Rose v. Aaron (In re Rose)
| Decision Date | 30 September 2020 |
| Docket Number | CASE NO. 17-42053,ADV. PROC. NO. 17-4104 |
| Parties | IN RE: CAROL ALISON RAMSAY ROSE, Debtor. CAROL ROSE AND CAROL ROSE, INC., Plaintiffs/Counter-Defendants, v. LORI AARON, PHILLIP AARON, AARON RANCH, AND JAY MCLAUGHLIN Defendants/Counter-Plaintiffs. |
| Court | U.S. Bankruptcy Court — Eastern District of Texas |
This case is before the Court on the Attorney Fee Application [Adv. Proc. No. 17-4104, Doc. No. 224] by Hynds & Gordon, P.C. and Frost Brown Todd LLC as well as the Application for Allowance of Fees and Expenses [Bankruptcy Case No. 17-41053, Doc. No. 289] by the Ashmore Law Firm, P.C. and Sheppard Sands, as attorneys for the Defendants/Counter-Plaintiffs Lori Aaron, Phillip Aaron and Aaron Ranch (collectively, the "Aarons"). Carol Rose ("Rose") and Carol Rose, Inc. (collectively, the "Rose Parties") and Equis Equine, LLC and Elizabeth Weston (collectively, "Weston") object to the allowance of the amount requested in the applications. The Court conducted an evidentiary hearing on April 24, 2019 and, at the end of the hearing, took the applications under advisement in order to prepare a detailed written ruling.
The parties are familiar with the underlying dispute and the Court will not repeat all its prior findings. In summary, and as relevant to the Aarons' fee applications, the underlying litigation began when Rose sued the Aarons in Texas state court on October 3, 2013 (the "Aaron Ranch Lawsuit"). In various iterations of her state court complaint, Rose sought between $2.6 million and $12.2 million in damages arising out of the Aarons' alleged breaches of contract1 as well as the Aarons' alleged (1) fraudulent inducement to enter into an agreement with respect to certain horses; (2) fraudulent inducement to enter into a lease her horse ranch in Gainesville, Texas (the "Gainesville Ranch"); (3) invasion of solitude; and (4) defamation. The Aarons filed counterclaims seeking between $5 million and $20 million in damages for (1) statutory fraud, common law fraud, and fraudulent misrepresentation; (2) breach of fiduciary duty; (3) invasion of privacy; (4) tortious interference with contracts and prospective business relations; (5) business disparagement; (6) specific performance and constructive trust; (7) trespass to real property; (8) breach of contract; (9) accounting; (10) declaratory judgment; (11) civil conspiracy; (12) violations of the Texas Theft Liability Act (the "TTLA"); and (13) equitable subrogation and constructive trust.
Two additional lawsuits were filed after the Aaron Ranch Lawsuit commenced. The first was a lawsuit filed in state court on July 16, 2014 by Rose against her ex-horse trainer, Jay McLaughlin, who was later employed by the Aarons (the "McLaughlin Lawsuit"). That actionwas consolidated with the Aaron Ranch Lawsuit in state court on September 25, 2015. The second lawsuit was filed in state court on August 7, 2015 by Weston against the Aarons, Rose, and others (the "Weston Lawsuit"). Weston filed the lawsuit after unsuccessfully attempting to intervene in the Aaron Ranch Lawsuit. In the Weston Lawsuit, Weston asserted claims against the Rose Parties for (1) violations of Texas Business and Commerce Code § 2-328; (2) common law fraud, fraudulent inducement, and fraud by nondisclosure; (3) negligence and negligent misrepresentation; (4) violations of the TTLA, (5) violations of the Texas Deceptive Trade Practices Act ("TDTPA"); and (6) conspiracy, aiding, and abetting.
The discovery process was contentious, especially with respect to the Aaron Ranch Lawsuit, and went on for years in state court. The parties fought over depositions and the production of documents, among other things, in various states where witnesses were located. Many attorneys were involved in the litigation of the Aaron Ranch Lawsuit and the Weston Lawsuit due to the amount of time that passed between the initiation of the litigation and trial, the many different types of claims asserted by the parties, the many potential witnesses located in different parts of the country, the fights over documents in different jurisdictions, and differing areas of legal expertise. Rose and the Aarons each employed numerous lawyers and law firms over the years.2
The Rose Parties filed for bankruptcy in September 2017. They removed all the pending litigation to bankruptcy court on October 25, 2017, which commenced several adversary proceedings. The Aarons and McLaughlin moved to remand the Rose Parties' lawsuits againstthem back to state court. The Rose Parties and Weston objected, arguing that the parties' claims against Rose were "core" claims against the bankruptcy estate that this Court would necessarily decide as part of the claims allowance process. The Court denied the motions to abstain following a hearing on February 13, 2018.
