J. Mark Swinnea v. ERI Consulting Engineers, Inc. and Larry Snodgrass ( 2015 )

ACCEPTED
12-14-00288-CV
TWELFTH COURT OF APPEALS
TYLER, TEXAS
8/6/2015 3:00:15 PM
CATHY LUSK
CLERK
ORAL ARGUMENT REQUESTED
No. 12-14-00288-CV FILED IN
12th COURT OF APPEALS
TYLER, TEXAS
8/6/2015 3:00:15 PM
In the Twelfth Court of Appeals CATHY S. LUSK
Clerk
Tyler, Texas
J. MARK SWINNEA,
Appellant,
V.
ERI CONSULTING ENGINEERS, INC.
AND LARRY SNODGRASS,
Appellees.
Appealed from the 114th Judicial District Court
Smith County, Texas
APPELLEES’ BRIEF
Mike A. Hatchell Deborah Race
State Bar No. 09219000 State Bar No. 16448700
LOCKE LORD, LLP IRELAND, CARROLL & KELLEY, P.C.
600Congress Ave. 6101 S. Broadway, Suite 500
Austin, Texas 78701 Tyler, Texas 75703
Tel: (512) 305-4752 Tel: (903) 561-1600
Fax: (512) 305-4800 Fax: (903) 581-1071
mahatchell@lockelord.com drace@icklaw.com
TABLE OF CONTENTS
Table of Contents. ..................................................................................................... ii
Index of Authorities ..................................................................................................iv
Statement Regarding Oral Argument ..................................................................... vii
Introduction ................................................................................................................ 1
Rejoinder to Swinnea’s Statement of Facts ............................................................... 3
Summary of the Argument......................................................................................... 6
Argument and Authorities........................................................................................ 11
I. The disgorgement remedy protects fiducial relationships.
It is not “punitive damages,” nor does it require actual
damages or a windfall to plaintiff ................................................... 11
A. Disgorgement is not punitive damages..............................13
B. Actual Damages are not required.......................................14
C. Disgorgement does not need to remedy a “windfall”.........16
D. Disgorgement is not double recovery.................................17
E. Disgorgement of lease payment was appropriate...............18
II. This court has already held there is no statutory constraint
on punitive damages ....................................................................... 20
III. There is nothing to remand…………………………………….….21
IV. The punitive damages pass constitutional muster...........................25
ii
(i) Ratio..................................................................................26
(ii) Reprehensibility..................................................................28
(iii) Statutory penalties..............................................................30
V. Snodgrass is entitled to recover.....................................................30
VI. Swinnea waived the attorney’s fee claim, but it is
meritless in any event.....................................................................32
Conclusion and Prayer for Relief ............................................................................. 33
Certificate of Compliance ........................................................................................ 35
Certificate of Service…...........................................................................................36
iii
INDEX OF AUTHORITIES
CASES
Alamo Nat’l Bank v. Kraus, 616 S.W.2d 908
(Tex. 1981) .................................................................................9, 24, 25, 26
Bennett v. Reynolds, 315 S.W.3d 867,
(Tex.2010) ................................................................................................. 29
BMW of North America, Inc. v. Gore, 517 U.S. 559,
116 S. Ct. 1589, 134 L. Ed. 2d 809 (1996) .....................................26, 27, 28
Boyce Iron Works, Inc. v. Southwestern Bell Telephone Co.,
747 S.W.2d 785 (Tex. 1988) .................................................................... 33
Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999) ............................7, 13, 14, 15, 18, 23
Cooper Industries v. Leatherman Tool Group, Inc.,
532 U.S. 424 (2001) ............................................................................23, 26
ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867
(Tex. 2010) ................ 1, 2, 3, 7, 11, 13, 16, 18, 19, 23, 24, 29, 30, 32, 33, 34
Gotham Ins. Co. v. Warren E&P, Inc.,
455 S.W.3d 558 (Tex. 2014) .............................................................21, 25
Green v. Priddy, 112 Tex. 567,
250 S.W. 656 (Tex. 1923) ........................................................................ 21
Hudson v. Wakefield, 711 S.W.2d 628 (Tex. 1986) ............................................... 33
Int’l Bankers Life Ins. Co. v. Holloway,
368 S.W.2d 567 (Tex. 1963) ....................................................................... 27
iv
Kinzbach Tool Co. v. Corbett-Wallace Corp.,
138 Tex. 565, 160 S.W.2d 509 (Tex. 1942) .............................................. 15
Lairsen v. Slutzky, 80 S.W.3d 121
(Tex.App.—Austin 2000, pet. denied) ....................................................... 32
In re Longview Energy Co., ___ S.W.3d ___,
2015 WL 2148353 (Tex. 2015) .............................................................. 13
McCullough v. Scarbrough, Medlin & Assocs., 435 S.W.3d 871
(Tex. App. – Dallas 2014, pet. denied) ....................................................... 18
McGaillard v. Kuhlmann, 722 S.W.2d 694 (Tex. 1986) .......................................... 4
Russell v. Truitt, 554 S.W.2d 948
(Tex. Civ. App. – Fort Worth 1977, writ dism’d.) ................................... 27
Saden v. Smith, 415 S.W.3d 450 (Tex. App.—Houston [1st Dist
2013, pet. denied) ...................................................................................... 18
State Farm Mutual Auto Ins. Co. v. Campbell, 538 U.S. 408,
123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003) .......................................27, 28, 29
Swinnea v. ERI Consulting Engineers, Inc., 236 S.W.3d 825
(Tex. App.–Tyler 2007, reversed, 318 S.W.3d 867) ...............................16, 32
Swinnea v. ERI. Consulting Eng’rs, Inc., 364 S.W.3d 321
(Tex.App. – Tyler 2012, pet. denied) ..................... 1, 9, 20, 22, 24, 25, 29, 34
U.S. Commodity Futures Trading Com'n v. U.S. Bank, N.A.,
13-CV-2041-LRR, 2013 WL 5944179 (N.D. Iowa Nov. 5, 2013) .............. 13
v
RULES
Tex.R.App.P. 33.127................................................................................................ 32
STATUTES AND CODES
Tex.Civ.Prac. & Rem.Code Ann. § 41.008(c) ....................................................7, 20
OTHER AUTHORITIES
Berra, Yogi. The Yogi Book. New York:
Workman Publ. Co., 1998, p. 9. ................................................................... 1
Restatement (Third) of Unfair Competition §45 ..................................................... 14
vi
STATEMENT REGARDING ORAL ARGUMENT
Swinnea has requested oral argument and Snodgrass and ERI would request same
if this court is inclined to grant Swinnea’s request. However, candidly, Snodgrass and
ERI do not believe oral argument will provide much beyond the briefing in this case
since the court is fully aware of the underlying facts, has already issued two opinions in
the case, and understands the matter remanded.
vii
INTRODUCTION
In the words of Yogi Berra, it’s “deja vu all over again.”1 Swinnea’s third
appearance in this court gives new dimension to the phrase “another bite at the
apple.” The first apple was a bitter one for Swinnea. He wants a new one. But the
principal arguments in his breathless Appellant’s Brief were foreclosed by the
Texas Supreme Court five years ago in ERI Consulting Eng’rs, Inc., et al v.
