MIAMI, FL– November 24, 2020-Following two years of litigation, numerous discovery abuses by the defendant, and weeks-long bifurcated jury trials in Dallas district court, Bast Amron lawyers Jeffrey P. Bast, Peter J. Klock, II, and paralegal Nakeisha Jones secured a final judgment in excess of $2.6M on behalf of firm clients Valtech Solutions, Inc. and Valtech Services, Inc., which included damages, attorneys’ fees, costs, litigation expenses, and a $25,000 sanction against the defendant, Cornerstone Staffing Solutions, Inc.
Valtech is a global digital marketing and technology services company that divested its temporary IT staffing business assets and contracts to a national staffing company, Cornerstone. The purchase price was to be paid in two tranches: $1.9M to be paid at closing, followed by a later payment adjustment to bring the total purchase price up to a specified multiple of earnings. When the payment adjustment came due, Cornerstone refused to pay.
In preparation for the lengthy trials, the Bast Amron team rented a large house in Dallas and literally lived together for weeks on end. Filled with computers, printers, binders, and other trial materials, the house served as a massive war room. Experts, consultants, and witnesses occupied couches and worked in different rooms throughout the house. Jeff Bast characterized those weeks as “the hardest I have worked in more than 25 years as a lawyer.” He added, “We truly came together as a team, with each member making critical contributions to our client’s ultimate objective. The case was complicated, and the trials were long, but both juries got it right in the end.”
After a 2-week trial in May of 2018 and a 1-week trial in August of 2018, Bast Amron’s attorneys achieved overwhelmingly successful results in this highly contentious litigation. Valtech successfully sued to recover the wrongfully withheld payment and also secured nearly $1.9M in attorneys’ fees, costs, and litigation expenses. By contrast, Cornerstone was unsuccessful in more than a dozen counterclaims alleging Valtech breached the asset purchase agreement and committed other misconduct.
Following the entry of final judgment, Cornerstone initiated an appeal in January 2019. Bast Amron continued to represent Valtech through the appeal, with Jeff Bast and Peter Klock preparing Valtech’s brief and Jeff Bast arguing on behalf of Valtech before the Court of Appeals, Fifth District of Texas at Dallas, in February 2020. On October 28, 2020, the Court of Appeals issued a 19-page opinion affirming the trial court’s judgment.
Case: Valtech Services, Inc. v. Cornerstone Staffing Solutions, Inc. (consolidated)
Case nos.: DC-16-10346, 116th Judicial District, Dallas County, Texas
DC-17-02424, 116th Judicial District, Dallas County, Texas
05-10-00093-CV, Court of Appeals, Fifth District of Texas at Dallas
Filing date: August 22, 2016
Judgment date: December 19, 2018
Judge: Hon. Tonya Parker, 116th Judicial District Court
Appellate Panel: Justices Robbie Partida-Kipness, Erin A. Nowell, and David Evans
Plaintiff’s attorneys: Jeffrey P. Bast, Lissette M. Carreras, Zakarij N. Laux (now an Assistant U.S. Attorney), and Peter J. Klock, II of Bast Amron LLP, Miami with Michael McCabe and Sarah Lopano of Munck Wilson Mandala, LLP, Dallas
Defendant’s attorneys: Todd Harlow, Helen Hutton, Dorlin Lafer-Sousa, and Nina Valdez, Cowles and Thompson, Dallas
Details: Valtech Solutions, Inc., headquartered in Plano, Texas, is a provider of digital marketing and technology services to large and established global businesses. For 25 years, Valtech has served its customers by designing, building, and transforming its customers’ digital presence. In 2010, Valtech acquired a small information technology temporary staffing company in Texas. In 2015, Valtech sold the staffing assets and contracts to Cornerstone Staffing Solutions, Inc. Cornerstone is a national staffing company with over $100M per year in revenues and is headquartered in Pleasanton, California. The total purchase price of 4.2x EBITDA included $1.9M cash at closing, with a payment adjustment due and owing six months post-closing. When the earn-out payment came due, Cornerstone refused to pay or even discuss it. Valtech hired Bast Amron to bring suit.
Plaintiff’s case: Valtech claimed Cornerstone wrongfully refused to make the payment due under the parties’ asset purchase agreement. Valtech sued for damages in the amount of the payment, for its attorneys’ fees in connection with enforcing the agreement, and for declaratory judgment affirming its right to offset payments received from its former customers against the payment owed by Cornerstone. During the litigation, Valtech sought extensive sanctions against Cornerstone due to egregious discovery abuses.
Defendant’s case: Cornerstone brought numerous counterclaims based on allegations that Valtech improperly calculated the earnings from which the payment adjustment was to be calculated and withheld information during due diligence, among other things. Nearly one and a half years into the litigation, and only months before trial, Cornerstone amended its claims to allege that Valtech fraudulently induced Cornerstone to enter into the asset purchase agreement.
Outcome: After a series of motions to compel and for sanctions, Valtech obtained numerous wrongfully withheld communications between Cornerstone’s chief executive officer and chief financial officer during the due diligence period preceding the sale. Among those wrongfully withheld emails were communications discussing financial statements which Cornerstone alleged Valtech had fraudulently withheld from Cornerstone during the due diligence period. In a dramatic moment during the first trial, Cornerstone’s CEO admitted under cross-examination that he had been in possession of the financial statements all along, though he had previously testified in trial and deposition that Valtech had fraudulently withheld them.
At the conclusion of the first trial, Valtech obtained a directed verdict for $150,000, and the jury returned a verdict for an additional $1.2M on Valtech’s claim for the earn-out payment, which, as requested by Valtech, was offset by the former customers’ funds received by Valtech.
Following the first trial, the court awarded Valtech $25,000 in sanctions in a scathing 8-page order which noted that the “wrongfully withheld communications and documents were of critical relevance to this matter,” and stated, “Prior to Cornerstone turning over the wrongfully withheld discovery, Valtech would have had considerable difficulty proving that Cornerstone was in possession of the documents it claimed Valtech withheld during due diligence, and Cornerstone stood to gain as much as $1,900,000, plus its reasonable attorneys’ fees, in connection with its misrepresentation and fraud claims. Had Valtech not pursued the production of the wrongfully withheld discovery through several motions and four hearings, Cornerstone likely would have successfully concealed the existence of that discovery.”
Following the second trial, in which Cornerstone unsuccessfully pursued its fraud claims against Valtech, final judgment was entered in favor of Valtech, including $717,000 in net damages, $85,000 in prejudgment interest, $25,000 in sanctions, $1.6M in attorneys’ fees, $41,000 in costs, $211,000 in litigation expenses, and a contingent award of an additional $350,000 in attorneys’ fees in the event of unsuccessful appeals by Cornerstone.
Cornerstone took an appeal from the trial court’s judgment, arguing that Valtech failed to satisfy Cornerstone’s interpretation of the conditions precedent to the earn-out provision. Valtech, for its part, explained that it had satisfied the condition precedent and that the jury came to the same conclusion based on ample evidence. Following oral argument, the Court of Appeals, Fifth District of Texas at Dallas, issued a 19-page opinion affirming the judgment, rejecting Cornerstone’s interpretation of the earn-out provision, and holding that Valtech’s interpretation “is in harmony with the rest of the parties’ agreement.” Inclusive of pre-and post-judgment interest and appellate attorneys’ fees, Valtech’s judgment against Cornerstone exceeds $3 million.
Click here to listen to the oral argument.