Roehrs v. Conesys, Inc. , 332 F. App'x 184 ( 2009 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 4, 2009
No. 07-10801 Charles R. Fulbruge III
Clerk
MICHAEL R ROEHRS
Plaintiff-Appellant
v.
CONESYS, INC.; RONALD E SPIRE; J-TECH, INC., JOHN POLLOCK; JULIE
BARKER
Defendants-Appellees
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:05-CV-829
Before WIENER, GARZA, and DeMOSS, Circuit Judges.
PER CURIAM.*
Plaintiff-Appellant Michael Roehrs (“Roehrs”) appeals the district court's
grant of summary judgment to Defendants-Appellees Conesys, Inc., Ronald E.
Spire, J-Tech, Inc., John Pollock, and Julie Barker (collectively, “Defendants”).
Roehrs, who was the former majority shareholder of Fiber Systems International
(“FSI”), alleges that Defendants committed several torts under Texas law in
blocking Roehrs’ attempt to regain control over FSI.
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
No. 07-10801
I
The chronology of events is important in understanding the transactions
underlying Roehrs’ claims. Michael Roehrs founded FSI in 1993 and was the
company’s CEO and majority shareholder. In 2001, a group of minority
shareholders (hereinafter “the Minority Group”) sued Roehrs. The Minority
Group also sold approximately 10% of all FSI shares to Conesys, a holding
company that was interested in FSI. During the subsequent litigation between
Roehrs and the Minority Group, the Texas state trial court appointed an
Attorney Ad Litem, Timothy Zeiger (“Zeiger”), to oversee FSI. Zeiger retained
the accounting firm of Whitley Penn, which assessed the value of FSI to be
approximately $23.4 million.
The litigation between Roehrs and the Minority Group proceeded to
mediation and culminated in a settlement. The settlement gave Roehrs ninety
days to finance the purchase of the Minority Group’s FSI shares for
approximately half their value (as valuated by Whitley Penn). Should he fail to
raise the capital, the Minority Group would be given the opportunity to purchase
Roehrs’ shares for the same price. Also as part of the settlement, the Minority
Group was required to cooperate in conducting due diligence during the 90-day
period.
Roehrs attempted to raise the capital by contacting several companies,
including Amphenol, Inc. (“Amphenol”) and Southwest Mezzanine Investments
(“SMI”). This appeal arises out of Conesys’ alleged interference with a potential
deal with Amphenol.1 An agent of Conesys called Amphenol to discuss Conesys’
right of first refusal with respect to the FSI stock owned by Conesys; Roehrs
claims that the phone call, as well as the Minority Group’s interference with due
diligence, prevented Roehrs’ deal with Amphenol from coming to fruition.
1
Roehrs abandoned his claims with respect to his negotiations with SMI.
2
No. 07-10801
Amphenol representative Craig Mullett offered deposition testimony
stating that Amphenol was interested in acquiring FSI and could have “beaten
the deals” offered by other entities interested in financing Roehrs’ purchase of
the Minority Group shares. No specific terms of a deal were discussed by
Amphenol and Roehrs, though a non-disclosure agreement was signed and
Amphenol began due diligence on a possible transaction. Roehrs alleges that it
was at this point that Conesys interjected itself into discussions between
Amphenol and Roehrs, asserting a right of first refusal to buy the Minority
Group’s shares. In November 2003, Roehrs informed Amphenol that he would
be conducting the deal with another investor, Red River Venture Partners (“Red
River”), as his 90-day window was about to expire. Roehrs ultimately entered
into a binding letter of intent with Red River on terms that Roehrs argues were
far less favorable to him than a prospective deal with Amphenol.2 He received
the necessary financing and purchased the Minority Group’s shares for $5
million. In 2005, fourteen months after purchasing the Minority Group’s shares,
he sold FSI to Amphenol for approximately $30 million, making a profit of
approximately $16 million. He brought suit in district court against Conesys for
tortious interference with prospective economic relations, arguing that but for
Conesys’ involvement in his earlier discussions with Amphenol, he would have
been able to conduct a deal with Amphenol in 2003 and make a substantially
higher profit. The district court, after hearing oral argument and considering
more than 2000 pages of exhibits, granted Conesys’ motion for summary
judgment, holding that Roehrs had not met his burden with respect to the
damages he suffered as a result of Conesys’ alleged interference. Roehrs appeals
the district court’s grant of summary judgment as well as the court’s earlier
2
Red River advanced approximately $5 million dollars in exchange for almost half of
FSI’s shares and a convertible promissory note.
