VACATE and AFFIRM and Opinion Filed May 25, 2022 

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In The 

### Court of Appeals Fifth District of Texas at Dallas No. 05-20-00936-CV DIANA CONVENIENCE, LLC, HQ FOOD, INC., HAJAR CONVENIENCE, LLC, SHARK PHONES, LLC, AN D AMK CONVENIENCE, LLC, Appellants V. DOLLAR ATM, LLC, Appellee On Appeal from the County Court at Law No. 4 Collin County, Texas Trial Court Cause No. 004-02331-2019 MEMORANDUM OPINION Before Justices Carlyle , Smith, and Garcia Opinion by Justice Smith Appellants Diana Convenience, LLC, HQ Food, Inc., Ha jar Convenience, LLC, Shark Phones, LLC, and AMK C onvenience, LLC appeal from a final judgment awarding appellee Dollar ATM, LLC damages for breach of contract. In two issues, appellants challenge the trial court’s January 28, 2020 and July 23, 2020 pre-trial orders imposing discovery sancti ons against them. We vacate the portion of the January 28, 2020 motion to compel order awarding $1,050 in attorney’s fees and expenses and render appell ee take nothing as to the interim award of fees. We–2– affirm the trial court’s July 23, 2020 orde r imposing death penalty sanctions and otherwise affirm the tr ial court’s judgment. Factual and Procedural Background Appellee brought suit against appellant s in July 2019 alleging that appellants breached “Placement Agreem ents” that appellee and each appellant entered into between 2014 and 2016. The agreements concerned automated teller machine (ATM) placement, installation, maintenan ce, and cash replenishment services at each of the convenience stores for a term of eighty-four months. The parties were to share the surcharge revenue generate d by each ATM. A ppellee alleged that appellants breached their agreements by s eeking removal of the ATMs, interrupting or unplugging the power supply, covering th e slot reader, or installing and using another ATM in their stores prior to th e expiration of the agreements’ terms. Appellee sent multiple pre-trial letters urging appellants to respond to discovery requests. Appelle e notified appellants that, if they did not respond, appellee would file a motion to compel and seek attorney’s fees. Appellants did not respond. On December 30, 2019, appellee filed a motion to compel appellants’ discovery responses complaining that a ppellants had failed to fully respond to interrogatories and requests for disclosu re served on November 1, 2019. The interrogatories focused on whether a ppellants were contending that the representative who signed each Placement Ag reement lacked the authority to do so, who such representatives were, and what authority the representatives had within–3– each store. One interrogatory also asked each appellant how much money it collected each year from th e ATM surcharges since the Placement Agreement began. On January 23, 2020, appellants file d supplemental responses denying that they or any authorized representativ e signed the Placement Agreements and asserting they had no knowledge of such agreements until appellee filed suit. Appellants answered that the representativ es who signed the Placement Agreements had no authority to employ, direct, or disc harge appellants’ employees and provided the name of the person who they claimed di d have authority. Appellants otherwise objected to appellee’s interrogatories a nd its requests for production seeking all documents signed, since 2014, by the repr esentatives who signed the Placement Agreements. Appellants did not provide a lis t of persons with k nowledge of relevant facts and, instead, responded, “D efendant will supplement.” The trial court held a hearing the same day appellants filed their supplemental responses. The trial court granted appellee’ s motion to compel, including its request to recover its attorney’s f ees and expenses incurred in preparing and presenting the motion. Appellants were or dered to fully respond to th e interrogatories by January 30 and to pay $1,050 in attorney ’s fees and expenses by Fe bruary 6, 2020. Trial was set for February 20, 2020. Appellee again warned appellants that if they continued not to respond, appellee would file a motion fo r sanctions specifically asking the trial court to find that the agreements were signed by someone with authority to bind each appellant.–4– Although appellants served second supplemental responses on appellee on February 10, they still failed to fully answer the in terrogatories as previously ordered by the court. Appellee moved for sanctions agains t all defendants seeking an order finding that each of the employees who signed th e Placement Agreements had authority to enter the agreement on behalf of their re spective employer and prohibiting appellants from opposing appellee’s evidence regardi ng the amount of ATM revenue appellants received during the terms of the agreements. On February 20, 2020, after the parties discussed the discovery issues in chambers , the trial court granted appellants a trial continuance so that they could comply w ith the outstanding discovery requests. The trial court withheld its rulin g on the motion for sanctions. After another trial se tting was continued due to the “Covid lockdown,” appellants’ counsel filed a motion to withdraw to which appellee objected. Appellants’ lead counsel had left the firm representing appellants since the time the trial court had granted appellants’ continua nce. The trial cour t denied the firm’s motion to withdraw. A bench trial was ultimately held remo tely via Zoom on July 23, 2020. Prior to the parties presenting their cases, the trial court heard and granted appellee’s motion for sanctions and ordered the followi ng fact established in the case: “Each agent, employee, owner, or officer of [appellants], who signed the five Placement Agreements had authority to enter into th e Placement Agreements on behalf of each [appellant].” The trial court also prohib ited appellants from opposing the amount of–5– ATM revenue they received under the Placeme nt Agreements. The trial court found that appellants had failed to answer appe llee’s discovery requests regarding whether appellants’ employees had authority to en ter into the Placement Agreements and failed to produce copies of any checks or other documents signed by the individuals who signed the Placement Agreements. The trial court further found that appellants had “abused the discovery proc ess by resisting discovery.” After appellee presented evidence on its breach of contract claims and appellants rested without presenting evid ence, the trial court found in favor of appellee and rendered judgmen t against appellants. A ppellants filed a motion for new trial, which the trial court denied, and this appeal ensued. Death Penalty Sanctions In their first issue, appellants argue th at the trial court e rred by granting death penalty sanctions against them, which re sulted in a declaratory judgment and uncontested damages in violati on of appellants’ right to due process. Specifically, appellants contend the sanctions precl uded them from contesting whether the signatories to the agreements represented appellants and had the authority to bind them. Appellants argue that the failure to respond to the discovery requests was not their fault because their previous trial co unsel abandoned them, and they were left without knowledge of conversations held and agreem ents made between previous counsel and the court. Appellants also ur ge that we should view the sanctions in–6– light of the Covid pandemic and the Texas Supreme Court’s orders to show leniency during such unprecedented times. Appellee first responds that appellants waived their challenge to the trial court’s order imposing death pe nalty sanctions because they failed to object to the trial court’s exclusion of their evidence and further failed to raise the complaint in a motion for new trial. Appellee next res ponds that appellants’ conduct of repeated discovery abuse justified th e death penalty sanctions. We disagree with appellee that appellants waived their challenge to the death penalty sanctions. Appellants opposed the motion for sanctions both in writing and at the hearing on the motion thereby by suffici ently presenting to the trial court their objection to death penalty sanctions being ordered against them. See T EX