Swinnea, 318 S.W.3d 367, 875 (Tex. 2010) (“Swinnea I”), or by this court three
years ago in Swinnea v. ERI. Consulting Eng’rs, Inc. et al, 364 S.W.3d
321(Tex.App. – Tyler 2012, pet. denied). (“Swinnea II”).
The legitimate issues in the present appeal are not nearly as broad as
Swinnea argues. The limited remand to the trial court from which this appeal
emanates was for one purpose only – to make and implement findings on the
disgorgement factors identified by the supreme court in Swinnea I, 318 S.W.3d at
875. On remand, the trial court made copious findings on each of the factors the
supreme court identified. All findings were devastating to Swinnea and fully
supported every penny of the disgorged sums. His brief challenges none of those
findings as without support in the evidence. The trial court declined Swinnea’s
invitation to try liability all over again, following to the letter this court’s
1
Berra, Yogi. The Yogi Book. New York: Workman Publ. Co., 1998, p. 9.
1
instructions that the trial court “review ... its forfeiture award in light of the
principles discussed in the supreme court’s opinion.” Id. at 425 (emphasis added).
Although this appeal should be about the sufficiency of the supplemental
findings, Swinnea makes no such argument and proceeds undaunted by that fact.
Ignoring two prior appellate court opinions that were solely about how much he
must pay following his concession of fraudulent breach of fiduciary duty, he uses
the outcome of the limited remand, instead, as a platform to start all over again,
boldly proclaiming in this court that he now deserves a take-nothing judgment
(AptBr: 6-11.)
● despite his concession seven years ago that he breached a fiduciary duty
through fraudulent inducement (pointedly noted [twice] by the supreme court in
Swinnea I, 318 S.W.3d at 872, 880, fn. 11),
● despite the trial court’s unchallenged finding that his “objective was the
financial destruction of ERI and Larry Snodgrass so that .. [he] .. could take
advantage thereof for his own benefit” (FOF #5c at 2CR293),
● despite the supreme court’s finding that equity permitted disgorgement of
the fraudulently induced contractual consideration,
● despite that court’s finding that “ERI proved lost profit damages”
(Swinnea I at 878), resulting from Swinnea’s fraudulent breach, and
2
● despite his failure to challenge both the sufficiency of evidence on the
disgorgement elements or their efficacy to support the disgorgement.
Describing his fraudulent scheme to drive ERI out of business as just
“garden variety” fraud (AptBr:29), he now seeks total exoneration on the theory
that, in reality, his fraud caused ERI to “prosper” (AptBr:35), even though the
supreme court held “the evidence is legally sufficient to establish a straightforward
link between Swinnea’s breach and the loss of profits by ERI.” Swinnea I, at 878.
The circuitous machinations by which Swinnea seeks to undo all the
findings and holdings decreeing his liability depend on his convincing this court of
two things:
 That the disgorgement authorized by the Texas Supreme Court
is actually “punitive damages” and must be further analyzed as
such.
 That a de novo review of all aspects of punitive damages
(including issues this court ruled on specifically in its last
opinion) is appropriate despite the fact that this is an appeal
from a remand limited to the disgorgement remedy.
Neither is a proper foundation for this appeal.
REJOINDER TO SWINNEA’S STATEMENT OF FACTS
The supreme court’s opinion contains an accurate statement of the pertinent
facts that support the judgment. Swinnea I, 318 S.W.3d 870-872. The sugar-coated
fact statement in Appellant’s Brief (AptBr:4-6) self-evidently seeks to curry
sympathy from the court in defiance of the standard of review by indulging
3
inferences contrary to both sets of findings. Swinnea’s assertion that his
fraudulent breach of fiduciary duty actually led ERI into “post-buyout prosperity”
(AptBr:6) mocks the original findings and the findings on remand, as seen in the
following:
Swinnea’s wrongful conduct was not an isolated violation but
consisted of a continuing, persistent, calculated course of conduct
which began before the buyout and continued thereafter until his
employment was terminated in June, 2004. (FOF #1d at 3CR395.)
J. Mark Swinnea’s wrongful conduct consisted of a multifaceted plot
designed to cause injury to Larry Snodgrass and ERI when they were
most vulnerable as a result of their extraordinary financial
commitment of cash and property for the buyout. (FOF #1e at
3CR395-96.)
Swinnea’s wrongful conduct was committed in bad faith,
intentionally, knowingly, willfully and with malice to cause injury to
ERI and Mr. Snodgrass and to unfairly and unjustly gain benefits to
himself at their expense. (FOF #2 at 3CR396.)
The targets of J. Mark Swinnea’s flagrant breaches were the core
elements of ERI, which gave the transaction value and for which ERI
and Larry Snodgrass paid dearly. (FOF #4c at 3CR397.)
Swinnea’s objective was the financial destruction of ERI and Larry
Snodgrass so that J. Mark Swinnea could take advantage thereof for
his own benefit. (FOF #5c at 3CR397.)
Both sets of findings are binding in this court, because they have never been
challenged. McGaillard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986). They
destroy the core of this appeal
A prime example of how far afield this appeal wanders is Swinnea’s
argument that his deceit was actually a boon to ERI and Snodgrass that allowed
4
them to triple their investment. (AptBr:7-8.) The argument is rooted, not in the
original appellate record, but, in the testimony of accountant, Nicholas Burkett,
who testified for Swinnea at the hearing on remand. Burkett had not looked at any
of the company records after 2004, and he had not seen the court’s findings in
2005. (SH2 84.)
Swinnea’s brief neglects to mention Burkett’s testimony that (i) the non-
competition clause fraudulently breached by Swinnea was an important factor in
his valuation of the company (SH 89), and (ii) that Swinnea never told Burkett he
violated that agreement (SH 85-86), or (iii) that Burkett was unaware that Swinnea
had set up AQA and Brady in violation of his agreement (SH 88), or (iv) that
Burkett was ignorant of the fact that Swinnea never intended to keep the promises
and representations made to Snodgrass in the contracts. (SH 90 ll 13-19: “No he
definitely never said that.”) In the end, Burkett contradicted Swinnea’s
“prosperity” theme, by admitting there was no way to know how much money the
company would have made had Swinnea done what he promised. (SH 93.)
