In this edition of Litigation Roundup, Lynn Pinker Hurst & Schwegmann has been tapped to represent a trading card company that accuses Irving-based Panini America of using its market dominance to stifle competition and create a monopoly in the industry, and Jackson Walker is hit with a new lawsuit over the scandal involving its former bankruptcy partner and a sitting judge.
The Litigation Roundup is a weekly feature highlighting the work Texas lawyers are doing inside and outside the state. Have a development we should include next week? Please let us know at tlblitigation@texaslawbook.net.
Superior Court, Los Angeles, California
Jackson Walker, Freeman Sued by Ex-Tech Co. Execs
A lawsuit filed earlier this month alleges conduct by Dallas-based Jackson Walker, a bankruptcy partner in Houston and a former bankruptcy partner Elizabeth Freeman that “manipulates federal bankruptcy proceedings to advance their own interests” at the expense of the former CEO and general counsel of the technology company
The suit, filed by former Volusion CEO Bardia Dejban and its former general counsel Bahar Dejban, names as defendants Freeman, Jackson Walker, Matthew Cavenaugh and 50 unidentified defendants. The Dejbans allege the defendants used “fraud, concealment and the most flagrant abuse of judicial process” to “steal plaintiffs’ right to pursue their valid California employment and tort claims in a neutral forum before a judge who was not sleeping with opposing counsel.”
The lawsuit centers on the once-secret romantic, live-in relationship between Freeman, who was formerly a bankruptcy partner at Jackson Walker, and David Jones, who resigned from the bankruptcy court after the relationship was publicly reported.
The Dejbans, who were terminated from Volusion after its board of directors was replaced in mid-2020, allege they were subjected to “discriminatory treatment” and were fired “without notice or cause” by the new board.
In July 2020, Volusion hired Jackson Walker and Cavenaugh to file for Chapter 11 bankruptcy protection in the Southern District of Texas. The Dejbans allege the bankruptcy filing misrepresented that Volusion’s principal place of business was in the Southern District when it was actually in Austin, the Western District of Texas, and also that the case was “non-complex,” which the Dejbans allege ensure that the case was assigned to Jones.
Meanwhile, the Dejbans filed employment claims against Volusion’s new board in Los Angeles Superior Court in March 2021.
“Throughout 2020 and 2021, defendants repeatedly told plaintiffs that pursuing their California case would subject them to contempt sanctions, and they could never prevail against Judge Jones,” the lawsuit alleges. “Defendants’ wrongful conduct culminated in the coercion of plaintiffs to dismiss their independent California employment and tort claims against Volusion’s individual board members and related parties — claims that were wholly outside the scope of the bankruptcy proceeding”
Additionally, the lawsuit alleges Jones “leveraged his judicial authority to intimidate” the Dejbans, threatening them with contempt at hearings in July and August 2021 unless they dropped the California litigation.
“Consequently, plaintiffs were forced to relinquish their claims after the Lothario Judge threatened sanctions at the behest of his lover and her law firm who shamelessly used the Judge as their enforcer under the guise of being a Judge,” the lawsuit alleges.
The plaintiffs are represented by Katherine Pratty and Tina Glandian of Geragos & Geragos.
Counsel for the defendants had not filed an appearance as of Monday.
The case number is 25STCV31899.
Western District of Texas
Texas Reaches Agreement Ending Lawsuit Over Marketing Text Message Law
Three companies that sued the state of Texas Sept. 1 seeking an injunction against a new state law targeting marketing text messages have reached an agreement with the state to end the litigation.
In a joint notice filed Nov. 6, the parties explained they had reached an agreement to dismiss the litigation without prejudice after learning more about how Texas plans to enforce SB 140.
Ecommerce Marketers Alliance, which does business as Ecommerce Innovation Alliance, Flux Footwear and Stodge, which does business as Postscript, told U.S. District Judge Robert Pitman in the lawsuit that the new law was intended to protect consumers from receiving “unwanted and unsolicited text messages” but argued that the law “goes further than its drafters intended.”
The sponsors of the bill, SB 140, represented during the legislative session that the law was “intended to only impact unwanted text messages,” the businesses allege. But the language of the law, which expanded the reporting and disclosure requirements in Chapter 302 of the Texas Business and Commerce Code, “has the potential to put businesses that text only with the consent of their customers on the hook for hundreds of thousands of dollars in litigation expenses and damages, not to mention potential criminal liability,” the lawsuit alleges.
“Under the new language of Chapter 302, businesses can only avoid these Draconian results by undertaking an extremely burdensome registration process and making lengthy disclosures in their text-messaging campaigns,” the suit alleges. “These disclosures may make sense for voice calls but are impractical in the context of character-limited text messages.”
