Introduction. In Chambers County v. Pelco Construction Co., the general contractor unilaterally terminated its contract after the project owner stopped work for 40 days. No. 01-18-00832-CV, 2020 WL 7776078, at *1 (Tex. App.—Houston [1st Dist.] Dec. 31, 2020, no pet. h.). The general contractor made payment demands upon the owner for work performed and the owner refused to pay. The jury found in favor of the contractor on its breach of contract claim. On appeal, judgment was reversed because the general contractor failed to give 7 days notice before terminating the contact as required by its provisions.

Background. Chambers County awarded Pelco a $565,000 contract to rebuild a fire station destroyed by Hurricane Ike. The day before Pelco submitted its second payment application, Dannenbaum, the architect and designated representative for Chambers County, ordered Pelco to stop work while administrative paperwork was being reviewed and approved by FEMA. After 40 days, Dannenbaum instructed Pelco to resume working. Pelco refused and provided notice that it was terminating the contract effective immediately. Pelco also demanded payment for work performed and submitted a 3rd payment application in the amount of $52,243.50. Dannenbaum did not issue a certificate of payment for this 3rd application. Pelco filed suit for breach of contract and Chambers County countersued for breach.

The jury found in favor of Pelco and against Chambers on the breach of contract claims. The jury awarded Pelco $52,243.50 for work performed, $35,667 in lost profits  and made findings entitling Pelco to recover attorney fees. The trial court entered judgment in favor of Pelco based upon the verdict.

On appeal, Chambers contended that the court erred in entering judgment in favor of Pelco on its breach of contract claim because Pelco failed to give notice as required by the contract. The provisions of the contract entitled Pelco to terminate the contract if work had been stopped for 30 days due to no fault of Pelco. The contract further stated that in this event:

the Contractor may, upon seven days’ written notice to the Owner and Architect, terminate the Contract and recover from the Owner payment for Work executed and for proven loss with respect to materials, equipment, tools, and construction equipment and machinery, including reasonable overhead, profit and damages.

Chambers County v. Pelco Constr. Co., supra, *9.

Holding. The court of appeals held that this language required Pelco to give 7 days’ advance notice to Chambers before terminating the contract. Since Pelco failed to comply with this condition precedent, Pelco was not entitled to recover for breach of contract. The court of appeals reversed the trial court’s judgment and rendered that Pelco take nothing.

Lessons learned. Texas has a strong history of strictly enforcing the written provisions in a contract. Thus, a party who terminates a contract without complying with corresponding notice provisions does so at its peril. Always give the required notice before terminating a contract, especially in Texas.  See Multi-Million Dollar Fraud Verdict Reversed.

Introduction. In this rear-end 18 wheeler collision case, the trial court entered judgment in favor of injured motorist Patterson for over $30 million against FTS International Services, LLC  and $26 million against FTS employee, Acker. The Appellate Court overturned the judgment because, amongst other reasons, the noneconomic damages awarded were excessive. The Appellate Courted remanded the case for new trial. FTS Int’l Services, LLC v. Patterson, 12-19-00040-CV, 2020 WL 5047913, at *1 (Tex. App.—Tyler Aug. 26, 2020, no pet. h.).

Background. According to the record, Acker was driving an FTS truck while in the course and scope of his employment for FTS. Acker negligently permitted the truck he was operating to drift into the lane of the vehicle being operated by Patterson. Acker’s truck collided into the right rear bumper and fender of Patterson’s vehicle.

Police were called to the scene and Patterson reported he was not injured. The officer cited Acker for failure to control speed and Acker later pleaded guilty. Acker was then able to drive his vehicle to his destination. FTS required Acker to take a drug test which was “positive for marijuana along with amphetamine and methamphetamine metabolites.” FTS Int’l Services, LLC v. Patterson, supra, *1.

That evening Patterson experienced pain and the  next day he obtained medical treatment. The treating doctor diagnosed Patterson with neck strain and provided medication. Subsequently, Patterson followed up for care with a chiropractor. Patterson was later referred to a pain specialist who performed epidural injections in Patterson’s neck and other procedures. Patterson’s symptoms continued and he was referred to a surgeon who performed surgery.

Patterson sued Acker for negligence and FTS on the grounds that it was vicariously liable for Acker’s negligence and for negligently hiring, training supervising, and retaining Acker.

The jury awarded damages to Patterson as follows: (1) $131,191.96 and $612,578.80 in respective past and future medical expenses; (2) $67,066.33 and $1,500,000 in past and future lost earning capacity; (3) $2,000,000 and $8,000,000 in past and future physical pain; (4) $2,000,000 and $4,000,000 in past and future mental anguish; (5) $3,000,000 and $5,000,000 in past and future physical impairment; and (6) $500.00 in past disfigurement. The jury also found that the harm to Patterson resulted from the gross negligence of Acker and FTS and assessed $75,000,000 and $50,000 in exemplary damages respectively against FTS and Acker.”

FTS Int’l Services, LLC v. Patterson, supra, *2.

Based upon the jury’s verdict, the trial court awarded judgment, jointly and severally, for over $30 million against FTS and $26 million against Acker. FTS and Acker appealed.

Issues on Appeal.    FTS and Acker raised several issues on appeal and the Appellate Court found that:

  • The law and evidence supported Patterson’s claims against FTS for negligent hiring, training, supervising and retention of Acker. The court found that this cause of action is recognized by Texas jurisprudence. The evidence supporting liability against FTS included that Acker’s accurate driving record showed that Acker’s traffic violations exceeded the permissible number to be eligible for hire under FTS policies. Acker had four incidents in his FTS truck while on duty, FTS placed Acker on probation for this, and Acker was on probation at the time of the accident.
  • There was sufficient evidence to show that Patterson’s injuries were caused by the accident.
  • However, the jury awarded excessive damages against FTS and Acker.