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No. 07-10801
dismissal of his malicious prosecution claim and the court’s striking of his
Supplemental Appendix. For the following reasons, we affirm.
II
This Court reviews a district court’s grant of summary judgment de novo,
applying the same standards as the district court. The evidence should be
viewed in the light most favorable to the nonmoving party, and the record should
not indicate a genuine issue as to any material fact. We may affirm the district
court’s summary judgment ruling on any ground supported by the record. Blase
Indus. Corp. v. Anorad Corp., 442 F.3d 235, 237-38 (5th Cir. 2006).
We address Roehrs’ appeal of the district court’s order on two grounds: (A)
the district court’s finding that the alleged damages are too speculative; and (B)
the district court’s holding that damages for mental anguish are not permitted
under Texas law.
A
The district court held that because the damages for lost profits alleged by
Roehrs are too speculative, they could not be submitted to a jury and thus
summary judgment in favor of Conesys is proper. Roehrs argues that in so
holding, the district court improperly weighed the evidence and incorrectly
applied Texas law governing claims of tortious interference with existing and
prospective economic relations.
Claims of tortious interference with prospective economic relations
(“TIPER”) and tortious interference with existing contract require a showing of
actual harm and damage that resulted from the defendant’s interference. See
Nano-Proprietary, Inc. v. Canon, Inc., 537 F.3d 394, 403 (5th Cir. 2008)(citing to
Texas cases that set out elements of TIPER claim); Butnaru v. Ford Motor Co.,
84 S.W.3d 198, 207 (Tex. 2002)(articulating elements of tortious interference
with contract claim). Thus, damages must be established for both of Roehrs’
tortious interference claims.
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Under Texas law, neither the fact and amount of damages alleged can be
speculative; both must be established with “reasonable certainty.” A plaintiff’s
failure to show either acts as a bar to recovery. Burkhart Grob Luft Und
Raumfahrt GmbH & Co. KG v. E-Sys., Inc., 257 F.3d 461, 467 (5th Cir.
2001)(citing to Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d
276, 279-80 (Tex. 1994)). The inquiry into the “reasonable certainty” of the
damages is flexible and fact-sensitive. Id.
Roehrs argues that he has provided sufficient evidence of damages based
on two different models: one which relied on the amount Amphenol eventually
paid when it acquired FSI in 2005 (thirty-million dollars), and one which used
the independent valuation of FSI conducted by Whitley Penn, which judged the
company to be worth $23.41 million. The district court found that the damages
models were too speculative to establish both the fact and the amount of
damages because they did not account for changed circumstances between
Amphenol’s prospective purchase of FSI in 2003 and its actual purchase of FSI
in 2005.
The district court was correct in finding that the record does not supply
sufficient evidence of lost profits resulting from the alleged tortious interference
with a prospective contract between Amphenol and Roehrs. In order to
demonstrate lost profits, Roehrs must show, by competent evidence with
reasonable certainty, that he would have made more in a deal with Amphenol
than the amount he made from the deal that was conducted with Red River
financing. See Holt Atherton Indus. Inc. v. Heine, 835 S.W.2d 80, 84 (Tex.
1992)(“[At] a minimum, opinions or estimates of lost profits must be based on
objective facts, figures, or data from which the amount of lost profits can be
ascertained.”) No such data exists here. Though Amphenol’s representative
Craig Mullett testified as to its interest in acquiring FSI, and opined that
Amphenol could have “beaten the deal” offered by Red River, there is no evidence
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No. 07-10801
in the record as to how much Amphenol would have considered offering for FSI
in 2003, likely because discussions between Roehrs and Amphenol were at a very
preliminary stage when the alleged tortious interference occurred. In his
deposition testimony, Mullett could not provide a range of prices that Amphenol
would have paid for FSI, nor could he point to any discussion between Roehrs
and Amphenol as to what form the financing would take. Roehrs is also unable
to provide any evidence as to how many fewer shares he would have had to give
up in a deal with Amphenol as opposed to the deal with Red River he eventually
struck. Without any explanation of what “beating” the deal with Red River
might have constituted, the amount Amphenol would have offered (and any
concomitant calculation of lost profits) simply cannot be established with
reasonable certainty. See Texas Instruments, 877 S.W.2d at 279 (“Profits which
are largely speculative, as from an activity dependent on . . . chancy business
opportunities . . . cannot be recovered.”)
