Opinion issued October 16, 2025
In The
Court of Appeals For The
First District of Texas ———————————— NO. 01-23-00924-CV ——————————— IRONOAK, INC., MICHAEL SYDOW, AND CHIDI ANUNOBI, Appellants V. MICHAEL EUGENE PORTER, JOHN T. PRESTON, CRISTEN DAVID FELDMAN, JEFFREY S. BAKER, GEOFFREY ALAN BERG, GABRIEL BERG, AND KATHRYN E. NELSON, Appellees
On Appeal from the 215th District Court Harris County, Texas Trial Court Case No. 2022-80846
OPINION
This appeal arises from the trial court’s imposition of sanctions on IronOak,
Inc. f/k/a Iron Oak LLC (“Iron Oak”), and its attorneys, Michael Sydow and Chidi
Anunobi (collectively, “appellants”). Sydow and Anunobi represented Iron Oak in a
suit based on a settlement agreement that purportedly, wrongfully assigned claims previously assigned to Iron Oak. Yet Iron Oak was not a party to the settlement, and
the settlement agreement did not include the claims Iron Oak alleged had been
improperly transferred.
Iron Oak brought suit against the parties to the settlement agreement who were
affiliated with Continuum Energy Technologies, LLC, (“CET”)—John Preston and
Michael Porter (CET’s principals); Geoffrey Berg, Gabriel Berg, and Kathryn
Nelson (Preston, Porter, and CET’s attorneys); John Hannan (CET’s receiver); and
Cristen Feldman and Jeffrey Baker (Hannan’s attorneys), but not CET itself. Iron
Oak alleged violations of the Texas Uniform Fraudulent Transfer Act (“TUFTA”),
conversion, and conspiracy, and shortly after, moved for a temporary restraining
order based on the same. Preston, Porter, Geoffrey Berg, Gabriel Berg, and Nelson
(collectively, “appellees”) responded by moving to dismiss under Rule 91a and
moving for sanctions. After the appellants nonsuited their claims, the trial court
granted the appellees’ motion for sanctions.
In three issues by Iron Oak and five issues each by Sydow and Anunobi, the
appellants contend that the trial court erred in imposing sanctions.
We modify the trial court’s judgment and affirm as modified.
2 Background
Iron Oak and its principal, Rajiv Gosain, have a long history of litigation
against CET, Preston, and Porter that spans across multiple jurisdictions, including
three countries.
Iron Oak, the appellees, and CET mediated one of their prior disputes, and all
parties—except Iron Oak—entered into a settlement agreement. In the settlement
agreement, Hannan (as appointed receiver for CET) assigned CET’s claims against
Iron Oak, Gosain, and two of Gosain’s companies (CETech and Visualize Holdings)
to Preston, Porter, and CET. Hannan also assigned them “all claims asserted or those
that could be or could have been asserted by the Receiver against any party . . . in
the Massachusetts Suit.”
Iron Oak immediately moved to void the settlement agreement, and the court
denied that motion.
Iron Oak, through its attorneys Sydow and Anunobi, then filed this suit—but
not against CET. Instead, Iron Oak sued CET’s principals (Porter and Preston), the
attorneys who represented them (Geoffrey Berg, Gabriel Berg, and Nelson), Hannan,
CET’s former receiver, and Hannan’s attorneys (Feldman and Baker). Iron Oak
claimed violations of TUFTA, conversion, and civil conspiracy based on allegations
that the settlement agreement wrongfully assigned claims previously assigned to
Iron Oak. The settlement agreement attached to their pleading and on which they
3 relied was mostly redacted. But the unredacted portion (1) named the parties to the
settlement agreement, which did not include Iron Oak; and (2) listed the claims
Hannan, as the receiver, had assigned to CET, which did not include the claims
forming the basis of Iron Oak’s suit.
A few weeks later, Iron Oak applied for a temporary restraining order (TRO)
in the trial court seeking to restrain the appellees from proceeding in a Massachusetts
suit, where a hearing on Porter and CET’s motion for summary judgment was set for
the following week. Iron Oak did not provide notice to the appellees of the first
hearing on its TRO application.
Shortly after, the appellees moved to dismiss this suit under Rule 91a and for
sanctions. In their motion for sanctions, they requested the trial court impose
sanctions based on Rule 13 of the Texas Rules of Civil Procedure, Chapter 10 of the
Texas Civil Practice and Remedies Code, and the court’s inherent authority.
Iron Oak, through Anunobi, filed a motion for nonsuit, which the trial court
granted.
The appellees supported their request for sanctions with, among other things,
the following:
• the unredacted settlement agreement and proof of Sydow’s and Anunobi’s receipt of the same; • evidence of Sydow and Iron Oak’s failure to comply with discovery in other cases;
4 • relevant pleadings in this and other cases; • declarations of Iron Oak’s principal, emails between the parties and their attorneys; and • evidence of attorney’s fees.
