LEE GABRIEL, JUSTICE.
Horizon Health Corporation (Horizon) moved for a rehearing of this panel's February 26, 2015 memorandum opinion and judgment. See Tex. R. App. P. 49.1. We grant the motion, withdraw our February 26, 2015 memorandum opinion and judgment, and substitute the following. We dismiss Horizon's motion for en banc reconsideration as moot. See Tex. Dep't of Public Safety v. Nail, 305 S.W.3d 673, 674 (Tex.App.-Austin 2010, no pet.) (op. on reh'g).
This appeal raises multiple questions involving a trial court's judgment based on the jury's answers to a 55-page charge. We are asked to review alleged jury-charge error, the sufficiency of the evidence to support the jury's findings, exemplary damages, attorneys' fees, and how preservation of error or lack thereof can affect our review of all of these issues. Because we conclude the evidence is legally insufficient to support future lost-profits damages and because exemplary damages may not be awarded jointly and severally under the facts of this case, we reverse those portions of the trial court's judgment. Because we also substantially reduce the exemplary-damages award based on the reduction of compensatory damages upon a suggestion of remittitur, we reverse the issue of attorneys' fees and remand that issue for a new trial. Otherwise, we will affirm the remainder of the trial court's judgment subject to our suggestion of a remittitur regarding exemplary damages.
Horizon Mental Health Management, Inc. was formed in 1981 to manage mental-health programs for healthcare entities such as hospitals. In 2007, Horizon Mental Health Management, Inc. became Horizon Health Corporation (Horizon) and was acquired by Psychiatric Solutions, Inc. (PSI). PSI's chief executive officer at the time was Joey Jacobs.
In early 2010, PSI considered going private and, thus, no longer being publicly traded. Several members of Horizon's executive-management team met shortly thereafter to discuss the possibility of buying Horizon from PSI. These team members,
Contrary to Jacobs's belief, however, PSI ultimately was acquired by Universal Health Services (UHS), a large, publicly-traded company. Project Shamrock then tried to negotiate buying Horizon from UHS. In late 2010, UHS rejected Project Shamrock's proposal and kept Horizon under UHS's ownership umbrella. The members of Project Shamrock remained employed by Horizon after UHS rejected their buy-out offer.
In May 2011, Saul approached Acadia Healthcare Company
In June 2011, Saul, Ulasewicz, Palus, and Bayma met to discuss their anticipated move to Acadia and "their plans for [the planned Acadia subsidiary]."
Based on these close-in-time resignations, Horizon conducted a forensic investigation of its computer system and discovered that all except Piechocki "had conferred with one another in reaching their individual decisions to leave, and in
It is undisputed that Saul, Palus, Ulasewicz, Bayma, and Piechocki (collectively, the individual defendants) accessed their work files and made copies of several Horizon documents before they left to work for PRP. In particular, Saul bought an external hard drive for his work computer in late 2010 and placed "a massive, massive amount" of Horizon documents on it such as policies and procedures, "non-standard" contract language, financial models, monthly account listings, sales presentations, orientation materials, and legal files. Basically, Saul copied onto his external hard drive "everything that was non-financial on [Horizon's] server."
Additionally, during a routine human-resources audit, it was discovered that Saul, Bayma, Palus, and Ulasewicz had signed employment agreements while employed at Horizon, mandating confidentiality and restricting solicitation and competition (collectively, the restrictive covenants). The agreements specifically mentioned the positions each had held at the time the agreements were signed, which were not the same positions each had held at the time of their resignations. The covenants not to compete barred the employees from seeking employment in or independently establishing "a psychiatric contract management company that is in direct competition with [Horizon]." They were further prohibited from soliciting "any employee of [Horizon]." The confidentiality covenants barred the employees from disclosing or using Horizon's trade secrets, confidential information, or proprietary information. Although the employees signed the agreements between 1997 and 2005, the agreements applied "for a period of one (1) year" after their respective employments with Horizon ended.
In September 2011, shortly after the individual defendants left their jobs with Horizon, Horizon notified Bayma, Jacobs, Palus, Piechocki, Saul, and Ulasewicz that their resignations and subsequent employments with Acadia were in violation of their employment agreements and the restrictive covenants entered into "at the inception of [their] employment" and of their common-law duties of good faith and loyalty.
