In this edition of Litigation Roundup, a few recent rulings from the Texas Supreme Court are highlighted, a San Antonio attorney charged with defrauding clients out of as much as $65 million over 20 years goes to prison, and cryptocurrency miners sue the Department of Energy over an effort to get data on energy use.
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Williamson County District Court
Luxury Homebuilder Criminally Indicted
The Georgetown owner of Ashby Signature Homes is facing felony charges after allegedly mismanaging customer funds.
According to court records, Norman Eugene Ashby was indicted on Feb. 13 on three charges: misapplication of fiduciary property exceeding $300,000, tampering with a witness and theft of service exceeding $300,000. All three are first-degree felony offenses.
A copy of the indictment, which would include details about the charges, was not available Monday, but the Texas attorney general issued a press release alleging that Ashby had for years comingled customer funds rather than placing them into a trust account and had also used that money for personal expenses.
Ashby had not retained defense counsel as of Monday, according to court records. The names of the prosecutors on the case also were not available Monday.
The case numbers are 24-0260-K277; 24-0261-K277; 24-0262-K277
Travis County District Court
Harris County Sues TCEQ Over Concrete Batch Plant Rules
The Texas Commission on Environmental Quality has been sued by Harris County and a coalition of neighborhood groups who are challenging the agency’s decision to give existing concrete batch plants a grace period of up to 10 years to comply with new regulations.
About a month ago TCEQ strengthened its concrete batch standard permit requirements in the wake of an earlier lawsuit lodged by Harris County over the issue. That lawsuit argued TCEQ had failed to properly consider the public health dangers posed by the emissions of particular matter and crystalline silica from the batch plants.
TCEQ’s changes to the permit included yearly production limits and dust emissions controls placed on the batch plants, as well as stockpile limits and setback increases.
Harris County Attorney Christian Menefee issued a statement explaining why legal action was now being taken against TCEQ over the 10-year grace period.
“While this permit is a step in the right direction, it allows for hundreds of concrete batch plants across Texas, many of which are in Harris County, to operate under standards that we know are outdated and potentially unsafe,” he said. “We asked that the TCEQ consider this when it issued their new permit, and are taking action since they failed to do so. Our communities cannot wait any longer to have the protection they deserve.”
The county is represented by its own Sarah Jane Utley, Bethany Dwyer and Ryan Cooper, and Adam M. Friedman and Hailey Culhane of McElroy, Sullivan, Miller & Weber. The neighborhood plaintiffs are represented by Amy Catherine Dinn, Caroline Crow and Noor Mozaffar of Lone Star Legal Aid.
Counsel information for TCEQ wasn’t available Monday, nor was a case number for the Travis County litigation.
Dallas County District Court
Megachurch Gets Injunction Halting Distribution Warehouse Construction
Dallas County District Judge Aiesha Redmond has sided with Friendship West Baptist Church, agreeing to enter a temporary injunction that will, for now, bar construction of a planned distribution warehouse adjacent to the church.
The church filed suit against the city of Dallas, its building inspection advisory, examining and appeals board, and developers Stonelake Capital Partners and SL6 Wheatland on Dec. 14,
According to the lawsuit, the city originally denied the permit application in August, citing in part concerns about how semitruck trailers driving in the area would impact traffic on Wheatland Road, including for emergency vehicles and school buses servicing Carter High School and Martin Weiss Elementary School. Wheatland Road is a “non-truck route, in the heart of a vibrant community,” the lawsuit alleges.
After the developers appealed, the city approved the permit application on Nov. 14, according to the lawsuit.
Judge Redmond held a hearing on the motion for temporary injunction Feb. 19 and issued her order granting the requested relief the following day.
“There is evidence that the harm is imminent and irreparable to plaintiff,” she wrote. “These injuries would be irreparable to plaintiff unless these restraints are ordered against defendants because no other legal remedy is available to protect plaintiff from these injuries, losses or damages.”
The developers had objected to the proposed temporary injunction, arguing in part it was conclusory, failed to state why the alleged injury was irreparable and failed to set a bond.