After the hearing, Anunobi moved for leave to file additional evidence
consisting of his supplemental affidavit with attachments, including unredacted
email correspondence attached as Exhibit 19. The trial court allowed the appellees
to incorporate such evidence in their post-hearing briefing. One day later, Anunobi
amended his motion for leave with the same affidavit and a redacted version of
Exhibit 19, but the trial court denied his amended motion.
The trial court granted the appellees’ motion for sanctions and imposed the
following sanctions:
(1) $44,720 sanction to compensate the appellees for their attorney’s fees and expenses plus conditional appellate fees, assessed jointly and severally; (2) $250,000 penalty against Sydow and Iron Oak, payable to the trial court; (3) $25,000 penalty against Anunobi, payable to the trial court; and (4) compulsory completion of ten additional CLE hours for the next five years.
The trial court also entered findings of fact and conclusions of law addressing
the existence of good cause for the sanctions under Rule 13 and Chapter 10.
5 Sanctions Award
Iron Oak, Sydow, and Anunobi contend that the trial court abused its
discretion in awarding sanctions against them. We disagree.
Standard of Review
When a sanctions order refers to a specific provision, either by citing it,
tracking its language, or both, we are confined to determining whether the sanctions
are appropriate under that provision. Metzger v. Sebek, 892 S.W.2d 20, 51 (Tex.
App.—Houston [1st Dist.] 1994, writ denied). Although the appellees included the
court’s inherent authority as a basis for sanctions in their motion, the judgment
invoked only Texas Rule of Civil Procedure 13 and Texas Civil Practice and
Remedies Code Chapter 10. We will thus confine our review to whether the trial
court properly sanctioned Iron Oak, Sydow, and Anunobi under these authorities.
We review the sanctions imposed pursuant to both provisions under the
abuse-of-discretion standard. Nath v. Tex. Child.’s Hosp., 446 S.W.3d 355, 361
(Tex. 2014). “Although we view conflicting evidence favorably to the court’s
decision, we are not bound by a trial court’s fact findings or conclusions of law and
must, instead, review the entire record independently to determine whether the trial
court abused its discretion.” Brewer v. Lennox Hearth Prods., LLC, 601 S.W.3d 704,
717 (Tex. 2020). “[We] may reverse the trial court’s ruling only if the trial court
acted without reference to any guiding rules and principles, such that its ruling was
6 arbitrary or unreasonable.” Low v. Henry, 221 S.W.3d 609, 614 (Tex. 2007). The
degree of discretion we afford the trial court is greater when sanctions are imposed
for groundless pleadings than when imposed for discovery abuse. Falk & Mayfield
L.L.P. v. Molzan, 974 S.W.2d 821, 827 (Tex. App.—Houston [14th Dist.] 1998, pet.
denied).
“A sanctions award that fails to comply with due process constitutes an abuse
of discretion because a trial court has no discretion in determining what the law is or
applying the law to the facts.” Nath, 446 S.W.3d at 361. But a trial court does not
abuse its discretion when imposing sanctions if some evidence supports its decision.
Id. We defer to the trial court’s determination of credibility. Powell v. Grimes, No.
01-23-00129-CV, 2025 WL 626428, at *9 (Tex. App.—Houston [1st Dist.] Feb. 27,
2025, no pet.).
Generally, courts presume pleadings, motions, and other papers are filed in
good faith. Nath, 446 S.W.3d at 361. “The party seeking sanctions bears the burden
of overcoming this presumption of good faith.” Id.
Sanctions under Texas Civil Practice and Remedies Code Chapter 10 and Texas Rule of Civil Procedure Rule 13
Chapter 10 prohibits attorneys from signing and filing pleadings or motions
with an improper purpose or that lack legal or factual support. Pressley v. Casar,
567 S.W.3d 327, 332 (Tex. 2019). Chapter 10 authorizes sanctions if (1) any claim
in the pleading is frivolous, or (2) a pleading was made for an improper purpose. 7 TEX. CIV. PRAC. & REM. CODE § 10.001; Westergren v. Jennings, 441 S.W.3d 670,
678 (Tex. App.—Houston [1st Dist.] 2014, no pet.).
Chapter 10 provides:
The signing of a pleading or motion as required by the Texas Rules of Civil Procedure constitutes a certificate by the signatory that to the signatory’s best knowledge, information, and belief, formed after reasonable inquiry:
(1) the pleading or motion is not being presented for any improper purpose, including to harass or to cause unnecessary delay or needless increase in the cost of litigation;
(2) each claim, defense, or other legal contention in the pleading or motion 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]
(3) each allegation or other factual contention in the pleading or motion has evidentiary support or, for a specifically identified allegation or factual contention, is likely to have evidentiary support after a reasonable opportunity for further investigation or discovery . . . .
TEX. CIV. PRAC. & REM. CODE § 10.001. “A court that determines that a person has
signed a pleading or motion in violation of Section 10.001 may impose a sanction
on the person, a party represented by the person, or both.” Id. § 10.004(a). But a
court may not sanction a represented party under Chapter 10 based on unsupported
legal contentions. Id. § 10.004(d).
