Yonghui "Richard" Zhu v. VivaTech Electronics, LLC; Blessed Land Development, LLC; Rongchuan Albert Zheng; Luke Secora; And Josh Steelman

• Court: Texas Court of Appeals, 3rd District (Austin)
• Decided: June 30, 2026
• Docket: 03-23-00522-CV
• Status: Published

Opinions

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-23-00522-CV

Yonghui “Richard” Zhu, Appellant

v.

VivaTech Electronics, LLC; Blessed Land Development, LLC; Rongchuan Zheng; Luke Secora; and Josh Steelman, Appellees

FROM THE COUNTY COURT AT LAW NO. 1 OF TRAVIS COUNTY NO. C-1-CV-20-003843, THE HONORABLE TODD T. WONG, JUDGE PRESIDING

MEMORANDUM OPINION

This appeal arises from a dispute between the members of a closely-held limited

liability company, Vivatech Electronics, LLC. On the one side, there is the company’s

organizing member, Yonghui “Richard” Zhu. And on the other side, there are two other

company members, Joseph Steelman and Blessed Land Investment, LLC, and Blessed Land’s

owner, Rongchuan “Albert” Zheng (collectively, Appellees). 1

The dispute arose a few years after Vivatech’s formation, when Zhu reviewed

company records, discovered that Vivatech had been making hundreds of thousands of dollars in

payments to Blessed Land and Zheng, demanded that he be bought out and reimbursed for

various expenses he had allegedly incurred years earlier, and transferred funds from Vivatech’s

1 A third company member, Luke Secora, is aligned with Appellees and is himself an appellee in this appeal. But, as explained further below, Secora’s involvement is minimal, so we will refer to him separately and only as necessary. bank account to his personal bank account pending resolution of his demands. Blessed Land

filed suit against Zhu, asserting derivative claims for theft and conversion. And Zhu filed suit

against Appellees, including a declaratory-judgment action and individual and derivative claims

for breach of fiduciary duty and theft.

Appellees filed motions for summary judgment on all of Zhu’s claims. Zhu

nonsuited his theft claims and declaratory-judgment claims, and the trial court granted summary

judgment on Zhu’s remaining individual and derivative claims for breach of fiduciary duty.

Blessed Land’s derivative claims for theft and conversion were then tried to a jury, which found

in Blessed Land’s favor. The trial court rendered final judgment awarding damages to

Blessed Land on its claims for theft and conversion and attorney’s fees on its claim for theft.

The trial court further awarded Appellees their attorney’s fees as prevailing parties on Zhu’s

breach-of-fiduciary-duty claims and nonsuited claims (which the trial court found Zhu had

strategically nonsuited to avoid summary judgment) and as sanctions against Zhu and his

trial counsel.

Zhu now appeals, raising various issues. For the reasons stated below, we will

reverse the parts of the trial court’s judgment that dismiss Zhu’s derivative claims for breach of

fiduciary duty against Blessed Land and Steelman and order that Blessed Land and Steelman are

entitled to an award of attorney’s fees as the prevailing parties on Zhu’s derivative claims for

breach of fiduciary duty. We will otherwise affirm the trial court’s judgment and remand the

case for further proceedings consistent with our opinion, including further proceedings on Zhu’s

derivative claims for breach of fiduciary duty against Blessed Land and Steelman and a new

hearing on attorney’s fees.

2 Background & Procedural History

Zhu forms and raises funds for Vivatech

Zhu formed Vivatech in March 2017. In the Certificate of Formation Zhu filed

with the Secretary of State, Zhu designated Vivatech as an entity to be “managed by managers,”

who Zhu identified as himself, Josh Steelman, and Luke Secora.

Vivatech was formed for the two related purposes of (1) buying and reselling

consumer electronics and (2) manufacturing and selling bubble wrap and bubble mailers for use

in shipping. Steelman and Secora had prior experience in the resale of consumer electronics, and

Zhu suggested that manufacturing bubble wrap and bubble mailers to protect goods during

shipping was a good business idea. Zhu owned a company in China and offered to use his

sources in China to acquire the bubble-wrap machine.

Because Vivatech lacked the funds necessary to acquire the machines, Zhu

solicited an investment from an acquaintance from church, Rongchuan “Albert” Zheng. Zheng

and his wife, Yujin “Ellen” Zhao, owned another closely-held Texas limited-liability company,

Blessed Land Investment, LLC. Ultimately, Blessed Land invested $100,000 in Vivatech for a

25% interest in the company, and Zhao loaned an additional $100,000 to Vivatech. The loan

agreement between Zhao and Vivatech was prepared by Zhu and bore interest at the rate of 5%

per annum.

3 Zhu, Steelman, Secora, and Blessed Land execute the Vivatech Company Agreement

In June 2017, Zhu, Steelman, Secora, and Blessed Land entered into the

Shareholder Agreement of Vivatech Electronics LLC (the Company Agreement), which Zhu put

together using a form he obtained from the internet. 2

Under the Company Agreement, Zhu, Steelman, Secora, and Blessed Land were

identified as Vivatech’s “Shareholders” and “the sole Directors and Officers of the Corporation.”

Zhu, Steelman, and Secora each agreed to contribute $30,000 in cash for a 25% interest in

Vivatech, while Blessed Land agreed to contribute the $100,000 discussed above for a

25% interest in Vivatech. According to Zhu, Blessed Land received the same interest as the

other members despite contributing over three times as much because Blessed Land was “just the

investor,” and Zhu, Steelman, and Secora would run the business. Zheng is not a party to the

Company Agreement, is not mentioned in the Company Agreement, and has never been a

member of Vivatech.

Under the Company Agreement, each Shareholder was designated as a director of

Vivatech. The Company Agreement provided that the directors would, “when appropriate,”

perform certain acts, including:

• determine in good faith the “current assets” of Vivatech for purposes of corporate distributions;

• cause a quarterly report to be sent to the Shareholders not later than 30 days after the close of each quarter to identify and approve any distributions;

2 Although the Company Agreement refers to Vivatech as a corporation and to Zhu, Steelman, Secora, and Blessed Land as its shareholders, Vivatech is, in fact, a limited-liability company. Accordingly, throughout this opinion, we use the terms “shareholder” and “member” interchangeably to refer to the owners of Vivatech. For the same reason, we use the terms “director,” “officer,” and “manager” interchangeably. 4 • cause Vivatech to maintain the books, records, and other documents required by Texas law; and

• use their best efforts to operate Vivatech in accordance with sound business practices.

The Company Agreement permitted Shareholders to be employed as officers, and

it established the roles and duties of three specifics officers: the President, the Vice President,

and the Treasurer. However, the Company Agreement did not appoint any particular

Shareholder to any particular office, and no Shareholder was ever formally hired to fill any of

these positions.

The Company Agreement also permitted Shareholders to make loans to the

company, but only “upon approval by all Shareholders and only under the agreed conditions,

unless otherwise agreed upon.” Repayment of a Shareholder loan would “occur when the

Shareholders agree[d] that there [was] enough corporate funds to pay the loan.”

The Company Agreement provided that any “modifications” to the agreement had

to be “in writing and approved by all Shareholders.” After its execution, the Company

Agreement was never modified.

Vivatech secures a warehouse lease

In August 2017, Vivatech signed a three-year warehouse lease so it would have

enough space to house and operate the bubble-wrap machines. The lease, requiring over

$100,000 a year in rent through September 2020, was personally guaranteed by Zhu, Steelman,

Secora, and Zheng.

Zhu testified that he helped Vivatech secure the lease by depositing $150,000 of

his own funds into Vivatech’s account to make it appear to the prospective landlord that

5 Vivatech could afford the lease. After the lease was signed, Zhu withdrew his personal funds

from Vivatech’s account.

Vivatech purchases inoperable bubble-wrap machines

In November 2017, Zhu ordered the bubble wrap machines from China. The

machines were delivered in late January 2018. Vivatech was never able to operate

them successfully.

Without the ability to operate the machines, Vivatech’s business consisted solely

of the purchase and resale of consumer electronics. Vivatech purchased discounted consumer

electronics at auction (typically from big-box retailers, like Best Buy) and resold them online.

The proceeds from sales either went directly into the company’s PayPal account or its

bank account.

Zhu stops actively participating in Vivatech

In June 2018, Zhu decided he no longer wanted to be involved in the company,

submitted a letter of resignation, and offered to sell his interest in Vivatech to Steelman and

Zheng for $30,000 and a release from all company liabilities, including liabilities for the

warehouse lease and loan. Steelman and Zheng rejected Zhu’s offer. As Steelman would

later explain:

[T]he business was [operating] at a substantial loss at that point. Every shareholder had taken a hit on their initial investment, and [Zhu] wanted to essentially exit the business with the full amount or actually with more than what he had paid. And so that is why [they] couldn’t ever come to an agreement because [they] weren’t going to pay him more money than what he initially had invested.

6 After that, Zhu ceased actively participating in the operation of the company. 3 He

quit coming to the office and stopped communicating with the other members. Although Zhu

was no longer involved in the business, he nonetheless remained a member, manager, and

signatory to the company bank account, and he retained access to at least some of Vivatech’s

records, including Vivatech’s bank account and PayPal account.

Without consulting Zhu, Vivatech borrows money from Zheng and sells inventory on consignment from Blessed Land

When Zhu resigned, Vivatech still had two years left on its warehouse lease,

which Zhu, Steelman, Secora, and Zheng had personally guaranteed. But, according to

Steelman, Vivatech did not have funds to purchase inventory to resell. So, Vivatech borrowed

money from Zheng and began selling products on consignment from Blessed Land, reimbursing

Blessed Land at five percent above cost. Steelman testified that Blessed Land and he made these

decisions without consulting Zhu because Zhu was no longer actively participating in the

business or communicating with them.

