Sunday, October 25, 2015

Local law enforcement set to cash in on illegal game room proceeds through asset forfeiture


Game room bonanza to be tapped by law enforcement agencies 

To be sure, HPD and Harris County are not in the business of running gambling operations, not to mention illegal ones, but that does not mean that law enforcement cannot share in the profits from this particular kind of vice; - as a bounty for cracking down on it, as it were.

In a slew of civil forfeiture lawsuits filed last week, the County's District Attorney's Office seeks court approval to keep loads of cash and gold seized in raids on illegal gaming operations that the owners had stashed away in bank safe deposit boxes and other hiding places. Compared with the typical seizures of property in connection with criminal investigations, such as small-scale drug busts, the amounts are staggering. $313,023.03 in Cause No. 201563147 and $271,200.00 in Cause No. 201563133, plus 27 gold bars and 4 watches.




In personal injury cases, the amounts of damages, if quantified in the pleading at all, are not particularly meaningful because they are not liquidated. The dollar amount sought may be considered newsworthy in a high-profile case, but it is no more than the price tag that the plaintiff or the plaintiff's lawyers put on the injury, and the court or the jury will have to determine the amount, if any damages are awarded at all.

But in the case of forfeiture proceedings, the money is already in the hands of law-enforcement, and has been accounted for. The only issue is whether the authorities gets to keep it as "contraband" rather than having to return it to the people from which the assets were seized in the course of a criminal investigation culminating in a raid and/or arrest.

The forfeiture cases are filed by the District Attorney's Offices in the name of the State of Texas and therefore show the State as the Plaintiff.


Strangely, in these type of civil proceedings (albeit relating to criminal cases), the amount of money is used in lieu of the name of the defendant(s) in the case style. The individuals from whom the money or other assets were taken are identified in the body of the pleading, and in the sworn notice of seizure signed by an officer involved in the law enforcement operation. They may contest the seizure, but if they are guilty of the underlying crime, it may make little sense, assuming they even have the wherewithal to mount a legal challenge.

Forfeiture is governed by Chapter 59 of the Code of Criminal Procedure, but Harris County such cases are filed in civil district courts.


Because of its large size and caseload, Harris County has many district courts that divide the caseload among them by case type: criminal, family, juvenile, and nonfamily civil cases.








Monday, October 19, 2015

Memorial Hermann faces class-action accusing the nonprofit hospital system of fleecing ER patients without insurance by charging them astronomical rates

Memorial Hermann Hospital System does not only sue scores of patients over unpaid hospital bills, it is also charging emergency room patients a multiple of the rates paid by private insurers and government programs such as Medicare, according to a class-action petition filed last week in Harris County District Court. 


The pleading alleges that the rates charged are grossly excessive, and that they far exceed the reasonable value of the services provided. The lawsuit was filed on behalf of one former Memorial Hermann ER patient, who complains that her bill was excessive, and seeks class certification on behalf of other whose hospital bill was not covered by insurance, and who were similarly overcharged.
 
Memorial Hermann has a practice of suing patients with unpaid bills on "sworn account" (with bills attached that have all meaningful detail removed, ostensibly for privacy reasons), leaving patients sued for the cost of medical treatment (excessive or otherwise) virtually without recourse to challenge the reasonableness of the bills, especially if they cannot afford legal representation, and do not know how to fight a sworn-account suit and contest the reasonableness of the amounts printed on the hospital's billing statement. Additionally, the law firm that handles the non-profit hospital's debt collection litigation routinely requests and receives substantial attorney's fees.
           
The class-action seeks a declaratory judgment that Memorial Herman's billing practices for ER patients without insurance, -- i.e. self-pay patients -- are improper and excessive, and that the hospital system is only entitled to be paid for charges that are reasonable. The lawsuit also challenges the contracts that ER patients are forced to sign upon admission as meaningless because no information is provided about the billing rates to which the patients purportedly agree (making the price an "open term" in the contract), and that the charges are - in fact - not standard because the rates for other patients are much lower and are either set by the government or negotiated with private insurance providers, with different rates resulting depending on the particular payor and the deal negotiated with it.    

EXCERPTS FROM THE CLASS ACTION PETITION 



Cause No. 2015-61950, Nataliya Shahin, on behalf of herself and all others similarly situated, v, Memorial Hermann Health System, e-filed with the Harris County District Clerk on October 16, 2015, and assigned to the 333rd District Court.  





























Thursday, October 15, 2015

Contractor sues defunct Fish & The Knife sushi restaurant for cost of installing margarita machine


Contractor sues defunct sushi bar and restaurant 
alleging they failed to pony up   

In a lawsuit filed October 14, 2015 in Harris County District Court Eric Damshekan alleges that the Fish & The Knife Sushi Bar & Grill restaurant, formerly at 7801 Westheimer, did not pay his bill for installation of a margarita machine.


Damshekan states that he filed a contractor's lien in January 2015 for $2,467.00 and now seeks to foreclose the lien to collect the amount owed. He also requests attorney's fees and court costs. The Original Petition was signed by Adam W. Fomby with the Houston law firm FOMBY & ZARGHOUNI LLC. Public records show that Fish & The Knife, Inc. has forfeited its right to do business in Texas.


