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The Gil Ramirez Group, L.L.C. v. Houston Independent School District

United States District Court, S.D. Texas, Houston Division

July 31, 2017





         This case involves multiple claims for relief based on an alleged bribery scheme to procure construction contracts. In 2010, Plaintiffs Gil Ramirez Jr. and The Gil Ramirez Group, LLC[1] (“GRG”) filed this action against Houston Independent School District (“HISD” or “the District”), former trustee Lawrence Marshall and his consulting company, alleged coconspirator Joyce Moss Clay and her consulting company, and two of GRG's competitors and their respective owners. After six years of litigation, this Court held a 14-day jury trial, in which the jury issued a verdict for Plaintiff, awarding actual and exemplary damages.[2] The Defendants request that the Court overturn the jury's verdict as a matter of law or, alternatively, grant a new trial. (Doc. Nos. 504, 505 and 516.) The Court finds that either form of relief would be inappropriate and contrary to law.

         I. BACKGROUND

         The Fifth Circuit ably described the factual background of this case, and the Court need not repeat it in detail. See Gil Ramirez Grp., L.L.C. v. Houston Indep. Sch. Dist., 786 F.3d 400, 404-08 (5th Cir. 2015).

         The alleged bribery scheme at the heart of this action concerns HISD's job-order contract (“JOC”) program, through which HISD procures some of its construction and facilities services. The HISD Board of Trustees receives recommendations regarding vendors, and the Board then votes on whether to offer JOC contracts to the suggested vendors. GRG was selected as a JOC vendor in 2008 but not in 2010. Mr. Ramirez, the owner of GRG, alleges that he and his company were punished for refusing to participate in the corruption scheme of Lawrence Marshall, former president of the HISD Board of Trustees. GRG alleges in particular a pay-to-play scheme in which: potential and selected JOC vendors hired Joyce Moss Clay and her company, JM Clay and Associates as a consultant; Ms. Clay then paid Mr. Marshall a portion of the consulting fee; and Mr. Marshall provided favorable treatment to those who hired Ms. Clay. Defendants RHJ-JOC (“RHJ”) and Fort Bend Mechanical (“FBM”), two companies competing for and ultimately awarded JOC contracts, hired Ms. Clay. Plaintiff contends that Mr. Ramirez's refusal to participate in this scheme harmed GRG's business, both in the reduction in assignments under the 2008 JOC contract, and in GRG's nonselection as vendor for the 2010 JOC program.

         In 2010, Plaintiff brought an array of federal and state law claims against the defendants named above. After rulings by both this Court and the Fifth Circuit, the remaining defendants are: Lawrence Marshall and his consulting company (“Marshall Defendants”); Joyce Moss Clay and JM Clay and Associates (“Clay Defendants”); FBM and its owner David “Pete” Medford (“Medford Defendants”); and RHJ and its owner Eva Jackson (“Jackson Defendants”). The claims include: (1) violations of the Racketeer Influenced Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962; and (2) state law claims for tortious interference with prospective business relations and civil conspiracy.

         In October and November 2016, this Court held a 14-day trial that included live and deposition testimony from 28 witnesses. The jury found Defendants liable for tortious interference with prospective business relations, civil conspiracy, and RICO violations, and awarded actual and exemplary damages. (Doc. No. 480.)

         Pending before the Court are Defendant Lawrence Marshall's Renewed Motion for Judgement as a Matter of Law and, alternatively, Motion for a New Trial (“motion” or “Defendants' motion”) (Doc. No. 505); the Clay Defendants' motion to join Mr. Marshall's motion (Doc. No. 504); and the Medford Defendants' motion to join Mr. Marshall's motion (Doc. No. 516).


         Mr. Marshall timely filed his motion on February 23, 2017. That same day, the Clay Defendants filed a notice of joinder to Mr. Marshall's motion. (Doc. No. 504.) The Medford Defendants filed a notice of joinder to Mr. Marshall's motion on March 28, 2017. (Doc. No. 516.) Plaintiff argues that the Clay and Medford Defendants failed to comply with the particularity requirements under Federal Rules of Civil Procedure 7 and 59. Plaintiff also points out that the Medford Defendants filed their notice of joinder late.

