Lakeway Regional Medical Center, LLC and Surgical Development Partners, LLC// Lake Travis Transitional LTCH, LLC N/K/A Lake Travis Specialty Hospital, LLC v. Lake Travis Transitional LTCH, LLC N/K/A Lake Travis Specialty Hospital, LLC// Lakeway Regional Medical Center, LLC Surgical Development Partners, LLC Brennan, Manna, & Diamond, LLC And Frank T. Sossi ( 2015 )

ACCEPTED
03-15-00025-CV
7943312
THIRD COURT OF APPEALS
AUSTIN, TEXAS
11/23/2015 10:21:08 AM
JEFFREY D. KYLE
CLERK
No. 03-15-00025-CV
______________________________________________
FILED IN
3rd COURT OF APPEALS
IN THE COURT OF APPEALS AUSTIN, TEXAS
FOR THE THIRD DISTRICT OF TEXAS 11/23/2015 10:21:08 AM
AUSTIN, TEXAS JEFFREY D. KYLE
______________________________________________ Clerk
APPELLANTS, LAKEWAY REGIONAL MEDICAL CENTER, LLC AND
SURGICAL DEVELOPMENT PARTNERS, LLC// CROSS-APPELLANT,
LAKE TRAVIS TRANSITIONAL LTCH, LLC N/K/A LAKE TRAVIS
SPECIALTY HOSPITAL, LLC
v.
APPELLEES, LAKE TRAVIS TRANSITIONAL LTCH, LLC N/K/A LAKE
TRAVIS SPECIALTY HOSPITAL, LLC// CROSS-APPELLEES, LAKEWAY
REGIONAL MEDICAL CENTER, LLC, SURGICAL DEVELOPMENT
PARTNERS, LLC, BRENNAN, MANNA, & DIAMOND, LLC
AND FRANK T. SOSSI
___________________________________________
BRIEF OF APPELLEE
LAKE TRAVIS TRANSITIONAL LTCH, LLC N/K/A
LAKE TRAVIS SPECIALTY HOSPITAL, LLC (“LTT”)
___________________________________________
Jane M.N. Webre
S. Abraham Kuczaj, III
Robyn B. Hargrove
SCOTT DOUGLASS
& MCCONNICO LLP
303 Colorado Street, 24th Floor
Austin, TX 78701
(512) 495-6300
(512) 495-6399 Fax
COUNSEL FOR LTT
ORAL ARGUMENT REQUESTED
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TABLE OF CONTENTS
INDEX OF AUTHORITIES......................................................................................v
STATEMENT OF THE CASE ..................................................................................x
STATEMENT OF JURISDICTION..........................................................................x
RECORD.................................................................................................................. xi
APPENDIX .............................................................................................................. xi
ISSUES ................................................................................................................... xii
OVERVIEW ..............................................................................................................1
STATEMENT OF FACTS ........................................................................................1
A. Defendants seek to acquire LTT’s facility, which was designed
with the flexibility to operate as a long-term care hospital or an
acute-care hospital. ................................................................................1
B. LTT shares confidential information with Defendants pursuant
to the LOI. .............................................................................................3
C. Defendants manipulate the LOI diligence process to game the
HUD mortgage guaranty process. .........................................................5
D. Defendants use LTT’s confidential information to secure the
HUD guaranty. ......................................................................................8
SUMMARY OF ARGUMENT ...............................................................................10
ARGUMENT ...........................................................................................................11
A. Ample evidence supports the jury’s causation finding. ......................11
1. The equal inference rule applies only when multiple
reasonable inferences are equally probable. .............................12
2. There are no equal inferences from the evidence; the only
reasonable inference is that HUD relied on Defendants...........14
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B. The damages findings are supported by sufficient evidence. .............17
1. LTT was a proper assignee of Berry and McDonald. ...............17
2. Ample evidence supports the jury’s award of $7.9 million
in lost fair market value of LTT. ...............................................20
a. Phillips v. Carlton confirms that fair market value
can be based on an agreed purchase price. .....................20
b. The evidence and Defendants’ judicial admissions
establish that $7.9 million was the fair market
value for LTT. .................................................................22
c. $7.9 million is within the range of evidence of
LTT’s lost fair market value, particularly in light
of the mitigation instruction. ..........................................24
d. Relying on the agreed purchase price does not
conflict with the summary judgment ruling
regarding section 2..........................................................25
e. The measure of damages does not impermissibly
“mix and match” methodologies to calculate fair
market value....................................................................27
3. Berry’s testimony was not conclusory or speculative. .............28
4. The loss in fair market value was foreseeable. .........................32
5. Ample evidence supports the jury’s award of $790,000 in
lost fair market value for the confidential information .............36
6. In the alternative, remand is proper because there is
evidence of some damages........................................................38
C. SDP’s argument that it is not a party to the LOI fails again. ..............38
1. SDP waived any complaint that it was not a party to the
LOI. ...........................................................................................38
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2. An agent may be personally liable on contracts made for
the benefit of his principal—even where the principal is
disclosed. ...................................................................................39
3. SDP identified itself as a party to the LOI and obligated
itself under the LOI and is consequently individually
liable for breach of the LOI. .....................................................40
4. The LOI is not ambiguous regarding SDP’s party status,
and no jury question was proper. ..............................................42
5. There is ample evidence that SDP breached the LOI. ..............43
D. The trial court properly charged the jury on breach of contract
and damages. .......................................................................................44
1. Background on broad-form submission and Casteel ................45
2. Casteel granulation is not required unless the alleged
invalid theory was presented to the jury at trial. .......................47
a. Factual allegations underlying breach of contract
do not need to be granulated. ..........................................48
b. Casteel does not apply if the alleged invalid theory
was not before the jury at trial. .......................................52
c. LTT never advocated at trial that Defendants
breached section 2 of the LOI.........................................55
3. Defendants’ proposed instruction would not have cured
any alleged error and was otherwise improper. ........................56
E. The fee award was proper. ..................................................................58
CONCLUSION AND PRAYER .............................................................................58
CERTIFICATE OF SERVICE ................................................................................60
CERTIFICATE OF COMPLIANCE .......................................................................60
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INDEX OF AUTHORITIES
Cases
Alonysius v. Kislingbury,
No. 01-13-00147-CV, 2014 WL 4088145 (Tex. App.—Houston
[1st Dist.] Aug. 19, 2014, no pet.) .......................................................... 19, 38
American Nat’l Bank of Houston v. Am. Loan & Mortg. Co.,
228 S.W. 169 (Tex. Comm’n App. 1921, judgm’t adopted).........................39
Basic Capital Mgmt., Inc. v. Dynex Commercial, Inc.,
348 S.W.3d 894 (2011)..................................................................... 32, 33, 34
Bed, Bath & Beyond, Inc. v. Urista,
211 S.W.3d 753 (Tex. 2006) ................................................................. passim
Benge v. Williams,
__S.W.3d__, No. 01-12-00578-cv, 2014 WL 6462352
(Tex. App.—Houston [1st Dist.] Nov. 18, 2014, n.p.h.) .................. 52, 53, 56
Benton v. State,
336 S.W.3d 355 (Tex. App.—Texarkana 2011, pet. ref’d)...........................23
Bohnsack v. Varco, L.P.,
668 F.3d 262 (5th Cir. 2012) .................................................................. 26, 27
Burbage v. Burbage,
447 S.W.3d 249 (Tex. 2014) .........................................................................13
City of Dallas v. Redbird Development Corp.,
143 S.W.3d 375 (Tex. App.—Dallas 2004, no pet.) ........................ 29, 30, 32
Clear Lake City Water Authority v. Kirby Lake Dev., Ltd.,
123 S.W.3d 735 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) .......54
Coastal Transp. Co., Inc. v. Crown Central Petroleum,
136 S.W.3d 227 (Tex. 2004) .........................................................................29
Columbia Medical Center of Las Colinas v. Bush,
122 S.W.3d 835 (Tex. App.—Fort Worth 2003, pet. denied) .......................50
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Columbia Rio Grande Healthcare, L.P. v. Hawley,
284 S.W.3d 851 (Tex. 2009) .................................................................. 47, 52
Crown Life Ins. Co. v. Casteel,
22 S.W.3d 378 (Tex. 2000) ................................................................... passim
Dillard v. Texas Elec. Co-Op,
157 S.W.3d 429 (Tex. 2005) .........................................................................46
Duke Energy Field Services, L.P. v Meyer,
190 S.W.3d 149 (Tex. App.—Amarillo 2005, pet. denied) ..........................29
Empire Life Ins. Co. of America v. Valdak Corp.,
468 F.2d 330 (5th Cir. 1972) .........................................................................19
Faour v. Faour,
789 S.W.2d 620 (Tex. App.—Texarkana 1990, pet. denied) ........................18
Formosa Plastics Corp., USA v. Kajima Int’l, Inc.,
216 S.W.3d 436 (Tex. App.—Corpus Christi—Edinburg 2006,
pet. granted, judg’t vacated by agrt.) .............................................................50
GJP, Inc. v. Ghosh,
251 S.W.3d 854 (Tex. App.—Austin 2008, no pet.).....................................56
Gupta v. Eastern Idaho Tumor Institute, Inc.,
140 S.W.3d 747 (Tex. App.—Houston [14th Dist.] 2004, pet. denied) .......57
Haase v. Glazner,
62 S.W.3d 75 (Tex. 2001) ............................................................................26
Hancock v. Variyam,
400 S.W.3d 59 (Tex. 2013) ...........................................................................13
Harris County v. Smith,
96 S.W.3d 230 (Tex. 2002) .................................................................... 46, 47
Holt Atherton Industries, Inc. v. Heine,
835 S.W.2d 80 (Tex. 1992) ...........................................................................28
Horizon/CMS Healthcare Corp. v. Auld,
34 S.W.3d 887 (Tex. 2000) ...........................................................................23
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Hughes v. Pearcy,
No. 03-10-00319, 2014 WL 7014353 (Tex. App.—Austin 2014,
pet. denied) ....................................................................................................23
Id. at *11...................................................................................................................21
Inimitable Group, L.P. v. Westwood Group Dev. II, Ltd.,
264 S.W.3d 892 (Tex. App.—Fort Worth 2008, no pet.) .............................57
Instone Travel Tech Marine & Offshore v. Int’l Shipping Partners, Inc.,
334 F.3d 423 (5th Cir. 2003) .................................................................. 39, 42
Jelinek v. Casas,
326 S.W.3d 526 (Tex. 2010) .........................................................................13
Louisiana-Pacific Co. v. Knighten,
976 S.W.2d 674 (Tex. 1988) .........................................................................56
Lozano v. Lozano,
52 S.W.3d 141 (Tex. 2001) .................................................................... 12, 13
Marathon Corp. v. Pitzner,
108 S.W.3d 724 (Tex. 2003) .........................................................................13
McFarland v. Boisseau,
365 S.W.3d 449 (Tex. App.—Houston [1st Dist.] 2011, no pet.).................54
McMillin v. State Farm Lloyds,
180 S.W.3d 183 (Tex. App.—Austin 2005, pet. denied) ....................... 24, 37
Mediacomp, Inc. v. Capital Cities Comm’n, Inc.,
698 S.W.2d 207 (Tex. App.—Houston [1st Dist.] 1985, no writ) ................42
Medina v. Hart,
240 S.W.3d 16 (Tex. App.—Corpus Christi 2007, pet. denied) ...................23
Memon v. Shaikh,
401 S.W.3d 407 (Tex. App.—Houston [14th Dist.] 2013, no pet.) . 48, 49, 54
Osterberg v. Peca,
12 S.W.3d 31 (Tex. 2000) .............................................................................38
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Phillips v. Carlton Energy Group, LLC.
