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.

Introduction. In this construction defect case, Pleasant Grove Independent School District (“Pleasant Grove”) sued its general contractor, Altech, Inc. (“Altech”), for breach of warranty and the manufacturer, FieldTurf USA, Inc. (“FieldTurf”), for breach of warranty and fraud, pertaining to the installation of artificial turf in the construction of Pleasant Grove’s new football field. Pleasant Grove Indep. Sch. Dist. v. FieldTurf USA, Inc., 06-19-00022-CV, 2020 WL 1646633, at *1 (Tex. App.—Texarkana Apr. 3, 2020, no pet. h.). Prior to trial, the trial court granted Altech’s motion for summary judgment finding as a matter of law that Pleasant Grove take nothing on its claims against Altech, and granted FieldTurf’s partial motion for summary judgment finding as a matter of law that Pleasant Grove take nothing on its fraud claims against FieldTurf. The case proceeded to trial only on Pleasant Grove’s claims for breach of warranty against FieldTurf and the jury awarded $175,000 to Pleasant Grove. Both Pleasant Grove and FieldTurf appealed. The Court of Appeals reversed the summary judgment rendered in favor of Altech and upheld the partial summary judgment rendered in favor of FieldTurf. The Court remanded the case for a new trial of Pleasant Grove’s breach of warranty claims against both Altech and FieldTurf.

Background. Pleasant Grove retained Altech to be its general contractor for the construction of a new high school football stadium to include an artificial turf field. After meetings and discussions with FieldTurf representatives, Pleasant Gove recommended that Altech use FieldTurf to provide the turf materials and labor for the installation of the artificial turf. Altech complied with the recommendation.

The artificial turf was installed in 2009 and FieldTurf provided an 8 year warranty that if the height of the artificial turf decreased by 50% or more, during normal and ordinary use, then FieldTurf would repair or replace the defective turf.

In 2014, Pleasant Grove notified FieldTurf of significant problems with the turf and demanded that the turf be replaced under the warranty. FieldTurf offered to perform a “laymore scrape” to remove some of the rubber infill at the base of the fibers to expose more of the fibers. Pleasant Grove rejected this offer and filed suit against FieldTurf and Altech for breach of warranty and also sued FieldTurf for fraud.

Before the case proceeded to trial, both Altech and FieldTurf filed motions for summary judgment with the trial court. Altech requested that the trial court enter a total summary judgment as a matter of law in its favor on Pleasant Grove’s breach of warranty claims, and the trial court granted the motion. FieldTurf requested that the trial enter a partial summary judgment as a matter of law in its favor on Pleasant Grove’s fraud claims only, and the trial court granted the motion. The case proceeded to jury trial on Pleasant Grove’s breach of warranty claims against FieldTurf. The jury returned a verdict for $175,000 in Pleasant Grove’s favor. Both Pleasant Grove and FieldTurf appealed.

Legal analysis. The Court of Appeals first discussed the summary judgment rendered in favor of Altech on Pleasant Grove’s breach of warranty claims and found that based upon the contract documents there was some evidence to support these claims. Thus, the trial court erred in rendering this summary judgment.

Next the Court of Appeals discussed the partial summary judgment rendered in favor of FieldTurf. In regard to Pleasant Grove’s fraudulent misrepresentation claim, the Court found that there was no evidence in the record that FieldTurf made a material misrepresentation to Pleasant Grove. Since this was an element that must be proved to support a fraudulent misrepresentation claim, there was no evidence to support the claim.

The Court of Appeals then discussed Pleasant Grove’s fraudulent nondisclosure claim based upon FieldTurf’s alleged failure to disclose material facts about the artificial turf. The Court stated that “in order for silence to become actionable for fraud by nondisclosure there must be a duty to disclose.” In this case, Pleasant Grove contended that this duty existed because FieldTurf voluntarily disclosed partial information and later failed to disclose new information that made the earlier representation misleading. Pleasant Grove argued that FieldTurf represented that the artificial turf’s useful life was 10-12 years and was exceptionally durable when in fact FieldTurf knew and failed to disclosed that the artificial turf being used was defective. However, the Court apparently found that Pleasant Grove failed to present any evidence regarding the partial disclosure. Therefore, there was no evidence that FieldTurf had a duty to disclose information to Pleasant Grove. The Court affirmed the partial summary judgment granted in favor of FieldTurf as to Pleasant Grove’s fraud claims.