“If the final hearing on the appeal is held within the next 60 days, the SL6 defendants request a bond of at least $70,000 considering that an injunction will tie up an asset worth more than $8.5 million,” the objection reads. “The current federal funds discount rate is 5.5 percent per annum. At this rate, SL6 Wheatland’s loss is $1,164 per day. Sixty days at this rate is approximately $69,863.00.”
Friendship West is represented by Paul K. Stafford of Stafford Moore.
The city defendants are represented by Christopher A. Klement and Darrell Noga of Fee, Smith & Sharp.
Stonelake Capital and SL6 Wheatland are represented by Joel W. Reese, Bradley M. Gordon and Margaret Terwey of Reese Marketos.
The case number is DC-23-20745.
Western District of Texas
Cryptocurrency Miners Challenge DOE’s Info Request
The Department of Energy and the Energy Information Administration’s request for information from cryptocurrency mining companies about energy consumption has drawn a lawsuit.
The Texas Blockchain Council and Riot Platforms filed suit Feb. 22 asking the court for a declaration that it doesn’t have to hand over the information and for an injunction that would bar the federal agencies from trying to collect the data. The lawsuit also names the Office of Management and Budget as a defendant and accuses the entity of unlawfully approving the data request.
The plaintiffs allege the administrator of the EIA, Joseph DeCarolis, eschewed the notice-and-comment period when he asked the OMB for emergency permission to request to collect the data. The data he is seeking, the cryptocurrency mining companies allege, includes sensitive and proprietary information.
The case has been assigned to U.S. District Judge Alan D. Albright.
The plaintiffs are represented by Mark D. Siegmund of Cherry Johnson Siegmund James, Chris Davis, Joshua Smeltzer and Greg White of Gray Reed and Kara M. Rollings and Russell G. Ryan of New Civil Liberties Alliance.
The defendants are represented by Jeremy S.B. Newman of the Department of Justice.
The case number is 6:24-cv-00099.
Attorney Gets Prison for Defrauding Clients
A former San Antonio attorney who was accused by federal prosecutors of perpetrating a Ponzi-like scheme with client funds has been sentenced to 50 years in prison on charges of wire fraud and money laundering.
U.S. District Judge Orlando L. Garcia sentenced Christopher John Pettit on Feb. 21. He had entered a guilty plea in October to three counts each of wire fraud and money laundering. Pettit was accused of causing losses to his clients of between $20 million and $65 million during the fraud that lasted more than 20 years.
Clients had given Pettit, who operated Chris Pettit & Associates, money to establish trusts, handle estate planning and also for services including investments and real estate transactions. But Pettit instead used the funds to pay other client debts and to for personal expenses.
Pettit told some clients he would invest their money in high percentage bonds but instead wired money to his own personal account. He was also accused of falsely representing himself as a qualified intermediary for a 1031 real estate exchange and then wiring millions of dollars from client asset sales to accounts he controlled.
“This case began with one victim filing a complaint before the investigation unraveled a massive and deceptive criminal scheme,” said U.S. Attorney Jaime Esparza for the Western District of Texas. “Thanks to the Fair Oaks Ranch Police Department for first recognizing the depth of the fraud in this case, and to the Bexar County District Attorney’s Office for referring the case to the FBI. The punishment handed down by Judge Garcia reflects the seriousness of the offense and is the product of steadfast collaboration by our partners at the local, state and federal levels.”
Pettit is represented by solo practitioner Matthew T. Allen.
Assistant U.S. Attorney Kelly Stephenson prosecuted the case.
The case number is 5:22-cr-00653.
Samsung Beats Back $4B Patent Suit
Samsung Electronics recently convinced a jury in Waco that it had not infringed two patents related to semiconductor manufacturing technology that are owned by inventor Ernest Demaray.
Demaray had alleged the electronics company was infringing his patents with technology used in its fabrication facilities in Texas and elsewhere. The lawsuit was filed in July 2020, and a jury heard a week of testimony before returning its verdict Feb. 16.
Damages sought in the case exceeded $4 billion, which could have ballooned to $12 billion if the jury had found the alleged infringement willful.
U.S. District Judge Alan Albright presided over the case that began with jury selection Feb. 12.
