WorldVue Connect Global, L.L.C. v. Szuch, 155 F.4th 472 (5th Cir. 2025)

Introduction

In WorldVue Connect Global, L.L.C. v. Szuch, the Fifth Circuit—applying Texas law—affirmed (with a narrow modification) a preliminary injunction enforcing non‑compete, non‑solicitation, and confidentiality provisions contained in a post‑acquisition settlement agreement. 155 F.4th 472 (5th Cir. 2025). The decision highlights how Texas courts approach restrictive covenants negotiated as part of business separations and settlement agreements, particularly in modern workplaces with remote employees and layered staffing arrangements.

For Texas businesses and executives, the opinion underscores the continued enforceability of well‑drafted restrictive covenants while drawing a clear line between protectable confidential information and an individual’s preexisting personal knowledge.

Factual Background

WorldVue Connect Global provides in‑room entertainment and technology services to hotels nationwide. In 2022, it purchased the domestic assets of Hospitality WiFi, a business founded by Jason Szuch, for approximately $9.45 million. Szuch retained a minority ownership interest and became CEO of the combined business. A key asset in the transaction was a highly trained technical support workforce that serviced hotel clients across the United States.

The relationship deteriorated. In 2024, WorldVue bought out Szuch’s remaining interest for $4.125 million, and the parties entered into a settlement agreement governed by Texas law. Under that agreement, Szuch and affiliated entities agreed for one year not to compete with WorldVue, solicit its customers, or recruit its employees or independent contractors within a defined geographic area covering the United States, Canada, and certain U.S. territories. The agreement also contained confidentiality provisions and stipulated that breaches could be enforced through injunctive relief due to irreparable harm.

Almost immediately after the settlement was signed, evidence showed that Szuch and related entities began recruiting WorldVue’s support personnel—including remote workers—using internal knowledge of salaries, skill levels, and team composition. Several workers left WorldVue within weeks. WorldVue sued for breach of contract and tortious interference and obtained a temporary restraining order followed by a preliminary injunction. The defendants appealed.

Analysis of the Court’s Opinion

The Fifth Circuit reviewed the injunction for abuse of discretion and largely affirmed the district court’s order. Its analysis addressed four key issues.

1. Geographic Scope and Remote Workers

The defendants argued that the non‑solicitation covenant applied only to workers who physically resided and worked within the “Restricted Area.” The Fifth Circuit rejected that narrow interpretation. Because WorldVue’s business involved supporting hotel networks “in” the Restricted Area regardless of where employees lived, the court held that workers performing services for clients in the Restricted Area were covered—even if they were remote employees located elsewhere. This interpretation, the court explained, harmonized the agreement’s provisions and reflected the business realities the parties sought to protect. Id. at * 481‑482.

2. Employees vs. Independent Contractors

Many of the solicited workers were technically employed by third‑party staffing agencies. The court nevertheless held that they fell within the agreement’s prohibition on soliciting WorldVue’s “employees or independent contractors.” Excluding them would have rendered the covenant largely meaningless, as these personnel performed essential, ongoing services for WorldVue. Texas law permits workers to be employees of one entity while simultaneously serving as independent contractors of another. Id. at * 482.

3. Confidential Information vs. Personal Knowledge

The Fifth Circuit drew a critical distinction regarding confidential information. It agreed that WorldVue’s internally developed information—such as evaluations of workers’ skills, compensation structures, and business assessments—was confidential and protected by the settlement agreement. However, the court held that Szuch’s personal knowledge of individuals he had worked with for years before selling his business was not “confidential information,” even if he later sold the business and its goodwill. Personal relationships and memory are not proprietary assets unless clearly defined as such. The court modified the injunction to exclude Szuch’s personal knowledge of employee identities from the definition of confidential information. injunction is proper. Id. at *484.

 Irreparable Harm and Injunctive Relief

Although the settlement agreement included a stipulation that breach would constitute irreparable harm, the Fifth Circuit emphasized that substantial independent evidence supported injunctive relief. The record showed ongoing recruitment efforts, imminent loss of trained personnel, potential harm to customer relationships, and damage to goodwill that could not be readily quantified. The court also upheld the district court’s findings that the balance of hardships and public interest favored enforcement of reasonable restrictive covenants under Texas law. Id. at 486.

Key Takeaways

  • Non‑solicitation covenants may apply to remote workers who perform services for clients within the restricted geographic area.
  • Workers supplied through staffing agencies can qualify as “employees or independent contractors” for purposes of restrictive covenants.
  • A former owner’s personal knowledge and relationships are not confidential information merely because a business was sold.
  • Employer‑developed assessments, evaluations, and workforce data constitute protectable confidential information.
  • Texas courts may enforce restrictive covenants in settlement agreements through injunctive relief when supported by evidence of irreparable harm.

Practical Implications for Texas Businesses

1. Draft With Remote Work in Mind.
Businesses should ensure restrictive covenants clearly address remote and hybrid workforces, focusing on where services are provided—not just where workers reside.

2. Define Confidential Information Precisely.
If a buyer intends to restrict a former owner’s use of personal knowledge or relationships, the agreement must clearly and expressly define what is being conveyed and protected.