Rule 13 provides:
8 The signatures of attorneys or parties constitute a certificate by them that they have read the pleading, motion, or other paper; that to the best of their knowledge, information, and belief formed after reasonable inquiry the instrument is not groundless and brought in bad faith or groundless and brought for the purpose of harassment . . . . If a pleading, motion or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, after notice and hearing, shall impose an appropriate sanction available under Rule 215-2b, upon the person who signed it, a represented party, or both. Courts shall presume that pleadings, motions, and other papers are filed in good faith. No sanctions under this rule may be imposed except for good cause, the particulars of which must be stated in the sanction order. “Groundless” for purposes of this rule means no basis in law or fact and not warranted by good faith argument for the extension, modification, or reversal of existing law.
TEX. R. CIV. P. 13. Thus, Rule 13 authorizes sanctions against attorneys and
represented parties who file a groundless pleading in bad faith or for the purpose of
harassment. Id.
1. The appellants’ groundless pleadings
“Groundless” means “no basis in law or fact and not warranted by good faith
argument for the extension, modification, or reversal of existing law.” Id. To
determine whether a pleading is groundless, a trial court must examine the facts
available to the party and the circumstances existing when the party filed it.
WWW.URBAN.INC. v. Drummond, 508 S.W.3d 657, 674 (Tex. App.—Houston [1st
Dist.] 2016, no pet.).
The pleadings at issue here—the original petition and TRO application—are
based on the settlement agreement in a prior action.
9 The trial court found that none of the exhibits attached to the pleadings
supported Iron Oak’s allegations and even the unredacted portion of the redacted
settlement agreement plainly contradicted Iron Oak’s allegations. The unredacted
portion established that Iron Oak was not a party to the settlement agreement and
that the receiver assigned claims held by CET, or that could have been asserted by
the receiver, to Porter, Preston, and CET. Thus, Iron Oak has no arguable cause of
action based on the settlement agreement. The record supports the trial court’s
conclusion that the appellants’ allegations had no basis in fact.
The trial court also concluded, even if all the facts alleged by Iron Oak were
true, the appellants’ allegations had no basis in law because:
(1) As to the claims against Hannan in his capacity as receiver for CET in the
prior suit, the original petition was an impermissible collateral attack on the former
receiver’s assignment in a new proceeding,1 and as the former receiver, Hannan had
absolute immunity for actions performed within the scope of the receivership;2
1 See Sun Tec Comput., Inc. v. Recovar Grp., LLC, No. 05-14-00257-CV, 2015 WL 5099191, at *3 (Tex. App.—Dallas Aug. 31, 2015, no pet.) (mem. op.). 2 See Davis v. West, 317 S.W.3d 301, 306-07 (Tex. App.—Houston [1st Dist.] 2009, no pet.).
10 (2) Iron Oak’s TUFTA claim alleged that the former receiver, not a debtor as
required by the statute,3 made the wrongful assignment;
(3) Iron Oak’s conversion claim involved a cause of action, and only tangible
property may be converted under Texas law;4
(4) Iron Oak’s conspiracy claim was derived solely from the groundless
conversion and TUFTA claims; and
(5) Iron Oak’s claims against the attorneys fail based on attorney immunity.5
Here, Anunobi argues that he had a plausible argument to overcome attorney
immunity, and Sydow and Iron Oak claim that attorney immunity, as an affirmative
defense, does not establish that Iron Oak’s claims are groundless. While an
affirmative defense, standing alone, may not establish that a claim is groundless, the
court may take it into account when appropriate to determine whether a party’s
claims have no good-faith basis in law or fact. See Nath, 446 S.W.3d at 367–71
(examining whether the claim was time-barred as a consideration to support the trial
court’s groundless and improper purpose finding). The evidence shows that the
3 See TEX. BUS. & COM. CODE § 24.005(a)(l)–(2). The trial court noted that Iron Oak did not bring suit against CET, the party to the STA that agreed to pay the promissory note. 4 See Robin Singh Educ. Servs., Inc. v. Test Masters Educ. Servs., Inc., 401 S.W.3d 95, 97 (Tex. App.—Houston [14th Dist.] 2011, no pet.). 5 See Cantey Hanger, LLP v. Byrd, 467 S.W.3d 477, 481 (Tex. 2015).
11 attorney-parties’ actions of representing their clients at mediation fall squarely
within their duties to represent their clients.
Sydow argues that the appellees never offered evidence showing that to
Sydow’s best knowledge, information, and belief, formed after reasonable inquiry,
CET’s collateral attack defense would defeat Iron Oak’s claims. Even so, there is at
least some evidence in the record to support the trial court’s conclusion that the
appellants brought the underlying suit to try to avoid the effect of the receiver’s
assignment and the denial of Iron Oak’s motion to void the settlement agreement in
the prior action.
