In In re State Farm Mut. Auto. Ins. Co., the Fifth Court held that the trial court abused its discretion by ordering an attorney to pay up to $88,240 as a sanction before final judgment, without making express written findings as to why the sanctions did not impair State Farm’s access to the courts.

Reviewing the supreme court’s precedent in the area, the Court held that when a litigant contends that a monetary sanction precludes access to the court, the sanctioning court must either (1) provide that the sanction is payable only at a date that coincides with or follows entry of a final order terminating the litigation, or (2) make express written findings, after a prompt hearing, as to why the award does not have such a preclusive effect. No. 05-24-00229-CV (Aug. 23, 2024) (mem. op.).

In MGO, LLC v. Accessology Too, LLC, a frustrated judge said:

If I need to order additional production, if you have objections that you are not sure about, I would urge you not to make frivolous or unnecessary objections, because, on the 14th, if it looks like people are still stalling, or trying not to hand over relevant information, I have been known to award attorney’s fees for that kind of behavior. And since we are coming up on the eve of trial, if it looks like you have something that is relevant and clearly within the scope of discovery and you’re hanging it up on some kind of technicality, that Friday is not going to go very well for your client.

While sincere and pointed, that statement didn’t satisfy the prerequisite for death-penalty sanctions of considering lesser sanctions:

[A]n order compelling discovery responses, coupled with an unequivocal warning that noncompliance would result in dismissal, constitutes a lesser sanction that can support a subsequent death-penalty sanction. However, equivocal warnings of future sanctions do not constitute lesser sanctions.  The trial judge’s remarks in this case were equivocal warnings about  future sanctions and did not specifically mention the possibility of death-penalty sanctions at all.

No. 05-23-00100-CV (July 17, 2024) (mem. op.) (citations and emphasis omitted).

Liebbe v. Courtney, discussed earlier this week as to its holding about damages, also reversed a sanctions order, stating:

… from the record before us, we cannot conclude the evidence gives rise to an inference of intent or willfulness or indicates improper motive on Liebbe’s part. As a result, we conclude the trial court abused its discretion by assessing sanctions against Liebbe under its inherent authority without finding bad faith, both with regard to the order to pay TLAP and take additional CLE hours, as well as with regard to the order to pay attorneys’ fees, a matter we address next.

No. 05-22-00158-CV (July 5, 2024) (citations omitted, emphasis added).

A sanction was reversed in Ariceaga-Banda v. Daftim, LLC:

We conclude the trial court’s statements in pre-trial hearings and on the day scheduled for trial demonstrate it imposed death penalty sanctions in response to appellant’s failure to pay the $1,000 sanction. As noted, a trial court may constitutionally impose death-penalty sanctions if the sanctioned conduct reasonably supports a presumption that a party’s claim is meritless.  However, as in Griggsand Khan, appellant’s failure to pay the $1,000 sanction reveals nothing about the merits of her claim. We find the reasoning in Griggs and Kahn to be apt and persuasive in this case. Consequently, we conclude the trial court’s imposition of death-penalty sanctions due to appellant’s failure to pay the $1,000 sanction was an abuse of discretion.

No. 05-22-00274-CV (Jan. 30, 2024) (mem. op.) (citations omitted).

The Fifth Court affirmed a severe sanction in Hizar v. Heflin. An issue was whether this admonition in an order on a motion to compel was a “lesser sanction” as understood byt by the case law about death-penalty sanctions:

“If Defendant fails to produce all responsive documents by Monday, July 12, 2021, Defendant’s pleadings will be struck.”

Aligning with several other appellate districts that have reached similar conclusions, the Court held that this language qualified as an unequivocal warning in the context of a death-penalty sanction. No. 05-21-00936-CV (July 10, 2023).

The Fifth Court reversed a sanction, holding, inter alia, that the trial court’s inherent power did not extend to the matter at hand: “Frenkel’s failure to investigate the source of the Document at Issue before making his bold proclamation that the document was not forged was ill advised. However, reviewing the evidence in the light most favorable to the trial court’s ruling, we cannot conclude the evidence gives rise to an inference of intent or willfulness or indicates improper motive.” Frenkel v. Courtney, No. 05-21-01114-CV (June 9, 2023) (mem. op.) (citation omitted).

