AZZ Incorporated and AZZ Group, L.P. v. Michael Coleman Morgan Boyce Galvanizing, LLC And Big Spring Holdings, LLC , 462 S.W.3d 284 ( 2015 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-14-00097-CV
AZZ INCORPORATED AND AZZ APPELLANTS
GROUP, L.P.
V.
MICHAEL COLEMAN MORGAN; APPELLEES
BOYCE GALVANIZING, LLC; AND
BIG SPRING HOLDINGS, LLC
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FROM THE 67TH DISTRICT COURT OF TARRANT COUNTY
TRIAL COURT NO. 067-257747-12
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OPINION
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I. INTRODUCTION
This is an appeal from a judgment on a jury’s verdict in favor of Appellees
Michael Coleman Morgan; Boyce Galvanizing, LLC; and Big Spring Holdings,
LLC. The primary issues we address in this appeal are whether Appellants AZZ
Incorporated and AZZ Group, L.P. (collectively, “AZZ”) conclusively established
that AZZ suffered $454,000 in past lost-profit damages and, alternatively,
whether the jury’s findings that AZZ suffered zero past lost profits and zero future
lost profits were against the great weight and preponderance of the evidence. 1
Because the evidence does not conclusively establish past lost profits and
because the jury’s zero past and future lost-profits damages findings are not
against the great weight and preponderance of the evidence, we will affirm.
II. FACTUAL AND PROCEDURAL OVERVIEW2
AZZ is in the business of galvanizing steel to prevent corrosion and to
strengthen steel products; AZZ has thirty-five galvanizing plants. AZZ hired then
twenty-three-year-old Cole Morgan in 2006 as an engineer. In connection with
his employment with AZZ, Morgan signed a “Code of Ethics” and an “Employee
Invention, Trade Secret, and Non-Compete Agreement.”3 In March 2010, AZZ
promoted Morgan to the position of plant manager, and he moved to Peoria,
1
AZZ does not expressly limit its factual sufficiency challenge to the jury’s
past lost-profits damages finding, so we liberally construe AZZ’s issue as
challenging both the factual sufficiency of the jury’s zero past lost-profits
damages finding and the jury’s zero future lost-profits damages finding. See Tex.
R. App. P. 38.1(f) (requiring appellate court to construe issues as covering every
subsidiary question fairly included).
2
We limit our recitation of the facts to those relevant to our disposition of
this appeal; much testimony and evidence exists in the record concerning AZZ’s
misappropriation-of-trade-secrets and breach-of-fiduciary-duty theories of
recovery that we need not set forth here.
3
Although containing the phrase “Non-Compete Agreement” in its title, it is
undisputed that this contract contains no postemployment noncompete provision;
no contractual provision exists prohibiting Morgan from competing with AZZ after
leaving AZZ’s employment.
2
Illinois, to manage AZZ’s plant there. In late summer 2010, AZZ promoted
Morgan again, and he moved to Baton Rouge, Louisiana, to serve as the plant
manager of an even larger AZZ plant located there.
In January 2011, while managing AZZ’s plant in Baton Rouge, Morgan
completed a twenty-eight-page business plan for a competing steel galvanizing
business in Big Spring, Texas, that Morgan planned to name Boyce Galvanizing.
Morgan set up a Boyce Galvanizing email address as well. Morgan’s business
plan referenced his knowledge of the steel galvanizing industry that was acquired
while he was employed by AZZ. Morgan’s plan listed several existing AZZ
customers as included within the possible customer market for Boyce
Galvanizing; one of them was Interstate Steel, a long-time customer of AZZ that
had generated $691,000 in sales revenue for AZZ in 2012. Interstate Steel’s
plant is located in Big Spring, Texas.
In the spring of 2011, Morgan contacted the Big Spring Economic
Development Corporation, banks, lenders, potential investors, and property
owners to discuss purchasing property and building a steel galvanizing plant in
Big Spring. Throughout the spring, summer, and early fall of 2011, while still
managing AZZ’s Baton Rouge plant, Morgan emailed, phoned, or met with
Interstate Steel’s CEO Kaddo Kothman dozens of times. The purpose of at least
some of the contacts was to explore whether Interstate Steel might be interested
in utilizing Morgan’s company––Boyce Galvanizing––for its steel galvanizing
needs if Morgan was successful in funding and building Boyce Galvanizing.
3
During one of these contacts, Morgan offered Kothman the opportunity to invest
in Boyce Galvanizing.
Morgan did not tell AZZ of his plans for, or inquiries on behalf of, Boyce
Galvanizing. On September 2, 2011, Morgan gave AZZ two weeks’ notice of his
upcoming September 16, 2011 resignation. Morgan traveled to Big Spring on
September 22, 2011. In October 2011, in order to secure a bank loan, Morgan
obtained written letters of intent from six known customers of AZZ––including
Interstate Steel––setting forth the pounds of steel, on average, that Boyce
Galvanizing would galvanize for the customer annually.
