In this edition of Litigation Roundup, the former general counsel of the Houston Housing Authority has her qui tam False Claims Act suit partially revived by the Fifth Circuit, an allegedly undisclosed personal relationship between a magistrate judge and a plaintiff attorney who secured a $124.5 million award in her court gets a second look, and a former CEO of a software company loses his bid to keep a $20 million suit in Texas courts.
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Harris County District Court
Jury Awards Construction Co. $32.5M in Spat with General Contractor
Mid Main Properties has been awarded $32.5 million in a lawsuit brought by Patriot Contracting stemming from a deal to construct a four-building, multiuse project in Houston’s midtown.
The jury heard six weeks of testimony before agreeing Mid Main was owed millions for the work it did on Houston Midtown apartments. The award included $8 million in actual damages, $7 million in attorney fees and $17.5 million in punitive damages — significantly more than the $10 million punitive award lawyers with Ahmad Zavitsanos and Mensing had requested on behalf of Mid Main.
Harris County District Judge Rabeea Collier presided over the trial where jurors heard that Mid Main hired Patriot in 2014 to construct four residential towers and a parking garage. Mid Main alleged the work was defective, that Patriot overcharged it and that the company abandoned the project in 2017.
Patriot is represented by Larry R. Veselka, Hector R. Chavez, Jacqueline R. Rex, Eugene Zilberman and Conor Harvey of Smyser Kaplan & Veselka.
The case number is 2017-19892.
Southern District of Texas
Hogan Lovells Tapped to Defend FTC’s Suit Against PE Firm in Anesthesia Competition Row
A private equity firm that the Federal Trade Commission says participated in a scheme to monopolize the anesthesia industry has hired a team of attorneys from Hogan Lovells to defend against the claim.
The FTC filed suit Sept. 21 against U.S. Anesthesia Partners and private equity firm Welsh, Carson, Anderson & Stowe XI, which created USAP in 2012, accusing the entities of collaborating in a yearslong efforts to consolidate anesthesiology practices in Texas to drive up costs and profits.
The government alleges the scheme had three parts: purchase most of the large anesthesia practices in Texas to create one dominant provider that could charge higher prices; implement price-setting agreements with independent practices to further drive up costs; and ink a deal with a competitor to keep it out of the Texas market.
FTC Chair Lina M. Khan issued a statement pointing to Welsh Carson as the entity that “spearheaded” the strategy.
“Along with a set of unlawful agreements to set prices and allocate markets, these tactics enabled USAP and Welsh Carson to raise prices for anesthesia services — raking in tens of millions of extra dollars for these executives at the expense of Texas patients and businesses,” Khan said. “The FTC will continue to scrutinize and challenge serial acquisitions, roll-ups, and other stealth consolidation schemes that unlawfully undermine fair competition and harm the American public.”
The case has been assigned to U.S. District Judge Kenneth M. Hoyt.
The FTC is represented by Kara Monahan and Bradley S. Albert, deputy assistant directors of the Federal Trade Commission.
U.S. Anesthesia Partners had not retained counsel as of Monday.
Welsh, Carson, Anderson & Stowe XI are represented by Kenneth Field, Ashley Ifeadike, Charles A. Loughlin, Ilana Kattan and Jamie Lee of Hogan Lovells.
The case number is 4:23-cv-03560.
U.S. Court of Appeals for the Fifth Circuit
Ex-GC of Houston Housing Authority Gets Some FCA Claims Revived
Karen Miniex, the former vice president, general counsel and director of procurement for the Houston Housing Authority recently was granted a second chance to bring her allegations that the HHA violated the False Claims Act.
A three-judge panel on Friday affirmed the dismissal of Miniex’s claims against the city of Houston, citing “inadequate briefing,” and also affirmed dismissal of her claims against six property management companies, finding her third amended complaint failed “to plead fraud with particularity” as to those parties.
But Miniex, who filed this qui tam lawsuit in 2018, will get another shot to prove HHA submitted false claims to the U.S. Department of Housing and Urban Development by violating procurement regulations and concealing other information from the federal government.
The panel held that Miniex’s lawsuit included specific allegations about HHA’s requests for federal funding and its failure to abide by procurement regulations, and detailed “the time, place and contents” of 25 transactions in support of her claims.