Not only must there be evidence of the existence of compensable noneconomic damages such as pain and suffering, mental anguish, and physical impairment, there must also be evidence to justify the amount awarded.

FTS Int’l Services, LLC v. Patterson, supra, *12.

  • This accident involved a minor impact. There was conflicting and conclusory evidence regarding the severity of Patterson’s noneconomic damages. The court concluded that when you couple this with the improper jury argument by Patterson’s attorney, including that defendants spoliated evidence, the award for noneconomic damages was excessive.

Disposition by Appellate Court. The Appellate Court reversed the trial court’s judgment and remanded the case for new trial.

Conclusion. The Appellate Court found that the award of noneconomic damages was excessive. According to the Court, this accident involved a relatively minor impact, even if caused by an 18 wheeler. Further, there was conflicting and conclusory testimony offered to support these damages. The Court also found that Plaintiff’s counsel made improper jury argument including allegations that Defendants spoliated evidence. A closer reading of the case also shows that the Court was troubled by the ratio of economic to noneconomic damages. Thus, in the end the Court ordered that justice required the jury verdict be overturned and the case be remanded for new trial.

Introduction. In this case, Valley Builders Supply, Inc., a manufacturer of concrete blocks, sued its competitor, Innovative Block of South Texas, Ltd,  for defamation and business disparagement. At the conclusion of the trial, Valley Builders chose only to submit questions to the jury for defamation. Based upon the jury’s verdict, the trial court entered judgment in favor of Valley Builders for $1,803,528 in compensatory damages and $937,056 in punitive damages. The parties later entered into a partial settlement of the punitive damages award. Innovative Block appealed the compensatory damages award and it was upheld by the court of appeals. Innovative Block subsequently filed a petition for review with the Texas Supreme Court which rendered a take nothing judgment against Valley Builders. Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., 603 S.W.3d 409 (Tex. 2020).

Background. Both Valley Builders and Innovative Block manufactured and sold concrete blocks and pavers in the Rio Grande Valley. Valley Builders started its business in 1940 and Innovative Block began its business in 2006. Valley apparently went out of business in 2010. It blamed its failure upon false and disparaging statements allegedly made by Innovative Block regarding Valley’s products.

Valley filed suit against Innovative for business disparagement and defamation. In general, the four statements made by Innovative that Valley complained about were: 1) “That is what their block looked like[,] and they’re making an inferior block.” 2) “Valley was producing bad product[,] and they used bad materials.” 3) “Valley Block uses low[-] quality aggregates to manufacture pavers.” 4)“Valley Block received a load of bad aggregate.” Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *415. These statements were allegedly made by Innovative to Valley’s customers and one of its suppliers.

Valley presented expert testimony at trial that it sustained $93,528 in lost profits resulting from the statement about the load of bad aggregate. Valley also presented expert testimony that it sustained damages between $1.5 and $1.66 million, in general to its reputation, because of Innovative’s alleged defamatory statements.

Valley elected to only submit its defamation claim to the jury. It did not submit the business disparagement claim. The jury awarded Valley $1.8 million in compensatory damages for reputational injury and $93,528 for lost profits. The jury also awarded $10 million in punitive damages which were reduced because of statutory caps. The resulting judgment entered by the trial court judge was for $1,803,528 in compensatory damages and $937,056 in punitive damages.

The parties settled the punitive damages portion of the judgment, and Innovative appealed the compensatory damages award. The court of appeals upheld the trial court verdict, finding that there was sufficient evidence to support the defamation findings and damages awarded. Innovative filed a petition for review with the Texas Supreme Court (SCOTX).

The primary issue before SCOTX was whether the evidence supported an action for defamation or business disparagement. In that regard, SCOTX stated:

To state a defamation claim, a plaintiff must show (1) the publication of a false statement of fact to a third party, (2) that was defamatory concerning the plaintiff, (3) with the requisite degree of fault, at least amounting to negligence, and (4) damages, in some cases. Id. at 593. A defamatory statement is one that “tends [ ] to harm the reputation of another as to lower him in the estimation of the community or to deter third persons from associating or dealing with him.” Restatement (Second) of Torts § 559 (Am. L. Inst. 1977); see also Hancock v. Variyam, 400 S.W.3d 59, 63 (Tex. 2013) (defining defamation “as the invasion of a person’s interest in her reputation and good name”).

In contrast, the tort of business disparagement encompasses falsehoods concerning the condition or quality of a business’s products or services that are intended to, and do in fact, cause financial harm. See Restatement (Second) of Torts § 629. Its elements are more stringent than those of defamation because business disparagement protects against pecuniary loss. Hurlbut v. Gulf Atl. Life Ins., 749 S.W.2d 762, 766 (Tex. 1987). The publication of a disparaging statement concerning the product of another is actionable when (1) the statement is false, (2) published with malice, (3) with the intent that the publication cause pecuniary loss or the reasonable recognition that it will, and (4) pecuniary loss does in fact result.

Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *417.

The court then turned to the expert testimony regarding damages because in order for Valley to be entitled to recover on its defamation cause of action it had to show injury to its reputation. Here, the jury awarded “$1.8 million for the harm to Valley’s reputation caused by Innovative’s  remarks about [Valley’s] products.” Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *420. The only evidence submitted by Valley in support of this harm was expert testimony. Unfortunately for Valley, SCOTX found that this testimony was not based upon reliable data and should have been excluded.

