In this edition of Litigation Roundup, Hunton Andrews Kurth scores a win for Oncor in an appeal of a National Labor Relations Board decision, and the former head of internal audits for a defunct electric vehicle company strikes a deal to settle insider trading allegations.
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.
District Court Dakota County, Minnesota
Jury Awards $18.4M to Man Who Lost Leg in Jeep Incident
A jury in Minnesota recently determined that a defective gearshift in a 2014 Jeep Grand Cherokee manufactured by Fiat Chrysler Automobiles was to blame for a rollaway incident that caused a man to lose his leg.
Jeffrey Wu filed suit in March 2023 against FCA US. He alleged that in March 2022 the gearshift made it appear his vehicle was in park when he exited the Jeep, but that instead the vehicle was in reverse and rolled backward, crushing his left leg and requiring amputation.
Wu was unaware the vehicle had been recalled in 2016, jurors were told, and evidence was presented at trial that FCA knew as early as 2011 about the issues with the gearshift.
The jury returned its verdict April 17. Judge Stacey E. Sorensen Green presided over the trial.
The jury awarded $12 million for future pain and disfigurement, $2.5 million to Wu’s wife, Ting Yang, for loss of companionship and about $3.9 million for past pain, past healthcare expenses and past loss of earnings. The jury found FCA was 70 percent liable for the incident while Wu bore 30 percent of the responsibility.
The defect that caused Wu to lose his leg also led to the death of actor Anton Yelchin in 2016.
Wu is represented by Wes Ball and Kyle Farrar of Kaster Lynch Farrar & Ball and Genevieve Zimmerman of Meshbesher & Spence.
“The evidence showed Chrysler knew this vehicle was defective before it ever hit the market,” Farrar said in a statement, noting that Wu’s incident “was a foregone conclusion based on decisions Chrysler made years before his 2014 Jeep Grand Cherokee was ever manufactured.”
Ball said “manufacturers have a responsibility to prioritize safety over cost-cutting decisions, especially when lives are at stake.”
FCA is represented by Fred J. Fresard, Ian Edwards and Jessica Russo of Klein Thomas Lee & Fresard and by Isaac Messmore, George Soule and Ellisse Thompson.
The case number is 19HA-CV-23-981.
Northern District of Texas
Former Internal Audit Head of E-Vehicle Co. Settles SEC Insider Trading Case
The former senior director of internal audit and controls at Canoo, an electric vehicle manufacturer that had its production operations based in Justin has reached a settlement with the U.S. Securities and Exchange Commission in an insider trading case.
The SEC filed its complaint against Jai Sondhi April 28. The same day, Senior U.S. District Judge A. Joe Fish entered final judgment in accordance with the consent judgment.
The government alleged that in internal meetings Sondhi learned Canoo was on the verge of inking a major contract with Walmart for the sale of 4,500 electric vehicles. Using that information, the government alleged Sondhi purchased stock in the company before the information was made public in a July 12, 2022, press release, and that the purchase netted him $54,965.23 in ill-gotten gains.
The stock price jumped 53 percent after the announcement of the Walmart deal. Canoo, which also secured contracts with NASA and the U.S. Postal Service, filed for Chapter 7 bankruptcy in Delaware in January 2025 and has ceased operations.
Under the agreement, Sondhi did not admit or deny the allegations and agreed to pay $54,965 in disgorgement, prejudgment interest of $15,969 and a civil penalty of $54,965.
The SEC is represented by its own Christopher Carney and Patrick Disbennett.
Sondhi is represented by Jeffrey J. Ansley and Arianna Goodman of Vedder Price.
The case number is 3:26-cv-01357.
Southern District of Texas
Former CEO, SEC Reach Consent Judgment in Fraudulent Offering Case
The U.S. Securities and Exchange Commission obtained a final consent judgment in a lawsuit accusing a CEO and his companies of making materially false and misleading statements to investors.
The agreement, entered April 27 by U.S. District Judge Keith P. Ellison, brings an end to the lawsuit against Aaron Verdugo and his wholly owned entities, Verdugo Enterprizes and BDaaS, that the government filed April 6.
The same day the complaint was filed, the SEC filed a motion asking for entry of the consent judgment. In the lawsuit, the SEC alleged Verdugo had received approximately $6.67 million from about 200 investors between August 2022 and January 2024 based on materially false and misleading statements.
Investors were told they were purchasing computer chipset units as well as management services provided by Verdugo’s companies to install, manage and maintain those units.
Verdugo allegedly lied to investors about his companies’ relationships with Fortune 500 companies as well as its capabilities, but the government has said that neither Verdugo nor his companies had any customer contracts.
As part of the final judgment, Verdugo will pay $5.5 million in disgorgement, $844,531 in interest and a civil penalty of $236,000.
Verdugo is represented by Alan Baskin of Weiss Brown.
The government is represented by Matthew J. Gulde of the SEC.
The case number is 4:26-cv-02721.
