William M. Bishop and Pinnacle Potash International, Ltd v. E. Barger Miller, III and Reunion Potash Company , 412 S.W.3d 758 ( 2013 )

Affirmed and Majority and Concurring Opinions filed September 12, 2013.
In The
Fourteenth Court of Appeals
NO. 14-12-00264-CV
WILLIAM M. BISHOP AND PINNACLE POTASH INTERNATIONAL,
LTD., Appellants
V.
E. BARGER MILLER, III AND REUNION POTASH COMPANY, Appellees
NO. 14-12-00318-CV
REUNION POTASH COMPANY, Appellant
V.
WILLIAM M. BISHOP AND PINNACLE POTASH INTERNATIONAL,
LTD., Appellees
On Appeal from the 269th District Court
Harris County, Texas
Trial Court Cause No. 2008-29234
OPINION
These cross appeals concern the alleged misappropriation of trade secrets
relating to a process for mining potash in a particular area of Utah. In its appeal,
Reunion Potash Company contends that the evidence is legally insufficient to
sustain the jury’s finding that it misappropriated trade secrets belonging to William
E. Bishop and Pinnacle Potash International, Ltd. In their cross appeal, Bishop and
Pinnacle contend that the trial court erred in submitting a proportionate
responsibility question, which asked the jury to apportion responsibility for the
misappropriation between Reunion and E. Barger Miller III, because there was no
evidence to support the question’s submission and because it was not properly
predicated on a finding of independent conduct by Miller. Although Miller was
found liable by the jury and assessed damages by the trial court, he does not join
this appeal. We affirm.
I. Background
About twenty miles outside Moab in southeastern Utah lies a potassium-rich
region known as Ten Mile Area. The rights to mine potash, or potassium-
containing ore, in this area were originally leased in 1984 by Buttes Resources
Company from the United States Bureau of Land Management (BLM).1 Although
the potassium deposits in the area are recognized as quite significant, mining them
has long been viewed as problematic in part because of the mild climate (for
reasons discussed below, most potassium production occurs in colder climates) and
because of the depth underground at which the deposits are found.
Bishop first learned of the Ten Mile Area around 1989, when the
engineering firm he worked for at that time, Parsons Brinckerhoff–Kavernen Bau
und Betrieb (PB-KBB), undertook on behalf of Buttes an evaluation of solution
1
Buttes Resources’ parent company, Buttes Oil & Gas Company, also apparently played
a role in investigating the Ten Mile Area for mining potential.
2
mining techniques which potentially could be utilized in the area. In his position at
PB-KBB, Bishop learned from documents provided by Buttes various attributes of
the Ten Mile Area potassium deposits, including that they existed at anomalously
high temperatures.
Bishop, a geologist and mechanical engineer, possessed considerable
experience in the solution mining of minerals contained in underground salt
formations. At one point in his career, he also had developed a patented “pipe-in-
pipe” or concentric-pipe heat exchanger. While working for PB-KBB and
examining the materials from Buttes, Bishop began to formulate a process for
“selective” solution mining of the Ten Mile Area. Among the documentation
Bishop reviewed was a 1995 report from an outside consultant for PB-KBB,
Norbert Gruschow, which concluded that selective solution mining could work in
the Ten Mile Area. Selective solution mining involves injecting a mining solution
(typically brine) underground and extracting a mineral in a crystallized form that is
separated from the mining solution. The solution can then be returned
underground. Selective solution mining requires a certain temperature differential
between the deposit and the surface. This differs from the basic process, where the
mineral is dissolved with the mining solution itself (usually freshwater) and later
processed for separation, typically leaving large deposits of salt in retention ponds.
When Bishop left his employment with PB-KBB, he negotiated for and obtained
the rights to the mining process he was developing, apparently including the rights
to the Gruschow report.
Bishop’s plan for mining in the Ten Mile Area capitalized on the fact of
anomalously high temperatures where high concentrations of potash are found in
the area. He envisioned achieving the necessary temperature differential for
selective solution mining by using a mostly closed-loop system that included the
3
pipe-in-pipe heat exchanger that he had designed. Basically, the mining process
would entail injecting colder brine through an outer pipe into the high-temp potash
deposits where the potash would be dissolved into the brine and then removed
through a second pipe that surrounds the first pipe. The colder brine sent into the
deposit through the outer pipe would cool the warmer brine carrying the potash in
the second pipe, causing “cold-cracking” or the crystallization of the potassium out
of the returning brine solution. One supposed economic benefit of such a closed-
loop system is that artificial heating and cooling methods would not be required,
and the supposed environmental benefits include that neither a continuous feed of
fresh water nor large-scale salt-retention ponds would be required.
After leaving PB-KBB, Bishop began to look for potential investors, with an
eye toward obtaining the potassium mining rights in Ten Mile Area—then owned
by Reunion, a successor-in-interest to Buttes—and developing his plan for mining
in the area. Bishop met Miller, a potential investor in the project, and the two
formed a partnership. In late 2000, Miller signed a confidentiality agreement
before Bishop shared specific information regarding the selective mining process
that he had developed. Miller then began soliciting other investors, and he and
Bishop entered negotiations with Reunion Industries for the purchase of Reunion
Potash and its potash leases in the Ten Mile Area. In 2002, Bishop and Miller
signed a letter agreement pledging joint participation in the project.
However, when new investors did not materialize, Miller and Bishop both
apparently sought investors on their own. In September 2003, Miller sent Bishop a
letter regarding terms for Miller’s possible exit from the project. In late 2004 or
early 2005, Miller informed Bishop that he (Miller) no longer took any
responsibility for the joint project. In June 2005, Miller formed a new company,
Carnallite Enterprises, LLC, with other investors. Miller also created a business
4
plan for development of a mining project in the Ten Mile Area. He used this plan
in an attempt to sell all or part of the project to BHP-Billiton. Miller also used the
business plan to obtain a loan from Texas Community Bank, which he used to
purchase Reunion (and its potash lease rights in the Ten Mile Area) on behalf of
Carnallite. Miller then became president of Reunion. BHP ultimately rejected all
overtures from Miller.
Miller further prepared a series of PowerPoint presentations regarding the
possibilities for mining in the Ten Mile Area. He presented or sent these
presentations to a number of potential investors, including Gordon Gray, owner of
Allied Crude Purchasing. Allied eventually purchased Reunion from Carnallite on
March 23, 2007 for $1.25 million. Out of this sum, Carnallite satisfied several
accounts payable and made a distribution to shareholders, including to Miller’s
company, E.B. Miller & Co. After the sale, Miller resigned as president of
Reunion but remained as company secretary and continued to act as an agent of
Reunion to develop an Operating Plan for the Ten Mile Area leases. Reunion
submitted the plan to the BLM, but the BLM rejected it as incomplete. Reunion’s
president, Gray, testified that Reunion still plans to develop the leases.
Bishop, meanwhile, was discussing investment possibilities with Randy
Taylor.2 During their due diligence review, one of Taylor’s employees learned that
Carnallite had purchased Reunion. Bishop thereafter filed the present lawsuit,
alleging, among other things, fraud and breach of contract against Miller and
misappropriation of trade secrets against Miller and Reunion. Bishop also sued on
behalf of a purported partnership between himself and Miller. Reunion
counterclaimed for misappropriation of trade secrets, among other things. Bishop
2
Around the time Carnallite was formed, Bishop discussed investment possibilities with
Taylor, but nothing came of those initial discussions until later.
5
subsequently assigned his and the purported partnership’s interests in the lawsuit to
Taylor’s company, Pinnacle Potash International, which then became a party to the
lawsuit.
At the conclusion of trial, the court submitted a 49-page, 36-question charge
to the jury. In response to questions 1 through 4, the jury found that Bishop and
Miller formed an equal partnership, Miller failed to comply with his duty of loyalty
to Bishop before early 2005, and Bishop was therefore entitled to $1.04 million
from Miller. In response to questions 7 and 8, the jury stated that Miller failed to
comply with his duty of loyalty to the partnership, and as a result, the partnership
was entitled to $2.08 million in damages.3 The jury next found, in questions 12
through 15, that Miller failed to comply with a confidentiality agreement and a
letter agreement and that these failures each resulted in a diminishment in Bishop’s
interest in the venture of $1.04 million. The jury declined to find, in response to
Question 16, that Miller committed fraud against Bishop.
