Clinton W. (Buddy) Pike, Sr., Daniel L. Walker, W. Tobin Wilson, VHSC Cement, LLC and Few Ready Mix Concrete Co. v. Texas EMC Management, LLC, Texas EMC Products, LP and EMC Cement, BV
This text of Clinton W. (Buddy) Pike, Sr., Daniel L. Walker, W. Tobin Wilson, VHSC Cement, LLC and Few Ready Mix Concrete Co. v. Texas EMC Management, LLC, Texas EMC Products, LP and EMC Cement, BV (Clinton W. (Buddy) Pike, Sr., Daniel L. Walker, W. Tobin Wilson, VHSC Cement, LLC and Few Ready Mix Concrete Co. v. Texas EMC Management, LLC, Texas EMC Products, LP and EMC Cement, BV) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.
Opinion
IN THE TENTH COURT OF APPEALS
No. 10-14-00274-CV
CLINTON W. (BUDDY) PIKE, SR., DANIEL L. WALKER, W. TOBIN WILSON, VHSC CEMENT, LLC AND FEW READY MIX CONCRETE CO., Appellants v.
TEXAS EMC MANAGEMENT, LLC, TEXAS EMC PRODUCTS, LP AND EMC CEMENT, BV, Appellees
From the 77th District Court Limestone County, Texas Trial Court No. 30,023-A
MEMORANDUM OPINION
In numerous issues, appellants, Clinton W. Pike Sr., Daniel L. Walker, W. Tobin
Wilson, VHSC Cement, LLC, and Few Ready Mix Concrete, challenge a judgment in
favor of appellees, Texas EMC Management, LLC, Texas EMC Products, LP, and EMC
Cement, BV, stemming from the breakup of a partnership and the subsequent purchase
of the partnership’s assets at a foreclosure sale. In a cross-appeal, EMC Management, EMC Products, and EMC Cement complain about the trial court’s denial of their request
for a permanent injunction in favor of cross-appellees, Pike, Walker, Wilson, VHSC, and
Few Ready Mix.1 After review, we modify the Amended Final Judgment to delete Pike’s
liability for breach of his Management Agreement with EMC Products and affirm the
judgment in all other respects. We also reverse the trial court’s denial of the permanent
injunction and remand for proceedings consistent with this opinion.
I. SUFFICIENCY OF THE EVIDENCE
Here, appellants raise sufficiency challenges with regard to aspects of the
Amended Final Judgment. In a legal-sufficiency review, we consider the evidence in the
light most favorable to the verdict, indulging every reasonable inference in favor of the
verdict. Autozone, Inc. v. Reyes, 272 S.W.3d 588, 592 (Tex. 2008) (per curiam); Associated
Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 286 (Tex. 1998). To determine
whether legally-sufficient evidence supports a challenged finding of fact, we credit
evidence that supports the finding if reasonable jurors could, and disregard contrary
evidence unless reasonable jurors could not. See Kroger Tex. Ltd. P’ship v. Suberu, 216
S.W.3d 788, 793 (Tex. 2006); see also City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005).
The factfinder is the sole judge of the credibility of the witnesses and the weight to be
assigned to their testimony. See City of Keller, 168 S.W.3d at 819. The factfinder is free to
1As this is a memorandum opinion and the parties are familiar with the facts, we only recite those necessary to the disposition of the case. See TEX. R. APP. P. 47.1, 47.4.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 2 believe one witness and disbelieve another, and reviewing courts may not impose their
own opinions to the contrary. Id. As such, reviewing courts must assume that the
factfinder decided all credibility questions in the favor of the findings and chose what
testimony to disregard in a way that was in favor of the findings, if a reasonable person
could do so. Id. at 819-20.
Additionally, it is within the factfinder’s province to resolve conflicts in the
evidence. Id. at 820. Consequently, we must assume that, where reasonable, the
factfinder resolved all conflicts in the evidence in a manner consistent with the findings.
Id. Where conflicting inferences can be drawn from the evidence, it is within the province
of the factfinder to choose which inference to draw, so long as more than one inference
can reasonably be drawn. Id. at 821. Thus, we must assume that the factfinder made all
inferences in favor of the findings if a reasonable person could do so. Id. As stated in
City of Keller, the final test for legal sufficiency must always be “whether the evidence at
trial would entitle reasonable and fair-minded people to reach the verdict under review.”
Id. at 827. Anything more than a scintilla of evidence is legally sufficient to support the
finding. See Cont’l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996).
In a factual-sufficiency challenge, an appellate court must consider and weigh all
of the evidence. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam). The verdict
should be set aside only if it is so contrary to the overwhelming weight of the evidence
as to be clearly wrong and unjust. Id. We may not pass upon the witnesses’ credibility
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 3 or substitute our judgment for that of the factfinder, even if the evidence would support
a different result. 2900 Smith, Ltd. v. Constellation New Energy, Inc., 301 S.W.3d 741, 746
(Tex. App.—Houston [14th Dist.] 2009, no pet.). If we determine the evidence is factually
insufficient, we must detail the evidence relevant to the issue and state in what regard
the contrary evidence greatly outweighs the evidence supporting the trial court’s
judgment; we need not do so when affirming the judgment. Id.
II. BREACH-OF-CONTRACT CLAIMS AGAINST WALKER AND WILSON
In their second issue, Walker, Wilson, and Few Ready Mix argue that appellees’
breach-of-contract claim against Walker and Wilson is invalid as a matter of law, arguing,
among other things, that: (1) the failure to provide an infinite amount of money was not
a breach of the Partnership Agreement; and (2) appellees breached the Partnership
Agreement first. Walker, Wilson, and Few Ready Mix also contend that EMC Cement
lacks standing to recover for diminished value of the partnership; that the attorney’s fees
award is improper; and that the amount awarded to Walker and Wilson for appellees’
breach of the Partnership Agreement was incorrect.
A. Standing
Because it is a threshold matter, we will first consider the standing argument.
“Standing is a constitutional prerequisite to maintaining suit in either federal or state
court.” Williams v. Lara, 52 S.W.3d 171, 178 (Tex. 2001) (citing Tex. Ass’n of Bus. v. Tex. Air
Control Bd., 852 S.W.2d 440, 444 (Tex. 1993)). Standing “focuses on whether a party has a
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 4 sufficient relationship with the lawsuit so as to have a ‘justiciable interest’ in its outcome.”
Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005). Essentially, parties
have standing when they are personally aggrieved, regardless of whether they are acting
with legal authority. See Nootsie, Ltd. v. Williamson County Appraisal Dist., 925 S.W.2d 659,
661 (Tex. 1996).
On appeal, Walker, Wilson, and Few Ready Mix assert that EMC Cement lacks
standing to bring a claim against Walker and Wilson for breach of the Partnership
Agreement because the cause of action belongs to the partnership, not the individual
partners. Appellees counter that this argument involves capacity and, as such, has been
waived by a failure to file a verified denial under Texas Rule of Civil Procedure 93. See
TEX. R. CIV. P. 93.
Capacity is a procedural issue dealing with the personal qualifications of a party
to litigate. See Lovato, 171 S.W.3d at 848; see also Hubbard v. Rosenthal, No. 10-10-00267-
CV, 2012 Tex. App. LEXIS 4391, at *9 (Tex. App.—Waco May 30, 2012, pet. denied) (mem.
op.). “[A] party has capacity when it has the legal authority to act, regardless of whether
it has a justiciable interest in the controversy.” Lovato, 171 S.W.3d at 848-49; see El T.
Mexican Rests. v. Bacon, 921 S.W.2d 247, 250 (Tex.
Free access — add to your briefcase to read the full text and ask questions with AI
IN THE TENTH COURT OF APPEALS
No. 10-14-00274-CV
CLINTON W. (BUDDY) PIKE, SR., DANIEL L. WALKER, W. TOBIN WILSON, VHSC CEMENT, LLC AND FEW READY MIX CONCRETE CO., Appellants v.
TEXAS EMC MANAGEMENT, LLC, TEXAS EMC PRODUCTS, LP AND EMC CEMENT, BV, Appellees
From the 77th District Court Limestone County, Texas Trial Court No. 30,023-A
MEMORANDUM OPINION
In numerous issues, appellants, Clinton W. Pike Sr., Daniel L. Walker, W. Tobin
Wilson, VHSC Cement, LLC, and Few Ready Mix Concrete, challenge a judgment in
favor of appellees, Texas EMC Management, LLC, Texas EMC Products, LP, and EMC
Cement, BV, stemming from the breakup of a partnership and the subsequent purchase
of the partnership’s assets at a foreclosure sale. In a cross-appeal, EMC Management, EMC Products, and EMC Cement complain about the trial court’s denial of their request
for a permanent injunction in favor of cross-appellees, Pike, Walker, Wilson, VHSC, and
Few Ready Mix.1 After review, we modify the Amended Final Judgment to delete Pike’s
liability for breach of his Management Agreement with EMC Products and affirm the
judgment in all other respects. We also reverse the trial court’s denial of the permanent
injunction and remand for proceedings consistent with this opinion.
I. SUFFICIENCY OF THE EVIDENCE
Here, appellants raise sufficiency challenges with regard to aspects of the
Amended Final Judgment. In a legal-sufficiency review, we consider the evidence in the
light most favorable to the verdict, indulging every reasonable inference in favor of the
verdict. Autozone, Inc. v. Reyes, 272 S.W.3d 588, 592 (Tex. 2008) (per curiam); Associated
Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 286 (Tex. 1998). To determine
whether legally-sufficient evidence supports a challenged finding of fact, we credit
evidence that supports the finding if reasonable jurors could, and disregard contrary
evidence unless reasonable jurors could not. See Kroger Tex. Ltd. P’ship v. Suberu, 216
S.W.3d 788, 793 (Tex. 2006); see also City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005).
The factfinder is the sole judge of the credibility of the witnesses and the weight to be
assigned to their testimony. See City of Keller, 168 S.W.3d at 819. The factfinder is free to
1As this is a memorandum opinion and the parties are familiar with the facts, we only recite those necessary to the disposition of the case. See TEX. R. APP. P. 47.1, 47.4.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 2 believe one witness and disbelieve another, and reviewing courts may not impose their
own opinions to the contrary. Id. As such, reviewing courts must assume that the
factfinder decided all credibility questions in the favor of the findings and chose what
testimony to disregard in a way that was in favor of the findings, if a reasonable person
could do so. Id. at 819-20.
Additionally, it is within the factfinder’s province to resolve conflicts in the
evidence. Id. at 820. Consequently, we must assume that, where reasonable, the
factfinder resolved all conflicts in the evidence in a manner consistent with the findings.
Id. Where conflicting inferences can be drawn from the evidence, it is within the province
of the factfinder to choose which inference to draw, so long as more than one inference
can reasonably be drawn. Id. at 821. Thus, we must assume that the factfinder made all
inferences in favor of the findings if a reasonable person could do so. Id. As stated in
City of Keller, the final test for legal sufficiency must always be “whether the evidence at
trial would entitle reasonable and fair-minded people to reach the verdict under review.”
Id. at 827. Anything more than a scintilla of evidence is legally sufficient to support the
finding. See Cont’l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996).
In a factual-sufficiency challenge, an appellate court must consider and weigh all
of the evidence. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam). The verdict
should be set aside only if it is so contrary to the overwhelming weight of the evidence
as to be clearly wrong and unjust. Id. We may not pass upon the witnesses’ credibility
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 3 or substitute our judgment for that of the factfinder, even if the evidence would support
a different result. 2900 Smith, Ltd. v. Constellation New Energy, Inc., 301 S.W.3d 741, 746
(Tex. App.—Houston [14th Dist.] 2009, no pet.). If we determine the evidence is factually
insufficient, we must detail the evidence relevant to the issue and state in what regard
the contrary evidence greatly outweighs the evidence supporting the trial court’s
judgment; we need not do so when affirming the judgment. Id.
II. BREACH-OF-CONTRACT CLAIMS AGAINST WALKER AND WILSON
In their second issue, Walker, Wilson, and Few Ready Mix argue that appellees’
breach-of-contract claim against Walker and Wilson is invalid as a matter of law, arguing,
among other things, that: (1) the failure to provide an infinite amount of money was not
a breach of the Partnership Agreement; and (2) appellees breached the Partnership
Agreement first. Walker, Wilson, and Few Ready Mix also contend that EMC Cement
lacks standing to recover for diminished value of the partnership; that the attorney’s fees
award is improper; and that the amount awarded to Walker and Wilson for appellees’
breach of the Partnership Agreement was incorrect.
A. Standing
Because it is a threshold matter, we will first consider the standing argument.
“Standing is a constitutional prerequisite to maintaining suit in either federal or state
court.” Williams v. Lara, 52 S.W.3d 171, 178 (Tex. 2001) (citing Tex. Ass’n of Bus. v. Tex. Air
Control Bd., 852 S.W.2d 440, 444 (Tex. 1993)). Standing “focuses on whether a party has a
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 4 sufficient relationship with the lawsuit so as to have a ‘justiciable interest’ in its outcome.”
Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005). Essentially, parties
have standing when they are personally aggrieved, regardless of whether they are acting
with legal authority. See Nootsie, Ltd. v. Williamson County Appraisal Dist., 925 S.W.2d 659,
661 (Tex. 1996).
