American Fisheries, Inc. v. National Honey, Inc. D/B/A National Commodities Co., or D/B/A NCC Group, Ltd., Jun Yang, Individually, and Lin Huang, Individually ( 2018 )

Opinion issued August 7, 2018
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-17-00340-CV
———————————
AMERICAN FISHERIES, INC., Appellant/Cross-Appellee
V.
NATIONAL HONEY, INC., D/B/A NATIONAL COMMODITIES CO. OR
D/B/A NCC GROUP, LTD., JUN YANG, INDIVIDUALLY, AND LIN
HUANG, INDIVIDUALLLY, Appellees/Cross-Appellants
On Appeal from the 157th District Court
Harris County, Texas
Trial Court Case No. 2013-29749
OPINION
Appellant/cross-appellee, American Fisheries, Inc., challenges the trial
court’s award of attorney’s fees granted to appellees/cross-appellants, National
Honey, Inc., d/b/a National Commodities Co. or d/b/a NCC Group, LTD., Jun
Yang, individually, and Lin Huang, individually (collectively, National Honey), in
connection with the enforcement of a settlement agreement and a motion for
sanctions. In its sole issue on appeal, American Fisheries argues that the trial court
abused its discretion in awarding attorney’s fees for enforcing a materially disputed
settlement agreement. In its cross-appeal, National Honey complains in six issues
that the trial court erred in denying sanctions against American Fisheries’ attorney.
We affirm.
Background
American Fisheries sued National Honey, asserting breach of contract,
fraud, and other claims in connection with a contract for the sale of frozen shrimp.
National Honey counter-claimed, asserting causes of action for violation of the
Texas Deceptive Trade Practices Act, breach of express and implied warranties,
fraud, and breach of contract.
After nearly four years of litigation, the parties eventually reached a
settlement. They appeared before a Special Master on January 17 and 18, 2017, to
pre-admit exhibits according to the schedule set by the trial court; but, instead, the
parties reached a settlement and read their Rule 11 agreement (the Rule 11
Agreement) into the record on January 18, 2017. According to the report filed by
the Special Master, the Master met with the parties on January 17, 2017, and,
“[a]fter a conference between counsels, a settlement was announced.” The Master
2
further reported that counsel for American Fisheries had “requested an
adjournment until the next day to obtain approval from his client in China.”
The Special Master reported that the parties appeared before her again on
January 18, 2017, and that American Fisheries’ counsel, Andrew Gass,
“announced the settlement offered by [National Honey] was accepted.” She further
reported that counsel for National Honey was charged with drafting the agreement
and that both the Special Master and counsel for American Fisheries waited while
the agreement was drafted. She stated, “At mid-day on January 18, the parties
announced the settlement document was complete. The agreement was read into
the record” with counsel for both parties present, and a transcript of the proceeding
was filed in the trial court.
The Rule 11 Agreement read into the record contained ten paragraphs. It
provided that National Honey would pay a lump sum settlement via wire transfer
to American Fisheries, and, in exchange, American Fisheries would “dismiss with
prejudice all claims asserted or which could have been asserted in this cause of
action against” National Honey and its agents. The Rule 11 Agreement addressed
American Fisheries’ further obligations to release claims to funds held in
connection with litigation in federal court in Illinois and in the Southern District of
Texas. The terms of the Rule 11 Agreement further required that National Honey
release all of its claims against American Fisheries. The Agreement also addressed
3
certain third-party defendants, stating that National Honey and the individual
representatives “will dismiss, as they deem fit, their claims asserted or which could
have been asserted” against those third parties. Finally, the Rule 11 Agreement
provided, “No other sums of money shall be paid by American Fisheries, National
Honey, Inc., Jun Yang or Lin [Huang] pursuant to the settlement agreement, other
than the [confidential settlement amount] referred to in” the Agreement.
At the time the parties entered into this Rule 11 Agreement on the record
before the Special Master, American Fisheries also had a petition for writ of
mandamus pending in this Court, in which it challenged the trial court’s ruling
quashing a deposition. See In re American Fisheries, No. 01-17-00026-CV, 2017
WL 2255772, at *1–2 (Tex. App.—Houston [1st Dist.] May 23, 2017, orig.
proceeding) (per curiam). The Rule 11 Agreement required American Fisheries to
inform this Court that the petition for writ of mandamus was moot in light of the
settlement.
On February 20, 2017, National Honey sent a written settlement agreement
(the Settlement Agreement) reflecting the terms of the Rule 11 Agreement to
American Fisheries through its lead attorney, Xenos Yuen, who had not been
present at the hearing on January 18, 2017. American Fisheries responded with a
proposed agreement of its own, seeking additional fees that it owed to a financial
manager appointed by the trial court pursuant to a 2013 agreed temporary
4
injunction1 and seeking to address the dismissal of certain third parties, many of
whom had not yet appeared before the trial court.
On February 24, 2017, counsel for National Honey sent Yuen an email
demanding that American Fisheries comply with the Rule 11 Agreement entered
into on January 18, 2017, as embodied in the written Settlement Agreement that
National Honey had sent to Yuen on February 26. National Honey informed
American Fisheries that its “proposal is not consistent with the Rule 11 Agreement
made on January 18, 2017,” pointing out that the Agreement stated the amount of
total compensation to be paid to American Fisheries and that it would not now
agree to pay any additional funds. National Honey stated that it had deposited the
settlement funds into its attorney’s trust account in order “to complete the
settlement,” and if American Fisheries would not agree to proceed based on the
Rule 11 Agreement, it would “ask the Appellate Court to lift the stay [imposed in
the mandamus proceeding] so that we may proceed to enforce the Rule 11
Agreement.” National Honey subsequently sought, and obtained, a stay of the
mandamus proceedings so that it could enforce the Rule 11 Agreement in the trial
court.
1
These fees were apparently incurred by American Fisheries as the result of the
trial court’s order requiring it to pay half of the fees owed to the financial manager
appointed to address another aspect of the parties’ dispute.