Question 20 inquired whether each item in a list of thirteen pieces of
information constituted Bishop’s trade secret and also whether “[a] compilation of
any or all of the . . . items” was his trade secret. The jury found that three specific
items and a compilation were trade secrets. The specific items were no. 5, “[t]he
calculations of Mr. Bishop of the temperatures the saturated brine and the
concentrations of potassium chloride leaving the well-head of the respective potash
beds,” no. 9, “[t]he use of a heat exchanger and crystallizer to conserve the natural
heat of the potash beds for both (a) the pre-heating of feed water (including spent
brine) for injection into the potash deposits to conserve the heat present in the
deposit so that more potash will dissolve into the produced brine and (b) the
3
Despite findings in its favor by the jury and the fact that it was a plaintiff in the
litigation, the Bishop-Miller Partnership received no award in the final judgment and is not a
party to this appeal.
6
cooling of such brine so that potash will crystallize and precipitate out of the brine
resulting in spent brine for re-injection,” and no. 11, “[t]he economic advantage
and environmental benefits of the use of a heat exchanger in a closed loop system
in the development of potash beds that exist at anomalously high temperatures.” In
response to questions 21 and 22, the jury further found that both Miller and
Reunion misappropriated Bishop’s trade secrets and that Miller was responsible for
80% of the harm caused thereby and Reunion was responsible for 20%. In
answering Question 26, the jury found damages proximately caused by the
misappropriation to be $1,696,428.55. In response to Question 32, the jury found
that none of a list of eight specific items was Reunion’s trade secrets.4
In its judgment, the trial court stated that “it appears” the jury verdict
favored Bishop and that Bishop had assigned his claims to Pinnacle Potash. On
that basis, the court awarded Pinnacle $1.04 million in actual damages plus
$1,456,929.84 in attorney’s fees from Miller for his breaches of contracts
(questions 12, 14, and 15). The court further awarded Pinnacle $1,357,142.84
from Miller for the misappropriation of trade secrets (questions 20, 21, 26). Lastly,
the court awarded Pinnacle $339,285.71 for misappropriation of trade secrets from
Miller and Reunion, jointly and severally. The court also ordered Reunion to pay
12.4% of Pinnacle’s court costs and Miller to pay 84.6% of those costs.
As mentioned above, both Reunion, on the one hand, and Bishop and
Pinnacle, on the other, filed appeals that have been consolidated. Reunion
challenges the legal sufficiency of the evidence on the misappropriation claim,
4
The jury additionally declined to find Miller or Reunion acted with malice or that the
Bishop-Miller Partnership owned any trade secrets. The jury did not answer several other
questions because they were predicated on positive answers to questions which the jury
answered in the negative.
7
while Bishop and Pinnacle assert error in the jury charge.5 Miller has not appealed
the liability or damages findings against him.
II. Reunion’s Appeal
Reunion raises a single issue in its appeal, challenging the legal sufficiency
of the evidence to support the jury’s finding that it was liable for the
misappropriation of Bishop’s trade secrets. Reunion specifically contends that
there was insufficient evidence to establish that (1) Bishop owned any trade
secrets, (2) Reunion used Bishop’s trade secrets, or (3) Bishop suffered damages as
a result.
“The final test for legal sufficiency must always be whether the evidence at
trial would enable reasonable and fair-minded people to reach the verdict under
review.” City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). In
performing a legal sufficiency review, we must credit favorable evidence if
reasonable factfinders could have credited it and disregard contrary evidence
unless reasonable factfinders could not have disregarded it. Id. “If the evidence . .
. would enable reasonable and fair-minded people to differ in their conclusions,
then [factfinders] must be allowed to do so.” Id. at 822. “A reviewing court
cannot substitute its judgment for that of the trier-of-fact, so long as the evidence
falls within this zone of reasonable disagreement.” Id. Although the reviewing
court must consider evidence in the light most favorable to the verdict, and indulge
every reasonable inference that would support the verdict, if the evidence allows
only one inference, neither fact finder nor the reviewing court may disregard the
inference. Id. We measure the sufficiency of the evidence according to the charge
submitted to the jury. Romero v. KPH Consol., Inc., 166 S.W.3d 212, 221 (Tex.
2005); Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000).
5
At times in this opinion, we refer collectively to Bishop and Pinnacle as “Bishop.”
8
A. Trade Secrets and In Re Bass
A trade secret is any formula, pattern, device or compilation of information
which is used in one’s business and presents an opportunity to obtain an advantage
over competitors who do not know or use it. In re Bass, 113 S.W.3d 735, 739
(Tex. 2003). “Secret” implies that the information is not generally known or
readily available. Id. However, the mere fact that knowledge of a product or
process may be acquired through inspection, experimentation, and analysis does
not preclude protection from those who would secure that knowledge by unfair
means. K & G Oil Tool & Serv. Co. v. G & G Fishing Tool Serv., 158 Tex. 594,
314 S.W.2d 782, 788 (1958). Moreover, “[t]he fact that some or all of the
components of the trade secret are well-known does not preclude protection for a
secret combination, compilation, or integration of the individual elements.”
Restatement (Third) of Unfair Competition § 39 cmt. f. Texas courts condemn the
employment of improper means to procure trade secrets. Sharma v. Vinmar
Intern., Ltd., 231 S.W.3d 405, 424 (Tex. App.—Houston [14th Dist.] 2007, no
pet.). The question is not, “How could he have secured the knowledge?” but “How
did he?” Id.
A person is liable for disclosure or use of a trade secret if either (1) he
discovers the secret by improper means; or (2) his disclosure and use, after
properly acquiring knowledge of the secret, constitutes a breach of the confidence
reposed in him. Hyde Corp. v. Huffines, 158 Tex. 566, 314 S.W.2d 763, 769
(1958). To determine whether information constitutes a trade secret, courts apply
the following six factors: (1) the extent to which the information is known outside
the claimant’s business; (2) the extent to which the information is known by
employees and others involved in the claimant’s business; (3) the extent of the
measures taken by the claimant to guard the secrecy of the information; (4) the
9
value of the information to the claimant and to its competitors; (5) the amount of
effort or money expended by the claimant in developing the information; and (6)
the ease or difficulty with which the information could be properly acquired or
duplicated by others. In re Bass, 113 S.W.3d at 739.6
The party claiming a trade secret need not satisfy all six factors because
trade secrets do not fit neatly into each factor every time. Id. at 740. The status of
the information claimed as a trade secret must be determined through a
comparative evaluation of all the relevant factors, including the value, secrecy, and
definiteness of the information as well as the nature of the defendant’s misconduct.
Id. at 739.
B. Bishop’s Trade Secrets
Reunion first challenges the jury’s finding that Bishop owned any particular
trade secrets.7 As set forth above, the jury specifically found three items in a list to
be Bishop’s trade secrets—(1) temperature calculations for saturated brine and the
concentrations of potassium chloride leaving the well-head of the respective potash
beds, (2) the use of a heat exchanger and crystallizer to conserve the natural heat of
the potash beds for pre-heating feed water for injection into the potash deposits and
the cooling of such brine so that potash will crystallize and precipitate out of the
brine resulting in spent brine for re-injection, and (3) the economic advantages and
6
In Question 20, the jury was instructed to consider these six Bass factors in determining
whether a trade secret existed.
7
Reunion begins its argument by asserting that “Bishop sought overly-broad protection,”
pointing out that in his testimony, Bishop identified as his trade secrets certain ideas well-known
in the mining industry and information clearly known to Reunion, for example, the idea of
reentering a previously-drilled wellbore or the nature of his relationship with Reunion.
Reunion’s assertions, however, oversimplify what Bishop was trying to convey. Bishop was not
suggesting that he alone was privy to these concepts and this information but that they were
integral parts of his overall scheme for mining in the Ten Mile Area. Moreover, the question in
this appeal is whether the evidence was legally sufficient to support the jury’s findings, not
whether Bishop spoke too broadly regarding his trade secret claims.