Zhu unexpectedly takes money from Vivatech’s account

In the spring of 2020, Zhu reviewed Vivatech’s financial records and realized that

Vivatech had been writing checks to Blessed Land for “invoices” (which were for inventory

Vivatech had sold on consignment) and checks to Zheng for “loans” (which were payments for

the money Zheng had personally loaned to Vivatech after Zhu resigned). He also reviewed

several of Vivatech’s tax statements and realized that Vivatech’s sales had increased

3 Shortly after Zhu stopped participating in the company, Secora resigned and took no active role in Vivatech. 7 significantly since his departure. From this, Zhu appears to have formed the belief that either

Vivatech had become profitable or the other members had been acting underhandedly.

In March 2020, Zhu transferred $25,000 from Vivatech’s bank account into his

own personal account, leaving Vivatech with $1,408.79, which, according to Steelman, was not

enough for Vivatech to cover payroll and rent. Zhu made the transfer unexpectedly and without

consulting Steelman or Zheng.

Zhu then sent an email to Steelman and Zheng. In the email, Zhu began by

“congratulat[ing]” them on their “successful business so far.” He then observed that, while

Vivatech’s sales over the past two years had “exceeded $1.5 million,” he hadn’t gotten “a penny

from [his] investment” while everyone else had received “significant benefit from Vivatech.”

Zhu requested that they provide him with various business records and information, including

explanations for “any checks written” by them “in the past 2 and a half years.” Zhu then

demanded reimbursement for $70,000 in various expenses he had allegedly incurred years

earlier. Zhu explained that he had “supported Vivatech with [his] financial resources” when

Vivatech was in a “difficult financial situation” and that it was now time for Vivatech to pay him

back, since Vivatech’s situation had gotten “better.” Zhu ended the email by advising them that

he would retain the $25,000 until he received “a solution and proposal” from them “to resolve

the issue.”

Steelman then called a member meeting, which was attended by Steelman, Zhu,

and Zheng (on behalf of Blessed Land). At the meeting, Steelman and Zheng demanded that

Zhu return the $25,000. The next day, Zhu returned $5,000, but he kept the remaining $20,000.

8 Vivatech sues Zhu

In July 2020, Vivatech filed this lawsuit against Zhu, asserting claims for

conversion, theft, breach of fiduciary duty, and breach of contract and seeking to recover the

funds taken by Zhu.

Zhu takes more money from Vivatech’s account

After Vivatech filed suit, Zhu transferred another $23,000 from Vivatech’s

account to his account, this time leaving Vivatech with $2,477.69, which, according to Steelman,

was again insufficient to cover payroll and rent. As before, Zhu made the transfer unexpectedly

and without consulting the other members. Zhu would later explain that he made the second

transfer because Steelman and Zheng never provided him with the information he had requested

and continued to write themselves checks on Vivatech’s account for “invoices” and “loans.”

Zhu sues Steelman, Secora, Blessed Land, and Zheng

A few days after he made the second transfer, Zhu filed third-party claims against

Appellees. Zhu asserted individual and derivative claims for breach of fiduciary duty, alleging

that Appellees had breached their fiduciary duties in 21 separate ways, including by engaging in

self-dealing, usurping business opportunities belonging to Vivatech, and diverting company

assets for personal use and private gain. Zhu also asserted individual and derivative claims for

theft, alleging that Appellees had unlawfully appropriated Vivatech assets, sales, revenue, and

property for personal gain. Finally, Zhu brought a declaratory-judgment action, seeking over

50 declarations, including declarations that Appellees had breached their fiduciary duties to both

him and Vivatech in various ways. Zhu sought monetary damages in excess of $1 million as

9 well as various forms of equitable relief, including disgorgement of profits, fee forfeiture, and an

audit and accounting of all company accounts.

Vivatech’s counsel withdraws, and Blessed Land steps in and continues to prosecute the claims brought by Vivatech

After Zhu asserted his third-party claims, Vivatech’s counsel withdrew. Blessed

Land then stepped in and derivatively asserted and continued to prosecute the claims originally

brought by Vivatech.

Steelman, Blessed Land, and Zheng move for summary judgment on Zhu’s claims

After more than two years of discovery and on the deadline established in the

agreed scheduling order, Blessed Land and Zheng filed a hybrid motion for summary judgment

on all Zhu’s claims. Steelman also filed a hybrid motion for summary judgment on all

Zhu’s claims. 4

Zhu defends his breach-of-fiduciary duty claims but nonsuits his other claims

On the day his responses were due, Zhu nonsuited his declaratory-judgment

action and his theft claims against Appellees. 5 He also filed responses to the hybrid motions on

his individual and derivative claims for breach of fiduciary duty. In his response, Zhu attempted

to raise a fact issue on just one of the 21 allegations of breach he made in his third-party petition,

specifically, his allegation that Appellees had breached their fiduciary duties by

“[i]mproperly taking and/or diverting large sums of money out of the Vivatech bank account for

personal, self-gain without providing [him] with any type of explanation or accounting about

4 Secora also filed a motion for summary judgment. 5 Zhu nonsuited all his claims against Secora. 10 how the money [was] being used.” In defending this allegation, Zhu focused on the checks

written to Blessed Land for the inventory Vivatech had sold on consignment and the checks

written to Zheng for the money he had personally loaned to Vivatech. Zhu argued that these

checks raised a fact issue on whether Steelman, Blessed Land, and Zheng had breached their

fiduciary duties by “making and repaying” the “loans” and “invoices” out of Vivatech’s bank

account (1) “without obtaining [Zhu’s] permission or authorization” and (2) “without providing

him with any type of disclosure, explanation or accounting about the loan transactions.”

The trial court grants summary judgment and dismisses Zhu’s claims for breach of fiduciary duty

The trial court heard the hybrid motions and, without specifying the grounds,

granted summary judgment on Zhu’s remaining individual and derivative claims for breach of

fiduciary duty.

The trial court awards Appellees attorney’s fees as prevailing parties on Zhu’s nonsuited claims

Appellees and Secora then moved to recover their attorney’s fees on Zhu’s

nonsuited claims, arguing that the claims were strategically nonsuited without prejudice to avoid

an unfavorable ruling on summary judgment. The trial court agreed, granted their motions, and

ordered that the amount of fees awarded against Zhu would be determined at a later date.

A jury finds that Zhu committed theft and conversion

In February 2023, the sole remaining claims in the suit—claims for theft and

conversion against Zhu asserted derivatively by Blessed Land on Vivatech’s behalf—were tried

11 to a jury. 6 Zhu proffered various exhibits and related testimony in an attempt to show why he

transferred the funds from Vivatech’s account to his personal account. The exhibits included

(1) the Company Agreement, (2) the checks for “invoices” and “loans,” (3) four IRS tax forms

reporting payments received by Vivatech via PayPal from 2017 through 2020, (4) the email Zhu

sent Appellees in March 2020 when he made the initial funds transfer, and (5) a parcel with a

return address allegedly showing that Zheng had been selling Vivatech products from his home

address. Blessed Land objected to the proffered evidence on relevancy grounds. The trial court

sustained the objection, and Zhu put on his defense without the benefit of the excluded evidence.

The jury reached a unanimous verdict on both claims, finding that Zhu committed theft and

conversion, and awarded damages on the claims.

The trial court renders final judgment on the jury’s verdict and sanctions Zhu and his counsel

After a jury trial, the trial court rendered final judgment awarding damages to

Blessed Land on its claims. The judgment also awarded Appellees attorney’s fees as prevailing

parties and as sanctions against Zhu and his trial counsel.

Zhu now appeals. In six issues, Zhu contends that: (1) the trial court erred in

granting summary judgment on his individual and derivative claims for breach of fiduciary duty

against Blessed Land, Zheng, and Steelman; (2) the trial court abused its discretion in excluding

from the trial on Blessed Land’s derivative claims for theft and conversion evidence relating to

Zhu’s intent in transferring funds from Vivatech’s account to his personal account; (3) the trial

court erred in awarding attorney’s fees to Blessed Land, Zheng, and Steelman on Zhu’s claims

against them; (4) the trial court erred in awarding attorney’s fees to Blessed Land on its

6 During the pretrial conference, to simplify the issues at trial, Blessed Land agreed to

nonsuit the derivative breach-of-contract and breach-of-fiduciary-duty claims against Zhu. 12 derivative claim for theft against Zhu; (5) the trial court erred in awarding attorney’s fees to

Appellees on the ground that Zhu strategically non-suited his claims against them; and (6) the

trial court erred in awarding attorney’s fees to Appellees as sanctions against Zhu and his

Summary Judgment

In his first issue, Zhu contends that the trial court erred in granting summary

judgment on his individual and derivative claims for breach of fiduciary duty.

I. Applicable law and standard of review

To prevail on a claim for breach of fiduciary duty, a plaintiff must prove that

(1) the defendant owed the plaintiff a fiduciary duty, (2) the defendant breached its fiduciary

duty, and (3) the defendant’s breach either proximately caused injury to the plaintiff or resulted

in a benefit to the defendant. First United Pentecostal Church of Beaumont v. Parker,

514 S.W.3d 214, 219 (Tex. 2017).

Here, Zhu asserted claims for breach of fiduciary duty, both directly in his

individual capacity and derivatively on behalf of Vivatech. Each Appellee asserted various

grounds for granting summary judgment on these claims.

