L&S Pro-Line, LLC and Lee Burkett v. Garrett Gagliano, Snook Holdings, LLC, and Tactical Automation, Inc.

• Court: Court of Appeals of Texas
• Decided: June 28, 2024
• Docket: 09-21-00178-CV
• Status: Published

Opinion

In The

Court of Appeals

Ninth District of Texas at Beaumont

__________________

NO. 09-21-00178-CV __________________

L&S PRO-LINE, LLC AND LEE BURKETT, Appellants

V.

GARRETT GAGLIANO, SNOOK HOLDINGS, LLC, AND TACTICAL AUTOMATION, INC., Appellees

__________________________________________________________________

On Appeal from the 457th District Court Montgomery County, Texas Trial Cause No. 18-06-07704-CV __________________________________________________________________

MEMORANDUM OPINION

This case involves a business dispute of a two-member Texas limited liability

company, L&S Pro-Line (“L&S”). Appellants, L&S and Lee Burkett, appeal the trial

court’s judgments for Appellees Garrett Gagliano, Snook Holdings, LLC (“Snook”),

and Tactical Automation, Inc. (“Tactical”). 1 On appeal, Appellants complain that

1Lee Burkett also filed two petitions for writ of mandamus, which this court

denied. See In re L&S Pro-Line, LLC & Lee Burkett, No. 09-21-00174-CV, 2021 WL 4312981, at *1, 4 (Tex. App.—Beaumont Sept. 23, 2021, orig. proceeding 1 the trial court erred by: (1) holding Burkett did not successfully purchase Gagliano’s

membership interest under the L&S Amended and Restated Company Agreement

(“Company Agreement”); (2) holding that Tactical was a third-party beneficiary of

the Company Agreement with standing to sue; (3) striking Burkett’s expert; (4)

allowing Gagliano to testify as an expert on lost profits and allowing testimony of

lost revenue rather than lost profits; and (5) denying Appellants’ Motion for Mistrial.

Appellants also complain that there is insufficient evidence to support the jury’s

conclusion that Appellants breached the Company Agreement and the jury’s award

of actual damages, punitive damages, and attorney’s fees in favor of Appellees.

We conclude the trial court erred in granting partial summary judgment for

Gagliano. For the reasons set forth below, we affirm the trial court’s judgment in

part, we reverse and render the trial court’s judgment in part, and we reverse and

remand the matter to the trial court for further proceedings consistent with this

opinion.

[mand. denied]) (mem. op.); In re L&S Pro-Line, LLC & Lee Burkett, No. 09-20- 00261-CV, 2020 WL 7756153, at *1 (Tex. App.—Beaumont Dec. 30, 2020, orig. proceeding [mand. denied]) (mem. op.).

2 BACKGROUND

In 2015, Burkett bought a 75% interest in L&S, which manufactures skid

equipment, metering equipment, control equipment and supplies parts to support the

equipment it manufactures. In 2016, Gagliano bought the other 25% interest of L&S,

and Burkett and Gagliano entered into the Company Agreement and agreed to share

responsibilities at L&S. Burkett was a member and the Executive Manager in charge

of sales, marketing, design and engineering, and Gagliano was a member and the

Chief Financial Officer (“CFO”) in charge of managing L&S’s books and records.

Gagliano also owned Snook, L&S’s landlord for a period, and Tactical, which

manufactured control system panels, and the Company Agreement gave Tactical the

right to bid on control panels sourced by L&S to third parties.

In 2018, Burkett’s and Gagliano’s relationship deteriorated, Snook evicted

L&S, and Gagliano allegedly refused to perform his duties as CFO, forcing L&S to

contract with a third-party to recreate L&S’s books. Burkett and Gagliano

unsuccessfully mediated their business disputes, and in 2019, Burkett sent Gagliano

a notice offering to purchase his 25% interest for $1.3 million as provided by the

Company Agreement. After Gagliano failed to respond, Burkett sent Gagliano a

cashier’s check for $1.3 million, and Gagliano never returned the check.

Subsequently, L&S sent Gagliano distributions totaling $1,347,376.28 for his 25%

interest in L&S’s profits for 2018 and 2019. From May 2019, Burkett operated L&S

3 independently without Gagliano’s assistance, and after Burkett took over the

operations of L&S, he amended L&S’s Company Agreement and continued to use

L&S funds to entertain company clients, and to pay for travel, legal fees, and other

expenses that were tied to the operations of L&S. Before May 2019, Burkett and

Gagliano had both used L&S funds to take L&S clients and vendors hunting, fishing

and to sporting events, and they both had also used L&S’s funds for personal

expenses, offsetting those expenses against future distributions. Gagliano had not

complained about L&S using funds to entertain clients before L&S sued.

In June 2018, L&S filed Plaintiff’s Original Petition, Request for Declaratory

Relief, and Request for Injunctive Relief/Temporary Restraining Order against

Gagliano, alleging causes of action for breach of contract, misappropriation of trade

secrets, breach of fiduciary duty, and declaratory judgment. Gagliano filed an

Original Answer and Verified Denial, and in his First Amended Original Answer he

asserted additional and affirmative defenses.

In October 2018, L&S filed Plaintiff’s First Amended Petition, Request for

Declaratory Relief, and Request for Disclosure and added, among others, Snook and

Tactical as defendants. L&S alleged that Gagliano had made unauthorized payments

from L&S to Snook and Tactical for his personal benefit. L&S alleged that after

Burkett refused Gagliano’s offer to buy his interest in L&S for $5 million, Gagliano

embarked on a campaign to disrupt and harm L&S, including demanding that L&S

4 vacate its premises located on Snook’s property. L&S alleged that Gagliano quit

performing his duties as CFO and engaged in conduct that damaged L&S and

subjected L&S to potential liability. L&S also alleged that Gagliano violated the

Company Agreement by competing with L&S and using L&S’s trade secrets.

In its breach of contract claim against Gagliano, L&S claimed that Gagliano

breached the Company Agreement by competing with L&S, disclosing its

confidential trade secrets, and charging and making unauthorized payments to

himself and his related entities. L&S alleged Gagliano, as a manager, member, and

CFO, owed fiduciary duties to L&S, and Gagliano breached those duties. L&S

sought a declaratory judgment holding that the non-competition and non-disclosure

provisions in the Company Agreement were enforceable and that Gagliano breached

those provisions.

Appellees filed a Second Amended Original Counterclaim, Third-Party

Petition, and Application for Temporary Restraining Order, Temporary Injunction

and Permanent injunction and Request for Permanent Relief. In the Second

Amended Original Counterclaim, Appellees alleged that the Company Agreement

included a provision that restricted the members (except for Gagliano while “during

the term of ownership of any Interests or while acting as a Manager”) from

engaging in the business of building, assembling, or selling control systems or

panels. Appellees also claimed that the Company Agreement included a provision

5 that we will refer to in the opinion as a right of first refusal that L&S and Burkett

also breached. Under the right of first refusal, if any product line that L&S sold

included a control system panel, Tactical Automation LLC would be given the right

to provide the panel to L&S for the product that was to be sold to a third party by

L&S unless several conditions, which are discussed later, applied. The Company

Agreement also required Burkett to obtain Gagliano’s consent before engaging in

any transaction that involved more than $5,000.

Appellees alleged that in early 2018, Burkett began violating the Company

Agreement by placing orders exceeding $5,000 and building and assembling his own

control panels and systems to undermine Gagliano and the Company Agreement as

it relates to Tactical’s right of first refusal. Appellees also alleged that as an intended

third-party beneficiary under the Company Agreement, Tactical had the right to

enforce the provisions in the Company Agreement, including those related to the

right of first refusal, and to seek damages that resulted from the Appellants’ failure

to comply with the Company Agreement. Appellees alleged that Burkett violated the

Company Agreement and breached his fiduciary duties to L&S by acts that included

engaging in bribes, taking over the management of financial affairs without

Gagliano’s consent, obstructing Gagliano from performing his CFO functions, and

refusing to pay Gagliano the proper amount he was owed for his share of the

distributions, alleging his damages for the distributions he did not receive exceeded

6 $2.23 million. According to Appellees, Burkett’s material breach of the Company

Agreement constituted a Terminating Event, which prevented Burkett from

effectively exercising the Company Agreement’s Push Pull provision and

purchasing Gagliano’s interest in L&S. Relying on the claim, the Appellees argued

that because Burkett’s exercise of the Push Pull was ineffective, Gagliano was not

required to respond. 2

Burkett filed his Original Answer, Verified Denial, and Counterclaim,

requesting that Appellees take nothing through the suit and award him court costs,

attorney’s fees, and any other relief to which he was entitled. In Appellants’ First

Amended Original Answer, Appellants argued that Appellees’ claims were barred

by, among others, the doctrines of prior material breach, waiver, and payment.

Appellees filed Defendants’ No-Evidence Motion for Partial Summary

Judgment, arguing, among other things, that there was no evidence of (1) L&S’s full

performance under the Company Agreement through its Executive Manager Burkett,

(2) an alleged breach of the Company Agreement by Gagliano, (3) damages caused

2Section 12.7 of the Company Agreement contains a “Push Pull” provision,

which members of L&S could invoke upon having an “Unresolved Dispute.” Under the Push Pull, the Member exercising the Push Pull option was required to send the other members of L&S an offer to purchase that member’s shares for a specific price. The member who was given the offer was required within 30 days to either elect to sell his interest in the LLC at the stated price or to buy out the member who had exercised the Push Pull option interest in the LLC at the same proportionate price. 7 by Gagliano’s alleged breach, or (4) reasonable and necessary attorney’s fees

attributable to the alleged breach. Appellees also argued that L&S’s claims for

misappropriation of trade secrets, breach of fiduciary duty, officer removal under

the Texas Declaratory Judgment Act, fraudulent misrepresentation, fraudulent

transfer under the Texas Uniform Fraudulent Transfer Act, conversion, and civil

theft must be dismissed because Appellants failed to produce evidence of the

required elements of those claims.

Appellants filed a Response to Defendants’ and Counter-Plaintiff’s No-

Evidence Motion for Summary Judgment and attached the following summary

judgment evidence: the Company Agreement; Deposition of Gagliano; Deposition

of Chelsea Lindsay; Affidavit of Burkett; Affidavit of Jason Casell; Affidavit of Jeff

Compton; Verification of Casell; Chase Bank Records; L&S’s Engagement Letter

with Baker Tilly Virchow Krause, LLP (“Baker Tilly”); L&S’s Chase Bank

Statements; L&S’s Attorneys’ Fee Invoices; and Affidavit of Jay Tompkins.

As to the breach of contract claim, Appellants argued that whether they had

fully performed under the Company Agreement was not an element to recover under

breach of contract. Appellants also maintained the summary judgment evidence

supported the claim that Gagliano breached his contractual obligation to accurately

maintain L&S’s books and records. Appellants argued that under the Company

Agreement, Gagliano had an affirmative obligation to act as L&S’s Treasurer and

8 CFO and maintain current and accurate books and records, and in his deposition,

Gagliano acknowledged that he failed to do so at all times. Appellants also argued

that Jeff Compton, the Certified Public Accountant (“CPA”) and forensic accountant

who reviewed L&S’s books and records under Gagliano’s tenure as CFO,

determined that L&S’s books and records were incomplete, contained fundamental

accounting errors, and showed that Gagliano failed to perform his duties under the

Company Agreement. Appellants also argued that Gagliano’s breach caused

damages to L&S, forcing L&S to hire a temporary bookkeeper to perform

Gagliano’s duties, to pay Baker Tilly $10,452 to reconcile L&S’s books and records,

and to pay taxes.

In his deposition, Gagliano testified that he and Burkett agreed that he would

serve as L&S’s CFO and Treasurer. Gagliano testified that he understood his

responsibilities included managing and maintaining current and accurate financial

books and records. Gagliano testified that after taking on those responsibilities, he

did not always perform them. Gagliano explained that he and Burkett agreed to hire

David Zareie, a CPA. Gagliano also explained that he was responsible for paying

L&S’s taxes. Gagliano testified that he had not performed any CFO work or

communicated with Burkett since Burkett asked him to leave the L&S premises.

Gagliano added that a Tactical purchase order shows that while he acted on

9 Tactical’s behalf, he sent L&S’s box design drawings to D&R Specialties for

purchase.

In his affidavit, Burkett stated that as L&S’s Executive Manager his job was

to procure “raw material including but not limited to unfinished enclosures for L&S

Pro-Line equipment.” Burkett claimed that D&R used L&S’s drawings to fabricate

and sell enclosures to Tactical, which Tactical sold without L&S’s approval. Burkett

explained that L&S did not make any profits on D&R’s unauthorized sales to

Tactical. Burkett also stated that in July 2018, Gagliano said that he had abandoned

his job duties as L&S’s CFO and Treasurer. Burkett claimed this forced L&S to

incur extra expenses by hiring a bookkeeper and by hiring Baker Tilly to audit L&S’s

books and records and to address a tax issue. Burkett also explained that after

Gagliano and Tactical quoted L&S a price for control panels, Tactical charged a

higher price without approval. Burkett stated that he found twelve check payments

from L&S to Snook that did not have any invoices and that transfers were made from

L&S’s Chase checking account to Gagliano’s personal checking account without

Burkett’s knowledge or consent.

In his Affidavit, Compton, a CPA, stated that he had reviewed twelve check

payment transactions from L&S to Snook and five electronic transfers, which

occurred in June and July 2018 and involved money going from L&S’s Chase Bank

Account to Gagliano’s account without underlying support to show that these

10 transfers involved L&S’s business expenses. Jason Casell, L&S’s and Burkett’s

attorney, stated in his Affidavit that despite all efforts, he could not secure an

Affidavit from Chase Bank and the owner of D&R to include in the summary

judgment response. L&S’s February 2019 Engagement Letter with Baker Tilly

shows that L&S hired Baker Tilly to perform Tax Compliance Services for the 2018

tax year. Jay Tompkins, a tax partner with Baker Tilly, swore in his Affidavit that,

after reviewing L&S’s books and records under Gagliano’s tenure as CFO, that the

books and records of L&S contain fundamental errors, are incomplete, and that the

errors required extensive work to correct.

Appellants filed Pleas to the Jurisdiction arguing that the trial court should

dismiss Gagliano’s breach of fiduciary duty claim against Burkett for Burkett’s

purported breach against L&S because Gagliano lacked standing to assert a breach

of fiduciary duty claim since Burkett acquired Gagliano’s interest in L&S when he

exercised his option to buy Burkett’s shares in June 2019. Consequently, since the

fiduciary duty theory was based on a direct or derivative action that belonged to

L&S, a company in which Gagliano was not a member when he filed suit, Appellants

claimed that Gagliano lacked standing to file a claim based on a theory involving a

derivative claim. Appellants also argued that in 2018, Gagliano began disrupting

L&S’s business, including demanding that L&S vacate the property that Snook

owned when Gagliano began stating that he would no longer perform his duties as

11 L&S’s CFO or conduct business on behalf of L&S. Appellants alleged that on May

14, 2019, Burkett exercised his option under section 12.7(b) of the Company

Agreement to purchase Gagliano’s entire partnership interest in L&S, and that by

June 11, 2019, under the terms of the buy-out option in the Company Agreement,

Gagliano was no longer a member of L&S after Burkett exercised his option to buy

out Gagliano and paid him $1.3 million dollars. Appellants also argued that even if

the trial court were to find that Gagliano remained a member of L&S, Gagliano

lacked standing under the shareholder-standing rule because the purported harm was

to L&S and if Gagliano did continue to retain his ownership interest in L&S, his

membership interest in the company was only indirectly harmed.

