Supreme Court of Texas, No. 14-1045 (May 20, 2016)
Justice Devine (Opinion)
Showing posts with label Romine. Show all posts
Showing posts with label Romine. Show all posts
TRADE SECRETS LITIGATION AND DUE PROCESS: IT HAS TO BE A BALANCING ACT
In re M-I L.L.C. d/b/a M-I-Swaco
Supreme Court of Texas, No. 14-1045 (May 20, 2016)
Justice Devine (Opinion)
In a narrow opinion, the Texas Supreme Court addressed whether a trial court abused its discretion by (1) summarily refusing to exclude a competitor’s designated corporate representative from the courtroom during portions of a temporary injunction proceeding where alleged trade secrets would have been discussed; and (2) compelling the production of an affidavit detailing those alleged trade secrets without first conducting an in camera review of the affidavit. In each instance, the Court found the trial court abused its discretion by failing to analyze and balance the competing considerations. It therefore conditionally granted the writ of mandamus.
Supreme Court of Texas, No. 14-1045 (May 20, 2016)
Justice Devine (Opinion)
NAVIGATING BETWEEN APPEAL AND MANDAMUS: THE PATH FROM AAA TO FINRA
Morford v. Esposito Securities, LLC
Dallas Court of Appeals, No. 05-14-01223-CV (September 18, 2015)
Justices Fillmore, Stoddart (Opinion), and Whitehill
Esposito, a licensed securities broker and member of FINRA, agreed to help Appellants find investors for their venture, Nemaha, in exchange for a percentage of the money received. The agreement contained a provision requiring any dispute to be resolved through AAA arbitration. After Appellants negotiated two transactions on their own, Esposito filed a claim for arbitration with the AAA, seeking a portion of the total consideration received by Nemaha. Appellants refused to participate in the AAA arbitration. So, Esposito filed suit, and a motion to compel arbitration before the AAA. In response, Appellants moved to compel arbitration before FINRA. The trial court determined that Appellants were not “customers” of Esposito, as required by FINRA, and granted Esposito’s motion to compel arbitration before the AAA. Appellants appealed, asking the Court to reverse the order compelling arbitration before the AAA and to compel arbitration before FINRA instead. In the alternative, Appellants asked the Court to treat their appeal from the order compelling AAA arbitration as a petition for writ of mandamus.
The Dallas Court of Appeals recognized it lacked jurisdiction to review the order compelling AAA arbitration, but concluded it could treat the appeal as a petition for writ of mandamus, while simultaneously reviewing on interlocutory appeal the denial of Appellants’ motion for FINRA arbitration. The Court reasoned—and the parties apparently agreed—that, if Appellants were “customers” of Esposito, they have a contractual right to compel arbitration through FINRA as a third-party beneficiary of Esposito’s member agreement with FINRA. And if that right is erroneously denied by virtue of an order compelling AAA arbitration, Appellants would lack an adequate remedy at law. Thus, the Court concluded that it had mandamus jurisdiction to consider whether the trial court abused its discretion by compelling arbitration before the AAA rather than FINRA.
In addressing the dispositive issue on appeal—whether Esposito was a “customer” of Appellants under FINRA rules—the appellate court rejected the argument that Appellants could only be customers of Esposito if Esposito had actually received payment from Appellants. Instead the Court found the agreement between Appellants and Esposito represented an undertaking to purchase services from Esposito for a fee, which falls within the ordinary definition of “customer” for FINRA purposes. Because the parties agreed that, if Appellants were customers of Esposito under FINRA rules, arbitration before FINRA was proper (notwithstanding the Agreement requiring arbitration before AAA), the Court reversed the trial court’s order denying Appellants’ motion to compel arbitration before FINRA and ordered the parties to proceed to FINRA arbitration. It then conditionally granted the Appellants’ petition for writ of mandamus with respect to the trial court’s order compelling arbitration before the AAA.
