Fryar Law Firm Announces: Jury Awards Houston-Area Businesswoman $1.2 Million Punitive Damages for Wrongful Foreclosure

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Fryar Law Firm, P.C. Announces: Jury Awards Kingwood Businesswoman $1.2 Million Punitive Damages for Wrongful Foreclosure

Business Litigation

Reinventing Business Litigation

The jury awarded $1.2 million in punitive damages. We believe this is an important message that this kind of business conduct is not tolerated in our community, says lead council for the plantiff, Eric Fryar.

A Harris County jury awarded Kingwood businesswoman Misty Cauthen $1,720,278.75, including $1.2 million in punitive damages, against her former business partner, David Bruce, as a result of Bruce’s wrongful taking of Cauthen’s 40% interest in a real estate limited partnership. The verdict was handed down by a twelve-person jury and accepted by the court in Cause No. 2013-11131; Misty Cauthen v. David Bruce, Alliance Recruiting Resources, Inc., and Kingwood Place GP, LLC, in the 127th Judicial District Court, Harris County, Texas.

According to Eric Fryar, lead counsel for the plaintiff, the evidence presented to the jury demonstrated that David Bruce founded Alliance Recruiting Resources, Inc., a Kingwood-based physician staffing company in 2001. Cauthen joined him in 2002 and eventually earned a 40% ownership interest and became President of the company. Under Cauthen’s leadership, Alliance grew to a multimillion dollar business and, in 2007, spent over $1 million to purchase a 4.5 acre tract of prime commercial property across the street from the Kingwood Medical Center to build a new corporate headquarters. The acquisition was profiled in the Humble Observer in 2009. Bruce and Cauthen formed Kingwood Place Investments #1, LP to own the land, and leased it to Alliance. As a result of the recession, the partners put their building plans on hold, and kept the property as an investment.

By 2012, the partners could no longer work together, and Cauthen left Alliance. Bruce bought out Cauthen's shares in Alliance under a Buy-Sell Agreement, which required him to pay only $158,000 over five years, and he allowed her to keep her company car; however, he refused buy out her interest in the land partnership, which by then had a market value of almost $1.7 million. Instead, Bruce began sending Cauthen monthly invoices for 40% of the mortgage payments on the land. Cauthen testified that she had no income at the time, could not afford the monthly payments, and could not understand why she was receiving the invoices, since Alliance’s monthly rent on the land fully covered the loan payments.

On March 6, 2014, Bruce “foreclosed” on Cauthen’s 40% partnership interest, by taking her entire ownership, which was worth more than a half a million dollars, in exchange for $51,000 in unpaid invoices. Cauthen retained the Fryar Law Firm, a Houston-based business litigation firm specializing in disputes among business partners. On March 25, 2014, Fryar Law Firm filed claims against Bruce for wrongful foreclosure and breach of fiduciary duties. On May 22, 2014, Judge R.K. Sandill, 127th Judicial District Court, ruled that the “foreclosure” had violated the Uniform Commercial Code and that Bruce was therefore liable to Cauthen for the full value of her partnership interest. Despite the Court’s ruling, Bruce continued to fight, contesting the Court’s ruling, claiming that the wrongfully-taken partnership interest had little or no value, and pursuing counterclaims against Cauthen for allegedly stealing confidential information from Alliance.

Trial commenced in the 127th District Court on March 30, 2015, and concluded on April 8, 2015, with the jury’s verdict in favor of Cauthen on all issues. According to the jury’s written verdict, which has been filed with the court, the jury unanimously found that Bruce had violated his fiduciary duties to Cauthen, that the value of her ownership interest was $520,278.75, that Bruce should be made to pay $1.2 million in punitive damages, and that Cauthen did not possess Alliance’s confidential information and never had. Cauthen’s legal team was lead counsel, Eric Fryar, associate counsel Caitlin Feste, and legal assistant, Jared Culotta.

According to lead counsel Eric Fryar: “We had requested less than $800,000 in exemplary damages, which would have erased the remaining profit that Mr. Bruce would realize on the investment after paying what he owed to Ms. Cauthen; however, the jury awarded $1.2 million in punitive damages. We believe this is an important message that this kind of business conduct is not tolerated in our community.” The jury’s verdict is subject to post-trial motions and appeal. Mr. Fryar will request that the Court enter a final judgment on the jury’s verdict, which together with interest and attorney’s fees, could total more than $2 million.

About Fryar Law Firm: Fryar Law Firm’s practice is devoted to protecting the rights of business owners and fighting for shareholders facing oppression, squeeze-outs, and violations of business owner’s rights. Our attorneys have helped thousands of business owners all over the country. We represent both majority and minority shareholders and discretely advise business owners how to avoid or prepare for litigation. We consult with other lawyers to find the strongest litigation strategy and legal theories. We fight for our clients in the courtroom and get results. We bring to our clients a solid record of achievement and the knowledge, skill, and tenacity to get the job done.

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Kimberly Smith
Ksmith Communications
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Karen Fryar
Fryar Law Firm
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