Litigation Service Firm Owes Subcontractor $820,000 for Breach

A Houston-based litigation services company will have to pay more than $820,000 in actual costs it owed a subcontractor, after a Texas court of appeals said Thursday that there was no evidence that the Indian company invoiced its costs with a profit margin.

Litigation & Records Services LLC contracted with QTAT BPO Solutions Inc. to assess claims from mass-tort litigation against makers of transvaginal mesh. The parties agreed that QTAT would be paid its monthly employee costs for the work they did on LRS projects. The contract also split net profits 25/75 to QTAT and LRS respectively. The contract included a clause noting that though the future was uncertain, LRS intended to “realize profit as soon as possible.”

QTAT alleged that LRS’s co-owner, attorney James Lee Jr., told QTAT that if it billed only its costs and waited to receive profits after the mesh suits settled, QTAT stood to make $20 million.

LRS later accused QTAT of billing more than just its costs and refused to pay over $820,000 in operation and deployment expenses. QTAT sued for breach of contract.

LRS failed to provide any evidence that QTAT was billing more than its actual costs, and was therefore in breach of the contract, the Texas Court of Appeals, Fourteenth District said.

The deployment expenses were billed at cost and were part of the work on LRS’ projects and thus fell under the contract, the court said.

In a counterappeal, QTAT argued that the court erred in granting a judgment notwithstanding the verdict on its fraud allegations against LRS based on Lee’s alleged promise to realize profit as soon as possible. But LRS also “intentionally” underpriced its services so that it would never turn a profit, according to QTAT. It therefore never had an intent to perform the promise signed in the contract, QTAT said.

But that promise was unenforceable because it was indefinite. LRS’s profit intent statement was more of an opinion, rather than an assertion or expectation, Justice Kevin Jewell wrote in the opinion.

Justice Randy Wilson joined the majority.

Justice Jerry Zimmerer concurred in the result as to LRS but disagreed that LRS’s promise was too indefinite.

Beck Redden LLP and Perdue & Kidd represented LRS. Meade Neese & Barr LLP represented QTAT.

The case is Litig. & Records Servs., LLC v. QTAT BPO Sols., Inc., Tex. App., 14th Dist., No.14-20-00558-CV, 4/28/22.