Piechocki, using a list of Horizon sales leads he had copied before resigning, was able to secure a consulting contract for PRP with Southwest Regional Medical Center, which was an active Horizon lead noted on its list of sales leads. Although Piechocki marked some of the leads on the list "DEAD" before he resigned from Horizon, those leads were added to PRP's
After joining PRP, Ulasewicz set up a meeting with Cottage Hospital, which was a potential client he had met with while employed by Horizon. Ulasewicz previously had learned while still employed by Horizon that Cottage Hospital's impediment to using contract-management services such as those offered by Horizon and PRP possibly would be removed; however, Ulasewicz did not share this information with anyone at Horizon. PRP also began pursuing several of Horizon's existing clients after the individual defendants left Horizon.
In October 2011, Horizon filed suit against the individual defendants for breach of fiduciary duty; misappropriation of trade secrets; conversion; accessing proprietary information in violation of the Harmful Access by Computer Act; appropriating proprietary information in violation of the Theft Liability Act, i.e., theft of trade secrets; tortious interference with existing contracts; tortious interference with prospective business relationships; and conspiracy. Against Saul, Palus, Ulasewicz, and Bayma, Horizon additionally raised claims for breach of the restrictive covenants not to compete, fraud, and breach of contract. Horizon alleged Acadia and PRP were liable for all of these acts and omissions either because they were directly involved or under the doctrines of ratification and vicarious liability. Horizon alleged as a separate claim that Acadia and PRP "aided and abetted and provided substantial assistance" to the individual defendants "in breaching their fiduciary duties." Horizon sought exemplary damages, attorneys' fees, the imposition of a constructive trust, compensation forfeiture, and injunctive relief.
Horizon filed a traditional motion for partial summary judgment, mainly seeking a determination that the employment agreements were valid and enforceable under Texas law; that Saul, Palus, Ulasewicz, and Bayma had breached the restrictive covenants; and that Saul and Ulasewicz had breached the nonsolicitation provisions. See Tex. R. Civ. P. 166a(c). Acadia, PRP, and the individual defendants (collectively, the Acadia defendants) also moved for summary judgment, under both traditional and no-evidence standards, based on the absence of any genuine issues of material fact on each claim raised by Horizon and because the employment agreements were unenforceable as a matter of law. See Tex. R. Civ. P. 166a(c), (i).
The trial court granted Horizon a partial summary judgment and concluded that "the noncompetition agreements entered into by Horizon with ... Saul, Palus, Ulasewicz, and Bayma were valid and enforceable covenants not to compete under Texas law at the time of their respective terminations of Horizon employment, without modification." See Tex. Bus. & Com. Code Ann. § 15.51(c) (West 2011) (directing trial court to modify unreasonable limitations in otherwise enforceable covenant). The trial court denied the Acadia defendants' motion for summary judgment.
After a lengthy trial, the Acadia defendants orally moved for an instructed verdict on all of Horizon's claims and on Horizon's request for attorneys' fees because Horizon's evidence regarding attorneys' fees did not "apportion[] the fees between the causes of action on which attorney's fees are recoverable" or delineate what factors were considered to establish reasonableness. See Tex. R. Civ. P. 268. The trial court denied the motion. At the charge conference, the trial court determined that a spoliation instruction allowing the jury to draw an adverse inference against Saul based on his discovery abuse would be included in the charge.
On December 21, 2012, the jury rendered the following unanimous verdicts on Horizon's claims:
The jury awarded Horizon $898,000 in future lost profits from the Westlake contract based on Saul's, Palus's, Ulasewicz's, and Bayma's failures to comply with their covenants not to compete and $3,300,000 in future lost profits based on Saul's and Ulasewicz's failures to comply with their covenants not to solicit. The jury found that Horizon suffered no past lost profits based on these failures to comply. Regarding Horizon's claims for breach of fiduciary duty, intentional interference with the employment agreements, misappropriation of Horizon's trade secrets, conversion of proprietary information, intentional theft of trade secrets, knowing access of Horizon's computer system, and fraud, the jury awarded Horizon $6,003,049.24:
The jury also awarded Horizon $900,000 in attorneys' fees for representation costs incurred through the conclusion of trial. The jury declined to award any appellate attorneys' fees.
Saul, Palus, Ulasewicz, and Bayma filed a motion to reconsider the partial summary judgment granted in favor of Horizon, and Saul sought reconsideration of the pretrial sanctions order. Acadia and PRP filed a motion to disregard the jury's
Horizon filed a motion for entry of judgment on the verdict and a motion for judgment notwithstanding the verdict regarding the jury's finding on appellate attorneys' fees. See Tex. R. Civ. P. 301, 305. The individual defendants responded to Horizon's motion for entry of judgment, and Acadia and PRP incorporated the individual defendants' arguments in their response to Horizon's motion. Horizon filed an "omnibus" reply in support of its motion.