Demaray is represented by Alan J. Heinrich of McGinnis Lochridge, Morgan Chu of Irell & Manella and C. Maclain Wells of Folio Law Group.
Samsung is represented by Adam R. Alper, Michael W. De Vries and Kat Li of Kirkland & Ellis and John M. Desmarais of Desmarais.
The case number is 6:20-cv-00636.
First Court of Appeals
Panel Revives Malpractice Claim Against Attorney
A three-justice panel on Feb. 22 revived a portion of a lawsuit against an attorney stemming from an alleged breach of the confidentiality provisions in a settlement agreement.
The settlement agreement between former spouses Jennifer Leigh Morris and David Patrick Daniel Jr. resolved child custody and defamation lawsuits between them. Lawyer Philip Placzek served as the mediator who facilitated the settlement agreement.
After Daniel filed a suit alleging Morris and Placzek violated the confidentiality provisions by filing an unredacted version of the agreement with a court, a trial court had granted summary judgment in favor of Morris and Placzek and entered a take-nothing judgment on all of Daniel’s claims.
Placzek had argued he can’t be sued for breaching the confidentiality provisions of an agreement he’s not party to.
The panel agreed.
“Because the unambiguous settlement agreement shows as a matter of law that Placzek is not a party to the agreement, Daniel cannot sue him for breach of the agreement’s confidentiality provisions,” the court wrote.
But the justices revived a legal malpractice claim against Placzek that the trial court had dismissed after agreeing Daniel missed the two-year deadline to bring that claim.
“Because the relation-back doctrine applies to the mediator malpractice claim Daniel alleges in his live pleading, his malpractice claim is not barred by limitations,” the panel held. “Thus, the trial court erred in granting summary judgment on the malpractice claim.”
The panel also determined that Morris had been improperly granted summary judgment on a claim that she breached the confidentiality provisions of the agreement by filing a copy with their son’s school.
“In sum, whether Morris provided the school with a copy of the settlement agreement in violation of its terms or provided the school with a copy of the trial court’s order incorporating the settlement’s terms, which is permissible because an order cannot be sealed under Rule 76a(1) of the Texas Rules of Civil Procedure, is a question that must be resolved by a factfinder,” the panel wrote. “This alleged breach is viable.”
Justices Gordon Goodman, Julie Countiss and April L. Farris sat on the panel.
Daniel represented himself.
Morris is represented by Stacy L. Kelly and Caroline S. Watson of The Blum Firm.
Plazcek is represented by Scott Maxwell Chapman of Chapman Law Group.
The case number is 01-22-00319-CV.
Texas Supreme Court
SCOTX Decision Brings First COA in Line Over Finality of Severed Claims
Justices settled a split in the lower courts over appellate jurisdiction and the finality of judgments in a severed action in Sealy Emergency Room v. Free Standing Emergency Room Managers of America.
The dispute involves a common situation in cases where the trial court grants partial summary judgment. The issue is whether a trial court can sever unresolved claims following a grant of partial summary judgment, thereby creating an appealable final judgment.
FERMA was hired to manage Sealy Emergency Room and sued over a contract dispute. The trial court granted partial summary judgment on Sealy ER’s counterclaims and third-party claims and severed those claims into a new action with a separate cause number.
The court reversed a decision by the First Court of Appeals to dismiss Sealy ER’s appeal for lack of jurisdiction due to the pendency of FERMA’s unresolved claims under the original case.
Appellate experts said the First COA was an outlier, approaching the procedural issues in a different way from the Fourteenth and other courts of appeals.
The court, in a unanimous opinion by Justice Brett Busby, decided two questions, saying yes to both:
- Does severing claims disposed of on partial summary judgment into a new action render the judgment final even though other claims between the parties remain pending in the original action?
- When a party seeks attorney’s fees as a remedy for a claim under a prevailing-party standard, does a summary judgment against the party on that claim also dispose of its fee request?
Sealy ER argued that orders severed into a separate action become final and appealable upon severance if those orders dispose of all claims between the parties in the severed action. FERMA contended that orders severed into a separate action between certain parties result in a final judgment only if all claims between those parties have been disposed of in both the severed and the original actions.