3. Settlement Agreements Carry Real Teeth.
Restrictive covenants in separation or settlement agreements are typically enforceable under Texas law when they are reasonable in scope and duration.

4. Evidence Still Matters for Injunctions.
While contractual stipulations of irreparable harm are helpful, courts will look for factual support showing real and ongoing business threats.

5. Staffing Structures Do Not Provide Safe Harbor.
Using third‑party staffing agencies will not necessarily insulate the promisor from non‑solicitation obligations.

Conclusion

WorldVue Connect Global v. Szuch reflects a pragmatic application of Texas contract and covenant‑not‑to‑compete principles to modern business operations. The decision reinforces that Texas courts will enforce bargained‑for restrictions designed to protect workforce stability and confidential business information—while also safeguarding an individual’s right to use general knowledge and experience. For businesses entering acquisitions, separations, or settlement agreements, it is important to narrowly tailor contractual provisions restricting the promisor’s right to compete and have a thorough understanding of Texas unfair competition laws.

Introduction

In a significant decision for Texas businesses that rely on layered contracting arrangements, the Texas Supreme Court has clarified that a settling defendant does not as a matter of law forfeit its contractual indemnity rights against a non-settling. In S&B Engineers & Constructors, Ltd. v. Scallon Controls, Inc., the Court reversed a court of appeals decision that had relied on decades‑old contribution cases to bar post‑settlement contractual indemnity claims. S&B Engineers & Constructors, Ltd. v. Scallon Controls, Inc., No. 24-0525, 2026 WL 705762 (Tex. Mar. 13, 2026).

The opinion provides important guidance on proportional indemnity provisions, the limits of the express‑negligence doctrine, and the risks and burdens facing parties who seek indemnification after settling underlying tort claims.

Factual Background

Sunoco hired S&B Engineers & Constructors, Ltd. (“S&B”) to design and install a safety system at a South Texas refinery. S&B subcontracted with Scallon Controls, Inc. (“Scallon”) to supply and program a fire‑suppression system. The parties’ purchase agreement contained an indemnity clause requiring Scallon to indemnify S&B and Sunoco for bodily injury claims “to the extent of [Scallon’s] negligence,” with indemnity expressly limited to Scallon’s “allocable share” in cases of comparative or concurrent negligence. S&B Engineers at *2.

In January 2015, a brief power loss triggered the system’s failsafe release of a chemical fire suppressant while workers were on scaffolding. Seven workers fell and were seriously injured. The workers sued S&B and Sunoco, who then asserted third‑party claims against Scallon, including contractual indemnity claims.

After years of litigation, S&B, Sunoco, and their insurers settled the workers’ claims in 2019 for several million dollars. The settlement agreement did not include Scallon, and there is no dispute that it fully resolved the workers’ claims. After settlement, S&B and Zurich (Sunoco’s insurer) pursued Scallon for proportional contractual indemnity based on Scallon’s alleged negligence.

The Lower Courts’ Rulings

The trial court granted summary judgment for Scallon, and the Beaumont Court of Appeals affirmed. The court of appeals reasoned that under Beech Aircraft Corp. v. Jinkins (Tex. 1987), a settling defendant cannot shift liability to a non‑settling party. It further concluded that the express‑negligence doctrine barred indemnity and that Zurich’s claims were time‑barred. 739 S.W.2d 19, 21–22 (Tex. 1987).

The Supreme Court’s Analysis

The Supreme Court rejected the premise that settlement automatically extinguishes contractual indemnity rights.

1. Jinkins Does Not Apply to Contractual Indemnity

The Court emphasized that Jinkins addressed only statutory and common‑law contribution claims—not contractual indemnity. Contribution involves imposing liability on a party with whom the settling defendant has no contractual relationship. Contractual indemnity, by contrast, reflects a voluntary and negotiated allocation of risk. The Court explained that nothing in Jinkins suggests parties are prohibited from agreeing in advance to proportional indemnification determined after a settlement. The Court also noted that Texas statutes governing comparative fault expressly preserve contractual indemnity rights and give them priority over statutory default rules.

2. Proportional Indemnity Is Permissible Under Ethyl

The court of appeals’ reliance on Ethyl Corp. v. Daniel Construction Co. was also misplaced. 725 S.W.2d 705. Ethyl does not bar proportional indemnity; it merely requires clear and express language before a party can be indemnified for its own negligence. Here, the contract did the opposite—it expressly limited indemnity to Scallon’s own negligence and disclaimed indemnity for S&B’s or Sunoco’s negligence. Under prior precedent, such a disclaimer makes the express‑negligence doctrine inapplicable.

The Court reaffirmed that parties “may contract for comparative indemnity” and that such provisions are common and enforceable in construction and industrial projects. See S&B Engineers at *4.

3. Settlement Does Not Eliminate—but Does Complicate—Indemnity Claims

While the Court allowed S&B and Zurich to pursue indemnification, it stressed that settlement carries real burdens. On remand, they must prove:

  • the settlement was reasonable and made in good faith; and
  • some portion of the liability is attributable to Scallon’s negligence.

