Order issued March 30, 2021
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-20-00606-CV
———————————
PORT ARTHUR STEAM ENERGY, L.P., Appellant
V.
OXBOW CALCINING LLC, Appellee
On Appeal from the 270th District Court
Harris County, Texas
Trial Court Case No. 2020-18313
ORDER ON MOTION TO REVIEW SUPERSEDEAS BOND
Pursuant to Texas Rule of Appellate Procedure 24.4, appellant, Port Arthur
Steam Energy, L.P. (“PASE”), requests that this Court review and vacate or
reverse the trial court’s order requiring a $1,207,282.97 bond to supersede
execution of an arbitration award that was confirmed by the trial court. PASE also
requests that the bond amount to be set at no more than $138,574.28. We deny
PASE’s Motion to Review Supersedeas Order.1
Background
PASE owns a waste heat recovery facility in Port Arthur, Texas. Appellee,
Oxbow Calcining LLC (“Oxbow”), owns and operates an adjacent coke-calcining
plant in Port Arthur. PASE and Oxbow’s predecessor entered into a Heat
Exchange Agreement (“HEA”),2 the alleged breach of which caused the parties to
engage in arbitration.
On March 17, 2020, an arbitration panel issued an arbitration award in favor
of Oxbow. The arbitration award was confirmed by the trial court in a July 23,
2020 final judgment.3 The arbitration panel found, among other things, that PASE
breached the HEA4 and that Oxbow had no liability to PASE. The arbitration
award ordered PASE to pay the following:
1
PASE filed a combined Motion to Review Supersedeas Order and Emergency
Motion to Stay. On January 7, 2021, the Court granted the portion of PASE’s
motion requesting a stay of the trial court proceedings pending this Court’s
disposition of the motion to review supersedeas order. We now address the
remaining portion of PASE’s combined motion.
2
According to the arbitration award, “Broadly speaking, Oxbow provided waste
heat generated by the calcining process to PASE.”
3
The final judgment granted Oxbow’s motion to confirm the arbitration award and
denied PASE’s motion to vacate the arbitration award.
4
The arbitration panel found that PASE breached the HEA by bringing an action in
state court and by failing to fund an escrow account.
2
• $500,000 in escrow plus interest at five percent from August 31, 2019 in
the amount of $68.49 per day until March 17, 2020, the date of the
arbitration award;
• An annual escrow deposit of $500,000 every August 31, beginning on
August 31, 2020, until the balance equals $2,000,000;5
• $44,425.00 in American Arbitration Association administrative fees;
• $244,798.57 in compensation and expenses of the arbitrators;
• $138,574.278 in reimbursement to Oxbow for the amount it had
deposited with the American Arbitration Association; and
• Interest at the rate of five percent per year post award and post judgment
until fully paid.
On April 4, 2020, Oxbow propounded post-judgment discovery on PASE.
On August 7, 2020, Oxbow filed a motion to compel PASE’s post-judgment
discovery responses.
On August 21, 2020, PASE posted a bond of $138,574.28 to suspend
enforcement of the trial court’s final judgment pending appeal. PASE filed a
notice of appeal the next day.6 On October 14, 2020, Oxbow filed a motion to
increase the amount of security, asserting that the bond was insufficient to
5
The escrow payments “relate[] to PASE’s ongoing obligation under the HEA and
[the arbitration award] to ‘expeditious[ly]’ dismantle and remove its Steam
Production Facility (which adjoins Oxbow’s Port Arthur facility).”
6
PASE states in its motion that it is appealing the arbitration panel’s escrow ruling
“on multiple grounds.”
