Johnathan David Rice and Diana Rice v. Lewis Energy Group, L.P. Lewis Petro Properties, Inc. Lewis Resource Management, LLC Segundo Navarro Drilling, Ltd. And Tercero Navarro, Inc.

Court of Appeals of Texas·Decided October 28, 2020·No. 04-19-00234-CV·Published

Opinion

Fourth Court of Appeals San Antonio, Texas MEMORANDUM OPINION

No. 04-19-00234-CV

Jonathan David RICE and Diana Rice Appellants

v.

LEWIS ENERGY GROUP, L.P.; Lewis Petro Properties, Inc.; Lewis Resource Management, LLC; Segundo Navarro Drilling, Ltd.; and Tercero Navarro, Inc., Appellees

From the 224th Judicial District Court, Bexar County, Texas Trial Court No. 2015-CI-08936 Honorable Peter A. Sakai, Judge Presiding

Opinion by: Irene Rios, Justice

Sitting: Sandee Bryan Marion, Chief Justice Rebeca C. Martinez, Justice Irene Rios, Justice

Delivered and Filed: October 28, 2020

REVERSED AND REMANDED IN PART, AFFIRMED IN PART

In this appeal from a final judgment, 1 we are asked to reverse parts of the judgment

assessing sanctions and sealing court records. We are also asked to grant leave to amend the notice

of appeal and to dismiss part of the appeal. We grant leave to amend the notice of appeal, deny the

1 The final judgment consists of two orders signed on January 29, 2019. The first order assesses sanctions and orders the case permanently sealed and the second order grants a permanent injunction. 04-19-00234-CV

motion to dismiss, reverse and remand the part of the judgment permanently sealing court records,

and affirm the remainder of the judgment. 2

BACKGROUND

After Jonathan David Rice and Diana Rice (“the Rices”) arbitrated their dispute with Lewis

Energy Group L.P., Lewis Petro Properties Inc., Lewis Resource Management LLC, Segundo

Navarro Drilling Ltd., and Tercero Navarro Inc., (collectively, “the Lewis parties”), the Rices filed

a motion to confirm the arbitration award. Attached to the motion was a copy of the arbitration

award, which detailed the arbitrator’s reasons for his ruling and awarded the Rices damages.

Contending the parties agreed to keep the arbitration award confidential, the Lewis parties moved

to enforce the confidentiality agreement. Their claim of confidentiality was based, in part, on a

provision in a document titled, “Arbitration Policy and Rules.” The Lewis parties also moved for

sanctions against the Rices’ lawyers, (“the lawyers.”). The sanctions motion asserted that the

lawyers had violated Texas Rule of Civil Procedure 13, which prohibits the filing of groundless

pleadings brought in bad faith or for the purpose of harassment. A later-filed supplemental

sanctions motion asserted the lawyers had violated their duty of candor to the trial court.

On May 22 and 23, 2018, the trial court 3 held a hearing on the motion to confirm the

arbitration award. At this hearing, the trial court asked the Rices’ lawyers if they had any

knowledge of a confidentiality agreement when they filed the arbitration award in the trial court.

The lawyers assured the trial court they were not aware of the “Arbitration Policy and Rules” when

2 In accordance with Rule 76a.1 of the Texas Rules of Civil Procedure, this opinion and its corresponding judgment are to remain unsealed. See TEX. R. CIV. P. 76a.1 (“No court order or opinion issued in the adjudication of a case may be sealed.”). 3 The Honorable Laura Salinas of the 166th Judicial District Court, Bexar County, Texas, presided at this hearing.

-2- 04-19-00234-CV

they filed the arbitration award. One of the lawyers testified under oath that he had no prior

knowledge of this document.

On May 24, 2018, the trial court signed an order temporarily sealing the motion to confirm

and the arbitration award; ordering briefing on the lawyers’ prior knowledge of the “Arbitration

Policy and Rules;” and permitting the Lewis parties to pay the damages awarded in the arbitration

award into the court registry. However, the trial court did not rule on the motion to confirm the

arbitration award.

