Trial over attorney's fees ends with $460K award

David Yates Jan. 10, 2008, 9:19am

Following eight years of litigation, countersuits and appeals, jurors finally heard the breach of contract case of Pyramid Constructors Inc. vs. the Port Neches-Groves Independent School District. But after all that time the lawsuit spent floundering in Texas court systems, the trial ended up as a battle over attorney's fees.

The trial concluded Jan. 10, and to the dismay of defense attorney Roger McCabe, who promised to appeal if he lost, jurors awarded plaintiff's attorney Dale Tingleaf almost $460,000 in attorney's fees. No money was awarded to the plaintiff, only to his attorney.

Pyramid Constructors owner Stephen Friedman filed suit against PNGISD in 2000, after the school district refused to pay him the rest of his retainer for completing improvements to two of its' schools, including the Port Neches-Groves High School.

In his closing remarks, McCabe, an attorney with Mehaffy Weber in Beaumont, told jurors an "elected official prohibited" PNGISD from defending itself from the accusations of Pyramid Constructors – the construction company hired by the school district a decade ago to perform $12 million worth of upgrades.

In all likelihood, McCabe was referring to Judge Gary Sanderson, 60th Judicial District, who presided over the case and shut down the expert testimony of several building inspectors and subcontractors. A suit document signed by Judge Sanderson showed that some witnesses were prohibited from testifying.

At press time, Judge Sanderson could not be reached for comment regarding the reason for excluding the defense experts.

"Sometimes elected officials make mistakes," McCabe said, adding that's why the appeals process exists.

McCabe wanted his witnesses to testify in hopes of persuading jurors to his perspective, which contends that it is "unconscionable to award (Pyramid) money for a lousy building…and unconscionable to award attorney's fees for a (frivolous lawsuit)."

During the trial, McCabe also insinuated that Tingleaf was requesting attorney's fees for different but related litigation that involved the school district's counterclaim.

Friedman testified that he had paid Tingleaf $200,000 of his own money, but still owed him an additional $200,000.

Jurors awarded Tingleaf $389,912.02 for the handling of the case from its inception through the trial, $35,000 for filing an appeals brief, $35,000 for responding to a petition for review to the Supreme Court and an additional $10,000 if the Supreme Court requests briefs on merit.

Tingleaf, a Houston lawyer, will share some of the money with a local counselor he hired.

The case

According to testimony and court documents, the school district still owed Friedman and his company $210,000 after the school project's completion. PNGISD had paid Friedman $400,000 of his retainer so he could settle up with his subcontractors, but ended up withholding the final $210,000, claiming one subcontractor was still owed $5,000.

Friedman testified that he had not paid the subcontractor because he was dissatisfied with his work and was waiting for him to come back in and finish the job.

The contract agreed upon by PNGISD and Pyramid stated that all subcontractors had to be paid first before the final retainer was released.

However, Friedman contended the contract wasn't the reason why he wasn't paid and testified that he believed the school district's architect, the project's overseer, was "mean spirited and just didn't want to pay (Pyramid)."

After three years of work, Pyramid finished the school's improvements in May 2000. When the school refused to pay Friedman's final retainer, he opted to bypass arbitration and filed suit, court documents showed.

Nearly two years into the litigation, the school's cafeteria floor began "de-bonding and separating from the building slab."

The school district's attorney, McCabe, argued Pyramid gave the school a "lousy building" and filed a counterclaim against Pyramid, asserting the construction company failed to supervise its subcontractors and was responsible for the damages.

The counterclaim settled and Pyramid's insurance company agreed to a settlement with the PNGISD. McCabe was also able to obtain settlements from the project's architect and Pyramid's subcontractors by threatening to sue them, said Tingleaf.

After the settlements, McCabe proceeded to bring a plea to the trail court concerning jurisdiction. He claimed the school district had sovereign immunity because it was a government entity. Judge Sanderson dismissed the plea and McCabe appealed, stated court documents.

On July 1, 2004, Justices on the Ninth Court of Appeals released an opinion affirming Sanderson's ruling.

"Here, PNG(ISD) was not the first to file suit; Pyramid was," wrote Justice Don Burgess in the court's affirming opinion.

"PNG(ISD) could have asserted its immunity without counterclaiming against Pyramid and seeking affirmative relief from the court. But, PNG(ISD) could not have filed suit against Pyramid for breach of contract without waiving its immunity. We find PNG(ISD) waived its immunity from suit when it counterclaimed against Pyramid and asserted its affirmative claims for damages."

After his loss at the appeals court, McCabe appealed to the Texas Supreme Court. On Aug. 31, 2006, the Supreme Court reversed the appeal court's judgment, remanded the case to the trial court and ruled that PNGISD recover court costs from Pyramid.

"In this case, we conclude that it would be preferable for the issue to first be presented to the trial court," stated the Supreme Court opinion. "On remand, Pyramid will have the opportunity to develop the record as it deems necessary and will be free to raise the issue."

Trial Case No. B163-853
Appeals Case No. 09-03-00589-CV
Supreme Court Case No. 04-0737

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