         Plaintiff maintains that the Clay Defendants' motion for joinder lacks particularity because it does not specify the Clay Defendants' reasons for a new trial. See Fed. R. Civ. P. 7(b)(1)(B) (“motion must . . . state with particularity the grounds for seeking the order”). The Clay Defendants state only their intention to join Mr. Marshall's motion, and add that there was no evidence that Ms. Clay bribed anyone or committed illegal acts. (Doc. No. 504.) Appellate courts have found that co-appellants in criminal cases may adopt by reference a part of another's brief, but “the arguments must actually be transferable from the proponent's to the adopter's case.” United States v. Ramirez-Rivera, 800 F.3d 1, 12 n.1 (1st Cir. 2015) (quoting United States v. Brown, 669 F.3d 10, 16 n.5 (1st Cir.2012)). Many of Mr. Marshall's arguments would be applicable to the Clay Defendants, but not all. The Court of Appeals for the D.C. Circuit has held that “adoption by reference is permitted only to the extent we can readily apply the proponent's arguments to the adopter's case, ” finding that purely legal arguments can readily be adopted whereas fact-specific ones cannot. United States v. Straker, 800 F.3d 570, 594 n.5 (D.C. Cir. 2015). The Court allows the Clay Defendants to adopt Mr. Marshall's legal arguments, and thus grants the Clay Defendants' motion to join Mr. Marshall's motion. (Doc. No. 504.)

         Plaintiff objects to the Medford Defendants' motion for joinder on the basis of untimeliness. A motion filed under Rule 59 must be filed within 28 days from the entry of judgment. Fed.R.Civ.P. 59(b). The Court may not extend that deadline. Fed.R.Civ.P. 6(b)(2). See also U.S. Leather, Inc. v. H & W P'ship, 60 F.3d 222, 225 (5th Cir. 1995) (“The requirement that post-trial motions be filed within the relevant . . . period after entry of judgment is jurisdictional, and may not be extended by a waiver of the parties or by a rule of the district court.”). Because the Medford Defendants filed their motion for joinder late, the Court lacks jurisdiction over it and must deny the motion. (Doc. No. 516.) Despite this ruling, the Court will address arguments raised by Mr. Marshall that also affect the Medford Defendants.


         A. Legal Standards

         Under Federal Rule of Civil Procedure 50, a motion for judgment as a matter of law may be granted if a trial court finds that a “reasonable jury would not have a legally sufficient evidentiary basis to find for the party on that issue.” Fed.R.Civ.P. 50(a)(1). In ruling on the renewed motion for judgment as a matter of law, the court may: “(1) allow judgment on the verdict, if the jury returned a verdict; (2) order a new trial; or (3) direct the entry of judgment as a matter of law.” Fed.R.Civ.P. 50(b).

         Federal Rule of Civil Procedure 59 states that a court may, on motion, grant a new trial after a jury trial “for any reason for which a new trial has heretofore been granted in an action at law in federal court.” Fed.R.Civ.P. 59(a)(1)(A). A court may grant a new trial if it finds that the “verdict is against the weight of the evidence, the damages awarded are excessive, the trial was unfair, or prejudicial error was committed in its course.” Smith v. Transworld Drilling Co., 773 F.2d 610, 613 (5th Cir. 1985) (internal citations omitted). See also Beckham v. La. Dock Co., L.L.C., 124 Fed.Appx. 268, 270 (5th Cir.2005); Vackar v. Sentry Supply Inc., No. CIV.A. H-12-3716, 2015 WL 338616, at *2 (S.D. Tex. Jan. 26, 2015). “[T]he burden of showing harmful error rests on the party seeking the new trial.” Streber v. Hunter, 221 F.3d 701, 736 (5th Cir. 2000). In determining whether to grant a motion for new trial, the court must view the evidence “in a light most favorable to the jury's verdict.” Dawson v. Wal-Mart Stores, Inc., 978 F.2d 205, 208 (5th Cir. 1992).

         B. Evidence of Proximate Cause

         Defendants first argue that that there is no evidence that their actions proximately caused any injury to Plaintiff. Specifically, they contend that the evidence does not show that Mr. Marshall influenced or interfered with: the addition of RHJ as a JOC participant in 2008; the decision not to renew the 2008 JOC vendor contracts, including Plaintiff's contract; or the decision not to select GRG as a JOC vendor in the 2010 procurement process. (Doc. No. 505 at 2-13.)

         When a party moves for a new trial on evidentiary grounds, a new trial should not be granted unless “the verdict is against the great weight of the evidence.” Pryor v. Trane Co., 138 F.3d 1024, 1026 (5th Cir. 1998). There is no legally sufficient evidentiary basis when “‘the facts and inferences point so strongly and overwhelmingly in favor of one party that the Court believes that reasonable men could not arrive at a contrary verdict.'” Rubinstein v. Adm'rs of the Tulane Educ. Fund, 218 F.3d 392, 401 (5th Cir. 2000) (quoting Boeing Co. v. Shipman, 411 F.2d 365, 374 (5th Cir. 1969)).