The trial court granted in part and denied in part Horizon's motion, awarding Horizon most of the damages awarded by the jury. The trial court denied the Acadia defendants' motion to disregard the jury's findings, their motion to reconsider the partial summary judgment granted in favor of Horizon, and Saul's motion to reconsider the sanctions. The trial court entered final judgment on July 1, 2013.
Horizon requested findings of fact and conclusions of law regarding, among other issues, the attorneys' fees awards in the judgment. See Tex. R. Civ. P. 296. The Acadia defendants filed a motion to modify, correct, or reform the judgment to "resolve [an] inconsistency in the final judgment ... [and] award actual past and future damages of $4,203,049.24." See Tex. R. Civ. P. 316, 329b. They also filed a motion for new trial, arguing that the jury's findings were supported by factually insufficient evidence.
On August 8, 2013, the trial court entered findings of fact and conclusions of law, clarifying that Horizon's submitted evidence on attorneys' fees "segregated 25% of its total fees ... and identified this 25% as fees that were not incurred in connection with a claim for which fees may be awarded." Therefore, the trial court "discounted" the requested attorneys' fees "by 25%." The motion for new trial and the motion to modify, correct, or reform the judgment were overruled by operation of law. See Tex. R. Civ. P. 329b(c). All parties filed notices of appeal from the
The Acadia defendants raise seven issues in their appeal challenging (1)the trial court's partial summary judgment and (2) the jury's findings and damages awards, mainly on the basis of insufficient evidentiary support. Horizon raises three issues in its appeal and argues that the trial court erred by reducing its attorneys' fees awards by 25% based on the admitted evidence establishing the full amount requested as a matter of law.
In their third issue, the Acadia defendants argue that the evidence is legally insufficient to support the jury's award of $4,198,000 for future lost-profits damages. The majority of the Acadia defendants' post-trial, post-judgment, and appellate arguments focused on this issue, but their appellate brief contains an accurate summary statement of their contention regarding lost-profits damages: "Texas law does not authorize a business to recover awards of significant damages for alleged future lost profits, when that business has lost no contracts or customers, and its only evidence of damages consists of statistics generated by an expert witness." For the following reasons, we sustain issue three.
The Acadia defendants assert that the opinion by Horizon's expert, Jeff D. Balcombe, relating to lost profits was unreliable, speculative, and conclusory; thus, it was no evidence of lost profits suffered by Horizon.
A party complaining about the reliability of expert testimony must object to the evidence before trial or when the evidence is offered to preserve a complaint on appeal that the evidence is unreliable.
In a legal-sufficiency review, we determine whether more than a scintilla of evidence supports the jury's finding by considering evidence favorable to the finding if a reasonable fact-finder could and disregarding evidence contrary to the finding unless a reasonable fact-finder could not. Cent. Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649, 651 (Tex.2007); Cont'l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex.1996).
Lost profits must be proven with reasonable certainty, and whether lost-profits evidence is reasonably certain is a fact-intensive inquiry. Phillips v. Carlton Energy Grp., LLC, ___ S.W.3d ___, ___, 58 Tex. Sup. Ct. J. 803, 2015 WL 2148951, at *9 (May 8, 2015); Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992); Fraud-Tech, Inc. v. Choicepoint, Inc., 102 S.W.3d 366, 381 (Tex.App.-Fort Worth 2003, pet. denied). We are to focus on the experience of the persons involved in the enterprise, the nature of the business activity, the relevant market, the nature of the client base, the sales force, the marketing plan, and the company's track record of sales. Carter v. Steverson & Co., 106 S.W.3d 161, 166 (Tex.App.-Houston [1st Dist.] 2003, pet. denied); Fraud-Tech, 102 S.W.3d at 381. The amount of loss need not be subject to exact calculation but need only be shown by competent evidence based on objective facts, figures, or data from which the amount may be ascertained with reasonable certainty. Hunter Bldgs. & Mfg., L.P. v. MBI Global, L.L.C., 436 S.W.3d 9, 17-18 (Tex.App.-Houston [14th Dist.] 2014, pet. filed). At a minimum, however, "opinions or estimates of lost profits must be based on objective facts, figures, or data from which the amount of lost profits can be ascertained." Heine, 835 S.W.2d at 84. A bare assertion that contracts were lost does not show lost profits with reasonable certainty. Id. at 85. "The law is wisely skeptical of claims of lost profits from untested ventures or in unpredictable circumstances, which in reality are little more than wishful thinking." Phillips, ___ S.W.3d at ___, 2015 WL 2148951, at *10.