5
On March 23, 2017, corporate representatives of American Fisheries
executed the February 20, 2017 draft of the Settlement Agreement created by
National Honey to memorialize the terms of the Rule 11 Agreement before a
notary at the consulate in Shanghai. However, Yuen, American Fisheries’ counsel,
did not convey the signed Settlement Agreement to the trial court or to National
Honey. Instead, Yuen made multiple inconsistent representations to National
Honey, on one occasion stating that American Fisheries was prepared to execute
the Settlement Agreement, but on other occasions arguing that the scope of the
Rule 11 Agreement was still disputed and engaging in further negotiations.
On March 30, 2017, National Honey—which at that time was unaware that
corporate representatives of American Fisheries had executed the Settlement
Agreement seven days earlier—moved to enforce the Rule 11 Agreement entered
into on January 18, 2017. National Honey related the details of the Rule 11
Agreement reached on the record before the Special Master on January 18, 2017,
and it asserted that it had prepared the settlement documents as contemplated at the
January 18 hearing. National Honey asserted that, on February 12, 2017,
American Fisheries “sent its revisions to the settlement agreement, substantively
altering many items that were previously agreed to before [the] Special Master[.]”
According to the motion to enforce, the parties exchanged numerous drafts of the
Settlement Agreement through the end of February 2017. The motion asserted,
6
“[American Fisheries] has attempted to modify the terms of the Rule 11
Agreement. The parties cannot agree on a formal document for the Settlement
Agreement made on the record on January 18, 2017. Consequently, [National
Honey] request[s] that this Court enforce the Settlement Agreement, as read into
the record.”
In its motion to enforce the Settlement Agreement, National Honey cited
authority indicating that a motion to enforce a settlement agreement may be treated
as a motion for summary judgment if it gives the nonmovant notice of the claim
and an opportunity to defend itself. It provided notice of an oral hearing more than
twenty-one days from the date of filing the motion to enforce. National Honey
further argued that it had established its right to enforcement of the Rule 11
Agreement as a matter of law—i.e., that the parties had a valid and enforceable
agreement, that it had tendered performance, that American Fisheries had breached
the terms of the Agreement, and that National Honey was harmed as a result of the
breach. National Honey also presented evidence, including transcripts of the
hearing in which the parties entered into the Rule 11 Agreement, the written
Settlement Agreement memorializing the Rule 11 Agreement it had provided to
American Fisheries, the declaration of National Honey indicating that it had
deposited the settlement funds into its counsel’s IOLTA account, and various
communications between counsel for American Fisheries and National Honey.
7
National Honey further asserted in its motion to enforce the Rule 11
Agreement that Andrew Gass and Diane Guillerman, the attorneys who
represented American Fisheries at the January 18, 2017 hearing, “clearly accepted
the agreement on the record on January 18, 2017,” after having informed the
Special Master that their client wanted to accept National Honey’s settlement offer
and having been granted a continuance to consult with their client before entering
the Rule 11 Agreement into the record. National Honey asserted that Yuen,
American Fisheries’ counsel, was attempting to change the settlement terms and
was arguing that he had not been present during the January 18 hearing and that he
had been unaware of the terms of the settlement.
National Honey included with its motion to enforce the Rule 11 Agreement
a copy of a motion to withdraw that had been filed by Guillerman in this Court in
conjunction with the related mandamus proceeding. In her motion to withdraw,
Guillerman asserted, among other grounds, that while the mandamus was pending,
“the parties in the underlying suit began settlement negotiations and entered into a
Rule 11 agreement, embodying the terms of the agreed upon settlement
negotiations, on January 18, 2017.” She stated that “Xenos Yuen gave [Gass, the
attorney who was present on behalf of American Fisheries at the January 18, 2017
hearing,] authority to enter into the settlement agreement.” She further stated that
8
“Gass and the other attorneys working on behalf of [American Fisheries] requested
Xenos Yuen attend the hearing before [the Special Master], but Yuen refused.”
Finally, National Honey sought approximately $31,000 in attorney’s fees
incurred in connection with its motion to enforce the settlement agreement. It
included affidavits establishing the amount of attorney’s fees.
On April 20, 2017, Gass and Guillerman intervened in the underlying
lawsuit and moved for attorney’s fees. According to their pleadings and other
arguments presented during hearings before the trial court, both Gass and
Guillerman worked with Yuen on the underlying case and he promised to pay them
a portion of the verdict or settlement in exchange for their services. However,
problems developed following the hearing on January 18, 2017, and Yuen removed
Gass and Guillerman from the case. They moved for the trial court to determine the
attorney’s fees owed to them pursuant to their agreement with Yuen and to order
payment accordingly.2
The trial court held a hearing on April 21, 2017. Yuen appeared on behalf of
American Fisheries. Gass and Guillerman appeared as intervenors seeking
attorney’s fees for their prior work on behalf of American Fisheries, and
2
The record on appeal contains only an unofficial copy of this pleading. However,
Yuen subsequently agreed on the record to pay the agreed-upon attorney’s fees to
Gass and Guillerman, and the trial court included the award of attorney’s fees to
both of them in the final judgment. American Fisheries does not challenge the trial
court’s ruling on this claim.
9
Guillerman stated that “all of [Gass’s and her] issues in this matter relate to the
settlement agreement, which is why the [parties] are here today.” Yuen asked the
trial court to exclude them from the hearing, but the trial court refused. Attorneys
for National Honey also appeared and argued that the trial court should grant the
motion to enforce the Rule 11 Agreement as asserted in its motion, and National
Honey supplemented its attorney’s fees affidavit with time records and moved “to
have that summary judgment evidence admitted.”
