Tekway, Inc. v. Pinnacle Technical Resources, Inc.

• Court: Court of Appeals of Texas
• Decided: April 26, 2024
• Docket: 05-22-00752-CV
• Status: Published

Opinion

AFFIRMED IN PART AND REVERSED AND RENDERED IN PART and Opinion Filed April 26, 2024

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-22-00752-CV

TEKWAY, INC., Appellant V. PINNACLE TECHNICAL RESOURCES, INC., Appellee

On Appeal from the 193rd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-19-14497

MEMORANDUM OPINION

Before Justices Partida-Kipness, Pedersen, III, and Garcia Opinion by Justice Garcia

In this commercial dispute, appellee Pinnacle Technical Resources, Inc. sued

appellee Tekway, Inc. for breach of contract and declaratory judgment, and Tekway

asserted several counterclaims. After a bench trial, the trial judge rendered judgment

for Pinnacle. Tekway appeals. We reverse the award of declaratory relief to Pinnacle

and render judgment that Pinnacle’s claims for declaratory relief are denied, but

otherwise we affirm the judgment. I. BACKGROUND A. Facts The following facts are drawn from the evidence introduced at trial unless

otherwise indicated.

1. The Parties’ Business Relationship Pinnacle is in the workforce-solutions industry. It helps large companies like

AT&T with workforce needs including IT staffing. When such a company needs

services, it publishes a requisition. Sometimes Pinnacle responds to the requisition

by submitting resumes of Pinnacle’s own employees. If the company selects a

Pinnacle employee, it pays Pinnacle for the worker’s services, and Pinnacle in turn

pays the worker. In other cases, Pinnacle relies on a subcontractor like Tekway to

provide resumes in response to a requisition. If the company selects a

subcontractor’s employee, it pays Pinnacle for the worker’s services, Pinnacle pays

a fee to the subcontractor, and the subcontractor pays the worker. Depending on the

situation, the worker remains an employee of Pinnacle or the subcontractor as the

case may be. Pinnacle has over 2,000 employees, and it interacts with thousands of

subcontractor suppliers like Tekway.

In 2014, Pinnacle began doing business with Tekway. Pavan Kumar was

Tekway’s operations manager at all times relevant to this case. Effective February

28, 2019, Pinnacle and Tekway entered a Supplier Subcontractor Agreement (the

Agreement) that specifically listed AT&T as the client. The gist of the Agreement

–2– was that Tekway would provide qualified candidates, referred to as “Contractors,”

to perform work for Pinnacle and AT&T. Section 2 provided that either Pinnacle or

Tekway could terminate the Agreement without cause at any time with two weeks’

advance written notice to the other party. It also provided that Pinnacle could

terminate the Agreement immediately for cause, which the Agreement defined as a

material breach of the Agreement. Section 14 gave Pinnacle the right to audit

Tekway’s records relating to the services provided, and it stated that Tekway’s

refusal to cooperate with an audit or failure to provide requested records would allow

Pinnacle to terminate the agreement for cause. Pinnacle’s audit rights lasted during

the Agreement’s term and for five years following the last date on which services

were provided for Pinnacle and its client.

Under the Agreement, the process of placing Contractors at AT&T went as

follows. AT&T would send Pinnacle a work order for a specific Contractor. The

work order would include a start date, an end date, and a bill rate from Pinnacle to

AT&T. Then Pinnacle would issue a purchase order to Tekway generally mirroring

the work order from AT&T. The Pinnacle–Tekway purchase order would recite a

“Regular Rate” for the Contractor that was the rate at which Pinnacle agreed to pay

Tekway. Each Pinnacle–Tekway purchase order recited that it “shall be incorporated

into and become a part of the” Agreement.

–3– 2. Genesis of The Controversy In the summer of 2019, a controversy arose involving two unhappy Tekway

Contractors that had been placed at AT&T through Pinnacle. These Contractors were

named Gopi Potla and Sandeep Davuluri. Both of them were from India, and they

worked for AT&T in Illinois. Potla was allowed to stay in the United States under

an H-1B work visa. If he lost that visa, he would have to return to India. The evidence

indicated that Davuluri was also in the United States under a type of immigration

visa.

Potla and Davuluri disliked working for Tekway, and in June 2019 they

approached an AT&T manager named Denise Perez to ask if they could change their

“vendor,” meaning Tekway. Perez said that she would contact Pinnacle about their

question. On or about July 1, 2019, Perez spoke to Pinnacle employee Rebecca

Abraham and asked whether Contractors could change vendors. Abraham told Perez

that they could and that it happened all the time. Perez asked Abraham if she could

give Abraham’s contact information to Potla and Davuluri, and Abraham said that

she could.

Before the end of August 2019, it was arranged that Potla and Davuluri would

continue their assignments at AT&T but would do so through a different supplier

called Pro IT. Abraham worked with Potla, Davuluri, and Pro IT to make Pro IT a

Pinnacle supplier and to get new purchase orders for Potla and Davuluri to work

under.

–4– On August 24, 2019, Kumar found out that Potla and Davuluri were planning

to leave Tekway but continue working for AT&T through Pinnacle. On August 25,

Kumar sent an email to Pinnacle’s president and several other Pinnacle employees

stating that Tekway was terminating its services “with ‘CAUSE’” and “with a 2

week termination notice.” Later that same day, he sent a separate, longer email to

several Pinnacle employees complaining about Pinnacle’s conduct and indicating

that Tekway was willing to sue to protect its interests. The evidence also includes a

termination letter dated August 28, 2019, on Tekway letterhead stating, “This letter

is a confirmation of termination of our services with Pinnacle Technical Resources,

with a 2 week notice.” The letter bears a “Pinnacle received” stamp dated September

5, 2019.

On August 27, Potla sent Kumar an email resigning from Tekway with two

weeks’ notice. Kumar replied that same day, accepting Potla’s resignation effective

immediately. It appears that Davuluri communicated his resignation to Tekway

around the same time; the evidence includes an August 28 email from Kumar to

Davuluri accepting Davuluri’s resignation effective immediately.

On August 28, Pinnacle sent Tekway a letter via email demanding to audit

certain records by September 5. Tekway responded by email on September 5. On

September 9, Pinnacle replied with an email stating that a few items appeared to be

missing.

–5– On September 11, Pinnacle filed this lawsuit against Tekway and also sent

Tekway a letter stating that the Agreement was terminated for cause based on

Tekway’s inadequate response to Pinnacle’s audit demand.

B. Procedural History

1. The Claims At the time of trial, Pinnacle’s live petition asserted claims against Tekway

for breach of contract and declaratory judgment.

Tekway’s live pleading asserted counterclaims against Pinnacle for breach of

contract, declaratory relief, civil conspiracy, and tortious interference with contract.

2. Judgment and Findings

After a five-day bench trial, the trial judge signed a final judgment in

Pinnacle’s favor. The judge awarded Pinnacle actual damages of roughly $306,000,

plus attorneys’ fees and interest. The judgment also included three items of

declaratory relief in Pinnacle’s favor:

• On September 11, 2019, Pinnacle properly and immediately terminated the Agreement for cause because of Tekway’s material breaches of the Agreement. • The for-cause termination of the Agreement released four former Tekway employees (Potla, Davuluri, Kruthika Agarwal, and Vishal Burra) from any non-competition agreements with Tekway. • Prior to September 11, 2019, Tekway had not terminated the Agreement. The judgment further ordered Tekway to take nothing on its counterclaims.

