A-Delta Overnight Legal Reproduction Services Corporation v. David W. Elrod, PLLC

• Court: Court of Appeals of Texas
• Decided: October 31, 2012
• Docket: 05-11-00708-CV
• Status: Published

Opinion

REVERSE and RENDER; Opinion issued October 31, 2012

In The uf ppiaIs Fifti iitrict uf Irxwa tt Oa11a No. 05-li -00708-CV

A-DELTA OVERNIGHT LEGAL REPRODUCTION SERVICES CORPORATION DIBIA A-LEGAL COPY & RECORD SERVICES, Appellant

V.

DAVID W. ELROD, PLLC, Appellee

On Appeal from the 95 th Judicial District Court Dallas County, Texas Trial Court Cause No. 09-09815

MEMORANDUM OPINION Before Justices Morris, Francis, and Murphy Opinion By Justice Francis

This case involves competing breach of contract claims between A-Delta Overnight Legal

Reproduction Services Corporation d/b/a A-Legal Copy & Record Services and David W. Elrod,

PLLC. Following a bench trial, the trial court found in Elrod’s favor and awarded it lost profit

damages and attorney’s fees. On appeal, A-Legal contends the trial court erred in (1) awarding lost

profits because Elrod failed to plead and prove such damages, (2) allowing Elrod to reopen the

evidence to allow additional proof regarding lost profits, and (3) awarding attorney’s fees without

evidence of presentment or damages. Because we conclude there was no evidence of lost profits,

we reverse the trial court’s judgment and render a take-nothing judgment on Elrod’s breach of contract claim.

Lirod describes itself as a small trial and litigation law firm .A—l .egal is a company that

provides litigation support services. On January 6. 20(Y), Flrod hired A—Legal to perlbrm electronic

discovery work on the R Project’ and delivered to A—Legal ten computer disks and a box of

documents to begin work. Iwo day’s later. Lirod pulled the job when A—Legal doubled the price it

previously quoted. That night, A-Legal delivered to Firod a hard drive that it contended contained

the requested work. Llrod said the work was performed after it had pulled the job and, regardless,

the drive did not contain the work requested. Five days after pulling the job from A-Legal, Elrod

hired a new vendor to perform the work at a lower price. That same day, A-Legal billed Elrod

$1 5,000 for its work on the project. When Elrocl refused to pay the bill, A-Legal sued for breach of

contract. Elrod counterclaimed for breach of contract, among other things. The contract claim

asserted A-Legal secretly outsourced the work to an unknown and unapproved vendor in violation

of an agreement to perform the work in-house and the work was not performed as requested.

At trial, each side contended the other breached the agreement. A-Legal claimed damages

in the amount of the unpaid bill. Elrod claimed damages from lost revenue and lost business

opportunities in dealing with A-Legal’s breach. Specifically, attorney Susan Nassar, who worked

on the “R Project” and hired A-Legal to perform the discovery work, testi lied at length about the

events that occurred during the two days A-Legal was on the job and, in particular, the various

communications she had with A-Legal representatives. She said that over the two-day period, she

spent ‘a number of hours” dealing with A-Legal on the situation. Nassar said. “once the whole thing

blew up,” she spent an hour in discussions with A-Legal and then trying to determine what to do

with the project. She had to find a new vendor because a discovery deadline was near. On February

2. she hired a new vendor that had been recommended by her paralegal on the day of A-Legal’s breach. (The new vendor charged $600 per gigabyte as compared to the original quote by A—Legal

of $ 1 .000 a iabvte.

Nassar stated that between .January 28 and l”ehruar 2. she spent ten to fifteen hours “dealing

with this situation and said her hourly rate is $325. Those hours were not hilled to the client and

did not include time spent by the paralegal. She believed the time constituted lost revenues to Elrod.

When asked how much time she expended from February 2 until the day of trial “dealing with this

Situation,” Nassar responded that since January 2009, she had spent approximately 65 hours, which

at $325 an hour, was “about $21,000.” She said this also was lost revenue to the law firm: “That’s

time that I could not spend on on other cases and flies.”

When asked on cross-examination whether she believed lost revenue is a recoverable

damage. Nassar testified that at a minimum. I incurred time as a result of your client’s breaching

the contract. call it what you want. It - - those are damages, whether it was just in finding another

vendor, having to deal with the situation. those - - those are damages. and I believe they’re

recoverable.” She also believed “those lost revenue damages” were recoverable as a sanction.

