Tow v. Amegy Bank N.A. et al

Filing 412

MEMORANDUM AND OPINION granting 394 Motion for Judgment; denying 395 Motion to Conduct Discovery; denying without prejudice 398 Motion for Attorney Fees; granting in part and denying in part 398 Motion for Costs. (Signed by Judge Lee H Rosenthal) Parties notified. (wbostic, 4)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
RODNEY TOW,
Plaintiff,
VS.
JOHN SPEER, et aI.,
Defendants.

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CIVIL ACTION NO. H-11-3700

MEMORANDUM AND OPINION
This adversary proceeding arises out of the Chapter 7 bankruptcy of Royce Homes, L.P., a
large residential property developer and builder. Rodney Tow was appointed as bankruptcy trustee.
Tow sued John Speer, the former owner of Royce Homes, and others, seeking to avoid, and to
receive a money judgment for, allegedly fraudulent transfers from Royce Homes.
The claims against the defendants besides Speer were settled or resolved on motions. Speer
was the only defendant to go to trial. A jury trial resulted in unanimous findings that some of the
challenged transfers to Speer or for his benefit were fraudulent. The court accepted a partial verdict
for the challenged transfers on which the jury unanimously agreed and declared a mistrial as to the
others. A second jury trial on the remaining transfers resulted in a verdict. The verdicts in both trials
resulted in findings that challenged transfers with a value totaling $20,001,907.29 were actually or
constructively fraudulent, and findings that other transfers were not fraudulent.
Tow has moved for entry of judgment awarding the bankruptcy estate the monetary value of
the transfers found to be fraudulent, as well as prejudgment and postjudgment interest, attorneys'
fees, and costs. (Docket Entry Nos. 394, 398). Speer responded and filed a postverdict brief

P ICASES\201 1111-370011 1-3700 Tow.judgment.g06.wpd

challenging the legal and factual bases for the verdicts and proposed judgment and for the fees and
costs Tow claimed. Speer also moved to conduct discovery into alleged jury misconduct, based on
a juror's online comments posted after the trial ended and the jury had been excused. (Docket Entry
No. 395).
Based on the motions, responses, and replies; the postverdict briefs; the arguments of
counsel; the record; and the applicable law, the court:
•

denies Speer's motion to conduct discovery into alleged jury misconduct;

•

grants Tow's motion for entry of judgment in the amount of$12,129,006.90 for the
transfers the jury determined to be fraudulent;

•

denies Tow's motion for attorneys' fees, without prejudice, and allows Tow to file,
within 14 days after the judgment is entered, an amended motion for attorneys' fees
containing additional information, including breaking out the number of hours for
which a fee award is now sought for each of the 21 individual lawyers and legal
assistants who worked on the case and the rates charged for those hours, because this
is part of the information necessary to permit the court properly to conduct the
lodestar analysis that the Fifth Circuit and Texas case law require;

•

grants Tow's motion for an award of taxable costs, in the amount of$11 ,948.03; and

•

rules on the rates for pre- and postjudgment interest.

The reasons for these rulings are set out below.
I.

Background

Much of the relevant background is set out in detail in the court's earlier opinions issued in
the extensive motions practice leading up to the trials and is only briefly summarized again here.

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This background summary includes a bri~f description oftrial evidence important to the issues raised
in the posttrial motions as well.
Royce Homes was a Delaware limited partnership that built and sold single-family homes
in the Houston area until August 2008. Manners founded Royce Homes and was its chief executive
officer until July 1998, when he sold 50 percent ofthe equity to Speer and became a limited partner.
Speer acted as general partner through the Hammersmith Group, a company he controlled.
In the spring of2006, Speer bought Manners's remaining interest in Royce Homes, taking
out a $2 million loan from Amegy Bank (the "Amegy Loan") and executing a $13,342,405 note
payable to Manners (the "Manners Note") to finance the purchase. When Royce Homes took on the
debt, Speer told Royce Homes's lenders that the Amegy Loan and the Manners Note would be repaid
from Royce Homes's income, but Speer also assured them that Royce Homes would remain within
the equity levels needed to comply with the lenders' debt-to-equity requirements and other loan
covenants. The lenders consented to the payments on this basis.

A.

The Amegy Loan Payments

Speer began paying the Amegy Loan in 2006. Speer made the payments using money he
directed Royce Homes to transfer to his personal bank account. Royce Homes pulled this money
from its lines of credit. As a result of these transfers to Speer, Royce Homes violated its loan
covenants.
Speer made the first payment on the Amegy Loan using money transferred to him from
Royce Homes on January 3, 2007. At trial, William D. Gathmann, Royce Homes's chief financial
officer during this period, testified that Royce Homes and Speer delayed the transfer and payment
from December 2006 until early January 2007 to avoid disclosing to Royce Homes's lenders in the

PICASESI2011111-J700111-J700.Tow.judgment g06 wpd

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last quarter of2006 the consequences ofthe transfer for Royce Homes's loan covenants. (Tr. 2, Vol.
1, pp. 113-14, 124). Delaying the transfer and payment the few days deferred the disclosure
obligation from the end of December 2006 to the end ofthe first quarter of2007. In May 2007, after
the transfer and loan-covenant violations were disclosed, Royce Homes sought waivers or
modifications of the covenants from its lenders. (Docket Entry No. 389, Tr. 2, Vol. 8, pp. 23-39).
Some of the lenders waived the violations or agreed to modify the loan covenants. Royce Homes
later failed to comply with the debt-to-equity ratio requirements under the modified covenants. (Jd.).

B.

The Manners Note Payments

At Speer's direction, Royce Homes made Manners Note payments on Speer's behalf. The
payments were billed to Royce Homes as "management fees" for Manners's work on home
construction and home closings. Manners testified at trial that he did not provide services for these
fees. Characterizing the disbursements as management fees allowed Royce Homes to capitalize the
payments on the Manners Note as part of the lot values, enhancing those values and allowing Royce
Homes to increase its stated revenues. By June 2007, Royce Homes had paid $3,085,100 in
management fees on the Manners Note, discharging the obligations Speer owed to Manners for
buying out his partnership interest.

C.

Other Payments

Besides the Manners Note payments, Royce Homes also paid Manners over $200,000 after
he sold his remaining 50 percent interest to Speer. These payments included a $160,000 annual
salary, health insurance, and other benefits.
Royce Homes also made salary and monthly $50,000 payments to Speer's now-deceased exwife, Donnie Lou Speer, through Royce Homes's parent company, First Duval, which Speer partly

P ICASES\201 III 1-3700111-3700 Tow.judgment.g06.wpd

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owned. Speer used these payments to cover amounts he owed Donnie Lou Speer under their divorce
decree.
Speer himself received additional distributions from Royce Homes. From September 2006
to January 2008, Speer received monthly $150,000 distributions from Royce Homes in addition to
his salary. (Docket Entry No. 390, Tr. 2, Vol. 9, pp. 40, 223). Evidence at trial included testimony
and exhibits describing various personal ways in which Speer used these distributions. (Id. at
p.254). Speer also received a $1,587,009 check from Royce Homes, which he used to purchase a
property from the company.

D.

Procedural History

Tow initiated adversary proceedings in October 2011 against Speer and Manners and
companies affiliated with them, Donnie Lou Speer, and Amegy Bank. The court granted summary
judgment dismissing some ofthe claims and defendants. The other defendants besides Speer settled.
The claims against Speer were tried in March 2014. The jury returned a partial verdict,
unanimously finding that some of the challenged transfers were fraudulent and that others were not.
The jury could not reach agreement on other challenged transfers. The court accepted a partial
verdict based on the unanimous jury answers and declared a mistrial as to the remaining transfers
at issue. (Docket Entry No. 372). The transfers not resolved in the first trial were the subject of a
second jury trial in June 2014. This resulted in a unanimous verdict as to all the transfers Tow
challenged.
The juries in the two trials found that the following transfers were made with the intent to
hinder, delay, or defraud a creditor of Royce Homes, making them actually fraudulent:

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Transfers to John Speer for Payments to Amegy Bank for the Partner Buyout
Date
Amount
113/2007
$ 10,000,000.00
412/2007
$ 79,652.78
4/25/2007
$ 77,083.33
5/29/2007
$ 79,652.78
7/212007
$ 2,577,083.33
7/25/2007
$ 62,951.39
8/30/2007
$ 59,739.59
9/28/2007
$ 57,812.50
111212007
$ 55,260.41
$ 53,125.00
11129/2007
114/2008
$ 2,553,854.17
2113/2008
$ 40,104.17
2/27/2008
$ 27,187.50
3/28/2008
$ 28,784.72
5/612008
$ 26,041.67
6/2/2008
$ 25,833.33
6/30/2008
$ 25,000.00
Transfers to Michael Manners for the Partner Buyout (Note Payments)
Date
Amount
4/4/2007
$ 292,500.00
5110/2007
$ 271,500.00
Transfers to Donnie Lou Speer from First Duval
Date
Amount
715/2007
$ 50,000.00
8/2/2007
$ 50,000.00
9/4/2007
$ 50,000.00
10/1/2007
$ 50,000.00
111112007
$ 50,000.00
12/3/2007
$ 50,000.00
112/2008
$ 50,000.00
Transfers to Donnie Lou Speer for Salary
Date
Amount
1112/2007
$ 6,231.97
1/31/2007
$ 6,231.98
2/15/2007
$ 6,231.97
2/28/2007
$ 6,231.97
3/1512007
$ 6,231.97
3/30/2007
$ 6,231.98
4113/2007
$ 6,231.97
4/30/2007
$ 6,231.98
5/15/2007
$ 6,231.97

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5/3112007
611512007
6/29/2007
711312007
7/3112007
8115/2007
8/3112007
9114/2007
9/28/2007
1011512007
10/3112007
11115/2007
11/29/2007
1211412007
12/3112007
111512008
1/3112008
2115/2008
2/29/2008
311412008
3/31/2008
411512008
4/30/2008
511512008
5/3012008
611312008
6/30/2008
711512008
7/3112008
Transfers to
Date
114/2007
2/2/2007
3117/2007
4/4/2007
4113/2007
4113/2007
51112007
7/5/2007
8/6/2007
9/4/2007
1012/2007
11/2/2007