Dallas Court of Appeals, No. 05-14-01223-CV (September 18, 2015)
Justices Fillmore, Stoddart (Opinion), and Whitehill
Esposito, a licensed securities broker and member of FINRA, agreed to help Appellants find investors for their venture, Nemaha, in exchange for a percentage of the money received. The agreement contained a provision requiring any dispute to be resolved through AAA arbitration. After Appellants negotiated two transactions on their own, Esposito filed a claim for arbitration with the AAA, seeking a portion of the total consideration received by Nemaha. Appellants refused to participate in the AAA arbitration. So, Esposito filed suit, and a motion to compel arbitration before the AAA. In response, Appellants moved to compel arbitration before FINRA. The trial court determined that Appellants were not “customers” of Esposito, as required by FINRA, and granted Esposito’s motion to compel arbitration before the AAA. Appellants appealed, asking the Court to reverse the order compelling arbitration before the AAA and to compel arbitration before FINRA instead. In the alternative, Appellants asked the Court to treat their appeal from the order compelling AAA arbitration as a petition for writ of mandamus.
The Dallas Court of Appeals recognized it lacked jurisdiction to review the order compelling AAA arbitration, but concluded it could treat the appeal as a petition for writ of mandamus, while simultaneously reviewing on interlocutory appeal the denial of Appellants’ motion for FINRA arbitration. The Court reasoned—and the parties apparently agreed—that, if Appellants were “customers” of Esposito, they have a contractual right to compel arbitration through FINRA as a third-party beneficiary of Esposito’s member agreement with FINRA. And if that right is erroneously denied by virtue of an order compelling AAA arbitration, Appellants would lack an adequate remedy at law. Thus, the Court concluded that it had mandamus jurisdiction to consider whether the trial court abused its discretion by compelling arbitration before the AAA rather than FINRA.
In addressing the dispositive issue on appeal—whether Esposito was a “customer” of Appellants under FINRA rules—the appellate court rejected the argument that Appellants could only be customers of Esposito if Esposito had actually received payment from Appellants. Instead the Court found the agreement between Appellants and Esposito represented an undertaking to purchase services from Esposito for a fee, which falls within the ordinary definition of “customer” for FINRA purposes. Because the parties agreed that, if Appellants were customers of Esposito under FINRA rules, arbitration before FINRA was proper (notwithstanding the Agreement requiring arbitration before AAA), the Court reversed the trial court’s order denying Appellants’ motion to compel arbitration before FINRA and ordered the parties to proceed to FINRA arbitration. It then conditionally granted the Appellants’ petition for writ of mandamus with respect to the trial court’s order compelling arbitration before the AAA.
A COMPANY HAS AN ABSOLUTE PRIVILEGE TO PROVIDE A REPORT TO LAW ENFORCEMENT IF DONE PRELIMINARY TO A PROPOSED JUDICIAL PROCEEDING
Shell Oil Co. v. Writt
Supreme Court of Texas, No. 13-0552 (May 15, 2015)
Opinion by Justice Johnson
Shell learned it was under investigation by the Department of Justice for possible violations of the Foreign Corrupt Practices Act by one of Shell’s contractors. After meeting with the DOJ, Shell agreed to conduct an internal investigation and provide a confidential report to the DOJ. During their discussions, the DOJ identified a Shell employee, Robert Writt, as a possible witness or person of interest. Upon conclusion of its investigation, Shell provided the promised written report to the DOJ. The report stated (among other things) that Writt was aware of “several red flags” and provided inconsistent information. Shell then terminated Writt’s employment. Writt sued Shell, alleging Shell defamed him when it voluntarily provided a copy of the written report to the DOJ. Shell moved for summary judgment on the ground it was absolutely privileged to provide the report to the DOJ because it did so “preliminary to a proposed judicial proceeding.” While that motion was pending, the DOJ filed a criminal action charging Shell with conspiracy to violate the FCPA; that action was concluded by a deferred prosecution agreement. The trial court granted Shell’s summary judgment motion, agreeing with Shell that its conduct was absolutely privileged. But the court of appeals reversed, holding that the report was only conditionally privileged.
The Texas Supreme Court held that Shell was entitled to the absolute privilege because Shell was the target of a DOJ investigation when it furnished the report, the information related to the DOJ’s inquiry, and the evidence conclusively established Shell provided the report with “serious contemplation” that it might be prosecuted by the DOJ. The Court emphasized the draconian penalties available under the FCPA, the rise in enforcement actions brought by the DOJ, and the fact that businesses that refused to cooperate with the DOJ were subjected to substantially greater penalties if the DOJ ultimately prevailed. The Court distinguished—but did not displace—its prior holding in Hurlbut v. Gulf Atlantic Life Insurance Co., where the Court concluded statements made to an Assistant Attorney General were only conditionally privileged because they were voluntarily made prior to a formal investigation of the company. Although the line between the absolute and conditional privilege is not always clear, the Court’s opinion provides guidance on the issue and an incentive for companies that are the target of an investigation to cooperate with law enforcement while minimizing the company’s exposure to a defamation suit.