The Rices filed a mandamus petition in this court, seeking review of the trial court’s May

24, 2018 order. We conditionally granted mandamus relief, directing the trial court to rule on the

motion to confirm and to withdraw its order permitting payment of damages into the court registry.

In re Rice, No. 04-18-00359-CV, 2018 WL 3440709, at *4 (Tex. App.—San Antonio July 18,

2018, orig. proceeding). The trial court complied with our mandamus order, signing an order

confirming the arbitration award and vacating its order permitting payment of the arbitration award

into the court registry.

On August 21, 2018, the trial court held a hearing. At the end of the hearing, it granted the

motion to enforce the confidentiality agreement and for sanctions and permanently sealed the court

records in this case.

On December 17, 2018, the trial court held another hearing, where it considered and denied

the Rices’ motion for reconsideration of the order permanently sealing court records.

On January 29, 2019, the trial court signed a final judgment, permanently enjoining the

Rices and their “[r]epresentatives” 4 “from using, disclosing, or transmitting for any purpose, any

4 The judgment defines “[r]epresentatives” as “any person or entity acting by, through, or under [the Rices], or subject to their control, including (without limitation) any employee, director, shareholder, officer, assign, predecessor, successor, attorney, representative, or agent of [the Rices] or [the Rices’] counsel.”

-3- 04-19-00234-CV

aspect of the arbitration proceeding [] or this lawsuit [].” The judgment also ordered the lawyers

to pay the Lewis parties monetary sanctions in the amount of $70,000.00, but suspended payment

of the $70,000.00 “as long as” the Rices and their representatives complied with the permanent

injunction. The trial court also ordered that “the case remain permanently sealed.” The Rices timely

filed a notice of appeal.

The Rices requested, and the trial court ultimately filed, findings of fact and conclusions

of law. The trial court’s conclusions of law state that $70,000.00 in monetary sanctions is proper

based on multiple grounds, including Rule 13 of the Texas Rules of Civil Procedure and “the

inherent power of the court.”

MOTIONS FILED ON APPEAL

The Rices present six issues on appeal. In their first, second, third, and fourth issues, the

Rices complain about the trial court’s order assessing sanctions against their lawyers. In their fifth

and sixth issues, the Rices complain about the trial court’s order permanently sealing court records.

As a preliminary matter, we must consider two motions pending in this appeal: (1) the Lewis

parties’ motion to dismiss the Rices’ sanctions-related issues; and (2) the Rices’ motion for leave

to file an amended notice of appeal.

The Lewis parties move to dismiss the sanctions-related issues asserting the Rices lack

standing to challenge sanctions assessed only against their lawyers. The Lewis parties emphasize

that the Rices’ lawyers are not listed as appellants in the original notice of appeal. The Lewis

parties’ argument is based on Niera v. Frost Nat’l Bank, No. 04-09-00224-CV, 2010 WL 816191,

at *2 (Tex. App.—San Antonio Mar. 10, 2010, pet. denied) (mem. op.). In Niera, the trial court

granted a motion for sanctions against a lawyer; however, the lawyer did not file a notice of appeal.

Id. at *1. On appeal, the client challenged the sanctions order and this court held that the client

lacked standing to complain about the sanctions order because an appealing party may not

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complain of errors that do not injuriously affect her or merely affect the rights of others. Id. Based

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Johnathan David Rice and Diana Rice v. Lewis Energy Group, L.P. Lewis Petro Properties, Inc. Lewis Resource Management, LLC Segundo Navarro Drilling, Ltd. And Tercero Navarro, Inc., (Tex. Ct. App. 2020).

Johnathan David Rice and Diana Rice v. Lewis Energy Group, L.P. Lewis Petro Properties, Inc. Lewis Resource Management, LLC Segundo Navarro Drilling, Ltd. And Tercero Navarro, Inc. (Johnathan David Rice and Diana Rice v. Lewis Energy Group, L.P. Lewis Petro Properties, Inc. Lewis Resource Management, LLC Segundo Navarro Drilling, Ltd. And Tercero Navarro, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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