Preview
FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022
NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 05/09/2023
Exhibit 1
FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022
NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 1
05/09/2023
Hearing
March 6, 2023
1 REPORTER'S RECORD
VOLUME 1 OF 1 VOLUMES
2 TRIAL COURT CAUSE NO. 2022-20609
3 ELECTRIC RED VENTURES ET AL) IN THE DISTRICT COURT
)
4 vs. ) HARRIS COUNTY, TEXAS
)
5 RDF AGENT LLC ) 129TH JUDICIAL DISTRICT
6
7
8 _____________________________________________
9 HEARING
_____________________________________________
10
11
12 On the 6th day of March, 2023, the following
13 proceedings came on to be held in the above-titled
14 and numbered cause before the Honorable Michael
15 Gomez, Judge Presiding, held in Houston, Harris
16 County, Texas.
17 Proceedings reported by computerized stenotype
18 machine.
19
20
21
22
23
24
25
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1 APPEARANCES
2
Mr. Hunter Barrow
3 SBOT NO. 24025240
Andrews Myers
4 1885 Saint James Place
Houston, Texas 77056
5 Counsel for Plaintiffs
6 Ms. Emily Miller
SBOT NO. 24079527
7 Andrews Myers
1885 Saint James Place
8 Houston, Texas 77056
Counsel for Plaintiffs
9
Mr. Andrew Bender
10 SBOT NO. 24084290
Andrew Myers
11 1885 Saint James Place
Houston, Texas 77056
12 Counsel for Plaintiffs
13 Mr. Brian Pidcock
SBOT NO. 24074895
14 Hunton Andrews Kurth LLP
600 Travis Street
15 Houston, Texas 77002
Counsel for Defendants
16
Mr. Patrick Robson
17 SBOT NO. 4135315
HUNTON
18 200 Park Avenue
New York, New York 10166
19 Counsel for Defendants
20
21
22
23
24
25
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1 THE COURT: The Court is on the record.
2 Cause No. 2022-20609, Electric Red versus RDF Agent.
3 Will everyone, please, introduce
4 themselves for the record?
5 MR. BARROW: Good afternoon, Your Honor.
6 Hunter Barrow, Emily Miller, and Andrew Bender on behalf
7 of the plaintiffs.
8 MS. DUNN: Good afternoon, Your Honor.
9 Kaylan Dunn, and with me on Zoom are Patrick Robson and
10 Sylvia Ostrower for the defendants. And it's our motion
11 when Your Honor is ready.
12 THE COURT: And then who do we have on
13 Zoom?
14 MR. ROBSON: Good afternoon, Your Honor,
15 Patrick Robson on behalf of the defendants.
16 MS. OSTROWER: Good afternoon. Sylvia
17 Ostrower on behalf of the defendants.
18 THE COURT: And this is -- this is a
19 motion to stay?
20 MS. DUNN: Yes, Your Honor, it is.
21 THE COURT: Do you have Mr. Robson logged
22 in on your laptop?
23 MS. DUNN: I am. I'm muted.
24 THE COURT: I'm just going to mute the --
25 Mr. Robson, are you able to hear -- well
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1 that's fine. I think -- can you move the -- that closer
2 to you? Yes.
3 You can go ahead and proceed, counselor.
4 MS. DUNN: Should I unmute to do so or --
5 THE COURT: I think we're going to have
6 the same issue; but unmute and see what happens, please.
7 MS. DUNN: Testing.
8 THE COURT: Yeah. Can you hear Ms. Dunn?
9 Mr. Robson, can you speak without unmuting?
10 MS. DUNN: Testing.
11 MR. ROBSON: Faintly. I will try to
12 listen along, Your Honor.
13 MS. DUNN: And I promise to speak up, Your
14 Honor.
15 THE COURT: Okay.
16 MS. DUNN: Your Honor, as I mentioned
17 previously Kaylan Dunn on behalf of the defendants.
18 This is our motion to stay.
19 During our last hearing before Your Honor,
20 you expressed concerns about this case and the parallel
21 New York lawsuit proceeding at the same time, including
22 the risk of inconsistent rulings and challenges
23 presented by having to determine how the decisions by
24 one court may affect the proceedings in another. And
25 the court invited defendants to file a motion to abate
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1 but mentioned that it also might consider issues related
2 to dominant jurisdiction.
3 After the hearing, Your Honor, the
4 defendants dug into the case law and found that the
5 doctrine of dominant jurisdiction does not apply when
6 suits are pending in other states. And this is because
7 the Texas first to file rule -- the first to file rule
8 only applies to situations in which two cases are
9 pending in different districts within the same state.
10 Texas law makes clear the pendency of
11 suits in different states cannot serve as grounds for
12 abatement. Instead when cases are pending in different
13 states, principles of comity tend to control. So while
14 the Court cannot abate this proceeding, Your Honor can
15 and should stay this proceeding on the basis of comity,
16 judicial efficiency, and judicial economy.
17 At our last hearing Your Honor did express
18 concern that the New York court did not exercise comity
19 in light of the earlier filing of this suit, but you
20 said you would not second guess this decision. One
21 thing I would like to notice that unlike Texas, in New
22 York the first to file rule and its exceptions apply in
23 both in intrastate and interstate parallel proceedings.
24 In one of the exceptions recognized in New York is where
25 parties file the first action preemptively after
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1 learning of the opposing party's intent to commence
2 litigation.
3 So here, the New York court applied New
4 York law and concluded that -- and this is quoting from
5 the Court's order -- plaintiffs filed the Texas action
6 in response to a demand letter to gain a tactical
7 advantage. And in doing so, the New York court
8 inherently determined that principles of comity did not
9 warrant dismissal of that case into the facts.
10 The New York court also found that that
11 case had a substantial connection to New York, which is
12 not surprising given that the plaintiffs hired a New
13 York broker to solicit a loan from a New York lender and
14 entered into a term sheet governed by New York law. So
15 while the posture of this case having been filed first
16 is unusual in a state context, staying this case is
17 nevertheless appropriate under the circumstances.
18 As the Court is now aware, the New York
19 case has proceeded further than this litigation. In New
20 York the Court has dismissed several of plaintiffs'
21 counterclaims including their fraudulent inducement
22 allegations with prejudice finding that the claims are
23 baseless. That determination serves as res judicata to
24 plaintiffs' fraud claim here both as to Defendant RDF
25 Agent and the defendants' Related Fund and Sedrish.
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1 So the only remaining claims in New York
2 related to the contract issue -- we have RDF Agent's
3 breach of contract claim and plaintiffs' breach of --
4 counterclaim for breach of contract and attorneys' fees.