That left only the expert testimony that Valley sustained $93,528 in lost profits “caused by Innovative’s false statement about “a load of bad aggregate.” Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *425. Innovative’s position was that these lost profits were not recoverable special damages for defamation. Although, they might have been recoverable under a business disparagement cause of action, this was not submitted to the jury. Therefore, Valley was not entitled to recover any compensatory damages.

In this regard, the Court stated:

But as we have already determined, disparaging a plaintiff’s goods or services is not defamatory per se because commercial disparagements do not necessarily impugn character or reputation. This distinction has long been observed: “[I]f the statement impugns the integrity or credit of a business, there is an action for defamation, but if merely the quality of a business’ goods or services are criticized, only disparagement will lie.”

Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *425.

Here, the statement allegedly causing the pecuniary loss is that Valley received a load of bad aggregate. The receipt of bad aggregate does not imply reprehensible conduct or a lack of integrity on Valley’s part. Although criticisms concerning the quality of a business’s goods or services may be actionable as commercial disparagement, they are not, without more, an indictment of the business’s integrity or character.

Innovative Block of S. Tex., Ltd. v. Valley Builders Supply, Inc., supra, *426.

Conclusion. SCOTX went on to hold that there was  no evidence to support an award of general damages based upon defamation or harm to Valley’s reputation. That left the issue of whether the statement about the receipt of bad aggregate was defamatory. Although, this statement might have supported an award for business disparagement it did not support an award for defamation. Since no questions based upon business disparagement were submitted to the jury, SCOTX reversed the court of appeals and rendered that Valley take nothing.

Lessons learned. Defamation and business disparagement are complicated and confusing areas of the law. Further, SCOTX has a fairly long history of closely scrutinizing the evidence submitted at trial, including expert witness testimony, upon which the underlying judgment is based. That is why it is important to always retain experienced litigation counsel, retain highly competent experts, and carefully research the law supporting the jury charge well in advance of trial. This is also why litigation tends to be so costly.

Introduction. TPI Cloud Hosting, Inc. (“TPI”) and Keller Williams Realty Inc. (“KW”) entered into an arrangement for TPI to develop a mobile app for KW’s real estate agents’ business. The alleged price tag to develop this app was $1.8 million. TPI sent a $600,000 invoice for payment to KW which KW refused to pay on the basis that the invoice lacked sufficient detail. The alleged agreement between the parties was never put into writing. TPI eventually sued KW for breach of contract, misappropriation of trade secrets, and fraud. KW filed a motion for summary judgment on the grounds that there were no genuine issues of material fact as to any of these claims so that judgment should be entered by the trial court as a matter of law in favor of KW. The Court denied KW’s motion for summary judgment. TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., A-19-CV-00808-JRN, 2020 WL 4708713, at *1 (W.D. Tex. June 18, 2020).

Background and analysis. In 2015, TPI, a software  application developer, entered into discussions with KW to develop a mobile app for KW’s real estate agency business. These discussions resulted in TPI developing a prototype of a mobile app for KW. The parties subsequently entered into discussions for TPI to develop a complete version of the app. TPI sent invoices to KW totaling $600,000 and KW refused to pay them because the invoices lacked sufficient detail. One of the disputed issues between the parties was whether an agreement was reached since it was never put into writing.

Breach of contract claim. KW asked the court to find as a matter of law that there was no agreement between the parties because there were essential terms open for future negotiations. However, TPI presented evidence that KW agreed to pay TPI $1.8 million to develop the app, evidence from its CEO regarding specific features of the app that the parties agreed upon, and evidence of continuous conversations between the executives of the parties pertaining to the app’s development. The court found that there were material facts in dispute so that it was ultimately up to the jury to decide whether a contract existed. Therefore, the trial court denied KW’s motion for summary judgment as to this claim.

Trade secret claim.  KW also requested the court  to enter judgment in its favor as a matter of law as to TPI’s trade secret claim.

TPI alleges that KW misappropriated the “ideas, plans, and prototypes for [the] integrated software application TPI provided to KW.” (Resp., Dkt. 68, at 12). KW argues that TPI provided only two sources from which trade secrets could even theoretically be stolen: a “wireframe” PDF mockup of what the app could look like and a prototype that TPI’s CEO James Cashiola showed to various KW executives on his cell phone. (Mot., Dkt. 67, at 12–13). KW argues that (a) these displays are not trade secrets, (b) they are premised on broad concepts that are known by the general public, (c) they lack economic value because they are readily ascertainable, and (d) TPI took no effort to protect them, even if they were trade secrets.

TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *2.

However, the Court found that there were genuine dispute as to what information TPI actually provided to KW and that the trade secret claim was disputed by competent expert testimony. Thus, the court denied KW’s request for summary judgment relief as to this claim. TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *3.

 Fraud claim. KW also moved for summary judgment as to TPI’s fraud claim.

TPI alleges that KW made a “knowingly false representation of future performance with no intention of performing its promise because KW had no intention of making” the $1.8 million payment until it “extracted additional intellectual property from TPI.” (Compl., Dkt. 1, at 6). KW argues that the fraud claim is preempted by the Texas Uniform Trade Secrets Act (“TUTSA”), Tex. Civ. Pract. [sic] & Rem. Code § 134A.001, et seq.

TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *3.

