Star Electricity, Inc. v. Northpark Office Tower, LP

• Court: Texas Court of Appeals
• Writing for the Court: Sherry Radack Chief Justice
• Decision Date: 14 July 2020
• Docket Number: NO. 01-17-00364-CV,01-17-00364-CV
• Citation: Star Elec., Inc. v. Northpark Office Tower, LP, NO. 01-17-00364-CV (Tex. App. Jul 14, 2020)
• Parties: STAR ELECTRICITY, INC. D/B/A STARTEX POWER F/K/A STAR ELECTRICITY, L.L.C. D/B/A STARTEX POWER, Appellant v. NORTHPARK OFFICE TOWER, LP, NORTHPARK OFFICE TOWER GP, LLC, JETALL COMPANIES INC., 1415 NLW, LLC, MOHAMMED A. CHOUDHRI A/K/A ALI CHOUDHRI A/K/A ALI JETALL, THE ESTATE OF NAEEM CHOUDHRI, SHAHNAZ CHOUDHRI A/K/A SHAHNAZ AKHTER, A.I.G.W.T., INC., 5700 THOUSAND OAKS, LLC, 411 NORTH BELT, LLC, AND INNER BELT HOLDINGS, LLC, Appellees

STAR ELECTRICITY, INC. D/B/A STARTEX POWER F/K/A STARELECTRICITY, L.L.C. D/B/A STARTEX POWER, Appellant v. NORTHPARK OFFICE TOWER, LP, NORTHPARK OFFICE TOWER GP, LLC,JETALL COMPANIES INC., 1415 NLW, LLC, MOHAMMED A. CHOUDHRIA/K/A ALI CHOUDHRI A/K/A ALI JETALL, THE ESTATE OF NAEEM CHOUDHRI,SHAHNAZ CHOUDHRI A/K/A SHAHNAZ AKHTER, A.I.G.W.T., INC.,5700 THOUSAND OAKS, LLC, 411 NORTH BELT, LLC, AND INNER BELT HOLDINGS, LLC, Appellees

NO. 01-17-00364-CV

Court of Appeals For The First District of Texas

July 14, 2020

On Appeal from the 129th District Court Harris County, Texas

Trial Court Case No. 2010-71330

MEMORANDUM OPINION ON REHEARING¹

This is a suit by an electric company against its customer for breach of contract and against the customer and its associated entities for fraudulent transfer, tortious interference with a contract, dishonor of a check, fraud, and conspiracy. Appellant, Star Electricity, Inc., doing business as StarTex Power, formerly known as Star Electricity, L.L.C. ("Star"), challenges the trial court's summary judgments in favor of appellees, Northpark Office Tower, LP, Northpark Office Tower GP, LLC (collectively, "Northpark"); Jetall Companies Inc. ("Jetall"); 1415 NLW, LLC ("NLW"); Mohammed A. Choudhri, also known as Ali Choudhri, also known as Ali Jetall ("Choudhri"); The Estate of Naeem Choudhri ("Naeem"); Shahnaz Choudhri, also known as Shahnaz Akhter ("Shahnaz"); A.I.G.W.T., Inc. ("A.I.G.W.T."); 5700 Thousand Oaks, LLC ("Thousand Oaks"); 411 North Belt, LLC ("North Belt"); and Inner Belt Holdings, LLC ("Inner Belt").

Star presents four issues. In its first and second issues, Star contends that the trial court erred by imposing a death-penalty sanction, i.e., striking the testimony of its sole expert on damages, and granting appellees' motion for no-evidence summary judgment on the damages element of Star's breach-of-contract claim. In its fourth issue, Star contends that the trial court erred in granting appellees' motion, anddenying Star's motion, for summary judgment on Star's claims brought under the Texas Uniform Fraudulent Transfer Act ("TUFTA").² In its third issue, Star contends that the trial court erred in granting summary judgment dismissing its remaining claims as barred by the doctrine of res judicata.

We affirm in part and reverse and remand in part.

Background

Star provides retail electricity services to commercial and residential users throughout Texas. As a service provider, Star does not generate or transmit electricity itself, rather, it purchases electricity from a supplier and sells it to the end user. When a customer executes a contract for electricity services, Star purchases sufficient power from its supplier to service the life of the customer's contract. Star then delivers the electricity to the customer through distribution lines operated by transmission and distribution service providers.

Star asserts that, in September 2008, it entered into an Electric Service Agreement ("ESA") with Northpark. Pursuant to the ESA, Star agreed to provide Northpark with electricity services at its office building located at 1415 North Loop West, Houston, (the "Property") for a term of 60 months, beginning on October 15, 2008. Northpark agreed to purchase electricity at a rate of 8.97 cents per kilowatt hour and to pay Star monthly. Northpark also agreed that, should it terminate ordefault on the ESA prior to the end of the agreed term, it would pay Star an "Early Termination Fee" ("ETF"), as follows:

In the event that Customer terminates this ESA or Customer defaults . . . then an [ETF] will be assessed. The [ETF] shall be equal to any mark to market costs. For purposes of this Agreement, the mark to market costs shall be calculated as the higher of: a) the difference between the cost of Energy procured by [Star] in order to satisfy the Customer's requirements under this ESA for the Customer's Service Location(s) . . . and the final net liquidated value of said Energy at the time of termination by Customer multiplied by the total amount of Energy procured for the Customer's Service Location(s) . . . for the remainder of the original Term of the ESA, as reasonably determined by [Star] and b) zero dollars and no cents ($0.00).