Zheng asserted both no-evidence and traditional grounds for summary judgment

on Zhu’s individual claim for breach of fiduciary duty. Specifically, Zheng argued that he was

entitled to no-evidence summary judgment because Zhu failed to produce evidence raising a fact

issue on the second and third elements of the claim. And Zheng argued that he was entitled to

the traditional summary judgment because he did not owe a fiduciary duty to Zhu as a matter of

law. Zheng also asserted both no-evidence and traditional grounds for summary judgment on

13 Zhu’s derivative claim for breach of fiduciary duty. Specifically, Zheng argued that he was

entitled to no-evidence summary judgment because Zhu failed to produce evidence raising a fact

issue on the second and third elements of the claim. And Zheng argued that he was entitled to

traditional summary judgment because he did not owe a fiduciary duty to Vivatech as a matter

of law.

Blessed Land asserted both no-evidence and traditional grounds for summary

judgment on Zhu’s individual claim for breach of fiduciary duty. Specifically, Blessed Land

argued that it was entitled to no-evidence summary judgment because Zhu failed to produce

evidence raising a fact issue on the second and third elements of the claim. And Blessed Land

argued that it was entitled to traditional summary judgment because it did not owe a fiduciary

duty to Zhu as a matter of law. Blessed Land asserted only no-evidence grounds for summary

judgment on Zhu’s derivative claim for breach of fiduciary duty, challenging the second and

third elements of the claim.

Steelman asserted no-evidence grounds for summary judgment on Zhu’s

individual claim for breach of fiduciary duty. Specifically, Steelman argued that he was entitled

to no-evidence summary judgment because Zhu failed to produce evidence raising a fact issue on

the first and second elements of the claim. Steelman asserted the same no-evidence grounds for

summary judgment on Zhu’s derivative claim. 7

Steelman also moved for traditional summary judgment on Zhu’s individual and 7

derivative claims, but his traditional motion was narrowly tailored, seeking summary judgment on only two of the 21 specific breaches alleged by Zhu. Specifically, Steelman moved for summary judgment on Zhu’s allegations that Steelman had breached his fiduciary duty by (1) “[w]rongfully interfering with and/or disrupting Vivatech’s business and relationship with its customers by diverting sales, sales opportunities, and sales proceeds and/or revenue away from Vivatech for personal gain” and (2) “[r]efusing to reimburse Mr. Zhu for the expenses incurred on Vivatech’s behalf, including the $120,000.00 expense for purchasing” the bubble wrap 14 The trial court granted summary judgment for each Appellee without specifying

any grounds.

We review the trial court’s summary judgment de novo, viewing the evidence in

the light most favorable to Zhu, crediting evidence favorable to Zhu if reasonable jurors could,

disregarding contrary evidence unless reasonable jurors could not, and resolving any doubts in

Zhu’s favor. Zive v. Sandberg, 644 S.W.3d 169, 173 (Tex. 2022). Applying this standard of

review, we will affirm summary judgment on traditional grounds if Appellees met their burden

to establish that there exists “no genuine issue as to any material fact” and that they are “entitled

to judgment as a matter of law.” Tex. R. Civ. P. 166a(c). We will affirm summary judgment on

no-evidence grounds if Zhu failed to meet his burden to produce “summary judgment evidence

raising a genuine issue of material fact” on any challenged element on which Zhu would have

had the burden of proof at trial. Id. R. 166a(i).

II. Analysis

In reviewing the trial court’s summary judgment, we first consider Zhu’s

individual claims against all three Appellees, then Zhu’s derivative claim against Zheng, and

then Zhu’s derivative claims against Blessed Land and Steelman.

A. The trial court did not err in granting summary judgment on Zhu’s individual claims against Appellees because Appellees did not owe a fiduciary duty to Zhu.

We begin by considering the trial court’s summary judgment dismissing Zhu’s

individual claims for breach of fiduciary duty against Appellees. Appellees asserted traditional

and no-evidence grounds challenging the first element of Zhu’s individual claim for breach of

machines. Zhu does not challenge the trial court’s grant of summary judgment on these specific allegations, so we do not address them here. 15 fiduciary duty—i.e., the existence of a fiduciary duty owed to Zhu individually. There are two

types of fiduciary duty: formal and informal. Bombardier Aerospace Corp. v. SPEP Aircraft

Holdings, LLC, 572 S.W.3d 213, 220 (Tex. 2019); Meyer v. Cathey, 167 S.W.3d 327, 330–31

(Tex. 2005) (per curiam). Zhu contends that Appellees owed him only a formal fiduciary duty as

a member of Vivatech.

Under Texas law, the equal and co-managing members of a limited-liability

company owe a fiduciary duty to the company, but they do not owe a fiduciary duty to each

other. See Bertucci v. Watkins, 709 S.W.3d 534, 544 (Tex. 2025) (“[M]embers of

limited-liability companies likewise do not owe formal fiduciary duties to fellow members

simply because of their relationship as co-members.”); Dunster Live, LLC v. LoneStar Logos

Mgmt. Co., No. 03-22-00014-CV, 2024 WL 291403, at *7 (Tex. App.—Austin Jan. 26, 2024, no

pet.) (mem. op.) (“Texas law does not impose fiduciary duties between members of a limited

liability company.”); Siddiqui v. Fancy Bites, LLC, 504 S.W.3d 349, 365 (Tex. App.—Houston

[14th Dist.] 2016, pet. denied) (declining to recognize fiduciary duty among members of LLC in

part because members had equal ownership interests and none had contractual right to greater

control over LLC than another member). However, Section 101.401 of the Business

Organizations Code permits the company agreement of a limited-liability company to impose

such duties. Tex. Bus. Orgs. Code § 101.401 (“The company agreement of a limited liability

company may expand, restrict, or eliminate any duties, including fiduciary duties, and related

liabilities that a member, manager, officer, or other person has to the company or to a member or

manager of the company.”).

Zhu contends that Vivatech’s Company Agreement imposes fiduciary duties on

Vivatech’s members, which they owe to one another. Zhu argues that the Company Agreement

16 should be construed as imposing such duties because it (1) provides that each member will be a

director of the company; (2) requires that the directors provide the members with quarterly

reports; (3) requires member approval of member loans; (4) prohibits members from being

concerned or financially interested in a similar or competing business; and (5) leaves in place

provisions from the Business Organizations Code requiring notice and disclosure of self-dealing

and interested transactions. Zhu further contends that his construction of the Company

Agreement is supported by the deposition testimony of Steelman, who agreed that Zheng and he

owed a fiduciary duty not only to Vivatech but to Zhu as well, and the deposition of Zheng, who

agreed that he needed to be fair, honest, and equitable with Vivatech’s members, including Zhu.

We disagree that the Company Agreement imposes fiduciary duties that Vivatech’s members

owe to one another.

As an initial matter, we observe that Zheng is not a member or manager of

Vivatech. The Company Agreement does not identify Zheng as a member or manager. The

Company Agreement does not mention Zheng at all. There is nothing in the Company

Agreement to support the imposition of a formal fiduciary duty upon Zheng to Zhu individually.

As discussed above, members of a limited-liability company do not owe duties to

other members. Given this well-settled principle of Texas law, no basis exists for holding that a

representative of a member owes fiduciary duties to other members unless the

company agreement provides otherwise. See Bertucci, 709 S.W.3d at 544; Dunster Live,

2024 WL 291403; Tex. Bus. Orgs. Code § 101.401.

Moreover, Blessed Land is a Texas LLC, and its members, including Zheng, are

afforded protection from any obligations or liabilities of the company. See Tex. Bus. Org. Code

§ 101.114. The Texas Supreme Court has noted that “[a] bedrock principle of corporate law is

17 that an individual can incorporate a business and thereby normally shield himself from personal

liability for the corporation’s contractual obligations.” Willis v. Donnelly, 199 S.W.3d 262, 271

(Tex. 2006); see Tex. Bus. Orgs. Code §§ 101.002(a) (extending corporate liability-limitation

statutes to LLCs and their members), .114 (“Except as and to the extent the company agreement

specifically provides otherwise, a member or manager is not liable for a debt, obligation, or

liability of a limited liability company, including a debt, obligation, or liability under a judgment,

decree, or order of a court.”). “Avoidance of personal liability is not only sanctioned by the law;

it is an essential reason that entrepreneurs . . . choose to incorporate their businesses.” Willis,

199 S.W.3d at 271.

Imposing a fiduciary duty upon Zheng to Zhu individually would upend

established law by creating duties and liabilities where none have previously been held to exist.

We hold that Zhu failed to produce evidence raising a fact issue as to whether Zheng owed a

formal fiduciary duty to him individually and thus no-evidence summary judgment on Zhu’s

breach-of-fiduciary duty claim against Zheng was proper.

Turning to Steelman and Blessed Land, we hold that the Company Agreement

does not impose upon them fiduciary duties that they owe to Zhu individually. No provision of

the Company Agreement expressly states that the members owe each other a fiduciary duty,

which distinguishes the Company Agreement from other agreements held to impose such a duty.

See, e.g., Strebel v. Wimberly, 371 S.W.3d 267, 276–78 (Tex. App.—Houston [1st Dist.] 2012,

pet. denied) (holding that managing member owed other member fiduciary duty when company

agreement stated that “the Managers shall have fiduciary duties to the Company and the

Members” (emphasis added)); Allen v. Devon Energy Holdings, L.L.C., 367 S.W.3d 355, 391

(Tex. App.—Houston [1st Dist.] 2012, pet. granted, judgm’t vacated w.r.m.) (holding that

18 manager owed duty to members when company agreement provided that manager would be

liable for “a breach of [his] duty of loyalty to the Company or its members” (emphasis added)).

If the parties had intended for the Company Agreement to create a fiduciary relationship between

the members of the company, they could have easily done so by directly stating as much. See

Abdullatif v. Choudhri, 561 S.W.3d 590, 609 (Tex. App.—Houston [14th Dist.] 2018, pet.

denied) (citing David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex. 2008) (per curiam))

(noting that when provisions of company agreement are unambiguous, courts must enforce them

as written).

