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Ponderosa Pine Energy, LLC, Nixon Peabody, LLP, and Shannon, Gracey, Ratliff & Miller, LLP v. Illinova Generating Company N/K/A Illinova Corporation

Citation: Not availableDocket: 05-15-00339-CV

Court: Court of Appeals of Texas; July 1, 2015; Texas; State Appellate Court

Original Court Document: View Document

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The document pertains to a legal case before the Fifth Court of Appeals in Dallas, Texas, identified as cause number 05-15-00339-CV. The parties involved include Appellants Ponderosa Pine Energy, LLC, and law firms Nixon Peabody LLP and Shannon, Gracey, Ratliff, Miller, LLP, versus Appellee Illinova Corporation. The appeal originates from the 14th District Court of Dallas County, Texas.

Key details include the identification of legal counsel for both Appellants and Appellee. For the Appellants, B. Frank Cain (Nixon Peabody LLP), and Joseph W. Spence, along with Frank H. Penski, Constance M. Boland, and Abigail T. Reardon are listed as counsel. For the Appellee, Mike A. Hatchell, Thomas F. Loose, and Bradley C. Weber of Locke Lord LLP represent Illinova Corporation. Contact information for all parties and their counsel, including addresses and phone numbers, is provided, indicating the formal nature of the proceedings and the need for communication among legal representatives.

Key points include the identity of the parties and counsel, a rejoinder to the appellants' statement of facts, and a summary of the argument. The underlying arbitration agreement mandated prompt payment, which Illinova executed under protest to stop interest accrual, while asserting its right to contest the award. Ponderosa and its legal counsel allegedly contributed to the grounds for vacating the arbitration award and denied Illinova's right to restitution as established in Miga decisions. The appellants had previously committed to pay the prejudgment interest they now contest. After losing in the Texas Supreme Court, Ponderosa refused to release funds owed to Illinova.

The argument section emphasizes that Texas Supreme Court rulings negate the voluntary payment rule when a right to appeal is reserved. The trial court applied Miga principles correctly, affirming Illinova's restitution rights and addressing misinterpretations of Miga by the appellants. The court also rightly awarded prejudgment interest, determining that it began accruing 180 days post a specific letter from Illinova and was accurately calculated. Additionally, the court enjoined Ponderosa from pursuing a second arbitration until all appeals concluded, arguing the second arbitration was premature and met the legal standards for an injunction. 

The trial court's decision to hold the appellants jointly and severally liable was justified, as they collectively agreed to pay interest and acted together in withholding funds. The argument underscores that equity and public policy support this liability arrangement.

The principal legal issue revolves around the voluntary payment rule and restitution claims following a judgment reversal when the payment is made with an intention to appeal, as clarified in the Miga case. The appellants' attempts to impose limitations on the application of restitution were rejected by the Supreme Court.

The litigation history is well-documented in Tenaska Energy, Inc. v. Ponderosa Pine Energy, LLC, 437 S.W.3d 518 (Tex. 2014), and this appeal centers on the "voluntary payment rule." Ponderosa asserts this rule to maintain its status as the arbitration winner, despite its significant role in the vacatur of the arbitration award. The Texas Supreme Court has noted that the voluntary payment rule has been rarely applied, suggesting it is not suited for Ponderosa's claims. Illinova’s restitution claim is grounded in unjust enrichment principles. The appellants argue they can retain the $16.9 million payment from Illinova despite knowing it was made to avoid accruing postjudgment interest while reserving the right to contest the award.

The arbitration agreement mandated prompt payment, specifying that obligations must be paid within 30 days post-decision without interest. Ponderosa sought postjudgment interest after this period, which Illinova contested by paying the arbitration award under protest to prevent interest accrual while asserting its right to challenge the award. Following the award on May 7, 2007, Ponderosa filed for confirmation in the district court, while Illinova expressed its intention to contest the award and tendered the amount to stop interest from accruing, reserving the right to reclaim the payment with interest if successful in its challenge.

