Translation Sanctions Vacated against Company for Attorney’s Misconduct in Contract Translation Dispute

Trial Court Found Attorney Misrepresented Facts Regarding a Certified Spanish to English Contract Translation

Legal translation services and accurate certified translations of international contracts and agreements play an important role in international business transactions. Attorneys involved in international negotiations are always looking for ways to minimize conflicts, discrepancies, and litigation. The below Texas case – In Re Kellogg Brown & Root, LLC, Relator, No. 01-23-00233-cv (Ct of Appeals TX, 1st Dist) 2024 WL 1260280 (March 26, 2024) – is an example of the issues that can develop between parties to a business transaction that negotiated an international contract involving Spanish to English certified contract translation services.

In a mandamus proceeding, engineering and IT company KBR challenged a Texas trial court’s decision to sanction it due to its attorney’s conduct. The trial court found that KBR’s counsel intentionally misrepresented facts regarding a certified Spanish to English contract translation in a dispute with a Mexican construction firm. Specifically, the court found that KBR’s attorney, despite not being fluent in Spanish, instructed the translation company to alter the certified Spanish to English translation to better align with KBR’s defense strategy and then misrepresented this action to the court.

The trial court deemed this behavior egregious and intentional, aiming to bolster KBR’s case. The trial court imposed sanctions on KBR due to its counsel’s conduct, including a requirement that the disputed agreement be referred to as a “Joint Venture Agreement” throughout the remainder of the litigation. Ultimately, it was deemed that the trial court abused its discretion in sanctioning KBR for its counsel’s actions. As a result, KBR’s mandamus petition was granted because it lacked an adequate remedy through appeal.

What Led to the Dispute?

In 2019, a subsidiary of Mexico’s national oil company planned to build a refinery project in Mexico. KBR and Hosto jointly bid for part of the project that consisted of two phases: Phase I for preliminary work and Phase II for actual construction. They signed agreements designating KBR as lead for Phase I and Hosto for Phase II. The oil company awarded the companies the Phase I work and they signed various contracts including a Prime Contract for Phase 1. However, Hosto later sued KBR for fraud and breach of fiduciary duty, alleging KBR falsely represented its ability to complete both phases. Hosto claimed KBR’s actions caused financial losses.

Spanish to English Translation of a “Convenio de Asociación” as “Association Agreement” by One Party and as a “Joint Venture Agreement” by The Other Party

KBR filed a motion to dismiss, citing clauses in contracts limiting liability and disclaiming joint venture status. The translation of a “Convenio de Asociación” became contentious, as KBR referred to it as “Association Agreement,” while Hosto called it a “Joint Venture Agreement.” KBR argued that Hosto’s breach of fiduciary duty claim was barred by the disclaimer language in another agreement called the “Teaming Agreement,” which denied the existence of a joint venture. Hosto disputed this claim, denying that the disclaimer language was attached to the “Convenio de Asociación.”

After the trial court denied KBR’s amended motion to dismiss, KBR filed a no-evidence and traditional motion for summary judgment, reiterating arguments made previously, including the assertion that Hosto’s breach of fiduciary duty claim was barred by the disclaimer language in the Teaming Agreement. KBR also argued that Hosto’s constructive fraud claim was a rephrasing of the breach of fiduciary duty claim. Hosto objected to the Spanish to English certified translation of the Prime Contract attached to KBR’s summary judgment motion, noting differences from the certified English translation provided previously. KBR admitted to using a new translation, claiming it was consistent with the translation of the “Convenio de Asociación.” The trial court sustained Hosto’s objection, ruling that KBR must use the original certified translation. Hosto further objected, alleging a fraudulent affidavit was filed with the new Spanish to English translation. KBR’s counsel initially claimed a new certification had been sent to Hosto, but later acknowledged it had not been sent. Subsequently, KBR obtained a certificate of accuracy for the new translation from the translator and withdrew the one in the trial exhibits.