At the hearing, Yuen argued, among other grounds, that the Rule 11
Agreement was not enforceable because he was not present during the January 18,
2017 hearing before the Special Master and because the Rule 11 Agreement was
not entered into “in open court,” but was done “in front of a court reporter.” When
the trial court pointed out the agreement was reached before the Special Master,
“who is an officer of this Court,” Yuen argued that the Special Master “was there
only for a specific purpose, [to] admit evidence or exhibits” and thus the Master
was not “actually representing the Court for anything other than doing the
exhibits.” Yuen also argued that, “if any agreement between the [parties] can be
withdrawn . . . , then you should go for a new pleading or a summary judgment or
trial in order to determine [the enforceability of the agreement]” and that National
Honey ought to be required to replead its case. He also argued that National Honey
did not properly make a demand and presentment as required under Civil Practice
10
and Remedies Code Chapter 38 and thus was not entitled to attorney’s fees. He
also stated, “It is true that [American Fisheries] wanted to settle these matters.
However, during the finalization of the terms, all we can say is that on the Rule 11
agreement, there is an agreement to agree. And there are some terms, but [the]
terms are [being] disputed at this point.”
At the conclusion of this hearing, the trial court announced on the record its
intention to grant the motion to enforce the Rule 11 Agreement. It further awarded
National Honey the entirety of the attorney’s fees it sought in connection with the
motion to enforce. It then continued the hearing, stating that it would consider
Gass and Guillerman’s intervention at a subsequent hearing.
The trial court held another hearing on April 24, 2017, noting at the
beginning of the hearing that American Fisheries’ counsel, Yuen, was not present
despite having “acknowledged the rescheduling of the hearing to this morning.” It
stated that it had waited for a period of time for Yuen to arrive but it was going to
proceed in his absence. The trial court reiterated that it was “inclined to grant” the
motion to enforce the Rule 11 Agreement, and it discussed with the attorneys
present the issue of taxable costs. The trial court ultimately continued the
remainder of the hearing due to Yuen’s absence and the fact that the intervening
parties, Gass and Guillerman, had a hearing on their motion for attorney’s fees
scheduled for April 28, 2017.
11
According to the parties, the trial court signed an order granting National
Honey’s motion to enforce the Rule 11 Agreement on April 25, 2017, ordering
American Fisheries to “comply with the Rule 11 Agreement announced and agreed
to on January 18, 2017.”3 The trial court further granted National Honey attorney’s
fees in the amount of $31,860.50 plus conditional appellate attorney’s fees.
The trial court held another hearing on April 28, 2017, with the intention of
resolving the intervenors’ motion for attorney’s fees. In this hearing, Yuen
announced,
I believe that I need to announce to the Court that we have a
final resolution which may have changed the whole—put this whole
thing as a moot issue. This is the final settlement offer by [National
Honey] and it was executed. It demanded about the settlement and it
was the first time [sic], [and it has] all the signature[s] of the parties.
And after I consult[ed] with my client, they agree[d] with that.
And this is the actual settlement agreement that they sent with that
letter so that that basically would be the final settlement being signed
and accepted—offered and accepted on April the 27th and it was
signed; and therefore, we would have to go back to this final
settlement agreement.
Yuen stated that the “signature of his client was notarized,” and, without pointing
out the date that the agreement was executed and notarized, he provided to the
court the Settlement Agreement that was executed by American Fisheries on
March 23, 2017, prior to National Honey’s filing of its motion to enforce and prior
3
The record in this case contains only an unofficial copy of this order. However, the
final judgment recited substantially similar rulings regarding the settlement
agreement and attorney’s fees.
12
to the trial court’s April 25 order. Counsel for National Honey, apparently not
realizing that the date of the execution of the Settlement Agreement predated the
trial court’s order, stated that “we had not seen that document,” and he argued, “It
appears that what they have done now is try to change the facts that occurred. They
have now signed the agreement that they were not willing to sign before your
order.” Finally, Yuen agreed on the record to pay the attorney’s fees requested by
Gass and Guillerman.
At the conclusion of the April 28, 2017 hearing, as the trial court was
discussing the rulings that needed to be included in the final judgment, counsel for
National Honey pointed out that the trial court had previously granted more than
$31,000 in attorney’s fees incurred in connection with National Honey’s attempts
to enforce the Rule 11 Agreement. Yuen objected to the trial court’s including this
award in the final judgment, stating,
[T]he offer which I just showed you, the original, that was sent on the
26th—on the 27th with the signature of the part[ies] . . . basically
preempt[s] everything else. It was a new offer. It was accepted and it
is now [before the court]. Therefore, the attorney fees to enforce [are]
no longer necessary. And therefore, we ask the Court to actually
rescind that order. It is no longer necessary, because there is a new
offer.
In response, National Honey argued that its lawyers sent the signed Settlement
Agreement to American Fisheries, through Yuen, “because of your order of April
25th,” stating:
13
The parties were to sign the agreement. That is the settlement
agreement that was attached to your order. It was also the settlement
agreement that was sent to Mr. Yuen on February 20th that he did not
sign, which instigated us even having to move to enforce[.] It’s not a
new settlement agreement and it’s not a new offer.
The trial court determined that the attorney’s fees requested by National Honey
were “necessitated by the reluctance of the plaintiffs [American Fisheries] to
consent to the settlement that had been read into the record and the Rule 11
agreement.” It further determined that the fees requested were reasonable and
necessary and ordered that the requested fees be deducted from the settlement.
The trial court signed its final judgment on April 28, 2017, entering
judgment based on the parties’ terms of the Rule 11 Agreement as embodied in the
Settlement Agreement. It also included an award to National Honey of $31,860.50
in attorney’s fees and an award of a portion of the attorney’s fees to Gass and
Guillerman.
On May 27, 2017, National Honey moved to modify the final judgment and
sought sanctions to address Yuen’s conduct prior to and following the entry of the
final judgment. It argued that Yuen represented to both the trial court and to
National Honey that American Fisheries had signed the Settlement Agreement sent
pursuant to the trial court’s April 25 order, when, in reality, American Fisheries
had, on March 23, 2017, signed the Settlement Agreement sent to it by National
14
Honey the previous month. Thus, it asked the trial court to modify the judgment to
reflect the correct nature of the agreement between the parties.