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. P. 33.1(a); Wright v. State Farm Lloyds , No. 03-20-00384-CV, 2022 WL 567860, at *2 (Tex. App.—Austin Feb. 25, 2022, no pet.) (mem. op.). In the case appellee cited for support, the parties did not contest th e sua sponte sanctions imposed by the trial court under Rule 13 or ask the trial court to reconsider its action. See Howell v. Tex. Workers’ Comp. Comm’n , 143 S.W.3d 416, 450 (Tex. App.—Austin 2004, pet. denied). Here, however, the sanctions we re not sua sponte imposed, and they were based on discovery issues litigated by the parties for months. Furthermore, a complaint regarding sanctions is not one of the complaints required to be specifically raised in a motion for new trial in order to preserve error. See T EX

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. P. 324. Therefore, we reject a ppellee’s invitation to waiv e appellants’ complaint.–7– We review the imposition of discovery sanctions for an abuse of discretion. TransAm. Nat. Gas Corp. v. Powell , 811 S.W.2d 913, 917 (Tex. 1991) (orig. proceeding). A trial court abuses its disc retion when it acts arbitrarily or without regard to any guiding rules or principles. Downer v. Aquamarin e Operators, Inc. , 701 S.W.2d 238, 241–42 (Tex. 1985). After no tice and a hearing, a trial court may issue sanctions in response to a party’s fa ilure to comply with discovery, such as ordering “that the matters regarding wh ich the order was made or any other designated facts shall be take n to be established,” “refusing to allow the disobedient party to support or oppose designated clai ms or defenses, or prohibiting him from introducing designated ma tters in evidence.” T EX

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. P. 215.2(b)(3), (4); 215.3. However, the trial court’s order must be just. T EX