Failure on either point will limit or defeat indemnity. The Court underscored that settling parties assume these risks and cannot rely on indemnity as a guaranteed backstop.

4. Zurich’s Claims Were Timely

Finally, the Court held that Zurich’s indemnity claims were not time‑barred. Indemnity claims accrue when liability becomes “fixed and certain,” which occurred at settlement—not at the time of the accident. Zurich intervened within four years of settlement, making its claims timely.

Key Holdings

  • Contractual proportional indemnity survives settlement unless the contract provides otherwise.
  • Jinkins does not bar contractual indemnity claims following settlement.
  • Proportional indemnity clauses that disclaim coverage for the indemnitee’s own negligence help avoid the express‑negligence doctrine.
  • Settling indemnitees bear the burden of proving settlement reasonableness and allocating fault to the indemnitor.
  • Indemnity claim limitations periods begin to run when liability becomes fixed by settlement or judgment.

Practical Implications for Texas Businesses and Practitioners

1. Contract Drafting Matters.
This case reinforces the value of carefully drafted proportional indemnity provisions that clearly allocate risk and expressly disclaim indemnity for the indemnitee’s own negligence.

2. Settlement Strategy Requires Planning.
Businesses may settle underlying claims without forfeiting indemnity rights but must be prepared to defend the reasonableness of the settlement and prove fault allocation afterward.

3. Indemnity Is Not Contribution.
Litigators should distinguish contractual indemnity claims from contribution theories early and clearly, particularly when responding to motions grounded in Jinkins.

4. Statute of Limitations Analysis Should Start at Settlement.
For indemnity claims, timing turns on when liability becomes fixed—not on when the underlying injury occurred.

Introduction

In Ly v. Maya Walnut LLC, No. 05-21-01140-CV, 2024, 2024 WL 260761 (Tex. App.—Dallas Jan. 24, 2024, pet. granted), the Dallas Court of Appeals reversed a $20 million jury verdict in favor of a commercial tenant and rendered a take-nothing judgment on its fraud and related claims. The case offers a comprehensive study regarding evidence that must be offered to satisfy the justifiable reliance element of common law fraud in the context of contractual negotiations between sophisticated parties.However, stay tuned because the Texas Supreme Court recently granted petition for review.

Background

Maya Walnut LLC operated El Rio Grande Latin Market in Walnut Creek Center under a lease set to expire in September 2019. The lease did not contain a renewal clause. Negotiations for renewal began in 2016 but stalled repeatedly. Unbeknownst to Maya, the landlord signed a lease with a competitor, El Rancho Supermercado, in July 2018. Maya continued negotiating under the impression that a renewal was forthcoming, and it does not appear from the record that the landlord’s leading agent timely disclosed that the landlord had already leased the premises to a competitor.

Maya sued for fraud, negligent misrepresentation, conspiracy, and promissory estoppel, alleging over $40 million in damages. The jury awarded over $20 million in actual and exemplary damages. The trial court entered judgment on the verdict, but the appellate court reversed, holding that Maya’s reliance was not justifiable as a matter of law.

Practical Implications

1. Justifiable Reliance as a Legal Barrier

The court emphasized that justifiable reliance is a required element of fraud, negligent misrepresentation, and promissory estoppel. (See – Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998); – Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997); – Ortiz v. Collins, 203 S.W.3d 414, 421 (Tex. App.—Houston [14th Dist.] 2006, no pet.)).

The court indicated that a party such as Maya may not rely on misrepresentations when “red flags” exist making reliance unwarranted. Id. at 5.

 In holding that Maya failed to satisfy the justifiable reliance element of its fraud claim, the Court considered the following factors:

– Sophistication of the parties;

– Arm’s-length negotiations;

– Lease terms lacking renewal or exclusivity rights raised a red flag;

-The alleged misrepresentations relied upon were indefinite;

-The negotiations raised red flags that renewal of the lease was in jeopardy; and 

-It was questionable whether Maya exercised care, as required by the law, to protect its interests, including by pursuing the lease of alternative space with another landlord.

2. Importance of Written Agreements and Exclusivity Clauses

The absence of a renewal clause or exclusivity provision in the lease proved fatal. Business tenants should consider:

– Including right-of-first-refusal or exclusive negotiation periods

– Documenting material representations in writing

– Seeking clarity on negotiation timelines and commitments

3. Damages and Expert Testimony

The court rejected Maya’s damages claims due to lack of justifiable reliance. This reinforces the need for reliable expert testimony tied to actionable conduct and clear causation between misrepresentations and economic harm.

4. Landlord’s Counterclaims Upheld

The court affirmed the landlord’s breach of contract claims for unpaid rent in the amount of $353,000 and property damage in the amount of $100,000.

Conclusion

Ly v. Maya Walnut LLC is a cautionary tale for tenants and landlords alike. For tenants, it highlights the risks of relying on informal assurances in lease negotiations. For landlords, it affirms the importance of clear communication and the potential exposure from misleading conduct—even if ultimately non-actionable.