___ S.W.3d ___, No. 12-0255, 2015 WL 2148951
(Tex. May 8, 2015) ................................................................................ passim
Pleasant v. Bradford,
260 S.W.3d 546 (Tex. App.—Austin 2008, pet. denied) ........... 22, 24, 27, 28
Powell Elec. Sys., Inc. v. Hewlett Packard Co.,
356 S.W.3d 113 (Tex. App.—Houston [1st Dist.] 2011,
no pet.) ........................................................................................ 47, 50, 51, 52
Reid Road Mun. Utility Dist. No. 2 v. Speedy Stop Food Stores, Ltd.,
337 S.W.3d 846 (Tex. 2011) .........................................................................29
Rojas v. Duarte,
393 S.W.3d 837 (Tex. App.—El Paso 2012, pet. denied).............................38
Romero v. KPH Consol., Inc.,
166 S.W.3d 212 (Tex. 2005) .........................................................................53
Rough Creek Lodge Operating, L.P. v. Double K Homes, Inc.,
278 S.W.3d 501 (Tex. App.—Eastland 2009, no pet.)..................... 47, 50, 51
Sand Point Ranch, Ltd. v. Smith,
363 S.W.3d 268 (Tex. App.—Corpus Christi 2012, no pet.) ........................54
Shelby Distributions, Inc. v. Reta,
441 S.W.3d 715 (Tex. App.—El Paso 2014, no pet.) ...................................49
Springs Window Fashions Div., Inc. v. Blind Maker, Inc.,
184 S.W.3d 840 (Tex. App.—Austin 2006, pet. granted,
judgm’t vacated w.r.m.) .................................................................................28
Stinnett v. Paramount-Famous Lasky Corp.,
37 S.W.2d 145 (Tex. Comm’n. App. 1931, holding approved) ............. 18, 19
Stuart v. Bayless,
964 S.W.2d 920 (Tex. 1998) (per curiam) ....................................................32
Sunbridge Healthcare Corp. v. Penny,
160 S.W.3d 230 (Tex. App.—Texarkana 2005, no pet.) ..............................50
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Tex. Dep’t of Human Servs. v. E.B.,
802 S.W.2d 647 (Tex. 1990) .........................................................................45
Tex. Dept. of Assistive & Rehabilitative Servs. v. Abraham,
No. 03-05-00003-CV, 2006 WL 191940, n.8 (Tex. App.—Austin
Jan. 27, 2006, no pet.) (mem. op.) .................................................... 45, 53, 56
Texas Comm’n on Human Rights v. Morrison,
381 S.W.3d 533 (Tex. 2012) (per curiam) ............................................. 49, 54
Thota v. Young,
366 S.W.3d 678 (Tex. 2012) ...................................................... 46, 47, 49, 54
Traxler v. Entergy Gulf States, Inc.,
376 S.W.3d 742 (Tex. 2012) .........................................................................44
United Pacific Railroad Co. v. Williams,
85 S.W.3d 162 (Tex. 2002) ...........................................................................56
USAA Cty. Mut. Ins. Co. v. Cook,
241 S.W.3d 93 (Tex. App.—Houston [1st Dist.] 2007, no pet.)...................13
Wingate v. Hajdik,
795 S.W.2d 717 (Tex. 1990) .................................................................. 17, 18
Statutes
12 U.S.C. § 1715z-7(a) ........................................................................................5, 14
24 C.F.R. § 242.16 .....................................................................................................5
Tex. Gov't Code § 22.220 ..........................................................................................x
Tex. R. Civ. P. 277 ...................................................................................................45
Other Authorities
Restatement (Second) of Contracts § 351 (1981) ....................................................32
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STATEMENT OF THE CASE
Nature of the Case: This breach of contract case involves two hospital
projects in Lakeway, Texas. Lake Travis Transitional
LTCH, LLC (“LTT”) sued Lakeway Regional Medical
Center, LLC (“LRMC”) and Surgical Development
Partners, LLC (“SDP”) (together, “Defendants”), as well
as certain Lawyer Defendants involved in the transaction,
for improperly taking LTT’s confidential information
obtained pursuant to a binding Letter of Intent (the
“LOI”) and using it to secure a lucrative government-
backed mortgage that allowed them to build a competing
hospital. The LOI had contemplated that LTT and
Defendants would work together on the LTT project, and
did not permit the use of LTT’s information for any other
purpose. The LOI is attached at App.1.
Trial Court: 343rd District Court of Travis County, Texas. Hon.
Steven Yelenosky rendered a pretrial partial summary
judgment. Hon. Lora Livingston presided over the
subsequent jury trial and rendered the final judgment.
Course of Proceedings: Judge Yelenosky rendered partial summary judgment as
to LTT’s claim for misappropriation of trade secrets and
its claim that Defendants breached section 2 of the LOI.
The summary judgment orders are the subject of LTT’s
Brief of Cross-Appellant.
LTT’s remaining claims were tried to a jury, which found
that Defendants breached the LOI. App.4. Judge
Livingston rendered judgment on the jury’s verdict
against Defendants for $7.9 million in actual damages,
together with $2 million in stipulated attorneys’ fees, pre-
and post- judgment interest, and costs of court. App.3.
STATEMENT OF JURISDICTION
This Court has jurisdiction over this appeal from a final judgment of a
district court pursuant to Texas Government Code § 22.220.
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RECORD
The record on appeal includes a 3-volume Clerk’s Record and four 1-volume
supplemental Clerk’s Records, only one of which is labeled “supplemental.”
Citations to the 3-volume Clerk’s Record will be to volume and page: ___CR___.
Citations to the one-volume Clerk’s Records will be to date and page: 5/21CR___,
6/18CR___, 7/17CR___, or 7/21CR___.
There is a 20-volume Reporter’s Record, a 1-volume supplemental
Reporter’s Record, and a 1-volume Reporter’s Record that is not labeled
“supplemental.” Volume 1 of the 20-volume Reporter’s Record is a Master Index.
Volumes 2 and 3 are pretrial hearings held on 2/4/14 and 7/2/14, respectively.
Volumes 4 through 15 include the jury trial in August 2014. Volumes 16 and 17
include the exhibits from the 2/4/14 pretrial hearing. Volumes 18 through 20
include the trial exhibits. The Supplemental Reporter’s Record includes additional
trial exhibits; it is duplicative of some of the exhibits in Volume 20. The 1-volume
Reporter’s Record (filed 1/22/15) is the same 7/2/14 hearing transcript as Volume
3 of the 20-volume Reporter’s Record.
Citations to the Reporter’s Record will be to volume and page number:
___RR___. Citations to trial exhibits will be to party and exhibit number: PX___,
DX___. Citations to video deposition testimony will be to the Court Exhibit
number (CE___), followed by the hour, minute, and second.
APPENDIX
References to items included in the Appendix will be to App. ____.
App. 1 Letter of Intent (PX2)
App. 2 Confidentiality Agreement (PX4)
App. 3 Judgment (6/18CR3-5)
App. 4 Charge of the Court (3CR12997-13009)
App. 5 May 10 e-mail (PX180)
App. 6 June 21 letter (PX136)
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ISSUES
1. The evidence showed that Defendants communicated with HUD extensively
to secure and protect their government-backed mortgage guaranty, that Defendants
used confidential information from LTT received pursuant to the LOI to answer
HUD’s questions about whether LTT was a potential competitor hospital, and
HUD parroted Defendants’ arguments in defending its failure to consider LTT
when analyzing whether Lakeway was underserved. Is that evidence—and the
reasonable inferences that flow from it—sufficient to support the jury’s
determinations regarding causation?
2. Can LTT, as assignee of its principals, sue for damages under the LOI?
3. Is the jury’s determination that LTT’s loss of fair market value was $7.9
million supported by sufficient evidence, given: (1) direct evidence and counsel’s
judicial admission in open court that $7.9 million was the fair market value a
willing buyer and a willing seller had agreed for LTT before breach; and (2)
evidence that the loss of fair market value was $13.8 million, together with
evidence that LTT could have recouped about half of that in mitigation by selling
the land and certain equipment?
4. Was Berry’s testimony regarding LTT’s fair market value conclusory and
speculative? Did Defendants waive this issue by failing to object to the testimony
at trial?
5. Were LTT’s damages foreseeable? Could Defendants have anticipated that
LTT would suffer a loss in market value if they: (1) persuaded LTT to stop
construction of its hospital under the LOI, even though LTT was two years ahead
of Defendants’ planned hospital; then (2) used LTT’s confidential information to
secure a lucrative mortgage guaranty that gave Defendants a significant
competitive advantage in the area?
6. Is the jury’s finding of $790,000 for loss of value of LTT’s confidential
information supported by sufficient evidence?
7. Is SDP a party to the LOI? Did it waive any charge error by failing to object
that the charge defined LOI as being the agreement “between SDP and LTT?” Is
there sufficient evidence that SDP breached the LOI?
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8. The charge properly included broad-form questions for breach of contract
liability and damages. Defendants argue that the questions impermissibly mixed
valid and invalid theories, claiming that the jury could have based its “yes” answer
on a breach of section 2 of the LOI, and section 2 is not enforceable. At trial, LTT
presented no evidence or argument that Defendants had breached section 2; there is
no possibility that the jury could have based its answer on section 2. Does Casteel
and its presumed harm rule apply under these circumstances?
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OVERVIEW
At issue is a breach of the LOI, and it is critical to identify the relevant
breach. LTT did not contend at trial that Defendants breached the LOI by failing
to consummate the transaction contemplated by the LOI. Instead, the gravamen of
LTT’s claim for breach is deceit. Defendants breached the LOI by taking LTT’s
confidential information—shared to facilitate Defendants’ acquisition of LTT’s
facility—and instead using that information to secure a $166 million HUD-backed
mortgage to build a competing hospital for their own economic benefit. The
misuse of LTT’s confidential information in violation of the LOI is the basis of
LTT’s breach of contract claim, and there is substantial evidence that Defendants
did just that.
STATEMENT OF FACTS
LTT also relies on the statement of facts in its opening brief.
A. Defendants seek to acquire LTT’s facility, which was designed with the
flexibility to operate as a long-term care hospital or an acute-care hospital.
This suit involves a hospital LTT developed in the Lakeway area. LTT’s
CEO Robert Berry explained that the hospital was designed to open as a long-term
acute care hospital (“LTCH”) with the ability to convert into a general acute-care
hospital (“ACH”). 6RR79; 6RR96; PX25. LTT secured C1 zoning from the City
of Lakeway, which was appropriate since there was no specific category for
hospitals, and Lakeway approved LTT’s general development plan. 6RR101-02;
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DX158.1 LTT hired architects and contractors to “make an initial assessment of
the viability of that site.” 6RR104. LTT secured agreements from them to keep all
hospital information confidential. 6RR108.
Healthcare REIT financed LTT’s hospital. 6RR113. As with the architects
and contractors, LTT required confidentiality agreements from its lenders before
sharing information about the project. See PX392; PX36; 6RR114-15. Under their
lease, Healthcare REIT would finance construction, HCN would be the landlord,
and LTT would be the tenant. PX338; 6RR122-124 (explaining financial structure
of lease). The lease contemplated $21.6 million in construction financing.
6RR124-25.
Construction began in 2008, and by spring 2009 was near completion.
LRMC, a larger hospital just a half-mile away, was just beginning development.
SDP’s CEO Eddie Alexander testified that LRMC was planned as a physician-
owned hospital, but regulatory changes would soon ban that. 11RR8-9. The plan
was for LRMC “to avoid the ban on physician-ownership by opening LTT as its
initial campus.” 11RR10. Defendants contacted LTT because they “were
interested in acquiring our lease.” 6RR89.
Before providing information to Defendants, LTT took steps to protect
confidentiality. On May 11, 2009, SDP and LTT executed a Confidentiality
1
Lakeway’s approval for an “Acute Care Hospital” rather than an LTCH reflects the long-term
plan for the facility to be an ACH.
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Agreement “in order for us to share any information with [SDP]…so they could
assess…the potential of acquiring our lease.” App.2; 6RR135. LTT would not
have disclosed any information about its facility to Defendants without the
Confidentiality Agreement. 6RR135-36.
LTT provided information to Defendants as negotiations continued. See
PX15; PX379; PX61; PX359; RR143-34. On Sept. 15, 2009, the parties executed
the LOI, through which Defendants “reaffirm [their] interest in the acquisition of
the” LTT lease “as the initial campus for” LRMC. App.1.
B. LTT shares confidential information with Defendants pursuant to the LOI.
After the LOI was executed, at Defendants’ request, construction on LTT’s
hospital “was postponed in key areas.” 6RR152. At the time, completion was
“probably three months” away. 8RR130. Berry testified that the delay was costly,
so the best efforts provision in section 3 of the LOI was important to LTT.
6RR151. Berry testified that section 6 of the LOI—which prohibited the parties
from using information obtained in the project discussions for their own benefit
even in the future—was also critical. 6RR156.
Defendants also interpreted the confidentiality and non-circumvention
provisions as continuing beyond termination. On Jan. 14, 2011, Frank Sossi—a
founder, officer, outside general counsel, and board member of SDP and LRMC—
explained:
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Based on our Letter of Intent with [LTT],…we are greatly concerned
that the Section 6 (Standstill and Non-Circumvention) and Section 9
(Confidentiality) provisions of that Letter of Intent, both of which
survive any termination of that Letter of Intent, require [LTT] to have
positive obligations to SDP and LRMC regarding any information
exchanged related to that Letter of Intent. Those obligations
specifically require that the Parties act in good faith and that any
knowledge gained in the discussions not be used by the Parties for
their own benefit.
PX45; PX442 (emphasis added). Sossi’s contemporaneous correspondence also
demonstrates that Defendants viewed both LRMC and SDP as parties to the LOI.
Pursuant to the LOI, LTT gave Defendants significant confidential
information regarding virtually every aspect of their hospital. See, e.g., PX385
(Alexander asks for diligence); PX353-358 (operational agreements); PX422
(“most current set of hospital plans”); PX341 (“mechanical & electrical
specification plans”); PX386 (contract file); PX344 (specific pages from
architectural drawings); 8RR125 (CAD file of architectural drawings); PX345
(architectural specs); PX 360-61 (information regarding equipment and vendors);
PX 362, 365 (costs); DX59 (SDP officer seeking information). LTT also allowed
Defendants’ consultants to tour the hospital and participate in construction
meetings. 6RR172. The purpose of this information sharing was to facilitate
Defendants’ acquisition of LTT’s lease under the LOI.
On Oct. 21, 2009, Defendants’ architect, Page Southerland Page, produced a
report based on its analysis of the confidential information LTT provided. PX368
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(the “PSP Report”). The PSP Report raised three concerns regarding LTT’s
hospital: (1) code violations; (2) inadequate parking; and (3) cost to convert to
Defendants’ use. Id.2 Alexander sent the PSP Report to Sossi and LTT’s lender
Scott Brinker. PX32. Sossi would later repeat the three concerns from the PSP
Report.
Even after the PSP Report, Defendants continued to negotiate towards
acquiring LTT’s lease. See, e.g., DX60; PX451; PX425; PX79. LTT relied on
those assurances: “we continued to standstill with our project. We did not make
public announcements about our project at that time. And we…continued to hold
off on construction in areas where they had changes that they wanted to make.”
