Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:Kajima International Inc. (Kajima), an industrial construction company, submitted several bids for work on Formosa’s expansion plant project located in Point Comfort, Texas. Formosa awarded Kajima five contracts, some involving piping work in the olefins area and others involving piping and equipment setting work in the polypropylene plant. Each contract specified a schedule of performance. Performance took much longer than provided for in the contracts, causing Kajima’s costs to vastly exceed the contract amount paid by Formosa. Kajima asserts it was required to spend this money as a result of Formosa’s fraudulent conduct in connection with the bidding process and Formosa’s fraudulent inducement of extra-contractual work. Kajima asserted Formosa fraudulently induced it to enter into the contracts and make artificially low bids on the contracts by withholding information relating to the design and drawings of the polypropylene plant. Kajima further asserted Formosa knowingly provided Kajima with a false schedule concerning the olefins plant, which failed to reveal that multiple contractors would be working in the same location at the same time. Moreover, according to Kajima, Formosa engaged in a “string-along” fraud scheme in which Formosa made repeated false promises to compensate Kajima for delays, disruptions, bid omissions and additional costs in order to keep Kajima working. At the conclusion of the project, Kajima had spent in excess of $38 million but had received only $10 million from Formosa. Formosa counters that Kajima spent in excess of the contract prices because of Kajima’s own bidding and contract-administration mistakes. Formosa asserts the drawings were adequate for building and bidding and, when problems arose, Kajima was paid pursuant to the contract. Formosa further contends that Kajima knew other contractors would be working within its area and that any conflict in scheduling was the result of Kajima’s own mismanagement. Kajima sued Formosa and Formosa Plastics Corp., Texas (Formosa Texas) in January 1993 for breach of contract, fraud and quantum meruit arising from five of the construction contracts. The matter was first tried to a jury in 1997. The jury found that Formosa did not breach any of the five contracts but did fraudulently induce one of the contracts. The decision is silent regarding findings about Formosa Texas. The trial court subsequently rendered judgment for Kajima for $4,491,066.65. Kajima appealed, and the 13th Court of Appeals reversed and remanded the case for a new trial. The case was tried again in 2002. Kajima nonsuited Formosa Texas. The matter was submitted to the jury on the issue of fraud. The jury found Formosa guilty of fraud and awarded Kajima approximately $15 million dollars, or roughly 60 percent of the damages it sought. The trial court rendered judgment for Kajima for actual damages of $15,432,123.45, prejudgment interest of $14,210,269.65, and $403,156.86 in costs. Another appeal ensued. HOLDING:Affirmed. Formosa, the court stated, argued that an expert retained and paid by one party cannot switch sides and testify as an expert for the opposing party in the same case. Formosa, the court further stated, contended that the firm of A. W. Hutchison & Associates, Inc. served as Formosa’s consulting experts, and the trial court erred in denying Formosa’s motion to disqualify the firm and its principal, A.W. “Chip” Hutchison. When disqualification based on a prior relationship with an adversary is requested, the court stated that disqualification is warranted if: 1. The moving party possessed an objectively reasonable basis to believe that a confidential relationship existed between that party and the expert witness; and 2. Confidential or privileged information was in fact provided to the expert by the moving party. Reviewing the record, the court held that it was not objectively reasonable for Formosa to conclude that it had a confidential relationship with Hutchison. The court also found no evidence that parties in the case disclosed confidential or privileged information to Hutchison. The court also considered policy factors before stating that the trial court did not err in denying the motion to disqualify the expert. The court also stated that the trial court did not abuse its discretion by failing to exclude Hutchison’s testimony regarding damages on grounds that his testimony was not reliable. The court affirmed the trial court’s judgment in all other respects. OPINION:Valdez, C.J. delivered the opinion for the en banc majority. CONCURRENCE:Castillo, J. DISSENT:Yanez, J., joined by Hinojosa, J. “Because I would hold that the trial court erred in refusing to disqualify Hutchison on the basis of”side-switching,’ I would sustain Formosa’s third issue, reverse the trial court’s judgment, and remand for a new trial. Accordingly, I respectfully dissent.”

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 3 articles* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.