In this edition of Litigation Roundup, we detail two new changes in rules governing attorneys who practice before the U.S. Court of Appeals for the Fifth Circuit, a jury in Harris County issues a $17 million verdict in a seven-year-old lawsuit and Whataburger goes to court to defend its trademark.
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Harris County District Court
Jury Returns $17M Verdict in Contract Dispute Case
Boutique litigation firm Beck Redden has obtained a more than $17 million jury verdict against St. Louis-based Graybar Electric Company over a contract dispute with the firm’s client, Buying Power.
A Harris County jury on June 6 found Graybar breached a three-year group purchasing contract by refusing to process enrollments from Buying Power’s members without providing a written notice terminating their agreement and providing 90 days to correct alleged material violation, according to the signed jury verdict form.
Buying Power filed its lawsuit in 2017. The jury was selected May 24, according to court records, and the case was tried in 270th District Judge Dedra Davis’ court.
Jurors rejected Graybar’s counterclaim alleging Buying Power breached the contract by failing to inform its members of necessary information to participate in the agreement.
Graybar’s failure to comply with the contract was not excused, the jury answered. Jurors awarded Buying Power more than $15 million in damages and more than $1 million in past and conditional lawyers’ fees. All told, jurors awarded Buying Power the full $17,123,742.65 requested by Beck Redden lawyers, according to the firm’s statement.
“We are pleased with the jury’s verdict and happy that our client finally had its day in court to address Graybar’s breach of its contractual obligations, and the numerous defenses Graybar asserted in an attempt to avoid responsibility for its decision to terminate the contract without cause,” firm partner Fields Alexander said.
Clark Hill lawyer Betsy Kamin, who represented Graybar, told The Texas Lawbook in a prepared statement that the Fortune 500 company plans to appeal the verdict.
“While Graybar respects the judicial process and the jury’s verdict, it disagrees with the result and plans to appeal the decision,” Kamin said.
The case number is 2017-37325.
Buying Power was also represented at trial by Owen J. McGovern, Jake McClellan and Madison Young Moore.
Middle District of North Carolina
Whataburger Says N. Carolina Burger Joint Infringes Trademark
A fast-food burger restaurant in North Carolina that has been operating under the name What-A-Burger #13 since 1969 has drawn a trademark infringement lawsuit from Whataburger, the iconic brand that launched in Texas in 1950.
The lawsuit, filed by Whatabrands on June 11, names What-A-Burger #13, What-A-Burger #13 Locust Partners, What-A-Burger Mobile Food, WAB #13 and Zeb Bost as defendants. The suit accuses the defendants of trademark infringement, unfair competition, breach of contract, unfair and deceptive trade practices, and common law unfair competition.
In October 2022, Whataburger was planning an expansion into that part of the country and contacted the North Carolina company to notify it of the likelihood of confusion between the two names. The companies signed a coexistence agreement that allowed What-A-Burger to continue using the name in connection with its then-existing physical locations and its then-existing single food truck.
Bost signed the agreement on behalf of What-A-Burger, the suit alleges, but the company has continued to breach the terms of the coexistence agreement and infringe Whataburger’s trademark.
Days before Bost signed the agreement, Whataburger alleges, he created a limited liability company called WAB #13 in “an apparent attempt to circumvent the purpose and intention of Signatory Defendants’ deal with Whataburger.”
The case has been assigned to U.S. Magistrate Judge Joi Elizabeth Peake.
Whatabrands is represented by Kevin G. Williams and Carson D. Schneider of Bell, Davis & Pitt in Winston-Salem, North Carolina and Wendy C. Larson and Giulio E. Yaquinto of Pirkey Barber in Austin.
Counsel for the defendants had not filed an appearance as of Monday.
The case number is 1:24-cv-00482.
U.S. Commodity Futures Trading Commission
Houston-Based Trafigura to Pay $55M, Settle Fraud Claims
The Commodity Futures Trading Commission announced Monday it had reached a deal with Trafigura Trading under which the company will pay $55 million to bring an end to allegations that it corrupted and manipulated the oil trading market.