For litigators, the case is a reminder that justifiable reliance remains a powerful gatekeeper in Texas tort law, especially in commercial settings. When advising clients, ensure they understand that sophistication and red flags can bar recovery—even in the face of apparent deception.

Introduction

In a significant decision for the oil and gas industry and contract law practitioners, the Texas Supreme Court in Roxo Energy Company, LLC v. Baxsto, LLC, 713 S.W.3d 404 (Tex. 2025), reversed the Eastland Court of Appeals and reinstated a trial court’s summary judgment in favor of Roxo Energy. The case centered on allegations of fraud and misrepresentation in the negotiation and execution of mineral lease and purchase agreements. The ruling reinforces the primacy of written contracts over oral representations and sets a high bar for justifiable reliance in fraud claims.

Analysis of the Court’s Opinion

Background

Baxsto LLC, the mineral interest owner, sued Roxo Energy and its affiliates for various fraud-related claims, including common-law fraud, fraudulent inducement, statutory fraud, and fraud by non-disclosure. Baxsto alleged that Roxo misrepresented its intent to develop the leased acreage rather than flip it, misled Baxsto about bonus payments, and prematurely recorded the lease in violation of their agreement.  Baxt claimed that as a result of these false representations, Baxsto was induced to sell the mineral interests to Roxo at lower than true market value.

The trial court granted summary judgment for Roxo, but the appellate court reversed. The Texas Supreme Court, however, found that Baxsto’s reliance on Roxo’s oral representations was unjustifiable given the written agreements.

Key Holdings

  1. Oral vs. Written Agreements: The Court emphasized that oral representations contradicting express, unambiguous terms of a written contract cannot form the basis for justifiable reliance. Roxo’s lease contained a standard assignment clause allowing transfer without obligation to drill, directly contradicting any oral promise to develop the land.
  2. Bonus Payment Misrepresentations: Baxsto claimed it was misled about the bonus payments compared to other mineral owners. The Court found that the written agreements clearly specified the bonus amount and included a “most favored nations” clause, which Baxsto did not allege was breached. The absence of written confirmation of these oral promises was deemed a red flag.
  3. Fraud by Non-Disclosure: The Court held that Roxo had no legal duty to disclose the premature recording of the lease, as the parties were in a business relationship, not a fiduciary one. Public deed records provided constructive notice.
  4. Intent to Induce Sale: Baxsto’s claim that Roxo’s actions were part of a scheme to induce a below-market sale of its mineral interests lacked evidentiary support. The Court found no connection between the timing of lease recordation and the eventual sale.

Practical Implications

For Attorneys

This decision reinforces the importance of ensuring that all material terms and representations are captured in the written contract. Attorneys should advise clients to avoid reliance on oral promises and to negotiate for explicit contractual protections.

For Businesses and Professionals

The ruling serves as a cautionary tale for parties entering complex transactions. Sophisticated parties are expected to understand and negotiate the terms they sign. Courts will not rescue parties from unfavorable outcomes based on oral assurances that contradict written agreements.

For the Oil & Gas and Real Estate Sector

The opinion underscores the limitations of fraud claims in mineral & real estate transactions. It also highlights the need for diligence in verifying public records and understanding lease & real property provisions.

Conclusion

The Texas Supreme Court’s decision in Roxo Energy v. Baxsto is a reaffirmation of contract law fundamentals: written agreements govern, and reliance on contradictory oral statements is legally untenable. This case is a must-read for legal professionals and industry stakeholders navigating mineral transactions and fraud litigation.

In Jasek v. Texas Farm Bureau Underwriters, the Court held that the Seller of used personal property was not liable to the Buyer for alleged misrepresentations posted by the third party online auction service. Jasek v. Tex. Farm Bureau Underwriters, No. 14-19-00759-CV, 2022 WL 364050, at *1 (Tex. App.—Houston [14th Dist.] Feb. 8, 2022, no pet.)

Background. Jasek purchased a used, badly damaged tractor “from an online auction website, SalvageSale.com.” Id. at 1. The following information was posted on the website:

“On December 5, 2013, this unit was damaged when the operator hit a stump. This unit will not start, run or operate in its current condition. No work has been done to the unit. Damage includes but is not limited to: undercarriage, housing, clutch, flywheel and driveshaft. Please refer to the attached photos and bid accordingly.

This listing is AS IS WHERE IS with all faults and no warranties expressed or implied.”

Id. at 1.

The listing included 16 photographs of the damaged tractor and no inspection was permitted before the auction. “However, the listing provided that at the  time of removal “if the item differs significantly from how it was represented in the lot description, the Buyer must contact Customer Care prior to removing.”” Id. at 1.

Jasek submitted the winning bid. He never inspected the tractor and hired a third party to pick up the tractor and deliver it to a repair shop that “identified a large hole in the clutch housing that had not been depicted in the listing photographs.” Id. at 1. As a result, Jasek filed a lawsuit against the seller, Texas Farm Bureau, alleging fraud and violations of the Texas Deceptive Trade Practices Act.

