Fiamma Statler, LP v. Challis, 02-18-00374-CV

CourtCourt of Appeals of Texas
Writing for the CourtMemorandum Opinion by Justice Gabriel
Docket NumberNo. 02-18-00374-CV,02-18-00374-CV
Decision Date29 October 2020

AND FIAMMA MANAGEMENT GROUP, LLC, Appellants and Appellees

No. 02-18-00374-CV

Court of Appeals Second Appellate District of Texas at Fort Worth

October 29, 2020

On Appeal from the 342nd District Court and the 141st District Court Tarrant County, Texas
Trial Court Nos. 342-303752-18, 342-294034-17, and 141-294034-17

Before Sudderth, C.J.; Gabriel and Kerr, JJ.
Memorandum Opinion by Justice Gabriel
Concurring and Dissenting Memorandum Opinion by Chief Justice Sudderth

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In this appeal, we are asked to decide whether a thirty-one-page petition alleging multiple claims against twelve defendants was subject to dismissal regarding two of those defendants under Rule 91a and, if so, whether the prevailing defendants were entitled to a larger award for costs and attorney's fees. We conclude under the facts of this case that although the petition included a plethora of facts, neither the petition's length nor its substantive allegations saved the claims brought against these two defendants from dismissal under Rule 91a. Therefore, the two defendants were entitled to a mandatory award of all costs and reasonable and necessary attorney's fees. Regarding costs, the trial court erred by awarding a specific amount, which is a ministerial duty reserved for the trial court clerk. Regarding their trial attorney's fees, the two defendants as prevailing parties under Rule 91a were entitled to recover their reasonable and necessary attorney's fees incurred with respect to the challenged causes of action. Because the two defendants supported their request for trial attorney's fees with sufficient proof, the trial court abused its discretion by limiting the recovery solely to those fees tied to filing the successful motion to dismiss. Accordingly, we affirm the trial court's dismissal, but reverse and remand for a redetermination of the specified amounts awarded for costs and for reasonable and necessary trial attorney's fees. See Tex. R. App. P. 43.2(a), (d). And although the evidence of conditional appellate attorney's fees was insufficient, that issue must be remanded to the trial court for a redetermination as well.

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This case involves the renovation and reconstruction of the historic Statler Hotel and downtown public library in Dallas (the Project). In 2015, Commerce Statler Development, LLC (the Developer) began to redevelop the Statler Hotel into a hotel, apartments, restaurants, and retail space and to transform the adjacent library building into office space. The Centurion Parties1 owned 75% of the Developer. The minority interest effectively was owned by appellants Fiamma Statler, LP; Fiamma Partners, LLC; and Fiamma Management Group, LLC (collectively and singularly, Fiamma).

Funding for the Project was accomplished through private and public funds, including special subsidies from tax credits based on the Project's location in a tax-increment finance (TIF) district. Thus, the Project qualified for and received $46 million in TIF funds. PNC Investment Company, LLC purchased the TIF funds for the Project. Other federally regulated loans were obtained through the assistance of A&J Capital Investments, Inc. and Henry Global Consulting.

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The Developer contracted with Statler Developers, one of the Centurion Parties, to oversee "design, construction and development of the Project." The Developer also leased the Project to 1914 Commerce Leasing, another Centurion Party, which then entered into an omnibus management agreement for the Project with Fiamma Management.

When construction of the Project's exterior was nearing completion, the Centurion Parties selected one of their own—TriArc—to be the manager and general contractor to finish out the interior. When Fiamma balked and questioned TriArc's selection, 1914 Commerce Leasing terminated its property-management agreement with Fiamma Management. Under TriArc's management, the interior finish-out costs increased significantly.

These and other cost overruns spurred the Centurion Parties to attempt to sell the TIF funds in a public-bond offering. In August 2016, appellee Jefferies, LLC and its senior vice president, appellee Matthew D. Challis, brokered and underwrote a bond sale, preparing an offering memorandum (the Offer) that included representations about the nature of the Project and offering $41 million of the TIF funds for sale. See 17 C.F.R. § 240.15c2-12(f)(8) (2018). The funds were offered to and sold to Wisconsin for $26 million.


The increased costs, the end of the management contract with Fiamma Management, the handling of the funds received from public sources, and the TIF sale

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soured the relationship between Fiamma, the Centurion Parties, and the Developer. This led to a long and convoluted litigation history involving several amended petitions, nonsuits, and an array of ever-shifting claims and allegations, all occurring before any significant discovery was conducted.