National Honey also sought sanctions pursuant to Civil Practice and
Remedies Code Chapter 10, Rule of Civil Procedure 13, and Rule of Civil
Procedure 191.3 to address Yuen’s conduct. It cited, among other alleged
violations of the Texas Disciplinary Rules of Professional Conduct, the facts that
Yuen (1) failed to notify the trial court or National Honey that American Fisheries
“had actually signed the settlement agreement prepared by [National Honey’s]
counsel on March 23, 2017, seven days before [National Honey’s] counsel filed
the Motion to Enforce Rule 11 Settlement Agreement”; (2) argued that there was
no Rule 11 Agreement after his client had signed the Settlement Agreement; and
(3) “told the [trial court] and [National Honey] that [American Fisheries]
‘accepted’ the settlement on April 27, 2017, when clearly [American Fisheries]
accepted the settlement on March 23, 2017.” National Honey asserted that Yuen
made these misrepresentations before the trial court in this case and that he made
these or substantially similar misrepresentations in related litigation that was
pending in federal court in Illinois and the Southern District of Texas.
In support of its motion, National Honey attached numerous documents,
including the copy of the Settlement Agreement signed by American Fisheries’
corporate representatives on March 23, 2017, and the copy of the Settlement
15
Agreement executed by National Honey’s representatives and sent to American
Fisheries pursuant to the trial court’s April 25, 2017 order. National Honey also
included copies of numerous communications between Yuen, on behalf of
American Fisheries, and counsel for National Honey.
American Fisheries responded, arguing that an award of sanctions would be
improper. In the response, it argued, “On April 27, 2017, the Plaintiff [American
Fisheries] felt forced to accept and did accept[] the presentment of [the] Settlement
Agreement to dispose of the claims and causes of action by and between [the
parties], by signing, the presented Settlement Agreement, in counterpart.”
American Fisheries argued that the motion for sanctions had no basis in law or in
fact, that it “contradicts” the trial court’s final judgment dismissing all of the
parties’ claims, and that it “contradicts the alleged Rule 11 agreement.” American
Fisheries specifically argued that the motion for sanctions was improper because
“[t]he Settlement Agreement executed by the parties and . . . which is binding
provides” for a release by National Honey of any future claims, rights, demands, or
causes of action.
The trial court held an evidentiary hearing on the motion to modify and to
award sanctions on July 21, 2017, and the hearing was later continued until August
3, 2017. National Honey presented evidence of the foregoing events, including the
nature of the settlement negotiations; the parties’ Rule 11 Agreement; the
16
subsequent communications between Yuen and counsel for National Honey; the
fact that representatives of American Fisheries executed the Settlement Agreement
on March 23, 2017; Yuen’s failure to inform National Honey that his clients had
executed the Settlement Agreement, necessitating National Honey’s motion to
enforce; the purported misrepresentations made by Yuen throughout the litigation
up until the April 28, 2017 hearing and beyond; and the additional attorney’s fees
incurred by National Honey following the April 28, 2017 hearing and final
judgment. National Honey sought sanctions for, among other things, Yuen’s
attempt to renegotiate the parties’ settlement even after his client had executed the
Settlement Agreement; Yuen’s misrepresentations about the date on which his
client had executed the Settlement Agreement, both in the trial court and in other
courts in which proceedings were pending; and several other improper actions.
At the sanctions hearing, Yuen testified that although his clients had
executed the Settlement Agreement on March 23, 2017, he was not authorized to
release that document to National Honey or to the trial court at that time. He stated
that his clients desired that he attempt to renegotiate some of the items discussed
amongst the parties, such as the fees for the financial manager and the terms for
dismissal of certain third-party claims.
At the conclusion of the sanctions hearing, the trial court noted that it had
“previously ruled that Mr. Yuen attempted to retrade the deal subsequent to the
17
Rule 11 [A]greement” and that this was the justification for its award of attorney’s
fees to National Honey in the April 28, 2017 final judgment. The trial court further
stated,
One of [National Honey’s] principal arguments in this motion is that
Mr. Yuen failed to disclose that his client had previously signed the
[S]ettlement [A]greement on March 23rd. This Court accepts Mr.
Yuen’s testimony that he was not authorized to release that document
unless there were other items that were renegotiated. While that
attempted renegotiation may have been improper, this Court has
already issued attorney’s fees for that and no additional sanctions will
be issued on that.
Regarding the other conduct for which National Honey sought sanctions, the trial
court denied sanctions “for at least two reasons,” including that National Honey
had released its claims against Yuen for all matters prior to the Settlement
Agreement and that National Honey lacked standing to seek attorney’s fees for
some of the conduct. The trial court further stated on the record that any
complaints regarding improper conduct or false statements that were made in
federal courts “should be addressed to those courts.”
On August 10, 2017, the trial court signed its order denying National
Honey’s motion to modify and motion for sanctions. This appeal followed.
Attorney’s Fees
In its sole issue on appeal, American Fisheries argues that the trial court
erred in granting attorney’s fees to National Honey in connection with its motion to
enforce the Rule 11 Agreement.
18
A. Form and Procedural Posture of Motion to Enforce
American Fisheries asserts various complaints about the form of National
Honey’s motion to enforce and the procedural posture of the proceedings before
the trial court at the time it ruled on the motion to enforce. Among other
arguments, American Fisheries argues that National Honey failed to comply with
“the normal rules of pleading and proof” for enforcing a contested Rule 11
agreement and that it did not afford American Fisheries an opportunity to conduct
discovery or allow it a full hearing. We conclude that the motion to enforce
properly placed the issue of enforceability of the parties’ agreement before the trial
court.
An agreement to settle a case is enforceable by the trial court if it complies
with Texas Rule of Civil Procedure 11. See, e.g., Padilla v. LaFrance, 907 S.W.2d
454, 460 (Tex. 1995). Rule 11 requires that the agreement must be either (1) in
writing, signed, and filed with the papers as part of the record or (2) made in open
court and entered of record. TEX. R. CIV. P. 11. Here, the parties, through their
counsel, announced before the Special Master that they had reached a settlement.