In December 2011, AZZ learned of Morgan’s plans for Boyce Galvanizing
and sent him a cease-and-desist letter. Morgan built a steel galvanizing plant in
Big Spring and opened the doors of Boyce Galvanizing for business on February
18, 2013. Interstate Steel was Boyce Galvanizing’s first customer; between
February 2013, when Boyce Galvanizing opened and the time of trial in October
2013, Boyce Galvanizing generated $468,098 in revenue from Interstate Steel.
AZZ sued Morgan, Boyce Galvanizing, and Big Spring Holdings4 for
misappropriation of trade secrets, breach of fiduciary duty, and breach of
contract. The case was tried to a jury; the jury failed to find that Morgan, Boyce
Galvanizing, and Big Spring Holdings misappropriated AZZ’s trade secrets and
4
Morgan testified that after AZZ filed the present lawsuit, Boyce
Galvanizing was divided into an asset holding company—Big Springs Holdings,
and an operational company––Boyce Galvanizing.
4
failed to find that Morgan had breached his fiduciary duty to AZZ. The jury found
for AZZ on its breach-of-contract claims against Morgan, finding that Morgan had
failed to comply with both the “Code of Ethics” and the “Employee Invention,
Trade Secret, and Non-Compete Agreement” that he had signed. The jury
found, however, that AZZ had suffered zero past and future lost-profits damages,
which were the only damages submitted. The trial court signed a take-nothing
judgment against AZZ, and AZZ perfected this appeal.
III. LOST PROFITS
In its first issue, AZZ asserts that it conclusively established that AZZ
suffered past lost-profits damages in the amount of $454,000 from the loss of
Interstate Steel’s business. AZZ alternatively asserts in its first issue that the
jury’s awards of zero past and future lost-profits damages are against the great
weight and preponderance of the evidence. Appellees contend that the jury
properly awarded zero past and future lost-profits damages because (1) no
causal nexus exists connecting Morgan’s breach of the contracts he signed to
AZZ’s loss of Interstate Steel’s business or to AZZ’s loss of future profits, and (2)
the jury was justified in disregarding the testimony of AZZ’s damages expert
because his opinions were unreliable and incompetent.
A. The Law Concerning Lost Profits
To recover damages for breach of contract, a plaintiff must show that he
suffered a pecuniary loss as a result of the breach. Peterson Grp., Inc. v. PLTQ
Lotus Grp., L.P., 417 S.W.3d 46, 64 (Tex. App.––Houston [1st Dist.] 2013, pet.
5
denied). “Such losses must be the natural, probable, and foreseeable
consequence of the defendant’s conduct.” Id. (quoting S. Elec. Servs., Inc. v.
City of Houston, 355 S.W.3d 319, 323–24 (Tex. App.––Houston [1st Dist.] 2011,
pet. denied)). A plaintiff may not recover breach-of-contract damages if those
damages are remote, contingent, speculative, or conjectural. Id. Thus, the
absence of a causal connection between the alleged breach and the damages
sought will preclude recovery. Id.
Generally, the measure of damages for breach of a contract is that which
restores the injured party to the economic position he would have enjoyed if the
contract had been performed. Mood v. Kronos Prods., Inc., 245 S.W.3d 8, 12
(Tex. App.—Dallas 2007, pet. denied). This measure may include reasonably
certain lost profits. Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex.
1992). Lost profits may be in the form of direct damages—that is, profits lost on
the contract itself—or in the form of consequential damages—such as profits lost
on other contracts resulting from the breach. Mood, 245 S.W.3d at 12. To be
recoverable, consequential damages must be foreseeable and directly traceable
to the wrongful act and result from it. Stuart v. Bayless, 964 S.W.2d 920, 921
(Tex. 1998) (citing Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812,
816 (Tex. 1997)). Thus, consequential damages are generally not recoverable
unless the parties contemplated at the time they made the contract that such
damages would be a probable result of the breach. Stuart, 964 S.W.2d at 921.
6
Proof of lost profits damages does not necessarily require proof that the
loss is susceptible to exact calculation. Tex. Instruments, Inc. v. Teletron Energy
Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994). Nor is the injured party required
to produce in court the documents supporting the lost-profits opinions or
estimates. Heine, 835 S.W.2d at 84. However, he must do more than merely
show that he suffered some lost profits. ERI Consulting Eng’rs, Inc. v. Swinnea,
318 S.W.3d 867, 876 (Tex. 2010) (citing Heine, 835 S.W.2d at 84); Helena
Chem. Co. v. Wilkins, 47 S.W.3d 486, 504 (Tex. 2001). The injured party must
show the amount of the loss by competent evidence with reasonable certainty.
Swinnea, 318 S.W.3d at 876. “What constitutes reasonably certain evidence of
lost profits is a fact intensive determination.” Heine, 835 S.W.2d at 84. “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 may be ascertained.”