10
environmental benefits of the use of a heat exchanger in a closed loop system in
the development of potash beds that exist at anomalously high temperatures—as
well as a compilation of “any or all” of thirteen listed items. Reunion challenges
the evidence on each of these items.
1. Calculations of Temperature and Concentration
Reunion urges this court to engage in a “nonstandard application” of the
Bass factors, arguing that Bishop’s alleged trade secrets are all derivative of
information he gleamed from his review of files belonging to Reunion itself, i.e.,
the information then belonging to Buttes Resources, Reunion’s predecessor
corporation, during his employment with PB-KBB. Reunion insists that while
Miller may have misappropriated such information from Bishop, Reunion could
not have, because it already had “institutional knowledge” of such information or
such information was readily ascertainable from its own files.8
Reunion specifically points to the first item the jury found to be Bishop’s
trade secret (item no. 5)—calculations of temperature and constituent
concentrations leaving the well-head—as being based purely on information from
its files. Reunion further emphasizes that Bishop admitted that the elevated
temperatures of the potash beds were not a secret. However, the fact that Reunion
presumably knew about the high in-ground temperatures and possessed the data on
which Bishop’s calculations were based does not mean that it ever undertook those
calculations independently or understood their importance in the way that Bishop
did. See K & G Oil, 314 S.W.2d at 788 (explaining that the mere fact that
knowledge may be acquired through inspection, experimentation, or analysis does
8
Essentially, Reunion urges that the sixth of the Bass factors, the ease or difficulty with
which the information could be properly acquired or duplicated by others, is of paramount
consideration in this case. 113 S.W.3d at 739.
11
not preclude protection from those who would secure that knowledge by unfair
means). Bishop testified in detail regarding the importance of these calculations in
the mining process he envisioned—that they in effect meant the process would be
effective for mining potash (using selective solution mining techniques) in a region
where mining had not previously occurred due to mild climate conditions.
Reunion does not point to any evidence, and we have discovered none, that it
understood the importance of the temperatures and concentrations at the well-head
in respect to selective solution mining of potash in the Ten Mile Area.
In its reply brief, Reunion additionally points out that the jury specifically
found Bishop’s calculations of temperature and concentrations to be a trade secret,
not his appreciation of the importance of those calculations. However, as the jury
was instructed, an assessment of the usefulness or importance of a trade secret is
often a key part of determining whether trade secret protection should apply. See
In re Bass, 113 S.W.3d at 739 (identifying the value of the information to the
claimant and to its competitors as a factor in determining whether a trade secret
exists). Reunion further notes that the jury rejected another of the thirteen listed
items (item no. 2) as a trade secret, which read: “As to potash beds 5, 9, and 19,
the relative depth, the relative concentrations of potassium chloride, and the
importance of the elevated temperatures of the respective beds to the selective
solution mining process.” Reunion suggests that the jurors’ rejection of this item
demonstrated they did not believe Bishops’ appreciation of the calculations
constituted a trade secret. Item no. 2, however, was addressed to the importance
of in-ground potash bed temperatures and concentrations, not calculations of
temperature and concentration at the well-head, which were addressed in item no.
5. Thus, the jury’s finding regarding item no. 2 has no relevance to its finding in
regard to item no. 5.
12
Moreover, the jury was authorized to find a trade secret based on a
compilation of more than one of the thirteen listed items. Thus, even if we
accepted Reunion’s position that Bishop could not claim trade secret protection for
the calculations of well-head temperature and concentration, this does not mean
that those calculations could not have been part of the compilation of information
found by the jury to be a trade secret. See generally Correa v. Houston Surgical
Assistant Servs., Inc., No. 14-12-01050-CV, 2013 WL 3958499, at *7 (Tex.
App.—Houston [14th Dist.] July 30, 2013, no pet. h.) (mem. op.) (“[C]ompilations
of information, even readily available information, may constitute a trade
secret.”).9
Reunion further maintains that Bishop failed to sufficiently identify specific
calculations that he claims are his trade secrets. The importance of the calculations
in question, however, as explained by Bishop in his testimony, is that they
permitted the use of selective solution mining through the process he developed.
Reunion does not explain why Bishop would have needed to identify specific
numbers in the record when he testified regarding the nature of the calculations and
their importance to the mining process he envisioned. This is not a case where a
trade secret claimant is making amorphous, generalized claims. A discussion of
specific numbers would have added nothing to Bishop’s case.10
2. Heat Exchangers
Reunion next points out that the use of heat exchangers for mining potash
9
The compilation finding will be discussed in more detail below.
10
Bishop did in fact discuss specific numbers regarding well-head temperatures (150 and
170 degrees), and he stated that the saturation levels were “close to full saturation.” Reunion’s
argument that Bishop did not possess a trade secret regarding the calculations because such
information was so readily obtainable from Reunion’s own files is inconsistent with Reunion’s
argument that Bishop did not identify specific information in making his claims.
13
was not unknown within the industry. See, e.g., In re Waste Mgmt. of Tex., Inc.,
392 S.W.3d 861, 870 (Tex. App.—Texarkana 2013, no pet.) (“A trade secret
cannot be a matter of general knowledge in an industry.”). Reunion acknowledges,
however, that Bishop’s trade secret claim was more specific than just the idea that
heat exchangers could be used in mining potash. Indeed, the jury found that
Bishop possessed a trade secret regarding:
The use of a heat exchanger and crystallizer to conserve the natural
heat of the potash beds for both (a) the pre-heating of feed water
(including spent brine) for injection into the potash deposits to
conserve the heat present in the deposit so that more potash will
dissolve into the produced brine and (b) the cooling of such brine so
that potash will crystallize and precipitate out of the brine resulting in
spent brine for re-injection.
Reunion’s industry expert at trial, Kimberly Gordon, testified that the use of
a heat exchanger at Ten Mile Area was mentioned in Buttes’s files, which Reunion
subsequently inherited.11 Reunion, however, did not present the Buttes’s document
where this mention supposedly occurred, and neither Reunion nor Gordon is
specific about its content. In contrast, Bishop testified specifically that his plan for
using a heat exchanger was “unique,” was not suggested by Buttes, and could
provide a significant competitive advantage.12 The jury may have discounted
Gordon’s brief mention and accepted Bishop’s more detailed claims regarding his
vision for using heat exchangers in mining potash in the Ten Mile Area. See City
of Keller, 168 S.W.3d at 819 (“Jurors are the sole judges of the credibility of the
witnesses and the weight to give their testimony. They may choose to believe one
11
Gordon stated: “The use of a heat exchanger to reheat the return brine with the
incoming brine is mentioned in . . . Buttes’s files” and “I think that’s in the study that they
presented to the BLM in 1982 or 1984.”
12
Bishop testified in detail regarding his conception of using a heat exchanger under the
circumstances presented at Ten Mile Area and as to how he gained inspiration for the idea from
working on liquefied natural gas projects utilizing heat exchangers.
14
witness and disbelieve another.”).
3. Economic Advantage and Environmental Benefits
The jury additionally found that Bishop possessed a trade secret concerning
“[t]he economic advantage and environmental benefits of the use of a heat
exchanger in a closed loop system in the development of potash beds that exist at
anomalously high temperatures.” Without citation to the record or authority,
Reunion suggests that this claimed secret merely shows Bishop’s knowledge of
common uses and benefits for using heat exchangers. In his testimony, Bishop
compared the mining method he devised to those in use in other potash mines,
emphasizing the economic and environmental benefits of his approach. He also
testified to the uniqueness of his ideas. The jury was entitled to accept his
statements.
