Altesse Healthcare Solutions, Inc. v. Wilson

Decision Date23 February 2018
Docket NumberNo. 16–0922,16–0922
Citation540 S.W.3d 570
Parties ALTESSE HEALTHCARE SOLUTIONS, INC., and Shawna Boudreaux, Petitioners, v. Allen WILSON and Becky Wilson, Respondents
CourtTexas Supreme Court

Christopher R.J. Hillis, Dan E. Martens, The Law Office Dan E. Martens, Dallas, TX, for Petitioners.

Collin D. Kennedy, David R. Wortham Jr., Hastings L. Hanshaw, Hanshaw Kennedy LLP, Frisco, TX, for Respondents.

PER CURIAM

Trial courts have broad authority to impose appropriate sanctions on recalcitrant litigants. In re Bennett , 960 S.W.2d 35, 40 (Tex. 1997). That authority is not, however, without limits. We previously held that "a direct relationship must exist between the offensive conduct and the sanction imposed." TransAmerican Natural Gas Corp. v. Powell , 811 S.W.2d 913, 917 (Tex. 1991). In other words, a court imposing sanctions must seek to ensure that "[t]he punishment ... fit[s] the crime." Id. Accordingly, so-called death-penalty sanctions, under which the offending party essentially loses the case because of the sanction, are generally reserved for the most egregious cases in which the offending party's conduct justifies a presumption that its claims lack merit. Paradigm Oil, Inc. v. Retamco Operating, Inc. , 372 S.W.3d 177, 184 (Tex. 2012).

In this case, the trial court imposed, and the court of appeals affirmed, sanctions even more severe than death-penalty sanctions for the defendants' failure to fully comply with a temporary restraining order. The sanctions made the plaintiffs better off than if they had succeeded on the merits of their claims. While we take seriously the defendants' violation of the restraining order, we conclude that the defendants' conduct did not justify the extreme punishment imposed. We therefore reverse the judgment of the court of appeals and remand the case to the trial court for further proceedings.

Plaintiffs Becky and Allen Wilson were the owners and sole shareholders of ABACAW Enterprises, Inc., a home healthcare company serving primarily elderly patients. Under a June 21, 2014 agreement, the Wilsons sold their business to defendant Altesse Healthcare Solutions, Inc., a company owned by defendant Shawna Boudreaux. The agreement provided for a transfer of all ABACAW's stock from the Wilsons to Altesse in exchange for a purchase price of $800,000, to be paid in installments beginning on October 15, 2014. Boudreaux personally guaranteed the payments.

After the agreement was signed, Altesse began running the business. On October 15, 2014, Altesse and Boudreaux (collectively Altesse) failed to make the first payment due under the agreement and instead sued the Wilsons in federal court, alleging a federal securities-fraud claim and invoking pendent jurisdiction over related state-law claims. Altesse alleged that the Wilsons misrepresented and failed to disclose material facts in the sale of ABACAW. Specifically, Altesse alleged that the Wilsons misrepresented the number of ABACAW patients, Medicare reimbursements due, an agreement with a landlord, and other facts.

On December 16, the Wilsons sued Altesse in state court for damages and injunctive relief, alleging that Altesse breached the parties' contract by failing to make the first payment. The Wilsons immediately sought a temporary restraining order. On December 17, attorneys for both sides appeared before the trial court. Without taking evidence, the court signed a TRO that prohibited Altesse from contacting ABACAW's employees, contractors, and patients, and from holding itself out as operating the business. It required Altesse to return to the Wilsons, within three days, all assets of ABACAW, access to the business and various business records and documents, administrator access and password information, and documents reflecting current patients, current employees, and patient records. The assets Altesse was required to turn over included ABACAW's Medicare license, provider numbers, accounts receivable, "all clients of ABACAW," computers and other physical equipment, and various records.

The TRO was set to expire on December 31. The TRO set a hearing for December 22 on the Wilsons' application for temporary injunction. On December 19, Altesse filed an emergency motion to set aside the TRO and later that day filed a notice of removal of the state-court action to federal court. The removed case was assigned to the federal court already hearing Altesse's federal complaint. On January 30, 2015, the federal court granted the Wilsons' motion to remand, concluding that removal jurisdiction was lacking and that "removal was clearly done in an attempt to avoid the [TRO] and delay the ... equitable relief granted by the state court." As best we can tell, the federal court retained Altesse's original complaint.