Ultimately, the Court of Appeals reversed the trial court’s summary judgment in favor of Altech and affirmed the partial summary judgment in favor of FieldTurf. The Court also remanded the case for a new trial on Pleasant Grove’s breach of warranty claims against both Altech and FieldTurf.

Lessons learned. Pleasant Grove reported problems it was experiencing with the artificial turf 6 years prior to the Court of Appeals’ decision. Assuming the case isn’t settled, it will now have to be retried before a jury against both FieldTurf and Altech since the Court of Appeals reversed the summary judgment rendered in favor of Altech. First, one wonders if it would have been a better business decision by FieldTurf to have just replaced the artificial turf as requested by Pleasant Grove rather than spend years in protracted litigation. Second, before a party like Altech files a motion for summary judgment, it should consider whether a favorable summary judgment will be upheld on appeal. Otherwise, it may find itself having to relitigate the case years later after an appellate court reverses the summary judgment.

In this residential property contract case, the Court addressed whether “as-is” and disclaimer-of-reliance contractual  provisions contained in the closing documents barred the homebuyer’s claims for fraud, negligent misrepresentation and violations of the Deceptive Trade Practice Act (DTPA), even when the seller’s disclosure statement apparently misrepresented and omitted material information. Pogue v. Williamson, 01-17-00844-CV, 2020 WL 1173708, at *1 (Tex. App.—Houston [1st Dist.] Mar. 12, 2020, no pet. h.). After considering these issues, the Court of Appeals reversed the $760,769 judgment of the trial court rendered in favor of the homebuyer.

Background. Williamson purchased the  home subject of this lawsuit from the Pogues. The parties initially entered an earnest money contract in which Williamson agreed to pay the Pogues $210,000 for the residential property and the Pogues agreed to provide seller financing to Williamson. Williamson also agreed to accept the property “as is” and have the property inspected.

Before the parties closed, Williamson reviewed the disclosure statement provided by the Pogues that it would later be learned contained numerous errors. The closing documents included a deed, a promissory note, and a deed of trust securing payment of the note. The deed of trust contained the following as is and disclaimer-of-reliance language:

As a material part of the consideration for the Property, [the Pogues have] executed this deed and granted, sold and conveyed the above described property, premises and improvements, and [Williamson] has accepted this deed and purchased the above-described property, premises improvements, “AS IS.” [The Pogues] and [Williamson] agree that there is no warranty by [the Pogues] that the Property is fit for a particular purpose. [Williamson] acknowledges that [she] is not relying upon any representations, statements, assertions or non-assertions by the [Pogues] with respect to the Property condition, but is relying solely on [her own] examination of the Property.

Pogue v. Williamson, supra, at *2.

Williamson also signed a document instructing the attorney drafting the closing documents to not perform a termite inspection or take actions to determine whether the property was in a flood plain or had drainage problems.

After moving into the house in October 2010, Williamson discovered serious problems with the house over the next 2 years, including extensive mold and water penetration, septic system problems, electrical problems, and bug infestation including termites. As a result, between 2010 and 2013, Williamson spent over $85,000 on repairs.

A dispute ensued between the parties regarding Williamson’s ability to timely pay the promissory note and Williamson hired an attorney. The attorney sent a demand letter to the Pogues stating that they failed to provide proper disclosures of the home’s condition, the septic tanks wasn’t code compliant, there was existing termite infestation, and there was extensive mold problems throughout the home. The letter requested an extension on the note payment.

The parties were unable to reach an agreement and Williamson filed suit alleging fraud, negligent misrepresentations and DTPA violations. After 7 years of litigation, the case proceeded to trial and the jury awarded a verdict in favor of Williamson. Based upon the verdict, the trial court rendered a judgment for Williamson totaling  $760,769. The Pogues appealed on the grounds that the deed of trust “As is” and disclaimer of reliance provisions barred Williamson from recovering on her claims.

Legal analysis. The Court of Appeals placed significance on  the jury’s findings in favor of Williamson on her fraud claims because:

A buyer is not bound by an “as-is” clause if she demonstrates that she was induced to enter the agreement by fraudulent representation or concealment of information by the seller. Id. at 162. To succeed on this theory, the buyer must show that the defendant made a material misrepresentation; the defendant was either aware that the representation was false or that he lacked knowledge of its truth; the defendant intended for the plaintiff to rely on the misrepresentation; the plaintiff relied on the misrepresentation; and the plaintiff’s reliance caused injury.”

Pogue v. Williamson, supra, at *4.