6RR195. Defendants consistently represented that they wanted to proceed and
acquire the lease under the LOI. Until they didn’t.
C. Defendants manipulate the LOI diligence process to game the HUD
mortgage guaranty process.
On June 3, 2009, shortly after executing the Confidentiality Agreement,
Defendants met with officials at HUD to discuss obtaining Section 242 hospital
mortgage insurance for LRMC. Section 242 insurance is only available for
hospitals in areas that are underserved. 12 U.S.C. § 1715z-7(a); 24 C.F.R. §
242.16.
2
LTT disagreed with the PSP Report’s concerns, and its architects “responded to every item.”
6RR180; PX462; 8RR131-41. The Texas Department of Health inspected the LTT facility the
day after the PSP Report and found 6 code violations, as compared to 71 in the PSP Report.
DX56; 6RR184-85; 8RR142-43.
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Defendants received preliminary approval of their HUD application before
discussions with LTT. PX55. LTT did not know about the HUD application, and
Berry testified he would not have contracted with Defendants had he known,
because the standstill caused LTT delay at a time when “we had a significant
competitive advantage in that market in that our facility was near completion, and
…I don’t know that they’d even started to move dirt or not.” 8RR64-65.
Defendants never disclosed to HUD the LOI or that LTT was building a
hospital a half-mile away. PX167; 10RR11, 14 (HUD representative Robert
Deen); 11RR20 (Alexander never told HUD about LTT even though he “knew that
LTT planned to open as a general acute care facility”). Indeed, just a few days
before the meeting with HUD, Alexander asked Berry to hold off announcing that
LTT would open as an ACH rather than an LTCH. PX61, PX26.
A condition of a Section 242 guaranty is that the area be underserved, so
LTT’s proximity as a competitor was critical, and Defendants should have
disclosed it. Defendants’ HUD expert said:
I think HUD as an independent party would need the info. Hopefully
it was provided to HUD with disclosure of earlier encumbrances (the
letter of intent and confidentiality agreement). I think HUD would
have been negligent if they hadn’t gotten the info. They could have
been crucified for not doing due diligence. Taxpayers would demand
full review.
10RR88-89.
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Defendants were aware that they should disclose LTT to HUD. Their
application—which does not mention LTT—was submitted less than two weeks
before the LOI. While the application was pending, Sossi sent an e-mail to SDP
consultants with the subject line: “DO NOT DISCUSS WITH HUD—Questions
on ‘existing’ or ‘acquired lease.’” PX177. In that e-mail, Sossi discussed the
pending acquisition of the LTT lease:
One of the alternatives has been an attempt to acquire the Long Term
Acute Care Hospital being constructed around the corner form [sic]
the LRMC acute care facility….At present the facility could be
converted to a general acute care hospital as a first step in a Main
Campus approach for LRMC.
PX177. Sossi recognized that LTT’s facility was readily converted to an ACH:
“We believe we can get the facility opened…configured in a manner to allow a
real acute care hospital to function during the construction period for LRMC….”
Id. Sossi acknowledged LTT’s hospital was a competitor. PX169 (11/12/09 Sossi
e-mail: Defendants could lease LTT hospital and “configure it as a general acute
care hospital that could be open about 24 months in advance of LRMC and
eliminate a potential competitive facility”).
On Mar. 17, 2010, HUD approved Defendants’ application, which gave
Defendants a mortgage guaranty of $166 million with estimated savings of
$65,557,605 over the life of the loan. PX85; PX72 at SDP6874; 11RR28. On
Mar. 22, 2010, Sossi informed Brinker that there would be no deal under the LOI.
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PX35. Brinker responded that Berry would follow up “with respect to the LOI,
including the confidentiality provision.” Id.
D. Defendants use LTT’s confidential information to secure the HUD guaranty.
LTT and its counsel followed up with Alexander regarding the return of
confidential information that LTT had provided under the LOI. PX81. On
May 10, 2010, Alexander promised that all materials were returned and he had
instructed his staff to delete any electronic materials. Id.; PX82; 11RR81. But that
same day, Defendants used LTT’s confidential information for their own benefit to
secure the HUD guaranty.
Rip Miller, CEO of a Westlake hospital, sent HUD an e-mail questioning the
guaranty because “there is a similar private hospital about ½ mile away, directly
behind the US Post Office, about 90% completed and scheduled to open this
summer.” PX179. Miller noted that LTT’s hospital “will be in direct competition
to your guaranteed project” and the “area is clearly NOT underserved.” Id. This
was the first HUD heard of LTT. 10RR12. On receiving Miller’s inquiry, Deen
contacted Defendants’ consultant and asked about the “new hospital behind the
post office.” App.5. Sossi answered Deen’s questions on May 10, 2010. App.5
(the “May 10 e-mail”). Sossi never sent the inquiry to LTT. 12RR115.
At the time of Miller’s inquiry, Defendants were desperate to get the HUD
funding; HUD was “the only viable option we had” to get financing for LRMC.
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11RR216. In the May 10 e-mail Sossi argued that LTT is not a competing hospital
(and thus HUD should fund the pending $166 million loan guaranty), and he
invoked the same three concerns from the PSP Report: (1) code violations; (2)
inadequate parking; and (3) cost to convert to Defendants’ use. App.5. Sossi
insisted at trial that he gleaned this information about the LTT facility based on a
visit to the construction site in May 2009, and he prepared the May 10 e-mail not
based on the PSP Report, but from “what was in my head.” 12RR143-44, 159.
Sossi entered the fenced LTT construction site as a trespasser: “uninvited and
without permission.” 13RR6-7.
HUD responded to Miller, parroting the May 10 e-mail and stating that HUD
did not believe the LTT hospital was a competitor because it could not meet
“general acute licensing standards without expensive redesign/reconstruction and
will not achieve general acute care zoning because of site limitations.” PX179.
Ten days later, HUD agreed to go forward on the guaranty and issue amendments
Defendants had requested. PX86.
After learning of HUD’s communication with Miller, LTT’s counsel asked
HUD to postpone closing on the guaranty pending a full review, given that LTT
had not been disclosed during the application process. PX181. HUD forwarded
the letter to Sossi, who responded, once again, with confidential information
obtained pursuant to the LOI. App.6 (the “June 21 letter”). The June 21 letter
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represented that plans for LTT “were discussed in detail with the HUD client
services team,” confirming that Defendants’ communications with HUD regarding
LTT were not limited to the May 10 e-mail. Id.
SUMMARY OF ARGUMENT
This case was well-tried, the jury’s findings are well-supported by the
evidence, and the judgment is proper. This Court should reject Defendants’
challenges on appeal, because they are divorced from the actual case tried and the
actual evidence presented.
The jury’s causation determinations rest on the reasonable inference that, in
making its decision to grant Defendants the guaranty, HUD relied on Defendants’
communications in violation of the LOI—including the May 10 e-mail, the June 21
letter, and the discussions “in detail” that Defendants had with HUD regarding
whether LTT was a competitor. Defendants’ contention that HUD could have
based its decision on communications with LTT is absurd; that is not a reasonable
inference from the evidence, and it is certainly not equally probable.
The jury’s award of $7.9 million for lost fair market value of LTT is
supported by sufficient evidence and judicial admissions by Defendants’ counsel,
particularly when viewed in light of the charge’s mitigation instruction. Fair
market value can properly be based on the value a willing buyer and willing seller
agreed to, and it is undisputed that value for LTT was $7.9 million. Moreover, the
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jury could reasonably have calculated that sum by accepting the testimony that fair
market value was $13.8 million, but the loss could be mitigated by the sale of
certain equipment and land.
The contention that SDP is not a party to the LOI and cannot be liable for its
breach is almost frivolous. SDP undertook numerous express obligations under the
LOI, and Sossi expressly invoked the LOI’s standstill, confidentiality, and non-
circumvention provisions on behalf of both SDP and LRMC. Moreover, Sossi’s
overlapping roles support a reasonable inference that his various communications
with HUD were made for both SDP and LRMC.
There was no Casteel error in the charge, because the broad form liability
and damages questions did not impliedly mix valid and invalid theories. There
was no evidence or argument at trial that Defendants breached section 2 of the
LOI, so there is no possibility that the jury based its finding of breach on an invalid
basis. As a threshold matter, moreover, section 2 is enforceable, so it was not an
invalid theory at all.
ARGUMENT
A. Ample evidence supports the jury’s causation finding.
Defendants’ HUD guaranty caused LTT’s investor support to dry up and
“doomed the LTT project.” 9RR208; 13RR121-23. Defendants concede the point;
they do not challenge that they breached the LOI or whether their securing the
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HUD loan caused harm to LTT. Instead, Defendants argue narrowly that there is
insufficient evidence that Defendants’ communications with HUD in breach of the
LOI caused HUD to issue the loan commitment, grant amendments that would
save LRMC tens of millions of dollars over the life of the loan; and close and
defend the loan. Brief at 19-24. They attempt to parse inferences available from
the evidence, but Defendants’ reliance on the equal inference rule is misplaced.
The evidence—and the only reasonable inferences flowing from the evidence—
support the jury’s causation findings.
1. The equal inference rule applies only when multiple reasonable
inferences are equally probable.
The equal inference rule provides that “a jury may not reasonably infer an
ultimate fact from meager circumstantial evidence which could give rise to any
number of inferences, none more probable than another.” Lozano v. Lozano, 52
S.W.3d 141, 148 (Tex. 2001) (citations omitted). Under the rule, “circumstantial
evidence is not legally insufficient merely because more than one reasonable
inference may be drawn from it.” Id. “If circumstantial evidence will support
more than one reasonable inference, it is for the jury to decide which is more
reasonable… .” Id. at 148-49.
The mere existence of multiple reasonable inferences is thus not the end of
the inquiry under the equal inference rule. Rather, the rule applies only when none
of the reasonable inferences is more probable than any other. Hancock v. Variyam,
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400 S.W.3d 59, 70-71 (Tex. 2013). In Hancock, a professor sued a colleague who
sent a defamatory letter to faculty. Id. at 62. The letter was also sent to an entity
reviewing accreditation for the professor’s department, but there was no evidence
of who within the entity received the letter. Id. at 70. The plaintiff argued that the
denial of accreditation was evidence that the letter damaged the professor’s
reputation with the entity. Id. Because there was “no evidence that the inference
regarding the letter was more probable than other possible inferences,” the Court
held that the denial of accreditation was insufficient to establish that the unsolicited
letter damaged the professor’s reputation with the entity. Id. at 70-71.
The equal inference rule thus provides that when circumstantial evidence
does not make one competing inference more probable than the other, the jury may
not reasonably infer either. See Lozano, 52 S.W.3d at 148; USAA Cty. Mut. Ins.
Co. v. Cook, 241 S.W.3d 93, 101 (Tex. App.—Houston [1st Dist.] 2007, no pet.)
(equal inference rule not applicable where competing inference could not be
equally inferred). 3 The rule has no application where, as here, substantial evidence
supports the reasonable inference that Defendants’ communications with HUD
caused HUD to issue and defend the guaranty, and no contrary inference is even
reasonable, let alone equally probable.
3
The additional cases Defendants cite are consistent in applying the equal inference rule only
where there are truly equal inferences, and neither is more probable than the other. See Burbage
v. Burbage, 447 S.W.3d 249, 262-63 (Tex. 2014); Jelinek v. Casas, 326 S.W.3d 526, 536-38
(Tex. 2010); Marathon Corp. v. Pitzner, 108 S.W.3d 724, 739 (Tex. 2003).
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2. There are no equal inferences from the evidence; the only reasonable
inference is that HUD relied on Defendants.
By law, HUD may only insure mortgages for “urgently needed hospitals.”
12 U.S.C. § 1715z-7(a). Information about potentially competing hospitals, such
as LTT, was therefore critical to whether HUD could guaranty Defendants’ loan.
HUD would have been “negligent” if it did not consider whether LTT was a
competing hospital and “would have been crucified for not doing due diligence.”
10RR88-89.
The following chronology demonstrates HUD’s reliance on Defendants’
communications in making its decisions:
• March 17. HUD made the initial loan commitment. 4 10RR10-11.
Defendants had not disclosed LTT’s existence to HUD. 10RR13-14.
HUD thus committed without knowing that LTT was a potential
competitor hospital.
• April 30. Defendants requested amendments for a more favorable
interest rate. PX85; 11RR74-77.
• May 8. Miller informed HUD that LTT was a nearby competitor to
LRMC, arguing that “[t]his area is clearly NOT underserved.”
PX179. The loan and amendments were still pending.
4
An initial commitment is not binding, and HUD could have rescinded it based on the failure to
disclose LTT as a competitor. 12 U.S.C. § 1709(e) allows HUD to rescind at any time for
misrepresentation in securing Section 242 mortgage insurance.
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• May 10. HUD representative Deen contacted Defendants (not LTT)
and requested detailed information about LTT. App.5 at 3. Deen
noted: “[a]nything you can tell me about the [LTT] Hospital will be
helpful.” Id.
• May 10. Sossi responded to Deen with the May 10 e-mail—addressed
in a familiar way to “Bob.” Sossi’s arguments regarding whether LTT
was a competitor could only be based on confidential information.
App.5; see 6RR228-30, 178-79. Deen contacted SDP personnel to
verify what he called “Mr. Sossi’s facts” from the May 10 e-mail.
1CR2170; 10RR16.5
• May 11. HUD responded to Miller, parroting Sossi’s arguments and
stating that LTT’s facility was not a competitor. PX179. HUD’s
defense of the initial commitment was thus based directly on
information Defendants provided HUD in violation of the LOI.
