» Blog

Texas High Court Holds Limitation-Of-Liability Clause Can Effectively Bar a Party From Obtaining Punitive Damages

In November 2018, the state supreme court issued a written opinion in a Texas breach of contract case discussing whether a clause purporting to limit the availability of punitive damages in a contract between two business was enforceable. Ultimately, the court concluded that the term was enforceable and reversed the lower court’s award of punitive damages.

According to the court’s opinion, the plaintiffs planned to purchase an aircraft from the defendant manufacturer, Bombardier. The nature of the transaction was somewhat complex in that it involved several purchasing companies and subsidiaries; however, in essence, the transaction was for the sale of an aircraft.

During negotiations, Bombardier required the plaintiffs to execute a management agreement so that Bombardier could handle preliminary matters such as inspection and registration of the aircraft. The contract contained a clause stating that neither party could be held liable to the other party for any “indirect, special or consequential damages and/or punitive damages for any reason, including delay or failure to furnish the aircraft or by the performance or non-performance of any management services covered by this Management Agreement.”

While Bombardier marketed the plane as new, the aircraft’s engines were previously installed on other planes. When the plaintiffs found this out, they filed several claims against Bombardier, including a claim for punitive damages. The case proceeded to trial, and the jury awarded $2,694,160 in actual damages for fraud and $5,388,320 in exemplary (punitive) damages.

Bombardier appealed, making several arguments including that the award for punitive damages was improper based on the valid agreement signed by the plaintiffs. Initially, the court agreed with the plaintiffs that, absent the agreement, punitive damages would have been appropriate. However, the court explained that it has “long recognized the strongly embedded public policy favoring freedom of contract,” and that the parties in this case indisputably entered into a contract agreeing to waive any right to pursue punitive damages.

The plaintiffs argued that Bombardier knew that the engines were not new and violated a fiduciary duty when it failed to inform them that the engines were used. However, the court held that the plaintiffs’ general claim that Bombardier fraudulently concealed this information did not specifically mention the violation of a fiduciary duty. Thus, the court did not consider whether the violation of a fiduciary duty eliminated any protection the contract provided to Bombardier. Instead, the court held that any fraud on Bombardier’s part did not void the agreement because the court must “respect and enforce terms of a contract that parties have freely and voluntarily entered.”

Contact an experienced business litigation attorney

When success matters, every decision you make for your business is important. Choosing which Austin business litigation firm to handle the unique issues your business faces is no exception. At the Law Offices of Gregory D. Jordan, we have over 25 years of experience assisting businesses in dealing with the full range of issues they confront, including breached contracts and business fraud cases. We also provide guidance and advice to companies looking to anticipate their future needs. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

Are Texas Arbitration Agreements Between Employers and Their Employees Always Enforceable?

Over the past decade, it has become common to see arbitration agreements in a variety of business agreements. Indeed, arbitration is the preferred method for many businesses to resolve all kinds of Texas business disputes, whether a dispute is between a company and its customers, employees, suppliers or another business.

Recently, forced arbitration clauses have come under fire, with appellate courts across the country hearing a wide range of cases involving the circumstances in which arbitration agreements are valid. Last year, the U.S. Supreme Court issued an opinion strengthening a business’ ability to compel arbitration based on a validly executed arbitration agreement.

The case consisted of three separate cases that were consolidated before the Court. In each case, employees signed agreements before or during their employment, agreeing that they would resolve any claims that arose during their employment individually and through arbitration, rather than through the court system.

Each of the three cases was based on a dispute that is not relevant to the issue at hand. What is important is that an employee filed a claim against his employer in federal court. The case was filed as a “class action lawsuit,” meaning that a single employee filed the claim, but did so on behalf of other similarly situated employees. The employers sought dismissal of the plaintiff’s claims against them, asking the court to enforce the agreement in which the employees agreed to resolve their grievances through arbitration.