The provisions on which Zhu relies, read together with the other provisions as a

whole in light of the Company Agreement’s context and purpose, do not impose fiduciary duties

owed to Vivatech’s individual members. Under the Company Agreement, Zhu and the other

members were equal and co-managing members. Everyone owned 25% of the company, and

everyone was an equal director. Zhu himself admitted that “each member has a co-equal voice

‘in the management and control of the affairs of [Vivatech], including management of the

business, division of profits, disposition of shares, and distribution of assets on liquidation.’”

In a fiduciary relationship, the fiduciary must “place the interest of the other party

before his own.” Crim Truck & Tractor Co. v. Navistar Int’l Transp. Corp., 823 S.W.2d 591,

594 (Tex. 1992). Nothing about these equal relationships, as set forth and established by the

Company Agreement, supports construing the agreement as requiring Steelman or Blessed

Land to put Zhu’s interests above their own. Cf. Sohani v. Sunesara, No. 01-20-00114-CV,

2022 WL 2976235, at *14 (Tex. App.—Houston [1st Dist.] July 28, 2022, no pet.) (mem. op.)

(“One circumstance that the trial court could take into consideration [in finding an informal

fiduciary relationship] was whether the members had an equal ownership interest or whether the

19 member allegedly owing fiduciary duties held a majority interest.”); Siddiqui, 504 S.W.3d

at 365.

Finally, Zhu cannot base the existence of formal fiduciary duties on the deposition

testimony of Steelman and Zheng. Whether a formal fiduciary duty exists is a question of law.

Environmental Procs., Inc. v. Guidry, 282 S.W.3d 602, 627 (Tex. App.—Houston [14tth Dist.]

2009, pet. denied). Thus, Steelman’s and Zheng’s testimony is not competent evidence of the

existence or scope of any formal fiduciary duties. See Tex. R. Evid. 701; Holland v. Memorial

Hermann Health Sys., 570 S.W.3d 887, 895 (Tex. App.—Houston [1st Dist.] 2018, no pet.) (“It

is generally true that a lay or fact witness’s testimony is limited to their perception and the facts

of which they have knowledge, and they may not testify as to personal opinions or legal

conclusions unless designated as an expert.”). The testimony of Steelman, a layperson, was

given over the objections of counsel, constitutes an improper legal conclusion without

foundation, and in any event, is not binding upon Blessed Land or Zheng. And Zheng’s

testimony that he intended to be fair, honest, and equitable with the members of Vivatech and act

in Vivatech’s best interest, also given over objections of counsel, does not constitute competent

evidence or an admission of the existence or scope of any duties.

Under Texas law, a fiduciary relationship is an extraordinary one that must not

lightly be created. In re Estate of Poe, 648 S.W.3d 277, 287 (Tex. 2022). We hold that Zhu

failed to produce summary-judgment evidence raising a fact issue as to whether Steelman or

Blessed Land owed a formal fiduciary duty to Zhu individually. Accordingly, we hold that Zhu

failed to show that the trial court erred in granting summary judgment on his individual claims

for breach of fiduciary duty, and we overrule this part of Zhu’s first issue.

20 B. The trial court did not err in granting summary judgment on Zhu’s derivative claim against Zheng because Zheng did not owe a fiduciary duty to Vivatech.

We now consider the trial court’s summary judgment dismissing Zhu’s derivative

claim for breach of fiduciary duty against Zheng. For the same reasons we hold that Zhu failed

to produce summary-judgment evidence that Zheng owed a formal fiduciary duty to Zhu

individually, we hold that Zhu failed to produce summary-judgment evidence that Zheng owed a

formal fiduciary duty to Vivatech. Unlike Steelman and Blessed Land, Zheng is not a member

or manager of Vivatech. In the absence of evidence of such a formal relationship between Zheng

and Vivatech, there is no basis for the imposition of a formal fiduciary duty on Zheng to

Vivatech. We hold that the trial court did not err in granting summary judgment on Zhu’s

derivative claim for breach of fiduciary duty against Zheng, and we overrule this part of Zhu’s

first issue.

C. The trial court erred in granting summary judgment on Zhu’s derivative claims against Blessed Land and Steelman.

Finally, we consider the trial court’s summary judgment dismissing Zhu’s

derivative claims against Blessed Land and Steelman. Blessed Land and Steelman did not move

for no-evidence summary judgment on the element of duty. It is undisputed that Blessed Land

and Steelman owed a formal fiduciary duty to Vivatech as members and managers of the

company. Instead, Blessed Land and Steelman both moved for no-evidence summary judgment

on the element of breach, and Blessed Land also moved for no-evidence summary judgment on

the element of damages. We consider each challenged element in turn.

21 1. Breach

In his response to Appellees’ no-evidence motions, Zhu argued that Blessed Land

and Steelman breached their formal fiduciary duties to Vivatech “by engaging in improper and

unauthorized ‘loan’ and ‘invoice’ transactions.” Zhu supported his response with (1) checks

drawn on Vivatech’s bank account, (2) deposition testimony from Steelman and Zheng, in which

they provided important information about the checks, and (3) his own affidavit, in which he

partially corroborated and partially disputed Steelman and Zheng’s testimony.

With two exceptions not relevant here, 8 the checks are written by Steelman and

made out to Zheng. They fall into three categories. First, there are five checks, totaling

$177,802.00, for “loans.” 9 Second, there are 19 checks, totaling $450,583.01, for “invoices.”10

Third, there are three checks, totaling $62,252.99, with nothing in the memo line.

In their depositions, Steelman and Zheng explained what the checks were for.

They testified that the checks for “invoices” were reimbursement payments for the inventory

Vivatech had sold on consignment from Blessed Land. They testified that, for at least some of

the inventory, 11 Vivatech reimbursed Blessed Land at 5% above cost. They testified that they

did not seek Zhu’s approval to write the checks or otherwise inform him of the consignment

sales. They testified that the “invoices” referenced in the memo line of the checks, as well as

8 Two of the checks, totaling $76,250.00, are payments on the loan from Zhao. 9 Specifically, those checks are for the amounts of $60,000.00; $41,253.00; $25,361.00; $25,573.00; and $25,615.00. 10 Specifically, the checks for “invoices” are written for the amounts of $40,000.00; $5,185.00; $4,633.75; $18,857.06; $9,011.04; $9,221.75; $25,279.91; $20,346.46; $25,576.36; $26,121.93; $25,862.99; $24,425.01; $28,631.35; $37,882.23; $25,686.72; $27,660.23; $24,813.00; $25,244.71; $31,018.00; and $15,125.51. 11 Specifically, for Invoices Nos. 1 and 2. 22 other information concerning the consignment sales, were reflected in Vivatech’s records and

that Zhu had access to these records.

Steelman and Zheng testified that the checks for “loans” were payments on a loan

Vivatech had taken out from Zheng. Zheng was inconsistent about how much money he loaned

to Vivatech, at one point testifying that he had loaned $260,000 and at another point appearing to

testify that he had loaned $100,000. Steelman and Zheng were also inconsistent on whether the

loan was memorialized in a promissory note or other written document. Steelman testified that

he “believed” there was a written agreement, while Zheng testified that there was “no written

agreement” and only an “oral agreement.” They were also inconsistent on whether they had

informed Zhu about the loan. Steelman testified that they did not seek Zhu’s approval to take out

the loan or otherwise inform him that Vivatech had borrowed money from Zheng. Zheng

testified that he called Zhu about the loan and that Zhu would not agree to guarantee the loan but

otherwise did not disapprove of Zheng lending Vivatech the money. However, Zheng admitted

that he never obtained Zhu’s “written approval” for the loan.

In his affidavit, Zhu testified that Appellees never informed him about the

consignment sales or loan, that he never approved of the consignment sales or loan, and that, had

Appellees asked, he would not have approved these transactions.

Zhu argues that this evidence raises a genuine issue of material fact as to whether

Blessed Land and Zheng breached their formal fiduciary duties to Vivatech. Specifically, Zhu

argues that this evidence shows that Blessed Land and Steelman breached their fiduciary duties

in two ways. First, Zhu argues that the evidence shows that Blessed Land and Steelman

breached their duty of loyalty by failing to obtain Zhu’s approval for Vivatech to sell inventory

on consignment from Blessed Land or to take out a loan from Zheng. Second, Zhu argues that

23 this evidence shows that Blessed Land and Steelman breached their duty of disclosure by failing

to notify Zhu of the consignment sales or loan. We agree with Zhu that this evidence raises a

genuine issue of material fact as to whether Blessed Land and Steelman breached their formal

fiduciary duty of loyalty to Vivatech.

Under Texas law, the managing member of a limited-liability company owes the

company a duty of loyalty, including a duty to refrain from self-dealing. See Marchiani

v. Shadle, No. 03-22-00484-CV, 2024 WL 3586022, at *4 (Tex. App.—Austin July 31, 2024, no

pet.) (mem. op.) (relying on manager’s duty of loyalty to impose liability for diversion of LLC

funds); White v. White, 704 S.W.3d 250, 269 (Tex. App.—El Paso 2024, no pet.) (“A claim of

self-dealing is essentially a subset of a claim for breach of fiduciary duty.”); Mims v. Beall,

810 S.W.2d 876, 880 (Tex. App.—Texarkana 1991, no writ) (“When the standard is a fiduciary

obligation, any self-dealing is prohibited.”).

