the-huff-energy-fund-lp-wrh-energy-partners-llc-william-rbill ( 2015 )

Fourth Court of Appeals
San Antonio, Texas
DISSENTING OPINION
No. 04-12-00630-CV
THE HUFF ENERGY FUND, L.P., WRH Energy Partners, L.L.C., William R. “Bill” Huff,
Rick D’Angelo, and Riley-Huff Energy Group, LLC,
Appellants
v.
LONGVIEW ENERGY COMPANY,
Appellee
From the 365th Judicial District Court, Zavala County, Texas
Trial Court No. 11-09-12583-ZCVAJA
Honorable Amado J. Abascal, III, Judge Presiding
Opinion by: Sandee Bryan Marion, Chief Justice
Concurring Opinion by: Marialyn Barnard, Justice
Dissenting opinion by: Luz Elena D. Chapa, Justice, joined by Rebeca C. Martinez, Justice
Concurring and Dissenting Opinion by: Patricia O. Alvarez, Justice
Sitting en banc: Sandee Bryan Marion, Chief Justice
Karen Angelini, Justice
Marialyn Barnard, Justice
Rebeca C. Martinez, Justice
Patricia O. Alvarez, Justice
Luz Elena D. Chapa, Justice
Jason Pulliam, Justice
Delivered and Filed: November 25, 2015
Longview Energy Corporation’s live pleadings gave fair notice that a basic issue to be
resolved at trial was whether Bill Huff and Rick D’Angelo engaged in competition with Longview
by forming and operating Riley-Huff Energy Group without the informed approval of Longview’s
board of directors. In addressing the corporate opportunity issues, the majority and concurrence
Dissenting Opinion 04-12-00630-CV
also misapply the applicable standard of review and re-define and narrow the scope of Delaware’s
corporate opportunity doctrine. Although the record clearly establishes the liability of Huff,
D’Angelo, and Riley-Huff, I would hold the trial court abused its discretion by disregarding Riley-
Huff’s development costs and not limiting the constructive trust to the profits or benefits Riley-
Huff obtained as a result of Huff and D’Angelo’s breach of fiduciary duty. Because I would reverse
and remand the case to the trial court for further proceedings regarding the proper remedy, I
respectfully dissent.
I
FACTUAL BACKGROUND & PROCEDURAL HISTORY
Longview is an oil and gas company organized under the laws of Delaware and
headquartered in Dallas, Texas. In 2006, Huff Energy Fund (HEF), a firm that invests in several
portfolio companies, invested in Longview and negotiated the right to seat two directors on
Longview’s board of directors. HEF selected Bill Huff and Rick D’Angelo, one of Huff’s
associates, to serve on Longview’s board. By investing an additional $20 million in Longview,
HEF became a 39-40% shareholder of the company.
In September 2009, members of Longview’s executive management team met with Huff
and D’Angelo to discuss opportunities for leasing acreage in an area known as the Eagle Ford. The
Eagle Ford is an oil reserve in Texas that spans nearly thirteen million acres, where the market for
leasing acreage to develop oil and gas assets at that time was becoming highly competitive. Huff
and D’Angelo requested that Longview begin investigating Eagle Ford opportunities, and Huff
told Longview that if it located an investment in the Eagle Ford that Longview liked, he would
fund it.
Researching Eagle Ford opportunities and positioning itself to invest in the Eagle Ford for
purposes of growth and financial prosperity became Longview’s top priority over the next several
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months. Longview hired Mark Lober, a geologist and geophysicist, to analyze public data on the
Eagle Ford and to discuss the “word on the street” with brokers. Lober analyzed seismic data,
isopach (thickness) maps, well logs, geochemical information, pipeline infrastructure, existing
wellbores, available acreage, and the activities of competitors in the area. Longview’s management
team also spent two-thirds to three-quarters of its time investigating Eagle Ford opportunities.
Longview provided Lober’s analyses to D’Angelo, who encouraged Longview to proceed with
pursuing opportunities in the Eagle Ford.
Lober introduced Longview to Pat Gooden and Tamara Ford, brokers who were leasing
acreage in the Eagle Ford. Gooden and Ford informed Longview that over 200,000 acres were
available for leasing and provided Longview with “blob maps” showing areas for lease, the acreage
available, general pricing information, and other information. Longview initially contemplated
leasing approximately 40,000 acres in eleven counties for roughly $1,000 per acre.
Longview provided D’Angelo with the information it received and updates on its progress,
and D’Angelo continued to express his enthusiasm about Longview’s prospective investment
opportunity. Longview made several attempts to contact Huff (who was the ultimate decision
maker regarding HEF’s financing of Longview’s investment in the Eagle Ford), but was unable to
meet with him because Huff was on vacation or otherwise unavailable.
Members of Longview’s management team continued to meet with Ford, Gooden, and
D’Angelo in December 2009 and January 2010. At a December 17, 2009 meeting, Lober presented
his analyses, economic plans for how Longview could develop the acreage, and other information
he received from Gooden and Ford. On December 21, 2009, Longview met again with Gooden
and Ford, who relayed that Chesapeake, a major oil company, had purchased a significant amount
of acreage that was under Longview’s consideration. At that meeting, D’Angelo participated by
phone and agreed that Longview was “absolutely ready” to go forward with an investment in the
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Dissenting Opinion 04-12-00630-CV
Eagle Ford. Longview sent D’Angelo the additional information it received from the brokers
during the meeting. On January 13, 2010, Longview’s management team discussed with D’Angelo
a proposal to lease about 21,000 acres for approximately $40 million. Longview’s strategy was to
lease acreage, “prove up” the acreage, and then sell or assign the leases at a profit. The proposal
was submitted to the directors as a way to increase the value of the shares for the benefit of
Longview’s shareholders.
Concerned about Huff’s unavailability, Longview scheduled a board meeting for January
28, 2010, to consider the proposal. At the board meeting, D’Angelo informed Longview that Huff
would not fund any investment in the Eagle Ford. Longview’s board did not vote on the proposal
at that meeting, but it considered other options for financing an Eagle Ford investment and
investments in other areas. Because the price per acre in the Eagle Ford was soaring, Longview
believed it had lost the opportunity to obtain a ground-floor acreage position in the Eagle Ford.
Longview did not thereafter lease any Eagle Ford acreage.
Longview later discovered that in October 2009, Huff had formed Riley-Huff Energy
Group, a Texas limited liability company with its headquarters in Oklahoma. Riley-Huff is also an
oil and gas company that sought to acquire, develop, and sell assets in the Eagle Ford. Longview
learned HEF was the limited partner and a 99% shareholder of Riley-Huff and D’Angelo had been
serving as one of its managers since Riley-Huff’s inception. Huff and D’Angelo never disclosed
either of those facts to Longview, nor did they seek Longview’s board’s approval before forming
and operating Riley-Huff.
Longview also discovered that after it notified D’Angelo about opportunities to lease
acreage through Ford, Riley-Huff was in discussions with Ford about leasing Eagle Ford acreage.
When Ford asked Riley-Huff about its relationship with Longview regarding leasing acreage in
Eagle Ford, she was informed Riley-Huff’s relationship with Longview was “arms-length and
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competitive.” Riley-Huff hired Jim Doherty to research and analyze some of the same types of
information, specifically well logs and an isopach map, that Lober was researching and analyzing.
After D’Angelo received the research and analyses from Doherty and Lober, HEF decided to fund
only Riley-Huff’s acreage play in the Eagle Ford.
Longview further discovered that three days before the January 28, 2010 board meeting,
Riley-Huff signed a letter of intent with Ford to lease a significant amount of Eagle Ford acreage.
Throughout 2010 and into 2011, Riley-Huff continued to lease additional acreage and develop its
assets in the Eagle Ford. Riley-Huff determined its value had increased from about $32.3 million
at the end of 2009 to more than $478 million by the end of 2010.
Longview filed suit against Huff, D’Angelo, HEF, WRH Energy Group LLC (HEF’s
general partner), Riley-Huff, and other defendants. The case proceeded to trial, and the jury found
Huff and D’Angelo breached their fiduciary duties of loyalty to Longview by usurping a corporate
opportunity and by competing with Longview without the informed approval of Longview’s board
of directors. The jury also found HEF and Riley-Huff liable for knowingly participating in Huff
and D’Angelo’s breach. The jury found that as a result of Huff and D’Angelo’s breach, Riley-Huff
acquired assets in the Eagle Ford. The jury answered four other questions about the market value,
acquisition costs, past production revenues, and development costs related to Riley-Huff’s Eagle
Ford assets.
The trial court rendered judgment in Longview’s favor. The trial court granted Longview
an equitable interest in, and a constructive trust over, all right, title, and interest of Riley-Huff in
and to specified assets, including production revenues. The trial court also awarded Longview an
additional $95.5 million. Huff, D’Angelo, HEF, WRH Energy, and Riley-Huff (Appellants) filed
this appeal.
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Dissenting Opinion 04-12-00630-CV
II
APPLICABLE LAW
The parties agree Delaware law applies to liability and remedy issues and Texas law
governs procedural issues, which include issues of evidence, burdens of proof, pleadings, and
standards of review. See Robin v. Entergy Gulf States, Inc., 91 S.W.3d 883, 886 (Tex. App.—
Beaumont 2002, pet. denied) (applying Louisiana substantive law and Texas procedural law,
including the standard of appellate review); see also Tex. Dep’t of Corr. v. Herring, 513 S.W.2d
6, 7-8 (Tex. 1974) (describing rules regarding evidence, burden of proof, pleadings, and motions
as procedural). I apply the law according to the parties’ agreement. See Helmerich & Payne Int’l
Drilling Co. v. BOPCO, L.P., 357 S.W.3d 801, 805 (Tex. App.—Eastland 2011, no pet.); Brown
v. Pennzoil-Quaker State Co., 175 S.W.3d 431, 435 (Tex. App.—Houston [1st Dist.] 2005, pet.
denied). When applying Delaware law, I first look for an authoritative decision from the Supreme
Court of Delaware and if none is available, I give due deference to decisions by Delaware’s lower
courts and, if necessary, other authorities. See Highland Crusader Offshore Partners, L.P. v.