Counsel for National Honey drafted the settlement document while the Special
Master and counsel for American Fisheries waited. The settlement document was
then read into the record before the Special Master, and both parties’ attorneys
affirmatively represented that those terms constituted the agreement between the
19
parties. Thus, the record reflects that the parties’ agreement was made in open
court and entered of record on January 18, 2017. See id.; Padilla, 907 S.W.2d at
460.
American Fisheries contends that the agreement was not made in open court
because it was made before the Special Master, and not the trial court. However, it
points to no authority, nor could we find any, to support its contention that an
agreement announced on the record before a Special Master was not made “in open
court.” On the contrary, special masters appointed pursuant to Rule of Civil
Procedure 171, as here, are officers of the court under the direction of the trial
court and “have such powers as the master of chancery has in a court of equity.”
See TEX. R. CIV. P. 171; In re Harris, 315 S.W.3d 685, 704–05 (Tex. App.—
Houston [1st Dist.] 2010, orig. proceeding) (discussing powers typically extended
to special master as including authority to contact parties, conduct hearings, require
production of evidence, and make recommendations to trial court). Furthermore,
the agreement here was reduced to writing and read into the record and approved
by both parties. National Honey further memorialized the parties’ Rule 11
Agreement in the written Settlement Agreement that was executed by
representatives for American Fisheries on March 23, 2017, and formally accepted
and agreed to on the record before the trial court on April 28, 2017.
20
American Fisheries also argues that, because it rescinded the Agreement
prior to judgment or effectively revoked its consent to the terms of the settlement
between January 18, 2017, and April 27, 2017, the trial court erred in not requiring
additional proceedings before enforcing the Agreement in its April 25, 2017 order.
This argument misconstrues the procedural posture of the motion to enforce.
“Although a court cannot render a valid agreed judgment absent consent at the time
it is rendered, this does not preclude the court, after proper notice and hearing,
from enforcing a settlement agreement complying with Rule 11 even though one
side no longer consents to the settlement.” Padilla, 907 S.W.2d at 461.
American Fisheries asserts that National Honey failed to seek enforcement
of the Agreement “in a separate action, subject to the normal rules of pleading and
proof,” but this Court “repeatedly has held that a motion to enforce an agreement
may be treated as a motion for summary judgment so long as the motion ‘gives the
nonmovant notice of the claim asserted and an opportunity to defend itself.’”
Bruess v. Residential Credit Sols., Inc., No. 01-13-00321-CV, 2014 WL 3843517,
*3 (Tex. App.—Houston [1st Dist.] Aug. 5, 2014, no pet.) (quoting Robinson v.
Cason, No. 01-11-00916-CV, 2013 WL 3354651, at *4 (Tex. App.—Houston [1st
Dist.] July 2, 2013, no pet.) (mem. op.), and citing Bayway Servs., Inc. v. Ameri-
Build Constr., L.C., 106 S.W.3d 156, 160 (Tex. App.—Houston [1st Dist.] 2003,
21
no pet.), and Neasbitt v. Warren, 105 S.W.3d 113, 117 (Tex. App.—Fort Worth
2003, no pet.)).
The record demonstrates that National Honey presented its claim that
American Fisheries was in breach of the parties’ Rule 11 Agreement in advance of
seeking enforcement in the trial court when it emailed Yuen on February 24, 2017,
informing him that National Honey believed the parties had a valid agreement and
that it would seek enforcement in the trial court if American Fisheries did not
honor the Agreement. National Honey subsequently moved to enforce the parties’
Rule 11 Agreement on March 30, 2017, and provided notice of a hearing at least
twenty-one days in advance. See TEX. R. CIV. P. 166a(c) (requiring twenty-one
days’ notice of summary judgment motion). Furthermore, National Honey argued
that it had established its right to relief as a matter of law, citing authority that such
a motion can be considered a motion for summary judgment. National Honey
presented evidence that the parties had a valid Rule 11 Agreement to settle, and
American Fisheries eventually effectively conceded as much by releasing the
executed Settlement Agreement that embodied the terms of the Rule 11 agreement,
albeit after National Honey was forced to file its motion to enforce.
Based on the record here, we conclude that the trial court could properly
treat the motion to enforce as a summary judgment motion. See Bruess, 2014 WL
3843517, *3; Bayway Servs., Inc., 106 S.W.3d at 160.
22
B. Merits of the Motion to Enforce
American Fisheries argues on appeal that there was no valid Rule 11
agreement or other enforceable settlement agreement between the parties until
April 27, 2017, when it finally agreed to the Settlement Agreement. It argues that,
prior to that time, no enforceable agreement existed and the trial court erred in
awarding National Honey attorney’s fees in connection with enforcing such an
agreement, as it did in its April 25, 2017 order granting National Honey’s motion
to enforce.
As we held above, the motion to enforce was effectively a motion for
summary judgment on National Honey’s claim that American Fisheries had
breached the parties’ Rule 11 Agreement. We review summary judgments de
novo. See Tex. Mun. Power Agency v. Pub. Util. Comm’n of Tex., 253 S.W.3d 184,
192 (Tex. 2007). When reviewing a summary judgment, we take as true all
evidence favorable to the nonmovant and indulge every reasonable inference and
resolve any doubts in the nonmovant’s favor. Valence Operating Co. v. Dorsett,
164 S.W.3d 656, 661 (Tex. 2005); Provident Life & Accident Ins. Co. v. Knott, 128
S.W.3d 211, 215 (Tex. 2003); Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910,
911 (Tex. 1997). The movant bears the burden to show that no genuine issue of
material fact exists and that it is entitled to judgment as a matter of law. TEX. R.
CIV. P. 166a(c); Knott, 128 S.W.3d at 215–16.
23
“Contract law governs settlement agreements made in open court pursuant to
Rule 11.” Gen. Metal Fabricating Corp. v. Stergiou, 438 S.W.3d 737, 744 (Tex.