Appellants also filed a Plea to the Jurisdiction on Tactical’s Breach of

Contract Claim, arguing that Tactical is not a third-party beneficiary and lacked

standing to assert a claim against Appellants. Appellants argued that Tactical was

neither a donee beneficiary, which requires the performance promised to be a pure

donation, nor creditor beneficiary, which requires that the maker of the contract

intend to confer a benefit upon the third party and to have the right to enforce the

contract. Appellants argued that based on the Company Agreement’s plain language,

nothing suggests that Burkett or Gagliano intended for Tactical to enforce a breach

of the Company Agreement, which includes a provision that, subject to exceptions

discussed below, gave Tactical a right of first refusal in supplying L&S with the

12 control panels that were incorporated into its products that were sold by L&S to third

parties. Appellants also argued that Tactical did not have standing to sue Burkett

because L&S is the party that committed the alleged wrongful acts.

Appellees filed Objections to the Deficient Evidence Offered by L&S in

Support of its Response to All Defendant’s No-Evidence Motion for Partial

Summary Judgment and asked that all the offending evidence be struck, including

the Affidavits of Burkett, Cassell, Compton, and Tompkins. Appellees also filed a

Reply in Support of their No-Evidence Motion for Partial Summary Judgment.

Appellees argued, among other things, that L&S failed to adduce evidence to support

its affirmative claims of fraudulent transfer and officer removal/declaratory

judgment and adduced no evidence to support the challenged elements on its breach

of contract claim against Gagliano. Appellees argued that L&S failed to produce

evidence that it complied with the Company Agreement and that Burkett’s affidavit,

which alleged that he and L&S performed under the terms of the Company

Agreement, and that the affidavit was conclusory and unsupported by competent

evidence. Appellees also argued that neither Gagliano’s deposition transcript nor

Compton’s affidavit show that Gagliano breached the Company Agreement because

Gagliano testified that the Company Agreement allowed him to hire a CPA firm. In

their reply, the Appellees also argued that Tompkins’s affidavit was conclusory, and

that it was unclear who was testifying in the affidavit. Based on Appellees’

13 objections to the summary judgment evidence, L&S filed a Motion for Leave to

Amend its Summary Judgment Evidence to cure the complaints Gagliano, Snook,

and Tactical had raised with its summary-judgment evidence. In their Motion for

Leave, they argued the trial court should overrule Appellees’ objections because the

affidavits were not based on hearsay and supported by documents that were properly

authenticated.

Tactical filed a Response to Appellants’ Plea to the Jurisdiction on its Breach

of Contract Claim, arguing the Company Agreement explicitly confers contractual

benefits on Tactical, making it a third-party beneficiary with standing to sue

Appellants. Tactical argued that it was a donee beneficiary because the Company

Agreement provided it would receive the pure benefit of control systems sales

outright without having to satisfy, offset, or eliminate some other underlying legal

obligation that Appellants owed Tactical or Gagliano. Tactical further argued that

the control panel/systems provisions were included to benefit Tactical and Gagliano

as part of the arrangement for Gagliano to invest in L&S. Additionally, the Company

Agreement contemplates Tactical’s involvement and enforcement of the Company

Agreement by giving Tactical the right to withhold consent to a customer’s request

for third parties to perform the control panel/system work. Tactical maintained that

Gagliano’s right to enforce the Company Agreement as a member of L&S extended

to his right as an affiliate of Tactical.

14 Gagliano filed a Response to Third-Party Defendant Lee Burkett’s Plea to the

Jurisdiction, arguing that Burkett’s attempted buyout did not strip him of standing

to sue on L&S’s behalf. Gagliano argued that Burkett failed to submit evidence of a

buyout, except for what Gagliano described as Burkett’s “summary recitation” of

having exercised the Push Pull purchase option. And absent evidence of an effective

buyout, according to Gagliano, Burkett’s standing argument fails. Gagliano also

argued that Burkett did not move for summary judgment to seek a ruling on the

alleged buyout, and the deadline to do so had passed. Gagliano maintained that

Burkett’s attempt to exercise the buyout was void and ineffective based on Burkett’s

prior material breaches of the Company Agreement, failure to address the unpaid

distributions, commission of illegal actions that constituted “Terminating Events”

under the Company Agreement, and failure to follow the Company Agreement’s

procedures.

Gagliano also argued that Burkett’s attempted exercise of the Push Pull

provision was an involuntary destruction of Gagliano’s interest to protect Burkett’s

illegal and dishonest conduct, and a fact issue on the purpose of Burkett’s actions

exists precluding his Plea to the Jurisdiction. Gagliano contended that the

shareholder standing rule did not prevent minority owners from suing officers or a

controlling owner who had injured a jointly owned company. He also argued Texas

Business Organizations Code Chapter 101 allows members of a limited liability

15 company to pursue derivative actions, and the business judgment rule does not

undercut a member’s standing or bar derivative suits in cases involving closely held

limited liability companies.

Gagliano asked the trial court to deny Burkett’s Plea to the Jurisdiction

because he had standing to sue for breach of fiduciary duty against Burkett as a

faithless officer and manager who harmed L&S. Gagliano included with his

Response an email from Zareie, L&S’s CPA, informing Gagliano that during the last

few months and since Gagliano had been instructed to stay away from the company,

Zareie had witnessed suspicious activities, including the possible hiding of revenues,

underpayment of tax liabilities, and disbursements from unknown bank accounts.

Zareie stated that he notified the company representative of the activities and would

be withdrawing as L&S’s accountant.

In March 2020, L&S filed its Fifth Amended Petition against Appellees,

arguing that a dispute existed concerning whether Burkett’s purchase effected a

complete sale of Gagliano’s ownership interest and whether L&S had fully

compensated Gagliano under the Company Agreement’s terms. L&S alleged that,

among other actions, Gagliano breached the Company Agreement by failing to

perform his duties, misappropriating trade secrets by using L&S’s drawings for

Tactical’s behalf, and by breaching his fiduciary duties. L&S requested a declaratory

judgment that Burkett purchased Gagliano’s entire interest in L&S on May 14, 2019,

16 under Section 12.7(b) of the Company Agreement and that on July 12, 2019, the

Company paid Gagliano all distributions owed for 2018 and 2019, consistent with

Section 6.3 of the Company Agreement. L&S also requested that the trial court order

Gagliano removed as L&S’s manager, officer, CFO, and Treasurer based on his

actions, and asked the trial court to prevent Gagliano from participating in any vote

authorized by the Company Agreement, alleging that he “has an irreconcilable

conflict of interest on such issues.”

In March 2020, Appellants filed a First Amended Original Answer, alleging

that the business judgment rule, express and/or implied consent, and the doctrines of

prior material breach, ratification, estoppel, lack of standing, repudiation, payment,

and waiver barred Appellees’ claims. Appellants also alleged that Appellees’ claims

were barred because Burkett’s conduct was justified and excused by Appellees’

unclean hands. Appellants also claimed that because Gagliano lacked standing under

the shareholder standing rule, he was not entitled to assert a derivative action on

L&S’s behalf. On May 8, 2019, Gagliano filed a First Amended Original Answer to

L&S’s Fourth Amended Petition, asserting, among others, the additional and

affirmative defenses of fault, consent, lack of proper presentment, the business

judgment rule, truth, lack of reliance, privilege, justified conduct, excuse, and the

doctrines of estoppel, prior material breach, ratification, waiver, offset, and setoff.

17 In May 2020, Appellants filed a Verified Motion for Continuance and, in the

alternative, Response to Defendants’ No-Evidence Motion for Summary Judgment,

requesting that the submission of the No-Evidence Motion for Partial Summary

Judgment be moved to a later date so the parties could complete discovery.

Appellants also argued that the trial court should deny the motion on L&S’s breach

of contract, breach of fiduciary duty, fraudulent misrepresentation, and officer

removal claims based on the law and evidence submitted. Appellants maintained that

the trial court had granted its previous Motion to Continue to conduct discovery, but

another continuance was needed because the COVID-19 pandemic had prevented

the parties from completing discovery.

The record shows that Appellants filed a Traditional and No-Evidence Motion

for Partial Summary Judgment, and Burkett moved for summary judgment on his

declaratory judgment action seeking the determination of whether he complied with

the Push Pull provision in the Company Agreement and purchased Gagliano’s

membership interest on June 11, 2019. Appellants also moved for summary

judgment on Appellees’ causes of action for breach of contract, breach of fiduciary

duty, equitable accounting, indemnification, and abuse of process.

Appellees filed a Response to Appellants’ Traditional and No-Evidence

Motion for Partial Summary Judgment, arguing that the motion included many

allegations unsupported by any evidence, and that material fact issues made

18 summary judgment improper. Appellees argued that Burkett was in prior material

breach of the Company Agreement when he tried to exercise the Push Pull provision

and conclusively failed to comply with the Company Agreement. Appellees also

argued that Burkett breached his fiduciary duty to L&S and Gagliano, who had

standing to bring a direct or derivative suit against Burkett for both his and L&S’s

benefit. Appellees argued that despite Burkett claiming he fully complied with the

Company Agreement when he exercised the Push Pull on April 12, 2019, and bought

Gagliano out of L&S on June 11, 2019, Burkett’s own evidence shows that he failed

to pay Gagliano’s 2018 and 2019 distributions until July 15, 2019. Gagliano also

disputed the amounts of those distributions. Appellees maintained that before

Burkett could exercise the Push Pull, the parties were required to mediate the dispute

and continue to mediate until the controversy was resolved or the mediator made a

good faith finding that no possibility existed that the case could be settled through

mediation, neither of which conditions had occurred. Appellees also argued that

Burkett failed to make the payment in cash as required by the Company Agreement

at closing, and at the very least, they claimed that genuine issues of material fact

existed as to whether Burkett effectively exercised the buy-out option in the

Company Agreement, which the Company Agreement and the parties refer to as the

Push Pull. Appellees maintained that Appellants wrongfully obtained and used a

19 Temporary Restraining Order to prevent Gagliano from enforcing his rights under

the Company Agreement and performing his dues as L&S’s CFO.

Appellees also argued that a shareholder derivative action allows Gagliano to

sue on L&S’s behalf for the wrongs Burkett committed against the company, and

the Business Judgment Rule did not shield Burkett from Gagliano’s claims because

Burkett’s conduct was not unsound business judgment or negligent but instead was

intentional and unlawful with the object of self-dealing. As to Tactical, Appellees

maintained that Tactical was a third-party beneficiary and that its standing to sue is

based on the Company Agreement as a donee beneficiary. Under the Company

Agreement, Appellees argued, Tactical was entitled to receive the pure benefit of

any control system panels that were not manufactured by Tactical but that had been

incorporated into the product lines and then sold by L&S.

Appellants filed a Reply to Appellees’ Response to Traditional and No-

Evidence Motion for Partial Summary Judgment, again arguing that Gagliano lacked

standing to bring a derivative action because he did not possess a present ownership

interest, Tactical lacked standing because it was not a third-party beneficiary, and

Gagliano failed to establish a prima facie case for abuse of process. Burkett filed a

Reply in support of his Motion for Partial Summary Judgment as to his request for

declaratory relief and a finding that, as of June 11, 2019, Burkett had purchased

Gagliano’s entire interest in L&S. Burkett argued that Gagliano’s affirmative

20 defense of prior material breach was not timely asserted and irrelevant because

Gagliano continued to accept the benefits under the Company Agreement by

accepting distributions. Burkett argued that Gagliano’s Response militates against

finding a failure of a condition precedent because Gagliano admitted the parties tried

to resolve their dispute in mediation. Burkett maintained that the trial court should

grant summary judgment and find that he purchased Gagliano’s membership interest

as of June 11, 2019, because Burkett had complied with the material terms of the

buy-out provision in the Company Agreement that governed the rights of Gagliano’s

and Burkett’s ownership of L&S.

Burkett also filed Objections to Evidence Gagliano attached to his Response

to Burkett’s Motion for Partial Summary Judgment. Burkett objected to Gagliano’s

First Declaration, claiming the statements in it were conclusory, and contained

hearsay, impermissible opinions, and legal conclusions. Burkett also objected to

Gagliano’s Second Declaration and John Ellis’s Declaration, arguing they were both

not credible and fatally defective. Appellants filed Objections to Evidence Appellees

offered in Response to Appellants’ Traditional and No-Evidence Motion for Partial

Summary Judgment on Appellees’ claims for breach of contract, breach of fiduciary

duty equitable accounting, indemnification, and abuse of process.

On May 8, 2020, Gagliano also filed a Sur-Reply in Support of his Response

to Burkett’s Motion for Partial Summary Judgment and Motion for Leave to File

21 Trial Amendment, Gagliano argued that Burkett had waived his election of remedies

claim as an affirmative defense, and Gagliano also argued that Burkett had not

shown that why Gagliano’s defense that Burkett had committed a prior material

breach did not relieve him from performing under the Company Agreement after

that breach occurred. Gagliano also objected to trying the election of remedies issues

by consent, and he argued that the issue would be relevant only after the verdict and

that an election of remedies defense did not bar the trial court from granting

summary judgment. According to Gagliano, Burkett bore the burden to prove that

he had complied with the Company Agreement, and as the non-movant it was not

Gagliano’s burden to plead and prove that Burkett had complied with all conditions

precedent to enforcing his rights under the party’s agreement. Gagliano explained

that L&S filed its Fifth Amended Petition on March 9, 2020, which was both after

the pleadings deadline and without leave of court. In the Fifth Amended Petition,

Burkett had asked for a declaratory judgment that he had purchased his interest on

May 14, 2019. Gagliano noted that he had objected to the late filed pleading and

because the deadline to amend pleadings under the trial court’s docket control order

had closed, he had not amended his pleadings to add affirmative defenses, including

claims for failure of conditions precedent. Gagliano explained that he also objected

and moved to strike Burkett’s late-filed Motion for Partial Summary Judgment, but

the trial court reopened pleadings on May 4, 2020, and he did not have an

22 opportunity to plead the affirmative defense of failure of conditions precedent.

Gagliano requested leave to file his Verified Second Amended Original Answer,

which includes a failure of conditions precedent defense that argues Burkett failed

to satisfy the conditions to close the buy-out option by tendering the required

payment at closing in cash.

On May 26, 2020, Appellants filed an Amended Plea to the Jurisdiction on

Tactical’s Breach of Contract Claim, arguing that Tactical is not a third-party

beneficiary and lacks standing to assert a breach of contract claim. Appellants stated

that their Motion for Partial Summary Judgment was based on many of the same

issues raised in the Plea. Appellants argued that since the Company Agreement

provided that Tactical would benefit so long as Gagliano owned or controlled

Tactical, it only intended for Gagliano to financially benefit from Tactical’s

opportunity to perform work. Appellants maintained that Tactical was an incidental

beneficiary with no enforceable contractual rights because its benefit immediately

terminated if Gagliano was no longer affiliated, and the provision was solely for

Gagliano’s benefit.

Burkett also filed an Amended Plea to the Jurisdiction, moving to dismiss

Gagliano’s breach of fiduciary duty claim against Burkett contending Gagliano lacks

standing to assert such a claim as a direct or derivative action on L&S’s behalf.