On June 4, 2007, Nixon Peabody, representing Ponderosa, indicated it was authorized to accept a specified Tender Amount as full payment for an arbitration award and provided wiring instructions for its trust account. However, Nixon Peabody clarified it could not accept a proposed $16.9 million tender until the outcome of Illinova's potential motion to vacate the arbitration award was resolved and an escrow agreement was established. Following this, Nixon Peabody sent a signed W-9 form to Illinova.

On June 5, 2007, Ponderosa issued two letters to Illinova. The first incorrectly claimed that full payment was due that day and accused the Sellers of fraudulent transfers. The second letter threatened sanctions against the Sellers and their counsel if they pursued claims to vacate the arbitration award. The next day, Illinova filed a counterclaim to vacate the arbitration award in the 191st District Court.

On June 7, 2007, Illinova transferred $16,941,000 to Nixon Peabody’s trust account, explicitly stating the payment was made under protest to prevent accruing interest on the arbitration award. Illinova reserved its rights to challenge the arbitration award and recover the payment with interest if successful. Jason Kinzel, a Senior Corporate Counsel for Illinova's parent company, testified that the payment was made to comply with the award and avoid accruing interest, not as a settlement of Ponderosa's claims.

Illinova's payment was made with the understanding that, per the Texas Supreme Court's Miga v. Jensen ruling, such a tender with explicit reservations preserved its right to later seek restitution. Ponderosa did not respond to Illinova’s Tender Letter and took control of the funds, aware of Illinova's intentions. Subsequently, Nixon Peabody allocated the funds: $14,399,850 to Deutsche Bank for the Lender Group, $2,452,209.75 to its operating account, and $88,940.25 to Shannon Gracey.

Ponderosa and its legal counsel played a significant role in the events leading to the vacatur of an arbitration award by the 191st District Court on March 31, 2010, due to evident partiality. The court criticized Ponderosa's counsel for altering Arbitrator Stern’s disclosures, specifically by adding a misleading sentence that downplayed the connections between Stern, Lexsite, and Nixon-Peabody, which was deemed an attempt to create a favorable bias for Ponderosa. The trial court condemned the nature of ex parte communications between Stern and Ponderosa's counsel, noting that these actions misled opposing counsel regarding conflicts of interest.

The Supreme Court recognized the trial court's findings as binding and supported by evidence, affirming that Ponderosa's conduct contributed to both the arbitration award and its subsequent vacatur. Following the vacatur, Illinova demanded restitution from Ponderosa and Nixon Peabody for the Wired Funds, plus interest, but Ponderosa refused, prompting Illinova to initiate a new lawsuit on April 16, 2010, asserting claims for restitution and unjust enrichment against Ponderosa and its counsel.

Initially, the trial court ordered Ponderosa to deposit the Wired Funds into escrow, including interest, but this requirement was later modified to exclude interest based on defense counsel's assurance that interest would be paid if included in a final judgment favoring Illinova.

In compliance with a trial court order, Illinova, Appellants, and U.S. Bank National Association established an Escrow Agreement, with U.S. Bank managing an escrow account that was fully funded by various entities as of September 21, 2010. Despite losing in the Texas Supreme Court, Ponderosa refused to release the Wired Funds to Illinova after the court upheld a vacatur of the arbitration award. Following this decision, Illinova requested the disbursement of the Wired Funds, which Ponderosa again denied, not having previously argued that Illinova's payment was voluntary or a settlement of claims in the arbitration. At trial, Ponderosa acknowledged it had never claimed that Illinova's challenge to the arbitration award was moot due to settlement. The trial court rendered a judgment supported by extensive, unchallenged factual findings, which remain binding. Ponderosa's defenses of "payment" and "unclean hands" were raised in a separate filing not included in the trial record, and the issue of voluntary payment was not contested in lower courts or the Texas Supreme Court. Illinova's restitution claim is supported by the legal principle that payments made under protest while intending to seek appeal are not barred by the voluntary payment rule if the judgment is later reversed. Illinova explicitly reserved its rights to challenge the arbitration award and recover the Tender Amount plus interest if successful in its appeal.