Swinnea’s willingness to sacrifice the standard of review to curry sympathy
is bad enough, but, as the following discussion will show, the greater problem with
this post hoc analysis is how irrelevant it is to the disgorgement remedy that is the
only legitimate issue in this limited appeal.
2
The record contains the Reporter’s Record from the first trial as Volumes 1-7, as well as the Reporter’s Record
from the Status Hearing which is also labeled as Volume 1. As a result, there would be two RR 1’s, so for clarity,
the Status Hearing will be referred to as SH.
5
SUMMARY OF THE ARGUMENT
This appeal is from a limited remand to the trial court to enter findings on
certain equitable elements underlying the disgorgement. Those findings were made
in detail. The findings embraced each element identified by the supreme court for
the trial court to consider.
This appeal should be just about the sufficiency of the evidence to support
those findings and their efficacy to support disgorgement. But Swinnea challenges
none of them as without support in the evidence. Instead, he uses the limited
remand as a platform to start all over again and claim he is entitled to a take-
nothing judgment, despite the supreme court’s and this court’s prior opinions being
only about how much he must pay, not whether he should pay at all.
The bulk of the issues assigned and discussed in Swinnea’s brief are thus not
properly within the scope of any legitimate appeal from the findings on remand.
Indeed, virtually all of the legal issues he discussed were decided five years ago in
the supreme court’s opinion. None of the points have an iota of merit. Swinnea’s
delaying tactics in this decade-old case can and should be swept aside with a broad
brush.
Disgorgement is not punitive damages: Most of Swinnea’s arguments
depend on the fallacious premise that the disgorgement award is punitive damages
and thus should be added to the actual punitive damages and re-analyzed as such.
6
The supreme court made clear in Burrow v. Arce, 997 S.W.2d 229, 240
(1999) that disgorgement is not punitive damages, but is an equitable remedy to
redress harm to or destruction of a fiducial relationship. Indeed, the supreme
court’s opinion in this case described the sums disgorged as “non-exemplary
damages.” Swinnea I, 318 S.W.3d at 872. Thus, because disgorged sums are not
the equivalent of punitive damages, disgorgement can be recovered along with
punitive damages and there is no double recovery. Also, in Burrow, the supreme
court squarely confronted and rejected Swinnea’s resurrected arguments that actual
damages are a necessary prerequisite to disgorgement or that the remedy is limited
to redressing a windfall to plaintiff.
The arguments at pp. 11-17 of Swinnea’s brief thus collapse of their own
weight because they depend on the long-rejected premise that disgorgement and
punitive damages are the same and subject to the same standards of review.
Statutory Limits on punitive damages have been considered: In its
previous opinion, this court fully considered the statutory limits on punitive
damages in Sec. 41.008(c) of the Civil Practice and Remedies Code and held that
the trial court’s original and unchallenged findings sufficiently established an
exception to the cap. Swinnea took that ruling to the Texas Supreme Court, which
surely would have reversed the holding if it were wrong. Now standing as the law
of the case, Swinnea offers no reason to revisit the issue.
7
There is nothing to remand: If he cannot get rendition in his favor, one of
Swinnea’s alternate strategies (as shown at pp. 18, 21, 24, 41 is brief) is to get the
case remanded to the trial court to begin a second decade of litigation, despite his
admission eight years ago that he is guilty of breach of fiduciary duty through
fraudulent inducement. There is nothing to remand for three reasons:
● The remand is premised, again, on the theory that disgorgement is punitive
damages and remand to the trial court is required, so the argument goes, because
the ratio of punitive to actual damages has “changed” dramatically and the
supreme court “reconstituted” disgorgement as punitive damages. The argument
dies on that false premise.
● There is nothing for the trial court to do on remand. The remand was
limited to entering findings on the disgorgement elements. The trial court did so.
Swinnea does not challenge those findings or their efficacy to support the
disgorgement. The application of state or federal legal principles to review an
award of punitive damages for excessiveness involves an application of legal
principles to the unchallenged facts. This court is fully capable of doing that and,
in fact, has done so already.
● On remand from the supreme court, this court fully considered the
sufficiency of the evidence to support punitive damages under the so-called “Kraus
factors” and affirmed the award. That put an end to the matter, because the court’s
8
application of the “Kraus factors” sufficiently encompasses both Texas standards
and federal due process standards for testing awards of punitive damages.
Federal due process standards are satisfied: Even if Swinnea were correct
in his disrespectful accusation that this court never lifted a finger to consider due
process, but engaged in ad hoc, sua sponte reasoning (AptBr:19), Swinnea’s due
process argument is doomed to failure, because he addresses only one of the
United States Supreme Court’s standards, and he proceeds under that standard only
on a false legal premise.
Those federal standards are (i) the reprehensibility of defendant’s conduct,
(ii) the ratio of punitive to actual damages, and (iii) comparable criminal penalties.
Reprehensibility is the most important principle, but Swinnea largely ignores
it, calling his misdeed “garden variety” fraud, despite the trial court’s unchallenged
original findings and remand findings of egregiously reprehensible fraud
committed by a fiduciary with the specific intent to injure Mr. Snodgrass and ruin
ERI to serve Swinnea’s own greed. As this court noted in its last opinion,
Swinnea’s conduct is about as reprehensible as it gets. Swinnea II, 364 S.W.3d at
424.
Swinnea’s arguments on the second element are premised on false ratios.
Disgorged sums are not counted as punitive damages, but in fact can be counted as
actual damages for ratio purposes, because Texas has long recognized that punitive
9
damages may be assessed even when the only relief is a form of disgorgement or
forfeiture against a fiduciary or fraudfeasor, of which Swinnea is both. If the
disgorged sums are counted, in this case, the ratio of punitive damages to actual
damages is 1.01:1. If just the lost profits award (plus its prejudgment interest) is
counted, the ratio is 3.75:1. Both ratios are within those Swinnea concedes satisfy
federal due process guidelines. Indeed, given the degree of reprehensibility, much
larger ratios would stand under both Texas and federal standards.
Finally, Swinnea waives the consideration of the third factor (comparable
criminal penalties) by not briefing it.
Swinnea has waived his standing challenge to Snodgrass’s individual
recovery: In his first appeal to this court, Swinnea challenged Mr. Snodgrass’s
ability to recover individually. He makes the same argument again. This court held,
and it is now the law of the case, that Swinnea’s challenge was one of capacity, not
standing, and Swinnea had waived the argument. Swinnea v. ERI Consulting
Eng’rs, Inc. 236 S.W.3d 825, 833 (Tex.App. – Tyler 2007, reversed 318 S.W.3d
867 (Tex 2010). He cites no new law or change in the facts to justify revising the
issue again.