Roehrs argues that the Whitley Penn evaluation provides an independent
estimate of the amount FSI was worth, and thus the amount Amphenol would
have paid, in 2003. However, as the district court found, it is purely speculative
to assume that Amphenol would have paid fair market value in 2003. No
evidence was provided that Amphenol had accepted Whitley Penn’s valuation,
or that Amphenol was willing to pay full price for all of the shares when Roehrs
would be able to purchase the Minority Group’s shares at a discounted price,
pursuant to the SPA. Given that Roehrs had a very narrow 90-day window
within which to conduct the deal before he lost his opportunity to purchase the
Minority Group’s shares, it is speculative to assume that Amphenol would not
have leveraged its position to pay less than full market value for FSI shares (as
Red River did.)3 Similarly, the amount paid by Amphenol in 2005—when the
3
Again, given that there is no evidence as to the kind of deal Amphenol and Roehrs
would have struck in 2003—whether an outright purchase of FSI, a partnership investment,
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No. 07-10801
ownership structure of FSI and the obligations of the owners were completely
different 4 —does not establish “with reasonable certainty” the amount Amphenol
would have paid in 2003.5
Contrary to Roehrs’ assertions, the district court did not require him to
prove the specific terms of a prospective contract in finding that his damages
models were too speculative—the court could not find any basis for a range of
damages that could be submitted to a jury. Roehrs is unable to establish the
amount of damages he suffered with reasonable certainty. Thus, the district
court was correct to grant summary judgment in favor of Conesys on this basis
alone.6
or a debt or equity financing—no factfinder could infer from Amphenol’s outright purchase of
FSI in 2005 the amount that would have changed hands in 2003.
4
In 2005, Amphenol purchased FSI from Roehrs as the sole owner (as Roehrs was able
to buy out the Minority Group with the assistance of financing from Red River). This is a very
different environment from 2003, when Amphenol was faced with an FSI ownership that
included Roehrs, the Minority Group, and other shareholders (i.e. Conesys) that would
potentially exercise a right of first refusal. Given the change in circumstances, Amphenol’s
2005 purchase of FSI does not provide a basis for determining how much it would have offered
in 2003.
5
The instant case is distinguishable from DSC Comm. Corp. v. Next Level Commc’ns.,
107 F.3d 322 (5th Cir. 1997), in which we upheld a damages award for lost profits for a product
that had yet to be placed on the market. In that case, the jury heard extensive expert
testimony as to the market conditions supporting the product’s profitability, the plaintiff’s
history of producing profitable telecommunications products, the success of a comparable
product, and the relative market shares of the company and its competitors, all supported by
data obtained from several respected sources in the telecommunications industry. The
evidence in DSC is both qualitatively and quantitatively stronger than the evidence Roehrs
offers here.
6
Roehrs contends that the district court conflated the fact and amount of damages in
arriving at this conclusion, arguing that the court placed the burden on Roehrs to prove the
specifics of a hypothetical 2003 contract between Amphenol and Roehrs as opposed to merely
a reasonable probability of such a contract as required by Texas law. However, the district
court did not have to make a finding as to whether Amphenol would have contracted with
Roehrs but for Conesys’ alleged interference in order to find that the damages models offered
by Roehrs are predicated on purely speculative assumptions about how Amphenol valued FSI
in 2003. The district court independently found the fact of damages to be speculative, based
on the paucity of evidence that the Amphenol deal would have been more lucrative than the
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No. 07-10801
B
The district court held that Roehrs’ was not entitled to mental anguish
damages resulting from Conesys’ alleged tortious interference. The Texas
Supreme Court has not yet ruled that plaintiffs may recover mental anguish
damages for such claims, and there is a conflict among the intermediate state
courts on the issue. Compare, e.g., Exxon Corp. v. Allsup, 808 S.W.2d 648, 660
(Tex.App.– Corpus Christi 1991, writ denied) with Hallmark v. Hand, 885
S.W.2d 471, 481 (Tex.App.– El Paso 1994, writ denied). Roehrs argues that this
Court should make an “Erie guess” as to Texas law and follow the intermediate
courts that hold that Texas permits the recovery of mental anguish damages in
cases of tortious interference with contract.
We do not address this argument because we find that Roehrs would not
prevail on his tortious interference claims as the alleged monetary damages are
speculative, as discussed supra. While it is left to the Texas Supreme Court to
determine whether mental anguish damages are recoverable at all for TIPER
claims, we are unable to locate any case in which mental anguish damages were
treated as the sole basis for satisfying the actual damages element of a TIPER
Red River deal. Because we affirm on the basis of the uncertainty of the amount of damages,
however, we need not specifically address the issue of the fact of damages.