The federal government alleged that between 2014 and 2019, Trafigura traded gasoline while in possession of nonpublic information that had been misappropriated from a Mexican trading entity; that in February 2017, the company manipulated a fuel oil benchmark in a way to benefit its futures and swap positions; and that between 2017 and 2020 Trafigura required its employees to sign agreements that prohibited them from voluntarily communicating with law enforcement officials.
Trafigura, which neither admitted nor denied the alleged conduct as part of the deal, issued a statement Monday noting it has voluntarily enhanced its compliance program in part by developing and implementing “enhanced, risk-based policies and procedures relating to market integrity; enhancing processes and controls around communications relating to market activity; investing additional resources in employee training and compliance testing; and enhancing ongoing compliance monitoring and controls testing processes.”
The company also said it has modified the nondisclosure provisions in its employment, termination and severance agreements, “making clear that nothing in those provisions should be understood to limit or prevent communications with governmental authorities about potential violations of law.”
The whistleblower who filed a complaint that launched the CFTC investigation is represented by Stephen M. Kohn of Kohn, Kohn & Colapinto.
“This is a giant breakthrough in the international commodities market,” Kohn said in a statement issued Monday. “This enforcement action sends a message that the CFTC is joining with other agencies in cracking down on the use of illegal NDAs which restrict whistleblowing. The CFTC knows that whistleblowers are critical to its enforcement efforts and is clearly committed to ensuring that companies, including privately held ones such as Trafigura, are not able to silence whistleblowers through NDAs.”
Doug Snodgrass, chief trial attorney for the CFTC, brought the case on behalf of the government.
The CFTC docket number is 24-08.
Ninth Court of Appeals
Beaumont Justices Trim Lawsuit Over Texas A&M’s Kyle Field Seats
A fight between The 12th Man Foundation and a group of donors who filed suit after renovations to Texas A&M’s Kyle Field displaced them from their seats has been narrowed after an intermediate appellate court agreed the Texas Citizens Participation Act mandated dismissal of some claims.
On June 13, a three-justice panel found the TCPA applied to the claims for breach of fiduciary duty and lack of good faith and ordinary care but agreed with the donors that the defense was raised too late to apply to their claims for breach of contract and promissory estoppel.
The justices determined the TCPA — a law intended to bring an early end to suits that are brought with the intent to chill free speech — applied to this case because the lawsuit raises a “matter of public concern.”
“Under the circumstances, we conclude that the Foundation’s fundraising to defray the expenses that Texas A&M incurs, which allows that University to benefit from a football team that plays football in first class stadium is ‘a matter of public concern,’” the court held.
“To summarize, we conclude that the Foundation met its initial burden to show that plaintiffs’ newly asserted claims against it fall within the TCPA,” the court held. “Therefore, the burden shifted to plaintiffs to establish by clear and specific evidence a prima facie case for each element of their claims for breach of fiduciary duty and good faith and fair dealing. Plaintiffs failed to establish a prima facie case for either of these claims.”
Justices Jay Wright, Hollis Horton and Leanne Johnson sat on the panel.
The 12th Man Foundation is represented by Layne E. Kruse, Katherine Mackillop, Julie Goodrich Harrison, Zachery Newton and Mark Emery of Norton Rose Fulbright and Karen Bennett and Jason Hughes of Germer PLLC.
The donors are represented by Brent W. Coon and Eric W. Newell of Brent Coon & Associates, Blair A. Bisbey of Seale, Stover & Bisbey and Scott McQuarrie and Claude M. McQuarrie III of McQuarrie Law Office.
The case number is 09-23-00175-CV.
Texas Supreme Court
Harris County Can’t Distribute Basic Income Funds
The Texas Supreme Court on Friday sided with the State of Texas and ordered Harris County not to distribute any funds under its Uplift Harris basic income pilot project.
Texas had argued the plan — which for 18 months would give $500 monthly cash payments to about 2,000 Harris County residents with income below 200 percent of the federal poverty line — ran afoul of the state constitution’s ban on “gratuitous payments to individuals.”