Damshekan filed the contractor's lien against the property and has named the property owner as a defendant in addition to the restaurant. According to HCAD data, the land is appraised at a value in excess of $2 mil.

A Latin American beef-centric concept -- Churrasca Brazilian Steakhouse -- has since replaced the ill-fated fish & knife sushi club at 7801 Westheimer.
 
Sample pleading from suit by contractor against restaurant over equipment installation

Cause No. 2015-61100; Eric Damshekan v Fish & The Knife Inc. d/b/a Fish & The Knife Sushi Bar & Grill, and Karia Y WM Houston Ltd; filed with the Harris County District Clerk 10/14/2015 and assigned to the 80th District Court.

FISH & KNIFE IN COURT

It is not the first lawsuit against the failed restaurant. In January 2015, CINTAS-R.U.S., L.P., filed suit against Fish & The Knife, Inc. on a textile rental services contract in county court, and later obtained a default judgment for $13,260.23 (most of which represented charges for the remainder of the contract term) and $2,500 in attorney's fees.

Default Judgment in lawsuit by linen service provider against restaurant

The hospitality services company attempted to have the judgment executed, but the effort was unsuccessful as the sushi operation on the corner of Westheimer and Stoney Brook had been shut down, and no assets were seized. Accordingly to the Constable's official report, the fish-and-knife signage was still on display.

Constable's return on execution of  judgment - unexecuted - nullo bono

Cause No. 1057339;  CINTAS RUS LP V FISH & KNIFE INC., Harris County Civil Court at Law No. 2.

Earlier, in July 2014, another contractor, International Hardwood Flooring LLC, sued both the restaurant and the property owner on an unpaid bill for flooring, which had also resulted in a mechanic's lien. That lawsuit was likewise filed in a county court at law and resulted in a summary judgment in favor of the contractor that also confirmed the lien and authorized foreclosure. The claim against the restaurant was dropped. The property owner satisfied the judgment and the contractor filed a release.

Example of release of judgment - satisfaction of judgment

Cause No. 1049629; International Hardwood Flooring, L.L.C. vs. Fish & The Knife, Inc and Karia Y WM Houston, Ltd., Harris County Court at Law No. 1.



Friday, October 9, 2015

Not your typical property tax protest - Chief Appraiser sues Valero over Appraisal Review Board's reduction of appraised value of oil company's property

Sands Stiefer, Chief Appraiser of the Harris County Appraisal District (HCAD) yesterday filed suit against Valero Refining Company of Texas, requesting that the order of the Appraisal Review Board reducing the appraised value of Valero's property for 2015 tax year, which the Board entered as a result of Valero's administrative protest, be set aside as too low. 


Stiefer v Valero Refining Company of Texas 

Acting in this official capacity, Stiefer complains about the Appraisal Review Board's reduction of the total appraised value of the subject property from $423,898,900 to $300,000,000, characterizing the adjusted value "far lower than the actual market value of the subject property as of January 1, 2015." 

"If allowed to stand," the pleading continues, "such value would permit the subject property to escape its fair share of the tax burden in Harris County, Texas, thereby increasing the tax burden on other taxpayers in the County." 

Stiefer asks the court for a judicial determination of value, and to increase the appraised value of the property on the appraisal roll.  

The petition was filed for Stiefer by Andrea Chan, an attorney with OLSEN & OLSEN, L.L.P., a law firm with offices at that Wortham Tower on Allen Parkway. 






Case info: Cause No. 2015-60014, Sands Stiefer, in his capacity as Chief Appraiser of the Harris County Appraisal District v. Valero Refining Company of Texas, filed 10/8/2015 with the Harris County District Clerk, and assigned to the 295th District Court.

THE SUBJECT PROPERTY: VALERY REFINERY 
AT 9701 MANCHESTER ST HOUSTON TX 77012 


HCAD ACCOUNT 0401980000012 Land and Improvements 

Breakdown by value of land and value of improvements 


 HCAD ACCOUNT 0401980000103 Pollution Control 


Thursday, October 8, 2015

Owner of Komodo's Pub in Midtown files lawsuit against roofing contractor over water damage and lost profits caused by temporary closure


MIDTOWN BAR SUES ROOFING CONTRACTOR OVER RAIN DAMAGE 

In a petition filed October 6, 2015 in Harris County District Court, Komodo's owner alleges that the bar hired Strata Roofing & Construction LLC to repair its roof for $15,580.00 and that the contractor's workers "allowed rain to flood the premises", forcing it to shut its doors for 12 business days.

As a result, the petition states, the popular neighborhood bar suffered damages in the form of $15,000 in lost profits, $6,000 in wages paid to employees while it was closed, and incurred additional expenses of $500 for paint.

The pleading further alleges that the contractor refused to pay for the alleged damages after having been sent a demand letter, and that the roofing company instead filed a mechanic's lien on the property located at 2004 Baldwin St. Houston TX 77002 for $9,640.00 on August 31, 2015.

Komodo says that the underlying contract for roofing repairs was signed on June 21, 2015 and that under the term of the contract Strata Roofing accepted responsibility for any damage that was directly caused by water intrusion during rainfall. It claims that the damages would not have occurred but for the contractor's negligent conduct in performing the job.