4. Compilation
Lastly, Reunion challenges the jury’s finding that a compilation of more
than one of the thirteen items listed in Question 20 constituted Bishop’s trade
secret. Reunion specifically asserts that Bishop failed to “put on any evidence of
what exactly went into [his] claimed combination of non-secret and secret
information.” Reunion itself, however, speaks in generalities and offers no
analysis of Bishop’s considerable testimony and other evidence regarding his plan
for mining potash in the Ten Mile Area using a selective solution process he
developed. Bishop explained the process in detail to the jury, told jurors why and
how it was unique in the industry and would provide a competitive advantage, and
even played an animation for the jury showing how the process worked. Reports
Bishop prepared in 1998 and 2001 explaining the process were presented into
evidence, and Bishop’s expert, Kenneth Mills, also testified regarding the value of
Bishop’s plan, stating “I’m saying the sum of the parts is worth more than the
15
individual parts. And it doesn’t mean that the sum has to include every one of the
parts.”13 Reunion’s complaints regarding a lack of evidence are without merit.
5. The Bass Factors
Turning to the six factors from In re Bass,14 there was evidence supporting
the conclusion that Bishop took efforts to keep the mining process he designed
secret by having those he shared it with sign confidentiality agreements, and he
specifically testified that his design was not a known application of technology
within the industry. Bishop also testified directly regarding the considerable value
such a process could provide in the industry, permitting economical and
environmentally-friendly cold-cracking in climates where such methods are
generally considered cost-prohibitive. Bishop’s two experts also testified
regarding the value of his ideas. Although Bishop acknowledged that he only
spent approximately one thousand dollars on developing his plan, it is apparent that
he spent a considerable amount of his own time and energy in its development.
Lastly, there was evidence—particularly that concerning Bishop’s own experiences
and knowledge-base—on which it could be concluded that his plan could not be
readily derived or duplicated by others. The evidence at trial was sufficient to
enable reasonable and fair-minded people to determine that Bishop owned certain
trade secrets as defined in jury Question 20. See City of Keller, 168 S.W.3d at 827.
13
In its appellant’s brief, Reunion suggests that, because the jury found only three of the
items constituted Bishop’s trade secrets, the compilation found by the jury could include, at
most, only those three items. In its appellee’s brief (in response to Bishop’s charge issue in his
cross-appeal), Reunion argues, however, that the jury’s compilation finding could have included
any or all of the thirteen items, whether each individual item was found to be a trade secret on its
own or not. We agree with Reunion’s argument in its appellee’s brief. There is nothing in the
jury charge that would have precluded the jury from considering all 13 items as components in a
compilation rather than just the few items it found separately to be Bishop’s trade secrets.
14
In re Bass, 113 S.W.3d at 739. Reunion generally does not discuss the Bass factors
except to urge a “nonstandard” application of them.
16
C. Reunion’s Use:
Next, Reunion contends that no evidence established that it, as opposed to
Miller, used any trade secret belonging to Bishop. In other words, Reunion argues
that any and all of Miller’s tortious conduct was in his own interests, or in the
interests of Carnallite, and not on behalf of Reunion.
The jury found that Reunion misappropriated a trade secret of Bishop in
response to Question 21. In that question, the jury was instructed that to answer
affirmatively for either Miller or Reunion, it had to find a secret exists and the
party in question used or disclosed it in violation of a confidential or contractual
relationship, after acquiring the secret by improper means, or after acquiring the
secret with notice the disclosure was improper. The charge further instructed that
“Use” of a trade secret means commercial use by which a person
seeks to profit from the use of the secret. Standing alone, mere receipt
of information does not establish commercial use.
“Improper means” of acquiring another’s trade secrets include the
theft, fraud, unauthorized interception of communications,
inducement of or knowing participation in a breach of confidence, and
other means either wrongful in themselves or wrongful under the
circumstances of the case.
You are instructed that Reunion Potash is responsible for the conduct
of Miller if:
a) Miller was an employee of Reunion Potash and was acting in
the course and scope of his employment when he committed
such conduct; or
b) Miller was an agent of Reunion Potash and was acting within
the scope of his actual authority when he committed such
conduct.
The parties focus on two categories of possible uses: Miller’s negotiations
with BHP and Allied and Reunion’s submission of a potash mining Operation Plan
17
to the BLM. Reunion acknowledges that prior to Carnallite’s acquisition of
Reunion on August 8, 2005, “Miller was clearly using information derived from
Bishop’s documents to develop a business plan for Carnallite and to entice
business associates.”15 Reunion also points out that any use of trade secrets by
Miller before Carnallite bought Reunion and Miller became Reunion’s president
could not be ascribed to Reunion. We agree with these two propositions.
1. Discussions with BHP and Allied
Reunion further contends that even once Miller was Reunion’s president, his
alleged use of Bishop’s trade secrets was always on behalf of Carnallite, of which
he was also president at the same time and which owned Reunion. According to
Reunion, it should not be held liable for any use of trade secrets because it was no
more than a commodity or asset that Miller attempted to sell on behalf of
Carnallite, first to BHP and then to the ultimate purchaser, Allied.
Post-August 8, 2005 correspondence between Miller and BHP
representatives, however, reveals that even though Miller typically represented
himself as Carnallite’s president, the focus of the negotiations was the
development of the mineral leases owned by Reunion. The evidence further shows
that Miller used information the jury found to be Bishop’s trade secrets in
attempting to entice BHP into investing considerable sums of money into the
development of these leases, even before any purchase by BHP would occur.16
Any such development of Reunion’s leases would certainly enhance the value of
15
According to his testimony, Miller appears to have been under the impression that he
had a legal right to use the information Bishop had developed based on agreements between the
two men. This issue was decided against Miller at trial and he has not filed an appeal.
16
Although Reunion suggests that it was merely an asset Carnallite was to sell to BHP, at
least some of the correspondence shows that BHP may have been interested in purchasing
Carnallite itself, the parent company.
18
Reunion itself. Because Miller was the president of Reunion and was engaged in
negotiations to enhance the value of Reunion leases, the jury reasonably could
have concluded that he was acting in the course and scope of his employment as
instructed in the jury charge. See Romero, 166 S.W.3d at 221 (stating that
sufficiency of the evidence is assessed according to the charge given the jury).
This is true even though Miller represented himself as an agent of Carnallite. See,
e.g., Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 924 &
n.18 (Tex. 2010) (explaining that an agent can represent more than one principal at
a time); Restatement (Third) of Agency §§ 3.14 (discussing agency for
coprincipals), 3.16 (same); 7.03 & cmt. d(3) (discussing attribution of shared
officer’s conduct and explaining the presumption officer’s conduct should be
attributed only to the entity for which he or she purports to be acting in a
transaction does not apply when the conduct is tortious). While Carnallite may
have benefitted as well had the transaction occurred, it stood to do so, in large part,
because of its ownership of Reunion.17 The evidence supports the conclusion that
Reunion, through Miller’s conduct as its president in negotiating with BHP, sought
to profit from using Bishop’s trade secrets.18
17
Reunion appears to be urging some form of piercing the corporate veil, suggesting that
because, as owner of Reunion, Carnallite would ultimately profit from the enhancement of
Reunion’s leases, Reunion itself could not be said to benefit from such a transaction. Reunion,
however, neither cites authority to support such a proposition, nor cites to any place in the record
where it urged this position in the trial court.
Reunion complains in a footnote regarding the fact that the jury was not authorized to
assess Carnallite’s proportionate responsibility in the charge. Reunion, however, does not raise
any point of error regarding this omission. See Pat Baker Co., Inc. v. Wilson, 971 S.W.2d 447,
450 (Tex. 1998) (stating that an appellate court cannot reverse a trial court’s judgment on
unassigned error). Bishop nonsuited Carnallite as a defendant before trial began.
18
Miller later used some of the same information to entice Allied to purchase Reunion
from Carnallite. We need not consider whether this also was a use by Reunion.
19
2. Submission to BLM
After Allied bought Reunion, Miller continued to work for Reunion as a
corporate officer and in cooperating with outside consultants to develop the
Operating Plan for submission to the BLM. Reunion contends that while this plan
may have had its genesis in Bishop’s trade secrets, its creation and submission did
not constitute a “use” of Bishop’s trade secrets due to important differences
between Bishop’s work and the plan actually submitted.
In his testimony, Bishop acknowledged that Reunion’s Operating Plan did
not copy his own plan “in toto”; however, he complained that the Operating Plan
was “very similar” and used “major pieces” of the plan he devised, including that:
“The well is the same design. The use of the selective solution mining. The
recognition that the high temperature allows you to cold crack. The flow rates.