Burkett claimed that Gagliano refused to renew L&S’s lease with Snook and evicted

23 L&S because a customer refused to use Tactical. Burkett claimed that mediation

with Alan Levin on July 17, 2018, “resulted in an impasse and Burkett and Gagliano

did not resolve any of their, by then, many disputes.” Burkett explained that although

he was prepared to buy-out Gagliano, he agreed to a second mediation with

Honorable Sylvia Matthews on April 9, 2019, and “[a]gain, the parties did not

resolve any of their several disputes at the conclusion” of the mediation, and after

the parties left, “Judge Matthews made an additional, final attempt to settle by

sending a mediator’s proposal[] to both parties which was not mutually accepted,

resulting in an impasse.” Burkett explained that a mediator’s proposal is “‘typically

used as a measure of last resort . . . after all other options for compromise have

been exhausted[.]’” Burkett asserted he then notified Gagliano’s attorney of his

intent to purchase Gagliano’s membership interest, after which he exercised his

option under the Company Agreement to buy Gagliano out for $1.3 million. L&S

made and recorded the closing effective as of June 11, 2019, at which time Gagliano

no longer had standing to pursue his claims.

Gagliano filed a Response to Burkett’s First Amended Plea to the Jurisdiction,

complaining that Burkett’s Amended Plea was his attempt to disguise another

motion for summary judgment as a plea to the jurisdiction. In support of this,

Gagliano asserted the buy-out issue was not jurisdictional, rather it concerned factual

24 matters and a determination of substantive law given Burkett’s material breaches

and failure to follow the buy-out procedure.

In August 2020, Gagliano filed a Traditional Motion for Partial Summary

Judgment on his request for declaratory judgment and his affirmative defenses of

prior material breach and failure of conditions precedent, arguing that Burkett did

not buy him out of L&S because he failed to follow the Push Pull provision’s precise

procedure for completing a forced buyout under the Company Agreement and was

in prior material breach of the Company Agreement. Gagliano argued that Burkett

breached the Company Agreement’s provisions: (1) limiting the type of business

Burkett and L&S could conduct; (2) requiring work to first be offered to Tactical;

(3) requiring Gagliano’s consent for transactions exceeding $5,000; and (4) payment

of quarterly distributions of net cash from operations to members. Gagliano

maintained that he was entitled to summary judgment and declaratory judgment that

Burkett’s attempt to exercise the Push Pull provision was ineffective for his prior

material breaches and failure to follow the buyout procedures requiring a good faith

finding of no possibility of settlement by the mediator, closing on the sixtieth day

after delivery of the Purchase Notice, and payment in cash. Gagliano argued that

Burkett materially breached the Company Agreement by using L&S’s funds to pay

for prostitution and other bribes to L&S’s customers, driving drunk with an L&S

customer, knowingly employing an undocumented immigrant and registered sex

25 offender, physically excluding Gagliano from L&S’s premises, refusing to source

control panels from Tactical, engaging in unauthorized competition that caused

Tactical to suffer $1,701,074 in actual damages, engaging in transactions exceeding

$5,000, and failing to authorize quarterly distributions to Gagliano.

Gagliano maintained that Burkett was in material breach of the Company

Agreement on April 12, 2019, when he tried to exercise the Push Pull and remained

in material breach on June 11, 2019, the date he claims he bought out Gagliano.

Gagliano further argued that Burkett’s attempt to pay him distributions for 2018 and

2019 after the date Burkett claimed the buyout occurred showed that Burkett was in

material breach of the Company Agreement when he sought to exercise the Push

Pull. Gagliano asserted he never deposited the distribution checks, which were made

out to Wahoo Lending, LLC, and fell short of the undistributed profit amounts that

Gagliano’s expert, Steven Fowler, testified he was owed for 2017, 2018, and 2019.

Gagliano further argued that Burkett made additional unauthorized expenditures of

L&S’s funds for his sole benefit of at least $686,670 through January 2020, and

Gagliano claimed he was entitled to his proportionate share of that amount, which is

$228,890.

Gagliano maintained that Burkett failed to properly exercise the Push Pull

absent a mediator’s good faith finding that there is no possibility of settlement. He

also argued that a closing must be held sixty days after the purchase offer, which

26 Burkett ignored. He also asserted that Burkett sent a cashier’s check from an

unrelated company called HAL Solutions thirty-two days after the initial notice on

April 12, 2019, declared Gagliano was bought out as of May 13, 2019, and failed to

pay cash at closing. Gagliano explained that despite Burkett being in breach of the

Company Agreement, on June 11, 2019, sixty days after the purchase notice, he

traveled to Houston to settle the buyout issue and assign his membership interest

upon Burkett paying the purchase price in cash at closing and properly paying the

distributions owed to Gagliano. Gagliano stated that since Burkett failed to appear

at the closing and pay in cash, Burkett did not follow the Push Pull procedure and

satisfy the Company Agreement’s conditions precedent to a buyout. Thus, Burkett’s

buyout attempt was unsuccessful.

Appellants filed a Response to Gagliano’s Motion for Partial Summary

Judgment, arguing that the trial court should deny Gagliano’s Motion regarding the

sole issue of whether Burkett’s exercise of the Push Pull provision purchased

Gagliano’s entire interest in L&S effective June 11, 2019. Appellants argued that

Gagliano could not both claim benefits under the Company Agreement and argue

the Push Pull provision could not be enforced because the Company Agreement was

invalid during the notice period. Appellants asserted that Gagliano neither responded

to Burkett’s notice, nor complained that the Company Agreement was no longer in

force. Appellants argued that Gagliano failed to meet his burden of conclusively

27 establishing the affirmative defense of Burkett’s material breaches of the Company

Agreement or that the Company Agreement prevented Burkett’s alleged conduct,

and the jury should decide whether Burkett’s alleged conduct violated the Company

Agreement. Appellants maintained that the law does not support Gagliano’s

argument that a material breach precludes the enforcement of a contract’s terms, and

Gagliano continued to accept quarterly distributions and never elected to cease

performance and terminate the Company Agreement. Appellants claimed that

Gagliano’s continued performance under the Company Agreement renders Burkett’s

alleged breaches immaterial to the trial court’s determination of whether Burkett

complied with the Push Pull provision. Additionally, they claimed that even if the

defense of prior material breach applied, Gagliano failed to identify the provision of

the Company Agreement claimed to have been breached and failed to present any

evidence to support each of the elements required to support a claim on a theory of

prior material breach as a matter of law. Appellants also argued that a nonmaterial

breach does not excuse future performance and instead only gives rise to a claim for

damages. Appellants also maintained that the business judgment rule precluded

Gagliano from maintaining a claim based on a theory of material breach because the

evidence shows that Burkett always acted for L&S’s sole benefit and exercised

sound and reasonable judgment. They also asserted the expenses Burkett incurred as

an L&S executive are common in the oil and gas services.

28 For their part, Appellants asserted that Burkett had fully complied with the

Push Pull provision when, on May 14, 2019, he paid Gagliano $1.3 million via a

cashier’s check, which they argued under the law is treated as the functional

equivalent of cash. Appellants also maintained that Gagliano received all ownership

benefits in L&S through the date of the sale of Gagliano’s interest in L&S closed,

which Appellant claim occurred on June 11, 2019. Appellants argued that under the

Company Agreement, performance before the due date is equivalent to performance

on the due date because the $1.3 million payment by cashier’s check remained in the

hands of Gagliano’s attorney. Appellants also argued that Burkett fulfilled all

conditions precedent required under the Company Agreement’s option to buy-out

another member, and that in his May 4, 2020 Response, Gagliano admitted that the

parties unsuccessfully attempted to resolve their dispute with mediators twice.

Gagliano filed Objections to Evidence Offered by Appellants in Support of

their Response to Gagliano’s Motion for Partial Summary Judgment. Gagliano also

filed a Reply in Support of his Motion for Partial Summary Judgment against

Appellants on his request for declaratory judgment and his affirmative defenses of

prior material breach and failure of conditions precedent, arguing that there were no

fact issues and that he was entitled to summary judgment. In his Reply, Gagliano

argued that Appellants adduced no evidence that Burkett complied with the Push

Pull buyout procedure. Gagliano argued that Burkett failed to satisfy the conditions

29 precedent to a buyout by: (1) showing that a mediator made a good faith finding

there is no possibility of settlement; (2) sending a Purchase Notice to Gagliano; (3)

participating in a closing sixty days after the attempted buyout; and (4) paying cash

at closing. Gagliano further argued that the evidence establishes Burkett materially

breached the Company Agreement including failing to pay him correct distributions.

Gagliano explained that he sued Burkett individually, and he argued that the business

judgment rule did not apply to protect corporate officers from liability to individual

members from a claim by another member who claims he has been personally

harmed.

In March 2021, Appellants filed a Motion Under Rule 166(g) to Determine

Tactical Is Not a Third-Party Beneficiary, arguing that Tactical cannot overcome the

presumptions against conferring third-party status. Appellants maintained that

Tactical is not a creditor beneficiary because the Company Agreement does not

provide Tactical with the right to enforce the agreement, and it is not a donee

beneficiary but an incidental beneficiary because Gagliano, on behalf of Tactical,

agreed to an exchange–Tactical would perform the control panel work under certain

conditions. Appellants argued that the parties intended for Gagliano to financially

benefit from the control panel work sent to Tactical.

Appellants also filed a Motion Under Rule 166(g) to Determine, as a Matter

of Law, that Burkett purchased Gagliano’s Interest in L&S. Appellants asked the

30 trial court to find as a matter of law that an “Unresolved Dispute” under the Company

Agreement is simply a dispute that has not been resolved and that “cash” includes a

cashier’s check and does not only mean “dollar bills.” Appellants explained that

while the parties briefed the issues in the context of motions for summary judgment

and L&S’s Plea to the Jurisdiction, neither party asked the trial court to answer a

pure question of law and interpret the contract, which Texas Rule of Civil Procedure

166(g) enables the trial court to do. Appellants also filed supplements to their

motions under Rule 166(g).

The trial court conducted a pretrial hearing on Appellants’ motions under

Texas Rule of Civil Procedure 166(g). During the hearing, Appellants argued that

neither party claimed the Company Agreement was ambiguous, and they suggested

that should the trial court find that Burkett purchased Gagliano’s membership

interest, that finding would resolve Gagliano’s and Tactical’s claims. On the other

hand, since the trial court declined to grant the Appellants’ motion and declined to

find that Burkett’s ownership interest had been redeemed as a matter of law,

Tactical’s third-party beneficiary issue became relevant, as did questions about

Burkett’s subsequent decision to amend the Company Agreement and to remove the

provision in the Company Agreement that provided Tactical with a right of first

refusal on manufacturing control panels sold by L&S.

31 Appellants argued that Burkett made an offer to buy Gagliano’s membership

interest under section 12.7 of the Company Agreement, waited sixty days, and

tendered a cashier’s check to Gagliano’s counsel. They explained that under the

terms of the Company Agreement, Gagliano had the option to buy Burkett’s

membership interest by offering to pay three times Burkett’s offer. But when

Gagliano failed to respond to Burkett’s offer by offering to buy Burkett’s shares,

under the terms of the Company Agreement Gagliano is deemed to have accepted

Burkett’s offer to buy Gagliano’s shares. Appellants argued that the disputed issue

was whether under section 12.7 there was an “Unresolved Dispute,” a term the

Company Agreement defines as a dispute that is unresolved after mediation.

Appellants argued that the case remained unresolved after two mediations, and that

Burkett made his offer after the second mediator’s joint proposal was not accepted.

Appellants also claimed that because Burkett’s cashier’s check satisfied the “cash”

requirement under section 12.7 of the Company Agreement, when the period expired

for Gagliano to respond to Burkett’s offer, Gagliano’s membership interest in L&S

was redeemed by Burkett.

Appellees explained that in a prior hearing, the trial court had denied the

parties’ cross-motions for summary judgment on the issue of Burkett’s purchase of

Gagliano’s interest in L&S. Appellees asked the trial court to revisit its rulings on

those motions. Appellees argued that since Appellants failed to show that a mediator

32 had declared an impasse, and because Appellants had not tendered the payment for

Gagliano’s interest in cash, the Appellants had failed to show that Burkett bought

Gagliano out under the terms of the Company Agreement.

The trial judge stated he did not need to look at the impasse part because “[n]o

mediator has said there is no possibility of settlement through mediation.” The judge

also noted that section 12.7(a) of the Company Agreement is unambiguous and does

not state there must be an impasse. Rather, what section 12.7(a) says is, “the parties

must try and resolve their dispute through a mediation until . . . a mediator makes a

good faith finding there is no possibility of settlement through mediation.” The trial

court also noted that it appeared the mediator was uncomfortable with finding no

possibility of settlement existed through mediation.

In response to the trial court’s observations, the Appellants raised four

arguments. First, they argue the Company Agreement doesn’t require a formalized

finding of impasse, and instead all that was needed was a generalized finding, which

was made clear given the time that passed after two mediations that were not

successful and the fact that the parties proceeded to trial. Second, they claimed that

section 12.7(a) of the Company Agreement required the parties to mediate their

disputes, but that section 12.7(b) addressed what occurred if the dispute remained

unresolved after it arose for a period of exceeding two years. Third, Appellants

suggested that the “no possibility of settlement” language in section 12.7(a) does not

33 apply when the buy-out provision applicable to Unresolved Disputes in section

12.7(b) of the Company Agreement is exercised. Fourth, they argued that an

Unresolved Dispute under the Company Agreement includes a dispute that remains

unresolved after mediation regardless of whether the mediator has made a no

possibility of settlement finding. Appellants also requested that the trial court rule

on whether a cashier’s check satisfied section 12.7(b)’s requirement that the

purchase price, if the parties cannot agree, “be payable in cash at closing.”

Turning to the Appellants’ Motion Under Rule 166(g) in which it argued that

Tactical was not a third-party beneficiary of the Company Agreement between

Burkett and Gagliano, Appellants explained that Tactical relied on the Company

Agreement by claiming L&S had breached it and that under the Company

Agreement, it had rights it could enforce under the agreement to provide control

panels for the products sold to third-parties in the product lines manufactured by

L&S. When L&S did not honor its obligation to allow Tactical to provide these

control panels, Tactical claims, it lost revenues that it otherwise would have received

from the sales and installation of these panels into product lines sold to third parties

by L&S.

According to Appellants, since Tactical was a stranger to the Company

Agreement, its right to sue depends on whether it is a third-party beneficiary to the

agreement, and there was a presumption against conferring third-party beneficiary

34 status on noncontracting parties. Appellants argued that in its response to the

Appellants’ plea to the jurisdiction, Tactical admitted that it is not a creditor

beneficiary to the Company Agreement. Appellants also claim that Tactical cannot

demonstrate that it is a donee beneficiary because it cannot show that the Appellants’

purchases of control panels from Tactical, when they occurred or when they were to

occur, were pure donations. Appellants also asserted that absent Tactical’s third-

party beneficiary status under the Company Agreement, Tactical has no basis on

which to assert a breach of contract claim under the Company Agreement while

Gagliano was an owner of L&S. In other words, the purpose of the provisions that

are in the Company Agreement that are tied to Tactical are there solely for

Gagliano’s benefit as an owner of L&S, and the parties to the agreement did not

intend to make Tactical a third-party beneficiary of the Company Agreement based

on the benefit the provisions gave Gagliano given the ownership interest that he had

in Tactical.

Appellees argued that the Company Agreement’s plain language, including a

provision providing Tactical with the right of first refusal to install control panels in

L&S products within the restrictions of the Company Agreement shows that Tactical

was an intended beneficiary under the Company Agreement. Appellees noted that

Burkett unilaterally amended the Company Agreement and removed the right of first

35 refusal provision from the Company Agreement while Gagliano still owned an

interest in L&S.