Allegheny Millwork v. Honeycutt highlights a tension in some requests for sanctions–a request for a large amounts of attorneys’ fees can be inconsistent with the underlying claim that a position is not well-founded:

“While Allegheny’s counsel’s failure  o reconcile or even address that the case is disappointing, and thereby raises an issue of candor with the Court, we do not see it as sufficiently egregious to support a shifting of fees, and certainly not in the amount requested by NQS. Given this Court’s familiarity with its own opinion in Ninety Nine Physicians, a brief reference to the case in response to the attorney’s fee issue would have sufficed.”

No. 05-21-00113-CV (June 8, 2022) (mem. op.) (footnote omitted).

In Diana Convenience LLC v. Dollar ATM, LLC, the Fifth Court affirmed a death-penalty sanctions award. Among the relevant facts considered, this particular move was unwise for the sanctioned party: “[T]he decision by appellants Shark Phones and AMK Convenience to file a no-evidence motion for summary judgment based on the very evidence that appellee was seeking—who signed the agreement and were they authorized to do so—supports the trial court’s finding that appellants had a callous disregard for the rules of discovery.” No. 05-20-00936-CV (May 25, 2022).

The difficulties of the COVID-19 pandemic led to reversal of a contempt finding in a family-law dispute about how to pass a child from one divorced parent to another:

“Here, the requirement that Hilburn surrender the child ‘at the school in which the child is enrolled’ became reasonably susceptible to more than one meaning when the child’s physical school closed, and the child moved to a virtual learning environment at his grandfather’s house. Although the child was enrolled at a public elementary school, he did not attend the physical school building nor was he enrolled in classes held at the school itself. Hilburn’s view that the physical location where the child is engaging in school constitutes the place of enrollment is, thus, one reasonable interpretation of the terms of the 2012 Order as applied to a virtual learning environment.”

In re Hilburn, No. 05-20-01068-CV (March 21, 2022) (mem. op.) (emphasis added).

“’Texas courts have long held that an appealing party may not complain of errors that do not injuriously affect it or that merely affect the rights of others.’ An appellant is not harmed when sanctions are imposed solely against the appellant’s attorney and does not have standing to challenge an order imposing sanctions solely upon his attorney.” On Deck Capital, Inc. v. CWO Designer Landscapes, No. 05-20-00471-CV (Feb. 10, 2022) (mem. op.).

The Fifth Court reversed a sanctions award arising from a discovery dispute involving a subpoena to a health-care provider, finding weaknesses in the supporting record that included these matters:

• Technical problems with the subpoena papers. “Incomplete preparation and service of the subpoena, however, is not evidence of Allstate’s bad faith, harassment, or improper purpose necessary to overcome the presumption that pleadings are made in good faith.”
• Other litigation. “ROSIT’s allegations of sanctionable conduct rest on its contention that, based on a history of intentional noncompliance in other cases, Allstate intentionally failed to comply with the requirements for service of a subpoena and then filed the motion in bad faith, for an improper purpose, and to harass ROSIT. The trial court’s findings of sanctionable conduct were based in part on this history. But Allstate’s motion for sanctions with its attachments was limited to ROSIT’s noncompliance with service in this case.”
• Alleged discovery agreement. “In its motion and at the hearing, and as reflected in the trial court’s findings and conclusions, ROSIT complained of Lexitas’s ‘repeated refusal to comply’ with an alleged agreement regarding service of depositions on written questions directed to ROSIT in this and other cases. Although the trial court cited this failure in its findings, no evidence of any such agreement was admitted.”

Allstate Property & Casualty Co. v. Ford, No. 05-20-00463-CV (Oct. 15, 2021) (mem. op.).

In re Frenkel illustrates an important procedural aspect of practice regarding sanctions; specifically, the supreme court’s holding in Braden v. Downey, 811 S.W.2d 922 (Tex. 1991) (orig. proceeding) about the interplay between an interlocutory sanctions order and the right to its appellate review.