–6– The trial judge signed findings of fact and conclusions of law the same day

she signed the final judgment. The findings and conclusions included the following:

• Tekway breached the Agreement in eight different ways, the following three of which caused damages to Pinnacle: + On or around August 31, 2019, Tekway breached the Agreement by moving four Contractors (Lakshmi Alluri, Devi Bellam, Smitha Chaparala, and Stevenson Sunchu) who had previously worked through Pinnacle to a competitor of Pinnacle called Collabera, Inc. This breach caused Pinnacle damages of $18,938.51. + Tekway breached the Agreement by failing to indemnify Pinnacle for amounts Pinnacle paid for AT&T’s defense in Illinois lawsuits Tekway filed against AT&T. This breach caused Pinnacle damages of $268,388. (The judge did not specify when Tekway committed this breach, but the evidence indicates that Pinnacle did not begin paying for AT&T’s defense until November 2019 at the earliest.) + Tekway breached the Agreement by failing to indemnify Pinnacle for amounts Pinnacle paid Potla, Davuluri, Agarwal, and Burra after those Contractors demanded that Pinnacle pay them amounts that they had earned but Tekway had failed to pay. This breach caused Pinnacle damages of $18,561.04. (The judge did not specify when Tekway committed this breach, but the evidence indicates that the Contractors did not begin presenting their claims to Pinnacle until November 2019.) • Tekway failed to establish a breach of the Agreement by Pinnacle, and Pinnacle did not materially breach the Agreement. • Any breach by Pinnacle was excused by Tekway’s prior material breaches. • Tekway could not recover breach-of-contract damages from Pinnacle because Tekway’s actions in terminating the various Contractors involved in the controversy negated the element of proximate cause.

–7– • Tekway could not recover breach-of-contract damages from Pinnacle related to Pinnacle’s alleged late payment of amounts owed to Tekway under the Agreement because Tekway failed to mitigate its damages by complying with the audits.

Tekway timely appealed the final judgment.

II. ISSUE AND ARGUMENTS PRESENTED The “Issue Presented” section of Tekway’s appellant’s brief presents a single

issue on appeal. Within that single issue, however, we discern five distinct

arguments, and the argument section of Tekway’s brief confirms our impression.

We paraphrase those arguments as follows:

1. The evidence is legally and factually insufficient to support the trial judge’s rejection of Tekway’s defense that Pinnacle committed a prior material breach of the Agreement. Accordingly, the trial judge erred by failing to rule that any breach by Tekway was excused. 2. The evidence is legally and factually insufficient to support the trial judge’s findings that Tekway did not terminate the Agreement before Pinnacle did. Accordingly, the trial judge erred by finding that Tekway breached the Agreement after its termination.

3. The evidence is legally and factually insufficient to support the trial judge’s findings and conclusions that (i) Tekway’s Contractors were released from their non-competition agreements with Tekway when Pinnacle terminated the Agreement, and (ii) Tekway breached the Agreement by failing to release Contractors from their non-competition agreements. 4. The trial judge erred by determining that the Agreement entitled Pinnacle to hire Contractors Potla, Davuluri, Agarwal, and Burra, and that Pinnacle did in fact hire Burra

5. The trial judge erred by ruling that Tekway was obligated to indemnify Pinnacle for (i) the attorneys’ fees that AT&T incurred defending itself in Tekway’s Illinois lawsuits and –8– (ii) sums Pinnacle paid Tekway’s former Contractors for allegedly unpaid wages. III. STANDARD OF REVIEW A. The Trial Judge as Fact Finder

We review a trial judge’s fact findings under the same legal and factual

sufficiency standards that apply to a jury’s findings. Catalina v. Blasdel, 881 S.W.2d

295, 297 (Tex. 1994). In a bench trial, the trial judge is the sole judge of the

witnesses’ credibility. Weisfeld v. Tex. Land Fin. Co., 162 S.W.3d 379, 380 (Tex.

App.—Dallas 2005, no pet.). The judge may accept or reject all or any part of a

witness’s testimony. Id. at 380–81.

B. Legal Sufficiency

When an appellant attacks the legal sufficiency of the evidence to support an

adverse finding on an issue on which it did not have the burden of proof, it must

show that no evidence supports the finding. Guillory v. Dietrich, 598 S.W.3d 284,

293 (Tex. App.—Dallas 2020, pet. denied). When evidence is so weak that it does

no more than create a surmise or suspicion of the matter to be proved, the evidence

is no more than a scintilla and, in legal effect, is no evidence. Id. The evidence is

legally sufficient if it is sufficient to enable reasonable and fair-minded people to

reach the finding under review. See City of Keller v. Wilson, 168 S.W.3d 802, 827

(Tex. 2005) (jury findings). In conducting our review, we view the evidence in the

light most favorable to the finding and indulge every reasonable inference that would

support it. Id. at 822. We must credit evidence favorable to the finding if a

–9– reasonable person could, and we must disregard contrary evidence unless a

reasonable person could not. Id. at 827.

When an appellant challenges the legal sufficiency of the evidence supporting

an adverse finding on an issue on which it had the burden of proof, it must show that

the evidence establishes as a matter of law all vital facts in support of the issue. Dow

Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001) (per curiam); see also Int’l

Bus. Machs. Corp. v. Lufkin Indus., LLC, 573 S.W.3d 224, 235 (Tex. 2019)

(appellant must show that the evidence conclusively established the fact as a matter

of law). If there is no evidence to support the finding, we then review the entire

record to determine if the contrary proposition is established as a matter of law. Dow

Chem. Co., 46 S.W.3d at 241. We sustain the point only if the contrary proposition

is conclusively established. Id.

C. Factual Sufficiency When an appellant challenges the factual sufficiency of the evidence to

support an adverse finding on an issue on which it did not have the burden of proof,

it must demonstrate that there is insufficient evidence to support the adverse finding.

See Hoss v. Alardin, 338 S.W.3d 635, 651 (Tex. App.—Dallas 2011, no pet.) (jury

findings). In reviewing the challenge, we consider all the evidence in the record and

set the finding aside only if the evidence supporting the finding is so weak or the

finding is so against the overwhelming weight of the evidence that the finding is

clearly wrong and unjust. See id.

–10– When an appellant appeals the factual sufficiency of the evidence supporting

an adverse finding on an issue on which it had the burden of proof, it must show that

the adverse finding is against the great weight and preponderance of the evidence.

Dow Chem. Co., 46 S.W.3d at 242. We must consider and weigh all of the evidence,

and we set aside the finding only if the evidence is so weak or the finding is so

against the great weight and preponderance of the evidence that the finding is clearly

wrong and unjust. Id.

D. Conclusions of Law

We review a trial court’s legal conclusions de novo. Sheetz v. Slaughter, 503

S.W.3d 495, 502 (Tex. App.—Dallas 2016, no pet.). An erroneous conclusion of law

will not require reversal if the controlling findings of fact support a correct legal

theory. Id.

IV. ANALYSIS A. Tekway’s First Argument: Did the trial judge err by failing to find that Pinnacle materially breached the Agreement before Tekway breached it?