Hosto filed a “Motion for Death Penalty Sanctions for Fraud on the Court” after the summary judgment hearing, seeking to strike KBR’s pleadings. Hosto accused KBR of manufacturing evidence by altering certified Spanish to English translations and asserted that KBR’s counsel had lied to the court to conceal fraudulent conduct. Hosto claimed that KBR had not disclosed that a new English translation of the Prime Contract was used in its summary judgment motion, which differed from the original English translation. Hosto provided the declaration of its counsel, stating that a representative of the translation company revealed to Hosto that KBR’s counsel had instructed it to make changes to the translation. KBR denied fraudulent conduct, explaining that new information prompted the request for a new translation. KBR argued that it did not provide the annexes to the Prime Contract to the translator during the initial translation process. Additionally, KBR stated that during a deposition, a former KBR employee clarified that the term “joint venture agreement” was not included in the Spanish version of the Prime Contract. KBR’s counsel declared that they sought the translation before receiving the annexes, which caused the discrepancy.

During the sanctions hearing, the trial court emphasized the importance of determining whether the term “Convenio de Asociación” referred to a “Joint Venture Agreement” or an “Association Agreement.” If it was not a joint venture, then Hosto’s claims of breach of fiduciary duty would fail. The trial court ultimately granted Hosto’s motion for sanctions, finding KBR’s counsel’s conduct intentionally aimed at strengthening KBR’s case by instructing the translation company to change “joint venture agreement” to “Association Agreement.”

The trial court, while acknowledging the merit of striking KBR’s pleadings, opted against it due to current case law constraints. Instead, it imposed sanctions including requiring the parties to refer to the agreement as “A Joint Venture Agreement,” denying KBR’s various motions and closing discovery. KBR’s new counsel highlighted the restriction’s broad scope, hindering procedural motions. The trial court clarified that only substantive motions were prohibited, leaving procedural motions and the possibility of a writ of mandamus unaffected. KBR petitioned for a writ of mandamus to require the trial court to overturn its sanctions order.

Mandamus Relief

In its mandamus petition, Hosto argued that KBR waived its right to challenge the Translation Sanction by not disputing two of the trial court’s findings, which Hosto claims constituted an evidentiary ruling. These findings pertained to the use of certified translations and the timeliness of objections under Texas Rule of Civil Evidence 1009 which reads:

Translating a Foreign Language Document

(a) Submitting a Translation. A translation of a foreign language document is admissible if, at least 45 days before trial, the proponent serves on all parties: (1) the translation and the underlying foreign language document; and (2) a qualified translator’s affidavit or unsworn declaration that sets forth the translator’s qualifications and certifies that the translation is accurate.

(b) Objection. When objecting to a translation’s accuracy, a party should specifically indicate its inaccuracies and offer an accurate translation. A party must serve the objection on all parties at least 15 days before trial.

(c) Effect of Failing to Object or Submit a Conflicting Translation. If the underlying foreign language document is otherwise admissible, the court must admit-and may not allow a party to attack the accuracy of-a translation submitted under subdivision (a) unless the party has:(1) submitted a conflicting translation under subdivision (a); or (2) objected to the translation under subdivision (b).

(d) Effect of Objecting or Submitting a Conflicting Translation. If conflicting translations are submitted under subdivision (a) or an objection is made under subdivision (b), the court must determine whether there is a genuine issue about the accuracy of a material part of the translation. If so, the trier of fact must resolve the issue.

(e) Qualified Translator May Testify. Except for subdivision (c), this rule does not preclude a party from offering the testimony of a qualified translator to translate a foreign language document.

(f) Time Limits. On a party’s motion and for good cause, the court may alter this rule’s time limits.

(g) Court-Appointed Translator. If necessary, the court may appoint a qualified translator. The reasonable value of the translator’s services must be taxed as court costs.

