Texas Appeals Court Upholds HP's Win In Fraud Suit

January 8, 2016 | Law360

Adam Sege

A Texas state appeals court refused Thursday to revive a fraud lawsuit against Hewlett-Packard Co. brought by a trio of minority-owned telecommunications companies, finding that a trial court correctly sided with HP in a dispute related to a suspended contract with a Dallas public school district.

Upholding the trial court’s 2014 decision, the appeals court said the claims from Lazo Technologies, Inc. and two other companies, which say they were denied payment due under the suspended contract through no fault of their own, were time-barred.

“Appellees [HP and its employees named in the suit] have established the affirmative defense of limitations by conclusively showing that appellants’ causes of action accrued more than four years before appellants filed suit,” the court wrote.

The three companies filing suit, which provide telecommunications and technology services, had joined HP in 2003 as a bidding consortium for a telecom contract with the Dallas Independent School District, according to the decision. Micro Systems Engineering Inc. was also part of the consortium, which ultimately won the contract.

In 2005, however, news outlets reported that a MSE executive had sent gifts to a top school district official, according to the decision. Contracting officials briefly suspended the contract after the allegations surfaced, and briefly reinstated it before suspending the contract again in 2006.

Lazo Technologies and the other two businesses in the dispute filed suit in 2012, alleging fraud, negligence and civil conspiracy.

“While appellants engaged in no wrongdoing and performed their duties, which consisted of making Internet connections to DISD schools for the benefit of Dallas schoolchildren, they were denied final payment for their work,” the companies wrote in a case summary in their appeal.

The companies, they continued, “were penalized for the wrongdoing of others,” including HP and the employees named in the suit.

In 2014, HP moved for summary judgment, arguing the companies had filed suit after the expiration of the statute of limitations.

After the judge granted the motion, the companies appealed, arguing that the clock for the statute of limitations began in 2011, when the Federal Communications Commission denied a request for relief from the companies. The FCC supervised the project for which the consortium had won the contract,

"The damages suffered by the appellants and sought to be recovered in this suit result from the non-payment by the FCC," the companies wrote in their appeal. "This non-payment did not occur until November 29, 2011, and the appellants could not have alleged damages until the FCC made that determination."

In addition to Lazo Technologies, the other two parties filing suit are W&R Technology LLC, doing business as Advanced Technology Solutions South, and Eddie Hill, doing business as Hill Professional Services.

Attempts to reach attorneys from both sides were not immediately successful Friday.

The companies are represented by Walter Steimel Jr. of Loeb & Loeb LLP and James E. Pennington of the Law Offices of James E. Pennington PC.

HP and its employees are represented by Patricia M. Hamill and Deborah J. Krabbendam of Conrad O'Brien PC, Carrington, Kelli Hinson and Tim Gavin of Carrington Coleman Sloman & Blumenthal LLP, and David J. Levy, Patrick K.A. Elkins and Crystal R. Axelrod of Morgan Lewis & Bockius LLP.

The case is Lazo Technologies Inc. et al v. Hewlett-Packard Company et al., case number 05-14-01060-CV, in the Court of Appeals for the Fifth District of Texas at Dallas.

--Editing by Patricia K. Cole.