5 On February 17th, defendant RDF Agent
6 moved for summary judgment on its breach of contract
7 claim and to dismiss plaintiffs' counterclaims and
8 affirmative defenses. The granting of that motion by
9 the New York court would fully resolve all of the issues
10 in New York and this case. Nevertheless the plaintiff
11 subsequently filed a partial motion for summary judgment
12 in this court seeking a determination that the
13 liquidated damages provision and the parties' term sheet
14 is an unenforceable penalty under New York law.
15 That issue is also addressed in RDF Agent
16 New York motion for summary judgment. Accordingly, Your
17 Honor, plaintiffs will have a full opportunity to
18 present their arguments on the enforceability of the
19 liquidated damage provision under New York law in their
20 opposition to the summary judgment motion or any cross
21 motion they may choose to file in New York.
22 Nevertheless, Your Honor, plaintiffs are
23 proposing, of course, it has the parties litigating this
24 one issue at the same time on two fronts; and this is
25 the least efficient and the most costly approach
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1 possible.
2 THE COURT: So on -- I guess, two points:
3 The first is, there is under what -- and they addressed
4 this in the response, which is this idea of dominant
5 jurisdiction and the first filed rule and all of the
6 scenarios where there is two different cases and in two
7 different -- one in Texas and one in a foreign
8 jurisdiction and how the Court has approached those
9 situations depending on which case was filed first and
10 issues of comity and those sorts of things. The problem
11 is you are the first filed case, right?
12 MS. DUNN: Yes, Your Honor.
13 THE COURT: And so I understand the New
14 York court has decided to forward and the presumption is
15 that they applied New York law appropriately. I have no
16 reason to quibble with anything the New York court has
17 done.
18 The issue, I guess, that I'm running into
19 is, one, I don't know that there's any sort of legal
20 framework that the Court could abate this case to allow
21 that case to move forward at least in these
22 circumstances, outside of sort of the general request
23 that you're making to stay this case, because there's
24 another case dealing with similar -- the same parties
25 and similar claims.
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1 I guess, I haven't done -- and they say
2 these cases aren't exactly alike. To the degree that
3 that Court is disposed of one issue, I presume you will
4 come to this Court and say there's res judicata, right?
5 MS. DUNN: We have filed a motion for
6 summary judgment on that point, Your Honor.
7 THE COURT: And so at that point the Court
8 will have to make a determination what to do with that.
9 And so it gets a little bit problematic.
10 And you said that it would affect
11 everything else --
12 MS. DUNN: Yes.
13 THE COURT: -- the resolution of that
14 issue?
15 MS. DUNN: It would -- well, it would
16 dismiss two of the parties to the case. It would have
17 that effect. And then it would leave these issues of a
18 dec action, essentially the flip side of the contract
19 issue that is being adjudicated on summary judgment in
20 New York. And it covers all of the issues in the cases.
21 So if the New York court were to grant the
22 summary judgment presented to it, it would resolve all
23 the issues before the Court.
24 THE COURT: Is that currently pending?
25 MS. DUNN: Yes, Your Honor, it is.
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1 THE COURT: And has it been heard?
2 MS. DUNN: It has not, Your Honor.
3 They're both -- both summary judgments are being briefed
4 essentially in parallel or close to it.
5 THE COURT: Okay. And so -- you said both
6 issues were being briefed in parallel.
7 MS. DUNN: Let me correct. Both summary
8 judgments are being briefed in parallel. One, the New
9 York one is more fulsome. It will address all of the
10 issues that are currently before this Court. This is a
11 subset, a single issue. And the remaining issues, even
12 if the Court were to grant summary judgment here, will
13 not resolve the remaining issues before this Court or
14 the New York court.
15 THE COURT: Right. But you're talking
16 about -- but that's your summary judgment. You're the
17 only one.
18 MS. DUNN: No. They have filed a summary
19 judgment as well. So right after we filed our summary
20 judgment in New York, they filed a summary judgment on
21 one aspect of their declaratory judgment claim asking
22 this Court to find that the liquidated damages provision
23 in our term sheet is unenforceable under New York law.
24 That is an issue that's being dealt with in the summary
25 judgment in New York in addition to here.
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1 THE COURT: Okay. So it has been resolved
2 in New York?
3 MS. DUNN: No.
4 THE COURT: For the sake of argument, if
5 the Court were to hear the motion and decide the issue,
6 I'm assuming they would go to New York and say it's
7 preclusive on that Court?
8 MS. DUNN: Yes, Your Honor, I would assume
9 that they would.
10 THE COURT: Just as you have come to this
11 Court said the rulings in New York --
12 MS. DUNN: Yes. I would assume that would
13 be their strategy.
14 THE COURT: Okay.
15 MS. DUNN: Can I make one clarification?
16 So you said that you don't believe that
17 there's a legal framework for abatement; and I do agree
18 with that, because abatement is not permitted in this
19 situation. But given the Court's broad discretion in
20 managing its docket and exercising judicial efficiency
21 and economy, it is well within your discretion to stay
22 this case.
23 THE COURT: Understood. And so I have
24 to -- and they haven't had an opportunity to respond.
25 But they had filed a response and the Court has had an
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1 opportunity to review it. And so the Court has to make
2 a decision that based on its previous rulings, that its
3 denied the special appearances, right?
4 MS. DUNN: Yes, Your Honor.
5 THE COURT: And so, therefore, the Court
6 believes it has personal jurisdiction over the
7 defendants that this is the first filed case. And so
8 there isn't actually a bar to the Court proceeding here.
9 The only issue is what the Court is to do with the New
10 York court moving forward with its case and whether I
11 should just allow it to proceed and stay this case
12 simply because it's made a determination that it's
13 appropriate to move in that case notwithstanding this
14 case will be the first filed or if the Court should
15 proceed on its own case because there really isn't,
16 outside of what the New York court is doing, any reason
17 why this Court shouldn't have the same -- why the
18 plaintiffs in this case shouldn't be given the same
19 deference any other plaintiff would be given in this
20 Court, which is to allow to prosecute their case.
21 And so I just don't -- I don't really know
22 what to do or how to treat what the New York court is
23 doing. I don't feel comfortable evaluating whether it's
24 proper or not proper. And so I don't have an opinion on
25 it. I respect that court and its determinations. And
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1 the presumption is that it's doing what it believes is
2 right and consistent with New York law.
3 At the same time I don't know that it
4 means I should necessarily do anything different in this
5 Court just because a New York court is deciding to move
6 forward. And so I haven't reconciled that in my mind
7 yet. But -- and we have had this discussion before
8 about this issue.
9 I'm only left with sort of the general
10 principle that this Court probably should have been the
11 first to deal with that issue, because it was the first
12 filed court, in the interest of comity. So if that
13 Court didn't abide -- did abide by general principles of
14 comity in allowing the first filed court to address this
15 issue, then the question is should I in determining
16 whether or not to entertain the motion to stay. And so
17 that's kind of where I'm at on this.