“A very small percentage of Harris County citizens will temporarily be denied receipt of the disputed payments if a stay is granted,” Justice Jimmy Blacklock wrote for the unanimous court. “But if those payments would have been illegal, then the temporary denial of them is not a harm that can tip the scales in the County’s favor. Requiring the government to follow the law benefits everyone. Temporarily preventing expenditure of these funds while the State’s appeal proceeds ensures public funds are not irrecoverably spent in violation of the Texas Constitution. Whether Harris County’s proposal would actually violate the Texas Constitution remains an open question at this early stage of the litigation.”
The Texas Supreme Court issued an administrative stay on April 23 after Harris County District Court Judge Ursula Hall denied Texas’ request for a temporary injunction on April 18. Texas appealed to the Fourteenth Court of Appeals but then sought emergency relief from the state’s high court in light of Harris County’s plans to start distributing funds on April 24.
Texas is represented by Lanora Pettit of the Texas attorney general’s office.
Harris County is represented by Grant B. Martinez, Justin P. Tschoepe and Jason R. LaFondof Yetter Coleman and by its own Christian D. Menefee, Jonathan G.C. Fombonne, Neal Sarkar, Tiffany S. Bingham, Christopher Garza and Eleanor Matheson of Ryan Cooper.
The case number is 24-0325.
Grocer Defeats Watermelon Display Injury Suit
The Texas Supreme Court on Friday unanimously determined that Pay and Save will not have to face a new trial over whether its watermelon display was unreasonably dangerous.
“We hold that the evidence is legally insufficient to support both claims because the wooden pallet was not unreasonably dangerous as a matter of law,” the per curiam opinion reads.
In July 2022, the Fourth Court of Appeals issued a ruling that wiped out a Duvall County jury’s award of $6.3 million in actual damages to Roel Canales and $13 million in punitive damages against Pay and Save Inc. Pursuant to damages caps, the trial court rendered judgment for Canales that knocked the punitive damages down to $1.8 million and trimmed his actual damages to $4.4 million.
Canales was injured in May 2016 at a Pay and Save store in Freer, Texas, when his steel-toed work boots got stuck in the open-sided wooden pallet beneath a cardboard watermelon display bin.
He lost his balance when he turned to leave and fell to the ground, shattering his elbow and injuring his back and hip. He required surgeries. The jury found Canales was 30 percent at fault for his injuries and Pay and Save 70 percent responsible.
The lower appellate court had ordered a new trial on the premises liability claim.
“As the court of appeals acknowledged, the record shows a ‘complete absence’ of any evidence of prior complaints, reports, or injuries from pallets like this one — and not just at Pay and Save’s 150 stores, but also at ‘H.E.B., Walmart, or any other grocery store,’” the high court wrote. “This is true despite the fact that thousands of customers walk past these and similar displays every single day.”
Pay and Save is represented by Charles T. Frazier of Alexander Dubose & Jefferson and Hugh N. Lyle and Angelia B. Lee of Mullin Hoard & Brown.
Canales is represented by William Chriss of The Snapka Law Firm.
The case number is 22-0953.
U.S. Court of Appeals for the Fifth Circuit
Changes to Uninterrupted Argument Time, AI Rule Rolled Out
Last week, the U.S. Court of Appeals for the Fifth Circuit issued two notices: one letting lawyers know the amount of time they’ll get to argue uninterrupted before the en banc court has been trimmed by 10 minutes, and another two days later walking back a proposed rule on required disclosures related to the use of artificial intelligence.
“Counsel for the appellant and appellee may each reserve no more than the first 5 minutes of an en banc argument as uninterrupted time,” the notice reads. “Uninterrupted time cannot be shared or divided between advocates for a side, nor can any part of the rebuttal be reserved as uninterrupted time.”
In November, the court circulated a proposed amendment to its rules that would have required attorneys to certify whether and to what extent AI was used in the drafting of court documents. The proposed change also outlined punishments for misrepresentations: the document could be struck from the record and the filer could face sanctions.
But last week, the court determined it would not adopt a “special rule regarding the use of artificial intelligence in drafting briefs at this time.”
“Parties and counsel are responsible for ensuring that their filings with the court, including briefs, shall be carefully checked for truthfulness and accuracy as the rules already require,” the decision reads. “’I used AI’ will not be an excuse for an otherwise sanctionable offense.”
Editor’s Note: Krista Torralva contributed to this report.