Komodo seeks relief for breach of contract, negligence, and also makes a claim under the Deceptive Trade Practices Act (DTPA). It seeks a total of $21,500 in actual damages, attorney's fees, interest, and court costs. Additionally, Komodo seeks a judicial declaration that the lien filed by the contractor is invalid. It requests that it be awarded its attorney's fees on the breach of contract claim, and also references the Property Code and the Declaratory Judgments Act as a basis for recovering attorneys fees that were necessary to remove the mechanic's lien filed by the contractor, which it claims is invalid.

Komodo's is an assumed name of Lizzard's Midtown, Inc, which was formally named as the plaintiff in this civil action. The company's law firm is MONSHAUGEN & VAN HUFF, P.C. and one its owners, Albert T. Van Huff, signed the original petition. Two other lawyers are also shown on the address block: Stephanie B. Donaho and Amy L. Schlaffer.

Defendant STRATA ROOFING & CONSTRUCTION, LLC has not yet been served with citation and has not answered the lawsuit. Therefore, it is not known who will represent them, and how they will defend the lawsuit. Based on their filing of a mechanic's lien in the property records of the Harris County Clerk's Office, which indicates that they have not been paid the full contracted-for price for the job, they will likely assert a counterclaim against the owner of the bar.

CASE INFO: Cause No. 2015-59375, Lizzard's Midtown, Inc. v. Strata Roofing & Construction, LLC, filed 10/6/2015 with the Harris County District Clerk, and randomly assigned to the 234th District Court, Harris County, Texas.


Attorney sues over bad advice about how to structure lawfirm to reduce tax bite


Catherine Benouis, a family law solo based in Austin, sought the advice of other professionals on how to restructure her lawfirm to minimize her tax bill and ran afoul of IRS rules as a consequence, according to the petition filed on her behalf on October 7, 2015 by another lawyer, Laura Richards Sherry, with Dallas-based THE HARRIS FIRM, in Harris County District Court.

Suing both in her own name, and in that of the lawfirm entities - CATHERINE BENOUIS, P.C. and BENOUIS LAW LTD, LLP - Benouis states that she had been practicing as a sole practitioner and that she was provided faulty legal and accounting advice regarding the benefits of reorganizing of her practice, which was supposed to relieve her from having to pay self-employment tax under a limited partnership structure.

She alleges that she later had to amend her tax returns and pay past-due self-employment tax because the IRS determined that the limited partnership structure does not provide a basis for non-payment of self-employment tax with Benouis as the sole individual partner in the partnership, performing the majority of legal services on behalf of the law firm, and acting as a partner rather than as an ordinary investor. She alleges that the Defendants represented the scheme as viable and legal when they should have known better.

Benouis names six defendants. The list includes both individuals and entity defendants: Loren R. Cook; Loren R. Cook, P.C.; Loren R. Cook & Associates, Ltd, LLP; Conrad Cook & Associates, Ltd, LLP; Ronald Mcelmurry; and November Consultants, LLC.
 
In her 19-page original petition Benouis invokes theories of fraud, negligence, negligent misrepresentation, and breach of fiduciary duty in addition to breach of contract. She also pleads the discovery rule, apparently because at least some of the causes of action would otherwise be time-barred. Benouis sues for restitution of the fees she paid the defendants, back taxes, penalties, and interest owed to the IRS, which she attributes to the defendants' wrongful conduct, and professional fees paid to CPAs for assistance with the IRS audit and the amendment of the tax returns.

Excerpt from Original Petition in Attorney's suit complaining of
faulty tax advice, and the financial aftermath of following it 
Interestingly, it appears that she seeks to hold the defendants liable for the self-employment taxes that she was ultimately not able to avoid, rather than merely the penalties and other costs resulting from their nonpayment and the need to file amended tax returns.

Cause No. 2015-59511, assigned to the 80th District Court, Harris County, Texas.



Thursday, October 1, 2015

Harris County files suit to cash in on Volkswagen emissions test scandal ... and here is a copy of the complaint


Harris County loses no time and files suit against Volkswagen and Audi over their manipulation of vehicle emissions testing, alleging violations of Texas state law, and seeking monetary damages, but not injunctive relief. 
   

Apparently they were in such a hurry that the case, filed September 30, 2015 with the Harris County District Clerk and assigned to 234th District Court (Judge Wesley R. Ward), was erroneously classified as an appeal from a Texas Alcoholic Beverage Commission (TABC) decision. But the benefits of the County hiring multiple private lawfirms to help it go after the VW bonanza are already paying off, -- not in terms of spoils, but in terms diffusion of responsibility. No telling really who can take credit for the mistake. Multiple lawyers' names are on the pleading, four of whom signed the original petition (elsewhere called complaint). The County Attorney's signature appears on the top of the signature and address blocks (which is significant under Rule 8), but the Civil Case Information Sheet was filled out and signed by one of the private attorneys. At least it won't have any substantive effect on the lawsuit. Case type categories and case information sheets are merely for statistical reporting purposes. 



RULE 8 OF THE TEXAS RULES OF CIVIL PROCEDURE 



ORIGINAL PETITION BY HARRIS COUNTY, TEXAS
AGAINST VOLKSWAGEN GROUP OF AMERICA, INC. 
AND AUDI OF AMERICA, LLC  


VOL














Thursday, August 27, 2015

The perils of making a counter-offer when time is running out


If you keep negotiating and don't settle with the insurance company of the motorist who caused the accident in which you were hurt, you may yet face more grief, as a case recently decided by the First Court of Appeals illustrates. Kamisha Davis v. Texas Farm Bureau Insurance, No. 01-14-00686-CV (Tex.App.- Houston, July 2, 2015)(Opinion by Justice Higley). 

