Cleveland v. Taylor
| Decision Date | 28 June 2012 |
| Docket Number | No. 01–11–00227–CV.,01–11–00227–CV. |
| Citation | 397 S.W.3d 683 |
| Court | Texas Court of Appeals |
| Parties | James R. CLEVELAND; Paul R. Cleveland; Kellie L. Dorman; Nicos Energy, LLC; Oasis Petroleum, LLC; and Lone Star Land & Exploration, LLC, Appellants v. Robert G. TAYLOR II; Joseph F. Archer; Claiborne Bruce; Allam Alshayeb; Russ Himel; Raymond Chachere; Dennis McLaughlin; Dale Gorman; Louay Joubarani; Seman Matta; and Carlo Cangelosi, Appellees. |
OPINION TEXT STARTS HERE
David George, Connelly, Baker, Mothring, LLP, Houston, TX, Gregg Alan Clements, Law Offices of Gregg Clements, Sealy, TX, for Appellants.
Eric Michael Adams, Jeremy Richard Stone, Meheffey Weber P.C., Houston, TX, J. Michael Lytle, Lytle & Moore, LLP, Richmond, TX, for Appellees.
Panel consists of Justices KEYES, BLAND, and SHARP.
Appellees, Robert G. Taylor II, Joseph F. Archer, Claiborne Bruce, Allam Alshayeb, Russ Himel, Raymond Chachere, Dennis McLaughlin, Dale Gorman, Louay Joubarani, Seman Matta, and Carlo Congelosi (collectively, “the Investors”), sued appellants, James R. Cleveland, Paul R. Cleveland, Kellie L. Dorman, Nicos Energy, LLC, Oasis Petroleum, LLC, and Lone Star Land & Exploration, LLC (collectively, “the Cleveland parties”) for fraud, breach of contract, and other causes of action arising out of investments related to an oil and gas prospect. The trial court eventually entered summary judgment in favor of the Investors on all of their claims. In five issues, the Cleveland parties argue that the trial court erred (1) in denying their motion to compel arbitration; (2) in refusing to allow them to withdraw their deemed admissions; (3) in granting summary judgment in favor of the Investors; (4) in granting summary judgment awarding the Investors attorney's fees of $500,000; and (5) in entering “the death-penalty sanction” against Kellie Dorman.
We modify and affirm as modified.
The Investors invested various sums of money in an oil and gas venture described by the parties as the Schleicher County well.1 The investments were primarily solicited by James “Rusty” Cleveland, who controlled the companies Oasis Petroleum, LLC, and Lone Star Land & Exploration, LLC. Paul Cleveland, James's son, was also involved in the venture at issue at various points, both individually and through his operating company, Copperhead Operating, LLC.2 Many of the investments were received by Nicos Energy, LLC, which was owned by James Cleveland's wife, Kellie Dorman.
The Investors subsequently discovered that James Cleveland had previously pled guilty to securities fraud and had served a prison sentence for that crime. They also discovered that, as a condition of his supervised release, James Cleveland was not supposed to act in a fiduciary capacity at any financial institution. They never received any of the promised returns on their investments regarding the oil and gas venture, and this lawsuit was filed. 3
Two investors, Archer and Taylor, filed their original petition on October 5, 2009, alleging causes of action for common law fraud and fraudulent inducement, breach of contract, conspiracy to defraud, unjust enrichment, and violations of the Texas Theft Liability Act.4 Archer and Taylor also demanded an accounting regarding the money they had invested and alleged that “Nicos Energy, LLC, Oasis Petroleum, LLC and Lone Star Land & Exploration, LLC are the alter egos of the individual Defendants.” The remaining investors were subsequently added in amended petitions.5 The Cleveland parties filed a general denial on April 9, 2010.
The Investors alleged that James and Paul Cleveland made various representations regarding the Schleicher County well's productivity and potential returns on investments with the purpose of inducing them to invest money. The Investors wrote checks or wired money to various Cleveland entities, including Oasis Petroleum and Nicos Energy, based on the Cleveland parties' representations that they would assign interests in the prospect to the Investors in return. However, the Investors were never given written documentation of their interests in the well. The Investors alleged that the Cleveland parties' representations about the nature of the oil and gas prospect and the additional wells and production that they intended to procure were all false.
The Investors propounded multiple requests for production and interrogatories, and the Cleveland parties failed to respond. On August 4, 2010, the Investors moved for the first time to compel the Cleveland parties to comply with the Investors' discovery requests. On August 16, 2010, the parties entered an agreed order, signed by the trial court, granting the Investors' motion to compel.