The beds leached.” See Restatement (Third) of Unfair Competition § 40, cmt. c
(“The unauthorized use need not extend to every aspect or feature of the trade
secret; use of any substantial portion of the secret is sufficient to subject the actor
to liability.”).19 Bishop’s solution mining expert, Kenneth Mills, broke Bishop’s
plan into 21 component parts and concluded that Reunion’s Operating Plan
incorporated 15 of those components and either modified or discarded the
remaining six. He further stated that without the “Bishop Plan,” “these
modifications would never have been done.” See id. (“[T]he actor need not use the
trade secret in its original form. Thus, an actor is liable for using the trade secret
with independently created improvements or modifications if the result is
19
The Texas Supreme Court has not expressly adopted the Restatement for all purposes
related to trade secrets but has referenced the Restatement, including section 40, on several
occasions. See, e.g., In re Bass, at 739-40 (examining changes in Restatement at length); see
also Twister B.V. v. Newton Research Partners, LP, 364 S.W.3d 428, 438-39 (Tex. App.—
Dallas 2012, no pet.) (discussing use of Restatement for trade secrets in Texas and specifically
referencing section 40, comment c).
20
substantially derived from the trade secret.”).20
Reunion’s expert, Gordon, also analyzed the differences between Bishop’s
plan and the Operating Plan and concluded that Reunion “is not using Mr.
Bishop’s Plan.” She described the two plans as being “fundamentally different.”
She emphasized that (1) the Operating Plan was contained in one document, while
Bishop’s ideas were spread over several documents; (2) Bishop’s primary focus
was potash bed 19, with beds 5 and 9 only of secondary importance, whereas the
Operating Plan focuses on beds 5 and 9; (3) the well field design, plant layout, and
proposed process flow are different; (4) the proposed heat exchanger is different in
the two plans; and (5) Reunion’s heat exchanger utilizes a chiller, whereas Bishop
believed a chiller was not necessary. Gordon acknowledged there are similarities
between the two plans but explained this by pointing out that the plans were aimed
at developing the same geographical area.
While Gordon provided the jury with important considerations to guide its
analysis, her testimony did not provide conclusive proof that Reunion did not use
Bishop’s trade secrets in preparing its Operating Plan. Gordon confirmed Bishop’s
acknowledgement that Reunion did not submit his plan in toto to the BLM as its
own Operating Plan; however, she did not directly refute Bishop’s contention that
major pieces of his plan were included in the Operating Plan. Gordon’s testimony
also does not refute Mills’s conclusion that even the modifications in the Operating
Plan were a result of the use of Bishop’s trade secrets. The jury had before it both
20
Reunion emphasizes that among the components Mills determined to have been
modified in the Operating Plan were the three items the jury found in response to Question 20 to
each constitute a trade secret of Bishop. While modification was certainly a factor the jury could
have considered in making its determination of “use,” it must also be pointed out that the jury
found Bishop held a trade secret in a compilation of items and not just in the three individual
items. Moreover, Mills emphasized that even the modifications in the Operating Plan would
never have been developed if not for the use of Bishop’s trade secrets.
21
Bishop’s plan and the Operating Plan, and, guided by the expert testimony, the jury
determined that Reunion used Bishop’s trade secrets.
The two plans contain many similarities. Bishop and Mills indicated the
similarities were due to the fact the Operating Plan was a modified version of
Bishop’s plan; Gordon explained any similarities as resulting from the fact the
plans were aimed at the same goal of mining potash from the Ten Mile Area.
Miller acknowledged bringing Bishop’s concepts to Reunion and working with
outside consultants to prepare the Operating Plan, thus linking it to Bishop’s plan.
The evidence was such that reasonable and fair-minded people could reach the
verdict the jury reached in this case. See City of Keller, 168 S.W.3d at 827.
Reunion further suggests that the submission of the Operating Plan to the
BLM could not have constituted “commercial use” of Bishop’s trade secrets
because the BLM rejected the Plan and there is no evidence Reunion has begun
mining based on Bishop’s plan. As set forth above, the jury charge defined “use”
as “commercial use by which a person seeks to profit from the use of the secret.”
(Emphasis added). In submitting its Operating Plan to the BLM, Reunion sought
approval to begin moving toward mining for potash in the Ten Mile Area. It was
rational for the jury to conclude that in doing so, Reunion was seeking to profit
from its use of Bishop’s trade secrets. See, e.g., Sw. Energy Prod. Co. v. Berry-
Helfand, No. 12-11-00370-CV, 2013 WL 3461644, at *24 (Tex. App.—Tyler July
10, 2013, no pet. h.) (“[A] lack of profit from [the] misappropriation and use of the
secret will not exempt the wrongdoer from liability in the amount of the trade
secret’s value when it was misappropriated.”).
Reunion urges that something more than this was required, but it cites no
cases in support of this argument. The one case it does cite, Metallurgical
Industries, Inc. v. Fourtek, Inc., 790 F.2d 1195, 1204 (5th Cir. 1986), is
22
distinguishable. In Metallurgical Industries, the defendants used a process the
plaintiffs claimed violated their trade secrets to modify two of defendants’
furnaces. Id. at 1197-98. The furnaces were never used for commercial purposes,
however, because of a shortage of the scrap material used in the furnaces. Id. at
1198. The court held that there had been no commercial use of the trade secrets
because the furnaces had never produced anything useable. Id. at 1205. The court
further stated that if in the future the defendant sought to profit by use or sale of the
furnaces, an action for relief might then lie. Id. Here, there was evidence on
which the jury could rationally conclude Reunion sought to profit by using
Bishop’s trade secrets in attempting to secure approval to mine the potash leases it
owned. See Sw. Energy Prod., 2013 WL 3461644, at *15; SP Midtown, Ltd. v.
Urban Storage, L.P., No. 14-07-00717-CV, 2008 WL 1991747, at *7 (Tex. App.—
Houston [14th Dist.] May 8, 2008, pet. denied) (mem. op.).21
21
In Southwestern Energy, evidence demonstrated the defendant oil and gas production
company had concluded that drilling in a particular area would not be profitable; however, after
it subsequently reviewed—under a confidentiality agreement—a study performed by the plaintiff
showing certain “sweet spots” in the region, defendant began acquiring leases in the subject area.
2013 WL 3461644, at *2-3. The court concluded “that it was not unreasonable for the jury to
infer [that defendant] used [plaintiff’s] data and analysis, not solely to evaluate the . . . prospects,
but to plan, map, and lease in preparation for a vast . . . drilling program.” Id. at *15. Damages
in the case were calculated using the “reasonable royalty” approach. Id. at *25.
In SP Midtown, the court identified as proof of commercial use evidence that defendant
contacted two of plaintiff’s customers “and tried to persuade them to switch their business.”
2008 WL 1991747, at *7. In regards to damages, the court then considered the fact that the two
customers had indeed switched their business from plaintiff to defendant. Id.
There was evidence at trial in the present case, including the testimony of Allied’s
president, Gray, that it is still Reunion’s goal to gain BLM’s approval of a mining process and
develop the leases. Gray explained that BLM declined to approve the Operating Plan because it
lacked sufficient detail. Gray anticipated that Reunion would have the resources necessary to
build the processing plant at the Ten Mile Area.
23
D. Damages
Lastly, Reunion contends that the jury’s damages finding is without support
in the record. In answering Question 26, the jury determined what a “reasonable
royalty” would have been had the parties negotiated for use of Bishop’s trade
secrets at the time the information was used. See generally Univ. Computing v.
Lykes-Youngstown Corp., 504 F.2d 518, 539 (5th Cir. 1974); Calce v. Dorado
Exploration, Inc., 309 S.W.3d 719, 737-38 (Tex. App.—Dallas 2010, no pet.)