The trial court found that TUTSA did not preempt the fraud claim. “Here, however, the alleged fraud could have taken place even without trade secret misappropriation. For instance, if KW intended to delay payment until it extracted trade secret information, but never received that information, the fraud claim could still be valid.” Therefore, this fraud claim is not dependent upon the misappropriation of trade secrets, so it is not barred by TUTSA’s preemption clause.” TPI Cloud Hosting, Inc. v. Keller Williams Realty Inc., supra, *3.

Thus, the trial court also denied KW’s motion for summary judgment as to the fraud claim.

Conclusion and lessons learned. This case shows why it is important for parties to memorialize their agreements in writing. By doing so, this allows parties to avoid costly legal disputes and to more easily resolve disputes that arise under the contract. This case also shows how the effective use of experts in trade secret claims can help a plaintiff avoid being defeated by a motion for summary judgment. Lastly, just because there is some overlap between trade secret and fraud allegations doesn’t meant that the fraud allegations are preempted by the Texas Uniform Trade Secret Act. The fraud allegations will survive as long as the plaintiff can show that the fraud could have taken place even without the trade secret misappropriation.

Introduction. In this tragic case involving interesting legal issues, a ranch hand was killed when he was trampled by cattle while working for a ranch. The ranch hand’s surviving parents and children sued the ranch for wrongful death and survival claims. The ranch was a nonsubscriber under the Texas Workers Compensation Act. However, the trial court tossed the family’s case on summary judgment under an obscure statute known as the Texas Farm Animal Activity Act. The Supreme Court of Texas (SCOTX) held that the Act did not apply and affirmed the appellate court’s decision to overturn the trial court’s judgment. This will allow the family to have their day in court. Waak v. Rodriguez, 603 S.W.3d 103 (Tex. 2020)

Background and analysis. In October 2013, the ranch owners asked the ranch hand to move 20 head of cattle. After moving the cattle, the ranch hand called the owners to confirm that he should move the 3 remaining cattle in the barn– a 2,000 pound bull, a cow and a calf. The owners confirmed that this should be done. When the owners returned home, they found the ranch hand lying dead and the cattle were still in the barn. The medical examiner found the cause of death to be “blunt force and crush injuries” resulting from force like being trampled by a large animal. The trial court granted the owner’s motion for summary judgment against the ranch hand’s family on the grounds that the Farm Animal Activity Act barred the family’s claims. The court of appeals reversed and SCOTX granted petition for review to make a final determination.

In discussing the Act in question, SCOTX stated:

The Texas Farm Animal Activity Act1 limits liability for injury to “a participant in a farm animal activity or livestock show” that results from an “inherent risk” of such activities,2 “whether the person is an amateur or professional or … pays … or participates … for free”.3 A divided court of appeals held that the Act does not apply to ranchers and ranch hands.4 We agree and affirm the court’s judgment.”

Waak v. Rodriguez, 603 S.W.3d 103, 104 (Tex. 2020).

 SCOTX went on to discuss the history of the Act and found that it did not apply to a ranch hand injured while working in the normal course and scope of employment for his ranch employer.

SCOTX also discussed the ranch’s failure to purchase workers compensation insurance.

The workers’ compensation system throughout the country strikes a balance between employers’ and employees’ respective interests in compensating workplace injuries. The employee cannot sue the employer on common law claims, thereby relieving the employer of defending and paying them, but in return, the employer must pay the employee standardized insurance benefits regardless of fault.49 Each pays or receives something, though perhaps more or less than under the common law.”

Waak v. Rodriguez, 603 S.W.3d 103, 110 (Tex. 2020).

Since the ranch owners chose not to provide workers compensation benefits to the ranch hand and his family, the ranch was not afforded protection from liability under the Texas Workers Compensation Act.

Conclusion and lessons learned. SCOTX found that the court of appeals correctly concluded that the Farm Animal Act does not apply in this case. This cleared the way for the family to have their day in court for the loss of their son and father. As discussed in previous blog articles, a business owner who fails to purchase workers compensation insurance proceeds at his or her own peril. Not only does this open the door for an injured employee to sue the business owner for on the job injuries, but under Texas law the owner waives the right to assert any common law defenses to the on the job injury claims.

Introduction. In this age of global unrest, intellectual property disputes are becoming more prevalent. The Supreme Court of the United States (SCOTUS) has now made it clear that the victim of trademark infringement does not have to show that the infringer acted willfully in order to recover a profits award for the false or misleading use of the victim’s trademark. Romag Fasteners, Inc v. Fossil, Inc., 140 S. Ct. 1492, 206 L. Ed. 2d 672 (2020). This should make it easier in the future to hold violators of U.S. trademark laws accountable.

Background and Court’s Analysis. This case arises out of an agreement entered into between Romag Fasteners, Inc., and Fossil, Inc.. The agreement allowed Fossil to use Romag’s fastners in Fossil’s handbags and other products.

Initially, both sides seemed content with the arrangement. But in time Romag discovered that the factories Fossil hired in China to make its products were using counterfeit Romag fasteners—and that Fossil was doing little to guard against the practice. Unable to resolve its concerns amicably, Romag sued. The company alleged that Fossil had infringed its trademark and falsely represented that its fasteners came from Romag. After trial, a jury agreed with Romag, and found that Fossil had acted “in callous disregard” of Romag’s rights. At the same time, however, the jury rejected Romag’s accusation that Fossil had acted willfully, as that term was defined by the district court.

Romag Fasteners, Inc v. Fossil, Inc., supra, *1494.