The Trial. Testimony revealed  that the tractor was determined by Texas Farm Bureau to be a total loss from being damaged when it hit a stump. Texas Farm Bureau paid its insured an amount equal to the tractor’s agreed pre-loss fair market value. In turn, Texas Farm Bureau decided to sell the damaged tractor through SalvageSale’s online auction, in order to recoup any remaining value of the tractor.

Prior to the sale, Texas Farm Bureau provided SalvageSale with a “Loss Assignment Sheet,” photographs of the damaged tractor, and the prior owner’s repair estimate. The Loss Assignment Sheet stated that the tractor “hit a stump causing damage to undercarriage. Damage is to housing, clutch, flywheel, and drive shaft.” The tractor was listed “as is” with no presale inspection permission allowed. Id. at 1.

“SalvageSale then created the online listing, scheduled an auction, and forwarded the proceeds from the sale to Texas Farm Bureau.” Id. at 2. SalvageSale was not included as  a party to the lawsuit.

At the conclusion of the trial, the jury found in favor of Jasek on his fraud and DTPA claims. Unfortunately for Jasek, the trial court entered a take nothing judgment, notwithstanding the jury verdict, in favor of Texas Farm Bureau.

Appeal. Jasek appealed the take nothing judgment. The Court of Appeals upheld the trial court’s take nothing judgment because Jasek did not establish that Teas Farm Bureau wrote or created the online listing for the tractor. Texas Farm Bureau emailed the Loss Assignment Sheet, photos, and repair estimate to SalvageSale. The implication was that SalvageSale created the final information posted online about the tractor. There was “not evidence that Texas Farm Bureau prepared the [online] listing or made a disclosure or representation to Jasek.”

Further, there was no evidence that SalvageSale was acting as the agent for Texas Farm Bureau in posting the listing that would make Texas Farm Bureau vicariously liable for the posting by SalvageSale.

As a result, the Court of Appeals, held that the trial court did not err in rendering its judgment notwithstanding the verdict.

Conclusion. It is interesting that, based upon these facts, the jury returned its verdict in favor of the buyer. Although it could be argued that the online posting should have included a photograph of the hole in the clutch housing, the damage to the clutch was mentioned and the tractor was being sold “as is” through “SalvageSale.com” without inspection. Surely, a buyer would not be expecting much value in return for this purchase. Interestingly, the Court of Appeals never really addressed whether the alleged misrepresentations or omissions of fact were actionable. It was able to dispose of the case on the grounds that the seller was not the one that made the alleged misrepresentations in the posting.

In this case, “[t]wo lenders seek to collect more than $58 million from Michael Lockwood.” Lockwood Int’l, Inc. v. Wells Fargo, Nat’l Ass’n, No. 20-40324, 2021 WL 3624748, at *1 (5th Cir. Aug. 16, 2021)). The case arises out of a personal guaranty and forbearance agreements signed by Lockwood guaranteeing his companies’ $90 million revolving lines of credit extended by Wells Fargo and Trustmark.

Lockwood’s companies provided services to the oil and gas and construction industries. They ‘entered into two revolving credit notes in 2015, borrowing $70 million from Wells Fargo and $20 million from Trustmark.’ Id at *1. By 2016, the companies had breached some of their obligations under the notes, and the parties entered into an agreement to modify the obligations and reduce the total debt to $72 million. Lockwood executed a personal guaranty of the debts. Wells Fargo and Trust Mark (the “Lenders”) also insisted that a chief restructuring office – CRO – be engaged to help “turn the companies around.” Id at *1.

Unfortunately, the Lockwood companies continued to be in default of the notes. As a result, the Lenders required Lockwood to “give the CRO “full authority to operate [Lockwood’s companies]” or face acceleration of the loans. Id at *1. Lockwood complied and gave full authority to the CRO. However, Lockwood’s companies continued to remain in default.

This time, in order to avoid acceleration, the Lenders required Lockwood and his companies to sign a forbearance agreement containing “a waiver and release of all “setoffs, counterclaims, adjustments, recoupments, defenses, claims, causes of action, actions or damages of any character or nature” against the Lenders. Id at *1.

Later, a second forbearance agreement was signed to avoid acceleration. When the second forbearance agreement expired, the loans remained uncured and the Lenders accelerated the lines of credit. As a result, a lawsuit ensued between the Lockwood parties and the Lenders. The Lockwood parties sought more than $1.5 billion in damages including for fraud and conversion. Of course, the Lenders made claims for breach of the loans and of the guaranty agreement.

‘After a trip through federal, state, and bankruptcy courts, nothing ultimately became of the Lockwood companies’ tort claims against the Lenders.’ Id at *2. However, the Lenders’ breach of guaranty claim against Lockwood survived, and the Lenders filed a motion for summary judgment. Lockwood asserted that fact issues remained as to his affirmative defenses, including for duress. The trial court granted the Lenders’ motion for summary judgment and entered judgment in favor of the Lenders and against Lockwood for in excess of $58 million.

Lockwood appealed contending that his defense of duress barred the Lenders from recovering on their loan agreements. He contended that he signed the guaranty and forbearance agreements under duress. In signing the first forbearance agreement, Lockwood contended that the Lenders pressured him into relinquishing full control of his companies to the CRO.