App.—Houston [1st Dist.] 2014, no pet.) (citing Padilla, 907 S.W.2d at 460); see
also Shamrock Psychiatric Clinic, P.A. v. Tex. Dep’t of Heath & Human Servs.,
540 S.W.3d 553, 560 (Tex. 2018) (“Litigants’ Rule 11 agreements are contracts
relating to litigation, and thus we construe them under the same rules as a
contract.”). The enforceability of a settlement agreement is a question of law.
McCalla v. Baker’s Campground, Inc., 416 S.W.3d 416, 418 (Tex. 2013); see also
Stergiou, 438 S.W.3d at 744 (issue of whether Rule 11 settlement agreement fails
for lack of essential terms is generally question of law to be determined by court);
Martin v. Martin, 326 S.W.3d 741, 746 (Tex. App.—Texarkana 2010, pet. denied)
(“The question of whether an agreement is an unenforceable agreement to agree is
a question of law, not a question for the jury.”). A Rule 11 agreement will be
enforced when it is “made in open court and entered of record.” TEX. R. CIV. P. 11
(“Unless otherwise provided in these rules, no agreement between attorneys or
parties touching any suit pending will be enforced unless it be in writing, signed
and filed with the papers as part of the record, or unless it be made in open court
and entered of record.”); Shamrock Psychiatric Clinic, P.A., 540 S.W.3d at 561
(“To be effective, a Rule 11 agreement must consist of a ‘written memorandum
24
which is complete within itself in every material detail, and which contains all of
the essential elements of the agreement.’”).
National Honey presented the trial court with evidence establishing the
existence of a valid Rule 11 agreement as a matter of law. The agreement was
made on the record before the Special Master. The transcript of that hearing and
the report of the Special Master both reflect that the parties expressly agreed to the
terms set out in the transcript on the record and subsequently filed with the trial
court. The Rule 11 Agreement here included all of the essential terms for the
payment of money in exchange for the performance of some act—i.e., National
Honey agreed to pay one lump sum settlement amount in exchange for the parties’
release or nonsuit of any claims. See Stergiou, 438 S.W.3d at 745 (“Like most
settlement agreements, the Rule 11 agreement here included essential terms for the
payment of money in exchange for the performance of some act[.]”); see also
Padilla, 907 S.W.2d at 460–61 (noting that material terms of Rule 11 settlement
agreement include payment and release of claims); CherCo Props., Inc. v. Law,
Snakard & Gambill, P.C., 985 S.W.2d 262, 266 (Tex. App.—Fort Worth 1999, no
pet.) (holding settlement agreement that included terms of payment and statement
that parties would execute mutual releases contained all material terms).
American Fisheries argues that, at the time the Rule 11 Agreement was
made on the record before the Special Master, the parties were still in negotiations
25
regarding the payment of certain fees, such as the fees owed to a financial manager
appointed by the trial court earlier in the litigation. However, the Rule 11
Agreement expressly stated that the parties agreed that National Honey would pay
one confidential lump-sum settlement amount via wire transfer to American
Fisheries, and in exchange, American Fisheries “will dismiss with prejudice all
claims asserted or which could have been asserted in this cause of action against”
National Honey and its agents. The Rule 11 Agreement also addressed American
Fisheries’ further obligations to release claims to funds held in connection with
litigation in federal court in Illinois and in the Southern District of Texas, and it
required that National Honey release all of its counter-claims against American
Fisheries. The Rule 11 Agreement expressly provided, “No other sums of money
shall be paid by American Fisheries, National Honey, Inc., Jun Yang or Lin
[Huang] pursuant to the settlement agreement, other than the [confidential
settlement amount] referred to in” the Agreement. American Fisheries further
argues that the Agreement was incomplete as to the disposition of claims against
certain third parties, but the Agreement addressed that concern, stating that
National Honey and the individual representatives “will dismiss, as they deem fit,
their claims asserted or which could have been asserted” against those third parties.
We conclude that National Honey conclusively established the existence of
an enforceable Rule 11 agreement. See TEX. R. CIV. P. 11; Shamrock Psychiatric
26
Clinic, P.A., 540 S.W.3d at 561. It set out its claims in a motion satisfying the
procedural requirements for enforcement, including providing American Fisheries
with proper notice of its claims and notice of the hearing, affording it an
opportunity to respond to National Honey’s claims. See TEX. R. CIV. P. 166a(c).
Finally, the trial court conducted a hearing on this motion, permitting each side to
supply additional evidence, which National Honey did, supplementing its
“summary judgment evidence” on attorney’s fees with billing records. The trial
court further allowed each party an opportunity to present arguments on the
motion, and American Fisheries’ counsel asserted many of the arguments in that
hearing that it now asserts on appeal, including its complaint that the Rule 11
Agreement was not enforceable and that attorney’s fees were not justified.
American Fisheries argues that National Honey was not entitled to an award
of attorney’s fees. National Honey sought attorney’s fees pursuant to Civil
Practice and Remedies Code section 38.001 in connection with its enforcement of
a written or oral contract. As discussed above, even when a party revokes its
consent to a Rule 11 agreement, that agreement may still be enforceable in a
breach of contract action, which can be decided on a summary basis provided that
the party receives proper notice and a hearing. See Padilla, 907 S.W.2d at 461.
“And as with other breach of contract actions, the unjustified breach of a
settlement agreement exposes the breaching party to attorney’s fees for
27
enforcement of the contract.” Garcia v. Harding, 545 S.W.3d 8, 12 (Tex. App.—El
Paso 2017, no pet.) (citing TEX. CIV. PRAC. & REM. CODE ANN. § 38.001(8)).
We have already held that the trial court could have properly considered
National Honey’s motion to enforce as a motion for summary judgment. See
Bruess, 2014 WL 3843517, at *3; Bayway Servs., Inc., 106 S.W.3d at 160. We
have also held that National Honey conclusively established the existence of an
enforceable Rule 11 agreement.