Andrews & Kurth, L.L.P., 248 S.W.3d 887, 890 n.4 (Tex. App.—Dallas 2008, no pet.).
III
USURPATION OF A CORPORATE OPPORTUNITY
The majority’s and concurrence’s analyses of Appellants’ corporate opportunity issues
misapply both the standard of review under Texas law and substantive Delaware law regarding
liability for usurping a corporate opportunity. The majority and concurrence do not measure the
legal sufficiency of the evidence against the charge as given. See St. Joseph Hosp. v. Wolff, 94
S.W.3d 513, 530 (Tex. 2002). 1 Appellants’ only challenge to liability based on usurping a
1
During the charge conference, Appellants objected to the submission of Question No. 1 based on its wording of (1)
the specificity of the corporate opportunity; (2) expectancy or actual interest; and (3) rejection of the corporate
opportunity. However, Appellants did not object to the absence of legal definitions or tender substantially correct legal
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Dissenting Opinion 04-12-00630-CV
corporate opportunity is, expressly, “There Is Legally Insufficient Evidence to Support the Jury’s
Answer to Question 1.” (emphasis added). Although Appellants’ briefs do not designate any issue
or contain any argument as to the denial of their motion for directed verdict, the majority and
concurrence measure the legal sufficiency of the evidence against a hypothetical jury charge under
Delaware law, as demonstrated by the majority’s and concurrence’s references to and analyses of
legal definitions and principles contained in Delaware case law. The jury was instructed that if a
word was used in the charge in a way that was different from its ordinary meaning, the trial court
would provide a correct legal definition. Because the charge did not define corporate opportunity,
expectancy interest, or financial ability, the majority and concurrence err by measuring the legal
sufficiency of the evidence against legal definitions not delineated or contained in the charge. See
Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000); Kroger Co. v. Brown, 267 S.W.3d 320, 322-23
(Tex. App.—Houston [14th Dist.] 2008, no pet.).
Moreover, our standard of review requires that we view all the evidence in Longview’s
favor and also assume the jury made credibility determinations in Longview’s favor, but the
majority and concurrence both disregard evidence favorable to Longview. See City of Keller v.
Wilson, 168 S.W.3d 802, 820, 823 (Tex. 2005). The majority disregards significant evidence
favorable to Longview in concluding there was no evidence that Huff and D’Angelo’s purchase of
Eagle Ford leases “hindered or defeated Longview’s plan to also acquire acreage in the Eagle
Ford.” First, there was evidence that Huff did not fund Longview’s resource play in the Eagle Ford
because Huff funded Riley-Huff’s resource play. Thus, Huff’s leasing Eagle Ford acreage through
Riley-Huff directly hindered Longview’s potential and defeated its plans to lease Eagle Ford
acreage. Second, as Appellants admit, many of the acres leased by Riley-Huff were in the areas
definitions of the terms “specific corporate opportunity,” “expectancy interest,” or “financial ability.” See TEX. R.
CIV. P. 274, 278.
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Dissenting Opinion 04-12-00630-CV
being considered by Longview and were leased through brokers with whom Longview was also
in negotiations. Third, there was evidence that by diminishing the supply of acreage in a high-
demand market, Riley-Huff’s purchase of Eagle Ford leases contributed to the soaring cost to lease
Eagle Ford acreage that ultimately priced Longview out of a worthwhile investment in the Eagle
Ford. The concurrence also makes credibility determinations and draws inferences unfavorable to
Longview when analyzing the jury’s implied finding on financial ability and disregards evidence
that Huff and D’Angelo’s breach was the sole reason why Longview’s board rejected the corporate
opportunity.
The majority and concurrence also misapply Delaware law. The majority’s reliance on
Johnston v. Greene, 121 A.2d 919 (Del. 1956), and Colorado & Utah Coal Co. v. Harris, 49 P.2d
429 (Colo. 1935), is misplaced. This case does not present the situation contemplated by Johnston
when the corporation is attempting to claim “any and every business opportunity” brought to the
director in the director’s individual capacity. See Johnston, 121 A.2d at 923-24. This case presents
a much narrower scope of opportunities in which the corporation has an expectancy interest: only
those opportunities a director induces the corporation to pursue. Also, Colorado & Utah Coal Co.
is distinguishable in a key respect. There, the court addressed whether the evidence was sufficient
to support a finding that there was not an expectancy interest in a corporate opportunity. See Colo.
& Utah Coal, 49 P.2d at 430-31. Some evidence that could support a finding that there is no
expectancy interest in a corporate opportunity does not necessarily conclusively establish the
absence of an expectancy interest. The concurrence cites no Delaware case holding there was no
corporate opportunity because the supposed business opportunity was not specific enough. Rather,
under Delaware law, a corporate opportunity can include a group of varying business
opportunities. See, e.g., Dweck v. Nasser, No. 1353-VCL, 2012 WL 161590, at *12 (Del. Ch. Jan.
18, 2012); McGowan v. Ferro, 859 A.2d 1012, 1026, 1039-40 (Del. Ch. 2004). I, therefore, decline
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Dissenting Opinion 04-12-00630-CV
to adopt a hypothetical or theoretical approach in determining the corporate opportunity issues.
Even if I were to agree with either or both opinions, I would nevertheless affirm liability based on
the jury’s answers to Question No. 2 regarding competition.
IV
COMPETITION
I respectfully disagree with the majority’s conclusion that Longview did not give fair notice
of its competition claim. The majority mints a new “theme”-based standard of construing pleadings
and holds that when a party pleads facts constituting two similar, yet distinct causes of action, but
pleads more facts in support of one than the other, no fair notice is given of the less prominently
pled cause of action. Although Appellants waived all complaints about defects and obscurities in
Longview’s pleading by not filing special exceptions, the majority recasts pleading defects and
obscurities as reasons why Longview may not prevail on its competition claim. For the past 170
years, Texas has sought to eliminate such technicalities from its pleading standard. And, because
the record confirms Appellants were informed and aware of Longview’s intent to prove a breach
of fiduciary duty of loyalty by competition, the trial court followed well-established Texas law and
properly construed Longview’s pleadings liberally in Longview’s favor and so as to do substantial
justice. By overruling Appellants’ objection to the competition question in the jury charge, the trial
court declined to reward Appellants for delaying until the charge conference to first complain
about technical defects that, because of their failure to specially except, Longview had no
opportunity or reason to correct. The majority’s holding that a competition cause of action could
not be reasonably inferred from Longview’s live pleadings disregards our state’s pleading
standard.
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A. Appellants’ Proposed Heightened Pleading Standard
Huff and D’Angelo’s issue on appeal, which the other Appellants adopted and which the
majority sustains, is that “Longview failed to plead a separate claim for competition.” Appellants
initially argued that Longview did not plead a competition claim because it failed to expressly
plead the legal theory of “breach by competition” separate from usurpation in the Claims section
of its live pleading. In post-en banc submission briefing, Appellants add that even if Longview’s
entire live pleading is considered, the pleading is defective and ambiguous as to whether Longview
was raising a competition claim. Although the majority adopts only the latter reasoning, an analysis
of Appellants’ initial argument helps to understand why both bases for Appellants’ issue lack
merit.
In arguing Longview did not plead the legal theory of “breach by competition” separate
from “breach by usurpation” because competition was not clearly pled in the Claims section,
Appellants incorrectly assume a party must expressly identify all of its legal theories of recovery
in a particular part of its pleading. Alternatively understood, Appellants’ argument is that when a
party voluntarily pleads some legal theories of recovery, the party is not entitled to recover on any
legal theory not expressly identified—even when, as is the case here, the petition affirmatively
alleges facts supporting an additional legal theory and the opposing party does not specially except.
Either way, Appellants have suggested that this court adopt a heightened pleading standard that is
not supported by the plain language and purposes of the Texas Rules of Civil Procedure; contrary
to Texas’s more-than-a-century-old fair-notice pleading standard; and out of step with the notice-
pleading standard other jurisdictions apply.
1. A party need not expressly plead legal theories of recovery to give fair notice.
The plain meaning of the Texas Rules of Civil Procedure neither expressly requires nor
supports a requirement that parties expressly identify their legal theories of recovery in their
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Dissenting Opinion 04-12-00630-CV
pleadings. Under Rule 45, all pleadings in district court must “consist of a statement in plain and
concise language of the plaintiff’s cause of action. . . . That an allegation be evidentiary or be of
legal conclusion shall not be grounds for objection when fair notice to the opponent is given by
the allegations as a whole.” TEX. R. CIV. P. 45(b) (emphasis added). Rule 47 provides, “An original
pleading which sets forth a claim for relief . . . shall contain . . . a short statement of the cause of
action sufficient to give fair notice of the claim involved.” TEX. R. CIV. P. 47(a). Rules 45 and 47
use the undefined terms “claim” and “cause of action.” A “claim” is “[a] demand for money,
property, or a legal remedy to which one asserts a right; esp., the part of a complaint in a civil
action specifying what relief the plaintiff asks for.” BLACK’S LAW DICTIONARY 264 (8th ed. 2004)
(“claim”). Therefore, a pleading that sets forth a demand for money, property, or other legal
remedy must contain a short statement of “the cause of action.” See TEX. R. CIV. P. 45, 47.
A “cause of action” can be defined either as “[a] group of operative facts giving rise to one
or more bases for suing; a factual situation that entitles one person to obtain a remedy in court
from another person,” or “[a] legal theory of a lawsuit.” BLACK’S LAW DICTIONARY 235 (8th ed.
2004) (“cause of action”). As the Supreme Court of Texas has noted, “[T]he generally accepted
meaning of [‘cause of action’] refers to the ‘fact or facts entitling one to institute and maintain an
action, which must be alleged and proved in order to obtain relief.’” Loaisiga v. Cerda, 379 S.W.3d
248, 255 (Tex. 2012) (quoting In re Jorden, 249 S.W.3d 416, 421 (Tex. 2008); A.H. Belo Corp. v.