In this case, the Fifth Court found that mandamus review of a $1000 sanction payable to TLAP was warranted because after final judgment, “the trial court would not have the means to compel TLAP to return the monetary sanction.”

Similarly, it found that a requirement to take certain ethics CLEs within 24 months of the order also require mandamus intervention, as “[t]here is no guarantee that a final appealable judgment will be rendered before the twenty-four month period expires,” particularly in light of the COVID pandemic. Accordingly, the Court required the trial court to defer both orders “until rendition of final judgment, thus allowing the merits of the sanctions order to be considered on appeal.” No. 05-21-000194-CV (July 13, 2021).

“[A]ppellants initiated the underlying suit and then essentially abandoned the proceedings they had set in motion. Appellants failed to participate in depositions even though the trial court and appellees attempted to make remote participation in the depositions possible. Not until appellees’ fourth motion to compel did the trial court impose death penalty sanctions on appellants and strike their pleadings. Under these circumstances, we conclude the trial court did not abuse its discretion in awarding  sanctions four times in response to appellants’ failure to appear at depositions and ultimately striking appellants’ pleadings.” Boktor v. U.S. Bank, No. 05-19-01306-CV (April 7, 2021) (emphasis added).

The Fifth Court reversed an award of sanctions, based on the trial court’s exercise of its inherent power, in In re Estate of Powell: “The trial court’s orders reflect that it made the attorney’s fees award as a sanction for Douglas’s and Putnam’s bad faith violation of the rule 11 agreement. Although there is some evidence supporting the trial court’s finding that Douglas and Putnam acted in bad faith, the trial court did not also find or conclude that Douglas’s and Putnam’s bad faith conduct significantly interfered with the court’s ‘legitimate exercise of its core functions.’ Consequently, we conclude the trial court abused its discretion by imposing the sanction against Douglas and Putnam.” No. 05-19-00689-CV (Aug. 4, 2020) (mem. op.) (citations omitted) (applying Union Carbide Corp. v. Martin, 349 S.W.3d 137 (Tex. App.–Dallas 2011, no pet.)

The details of Duncan v. Park Place Motorcars provide a road map to “death penalty” sanctions, both substantively and procedurally as to the trial court’s findings: “On this record, we conclude the imposition of death penalty sanctions was just because it related directly to the conduct at issue in the case—specifically, Duncan’s  failure to appear for the completion of his deposition, and generally, Duncan’s  continuing violation of the trial court’s orders and hindrance of the discovery process  for appellees; the trial court imposed lesser sanctions to no avail; and Duncan’s  conduct throughout the long history of the case reasonably justified a presumption his affirmative claims lacked merit. Accordingly, we conclude the trial court did not abuse its discretion in ordering death penalty sanctions in this case.” No. 05-19-00032-CV (June 2, 2020) (mem. op.)

“Appellants did not request an evidentiary hearing on their motion for attorney’s fees even though Denney stated in her response that an evidentiary hearing is required before sanctions may be imposed. Her attorney stated at the hearing that he was prepared to offer testimony in response to appellants’ request for sanctions.  Appellants, however, never offered any evidence at the hearing and never objected to  the lack of an evidentiary hearing on their motion. . . .  On appeal, Dallas Metro and Net Worth’s rely on documents and portions of Denney’s deposition attached to their motion for attorney’s fees as evidence to support their claim. However, the documents and deposition testimony were never admitted into evidence. As a result, the documents were not before the trial court and cannot be considered as evidence on appeal.” Net Worth Realty USA v. Denney, No. 05-18-00336-CV (March 6, 2019) (mem. op.) (citations omitted, emphasis added).

A detailed road map for a sustainable award of death-penalty sanctions appears in Hill v. Spracklen – “In their motion to impose death-penalty sanctions, the Spracklens catalogued Hill’s history of misconduct, including his deliberate and continuing violation of multiple court orders and his abusive and defiant behavior at his deposition. In granting the Spracklens’ request for death-penalty sanctions, the trial court [also] considered . . .  the admission of Hill’s counsel that Hill chose not to appear at the hearing. In addition, in the final judgment, the trial court found Hill’s conduct during trial provided additional support and grounds for striking Hill’s pleadings . . . At trial, Hill introduced documents he should have produced during the course of the case, but failed to do so despite having been repeatedly ordered to do so, and presented what appeared to be inconsistent forms of the contract Janet Spracklen supposedly signed.” No. 05-17-00829-CV (July 12, 2018) (mem. op.)