Here, the consignment sales and loan are evidence of self-dealing. Through these

transactions, Blessed Land dealt benefits to itself: (1) in the case of the consignment sales, the

benefit of receiving 5% more than what it paid for the inventory sold by Vivatech, and (2) in the

case of the loan, the benefit of the interest paid on the loan made to Vivatech by Zheng. 12 See

In re KrisJenn Ranch, LLC, 629 B.R. 589, 607 (Bankr. W.D. Tex. 2021) (holding that LLC

member breached fiduciary duty by making loan to LLC without obtaining approval of

12 To the extent Appellees have argued that the loans do not constitute self-dealing because the funds were loaned by Zheng (who is not a member) rather than Blessed Land (which is a member), we observe that the duty to refrain from self-dealing extends to self-dealing through “others whose interests are closely identified with those of the fiduciary.” Dearing Inc. v. Spiller, 824 S.W.2d 728, 733 (Tex. App.—Fort Worth 1992, writ denied); see also KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 81 (Tex. 2015) (“Self-dealing has most commonly been observed in situations where the executive employs a legal contrivance to benefit himself, a close familial relation, or both.”). 24 other member as required by company agreement), aff’d in part, rev’d in part on other grounds,

661 F. Supp. 3d 654 (W.D. Tex. 2023).

Self-dealing transactions are presumptively unfair. Hrdy v. Second St. Props.

LLC, 649 S.W.3d 522, 539 (Tex. App.—Houston [1st Dist.] 2022, pet. denied). The burden is

not on the principal to prove that a self-dealing transaction is unfair. Id. Rather, the burden is on

the fiduciary to prove that a self-dealing transaction is fair. Id. Therefore, once Zhu produced

evidence that the consignment sales and loan had taken place, the burden shifted to Blessed Land

and Steelman to prove that these transactions were fair and reasonable. But Blessed Land and

Steelman did not move for traditional summary judgment on the element of breach. They only

moved for no-evidence summary judgment, and it is well established that “a party may not

obtain a no-evidence summary judgment on an issue for which it bears the burden of proof.”

Weekley Homes, LLC v. Paniagua, 646 S.W.3d 821, 827 n.4 (Tex. 2022) (per curiam).

Blessed Land and Steelman argue that Zhu failed to preserve the presumption of

unfairness and related burden shifting for our review because Zhu did not explicitly argue in his

response that the burden had shifted. We disagree that Zhu failed to preserve the issue. In his

response, Zhu described the transactions and produced evidence that they were never disclosed

to him and that he never approved of them. Although Zhu did not use the words “self-dealing,”

“burden,” or “fairness” in his response, the facts and arguments presented in his response

describe self-dealing transactions, the fairness and reasonableness of which Appellees had the

burden to prove. See Li v. Pemberton Park Cmty. Ass’n, 631 S.W.3d 701, 704 (Tex. 2021) (per

curiam) (arguing substance of issue preserves issue for review “even if the party does not call the

issue by name.”).

25 Even if it was Zhu’s burden to raise a fact issue as to the fairness and

reasonableness of these transactions, we hold that the evidence, viewed in the light most

favorable to Zhu, raises a fact issue. Zhu produced evidence of hundreds of thousands of dollars

in payments from Vivatech to Blessed Land and Zheng. Steelman and Zheng testified about

these payments, explaining that Vivatech was operating at a loss and that the consignment sales

and loan were necessary for Vivatech to stay in business until the end of its lease. But they

failed to provide crucial information about the transactions or supporting documents. The record

does not contain any consignment agreement or other document setting out the terms by which

Vivatech sold inventory on consignment from Blessed Land, and there is no evidence of the

amount for which Vivatech sold the inventory. Likewise, the record does not contain a

promissory note or other written document memorializing the terms of the loan from Zheng to

Vivatech. The record contains little-to-no evidence of the loan’s essential terms. There is no

evidence of the loan’s interest rate. There is no evidence of the loan’s duration. The evidence is

unclear as to the loan’s principal. The lack of information about these transactions raises a fact

issue as to the fairness and reasonableness of the consignment sales and loan.

Blessed Land and Steelman insist that all information necessary to prove the

fairness and reasonableness of these transactions is contained in Vivatech’s records. They

further emphasize that Zhu at all times had access to these records. But they failed to attach

these records to their summary-judgment motions, and they do not appear to be included in the

clerk’s record. And while Zhu concedes that he had access to some of Vivatech’s records, he

disputes that he had access to all of them. Viewed in the light most favorable to Zhu, we hold

that the summary-judgment evidence raises a genuine issue of material fact as to whether

Blessed Land and Steelman breached their formal fiduciary duty of loyalty to Vivatech. We hold

26 that the trial court erred to the extent that it granted summary judgment for Blessed Land on this

claim based on the element of breach. Because breach is the only element of Zhu’s derivative

fiduciary-duty claim that Steelman challenged in his no-evidence motion, we hold that the trial

court erred in granting summary judgment on this claim for Steelman and accordingly sustain

this part of Zhu’s first issue.

2. Damages

Finally, we consider damages. In its no-evidence motion, Blessed Land

challenged the third element of Zhu’s derivative claim, arguing that Zhu had failed to produce

evidence that Blessed Land’s breaches caused damage to Vivatech or resulted in a benefit to

Blessed Land. On appeal, Zhu argues that the trial court erred to the extent it granted summary

judgment on this basis because (1) he was not required to produce evidence of damages to

Vivatech and (2) he did produce evidence of a benefit obtained by Blessed Land. We agree

with Zhu.

When the principal seeks equitable relief rather than actual damages, the principal

does not necessarily need to prove damages as a result of the fiduciary’s breach of its duty.

Houle v. Casillas, 594 S.W.3d 524, 553 (Tex. App.—El Paso 2019, no pet.) (citing First United

Pentecostal, 514 S.W.3d at 220). Here, as a remedy for Blessed Land’s alleged breaches, Zhu

seeks equitable relief (in the form of an audit and accounting, disgorgement of profits, and

forfeiture) rather than actual damages. Therefore, Zhu had no burden to produce evidence of

damages to Vivatech to defeat Blessed Land’s no-evidence motion. And, to the extent Zhu had a

burden to produce evidence of a benefit improperly obtained by Blessed Land sufficient to raise

27 a fact issue, we hold that he did so. Specifically, Zhu produced evidence that Blessed Land

obtained unknown profits from the consignment sales and unknown interest on the loan.

We hold that the trial court erred in granting summary judgment on Zhu’s

derivative claim against Blessed Land, and we accordingly sustain this part of Zhu’s first issue.

Exclusion of Evidence

In his second issue, Zhu contends that the trial court abused its discretion in

excluding from the trial on Blessed Land’s derivative claims for theft and conversion evidence

showing why Zhu transferred the funds from Vivatech’s account to his personal account.

The excluded evidence consisted of 37 exhibits, which can be divided into five

categories: (1) the Company Agreement; (2) the checks for invoices and loans; (3) four IRS tax

forms reporting payments received by Vivatech via PayPal from 2017 through 2020; (4) an email

from Zhu to Zheng and Steelman dated March 17, 2020, the date of Zhu’s initial funds transfer;

and (5) a package with a return address that allegedly showed that Zheng had been selling

Vivatech products from his home address.

These exhibits fell within the scope of the trial court’s limine orders; specifically,

the orders excluding evidence relating to Zhu’s breach-of-fiduciary-duty claims as irrelevant to

Blessed Land’s claims for theft and conversion. At trial, Zhu offered the exhibits into evidence,

and Blessed Land objected on relevancy grounds. Zhu then made the following offer of proof:

Your Honor, at this time, we would formally offer into evidence Defendant’s Exhibits 1 through 37. Those exhibits go to demonstrate Mr. Zhu’s motive in terms of why he took the money out of the account. I understand the Court’s rulings in pretrial excluding that evidence, but we would ask—I would invite the Court to reconsider those rulings and permit that testimony to go to the jury.

28 The trial court sustained Blessed Land’s objection and excluded the exhibits:

All right. Those are over—the objections are sustained to them based on the prior rulings by the Court on the various legal issues that have come up in pretrial motions and, actually, even before then with the motions for summary judgment, et cetera. And the Court is not inclined to go into areas that are not legally based on active pleadings that the Court would be able to consider.

Now, on appeal, Zhu challenges the trial court’s ruling to exclude the exhibits,

arguing that the exhibits were admissible to show that he lacked the requisite intent for theft and

conversion. We review the trial court’s evidentiary ruling for an abuse of discretion. Enbridge

Pipelines (E. Tex.) L.P. v. Avinger Timber, LLC, 386 S.W.3d 256, 262 (Tex. 2012). In

determining whether the trial court abused its discretion in excluding the exhibits proffered by

Zhu, we look to see whether the trial court acted without regard to any guiding rules or

principles. Id. We will uphold the trial court’s ruling if there is any legitimate basis for doing

so. Id.

We hold that there is a legitimate basis for upholding the trial court’s ruling to

exclude Zhu’s exhibits—specifically, Zhu’s failure to make an adequate offer of proof as

required by Rule 103 of the Rules of Evidence. See Tex. R. Evid. 103(a). Under Rule 103, to

claim error in a ruling to exclude evidence, the complaining party must inform the trial court of

the substance of the excluded evidence by an offer of proof. Id. R. 103(a)(2). The basic

principle behind Rule 103 is “party responsibility.” Goode and Wellborn, 1 Texas Practice:

Guide to the Texas Rules of Evidence § 103.2 (4th ed.). “The parties, not the judge, are

responsible for the correct application of evidentiary rules; in order to preserve a complaint for

appeal, the complaining party must have done everything necessary to bring the relevant

evidentiary rule and its precise and proper application to the trial court’s attention.” Resendez 29 v. State, 306 S.W.3d 308, 313 (Tex. Crim. App. 2009); see Michael v. NE CS First Nat’l, LP,

No. 02-23-00307-CV, 2024 WL 1579009, at *20 n.3 (Tex. App.—Fort Worth Apr. 11, 2024, no

pet.) (mem. op.) (citing Resendez for “allocation of responsibility for preserving error” in civil

context). Thus, the offer of proof “should reasonably and specifically summarize the evidence

offered and state its relevance unless already apparent.” In re N.R.C., 94 S.W.3d 799, 806 (Tex.

