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Can I Sue for Breach-of-Contract, Based on a Few Emails?

When you think of a typical business contract, you usually picture a few hard copy pages of terms and conditions, with space for the parties’ signatures and dates. In today’s world, that is not always true.  The recent case of Le Norman Operating LLC v. Chalker Energy Partners III, LLC et al., from Texas’s First District Court of Appeals in Houston, demonstrates this to a tee--and gives us a resounding “yes” to the title question.  So in looking at a potential breach-of-contract claim, do not blindly assume that no “signed” document means “no contract.��  Here’s a quick summary of that case and Texas law.

Background to the Chalker Case

The dispute in the case centered on Chalker’s alleged offer to sell oil and gas interests in Texas, which Le Norman Operating, LLC (”LNO”) was interested in purchasing.  The value of the interests exceeded $200 million.

During the bid process, the parties engage in negotiations via phone and in-person conversations, as well as email discussions involving various individuals at each company. After certain deadlines had passed, LNO believed it had entered into a binding agreement to make the purchase based on a series of emails.  Allegedly, only minor details remained to fully complete the transaction.

The Chalker Parties Dispute--and LNO’s Breach-of-Contract Claim

However, before anything was “signed” by any party, Chalker completed the sale to a third party (obviously, on better terms).  LNO then sued Chalker and others for breach-of-contract.  

In turn, the defendants filed a motion for summary judgment (”MSJ”).  In their MSJ, the defendants asked the trial court to declare as a matter of law that NO contract could have been created between LNO and the defendants.  In other words, the defendants wanted the trial court to declare that LNO had “no-evidence” of any contract to breach.

The trial court agreed with the defendants, and dismissed LNO’s breach-of-contract claims.  In doing so, the trial court essentially disposed of the case, finding that LNO had not presented any evidence concerning whether the parties had formed a contract to support its breach-of-contract claim.

LNO appealed, and landed in Houston’s First District Court of Appeals.  The 3-judge appellate court panel reversed the trial court’s MSJ ruling.  Reviewing the record, it found that the e-mails circulated among the parties were sufficient to raise a question about the existence of an agreement. The appellate court noted that “the e-mails that LNO alleges formed the basis of the agreement between the parties identified the sending parties in the “from” line and contained names or signature blocks identifying the senders,” and that this “raises at least a fact question regarding whether the e-mails were signed electronically.”

As such, the appellate court remanded the case back to the trial court so the case could proceed on LNO’s allegations that the parties created an agreement through the email exchanges, and that Chalker breached by selling the oil and gas interests to a third party.  Since the opinion came out, the defendants have filed a motion for rehearing en banc in front of the entire First District Court of Appeals (eight justices and one Chief Justice) to reconsider this ruling.

Lessons for Texas Litigants in Business Disputes

The Chalker decision offers several lessons for those considering or facing a breach-of-contract claim.

First, know your legal elements of your claim.  In general, Texas contract law requires certain elements before a legally binding agreement is created, including:

● Offer; ● Acceptance; ● Consideration; and, ● Mutual assent.

Second, be aware of the creative ways of proving (or disproving) these elements.  As the Chalker decision makes clear, that does not have to happen with a written, signed agreement--even for a $200 million deal.  In fact, any evidence that proves these elements may indicate an agreement, such as a party’s emails.

Third, do not become overly optimistic if a trial court grants your MSJ--or overly pessimistic if the trial court grants the other side’s.  The appellate courts do overturn motions for summary judgment - and can do so on grounds that may not have been clear to the trial judge.

Questions?

If you have questions about breach-of-contract or other business litigation claims, contact an experienced attorney.  Our office offers free consultations, so feel free to contact Will Denham, Of Counsel at Drucker Hopkins, LLP at 713-352-8888 or visit our website.

Friendly disclaimer: Nothing in this post is to be construed as legal advice or as establishing an attorney-client relationship.

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Texas Evidentiary Rules on Expert Testimony in Business Litigation

In complex business cases, expert testimony can be crucial to success.  The Texas Rules of Evidence and related court decisions give guidance to litigants about when and how that expert testimony can be presented to the jury.  Here’s a general overview of how those rules work, particularly in business litigation.

What is Expert Testimony?  And How Is Expert Testimony Different from “Fact” Testimony?

Texas courts are quick to note that a witness can provide “factual” testimony, “expert” testimony, or both.  In other words, when a person testifies at trial, the issue is not what kind of witness the person is (”fact” or “expert”), but what kind of testimony the witness intends to provide.  (Nevertheless, Texas generally mandates the disclosure of those who may offer “expert” testimony.)