Following an automobile accident, offers and counteroffers went back and forth between the claimant and the insurer of the other driver, until the statute of limitations had run, with no lawsuit on file. The claimant then wanted to accept the last settlement offer made by the insurer, but had made a Stowers demand for policy limits after receiving the offer from the insurer, which was for less. 

The claimant eventually sued the insurer for refusing to settle and denying the claim in its entirety. The court of appeals held that the Stowers demand for policy limits constituted a counter-offer, and as such, also constituted a rejection of the insurer's then outstanding offer. Since the insurer's offer had been rejected, the claimant could no longer accept it, and the insurer was under no obligation to renew it. Nor was the insurer obligated to accept the counteroffer. Therefore, no contract was formed, and the claimant couldn't pursue a viable cause of action for breach against the insurance company. And since the two-year limitations period had expired, it was too late to file a lawsuit on the original personal injury claim.

In ruling for the insurer, the court of appeals rejected the plaintiff's alternative theory of promissory estoppel, holding that it was not reasonable for a claimant to rely on the insurer's representations in the adversarial context of claim settlement, and that the other elements for a viable promissory estoppel claim were not satisfied either.  
  
The opinion, written by Justice Higley, is worth reading in its entirety because it suggests, though implicitly, how the problem could be avoided (leaving aside the obvious solution of timely filing a lawsuit if a mutually satisfactory settlement of the claim is not promptly reached). 

KAMISHA DAVIS, Appellant,
v.
TEXAS FARM BUREAU INSURANCE, Appellee.

No. 01-14-00686-CV.

Court of Appeals of Texas, First District, Houston.

Opinion issued July 2, 2015.

Panel consists of Chief Justice Radack and Justices Higley and Massengale.

OPINION

LAURA CARTER HIGLEY, Justice.

Kamisha Davis sued Texas Farm Bureau Insurance, asserting several causes of action. The trial court granted summary judgment against Davis in favor Texas Farm Bureau. On appeal, Davis raises two issues in which she asserts that the trial court erred in granting summary judgment on her breach of contract and promissory estoppel claims.

We affirm.

Background

On August 26, 2009, Kamisha Davis was involved in a motor vehicle accident with Texas Farm Bureau's insured. Davis hired attorney Corey Gomel to pursue a personal injury claim arising out of the accident. On April 19, 2011, Gomel sent Texas Farm Bureau a letter, stating that Davis would be willing to settle her personal-injury claims against Texas Farm Bureau's insured for $37,500. Texas Farm Bureau, through its claims adjuster, Jody Roe, made a counter-offer of $10,000 on May 2, 2011.
Gomel, on behalf of Davis, sent a second settlement offer of $22,500 to Texas Farm Bureau on June 9, 2011. On June 10, 2011, Texas Farm Bureau responded that, "[a]fter careful review and evaluation of the information you have submitted, we believe this claim has a value of $12,000.00." Gomel made a counteroffer of $18,000.00 on June 21, 2011. In response, Texas Farm Bureau sent a letter to Gomel on June 30, 2011, again stating that it valued her claim at $12,000.00.

On July 28, 2011, Davis's attorney faxed Texas Farm Bureau a Stowers demand.[1] The fax cover sheet stated, "We are withdrawing past [June 21] demand. Please see attached."
The Stowers demand informed Texas Farm Bureau that Davis would settle her claims only if Texas Farm Bureau paid her "the limits of your insured's policy." It further stated, "This will be the only correspondence that you will receive prior to us filing suit." The demand also informed Texas Farm Bureau that the offer to settle for the policy limits expired on August 29, 2011.
Davis never filed a personal injury suit against Texas Farm Bureau or the insured. At some point, Davis retained new counsel. On April 12, 2012, Davis's new counsel sent a letter to Texas Farm Bureau, which stated, "We have been retained by Corey Gomel to assist . . . in the prosecution of this matter for Ms. Davis. Please be advised our client, Ms. Kamisha Davis, has given us authorization to accept your final offer of $12,000.00. Please forward settlement documents to the address above."
On April 20, 2012, claims adjuster Roe responded, denying Davis's claim. Roe informed Davis, "Our offer expired on the two year anniversary from the date of accident 8-26-2009; therefore, we are respectfully declining your client's claim."

Davis filed suit against Texas Farm Bureau on April 16, 2013. She alleged as follows:
In an attempt to settle the matter, [Texas Farm Bureau] offered [Davis] $12,000.00 to settle [Davis's] claims on June 10, 2011.[2] This offer of settlement had neither a designated time period in which [Davis] had to accept the offer, nor did the offer state that it expired on any date or upon any action or inaction of [Davis] or that the offer would otherwise be revoked. [Texas Farm Bureau] never revoked the offer. Furthermore, [Davis] never rejected the offer. . . . On April 13, 2012, [Davis] accepted the offer to settle the case and sent the acceptance letter via fax. On April 20, 2012, [Texas Farm Bureau] denied the offer, stating that the offer expired on the expiration of limitations of the underlying incident. . . . [Davis] relied on the representations made by [Texas Farm Bureau], that being that there was an open ended offer to settle her case for $12,000.00. [Texas Farm Bureau] never revoked the offer to [Davis] until after [Davis] had accepted the offer. . . . [Texas Farm Bureau has] failed to make the offer of settlement good. [Davis] relied on [Texas Farm Bureau's] promise to [Davis's] detriment.
Based on these allegations, Davis asserted claims for breach of contract, promissory estoppel, fraud, and quantum meruit against Texas Farm Bureau.