As the Texas Supreme Court has instructed, we need not distinguish between
As previously stated, the jury based its lost-profit awards on two measures of recovery: (1) lost profits from the Westlake contract that Horizon, in reasonable probability, would sustain in the future and (2) lost profits from Piechocki's production that Horizon, in reasonable probability, would sustain in the future. For the first measure, the jury uniformly awarded $898,000 and for the second measure, the jury awarded $3,300,000. The first measure was tied to Saul's, Bayma's, Ulasewicz's, and Palus's failure to comply with the noncompetition covenants, breaches of fiduciary duties, intentional interference with the employment agreements, misappropriation of trade secrets, conversion of proprietary information, theft of trade secrets, knowing access of Horizon's computer system, and fraud. The second measure was tied to these same claims (with the exception of breach of the covenants not to compete) and Saul's and Ulasewicz's breaches of their covenants not to solicit. Balcombe testified as to both measures of lost-profit damages.
Balcombe testified as to the "lost production" damages Horizon suffered as a result of the individual defendants' wrongful actions. In doing so, he attempted to determine what would have happened but for the wrongful actions — as opposed to what actually happened
To determine the first consideration, Balcombe analyzed the average amount of time Horizon retained its higher-level employees and "conservatively elected to assume" that Piechocki would have stayed at Horizon two or four more years but for the alleged wrongful conduct. The four-year tenure was assumed because Piechocki presumably would have been promoted after two years and "senior vice presidents stayed longer." After reviewing e-mails and "deposition testimony," Balcombe concluded that Piechocki "sold more contracts, closed more deals" — 50% more than other Horizon salespeople. Thus, Balcombe opined regarding the second consideration that Piechocki would have sold six contracts in each year he stayed, up to four years, but for the wrongful conduct because other Horizon salespeople sold four contracts per year. He affirmed that he included reductions for "normal business losses that would have occurred." Balcombe's third consideration involved a compilation of "data over the period from 2001 through 2011 or '12 regarding the profit per contract ... to see if there were trends and how to use the data that [was]
Balcombe also testified as to the lost profits attributable to the Westlake contract. He reviewed PRP's contract with Westlake "along with other financial documents about that contract." He concluded that the "lost profit or cumulative economic damages" arising from the Westlake contract was $668,220 after five years, $871,500 after ten years, and $898,200 after fifteen years. Balcombe knew that Westlake was not a customer of Horizon but believed Westlake was a lead of Horizon's after the individual defendants left Horizon. In fact, he admitted that his assumption that Westlake was a Horizon lead "might be guessing."
Balcombe's calculations, estimates, "statistical analysis," and "work papers" supporting his conclusions were not admitted into evidence and were merely demonstrative aids. Because this information was not admitted into evidence, some of Balcombe's explanations for his conclusions are difficult to decipher on appeal. For example, Balcombe explained how he calculated the per-year profit of a representative contract by referring to the demonstrative aid he prepared:
An expert's opinion is not reliable if "there is simply too great an analytical gap between the data and the opinion proffered." Gammill v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 726 (Tex. 1998). Further, an expert's opinion is not reliable if the foundational data is unreliable or if the expert draws conclusions from sound data based on flawed methodology. Havner, 953 S.W.2d at 714. "In sum, case law shows expert testimony on lost profits damages cannot be reliable, and therefore is not admissible, if the expert bases his opinion and calculations on nothing more than assumptions, hearsay, speculation, and his credentials." Jeff Patterson & Giovanna Tarantino, Is the Bar Really Lower for Nonscientific Expert Testimony?, 33 The Advoc. (Tex.) 65, 67 (2005). See generally Robert M. Lloyd, The Reasonable Certainty Requirement in Lost Profits Litigation: What it Really Means, 12 Transactions: Tenn. J. Bus. L. 11, 17-28 (2010) (collecting cases and discussing factors courts consider in determining reasonable certainty, including the court's confidence that the estimate is accurate).
We conclude that Balcombe's opinion was too speculative based on an analytical gap between the data and his opinion; thus, it was no evidence of lost profits suffered by Horizon. The calculations and estimates Balcombe relied on in reaching his lost-profits conclusion were based on nothing more than speculation that (1) Piechocki, an at-will employee, would have stayed employed by Horizon, been offered a senior vice-president position,
Because we have concluded the evidence was legally insufficient to support the jury's lost-profits findings under any liability theory, we need not address the Acadia defendants' issues attacking the sufficiency of the evidence supporting those liability findings or the manner in which those liability theories were submitted in the jury charge.
