in Re Warrior Energy Services Corp.

Petition for Writ of Mandamus Conditionally Granted, Stay Order Lifted, and
Opinion filed April 7, 2020.
In The
Fourteenth Court of Appeals
NO. 14-19-01010-CV
IN RE WARRIOR ENERGY SERVICES CORP., Relator
ORIGINAL PROCEEDING
WRIT OF MANDAMUS
80th District Court
Harris County, Texas
Trial Court Cause No. 2019-46881
OPINION
Relator and defendant below, Warrior Energy Services Corp., seeks
mandamus relief from an order compelling it to deposit $2,064,042.19 into the trial
court’s registry before the claims asserted against it have been adjudicated. See Tex.
Gov’t Code § 22.221; see also Tex. R. App. P. 52. The underlying lawsuit is a
breach of contract action against Warrior. Plaintiff and real party in interest, Oilfield
Specialties, LLC, alleges Warrior breached an agreement to pay royalties.
We conditionally grant the petition for writ of mandamus. Our stay order of
December 30, 2019 is lifted.
Background
The underlying dispute concerns royalties for a technology system. While
employed by Warrior, Don Umphries and Gabe Williger created certain products
and processes known as the WIPR technology. Warrior licensed the right to use
WIPR from Umphries and Williger for 25% of the gross revenues related to WIPR.
Oilfield is a company created by Umphries and Williger that invoices Warrior. The
main dispute is whether the 25% royalty applies per person or collectively.
Oilfield sued Warrior in 2018 for breach of contract (the “2018 Lawsuit”).
Oilfield contends Warrior owes 25% of WIPR gross revenue to Umphries and a
separate 25% to Williger. Warrior disputes that interpretation, contending it paid
lesser amounts for seven years until, in the 2018 Lawsuit, Oilfield “reversed course”
and claimed Warrior was required to pay a total of 50% of WIPR gross revenue. A
jury agreed with Oilfield, and the trial court signed a judgment in Oilfield’s favor
for over $11 million. Warrior superseded the judgment by filing a supersedeas bond
and appealed the judgment.1
After the jury returned its verdict but before the trial court signed the judgment
in the 2018 Lawsuit, Oilfield filed a second suit (the “2019 Lawsuit”)—the one
underlying this mandamus proceeding. The 2018 Lawsuit was for past damages,
and the 2019 Lawsuit is said to be for contract damages accruing for breaches since
the 2018 verdict and for a permanent injunction.
1
The appeal is pending in this court as No. 14-20-00069-CV, Warrior Energy Servs. Corp. v.
Oilfield Specialties, LLC. Warrior filed a supersedeas bond on January 17, 2020, and the district
clerk has approved it. Thus, enforcement of the judgment in the 2018 Lawsuit is stayed. Tex. R.
App. P. 24.1(f).
2
In early December 2019, Oilfield filed a verified motion in the 2019 Lawsuit
asking the court to require Warrior to deposit money into the court’s registry in
anticipation of the damages Oilfield contended it would establish as a result of the
breaches since the 2018 Lawsuit verdict. The motion alleges Warrior’s financial
situation is precarious for various reasons. The trial court held a hearing on the
motion on December 18, 2019, and signed an order granting the motion the same
day. The December 18 order requires Warrior to deposit (1) $2,064,042.19 into the
court’s registry by December 25, 2019; and (2) an amount equal to 50% of gross
revenue related to WIPR on a monthly basis until the 2019 Lawsuit is resolved.
Before the deadline for compliance, Warrior petitioned for a writ of
mandamus and filed a motion for emergency stay of the order. We granted the
emergency relief in part, staying the requirement for ongoing future deposits. 2 On
January 2, 2020, the trial court signed a modified order sua sponte that repeats the
requirement for an initial deposit of $2,064,042.19 but deletes the requirement for
ongoing future deposits. Warrior has filed a supplemental petition complaining of
the modified order as well. Because the December 18 and January 2 orders both
require a $2,064,042.19 initial deposit, we refer to them as a single order.
