Dale Ball and Clifford Wieck v. Barley Water Group, Inc.and Etter Water Well, LLC

• Court: Court of Appeals of Texas
• Decided: May 9, 2024
• Docket: 07-23-00378-CV
• Status: Published

Opinion

In The Court of Appeals Seventh District of Texas at Amarillo

No. 07-23-00378-CV

DALE BALL AND CLIFFORD WIECK, APPELLANTS

V.

BARLEY WATER GROUP, INC. AND ETTER WATER WELL, LLC, APPELLEES

On Appeal from the 31st District Court Hemphill County, Texas Trial Court No. 7654, Honorable Steven R. Emmert, Presiding

May 9, 2024 MEMORANDUM OPINION Before QUINN, C.J., and PARKER and DOSS, JJ.

This appeal concerns the enforceability of a covenant not to compete. It was

invoked after two employees of Etter Water Well, LLC (EWW) opted to pursue their own

well drilling and service business. Those employees were Dale Ball and Clifford Wieck.

Other questions pervaded the dispute between the two individuals, EWW, and the

corporation that owned 100% of EWW, that is, Barley Water Group, Inc. (BWG). They

included allegations of breached fiduciary duty and the non-payment of profit-sharing

sums purportedly due. All became the substance of a lawsuit. And, while the dispute about the validity of the covenant was resolved by the trial court through summary

judgment, the other matters were tried by a jury. The latter denied Ball and Wieck

damages for purportedly withheld profit sharing and awarded both EWW and BWG

recovery for breached fiduciary duties. Each then appealed. We reverse in part, remand

in part, and affirm in part. That said, let us get to the issues.

EWW and BWG Appeal

We begin with the appeal of EWW and BWG. It involved one issue, that being the

enforceability of the non-compete agreement. Allegedly, the trial court erred in holding it

unenforceable via Ball and Wieck’s motions for traditional and no-evidence summary

judgment. 1 We overrule the issue.

As a preliminary matter, we observe that the summary judgment order granting

summary judgment did just that. The trial court simply stated that it “GRANTS the Motion

on the sole issue of the enforceability of the No-Compete Agreements and their ability to

support a breach of contract claim.” Then, it denied other aspects of the motions. An

order simply stating a motion for summary judgment “is granted” or that the court “grants

the motion” lacks decretal language and adjudicates nothing. Sunday Canyon Prop.

Owners Ass’n, Inc. v. Brorman, No. 07-23-00195-CV, 2024 Tex. App. LEXIS 1464, at *4

(Tex. App.—Amarillo Feb. 28, 2024, no pet.) (mem. op.); see Naaman v. Grider, 126

S.W.3d 73, 74 (Tex. 2003) (per curiam) (stating that an order merely granting a motion

for judgment is in no sense a judgment itself for it “adjudicates nothing.”) Yet, unlike the

circumstances in Sunday Canyon, the trial court at bar uttered the missing decretal

1The motions attacked claims in addition to that founded upon breach of the non-compete agreement.

2 language at a later date and before entry of the final judgment. It did so via the jury

charge, wherein it clarified that the covenants “were unenforceable as a matter of law.”

The enforceability of those covenants was one ground upon which Ball and Wieck sought

summary judgment. And, in telling the jury they were unenforceable, the trial court was

undoubtedly alluding to what it perceived as its earlier disposition of the summary

judgment motions. So, the trial court ultimately granted the “remedy sought” by Ball and

Wieck and provided the earlier missing decretal language nullifying the non-compete

agreements. See In re Guardianship of Jones, 629 S.W.3d 921, 925-26 (Tex. 2021)

(describing “decretal” language as language granting or denying the “remedy sought”

which in Jones was the “dismissal of the bill-of-review”). 2

As for the validity of the trial court’s decision, we first describe the covenant. Its

entirety consisted of:

Canadian Water Well, Inc. No-Compete Agreement

I, _________, understand that by signing and accepting this payment (form of a paycheck or shares/ownership) that I am obligated to Canadian Water Well, Inc. and its subsidiaries [referred to as CWW, Inc.]. I no longer have the right or privilege to own or be gainfully employed by another water well drilling or service company within 300 miles of any location of CWW, Inc. for a period of two years from the time of non-employment by CWW, Inc. I understand that I shall never sell, trade, or give out confidential information about company structure, customers, or trade practices gained while employed by CWW, Inc.

2 Contrary to the supposition of EWW and BWG, simply saying a motion for summary judgment “is

granted” is not granting the actual remedy sought. Explaining or revealing the effect of granting the motion constitutes “the remedy sought,” e.g., the claim is dismissed, the claim is barred by limitations, or the like. And, we again stress the need for the court to include such decretal language in its summary judgment orders.

