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Texas Attorneys Avoid Lawsuit Over Gas-Technology Settlement

July 28, 2022, 5:28 PM

The estate of an inventor’s widow lost an appeal of an arbitration award for the law firm that helped the family receive a $800,000 settlement over technology for recycling rubber tires, after the court found no evidence of foul play, according to a Texas appeals court ruling Thursday.

Michael Wilwerding invented a process that turned old rubber tires into hydrocarbon gas and solvent. Michael Wilwerding shared his intellectual property with several companies in Texas through licensing agreements, the Texas Appeals Court, Fourteenth District, said.

After the end of the license agreements, they allegedly filed several patent applications based on Wilwerding’s technology, without his knowledge. They then formed a company to monetize the technology.

When Wilwerding died in 2007 his widow, Betty Wilwerding, sought counsel to work on a case against the licensees. Betty Wilwerding hired Goldstein Faucett & Prebeg LLP under a contingency fee agreement. Goldstein Faucett and other attorneys reached a settlement on the trade secret claims amounting to $800,000 in total.

After Betty died in 2012, her daughter Carol Sousa disputed the agreement between the law firms and her mother in a state trial court, alleging that the law firms had taken advantage of her mother.

The IP attorneys, however, were able to provide various emails sent from Sousa’s attorney that reflected her approval of the contingency fee contract. Therefore, the trial court decided that because she ratified Betty’s contract, there was no need for an evidentiary hearing on Betty’s capacity to make the agreement.

The trial court therefore affirmed the parties’ arbitration award and granted attorneys’ fees.

Sousa argued on appeal that the arbitrator had a conflict of interest, because he had a prior business relationship with Wilson Elser, the law firm representing the IP attorneys. Sousa alleged that the arbitrator signed a false arbitrator oath.

The appeals court said Thursday there was no evidence of the arbitrator’s disqualification because he disclosed the relationship in his oath. The arbitrator disclosed that he had conducted 11 mediations involving seven attorneys who were associated with Wilson Elser from 2006-2019.

These disclosures were made after the arbitrator’s appointment, but before his confirmation and before any proceedings in the arbitration began, the court said.

Sousa previously alleged the arbitrator refused to hear material evidence and allow cross-examination. But the court found no evidence of actual bias at the hearing, with the court saying her “arguments aren’t consistent with the record.”

“Sousa offers a long list of complaints but offers little discussion or explanation as to how the excluded evidence was material and therefore its exclusion deprived her of a fair hearing,” the court said. The appeals court affirmed the judgment of the trial court.

Justice Charles A. Spain delivered the opinion. Justices Ken Wise and Meagan Hassan joined.

Faucett was represented by Paul I. Aronowitz of Houston and Bayko, Prebeg, Faucett & Abbott PLLC. Sheller Law Firm PLLC represented Sousa.

The case is Sousa v. Goldstein Faucett & Prebeg LLP, Tex. App., 14th Dist., 7/28/22.

To contact the reporter on this story: Janet Miranda in Houston at jmiranda@bloombergindustry.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com