The jury’s distinction was significant. Since the jury rejected Romag’s accusation that Fossil had acted willfully, the trial court denied Romag’s request for a profits award. On appeal, the Court of Appeals affirmed the district court’s judgment and SCOTUS (the “Court”) granted the Plaintiff’s writ of certiorari.

The Court recognized that, in cases like this, there was a split in appellate court decisions as to whether the Plaintiff must show that a Defendant’s violation was willful in order for the Plaintiff to recover the profits that the Defendant made from the trademark violations.  The court then quoted the current version of the Lanham Act governing trademark infringement that states:

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established …, the plaintiff shall be entitled, *1495 subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.”

Romag Fasteners, Inc v. Fossil, Inc., supra, *1494–95.

Romag alleged and proved a violation under § 1125(a), the provision providing for relief for the false or misleading use of trademarks. “And in cases like that, the statutory language has never required a showing of willfulness to win a defendant’s profits.” Romag Fasteners, Inc v. Fossil, Inc., supra, *1495. Thus, the Court went on to hold that Romag was not required to prove a willful violation to recover a profits award, vacated the judgment of the court of appeals and remanded the case for further proceedings consistent with the opinion.

Conclusion. This decision makes it clear that the victim of trademark infringement seeking to recover a lost profits award for an infringer’s false or misleading use of a trademark does not have to show that the infringer acted willfully under the Lanham Act. In the age of our global economy, this decision should make it easier to hold violators of U.S. trademark laws accountable.

Zeke lost his battle to cancer and died in 2018. He had no children and was survived by his 2 brothers, George and William. In 2010, Zeke drafted a Will leaving everything to Linda who Zeke had lived with for 30 years. George and William contested the 2010 Will on the grounds that Zeke was unduly influenced by Linda into executing it. Linda filed a no evidence motion for summary judgment that was granted by the trial court. The Court of Appeals affirmed. Estate of Grogan, 595 S.W.3d 807 (Texarkana 2020, no pet.).

In rendering its decision, the Court of Appeals stated that, in order to successfully contest a will based upon undue influence, a will contestant must show:

‘(1) the existence and exertion of an influence (2) that subverted or overpowered the mind of the testator at the time of execution of the instrument (3) so that the testator executed an instrument he or she would not otherwise have executed but for such influence.’

Estate of Grogan, supra, *813.

The Court of Appeals relied upon the following key facts:

  • Zeke had a strained relationship with his brothers. The brothers operated a dental practice together until 1979 when George strangled brother William in the office. George admitted he would have killed William if Zeke had not intervened. George never spoke to William again and after the fight did not have close contact with Zeke.
  • Zeke and Linda had a close relationship for 30 years and lived together as “lifetime companions.” Zeke also loved Linda’s children including Ryan to whom Zeke loaned or gifted hundreds of thousands of dollars.
  • The 2010 Will leaving everything to Linda was drafted by Zeke’s lawyer with all the formalities required by law.
  • The evidence showed Zeke was in good health in 2010 when he signed the Will.
  • Linda had been employed by Zeke’s dental practice and also helped Zeke with his cattle business.
  • Neither the brothers nor their witnesses had any real knowledge of any of the circumstances surrounding the execution of the 2010 Will.

On appeal, William seemed to rely heavily upon the fact that Zeke had gifted or loaned Linda’s son, Ryan, approximately $300,00 over time. Linda testified that she told Zeke he could stop loaning money to Ryan but Zeke was adamant that he was going to help Ryan. In that regard, the Court of Appeals stated:

Here, there was evidence showing that Linda had some influence over Zeke in light of Zeke’s loans or gifts to Ryan, conflicting testimony about statements Zeke made after the 2010 will regarding who he wished to leave his estate  *820 to, and testimony that Linda had her “talons” in Zeke. “However, ‘[i]t cannot be said that every influence exerted by one person on the will of another is undue, for the influence is not undue unless the free agency of the testator was destroyed and a testament produced that expresses the will [of] the one exerting the influence.’

Estate of Grogan, supra, *819-20.

The Court of Appeals went on to affirm the trial court’s decision to grant Linda’s no evidence motion for summary judgment. “In order to defeat Linda’s no-evidence summary judgment motion, William was required to introduce evidence showing that Linda’s “undue influence subverted or overpowered the mind of the testator at the time of execution of the instrument.”  Estate of Grogan, supra, *820. Neither the brothers nor their witnesses had knowledge regarding the specific circumstances of the execution of the 2010 Will. “Simply put, William introduced no evidence that Zeke’s mind was subverted or overpowered at the time Zeke executed the 2010 will.”

This case is somewhat unusual in that Linda, the will proponent, was able to prevail on a no evidence motion for summary judgment, since undue influence cases can be supported by circumstantial evidence and are typically fact intensive. However, in light of the contestants strained relationship with their brother, Zeke, and their lack of knowledge regarding the circumstances surrounding the execution of the 2010 Will, it would probably have been very difficult, if not impossible, for them to prevail even if this case had been allowed to proceed to trial before a jury.

Introduction. In the COVID19 age, Business transactions and formal legal proceedings are now commonly being conducted remotely. In the recent Texas Supreme Court decision of Chalker Energy Partners III, LLC v. Le Norman Operating LLC, 595 S.W.3d 668, 669–70 (Tex. 2020), the Court recognizes that transactions conducted remotely and through email can result in the consummation of binding legal contracts. However, the electronically transmitted negotiations in this case were made subject to the execution of a Purchase and Sale Agreement (“PSA”) that was never executed. As a result, the Plaintiff lost on its breach of contract claim involving the purchase of over $200+ million in oil and gas interest Assets.