3 And, though Ball and Wieck voiced several reasons why they deemed it unenforceable,

we need only address one. 3 It pertains to the scope of the restriction found in “I no longer

have the right or privilege to own or be gainfully employed by another water well drilling

or service company within 300 miles of any location of CWW . . . .”

The accord effectively prohibits Ball and Wieck from working in a particular

industry, i.e., “well drilling and service.” Such industry wide restrictions are unreasonable.

Wright v. Sport Supply Group, Inc., 137 S.W.3d 289, 298 (Tex. App.—Beaumont 2004,

no pet.); John R. Ray & Sons v. Stroman, 923 S.W.2d 80, 85 (Tex. App.—Houston [14th

Dist.] 1996, writ denied). The same is true of restrictions barring one from pursuing

business prospects other than an employer’s clients or customers. Id.; accord, Peat

Marwick Main & Co. v. Haass, 818 S.W.2d 381, 388 (Tex. 1991) (finding the covenant

unreasonable because, among other things, it inhibited “departing partners from engaging

accounting services for clients who were acquired after the partner left, or with whom the

accountant had no contact while associated with the firm . . .”). The covenant at bar does

that, too. Thus, the trial court had reasonable basis to rule as it did.

Furthermore, and contrary to the suggestion of EWW and BWG otherwise, the trial

court had no obligation to ask the jury to adjudicate the restriction’s reasonableness and

enforceability. That question was and is one of law. Peat Warwick Main & Co. 818

S.W.2d at 386; Gallagher Healthcare Ins. Servs. v. Vogelsang, 312 S.W.3d 640, 654

3 Of those reasons, one consisted of the allegation that the agreement was only between the actual

signatories thereto, Canadian Water Well, Inc., Ball, and Wieck. We need not deal with that due to its unenforceability irrespective of whether EWW was some third-party beneficiary to the accord, as suggested by EWW.

4 (Tex. App.—Houston [1st Dist.] 2009, pet. denied). And, juries do not decide legal

questions. That said, we overrule the issue.

Ball and Wieck Appeal

Turning to the remaining aspects of this appeal, we note that they involve various

complaints founded on allegations of deficient evidence. Ball and Wieck tell us no or

factually insufficient evidence supports the findings that 1) they breached fiduciary duties

owed to EWW or 2) EWW and BWG were entitled to damages for such breaches.

Allegedly, they also “conclusively established that EWW breached the profit-sharing

agreements”; thus, denying them damages was erroneous. We sustain the issues

concerning evidence supporting the award of damages and overrule the others.

1) Profit Sharing

Our initial foray into the argument takes us to profit sharing and whether they

“conclusively” proved entitlement to same. The applicable standard of review need not

be explained. We find it enough to cite all involved to page 526 of Earth Power A/C &

Heat, Inc. v. Page, 604 S.W.3d 519 (Tex. 2020), and apply that test here.

Ball and Wieck signed a written employment contract entitling each to profit

sharing. EWW was not a named party to the agreement. Rather, the signatories were

Canadian Water Well, Inc., Ball, and Wieck. Yet, EWW did not appeal the jury’s answer

of “yes” to the questions whether 1) “Etter Water Well, LLC agree[d] to pay Dale Ball 14%

of all profits from Etter Water Well, LLC” and 2) “Etter Water Well, LLC agree[d] to pay

Clifford Wieck 8% of all profits from Etter Water Well, LLC”. Despite answering

affirmatively to those questions, the jury, nevertheless said “no” when asked if EWW failed

to comply with its agreement.

5 Ball and Wieck sought to recover their share of the profits supposedly due them

for the years 2016 and 2017. No one denies that neither claimant received profit sharing

for those years. Yet, the record contains evidence that EWW experienced no profits

during that period, only losses. Furthermore, the jury was free to believe that evidence,

though Ball and Wieck proffered their own information disputing it. And, believing the

evidence of losses rather than profits was not against the great weight and

preponderance of the evidentiary record. So, without profits, EWW had nothing to share

with Ball or Wieck, which in turn legitimates the jury’s finding of no breach.

2) Evidence of Breach and Damages

Next, we address the findings of breached fiduciary duty and damages and start

with the former. The jury found that EWW and BWG both were victims of breached duties

by Ball and Wieck. Ball and Wieck, however, contested the liability findings only with

regard to EWW. They did not appeal the findings of breached duties owed BWG. So,

the latter stand. With that, we turn to our analysis of the recovery by EWW.

EWW

As for breaching duties due EWW, Ball and Wieck argue that neither legally nor

factually sufficient evidence support the findings. That is, no evidence illustrated they (for

their benefit) solicited either employees or customers of EWW while working for EWW.

Proof of one or the other was necessary, in their estimation. Such proof appears of

record.