Issues
As respondent has withdrawn the portion of the order requiring future
deposits, we limit our consideration of Warrior’s petition to the portion of the order
compelling the initial deposit. Warrior contends the trial court’s order amounts to a
writ of attachment governed exclusively by Civil Practice and Remedies Code
chapter 61. Because chapter 61’s requirements were not satisfied, Warrior asserts,
the trial court abused its discretion in compelling the deposit. Warrior alleges it
2
The request for emergency relief regarding the initial deposit became moot when Warrior
deposited that amount into the trial court’s registry on December 26, 2019.
3
lacks an adequate appellate remedy to cure the trial court’s error because it is
deprived of the use of its money, the orders will be moot by the time an appeal from
a final judgment may be taken, and the parties’ litigation footing has become unfairly
imbalanced.
Oilfield maintains the trial court’s authority to sign the orders could derive
from either of two sources: chapter 61 or the court’s inherent authority. Oilfield
expressly disclaims reliance on chapter 61, however, and asserts the court acted
within its discretion under its inherent authority. 3 Oilfield offers no argument as to
whether Warrior lacks an adequate appellate remedy.
Mandamus Standard
To obtain mandamus relief, a relator generally must show both that the trial
court clearly abused its discretion and that relator has no adequate remedy at law,
such as an appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex.
2004) (orig. proceeding). A trial court clearly abuses its discretion if it reaches a
decision so arbitrary and unreasonable as to amount to a clear and prejudicial error
of law or if it clearly fails to analyze the law correctly or apply the law correctly to
the facts. In re Cerberus Capital Mgmt. L.P., 164 S.W.3d 379, 382 (Tex. 2005)
(orig. proceeding) (per curiam). “The relator must establish that the trial court could
reasonably have reached only one decision.” Walker v. Packer, 827 S.W.2d 833,
840 (Tex. 1992) (orig. proceeding). We review the trial court’s determination of the
legal principles controlling its ruling with limited deference. See id.
3
Although Oilfield requested permanent injunctive relief in its petition, it did not seek a temporary
injunction to compel payment of anticipated damages into the registry.
4
Analysis
A. Abuse of discretion
Effectively, the trial court’s order is a pre-judgment writ of attachment.4 This
court conditionally granted mandamus relief as to a similar order in In re Wakefield.
2010 WL 5237857, at *1. There, a party sued Wakefield for breach of contract, and
the trial court ordered Wakefield to deposit into the registry, before trial, a sum
certain allegedly resulting from the breach. Id. We held the trial court abused its
discretion because the requirements for a writ of attachment under chapter 61 were
not met. Id. Because pre-judgment attachment is a harsh, oppressive remedy, the
statutes and rules governing this remedy must be strictly followed. 5
What was true in In re Wakefield is true here. Oilfield did not comply with
chapter 61’s strict requirements, and it expressly disclaims reliance on chapter 61 to
support the order. Generally, a trial court abuses its discretion if it compels a pre-
judgment deposit into the registry when the movant does not meet chapter 61’s
requirements. Id. at *1.
Oilfield argues the order is justifiable on another ground: inherent authority.
According to Oilfield, inherent authority empowers the court to require a pre-
adjudication deposit of anticipated contract damages into the registry when a party’s
financial wherewithal to satisfy a potential future judgment is questionable. Oilfield
4
In re Wakefield, No. 14-10-01160-CV, 2010 WL 5237857 (Tex. App.—Houston [14th Dist.]
Dec. 15, 2010, orig. proceeding) (mem. op.); Sharman v. Schuble, 846 S.W.2d 574, 576 (Tex.
App.—Houston [14th Dist.] 1993, orig. proceeding); see In re Grupo Consejero Mundial, S.A. de
C.V., No. 13-11-00493-CV, 2012 WL 1073349, at *6 (Tex. App.—Corpus Christi Mar. 29, 2012
orig. proceeding) (mem. op.); Behringer Harvard Royal Island, LLC v. Skokos, No. 05-09-00332-
CV, 2009 WL 4756579, at *3 (Tex. App.—Dallas Dec. 14, 2009, orig. proceeding) (mem. op.).