On appeal, Walker, Wilson, and Few Ready Mix assert that EMC Cement lacks
standing to bring a claim against Walker and Wilson for breach of the Partnership
Agreement because the cause of action belongs to the partnership, not the individual
partners. Appellees counter that this argument involves capacity and, as such, has been
waived by a failure to file a verified denial under Texas Rule of Civil Procedure 93. See
TEX. R. CIV. P. 93.
Capacity is a procedural issue dealing with the personal qualifications of a party
to litigate. See Lovato, 171 S.W.3d at 848; see also Hubbard v. Rosenthal, No. 10-10-00267-
CV, 2012 Tex. App. LEXIS 4391, at *9 (Tex. App.—Waco May 30, 2012, pet. denied) (mem.
op.). “[A] party has capacity when it has the legal authority to act, regardless of whether
it has a justiciable interest in the controversy.” Lovato, 171 S.W.3d at 848-49; see El T.
Mexican Rests. v. Bacon, 921 S.W.2d 247, 250 (Tex. App.—Houston [1st Dist.] 1995, no writ)
(stating that capacity is a party’s legal authority to go to court to prosecute or defend a
suit). While standing may be raised for the first time on appeal, capacity must be raised
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 5 by verified plea in the trial court or else it is deemed waived. See Lovato, 171 S.W.3d at
849; see also Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46, 56 (Tex. 2003).
We characterize the standing argument as a challenge to EMC Cement’s right to
recover in the capacity in which it filed suit. 2 In other words, we conclude that Walker,
Wilson, and Few Ready Mix’s argument that EMC Cement did not have authority to
prosecute this lawsuit because that authority belonged to the partnership involves
capacity, not standing. See Pledger v. Schoellkopf, 762 S.W.2d 145, 145-46 (Tex. 1988) (per
curiam) (holding that the question whether claims brought by shareholders belonged to
the corporation involved capacity); see also Baker v. City of Robinson, 305 S.W.3d 783, 788
(Tex. App.—Waco 2009, pet. denied) (concluding that an individual’s alleged lack of
standing to recover lost profits suffered by a partnership was really an issue of capacity);
WHM Props. v. Dallas County, 119 S.W.3d 325, 330-31 (Tex. App.—Waco 2003, no pet.)
(holding that an issue presented as a “standing” challenge pertaining to corporate status
actually involved “capacity”). And because the record does not contain a verified plea
2 And even if Walker, Wilson, and Few Ready Mix’s argument involved standing, we note that section 152.210 of the Texas Business Organizations Code provides:
A partner is liable to a partnership and the other partners for:
(1) A breach of the partnership agreement; or
(2) A violation of a duty to the partnership or other partners under this chapter that causes harm to the partnership or the other partners.
TEX. BUS. ORG. CODE ANN. § 152.210 (West 2012). In other words, section 152.210 would have conferred standing on EMC Cement, a Class A limited partner. See id.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 6 filed in the trial court under Texas Rule of Civil Procedure 93, we conclude that this
argument has been waived. See TEX. R. CIV. P. 93; see also Lovato, 171 S.W.3d at 849; Sixth
RMA Partners, L.P., 111 S.W.3d at 56.
B. The Partnership Agreement
Next, we will address Walker, Wilson, and Few Ready Mix’s arguments regarding
the Partnership Agreement.
The partners in EMC Products, a Texas limited partnership, are EMC
Management, EMC Cement, Walker and certain members of his family, and Wilson.
EMC Management is a general partner with a 1% share in the partnership. EMC Cement
is a Class A limited partner with a 49.5% ownership stake. Walker and his family and
Wilson are Class B limited partners with a collective 49.5% ownership share in the
partnership. Under the Partnership Agreement, the following was required of Class B
limited partners Walker and Wilson:
Section 2.5. Financing Assistance by Class B Limited Partners. The Class B Limited Partners shall loan funds to and/or obtain financing for the Partnership to meet the Primary Objective until such time as the Partnership has the financial ability to obtain such financing on its own resources. The General Partner and the Class A Limited Partner shall have no obligation to make loans to and/or obtain financing for the Partnership.
Section 1.5 of the Partnership Agreement outlines the primary objective of the
Partnership as follows: “The Partners agree that the primary objective of the partnership
will be to maximize the degree and speed of market penetration for the Products in the
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 7 State of Texas, in accordance with market demand and potential, respecting sound
business principals.”
The usage of the term “shall” in Section 2.5 of the Partnership Agreement imposed
a mandatory duty on Walker and Wilson to loan funds and/or obtain financing. See
Lesikar v. Moon, 237 S.W.3d 361, 367 (Tex. App.—Houston [14th Dist.] 2007, pet. denied)
(“The word ‘shall’ as used in contracts is generally mandatory, operating to impose a
duty.” (internal citations omitted)); In re J.L.W., 919 S.W.2d 841, 842 (Tex. App.—El Paso
1996, no writ) (stating that the term “shall” is generally construed to be mandatory and
may also be considered as directory). However, despite this language, Walker, Wilson,
and Few Ready Mix assert that their duty to loan or obtain funds was limited by the
“sound business principals” language of the primary objective, and thus, the failure to
provide an infinite amount of money did not constitute a breach of the agreement.
We do not agree with Walker, Wilson, and Few Ready Mix’s interpretation of the
Partnership Agreement. The “sound business principles” language modifies the
language about the partnership’s goal of maximizing market penetration, not Walker and
Wilson’s obligation to loan funds and/or obtain financing for the partnership. The
interpretation advanced on appeal by Walker, Wilson, and Few Ready Mix would require
us to rewrite the agreement to move the “sound business principles” language from
Section 1.5 to Section 2.5 of the Partnership Agreement—something we cannot do. See
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 8 Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 162 (Tex. 2003) (“But we may neither
rewrite the parties’ contract nor add to its language.”).
And to the extent that Walker, Wilson, and Few Ready Mix contend that they did
not have to provide further financing because the partnership was unable to meet the
primary objective, we note that such a contention raises the affirmative defense of
excuse—something that Walker and Wilson had to plead and prove in the trial court. See
TEX. R. CIV. P. 94; see also Trencor, Inc. v. Cornech Mach. Co., 115 S.W.3d 145, 153 (Tex.
App.—Fort Worth 2003, pet. denied). A review of the record reveals that they did neither.
As such, Walker and Wilson waived any excuse argument brought on appeal. See AMS
Const. Co. v. K.H.K. Scaffolding Houston, Inc., 357 S.W.3d 30, 43 (Tex. App.—Houston [1st
Dist.] 2011, pet. dism’d); see also RE/MAX of Tex., Inc. v. Katar Corp., 961 S.W.2d 324, 327
(Tex. App.—Houston [1st Dist.] 1997, writ denied) (noting that excuse is an affirmative
defense and thus is waived if not pleaded or tried by consent).
Additionally, Walker, Wilson, and Few Ready Mix argue that Walker and Wilson’s
breach of the Partnership Agreement was excused because of the jury’s finding that EMC
Products also breached the agreement. Irrespective of the excuse affirmative defense that
was not pleaded in the trial court, the jury concluded that Walker and Wilson were the
first to breach the Partnership Agreement. However, whether EMC Products or Walker
and Wilson breached first is immaterial because of the well-settled rule that when a party
materially breaches an agreement, the non-breaching party can elect to either rescind the
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 9 agreement or affirm and seek damages, but not both. See Texana Oil Co. v. Stephenson, 521
S.W.2d 104, 106-07 (Tex. App.—El Paso 1975, no writ). Therefore, “[t]reating a contract
as continuing, after a breach, deprives the non-breaching party of any excuse for
terminating their own performance.” Chilton Ins. Co. v. Pate & Pate Enters., Inc., 930
S.W.2d 877, 888 (Tex. App.—San Antonio 1996, writ denied) (citing W. Irrigation Co. v.
Reeves County Land Co., 233 S.W.2d 599, 602 (Tex. Civ. App.—El Paso 1950, no writ)).
Here, Walker and Wilson continued to perform under the Partnership Agreement,
despite the purported breach by EMC Products and then sought damages. See id.
(“Seeking to recover damages under the contract, as Pate did, is evidence that Pate
considered the contract as continuing.” (citing Cox, Colton, Stoner, Starr and Co., P.C. v.
Deloitte, Haskins & Sells, 672 S.W.2d 282, 286-87 (Tex. App.—El Paso 1984, no writ))). At
the point in time that Walker and Wilson believed that EMC Products breached the
agreement, they were faced with one of two mutually-exclusive courses of action: (1)
discontinue their performance, rescind the contract, and sue for material breach; or (2)
continue performing and lose the other party’s material breach as an excuse for its own
non-performance. Id. (citing W. Irrigation Co., 233 S.W.2d at 602). Therefore, because
Walker and Wilson chose to continue performing their duties under the Partnership
Agreement after they believed EMC Products breached the agreement, Wilson and
Walker forfeited any excuse for their own breach. See id. (“By its actions, Pate chose the
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 10 latter. Because Pate treated the contract as continuing after Chilton’s material breach,
Pate forfeited any excuse for its own breach.”).
Having rejected Walker, Wilson, and Few Ready Mix’s complaints about the jury’s
breach-of-contract finding, we therefore overrule their second issue.3
III. CIVIL CONSPIRACY & JOINT AND SEVERAL LIABILITY
In their third issue, Walker, Wilson, and Few Ready Mix argue that appellees’
joint-and-several liability theories fail as a matter of law for a number of reasons: (1) the
evidence supporting underlying tort liability is lacking; (2) that the “knowingly
participated” theory cannot be a valid basis for joint-and-several liability; and (3) the
conspiracy theory is flawed.
A. Applicable Law
The elements of civil conspiracy are (1) two or more persons, (2) an object to be
accomplished, (3) a meeting of the minds on the object or course of action, (4) one or more
unlawful, overt acts, and (5) damages as a proximate result. Tri v. J.T.T., 162 S.W.3d 552,
556 (Tex. 2005); see BP Auto., L.P. v. RML Waxahachie Dodge, LLC, 448 S.W.3d 562, 573 (Tex.
App.—Houston [1st Dist.] 2014, no pet.). Civil conspiracy “‘requires specific intent’ to
agree ‘to accomplish an unlawful purpose or to accomplish a lawful purpose by unlawful
Because we believe that Walker, Wilson, and Few Ready Mix’s complaints about attorney’s fees 3
and the damages awarded to them are best categorized in a separate section, we will consider these complaints later in this memorandum opinion.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 11 means.’” Juhl v. Airington, 936 S.W.2d 640, 644 (Tex. 1996) (quoting Triplex Comm’cns, Inc.
v. Riley, 900 S.W.2d 716, 719 (Tex. 1995)).
“[O]nce a civil conspiracy is found, each co-conspirator is responsible for the
action of any of the co-conspirators which is in furtherance of the unlawful combination.”
Akin v. Dahl, 661 S.W.2d 917, 921 (Tex. 1983) (citing Carroll v. Timmers Chevrolet, Inc., 592
S.W.2d 922, 926 (Tex. 1979)). “A finding of civil conspiracy imposes joint and several
liability on all conspirators for actual damages resulting from acts in furtherance of the
conspiracy.” Energy Maint. Servs. Group, LLC v. Sandt, 401 S.W.3d 204, 220 (Tex. App.—
Houston [14th Dist.] 2012, pet. denied) (citing Carroll, 592 S.W.2d at 925-26; Greenberg
Traurig of N.Y., P.C. v. Moody, 161 S.W.3d 56, 90 (Tex. App.—Houston [14th Dist.] 2004,
no pet.)).
B. Discussion
Ronin and Lygren both testified that, in 2008 and 2009, they began negotiating
with C-Change in California about financing, developing, and commercializing EMC
Cement’s intellectual property. According to Ronin and Lygren, John Preston, a
managing partner of C-Change, and Alan Quasha, the president of Quadrant
Management, were involved in the negotiations. Lygren noted that Walker and Wilson
were aware of the C-Change negotiations, though Wilson’s testimony implied that he
was unaware of the negotiations. Nevertheless, as a result of the negotiations, Ronin,
Lygren, and C-Change executed a letter of intent calling “for C-Change to commit to
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 12 contribute a maximum investment of 50 million dollars to . . . California, 49 million to the
company and a million to the idea” in exchange for a 51% equity interest in a holding
company formed to develop and commercialize EMC Cement technology in California.
Beginning in 2010, Quasha and Preston spoke with Walker and Wilson several times.
Apparently, Quasha and Preston told Walker and Wilson that they wanted to buy EMC
Products’ business but did not want to enter into an agreement with Lygren. Both Ronin
and Lygren testified that they were unaware that Quasha and Preston were
communicating with Walker and Wilson. In any event, in December 2010, EMC Cement
called off negotiations with C-Change.
In January 2011, Walker and Wilson, frustrated with the actions of Lygren and
Ronin, decided to stop making the monthly $25,000 payments on EMC Products’ loan
with Texas Capital Bank, thereby causing the partnership to default on an underlying
loan. Phillip Wood, Texas Capital Bank’s Executive Vice President, testified that Walker
and Wilson had stated that their goal was to end their relationship with Lygren and allow
Quasha and Preston to buy EMC Products’ assets at a foreclosure sale following the
default. These plans were subsequently relayed to Quasha and Preston, according to the
testimony.
Lygren recounted that, in February 2011, Wilson told Wood that a group
represented by Quasha was interested in EMC Products—a sentiment that Quasha
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 13 confirmed to Wood. On April 12, 2011, Texas Capital Bank noticed the foreclosure of
EMC Products’ assets for May 3, 2011.
