputing causation for Boardwalk’s claimed damages, as the striking of the pleadings meant that Imagine’s theft of the cars was an established fact. Imagine could have put on evidence that the cars were worth less than Boardwalk claimed, but could not dispute they had been stolen. The Court held that the sanctions were not excessive in light of Imagine’s multiple misrepresentations and acts of discovery abuse. Finally, the Court of Appeals rejected Imagine’s argument that Boardwalk should have been required to sub-segregate its attorney fees for the Theft Liability Act claim because that claim had shrunk during the course of the litigation from 256 allegedly stolen vehicles to only 11. The Court reasoned that segregation is only required between causes of action, not within a particular cause of action.

Imagine Automotive Group v. Boardwalk Motor Cars, No. 05-11-01119-CV

On Debtor’s Prison

A habeas corpus case arising out of an underlying divorce proceeding helps to illustrate the limits of a court’s authority to imprison a litigant for contempt. The trial court ordered the wife to pay her former husband $40,000 secured by a lien on a residence awarded to her in the divorce, to be paid six months after the decree. After that date came and went without payment, the husband moved for contempt, and the trial court sentenced her to confinement in the Hunt County jail until she tendered payment. The Court of Appeals ordered her to be released, citing the Texas Constitution’s provision that “No person shall ever be imprisoned for debt.” Tex. Const. art I, §18. Although the trial court could have jailed the wife for failing to comply with a court order to turn over specified property or funds (e.g., “the $40,000 in Wife’s savings account”), that authority did not extend to the failure to pay a pure debt to the other spouse. The Court therefore granted habeas corpus and ordered that the wife be unconditionally released.

In re Kinney, No. 05-14-00159-CV

Arbitration Confirmed, Sanctions Reversed

The Court of Appeals has issued a lengthy opinion affirming the confirmation of a take-nothing arbitration award, but reversing the trial court’s grant of a $10,000 sanction award against the attorney who challenged the award. The case arose out of the sale and subsequent foreclosure on a mineral lease in California. The lender alleged that it had been defrauded because it had not known about a $500,000 finder’s fee paid to the principal of the company that bought the mine for $2 million. The arbitrator rejected that position, finding that the lender’s chief witness was not credible in his allegations that he had not known about the finder’s fee. The opinion disposes of multiple grounds for vacating the award, including arguments that the arbitrator exceeded his authority and manifestly disregarded the law or committed a gross mistake in his award. The Court also denied the lender’s argument that the trial judge should have been disqualified due to her and her husband’s authorship (before she became a judge) of a paper praising arbitration and her husband’s continuing service as an arbitrator. But while the Court of Appeals found no merit to the lender’s challenges, it concluded that the trial court had abused its discretion in sanctioning the lender’s attorney. The largely generic facts alleged in the attorney’s pleading were supported by the record, and his legal contentions, even if not ultimately meritorious, could not serve as a basis for sanctions under Chapter 10 of the Civil Practice & Remedies Code. The Court remanded the case to the trial court for further consideration of alternative grounds for sanctions that the trial court had not ruled upon.

Humitech Dev. Corp. v. Perlman, No. 05-12-00857-CV

Inaccurate, But Not Groundless

A Collin County divorce case turned into a temporary injunction proceeding involving claims of assault and terroristic threats by an attorney in the middle of a deposition. The plaintiff, Barry Wells, alleged that his wife’s attorney became angry when Wells told him to calm down and commented that May’s daughter had probably committed suicide due to the attorney’s supposed anger issues. The lawyer allegedly made multiple death threats in the course of throwing Wells out of the building. Five days later, Wells filed a petition seeking injunctive relief to prevent the attorney from coming within 300 feet of him. The trial court granted an ex parte TRO, but the attorney quickly moved to dissolve the order and to impose sanctions for filing a groundless, bad faith pleading. After a hearing, the trial court dissolved the TRO and entered sanctions against Wells by striking his petition and dismissing the case with prejudice.

The Court of Appeals affirmed the dissolution of the TRO, but reversed the sanctions order. The ruling on the TRO was moot, and therefore non-appealable, because the order would have expired after 14 days in any event. As to the sanctions order, the deposition transcript revealed that Wells had been the instigator of the confrontation with the defendant, and that his comment about the attorney’s daughter was outrageous, the transcript also showed that the attorney had indeed threatened to kill Wells if he did not leave or if he ever returned. Thus, even though though Wells’ pleading presented an inaccurate account of what had transpired, the threat of imminent bodily injury meant that the claims of assault and terroristic threat were not groundless. The order striking the petition was therefore reversed, and the case was remanded for further proceedings.

Wells v. May, No. 05-12-01100-CV

Consideration of Lesser Sanctions Must Appear in the Record

The Shops at Legacy filed suit against Fine Autographs & Memorabilia for breach of their lease agreement. On the day of trial, TSAL filed a motion for continuance, which was denied. Fine Autographs then filed a motion for sanctions based on alleged discovery abuse by TSAL, apparently relating to its failure to produce copies of checks and a document related to the lease. The trial court granted the motion and dismissed TSAL’s claim with prejudice as a “death penalty” sanction. Although the court’s order recited that it had considered, and rejected, the possibility of lesser sanctions, nothing in the record of the sanctions hearing actually demonstrated the consideration of lesser sanctions. Because a court must consider the availability of lesser sanctions before dismissing a party’s case, the Court of Appeals reversed and remanded the case for further proceedings.

The Shops at Legacy (Inland) L.P. v. Fine Autographs & Memorabilia Retail Stores, Inc., No. 05-12-00864-CV

Jury Trial Required to Sustain 9-Month Sentence for Contempt

The pace of the Court’s docket has slowed down since the end of August, but the stakes are still high for some litigants. Relator Todd Tomasella was convicted of criminal contempt and sentenced to consecutive terms of 6 and 3 months. The Court of Appeals granted habeas corpus because Tomasella had not had a jury trial, which cannot be denied if the sentence is in excess of six months. However, Tomasella had also been convicted of civil contempt, and he did not challenge that portion of the conviction in his habeas petition. The Court of Appeals therefore discharged the conviction and sentence for criminal contempt, but left the conviction and sentence for civil contempt in place. As a result, Tomasella will apparently remain in the custody of the Kaufman County Sheriff for an unspecified period of time.

In re Tomasella, No. 05-13-01077-CV