3
supersede the judgment of $1,185,345.99.7 In its motion, Oxbow asked the trial
court to order PASE to post an additional bond of $1,046,771.71. PASE filed a
response, and the motion to increase the amount of security was heard on
November 18, 2020. On November 24, 2020, the trial court signed an Order
Increasing Amount of Security to Supersede Judgment (the “supersedeas order”),
stating in pertinent part:
The security [PASE] must post to supersede the [j]udgment is
increased by the amount of $1,068,708.69 and the deadline to
supersede the [j]udgment with this increased amount shall be
March 1, 2021. The amount of the supersedeas bond shall increase by
$500,000.00 on August 31, 2021, and by $500,000.00 on August 31,
2022.
The order also required PASE to respond to certain post-judgment discovery. On
December 31, 2020, PASE filed in this Court its Motion to Review Supersedeas
Order.
In its motion, PASE asserts that the $138.574.28 bond it posted was a
sufficient bond because (1) Oxbow was not awarded compensatory damages in the
trial court’s judgment, (2) the security amount bears no relationship to any
potential loss Oxbow could incur while PASE’s appeal is pending, and (3) ordering
the additional security will cause PASE substantial economic harm and hinder its
7
Oxbow asserts that the trial court’s judgment comprises the $500,000 escrow
payment due on August 31, 2019, the $500,000 escrow payment due on August
31, 2020, $13,629.51 in pre-award interest on the $500,000 August 31, 2019
escrow payment, $138,574.28 in arbitration administrative fees and expenses and
compensation, and $33,142.40 in post-award and post-judgment interest.
4
ability to pursue its appeal and other litigation with Oxbow. PASE also asserts that
it should not have to respond to the requested post-judgment discovery. In
response to PASE’s motion, Oxbow asserts that (1) the escrow-payment awards
are compensatory damages and therefore the trial court’s supersedeas order
correctly required PASE to pay an additional $1,068,708.69 to supersede the
court’s judgment, (2) even if the escrow payments are not compensatory damages,
requiring security for them is still proper, (3) the supersedeas order is not excessive
and does not cause PASE substantial economic harm, and (4) this Court lacks
jurisdiction over PASE’s appeal of the trial court’s post-judgment discovery ruling.
Standard of Review
A trial court’s ruling on the amount of supersedeas bond is reviewed for an
abuse of discretion. Eagle Oil & Gas Co. v. Shale Expl., LLC, 510 S.W.3d 92, 94
(Tex. App.—Houston [1st Dist.] 2016, order); EnviroPower, L.L.C. v. Bear,
Stearns & Co., Inc., 265 S.W.3d 1, 2 (Tex. App.—Houston [1st Dist.] 2008, order).
To survive an abuse-of-discretion challenge, the evidence must be legally and
factually sufficient to support the trial court’s ruling. G.M. Houser, Inc. v.
Rodgers, 204 S.W.3d 836, 840 (Tex. App.—Dallas 2006, no pet.). “The test for
whether a trial court abused its discretion is whether the trial court acted arbitrarily
or unreasonably in light of all the circumstances of the case.” EnviroPower, 265
S.W.3d at 2. Upon a finding that the trial court abused its discretion, this Court has
5
the authority to order the amount of the security increased or decreased, but if
increased, it must be an amount not to exceed the lesser of fifty percent of the
judgment debtor’s net worth or $25,000,000. TEX. CIV. PRAC. & REM. CODE ANN.
§ 52.006; TEX. R. APP. P. 24.2, 24.4.
Discussion
Texas Rule of Appellate Procedure 24 governs the suspension of
enforcement of a trial court judgment. It states in pertinent part:
(a) Methods. Unless the law or these rules provide otherwise, a
judgment debtor may supersede the judgment by:
(1) filing with the trial court clerk a written agreement with the
judgment creditor for suspending enforcement of the judgment;
(2) filing with the trial court clerk a good and sufficient bond;
(3) making a deposit with the trial court clerk in lieu of a bond; or
(4) providing alternate security ordered by the court.