Szczepanik v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex. 1994).
In other words, “reasonable certainty” is not demonstrated when the profits
claimed to be lost are largely speculative or a mere hope for success, as from an
activity dependent on uncertain or changing market conditions, on chancy
business opportunities, or on promotion of untested products or entry into
unknown or unproven enterprises. Atlas Copco Tools, Inc. v. Air Power Tool &
Hoist, Inc., 131 S.W.3d 203, 206–07 (Tex. App.––Fort Worth 2004, pet. denied).
And uncertainty as to the exact amount of lost-profits damages will not defeat
7
recovery, but uncertainty as to the fact of legal damages is fatal to recovery. Sw.
Battery Corp. v. Owen, 131 Tex. 423, 428, 115 S.W.2d 1097, 1099 (1938).
B. Standard of Review
Appellants attacking the legal sufficiency of an adverse finding on an issue
on which they had the burden of proof must demonstrate that the evidence
conclusively establishes all vital facts in support of the issue. Dow Chem. Co. v.
Francis, 46 S.W.3d 237, 241 (Tex. 2001). The appellants must show that there
is no evidence to support the factfinder’s finding and that the evidence
conclusively establishes the opposite of the finding. See id. We first examine
the record for any evidence supporting the jury’s finding while ignoring all
evidence to the contrary. Id. If there is no evidence to support the finding, then
we examine the entire record to determine whether the contrary proposition is
established as a matter of law. Id.
To determine whether the evidence is factually sufficient to support a
finding, an appellate court considers and weighs all evidence that was before the
trial court. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). “When a party
attacks the factual sufficiency of an adverse finding on an issue on which she has
the burden of proof, she must demonstrate on appeal that the adverse finding is
against the great weight and preponderance of the evidence.” Francis, 46
S.W.3d at 242; In re King’s Estate, 150 Tex. 662, 665, 244 S.W.2d 660, 661
(1951). As the reviewing court, we may not act as factfinder and may not pass
judgment on the credibility of witnesses or substitute our judgment for that of the
8
trier of fact. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex.
2003).
C. Analysis
1. The Jury’s Findings
The jury found that Morgan had breached both of the contracts he signed
with AZZ––the “Code of Ethics” and the “Employee Invention, Trade Secret, and
Non-Compete Agreement.” The “Employee Invention, Trade Secret, and Non-
Compete Agreement” provided, in pertinent part:
8. Employee agrees that during the period Employee is employed
by Employer, Employee shall not engage in any business or any
other activity which is or may be contrary to the welfare, interests or
benefit of Employer.
Morgan testified that he did not honor paragraph 8 of the “Employee Invention,
Trade Secret, and Non-Compete Agreement” during his employment with AZZ.
He testified:
Q. Did you honor that provision during your employment with
AZZ?
A. . . . in the strictest sense of that provision of this
agreement, I did not honor it. I was making a plan, but I also did not
violate that. I did not go into competition while I was employed. I did
not solicit employees. I did not solicit customers. I did not have any
money to start anything. I do not believe I violated it. But in honor,
no, I was in the wrong.
The “Code of Ethics” provided, in pertinent part:
Conflicts of Interest
You are expected to avoid all situations that might lead to a real or
apparent conflict between your self-interest and your duties and
9
responsibilities to the Company. . . . Any position or interest,
financial or otherwise, which could materially conflict with your
performance as an officer, director or employer of the Company, or
which affects or could reasonably be expected to affect your
independence or judgment concerning transactions between the
Company and its customers, suppliers or competitors or otherwise
reflects negatively on the Company should be considered a conflict
of interest.
....
Corporate Opportunities
Using confidential information about the Company or its businesses,
employees, agents, officers, directors, customers, or suppliers for
personal benefit or disclosing such information to others outside your
normal duties is prohibited.
Morgan testified that he believed he did honor the “Conflicts of Interest”
provision, specifically with regard to Interstate Steel. He testified:
Q. Do you believe you honored that provision [the “Conflicts of
Interest” provision] in respect to Interstate Steel?
A. I did not solicit them. I do not believe that anything I did, even
opening up the plant, had any decision on Interstate switching
because they had already switched to Sabre Galvanizing a year
before I even came open.
So in your response to Interstate Steel specifically, no, sir.
They switched well before I became a competitor on their own.
Concerning the “Corporate Opportunities” provision, Morgan admitted that he
had violated that provision in July 2011 by providing detailed profit and loss
information from AZZ’s Peoria plant and Baton Rouge plant during the time he
had managed those plants to a banker in Big Springs, Justin Myers, with whom
Morgan was communicating about the possibility of a loan for Boyce Galvanizing.
10
He testified that this was AZZ’s information and that he should not have
disclosed it.