However, the Court went onto discuss the disclaimer of reliance clause contained in the deed of trust and stated:

In a “disclaimer-of-reliance” clause, a buyer generally agrees that she is entering the contract relying solely on her own judgment and not on any statement or representation by the seller. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 178–81 (Tex. 1997). And similar to how demonstrating fraudulent inducement can, as a matter of law, preclude a contract’s “as-is” clause, proof of an enforceable disclaimer-of-reliance clause can, as a matter of law, preclude a fraudulent-inducement claim. Lufkin, 573 S.W.3d at 229; Schlumberger, 959 S.W.2d at 181. The enforceability of this disclaimer-of-reliance provision is a question of law. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex. 2011) (citing Schlumberger, 959 S.W.2d at 181). And it is dispositive.

Pogue v. Williamson, supra, at *4.

In determining whether a disclaimer-of-reliance clause is enforceable, we consider the totality of the circumstances and whether (1) the disclaimer language is clear;      (2) the terms of the agreement were negotiated, rather than boilerplate; (3) the contract was the product of an arm’s-length transaction; (4) the complaining party was represented by counsel; and (5) the parties were knowledgeable in business. Lufkin, 573 S.W.3d at 229 (citing Italian Cowboy, 341 S.W.3d at 337 n.8, and Forest Oil Corp. v. McAllen, 268 S.W.3d 51, 60 (Tex. 2008)).

Pogue v. Williamson, supra, at *5.

After considering the totality of the circumstances and the above factors, the Court of Appeals concluded that the disclaimer-of-reliance clause was enforceable and barred Williamson from recovering on her claims. Thus, the Court reversed the trial court’s judgment and rendered judgment that Williamson, the homebuyer, take nothing.

Lessons learned. Although this decision may appear harsh on its face, contractual “as is” and disclaimer-of-reliance provisions are strictly enforced in Texas with only limited exceptions. This may be an issue that can only be changed through legislative action. Until then, if a homebuyer can afford it, the buyer should hire independent counsel to carefully review and revise all closing documents before completing the purchase of a house.

Introduction. As a matter of first impression, the Texas Supreme Court, in Energy Transfer Partners, L.P., et al (“ETP”) v. Enterprise Products Partners, L.P., et al (“Enterprise”), affirmed the reversal of a judgment exceeding $500 million involving a pipeline partnership dispute, on the grounds that in Texas parties can contract for conditions precedent to preclude the unintentional formation of a partnership. Energy Transfer Partners, L.P. v. Enter. Products Partners, L.P., 593 S.W.3d 732 (Tex. 2020).

Background. In this case, ETP and Enterprise agreed to explore the possibility of forming a joint venture to provide pipeline services to transport oil from Cushing, Oklahoma to the south. In March 2011, Enterprise approached ETP to discuss converting the Old Ocean pipeline into one that could transport oil south from Cushing. ETP owned the pipeline but Enterprise held the lease on it.

Enterprise was also a joint owner with ConocoPhillips in a pipeline called Seaway that transported oil north from the Texas Gulf Coast to Cushing. Enterprise wanted to reverse the direction of the pipeline from Cushing but ConcocoPhillips was not interested in doing so.

In three written agreements, ETP and Enterprise expressed that neither party would be bound to proceed until each company’s board of directors approved the execution of a formal written contract regarding this joint venture. This never happened.

The first of these agreements was a Confidentiality Agreement entered in March 2011. The second and third agreement were a Letter Agreement with an attached Non-Binding Term Sheet entered and a Reimbursement Agreement, entered in April 2011.

By May 2011, ETP and Enterprise began marketing the project to potential customers as a 50/50 joint venture. They needed commitments from shippers to ship at least 250,000 barrels per day to make the venture profitable.  The first two marketing attempts were unsuccessful. But, during their last attempt, Chesapeake committed to ship 100,000 barrels per day.

However, just prior to this commitment, Enterprise had begun preparing for its exit from the proposed transaction and negotiating with Enbridge to form a pipeline venture. In August 2011, Enterprise terminated its relationship with ETP.

In September 2011, Conoco sold its interest in the Seaway pipeline to Enbridge making Enbridge the joint owner in Seaway with Enterprise. Enbridge and Enterprise then moved forward to obtain shipper commitments sufficient to to support the modification of this pipeline for transporting oil south from Cushing. They spent billions to reverse the direction of this pipeline. The new pipeline–Wrangler–opened in June 2012 and became financially successful.