David W. Elrod, managing member and owner of the law firm, testified the firm suffered

$20,000 in damages as a result of A-Legal’s breach. He explained that the $20,000 represented the

“time it took in the firm of Nassar, the paralegals. the staff, all of which was not billable. None of

that could be billed, and none of it’s being charged in this case.” Elrod explained “business is our

time” and he could not use that time “because we’re using it on unproductive matters such as this

that’s being taken up on this.” He reiterated his position on cross-examination. quantifying the loss

as “the time of the people who work for the Elrod firm, their inability to work on other business, lost

business opportunities. because they were having to deal with the breach by A-Legal ofthe contract.”

Elrod said those damages were separate from the attorney’s fees the firm was entitled to for handling the litigation.

At the conclusion ol the evidence, the trial court ruled in Elrod’s flivor and awarded $20,000

in damages. $60J)0() in attorneys fees. and pre— and post—judgment interest. One week later. before

the trial court signed a judgment, Elrod filed a motion to re—open the evidence under Texas Rule of

Civil Procedure 270 to otter additional testimony to clarify “how lost revenue equates to lost

profits.” The trial court granted the motion over A-Legal’s objections.

During a hearing almost three months after the trial ended, Elrod testified that based upon

how his law firm works, “lost profits is identical to lost net profits.” Elrod said the firm had net

profits in 2009 when the breach occurred, as well as in 2007, 2008, and 2010. When asked what he

believed were net profits. Elrod explained. “Our firm has no debt. So net pro [its. to me, is when you

pay all our vendors, you pay all your salaries, including mine, at year end. you have a net amount

of money left that you call net profits. after you’ve made all your obligations and you’ve paid all your

indebtedness, is there a net profit available.” Further, based on how his law firm operates, lost

revenue is lost net profit and “[c]very dollar of that $20,000 ... was profit, pure net profit to the

Elrod law firm.”

The trial court ultimately rendered a written judgment awarding Elrod damages and

attorney’s fees. In findings of fact and conclusions of law, the trial court found that A-Legal failed

to comply with the contract first, refused to perform its contractual obligations, and materially

breached the contract. The trial court further found the breach caused Elrod damages and concluded

Hirod was entitled to recover $20,000 for lost profit damages.

In its second issue. A-Legal argues Elrod failed to present any evidence of lost profits. A

Legal argues that Elrod’s evidence showed lost revenue, not lost profit. and ‘described its lost

revenue damages in terms that don’t meet the proof requirements of lost profits under established law.” \Ve aeree.

When an appellant attacks the legal suliiciencv ol an adverse finding on an issue on which

it did not have the burden of prool. as in this case. it must demonstrate that no evidence supports the

finding. Crouch’r v. Croucher, 660 S.W.2d 55,58 (Tex. 1983). We review the evidence presented

at trial in the light most favorable to the fact-finder’s findings, crediting evidence favorable to that

party if a reasonable fhct-finder could and disregarding evidence unless a reasonable ftict-finder

could not. (Juevura v. Ferrer. 247 S.W.3d 662. 665 (Tex. 2007): (‘i/v of Keller v. Wilson. 168

S.W.3d 802, 822 ([cx. 2005). Anything more than a “scintilla of evidence” is legally sufficient to

support the finding. Con! 1 Co/fee Prods., Co., 937 S.W.2d 444.450 ([cx. 1996). To be more than

a scintilla, the evidence must rise “to a level that would enable reasonable and fair-minded people

to differ in their conclusions.” Transp. ins, Co. v. Moriel, 879 S.W.2d 10, 25 (Tex. 1 994).

Generally. the measure of damages for breach of contract is what restores the inj ured party

to the economic position he would have enjoyed if the contract had been performed. Mood v.

Aronos Prods., inc., 245 S.W.3d 8. 1 2 (Tex. App.—Dallas 2007, pet. denied). This measure may

include reasonably certain lost profits. id. Lost profits are damages for the loss of net income to a

business and, broadly speaking, reflect income from lost business activity, less expenses that would

have been attributable to that activity. Examination Mmt. Svcs., inc. v. Kersh Risk Mgmt., inc., 367

S.W.3d 835, 840 (Tex. App.—I)allas 2012, no pet.). Lost profits may be in the form of direct

damages. that is. profits lost on the contract itself, or in the form of consequential damages, such as

profits lost on other contracts or relationships resulting from the breach. Mood, 245 S.W.3d at 12.