Background and analysis. The Texas Supreme Court begins its decision by stating:

In Texas, a deal is, of course, a deal. An agreement as to many things can be oral, sealed by a handshake, even a $10.53 billion handshake.1 The common law has long recognized that an agreement can be expressed in multiple writings exchanged between the parties.2 Emails are such writings.3 Email can be a convenient way to  *670 reach agreement, but it is also a distinctly conversational, informal medium. Hitting send may be deliberate; it may be hasty. And so in this brave new world, or at least this braver new world, we must decide whether an email exchange reflected the meeting of minds required for a contract, given the nature of the transaction and the parties’ expressed contemplations. And we must begin to give certainty to this developing area of contract law. Today, we hold that the parties’ email exchange falls short of an agreement as a matter of law and therefore reverse the judgment of the court of appeals4 and render judgment for petitioners.

Chalk Energy Partners, III, LLC, v. Le Norman Operation, LLC, supra, *669-070.

This case involved the online auction of hundreds of millions of dollars in oil and gas interest “Assets.” Bidding procedures required the bidders to be given access to a virtual room containing information about the Assets. The bidders were required to sign a Confidentiality Agreement. Once a bid was made each Seller had 24 hours to decide whether to accept it.

The key provision in the Confidentiality Agreement stated:

No Obligation. The Parties hereto understand that unless and until a definitive agreement has been executed and delivered, no contract or agreement providing for a transaction between the Parties shall be deemed to exist and neither Party will be under any legal obligation of any kind whatsoever with respect to such transaction by virtue of this or any written or oral expression thereof, except, in the case of this Agreement, for the matters specially agreed to herein. For purposes of this Agreement, the term “definitive agreement” does not include an executed letter of intent or any other preliminary written agreement or offer, unless specifically so designated in writing and executed by both Parties.

Chalk Energy Partners, III, LLC, v. Le Norman Operation, LLC, supra, *670.

On the date of the bidding deadline, one bid was submitted by LNO for $332 million and another was submitted by Jones Energy. Sellers refused the offers.

Subsequently, Sellers offered by email to sell 67% of the ssets. On November 19, LNO offered to purchase 67% of the Assets without reference to the bidding procedures. The “Counter Proposal” included multiple terms including that a PSA had to be executed before November 30, 2012. On November 20, 2020, the Sellers sent an email to LNO that they were on board to sell 67% of the Assets to LNO, subject to the execution of a mutually agreeable PSA.

On November 22, Jones Energy, the other bidder, presented Sellers with a new offer. The Sellers found this offer to be more beneficial than the one made by LNO and elected to accept it. And, on November 28, 2020 the sellers entered into a binding PSA with Jones Energy. The Sellers never entered into a final PSA with LNO.

LNO sued Sellers for breach of contract on the grounds that the Sellers breached the agreement created by the November 19 and 20 email exchange for Sellers to sell 67% of the Assets to LNO. The trial granted summary judgment in favor of Sellers as to Plaintiff’s breach of contract claim which was reversed on appeal, resulting in this petition for review being decided by the Texas Supreme Court.

In a nutshell, the Texas Supreme Court found that since the No Obligation Clause in the Confidentiality Agreement stated that a definitive agreement (the “PSA”) was a condition precedent to contract formation, there was no issue of fact as to whether Sellers breached any agreement with LNO since no PSA was ever executed between Sellers and LNO. The Texas Supreme Court also noted that:

The emails here are more akin to a preliminary agreement than a definitive agreement to sell the Assets, and the parties’ dealings suggest that they intended that a more formalized document, like a PSA, would satisfy the definitive-agreement requirement.

Chalk Energy Partners, III, LLC, v. Le Norman Operation, LLC, supra, *675.

Court’s holding. Thus, the Court held that as a matter of law that the Sellers and LNO did not execute a definitive agreement as required by the Confidentiality Agreement. The judgment of the court of appeals was reversed and judgment was rendered for the Sellers.

Lessons learned. The Texas Supreme Court has a history of holding parties to the strict terms of their negotiations and express language of their contracts. If the parties stipulate that a condition precedent must be satisfied to form a contract, then this condition must be satisfied in order for there to be an enforceable contract. (See reversal-of-500-million-judgment-in-pipeline-partnership-dispute-affirmed). Thus, if you are a party to contract negotiations, carefully review any conditions that must be satisfied in order for there to be a final binding agreement and make sure that you intend for these conditions to be part of your negotiations and the terms of any written contracts presented for signature. Otherwise, you may find yourself in the shoes of LNO with no final agreement to enforce.

Introduction. My 13 year old son and I were recently traveling through a small Texas town and saw a sign that said computers and guns for sale. Where else but Texas would you find this? Of course, we still have remnants of the open range laws in our great state.

This brings me to the interesting SCOTX case of Pruski v. Garcia in which the court held that a rancher was not liable for automobile accident property damages and injuries caused by the rancher’s bull since the rancher did not knowingly permit his bull to wander onto the highway. 594 S.W.3d 322 (Tex. 2020). In explaining its reasoning the court started with the premise that Texas is an open range state except to the extent limited by statute.