• May 20. HUD agreed to go forward and issue the amendments
Defendants had requested. PX86; 11RR83-84. The loan closed and
funded the next day. 11RR84-85.
5
When Deen’s deposition testimony was read at trial, the court reporter transcribed “Mr. Sossi’s
facts” as “Mr. Sossi’s fax.” Compare 10RR16 with 1CR2170. Deen had an opportunity to
review and correct his deposition testimony, indicating that “Mr. Sossi’s facts” is the correct
transcription. See Tex. R. Civ. P. 203.1.
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• June 11. Concerned that HUD based its decision on incomplete
information, LTT’s counsel requested that HUD stay the loan pending
a review. DX116. HUD did not ask for further information from
LTT, but, once again, sent the inquiry to Defendants. PX181.6
• June 21, Sossi responded to HUD that the plans for LTT “were
discussed in detail with the HUD Client Service Team” and informed
HUD that Defendants “expect HUD to defend the decision to issue the
Guarantee.” App.6. Defendants thus admitted that their “detailed”
discussions with HUD about LTT influenced HUD’s determination
that Lakeway was underserved for the purpose of issuing the
guaranty. The same day HUD received Sossi’s June 21 letter, it
responded to Sossi that he can be “assured HUD intends to defend the
guarantee.” PX182.
HUD relied on Sossi to such an extent in its decisions to issue and defend
the guaranty that Deen—who handled LRMC’s application and testified as HUD’s
corporate representative—thanked Sossi for providing information regarding LTT:
“Well done good and faithful solicitor!” PX184. Defendants also worked closely
6
Defendants contend that it is an equally reasonable inference that HUD defended its decision
on the LRMC loan “based on information LTT provided.” Brief at 21. That contention is
nonsensical, given that the only communication between HUD and LTT was counsel’s letter
urging HUD to stay the loan pending further review, and HUD’s reaction was to forward that
letter to allow Sossi to weigh in. PX181.
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to help HUD resist LTT’s FOIA request for information HUD relied on when
determining the Lakeway area was underserved. PX136; PX182; PX187; PX188;
PX87; 12RR121-22, 124-261.
Given this evidence, HUD’s motivation to avoid appearing negligent in
approving the guaranty, and its joint efforts with Defendants to avoid disclosing
the lack of investigation, the only reasonable inference is that Defendants’
disclosures in breach of the LOI resulted in HUD’s decision to close, fund, and
defend Defendants’ guaranty. There is no other reasonable inference from the
evidence, and certainly not one that is equally probable.
B. The damages findings are supported by sufficient evidence.
1. LTT was a proper assignee of Berry and McDonald.
Defendants’ position that LTT, as assignee of Berry and McDonald’s claims
under the LOI, cannot recover damages ignores long-settled Texas precedent, the
plain language of the LOI, and the evidence.
First, Defendants argue LTT’s principals cannot recover damages for LTT’s
loss in market value, citing Wingate v. Hajdik, 795 S.W.2d 717, 719 (Tex. 1990).
Brief at 27. While Wingate recognized the general rule that “a corporate
stockholder cannot recover damages personally for a harm done solely to the
corporation,” it reiterated this equally well-established exception: “This rule does
not, of course, prohibit a stockholder from recovering damages for wrongs done to
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him individually, ‘where the wrongdoer violates a duty arising from a contract or
otherwise, and owing directly by him to the stockholder.’” Wingate, 795 S.W.2d
at 719. The exception applies exactly here, where Defendants violated duties
arising under the LOI that Defendants owed directly to Berry and McDonald.
In support of this exception, the Wingate court cited Stinnett v. Paramount-
Famous Lasky Corp., 37 S.W.2d 145, 149-151 (Tex. Comm’n. App. 1931, holding
approved). Stinnett is instructive. In that case, shareholders alleged that the
defendants’ conduct forced their theater out of business and compelled them to
“sell their business at great sacrifice.” Id. at 149. The Court rejected the argument
that only the corporation could recover damages for the destruction of its business,
holding that if “the wrongful acts are not only wrongs committed against the
corporation, but also violations of duties arising from contracts or otherwise and
owing directly to the injured stockholders, the stockholders should be permitted to
file and maintain a suit for injuries sustained as a stockholder and as an
individual.” Id. at 150-51.7
Berry and McDonald were parties to the LOI. App.1. LTT was wholly
owned by Berry and McDonald, so they owned a personal property interest in
7
Other courts agree that shareholders may recover for the loss of value to their company when
that loss results from the shareholder’s individual cause of action. See, e.g., Empire Life Ins. Co.
of America v. Valdak Corp., 468 F.2d 330, 336 (5th Cir. 1972); Faour v. Faour, 789 S.W.2d 620,
622 (Tex. App.—Texarkana 1990, pet. denied) (“a shareholder may sue for violation of his
individual rights, regardless of whether the corporation also has a cause of action”).
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LTT. 6RR98-99; Tex. Bus. Orgs. Code Ann. § 101.106(a). As is discussed below,
Defendants’ breach of the LOI resulted in a significant loss in value of LTT and its
assets. When Defendants destroyed LTT by breaching their contract with
McDonald and Berry, they destroyed McDonald’s and Berry’s personal property.
Texas law allows Berry and McDonald recover this loss in value. See Stinnett, 37
S.W.2d at 151 (shareholders could recover damages resulting from destruction of
business in breach of duty owed to shareholders); Empire Life Ins. Co. of Am., 468
F.2d at 336 (pledgor shareholder could damages based on loss in value to pledged
stock); Alonysius v. Kislingbury, No. 01-13-00147-CV, 2014 WL 4088145 at *4
(Tex. App.—Houston [1st Dist.] Aug. 19, 2014, no pet.) (mem. op.) (corporation’s
owner could recover corporate funds diverted in breach of owner’s contract).
Berry and McDonald assigned their causes of action to LTT. PX421;
8RR163-64. Under the assignment, LTT is free to assert the principals’ right to
sue for damages they suffered, including recovering damages for the loss in value
of LTT and its assets. See Stinnett, 37 S.W.2d at 151; Empire Life Ins. Co. of Am.,
468 F.2d at 336; Alonysius, 2014 WL 4088145 at *4.
Defendants argue that disclosure or use of LTT’s confidential information
could not create liability or damages. Brief at 26. The LOI is not so restrictive.
Section 6 prohibits the use of “any knowledge” or the sharing of “any information”
gained in the development process for the LTT project. App.1. Section 9 provides
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that “all information” disclosed by any party at any time in connection with the
LTT Project was subject to its confidentiality obligations. Id. The broad
protections of sections 6 and 9 encompass any LTT information disclosed during
the Project review. 6RR90-91.
This Court should reject Defendants’ attempt to parse interests between
LTT, Berry, and McDonald.
2. Ample evidence supports the jury’s award of $7.9 million in lost fair
market value of LTT.
Defendants’ challenge to the jury’s award of $7.9 million in lost fair market
value is contrary to recent Supreme Court precedent and ample evidence.
a. Phillips v. Carlton confirms that fair market value can be based
on an agreed purchase price.
Defendants’ legal and factual sufficiency challenge to the $7.9 million loss
in LTT’s fair market value is governed by Phillips v. Carlton Energy Group, LLC.
___ S.W.3d ___, No. 12-0255, 2015 WL 2148951 (Tex. May 8, 2015). In Phillips,
the defendant contracted with the plaintiff to invest $8.5 million for a 10% interest
in an oil and gas concession owned by a third party. Id. at *4. Prior to funding the
investment, the defendant attempted to eliminate the plaintiff from the deal by
terminating its contract with the plaintiff and convincing the third party to
terminate its contract with the plaintiff, stripping the plaintiff of a 38% interest in
the concession. Id. The defendant then entered a new contract with the third party
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and began developing the prospect. Id. The plaintiff filed suit to recover the fair
market value of its 38% interest. Id. at *5.
The plaintiff advanced three different models of determining the fair market
value. Id. at *5-6. The first two models, based on the value of gas in the ground,
yielded two alternative value ranges. Id. The third model was based on the
defendant’s original unfulfilled agreement with plaintiff to pay $8.5 million for a
10% interest, which extrapolated to a fair market value of $31.16 million for the
plaintiff’s 38% interest. Id. at *6. The jury awarded $66.5 million, reduced by a
remitter to $31.16 million. Id. at *7.
On appeal, the Court held that “when lost profits are not sought as damages
themselves but are used to determine the market value of property for which
recovery is sought,” the lost profits must be shown with reasonable certainty. Id. at
*10. However, Phillips explained that the reasonable certainty requirement
“should not be used to deny a claimant damages equal to the value the market
would have placed on lost property.” Id. While the Phillips Court held that the
first two damage models were not reasonably certain, it held that calculating the
$31.16 million value for the 38% share from the $8.5 million the defendant was
willing to pay for a 10% share was legally sufficient evidence of fair market value,
noting that this “calculation is based on an actual offer by a willing buyer –
[defendant] – to a willing seller – [plaintiff].” Id. at *11; see also Pleasant v.
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Bradford, 260 S.W.3d 546, 559-60 (Tex. App.—Austin 2008, pet. denied)
(purchase price agreed to by parties constitutes sufficient evidence of property’s
value as represented).
b. The evidence and Defendants’ judicial admissions establish that
$7.9 million was the fair market value for LTT.
Berry testified that fair market value could be determined by the price a
willing buyer would pay a willing seller. 8RR100. Berry then testified, using the
net income methodology, that LTT’s fair market value was $13.8 million before
Defendants’ breach. 8RR100-03; see also 8RR82-99; PX416. LTT’s fair market
value was rendered virtually worthless by Defendants’ breach. 8RR102-03. While
the $7.9 million awarded by the jury falls squarely within the range of loss to fair
market value Berry testified about using the net income methodology, consistent
with the holding in Phillips, there is other evidence that directly establishes $7.9
million as a measure of LTT’s fair market value prior to breach.
LTT’s principals Berry and McDonald were willing sellers and Defendants
were willing buyers of LTT’s operations in Lakeway for $7.9 million under the
LOI. App.1; 12RR171. Sossi testified that the amount to be exchanged when the
deal closed would be between $7.5 million and $8.5 million. Id. When asked by
Defendants’ counsel about the amount of consideration that the parties had agreed
upon in the LOI to acquire the hospital, LTT’s expert testified that the sum was
$7.9 million. 13RR103-05.
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In addition to that testimony, during his opening statement Defendants’
counsel informed the jury that the parties agreed the consideration under the LOI
was $7.9 million: “You heard what counsel said, approximately $7.9 million was
what was going to be paid.” 6RR60. Defendants’ counsel made a similar
argument in closing, moments before telling the jury that “fair market value
is…the price a willing buyer and a willing seller can agree to”:
[W]e were going to give them about $8 million under the terms of the
LOI, but what was that for? Was that just for the information, or was
that for the opportunity to take over the actual bricks and mortar
facility? We weren’t paying $8 million for information. We were
considering paying $8 million in terms of the 1.5 lump sum payment,
plus taking on some of their debt, we were willing to do that to take
the facility.
14RR106-07.
Defense counsels’ clear, deliberate, and unequivocal declarations in open
court are judicial admissions that preclude Defendants from disputing that the fair
market value of LTT was $7.9 million. Horizon/CMS Healthcare Corp. v. Auld,
34 S.W.3d 887, 905 (Tex. 2000); Medina v. Hart, 240 S.W.3d 16, 24 (Tex. App.—
Corpus Christi 2007, pet. denied); Benton v. State, 336 S.W.3d 355, 360 (Tex.
App.—Texarkana 2011, pet. ref’d); Hughes v. Pearcy, No. 03-10-00319, 2014 WL
7014353, *5 (Tex. App.—Austin 2014, pet. denied) (mem. op.) (attorney’s
“admi[ssion] during closing arguments that [client] failed to comply with the
licensing agreement” constituted a judicial admission). Defendants’ judicial
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admissions regarding LTT’s fair market value, along with Berry’s testimony that
LTT was rendered virtuously worthless as a result of Defendants’ actions, are
factually and legally sufficient to support the jury’s award of $7.9 million in lost
market value. Phillips, at *11.
c. $7.9 million is within the range of evidence of LTT’s lost fair
market value, particularly in light of the mitigation instruction.
“Where there is proof to support a range of damage options, the mere fact
that nothing in the record shows how the jury arrived at a specific amount is not
fatal to the verdict.” McMillin v. State Farm Lloyds, 180 S.W.3d 183, 202 (Tex.
App.—Austin 2005, pet. denied). Consequently, “‘[e]vidence corresponding to the
precise amount found by the jury is not essential’ in order to withstand a legal-
sufficiency challenge.” Pleasant, 260 S.W.3d at 559. A damage award “is not per
se arbitrary because it does not match up precisely with figures presented by expert
testimony.” Id. at 560. As long as there is a rational basis for the award, “a jury’s
finding will not be disregarded merely because its reasoning in arriving at the
award may be unclear.” Id. at 559.
At Defendants’ request the jury was instructed in the damages question to
reduce LTT’s damages by amounts “LTT could have avoided by the exercise of
reasonable care.” App.4 Q6. Defendants do not contend that the jury did not
follow the mitigation instruction; their brief is silent on the issue. The evidence on
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mitigation provided an independent basis for the jury to find LTT’s fair market
value was $7.9 million.