In part of issue four, the Acadia defendants assert that the evidence was legally
We may sustain a legal sufficiency challenge only when (1)the record discloses a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of a vital fact. Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex.1998), cert. denied, 526 U.S. 1040, 119 S.Ct. 1336, 143 L.Ed.2d 500 (1999). Anything more than a scintilla of evidence is legally sufficient to support the finding. Cont'l Coffee, 937 S.W.2d at 450. More than a scintilla of evidence exists if the evidence, even if circumstantial, furnishes some reasonable basis for differing conclusions by reasonable minds about the existence of a vital fact. Rocor Int'l, Inc. v. Nat'l Union Fire Ins. Co., 77 S.W.3d 253, 262 (Tex.2002); Russell v. Russell, 865 S.W.2d 929, 933 (Tex.1993).
The Acadia defendants attempt to challenge the jury's findings that the individual defendants intentionally committed theft of Horizon's property or trade secrets.
The Acadia defendants next attempt to challenge the jury's findings that Saul, Palus, Ulasewicz, and Bayma committed fraud and fraud by nondisclosure and the jury's attendant damages findings regarding Palus, Ulasewicz, and Bayma. The entirety of their argument focuses on the record facts surrounding these findings:
Although we are unsure what the Acadia defendants specifically are attacking, if they are challenging the sufficiency of the evidence to support each of these findings, the above-quoted statement is insufficient to appropriately raise such an evidentiary argument. See, e.g., McCullough v. Scarbrough, Medlin & Assocs., Inc., 435 S.W.3d 871, 912 (Tex.App.-Dallas 2014, pet. denied). We overrule this portion of issue four.
The Acadia defendants argue as part of their fifth issue that the evidence was legally insufficient to support the jury's malice finding against the individual defendants because there was no evidence that the individual defendants specifically intended to cause a substantial injury that would support exemplary damages.
In their reply brief, the Acadia defendants expound on their legal-insufficiency argument raised in their opening brief:
The Acadia defendants did not include any record references or citations to legal authorities to support these factual statements and legal precepts.
In any event, exemplary damages may be awarded if Horizon produced clear and convincing evidence that its harm resulted from the individual defendants' fraud or malice. See Tex. Civ. Prac. & Rem. Code Ann. § 41.003(a)-(b) (West 2015). Clear and convincing evidence is "the measure or degree of proof that will produce in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established." Id. § 41.001(2) (West 2015). As the jury was charged, malice is "a specific intent by the defendant to cause substantial injury or harm to the claimant." Id. § 41.002(7) (West 2015). In their opening brief, the Acadia defendants focus solely on the sufficiency of the evidence to show malice and do not sufficiently address fraud.
In reviewing the legal sufficiency of the evidence to support an actual malice finding, which must be proven by clear and convincing evidence, we must consider all the evidence in the light most favorable to the finding to determine whether a reasonable trier of fact could have formed a firm belief or conviction that the defendant acted with actual malice. Romero v. KPH Consol., Inc., 166 S.W.3d 212, 220-21 (Tex.2005); Sw. Bell Tel. Co. v. Garza, 164 S.W.3d 607, 609, 627 (Tex.2004). Malice may be shown through direct or circumstantial evidence. See Soon Phat, L.P. v. Alvarado, 396 S.W.3d 78, 110 (Tex.App.-Houston [14th Dist.] 2013, pet. denied).
We conclude that the evidence was legally sufficient to support the jury's finding that the individual defendants acted with malice. Each of the individual defendants were highly-placed employees at Horizon. Part of the business plan that Saul presented to Acadia regarding the idea of forming an Acadia subsidiary recognized that Horizon's customers would have to be targeted. Saul cautioned Acadia's president, Turner, that any attempt to "orchestrate a management team `lift-out'" while the individual defendants were employed by Horizon carried "risk," specifically a "claim [of] tortious interference." One e-mail from Ulasewicz to Saul, which was sent while both were employed by Horizon and three days before Saul made his presentation to Acadia, was particularly damning:
Once Acadia decided to proceed with Saul's plan, Saul forwarded Ulasewicz's, Palus's, and Bayma's resumes to Turner. Bayma questioned Saul extensively about the benefits she would receive as an Acadia executive. Bayma further recommended "bring[ing] more technology" to Acadia clients than that provided by Horizon and "integrating clinical policies, systems with the Acadia hospitals." Saul told Turner that Acadia should "go hard" after Piechocki, which would "put a real hurt on the competition." Ulasewicz and Saul discussed how to convince Horizon customers to use PRP's services. Saul requested an external hard drive for his Horizon computer, which Horizon paid for, and downloaded "everything that was non-financial on [Horizon's] server." He instructed his secretary to disable any encryption on the computer and to not re-enable it. Saul also e-mailed many Horizon confidential documents to himself before resigning.