Appellants' reliance on the voluntary payment rule is flawed for two main reasons. First, they incorrectly interpret the Miga decisions as requiring an existing court judgment to apply the rule. The coercive nature of the arbitration award itself, Ponderosa's swift move to confirm it, the severe sanctions threatened, and the high interest rate on the significant amount in question all contribute to this coercion. Furthermore, since the judgment in Miga was superseded, it was unenforceable when payment was made, eliminating any threats of collection actions that were present in that case. Second, the necessity for a binding agreement for the rule's application was dismissed in Miga II, where the court noted disagreements on appeal rights post-payment. The trial court's judgment aligns with Texas public policy, which favors arbitration and supports restitution claims when judgments are reversed after coerced payments. This establishes that judgment debtors should not be exempt from postjudgment interest while arbitration debtors are not afforded similar relief. 

Appellants also failed to contest the trial court’s findings regarding Ponderosa's misconduct, which contributed to arbitrator Stern's evident partiality. Their arguments against paying prejudgment interest are unfounded for two reasons: the trial court's decision was based on equitable considerations, and the interest was correctly calculated to start accruing 180 days after Illinova's written notice of claim. Additionally, even if the notice was inadequate, the filing of Illinova's counterclaim also justifies the interest accrual.

Lastly, Ponderosa's effort to pursue a second arbitration while appealing the restitution case is seen as an inequitable tactic. The trial court did not err in enjoining Appellants from this second arbitration, as it involved the same claims that Ponderosa argues were resolved by Illinova's previous payment, making the second arbitration an inefficient use of resources until the appeal is resolved.

Proceeding with a second arbitration posed imminent harm to Illinova, as it would incur unnecessary costs and expenses. The potential injury from a parallel arbitration was deemed irreparable, with no legal basis for Illinova to recover these expenses. Allowing Ponderosa to pursue the second arbitration would have forced Illinova to defend in two separate forums, risking a more favorable outcome for Ponderosa from either proceeding. The trial court's decision to prevent the second arbitration was justified and insulated from abuse of discretion due to these considerations, as Illinova had no adequate legal recourse once the second arbitration commenced.

Regarding joint and several liability, the trial court did not abuse its discretion for three reasons: Ponderosa's counsel assured that all Appellants would pay interest if included in a final judgment, which influenced the trial court and Illinova's actions; all Appellants jointly withheld Illinova’s funds for over three years; and public policy supports joint and several liability to ensure plaintiffs receive full relief without the burden of pursuing multiple defendants, especially in cases of potential insolvency.

Texas Supreme Court rulings indicate that the voluntary payment rule does not apply when there is a clear reservation of the right to appeal upon making a payment. The Appellants' reliance on this rule misinterprets its current standing, as it is now subordinate to principles of unjust enrichment. Payments made with the intent to appeal do not moot the appeal, contrasting with past interpretations where any payment would do so. The Miga decisions aimed to facilitate the abatement of interest on substantial judgments while preserving the right to appeal.

The Court in Miga I established that parties should have the ability to stop the accrual of post-judgment interest without sacrificing their appellate rights, particularly in significant judgments. Illinova's actions mirrored the principles set forth in Miga I and II, which confirm its right to restitution. The trial court correctly applied these principles, recognizing that restitution after a reversal is a long-standing rule in Texas law, supported by cases such as County of Dakota v. Glidden. 

A debtor can settle a judgment and later seek a reversal, recovering payments made if the judgment is overturned. Current Texas law articulated in Miga II states that if payment on a judgment occurs with an expressed intent to appeal, the voluntary payment rule does not bar restitution if the judgment is reversed. This doctrine is underpinned by three key policy considerations: the narrowing scope of the voluntary payment rule due to adequate legal remedies, the rule's aim to prevent misleading payments by a debtor, and the absence of deception when a creditor accepts payment knowing the debtor intends to appeal. 