$ 6,357.53
$ 6,849.03
$ 6,849.02
$ 6,849.03
$ 6,849.03
$ 6,849.03
$ 7,184.03
$7,519.03
$ 7,519.03
$ 7,519.03
$ 7,519.02
$7,519.03
$7,519.03
$ 7,519.03
$7,519.03
$ 6,251.37
$ 6,251.38
$ 6,251.37
$ 6,251.38
$ 6,251.38
$ 6,251.38
$ 6,251.37
$ 6,251.38
$ 6,251.37
$ 6,251.38
$ 6,711.57
$ 6,868.12
$ 6,868.13
$ 8,018.80
John Speer as Other Distributions
Amount
$ 150,000.00
$ 150,000.00
$ 150,000.00
$ 150,000.00
$ 1,587,009.00
$ 870,128.00
$ 150,000.00
$ 150,000.00
$ 150,000.00
$ 150,000.00
$ 150,000.00
$ 150,000.00

P:ICASESI2011111-3700111-3700 Tow judgment.g06.wpd

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12/4/2007
12111/2007
1/412008

$ 150,000.00
$ 156,428.00
$ 150,000.00

The juries also found that the following transfers left Royce Homes with an unreasonably
small amount of capital and were made without Royce Homes receiving a reasonably equivalent
value in exchange, making them constructively fraudulent:

Transfers to John Speer for Payments to Amegy Bank for the Partner Buyout
Date
Amount
113/2007
$ 10,000,000.00
1125/2007
$ 87,361.11
2/2112007
$ 71,944.44
4/2/2007
$ 79,652.78
4/25/2007
$ 77,083.33
5/29/2007
$ 79,652.78
7/2/2007
$ 2,577,083.33
7/25/2007
$ 62,951.39
8/30/2007
$ 59,739.59
9/28/2007
$ 57,812.50
11/2/2007
$ 55,260.41
11129/2007
$ 53,125.00
1/4/2008
$ 2,553,854.17
2/13/2008
$ 40,104.17
2/27/2008
$ 27,187.50
3/28/2008
$ 28,784.72
5/6/2008
$ 26,041.67
6/2/2008
$ 25,833.33
6/30/2008
$ 25,000.00
Transfers to Michael Manners for the Partner Buyout (Note Payments)
Date
Amount
1/8/2007
$ 364,500.00
2/8/2007
$ 291,000.00
3/9/2007
$ 232,500.00
4/4/2007
$ 292,500.00
5/10/2007
$ 271,500.00
Transfers to Donnie Lou Speer from First Duval
Date
Amount
7/5/2007
$ 50,000.00
8/2/2007
$ 50,000.00
9/4/2007
$ 50,000.00

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101112007
111112007
12/3/2007
11212008
Transfers to
Date
1112/2007
113112007
2115/2007
212812007
3115/2007
3/30/2007
411312007
4/30/2007
511512007
5/31/2007
611512007
6/2912007
711312007
7/3112007
8115/2007
8/3112007
911412007
9/28/2007
10115/2007
10/31/2007
1111512007
11/2912007
1211412007
12/3112007
1115/2008
113112008
2/15/2008
2/29/2008
311412008
3/3112008
4115/2008
4/30/2008
5/15/2008
5/30/2008
611312008
6/30/2008
7/15/2008

$ 50,000.00
$ 50,000.00
$ 50,000.00
$ 50,000.00
Donnie Lou Speer for Salary
Amount
$ 6,231.97
$ 6,231.98
$ 6,231.97
$ 6,231.97
$ 6,231.97
$ 6,231.98
$ 6,231.97
$ 6,231.98
$ 6,231.97
$ 6,357.53
$ 6,849.03
$ 6,849.02
$ 6,849.03
$ 6,849.03
$ 6,849.03
$ 7,184.03
$7,519.03
$7,519.03
$7,519.03
$ 7,519.02
$7,519.03
$7,519.03
$ 7,519.03
$ 7,519.03
$ 6,251.37
$ 6,251.38
$ 6,251.37
$ 6,251.38
$ 6,251.38
$ 6,251.38
$ 6,251.37
$ 6,251.38
$ 6,251.37
$ 6,251.38
$ 6,711.57
$ 6,868.12
$ 6,868.13

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7/31/2008

$ 8,018.80
Transfers to John Speer as Other Distributions
Date
Amount
12/1112007
$ 156,428.00

Tow seeks entry of a judgment based on the verdicts against Speer for the monetary value
of the transfers the juries determined to be fraudulent. Tow also moves for an award of attorneys'
fees and costs and for pre- and postjudgment interest.
Speer opposes all of Tow's motions. Speer also moves to conduct discovery on alleged jury
misconduct based on a postverdict comment one of the jurors left on a blog post critical of Speer and
Royce Homes. (Docket Entry No. 395). Tow opposes this motion.
Each issue is addressed below.

II.

Speer's Motion for Discovery into Jury Misconduct
The day the jury returned its verdict in the second trial, July 11, 2014, the court accepted the

verdict and excused the jury. Hours later, one of the jurors left a comment on a blog post on
.. www.swamplot.com ... The blog post, written in August 2008 and titled "17 Problems with Royce
Builders: Lavish Spending, Loose Keys, and Roaming Rats," criticized Royce Homes and Speer.
The juror, whose posting pseudonym matched a Twitter account bearing her photograph, added a
comment on the 2008 blog post stating: "People, I know the facts, I served on the jury. He will have
to pay what he owes. Problem is, the people won't see a red cent. He is scum and you realize that
when he opens his mouth. If you have a claim you need to contact the trustee Rodney Tow."
(Docket Entry No. 396-1, Ex. G). Speer claims that the juror's online comment shows that she was
exposed to extraneous prejudicial information during trial. He asks the court to disclose the jurors'
names and conduct an evidentiary hearing, presumably to hear jurors' testimony.

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An evidentiary hearing "is not mandated every time there is an allegation ofjury misconduct
or bias. Rather, in determining whether a hearing must be held, the court must consider the content
of the allegations, the seriousness of the alleged misconduct or bias, and the credibility of the
source." United States v. Smith, 424 F.3d 992, 1011 (9th Cir. 2005). "[A] hearing is inappropriate
when the alleged influence has to do with a juror's internal state of mind." United States v.

Cornelius, 696 F.3d 1307, 1325 (lOth Cir. 2012) (citing Tanner v. United States, 483 U.S. 107,
118-25 (1987)).
Rule 606(b) of the Federal Rules of Evidence prohibits juror testimony on the content of the
jury's deliberations "or any juror's mental processes concerning the verdict or indictment." FED. R.
EVID. 606(b). Under certain narrow circumstances, the rule permits juror testimony about whether
"extraneous prejudicial information was improperly brought to the jury's attention," or "an outside
influence was improperly brought to bear on any juror." FED. R. EVID. 606(b)(2). "[D]istrict courts
should be reluctant 'to haul jurors in after they have reached a verdict in order to probe for potential
instances of bias, misconduct or extraneous influences.'" United States v. Vitale, 459 F.3d 190, 197
(2d Cir. 2006) (citation omitted).
The cases distinguish "between testimony related to influence caused by extrinsic factors,
such as a bribe, which is admissible post-trial, and testimony about intrinsic factors, such as ajuror's
thought processes, which is inadmissible." United States v. Scott, 576 Fed. App'x 409, 413 (5th Cir.
2014). "[I]nformation is deemed 'extraneous' if it derives from a source 'external' to the jury."

Warger v. Shauers, -U.S. - , 135 S. Ct. 521, 529 (2014) (citing Tanner v. United States, 483 U.S.
107, 117 (1987)). "'External' matters include publicity and information related specifically to the
case the jurors are meant to decide, while 'internal' matters include the general body of experiences

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that jurors are understood to bring with them to the jury room." ld. (internal citations omitted).
This record provides no basis to find potential misconduct or to require discovery or a
hearing. There is no indication that the juror who posted the statement was exposed to extrinsic
influences, conducted internet research, or discussed the case online during the trial. The jury
deliberated on July 11, 2014 before reaching a verdict. The court excused the jury that afternoon.
The juror's online comment is timestamped 11: 14 p.m. on July 11, many hours after the court
excused the jury and lifted the restrictions on the jurors' conduct and communications that had been
imposed during the trial. Juror misconduct during trial cannot be implied from conduct occurring
after the trial has ended. See Scott, 576 Fed. App'x at 415 (affirming the district court's decision not
to hold an evidentiary hearing to examine the posttrial relationship between a juror and a prosecutor);

Cornelius, 696 F.3d at 1325 (10th Cir. 2012) (the district court did not err by refusing to conduct an
inquiry into a letter the foreperson sent to the prosecution, after the trial had ended, describing
"gang-related activity [a]s a 'cancer' to our society.").
At most, the online comment shows that the juror reached a conclusion about Speer during
the trial. Assuming that, the juror's online comment is not an appropriate subject of inquiry under
Rule 606(b) or a basis for an evidentiary hearing. See Scott, 576 Fed. App'x at 414 ("We cannot
equate an attraction that a juror developed during trial for one of the attorneys or parties, or a distaste
for any of them, to situations of developed relationships such as those of family or professional
connections.").

"The SUbjective thoughts and emotions that may have influenced a juror's

deliberations are shielded from inquiry." Carson v. Polley, 689 F.2d 562, 581 (5th Cir. 1982)
(internal citations omitted) (a letter from ajuror to the judge indicating that the juror thought the case
was frivolous was not an appropriate subject of inquiry under Rule 606(b), because the letter

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revealed only the juror's "internal mental processes.").
There is no indication that the commenting juror, or any other juror, disobeyed the court's
instructions during trial or was affected during deliberations by improper extrinsic influences. No
discovery or hearing is required. Speer's motion to conduct discovery into possible jury misconduct
is denied.

III.

Tow's Motion for Entry of Judgment
A.

