Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg
appeal from the 94th District Court of Nueces County, Texas.
Chief Justice Contreras and Justices Longoria and Perkes
GREGORY T. PERKES, JUSTICE
failed investments, appellant Duncan Litigation Investments,
LLC sued appellees Mikal Watts and Watts Guerra, LLP for
negligence, gross negligence, and negligent
misrepresentation. The trial court granted summary judgment
in favor of appellees based on their limitations defense. By
three issues, appellant argues that: (1) the trial court
considered untimely and inadmissible evidence; (2) appellees
failed to conclusively establish the accrual date of
appellant's claims; and (3) appellant failed to negate
application of the discovery rule and continuing tort
doctrine. Because we conclude there was no evidentiary error
and the record conclusively establishes appellant had actual
knowledge of its injury more than two years before filing
suit, we affirm.
early June 2010, Corpus Christi attorney Robert Hilliard
approached Max Duncan of Corpus Christi about investing in
mass-tort litigation stemming from the BP "Deepwater
Horizon" oil spill. Hilliard had entered into a cost and
fee sharing agreement with San Antonio attorney Mikal Watts
and his law firm. In exchange for funding Hilliard's
portion of the upfront litigation costs, Duncan and Hilliard
would share equally in Hilliard's portion of the
Duncan asked Watts about the downside risk of the investment,
Watts responded that the chief concern is getting "duped
on the sign-ups," but he explained that this was
"[n]ot likely given our guys' history of acquisition
prowess." Watts had also reached a fee sharing agreement
with Mississippi attorney Anders Ferrington to be the
originating attorney responsible for acquiring clients and
referring them to Watts Guerra. Watts and Hilliard had
previously worked with Ferrington on the FEMA
Formaldehyde litigation under a similar arrangement.
Duncan was told that Ferrington's field team had a proven
track record of determining which claimants (i.e., potential
clients) were legitimate.
formed appellant as its sole owner and entered into an
agreement with Hilliard and his law firm. According to its
petition, "[appellant] agreed to invest in the
litigation based on the representations that the investment
guaranteed a significant financial return, the reputation of
Mikal Watts, and Watts' [sic] specific representation
that Duncan would not lose money." Appellant's
petition also alleged that, "[i]n June 2010, Max Duncan
believed Watts already had 15, 000 clients and he was going
to get more clients, thereby increasing the financial return
on the investment. By July 1, 2010, it was reported to Duncan
that the number of clients had increased to 25, 000."
This number would eventually balloon to over 40, 000.
initial outlay of $3.2 million in June 2010 to a final $100,
000 in late July 2012, appellant invested a total of $5.8
million in the venture. Watts Guerra also invested matching
funds over this period. To raise capital, Watts Guerra sold a
portion of its interest in the recovery to Dallas attorney
John Cracken for $2 million. Most of the upfront litigation
costs funded the Ferrington field team's acquisition
efforts in the spring and summer of 2010. By August 2010,
appellant had already invested $5.6 million of its $5.8
million total investment.
summer of 2010, Watts Guerra filed twenty-five complaints on
behalf of approximately 40, 000 plaintiffs that were
consolidated with other cases into a multi-district
litigation (MDL) proceeding. Based on the large number of
clients Watts Guerra purported to represent, Watts was
appointed to the plaintiff's steering committee, a
position coveted for the access, control, and additional
compensation afforded to its members. Eventually, in the
spring of 2012, BP negotiated a multibillion-dollar class
action settlement agreement, part of which was based on Watts
Guerra's purported representation of over 40, 000 viable
interim, though, BP had established a $20 billion fund and
the Gulf Coast Claims Facility (GCCF) to settle claims. In
September 2010, Watts Guerra submitted 26, 000 claims on
behalf of clients to the GCCF. In a November 10, 2010 letter
from the GCCF administrator to Watts, the administrator
explained that, due to forty-three complaints against Watts
Guerra by claimants alleging unauthorized use of their social
security number, the GCCF would not process any claim
submitted by Watts Guerra without a signed written
authorization from the claimant. This letter was forwarded to
Duncan that same day.
a successful claim, the GCCF also required a claimant to
provide documented evidence of lost income, such as W-2s from
before and after the oil spill. It became apparent in
November 2010 that gathering the necessary documentation from
their clients-almost all of whom were transient Vietnamese
fishermen typically paid in cash or by barter-would be
exceedingly difficult. In a November 29, 2010 email from
Cracken, forwarded to Duncan that same day, Cracken recounted
his recent meeting with one of the lead members of the
Ferrington field team, who "advised . . . that she
cannot, in the ordinary course, collect 'proof' of
past income or lost income due to the Spill." In
response to this news, Duncan wrote to Hilliard that same
day, "This sounds grim."