The Court recognized that preventing restitution could unjustly penalize a debtor for judicial error, especially if the creditor's actions contributed to the reversal. Illinova's claim for restitution aligns with the Miga decisions, as it paid the Wired Funds under protest, informed Ponderosa of its challenge to the arbitration award, and explicitly reserved the right to recover funds if successful. Illinova's successful challenge of the arbitration award by the Texas Supreme Court underscores the validity of its restitution claim, which is viewed as more compelling than prior cases in the Miga litigation.

Jensen communicated his intent to appeal orally to Miga during payment negotiations, but Illinova’s Tender Letter explicitly reserved its rights to contest the award and recover the Wired Funds with interest. Miga I highlights that Illinova's written reservation is a model practice for safeguarding the right to restitution, contrasting it with Jensen’s oral statement. Illinova's letter clearly states its intent to both challenge the award in court and recover the Tender Amount if successful, leaving no doubt about its appeal intentions. This reservation meets the requirements of Miga II, which indicates that a payment made with an expressed intent to appeal prevents the application of the voluntary payment rule.

The Appellants misinterpret the Miga decisions by claiming that a judgment must exist at the time of tender and that the tender must be based on a binding contract. Both assertions are incorrect. The argument that an existing judgment is required overlooks the coercive nature of the arbitration award, which functions similarly to a judgment. Additionally, Ponderosa's actions, including filing to confirm the award and threatening litigation, heightened the coercive circumstances faced by Illinova. The arbitration award also mandated postjudgment interest, further reinforcing its judgment-like qualities. Thus, the conditions for coercion and the implications of the Miga decisions are satisfied, countering the Appellants' claims.

Illinova's unconditional tender prevented daily interest accrual of $3,829.13, highlighting the economic coercion typical for judgment debtors, which is a central tenet of the Miga rule. The Miga cases indicate that a currently enforceable judgment is not necessary for payment under a fully-litigated claim. At the time of Jensen's payment, he had secured a supersedeas bond, suspending the judgment's enforcement under TEX. R. APP. P. 24.1(a)(2, f). Despite the judgment's suspension, the Supreme Court deemed it sufficiently coercive to negate the voluntary payment rule. Notably, case law does not require a judgment for restitution; for instance, in Dallas County Community College District v. Bolton, the issue was the students' lack of protest regarding a technology fee rather than the existence of a judgment. The court noted that had students sought waivers and been denied, or protested at payment time, the analysis would differ. This principle was later established in Miga II, which necessitated that payment be linked to an expressed intent to appeal. The context surrounding Illinova and Jensen shows they faced similar coercion; while Jensen could not execute on the judgment due to supersession, Ponderosa could not execute on an unconfirmed arbitration award. The arguments presented by Appellants regarding judgment creditors' rights are deemed irrelevant in this context, aligning with the rationale from Miga II that aims to prevent misleading opponents about the resolution of disputes.

A police union successfully obtained a monetary judgment against the city, which later negotiated a settlement during the appeal process as part of a new collective bargaining agreement. Subsequently, a different union, representing firemen, sought additional benefits based on a clause in its collective bargaining agreement that entitled them to any benefits from negotiations with other unions. The court dismissed the city's argument that the settlement with the police union was not "voluntary," noting that the intention was to resolve the dispute, aligning with the voluntary payment rule, which states that a payment made to settle a dispute is not subject to recovery in restitution unless the settlement can be invalidated. 

The Supreme Court has affirmed that reserving the right to appeal inherently includes the right to a refund if the judgment is modified or reversed. In this instance, the appellants could not argue that Illinova’s payment, made under protest and with a reservation to continue litigation, was intended to end the controversy, as documented evidence indicated the opposite. 