Supreme Court of Texas, No. 13-0552 (May 15, 2015)
Opinion by Justice Johnson
Shell learned it was under investigation by the Department of Justice for possible violations of the Foreign Corrupt Practices Act by one of Shell’s contractors. After meeting with the DOJ, Shell agreed to conduct an internal investigation and provide a confidential report to the DOJ. During their discussions, the DOJ identified a Shell employee, Robert Writt, as a possible witness or person of interest. Upon conclusion of its investigation, Shell provided the promised written report to the DOJ. The report stated (among other things) that Writt was aware of “several red flags” and provided inconsistent information. Shell then terminated Writt’s employment. Writt sued Shell, alleging Shell defamed him when it voluntarily provided a copy of the written report to the DOJ. Shell moved for summary judgment on the ground it was absolutely privileged to provide the report to the DOJ because it did so “preliminary to a proposed judicial proceeding.” While that motion was pending, the DOJ filed a criminal action charging Shell with conspiracy to violate the FCPA; that action was concluded by a deferred prosecution agreement. The trial court granted Shell’s summary judgment motion, agreeing with Shell that its conduct was absolutely privileged. But the court of appeals reversed, holding that the report was only conditionally privileged.
The Texas Supreme Court held that Shell was entitled to the absolute privilege because Shell was the target of a DOJ investigation when it furnished the report, the information related to the DOJ’s inquiry, and the evidence conclusively established Shell provided the report with “serious contemplation” that it might be prosecuted by the DOJ. The Court emphasized the draconian penalties available under the FCPA, the rise in enforcement actions brought by the DOJ, and the fact that businesses that refused to cooperate with the DOJ were subjected to substantially greater penalties if the DOJ ultimately prevailed. The Court distinguished—but did not displace—its prior holding in Hurlbut v. Gulf Atlantic Life Insurance Co., where the Court concluded statements made to an Assistant Attorney General were only conditionally privileged because they were voluntarily made prior to a formal investigation of the company. Although the line between the absolute and conditional privilege is not always clear, the Court’s opinion provides guidance on the issue and an incentive for companies that are the target of an investigation to cooperate with law enforcement while minimizing the company’s exposure to a defamation suit.
TEXAS SUPERSEDEAS 101: SUSPENDING ENFORCEMENT OF AN ADVERSE JUDGMENT
You never lose. Of course. But maybe you have “a friend” who does, on occasion, and who needs help holding the other side at bay while that miscarriage of justice is being rectified on appeal. You’re in luck. In this month’s edition of the Dallas Bar Association’s HEADNOTES, Ken Carroll and Sara Romine explain the basics of supersedeas in the state courts of Texas. Check out their article here.
IT’S JUST LUNCH: TEXAS SUPREME COURT CLARIFIES WHAT CONSTITUTES A REASONABLE GOOD-FAITH ALLEGATION OF SEXUAL HARASSMENT UNDER THE TCHRA.
San Antonio Water System v. Nicholas
Supreme Court of Texas, No. 13-0966 (April 24, 2015)
Opinion by Justice Brown
After a female paralegal with SAWS complained that a male executive had repeatedly asked her to lunch, making her uncomfortable, Nicholas met with the male executive to discuss the complaint. Nicholas, along with SAWS’s CEO, counseled the male executive and admonished him to refrain from asking women in the organization to lunch. Roughly two years later, Nicholas was reassigned to a position that reported directly to the male executive. One year later, Nicholas’s position was eliminated. Nicholas sued SAWS under the Texas Commission on Human Rights Act, alleging she was retaliated against for opposing a discriminatory employment practice. A jury agreed and awarded Nicholas nearly $1 million in damages.