The employees argued that the clause in the agreement requiring they resolve their claim individually violated their rights under the National Labor Relations Act (NLRA). Specifically, the right to take “concerted action” with fellow employees against an employer. The lower court agreed with the employees. On appeal to the Ninth Circuit, the court added that, because the agreement violated the NLRA, the entire contract was invalid, including the arbitration portion of the agreement. The employers appealed the case to the United States Supreme Court.

In its opinion, the Court noted that the terms of the agreement were clear in that the contract called for employees’ claims to be resolved individually and through arbitration. The Court acknowledged that the National Labor Review Board (the federal agency that is responsible for enforcing the NLRA) believed that compelling individualized dispute resolution was a violation of the NLRA. However, the Court added that this was a recent change in the National Labor Review Board’s policy.

The U.S. Supreme Court ultimately reversed the lower courts’ decisions, notwithstanding the National Labor Review Board’s agreement with the employees. The Court explained that the Federal Arbitration Act (FAA) instructs federal courts “to enforce arbitration agreements according to their terms” and that the NLRA “does not mention class or collective action procedures.” Thus, the Court determined that the NLRA does not “displace” the FAA.

The Court reasoned that, when presented with two acts of Congress that could possibly be read to conflict with one another, if possible, the Court must read both in a manner such that there is no conflict. Thus, the Court based its decision on the fact that the FAA explicitly condones individualized dispute resolution and the NLRA does not confer a right to pursue a class action lawsuit.

Are you involved in a Texas business dispute?

When success matters, every decision you make is important. Choosing which Texas business law firm will handle your case is no exception. At the Law Offices of Gregory D. Jordan, we have over 25 years of experience assisting businesses in dealing with the full range of issues they confront, including breach of contract, employment law and franchise litigation. To learn more about how we can help your business through the issues it faces, call 512-419-0684 to schedule a consultation today.

The Duties of the Holder of the Executive Right to Minerals

In the case of Texas Outfitters, LLC vs. Nicholson, the Texas Supreme Court examined the holder of the executive right’s duty of utmost good faith and fair dealing to non-participating mineral interest owners. In Texas Outfitters, the holder of the executive right to lease minerals refused to sign a lease which the owner of a non-participating mineral interest alleged it should have signed.

A company called Texas Outfitters, LLC purchased over a thousand acres, including 1/24th of the mineral rights, as well as the exclusive right to lease 11/24th of the mineral rights retained by the sellers of the property. At the time, the land was not leased and had no oil and gas production. Approximately a decade after the sale of the land, the owners of the remaining 50 percent of the minerals leased to El Paso Oil Exploration and Production Company. El Paso made the same offer to Texas Outfitters; however, Texas Outfitters refused to lease even though the sellers made it clear to Texas Outfitters that they wanted Texas Outfitters to lease. Ultimately, the sellers filed suit against Texas Outfitters for breaching its duty of good faith and fair dealing as the executive holder of the right to lease the mineral rights. The sellers sought damages in the amount that they lost due to Texas Outfitters refusing to lease the mineral rights.

At a bench trial, the trial court found in favor of the sellers, holding that Texas Outfitters did not act in good faith and breached its duty as the holder of the executive right. The case was eventually appealed to the Texas Supreme Court. The Court looked at the history of the executive right and ultimately held that, in this case, Texas Outfitters breached its duty of good faith and fair dealing where it engaged in acts of self-dealing to the benefit of its interest in the surface estate and to the detriment of the owners of the mineral estate. The Court stated that Texas Outfitters, in refusing to lease the mineral rights, did so “in acts of self-dealing that unfairly diminished the value of the non-executive interest.” This action “crossed the line” bringing Texas Outfitters, LLC into the realm of breaching its duty to the non-executive rights holder.