Before leaving Horizon, Saul, Ulasewicz, Bayma, and Palus met away from Horizon offices to discuss their plans for the subsidiary. Palus, Ulasewicz, and Bayma sought and received reimbursement from Horizon for the costs of this trip. Saul cautioned the group to keep their "plans discrete [sic]" and described their planned, orchestrated resignations. In addition, Saul checked out the individual defendants' personnel files in April 2011, shortly before his presentation to Acadia, and kept them until August 15, 2011, shortly before he resigned.
Before resigning to work for PRP, Piechocki e-mailed many Horizon documents to his personal e-mail address, including Horizon's lead list. Piechocki and Ulasewicz later used this list to create a lead list for PRP. Ulasewicz told Saul, Palus, Piechocki, and Bayma that the disclosure of the newly-formed PRP lead list "or any related strategy" would "be viewed as an act of treason against the group." Piechocki later used Horizon's confidential contract form and merely substituted "PRP" everywhere it provided "Horizon." While he was still employed by Horizon, Ulasewicz found out that a potential Horizon client, which previously had been unable to contract with Horizon, had determined it could use Horizon's services. Ulasewicz told no one at Horizon and contacted the company after he joined PRP.
This legally sufficient evidence supports the jury's finding of malice by the individual defendants. See, e.g., Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867, 883-84 (5th Cir.2013); Nova Consulting Grp., Inc. v. Eng'g Consulting Servs., Ltd., 290 Fed. Appx. 727, 740-41 (5th Cir.2008); Lundy v. Masson, 260 S.W.3d 482, 496-97 (Tex. App.-Houston [14th Dist.] 2008, pet. denied). We overrule this portion of issue five.
Although not raised by the Acadia defendants on appeal,
Although exemplary damages are imposed to punish a defendant, they may not be grossly disproportionate to the gravity of the defendant's conduct. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 426, 123 S.Ct. 1513, 1524, 155 L.Ed.2d 585 (2003). In determining whether the jury's award is grossly excessive or disproportionate we consider (1) the degree of reprehensibility of the defendant's misconduct, (2) the disparity between the actual or potential harm suffered by the plaintiff and the exemplary-damages award, and (3) the difference between the exemplary damages awarded by the jury and the penalties authorized or imposed in comparable cases. Id. at 418, 123 S.Ct. at 1520.
The most important of the three considerations is the degree of reprehensibility of the defendant's conduct. Id. at 419, 123 S.Ct. at 1521. Reprehensibility, in turn, considers whether the harm caused was physical as opposed to economic, the tortious conduct evinced a reckless disregard of the health or safety of others, the target of the conduct had financial vulnerability, the conduct involved repeated actions or was an isolated incident, and the harm was the result of intentional malice, trickery, deceit, or mere accident. Id. Here, there was no physical injury to Horizon, Horizon did not allege that the individual defendants exhibited reckless disregard for others' health or safety, and Horizon was not financially vulnerable. However, the individual defendants' conduct was repeated and intentional. See Bennett v. Reynolds, 315 S.W.3d 867, 874-75 (Tex.2010) (considering surrounding circumstances beyond the underlying tort in determining reprehensibility). The disparity between the exemplary damages and the compensatory damages after our reduction of Horizon's compensatory damages is a more than thirty-to-one ratio. Finally, the criminal penalties authorized for theft of trade secrets are imprisonment for two to ten years and a maximum
Few awards that exceed a single-digit ratio will satisfy due process, and the Supreme Court has suggested that a four-to-one ratio perhaps is the limit of what the constitution will allow. Campbell, 538 U.S. at 425, 123 S.Ct. at 1524. The Texas Supreme Court has concluded that a 4.33-to-1 ratio violated due process when only one of the reprehensibility factors was present. See Tony Gullo, 212 S.W.3d at 308-10; see also Bennett, 315 S.W.3d at 878-80 (analyzing Tony Gullo's disapproval of 4.33-to-1 ratio and concluding absence of particularly egregious act negated requested upward departure from 4-to-1 ratio). While the individual defendants' conduct may be categorized as repeated and intentional, the degree of its reprehensibility is mitigated by the economic nature of the harm to Horizon, the lack of any reckless disregard for the health or safety of others, and Horizon's financial status. Finally, the maximum criminal fine for theft of trade secrets is $10,000. We conclude that the jury's award of exemplary damages, given the lack of legally sufficient evidence of lost profits, was excessive and unconstitutional.
