In this week’s edition of Litigation Roundup, the Dallas appellate court undoes a $20.8 million award in a fight between a landlord and a grocery company after finding “red flags” during the negotiation process were ignored, a federal jury convicts a software company CEO of bilking investors out of at least $25 million and prosecutors go after a business mogul who they say hasn’t paid taxes since 1992.
Have a development we should include in the next Litigation Roundup? Please let us know at email@example.com.
Dallas County Court at Law
Trinity Industries Gets $24.5M in Fight with Sunoco
A dispute over who should have to pay for safety modifications made to 280 railcars that transport oil and gas has officially come to an end at the trial court.
Attorneys for Sunoco have previously said they intend to challenge the directed verdict that was entered in favor of Trinity following a bench trial in May.
The case was assigned to Judge Sally Montgomery, who signed the final judgment in Trinity’s favor Jan. 11. The award included the stipulated damages amount of $15.4 million to retrofit the railcars, prejudgment interest totaling about $6.7 million, $2.5 million in attorney fees and costs and postjudgment interest of 11.5 percent.
Trinity had filed suit in July 2019, alleging that under the terms of an agreement with Sunoco the parties had decided that if the Obama administration implemented certain safety regulations requiring modifications, Sunoco would have to retrofit the railcars it was leasing from Trinity or buy them outright.
After Sunoco allegedly tried to avoid making the modifications by deciding not to lease the railcars anymore, litigation ensued.
The case number is CC-19-03865-C.
Limestone County District Court
Navasota Valley Electric Co-op Hit with $100M Lawsuit
The family of two children who were seriously injured after coming into contact with a downed power line have filed a lawsuit seeking more than $100 million in damages from Navasota Valley Electric Cooperative.
The 7-year-old daughter and 10-year-old son of Joshua and Heidi Longer were injured in February 2023 when they came into contact with the energized power line at their grandparents’ house in Limestone County, according to the lawsuit. The daughter suffered the most serious injuries and lost three fingers on her left hand.
The family alleges Navasota Valley Electric was negligent in maintaining the power lines and failed to trim and prune problematic vegetation despite complaints from customers about trees coming into contact with power lines.
Information about the judge the case has been assigned to and counsel for the defendant was not available Monday.
The Longer family is represented by Samuel R. Palermo and Randy Sorrels of Sorrels Law.
The case number is 32911-A.
Northern District of Texas
Founder of Software Co. Convicted in $25M Fraud Trial
A jury has convicted Christopher Kirchner, 36, of defrauding investors in his supply-chain management software startup out of at least $25 million.
Kirchner is the founder of Slync and served as CEO of the company from 2017 until the board of directors removed him because of misconduct allegations in 2022. The jury heard four days of testimony before convicting him on Jan. 25 on four counts of wire fraud and seven counts of money laundering.
U.S. District Judge Mark Pittman presided over the case that began with Kirchner’s indictment in February 2023. Prosecutors alleged he made roughly 100 transfers of funds from the company’s bank account that held about $57 million in investor funds into a different bank account that only Kirchner had access to — including a $20 million transfer into his personal checking account.
Kirchner is alleged to have used investor funds for personal expenses, including the purchase of a $16 million private jet. He faces up to 20 years in prison for each count of wire fraud and 10 years in prison for each count of money laundering.
As of Monday, a date had not been set for his sentencing.
Kirchner is represented by federal public defender Christopher Weinbel of Fort Worth.
The case was prosecuted by assistant U.S. attorneys Joshua D. Detzky, Nashonme Johnson and Jay Weimer.
The case number is 4:23-cr-00127.
Physician’s Assistant Convicted in Amniotic Fluid Scam
A physician’s assistant at a Fort Worth pain management clinic, Ray Anthony Shoulders, 36, has been convicted of healthcare fraud for a scheme that involved injecting patients with amniotic fluid as a purported treatment for joint pain.
Prosecutors alleged Shoulders began injecting the fluid into patients’ connective tissue in an off-label attempt at pain management but initially used a product that Medicaid would not reimburse called “Cell Genuity,” having patients pay more than $800 out of pocket for the treatment.
Later, Shoulders discovered another amniotic product that Medicaid would reimburse for called “Fluid Flow” that was more expensive than Cell Genuity. Prosecutors said he hatched a plan to bill Medicaid for Cell Genuity injections by using the billing code for Fluid Flow.
By using the incorrect code, the clinic profited $1,200 for each cc of Cell Genuity injected, compared to the $400 per cc the clinic would have made off Fluid Flow injections.
