In 1993, an Argentine company, Bridas, entered in to a joint venture with the government of Turkmenistan, which was recently liberated from the Soviet Union. The venture went south when the government of Turkmenistan demanded a higher royalty percentage than provided by the Joint Venture Agreement. When Bridas refused to capitulate, Turkmenistan simply banned Bridas from the country. A joint venture with a government of an unstable and new country in the former Soviet Union is a situation where arbitration really does make sense, and the JVA between Bridas and the Government of Turkmenistan did in fact contain an arbitration clause, which required disputes to be arbitrated in Houston. After being banned from the country, Bridas initiated arbitration. In response, Turkmenistan dissolved the governmental entity that actually entered into the JVA, and it abolished its Ministry of Oil and Gas. The government decreed that all proceeds from oil and gas exports in the country were to be directed to a special State Oil and Gas Development fund, and the fund’s assets were declared immune from seizure. After the arbitration proceeding, which lasted several years, including twenty-one days of trial, the panel awarded Bridas an arbirtal award of $495 million. A federal district court in Houston upheld the award, but Turkmenistan appealed, arguing that the award could not be confirmed against an entity that did not exist at the time the JVA was signed. The Fifth Circuit remanded the case, instructing the district court to consider whether the alter ego theory allows confirmation of the award against the Turkmenistani entity that succeeded the entity dissolved by the government in the face of the arbitration. The original Fifth Circuit opinion in this case is reported at 345 F.3d 347 (5th Cir. 2003), and it is a seminal opinion on Fifth Circuit law with respect to confirming arbitral awards (or opposing their confirmation) under the FAA. As an aside, it is also, as of at least a couple years ago, the only reported opinion that mentions the Texas International Arbitration Act. At any rate, last Friday, April 21, the Fifth Circuit issued its second Bridas opinion. After remand, the district court reviewed the evidence, ruled that alter ego did not apply, and refused to confirm the award against Turkmenneft, the successor-entity. The Fifth Circuit has reversed that ruling (link is to .pdf), finding that alter ego does in fact apply in this case. The opinion is more about alter ego law than it is about arbitration law, but the Bridas case is an important one in this area, so it seemed worth mentioning an additional chapter in the long story. Technorati Tags: arbitration, ADR, Fifth Circuit, law

On Friday, the Third Court of Appeals issued an opinion in an accelerated appeal of a trial court’s denial of a special appearance, finding that the appellants in question did not have, in their individual capacities, sufficient contacts with the State of Texas to be subject to a Travis County District Court’s personal jurisdiction. The case involved a California corporation’s breach of a commercial lease of some Austin office space. The corporation, which provided PR services to what the Court refers to as “dot.com” companies, closed its doors in June 2001. The landlord sued not only the company, which was a party to the lease, but also the individual officers of the California company, who lived and worked solely in California. The individual defendants filed special appearances, claiming that Texas lacked personal jurisdiction over them because (1) all actions regarding the Cedar Bridge lease were performed in their corporate capacities, (2) all payments from NWR to them occurred in California, and (3) they did not know and should not be expected to have known that the dot.com industry would crash in January 2001, meaning that they did not accept their biannual bonus with any intent to defraud NWR’s creditors. Niehuas, Ryan, and Wong each attached affidavits swearing to these facts. Appellants’ pleadings and affidavits also negated the standard jurisdictional facts, such as not having a residence, maintaining an agent, a place of business, a bank account, real or personal property, personal employees, or a mailing address in Texas; not committing a tort or entering a contract in Texas; and not paying taxes in Texas. The landlord, in response, asserted that certain bonus payments the company made to the individual defendants at the end of 2000 constituted fraudulent transfers, as the company and its officers ought to have known that the “dot.com” industry was about to crash (or was in the process of crashing). The Court of Appeals, however, stated that even if the bonus payments were fraudulent transfers to the detriment of the company’s creditors, even the fraudulent transfer scheme occurred solely in California, so it could not provide a basis for personal jurisdiction over the individual officers. Edwin Niehaus, William Ryan and Carrie Wong v. Cedar Bridge, Inc., Cause No. 03-05-003340CV Technorati Tags: litigation, Third Court of Appeals, law