         Defendants point to many instances in the testimony when HISD administrators stated that they had no contact with Mr. Marshall about which contractors to consider or recommend. (See Eaglin Trial Tr. 2 at 36, 42-43; Lindsay Trial Tr. at 13-16, 33; Garrett Trial Tr. at 41; Marshall Trial Tr. at 90-91; Eastman Trial Tr. at 165-66; Grier Trial Tr. at 64-66, 111; Grier Deposition Tr. at 11-12, 18-19.) They also maintain that Mr. Marshall was one of several Board members, and his vote alone could not and did not change the outcome of any contract selection decision. Furthermore, GRG placed so low (10 out of 13) in the 2010 JOC procurement rankings that it was not close to renewing its contract, regardless of Mr. Marshall's conduct.

         Plaintiff counters that Mr. Marshall had ample opportunity to exert pressure over administrators and other Board members. (See Abe Saavedra Deposition Tr. at 39-40; Watson Deposition Tr.; Pottinger Trial Tr. at 25; Marshall Trial Tr. at 155.) Plaintiff cites testimony suggesting that Mr. Marshall actually exerted that pressure: he asked administrators to help RHJ, facilitated RHJ's award of a 2008 JOC contract, and expected payments via Ms. Clay from JOC vendors who wanted jobs. (See Abe Saavedra Deposition Tr. at 39-40; Medford Recording Tr. at 63-64; Pottinger Trial Tr. at 25; Marshall Trial Tr. at 100; Ramirez Trial Tr. 1 at 241; Ramirez Trial Tr. 2 at 10, 12, 36.) Mr. Marshall-albeit along with other Board members-voted to approve certain JOC vendors, including firms that had hired Ms. Clay, and against the renewal of contracts with the vendors selected in 2008. (See Medford Trial Tr. at 120, 154-55.) Plaintiff also calls into question the validity of the rankings before the 2010 procurement process, as the criteria was largely subjective and easy to manipulate. (See Medford Recording Tr. at 81; Eaglin Trial Tr. 1 at 140; Kashani Trial Tr. at 12, 30, 91-92.) After considering all the evidence, the jury found Mr. Marshall liable on all the claims against him. To reach this verdict, the jury must have found that Mr. Marshall proximately caused Plaintiff's injuries, as required by the jury charge. (Doc. No. 480 at 12-13.)

         A motion for a new trial should not be granted if the verdict is against “merely against the preponderance of the evidence.” Dresser-Rand Co. v. Virtual Automation Inc., 361 F.3d 831, 838-39 (5th Cir. 2004) (citing Dahlen v. Gulf Crews, Inc., 281 F.3d 487, 497 (5th Cir.2002)). When there is an “abundance of fact and expert testimony on each side, the relative credibility of these witnesses must be important to the outcome of the case.” Beckham v. Louisiana Dock Co., 124 F. App'x 268, 272 (5th Cir. 2005) (citing Polanco v. City of Austin, 78 F.3d 968 (5th Cir.1996)). See also Reeves v. Gen. Foods Corp., 682 F.2d 515, 519 (5th Cir. 1982) (“it is the function of the jury as the traditional finder of the facts, and not the Court, to weigh conflicting evidence and inferences and determine the credibility of witnesses”); Martin v. Chesebrough-Pond's, Inc., 614 F.2d 498, 500 (5th Cir. 1980) (uphold jury's verdict if supported by rational basis); Lowe v. Pate Stevedoring Co., 558 F.2d 769, 772 (5th Cir. 1977) (jury weighs conflicting evidence and inferences, and determines witness credibility); Torrence v. Union Barge Line Corp., 408 F.2d 873, 875 (5th Cir. 1969) (same). The case law strongly encourages a court to defer to the findings of the jury.

         That said, to prevail at trial, “it is not enough for the jury to disbelieve the defendant's testimony. Rather, the plaintiff must offer clear and convincing affirmative proof to support a recovery.Dollar v. Georgia-Pac. Corp., 59 F.3d 1242, 1995 WL 1242, at *2 (5th Cir. 1995) (citing Casso v. Brand, 776 S.W.2d 551, 558 (Tex.1989)) (emphasis in original). See also United States v. Slone, 601 F.2d 800, 804 (5th Cir. 1979). Plaintiff provided affirmative evidence to support the jury's finding of proximate cause, even if the Court or another fact finder might have reached a different verdict. The jury deliberated for two days, weighing the evidence of more than two dozen witnesses. The Court respects the jury's verdict.