Subsequently, to fulfill its commitment under the ESA to provide electricity to Northpark, Star executed a Power Purchase and Sale Agreement ("Supplier Agreement") with its supplier, Luminant Energy Company LLC ("Luminant"). Under the Supplier Agreement, Star purchased the volume of electricity required to service the Property for the life of the 60-month ESA. Thereafter, Star began providing electricity to the Property and submitting monthly invoices to Northpark.

Two years later, in July 2010, Northpark began falling behind on its monthly payments to Star for electricity services at the Property. By October 14, 2010, Northpark's outstanding balance for electricity services totaled $82,548.39. On October 18, 2010, Choudhri, as the principal of Northpark and an officer of Jetall,³ sent an email to Star, in which he repudiated the ESA on the ground that Star had"never signed" it. Choudri asserted that the parties had been "operating on a month to month" basis and that he was "[t]hereby revok[ing] the agreement." Star responded that if Northpark did not retract its repudiation, it would sue to recover Northpark's outstanding balance for electricity services and for an early termination fee of $410,986.00, based on the remaining 11,265 megawatts of electricity that Star had contractually agreed to purchase from Luminant. Choudhri, on behalf of Northpark, then sent Star a letter terminating the ESA.

On October 27, 2010, Star sued Northpark for breach of the ESA, alleging that Northpark had defaulted on its terms by failing to pay for electricity services as agreed. Star sought damages in the amount of $493,534.39, consisting of $82,548.39 in unpaid services and an ETF in the amount of $410,986.00. Star also asserted liability against Choudhri and Jetall under veil-piercing theories. Star sought injunctions to enjoin Northpark from taking any action that would impair its ability to pay the judgment sought.

Star asserts that, on the same day that it filed its suit, Choudhri executed a deed transferring the Property, which was Northpark's sole asset, to NLW, another entity that Choudhri created. The transfer left Northpark depleted of assets adequate to satisfy the judgment Star sought. The following day, NLW, through Choudhri, encumbered the Property by obtaining a $6,500,000 loan against it. NLW then paid a portion of the proceeds to AIGWT, an entity owned by Choudhri and his parents,Shanaz and Naeem. Star asserts that proceeds further flowed to other entities that Choudhri had created, Thousand Oaks and North Belt. Accordingly, Star brought fraudulent transfer claims against all appellees. Star alleged that, in violation of TUFTA, each had fraudulently transferred assets without receiving reasonably equivalent value in exchange and with the actual intent to hinder, defraud, and delay Star, as a creditor, from recovering on its claims.

Star also brought claims against Northpark and Choudhri for dishonor of a check⁴; against Choudhri, Jetall, Shahnaz, and Naeem for tortious interference with a contract; and against all appellees for fraud and conspiracy. Star asserted that the corporate forms of Northpark, Jetall, NLW, AIGWT, Thousand Oaks, North Belt, and Inner Belt should be disregarded because Choudhri, Shahnaz, and Naeem had organized and operated them as conduits to perpetrate fraud.

Mediation

On May 24, 2011, the parties attended mediation before mediator, Alan Levin, and entered into a "Confidential Binding Settlement Agreement" ("Settlement Agreement"). The parties agreed that, to guarantee that Star, were it to prevail on its breach-of-contract claim against Northpark, could recover on its judgment, appellees would pledge collateral having an aggregate value in excess of $1,050,000. In partial satisfaction, Choudhri presented an 8.733-acre tract of land located onWest Fuqua Street, Houston, ("Fuqua Tract"), which he asserted had a value of $800,000. In exchange, Star agreed to non-suit its other claims without prejudice against all appellees. The Settlement Agreement states, in relevant part, as follows:

1. Land in Exhibit 1 [Fuqua Tract] placed as collateral to a[n] $800,000 payment by [illegible] party to indemnify the payment if [Star] get[s] to final judgment after appeals are exhausted. [Star] may at its expense get another appraisal and A. Levin will be non-appealable mediator to decide that this tract and any additional tracts are more than [$1,050,000].

. . . .

3. [Star] dismisses all parties but [Northpark] . . . without prejudice.

. . . .

6. If one or more disputes should arise with regard to the interpretation and/or performance of this agreement or any of its provisions, or the drafting or execution of further settlement documents, the parties agree to attempt to resolve any such dispute first by telephone conference with Alan. F. Levin, mediator herein, who facilitated this settlement. If the parties cannot resolve their differences by telephone conference, then each agrees to schedule one day of mediation with Alan F. Levin, mediator herein, within thirty (30) days after the unsuccessful telephone conference to attempt to resolve the disputes. . . . If any party refuses to mediate, that that party hereby forfeits all right to recover attorney's fees and/or costs in any subsequent litigation brought to construe or enforce this agreement. Conversely, if the subsequent mediation is unsuccessful, then the prevailing party or parties in the subsequent litigation shall be entitled to recover, as allowed by law or contract, reasonable attorneys' fees and expenses, including the cost of the unsuccessful mediation. Alan F. Levin has the final decision on any ambiguity in the settlement agreement.

Star noted that all appellees, except Inner Belt, executed...