18 But I also recognize there -- it becomes
19 problematic. And I have no interest in overcomplicating
20 this case or doing anything to jeopardize or interfere
21 with the New York court's resolution of its case. It
22 may be ultimately I need to make a decision on what the
23 Court thinks is appropriate; and it's just like you
24 said, it's in the Court's discretion.
25 MS. DUNN: Can I address one issue --
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1 THE COURT: Yes.
2 MS. DUNN: -- before we turn it over to
3 them?
4 THE COURT: Yes.
5 MS. DUNN: And that is something that they
6 raise in their response to our motion, and it's an
7 argument that these are not parallel proceedings subject
8 to which the Court could exercise its jurisdiction. And
9 there's just simply no merit to that argument, Your
10 Honor.
11 Plaintiffs are telling the Court that
12 despite having fully litigated their fraud claim in New
13 York and New York court finding the claims to be
14 baseless, that they nevertheless want to re-litigate
15 them here against Related Fund and Sedrish because they
16 aren't parties to that New York suit. That's part of
17 their argument about why the cases are not parallel.
18 Now, it is true that for some reason
19 plaintiffs chose not to assert their fraudulent
20 inducement claims in New York against Related Fund or
21 Sedrish and that neither is a party to that case; but it
22 does not mean that plaintiffs' fraud claims against
23 those two parties here were not fully resolved by the
24 New York court's dismissal with prejudice of plaintiffs'
25 fraud claims against RDF Agent.
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1 The claims here -- the fraud claims here
2 are premised on allegations that Related Fund is the
3 alterego of RDF Agent and that Sedrish is an agent of
4 RDF Agent. So for all intents and purposes, plaintiffs
5 have taken the position in this case that Related Fund
6 and Sedrish are RDF Agent.
7 And as set forth in detail in our motion
8 for summary judgment, the position taken by the
9 plaintiffs means that dismissal of the plaintiffs'
10 fraudulent inducement claims in New York has res
11 judicata effect on the claims against the three
12 defendants here.
13 So that brings us back to what is left and
14 that is a contract issue in New York with a flip side
15 dec action here in which the plaintiffs ask for findings
16 that they did not breach their obligations under the
17 term sheet, that RDF Agent doesn't suffer any harm, and
18 that the liquidated damages provision constitutes an
19 unenforceable penalty.
20 Like I said, all those issues are being
21 addressed in New York. So we believe that the cases are
22 undoubtedly parallel despite their differences and that
23 judicial efficiency and economy warrants staying this
24 provision pending the resolution of the New York case or
25 at a minimum pending the resolution of the summary
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1 judgment in New York, which would deal with all of the
2 issues before Your Honor now.
3 THE COURT: Counsel?
4 MR. BARROW: Yes, Your Honor. Thank you.
5 First, the Court's right. This Court has
6 dominant jurisdiction. The fact that they're citing
7 cases that say, You don't consider dominant jurisdiction
8 when you're dealing with sister state issues, those
9 cases are in a pause it [phonetic]. And the reason is
10 because those cases all dealt with the issue of comity
11 whenever the second filed suit was the one in Texas and
12 the first filed suit was in another case.
13 And those instances, that's when the Court
14 evaluates certain factors as to considering whether to
15 stay the case or not. And by the way, one of those
16 factors is absolutely if the case was filed first. In
17 this instance, this -- and let's just call it what it
18 is, a mess, effectively, is something that they have
19 created, they have chosen, and now they're asking you to
20 say stand down and effectively Texas needs to roll over,
21 let New York do what it needs to do. And it doesn't
22 matter the fact that Texas residents can be deprived of
23 jurisdiction. Their choice of forum, we should be able
24 to race to the New York courthouse and continue fast
25 despite the fact the New York court is not going to
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1 recognize issues of comity.
2 There was nothing untoward in what we did.
3 We received a letter -- a demand letter. It said -- it
4 didn't say we're filing a suit tomorrow. It said, We're
5 going to preserve all our legal rights. You owe us $2.3
6 million for the liquidated damages. And we filed a dec
7 action. We filed a dec action here. And as soon as
8 they were served with it two days later, they went and
9 filed another lawsuit up there. And yes, the New York
10 court did not recognize at least the issue of comity.
11 That said, the order, it did not just say
12 because we, quote, gained a tactical advantage, whatever
13 that meant. But rather it said -- and I quote -- and
14 indeed plaintiff might not be subject to personal
15 jurisdiction in Texas.
16 At that time when it entered this order,
17 it was a question as to whether this Court had
18 jurisdiction. This order was entered, I believe, last
19 August -- no. July 26th. So the special appearance had
20 not come to fruition at that time. This Court has since
21 ruled, yes, indeed it does have jurisdiction over these
22 folks.
23 And from our standpoint, if the Court --
24 we don't think that the motion to stay analysis you
25 should even get there because all these cases deal with
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1 when the Texas court is the second case filed. But if
2 the Court was going to get here, the Court should look
3 to see whether the matters are identical; and they're
4 not. And, in fact, she tried to characterize this as
5 New York was the dominant all-encompassing case. That's
6 not the case. New York is a subset of what's going on
7 here. That's part of the reason we said we wanted to
8 dismiss our fraud claims against the plaintiff to say,
9 We will litigate them in Texas with Bryan Sedrish and
10 Related Fund.
11 And by the way, just because they were
12 making representations whether it was in the
13 representative or individual capacity, they are both
14 liable for the independent tort. I'm not aware of a res
15 judicata principle that would be applicable in this
16 instance.
17 But, Your Honor, you have a motion for
18 summary judgment that's pending right now in front of
19 you that is set for submission in two weeks. That's
20 dealing with the declaratory judgment with respect to
21 the unenforceable penalty.
22 If this Court exercises its jurisdiction
23 and it can and can go forward and issue summary
24 judgment, that will resolve so much of this case, so
25 much so that the New York case -- we don't have any
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1 counterclaims right now pending other than a contract
2 claim in New York. And they have filed a motion for
3 summary judgment on all of their affirmative claims.
4 And so what we're saying is if this Court would deny the
5 stay, resolve the summary judgment one way or the other,
6 that would absolutely have an effect on New York and
7 what's going on. But it's within this Court's purview,
8 it's within this Court's jurisdiction and this Court has
9 absolute discretion to do that.
10 What they're asking you to do is
11 completely give a -- strip Texas residents from being
12 able to choose their forum and to go forward and to have
13 foreign courts or foreign entities come in and say we're
14 going to stay everything in Texas and go litigate in
15 another state.
16 THE COURT: So -- and I -- I -- you know,
17 I think that on some level that that's a consideration
18 about allowing parties to select the forum. Plaintiffs
19 generally are allowed to select the forum. You have two
20 sets of plaintiffs here. But sometimes it is on some
21 level a race to the courthouse. And in some
22 circumstances tactical advantages is a consideration in
23 determining who has dominant jurisdiction and equitable
24 principles apply.