The damage question included in the court’s charge was conditioned on an
affirmative answer to any of the liability questions (misappropriation of trade
secrets, breach of fiduciary duty, or breach of contract); it then asked, “What sum
of money, if any, if paid now in cash would fairly and reasonably compensate
AZZ for its damages, if any that were proximately caused by the wrongful
conduct of [Appellees].” The question included the standard definition of
proximate cause.5 The jury answered zero for past and future lost profits.
2. Legal and Factual Sufficiency of Zero Past Lost-Profits Finding and
Factual Sufficiency of Zero Future Lost-Profits Finding
a. Evidence of No Nexus Between Morgan’s Breach of the Contracts
and AZZ’s Loss of Interstate Steel’s Business
The evidence established that AZZ did not have agreements with its
customers to lock them into any particular term of doing business with AZZ.
AZZ’s Chief Operating Officer, Tim Pendley, testified that AZZ typically did not
have contracts or agreements with top, long-time AZZ customers for ongoing
5
The charge defined “proximate cause” as
that cause which, in a natural and continuous sequence,
produces an event, and without which cause such event would not
have occurred. In order to be a proximate cause, the act or
omission complained of must be such that a person using the
degree of care required of him would have foreseen that the event,
or some similar event, might reasonably result there from. There
may be more than one proximate cause of an event.
11
work with AZZ and specifically did not have such contracts with the six customers
who signed letters of intent with Boyce Galvanizing. Instead, AZZ would send
the customer a price list, the customer would issue a “PO” (purchase order) for a
select number of items, and AZZ would bill them accordingly; only for “a very
small, select few [customers] it will be by a project in which there is a contract
written.” The evidence established that AZZ’s customers were free to stop
sending business to AZZ at any time for any reason.
Morgan resigned from AZZ in September 2011, yet Interstate Steel
continued to do business with AZZ for the next year. Bryan Stovall, Vice
President of Central Operations for AZZ, testified that AZZ lost Interstate Steel as
a customer in November 2012 when Interstate Steel began utilizing Sabre
Galvanizing in Alvarado. Interstate Steel sent no business to AZZ in 2013.
AZZ’s valuation expert, David Fuller, testified that AZZ last invoiced Interstate
Steel in November 2012 and that AZZ generated $1.4 million in revenue from
Interstate Steel for the year ending February 29, 2013. 6 On February 18, 2013,
the date that Boyce Galvanizing opened its doors for business, Interstate Steel
began sending its galvanizing business to Boyce Galvanizing.
The record contains no explanation for why Interstate Steel elected to
discontinue its long-standing business relationship with AZZ and switch to Sabre
Galvanizing and then to Boyce Galvanizing, but the evidence in the record does
6
This is the date used in the record, despite that 2013 was not a leap year.
12
establish that Interstate Steel was free to do so because AZZ did not have a
contract with Interstate Steel binding Interstate Steel to a fixed-term business
relationship with AZZ. Cf. Heritage Operating, L.P. v. Rhine Bros., No. 02-10-
00474-CV, 2012 WL 2344864, at *7 (Tex. App.––Fort Worth June 12, 2012, no
pet.) (mem. op.) (considering testimony of former customers that business
formed in violation of post-employment covenant-not-to-compete had solicited
customers’ business). Although AZZ asserted and offered some evidence that
Morgan had solicited Interstate Steel’s business on behalf of Boyce Galvanizing
during his employment with AZZ, Morgan repeatedly denied doing so and said he
could not solicit Interstate Steel’s business while he was employed with AZZ
because he did not have a galvanizing plant then. The contracts Morgan signed
do not contain any post-employment covenant-not-to-compete clauses, and
Morgan freely admitted that “since the day [Boyce Galvanizing] was in operation,”
he has been soliciting the business of each of the companies that provided
Boyce Galvanizing with letters of intent; the companies have just not been
sending him the business they projected.
b. Evidence of Faulty Assumptions by Fuller
AZZ’s valuation expert David Fuller testified that AZZ had suffered
$454,000 in past lost profits from the loss of Interstate Steel’s business and
would suffer $3,206,000 in future lost profits from the loss of Interstate Steel and
13
five other companies as customers.7 In computing AZZ’s lost profits, Fuller
assumed that each of the six AZZ customers8 who had signed letters of intent for
Morgan would move all of their business to Boyce Galvanizing. He looked at the
volume of sales that AZZ had been generating for each of these customers and
looked at the profitability associated with each of the specific AZZ galvanizing
plants that these customers had purchased from. Once he knew how much each
customer was buying and knew AZZ’s profit margin in each of the plants where
the work was performed for these customers, he was able to calculate the
amount of annual profit that AZZ had generated from each customer. Because
AZZ had lost Interstate Steel’s business prior to trial, Fuller utilized this formula to
compute the profits that AZZ had lost in the past––from November 2012 through
trial in October 2013––by virtue of losing Interstate Steel’s business and arrived
at the figure of $454,000. Fuller did not calculate past lost profits for the five
other customers that had signed letters of intent with Boyce Galvanizing because
“based on the last sale date, AZZ had not yet lost those client relationships for
the other customers.”