Sydow and Iron Oak concede that Iron Oak’s claims were weak but urge that
they were not groundless. They challenge the trial court’s conclusions as to each
claim in the original petition. We address them below.
In its TUFTA claim, Iron Oak sued Hannan, the receiver but not CET, the
debtor. Anunobi argues that a receiver may be sued for breach of fiduciary duty.
Sydow and Iron Oak argue that Hannan, as the receiver, was a “debtor” under
TUFTA and that CET did not have to be a party to the case. Yet none of the
appellants cite any authority holding that a receiver may be liable for a violation of
TUFTA. Indeed, Hannan was entitled to absolute immunity. See Davis, 317 S.W.3d
at 306–07.
12 Iron Oak’s conversion claim was based on claims CET previously assigned to
Iron Oak, but Texas law is well-settled that only tangible property may be converted.
See Robin Singh Educ. Servs. Inc., 401 S.W.3d at 97. The appellants argue they had
a good-faith argument for the extension of conversion to intangible property. But the
appellants did not make this argument below until sanctions were requested, and
they even used their conversion claim to seek a temporary restraining order, which
requires a likelihood of success on the merits. See DeSantis v. Wackenhut Corp., 793
S.W.2d 670, 686 (Tex. 1990).
As to the conspiracy claim, Sydow and Iron Oak argue that the legal merit of
the conspiracy claim is itself no basis for sanctions because if either the TUFTA
claim or the conversion claim was not groundless, then the same is true of the
conspiracy claim. Nevertheless, because conspiracy is not an independent,
actionable claim, Iron Oak’s inability to bring one actionable tort claim is fatal. See
Bradt v. Sebek, 14 S.W.3d 756, 767 (Tex. App.—Houston [1st Dist.] 2000, pet.
Anunobi argues that even if the court denied the claims on their merits, his
incorrect analysis should not be the basis for sanctions. But the trial court, as fact
finder, weighs evidence and determines credibility. McLaurin v. McLaurin, No.
01-14-00710-CV, 2016 WL 3023020, at *13 (Tex. App.—Houston [1st Dist.] May
26, 2016, pet. denied).
13 Despite the lack of factual and legal basis for the claims, the appellants did
not qualify their allegations to be “upon information and belief”; they even went so
far in the TRO application to declare that they were “undisputed.” Anunobi argues
that he attempted to advocate in good faith that the results of the settlement
agreement’s terms were “undisputed” facts because it appeared that way from the
redacted settlement agreement. But the statements that certain facts are “undisputed”
when the unredacted portions of the settlement agreement plainly showed otherwise
reveal the hollowness of this argument. See TEX. R. CIV. P. 13.
We conclude that there is at least some evidence to support the trial court’s
finding that the TRO application was groundless because the appellants could not
show they had a probable right of recovery in a trial on the merits based on either
the redacted or the unredacted settlement agreement. See DeSantis, 793 S.W.2d at
686.
Thus, we hold that the trial court did not err in concluding that the appellants’
pleadings were groundless.
2. The appellants’ bad faith and improper purpose under Rule 13 and section 10.001
Under both Civil Practice and Remedies Code section 10.001(1) and Rule 13,
the movant must prove the offending party’s state of mind. TEX. CIV. PRAC. & REM.
CODE § 10.001(1); TEX. R. CIV. P. 13.
14 Bad faith “means the conscious doing of a wrong for dishonest,
discriminatory, or malicious purposes” and does not exist when a party merely
exercises “bad judgment or negligence.” Gomer v. Davis, 419 S.W.3d 470, 478 (Tex.
App.—Houston [1st Dist.] 2013, no pet.). We construe “improper purpose” under
Chapter 10 as the equivalent of “bad faith” under Rule 13. Dike v. Peltier Chevrolet,
Inc., 343 S.W.3d 179, 184 (Tex. App.—Texarkana 2011, no pet.); see Gomer, 419
S.W.3d at 478 (“Improper motive is an essential element of bad faith”). A document
is filed for the purpose of harassment if it is filed with the intent to “annoy, alarm,
and abuse another person.” Akinwamide v. Transp. Ins. Co., 499 S.W.3d 511, 527
(Tex. App.—Houston [1st Dist.] 2016, pet. denied). The trial court must measure the
party’s conduct and examine the facts available to the party at the time the relevant
document was signed. Gomer, 419 S.W.3d at 478.
Additionally, a party acts in bad faith if he has been put on notice that his
understanding of the facts may be incorrect, and he does not make reasonable inquiry
before pursuing a claim further. Robson v. Gilbreath, 267 S.W.3d 401, 407 (Tex.
App.—Austin 2008, pet. denied). A court may infer bad faith, improper motive, and
intent to harass based on circumstantial evidence. Ketterman v. Tex. Dep’t of Fam.
& Protective Services, No. 01-12-00883-CV, 2014 WL 7473881, at *10 (Tex.