Texas Farm Bureau moved for traditional summary judgment on Davis's breach-of-contract claim, asserting that Davis's Stowers demand was a rejection of its last $12,000 offer. Texas Farm Bureau argued that, because it offered to settle the dispute for full policy limits, a sum greater than the $12,000 offer, the Stowers demand was a counteroffer. Texas Farm Bureau cited authority for the proposition that a settlement offer does not remain open after a counteroffer has been made. Thus, according to Texas Farm Bureau, Davis could no longer accept the $12,000 offer after she made theStowers demand. It asserted that, without a valid acceptance, no contract had been formed between Texas Farm Bureau and Davis as a matter of law.

Wednesday, July 15, 2015

The Asset-rich Anna Nicole Smith Saga: Houston Court of Appeals writes one more chapter - Will it be the last? [Stern v Marshall Family appeal decided]

HOWARD STERN AS EXECUTOR OF THE ESTATE OF VICKIE LYNN MARSHALL, V. ELAINE MARSHALL AS INDEPENDENT EXECUTRIX OF THE ESTATE OF E. PIERCE MARSHALL, NO. 01-02-00114-CV (Tex.App. - Houston [1st Dist.] July 14, 2015, no pet h.) (hyperlink to appellate docket)
 
Opinions issued by Texas Courts of Appeals  typically do not attract much public attention, nor does even the Texas Supreme Court receive much media coverage; -- at least not on a regular basis. But there are exceptions, such as when same-sex marriage is on the agenda, or when a prominent person with large assets, or -- as in this case -- a fight over what is left worth fighting over in the aftermath of their demise, occasions litigation that ends up in the courts of appeals; -- not to mention multiple courts of appeals; -- not to mention a couple of trips to the U.S. Supreme Court. Not to mention when what's at stake involves millions of dollars, and attorney's fees in the six-figure range. 


And so it was with Vickie Lynn Marshall (a/k/a Anna Nicole Smith) and the fight over the fortunes of her husband, who preceded her in death, but not by much, despite the huge age difference between the former playmate and the asset-rich old man with a weak spot for the erstwhile Texas store clerk and subsequent playmate -- rich in assets too -- albeit assets of a different sort. 

Judgment - HOWARD STERN AS EXECUTOR OF THE ESTATE OF VICKIE LYNN MARSHALL, V. ELAINE MARSHALL AS INDEPENDENT EXECUTRIX OF THE ESTATE OF E. PIERCE MARSHALL, NO. 01-02-00114-CV (Tex.App. - Houston [1st Dist.] July 14, 2015, no pet h.)
Judgment issued contemporaneously with
opinion in Stern v Marshall Family  

Yesterday, the First Court of Appeals wrote another chapter in the saga, and it has already attracted the attention of Forbes Magazine: "Court Ruling Likely Ends Anna Nicole Smith Estate's Fight For Marshall Family Millions"; -- with more than 3,000 pageviews within 24 hours of posting. 

The opinion, written by Chief Justice Radack, runs sixty pages and covers a number of procedural issues relating to propriety and viability of declaratory judgment claims, effect of nonsuit, and compulsory counterclaims, that were implicated in the proceeding that played out in Harris County probate court, in a protracted legal fight that also involved courts elsewhere, most notably a bankruptcy court in California. 
  
Most importantly, however, the Houston appeals court threw out the attorneys fees awarded to Pierce Marshall against the Estate of Anna Nicole in the probate court's judgment, -- also for procedural reasons. The issue of attorney's fees against Anna Nicole -- for defending against her claims -- had not been submitted to the jury, nor had any been awarded by the trial court judge based on a motion made to the court independent of the jury trial. Therefore, the award of attorneys' fees in the final judgment of the probate court - in the six-figure range -- did not have a proper basis. 
  
Writes Radack: "We agree with Stern that Pierce waived recovery of attorneys’ fees from Vickie by failing to request submission of that issue to the jury." 

Bottom line: The Houston Court of Appeals affirms the adverse ruling against Vickie (with minor modifications), but reverses the attorneys’ fees awarded to Pierce from Vickie and renders judgment that Pierce take nothing on that claim. 




THE MATTER OF PRECLUSION 
IN THE CONTEXT OF PARALLEL LITIGATION
IN DIFFERENT COURTS IN DIFFERENT STATES

The issues on appeal, however, were not as straightforward as one might think. They hinged on matters of Texas procedural law, including the viability of declaratory judgment claims covering the same issues when the opponent had dropped its claim involving those issues, and the interplay of what happened in the Texas court with what happened in Vickie's bankruptcy in California, not mention matters such as scope of bankruptcy stay and  jurisdiction. 
   In the Harris County probate case, Vickie had actually dropped (nonsuited) her claims, but the Marshall Family Defendants asserted their own claims against her and did not let her out of the case. The jury and court in the end rejected the challenges to the validity of Marshall's will and estate plan (most of his assets were transferred via a living trust), and also passed on the merits of Vickie's claims because they were closely tied to the will contest brought by  J. Howard Marshall, III, and because Vickie's opponents invoked the Declaratory Judgments Act as a basis for their counterclaim. 
  