Attorney Gregory D. Jordan is an oil and gas attorney with offices in the Austin area. To learn more, visit http://www.theaustintriallawyer.com/

Law Offices of Gregory D. Jordan
5608 Parkcrest Drive, Suite 310
Austin, Texas 78731
Call: 512-419-0684

Texas fines a cryptocurrency investment firm

An investment firm that marketed cryptocurrency in Texas has been fined and ordered to provide restitution to its investors. Texas security regulators reported that Mintage Mining LLC has agreed to pay the penalties and restitution. This agreement came on the heels of an 18 month long investigation by Texas security regulators of what they characterized as increasing fraud in the new cryptocurrency industry.

The Texas State Securities Board had initially alleged that the company was committing fraudulent and misleading advertising in relation to the trading and the creation (“mining”) of cryptocurrencies such as Bitcoin. The Board also alleged that one of Mintage Mining’s affiliates was illegally offering its members commissions if they recruited more members.

Mintage Mining LLC, with its headquarters in Utah, is the first cryptocurrency investment firm to be ordered to pay fines and restitution in the state of Texas. The company was fined $25,000 and the restitution to investors was approximately $100,000, as estimated by the company. “We got this one stopped early,” said Joe Rotunda, director of enforcement at the Texas State Securities Board. “This thing would have continued to sell and could have spread like wildfire throughout Texas. It didn’t have that opportunity.”

A spokesperson for Mintage Mining LLC stated that the company was agreeing to the order of the Texas State Securities Board in order to clear its name and argued that the order did not mention fraud charges but merely a registration violation. The company spokesperson argued that the new “digital coins” were not financial products that actually needed to be registered in the state.

The Texas State Securities Board has reported that there has been a significant increase in potential cryptocurrency fraud in the state. The instances of alleged fraud in this burgeoning industry have arguably now surpassed the claims of fraud in the oil and gas industry, real estate industry and stock trading industries.

Jury awards no damages in sex discrimination trial against Baker Tank

A Federal jury awarded no damages to a plaintiff who sued her employer for sexual discrimination and harassment. The trial was held in Marshall, Texas’ Federal Courthouse and was presided over by U.S. Chief District Judge Rodney Gilstrap. The trial lasted three days.

The case began when the plaintiff filed a complaint with the Equal Employment Opportunity Commission (EEOC) alleging her employer, Smith County Baker Tank, ignored her complaints of sexual harassment, discrimination and a hostile work environment. The lawsuit alleged violations of Title VII, the Lilly Ledbetter Fair Pay Act, the Equal Pay Act and the Texas Employment Discrimination Act. The lawsuit claimed that throughout the plaintiff’s employment at Baker Tank’s Arp facility, she earned less than her male co-workers with similar jobs and was also subjected to sexual harassment and a hostile work environment. She alleged that male co-workers and supervisors would make sexist and inappropriate comments and engage in inappropriate behavior in her presence.

The plaintiff was seeking punitive damages between $48,000 and $480,000 as well as $15,000 in compensatory damages for lost pay. Further, the plaintiff sought damages for physical and emotional pain due to the discrimination and hostile working environment in the amount of $50,000 to $150,000, which represented her yearly salary for the three years she worked at Baker Tank.

The jury denied the plaintiff’s pay gap claim and found that she did not prove that she was paid less than her male counterparts because she was female. The jury also found that although she did prove that more than one co-employee harassed her because of her sex, this harassment did not rise to the level of creating a hostile work environment that would alter the terms of her employment. Therefore, the jury awarded no damages to the plaintiff.

Attorney Gregory D. Jordan is an employment attorney who represents employers and employees with offices in the Austin area. To learn more, visit http://www.theaustintriallawyer.com/

Texas jury awards $60 million in oil and gas royalty fraud case

A jury in Roby, Texas has awarded a group of oil and gas investors $60 million, making it the largest verdict ever in Fisher County. The case stemmed from a fraudulent scheme concocted by two men to cut other partners out of profits from the sale of oil and gas leases, thus keeping the profits for themselves. The fraud was allegedly planned and performed by attorney Kerwin Stephens and oilman Chester Carroll.