This past Friday, the Third Court of Appeals issued an opinion in a post-divorce fraud case which sets forth a nice statement of the law on collateral attacks in Texas. In 1993, a Timothy Chambers and his father created a Texas partnership to develop a piece of real estate. They hired attorneys to draft the paperwork, which established that Mr. Chambers’ interest was to be his separate property, a gift from his parents. In 1997, Mr. Chambers and his wife divorced, and during the divorce, the wife argued that Mr. Chambers “had attempted to defraud [wife] out of her share of community property by fraudulently recharacterizing community property as his separate property.” Nonetheless, a property settlement was reached, and the Final Decree of Divorce awarded Mr. Chambers all of the interest in the partnership. In 2001, however, Mr. Chambers’ ex-wife subsequently sued Mr. Chambers’ father and the law firm that did the partnership work for fraud. Judge Meurer granted the defendants’ motion for summary judgment on the basis that the ex-wife’s claims were an impermissible collateral attack on the divorce judgment, and the Third Court of Appeals affirmed. The opinion explains in detail the difference between intrinsic and extrinsic fraud in collateral attack analysis. Henderson v. Chambers, et al., Cause No. 03-04-00599-CV The Court also issued a lengthy opinion in a workers’ comp case involving a dispute about which of two companies employed two workers injured in a trucking accident. One of the companies owned the truck, and the other owned the DOT license. They jointly operated the truck under a written lease agreement. Texas Prop. & Cas. Guar. Assoc. v. National Amer. Ins. Co., Cause No. 03-05-00401-CV Technorati Tags: litigation, Third Court of Appeals, law

This morning, the Third Court of Appeals issued an opinion in a fascinating case, from a procedural perspective. Jeffrey Kendziorski obtained a judgment for fraud from a Comal County justice court against a Robert Marshall. The $2,760.50 judgment was for compensatory damages and court costs, but not for exemplary damages. Mr. Marshall appealed the judgment de novo to the Comal County Court at Law and posted a $5,521.00 surety bond (Rule 571 requires that an appellate bond of twice the judgment be posted in justice court appeals). One of the sureties was a Don Saunders. On appeal, the Country Court at Law awarded Kendziorski $1,334 in compensatory damages, $1,399.44 in court costs, and $5,000.00 in exemplary damages. In other words, more than the justice court had ordered. After the judge announced the judgment in open court, but before it was actually reduced to judgment, Mr. Marshall, the defendant, passed away. Unable to collect from Mr. Marshall’s widow, Kendziorski came after the surety. Mr. Marshall resisted, and Kendziorski sued Marshall on the bond. Marshall answered and assorted a whole host of legal defenses. The Court, on motion for summary judgment, ordered that Mr. Saunders was liable for the compensatory damages, but not the exemplary damages, and Kendziorski appealed. The Court’s opinion is actually quite an interesting discussion of the interpretation of surety bonds and the various legal defenses that can be made against any breach of contract claim, such as unconscionability, unilateral mistake and ambiguity. The Court also examines the law pertaining to collateral attacks on judgments. Saunders, the surety, argued that the Court at Law impermissibly issued a punitive damages award against an estate, and so he, the surety, cannot be liable for it. The Court of Appeals found this to be an impermissible collateral attack on the judgment against the Estate of Mr. Marshall. The Court did, however, allow Mr. Saunders to attack the underlying judgment on the basis that it exceeded the limits of a justice court’s jurisdiction. All in all, it’s quite an interesting opinion, from a procedural perspective, despite the fact that only $5000 was at stake, and the Court never tells us anything about the underlying facts, that is, what Mr. Marshall did to defraud Mr. Kendziorski in the first place. Jeffrey A. Kendziorski v. Don Saunders, Cause No. 03-04-00334-CV Technorati Tags: litigation, Third Court of Appeals, law