TEX. R. APP. P. 24.1(a). When the judgment is for money, the amount of the bond
or security “must equal the sum of compensatory damages awarded in the
judgment, interest for the estimated duration of the appeal, and costs awarded in
the judgment.” TEX. R. APP. P. 24.2(a)(1); see also TEX. CIV. PRAC. & REM. CODE
§ 52.006(a). When the judgment is for something other than money or a property
interest, the trial court determines the amount and type of supersedeas bond that
the judgment debtor must post. TEX. R. APP. P. 24.2(a)(3). The purpose of
6
supersedeas bond is to “preserve[] the status quo of the matters in litigation as they
existed before the issuance of the order or judgment from which an appeal is
taken.” Smith v. Tex. Farmers Ins. Co., 82 S.W.3d 580, 585 (Tex. App.—San
Antonio 2002, pet. denied).
A. Compensatory Damages
During the hearing on Oxbow’s motion to increase the amount of security,
the trial court determined that the funds to be escrowed are compensatory damages.
The Texas Civil Practice and Remedies Code defines “[c]ompensatory damages”
as “economic and noneconomic damages.” TEX. CIV. PRAC. & REM. CODE ANN.
§ 41.001(8) (internal quotations omitted). “Economic damages” are defined as
“compensatory damages intended to compensate a claimant for actual economic or
pecuniary loss; the term does not include exemplary damages or noneconomic
damages.” Id. § 41.001(4) (internal quotations omitted). “Noneconomic damages”
are defined as “damages awarded for the purpose of compensating a claimant for
physical pain and suffering, mental or emotional pain or anguish, loss of
consortium, disfigurement, physical impairment, loss of companionship and
society, inconvenience, loss of enjoyment of life, injury to reputation, and all other
nonpecuniary losses of any kind other than exemplary damages.” Id. § 41.001(12)
(internal quotations omitted).
7
According to PASE, no security is needed for the escrow account it was
ordered to fund because those funds do not constitute compensatory damages.
PASE asserts that the arbitration panel’s award ordering PASE to deposit funds
into an escrow account rather than awarding the funds to Oxbow “in any manner,
whether as costs, compensatory damages, liquidated damages, penalties, interest,
or otherwise,” coupled with the fact that Oxbow “never claimed, argued, or much
less established that it suffered a loss of approximately $2 million or that the
approximately $2 million in escrow funding required by the [j]udgment constitutes
compensation to Oxbow for a loss Oxbow actually incurred” negates any
possibility that the escrowed funds could be compensatory damages.
PASE relies on the definition of “damages” in In re Xerox Corp., 555
S.W.3d 518 (Tex. 2018) (orig. proceeding). In In re Xerox Corp., the Texas
Supreme Court held that the proportionate-responsibility scheme in chapter 33 of
the Texas Civil Practice and Remedies Code does not apply to the Texas Medicaid
Fraud Prevention Act. 555 S.W.3d at 539. In its analysis, the supreme court
compared the definitions of “damages” and “penalty”:
“Damages” are “[m]oney claimed by, or ordered to be paid to, a
person as compensation for loss or injury.” “Damages” compensate
for loss—actual or reasonably estimable—and no more. But, not all
compensation constitutes “damages,” even when an award is
necessary to make a party whole. For example, attorney’s fees are
generally not damages, even if compensatory. More recently, we
8
reaffirmed in Wal-Mart Stores, Inc. v. Forte,[8] that “not all
compensatory recovery can be considered damages,” and explained
that “civil penalties are different from compensatory damages.”
A “penalty” is “[p]unishment imposed on a wrongdoer,” especially,
“a sum of money exacted as punishment for either a wrong to the
state or a civil wrong (as distinguished from compensation for an
injured party’s loss).” Penalties “go beyond compensation” and “are
intended to punish, and label defendants wrongdoers.” Monetary
liability that exists even when no loss has occurred can only be a fine
or a penalty, not damages. But that does not mean penalties do not
and cannot have “compensatory traits.” Indeed, the Legislature may
choose a penalty regime precisely because harm ensuing from a
wrong may be inestimable and, therefore, must be deterred and
prevented. Moreover, penalties necessarily compensate in the sense
that the hallmark of a penalty is that it goes beyond compensating for
a loss.