1. Summary of the Argument Tekway first argues that the trial judge erred by rejecting Tekway’s prior-

material-breach defense to Pinnacle’s claims. According to Tekway, Pinnacle

materially breached the Agreement in three ways:

1. by transferring Tekway Contractors Potla and Davuluri to a new employer during an active Pinnacle–Tekway purchase order, 2. by transferring Tekway Contractors Agarwal and Burra to new employers during active Pinnacle–Tekway purchase orders, continuing to have those Contractors perform services for –11– AT&T, and then failing to pay Tekway for those post-transfer services, and 3. by failing to timely pay Tekway roughly $187,000 due for services that Tekway Contractors provided to AT&T while those Contractors were still Tekway employees.

Tekway contends that these material breaches excused Tekway from any further

performance under the Agreement, such as complying with Pinnacle’s August 28,

2019 audit demand. Thus, Tekway attacks the trial judge’s conclusion of law 16,

which recites, “Pinnacle did not materially breach the Supplier Agreement,” and

conclusion of law 24, which recites, “Tekway failed to establish a breach of the

Supplier Agreement by Pinnacle,” as well as a few other similar findings and

conclusions.

Pinnacle responds that its conduct regarding Contractors Potla, Davuluri,

Agarwal, and Burra did not breach the Agreement or any purchase order;

accordingly, that conduct necessarily could not constitute a prior material breach. As

for Tekway’s argument that Pinnacle committed a prior material breach of the

Agreement by paying the $187,000 late, Pinnacle responds that Tekway failed to

prove when Pinnacle’s obligation came due. Thus, Pinnacle contends, Tekway failed

to prove that Pinnacle committed this alleged breach before Tekway breached the

Agreement.

2. Applicable Law

The elements of a breach-of-contract claim are (i) a valid contract,

(ii) performance or tendered performance by the plaintiff, (iii) breach by the –12– defendant, and (iv) damages sustained by the plaintiff as a result of that breach.

Pathfinder Oil & Gas, Inc. v. Great W. Drilling, Ltd., 574 S.W.3d 882, 890 (Tex.

2019). “A breach of contract occurs when a party fails to perform an act it has

explicitly or impliedly promised to perform.” Gaspar v. Lawnpro, Inc., 372 S.W.3d

754, 757 (Tex. App.—Dallas 2012, no pet.).

Prior material breach is an affirmative defense to a breach-of-contract claim.

Compass Bank v. MFP Fin. Servs., Inc., 152 S.W.3d 844, 852 (Tex. App.—Dallas

2005, pet. denied); see also Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299,

314 (Tex. 2006) (referring to prior material breach as an affirmative defense).

Whether a breach is material is ordinarily a fact question. Bartush-Schnitzius Foods

Co. v. Cimco Refrig., Inc., 518 S.W.3d 432, 436 (Tex. 2017) (per curiam). Five

factors are relevant to the materiality determination:

(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;

(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of the circumstances including any reasonable assurances;

(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

–13– Mustang Pipeline Co., Inc. v. Driver Pipeline Co., Inc., 134 S.W.3d 195, 199 (Tex.

2004) (per curiam) (quoting RESTATEMENT (SECOND) OF CONTRACTS § 241 (AM. L.

INST. 1981)).

3. Application of the Law to the Facts

a. The Transfer of Contractors Potla and Davuluri

Tekway argues first that Pinnacle committed a material breach of the

Agreement and purchase orders in the July–August 2019 timeframe by transferring

Tekway Contractors Potla and Davuluri to another employer before the “end dates”

listed on their Pinnacle–Tekway purchase orders. We note that Pinnacle contests

Tekway’s use of the word “transfer”; in Pinnacle’s view it is more accurate to say

that these Tekway employees quit or were terminated and then began working for

another employer. We use the word “transfer” in this opinion solely for convenience.

We start by reviewing the relevant evidence regarding Pinnacle’s conduct as

to Potla and Davuluri.

As of summer 2019, Potla and Davuluri were providing services to AT&T

under separate Pinnacle–Tekway purchase orders, each with an “End Date” of

October 8, 2020. There was evidence that Potla and Davuluri were both unhappy

working for Tekway. Potla and Davuluri told AT&T employee Denise Perez that

they wanted to work for an employer other than Tekway. Tekway does not challenge

the trial judge’s finding that Potla and Davuluri located the company that became

their new employer, Pro IT. The trial judge also found that Pinnacle was not

–14– “involved in directing Mr. Potla and Mr. Davuluri to Pro IT.” Although Tekway

challenges the sufficiency of the evidence to support this finding, we reject that

challenge. Potla testified that (1) he found Pro IT, (2) he met Pro IT’s chairman

through a mutual friend, (3) he was the person who introduced Pro IT to Pinnacle,

and (4) no one at Pinnacle ever told Potla about Pro IT. Potla also testified that he

told Davuluri that he had reached out to Pro IT. Davuluri testified that no one from

Pinnacle introduced him to Pro IT. The trial judge was entitled to credit their

testimony. See Weisfeld, 162 S.W.3d at 380.

Evidence, including testimony by Pinnacle’s general counsel Erin Stewart,

further showed that Pinnacle employee Rebecca Abraham worked with Potla,

Davuluri, and Pro IT to make Pro IT a Pinnacle supplier and to get new purchase

orders for Potla and Davuluri to work under. Stewart also testified that Pinnacle

facilitated visa transfer requests for Potla and Davuluri, in order to have their

immigration visas transferred from Tekway to Pro IT. Potla testified that he began

working for Pro IT immediately after Kumar accepted Potla’s resignation, which

emails showed happened on August 27, 2019. Davuluri testified that he started

working for Pro IT on August 26, 2019, and an August 28, 2019 email from Kumar

accepted Davuluri’s resignation effective immediately.

Pinnacle argues that its conduct, as found by the trial judge and supported by

the evidence viewed in the light most favorable to Pinnacle, simply did not breach

any contract provision. For the reasons stated below, we agree with Pinnacle that

–15– Tekway has not shown that Pinnacle’s conduct described above breached the

The only contract language that Tekway relies on are the various Contractors’

“end dates” that appear in the Pinnacle–Tekway purchase orders, which Pinnacle’s

general counsel testified are incorporated into the Agreement. An example from

Potla’s purchase order follows:

Tekway contends, in essence, that the “End Date” term means that Pinnacle

promised not to do anything, for the duration of a Pinnacle–Tekway purchase order,

to help a Tekway employee (1) quit Tekway during an active Pinnacle–Tekway

purchase order, (2) join a new employer, and (3) continue to work for the same

Pinnacle client. But Tekway points to nothing in the documents to justify reading

such a promise by Pinnacle into the phrase “End Date.” We will not rewrite the

–16– parties’ contract by inserting provisions that the parties could have included, nor will

we imply restraints for which the parties did not bargain. See LG Ins. Mgmt. Servs.,

L.P. v. Leick, 378 S.W.3d 632, 638 (Tex. App.—Dallas 2012, pet. denied).