The appellate court said that duress requires more. In order to prove the legal defense of duress, one must prove “(1) a threat to do something a party has no legal right to do, (2) an illegal exaction or some fraud or deception, and (3) an imminent restraint that destroys the victim’s free agency and leaves him without a present means of protection.”

Here, “Lockwood’s duress defense falters at the first step because he has not proven that the lenders threatened to take any unauthorized action.” Id at *4. There is simply nothing that prohibits a lender from demanding a change in management as a condition to modifying a loan. The court went onto say:

Lockwood has not established that the lenders perpetrated any “bad acts” to obtain his signature on the first forbearance agreement. The duress defense fails.

Id at *4.

At the end of the day, the Lender’s prevailed on their $58 million judgment. The moral of the story is that leveraging financial pressure against an opposing party in negotiations, alone, is insufficient to support the defense of financial duress.

Introduction. A party can be held liable for conspiracy to commit fraud and theft, even if the party did not commit all of the underlying bad acts. Bates Energy Oil & Gas, L.L.C. v. Complete Oil Field Servs., L.L.C., No. 20-50952, 2021 WL 4840961, at *1 (5th Cir. Oct. 15, 2021). In this case, the 5th Circuit Court of Appeals affirmed the trial court’s judgment finding that David Bravo and his company, Unlimited Frac Sand, were vicariously liable for $652,146.22 in damages and $227,614.77 in attorney fees, based upon conspiracy to commit fraud and theft.

Factual & Procedural Background. Bates Energy Oil & Gas, LLC (“Bates Energy”) and its principal, Stanley Bates (“Bates”), agreed to obtain frac sand for Complete Oil Field Services (“COFS”). The COO of Bates Energy was David Bravo (“Bravo”). He later formed and managed a new  company, Unlimited Frac Sand, LLC d/b/a Frac Sand Unlimited (“FSU”). FSU listed Bates as Vice President and Member, and FSU listed Bates’ girlfriend as a Manager.

Bates Energy and COFS agreed to place $1,000,000 in an escrow account to be used by Bates Energy to purchase the frac sand for COFS. However, the escrow funds could only be withdrawn with the approval of COFS. A proof of escrow funds confirmation letter was later sent to Bravo.

Little did COFS know, the principal of the escrow account, Dewayne Neumann (“Neumann”), was a close associate of Bates. Over several months, Bates, Bravo, and Neumann coordinated the withdrawal of escrow funds, without the approval of COFS. They ultimately misappropriated $652,146.22 of the escrow funds and delivered no sand to COFS.

“This fraud and theft occurred in two ways; Bravo played a key role in both. First, the group executed a series of unauthorized disbursements of COFS’s money from the escrow account to Bates and his associates. This included David Bravo, who was listed as an intended recipient and received $47,500 through accounts held in his wife’s name. Each of the disbursement authorizations stated: “electronic signature  added under authorization by Frac Sand Unlimited, LLC.” For one round of disbursements, the authorizations were signed by Bates but indicated in the “by” section that they were made by “David Bravo, CEO.” Despite the clear terms of the escrow agreement, each of these disbursements was made without the knowledge or approval of COFS.”

Id at *1.

Second, the group defrauded COFS by using the escrow funds to purchase frac sand from Tier 1. Bates and FSU arranged to use the escrow funds to pay for this frac sand. One of the disbursement authorizations was signed by Bravo as CEO of FSU. He even admitted at trial that he was aware that the funds were used to purchase the sand. Rather than deliver the sand to COFS, it was sold to a third party.

The trial court found David Bravo and FSU liable for conspiracy to commit fraud and theft. As a result, the court held that they were jointly and severally liable for $652,146.22 in damages and $227,614.77 in attorney fees. Bravo and FSU appealed to the 5th Circuit.

5th Circuit’s Decision. On appeal, the 5th Circuit stated:

““In Texas, a civil conspiracy is a combination by two or more persons to accomplish an unlawful purpose or to accomplish a lawful purpose by unlawful means.” Firestone Steel Prods. Co. v. Barajas, 927 S.W.2d 608, 614 (Tex. 1996). “The essential elements are: (1) two or more persons; (2) an object to be accomplished; (3) a meeting of minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result.” Massey v. Armco Steel Co., 652 S.W.2d 932, 9234 (Tex. 1983) (citations omitted).”

Id at *3.

The 5th Circuit then stated that a party can be liable for conspiracy even if the party “did not commit the underlying bad acts.” Id at *3.

Conclusion. The 5th Circuit went on to find that there was ample evidence that Bates, Bates Energy, and other parties hatched a scheme to defraud COFS. Further, there was ample evidence that Bravo was a co-conspirator in that scheme, and that Bravo and FSU were members of the conspiracy. This same evidence supported the claims by COFS for theft and conspiracy to commit theft. Thus, the 5th Circuit affirmed the trial court’s judgment on both counts.