As suggested above, there are two kinds of testimony.  First, there is “fact” testimony.  This kind of testimony is almost always proper (if relevant) because it conveys to the jury what the witness personally saw, heard, did, or experienced.  This kind of testimony is essential to any case because the jury must have facts to make its ultimate decision.

The second kind of testimony is “expert” testimony.  This type of testimony is not always proper because it provides an interpretive, explanatory, or conclusory role.  This type of testimony is not essential to every case because many cases do not need this kind of testimony. 

An Example of How Expert Testimony Differs from Factual Testimony in a Business Litigation Suit.

Let’s take a breach-of-contract case as an example.  Seller Sam decides to sell key computer parts--according to certain specifications--to Buyer Bill for $10 per part.  Sam knows that Bill intends to use each component to build and sell the world’s newest and best computer at a profit of $50/computer.

Sam and Bill sign an agreement, Bill pays Sam $1 million for the first 100,000 parts.  Sam delivers the parts, but they’re all faulty - and not up to specifications under the contract.  So Bill can’t sell any of his computers.

Obviously, Bill is furious.  He tries to convince Sam to settle, but to no avail.  So Bill sues Sam under a breach-of-contract theory.  At trial, Bill offers two kinds of testimony.  

First, he offers factual testimony.  This testimony includes the facts (that Bill observed) that (a) he and Sam signed an agreement and (b) Sam breached the agreement by delivering parts that didn’t match the agreement’s specifications.

Second, he offers expert testimony on his “lost profits.” Namely, Bill testifies that had Sam delivered the 100,000 parts as promised, he would have made $5,000,000 ($50 profit per computer, times 100,000 computers).  Here, Bill is clearly going beyond what he in fact saw, heard, or experienced.  He is testifying about a world that never happened--the world where he obtained the parts according to the order.  This is the world of expert testimony, divining from his experiences how things would have looked had the contract with Sam been followed properly. 

What Rules of Evidence Must Expert Testimony Satisfy? 

Generally, a Texas court will not admit expert testimony unless it satisfies several key requirements.  These requirements are generally found in Texas Rules of Evidence 701, 702, 703, and 704.  There is a tremendous amount of litigation surrounding these rules, particularly as they generally follow the Federal Rules of Evidence.

Overall, these rules require that the expert testimony be offered by someone qualified to provide the testimony, that the testimony be relevant to the facts of the case, and that the testimony be reliable.  Let’s look briefly at each of these requirements in turn.

First, the person must be qualified to offer the expert testimony.  Following our example above, before Bill tells the jury that he lost $5 million because of Sam’s breach of contract, the trial court will want to know: How is Bill qualified to give this opinion?  How much experience does he have in selling computers?  Did Bill ever earn a degree or write a book about selling computers?  What kind of relevant training does he have?

Second, the person must provide testimony that is relevant.  Again, before Bill testifies about lost profits, the trial court should require Bill to satisfy the evidentiary rules.  Here, the questions will center on whether this testimony would or would not help the jury decide the case.  For instance: Does the agreement already have in it a liquidated damages clause that already sets out that the maximum recovery Bill can win is $1 million?

Third, the person must provide testimony that is reliable. These questions are often the most difficult to answer: Did anything else cause Bill’s loss?  Can Bill explain how he would have sold 100,000 computers, when his competitors’ computers sold far less?  Or when his potential clients had already had all of their computer needs met?  Or when his biggest potential client declared bankruptcy the day after Sam defaulted?  In these instances, how can Bill reliably say that he would have sold 100,000 computers? 

Contact a Texas Business Litigation Attorney for More Information

Ultimately, an experienced lawyer can tell you more about whether and how you might benefit from expert testimony in your case.  While there are many benefits to having an expert on your side, it may not be justified or necessary to prevail.  If you have questions about use of experts in a litigation matter, please contact Will Denham, Of Counsel at Drucker Hopkins, LLP at 713-352-8888 or visit our website. 

Friendly disclaimer: Nothing in this post is to be construed as legal advice or as establishing an attorney-client relationship.

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Attorney’s Fees in Texas Business Litigation: Who Wins What?

In today’s market, the costs of business litigation in Texas are significant. Lawyer fees often eclipse the amount in controversy.  And for many of our clients who are new to litigation, the first question is: If we win, can we get our attorney’s fees back?  In other words, if the other side is wrong (as we way), can we make them pay our legal bills?