In attempting to show a breach by Pinnacle, Tekway relies heavily on a July

5, 2019 email by Pinnacle employee Rebecca Abraham. She and Davuluri had

previously exchanged emails about his desire to change employers, and on July 3

she wrote that all Pinnacle would have to do is “partner with the new vendor and

have them sign our ATT agreement.” But in her July 5 email, Abraham backtracked

and wrote the following:

Tekway argues that this email constitutes an admission that the Agreement forbade

Pinnacle from helping a Tekway Contractor change employers during an ongoing

Pinnacle–Tekway purchase order. 1

1 We note that extrinsic evidence of a contract’s meaning cannot be considered unless the contract is ambiguous. See David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450–51 (Tex. 2008) (per curiam). We conclude that the “End Date” provisions in the purchase orders do not unambiguously prohibit Pinnacle’s conduct at issue in this case, and we assume without deciding that the Agreement is ambiguous on that point. Thus, we consider the extrinsic evidence admitted at trial. –17– We disagree that the July 5, 2019 Abraham email is dispositive. Abraham

cited no contract provisions and offered no explanation for her apparent conclusion

that the Agreement forbade Pinnacle from allowing Contractors to change employers

during active purchase orders. And Pinnacle’s general counsel Erin Stewart testified

that, despite Abraham’s email, “[t]here is simply no language anywhere in the

contract that states what Ms. Abraham is indicating here.” Stewart further explained

that Abraham’s reference to getting Tekway’s permission represented the least risky

way to handle employees who wanted to change employers, because without that

permission a “messy back and forth” situation can develop. Finally, Stewart testified

that the “End Date” term in the purchase orders is only an estimate and that it

represents the latest date on which billing can happen under that purchase order

unless it is amended or replaced. She further explained that the end date does not

guarantee work for the Contractor for the entire duration of the purchase order; it is

“a maximum date not a guarantee date.” A purchase order can end before the end

date if, for example, the client terminates the particular project for budgetary

reasons. Moreover, employees can come and go, quit or get fired, so the purchase

order does not represent a firm obligation by Tekway to provide the particular

Contractor.

We conclude that Tekway has not shown that the trial judge erred by refusing

to find that Pinnacle’s conduct related to Potla’s and Davuluri’s changes of employer

breached the Agreement. Thus, this prior-material-breach argument fails.

–18– b. Contractors Agarwal and Burra Tekway also asserts that Pinnacle committed a prior material breach of the

Agreement by transferring Contractors Agarwal and Burra before the end dates of

their purchase orders and not paying Tekway for their subsequent work for AT&T.

Pinnacle responds that the trial judge reasonably rejected this argument because

there was evidence that Pinnacle terminated the Agreement before Agarwal and

Burra changed their employers.

Tekway’s argument focuses on Pinnacle’s alleged failure to pay Tekway for

Agarwal’s and Burra’s work, and that argument runs as follows: In the Agreement,

Pinnacle promised to pay Tekway for a Contractor’s services up to the termination

of the relevant Pinnacle–Tekway purchase order. Although Pinnacle purported to

terminate the Agreement for cause on September 11, 2019, Pinnacle did not

terminate Agarwal’s and Burra’s purchase orders, and Agarwal and Burra continued

providing services for AT&T after September 10, 2019. Thus, Pinnacle was

obligated to pay Tekway for those services. Pinnacle did not pay and thus breached

the Agreement.

We reject Tekway’s argument because even if Pinnacle breached the

Agreement by failing to pay Tekway for Agarwal’s or Burra’s work, Tekway has

not shown that this breach was material. There was evidence of the following facts:

• Pinnacle notified Tekway by a September 27, 2019 email that Agarwal’s purchase order was terminated as of September 24, 2019.

–19– • On October 8, 2019, Pinnacle notified Tekway by email that Pinnacle was exercising its right under the Agreement to hire Burra directly.

Thus, the trial judge could reasonably conclude that Pinnacle had no obligation to

pay Tekway for Agarwal’s work after September 24 or Burra’s work after October

8.

Even assuming that Pinnacle owed Tekway a contractual obligation to pay for

Agarwal’s and Burra’s services to AT&T rendered between September 11, 2019,

and September 24, 2019 (in Agarwal’s case) and October 8, 2019 (in Burra’s case),

we conclude that Tekway has not shown that any failure to make those payments

were material breaches of the Agreement. The time periods involved were brief,

involving two weeks of work by Agarwal and about four weeks of work by Burra.

Whether a contract breach is material requires consideration of several factors

outlined in cases such as Mustang Pipeline Co., 134 S.W.3d at 199. Although

Tekway lists the materiality factors in its brief, it does not show how they apply to

the facts of this alleged breach.

We conclude that Tekway has not shown that the trial judge erred by failing

to find that Pinnacle’s conduct relating to Agarwal and Burra was a material breach

of the Agreement. Thus, this argument does not support Tekway’s prior-material-

breach defense.

–20– c. Pinnacle’s Failure to Pay for Contractors’ Work Finally, Tekway argues that Pinnacle committed a prior material breach by

failing to pay Tekway amounts owed for services rendered to AT&T by six Tekway

Contractors (Potla, Davuluri, Agarwal, Burra, Santosh Chenkapur, and Srikanth

Nadipalli)—services that were apparently rendered before Pinnacle purported to

terminate the agreement for cause on September 11, 2019. The trial judge found that

Pinnacle ultimately paid Tekway for those services in November 2020 and that

Pinnacle had properly withheld the payment up to that point pursuant to various

sections of the Agreement.

Pinnacle responds that Tekway’s argument fails because Tekway does not

show when Pinnacle’s payment obligation fell due. Tekway cites § 4 of the

Agreement, which states, “Payment will be made within five (5) business days of

Pinnacle’s receipt of payment from the Client, unless otherwise specified in the

Payment Method section.” Pinnacle contends that this term was superseded by the

following unnumbered clause on page one of the Agreement: “Payment Terms:

Pinnacle will pay Supplier within ten (10) days of Client approval of timesheets,

with a 1% early pay discount applied.” But regardless, Pinnacle continues, Tekway

did not prove the payment-due date under either provision.

Under the applicable standards of review, we conclude that Pinnacle is

correct: Tekway did not prove as a matter of law that Pinnacle’s payment obligation

fell due before Tekway breached the Agreement by failing to comply with its audit

–21– obligations, nor did the great weight and preponderance of the evidence support that

fact. See Dow Chem. Co., 46 S.W.3d at 241, 242.

In its opening appellate brief, Tekway cites testimony in which Pinnacle’s

general counsel, Stewart, acknowledged that Pinnacle withheld funds from Tekway

until November 2020 “pending review of the documents requested in the audit and

assessment of Pinnacle’s potential exposure and liability under those audit

provisions.” But this testimony does not establish when Pinnacle’s payment

obligation came due, much less that it came due before Tekway’s breaches.

In its appellate reply brief, Tekway asserts that Pinnacle admitted in its

appellee’s brief that it did not timely pay Tekway. We disagree. Pinnacle

acknowledged that it withheld payment from Tekway, but it did not concede that its

payment obligation came due before Tekway breached the Agreement. Indeed, the

very passage of Pinnacle’s brief cited by Tekway insists that Tekway failed to prove

when Pinnacle’s payment obligation came due.

In its reply brief, Tekway cites additional evidence. For example, Stewart

testified that Pinnacle was “withholding all the payments related to Tekway

beginning on August 28th, 2019.” But this testimony does not establish that Pinnacle

actually owed any payments to Tekway on August 28 or on any particular date.