U.S. District Judge Terry R. Means presided over the case in which jurors heard five days of testimony before convicting Shoulders on Jan. 22 on one count of conspiracy to commit healthcare fraud and 12 counts of healthcare fraud. Jurors deliberated for less than an hour.
Shoulders was indicted in July. He faces up to 20 years in prison for each count, and his sentencing has been set for May.
Shoulders is represented by Michael P. Heiskell of Johnson Vaughn & Heiskell, Matthew Lawhon of Chapman Law Group and Sean McKenna of Spencer Fane.
Assistant U.S. attorneys P.J. Meitl and Nancy Larson prosecuted the case.
The case number is 4:23-cr-00207.
Dallas Business Owner Accused of Decadeslong Tax Evasion
The owner of several businesses, bars and nightclubs in the Dallas-Fort Worth area has been indicted on charges he hasn’t paid taxes since 1992.
Dhanesh Deoraj Ganesh, 62, was indicted Jan. 17 on five counts of tax evasion, one count of conspiracy to possess and distribute a controlled substance and one count of conspiracy to launder money.
Prosecutors allege Ganesh avoided paying Uncle Sam in part by concealing that he owned the businesses, instead putting them in the names of his brothers, sons and ex-wife. He also did not keep bank accounts in his name and didn’t retain signatory authority on the companies’ bank accounts.
The government alleges Ganesh owes about $1.6 million in unpaid taxes and that he was using some of his restaurants and bars to sell cocaine. The charges for tax evasion are punishable by up to five years in prison each, the drug conspiracy charge carries a 20-year maximum sentence, as does the money laundering conspiracy charge.
The case has been assigned to U.S. District Judge Sam A. Lindsay. A jury trial has been tentatively set to begin April 2.
Ganesh is represented by Dallas solo practitioners John M. Lozano and Robert R. Smith.
Assistant U.S. attorney Mary Walters and Dimitri Rocha are prosecuting the case.
The case number is 3:24-cr-00019.
Eastern District of Texas
Jury Says Samsung Owes $67.5M for Infringement
G+ Communications is entitled to $67.5 million in damages from Samsung Electronics for its infringement of patents related to 5G technology via its Galaxy line of phones.
G+ filed suit against Samsung in March 2022, alleging infringement of three patents.
U.S. District Judge Rodney Gilstrap presided over the six-day trial that ended Friday. The jury found Samsung had infringed two of the three asserted patents, awarding $45 million in damages for infringement of one, $22.5 million for infringement of another, and clearing Samsung of infringing the third.
The jury also determined G+ is entitled to a running royalty of $1.50 per phone sold that uses the infringing technology.
Samsung is represented by Ruffin B. Cordell of Fish & Richardson and Melissa Smith of Gillam & Smith.
The case number is 2:22-cv-00078.
Superior Court of California, San Diego County
Jury Decides Fight Between Medical Device Companies
NuVasive, a medical device company that designs, develops and markets products used in spinal surgeries, has been awarded $812,000 in damages by a California jury that had been asked to hit a rival company with an award of about $50 million.
NuVasive filed suit in January 2020, alleging Alphatec Spine was “on the brink of financial failure” when it decided to “resuscitate itself by unlawfully targeting and stealing the key employees, distributors and business strategies of its market-leading competitor,” NuVasive claimed.
Alphatec was accused of unlawfully trying to copy NuVasive’s business model in part by recruiting former NuVasive executives to work for it and using those hires as a way to raise capital from lenders. NuVasive alleged the executives shared its confidential business information with Alphatec.
“In so doing, Alphatec Spine has and is still illegally inducing many of these individuals to violate obligations they owe to NuVasive, such as by agreeing to indemnify certain third persons for lawsuits brought by NuVasive to stop their illegal activities,” the lawsuit alleged.
The case was assigned to Judge Richard S. Whitney.
Alphatec Spine is represented by and Tom Melsheimer, Nimalka Wickramasekera, Brian Nisbet, John Sanders, Libby Deshaies, Alex Wolens and Mike Woodrum of Winston & Strawn and Micha Danzig, Natalie Prescott, Nicole V. Ozeran and Edward M. Fallas of Mintz Levin Cohn Ferris Glovsky and Popeo.
NuVasive is represented by Jeff S. Hood and Ryan C. Caplan of Procopio, Cory, Hargreaves & Savitch and J. Christian Nemeth, Rachel B. Cowen and Emory D. Moore Jr. of McDermott Will & Emery.