Texas open range laws. “From the time of the Republic of Texas, the default rule in this state has been that livestock owners may allow their animals to run at large.1 Early on, Texas rejected altogether the English common-law duty to keep livestock confined. As this Court observed in 1893:

Neither the courts nor the legislature of this state ha[d] ever recognized the rule of the common law of England which requires every man to restrain his cattle either by tethering or by inclosure…. It is the right of every owner of domestic animals in this State, not known to be diseased, vicious, or “breachy,” to allow them to run at large…”

The Court then stated:

 Like all common-law rules, however, Texas’s free-range rule yields to legislative enactments to the contrary. Id. at 748 (describing history of legislative departures from free-range rule). The 1876 Constitution specifically authorized the Legislature to deviate from the free-range rule by passing laws regulating fences and livestock. Tex. Const. art. XVI, §§ 22, 23.

 Pruski v. Garcia, supra, * 323.

Factual background and analysis. The Plaintiff in this case was driving his pickup on State Highway 123 in Wilson County. A bull owned by the Defendant escaped from a fenced pasture and wandered onto a state highway. The Plaintiff’s truck collided with the bull, damaging Plaintiff’s truck and injuring the Plaintiff. The poor lost bull died from the collision.

Apparently, the bull was able to escape through a gate on the rancher’s property because of a broken latch. The question was whether the rancher was liable for the Plaintiff’s resulting  injuries and property damages. The court found that, since this bull wandered onto a state highway, the standard set forth in Texas Agriculture Code § 143.102 applied under the pleadings of this case.

“The statute provides that a livestock owner “may not knowingly permit [a horse, mule, donkey, cow, bull, steer, hog, sheep, or goat] to traverse or roam at large, unattended, on the right-of-way of a highway.” TEX. AGRIC. CODE § 143.102 (emphasis added). In order for there to be any liability under this provision, whether civil or criminal, the defendant must “knowingly permit” the animal to roam at large.”

The Court found that since there was no issue of material fact concerning whether the Plaintiff knowingly permitted his bull to roam at large, then the trial court was correct in granting summary judgment as a matter of law against the Plaintiff and in favor of the rancher.

Conclusion. Nowhere but Texas does a court begin its legal opinion with the history of the state’s open range laws. And, under the facts and pleadings of this case, a motorist injured on a Texas state highway who suffers automobile damages or injures because of livestock roaming onto a state highway must prove that the owner of the livestock knowingly permitted the livestock to roam onto the highway.

Like most will contests, the case of In re Estate of Buford is about good old-fashioned greed. Buford’s investigator and the investigator’s assistant convinced Buford over a period of three years to execute a series of wills to their benefit. The jury found that the wills were either signed without testamentary capacity or as the result of undue influence. As a result, the trial court declared all of the wills to be invalid resulting in Buford’s cousins inheriting Buford’s estate. In re Estate of Scott, 08-19-00011-CV, 2020 WL 1685419, at *1 (Tex. App.—El Paso Apr. 7, 2020, no pet. h.)

In order to understand why the jury made this determination, you must first understand a little about Buford.

Buford Scott, Jr., who never married and had no children, grew up on a ranch in Cresson, Texas, where he lived until his death in August of 2015. For most of his life Buford lived a sheltered existence with his immediate family members. Buford who had a below average IQ and some cognitive impairments, did not graduate from high school until he was 22 years old, and was never regularly employed outside of working on his family’s ranch. His parents and his only sibling predeceased him, each dying intestate. When his mother passed away in 2003 or 2004, Buford inherited a substantial estate, but was left to live alone on the ranch.

In re Estate of Scott, supra, at *1.

Buford’s troubles appear to have begun after he was left to live alone. After his mother passed away, his mother’s attorney became concerned about Buford’s welfare and initiated guardianship proceedings. The court-appointed doctor found that Buford was mentally retarded, suffered from substance or alcohol abuse, was unable to make his own financial and medical decisions and was totally incapacitated. As a result, the court ordered that a management trust be created for Buford’s benefit.

In June 2012, Buford contacted a private investigator, Tait, whose name Buford found in a phone book, to assist Buford in setting aside the court-ordered management trust. Tait and his assistant, Rueda, agreed to help Buford with his endeavor. They saw Buford almost every day over a 3 year period. During that time, Buford paid them tens of thousands of dollars for their investigation and other services and even gave their family members cash bonuses and gifts.

In August 2012, Tait began discussing with Buford the need for Buford to sign a will, trust, and power of attorney. Tait even contacted an attorney to discuss this at which time Tait learned that Buford could sign a hand-written will instead of a more formally executed will. On March 23, 2013 Buford signed a will in Buford’s hand-writing stating that he wished to create a charitable trust to which all of his assets would pass at the time of his death. It also stated that Buford had aunts, uncles, and cousins but he did not wish to leave anything to them. In actuality, Buford only had living cousins. He did not have any living aunts or uncles. The will stated he was upset with his cousins because he believed they participated in the guardianship proceedings.

Tait contacted two psychologists in 2014 to examine Buford to establish that Buford didn’t need a court-ordered management trust or guardianship. Although, the psychologists found Buford had below-average IQ, they concluded that he was not incapacitated. Based upon these reports, the trial court presiding over the guardianship restored Buford to full legal capacity. One month later Buford signed a Limited Power of Attorney giving Tait the right to make financial decisions on behalf of Buford.

In early July 2015, Tait and Rueda noticed that Buford looked in poor health and Tait drafted a will for Buford to sign but Tait failed to get the Will notarized or witnessed.