December 2010, Cracken traveled to Biloxi, Mississippi to
meet with a lead member of the Ferrington field team. His
report to Watts and Hilliard, shared with Duncan the next
day, provided more bad news: half of the approximately 300
clients interviewed wanted to terminate their representation
contracts; many of their clients were filing a separate claim
with the GCCF to avoid paying attorney's fees; the field
team did not have reliable contact information for many of
the clients; and $600, 000 in recent funding to the field
team had resulted in only 10-15 completed GCCF claim packets.
In summation, Cracken wrote, "We don't have 41K
'clients'; we have a list of 41K names we hope [the
field team] can convert into 'clients' over time . .
. ." In response, Duncan wrote to Hilliard, "Give
me a ray of hope."
continued to provide a sobering assessment of their prospects
into January 2011, prompting Hilliard to suggest a change in
direction. In an email to Watts and Cracken that was
forwarded to Duncan that same day, Hilliard wrote:
Clearly the 40k clients are ghosts in the wind. No amount of
$$ will bring them back and time is a [sic] enemy. From
looking at Cracken's bleak yet accurate summary of where
this is[, ] I am sure that it is time for an aggressive
'put it to bed today' approach.
These cases, as a bundle, need to be pitched as a complete
and early settlement to BP, et al. This pitch needs to go to
BP not to [the GCCF]. 40k filed cases, today, have value and
settlement attractiveness to the defs. It cleans out 40k from
Watts and Hilliard expressed some renewed optimism in this
strategy, they also realized each client would still have to
provide substantive proof of his or her loss before receiving
a payment from any settlement. Without this substantive
proof, Cracken warned that their "docket may trend
toward -0- value." Duncan received Cracken's warning
from Hilliard on January 28, 2011.
this point, the interested parties were focused on client
retention and the practical challenges of monetizing their
efforts, but in a January 23, 2011 email, Cracken exposed a
different kind of problem-a percentage of their purported 40,
000 clients were nothing more than "names from a phone
book," some were duplicates, and some claimed they were
"duped" into signing representation agreements.
This correspondence was forwarded to Duncan that same day.
this nature continued to emerge. Duncan already knew at this
point that the GCCF administrator was taking the position
that there were approximately 5, 000 total deckhands
operating in the Gulf at the time of the oil spill while
Watts Guerra purported to represent over 40, 000
deckhands-all of them Vietnamese. In a January 25, 2011
email, Duncan learned that Watts Guerra's own consultant
confirmed "there were not 40k Vietnamese deckhands at
the ready" when the oil spill occurred. The consultant
also found it "odd" that their "clients"
were concentrated in Texas and Florida because the Vietnamese
fishing community was concentrated in Louisiana, Mississippi,
and Alabama. This significant discrepancy would also be a
source of contention for BP during settlement negotiations of
the MDL. BP took the same position as the GCCF administrator
that there were approximately 5, 000 total deckhands
operating in the Gulf in 2010. BP's specific misgivings
were shared with Duncan on February 26, 2012.
a year before, though, a March 8, 2011 email chain forwarded
to Duncan the next day includes a discussion regarding the
discovery that one of Watts Guerra's "clients"
died five years before the oil spill. Watts wrote,
"Another fine example of the shit we paid for; dead 5
years ago." Cracken simply responded, "Fraud."
United States Department of Justice investigation, including
a raid by the United States Secret Service on the San Antonio
offices of Watts Guerra in February 2013, revealed that two
members of the Ferrington field team perpetrated a massive
fraud; thousands of the purported clients acquired by the
field team never actually signed representation agreements
with Watts Guerra. As Cracken had warned in January 2011,
many were nothing more than Vietnamese names selected from a
phonebook, if they existed at all. The raid was covered
contemporaneously by the Houston Chronicle and the
San Antonio Express-News.
December 17, 2013, BP sued Watts and Watts Guerra, alleging
the firm filed thousands of fraudulent claims. Watts, along
with employees of his firm and two members of the Ferrington
field team, were indicted by a federal grand jury in
September of ...