Formosa Plastics Corp. v. Kajima Intern.

• Decision Date: 28 December 2006
• Docket Number: No. 13-02-00385-CV.,13-02-00385-CV.
• Citation: 216 S.W.3d 436
• Parties: FORMOSA PLASTICS CORP., USA, Appellant, v. KAJIMA INTERNATIONAL, INC., Appellee.
• Court: Texas Court of Appeals

216 S.W.3d 436

FORMOSA PLASTICS CORP., USA, Appellant, v. KAJIMA INTERNATIONAL, INC., Appellee.

No. 13-02-00385-CV.

Court of Appeals of Texas, Corpus Christi-Edinburg.

December 28, 2006.

David R. Montpas, San Antonio, TX, for Appellant.

Steven John Lownds, Quilling, Selander, Cummiskey & Lownds, Dallas, TX, for Appellee.

Before the court en banc.

OPINION ON REHEARING EN BANC

ROGELIO VALDEZ, Chief Justice.

Appellee, Kajima International, Inc. ("Kajima"), moved for rehearing en banc of this Court's opinion issued November 10, 2004, in which the Court concluded that Formosa Plastics Corp., USA ("Formosa") met its burden to disqualify A.W. "Chip" Hutchison, Kajima's expert witness, on the basis that Hutchison's colleague, Steven Huyghe, previously consulted with Formosa. Formosa Plastics Corp., USA v. Kajima Int'l, Inc., No. 13-02-00385-CV, 2004 WL 2534207, 2004 Tex.App. LEXIS 9950, *15 (Tex.App.-Corpus Christi Nov. 10, 2004, no pet. h.). The Court reversed the judgment and remanded the matter for a new trial with directions that Hutchison and others from his firm would not be permitted to testify. See id. at *20. Justice Castillo's dissenting opinion concluded that Formosa had waived the side-switching issue, and would have affirmed the judgment of the trial court. Id. at *83 (Castillo, J., dissenting).

The Court has granted rehearing en banc. We withdraw our original opinion and judgment issued on November 10, 2004, and issue this opinion and accompanying judgment in their stead. On rehearing, we conclude that Formosa failed to meet its burden of proof to disqualify Hutchison, and we affirm the judgment of the trial court.

I. Background

Kajima International Inc. ("Kajima"), an industrial construction company, submitted several bids for work on Formosa's expansion plant project located in Point Comfort, Texas. Formosa awarded Kajima five contracts, some involving piping work in the olefins area and others involving piping and equipment setting work in the polypropylene plant. Each contract specified a schedule of performance. The general terms and conditions common to all contracts permitted Kajima to work overtime only if Kajima or its subcontractors delayed the work, and, in such an event, Kajima received no additional compensation for the overtime.

Performance took much longer than provided for in the contracts, causing Kajima's costs to vastly exceed the contract amount paid by Formosa. Kajima asserts it was required to spend this money as a result of Formosa's fraudulent conduct in connection with the bidding process and its fraudulent inducement of extra-contractual work. According to Kajima, the engineering drawings for its work at the polypropylene plant were full of errors and inaccuracies, yet Formosa knowingly misrepresented the quality of the design drawings for the project during the bidding process. Kajima asserts Formosa fraudulently induced it to enter into the contracts and make artificially low bids on the contracts by withholding information relating to the design and drawings of the polypropylene plant. Kajima further asserts Formosa knowingly provided Kajima with a false schedule concerning the ole-fins plant which failed to reveal that multiple contractors would be working in the same location, and at the same time, as that planned by Kajima, thus preventing Kajima from executing its responsibilities under the contracts. Moreover, according to Kajima, Formosa engaged in a "string along" fraud scheme in which Formosa made repeated false promises to compensate Kajima for delays, disruptions, bid omissions, and additional costs in order to keep Kajima working. At the conclusion of the project, Kajima had spent in excess of $38 million but had received only $10 million from Formosa.

Formosa counters that Kajima spent in excess of the contract prices because of Kajima's own bidding and contract administration mistakes. Formosa asserts the drawings were adequate for building and bidding and, when problems arose, Kajima was paid pursuant to the contract. Formosa further contends that Kajima knew other contractors would be working within its area and that any conflict in scheduling was the result of Kajima's own mismanagement.

Kajima sued Formosa and Formosa Plastics Corp., Texas ("Formosa Texas") in January 1993 for breach of contract, fraud, and quantum meruit arising from five of the construction contracts. The matter was first tried to a jury in 1997. The jury found that Formosa did not breach any of the five contracts but did fraudulently induce one of the contracts. The trial court subsequently rendered judgment for Kajima for $4,491,066.65. Kajima appealed, and this Court reversed and remanded the case for a new trial. Kajima Int'l Inc. v. Formosa Plastics Corp., USA, 15 S.W.3d 289, 294 (Tex.App.-Corpus Christi 2000, pet. denied).