25 And so that analysis -- and I have done
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1 that analysis of the case where folks said they weren't
2 going to file and they run and file say, Well, we have
3 got jurisdiction and they weren't invited by their
4 understanding or whatever the case may be and so --
5 MR. BARROW: And that's not this case.
6 THE COURT: Right. And I have had to
7 apply that analysis and I said, You're right, there has
8 been -- this was done in bad faith and this Court
9 doesn't have dominant jurisdiction even though it was
10 the first filed case. Doesn't happen too often but I
11 have had to do that analysis and abate the case and
12 allow the second filed Court to go ahead and proceed.
13 But I haven't -- that analysis hasn't happened here and
14 I -- it doesn't sound like it can happen at least
15 because of the way the -- because it involves a sister
16 state.
17 And I don't want the parties -- also I'm
18 concerned because I don't want the parties pinning Texas
19 state court with New York state court. I'm not
20 interested and I'm not trying to and I don't want to be
21 in conflict with a sister state court. I would like to
22 avoid that as much as possible, and I want to make sure
23 I'm not being seen as critical in any way of what's
24 happened there or is happening in that Court.
25 I can only evaluate the case that's in
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1 front of me using the legal principles they have and the
2 law of this state and apply it to the parties and the
3 circumstances here. And so that's all I'm trying to do.
4 I do recognize that there's a parallel proceeding, and I
5 do recognize it can be problematic when those two are
6 happening at the same time and one court doesn't
7 necessarily see the lean to another court. And so I'm
8 trying to figure out what the appropriate course of
9 action is recognizing all of those issues.
10 I don't want to -- you know, judicial
11 economy is a concern. And I don't want to issue
12 conflicting rulings, and I don't want to be stepping on
13 toes when it's not helpful to anybody and folks running
14 to one court or the other. This Court ruled here and
15 they have ruled here and what do we do with that and
16 unnecessarily complicating things.
17 I think at this juncture because I'm not
18 fully meshed in the proceedings as they haven't matured
19 to the degree that they have in the New York case. I'm
20 not probably in the best position to evaluate what this
21 case is really about yet. But I think once I get --
22 once we start moving forward with some of these motions
23 and the Court gets better educated on that, I think I
24 will be in a better position whether or not this case
25 should, in fact, be stayed.
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March 6, 2023
1 I think at this juncture I am going to
2 deny the motion to stay. But it may -- we may
3 ultimately end up the Court having to stay because it
4 simply gets too complicated because the New York case
5 simply resolved these issues before I did. And so
6 that's not -- it is what it is, and ultimately that's
7 just how it worked out.
8 I don't -- and then, you know, there's
9 issue of special appearances that are on appeal. I
10 don't know how that will ultimately shake out. This
11 Court isn't infallible. We just, you know, make
12 decisions the best that I can and then obviously you're
13 entitled to get those reviewed on appeal.
14 So I think at this juncture the Court is
15 going to deny the motion to stay. The Court may be
16 willing to reconsider at some later date. I think for
17 right now I'm going to allow it to proceed with the
18 understanding that I provided here today.
19 Is there anything else?
20 MS. DUNN: Yes, Your Honor. One more
21 issue.
22 As opposing counsel mentioned, there is a
23 current submission on our MSJ set for the 20th. We have
24 asked them for a one-week extension. Mr. Barrows
25 indicated that they are not inclined to give that to us
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1 but we discussed potentially conferring further after
2 this hearing because they haven't been available
3 prior -- I would like to work it out now if at all
4 possible so we don't have to make it known their motion
5 in front of the Court. We're asking for one week in
6 light of some travel concerns and the like of Spring
7 Break and some other things going on.
8 THE COURT: When -- it sounds like the
9 motion has already been on file. When is it noticed for
10 hearing?
11 MS. DUNN: The 20th. So we're asking
12 for -- it's not for hearing. It's just submission. And
13 we're asking for that to be extended by one week to the
14 27th to make our response due on the 20th as opposed to
15 the 13th.
16 MR. BARROW: Your Honor, we will agree
17 right now to stay all proceedings in New York and in
18 Texas pending the appeal. And so if they want to put a
19 pause button on their New York motion for summary
20 judgment, which by the way has obviously precipitated.
21 They filed that after we filed our motion for anti-suit
22 injunction, the next day they file a motion for summary
23 judgment on the entire case; and we filed it -- as well
24 as the res judicata issue that they're claiming here in
25 this court. We filed our motion for summary judgment on
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1 really what this case is about regarding the dec action
2 and the unenforceable penalty issue. But if they agree
3 to just say, We'll pull everything down right now until
4 the Appellate Court decides whether there's jurisdiction
5 or not, we will pull everything down and stay
6 everything.
7 MS. DUNN: Your Honor, we're not going to
8 agree to that. That delays the inevitable resolution of
9 this case for a significant amount of time
10 unnecessarily. That's not something we can agree to.
11 The one-week extension does not affect either of the
12 pending motions. I mean, they're both going to be heard
13 or considered in due time but essentially at the same
14 time. And so my client is not going to be willing to
15 pull all motions and just simply stop this case waiting
16 for the Court of Appeals which could be up to a year or
17 longer.
18 THE COURT: When are the motions in the
19 New York court supposed to be heard?
20 MR. BARROW: I believe April 4th or so.
21 So, you know, if they want a few days extension -- if
22 they're not going to agree to everybody pull everything
23 down -- if they want a few days to extend it, we'd like
24 to keep the submission date on the 20th so that this
25 Court, as we stay, can determine whether, in fact, the
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1 liquidated damage provision is a penalty or not. We
2 will argue that as a matter of law. It is -- of course,
3 they have a differing opinion on that.
4 MS. DUNN: Your Honor, can I just add one
5 note? We just gave them a 14-day extension in New York
6 in their response to our motion for summary judgment
7 which pushed it out to the April 6th, so we don't think
8 that giving us an additional week and putting it on
9 submission on the 27th is any prejudice to them. And it
10 seems --
11 THE COURT: So your response is due on the
12 what?