On July 19, 2015, Buford was admitted to the hospital with terminal esophageal cancer and died one month later. On the second day at the hospital, Buford signed another will that Tait had drafted. Tait videoed the execution of the July 21, 2015 Will at the hospital. The video shows Buford laying in the hospital bed and Tait summarizing the Will. Tait had Buford confirm that he was making the majority of his bequests to a charitable trust, making some bequests to Tait and Rueda, and not leaving anything to Buford’s cousins because Buford believed that his cousins were involved in the previous guardianship proceedings.

Tait consulted with an attorney in August 2015 who told Tait that the July 21, 2015 Will could have been drafted better. Tait revised the will and added more details about the charitable trust and included a self-proving affidavit. The will was signed by Buford, on August 13, 2015, at the assisted nursing facility where he was staying. Tait conducted a video recorded interview with Buford in which Buford acknowledged his awareness of the will’s provisions, that a “large bequest” had been left to a charitable trust and he had also “left things” to Tait, Rueda, and five others named in the will.

This August 13, 2015 Will named Tait as the Trustee of the charitable trust. Buford also stated he had not left anything to his cousins because of the guardianship. In actuality, the value of the mineral leasing rights that were to pass under the Will to the charitable trust upon Buford’s death were only worth about $33,000. The Will gave all of Buford’s real and personal property to Tait and Rueda, $350,000 cash to Tait, and $200,000 cash to Rita. The Will named Tait’s and Rita’s children as alternate beneficiaries. The total value of the requests to Tait and Rueda was estimated to be $2.4 million. Under the terms of this Will,  Buford disinherited his cousins for failing to speak up on his behalf during the guardianship proceedings. Buford died five days later. His cousins did not learn about his death until several months later.

After Buford died, Tait submitted the August 13, 2015 Will to probate and the court named him as the executor of the estate. Subsequently, Buford’s two surviving cousins contested the August 2015 Will on the grounds that Buford lacked testamentary capacity and had been unduly influenced by Tait in the signing of the Will. The jury found that Buford:

  1. Lacked testamentary capacity to sign the August 13, 2015 will and signed it as a result of undue influence;
  2. Lacked testamentary capacity to sign the July 21, 2015 Will and signed it as the result of undue influence; and
  3. Had testamentary capacity to sign the March 23, 2013 Holographic (hand-written) Will but signed it as a result of undue influence.

Based upon the jury’s verdict, the trial court declared that all 3 wills were invalid, resulting in the cousins inheriting Buford’s estate. Tait and Rueda appealed on the grounds that there was insufficient evidence to support the jury’s findings.

The Court of Appeals provides a good history of the law on undue influence.

Generally, the term undue influence describes “such influence or dominion as exercised at the time, under the facts and circumstances of the case, which destroys the free agency of the testator, and substitutes in the place thereof the will of another.” Long v. Long, 133 Tex. 96, 125 S.W.2d 1034, 1035 (1939). As this Court has recognized, “[t]he exercise of undue influence may be accomplished in many different ways–directly and forcibly, as at the point of a gun; but also by fraud, deceit, artifice and indirection; by subtle and devious, but none-the-less forcible and effective means.” In re Olsson’s Estate, 344 S.W.2d 171, 173-74 (Tex.Civ.App.–El Paso 1961, writ ref’d n.r.e.). Or as the Texas Supreme Court stated, undue influence may take the form of “force, intimidation, duress, excessive importunity or deception used in an effort to overcome or subvert the will of the maker of the testament and induce the execution thereof contrary to his will.” Rothermel v. Duncan, 369 S.W.2d 917, 922 (Tex. 1963).

To prove undue influence, the contestant must convince the fact finder of: (1) the existence and exertion of an influence; (2) that the influence subverted or overpowered the mind of the testator at the time of the execution of the testament; and (3) the maker would not have executed the testament but for that influence. Id. The burden is upon the contestant to prove each of these allegations by a preponderance of the evidence. Woods’ Estate, 542 S.W.2d 845, 846 (Tex. 1976); see also Matter of Kam, 484 S.W.3d 642, 651-53 (Tex.App.–El Paso 2016, pet. denied) (recognizing that once evidence established that will was signed in compliance with all statutory requirements, the burden shifted to will contestant to establish that the will should be voided as the product of undue influence).

In re Estate of Scott, supra, at *7.

The Court of Appeals then focused on whether there was sufficient evidence to support the jury’s findings that Buford was unduly influenced into signing each of the three Wills. The Court found that there was sufficient evidence including that:

  1. When Buford met Tait and Rueda, Buford did not have a will and had no intent to draft one.
  2. By the time Buford signed the March 23, 2013 Holographic Will, Tait had taken over almost all of Buford’s legal affairs.
  3. There was evidence that Buford was susceptible to being unduly influenced, including medical testimony that Buford showed signs of paranoia and had cognitive impairments. Tait and Rueda played on Buford’s paranoia about his cousins’ participation in the guardianship.
  4. Buford signed a power of attorney giving Tait control over Buford’s financial, legal and medical decisions.
  5. Tait and Rueda received bequests in excess of $2 million under the July and August 2015 Wills.
  6. Buford was in a weakened condition when he signed the July and August Wills and Tait and Rueda took advantage of this.
  7. Tait drafted at least 3 different formal wills for Buford to sign during Buford’s stay at the hospital.
  8. Tait misrepresented the terms of the wills by falsely stating that Buford was leaving the majority of his estate to a charitable trust when in fact only one minor asset was bequeathed to the trust and the most valuable assets were bequeathed to Tait and Rueda.

Needless to say the Court of Appeals affirmed the trial court’s judgment setting aside the Wills, resulting in Buford’s cousins inheriting his estate.