SE Texas Record

Friday, December 13, 2019

State appeals court returns longtime StarTex dispute over unpaid bill to Harris County


By Karen Kidd | May 28, 2019

Law money 07

HOUSTON (SE Texas Record) —  A Texas commercial and residential power utility's lawsuit against a customer is on its way back to a Harris County court, following a state appeals court decision earlier this month.

In its 68-page memorandum opinion, a Texas First District Court of Appeals three-judge panel affirmed parts of a Harris County court's grants of summary judgment in favor of a group of StarTex Power customers in a dispute over their electric service agreement (ESA) with the utility.

"We reverse the trial court’s summary judgment granted in favor of appellees on the damages element of Star’s breach-of-contract claim based on the ESA," the memorandum opinion noted. "We reverse the portion of the trial court's summary judgment dismissing Star[Tex]’s fraudulent transfer claim against NLW. Further, we reverse the trial court's summary judgment dismissing Star’s remaining claims on the ground of res judicata. We remand these claims for further proceedings. We affirm the trial court's judgment in all other respects."

Texas First District Court of Appeals Chief Justice Sherry Radack |

Appeals Court Chief Justice Sherry Radack wrote the opinion in which justices Gordon Goodman and Julie Countiss concurred.

"This is a suit by an electric company against its customer for breach of contract and against the customer and its associated entities for fraudulent transfer, tortious interference with a contract, dishonor of a check, fraud and conspiracy," the background portion of the opinion noted.

StarTex Power, formerly known as Star Electricity LLC , challenged Harris County 129th District Court's grant of summary judgments in favor of appellees, Northpark Office Tower LP, Northpark Office Tower GP LLC, Jetall Companies Inc., 1415 NLW LLC, Mohammed A. Choudhri, the estate of Naeem Choudhri Shahnaz Choudhri, AIGWT, Inc. Thousand Oaks LLC, 411 North Belt and Inner Belt Holdings, LLC.

In its appeal, StarTex Power argued the Harris County court "erred by imposing a death penalty sanction," when it struck testimony of the electric company's only expert on damages and granted the appellees’ motion for no-evidence summary judgment. StarTex also argued that the Harris County court was wrong when it granted the appellees' motion, while denying StarTex Power's motion, for summary judgment on StarTex Power's claims brought under the Texas Uniform Fraudulent Transfer Act (TUFTA).

StarTex Power also alleged that the Harris County Court's decision to dismiss its remaining claims should have been barred by the doctrine of res judicata.

The case stems from Star's September 2008 electric service agreement between the utility and Northpark Office Tower to provide 60 months of service, in which Northpark agreed to an early termination fee. In July 2010, Northpark began missing monthly payments, and by the following October it owed StarTex more than $82,500.

That same month, Choudhri, Northpark principal and an officer of Jetall, e-mailed StarTex to repudiate the electric service agreement, arguing StarTex never signed it.

StarTex threatened to sue to recover Northpark’s outstanding balance and for an early termination fee of almost $411,000. Choudhri subsequently terminated the electric service agreement and StarTex sued, alleging breach of the agreement.

StarTex argued that Choudhri and Jetall were liable under veil-piercing theories and sought to enjoy Northpark "from taking any action that would impair its ability to pay the judgment sought," the opinion said.

StarTex also alleged that on the same day that the utility filed its lawsuit, Choudhri executed a deed that transferred Northpark Office Tower to NLW, "another entity that Choudhri created," depleting its assets, and subsequently encumbering the property with a $6.5 million loan. 

NLW then paid part of the proceeds to AIGWT, an entity owned by Choudhri and his parents Shahnaz and Naeem Choudhri.

In response, StarTex filed fraudulent transfer claims against the entire group, alleging TUFTA violations. In mediation that followed, StarTex agreed to nonsuit without prejudice most of its claims, leaving in place its allegations against Northpark over alleged breach of the electric service agreement.

Appellees later asked the trial court for a traditional summary judgment on Star's fraudulent transfer claims, arguing the claims were extinguished by the statute of repose. After the trial court granted that motion, StarTex moved for summary judgment on the merits of its fraudulent transfer claims against NLW and the Choudhris, but the trial court did not rule on those claims.

Litigation continued and, in February 2017, the trial court issued an order sustaining appellees' objections to StarTex’s summary judgment evidence and excluding StarTex's expert's testimony "for failing to appear for his deposition without good cause." 

In that order the trial court also granted appellees' motion for traditional and no-evidence summary judgment on the damages issue and held that StarTex would take nothing on its remaining claim against Northpark.

In April 2017 the appellees non-suited their remaining claims, which made the trial court’s judgment final.

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StarTex PowerCourt of Appeals for the 1st District of Texas

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