Hosto asserted that these findings, in conjunction with others, supported the trial court’s conclusion that KBR’s counsel engaged in misconduct regarding the Spanish to English translation. However, the appeals court disagreed, explaining that these findings do not independently justify the Translation Sanction. Even if they did, the Translation Sanction’s scope extends beyond just the Second Translation, impacting KBR’s use of previously certified translations as well. Therefore, the appeals court rejected Hosto’s argument that KBR waived its right to challenge the Translation Sanction.

The appeals court explained that mandamus relief is considered an extraordinary remedy, and to obtain it, the KBR had to demonstrate that the trial court clearly abused its discretion. This abuse occurs when the court acts arbitrarily or disregards established rules or principles. Additionally, KBR had to show that there is no adequate remedy available through the normal appeals process. Whether an abuse of discretion can be adequately addressed through appeal depends on weighing the costs and benefits of interlocutory review.

Were the Sanctions Appropriate?

The trial court may impose sanctions against a party or their attorney based on rule, statute, or inherent authority. When specific conduct is not covered by a rule or statute, the court’s inherent authority allows it to discipline bad faith abuses of the judicial process. However, sanctions imposed under inherent authority must adhere to principles of due process and be just.

To determine whether or not a sanction is just, the appeals court explained that Texas courts use a two-prong test established in TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913 (Tex. 1991). The first prong assesses the relationship between the conduct and the sanction, requiring a direct nexus between the offensive conduct, the offender, and the sanction. Sanctions must be directed against the abuse and aim to remedy the prejudice caused to the innocent party, while also being imposed on the true offender. If evidence shows that offensive conduct is attributable solely to counsel, sanctions may be exclusively against the attorney. The second prong ensures that sanctions are not excessive and must fit the severity of the offense. They should be no more severe than necessary to achieve legitimate purposes like securing compliance with rules, punishing violators, and deterring future misconduct.

Unjust Sanctions

KBR argued that the trial court’s sanctions were unjust because they were not directed at the true offender, attributing the offensive conduct solely to its counsel. The trial court’s findings detailed counsel’s intentional and egregious conduct, including instructing the translation company to change the term “joint venture agreement” in the Prime Contract’s translation to “association agreement.” Despite counsel’s knowledge of the need for a new certificate of accuracy for the second translation, it was attached to the motion for summary judgment with the certificate from the first translation, and counsel represented to the court that an updated certificate was attached. Additionally, counsel’s declaration misrepresented a statement from the translation company’s representative by omitting a crucial portion, which the trial court deemed a material omission. Notably, the trial court’s findings implicated only counsel in the misconduct, not KBR.

While appellate courts are not bound by trial court findings, they must independently review the record to determine if the trial court abused its discretion. Hosto argued in its mandamus response that KBR’s in-house counsel’s attendance at hearings and depositions suggests KBR’s involvement in the misconduct. However, Hosto provided no additional support or explanation for this assertion. Hosto also pointed to a KBR corporate representative’s deposition testimony, where the representative did not recall specific terms in the contract, suggesting KBR’s awareness of the forthcoming second translation. Despite this, the record indicated the second translation was prepared after the KBR representative’s deposition, which raised questions about KBR’s direct involvement in the offensive conduct.

According to the appeals court, the representative’s testimony did not implicate KBR in its counsel’s conduct of instructing the translator to change the translation. The testimony merely indicated his lack of recollection regarding specific terms in the contract, offering no support for implicating KBR in its counsel’s actions. Additionally, emails between the translation company’s representative and counsel’s paralegal did not provide evidence of KBR’s involvement in directing the translator to change the translation. The context of the emails did not support such a conclusion, and counsel’s later explanation for seeking the second translation demonstrated her decision-making and actions, not KBR’s.

The appeals court reasoned that while an attorney-client relationship does not absolve a client of responsibility for its attorney’s misconduct, a party should not be penalized for conduct in which it is not directly implicated apart from entrusting its legal representation to counsel. Neither the trial court’s findings nor an independent review of the record implicated KBR in any sanctionable conduct by its counsel. As such, the first prong of the TransAmerican test requiring a direct nexus between the offensive conduct, the offender, and the sanction imposed was not satisfied. Therefore, the trial court abused its discretion in sanctioning KBR.

