Court Opinion

ID: 4436416
Source: CourtListenerOpinion
Date Created: 2019-09-07 00:11:40.879036+00
Date Added: 2024-06-11T14:46:10.189844
License: Public Domain

Opinion filed September 6, 2019

                                      In The

        Eleventh Court of Appeals
                                   __________

                              No. 11-18-00086-CV
                                  __________

   TRISHE RESOURCES, INC.; TRISHE WIND MINNESOTA,
    LLC; AND TRISHE WIND COLORADO, LLC, Appellants
                                         V.
                  HILLIARD ENERGY, LTD., Appellee

                    On Appeal from the 385th District Court
                           Midland County, Texas
                       Trial Court Cause No. CV 50941

                     MEMORANDUM OPINION
      After it imposed lesser sanctions against Appellants (collectively, Trishe), the
trial court entered “death penalty” sanctions and entered a default judgment against
Trishe. This is an appeal from the default judgment and a previous partial summary
judgment. Trishe raises three issues on appeal. First, Trishe contends that the trial
court abused its discretion when it assessed approximately $2.1 million in sanctions
against Trishe. Second, Trishe argues that the trial court abused its discretion when
it awarded Hilliard $33,454.98 in attorney’s fees as a discovery sanction. Third,
Trishe asserts that the trial court erred when it granted Hilliard a summary judgment
for contractual interest on success fees under the parties’ contract. We affirm in part
and reverse and remand in part.
      In August 2014, Trishe entered into a consulting contract with Hilliard
whereby Hilliard agreed to assist Trishe in the marketing and sale of wind farms.
Hilliard was to be paid a monthly consulting fee. Hilliard was also to receive a
“success fee” equivalent to 12% of any sale that occurred during the contract term
or 5% of any sale that occurred within eighteen months after the contract terminated.
      When Trishe later terminated the contract, Hilliard sued Trishe for breach of
contract and alleged that Trishe had failed to pay fees that were due under the
contract. Hilliard later filed a motion to compel discovery on the grounds that Trishe
had failed to produce financial records—principally bank statements—in response
to repeated requests for production. The trial court granted Hilliard’s motion and
ordered Trishe to produce the documents within thirty days and to pay $1,200 in
discovery sanctions.
      Hilliard later filed a motion for sanctions and alleged that Trishe had failed to
produce the documents and had also failed to pay the sanctions. Hilliard requested
that the trial court enter an order by which Trishe would be prohibited from
conducting further discovery under Rule 215.2(b)(1) of the Texas Rules of Civil
Procedure. Hilliard also asked the trial court to order Trishe to pay Hilliard’s legal
fees under Rule 215.2(b)(8) and to strike Trishe’s pleadings under Rule 215.2(b)(5).
      The trial court conducted a hearing on Hilliard’s motion. During the hearing,
Hilliard’s counsel explained that, in addition to the fact that some requested
documents were still missing, many of the documents that had been produced

                                          2
appeared to have been altered or redacted to exclude necessary information. The
trial court granted the motion. In its order, the trial court prohibited further discovery
by Trishe, struck Trishe’s pleadings, and ordered Trishe to pay $33,454.98 in legal
fees and court costs to Hilliard.
      Hilliard also filed a motion for partial summary judgment for unpaid
consulting and success fees and expenses from the sales of wind farms in Ohio and
Minnesota. Trishe did not respond. The trial court granted the motion and awarded
Hilliard a total of $344,848.15 in damages and contractual interest. The summary
judgment order left open Hilliard’s claim for additional damages related to the sale
of the Ohio wind farm. Trishe was to be paid under the Ohio sales contract in a
series of payments for specified construction milestones. Hilliard’s success fee was
payable only if, and as, Trishe received payment.
      Hilliard filed yet another motion for sanctions when Trishe continued to fail
to produce the required documents and continued to fail to pay the ordered sanctions.
Hilliard requested a default judgment under Rule 215.2(b)(5) and requested that the
trial court enter a deemed finding that “the Ohio wind farm was built to its full
potential, meaning that milestone payments due to [Hilliard] will be calculated as
though each milestone was met timely and to its full potential” as identified in the
original contract. Hilliard argued that it was due a total success fee of $2,114,220.
Therefore, Hilliard “request[ed] that Trishe be ordered to pay sanctions in the
amount of $2,114,220.” Trishe did not appear at the hearing on Hilliard’s motion.
The trial court entered a default judgment in which it awarded Hilliard:
          • the previously granted sanctions of $1,200;
          • the previously granted sanctions of $33,454.98;
          • damages of $344,848.15, as previously granted in the summary
            judgment order;