The Applicable Legal Standards

Section 544(b) of the Bankruptcy Code allows the trustee to step into a creditor's shoes to
avoid "any transfer of an interest of the debtor in property or any obligation incurred by the debtor
that is voidable under applicable law," including state fraudulent-transfer statutes.

11 U.S.C.

§ 544(b).
The applicable state law is the Texas Uniform Fraudulent Transfers Act ("TUFTA"), TEX.
Bus. & COM. CODE § 24.001 et seq. TUFTA recognizes two categories of voidable fraudulent
transfers: actually fraudulent transfers, id. § 24.005(a)(1); and constructively fraudulent transfers,
id. §§ 24.005(a)(2), 24.006(a).

A transfer is actually fraudulent "if the debtor made the transfer ... with actual intent to
hinder, delay, or defraud any creditor of the debtor." Id. § 24.005(a)(1). TUFTA supplies a nonexclusive list of eleven "badges offraud" that indicate whether a debtor actually intended to defraud
creditors under TUFT A. In re Soza, 542 F.3d 1060, 1066 (5th Cir. 2008). A transfer is not voidable
if the recipient took it in good faith and for value. 11 U.S.c. § 550(b); TEX. Bus. & COM. CODE
§ 24.009.
A transfer is constructively fraudulent if it was made without the debtor receiving a

P:ICASES\201 III 1·370011 1·3700.Tow judgment g06.wpd

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reasonably equivalent value in exchange and the debtor either:
(A) was engaged or was about to engage in a business or a transaction
for which the remaining assets of the debtor were unreasonably small
in relation to the business or transaction; or
(B) intended to incur, or believed or reasonably should have believed
that the debtor would incur, debts beyond the debtor's ability to pay
as they became due.
TEX. Bus. & COM. CODE § 24.005(a)(2).
Section 24.008(a) of TUFTA allows a creditor to avoid a fraudulent transfer to the extent
necessary to satisfy the creditor's claim. Section 24.008(a) also allows the court to impose "any
other relief the circumstances may require."

Id. § 24.008(a)(3)(C).

A money judgment is

appropriate under § 24.008(a)(3)(C) if avoiding the transfers comes too late to provide relief. See

In re Cowin, 492 B.R. 858,903 (Bankr. S.D. Tex. 2013). Under § 24.009 of TUFTA, if a transfer
is voidable under § 24.008(a)(1), a creditor may recover a money judgment for the value of the
transfer against either "the first transferee of the asset or the person for whose benefit the transfer
was made," or "any subsequent transferee other than a good faith transferee who took for value or
from any subsequent transferee." TEX. Bus. & COM. CODE § 24.009.
Determining liability under TUFTA is a two-step process. The first step is to determine
whether a debtor committed a fraudulent transfer under § 24.005. The second step is to determine
whether recovery ofthat fraudulent transfer, or its value, from the transferee is appropriate under §§
24.008 and 24.009. Spring St. Partners-IV, L.P. v. Lam, 730 F.3d 427,436 (5th Cir. 2013). The
Bankruptcy Code also provides a two-step process for recovering a money judgment for a fraudulent
transfer. Section 544 of the Bankruptcy Code permits a claim for avoidance of a transfer found
fraudulent under state law. Section 550 allows the trustee to recover the fraudulently transferred

PICASESI2011111.J700111-J700Tow.judgment.g06 wpd

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property or its value from the "initial transferee of such transfer, or the entity for whose benefit the
transfer was made." 11 U.S.C. §§ 544, 550(a). Whether to enter such a judgment is "within the
discretion of the court." ASARCO LLC v. Americas Mining Corp., 404 B.R. 150, 162 (S.D. Tex.
2009) (quoting In re Vedaa, 49 B.R. 409,411 (Bankr. D.N.D. 1985)).

B.

Tow Did Not Waive His TUFTA Claims for a Money Judgment

"[A] trustee may bring a cause of action for fraudulent transfers under either federal or state
law, or both." In re Supplement Spot, LLC, 409 B.R. 187, 197-98 (Bankr. S.D. Tex. 2009) (citing

In re Houston Drywall, Inc., No. 06-03415,2008 WL 2754526, at **30-31 (S.D. Tex. July 10,
2008)). Tow pleaded both state and federal law in his third amended complaint.
Tow seeks a money judgment under § 24.008(a)(3)(C) of TUFTA, which allows the court
to enter jUdgment for "any other relief the circumstances may require." Speer objects that Tow has
waived any claim for a money judgment under that TUFTA section because he did not plead it in
his third amended complaint or include it in the joint pretrial order. Although Tow did not explicitly
cite § 24.008(a)(3)(C) in those filings, he was clear that he sought to avoid the transfers and obtain
a money judgment under TUFTA and § 550 of the Bankruptcy Code. In his reply in support of the
motion for entry of judgment, Tow points out that he also sought a money judgment under
§ 24.009(b) of TUFTA and § 550 of the Bankruptcy Code.
Both § 24.009(b) of TUFT A and § 550 ofthe Bankruptcy Code, which Tow cited in his third
amended complaint and in the joint pretrial order, allow a claim for a money judgment against either
the initial transferee or the person for whose benefit the transfer was made. See In re Advanced

Modular PowerSys., Inc., 413 B.R. 643, 678 (Bankr. S.D. Tex. 2009), afJ'dsub nom. Hsu v. W, No.
ADV 08-03177, 2009 WL 7760300 (S.D. Tex. Dec. 30, 2009); ASARCO, 404 B.R. at 162-63.

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Tow's failure in those filings to include express references to § 24.008(a)(3)(C) of TUFTA, which
also allows recovery of a money judgment, does not waive his claims.

C.

Tow Has Standing to Seek the Money Judgment

As the trustee, Tow has standing under both TUFTA and § 550 of the Bankruptcy Code to
sue for a money judgment based on fraudulent transfers. The Bankruptcy Code grants a trustee the
right to recover a money judgment for avoidable transfers "if the court so orders." 11 U.S.C. § 550.
Courts applying TUFTA have held that a bankruptcy trustee stands in the creditor's shoes and has
standing to pursue the causes of action TUFT A creates for creditors. See, e.g., Spring St., 730 F.3d
at 440 (5th Cir. 2013) (allowing a creditor, as the trustee's successor-in-interest, to assert claims
under TUFTA § 24.009); In re Powers, No. 83-05547-H3-7, 1990 WL 290210, at * 12 (Bankr. S.D.
Tex. Oct. 18, 1990) ("Pursuant to Section 24.009(b), the Trustee is entitled to a judgment against
[the transferee] for the value of the assets transferred."); In re Houston Drywall, 2008 WL 2754526,
at *29 (allowing the trustee to recover under § 24.008(a)(3)(C)); Esse v. Empire Energy III, Ltd., 333
S.W.3d 166, 180 (Tex. App. - Houston [1 st Dist] 2010, pet. denied) (allowing a trustee to recover
under TUFT A § 24.009 against the persons for whose benefit the transfer was made).
Tow has standing to sue for and recover a money judgment under §§ 24.008(a)(3)(C) and
24.009 of TUFTA and § 550 of the Bankruptcy Code.

D.

Tow Did Not Waive Money Judgment Claims by Failing to Submit Jury
Questions

Speer argues that Tow waived his claims under 11 U.S.C. § 550 or § 24.009 of TUFTA
because he did not submit them to the jury. According to Speer, the absence of a jury finding that
the challenged transfers were made for Speer's benefit bars Tow from recovering a money judgment

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16

under either statute.
Some of the transfers at issue were made to Speer himself. Because both TUFTA and the
Bankruptcy Code allow a trustee to recover against the initial transferee, see 11 U.S.C. § 550; TEX.
Bus. & COM. CODE § 24.009, Tow did not have to prove that the transfers to Speer were made for
his benefit. See Trigeant Holdings, Ltd. v. Jones, 183 S.W.3d 717,726 (Tex. App. -Houston [1st
Dist.] 2005, pet. denied) (TUFTA "not only creates liability against 'the person for whose benefit
the transfer was made,' such as the debtor, but also against 'the first transferee ofthe asset,' or any
'subsequenttransferee. "'); In re Red Dot Scenic, Inc., 293 B.R. 116, 121 (S.D.N.Y.), aff'd, 351 F.3d
57 (2d Cir. 2003) ("Section 550(a)(1) imposes liability on both initial transferees and beneficiaries
of fraudulent transfers." (emphasis in original)).
Separate jury questions were not needed for the transfers made to Manners and Donnie Lou
Speer. The trial evidence conclusively showed that these transfers were made for Speer's benefit.
The uncontroverted evidence - including Speer's own testimony - showed that the Royce Homes
payments to Donnie Lou Speer were made to pay amounts Speer owed her under their divorce
settlement and decree. (Tr. 2, Vol. 5, pp. 189-92; Vol. 6, pp. 96-102; Tr. 1, March 10, 146-49,212,
220). Speer also testified that the monthly $50,000 payments to Donnie Lou Speer from First Duval
were made to satisfy his divorce obligations to her. Saul Solomon, an expert witness in accounting
who testified on Tow's behalf, explained how the evidence showed that the payments Royce Homes
made to Manners were for amounts Speer owed Manners to pay for the partner buyout. (Tr. 2, Vol.
7, pp. 138-39). There was no waiver in failing to ask the jury about undisputed facts.

E.

The Evidence Was Sufficient

To avoid the transfers and obtain a money judgment, Tow had to show that the defendants

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made either actually or constructively fraudulent transfers of Royce Homes's money. The jury in
each trial found both elements of actual fraud as to a number of the transfers: that they were made
with actual intent to hinder, delay, or defraud a creditor of Royce Homes, and that Royce Homes did
not receive reasonably equivalent value in exchange. (Docket Entry Nos. 345, 388). Bothjuries also
found that certain transfers were constructively fraudulent because Royce Homes did not receive
reasonably equivalent value for them and each left Royce Homes with an unreasonably small amount
of capital. (ld.).
Speer challenges the sufficiency ofthe evidence supporting these findings. Speer argues that
Tow failed to establish that the money conveyed in the transfers the juries found to be fraudulent was
Royce Homes's money, and that Tow failed to establish either actual or constructive fraud.
Tow contends that these challenges are waived because Speer did not raise them in a preverdict motion. Speer moved for judgment as a matter of law at trial on the grounds that Tow had
failed to prove "any intent to hinder, delay or defraud a creditor of Royce Homes"; that "any transfer
was made without reasonably equivalent value and at a time when there was unreasonably small
capital"; and that the transfers were not "the money of Royce Homes." (Tr. 2, Vol. 8, pp. 124-25).
Speer did not waive these objections, which are each analyzed below.
1.

