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Trishe Resources, Inc. v. Hilliard Energy, Ltd.

Court of Appeals of Texas, Eleventh District

September 6, 2019

TRISHE RESOURCES, INC.; TRISHE WIND MINNESOTA, LLC; AND TRISHE WIND COLORADO, LLC, Appellants
v.
HILLIARD ENERGY, LTD., Appellee

          On Appeal from the 385th District Court Midland County, Texas Trial Court Cause No. CV 50941

          Panel consists of: Bailey, C.J., Wright, S.C.J., [1] and Dauphinot, S.J. [2]

          MEMORANDUM OPINION

          JIM R. WRIGHT, SENIOR CHIEF JUSTICE

         After it imposed lesser sanctions against Appellants (collectively, Trishe), the trial court entered "death penalty" sanctions and entered a default judgment against Trishe. This is an appeal from the default judgment and a previous partial summary judgment. Trishe raises three issues on appeal. First, Trishe contends that the trial court abused its discretion when it assessed approximately $2.1 million in sanctions against Trishe. Second, Trishe argues that the trial court abused its discretion when it awarded Hilliard $33, 454.98 in attorney's fees as a discovery sanction. Third, Trishe asserts that the trial court erred when it granted Hilliard a summary judgment for contractual interest on success fees under the parties' contract. We affirm in part and reverse and remand in part.

         In August 2014, Trishe entered into a consulting contract with Hilliard whereby Hilliard agreed to assist Trishe in the marketing and sale of wind farms. Hilliard was to be paid a monthly consulting fee. Hilliard was also to receive a "success fee" equivalent to 12% of any sale that occurred during the contract term or 5% of any sale that occurred within eighteen months after the contract terminated.

         When Trishe later terminated the contract, Hilliard sued Trishe for breach of contract and alleged that Trishe had failed to pay fees that were due under the contract. Hilliard later filed a motion to compel discovery on the grounds that Trishe had failed to produce financial records-principally bank statements-in response to repeated requests for production. The trial court granted Hilliard's motion and ordered Trishe to produce the documents within thirty days and to pay $1, 200 in discovery sanctions.

         Hilliard later filed a motion for sanctions and alleged that Trishe had failed to produce the documents and had also failed to pay the sanctions. Hilliard requested that the trial court enter an order by which Trishe would be prohibited from conducting further discovery under Rule 215.2(b)(1) of the Texas Rules of Civil Procedure. Hilliard also asked the trial court to order Trishe to pay Hilliard's legal fees under Rule 215.2(b)(8) and to strike Trishe's pleadings under Rule 215.2(b)(5).

         The trial court conducted a hearing on Hilliard's motion. During the hearing, Hilliard's counsel explained that, in addition to the fact that some requested documents were still missing, many of the documents that had been produced appeared to have been altered or redacted to exclude necessary information. The trial court granted the motion. In its order, the trial court prohibited further discovery by Trishe, struck Trishe's pleadings, and ordered Trishe to pay $33, 454.98 in legal fees and court costs to Hilliard.

         Hilliard also filed a motion for partial summary judgment for unpaid consulting and success fees and expenses from the sales of wind farms in Ohio and Minnesota. Trishe did not respond. The trial court granted the motion and awarded Hilliard a total of $344, 848.15 in damages and contractual interest. The summary judgment order left open Hilliard's claim for additional damages related to the sale of the Ohio wind farm. Trishe was to be paid under the Ohio sales contract in a series of payments for specified construction milestones. Hilliard's success fee was payable only if, and as, Trishe received payment.