The issue began when Richard Roughton and Lowry Hunt, along with other investors, acquired mineral and property rights to 25,000 acres in the Three Finger/Black Shale region of the Cline Shale in West Texas. Roughton then brought in as additional investors his attorney, Stephens, and Roughton’s best friend, Carroll. They created a partnership called the Alpine Group. The leases were then transferred from Roughton and Hunt to the Alpine Group. It was then that Stephens and Carroll allegedly conspired to cut the other partners out of any profits obtained from subsequently selling the leases.

Stephens and Carroll were accused of fraudulently convincing Roughton and Hunt to lower their percentages of ownership in the leases, indicating to the two that Stephens and Carroll were also lowering their interests, but they actually did not. This was done by allegedly convincing Roughton and Hunt that there was no buyer for any of the leases, but actually there was a buyer lined up by Stephens and Carroll. Instead of lowering their ownership interest, Stephens and Carroll purportedly increased their ownership interest in the leases. Then, unbeknownst to Roughton and Hunt, Stephens and Carroll allegedly sold an additional 17,000 acres of leases to a buyer, splitting the money for themselves.

The verdict on behalf of Hunt and Raughton includes $3 million in actual damages plus more than $7 million in returned profits and $18 million in punitive damages. Two additional plaintiffs in the trial, Tiburon Land and Cattle and Trek Resources, both of Dallas, were awarded $33.1 million, including $24 million in actual damages and $9 million in exemplary damages.

Attorney Gregory D. Jordan is an oil and gas litigation attorney with offices in the Austin area. To learn more, visit http://www.theaustintriallawyer.com/

Co-owner dispute at Spider House in Austin, Texas gets serious

The Spider House Cafe and Ballroom has been a famous Austin college hang-out since it opened its doors in 1995. Most customers, however, probably do not know of the legal battle between the two co-owners of the business, John Dorgan and Conrad Bejarano. In October of 2018, Dorgan filed a lawsuit against Bejarano and an employee of Spider House, Jeremy Rogers. The lawsuit accuses both men of libel and slander against Dorgan and Spider House. The lawsuit has brought to light many instances of alleged impropriety in the business and on the premises.

The lawsuit stems from a social media post by Rogers and his wife asserting that Dorgan sexually assaulted his wife in 2014. A day after the post, Bejarano stated that he was banning Dorgan from the property, of which he is still a co-owner. In the lawsuit, Dorgan is seeking monetary damages as well as a declaratory judgment that Bejarano has no legal authority to ban Dorgan or constrain his ownership. There is no record of Bejarano filing any kind of legal document restricting Dorgan from the property.

Motion to Dismiss
On December 21, 2018, Bejarano filed a motion to dismiss Dorgan’s lawsuit, arguing that the lawsuit is inhibiting Bejarano’s free speech. The motion relies on the Texas Citizens Participation Act, which specifically protects free speech made in connection with a “matter of public concern.” Bejarano also filed an answer to the lawsuit denying the substantive claims.

Attorney Gregory D. Jordan is a business litigation and corporate law attorney with offices in Austin who has handled matters under the Texas Citizens Participation Act. To learn more, visit http://www.theaustintriallawyer.com/

Retaliation claim over firing that took place soon after workplace injury should have gone to jury

The close proximity in time between a construction worker’s termination and his filing of a workers’ compensation claim, along with other factors that called the employer’s justification into question, should have been enough to get the employee past the employer’s motion for a judgment in their favor, the U.S. Court of Appeals for the Fifth Circuit held recently in a retaliatory termination case.

Reversing the trial court in a case in which the worker was fired just 15 days after he injured himself in a fall from a scaffold, and 11 days after he filed a workers’ compensation claim, the court said that the worker had presented enough evidence to get his case to the jury. The court, in an opinion written by Judge Catharina Haynes, called the judge’s decision to direct a verdict in favor of the employer “unexplained and difficult to discern.”