Plaintiffs are entitled to attorney’s fees, but the argument has been
waived: Swinnea’s belated argument that plaintiffs cannot recover attorney’s fees
has not been raised before and has been waived. However, attorney’s fees are
10
recoverable, because the supreme court held that the lost profits damages were
recoverable under all theories, including breach of contract. Attorney’s fees are
recoverable for breach of contract.
ARGUMENT AND AUTHORITIES
I. The disgorgement remedy protects fiducial relationships. It is not
“punitive damages,” nor does it require actual damages or a windfall to
plaintiff.”
Swinnea’s argument that disgorgement cannot be imposed as a remedy
under the unchallenged findings (AptBr:10-17) was put to rest in Swinnea I when
the supreme court held:
We hold that where willful actions constituting breach of fiduciary
duty also amount to fraudulent inducement, the contractual
consideration received by the fiduciary is recoverable in equity
regardless of whether actual damages are proven, subject to certain
limiting principles set out below.
Swinnea I, 318 S.W.3d at 873. In choosing (nearly ten years ago), not to challenge
any of the trial court’s original findings, Swinnea calculatedly admitted he is guilty
of “willful actions constituting breach of fiduciary duty .. [that amounted to] ..
fraudulent inducement.” Id.
The only condition to recovery of the disgorged sums imposed by the
supreme court was the trial court’s need to consider, and make findings on, certain
equitable elements defined by the court to justify disgorgement. The trial court
11
made those findings (in extraordinary detail) and, again, Swinnea does not
challenge them.
The mindset by which Swinnea believes this court can set aside
disgorgement without his challenging the trial court’s findings is, charitably,
puzzling. It seems to rest on three false premises: (i) that disgorgement is not
available unless it remedies a “windfall” to Swinnea in the form of “restitutionary”
money damages, but Swinnea reaped no “windfall,” (ii) “the buyout did not cause
any actual damages” (AptBr:16), therefore, (iii) the disgorged sums can only be
punitive damages and must be analyzed only as such. (AptBr:10-17.) It is only
through a complex interweaving of those theories that Swinnea can make
arguments like:
● disgorgement “is a species of punitive damages,” and here it is “100% a
second punitive-damage award” (AptBr:12), or “when a court orders a defendant
to disgorge more than his net profits [i.e., actual damages], the disgorgement award
becomes a punitive damage award” (AptBr:11);
● “the disgorgement remedy seeks to neutralize windfalls.” (AptBr: 11);
● disgorgement is improper “[b]ecause no actual damages have been
recovered.” (AptBr:15).
In other words, Swinnea asks the court to recharacterize disgorgement as
punitive damages, and review the remedy under different criteria than the supreme
12
court imposed. The foundation for these arguments was rejected as early as 1942,
and just making them here is a cynical affront to the “law of the case” from
Swinnea I. Every premise that supports those arguments has been considered and
rejected by our supreme court in the past, even as late as this very case:
A. Disgorgement is not punitive damages: In Swinnea I, Justice Green
described the disgorged sums as among the “non-exemplary damages awarded by
the trial court.” 318 S.W.3d at 872. That echoes the earlier characterization in
Burrow v. Arce:
The Attorneys [whose fees were disgorged] point out that one
measure of whether punitive damages are excessive is the amount of
actual damages awarded. While this is true, forfeiture of an agent's
compensation is not mainly compensatory, …nor is it mainly punitive.
Forfeiture may, of course, have a punitive effect, but that is not the
focus of the remedy. Rather, the central purpose of the remedy is to
protect relationships of trust from an agent's disloyalty or other
misconduct. Appropriate application of the remedy cannot therefore
be measured by a principal’s actual damages. An agent’s breach of
fiduciary duty should be deterred even when the principal is not
damaged.
Burrow, 997 S.W.2d at 240 (emphasis added). This was reiterated by the Chief
Justice on May 8, 2015, in In re Longview Energy Co., ___ S.W.3d ___, 2015 WL
2148353, *5 (Tex. 2015). This description of the remedy’s purpose proves it is not
“restitution” or “restitutionary.” (AptBr:11-16.) See U.S. Commodity Futures
Trading Com'n v. U.S. Bank, N.A., 13-CV-2041-LRR, 2013 WL 5944179, at *16
(N.D. Iowa Nov. 5, 2013 (Disgorgement does not aim to compensate the victims of
13
the wrongful acts, as restitution does.... [Disgorgement] is not restitution”).
Swinnea’s argument thus collapses with its critical fulcrum point.3
B. Actual Damages are not required: Swinnea’s resurrection of his
argument that “actual damages” are a predicate to disgorgement (e.g. AptBr:15) is
seventy-three years too late.
In 1999, the lawyers representing Burrow argued that “actual damages” were
an absolute prerequisite to disgorgement. To that end, their attorney’s ultimately
stricken affidavit speculatively asserted that plaintiffs sustained no damages from
the attorneys’ breach of fiduciary duty, because
[e]ach and all of the Plaintiffs were reasonably and fairly compensated
by way of settlement for those elements of damages that were
available to them as Plaintiffs.
Burrow, 997 S.W.2d. at 235.
The supreme court rejected the notion that such damages were a necessary
predicate to disgorgement:
Fee forfeiture for attorney misconduct is not a windfall to the client.
An attorney's compensation is for loyalty as well as services, and his
failure to provide either impairs his right to compensation. While a
client's motives may be opportunistic and his claims meritless, the better
3
The extent to which Swinnea’s arguments struggle to find any support is seen in the citation to RESTATEMENT
(THIRD) OF UNFAIR COMPETITION §45, which applies to “Monetary Relief: Appropriation of Trade Secrets.”
Swinnea cites a comment to a section on the relationship between legal and equitable remedies. The comment reads
in part, “The traditional measure of damages awards relief measured by the loss to the plaintiff resulting from the
appropriation. The nature of the competitive marketplace, however, often makes it difficult for a plaintiff to prove
lost sales or other losses attributable to the appropriation of a trade-secret. Similarly, the value of a trade secret that
has been destroyed through public disclosure is often speculative. The remedy of restitution is thus an important
form of monetary relief in trade secret cases.” RESTATEMENT 3RD OF UNFAIR COMPETITION §45, cmt. c.
This is not a trade secrets case. The comment has no applicability here. The authority is part of Swinnea’s grand
scheme to conflate disgorgement principles with restitution. This is not a restitution case either.
14
protection is not a prerequisite of actual damages but the trial court's
discretion to refuse to afford claimants who are seeking to take unfair
advantage of their former attorneys the equitable remedy of forfeiture.
*****
Appropriate application of the remedy cannot therefore be measured
by a principal's actual damages. An agent's breach of fiduciary duty
should be deterred even when the principal is not damaged.
Burrow, 997 S.W.2d at 240.