App.—Houston [1st Dist.] Dec. 30, 2014, no pet.); Scheel v. Alfaro, 406 S.W.3d
216, 227 (Tex. App.—San Antonio 2013, pet. denied). While a court is generally
15 required to hold an evidentiary hearing to make a determination about the motives
and credibility of the parties, the trial court may, in some circumstances, be able to
make such a determination by taking judicial notice of items in the case file. Gomer,
419 S.W.3d at 478.
Here, the trial court concluded that appellants filed this suit and TRO
application in bad faith and for improper purpose. The evidence in the record
supports the trial court’s conclusion.
In their briefing, the parties discuss numerous allegations of the appellants’
wrongdoing. We need not address each of these allegations, so long as we determine
that the trial court did not abuse its discretion by finding one or more of these
allegations violates Chapter 10 and Rule 13.
The appellees introduced ample evidence from which the trial court may have
inferred bad faith and improper purpose. Such evidence includes: (1) the unredacted
portion of the redacted settlement agreement’s direct contradiction with the
appellants’ allegations; (2) the appellants’ representation that facts were
“undisputed” when they were demonstrably false; (3) the appellants’ filing of a TRO
application explicitly seeking to restrain the appellees from proceeding in the
Massachusetts lawsuit just before a summary judgment hearing in that suit; (4) the
appellants’ failure to notify the parties of their TRO application in contravention of
the Texas Rules of Civil Procedure and their email discussion regarding whether to
16 give notice; (5) the appellants’ filing of a TRO application based on an extensively
redacted agreement; and (6) the appellants’ constructive possession of the
unredacted settlement agreement when they filed their original petition and TRO
application. These facts support a reasonable inference that the appellants filed their
original petition and TRO application in bad faith and for improper purpose.
Iron Oak contends that he should not be held responsible for his attorneys’
conduct. Although a party should not be punished for its counsel’s conduct “unless
the party is implicated apart from having entrusted its legal representation to
counsel,” the court can impose sanctions when a party gives false testimony.
Metzger, 892 S.W.2d at 52; see In re Reece, 341 S.W.3d 360, 368 (Tex. 2011).
Iron Oak, through Gosain’s declaration attached to the TRO application,
represented to the court under oath that multiple factual allegations were
“undisputed” when the evidence established the contrary and could not have been
represented as such in good faith. The appellees contend that Iron Oak’s acts are
sufficient to uphold the sanctions against it. We agree. Misrepresenting facts in a
declaration to the court disserves justice and sanctions are appropriate under both
Rule 13 and Chapter 10. See Metzger, 892 S.W.2d at 52–53 (holding sanctions under
Rule 13 was appropriate when the represented party lied through an affidavit
attached to the pleading).
17 Anunobi argues that his failure to give notification to the other parties is not
a ground for sanctions under Rule 13 or Chapter 10. Nonetheless, the trial court may
consider the case’s entire history. Greene v. Young, 174 S.W.3d 291, 301 (Tex.
App.—Houston [1st Dist.] 2005, pet. denied). To the extent Sydow and Anunobi
claim that they submitted evidence of their good faith, the trial court, as the fact
finder, was entitled to disbelieve all or any portion of Anunobi’s and Sydow’s
testimony. See Powell, 2025 WL 626428, at *9. The trial court resolves any
inconsistencies or conflicts in the evidence, and we may not substitute our judgment
for that of the trial court. Marshall v. MarOpCo, Inc., 714 S.W.3d 724, 770 (Tex.
App.—Houston [1st Dist.] 2025, pet. filed). Likewise, the trial court had the
discretion to disbelieve the appellants’ argument regarding their knowledge and
intention. See Powell, 2025 WL 626428, at *9.
The appellants urge that the appellees failed to meet their burden of showing
improper motive because the lack of witness testimony to admit their exhibits was
fatal to their motion for sanctions. At the hearing, counsel for Porter stated,
“[Anunobi] wants us to take up all of the exhibits one at a time . . . .” Anunobi later
questioned, “I’m just confused as to, when he says that’s how he’s going to be
offering them, is he testifying? Is he going to be arguing trying to get this in?” He
explained,
Because we intend to call them to testify and cross-examine them because they’ve been filed for sanctions, as well; and I want to be able 18 to have an opportunity to do that within the time we have. I’m just concerned about equity with respect to time.
Anunobi’s objection to the trial court appears to be based on his own motion
for sanctions and his perceived lack of time to present his own evidence. In any
event, although he asked how the exhibits would be offered, he did not object on this
basis and did not state the grounds for his objection with sufficient specificity to
make the trial court aware of the complaint. See TEX. R. EVID. 103(a); TEX. R. APP.
33.1. Other than Anunobi’s vague objection, the appellants did not timely object to
the exhibits being admitted into evidence. See TEX. R. EVID. 103(a); TEX. R. APP.