The case number is 37-2019-00051562-CU-BT-CTL.
Fifth Court of Appeals
Reliance in Face of ‘Red Flags’ Dooms $20.8M Award
A three-justice panel recently determined that the operators of a grocery store who alleged they were defrauded by their landlord who entered a lease agreement with a competing grocery store were not entitled to a $20.8 million damages award handed down by a jury.
Walnut Creek Center and Bryan Ly had argued on appeal that they were within their rights to sign a lease agreement with a different store after negotiations stalled out with Maya Walnut, formerly known as Maya Foods, which operated the El Rio Grande Latin Market No. 5 in Walnut Creek’s shopping center.
Maya had brought claims for fraud, negligent misrepresentation, conspiracy to commit fraud, promissory estoppel and equitable estoppel against Walnut Creek based on its decision to lease the space formerly occupied by Maya to El Rancho Supermercado.
A six-person jury sided with Maya, awarding the company damages for past and future lost profits, lost business value and $10 million in exemplary damages.
“The lease did not require landlord to negotiate exclusively with tenant,” the panel wrote in reversing the award. “The lease did not prevent landlord from leasing to anyone other than tenant. We conclude the terms of the existing lease raised a red flag precluding tenant’s blind trust in landlord providing notice of the El Rancho lease. Tenant and its experienced negotiator should have been aware landlord was free under the lease to negotiate and enter a lease with another tenant without providing notice to tenant.”
The panel wrote that the record contains evidence of “numerous red flags,” and held that Maya had “placed its entire business in jeopardy while operating under circumstances that a similarly situated and savvy party would have recognized as imminently risky and as requiring self protection.”
Justices Bill Pedersen III, Bonnie Lee Goldstein and Michael J. O’Neill sat on the panel.
Maya Walnut is represented by W. Ira Bowman, Samantha Baynes and Monica Niewiarowski of Godwin Bowman.
The case number is 05-21-01140-cv.
Split Panel Undoes $15.6M in Electrocution Case
A multimillion-dollar jury award in favor of one plumber who died and two others who were seriously injured after being electrocuted on a job site has been undone by the Dallas Court of Appeals that determined the company operating the apartment complex where the incident occurred owed no duty to the men.
Kiley Russell was killed and his coworkers Jackson Wells and Devin Schares were injured when they were dispatched to handle a plumbing job at the River Ranch Apartments in Sherman, Texas, in 2017, according to court documents and decided that to complete the work on the water main, a nearby flagpole needed to be moved.
A jury in April 2022 determined Monticello, the company managing the complex, was 50 percent responsible, Russell was 25 percent responsible, Shares and Wells were each 2 percent responsible and that their employer, Red River Plumbing was 21 percent responsible.
While they moved the flagpole, it came into contact with powerlines overhead, injuring Wells and Shares and killing Russell.
Justice Amanda Reichek authored the majority opinion, joined by Justice Emily Miskel holding that there’s no evidence in the record that Monticello knew the plumbers were going to move the flagpole, and that for the plumbers to prevail in this suit, their theory of liability would “require premises owners and occupiers to anticipate the methods and procedures by which an independent contractor will perform work and to furnish the contractor’s employees with appropriate safety equipment to guard against hazards arising from that work.”
“The families in this case suffered horrible losses,” she wrote. “But Texas law strictly proscribes the liability of premises owners and occupiers for hazards created by the work activity of an independent contractor’s employees over which they had no control. Based on the foregoing, we reverse the trial court’s judgment and render judgment that appellees take nothing by their claims.”
Justice Robbie Partida-Kipness dissented, writing that she disagreed with the majority’s “narrow characterization” the dangerous condition.
“Here, I would conclude although the power lines were visible, the danger posed by the power lines and their proximity to the flagpole was not obvious because appellees were not working on the power lines and could not anticipate the danger in moving the flagpole. Further, I would conclude appellees’ decision to move the flagpole did not create the dangerous condition,” she wrote. “The danger lay with the flagpole itself; more particularly, the location, weight, and unwieldy nature of the flagpole.”
Monticello is represented by Robert B. Gilbreath of Hawkins Parnell & Young.
The plaintiffs are represented by Shelby J. White, Kirk Pittard and Thad D. Spalding of Durham, Pittarg & Spalding, Bill Kennedy and Joan Ballard of Bill Kennedy Law and Jason Stephens of Stephens Law Firm.
The case number is 05-22-00709-CV.