Texas Case Law

FORMOSA v. KAJIMA, 13-02-385-CV (Tex.App. [13th Dist.]
13-02-385-CV. Court of Appeals of Texas, Thirteenth
District, Corpus Christi — Edinburg. Delivered and
filed December 28, 2006.

On appeal from the 135th District Court of Calhoun County,

Before the Court EN BANC Opinion on REHEARING EN BANC.


ROGELIO VALDEZ, Chief Justice.

Appellee, Kajima International, Inc. (“Kajima”), moved for
rehearing en banc of this Court’s opinion issued November
10, 2004, in which the Court concluded that Formosa
Plastics Corp., USA (“Formosa”) met its burden to
disqualify A.W. “Chip” Hutchison, Kajima’s expert witness,
on the basis that Hutchison’s colleague, Steven Huyghe,
previously consulted with Formosa. Formosa Plastics Corp.,
USA v. Kajima Int’l, Inc., No. 13-02-00385-CV, 2004 Tex.
App. LEXIS 9950, *15 (Tex.App.-Corpus Christi Nov. 10,
2004, no pet. h.). The Court reversed the judgment and
remanded the matter for a new trial with directions that
Hutchison and others from his firm would not be permitted to
testify. See id. at *20. Justice Castillo’s dissenting
opinion concluded that Formosa had waived the
side-switching issue, and would have affirmed the judgment
of the trial court. Id. at *83 (Castillo, J., dissenting).

The Court has granted rehearing en banc. We withdraw our
original opinion and judgment issued on November 10, 2004,
and issue this opinion and accompanying judgment in their
stead. On rehearing, we conclude that Formosa failed to
meet its burden of proof to disqualify Hutchison, and we
affirm the judgment of the trial court.

I. Background

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. The general terms and conditions common to all
contracts permitted Kajima to work overtime only if Kajima
or its subcontractors delayed the work, and, in such an
event, Kajima received no additional compensation for the

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 its fraudulent inducement of extra-contractual work.
According to Kajima, the engineering drawings for its work
at the polypropylene plant were full of errors and
inaccuracies, yet Formosa knowingly misrepresented the
quality of the design drawings for the project during the
bidding process. Kajima asserts 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 asserts 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, and at the same time, as that planned
by Kajima, thus preventing Kajima from executing its
responsibilities under the contracts. 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 trial court subsequently rendered
judgment for Kajima for $4,491,066.65. Kajima appealed, and
this Court reversed and remanded the case for a new trial.
Kajima Int’l Inc. v. Formosa Plastics Corp., USA, 15 S.W.3d
289, 294 (Tex.App.-Corpus Christi 2000, pet. denied).

The case was tried again in 2002. Kajima nonsuited Formosa
Texas and 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% 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. This appeal ensued. Formosa raises
nine issues on appeal.

II. Expert Disqualification

We will first address Formosa’s third issue on appeal, that
is, the expert disqualification issue which the Court found
determinative of the appeal in its original opinion.
Formosa alleges that Kajima’s expert, A. W. “Chip”
Hutchison, should not have been permitted to testify.
Formosa first argues 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 contends that
the firm of A. W. Hutchison & Associates, Inc. served as
Formosa’s “consulting” experts and Formosa satisfied all
requirements to disqualify the firm and Chip Hutchison. In
contrast, Kajima contends that any information Formosa
provided to Hutchison’s colleague, Steven Huyghe, was
discoverable and not confidential, and no confidential
information was shared with Hutchison or Huyghe. Kajima
further asserts that, even if confidential information was
disclosed to Huyghe, that knowledge could not be imputed to
Hutchison. The factual background regarding this matter is
critical to understanding and properly analyzing this

When the question of litigation with Kajima first
originated, Formosa retained the law firm of Jones, Day,
Reavis & Pogue (“Jones Day”). Counsel for Jones Day
contacted Huyghe, an expert in heavy industrial
construction and president of A.W. Hutchison & Associates of
California, Inc. Huyghe and an assistant met with attorneys
from Jones Day and in-house counsel for Formosa. They spoke
about “strategies for this case and what kind of defense we
ought to establish,” and “what the contentions were that
Kajima had against Formosa and how we were going to answer
some of those allegations.” They further discussed Kajima’s
allegations against Formosa and which allegations might be
true or were not true. Huyghe was to assist in document
review and organization in order to “see what we had.” The
Formosa attorneys never requested that Huyghe maintain
confidentiality regarding these conversations or documents,
nor did they request that he execute any confidentiality

Huyghe reviewed and organized documents that had been
produced by Formosa to Kajima and documents produced from
Kajima to Formosa. He prepared a work plan outlining his
proposed method for evaluating the situation as well as an
index of relevant documents received from Kajima.

