Equis Equine, LLC v. Rose (In re Rose)

IN RE: CAROL ALISON RAMSAY ROSE, Debtor.

EQUIS EQUINE, LLC AND ELIZABETH WESTON, Plaintiffs, v. CAROL ALISON RAMSAY ROSE, CAROL ROSE, INC., LORI AARON,PHILLIP AARON, AARON RANCH, AND AARON'S RANCH, INC., Defendants.

CASE NO. 17-42053

ADV. PROC. NO. 17-4131

UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF TEXAS SHERMAN DIVISION

September 30, 2020

CHAPTER 11

MEMORANDUM OPINION AND ORDER

This case is before the Court on the Post-Trial Application for Attorneys' Fees by Equis Equine, LLC and Elizabeth Weston (collectively, "Weston"). Carol Rose ("Rose") and Carol Rose, Inc. (collectively, the "Rose Parties") object to the allowance of the amount requested in the application. The Court conducted an evidentiary hearing on May 16, 2019 and, at the end of the hearing, took the application under advisement in order to prepare a detailed written ruling.¹

I. BACKGROUND

A. State Court Litigation

The parties are familiar with the underlying dispute and the Court will not repeat all its prior findings. In summary, and as relevant to Weston's fee application, the underlying litigation began when the Rose Parties sued Lori Aaron, Phillip Aaron and Aaron Ranch (collectively, the "Aarons") in Texas state court on October 3, 2013 (the "Aaron Ranch Lawsuit"). In various iterations of their state court complaint, the Rose Parties sought between $2.6 million and $12.2 million in damages arising out of the Aarons' alleged breaches of contract 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 action was 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.²

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. These are the same claims Weston asserted in her attempted intervention in the Aaron Ranch Lawsuit. If Weston had succeeded on all her claims against the Rose Parties, her actual money damages would have been approximately $450,000 plus exemplary damages and attorneys' fees.

Weston's claims against the Rose Parties centered around a "complete dispersal sale" conducted by Rose in August 2013. Weston contended that Rose had violated Texas law by using the Aarons as "puff" bidders during the auction of her horses. Weston also contended that the auction was tainted by Rose's secret use of reserves. Weston raised various fraud claims with respect to the dispersal sale catalogue, the misrepresentations of the auctioneers and announcers during the auction, and the false bidding by the Aarons during the auction. Finally, Weston contended that Rose violated the TTLA by inducing her to buy several horses and embryos at the auction through deception, material omissions, and false representations. (Weston withdrew her claim for violations of the TDPA prior to trial.)

The discovery process was contentious and went on for years in state court. Although Weston agreed to be deposed several times, the other parties fought over depositions and the production of documents. The eventual document production was massive, and the documentsproduced to Weston required analysis by her attorneys. The litigation was novel inasmuch as Weston's claims relating to "puff" bidding and the dispersal sale are rarely litigated in Texas courts. Weston also had to defend herself against a claim by the Aarons for tortious interference with their relationship with Rose. Rose's decision to file for bankruptcy prior to trial added more complexity and necessitated Weston's retention of counsel with bankruptcy experience.

Weston employed two law firms during the course of the Weston Lawsuit. Davis & Santos, P.C. ("D&S"), a San Antonio-based law firm, represented Weston in connection with the state court litigation prior to bankruptcy. Weston retained Baker Botts, LLP ("BB"), after the Rose Parties filed for bankruptcy to represent her in bankruptcy matters and assist with the trial of her claims in bankruptcy court. D&S and BB jointly represented Weston during the Rose Parties' bankruptcies.

B. The Rose Parties File for Bankruptcy

The Rose Parties filed petitions for relief under chapter 11 of the Bankruptcy Code in September 2017. The Rose Parties 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 against them back to state court. Rose and Weston objected, arguing that the parties' claims against the Rose Parties 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. Weston's complaint did not seek damages in a specific amount but asserted ten claimsagainst the Rose Parties, the Aarons, and certain other alleged co-conspirators for alleged fraud relating to a pre-petition auction and other violations of Texas law. Weston also sought a declaration that Carol Rose, individually, could not discharge her debt to Weston in bankruptcy.

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 along with a 294-page exhibit list. The Rose Parties included 368 exhibits on their original exhibit list, the Aarons included 762 exhibits, and Weston included 592 exhibits.

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, 2018, for oral closing arguments. The parties filed closing briefs and proposed findings on or before presenting their closing arguments on July 6, 2018.

For the reasons explained in the Court's memorandum opinion entered on January 23, 2019 (and amended on September 27, 2019), this Court found in favor of Weston on the following claims: (i) violations of TEX. BUS. & COM. CODE § 2-328 (prohibiting "puff" bidding); (ii) violations of TEX. ADMIN. CODE § 67.70 (prohibiting false advertising of an auction); (iii) common law fraud; (iv) fraudulent inducement; (v) fraud by non-disclosure; (vi) negligence; (vii) negligent misrepresentation; (viii) violations of the Texas Theft Liability Act ("TTLA"); (ix) equitablesubrogation; and (x) as to Rose, individually, a determination of non-dischargeability under 11 U.S.C. § 523(a)(2)(A).⁴ The Court awarded Weston actual damages in the amount of $437,918.12, plus pre-judgment interest in the amount of $68,807.13, as well as post-judgment interest and the remedy of rescission with respect to her purchase of SHINERS LENA DOC at the auction. The Court also awarded Weston her attorneys' fees for prevailing on the TTLA claim and ordered Weston to file an application for attorneys' fees and court costs within thirty days.

C. Weston's Application for an Award of her Attorneys' Fees and Court Costs

Weston timely filed an application seeking an award of her attorneys' fees in connection with her claim for TTLA violations. See TEX. CIV. PRAC. & REM. CODE § 134.005. The supporting records include hundreds of pages of detailed time entries from October 2014 through January 2019.⁵ As discussed below, the original application seeks an award of $1,332,718.99 in attorneys' fees and $58,753.45 in recoverable court costs for a grand total of $1,391,472.44. In addition, Weston filed a supplemental application for additional attorneys' fees that she had not yet been billed at that time of the original application and that she incurred responding to the Rose Parties' objections to her fee application. The supplemental application increases the requested award to $1,537,143.44.

In her original application, Weston...