5
In re Argyll Equities, LLC, 227 S.W.3d 268, 271 (Tex. App.—San Antonio 2007, orig.
proceeding); see S.R.S. World Wheels v. Enlow, 946 S.W.2d 574, 575 (Tex. App.—Fort Worth
1997, orig. proceeding); Block 145, Ltd. v. Pace, 617 S.W.2d 820, 822 (Tex. App.—Houston [14th
Dist.] 1981, writ ref’d n.r.e.).
5
cites a line of cases rooted in Castilleja v. Camero, 414 S.W.2d 431, 433-34 (Tex.
1967).6
In Castilleja, Severa Camero obtained a finding that Alberto Castilleja had
$17,000 in a bank in Mexico that belonged to Camero. Id. at 432. The court signed
a judgment awarding Camero $17,000 and permanently enjoining Castilleja from
assigning, removing, or dissipating that sum, except to deposit it into the court’s
registry as supersedeas. Id. Castilleja appealed the judgment but filed no
supersedeas bond and did not deposit the money into the registry. Id. Camero
attempted to execute the judgment but was unsuccessful. Id. at 432-33. Camero
then filed a second lawsuit for a writ of mandamus compelling Castilleja to deposit
the sum into the registry. Camero alleged that Castilleja was insolvent, that the
specific fund was in Mexico and outside the court’s jurisdictional reach, and that
Castilleja threatened to leave the jurisdiction. Id. at 433. The trial court granted the
writ, and the court of appeals affirmed. The supreme court also affirmed, concluding
the order conserved the disputed property pending final judgment on the merits of
the appeal. As the court noted: the trial court’s injunction did not protect the fund
because it was in Mexico and out of the court’s or Camero’s reach; Castilleja did not
supersede the judgment; and Castilleja testified that he did not intend to satisfy the
judgment even if he lost the appeal. Id. The court stated that when ownership of a
specific fund is in dispute and the fund was in danger of being lost or depleted, a
court can order payment of the disputed funds into its registry until ownership is
finally determined. See id. The thrust of the court’s ruling was that a trial court may
6
Oilfield’s citations include: In re G-M Water Supply Corp., No. 12-16-00223-CV, 2016 WL
6873181, at *2 (Tex. App.—Tyler Nov. 22, 2016, orig. proceeding) (mem. op); Zhao v. XO Energy
LLC, 493 S.W.3d 725, 736-37 (Tex. App.—Houston [1st Dist.] 2016, no pet.) (appeal consolidated
with mandamus); In re Reveille Res. (Tex.) Inc., 347 S.W.3d 301, 304 (Tex. App.—San Antonio
2011, orig. proceeding); Behringer, 2009 WL 4756579, at *4; N. Cypress Med. Ctr. v. St. Laurent,
296 S.W.3d 171, 178-79 (Tex. App.—Houston [14th Dist.] 2009, no pet.); Prodeco Expl., Inc. v.
Ware, 684 S.W.2d 199, 201 (Tex. App.—Houston [1st Dist.] 1984, no writ.).
6
sign post-judgment orders not inconsistent with the original judgment to conserve
the property—there, a specific fund, not a money judgment—which is the subject of
appeal. Id. Trial courts have long possessed authority to enforce their judgments, 7
including in appropriate cases by attachment of specific property. E.g., Tex. R. Civ.