The court traced its holding back to the 1942 decision in Kinzbach Tool Co.
v. Corbett-Wallace Corp., another corporate sales contract case, where a disloyal
employee violated fiduciary duties in the course of negotiating a sale of his
employer’s contract rights by accepting a bribe from the buyer. The employee
sought exoneration for his secret commission with the same “no harm, no foul”
argument. The court rejected it on core policy grounds:
It is beside the point for either Turner [the employee] or Corbett [the
purchaser] to say that Kinzbach suffered no damages because it
received full value for what it has paid and agreed to pay. A fiduciary
cannot say to the one to whom he bears such relationship: You have
sustained no loss by my misconduct in receiving a commission from a
party opposite to you, and therefore you are without remedy. It would
be a dangerous precedent for us to say that unless some affirmative
loss can be shown, the person who has violated his fiduciary
relationship with another may hold on to any secret gain or benefit he
may have thereby acquired.
138 Tex. 565, 573-574, 160 S.W.2d 509, 514 (Tex. 1942).
On the limited remand ordered in this case, the trial court made that exact
finding: “Disgorgement of the ill-gotten profits and gains obtained by J. Mark
15
Swinnea is designed to protect the trust relationship and remediate the breach of
that trust.” (3CR:398.)
The supreme court’s reversal in Swinnea I put to rest Swinnea’s “actual
damages” argument, and it is now the law of the case. Swinnea offers no
explanation why he is entitled to make the argument again.
C. Disgorgement does not need to remedy a “windfall:” Swinnea made his
“windfall” argument to this court the first time the case was appealed:
Appellants contend that the trial court misapplied the rule for
disgorging windfalls. They argue that there is no evidence that
Swinnea profited beyond what would have been expected at the time
of the transaction or that any profit was made illicitly at ERI's
expense.
Swinnea, 236 S.W.3d at 841.
The supreme court put the argument to rest in Swinnea 1 when it held:
where willful actions constituting breach of fiduciary duty also
amount to fraudulent inducement, the contractual consideration
received by the fiduciary is recoverable in equity regardless of
whether actual damages are proven, subject to certain limiting
principles set out below.
Swinnea I, 318 S.W.3d at 873. The court also held that, under the facts of the case,
“exemplary damages may be recoverable” concurrent with disgorgement. Id. at
880.
16
On the limited remand, the trial court made findings on all the elements
identified by the supreme court, including the following relating to the
disgorgement remedy:
● “The [separate] punitive damages awarded are not designed to compensate
Mr. Snodgrass or ERI for their loss, but to punish J. Mark Swinnea and deter and
serve as an example to others from engaging in this type of egregious conduct.”
(FOF #6e at 3CR398.)
●: “The award of punitive damages, without forfeiture, is inadequate to
remediate under the circumstances in this case.” (FOF #6f at 3CR398.)
● “An award of merely actual damages and punitive damages, based on the
circumstances of this case, is inadequate.” (FOF #6h at 3CR398.)
Those are just examples. All the unchallenged findings end Swinnea’s
challenge to disgorgement.
D. Disgorgement is not double recovery: Swinnea just repeats his erroneous
premise when he argues that “[a] court may award one punitive damage recovery
per injury. *** As a result, disgorgement may not be awarded in addition to
punitive damages when to do so results in double punishment.” (AptBr:16.)
This ignores, again, that (i) the remedy is not “mainly punitive,” Swinnea I,
318 S.W.3d at 873-74, and (ii) that the remedy redresses a separate injury to the
relationship, so it cannot be a double recovery.
17
One Texas court recently rejected a similar argument. In McCullough v.
Scarbrough, Medlin & Assocs., 435 S.W.3d 871, 905 (Tex. App.—Dallas 2014,
pet. denied), the court wrote, “The disgorgement award here does not result in
double-recovery problem. Equitable disgorgement is distinct from an award of
actual damages in that the disgorgement award ‘serves a separate function of
protecting fiduciary relationships.’ Saden v. Smith, 415 S.W.3d 450, 469 (Tex.
App.—Houston [1st Dist.] 2013, pet. denied) (citing ERI Consulting Eng’rs, Inc. v.
Swinnea, 318 S.W.3d 867, 874 (Tex. 2010)); see also Burrow, 997 S.W.2d at 238
(purpose of disgorgement remedy is to protect relationships of trust by
discouraging agent's disloyalty or other misconduct). And because equitable
disgorgement and actual damages are intended to address separate and distinct
injuries, the one-satisfaction rule does not preclude the recovery of both. Saden,
415 S.W.3d at 469.”
E. Disgorgement of lease payment was appropriate: Swinnea only half-
heartedly argues that this disgorgement award should not stand because it
confiscates 100% of the rentals ERI paid Swinnea to lease office
space, even though half of this sum is rentals earned on the 50%
interest Swinnea acquired in the leased premises years before the
events at issue.
(AptBr:25.)
This argument, too, ignores the nature of the remedy, the supreme court’s
pronouncement on its breadth, and the trial court’s findings.
18
First, the trial court expressly found that it was fair, equitable and just for
Swinnea to disgorge himself of the $3,600 a month lease payments on the
Malmeba building. (FOF #9 at 3CR:399.)
Second, the supreme court confirmed that the lease was part of the
contractual consideration. Swinnea I, 318 S.W.3d at 876.
Third, the supreme court held that, “even if a fiduciary does not obtain a
benefit from a third party by violating his duty, a fiduciary may be required to
forfeit the right to compensation for the fiduciary’s work,” and it then concluded
that “The same principles apply to circumstances where a fiduciary takes
advantage of his position of trust to induce a principal to enter into a contract. The
remedy of forfeiture is necessary to prevent such abuses of trust, regardless of
proof of actual damages.” Id. at 873.
To sum up …
All of Swinnea’s arguments on disgorgement deny the fundamental basis
and purpose for the remedy, as established by the Texas Supreme Court. There is
no longer room to debate the issue. Swinnea’s de novo attacks on established
precedent appear to embrace frivolity for the purpose of delay. They should be
dispatched swiftly.
19
II. This court has already held there is no statutory constraint on punitive
damages.
The argument at pp. 25-32 of Swinnea’s brief seeking to “cap” punitive
damages under Tex.Civ.Prac. & Rem.Code Ann. § 41.008(c) is, in effect, a motion
for rehearing of Swinnea II, which is more than three years too late. In its last
decision, this court squarely confronted the issue of the statutory cap and held:
The trial court found that Swinnea made false representations of past
and existing material facts to ERI and Snodgrass, which were relied
on by them, and which were made for the purpose of inducing them to
enter the buyout. The court also found that Swinnea made the false
representations with actual awareness of their falsity and with the
intent to cause damage to ERI and Snodgrass. Accordingly, the trial
court found the type of conduct referred to in Section 41.008(c)(11)
and therefore the statutory cap on exemplary damages does not apply.
