In this week’s edition of Litigation Roundup, the state of Texas turns to Gibson Dunn & Crutcher to defend it in a long-running lawsuit over the quality of foster care, minority investors in an energy company allege one of the world’s largest hedge funds breached its duties in a rushed $788 million sale, and the Texas Supreme Court clarifies the reach of arbitration provisions.
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Southern District of Texas
Texas Hires Gibson Dunn to Defend in Foster Care Suit
In the long-running lawsuit against the state of Texas alleging substandard care for children in the foster care system, Texas has recently hired outside counsel to defend against the claims.
Allyson N. Ho of Gibson Dunn & Crutcher in Dallas filed notice of appearance with U.S. District Judge Janis Jack May 11, informing the court she is now the attorney-in-charge in the class action lawsuit. Joining Ho are Gibson Dunn colleagues Savannah Silver and Prerak Shah.
Paul Yetter and Dori Goldman of Yetter Coleman as well as Barry F. McNeil of Haynes and Boone have been among the attorneys working pro bono, leading the suit for the plaintiffs, since it was filed in March 2011.
Also representing Texas are Kimberly Gdula, Kara Holsinger, Karl Neudorfer, Clayton Watkins, Reynolds Brissenden, Noah Reinstein, Robert Salmon and Leif Olson of the office of the attorney general.
The case number is 2:11-cv-00084.
Northern District of Texas
Primexx Investors Sue Over ‘Rushed’ $788M Sale to Callon Petroleum
Primexx Energy Opportunity Fund minority investors are alleging one of the largest private equity firms in the world, Blackstone Inc., committed breach of contract and breach of fiduciary duty when, as the majority owner of Primexx, it forced a “quick” and “rushed” sale of the company below its fair value.
The minority investors filed the lawsuit May 4, alleging that the August 2021 sale effectively rendered their roughly $200 million in investments “almost totally worthless, while generating hundreds of millions of dollars for Blackstone.”
In June 2021, the suit alleges, an independent third-party valued Primexx Energy Partners at $1.43 billion, but the next month the board notified investors it would be selling Primexx to Callon for $788 million.
“Faced with an offer that almost exclusively benefitted itself while destroying the value for all other investors (including plaintiffs), did Blackstone undertake even the most basic step of taking reasonable steps to explore other avenues that might benefit all Primexx investors? No, Blackstone was in far too much of a hurry to seek any other formal bids for the business, or to engage in any other process to try to maximize the value and return for the company and all of its investors,” the suit alleges.
Primexx Energy Opportunity Fund is represented by Terrell W. Oxford, Brian J.E. Caforio, Marc M. Seltzer, Sarah Hannigan, Stephen Shackelford Jr. and Lindsey Godfrey Eccles of Susman Godfrey.
Counsel information for the defendants wasn’t available Monday.
The case has been assigned to U.S. District Judge Ed Kinkeade.
The case number is 3:23-cv-00985.
Western District of Texas
Texas Energy Tech Co. Founder Hires Defense in SEC’s $155M Ponzi Suit
A lawyer and founder of Clean Energy Technology Association who has been accused by the U.S. Securities and Exchange Commission of duping more than 500 investors out of $155 million in a Ponzi scheme has hired lawyers to defend him against the claim.
Roy W. Hill, 75, of Fairfield, Texas, has hired Houston attorney Christopher L. Tritico of Tritico Rainey and Gene R. Besen of Bradley Arant Boult Cummings in Dallas, according to notices filed with U.S. District Judge Alan Albright May 9.
The SEC filed a complaint May 3 accusing Hill, CETA, Eric N. Shelly and a business he founded and serves as CEO of, Freedom Impact Consulting, of running a Ponzi scheme since December 2019.
The government alleges CETA, a company that specializes in developing and commercializing environmentally sustainable technologies for oil and gas development, lied to its investors about production of carbon capture units, about leasing that equipment to ExxonMobil Corporation and about having patents for the technology.
“A quick review of CETA’s books and records confirmed what the bank records already revealed, which is that CETA has virtually no revenue from sales or operations,” the government alleges. “No employee could answer the question of how CETA makes money, other than by investor deposits.”
The SEC’s Jennifer D. Reece and Jason J. Rose are prosecuting the case for the government.
The case number is 6:23-cv-00321.
Texas Supreme Court
Arbitration Agreements Apply to Successor Homeowner in Mold Claim Case
A Dickinson homeowner who contested an arbitration award against her mold claim was bound by the award under language in the deed and home warranty she acquired from the original homebuyer, the court said in an opinion issued Friday.
Homebuilders were closely watching the case as a test of the validity of arbitration agreements with successor homeowners. The Texas Association of Builders said in an amicus brief that the builder’s warranty established the subsequent homeowner as a third-party beneficiary of the warranty and accompanying arbitration provision.
Kara Whiteley sued Lennar Homes of Texas in 2017, claiming negligent construction and breach of the implied warranty of good workmanship caused a serious mold problem. The trial court initially stayed the case for arbitration over Whiteley’s objection. After a seven-day hearing, the arbitrator denied Whiteley all relief and awarded attorney’s fees to Lennar.
