The Houston [1st] Court of Appeals has upheld a trial court’s sanctions against a New York lawyer for filing a bad faith suit to enjoin the merger of two energy companies in order to extort a settlement.
Dr. Robert Corwin, Richard B. Brualdi, and the Brualdi Law Firm, P.C. v. Exxon Mobil Corporation (No. 01-24-00207-CV; March 31, 2026) stemmed from Exxon’s 2024 acquisition of Pioneer Natural Resources. Dr. Corwin, a Pioneer shareholder, sued to enjoin the closing of the deal, alleging violations of the Texas Securities Act and negligent misrepresentation. Brualdi and his firm (located in New York City) served as Plaintiff’s counsel. After a hearing five days before the scheduled closing, the trial court denied Plaintiff’s petition for an emergency temporary injunction. Subsequently, Plaintiff filed a notice to nonsuit his claims without prejudice, which the trial court granted. Exxon moved for sanctions against Brualdi, asserting that the trial court had power to sanction him under Chapter 10, CPRC, and TRCP 13 on the basis that Brualdi’s request for a TI was groundless and filed in bad faith and for an improper purpose.
Exxon characterized the case as a “merger tax lawsuit,” that is, a lawsuit filed a short time before a shareholder vote in hopes that the company will pay a settlement under the remote threat of an injunction. Put another way, a merger tax lawsuit is a form of extortion. Exxon’s counsel further testified that Brualdi was an expert in this tactic and that $425,000 was his going rate. Brualdi tried to talk around the inconvenient $425,000 elephant in the room, drawing this response from the trial court: “It is my job to judge credibility as well. You can dance around this issue. The more you dance around the issue, the less credible I find you; and that goes to any fact findings that I would do.” In its motions for sanctions, Exxon introduced evidence of more than 70 stockholder suits filed by Brualdi in various jurisdictions, most of which had been voluntarily dismissed. It also pointed to two opinions, one in Delaware and the other in New York, harshly admonishing Brualdi from bringing these types of suits. The trial court granted Exxon’s motion and awarded $59,861.19 in attorney’s fees and $10,000 to the Harris County treasurer. Brualdi appealed.
In an opinion by Justice Guiney, the court of appeals affirmed. Brualdi argued that the trial court abused its discretion in levying sanctions under Chapter 10 and Rule 13 because neither he nor his firm signed the TI motion. The trial court determined that Brualdi had “electronically signed” the petition in violation of the statute and rule. Here Plaintiff’s local counsel actually signed the petition, but Brualdi’s name and the name of his firm appeared in the signature block. The court didn’t need to reach the signature issue, however, because it concluded that the trial court had inherent authority “to sanction [Brunaldi] for bad faith abuse of the judicial process not covered by rule or statute” (citations omitted).
Assuming no rule or statute applied, the question became whether Brualdi acted in “bad faith.” Exxon bore the burden of overcoming the judicial presumption that pleadings and other documents are filed in good faith, which it did by “establishing that Brualdi acted in bad faith by attempting to enjoin the merger between Exxon Mobil and Pioneer for the purpose of extracting a settlement offer.” As Exxon’s counsel pointed out, he had litigated “numerous prior cases against Brualdi” without regard to “transaction or jurisdiction,” including suits in at least eight states. These suits were of the “cookie cutter” variety, “filed on behalf of a single stockholder or a small number of stockholders who hold a de minimis number of shares of one of the companies involved in the transaction (usually the target company).” They contain the same allegations and are designed to “put[] the defendants in a spot in which settling a meritless lawsuit is the least-worst option,” given that delaying a merger causes “severe fluctuations in the stock price” of the companies and “could introduce other risks and uncertainties to the transaction.” Counsel pointed out further that in those cases in which the company strikes back, “Brualdi almost always quickly nonsuits his frivolous claims after his request for a temporary injunction or restraining order is denied.”
Brualdi contended that the trial court could not “impose sanctions about activity in unrelated matters in other states.” But, as the court pointed out, those matters constituted “evidence of his motive in this case,” not any of the others. “A trial court may,” the court stated, “properly consider evidence of misconduct in other litigation” when determining bad faith (citations omitted). It may further “infer bad faith from circumstantial evidence.” In this case, the trial court did not abuse its discretion by sanctioning Brualdi under its inherent authority.
It’s somewhat unusual to see a scam so fully exposed in an appellate opinion, and Exxon cannot be given enough credit for calling it out. If more companies were willing to draw the line in the sand, we might have fewer of them.