         Hilliard filed yet another motion for sanctions when Trishe continued to fail to produce the required documents and continued to fail to pay the ordered sanctions. Hilliard requested a default judgment under Rule 215.2(b)(5) and requested that the trial court enter a deemed finding that "the Ohio wind farm was built to its full potential, meaning that milestone payments due to [Hilliard] will be calculated as though each milestone was met timely and to its full potential" as identified in the original contract. Hilliard argued that it was due a total success fee of $2, 114, 220. Therefore, Hilliard "request[ed] that Trishe be ordered to pay sanctions in the amount of $2, 114, 220." Trishe did not appear at the hearing on Hilliard's motion. The trial court entered a default judgment in which it awarded Hilliard:

• the previously granted sanctions of $1, 200;
• the previously granted sanctions of $33, 454.98;
• damages of $344, 848.15, as previously granted in the summary judgment order;
• sanctions in the amount of $2, 114, 220; and
• attorney's fees of $4, 396.24.

         We will address Trishe's first issue on appeal. In that issue, Trishe contends that the trial court abused its discretion when it assessed approximately $2.1 million in sanctions against Trishe.

         We review a trial court's ruling on a motion for discovery sanctions for an abuse of discretion. Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004). A trial court abuses its discretion when its ruling is arbitrary, unreasonable, or without reference to any guiding rules or legal principles. Id. at 838-39; Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). An appellate court reviews the entire record, including the evidence, arguments of counsel, written discovery on file, and the circumstances surrounding the party's discovery abuse. Tidrow v. Roth, 189 S.W.3d 408, 412 (Tex. App.-Dallas 2006, no pet.).

         A trial court has discretion to impose sanctions for discovery abuses under Rule 215 of the Texas Rules of Civil Procedure. Tex.R.Civ.P. 215. If a party fails to comply with an order compelling discovery or abuses the discovery process, a trial court can strike the party's pleadings or render a judgment by default after notice and hearing. Tex.R.Civ.P. 215.2(b)(5), 215.3. Any sanction by the trial court that is based on the party's conduct during discovery, and by which a trial court adjudicates a party's claim without regard to the merits, constitutes a "death-penalty" sanction. State v. Bristol Hotel Asset Co., 65 S.W.3d 638, 647 (Tex. 2001).

         Discovery sanctions serve three purposes: (1) to secure compliance with discovery rules; (2) to deter other litigants from similar misconduct; and (3) to punish parties for violating the discovery rules. Response Time, Inc. v. Sterling Commerce (N. Am.), Inc., 95 S.W.3d 656, 659 (Tex. App.-Dallas 2002, no pet.). When an appellate court determines whether sanctions imposed are just, it is to consider (1) whether there is a direct relationship between the offensive conduct and the sanctions imposed and (2) whether the sanctions are excessive. TransAmerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991). Further, the trial court should always consider and test lesser sanctions before imposing case-determinative sanctions. Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 849 (Tex. 1992).

         TransAmerican, like the present case, involved the imposition of a case-determinative sanction. The court discussed some of the restraints on such extreme punishment:

Discovery sanctions cannot be used to adjudicate the merits of a party's claims or defenses unless a party's hindrance of the discovery process justifies a presumption that its claims or defenses lack merit. However, if a party refuses to produce material evidence, despite the imposition of lesser sanctions, the court may presume that an asserted claim or defense lacks merit and dispose of it. . . . Sanctions which are so severe as to preclude presentation of the merits of the case should not be assessed absent a party's flagrant bad faith or counsel's callous disregard for the responsibilities of discovery under the rules.

TransAmerican, 811 S.W.2d at 918 (citations omitted).

         Pursuant to Trishe's timely request, the trial court filed findings of fact and conclusions of law. Although findings of fact and conclusions of law extend the appellate timetables under Rule 26.1(a)(4) of the Texas Rules of Appellate Procedure, they are not required after a judgment rendered as sanctions. IKB Indus. v. Pro-Line Corp., 938 S.W.2d 440, 443 (Tex. 1997). Thus, an appellate court need not give findings of fact made after a judgment rendered as sanctions the same deference as findings of fact made after a trial on the merits. Id. at 442; see Chrysler, 841 S.W.2d at 852. In this case, however, the trial court's findings are helpful because they are supported by the record and are "specifically tied to an appropriate legal standard," the standard set forth in TransAmerican. See Chrysler, 841 S.W.2d at 853.

         Among the pertinent facts found by the trial court, excluding record ...


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