Id. at 529–30 (internal footnotes omitted). PASE asserts that the escrow award
cannot be classified as compensatory damages because Oxbow was not awarded
the escrow fund as “compensation for a loss.”9
Oxbow, on the other hand, asserts that the escrow funds are compensatory
damages because the payment of the escrow funds was ordered by the arbitration
panel. Oxbow relies on the definition of damages from In re Xerox Corp. to assert
8
497 S.W.3d 460 (Tex. 2016).
9
During the hearing in the trial court, Oxbow stated that the escrowed funds are
liquidated damages. “Liquidated damages constitute a penalty unless (1) the harm
caused by the breach is incapable or difficult of estimation and (2) the amount of
liquidated damages is a reasonable forecast of just compensation. . . . A remedy
unrelated to actual loss is a penalty.” In re Xerox Corp., 555 S.W.3d 518, 532–33
(Tex. 2018) (orig. proceeding) (internal footnotes omitted). Oxbow did not
re-urge its liquidated damages argument in its response to PASE’s motion in this
Court.
9
that the escrow funds need not be paid to it to constitute damages, given that
Oxbow has a claim to the maintenance of the escrow funds. Id. at 529.
Specifically, Oxbow states that the HEA and the arbitration award describe the
circumstances under which it has a claim to the escrow funds. The arbitration
award says that the HEA “did not prohibit Oxbow from demanding debts due from
PASE in cash.” And section 8.6(b) of the HEA, which enumerates the
requirements for the escrow deposits, states that the funds in the escrow account
may only be removed by PASE “upon [Oxbow’s] written acknowledgment that
PASE has satisfied all of its obligations under [s]ection 8.6(a)” of the HEA.
Oxbow asserts that the escrow funds are not, as PASE argues, potential
compensation for a future loss but are, rather, compensation for a current loss:
PASE’s continued failure to remove its equipment as required at the termination of
the HEA agreement.10 According to Oxbow, the escrow award gave it the “benefit
of its bargain,” the typical measure of damages in a breach-of-contract suit, but that
without a sufficient supersedeas bond, it will not have access to the escrowed
funds, if necessary. PASE does not dispute the lack-of-access argument. Rather, it
says it “does not want to put a million-plus in escrow, and not be able to use
it . . . for legal fees or to maintain [its] assets.”
10
PASE acknowledged during the trial court’s hearing that it was “leaving all of its
equipment[] while the appeal [was] pending.” PASE subsequently stated that it
“w[ould] not remove its plant assets and equipment[] while the appeal [was]
pending.”
10
The cases PASE relies on are inapt. See In re Xerox Corp., 555 S.W.3d at
532–33 (liquidated damages are penalty unless harm caused by breach is difficult
to estimate and damage amount is “reasonable forecast of just compensation”); In
re Longview Energy Co., 464 S.W.3d 353, 361 (Tex. 2015) (orig. proceeding)
(disgorgement, like attorney’s fees, is not measure of compensatory damages); In
re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d 168, 172 (Tex. 2013) (orig.
proceeding) (attorney’s fees are not compensatory damages); Flores v. Millennium
Interests, Ltd., 185 S.W.3d 427, 433–34 (Tex. 2005) (liquidated damages award in
relevant Texas Property Code provision was punitive).
The assertion that the escrow payments are compensatory damages is
cogent, given that Oxbow has an actual claim to $1,000,000 in escrow payments.
B. Economic Harm
PASE asserts that the supersedeas order will cause substantial economic
harm, depriving it of money it needs to “manage, protect, and maintain its assets,
and to pursue relief in the courts.” But, during the hearing on Oxbow’s motion to
increase the amount of security, PASE stated, and its representative testified, that
PASE’s assets—especially the value of the equipment in its plant—are significant:
• “You have no idea . . . [of] the magnitude of . . . the dollars that are tied up
in this equipment, and assets, and the value. But it, it – it’s a lot – way
more than any $2 million.”