“The [third amended complaint] states FCA claims against HHA based on a certification theory — that is, the TAC alleges that HHA was submitting false claims by certifying future compliance with various statutes and regulations, which HHA later violated, thus rendering its prior certifications false.” the panel held. “Contrary to HHA’s arguments, Miniex did allege false statements per that theory. And furthermore, despite HHA’s arguments otherwise, Miniex pled facts showing materiality.”
Miniex filed notice of appeal in August 2021, challenging U.S. District judge Lynn Hughes’ decision to dismiss the entirety of her lawsuit.
Judges E. Grady Jolly, James L. Dennis and Stephen A. Higginson sat on the panel.
HHA is represented by William S. Helfand and Felix M. Digilov of Lewis, Brisbois, Bisgaard & Smith.
Miniex is represented by Michael Adams-Hurta of Wright, Close & Barger.
The case number is 21-20435.
Inquiry Ordered in $124.5M Case Where Plaintiff’s Lawyer Served as Magistrate Judge’s Groomsman
In a Sept. 21 ruling a panel determined that allegations that a magistrate judge failed to disclose her personal relationship with the lead plaintiff lawyer litigating a dispute before her — with the plaintiff netting a $124.5 million award — deserves a second look.
IFG Port Holdings and Lake Charles Harbor & Terminal District agreed to litigate a “sprawling commercial dispute” before U.S. Magistrate Judge Kathleen Kay, according to the opinion.
“But, allegedly unbeknownst to the defendant, the judge was longtime family friends with the lead trial lawyer for the plaintiff,” the opinion reads. “Specifically, the lawyer had been a groomsman in the judge’s own wedding, and the judge officiated the wedding of the lawyer’s daughter three months before this lawsuit was filed. None of this information was disclosed to the defendant.”
Judge Kay presided over a 21-day bench trial in the landlord-tenant dispute and rendered judgment for the plaintiff, awarding $124.5 million that included more than $100 million in trebled damages. It was after judgment was entered that counsel for the defendants learned about “the undisclosed longstanding friendship” and began trying to get the referral to Judge Kay vacated.
The district judge denied discovery on the matter, and Lake Charles filed notice of appeal in July 2022.
The panel held that if the allegations are true, they raise “serious doubts about the validity of the defendant’s constitutionally essential consent to have its case tried by this magistrate judge.”
“Because the facts are not sufficiently developed for us to decide whether the defendant’s consent was validly given or whether vacatur of the referral is otherwise warranted, we remand to the district court for an evidentiary inquiry consistent with this opinion,” the panel held.
Judges Stephen A. Higginson, James E. Graves Jr. and Dana M. Douglas sat on the panel.
Lake Charles Harbor & Terminal District is represented by Michael H. Rubin of McGlinchey Stafford.
The case number is 22-30398.
Panel Affirms Texas Software CEO’s Suit Over $20M Oral Promise Belongs in Delaware
The former CEO of Texas-based Magnitude Software, which was acquired by private-equity backed New Amsterdam Software Holdings in March 2019 in a deal advised by Kirkland & Ellis, failed to convince an appellate panel that his claim he’s owed $20 million belongs in Texas courts.
In a Sept. 19 ruling, the panel determined that forum selection clauses in the acquisition agreements mandate Christopher Ney litigate his dispute in Delaware.
According to court documents, Ney sued New Amsterdam and its indirect investor 3i Group in Texas state court in 2020, shortly after he was terminated, alleging he was orally promised $20 million in exchange for his support of the acquisition.
Citing the Delaware forum selection clause, the district court granted New Amsterdam’s motion to dismiss with prejudice. Ney again brought suit in Texas state court, naming as defendants 3i Group and 3i Corporation, an investment advisor for 3i Group. The defendants removed the suit to federal court.
U.S. District Judge Lee Yeakel granted 3i’s motion to dismiss based on the forum selection clause, and Ney appealed to the Fifth Circuit in May 2021.
The panel rejected Ney’s argument that the oral contract that is the basis of his claim fell outside the scope of the written agreements and the forum selection clause therein.
Judges Rhesa H. Barksdale, Carl E. Stewart and James L. Dennis served on the panel.
Ney is represented by Jane Webre, Amy Dashiell and Lauren Ditty of Scott, Douglass & McConnico.
The case number is 21-50431.