P. 308.8
Castilleja involved a form of post-judgment relief to protect specific property
awarded in the judgment pending an appeal. This case does not. The trial court’s
order here compels a party to deposit anticipated contract damages into the registry
before trial based on the assertion that it may not be able to satisfy any ultimate
judgment. Based on Castilleja, several appellate courts, including this one, have
stated that a trial court has inherent authority to order a party to pay disputed funds
into the court’s registry before trial if there is evidence the funds are in danger of
being lost or depleted. E.g., In re G-M Water Supply Corp., 2016 WL 6873181, at
*4; Zhao, 493 S.W.3d at 736; O’Brien v. Baker, No. 05-15-00489-CV, 2015 WL
6859581, at *3 (Tex. App.—Dallas Nov. 9, 2015, orig. proceeding) (mem. op.); In
re Reveille Res. (Tex.) Inc., 347 S.W.3d at 304; N. Cypress Med. Ctr., 296 S.W.3d
at 178-79. But Castilleja was about post-judgment remedies to conserve an asset
that was the subject of a judgment during the appeal’s duration; it did not address an
order to deposit disputed funds—here, anticipated contract damages—into the
court’s registry before trial. The cases reading Castilleja as permitting such relief
7
Arndt v. Farris, 633 S.W.2d 497, 499 (Tex. 1982) (“The general rule is that every court having
jurisdiction to render a judgment has the inherent power to enforce its judgments.”); Harris Cty.
Appraisal Dist. v. West, 708 S.W.2d 893, 896 (Tex. App.—Houston [14th Dist.] 1986, orig.
proceeding).
8
“The court shall cause its judgments and decrees to be carried into execution; and where the
judgment is for personal property, and it is shown by the pleadings and evidence and the verdict,
if any, that such property has an especial value to the plaintiff, the court may award a special writ
for the seizure and delivery of such property to the plaintiff; and in such case may enforce its
judgment by attachment, fine and imprisonment.”
7
commit no discussion to Castilleja’s applicability or the trial court’s inherent
authority to require pretrial deposits of anticipated contract damages as an alternative
to chapter 61. The Dallas Court of Appeals, in contrast, has concluded a trial court
lacks authority—beyond the purview of the attachment statutes—to order that funds
be deposited into the court’s registry to generally secure payment of a possible future
judgment. Behringer, 2009 WL 4756579, at *4. This court cited Behringer as
support for its decision in In re Wakefield. 2010 WL 5237857, at *1.
The issue of Castilleja’s applicability need not detain us. Presuming without
deciding that it applies to the order at issue, Castilleja’s standards as Oilfield
interprets them have not been met on the present record. To begin with, both Oilfield
and our dissenting colleague say the funds in dispute are in danger of being lost or
depleted. We disagree.
Oilfield was required to support its motion with competent evidence. See
Zhao, 493 S.W.3d at 736-37; In re Reveille Res. (Tex.) Inc., 347 S.W.3d at 304;
O’Brien, 2015 WL 6859581, at *3; N. Cypress Med. Ctr., 296 S.W.3d at 178-79.
Oilfield filed a verified motion containing the following relevant factual assertions:
(1) since the verdict in the 2018 Lawsuit, Warrior owes Oilfield an additional
$2,064,042.19 in unpaid royalties as of November 30, 2019; (2) Warrior is a
subsidiary of Superior Energy Services, Inc.; (3) Superior’s stock price has dropped
from approximately $18/share when the first suit was filed to $.29/share;
(4) Superior announced a net loss of $38.4 million for the third quarter of 2019 and
a net loss of $71.1 million for the second quarter of 2019; (5) Warrior has earned an
average of $545,000 a month in gross revenue from its use of the WIPR patents
during this same period; and (6) on September 26, 2019, Superior “was notified by
the New York Stock Exchange (“NYSE”) of its determination to commence
proceedings to delist the Company’s common stock and to suspend trading of the
8
Company’s common stock due to ‘abnormally low’ price levels.” Oilfield supported
these assertions with true and correct copies of Superior’s website stock information
and two Superior press releases. Further, based on an affidavit by Umphries, Oilfield
asserted several Warrior employees in the WIPR division, including Umphries, were
terminated in November 2019, and that Warrior informed Umphries it intended to
discontinue the WIPR division and cease offering WIPR to customers.
At the hearing, Oilfield offered and the court admitted a copy of a news report
stating Superior announced an agreement to merge its U.S. energy business with
another entity. According to the report, the merger was expected to close in the first
quarter of 2020. The report quotes a Superior representative’s belief that the
transaction will reduce debt, lower interest costs, and assist Superior in generating
cash flow. Oilfield offered no other exhibits at the hearing and presented no
witnesses.