As the surviving spouse, Vickie would have had a claim to part of the estate as an heir-at-law under the intestacy statute, had the will and estate plan documents been set aside for lack of testamentary capacity or duress. Therefore, she was deemed a necessary party, and was not permitted to get out of the case.  
     
Vickie only non-suited her claims in Texas after she obtained a favorable multi-million dollar judgment against E. Pierce Marshal in her bankruptcy case in California, in which she asserted that Pierce tortiously interfered with an intended gift from her late husband. But that legal victory was later undone based on the final judgment rendered by the Harris County Probate Court after a drawn-out jury trial, which finally adjudicated the validity of the will and living trust, subject to review by the Texas courts of appeals, of course.  
   
The principal purpose of the appeal by Howard Stern (as representative of Vickie's estate) in Houston was therefore to reverse the judgment of the probate court and thereby remove the bar to the claims Vickie had successfully pursued (initially) in California. 
  
But the reversal of attorneys fees constitutes at least a partial victory for her estate, and -- while small compared to the one-time award in California that she did not get to keep -- not exactly in a trivial amount: $541,000 for services rendered through the trial and $100,000 each for appeals to the court of appeals and the Texas Supreme Court, respectively. And as for court costs run up for the first level of appeal, the Houston Court of Appeals split them 50-50.  
    


No need for her to turn in her grave. The supreme court has not yet had a chance to weigh in on the latest issues. The story of Anna Nicole's rise, fall, and aftermath may yet grow by a few more chapters, perhaps enough for a full feature-long sequel. 


Editorial note: This blog post on the First Court of Appeal's July 14, 2015 decision in Stern v Marshall was updated and expanded on 7/16/2015) 


Click appellate cause number to link to court of appeals' docket for this case 


Opinion issued July 14, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
———————————
HOWARD STERN AS EXECUTOR OF THE ESTATE OF VICKIE LYNN
MARSHALL, Appellant
V.
ELAINE MARSHALL AS INDEPENDENT EXECUTRIX OF THE ESTATE
OF E. PIERCE MARSHALL, ROBERT MCINTYRE AS TEMPORARY
ADMINISTRATOR OF THE ESTATE OF J. HOWARD MARSHALL, II,
APPLICATION TO APPOINT ELAINE MARSHALL PENDING, IV
ELAINE MARSHALL AS TRUSTEE OF THE MARSHALL
GRANDCHILDREN’S TRUST FOR THE BENEFIT OF E. PIERCE
MARSHALL, JR., ELAINE MARSHALL AS TRUSTEE OF THE
MARSHALL GRANDCHILDREN’S TRUST FOR THE BENEFIT OF
PRESTON MARSHALL, E. PIERCE MARSHALL, JR., ELAINE
MARSHALL, AND PRESTON MARSHALL AS TRUSTEES OF THE
MARSHALL PETROLEUM, INC. STOCK HOLDING TRUST, E. PIERCE
MARSHALL, JR., ELAINE MARSHALL, AND PRESTON MARSHALL AS
TRUSTEES OF THE MARSHALL HERITAGE FOUNDATION AND THE
MARSHALL LEGACY FOUNDATION, ELAINE MARSHALL AS
TRUSTEE OF THE BETTYE B. MARSHALL LIVING TRUST, ELAINE
MARSHALL AS TRUSTEE OF THE J. HOWARD MARSHALL, II,
MARITAL TRUST NUMBER TWO, ELAINE MARSHALL AS TRUSTEE 
2
OF THE E. PIERCE MARSHALL FAMILY TRUST CREATED UNDER
THE BETTYE B. MARSHALL LIVING TRUST INDENTURE DATED
OCTOBER 30, 1990, ELAINE MARSHALL INDIVIDUALLY
ELAINE MARSHALL AS TRUSTEE OF THE MARSHALL
GRANDCHILDREN’S TRUST FOR THE BENEFIT OF E. PIERCE
MARSHALL, JR., ELAINE MARSHALL AS TRUSTEE OF THE
MARSHALL GRANDCHILDREN’ TRUST FOR THE BENEFIT OF
PRESTON MARSHALL, E. PIERCE MARSHALL, JR., PRESTON
MARSHALL, TROF, INC., FINLEY HILLIARD, ELAINE MARSHALL
AND STEPHEN COOK AS TRUSTEES OF THE J. HOWARD
MARSHALL, II LIVING TRUST, E. PIERCE MARSHALL, JR., ELAINE
MARSHALL AND PRESTON MARSHALL AS TRUSTEES OF
THE MARSHALL PETROLEUM, INC. STOCK HOLDING TRUST,
Appellees
On Appeal from the Probate Court No. 2
Harris County, Texas
Trial Court Case No. 276815402

O P I N I O N

This is an appeal from a probate court judgment. We reverse the attorneys’ fees awarded in favor of one of the appellees and render judgment that appellee take nothing on that claim. We additionally modify the trial court’s judgment and affirm the judgment as modified.