8
No. 07-10801
claim.7 Accordingly, we affirm the district court’s grant of summary judgment
to Conesys on this issue.8
III
A
Roehrs argues that the district court erred in dismissing his claim against
Conesys for malicious prosecution. Below, Roehrs asserted that Conesys acted
with malice in instigating the 2001 lawsuit against him. We review de novo a
district court’s grant or denial of a Rule 12(b)(6) motion to dismiss, Frank v.
Delta Airlines, Inc., 314 F.3d 195, 197 (5th Cir.2002), “accepting all well-pleaded
facts as true and viewing those facts in the light most favorable to the plaintiff,”
Stokes v. Gann, 498 F.3d 483, 484 (5th Cir.2007)(per curiam).
The district court held that Roehrs’ malicious prosecution claim was
barred by a one-year statute of limitations. See T EX. C IV. P RAC. & R EM. C ODE
§16.002(a)(“A person must bring suit for malicious prosecution. . . not later than
one year after the day the cause of action accrues.”). Ignoring the plain language
of the statute, Roehrs argues that a two-year statute of limitations governs
claims for civil malicious prosecution, citing a Texas Supreme Court case from
1885 for this proposition. See Bear Bros. & Hirsch v. Marx & Kempner, 63 Tex.
298 (1885). The Bear Brothers case distinguished claims for malicious civil
7
In the unpublished case cited by Roehrs, Watson v. Houston Ind. School Dist., 2005
WL 1869064 (Tex.App.–Houston Aug. 9, 2005), the court held that, assuming the plaintiff
could succeed on his tortious interference claim, he would be entitled to recover damages
beyond those he recovered for lost wages. Id. at *6. In Exxon Corp., though the court held that
“[c]ompensation for mental anguish and injury to feelings are recoverable as elements of actual
damage when the plaintiff establishes an intentional tort,” the jury award in that case was for
loss of earnings as well as mental anguish damages. Id. at 661. The weight of authority thus
strongly suggests that mental anguish damages alone are insufficient to support a TIPER
claim.
8
Because we affirm the district court on the grounds discussed above, we do not need
to address alternate grounds for granting summary judgment addressed by the parties.
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No. 07-10801
prosecution from claims for malicious criminal prosecution, holding that a two-
year statute of limitations was applicable to the latter. The Texas legislature
has revised the Code since Bear Brothers was decided, however, and the current
relevant provision does not distinguish between civil and criminal malicious
prosecution claims, applying a one-year limitations period to “suit[s] for
malicious prosecution.” 9 Though we recognize that the Texas Supreme Court
has not explicitly overruled its 123-year old decision, we are bound to apply the
statute as it is written and do so here. See also Internet Corporativo S.A. de C.V.
v. Business Software Alliance, Inc., 2004 WL 3331843 at *7(S.D.Tex. Nov. 15,
2004)(unpublished)(rejecting theory that different statute of limitations applies,
and citing to Texas cases holding that one-year statute of limitations is
applicable to malicious civil prosecution claims).
B
Roehrs argues that the district court erred in granting Conesys’ motion to
strike Roehrs’ supplemental appendix from the record. A motion to strike is
reviewed for abuse of discretion. Cambridge Toxicology Group, Inc. v. Exnicios,
495 F.3d 169, 178 (5th Cir. 2007).
The district court did not abuse its discretion in granting the motion to
strike. The district court stated in its order that it had not authorized the
submission of additional evidence, and that Roehrs had not moved the Court for
leave to file. We accord significant deference to a trial judge’s evidentiary
rulings, see Hardy v. Chemetron Corp., 870 F.2d 1007, 1009 (5th Cir.1989), and
only reverse where it has affected the substantial rights of the parties, Stitt
9
We note also that the provision that Roehrs argues applies to his claim does not
mention malicious civil prosecution at all. See TEX . CIV . PRAC . & REM . CODE § 16.003 (“. . . a
person must bring suit for trespass for injury to the estate or to the property of another,
conversion of personal property, taking or detaining the personal property of another, personal
injury, forcible entry and detainer, and forcible detainer not later than two years after the day
the cause of action accrues.”)
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No. 07-10801
Spark Plug Co. v. Champion Spark Plug Co., 840 F.2d 1253, 1259 (5th Cir.1988).
Roehrs has not demonstrated prejudice resulting from the exclusion of his
supplemental appendix. Accordingly, we affirm the district court’s order.
IV
For the reasons above, we AFFIRM the district court’s grant of summary
judgment, its dismissal of Roehrs’ malicious prosecution claim, and its grant of
the motion to strike Roehrs’ supplemental appendix.
11