NRG failed to attend a court-ordered mediation. The court entered “death penalty” sanctions and NRG sought a new trial, alleging problems with notice and difficutly finding appropriate counsel (as an LLC, NRG could not appear pro se). The Fifth Court reversed, finding (1) no direct relationship between the sanction and the harm (incurred expenses) to the other party, (2) a failure to test less sanctions, and (3) potentially meritorious defenses. NRG & Associates v. Service Transfer, LLC, No. 05-16-01375-CV (Dec. 21, 2017) (mem. op.)

In a topic also addressed on 600Camp today, the interplay of criminal proceedings and civil litigation can be challenging. The conclusion of Dunne v. Brinker Texas, Inc. summarizes one potential result: “Under the particular facts of this case, the only possible remedial measure that could have protected Dunne’s Fifth Amendment privilege was an abatement. But an abatement could not cure the prejudice Chili’s had already suffered from being unable to identify fact witnesses for the more than a year that had passed since it first requested that information. In addition, there was no indication how long the case might sit in limbo, when trial might be, and whether Dunne would continue to assert his Fifth Amendment rights in the event of an appeal. We conclude the trial court did not abuse its discretion in striking Dunne’s pleadings and therefore affirm.” No. 05-16-00496-CV (Aug. 10, 2017).

In some detail, the district court ordered Altesse Healthcare not to deplete the assets of a business, whereupon: “Altesses’s actions in failing to comply with the TRO resulted in destroying the value of the company over which the lawsuit was based. In essence, Altesse took over running the company and then failed to make the scheduled payments when due, leaving the Wilsons without the company or payment. After the trial court ordered Altesse to return the company to the Wilsons, Altesse delayed and by the time it returned the necessary assets to run the business, there was little left to run.” The Fifth Court affirmed the trial court’s detailed order awarding “death penalty” sanctions and other penalties, including contempt. Altesse Healthcare Solutions v. Wilson, No. 05-15-00906-CV (Aug. 23, 2016) (mem. op.)

Last Friday, blog publisher David Coale spoke about recent federal cases on sanctions and professional responsibility issues; for some ethics CLE self-study, here is the handout that he used.

Tunnell sued Archer for negligence after a truck accident involving Archer’s cattle.  The trial court declined to dismiss Tunnell’s claim for failure to file an expert report under a statute related to claims against health care providers (Archer was a doctor), and Archer  appealed that denial.  After a Texas Supreme Court opinion clarified the underlying statute,Tunnell contended that Archer’s appeal not only no longer had merit, but had become frivolous and sanctionable.

After Archer continued with the appeal on other grounds, the Fifth Court agreed with Tunnell and sanctioned Archer and his counsel for the costs of the motion to dismiss: “After the supreme court’s opinion in Ross, there were no reasonable grounds for an advocate to believe the case could be reversed. However, appellants did not dismiss this frivolous appeal. Instead, appellants’ counsel filed a brief on the merits asserting ERISA preemption based on non-existent orders that this Court lacked jurisdiction to consider. No reasonable counsel could believe the ERISA-preemption argument was a reasonable ground for reversal in this case when there was no written order on a motion asserting the argument and no statute permits an interlocutory appeal from such an order. In these circumstances, we conclude that appellants and their counsel’s actions are so egregious as to warrant the award to Tunnell of just damages from appellants and their counsel for their pursuit of this frivolous appeal.”  Archer v. Tunnell, No. 05-15-00459-CV (Feb. 9, 2016) (mem. op.)