The Texas Supreme Court disagreed, concluding that—as a matter of law—no reasonable person could conclude the lunch invitations complained of gave rise to an actionable claim of sexual harassment. Moreover, the fact that SAWS instructed Nicholas to reprimand and counsel the executive is insufficient to establish an objective good-faith belief that sexual harassment occurred. Rather, the Texas Supreme Court reasoned, the evidence suggested SAWS took immediate action to prevent conduct that is not actionable from escalating into conduct that is actionable. Because Nicholas did not engage in protected activity, the Court reversed the judgment in favor of Nicholas.
Supreme Court of Texas, No. 13-0966 (April 24, 2015)
Opinion by Justice Brown
After a female paralegal with SAWS complained that a male executive had repeatedly asked her to lunch, making her uncomfortable, Nicholas met with the male executive to discuss the complaint. Nicholas, along with SAWS’s CEO, counseled the male executive and admonished him to refrain from asking women in the organization to lunch. Roughly two years later, Nicholas was reassigned to a position that reported directly to the male executive. One year later, Nicholas’s position was eliminated. Nicholas sued SAWS under the Texas Commission on Human Rights Act, alleging she was retaliated against for opposing a discriminatory employment practice. A jury agreed and awarded Nicholas nearly $1 million in damages.
The Texas Supreme Court disagreed, concluding that—as a matter of law—no reasonable person could conclude the lunch invitations complained of gave rise to an actionable claim of sexual harassment. Moreover, the fact that SAWS instructed Nicholas to reprimand and counsel the executive is insufficient to establish an objective good-faith belief that sexual harassment occurred. Rather, the Texas Supreme Court reasoned, the evidence suggested SAWS took immediate action to prevent conduct that is not actionable from escalating into conduct that is actionable. Because Nicholas did not engage in protected activity, the Court reversed the judgment in favor of Nicholas.
STRICT REQUIREMENTS: EXPLAINING BREACH AND CAUSATION IN MEDICAL LIABILITY EXPERT REPORTS
Senior Care Centers, LLC v. Shelton
Fifth Court of Appeals, No. 05-14-00586-CV (February 27, 2015)
Justices Bridges, Lang, and Evans (Opinion)
The Dallas Court of Appeals reversed the denial of a motion to dismiss, concluding the plaintiff’s expert report failed to satisfy the requirements of the Texas Medical Liability Act. A trial court abuses its discretion in denying such a motion if the expert report does not specifically identify the standard of care, how the defendant breached it, and how the alleged breach caused the injury.
After she suffered a stroke, Carolyn McCain was transferred to Senior Care with the proviso she not be fed by mouth, but only by a stomach tube. When McCain later went into respiratory distress, food particles were discovered in her mouth, airway, and vocal chords. After McCain died, Appellees filed suit, alleging Senior Care was negligent. Senior Care moved to dismiss, asserting the statutorily required expert report was deficient. The trial court disagreed, denied the motion, and Senior Care appealed.
The Dallas Court of Appeals reversed. The expert report properly stated the appropriate standard of care required Senior Care to refrain from feeding McCain orally. But, the Court of Appeals held, the report failed “to indicate what specifically an ordinarily prudent health care provider would do under the same or similar circumstances.” Applying what appears at first to be a very exacting standard, the Court suggested the expert report needed to address the type of training that staff, visitors, and even McCain’s roommate should have received to prevent the incident. The report here failed to do so, and failed even to rule out the possibility McCain’s family, a visitor, or her roommate was responsible. In short, the Court said, the expert report had to eliminate other equally plausible explanations for the presence of the food particles in McCain’s airway—explanations other than Senior Care’s negligence. The Court could not infer negligence by Senior Care from the mere existence of the food particles.
Fifth Court of Appeals, No. 05-14-00586-CV (February 27, 2015)
Justices Bridges, Lang, and Evans (Opinion)
The Dallas Court of Appeals reversed the denial of a motion to dismiss, concluding the plaintiff’s expert report failed to satisfy the requirements of the Texas Medical Liability Act. A trial court abuses its discretion in denying such a motion if the expert report does not specifically identify the standard of care, how the defendant breached it, and how the alleged breach caused the injury.