It is a common assumption that the winner in a lawsuit should recover the amounts expended for litigation.  This seems inherently fair to many of our less experienced clients.  Often, these clients believe (understandably) that the “loser should pay.”  And that is, in fact, the rule in several countries, including the U.K.

Texas Follows the American Rule: Generally, Litigants Pay Their Own Way.

But Texas follows the American rule: Litigants must pay their own legal costs - no matter what the outcome - unless there is a contract, statute, or other grounds for forcing the opposing party to do so.  In other words, the general rule is that you are responsible for your own legal fees, whether you win or lose.

But the caveats are important.  They highlight the most common grounds for obtaining an award of attorney’s fees in a successful commercial case.  Let’s briefly look at the first two of these exceptions: the “contract” exception, and the “statutory” exception.

Texas’s First Big Exception: Parties Can Contract Their Way to an Award.

First, if there is a contract, then the parties are generally free to decide (and agree upon) whether and how any party can win attorney’s fees in a dispute.  Lawyers often talk about this as an “allocation of risk” or “fee-shifting”.  This is accomplished according to the words and terms of the contract.

For instance, a contract may state simply: “Any party who prevails in a dispute against the other party concerning this agreement is entitled to--and shall be awarded--all of its attorney’s fees, costs, and expenses in litigation.”  Or the contract may go the other way: “The parties agree that no matter who prevails in any dispute concerning this agreement, no party shall ever be entitled to attorney’s fees, costs, and expenses and shall only be entitled to its actual damages.”

But these provisions, no matter how “plain” they may sound, can bring up their own difficulties.  For instance, it can sometimes be difficult to determine who prevails.  Let’s say that a seller sues for breach-of-contract and the buyer sues back (brings a counterclaim) for deceptive trade practices--and the jury agrees that both claims succeed?  What if both parties are awarded just $1--can that justify a fee award of $100,000?  Or what if the jury awards amounts that simply cancel each other out? 

Likewise, what happens when you have a verbal contract?  Verbal contracts are sometimes enforceable and sometimes not.  When they are, should you still be entitled to an award of attorney’s fees under the contract (assuming that the parties in fact agreed to that)?  Technically, the answer may be yes.  But good luck convincing a judge or jury that the parties had that understanding.

Texas’s Second Big Exception: Statutes, Especially Texas Civil Practices & Remedies Code Section 38.001.

Second, the Legislature has the power to make exceptions to the general American rule.  These statutory carve-outs are extremely varied.  For instance, the Texas Legislature has allowed successful litigants to win back their attorney’s fees in cases involving residential security deposits, deceptive trade practices, and human trafficking.

Section 38.001: The Basics.

But the most common statute relied on business litigation cases in Texas is Texas Civil Practice and Remedies Code, Section 38.001.  Almost invariably, one party to a commercial dispute in Houston will name this statute as a basis for recovering its attorney’s fees.

According to this provision, a person may seek reimbursement for attorneys’ fees if the underlying claim falls within certain categories, including:

● Services and labor; ● Materials; ● Fees related to overcharging for freight, or lost or damaged freight; ● Fatalities or injuries to livestock; ● A sworn account; or, ● An agreement, whether written or oral.

In other words, almost every time the parties had a contract, they can rely on Section 38.001 as a way for recovering their attorney’s fees.  (As noted above, the parties can agree to waive their rights under this statute by agreeing not to an award of attorney’s fees for the prevailing party.)

Section 38.001: A Few Twists.

Section 38.001 is not always as straightforward as litigants would imagine.

First, there are procedural hurdles for recovering fees under this section.  In other words, the payment for attorneys’ fees is not automatic.  Among other things, it is necessary for the claimant to have legal representation, and the claim for fees must be presented to the opposing party or an authorized agent.  In legal jargon, the claim must be “presented” properly.

Second, a person can only obtain attorney’s fees from an “individual or corporation.”  Texas courts have recently concluded that this language actually excludes other types of business organizations, such as LLCs and partnerships.  That means that the best defense for many corporate defendants facing an attorney’s fees request is, “Section 38.001 doesn’t apply to me.”

Somewhat amazingly, this defense seems to hold water, as both state and federal courts in Texas have concluded that Section 38.001 should be narrowly construed to include only individuals (persons) and corporations (”Inc.’s”).  Indeed, to hold a corporation liable for attorneys’ fees while not requiring payment from limited liability companies and partnerships seems to defy logic. As a result, a Texas state representative proposed legislation in 2016 via House Bill 744 that the statute be amended to include other types of legal entities. The measure passed the House in March 2017, but there is no assurance that the law will make it on the books in Texas.