Huyghe sent several letters to Jones Day and copied some of
those letters to Hutchison, his colleague at A. W.
Hutchison & Associates, Inc., in Atlanta, a separate but
related corporation from that which employed Huyghe.[fn1]

The first of these letters, dated June 14, 1993, discussed
the consulting group’s “possible involvement” in the
litigation, provided examples of prior work, and mentioned
that Hutchison was available for a meeting “if you so
desire.” A letter dated October 19, 1993, discussed what
A.W. Hutchison & Associates had done for clients in the past
and explained the methodology usually employed to evaluate
problems. This letter was marked as “privileged and
confidential.” Huyghe also provided a letter agreement for
the engagement of the group and included a proposed
confidentiality agreement, which Formosa’s attorneys never

In late 1993, Formosa transferred its defense from Jones
Day to the law firm of Porter & Hedges. The Porter & Hedges
attorneys received Huyghe’s proposed work plan and the
index of documents from Kajima, but decided not to employ
Huyghe’s services. On April 6, 1994, Porter & Hedges told
Huyghe to consider himself “indefinitely on hold.” By this
point, Huyghe had submitted bills totaling approximately
$22,000 for more than 167 hours of work. On April 15, 1994,
Huyghe contacted Porter & Hedges and, detailing his group’s
work on prior cases, requested an opportunity to meet with
Formosa’s attorneys to present his thoughts on the case.
Porter & Hedges failed to accept this invitation.

A few months later, Kajima’s attorney approached Huyghe
about consulting with Kajima in the lawsuit. Huyghe
informed the attorneys at Jones Day, who suggested
contacting Porter & Hedges about this possibility and any
potential conflicts of interest. Apparently Huyghe did not
contact the new attorneys. Huyghe did sign a “conflict
certification” affidavit provided by Kajima, in which he
certified that “A.W. Hutchison & Associates, Inc., has not
received any confidential information from any Formosa
entity or from its counsel.” Kajima did not hire Huyghe;
however, it did hire both Chip Hutchison and Brian Rogers
of A.W. Hutchison & Associates, Inc. in Atlanta, Georgia.

At the trial, Huyghe testified that he had not received
any confidential information from Formosa. In contrast, an
attorney for Jones Day testified that she had revealed
confidential information, including settlement strategies,
to Huyghe. Nevertheless, Jones Day admitted that it had not
made a determination regarding whether Huyghe would be
utilized as a testifying expert.

Huyghe testified that he had never discussed any
Formosa-related information with Hutchison or Rogers.
Counsel for Jones Day testified that the lawyers at the
firm had no communications with Hutchinson or Rogers, did
not disclose any information to Hutchinson or Rogers, and
knew of no confidential information that was ever disclosed
from Formosa to Hutchinson or Rogers. Counsel also knew of
no contact with Jones Day and Hutchinson in Atlanta.
Hutchison himself testified that he had no knowledge of any
Formosa-related information known to Huyghe.

On the basis of this lack of disclosure, the trial court
denied Formosa’s motion to disqualify Hutchison and Rogers
from testifying, and the jury subsequently awarded a
verdict in favor of Kajima.

The chief issues before this Court are: (1) what guidelines
should have framed the trial court’s decision whether to
disqualify Hutchison and A. W. Hutchison and Associates
(“AWH”); and (2) whether the trial court’s decision was
properly executed within those guidelines. Any question
about an expert’s breach of his or her duties, fiduciary or
otherwise, to a former client is not at issue here.
Likewise, the hypothetical question of whether Huyghe
should have been disqualified is not before the Court, nor
is the hypothetical question of whether disqualification
and other sanctions would have been appropriate if
Hutchison and Huyghe were lawyers and not engineering

We write separately on this issue on rehearing en banc for
the following reasons. The Court’s dissenting opinion on
rehearing adopts the two-part expert disqualification test
outlined in Koch Ref. Co. v. Jennifer L. Boudreaux MV, 85
F.3d 1178, 1181 (5th Cir. 1997). While we do not disagree
with the dissent’s utilization of this test, and, in fact,
would apply the same basic test with additional factors
utilized by other courts, we diverge from the dissent
insofar as it concludes that Formosa met its burden for
disqualification under this standard. That is, the dissent
states that it was objectively reasonable for Formosa to
believe that it had a confidential relationship with
Hutchison and confidential information was disclosed to
Hutchison. We conclude otherwise. The concurring opinion on
rehearing asserts that Formosa waived its right to seek
disqualification of Hutchison and AWH because Formosa
failed to assert a claim of confidentiality over
information imparted to Huyghe, and would affirm the
judgment below. Rather than finding waiver, as does the
concurrence, we conclude simply that Formosa has failed to
meet its initial burden to show that disqualification is