• “[T]oday – if you were just going to rip it all out, or leave something in
place and walk away – it, it’s worth, you know, over $5 million. And if
11
you netted out the cost of scrapping some things, it’s still way over $4
million.”
• “[W]e’ve got evidence that . . . Oxbow was valuing this for a buy-out
purpose, at $30 million, a few years ago.”
• “[I]t’s insured for over $60 million. This is a major plant, with major
assets.”
• “[I]f we put on [evidence of] the assets, Judge, you will see . . . [w]e’re
talking about what, what’s insured for $60 million. This isn’t just some
chumpy [sic] little outfit.”
• [W]e came up with . . . an overall value. The assets themselves [are worth] a
little over $5 million. We have a number for removal and demolition costs
– that’s $740,715. And so the . . . total net value of the assets, minus the
removal and demo costs, was $4,427,559.
And PASE said that Oxbow “is fully protected by the value of PASE’s plant
assets” but that it has no intention of selling the assets.11
“[T]he correct measure of a company’s net worth for the purpose of setting a
supersedeas bond under section 52.006 of the Texas Civil Practice and Remedies
Code and Rule 24 of the Texas Rules of Appellate Procedure is the company’s
current assets minus current liabilities at the time the bond is set.” EnviroPower,
265 S.W.3d at 5. Given PASE’s statements and testimony about the value of the
11
According to PASE,
it was [not] appropriate to start selling the[] assets that c[ould] be easily
removed, and tak[e] value away from, from th[e] plant, without putting that
money in escrow. And PASE d[id] not want to put a million dollars-plus in
escrow, and not be able to use it . . . for legal fees, or to maintain these
assets.
12
assets, the trial court did not abuse its discretion when it concluded that PASE can
find a source of funds to pay the additional bond amount.
Further, PASE could have requested a hearing to enable the trial court to
determine its net worth for establishing the amount of the bond. TEX. R. APP. P.
24.2(c). Although PASE argued that the legislature has recognized a “new
balance” between the judgment creditor’s right to a sufficient supersedeas bond
and the judgment debtor’s right to prevent the dissipation of its assets during
appeal, PASE did not try to prove its net worth in challenging the requested bond
increase. Texas Rule of Appellate Procedure 24.2 requires the trial court to lower
the bond to “an amount that will not cause the judgment debtor substantial
economic harm if, after notice to all parties and a hearing, the court finds that
posting a bond, deposit, or security in the amount required by [the trial court] is
likely to cause the judgment debtor substantial economic harm.” TEX. R. APP. P.
24.2(b). The rule continues:
(c) Determination of Net Worth.
(1) Judgment Debtor’s Affidavit Required; Contents; Prima
Facie Evidence. A judgment debtor who provides a bond,
deposit, or security . . . in an amount based on the debtor’s net
worth must simultaneously file with the trial court clerk an
affidavit that states the debtor’s net worth and states complete,
detailed information concerning the debtor’s assets and
liabilities from which net worth can be ascertained. An
affidavit that meets these requirements is prima facie evidence
of the debtor’s net worth for the purpose of establishing the
amount of the bond, deposit, or security required to suspend
13
enforcement of the judgment. A trial court clerk must receive
and file a net-worth affidavit tendered for filing by a judgment
debtor.
(2) Contest; Discovery. A judgment creditor may file a
contest to the debtor’s claimed net worth. The contest need not
be sworn. The creditor may conduct reasonable discovery
concerning the judgment debtor’s net worth.
(3) Hearing; Burden of Proof; Findings; Additional Security.