After she suffered a stroke, Carolyn McCain was transferred to Senior Care with the proviso she not be fed by mouth, but only by a stomach tube. When McCain later went into respiratory distress, food particles were discovered in her mouth, airway, and vocal chords. After McCain died, Appellees filed suit, alleging Senior Care was negligent. Senior Care moved to dismiss, asserting the statutorily required expert report was deficient. The trial court disagreed, denied the motion, and Senior Care appealed.
The Dallas Court of Appeals reversed. The expert report properly stated the appropriate standard of care required Senior Care to refrain from feeding McCain orally. But, the Court of Appeals held, the report failed “to indicate what specifically an ordinarily prudent health care provider would do under the same or similar circumstances.” Applying what appears at first to be a very exacting standard, the Court suggested the expert report needed to address the type of training that staff, visitors, and even McCain’s roommate should have received to prevent the incident. The report here failed to do so, and failed even to rule out the possibility McCain’s family, a visitor, or her roommate was responsible. In short, the Court said, the expert report had to eliminate other equally plausible explanations for the presence of the food particles in McCain’s airway—explanations other than Senior Care’s negligence. The Court could not infer negligence by Senior Care from the mere existence of the food particles.
SEEKING THE PRODUCTION OF ELECTRONIC STORAGE DEVICES UNDER RULE 196.4? YOU’RE GOING TO NEED EVIDENCE
In re VERP Investment, LLC
Fifth Court of Appeals, No. 05-15-00023 (February 17, 2015)
Lang, Fillmore, and Brown (Opinion)
The Dallas Court of Appeals recently clarified the circumstances under which a trial court may compel the production of electronic storage devices in discovery. The Court made clear that the production of electronic storage devices is inherently burdensome because it is intrusive. For this reason, a party seeking direct access to an opponent’s electronic storage devices must present evidence showing (1) the responding party has defaulted on its discovery obligations (a “threshold” requirement); (2) it is impossible to obtain the requested information through a less intrusive means; (3) the proffered expert is qualified to conduct the search of the particular storage device sought; and (4) the proposed search methodology is likely to yield the requested information. Unless a party satisfies these evidentiary requirements, a trial court abuses its discretion in ordering the production of an electronic storage device.
Fifth Court of Appeals, No. 05-15-00023 (February 17, 2015)
Lang, Fillmore, and Brown (Opinion)
The Dallas Court of Appeals recently clarified the circumstances under which a trial court may compel the production of electronic storage devices in discovery. The Court made clear that the production of electronic storage devices is inherently burdensome because it is intrusive. For this reason, a party seeking direct access to an opponent’s electronic storage devices must present evidence showing (1) the responding party has defaulted on its discovery obligations (a “threshold” requirement); (2) it is impossible to obtain the requested information through a less intrusive means; (3) the proffered expert is qualified to conduct the search of the particular storage device sought; and (4) the proposed search methodology is likely to yield the requested information. Unless a party satisfies these evidentiary requirements, a trial court abuses its discretion in ordering the production of an electronic storage device.
SPOLIATION: NOW EASIER TO PRESERVE, HARDER TO PROVE
Wackenhut Corp. v. Gutierrez
Supreme Court of Texas, No. 05-12-0136 (February 6, 2015)
Per Curiam Opinion
On the heels of its decision in Brookshire Brothers, Ltd. v. Aldridge, which established a new framework for addressing spoliation of evidence, the Texas Supreme Court clarified (1) how a party may preserve an objection to a spoliation instruction; (2) when a spoliation instruction is proper; and (3) when an improper spoliation instruction constitutes reversible error.
Supreme Court of Texas, No. 05-12-0136 (February 6, 2015)
Per Curiam Opinion
On the heels of its decision in Brookshire Brothers, Ltd. v. Aldridge, which established a new framework for addressing spoliation of evidence, the Texas Supreme Court clarified (1) how a party may preserve an objection to a spoliation instruction; (2) when a spoliation instruction is proper; and (3) when an improper spoliation instruction constitutes reversible error.