The Transfers Were Transfers from Royce Homes's Funds

Speer argues that the trial evidence did not show that the transfers were of Royce Homes's
money because Royce Homes had a negative cash balance when the transfers were made. (Docket
Entry No. 297 at 1). Speer argues that Solomon's testimony confirmed that Royce Homes had a
negative $9 million cash balance and that any funds transferred were therefore not Royce Homes's
money, but rather the funds of Royce Homes's subsidiary, Texas Colonial.

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Solomon testified as follows:

Q. Where is it reflected on the book and record of Royce Homes, the
operating account?
A. Royce's general ledger and the audit show a negative $9 million
cash balance. That is the Amegy account for Royce Homes.
(Tr. 2, Vol. 8, p. 60)
Q. How is it that on July the 2nd, 2007; that there was a wire transfer
from that account to the personal account of John Speer at Amegy
Bank, if there was no money there?
A. I didn't say there was no money there. The Bank statement
reflected some money and part of that is Texas Colonial's money.
That two-and-a-half million dollars, the funds that were there and on
the bank was Texas Colonial's money that went to Mr. Speer.

Q. Just so it's clear, you're saying that the money was Texas
Colonial's, true?
A. Physically, yes. Because Royce Homes had no money.
(Tr. 2, Vol. 8, p. 67).
The parts of Solomon's testimony on which Speer relies address the July 2, 2007 balance in
an Amegy Bank account that Royce Homes shared with its subsidiary, Texas Colonial. Solomon
testified that although there was money in this shared bank account, Royce Homes's books showed
that it had a negative cash balance on that date. But Texas Colonial's books showed that the
subsidiary had a positive balance on that date. Solomon testified that Texas Colonial and Royce
Homes commingled funds and did not distinguish between their respective balances in the shared
Amegy Bank account. Solomon also testified that the money in the shared Amegy Bank account
came from lines of credit Royce Homes -

not Texas Colonial -

had opened with construction

lenders. (Tr. 2, Vol. 8, p. 125). Both Gathmann and Speer testified that the challenged transfers
were made with Royce Homes's money and that Royce Homes took on debt to make the transfers.

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The evidence was sufficient to allow a reasonable jury to conclude that the transfers were made with
Royce Homes's money.

2.

The Evidence Supported the Finding That Some Transfers Were
Actually Fraudulent

Under TUFTA, a transfer is actually fraudulent "if the debtor made the transfer ... with
actual intent to hinder, delay, or defraud any creditor of the debtor." TEX. Bus. & COM. CODE
§ 24.005(a)(1); see also Spring St., 2013 WL 5012436, at *7. Whether the transfer was made with
such an intent is a fact question for the jury. See Coleman Cattle Co., Inc. v. Carpentier, lOS. W.3d
430,433 (Tex. App. -

Beaumont 2000, no pet.) (quoting Spoljaric v. Percival Tours, Inc., 708

S.W.2d 432,434 (Tex. 1986); Quinn v. Dupree, 157 Tex. 441, 303 S.W.2d 769, 774 (Tex. 1957)).
TUFTA "supplies a 'non-exclusive list of eleven factors, commonly known as badges of
fraud, that courts may consider in determining whether a debtor actually intended to defraud
creditors.'" Spring St., 2013 WL 5012436, at *7 (quoting In re Soza, 542 F.3d at 1066); see TEX.
Bus. & COM. CODE § 24.005(b) (listing the eleven factors). A transfer "is not voidable under [the
actual fraud provision] against a person who took in good faith and for a reasonably equivalent value
or against any subsequent transferee or obligee." Id § 24.009(a).
Whether a transfer was for a "reasonably equivalent value" is a factor in determining whether
there was actual intent to defraud creditors, id § 24.005(b)(8), and is an element of the defendant's
good-faith defense to avoidance or a money judgment, id § 24.009(a). TUFTA defines "value" as
follows:
Value is given for a transfer or an obligation if, in exchange for the
transfer or obligation, property is transferred or an antecedent debt is
secured or satisfied, but value does not include an unperformed
promise to furnish support to the debtor or another person unless the

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promise is made in the ordinary course of the promisor's business.
Id. § 24.004(a); see also 11 U.S.C. § 550 (stating that a trustee may not recover against "a transferee
that takes for value, including satisfaction or securing of a present or antecedent debt, in good faith,
and without knowledge of the voidability of the transfer avoided" or any subsequent "good faith
transferee"). "'Reasonably equivalent value' includes ... a transfer or obligation that is within the
range of values for which the transferor would have sold the assets at an arm's length transaction."
TEX. Bus & COM. CODE § 24.004(d).
The juries were instructed to consider whether the following four factors were present:
(1) the transfer or obligation was to an insider of Royce Homes;
(2) the transfer or obligation was concealed;
(3) Royce Homes removed or concealed assets; and
(4) the value of what Royce Homes received was not reasonably
equivalent to the value of the asset transferred or the amount of the
obligation incurred.
Speer admits that there is evidence of one of these badge-of-fraud factors: the transfers were
to an insider of Royce Homes. But he argues that there is insufficient evidence of the remaining
three badges of fraud and that more than two badges of fraud must be proven to show actual
fraudulent intent.
One badge of fraud is generally not enough to support a finding that a transfer is actually
fraudulent. Diamant v. Sheldon L. Pollack Corp., 216 B.R. 589, 591 (Bankr. S.D. Tex. 1995)
("[O]ne badge of fraud standing alone may amount to little more than a suspicious circumstance,
insufficient in itself to constitute fraud per se.") (quoting Us. v. Fernon, 640 F.2d 609, 613 (5th Cir.
1981)); Walker v. Anderson, 232 S.W.3d 899 at 914 ("An individual badge of fraud is not
conclusive."); G.M Houser, Inc. v. Rodgers, 204 S.W.3d 836 at 843 (stating same); Rolandv. Us.,

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21

838 F.2d 1400, 1403 (5th Cir. 1988) (holding that an inference of fraud is proper only when several
indicia are found). But there is no bright-line rule that more than two badges offraud must be found.

See Williams v. Houston Plants & Garden World, Inc., No. Civ. A. H-11-2545, 2014 WL 3665764,
at **7-8 (S.D. Tex. July 22, 2014) (analyzing the cases Speer relies on and finding that they do not
stand for a "bright-line" rule that three or fewer badges of fraud is insufficient). Courts and juries
must consider all the factors and the "totality" of the circumstances.
The evidence presented at the trials supported finding that the transfers were concealed.
Speer argues that certain transfers to Manners were not concealed because they were disclosed to
Royce Homes's lenders, who consented and waived certain loan-covenant violations that resulted.
But the trial evidence showed that Speer did not disclose all aspects of the transfers to the lenders,
and that Speer delayed disclosing the first transfer and its financial consequences on Royce Homes's
loan covenants.! Gathmann testified that he knew the transfers would trigger covenant violations.
(Tr. 2, Vol. 1, pp. 113-14, 124). He also testified that Royce Homes delayed "pulling down" the
money for the first transfer so that it did not occur until January 2 or 3, 2007, instead of December

Q. And you knew, at this point in time, that by booking another $10 million in debt, it was going to
probably trigger additional covenant violations, correct?
A. I'm assuming that's why we did it. Yeah.
Q. And by waiting until after the first of January to make the distributions, then it wouldn't be reflected
until your March 31 st, 2007 financials, correct?
A. Correct.
Q. And then those financials wouldn't have to be reported to your lenders until some time after March
31 st of 2007, correct?
A. That's correct.
Q. And it delayed the reporting of this transaction to your lenders by some three months, correct?
A. Correct.
Q. And by making - pulling down the money on January 3rd or January 2nd as opposed to December
31 st or December 29th, 2006, it allowed Royce Homes not to have to report the additional debt for some
90 days, correct?
A. Correct.
(Tr. 2, Vol. I, pp. 113-14).
!

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22

2006. This delay was to avoid reporting the financial consequences of the transfer -

including

increased debt-to-equity ratios and loan-covenant violations - for an additional 90 days. (Id.). The
lenders were not asked to waive or to modify the loan covenants until after Royce Homes made the
challenged transfer to Speer to pay the Amegy Loan. (Docket Entry No. 350, Gathmann Testimony,
at pp. 73-74). The jury reasonably could have inferred, based in part on Gathmann's testimony
about the transfer timing, that Speer concealed the transfer for at least a quarter to delay reporting.
And Gathmann testified that in each month following the transfers Tow challenged, Royce Homes
violated the debt-to-equity ratios required under its loan covenants. (Id.).
The evidence presented at trial also supported finding that Royce Homes removed assets,
which is sufficient proof of this badge of fraud even without a finding of concealment. Speer does
not dispute that the evidence showed that assets were removed from Royce Homes. And, as
discussed above, Gathmann's testimony also allowed the jury to conclude that Speer concealed the
effects of the first transfer for three months.
The evidence also supported finding a fourth badge of fraud: that Royce Homes did not
receive reasonably equivalent value for the transfers. Value is determined as of the date of the
transfer in question. Mladenka v. Mladenka, 130 S.W.3d 397, 407 (Tex. App. -

Houston [14th

Dist.] 2004, no pet.); In re Viscount Air Servs., Inc., 232 B.R. 416, 435 (Bankr. D. Ariz. 1998). The
factfinder examines all aspects of a transaction, including direct and indirect burdens to the debtor,
and asks whether there is a reasonable and fair proportion between what the debtor surrendered and
what the debtor received in return. In re Pace, 456 B.R. 253, 270 (Bankr. W.D. Tex. 2011); In re
IFS Fin. Corp., 417 B.R. 419, 442 (Bankr. S.D. Tex. 2009). The issue is whether, from the

creditor's standpoint, the debtor's estate lost value. Nat '/ Loan Investors, L.P. v. Robinson, 98

P ICASESI201 III 1-3700111-3700.Tow.judgment.g06.wpd

23

S.W.3d 781,784 (Tex. App. -

Amarillo 2003, pet. denied); see also In re Prejean, 994 F.2d 706,

708--09 (9th Cir. 1993). "The proper focus is on the net effect of the transfers on the debtor's estate,
the funds available to the unsecured creditors." In re Hinsley, 201 F.3d 638, 644 (5th Cir. 2000)
(quoting In re Viscount Air Servs., Inc., 232 B.R. at 435); SE. C v. Res. Dev. Int'l, LLC, 487 F.3d
295,301 (5th Cir. 2007).
The fraudulent-transfer statute states that "value is given for a transfer or an obligation if, in
exchange for the transfer or obligation, property is transferred or an antecedent debt is secured or
satisfied." TEX.