But the parties told the court any possible confusion about the scope or enforcement of SB 140 was cleared up after Texas filed its response in opposition to the motion for a preliminary injunction in late September.
“Defendants explained that the Office of the Attorney General of Texas does not understand SB 140 as extending Chapter 302’s requirements to businesses which operate consent-based marketing programs and, instead, interprets Section 302’s definition of ‘call’ to mean a ‘telephone call’ as that term is defined by Section 304 of the Texas Business & Commerce Code,” the joint notice reads. “Based on defendants’ understanding of SB 140 as it applies to businesses like plaintiffs, the parties have reached an agreement that includes stipulating to dismiss this matter without prejudice.”
The plaintiffs are represented by Thomas M. Farrell, Matthew A. Fitzgerald and Hannah K. Caison of McGuireWoods.
Texas is represented by Munera Al-Fuhaid of the attorney general’s office.
The case number is 1:25-cv-01401.
Eastern District of Virginia
FCA Suit Over PPP Loan, With Issue of First Impression, Reaches Settlement
A construction company, Engineered Structures Inc., has reached an agreement that will end a lawsuit alleging the company violated the False Claims Act in its application for a Paycheck Protection Program loan from the Small Business Administration during the pandemic.
Karen Bloomfield filed her lawsuit on behalf of the United States against ESI in July 2022. Bloomfield worked for ESI from October 1997 until April 2020, holding a variety of roles including senior assistant project manager and accounting/HR manager and benefits coordinator.
“In April 2020 Ms. Bloomfield discovered that ESI was manipulating its workforce numbers and accounting to secure funds from the SBA’s PPP,” the lawsuit alleges. “She and other longtime employees received notices that they were being terminated but may be brought back, despite ESI being designated as an essential business because of its primary business purpose — construction.”
Bloomfield alleged ESI laid off about 100 employees before applying for the loan to get below the 500-employee threshold to qualify for the funds. ESI applied for and received in April 2020 a loan of $8.6 million, which was forgiven in June 2021, according to court documents. Bloomfield also drew parallels between the timing of receipt of the funds and ESI’s purchase of a private jet, an 11-seat Cessna 525C.
On Friday Bloomfield asked U.S. District Judge David J. Novak to approve the settlement, which includes $444,524 in litigation expenses and a redacted amount of attorney fees that is “significantly less” than the $3.4 million total accumulated. According to the motion, ESI agreed to pay the United States $5.7 million to resolve the lawsuit, and Bloomfield will receive 29.5 percent of that, about $1.7 million.
“While relator and her counsel believe in the strength the claims at issue, it bears noting that ESI had proffered defenses not only based upon falsity but also on the basis of materiality and scienter that could have proven fatal to relator’s claims brought on behalf of the United States,” Bloomfield argues in the motion. “The settlement also provides for payment of a high percentage of the amount of the PPP loan at issue without the risk of a reduced recovery or no recovery.”
“Here, not only do relator’s counsel — who are extremely experienced in this field — believe that the settlement is fair and reasonable, but the United States, in its capacity as the real party-in-interest and the beneficiary of the settlement, is supportive of the resolution reached and has approved it. Relator respectfully submits that the court should afford significant weight to this factor in approving the settlement.”
In an opinion issued Oct. 20, Judge Novak resolved an issue of first impression that he wrote was “a question of law integral to relator’s claims: whether businesses applying for PPP loans on the basis that they employed no more than 500 people needed to include temporary workers obtained from staffing agencies in their employee headcount.”
He wrote that under the definition of “employees” used for PPP-eligibility determinations, businesses must include such workers in their headcounts.
As of Monday afternoon, the docket did not reflect a ruling on the motion for approval.
Bloomfield is represented by Rachel Rose of Houston, Patricia D. Ryan of Glen Echo, Maryland, Glenn Chappell of Tycko & Zavareei and James E. Miller, Bruce D. Parke, Alec J. Berin, Anna K. D’Agostino and Madison A. Gregg of Miller Shah.
ESI is represented by Jason M. Crawford, Amy O’Sullivan and Agustin D. Orozco of Crowell & Moring.
The case number is 1:22-cv-00789.
Eastern District of Texas
Trading Card Co. Panini America Hit with Monopoly Claims
Irving-based trading card company Panini America has been accused of operating or attempting to operate a monopoly within the industry, a new lawsuit filed by Tennessee-based Wild Card alleges.
“This case is about Panini weaponizing its dominance to choke off Wild Card’s emergent trading-card brand,” the 20-page lawsuit begins. “In 2021, Wild Card entered the market and quickly gained traction with athletes, distributors, and collectors. Panini, which dominated the U.S. markets for premium basketball and football trading cards, responded by leveraging its market power to coerce essential downstream distributors and an essential upstream specialized manufacturer.”