Berry testified that the pre-breach value of LTT was $13.8 million, and post-
breach LTT was “virtually worthless” except for the value of equipment that could
be sold for “about 60 percent of the historical cost.” 8RR102-03. The historical
cost of the equipment was $1,360,000. PX416 at 19RR471. Berry also testified
that, after Defendants’ breach, LTT sold the land on which the hospital was built
for $4-5 million. 9RR164-65. Based on this evidence, the jury could have found
LTT suffered a fair market value loss of $13.8 million but that the loss could be
mitigated by the sale of equipment and land. If the jury followed the mitigation
instruction, it easily could have found damages of $7.9 million. Indeed, if the jury
reduced the damages by exactly 60% for the equipment and $5 million for the land,
the damages would be $7,984,000—within 1% of the $7.9 million awarded. When
combined with evidence that $7.9 million was the price Defendants agreed to pay
for LTT’s hospital, it is plain that the record supports the jury’s award of $7.9
million for the lost fair market value of LTT.
d. Relying on the agreed purchase price does not conflict with the
summary judgment ruling regarding section 2.
Defendants argue that the verdict may not rest on the agreed $7.9 million
purchase price under the LOI, because “allowing LTT to recover the amount Berry
and McDonald would have received under Section 2 conflicts with Judge
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Yelenosky’s summary judgment order.” Brief at 44. As is discussed in LTT’s
opening brief of appellant, the summary judgment as to section 2 was error. If this
Court agrees, it need not address this argument challenging the damages award.
In addition, looking to the agreed consideration does not ipso facto
transform the award into impermissible benefit of the bargain damages.
Defendants cite no authority for the proposition that the consideration
contemplated by the parties cannot provide the “fair market value” of property, if
that is an appropriate measure of consequential damages for a contract claim. 8
Indeed, that is exactly what the Court in Phillips did: the consideration
contemplated in the contract between the defendant and plaintiff was sufficient to
establish the lost fair market value caused by the defendant’s tortious interference
with the plaintiff’s contract. 2015 WL 2148951 at *11.
Bohnsack v. Varco, L.P. is instructive. 668 F.3d 262 (5th Cir. 2012).
Bohnsack arose out of negotiations between an inventor and the defendants to
patent and acquire a cleaning device for drilling fluids. The parties “agreed in
principle” on the amount defendants would pay to acquire the invention. Id. at
270-71. The negotiations fell through and a dispute arose over the harm caused by
8
Defendants cite Haase v. Glazner, which holds that a party cannot recover benefit of the
bargain damages for a fraud claim when the contract is unenforceable. 62 S.W.3d 75, 800 (Tex.
2001). LTT sought lost fair market value as consequential, not benefit of the bargain, damages,
and Defendants do not argue on appeal that the other provisions of the LOI (e.g., sections 3, 6
and 9) were unenforceable, making Haase inapposite.
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the delay and defendants’ actions. The jury awarded the inventor $600,000 as
benefit-of-the-bargain damages for the fraud claim and $600,000 as reasonable
royalty damages for the misappropriation of trade secrets claim. Id. at 272. The
Fifth Circuit reversed the $600,000 benefit-of-the-bargain award because the
“agree[ment] in principle” was not an enforceable contract between the parties. Id.
at 275-76. However, the Fifth Circuit upheld the $600,000 reasonable royalty for
misappropriation based on the consideration contemplated in the unenforceable
“agree[ment] in principle,” holding that the “terms negotiated between [the parties]
are sufficient evidence to prove the value” of the confidential information. Id. at
280. Similarly, while Judge Yelenosky found section 2 unenforceable, the
consideration agreed by the parties under the LOI is sufficient to support the
amount of loss in fair market value to LTT. Id.; see also Pleasant, 260 S.W.3d at
559 (holding purchase price agreed to by parties constitutes sufficient evidence of
property’s value as represented).
e. The measure of damages does not impermissibly “mix and
match” methodologies to calculate fair market value.
Defendants contend that LTT cannot “mix and match” measures of lost fair
market value other than the net income method Berry used. Brief at 45. That
contention is without merit; in Phillips, the Court considered three different lost
fair market value damage methodologies. 2015 WL 2148951 at *5-6 & 11.
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The requirement that a party determine lost profits based on “one complete
calculation” does not mandate a single damages methodology. For example, while
Holt Atherton held that lost profits must be determined by “one complete
calculation,” this Court subsequently explained that Holt Atherton applies to the
calculation itself rather than the damage model. Compare Holt Atherton
Industries, Inc. v. Heine, 835 S.W.2d 80, 85 (Tex. 1992) with Springs Window
Fashions Div., Inc. v. Blind Maker, Inc., 184 S.W.3d 840, 887, 889 (Tex. App.—
Austin 2006, pet. granted, judgm’t vacated w.r.m.) (holding “there is sufficient
evidence that [plaintiff] incurred lost profits damages based on two measures,” and
suggesting remittur to allow recovery under the larger measure).
The jury could determine LTT’s lost fair market value by considering the
testimony and Defendants’ judicial admissions. Id.; see also Phillips, 2015 WL
2148951 at *5-6 & 10-11; Pleasant, 260 S.W.3d at 560 (the “jury can depart from
expert valuations if other evidence presented at trial is sufficient for them to do
so,” and holding that five different appraisal models gave the jury a range of values
to support damages awarded). Based on Texas law and the totality of the record,
the evidence is sufficient to support the damages awarded.
3. Berry’s testimony was not conclusory or speculative.
Defendants contend that Berry’s opinion of LTT’s lost market value was
conclusory, speculative, and “lacking in reasonable certainty.” Brief at 31-38. That
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contention is wrong, but as discussed above, even without Berry’s testimony, the
evidence is sufficient to support the jury’s $7.9 million award.9
Further, Defendants failed to object or request a limiting instruction to
Berry’s testimony regarding market value, so any challenge to the sufficiency of
that testimony is waived. See Coastal Transp. Co., Inc. v. Crown Central
Petroleum, 136 S.W.3d 227, 229 (Tex. 2004) (objection required to preserve
challenge to “underlying methodology, technique, or foundational data used by
expert witness); City of Dallas v. Redbird Development Corp., 143 S.W.3d 375,
385 (Tex. App.—Dallas 2004, no pet.) (complaint about lost profit calculations by
plaintiff’s president constituted an “attack on the methodology, technique, and
foundational data” that defendant failed to preserve); Duke Energy Field Services,
L.P. v Meyer, 190 S.W.3d 149, 153 (Tex. App.—Amarillo 2005, pet. denied)
(defendant’s failure to object or seek limiting instruction to owner’s opinion
evidence “waived its complaint to the general admission of the evidence.”)
When an expert’s “underlying methodology is challenged, the court
‘necessarily looks beyond what the expert said,’” so a timely objection is required
for the court to “evaluate the underlying methodology, technique, or foundational
data.” Crown Central, 136 S.W.3d at 233. Here, Defendants attack Berry’s
9
Defendants do not dispute that Berry, as LTT’s CEO and managing member with familiarity of
LTT’s operations and assets could testify regarding the value of LTT and its assets. Reid Road
Mun. Utility Dist. No. 2 v. Speedy Stop Food Stores, Ltd., 337 S.W.3d 846, 854-55 (Tex. 2011).
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methodology, technique, and foundational data, contending that he failed to
explain: (i) “key pieces of his pro forma,” (ii) his reliance on an allegedly
“factually incorrect pro forma,” (iii) “his assumed ‘extraordinarily high’ occupancy
rate,” (iv) “inconsistencies in his testimony,” and (v) his use of a three-year
multiplier. Brief at 34-38; City of Dallas, 143 S.W.3d at 385. Those challenges
require this Court to “look beyond” what Berry said to evaluate the reliability of
his testimony, and thus Defendants failed to preserve them.
On the merits, Berry sufficiently explained and tendered facts on lost fair
market value. See City of Dallas, 143 S.W.3d at 386 (lost profits testimony not
conclusory where expert tenders facts to support conclusions). Berry testified that
as managing member and CEO of LTT, he has personal knowledge of LTT and its
assets. 6RR98-99. He explained that the definition of fair market value was the
price a willing buyer would pay a willing seller. 8RR100. Berry testified that the
loss in fair market value as a result of Defendants’ conduct was “approximately
$13.8 million.” 8RR100-01. Berry testified that he determined that loss by using
the net income methodology to calculate LTT’s fair market value prior to the
breach, and then subtracting LTT’s remaining value after Defendants’ breach.
8RR101-03. Berry, who was an experienced CPA and hospital administrator,
testified that the net income methodology was generally recognized as a valid
methodology and described how it is used. 8RR101-02. Berry explained that
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valuations are determined by multiplying EBITDA 10 by a period of time that is
“typically between three and seven years,” and that he used a three-year multiplier
because LTT had not yet begun operations. Id. Berry explained that he arrived at
EBITDA using a detailed, 48-month financial pro forma that he compiled and used
for LTT long before Defendants’ misconduct came to light. 8RR102, 82-83;
RX416. Berry testified that the pro forma was based on a model that he had used
many times, it had proven to be reliable, and he tailored it to LTT using objective
data. 8RR84-85. Berry provided detailed information about how specific line
items in the pro forma were developed and calculated. 8RR85-89.
LTT’s damages expert, Tom Glass, testified that he analyzed Berry’s pro
forma and vouched for “the reasonable certainty of the numbers.” 13RR34-35, 37-
43; see also 8RR43-45. And while Defendants argue that Berry’s projected
occupancy rate of 81.6% was “extraordinarily high” (Brief at 37), Glass compared
Berry’s pro forma to SDP’s self-described “conservative” pro forma for the LTT
facility, and found that SDP projected even more admissions as well as a “95-
96%” occupancy rate. 13RR45-47; PX163. Glass testified that SDP’s projections
for the LTT facility were another factor establishing the reasonableness of Berry’s
pro forma. 13RR50. Glass also noted that Berry’s pro forma projected 22 beds per
10
EBITDA stands for earnings before interest, taxes, depreciation, and amortization. 8RR101.
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day starting out, and ramped up in the following years, consistent with Berry’s
testimony about the developing market. 13RR121.
Taken together, the evidence is sufficient to support the jury’s award. See
City of Dallas, at 386 (where expert tendered evidence to support lost profits
testimony, it is the role of the jury to sort out the evidence and act as “the sole
judge of the witnesses’ credibility and the weight to be given their testimony”).
4. The loss in fair market value was foreseeable.
Consequential damages “result naturally, but not necessarily from the acts
complained of.” Basic Capital Mgmt., Inc. v. Dynex Commercial, Inc., 348
S.W.3d 894, 901 (2011). To be recoverable, consequential damages must be
foreseeable and directly traceable to the defendant’s wrongful act and result from
it. Stuart v. Bayless, 964 S.W.2d 920, 921 (Tex. 1998) (per curiam).
Whether consequential damages are foreseeable is an objective inquiry that
asks whether the breaching party had reason to foresee the loss as a probable result
of the breach at the time the contract was made. See Restatement (Second) of
Contracts § 351 cmt. a (1981) (“[T]he party in breach need not have made a ‘tacit
agreement’ to be liable for the loss. Nor must he have had the loss in mind when
making the contract, for the test is an objective one based on what he had reason to
foresee.”). A loss is foreseeable if it follows from the breach “(a) in the ordinary
course of events, or (b) as a result of special circumstances, beyond the ordinary
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course of events, that the party in breach had reason to know.” Basic Capital, 348
S.W.3d at 902 (quoting Restatement (Second) of Contracts § 351 (1981)). Because
the inquiry is focused on what the party in breach “had reason to know” or what
loss follows in “the ordinary course of events,” proving foreseeability does not
require direct evidence that the parties anticipated the specific loss at the time the
contract was made. Id. at 902–03.
The Texas Supreme Court recently reaffirmed this principle. In Basic
Capital, a lender, Dynex, agreed to provide $160 million in financing to Basic for
real estate investments. 348 S.W.3d at 896–97. Soon thereafter, market interest
rates rose, making the terms unfavorable to Dynex. Id. at 897. When Dynex
refused to provide further funding, Basic sued for breach of contract. Id. At trial,
the jury found that Dynex breached the agreement and awarded Basic damages for
the increased costs it paid in obtaining alternate financing for some investments
and for the profits it lost from other investments for which it could not find
alternate financing. Id. at 897–98. The court of appeals held “that Basic could not
recover lost profits as consequential damages for Dynex’s breach of the [$160
million commitment] because there was no evidence that Dynex knew, when it
made the Commitment, what specific investments would be proposed, or that other
financing would not be obtainable.” Id.
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 The Supreme Court reversed. Id. at 896. The Court held that to be “liable
for the consequential damages resulting from a breach of a loan commitment, the
lender must have known, at the time the commitment was made, the nature of the
borrower’s intended use of the loan proceeds but not the details of the intended
venture.” Id. at 903. The Court found that the evidence supported a finding that
“Dynex knew that Basic’s purpose in arranging the $160 million commitment was
to ensure financing” for real estate investments. Id. As for the foreseeability of the
lost profits resulting from a breach of that agreement, the Court held:
Dynex certainly knew that if market conditions changed and interest
rates rose, its refusal to honor the Commitment would leave Basic
having to arrange less favorable financing.…Certain that its breach
would increase Basic’s costs, Dynex cannot profess blindness to the
foreseeability that its breach would also cost Basic business.
Id.