The remedy for excessive punitive damages is to suggest a remittitur, if possible, or remand for a new trial. Guevara v. Ferrer, 247 S.W.3d 662, 670 (Tex. 2007). We initially ordered a remittitur amount that reflected the exemplary-damages total to be in proportion to the awarded actual damages — the total amount of exemplary damages against the individual defendants added together could not exceed the constitutional ratio to actual damages. On rehearing, Horizon argues that the proportion of actual damages to exemplary damages is measured on a per-defendant basis. The law on this point is far from clear, but we believe Horizon has the more reasoned argument and conclude that the exemplary damages against each individual defendant should be compared to and proportionate to the amount of actual damages awarded by the jury. See Carlton Energy Grp., LLC v. Phillips, 369 S.W.3d 433, 459-61 (Tex.App.-Houston [1st Dist.] 2012) (considering exemplary-damage amounts on a per-defendant basis in concluding that ratio of actual damages to exemplary damages was not constitutionally excessive), aff'd in part & rev'd in part on other grounds, ___ S.W.3d ___, 2015 WL 2148951; Huynh v. Phung, No. 01-04-00267-CV, 2007 WL 495023, at *13-14 (Tex.App.-Houston [1st Dist.] Feb. 16, 2007, no pet.) (mem.op.) (comparing each exemplary-damage award against each defendant in determining ratio to compensatory damages and excessiveness); cf. Rose v. Doctors Hosp., 801 S.W.2d 841, 846 (Tex.1990) (op. on reh'g) (calculating wrongful-death damages governed by statutory cap on a per-defendant basis); Seminole Pipeline Co. v. Broad Leaf Partners, Inc., 979 S.W.2d 730, 751 (Tex.App.-Houston [14th Dist.] 1998, no pet.) (applying exemplary-damage cap in current section 41.008 on a per-defendant basis); 28 Tex. Jur.3d Damages § 350 (2015) ("Furthermore, the statutory cap [on exemplary damages in section 41.008] is applied on a per-defendant basis, not to the entire award of exemplary damages."). But see Planned Parenthood of Columbia/Willamette Inc. v. Am. Coalition of Life Activists, 422 F.3d 949, 963-64 (9th Cir.2005) ("We shall remit to a sum for each plaintiff that is nine times that plaintiff's compensatory recovery, and we shall allocate that amount of punitive damages among defendants in the same proportion as the jury did in its verdicts."), cert. denied, 547 U.S. 1111, 126 S.Ct. 1912, 164 L.Ed.2d 664 (2006); Cass v. Stephens, 156 S.W.3d 38, 77 (Tex.App.-El Paso 2004, pets. denied) (op. on remand) ("The jury assessed compensatory
Here, we believe four times the $55,049.24 in actual damages awarded — $220,196.96 — would render the punitive damages against each individual defendant appropriately proportional to the gravity of their conduct and the actual damages awarded and, thus, constitutional. Therefore, we suggest a remittitur in an amount that would cause $220,196.96 in exemplary damages to be assessed against each individual defendant.
As part of their fifth issue, the Acadia defendants assert that question 23 — inquiring as to the appropriate amount of exemplary damages to be awarded to Horizon — was fatally defective and improperly submitted.
Horizon argues that the Acadia defendants waived this argument because they did not object to question 23 at trial on the basis that the question failed to segregate between theories of liability. At trial, the Acadia defendants objected to question 23 because "there [was] not a separate question for each Defendant. It is a Casteel problem." Now on appeal, the Acadia defendants argue that each legal theory should have been submitted in a separate question. By referencing "Casteel," the Acadia defendants were necessarily raising the issue that the question erroneously comingled valid and invalid liability
The jury was asked in question 23 "[w]hat sum of money, if any, if paid now in cash, should be assessed against Saul, Palus, Ulasewicz, Bayma, and Piechocki and awarded to Horizon as exemplary damages, if any, for the conduct found in Question No. 21 [malice by the individual defendants] or Question No. 22 [Saul's, Palus's, Ulasewicz's, and Bayma's fraud]." Broad-form questions are the preferred method of submitting issues to the jury. See Tex. R. Civ. P. 277. But a broad-form question cannot be used to "put before the jury issues that have no basis in the law or the evidence." Romero, 166 S.W.3d at 215. Here, there was evidence to support the submission of both fraud and malice as a basis for exemplary damages — neither was an invalid theory of recovery. Cf. Morrison, 381 S.W.3d at 537 (holding broad-form liability question harmful because included whether employer took adverse employment action against employee because employee's claim she was denied promotion was an invalid theory given that she had not included claim in her EEOC complaint). Because there is a presumption in favor of broad-form submissions and because question 23 did not put an invalid theory before the jury, we conclude that the trial court did not abuse its discretion in submitting both malice and fraud as theories of liability supporting exemplary damages. See Cimarron Country Prop. Owners Ass'n v. Keen, 117 S.W.3d 509, 511 (Tex.App.-Beaumont 2003, no pet.).