VHSC formed on April 28, 2011. The company is owned by INEA International,
Limited, a company purportedly closely associated with Quasha and Preston. According
to Wood, Wilson put together the potential sale of the loan to INEA, which led to Quasha
entering into discussions with the bank. These discussions allegedly resulted in a draft
agreement that designated Quasha as the sole primary contact for purposes of the
agreement.
Also in April 2011, Lygren informed the bank that EMC Products’ license from
EMC Cement was “neither assignable nor transferable” and that the foreclosure
proceedings would result in the disclosure of intellectual property belonging to EMC
Cement. Lygren also noted that the bank had no right to foreclose and that legal action
would be taken if the foreclosure was to proceed. Lygren then notified Walker a couple
of days before May 3, 2011, that EMC Cement had terminated the license agreement with
EMC Products.
Upon receiving Lygren’s notices, the bank decided not to conduct the foreclosure
sale. However, Walker and Wilson coordinated the purported sale of the loan to Few
Ready Mix, Walker’s company, so that Few Ready Mix could foreclose on EMC Products’
assets on May 3, 2011. To facilitate the purported sale of the loan, Walker and Wilson
both wired over $1.9 million to the bank on behalf of Few Ready Mix. Thereafter, Few
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 14 Ready Mix sold EMC Products’ assets to VHSC at the May 3, 2011 foreclosure sale.
Wilson served as the trustee, and Preston was the bidder at the foreclosure sale.
VHSC bought EMC Products’ assets for $3,126,090; however, the winning bid left
an approximate $800,000 deficiency on the loan. In any event, Walker testified that he
and Wilson equally shared the proceeds from the sale. A day later, Few Ready Mix sold
the loan agreement to VHSC for $300,000. Walker and Wilson once again equally split
the proceeds from the sale. And within days of the sale, VHSC began selling products
produced by EMC Cement’s purported trade secrets.
Based on the evidence outlined above, and viewing the evidence in the light most
favorable to the jury’s verdict, we conclude that a rational factfinder could determine that
Walker, Wilson, and Few Ready Mix worked together to achieve the common goal of
delivering EMC Cement’s trade secrets to Quasha and Preston at VHSC by breaching the
Partnership Agreement, defaulting on the loan, and ensuring that EMC Products’ assets
were sold to VHSC at the foreclosure sale—acts that resulted in damage to EMC Cement.
See Tri, 162 S.W.3d at 556; Juhl, 936 S.W.2d at 644; Riley, 900 S.W.2d at 719; BP Auto., L.P.,
448 S.W.3d at 573; see also Reyes, 272 S.W.3d at 592; City of Keller, 168 S.W.3d at 822.
Furthermore, we cannot say that the jury’s verdict as to the civil-conspiracy claim is so
contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust.
See Cain, 709 S.W.2d at 176. Accordingly, we conclude that the evidence supporting the
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 15 jury’s finding of civil conspiracy against Walker, Wilson, and Few Ready Mix is
supported by legally- and factually-sufficient evidence. We overrule their third issue.4
IV. CUMULATIVE ERROR
In their fourth issue, Walker, Wilson, and Few Ready Mix assert that the trial
court’s alleged cumulative errors “probably led to the rendition of an improper result.”
We disagree.
4 In this issue, Walker, Wilson, and Few Ready Mix also appear to argue that civil conspiracy only applies to dangerous activities and that the issue was improperly submitted to the jury. First, we note that the “purpose of the concert of action theory is to deter antisocial or dangerous behavior.” Juhl v. Airington, 936 S.W.2d 640, 644 (Tex. 1996) (citations omitted). Concert of action “imposes liability not for an agreement, but for substantially assisting and encouraging a wrongdoer in a tortious act.” Id. However, in analyzing Airington’s claims, the Juhl Court considered civil conspiracy and the concert-of-action theory as separate theories. See id. (noting that “[b]ecause Airington’s pleadings allege only that defendants were negligent, civil conspiracy is not a theory upon which he could have relied to avoid summary judgment” and subsequently analyzing Airington’s concert-of-action theory). We therefore are not persuaded by Walker, Wilson, and Few Ready Mix’s assertion that civil conspiracy only applies to dangerous activities.
Additionally, we reject Walker, Wilson, and Few Ready Mix’s complaint about the jury charge. In their brief, Walker, Wilson, and Few Ready Mix invoke Casteel and argue that the conspiracy question was impermissibly commingled with valid and invalid liability grounds. See Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 388 (Tex. 2000) (reversing for a new trial due to the erroneous commingling of valid and invalid liability theories in a single broad-form liability question). At trial, Walker, Wilson, and Few Ready Mix did not raise a Casteel objection to the conspiracy question. See Burbage v. Burbage, 447 S.W.3d 249, 255-56 (Tex. 2014) (“Thus, in Casteel, we required a new trial when a timely and specific objection preserved the issue of erroneous commingling of valid and invalid theories of liability in a broad-form liability question, such that the appellate court could not determine whether the jury based its verdict on an improperly submitted theory. . . . [I]n situations where a party does not raise a Casteel-type objection, that party surely cannot raise a Casteel issue when it failed to preserve a claim of an invalid theory of liability that forms the basis of a Casteel-type error.”). Rather, Walker, Wilson, and Few Ready Mix objected that the conspiracy question was not supported by the evidence and that the question was duplicative of the aiding and abetting question associated with the breach-of-fiduciary-duty questions. As such, we conclude that this argument was waived. See Burbage, 447 S.W.3d at 255-56.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 16 “A reviewing court may reverse a lower-court judgment under the cumulative-
error doctrine when the record shows a number of instances or error, no one instance
being sufficient to call for reversal, yet all instances taken together may do so.” Rhey v.
Redic, 408 S.W.3d 440, 462 (Tex. App.—El Paso 2013, no pet.) (citing Sproles Motor Freight
Lines, Inc. v. Long, 140 Tex. 494, 168 S.W.2d 642, 645 (1943); Univ. of Tex. at Austin v. Hinton,
822 S.W.2d 197, 205 (Tex. App.—Austin 1991, no writ)). “To show cumulative error, an
appellant must show that, based on the record as a whole, but for the alleged errors, the
jury would have rendered a verdict favorable to it.” Id. (citing Hinton, 822 S.W.2d at 205).
In this issue, Walker, Wilson, and Few Ready Mix point to several instances that
they assert demonstrate cumulative error. Specifically, they complain that the trial court
improperly: (1) included fiduciary-duty questions in the charge; (2) admitted Plaintiff’s
Exhibit 129 into evidence over their objection; (3) overruled their motion for directed
verdict on several claims; and (4) allowed questioning about the failure to disclose
discussions surrounding the purchase of the EMC Products note. Based on our review
of the record and our analysis of prior issues, there is sufficient evidence to support the
jury’s liability findings against Walker, Wilson, and Few Ready Mix. And as such, we
cannot say that, based on the record as a whole, but for the alleged errors, the jury would
have rendered a verdict in favor of Walker, Wilson and Few Ready Mix. See Long, 168
S.W.2d at 645; see also Rhey, 408 S.W.3d at 462; Hinton, 822 S.W.2d at 205. Accordingly,
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 17 Walker, Wilson, and Few Ready Mix have not satisfied their burden in this issue. See
Long, 168 S.W.2d at 645; see also Rhey, 408 S.W.3d at 462; Hinton, 822 S.W.2d at 205. We
overrule Walker, Wilson, and Few Ready Mix’s fourth issue.
V. TRADE-SECRET MISAPPROPRIATION
In their first issue, VHSC and Pike assert that EMC Cement’s trade-secret claim
fails as a matter of law.
A trade secret is “any formula, pattern, device or compilation of information which
is used in one’s business and presents an opportunity to obtain an advantage over
competitors who do not know or use it.” In re Bass, 113 S.W.3d 735, 739 (Tex. 2003).
“There must be a substantial amount of attendant secrecy for information to be a trade
secret.” Sw. Energy Prod. Co. v. Berry-Helfand, 411 S.W.3d 581, 597 (Tex. App.—Tyler 2013,
pet. granted) (citing Rugen v. Interactive Bus. Sys., Inc., 864 S.W.2d 548, 552 (Tex. App.—
Dallas 1993, no writ)). “[A] trade secret can exist in a combination of characteristics and
components[,] each of which, by itself, is in the public domain, but the unified process,
[the] design and operation of which in unique combination[] affords a competitive
advantage, is a protected trade secret.” Id. (citing Metallurgical Indus. v. Fourtek, Inc., 790
F.2d 1195, 1202 (5th Cir. 1986)). “A trade secret is not necessarily destroyed by a
disclosure, but, in disclosing a trade secret, the owner must establish a confidential
relationship with the other party, by contract or otherwise, or the secret will be lost by
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 18 the disclosure.” Id. (citing Furr’s, Inc. v. United Specialty Adver. Co., 385 S.W.2d 456, 459
(Tex. App.—El Paso 1964, writ ref’d n.r.e.). With respect to “use,” Texas law has adopted
the Restatement definition:
Any exploitation of the trade secret that is likely to result in injury to the trade secret owner or enrichment to the defendant is a “use” under this Section. Thus, marketing goods that embody the trade secret, employing the trade secret in manufacturing or production, relying on the trade secret to assist or accelerate research or development, or soliciting customers through the use of information that is a trade secret . . . all constitute “use.”
Bohnsack v. Varco, L.P., 668 F.3d 262, 279 (5th Cir. 2012) (quoting RESTATEMENT (THIRD) OF
UNFAIR COMPETITION § 40 cmt. c (1995)); see Sw. Energy Prod. Co., 411 S.W.3d at 597.
Under Texas law, trade-secret misappropriation requires: (1) the existence of a
trade secret; (2) a breach of a confidential relationship or improper discovery of the trade
secret; (3) use of the trade secret; and (4) damages. See Bohnsack, 668 F.3d at 279; see also
Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 463 (Tex. App.—Austin
2004, pet. denied); IBP, Inc. v. Klumpe, 101 S.W.3d 461, 476 (Tex. App.—Amarillo 2001,
pet. denied). Proof of trade-secret misappropriation often depends upon circumstantial
evidence. Sw. Energy Prod. Co., 411 S.W.3d at 598 (citing SI Handling Sys., Inc. v. Heisley,
753 F.2d 1244, 1261 (3d Cir. 1985)).
At trial, Ronin testified about the information that EMC Cement maintained as
trade secrets and about specific documents that contained trade-secret information.
Specifically, Ronin described confidential Mill Records and test reports from 2010 that Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 19 contain specific details about EMC Cement processes. Ronin explained that the records
show the test results of processing materials through high-energy vibratory-ball mills
(“VBM”) under different conditions. According to Ronin, the tests show that changing
the speed at which fly ash is fed through the mill affects the final product. Additionally,
the tests indicate the effects of varying the size and weight of the grinding media, the
particle size of the fly ash, and the configuration of the openings on the mill wall. Ronin
testified that these test results and records were not intended to be disclosed to the public
because they were trade secrets.
Ronin also explained the he did fill out a patent application for the VBMs, but that
he purposely excluded certain information to prevent it from being released to the public.
Ronin noted that: “We didn’t include information related to an exact positioning of the
openings, an exact configuration of the openings, an exact size of the openings related to
different rates, through capacities of the mill. So this whole element you always keep it
out like the trade secret—know how.” He denied including the aforementioned Mill
Records and reports from 2010 in the patent application.
In later testimony, Ronin stated that EMC Cement maintained information as trade
secrets about the grinding media—i.e., the ceramic balls—within the mills, the frequency
and amplitude of the mill’s vibrations, data regarding the alteration of fly ash in the mill,
and the results of performance tests on two EMC products, CemPozz and PozzoSlag.
Ronin also testified that these trade secrets gave EMC Cement a competitive advantage
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 20 over its competitors in the cement industry because EMC Cement was the “one company
who’s doing this” and that EMC Cement had always taken measures to protect and guard
the secrecy of the trade-secret information.
The record reflects that Pike, the former general manager of EMC Products who
eventually became President of VHSC, included the Mill Records in the patent
application he filed on May 6, 2011, just three days after VHSC acquired the EMC assets
at the foreclosure. With regard to the Mill Records, Pike testified that “[t]he data
belonged to Texas EMC but what we did with that data and how we modified that mill,
particularly the mill, I felt like it was the mill modification nothing to do with the
process.” Nevertheless, Pike admitted that this information was EMC’s trade secrets and
that it contained highly-sensitive information.
Based on our review of the evidence, a rational factfinder could conclude that EMC
Cement identified its trade secrets at trial; that Pike used his position at EMC Products to
obtain the trade-secret information that ultimately benefitted his new employer, VHSC—
a competitor of EMC Products; that Pike used the information in his patent application
and VHSC used the information to produce cement subsequent to the foreclosure sale;
and that the use of the trade-secret information caused EMC Cement damage. See
Bohnsack, 668 F.3d at 279; Sw. Energy Prod. Co., 411 S.W.3d at 598; Trilogy Software, Inc.,
143 S.W.3d at 463; Klumpe, 101 S.W.3d at 476. Therefore, viewing the evidence in the light
most favorable to the jury’s verdict, we conclude that the trade-secret-misappropriation
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 21 finding is supported by legally-sufficient evidence. See Reyes, 272 S.W.3d at 592; City of
Keller, 168 S.W.3d at 822; see also Bohnsack, 668 F.3d at 279; Sw. Energy Prod. Co., 411 S.W.3d
at 598; Trilogy Software, Inc., 143 S.W.3d at 463; Klumpe, 101 S.W.3d at 476. Additionally,
we cannot say that the jury’s verdict as to this claim is so contrary to the overwhelming
weight of the evidence as to be clearly wrong and unjust. See Cain, 709 S.W.2d at 176.