Bus. & COM. CODE § 24.004(a); see also In re Gerdes, 246 B.R. 311,314-15

(Bankr. S.D. Ohio 2000); In re Uiterwyk Corp. v. Maher Terminals, Inc., 75 B.R. 33, 34 (Bankr.
M.D. Fla. 1987). But the antecedent debt must be the debtor's own. Res. Dev. Int'!, 487 F.3d at
301--02 (citing In re Whaley, 229 B.R. 767, 775 (Bankr. Minn. 1999) ("A payment made solely for
the benefit of a third party, such as a payment to satisfy a third party's debt, does not furnish
reasonably-equivalent value to the debtor.")).
Speer claims that Royce Homes received reasonably equivalent value for each of the transfers
because between 1998 and 2006, Royce Homes's equity grew from $5 million to $43 million.
(Docket Entry No. 404 at 8; Tr. 2, June 4, pp. 28-29). Speer claims that the equity increase resulted
from the partners' decision to reinvest profits rather than withdrawing them for the partners' personal
benefit. Speer cites In re Food & Fibre Protection, Ltd., 168 B.R. 408 (Bankr. D. Ariz. 1994), to
support the argument that a partner's decision to reinvest profits in the company years earlier can be
reasonably equivalent value for that partner's later withdrawal of money from the company.
In Food & Fibre Protection, the trustee sought to avoid $30,000 that Food & Fibre, the
debtor, paid to Jonovich, its principal. Jonovich had taken out a $165,000 personal loan from a third

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24

party, giving Food & Fibre $135,000 to ensure its solvency and using the remaining $30,000 for
"unrelated personal purposes." Id. at 414. One year later, Food & Fibre paid Jonovich the full
amount of the loan and accrued interest so that Jonovich could discharge his debt. The court found
that Food & Fibre received reasonably equivalent value under § 548(a)(2) in exchange for its
payment of$165,000 plus interest to Jonovich. The court found credible Jonovich's evidence that
he had invested more than the $30,000 difference in the company during his prior eight years as its
principal.
This case is, however, distinguishable both on the law and facts. On the law, the Fifth Circuit
has held that a principal's prior loans to his company are not reasonably equivalent value for a later
distribution to that principal. See In re Eastmark Capital Corp., 73 Fed. App'x 79 (5th Cir. 2003);

Mayo v. Pioneer Bank & Trust Co., 270 F.2d 823, 829 (5th Cir. 1959). On the facts, in Food &
Fibre, Jonovich was the company's sole principal and the challenged amount was $30,000. Jonovich
had paid the company $130,000 for the $165,000 he borrowed, which the company later gave him
the money to repay. The court credited Jonovich's testimony that he had contributed more than
$30,000 in the eight years he had served as principal.
Unlike the Food & Fibre case, the present case does not involve allegations and evidence that
the value the debtor, Royce Homes, previously received from its principal, Speer, was close enough
to the value of what Royce Homes transferred to Speer or for Speer's benefit to be reasonably
equivalent. Instead, Tow alleged and submitted evidence that Royce Homes received no value for
the challenged transfers. Tow also submitted evidence that Speer used all the challenged transfers
- not just a relatively modest part of them -

for unrelated personal purposes. And the evidence

does not show that Speer put more into Royce Homes than the "difference the Trustee disputes."

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25

Food & Fibre, 168 B.R. at 419. Speer was not the only partner of Royce Homes during the relevant

time. Manners was a 50 percent owner through 2006, when Speer bought Manners's remaining
interest. (Tr. 2, Vol. 7, pp. 7-13). And even if Royce Homes's capital increased before the
challenged transfers in part because the partners reinvested some of the profits rather than making
larger distributions to themselves, Speer did not show that the amounts he reinvested added more
than the value later withdrawn in the challenged transfers, particularly given other economic
pressures on home builders such as Royce Homes when the transfers occurred. Moreover, the
challenged transfer amounts at issue here far exceed the $30,000 difference at issue in Food & Fibre.
The relatively small amount of that difference allowed the Food & Fibre court, once it found the
principal's testimony about the value of his earlier contributions to the company to be credible, to
cite those earlier contributions as "reasonably equivalent" to the company's payment to the principal.
In this case, the jury apparently did not credit Speer's testimony about how his earlier role provided
reasonably equivalent value to Royce Homes.
In sum, the record does not establish that the value of what Speer "put into" the company
before 2007 was reasonably equivalent in value to the challenged transfers from Royce Homes to
Speer or for his benefit in 2007 and 2008.
The evidence showed that Royce Homes decreased its equity and increased its debt when it
made the challenged transfers, and these transfers resulted in Royce Homes violating the debt-toequity ratios its loan covenants required. (Plaintiff Exs. 28, 31, 143, 144, 155, 156, 157, 161, 162,
163, 164).

Solomon testified that the transfers were made without Royce Homes receiving

reasonably equivalent value. (Tr. 2,Vol. 7, pp. 125-26, 128, 130, 133, 156-36, 137-38, 140--41,
148-51; Plaintiff Ex. 163). The jury in each trial could reasonably have concluded that Royce

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26

Homes did not receive reasonably equivalent value in exchange for the transfers found to be
fraudulent.
The evidence here supported finding three or perhaps four "badges of fraud," which has been
found sufficient to find a transfer actually fraudulent under TUFT A. In re Cipolla, 541 Fed. App'x
473,479 (5th Cir. 2013); In re Ritz, 513 B.R. 510,538 (S.D. Tex. 2014); Ingalls v. SMTC Corp. (In

re SMTC Mfg. of Tex.) , 421 B.R. 251, 299-300 (Bankr. W.D. Tex. 2009). The trial evidence
sufficiently supports the jury findings that certain of the transfers to Speer, Manners, and Donnie Lou
Speer were actually fraudulent.

3.

The Evidence Supporting the Finding That Certain Transfers Were
Constructively Fraudulent Transfers

The jury in each trial also found that certain of the transfers were constructively fraudulent.
A transfer is constructively fraudulent if "the debtor made the transfer ... without receiving a
reasonably equivalent value," and the debtor was left with an unreasonably small amount of assets
after the transfer. TEX. Bus. & COM. CODE § 24.005(a)(2).
As discussed above, the evidence at trial supported the jury findings that Royce Homes did
not receive reasonably equivalent value for the transfers. The evidence also showed that Royce
Homes was left with an unreasonably small amount of capital after each of the transfers found
constructively fraudulent. (Plaintiff Ex. 163; Tr. 2, Vol. 7, pp. 125-48). The trial evidence was
sufficient to support these findings.

F.

The Record Presents No Basis to Withhold or Reduce Prejudgment Interest

A court may award prejudgment interest on fraudulent transfers from the date adversary
proceedings are instituted to "compensate[] the estate for the time it was without use of the

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27

transferred funds." In re Tex. Gen. Petroleum Corp., 52 F.3d 1330, 1339-40 (5th Cir. 1995).
Speer asks the court not to award prejudgment interest because Tow failed to narrow the
issues and defendants; prelawsuit discovery was excessive; and, in the first trial, Speer prevailed on
most of the questions the jury did unanimously answer. (Docket Entry No. 404 at 13). These aspects
of Tow' s litigation conduct and the first jury verdict do not make prejudgment interest inappropriate.
The purpose of prejudgment interest is to "make a plaintiff whole," Williams v. Trader Pub. Co., 218
F.3d 481,488 (5th Cir. 2000), not to reward or punish a party for its litigation conduct. The fact that
the jury in the first trial did not find Speer liable for some of the challenged transfers reduced the
damages Speer must pay and therefore reduced the prejudgment interest amount. Speer's arguments
do not justifY forgiving prejudgment interest or reducing it further. The court finds that an award
of prejUdgment interest is appropriate.
The parties also dispute the rate at which prejudgment interest should be calculated. Speer
advocates using the Federal Reserve System prime rate, as federal law provides for calculating
postjudgment interest. Tow asks the court to use the higher rate of five percent, as Texas law
provides.
"Federal law governs the allowance of prejudgment interest when a cause of action arises
from a federal statute." In re Tex. Gen. Petroleum Corp., 52 F.3d at 1339. Federal law does not set
a statutory rate for prejudgment interest. When the federal law at issue is silent as to prejudgment
interest but incorporates state law, as the Bankruptcy Code does with TUFT A, courts often look to
state law to determine the appropriate prejudgment interest rate. See Hansen v. Cant 'I Ins. Co., 940
F.2d 971, 984 (5th Cir. 1991); ASARCO, 404 B.R. at 163-64; In re Supplement Spot, 409 B.R. at

208; In re Advanced Modular Power Sys., 413 B.R. at 684; In re Mega Sys., LLC, No. 03-30190,

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2007 WL 1643182, at *10 (Bankr. E.D. Tex. June 4, 2007).
Tow brought claims under both state and federal law. The parties have framed their
arguments in terms of Texas law. The court applied Texas law to the substance of Tow's claims.
The Bankruptcy Code requires reference to state law. Given the predominance of state-law issues
in this case and the absence of a federal statute establishing a prejudgment interest rate, the court
concludes that the Texas prejudgment interest rate should apply.
Under Texas law, prejudgment interest is normally calculated at the prime rate published by
the Board of Governors of the Federal Reserve System. TEX. FIN. CODE § 304.003(c). If that rate
is less than five percent, prejudgment interest is instead calculated at five percent per annum.
Because the current prime rate is less than five percent, see Federal Reserve Statistical Release, H.15
Selected Interest Rates (Weekly), http://www.federalreserve.gov/releases/h15/current/default.htm
(last visited March 9, 2015), under Texas law, the court applies a five percent interest rate. The
record presents no basis for a lower rate or a reduction in the prejudgment interest amount.