“The court of appeals agreed with FERMA, relying on a line of First Court of Appeals cases holding that a severed action is not final on appeal if pending claims remain in the underlying action. Under our precedent, however, we conclude that Sealy ER is correct,” said Busby.
The opinion cited two decisions from 2001, Lehmann v. Har-Con Corp. and Harris County Flood Control Dist. v. Adam.
“Because the severed action here consists only of claims that have been fully and finally resolved on summary judgment, it must be considered final under Lehmann and Adam. Whether the parties have other claims pending in the original action has no bearing on the severed action’s finality,” Busby said.
Cynthia L. Jones of Newton, Jones & McNeely argued the case for Sealy ER. Ashish Mahendru appeared for FERMA.
The case number is 22-0459.
Union Pacific Gets Fatal Crash Suit Tossed
The Texas Supreme Court on Friday brought an end to a negligence lawsuit brought by the family of a man who was fatally struck by a train. The family had argued a trees and a fence line obstructed his view of the tracks and that because the crossing was “extra hazardous,” Union Pacific had a duty to use “extraordinary means” to warn drivers about the approaching train.
Justice Jeff Boyd, writing for the court, sided with Union Pacific in the lawsuit brought by Rolando Prado Jr.’s family. Prado, who did not stop at a posted stop sign near the tracks, died after being struck by a train on Sept. 12, 2015, while crossing the tracks in his pickup truck.
Justice Boyd wrote that the Prado family urged the court to adopt a holding that “not every visible stop sign is visible enough or, even if it is, people cannot always expect that even reasonably prudent drivers will obey it.”
“We conclude the evidence in this record is insufficient to create a fact issue on whether a railroad crossing protected by a stop sign in addition to a crossbuck sign was ‘extra-hazardous.’ And assuming the crossing was ‘unreasonably dangerous,’ no evidence exists that the landowner knew it was,” the court held.
The ruling reinstates a trial court’s summary judgment ruling in favor of Union Pacific and undoes a ruling from the Fourth Court of Appeals in San Antonio that had revived the suit.
The Prados are represented by Andrew R. Gould, Noah M. Wexler and Jason A. Itkin of Arnold & Itkin.
Union Pacific is represented by Kent Rutter and Christina Crozier of Haynes Boone.
The case number is 22-0431.
Justices Split on Rehearing Denial in Nate Paul Case
The Texas Supreme Court was not unanimous Friday in a decision denying rehearing to embattled Austin real estate developer Nate Paul in an investment dispute with the Roy F. and Joann Cole Mitte Foundation.
Justice Brett Busby authored a six-page dissent from the denial, joined by Chief Justice Nathan Hecht and Justice John Devine. The case asked the court to determine whether an arbitrator can decide that someone who did not sign an arbitration agreement is still required to arbitrate claims brought against them, or if the courts must first determine whether the arbitrator has authority over the nonsignatory.
“Because we have concluded that this issue is for courts to decide, and that conclusion affects the contempt order that is the subject of the original proceeding, I respectfully dissent,” Justice Busby wrote.
Paul appealed after a trial court entered judgment confirming an arbitrator’s joint award of damages against Paul and entities he controls. Paul also brought an original proceeding to the Texas Supreme Court, challenging the trial court’s order of criminal contempt against him for violating an injunction.
“But if Paul is correct that the arbitrator had no authority to decide whether he was bound to arbitrate as the alter ego of a signatory, then the trial court erred by confirming the arbitration award against him, which was the basis for all of the trial court’s subsequent orders — including the injunction it held Paul in contempt for violating,” Justice Busby wrote. “Our cases show that Paul is correct.”
Paul and his entities are represented by Brent C. Perry and Zachary R. Carlson of Burford Perry.
The Mitte Foundation is represented by Ray C. Chester, Michael A. Shaunessy and Andrew Edge of McGinnis Lochridge and Craig T. Enoch and Elana Einhorn of Enoch Kever.
The case number is 23-0390.
Editor’s Note: Janet Elliott contributed to this report.