On September 22, 2010, the Investors moved again for sanctions, complaining of multiple instances in which the Cleveland parties “have refused to participate in discovery.” The motion for sanctions alleged that the Cleveland parties had not complied with the agreed order of August 16, 2010. The Investors also alleged that “Kellie Dorman refused to attend her properly noticed deposition” 6 and that “James R. Cleveland appeared at his deposition for approximately 17 minutes, where he refused to answer even basic questions regarding his prior employment, and then walked out of the deposition on the advice of counsel when asked about his parole terms for his theft and securities violations conviction.”
On October 4, 2010, attorneys for both sides attended a hearing on the Investors' motion for sanctions. The trial court stated that the Investors' motion for sanctions “appear[ed] to be the death penalty” and that he would attempt to use less-harsh remedies to procure compliance before he struck the Cleveland parties' pleadings and entered a default judgment. The trial court signed an order, dated November 29, 2010, and subsequently amended on December 6, 2010, granting sanctions and compelling discovery. The trial court ordered full and complete compliance with the Investors' previous discovery requests and provided specific dates and times for each Cleveland party to appear to be deposed at the offices of the Investors' counsel, Lytle & Moore, LLP, in Richmond, Texas.
On December 6, 2010, the Cleveland parties filed their first amended answer, special exceptions, and breach of contract counterclaim for unpaid operating costs under a “valid participation agreement.” In response, the Investors filed several special exceptions and asserted numerous affirmative defenses.
On December 13, 2010, the Cleveland parties filed their motion to compel arbitration. The motion states, “In a written Participation Agreement[, the Investors] agreed to arbitrate this case in the following terms: A copy of the agreement is attached hereto and is labeled as Exhibit A.” It also quotes a portion of the “Participation Agreement” addressing arbitration. However, the “Participation Agreement” itself is not attached to the motion provided with the clerk's record.
On December 14, 2010, Kellie Dorman again failed to appear for her deposition. The Investors filed a second certificate of nonappearance.
On December 20, 2010, the Investors answered the Cleveland parties' counterclaim and filed special exceptions. The Investors also moved for summary judgment, seeking traditional summary judgment on their own claims and no-evidence summary judgment on the Cleveland parties' counterclaim.
On December 30, 2010, the Investors moved again for orders of contempt and sanctions against the Cleveland parties, arguing that Kellie Dorman and Nicos Energy failed to appear for their depositions and that all Cleveland parties had failed to comply with the court's prior order. The Investors asked that, in addition to ordering further sanctions and holding the Cleveland parties in contempt, the trial court render a default judgment against all Cleveland parties.
On January 10, 2011, the date the Investors noticed for the hearing on their motion for contempt and sanctions, the Cleveland parties moved for a continuance on the grounds that their attorney had a scheduling conflict and that they had moved to compel arbitration and were “awaiting the Order setting this Motion for a hearing.” The trial court proceeded with the hearing, granted the Investors' motion, and ordered that Kellie Dorman's pleadings be struck. The Investors also argued their December 20, 2010 motion for summary judgment on all of their claims against the Cleveland parties; the trial court denied the motion.7
On January 25, 2011, the Investors filed a motion for default judgment against Kellie Dorman in compliance with the trial court's order striking her pleadings.
On January 27, 2011, the Investors filed a “Notice of Filing [of] Defendant's Admissions,” contending that they had served the Cleveland parties with requests for admission on December 21, 2010, and that the Cleveland parties had failed to respond. The Investors attached a copy of their requests for admission to the notice and certified that the notice had been served on Gregg Clements, the attorney for the Cleveland parties.
On January 31, 2011, the Investors filed their response to the Cleveland parties' motion to compel arbitration. The Investors argued multiple bases for denying the motion, including: (1) the Cleveland parties failed to establish that an agreement of the parties to arbitrate existed or that the dispute fell within the scope of an arbitration agreement between the parties; (2) the arbitration clause cited in the motion to compel arbitration was unconscionable because it permitted the Cleveland parties to choose all three members of the arbitration panel; and (3) the Cleveland parties waived their right to compel arbitration “by waiting over a year since this suit was filed, and less than sixty days before the commencement of trial” to bring their motion to compel. Among other arguments, the Investors complained that the Cleveland parties attached only “an unverified and...
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