33.1. Thus, any argument on how the exhibits were entered into the record is waived.
Sydow and Iron Oak contend that the trial court erred by considering their
misconduct in other cases. But a trial court may properly consider evidence of
misconduct in other litigation, especially regarding a party’s state of mind. See, e.g.,
Falk & Mayfield L.L.P., 974 S.W.2d at 824-25 (considering evidence of the party’s
conduct in other lawsuits to establish element of “bad faith”); Bradt, 14 S.W.3d at
767–68 (finding that a pattern of misconduct—including in other related litigation—
demonstrated the party’s bad faith in filing pleadings). Even if the evidence of
Sydow’s and Iron Oak’s misconduct in other cases is irrelevant, the appellants
waived their objection. See Low, 221 S.W.3d at 619.
In his fourth issue, Sydow contends that the trial court could not sanction
Sydow for any misrepresentation about his status as counsel and that the trial court 19 could not consider Anunobi’s affidavit filed after the hearing. At the same time,
Sydow’s signature on both the petition and TRO application, his name as one of the
case contacts in the automated system, his attendance at the hearings, and his request
for the unredacted settlement agreement all demonstrate that he represented Iron Oak
in this case, despite his declaration otherwise. We defer to the trial court’s
determination of the witnesses’ credibility on this issue. See Powell, 2025 WL
626428, at *9. Regardless of Anunobi’s affidavit, the evidence supports that Sydow
was Iron Oak’s counsel in this case, and Sydow’s representation otherwise is
patently false. Any error the trial court made by admitting Anunobi’s affidavit into
evidence was harmless. See TEX. R. APP. P. 44.1.
Based on the record before us, we hold that the trial court did not abuse its
discretion in concluding that the pleadings were filed in bad faith or with the intent
to harass and for improper purpose. Because there is at least some evidence to
support the trial court’s sanctions under both Civil Practice and Remedies Code
section 10.001(1) and Rule 13, we need not consider whether the trial court’s
sanctions were proper under section 10.001’s other provisions.
We overrule Iron Oak’s first issue, Anunobi’s first and second issue, and
Sydow’s first, second, and fourth issues.
20 Attorney’s fees and expenses under Rule 13
Iron Oak complains that the evidence of attorney’s fees and expenses
supporting the $44,720 sanction under Rule 13 included unrecoverable items, such
as expenses for computer-assisted legal research, billing for the attorneys’ effort in
pursuing sanctions, and charges accounted for under block billing. But Iron Oak did
not include any citations to the clerk’s record and only makes a global assertion of
block billing. This does not properly present this issue for appeal, and thus his
complaint is waived due to inadequate briefing. TEX. R. APP. P. 38.1; See Adell v.
State, No. 01-21-00439-CR, 2023 WL 4938111, at *44 (Tex. App.—Houston [1st
Dist.] Aug. 3, 2023, pet. ref’d).
Amount of monetary sanctions under Chapter 10
In Iron Oak’s second issue, Sydow’s third issue, and Anunobi’s third issue,
the appellants contend that the $250,000 sanction against Sydow, the $250,000
sanction against Iron Oak, and the $25,000 sanction against Anunobi, respectively,
were excessive. Chapter 10 authorizes imposition of a monetary penalty, payable to
the court, against parties and lawyers who file groundless pleadings in bad faith.
TEX. CIV. PRAC. & REM. CODE §§ 10.001, 10.004(a).
“The amount of the sanction is limited by the trial court’s duty to exercise
sound discretion.” Low, 221 S.W.3d at 619. “A trial court abuses its discretion when
it acts without reference to any guiding rules or principles, not when it simply
21 exercises that discretion in a different manner than reviewing appellate courts
might.” Id. at 620.
To comply with constitutional due process, a sanction must be neither unjust
nor excessive. Nath, 446 S.W.3d at 363. The first prong of the due process analysis
requires a direct nexus between the offensive conduct, the offender, and the sanction
award. Id. A just sanction is “directed against the abusive conduct with an eye toward
remedying the prejudice caused to the innocent party.” Id. at 363. “A court must
attempt to determine whether the offensive conduct is attributable to counsel only,
to the party only, or to both.” Id.
The second prong of the due process analysis requires the punishment to be
proportional to the offensive conduct. Id. “[T]he sanction imposed should be no
more severe than necessary to satisfy its legitimate purposes.” Id. “Legitimate
purposes may include securing compliance with the relevant rules of civil procedure,
punishing violators, and deterring other litigants from similar misconduct.” Id.
Under Chapter 10, the only restriction on the amount of the penalty in the
language of the statute is that “[t]he sanction must be limited to what is sufficient to
deter repetition of the conduct or comparable conduct by others similarly situated.”
Id. § 10.004(b); see, e.g., Skepnek v. Mynatt, 8 S.W.3d 377, 380-81 (Tex. App.—El
Paso 1999, pet. denied) (upholding $25,000 sanction to be paid into registry of court
under Chapter 10).