Accepting as true all of Oilfield’s evidence, it focuses on Superior, which is
an entity separate from Warrior. Absent exceptional circumstances and evidence to
support collapsing corporate distinctiveness, Superior and Warrior as parent and
subsidiary cannot be treated as one and the same.9 Even if Superior’s financial
standing was relevant, Oilfield showed that Superior has incurred recent losses and
that its stock price has depreciated substantially, but Oilfield offered no proof of how
those losses or depreciation affect Warrior and why (or when) they would probably
deplete Warrior’s assets to a degree that Warrior is likely unable to satisfy a
judgment. Regarding the relevant entity, Warrior, the record contains no evidence
9
Courts presume a parent corporation and its separate corporate subsidiary are distinct legal
entities. See Sitaram v. Aetna U.S. Healthcare of N. Tex., Inc., 152 S.W.3d 817, 825 (Tex. App.—
Texarkana 2004, no pet.) (citing BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 798
(Tex. 2002)); Valero S. Tex. Processing Co. v. Starr Cty. Appraisal Dist., 954 S.W.2d 863, 866
(Tex. App.—San Antonio 1997, pet. denied).
9
of, among other things, Warrior’s current net worth, Warrior’s current assets
(including available cash in any bank accounts), Warrior’s current cash flow,
Warrior’s current or long-term debt obligations, or Warrior’s source of revenue, if
any, other than that derived from WIPR services. Further, unlike Castilleja, our
record shows that Warrior superseded the underlying judgment with a $13,000,000
bond, thus indicating Warrior’s intent to pay the 2018 judgment if it is affirmed.
Moreover, Oilfield offered no evidence that Warrior does not intend to pay any
future judgment in the 2019 Lawsuit or that Warrior will be unable to secure a similar
supersedeas bond if the need arises. Oilfield’s assertion that Warrior has possession
of funds in danger of loss or depletion is utterly speculative.
Assuming Castilleja applies and when the record reveals insufficient evidence
that funds are in danger of being “lost or depleted,” the trial court abuses its
discretion by ordering funds deposited in the registry of the court pretrial, and
mandamus relief from such an order is appropriate. E.g., O’Brien, 2015 WL
6859581, at *3 (granting mandamus); In re Reveille Res. (Tex.) Inc., 347 S.W.3d at
304 (granting mandamus); N. Cypress Med. Ctr., 296 S.W.3d at 178-79 (granting
mandamus); In re Deponte Invs., No. 05-04-01781-CV, 2005 WL 248664, at *2
(Tex. App.—Dallas Feb. 3, 2005, orig. proceeding) (mem. op.) (granting mandamus)
(“[T]he Allens were required to present evidence the revenues in Deponte’s
possession were in danger of being lost or depleted. They did not do so. We
conclude that absent any evidence, the trial court abused its discretion in ordering
Deponte to deposit the funds into the registry of the court.”).
Because Oilfield presented no legally sufficient evidence to demonstrate that
the “disputed funds” were in danger of being “lost or depleted,” the trial court’s order
was improper and an abuse of discretion under Castilleja. For that reason, we need
not address Warrior’s additional contention that a trial court’s inherent power to
10
require a registry deposit arises only when a specific, identifiable asset or fund is in
danger of loss or depletion. See Castilleja, 414 S.W.2d at 433.
B. Inadequate appellate remedy
In determining whether appeal is an adequate remedy, appellate courts
consider whether the benefits outweigh the detriments of mandamus review. In re
BP Prods. N. Am., Inc., 244 S.W.3d 840, 845 (Tex. 2008) (orig. proceeding); N.
Cypress Med. Ctr., 296 S.W.3d at 179. Because this balance depends heavily on
circumstances, it must be guided by analysis of principles rather than simple rules
that treat cases as categories. In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 464
(Tex. 2008) (orig. proceeding). In evaluating benefits and detriments, we consider
whether mandamus will preserve important substantive and procedural rights from
impairment or loss. In re Prudential Ins. Co. of Am., 148 S.W.3d at 136. We also
consider whether mandamus will “allow the appellate courts to give needed and
helpful direction to the law that would otherwise prove elusive in appeals from final
judgments.” Id. Finally, we consider whether mandamus will spare the litigants and
the public “the time and money utterly wasted enduring eventual reversal of
improperly conducted proceedings.” Id.