7
Fuller’s report was not introduced into evidence, and at trial, he explained
his computations using a sketch pad near the witness stand; the sketch pad
computations are not included in the record. Therefore, we summarize Fuller’s
testimony as best we are able without the benefit of the documents showing the
columns and calculations referred to in his testimony.
8
Those customers were ALNC, Hirschfeld Industries, Interstate Steel,
Interstate Treating, Saulsbury Industries, and Young’s Building Systems.
14
To determine future lost profits, Fuller then performed a customer-attrition
analysis for AZZ and determined that AZZ kept customers with yearly sales of
over $100,000 for over ten years. Fuller determined the likely remaining duration
of each of the six customers’ business relationships with AZZ based on his
customer-attrition analysis and, utilizing the annual-profit figure he had calculated
for each customer, generated future lost-profit calculations based on a three-year
and a five-year remaining life span of the relationship. He then reduced the
numbers to present value; the combined calculated future lost profits from all six
customers totaled $3,206,000.
Morgan testified that one of the assumptions Fuller utilized to arrive at his
calculation of AZZ’s future lost profits––the assumption that all of the companies
who were customers of AZZ and had signed a letter of intent with Morgan would
move all of their business to Boyce Galvanizing––was false. Morgan testified
that this was a false assumption because “of all those companies that signed
letters of intent, I would say Interstate Steel is the only one [Boyce Galvanizing is]
remotely getting a portion of the work from.” Morgan testified that several of the
companies that signed letters of intent with Boyce Galvanizing were still using
AZZ for at least some of their galvanizing needs; he testified that a driver for
Saulsbury showed up at Boyce Galvanizing to pick up some items, and Morgan
saw “a strapping from AZZ Galvanizing in Crowley and it has their phone number
on it.” Morgan snapped a picture of the load, and it was introduced into
evidence.
15
c. Application of Standards of Review to Evidence
Applying the first step of the conclusively-established-as-a-matter-of-law
legal-sufficiency analysis and examining the record for any evidence supporting
the jury’s finding of zero past lost-profit damages while ignoring all evidence to
the contrary, we hold that some evidence exists from which the jury, as the sole
judge of the credibility of the witnesses, could have determined that AZZ had
suffered no pecuniary loss as the probable and foreseeable result of Morgan’s
breaches of the “Code of Ethics” and of the “Employee Invention, Trade Secret,
and Non-Compete Agreement.” See, e.g., Stuart, 964 S.W.2d at 921 (requiring
lost-profits damages from breach of contract to be directly traceable to the
wrongful conduct and to result from it); see also Francis, 46 S.W.3d at 241
(setting forth standard of review). Fuller offered no causation opinion, and the
jury was free to believe that Morgan’s breaches of the “Code of Ethics” and of the
“Employee Invention, Trade Secret, and Non-Compete Agreement” during his
employment with AZZ did not proximately cause Interstate Steel to stop doing
business with AZZ over a year after Morgan’s employment with AZZ had ended.
See S. Elec. Servs., Inc., 355 S.W.3d at 323–24. The jury was free to believe
that Morgan’s postemployment solicitation of Interstate Steel’s business caused
Interstate Steel to stop doing business with AZZ or that Interstate Steel decided
to stop doing business for some reason known only to Interstate Steel. Applying
this same line of reasoning, we also hold that some evidence exists from which
the jury could have determined that Fuller’s past-lost-profits analysis was
16
speculative because it was based on the assumption that Interstate Steel would
continue sending its galvanizing work to AZZ from November 2012 through
October 2013, despite the lack of a formal business arrangement between
Interstate Steel and AZZ and despite the fact that Interstate Steel had in fact
exercised its right to stop using AZZ in November 2012. See, e.g., Mood, 245
S.W.3d at 13 (holding expert’s lost-profits analysis based on assumption of
continuation of distributorship agreement constituted no evidence of direct or
consequential damages for breach of sixty-day notice-of-termination provision in
agreement); Atlas Copco Tools, Inc., 131 S.W.3d at 206–07 (holding expert’s
lost-profits projections were speculative because they assumed a contract
renewable yearly would be renewed for six consecutive years despite letter
terminating contract); United Way of San Antonio, Inc. v. Helping Hands Lifeline
Found., Inc., 949 S.W.2d 707, 711–12 (Tex. App.––San Antonio 1997, writ
denied) (“[T]he mere hope for funding renewable at the discretion of another
party will not support recovery of any future funds the other party could withhold
at its discretion.”). Because under the first step of the conclusively-established-
as-a-matter-of-law legal-sufficiency analysis some evidence exists supporting the
jury’s award of zero past lost-profits damages, AZZ has failed to conclusively
establish $454,000 in past lost-profits damages, and we overrule that portion of
AZZ’s first issue claiming otherwise.9
9