22 The Texas Supreme Court has recognized “a nonexclusive list of factors” for
courts to consider in determining an appropriate award of sanctions. See Low, 221
S.W.3d at 620 n.5. The factors are:
a. the good faith or bad faith of the offender; b. the degree of willfulness, vindictiveness, negligence, or frivolousness involved in the offense; c. the knowledge, experience, and expertise of the offender; d. any prior history of sanctionable conduct on the part of the offender; e. the reasonableness and necessity of the out-of-pocket expenses incurred by the offended person as a result of the misconduct; f. the nature and extent of prejudice, apart from out-of-pocket expenses, suffered by the offended person as a result of the misconduct; g. the relative culpability of client and counsel, and the impact on their privileged relationship of an inquiry into that area; h. the risk of chilling the specific type of litigation involved; i. the impact of the sanction on the offender, including the offender’s ability to pay a monetary sanction; j. the impact of the sanction on the offended party, including the offended person’s need for compensation; k. the relative magnitude of sanction necessary to achieve the goal or goals of the sanction; 1. burdens on the court system attributable to the misconduct, including consumption of judicial time and incurrence of juror fees and other court costs; [and] n. the degree to which the offended person’s own behavior caused the expenses for which recovery is sought.
Id. Here, the trial court properly considered the factors applicable to the appellants’
conduct when determining the monetary sanctions imposed on each appellant.
23 Sydow complains that the trial court failed to consider all of the Low factors,
but the Texas Supreme Court only requires courts to consider relevant Low factors.
Low, 221 S.W.3d at 621 (Tex. 2007). In any event, Sydow did not preserve this
complaint because he raises it for the first time on appeal. TEX. R. APP. P. 33.1(a).
Much of the appellants’ arguments discuss the prompt nonsuit after the
appellees filed their Rule 91a motion and motion for sanctions. Nevertheless,
baseless filing burdens both courts and individuals with needless expense and delay,
and even if the litigant quickly nonsuits, the harm from the misconduct has already
occurred. Scott & White Mem’l Hosp. v. Schexnider, 940 S.W.2d 594, 597 (Tex.
1996). Although Sydow’s and Iron Oak’s sanctions were severe, they were
supported by the evidence of Sydow’s and Iron Oak’s flagrant bad faith conduct,
abuse of the court system, and blatant disregard of their responsibilities. See Brewer,
601 S.W.3d at 720 (observing “the severity of sanction imposed turns on the degree
of bad faith”) (emphasis in original); TransAm. Nat. Gas Corp. v. Powell, 811
S.W.2d 913, 918 (Tex. 1991) (explaining that severe sanctions should be reserved
for circumstances where offending party has flagrant bad faith or counsel callously
disregarded their responsibilities under rules of procedure). The trial court explained
that while the evidence showed Anunobi’s misconduct did not arise to the level of
Sydow’s and Iron Oak’s, Anunobi admitted that he would have done “the exact same
thing.”
24 Sydow contends that the trial court failed to consider lesser sanctions or
explain why the $250,000 sanction was necessary. Yet the trial court explained that
the large monetary sanction was justified under the Low factors and necessary to
deter repetition of the sanctionable conduct. See Powell, 811 S.W.2d at 918 (holding
punishment and deterrence are legitimate purposes for sanctions).
Accordingly, we cannot say the trial court abused its discretion by awarding
$250,000 sanctions against Sydow, $250,000 sanctions against Iron Oak, and
$25,000 sanctions against Anunobi.
Additionally, Sydow and Anunobi argue that Chapter 10 does not allow the
trial court to impose continuing legal education requirements or notification
requirements on an attorney. But neither Sydow nor Anunobi raised this objection
in the trial court, and it is therefore not preserved for our review. TEX. R. APP. P.
33.1.
We overrule Iron Oak’s second issue, Anunobi’s third issue, and Sydow’s
third issue.
Evidentiary arguments by Anunobi
In Anunobi’s fifth issue, he contends that the trial court erred by admitting the
appellees’ exhibits into evidence despite his objection and for refusing to allow
Anunobi to call Berg as a witness at the evidentiary hearing.
25 When the appellees asked the trial court to admit their documents into
evidence, Anunobi objected, stating, “Because we intend to call them to testify and
cross-examine them because they’ve been filed for sanctions, as well; and I want to
be able to have an opportunity to do that within the time we have. I’m just concerned
about equity with respect to time.” The trial court overruled Anunobi’s objection.
Although Anunobi complains in his brief that his due process rights were violated,
he did not object on that basis in the trial court. Accordingly, any error is waived.
TEX. R. EVID. 103; TEX. R. APP. P. 33.1.
Anunobi also contends that the trial court erred by not requiring Berg to testify
at the evidentiary hearing. At the hearing, Anunobi explained, “I filed a motion for
sanctions against him. So, he’s—actually, he’s a party to the case. He may be a
lawyer, but he’s a party to the ultimate lawsuit.” He further stated, “So, they filed
sanctions against me. So, I filed sanctions against them.” Thus, it appears from the
record that Anunobi merely wanted Berg to testify based on Anunobi’s own motion
for sanctions.
