In this edition of Litigation Roundup, the Texas Supreme Court sides with an attorney who got zero compensation for his shares when he and his old firm parted ways, McKool Smith secures a unanimous $4 million jury verdict for a software company client and Baker McKenzie notches a SCOTUS win.
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Dallas County District Court
McKool Smith Gets $4M Jury Win for Software Co.
A Dallas County jury on June 21 unanimously agreed with software company OSGHD that Nomi Health failed to comply with a licensing agreement and awarded about $3.9 million in damages.
Dallas-based OSGHD had filed suit in April 2022 against Nomi Health and development partner Agiliway Group, but on June 20 OSGHD voluntarily dropped its claims against Agiliway, the day before voir dire began. OSGHD alleged Nomi had licensed certain software to use in conjunction with testing for COVID-19 but then partnered with Agiliway to build a knock-off version of the software to avoid paying the licensing fee.
The verdict doesn’t bring an end to fighting between OSGHD and Nomi, as the software company currently has a fraud lawsuit and a copyright infringement lawsuit still pending against Nomi.
Dallas County District Judge Eric Moyé presided over the trial.
The case number is DC-22-03963.
Southern District of Texas
No Class Claims in ITC Chemical Plant Suit
U.S. Magistrate Judge Dena Palermo has determined claims against Intercontinental Terminals Co stemming from a March 2019 fire that burned for days cannot proceed as a class action.
In an order issued June 21, Judge Palermo denied class certification, holding “individual issues would predominate over common questions because resolving Plaintiffs’ claims would require individualized inquiries into causation and damages that would overwhelm common questions” in the litigation brought by lead plaintiff Amanda Bryant on behalf of as many as 190,000 individuals and 3,500 businesses.
The parties consented to proceeding before Judge Palermo in the class action, so her order is the final word on class certification in the trial court.
The fire, which burned from March 17 through March 20 of 2019, sent dark columns of smoke into the air that were visible from miles around and triggered a shelter-in-place warning for those near the Deer Park facility. City officials reported elevated levels of benzene “and other volatile organic compounds” in the air during the fire.
Bryant and the other plaintiffs brought claims for trespass, negligence, nuisance, manufacturing and design defects and products liability but sought no damages for personal injury.
Determining both causation and damages would require a “person-by-person, property-by-property, and business-by-business” analysis, Judge Palermo wrote in the 46-page order.
ITC attorney Russell Lewis of Baker Botts issued a statement praising the court’s decision.
“Class treatment of such individualized claims only would have injected needless confusion into an already complex litigation landscape,” he said.
ITC is also represented by Ben Gonsoulin, Joshua Frank, Michael Goldberg, Kelly Hanen, Lindsay Buchanan, Jennifer Golinsky Baseman, Elizabeth Furlow Malpass and Samantha Olson of Baker Botts and J. Alan Harrell, Ivan M. Rodriguez and Marc G. Matthews of Phelps Dunbar.
The plaintiffs are represented by Mark F. Underwood of McKinney, Michael G. Stag and Ashley Liuzza of Stag Liuzza, Van Bunch of Bonnett, Fairbourn, Friedman & Balint, Kevin W. Thompson and David R. Barney Jr. of Thompson Barney Law Firm, P. Rodney Jackson of Charleston, West Virginia, and Dennis D. Spurling of Houston.
The case number is 4:19-cv-01460.
Texas Supreme Court
Private Equity Investors Win Holding but No Mandamus in Plant Explosion MDL
Plaintiffs in a mass tort case involving explosions at a petrochemical plant failed to plead sufficient facts that investors in the plant’s owner are directly liable for the damages, the court held Friday. The justices, however, declined to dismiss claims against the investors because of procedural irregularities in the case caused by the owner’s bankruptcy.
The mandamus petition arose from an MDL proceeding before District Judge Courtney Arkeen of Orange County. The MDL contains more than 2,000 lawsuits involving more than 7,000 residents against First Reserve Management and a group of six investors in TPC, the plant owner. The lawsuits were filed after widespread property damage and injuries caused by the Thanksgiving eve 2019 explosions at the Port Neches facility.
Plaintiffs allege that the First Reserve investors exercised control over TPC because they appointed two of five directors to TPC’s board. They say the twin explosions could have been prevented if those managing the plant had complied with long-established industry safety standards.
The Supreme Court concluded that the MDL court should have dismissed the claim against First Reserve as lacking basis in law under Rule 91a. The opinion by Chief Justice Nathan Hecht noted that the plaintiffs, in addition to blaming the First Reserve investors, asserted that TPC was controlled by the board of Sawgrass Holdings GP, which did not join the Rule 91a motion.
“Because plaintiffs make no allegation that First Reserve — a group of entities that are distinct from Sawgrass Holdings GP — undertook to render services to TPC, their negligent-undertaking claim has no basis in law,” Hecht said.
Nor did the plaintiffs allege sufficient facts to show that First Reserve was involved in the day-to-day operational decisions of the plant, according to Hecht.
“Plaintiffs’ third amended petition makes many legal accusations but no factual allegations to show a cause of action with a basis in law against First Reserve for TPC’s conduct,” Hecht said.
The Beaumont Court of Appeals had denied mandamus relief. The private equity industry urged the Supreme Court to grant the mandamus, saying the lower court rulings put the industry at risk of losing limited liability in Texas.