Whiteley argued that she was not bound to arbitrate because she was not a party to and did not sign any of the agreements in the original purchase agreement and limited warranty. The trial court granted Whiteley’s motion and vacated the arbitration decision.
The Fourteenth Court of Appeals in 2021 affirmed, holding that the arbitration provision in the original homebuyer’s deed could not bind subsequent purchasers.
The Supreme Court reversed the court of appeals judgment and confirmed the arbitration award against Whiteley. The court concluded that Whiteley was required to arbitrate her claims under the doctrine of direct-benefits estoppel because her claims were premised on the existence of the purchase and sale agreement.
The court rejected Whiteley’s argument that any implied warranties, because they derive from the common law, would not have become a part of the purchase documents.
“To the contrary, as we have previously noted, ‘a warranty which the law implies from the existence of a written contract is as much a part of the writing as the express terms of the contract,’” under a 1968 case, Certain-Teed Prods. Corp. v. Bell, said Justice J. Brett Busby.
The Supreme Court remanded the case to the trial court for further proceedings on Lennar’s request to confirm the arbitrators’ award against two of its subcontractors.
Lennar Homes was represented by Wallace B. Jefferson, Rachel A. Ekery and Nicholas Bacarisse of Alexander Dubose & Jefferson and Timothy F. Lee, Margaret Bryant and Don Jackson of Ware, Jackson, Lee, O’Neill, Smith & Barrow.
Kara Whiteley was represented by Dax O. Faubus.
The case is number 21-0783.
Batson Violation Merits New Trial in Fatal Crash Suit
In a case where plaintiff’s counsel had stated during jury selection that “the African-American female is the most favorable juror for this case,” the Texas Supreme Court decided on Friday the admission means a new trial must take place in the suit brought by the family of Clark Davis.
Davis was killed when a large piece of equipment on a flatbed trailer struck an overpass on Interstate 35, and falling debris crushed Davis’ vehicle. Davis’ family sued numerous plaintiffs and took United Rentals to trial.
Justice Jimmy Blacklock authored the court’s opinion, writing that the ruling shouldn’t be viewed as an attempt to “impugn the integrity of the counsel involved in this case, who no doubt relied on conventional sources of insight into jury-selection strategy, such as the advice of jury consultants or feedback from focus groups.”
“But consulting these sources for advice on the color of an ideal juror cannot help but undermine our judicial system’s obligation to provide race-neutral proceedings,” Justice Blacklock wrote. “This court’s precedent insists that jury selection — which routinely involves venire panels as diverse as the population of Texas — must be conducted without regard to race, to the greatest extent possible. The expression on the record of a race-based preference, coupled with peremptory strikes consistent with the stated preference, compels the conclusion that racial considerations impermissibly tainted the selection of this jury.”
A Dallas County jury had determined United Rentals was 30 percent responsible for Davis’ death and awarded his family and estate $9.3 million. Judge Gena Slaughter entered judgment consistent with the proportionate responsibility finding, awarding the family about $2.8 million.
The Fifth Court of Appeals affirmed the judgment and the court denied en banc review, though three justices dissented to the decision.
Justice Debra Lehrmann did not participate in the decision.
United Rentals is represented by Jessica Z. Barger, Bradley W. Snead and Brian J. Cathey of Wright Close & Barger.
Davis’ family is represented by Douglas W. Alexander, Anna M. Baker and Nicholas Bacarisse of Alexander Dubose & Jefferson and Bryan A. Green of Baron & Budd.
The case number is 20-0737.
U.S. Court of Appeals for the Fifth Circuit
GEICO Can’t Ax Class Cert. in Total Loss Dispute
GEICO and several of its affiliates lost a bid on Friday to undo class certification in a lawsuit brought by Philip Angell and other policyholders who allege the insurer systematically underpaid them for the actual cash value of their vehicles following crashes.
GEICO filed notice of appeal in February 2022 after U.S. District Judge Keith P. Ellison granted class certification. On appeal, the insurer argued the plaintiffs didn’t have standing to serve as class representatives because each one is alleging they are owed different fees — sales tax, title fees or registration fees — while the class is defined as those deprived of all three fees.
“We disagree with the contention that plaintiffs have alleged three separate injuries,” the panel wrote. “GEICO’s failure to remit any of the three Purchasing Fees amounts to the same harm — a breach of the policies.”
“If plaintiffs were indeed harmed, no one contests that this harm must have been caused by GEICO’s underpayment of [actual cash value]. And such an underpayment may be remedied through money damages,” the panel wrote. “Accordingly, plaintiffs have demonstrated their standing under either the class certification or standing approach.”
Chief Judge Priscilla Richman and Judges Carolyn Dineen King and Stephen A. Higginson sat on the panel.
GEICO is represented by Kymberly Kochis and Alexander Fuchs of Eversheds Sutherland in New York.
Angell and the other plaintiffs are represented by Jacob Phillips and Edmund A. Normand of Normand Law in Orlando, Richard Daly of Daly & Black in Houston and Andrew Shamis of Shamis & Gentile in Miami.
The case number is 22-20093.
Editor’s note: Janet Elliott contributed to this report.