National Honey asserted in its motion to enforce that it was entitled to
attorney’s fees incurred as a result of American Fisheries’ failure to adhere to the
parties’ Rule 11 Agreement read into the record on January 18, 2017, and reduced
to a written Settlement Agreement on February 20, 2017. American Fisheries’
attorney agreed on the record to the settlement on January 18, 2017, and
representatives of American Fisheries executed the Settlement Agreement on
March 23, 2017. Nevertheless, American Fisheries did not provide this document
to National Honey or otherwise tender performance under the parties’ agreement,
necessitating National Honey’s motion to enforce. National Honey provided an
affidavit of its counsel setting out the attorney’s fees incurred in connection with
its attempts to enforce the Rule 11 Agreement, and it also provided billing records
supporting its claim. The trial court determined that the fees sought by National
Honey were reasonable and necessary, and American Fisheries does not controvert
28
National Honey’s attorney’s fees evidence or argue that the amount of fees
awarded was improper. Accordingly, we conclude that American Fisheries’
“unjustified breach of a settlement agreement expose[d] [it] to attorney’s fees for
enforcement of the contract.” See Garcia, 545 S.W.3d at 12 (citing TEX. CIV.
PRAC. & REM. CODE ANN. § 38.001(8) (West 2015)).
We overrule American Fisheries’ sole issue on appeal.
Sanctions
In six issues on appeal, National Honey argues that the trial court erred in
denying its request for sanctions against Yuen for alleged misconduct and
misrepresentations.4
A. Standard of Review
In reviewing a sanctions order, we are not bound by the trial court’s findings
of fact and conclusions of law; rather, we must independently review the entire
record to determine whether the denial of a motion for sanctions was an abuse of
the trial court’s discretion. Am. Flood Research, Inc. v. Jones, 192 S.W.3d 581,
583 (Tex. 2006). We may reverse the trial court’s ruling on a motion for sanctions
only if the trial court acted without reference to any guiding rules and principles so
that its ruling was arbitrary or unreasonable. See id. The trial court does not abuse
4
American Fisheries filed a motion for involuntary dismissal of National Honey’s
cross-appeal. However, it failed to advance any meritorious grounds for dismissal;
accordingly, we deny the motion.
29
its discretion if it bases its decision on conflicting evidence and some evidence
supports its decision. Unifund CCR Partners v. Villa, 299 S.W.3d 92, 97 (Tex.
2009) (per curiam). The party moving for sanctions bears the burden of
overcoming a presumption that pleadings and other papers are filed in good faith.
See id.
National Honey sought sanctions against Yuen and his affiliated law firms
under both Texas Rule of Civil Procedure 13 and Civil Practice and Remedies
Code Chapter 10. A trial court may impose sanctions pursuant to Rule 13 if a
pleading is groundless and brought in bad faith or for the purpose of harassment.
See TEX. R. CIV. P. 13; www.URBAN.INC v. Drummond, 508 S.W.3d 657, 676
(Tex. App.—Houston [1st Dist.] 2016, no pet.); Thielemann v. Kethan, 371 S.W.3d
286, 294 (Tex. App.––Houston [1st Dist.] 2012, pet. denied). In determining
whether a party acted in bad faith, we must be mindful that bad faith “is the
conscious doing of a wrong for dishonest, discriminatory, or malicious purposes”
and does not exist when a party “merely exercises bad judgment or is negligent.”
Drummond, 508 S.W.3d at 676 (citing Thielemann, 371 S.W.3d at 294). “A
document is filed for the purpose of harassment if it is filed with the intent to
annoy, alarm, and abuse another person.” Id. “[T]he trial court must measure the
party’s conduct and examine the facts available to the party at the time the relevant
document was signed.” Id. (citing Gomer v. Davis, 419 S.W.3d 470, 478, 480
30
(Tex. App.––Houston [1st Dist.] 2013, no pet.)). The trial court must consider the
acts or omissions of counsel and not merely the legal merit of a pleading or
motion. See id.
“Our analysis of a motion for sanctions filed under Chapter 10 is the same as
our review of a motion filed under Rule 13.” Drummond, 508 S.W.3d at 675
(citing Nath v. Tex. Children’s Hosp., 446 S.W.3d 355, 361 (Tex. 2014)). Chapter
10 provides that “the signature of attorneys or parties on a pleading or motion
constitutes a certificate by them that, to the best of their knowledge, information,
and belief formed after a reasonable inquiry, the instrument is not being presented
for an improper purpose,” that it “is warranted by existing law or by a nonfrivolous
argument for the extension, modification, or reversal of existing law or the
establishment of new law,” and that “there is evidentiary support for each
allegation or contention.” Drummond, 508 S.W.3d at 676–77 (reciting terms of
TEX. CIV. PRAC. & REM. CODE ANN. § 10.001 (West 2002)); see also TEX. R. CIV.
P. 191.3(e) (addressing sanctions in discovery context and providing, “If the
certification is false without substantial justification, the court may . . . impose . . .
an appropriate sanction as for a frivolous pleading or motion under Chapter 10 of
the Civil Practice and Remedies Code”). The party moving for sanctions under
Chapter 10 must prove the pleading party’s subjective state of mind. See
Drummond, 508 S.W.3d at 677.
31
B. Analysis
National Honey sought to have sanctions imposed against Yuen individually
to address his conduct. It cited, among other alleged misrepresentations and
improper conduct, the facts that Yuen (1) failed to notify the trial court or National
Honey that American Fisheries “had actually signed the settlement agreement
prepared by [National Honey’s] counsel on March 23, 2017, seven days before
[National Honey’s] counsel filed the Motion to Enforce Rule 11 Settlement
Agreement”; (2) argued that there was no Rule 11 Agreement after his client had
signed the Settlement Agreement; and (3) “told the [trial court] and [National
Honey] that [American Fisheries] ‘accepted’ the settlement on April 27, 2017,
when clearly [American Fisheries] accepted the settlement on March 23, 2017.”