         C. Tortious Interference With Prospective Business Relations

         The jury found for Plaintiff and against all Defendants on the claim for tortious interference with prospective business relations (hereinafter “tortious interference”). (Doc. No. 480 at 15.) Defendants contest this finding as a matter of law, on two grounds. First, they argue that Plaintiff lacked the requisite foundation for a tortious interference claim because the contract that originally awarded a JOC bid to GRG in 2008 was invalid. Second, Plaintiff failed to exhaust all administrative remedies and was not exempted from the exhaustion requirement.

         1. Validity and Relevance of the 2008 JOC Contract

         Defendants argue that Plaintiff cannot prevail on a tortious interference claim because the 2008 JOC contract (awarded to GRG) was void, due to HISD's failure to comply with the Texas Education Code requirements in the 2008 JOC procurement process. Defendants' proposed jury charge included a question on whether the 2008 JOC contract was void, but the Court did not include such an instruction. (Doc. No. 473 at 33-34; Doc. No. 480.)

         Plaintiff responds with several arguments. First, the Fifth Circuit found that the tortious interference claim could proceed even if the 2008 JOC contract was awarded for reasons other than the Texas Education Code criteria. Second, because the claim regards prospective business relations, it does not hinge on the validity of the 2008 JOC contract under state law. Third, the evidence at trial failed to establish that the 2008 JOC contract was void. (Doc. No. 519 at 8-11.)

         The Court finds Plaintiff's second argument persuasive. Plaintiff maintains the validity of the contract is irrelevant because this claim regards interference with prospective business relations.

“To prevail on a claim for tortious interference with prospective business relations, the plaintiff must establish that (1) there was a reasonable probability that the plaintiff would have entered into a business relationship with a third party; (2) the defendant either acted with a conscious desire to prevent the relationship from occurring or knew the interference was certain or substantially certain to occur as a result of the conduct; (3) the defendant's conduct was independently tortious or unlawful; (4) the interference proximately caused the plaintiff injury; and (5) the plaintiff suffered actual damage or loss as a result.” Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 923 (Tex. 2013) (internal citations omitted). See also In re Burzynski, 989 F.2d 733, 739 (5th Cir. 1993). Plaintiff points out that, unlike a claim for tortious interference with a contract, there is no element requiring the existence of a contract. Cf. Cuba v. Pylant, 814 F.3d 701, 717 (5th Cir. 2016) (first element is “a contract subject to interference”).

         It is clear that a tortious interference with a prospective contract claim does not require an existing contract. However, Defendants argue that Plaintiff could only obtain jobs based on the 2008 JOC contract; if that contract was void, then Plaintiff had no claim to any jobs stemming from it. Defendants cite TXU Energy Retail Co. L.L.C. v. Fort Bend Indep. Sch. Dist., in which the Texas Supreme Court held that a contract was void because it violated the competitive bidding requirements under the Texas Education Code, and that a contractor could not enforce the waiver of immunity in the (now void) contract. 472 S.W.3d 462 (Tex. App.-Dallas 2015). The Court finds TXU Energy distinguishable because, in that case, the plaintiff wanted to enforce a term within the contract. Here, GRG needs to show only that it had a reasonable chance of entering the business relationship. The evidence at trial showed that it did have a chance. Although GRG was eligible for jobs only because of the 2008 JOC contract, Plaintiff never contended that it was entitled to any of those jobs. Even if that contract were later found void, during the 2008 contract window, GRG still had that reasonable expectation that it would receive jobs. Despite Defendants' well-reasoned arguments, the Court upholds the jury's finding that Defendants interfered with Plaintiff's prospective business relations.

         2. Exhaustion of Remedies

         Mr. Marshall next argues that Plaintiff cannot prevail on its state tort claim because GRG did not exhaust administrative remedies. The Texas Education Code § 22.0514 requires, prior to the filing of a lawsuit against a professional employee of a school district, exhaustion of the remedies provided by the school district. It is undisputed that Plaintiff did not exhaust administrative remedies before filing this suit against Mr. Marshall. The parties discuss three possible exceptions to the exhaustion requirement: when exhaustion would have been futile; when the acts challenged were outside the scope of employment; and when the acts were “clearly illegal.” See Ogletree v. Glen Rose Indep. Sch. Dist., 314 S.W.3d 450, 454 (Tex. App.-Waco 2010) (“Futility is a recognized exception to the exhaustion of administrative remedies requirement.”); Melendez v. Houston Indep. Sch. Dist., 418 S.W.3d 701, 710 (Tex. App.- Houston [14th Dist.] 2013) (recognizing exception to exhaustion requirement for claims that involve parties acting outside the scope of their employment); Texas Air Control Bd. v. Travis Cty., 502 S.W.2d 213, 216 (Tex. Civ. App.-Austin 1973) (principle of exhaustion of administrative remedies sometimes relaxed in cases where action is clearly illegal).