After considering that parties’ arguments, the trial court: (1) found the

Company Agreement unambiguous; (2) citing section 8.4(d)(v) of the Company

Agreement, found Tactical to be a third-party beneficiary of the Company

Agreement, and gave Tactical the right to enforce the right of first refusal in section

8.4; and (3) found that due to the mediator’s failure to make a good faith finding that

the case could not be resolved by mediation and there was no unresolved dispute,

determined there was a failure in a condition precedent to Burkett’s invoking the

Push-Pull clause, section 12.7, and found that Burkett’s attempt to purchase

Gagliano’s interest in L&S to be invalid. After the trial court signed a summary-

judgment order consistent with its rulings, Appellants filed Motions to Reconsider,

but its motions were denied.

Subsequently, the case proceeded to trial. At the conclusions of the trial, the

jury found that: (1) L&S failed to comply with the Company Agreement; (2) Burkett

failed to comply with the Company Agreement; (3) Gagliano did not fail to comply

with the Company Agreement; (4) L&S’s failure to comply was not excused; (5)

Burkett’s failure to comply was not excused; (6) Gagliano was entitled to

$2,638,101.05 in unpaid distributions for breach of contract damages due to L&S’s

and Burkett’s failure to comply with the Agreement; (7) Tactical was entitled to

36 $2,389,725.29 in past lost profits for breach of contract damages due to L&S’s and

Burkett’s failure to offer control panel and systems work to Tactical; (8) Gagliano

was entitled to $1,261,000 in attorney’s fees for Gagliano’s breach of contract

claims, $291,000 for representation through appeal to the court of appeals, and

$97,000 for representation in the Supreme Court of Texas; (9) Burkett failed to

comply with his fiduciary duty to L&S; (10) Burkett’s decisions and expenses were

not protected by the Texas Business Judgment Rule; (11) Gagliano, standing in the

shoes of L&S, was entitled to $525,337.11 in damages for payments L&S made to

Burkett and others for Burkett’s personal expenses; (12) L&S must pay Tactical

$2,389,725.29 as a result of Burkett causing L&S to breach its contract with Tactical;

(13) Gagliano, standing in the shoes of L&S, was entitled to $2,638,101.05 in unpaid

distributions for breach of contract damages; (14) the harm to L&S as a result of

Burkett’s breach of fiduciary duty resulted from malice, gross negligence, and

intentional self-enrichment; (15) Gagliano, standing in the shoes of L&S, was

entitled to $15,106,326 as exemplary damages because of Burkett’s malicious,

grossly negligent, and intentionally self-enriching breach of fiduciary duty; (16)

Gagliano did not fail to comply with his fiduciary duty to L&S; (17) Burkett failed

to comply with his fiduciary duty to Gagliano; (18) Gagliano was entitled to

$2,638,101.05 in unpaid distributions for damages because of Burkett’s breach of

his fiduciary duty; (19) the harm to Gagliano resulted from malice, gross negligence,

37 and intentional self-enrichment attributable to Burkett’s breach of fiduciary duty;

(20) Gagliano was entitled to $10,000,000 as exemplary damages from Burkett

because of Burkett’s malicious, grossly negligent, and intentionally self-enriching

breach of fiduciary duty; (21) a relationship of trust and confidence existed between

Burkett and Gagliano; (22) Burkett failed to comply with his fiduciary duty to

Gagliano; (23) Gagliano was entitled to $2,638,101.05 in unpaid distributions based

on Burkett’s breach of his fiduciary duty; (24) Gagliano was entitled to $525,337.11

for payments L&S made to Burkett and others for Burkett’s personal expenses; (25)

L&S must pay Tactical $2,389,725.29 as a result of Burkett’s causing L&S to breach

with Tactical; (26) the harm to Gagliano as a result of Burkett’s breach of fiduciary

duty resulting from malice, gross negligence, and intentional self-enrichment

attributable to Burkett; (27) Gagliano was entitled to $15,106,326 in exemplary

damages because of Burkett’s malicious, grossly negligent, and intentionally self-

enriching breach of fiduciary duty; (28) Burkett committed a Terminating Event

under the Company Agreement; (29) for representing Gagliano against Burkett’s

failed request for a declaration tied to his attempt to exercise his rights under Section

12.7(b) of the Company Agreement, Gagliano was entitled to $1,170,000 in

attorney’s fees through trial, $270,000 through appeal, $45,000 for representation at

the petition for review stage of the Supreme Court, $22,500 for merits briefing stage

in the Supreme Court, and $22,500 for representation through oral argument and

38 completion of proceedings in the Supreme Court; (30) L&S failed to comply with

its Commercial Lease Agreement with Snook; (31) Snook was entitled to

$104,139.12 in damages for past property repairs and $5,100 for erecting a privacy

fence; (32) for representing Snook, Snook is entitled to recover $39,000 in

reasonable and necessary attorney’s fees through trial on his claim alleging that L&S

failed to comply with its Commercial Lease Agreement, plus an additional $9,000

in attorney’s fees for appeal to the court of appeals, $1,500 for petition for review

stage, $750 for merits briefing, and $750 through oral argument; (33) for

representing Gagliano on his claims against L&S, Gagliano is entitled to recover

$30,000 in attorney’s fees through trial for defending L&S’s claim for theft under

the Texas Theft Liability Act, plus an additional $6,912 in attorney’s fees for appeal

to the court of appeals, $1,152 for petition for review stage, $576 for merits briefing,

and $576 through oral argument; (34) for representing Gagliano on his declaratory

judgment claims against Burkett and L&S, Gagliano is entitled to recover reasonable

and necessary attorney’s fees of $1,170,000 in attorney’s fees through trial plus an

additional $270,000 in attorney’s fees for appeal to the court of appeals, $45,000 for

petition for review stage, $22,500 for merits briefing, and $22,500 through oral

argument; (35) for representing Gagliano on his claim against Burkett, Gagliano is

entitled to recover reasonable and necessary attorney’s fees of $1,170,000 through

trial, plus an additional $270,000 for appeal to the court of appeals, $45,000 for

39 petition for review stage, $22,500 for merits briefing, and $22,500 through oral

argument; (36) Gagliano is entitled to be indemnified or reimbursed under Section

14.1 of the Company Agreement; and (37) Gagliano incurred a total of $1,170,000

in reasonable attorney’s fees in this proceeding through trial along with $113,190 in

court costs and fees and was entitled to $270,000 for appeal to the court of appeals,

$45,000 for petition for review stage, $22,500 for merits briefing, and $22,500

through oral argument.

The trial court accepted the jury’s verdict and incorporated the findings into

the Final Judgment, including its pretrial dispositive rulings that Burkett’s purported

exercise of Section 12.7(b) of the L&S Company Agreement was ineffective and

Tactical is a third-party beneficiary of the Company Agreement. The trial court

conducted a hearing on the entry of the Final Judgment and asked whether the

Appellees had made their elections. Appellees responded that they had provided the

court with binding authority stating that “what goes to the appellate review is the

final judgment with all of the bases and the Appellate Court can sustain this jury’s

work on any one of the different bases for liability, be it breach of contract or

fiduciary duty or otherwise.” Appellees’ counsel explained that if Appellants were

concerned over double or multiple recoveries, the trial court retained plenary

jurisdiction to enforce its judgment, and the court could ensure that no double

recovery was allowed or one that exceeded what the Court of Appeals would

40 authorize. In response, Appellants’ counsel argued that a plaintiff must elect their

remedies after verdict and before the judgment was entered, and the judgment

contains four categories of actual damages including (1) distributions to Gagliano,

(2) damages to Tactical, (3) Burkett’s personal expenditures, and (4) Snook’s

damages. The damages are owed by either Burkett or L&S but not both. Appellees’

counsel maintained that when a jury returns favorable findings on two or three

alternative theories, the prevailing party need not formally waive the alternative

findings and may seek recovery under an alternative theory should the judgment be

reversed on appeal. Appellants’ counsel explained that the judgment just needed to

contain alternative language concerning the theories of recovery.

The Final Judgment “DECLARES, ORDERS, ADJUDGES, DECREES,

AND ENTERS JUDGMENT” against L&S Pro-Line and to Gagliano for breach of

contract in the amount of $2,638,101.05; against L&S Pro-Line and to Tactical for

breach of contract in the amount of $2,389,725.29; against L&S Pro-Line and to

Snook for breach of contract in the amount of $109,239.12; against Burkett and to

Gagliano for breach of contract in the amount of $2,638,101.05; against Burkett and

to Tactical for breach of contract in the amount of $2,389,725.29; against Burkett

and to Gagliano for breach of fiduciary duty in the amount of $5,553,163.45; against

Burkett and to Gagliano as punitive damages for Burkett’s malicious, grossly

negligent and intentionally self-enriching breach of fiduciary duty in the amount of

41 $5,276,202.10; against Burkett and to Gagliano, standing in the shoes of L&S, for

breach of fiduciary duty in the amount of $5,553,163.85; against Burkett and to

Gagliano, standing in the shoes of L&S as punitive damages for Burkett’s malicious,

grossly negligent and intentionally self-enriching breach of fiduciary duty in the

amount of $11,106,329.70; against L&S and to Gagliano for reasonable and

necessary legal fees in the amount of $1,170,000; against Burkett and to Gagliano

for reasonable and necessary legal fees in the amount of $1,170,000 and for

reasonable and necessary appellate fees; against L&S and to Gagliano for reasonable

and necessary court costs in the amount of $113,190 and for reasonable and

necessary appellate fees; against L&S and to Gagliano for additional reasonable and

necessary legal fees incurred in proceeding to defend and prevail against L&S’s theft

claim in the amount of $30,000 and reasonable and necessary appellate fees; and

against L&S and to Snook for reasonable and necessary legal fees in the amount of

$39,000 and for reasonable and necessary appellate fees.

Appellants filed a Motion for Judgment Notwithstanding the Verdict, arguing

there was no evidence to support any elements of Gagliano’s and Tactical’s claims

or any awarded damages. Appellants asked the trial court to set aside the jury’s

verdict and render judgment in their favor because: (1) there is insufficient evidence

to demonstrate that Appellants failed to comply with the Company Agreement by

not paying Gagliano distributions because Gagliano was not a member of L&S after

42 June 11, 2019; and (2) because Tactical did not have standing to assert a breach of

contract claim under the Company Agreement. Appellants complained that no

evidence supported the jury’s damages awards for unpaid distributions to Gagliano

and lost profits to Tactical, and that the responses by the jury to the question on

attorney’s fees were unsupported by legally sufficient evidence. Appellants also

complained the evidence was insufficient to support the jury’s answers to the

questions about whether Burkett had failed to comply with his fiduciary duties to

L&S and Gagliano. And Burkett also argues that the jury’s failure to find that the

decisions he made while acting as an officer, director, or manager of L&S is against

the greater weight and preponderance of the evidence under the Business Judgment

Rule. Appellants also argue the evidence is insufficient to support the jury’s damages

awards, and that the trial court’s judgment violates the one satisfaction rule by

allowing Appellees, Gagliano and Tactical, a double, triple, or even greater recovery.

Appellants also challenged the legal sufficiency of the evidence supporting the

“excessive” punitive damages award, that Burkett committed a Terminating Event

under the Company Agreement, and that L&S failed to comply with its commercial

lease with Snook.

Appellees filed a Response to Appellants’ Motion for Judgment

Notwithstanding the Verdict, arguing that Appellants were attempting to “rehash”

the trial court’s prior rulings, and they were not entitled to a judgment as a matter of

43 law on any grounds asserted. Appellants filed a Motion for New Trial asking the trial

court to disregard the jury’s findings and grant them a new trial, which was overruled

by operation of law.

ANALYSIS

Issues One and Two: Summary Judgment

Appellants complain that erroneous pre-trial rulings significantly impacted

the scope of the trial. In issue one, Appellants argue the trial court erred by holding

that Burkett did not purchase Gagliano’s membership interest under the Company

Agreement. Appellants argue this Court should determine these issues as a matter of

law and reverse and remand the breach of contract question so it may be tried in the

correct procedural posture. In issue two, Appellants assert the trial court erred by

holding Tactical was a third-party beneficiary of the Company Agreement with

standing to sue.

We review summary judgment orders de novo. Provident Life & Accident Ins.

Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). The party moving for traditional

summary judgment must establish that (1) no genuine issue of fact exists, and (2) it

is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c); Randall’s Food

Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). If the moving party

produces evidence entitling it to summary judgment, the burden shifts to the non-

movant to present evidence that raises a fact issue. Walker v. Harris, 924 S.W.2d

44 375, 377 (Tex. 1996). In determining whether there is a disputed material fact issue

precluding summary judgment, evidence favorable to the nonmovant will be taken

as true. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548–49 (Tex. 1985). We

review the summary judgment record “in the light most favorable to the nonmovant,

indulging every reasonable inference and resolving any doubts against the motion.”

City of Keller v. Wilson, 168 S.W.3d 802, 824 (Tex. 2005); see also Mosaic

Baybrook One, L.P. v. Simien, 674 S.W.3d 234, 252 (Tex. 2023) (citation omitted).

When both parties move for summary judgment on the same issue and the

trial court grants one motion and denies the other, the reviewing court considers the

summary judgment evidence presented by both parties and determines all the

questions presented. Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289

S.W.3d 844, 848 (Tex. 2009). If the reviewing court determines that the trial court

erred, the reviewing court renders the judgment the trial court should have rendered.

Id. We must affirm the summary judgment if any grounds asserted in the motion are

meritorious. Tex. Workers’ Comp. Comm’n v. Patient Advocates of Tex., 136 S.W.3d

643, 648 (Tex. 2004). When, as here, a trial court orally grants summary judgment

on a particular basis but reduces that ruling to writing without stating any basis, the

trial court’s written judgment controls, and the appellant must show that the trial

court erred to base the summary judgment on every ground asserted in the motion.

See Star-Telegram v. Doe, 915 S.W.2d 471, 473 (Tex. 1995); Gonzales v. Thorndale

45 Coop. Gin and Grain Co., 578 S.W.3d 655, 657–58 (Tex. App.—Houston [14th

Dist.] 2019, no pet.) (citations omitted) (explaining that appellate courts look to the

trial court’s formal summary-judgment order to determine the trial court’s grounds,

if any, for the ruling).

Whether a contract is ambiguous is a question of law for the court and is

subject to de novo review. Bowden v. Phillips Petroleum Co., 247 S.W.3d 690, 705

(Tex. 2008). To determine whether a contract is ambiguous, a court looks at the

contract as a whole and considers the circumstances at the time of the agreement.

Sadler Clinic Ass’n, P.A. v. Hart, 403 S.W.3d 891, 895 (Tex. App.—Beaumont

2013, pet. denied) (citation omitted). A court attempts to give effect to the parties’

intent as expressed in the agreement. Id. An ambiguity does not exist simply because

the parties offer conflicting interpretations of an agreement. See id. If an agreement

can be given a clear and definite legal meaning, then it is not ambiguous as a matter

of law. See id.; see also Zarkasha Enter., Inc. v. Old Republic Title Ins. Co. of

Conroe, No. 09-20-00057-CV, 2021 WL 3774710, at *11 (Tex. App.—Beaumont

Aug. 26, 2021, no pet.) (mem. op.) (citations omitted). That said, if an agreement

contains an ambiguity, summary judgment is improper because interpretation of the

contract is a fact issue. See Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1985); see

Zarkasha Enter., Inc., 2021 WL 3774710, at *11.

46 Issue One: Did the summary judgment evidence prove as a matter of law that Burkett did not purchase Gagliano’s Membership Interest under the Company Agreement?

In issue one, Appellants complain the trial court erred in finding as a matter

of law that Burkett failed to successfully purchase Gagliano’s membership interest

in L&S. Appellants argue the Company Agreement does not require a formalized

finding of impasse, only a general finding that there is no possibility of settlement.