While First Reserve’s mandamus petition was pending before the Supreme Court, TPC moved for protection in the U.S. Bankruptcy Court for the District of Delaware. That court confirmed a reorganization plan for a global settlement under which millions of dollars went to pay plaintiffs’ claims, Hecht said. Both the plaintiffs and First Reserve have appealed the bankruptcy court’s order.
Because of rulings by the bankruptcy court involving certain claims against First Reserve, the Supreme Court said it will not direct the MDL court to take action.
“Mandamus is discretionary and ‘controlled by equitable principles’, and we cannot determine what disruption a directive would have on proceedings that have been stayed during the bankruptcy proceedings and may resume on a different petition,” Hecht said. “With that explanation, we deny First Reserve’s petition for a writ of mandamus.”
Justice Jeff Boyd concurred in the disposition but did not join the opinion. Justice Jane Bland did not participate in the decision.
Arguments for First Reserve were presented by Michael A. Heidler of Vinson Elkins. Arguments for the real-parties-in-interest were presented by Rick Thompson of Durham, Pittard & Spalding.
The case number is 22-0227.
Suit Revived for Attorney Who Got Zero for Shares
On Friday the Supreme Court held 7-1 that a lawyer’s former firm was not permitted to unilaterally set redemption terms for his shares when he departed, sending the 7-year-old dispute between David A. Skeels and his former firm, Friedman, Suder & Cooke, back to the trial court.
Skeels, who now is a member of Whitaker Chalk Swindle & Schwartz in Fort Worth, filed suit against the firm and two of its founders after the firm redeemed his shares at no cost in the wake of his termination.
The case asked the court to determine whether a corporate resolution Skeels signed gave the firm permission to unilaterally redeem the shares at no cost. A trial court determined the document gave the firm that authority, and a lower court of appeals agreed.
But the Texas Supreme Court disagreed, holding that the resolution authorized the firm to take some actions but not to “set redemption terms of their own accord on [Skeels’] behalf.”
“We express no opinion on the value of Skeels’ shares because that is a question for another day,” Justice John P. Devine wrote for the majority. “Rather, we hold that the firm did not establish as a matter of law that, based on the 2014 resolution, the founders could determine the redemption price and redeem Skeels’ shares without his agreement.”
Chief Justice Nathan Hecht authored a dissent arguing that the firm could redeem Skeels’ shares without payment.
“Thus, the court holds that under the Resolution, the founders cannot unilaterally set the terms for redeeming Skeels’ shares but can unilaterally amend the firm’s governing documents to set the terms of redemption,” Hecht wrote. “To hold that Skeels agreed to the one but not the other makes no sense. Skeels unquestionably could have agreed, in just so many words, that the firm could redeem his shares on his departure without payment. The only question is whether he did. In the end, the answer is yes.”
Skeels represented himself.
Justice Debra Lehrmann did not participate in the decision.
Friedman, Suder & Cooke are represented by Jonathan T. Suder and Michael T. Cooke and Robert J. Myers and John J. Shaw of Myers Law.
The case number is 21-1014.
U.S. Supreme Court
Baker McKenzie Wins in Civil RICO Case
The nation’s high court on June 22 sided with the U.S. Court of Appeals for the Ninth Circuit in a case that asked it to determine the reach of the Racketeer Influenced and Corrupt Organizations Act, holding that a Russian citizen can pursue his bid to collect an arbitration award against a former business partner who now lives in California.
The court determined that Vitaly Smagin had alleged a “domestic injury” that allows him to proceed with the suit against Ashot Yegiazaryan. The ruling establishes that a plaintiff alleges a domestic injury “when the circumstances surrounding the injury indicate it arose in the United States.”
Smagin is trying to enforce a $92 million arbitration award from a London panel that was confirmed by a court in California. Smagin alleges Yegiazaryan defrauded him in a joint real estate venture in Russia and has employed “a complex web of financial instruments and personal relationships” to avoid paying the award.
Smagin also accuses the bank CMB Monaco of being an accomplice.
Nick Kennedy of Baker McKenzie, who represents Smagin and argued this case before the high court, issued a statement to The Lawbook that he and his client “look forward to finally holding Mr. Yegiazaryan accountable for his actions and collecting the many millions he owes our client.”
“RICO was created to hold accountable criminal enterprises operating in the United States, like the one created by Mr. Yegiazaryan to avoid payment of the U.S. judgment issued to Mr. Smagin,” he said. “We are pleased with today’s decision which confirms that criminals like Mr. Yegiazaryan who operate in the United States are not granted a license to defraud victims simply because those individuals happen to live abroad.”
Justice Samuel Alito, joined by Justice Clarence Thomas, authored a dissent in which Justice Neil Gorsuch partially joined, writing that despite a circuit split among lower courts, the majority opinion here “resolves very little” and “offers virtually no guidance to lower courts.”
“It holds only that ascertaining the site of intangible injuries for purposes of civil RICO requires a court to consult a variety of factors and that two factors it identifies show that respondent has suffered a domestic injury,” Alito wrote. “Rather than take this unhelpful step, I would dismiss the writ of certiorari as improvidently granted.”
Smagin is also represented by and Alex Burch of Baker McKenzie.
Yegiazaryan is represented by Vincent Levy, Kevin D. Benish and Brian T. Goldman of Holwell Shuster & Goldberg in New York.
CMB Monaco is represented by Michael Tu of Cooley.
The case numbers are 22-381 and 22-383.
Editor’s Note: Janet Elliott contributed to this report.