ETP sued on the grounds that ETP and Enterprise had formed a partnership by their conduct to “market and pursue” a pipeline, irrespective of their contractual disclaimers.  It was ETP’s position that, in moving forward on the Wrangler pipeline with Enbridge, Enterprise breached the statutory duty of loyalty owed by a partner. The jury found in favor of ETP and the trial court entered a judgment awarding ETP a total of $535,794,777 against Enterprise.

The Court of Appeals reversed the judgment apparently on the grounds that the Texas Business and Commerce Code allows parties to contract for conditions precedent to the formation of a partnership. Since the parties did not meet the conditions precedent requiring that a formal agreement be entered and approved by each party’s board of directors, then the parties did not form a partnership.

In analyzing the decision of the Court of Appeals, the Texas Supreme Court first discussed Section 152.051(b) of the Texas Business and Organizations Code which states:

Except as provided by Subsection (c) and Section 152.053(a), an association of two or more persons to carry on a business for profit as owners creates a partnership, regardless of whether:

(1) the persons intend to create a partnership; or

(2) the association is called a “partnership,” “joint venture,” or other name.

The Court also discussed § 152.052 which lists those factors that  may be considered in determining whether a partnership has been formed.

Next, the Court discussed Texas Business Organizations Code § 152.0003 that provides:

The principles of law and equity and the other partnership provisions supplement this chapter unless otherwise provided by this chapter or the other partnership provisions.

Given that the common law of Texas strongly favors freedom of contract,  the Court held that parties can in fact contract for conditions precedent to preclude the unintentional formation of a partnership. Thus, the Texas Supreme Court affirmed the Court of Appeals reversal of the trial court’s judgment.

Lessons learned. The Texas Supreme Court has a history of going to great lengths to uphold the freedom of contract. (See previous blog article texas-supreme-court-reverses-another-multi-million-dollar-business-fraud-verdict.html). Thus, each party to a major transaction should always have their attorney participate in drafting and reviewing any related agreements.  Otherwise, one of the parties may find itself in the shoes of ETP losing out on a five-hundred million dollar deal.

Introduction. In the fraud case of Pettit*v. Tabor, Marilyn Eileen Pettit Tabor (Lyn) ‘conveyed her interest in the family farm to her brother, Robert York Pettit (Bob), based upon Bob’s promise to protect the property and to reconvey it to Lyn. However, when it came time for Bob to reconvey the farm to Lyn, Bob refused to do so. The Court of Appeals upheld the Trial Court’s judgment which included the imposition of a constructive trust upon the farm in favor of Lyn based upon Bob’s fraudulent conduct. Pettit v. Tabor, 06-19-00002-CV, 2020 WL 216025, at *1 (Tex. App.—Texarkana Jan. 15, 2020, pet. filed). This article primarily addresses the appellate court’s opinion addressing the constructive trust.

Background and Court’s Holding. In 2006, Lyn’s and Bob’s mother conveyed the family farm to Lyn and Bob. In March 2013, Lyn received notice about a lawsuit that had been filed against a company she owned–Pettit Mortgage, Inc. At that time, Lyn was already contemplating conveying her interest in the family farm to her children, as a result of her health problems. The lawsuit made her feel a greater sense of urgency to complete this transfer. Lyn called her brother, Bob, to let him know that she was going to convey her interest in the farm to her children. However, Bob convinced Lyn that, while the lawsuit was pending, a better way to protect the farm would be to transfer it to Bob. When the lawsuit was over, he would reconvey it to Lyn. Within a few days, Bob prepared warranty deeds that Lyn signed conveying her interest in the farm to Bob.

In May of 2013, Lyn settled the lawsuit that had been filed against her company. Lyn then contacted Bob to let him know that the lawsuit was settled and asked him to start the paperwork reconveying her interest in the farm back to her. Bob initially said he would take care of it but later told Lyn that he was not going to reconvey the interest in the farm to her. Lyn eventually discovered that Bob, through a series of transfers, conveyed all of the farm and related mineral interests to his son Jeffery, as Trustee for the Big Horn Phalanx Trust, to protect it from Lyn.