We uphold the trial court’s evidentiary ruling if there is any legitimate basis
for the ruling. Jones v. Mattress Firm Holding Corp., 558 S.W.3d 732, 737 (Tex.
App.—Houston [14th Dist.] 2018, no pet.). “A reviewing court will not reverse a
judgment because a trial court erroneously excluded evidence when the excluded
26 evidence is cumulative or not controlling on a material issue dispositive to the case.”
Id. at 739; see TEX. R. APP. P. 44.1(a)(1).
Anunobi fails to show how Berg’s testimony is material or relevant to the
imposition of sanctions on Anunobi. See, e.g., Drew v. State, 76 S.W.3d 436, 449–
50 (Tex. App.—Houston [14th Dist.] 2002, pet. ref’d) (overruling issue regarding
right to confront when appellant was not permitted to cross-examine). The record
evidence of the appellants’ misconduct is sufficient to support the sanctions
imposed. Because the judgment does not involve Anunobi’s own motion for
sanctions, we hold any purported error in the admission or exclusion of Berg’s
testimony is harmless. See U–Haul Int’l, Inc. v. Waldrip, 380 S.W.3d 118, 132 (Tex.
2012); TEX. R. APP. P. 44.1.
We overrule Anunobi’s fifth issue.
Appellate fees
In Iron Oak’s third issue, Sydow’s fifth issue, and Anunobi’s fifth issue, the
appellants argue that the appellate attorney’s fees awarded should have been
explicitly contingent on the appellees’ success on appeal.
The final judgment states that the appellate attorney’s fees are contingent, but
the trial court was not explicit regarding such contingency. The trial court must
condition an award of appellate attorney’s fees upon the appellant’s unsuccessful
appeal. Keith v. Keith, 221 S.W.3d 156, 171 (Tex. App.—Houston [1st Dist.] 2006,
27 no pet.). We may modify the judgment to make the award of appellate attorney’s
fees contingent upon the receiving party’s success on appeal and do so here. See id.
Suggestion of Bankruptcy
After this case was set for submission, Iron Oak filed a suggestion of
bankruptcy requesting this Court to stay all proceedings because Iron Oak filed for
bankruptcy in France. Citing Texas Rule of Appellate Procedure 8.2, Iron Oak
contends that this French bankruptcy suspends this appeal. But Iron Oak has not
cited any authority to support such an application of Rule 8.2. Conversely, Anunobi
and the appellees contend that Rule 8.2 applies only to domestic bankruptcy filings.
We agree with Anunobi and the appellees.
“Congress has exercised its constitutional grant of authority over bankruptcy
matters by vesting jurisdiction over them exclusively in the federal courts.”
Kumkang Valve Mfg. Co. Ltd. v. Enter. Prods. Operating LLC, 442 S.W.3d 602, 606
(Tex. App.—Houston [1st Dist.] 2014, no pet.); see 28 U.S.C. § 1334(a); U.S.
CONST. art. I, § 8. The Texas Rules of Appellate Procedure recognize that a federal
bankruptcy filing triggers a Texas appellate court’s obligation to stay an appeal. See
TEX. R. APP. P. 8.1(d) (referencing bankruptcy filings available through federal court
online filing system); TEX. R. APP. P. 8.2 (“A bankruptcy suspends the appeal and
all periods in these rules from the date when the bankruptcy petition is filed until the
appellate court reinstates or severs the appeal in accordance with federal law.”
28 (emphasis added)). As this Court explained in Kumkang Valve, a representative
appointed in a foreign bankruptcy proceeding may petition for recognition of the
foreign proceeding in United States bankruptcy court. 442 S.W.3d at 607; 11 U.S.C.
§§ 1504, 1509(a), 1515. If the petition meets the statutory requirements, the
bankruptcy court, after notice and a hearing, must enter an order granting recognition
of the foreign proceeding. See 11 U.S.C. §§ 1515, 1517. Without such recognition,
though, the entity seeking relief in the foreign bankruptcy proceeding is not entitled
to a stay of proceedings within the United States. See id. §§ 1520, 1521.
Iron Oak has provided no evidence that a federal court has recognized the
French bankruptcy. Accordingly, the suggestion of bankruptcy is deficient, and Iron
Oak is not entitled to the benefit of a stay pursuant to the federal bankruptcy law and
Texas Rule of Appellate Procedure 8.2.
29 Conclusion
Based on the record before us, and all the reasons above, we affirm the trial
court’s imposition of sanctions under Chapter 10 and Rule 13. We modify the
portion of the trial court’s judgment ordering the appellants to pay the appellees’
attorney’s fees to be contingent on the appellees’ success on appeal and affirm as
modified.
Clint Morgan Justice
Panel consists of Chief Justice Adams and Justices Morgan and Dokupil.