App.—Houston [14th Dist.] 2002, pet. denied).

Here, Zhu’s offer of proof fails on both counts: It neither describes the actual

content of the exhibits nor sufficiently explains their relevance with the specificity required by

Rule 103. Zhu’s counsel merely asserted, in conclusory fashion, that the exhibits “go to

demonstrate Mr. Zhu’s motive in terms of why he took the money out of the account.” But he

failed to explain how or why. And without such an explanation, the trial court had no basis for

ruling that the exhibits were relevant to show Zhu lacked the requisite intent to commit theft

and conversion.

We hold that Zhu has failed to show the trial court abused its discretion in

excluding the proffered exhibits. Accordingly, we overrule Zhu’s second issue.

Fees on Zhu’s Claims for Breach of Fiduciary Duty

In his third issue, Zhu contends that the trial court erred in awarding attorney’s

fees to Zheng, Blessed Land, and Steelman as the prevailing parties on Zhu’s individual and

derivative breach-of-fiduciary-duty claims. Zhu does not dispute whether fees are recoverable

by the prevailing party on these claims; it is undisputed that fees are recoverable by the

prevailing party under Section 10.3 of the Company Agreement and Section 101.461 of the

Business Organizations Code. See Tex. Bus. Orgs. Code § 101.461(b). Instead, Zhu argues that

30 the trial court erred in awarding attorney’s fees because the trial court erred in granting summary

judgment in the first place. In light of our resolution of Zhu’s first issue, we hold that (1) the

trial court did not err in awarding attorney’s fees to Zheng, Blessed Land, and Steelman as the

prevailing parties on Zhu’s individual claims for breach of fiduciary duty; and (2) the trial court

did not err in awarding attorney’s fees to Zheng as the prevailing party on Zhu’s derivative claim

for breach of fiduciary duty; but (3) the trial did err in awarding attorney’s fees to Blessed Land

and Steelman as the prevailing parties on Zhu’s derivative claims for breach of fiduciary duty.

Accordingly, we overrule Zhu’s third issue in part and sustain it in part.

Fees on Blessed Land’s Claim for Theft

In his fourth issue, Zhu contends that the trial court erred in awarding attorney’s

fees to Blessed Land on its derivative claim for theft. Like his challenge to the fees awarded on

his claims for breach of fiduciary duty, Zhu does not dispute whether fees are recoverable by the

prevailing party on Blessed Land’s derivative claim for theft; it is undisputed that fees are

recoverable (indeed mandatory) under the Theft Liability Act (TLA). Tex. Civ. Prac. & Rem.

Code § 134.005(b) (“Each person who prevails in a suit under [the Theft Liability Act] shall be

awarded court costs and reasonable and necessary attorney’s fees.”). Instead, Zhu argues that the

award of fees to Blessed Land as the prevailing party on its claim for theft must be reversed

because the jury’s finding in favor of Blessed Land on its theft claim must be reversed due to the

trial court’s harmful exclusion of evidence. But, as we have already held, the trial court did not

abuse its discretion in excluding the evidence offered by Zhu. Because Zhu’s argument for

reversing the jury’s finding in favor of Blessed Land fails, his argument for reversing the trial

court’s award of fees fails too. Accordingly, we overrule Zhu’s fourth issue.

31 Fees on Zhu’s Nonsuited Claims

In his fifth issue, Zhu contends that the trial court erred in awarding attorney’s

fees to Blessed Land, Zheng, Steelman, and Secora on Zhu’s nonsuited claims on the ground that

Zhu strategically nonsuited the claims to avoid an unfavorable ruling on summary judgment.

The general rule is that a defendant is not a prevailing party entitled to attorney’s

fees when the plaintiff nonsuits his claim without prejudice. Epps v. Fowler, 351 S.W.3d 862,

864 (Tex. 2011). However, there is an important exception. If the trial court determines, on the

defendant’s motion, that the nonsuit was taken to avoid an unfavorable ruling on the merits, then

the defendant is the prevailing party entitled to attorney’s fees. Id. at 870.

Any number of factors may support a determination that the defendant is the

prevailing party, such as a nonsuit taken only after the defendant files a motion for summary

judgment. Id. at 870–71. Likewise, any number of factors may support the opposite

determination, such as a nonsuit taken after discovery reveals previously unknown flaws in the

plaintiff’s claims. Id. at 871.

In this case, on the day Zhu’s summary-judgment responses were due, he

nonsuited all his claims against Secora, and he nonsuited his declaratory-judgment and theft

claims against Blessed Land, Zheng, and Steelman. The trial court determined, on appellees’

motion, that Zhu nonsuited his claims to avoid an unfavorable judgment. The trial court’s

determination is supported by sufficient evidence.

The record supports the trial court’s determination that Zhu strategically

nonsuited his declaratory-judgment claims to avoid an unfavorable ruling on summary judgment.

As appellees argued in their motions for summary judgment, Zhu essentially recast his breach-

of-fiduciary-duty claims as a request for declaratory relief under the UDJA. Zhu sought

32 56 separate judicial declarations that were identical to his breach-of-fiduciary-duty allegations.

Regardless of the merits of Zhu’s breach-of-fiduciary-duty claims, this was an improper use of

the UDJA.

“There is no basis for declaratory relief when a party is seeking in the same action

a different, enforceable remedy, and a judicial declaration would add nothing to what would be

implicit or express in a final judgment for the enforceable remedy.” Universal Printing Co.

v. Premier Victorian Homes, Inc., 73 S.W.3d 283, 296 (Tex. App.—Houston [1st Dist.] 2001,

pet. denied); see also Etan Indus., Inc. v. Lehmann, 359 S.W.3d 620, 624 (Tex. 2011) (per

curiam) (“The declaratory judgment claim must do more ‘than merely duplicate the issues

litigated’ via the contract or tort claims.”).

The UDJA provides for an award of costs and reasonable attorney’s fees to a

defending party. Tex. Civ. Prac. & Rem. Code § 37.009 (“In any proceeding under this chapter,

the court may award costs and reasonable and necessary attorney’s fees as are equitable and

just.”). The trial court’s discretion in awarding fees under the UDJA is broad and not limited to

cases tried and resulting in a judgment. Falls County v. Perkins & Cullum, 798 S.W.2d 868, 871

(Tex. App.—Fort Worth 1990, no writ); see also Hong Kong Dev., Inc. v. Nguyen, 229 S.W.3d 415,

452 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (“One need not even . . . seek affirmative

relief to be awarded attorney’s fees under the [UDJA], as long as the award of fees is equitable

and just.”); Save Our Springs All., Inc. v. Lazy Nine Mun. Util. Dist. ex rel. Bd. of Dirs.,

198 S.W.3d 300, 318 (Tex. App.—Texarkana 2006, pet. denied) (“Either party may obtain

attorney’s fees [under the UDJA] regardless of which party is affirmatively seeking relief.”);

Del Valle Indep. Sch. Dist. v. Lopez, 863 S.W.2d 507, 512–13 (Tex. App.—Austin 1993, writ

denied) (“[A]n award [of attorney’s fees] under the [UDJA] is not limited to the prevailing

33 party.”). Courts have accordingly upheld the award of attorney’s fees and costs to a defendant

after a plaintiff seeking a declaratory judgment nonsuited its claim before judgment on the

merits. See Falls County, 798 S.W.2d at 871–72.

Here, under well-established law, there was no basis for Zhu’s

declaratory-judgment claims. Despite there never being any basis for the claims, Zhu waited

until the day his response to appellees’ summary-judgment motions was due to nonsuit the

claims. We hold that the record supports the trial court’s determination that Zhu nonsuited his

declaratory-judgment claims to avoid an unfavorable ruling on summary judgment.

The record supports the trial court’s determination that Zhu strategically

nonsuited his theft claims to avoid an unfavorable ruling on summary judgment. The award of

fees and costs to a prevailing party on a TLA claim is mandatory. Tex. Civ. Prac. & Rem. Code

§ 134.005(b) (“Each person who prevails in a suit under this chapter shall be awarded court costs

and reasonable and necessary attorney’s fees.” (emphasis added)).

Courts have awarded fees and costs to a defendant following a plaintiff’s nonsuit

of a TLA claim without prejudice where the dismissal was strategically timed to avoid an

unfavorable ruling on the merits. Moore v. Amarillo-Panhandle Humane Soc’y, 541 S.W.3d 403,

405–06 (Tex. App.—Amarillo 2018, pet. denied) (upholding fee award to defendant

after plaintiff nonsuited TLA claim without prejudice before summary judgment hearing to

avoid unfavorable ruling on merits); BBP Sub I LP v. Di Tucci, No. 05-12-01523-CV,

2014 WL 3743669, at *4 (Tex. App.—Dallas July 29, 2014, no pet.) (mem. op.) (upholding

award of fees to defendant as prevailing party under TLA after plaintiff voluntarily dropped TLA

claim in response to summary-judgment motion).

34 The fact that a nonsuit is taken only after a summary-judgment motion has been

filed is a factor that has repeatedly been held to support such an inference. See, e.g., Epps,

351 S.W.3d at 870–71 (court may infer that plaintiff who nonsuits claim only after

defendant files motion for summary judgment does so in order to avoid summary judgment);

BBP Sub I LP, 2014 WL 3743669, at *4 (plaintiff’s amended pleading dropping TLA claim,

filed “closely on the heels” of defendant’s summary-judgment motion, supported inference that

nonsuit was filed to avoid unfavorable ruling on merits). That is what occurred here. It was only

after appellees filed their summary-judgment motion that Zhu abandoned his TLA claims.