The Texas Supreme Court, in Cont’l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 451 (Tex. 1996), set out a list of factors for trial courts to consider when deciding whether unlawful retaliation played a role in a termination following a workers’ compensation claim:

  • Did the manager making the decision on the termination have knowledge of the compensation claim?
  • Did the manager express a negative attitude toward the employee’s injured condition?
  • Did the manager fail to adhere to established company policies?
  • Is there evidence of discriminatory treatment in comparison to similarly situated employees?
  • Is there evidence that the stated reason for the discharge was false?

Here, the Fifth Circuit, without passing on the merits of the employee’s retaliation claim, found more than enough evidence to withstand the employer’s motion for judgment as a matter of law.

First, the firing took place two weeks after the injury, and the manager was aware of both the injury and the subsequent filing of a worker’s compensation claim.

Second, the manager failed to follow the company’s progressive discipline policy — he jumped from Step One (verbal warning) to Step Five (termination), skipping the intermediate steps.

Third, the manager expressed a negative attitude toward the employee, describing his injury as a “supposed injury” and his physical restrictions as “self-imposed.”

Fourth, the manager — who in fact was the employer’s safety officer and not the employee’s direct supervisor at the time of the accident — offered several, shifting explanations for why the employee was fired. The employee was initially verbally warned for failing to pick up paperwork, then later fired after the manager accused him of being profane and insubordinate on a single occasion. However, the company’s documentation of the firing mentioned only “Violation of Safety Rules” and “Violation of Company Policy/Practices.” It described the employee’s injury as an occasion in which the employee “took it upon himself to utilize a scaffold of which he was not trained or authorized to use.”

The court decided that the circumstances surrounding the employee’s termination were circumstantial evidence of retaliatory motive.

“[The employee] has presented evidence to support the notion that the stated reason for discharge was false,” the court ruled, sending the retaliation claim back to the lower court for retrial.

The case is Cristain v. Hunter Buildings and Manufacturing LP, No. 17-20667 (5th Cir., decided Nov. 14, 2018).

Disclosure requirements reach mailed, but not emailed, offers to purchase oil interests

A Texas statute requiring that offers to purchase oil rights contain a conspicuous, large-print disclaimer does not apply to emailed offers, according to a recent ruling from the Texas Court of Appeals in El Paso.

The court turned back several arguments why an arbitration clause in an agreement to purchase mineral interests was unconscionable, among them the lack of the statutorily mandated large-print disclaimer.

Texas Property Code, § 5.151, provides in relevant part:

A person who mails to the owner of a mineral or royalty interest an offer to purchase only the mineral or royalty interest . . . and encloses an instrument of conveyance of only the mineral or royalty interest and a draft or other instrument, as defined in Section 3.104, Business & Commerce Code, providing for payment for that interest shall include in the offer a conspicuous statement printed in a type style that is approximately the same size as 14-point type style or larger and is in substantially the following form:

By executing and delivering this instrument you are selling all or a portion of your mineral or royalty interest in (description of property being conveyed).

By its terms, Section 5.151(a) applies only to “mailed offers, not emailed offers,” Justice Yvonne T. Rodriguez wrote for a unanimous court. The court gave this limiting interpretation to the statute without analysis, though it appears to be the first time a Texas court has considered the question.

State law regulating real estate transactions marched into the twenty-first century with the 2005 Uniform Electronic Real Property Recording Act (Real Property Code § 15.001 et seq.) and 2007 Uniform Electronic Transactions Act (Business and Commerce Code § 322.001 et seq.), the latter declaring that if a law requires a record to be in writing, an electronic record satisfies the law.

The court’s ruling, if widely adopted, means that consumer protections found in Section 5.151 will not be traveling along. By restricting the statute’s reach to mailed offers, the court appears to have confined the state legislature’s command that offers to purchase mineral interests include a conspicuous disclaimer to the rapidly receding era of mailed, ink-on-paper transactions.