Consequential damages may not he recovered unless they are foreseeable and traceable to the

wrongful act and result from it. Id. Regardless of whether the lost profits are characterized as direct

or consequential damages, the amount of the loss must be shown by competent evidence with reasonable certainty. be based on objective lcts. figures. or data, and he predicated on one complete

calculation. Id. I he calculation of lost profits must he based on net profits, not gross revenues.

Evaininatio,i J,’nii. S’vcs.. 367 S.W.3d at 840.

Initially, we note A—Legal has not challenged whether the damages sought by Elrod were a

foreseeable consequence of’ its breach: consequently. we will assume lost profits would be an

appropriate measure ofdaniage under the circumstances presented here. Given that assumption. our

review of the record nevertheless shows there is not more than a scintilla of evidence that Elrod

suffered reasonably certain business losses resulting from A-Legal’s breach.

Elrod testified to nothing more than a general number of $20,000 as damages, generally

linked that number to the firm’s time spent dealing with the breach, and then said the firm was

prolitable in 2009. the year of the breach, and in the years before and the year after. The only

specific evidence relating to a worker’s time came from Nassar, who testified her hourly rate is $325

and she spent ten to fifteen hours over the course of about six days (from the time Elrod pulled the

job from A—Legal until the time another vendor was hired) dealing with the situation.” Further. she

said since January 2009, she had spent sixty-five hours “dealing with the situation.” Nassar was not

asked, and she did not provide any evidence of, exactly what she did for fifty hours after a new

vendor had been engaged. Regardless, based on the evidence presented, the only calculation that can

be made from the evidence produced by Elrod is potential gross revenue brought in by Nassar. But

no evidence shows Nassar billed less in the year 2009 because of this breach or that but for the

breach she would have billed more. Nor is there any evidence of any particular business that Nassar

would have worked on had she not been dealing with” the A-Legal breach, that the work she would

have done would have been billed to any particular client, or that Elrod would have collected the

amount billed.

—6— Moreover. Elrod made no attempt to establish what expenses would have been attributable

to Nassaf s billable hours. lZlrod S testimony that the Orm netted a prolit in 2009 (and in the years

beibre and the year after) does not constitute proof that every hour Nassar might have billed had she

not been dealing with A-Legals breach would have been net profit. [‘inally, there was no evidence

presented that Elrod lost any specitic business or any business opportunity because of the breach.

Because the only evidence presented was conclusorv and speculative, we conclude there is

no evidence of lost protits. We sustain the second issue. Because Lirod’s attorney’s fee award

depends on the success of its breach of contract claim, we also reverse the award of attorney’s fees.

See TEX. Civ. PRAC. & REM. CODE ANN. § 38.001(8) (West 2008): see also Green In! ‘1, Inc. v. Soils. 951 S.W.2d 384. 390 (Tex. 1997) (explaining that only party who prevails Ofl breach of contract and

recovers damages can recover attorney’s lees). We need not address the remaining issues. See TEx.

R. App. P. 47.1.

We reverse the trial court’s judgment on Elrod’s breach of contract claim and render

judgment that Elrod take nothing on its claim.

MOLLY FRANCIS JUSTICE

I 10708F.P05 (!tuirt uf SppcttEi Fifth Jiwtrirt uf hxa tt tIathts

JUDGMENT A—[)Ei.Ii\ OVF;RNIGFIT l.IXiAL Appeal from the 95th Judicial District Court RI PRODI ( I ION SE’RVI( I S of I)allas County. Texas. (Tr.Ct.No. 09- CORPOR \ I ION DiB \ A-I I ( \L COPY 09815). & RI CORD ‘I RV1CI S Appcllant Opinion delivered by Justice Francis, Justices Morris and Murphy participating. No. 05-1 1-00708-CV V

DAVID W. ELROD. PLLC. Appeflee

In accordance with this Court’s opinion of this date, the judgment of the trial court is REVERSED and judgment is RENDERED that David W. Elrod. PLLC take nothing on its breach of contract claim. It is ORDERED that appellant A-DELTA OVERNIGHT LEGAL RLPRODUC 1 iON SERVI( ES CORPORA flON D/B/A A-LEGAL COPY & RECORD SERVICES recover its costs of this appeal from appellee David W. Elrod, PLLC.

Judgment entered October31. 2012.

MOl LY FRANCIS JUSTICE