NO JURISDICTION IN OHIO; NO FULL FAITH & CREDIT IN TEXAS
Sign Effects Sign Co. v. SignWarehouse.Com
Dallas Court of Appeals No. 05-12-01301-CV (January 30, 2015)
Justices Bridges, Lang-Miers (Opinion), and Meyers
The Dallas Court of Appeals confirmed there is no specific jurisdiction over a Texas company in a foreign state where (1) the alleged wrongful conduct arose from a single transaction initiated by an entity in that foreign state, and (2) the parties agreed to resolve any disputes in Texas. SignWarehouse.com, a Texas company, maintained a website that marketed its products and allowed customers to submit orders through the website or by telephone. Sign Effects, an Ohio company, initiated an order with SignWarehouse by telephone. SignWarehouse filled the order in Texas and arranged for shipment to Ohio via commercial carrier. The invoice and sales contract provided that any lawsuits regarding the transaction would be pursued “only in Sherman, Grayson County, Texas.” Nevertheless, Sign Effects sued SignWarehouse in Ohio and obtained a default judgment. After Sign Effects attempted to domesticate the judgment in Texas, SignWarehouse moved to vacate that judgment. The trial court vacated the judgment, finding no personal jurisdiction existed over SignWarehouse in Ohio. The Dallas Court of Appeals affirmed, holding that (1) lack of personal jurisdiction over the defendant is a “well-established exception to the requirement that a foreign judgment be afforded full faith and credit,” and (2) the record did not support the exercise of personal jurisdiction in Ohio because Sign Effects initiated the transaction at issue and the sales contract provided for exclusive jurisdiction in Texas. Accordingly, the Court of Appeals held the trial court did not abuse its discretion by vacating the Ohio judgment.
Dallas Court of Appeals No. 05-12-01301-CV (January 30, 2015)
Justices Bridges, Lang-Miers (Opinion), and Meyers
The Dallas Court of Appeals confirmed there is no specific jurisdiction over a Texas company in a foreign state where (1) the alleged wrongful conduct arose from a single transaction initiated by an entity in that foreign state, and (2) the parties agreed to resolve any disputes in Texas. SignWarehouse.com, a Texas company, maintained a website that marketed its products and allowed customers to submit orders through the website or by telephone. Sign Effects, an Ohio company, initiated an order with SignWarehouse by telephone. SignWarehouse filled the order in Texas and arranged for shipment to Ohio via commercial carrier. The invoice and sales contract provided that any lawsuits regarding the transaction would be pursued “only in Sherman, Grayson County, Texas.” Nevertheless, Sign Effects sued SignWarehouse in Ohio and obtained a default judgment. After Sign Effects attempted to domesticate the judgment in Texas, SignWarehouse moved to vacate that judgment. The trial court vacated the judgment, finding no personal jurisdiction existed over SignWarehouse in Ohio. The Dallas Court of Appeals affirmed, holding that (1) lack of personal jurisdiction over the defendant is a “well-established exception to the requirement that a foreign judgment be afforded full faith and credit,” and (2) the record did not support the exercise of personal jurisdiction in Ohio because Sign Effects initiated the transaction at issue and the sales contract provided for exclusive jurisdiction in Texas. Accordingly, the Court of Appeals held the trial court did not abuse its discretion by vacating the Ohio judgment.
SUPERSEDING A JUDGMENT UNDER T.R.A.P. 24: LESSONS ON FRAUDULENT TRANSFER AND THE CALCULATION OF AN INDIVIDUAL’S NET WORTH
White v. Pottorff
Dallas Court of Appeals No. 05-14-00675-CV (January 23, 2014)
Chief Justice Wright and Justices Lang-Miers and Stoddart (Opinion)
White appealed a $30 million judgment and sought to suspend its enforcement pending that appeal. Pursuant to TRAP 24.2(c), White filed a $100 supersedeas bond and an affidavit of net worth, claiming his liabilities exceeded his assets by more than $1 million. The appellees challenged the affidavit, contending that—among other things—White’s gift of certain property to his family after being served with the lawsuit constituted a fraudulent transfer. The court conducted a two-day evidentiary hearing regarding White’s net worth and found it to be $7,566,651. The trial court ordered White to post a bond equal to the lesser of (1) one half of that net worth; or (2) the compensatory damages awarded in the judgment plus two years’ post-judgment interest. The trial court’s ruling was based, in part, on its finding that White’s conveyance of property to his family was a fraudulent transfer. Pursuant to TRAP 24.4(a), which allows a party to seek appellate review of a trial court’s order setting the amount of a supersedeas bond, White filed a motion in the court of appeals, asking it to correct the trial court’s order setting the amount of the bond. An appellate court reviews an order determining the amount of a security for an abuse of discretion.