Appellants argue that there was an impasse since the parties were unable to settle

after two mediations, and Burkett rightfully moved under the Company Agreement

to purchase Gagliano’s 25% interest and this Court should declare Burkett the 100%

owner of L&S.

In his Traditional Motion for Partial Summary Judgment, Gagliano argued

that Burkett’s attempt to exercise the Push Pull provision was ineffective due to his

prior material breaches and failure to follow the buyout procedures requiring (1) a

good faith finding of no possibility of settlement by the mediator, (2) closing on the

sixtieth day after delivery of the Purchase Notice, and (3) payment in cash at closing.

Section 12.7 of the Company Agreement, The Disputes and Push Pull, states:

(a) At any time of a disagreement between the Members on any material matter affecting the Company in a material way economically and financially, if such a deadlock is not resolved by informal negotiations among the Members (the “Disputants”), and such dispute can be reasonable [sic] anticipated to have a material adverse effect on the financial interests of the Company (“a Dispute”), any Member shall be entitled to demand in writing that the Managers

47 engage a professional mediator to assist in the negotiation and mediation of the relevant Dispute. The Disputants shall attempt to select a mutually acceptable mediator, who shall be a person who has requisite training and accreditation as a mediator to determine, understand and analyze the dispute between the parties. . . . The mediation process shall commence within thirty (30) days after written request therefor, and shall continue until the controversy is resolved or the mediator makes a good faith finding that there is no possibility of settlement through mediation. All costs and expenses of the mediator shall be shared equally by the Disputants (any dispute being unresolved after mediation being an “Unresolved Dispute”).

(b) After the expiration of two (2) years from the effective date of this Agreement, [April 12, 2016] any “Disputant” (an “Initiating Member”) may, upon an Unresolved Dispute occurring, give written notice to the Members and Managers regarding another Disputant Member (the “Responding Member”) stating that the Initiating Member desires to invoke this Section and purchase all (but not less than all) of the Units of the other Member (the “Purchase Notice”), and such notice shall constitute an unconditional and irrevocable commitment by the Initiating Member to purchase the Units of the Responding Member. The Purchase Notice shall set forth the price per Unit at which the Initiating Member is willing to purchase all, and not less than all, of the Interest of the Responding Member. The Responding Member shall thereafter have thirty (30) days from the receipt of the Purchase Notice in which to elect by written notice to all Members and Managers to purchase all of the Interests of the Initiating Member at that same price per Unit set forth in the “Buy-Sell Notice” or sell its ownership Interest at the price set forth in the Buy-Sell Notice. Failure of a Responding Member to make and deliver a written election to purchase all the Interests of the Initiating Member at the price per Unit set forth in the Buy-Sell Notice shall be deemed an election by the Responding Member to sell its Interests to the Initiation Member at such price.

The closing shall be held on the (60th) day after the delivery of the Purchase Notice to the Responding Member, or such other date as mutually agreed upon by the Responding and Initiating Members. The purchase consideration shall be payable in such manner as the parties

48 may agree, or if they cannot agree prior to closing, then the purchase price shall be payable in cash at closing.

(Emphasis added.) Section 15.13, entitled Mediation, provides, “The mediation

process shall continue until the controversy is resolved or the mediator makes a

finding that there is no possibility of settlement through mediation or any Disputant

chooses not to continue further.” (Emphasis added.)

In June 2018, L&S filed Plaintiff’s Original Petition. The summary judgment

evidence shows that Burkett and Gagliano did not resolve their “Dispute” after two

mediations. More specifically, the records show that on July 17, 2018, Burkett and

Gagliano agreed to mediate with Alan Levin, and the mediation ended without them

resolving their “Dispute.” Also, in April 2019, Burkett and Gagliano mediated with

the Honorable Sylvia Matthews, and the parties again failed to resolve their

“Dispute.” Gagliano alleged that the mediator did not make a good faith finding that

settlement would not be possible. However, at the end of the second mediation, and

before releasing the parties from the mediation, Judge Matthews prepared and

submitted a mediator’s proposal to both parties as a last and final attempt to settle

the parties’ “Dispute,” but since it was not mutually accepted by both parties, the

mediation failed. Therefore, we conclude that after two failed mediations and under

the unambiguous language of the Company Agreement, an “Unresolved Dispute”

existed following the second failed mediation in April 2019.

49 Following the second failed mediation, neither party demanded in writing that

another mediator be engaged to attempt to further mediate the “Dispute,” and no one

demanded in writing that parties return to either Levin or Matthews for additional

mediation proceedings. Simply put, no one demanded further proceedings pursuant

to the mediation provision in section 12.7(a) of the Company Agreement. And while

Section 15.13 of the Company Agreement requires a finding by the mediator that

there is no possibility of settlement, it does not require the finding to be in writing.

And importantly, Section 15.13 goes on to provide an alternative to a mediator’s

making a finding if a “Disputant chooses not to continue further[,]” which is what

both parties did here. We conclude the record shows as a matter of law that the

parties—certainly Burkett—chose not to continue further, which in our opinion

rendered the need for a mediator’s finding (written or implied) a moot issue.

On April 12, 2019, Burkett, as a “Disputant” (and as an “Initiating Member”)

upon the “Unresolved Dispute” occurring between the parties, acted within his rights

under the Company Agreement by invoking section 12.7(b) by providing Gagliano’s

counsel written notice (the “Purchase Notice”) of his intent to purchase Gagliano’s

membership interest in L&S under the Company Agreement. In the notice, Burkett

requested that Gagliano respond no later than May 13, 2019, as required by section

12.7(b). By invoking section 12.7(b), Burkett was electing the Push-Pull’s buy-out

50 provision and rejecting any further efforts to mediate the parties’ “Unresolved

Dispute.”

Under the unambiguous language of Section 12.7(b) of the Company

Agreement, Gagliano had two choices: (1) as the “Responding Member”, he had

thirty (30) days from the receipt of the “Purchase Notice” to elect by written notice

to the “Initiating Member” (Burkett) that he would purchase Burkett’s entire interest

in L&S at that same price per Unit that Burkett set forth in his “Buy-Sell Notice,”

or Gagliano could sell his interest in L&S to Burkett at the price set forth in the

“Buy-Sell Notice.” That said, Gagliano didn’t respond to Burkett’s notice by the

May 13, 2019 deadline. Therefore, pursuant to the unambiguous language in section

12.7(b) stating that the “[f]ailure of a Responding Member to make and deliver a

written election . . . shall be deemed an election by Responding Member to sell its

Interest to the Initiating Member at such price[,]” we conclude that Gagliano is

deemed to have made an election to sell his interest in L&S after failing to respond

within the 30-day deadline for the consideration stated in the notice.

Relying on section 12.7(b) and the fact that Gagliano had failed to respond to

his buy-sell notice, on May 14, 2019, Burkett’s counsel sent a letter to Gagliano’s

counsel enclosing a cashier’s check for $1,300,000. In the letter, Burkett’s counsel

stated that “under the express terms of the Operating Agreement, Gagliano is

deemed to have accepted Initiating Member Lee Burkett’s offer[.]” After Gagliano’s

51 counsel received the letter, Gagliano’s counsel acknowledged in writing receiving

the cashier’s check on Gagliano’s behalf. On June 11, 2019, Gagliano and his

counsel went to Burkett’s counsel’s office to receive cash at closing, and Burkett’s

counsel presented them with a letter without presenting any cash in exchange for the

cashier’s check, which Gagliano had not requested, and Burkett testified that he

considered the transaction closed on that date.

The evidence shows that the parties agreed to close on June 11, 2019, which

was sixty days after Burkett delivered the Purchase Notice to Gagliano; however, on

May 14, 2019, Gagliano’s counsel received a cashier’s check for $1,300,000. The

summary judgment evidence establishes that before the date the transaction closed,

Gagliano’s counsel received the cashier’s check tendered in payment for Gagliano’s

interest in L&S. Before the transaction closed, the evidence does not show that

Gagliano ever complained about the fact that the consideration tendered was in the

form of a cashier’s check. Section 12.7(b) provides that the purchase price shall be

payable in cash at closing if the parties cannot agree on the form in which the

consideration is to be paid before closing, and there is no such evidence here. Since

there is no evidence that Gagliano did not agree to accept a cashier’s check prior to

the date the transaction closed, we conclude that Burkett did not violate section

12.7(b) by failing to tender cash in lieu of the cashier’s check for Gagliano’s shares

in L&S.

52 Turning next to Gagliano’s argument that Burkett’s attempt to exercise the

Push-Pull provision was ineffective based on his claim that Burkett had materially

breached the Company Agreement before exercising his option under the Push-Pull,

Section 12.7(b) defines an “Unresolved Dispute.” Section 12.7(b) anticipates that

the parties to the Company Agreement are in conflict, but it does not require any

conditions for Burkett as the Initiating Member to invoke the section, including that

the Initiating member not be in material breach of the Company Agreement before

they exercise their option under the Push-Pull. For instance, even if the Initiating

Member was in breach, the breach could be waived by the Responding Member by

accepting the offer made by the Initiating Member who exercised the Push-Pull.

Additionally, section 12.7(b) does not require the parties to resolve their

“Unresolved Disputes” before the closing date, including paying any unpaid

distributions. It merely provides the procedure for Burkett to buy Gagliano’s Interest

at the price per unit set forth in the Buy-Sell Notice after Gagliano failed to timely

make and deliver a written election to purchase all Burkett’s Interests, which was

then deemed Gagliano’s election to sell his Interest at the Initiating Member’s price.

Based on the language in the Company Agreement and for the reasons explained

above, we conclude the trial court erred by granting Gagliano’s Traditional Motion

for Partial Summary Judgment and finding that Burkett’s purchase of Gagliano’s

Membership Interest was ineffective.

53 We sustain Appellants’ first issue and vacate that portion of the trial court’s

judgment granting Gagliano’s Motion for Partial Summary Judgment and holding

that Burkett’s purported exercise of Section 12.7(b) of the L&S Company

Agreement was ineffective. Having concluded that the trial court erred, we render

the judgment the trial court should have rendered and conclude as a matter of law

that Burkett effectively exercised Section 12.7(b) of the L&S Company Agreement.

See Fielding, 289 S.W.3d at 848.

Issue Two: Did the summary judgment evidence prove as a matter of law that Tactical is a Third-party Beneficiary of the Company Agreement?

In issue two, Appellants complain the trial court erred by holding that Tactical

was a third-party beneficiary of the Company Agreement with standing to sue.

Appellants argue that Tactical lacks standing to assert a breach of contract claim

because it is not a party to the Company Agreement and because Tactical cannot

overcome the presumption against conferring third-party beneficiary status on

noncontracting parties. Appellants also argue that Tactical cannot enforce the

Company Agreement because it is neither a donee nor a creditor beneficiary under

that agreement.

Section 4.1 of the Company Agreement states that the specific purpose of

L&S “is to engage in the assembly and sale of skids, buildings, enclosures, housings,

and similar products for the well site hydrocarbon transportation, metering, and

54 processing infrastructure in the United States (the “Business”).” The Company

Agreement provides that L&S has two Members, Burkett and Gagliano, who own

Interests in the company. Section 8.2 of the Company Agreement states that Burkett

is the Executive Manager, and Section 8.4 of the Company Agreement, entitled

Powers of Executive Manager and Managers, provides that Gagliano is the Tax

Matters Manager, Company’s Treasurer, and Chief Financial Officer. Although

subject to exceptions, Section 8.4(d)(v) of the Company Agreement gives Tactical a

right of first refusal to build control system panels that are then installed in products

manufactured by L&S and then sold by L&S to third parties. Section 8.4(d)(v) states:

The parties agree that to the extent that any product, housing, building, skids, enclosures, or similar products assembled, manufactured, fabricated or otherwise sold by the Company to third parties will contain a control system of panels, the same shall be provided by TACTICAL AUTOMATION, LLC, an Affiliate of GAGLIANO, unless TACTICAL AUTOMATION, LLC, is (i) no longer affiliated with GAGLIANO, (ii) declines to provide the same, (iii) unable to offer same at competitive rates, (iv) unable to make delivery times required by the Company’s customer, (v) otherwise unable to make such a control system on a competitive basis or, if by virtue of its inclusion in the Company’s products, the Company’s products become uncompetitive. In the event any of these circumstances situations occur Company shall be free to source a control system of panels from any vendor, until the above-referenced circumstances cease. In the event TACTICAL AUTOMATION is no longer owned or controlled by GAGLIANO, this section shall be null and void. GAGLIANO agrees to, for so long as he owns a controlling management interest therein, to the extent TACTICAL AUTOMATION, LLC, will provide such a product to the Company, that the same shall be provided on commercially reasonable terms and at non-discriminatory prices to the Company. To the extent that a

55 customer of the Company requires a third party provide control systems or panels related to a Company product, the Company shall disclose the same to GAGLIANO and with GAGLIANO’s consent, which will not be unreasonably withheld, the Company shall be entitled, to satisfy that customer, to use the required third party control systems of panels.

Appellants’ Plea to the Jurisdiction, Traditional and No-Evidence Motion for

Partial Summary Judgment, and Motion Under Rule 166(g) included the argument

that Tactical lacked standing because it was not a third-party beneficiary of the

Company Agreement between Burkett and Gagliano. Appellants argued that the

plain language of the Company Agreement does not show that Gagliano and Burkett

intended to give Tactical the right to enforce the Company Agreement.

Standing is a constitutional prerequisite to filing suit. Heckman v. Williamson

Cnty., 369 S.W.3d 137, 150 (Tex. 2012). “To establish standing to assert a breach of

contract cause of action, a party must prove its privity to the agreement or that it is

a third-party beneficiary.” Maddox v. Vantage Energy, LLC, 361 S.W.3d 752, 756

(Tex. App.—Fort Worth 2012, pet. denied) (citations omitted); see also Debes v.

General Star Indem. Co., No. 09-12-00527-CV, 2014 WL 3384679, at *2 (Tex.

App.—Beaumont July 10, 2014, no pet.) (mem. op.) (citations omitted). “A third

party may recover on a contract made between other parties only if the parties

intended to secure some benefit to the third party, and only if the contracting parties

entered into the contract directly for the third party’s benefit.” Basic Cap. Mgmt. v.

Dynex Com., Inc., 348 S.W.3d 894, 900 (Tex. 2011). When a contract only confers

56 an indirect, incidental benefit, a third party cannot enforce the contract. Tawes v.

Barnes, 340 S.W.3d 419, 425 (Tex. 2011) (citation omitted). There is a presumption

against conferring third-party beneficiary status on noncontracting parties, and “[a]ll

doubts must be resolved against conferring third-party beneficiary status.” Id.; S.

Tex. Water Auth. v. Lomas, 223 S.W.3d 304, 306 (Tex. 2007).

To create a third-party beneficiary, the contracting parties must have intended

to grant the third party the right to be a claimant in the event of a breach. See Corpus

Christi Bank & Tr. v. Smith, 525 S.W.2d 501, 505 (Tex. 1975). To determine

whether the parties intended to directly benefit a third party and contracted for that

purpose, courts must look solely to the contract’s language, construed as a whole.

First Bank v. Brumitt, 519 S.W.3d 95, 102 (Tex. 2017). When construing an

unambiguous contract, the construction of the written agreement is a question of law

for the court. Dynex Com., Inc., 348 S.W.3d at 900 (citation omitted). Absent clear

and unequivocal expression of the contracting parties’ intent to directly benefit a

third party, courts will not confer third-party beneficiary status by implication. MCI

Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 651 (1999); see also

Brumitt, 519 S.W.3d at 103. Courts may not presume the necessary intent, and a

presumption exists that the parties contracted for themselves unless it appears that

they intended a third party to benefit from the contract. Brumitt, 519 S.W.3d at 103;

Dynex Com., Inc., 348 S.W.3d at 900 (citation omitted). A party receiving only an

57 incidental benefit from a contract does not give the party a right to enforce the

contract. Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002).