13 MS. DUNN: 13th, Your Honor.
14 THE COURT: The 13th.
15 And so you would like it due on the 20th?
16 MS
Preview
FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 05/09/2023 Exhibit 1 FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 1 05/09/2023 Hearing March 6, 2023 1 REPORTER'S RECORD VOLUME 1 OF 1 VOLUMES 2 TRIAL COURT CAUSE NO. 2022-20609 3 ELECTRIC RED VENTURES ET AL) IN THE DISTRICT COURT ) 4 vs. ) HARRIS COUNTY, TEXAS ) 5 RDF AGENT LLC ) 129TH JUDICIAL DISTRICT 6 7 8 _____________________________________________ 9 HEARING _____________________________________________ 10 11 12 On the 6th day of March, 2023, the following 13 proceedings came on to be held in the above-titled 14 and numbered cause before the Honorable Michael 15 Gomez, Judge Presiding, held in Houston, Harris 16 County, Texas. 17 Proceedings reported by computerized stenotype 18 machine. 19 20 21 22 23 24 25 FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 2 05/09/2023 Hearing March 6, 2023 1 APPEARANCES 2 Mr. Hunter Barrow 3 SBOT NO. 24025240 Andrews Myers 4 1885 Saint James Place Houston, Texas 77056 5 Counsel for Plaintiffs 6 Ms. Emily Miller SBOT NO. 24079527 7 Andrews Myers 1885 Saint James Place 8 Houston, Texas 77056 Counsel for Plaintiffs 9 Mr. Andrew Bender 10 SBOT NO. 24084290 Andrew Myers 11 1885 Saint James Place Houston, Texas 77056 12 Counsel for Plaintiffs 13 Mr. Brian Pidcock SBOT NO. 24074895 14 Hunton Andrews Kurth LLP 600 Travis Street 15 Houston, Texas 77002 Counsel for Defendants 16 Mr. Patrick Robson 17 SBOT NO. 4135315 HUNTON 18 200 Park Avenue New York, New York 10166 19 Counsel for Defendants 20 21 22 23 24 25 FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 3 05/09/2023 Hearing March 6, 2023 1 THE COURT: The Court is on the record. 2 Cause No. 2022-20609, Electric Red versus RDF Agent. 3 Will everyone, please, introduce 4 themselves for the record? 5 MR. BARROW: Good afternoon, Your Honor. 6 Hunter Barrow, Emily Miller, and Andrew Bender on behalf 7 of the plaintiffs. 8 MS. DUNN: Good afternoon, Your Honor. 9 Kaylan Dunn, and with me on Zoom are Patrick Robson and 10 Sylvia Ostrower for the defendants. And it's our motion 11 when Your Honor is ready. 12 THE COURT: And then who do we have on 13 Zoom? 14 MR. ROBSON: Good afternoon, Your Honor, 15 Patrick Robson on behalf of the defendants. 16 MS. OSTROWER: Good afternoon. Sylvia 17 Ostrower on behalf of the defendants. 18 THE COURT: And this is -- this is a 19 motion to stay? 20 MS. DUNN: Yes, Your Honor, it is. 21 THE COURT: Do you have Mr. Robson logged 22 in on your laptop? 23 MS. DUNN: I am. I'm muted. 24 THE COURT: I'm just going to mute the -- 25 Mr. Robson, are you able to hear -- well FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 4 05/09/2023 Hearing March 6, 2023 1 that's fine. I think -- can you move the -- that closer 2 to you? Yes. 3 You can go ahead and proceed, counselor. 4 MS. DUNN: Should I unmute to do so or -- 5 THE COURT: I think we're going to have 6 the same issue; but unmute and see what happens, please. 7 MS. DUNN: Testing. 8 THE COURT: Yeah. Can you hear Ms. Dunn? 9 Mr. Robson, can you speak without unmuting? 10 MS. DUNN: Testing. 11 MR. ROBSON: Faintly. I will try to 12 listen along, Your Honor. 13 MS. DUNN: And I promise to speak up, Your 14 Honor. 15 THE COURT: Okay. 16 MS. DUNN: Your Honor, as I mentioned 17 previously Kaylan Dunn on behalf of the defendants. 18 This is our motion to stay. 19 During our last hearing before Your Honor, 20 you expressed concerns about this case and the parallel 21 New York lawsuit proceeding at the same time, including 22 the risk of inconsistent rulings and challenges 23 presented by having to determine how the decisions by 24 one court may affect the proceedings in another. And 25 the court invited defendants to file a motion to abate FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 5 05/09/2023 Hearing March 6, 2023 1 but mentioned that it also might consider issues related 2 to dominant jurisdiction. 3 After the hearing, Your Honor, the 4 defendants dug into the case law and found that the 5 doctrine of dominant jurisdiction does not apply when 6 suits are pending in other states. And this is because 7 the Texas first to file rule -- the first to file rule 8 only applies to situations in which two cases are 9 pending in different districts within the same state. 10 Texas law makes clear the pendency of 11 suits in different states cannot serve as grounds for 12 abatement. Instead when cases are pending in different 13 states, principles of comity tend to control. So while 14 the Court cannot abate this proceeding, Your Honor can 15 and should stay this proceeding on the basis of comity, 16 judicial efficiency, and judicial economy. 17 At our last hearing Your Honor did express 18 concern that the New York court did not exercise comity 19 in light of the earlier filing of this suit, but you 20 said you would not second guess this decision. One 21 thing I would like to notice that unlike Texas, in New 22 York the first to file rule and its exceptions apply in 23 both in intrastate and interstate parallel proceedings. 24 In one of the exceptions recognized in New York is where 25 parties file the first action preemptively after FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 6 05/09/2023 Hearing March 6, 2023 1 learning of the opposing party's intent to commence 2 litigation. 3 So here, the New York court applied New 4 York law and concluded that -- and this is quoting from 5 the Court's order -- plaintiffs filed the Texas action 6 in response to a demand letter to gain a tactical 7 advantage. And in doing so, the New York court 8 inherently determined that principles of comity did not 9 warrant dismissal of that case into the facts. 10 The New York court also found that that 11 case had a substantial connection to New York, which is 12 not surprising given that the plaintiffs hired a New 13 York broker to solicit a loan from a New York lender and 14 entered into a term sheet governed by New York law. So 15 while the posture of this case having been filed first 16 is unusual in a state context, staying this case is 17 nevertheless appropriate under the circumstances. 18 As the Court is now aware, the New York 19 case has proceeded further than this litigation. In New 20 York the Court has dismissed several of plaintiffs' 21 counterclaims including their fraudulent inducement 22 allegations with prejudice finding that the claims are 23 baseless. That determination serves as res judicata to 24 plaintiffs' fraud claim here both as to Defendant RDF 25 Agent and the defendants' Related Fund and Sedrish. FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 7 05/09/2023 Hearing March 6, 2023 1 So the only remaining claims in New York 2 related to the contract issue -- we have RDF Agent's 3 breach of contract claim and plaintiffs' breach of -- 4 counterclaim for breach of contract and attorneys' fees. 5 On February 17th, defendant RDF Agent 6 moved for summary judgment on its breach of contract 7 claim and to dismiss plaintiffs' counterclaims and 8 affirmative defenses. The granting of that motion by 9 the New York court would fully resolve all of the issues 10 in New York and this case. Nevertheless the plaintiff 11 subsequently filed a partial motion for summary judgment 12 in this court seeking a determination that the 13 liquidated damages provision and the parties' term sheet 14 is an unenforceable penalty under New York law. 15 That issue is also addressed in RDF Agent 16 New York motion for summary judgment. Accordingly, Your 17 Honor, plaintiffs will have a full opportunity to 18 present their arguments on the enforceability of the 19 liquidated damage provision under New York law in their 20 opposition to the summary judgment motion or any cross 21 motion they may choose to file in New York. 22 Nevertheless, Your Honor, plaintiffs are 23 proposing, of course, it has the parties litigating this 24 one issue at the same time on two fronts; and this is 25 the least efficient and the most costly approach FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 8 05/09/2023 Hearing March 6, 2023 1 possible. 