Here, there is ample evidence that at the time Defendants entered into the
LOI, they had reason to know that a breach of the LOI to gain a competitive
advantage over LTT would cause the value of LTT and its confidential information
to decrease. To begin with, Defendants touted their prior experience developing
hospitals. 11RR121-28, 132-33, 215-16; 12RR139-40. Before entering the LOI,
Defendants recognized that LTT was a competitor hospital with a substantial head
start on construction. PX25; 10RR167-68; 11RR9-10. Defendants investigated
LTT to determine its impact on LRMC, including by having Sossi trespass on
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LTT’s closed construction site. 13RR7-8; see also 12RR175-76; 13RR22. During
the project review, Defendants asked LTT to delay announcing LTT’s plans to
open as a general acute care hospital. 11RR12-14: 12RR24-25. This was shortly
before Defendants met with HUD, and the evidence shows that Defendants were
aware that HUD’s knowledge of a nearby competitor could be detrimental to the
HUD loan—which was Defendants’ “only viable option” to finance LRMC.
11RR20-22, 40-41, 63-64. Defendants considered information provided to HUD
about LRMC to have been submitted confidentially, and Defendants recognized
that such information in the hands of a competitor could cause “substantial
competitive harm.” PX187 at 3. Based on this evidence, the jury could reasonably
infer that Defendants, as experienced hospital developers in economic conditions
that Alexander recognized were “as bad as I’ve ever experienced in my career,”
could reasonably foresee that breaching the LOI to gain a competitive advantage
would diminish the market value of LTT’s nearby facility.
LTT halted construction at Defendants’ request, at considerable expense.
6RR151-53. Berry testified that delay was one reason the LOI included the best
efforts provision. Id. The parties also agreed to the exception to section 6 that
allowed LTT to continue discussions with potential equity investors because they
recognized that LTT planned on opening and operating its facility if the LOI
transaction was not consummated. CE3:0:18:43-0:23:53. And during closing
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argument, Defendants’ counsel conceded Defendants foresaw the possible impact
of their actions on LTT’s value:
I want to note the concept of foreseeability. I want to note that every
one of these damage questions that you’re going to be required to
answer means that you will—if you write a number in there, you’ll be
required to find that the defendants foresaw, they were able to foresee
the consequences of these actions. I guarantee you when Frank Sossi
sent that letter—sent that e-mail, he had no idea that the plaintiff
would come back and say that cost them $34 million. It’s just not
even realistic. He thought the facility, if they did it, was worth 7 max.
14RR112 (emphasis added).
Finally, because of the sensitive nature of the information and the potential
competitive impact that could result from a breach, the parties agreed that breach
of the confidentiality and non-circumvention provisions of the LOI would mean
that “material and irreparable harm shall be presumed,” that injunctive relief would
be appropriate, and that the non-breaching party would “be entitled to seek all
other rights or remedies which the Party may have in law or equity.” App.1 §10.1.
The parties thus anticipated broad available relief for any breach.
5. Ample evidence supports the jury’s award of $790,000 in lost fair
market value for the confidential information
Evidence also supports the jury’s finding of $790,000 in lost fair market
value of LTT’s confidential information.11 Berry testified based on his personal
knowledge that the fair market value of the confidential information was $7.9
11
The $790,000 award was not included in the judgment because LTT elected to recover the
$7.9 million in lost fair market value to LTT. This Court may render judgment for $790,000 if it
determines that the $7.9 million award is unsupported.
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million before Defendants’ breach and was rendered virtually worthless as a result
of the breach. 8RR104-06, 161-62. The jury found that the lost fair market value
was $790,000, a number falling within the pre-breach and post-breach values. As
discussed above, “[w]here there is proof to support a range of damage options, the
mere fact that nothing in the record shows how the jury arrived at a specific
amount is not fatal to the verdict.” McMillin, 180 S.W.3d at 202. The evidence
presented by Berry’s testimony provided both the method and range from which
the jury could arrive at its verdict, and the jury’s award should be upheld on that
basis alone.
Defendants again ignore the instruction regarding mitigation. Defendants
argued that LTT could have reduced its damages by commencing operations and
earning profits. SDP projected that profits from the LTT facility could generate
$7-8 million of profits in its first five years of operation, broken out on a yearly
basis. PX163; 13RR45-50; 11RR61. Similarly, LTT presented evidence, also
broken out on a yearly basis, that it could have earned profits of up to $34.5
million over five years. PX416; 8RR82-89; 13RR34-50. While LTT does not
believe that its damages were subject to mitigation, the evidence presented to the
jury was sufficient to allow it to determine that the loss in market value to LTT of
$7.9 million may have been reduced by mitigation to $790,000. The jury’s
damages award falls within the range provided and is supported by evidence.
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6. In the alternative, remand is proper because there is evidence of some
damages.
In the alternative, if this Court determines that there is no evidence to
support the specific damage awards, it should remand rather than rendering a take-
nothing judgment because there is evidence of some damage to LTT. “Remand in
the interests of justice is appropriate in a case where the plaintiff has proved
liability and that he has sustained some loss as result, but has failed to prove the
amount of damages with reasonable certainty.” Rojas v. Duarte, 393 S.W.3d 837,
846 (Tex. App.—El Paso 2012, pet. denied); see also Tex. R. App. P. 43.3.
C. SDP’s argument that it is not a party to the LOI fails again.
SDP repeats its argument that it was not a party to the LOI and as a result
cannot be liable for breach of the LOI. Judge Yelenosky and Judge Livingston
rejected this argument, and it should fare no better in this Court.
1. SDP waived any complaint that it was not a party to the LOI.
The charge defined “Letter of Intent” as “the letter agreement between LTT
and SDP dated September 15, 2009.” App.4 at 12999. SDP did not object to this
definition, and SDP cannot complain on appeal that it was not a party to the LOI
and should not have been included in the charge questions regarding breach and
damages. See Osterberg v. Peca, 12 S.W.3d 31, 55-56 (Tex. 2000) (sufficiency of
the evidence is measured under the charge). SDP’s argument regarding its party
status can be disposed of on that basis alone.
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2. An agent may be personally liable on contracts made for the benefit of
his principal—even where the principal is disclosed.
SDP argues that, because it disclosed its agency relationship with LRMC, it
cannot be held liable under the LOI. Brief at 58-59. But it is well established that
an agent can be personally liable under a contract, even if the agent discloses that
he is acting on behalf of a principal. See American Nat’l Bank of Houston v. Am.
Loan & Mortg. Co., 228 S.W. 169, 171 (Tex. Comm’n App. 1921, judgm’t
adopted) (“An agent, although his agency is known and who has authority to bind
his principal through contract, is not precluded from binding himself personally
upon such contract.”). “The mere fact that an agency relationship exists does not
preclude the imposition of personal liability on an express contract with a third
party, even though the contract is primarily for the benefit of the principal.”
Instone Travel Tech Marine & Offshore v. Int’l Shipping Partners, Inc., 334 F.3d
423, 428 (5th Cir. 2003). Instead, where an agent “has pledged his own
responsibility in addition to that of his principal, he will be bound accordingly.”
American Nat’l, 228 S.W. at 171. The agent’s liability is thus not predicated upon
the agency relationship, but on the contractual obligations the agent undertakes.
Id. When the agent has expressed in the contract “an interest of his own, together
with his principal, both principal and agent may be held upon the contract.” Id.
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 3. SDP identified itself as a party to the LOI and obligated itself under
the LOI and is consequently individually liable for breach of the LOI.
SDP is identified as a Party to the LOI in section 9, which concerns the
confidentiality of the Proprietary Information:
[A]ll information disclosed by any Party or its Representatives at any
time to any other Party or its Representatives in connection with the
Project in any manner shall be deemed “Proprietary Information.”
The term “Representative(s)” means, in the case of LRMC or SDP,
any director, officer, employee, member, shareholder, or agent of
LRMC or SDP engaged in the evaluation of the Project. . . .
PX2 at §9.1 (emphasis added). If, as SDP contends, it were acting solely as the
agent of LRMC, then SDP would have been included among LRMC’s unnamed
Representatives, just as LRMC’s other agents were. Instead, the LOI lists SDP as
a Party with its own Representatives. Berry testified that this language in the LOI
meant that both LRMC and SDP were parties to the LOI. 9RR173-174.
In addition, SDP had affirmative obligations under the LOI. For example,
SDP took on financial obligations in exchange for disclosure of the Proprietary
Information:
In consideration of the Principals’ willingness to enter into this Letter
of Intent and disclose Proprietary Information relating to the Lease
and the Facility to SDP and LRMC, SDP shall cause LRMC to deposit
as earnest money the amount of $50,000. . .
App.1 at §4 (emphasis added).
Despite this and other similar covenants (e.g., the provisions of sections 6
and 9 imposing affirmative obligations on each of the Parties regarding the
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treatment of information exchanged during project review), SDP relies on a single
sentence in the LOI to attempt to insulate itself from liability:
Surgical Development Partners, LLC, (“SDP”) is pleased to submit
this Letter of Intent, as the agent for LRMC, to each of you
(collectively, the “Principals”) (each a “Party” and collectively the
“Parties”) …
Brief at 58. But rather than show that SDP has no independent interest in the
agreement, the sentence includes SDP as a Party. The same paragraph further
confirms SDP’s party status:
The objective of this Binding Letter of Intent is to indicate SDP’s
interest in the Project and to establish the ground rules for the
ongoing exchange of information between the Parties to facilitate the
development of the Project and the exchange of information required
for such a process to succeed. To clarify this relationship and to best
protect the interests of all of the Parties, the Parties hereto agree as
follows: . . . .
App.1 at 1 (emphasis added). Consistent with this, Alexander signed the LOI as
President and CEO of SDP (printing it on SDP letterhead)—not as an agent of
LRMC. App.1 at 1, 7; 6RR149; 9RR173-74.
LTT’s lawyer in the negotiation of the LOI testified that both SDP and
LRMC are parties to the LOI because they are defined as “Parties.” CE3:0:4:49-
0:6:21&0:9:47-0:10:09; see also CE3:0:6:21-0:8:45. Similarly, Sossi, who drafted
the LOI on behalf of Defendants, also considered SDP to be a party to the LOI in
an email he wrote to LTT’s landlord before this lawsuit was filed:
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Based on our Letter of Intent with [LTT] … we are greatly concerned
that the Section 6 (Standstill and Non-Circumvention) and Section 9
(Confidentiality) provisions of that Letter of Intent, both of which
survive any termination of that Letter of Intent, require your Tenant to
have positive obligations to SDP and LRMC regarding any
information exchanged related to the Letter of Intent.
PX442 at 2 (emphasis added).
SDP is plainly a party to the LOI. SDP’s argument that it can avoid liability
simply by disclosing its principal fails, as a matter of law, because it incorrectly
“presupposes that an agent is necessarily not liable on a contract where the other
party is aware that it is acting as an agent.” Instone Travel, 334 F.3d at 430;
Mediacomp, Inc. v. Capital Cities Comm’n, Inc., 698 S.W.2d 207, 211 (Tex.
App.—Houston [1st Dist.] 1985, no writ) (“an agent of a known principal may be
personally liable if the agent…has pledged his own responsibility in addition to
that of his principal”).
4. The LOI is not ambiguous regarding SDP’s party status, and no jury
question was proper.
SDP asserts that the LOI is ambiguous regarding whether SDP was a party
to it, and there should have been a jury question as to its party status. Brief at 59.
That contention is without merit, for several reasons.
First, SDP did not plead ambiguity, so it cannot raise that issue now.
1CR2659-64; Tex. R. Civ. P. 94. SDP also waived any charge error by failing to
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object to the definition of LOI as being the “letter agreement between SDP and
LTT.” App.4 at 12999.
On the merits, the LOI terms and evidence discussed above in Section C.3
establish that the LOI is unambiguous regarding whether SDP is a party.
5. There is ample evidence that SDP breached the LOI.
SDP argues that it did not breach the LOI, but its argument is based on the
false premise that only Sossi communicated with HUD in breach of the LOI, and
he did so on behalf of LRMC only. Brief at 60-61. The evidence shows that at all
times, Sossi was a co-owner, board member, and general counsel for SDP.
10RR156-57; 12RR79-81. Sossi copied SDP officers and/or employees on the
May 10 e-mail and other LTT-related communications to HUD. App.5; PX184;
PX187; PX188; PX191; PX428; PX432; PX488. After receiving the May 10
email, HUD reached out to others at SDP to verify “Mr. Sossi’s facts.” App.5;
10RR16; see also 1CR2170. Sossi claimed the protections of the LOI for both
SDP and LRMC. PX442.
The jury could reasonably infer from the evidence that Sossi sent the May 10
e-mail, as well as other communications to HUD, on behalf of SDP and LRMC. In
addition, SDP communicated with HUD about LTT in respect to the FOIA request
and LTT’s June 11, 2010 letter. 11RR112-14. Those communications on behalf
of SDP provide additional support for the jury to infer, given Sossi’s many
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overlapping roles, that Sossi’s communications with HUD were made for both
SDP and LRMC.
D. The trial court properly charged the jury on breach of contract and damages.
Question 1 of the charge is a plain-vanilla, broad form PJC breach of
contract question, and Question 6 is the corresponding broad form damages
question. App.4. Defendants argue that the broad form questions were flawed
under Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000), because they
impliedly mixed valid and invalid liability theories. Specifically, Defendants argue
that the jury could have based its findings on section 2 of the LOI, which Judge
Yelenosky had ruled was unenforceable. This challenge to the charge fails for two
reasons.