After a deadly 18-wheeler accident, the trucking company “decided to have the remains of the tractor and part of the trailer cut in half and crushed.”  The district court allowed a spoliation instruction in the subsequent litigation, and the Fifth Court affirmed, noting: “the severity of the crash, [the CEO’s] years of experience in the industry, his previous dealings with obtaining police reports, and his awareness to preserve the [electronic control mechanism].”  That said, particularly given the company’s protection by the workers’ compensation statutes, the death penalty sanctions entered by the district court did not have a “direct relationship” to that destruction.  In re: J. H. Walker Inc., No. 05-14-01497-CV (Jan. 15, 2016) (mem. op.)  This opinion presents a thoughtful application of the Texas Supreme Court’s recent analysis of spoliation in Brookshire Brothers, Ltd. v. Aldridge, 438 S.W.2d 9 (Tex. 2014).

After the second mediation of a wrongful death case failed to yield a settlement, the trial judge ordered the Chief Claims Officer (a resident of Alabama not otherwise involved in the case) of the defendant’s carrier (a nonparty) to appear at a show cause hearing.  The Fifth Court granted a mandamus petition about that order: “[W]e conclude the judge lacked jurisdiction to order Thomas, a non-party who did not attend either mediation and who lives outside the trial court’s subpoena range, to appear and explain why ProAssurance should not be sanctioned.”  In re ProAssurance Ins. Co., No. 05-15-01256-CV (Jan. 4, 2016) mem. op.)

A long-running suit over a 1999 contract for the sale of a house resulted in a mistrial, followed by cross-motions for death penalty sanctions. The seller sought sanctions for discovery abuse and fraud, while the buyer claimed the seller had testified falsely at trial. The trial court granted both motions, striking everyone’s pleadings. Both sides appealed, and the Court of Appeals reversed and remanded. As to the buyer, the trial court had not considered the availability of lesser sanctions, and the fabrication of one construction estimate did not give rise to a presumption that other claims not based on that document were meritless. As to the seller, the death penalty sanction was disproportionate to the seriousness of the offense. The seller had testified that she paid a property tax bill with a credit card when records showed it was actually paid with cash and a check. Although the trial court found that misstatement was intentional, the Court of Appeals did not consider the discrepancy to be material enough to warrant the striking of her entire case.

Kim v. Hendrickson, No. 05-13-01024-CV

In this post-judgment litigation, the plaintiff sought to collect on a judgment against the defendant.  During the course of the litigation, the plaintiff filed pleadings and made assertions that the defendant felt were false.  Consequently, the defendant successfully moved for sanctions under Chapter 10 of the Texas Civil Practice and Remedies Code.

The plaintiff appealed and raised nearly every possible argument for overturning the sanctions award, but the Court of Appeals rejected them all, affirming the award.

Powell v. Penhollow, Inc.

The defendant in this private jet interior decoration case pleaded a series of affirmative defenses.  After the defendant’s counsel objected to requests for production asking for documents related to these affirmative defenses and then instructed its corporate representative not to answer depositions questions about them, the trial court struck the affirmative defenses in their entirety as a sanction.  The defendant later lost at trial and appealed the trial court’s sanction.

The Court of Appeals reversed, holding that striking the defendant’s affirmative defenses amounted to a “death penalty” sanction that went too far.  Because the trial court had not adequately considered other remedies (such as assessing deposition costs or awarding attorneys’ fees), the sanction was unwarranted.  The Court explained that “case determinative sanctions may be imposed in the first instance only in exceptional cases when they are clearly justified and it is fully apparent that no lesser sanctions would promote compliance with the rules.”

Associated Air Ctr. LP v. Tary Network Ltd.

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

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

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

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

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

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

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

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

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

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

In the course of a lawsuit for breach of contract and fraud, the district court entered an order permitting discovery on a pair of banks, but prohibiting the litigants from disclosing their documents to third parties. The plaintiffs’ attorney subsequently filed the two business records affidavits produced by the banks, along with 1300 pages of accompanying documents. Six months later, the defendants moved to seal the documents and for sanctions based on the earlier protective order. The trial court fined the plaintiffs’ attorney $2000. The attorney appealed after final judgment in the case, arguing that the defendants had not asked for any particular amount of sanctions and had presented no evidence justifying the $2000 award. The Court of Appeals agreed, citing the Supreme Court’s recent opinion in Paradigm Oil, Inc. v. Retamco Operating, Inc. for the proposition that “[s]anctions for discovery abuse should not be dispensed as arbitrary monetary penalties unrelated to any harm.” 372 S.W.3d 177, 184 (Tex. 2012). In this instance, the defendants had not even incurred any attorney fees for bringing their motion, as they were appearing pro se at the time. Accordingly, the court rendered judgment denying the motion for sanctions.