National Honey asserted that Yuen made these misrepresentations before the trial
court in this case and that he made these or substantially similar misrepresentations
in related litigation that was pending in federal court in Illinois and the Southern
District of Texas.
Yuen testified at the sanctions hearing that, although his client had executed
the Settlement Agreement on March 23, 2017, it did not authorize him to release
that document and asked that he engage in further negotiations. The trial court did
not make any written findings of fact or conclusions of law, but at the sanctions
hearing, the trial court stated on the record:
32
One of [National Honey’s] principal arguments in this motion is that
Mr. Yuen failed to disclose that his client had previously signed the
settlement agreement on March 23rd. This Court accepts Mr. Yuen’s
testimony that he was not authorized to release that document unless
there were other items that were renegotiated. While that attempted
renegotiation may have been improper, this Court has already issued
attorney’s fees for that and no additional sanctions will be issued on
that.
National Honey’s efforts to obtain sanctions for Yuen’s conduct urge an
interpretation of Yuen’s failure to report his client’s execution of the Settlement
Agreement as early as March 23, 2017, and his attempts to renegotiate the terms of
the Rule 11 Agreement as willful and deliberate bad acts. However, the law is
clear that parties are entitled to withdraw their consent to settlement agreements,
even if such revocation of consent might expose them to claims for breach of
contract, as it did here. Furthermore, there was some evidence, in the form of
Yuen’s testimony, that, although his client had executed the Settlement Agreement
on March 23, 2017, American Fisheries did not intend to agree to the Settlement
Agreement at that time and instead wished to engage in further negotiation. The
trial court stated that it “accept[ed] Mr. Yuen’s testimony that he was not
authorized to release that document unless there were other items that were
renegotiated.”
The trial court’s determination that Yuen was acting on his client’s
instruction is not improper, as National Honey asserts in its first issue. Rather, the
trial court’s determination goes to whether Yuen’s actions and representations to
33
the trial court demonstrated a “conscious doing of a wrong for dishonest,
discriminatory, or malicious purposes” or whether Yuen “merely exercise[d] bad
judgment or [was] negligent” in pursuing his client’s wishes and interests. See
Drummond, 508 S.W.3d at 676. Likewise, the propriety of the trial court’s
determination goes to Yuen’s state of mind at the time he made the complained-of
representations, and the record supports a conclusion that, although Yuen’s efforts
to renegotiate the settlement agreement might have ultimately been improper, they
do not demonstrate a subjective state of mind indicating bad faith or harassment.
See id. In either case, the record provides some evidence to support the trial court’s
determination that sanctions were not appropriate; and, thus, we cannot conclude
that the trial court abused its discretion. See id. at 677.
In its fourth issue, National Honey argues that the trial court erred in
refusing to award sanctions for conduct that occurred in federal courts. The trial
court stated on the record at the sanctions hearing, “Finally, [National Honey’s]
argument that Mr. Yuen made improper and false statements to the Northern
District of Illinois and the Southern District [of Texas] are arguments that should
be addressed to those courts.” National Honey cites to authorities indicating that a
court may sanction conduct that occurs within another court, but its cites no
authority, nor could we find any, indicating that such an award is mandatory under
circumstances such as those presented here or that a trial court abuses its discretion
34
in failing to award such sanctions. See Malone v. Abraham, Watkins, Nichols &
Friend, No. 01-99-01192-CV, 2004 WL 1120005, at *8 (Tex. App.—Houston [1st
Dist.] May 20, 2004, no pet.) (mem. op.) (recognizing that “a trial judge presiding
in his own court was without jurisdiction to impose sanctions on a party for
violation of another court’s order,” but permitting imposition of sanctions “for
committing the same conduct for which the court had just admonished him—filing
frivolous lawsuits” and recognizing that “the court could impose sanctions on a
party to prevent him from filing the same [frivolous] claims in another court”).
In its fifth issue, National Honey further argues that the trial court erred in
considering the attorney’s fees award when deciding the sanctions issue. We
disagree. In reviewing a sanctions order, we must independently review the entire
record to determine whether the trial court abused its discretion. See Jones, 192
S.W.3d at 583. This includes reviewing other means employed by the trial court to
correct any injustice or any additional expenses incurred as a result of improper
conduct. The trial court here determined that the attorney’s fees awarded in
connection with the motion to enforce adequately compensated National Honey for
the additional expenses and inconvenience it incurred as a result of American
Fisheries’ and Yuen’s conduct following the parties’ Rule 11 Agreement, and we
cannot say that this was an abuse of the trial court’s discretionary powers to
sanction parties or their attorneys for purported misconduct. See Villa, 299 S.W.3d
35
at 97 (holding that trial court does not abuse its discretion if it bases its decision on
conflicting evidence and some evidence supports its decision, and that party
moving for sanctions bears burden of overcoming presumption that pleadings and
other papers are filed in good faith).
Finally, in its second and third issues, National Honey asserts that the trial
court erred in denying sanctions based on release language contained in the
Settlement Agreement, which was finally executed between the parties on April
27, 2017. In its sixth issue, it asserts that the trial court erred by stating that
National Honey lacked standing to seek sanctions for some aspects of Yuen’s
alleged misconduct. We observe, however, that, in reviewing a sanctions order, we
are not bound by the trial court’s findings of fact and conclusions of law. Rather,
we must independently review the entire record to determine whether the trial
court abused its discretion. See Jones, 192 S.W.3d at 583. We have reviewed the
entire record, and, for the reasons set out above, we have determined that the trial
court did not abuse its discretion in denying National Honey’s request for
sanctions. Accordingly, we need not address these particular findings or
conclusions of the trial court. See id.
We overrule National Honey’s issues on appeal.
36
Conclusion
We affirm the judgment of the trial court.
Evelyn V. Keyes
Justice
Panel consists of Justices Keyes, Bland, and Massengale.
37