After remand, Altesse was under no obligation to continue to comply with the TRO, which had expired. The Wilsons did not request a hearing on a temporary injunction that might have continued the relief granted by the TRO. But on March 19, 2015, the Wilsons filed a motion for contempt and sanctions, alleging that Altesse violated the TRO. The trial court conducted an evidentiary hearing on this motion that lasted about 2.5 hours. At the hearing, Mr. Wilson testified that during the term of the TRO, Altesse transferred funds out of ABACAW's bank account and failed to return certain physical assets. Wilson testified that, during the TRO period, ABACAW went from treating 55 patients to just three and that he could document that 20 or 21 of these patients had transferred to a new company Boudreaux formed called Trinicare. Wilson also testified that Boudreaux had drawn down $46,000 on a line of credit. Boudreaux admitted that, during the term of the TRO, Altesse held itself out as an owner or agent of ABACAW, used ABACAW's Medicare provider number, National Provider Number, and Medicare license, and contacted ABACAW's patients. She admitted that she depleted assets of ABACAW during the term of the TRO, but she also claimed the Wilsons had left her with almost $200,000 in debt when she acquired the business. She testified that she transferred all ABACAW assets in her possession to the Wilsons by December 29, 2014, before the TRO expired.

On April 21, the trial court signed an order granting the motion for contempt and sanctions. The order stated that "death penalty sanctions should be imposed" against Altesse. It awarded sanctions of $897,937.51. This amount included the full $800,000 contractual purchase price of the business, attorney's fees, and an award reflecting cash transfers Altesse made during the term of the TRO. On April 27, the trial court signed a final judgment for the same amount. The court of appeals affirmed the judgment. 544 S.W.3d 1, 2016 WL 4443762 (Tex. App.–Dallas 2016).

We review a trial court's ruling on a motion for sanctions for abuse of discretion.

Cire v. Cummings , 134 S.W.3d 835, 838 (Tex. 2004). There is little question on this record that Altesse knowingly violated the TRO. The trial court heard evidence that Altesse was aware of the TRO as soon as it was signed. The TRO directed Altesse to turn over all assets of ABACAW to the Wilsons, yet Boudreaux wrote numerous checks and made other cash transfers after the TRO was signed. Boudreaux admitted that Altesse held itself out as an owner or agent of ABACAW and used ABACAW's Medicare provider number, National Provider Number, and Medicare license in violation of the TRO. The trial court also heard evidence regarding Altesse's failure to return certain physical assets of ABACAW, although Boudreaux testified she had given some of those assets to charity. Regardless, the record before us demonstrates that Altesse did not fully comply with the TRO despite knowing of its requirements.

None of Altesse's excuses for non-compliance is completely persuasive. Altesse argues that it could not under Texas law turn over its patients to the Wilsons in the short time required by the TRO. But it does not cite, nor are we able to locate, any specific regulation that the TRO required it to violate. The Wilsons point out that 40 TEX. ADMIN. CODE § 97.218 requires notice of a change in the controlling person, but this notice may be made within seven days after the date of the change and does not appear to conflict with the TRO. Moreover, Altesse's argument is inconsistent with evidence that Altesse began treating patients as soon as it purchased ABACAW from the Wilsons.

Altesse argues that it removed the case to federal court because it fairly believed the state lawsuit was a counterclaim to its previously filed federal suit. Even if we ignore the federal court's conclusions that the removal was an attempt to avoid the effect of the TRO and that the state suit was improperly removed, the removal was not a legitimate basis for ignoring the TRO. Post-removal, state-court orders generally "remain in full force and effect until dissolved or modified by the [federal] district court." 28 U.S.C. § 1450.

The TRO prohibited contact with patients, employees, and nurses. Boudreaux argues that she could not as a nurse ethically abandon her patients, who needed constant care. Altesse also argues that patients have a right to choose their provider. While both of these assertions may be true, they did not entitle the defendants to violate the TRO by persuading patients to go with Boudreaux to her new company. The TRO broadly prohibited all patient contact, and some violations of that prohibition may indeed have been justified by medical necessity or professional ethical obligations. But the TRO's prohibition on patient contact appears to have been intended primarily to avoid exactly the kind of patient recruitment engaged in by Boudreaux.

Having concluded that Altesse knowingly...

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