Introduction. In Texas, an employer is vicariously liable for the negligence of its employee, acting within the course and scope of employment, resulting in injuries to a third party. In the automobile accident case of EAN Holdings, LLC v Arce, 636 S.W.3d 290 (Tex. App.- Fort Worth 2021, pet. denied), the Fort Worth Court of Appeals considered whether EAN Holdings, LLC was vicariously liable for the negligence of EAN’s employee, Nelson, resulting in injuries to third party Guillermo Arce. Since Nelson was operating the EAN owned vehicle while he was on his way home from work, the court held that EAN was not vicariously liable for Nelson’s negligent operation of the EAN owned vehicle.

Background. On the date of the accident, Nelson was driving home from EAN’s branch office, in a car owned by EAN, and was involved in a motor vehicle accident resulting in injuries to Arce. As a result, Arce sued EAN for being vicariously liability for the negligence of Nelson. The jury found that Nelson was negligently operating the vehicle, within the course and scope of employment for EAN, and awarded Arce substantial damages. EAN challenged the verdict on appeal.

In analyzing whether EAN was vicariously liable, the Court of Appeals discussed  the common law doctrine of vicarious liability. “To establish that an employer is vicariously liable for an employee’s negligence, a plaintiff must prove that, at the time of the negligent conduct, the employee was acting in the course and scope of his employment.” Id at 295.

“On the evening in question, Nelson was driving home in an EAN personal-use vehicle after leaving work when he collided with Arce’s vehicle.3 Nelson’s plan had been to stop at a Whataburger to get dinner and then to go home. He was not conducting any EAN business at the time of the collision. Although he had his personal cell phone with him, he was not using it at the time of the collision. He had no plans to conduct any EAN business when he arrived home for the evening, and EAN, according to his area supervisor, did not expect him to work from home.4” Id. at 294.

The Court discussed the application of the coming-and-going rule as noted by the Supreme Court of Texas (SCOTX) in Painter v. Amerimex Drilling I, Ltd., 561 S.W.3d 125, 128 (Tex. 2018). In Painter, SCOTX stated that under this rule an employer is not vicariously liable for the negligent operation of a motor vehicle by its employee, if the automobile accident occurs while the employee is traveling to or from the place of employment.

Holding. Based upon the coming-and-going rule, the Fort Worth Court of Appeals held that, as a matter of law, EAN was not vicariously liable for the negligence of Nelson since he was on his way home at the time of the automobile accident.

Introduction. The Texas Supreme Court (SCOTX), in Signature Indus. Services, LLC (SIS) v. Int’l Paper Co. (IP), reduced the $59.1 million jury award to just under $1.8 million. [638 S.W.3d 179, 186 (Tex. 2022)]. The jury’s verdict was largely based upon consequential damages sustained by SIS as a result of IP’s breach of contract.  SCOTX held that, since these consequential damages were either not foreseeable or proven with reasonable certainty, SIS was not entitled to recover them.

Background. SIS is a construction and maintenance company founded in 2010 that performed maintenance for IP as well as other industrial businesses. In March 2014, SIS and IP entered into a contract for SIS to upgrade a vessel known as a slaker. IP used the slaker to recycle chemicals for making paper. Apparently, IP was required to initially pay $775,000 to SIS. However, SIS could also charge for other costs as they were incurred.

Delays and disputes arose, and SIS claimed that it was still owed $2.4 million after it finished the work. In  the interim, SIS had entered  into confidential negotiations to be acquired for the amount of $42 million, by another company. Apparently, these negotiations faltered, after IP refused to pay the $2.4 million to SIS for its services. Subsequently, SIS began experiencing cash flow problems and was not even able to timely pay payroll taxes, resulting in penalties being assessed.

SIS sued IP for breach of contract and fraud. SIS’s expert testified that as a result of IP’s breach, SIS lost $42 million from the lost sale, SIS’s book value decreased by $12.4 million, and SIS incurred $1.9 million in penalties for non-payment of payroll taxes. The total of these consequential damages was $56.3 million. Based upon the evidence, the jury awarded this $56.3 million plus the $2.4 million in direct damages that SIS was claiming for services provided to IP. The court of appeals reduced the $56.3 million in consequential damages to $12.4 million and upheld the $2.4 million in direct damages. The parties then petitioned SCOTX for review.

SCOTX began its analysis by discussing direct and consequential damages.

Direct damages often include restoration of “the benefit of a plaintiff’s bargain.”…Consequential damages, on the other hand, compensate the plaintiff for foreseeable losses that were caused by the breach but were not a necessary consequence of it.

Signature Indus. Services, LLC v. Int’l Paper Co., 638 S.W.3d 179, 186 (Tex. 2022).

SCOTX found that IP did not know about the pending $42 million sale of SIS to the third party. In fact, the negotiation of this sale was confidential. Since these consequential damages were not foreseeable by IP, then SIS was not entitled to recover them.

SCOTX next addressed the jury’s award of $12.4 million for the loss of SIS’s book value. The Court found that SIS failed to prove these damages with reasonable certainty and that loss of book value was not a proper measure of damages. Therefore, this part of the damages award was  also not recoverable.

SCOTX then went onto address the $2.4 million awarded in direct damages for unpaid services. The Court upheld all but $622,560 of this part of the award. This was disallowed because it was based upon charges for overhead, tax penalties, and lost revenue. Unfortunately for SIS, recovery of these charges was prohibited by the contract.