Thursday, July 9, 2015

Simien v Unifund's shaky premise - U.S. Comptroller of the Currency (OCC) enforcement action against Chase Bank punctures presumption of trustworthiness of credit card debt records established by Houston Court of Appeals in 2010


The Comptroller of the Currency has now fined Chase Bank $30 million dollars for robosigning and other less than kosher debt collection practices that have been known for years. See July 8, 2015 Press release here. Consent Order for the Assessment of a Civil Money Penalty here.

But meanwhile our local courts of appeals have gone out of their way to accommodate and legitimize wrongful collection conduct, and other intermediate courts around Texas (but not all) have followed their lead. In light to the regulatory actions involving robosigning, including the most recent consent order against a major bank, the time seems ripe to revisit Simien v. Unifund CCR Partners321 S.W.3d 235 (Tex. App.-Houston [1st Dist.] 2010, no pet.)(overruling objections to admissiblity of credit card bank records sought to be admitted through an employee testifying for debt buyer).

THE LOWERING OF EVIDENTIARY STANDARDS IN COLLECTION CASES 

This is how the issue was handled in Texas when assignees of credit card debt used dubious affidavits and documentation in credit card debt collection cases: Rather than holding debt collection plaintiffs and their attorneys to the same evidentiary standards that others have to live by, the Houston appellate courts fashioned special interest jurisprudence to accommodate debt collection firms' interest in efficient and fast-paced mass-litigation and procurement of judgments.

The First Court of Appeals (later followed by some others) simply changed the case law governing admissibility of business records to accommodate the debt collectors, and provided them with a remedy for their problems in proving their debt claims with poor documentation in the trial courts. How so? By creating new controlling precedent for admissibility of original creditor records through otherwise unqualified witnesses on the premise that the records must be trustworthy because the bank that sold the account would be violating the law -- and face penalties -- if it had not acted properly in running its business.

BANK RECORDS TRUSTWORTHY QUA BANK RECORDS

The debt buyer was therefore justified in relying on whatever documentation they had received upon purchase of portfolios of charged-off credit card accounts because those records were deemed inherently trustworthy. That exempted them from the need to actually know anything about the operations of the original creditor to put them in a position to vouch for the reliability of those records.

In other words, the Houston Court of Appeals blessed the practice of robosigning by employees of companies that bought charged-off accounts from banks such as Chase, Citibank, Capital One, GEMB, HSBC, and others. They substituted an evidentiary presumption of trustworthiness, thereby short-circuiting the safeguards for quality control that otherwise apply to use of documentary evidence in the litigation process, including authentication and hearsay.

Essentially, the justices on the court of appeals took the position that a major national bank could not possibly have done anything wrong, and that the records that the debtbuying company suing on the debt claims to have received must necessarily be trustworthy because they are business records created by a national bank. After all, if the bank were to engage in shady practices, they would face consequences.

Here is an example of a Houston appellate justice's reasoning used to affirm a judgment on a credit account sold by Chase Bank USA, N.A., citing her former colleague Elsa Alcala, who now sits on the CCA and took the lead in fashioning the precedent to lower the bar for admissibility of credit card debt records on the premise that a major bank like Citibank can do no wrong. See Simien v. Unifund CCR Partners, 321 S.W.3d 235, 240-43 (Tex. App.-Houston [1st Dist.] 2010, no pet.) (establishing alternative predicate for admissibility of business records).

Chief Justice Adele Hedges writes:

Chase's failure to keep accurate records could result in criminal or civil penalties. See Tex. Fin. Code Ann. § 392.304(a)(8) (prohibiting misrepresentations of amount of consumer debt); id. § 392.402 (providing for criminal penalties for violations of chapter 392 of Texas Finance Code); see also Fair Debt Collection Practices Act, 15 U.S.C.A. § 1692e(2)(a) (prohibiting misrepresentation of amount of debt); id. § 1692l (providing for administrative enforcement of Administrative Debt Collection Practices Act). These circumstances otherwise indicate the trustworthiness of the Chase Bank documents.[3] See Simien, 321 S.W.3d at 243-44. Accordingly, because the business-records affidavit at issue here meets the criteria for admission as business records under Texas Rule of Evidence 803(6), the trial court did not abuse its discretion in admitting these records. See id. We overrule Ainsworth's first issue.  

The OCC has now imposed penalties to the tune of $30 million on Chase Bank for practices that the Houston Court of Appeals justices simply presumed would not occur because Chase and its like would be deterred by the possibility of facing an enforcement action by regulators. And the OCC is not the only regulator whose attention Chase attracted with its dubious practices. The CFPB and a bevy of state attorneys general also took action against the bank over improper conduct.

CFPB Action against JPMorgan Chase over wrongful debt collection conduct
URL: http://www.consumerfinance.gov/blog/were-ordering-jp-morgan-chase-to-refund-50-million-and-stop-collecting-on-528000-accounts

But misconduct and illegal conduct by major financial institutions is hardly man-bites-dog news. Nor was that so when Siemien v Unifund was decided in 2009 (with a superseding opinion in 2010).