Because we hold that AZZ did not conclusively establish $454,000 in past
lost-profits damages, we likewise hold that AZZ is not entitled to a remand to
17
We next address AZZ’s complaint that the jury’s zero past lost-profits
damages and zero future lost-profits damages findings are against the great
weight and preponderance of the evidence. We must consider and weigh all of
the evidence and set aside the jury’s finding only if the evidence is so weak or
the finding is so contrary to the great weight and preponderance of the evidence
as to be clearly wrong and unjust. Francis, 46 S.W.3d at 242. Citing this court’s
opinion in Heritage Operating, L.P., AZZ argues that “[w]hen there is objective
evidence of injury, a jury’s award of zero damages is against the great weight
and preponderance of the evidence.” 2012 WL 2344864, at *7. Heritage
involved a defendant’s breach of a postemployment covenant-not-to-compete by
starting a competing company; Heritage’s former customers testified that the
competing company had solicited their business, and Heritage produced
eighteen contracts signed by its former customers with the new competing
company. Id. In Heritage, we reviewed this evidence of an injury––testimony
that the competing company had solicited Heritage’s clients and the contracts
signed by Heritage clients with the competing company––and based on this
uncontroverted, objective evidence of an injury, we held that the jury’s zero
damages award was against the great weight and preponderance of the
evidence because the record contained some evidence of damages. Id. at *8.
recover attorney’s fees on its breach of contract claims. See Ashford Partners,
Ltd. v. ECO Res., Inc., 401 S.W.3d 35, 40–41 (Tex. 2012) (requiring recoverable
damages on breach of contract claim in order to recover attorney’s fees).
18
Here, unlike in Heritage, the evidence concerning the existence of an injury was
hotly contested.
This contested evidence concerning whether AZZ suffered an injury from
Morgan’s breach of the “Code of Ethics” during his employment with AZZ and his
breach of the “Employee Invention, Trade Secret, and Non-Compete Agreement”
during his employment with AZZ includes the following. Interstate Steel
continued to do business with AZZ for over a year after Morgan resigned from
AZZ. When Interstate Steel stopped doing business with AZZ in November
2012, it began utilizing Sabre Galvanizing. No reason is given in the record for
Interstate Steel’s decision to end its long-time relationship with AZZ and to begin
using Sabre Galvanizing. AZZ established that there were numerous
communications between Morgan and Kothman while Morgan was employed
with AZZ; some of the communications suggested that Morgan had solicited
Interstate Steel’s business on behalf of Boyce Galvanizing while he was
employed with AZZ. Morgan repeatedly denied soliciting Interstate Steel’s
business while employed with AZZ and denied competing with AZZ while he was
employed with AZZ. Morgan said he could not solicit Interstate Steel’s business
while he was employed with AZZ because he did not have a galvanizing plant
then. Morgan denied that he had solicited Interstate Steel’s business by striking
a deal that when he opened Boyce Galvanizing, Interstate Steel would come do
business with him. Thus, here, there is evidence from which the jury could have
concluded that AZZ suffered no objective past lost-profits injury other than loss of
19
a mere hope that Interstate Steel would continue to send some or all of its
galvanizing business to AZZ despite the lack of a contractual relationship
between Interstate Steel and AZZ.10 See Atlas Copco Tools, Inc., 131 S.W.3d at
206–07; accord Acadia Healthcare Co. v. Horizon Health Corp., No. 02-13-
00339-CV, 2015 WL 831474, at *8 (Tex. App.––Fort Worth Feb. 26, 2015, no
pet. h.) (mem. op.) (holding expert’s lost-profits calculations speculative when
based on assumption that, but for defendant’s wrongful conduct, at-will employee
would have remained employed with plaintiff for fifteen years after employee
actually resigned and would have continued same level of sales during that time);
Allied Vista, Inc. v. Holt, 987 S.W.2d 138, 141 (Tex. App.––Houston [14th Dist.]
1999, pet. denied) (holding plaintiff––who declined at-will brokerage position
based on defendant’s negligent misrepresentation that defendant would help
plaintiff start a business––could not recover past lost-salary damages from
declined brokerage position because “[d]amages for anticipated lost salary are
inappropriate where employment is at will” and “[t]here is no certainty how long
[plaintiff] would have worked as a broker”). Thus, here, uncertainty exists as to
10
In its reply brief, AZZ argues that it was required to prove only lost sales
caused by Morgan, not an exclusive customer relationship with Interstate Steel.
We agree. But the absence of an agreement between AZZ and Interstate Steel
to do business for a set period of time and the absence of an explanation in the
record for Interstate Steel’s decision to terminate its relationship with AZZ
permitted the jury to reasonably infer that Interstate Steel’s termination of its
relationship with AZZ was not directly attributable to Morgan’s breaches of the
“Code of Ethics” and of the “Employee Invention, Trade Secret, and Non-
Compete Agreement” while employed by AZZ.