This is not a case where a nonsuit occurred after discovery revealed previously

unknown flaws in Zhu’s claims. The only explanation offered by Zhu for the timing of his

decision to nonsuit his theft claims was Zhu’s alleged inability to obtain records from State Farm

to prove theft of insurance proceeds. But those records had no bearing on his theft claims against

Blessed Land or Zheng because Zhu did not allege that Blessed Land or Zheng handled any

insurance claim or shared in any insurance proceeds. To the extent the records were relevant to

his theft claims against Steelman and Secora, Zhu’s inability to obtain the records still does not

sufficiently explain the timing of the nonsuit—on the day his response was due and not, say,

shortly after he discovered he would not be able to obtain the records. We hold that the record

supports the trial court’s determination that Zhu nonsuited his theft claims to avoid an

unfavorable ruling on summary judgment. Accordingly, we overrule Zhu’s fifth issue. 13

13 We note that Zhu contends that there is a conflict between the trial court’s Order on Motions for Attorney’s Fees (Fee Order) and the trial court’s Final Judgment. Specifically, Zhu contends that while the Fee Order awards attorney’s fees on the basis of a strategic nonsuit, the Final Judgment does not and therefore conflicts with the Fee Order. And because the terms of the Final Judgment control, Zhu argues, no fees were awarded based on his strategic nonsuit. We disagree. There are no inconsistent findings. The trial court made its findings in the Fee 35 Fees as Sanctions Against Zhu and His Trial Counsel

In his sixth issue, Zhu contends that the trial court abused its discretion in

imposing sanctions against him and his trial counsel under Rule 13 of the Rules of Civil

Procedure and under Chapter 10 of the Civil Practice and Remedies Code.

Rule 13 of the Rules of Civil Procedure and Chapter 10 of the Civil Practice and

Remedies Code authorize a trial court to sanction an attorney and a party for filing pleadings that

lack a reasonable basis in fact or law. Rule 13 provides, as relevant here:

The signatures of attorneys or parties constitute a certificate by them that they have read the pleading, motion, or other paper; that to the best of their knowledge, information, and belief formed after reasonable inquiry the instrument is not groundless and brought in bad faith or groundless and brought for the purpose of harassment. . . . If a pleading, motion or other paper is signed in violation of this rule, the court, upon motion or upon its own initiative, after notice and hearing, shall impose an appropriate sanction available under Rule 215, upon the person who signed it, a represented party, or both.

Tex. R. Civ. P. 13. Rule 13 authorizes the imposition of sanctions against an attorney or

party who files a pleading that is groundless and either brought in bad faith or brought for the

purpose of harassment. Sullivan v. Arguello Hope & Assocs., PLLC, No. 03-18-00144-CV,

2018 WL 6424200, at *2 (Tex. App.—Austin Dec. 7, 2018, no pet.) (mem. op.). Sanctions for a

violation of Rule 13 are mandatory and may include an order requiring the attorney and party to

Order and expressly stated that the amount of fees awarded would be determined later. The trial court then expressly referenced the Fee Order and the findings made therein in its Final Judgment and awarded an amount of attorney’s fees consistent with the evidence that was presented. The fees awarded in the Final Judgment thus include fees based on Zhu’s strategic nonsuit of claims. 36 pay the reasonable attorney’s fees and expenses incurred by the opposing party as a result of the

violation of Rule 13. See Tex. R. Civ. P. 13 & 215.2(b)(2), (8).

Chapter 10 of the Civil Practice and Remedies Code similarly provides:

The signing of a pleading or motion as required by the Texas Rules of Civil Procedure constitutes a certificate by the signatory that to the signatory’s best knowledge, information, and belief, formed after reasonable inquiry:

(1) the pleading or motion is not being presented for any improper purpose, including to harass or to cause unnecessary delay or needless increase in the cost of litigation;

(2) each claim, defense, or other legal contention in the pleading or motion is warranted by existing law or by a nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;

(3) each allegation or other factual contention in the pleading or motion has evidentiary support or, for a specifically identified allegation or factual contention, is likely to have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) each denial in the pleading or motion of a factual contention is warranted on the evidence or, for a specifically identified denial, is reasonably based on a lack of information or belief.

Tex. Civ. Prac. & Rem. Code § 10.001. Under Chapter 10, a party is not required to specifically

show bad faith or malicious intent on the part of the attorney, but only that the attorney certified

that he made a reasonable inquiry into all of the allegations, when he did not, and that he

certified that all of the allegations in the petition had evidentiary support, or were likely to have

evidentiary support, when some allegations did not. Low v. Henry, 221 S.W.3d 609, 617 (Tex.

2007). Sanctions for a violation of Chapter 10 may include an award to the prevailing party of

all costs for inconvenience, harassment, and out-of-pocket expenses incurred or caused by the

subject litigation. Tex. Civ. Prac. & Rem. Code § 10.002.

37 We review an award of sanctions for an abuse of discretion. Nath v. Texas

Children’s Hosp., 446 S.W.3d 355, 361 (Tex. 2014) (sanctions under Chapter 10); Robson

v. Gilbreath, 267 S.W.3d 401, 405 (Tex. App.—Austin 2008, pet. denied) (sanctions under

Rule 13).

Zhu contends that the sanctions award must be reversed for two reasons:

(1) because the trial court failed to hold an evidentiary hearing on appellees’ motion for

sanctions and (2) because the evidence does not support a finding that Zhu and his trial counsel

committed sanctionable conduct.

A. The trial court held an evidentiary hearing.

“Both Rule 13 and Section 10.001 require an evidentiary hearing to enable the

trial court ‘to make the necessary factual determinations about the motives and credibility of the

person signing the allegedly groundless pleading.’” Orbison v. Ma-Tex Rope Co., Inc.,

553 S.W.3d 17, 35 (Tex. App.—Texarkana 2018, pet. denied).

Zhu contends that the trial court failed to hold an evidentiary hearing on

appellees’ motion for sanctions. We disagree. The record reflects that the trial court held an

evidentiary hearing, which was conducted by Zoom by the agreement of all parties,

including Zhu.

At the hearing, all parties, including Zhu, submitted evidence for the trial court’s

consideration. Appellees submitted excerpts from Zhu’s deposition and directed the trial court to

specific pleadings filed by Zhu, including the sworn declarations that he submitted in response to

the summary-judgment motions. Zhu did not object to any of the evidence submitted. Zhu in

38 turn submitted the transcript of his own deposition, along with an affidavit from his counsel and

directed the court to specific pleadings and orders in the case. The parties asked the trial court to

consider their respective submissions in deciding the motion. The trial court’s sanctions order

reflects that it did so.

Moreover, at the time the trial court heard the sanctions motion, it had already

granted summary judgment on Zhu’s breach-of-fiduciary-duty claims, determined that Zhu

nonsuited his other claims to avoid an unfavorable summary-judgment ruling, and presided over

the pretrial conference and jury trial, where it had observed and assessed Zhu’s credibility. The

trial court could properly take judicial notice of the case file and make credibility determinations

in ruling on the sanctions motion. See R.M. Dudley Constr. Co. v. Dawson, 258 S.W.3d 694,

710 (Tex. App.—Waco 2008, pet. denied) (citing Elkins v. Stotts-Brown, 103 S.W.3d 664, 667

(Tex. App.—Dallas 2003, no pet.)) (noting that in some circumstances trial court may be able to

make determination regarding motives and credibility of person signing petition by taking

judicial notice of items in case file).

B. The record supports the award of sanctions against Zhu and his counsel.

Upon consideration of the evidence, the trial court found (among other things)

that Zhu’s third-party claims were not well grounded in fact after reasonable inquiry and were

interposed for an improper purpose, such as to harass, cause unnecessary delay, or cause a

needless increase in the cost of litigation. The trial court further found that Zhu’s counsel had

failed to reasonably investigate the facts and law in several material respects. Sufficient

evidence exists to support the trial court’s findings. Specifically, the record supports findings

that (1) Zhu made groundless claims for reimbursement that were brought in bad faith or for the

39 purpose of harassment, (2) Zhu’s trial counsel failed to make a reasonable inquiry before filing

Zhu’s third-party petition, and (3) Zhu’s counsel should jointly bear responsibility for the fees

awarded against Zhu.

1. The record supports a finding that Zhu made groundless claims for reimbursement brought in bad faith or for the purpose of harassment.

Appellees contend that Zhu’s third-party petition contained four claims for

reimbursement that were groundless and brought either in bad faith or for the purpose of

harassment. Sufficient evidence exists to support a finding that these reimbursement claims were

groundless and brought for an improper purpose. We discuss each claim in turn.

First, in support of their motion for sanctions, Appellees argued that Zhu falsely

alleged that he paid $120,000 for machinery for Vivatech. In his third-party petition, Zhu

alleged that he was entitled to be reimbursed $120,000 because he used his personal funds to

acquire the machines for Vivatech. But after written discovery and two days of deposition

testimony, Zhu admitted that the funds used to acquire the machines were Vivatech’s, not his:

Q: And you’re also seeking to recover the “$120,000 in costs associated with the purchase of the bubble wrap machine and bubble poly mailer machine, raw materials, equipment, and tools.” Did I read that correctly? [referring to Zhu’s Third-Party Complaint]

A: Yes, but this one I think, you know, my lawyer misunderstood. It’s not for the—bubble wrap machines because I didn’t—read this document for this filing.