Stewart went on to explain that in the morning on August 28, “Tekway had reached

out to the client and sent them some very inappropriate communication[s] and we

put the vendor on hold pending the outcome of the audit we issued that same day.”

–22– Thus, the trial judge could reasonably have concluded that on August 28 Pinnacle

decided to stop making payments to Tekway, but that the testimony did not establish

that any payments were owed on that date or on any particular date.

Tekway also cites a September 11, 2019 email from Potla to Rebecca

Abraham in which Potla asked her to “hold the pay from 27th August, instead of

paying Tekway until my transfer process is complete with ProIT.” That same day,

Abraham responded that she had sent in the request. But again, this email string does

not prove when Pinnacle’s payment obligation to Tekway became due under the

Agreement—that is, it does not show when AT&T paid Pinnacle for Potla’s work or

when AT&T approved Potla’s timesheets.

Tekway also cites testimony that refers to a September 10, 2019 demand letter

from Tekway to Pinnacle for amounts allegedly due. But the Tekway demand letter

does not show when the demanded amounts actually came due under the Agreement,

and in any event the trial judge was not required to accept the facts stated therein as

true. See Intec Sys., Inc. v. Lowrey, 230 S.W.3d 913, 920 (Tex. App.—Dallas 2007,

no pet.) (“The trial court as factfinder weighs the evidence . . . .”).

We conclude that Tekway has not shown that the trial judge erred by refusing

to find that Pinnacle committed a prior material breach of the Agreement by failing

to timely pay Tekway the sums discussed above.

4. Conclusion We reject Tekway’s first argument on appeal.

–23– B. Tekway’s Second Argument 1. Summary of the Argument

The trial judge granted declaratory relief that (1) Tekway did not terminate

the Agreement before September 11, 2019; (2) Pinnacle properly terminated the

Agreement for cause on September 11, 2019, based on Tekway’s material breaches

of the Agreement; and (3) Pinnacle’s for-cause termination of the Agreement

released Potla, Davuluri, Agarwal, and Burra from any non-competition agreements

those Contractors had with Tekway.

Tekway argues that these rulings are erroneous because Tekway terminated

the Agreement first via an email it sent to Pinnacle on August 25, 2019. Although

§ 19 of the Agreement required Tekway to send notices to Pinnacle by personal

delivery with signed receipt, by overnight courier with signature required, or by

registered or certified mail, return receipt requested, Tekway contends its email

termination was effective because the email substantially complied with the notice

provision. Accordingly, Tekway concludes, Tekway terminated the Agreement first,

and the trial judge therefore erred by determining that (1) Tekway materially

breached the Agreement and (2) Potla, Davuluri, Agarwal, and Burra were released

from their non-competition agreements with Tekway.

Pinnacle responds that Tekway’s August 25, 2019 attempt to terminate the

Agreement by email was ineffective because it did not strictly comply with the

Agreement’s notice requirements.

–24– 2. Applicable Law The Texas Supreme Court recently addressed the substantial-compliance

doctrine in James Construction Group, LLC v. Westlake Chemical Corp., 650

S.W.3d 392 (Tex. 2022). The court stated the rule as follows: “[A] party’s minor

deviations from a contractual notice condition that do not severely impair the

purpose underlying that condition and cause no prejudice do not and should not

deprive that party of the benefit of its bargain.” Id. at 406. (The court further held

that, as a matter of law, oral notice does not substantially comply with a written-

notice requirement, id. at 409, but that holding is not relevant to this case.)

Additionally, the James Construction court favorably cited two of our

opinions applying the substantial-compliance doctrine to contractual notice

requirements. In Barbier v. Barry, a contract required notice of cancellation to be

sent by registered mail. 345 S.W.2d 557, 560 (Tex. App.—Dallas 1961, no writ). A

party canceled the contract by a written letter that was received by the other party

but was not sent by registered mail. We held that the cancellation was nevertheless

effective under the substantial-compliance doctrine. Id. at 562. And in Texas Utilities

Electric Co. v. Aetna Casualty & Surety Co., a bond required the surety to send

notice of cancellation to TUEC’s office in Allen, Texas. 786 S.W.2d 792, 793 (Tex.

App.—Dallas 1990, writ denied). But the surety instead sent notice to TUEC’s office

in Mesquite, Texas, where it was delivered to an authorized TUEC agent. We held

–25– as a matter of law that the notice of cancellation was nevertheless effective under the

substantial-compliance doctrine. Id. at 794.

3. Application of the Law to the Facts a. The trial judge erred.

We agree with Tekway that its August 25, 2019 email termination of the

Agreement was effective because the evidence established that the email

substantially complied with the Agreement’s notice provision.

Section 19 of the Agreement required Tekway to give any notices

contemplated by the Agreement in writing, and it further provided that notices would

be effective when (1) personally delivered with signed receipt, (2) mailed by

overnight courier with signature required, or (3) mailed by registered or certified

mail, return receipt requested. The Agreement further provided that notices to

Pinnacle should be sent to its general counsel at a specific address. Although there

was no evidence at trial that Tekway complied with § 19, the evidence was

uncontroverted that Tekway gave Pinnacle notice of termination via email on

Sunday, August 25, 2019. Pinnacle’s general counsel testified that she received the

email that morning.

Our Barbier opinion supports Tekway’s position that it substantially complied

with § 19. Barbier involved a contract clause that required notice by registered mail.

We held that a notice by a written letter that was actually received substantially

complied with the notice clause. 345 S.W.2d at 562. In this case, the Agreement

–26– required Tekway to give notice by certain methods that required Pinnacle to

acknowledge receipt in some fashion. But Kumar’s email to several Pinnacle

employees was actually received by, at a minimum, Pinnacle’s general counsel—

who was the person contractually designated to receive notices for Pinnacle.

Barbier, then, indicates that Tekway’s termination email substantially complied with

the Agreement’s notice provision.

We next consider whether the Texas Supreme Court’s opinion in James

Construction affects the outcome. The opinion indicates that a deviation from a

contractual notice condition does not substantially comply with the condition if the

deviation severely impairs the purpose underlying the condition and causes

prejudice. 650 S.W.3d at 406. In this case Pinnacle adduced some evidence

explaining the purpose of the Agreement’s notice provision. Specifically, Stewart

testified that Pinnacle wanted a degree of formality in notices from suppliers for

three reasons: (1) to protect suppliers from doing something in a telephone call or

email they might later regret, (2) to protect the continuity of services that the

suppliers provide to Pinnacle and the customer, and (3) to ensure that notices are

received by the right people at Pinnacle. But we conclude that the evidence does not

support a conclusion that Tekway’s use of email to give its termination notice

severely impaired the purpose of the notice provision or prejudiced Pinnacle. The

evidence is undisputed that the proper person to receive notice for Pinnacle received

the termination notice the same day it was sent. The record contains many

–27– subsequent communications demonstrating that Tekway’s decision was not a

passing whim that Tekway needed to be protected from. And there is no evidence

that Tekway’s use of email rather than a more formal method of communication

harmed the continuity of services to Pinnacle or any of its customers.