The appellants incorrectly asserted that Illinova had no right to restitution because there was no agreement with Ponderosa regarding the payment. Previous decisions clarified that no agreement is necessary for a restitution claim, contradicting the appellants' interpretation of Miga II. They also misrepresented the City of Brownsville case, which affirmed that voluntary payments made under a compromise and settlement could still sustain restitution claims. The court emphasized that the lack of agreement between the parties in Miga did not negate the possibility of pursuing a restitution claim, paralleling scenarios where a party executes on a non-superseded judgment.

The right to recover upon reversal is established as a matter of law, and the absence of an agreement does not negate the restitution-after-reversal rule. Ponderosa ratified Illinova's conditions by accepting the Wired Funds with knowledge of the Tender Letter terms, which were deposited and distributed to Appellees and Ponderosa’s owners. The unconditional tender halts the accrual of interest as a matter of law, regardless of Ponderosa's lack of explicit agreement on interest. Illinova's post-payment accounting is irrelevant to the case. Appellants argue that Illinova treated the Wired Funds as a settlement payment, but this claim is flawed for three reasons: (1) the trial court found that Illinova intended to seek review and reversal, a finding unchallenged on appeal; (2) Illinova's letters clearly reserved its restitution claim; and (3) Illinova’s internal accounting practices were not communicated to Ponderosa and thus are not pertinent. The letters sent to Ponderosa indicated that the payment was made under protest, with the intent to challenge the arbitration award and seek restitution if successful. Public policy supports applying the restitution-after-reversal principle to both arbitration awards and judgments, as distinguishing between the two could disadvantage arbitration debtors and encourage noncompliance with arbitration obligations. Appellants failed to provide a valid rationale for such a distinction.

The rule against recovery of voluntary payments is not strictly enforced when the payor did not intend to relinquish their rights. In the context of this case, if the trial court had upheld the arbitration award and Illinova had made a payment while indicating an intent to appeal, Appellants would likely concede that the voluntary payment rule would not prevent a restitution claim if the award were later reversed. The trial court correctly awarded Illinova prejudgment interest based on several principles:

1. **Compensation for Lost Use**: Prejudgment interest compensates for the lost use of money from the claim's accrual to the judgment date.
2. **Applicability in Restitution**: Prejudgment interest is applicable in restitution cases, as established in prior rulings.
3. **Discretionary Award**: In the absence of a controlling statute, the trial court has discretion to award prejudgment interest based on equitable principles and public policy.
4. **Burden on Appellants**: Appellants must demonstrate that the trial court's decision was arbitrary, unreasonable, or lacked guiding principles.

The trial court's decision is further supported by findings that Appellants' intentional misconduct allowed them to benefit from the Wired Funds for over three years, depriving Illinova of its money during that period. The trial court determined that prejudgment interest began to accrue 180 days after Illinova's June 7, 2007 Tender Letter, which is consistent with established legal principles regarding the accrual of claims for prejudgment interest. A claim for such interest accrues either 180 days post-notice of a claim or upon the filing of a suit, with courts broadly interpreting the written notice requirement.

A lawsuit previously filed and dismissed constituted written notice of a claim, as established in Robinson v. 894 S.W.2d at 528-29. Illinova submitted its claim via a Tender Letter on June 7, 2007, related to its challenge of an arbitration award and the Wired Funds. The letter explicitly reserved Illinova's rights to contest the award and pursue recovery, triggering a 180-day period for prejudgment interest to accrue, which began on December 5, 2007. Appellants contested the trial court’s determination of the accrual date and interest rate, arguing that the Tender Letter was premature since Illinova's claim for restitution only arose after a Texas Supreme Court decision on August 22, 2014. However, the court clarified that a cause of action accrues when the facts permit judicial relief, not at its resolution. Illinova had grounds for its challenge when it wired the funds, having filed a counterclaim on June 6, 2007.