First, the charge did not impliedly instruct the jury on an invalid liability
theory. As is discussed in LTT’s Cross-Appellant’s Brief, section 2 was
enforceable and should not have been dismissed on summary judgment. Because
section 2 was enforceable, there was no reason to exclude it from the breach of
contract questions in the charge. See Traxler v. Entergy Gulf States, Inc., 376
S.W.3d 742, 751 (Tex. 2012) (finding no Casteel problem when underlying
liability theories are valid); Casteel, 22 S.W.3d at 388 (requiring submission of an
invalid theory before presuming harm); see also Tex. Dept. of Assistive &
Rehabilitative Servs. v. Abraham, No. 03-05-00003-CV, 2006 WL 191940, at *7,
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n.8 (Tex. App.—Austin Jan. 27, 2006, no pet.) (mem. op.) (declining to remand
under Casteel where jury question included multiple liability theories, all of which
were valid). If this Court determines that section 2 is enforceable there is no need
to address this charge issue further.
Second, even if section 2 is not enforceable, the court did not err by
submitting the liability and damages questions in broad form. Texas law does not
require granulation of each individual factual allegation in support of a single
liability theory such as breach of contract, particularly when there was no
discussion of breach of section 2 at trial.
1. Background on broad-form submission and Casteel
Texas law requires the broad-form submission of jury questions whenever
feasible. Tex. R. Civ. P. 277; see also Tex. Dep’t of Human Servs. v. E.B., 802
S.W.2d 647, 649 (Tex. 1990) (requiring broad-form submission “in any or every
instance in which it is capable of being accomplished.”). In Casteel, the Supreme
Court recognized a limited exception to this rule when a question mixes valid and
invalid liability theories, thus injecting error into the question and making it
impossible for the appellate court to determine whether the jury based its answer
solely on the invalid theory. Casteel, 22 S.W.3d at 388. In those circumstances,
the error may be presumed harmful. Id. The Court has since expanded Casteel to
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other contexts, such as broad-form damages questions that list invalid elements.
See Harris County v. Smith, 96 S.W.3d 230, 235 (Tex. 2002).
However, the Court has cautioned against expanding the doctrine too far. In
Bed, Bath & Beyond, Inc. v. Urista, the Court explained:
When, as here, the broad-form questions submitted a single liability
theory (negligence) to the jury, Casteel’s multiple-liability-theory
analysis does not apply.
211 S.W.3d 753, 757 (Tex. 2006) (emphasis added). And in Thota v. Young the
Court cautioned against allowing the Casteel exception to swallow the rule:
Notwithstanding Casteel’s presumed harm analysis in situations that
erroneously commingle valid and invalid theories of liability, we have
repeatedly reaffirmed our longstanding, fundamental commitment to
broad-form submission.
366 S.W.3d 678, 689 (Tex. 2012); see also Harris County, 96 S.W.3d at 235
(“Neither our decision today nor Casteel is a retrenchment from our fundamental
commitment to broad-form submission.”).
These limits make sense if broad-form submission is to survive in any
meaningful way. A fundamental component of broad-form submission is that the
jury need not agree on the individual factual allegations, “so long as they agree on
the legally relevant result.” Dillard v. Texas Elec. Co-Op, 157 S.W.3d 429, 434
(Tex. 2005). For example, jurors may agree that a defendant was negligent, “even
if half believed the negligent act was overloading his truck and half believed it was
failing to warn oncoming traffic . . .” Id.
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 The general rule thus remains that, in a case involving a single liability
theory such as negligence or breach of contract, the court should submit the claims
to the jury in broad form rather than granulated to individual factual allegations.
See Thota, 366 S.W.3d at 689 (negligence); Urista, 211 S.W.3d at 757
(negligence); Powell Elec. Sys., Inc. v. Hewlett Packard Co., 356 S.W.3d 113, 123-
24 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (contract); Rough Creek Lodge
Operating, L.P. v. Double K Homes, Inc., 278 S.W.3d 501, 509 (Tex. App.—
Eastland 2009, no pet.) (contract). Otherwise, the Casteel exception would
swallow the rule.
2. Casteel granulation is not required unless the alleged invalid theory
was presented to the jury at trial.
The typical scenario triggering Casteel arises when the charge injects error
by instructing the jury to consider an erroneous liability theory or damages
element. See, e.g., Casteel, 22 S.W.3d at 387 (single question instructed jury on
thirteen listed liability grounds, several of which were invalid); Harris County, 96
S.W.3d at 231-232 (damages question instructed the jury it could consider
unsupported elements of damages); Columbia Rio Grande Healthcare, L.P. v.
Hawley, 284 S.W.3d 851, 865 (Tex. 2009) (submission of invalid theory under
Casteel involves a “trial court’s error in instructing a jury to consider erroneous
matters.”). That is not the situation here—the standard, broad-form jury questions
at issue did not reference section 2 or suggest to the jury that it should consider
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Defendants’ breach of section 2 in determining liability or damages. App.4 at Q1,
Q6. Instead, Defendants’ Casteel argument is based on the assumption that,
because the broad-form questions did not instruct the jury to exclude section 2,
they impliedly mixed invalid and valid liability theories.
Courts have struggled with defining precisely when individual factual
allegations related to a claim constitute separate liability theories that require
granulation. There is no doubt, however, that Casteel is not triggered unless the
alleged invalid issue was presented to the jury at trial. Here, there was no evidence
or argument at trial regarding breach of section 2.
a. Factual allegations underlying breach of contract do not need to
be granulated.
“When a plaintiff alleges that multiple instances of the same kinds of acts
committed by the same defendant result in liability for the same cause of action, it
is an open question as to whether the acts constitute multiple theories of liability or
simply multiple factual allegations supporting a single theory of liability.” Memon
v. Shaikh, 401 S.W.3d 407, 416 (Tex. App.—Houston [14th Dist.] 2013, no pet.).
Courts have come down on both sides of this issue.12 Defendants ignore this split
in authority, and instead cite only to a limited set of cases that have required
Casteel granulation. See Brief at 52-55.
12
LTT has been unable to identify any Third Court cases on this issue; nor did Defendants cite
any.
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The bulk of authority, however, agrees that Casteel does not require the
granulation of factual issues related to a single liability theory, such as negligence
or breach of contract. See, e.g., Urista, 211 S.W.3d at 757 (“Where, as here, the
broad-form questions submitted a single liability theory (negligence) to the jury,
Casteel’s multiple-liability-theory analysis does not apply.”); Thota, 366 S.W.3d at
681-82, 693 (plaintiff alleged five different reasons why the defendant doctor was
negligent, but court concluded that the case involved only one liability theory,
negligence, and held that granulation of inferential rebuttal and defensive theories
was not required) 13; Shelby Distributions, Inc. v. Reta, 441 S.W.3d 715, 718-19
(Tex. App.—El Paso 2014, no pet.) (Casteel’s presumed-harm rule did not apply to
a single broad-form liability question because that question involved only one
liability theory—retaliatory discrimination); Memon, 401 S.W.3d at 416 (plaintiff
13
In Thota and Urista, the Supreme Court makes clear that a negligence claim is a single liability
theory under Casteel. The Court has not yet analyzed whether a breach of contract claim should
be treated the same way, but the appellate courts that have analyzed this question agree that
breach of contract is a single liability theory, like negligence. Defendants ignore these cases, and
instead focus on a single decision in Morrison, which involved a statutory claim for adverse
employment actions. See Texas Comm’n on Human Rights v. Morrison, 381 S.W.3d 533 (Tex.
2012) (per curiam). The Labor Code mandates, as a jurisdictional prerequisite to suit, that the
plaintiff first file a charge of discrimination with the EEOC. Tex. Lab. Code §§ 21.201, 21.254.
The plaintiff in Morrison failed to file an EEOC charge on her claim of failure to promote, but
nevertheless presented evidence at trial that she was denied a promotion. The Court found error
under Casteel where the charge asked if the defendant had taken “adverse personnel actions”
without limiting the jury’s consideration of the denied promotion. Id. at 537. The Morrison
opinion does not explain why “negligence” is a single liability theory and “adverse personnel
actions” are not, but logically the unique statutory requirements for a Labor Code cause of action
are the difference. Because the statute mandates EEOC exhaustion as a jurisdictional matter,
every factual allegation that could give rise to liability under the statute must be treated as an
independent liability theory. Regardless, as set forth below, Morrison is distinguishable because
denied promotion was an issue actually presented to the jury at trial.
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had alleged defamation liability based on multiple statements; the court held that
“on the facts of this case, in which each factual allegation required proof of the
same elements and resulted in the same injuries, only one theory of liability was
presented.”); Formosa Plastics Corp., USA v. Kajima Int’l, Inc., 216 S.W.3d 436,
455 (Tex. App.—Corpus Christi—Edinburg 2006, pet. granted, judg’t vacated by
agrt.) (rejecting defendant’s argument that fraud question should have included
separate answer blanks for each of the contracts at issue because “Casteel applies
to multiple theories of liability; by contrast, the instant situation involves only
one—fraud.”); Sunbridge Healthcare Corp. v. Penny, 160 S.W.3d 230, 254 (Tex.
App.—Texarkana 2005, no pet.) (case submitted under a single negligence theory
did not require Casteel granulation); Columbia Medical Center of Las Colinas v.
Bush, 122 S.W.3d 835, 858 (Tex. App.—Fort Worth 2003, pet. denied) (same).
In particular, two recent cases hold that breach of contract is a single liability
theory that does not need to be granulated under Casteel. Powell, 356 S.W.3d at
123-124; Rough Creek Lodge, 278 S.W.3d at 509. In Rough Creek the defendant
challenged submission of a contract question in broad form, claiming that it could
not determine the factual basis for the jury’s answer on appeal. The court of
appeals disagreed, explaining:
Unlike Casteel, [the plaintiff] asserted a single cause of action: breach
of contract. Merely because this required the resolution of multiple
fact questions does not convert it into multiple theories of liability.
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Unlike Harris County, the jury was not instructed to consider an
element of damage for which there was no evidence.
Rough Creek, 278 S.W.3d at 509 (emphasis added).
In Powell, the plaintiff alleged eleven different contract breaches. Powell,
356 S.W.3d at 123. The trial court submitted contract liability to the jury in broad
form. On appeal, the defendant argued that several of the breach theories were
invalid because they were not the cause of the alleged damages, and the charge
therefore included Casteel error. The court of appeals disagreed because breach of
contract was a single theory of liability and the trial court did not otherwise instruct
the jury to consider erroneous matters. Id. at 124. The court also noted that,
although there may have been evidence that the defendant breached the contract in
multiple ways, the plaintiff “never contended that any other breach caused
damages, so there was no risk that the jury might find damages based on evidence
of other breaches.” Id. at 123.
Here, like the defendants in Rough Creek and Powell, Defendants allege that
the court should not have submitted broad-form contract questions to the jury, but
instead should have limited the jury’s consideration to particular allegations of
breach. That argument ignores the case law that Casteel simply does not apply to
single liability theories.
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b. Casteel does not apply if the alleged invalid theory was not
before the jury at trial.
This Court does not need to resolve the question of precisely where to draw
the line between factual allegations and liability theories under Casteel because
Casteel does not apply unless the allegedly invalid “liability theory” was actually
presented to the jury at trial. See Powell, 356 S.W.3d at 123 (declining to apply
Casteel presumed harm in a contract case when the plaintiff never contended at
trial that invalid breach theories had caused damages, “so there was no risk that the
jury might find damages” on that basis); Benge v. Williams, __S.W.3d__, No. 01-
12-00578-cv, 2014 WL 6462352, at *11 (Tex. App.—Houston [1st Dist.] Nov. 18,
2014, n.p.h.) (“If one of the plaintiff’s legal theories does not support liability as a
matter of law and the plaintiff presented evidence to the jury on that theory that
may have led the jury to answer affirmatively the broad-form liability question
incorporating the invalid theory, there is a Casteel-type charge error.”) (citing
Hawley, 284 S.W.3d at 863-65).
Benge provides an excellent example of this concept. See Benge, 2014 WL
6462352. The plaintiff sued her surgeon for negligence in performing surgery and
in failing to obtain informed consent that a resident would assist. The plaintiff did
not plead informed consent, so that was an invalid liability theory. The charge
asked only a broad form liability question on negligence. In analyzing whether
there was Casteel error, the court of appeals determined that “[e]vidence regarding
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the disclosure issue was a major theme of [plaintiff’s] case and was explicitly
incorporated into liability questions asked of her expert.” Id. at *12. The court
concluded that the “disclosure theory was a primary theme of the case,” Id. at *15,
and for that reason the broad form question raised a Casteel issue:
The introduction of evidence admissible for multiple purposes does
not in itself create a Casteel problem. But the broad-form negligence
question here necessarily included a non-disclosure legal theory
because the evidence explicitly included standard-of-care questions on
informed consent.
Id. at *18.