G.

Speer is Entitled to Have the Award Reduced by Settlement Credits

The award - the amount of the avoided transfers - must be offset by the settlements Tow
received from other defendants in this case. See TEX. CIY. PRAC. & REM. CODE § 33.012(b). Tow
received $100,000 from George Kopecky, $250,000 from Donnie Lou Speer, $9,300,000 from
Amegy Bank, and $600,000 from Manners. (Docket Entry No. 394, Ex. C). Tow also received
19.25 acres ofland in Galveston, Texas, as a settlement payment from Watermark, which Tow sold
for $1 million. (Docket Entry No. 411). A $1 million settlement credit for the land is included in
calculations, based on the evidence showing that the property given in settlement of claims was sold
for $1 million. (Docket Entry No. 411, Ex. 1).

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A settlement payment is applied first to the accrued prejudgment interest on the date the
settlement payment was made, then to the principal amount of the award. See Battaglia v.
Alexander, 177 S.W.3d 893, 912 (Tex. 2005). Applying the settlement credits Tow received to
prejudgment interest and then to the principal amount reduces the amount by $11,250,000 plus
prejudgment interest on these amounts. The result is a $12,l29,006.90 award.

H.

Post judgment Interest

A court may also award postjudgment interest. See Williams v. Trader Pub. Co., 218 F.3d
481,488 (5th Cir. 2000) ("A district court has discretion to impose a pre and post-judgment interest
award to make a plaintiffwhole"); In re Supplement Spot, LLC, 409 B.R. at 208. Federal law allows
a court to award postjudgment interest on a money judgment at the Federal Reserve System's prime
rate. 28 U.S.C. § 1961(a). Texas law similarly allows an award of postjudgment interest on a
fraudulent-transfer claim, using the same rate as for prejudgment interest. Int'l Turbine Servs., Inc.

v. VASP Brazilian Airlines, 278 F.3d 494,500 (5th Cir. 2002). As with prejudgment interest, the
court concludes that it is appropriate to refer to Texas law to determine the postjudgment interest rate
in this case. Postjudgment interest is awarded at a rate of five percent per annum, or $1,619.36 per
day, from the date judgment is entered until paid.

III.

Tow's Motion for an Award of Attorneys' Fees and Costs
A.

The Legal Standard for Fee Awards

TUFT A permits a court to award "costs and reasonable attorney's fees as are equitable and
just." TEX. Bus. &COM. CODE § 24.013. The court must examine whether a fee award is reasonable
and necessary. A contingency fee agreement specifying a percentage-of-recovery formula does not
in itself show that the fees sought are reasonable. Arthur Andersen & Co. v. Perry Equip. Corp., 945

P \CASESI201 III 1-370011 1-3700 Towjudgment g06.wpd

30

S.W.2d 812, 818 (Tex. 1997) ("[W]e cannot agree that the mere fact that a party and a lawyer have
agreed to a contingent fee means that the fee arrangement is in and of itself reasonable for purposes
of shifting that fee to the defendant. ").
Texas courts generally use the lodestar method for calculating attorneys' fees. Toshiba
Mach. Co., Am. v. SPM Flow Control, Inc., 180 S.W.3d 761, 782 (Tex. App. - Fort Worth 2005,
pet. granted,judgm't vacated w.r.m.); see also Guityv. C C! Enter., 54 S.W.3d 526, 528 (Tex. App.
- Houston [1st Dist.] 2001, no pet.) ("In determining the reasonableness ofattorney's fees, the fact
finder must be guided by a specific standard. This standard is substantially similar under both
federal law and state law. "). The first lodestar step is to determine the reasonable hourly rate for the
attorneys and nonlegal personnel who worked on the case. The reasonable hourly rate is based on
"the prevailing market rates in the relevant community." Blum v. Stenson, 465 U.S. 886, 895 (1984).
The second step is to determine the number of hours "reasonably expended." McClain v. LUfkin
Indus., Inc., 519 F.3d 264, 284 (5th Cir. 2008).
When a plaintiff seeks to recover attorneys' fees in a case involving multiple claims, at least
one of which supports a fee award and at least one of which does not, the plaintiff must offer
evidence segregating the hours worked among the various claims. Tony Gullo Motors

L L.P.

v.

Chapa, 212 S.W.3d299, 310-14 (Tex. 2006); NavigantConsulting, Inc. v. Wilkinson, 508 F.3d277,
298 (5th Cir. 2007). There is an exception to the duty to segregate when discrete legal services
advance both a recoverable and unrecoverable claim that are so intertwined that they cannot be
segregated. Chapa, 212 S.W.3d at 313-14. The party seeking to invoke this exception has the
burden of demonstrating that it applies. Gallagher Headquarters Ranch Dev., Ltd. v. City of San
Antonio, 269 S.W.3d 628, 642 (Tex. App. -

P ICASESI201 III 1·370011 1·3700Tow.judgmenLg06 wpd

San Antonio 2008, pet. granted, judgm't vacated by
31

agr.) (citing Hong Kong Dev., Inc. v. Nguyen, 229 S.W.3d 415,455 (Tex. App. -

Houston [1st

Dist.] 2007, no pet.)). When such legal services are at issue, the fee applicant should identifY the
percentage of the time spent that would have been necessary without the unrecoverable claim.
Chapa, 212 S.W.3d at 314.

One consideration in determining reasonableness is whether the party seeking attorneys' fees
exercised billing judgment. "Billing judgment requires documentation of the hours charged and of
the hours written off as unproductive, excessive, or redundant." Saizan v. Delta Concrete Products
Co., 448 F.3d 795, 799 (5th Cir. 2006). "The proper remedy for omitting evidence of billing

judgment does not include a denial of fees but, rather, a reduction of the award by a percentage
intended to substitute for the exercise of billing judgment." Id. at 799; see also Walker v. City of
Mesquite, Tex., 313 F.3d 246,251 (5th Cir. 2002).

Another consideration is whether the hours claimed yield a fee that is excessive compared
to the amount at stake or owed. See Sibley v. RMA Partners, L.P., 138 S.W.3d 455,459 (Tex. App.
- Beaumont 2004, no pet.). "Attorney's fees must bear some reasonable relationship to the amount
in controversy." Cordova v. Southwestern Bell Yellow Pages, 148 S.W.3d 441, 448 (Tex. App.El Paso 2004, no pet.) (citing Rep. Nat 'I Life Ins. Co. v. Heyward, 568 S.W.2d 879 (Tex. App.Eastland 1978, writ ref d n.r.e.)). Texas law, however, does not require precise proportionality
between the fees awarded and either the relief obtained or the original amount in controversy.
"[D]isproportion alone does not render the award of attorneys' fees excessive." Northwinds
Abatement, Inc. v. Emp'rs Ins. of Wausau, 258 F.3d 345, 355 (5th Cir. 2001) (affirming $712,000

in attorneys' fees on recovery of$74,570 in actual damages on various state statutory and common-

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32

law claims); see also Quanta Serv 's Inc. v. Am. Admin. Grp. Inc., 384 Fed. App'x 291,298 (5th Cir.
2008) (affirming $116,767.68 in attorneys' fees for a $1 00,000 damages award obtained in a contract
suit).
After the court determines the reasonable hourly rate for the legal services provided and the
number of hours reasonably expended, it multiplies the hours "reasonably expended" by the
reasonable hourly rates to determine the lodestar. Id. The court then decides whether to increase
or decrease the amount based on the factors set out in Johnson v. Georgia Highway Express, 488

F.2d 714 (5th Cir. 1974). The twelve Johnson factors are (1) the time and labor involved, (2) the
novelty and difficulty of the questions, (3) the skill requisite to perform the legal services properly,
(4) the preclusion of other employment due to this case, (5) the customary fee, (6) whether the fee
is fixed or contingent, (7) time limitations, (8) the amount involved and results obtained, (9) the
experience, reputation, and ability of counsel, (10) the undesirability of the case, (11) the nature and
length of the professional relationship with the client, and (12) awards in similar cases. Id. at
717-19. Texas courts weigh similar factors under Rule 1.04 of the Texas Disciplinary Rules of
Professional Conduct to determine reasonable fees. See Arthur Andersen & Co., 945 S. W.2d at 818;
Brazos Elec. Power Co-op., Inc. v. Weber, 238 S.W.3d 582,585-87 (Tex. App. - Dallas 2007, no

pet.).

B.

The Fee Application

Tow seeks $ 6,393,409.62, representing 31.964 percent of the total amount of transfers the
jury found fraudulent.

Tow contends that this amount is justified based on the 40-percent

contingency fee agreement he had with the lawyers he retained to pursue and try the case.
Alternatively, Tow seeks fees of $4,290,600.42, based on an undisclosed total number of hours at

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33

an hourly rate of $425 for all the attorneys working on the case who had 7 or more years of
experience, $350 for attorneys who had less than 7 years of experience, and $100 or $120 for legal
assistants.
Tow submitted an affidavit from Timothy Micah Dortch, the lead trial attorney with Cooper
& Scully; a 262-page spreadsheet of itemized bills showing the lawyer who performed the work, the

time spent, and a brief description of the work; and an affidavit from Patrick Zummo, an attorney
who Tow retained as a fee expert, opining on the reasonableness of the proposed fees. Tow replied
to Speer's response to the motion for fees, and attached a revised 252-page spreadsheet that he
claimed included additional write-offs and reductions. The amount requested was reduced from the
$4,533,154.19 sought in the original motion to $4,290,600.42 in the reply. Tow still did not specify
the total number of hours he claimed or explain in detail what was written off or reduced.