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the fact of an injury (the loss of Interstate Steel’s business) from the breaches––
which is fatal to recovery, while in Heritage, uncertainty existed only as to exact
amount of lost profits damages—which will not defeat recovery. See Sw. Battery
Corp., 131 Tex. at 428, 115 S.W.2d at 1099. Giving due deference to the jury’s
credibility determinations, as we must, we hold that the jury’s finding that AZZ
suffered zero past lost-profits damages is not against the great weight and
preponderance of the evidence. We overrule this portion of AZZ’s first issue.
Lastly, we address AZZ’s challenge to the factual sufficiency of the
evidence to support the jury’s award of zero future lost-profits damages. As set
forth above, in computing future lost-profits damages, Fuller calculated AZZ’s lost
profits three years and five years into the future.11 Fuller testified that his
calculations assumed that AZZ had lost or would lose all of the business of the
six customers who had signed letters of intent with Boyce Galvanizing, that these
customers would have continued to do the same amount of business with AZZ
annually for the three-year or five-year future lost-profits term, and that the AZZ
plants utilized by these customers would have maintained the same level of
profitability over the three-year or five-year future lost-profits term. Fuller agreed
that at the time of trial, AZZ continued to provide some galvanizing services for
11
Apparently on the sketch pad Fuller utilized while testifying, he also
computed AZZ’s future lost-profits totals for one, two, and three years following
trial. Because we conclude below that the assumptions upon which Fuller based
his calculations are speculative, any discrepancy in the term for which he
calculated future lost-profit damages is immaterial.
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ALNC and for Saulsbury, two of the six businesses that signed letters of intent
with Morgan. Fuller also agreed that the future lost profits actually suffered by
AZZ could be higher or lower than his computations; he provided an estimate.
And finally, Fuller agreed that under his future lost-profits analysis, Boyce
Galvanizing could be required to pay AZZ damages for future lost profits even if
the customer AZZ lost did not utilize Boyce Galvanizing’s services. Although the
methodology utilized by Fuller––after making the above assumptions––to
calculate AZZ’s future lost profits for three years or five years into the future may
be valid, the underlying assumptions themselves, that is, the facts Fuller’s future
lost-profits calculations are premised on, are merely speculative. See, e.g.,
Aquila Sw. Pipeline, Inc. v. Harmony Exploration, Inc., 48 S.W.3d 225, 246 (Tex.
App.––San Antonio 2001, pet. denied) (holding expert testimony using proper
methodology nonetheless constituted no evidence of lost profits when underlying
factual basis for computation was merely speculative). Accordingly, we hold that
the jury’s finding of zero future lost-profits damages is not against the great
weight and preponderance of the evidence. We overrule the remainder of AZZ’s
first issue.
D. Effect of Jury’s Award of No Damages
Appellees argue that if this court overrules AZZ’s legal and factual
sufficiency challenges to the jury’s zero past-lost-profits-damages findings, then
we need not address AZZ’s second issue alleging charge error in the breach-of-
fiduciary-duty question or AZZ’s third issue challenging the legal and factual
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sufficiency of the evidence to support the jury’s “no” answer to the breach-of-
fiduciary-duty question. AZZ, on the other hand, asserts that because the
damages question was conditionally submitted and because the jury answered
“no” to the breach-of-fiduciary-duty question, the jury’s zero damages finding
applies only to its breach-of-contract theory of recovery; AZZ claims that if charge
error exists in the breach-of-fiduciary-duty question, then AZZ is entitled to a
remand to have the jury consider a properly submitted breach-of-fiduciary-duty
question and to make a damages finding based on that proper question.
It is true, as AZZ contends, that a party is entitled to sue and to seek
damages on alternative theories, and a judgment awarding damages on each
alternative theory may be upheld if the theories depend on separate and distinct
injuries and if separate and distinct damage findings are made as to each theory.
See Waite Hill Servs., Inc. v. World Class Metal Works, Inc., 959 S.W.2d 182,
184 (Tex. 1998); see also Peterson Grp., Inc., 417 S.W.3d at 64 (upholding
separate recoveries for fraud and breach of contract claims because claims
“sought recovery of different damages” and because the jury awarded “separate
and distinct damages for separate and distinct injuries for fraud and breach of
contract”). But for one injury, there can be only one recovery. Utts v. Short, 81
S.W.3d 822, 831 (Tex. 2002); Foley v. Parlier, 68 S.W.3d 870, 882–83 (Tex.