                                            3
          • sanctions in the amount of $2,114,220; and
          • attorney’s fees of $4,396.24.
      We will address Trishe’s first issue on appeal. In that issue, Trishe contends
that the trial court abused its discretion when it assessed approximately $2.1 million
in sanctions against Trishe.
      We review a trial court’s ruling on a motion for discovery sanctions for an
abuse of discretion. Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004). A trial
court abuses its discretion when its ruling is arbitrary, unreasonable, or without
reference to any guiding rules or legal principles. Id. at 838–39; Downer v.
Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985). An appellate
court reviews the entire record, including the evidence, arguments of counsel,
written discovery on file, and the circumstances surrounding the party’s discovery
abuse. Tidrow v. Roth, 189 S.W.3d 408, 412 (Tex. App.—Dallas 2006, no pet.).
      A trial court has discretion to impose sanctions for discovery abuses under
Rule 215 of the Texas Rules of Civil Procedure. TEX. R. CIV. P. 215. If a party fails
to comply with an order compelling discovery or abuses the discovery process, a
trial court can strike the party’s pleadings or render a judgment by default after notice
and hearing. TEX. R. CIV. P. 215.2(b)(5), 215.3. Any sanction by the trial court that
is based on the party’s conduct during discovery, and by which a trial court
adjudicates a party’s claim without regard to the merits, constitutes a “death-penalty”
sanction. State v. Bristol Hotel Asset Co., 65 S.W.3d 638, 647 (Tex. 2001).
      Discovery sanctions serve three purposes: (1) to secure compliance with
discovery rules; (2) to deter other litigants from similar misconduct; and (3) to
punish parties for violating the discovery rules. Response Time, Inc. v. Sterling
Commerce (N. Am.), Inc., 95 S.W.3d 656, 659 (Tex. App.—Dallas 2002, no pet.).
When an appellate court determines whether sanctions imposed are just, it is to

                                           4
consider (1) whether there is a direct relationship between the offensive conduct and
the sanctions imposed and (2) whether the sanctions are excessive. TransAmerican
Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991). Further, the trial court
should always consider and test lesser sanctions before imposing case-determinative
sanctions. Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 849 (Tex. 1992).
      TransAmerican, like the present case, involved the imposition of a case-
determinative sanction. The court discussed some of the restraints on such extreme
punishment:
      Discovery sanctions cannot be used to adjudicate the merits of a party’s
      claims or defenses unless a party’s hindrance of the discovery process
      justifies a presumption that its claims or defenses lack merit. However,
      if a party refuses to produce material evidence, despite the imposition
      of lesser sanctions, the court may presume that an asserted claim or
      defense lacks merit and dispose of it. . . . Sanctions which are so severe
      as to preclude presentation of the merits of the case should not be
      assessed absent a party’s flagrant bad faith or counsel’s callous
      disregard for the responsibilities of discovery under the rules.

TransAmerican, 811 S.W.2d at 918 (citations omitted).
      Pursuant to Trishe’s timely request, the trial court filed findings of fact and
conclusions of law. Although findings of fact and conclusions of law extend the
appellate timetables under Rule 26.1(a)(4) of the Texas Rules of Appellate
Procedure, they are not required after a judgment rendered as sanctions. IKB
Indus. v. Pro-Line Corp., 938 S.W.2d 440, 443 (Tex. 1997). Thus, an appellate court
need not give findings of fact made after a judgment rendered as sanctions the same
deference as findings of fact made after a trial on the merits. Id. at 442; see Chrysler,
841 S.W.2d at 852. In this case, however, the trial court’s findings are helpful
because they are supported by the record and are “specifically tied to an appropriate

                                           5
legal standard,” the standard set forth in TransAmerican. See Chrysler, 841 S.W.2d
at 853.
      Among the pertinent facts found by the trial court, excluding record
references, are the following:
      4. Trishe Defendants sold the wind projects within the terms of the
      Consulting Agreement.