C.

The Lodestar Calculation
1.

The Hourly Rates

The contingency fee arrangement is not entitled to a presumption of reasonableness. See
Arthur Anderson, 945 S.W.2d at 818. The lodestar analysis applies.

Tow asserts that the attorneys and legal assistants billed their time at the following hourly
rates:
Tow & Koenig:
Rodney Tow
Julie Koenig
Linda Wariner (Legal Asst.)
Shirley Ziegler (Legal Asst.)
Jones Morris:
Erin Jones
Charles Murmane
Cage, Hill & Niehaus:

P ICASES\2011l11-37001l1-3700.Tow.judgmenl.g06 wpd

$425
$425
$120
$100
$350
$350

34

Joseph Hill
Mike Duncan
Cooper & Scully:
T. Micah Dortch
R. Brent Cooper
Michelle Robberson
Diana Faust
Eric Hines
Christopher Lindstrom
Elliott Cooper
Kyle Burke
Maryssa Simpson
Lauren Tow
Julie Warren (Legal Asst.)
Luisa Ulluela (Legal Asst.)
Donna Botello (Legal Asst.)

$425
$425
$425
$425
$425
$425
$425
$425
$350
$350
$350
$350
$100
$100
$100

Tow has submitted limited information about each attorney's experience and expertise in
bankruptcy law, in litigating complex commercial cases, and in conducting jury trials. See Louisiana
Power & Light Co. v. Kellstrom, 50 F.3d 319, 324 (5th Cir. 1995) (per curiam) (noting that the

documentation of attorneys' fees must be sufficient to allow the court to determine the reasonable
award amount). Tow and Julie Koenig each have over 20 years of experience in representing
bankruptcy estates. (Docket Entry No. 398, Ex. 2, at 16). Erin Jones has 14 years of experience
practicing law in Texas and specializes in bankruptcy litigation. Charles Murname, an associate at
Jones Morris, has four years of experience.

Joseph Hill has over 30 years of experience in

representing trustees. His partner, Mike Duncan, also has over 30 years of experience in civil
litigation in Texas. At Cooper & Scully, the lead trial firm, Micah Dortch has 9 years of experience
in practice, specializing in civil litigation. R. Brent Cooper has been licensed in Texas since 1977
and specializes in personal injury law and commercial litigation. Michelle Robberson has over 20
years of experience and specializes in appellate law. Diana Faust has 20 years of experience in

P;ICASESI2011111-3700111-3700.Tow.judgmenLg06.wpd

35

Texas litigation. Chris Lindstrom is a trial lawyer with 14 years of experience. Elliott Cooper,
Maryssa Simpson, Kyle Burke, and Lauren Tow are Cooper & Scully associates with five years or
less of experience in litigation in Texas. Eric Hines no longer works at Cooper & Scully; he has over
15 years of experience in civil litigation. The five legal assistants each have between 12 and 36 years
of experience.
Tow seeks hourly rates of$425 for more experienced attorneys and $350 for attorneys with
less experience. The court takes judicial notice of other recently filed fee applications by Cooper &
Scully, in which the lawyers' hourly rates were $200 for less experienced lawyers and $325 to $375
for more experienced lawyers. The court concludes that a reasonable hourly rate is $350 for
attorneys with seven or more years of experience and $200 for attorneys with less than seven years
of experience. The court concludes that $100 is a reasonable hourly rate for legal assistants.
These hourly rates are consistent with the prevailing market rates for attorneys in Houston
in civil commercial litigation. See Miller v. Raytheon Co., 716 F.3d 138,149 (5th Cir. 2013)("The
record shows that the reduced hourly rates of $577.50, $542.50, and $280 were reasonable,
customary rates."); Lotte Chern. Titan (M) SendirianBerhadv. Wilder, No. Civ. A. H-14-1116, 2014
WL 7151569, at *7 (S.D. Tex. Dec. 12,2014) ($500 per hour for partners and $375 per hour for
associates); Ornni USA, Inc. v. Parker-Hannifin Corp., No. Civ. A. H-I0-4728, 2014 WL 710386,
at *6 (S.D. Tex. Feb. 14,2014) ($250 per hour for partners); Preston Exploration Co., LP v. G.P',
LLC, No. Civ. A. H-08-3341, 2013 WL 3229678, at *5 (S.D. Tex. June 25, 2013) ($407.03lhourfor

partners, $224.27/hour for associates, and $ 132.84/hour for legal assistants); In re Enron Corp. Sec.,
Derivative & "ERISA" Litig., 586 F. Supp. 2d 732, 781 & n. 61 (S.D. Tex. 2008) (hourly rate of

$630 for partners). These hourly rates are also consistent with the prevailing rates in Dallas. See

P:ICASES\20!!I!!-37001!!-3700 Tow.judgment g06.wpd

36

SortiumUSA, LLCv. Hunger, No. 3:11-CV-1656-M, 2015 WL 179025, at *5 (N.D. Tex. Jan. 14,
2015) ($325/hour for partner and $225/hour for associate); Hernandez v. Aleman Const., Inc., No.

3:1O-CV-2229-BN, 2013 WL 5873289, at *5 (N.D. Tex. Nov. 1,2013) ($350/hour for partners);
Powell v. Procollect, Inc., No. ll-cv-846-B, Dkt. No. 30 (N.D. Tex. July 18, 2012) (finding an

average hourly rate of $250, with hourly rates from $100 to $400 per hour for each attorney, to be
reasonable); Fluor Corp. v. Citadel Equity Fund Ltd., No. 3:08-cv-1556-B, 2011 WL 3820704, at
*5 (N.D. Tex. Aug. 26, 2011)) (finding reasonable an hourly rate of$350 for a partner and $250 for
an associate).

2.

The Number of Hours Expended

Dortch testified in his affidavit that Tow's attorneys, 21 lawyers and legal assistants, from
four different firms, spent a total of 15,429 hours working on this case on issues as to which Tow
prevailed. Dortch provided the following breakdown:
Law Firm
Tow & Koenig
James Morris Klevenhagen
Cage, Hill & Niehaus
Cooper & Scully
Total

Hours
4,845
2,855
4,352
3,377
15,429

There is no summary of how much time each lawyer spent on the case, or how much of that time two
or more lawyers spent working on the same task or service.
In his reply to Speer's response to the fee motion, Tow agreed not to seek additional fees,
which he claimed totaled $269,875.16. Tow claimed that the reduction was due to a decision to
write off all hours associated with the Elan Development testimony,2 which was used to impeach

Royce Homes paid the payroll for Elan Development, a company Manners owned. Speer testified that
Elan Development reimbursed Royce Homes for this money. Manners testified that this was incorrect.

2

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37

Speer at trial; Tow's own attendance at trial; and correcting misplaced decimal points in the original
262-page spreadsheet of itemized billings. (Docket Entry No. 406). But Tow does not specify how
many hours were written off or whether the hours written off for the Elan Development work were
performed by more experienced lawyers or less experienced lawyers.
Although Tow's reply includes 252 pages of itemized records of thousands of time entries
describing each item billed for, the billing attorney or legal assistant, and the time spent, Tow has
not provided a summary or chart showing the hours each lawyer who worked on the case expended.
The amount Tow seeks in the reply to the response is based on different hourly rates for 21 lawyers
and legal assistants, and two reductions of the amount originally requested. Although the 252-page
spreadsheet shows that two or more lawyers billed time for the same or overlapping work, there is
no summary of when or how often that occurred, the total hours each lawyer spent on such
potentially duplicative work, or the categories or types of legal services that justified two or more
lawyers.
Reasonably accessible information on the hours the individual lawyers and legal assistants
spent on the case and seek fees for is necessary for this court to conduct a meaningful review of the
time spent, to verify that the number of hours billed was reasonable, and to calculate a lodestar
amount. To calculate the lodestar amount on the current record, the court would have to manually
add the itemized entries on the 252-page spreadsheet as to each of the 21 people who billed time on
this case, multiply each lawyer's or legal assistant's total time by the reasonable hourly rate for that
person, and then, based on Tow's stipulation, apply a 15 percent reduction, then a 10 percent further
reduction. This is not a feasible task. See Nat 'I Elec. Ben. Fund v. AC-DC Elec., Inc., No. Civ. A.

Manners and Elan kept the money. (Docket Entry No. 406 at 3).
P ICASES1201 III 1·370011 1·3700.Tow.judgment g06.wpd

38

DKC 11-0893,2013 WL 388986, at *3 (D. Md. Jan. 30, 2013) ("Because Ms. Hawkins has not
provided the total number of hours she spent working on the case -

much less a breakdown by

specific task - the court cannot assess whether the number of hours was reasonable. "); Illinois Cent.
R. Co. v. Harried, No. 5:06CV160-DCB-JMR, 2011 WL 283925, at *8 (S.D. Miss. Jan. 25, 2011)
(The prevailing party submitted the daily time entries of each attorney and paralegal, but this
documentation was insufficient because the party "should have presented its supporting
documentation to the Court in a more organized fashion, rather than expecting the Court to parse
what appear to be hundreds of pages of individual time entries." The court ordered the prevailing
party to submit a chart summarizing the number of hours billed by each attorney and the total dollar
amount.); Baker v. Washington Mut. Fin. Grp., LLC, No. Civ. A 104CV137WJG-JMR, 2007 WL
571103, at * 10 (S.D. Miss. Feb. 20, 2007) (dismissing the fee application for failure to summarize
the number of hours claimed); cf Yellowbooklnc. v. Brandeberry, 708 F.3d 837, 849 (6th Cir. 2013)
(holding that the district court abused its discretion by denying fees entirely because the prevailing
party failed to total the number of fees claimed, when the court could easily have summed the
individual line items contained on a single billing sheet); see also Rappaport v. State Farm Lloyds,
275 F.3d 1079, at *3 (5th Cir. 2001) ("The fee applicant bears the burden of proof in showing the
reasonableness of the hours applied for: It must provide documentation that will enable the district
court to verify this showing, and a district court may reduce the number of hours awarded if the
documentation is vague or incomplete.") (unpublished).
Tow's motion for attorneys' fees is denied, but without prejudice. He may resubmit an
amended fee application within 14 days of this opinion that meets the requirements courts impose
to enable a meaningful review offee applications. The amended fee application must include at least

P:ICASESI201 1111-3700111-3700 Tow.judgment g06.wpd

39

a summary of the hours each lawyer working on this case spent for which fees are sought, the total
number of hours and fees sought for each lawyer, and the total. The amended application must also
summarize the time that two or more lawyers spent working on the same task or service and the dates
and types of those services.