Appellants also criticized the interest rate as excessively high, labeling it a "windfall." The trial court, however, adhered to the appropriate interest rate as mandated by Texas law and the Finance Code, reflecting the rightful interest for the period Appellants used Illinova's funds. Prejudgment interest was calculated as simple interest at the postjudgment interest rate, ranging from a minimum of 5% to a maximum of 15% as dictated by the Texas Finance Code. The trial court determined the applicable interest rate based on the Federal Reserve's prime rate, resulting in a prejudgment interest award of $2,455,396.20, which precisely matched the calculated amount.

The trial court upheld the prejudgment interest calculated by Illinova, noting that the Tender Letter notified Ponderosa of IGC’s intention to recover the Wired Funds plus interest, fulfilling the Texas legal requirement for a demand for compensation. The court affirmed the prejudgment interest award, citing Illinova's counterclaim for restitution filed on October 3, 2007, as an independent basis for the ruling. The filing date also marked the commencement of interest accrual. Had interest started on this date, it would have resulted in a higher award than what the trial court granted. 

Additionally, the court correctly enjoined Ponderosa from pursuing a second arbitration against Illinova pending the outcome of appeals in this case. Ponderosa's second arbitration, initiated on November 20, 2014, involved claims previously settled by Illinova's payment of the Wired Funds. If the appeal favors the Appellants, Ponderosa's indemnity claims will be moot, rendering the second arbitration unnecessary. The injunction met the criteria for a permanent injunction under Texas law, addressing the potential wrongful act of proceeding with arbitration while appeals are ongoing.

Imminent harm and irreparable injury, along with the absence of an adequate legal remedy, are essential elements for granting an injunction, as established in Lagos v. Plano Econ. Dev. Bd. and Wright v. Sport Supply Grp. Inc. The trial court's injunction fulfills these criteria. Ponderosa's attempt to pursue premature arbitration claims against Illinova is considered a wrongful act, as there is no live controversy to arbitrate, particularly until a final appellate decision clarifies whether the claims were settled. Ponderosa's strategy to arbitrate claims it deems moot is viewed as bad faith, aimed at increasing Illinova's litigation costs.

The imminent harm to Illinova was evident when the trial court issued the injunction, following Ponderosa's service of a Statement of Claim for arbitration. The Purchase Agreement's arbitration provisions required prompt action from Illinova. The court found that allowing Ponderosa to proceed with arbitration during the appeal would necessitate costly actions from Illinova, including preparing an answering statement, appointing an arbitrator, and engaging in discovery, all while uncertain about the appeal's outcome. Testimony indicated that the first arbitration cost Illinova between $500,000 and $1 million, suggesting that subsequent arbitration would likely incur even higher costs.

Furthermore, forcing a party to arbitrate a dispute that should not be arbitrated results in irreparable injury, as seen in CMH Homes v. Perez and Freis v. Canales. Once a party is compelled to arbitrate, it cannot regain the right to avoid arbitration, just as a party denied proper arbitration cannot regain that right after litigation. The equitable principles supporting the mandamus relief in those cases also underpin the injunctive relief granted here, emphasizing that defending against premature claims while managing an appeal would place Illinova at a significant strategic disadvantage.

Ponderosa and other Sellers (Tenaska and Continental) have initiated a second arbitration, with an arbitration panel already appointed and proceedings underway. An award is expected before Ponderosa’s appeal in the current case concludes. The arbitration agreement mandates that hearings start within 60 days of arbitrator designation and decisions be made within 30 days after the last hearing session. If the second arbitration results in a favorable award for Ponderosa, they could dismiss the current appeal and seek collection from Illinova. Conversely, if the award favors Illinova, Ponderosa might ignore it and continue pursuing the current appeal regarding the Wired Funds.

Illinova faces a disadvantage due to the absence of a recovery mechanism for arbitration fees and costs in the Purchase Agreement’s arbitration clause, which employs a "Baseball Arbitration" format requiring each party to submit one settlement proposal. Illinova lacks statutory or contractual grounds to recover attorney fees, leaving them without a proper remedy for any unnecessary arbitration expenses. The argument that Illinova would only incur minor costs fails to recognize the unfairness of the situation, where Ponderosa could choose outcomes based on the second arbitration's result.