BANKS TRUSTWORTHY AS A MATTER OF LAW - EVEN FAILED ONES 

Not to mention that the FDIC had shut down and liquidated Washington Mutual Bank years ago because of unsound practices (and resulting lack of trustworthiness). Chase Bank acquired WaMu's credit card portfolio (and other assets) via the FDIC acting as receiver, which also included accounts originated by Providian Bank that had been assumed by WaMu before its demise by merger.

Yet the Houston Courts of Appeals found such records presumptively trustworthy, and instructed (through the precedent set in Simien and its progeny) the lower courts to overrule evidentiary objections made by consumers lucky enough to find a competent attorney to make evidentiary objections to offers of dubious records and shoddy affidavits by robosigners in credit card and other consumer debt collection cases.

The Texas Supreme Court was not asked to weigh in at the time; nor is it likely that it would have ruled differently. But the latest regulatory developments have again shown that the premise underlying Simien was wrong. It was wrong all along. -- An exercise not in legislating from the bench, but of handing down special-interest jurisprudence to ease the burdens of proof for a particular category of litigants at the expense of others. And that amounts to policymaking too: Policymaking by other means. On the back-end of the law.

Presumed Trustworthiness 

EXCERPT FROM AINSWORTH V. CACH, LLC
MEMORANDUM OPINION BY ADELE HEDGES, 
CHIEF JUSTICE, 14th COURT OF APPEALS 

Admissibility of the Business-Records Affidavit

Ainsworth challenged the admission of the business-records affidavit and supporting documentation on numerous grounds, including hearsay and that the supporting documents were unreliable and not trustworthy. The admission and exclusion of evidence are within the sound discretion of the trial court. Bayer Corp. v. DX Terminals, Ltd., 214 S.W.3d 586, 609 (Tex. App.-Houston [14th Dist.] 2006, pet. denied) (citing City of Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex. 1995)). The complaining party must show that the trial court erred and that such error probably resulted in an improper judgment, which usually requires a showing that the judgment turned on the challenged evidence. Id.; see also Tex. R. App. P. 44.1(a)(1) (requiring that before a judgment can be reversed on appeal it must be determined that the error probably caused rendition of an improper judgment or prevented the appellant from properly presenting the case on appeal).

A proponent of hearsay evidence bears the burden of showing that testimony fits within an exception to the general rule prohibiting admission of the hearsay evidence. Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d 897, 908 n. 5 (Tex. 2004); see also Tex. R. Evid. 802. Rule of Evidence 803(6) provides an exception to the hearsay rule for business records if the offering party shows (1) the records were made and kept in the regular course of business; (2) the business kept the records as part of its regular practice; (3) the records were made at or near the time of the event they contain; and (4) the person making the records or submitting the information had personal knowledge of the events being recorded. See Tex. R. Evid. 803(6). Business records may also be "admissible in evidence in any court in this state upon the affidavit of [a] person" who can satisfy the requirements of Rule 803(6). Tex. R. Evid. 902(10)(a).

Finally, third-party documents can become the business records of an organization and, consequently, admissible under rule 803(6), if the records are (1) incorporated and kept in the course of the testifying witness's business; (2) the business typically relies upon the accuracy of the contents of the documents; and (3) the circumstances otherwise indicate the trustworthiness of the documents. Simien v. Unifund CCR Partners, 321 S.W.3d 235, 240-41 (Tex. App.-Houston [1st Dist.] 2010, no pet.) (citing Bell v. State, 176 S.W.3d 90, 92 (Tex. App.-Houston [1st Dist.] 2004, pet. ref'd)).

The business-records affidavit, described above, meets these criteria. Hwang stated that she is the custodian of records for CACH and that it is CACH's "regular business practice to obtain, integrate and rely upon documents prepared by the original creditor of the account at issue." She further averred that CACH relies on the accuracy of the documents in its day-to-day business activities and that the records are made and maintained by individuals who have a duty to keep the record accurately at or near the time of the event that they record. Finally, one of the documents attached to the business-records affidavit is the "affidavit of sale," which is notarized. Such a notarized document is self-authenticating under the Texas Rules of Evidence. See Tex. R. Evid. 902(8).

In this document, described above, an authorized agent of Chase Bank, N.A., stated that Chase had acquired Ainsworth's account from Washington Mutual Bank, sold it to CACH in December 2008, and that the amount due on the account at the time of the sale was $4,567.07.

Chase's failure to keep accurate records could result in criminal or civil penalties. See Tex. Fin. Code Ann. § 392.304(a)(8) (prohibiting misrepresentations of amount of consumer debt); id. § 392.402 (providing for criminal penalties for violations of chapter 392 of Texas Finance Code); see also Fair Debt Collection Practices Act, 15 U.S.C.A. § 1692e(2)(a) (prohibiting misrepresentation of amount of debt); id. § 1692l (providing for administrative enforcement of Administrative Debt Collection Practices Act).

These circumstances otherwise indicate the trustworthiness of the Chase Bank documents.[3] See Simien, 321 S.W.3d at 243-44. Accordingly, because the business-records affidavit at issue here meets the criteria for admission as business records under Texas Rule of Evidence 803(6), the trial court did not abuse its discretion in admitting these records. See id.

We overrule Ainsworth's first issue.

RELATED LINKS:  07/08/2015: OCC Fines JPMorgan Chase $30 Million for Deficiencies in Debt Collection Practices and Servicemembers Civil Relief Act Compliance