Conditional Attorneys' Fees for Appeal

D.

Tow requests conditional attorneys' fees for appeal.

He seeks $100,000 if Speer

unsuccessfully appeals to the Fifth Circuit, and $75,000 more if Speer unsuccessfully appeals to the
Supreme Court. Speer argues that the evidence is insufficient to support a conditional award of
attorneys' fees.
An award of attorneys' fees may include conditional fees for an appeal. Solomon v. Steitler,
312 S.W.3d 46,59 (Tex. App. (Tex. App. -

Texarkana 2010, no pet.); Keith v. Keith, 221 S.W.3d 156, 169

Houston [1st Dist.], 2006, no pet.); Tex. Farmers Ins. Co. v. Cameron, 24 S.W.3d

386,400 (Tex. App. - Dallas 2000, pet. denied). But "there must be evidence of the reasonableness
of fees for appellate work to support the award of appellate attorney's fees." Keith, 221 S.W.3d at
169. Tow does not provide a basis for the amounts he seeks. The request for appellate attorneys'
fees is denied, without prejudice to refiling in the appellate court if appropriate. Fid. & Deposit Co.

ofMd. v. Rodriguez, Civ. A. No. 3:09-CV-76-KC, 2009 WL 2382979, at *5 (W.D. Tex. June 10,
2009) (denying a "speculative" award of appellate attorneys' fees before the party had incurred the
fees without prejudice to refiling after a successful appeal); Primrose Operating Co. v. Nat 'I Am. Ins.

Co., No. Civ. A. 5:02-CV-101-C, 2003 WL21662829, at *6-7 (N.D. Tex. July 15,2003) (declining
to award fees for an appeal before the services were rendered and noting that the Fifth Circuit could
provide fees on appeal if appropriate (citing Heasley, 867 F.2d at 125)), rev'd in part on other

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40

grounds, 382 F.3d 546 (5th Cir. 2003).

E.

Costs

Tow seeks $77,437.42 in costs for copies, transcripts, subpoenas, and fees of the clerk. Rule
54(d)(1) of the Federal Rules of Civil Procedure states that "[u]nless a federal statute, these rules,
or a court order provides otherwise, costs - other than attorney's fees - should be allowed to the
prevailing party." There is a strong presumption under Rule 54(d)(1) that the prevailing party will
be awarded costs. Cheatham v. Allstate Ins. Co., 465 F.3d 578,586 (5th Cir. 2006). Title 28 U.S.C.

§ 1920 allows the following categories of costs:
(1) Fees of the clerk and marshal;
(2) Fees of the court reporter for all or any part of the stenographic
transcript necessarily obtained for use in the case;
(3) Fees and disbursements for printing and witnesses;
(4) Fees for exemplification and copies of papers necessarily obtained
for use in the case;
(5) Docket fees under section 1923 of this title;
(6) Compensation of court appointed experts, compensation of
interpreters, and salaries, fees, expenses, and costs of special
interpretation services under section 1828 of this title.
28 U.S.C. § 1920.

Rule 54(d)(1) does not authorize a court to award costs not included in the

statute. Crawford Fitting Company v. J T Gibbons, Inc., 107 S. Ct. 2494, 2497 (1987).
Speer has filed objections to the bill of costs. Each of the challenged cost items is analyzed
below.

1.

Copies

Tow seeks $44,542.07 in copying costs. Under 28 U.S.C. § 1920, "disbursements for
printing" and "fees for exemplification and copies of papers necessarily obtained for use in the case"
are taxable costs. Costs are recoverable if the party making the copies had "a reasonable belief that

P,ICASESI201 III 1-370011 1-3700.Tow.judgment.g06 wpd

41

the documents w[ ould] be used during trial or for trial preparation." Rundus v. City of Dallas, 634
F.3d 309, 316 (5th Cir. 2011). Copies "obtained simply for the convenience of counsel" are not
recoverable under § 1920(4). Fogleman v. ARAMCO (Arabian Amer. Oil Co.), 920 F.2d 278, 286
(5th Cir. 1991).
Speer objects to the copying costs because they are not sufficiently itemized. Tow submitted
a list showing the date the copies were made, the number of pages, and the cost, but did not specify
what was copied or why. (Docket Entry No. 393, Ex. 1). This detail is insufficient to award copying
costs as taxable costs. See Kellogg Brown & Root Int'/., Inc. v. Atlanmia Commercial Mktg. Co.
WL.L., No. 07-cv-2684, 2009 WL 1457632, at *6 (S.D. Tex. May 26, 2009). Although an

item-by-item description is not required, there must be some information about the types or
categories of documents copied and the reason for the copies. See Montgomery Cty. v. Microvote
Corp., No. 97-6331,2004 WL 1087196, at **7-8 (E.D. Pa. May 13, 2004)("The reports show the
dates of the copies and the rate that was charged, however, the columns reserved for the description
of what documents were copied are blank. Without providing a description of the documents that
were copied, the Court is unable to evaluate the necessity of the costs."); Pion v. Liberty Dairy Co.,
922 F. Supp. 48, 53 (W.D. Mich. 1996) ("[T]he court will not endeavor to calculate the number of
pages or documents for which costs are available; this task should have been performed by the
defendant. ").
A conclusory statement that the copying costs "were necessarily incurred in this action" is
not enough to allow the court to determine that the copies were necessary and award them as taxable
costs. See MontgomeryCty., 2004 WL 1087196, at *8 ("As for the affidavit of counsel averring that
the costs sought were actually incurred, its conclusory statement that copies were 'reasonably

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42

necessary throughout the litigation' does not assist the Court in determining the nature, and the
necessity, of the documents that were copied.").
Tow has failed to show that the costs of in-house copies he seeks were necessarily obtained.

See Crevier-Gerukos v. Eisai, Inc., No. Civ. A. H-II-0434, 2014 WL 108730, at *6 (S.D. Tex. Jan.
9,2014); Denner v. Tex. Dep't ofCrim. Justice, No. SA-05-CA-184-XR, 2007 WL 294191 at *7
(W.D. Tex. Jan. 29, 2007) ("The Court 'require[s] some demonstration that reproduction costs
necessarily result from [the] litigation' beyond the mere conclusory recitation of the standard on the
bill of costs."); Pion, 922 F. Supp. at 53 (disallowing copying costs where "[d]efendant's
submissions ... d[id] not identifY the number, substance, or purpose of the copies made in a manner
sufficient to demonstrate that the expenses were reasonable or necessary"); see also Fogleman, 920
F .2d at 286 (stating that although the unsuccessful party "should be taxed for the cost of reproducing
relevant documents and exhibits for use in the case, [the party] should not be held responsible for
multiple copies of documents, attorney correspondence, or any of the other multitude of papers that
may pass through a law firm's xerox machines.").

2.

Deposition Transcripts and Video Recordings

Tow seeks $30,917.07 for the cost of deposition transcripts and videos. Deposition transcript
costs are taxable "[i]f, at the time it was taken, a deposition could reasonably be expected to be used
for trial preparation, rather than merely for discovery." Fogleman, 920 F.2d at 285. But some of the
costs Tow seeks are for expedited or daily transcripts, or for video recordings in addition to the
transcripts. These additional costs are generally not recoverable unless they were necessary for the
litigation. See Mota v. Univ. of Tex. Houston Health Sci. Ctr., 261 F.3d 512, 530 (5th Cir. 2001)
(videotape deposition fees); Cox v. Waste Mgmt. of Texas, Inc., No. Civ. A. H-I0-1626, 2013 WL

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43

690849, at *2 (S.D. Tex. Feb. 25, 2013) (awarding costs for videotaped depositions that "were
necessarily obtained for use in the case."); Baisden v. I'm Ready Prods., Inc., 793 F. Supp. 2d 970,
977-78 (S.D. Tex. 2011), ajf'd on other grounds, 693 F.3d 491 (5th Cir. 2012) (awarding costs for
video recordings that were played during trial); Jones v. White, No. Civ. A. H-03-2286, 2007 WL
2427976, at *10 (S.D. Tex. Aug. 22, 2007) (expedited transcript fees); but see Corder v. Lucent
Tech. Inc., 162 F.3d 924 (7th Cir. 1998) (finding that the case schedule required expedited delivery
of transcripts). Tow has not shown why expedited transcripts or video copies were required costs.
Tow is awarded costs for the deposition transcripts of Deborah LaDay, Sidney Evans,
Matthew Gilby, Caroline Grahmann Gardner, Charlotte Lynne Barosh, Dale Andreas, Omar Khan,
Chris DenIson, J.F. "Chip" Morrow, Joseph Henry Argue, Joseph Stanfield, Victor Davis, Saul
Solomon, Scott Adam Bayley, Rodney Tow, and Tim Ashcraft. These deposition costs total
$9,969.75. No costs are awarded for the expedited transcript or video recording fees sought.

IV.

Conclusion
Speer's motion for discovery into jury misconduct, (Docket Entry No. 395), is denied. Tow's

motion for entry of judgment, (Docket Entry No. 394), is granted. Tow's motion for attorneys' fees,
(Docket Entry No. 398), is denied without prejudice. Speer's objections to the bill of costs, (Docket
Entry No. 402), are sustained in part. Judgment is separately entered awarding Tow $12,129,006.90
for the fraudulent transfers and $11,948.03 in costs. Postjudgment interest will accrue on the money
judgment at a rate of $1 ,619.36 per day until the judgment is satisfied in full.
SIGNED on March 10,2015, at Houston, Texas.

United States District Judge
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