Bigham v. Se. Tex. Envtl., LLC
| Decision Date | 05 February 2015 |
| Docket Number | NO. 14–12–00084–CV,14–12–00084–CV |
| Citation | 458 S.W.3d 650 |
| Parties | Ken Bigham and Tracy Hollister, Appellants/Cross–Appellees v. Southeast Texas Environmental, LLC, Appellee/Cross–Appellant |
| Court | Texas Court of Appeals |
Lauren Beck Harris, James Martin Juranek Jr., David George, Houston, TX, for Appellant.
Tom A. Dickens, Gene F. Creely, II, Lydia S. Zinkhan, Houston, TX, for Appellee.
Panel consists of Justices McCally, Busby, and Donovan.
Appellant/cross-appellee, Ken Bigham, was granted power of attorney to manage environmental-contamination litigation filed on behalf of appellee/cross-appellant, Southeast Texas Environmental, LLC (“STE”), against third parties, in exchange for Bigham receiving a percentage of the proceeds. Appellant/cross-appellee, Tracy Hollister, was an owner of STE and also designated to receive a percentage of the proceeds pursuant to the power-of-attorney agreement, although not a signatory thereto. When the parties' relationship eventually deteriorated, STE sued Bigham and Hollister (hereinafter collectively “appellants”), claiming, inter alia, they breached fiduciary duties to STE by essentially sabotaging the contamination litigation. Pursuant to the jury's verdict in the present case, the trial court rendered judgment against appellants for actual and exemplary damages, but refused to order disgorgement of the proceeds they had already received.
On appeal, appellants seek reversal of the damages award. STE has filed a cross-appeal, advancing grounds for remand if we do not uphold the award and challenging the trial court's refusal to order disgorgement. We reverse the portion of the judgment awarding damages to STE and render judgment that STE take nothing on its claim for damages. However, we also reverse the trial court's refusal to order disgorgement and remand for further proceedings on that request. We affirm the remainder of the judgment.
A chemical waste facility on Galveston Bay, known as “the Malone site,” began operating in the 1960s. Over the decades, numerous companies deposited hazardous waste at the site, and it was continually cited for permit violations. The State of Texas put the site into involuntary bankruptcy in the early 1990s.
A businessperson named Jeffrey Pitsenbarger (“Jeff”) wanted to buy the Malone site out of bankruptcy and use it as a location for converting hazardous waste into various products. Jeff formed STE for that purpose. At that time, Jeff owned 30% of STE, Hollister owned 20%, and the remainder was owned by two persons who are not involved in this case. Jeff wanted Hollister's participation because he had expertise in hazardous-waste disposal, which Jeff lacked, and Hollister had managed the site for some period and brought it into compliance.
Only a month after the purchase (which was completed in 1999), the Environmental Protection Agency (“EPA”) unexpectedly declared the site a Superfund site, which removed STE's authority and forced it, as current owner, to clean up the contamination, at great expense. However, STE, as innocent landowner, could seek contribution for those costs from the companies who deposited the waste. Toward that goal, Hollister introduced Jeff to Bigham, with whom Hollister had previously owned a hazardous-waste storage and disposal company. It was represented to Jeff that Bigham possessed expertise in managing environmental litigation.
In return, the POA provided that Bigham would receive a percentage of the litigation proceeds. Although Hollister was not a signatory to the POA, he was also designated to receive a small percentage of the proceeds because he was an owner of STE and key witness in the Malone litigation. STE was not designated to receive any proceeds. Instead, because Jeff's father, Roger Pitsenbarger (“Roger”), financed the purchase of the property, clean-up costs, and the Malone litigation, he was made a party to the POA and assigned a share of the proceeds. The POA set forth that net proceeds would be divided as follows:
In the meantime, to repay the debt to Roger, STE had transferred the property to Regor Properties LLC (“Regor”), a company formed by Roger as a subsidiary of Kordel, Inc. (“Kordel”), another company owned by Roger. Thus, Regor and Kordel were also parties to the POA. Roger died while the Malone litigation was pending. His interests in Kordel (and thus Regor) passed to his wife, Elsie Pitsenbarger (“Elsie”), and were ultimately placed in a trust for her.
Partners Mike Martin and Frank Mitchell were retained as the attorneys to prosecute the Malone litigation, pursuant to a separate contingency-fee agreement. The attorneys filed the litigation on STE's behalf in Galveston County.1 The litigation was prosecuted from 2003 through 2007. In 2007, STE settled with various defendants considered “de minimis” contributors to the site. The trial against the remaining defendants, considered major contributors, was set for November 5, 2007.
As the de minimis settlements were consummated and the remaining trial date approached, the relationship between the parties to the present case deteriorated. Jeff came to believe that Bigham was not actively managing the litigation and was placing his own interests above those of STE. In particular, beginning in April 2007,2 Bigham insisted the property should be conveyed to the Malone defendants as part of any future settlement of that litigation—a proposition that Jeff strongly opposed. Then, according to Jeff and Martin, in July, Bigham made verbal threats to inform the Malone defendants that another company partially owned by Jeff had illegally deposited waste at the property after it was declared a Superfund site. Such revelation would undisputedly destroy STE's status as innocent landowner and undermine its position in the Malone litigation and could result in the EPA holding STE responsible for clean-up costs.3 STE alleges Bigham made these threats to force STE to immediately settle the Malone litigation under Bigham's proposed terms so that he could receive his percentage because he was having financial difficulties.
Meanwhile, Martin and Mitchell began to have differences that would ultimately result in dissolution of their partnership. During July and August, Bigham, while expressing concerns about the representation if the partnership dissolved, insisted that Martin confirm Bigham had complete control of the Malone litigation in the event he and Jeff disagreed about any issues. This request concerned Martin because he believed (1) his obligation was to all parties to his contingency-fee agreement (which included Bigham, Jeff, and STE), (2) Jeff must approve any settlements, and (3) Bigham's authority under the POA to manage the litigation was a role belonging to Martin.
On August 28, Martin and Mitchell dissolved their partnership. Bigham chose Mitchell to continue representing STE and signed a new contingency-fee contract with him. Jeff was upset about this action because he thought Martin was much more familiar with the Malone litigation. The next day, Martin declared a conflict of interest regarding Bigham's interest in the litigation based on Martin's concerns described above and the disputes between Bigham and Jeff on how to handle the litigation.
On the same day, Jeff, individually and on behalf of STE, and Elsie's trustee, on behalf of Regor and Kordel, revoked the POA because of Jeff's view that Bigham was placing his own interests above those of STE and Bigham's choice of Mitchell to continue as counsel. Jeff then retained two other attorneys to oversee the Malone litigation, and they reinstated Martin. Mitchell and Martin also agreed to set aside their differences in order to prosecute the Malone litigation to an optimal result.
At that point, some settlement funds in the Malone litigation had been distributed pursuant to the POA, but $450,000 in de minimis settlement funds had not been received, and trial against the major contributors was two months away. Thus, the parties to the present case became involved in a dispute over appellants' rights under the POA. STE maintained that the POA had been properly revoked. Appellants insisted that they were entitled to a percentage of any proceeds, Bigham still had sole right to control the Malone litigation, and that STE accept a settlement offer from the major contributors for $1 million—an amount that STE considered inadequate. STE proposed that prospective settlement funds be escrowed pending resolution of the dispute so that the parties could focus on prosecuting the litigation against the major contributors. Appellants opposed that proposition and threatened in writing to intervene in the Malone litigation if STE did not confirm the rights claimed by appellants.
In September, STE filed the present suit,...
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