The trial court must hear a judgment creditor’s contest of the
judgment debtor’s claimed net worth promptly after any
discovery has been completed. The judgment debtor has the
burden of proving net worth. The trial court must issue an
order that states the debtor’s net worth and states with
particularity the factual basis for that determination. If the trial
court orders additional or other security to supersede the
judgment, the enforcement of the judgment will be suspended
for twenty days after the trial court’s order. If the judgment
debtor does not comply with the order within that period, the
judgment may be enforced against the judgment debtor.
TEX. R. APP. P. 24.2(c). PASE did not request a hearing to enable the trial court to
determine its net worth for posting bond. Rather, on the day of the hearing, PASE
tendered to the court in camera a bank-balance sheet that was filed under seal in
this Court.
Even if the hearing on Oxbow’s motion to increase the amount of security
was intended also to be a hearing to determine PASE’s net worth—which was not
the case—PASE’s filing of a balance sheet as of October 31, 2020 does not satisfy
the requirement that it file “complete, detailed information concerning [its] assets
and liabilities from which net worth can be ascertained.” TEX. R. APP. P.
14
24.2(c)(1). Neither the balance sheet, nor the affidavit of PASE’s counsel, which
was also filed the day of the hearing, addresses PASE’s assets. As the testimony
from the hearing shows, PASE’s assets include several million dollars’ worth of
equipment in its Port Arthur plant.
Had there been a net-worth hearing, the trial court would have had to “issue
an order that state[d] the debtor’s net worth and state[d] with particularity the
factual basis for that determination.” TEX. R. APP. P. 24.2(c)(3). Given PASE’s
apparent decision to not request a net-worth hearing, its argument that it cannot
afford the increased bond is unavailing.
C. Post-Judgment Discovery
PASE also asks this Court for relief from the post-judgment discovery
propounded by Oxbow. But PASE waived its objections to most of the discovery
requests during the hearing on Oxbow’s motion to increase the amount of security.
PASE stated that it did not “have any particular problem with . . . answering those
questions, because the assets ha[d] been disclosed,” but that PASE would not
provide information about its bank balance. PASE also said that it was “inclined”
to answer the discovery, “except for cash positions and bank accounts.” The trial
court gave PASE until January 15, 2021 to respond to Oxbow’s post-judgment
discovery and held that PASE did not need to disclose the amount in its bank
accounts. The trial court’s order said PASE need not respond to two
15
interrogatories and one request for production that “seek information relating to
PASE’s bank accounts, bank institutions, and cash balances, except that PASE
shall be required to provide information regarding any transfer of money away
from its bank accounts or bank institutions between January 1, 2018 and January
15, 2021.” Given that PASE agreed during the hearing to answer the other
discovery requests, this issue is moot.12
Conclusion
We conclude that the trial court did not abuse its discretion in ordering the
bond increased by $1,068,708.69, inclusive of interest, and we deny PASE’s
Motion to Review Supersedeas Order. The stay previously imposed by this
Court’s January 7, 2021 order is lifted. We dismiss as moot Oxbow’s request for
reconsideration of this Court’s January 7, 2021 stay order.
12
Oxbow asserts that this Court lacks jurisdiction over PASE’s complaints about the
post-judgment discovery. At least one appellate court has ruled on a
post-judgment discovery motion in similar circumstances. See Huff Energy Fund,
L.P. v. Longview Energy Co., 510 S.W.3d 479, 487–88 (Tex. App.—San Antonio
2014, no pet.) (holding trial court, in response to rule 24.4 motion, did not abuse
its discretion in ordering post-judgment production of documents for monitoring
of trust assets during pendency of appeal). Noting that the court of appeals and the
trial court concluded that the post-judgment discovery was reasonable, the Texas
Supreme Court held that ordering the discovery was not an abuse of discretion. In
re Longview Energy Co., 464 S.W.3d 353, 362 (Tex. 2015) (orig. proceeding).
16
PER CURIAM
Panel consists of Justices Countiss, Rivas-Molloy, and Guerra.
17