Wild Card told the court that after its debut in 2021, the company “achieved immediate success” and “entered the premium market as a serious competitor capable of challenging Panini’s dominance.”
Panini took notice, the lawsuit alleges, “and bristled at Wild Card’s breakthrough into the premium card market.” That same year, according to the lawsuit, Panini was informed that its exclusive licensing deals with the NBA and NFL wouldn’t be renewed and would expire in 2025-2026.
“But rather than prepare to compete on innovation, quality, design, or collector value, Panini opted to use its market power to suppress competition before it could take root,” the lawsuit alleges.
At a closed-door annual meeting in October 2021, Panini allegedly told its distributors that it required loyalty and that carrying any Wild Card products would carry consequences. Within three weeks of that meeting, four major card distributors “abruptly reversed course and refused further Wild Card allocations,” the lawsuit alleges.
While the distributors told Wild Card their decision was based on “capacity” or “priority” reasons, Wild Card alleges in the suit those excuses were “pretextual and contradicted months of increasing orders, strong sell-through, and undisputed performance.”
“The distributors’ abrupt, synchronized withdrawals ran contrary to their economic interests, absent Panini’s coercion,” the suit alleges.
The case, filed Nov. 6, has been assigned to Chief U.S. District Judge Amos L. Mazzant III and brings claims for violations of the Sherman Act, the Clayton Act — monopolization, attempted monopolization, conspiracy to monopolize — and the Texas Business and Commerce Code.
The lawsuit is seeking trebled damages, an injunction that would prohibit Panini from conditioning its allocations on refusal to carry Wild Card products and a final judgment that would require the company “to adopt neutral, written allocation criteria applicable to all distributors,” among other relief.
Wild Card is represented by Chris Schwegmann, Chris Patton, Hayden G. Hanson and Shirley Xu of Lynn Pinker Hurst & Schwegmann.
Counsel for Panini America had not filed an appearance as of Monday.
The case number is 4:25-cv-01216.
Eastern District of North Carolina
Lenovo, Motorola Hit with Infringement Suit
The law firm Alavi Anaipakos is representing a German research institution in a lawsuit accusing Lenovo and Motorola of infringing six patents covering technology used in enhanced voice services, which improves the audio quality of phone calls on mobile networks.
Fraunhofer-Gesellschaft is “one of the world’s leading organizations for applied research, operating 76 institutes and research facilities throughout Germany,” according to the lawsuit. It alleges Lenovo’s 4G, 5G and wi-fi capable devices infringe its technology.
In October 2023, Fraunhofer-Gesellschaft alleges it sent a FRAND licensing package to Lenovo concerning its use of the asserted patents. The parties exchanged communication back and forth in February 2024 and March 2024, but then Lenovo stopped responding to its inquiries.
“In sum, beginning in October 2023, plaintiff attempted to engage with Lenovo multiple times, but despite repeated attempts as of the filing date of this complaint, plaintiff has received no communication from Lenovo since March 22, 2024,” the lawsuit alleges.
Fraunhofer-Gesellschaft is represented by Amir H. Alavi, Demetrios Anaipakos, Scott W. Clark and Masood Anjom of Alavi Anaipakos and Robert J. Morris of Smith Anderson Blount Dorsett Mitchell & Jernigan.
Counsel for the defendants had not filed an appearance as of Monday. The defendants are Lenovo Group, Lenovo (United States), Lenovo (Shanghai), Lenovo (Beijing), Motorola Mobility and Motorola (Wuhan) Mobility Technologies Communication.
The case number is 5:25-cv-00680.
New York Superior Court
Array Defeats Ex-Employee’s Claim of Oral Equity Promise
After a bench trial in state court in New York, lawyers with Reese Marketos prevailed on behalf of client Array US in a lawsuit where a former employee claimed he was owed a 5 percent equity stake based on an alleged oral agreement, defeating a lawsuit that was seeking more than $65 million in damages.
Judge Joel M. Cohen, who presided over a bench trial in the case from Aug. 6 through Aug. 12, issued his decision Nov. 3 dismissing with prejudice the lawsuit filed by Jason Owen.
Owen, who was an Array executive, had alleged that during a September 2020 phone call the company’s founder and then-sole shareholder promised him a 5 percent equity stake in the company “as a component of his employment.” Array denied any such commitment was made.
Owen joined the company in September 2020 as its chief strategy officer for a salary of $300,000, according to court documents. Owen testified that the employment offer also included 5 percent of Array’s common stock above a $100 million valuation, vesting over four years with a one-year cliff.
Closing arguments in the case were given Oct. 17, and Judge Cohen issued an oral ruling from the bench the same day finding that Owen failed to prove an oral contract existed. The court also determined that even if an oral agreement existed, it wouldn’t be applicable under Delaware law.