Tex. Civ. Prac. & Rem.Code Ann. § 41.008(c). Because the statutory
cap does not apply and the evidence is sufficient to support the
amount of exemplary damages awarded, we overrule Swinnea's fourth
issue.
Swinnea II, 364 S.W.3d at 424.
An attack on that holding was the principal focus of Swinnea’s petition for
review. In Sections II-III of that petition, Swinnea devoted six pages to the same
argument made here. Surely the supreme court would have granted the petition had
it found error in that holding, because it would significantly affect the punitive
damages. The rule in this situation is:
Under the law of the case doctrine, a court of appeals is ordinarily
bound by its initial decision if there is a subsequent appeal in the same
case; but a determination to revisit an earlier decision is within the
discretion of the court under the particular circumstances of each case.
20
Gotham Ins. Co. v. Warren E&P, Inc., 455 S.W.3d 558, 562 n.8 (Tex. 2014).
Absent any change in the facts or prevailing law, the only “circumstance”
justifying a second look at an already decided issue is that the ruling is “clearly
erroneous.” See eg, Green v. Priddy, 112 Tex. 567, 577, 250 S.W. 656, 660 (Tex.
1923).
In the face of the supreme court’s tacit approval of that case-determinative
issue, Swinnea is hard pressed to identify any circumstances to justify revisiting
an issue that court was untroubled by. Certainly, nothing that occurred in the
remand to the trial court justifies a second look. That remand was limited to the
findings on the disgorgement elements. It does not provide a new platform per se
to review a separate statutory matter that has once been decided by this court and
reviewed by a court of last resort.
III. There is nothing to remand.
The confusing argument under Swinnea’s §IIIA (there is no IIIB) is a classic
tangled web. (AptBr:17-24.) The purpose of the argument is seen in its last
sentence where Swinnea says the “punitive awards must be vacated and remanded
for a proper analysis.” (AptBr:24.) The gambit very clearly aims to consign this
now-decade-old litigation to another decade of endless trials and appeals where
Swinnea apparently hopes attrition from costly litigation will give him the victory
he cannot accomplish legally.
21
Swinnea’s legal premise for a remand is found in this argument:
Because the disgorgement award is punitive and not restitution, it
(together with any award of express punitive damages to Snodgrass)
must be analyzed by the trial court as an initial matter and this Court
for constitutional excessiveness and compliance with the Kraus
factors.
(AptBr:18.)
His factual premises for the remand is that
● there has been “a five-fold reduction in what the trial court perceived as
actual damages when setting the punishment,”
● “the actual damages have been reduced by 80 percent,” and
● “[w]hen actual damages have been reduced to only about 15% of their
former amount, it should suggest taking a fresh look at the amount of punitive
damages.” (AptBr:21.)
This court bears its share of the blame because, according to Swinnea,
Justice Griffith’s opinion in Swinnea II “made no attempt at analysis” of
“constitutional due-process,” “invoked [an]impermissible, sua sponte ground to
avoid the statutory cap,” “failed to acknowledge the effect of the lost-profits
remittitur,” and “precluded the trial court from conducting any punitive-damage
analysis in light of the revised actual damages and the remanded disgorgement.”
(AptBr:19-20.)
22
The logic connecting those failures with a need to remand is not clear. That
analytical gap exposes numerous fallacies in the argument:
First, and foremost, Swinnea’s principal (if not only) reason for the remand
is the premise that the ratio of actual to punitive damages has “changed
dramatically” due to the “supreme court’s reconstitution of the disgorgement as
other than actual damages.” (AptBr:19, 22.) The premise is utterly false. As we
showed above, the supreme court has made clear that the disgorgement sums are
not “mainly punitive.” Burrow, 997 S.W.2d 240. The entire argument collapses for
that reason alone.
Second, there is nothing for the trial court to do. The trial court has
exercised its fact-finding function – both at the original trial and on remand. The
facts found are unchallenged. The application of punitive damages guidelines to
those findings to test excessiveness of punitive damages is a de novo legal exercise
in which appellate courts have the last word. See Cooper Industries v. Leatherman
Tool Group, Inc., 532 U.S. 424, 432, 437 (2001) (level of punitive damages “is not
really a ‘fact’ ‘tried’ by the jury.”) The supreme court understood that principle. In
remanding Swinnea I, it said: “it is now proper for the courts below to consider any
remaining issues concerning the trial court’s initial award of $1 million in punitive
damages…” Swinnea I, 318 S.W.2d at 880. The plural “courts” indicates this
court’s primary role in performing the analysis.
23
Third, this court has already done the analysis under the Kraus factors.
Under the heading “Exemplary Damages,” this court devoted an entire section of
its opinion on remand from the supreme court to testing the amount of the punitive
damages against applicable standards. The court concluded:
After reviewing the entire record, applying the Kraus factors, and
considering the amount of actual damages properly recoverable, we
conclude that exemplary damages in the amount of $1,000,000.00 is
not so contrary to the overwhelming weight and preponderance of the
evidence as to be clearly wrong and manifestly unjust.
Swinnea II, 364 S.W.3d at 424, citing Alamo Nat’l Bank v. Kraus, 616 S.W.2d 908,
910 (Tex. 1981). The trial court noted on remand from this court that it would not
conduct the due process analysis as urged by Swinnea because the “issue relating
to the amount of punitive damages and the propriety of that award has been settled
by the Twelfth Court of Appeals.” (2CR285.)
Swinnea wants a remand to the trial court, not because he didn’t receive a
full analysis from this court the last time, but because of his dissatisfaction with the
analysis he got -- which he impugns in particularly caustic terms:
“Rather than consider the limits due process places upon a defendant’s
punishment, once the supreme court had reversed in part on other
grounds, Justice Griffith’s opinion perfunctorily invoked Alamo Natl’
Bank v. Kraus with no real attempt at analysis, solely in connection
with the express punitive award to Snodgrass.”
(AptBr: 19.)
24
This criticism again overlooks the important principle that, under the law of
the case doctrine, a court of appeals is ordinarily bound by its initial decision if
there is a subsequent appeal in the same case. Gotham Ins. Co., 455 S.W.3d at 562
n.8.
Because this court’s opinion in Swinnea II found the maximum amount of
actual damages and suggested a remittitur, it clearly had the remitted amount of
lost profits in mind in its Kraus-factors analysis. Other than the false notion that
the supreme court “reconstituted” disgorgement as punitive damages, Swinnea
offers no reason for this court (or the trial court) to apply the Kraus factors again,
again, and again. (We discuss his separate constitutional due process complaint in
the following section.
IV. The punitive damages pass constitutional muster.
Swinnea insists that he has never received a separate analysis of punitive
damages under the due process clause of the federal constitution. We disagree
with his characterization that “no court has lifted a finger to consider whether the
combined $1.72 million in punitive awards might be constitutionally excessive.”