The case was tried again in 2002. Kajima nonsuited Formosa Texas and the matter was submitted to the jury on the issue of fraud. The jury found Formosa guilty of fraud and awarded Kajima approximately $15 million dollars, or roughly 60% of the damages it sought. The trial court rendered judgment for Kajima for actual damages of $15,432,123.45, prejudgment interest of $14,210,269.65, and $403,156.86 in costs. This appeal ensued. Formosa raises nine issues on appeal.

II. Expert Disqualification

We will first address Formosa's third issue on appeal, that is, the expert disqualification issue which the Court found determinative of the appeal in its original opinion. Formosa alleges that Kajima's expert, A.W. "Chip" Hutchison, should not have been permitted to testify. Formosa first argues that an expert retained and paid by one party cannot switch sides and testify as an expert for the opposing party in the same case. Formosa contends that the firm of A.W. Hutchison & Associates, Inc. served as Formosa's "consulting" experts and Formosa satisfied all requirements to disqualify the firm and Chip Hutchison. In contrast, Kajima contends that any information Formosa provided to Hutchison's colleague, Steven Huyghe, was discoverable and not confidential, and no confidential information was shared with Hutchison or Huyghe. Kajima further asserts that, even if confidential information was disclosed to Huyghe, that knowledge could not be imputed to Hutchison. The factual background regarding this matter is critical to understanding and properly analyzing this issue.

When the question of litigation with Kajima first originated, Formosa retained the law firm of Jones, Day, Reavis & Pogue ("Jones Day"). Counsel for Jones Day contacted Huyghe, an expert in heavy industrial construction and president of A.W. Hutchison & Associates of California, Inc. Huyghe and an assistant met with attorneys from Jones Day and in-house counsel for Formosa. They spoke about "strategies for this case and what kind of defense we ought to establish," and "what the contentions were that Kajima had against Formosa and how we were going to answer some of those allegations." They further discussed Kajima's allegations against Formosa and which allegations might be true or were not true. Huyghe was to assist in document review and organization in order to "see what we had." The Formosa attorneys never requested that Huyghe maintain confidentiality regarding these conversations or documents, nor did they request that he execute any confidentiality agreement.

Huyghe reviewed and organized documents that had been produced by Formosa to Kajima and documents produced from Kajima to Formosa. He prepared a work plan outlining his proposed method for evaluating the situation as well as an index of relevant documents received from Kajima.

Huyghe sent several letters to Jones Day and copied some of those letters to Hutchison, his colleague at A.W. Hutchison & Associates, Inc., in Atlanta, a separate but related corporation from that which employed Huyghe.¹

The first of these letters, dated June 14, 1993, discussed the consulting group's "possible involvement" in the litigation, provided examples of prior work, and mentioned that Hutchison was available for a meeting "if you so desire." A letter dated October 19, 1993, discussed what A.W. Hutchison & Associates had done for clients in the past and explained the methodology usually employed to evaluate problems. This letter was marked as "privileged and confidential." Huyghe also provided a letter agreement for the engagement of the group and included a proposed confidentiality agreement, which Formosa's attorneys never signed.

In late 1993, Formosa transferred its defense from Jones Day to the law firm of Porter & Hedges. The Porter & Hedges attorneys received Huyghe's proposed work plan and the index of documents from Kajima, but decided not to employ Huyghe's services. On April 6, 1994, Porter & Hedges told Huyghe to consider himself "indefinitely on hold." By this point, Huyghe had submitted bills totaling approximately $22,000 for more than 167 hours of work. On April 15, 1994, Huyghe contacted Porter & Hedges and, detailing his group's work on prior cases, requested an opportunity to meet with Formosa's attorneys to present his thoughts on the case. Porter & Hedges failed to accept this invitation.

A few months later, Kajima's attorney approached Huyghe about consulting with Kajima in the lawsuit. Huyghe informed the attorneys at Jones Day, who suggested contacting Porter & Hedges about this possibility and any potential conflicts of interest. Apparently Huyghe did not contact the new attorneys. Huyghe did sign a "conflict certification" affidavit provided by Kajima, in which he certified that "A.W. Hutchison & Associates, Inc., has not received any confidential information from any Formosa entity or from its counsel." Kajima did not hire Huyghe; however, it did hire both Chip Hutchison and Brian Rogers of A.W. Hutchison & Associates, Inc. in Atlanta, Georgia.

At the trial, Huyghe testified that he had not received any confidential...