Q: So you’re not seeking to recover $120,000 in costs associated with the purchase of the bubble wrap machine and bubble poly mailer machine, raw materials, equipment and tools—

A: No.

40 Q: Because that was actually paid for by Vivatech, was it not?

A: Yes, that’s paid by Vivatech. Yes.

Zhu responds that this allegation, even if untrue, does not support sanctions

because it was the result of a miscommunication between him and his trial counsel and he

withdrew it during his deposition. We disagree.

On this record, the trial court could have disbelieved Zhu’s testimony that his

lawyer had “misunderstood” him or could have otherwise determined that Zhu and his trial

counsel knew or should have known the allegation was false when made. The allegation was

contradicted not only by Zhu’s deposition testimony, but also by documents produced during

discovery, including the general ledger and other financial records of Vivatech, and an e-mail

produced by Zhu that he sent to the other members of Vivatech in November 2017 confirming

the cost of the machines and that the cost had been paid by Vivatech. And even after Zhu in his

deposition confirmed the falsity of the allegation, it was never formally removed from Zhu’s

third-party petition.

Second, in support of their motion for sanctions, appellees argued that Zhu falsely

alleged that he paid $30,000 to engineers to research and procure bubble-wrap machinery from

China. In his third-party petition, Zhu alleged that he personally paid and was entitled to be

reimbursed for $30,000 in costs he paid to engineers to research and procure the machinery.

In response to discovery requests asking for documents to support this allegation,

Zhu produced a single document—an invoice, dated June 18, 2018, that Zhu had prepared on his

home computer over five months after the machines had been procured and that he could not

prove he had ever submitted to Vivatech. Zhu produced no backup documentation to support the

invoice and produced no evidence that he had personally paid for any of the alleged costs 41 reflected in the invoice. This alleged procurement cost was not reflected in the general ledger or

other financial records of Vivatech that were produced to Zhu’s counsel early in the lawsuit, and

its veracity was called into question when Zhu admitted in his deposition that he did not disclose

this cost to the other members of Vivatech when he sent the November 2017 e-mail referenced

above, in which he confirmed the purchase of the machines, the total cost, and that the machines

were ready to be shipped and installed. It was undisputed that Zhu had procured the machinery

by November 2017, and it was shipped to Vivatech by late January 2018, over five months

before the date of the invoice. Zhu explained the delay by testifying that he decided “later” that

he should be reimbursed for this alleged cost and that he was free to seek payment from Vivatech

at “any time.” On this record, the trial court could have disbelieved Zhu’s explanation for

the delay.

Third, in support of their motion for sanctions, Appellees argued that Zhu falsely

alleged that he paid for Vivatech’s insurance without being reimbursed. In his third-party

petition, Zhu alleged that he personally paid and was entitled to reimbursement for Vivatech’s

insurance. Although Zhu did make Vivatech’s initial premium payment when the company was

formed, the documents produced by Zhu himself during discovery included a check to Zhu from

Vivatech with a memo notation stating that the check was to reimburse Zhu for the initial

premium payment. Moreover, the fact that Zhu had been reimbursed for the initial premium

payment and that Vivatech itself paid for its insurance was corroborated by company banking

and financial records produced to Zhu and his counsel during discovery.

Fourth, in support of their motion for sanctions, Appellees argued that Zhu falsely

alleged he paid and was entitled to reimbursement for rent. In his third-party petition, Zhu

claimed he was entitled to be reimbursed for rent he paid to Vivatech for ZipcodeXpress, a

42 company that for a time subleased office space from Vivatech. Zhu admitted in his deposition

that the rent paid on the sublease was actually paid by ZipcodeXpress, not by him personally,

and that he was but one of the members of ZipcodeXpress:

Q: The funds that were paid to Vivatech for the ZipcodeXpress sublease, those were not your personal funds, were they?

Q: Those were monies that belonged to ZipcodeXpress. Correct?

A: Yes.

Q: And ZipcodeXpress you mentioned earlier in the first part of your deposition was a company in which Blessed Land Investment and two other individuals had invested. Correct?

Checks written to Vivatech on the account of ZipcodeXpress further support a

finding that Zhu falsely claimed to have personally paid the rent. And, although Zhu asserts on

appeal that he was the sole shareholder of ZipcodeXpress after 2019, that was after the date rent

was paid and after Blessed Land and other shareholders had exited ZipcodeXpress. On this

record, no factual basis exists for Zhu to have claimed these funds.

None of Zhu’s claims above relating to an alleged right to reimbursement were

relevant to or recoverable in connection with the third-party claims he asserted. These amounts,

if recoverable at all, were recoverable from Vivatech and not its members. Appellees argued and

the trial court could have reasonably determined that Zhu made these claims for reimbursement

to make his transfer of $43,000 appear justified and de minimis in relation to what he claimed to

be owed in the hope of exerting leverage over the other members and Zheng. Thus, the record

43 supports a finding that the reimbursement claims were groundless and brought in bad faith or for

the purpose of harassment.

2. The record supports a finding that Zhu’s trial counsel failed to make a reasonable inquiry before filing Zhu’s third-party petition.

By filing the third-party petition in this case, Zhu’s counsel certified that to the

best of his knowledge, information, and belief, the factual contentions in the pleading had or

were likely to have evidentiary support. For the reasons stated above, sufficient evidence exists

to support the trial court’s finding that Zhu’s counsel failed to reasonably investigate the factual

contentions in the pleading, specifically, the contentions in support of Zhu’s claims

for reimbursement.

Further, Zhu testified that his counsel never had him review the third-party

petition to confirm its accuracy before it was filed. On the first day of his deposition, when first

asked whether he had ever seen the third-party petition, Zhu testified that he had not. Then, after

a break in the deposition during which he conferred with his counsel, Zhu returned to the

deposition and immediately volunteered before questioning resumed that he had reviewed the

pleading before it was filed. On the second day of his deposition, however, Zhu again testified,

this time without prompting, that he had not reviewed the third-party petition: “I didn’t—read

this document for this filing.” Thus, Zhu’s deposition testimony further supports a finding that

Zhu’s counsel did not make a reasonable inquiry before filing Zhu’s third-party petition.

44 3. The record supports holding Zhu’s counsel jointly responsible for fees for failure to advise Zhu of the risk of asserting his claims for theft and declaratory judgment.

Zhu’s deposition testimony supports a finding that Zhu’s counsel never advised

Zhu that Blessed Land and Zheng were seeking to recover their costs and attorney’s fees for the

claims Zhu had asserted against them. Zhu testified:

Q: Do you understand, Mr. Zhu, that in connection with this lawsuit the other parties are asking the Court to require you to pay their attorney’s fees and costs?

A: I don’t know.

Q: Were you aware that one of the claims made in the lawsuit is that you have filed false claims and as a result our clients should get to recover all of the money they spend in having to continue on in this case?

A: I don’t know that.

Without this knowledge, it would have been reasonable for Zhu to believe he had

nothing to lose by continuing to pursue his third-party claims. Zhu testified that he had not been

invoiced for any of the work in the case, so Zhu’s counsel was presumably representing Zhu

under a contingent fee arrangement. If so, it cost Zhu nothing to continue to pursue his claims.

Zhu’s counsel chose to file claims under the TLA and UDJA, both of which allow for the

recovery of attorney’s fees by a defending party. On this record, it was reasonable for the trial

court to hold Zhu’s counsel jointly responsible for the fees awarded on these claims.

Based on the foregoing, the trial court did not abuse its discretion in determining

that Zhu and his counsel brought and pursued groundless claims for an improper purpose.

Accordingly, we overrule Zhu’s sixth issue.

45 CONCLUSION

With regard to the trial court’s summary judgment on Zhu’s individual and

derivative claims for breach of fiduciary duty, we (1) affirm the part of the summary judgment

that dismisses Zhu’s individual claims against all three Appellees, and (2) affirm the part of the

summary judgment that dismisses Zhu’s derivative claim against Zheng, but (3) reverse the part

of the summary judgment that dismisses Zhu’s derivative claims against Blessed Land

and Steelman.

With regard to Blessed Land’s derivative claims for conversion and theft, we

affirm the parts of the trial court’s final judgment adopting the jury’s findings that Zhu converted

Vivatech’s property and that Zhu committed theft of Vivatech’s property.

With regard to the parts of the trial court’s final judgment awarding attorney’s

fees and sanctions, we (1) affirm the part ordering that Appellees are entitled to an award of

attorney’s fees as the prevailing parties on Zhu’s individual claims for breach of fiduciary duty,

and (2) affirm the part ordering that Zheng is entitled to an award of attorney’s fees as the

prevailing party on Zhu’s derivative claim for breach of fiduciary duty, but (3) reverse the part

ordering that Blessed Land and Steelman are entitled to an award of attorney’s fees as the

prevailing parties on Zhu’s derivative claims for breach of fiduciary duty. We affirm the part

ordering that Blessed Land is entitled to an award of attorney’s fees as the prevailing party on its

derivative claim for theft. We affirm the part ordering that Appellees and Secora are entitled to

an award of attorney’s fees as the prevailing parties on Zhu’s nonsuited claims for theft and

declaratory judgment. And we affirm the part awarding Appellees and Secora their attorney’s

fees as sanctions against Zhu and his trial counsel.

46 We remand the case to the trial court for further proceedings consistent with our

opinion, including further proceedings on Zhu’s derivative claims for breach of fiduciary duty

against Blessed Land and Steelman and, because fees were awarded as a lump sum and not

segregated, a new hearing on attorney’s fees.

__________________________________________ Maggie Ellis, Justice

Before Justices Theofanis, Crump, and Ellis Concurring and Dissenting Opinion by Justice Crump

Affirmed in Part; Reversed and Remanded in Part

Filed: June 30, 2026