Ten months after two Texas trial lawyers were the subject of a scathing opinion from the Fifth Circuit that drew a new trial order based on improper jury argument, another judge has determined the duo’s conduct before a jury mandates a do-over.
Earlier this week, Dallas County District Judge Gena Slaughter issued a four-page order finding that the arguments made by defense lawyers Stephen A. Khoury and C. Gregory Shamoun in front of a Dallas County jury deciding a fraudulent transfer case were “improper and incurable.” But Khoury and Shamoun told The Texas Lawbook this week they are “shocked” by the finding and argue Judge Slaughter’s order is “inaccurate and incorrect.”
Judge Slaughter found the “improper conduct” of Khoury and Shamoun “probably resulted in an improper verdict against plaintiffs.”
“The Court finds that the improper jury argument … including the unsubstantiated personal attacks on plaintiffs, plaintiffs’ counsel and plaintiffs’ expert witness; referring to evidence outside the record in closing argument; injecting personal opinions; and appealing to local and religious bias, was so pervasive, inflammatory, and prejudicial that it could not be cured,” Judge Gena Slaughter wrote in a four-page order issued Tuesday.
Khoury and Shamoun, Judge Slaughter wrote, “engaged in unsupported, extreme, and personal attacks on the integrity of plaintiffs’ lead counsel, Mr. Todd J. Harlow.”
“The attacks on Mr. Harlow included denigrating Mr. Harlow by repeatedly referring to him as ‘Harlow,’ insulting him as a ‘silver-tongued lawyer,’ and repeatedly accusing Mr. Harlow of dishonesty, despite being admonished repeatedly by the court — both on and off the record,” the order reads.
In the underlying fraudulent transfer lawsuit, which is now destined for a new trial, Renate Nixdorf GmbH & Co. and Watercrest Partners sued a large number of defendants in two separate actions that were consolidated for trial. The defendants are TRA Midland Properties, Pillar Income Asset Management, Midland Residential Investment, TRA Apt. West TX, Transcontinental Realty Investors, American Realty Investors, Winter Sun Management, H198, Triad Realty Services, Regis Realty Prime, Chikory I, Sunchase American, Longfellow Arms Apartments, Vistas of Vance Jackson, Donald C. Carter, Robert T. Shaw Sr., and Ryan Phillips.
Renate Nixdorf, referred to in court documents as RNK, alleged it held a $48.75 million judgment against “disgraced real estate fraudster and international fugitive” Werner Eric Brauss, while Watercrest held a $300,000 judgment against Brauss’ “ex-wife and coconspirator.”
“Brauss fled the country on Nov. 11, 2009 to avoid criminal prosecution and a flood of civil lawsuits brought by defrauded investors in his myriad real estate scams,” RNK alleged in its fourth amended petition. “Immediately before Brauss escaped to Brazil, on Nov. 10, 2009, Brauss [and his ex-wife] ‘assigned’ all of their ownership interests in TRA Midland to [Midland Residential Investment] in return for no consideration.”
In March 2023, after three weeks of trial, jurors were given a 41-page charge, containing 28 multipart questions. The jury determined that RNK and Watercrest were creditors of Brauss’ and that Brauss had transferred stock in two entities and 100 percent of the membership interests in Midland Equity “with actual intent to hinder, delay or defraud” his creditors.
The jury found that six of the defendant entities — MRI, TRA Midland, TRA Apt. Pillar, TCI and ARI — were “part of a conspiracy that caused harm to either Renate Nixdorf or Watercrest Partners.” The jury also made findings of liability against some of the defendants, but not all.
Harlow, an attorney with Frost Brown Todd who represents the plaintiffs, told The Lawbook he was pleased with the court’s ruling.
“The misconduct throughout trial, that we detailed in our motion, ultimately created too much noise for the jury to focus on the issue,” he said. “So we look forward to the opportunity to try this case at a more suitable volume.”
Khoury and Shamoun no longer represent the defendant entities involved in the underlying litigation. Khoury, in an email to The Lawbook, hit back against the new trial order, while stating that his assertions were not made in his capacity as a representative of his former clients.
“I object to and roundly reject the Court’s Order granting a new trial, and the findings therein, as being inaccurate and incorrect, and not based upon a fair reading of the record. The Court also completely ignores the Court’s excessive and repetitive admonishments of Plaintiffs’ counsel throughout the trial and transcript,” he wrote.
Khoury alleges that plaintiffs’ counsel “never moved for mistrial, or raised the issue regarding alleged misconduct, during or after trial in March 2023, nor in plaintiffs’ motion for judgment, which was heard by the court in August of 2023.”
Shamoun, in a phone call with The Lawbook, made clear his statements were being made on his own behalf and lodged similar complaints about the court’s order.
“I’ve been practicing for over 35 years,” he said. “I have never heard of, or read, an order on a motion for new trial, after a jury verdict, where the movant never objected during trial, and never moved for a mistrial and the judge never entered a judgment based upon the jury verdict, and then upon a motion filed by the losing party for a new trial (which is a mistrial. It may be titled motion for new trial, but it’s really a motion for mistrial) after an unfavorable jury verdict.”
In an interview with The Lawbook, Harlow challenged the argument that there were no objections made during the trial regarding the misconduct.
“The insinuation that plaintiffs did not object to the misconduct addressed in the motion for a new trial during the course of the trial is flatly untrue,” he said. “Plaintiffs repeatedly objected during the trial to this misconduct and the defendants were admonished repeatedly both on and off record by the court which is reflected in the court’s order granting a motion for a new trial.”
Portions of the trial transcript attached as exhibits to the motion for a new trial also reflect objections were lodged with the court.
Because Khoury and Shamoun no longer represent the defendants in the underlying dispute, Shamoun told The Lawbook there is no recourse for him. He said he was “offended by the inuendo that I did and said something improper.”
“There’s nothing that Steven Khoury and I can do to challenge this reprehensible order,” he said. “We can’t challenge it personally, but it’s not going to affect my reputation. In fact, it might say, ‘Hey you guys are so good in convincing a jury, we might want to hire you again.’”
Khoury, similarly, issued a statement that the new trial order wasn’t all bad news for him and his former clients.
“[T]he jury entered findings of liability against my clients. So, I suppose that one should think of thanking plaintiffs’ counsel for obtaining a mistrial, which effectively eliminates any adverse verdict against my clients,” he said. “And I suppose what the Court’s finding, that the improper jury argument ‘probably resulted in an improper verdict,’ really means is that a proper verdict — caused by the jury arguments — would have been the total exoneration of my former clients.”
The case number is DC-13-13354.