             ....

      6. Trishe Defendants did not pay [Hilliard] the percentage of the sales
      price for the wind projects and failed to pay for substantial consulting
      and land management fees and expenses to [Hilliard].
      7. [Hilliard] filed suit on January 9, 2015[,] against the Trishe
      Defendants alleging failure to pay [Hilliard] according to the
      Agreements as the projects had been sold.

      8. The sales price of these projects and amounts received are relevant
      and the ultimate issue of [Hilliard’s] cause of action and the Trishe
      Defendants had the sales and financial information available to the
      Trishe Defendants.

      9. The sales documents designated that funds from the sale were to be
      deposited in an account at Citibank. The Trishe Defendants never
      produced any documentation from any account at Citibank.

      10. On April 24, 2015, [Hilliard] served Requests for Production on
      [Trishe] seeking the sales and financial documents relating to the sale
      of the wind projects and amounts received and amounts to be received
      during the completion of the phases.

      11. On June 25, 2015, [Hilliard] served further Requests for Production
      on [Trishe] seeking the financial documents relating to the sale of the
      wind projects and the amounts received by the Trishe Defendants.

      12. Despite these requests, Trishe Defendants failed to provide the
      relevant information to [Hilliard].

                                         6
13. On March 31, 2016, . . . [Trishe] acknowledged the request for the
financial documents and promised to provide the documents.
[Hilliard’s counsel twice sent correspondence to Trishe’s counsel again
seeking the financial documents which had been previously requested
and promised.]
      ....

17. On August 11, 2016, the Court ordered the Trishe Defendants to
produce certain records [and sanctioned Trishe $1,200]. The Trishe
Defendants flagrantly and in bad faith failed to comply with the Court’s
order.

      ....
19. Trishe Defendants produced a few documents, but those documents
were intentionally redacted to hide the relevant information.

20. Trishe Defendants were intentionally attempting to conceal whether
Trishe Defendants had received in excess of $23,000,000.00 from the
sale of these projects.
21. On November 2, 2016, this Court granted sanctions prohibiting
Trishe Defendants from conducting discovery, payment of legal
expenses and struck Trishe Defendants’ pleadings.

22. Despite these escalating sanctions, Trishe Defendants disregarded
the orders to produce the sales and financial information.

      ....
24. The discovery abuses are the result of the actions of the party Trishe
Defendants and not of their legal counsel.
      ....

26. The discovery withheld constitutes material evidence related to
Trishe Defendants liability in the case.

                                    7
      27. Despite all of the sanctions, Trishe Defendants continued to
      repeatedly and systematically refuse to comply with the Court Orders
      and refused to produce the financial information.

             ....

      29. The wind projects were sold, [Hilliard] was due its share of the
      proceeds and the Trishe Defendants simply would not disclose the truth
      regarding the sales proceeds.
      30. Despite imposing lesser sanctions on Trishe Defendants, no lesser
      sanction imposed by the Court was effective to obtain compliance with
      the Court’s Orders.

      31. Trishe Defendants sold the wind projects and owed [Hilliard] a
      share of the proceeds. Trishe Defendants raised no meritorious defense
      as to why [Hilliard] was not entitled to its share of the proceeds. Trishe
      Defendants’ only defense was to refuse to divulge the financial and
      sales information.

      32. Trishe Defendants’ conduct [was] intentional.
      Among the documents sought by Hilliard, and not produced by Trishe, were
unaltered and complete bank statements and schedules that would provide
information about the value and price of the wind farm sales. Trishe failed to
produce the requested information, despite Hilliard’s repeated requests and the trial
court’s orders. The requested information was relevant to Trishe’s liability on
Hilliard’s claims, which necessarily required a showing of how much Trishe was
paid for the wind farms. Trishe correctly argues that Hilliard failed to prove its
damages. But that failure is because of Trishe’s conduct: Without the requested
documents and information, Hilliard was unable to prove its claims because the
calculation of Hilliard’s fee would be impossible.