Prior to the hearing on the motion to abstain, in January 2018, the Aarons, McLaughlin and Weston filed proof of their claims against the Rose Parties. They stated that the amounts of their claims were unknown and attached materials relating to the state court litigation to their proofs of claim. However, in their fourth amended answer and counterclaim, the Aarons sought a minimum of $5 million in damages, $15 million in exemplary damages, costs and reasonable attorneys' fees. The Rose Parties objected to the allowance of their bankruptcy claims.
The Court administratively consolidated the claim objections with the adversary proceedings for purposes of trial. The parties agreed that this Court should try some, but not all, of the state law claims between the parties.3 Despite the (relatively) limited nature of the trial, the parties submitted a 92-page joint pre-trial order together with a 249-page exhibit list. The Rose Parties included 368 exhibits on her original exhibit list, the Aarons included 762, and Weston included 592.
The Court tried the parties' claims and counterclaims over nine days in May and June 2018. Much of the trial was focused on the Aaron Ranch Lawsuit. At the conclusion of trial, the Court invited the parties to submit proposed findings and conclusions for the Court's consideration as well as written closing arguments. In addition, the Court scheduled a hearing on July 6, 2019, fororal closing arguments. The parties filed closing briefs and proposed findings on or before presenting their closing arguments on July 6, 2018.4
For the reasons explained in the Court's memorandum opinion entered on January 23, 2019 (and amended on September 27, 2019), the Rose Parties did not prevail on any of their claims against the Aarons. This Court found in favor of the Aarons on their claims for breach of contract, TTLA violations, and breach of fiduciary duty. With respect to breach of contract, the Court found that the parties intended a Confidential Term Sheet, Consulting Agreement, and Lease to "work as a single unified contract," and that Rose breached the agreement by locking the Aarons out of the Gainesville Ranch. The Court also found that Rose violated the TTLA by refusing to allow the Aarons to retrieve their horses from the Gainesville Ranch after the lockout until they paid the entire amount of a so-called "stableman's lien." And the Court found that Rose breached her fiduciary duties under the agreements prior to the lockout by deliberately attempting to sabotage the performance of Jay McLaughlin, who was at that time employed by the Aarons, at a competition. The Court found that the Aarons established damages for breach of contract in the amount of $1,109,000.00 and damages for TTLA violations in the amount of $61,257.32. The Court found that Rose's attempted sabotage of McLaughlin's performance was unsuccessful and that the Aarons had not established any damages as a result of Rose's breach of her fiduciary duty.5
The Aarons are seeking their attorneys' fees in connection with their breach of contract claim and their claim for TTLA violations. See TEX. CIV. PRAC. & REM. CODE §§ 38.001, 134.005.They submitted two fee applications to this Court with supporting records that include more than 8,000 detailed time entries from the inception of litigation in October 2013 through July 2018. As discussed below, the application from the Ashmore Law Firm, P.C. and Sheppard Sands ("Ashmore") seeks approximately $400,000 for legal services in pursuing the breach of contract claim plus approximately $20,000 incurred in connection with the prosecution of his fee application. The joint application by Hynds & Gordon, P.C. ("H&G") and Frost Brown Todd LLC ("FBT") seeks approximately $3.1 million for legal services in connection with the breach of contract claim and the TTLA claim plus approximately $220,000 incurred in connection with the prosecution of their fee application.
According to the briefs and affidavits, the Aarons incurred the total sum of $4,319,097 in fees and costs billed by H&G and FBT through July 2018. The Aarons separately incurred the total sum of $568,610 in fees and costs billed by Ashmore. The Aarons have paid all or substantially all the fees and costs billed by their attorneys.
The fee applications describe how counsel arrived at the amounts requested in their applications. Mr. Sands states in an affidavit in support of the Ashmore law firm's application that he personally reviewed all his firm's invoices. The Ashmore law firm is not seeking recovery for $135,451.25 relating to fees that Mr. Sands determined are not recoverable under Texas law. Mr. Sands states in his affidavit that the remainder of the entries, which total $410,479.25 for the period of October 1, 2013 through February 22, 2019, are so inextricably intertwined with the breach of contract and TTLA claims that they are 100% recoverable. In addition, the Ashmore law firm seeks $22,479.45 for its fee litigation-related costs.
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