Thus, we further conclude that the jury’s finding as to this claim is supported by factually-
sufficient evidence. See id.
However, despite our conclusion that the jury’s finding on the trade-secret-
misappropriation claim is supported by legally- and factually-sufficient evidence, VHSC
and Pike contend that EMC Cement consistently disclosed its “secret” technology in
patent applications and public materials; therefore, there was no trade secret to
misappropriate. In addition, VHSC and Pike allege that they were authorized to use any
trade secrets that EMC Cement might have had based on licenses acquired in the
foreclosure sale.
The record includes testimony from Ronin, the inventor of the process, about the
methods and tools he developed over time for activating fly ash and the data collected
from years of experimentation. And as outlined above, information related to the unique
configuration, use, and maintenance of the VBMs used to produce CemPozz and
PozzoSlag were kept as trade secrets within the company and were not disclosed to the
public in advertising materials or in a patent application filed by Ronin. In fact, Ronin
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 22 testified that he purposefully excluded certain trade-secret information from his patent
application to protect it from disclosure to the public. Ronin also noted that PozzoSlag,
for example, could not be reproduced using only the information contained in the patent
application. The disputed trade-secret information was needed to replicate PozzoSlag.
Moreover, the record reveals that it was Pike, not Ronin, who disclosed EMC Cement
trade-secret information to the public via his patent application.
In addition, we are not persuaded by VHSC and Pike’s contention that they were
authorized to use EMC Cement’s trade secrets by virtue of the licenses acquired in the
foreclosure sale. The Deed of Trust acquired after the foreclosure sale provided the
following definition for “Contracts”: [A]ll of the right, title and interest of [EMC
Products], including equitable rights, in, to, and under any and all . . . contracts, licenses,
or permits which are directly or indirectly related to, or connected with, the development,
ownership, maintenance or operation of the [cement plant].” Despite this language,
Lygren testified that EMC Cement terminated the License Agreement before the
foreclosure sale. To corroborate Lygren’s testimony, appellees included an email dated
April 20, 2011, notifying Walker that EMC Products’ rights under the License Agreement
with EMC Cement had been cancelled. Therefore, at the time of the foreclosure sale, EMC
Products had no license to convey to VHSC, and thus, VHSC could not have acquired use
of EMC Cement’s trade secrets by virtue of the License Agreement. Accordingly, we
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 23 reject VHSC and Pike’s arguments with regard to the trade-secret-misappropriation
finding and overrule their first issue.
VI. BREACH OF CONTRACT, TORTIOUS INTERFERENCE WITH AN EXISTING CONTRACT, & CONSPIRACY
In their second issue, VHSC and Pike argue that appellees’ tortious-interference,
breach-of-contract, and conspiracy claims fail as a matter of law.
The elements of a breach-of-contract claim are: (1) the existence of a valid contract
between plaintiff and defendant; (2) the plaintiff’s performance or tender of performance;
(3) the defendant’s breach of the contract; and (4) the plaintiff’s damage as a result of the
breach. Runge v. Raytheon E-Systems, Inc., 57 S.W.3d 562, 565 (Tex. App.—Waco 2001, no
pet.). On the other hand, the elements for a cause of action for tortious interference with
a contract are: (1) an existing contract subject to interference; (2) a willful and intentional
act of interference with the contract; (3) that proximately caused the plaintiff’s injury; and
(4) caused actual damage or loss. Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29
S.W.3d 74, 77 (Tex. 2000).
In 2006, appellees hired Pike as the general manager to oversee day-to-day
operations for EMC Products. As a condition of his employment, Pike signed a
Management Agreement, which provided that, among other things, he agreed to be
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 24 bound by the confidentiality provisions of EMC Products’ License Agreement with EMC
Cement. Specifically, the Management Agreement provides the following:
The Manager agrees that he is subject to the same obligations of confidentiality and secrecy with respect to the Company’s or Ltd’s Confidential Information as set out in the License Agreement attached as Exhibit B hereto for a duration of his engagement with the Company and for a period of 10 (ten) years following his termination, irrespective of the circumstances of which termination took place.
....
For the duration of this Agreement, and any extension thereof, all rights to intellectual property related to the Company’s or Ltd.’s business belongs to the Company or Ltd., respectively, including but not limited to intellectual property under development or under consideration for development, with or without the participation of the Manager.
Moreover, the Manager may not use information gleaned about the EMC Technology for purposes other than to benefit EMC, Ltd. or the Company.
The attached Licensing Agreement stated that:
“Technical Data” shall mean any and all documents containing design and technical information, engineering or production data, drawings, plans, specifications, techniques, methods, processes, trade secrets, reports, models, market research data, and any and all other material and matter used by or in possession of Licensor and applicable to the design, manufacture, assembly, service and sale of Products as defined hereafter.
“Know-how” shall mean the general and specific “knowledge, experiences and information known to the Licensor, not in written or printed form, applicable to the design, manufacture, assembly, service and sale of Products.
.... Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 25 “Confidential information” shall mean information regarding the development of products or otherwise relating to the business of either party or of a related company, including without limitation Technical Data and Know-how. It shall include any information, of scientific or commercial value, gathered while working within the Licensing Agreement and Management Agreements between the parties and any other agreements entered into between the parties from time to time. Confidential Information shall include all documents prepared by one party after receipt of Confidential Information from the other and which contain or otherwise reflect the Confidential Information. Information shall not be considered confidential nor subject to this Agreement if it can be demonstrated:
(a) To have been rightfully in the possession of the receiving party prior to the date of the disclosure of such information to receiving party by the disclosing party;
(b) To have been in the public domain prior to the date of the disclosure of such information to the receiving party by the disclosing party;
(c) To have become part of the public domain by publication or by any other means except an unauthorized act or omission by the receiving party; or
(d) To have been supplied to the receiving party without restriction by a third party who is under no obligation to the disclosing party to maintain such information in confidence.
Each party agrees to hold all Confidential Information of the other in confidence, and shall take all necessary care to maintain the confidentiality of such other’s Confidential Information. Each party shall restrict the number of employees having access to the Confidential Information to those directly connected with the Products or those who otherwise need to know the Confidential Information. Except as otherwise provided herein, neither party shall use any of the Confidential Information made available
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 26 to it by the other for any purpose other than as contemplated by this Agreement without the prior written consent of the other.
As stated earlier, VHSC was formed on April 28, 2011, just a few days prior to the
scheduled foreclosure sale of EMC Products’ assets. At the May 3, 2011 foreclosure sale,
VHSC acquired EMC Products’ assets. On May 5, 2011, Pike resigned from EMC
Products and immediately went to work for VHSC as its president. The following day,
VHSC filed a patent application naming Pike as the sole inventor. Testimony revealed
that the substance of the patent application was based on Ronin and EMC Cement’s
technology and trade secrets. Even Pike admitted at trial that he gave VHSC highly-
sensitive trade-secret information from EMC Cement. Pike further acknowledged that
he filed the patent application containing trade-secret information because he was upset
with Lygren and Ronin.
Pike later testified that Preston approached him the day after the foreclosure sale
and suggested that he apply for a patent for EMC Products’ technology and information
and assign the patent to VHSC. Pike gathered “a stack” of material containing
information that he and Ronin had spent eighteen months preparing and faxed the
information to VHSC’s patent attorney on May 5, 2011. A day later, VHSC filed the patent
application with twenty-five patent claims. In support of their contention that VHSC
interfered with Pike’s Management Agreement by inducing Pike to divulge confidential
trade-secret information obtained from EMC Products prior to the May 3, 2011
foreclosure sale, appellees asked Ronin, the owner of twenty-seven patents, how long the Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 27 process is for filing a patent. Ronin responded, “[u]sually takes—if you’re really focused
on that, between four and six weeks when you have all experimental data.”
Based on the foregoing, and viewing the evidence in the light most favorable to
the jury’s verdict, we conclude that a rational factfinder could conclude that Pike
breached the Management Agreement by providing VHSC with trade-secret information
obtained during his employment with EMC Products.5 Accordingly, we hold that the
evidence supporting the jury’s finding that Pike breached the Management Agreement is
legally sufficient. See Reyes, 272 S.W.3d at 592; City of Keller, 168 S.W.3d at 822; see also
Runge, 57 S.W.3d at 565. Additionally, we cannot say that the jury’s verdict as to this
claim is so contrary to the overwhelming weight of the evidence as to be clearly wrong
and unjust. See Cain, 709 S.W.2d at 176. Thus, we further conclude that the jury’s finding
as to this claim is supported by factually-sufficient evidence. See id.
However, our analysis of this issue does not stop there. VHSC also challenges the
jury’s tortious-interference finding, asserting four arguments: (1) EMC Products lacks
standing to assert the tortious-interference claim because it currently has no interest in
the Management Agreement; (2) VHSC could not interfere with the Management
Agreement because VHSC acquired EMC Products’ assets in the foreclosure sale; (3)
5Pike also makes a standing argument in this issue, which hinges on the assumption that the breach transpired after the foreclosure sale. However, we reject this argument because we conclude that the jury could have determined that the breach of the Management Agreement transpired prior to the foreclosure sale. Accordingly, appellees had a “justiciable interest” in the outcome at the time the breach occurred. See Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005).
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 28 VHSC had a license to use the confidential information; and (4) VHSC’s actions were
justified because it acquired the License and Management Agreements in the foreclosure
sale. Each of these arguments is premised on a faulty assumption—that appellees’
tortious-interference claim is based on events that occurred after the May 3, 2011
foreclosure sale. In Question No. 8 of the charge, the jury was asked: “Did VHSC
intentionally interfere with Pike’s Management Agreement prior to May 4, 2011?” The
jury answered Question No. 8 in the affirmative. And based on the evidence outlined
above with respect to Pike’s Management Agreement, a rational factfinder could have
concluded that VHSC induced Pike to share EMC Cement’s confidential information—
an act that was prohibited by Pike’s Management Agreement—long before the
foreclosure sale for purposes of filing the patent application and to produce and market
VHSC cement. We therefore conclude that the evidence contains legally- and factually-
sufficient evidence to support the jury’s finding that VHSC tortiously interfered with
Pike’s Management Agreement. See Prudential Ins. Co. of Am., 29 S.W.3d at 77; see also
Reyes, 272 S.W.3d at 592; City of Keller, 168 S.W.3d at 822; Cain, 709 S.W.2d at 176.
And finally, VHSC and Pike also challenge the jury’s conspiracy finding. While
we agree that Pike cannot be liable for interfering with his own Management Agreement,
see, e.g., In re Vesta Ins. Group, Inc., 192 S.W.3d 759, 761 (Tex. 2006), we note that we have
already determined that legally- and factually-sufficient evidence supports the jury’s
finding that VHSC and Pike misappropriated EMC Cement’s trade secrets and that
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 29 VHSC tortiously interfered with Pike’s Management Agreement. Thus, VHSC and Pike’s
liability is not based on the jury’s conspiracy finding, but on findings of direct liability.
Nevertheless, throughout this memorandum opinion, we document VHSC and Pike’s
involvement in the conspiracy to default on EMC Products’ loans, sell EMC Products’
assets at a foreclosure sale, and form a new company, VHSC, using the trade-secret
information and technology obtained from EMC Cement.
As stated earlier, “once a civil conspiracy is found, each co-conspirator is
responsible for the action of any of the co-conspirators which is in furtherance of the
unlawful combination.” Akin, 661 S.W.2d at 921; see Carroll, 592 S.W.2d at 926.
Additionally, because we have upheld the jury’s conspiracy finding, all co-conspirators
are jointly and severally liable for actual damages resulting from acts in furtherance of
the conspiracy. See Carroll, 592 S.W.2d at 925-26; Sandt, 401 S.W.3d at 220 (“The concept
of civil conspiracy is sometimes used by a plaintiff as a basis for establishing joint and
several liability among several defendants, some of whom may not have committed a tort
by their own conduct.”); Moody, 161 S.W.3d at 90. Accordingly, we conclude that the
jury’s conspiracy finding against VHSC and Pike is supported by legally- and factually-
sufficient evidence. See Akin, 661 S.W.2d at 921; Carroll, 592 S.W.2d at 296; Sandt, 401
S.W.3d at 220; Moody, 161 S.W.3d at 90; see also Reyes, 272 S.W.3d at 592; City of Keller, 168
S.W.3d at 822; Cain, 709 S.W.2d at 176. We therefore overrule VHSC and Pike’s second
issue.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 30 VII. THE DAMAGES & ATTORNEY’S FEES AWARDS6
In their third through fifth issues, VHSC and Pike make numerous challenges to
the damages award. Specifically, they assert that the evidence supporting the damages
award is conclusory and speculative and, thus, is not sufficient. Additionally, they
contend that appellees’ damage model is not competent evidence; the record contains no
evidence of “costs saved” damages; the trial court’s judgment improperly allowed
appellees to recover multiple times for the same injury; and that the trial court’s judgment
incorrectly calculated the deficiency judgment. Moreover, in their first issue, Walker,
Wilson, and Few Ready Mix join in the arguments made by VHSC and Pike and also
assert that appellees’ damage model is not a proper “lost profits” or “market value”
model; that appellees’ expert opinions are mixed with fact and fiction and cannot support
the damages award; and that EMC Cement cannot recover under a damage model that is
6 On appeal, appellees argued that any damages complaints were waived pursuant to Coastal Transport Co. v. Crown Central Petroleum Corp., 136 S.W.3d 227 (Tex. 2004) and Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402 (Tex. 1998)—which the former held that an objection is required to challenge expert testimony on the basis of underlying methodology, technique, or foundational data used by the witness. However, recent commentators have noted the following:
At the time Coastal Transport exception may have been viewed as a narrow one. But in subsequent cases, the Court has defined “conclusory” and “speculative” to incorporate a broad array of reliability challenges, and as a result, the Coastal Transport exception to Maritime Overseas’s objection requirement has nearly swallowed the rule. Thus, in Texas, appellate challenges to expert evidence are routinely raised and decided under a legal- sufficiency rubric, not the admissibility rubric.