Lyn sued Bob and his children, including Bob’s son, Jeffrey, as Trustee of the Big Horn Phalanx Trust. Lyn sought a judgment for fraud, breach of fiduciary duty, the imposition of a constructive trust, damages and other relief. After a bench trial, the Trial Court:

  1. Declared that the transfer of Lyn’s interest in the family farm to Bob was void because of fraud by Bob;
  2. Imposed a constructive trust upon Lyn’s 50% undivided interest in the family farm;
  3. Awarded Lyn $50,000 in punitive damages for Bob’s conduct;
  4. Awarded Lyn reasonable attorney fees and costs; and
  5. Awarded Lyn other relief.

Bob and his children (Defendants) appealed on the grounds including that the court should have found they prevailed on their affirmative defense of illegality and because the imposition of a constructive trust was not supported by the evidence.

The Court of Appeals first discussed the equitable remedy of a constructive trust and stated:

A constructive trust is “a creation of equity to prevent a wrongdoer from profiting from her wrongful acts.” Gray v. Sangrey, 428 S.W.3d 311, 315 (Tex. App.—Texarkana 2014, pet. denied) (citing Procom Energy, L.L.A. v. Roach, 16 S.W.3d 377, 381 (Tex. App.—Tyler 2000, pet. denied)). A constructive trust subjects the person who holds title to property “to an equitable duty to convey it to another, on the ground that his acquisition or retention of the property is wrongful and that he would be unjustly enriched if he were permitted to retain the property.” Cailloux, 224 S.W.3d at 736 (quoting Talley v. Howsley, 176 S.W.2d 158, 160 (Tex. 1943)). “To obtain a constructive trust, the proponent must prove (1) the breach of a special trust, fiduciary relationship, or actual fraud, (2) unjust enrichment of the wrongdoer, and (3) tracing to an identifiable res.” Gray, 428 S.W.3d at 315 (citing Troxel v. Bishop, 201 S.W.3d 290, 297 (Tex. App.—Dallas 2006, no pet.)).”

Pettit v. Tabor, supra, at *5.

Next, the Court of Appeals discussed the Defendants’ contention that their affirmative defense of illegality barred Lyn from recovering this equitable relief. The court stated that this affirmative defense is applicable when:

A grantor who conveys his property for the purpose of shielding the property from liability to future creditors, when the purpose of such a conveyance is not to divest the grantor of beneficial interest, should not receive the aid of the courts against his grantee. Public policy considerations demand that we refuse equitable relief and leave the parties where they have placed themselves.

Pettit v. Tabor, supra, at *6.

Defendants contended that  this defense was available because Lyn conveyed her interest to Bob to defraud her creditor in the lawsuit filed against the company she owned, Pettit Mortgage, Inc. However, the Court of Appeals found that since the Plaintiff sued Pettit Mortgage, Inc. and not Lyn, individually, the Plaintiff was never Lyn’s creditor. Therefore the affirmative defense did not apply.

The court went on to hold that there was sufficient evidence to support the imposition of a constructive trust, in Lyn’s favor, upon the interest in the farm she had conveyed to Bob. The court stated:

To obtain a constructive trust, the proponent must prove (1) the breach of a special trust, fiduciary relationship, or actual fraud, (2) unjust enrichment of the wrongdoer, and (3) tracing to an identifiable res.” Gray, 428 S.W.3d at 315 (citing Troxel v. Bishop, 201 S.W.3d 290, 297 (Tex. App.—Dallas 2006, no pet.)). Thus, the imposition of a constructive trust may be based either on the breach of a special trust or a fiduciary relationship, or on actual fraud. “Where the grantor voluntarily conveys to the grantee on a false oral promise that the grantee will reconvey, there is actual fraud justifying the imposition of a constructive trust.” In re Marriage of Braddock, 64 S.W.3d 581, 587 (Tex. App.—Texarkana 2001, no pet.) (citing Thigpen v. Locke, 363 S.W.2d 247, 250 (Tex. 1962)).

Pettit v. Tabor, supra, at *13.

The Court of Appeals found that there was evidence to support the Trial Court’s findings that Bob had committed actual fraud. Thus, the Trial Court did not abuse its discretion in imposing a constructive trust. The Court of Appeals went on to uphold the Trial Court’s judgment in its entirety including the award of punitive damages and attorney fees.

Lessons Learned.  It appears that Lyn’s mistake was trusting her brother. Of course, it is hard to call trusting one’s sibling a mistake. Unfortunately, family businesses often result in sticky situations. Lyn would have been better served by consulting with an experienced estate planning attorney to devise a succession plan that would have passed Lyn’s interest in the family farm to her children and helped protect it from Lyn’s creditors. In turn, Lyn could have preserved her relationship with her brother and avoided costly litigation.