Thus, we turn to the issue currently before the Court, that
is, the disqualification of a non-attorney expert witness
based on another expert’s work for the opposing party. We
will also examine the expert’s contacts with the opposing
party in the litigation. While the issue of expert
disqualification in terms of an expert’s relationship with a
law firm has been tangentially discussed in opinions by the
Texas Supreme Court and other appellate courts, the issue
at hand is one of first impression. See, e.g., In re Am.
Home Prods. Corp., 985 S.W.2d 68, 73 (Tex. 1998) (orig.
proceeding) (considering disqualification of counsel for
plaintiffs because of their retention of testifying expert
who had previously worked as consulting expert for
defendant in the same litigation); In re Bell Helicopter,
87 S.W.3d 139, 151 (Tex.App.-Fort Worth 2002, orig.
proceeding) (considering disqualification of law firm
because of its retention of consulting expert who had
previously worked for defendant in the same litigation).
More specifically, the issues of first impression we must
address are: (1) whether an expert should be disqualified
where he was retained by one side but was somehow related
to an expert previously retained by the opposing party; and
(2) whether the entire firm of experts to which both of
these experts belong should be disqualified.

We first must decide the appropriate standard of review. In
general, we review the trial court’s decision to admit or
exclude expert evidence for an abuse of discretion. State
Farm Fire & Cas. Co. v. Rodriguez, 88 S.W.3d 313, 318
(Tex.App.-San Antonio 2002, pet. denied); see
Guadalupe-Blanco River Auth. v. Kraft, 77 S.W.3d 805, 810
(Tex. 2002).

We see no reason not to apply this standard herein even
though this matter turns not on qualifications or
reliability, but rather on an alleged conflict of interest.
We reverse based on the erroneous admission or exclusion of
evidence only if the appellant shows error that was
calculated to cause and probably did cause the rendition of
an improper judgment. Tex. R. App. P. 44.1(a); City of
Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex. 1995);
Doncaster v. Hernaiz, 161 S.W.3d 594, 601 (Tex.App.-San
Antonio 2005, no pet.) (“error on questions of evidence is
generally not reversible unless the appellant can show that
the whole case turns on the particular evidence admitted or
excluded”). We note that disqualification is a drastic
measure that courts should impose only “hesitantly,
reluctantly, and rarely.” Owen v. Wangerin, 985 F.2d 312,
317 (7th Cir. 1993); Koch Ref. Co., 85 F.3d at 1181;
Hewlett-Packard Co. v. EMC Corp., 330 F. Supp. 2d 1087,
1092 (N.D.Cal. 2004); United States v. Salamanca, 244 F.
Supp. 2d 1023, 1025 (D.S.D. 2003); Proctor & Gamble Co. v.
Haugen, 184 F.R.D. 410, 413 (D. Utah 1999); Palmer v.
Ozbek, 144 F.R.D. 66, 67 (D. Md. 1992).

When disqualification based on a prior relationship with an
adversary is requested, the majority of courts have adopted
a two-prong test which balances the competing interests of
the parties. See W. Va. ex rel. Billups v. Clawges, 620
S.E.2d 162, 167, 218 W. Va. 22 (2005) (collecting cases);
In re Mitchell, 981 P.2d 172, 175 (Colo. 1999). Under the
test, 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. See Koch Ref. Co., 85 F.3d at 1181;
Hewlett-Packard Co., 330 F. Supp. 2d at 1093.[fn2] In the
usual case, both factors must be present to merit
disqualification. See Hewlett-Packard, 330 F. Supp. 2d at
1093 (explaining that if only one of the factors is
present, disqualification is likely inappropriate). Other
courts also apply additional factors, sometimes generally
spoken of in such general terms as “fundamental fairness”
and “prejudice.” These courts consider and weigh competing
policy considerations, whether disqualification would be
fair to the affected party or would be unduly prejudicial,
whether disqualification would promote the integrity of the
judicial process, and whether the public has an interest in
allowing or not allowing the expert to testify. See Grioli
v. Delta Int’l Mach. Corp., 395 F. Supp. 2d 11, 13
(E.D.N.Y. 2005) (citing cases); Hewlett-Packard Co., 330 F.
Supp. 2d at 1094-95 (citing cases). As stated in

It is important to consider other policy concerns in order
to achieve the goal of protecting the integrity of the
adversary process and of promoting public confidence in the
legal system. Such concerns include consideration of the
parties’ strategic positions . . . and avoidance of
creating `troublesome incentives for both experts and the
retaining party.’ For example, if experts are permitted to
breach confidentiality agreements, they might be motivated
`to sell their opinions to the opposing parties or the
highest bidder without concern about the potential
confidentiality of their previous consultations.” The
retaining party might be motivated `not to withdraw a
previously designated expert while litigation is pending
for fear that the party’s confidential information would
become available to its adversary.’ However, if `experts
are too easily disqualified, unscrupulous attorneys may
attempt to create relationships with numerous potential
experts at a nominal fee hoping to preempt the ability of
their adversaries to obtain expert assistance.’

Hewlett-Packard Co., 330 F. Supp. 2d at 1095 (internal
citations omitted).