                                          8
      At oral argument before this court, Trishe’s counsel acknowledged that
Trishe’s conduct prevented Hilliard from getting the information Hilliard sought.
Trishe admits as much in its brief:
      Trishe’s conduct may have left Hilliard unable to prove whether it was
      entitled to additional damages from Trishe’s sale of the Ohio wind
      farm. And Hilliard’s potential damages might have reached $2.1
      million (the trial court record contains no evidence that Trishe received
      any milestone payment, so no one can know Hilliard’s damages, if any,
      based on this record).

Trishe argued, however, that Hilliard chose the wrong tool to obtain judicial relief.
We disagree.
      Trishe also asserts that the evidence conclusively establishes that Trishe’s
counsel is to blame for some of the discovery abuses in this case. Trishe contends,
therefore, that the trial court abused its discretion when it assessed the full sanction
amount against Trishe.
      The Texas Rules of Civil Procedure provide that a party, his attorney, or both
may be subject to sanctions. TEX. R. CIV. P. 13, 215.1(d), 215.2(b)(8). However,
the trial court must determine whether the party or its counsel is to blame for the
discovery abuse; the trial court should not punish a party for its counsel’s conduct in
which it is not implicated. TransAmerican, 811 S.W.2d at 917. Here, Trishe’s trial
counsel stated affirmatively on the record that he asked Trishe for all the bank
account information and that he “didn’t redact anything from any of the documents.
If [Trishe] did, they certainly didn’t tell me they were going to or ever ask me about
it.” Trishe’s trial counsel also pointed out that the lack of discovery compliance was
Trishe’s fault:
            This isn’t an unwillingness to participate in litigation. The reality
      and the cause for this tardiness is the unfortunate reality of Trishe’s
      circumstances. Thanks in large part to this lawsuit, this company is

                                           9
      essentially not functioning. They have no day-to-day employees, no
      one minding the store, so to speak, and it’s essentially why they were
      late.

             It took forever to finally get someone to pay attention. In fact, it
      specifically took me asking for their consent to my Motion to Withdraw
      before somebody finally said, okay, I’ll -- in addition to this other job
      I’m doing now, I’ll sort of take back up the reins on this.
Given these statements from Trishe’s trial counsel, we cannot say that the trial
court’s finding—that Trishe, not its trial counsel, was to blame for the discovery
abuses—was arbitrary, unreasonable, or without reference to any guiding rules or
legal principles.
      Trishe points us to Lopez v. La Madeleine of Texas, Inc., in which the Dallas
Court of Appeals reversed the trial court’s decision to assess as sanctions the amount
sought by the plaintiff as damages. There, the court held that the “requested sanction
does not compensate [plaintiff] for expenses incurred in the litigation caused by the
abuse, nor is it discovery expenses or court costs. Rather, we agree . . . that [the]
requested sanction is compensation for his personal injury claim.” 200 S.W.3d 854,
865 (Tex. App.—Dallas 2006, no pet.).           However, Lopez centered on Rule
215.2(b)(2), which authorizes the trial court to impose sanctions in the form of
discovery expenses or court costs. See id. We do not quarrel with that general
proposition. However, in this case, the trial court also granted Hilliard’s default
judgment in accordance with Rule 215.2(b)(5). Our decision in Crystal River Oil &
Gas, L.L.C. v. McClymond, Inc., No. 11-00-00158-CV, 2000 WL 34234440 (Tex.
App.—Eastland Nov. 30, 2000, no pet.) (not designated for publication), is more
analogous.
      Similar to Crystal River, this case involves case-determinative sanctions and
the previous imposition of lesser sanctions to no avail. Further, Hilliard needed the