Blanton, 133 Tex. 391, 129 S.W.2d 619, 621 (1939)); see Charles E. Clark, The Complaint in Code
Pleading, 35 YALE L.J. 259, 289 (1926) (explaining “cause of action” in pleading rules refers to
the “facts giving ground for societal action through the courts”). Furthermore, Rule 45 provides
that alleging legal conclusions is not objectionable when the allegations as a whole provide fair
notice. TEX. R. CIV. P. 45(b). If Rules 45 and 47 are construed to require allegations of legal
conclusions supporting “a legal theory of a lawsuit,” then Rule 45’s provision permitting the
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Dissenting Opinion 04-12-00630-CV
pleading of legal conclusions would be surplusage. See In re Christus Spohn Hosp. Kleberg, 222
S.W.3d 434, 437 (Tex. 2007) (applying statutory rules of construction when construing rules of
civil procedure); Tex. Dep’t of Pub. Safety v. Deakyne, 371 S.W.3d 303, 307 (Tex. App.—San
Antonio 2012, pet. denied) (citing Spradlin v. Jim Walter Homes, Inc., 34 S.W.3d 578, 580 (Tex.
2000), for proposition that courts should avoid constructions that make statutory language
surplusage).
Under the plain meaning of Rules 45 and 47, a pleading states a “cause of action” if it
alleges a factual situation that entitles the pleader to obtain a requested legal remedy. See TEX. R.
CIV. P. 45, 47; see also Loaisiga, 379 S.W.3d at 255; BLACK’S LAW DICTIONARY at 234, 264. 2
Rules 45 and 47 do not require a party to expressly identify its legal theories of recovery, although
such legal theories are not necessarily objectionable under Rule 45. TEX. R. CIV. P. 45, 47; accord
Ferguson v. Tanner Dev. Co., 541 S.W.2d 483, 492 (Tex. Civ. App.—Houston [1st Dist.] 1976)
(“A plaintiff is not required to plead his legal theory for recovery if he pleads facts sufficient to
support a recovery. It is the duty of the trial court to determine the law and apply it to the facts
presented.”) (citing Behan v. Ghio, 75 Tex. 87, 12 S.W. 996 (1889)), rev’d on other grounds, 561
S.W.2d 777 (Tex. 1977).
The heightened pleading standard advocated by Appellants is also inconsistent with the
purpose of Rules 45 and 47. The Supreme Court of Texas has explained Rules 45 and 47 require
fair notice “such that the opposing party can prepare a defense.” In re Lipsky, 460 S.W.3d 579,
590 (Tex. 2015) (citing TEX. R. CIV. P. 45, 47). The ability to prepare a defense entails being
informed of “the nature and basic issues of the controversy and what testimony will be relevant.”
2
Rule 50, which governs how allegations should be stated and how some of the required contents of a pleading should
be organized, does not require a pleading to expressly identify any legal theories or make legal arguments. See TEX.
R. CIV. P. 50.
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Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 896 (Tex. 2000). Courts applying Texas’s
fair-notice pleading standard must review the allegations as a whole (which necessarily includes
all factual allegations) to determine whether a pleading gives fair notice. TEX. R. CIV. P. 45;
Paramount Pipe & Supply Co. v. Muhr, 749 S.W.2d 491, 495 (Tex. 1988); Ware v. Crystal City
Indep. Sch. Dist., 489 S.W.2d 190, 191 (Tex. Civ. App.—San Antonio 1972, writ dism’d) (per
curiam). Ultimately, as the Supreme Court of Texas has explained, “[a] petition is sufficient if it
gives fair and adequate notice of the facts upon which the pleader bases his claim.” Roark v. Allen,
633 S.W.2d 804, 810 (Tex. 1982) (emphasis added).
Texas has long rejected pleading rules, such as a requirement that legal theories of recovery
be clearly and accurately identified, that prioritize form over substance. “In common-law pleading,
‘issue pleading’ was the norm. . . . It developed over the course of centuries into a highly technical
exchange of written instruments . . . having as their ‘great object’ the reduction of the dispute to a
single issue.” 2 ROY MCDONALD & ELAINE E. GRAFTON CARLSON, TEXAS CIVIL PRACTICE § 7:2,
at 177 (2002 ed.). “[T]he common law system of pleadings was never used in Texas courts.”
William V. Dorsaneo, III, The History of Texas Civil Procedure, 65 BAYLOR L. REV. 713, 717
(2013). Instead, Texas adopted “fact pleading,” an equitable pleading system that required a
statement of “the factual basis of the dispute rather than a technically precise selection of legal
theories.” 2 MCDONALD & CARLSON, § 7:2, at 178; see Dorsaneo, 65 BAYLOR L. REV. at 717; see
also Gunnells Sand Co. v. Wilhite, 389 S.W.2d 596, 597-98 (Tex. Civ. App.—Waco 1965, writ
ref’d n.r.e.) (“Texas early rejected the English system of pleading and adopted that of the Roman,
or civil law as modified by Spanish and Mexican practice.”). Under Texas’s former fact-pleading
standard, the rules “required that pleading[s] state ‘facts, in contradistinction to a statement of
evidence, of legal conclusions, and of arguments.’” 2 MCDONALD & CARLSON, § 7:2, at 179
(quoting former Texas Rule of Civil Procedure 2).
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Texas’s fact-pleading standard stood in contrast to those of jurisdictions that followed the
“theory of the pleadings” doctrine, which was a “‘rule of pleading that a complaint must proceed
upon some definite theory, and on that theory the plaintiff must succeed, or not succeed at all.’”
See 5 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE & PROCEDURE § 1219
(3d ed. 2002) (quoting Mescall v. Tully, 91 Ind. 96, 99 (1883)). “In many ways the ‘theory of the
pleadings’ doctrine seems to represent little more than a reversion to the pleading philosophy of
the common law forms of action in a new guise and therefore [is] subject to many of the objections
leveled at the common law system.” Id. One such objection was that common-law pleading
resulted in “dismissals based on technical deficiencies.” Id. § 1374. The vast majority of
jurisdictions in the United States have abolished the “theory of the pleadings” doctrine in favor of
notice pleading or fact pleading, and do not require a party to expressly identify legal theories of
recovery in the pleading stage. 3
But even under Texas’s former fact-pleading standard, the requirement that pleadings
contain statements of facts and not legal conclusions or arguments became overly technical. “By
1925, it could be declared that ‘into these simple rules . . . has been injected by the courts a mass
of technicalities that confound the oldest practitioner, . . . . A critical reexamination of the
3
Federal Rule of Civil Procedure 8(a) requires a statement of the grounds of jurisdiction, a short and plain statement
of the claim showing that the pleader is entitled to relief, and a demand for the relief sought. FED. R. CIV. P. 8(a).
Similarly, Texas’s rules require only a short statement of a cause of action, a statement of jurisdiction, a range of
monetary relief, and a demand for all other relief to which the party may be entitled. TEX. R. CIV. P. 47. Federal Rule
of Civil Procedure 8(a), and the states that have adopted rules nearly identical to Rule 8(a), do not require parties to
expressly plead legal theories of recovery. See Johnson v. City of Shelby, Miss., 135 S. Ct. 346, 346 (2014) (per
curiam); see, e.g., Atlanta Newspapers, Inc. v. Shaw, 182 S.E.2d 683, 685 (Ga. 1971); Shields v. Taylor, 976 N.E.2d
1237, 1244 (Ind. Ct. App. 2012); Golden v. Den-Mat Corp., 276 P.3d 773, 784 (Kan. Ct. App. 2012); Whitinsville
Plaza, Inc. v. Kotseas, 390 N.E.2d 243, 245 (Mass. 1979); State ex rel. B.M. v. Brian F., 846 N.W.2d 257, 267 (Neb.
2014); Illinois Controls, Inc. v. Langham, 639 N.E.2d 771, 782 (Oh. 1994); Haley v. Town of Lincoln, 611 A.2d 845,
848 (R.I.1992). Fact-pleading jurisdictions and notice-pleading jurisdictions that do not have rules modeled on Rule
8(a) also do not require a party to plead legal theories of recovery. See, e.g., Roush v. Mahaska State Bank, 605 N.W.2d
6, 9 (Iowa 2000); Parish of Jefferson v. Bankers Ins. Co., 88 So. 3d 1082, 1085 (La. Ct. App. 5 Cir. 2012, writ denied);
Goodley v. Folino, No. 2376 C.D. 2010, 2011 WL 10858491, at *4 (Pa. Commw. Ct. July 22, 2011).
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requirement of ‘fact’ pleading was an important aspect of the procedural reforms during the 1930s
and 1940s.” 2 MCDONALD & CARLSON, § 7:2, at 180 (quoting Thomas H. Franklin, Simplicity in
Procedure, 4 TEX. L. REV. 83, 94 (1925)). In 1941, Texas Rules of Civil Procedure 45 and 47 were
adopted, and Rule 45 provides, “That an allegation be . . . of legal conclusion shall not be grounds
for objection when fair notice to the opponent is given by the allegations as a whole.” TEX. R. CIV.
P. 45(b). “Rule 45 shifts the emphasis from the inherently unworkable metaphysical distinction
[between facts and conclusions of law] to a thoroughly practical test of whether the pleading gives
adequate notice.” 2 MCDONALD & CARLSON, § 7:4, at 189.
Like other jurisdictions’ pleading rules, Rules 45 and 47 do not “countenance dismissal of
a complaint for imperfect statement of the legal theory supporting the claim asserted.” Johnson v.
City of Shelby, Miss., 135 S. Ct. 346, 346 (2014) (per curiam); see TEX. R. CIV. P. 45, 47. Under
the overall scheme of the Texas Rules of Civil Procedure, the identification and narrowing of the
legal theories raised by the pleadings is a function of discovery and summary judgment. See, e.g.,
TEX. R. CIV. P. 194.2(c) (“A party may request disclosure of . . . the legal theories and, in general,
the factual bases of the responding party’s claims or defenses.”); TEX. R. CIV. P. 197.1 (“An
interrogatory may inquire whether a party makes a specific legal or factual contention and may
ask the responding party to state the legal theories and to describe in general the factual bases for
the party’s claims or defenses.”); see also 2 MCDONALD & CARLSON, § 7:2, at 180 (“‘[T]he modern
remedies of discovery . . . and summary judgment . . . are geared to the prompt disclosure of all
facts and matters in dispute.’”) (quoting Charles E. Clark, Simplified Pleading, 27 IOWA L. REV.