An at-will employee may plan to go into competition with his employer and pursue

those plans while employed. Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 201-

02 (Tex. 2002). Yet, one may not 1) appropriate the employer’s trade secrets, 2) solicit

6 its customers while still working for the employer, 3) take certain information such as

customer lists, or 4) utilize employer funds, employees, or assets for personal gain. Id.

The record at bar contains evidence from which a rational jury could reasonably infer that

Ball and Wieck 1) communicated with at least one existing customer of EWW before their

departure, 2) discussed prepaying Ball and Wieck $500,000 for future well services, and

3) secured a payment in that amount from the customer within days of leaving EWW.

That is some evidence of their breaching the duty to forego soliciting their employer’s

customers (for the benefit of Ball and Wieck) while still employed. And, finding it occurred

is not against the great weight of the other record evidence. So, we overrule this aspect

of their sufficiency attack.

That leaves the attack upon the finding of lost profits by EWW. It was the sole

measure of damages submitted to the jury. EWW attempted to prove them through the

testimony of a forensic accountant, Hartman.

In deriving her opinion, the accountant simply determined the identity of EWW

customers who subsequently utilized the services of Ball and Wieck once they left. She

described her equation as one of “but for”; that is, she determined the profits EWW would

have experienced “but for” the departure of Ball and Wieck. Her calculations consisted

of 1) identifying EWW customers who gave business to Ball and Wieck after they left and

over the ensuing two years and 2) estimating the amount of business those customers

would have given EWW without competition by Ball and Wieck. Why those customers

decided to acquire well services from Ball or Wieck was not part of her calculus. From

that sum, the witness subtracted the estimated expense related to providing the services.

The calculation resulted in lost profits of $1.53 million, opined the witness.

7 Having heard that testimony, the jury was then charged to calculate the “damages,

if any, that were proximately caused by [the] breach of fiduciary duty.” Such was an

accurate description of the test; that is, lost profits must proximately arise from or be

caused by the wrong in question. See First State Bank, N.A. v. Morse, 227 S.W.3d 820,

829 (Tex. App.—Amarillo 2007, no pet.) (stating that the lost profits “must naturally and

proximately arise from the defendant’s wrong”) (emphasis in original). And, therein lies

the problem.

There is no evidence that the forensic accountant factored into her “but for”

analysis the reason the EWW customers transacted business with Ball and Wieck after

the latters’ departure. There is no evidence that the supposed $1.53 million in lost profits

naturally and proximately arose from a particular wrong committed by Ball and Wieck.

The accountant merely calculated revenue and profits EWW should have received had

the two ex-employees not opened a competing business. But, again, opening a

competing business alone violates no fiduciary duties. So, the sums she derived did not

reflect an accurate calculation of damages. Nor did anyone cite us to evidence filling the

void left by omitting the causative link from her calculation. Our own search of the record

also failed to uncover such evidence. So, the record contains no evidence of lost profits

suffered by EWW and caused by the wrongs of Ball and Wieck. 4 Given this absence of

legally sufficient evidence to support the damage finding, EWW must be denied recovery

4 Though it could be said that the customer who agreed to prepay for services reflected lost income

caused by improper conduct, nothing of record illustrates the lost profit, if any, arising therefrom. Lost income and lost profit are not the same thing. Univ. Gen. Hosp., LLC v. Prexus Health Consultants, LLC, 403 S.W.3d 547, 551 (Tex. App.—Houston [14th Dist.] 2013, pet. dism’d) (describing lost profit as the loss of net income to a business, that is, income for lost business activity less any expenses that would have been attributable to that activity).

8 against Ball and Wieck. See Jackson Walker, LLP v. Kinsel, 518 S.W.3d 1, 15 (Tex.

App.—Amarillo 2015), aff’d 526 S.W.3d 411 (Tex. 2017) (denying recovery for fraud

because no evidence established the damages element of the claim); Yorkshire Ins. Co.

v. Seger, 407 S.W.3d 435, 443 (Tex. App.—Amarillo 2013), aff’d 503 S.W.3d 388 (Tex.

2016) (reversing judgment and ordering the Segers take nothing due to legally insufficient

evidence of damages). The same is not true of BWG.

BWG

No one disputes that Ball was a director of BWG before departing EWW and

remained so afterwards. Nor can anyone legitimately question that directors owe

fiduciary duties to the corporation on whose board they sit. Ritchie v. Rupe, 443 S.W.3d

856, 868-69 (Tex. 2014). Those duties include dedication of their uncorrupted business

judgment for the sole benefit of the corporation. Id. Dedicating such uncorrupted

business judgment means the director cannot usurp corporate opportunities for personal

gain. Id. at 875 n.27; Int’l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 577 (Tex.

1963).

