Hernandez v. Sovereign Cherokee Nation Tejas
343 S.W.3d 162
Tex. App.
2011

Background

  • SCNT sued Hernandez for fraud, breach of fiduciary duty, and related claims arising from alleged misappropriation of funds for the Raven Casino Project.
  • The trial court struck Hernandez's pleadings as a discovery sanction after multiple pretrial proceedings and orders.
  • A damages trial proceeded to a jury, which awarded actual and exemplary damages to SCNT; judgment was entered in SCNT's favor.
  • Hernandez challenged the sanctions as an abuse of discretion and challenged the sufficiency/evidence supporting damages.
  • SCNT sought discovery to obtain records and IOLTA account information Hernandez controlled; evidence at hearings showed Hernandez continued to act for SCNT despite injunctions and orders not to.
  • The court supplemented with post-trial findings and ultimately suggested remittitures reducing both actual and exemplary damages to $665,681.22 each.

Issues

Issue Plaintiff's Argument Defendant's Argument Held
Whether the sanctions sanctioning Hernandez were an abuse of discretion. Hernandez argues sanctions were excessive and not properly tied to conduct. SCNT contends sanctions were properly tied to multiple willful violations of court orders. No abuse of discretion; sanctions directly related to conduct and not excessive.
Whether the damages award for fraud is legally sufficient but factura­lly excessive requiring remittitur. SCNT elected the $5,000,000 benefit-of-the-bargain damages. Hernandez argues the lost-profits evidence is speculative and insufficient. Actual damages supported but amount excessive; remittitur suggested to $665,681.22.
Whether exemplary damages awarded were excessive and should be remittited. SCNT obtained significant exemplary damages ($2.5M for various theories). Exemplary damages should reflect Kraus factors and be proportionate to actual damages. Exemplary damages reduced to $665,681.22; remittitur suggested.
Whether the jury's parallel damages findings contained conflicts or were preserved for appeal. Appeals regarding conflicting jury findings. No preserved error; conflicts can be reconciled or not reversible. Conflict issues not preserved; overruled.
Whether SCNT, as an unincorporated association, could sue and recover damages for Hernandez's fiduciary breaches. SCNT may sue to enforce substantive rights; breach caused damages to SCNT. Hernandez argues SCNT’s status limits recoveries. SCNT may sue; damages remedies available.

Key Cases Cited

  • American Flood Research, Inc. v. Jones, 192 S.W.3d 581 (Tex.2006) (abuse of discretion standard for sanctions; independent review of record)
  • TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913 (Tex.1991) (sanctions must be just and related to improper conduct)
  • City of Keller v. Wilson, 168 S.W.3d 802 (Tex.2005) (legal-sufficiency standard; scintilla evidence rule)
  • Cont'l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444 (Tex.1996) (scope of evidence required for sufficiency review; prohibition on ignoring evidence)
  • Moriel v. Trans­portation Ins. Co., 879 S.W.2d 10 (Tex.1994) (standards for reviewing factual sufficiency; determinations on weight of evidence)
  • Alamo National Bank v. Kraus, 616 S.W.2d 908 (Tex.1981) (Kraus factors for assessing exemplary damages)
  • Larson v. Cactus Utility Co., 730 S.W.2d 641 (Tex.1987) (remittitur framework and option to remand or affirm)
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