272 (1942)). Thus, parties are not required to expressly plead legal theories of recovery to give fair
notice. And in determining whether a party received fair notice, we must consider the allegations
as a whole and not simply scrutinize one particular section of a pleading.
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Dissenting Opinion 04-12-00630-CV
2. Voluntarily pleading some legal theories does not alter the fair-notice pleading
standard or necessarily waive legal theories not expressly pled.
The alternative understanding of Appellants’ position is that when a party voluntarily
identifies some legal theories of recovery in its pleading, the party may not recover on any legal
theory not expressly pled—even when the pleading expressly alleges facts supporting an additional
theory of recovery and the opposing party does not specially except. As a variant of a requirement
that a party must plead legal theories, Appellants’ position lacks support in the plain meaning and
purposes of Rules 45 and 47 and, by virtue thereof, is not informed by the historical development
of those rules. Appellants cite no well-reasoned authority supporting the proposition that by
voluntarily identifying some legal theories of recovery in a pleading, a party alters the fair-notice
pleading standard or imposes upon itself a heightened pleading standard. Such a proposition is
precluded by the plain language of Rule 45, the liberal construction rule, and decisions of the
Supreme Court of Texas.
The plain language of Rule 45 requires courts to consider the “allegations as a whole” when
determining whether a pleading gives fair notice. TEX. R. CIV. P. 45(b). A requirement that trial
courts consider only the legal theories identified in one section of a petition is directly contrary to
Rule 45’s plain language and defeats its purpose. See id. When a party includes some legal theories
of recovery in a pleading and alleges facts supporting other legal theories, the omission of the other
legal theories can create a misleading ambiguity. City of Houston v. Howard, 786 S.W.2d 391, 393
(Tex. App.—Houston [14th Dist.] 1990, writ denied) (citing 2 MCDONALD, TEXAS CIVIL
PRACTICE, at 14-16 (1970)). Special exceptions must be filed to force clarification and
specification in the pleadings when they are not clear or sufficiently specific. Hefley v. Sentry Ins.
Co., 131 S.W.3d 63, 65 (Tex. App.—San Antonio 2003, pet. denied); see Stone v. Lawyers Title
Ins. Corp., 554 S.W.2d 183, 187 (Tex. 1977); Howard, 786 S.W.2d at 393.
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Dissenting Opinion 04-12-00630-CV
If an opposing party chooses not to specially except and identify such an ambiguity or
obscurity in a pleading, the pleader is given “no opportunity to correct it.” Horizon/CMS, 34
S.W.3d at 897. Thus, “[w]hen a party fails to specially except, courts should construe the pleadings
liberally in favor of the pleader.” Id.; see Howard, 786 S.W.2d at 393 (construing pleading, in
absence of special exceptions, as raising legal theories not expressly pled but supported by alleged
facts). In liberally construing the pleadings, “[a] court should uphold the petition as to a cause of
action that may be reasonably inferred from what is specifically stated, even if an element of the
cause of action is not specifically alleged.” Boyles v. Kerr, 855 S.W.2d 593, 601 (Tex. 1993).
Construing the express identification of some legal theories of recovery as an implied
exclusion or disavowal of omitted legal theories is to apply the doctrine of expressio unius est
exclusio alterius, an inherently restrictive rule of contract and statutory construction. See Americo
Life, Inc. v. Myer, 440 S.W.3d 18, 24-25 (Tex. 2014); Mid-Century Ins. Co. of Tex. v. Kidd, 997
S.W.2d 265, 274 (Tex. 1999). Because the Supreme Court of Texas has held that in the absence
of special exceptions, a pleading must be liberally construed in favor of the pleader, courts should
not deploy rules of statutory or contract construction to narrowly construe a pleading and make
“refined inferences against the pleader.” See De Loach v. Crowley’s, Inc., 128 F.2d 378, 380 (5th
Cir. 1942) (interpreting the rule that pleading should be “construed so as to do substantial justice”
in an identically phrased provision in Federal Rule of Civil Procedure 8(e)); Horizon/CMS, 34
S.W.3d at 897; 2 MCDONALD & CARLSON, § 7:2, at 189-91.
The Supreme Court of Texas has held that in the absence of special exceptions, a party may
prevail on a legal theory supported by the factual allegations in a pleading even if the legal theory
was omitted from a list of other expressly pled legal theories. In Hammer v. Dallas Transit Co.,
the supreme court reversed the court of appeals that held:
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Dissenting Opinion 04-12-00630-CV
plaintiff did not sufficiently plead that defendant was negligent in being across the
center of the road. Plaintiff generally described the nature of the accident and in
doing so stated that defendant’s bus crashed into plaintiff’s car “when said bus
crossed the center dividing strip on said street.” In a subsequent paragraph of the
pleading, plaintiff stated several specific acts and omissions of negligence without
repeating that the bus was across the center of the road. Defendant urged no
exceptions to the pleadings.
400 S.W.2d 885, 889 (Tex. 1966). The supreme court disagreed, holding “We can not say that
defendant was surprised or did not have fair notice of plaintiff’s theory of the case.” Id. And in
Southwestern Bell Telephone Co. v. Garza, the supreme court held the plaintiff gave fair notice of
a discrimination claim even though the plaintiff expressly pled his claim as one for retaliation. 164
S.W.3d 607, 616-17 (Tex. 2004). The court analyzed the issue as follows:
SWBT argues that Garza pleaded only unlawful discharge, not discrimination. . . .
But Garza also pleaded that “[i]n retaliation for filing” a compensation claim, he
was “ordered to find a non-driving position” and was thereby “effectively
disqualified from his job.” He sought damages for “retaliatory discharge under the
Texas Workers’ Compensation Act and wrongful conduct” of SWBT. While
Garza’s pleadings did not use the word ‘discrimination,’ they were nevertheless
sufficient to raise that charge if they gave fair notice of the facts on which Garza
based his action sufficient to allow SWBT to anticipate what evidence would be
relevant and to prepare its defense. We think Garza’s pleadings clearly met this
standard. Had SWBT been in doubt about Garza’s claims, it could have sought
clarification through special exceptions. It did not do so.
Id. Appellants’ position, and the majority’s suggestion, that Longview waived a competition claim
by not specifically listing competition as a separate breach of fiduciary duty in the Claims section
of its pleading is foreclosed by the supreme court’s holdings in Hammer and Garza.
B. Texas’s Fair-Notice Pleading Standard & the Liberal Construction Rule
The majority misapplies Texas’s fair-notice pleading standard and the liberal construction
rule. It also recasts pleading defects and obscurities, to which Appellants chose not to specially
except, as reasons why Appellants lacked fair notice. As a result, the majority reaches an incorrect
conclusion as to whether, with regard to competition, Longview pled a factual basis entitling it to
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Dissenting Opinion 04-12-00630-CV
relief under Delaware law, and thus gave fair notice of a competition claim. I decline to abandon
Texas courts’ long-standing and well-established applications of these two rules.
1. The majority incorrectly holds that pleading a cause of action fails to give fair
notice if more facts are alleged in support of another cause of action.
The majority reasons that because most of Longview’s factual allegations are thematically
related to usurpation of a corporate opportunity, the trial court erred by considering Longview’s
express allegations that Huff and D’Angelo formed and operated a direct competitor without
Longview’s knowledge or approval. The majority assumes without any authority that
“competition” and “usurpation” are coterminous breaches of fiduciary duty or that if a plaintiff
pleads more facts and legal arguments in support of one than the other, the plaintiff has not pled
the other. But under Delaware law, a corporate director may be held liable for breaching his
fiduciary duty if he usurps a corporate opportunity and/or engages in unapproved competition
through a competing company. Pleading more facts in support of one of these two breaches does
not per se preclude a party from pleading the other.
Under Delaware law, there are three elements of a corporate breach of fiduciary duty cause
of action: (1) the existence of a fiduciary duty, (2) a breach of that duty, and (3) resulting injury or
unjust enrichment. See Guth v. Loft, Inc., 5 A.2d 503, 510 (Del. 1939). 4 A director’s acts of
4
Huff and D’Angelo argue a “competitive injury” is necessary to show a breach. However, “‘the absence of specific
damage to a beneficiary is not the sole test for determining disloyalty by one occupying a fiduciary position.’” In re
Tri-Star Pictures, Inc., Litig., 634 A.2d 319, 334 (Del. 1993) (quoting Oberly v. Kirby, 592 A.2d 445, 463 (Del. 1991)),
disapproved of on other grounds by Tooley v. Donaldson, Lufkin & Jenrette, Inc., 845 A.2d 1031, 1038 (Del. 2004);
cf. Brophy v. Cities Serv. Co., 70 A.2d 5, 8 (Del. 1949) (“In equity, when the breach of a confidential relation by an
employee is relied on and an accounting for any resulting profits is sought, loss to the corporation need not be charged
in the complaint.”). Huff and D’Angelo misplace their reliance on Thorpe ex rel. Castleman v. CERBCO, Inc. In
Thorpe, the Supreme Court of Delaware explained “[t]he strict imposition of penalties under Delaware law are
designed to discourage disloyalty.” 676 A.2d at 445. “‘The rule . . . does not rest upon the narrow ground of injury or
damage to the corporation resulting from a betrayal of confidence, but upon a broader foundation of a wise public
policy . . . of . . . extinguish[ing] all possibility of profit flowing from a breach of the confidence imposed by the
fiduciary relation.’” Id. (quoting Guth, 5 A.2d at 510) (emphasis added). The court in Thorpe then held the lower court
erred by not disgorging benefits derived from a breach of fiduciary duty even though the lower court found the
directors’ breach “caused no injury to [the corporation].” Id. at 437, 445.