Wiegand v. Sky King Foundation Inc., No. 05-12-00020-CV

Twice before, Elite Door & Trim had prevailed at the court of appeals in its attempt to obtain a no-answer default judgment against the defendant in a dispute between the two contractors. See Elite Door & Trim, Inc. v. Tapia, 355 S.W.3d 757 (Tex. App.-Dallas 2011, no pet.); In re Elite Door & Trim, Inc., 362 S.W.3d 199 (Tex. App.-Dallas 2012, orig. proceeding). After the trial court again proceeded to hear the default motion, it entered an order denying it once again, finding that Elite had failed to establish liability because it had not proven various non-damages elements of its claims. The court of appeals rejected that finding, because Tapia’s failure to file an answer served as an admission of the contentions in Elite’s petition. The court of appeals also reversed the trial court’s finding that Elite had not submitted competent evidence of its damages, concluding that the testimony of Elite’s president had adequately established the amount and method of calculating the company’s damages, attorney fees, and prejudgment interest. However, the court of appeals rejected Elite’s request for $15,000 in sanctions against the trial judge for requiring Elite to pursue multiple appeals and mandamuses to obtain a no-answer default judgment, as 42 U.S.C. § 1983 no longer permits such relief against a judge for an act or omission taken in the judge’s official capacity in the absence of extraordinary circumstances. In all other respects, the court of appeals rendered judgment in favor of Elite.

Elite Door & Trim, Inc. v. Tapia, No. 05-12-00725-CV

In a lengthy opinion arising from a legal malpractice case, the court of appeals has reversed the judgment of the district court striking the plaintiffs’ experts and granting judgment for the defendants due to the lack of expert testimony. The experts had been struck after the plaintiff’s attorney had missed two previous disclosure deadlines, then failed to provide expert reports as required by the trial court’s amended scheduling order. The plaintiff argued that the trial court had issued improper “death penalty” sanctions, and the court of appeals agreed. There was nothing in the record indicating that the plaintiff herself bore any responsibility for her attorney’s failure to timely designate the experts, so there was no direct relationship between the plaintiff’s conduct and the sanction imposed. The court of appeals also held that the sanctions were excessive in any event, because the trial court had not previously awarded any lesser sanctions for the previous failures to timely designate the experts. It was not enough, the court of appeals held, for the trial court to simply recite that no lesser sanction would suffice because this was not the type of egregious and exceptional discovery abuse that would make death penalty sanctions “clearly justified” and “fully apparent.” However, the court of appeals also affirmed the trial court’s denial of the plaintiff’s motion for leave to file an amended petition after the pleading deadline, where the petition sought to add new claims and causes of action to the case.

Gunn v. Fuqua, No. 05-11-00162-cv

We don’t usually cover family law cases here at 600 Commerce, but this one involves the validity of an award of attorney fees as a sanction against the plaintiff. Steven Shilling and Karrie Gough divorced in 2005. The divorce decree included an agreed permanent injunction prohibiting the Ms. Gough from “disclosing” information about her ex-husband’s medical history. Several years later, Mr. Shilling sued his ex-wife for allegedly violating the injunction. After a bench trial, the trial court ruled that Gough had not violated the injunction by discussing Shilling’s medical history with her friend and new husband because they already knew about Shilling’s medical history — hence, Gough had not “disclosed” it to them. The trial court then awarded Ms. Gough $96,000 in attorney fees under both section 9.014 of the Family Code and as sanctions against Shilling for bringing a frivolous and bad faith lawsuit.