This and other appellate courts have found relief by ordinary appeal
inadequate to cure a trial court’s abuse of discretion in compelling a prejudgment
registry deposit. E.g., G-M Water Supply, 2016 WL 6873181, at *3; O’Brien, 2015
WL 6859581, at *3; In re Reveille Res. (Tex.) Inc., 347 S.W.3d at 304; N. Cypress
Med. Ctr., 296 S.W.3d at 178-79; In re Wakefield, 2010 WL 5237857, at *1; In re
Deponte Invs., 2005 WL 248664, at *2.
Warrior contends it lacks an adequate remedy by ordinary appeal because the
order: (1) deprives it of the use of its own money; (2) will become moot once the
court signs a judgment in the 2019 Lawsuit and will therefore escape appellate
11
review, given that interlocutory review is unavailable; and (3) leaves the parties on
imbalanced footing.
1. Deprivation of use of money
Warrior maintains an appeal cannot restore its rights to invest and spend its
funds as it chooses during the pendency of Oilfield’s lawsuit. See N. Cypress Med.
Ctr., 296 S.W.3d at 179 (concluding appeal was inadequate to cure harm attendant
to being deprived of use of one’s own money); accord G-M Water Supply, 2016 WL
6873181, at *3. The Supreme Court of Texas has held deprivation of the use of
money does not by itself render an appeal inadequate to cure the harm:
KCSI argues that its remedy by appeal is inadequate because the trial
court has improperly deprived it of the “valuable use” of its own money.
That is not the permanent loss of substantial rights; it is really only a
complaint that the normal appellate remedy is too slow. As we have
repeatedly held, the cost or delay incident to pursuing an appeal does
not make the remedy inadequate.
In re Kansas City S. Indus., Inc., 139 S.W.3d 669, 670 (Tex. 2004) (orig.
proceeding). However, KCSI was decided before Prudential. We conclude that
deprivation of the use of money is a factor properly considered under Prudential’s
balancing test for evaluating the adequacy of an appeal. That factor supported
mandamus relief in North Cypress Medical Center, and Oilfield does not attempt to
distinguish that case. N. Cypress Med. Ctr., 296 S.W.3d at 179.
2. Evades meaningful appellate review
Interlocutory review of a prejudgment order to deposit funds into the court’s
registry is not available, and the order itself will cease to be of effect once a judgment
is rendered. See G-M Water Supply, 2016 WL 6873181, at *3. Consequently, any
appeal of such an order after judgment would become moot. Id. With certain
exceptions, a court of appeals may not consider moot issues. See O’Hern v.
12
Mughrabi, 579 S.W.3d 594, 600–01 (Tex. App.—Houston [14th Dist.] 2019, no
pet.) (considering only those issues for which a live controversy still existed). The
Tyler Court of Appeals wrote:
[A] party ordered to deposit funds during the pendency of the lawsuit
would not only be deprived of the use of its funds, but would be
precluded from challenging the trial court’s order by appeal. This is
because, with interlocutory appeal unavailable, the party would be
required to wait until the suit’s conclusion to appeal the order. At that
time, the order to deposit funds would no longer be in effect, which
would render an appeal moot. Without mandamus relief, a trial court
could freely order that funds be deposited into its registry without
appellate review.
G-M Water Supply, 2016 WL 6873181, at *3. We agree with our sister court that
ordinary appeal is an inadequate remedy for such an order.
Conclusion
We conditionally grant the petition for writ of mandamus and direct the trial
court to vacate its orders signed December 18, 2019 and January 2, 2020 requiring
Warrior to deposit funds into the court’s registry. We are confident the trial court
will act in accordance with this opinion. The writ of mandamus shall issue only if
the trial court fails to do so.
/s/ Kevin Jewell
Justice
Panel consists of Justices Wise, Jewell, and Poissant.
13