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Dissenting Opinion 04-12-00630-CV
usurping a corporate opportunity and forming and operating a competing company are two distinct
methods of breaching the fiduciary duty of loyalty. See Sci Accessories Corp. v. Summagraphics
Corp., 425 A.2d 957, 961, 964 (Del. 1980) (analyzing whether employees’ preparation to compete
breached fiduciary duty although corporation had “abandoned its corporate opportunity thesis”);
Brown v. Fenimore, No. 4097, 1977 WL 2566, at *5-6 (Del. Ch. Jan. 11, 1977) (holding corporate
officer forming and operating competing towing company was a breach of fiduciary duty similar
to a usurpation of a corporate opportunity); Craig v. Graphic Arts Studio, Inc., 166 A.2d 444, 445-
46 (Del. Ch. 1960) (holding, without discussion of the corporate opportunity doctrine, that forming
and operating a competing graphic design company was a breach of fiduciary duty); see also
Thorpe ex rel. Castleman v. CERBCO, Inc, 676 A.2d 436, 442 (Del. 1996) (noting “[t]he
fundamental proposition that directors may not compete with the corporation”) (emphasis added);
1 R. FRANKLIN BALOTTI & JESSE A. FINKELSTEIN, DEL. LAW OF CORPORATIONS AND BUSINESS
ORGANIZATIONS § 4.16 (3d ed. 2015) (listing “competition with the corporation by officers or
directors” and “usurpation of a corporate opportunity” as two of many ways a director can breach
his fiduciary duty of loyalty to the corporation); RESTATEMENT (SECOND) OF RESTITUTION § 43m,
cmt. d (2011) (recognizing “competing with the beneficiary” can breach one’s fiduciary duty). 5
The two breaches are distinct; they are not coterminous or mutually exclusive. See Sci. Accessories
Corp., 425 A.2d at 964; Brown, 1977 WL 2566, at *5-6; 1 BALOTTI & FINKELSTEIN, at § 4.16.
Although the majority suggests Appellants were not obligated to file special exceptions
because Longview pled “none of the elements of a viable cause of action,” Longview pled factual
5
Numerous other jurisdictions similarly recognize that a corporate director’s operation of a competing company can
“work injury to the corporation, or . . . deprive it of profit or advantage.” Guth, 5 A.2d at 510; see, e.g., Slosberg v.
Callahan Oil Co., 7 A.2d 853, 855 (Conn. 1939); Red Top Cab Co. v. Hanchett, 48 F.2d 236, 238 (N.D. Cal. 1931);
Coleman v. Hanger, 275 S.W. 784, 789 (Ky. 1925); Blakeslee v. Sottile, 194 N.Y.S. 752, 753-54 (N.Y. Sup. Ct. 1922);
Hussong Dyeing Mach. Co. v. Morris, 89 A. 249, 250 (N.J. Ch. 1913). Thus, there is no merit to Huff and D’Angelo’s
issue that competition, without some additional breach of duty, is insufficient to establish liability.
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Dissenting Opinion 04-12-00630-CV
allegations and legal conclusions that, independently, raise all of the elements of a cause of action
for competition. In the “Breach of Fiduciary Duty/Usurpation of a Corporate Opportunity”
subsection under the Claims section, Longview pled in paragraph 55, “D’Angelo and Huff owe
Longview a duty of loyalty.” In paragraph 59, Longview alleged, “By diverting the Eagle Ford
opportunity to themselves, D’Angelo and Huff placed themselves in a position of conflict or
competition with Longview.” In paragraph 62, Longview pled, “D’Angelo and Huff’s breaches of
duty and usurpation of Longview’s opportunity proximately caused Longview injury and
damages.” In paragraph 54, Longview alleged Huff leased acreage through Riley-Huff rather than
Longview because HEF would obtain 99% of the profits from Riley-Huff but only 39-40% of the
profits through Longview. Longview also requested a constructive trust for Appellants’ “breaches
of fiduciary duty,” and a constructive trust is a remedy for unjust enrichment under Delaware law.
See Guth, 5 A.2d at 510.
Paragraph 62 alleged Longview was injured by “D’Angelo and Huff’s breaches of duty
and usurpation of corporate opportunity” (emphasis added). “Breaches” is the plural of “breach,”
and the plural denotes more than one. AMERICAN HERITAGE DICTIONARY (5th ed. 2014) (“plural”).
“And” means “in addition to” or “added to.” Id. (“and”). The literal meaning of the allegation in
paragraph 62 is that Huff and D’Angelo committed two or more breaches of fiduciary duty in
addition to usurpation of a corporate opportunity. Paragraph 62 expresses Longview’s intent to
pursue multiple theories for breach of fiduciary duty other than usurpation of a corporate
opportunity. Thus, Longview alleged (1) a fiduciary duty; (2) “breaches” of fiduciary duty in
addition to usurpation; and (3) injury and unjust enrichment.
Appellants argue Longview’s live pleading was unclear about whether one of the
“breaches” it was alleging was by competition. If Appellants believed Longview’s pleading was
obscure, misleading, or ambiguous about its legal theories of recovery, they should have filed
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Dissenting Opinion 04-12-00630-CV
special exceptions. See TEX. R. CIV. P. 91; Stone, 554 S.W.2d at 187; Hammer, 400 S.W.2d at 889;
Howard, 786 S.W.2d at 393. When a party does not file special exceptions to a pleading, the
pleading must be construed in the pleader’s favor and upheld “as to a cause of action that may be
reasonably inferred from what is specifically stated, even if an element of the cause of action is
not specifically alleged.” Boyles, 855 S.W.2d at 601; accord Horizon/CMS, 34 S.W.3d at 897.
Longview clearly alleged the first and third elements of a breach of fiduciary duty claim under
Delaware law and ambiguously alleged the second element of breach. Appellants did not specially
except. Therefore, Longview’s pleading must be construed to uphold any cause of action that can
be reasonably inferred from the rest of Longview’s pleading. See Horizon/CMS, 34 S.W.3d at 897;
Boyles, 855 S.W.2d at 601.
To plead a cause of action, Texas’s pleading rules require the allegations of a factual
situation that entitled it to obtain relief. See TEX. R. CIV. P. 45, 47; see also Loaisiga, 379 S.W.3d
at 255; In re Christus Spohn Hosp. Kleberg, 222 S.W.3d at 437; Deakyne, 371 S.W.3d at 307. I
would hold Longview satisfied this requirement. In paragraph 18, Longview alleged Huff and
D’Angelo were directors of Longview. Under the subsection entitled “The Scheme and Its Roots,”
Longview pled:
29. Longview diligently educated its Directors concerning their duties of loyalty to
the company. These duties demand absolute fidelity to Longview’s interests and
require an extra measure of diligence when a director may have divided interests
by, for instance, simultaneously serving as a director, officer, partner, investor or
manager of entities in competition with Longview. . . .
....
34. Not long after Huff, D’Angelo and their associates directed Longview to pursue
the Eagle Ford, Riley-Huff was formed (on October 28, 2009). Huff operatives
Dartley, D’Angelo, and Bloom were listed as Riley-Huff’s Managers. Bobby Riley
was listed as its President as well as a Manager.
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Dissenting Opinion 04-12-00630-CV
In paragraph 26, Longview alleged, “Riley-Huff is a direct competitor of Longview; on
information and belief, one or more of the Huff Energy companies is directly or indirectly the
majority and controlling investor of Riley-Huff.” In paragraphs 23, 24, and 25, Longview repeated
its allegations that Riley-Huff was one of Longview’s “direct competitors.” In paragraph 42,
Longview alleged D’Angelo and another Huff associate were managers of Riley-Huff, “a fact
neither of them disclosed to Longview.” Paragraph 50 reads:
On the eve of the January 28, 2010 Board meeting, [a Huff associate] sent a letter
on behalf of WRH Energy to Longview expressing its displeasure with Longview’s
management, especially with regard to asset acquisitions. . . . The letter did not
disclose that the Huff parties had decided to pursue Eagle Ford opportunities
through Riley-Huff and its other portfolio companies rather than Longview, nor
that it already had negotiated a contract with Ford’s company, Wyldfire.
In Paragraph 53, Longview alleged “Riley-Huff ultimately acquired through Wyldfire thousands
of acres first identified and targeted by Longview and it obtained tens of thousands of acres from
other sources.” Paragraph 54 alleges, “By as early as April 2010, Huff Energy had dumped almost
$40 million into Riley-Huff’s Eagle Ford play, which—by no coincidence—was exactly what
Longview had proposed to do only weeks earlier to its Board (and to Huff and D’Angelo as
Directors).”
Delaware law entitles a corporation to relief if one of its directors forms or operates a
competing company without the corporation’s consent. See Brown, 1977 WL 2566, at *5; Craig,
166 A.2d at 446. Longview alleged (1) Huff and D’Angelo were directors of Longview (Paragraph
18, 54); (2) Huff and D’Angelo formed a company that was a competitor of Longview (Paragraphs
23, 24, 25, 26, and 34); (3) Huff and D’Angelo operated Riley-Huff in competition with Longview
(Paragraphs 53-54); and (4) Huff and D’Angelo did not disclose to Longview that they had formed
and operated Riley-Huff (Paragraphs 42, 50). It is reasonable to infer that if Huff and D’Angelo
did not disclose the formation and operation of Riley-Huff to Longview, Longview did not approve
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Dissenting Opinion 04-12-00630-CV
Huff and D’Angelo’s formation and operation of Riley-Huff. See Roark, 633 S.W.2d at 809
(requiring courts to make reasonable inferences from pleader’s factual allegations). Because
Longview alleged a factual situation—Huff and D’Angelo’s formation and operation of a
competing company—that entitled it to obtain relief under Delaware law, Longview alleged a
cause of action against Huff and D’Angelo for competition.
The petition gave fair notice of the competition claim. In the Factual Background of its
pleading, Longview alleged facts supporting all essential elements of a competition claim against
Huff and D’Angelo for competing with Longview through Riley-Huff. These allegations informed
Huff and D’Angelo that their competition with Longview through Riley-Huff was an issue in the
case and testimony regarding their competition through Riley-Huff would be relevant. See
Horizon/CMS, 34 S.W.3d at 896. An attorney of reasonable competence could ascertain from the
live pleadings that Huff and D’Angelo’s secret formation and operation of a direct competitor was
a basic issue in the case. See Bowen v. Robinson, 227 S.W.3d 86, 91 (Tex. App.—Houston [1st
Dist.] 2006, pet. denied). As the factual allegations in Hammer, Garza, and Howard were sufficient
to give fair notice of a claim that was not specifically alleged in the Claims section of the pleading,
so too did Longview’s pleading give Appellants fair notice of a competition claim. See Hammer,
400 S.W.2d at 889; Garza, 164 S.W.3d at 616-17; Howard, 786 S.W.2d at 393. In addition to
those factual allegations, Longview further pled legal conclusions that Huff and D’Angelo’s
conduct constituted multiple “breaches” of fiduciary duty in addition to usurpation and placed
themselves in “competition with Longview.” Thus, Longview’s allegations present a stronger case
for fair notice than the allegations did in Hammer, Garza, and Howard.