The injunction serves to maintain the status quo, countering Appellants' claims about heightened requirements for mandatory injunctions, as the trial court's prohibitory injunction effectively preserves the parties' standing until all appeals are settled. The court required Appellants to withdraw Ponderosa's November 2014 Statement of Claim, which did not alter the parties' positions in the second arbitration, as no substantial actions had yet transpired. At a hearing concerning Illinova’s request for a restraining order against the second arbitration, Ponderosa’s counsel acknowledged Illinova's obligations regarding the arbitration.

Ponderosa agreed to remain involved in the case until the Court ruled shortly after the December 15 trial, leading Illinova to withdraw its application for a Temporary Restraining Order (TRO). The trial court determined that injunctive relief favored Illinova after weighing relative harms and considering equitable principles. Courts of equity, unless conflicting with Texas law, guide injunction proceedings. The trial court assessed the potential injury to both parties, concluding that Ponderosa's argument against the injunction lacked merit. If Ponderosa succeeds on appeal, it would receive the Wired Funds from Illinova; if it loses, it retains the option to pursue indemnity claims in a new arbitration. The injunction's latest effective date is tied to the conclusion of all appeals. The trial court also found Appellants jointly and severally liable, exercising its broad discretion in equity matters, particularly concerning Illinova's claims for restitution and unjust enrichment. Ponderosa could have opted not to appeal, which would have allowed it to proceed with a second arbitration against Illinova. The trial court's imposition of joint and several liability will only be overturned if deemed arbitrary or unreasonable. Appellants had also jointly promised to pay interest.

Joint and several liability applies when multiple parties promise the same performance. In Bluestar Energy, Inc. v. Murphy, it was established that liability is joint and several if parties agree to pay a judgment collectively. Appellants, through their counsel, assured the trial court in 2010 that the Lender Group, along with Nixon Peabody and Shannon Gracey, would cover prejudgment interest, which led to the trial court relieving them from further escrowing that amount. The trial court relied on this representation, deeming it equitable to hold parties accountable for statements made in court. 

Appellants argued that the vague reference to “other defendants” did not sufficiently establish Nixon Peabody and Shannon Gracey’s liability for Ponderosa’s debt; however, they misconstrue the issue. They are not being held liable for Ponderosa's overall debt but specifically for the prejudgment interest they promised to pay to avoid additional escrow deposits.

Further, joint and several liability is justified as the Appellants acted in concert by withholding the Wired Funds. Citing Dorough v. Thornton, the court noted that when defendants collectively withhold funds, joint and several liability is appropriate. In this case, Illinova deposited Wired Funds into Nixon Peabody’s trust account, which were then distributed among the Appellants, who collectively withheld those funds. The argument that Appellants should not be liable because the arbitration award favored Ponderosa, not its counsel, does not hold. Their role as counsel does not exempt them from compensating Illinova for its loss related to the Wired Funds.

Imposing joint and several liability is justified by evidence and aligns with Texas policy favoring full relief for plaintiffs. Due to Ponderosa's bankruptcy, ownership has transferred to a group of eight banks (the Lender Group). Illinova should not be responsible for tracking down payments made to potentially insolvent recipients. Joint and several liability supports the fundamental policy of tort law to ensure compensation for injuries, particularly when defendants may be insolvent. The appellants, having distributed Illinova's funds, should assume the risk of non-repayment from those entities. It would be inequitable for Illinova to face the burden of suing multiple banks for their shares of prejudgment interest. The appellants' misconduct resulted in a wrongful arbitration award and subsequent withholding of Illinova’s funds. Public policy and equity support holding the appellants jointly and severally liable. Illinova seeks affirmation of the district court’s judgment and additional relief as warranted. The document also includes compliance certificates regarding word count and service of the brief to the appellants’ counsel.