“Owen claims he accepted the offer on the spot and began working full-time thereafter,” Judge Cohen said according to a transcript of his oral ruling. “The record reflects no contemporaneous notes, emails, text messages, Slack messages or other communications memorializing the alleged promise or even any contemporaneous conversations with others reflecting that such an important agreement had been reached.”
“Moreover, the specific terms regarding the unusual $100 million valuation threshold and vesting schedule, neither of which have ever before been convincingly explained, first appeared in the complaint and then evolved further in plaintiff’s amended complaints, not in any contemporaneous writing from 2020. In my view, that evolution, including the addition of details as to the supposed oral agreement, undermines the credibility of the testimony that there was such an agreement to begin with.”
Judge Cohen said, according to the transcript, that he doesn’t doubt equity compensation was discussed during that September 2020 phone call, nor does he doubt that Owen left the conversation believing he would receive equity in the company.
“But the evidence simply does not support a finding that a legally binding contract was formed in that breezy and informal setting,” he said.
Array is represented by Pete Marketos, Tyler Bexley, Jamison Joiner, Leslie Chaggaris and Whitney Wendel of Reese Marketos.
Owen is represented by Joshua A. Berman, Paul C. Gross, Sara N. Bricker, Sarah Kim and Jason W. Denaburg of Paul Hastings.
The case number is 651471/2022.
Craving more Texas Lawbook litigation coverage? Don’t worry, we’ve got you covered. Take a look at these stories you may have missed in the past few days.
Lawyers who spoke to The Lawbook last week said that the complaint filed in February by the Reid Collins & Tsai-represented bankruptcy trustee for GWG Holdings was the Department of Justice’s roadmap to bring criminal proceedings against Bradley Heppner, the former chief executive officer of Beneficient. The indictment was filed in the Southern District of New York Oct. 28 and was unsealed Tuesday. Heppner is facing five charges: securities fraud, wire fraud, conspiracy to commit securities fraud and wire fraud, making false statements to auditors and falsifying records in a federal investigation.
Days after Heppner’s indictment, a flurry of activity hit the GWG bankruptcy case, with Bankruptcy Judge Marvin Isgur being recused and wind down trustee Elizabeth Freeman announcing her resignation from the case. The bankruptcy case will be assigned to a different judge in the Southern District of Texas, Chief Judge Alia Moses has determined.
At a hearing in Fort Worth in early September, Chief U.S. District Judge Reed O’Connor heard testimony from some of the wives, parents, brothers and daughters of the 346 people killed in two Boeing 737 Max plane crashes who pleaded with him to reject the government’s request to dismiss the criminal case against the manufacturer. In Thursday’s order dismissing the case, the judge ruled that the government “has not acted with bad faith, has given more than mere conclusory reasons for its dismissal, and has satisfied its obligations under the [Crime Victim’s Rights Act].”
The lawsuit over the Dallas Mavericks and Dallas Stars shared venue space at American Airlines Center in Dallas that was filed Oct. 28 has been set for a jury trial to begin before Business Court Judge Bill Whitehill Jan. 26. Lawyers said that type of speed is what they hoped to see from the new specialty court.
In this latest edition of Asked & Answered, Kirkland & Ellis partner Kasdin Mitchell talks about getting to argue in the U.S. Supreme Court, where she once clerked for Justice Clarence Thomas, as well as her time before law school, working in the White House for First Lady Laura Bush. Her mother’s pursuit of a law degree inspired her own path.
Two defamation lawsuits filed against critics of FBI Director Kash Patel are unfolding in federal court in Texas. In the Western District of Texas, Patel’s girlfriend has sued a former FBI special agent for allegedly defamatory statements made on a podcast, while in the Southern District of Texas, Patel himself has sued the former assistant director of counterintelligence for the FBI for comments he made during an MSNBC appearance. The defendants have enlisted Dorsey & Whitney, Dykema, Jackson Walker, Fletcher Held and First Amendment pros from SMU to fight the litigation. Binnall Law Group in Alexandria, Virginia, is representing the plaintiffs.
Pine Gate Renewables and 78 of its affiliated businesses filed for Chapter 11 bankruptcy protection Thursday in the Southern District of Texas as the North Carolina-headquartered business “continues to engage in a competitive sales process with multiple interested parties to transition ownership of its solar and energy storage project fleet while preserving jobs and maximizing value.”
About 60 judges and lawyers gathered last week for a book signing event celebrating the second edition of On the Jury Trial, authored by Winston & Strawn partner Tom Melsheimer and Fifth Court of Appeals Justice Craig Smith. U.S. District Judge Ada Brown was among those present and said she gives a copy of the book to all her law clerks.