Harvey Brown & Melissa Davis, Eight Gates for Expert Witnesses: Fifteen Years Later, 52 HOUS. L. REV. 1, 46- 47 (2014); see generally Houston Unlimited, Inc. v. Mel Acres Ranch, 443 S.W.3d 820 (Tex. 2014); City of San Antonio v. Pollock, 284 S.W.3d 809 (Tex. 2009). Therefore, despite the fact that appellants did not object in the trial court regarding damages, given the trend of allowing parties to challenge expert-witness testimony under the legal-sufficiency rubric, we will address appellants’ damages complaints in this appeal.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 31 premised on the diminished value of a partnership interest. Walker, Wilson, and Few
Ready Mix also challenge the attorney’s fees award.
A. Modification of the Amended Final Judgment
The Amended Final Judgment awarded the following damages:
For misappropriation of trade secrets and conspiracy, the trial court awarded EMC Cement $1.5 million from VHSC, Pike, Walker, Wilson, and Few Ready Mix, jointly and severally, as well as pre- and post-judgment interest.
For tortious interference with Pike’s Management Agreement, the trial court awarded EMC Products $7 million from VHSC, Pike, Walker, Wilson, and Few Ready Mix, jointly and severally, as well as pre- and post-judgment interest.
For breach of the Management Agreement, the trial court awarded EMC Products $1 million from Pike, as well as pre- and post-judgment interest.
For breach of the Partnership Agreement, the trial court awarded EMC Cement $7 million from Walker and Wilson, jointly and severally, as well as pre- and post-judgment interest.
Additionally, the trial court awarded EMC Cement $580,000 in attorney’s fees from Walker and Wilson, as well as attorney’s fees for appeals to this Court and the Texas Supreme Court.
At the outset of our analysis, we note that appellees have conceded that Pike
cannot be liable for intentionally interfering with his own contract—the Management
Agreement. See In re Vesta Ins. Group, Inc., 192 S.W.3d at 761 (“The obligation not to
interfere with existing contracts is a general obligation imposed by law. But it is not
imposed on the parties to that contract, as ‘a party cannot tortiously interfere with its own
contract.’” (quoting Holloway v. Skinner, 898 S.W.2d 793, 796 (Tex. 1995)) (emphasis in
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 32 original)). As such, the Amended Final Judgment should be modified to remove Pike’s
liability for the tortious-interference-with-the-Management-Agreement claim.
B. Applicable Law
We now endeavor to analyze the remaining damage awards. “In determining
damages, the jury has discretion to award damages within the range of evidence
presented at trial.” Gulf States Utils. Co. v. Low, 79 S.W.3d 561, 566 (Tex. 2002) (citing Price
Pfister, Inc. v. Moore & Kimmey, Inc., 48 S.W.3d 341, 352 (Tex. App.—Houston [14th Dist.]
2001, pet. denied)). Lost profits must be shown by competent evidence with reasonable
certainty. Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 504 (Tex. 2001). At a minimum,
opinions or estimates of lost profits “must be based on objective facts, figures, or data
from which the lost-profits amount may be ascertained.” Id. In most instances, when
conducting a lost-profit analysis, you look to past profits and adjust these numbers based
on the surrounding circumstances to determine what the lost profit for a certain time
period should be. Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279
(Tex. 1994).
However, where no history of relevant past profits exists, such as the case here, a
historically-unprofitable business must produce “some other objective data, such as
future contracts, from which lost profits can be calculated with reasonable certainty.”
Helena Chem. Co., 47 S.W.3d at 505. “Revenue forecasting[,] as in a lost[-]income
analysis[,] must be based on objective facts or data and established to a reasonable
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 33 certainty.” M&A Tech., Inc. v. iValue Group, Inc., 295 S.W.3d 356, 366 (Tex. App.—El Paso
2009, pet. denied) (citing Helena Chem Co., 47 S.W.3d at 505).
“When an expert opinion is admitted into evidence without objection, ‘it may be
considered probative evidence even if the basis for the opinion is unreliable.’” Houston
Unlimited, Inc. v. Mel Acres Ranch, 443 S.W.3d 820, 829 (Tex. 2014) (quoting City of San
Antonio v. Pollock, 284 S.W.3d 809, 818 (Tex. 2009)). “‘But if no basis for the opinion is
offered, or the basis offered provides no support, the opinion is merely a conclusory
statement and cannot be considered probative evidence, regardless of whether there is
no objection.’” Id. (citing Pollock, 284 S.W.3d at 818). “This is because the evidentiary
value of expert testimony is derived from its basis, not from the mere fact that the expert
has said it.” Id. (citations omitted).
C. Discussion
On appeal, many of appellants’ arguments on damages center on the proposition
that Lygren’s opinion is unreliable and suffers from analytical gaps because it is allegedly
based on speculation and improper data. In particular, appellants challenge Lygren’s
assumption of a 19% annual growth rate through 2021, Miller’s assumption of an 11-18%
annual growth rate through 2018, and projections of rising sales prices and volumes,
despite EMC Products’ track record of unprofitability.
Expert testimony is unreliable if “there is simply too great an analytical gap
between the data [relied upon] and the opinion proffered.” Gammill v. Jack Williams
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 34 Chevrolet, Inc., 972 S.W.2d 713, 726 (Tex. 1998) (internal citations omitted). An expert must
“connect the data relied on and his or her opinion” and “show how that data is valid
support for the opinion reached.” Whirlpool Corp. v. Camacho, 298 S.W.3d 631, 642 (Tex.
2009) (citing Pollock, 284 S.W.3d at 819-20; Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d
897, 906 (Tex. 2004); Gammill, 972 S.W.2d at 726). “We are not required . . . to ignore fatal
gaps in an expert’s analysis or assertions that are simply incorrect.” Volkswagen of Am.,
Inc., 159 S.W.3d at 912. “A flaw in the expert’s reasoning from the data may render
reliance on a study unreasonable and render the differences drawn therefrom dubious.
Under that circumstance, the expert’s scientific testimony is unreliable and, legally, no
evidence.” Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 714 (Tex. 1997).
1. Lygren’s Testimony About the Value of EMC Products
At trial, Lygren testified that the value of the Texas EMC business related to the
Jewett plant, including EMC technology was “about $12 million, excluding the value of
the plant itself” before the foreclosure sale. After the foreclosure sale, the business was
valued at zero. Later, Lygren stated that the value of the plant as carried on the books of
EMC Products as of March 2011 was “about $4 million.” Lygren purportedly arrived at
these values based on two theories: (1) a comparison of EMC Products’ operation in
Texas to the proposed partnership with C-Change in California; and (2) EMC Products’
financial records from 2006-2010, Pike’s projections about future growth, historical
records of cement sales in Texas, and generally-accepted accounting methods.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 35 Lygren’s assessment that the business had fair-market value of $12 million prior to the
foreclosure sale was based on an evaluation of EMC Products’ projected EBITDA7 for the
years 2011 through 2020. Lygren, an individual with a Bachelor of Science in Business
from the Norwegian School of Business and over forty years’ of experience in business,
testified that EBITDA is recognized and commonly used for assessing the value of a
business. Appellants’ damages expert, Todd Burchett, agreed that an EBITDA-based
analysis is an acceptable valuation methodology, though he asserted that the
methodology was not properly applied in this case.
In any event, Lygren noted that he arrived at his valuation by considering the
following: (1) EMC Products’ financial statements from 2006-10, which notably reflected
positive EBITDA figures; (2) Federal Accounting Standards and Procedures; (3)
International Private Equity Fund and Venture Capital Guidelines; (4) Pike’s projections
for EMC Products’ earnings and expenses for 2011; (5) American Coal Ash Association
reports on consumption and production of fly ash in the United States; (6) United States
Geological Survey reports on cement consumption in Texas; and (7) deposition testimony
of Walker. Using this information, Lygren made the following determinations: (1) the
amount of Portland Cement that was sold in Texas from 2005-2012; (2) the market
potential for CemPozz, a substitute product for Portland Cement; (3) market penetration
7 EBITDA is described as the business’s earnings before interest, tax, depreciation, and amortization.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 36 for CemPozz from 2005-2010, which Lygren characterized as having “significant upside
potential”; (4) EMC Products’ average EBITDA from 2006-2010 as $458,003;8 (5) the
volume of products EMC Products would have sold in 2011 (86,273 tons); (6) the price
per ton sale price EMC Products would have received in 2011 ($52.97), based on sales
prices from 2006-10; (7) cost of goods sold per ton for 2011 ($34.52), based on costs from
2006-10; and (8) administrative, sales, and marketing costs for 2011, based on Pike’s
estimates ($573,328 for general administrative expenses and $199,291 for sales and
marketing). Using these figures, Lygren extrapolated that EMC Products would have
had an EBITDA of $819,083 for 2011. When using a 20% inflation rate to discount cash
flows over a nine-year period, Lygren calculated the net present value of the EBITDA of
2011 to be $682,569.
Next, Lygren projected a 19% annual increase in sales volume from 2012 through
2020. This projection was based on a 48% increase in sales volume that Pike estimated
for 2011 over 2010 and EMC Products’ historical market penetration, which was small at
the time of the foreclosure sale. Additionally, Lygren projected the selling price per ton
that EMC Products would receive for sales from 2012 through 2020, based on prices from
2005 to 2010. The price projections increased from $55.26 per ton in 2012 to $73.61 per ton
in 2020. Lygren did the same for cost of goods sold and administrative, sales, and
8 Lygren recounted that EMC Products’ EBITDA for 2006-10 was as follows: (1) $506,149 for 2006; (2) $745,071 for 2007; (3) $389,914 for 2008; (4) $461,499 for 2009; and (5) $187,308 for 2010.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 37 marketing costs for 2012 through 2020. With respect to administrative, sales, and
marketing costs, Lygren applied a 1.5% inflation rate. From these figures, Lygren derived
a yearly EBITDA for 2012 through 2020, and after applying the previously-mentioned
20% discount rate, Lygren determined the present value of the EBITDA figures for 2012
through 2020.
Based on the foregoing testimony, we cannot say that Lygren’s testimony was
unreliable on its face. See Beaumont v. Basham, 205 S.W.3d 608, 621 (Tex. App.—Waco
2006, pet. denied) (concluding that an expert opinion was not speculative or conclusory
because it was based on billing records and personal knowledge); Durham Transp. Co. v.
Beettner, 201 S.W.3d 859, 868 n.5 (Tex. App.—Waco 2006, pet. denied) (“Here, the
orthopedic surgeon based her opinions on her 2 physical examinations of Thomas,
Thomas’s reports of her symptoms and medical history, CT scans, x-rays, and Thomas’s
progress in physical therapy. Accordingly, we reject Durham’s contention that the
surgeon’s testimony on its face is conclusory or speculative.”); see also Lockhart v.
McCurley, No. 10-11-00073-CV, 2013 Tex. App. LEXIS 4075, at **30-31 (Tex. App.—Waco
Mar. 28, 2013, no pet.) (mem. op.) (holding that an expert opinion regarding the value of
a business was not speculative or conclusory because the expert explained the data he
relied on and his methodology). In fact, Lygren’s testimony was based on widely-
accepted valuation methodology and was supported by data, including government
records, EMC Products’ financial records, and Pike’s own estimate of EMC Products’
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 38 future sales and expenses. Given the number of sources Lygren relied upon and Lygren’s
extensive testimony explaining how he arrived at his valuation, we do not believe that
Lygren’s testimony about the valuation of the business constituted ipse dixit. See Earle v.
Ratliff, 998 S.W.2d 882, 890 (Tex. 1999) (“An expert’s simply ipse dixit is insufficient to
establish a matter; rather, the expert must explain the basis of his statements to link his
conclusions to the facts.” (emphasis in original)); see also Natural Gas Pipeline Co. of Am. v.
Justiss, 397 S.W.3d 150, 156 (Tex. 2012) (“‘If an expert br[ings] to court little more than his
credentials and a subjective opinion,’ his testimony will not support a judgment.”
(quoting Havner, 953 S.W.2d at 712)) .
2. Testimony About Misappropriation-of-Trade-Secret Damages
Appellants also complain about Lygren’s testimony regarding damages sustained
for misappropriation of trade secrets.