2 THE COURT: So on -- I guess, two points: 3 The first is, there is under what -- and they addressed 4 this in the response, which is this idea of dominant 5 jurisdiction and the first filed rule and all of the 6 scenarios where there is two different cases and in two 7 different -- one in Texas and one in a foreign 8 jurisdiction and how the Court has approached those 9 situations depending on which case was filed first and 10 issues of comity and those sorts of things. The problem 11 is you are the first filed case, right? 12 MS. DUNN: Yes, Your Honor. 13 THE COURT: And so I understand the New 14 York court has decided to forward and the presumption is 15 that they applied New York law appropriately. I have no 16 reason to quibble with anything the New York court has 17 done. 18 The issue, I guess, that I'm running into 19 is, one, I don't know that there's any sort of legal 20 framework that the Court could abate this case to allow 21 that case to move forward at least in these 22 circumstances, outside of sort of the general request 23 that you're making to stay this case, because there's 24 another case dealing with similar -- the same parties 25 and similar claims. FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF: 9 05/09/2023 Hearing March 6, 2023 1 I guess, I haven't done -- and they say 2 these cases aren't exactly alike. To the degree that 3 that Court is disposed of one issue, I presume you will 4 come to this Court and say there's res judicata, right? 5 MS. DUNN: We have filed a motion for 6 summary judgment on that point, Your Honor. 7 THE COURT: And so at that point the Court 8 will have to make a determination what to do with that. 9 And so it gets a little bit problematic. 10 And you said that it would affect 11 everything else -- 12 MS. DUNN: Yes. 13 THE COURT: -- the resolution of that 14 issue? 15 MS. DUNN: It would -- well, it would 16 dismiss two of the parties to the case. It would have 17 that effect. And then it would leave these issues of a 18 dec action, essentially the flip side of the contract 19 issue that is being adjudicated on summary judgment in 20 New York. And it covers all of the issues in the cases. 21 So if the New York court were to grant the 22 summary judgment presented to it, it would resolve all 23 the issues before the Court. 24 THE COURT: Is that currently pending? 25 MS. DUNN: Yes, Your Honor, it is. FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:10 05/09/2023 Hearing March 6, 2023 1 THE COURT: And has it been heard? 2 MS. DUNN: It has not, Your Honor. 3 They're both -- both summary judgments are being briefed 4 essentially in parallel or close to it. 5 THE COURT: Okay. And so -- you said both 6 issues were being briefed in parallel. 7 MS. DUNN: Let me correct. Both summary 8 judgments are being briefed in parallel. One, the New 9 York one is more fulsome. It will address all of the 10 issues that are currently before this Court. This is a 11 subset, a single issue. And the remaining issues, even 12 if the Court were to grant summary judgment here, will 13 not resolve the remaining issues before this Court or 14 the New York court. 15 THE COURT: Right. But you're talking 16 about -- but that's your summary judgment. You're the 17 only one. 18 MS. DUNN: No. They have filed a summary 19 judgment as well. So right after we filed our summary 20 judgment in New York, they filed a summary judgment on 21 one aspect of their declaratory judgment claim asking 22 this Court to find that the liquidated damages provision 23 in our term sheet is unenforceable under New York law. 24 That is an issue that's being dealt with in the summary 25 judgment in New York in addition to here. FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:11 05/09/2023 Hearing March 6, 2023 1 THE COURT: Okay. So it has been resolved 2 in New York? 3 MS. DUNN: No. 4 THE COURT: For the sake of argument, if 5 the Court were to hear the motion and decide the issue, 6 I'm assuming they would go to New York and say it's 7 preclusive on that Court? 8 MS. DUNN: Yes, Your Honor, I would assume 9 that they would. 10 THE COURT: Just as you have come to this 11 Court said the rulings in New York -- 12 MS. DUNN: Yes. I would assume that would 13 be their strategy. 14 THE COURT: Okay. 15 MS. DUNN: Can I make one clarification? 16 So you said that you don't believe that 17 there's a legal framework for abatement; and I do agree 18 with that, because abatement is not permitted in this 19 situation. But given the Court's broad discretion in 20 managing its docket and exercising judicial efficiency 21 and economy, it is well within your discretion to stay 22 this case. 23 THE COURT: Understood. And so I have 24 to -- and they haven't had an opportunity to respond. 25 But they had filed a response and the Court has had an FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:12 05/09/2023 Hearing March 6, 2023 1 opportunity to review it. And so the Court has to make 2 a decision that based on its previous rulings, that its 3 denied the special appearances, right? 4 MS. DUNN: Yes, Your Honor. 5 THE COURT: And so, therefore, the Court 6 believes it has personal jurisdiction over the 7 defendants that this is the first filed case. And so 8 there isn't actually a bar to the Court proceeding here. 9 The only issue is what the Court is to do with the New 10 York court moving forward with its case and whether I 11 should just allow it to proceed and stay this case 12 simply because it's made a determination that it's 13 appropriate to move in that case notwithstanding this 14 case will be the first filed or if the Court should 15 proceed on its own case because there really isn't, 16 outside of what the New York court is doing, any reason 17 why this Court shouldn't have the same -- why the 18 plaintiffs in this case shouldn't be given the same 19 deference any other plaintiff would be given in this 20 Court, which is to allow to prosecute their case. 21 And so I just don't -- I don't really know 22 what to do or how to treat what the New York court is 23 doing. I don't feel comfortable evaluating whether it's 24 proper or not proper. And so I don't have an opinion on 25 it. I respect that court and its determinations. And FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:13 05/09/2023 Hearing March 6, 2023 1 the presumption is that it's doing what it believes is 2 right and consistent with New York law. 3 At the same time I don't know that it 4 means I should necessarily do anything different in this 5 Court just because a New York court is deciding to move 6 forward. And so I haven't reconciled that in my mind 7 yet. But -- and we have had this discussion before 8 about this issue. 9 I'm only left with sort of the general 10 principle that this Court probably should have been the 11 first to deal with that issue, because it was the first 12 filed court, in the interest of comity. So if that 13 Court didn't abide -- did abide by general principles of 14 comity in allowing the first filed court to address this 15 issue, then the question is should I in determining 16 whether or not to entertain the motion to stay. And so 17 that's kind of where I'm at on this. 18 But I also recognize there -- it becomes 19 problematic. And I have no interest in overcomplicating 20 this case or doing anything to jeopardize or interfere 21 with the New York court's resolution of its case. It 22 may be ultimately I need to make a decision on what the 23 Court thinks is appropriate; and it's just like you 24 said, it's in the Court's discretion. 