First Court of Appeals, Houston
Firm Can Arbitrate Malpractice Claims, Divided Panel Determines
Foley & Lardner will get to arbitrate claims brought by former clients, a divided appellate panel has determined, finding the former clients failed to meet the “heavy burden” of showing waiver.
As Justice David Gunn explained in the 19-page opinion issued April 30, neither party “has identified a case quite like this one.”
“In our view, the arbitration train was delayed but not missed,” he wrote. “In this case, the lawyers had two tools at their disposal: their contractual right to arbitrate, and their statutory right to seek dismissal (on a short timeline) under the [Texas Citizens Participation Act]. They pursued both — and on this record, they did not waive their right to arbitrate.”
According to the opinion, four minority shareholders in a corporation hired Gardere Wynne Sewell for legal work and signed an engagement letter that contained an arbitration provision. Gardere combined with Foley in 2018, and the firm is now known as Foley & Lardner.
Two of the clients, Stephen and David Dernick, later sued the firm for breach of fiduciary duty. The firm demanded arbitration, then filed an answer to the lawsuit as well as a motion to compel arbitration. A month after that, according to the opinion, the firm moved to dismiss the suit under the TCPA.
In March 2022, the trial court granted the motion to dismiss, but the First Court of Appeals reversed that ruling in August 2024. Once back at the trial court, the lawyers filed a supplement to the motion to compel arbitration, and after a hearing, the judge denied the motion.
Justice Veronica Rivas-Molloy authored a 33-page dissenting opinion explaining that in her view, Foley “substantially invoked the judicial process” and waived its right to arbitration.
“Although appellants filed a motion to compel arbitration with their answer, they sat on their motion, seeking to pursue relief under the TCPA instead — a remedy not available in arbitration. Appellants’ choice paid off,” she wrote. “They secured a complete victory by ending the litigation in court, foreclosing arbitration proceedings altogether. It is difficult to imagine a clearer example of a party substantially invoking the judicial process inconsistent with the right to compel arbitration than one who seeks a benefit not available in arbitration to secure complete dismissal of his opponents’ claims on the merits, with res judicata implications, and only seeks to enforce its right to arbitration after reversal of the dismissal on appeal.”
Foley & Lardner is represented by Barry Abrams and Joshua A. Huber of Blank Rome.
The clients are represented by David Kassab and Lance Kassab of The Kassab Law Firm.
The case number is 01-25-00109-CV.
Fifth Court of Appeals, Dallas
Panel Undoes $785K Award
Abri Health Services, which operates healthcare facilities, has won an appeal in a lawsuit brought by its former CEO and chief clinical director.
According to the opinion, Tina Hecht, the former CEO, and Paul Wray, the former chief clinical director, filed a breach of contract suit against Abri after they were fired, alleging they were owed money under their respective employment agreements.
The trial court granted Wray summary judgment and sided with Hecht after a bench trial, then entered final judgment awarding Wray $754,087 in actual damages and about $19,500 in attorney fees, and awarding Hecht $33,335 in damages and $12,200 in attorney fees.
Justice Craig Smith, writing for the panel, explained there was a fact issue that should have precluded the court from granting summary judgment in favor of Wray as to whether he met certain conditions to trigger a severance payment.
The panel also found there was insufficient evidence to support the award of attorney fees to Hecht and remanded the case back to Dallas County District Judge Eric V. Moyé for further proceedings.
Abri is represented by Chad Baruch of Johnston Tobey Baruch.
“Appellate review serves as a check on whether legal standards were met,” Baruch said in a statement. “In this case, the court recognized the evidentiary records didn’t support the summary-judgment relief awarded and remanded for further proceedings.”
Justices Emily Miskel and Cynthia M. Barbare also sat on the panel.
Wray and Hecht are represented by Michael E. Coles and Elizabeth Lamberson of The Coles Firm.
The case number is 05-25-00194-CV.
Fourteenth Court of Appeals, Houston
Panel Wipes Out $2.8M Attorney Fee Award
A three-justice panel recently undid an award of about $2.4 million in attorney fees and $400,000 in interest on those fees after finding that because the jury rejected a breach of contract claim, the award cannot stand.
The 26-page opinion was issued April 30 in the dispute between GR Energy Services and its affiliated companies and DistributionNOW subsidiary Odessa Pumps and Equipment. In October 2023, a Harris County jury heard three weeks of testimony in the case.
According to court records, GR sold its horizontal pump rental business, Flex Flow, to Odessa for $90 million in March 2021, but the parties could not agree on the true value of the company so they negotiated an earnout provision: if the pump business generated $15 million in earnings over the court of a year, GR would be entitled to an additional $30 million payday. GR also agreed not to compete with Flex Flow.
Jurors had to answer two questions: whether Odessa acted in bad faith in the way it managed Flex Flow to avoid having to pay the earnout, and whether GR violated the noncompete agreement through its communications with SpaceX about a potential pump deal. The panel determined Odessa did not act in bad faith and that GR had not violated the noncompete and did not reach a third question where GR was seeking $29.8 million in damages for Odessa’s alleged bad faith actions.