Damages in trade secret cases can take a variety of forms. The variety of approaches demonstrates the flexible and imaginative methods employed. The methods used to calculate damages include the value of the plaintiff’s lost profits; the defendant’s actual profits from the use of the secret; the value that a reasonably prudent investor would have paid for the trade secret; the development costs the defendant avoided by the misappropriation; and a “reasonable royalty.” Courts adjust the measure of damages to accord with the commercial setting of the injury, the likely future consequences of the misappropriation, and the nature and extent of the defendant’s use of the trade secret. Each case is controlled by its own peculiar facts and circumstances.
Sw. Energy Prod. Co., 411 S.W.3d at 608-09 (internal citations & quotations omitted).
The law does not require absolute certainty as to the amount of lost profit. While damages may not be determined by mere speculation or guess, it will Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 39 be enough if the evidence show[s] the extent of the damages as a matter of just and reasonable inference, although the result be only approximate.
Downtown Realty, Inc. v. 509 Tremont Bldg., Inc., 748 S.W.2d 309, 313 (Tex. App.—Houston
[14th Dist.] 1988, no writ); see Szczepanik v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex.
1994) (per curiam); see also Wellogix, Inc. v. Accenture, L.L.P., No. 11-20816, 2013 U.S. App.
LEXIS 25944, at **22-27 (5th Cir. May 15, 2013).
In the instant case, the jury was tasked with determining EMC Cement’s trade-
secret damages based on “the costs saved by VHSC as a result of its use . . . of the Trade
Secrets in Texas” and the value of the use of the trade secrets to a reasonably-prudent
investor. The record evidence reflects that EMC Cement’s technology and trade secrets
were developed for many years at a cost of millions of dollars. Lygren noted that he
personally invested $20 million in the development of technology that ultimately resulted
in the CemPozz and PozzoSlag products.
Presumably, VHSC saved some on development costs, especially given that we
have affirmed VHSC’s liability under appellees’ misappropriation-of-trade-secrets claim.
However, appellees do not direct us to record evidence reflecting the amount of
development costs saved by VHSC as a result of the misappropriation. Lygren’s
testimony about his personal investment in the entire EMC business is not enough to
support the jury’s conclusion that VHSC saved $1.5 million in development costs as a
result of the misappropriation of EMC Cement’s trade secrets. See Houston Mercantile
Exch. Corp. v. Dailey Petroleum Corp., 930 S.W.2d 242, 248 (Tex. App.—Houston [14th Dist.] Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 40 1996, no writ) (finding that, as a threshold requirement to recovering damages in trade-
secret and unfair-competition claims, “a plaintiff must produce evidence from which the
jury may reasonably infer that the damages sued for have resulted from the conduct of
the defendant.”). Lygren’s personal investment could have been used to finance other
business expenses across EMC’s entire business enterprise just as easily as it could have
been used to finance trade-secret technology. See MGE UPS Sys. v. GE Consumer & Indus.,
Inc., 622 F.3d 361, 369 (5th Cir. 2010) (applying Texas law, and finding no evidence of
trade-secret damages where “MGE has not presented evidence that provides any means
of distinguishing revenue PMI gained from other sources from revenue gained through
misappropriation of MGE’s trade secrets, let alone a calculation of profits from the
relevant portion of revenue”) And though damages in trade-secret cases can be flexible
and imaginative, appellees have not proffered sufficient evidence for the jury to have
made a just and reasonable inference regarding development costs saved by VHSC. See
Szczepanik, 883 S.W.2d at 649; Sw. Energy Prod. Co., 411 S.W.3d at 608-09; Houston
Mercantile Exch. Corp., 930 S.W.2d at 248; Downtown Realty, Inc., 748 S.W.2d at 313; see also
Wellogix, Inc., 2013 U.S. App. LEXIS 25944, at **22-27. Instead, the jury was left to
speculate or guess about the amount VHSC saved in development costs based on the
misappropriation of EMC Cement’s trade secrets, which does not constitute legally-
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 41 sufficient evidence.9 See Downtown Realty, Inc., 748 S.W.2d at 313; see also Reyes, 272
S.W.3d at 592; City of Keller, 168 S.W.3d at 822.
3. Paula’s Miller’s Expert Testimony
Appellees also presented the testimony of Paula Miller, by deposition, regarding
the value of EMC Products. Miller is a financial consultant with an MBA in finance and
a Master of Science in accounting. Previously, Miller worked for Coopers & Lybrand and
has had her own consulting firm since 1996. In her deposition testimony, Miller reviewed
EMC Products’ balance sheets, profit-and-loss statements, and EBITDA statements from
2003 through March of 2011. Miller asserted that she applied general business valuation
standards of the American Society of Appraisers and the American Institute of Certified
Public Accountants in arriving at her valuation of the business. Miller recounted that she
used the EBITDA figures from 2006 through March of 2011 to forecast future earnings
9 However, despite our conclusion that the damage theory based on the development costs saved by VHSC is not supported by legally-sufficient evidence, we can still affirm the $1.5 million award for misappropriation of trade secrets. In the charge, the jury was asked to calculate damages for misappropriation of trade secrets based on: (1) the value that a reasonably prudent investor would have paid for use of the trade secrets in Texas; and (2) development costs saved by VHSC. In its order granting, in part, appellants’ motion for JNOV, the trial court set aside the jury’s $1.5 million award with respect to the value a reasonably prudent investor would have paid for use of the trade secrets in Texas. We believe that the trial court erred in setting aside that finding. See TEX. R. CIV. P. 301; see also Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 830 (Tex. 2009); Brown v. Bank of Galveston, 963 S.W.2d 511, 513 (Tex. 1998). Instead, as shown above, the trial court should have set aside the finding premised on development costs saved. Because the trial court erred, we reverse the portion of the JNOV setting aside the jury’s finding in Question 2(a) of the jury charge and reinstate that finding as support for appellees’ misappropriation-of- trade-secrets claim. See John Masek Corp. v. Davis, 848 S.W.2d 170, 173 (Tex. App.—Houston [1st Dist.] 1992, writ denied) (noting that if there is more than a scintilla of competent evidence to support the jury’s findings, the JNOV will be reversed) (citing Navarette v. Temple Indep. Sch. Dist., 706 S.W.2d 308, 309 (Tex. 1986)).
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 42 based on a seven-year business cycle and determined that the fair market value of EMC
Products in May 2011 was approximately $5.3 million, not including plant and
equipment.
As was the case with Lygren, appellants challenge Miller’s testimony on the
ground that it is unreliable because it is based on faulty data. And similar to Lygren,
appellants did not raise this challenge during trial or when either Lygren or Miller
testified. Nevertheless, like Lygren, we cannot say that Miller’s testimony was unreliable
on its face. See Beaumont, 205 S.W.3d at 621; Durham Transp. Co., 201 S.W.3d at 868 n.5; see
also Lockhart, 2013 Tex. App. LEXIS 4075, at **30-31. Miller’s testimony was based on
widely-accepted EBITDA-valuation methodology and was supported by data, including
EMC Products’ financial records. Furthermore, Miller linked the basis of her testimony
with her conclusions about the value of the business. We therefore cannot say that
Miller’s testimony was founded on unsupported assumptions and, thus, incompetent.
See Earle, 998 S.W.2d at 890; see also Justiss, 397 S.W.3d at 156; Havner, 953 S.W.2d at 712.
4. Harry Swanstrom’s Testimony
The record reflects that Harry Swanstrom and his company, Swanstrom
Engineering, designed, built, and acquired equipment for EMC Products’ plant in 2003.
Swanstrom continued to work on the plant through at least 2005. At trial, Swanstrom
testified that the value of the plant and equipment was $4.1 million in May 2011, when
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 43 the foreclosure sale took place—a figure roughly 75% of the price VHSC paid for EMC
Products’ assets at a foreclosure sale.
On appeal, appellant challenge Swanstrom’s testimony on two grounds: (1) his
method; and (2) the reliability of his evidence. Specifically, with respect to Swanstrom’s
method, appellants contend that he improperly used the replacement value of the
equipment as a basis for his opinion.
“Fair market value has been defined as ‘the price which the property would bring
when it is offered for sale by one who desires, but is not obliged to sell, and is bought by
one who is under no necessity of buying it.’” Burns v. Rochon, 190 S.W.3d 263, 270 (Tex.
App.—Houston [1st Dist.] 2006, no pet.) (quoting City of Austin v. Cannizzo, 153 Tex. 324,
267 S.W.2d 808, 815 (1954)). However, when property has no readily ascertainable fair
market value, “the measure of damages is the actual value of the property to the owner
at the time of its loss.” Id. (citing Crisp v. Sec. Nat’l Ins. Co., 369 S.W.2d 326 (Tex. 1963)).
“The actual value measure of damages has frequently been employed in cases of
conversion involving furniture and equipment used in the operation of restaurants and
bars.” Id. (citations omitted).
In determining both fair market value and actual value, courts have considered the purchase price paid by an owner, particularly when evidence of the purchase price is neither objected to nor controverted. See Wutke v. Yolton, 71 S.W.2d 549, 552 (Tex. Civ. App.—Beaumont 1934, writ ref’d) (holding that purchase price is probative of actual value); San Antonio Pub. Serv. Co. v. Murray, 59 S.W.2d 851, 854 (Tex. Civ. App.—Beaumont 1933) (holding that purchase price is probative of fair market value when it is the only evidence admitted regarding value and its admission is not Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 44 objected to). No matter what measure of damages is employed in establishing the value of the converted property, “it is well settled that the owner of property can testify as to his opinion regarding the value of his own property . . . even if the owner’s testimony is halting and indefinite it nonetheless will be sufficient to sustain a verdict when there is no controverting evidence.” Espinosa v. Schomberg, 601 S.W.2d 161, 164 (Tex. Civ. App.—Waco 1980, writ ref’d n.r.e.).
Id. at 270-71.
Here, Swanstrom testified that there was no way to establish a fair market value
for the used equipment in the facility. Accordingly, he based his opinion on the purchase
price of the equipment, plus a 20% escalation factor that he applied based on his
experience in pricing equipment. This testimony was offered without objection, and it
was unrebutted. Therefore, in light of Burns and other case law cited above, we cannot
say that the measure of damages used by Swanstrom was improper. See id. at 270-71; see
also Yolton, 71 S.W.2d at 552; Murray, 59 S.W.2d at 854.
Additionally, appellants contend that Swanstrom’s testimony was unreliable. We
reject this argument as the record indicates that Swanstrom based his testimony on his
experience both in pricing equipment and as the designer and builder of the plant
equipment involved in this case. Thus, we conclude that Swanstrom sufficiently linked
his testimony with his conclusions regarding the value of the plant equipment. See Earle,
998 S.W.2d at 890; see also Justiss, 397 S.W.3d at 156; Havner, 953 S.W.2d at 712.
5. The One-Satisfaction Rule
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 45 Under Texas law, “[t]here can be but one recovery for one injury, and the fact that
more than one defendant may have caused the injury or that there may be more than one
theory of liability, does not modify this rule.” Stewart Title Guar. Co. v. Sterling, 822 S.W.2d
1, 8 (Tex. 1991); see Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 303 (Tex. 2006).
However, “a ‘jury’s award is not duplicative simply because it allocated damages under
two distinct causes of action.” Aspen Tech., Inc. v. M3 Tech, Inc., 569 F. App’x 259, 271 (5th
Cir. 2014) (not designated for publication) (quoting Indu Craft, Inc. v. Bank of Baroda, 47
F.3d 490, 497 (2d Cir. 1995)); see DSC Comm’cns Corp. v. Next Level Comm’cns, 107 F.3d 322,
330 (5th Cir. 1997) (“The damage model Sears presented showed the total damages
allocated to Next Level’s alleged wrongful conduct. The jury then allocated damages to
each different cause of action. DSC was not obligated to precisely apportion damages for
each instance of wrongful conduct it alleged, as unitary damages models are permissible
under Texas law.” (citing Bildon Farms, Inc. v. Ward County Improvement Dist., No. 2, 415
S.W.2d 890, 896 (Tex. 1967))). In other words, “a court may rationally conclude that the
jury found that the plaintiff suffered that amount of injuries and ‘merely allocated that
amount between the two different causes of action.” Aspen Tech., Inc., 569 F. App’x at 271
(citing Indu Craft, Inc., 47 F.3d at 497).
Here, the Amended Final Judgment awarded, among other things, $7 million to
EMC Products on the claim involving tortious interference with Pike’s Management
Agreement; $7 million to EMC Cement for the claim of breach of the Partnership
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 46 Agreement; and $1 million to EMC Products for the breach of the Management
Agreement claim. These figures were based on the aforementioned unchallenged
testimony regarding the value of the EMC Products business and assets at the time of the
foreclosure sale. And based on the foregoing case law, and our affirmance of appellants’
underlying liability, the jury was entitled to allocate the damages between the three
causes of action without violating the one-satisfaction rule. See Aspen Tech, Inc., 569 F.
App’x at 271; DSC Comm’cns Corp., 107 F.3d at 330; Indu Craft, Inc., 47 F.3d at 497; see also
Bildon Farms, Inc., 415 S.W.2d at 896.
6. Attorney’s Fees
Next, Walker, Wilson, and Few Ready Mix challenge the attorney’s fees award,
arguing that the trial court should not have granted the fees because billing records were
not produced until trial; there was no proof of presentment; the fees were not segregated;
and the only support for the award was the breach-of-the-Partnership-Agreement claim,
which Walker, Wilson, and Few Ready Mix contend should be reversed and rendered.