After rejecting section 9.014 as the basis for an award of fees — concluding that section only authorizes attorney fees in a suit for enforcement of the division of property, not enforcement of an injunction against speech — the court of appeals turned to the issue of attorney fees as a sanction. Gough’s answer had requested an award of attorney fees and stated that Shilling’s suit was “frivolous and brought for the purposes of harassment only.” The pleading was otherwise silent on the basis for any award of fees, no motion for sanctions was ever filed, and the trial court never issued any order for Shilling to show cause why he should not be sanctioned. Under those circumstances, the court of appeals held that the trial court abused its discretion by awarding fees to Gough under Chapter 10 of the Civil Practice & Remedies Code, which requires either a motion for sanctions or an order to show cause that describes the sanctionable conduct. The court likewise ruled that the attorney fees could not be sustained as a sanction under Rule 13 for filing a case that was “groundless and brought in bad faith,” because it was not self-evident that Ms. Gough’s discussions with her friend and new husband had not “disclosed” new information about Shilling’s medical history. Accordingly, the court of appeals reversed and rendered the attorney fees award.

Shilling v. Gough, No. 05-11-00292-CV

The court of appeals has issued an opinion reversing an award of sactions in a case arising out of the purchase of a $1.5 million painting.  According to the plaintiff, the defendant art gallery had sold him an N.C. Wyeth painting titled The Sheriff (you can see it here), based in part on the representation that it had been used on the cover of the Saturday Evening Post in 1908.  The buyer subsequently found out that was not true, and sued the gallery for a number of claims, including violations of the Deceptive Trade Practices Act.  The gallery moved for summary judgment, and the plaintiff nonsuited his case.  That led the gallery to move for sanctions, alleging that the suit had been brought in bad faith.

The trial court held a hearing on the sanctions motion, but the plaintiff’s attorney missed it due to a mix-up by his office. The court went ahead with the hearing anyway and awarded sanctions of approximately $83,000.  When the attorney discovered what had happened, he filed a motion for reconsideration and motion to vacate, which the court granted, reducing the sanctions award to $7,500.  But while the first sanctions order had explained the basis for the award in detail, the second order stated only that it was for “violation of TEX. CIV. PRAC. & REM. CODE § 10.001 (1), (3) relating to the plaintiff’s claims brought against the defendant pursuant to the Deceptive Trade Practices Act.”  The court of appeals held that finding was insufficiently specific to sustain the sanctions, especially in light of the nearly $75,000 difference between the two orders.  The court of appeals therefore reversed the judgment and remanded to the trial court for additional consideration — but with a footnote noting the panel’s “grave reservation to condone an award of sanctions against an attorney for filing a suit with multiple claims and asking for more in damages than the statutory limit of a single claim.”

Although it was not mentioned in the court’s opinion, the plaintiff had actually refiled his case in federal court shortly after he nonsuited it in state court.  You can find some of the background of the dispute, including a statement from the gallery’s attorney, here.  According to PACER, that version of the lawsuit is still being litigated.

Sell v. Peters Fine Art, Ltd., No. 05-11-00469-CV

James Owen did not have a winning case.  In fact, the lawsuit he filed on behalf of Rhonda Krisle against Rusty Wallis Volkswagen asserted the precise claim (under the Texas Finance Code) that the Court of Appeals had rejected several years earlier.  What’s more, Owen knew about this earlier case because he had been counsel for the losing appellant.  Despite this, Owen still brought suit.  After motion practice, which ended in a non-suit of all claims by Krisle, Rusty Wallis moved for sanctions.  Not surprisingly, the trial court sanctioned Owen to the tune of $20,000.

Owen appealed.  The Court of Appeals, however, was equally unimpressed was Owen’s reasons why he should not be sanctioned, which included the claim that the decisions by the Court of Appeals do not have binding precedential value unless they are explicitly approved by the Texas Supreme Court.   Among other things, the Court found that, based on the explicit precedent rejecting Krisle’s claim, as well as Owen’s clear awareness of this precedent, the trial court did not abuse its discretion in sanctioning Owen.  After rejecting the rest of Owen’s arguments against sanctions, the Court then concluded that Owen’s appeal was “objectively frivolous” and cited him for an additional $7,500.

Owen v. Rusty Wallis Volkswagen, No. 05-10-01021