University General Hospital, L.P., University Hospital Systems, LLP, Charo Barnette, in Her Capacity as Independent of the Estate of Guy Barnette, and John E. Udeh v. Siemens Medical Solutions USA, Inc.
01-14-00678-CV
| Tex. App. | May 9, 2017Background
- Siemens sued University General Hospital, L.P. (University General), University Hospital Systems, LLP (University Hospital), and individual guarantors (Barnette, Udeh, Butt) in 2010; parties entered a settlement requiring University General to pay $4,850,000 (with $1,000,000 due on execution and the balance in 20 monthly installments) and to tender a signed “Agreed Judgment.”
- The Agreed Judgment (for $5,500,000) would be held by Siemens and could be filed if University General breached; the Agreed Judgment allocated joint-and-several liability to University General and University Hospital and individual liability ($866,667 each) to the guarantors, with specified credits for prior payments.
- University General paid the initial $1,000,000 but defaulted on subsequent installments; Siemens attempted to file the Agreed Judgment after dismissal but the trial court entered it after its plenary power expired and this court later vacated it as void.
- Siemens sued to enforce the settlement agreement; the trial court entered judgment finding University General and University Hospital jointly and severally liable for $3,577,333 (reflecting credits) and held Barnette and Udeh personally liable; it also awarded Siemens attorney’s fees and interest.
- On appeal, the court affirmed liability of University General and University Hospital under the settlement agreement (for the full amount of the Agreed Judgment less credits) but reversed personal liability of Barnette and Udeh because their post-settlement liability depended solely on the now-void Agreed Judgment; the court also reversed and remanded the attorney’s-fee award for reevaluation, and remanded clarifications on prejudgment interest.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the settlement agreement permits Siemens to recover under the terms of the Agreed Judgment after the Agreed Judgment was rendered unenforceable | Siemens: Settlement incorporates Agreed Judgment remedies on breach; Siemens can recover as if Agreed Judgment were enforceable | Appellants: Trial court improperly enforced the Agreed Judgment rather than the settlement; guarantors relieved if Agreed Judgment unenforceable | Held: Settlement made University General and University Hospital jointly and severally liable for the “full amount of the Agreed Judgment” ($5,500,000) subject to dollar-for-dollar credits and payments made by others; enforceable notwithstanding the Agreed Judgment’s void status. |
| Whether guarantors (Barnette, Udeh, Butt) remain personally liable after Agreed Judgment was vacated | Siemens: Guarantors agreed to the Agreed Judgment and should remain liable consistent with its terms | Appellants: Their continuing liability arose only under the Agreed Judgment, which is void, so they are not liable | Held: Reversed judgment as to Barnette and Udeh and rendered take-nothing for them; guarantors’ liability arose solely under the now-void Agreed Judgment and thus they are not personally liable under the settlement. |
| Recoverability of attorney’s fees for Siemens’ earlier efforts to enforce the vacated Agreed Judgment and for pursuing settling/now-nonliable parties | Siemens: All fees were necessary and reasonable in pursuing enforcement and the resulting litigation | Appellants: Fees related to the unsuccessful enforcement and to pursuing settling/innocent parties are unnecessary and unreasonable | Held: Fees incurred in the unsuccessful effort to enforce the vacated Agreed Judgment and fees pursuing settling parties or non-liable guarantors were unnecessary as a matter of law; trial court abused discretion in awarding unsegregated fees and remand is required to determine recoverable, reasonable fees. |
| Prejudgment interest — whether awarded/clarified | Siemens: Trial court’s judgment references prejudgment interest | Appellants: Trial court did not actually award prejudgment interest in the judgment language | Held: Court declined to resolve on appeal and left clarification to the trial court on remand. |
Key Cases Cited
- Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445 (Tex. 2015) (contract interpretation is a question of law reviewed de novo)
- Seagull Energy E&P v. Eland Energy, 207 S.W.3d 342 (Tex. 2006) (court must give effect to all contract provisions)
- Fischer v. CTMI, L.L.C., 479 S.W.3d 231 (Tex. 2016) (court may not rewrite contracts or add terms)
- Varner v. Cardenas, 218 S.W.3d 68 (Tex. 2007) (fees for claims against nonliable defendants are not recoverable)
- Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1 (Tex. 1991) (fees pursuing settling parties generally not recoverable)
- A.G. Edwards & Sons v. Beyer, 235 S.W.3d 704 (Tex. 2007) (remand for segregation of recoverable attorney’s fees when necessary)