In this edition of Litigation Roundup, a federal judge in Texas determines an insurer does not have to cover policyholders accused of stealing $80 million in Bitcoin through a malware attack, the operators of a pyramid scheme agree to pay Texas $10.76 million and the state draws a lawsuit from booksellers over a new regulation.
Have a development we should cover in the next Litigation Roundup? Please let us know at email@example.com.
Howard County District Court
Jury Sides with Landowners in Saltwater Disposal Well Fight
A jury in West Texas recently sided with landowners Buzzard Roost Farms and C&L Solutions in a dispute with an operator, SM Energy, over the right of first refusal related to the drilling of a saltwater disposal well.
The crux of the dispute was whether the surface use agreement between the parties gave Buzzard and C&L the first crack at having any saltwater disposal wells SM Energy planned to drill within five miles of their property placed on their property. They alleged SM breached the deal by drilling the well elsewhere.
SM alleged that it used geologic data to determine where to drill the saltwater disposal well and that “no portion of the surface lands, nor adjacent lands owned by defendants, had geology suitable for the placement and operation of a [saltwater disposal well.]”
After hearing a week of testimony, the jury agreed with the landowners and awarded $9.3 million in actual damages.
District Judge R. Shane Seaton, whose district includes Howard, Martin and Glasscock counties, entered final judgment in the case July 20, awarding an additional $2.7 million in interest and about $1.3 million in attorney fees.
The landowners are represented by Fred Wahrlich and Liza Eoff of Munsch Hardt Kopf & Harr, James P. Barnett and Ruth Brenton of James P. Barnett Jr. & Associates and Brandy R. Manning of Dykema Gossett.
SM Energy is represented by Richard E. Booth of Lynch, Chappell & Alsup and Murray Fogler of Fogler, Brar, O’Neil & Gray.
The case number is 53991.
Collin County District Court
‘Blessings in No Time’ Pyramid Schemers to Pay $10.7M
The Frisco duo behind BINT Operations, which did business as “Blessings in No Time” have been hit with a final judgment and permanent injunction that requires they pay $10.76 million to the state of Texas and stop operating the illegal pyramid scheme that scammed nearly 8,000 individuals.
LaShonda and Marlon Moore were sued by the Texas attorney general in 2021, accused of operating a pyramid scheme that promised investors returns as high as 800 percent. The state alleged the Moores had used an appearance on a reality show that was aired on the Oprah Winfrey Network to bolster their credibility and that they represented themselves as a faith-based wealth building organization that would “bless” investors who made up-front monetary contributions.
The case was assigned to Collin County District Judge Andrea K. Bouressa. The parties filed a joint motion for entry of the final judgment and permanent injunction with Judge Bouressa July 25.
Texas is represented by Robert Robinson of the attorney general’s consumer protection division.
The Moores are represented by Justin M. Bryan and Kristin M. Hecker of McCathern in Dallas.
The case number is 471-03088-2021.
Southern District of Texas
Insurer Doesn’t Have to Cover $80M Bitcoin Theft Lawsuit
Nationwide Mutual Insurance Company is not on the hook for defending two policyholders who are being sued in Florida for allegedly using a malware attack to steal $80 million in Bitcoin, a federal judge recently determined.
U.S. District Judge Charles Eskridge granted Nationwide a summary judgment win July 25, agreeing the insurer had no duty to defend or indemnify Hiu Lam Cookie Choi or Brandon Ng in an underlying lawsuit that alleges conspiracy, conversion theft and unjust enrichment.
Nationwide filed suit in April 2022, seeking a declaration from the court that neither the homeowner policy nor the personal-liability umbrella policy held by Choi and Ng required it to pay defense costs or indemnify Choi and Ng in the underlying lawsuit.
Choi and Ng also moved for summary judgment, arguing the duty to defend and indemnify is triggered under the policies.
“The policies cover negligent conduct in all pertinent respects, nothing more,” Judge Eskridge wrote. “By comparison, the underlying action alleges only intentional conduct by Choi and Ng. Nationwide thus has no duty to defend or to indemnify them.”
Nationwide is represented by Rhonda J. Thompson of Thompson Coe Cousins & Irons.
Choi and Ng are represented by Rebecca Suzanne DiMasi of Shidlofsky Law Firm in Austin.
The case number is 4:22-cv-01231.
Western District of Texas
Texas Sued Over New Book Sale Regulation Law
A group of bookstores, publishers and authors are challenging a new Texas law regulating books they sell to school libraries and is seeking a preliminary injunction against House Bill 900, which is set to take effect Sept. 1.
The law bans books deemed “sexually explicit” and restricts access to books deemed “sexually relevant” in public schools in violation of the First Amendment, according to the lawsuit filed July 25. Plaintiffs include Austin’s Book People, Houston-based Blue Willow Bookshop, the American Booksellers Association, the Association of American Publishers, the Authors Guild and Comic Book Legal Defense Fund.