At the outset, we reject the argument that the attorney’s fees award should be
reversed based on the breach-of-the-Partnership-Agreement claim. Earlier, we held that
the evidence supporting that claim is sufficient. Furthermore, Walker, Wilson, and Few
Ready Mix have not provided any citations to case law or the record to support this
argument. See TEX. R. APP. P. 38.1(i).
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 47 Walker, Wilson, and Few Ready Mix also complain that the billing records were
not produced at trial. Essentially, Walker, Wilson, and Few Ready Mix contend that the
trial court abused its discretion in admitting the billing records at trial. We review a trial
court’s decision to admit or exclude evidence for an abuse of discretion. See City of
Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex. 1995); see also Cady v. Cargile, No. 10-13-
00026-CV, 2015 Tex. App. LEXIS 4501, at *9 (Tex. App.—Waco Apr. 30, 2015, no pet.)
(mem. op.) (citing Bay Area Healthcare Group, Ltd. v. McShane, 239 S.W.3d 231, 234 (Tex.
2007)). A trial court exceeds its discretion if it acts in an arbitrary or unreasonable manner
or without reference to guiding rules or principles. See Bowie Mem’l Hosp. v. Wright, 79
S.W.3d 48, 52 (Tex. 2002). When reviewing matters committed to the trial court’s
discretion, we may not substitute our own judgment for the trial court’s judgment. Id.
And we must uphold the trial court’s evidentiary ruling if there is any legitimate basis
for the ruling. Owens-Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998).
At the hearing on attorney’s fees, counsel for Walker, Wilson, and Few Ready Mix
argued that requests for production were propounded, but records of fee billings were
not produced until well into trial on April 30, 2011. Counsel for appellees explained the
numbers of hours spent by counsel in this trial and that a lot of effort was made to get up
to speed on this case both before and after trial days. Counsel further asserted that “it
takes more time to represent the plaintiff than it does to represent the defendant. . . . But
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 48 the time that I testified to was time that was actually spent.” The trial court took the
matter under advisement, but eventually admitted the fee records into evidence.
Texas Rule of Civil Procedure 193.6(a) provides that a party who fails to make,
amend, or supplement a discovery response in a timely manner may not introduce the
untimely information in evidence unless the court finds good cause or no unfair surprise
or prejudice to the other parties. See TEX. R. CIV. P. 193.6(a). On appeal, Walker, Wilson,
and Few Ready Mix do not address the exception for unfair surprise or prejudice, but
rather focus on good cause. Given that counsel for appellees explained that the fees
corresponded with work associated with trial—largely an event attended by all parties
in this case, we cannot say that the record demonstrates a finding of unfair surprise or
prejudice. See id. at R. 193.6(b). Therefore, we cannot say that the trial court abused its
discretion in admitting the billing records. See McShane, 239 S.W.3d at 234; Alvarado, 897
S.W.2d at 753; see also Cady, 2015 Tex. App. LEXIS 4501, at *9.
Walker, Wilson, and Few Ready Mix also complain that appellees did not properly
present the underlying claim. To recover attorney’s fees under Chapter 38 of the Texas
Civil Practice and Remedies Code,
(1) the claimant must be represented by an attorney;
(2) the claimant must present the claim to the opposing party or to a duly authorized agent of the opposing party; and
(3) payment for the just amount owed must not have been tendered before the expiration of the 30th day after the claim is presented.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 49 TEX. CIV. PRAC. & REM. CODE. ANN. § 38.002 (West 2015). The purpose of the presentment
requirement is to allow the person against whom the claim is asserted an opportunity to
pay a claim within thirty days of receiving notice of the claim without incurring an
obligation for attorney’s fees. See Jones v. Kelley, 614 S.W.2d 95, 100 (Tex. 1981).
Presentment requires no particular form; all that is necessary is an assertion of a debt or
claim, a request for payment, and the opposing party’s refusal to pay. Id.; see Standard
Constructors, Inc. v. Chevron Chem. Co., 101 S.W.3d 619, 627 (Tex. App.—Houston [1st
Dist.] 2003, pet. denied). “When the question of attorney’s fees is submitted to the court,
the court may consider the entire case file to determine whether presentment was made.”
Bethel v. Norman Furniture Co., 756 S.W.2d 6, 8 (Tex. App.—Houston [1st Dist.] 1988, no
writ) (citing Carrington v. Hart, 703 S.W.2d 814, 818 (Tex. App.—Austin 1988, no writ));
see TEX. CIV. PRAC. & REM. CODE ANN. § 38.004(1) (West 2015).
The claimant bears the burden to plead and prove presentment of its contract claim
and that the party failed to tender performance. See Ellis v. Waldrop, 656 S.W.2d 902, 905
(Tex. 1983) (op. on reh’g). “But when a claimant avers in its petition that all conditions
precedent to recovery have occurred or have been performed, it is required to prove only
those conditions precedent that have specifically been denied by the opposing party.”
Shin-Con Dev. Corp. v. I.P. Invs., Ltd., 270 S.W.3d 759, 768 (Tex. App.—Dallas 2008, pet.
denied) (citing TEX. R. CIV. P. 54); see Belew v. Rector, 202 S.W.3d 849, 857 (Tex. App.—
Eastland 2006, no pet.).
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 50 In the instant case, EMC Cement pleaded “[a]ll conditions precedent necessary for
the enforcement of the Partnership Agreement, the Management Agreement, and the
License Agreement have been satisfied, fulfilled, or excused.” Walker, Wilson, and Few
Ready Mix responded “that all conditions precedent necessary for enforcement of the
Partnership Agreement have not occurred.” By failing to specifically deny that appellees
failed to present their contract claim as required by statute, Walker, Wilson, and Few
Ready Mix have waived their right to complain of such failure on appeal. See Shin-Con
Dev. Corp., 270 S.W.3d at 768 (citing Gill Sav. Ass’n v. Int’l Supply Co., Inc., 759 S.W.2d 697,
701 (Tex. App.—Dallas 1988, writ denied)); see also TEX. R. CIV. P. 54 (“In pleading the
performance or occurrence of conditions precedent, it shall be sufficient to aver generally
that all conditions precedent have been performed or have occurred. When such
performance or occurrences have been so plead, the party so pleading same shall be
required to prove only such of them as are specifically denied by the opposite party.”).
And finally, we address Walker, Wilson, and Few Ready Mix’s contention that the
attorney’s fees should have been segregated. An appellate court reviews a trial court’s
decision on the award of attorney’s fees for an abuse of discretion. Bocquet v. Herring, 972
S.W.2d 19, 21 (Tex. 1998). “Whether to award attorney’s fees, and to which party, is a
decision that is solely within the trial court’s discretion and will not be reversed absent a
clear abuse of that discretion.” Sammons v. Elder, 940 S.W.2d 276, 284 (Tex. App.—Waco
1997, writ denied).
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 51 Ordinarily, fees claimants must segregate fees between claims for which they are
recoverable and claims for which they are not. Chapa, 212 S.W.3d at 311. Moreover, the
need to segregate fees is a question of law that appellate courts review de novo. See id. at
312. However, a recognized exception to the duty to segregate arises when the attorney’s
fees rendered are in connection with claims arising out of the same transaction and are
so interrelated that their “prosecution or defense entails proof or denial of essentially the
same facts.” Sterling, 822 S.W.2d at 10; see Ski River Dev., Inc. v. McCalla, 167 S.W.3d 121,
143 (Tex. App.—Waco 2005, pet. denied). “Therefore, when the causes of action involved
in the suit are dependent upon the same set of facts or circumstances and thus are
‘intertwined to the point of being inseparable,’ the party suing for attorney’s fees may
recover the entire amount covering all claims.” McCalla, 167 S.W.3d at 143 (quoting
Sterling, 822 S.W.2d at 11).
At the hearing on attorney’s fees in this case, the trial court heard testimony that
appellees’ contract claims against Walker and Wilson were too intertwined with the other
claims in the case to segregate. The record evidence supports this contention, especially
given that Walker and Wilson’s breaches of the Partnership Agreement were closely
linked with the conspiracy to end the EMC Products partnership and misappropriate
EMC Cement’s trade secrets for a new competitor in the cement business, VHSC.
Accordingly, based on the record before us, we cannot say that the trial court abused its
discretion in accepting appellees’ testimony that the claims were too intertwined to
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 52 segregate and awarding appellees’ attorney’s-fees request. See Bocquet, 972 S.W.2d at 21;
Sterling, 822 S.W.2d at 10-11; McCalla, 167 S.W.3d at 143; see also Classic Superoof LLC v.
Bean, No. 05-12-00941-CV, 2014 Tex. App. LEXIS 11365, at **23-24 (Tex. App.—Dallas Oct.
14, 2014, pet. denied) (mem. op.) (finding no abuse of discretion where the trial court did
not require the segregation of attorney’s fees because the testimony established that the
claims at issue were inextricably intertwined).
7. Walker and Wilson’s Monthly Payments to Texas Central Bank
Walker and Wilson also argue that they are entitled to recover sums they “loaned”
to EMC Products. Their claim is premised on the jury’s award of $250,000 to Walker and
Wilson for “unpaid loans made to EMC Products,” which they contend omits funds that
are still owed. Specifically, Walker and Wilson allege that they should be reimbursed for
the $25,000 monthly principal payments made to the bank from July 2009 to December
2010.
At the outset, we note that Walker and Wilson have not cited any authority to
support their claim for these amounts. See TEX. R. APP. P. 38.1(i). Moreover, under the
express terms of the Partnership Agreement, any payments made by Walker and Wilson
to the bank as a result of their personal guarantees were deemed to be additional capital
contributions to the partnership, rather than loans. Specifically, section 2.6 of the
Partnership Agreement provided:
Deemed Additional Capital Contributions. A Partner shall be deemed to have made an additional Capital Contribution to the Partnership if and to Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 53 the extent: (i) such Partner makes any payment to a creditor of the Partnership because of personal liability thereon; or (ii) such Partner makes any payment to a creditor of the Partnership because of the personal guarantee by such Partner.
Because Walker and Wilson admitted that they made $25,000 monthly principal
payments because of their personal guarantees, and because Walker admitted that he
understood the payments to be additional capital contributions under the terms of the
Partnership Agreement, we cannot say that it was error to not include the principal
payments in the judgment.
8. EMC Products’ Liability Under the Loan Agreement
In this sub-issue, VHSC contends that EMC Products is liable for the amount
allegedly remaining due on the loan. The record reflects that Walker and Wilson wired
a combined sum of $3,937,418—the full amount outstanding on the EMC Products loan—
to Texas Capital Bank. VHSC asserts that this money was sent on behalf of Few Ready
Mix to pay for its acquisition of the loan. VHSC, Pike, Walker, Wilson, and Few Ready
Mix moved for judgment notwithstanding the verdict on this complaint.
A trial court may disregard a jury’s verdict and render a JNOV if there is no
evidence to support the jury’s findings or if a directed verdict would have been proper.
Brown v. Bank of Galveston, 963 S.W.2d 511, 513 (Tex. 1998); see TEX. R. CIV. P. 301. We
review the trial court’s ruling on a motion for JNOV under a legal-sufficiency standard.
See Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 830 (Tex. 2009).
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 54 Phillip Wood, formerly the Executive Vice President of Texas Capital Bank,
testified that, on May 2 and May 3, Walker and Wilson each wired $1,968,709. Wood
noted that the beneficiary listed on the document was EMC Products, not the bank.
Though Wood believed that the wire transfers were for the purchase of the note, he
admitted that there was not any reference to the purchase of the note in bank documents.
The bank honored the beneficiary named in the wire transfer and applied the funds to
EMC Products’ account. The transactions were recorded in the bank ledger, and as a
result of the transactions, the principal balance of the note was zero.
Given that bank documents do not reflect a purchase of the note, but rather the
paying off of the note, we cannot say that the jury erred in relying on the bank’s records
in finding that EMC Products complied with the loan agreement. As such, we hold that
the trial court did not err in failing to enter judgment notwithstanding the verdict on
VHSC’s deficiency counterclaim. See TEX. R. CIV. P. 301; see also Tanner, 289 S.W.3d at 830;
Brown, 963 S.W.2d at 513.
Based on the foregoing, we overrule VHSC and Pike’s third through fifth issues.
We also overrule Walker, Wilson, and Few Ready Mix’s first issue.
VIII. PERMANENT INJUNCTION
In their sole issue on cross-appeal, EMC Management, EMC Products, and EMC
Cement contend that the trial court abused its discretion in failing to enter a permanent
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 55 injunction in their favor, especially considering VHSC and Pike have used and disclosed
EMC Cement trade secrets and are in a position to continue to do so.
Whether to grant a permanent injunction is ordinarily within the sound discretion
of the trial court and, on appeal, review of the trial court’s action is limited to the question
of whether the trial court clearly abused its discretion. See Noell v. City of Carrollton, 431
S.W.3d 682, 712 (Tex. App.—Dallas 2014, pet. denied); see also Devon Energy Prod. Co., L.P.
v. McCarver, No. 10-15-00002-CV, 2015 Tex. App. LEXIS 8241, at *3 (Tex. App.—Waco
Aug. 6, 2015, no pet.) (mem. op.). We view the evidence in the light most favorable to the
trial court’s judgment. Swate v. Medina Cmty. Hosp., 966 S.W.2d 693, 700 (Tex. App.—San
Antonio 1998, pet. denied). If some evidence appears in the record that reasonably
supports the trial court’s decision, there is no abuse of discretion. Id. The trial court
abuses its discretion only if the record contains no evidence supporting the trial court’s
findings. Operation Rescue-Nat’l v. Planned Parenthood of Houston, 975 S.W.2d 546, 560 (Tex.