App.––Fort Worth 2002, no pet.). A party is entitled to but one satisfaction for the
injuries sustained by him. See, e.g., Tony Gullo Motors, I, L.P. v. Chapa, 212
S.W.3d 299, 303 (Tex. 2006); Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1,
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7 (Tex. 1991). Thus, when a defendant’s acts result in a single injury and the
jury returns favorable findings on more than one theory of liability, the plaintiff is
entitled to judgment on the theory affording him the greatest relief. Boyce Iron
Works, Inc. v. Sw. Bell Tel. Co., 747 S.W.2d 785, 787 (Tex. 1988); see also
Saden v. Smith, 415 S.W.3d 450, 466 (Tex. App.––Houston [1st Dist.] 2013, pet.
denied) (holding plaintiff entitled to one award of lost profits although jury
awarded lost-profits damages in connection with breach-of-contract question and
breach-of-fiduciary-duty question).
Here, AZZ sought recovery of the same damages––lost profits––for each
of its theories of liability. AZZ did not seek recovery of different damages for a
distinct injury stemming from each of its liability theories. Cf. Peterson Grp., Inc.,
417 S.W.3d at 64 (upholding award of fraud and breach-of-contract damages
when damage awards were for separate, distinct injuries). AZZ did not allege
different damages were attributable to Morgan’s alleged disloyal acts purportedly
constituting a breach of his fiduciary duty to AZZ than the damages attributable to
Morgan’s breach of the “Code of Ethics” and his breach of the “Employee
Invention, Trade Secret, and Non-Compete Agreement.” The single injury for
which AZZ sought recovery was lost profits.
The causation evidence discussed above in connection with AZZ’s legal
and factual sufficiency challenges to the jury’s zero past lost-profits damages
award may be unique to AZZ’s breach-of-contract claim. This same causation
analysis would not necessarily apply to a jury’s determination of damages based
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on an affirmative answer to the breach-of-fiduciary-duty question. But the faulty
assumptions that Fuller premised his past and future lost-profits damages model
upon render his lost-profits conclusions speculative, and this defect would persist
even if a breach-of-fiduciary-duty question had been submitted, as AZZ contends
it should have been, and even if the jury had answered the breach-of-fiduciary-
duty question affirmatively. Consequently, our holdings—that the jury’s zero past
lost-profits damages finding is supported by legally sufficient evidence and that
the jury’s zero past and future lost-profits damages findings are supported by
factually sufficient evidence—do, under the particular facts here, make it
unnecessary for us to address AZZ’s second and third issues. See Hancock v.
City of San Antonio, 800 S.W.2d 881, 885–86 (Tex. App.––San Antonio 1990,
writ denied) (holding charge error harmless because plaintiff was entitled to no
recovery based on percentage of fault assigned to party who settled before trial);
Canales v. Nat’l Union Fire Ins. Co., 763 S.W.2d 20, 22 (Tex. App.––Corpus
Christi 1988, writ denied) (explaining alleged charge error need not be addressed
when plaintiff not entitled to damages based on zero damages award).
AZZ also argues that we should reach its second issue claiming charge
error in the breach-of-fiduciary-duty question because in connection with that
claim, AZZ pleaded for the equitable remedy of disgorgement. AZZ argues that,
despite the jury’s zero damages award, the trial court may grant this remedy if on
remand, after a proper submission, a jury finds a breach of fiduciary duty. Under
the equitable remedy of disgorgement, a person who renders service to another
25
in a relationship of trust may be denied compensation for his service if he
breaches that trust. Burrow v. Arce, 997 S.W.2d 229, 237 (Tex. 1999). The
remedy essentially returns to the principal the value of what it paid for because it
did not receive the trust or loyalty. Id. at 237–38; McCullough v. Scarbrough,
Medlin & Assoc., Inc., 435 SW.3d 871, 904 (Tex. App.––Dallas 2014, pet.
denied). To obtain the remedy of equitable disgorgement, however, proof of the
fiduciary’s salary, profits, or other income during the time of his breach of
fiduciary duty is required, as well as proof of what he was actually entitled to
receive. See McCullough, 435 S.W.3d at 904 (trial court signed final judgment
for “equitable forfeiture and disgorgement remedy” based on difference between
jury’s findings as to amount fiduciary received and amount he was entitled to
receive). AZZ does not point to evidence of monies wrongfully gained by Morgan
during his employment with AZZ that should be disgorged, nor have we located
such evidence in the record. Consequently, we hold that AZZ’s pleading for
disgorgement, in the absence of evidence of monies subject to disgorgement,
does not require a remand.
IV. CONCLUSION
Having overruled AZZ’s first issue, we need not address Appellees’
conditional cross-point challenging the sufficiency of the evidence to support the
jury’s affirmative breach-of-contract findings. Having determined that we need
not address AZZ’s second and third issues, we affirm the judgment of the trial
court.
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/s/ Sue Walker
SUE WALKER
JUSTICE
PANEL: DAUPHINOT, GARDNER, and WALKER, JJ.
DELIVERED: April 9, 2015
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