We conclude that Tekway is correct and that the evidence established that

Tekway’s August 25, 2019 email termination of the Agreement was effective under

the substantial-compliance doctrine. Given the two-week notice provision in § 2,

which was referenced in Kumar’s email, this means that the Agreement terminated

on Sunday, September 8, 2019—which was before Pinnacle terminated the

Agreement for cause on September 11, 2019. The trial judge’s findings and

conclusions to the contrary were erroneous.

b. Relief on Appeal

Having concluded that the trial judge erred, we next consider what relief

Tekway is entitled to. If possible, we render the judgment the trial judge should have

rendered. See TEX. R. APP. P. 43.2(c).

(1) Declaratory Relief

Under our holding above, the three items of declaratory relief granted by the

trial judge to the contrary were erroneous and must be reversed. Those declarations

are:

[O]n September 11, 2019, Pinnacle properly and immediately terminated the “Supplier Agreement” “for cause” because of Tekway, Inc.’s material breaches of the Supplier Agreement.

–28– [B]ecause of the “for cause” termination of the Supplier Agreement, [Potla, Davuluri, Agarwal, and Burra] were released from any non-competition agreements with Tekway, Inc.

[P]rior to September 11, 2019, Tekway, Inc. had not terminated the Supplier Agreement.

(Footnotes omitted.)

Tekway does argue, however, that its termination of the Agreement has the

more far-reaching consequence that it cannot have committed any breaches after that

termination. We cannot agree, because the three damage-causing breaches found by

the trial judge involved contractual obligations that expressly survived the

Agreement’s termination.

Again, the trial judge found that Tekway committed three breaches of the

Agreement that caused damages to Pinnacle:

1. Tekway breached the Agreement’s noncompetition provision, § 5, by placing four Contractors previously placed through Pinnacle with a Pinnacle competitor;

2. Tekway breached the Agreement’s indemnity provision, § 11, by failing to indemnify Pinnacle for attorneys’ fees that AT&T incurred defending against Tekway lawsuits; and

3. Tekway also breached § 11 by failing to indemnify Pinnacle for sums Pinnacle paid to former Tekway employees because Tekway failed to properly pay them. Section 23 of the Agreement expressly provides that both § 5 and § 11 survive the

end of the Agreement:

Sections 1, 5, 9, 11, . . . and any other provision that would logically extend beyond the term shall survive the termination or rescission of the Agreement and will continue in full force and effect after this Agreement is terminated. –29– Thus, under § 23, Tekway’s duties under § 5 and § 11 continued even after Tekway

terminated the Agreement. Accordingly, we conclude that Tekway has not shown

that its termination of the Agreement defeated Pinnacle’s breach-of-contract claims.2

(2) Attorney’s Fees

Finally, we consider whether our reversal of the declaratory relief portion of

the judgment requires reversal of the award of attorney’s fees to Pinnacle. For two

reasons, we conclude it does not.

First, we conclude that, under the trial judge’s findings, all fees recovered by

Pinnacle are supported by Pinnacle’s successful breach-of-contract claims. The trial

judge ordered Tekway to pay Pinnacle’s attorney’s fees under Agreement § 17,

which required Tekway to pay Pinnacle’s “legal expenses relating to litigation,

including court costs, expenses, attorneys’ fees, and expert witness fees,” if Tekway

were found to have breached the Agreement. The trial judge found that Pinnacle’s

reasonable and necessary attorney’s fees in the past were $554,122.53, and she also

found and awarded additional amounts as conditional appellate attorney’s fees. She

further made findings regarding segregation of those fees, both trial and appellate,

as follows:

2 Tekway does not ask us to render declaratory judgment in its favor. We decline to do so without briefing explaining the precise relief that the evidence compels. Also, we do not see how a declaratory judgment that Tekway’s email termination of the Agreement was valid would “terminate the uncertainty or controversy giving rise to the proceeding.” TEX. CIV. PRAC. & REM. CODE ANN. § 37.008. –30– We construe findings (a) through (c) to mean that all of Pinnacle’s attorney’s

fees advanced its pursuit or defense of claims for breach of the Agreement, and we

construe findings (d) and (e) to mean that 5% of those fees also advanced Pinnacle’s

declaratory-judgment claims and 75% of the fees also advanced Pinnacle’s defense

of Tekway’s tort claims. See Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299,

313–14 (Tex. 2006) (attorney’s fees incurred to advance claims or defenses for

which fees are recoverable can be recovered even if the same legal services also

advanced claims or defenses for which fees cannot be recovered). Again, Pinnacle

was entitled to recover its attorney’s fees if Tekway were found to have breached

the Agreement. The trial judge found that Tekway breached the Agreement, and we

are not disturbing those findings. Accordingly, we conclude that our reversal of the

declaratory-relief portion of the judgment does not affect Pinnacle’s recovery of

attorney’s fees based on the judge’s segregation-of-fees findings.

Second, we conclude that reversal is not required under the declaratory-

judgment statute’s fee-shifting provision. Under that statute, the trial judge may –31– award attorney’s fees “as are equitable and just.” TEX. CIV. PRAC. & REM. CODE

ANN. § 37.009. Thus, when an appellate court’s judgment changes the extent to

which the parties prevail on their declaratory-judgment claims, the appellate court

will generally reverse the award of attorney’s fees and remand to the trial judge for

reconsideration of what is equitable and just. See Farmers Grp., Inc. v. Geter, 620

S.W.3d 702, 712 (Tex. 2021). In this case, we are reversing the award of declaratory

relief to Pinnacle, but we are otherwise affirming the judgment in its favor. We

conclude that Pinnacle remains the prevailing party for all practical purposes, and

that it is unnecessary to reverse the fee award for reconsideration of whether the

award is equitable and just.

4. Conclusion We agree with Tekway’s second argument on appeal and conclude that it

entitles Tekway to reversal of the declaratory relief granted by the trial judge but no

other relief.

C. Tekway’s Third Argument

1. Summary of the Argument

The trial judge found (in finding 14 and conclusion 22) and declared in the

judgment, that Pinnacle’s termination of the Agreement for cause released Tekway’s

Contractors from any noncompetition agreements that would limit their ability to

work for Pinnacle or AT&T. The trial judge also determined (in conclusion 8(b))

that Tekway breached the Agreement by failing to release its former employees from

–32– any non-competition obligations, but she did not award Pinnacle any damages for

this breach.

Tekway argues that the judge’s rulings are erroneous because they do not

comport with the Agreement. According to Tekway, the Agreement requires

Tekway to release a Contractor from a noncompetition agreement only if:

(1) Pinnacle terminates the Agreement for cause, (2) the Contractor at issue is currently working under a purchase order, (3) Pinnacle terminates the purchase order, and

(4) Pinnacle hires the Contractor directly. Tekway contends that element (3) was not satisfied as to Contractors Potla, Davuluri,

Agarwal, and Burra because Pinnacle did not terminate their purchase orders.

Tekway also contends that elements (2) and (4) were not satisfied as to Potla and

Davuluri because (i) they had been fired by Tekway and so were no longer working

under a purchase order and (ii) they were hired by Pro IT rather than Pinnacle.

In a footnote, Tekway also asserts that finding 19 is immaterial and is

supported by insufficient evidence. That finding states that the Agreement required

Tekway to use best efforts to get two weeks’ notice from any Contractor who quit

or was terminated, and that Tekway failed to do so.