Even if the statute did apply to emailed offers, the court continued, the remedy is not rescission or a finding of unconscionability.

“Nothing about the text of this statute indicates that the Legislature intended for transactions like this one to be voidable, and nothing in the text of the statute excuses a party from his general duty under Texas contractual common law to read whatever instrument it is he is signing,” the court said.

Justice Rodriguez said that the remedy for a violation of Section § 5.151 is an award of $100 statutory damages or the difference in value between the amount paid for the mineral interest and its fair market value.

Along the way, the court invalidated language in the arbitration agreement eliminating punitive damages, finding that this restriction on available remedies violates Texas public policy. The court’s ruling is consistent with other rulings in this area, cf., Amateur Athletic Union of the U.S., Inc. v. Bray, 499 S.W.3d 96, 108-09 (Texas Ct. App., 4th Dist.—San Antonio, 2016).

The case is Ridge Natural Resources LLC v. Double Eagle Royalty L.P., No. 08-17-00227, (Texas Ct. App., 8th Dist.—El Paso, Aug. 24, 2018).

EEOC to United Airlines: Conduct outside the workplace can create harassment in the workplace

A case involving “revenge porn” photos of a flight attendant published online by a pilot for the same airline promises to illuminate an employer’s duty to take affirmative measures to protect employees against sexual harassment in the workplace.

According to a recent complaint filed by the Equal Employment Opportunity Commission against United Airlines, the airline’s duty to keep its workplace free from sexual harassment includes a duty to crack down on harassment occurring outside the workplace as well — at least when bad acts are brought to its attention, multiple times, over a period of several years.

The EEOC’s complaint alleges that United Airlines knew about the pilot’s “revenge porn” posts targeting the flight attendant but unlawfully did nothing about them.

“Employers have an obligation to take steps to stop sexual harassment in the workplace when they learn it is occurring through cyber-bullying via the internet and social media,” said Philip Moss, an EEOC attorney. “When employers fail to take action, they fail their workers and enable the harassment to continue.”

The EEOC’s complaint was a long time in coming, according to the government. According to the EEOC, the flight attendant filed three civil lawsuits against the pilot. She obtained restraining orders against him in 2009 and 2011. Reporting by the San Antonio Express-News indicated that the pilot settled these cases for $110,000.

The flight attendant also purportedly complained to United Airlines officials in 2011. No corrective action took place as a result of these complaints. The pilot continued to work at the airline.

In 2013, the flight attendant filed another complaint with United Airlines. According to the flight attendant, the pilot was continuing to post photos of her online, sometimes while on the job during layovers between flights. United Airlines investigated but, according to the EEOC, took no action “that could be reasonably calculated to be effective.”

The flight attendant next complained to the FBI, which arrested the pilot in 2015. Federal charges notwithstanding, the pilot remained actively employed at United Airlines until January 2016 when the airline granted him a long-term disability. He pleaded guilty to a federal stalking offense in June 2016 and retired with full benefits one month later.

In its complaint, the EEOC alleged that United Airlines’ failure to address that the pilot’s actions interfered with the flight attendant’s ability to perform her job. The EEOC asserts that United Airlines’ inaction subjected the flight attendant to a sexually hostile work environment, in violation of Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination based on sex, including sexual harassment. The EEOC is seeking a permanent injunction preventing the airline from allowing hostile work environment for women. It also seeks money damages for the flight attendant.

United Airlines told the San Antonio Express-News that its conduct did not violate federal law. “United does not tolerate sexual harassment in the workplace and will vigorously defend against this case,” the airline said through a spokesman.

The case is EEOC v. United Airlines, Inc., No. 5:18-cv-817 (W.D. Texas, complaint filed Aug. 9, 2018).

Website by SEO | Law Firm™, an Adviatech Company