The three types of third-party beneficiaries include donee, creditor, and

incidental beneficiaries. Esquivel v. Murray Guard, Inc., 992 S.W.2d 536, 543 (Tex.

App.—Houston [14th Dist.] 1999, pet. denied). To assert a breach of contract claim

as a third-party beneficiary, the party must show that it is either a donee or creditor

beneficiary to the contract. Id. A party is a donee beneficiary only if a donative intent

expressly or impliedly appears in the contract. Id. In other words, a party “is a donee

beneficiary if the performance of the contract inures to his benefit as a gift.” Allan

v. Nersesova, 307 S.W.3d 564, 571 (Tex. App.—Dallas 2010, no pet.). Thus, if the

party must provide some consideration or exchange to benefit from the contract, the

performance promised will not come as a pure donation and the party is not a donee

beneficiary. See Maddox, 361 S.W.3d at 759. Since Tactical had to provide L&S

with finished control panels and satisfy other conditions to benefit from the

Company Agreement, which was to receive L&S’s control panel work, Tactical is

not a donee beneficiary under the Company Agreement.

A party is a creditor beneficiary if no intent to make a gift appears in the

contract, but performance will satisfy an actual or asserted duty of the promisee to

the beneficiary, such as indebtedness, contractual obligation, or other legally

enforceable commitment to the third party. Esquivel, 992 S.W.2d at 543–44. “The

58 promisee must intend that the beneficiary will have the right to enforce the contract.”

Id. at 544 (citation omitted). “The intent to confer a direct benefit upon a third party

‘must be clearly and fully spelled out or enforcement by the third party must be

denied.’” Lomas, 223 S.W.3d at 306 (quoting MCI Telecomms. Corp., 995 S.W.2d

at 651). Not only did Tactical admit in its Response to Appellants’ Plea to the

Jurisdiction that Tactical’s role in the Company Agreement fits the definition of

donee beneficiary and not creditor beneficiary, here, the evidence established as a

matter of law that Tactical was a stranger to the Company Agreement, and that it

was not a donee or creditor beneficiary of the Company Agreement, as L&S did not

owe an actual indebtedness, contractual obligation, or other legally enforceable

commitment to Tactical. See Esquivel, 992 S.W.2d at 543–44. Nor does the

Company Agreement clearly and unequivocally express an intent by the parties for

Tactical to have the right to enforce the Company Agreement, and a court may not

presume that the parties to a contract intended to bestow a benefit on a stranger to it.

See Brumitt, 519 S.W.3d at 103; MCI Telecomms. Corp., 995 S.W.2d at 651.

Section 8.4(d)(v) of the Company Agreement states that if Tactical is no

longer owned or controlled by Gagliano, this section shall be “null and void.”

According to the Company Agreement’s express language, the parties intended for

Gagliano to benefit from the provision to give Tactical control panel work, and we

presume that the parties contracted for themselves. See Brumitt, 519 S.W.3d at 103;

59 Dynex Com., Inc., 348 S.W.3d at 900 (citation omitted). Tactical is merely an

incidental beneficiary of the Company Agreement, and that incidental benefit is

contingent on its affiliation with Gagliano and the other conditions in Section

8.4(d)(v) of the Company Agreement, which Tactical would have been required to

meet before benefitting from the sale of L&S products that incorporated control

panels like the ones Tactical made. See Brumitt, 519 S.W.3d at 103–04; MCI

Telecomms., 995 S.W.2d at 651–52.

Looking at the Company Agreement’s language and the parties’ intent, we

conclude that Tactical is merely an incidental beneficiary and as such has no right to

enforce the Company Agreement. See Brumitt, 519 S.W.3d at 103; Dynex Com., 348

S.W.3d at 900; Esquivel, 992 S.W.2d at 543. Thus, we further conclude that Tactical

did not have standing to assert a breach of contract claim against Appellants. See

Esquivel, 992 S.W.2d at 543; Maddox, 361 S.W.2d at 756.

Based on our interpretation of the Company Agreement, we conclude the trial

court erred by granting Gagliano’s Traditional Motion for Partial Summary

Judgment and in finding Tactical to be a third-party beneficiary of the Company

Agreement. We sustain Appellants’ second issue and vacate that portion of the trial

court’s judgment finding Tactical is a third-party beneficiary of the Company

Agreement. Having concluded that the trial court erred, we render the judgment the

trial court should have rendered and further conclude as a matter of law that Tactical

60 is not a third-party beneficiary of the Company Agreement. See Fielding, 289

S.W.3d at 848.

Since sustaining Appellants’ first and second issues affects the jury’s verdict

regarding the parties’ breach of contract claims and resulting damages and attorneys’

fees regarding same, we must reverse the portions of the trial court’s judgment

regarding the parties’ breach of contract claims and remand for further proceedings

consistent with this opinion. We reverse the following portions of the trial court’s

judgment: against L&S Pro-Line and to Gagliano for breach of contract in the

amount of $2,638,101.05; against Burkett and to Gagliano for breach of contract in

the amount of $2,638,101.05; against L&S Pro-Line and to Gagliano for reasonable

and necessary legal fees Gagliano incurred in this proceeding through trial and

completion of the trial proceedings in the amount of $1,170,000; against Burkett and

to Gagliano for reasonable and necessary legal fees Gagliano incurred in this

proceeding through trial and completion of the trial proceedings in the amount of

$1,170,000; against L&S Pro-Line and to Gagliano for reasonable and necessary

court costs and expert witness fees in the amount of $113,190; against L&S Pro-

Line and to Gagliano for reasonable and necessary appellate attorney fees; against

Burkett and to Gagliano for reasonable and necessary appellate attorney fees.

We reverse the following portions of the trial court’s judgment against L&S

Pro-Line and Burkett and to Tactical: against L&S Pro-Line and to Tactical for

61 breach of contract in the amount of $2,389,725.29; and against Burkett and to

Tactical for breach of contract in the amount of $2,389,725.29. We render judgment

that Tactical take nothing against L&S and Burkett.

Issues Three through Six: Legal and Factual Sufficiency

In issues three, four, five, and six, Appellants complain that there is

insufficient evidence to support the jury’s conclusion that they breached the

Company Agreement, and insufficient evidence to support the jury’s award of actual

damages, punitive damages, and attorney’s fees.

Standard of Review

In a legal sufficiency review, we must consider all the evidence “‘in the light

most favorable to the party in whose favor the verdict has been rendered,’” and

“‘every reasonable inference deducible from the evidence is to be indulged in that

party’s favor[.]’” Bustamante v. Ponte, 529 S.W.3d 447, 456 (Tex. 2017) (quoting

Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)).

Evidence is legally insufficient to support a jury finding when: (1) the record discloses a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes the opposite of a vital fact.

Crosstex N. Tex. Pipeline, L.P. v. Gardiner, 505 S.W.3d 580, 613 (Tex.

2016) (citations omitted). As the sole judges of the witnesses’ credibility and the

62 weight to give their testimony, the jurors may choose to believe one witness and

disbelieve another. City of Keller, 168 S.W.3d at 819. We “credit favorable evidence

if reasonable jurors could, and disregard contrary evidence unless reasonable jurors

could not.” Id. at 827. “The final test for legal sufficiency must always be whether

the evidence at trial would enable reasonable and fair-minded people to reach the

verdict under review.” Id. “We will uphold the jury’s finding if more than a scintilla

of competent evidence supports it.” Tanner v. Nationwide Mut. Fire Ins. Co., 289

S.W.3d 828, 830 (Tex. 2009) (citation omitted); Herrera v. Wendell Legacy Homes,

LLC, 631 S.W.3d 441, 451 (Tex. App.—Beaumont 2021, no pet.). We presume

jurors made all inferences for the verdict, but only if reasonable minds could do so.

Serv. Corp. Int’l v. Guerra, 348 S.W.3d 221, 228 (Tex. 2011). “Jurors may not

simply speculate that a particular inference arises from the evidence.” Id. (citing City

of Keller, 168 S.W.3d at 821).

When challenging the factual sufficiency of the evidence supporting an

adverse finding on which the appellant did not have the burden of proof at trial, the

appellant must demonstrate that insufficient evidence supports the adverse

finding. Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983); Am. Interstate Ins.

Co. v. Hinson, 172 S.W.3d 108, 120 (Tex. App.—Beaumont 2005, pet. denied).

When reviewing a factual sufficiency challenge, we consider and weigh all the

evidence in support of and contrary to the jury’s finding. Mar. Overseas Corp. v.

63 Ellis, 971 S.W.2d 402, 406–07 (Tex. 1998). We set aside a finding only if it “is so

contrary to the overwhelming weight of the evidence as to be clearly wrong and

unjust.” Dyson v. Olin Corp., 692 S.W.2d 456, 457 (Tex. 1985) (citation omitted).

Evidentiary Sufficiency to Support Breach of Contract

In issue three, Appellants complain there is insufficient evidence to support

the jury’s conclusion that they breached the Company Agreement. Having already

reversed the portions of the trial court’s judgment regarding the parties’ breach of

contract claims and remanding for further proceedings consistent with this opinion,

we need not address this issue. See Tex. R. App. P. 47.1.

Evidentiary Sufficiency to Support Actual and Punitive Damages

In issue four, Appellants complain that the jury’s award of punitive damages

was excessive, duplicative, and not supported by factually sufficient evidence. In

issue five, Appellants complain that the jury’s award of actual damages was not

supported by legally and factually sufficient evidence.

Having sustained Appellants’ first issue, we reversed the portions of the trial

court’s judgment regarding the parties’ breach of contract claims and resulting

damages and attorneys’ fees, and remand for the determination of whether

Appellants or Gagliano breached the contract. On remand, any breach of contract

damages must be considered in light of our determination that Burkett’s purported

exercise of Section 12.7(b) of the L&S Company Agreement was effective. We have

64 also reversed the jury’s award of lost profits based on our determination that Tactical

is not a third-party beneficiary of the Company Agreement and rendered judgment

that Tactical take nothing against L&S and Burkett. Therefore, we need not address

issue five concerning breach of contract damages. See id.

Considering our determination that Burkett’s exercise of Section 12.7(b) of

the L&S Company Agreement was effective, we also reverse the jury’s finding of

Appellants’ breach of fiduciary duty and the jury’s award of breach of fiduciary

damages. We remand for the determination of whether Appellants or Gagliano

breached any fiduciary duty prior to Burkett effectively exercising Section 12.7(b)

of the L&S Company Agreement on June 11, 2019.

Accordingly, we reverse the following portions of the trial court’s judgment:

against Burkett and to Gagliano for breach of fiduciary duty in the amount of

$5,553,163.45; and against Burkett and to Gagliano, standing in the shoes of L&S,

for breach of fiduciary duty in the amount of $5,553,163.85.

Since we have reversed the actual damages awards, we must also reverse the

exemplary damages awards, because the exemplary damages awards must be

proportionate to the compensatory damages awards. Bunton v. Bentley, 153 S.W.3d

50, 53 (Tex. 2004). Accordingly, we reverse the following portions of the trial

court’s judgment: against Burkett and to Gagliano as punitive damages for Burkett’s

malicious, grossly negligent and intentionally self-enriching breach of fiduciary duty

65 in the amount of $5,276,202.10; and against Burkett and to Gagliano, standing in the

shoes of L&S as punitive damages for Burkett’s malicious, grossly negligent and

intentionally self-enriching breach of fiduciary duty in the amount of

$11,106,329.70.

Evidentiary Sufficiency to Support Attorney’s Fees

In issue six, Appellants argued that the jury’s award of attorney’s fees was not

supported by legally and factually sufficient evidence. We have already reversed the

portions of the trial court’s judgment awarding attorney’s fees for the breach of

contract damages. Based on our determination that Burkett effectively exercised

Section 12.7(b) of the L&S Company Agreement, we also reverse the portion of the

trial court’s judgment awarding Gagliano attorney’s fees for representing against

Burkett’s failed request for a declaration regarding his purported exercise of Section

12.7(b).

Since Appellants failed to challenge the portions of the trial court’s judgment

awarding attorney’s fees to Snook and to Gagliano for prevailing against L&S’s theft

claim under the Texas Theft Liability Act, we affirm part of the trial court’s

judgment, as follows: against L&S and to Gagliano for reasonable and necessary

legal fees to defend and prevail against L&S’s theft claim under the Texas Theft

Liability Act through trial in the amount of $30,000 and the conditional award of

appellate attorney’s fees; and against L&S and to Snook for reasonable and

66 necessary attorney’s fees incurred through trial in the amount of $39,000 and the

conditional award of appellate attorney’s fees.

Issue Seven: Motion to Strike Legal Expert Douglas Moll

In issue seven, Appellants complain the trial court abused its discretion by

striking its expert, Douglas Moll. In the trial court, Appellees argued that Moll was

being offered to draw conclusions of law that would confuse the jury and prejudice

Appellees. Appellants assert that Moll’s testimony was admissible because it (1)

concerned the question of breach of fiduciary duties, which is a mixed question of

law and fact, (2) was based on Moll’s qualifications as an expert, and (3) was

relevant, because his testimony would have aided the jury in understanding the

subject of fiduciary duties in the context of an LLC. Appellants explained that they

timely designated Moll as an expert on July 27, 2020, which was before the deadline

of August 6, 2020, and nine months before the April 2021 trial. Appellants argue

that they should not be punished for Appellees’ failure to depose Moll and designate

a rebuttal witness in the eight-month period prior to the trial.

Appellees counter that Appellants failed to timely designate Moll as required

by the docket control order, failed to present evidence at the Robinson hearing to

show that he was qualified and reliable, and failed to provide them with an expert

report. See E.I. du Pont Nemours & Co., Inc. v. Robinson, 923 S.W.2d 549 (Tex.

1995). Appellees maintained that any error in excluding Moll was harmless because

67 Gagliano prevailed under Burkett’s common law fiduciary duty claim, which

Appellants did not challenge on appeal, and because under the Company Agreement,

Gagliano did not owe L&S a duty of loyalty. Appellants also argued that Moll’s offer

of proof shows that he intended to testify about pure questions of law concerning the

fiduciary duties owed by members and officers of a member-managed LLC and that

Burkett did not breach the fiduciary duties that he owed to L&S.

We review a trial court’s decision to exclude an expert who has not been

properly designated for an abuse of discretion. See Fort Brown Villas III Condo.

Ass’n v. Gillenwater, 285 S.W.3d 879, 881 (Tex. 2009) (citation omitted). Unless

otherwise ordered by a trial court, a party seeking affirmative relief must designate

an expert within 90 days before the end of the discovery period. Tex. R. Civ. P.

195.2(a).3 The record shows that on June 6, 2019, the trial court issued a Scheduling

Order, which included a trial setting for the case on the jury docket for March 2,

2020, and required the parties to provide their expert witness designations 90 days

before trial. See id. 190.4. The record also indicates that on August 18, 2020, which

was after Appellants untimely designated Moll, the trial court entered an Order

Adopting and Modifying Scheduling Order.