                                          10
withheld documents in order to know whether Trishe had actually been paid and,
thus, whether Hilliard was owed its fee, as well as how much that fee would be.
Similarly, Trishe’s defense that Trishe had not yet been paid would have been solved
by the production of the financial statements, yet Trishe categorically refused to
produce them.
      Based on the record and the trial court’s findings, the sanctions imposed met
both criteria set forth in TransAmerican. The trial court determined that Trishe, not
its attorney, was at fault for failing to respond properly to Hilliard’s discovery
requests and to the trial court’s orders; Hilliard could not prove its damages because
of Trishe’s conduct. Thus, there is a direct relationship between the offensive
conduct and the sanctions imposed. Further, the trial court found that Trishe
“flagrantly and in bad faith” refused to produce the documents and comply with the
trial court’s orders. The record supports these findings. Finally, the trial court
ordered lesser sanctions against Trishe before granting default judgment. The
sanctions are not excessive. The trial court did not commit an abuse of discretion.
We overrule Trishe’s first issue on appeal.
      In its second issue, Trishe argues that the trial court abused its discretion when
it awarded Hilliard $33,454.98 in attorney’s fees as a discovery sanction because
that figure represents all fees in the lawsuit through the date of the first sanctions
motion. We agree.
      Rule 215.2(b)(8) authorizes a trial court to award “the reasonable expenses,
including attorney fees, caused by the failure” to respond.                   TEX. R.
CIV. P. 215.2(b)(8). While Trishe’s appeal was pending before this court, the
Supreme Court of Texas issued Nath v. Texas Children’s Hospital, 576 S.W.3d 707
(Tex. 2019) (per curiam), which clarified the evidentiary standard of proof for
attorney’s fees awarded as a sanction. See Nath, 576 S.W.3d at 710 (“Although this

                                          11
case deals with attorney’s fees awarded through a sanctions order, the distinction is
immaterial because all fee-shifting situations require reasonableness.”). After Nath,
proof of reasonableness is required when attorney’s fees are assessed as sanctions.
See id. In Nath, the court explained that, “[b]efore a court may exercise its discretion
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.” Id. at 709
(quoting PR Invs. & Specialty Retailers, Inc. v. State, 251 S.W.3d 472, 480 (Tex.
2008)). Thus, the party that seeks a sanction of attorney’s fees bears the burden “to
put forth some affirmative evidence of attorney’s fees incurred and how those fees
resulted from or were caused by the sanctionable conduct.” Id. (quoting CHRISTUS
Health Gulf Coast v. Carswell, 505 S.W.3d 528, 540 (Tex. 2016)).
      Generally, although contemporaneous billing records are not required to
prove up attorney’s fees, legally sufficient evidence to establish a reasonable and
necessary fee should include a description of the particular services performed, who
performed the services, approximately when the services were performed, the
reasonable amount of time required to perform the services, and the reasonable
hourly rate for each attorney performing the services. See Rohrmoos Venture v.
UTSW DVA Healthcare, LLP, No. 16-0006, 2019 WL 1873428, at *20, *22, *23
(Tex. Apr. 26, 2019) (cited in Nath, 576 S.W.3d at 710 (“[T]he standard for fee-
shifting awards in Rohrmoos likewise applies to fee-shifting sanctions.”)).
      In its motion for sanctions, Hilliard argued that “a large portion of Plaintiff’s
legal fees have been devoted to the pursuit of the discovery process” and that Hilliard
was “unable to pursue its claim” due to the refusal to produce the records. At the
hearing, Hilliard’s counsel gave a cursory description of her firm’s legal bills but
failed to explain what portion of those bills was related to Trishe’s discovery abuses,

                                          12
the sanctionable conduct in this case. Hilliard’s counsel also did not provide enough
information to meet the requirements articulated by the Supreme Court of Texas in
Nath and Rohrmoos. Hilliard’s evidence lacks the substance required to uphold a
fee award and, thus, is legally insufficient. See Nath, 576 S.W.3d at 709–10;
Rohrmoos, 2019 WL 1873428, at *25. We note that neither the trial court nor the
attorneys had the benefit of Nath when this case was heard in the trial court. Further,
the attorneys did not have the benefit of Nath when they briefed this case.
      We sustain Trishe’s second issue and reverse the trial court’s sanction award
of $33,454.98 in attorney’s fees. However, in light of Nath, we remand the case to
the trial court in the interest of justice for further proceedings limited to a
determination of Hilliard’s claim for attorney’s fees as related to its sanction claim.
See TEX. R. APP. P. 43.3(b).
      In its third issue, Trishe asserts that the trial court erred when it awarded
summary judgment to Hilliard for contractual interest on success fees. We review a
trial court’s summary judgment de novo. KMS Retail Rowlett, LP v. City of Rowlett,
No. 17-0850, 2019 WL 2147205, at *3 (Tex. May 17, 2019). In our review of a
traditional motion for summary judgment, we consider the evidence in the light most
favorable to the nonmovant, indulging every reasonable inference in favor of the
nonmovant and resolving any doubts against the movant. Id. To prevail on a
traditional motion for summary judgment, the movant must show that there is no
genuine issue of material fact and that it is entitled to judgment as a matter of law.
TEX. R. CIV. P. 166a(c); KMS Retail Rowlett, 2019 WL 2147205, at *3.
      In its motion for partial summary judgment, Hilliard sought 1.5% interest per
month on the two unpaid success fees. The trial court granted Hilliard’s motion and
awarded 1.5% interest on the Minnesota wind farm success fee and 1.5% interest on