1998).
At common law, the applicant seeking injunctive relief must demonstrate: (1) the
existence of a wrongful act; (2) the existence of imminent harm; (3) the existence of
irreparable injury; and (4) the absence of an adequate remedy at law. See Noell, 431
S.W.3d at 712; see also McCarver, 2015 Tex. App. LEXIS 8241, at *3. “Without proof of all
four elements, injunctive relief is improper.” John Paul Mitchell Sys. v. Randalls Food Mkts.,
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 56 Inc., 17 S.W.3d 721, 732 (Tex. App.—Austin 2000, pet. denied). An injunction will not be
issued to prevent injury that is purely conjectural or speculative. Jordan v. Landry’s Seafood
Rest., Inc., 89 S.W.3d 737, 742 (Tex. App.—Houston [1st Dist.] 2002, pet. denied) (op. on
reh’g).
The complaints about the permanent injunction correspond with the
misappropriation-of-trade-secrets claim alleged at trial. The trial court made numerous
findings of fact and conclusions of law. Ultimately, the trial court concluded that EMC
Cement does not face imminent harm based on the following fact findings:
1. VHSC is not currently using any of EMC Cement’s claimed trade secrets.
2. VHSC discontinued use of any EMC Cement’s claimed trade secrets shortly after the foreclosure sale.
3. Soon after the foreclosure sale, VHSC removed the equipment modifications EMC Cement used to mill cementitious material.
4. Within several weeks of the foreclosure sale, VHSC began using different materials in its milling process, by among other things, substituting lime for Portland Cement.
5. In 2012, VHSC began using entirely different milling equipment that employed a different technique to produce cementitious materials.
And in concluding that EMC Cement did not face imminent harm, the trial court stated
that the Amended Final Judgment awarded future damages for the misappropriation of
trade secrets; thus, EMC Cement already obtained an adequate legal remedy and is not
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 57 entitled to a permanent injunction. Contrary to the assertions of cross-appellees,
appellants have challenged the trial court’s findings of fact and conclusions of law.
1. Existence of a Wrongful Act
As we have concluded earlier, the evidence supporting cross-appellants’
misappropriation-of-trade-secrets claim is legally and factually sufficient. As such, cross-
appellants have established the first prong for a permanent injunction—a wrongful act.
2. Imminent Harm
The next prong—imminent harm—was hotly contested at trial and was the focus
of the trial court’s findings of fact. On cross-appeal, cross-appellants contend that harm
is presumed in a misappropriation-of-trade-secrets case when a defendant possesses
trade secrets and is in a position to use them. Cross-appellees, on the other hand, argue
that there is no basis for finding imminent harm, especially considering that the trial
court, in its findings of fact, stated that VHSC is no longer using the claimed trade secrets.
With this prong, we necessarily have to analyze the propriety of the trial court’s findings
of fact and conclusions of law.
Findings of fact entered in a case tried to the court have the same force and dignity
as a jury verdict. Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991). We
thus review findings of fact by the same standards that are applied in reviewing the legal
and factual sufficiency of the evidence supporting a jury’s answer to a jury question. Id.
We have already laid out the governing law for legal and factual sufficiency.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 58 The standard of review for conclusions of law is de novo. See BMC Software Belg.,
N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002). We evaluate the trial court’s legal
conclusions independently to determine whether the trial court correctly drew the legal
conclusions from the facts. Id. We uphold conclusions of law on appeal if the judgment
can be sustained on any legal theory the evidence supports. Material P’ships, Inc. v.
Ventura, 102 S.W.3d 252, 257 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). Thus,
incorrect conclusions of law do not require reversal if the controlling findings of fact
support the judgment under a correct legal theory. Id.
At trial, Pike admitted that VHSC was using EMC Cement trade secrets, including
the VBMs, in May 2013, or, in other words, two years after the foreclosure sale.
Additionally, immediately after the foreclosure sale, VHSC sold the same PozzoSlag
product that EMC Products had developed, and testimony at trial revealed that VHSC
was still selling PozzoSlag at the time of trial. Finally, the evidence indicated that Pike
worked with Ronin to develop processes for using Rotary Ball Mills to manufacture
energetically-modified cement, and at the time of trial, VHSC was using this same
technology to manufacture PozzoSlag.
In light of this unchallenged evidence, it is our belief that a reasonable factfinder
could not have concluded that VHSC stopped using EMC Cement trade secrets shortly
after the foreclosure sale. Additionally, a reasonable factfinder could have concluded
that VHSC was using EMC Cement trade secrets at the time the permanent injunction
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 59 was denied. As such, we conclude that the trial court’s findings of fact regarding VHSC’s
usage of EMC Cement’s trade secrets are not supported by legally-sufficient evidence.
And given that the underlying fact findings are not supported by legally-sufficient
evidence, we must reverse the trial court’s conclusion of law that EMC Cement did not
face imminent harm.10
And despite the fact that the trial court’s findings of fact and conclusions of law
pertaining to imminent harm are not supported by sufficient evidence, we also agree with
cross-appellants’ contention that when a defendant possesses trade secrets and is in a
position to use them, harm is presumed. See IAC, Ltd. v. Bell Helicopter Textron, Inc., 160
S.W.3d 191, 200 (Tex. App.—Fort Worth 2005, no pet.) (“When a defendant possesses
trade secrets and is in a position to use them, harm to the trade secret owner may be
presumed” (citing Fox v. Tropical Warehouses, Inc., 121 S.W.3d 853, 860 (Tex. App.—Fort
Worth 2003, no pet.))); T-N-T Motorsports, Inc. v. Hennessey Motorsports, 965 S.W.2d 18, 24
(Tex. App.—Houston [1st Dist.] 1998, no pet.) (holding that because appellant possesses
confidential information and was in a position to use it, appellant was likely to use the
information to the former employer’s detriment); see also Hill v. McLane Co., No. 03-10-
10 Not only is the trial court’s conclusion of law regarding imminent harm erroneous based on the insufficiency of the underlying findings of fact, but the assumption that the Amended Final Judgment awarded future damages to EMC Cement and was an adequate legal remedy is incorrect. In fact, as stated earlier in this memorandum opinion, the jury was asked two damages questions with respect to the misappropriation-of-trade-secrets claim. Both of the questions asked about past damages—namely, what a reasonably prudent investor would have paid for use of EMC Cement’s trade secrets in Texas and what development costs were saved by VHSC.
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 60 00293-CV, 2011 Tex. App. LEXIS 169, at *14 (Tex. App.—Austin Jan. 5, 2011, no pet.)
(mem. op.); Lockhart v. McCurley, No. 10-09-00240-CV, 2010 Tex. App. LEXIS 1909, at *14
(Tex. App.—Waco Mar. 10, 2010, no pet.) (mem. op.) (“It was proper for the trial court to
enjoin Lockhart from using such information because he is still in a position to use it.”).
Here, Pike was previously the general manager for EMC Products and had access to EMC
Cement’s trade secrets. However, the record shows that immediately after the
foreclosure sale, Pike went to work for VHSC, another cement-manufacturing company,
and tried to patent EMC Products’ trade secrets. Furthermore, Pike admitted that VHSC
continued to use EMC Products’ trade secrets until at least May 2013. Clearly, Pike and
VHSC were in possession of EMC Cement’s trade-secret information and were in a
position to use it. Accordingly, under these circumstances, imminent harm is presumed.11
See IAC, Ltd., 160 S.W.3d at 200; Fox, 121 S.W.3d at 860; T-N-T Motorsports, Inc., 965 S.W.2d
at 24; see also Hill, 2011 Tex. App. LEXIS 169, at *14; Lockhart, 2010 Tex. App. LEXIS 1909,
at *14.
3. Irreparable Injury and Absence of an Adequate Remedy at Law
11And to the extent that cross-appellees argue that the imminent-harm presumption only applies to temporary injunctions, we first note that cross-appellees have not cited any controlling authority to support that contention. Furthermore, “[a]s the Supreme Court of the United States has recognized, the standards applicable to requests for preliminary and permanent injunctions are ‘essentially the same . . . with the exception that the plaintiff must show a likelihood of success on the merits rather than actual success’ when pursuing a preliminary injunction.” Heil Trailer Int’l Co. v. Kula, 542 F. App’x 329, 335 (5th Cir. 2013) (not designated for publication) (quoting Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 32 (2008)); see Amoco Prod. Co. v. Vill. of Gambell, AK, 480 U.S. 531, 546 n.12 (1987).
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 61 It is undisputed that the final two prongs of this inquiry are directly related. See Williams
v. Compressor Eng’g Corp., 704 S.W.2d 469, 472 (Tex. App.—Houston [14th Dist.] 1986, writ
ref’d n.r.e.) (“When the term ‘irreparable injury’ is used with ‘no adequate remedy at
law[,]’ the former term is a misnomer, because if an injury is irreparable, there is no
remedy for it, adequate or inadequate.”). Cross-appellees contend that EMC was not
irreparably harmed by the alleged misappropriation of trade secrets because Pike was an
independent contractor, and because the damage award for this claim already considered
future damages.
We first reject cross-appellees’ latter contention about future damages. As
explained in footnote 9, the jury was asked about past damages in the charge question
pertaining to misappropriation of trade secrets. As such, we cannot say that the damage
award already considered future damages.
Additionally, we are not persuaded by cross-appellees’ contention that Pike’s
work status somehow affects the analysis of this issue. The record evidence clearly
established that Pike worked at EMC Products and had access to EMC Cement’s trade
secrets. The record also indicates that Pike, on behalf of VHSC, used the trade-secret
information to attempt to file a patent, as well as market cement products manufactured
by VHSC.
Furthermore, numerous courts have held the following:
“We agree with the trial court’s disregarding of the answer to the issue and its ruling that where the uncontradicted evidence shows that a former employee Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 62 is working for a direct competitor, no finding of irreparable injury is necessary to support a permanent injunction to protect trade secrets. Williams, 704 S.W.2d at 470.
“Even in the best of good faith, a former technical or ‘creative’ employee such as Powell working for a competitor such as SRI can hardly prevent his knowledge or his former employer’s confidential methods from showing up in his work. . . . The mere rendition of service in the same area would almost necessarily impart such knowledge to some degree in his subsequent employment. Powell cannot be loyal both to his promise to his former employer, EDS, and to his new obligation to his present employer, SRI. In these circumstances, the most effective protective device is to restrain Powell from working in the same computer field in which he was associated while employed by EDS.” Elec. Data Sys Corp. v. Powell, 524 S.W.2d 393, 398 (Tex. App.—Dallas 1975, writ ref’d n.r.e.) (internal citations omitted).
“When a defendant possesses trade secrets and is in a position to use them, harm to the trade secret owner may be presumed. . . . The threatened disclosure of trade secrets constitutes irreparable injury as a matter of law.” IAC, Ltd., 160 S.W.3d at 200 (internal citations omitted).
“Texas precedent is that the threatened disclosure or use of the trade secrets of another constitutes irreparable injury as a matter of law.” Core Labs. LP v. Spectrum Tracer Servs., L.L.C., 532 F. App’x 904, 909 (Fed. Cir. 2013) (not selected for publication) (internal citations omitted).
Based on the foregoing case law and our review of the record, we conclude that
cross-appellants established the final two prongs of the permanent-injunction analysis.
And given that cross-appellants have satisfied all of the requirements for a permanent
injunction, we conclude that the trial court abused its discretion in denying cross-
appellants’ request for a permanent injunction. See Halliburton Energy Servs. v. Axis Techs.,
LLC, 444 S.W.3d 251, 260 (Tex. App.—Dallas 2014, no pet.) (“The law is clear that
injunctive relief for trade secret misappropriation must be sufficient to protect the
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 63 plaintiff’s legal rights and remove the competitive advantage obtained through the
misappropriation.”); Noell, 431 S.W.3d at 712; John Paul Mitchell Sys., 17 S.W.3d at 732; see
also McCarver, 2015 Tex. App. LEXIS 8241, at *3. We therefore sustain cross-appellants’
sole issue on cross-appeal.
IX. CONCLUSION
In sum, with respect to the direct appeal, we modify the Amended Final Judgment
to reflect that Pike is not liable for breaching his own Management Agreement and affirm
the Amended Final Judgment in all other respects. With respect to the cross-appeal, we
reverse the trial court’s denial of cross-appellants’ request for a permanent injunction and
remand for proceedings consistent with this opinion.
AL SCOGGINS Justice
Before Chief Justice Gray, Justice Davis, and Justice Scoggins *(Chief Justice Gray dissenting) Affirmed as modified, in part, and reversed and remanded, in part Opinion delivered and filed May 31, 2017 [CV06]
Pike, et al. v. Tex. EMC Mgmt., LLC, et al. Page 64
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Cite This Page — Counsel Stack
Clinton W. (Buddy) Pike, Sr., Daniel L. Walker, W. Tobin Wilson, VHSC Cement, LLC and Few Ready Mix Concrete Co. v. Texas EMC Management, LLC, Texas EMC Products, LP and EMC Cement, BV, Counsel Stack Legal Research, https://law.counselstack.com/opinion/clinton-w-buddy-pike-sr-daniel-l-walker-w-tobin-wilson-vhsc-texapp-2017.