Next, included in the litany of fiduciary duties mentioned in the trial court’s jury

charge at bar were those concerning whether Ball 1) acted fairly and equitably regarding

BWG, 2) acted in the utmost good faith or exercised the most scrupulous honesty towards

BWG, and 3) placed the interests of BWG before his own and gained a benefit for himself

at the expense of BWG. Furthermore, the measure of damages submitted also alluded

to “lost profits” which were the consequence of the wrong. The jury found both breach

and damages. Ball and Wieck do not question, on appeal, 1) the accuracy of the charge,

2) the general finding of breached duty owed BWG, or 3) the test by which damages were

9 to be assessed as a consequence of the breach. Their complaint lies with the sufficiency

of evidence underlying the damage finding and the inclusion within the judgment of an

award mirroring that granted EWW.

Regarding the matter of sufficiency, the nature of Ball’s contention is a bit unclear.

He posits that “1) [b]oth BWG and EWW sought to recover for the same injury: lost

profits”; 2) “[b]oth parties presented and relied on the same damage model”; 3) “Hartman,

the only damages expert, testified that her analysis of lost profits was the same for both

BWG and EWW”; 4) her “estimate of lost profits to BWG was solely based on BWG’s

supposed entitlement to 70% of EWW’s lost profits”; and 5) “[b]ecause the award of $1.53

million to any party is not supported by sufficient evidence, see supra at Section II, it must

be reversed as to both EWW and BWG.” The passage “see supra at Section II” obviously

refers to the contention about Hartman’s failure to restrict her calculations to lost profits

caused by the breach of duties particularly owed to EWW. Again, she simply calculated

lost profits in general, irrespective of whether they were caused by the wrongs of Ball or

Wieck.

So, upon our combining the reference to “Section II” with the other quoted excerpts

from their brief, we construe the argument as this: because the expert failed to accurately

calculate lost profits arising solely from the breached duties owed EWW, the award to

BWG of 70% of EWW’s lost profits cannot stand either. This may be true if, as Ball

suggested, EWW and BWG were prosecuting the same claim “for the same injury.” They

were not, though.

The wrongs encountered by EWW and BWG differed. The former was injured by

Ball and Wieck’s soliciting EWW customers or employees while employed by EWW.

10 Had none of that occurred, then they were free to compete with and divert opportunities

from EWW. So, any lost profits suffered by EWW had to emanate from the foregoing bad

acts. That is not true of the lost profits suffered by BWG.

The wrong BWG experienced revolved around Ball’s diversion of BWG corporate

opportunities for his personal benefit while also serving as a director of BWG. The causal

link between that wrong and the resulting damages is not dependent upon Ball and

Wieck’s acting improperly while employed by EWW. It depended upon Ball’s acting

improperly (i.e., diverting corporate gain of BWG) while a director of BWG. Loss

attributable to the latter, therefore, emanated from what BWG would have gained had Ball

not diverted those opportunities, and that was 70% of the profits EWW would have

generated from the diverted business.

Simply put, BWG made its money from profits generated by EWW. And, though

Hartman’s calculations may have been deficient viz-a-viz the claim of EWW, they sufficed

when determining lost profits related to BWG’s claim. To reiterate, the latter focused on

the diversion of business while Ball remained a director of BWG, and that was the very

substance of Hartman’s testimony. She testified that after Ball and Wieck left, business

generating $1.53 million in general lost profits due EWW actually went to Ball and

Wieck. Furthermore, BWG was entitled to 70% of those general lost profits, according

to her, and 70% of those general lost profits ($1.53 million x .7) approximated $1.1

million. Moreover, the jury awarded BWG that very sum. 5 Consequently, the finding of

5 Since we do not understand Ball and Wieck to argue that the $1.1 million to which Hartman

testified failed to exclude expenses incurred by BWG to obtain it and, therefore, was not an accurate measure of actual lost profit, we do not address that matter.

11 $1.1 million in damages to BWG had the support of legally and factually sufficient

evidence.

As for the trial court’s awarding BWG $1.53 million in damages through its

judgment, we agree that was a mistake. The evidence was sufficient to support the $1.1

million damage finding. It was neither legally nor factually sufficient to support an award

of $1.53 million. Thus, the latter must be reversed.

We reverse that portion of the judgment awarding Etter Water Well, LLC recovery

against Dale Ball and Clifford Wieck and order that Etter Water Well, LLC take nothing

from Dale Ball and Clifford Wieck. We also reverse the trial court’s award of One Million

Five Hundred and Thirty Thousand dollars plus pre-judgment interest of Two Hundred

Twenty Thousand, Five Hundred Forty-Three dollars and remand the cause to the trial

court for entry of judgment commensurate with this opinion. Finally, we affirm the

judgment in all other respects.

Brian Quinn Chief Justice

Doss, J., concurring in the judgment.