The Dallas Court of Appeals reversed the trial court’s determination, holding there was legally and factually insufficient evidence to support the fraudulent transfer finding. The Court observed that appellees bore the burden of proving fraudulent transfer by a preponderance of the evidence. Here, although appellees called into question the veracity of White’s testimony and evidence, they failed to carry their burden of proof. In particular, the appeals court found that (1) appellees presented no evidence the transfer of property was for less than reasonably equivalent value; (2) the effective date of the transfer was prior to White’s being served with the lawsuit; and (3) there was no evidence White maintained control over the property after its transfer. Because the appellees failed to meet their burden of proof, the Dallas Court of Appeals reversed the trial court’s supersedeas ruling. Nonetheless, the appeals court found White’s net worth to be in excess of $4 million and ordered him to post bond in the lesser of half that amount or the compensatory damages awarded at trial plus two years’ post-judgment interest.
Dallas Court of Appeals No. 05-14-00675-CV (January 23, 2014)
Chief Justice Wright and Justices Lang-Miers and Stoddart (Opinion)
White appealed a $30 million judgment and sought to suspend its enforcement pending that appeal. Pursuant to TRAP 24.2(c), White filed a $100 supersedeas bond and an affidavit of net worth, claiming his liabilities exceeded his assets by more than $1 million. The appellees challenged the affidavit, contending that—among other things—White’s gift of certain property to his family after being served with the lawsuit constituted a fraudulent transfer. The court conducted a two-day evidentiary hearing regarding White’s net worth and found it to be $7,566,651. The trial court ordered White to post a bond equal to the lesser of (1) one half of that net worth; or (2) the compensatory damages awarded in the judgment plus two years’ post-judgment interest. The trial court’s ruling was based, in part, on its finding that White’s conveyance of property to his family was a fraudulent transfer. Pursuant to TRAP 24.4(a), which allows a party to seek appellate review of a trial court’s order setting the amount of a supersedeas bond, White filed a motion in the court of appeals, asking it to correct the trial court’s order setting the amount of the bond. An appellate court reviews an order determining the amount of a security for an abuse of discretion.
The Dallas Court of Appeals reversed the trial court’s determination, holding there was legally and factually insufficient evidence to support the fraudulent transfer finding. The Court observed that appellees bore the burden of proving fraudulent transfer by a preponderance of the evidence. Here, although appellees called into question the veracity of White’s testimony and evidence, they failed to carry their burden of proof. In particular, the appeals court found that (1) appellees presented no evidence the transfer of property was for less than reasonably equivalent value; (2) the effective date of the transfer was prior to White’s being served with the lawsuit; and (3) there was no evidence White maintained control over the property after its transfer. Because the appellees failed to meet their burden of proof, the Dallas Court of Appeals reversed the trial court’s supersedeas ruling. Nonetheless, the appeals court found White’s net worth to be in excess of $4 million and ordered him to post bond in the lesser of half that amount or the compensatory damages awarded at trial plus two years’ post-judgment interest.
TEXAS SUPREME COURT DISTINGUISHES EXXON’S EMPLOYEE INCENTIVE COMPENSATION AGREEMENT FROM NON-COMPETE AGREEMENT AND ENFORCES NEW YORK CHOICE-OF-LAW PROVISION
Exxon Mobil Corp. v. Drennen
Supreme Court of Texas, No. 12-0621 (August 29, 2014)
Justice Green (Opinion)
In a unanimous opinion, the Texas Supreme Court distinguished a forfeiture provision in a company’s incentive compensation plan from a covenant not to compete, and enforced a New York choice-of-law provision contained in the plan. The decision has important ramifications for employers that use incentive compensation plans to retain employees and wish to select a particular state’s law to govern the enforceability of those plans.
Supreme Court of Texas, No. 12-0621 (August 29, 2014)
Justice Green (Opinion)
In a unanimous opinion, the Texas Supreme Court distinguished a forfeiture provision in a company’s incentive compensation plan from a covenant not to compete, and enforced a New York choice-of-law provision contained in the plan. The decision has important ramifications for employers that use incentive compensation plans to retain employees and wish to select a particular state’s law to govern the enforceability of those plans.
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