2. Analysis and Conclusion

Based on Tekway’s second argument, we are already reversing the trial

judge’s declaration that Pinnacle’s purported for-cause termination of the

Agreement released Tekway’s Contractors from any noncompetition agreements. –33– Tekway does not explain how it was otherwise harmed by the findings and

conclusions it challenges in its third argument. Nor do we perceive any harm to

Tekway flowing from those findings and conclusions.

Because Tekway has not shown any harm flowing from the above-described

findings and conclusions, we reject Tekway’s third argument on appeal. See Brown

v. Frontline Asset Strategies, No. 05-21-00207-CV, 2022 WL 1421040, at *2 (Tex.

App.—Dallas May 5, 2022, no pet.) (mem. op.) (holding that appellant bears the

burden of demonstrating harm).

D. Tekway’s Fourth Argument

1. Summary of the Argument In finding 15, the trial judge found that the Agreement gave Pinnacle the right

to hire a Tekway Contractor after the Contractor provided 960 hours of service for

Pinnacle. In finding 34, the judge found that by August 31, 2019, Contractors Potla,

Davuluri, Agarwal, and Burra had provided more than 960 hours of service to

Pinnacle. And in conclusion 29, the judge determined that the Agreement entitled

Pinnacle to hire Potla, Davuluri, Agarwal, and Burra, and that Pinnacle did in fact

hire Burra.

Tekway argues that findings 15 and 34 are immaterial. It also argues that those

findings and conclusion 29 are supported by insufficient evidence.

–34– Pinnacle responds that Tekway’s argument is insufficient to show that these

determinations are supported by insufficient evidence. It also contends that the

determinations are immaterial and present no basis for reversal.

Tekway does not explain how it was harmed by the findings and the

conclusion it challenges in its fourth argument. Nor do we perceive any harm to

Tekway flowing from those determinations.

Because Tekway has not shown harm, we reject Tekway’s fourth argument

on appeal. See id.

E. Tekway’s Fifth Argument 1. Summary of the Argument

In conclusions 8(c) and 8(d), the trial judge determined that Tekway breached

contractual indemnity obligations to Pinnacle in two ways:

c. Failing to indemnify Pinnacle for [Potla’s, Davuluri’s, Agarwal’s, and Burra’s] indemnity demands to Pinnacle based on Tekway’s failure to pay wages and failing to comply with federal and state obligations regarding the payment of wages to [them]; [and] d. Failing to indemnify Pinnacle for the lawsuits [Tekway] filed against AT&T[.] The judge found that Pinnacle’s damages from the first breach were $18,561.04 and

its damages from the second breach were $268,388.00.

As to the AT&T claim, Tekway argues that the Agreement’s indemnity clause

simply did not require Tekway to indemnify Pinnacle against AT&T’s demand for

–35– indemnification; thus, Tekway’s refusal to indemnify Pinnacle against that demand

is not a breach. As to the sums Pinnacle paid Potla, Davuluri, Agarwal, and Burra,

Tekway argues that it did not have to indemnify Pinnacle against those Contractors’

claims because Pinnacle refused to pay Tekway for those Contractors’ work for over

a year.

Pinnacle responds that Tekway’s argument fails because Tekway has not

challenged two findings, 78 and 79, that support the indemnity awards. We reject

this argument, concluding that Tekway’s brief adequately addresses all necessary

findings. On the merits, Pinnacle contends that AT&T’s demand for a defense

against Tekway’s claims is indeed covered by the Agreement’s indemnity clause.

And it contends that its delay in paying Tekway for the Contractors’ work is not a

valid basis for Tekway to refuse to indemnify Pinnacle for sums Pinnacle paid on

the Contractors’ wage claims.

2. Applicable Law and Text of the Indemnity Clause We construe indemnity agreements according to the normal rules of contract

construction. Yowell v. Granite Operating Co., 620 S.W.3d 335, 353 (Tex. 2020).

Our primary concern is to ascertain and give effect to the parties’ intentions as

expressed in the instrument. Id. We may not expand their rights or responsibilities

beyond the limits expressed in the contract. Id. We construe indemnity agreements

strictly to give effect to the parties’ intent as expressed in the agreement. Id.

The Agreement’s indemnity clause is § 11, and it provides as follows:

–36– . . . Supplier will defend, indemnify, and hold harmless Pinnacle . . . from and against all claims, actions, suits, damages, liabilities, losses, judgments, awards, and expenditures including attorneys’ fees arising out of or relating to:

(i) the negligent acts or omissions or the performance or failure of performance by Supplier . . . under this Agreement, PO, or Client Addendum;

(ii) [S]upplier’s failure to comply with any labor, employment, employee benefit, tax, or other laws or regulations for payment of compensation, including benefits or salary asserted by Supplier’s employees, agents, subcontractors, or other representative[s]; (iii) damage to or destruction of tangible property to [sic] Pinnacle or third parties; (iv) bodily injury or death to the extent arising directly out of any negligent or wrongful act or omission of Supplier or its employees, agents, subcontractors, or other representative[s]; or

(v) Supplier’s failure to comply with any law, statute, ordinance, administrative order, rule, or regulation. (Paragraph breaks added for clarity.)

We note that the indemnity clause requires Tekway to indemnify Pinnacle

against losses, expenditures, and the like “relating to” the five specified subject

matters. The phrase “relating to” is a broad term. See RSR Corp. v. Siegmund, 309

S.W.3d 686, 701 (Tex. App.—Dallas 2010, no pet.). Thus, the indemnity clause

covers Pinnacle’s losses, expenditures, and the like that have a connection with the

listed subject matters. See id.

–37– 3. Analysis of the AT&T Indemnity Claim We first consider Pinnacle’s claim that Tekway had to indemnify Pinnacle for

sums that Pinnacle paid to cover AT&T’s defense costs in Illinois litigation

prosecuted by Tekway. The trial judge awarded Pinnacle $268,338 on that claim.

a. Relevant Evidence There was evidence of the following facts. On September 10, 2019, Tekway

sued Potla and Davuluri in Illinois state court, seeking to enforce noncompetition

agreements against them. On October 25, 2019, Tekway joined AT&T as a

defendant in that suit. On July 10, 2020, Tekway filed a separate lawsuit against

AT&T in Illinois. In both cases, Tekway sued AT&T for tortiously interfering with

(i) the Agreement between Pinnacle and Tekway and (ii) Tekway’s employment

agreements with Potla, Davuluri, Agarwal, and Burra.

Other evidence showed that AT&T demanded indemnity from Pinnacle for

AT&T’s defense costs in Tekway’s Illinois lawsuits. Pinnacle accepted that demand

and paid attorneys to defend AT&T against Tekway’s claims in those lawsuits.

b. Application of the Law to the Facts

Tekway asserts that Pinnacle’s payment of AT&T’s defense costs in

Tekway’s Illinois lawsuits did not arise of or relate to any of the five indemnification

situations listed in § 11 of the Agreement.

In response, Pinnacle argues that its payment of AT&T’s defense costs

satisfies § 11(v), quoted above, because Pinnacle’s expenditures arose from or

–38– related to Tekway’s failure to comply with a law, statute, ordinance, administrative

order, rule, or regulation. Specifically, Pinnacle argues that (1) Tekway’s claims

against AT&T depended on the enforceability of Tekway’s noncompetition

agreements with its Contractors and (2) the trial judge specifically concluded that

those agreement were unenforceable under governing Illinois law.