The majority gives no weight to these allegations under its newly created “themes”
standard of construing pleadings. The majority notes that despite Longview’s allegations regarding
competition and Huff and D’Angelo’s “breaches” of fiduciary duty other than usurpation, the
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Dissenting Opinion 04-12-00630-CV
remainder of Longview’s allegations thematically relate to usurpation—a different theory for a
breach of fiduciary duty. There is no support in Texas law for construing pleadings in accordance
with their themes—recurring, pervasive, dominant, or otherwise. Such a rule of construction adds
unnecessary complexity where Texas courts historically have sought simplicity. See Gunnells
Sand Co., 389 S.W.2d at 597-98; 2 MCDONALD & CARLSON, § 7:2, at 177-80. The majority only
demonstrates that Longview’s usurpation allegations were more prevalent than Longview’s
competition allegations. But simply because a party alleges more facts and legal arguments in
support of one cause of action than another, does not mean the other cause of action was not
sufficiently pled. See Hammer, 400 S.W.2d at 889; Howard, 786 S.W.2d at 393. Thus, the majority
misapplies Texas’s fair-notice pleading standard and, as a result, I believe the majority errs in
concluding Longview’s pleading did not give fair notice of a competition claim.
2. By recasting formal defects and obscurities in Longview’s pleading as a “no fair
notice” issue, the majority further misapplies the liberal construction rule and gives no
effect to Texas Rules of Civil Procedure 90 and 91.
By choosing not to specially except to Longview’s live pleading, Appellants made no
written objection to any defect or obscurity in Longview’s live pleading in the trial court. See TEX.
R. CIV. P. 90, 91. Rules 90 and 91 require a party who wishes to complain about a pleading’s
defects or obscurities to identify the defect or obscurity in writing and to bring the special exception
to the trial court’s attention. TEX. R. CIV. P. 90, 91. Otherwise, all complaints about a pleading’s
defects and obscurities are waived. TEX. R. CIV. P. 90; Shoemake v. Fogel, Ltd., 826 S.W.2d 933,
937 (Tex. 1992); Aquila Sw. Pipeline, Inc. v. Harmony Exploration, Inc., 48 S.W.3d 225, 233
(Tex. App.—San Antonio 2001, pet. denied). When a party chooses not to specially except in
accordance with Rules 90 and 91, then the opposing party is given no opportunity to correct the
pleading defect or obscurity and, therefore, courts must liberally construe the pleading in the
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Dissenting Opinion 04-12-00630-CV
pleader’s favor and uphold any claim or defense that is reasonably inferable from what is contained
in the pleading. Horizon/CMS, 34 S.W.3d at 897.
In this context, the liberal construction rule is intended to assist courts in construing a
party’s pleading when the pleading contains defects and obscurities, formal and substantive, about
which opposing parties have waived all complaints. See id.; Roark, 633 S.W.2d at 810. Unless a
pleading is devoid of factual or legal allegations from which a claim or defense can be reasonably
inferred, “no fair notice” arguments raised without a special exception in the post-pleading phases
of litigation—such as the summary judgment phase or, as in this case, at the charge conference—
should be resolved in the pleader’s favor. See Horizon/CMS, 34 S.W.3d at 897; Roark, 633 S.W.2d
at 809-10; see also Med. Disc. Pharmacy, L.P. v. State, No. 01-13-00963-CV, 2015 WL 4100483,
at *12 (Tex. App.—Houston [1st Dist.] July 7, 2015, no pet.) (mem. op.) (applying fair-notice
standard and liberal construction rule in determining whether pleadings supported submission of
jury question); U.S. Fire Ins. Co. v. Lynd Co., 399 S.W.3d 206, 221 (Tex. App.—San Antonio
2012, pet. denied) (applying the fair-notice standard and liberal construction rule in the summary
judgment context). If formal pleading defects and obscurities—the complaints about which have
been waived—could properly be recast as “no fair notice” arguments, then special exceptions
would serve little to no purpose, the waiver rule provided in Rule 90 would have no effect, and the
past 170 years’ liberalization of Texas’s pleading standard to prioritize substantive rights over
compliance with technical rules would be largely undone. See 2 MCDONALD & CARLSON, § 7:2,
at 177-80.
The majority recasts Longview’s pleading defects and obscurities, about which Appellants
have waived all complaints under Rule 90, as reasons why Longview did not give fair notice of a
competition-based theory of liability. Although using other words, the majority faults Longview
for obscurities created by the inclusion of obfuscatory legal allegations, and its failure to comply
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Dissenting Opinion 04-12-00630-CV
with Rules 45 and 47(a)’s requirement that the statement of its causes of action be “short” and
“concise,” and with Rule 50’s requirement that each paragraph averring a claim be limited as far
as practicable to a single set of circumstances.
The majority cites several pleading defects and obscurities as reasons why Appellants had
no fair notice of a competition claim. First, the primary basis for the majority’s holding is that the
over-abundance of usurpation allegations obscured whether Longview intended to pursue a claim
based on its competition allegations (an obscurity and arguable defect under Rules 45 and 47).
Second, the majority notes Longview’s pleading fails to include a separate paragraph in the Claims
section in which Longview clearly states it is alleging competition as an independent cause of
action (an arguable defect under Rule 50). Third, the majority notes Longview’s request for a
constructive trust was unclear because Longview had one request based solely on usurpation while
it had a second, broader request for a constructive trust based on Huff and D’Angelo’s “breaches”
of fiduciary duty (an obscurity). Fourth, it notes that Longview characterized its other theories of
recovery, such as fraud and tortious interference, “in terms of” usurpation (an obscurity). The
majority claims it has liberally construed Longview’s pleading in Longview’s favor, but it has not
done so in a way that effectuates the purpose of Rules 90 and 91, which require that a party file
written special exceptions or waive any complaint about a pleading’s defects and obscurities.
Appellants express a concern that if a party were to file an excessively long pleading and
allege barely sufficient facts that comprise a claim or defense, an opponent would be deemed to
have fair notice. However, a litigant has mechanisms available to address excessively long
pleadings in which claims could be buried. First, a party can file special exceptions and force an
opposing party to re-plead its causes of action shortly and concisely in separate paragraphs without
extraneous, obfuscatory allegations. See TEX. R. CIV. P. 45, 47, 49, 50, 90, 91; see also 2
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Dissenting Opinion 04-12-00630-CV
MCDONALD & CARLSON, §§ 9:25, 9:27. 6 Second, the party can serve interrogatories and requests
for disclosures to have the opposing party identify their legal theories. See TEX. R. CIV. P. 194.2(c),
197.1. Third, the party can file a Chapter 10 motion for sanctions for attorney’s fees when an
opposing party files a pleading intended to delay or needlessly increase the cost of litigation. See
TEX. CIV. PRAC. & REM. CODE ANN. §§ 10.001(1), 10.002-.005 (West 2002). Given Texas courts’
efforts to liberalize the pleading standard, the greater concern is creating a technical, yet
amorphous standard that—even in the absence of special exceptions—requires a party to plead
claims and defenses in terms of prominent themes.
Ultimately, Appellants’ failure to specially except in the trial court defeats the arguments
they raise in their post-submission briefing. The purpose of special exceptions is to force
clarification and specification when a pleading is defective or obscure. See Hefley, 131 S.W.3d at
65; Stone, 554 S.W.2d at 187; Howard, 786 S.W.2d at 393. Had Appellants filed special exceptions
identifying the defects and obscurities upon which the majority bases its holding, Longview would
have had the opportunity to correct and clarify its pleadings to address those alleged defects and
obscurities. See Horizon/CMS, 34 S.W.3d at 897. By choosing not to file special exceptions,
Appellants deprived Longview of the opportunity to correct and clarify its pleadings. See id.
Longview should not be penalized on appeal because Appellants chose not to specially except in
the trial court.
C. The trial court properly construed Longview’s pleading so as to do substantial justice.
Longview argues the record confirms Appellants were informed and aware that Longview
was pursuing a theory of liability based on Huff and D’Angelo’s competition through Riley-Huff.
6
“If the trial court properly sustained the special exceptions and the plaintiff refuses or fails to amend, the trial court
does not err in dismissing the cause of action.” Connolly v. Gasmire, 257 S.W.3d 831, 838 (Tex. App.—Dallas 2008,
no pet.).
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Dissenting Opinion 04-12-00630-CV
Trial courts must construe “[a]ll pleadings . . . so as to do substantial justice.” TEX. R. CIV. P. 45.
When a pleading is ambiguous as to the legal theories upon which the pleader relies, courts must
balance “the intent of the rules to eliminate technicality” and the need to ensure all “parties are
aware of the basic controversies to be settled.” See 2 MCDONALD & CARLSON, § 7:4, at 191. Such
determinations must be made on a case-by-case basis. Id. (citing Murray v. O & A Express, Inc.,
630 S.W.2d 633, 636 (Tex. 1982)). Courts apply “a standard of convenience and fairness, bearing
in mind the positions of the parties and such pertinent factors as their means of knowledge of the
facts and access to necessary evidence.” Id.; see Hammer, 400 S.W.2d at 889 (considering request
for admission in determining whether a party had fair notice of theory of breach of duty in
negligence suit). 7
The record is replete with clear indications that confirm Appellants had fair notice of
Longview’s claim of a breach of fiduciary duty by competition. At the very least, the following
7
See, e.g., Fountains Int’l Group, Inc. v. Summit Oak Dev., LLC, No. 04-14-00205-CV, 2015 WL 1138418, at *3 n.2
(Tex. App.—San Antonio Mar. 11, 2015, no pet.) (mem. op.) (noting that language in the partial summary judgment
was “an indication that Summit Oaks was well aware that Fountains International was seeking to recover interest
accruing after September 14, 2002”); U.S. Fire, 399 S.W.3d at 221 (“Further, the record indicates that U.S. Fire was
aware that one of the issues to be resolved at the bench trial was the amount of penalty interest owed on the $5 million
in payments made by U.S. Fire. We conclude U.S. Fire had fair notice of Lynd’s claim for statutory interest on the $5
million payment.”); Jefferson Cnty. Appraisal Dist. v. Morgan, No. 09-11-00517-CV, 2012 WL 403861, at *2 (Tex.
