DALLAS – On Dec. 21, the 5th District of Texas at Dallas Court of Appeals reversed a decision by a lower court to impose a “death penalty sanction” against debt recovery company NRG & Associates when it did not appear in mediation for the lawsuit brought against it by Service Transfer Inc.
The court ruled that the County Court at Law No. 5 in Dallas County abused its discretion in imposing the sanction and reversed and remanded it.
NRG filed an appeal following the trial court hearing in November 2016, where the court ruled that NRG’s refusal to retain counsel had stalled the case and rendered final judgment as a sanction against NRG after concluding that no lesser sanctions were available.
Justice Elizabeth Lang-Miers, Justice Ada Brown and Justice Jason Boatright with the appellate court remanded the case back to trial court for further proceedings. Boatright noted in the court opinion that the final judgment was excessive, saying, “The final judgment rendered against NRG, while premised on its failure to attend the court-ordered mediation, was not directed toward remedying the prejudice caused Service Transfer.”
According to the opinion, Service Transfer filed suit against NRG in 2016 over breach of contact allegations. The trial court set up a mediation when NRG refused to retain counsel. NRG did not attend the mediation or hearing. The trial court imposed “the death penalty” by striking NRG’s answer and ordering NRG to pay Service Transfer’s attorney fees and costs.
The three-judge panel determined that the death penalty sanction was excessive and did not establish a direct relationship between NRG’s conduct and the death penalty sanction imposed against NRG.
The panel also criticized the trial court for not testing lesser sanctions before resorting to death penalty sanctions, stating, “the monetary sanction against NRG, given that it was imposed simultaneously with the death penalty sanction, 'provide[d] no test of the effectiveness of lesser sanctions first'…the trial court could have stricken NRG’s answer while allowing the company a reasonable period of time to retain counsel who could file another answer on its behalf.”
“While we do not condone NRG’s conduct, the record does not show that this conduct went to the merits of NRG’s defense or otherwise justified a presumption that its defenses lacked merit.”
Boatright noted that the record only proves that NRG had no counsel at the time of the lawsuit, and simply did not go to the hearing or the mediation. “…. the trial court abused its discretion in imposing a death penalty sanction.”
5th District of Texas at Dallas Court of Appeals case number 05-16-01376-E