3When we have cited any Rule of Civil Procedure in the opinion, we have

cited to the current version of the Rule. Any changes to the Rules that have occurred since the suit was filed are not relevant since the changes are either not applicable or they do not affect the outcome of the appeal. 68 A party who fails to timely amend or supplement a discovery response,

including a required disclosure, may not introduce in evidence the material or

information that was not timely disclosed, including expert witness testimony, unless

the trial court finds that (1) there was good cause for the failure to timely provide the

information or (2) the failure to provide the discovery will not unfairly surprise or

prejudice the other party. Id. 193.6(a). The burden of establishing good cause or lack

of unfair surprise or unfair prejudice is on the party seeking to call the witness, and

a finding of good cause or of the lack of unfair surprise or prejudice must be

supported by the record. Id. 193.6(b).

On July 22, 2020, Appellants filed their Second Amended Expert Designation,

which did not include Moll. On July 27, 2020, in their Third Amended Expert

Designations, Appellants designated Moll for the first time; however, they did not

provide the Appellees with an expert report. Appellees filed a Motion to Strike

Moll’s designation and testimony. In the motion, Appellees complained that Moll

should be stricken because Appellants failed to timely designate Moll by the Docket

Control Order’s July 22, 2020, deadline. Appellees explained that Appellants

designated Moll as an expert on fiduciary duties on July 27, 2020, after they

requested a five-day extension to their third deadline for designating experts, which

was on July 22, 2020, and despite the fact that L&S’s Original Petition, on file for

more than two years, included a breach of fiduciary duty claim. Appellees also

69 complained that Appellants had refused to timely offer dates for Moll’s deposition,

and they argued they would be prejudiced by allowing Moll to be designated so late

since they had not designated a rebuttal expert.

Appellees also argued that Moll’s testimony was irrelevant and should be

stricken because the Company Agreement contractually eliminated Gagliano’s

fiduciary duty to L&S, and the Company Agreement allowed Gagliano to engage in

“self-interested” transactions involving Gagliano, Tactical, and L&S. Appellees also

argued that Moll’s testimony, if allowed, would be conclusory, speculative,

unreliable, and would contain impermissible legal conclusions about fiduciary duties

that would usurp the trial court’s role or involve impermissible opinion testimony

on mixed questions of law and fact that relied on unsubstantiated interpretations of

Texas law. Appellees maintained that if allowed, Moll’s testimony would be highly

prejudicial and misleading as to the issues of Burkett’s fiduciary duties to L&S in

the LLC context because it is an unsettled area of Texas law.

In response to Appellees’ Motion to Strike their expert, the Appellants argued

that Moll’s testimony if allowed would be relevant, credible, and reliable as to the

duties of fiduciaries as those duties applied to Gagliano and Burkett. According to

Appellants, Moll’s testimony was needed because the subject matter in his

testimony, which involved the duties of managers of LLCs, was beyond the

knowledge of most jurors. According to the Appellants, Moll’s testimony would aid

70 the jury’s understanding of the subject matter, it would be based on his qualifications

and expertise, his testimony would be relevant given the issues in the case, and the

testimony would not be unfairly prejudicial. Appellants maintained that the

Company Agreement did not fully eliminate Gagliano’s duty of loyalty to L&S

because it was restricted to the non-compete and non-solicitation provisions.

Appellants explained that on July 22, 2020, they requested that the trial court grant

a “brief but necessary five-day extension to designate testifying experts on L&S Pro

Line’s and Burkett’s affirmative claims.” They noted that while Appellees opposed

the request, Appellees failed to show they would suffer any prejudice. Appellants

maintained that good cause existed because their original expert was unable to testify

at trial.

During a pretrial hearing, the trial court considered Appellees’ Motion to

Strike Moll. Appellees argued that Moll’s designation was late without excuse, and

Appellants had years to designate an expert on the duties of a fiduciary. Appellees

explained that because Appellants’ request to extend the deadline was never granted,

they did not designate a rebuttal expert. Appellees maintained that they would be

prejudiced if the trial court were to allow Moll’s late designation.

Appellees also argued that Moll’s testimony about legal issues on fiduciary

duties in limited liability companies would invade the Court’s province. They also

complained the Company Agreement expressly disclaims Gagliano’s fiduciary

71 duties, and Moll failed to show he is uniquely qualified to interpret the Company

Agreement.

Appellants explained they filed a Motion for Leave to designate five days after

the deadline because they had learned their other expert had elected to withdraw.

Appellants argued that Appellees were not prejudiced because they had ample time

to depose Moll but chose not to, and Appellees failed to show that Moll intended to

offer testimony on a question of law. Appellants argued that Moll’s opinion about

whether there was a breach of fiduciary duties is a mixed question of law and fact.

Appellees responded that Moll’s designation was late and did not include a

report, and Appellants had the obligation to tender him for a deposition reasonably

and promptly, which did not occur. Appellees argued that the hearing was a

Robinson hearing and there was no evidence in the record satisfying Appellants’

burden as to Moll’s qualification, relevancy, reliability, methodology, and opinions.

Appellees maintained that Appellants’ counsel could not even tell the trial court what

Moll’s opinions were.

After taking the arguments under advisement, the trial court denied

Appellants’ Motion for Leave to Designate Douglas Moll and granted All

Defendants’ Motion to Strike and Exclude the Testimony of Plaintiff’s and Third-

Party Defendant Burkett’s Designated Expert Douglas Moll. Appellants filed a

Motion to Reconsider, which the trial court heard during a second pretrial hearing.

72 The trial court stated that it considered whether Appellees would suffer any unfair

prejudice under the 193.6 exception to the late designation and that Appellants’

counsel informed the court that he did not know what Moll’s opinions were.

As to its decision to exclude Moll’s testimony, the trial court explained that

after Appellants’ counsel represented that he did not know what Moll’s opinions

were,

[so] then that it weighed more into my, okay, well, is there any unfair prejudice if the sponsoring party doesn’t know what the opinions are going to be? I had a - - thought that then definitely the other side would be prejudiced, so then I denied the motion leave and then I excluded him based on that. So I’m going to deny the motion to reconsider Douglas Moll as an expert in this . . . matter.

The trial court granted Appellants’ request to make an offer of proof about Moll’s

opinion, but the trial court explained that “the opportunity for those opinions to come

out would have been last week when we had the motion to strike.”

In the offer of proof, Professor Moll testified he graduated from Harvard Law

School and was licensed in Texas and currently working as a business law professor

at University of Houston Law Center. Moll testified that Appellants’ counsel

retained him as an expert, and based on his review of documents, he opined that the

business development expenses at issue in the case do not rise to the level of a breach

of fiduciary duty on Burkett’s part. Moll explained that the business expenses were

designed to benefit L&S, Burkett’s incentives were aligned, and as a 75% owner,

73 Burkett was positioned to not want to waste money. Moll also explained that no

evidence showed that the business development expenses were excessive or that any

benchmark had been exceeded. Moll testified that there was no evidence that

Burkett’s alleged failure to obtain Gagliano’s consent for expenses over $5,000

harmed L&S, and harm is necessary for a breach of fiduciary duty claim against

L&S. Moll also testified that Gagliano had paid and acquiesced in the business

development expenses, and even if he thought the expenses were “unwise, foolish

[or] negligent, that is not enough to rise to the level of a breach of fiduciary duty.”

Moll also explained that it was not illegal for Burkett to hire Kyle Smith, who had a

criminal record, and there was no harm to L&S.

As for Gagliano, Moll testified that the evidence suggested Gagliano

abdicated his CFO responsibilities, which in his opinion, constituted a breach of

fiduciary duty. Moll testified that if the evidence showed Gagliano used company

expenditures for personal purposes, that would be a breach of fiduciary duty. After

Moll testified about his opinions, the trial court reviewed the timing of Appellants’

designations, stated it was not going to treat the offer of proof as a rehash of the

Robinson hearing, and then denied Appellants’ Motion to Reconsider its Order

striking Moll.

Based on this record, the trial court could have reasonably concluded that

Appellants failed to timely designate Moll as an expert and disclose Moll’s opinions

74 as required in the trial court’s scheduling order as to expert witness designations. It

was within the trial court’s discretion to deny Appellants the opportunity to call an

expert witness who was not properly designated by the relevant deadline. See Perez

v. Embree Const. Grp., Inc., 228 S.W.3d 875, 884 (Tex. App.—Austin 2007, pet.

denied). We conclude that the trial court did not abuse its discretion by denying

Appellants’ motion for leave to designate Moll as an expert and by excluding Moll’s

testimony because Moll was not properly designated because of Appellants’ failure

to comply with the scheduling order. See Gillenwater, 285 S.W.3d 882; May v. Ticor

Title Ins., 422 S.W.3d 93, 105 (Tex. App.—Houston [14th Dist.] 2014, no pet.);

Perez, 228 S.W.3d at 884. We further conclude that Appellants failed to satisfy their

burden of establishing good cause or a lack of unfair surprise or prejudice against

Appellees as the record shows the trial court found that Appellees would suffer

unfair prejudice because Appellants were unable to disclose Moll’s opinions during

the Robinson hearing. See Tex. R. Civ. P. 193.6(b). We overrule issue seven.

Issue Eight: Gagliano’s Expert Testimony

In issue eight, Appellants complain the trial court abused its discretion by

allowing Gagliano to testify as an expert on Tactical’s lost profits and by allowing

testimony of lost revenue rather than lost profits. Yet since we sustained Appellants’

second issue and concluded as a matter of law that Tactical is not a third-party

beneficiary, we reversed the portions of the trial court’s judgment awarding Tactical

75 damages against L&S and Burkett. Thus, we need not address this issue. See Tex.

R. App. P. 47.1.

Issue Nine: Sanctions Award and Motion for Mistrial

In issue nine, Appellants argue the trial court erred by denying the Motion for

Mistrial. On appeal, they argue the trial court admonished and threatened to arrest

Burkett in front of the jury, and the trial court abused its discretion by sanctioning

Burkett’s counsel, W. Earl Touchstone, $5,000, for violating the trial court’s rulings

on the Appellees’ motion in limine. Appellants argue the trial court’s emotional

display demonstrated partiality and unfairly prejudiced Burkett, which is reflected

in the jury’s excessive verdict. Appellants also complain the sanction of $5,000

based on what occurred was unwarranted and excessive, claiming that Touchstone

had inadvertently displayed one page of an exhibit that had not been admitted into

evidence to the jury. Appellants argue that Touchstone’s violation of the Motion in

Limine was an innocent mistake and that this Court should reverse the trial court’s

sanction award because there is no relationship between the amount of the sanction

and the purported harm.

“We review a trial court’s imposition of sanctions for an abuse of discretion.”

Am. Flood Rsch., Inc. v. Jones, 192 S.W.3d 581, 583 (Tex. 2006) (citation omitted).

The test for abuse of discretion is whether the trial court acted without reference to

any guiding rules or principles or whether, under the circumstances, the trial court’s

76 action was arbitrary or unreasonable. Low v. Henry, 221 S.W.3d 609, 614 (Tex.

2007). To determine whether sanctions are appropriate, “the appellate court must

ensure there is a direct nexus between the improper conduct and the sanction

imposed.” Id. (citation omitted). We must also ensure the sanction imposed is not

excessive and that less severe sanctions would have been enough to promote

compliance. TransAmerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex.

1991).

The party that moves for a mistrial must show a judicial impropriety and that

the impropriety caused probable prejudice. Metzger v. Sebek, 892 S.W.2d 20, 39

(Tex. App.—Houston [1st Dist.] 1994, writ denied). We review a trial court’s denial

of a motion for mistrial under an abuse of discretion standard. See Dolgencorp of

Tex., Inc. v. Lerma, 288 S.W.3d 922, 926 (Tex. 2009). A mistrial is required only in

extreme circumstances, where the prejudice is incurable. See Givens v. Anderson

Columbia Co., Inc., 608 S.W.3d 65, 71 (Tex. App.—San Antonio 2020, pet. denied)

(citation omitted); In re Estate of Stack, No. 09-17-00089-CV, 2018 WL 4138939,

at *16 (Tex. App.—Beaumont Aug. 30, 2018, no pet.) (mem. op.). A trial court has

discretion over the conduct of a trial and may intervene to maintain control in the

courtroom. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 240–41 (Tex. 2001). A party

moving for mistrial must rebut the presumption that a limiting instruction cured any

prejudice. See In re Rudolph Auto., LLC, 674 S.W.3d 289, 312 (Tex. 2023); In re

77 Commitment of Rivera, No. 04-22-00324-CV, 2023 WL 7005848, at *5 (Tex. App—

San Antonio Oct. 25, 2023, no pet.) (op. on reh’g).

Touchstone filed an Opposed Motion for Reconsideration of the Court’s

Sanction’s Order, which includes his Affidavit. In the Affidavit, Touchstone claimed

that when he was examining Tim Word, he inadvertently displayed page eight of a

credit card statement from American Express because Appellees had previously used

the statement during a deposition and because the trial court had admitted similar

exhibits that contained credit card statements during the trial. Touchstone stated that

he mistakenly thought the trial court had admitted the American Express Statement,

which was marked as Exhibit 13, and that Appellees had redacted any objectional

portion of the statement. Touchstone explained that he accidentally displayed the

portion of the exhibit thinking it had been admitted when it had not, but his error

was inadvertent and unintentional, as he had a good faith belief that the trial court

had admitted Exhibit 13. Upon realizing that Exhibit 13 had not been admitted,

Touchstone swore that he removed page eight from the exhibit the jury could view,

which did not contain any specifically excluded charges pertaining to strip clubs.

Appellees filed a Response to Touchstone’s Opposed Motion for

Reconsideration of the Court’s Sanction’s Order, arguing that the trial court’s

sanction was an appropriate response to bring Touchstone into compliance with the

trial court’s orders. They also argued that Touchstone waived his right to have the

78 trial court reconsider the sanction because he did not ask the court to reconsider its

ruling until after the trial court rendered judgment. Appellees’ Response included

the Affidavit of one of its attorneys, who claimed that when Touchstone’s assistant

published Exhibit 13, she saw three credit card entries reflecting Enterprise as a

payee and the phone number for the St. James Cabaret, a Houston strip club.

Appellants filed a Reply to Appellees’ Response, denying that they had waived their

right to ask the trial court to reconsider its ruling, and Appellants maintained that

Touchstone acted under the mistaken belief that the exhibit had been admitted

without a calculated intent to introduce evidence that the trial court had excluded

under its pretrial rulings. Appellants’ Reply included the Declaration of

Touchstone’s paralegal, who published Exhibit 13 to the jury during trial. In her

Declaration, she asserted that she did not scroll through the credit card statement in

a manner in which pages other than page eight would have been published to the

jury before she located and published page eight.

An order on a motion in limine is an action taken by the court in the exercise

of its control over its proceedings, and the parties have a duty to comply with that

order. Onstad v. Wright, 54 S.W.3d 799, 805 (Tex. App.—Texarkana 2001, pet.

denied). “Noncompliance with the order may lead to contempt or other sanctions the

trial court deems appropriate.” Id. (citations omitted). During a pretrial hearing, the

trial court considered L&S’s Motions in Limine, which included the requests to

79 exclude Burkett’s use of L&S’s funds at a gentlemen’s club and for prostitution, and

the trial court granted L&S’s Motion in Limine as to those points. The record shows

that Appellees filed their First Amended Trial Exhibit List, which included trial

Exhibit 13, and L&S’s American Express Business Credit Card Statement, which

shows that on page eight a $888.38 PayPal payment to “TTWORD.” The record

shows that TTWORD is and initialism for Tim Word of Enterprise. Appellants filed

their Initial Objections to Appellees’ Trial Exhibits, including Exhibit 13.

