James Cleveland v. Rob Taylor
397 S.W.3d 683
| Tex. App. | 2012Background
- Investors sued Cleveland parties for fraud, breach of contract, and related claims over investments in Schleicher County oil/gas prospect; James Cleveland controlled Oasis Petroleum and Lone Star; Nicos Energy, owned by Kellie Dorman, received many investments.
- Investors alleged representations about production and returns were false and that investors never received promised interests or profits.
- Court sanctioned the Cleveland parties for discovery abuses, including failure to respond to requests and improper depositions.
- Cleveland moved to compel arbitration but the motion was denied; issues regarding deemed admissions and various sanctions followed.
- Trial court granted summary judgment on multiple Investor claims, awarded substantial damages and $500,000 in attorney’s fees, and later Court of Appeals modified the fee award to $155,075.54, affirming the judgment as modified.
- The opinion discusses whether arbitration was appropriate, whether deemed admissions could be withdrawn, the merits of breach of contract and other claims, and the reasonableness of attorney’s fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Arbitration viability under disputed Participation Agreement | Cleveland; investors failed to prove a valid arbitration agreement. | Arbitration clause applicable; scope broad; agreement signed by Investors. | Arbitration denied; no valid agreement proven to bind parties; judgment upholds denial. |
| Withdrawal of deemed admissions | Due process and ability to correct; good cause to withdraw. | Waived rights by not timely responding; no good cause. | Cleveland waived right to challenge deemed admissions; summary judgment supported by other evidence. |
| Affirmative breach of contract and other merits | Investors established breach; monies invested not used per agreement; damages. | Defendants contested breach and causation; evidence inadequate. | Summary judgment against Cleveland parties upheld on breach of contract and related claims. |
| Attorney’s fees award | $500,000 reasonable under fee affidavit and factors. | Fee amount excessive; contingency fee basis inappropriate for shifting to defendants. | Partially sustained; fee award reduced to $155,075.54. |
| Death-penalty sanction against Kellie Dorman | Sanction appropriate for noncompliance. | Sanction improper or overly harsh; remedy exists other than default. | |
| Not necessary to resolve on appeal; judgment affirmed as modified. |
Key Cases Cited
- Wheeler v. Green, 157 S.W.3d 439 (Tex. 2005) (flagrant bad faith standard for deemed admissions under summary judgment)
- Marino v. King, 355 S.W.3d 629 (Tex. 2011) (good cause required to withdraw deemed admissions; pre-judgment timing matters)
- Arthur Andersen & Co. v. Perry Equipment Co., 945 S.W.2d 812 (Tex. 1997) (attorney’s fees may be awarded under contingent fee considerations with limits)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (summary judgment standard and evidentiary review guidance)
- Rhone-Poulenc, Inc. v. Steel, 997 S.W.2d 217 (Tex. 1999) (elements of breach of contract and burden-shifting on summary judgment)
- Prime Prods. Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631 (Tex. App.—Houston 2002) (elements of breach of contract and burden-shifting on summary judgment)
- Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754 (Tex. 2007) (standard for determining existence of material fact at summary judgment)
- McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337 (Tex. 1993) (summary judgment principles and burden-shifting framework)