25 MS. DUNN: Can I address one issue -- FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:14 05/09/2023 Hearing March 6, 2023 1 THE COURT: Yes. 2 MS. DUNN: -- before we turn it over to 3 them? 4 THE COURT: Yes. 5 MS. DUNN: And that is something that they 6 raise in their response to our motion, and it's an 7 argument that these are not parallel proceedings subject 8 to which the Court could exercise its jurisdiction. And 9 there's just simply no merit to that argument, Your 10 Honor. 11 Plaintiffs are telling the Court that 12 despite having fully litigated their fraud claim in New 13 York and New York court finding the claims to be 14 baseless, that they nevertheless want to re-litigate 15 them here against Related Fund and Sedrish because they 16 aren't parties to that New York suit. That's part of 17 their argument about why the cases are not parallel. 18 Now, it is true that for some reason 19 plaintiffs chose not to assert their fraudulent 20 inducement claims in New York against Related Fund or 21 Sedrish and that neither is a party to that case; but it 22 does not mean that plaintiffs' fraud claims against 23 those two parties here were not fully resolved by the 24 New York court's dismissal with prejudice of plaintiffs' 25 fraud claims against RDF Agent. FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:15 05/09/2023 Hearing March 6, 2023 1 The claims here -- the fraud claims here 2 are premised on allegations that Related Fund is the 3 alterego of RDF Agent and that Sedrish is an agent of 4 RDF Agent. So for all intents and purposes, plaintiffs 5 have taken the position in this case that Related Fund 6 and Sedrish are RDF Agent. 7 And as set forth in detail in our motion 8 for summary judgment, the position taken by the 9 plaintiffs means that dismissal of the plaintiffs' 10 fraudulent inducement claims in New York has res 11 judicata effect on the claims against the three 12 defendants here. 13 So that brings us back to what is left and 14 that is a contract issue in New York with a flip side 15 dec action here in which the plaintiffs ask for findings 16 that they did not breach their obligations under the 17 term sheet, that RDF Agent doesn't suffer any harm, and 18 that the liquidated damages provision constitutes an 19 unenforceable penalty. 20 Like I said, all those issues are being 21 addressed in New York. So we believe that the cases are 22 undoubtedly parallel despite their differences and that 23 judicial efficiency and economy warrants staying this 24 provision pending the resolution of the New York case or 25 at a minimum pending the resolution of the summary FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:16 05/09/2023 Hearing March 6, 2023 1 judgment in New York, which would deal with all of the 2 issues before Your Honor now. 3 THE COURT: Counsel? 4 MR. BARROW: Yes, Your Honor. Thank you. 5 First, the Court's right. This Court has 6 dominant jurisdiction. The fact that they're citing 7 cases that say, You don't consider dominant jurisdiction 8 when you're dealing with sister state issues, those 9 cases are in a pause it [phonetic]. And the reason is 10 because those cases all dealt with the issue of comity 11 whenever the second filed suit was the one in Texas and 12 the first filed suit was in another case. 13 And those instances, that's when the Court 14 evaluates certain factors as to considering whether to 15 stay the case or not. And by the way, one of those 16 factors is absolutely if the case was filed first. In 17 this instance, this -- and let's just call it what it 18 is, a mess, effectively, is something that they have 19 created, they have chosen, and now they're asking you to 20 say stand down and effectively Texas needs to roll over, 21 let New York do what it needs to do. And it doesn't 22 matter the fact that Texas residents can be deprived of 23 jurisdiction. Their choice of forum, we should be able 24 to race to the New York courthouse and continue fast 25 despite the fact the New York court is not going to FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:17 05/09/2023 Hearing March 6, 2023 1 recognize issues of comity. 2 There was nothing untoward in what we did. 3 We received a letter -- a demand letter. It said -- it 4 didn't say we're filing a suit tomorrow. It said, We're 5 going to preserve all our legal rights. You owe us $2.3 6 million for the liquidated damages. And we filed a dec 7 action. We filed a dec action here. And as soon as 8 they were served with it two days later, they went and 9 filed another lawsuit up there. And yes, the New York 10 court did not recognize at least the issue of comity. 11 That said, the order, it did not just say 12 because we, quote, gained a tactical advantage, whatever 13 that meant. But rather it said -- and I quote -- and 14 indeed plaintiff might not be subject to personal 15 jurisdiction in Texas. 16 At that time when it entered this order, 17 it was a question as to whether this Court had 18 jurisdiction. This order was entered, I believe, last 19 August -- no. July 26th. So the special appearance had 20 not come to fruition at that time. This Court has since 21 ruled, yes, indeed it does have jurisdiction over these 22 folks. 23 And from our standpoint, if the Court -- 24 we don't think that the motion to stay analysis you 25 should even get there because all these cases deal with FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:18 05/09/2023 Hearing March 6, 2023 1 when the Texas court is the second case filed. But if 2 the Court was going to get here, the Court should look 3 to see whether the matters are identical; and they're 4 not. And, in fact, she tried to characterize this as 5 New York was the dominant all-encompassing case. That's 6 not the case. New York is a subset of what's going on 7 here. That's part of the reason we said we wanted to 8 dismiss our fraud claims against the plaintiff to say, 9 We will litigate them in Texas with Bryan Sedrish and 10 Related Fund. 11 And by the way, just because they were 12 making representations whether it was in the 13 representative or individual capacity, they are both 14 liable for the independent tort. I'm not aware of a res 15 judicata principle that would be applicable in this 16 instance. 17 But, Your Honor, you have a motion for 18 summary judgment that's pending right now in front of 19 you that is set for submission in two weeks. That's 20 dealing with the declaratory judgment with respect to 21 the unenforceable penalty. 22 If this Court exercises its jurisdiction 23 and it can and can go forward and issue summary 24 judgment, that will resolve so much of this case, so 25 much so that the New York case -- we don't have any FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:19 05/09/2023 Hearing March 6, 2023 1 counterclaims right now pending other than a contract 2 claim in New York. And they have filed a motion for 3 summary judgment on all of their affirmative claims. 4 And so what we're saying is if this Court would deny the 5 stay, resolve the summary judgment one way or the other, 6 that would absolutely have an effect on New York and 7 what's going on. But it's within this Court's purview, 8 it's within this Court's jurisdiction and this Court has 9 absolute discretion to do that. 10 What they're asking you to do is 11 completely give a -- strip Texas residents from being 12 able to choose their forum and to go forward and to have 13 foreign courts or foreign entities come in and say we're 14 going to stay everything in Texas and go litigate in 15 another state. 