Discuss Your Attorney’s Fees Question with a Texas Business Litigation Lawyer.

Whether you’re involved in a breach-of-contract, fiduciary duty, or deceptive trade practices case, you ought to know whether you can win your attorney’s fees back.  (It’s also nice to know if the other side can win its fees back, too.)  To do that, call us to help you.  Will Denham and Drucker Hopkins, LLP have the experience and knowledge to take on all types of business litigation matters.  You can also reach our legal team directly by calling our Houston, Texas office at 713-352-8888.  

Friendly disclaimer: Nothing in this post is to be construed as legal advice or as establishing an attorney-client relationship.

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After Harvey: What Bad Faith Insurance Claims Are--And Why You Should Care.

Lawyers tend to spout out incomprehensible jargon--and "bad faith insurance claims” probably falls into that category.  But if Hurricane Harvey hurt your home or your business, it’s essential that you understand what that term means.  Here’s a summary to help you through the process.

To start with, a little background: Every insurance contract (or “policy”) in some ways is like every other contract.  That is, there are two parties, and each one must do something in exchange for something else.

In insurance policies, the two parties are you (the “insured”) and the insurance company (the “insurer”).  At its most basic, you agree to pay money (or “premiums”) and to notify the insurer of any relevant losses (i.e., to “make a claim”) under certain deadlines and procedures.  In exchange, the insurer agrees to restore you to where you were before the damage (up to a certain, agreed cap: the “policy limits”).

For example: Let’s say you paid $200/month in premiums to protect your house from windstorm damage.  In exchange, the insurer (like State Farm or Farmer’s; we’ll call it “State Farmer’s”) has promised to pay you up to $25,000 in repair costs if your house is damaged by windstorm.  

So long as you’ve otherwise complied with the policy (and payment is usually your primary duty), State Farmer’s should promptly pay you (up to the policy limits of $25,000) for any windstorm damage to your damage that you claim.

But the insurer must do more than fulfill the letter of the policy.  Texas law says that they have a duty to act in “good faith” when dealing with you.

Continuing our example: Let’s say Hurricane Harvey caused $30,000 to your house in windstorm damage.  (Private insurance companies like State Farmer’s do not generally insure against flood damage: That’s part of what the government provides, so bad faith insurance claims really only matter against the State Farmer’s companies of the world.)  You then timely and properly make a windstorm claim to State Farmer’s.  

But instead of acting in “good faith,” State Farmer’s instantly says “NO” to your claim (i.e., “denies” your claim).  Or they “accept” the claim, but immediately offer you only $2500 to resolve the claim.  Or they eventually decide to pay you the policy limits of $25,000, but do so three years later.  All of these are signs that State Farmer’s has violated its duty of good faith--and in fact has acted in bad faith.

If your insurer acts in any of these ways, you likely have a “bad faith insurance claim”--in other words, a claim against your insurance company that they acted in bad faith.  Again, it’s not enough that the insurer offered to pay you something, or even (necessarily) that they offered you policy limits.  They must act reasonably toward you.

The comforting news is that if happens, lawyers can help, and will often work on contingency fee (so if you don’t win, they don’t get paid).  But of course, the faster you act, the better your advantage in fighting the insurer.  Please pass this along to others who may have been affected by Hurricane Harvey with windstorm claims.  

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3 Things You Must Do After Hurricane Harvey.

If your home or business get “Harvey-ed”, you’ll want to act quickly to maximize the value of any insurance claim.  Here are three things you must do:

*Document the damage thoroughly.  It’s not enough nowadays to say, “It wasn’t like this before.”  When you’re making an insurance claim, the insurance company is going to want to see photos, videos, and records.  So get your smartphone out, and start recording!

*Read through your policy carefully.  Insurance policies come in all shapes and sizes.  State Farm’s will differ from USAA’s, and GEICO’s may not look anything like Progressive’s.  So read through your policy to see what timelines and other requirements apply to your claim.

*Make your claim–and keep tabs on the insurance company.  Many people don’t know that Texas law requires insurance companies to act in “good faith” in resolving claims.  So if the insurance company immediately sends out a denial letter, or provides an exceptionally low “low-ball” offer, that’s a sign that the insurer is not fulfilling its duty.  So stay diligent!

If you’ve had trouble with your insurance company with a Hurricane Harvey-related claim, give us a call for a free consultation: 713.352.8888.  Or email us contact@willdenham.com.  

Good luck!