(AptBr:19.) He received such a review from this court in Swinnea II, because the
guidelines announced in Alamo Nat’l Bank v. Kraus, 616 S.W.2d 908, 910 (Tex.
1981), individually applied by the court in that case closely match the United
States Supreme Court guidelines.
25
Those federal criteria include: (1) the degree or reprehensibility of the
defendant's misconduct, (2) the disparity between the harm (or potential harm)
suffered by the plaintiff and the punitive damages award, and (3) the difference
between the punitive damages awarded by the jury and the civil penalties
authorized or imposed in comparable cases. Cooper Indus., Inc., 532 U.S. at 440,
citing BMW of North America v. Gore, 517 U.S. 559, 574-575 (1996).
“Reprehensibility” encompasses Kraus’s “character of the conduct” and “degree of
culpability;” the other two factors (ratio and statutory punishment) fit comfortably
within Kraus’s “offense to a public sense of justice and propriety.” Kraus, 616
S.W.2d at 910.
To stop the treadmill on which Swinnea wants to keep this case (hopefully),
we offer the following purely constitutional analysis to put the matter to rest and
demonstrate once and for all that federal due process principles confirm the
punitive damages award.
(i) Ratio: Given the unchallenged findings, Swinnea understandably avoids
“reprehensibility” and concentrates only on the ratio of punitive damages to actual
damages. (AptBr: 32-33.)
The United States Supreme Court has instructed that, “because there are no
rigid benchmarks that a punitive damages award may not surpass, ratios greater
than those we have previously upheld may comport with due process where ‘a
26
particularly egregious act has resulted in only a small amount of economic
damages,’ Ibid.4; see also ibid. (positing that a higher ratio might be necessary
where ‘the injury is hard to detect or the monetary value of noneconomic harm
might have been difficult to determine’).” State Farm Mutual Auto Ins. Co. v.
Campbell, 538 U.S. 408, 425, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003).
Swinnea concedes the validity of a 4:1 ratio without realizing that the ratios
here are below that.
(i) Texas has long recognized that exemplary damages may be recovered
based on disgorged sums from “defaulting fiduciaries.” Int’l Bankers Life Ins. Co.
v. Holloway, 368 S.W.2d 567, 584 (Tex. 1963); Russell v. Truitt, 554 S.W.2d 948,
955 (Tex. Civ. App. – Fort Worth 1977, writ dism’d.) Adding the disgorged sums
of $720,700 to lost profits plus prejudgment interest of $267,000 yields a ratio
punitive damages to actual damages of 1.01:1.
(ii) Using just the lost profits of $178,600 plus prejudgment interest in the
sum of $88,370 yields a ratio of 3.75:1.
Both ratios are within the range Swinnea concedes is appropriate. Swinnea’s
argument that the ratio does not leave room for greater punishment in cases
involving, among other things “financial ruin,” ignores the unchallenged finding
that Swinnea’s “objective was the financial destruction of ERI and Larry
4
Referring to BMW of North America, Inc. v. Gore, 517 U.S. 559 (1996).
27
Snodgrass so that .. [he] .. could take advantage thereof for his own benefit.” (FOF
# 5c at 3CR397.) This case thus justifies the extraordinary punishment.
(ii) Reprehensibility: Swinnea largely ignores the reprehensibility factor
even though it is “the most important indicium of the reasonableness of a punitive
damages award.” Gore, 517 U.S. at 575.
The nonexclusive factors identified by the United States Supreme Court as
indicative of the requisite reprehensibility include (i) that “the target of the conduct
had financial vulnerability,” (ii) “the conduct involved repeated actions,” and (iii)
the harm resulted from “intentional malice, trickery, or deceit,” as opposed to
“mere accident.” State Farm, 538 U.S. at 419, see also Gore, 517 U.S. at 576–77.
Those factors are supported in this case by numerous unchallenged findings:
(i) ERI and Snodgrass were financially vulnerable because, under the terms
of the buyout, Swinnea – a prime producer of income for ERI – continued working
for ERI as a fraudfeasor in sheep’s clothing while his “objective was the financial
destruction of ERI and Larry Snodgrass so that .. [he] .. could take advantage
thereof for his own benefit.” (FOF #5c at 3CR397.) His employment at ERI was a
cover that allowed him to have “executed a scheme, taking advantage of his
intimate knowledge of ERI and Snodgrass, which would jeopardize ERI and Larry
Snodgrass of their major sources of revenue, expertise, longstanding client
relationships and goodwill.” (FOF #3e at 3CR396.)
28
(ii) Swinnea’s fraud, deceit, and deception “continued after the buyout”
(FOF #66 at 1CR83) and thus was repeated daily for years, until he was
terminated.
(ii) Swinnea engaged in fraudulent breach of fiduciary duty by which he
“willfully, maliciously and intentionally caused injury to” ERI and Snodgrass
(FOF #’s57, 72, 74 at 1CR82-83); or, as this court noted in Swinnea II, Swinnea’s
conduct involved “dishonesty and deceit,” “Swinnea acted in bad faith and with
malice,” and his “culpability was significant.” Swinnea II, 364 S.W.3d at 423-424.
All of Swinnea’s wrongful conduct was done with “malice.” (FOF #84 at 1CR84.)
Additionally, Bennett v. Reynolds recognizes that the State Farm factors are
non-exclusive. Bennett v. Reynolds, 315 S.W.3d 867, 873-874 (Tex. 2010), so, it
is appropriate to consider that Texas has a strong interest in protecting the integrity
of fiducial relationships and good reason to administer strong medicine to actors,
like Swinnea, who commit fraud while acting as fiduciaries. Indeed, Swinnea I
justified disgorgement precisely because Swinnea’s “willful actions constituting
breach of fiduciary duty also amount to fraudulent inducement,” and therefore,
“the contractual consideration received by the fiduciary is recoverable in equity
regardless of whether actual damages are proven.” Swinnea I, 318 S.W.3d 873.
The unchallenged original and remand findings establish that Swinnea’s
conduct is about as reprehensible as it gets. Describing his conduct as “garden-
29
variety” fraud (AptBr:29) is an oxymoronic contradiction of terms. His statement
that there is “no evidence of any specific desire to harm the plaintiff” (AptBr:34),
cynically ignores the unchallenged findings to the contrary. The financial razzle-
dazzle at pp. 32-36 seeking to minimize the nature of his acts, his malicious intent
and the harm they caused, brazenly asks this court to abandon all tenets of
principled appellate review and essentially review the case de novo.
(iii) Statutory penalties: Swinnea makes no argument on the statutory
remedies element, so it is irrelevant.