As a result, SCOTX rendered judgment that SIS take nothing on its claim for consequential damages and reduced the award for direct damages to approximately $1,777,440.

Conclusion. The plaintiff must prove that consequential damages, like those being claimed by SIS, are foreseeable. This makes it exceptionally challenging to recover these types of damages. Further, these damages must be proven with reasonable certainty. This will almost  always require the plaintiff to support these damages with competent expert testimony.

Introduction. In the Estate of Wlecyk, the trial court found that the Decedent revived his 2001 Will by making a 2016 hand-written notation on the Will that it stands. [No. 01-19-00299-CV; 2021 WL 1537489 (Tex.App.–Houston [1st Dist.] April 20, 2021, no pet.)]. This resulted in Decedent’s estate passing to his children in equal shares rather than to his live-in friend.

Background & analysis. Billy Joe Wlecyk died  on January 30, 2018,  while bailing hay. On February 1, 2018, Billy Joe’s daughter, Sharon Reed, filed an application to probate Billy Joe’s 2001 Will that was ratified on July 15, 2016. The ratification was significant because Billy Joe had also executed a Will in 2005 leaving his estate to his live-in friend, Daniel. Whereas, in the 2001 Will, Billy Joe left his estate in equal shares to his children.

Daniel filed a competing Application requesting the Court to probate the 2005 Will leaving everything to her. She contended that the 2005 Will remained in effect at the time of Billy Joe’s death and that the 2016 hand-written notation on the 2001 Will was procured by fraud. After hearing the evidence, the Court found that Billy Joe’s hand-written 2016 notation revived Billy Joe’s 2001 Will. The trial court admitted the 2001 Will to probate.

So, how did the 2001 Will end up trumping the 2005 Will? Well, on July 15, 2016, Billy Joe called his daughter, Sharon, and asked her to bring him the 2001 Will. Sharon removed the 2001 Will from her gun safe where she had stored it for safekeeping (no place but Texas). She took it to Billy Joe who was at the home of his friend, Allan. Billy Joe put the Will on the car hood and wrote on this 2001 Will that “This will still stands.” He initialed this notation. This was followed by Billy Joe’s handwritten signature. Another page followed containing a jurat stating that the document was “signed and sworn to” in Brazoria County, on July 15, 2016, by Billy Joe Wleczyk, before notary Kimberly Miller. Estate of Wlecyk, No. 01-19-00299-CV, 2021 WL 1537489, at *1 (Tex. App.—Houston [1st Dist.] Apr. 20, 2021, no pet.).

When Billy Joe signed the written notation, his daughter, Sharon, and his two friends, Allan and Pamela, were all present. Pamela’s testimony included that, prior to writing the 2016 codicil on the 2001 Will, Daniel said that Billy Joe wanted her to move out of his house. Allan testified that when Billy Joe signed the 2016 codicil, Billy Joe “appeared to be of sound mind and body, and to know what he wanted. “ No one was pressuring Billy Joe.

After the trial, the court  admitted the 2001 will and the 2016 codicil to probate and appointed Sharon as independent executor. In doing so, the trial court found that Billy Joe executed a valid hand-written codicil on July 15, 2016. This 2016 codicil not only revived the 2001 Will but it also revoked the 2005 Will.

The court of appeals affirmed the trial court’s decision.

A written will may be revoked by “a subsequent will, codicil, or declaration in writing that is executed with like formalities.” TEX. EST. CODE ANN. § 253.002.

Estate of Wlecyk, No. 01-19-00299-CV, 2021 WL 1537489, at *5 (Tex. App.—Houston [1st Dist.] Apr. 20, 2021, no pet.).

A codicil that contains a sufficient reference to a prior will operates as a republication of the will as much as the codicil does not alter or revoke it.

Id at *5.

“Like formalities” means “under the formalities required to establish a valid will.” Wells v. Royall Nat’l Bank, 249 S.W.2d 695, 698 (Tex. App.—Galveston 1952, writ ref’d n.r.e.). It “does not mean that a typewritten, attested will can be revoked only by a later typewritten, attested instrument, or that a holographic will can be revoked only by a later holographic instrument.” Cason v. Taylor, 51 S.W.3d 397, 410–11 (Tex. App.—Waco 2001, no pet.). “A holographic will can revoke an attested will, and vice versa, so long as the revoking instrument is in accordance with the legal requirements.

Id at *5.

To be valid, a holographic will must be wholly written in the testator’s handwriting and signed by the testator. TEX. EST. CODE ANN. § 251.052.

Id at *5.

The record supports the trial court’s finding that the 2016 codicil meets these requirements. Miller, [Sharon] Reed, and Allan all testified that they watched as Billy Joe wrote and signed the codicil.

Id at *6.

Conclusion. It appears that the court reached the just result  in this case. However, the problems that arose could have probably been avoided if the Decedent had requested his attorney to draft a new formal will in 2016. Simple estate planning is relatively inexpensive and well worth the peace of mind it will give your rightful heirs, when it comes time for them to probate your estate.