Altesse Healthcare Solutions, Inc. v. Wilson

• Decision Date: 23 February 2018
• Docket Number: No. 16–0922,16–0922
• Citation: 540 S.W.3d 570
• Parties: ALTESSE HEALTHCARE SOLUTIONS, INC., and Shawna Boudreaux, Petitioners, v. Allen WILSON and Becky Wilson, Respondents
• Court: Texas Supreme Court

540 S.W.3d 570

ALTESSE HEALTHCARE SOLUTIONS, INC., and Shawna Boudreaux, Petitioners,
v.
Allen WILSON and Becky Wilson, Respondents

No. 16–0922

Supreme Court of Texas.

OPINION DELIVERED: February 23, 2018

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

540 S.W.3d 573

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...