Cornerstone Staffing Solutions, Inc. v. Valtech Solutions, Inc. and Valtech Services, Inc.

CourtCourt of Appeals of Texas
DecidedOctober 28, 2020
Docket05-19-00093-CV
StatusPublished

This text of Cornerstone Staffing Solutions, Inc. v. Valtech Solutions, Inc. and Valtech Services, Inc. (Cornerstone Staffing Solutions, Inc. v. Valtech Solutions, Inc. and Valtech Services, Inc.) 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.

Bluebook
Cornerstone Staffing Solutions, Inc. v. Valtech Solutions, Inc. and Valtech Services, Inc., (Tex. Ct. App. 2020).

Opinion

AFFIRMED and Opinion Filed October 28, 2020

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-19-00093-CV

CORNERSTONE STAFFING SOLUTIONS, INC., Appellant V. VALTECH SOLUTIONS, INC. AND VALTECH SERVICES, INC., Appellees

On Appeal from the 116th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-16-10346

MEMORANDUM OPINION Before Justices Partida-Kipness, Nowell, and Evans Opinion by Justice Evans After a jury trial, Cornerstone Staffing Solutions, Inc., appeals from the trial

court’s adverse judgment on Valtech Services, Inc.’s breach of contract claim

against it.1 Appellee Valtech Services, Inc. is a subsidiary of appellee Valtech

Solutions, Inc. which, in turn, is a U.S. subsidiary of Valtech, S.E., a European

1 The final judgment followed bifurcated trials on June 11, 2018 and August 27, 2018 in consolidated cases Valtech Services, Inc. v. Cornerstone Staffing Solutions, No. DC-16-10346 and Cornerstone Staffing Solutions, Inc., v. Valtech Solutions, Inc., No. DC-17-02424. company.2 In two issues, Cornerstone generally challenges the legal sufficiency of

the evidence to support the jury’s verdict. Cornerstone also brings a conditional

issue, in the event we reverse the trial court’s judgment based on either of its first

two issues. For the reasons set forth below, we affirm the trial court’s judgment.

BACKGROUND

Valtech provides information technology services/digital marketing

throughout the United States.3 Cornerstone provides staffing services nationwide.

In December 2015, the parties signed an asset purchase agreement (APA) setting

forth the details of Cornerstone’s purchase of assets related to Valtech’s information

technology temporary staffing, recruiting, and related staffing business.4

Cornerstone paid $1.9 million at the closing of the sale (Initial Payment), which

occurred in December before Valtech had completed year-end accounting of its

books to submit to its parent company’s auditors. The APA, however, provided that

Cornerstone would make an additional payment after the closing should certain

metrics set forth in the agreement be met (Initial Payment Adjustment or IPA)

generally comprised of a multiple of earnings before interest, taxes, depreciation and

2 Although Cornerstone identifies Valtech Solutions as an appellee, it appeals only the judgment rendered in favor of Valtech Services. Cornerstone’s conditional third issue, however, seeks remand of claims on which Valtech Solutions was awarded attorney’s fees. Unless otherwise indicated, “Valtech” refers to Valtech Services. 3 In 2014, Valtech Solutions spun off its information technology (IT) recruiting and temporary staffing business to Valtech Services which began operating on January 1, 2015. 4 The purchased assets included staffing service contracts, licenses, list of personnel, non-competition agreements, telephone numbers, registrations, certifications, and assumption of company office leases.

–2– amortization (EBITDA).5 Specifically, the primary provision addressing the IPA

stated:

2.3.2. If pursuant to the consolidated audited financial statements of Valtech S.E., as at December 31, 2015, the amount equal to four point two (4.2) times the EBITDA realized by the Business during said fiscal year is greater than the Initial Payment, as notified by the Seller to the Buyer no later than on April l5, 2016, then the Buyer shall pay, subject to the Buyer’s consent (which shall not be unreasonably withheld) to the Seller the amount of such difference (the “Initial Payment Adjustment”). The Initial Payment Adjustment is non-refundable, as contemplated in Section 2.3.3 below (without limiting the indemnification obligations under Section 8.7 of this Agreement). Such Initial Payment Adjustment will be subject to the Buyer’s complete and prompt access to the books, records, and calculations of the Seller and its agents serving as the basis for the Initial Payment Adjustment;

The term “EBITDA,” in turn, is defined in section 1.17 of the APA as “the

operating income and depreciation, as illustrated on the profit and loss statement of

the Business in the form and format used on Exhibit B.” 6 According to section 1.8

of the APA, “Business” had the meaning set forth in the recitals of the parties’

agreement: “WHEREAS, the Seller is the owner of all of the assets described on

Exhibit A and as further defined below (the “Assets”) relating to Seller’s information

technology temporary staffing, recruiting, and related staffing business (the

Business”)” (emphasis in original).

5 Cornerstone’s CEO testified that the $1.9 million was a reduced purchase price and the parties agreed to an initial payment adjustment provision. 6 At trial there was testimony that EBITDA is an acronym “earnings before interest, taxes, depreciation and amortization” representing “a measurement of the recurring, ongoing performance of the company.” But the non-standard term does not have a defined method of calculation or meaning under generally accepted accounting principles or international; financial reporting standards in ordinary usage. –3– On February 22, 2016 Valtech notified Cornerstone of its EBITDA

calculation and that an IPA was due. In response, Cornerstone requested an

“accounts receivable rollforward schedule” which Valtech provided. Having heard

nothing further from Cornerstone, on April 11, 2016, Valtech made an official

written demand to Cornerstone for an IPA of $1,791,524. In support of its IPA

calculation, Valtech attached its EBITDA calculation from its February 22 email and

a calculation showing the amount of IPA due. It is undisputed that the financial

statement that Valtech used for purposes of doing its IPA demand was not audited.

However, Valtech’s parent company’s auditors accessed Valtech’s year-end

financial data through Valtech’s accounting system and subjected the data to their

audit criteria before compiling Valtech, S.E.’s consolidated audited financial

statements. Cornerstone failed and refused to pay any IPA, asserting “all

calculations of the purchase price are to be made based on the audited financial

statements of Valtech, S.E.” and Valtech’s calculations were based on “[t]he latest

version of the Valtech Services P&L.” Cornerstone made other complaints about

Valtech’s calculations and indicated that it was “engaging an independent auditing

firm to review the financials, books, and records of Valtech—as expressly permitted

by the Agreement.” Cornerstone, however, never requested the consolidated audited

financials of Valtech, S.E. The parties were unable to resolve their dispute and

–4– Valtech ultimately filed this breach of contract lawsuit.7 The matter proceeded to

trial and the jury was asked the following question to which neither party objected:

QUESTION 1(a)

Did Cornerstone Staffing fail to comply with Section 2.3.2 of the APA?

You are instructed that in order to answer “Yes” you must find that Valtech Services complied with the condition imposed upon it under the APA.

Answer “Yes” or “No.”

Answer: YES

The jury went on to award Valtech damages for Cornerstone’s failure to

comply with Section 2.3.2. The jury also returned a verdict in favor of Cornerstone

on its claim for money had and received. The trial court rendered judgment on the

verdict awarding Valtech $717,437.12 in actual damages and $1,612,546 for

attorney’s fees in the trial court, among other relief.8 Cornerstone filed this appeal

from the trial court’s final judgment.

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Cornerstone Staffing Solutions, Inc. v. Valtech Solutions, Inc. and Valtech Services, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/cornerstone-staffing-solutions-inc-v-valtech-solutions-inc-and-valtech-texapp-2020.