App.—Beaumont Feb. 9, 2012, no pet.) (mem. op.) (holding that although petition did not refer to 2006 tax year
appraisal, record supported conclusion that petition’s reference to 2005 tax year was mistake and “[t]here could be no
confusion by the parties on that point”); Burke v. Union Pac. Res. Co., 138 S.W.3d 46, 68 (Tex. App.—Texarkana
2004, pet. denied) (noting “the depositions of Russell and Lori Burke indicate that UPRC was well aware that the
Burkes were seeking damages for the dead cattle and the decreased weight gain of the surviving cattle”); Boorhem-
Fields, Inc. v. Burlington N. R. Co., 884 S.W.2d 530, 534 (Tex. App.—Texarkana 1994, no writ) (“The record as a
whole indicates that Boorhem-Fields had fair notice that the entire clearances provision was in dispute.”); Cartwright
v. MBank Corpus Christi, N.A., 865 S.W.2d 546, 552 (Tex. App.—Corpus Christi 1993, writ denied) (“Construing
the pleading with an effect to do ‘substantial justice’ and mindful that the Cartwrights were not prejudiced in their
attempt to raise defenses against the note, we hold the pleadings sufficient to allow judgment . . . .”); see also Lone
Star Gas Co. v. Thomas, 345 S.W.2d 844, 848 (Tex. Civ. App.—Fort Worth 1961, writ ref’d n.r.e.) (“The modern
tendency is toward greater liberality in the construction of pleadings in order not to require the retrial of a case when
justice has been done, and the parties understood what the points in issue were, and the same were submitted to a court
or jury.”); 2 MCDONALD & CARLSON, § 7:4, at 190 (“Notice is obtained not merely from the pleadings. The availability
of discovery procedures relieves the pleader of the burden of alleging the details of a claim . . . as may be sought in
preparation for trial.”).
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Dissenting Opinion 04-12-00630-CV
shows why Appellants could not argue they were surprised by Longview requesting the submission
of Question No. 2 at the jury charge conference.
 In their written response to Longview’s motions in limine, Appellants noted, “The crux of
Plaintiff’s claim is a lack of disclosure on the part of the Huff Defendants with regard to
the Huff Defendants’ alleged competition with Longview. . . . The Confidentiality
Agreement referenced in Plaintiffs Motion in Limine . . . provides disclosure to Longview
that the Huff Defendants were in competition with Longview. This evidence is directly
relevant to the Huff Defendants’ defense in this litigation, and directly contradicts Plaintiffs
primary theory in this case.”
 Huff and D’Angelo also filed a motion to exclude Longview’s expert Ronald J. Gilson.
The motion, which was based not upon relevance but upon improper expert testimony,
sought to exclude Gilson’s opinions that under Delaware law “competition is prohibited”
and Huff and D’Angelo were prohibited from “competing with Longview without
disclosure.” Huff and D’Angelo objected to Gilson’s “testi[mony] that Huff and D’Angelo
somehow competed with Longview in violation of an economic fiduciary “obligation”
consistent with Delaware law.” Huff and D’Angelo also objected to Gilson’s “opin[ion]
that Huff and D’Angelo ‘prevented Longview from competing with economic interests of
Huff entities.’”
 Huff and D’Angelo attached Gilson’s deposition testimony as Exhibit A to their motion to
exclude. Gilson’s deposition testimony includes significant discussion of Huff’s
competition with Longview through Riley-Huff.
 Attached as Exhibit B to Huff and D’Angelo’s motion to exclude was Longview’s response
to a request for disclosures in which Longview disclosed “the legal theories and . . . factual
bases” for its claims. Longview explained Riley-Huff was “a competing company that the
defendants formed shortly after Longview began investigating the Eagle Ford” and that
D’Angelo served as a manager without disclosure to Longview. Longview further
disclosed that “Huff and D’Angelo owed fiduciary duties to Longview by virtue of their
position on the Longview board of directors. They breached these duties when they stole
Longview’s proprietary information, diverted the Eagle Ford opportunity to a competing
entity from which they stood to gain a larger profit, and failed to present to Longview other
opportunities to invest in the Eagle Ford.” Longview listed D’Angelo and several others as
persons with knowledge of relevant facts and stated they were “involved with several oil
and gas companies that are direct competitors of Longview, including . . . Riley-Huff.” The
disclosures also mentioned Gilson’s opinions, including the following: “The duties of
directors are well known. . . . Reasonably prudent directors know that they must conform
their behavior to a standard of conduct mandating that their first loyalties are to the
corporation (not to their own self-interest or that of another organization) and to which they
must be candid, make full disclosure, and avoid competing interests”; “During the critical
investment period (late 2009/early 2010), neither Huff nor D’Angelo disclosed to
Longview’s board that Huff Energy was investing heavily in the Eagle Ford trend or that
Longview was in competition with Riley-Huff for Eagle Ford acreage, including acreage
available through Wyldfire”; and “Huff and D’Angelo acted in competition with Longview
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Dissenting Opinion 04-12-00630-CV
while they were in possession of information that Longview had provided to them.” The
disclosures also mentioned the following expert opinion of Robert Valdez: “Anyone who
is a director of a corporation knows that he or she must be strictly faithful and loyal to the
company. This means that a director who has a conflict of interest or who wants to compete
with the company must first get the permission of the majority of other directors.”
 Longview filed a motion to exclude the testimony of Gilbert Herrera, an expert witness for
Appellants. Longview noted Herrera was hired to compare the “due diligence of competing
oil and gas companies—Longview Energy and Riley-Huff.” Longview argued Herrera’s
opinion as to the reasonableness of Huff’s evaluation of Longview’s due diligence was
irrelevant because “Huff and D’Angelo, as board members, owed a fiduciary duty not to
compete with Longview,” (emphasis in original) and cited authority supporting that
Delaware law recognizes competition as a breach of duty separate from usurpation of a
corporate opportunity.
 Attached to Longview’s motion to exclude was a defendant’s response to a request for
disclosure stating, “Herrera will . . . testify regarding the industry practice and/or custom
that is associated with private equity investors having more than one portfolio company
competing for the same and/or similar investment, including investments in competing oil
and gas companies. . . . Herrera shall opine that it is common . . . for investors, like the
Huff Defendants, to make and/or consider investments in companies that may compete in
the same industry and/or area.”
 In Longview’s response to Riley-Huff’s motion to expunge lis pendens, Longview’s
Preliminary Statement begins with the assertion that “Defendants stole oil and gas leases
properly belonging to Longview and lodged them in Riley-Huff, an entity established and
maintained for the express purpose of illegally competing with Longview.”
The record confirms Huff and D’Angelo were informed and aware that their unapproved
competition with Longview through Riley-Huff was a basic issue to be settled at trial, and
testimony regarding this issue would be relevant. See Horizon/CMS, 34 S.W.3d at 896. Thus, the
trial court properly construed Longview’s pleading “so as to do substantial justice.” TEX. R. CIV.
P. 45; accord Howell v. Mauzy, 899 S.W.2d 690, 707 (Tex. App.—Austin 1994, writ denied)
(“Technical rules of pleading cannot defeat a right substantially alleged.”) (citing Barnes v.
Patrick, 105 Tex. 146, 146 S.W. 154, 155 (1912)); see also De Loach, 128 F.2d at 380;
2 MCDONALD & CARLSON, § 7:4, at 189, 191.
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Dissenting Opinion 04-12-00630-CV
D. Conclusion
Longview’s pleading contained factual allegations that Huff and D’Angelo, while active
directors on Longview’s board, formed and operated a competing company, Riley-Huff, without
disclosing this competition to Longview or seeking its prior approval. Under Delaware law, this is
a breach of fiduciary duty separate from usurping a corporate opportunity. In the absence of special
exceptions, Longview’s live pleading was sufficient to give Appellants fair notice that Huff and
D’Angelo’s competition with Longview through Riley-Huff was one of the “breaches” of fiduciary
duty to be resolved at trial. Applying nearly 170 years of Texas jurisprudence in considering
Longview’s allegations, and liberally construing them in Longview’s favor, I would hold
Longview gave fair notice of a competition claim. The trial court’s overruling of Appellants’
objection to the submission of Question No. 2 is further supported by clear evidence in the record
confirming that Appellants were given fair notice—through pleadings, interrogatories, disclosures,
motions in limine, and expert deposition testimony, including Appellants’ own defense expert’s
hired to rebut Longview’s competition allegations—that Longview intended to prove a breach of
fiduciary duty based on Huff and D’Angelo’s direct competition with Longview by forming and
operating Riley-Huff. Question No. 2 regarding competition was supported by the pleadings, and
thus the trial court did not err by submitting the question to the jury. 8
V
CONSTRUCTIVE TRUST & MONETARY AWARD
Appellants raise numerous other issues, arguing that Longview is not entitled to either a
constructive trust or monetary relief and, alternatively, Longview may not recover both. As
8
I would further hold Riley-Huff’s liability for aiding and abetting was established through the jury’s findings, which
were supported by sufficient evidence that Riley-Huff knowingly participated in Huff and D’Angelo’s breach. Under
Delaware law, Riley-Huff can be held liable for aiding and abetting a breach of fiduciary duty. See Malpiede v.
Townson, 780 A.2d 1075, 1096 (Del. 2001); O’Malley v. Boris, 742 A.2d 845, 851 (Del. 1999).
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Dissenting Opinion 04-12-00630-CV
explained below, I would sustain Appellants’ issues regarding the trial court’s error in not
accounting for Riley-Huff’s developments costs, and reverse and remand for further proceedings.