Named as defendants are the Texas State Library and Archives Commission, Texas State Board of Education and Texas Education Agency. The state entities had not yet filed a response.
HB 900 requires vendors of school library materials to submit to the education agency each year an updated list of library materials rated as sexually explicit or sexually relevant as defined by the law that were sold to a school district during the preceding year. The lawsuit claims that the law is unconstitutional because it compels the booksellers’ speech, is vague in its definitions and constitutes a prior restraint.
“The Book Ban must be enjoined to avoid the compulsion of unwanted government speech, the institution of a state-wide book licensing regime, and the recall, removal, and banning of many constitutionally protected books in public schools,” the motion for preliminary injunction states.
The case has been assigned to U.S. District Judge Alan Albright.
The case number is 1:23-CV-00858.
Texas Supreme Court
Appeal Filed in Beto Defamation Suit
The CEO of Energy Transfer, Kelcy Warren, asked the Texas Supreme Court on July 24 to overturn a June ruling from the Third Court of Appeals in Austin that ended his defamation lawsuit against politician Robert Francis “Beto” O’Rourke.
“It is a reality in the world of bare-knuckle politics that politicians will say horrible things — often hyperbolic, misleading, or even untrue — about their political opponents,” Warren told the state’s high court. “However, that reality does not absolve perennial political candidates, like O’Rourke, from liability for defamatory statements when they repeatedly accuse non-candidate private figures such as Warren of ‘bribery,’ ‘corruption’ and ‘extortion.’”
Warren alleged that while on the campaign trail, O’Rourke equated Warren’s political donations to Gov. Greg Abbott with crimes. O’Rourke argued, and the lower appellate court agreed, that the lawsuit should be dismissed under the Texas Citizens Participation Act, a law meant to bring an early end to lawsuits that seek to chill free speech.
A panel of the lower court found O’Rourke had only colloquially used the terms “bribery” and “corruption” during the campaign.
Warren is represented by Constantine Z. Pamphilis, Steven J. Owens and Daniel R. Benson of Kasowitz Benson Torres and Richard T. Miller of San Saba.
O’Rourke is represented by Chad W. Dunn and K. Scott Brazil of Brazil & Dunn, Joseph E. Sandler of Sandler Reiff Lamb Rosenstein & Birkenstock and Sarah Holley Long of Walters Balido & Crain.
The case number is 23-0583.
U.S. Court of Appeals for the Fifth Circuit
Convictions Upheld for 4 UDF Execs
The criminal convictions of four former executives of Grapevine-based United Development Funding were upheld Monday by a Fifth Circuit panel that rejected arguments an improper jury instruction and other rulings from U.S. District Judge Reed O’Connor mandated a new trial.
Former CEO Hollis Morrison Greenlaw, former partnership president and committee member Benjamin Lee Wissink, former CFO Cara Delin Obert and former director of asset management Jeffrey Brandon Jester each separately appealed their convictions that were handed down by a Fort Worth jury in January 2022.
The jury convicted the executives on all 10 counts of wire fraud, securities fraud and aiding and abetting securities fraud for their roles in what the government said was a Ponzi scheme. Greenlaw was sentenced to seven years in prison, Obert and Wissink each received five-year prison sentences, and Jester was sentenced to three years in prison.
The panel held that while there was “at least one error” in the jury instructions, the error was harmless. The executives had also argued that Judge O’Connor committed reversible error by limiting cross-examination of a government informant, by letting the government amend the indictment and make improper closing arguments, by imposing a time limit during trial and by failing to apply the cumulative error doctrine.
“Here, appellants fail to highlight the multiple errors that they allege occurred throughout their trial,” the panel held. “The only error they point to involves the district court’s jury instructions, and we have already determined that this error was, at most, harmless and does not warrant reversal of their convictions.”
Judges Carl E. Stewart, James L. Dennis and Leslie H. Southwick sat on the panel.
The government is represented by Amy Mitchell, Amanda R. Burch and Brian W. McKay of the U.S. attorney’s office for the Northern District of Texas.
Greenlaw is represented by Kannon K. Shanmugam, Hillary Black, Brian M. Lipshutz, Danielle Marryshow of Paul, Weiss, Rifkind, Wharton & Garrison; Wissink is represented by Guy Lewis of Pincrest, Florida, and Matthew Nielsen of Bracewell; Obert is represented by James Burnham, Brian M. Jorgensen, Margaret Maloy and Neal Stephens of Jones Day; Jester is represented by Arthur Lee Bentley III, Michael Holleman II and Elisha Kobre of Bradley Arant Boult Cummings, Jeffrey J. Ansley and Arianna G. Goodman of Vedder Price
The case number is 22-10511.
Editor’s Note: Janet Elliott contributed to this report.