In a final judgment, the trial court awarded Odessa $2.4 million in attorney fees plus interest. The appellate court wrote that it was an error to award the fees under the Declaratory Judgment Act.
“It would be inconsistent to allow Odessa to recover attorney’s fees under the DJ Act just because Odessa filed its claim first,” the panel wrote. “In the context of the trial court’s single, retrospective declaration that overlaps both procedurally and substantively with Odessa’s defense of the bad faith counterclaim, we conclude that Odessa may not use the DJ Act as a vehicle to obtain the fee award, which is an award of otherwise impermissible attorney’s fees.”
The appellate court modified the fee award so that Odessa received about $529,000 for its lawyers’ work on the claim that GR had breached a different part of the agreement, section 2.8(d), that required GR to timely pay a post-sale adjustment amount.
Justices Randy Wilson, Brad Hart and Katy Boatman sat on the panel.
GR is represented by Mark Giugliano, Conor McEvily, Brice Wilkinson and Gabe Kaim.
Odessa Pumps is represented by Daryl L. Moore and Emily M. Adler of Ahmad, Zavitsanos & Mensing.
The case number is 14-24-00370-CV.
U.S. Court of Appeals for the D.C. Circuit
Oncor Prevails Against NLRB in Employee Firing Row
In a case that the court wrote is about “the balance between an employee’s right to speak out about matters connected to an ongoing labor dispute and an employer’s right to terminate employees who make disparaging public comments,” Oncor Electric Delivery Company has prevailed.
The National Labor Relations Board had determined Oncor’s firing of Bobby Reed, after he gave “disparaging testimony about Oncor’s products at a legislative hearing,” constituted an unfair labor practice and ruled that Reed’s testimony was protected. Oncor filed its petition for review in August 2024, and oral arguments took place in September.
The appellate panel, in a 13-page opinion issued April 28, found that the NLRB “misapplied the relevant standard” and that its “conclusions are unsupported by substantial evidence.”
Reed, who was also the spokesman for the International Brotherhood of Electrical Workers, Local Union Number 69, testified before the Texas Senate in the middle of collective bargaining discussions that Oncor’s new smart meters were “causing damage to people’s homes.”
Oncor fired Reed for allegedly violating a company policy against “providing misleading or fraudulent information to public officials.”
The appellate panel wrote that Reed’s statements aren’t protected speech because “he did not mention, much less draw a clear connection to, an ongoing labor dispute.”
Judges Sri Srinivasan, Patricia A. Millett and Neomi Rao sat on the panel.
Oncor is represented by Amber Rogers and David Lonergan of Hunton Andrews Kurth.
The NLRB is represented by its own Ruth E. Burdick, Elizabeth Heaney and Barbara Sheehy.
The case number is 24-1277.
U.S. Court of Appeals for the Fifth Circuit
After $210M Judgment, Parties Take Fight Over $25M Supersedeas Bond to Fifth Circuit
The Fifth Circuit is in possession of briefing from both parties in an oil and gas contract dispute between two former business partners that ended in a whopping $210 million final judgment over what bond must be posted in order to appeal.
In December, a federal jury sided with businessman Carlo Civelli and awarded him $138 million in the lawsuit he brought against Phillippe Mulacek, his former business partner at InterOil, an oil and gas exploration company that invested in properties in Papua New Guinea. Civelli sued Mulacek after a disagreement about whether Mulacek had to pay back loans from Civelli.
The verdict, according to briefing on appeal from Mulacek, represents the largest verdict against a noncorporate defendant issued in Texas last year.
About three months after the verdict, Chief U.S. District Judge Randy Crane entered a final judgment Thursday awarding Civelli $210.3 million. Mulacek asked Chief Judge Crane to approve a $25 million supersedeas bond, in line with Texas’ statutory cap, which he denied from the bench “and confirmed in a subsequent order devoid of reasoning,” according to briefing.
In a motion filed with the Fifth Circuit April 20, counsel for Mulacek argued Texas’ statutory cap applies in federal diversity cases like this, and that because federal rules “are silent on the amount of the bond required to supersede a judgment, and because Texas’ $25 million bond limit is substantive, the bond cap must be applied here.”
“Because there’s no federal law or rule that controls the amount of bond required to supersede a judgment, federal courts must apply state substantive law under Erie,” the motion argues.
But in a response filed April 30, Civelli argued the law does not support Mulacek’s request to allow him to “post security worth less than 12 cents on the dollar,” the brief reads.
“Federal law provides a remedy to judgment debtors who genuinely cannot post a full bond,” Civelli argued. “The district court invited the Mulaceks to make that showing. They declined.”
Civelli is represented by Richard A. Schwartz of Munch Hardt Kopf and Harr, Andrew Bender of Andrew Myers and Michael Martin of Martin Walton Law Firm.
Mulacek is represented by Allyson Ho, Elizabeth Kiernan, Arjun Ogale, Robert Frey and Jessica J. Kinnamon of Gibson, Dunn & Crutcher and Paul Yetter, Reagan Simpson, Justin Rowinsky and David Gutierrez of Yetter Coleman.
The case number is 4:17-cv-03739.