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. P. 215.2(b). A sanction is just if (1) there is a di rect relationship between the offensive conduct and the sanction imposed a nd (2) it is not excessive. TransAm. , 811 S.W.2d at 917. The sanction must be asse ssed against the true offender. Id. Therefore, the trial court should attempt to determine whether the offens ive conduct is attributable to counsel only, the client, or to both, so that a client is not unduly punished by its counsel’s conduct. Id. Additionally, a sanction should be no more severe than necessary to satisfy its legitimate purpose. Id. When an offending party essentially loses the case because of the sanction, it is a death penalty sanction. Altesse Healthcare Sols., Inc. v. Wilson , 540 S.W.3d 570, 572 (Tex. 2018) (per curiam). Death penalty sanctions “cannot be used to adjudicate the merits of a party’s claims–8– or defenses unless a party’s hindrance of the discovery process justifies a presumption that its claims or defenses lack merit.” TransAm. , 811 S.W.2d at 918; see also Altesse , 540 S.W.3d at 572. A trial cour t may presume that a claim or defense lacks merit when a party refuses to produce material ev idence, despite the previous imposition of lesser sanctions. TransAm. , 811 S.W.2d at 918. Here, after numerous opportunities to respond to discovery including a continuance granted in lieu of imposing sa nctions in February 2020, appellants still failed to fully respond to a ppellee’s discovery requests be fore trial. While counsel provided many excuses as to why appellants had been unable to respond, such as the change in counsel, the unprecedented challe nges of Covid, and not being able to contact his clients for an extended peri od of time because they were “not from America,” appellants’ failure to fully an swer discovery began many months before a new attorney took over and th e Covid pandemic began. Despite appellants’ resistance in answer ing discovery, appellee was able to take the deposition, by written questions, of the signatory to the Diana Convenience agreement. The signatory testified that he was authorized to sign the agreement on behalf of Diana Convenience and that he signed all the documents and checks for the company. This information, couple d with appellants’ refusal to provide discovery that would give appellee an oppor tunity to depose additional signatories, supports a presumption that appellants’ defense lacks merit. Furthermore, the decision by appellants Shark Phones and AM K Convenience to f ile a no-evidence–9– motion for summary judgment based on th e very evidence th at appellee was seeking—who signed the agreement and we re they authorized to do so—supports the trial court’s finding that appellants had a callous disregard for the rules of discovery. See TransAm. , 811 S.W.2d at 918 (sanctions that preclude presentation of the merits should be reserved for thos e cases in which there is evidence of “a party’s flagrant bad faith or counsel’s callous disregard for the responsibilities of discovery under the rules”). The sanction directly related to the abusive conduct in that it prohibited appellants from contesting the very inform ation that they refused to provide— whether the signatories had the authority to bind them and how much they received from the agreements. Thus, the sanction was just becaus e it was “directed against the abusive conduct with an eye toward remedying the prejudice caused to the innocent party.” Nath v. Tex. Children’s Hosp. , 446 S.W.3d 355, 363 (Tex. 2014) ( Nath 1 ). The sanction was also assessed agains t the proper offender. Appellants’ behavior in not communicating with counsel in the months leading up to trial contributed to counsel’s inability to gath er the appropriate discovery responses and documents and, thus, the clients played an active role in the offensive conduct. This is not a case in which the trial court did not consider and analyze the availability of less stringent sanctions and whether such lesser sanctions would promote compliance. See, e.g. , Shops at Legacy (Inland), Ltd. P’ship v. Fine–10– Autographs & Memorabilia Retail Stores Inc. , 418 S.W.3d 229, 234–35 (Tex. App.—Dallas 2013, no pet. ). The trial court imposed le sser sanctions in the form of ordering appellants to pay appellee’s expens es and attorney’s fees when appellants first failed to timely comply with discovery. Then, the trial court withheld its ruling on appellee’s motion for death penalty sanctions and gran ted appellants a continuance on the day of trial because they still had not fully responded to discovery. Five months la ter, and after appellants fa iled to fully provide the discovery as ordered, the trial court granted appellee’ s motion for death penalty sanctions. We cannot say that the trial cour t abused its discreti on in doing so under the facts of this case. No further moneta ry sanctions or further extensions of time would have promoted compliance with the discovery rules. See Cire v. Cummings , 134 S.W.3d 835, 841–42 (Tex. 2004). We overrule appellants’ first issue. Interim Award of Attorney’s Fees In their second issue, appellants argue that the trial court reversibly erred when it awarded attorney’s fees after granting appellee’s motion to compel because the award was not supported by legally suffic ient evidence. Ap pellee responds that appellants lack standing to complain a bout the attorney’s fee sanction from the January 2020 order because they have not s hown that they paid the sanction or are expected to pay it. Appelle e contends that the fees we re paid by a personal check from appellants’ prior counsel but concedes that the record does not reflect this information.–11– We have found no evidence in the reco rd that shows the interim attorney’s fee award was paid or by whom it was paid. But the trial court ordered appellants to “[p]ay [appellee’s] attorney’s fees a nd expenses incurred in the amount of $1,050 from drafting, filing, setting, and appeari ng for the hearing on Plaintiff’s Motion to Compel by February 6, 2020.” Therefor e, appellants may ch allenge the order entered against them. “Before a court may exercise its discre tion to shift attorney’s fees as a sanction, there must be some evidence of reasonableness because without such proof a trial court cannot determine that the sanction is ‘no more severe than necessary’ to fairly compensate the prevailing party.” Nath v. Tex. Children’s Hosp. , 576 S.W.3d 707, 709 (Tex. 2019) (per curiam) ( Nath II ). Rule 215 specifically incorporates a reasonableness determination in awarding attorney’s fees in connection with a motion to compel. If a party’s motion to compel is granted, the trial court shall award the moving party the reasonable expens es, including attorney’s fees, incurred in obtaining the order. T EX