(following University Computing); Restatement (Third) of Unfair Competition §
45 cmts. d, g (discussing application and parameters of reasonable royalty
damages).22 The trial court specifically instructed the jury as follows:
In determining a reasonable royalty, you should calculate what the
parties would have agreed to as a fair price for licensing the
confidential information. Your determination does not depend on the
parties’ actual willingness to engage in such negotiations. Your focus
should be on what the parties’ expectations would have been had they
entered negotiations for royalties at the time the confidential
information was used. In calculating what a fair licensing price would
have been had the parties agreed, you should consider such factors as
the resulting and foreseeable changes in the parties’ competitive
posture; the prices past purchasers or licensees may have paid; the
total value of the confidential information to Bishop, including the
development costs and the importance of the confidential information
to Bishop’s business; the nature and extent of the use intended for the
22
As the Restatement explains, there are several possible measures of damages in trade
secrets cases, including: the plaintiff’s lost profits, the defendant’s gain, the defendant’s savings
resulting from using the trade secrets, and reasonable royalty. Restatement (Third) of Unfair
Competition § 45 cmts. d-g. “Selection of the appropriate method of measuring monetary relief
depends on the facts and circumstances of the particular case.” Id. cmt. d; see also Univ.
Computing, 504 F.2d at 535-37 (discussing different measures and specifically differentiating
situations calling for “reasonable royalty” as opposed to “lost profits” calculations). The
reasonable royalty measure has been employed in various situations, id. cmt. g; however,
regardless of the propriety of its use in the present case, we must measure the sufficiency of the
evidence on damages according to the charge submitted to the jury, which in this case presented
the reasonable royalty measure and not lost profits or any other calculation. Romero, 166
S.W.3d at 221.
24
confidential information; and the availability of alternative sources for
the information.23
The jury answered that a reasonable royalty would have been $1,696,428.55.24
The primary analysis of damages at trial came from Bishop’s finance expert,
James Woods, who, in addition to testifying, also provided an initial 17-page report
and a 14-page supplemental report.25 In the two reports, Woods details his analysis
and findings, including his conclusion that Bishop’s reasonable royalty damages
for the misappropriation of his trade secrets amounted to at least $49 million. In
his reports and testimony, Woods also detailed the sources for his information and
the bases for his calculations. A large number of the sources he identified were
also available for the jury to consider.26
“If scientific, technical, or other specialized knowledge will assist the trier of
fact to understand the evidence or to determine a fact in issue, a witness qualified
as an expert by knowledge, skill, experience, training, or education may testify
thereto in the form of an opinion or otherwise.” Tex. R. Evid. 702. Expert
testimony is admissible if the expert is qualified and the testimony is relevant and
based on a reliable foundation. Cooper Tire & Rubber Co. v. Mendez, 204 S.W.3d
23
The concepts in the charge appear to have been derived from University Computing,
504 F.2d at 539.
24
The jury found Reunion liable (jointly and severally with Miller) for 20% of this sum,
or $339,285.71. Miller was held individually liable for the remainder.
25
Reunion only references the first report in its briefing. At one point, Reunion suggests
that Woods failed to consider the factors set forth in the seminal University Computing case. In
his supplemental report, however, Woods specifically states that he analyzed those factors in
making his determinations.
26
Exhibit C to Woods’s initial report represents that he reviewed well over a hundred
documents, including many that were admitted into evidence in the case. These documents
included, but were not limited to, various cost estimates and financial projections, government
and other reports on potash and the potash market, negotiation and sales information,
depositions, and mining plans.
25
797, 800 (Tex. 2006). Appellate courts generally review challenges to the
admission of expert testimony under an abuse of discretion standard, but when a
trial court admits expert testimony that is challenged on appeal as constituting “no
evidence,” we review the reliability of the expert testimony using a de novo
standard of review. Thomas v. Uzoka, 290 S.W.3d 437, 447 (Tex. App.—Houston
[14th Dist.] 2009, pet. denied).27
Reunion begins by arguing that Woods’s damages calculations were
unreliable because he failed to provide separate values for each of the items the
jury found to be Bishop’s trade secrets and instead provided only one value for
misappropriation. This argument, however, ignores the possibility that all of the
discussed items were in fact part of Bishop’s trade secret; the jury, after all, found
Bishop owned a compilation trade secret comprised of some or all of the thirteen
items listed in the jury charge. Moreover, Woods appears to have reasonably
27
In this issue, Reunion principally challenges the reliability of Woods’s testimony.
Generally, challenges to the reliability of expert testimony must be preserved by proper and
timely objection in the trial court. See, e.g., RDG P’ship v. Long, 350 S.W.3d 262, 268 (Tex.
App.—San Antonio 2011, no pet.) (“When a reliability challenge requires the appellate court to
evaluate the underlying methodology, technique, or foundational data used by an expert, an
objection must be timely made in order to preserve a sufficiency complaint with regard to the
expert’s testimony.”). It is difficult to tell on this record whether Reunion preserved these
arguments. Reunion states in a footnote that it filed a motion to exclude Woods’s testimony and
that although the motion was not included in the clerk’s record, Reunion has requested the clerk
prepare a supplemental record containing the motion. No such record has been filed. See
generally Tex. First Nat’l Bank v. Ng, 167 S.W.3d 842, 865-66 (Tex. App.—Houston [14th
Dist.] 2005, judgm’t vacated w.r.m.) (discussing supplementation of the record and refusing to
consider supplemental record filed after opinion originally issued). In the reporter’s record
immediately prior to the beginning of Woods’s testimony, there is a discussion regarding a
motion in limine, but a motion in limine would not preserve arguments for the exclusion of the
witness’s testimony. See, e.g., Perez v. Spring Branch I.S.D., No. 14-10-00058-CV, 2011 WL
742601, at *3 n.6 (Tex. App.—Houston [14th Dist.] March 3, 2011, pet. denied). During that
discussion, there is a reference to an earlier “Robinson hearing” (possibly a hearing on the
admissibility of Woods’s testimony, see E.I. du Pont de Nemours & Co. v. Robinson, 923
S.W.2d 549 (Tex.1995), and Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 576 (Tex. 2006)),
but, again, no transcript from that hearing appears in the record. Nonetheless, for purposes of
this appeal, we will assume without deciding that Reunion’s arguments regarding Woods’s
testimony were preserved in the trial court.
26
concluded that within Bishop’s trade secrets there exists a “tipping point” of sorts
without which mining in the Ten Mile Area was not economically feasible. Under
that analysis, it would be illogical to assign a value to each separate piece of the
compilation.28
Next, Reunion asserts Woods failed to properly discount his figures due to
the fact some of the information Bishop claimed to be part of his trade secret was
indisputably in the public domain. Reunion further deems it “absurd” that Reunion
would have paid money to be told what was in its own files. Again, the fact that
some information Bishop used was in the public domain or contained within
Reunion’s files would not necessarily lessen the value of his trade secret: as
discussed in prior sections of this opinion, evidence demonstrated that without
Bishop’s trade secret, there was little or no thought of economically mining potash
in the Ten Mile Area; the jury could reasonably have deduced that Bishop’s trade
secret made such mining feasible where it was not feasible before. See
Restatement (Third) of Unfair Competition § 39 cmt. f (“The fact that some or all
of the components of the trade secret are well-known does not preclude protection
for a secret combination, compilation, or integration of the individual elements.”).
Reunion further complains that Woods’s analysis focused on a hypothetical
negotiation between Bishop and Miller, instead of Bishop and Reunion, and did
not take into account the fact Miller may have shared the information with others
28
In other words, Reunion’s arguments do not account for the possibility that the value of
Bishop’s plan may not fluctuate based on the number of individual items contained within the
plan. If Bishop’s plan was the key that made potash mining in the Ten Mile Area economically
feasible, as the jury may have reasonably determined, it would not necessarily matter that the
plan had three components or thirteen. The jury could have determined the plan had the same
value regardless of how many component parts were involved or were trade secrets on their own.
Without explanation, Reunion also complains that Woods failed to assign a value to the
compilation as a whole. On the surface, this appears to be the opposite of their complaint that he
failed to disaggregate items from the compilation.
27
or that different negotiations could have occurred at different times. These
arguments ignore the considerable evidence indicating Miller served as an agent
for Reunion from the time he became its president through the time he worked
with outside consultants to develop the Operating Plan for submission to the BLM.
