Violating a TRO to destroy the subject matter of the lawsuit justifies death penalty sanctions and a final judgment awarding contempt damages of almost $900,000, according to the Dallas Court of Appeals.

Altesse Healthcare Solutions, Inc. v Wilson

Dallas Court of Appeals (August 23, 2016)

Justices Lang‐Miers, Evans (Opinion), and Brown

Allen and Becky Wilson agreed to sell their home healthcare business to Altesse in June 2014 for $800,000, with the first payment due in October. Rather than make the first payment, Altesse sued the Wilsons in federal court. The Wilsons then sued Altesse for fraud and breach of contract in state court, and requested injunctive relief. After a conference in chambers attended by counsel for both parties, a Collin County district court entered a temporary restraining order on December 17, 2014, and scheduled a temporary injunction hearing five days later. The TRO required Altesse to return all company assets and records to the Wilsons within three days. On December 19, Altesse filed an emergency motion to set aside the TRO and—one hour later—a notice of removal to federal court. The state court therefore never heard either the emergency motion or the application for a temporary injunction. At the end of January 2015, the federal court returned the case to state court. (Meanwhile, Altesse’s original suit against the Wilsons remained pending in federal court.)

In March 2015, the Wilsons filed a motion for contempt and sanctions against Altesse, based on alleged violations of the TRO in December 2014. After an evidentiary hearing, the trial court found Altesse had failed to return any of the assets or records to the Wilsons as ordered, and had deliberately decimated the healthcare business’s assets and effectively destroyed the value of the company during the 14 days the TRO was in effect. The court entered a detailed order granting the motion and imposing a monetary sanction for contempt of court of $897,937.51 (the agreed value of the business) as well as “death penalty sanctions” making Altesse liable for all the Wilsons’ claims. That order was ultimately converted to a final judgment awarding damages in the same amount plus attorney’s fees. Altesse appealed.

The Dallas Court of Appeals affirmed, concluding the judgment satisfied the two factors required to justify any sanctions order: there must be “a direct relationship between the offensive conduct and the sanctions,” and “the sanction imposed must not be excessive,” quoting Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 849 (Tex. 1992). The court also found due process was satisfied because the evidence justified a presumption that Altesse’s defenses lacked merit. Although the trial court did not specifically mention possible lesser sanctions, the appeals court concluded the trial court did not err in determining a lesser sanction would have been inadequate. Finally, the appeals court ruled the trial court did not abuse its discretion in rejecting Altesse’s arguments that it “substantially complied” or was unable to comply with the TRO because of a concern for patient safety. Given the Texas Supreme Court’s demonstrated reluctance to approve death penalty sanctions, it will be interesting to see what happens if Altesse seeks review by that court.