Benge makes clear that Casteel is limited to cases where the plaintiff
advocated an invalid liability theory at trial that could have influenced the jury’s
decision. For Casteel presumed harm to apply, “the erroneous instruction must
have ‘probably prevented the appellant from properly presenting the case to the
court of appeals.’” Abraham, 2006 WL 191940, at *7 n. 8 (citing Romero v. KPH
Consol., Inc., 166 S.W.3d 212, 227 (Tex. 2005)). But where, as here, the invalid
theory was not advocated at trial, the jury could not have been misled, and the
defendant could not have been harmed by the submission of a broad form
question. 14
14
The presumption of harm under Casteel is not always a foregone conclusion; nor is the
inclusion of a flawed liability theory in a broad-form question always automatically reversible
under Casteel. Abraham, 2006 WL 191940, at *7 n.8. If the appeals court is “reasonably certain
that the jury was not significantly influenced by issues erroneously submitted to it” then the court
may find that any error was harmless. Id; see also Urista, 211 S.W.3d at 757 (under traditional
harm analysis, an incorrect jury instruction requires reversal only if it “was reasonably calculated
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The cases Defendants cite are distinguishable on this critical basis. In each
case, the invalid liability theory was prominently featured at trial. See Morrison,
381 S.W.3d at 537 (plaintiff presented evidence at trial that she was denied a
promotion); McFarland v. Boisseau, 365 S.W.3d 449, 450-51 (Tex. App.—
Houston [1st Dist.] 2011, no pet.) (jury found defamation liability on eight
statements listed in the charge but only two were properly before the jury); Sand
Point Ranch, Ltd. v. Smith, 363 S.W.3d 268, 275 (Tex. App.—Corpus Christi
2012, no pet.) (two groups of plaintiffs challenged a partition order; one group did
not have standing; court allowed both sets of plaintiffs to challenge the order at
trial and submitted only one question that failed to differentiate between the
parties); Clear Lake City Water Authority v. Kirby Lake Dev., Ltd., 123 S.W.3d
735, 739-41, 748 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) (only one of
three contract liability theories presented at trial was valid).15 In each case there
to and probably did cause the rendition of an improper judgment.”). Further, there was sufficient
evidence that Defendants breached sections 3, 6, and 9 of the LOI, and that those breaches
resulted in harm to LTT. Viewing the record as a whole, any alleged error in the charge did not
cause the rendition of an improper judgment. See Thota, 366 S.W.3d at 696 (where a reasonable
jury could resolve conflicting evidence either way, “we presume the jury did so in favor of the
prevailing party.”). That is particularly true here, where LRMC did not even challenge the
sufficiency of the evidence of its breach of LOI sections 3, 6, and 9.
15
Clear Lake was decided before Thota and Urista, which cautioned against applying Casteel
too broadly and held that Casteel does not apply in a case asserting a single liability theory.
Thota, 366 S.W.3d at 681-82; Urista, 211 S.W.3d at 757. Perhaps for this reason, the court in
Clear Lake did not analyze whether multiple theories of contract breach are independent liability
theories under Casteel. Id. at 753. However, that same court later acknowledged in Memon that
it is an “open question” whether factual allegations in support of a cause of action are “liability
theories” under Casteel. See Memon, 401 S.W.3d at 416. In light of subsequent case law, Clear
Lake is questionable authority on this issue.
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was a real possibility that the jury would base its decision on an invalid theory that
was actually litigated at trial, unless the charge instructed the jury not to do so.
There is no such possibility here.
c. LTT never advocated at trial that Defendants breached section 2
of the LOI.
Here, the charge did not instruct the jury to consider section 2 of the LOI.
Nor did LTT contend at trial that Defendants breached section 2 of the LOI, or that
any breach of section 2 caused LTT damages. When asked which contract
provisions LTT contended Defendants had breached, LTT’s Berry answered
“Sections 3, 6, [and] 9.” 8RR177. Berry testified that LTT contended Defendants
failed to use their best efforts in breach of section 3, and that they had used LTT’s
confidential and proprietary information in violation of sections 6 and 9. Id. There
was nary a discussion of any breach of section 2.16
Defendants nevertheless argue that the charge was flawed because it did not
limit the jury’s consideration to the specific contract provisions at issue. If this is
the law, then every contract case, regardless of the evidence at trial, will require
granulated submission, and any defendant in a breach of contract case can cherry-
pick random contract provisions, allege there was legally insufficient evidence in
16
As is discussed above in section B.2.a, reference to the agreed purchase price of a terminated
contract to establish value is proper and does not impermissibly seek to enforce that contract.
See Phillips, 2015 WL 2148951 at *11. Thus, any reference to section 2 to identify the
consideration agreed upon for LTT does not involve a claimed breach of section 2.
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support of breach of those contract provisions, and contend that a broad-form
question was therefore improper. That is not the law.
3. Defendants’ proposed instruction would not have cured any alleged
error and was otherwise improper.
The court properly refused Defendants’ requested instruction listing the
elements of a breach of contract claim. 3CR12972. That is a superfluous
instruction that would have confused the jury. Further, it would not have cured
any alleged Casteel issues.
“A trial court is afforded more discretion when submitting instructions than
when submitting questions.” GJP, Inc. v. Ghosh, 251 S.W.3d 854, 886 (Tex.
App.—Austin 2008, no pet.). A trial court has great latitude and considerable
discretion to determine necessary and proper jury instructions. Id.; see also
Abraham, 2006 WL 191940, at *8 (citing Louisiana-Pacific Co. v. Knighten, 976
S.W.2d 674, 676 (Tex. 1988)). When a trial court refuses to submit an instruction,
“the question on appeal is whether the request was reasonably necessary to enable
the jury to render a proper verdict.” Benge, 2014 WL 6462352, at *11. The court
should not reverse unless the refusal probably caused the rendition of an improper
judgment. United Pacific Railroad Co. v. Williams, 85 S.W.3d 162, 170 (Tex.
2002). Further, the “charge need not and should not burden the jury with surplus
instructions, even if the additional instructions are correct statements of the law.”
Ghosh, 251 S.W.3d at 887-88.
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The court did not abuse its discretion here. The instruction conflates legal
questions properly determined by the court, such as whether there was a valid,
enforceable contract, with the discrete factual questions properly before the jury,
such as whether the defendant failed to comply with the contract terms. See, e.g.,
Inimitable Group, L.P. v. Westwood Group Dev. II, Ltd., 264 S.W.3d 892, 899
(Tex. App.—Fort Worth 2008, no pet.) (“Whether an agreement is legally
enforceable or binding is a question of law.”); Gupta v. Eastern Idaho Tumor
Institute, Inc., 140 S.W.3d 747, 756 (Tex. App.—Houston [14th Dist.] 2004, pet.
denied) (“A trial court should not submit a pure question of law to the jury, but it
may submit a question that asks the jury to resolve a factual dispute regarding a
party’s failure to perform.”). Further, the instruction would have submitted
causation and damages to the jury twice; the charge had a separate question on
whether Defendants’ failure to comply resulted in damages. App.4 Q6.
The jury did not need to know the elements of a breach of contract claim in
order to determine whether Defendants failed to comply with the LOI; that is why
the PJC frames breach of contract questions as it does. Nor would an instruction
on the elements of a contract claim have directed the jury not to consider breach of
section 2 of the LOI. Moreover, instructing the jury that it can find a “failure to
comply” only when there is a “valid, enforceable agreement” to which the
defendants were “proper parties” asks the jury to speculate on questions not
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properly before it—without any guidance on what a “valid, enforceable contract”
or a “proper party” would be.
E. The fee award was proper.
For the reasons discussed above, this Court should affirm the judgment.
Because LTT can recover on its contract claim against Defendants, this Court
should affirm the fee award as well. Defendants stipulated as to the amount of the
fee award.
CONCLUSION AND PRAYER
As noted at the start of this brief, this case was well-tried, the jury’s findings
are well-supported, and judgment is proper. LTT respectfully prays that this Court
affirm the judgment in its entirety. In the alternative, LTT prays that the Court
render judgment for $790,000 in damages. In the further alternative, LTT prays
that this Court remand for a new trial in the interest of justice. LTT prays for such
additional relief to which it may be entitled.
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Respectfully submitted,
SCOTT DOUGLASS & MCCONNICO LLP
303 Colorado Street, 24th Floor
Austin, TX 78701
(512) 495-6300
(512) 495-6399 Fax
By: /s/ Jane Webre_________
Jane M.N. Webre
State Bar No. 21050060
jwebre@scottdoug.com
S. Abraham Kuczaj, III
State Bar No. 24046249
akuczaj@scottdoug.com
Robyn B. Hargrove
State Bar No. 24031859
rhargrove@scottdoug.com
COUNSEL FOR LTT
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CERTIFICATE OF SERVICE
I certify that the foregoing pleading was served on the following counsel of
record via the electronic noticing system and e-mail, on November 20, 2015.
Jeff Cody
Barton Wayne Cox
NORTON ROSE FULBRIGHT
2200 Ross Avenue, Suite 2800
Dallas, TX 75201-2784
Joy Soloway
NORTON ROSE FULBRIGHT
1301 McKinney, Suite 5100
Houston, TX 77010-3095
Robert A. Bragalone
B. Ryan Fellman
GORDON & REES, LLP
2100 Ross Avenue, Suite 2800
Dallas, TX 75201
Jessica Z. Barger
Raffi Melkonian
Wright & Close, LLP
One Riverway, Suite 2200
Houston, TX 77056
/s/ Jane Webre______
Jane Webre
CERTIFICATE OF COMPLIANCE
I certify that the foregoing instrument was prepared using Microsoft Word
2010, and that, according to its word-count function, the sections of the foregoing
pleading covered by TRAP 9.4(i)(1) contain 14,370 words.
______/s/ Jane Webre________
Jane Webre
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APP. 1
LTT v LRMC/SDP
exhibitsticker.com
No. D-1-GN-12-000983
PX0002
APP. 2
LTT v LRMC/SDP
exhibitsticker.com
No. D-1-GN-12-000983
PX0004
APP. 3
DC BK14294 PG476
Filed in The District Court
of Travis County, Texas
OCT 17 2014 RT
At 1:?Jc; 4 M.
CAUSE NO. D-1-GN-12-000983 Amalia Rodriguez-Mendoza, Cieri<.
LAKE TRAVIS TRANSITIONAL LTCH, § IN THE DISTRICT COURT OF
LLC n/k/a LAKE TRAVIS SPECIALTY §
HOSPITAL, LLC, §
§
v. § TRAVIS COUNTY, TEXAS
§
LAKEWAY REGIONAL MEDICAL §
CENTER, LLC, SURGICAL §
DEVELOPMENT PARTNERS, LLC, §
BRENNAN, MANNA & DIAMOND, LLC, §
AND FRANK T. SOSSI, § 345th JUDICIAL DISTRICT
JUDGMENT
On August I I. 2014. this cause came on to be heard. Plaintiff Lake Travis
Transitional LTCH, LLC n/k/a Lake Travis Specialty Hospital, LLC ("Plaintiff' or "LTT"),
appeared in person and by attorney of record and announced ready for trial. Defendant
Lakeway Regional Medical Center, LLC ("LRMC") and Defendant Surgical Development
Partners, LLC ("SDP") (collectively, "Defendants" and each a "Defendant"), appeared in
person and by their attorney of record and announced ready for trial. A jury having been
previously demanded, a jury was duly empanelled and the case proceeded to trial.
The jury heard the witnesses and the presentation of evidence. At the conclusion
of the evidence, the Court submitted the questions of fact in the case to the jury. The
charge of the court and the verdict of the jury are incorporated by reference herein for all
purposes. On August 28. 2014, the jury returned a verdict to the Court. Because it
appears to the Court that the verdict of the jury was for Plaintiff LTT and against
1138876
3
DC BK14294 PG477
Defendants SDP and LRMC, judgment should be rendered on the verdict in favor of the
Plaintiff LTT and against the Defendants SDP and LRMC.
IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that Plaintiff
L TT, in respect to its breach of contract claim, have and recover actual, past damages
from Defendants SOP and LRMC. jointly and severally, in the amount of $7,900,000.00,
as well as prejudgment interest on that amount at an annual rate of five percent (5.0% ).
As of October 13. 2014. prejudgment interest on that amount, calculated as simple
interest based on the date this case was filed on April 3, 2012, totals $998,863.01, which
amount shall increase by $1,082. 19 per day until the date this judgment is signed.
The Court finds that the parties have stipulated that the amount of reasonable
attorney fees incurred by Plaintiff LTT in the prosecution of its breach of contract claim
against Defendants SOP and LRMC is $2,000,000.00. IT IS THEREFORE ORDERED,
ADJUDGED, AND DECREED that Plaintiff L TT have and recover from Defendants
SDP and LRMC, jointly and severally, reasonable attorneys' fees incurred in the
prosecution of LTT' s breach of contract claim in the sum of $2,000,000.00 pursuant to
Chapter 38 of the Texas Civil Practice and Remedies Code.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that all costs of
court incurred by Plaintiff LTT in this matter are adjudged against and shall be recovered,
jointly and severally, from Defendants SDP and LRMC.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Plaintiff LTT
have judgment against Defendants SDP and LRMC, and that the total amount of
2
1138876
4
DC BK14294 PG478
•
judgment for Plaintiff LTT against Defendants SOP and LRMC, jointly and severally,
shall be as follows: actual damages in the sum of $7,900,000.00; plus prejudgment
interest on that sum as set forth above; plus attorneys' fees in the stipulated amount of
$2,000,000.00; plus costs of court; plus post-judgment interest on the sum total of each of
the foregoing, at an annual rate of five percent (5.0% ), compounded annually, from the
date this judgment is rendered until paid.
IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that all writs and
processes for the enforcement and collection of this judgment or the costs of court shall
tssue as necessary.
IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED by the Court
that the relief specified above is hereby granted and, as to all parties and issues in this
case, all relief not specifically granted herein is expressly denied. This judgment is final,
disposes of all claims and parties. and is appealable.
SIGNED on October _ _il ~-.-
'
,:~~-/ - .
'
HONORABLE'LdRA .-- INGSTON
'
PRESIDINGJUDGE
3
5
APP. 4
12997
12998
12999
13000
13001
13002
13003
13004
13005
13006
13007
13008
13009
APP. 5
LTT v LRMC/SDP
exhibitsticker.com
No. D-1-GN-12-000983
PX0180
APP. 6
LTT v LRMC/SDP
exhibitsticker.com
No. D-1-GN-12-000983
PX0136