Swinnea’s argument on due process ignores two of the federal standards and
bases the third on a false premise. To sustain such an attenuated, make-weight
argument would itself be a denial of due process to plaintiffs.
V. Snodgrass is entitled to recover.
Swinnea’s first argument is that Snodgrass could not recover individually,
because, as a corporate shareholder, he could not recover individually for a loss
sustained by ERI. (AptBr:8.)
In this appeal, he phrases the argument a little differently, but it is essentially
the same one that he made before that this court rejected. In the first appeal to this
court, Swinnea argued “There is no basis for awarding Mr. Snodgrass any loss-of-
income damages and such recovery should be eliminated from the judgment for the
simple reason that if there was any loss of work, income, or profits, it was damage
30
solely to ERI, not Snodgrass.” (AptBr[2006]30.) Swinnea also argued in that brief
that there was no evidence Snodgrass, as opposed to ERI, had paid any portion of
the upfront buyout money or that he had any standing to recover it. Id. at 33. His
legal argument was that, “Because a corporate director’s fiduciary duty runs only
to the corporation, not to its individual shareholders, whether Mark Swinnea owed
ERI a fiduciary duty to disclose AQA’s formation and Dawn’s ownership in AQA,
it was not a duty owed to Snodgrass individually.” Id. at 43.
Swinnea now argues that “[t]his court should have addressed Swinnea’s
attacks on Snodgrass’s standing to recover ERI’s lost profits and punitive
damages.” (AptBr:9.) This court did address that very argument. It found that
Swinnea’s challenges raised issues of capacity, not standing, and were waived:
The gist of Appellants’ argument is that, because the transaction at
issue was the repurchase by ERI of its own stock, and Snodgrass
individually was not a party to the transaction, he cannot be entitled to
win damages individually. This argument raises the issue of capacity,
not standing.”
This Court then concluded, “Appellants’ answer does not raise the issue of
capacity, nor is it verified by affidavit. Appellants have waived the right to raise
the issue of Snograss’s capacity. We overrule Appellant’s second issue.
Swinnea[2007], 236 S.W.3d at 833.
Swinnea’s present argument does not address the prior waiver holding. He
also does not address (or challenge) the trial court’s and the supreme court’s
31
holding that “ERI and Snodgrass” were both injured by Swinnea’s conduct.
1CR82-83; 2CR293; 3CR396; Swinnea I 318 S.W.3d at 880. The argument is
meritless.
VI. Swinnea waived the attorney’s fee claim, but it is meritless in any event.
The half-page argument contending that appellees are not entitled to
attorney’s fees cannot be taken seriously – for several reasons:
First, the argument has been waived. Appellees cannot find where this
complaint was raised to either the trial court or this court in prior proceedings.
Arguing it now comes too late. Tex.R.App.P. 33.1; see also Lairsen v. Slutzky, 80
S.W.3d 121, 130 (Tex.App.—Austin 2000, pet. denied).
Second, the argument’s premise is the puzzling statement that “the plaintiff
is entitled to only one recovery, even when his injury could be said to result from
multiple culpable acts” and “plaintiff may recover under his one best legal theory.”
(AptBr:36-37.) It is not clear how those principles logically lead to a denial of
attorney’s fees, but, logic aside, the argument defies the following supreme court
holding in Swinnea I:
We need not distinguish here between ERI’s causes of action –
common law and statutory fraud, breach of contract, and breach of
fiduciary duty – because ERI’s lost profit damages are recoverable for
any one of those claims.
Swinnea I, 318 S.W.3d at 876 n 3.
32
The decision in Boyce Iron Works, Inc. v. Southwestern Bell Telephone Co.,
747 S.W.2d 785, 787 (Tex. 1988), has nothing to do with this case. That case held:
When a party tries a case on alternative theories of recovery and a jury
returns favorable findings on two or more theories, the party has the
right to a judgment on the theory entitling him to the greatest of most
favorable relief.
Id.
The attorney’s fees are related to the lost profits recovery. Attorney’s fees
are recoverable for breach of contract. Swinnea’s argument thus was foreclosed
long ago by the trial court’s original and the supreme court’s holding – which is
apparently the reason Swinnea has never challenged it until this latest attempt at
review de novo.
CONCLUSION AND PRAYER FOR RELIEF
This case is here only because of this court’s limited remand to consider
principles that undergird a disgorgement remedy. When an appellate court remands
a case only as to a particular issue, the trial court is restricted to a determination of
that particular issue. Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986).
“Thus, in a subsequent appeal, instructions given to a trial court in the former
appeal will be adhered to and enforced.” Id. “By narrowing issues in successive
stages of the litigation, the law of the case doctrine is intended to achieve
uniformity of decision as well as judicial economy and efficiency. Id., at 629.
33
The purpose for the remand was clear: “As directed by the supreme court,
we remand the case to the trial court for review of its forfeiture award in light of
the principles discussed in the supreme court’s opinion.” Swinnea II, 364 S.W.3d
at 425. No issues of standing, capacity or any other complaints, other than those
relating to the disgorgement defined by the supreme court were available for
review by the trial court.
This appeal has little to do with the trial court’s ruling following this court’s
remand. Instead, it seeks de novo review of (i) the nature of the disgorgement
remedy that was decided in Swinnea 1, (iii) this court’s holdings in Swinnea II that
did not trouble the supreme court, and (iii) issues that were plainly waived years
ago – all in a context where the findings on remand are unchallenged.
Appellees, Larry Snodgrass and ERI ask that the prior judgment in this case
be affirmed for all those reasons.
34
Respectfully submitted,
/s/ Deborah Race
Deborah Race
State Bar No. 16448700
IRELAND, CARROLL & KELLEY, P.C.
6101 S. Broadway, Suite 500
Tyler, Texas 75703
Tel: (903) 561-1600
Fax: (903) 581-1071
drace@icklaw.com
Mike A. Hatchell
State Bar No. 09219000
LOCKE LORD, LLP
600 Congress Ave.
Austin, Texas 78701
Tel: (512) 305-4752
Fax: (512) 305-4800
mahatchell@lockelord.com
CERTIFICATE OF COMPLIANCE
This brief complies with Texas Rule of Appellate Procedure 9.4(i) because it
Contains 8073 words (excluding the parts of the brief exempted by this rule).
Signed this 6th day of August, 2015.
/s/ Deborah Race
35
CERTIFICATE OF SERVICE
I certify that on August 6, 2015, I served a copy of this motion electronically
on the following:
Gregory D. Smith
Nolan Smith
Ramey & Flock, P.C.
100 E. Ferguson, Suite 500
Tyler, TX 75702
Michael E. Gazette
Law Office of Michael E. Gazette
100 E. Ferguson, Suite 1000
Tyler, TX 75702
/s/ Deborah Race
36