In its reply brief, Tekway argues that it is not obligated to indemnify Pinnacle

for its expenditures on AT&T’s defense costs because that would amount to

indemnification “for AT&T, not Pinnacle.”

Based on the following logic, we conclude that Tekway has not shown error:

• Tekway promised to indemnify Pinnacle for Pinnacle’s expenditures related to Tekway’s “failure to comply with any law.”

• Tekway’s employment agreements with its Contractors contained noncompetition agreements that were unenforceable under governing Illinois law. The trial judge so concluded, and Tekway does not challenge those conclusions on appeal.

• Thus, by entering those unenforceable noncompetition agreements, Tekway failed to comply with Illinois law. See comply, WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY (1981) (“conform or adapt one’s actions (as to another’s wishes)”); comply, BLACK’S LAW DICTIONARY (11th ed. 2019) (“To do what is required or requested; to conform, submit, or adapt to (a command, demand, requirement, etc.)”).

• Tekway’s claims against AT&T in the two Illinois lawsuits included claims for tortious interference with Tekway’s employment contracts with the Contractors.

• Thus, when Pinnacle paid AT&T’s defense costs in the Illinois lawsuits, those expenditures related to—that is, had some connection with—Tekway’s failure to comply with Illinois law,

–39– specifically its entering into unenforceable employment contracts with the Contractors and then suing for interference with those contracts. That is sufficient to trigger Tekway’s indemnity obligation under § 11.

We also reject Tekway’s suggestion in its reply brief that the award of

Pinnacle’s expenditures for AT&T’s defense costs amounted to indemnification of

AT&T rather than Pinnacle. Pinnacle adduced testimony that it actually paid more

than $268,388 for defense costs that AT&T incurred in the Illinois lawsuits. Because

Pinnacle actually paid those amounts, we disagree that the judgment’s award of

$268,388 amounted to indemnification of AT&T rather than Pinnacle.

In sum, we reject Tekway’s attack on the judgment’s $268,388 award based

on Tekway’s failure to indemnify Pinnacle for AT&T’s defense costs in Tekway’s

Illinois lawsuits.

4. Analysis of the Contractor Indemnity Claim

We next consider Pinnacle’s claim that Tekway had to indemnify Pinnacle for

sums that Pinnacle paid to Contractors Potla, Davuluri, Agarwal, and Burra based

on their demands for payments of wages that Tekway owed them but failed to pay.

The trial judge awarded Pinnacle $18,561.04 on this claim.

a. The Trial Judge’s Findings and the Parties’ Arguments

The trial judge found that Tekway did not pay Potla, Davuluri, Agarwal, and

Burra “in compliance with state and federal wage and hour laws because the

payments were not timely and/or never made by Tekway.” The judge further found

that (1) those Contractors demanded that Pinnacle pay them the amounts Tekway –40– had failed to pay and (2) Pinnacle paid the Contractors sums totaling $18,561.04 to

avoid violations of state and federal wage and hour laws.

On appeal, Tekway asserts that the trial judge’s findings are supported by

insufficient evidence. However, it does not explain this assertion, and we

consequently reject it. See TEX. R. APP. P. 38.1(i).

Tekway also argues that its duty to indemnify Pinnacle was excused or

negated by Pinnacle’s failure to timely pay Tekway roughly $186,000 that Pinnacle

owed Tekway under the Agreement for the Contractors’ work for AT&T.

Pinnacle responds that § 6 of the Agreement required Tekway to pay its

employees “in accordance with its established payroll schedule.” Indeed, we note

that § 6 goes on to state, “Supplier may not withhold or delay payment to

Contractors.”

In its reply brief, Tekway adds that Pinnacle’s payments to the Contractors

“confirms that Pinnacle failed to comply with the . . . Agreement and timely pay

Tekway.”

b. Analysis

We reject Tekway’s argument. Tekway points to nothing in the indemnity

clause that excuses Tekway from indemnifying Pinnacle against Tekway Contractor

wage claims if Pinnacle pays Tekway late. To the contrary, § 6 of the Agreement

appears to impose an absolute duty on Tekway to timely pay its Contractors for their

work: “Supplier may not withhold or delay payment to Contractors.”

–41– Tekway’s argument appears to amount to a contention that Pinnacle did not

really incur any losses when it paid some $18,561.04 on the Contractors’ claims

because Pinnacle was withholding far more than that amount—over $186,000—that

it owed to Tekway for the Contractors’ work. But this contention does not reckon

with the fact, found by the trial judge, that Pinnacle eventually paid Tekway the

amount due under the Agreement. Thus, the trial judge could reasonably conclude

that Pinnacle’s payments to the Contractors totaling $18,561.04 were actual

expenditures by Pinnacle in addition to what it paid Tekway, and that the tardiness

of Pinnacle’s payment was not a valid reason to deny Pinnacle claim for indemnity

under § 11.

For these reasons, we reject Tekway’s attack on the judgment’s $18,561.04

award based on Tekway’s failure to indemnify Pinnacle against the Contractors’

wage claims.

5. Conclusion For the foregoing reasons, we reject Tekway’s fifth argument on appeal.

V. DISPOSITION We reverse the portion of the final judgment that grants declaratory relief in

favor of Pinnacle, and we render judgment that Pinnacle’s requests for declaratory

relief are denied. We affirm the remainder of the judgment.

–42– 220752f.p05 /Dennise Garcia/ DENNISE GARCIA JUSTICE

–43– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT

TEKWAY, INC., Appellant On Appeal from the 193rd Judicial District Court, Dallas County, Texas No. 05-22-00752-CV V. Trial Court Cause No. DC-19-14497. Opinion delivered by Justice Garcia. PINNACLE TECHNICAL Justices Partida-Kipness and RESOURCES, INC., Appellee Pedersen, III participating.

In accordance with this Court’s opinion of this date, the judgment of the trial court is AFFIRMED in part and REVERSED in part. We REVERSE the following three paragraphs in the trial court’s judgment:

• The paragraph ordering that “Pinnacle Technical Resources, Inc. is entitled to a declaration that on September 11, 2019, Pinnacle properly and immediately terminated the ‘Supplier Agreement’ [footnote omitted] ‘for cause’ because of Tekway, Inc.’s material breaches of the Supplier Agreement.”

• The paragraph ordering that “Pinnacle Technical Resources, Inc. is entitled to a declaration that because of the ‘for cause’ termination of the Supplier Agreement, the ‘Former Tekway Employees’ were released from any non-competition agreements with Tekway, Inc. [footnote omitted]”

• The paragraph ordering that “Pinnacle Technical Resources, Inc. is entitled to a declaration that prior to September 11, 2019, Tekway, Inc. had not terminated the Supplier Agreement.”

We RENDER judgment that appellant Pinnacle Technical Resources, Inc.’s requests for declaratory relief are denied. In all other respects, the trial court’s judgment is AFFIRMED.

–44– It is ORDERED that appellee Pinnacle Technical Resources, Inc. recover its costs of this appeal and the full amount of the trial court’s judgment from appellant Tekway, Inc. and from the cash deposit in lieu of supersedeas bond. After the judgment and all costs have been paid, the clerk of the district court is directed to release the balance, if any, of the cash deposit to the person or entity that made the deposit.

Judgment entered this 26th day of April 2024.

–45–