Adequate Remedy by Appeal

KBR met the first requirement for mandamus relief by demonstrating that the trial court abused its discretion. The appeals court then assessed whether or not KBR had an adequate remedy by appeal to challenge the sanctions order. The adequacy of a remedy by appeal is not precisely defined and depends on various factors, including the circumstances of the case. The appeals court explained it is a nuanced determination that requires analysis of principles rather than rigid rules or categories.

1. Translation Sanction

KBR argued that the Translation Sanction severely undermined its ability to defend against Hosto’s assertion that the “Convenio de Asociación” constituted a joint venture agreement. The sanction restricts KBR from referring to the agreement in any way other than as a “Joint Venture Agreement.” This limitation hampers KBR’s ability to present evidence, cross-examine witnesses, and make arguments in a meaningful way, significantly compromising its defense strategy. Hosto contended that the sanction merely restored the status quo before KBR obtained the Second Translation and does not impede its ability to defend against Hosto’s claims. However, the Translation Sanction went beyond reverting to the First Translation and significantly impacted KBR’s defense by restricting its ability to present evidence and challenge Hosto’s claims effectively. Therefore, KBR lacked an adequate remedy by appeal for the Translation Sanction, as it severely compromised its defense against Hosto’s causes of action.

2. Sanctions Denying Motions

KBR argued that the trial court’s denials of its motions for summary judgment, to strike Hosto’s fourth amended petition, and to exclude Hosto’s damages experts were sanctions, not substantive rulings on the motions’ merits. The trial court’s order explicitly listed the denials of these motions as sanctions. Considering the balance of benefits and detriments, the appeals court ruled that KBR lacked an adequate appellate remedy to challenge these sanctions because it has a right to substantive rulings on its motions, which could potentially avoid the need for a trial. Granting mandamus relief would preserve KBR’s right to a ruling on its motions, allowing the trial court to assess the merits of the motions.

3. Sanction Prohibiting Additional Motions

The trial court also imposed a sanction on KBR by prohibiting it from filing further motions for summary judgment, motions to strike experts, or motions that rehash matters ruled upon in the sanctions order. KBR argued that there is no adequate remedy by appeal for this sanction, citing the precedent set in Kahn v. Garcia, where a similar sanction was deemed unjust because it effectively denied the party the means to communicate with the court and preserve appellate error. The court held that such a sanction deprived the party of an adequate remedy by appeal. Similarly, in KBR’s case, this sanction would hinder its ability to challenge Hosto’s damages experts at trial, thus impeding its ability to preserve error for appeal. Therefore, the court concluded that KBR also lacked an adequate appellate remedy for this sanction.

4. Sanction Closing Discovery

The trial court’s statement in the sanctions order, “Discovery in this case is now closed,” is disputed by the parties. KBR argues that it constituted a sanction closing discovery, while Hosto claims it was merely a statement acknowledging that discovery had already been closed. Despite Hosto’s assertion that discovery had been closed two months prior as per the docket control order, the literal interpretation of the sanctions order suggests that the trial court indeed sanctioned KBR by closing discovery. This sanction may have been intended to prevent KBR from filing a motion to reopen discovery, as it would have been subject to the final sanction prohibiting motions that rehash matters ruled upon by the court. However, regardless of the intention behind the sanction, its effect would disallow discovery that could never become part of the appellate record, thus depriving the appellate court of the ability to assess the impact of the trial court’s error. As a result the appeals court found that KBR lacked an adequate appellate remedy for this sanction as well.

KBR’s request for a writ of mandamus was granted. The trial court was directed to revoke its sanctions order.

Ger in touch with the legal translation services, Apostille services and deposition interpreting company All Language Alliance, Inc. to obtain certified translation of international contracts from Spanish to English and to hire English to Spanish court-certified interpreters for on-site depositions and for remote video depositions via Zoom; and to retain English to Spanish arbitration interpreters for international arbitration.

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