                                          13
the Ohio wind farm success fee. Trishe asserts that those awards are improper. We
agree.
         We begin our analysis with the express language of the contract. If a written
contract is so worded that it can be assigned a certain or definite legal meaning or
interpretation, it is not ambiguous, and we will construe the contract as a matter of
law. Eagle Oil & Gas Co. v. TRO-X, L.P., 416 S.W.3d 137, 144 (Tex. App.—
Eastland 2013, pet. denied) (citing Coker v. Coker, 650 S.W.2d 391, 393 (Tex.
1983)).
         The parties structured their contract in such a fashion as to make its interest
provisions inapplicable to success fees. There is no provision in the contract in
which the parties provided for interest on success fees. The parties did provide for
late payment charges on certain past-due amounts, but those provisions do not apply
to success fees. The parties provided for success fees in a different section of the
contract, a section that bears the title “Compensation.” The provision that concerns
payment of success fees contains no reference to any invoices by Hilliard. In the
success fee provisions of the contract, the parties instead provided that “[Hilliard]
shall be paid [each Success Fee] prorata on the basis of the cash as and when received
[by Trishe as a result of the sale of a project].” The parties did not make any
provision for the payment of interest on unpaid success fees. The only provision
relating to interest is contained in the section of the contract covering expenses, and
the parties did not provide for that same charge in the section of the contract that
governs success fees.
         Hilliard argues that the plain language of the contract reveals that there is no
limitation on contractual interest. Hilliard points out that “[t]he interest provision in
the [contract] states: ‘A late payment charge of 1.5% per month shall be payable on
any outstanding balances.’” Hilliard further asserts: “There is no limitation as to

                                            14
which outstanding balances shall incur the fee. Simply put ‘any’ means ‘any.’”
However, Hilliard’s argument ignores the first sentence of that very provision, found
in the expenses section, which reads: “[Trishe] shall pay all invoices within thirty
(30) days of the receipt thereof.” Thus, in context, the interest provision of 1.5%
would apply to the invoices for billed expenses that go unpaid, not to success fees
as Hilliard argues. “Any” refers to outstanding balances, and under the contract, an
outstanding balance would refer to what is owed on Hilliard’s invoices for expenses,
not to the success fee. As we have said, success fees are covered in a different
section of the contract. Therefore, the trial court’s grant of summary judgment to
Hilliard for contractual interest on success fees under the parties’ contract was
improper. We sustain Trishe’s third issue.
        We reverse the judgment of the trial court insofar as it provides for the award
of $33,454.98 in attorney’s fees and for the accrual of 1.5% interest on the Ohio
success fee and the Minnesota success fee, and we remand those matters to the trial
court for further proceedings consistent with this opinion. By our ruling, we are not
to be taken as condoning Trishe’s discovery abuses as found by the trial court. In
all other respects, we affirm the judgment of the trial court.

September 6, 2019                                                  JIM R. WRIGHT
Panel consists of: Bailey, C.J.,                                   SENIOR CHIEF JUSTICE
Wright, S.C.J.,1 and Dauphinot, S.J.2

Willson, J., and Stretcher, J., not participating.

        1
          Jim R. Wright, Senior Chief Justice (Retired), Court of Appeals, 11th District of Texas at Eastland,
sitting by assignment.
        2
         Lee Ann Dauphinot, Senior Justice (Retired), Court of Appeals, 2nd District of Texas at Fort
Worth, sitting by assignment.

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