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. P. 215.1(d). “In dete rmining the amount of reasonable expenses, including attorney f ees, to be awarded in connection with a motion, the trial court shall award expenses which are reasonable in relation to the amount of work reasonably e xpended in obtaining an orde r compelling compliance.” Id. Therefore, when a party seeks attorney ’s fees as sanctions, the party must put forth evidence of the fees it incurred. Nath II , 576 S.W.3d at 709. Such evidence–12– must meet the legal and evidentia ry requirements established in Rohrmoos Venture v. UTSW DVA Healthcare, LLP , 578 S.W.3d 469 (Tex. 2019). Id. The motion to compel alleges that appellee “has incurred expenses in preparing and filing this motion” and th at appellee “is entitled to reasonable expenses incurred in obtaining the order, including attorney’s fees.” However, appellee offered no evidence, either att ached to its motion or at the hearing, regarding the reasonable amount of attorney ’s fees incurred. As a result, the evidence is legally insufficient to s upport the $1,050 award of attorney’s fees. See Rohrmoos , 578 S.W.3d at 497, 501–02. Becaus e appellee failed to present any evidence of reasonable expenses or a ttorney’s fees incurred, a remand for a redetermination of reasonable expenses and fees would be inappropriate. See Skeels v. Suder , No. 02-18-00112-CV, 2021 WL 4785782, at *13–14 (Tex. App.—Fort Worth Oct. 14, 2021, pet. filed) (mem . op. upon further reh’g). We sustain appellants’ second issue.–13– Conclusion Having sustained appellants’ second i ssue, we vacate the portion of the January 28, 2020 motion to compel order awarding $1,050 in attorney’s fees and expenses and render appellee ta ke nothing as to the interim award of fees. We affirm the trial court’s July 23, 2020 order imposi ng death penalty sanctions and otherwise affirm the trial court’s judgment.

200936F.P05 /Crai g Smith / CRAIG SMITH JUSTICE–14– 

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Court of Appeals Fifth District of Texas at Dallas JUDGMENT DIANA CONVENIENCE, LLC, HQ FOOD, INC., HAJAR CONVENIENCE, LLC, SHARK PHONES, LLC, AND AMK CONVENIENCE, LLC, Appellants
No. 05-20-00936-CV V. DOLLAR ATM, LLC, Appellee On Appeal from the County Court at Law No. 4, Collin County, Texas Trial Court Cause No. 004-02331- 2019. Opinion delivered by Justice Smith. Justices Carlyle and Garcia participating.

In accordance with this C ourt’s opinion of this date, we VACATE the portion of the trial court’s January 28, 2020 motion to compel order awarding $1,050 in attorney’s fees and expenses and RENDER appellee DOLLAR ATM, LLC take nothing as to the interim award of fees. We AFFIRM the trial court’s July 23, 2020 order imposing death penalty sanctions and otherwise AFFIRM the trial court’s judgment. It is ORDERED that each party bear its own costs of this appeal.
Judgment entered this 25th day of May 2022.