It therefore was not necessarily improper to consider Miller as one half of the
negotiating pair. Furthermore, the core of the negotiation analysis is what a willing
buyer would be willing to pay a willing seller for a license to use the trade secret at
issue. See Restatement (Third) of Unfair Competition § 45 cmt g. Reunion does
not suggest how using Miller’s name as the hypothetical “willing buyer” changed
Woods’s calculations in any way. Reunion further points to no evidence that the
value of the trade secrets was in any way affected by any prior disclosure, such as
that to BHP, or that Woods failed to appreciate this possibility. See generally In re
Waste Mgmt. of Tex., Inc., 392 S.W.3d 861, 870 (Tex. App.—Texarkana 2013, no
pet.) (explaining that while absolute secrecy is not required for trade secret
protection to apply, the owner must take reasonable precautions to ensure the
secrecy of the information); Restatement (Third) of Unfair Competition § 39 cmt. f
(discussing the level of secrecy required and stating, “[C]onfidential disclosures . .
. will not destroy the information’s status as a trade secret. Even limited non-
confidential disclosure will not necessarily terminate protection if the recipients . . .
maintain the secrecy of the information.”). Reunion was certainly free to question
Woods regarding this at trial or to put on its own evidence or expert.29
Lastly, Reunion posits that Woods’s methodology was unreliable because he
utilized Miller’s financial projections and assumed that adequate financing for the
project could be arranged. In support, Reunion points to earlier attempts to market
29
Reunion, in fact, presented its own valuation expert, Karl Schwabauer, who provided a
critical assessment of Woods’s calculations as well as of the reliability of the underlying
financial projections.
28
the plan that were unsuccessful, such as the overtures to BHP and Bishop and
Miller’s initially unsuccessful attempts to find investors. Reunion further asserts
Woods failed to adequately account for inherent risks involved in a project of this
magnitude, citing City of Harlingen v. Estate of Sharboneau, 48 S.W.3d 177, 184-
85 (Tex. 2001) (finding expert testimony on fair market value incompetent when it
“fail[ed] to account for basic marketplace realities,” including “unexpected
competition,” “economic stagnation,” and “other risks.”).30
As Woods stated in his trial testimony, “the main purpose of [his]
supplemental report” was to address the reliability of the underlying financial
calculations, including specific elements regarding Miller’s background, events
relating to the case, and events arising subsequent to the misappropriation of
Bishop’s trade secrets that Woods determined made the financial projections
reasonable and reliable. Reunion does not mention Woods’s supplemental report
in its briefing nor discuss the substance contained therein.31 Although BHP
ultimately declined to participate in developing the project, it is not clear on this
record exactly why BHP made this decision. It may have had little to do with the
viability of the project. Ultimately, Miller convinced Reunion to invest and Bishop
did the same with Pinnacle. Reunion President Gordon Gray also testified
30
Woods stated in his report, “[a]s the use of the trade secrets was going to allow for
mining and sales of potash from a location that had not previously been able to profitably
produce potash, the value of the trade secret is the entirety of the value expected to be derived
from the Project.” Reunion contends that this language suggests Woods did not sufficiently
contemplate the risks.
31
Reunion asserts that “[b]ecause [Woods] relied on speculative pro forma projections of
profits . . . and [Bishop] did not present evidence of any of the University Computing factors . . .
the jury was left without any evidentiary basis for assessing damages.” However, as stated, the
point of Woods’s second report was to address the propriety of using the financial projections
that he did. Woods also expressly stated in the second report that the University Computing
factors guided his analysis. Reunion does not mention, much less analyze or critique, the
supplemental report, and the supplemental report renders Reunion’s challenges to the original
report moot.
29
optimistically regarding obtaining further funding. We do not find any merit in
Reunion’s legal sufficiency arguments regarding Woods’s expert testimony and
reports or, consequently, the sufficiency of the evidence on damages.32 Finding no
merit in any of Reunion’s appellate complaints, we overrule its sole issue.
III. Bishop & Pinnacle’s Appeal
Bishop raises two contentions in his appeal, asserting the trial court erred in
submitting (or failing to disregard) Question 22 on proportionate responsibility for
32
Reunion does not make any specific arguments based on the fact that while Woods
concluded reasonable royalty damages were $49 million, the jury only awarded $1,696,428.55
for such damages. Reunion’s argument is essentially that because Woods’s testimony and
reports were unreliable, there was no evidence to support an award of any reasonable royalty
damages. In other words, Reunion expressly seeks a reversal and render, not reversal and
remand. See ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 877-78 (Tex. 2010)
(remanding case when plaintiff proved entitlement to lost profit damages but trial court awarded
more than the evidence supported); Garza v. Cantu, No. 14-11-00724-CV, 2013 WL 2631573, at
*5, 7, 9 (Tex. App.—Houston [14th Dist.] June 11, 2013, no pet. h.) (reversing and remanding
for new trial when evidence demonstrated some damages were incurred but not the full amount
awarded by the jury).
Moreover, given the nature of calculating a reasonable royalty based on a hypothetical
negotiation, juries in reasonable royalty cases are entitled to a certain amount of flexibility in
making their determination. See, e.g., Unisplay, S.A. v. Amer. Elec. Sign Co., 69 F.3d 512, 517
(Fed. Cir. 1995) (stating reasonable royalty calculation is a question of fact that “necessarily
involves an element of approximation and uncertainty”); SmithKline Diagnostics, Inc. v. Helena
Labs. Corp., 926 F.2d 1161, 1168 (Fed. Cir. 1991) (explaining that factfinder was not restricted
to the specific figures proffered by the parties).
Here, the jury had input from competing expert witnesses to guide its analysis; the jury
may reasonably have believed some of Woods’s testimony regarding value but also may have
agreed with some of Schwabauer’s critique. See, e.g., CBS Outdoor, Inc. v. Potter, No. 01-11-
00650-CV, 2013 WL 269091, at *13 (Tex. App.—Houston [1st Dist.] Jan. 24, 2013, pet. denied)
(upholding jury’s damages award based on lost profits when award was below the amount
plaintiff’s expert testified to and opposing experts offered critiques of plaintiff’s experts
calculations and not their own calculations); Vela v. Wagner & Brown, Ltd., 203 S.W.3d 37, 50-
51 (Tex. App.—San Antonio 2006, no pet.) (explaining that jury was entitled to weigh
competing expert testimony regarding lost royalty damages and could reasonably have reduced
plaintiff’s expert’s projections based on challenges made by defendant’s expert). As one
example, Schwabauer strongly criticized Woods for using a 10 percent discount rate in
determining the present value of future potential profits; Schwabauer argued that a rate of 50-80
percent would be more reasonable. He further criticized Woods for not properly accounting for
the payment of taxes in his calculations, among other things.
30
misappropriation because it was (1) not supported by evidence and therefore
immaterial and (2) not predicated on a finding of independent conduct by Miller.
Question 22 was predicated on an affirmative finding for misappropriation by both
Miller and Reunion in response to Question 21. Question 22 further instructed the
jury, “For each person you found caused or contributed to cause the harm, find the
percentage of responsibility attributable to each[.]” The jury found Miller 80%
responsible and Reunion 20% responsible.
A. Evidence Supporting Proportionate Responsibility Question
Bishop first argues, in two issues, that Question 22 was immaterial because
(1) the evidence established that this was a case of “pure” vicarious liability
because there is no evidence Reunion acted in any way to misappropriate Bishop’s
secrets except through Miller’s conduct, and (2) there is no evidence that Miller
misappropriated trade secrets outside of his relationship with Reunion. Bishop
therefore asserts that the trial court should not have submitted the proportionate
responsibility issue to the jury. See Tex. Civ. Prac. & Rem. Code § 33.003(a)
(governing proportionate responsibility determinations), (b) (“This section does not
allow a submission to the jury of a question regarding conduct by any person
without sufficient evidence to support the submission.”); Rosell v. Cent. W. Motor
Stages, Inc., 89 S.W.3d 643, 657 (Tex. App.—Dallas 2002, pet. denied) (“[W]hile
the statute on its face requires all defendants to be included in the apportionment
question, it would not be proper for an employer to be included along with the
driver if its only responsibility was that of respondent superior.”). Alternatively,
Bishop contends the trial court should have disregarded the jury’s findings on the
issue. See Spencer v. Eagle Star Ins. Co. of Am., 876 S.W.2d 154, 157 (Tex. 1994)
(“A trial court may disregard a jury finding only if it is unsupported by evidence . .