I would overrule Riley-Huff’s remaining issues.
A. Explanation of the Jury Findings & Trial Court’s Judgment
After finding Huff and D’Angelo breached their fiduciary duty to Longview, and that
Riley-Huff was liable for knowingly participating in their breach, the jury found Riley-Huff
acquired assets in the Eagle Ford shale “as a result of” the breach. The jury also answered four
valuation questions regarding Riley-Huff’s Eagle Ford assets:
The market value of the assets in the Eagle Ford shale that Riley-Huff acquired as
a result of Huff and D’Angelo’s breach was $42 million.
The amount Riley-Huff paid for its assets in the Eagle Ford shale was
$24.5 million.
The amount of past production revenues Riley-Huff derived from the wrongfully
acquired assets in the Eagle Ford shale was $120 million.
Riley-Huff paid $127 million to develop the assets it acquired in the Eagle Ford
shale.
Longview acknowledged during oral argument that it may recover either (1) the assets in a
constructive trust or (2) the assets’ market value of $42 million. Longview requested that the trial
court impose a constructive trust on the Eagle Ford assets Riley-Huff acquired as a result of Huff
and D’Angelo’s breach of fiduciary duty. Riley-Huff requested an offset against the constructive
trust for its acquisition and development costs, but Longview argued Riley-Huff was akin to a bad-
faith trespasser and thus not entitled to offsets for development costs.
Granting Longview’s request, the trial court awarded Longview a constructive trust on the
Eagle Ford assets rather than the assets’ market value of $42 million. The trial court also awarded
Longview $120 million for the value of the past production revenues. Although the trial court
offset the $120 million by the $24.5 million in acquisition costs, it did not offset Riley-Huff’s
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Dissenting Opinion 04-12-00630-CV
development costs of $127 million. As a result, the judgment awards Longview a constructive trust
(without offsets) and an additional $95.5 million.
The trial court granted Longview an equitable interest in and imposed a constructive trust
“over all right, title and interest of Riley-Huff in and to” the Eagle Ford assets identified by the
judgment. It ordered Riley-Huff “to execute and deliver to Longview all instruments and
documents and to do all acts and things as may be necessary to fully transfer, convey, grant, or
assign to Longview the legal title to all of the respective properties, rights and interests.” The trial
court specified the leases by reference to two of Appellants’ trial exhibits, Exhibits 2166 and 2860.
Exhibit 2166 contained all of the actual Eagle Ford leases at issue in the case, and Exhibit 2860
was a list of those leases.
The trial court incorporated Exhibit 2860 as two exhibits to the judgment: Exhibit A
contains all leases Riley-Huff executed between January 2010 and February 2011, and Exhibit B
are those leases “expressly excluded from the Constructive Trust” that Riley-Huff acquired
“pursuant to the ‘BGE’ transaction and the ‘Maali’ transaction” and executed before January 2010.
Also included in the constructive trust are ancillary interests related to the included leases; wells
located on the leased acreage; all oil, gas, and other minerals produced therefrom; all production
revenues derived therefrom, from June 2, 2012 (the date of the jury’s verdict) until the date of
transfer of the assets; and all documents and records related to the leases.
B. Standard of Review & Applicable Law
Under Texas law, the imposition, scope, and application of a constructive trust is generally
left to the trial court’s discretion. Baker Botts, L.L.P. v. Cailloux, 224 S.W.3d 723, 736 (Tex.
App.—San Antonio 2007, pet. denied). A trial court abuses its discretion if it acts arbitrarily,
unreasonably, without reference to any guiding rules and principles, or without supporting
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Dissenting Opinion 04-12-00630-CV
evidence. Id. Because the parties agreed in the trial court that Delaware law applies to remedy
issues, Delaware law provides the applicable guiding rules and principles.
Under Delaware law, the “imposition of a constructive trust upon all profits derived from
the competing [company]” is a proper remedy for a breach of fiduciary duty by competition.
Brown, 1977 WL 2566, at *5; see Guth, 5 A.2d at 510. A constructive trust “is an equitable remedy
of great flexibility and generality.” Hogg v. Walker, 622 A.2d 648, 652 (Del. 1993). Under
Delaware law, the purpose of a constructive trust in the corporate context is to ensure a corporate
director does not profit from breaching his fiduciary duty of loyalty. Guth, 5 A.2d at 510. “[T]he
duty to transfer the property relates back to the date of the wrongful act that created the constructive
trust.” Hogg, 622 A.2d at 652.
C. The $95.5 Million Award
Appellants argue the trial court erred by denying Riley-Huff’s request for offsets against
the constructive trust and not awarding reimbursement for Riley-Huff’s development costs of
$127 million.9 Longview’s basis for the $95.5 million award in addition to the constructive trust
is that Riley-Huff was akin to a bad-faith trespasser and did not prove its development costs were
reasonable and necessary. Thus, the propriety of the $95.5 million award turns on whether, under
Delaware law, Riley-Huff is entitled to offsets against the constructive trust for its development
costs.
Delaware law limits constructive trusts to disgorging unjust enrichment (profits or
benefits). See Guth, 5 A.2d at 510. Recognizing this principle, Delaware courts award offsets when
imposing a constructive trust without regard to bad faith or whether the expenses were “reasonable
9
In the same issue, Appellants also argue that the constructive trust’s inclusion of post-verdict production revenues
should have been limited to profits. In accordance with this section’s conclusion, I would also hold the trial court
abused its discretion by not limiting the constructive trust to post-verdict profits.
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Dissenting Opinion 04-12-00630-CV
and necessary.” See Walker v. Res. Dev. Co. Ltd., L.L.C. (DE), 791 A.2d 799, 818 (Del. Ch. 2000);
see, e.g., Hayward v. Green, 88 A.2d 806, 812 (Del. 1952). Longview cites no authority, and I
found none, that under Delaware law, a constructive trust may include more than profits or benefits
when a corporate director breaches his fiduciary duty in bad faith. I would hold the trial court erred
by awarding Longview $95.5 million in addition to the constructive trust because it did not account
for Riley-Huff’s development costs of $127 million. See Guth, 5 A.2d at 510.
D. Constructive Trust
Appellants argue the judgment is defective because the constructive trust language is “void
for vagueness” and violates the statute of frauds; the constructive trust violates the rights of third
parties; Longview did not trace the leases in the constructive trust to usurping a corporate
opportunity; and the constructive trust gives Longview an inequitable windfall.
I would overrule Appellants’ vagueness, statute-of-frauds, and “rights of third parties”
issues. The judgment clearly orders Riley-Huff to transfer all rights, title, and interests in and to
certain leases, which the judgment specified by reference to the actual lease documents from a trial
exhibit that Appellants offered. See Hogg, 622 A.2d at 652 (“[T]he only duty of the constructive
trustee is to transfer the property to the equitable owner.”); see also Pick v. Bartel, 659 S.W.2d
636, 637 (Tex. 1983) (noting judgments satisfy statute of frauds by including property description
or “by reference to other identified writings”). The lease documents provide that the lessors may
not unreasonably withhold their consent to Riley-Huff’s assignment of interests or that Riley-Huff
may assign its interest without the lessors’ consent.
I would also overrule Appellants’ “tracing” issues. Because the jury found Riley-Huff
wrongfully acquired Eagle Ford leases “as a result of” Huff and D’Angelo’s breach, and D’Angelo
admitted Riley-Huff and Longview were both trying to “get into Eagle Ford shale and acquire
leases,” the only relevant factual question the jury did not answer was, “What are the interests in
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Dissenting Opinion 04-12-00630-CV
Eagle Ford leases that Riley-Huff acquired in trying to ‘get into Eagle Ford shale and acquire
leases’?” The trial court admitted Appellants binders of leases that they represented were leases
Riley-Huff acquired in the Eagle Ford shale. Counsel for Riley-Huff confirmed at oral argument
“everything that Riley-Huff owned or at one time may have owned or had a part of is in those
binders” and the binders were offered at trial to show that of all the leases Riley-Huff purchased,
none were inside Longview’s claimed “corporate opportunity.” There was no dispute at trial, nor
is there a dispute here on appeal, as to what interests in Eagle Ford leases Riley-Huff acquired in
competing with Longview in trying to “get into Eagle Ford shale and acquire leases.” Because jury
findings are necessary only when material facts are disputed, I would overrule these issues. See
DiGiuseppe v. Lawler, 269 S.W.3d 588, 596 (Tex. 2008).
Appellants repeatedly emphasize that the windfall to Longview is “astounding” and the
constructive trust is likely the largest imposed in Texas history. But context matters. In the
corporate context, Delaware courts recognize the “sound public policy that it is better to give a
windfall to a beneficiary than to let a faithless fiduciary benefit from his wrongdoing.” See
Bomarko, Inc. v. Int’l Telecharge, Inc., 794 A.2d 1161, 1190 (Del. Ch. 1999), aff’d, 766 A.2d 437
(Del. 2000) (citing Thorpe, 676 A.2d at 445; Guth, 5 A.2d at 510). Appellants cite no authority
that the size of a constructive trust necessarily affects its propriety. That the constructive trust
might be the largest in Texas history, alone, shows nothing more than Huff and D’Angelo
potentially committed the most profitable breach of fiduciary duty in Texas history. See Guth, 5
A.2d at 510 (explaining a constructive trust under Delaware law should disgorge all profits
obtained as a result of a corporate breach of fiduciary duty).
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Dissenting Opinion 04-12-00630-CV
VI
CONCLUSION
I would affirm the liability of Huff, D’Angelo, and Riley-Huff, but reverse the constructive
trust and $95.5 million awards. I would remand the case for the trial court to reconsider an
appropriate remedy in light of Riley-Huff’s entitlement to reimbursement for its development
costs. See Drury Sw., Inc. v. Louie Ledeaux #1, Inc., 350 S.W.3d 287, 293-94 (Tex. App.—San
Antonio 2011, pet. denied) (noting trial court should award prevailing party the greatest and most
favorable relief supported by the record). 10
Luz Elena D. Chapa, Justice
10
Because the trial court could properly exercise its discretion to award a constructive trust if the case were remanded,
I do not address the lis pendens issue.
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