16 THE COURT: So -- and I -- I -- you know, 17 I think that on some level that that's a consideration 18 about allowing parties to select the forum. Plaintiffs 19 generally are allowed to select the forum. You have two 20 sets of plaintiffs here. But sometimes it is on some 21 level a race to the courthouse. And in some 22 circumstances tactical advantages is a consideration in 23 determining who has dominant jurisdiction and equitable 24 principles apply. 25 And so that analysis -- and I have done FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:20 05/09/2023 Hearing March 6, 2023 1 that analysis of the case where folks said they weren't 2 going to file and they run and file say, Well, we have 3 got jurisdiction and they weren't invited by their 4 understanding or whatever the case may be and so -- 5 MR. BARROW: And that's not this case. 6 THE COURT: Right. And I have had to 7 apply that analysis and I said, You're right, there has 8 been -- this was done in bad faith and this Court 9 doesn't have dominant jurisdiction even though it was 10 the first filed case. Doesn't happen too often but I 11 have had to do that analysis and abate the case and 12 allow the second filed Court to go ahead and proceed. 13 But I haven't -- that analysis hasn't happened here and 14 I -- it doesn't sound like it can happen at least 15 because of the way the -- because it involves a sister 16 state. 17 And I don't want the parties -- also I'm 18 concerned because I don't want the parties pinning Texas 19 state court with New York state court. I'm not 20 interested and I'm not trying to and I don't want to be 21 in conflict with a sister state court. I would like to 22 avoid that as much as possible, and I want to make sure 23 I'm not being seen as critical in any way of what's 24 happened there or is happening in that Court. 25 I can only evaluate the case that's in FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:21 05/09/2023 Hearing March 6, 2023 1 front of me using the legal principles they have and the 2 law of this state and apply it to the parties and the 3 circumstances here. And so that's all I'm trying to do. 4 I do recognize that there's a parallel proceeding, and I 5 do recognize it can be problematic when those two are 6 happening at the same time and one court doesn't 7 necessarily see the lean to another court. And so I'm 8 trying to figure out what the appropriate course of 9 action is recognizing all of those issues. 10 I don't want to -- you know, judicial 11 economy is a concern. And I don't want to issue 12 conflicting rulings, and I don't want to be stepping on 13 toes when it's not helpful to anybody and folks running 14 to one court or the other. This Court ruled here and 15 they have ruled here and what do we do with that and 16 unnecessarily complicating things. 17 I think at this juncture because I'm not 18 fully meshed in the proceedings as they haven't matured 19 to the degree that they have in the New York case. I'm 20 not probably in the best position to evaluate what this 21 case is really about yet. But I think once I get -- 22 once we start moving forward with some of these motions 23 and the Court gets better educated on that, I think I 24 will be in a better position whether or not this case 25 should, in fact, be stayed. FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:22 05/09/2023 Hearing March 6, 2023 1 I think at this juncture I am going to 2 deny the motion to stay. But it may -- we may 3 ultimately end up the Court having to stay because it 4 simply gets too complicated because the New York case 5 simply resolved these issues before I did. And so 6 that's not -- it is what it is, and ultimately that's 7 just how it worked out. 8 I don't -- and then, you know, there's 9 issue of special appearances that are on appeal. I 10 don't know how that will ultimately shake out. This 11 Court isn't infallible. We just, you know, make 12 decisions the best that I can and then obviously you're 13 entitled to get those reviewed on appeal. 14 So I think at this juncture the Court is 15 going to deny the motion to stay. The Court may be 16 willing to reconsider at some later date. I think for 17 right now I'm going to allow it to proceed with the 18 understanding that I provided here today. 19 Is there anything else? 20 MS. DUNN: Yes, Your Honor. One more 21 issue. 22 As opposing counsel mentioned, there is a 23 current submission on our MSJ set for the 20th. We have 24 asked them for a one-week extension. Mr. Barrows 25 indicated that they are not inclined to give that to us FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:23 05/09/2023 Hearing March 6, 2023 1 but we discussed potentially conferring further after 2 this hearing because they haven't been available 3 prior -- I would like to work it out now if at all 4 possible so we don't have to make it known their motion 5 in front of the Court. We're asking for one week in 6 light of some travel concerns and the like of Spring 7 Break and some other things going on. 8 THE COURT: When -- it sounds like the 9 motion has already been on file. When is it noticed for 10 hearing? 11 MS. DUNN: The 20th. So we're asking 12 for -- it's not for hearing. It's just submission. And 13 we're asking for that to be extended by one week to the 14 27th to make our response due on the 20th as opposed to 15 the 13th. 16 MR. BARROW: Your Honor, we will agree 17 right now to stay all proceedings in New York and in 18 Texas pending the appeal. And so if they want to put a 19 pause button on their New York motion for summary 20 judgment, which by the way has obviously precipitated. 21 They filed that after we filed our motion for anti-suit 22 injunction, the next day they file a motion for summary 23 judgment on the entire case; and we filed it -- as well 24 as the res judicata issue that they're claiming here in 25 this court. We filed our motion for summary judgment on FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:24 05/09/2023 Hearing March 6, 2023 1 really what this case is about regarding the dec action 2 and the unenforceable penalty issue. But if they agree 3 to just say, We'll pull everything down right now until 4 the Appellate Court decides whether there's jurisdiction 5 or not, we will pull everything down and stay 6 everything. 7 MS. DUNN: Your Honor, we're not going to 8 agree to that. That delays the inevitable resolution of 9 this case for a significant amount of time 10 unnecessarily. That's not something we can agree to. 11 The one-week extension does not affect either of the 12 pending motions. I mean, they're both going to be heard 13 or considered in due time but essentially at the same 14 time. And so my client is not going to be willing to 15 pull all motions and just simply stop this case waiting 16 for the Court of Appeals which could be up to a year or 17 longer. 18 THE COURT: When are the motions in the 19 New York court supposed to be heard? 20 MR. BARROW: I believe April 4th or so. 21 So, you know, if they want a few days extension -- if 22 they're not going to agree to everybody pull everything 23 down -- if they want a few days to extend it, we'd like 24 to keep the submission date on the 20th so that this 25 Court, as we stay, can determine whether, in fact, the FILED: NEW YORK COUNTY CLERK 05/09/2023 05:08 PM INDEX NO. 656537/2022 NYSCEF DOC. NO. 165 RECEIVED NYSCEF:25 05/09/2023 Hearing March 6, 2023 1 liquidated damage provision is a penalty or not. We 2 will argue that as a matter of law. It is -- of course, 3 they have a differing opinion on that. 4 MS. DUNN: Your Honor, can I just add one 5 note? We just gave them a 14-day extension in New York 6 in their response to our motion for summary judgment 7 which pushed it out to the April 6th, so we don't think 8 that giving us an additional week and putting it on 9 submission on the 27th is any prejudice to them. And it 10 seems -- 11 THE COURT: So your response is due on the 12 what? 13 MS. DUNN: 13th, Your Honor. 14 THE COURT: The 13th. 15 And so you would like it due on the 20th? 16 MS