. or if the issue is immaterial.”). We apply the usual standards of review governing
31
no evidence contentions. See City of Keller, 168 S.W.3d at 822, 827.33
Bishop first asserts that Reunion successfully sought directed verdict on
Bishop’s other tort claims against it by explaining that all of the conduct alleged
against Reunion was actually performed by Miller. However, even assuming
Reunion can only be held liable based on Miller’s actions on its behalf, this does
not necessarily mean the proportionate responsibility submission was in error.
There was at least some evidence in the record that Miller also misappropriated
Bishop’s trade secrets outside his capacity as an agent or vice principal of Reunion,
meaning there is evidence to support the trial court’s decisions to submit the
proportionate responsibility question and for the jury to apportion responsibility
between Miller and Reunion.
It is undisputed that before he became president of Reunion, Miller used at
least some of Bishop’s information in presentations to other shareholders of
Carnallite (which subsequently bought Reunion) as well as to BHP and others, to
try to obtain their investment in the project, and to Texas Community Bank in
order to obtain funding to purchase Reunion. Bishop maintains that the
information in these earlier presentations, sometimes entitled “Executive
Summary,” was not specific enough to have misappropriated his trade secrets.
According to Bishop, it was only in later PowerPoint presentations, which Miller
developed after Carnallite purchased Reunion, and in the Operating Plan submitted
to the BLM that Miller actually used enough of Bishop’s plan to constitute
misappropriation.
33
In his closing argument at trial, Bishop’s attorney urged the jury to find that Reunion
was 80 percent responsible for Bishop’s damages and Miller was only 20 percent responsible. In
doing so, he explained that Bishop was at times “wearing the hat of Carnallite,” but that
ultimately, Reunion had the information and the asset going forward.
32
The executive summaries, however, provided significant detail regarding
Bishop’s plan for mining potash, touting the novelty of the process and explaining
it was a selective solution mining technique borrowed from the natural gas industry
that utilized a counter-flow, recycling heat exchanger and crystallizer and provided
environmental benefits such as using less water and a smaller “footprint” than
those typically allowed by the BLM. Other communication Miller engaged in,
with BHP representatives, among others, prior to his association with Reunion also
provided details regarding Bishop’s plan and hinted that additional details had been
otherwise shared. As discussed in detail above, even once Carnallite purchased
Reunion and Miller became Reunion’s president, there was evidence Miller
continued to act on behalf of Carnallite and in his own interests as well. 34 For
example, the Carnallite Business Plan, which Miller admitted was essentially taken
wholly from Bishop’s plan, discusses how to develop and capitalize upon the
mining process Bishop developed. While this plan might not by itself constitute a
commercial use of Bishop’s trade secrets, it supports the conclusion that Miller
was not operating solely on behalf of Reunion when he used Bishop’s information.
Furthermore, in his communication with BHP, Miller identified himself as
working for Carnallite, and one of his proposals was for BHP to buy Carnallite
itself and not just Reunion. Altogether, this evidence supports the trial court’s
decision to submit the proportionate responsibility issue to the jury. Consequently,
we overrule Bishop’s first two issues.
34
“When the same individuals serve multiple entities as their officers, directors, or
employees, it may become necessary to determine the entity to which an individual’s conduct
should be attributed.” Restatement (Third) of Agency § 7.03 cmt. d(3). In its own appeal,
Reunion argues that all of Miller’s conduct was either on his own behalf or on behalf of
Carnallite and that none of it benefitted or can be ascribed to Reunion.
33
B. Not Predicated on Independent Conduct
In his third issue, Bishop complains that Question 22 on proportionate
responsibility should have been predicated on a finding of conduct by Miller
independent of his conduct on behalf of Reunion. More specifically, Bishop
contends the trial court should have disregarded the jury’s answer to Question 22
because Reunion failed to obtain a necessary predicate finding regarding Miller’s
conduct.
We begin by noting that Bishop did not object to the charge on the grounds
that it omitted a question on independent conduct or that the proportionate
responsibility question was not predicated on such a finding. Bishop objected to
Question 22 only on the ground that it should not have been submitted because
Reunion’s potential liability was only derivative of Miller’s liability as an
individual.35 Bishop suggests that this objection was sufficient to put Reunion and
the court on notice that a separate question on independent conduct was required.
Texas Rule of Civil Procedure 274, however, requires that “[a] party objecting to a
charge must point out distinctly the objectionable matter and the grounds of the
objection. Any complaint as to a question, definition, or instruction, on account of
any defect, omission, or fault in pleading, is waived unless specifically included in
the objections.” Tex. R. Civ. P. 274; see also Carousel’s Creamery, L.L.C. v.
Marble Slab Creamery, Inc., 134 S.W.3d 385, 404 (Tex. App.—Houston [1st
Dist.] 2004, pet. dism’d by agreement) (“An objection does not meet requirements
of Rule 274 unless the defect relied upon by the objecting party and the grounds of
the objection are stated specifically enough to support the conclusion that trial
35
We rejected this argument above in discussing Bishop’s first two issues. Basically,
even assuming all of Reunion’s liability is based on Miller’s conduct, the proportionate
responsibility question was still properly submitted because there was evidence that Miller
misappropriated trade secrets outside of his agency for Reunion.
34
court was fully cognizant of the ground of complaint and deliberately chose to
overrule it.”). Bishop’s objection neither mentioned the specific problem he
complains about on appeal (failure to condition the proportionate responsibility
question on an additional question regarding Miller’s independent conduct) nor
urged the solution he now claims was required (submission of a separate question
regarding Miller’s conduct). See Tex. R. App. P. 33.1(a) (providing that as a
prerequisite to presenting a complaint for appellate review, the complaint must be
made to the trial court by a timely request, objection, or motion that stated the
grounds for the ruling that the complaining party sought from the trial court with
sufficient specificity to make the trial court aware of the complaint).
Furthermore, Bishop does not offer any authority that supports his position
or offer an explanation as to why the charge as given was not sufficient under the
circumstances of this case. See id. 38.1(i) (requiring appellant’s brief “contain a
clear and concise argument for the contentions made, with appropriate citations to
authorities and to the record”).36 The jury was specifically instructed, in Question
21 on misappropriation, that Reunion would be responsible for Miller’s conduct
only to the extent that conduct was committed within the scope of his employment
or his actual authority as an agent. The fact that the jury found both parties
misappropriated trade secrets but Reunion was only 20% responsible strongly
suggests that the jury found at least some of Miller’s conduct was not within the
scope of his employment or agency. As discussed above, the evidence supports
36
Bishop cites Texas Rule of Civil Procedure 279 (relating to omitted elements of claims
or defenses) and DiGiuseppe v. Lawler, 69 S.W.3d 588, 598 (Tex. 2008) (discussing rule 279
and deemed elements), but neither of these authorities suggests that Question 22 on proportionate
responsibility should have been predicated on a finding of independent conduct by Miller.
Bishop further cites Powell Industries, Inc. v. Allen, 985 S.W.2d 455, 457 (Tex. 1998), for the
proposition that a plaintiff must obtain an additional finding in order to prove tortious
interference, which Bishop analogizes to the circumstances at hand, but Powell was a summary
judgment case which says nothing about what should be in a jury charge.
35
this finding. Bishop has not established that the trial court erred in submitting the
charge. Accordingly, we overrule Bishop’s third issue.
IV. Conclusion
Having overruled all of the issues raised in these consolidated cross-appeals,
we affirm the trial court’s judgment.
/s/ Martha Hill Jamison
Justice
Panel consists of Justices Christopher, Jamison, and McCally (Christopher, J.,
concurring).
36