         The Court did not present the jury with a question on whether exhaustion would have been futile. The parties disagree as to whether the evidence presented at trial could support such a finding. (Doc. No. 505 at 16-19; Doc. No. 519 at 12-17; Doc. No. 525 at 2-5.) This disagreement is irrelevant to the Court's holding, as the Court did not rely on Plaintiff's futility argument in determining that Plaintiff could proceed with its claim.

         Instead, the Court holds that exhaustion was unnecessary because Mr. Marshall's conduct fell outside of the scope of his employment. The Fifth Circuit already determined that the conduct alleged against Mr. Marshall did not fall within the scope of his duties as a trustee. The Court of Appeals stated: “bribery and peddling influence are not within the scope of a trustee's duty. He was allegedly defiling his position and wholly outside the legitimate scope of a trustee's duties if he accepted bribes in exchange for advancing the interests of certain contractors.” Gil Ramirez, 786 F.3d at 417.

         Defendants argue that the Fifth Circuit erred in finding that Mr. Marshall's alleged conduct fell outside of the scope of his employment. They turn to Laverie v. Wetherbe, in which the Texas Supreme Court held that the scope of employment analysis “remains fundamentally objective” and that “subjective intent is [not] a necessary component of the scope-of- employment analysis.” 517 S.W.3d 748, 753 (Tex. 2017). The parties disagree on the proper interpretation of Laverie. According to Plaintiff, “Laverie merely stands for the proposition that where the alleged tortious acts fall entirely within an official's job duties, courts need not probe the employee's subjective intent to analyze whether the acts were within the scope of employment.” (Doc. No. 525 at 6.) Defendants, on the other hand, argue that “because Laverie forbids inquiry into a governmental employee's subjective motivations, the fact that GRG alleges that Marshall's actions-including his official act of voting-are criminal is immaterial to the analysis of his entitlement to dismissal of his civil tort claim under Texas law.” (Doc. No. 526 at 5.) According to Defendants, even if Mr. Marshall cast his vote in the shadow of a bribe, the act of voting fell within the scope of his duties.

         The Court instructed the jury that, to find Mr. Marshall liable for tortious interference, it must find that he had committed an “official act.” (Doc. No. 480 at 12.) To explain the term “official act, ” the jury instruction[3] quoted language from McDonnell v. United States, 136 S.Ct. 2355, 2358 (2016). Defendants conclude that, because the jury found that Mr. Marshall committed an official act, his conduct was “incident to, and squarely within, the scope of his duties as a trustee.” (Doc. No. 526 at 4.) Given this, the exemption to the exhaustion requirement would not apply.

         The Court rejects Defendants' argument because Laverie is distinguishable from this case. Unlike in Laverie, Mr. Marshall's conduct in question is not exclusively his vote-one of the possible “official actions” found by the jury-but also his other actions in the alleged pay-to-play scheme.[4] In contrast, the Laverie plaintiff based his defamation claim solely on Ms. Laverie's statements about him as a job applicant. The Texas Supreme Court held that Ms. Laverie's job duties as senior associate dean and member of university job search committee included sharing her knowledge about the plaintiff. Ms. Laverie's personal motivations for providing unfavorable information were irrelevant to the determination of whether or not she performed her duties. See Laverie, 517 S.W.3d at 754-55. Her statements, even if defamatory, were made entirely as part of her role on the university's search committee. Even more importantly, Ms. Laverie was not on the receiving end of a bribe, an act that would fall beyond the scope of her duties.

         As in Laverie, other courts that have recognized immunity for public employees have found that all of the alleged tortious conduct fell within the scope of an employee's duties. See, e.g., McFadden v. Olesky, 517 S.W.3d 287 (Tex. App.-Austin 2017, pet. denied) (police meeting, talking to another official, or organizing an event (or agreeing to do officers acted within scope of employment when preparing arrest affidavit, even if information supplied was false). For example, in Rosencrans v. Altschuler, 161 S.W.3d 517 (Tex. App.- Eastland 2004), the court found that a school employee was immune from claims of assault-Mr. Altshuler had allegedly covered the plaintiff's mouth with his hand to prevent her from speaking during a business meeting. The court held that Mr. Altshuler's choice to silence his colleague in this way was incident to or within his scope of duties as a school district employee and involved discretion or judgment, as permitted by the Texas Education Code. Id. at 521. Rosencrans exemplifies an expansive reading of the “scope of employment, ” but it does not change the outcome of the instant case. No part of Mr. Marshall's acceptance of bribes is incidental to his duties as a trustee. Although ...

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