The record shows that Touchstone violated the trial court’s rulings on the

Appellees’ Motion in Limine several times before the trial court sanctioned him, and

when those violations occurred, the trial court instructed Touchstone to follow the

Court’s orders. On the second of these violations, the trial court stated “[t]hat was a

jab that I don’t stand for. Stick to the facts. Stick to the legal Texas Rules of Evidence

that’s permitted in front of a jury, and if you want to get into something, approach. I

know you did not ask that.”

At one point, the trial court instructed Touchstone to take down his exhibit,

asked the attorneys to approach the bench, informed Touchstone that he was shutting

him down on Gagliano and that it “read up there very clearly what was supposed to

be out.” Gagliano’s counsel stated that Touchstone “displayed to the jury, in legible

form, the treasurer’s information associated with the strip club[,]” and the trial court

agreed, stating: “That’s exactly true.” The trial court noted the white noise was on

80 when the attorneys approached, and it explained that it could not have been clearer

on its rulings multiple times that evidence that the Court had ordered redacted should

not be displayed to the jurors. Touchstone answered that he thought Defense Exhibit

163 had been pre-admitted, and he did not create the redactions. Gagliano’s counsel

responded that it was an excluded exhibit. The trial court stated that Defense Exhibit

163 was not pre-admitted, instructed the parties to ensure they complied with the

court-ordered redactions of exhibits, and informed the parties that it would impose

a sanction of $5,000 for every incorrect redaction. The trial court also stated that

“it’s incumbent on you, both of y’all, to make sure those are right, because if those

go back there and there’s little sneak attacks like that, then it’s not going to be good.”

Later, after the trial court sustained Appellees’ objection to Touchstone’s

question about another matter that violated the trial court rulings on the Motion in

Limine, Touchstone published Defense Exhibit 13, which had not been admitted.

When that happened, the trial court sanctioned Touchstone $5,000 for violating the

trial court’s order. Exhibit 13 shows the charge to TTWORD. The trial court told

Touchstone, who claimed it was unintentional, that he received a copy of the court’s

exhibit list and was responsible for what he published. After the trial court’s

warning, Touchstone violated the order in limine two more times, and on the second

occurrence the trial court sanctioned him $5,000.

81 The first matter we consider is the relationship between the conduct in

question and the sanction imposed. There should be a direct nexus between the

offensive conduct, the offender, and the sanction award. See Low, 221 S.W.3d at

614. In this case, the trial court addressed Touchstone’s multiple violations of the

order in limine, which it characterized as “little sneak attacks,” and warned that

future violations would be sanctioned. Therefore, we conclude this prong is satisfied.

See TransAmerican, 811 S.W.2d at 917.

Next, we consider whether the punishment is proportional relative to the

misconduct and whether the sanction is excessive. See id. Here, the trial court

warned Touchstone that future violations would result in a $5,000 sanction. The trial

court’s characterization of Touchstone’s violations shows that it viewed the

successive violations as evidence of Touchstone’s bad faith. See Cantu v. Guerra &

Moore, Ltd. LLP, 328 S.W.3d 1, 10 (Tex. App.—San Antonio 2009, no pet.)

(affirming $10,000 for repeated limine violations appearing in bad faith); see also

Brewer v. Lennox Hearth Prods., LLC, 601 S.W.3d 704, 716 (Tex. 2020) (stating

that direct evidence of bad faith is not required). We conclude that the punishment

is proportional relative to the repeated misconduct, the sanction is not excessive, and

less severe sanctions would have been insufficient to promote compliance. See

TransAmerican, 811 S.W.2d at 917. The trial court’s $5,000 sanction is not

unreasonable or arbitrary, and we cannot say the trial court acted without reference

82 to any guiding rules and principles. See Low, 221 S.W.3d at 614. On this record, we

conclude the trial court did not abuse its discretion by imposing the sanction award.

See id.; Am. Flood Resch., Inc., 192 S.W.3d at 583.

As for the Motion for Mistrial, the record shows that during trial, the trial court

paused the proceedings, asked to see the attorneys at the bench, and turned on white

noise while warning Burkett’s counsel that if Burkett were to continue to stare down

the trial court, Burkett would be kicked out of the courtroom. The trial court

summoned Burkett to the bench and warned him that “[i]f I catch you staring me

down one more time, I’m going to have you arrested.” The trial court instructed

Burkett to sit down and “[d]on’t look up here again.” The judge told Touchstone that

Burkett had been staring him down the whole trial and that Burkett would not be

allowed to intimidate the Court. After the bench discussion concluded, the judge

turned off the white noise and stated, “We will not be bullied in this courtroom. Is

that clear by everybody in – in this courtroom?”

At another point, the trial court asked the attorneys to approach the bench,

turned the white noise on, and stated that it wanted to put some aspects of Burkett’s

behavior on the record. The trial court stated that it had asked the lawyers and bailiffs

to keep an eye on Burkett, who had spread his legs open toward the trial court and

stared down the court and opposing counsel with intimidating looks. The trial court

also stated that Burkett approached the trial court’s bench and then looked and

83 inquired about personal items and guns. The trial court asked the parties to “hold

back some of those extra responses” and stated it was concerned about the court

perceiving a threatening type of behavior over several days.

Touchstone moved for a mistrial based on the trial court’s statements that

Burkett was staring the court down. When Touchstone claimed the comments were

made in open court in front of the jury, the trial court stated that “[w]e were

approached outside of their presence[]” when he made the comments and that

“[w]hat was made in front of the jury was, ‘We will not – this – we will not bully

anyone in this court,’ and that was addressed to every single person in this

courtroom.” The trial court denied the motion for mistrial.

The next day, Appellants renewed their motion for mistrial in the trial court’s

chamber, and the trial court denied the motion. The trial court agreed to instruct the

jury to disregard admonitions to the parties and anything said during private

conversation at the bench with the white noise on. The trial court reiterated that the

comments made in the jury’s presence were to all parties for the safety of the court

and everyone involved, and no one was singled out. The trial court instructed the

jury as follows:

Any private conversations that occur at the bench with the white noise on or if – if, by chance, y’all ever heard anything, comments during those private conversations are not to be considered as evidence or play any role in your deliberations nor should they ever. You should base your decision solely on the evidence that is presented in open

84 court, the documents, the testimony, and weigh your deliberations based on those types of things. In addition, anytime the Court admonishes – makes a ruling or admonishes the lawyers or parties in the case, that, again, is not evidence for you to consider. That is – should play no role in your deliberation process.

Based on this record, we hold that the trial court’s admonishment to

“everybody” was well within its ministerial discretion to maintain order in the

courtroom and did not display bias. See Francis, 46 S.W.3d at 240–41. The trial

court’s remarks during the bench conference also do not support bias, and the record

shows that the trial court’s remarks were made at the bench with the white noise on.

See Haynes v. Union R.R. Co., 598 S.W.3d 335, 354, 356 (Tex. App.—Houston [1st

Dist.] 2020, pet. dism’d) (stating that judicial remarks during trial that are critical,

disapproving, or even hostile do not ordinarily support a bias or partiality challenge);

Metzger, 892 S.W.2d at 40 (explaining where jury did not decide case, prejudice

against a party’s attorney’s is irrelevant).

The trial court also instructed the jury that when deliberating on its verdict not

to consider any private conversations at the bench with the white noise or any

admonishments that the court made to the lawyers or parties. We presume the jury

followed the trial court’s instruction. See In re Rudolph Auto., LLC, 674 S.W.3d at

312; In re Commitment of Rivera, 2023 WL 7005848, at *5. Nothing in the record

shows that the remarks or admonishments had any harmful effect, the jury could not

85 follow the trial court’s instruction, or that the presumption was rebutted by showing

that the probability that the remarks or admonishments caused harm is greater than

the probability the jury decided the case on proper proceedings and evidence. See In

re Commitment of Allen, No. 09-11-00449-CV, 2012 WL 3860466, at *3 (Tex.

App.—Beaumont Sept. 6, 2012, no pet.) (mem. op.); Quiroz ex rel. Quiroz v.

Covenant Health Sys., 234 S.W.3d 74, 90 (Tex. App.—El Paso 2007, pet. denied).

We conclude Appellants failed to establish the trial court abused its discretion in

denying the Appellants’ motion for mistrial and failed to show that any prejudice

caused by the errors the Appellees allege occurred were incurable. See Lerma, 288

S.W.3d at 926; Givens, 608 S.W.3d at 71. We overrule issue nine.

CONCLUSION

We sustain Appellants’ first issue, vacate that portion of the trial court’s

judgment granting Gagliano’s Motion for Partial Summary Judgment and holding

that Burkett’s purported exercise of Section 12.7(b) of the L&S Company

Agreement was ineffective, and render judgment that Burkett’s exercise of Section

12.7(b) of the L&S Company Agreement was effective on June 11, 2019. We sustain

Appellants’ second issue, vacate that portion of the trial court’s judgment granting

Gagliano’s Motion for Partial Summary Judgment holding that Tactical is a third-

party beneficiary of the Company Agreement, and render judgment that Tactical is

not a third-party beneficiary of the Company Agreement.

86 Since sustaining Appellants’ first and second issues affects the jury’s verdict

regarding the parties’ breach of contract claims and resulting damages and attorneys’

fees regarding same, we must reverse the portions of the trial court’s judgment

regarding the parties’ breach of contract claims. We reverse the following portions

of the trial court’s judgment against L&S and Burkett and to Gagliano and remand

for further proceedings consistent with this opinion: against L&S and to Gagliano

for breach of contract in the amount of $2,638,101.05; against Burkett and to

Gagliano for breach of contract in the amount of $2,638,101.05; against L&S and to

Gagliano for reasonable and necessary legal fees Gagliano incurred in this

proceeding through trial and completion of the trial proceedings in the amount of

$1,170,000; against Burkett and to Gagliano for reasonable and necessary legal fees

Gagliano incurred in this proceeding through trial and completion of the trial

proceedings in the amount of $1,170,000; against L&S and to Gagliano for

reasonable and necessary court costs and expert witness fees in the amount of

$113,190; against L&S and to Gagliano for reasonable and necessary appellate

attorney fees; against Burkett and to Gagliano for reasonable and necessary appellate

attorney fees.

We reverse the following portions of the trial court’s judgment against L&S

and Burkett and to Tactical: against L&S and to Tactical for breach of contract in

the amount of $2,389,725.29; and against Burkett and to Tactical for breach of

87 contract in the amount of $2,389,725.29. We render judgment that Tactical take

nothing against L&S and Burkett.

Having reversed the parties’ breach of contract claims and resulting damages

and attorneys’ fees regarding same, we must also reverse the portions of the trial

court’s judgment regarding the parties’ breach of fiduciary duty claims, and we

remand for the jury to determine whether Appellants breached any fiduciary duty

prior to Burkett effectively exercising Section 12.7(b) of the L&S Company

Agreement on June 11, 2019. Accordingly, we reverse the following portions of the

trial court’s judgment against L&S and Burkett and to Gagliano: against Burkett and

to Gagliano for breach of fiduciary duty in the amount of $5,553,163.45; and against

Burkett and to Gagliano, standing in the shoes of L&S, for breach of fiduciary duty

in the amount of $5,553,163.85.

Having reversed the portions of the trial court’s judgment regarding the

parties’ breach of contract and breach of fiduciary duties claims, we reverse the

following portions of the trial court’s judgment regarding punitive damages: against

Burkett and to Gagliano as punitive damages for Burkett’s malicious, grossly

negligent and intentionally self-enriching breach of fiduciary duty in the amount of

$5,276,202.10; and against Burkett and to Gagliano, standing in the shoes of L&S

as punitive damages for Burkett’s malicious, grossly negligent and intentionally self-

enriching breach of fiduciary duty in the amount of $11,106,329.70.

88 Since Appellants failed to challenge certain portions of the trial court’s

judgment, we affirm the following portions: L&S Pro-Line voluntarily non-suited

its Texas Theft Liability Act claim to avoid an unfavorable ruling on the merits; as

such Gagliano is the prevailing party under the Texas Theft Liability Act; Gagliano,

Snook Holdings, and Tactical Automation are not entitled to recovery of attorney

fees specifically under Chapter 38 of the Texas Civil Practice and Remedies Code

because L&S Pro-Line is a limited liability company; judgment against L&S and to

Snook for breach of contract in the amount of $109,239.12; judgment against L&S

and to Gagliano for additional and reasonable and necessary legal fees to defend and

prevail against L&S’s theft claim under the Texas Theft Liability Act through trial

in the amount of $30,000 and conditional attorney’s fees to defend on appeal; and

judgment against L&S and to Snook for reasonable and necessary attorney’s fees

incurred through trial in the amount of $39,000 and conditional attorney’s fees to

defend on appeal. We also affirm the trial court’s sanction award.

Based on our disposition of the trial court’s pretrial rulings and the jury’s

findings, we also reverse the trial court’s findings or orders that: Burkett’s purported

exercise of Section 12.7(b) of the L&S Pro-Line Company Agreement was

ineffective; Burkett did not effectively purchase any of Gagliano’s interest in L&S

Pro-Line on June 11, 2019, under Section 12.7(b) of the L&S Pro-Line Company

Agreement; L&S Pro-Line TAKES NOTHING as to any of its affirmative claims;

89 Burkett TAKES NOTHING as to any of his affirmative claims; L&S did not issue

to Gagliano all distributions under Section 6.3 of the Company Agreement; Tactical

Automation is a third-party beneficiary of the L&S Pro-Line Company Agreement;

L&S Pro-Line’s Officer Removal claim is dismissed; Gagliano should not be

removed as a manager, CFO and Treasurer of L&S under the Company Agreement

and he is allowed to participate in any vote authorized by the Company Agreement

or Texas law on such issues; L&S is a closely held limited liability company and

Gagliano and Burkett are its only Members; as such, Gagliano has standing and it is

equitable for him to bring a direct and derivative suit against Burkett for the benefit

of L&S and for the benefit of Gagliano himself as a Member of L&S; Gagliano was

named as a defendant in this lawsuit precisely because he is a Member, Manager,

and officer of L&S and he prevailed on each and all matters asserted against him; as

such, Gagliano is entitled under Section 14.1 of the L&S Company Agreement to

indemnification from L&S for all his costs, expenses, and attorney fees incurred in

connection with the lawsuit; Burkett committed a Terminating Event under the

Company Agreement because of his (i) neglect of his duties to the L&S Company

Agreement as a result of his, (ii) fraud and dishonesty in connection with his

fiduciary duties to L&S, and (iii) breach of section 9.6 of the Company Agreement;

Burkett is required to sell his ownership interest in L&S under Sections 8.6 and 9.5

and Exhibits B and D of the Company Agreement because Burkett committed a

90 Terminating Event under the L&S Company Agreement; Burkett is ORDERED to

transfer his ownership interest in L&S to Gagliano, the remaining member of L&S,

pursuant to and in conformity with Sections 8.6 and 9.5 and Exhibits B and D of the

L&S Company Agreement; it is equitable and just for Gagliano to be awarded

against Burkett and L&S reasonable legal fees Gagliano incurred to pursue and

defend against various declaratory judgment claims made in this proceeding; and it

is equitable and just for Gagliano to be conditionally awarded against Burkett and

L&S appellate attorney fees. We also reverse the trial court’s Order entering an

injunction against L&S and Burkett.

For the reasons explained above, we affirm the trial court’s judgment in part,

reverse and render the trial court’s judgment in part, and reverse and remand the

cause in part to the trial court for further proceedings consistent with this opinion.

AFFIRMED IN PART; REVERSED AND RENDERED IN PART;

REVERSED AND REMANDED IN PART.

W. SCOTT GOLEMON Chief Justice

Submitted on April 20, 2023 Opinion Delivered June 28, 2024

Before Golemon, C.J., Horton and Wright, JJ.