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Houston Personal Injury Lawyers Face Allegations of Barratry--Essentially, Paying for Clients

“Barratry” can mean several things, but essentially boils down to a lawyer’s improperly obtaining clients.  Picture the horrible stereotype of the “ambulance chaser” - that’s barratry.  So having ads up for services is fine.  But going to a stranger’s house (uninvited) to sign them up for a personal injury case is NOT.

Now a set of well-known Houston personal injury lawyers face new allegations of barratry, according to their former clients.  According to the lawsuit, the lawyers and/or their firms hired “teams of case runners who traveled all over the country as putative representatives” for “sham” financing companies, “offering accident victims money if they hired” certain lawyers for their claims.

The former clients also allege that these “runners often pretended to be family members to they could get into hospital ICU rooms to see victims, and appeared at funerals pretending to be acquaintances of the deceased victims.”

Worst of all, the allegations suggest that the runners targeted minority groups, who may not have known all of their rights or have been as capable of making the best decisions for themselves.

These allegations, if true, raise real issues for the lawyers.  First, these types of behavior clearly run afoul of a lawyer’s ethical duties.  Second, these behaviors may even carry criminal penalties.  Third, these behaviors cry out for a public demonstration against lawyers acting badly.  The public - particularly in less educated, more vulnerable areas - needs to know what lawyers can and cannot ethically do.

In the end, if you know of anyone being pressured by a “financing company” to agree to “investigate” a personal injury claim - be on high alert.  

And if you know someone who already has signed up with one of these companies (or the lawyers they inevitably send the clients to), let us know.  We’ll see if we can help.  Call: 713.352.8888; or email: contact@willdenham.com.

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Graco Recalls Thousands of Child-Safety Seats

Highway Safety Administration cites concerns over seats’ webbing

Graco Children’s Products, one of the world’s largest manufacturers of child safety seats, has a major problem on its hands.  According to the Houston Chronicle, the company is recalling more than 25,000 car seats because those seats’ webbing may not hold up during a crash.

Specifically, according to NHTSA (the National Highway Traffic Safety Administration): “In the event of a crash, the child seat webbing may not adequately restrain the child,” and therefore “fail to conform” with mandated safety standards.

According the Chronicle, the recall affects some of Graco’s “My Ride 65″ convertible seats - particularly model numbers 1871689, 1908152, 1813074, 1872691, 1853478, 1877535, 1813015, and 1794334. 

These seats were apparently made in July 2014, and should have a code of 2014/06 on a tag that's on the webbing.

Graco plans to notify owners of the recall and offer a replacement harness, free of charge. The recall is expected to begin July 17.

If you know anyone who has been harmed by this model or any type of car seat-malfunction, please let us know: 713.352.8888.  We’re here to help.  

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Chipotle is under attack again.  

Just weeks after a Harris County jury awarded $7.5 million to a former female employee for underage sexual harassment, a new suit in Brazoria County says that the restaurant’s manager at the Missouri City location (off Highway 6) installed a spy camera in the women’s bathroom.

But it gets worse.  Beyond the individual’s culpability for invading the plaintiff’s privacy, according to the lawsuit, Chipotle management tried to cover up the wrongdoing--and caused serious emotional damage as a result.  

Specifically, the claim is that Chipotle, among other things, engaged in: “(1) attempting to blame customers for planting the recording device, (2) destroying SIM cards which contained graphic images of the women and children undressing and using the restroom, (3) mandating that none of the Chipotle managers and employees with knowledge of the visual recording scandal notify anyone, including law enforcement, (4) the General Manager allowing another member of Management to take the video recorder home in an attempt to destroy evidence and to undoubtedly engage in self-gratification from viewing the videos of the women and children undressing and using the restroom, (5) by continuing to allow the general manager who was involved in the cover-up to continue working in a managerial capacity for over two months after the invasive video recording scandal was uncovered, (6) by removing interoffice emails which advised a Manager, who was a co-conspirator and close friend of one of the sexual predators, of the names of Chipotle employees and former employees complaining of the scandal that were provided to Chipotle by Plaintiffs’ counsel in confidence in an attempt to resolve Plaintiffs’ claims without resorting to a lawsuit, and (7) by refusing to notify any of its employees and/or customers, including children, who had no knowledge of the invasive video-recording scandal.”

It’s not clear what Chipotle’s response will be, or if the claims will prevail.  But one thing is certain: Chipotle’s image again needs repair.

If you or someone you know has an invasion-of-privacy or intentional-infliction-of-emotional-distress claim like this, please let us know at 713.352.8888.  We may be able to help.