1. Multiple Petitions and Initial Motions to Dismiss

In December 2016, Fiamma petitioned the 348th District Court of Tarrant County for an order allowing Fiamma to investigate possible claims against A&J. See Tex. R. Civ. P. 202.1. Fiamma twice amended its petition to add as defendants PNC and Jefferies. On May 8, 2017, the trial court denied Fiamma's petition. See Tex. R. Civ. P. 202.4(a).

On July 31, 2017, Fiamma filed suit against several parties involved in the Project, including Jefferies and Challis (the Underwriters); the suit was assigned to the 141st District Court of Tarrant County.2 Against the Underwriters, Fiamma alleged claims for

• aiding and abetting breach of fiduciary duty and

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• aiding and abetting fraud.

Two days later, Fiamma filed a notice of nonsuit, and the petition was dismissed.

On August 21, Fiamma filed an original petition bringing similar claims against the Underwriters, A&J, Henry Global, and PNC. The case was assigned to the 352nd District Court. The Underwriters moved to transfer the case back to the 141st District Court because Fiamma's prior nonsuit and rapid refiling constituted "improper forum- or judge-shopping" given the "liberal rules regarding amendments to pleadings." The 352nd District Court granted the motion and transferred the case to the 141st District Court. Against the Underwriters, Fiamma raised claims for

• aiding and abetting Centurion American's breach of fiduciary duty and

• aiding and abetting Centurion American's fraud.

The Underwriters answered and raised the affirmative defense of legal justification.3 See Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 863 (Tex. App.—Houston [14th Dist.] 2001, pets. denied) (op. on reh'g).

Jefferies and Challis each filed a motion to dismiss Fiamma's claims because they had no basis in law or fact.4 See Tex. R. Civ. P. 91a.1. The motions were set for a

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December 14 hearing. On November 13, Fiamma filed a first amended petition against the same defendants. Against the Underwriters, Fiamma alleged

• fraud arising from its role in the TIF sale;

• aiding and abetting the "fraudulent scheme" to misuse the federally backed loan proceeds and to sell the TIF funds; and

• conspiracy.

On November 28—sixteen days before the dismissal hearing—Fiamma filed a second amended petition, adding as defendants most of the Centurion Parties5 and the Developer. Fiamma raised claims against the Underwriters for

• fraud;

• aiding and abetting the "fraudulent scheme" surrounding the Project and its funding;

• aiding and abetting Centurion American's, 1914 Commerce GM's, and Moayedi's breach of the management contract with Fiamma Management; and

• conspiracy.

Rather than amending their dismissal motions, the Underwriters withdrew them on December 11 "in light of [Fiamma's] Second Amended Petition." See Tex. R. Civ. P. 91a.5(b).

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Six hours later, Fiamma filed a third amended petition against the same defendants and added the remaining Centurion Parties. Against the Underwriters, Fiamma alleged:

• fraud by material misrepresentations in the Offer and by failing to disclose the TIF sale to Fiamma;

• aiding and abetting fraud regarding the Project and, specifically, regarding the TIF sale;

• aiding and abetting 1914 Commerce Development's, Moayedi's, the Developer's, and Centurion American's breaches of fiduciary duty; and

• conspiracy.

2. Motion for Sanctions Based on Pleadings Abuse

The Underwriters then filed a motion for sanctions against Fiamma based on pleadings abuse, raising some of the same arguments included in their prior motions to dismiss:

[Fiamma] and [its] attorneys have abused the judicial process by filing multiple frivolous, groundless, and false pleadings against [the Underwriters] in bad faith and without reasonable inquiry of facts or applicable law as the next step in their long campaign to coerce a buy-out at a steep profit of their involvement in [the Project]. . . . [Fiamma's] baseless claims against [the Underwriters] rest on conclusory allegations devoid of evidentiary support, are belied by publicly available documents, and are unviable under Texas law.

See Tex. Civ. Prac. & Rem. Code Ann. § 10.004(a), (c); Tex. R. Civ. P. 13.

On January 23, 2018, the trial court stayed the case "until the date of the oral hearing on the [sanctions] Motion," which was later set for March 23, 2018. Fiamma then nonsuited its claims against PNC and A&J. Three days before the hearing, Fiamma

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responded to the Underwriters' sanctions motion and argued that the motion was based on no legal or evidentiary support and was premature because no appreciable discovery had been conducted.

At the nonevidentiary hearing, the trial court ordered Fiamma to file a proposed jury charge to clarify what claims it was alleging against which defendant. The Underwriters explained the reason why they chose to file a sanctions motion instead of a second motion to...

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