The Acadia defendants also attack the question that asked whether Horizon's harm was attributable to any malice by Acadia or PRP — question 24 — because it did not allow this court to specify "what conduct the jury determined was the basis for a finding of malice" and because the question did "not allow the Court to determine that the same twelve jurors found the malice resulted from the conduct or ratification of the same individual defendants." At trial, the Acadia defendants objected to question 24 because it (1) improperly allowed a ratification or approval finding through a vice-principal with no evidence that any individual defendant was a corporate officer and (2) failed to "differentiate between the dates of occurrence for the various causes of action." The Acadia defendants' appellate arguments are substantively different from the objections raised to the trial court, and they failed to submit a substantially correct question resolving their appellate arguments. Thus, the Acadia defendants' arguments directed to question 24 were not preserved for our review.
We overrule these portions of issue five.
The Acadia defendants argue that the trial court's judgment awarding exemplary damages against Acadia and PRP jointly and severally was in error.
In actions against multiple defendants, "an award of exemplary damages must be specific as to a defendant, and each defendant is liable only for the amount of the award made against that defendant." Tex. Civ. Prac. & Rem. Code Ann. § 41.006 (West 2015). Thus, the Acadia defendants assert that the lack of a specific amount of exemplary damages awarded against Acadia and PRP by the jury renders the joint and several exemplary-damage award improper under section 41.006.
In question 24, the jury found that the harm arising from the individual defendants' theft of trade secrets "resulted from malice attributable to" Acadia and PRP. The jury previously concluded that the individual defendants were acting in the course and scope of their employment with Acadia or PRP when they stole Horizon's property or trade-secret information and that Acadia and PRP ratified this conduct. But contrary to Horizon's contention, these findings do not allow a joint and several award of exemplary damages. See Computek Computer & Office Supplies, Inc. v. Walton, 156 S.W.3d 217, 223-24 (Tex.App.-Dallas 2005, no pet.); 2 John J. Kircher et al., Punitive Damages: Law & Prac. § 16:2 (2d ed.2015). Thus, the trial
Although we agree that the joint-and-several nature of the award against Acadia and PRP was error as a matter of law, the remedy for such error is not as clear. Two appellate courts have remanded the issue to the trial court for a determination of the amount of exemplary damages to be awarded against each individual defendant. Andress v. Meah Invs. No. 2, Ltd., No. 01-07-00792-CV, 2009 WL 2882930, at *9-10 (Tex.App.-Houston [1st Dist.] Sept. 10, 2009, no pet.) (mem.op.); Computek, 156 S.W.3d at 224. However, both appeals were from bench trials, and the trial courts solely awarded exemplary damages jointly and severally, i.e., there were no individual awards of exemplary damages. Here however, Horizon proposed the jury questions regarding exemplary damages and specifically requested that the jury be asked to assign a specific dollar amount against each individual defendant but did not ask for a specific dollar amount against either Acadia or PRP. Because the jury charge, at Horizon's request, specifically asked for dollar amounts for exemplary damages to be awarded only against each individual defendant, we need not remand to the trial court "to determine whether to award exemplary damages as to any specific defendant." Computek, 156 S.W.3d at 224; see O'Hare, 455 Fed.Appx. at 382-83 (refusing to reverse joint award of exemplary damages because proposed jury question invited the joint assessment). The error in the form of the exemplary-damages award is its joint and several nature, not that it wholly failed to award exemplary damages against any defendant individually; thus, we are able to render an award that is not joint and several and appropriately awards amounts only against individual parties as the jury was charged and as allowed by section 41.006. See Tex. R. App. P. 43.3.
In their sixth issue, the Acadia defendants assert that Horizon is not entitled to recover attorneys' fees on its claims, Horizon failed to segregate its trial attorneys' fees, the evidence was insufficient to support the trial attorneys' fees, and the trial court erred by awarding appellate attorneys' fees after the jury found no appellate attorneys' fees were recoverable by Horizon. In its appeal, Horizon asserts in three issues that the trial court improperly reduced their trial and appellate attorneys' fees.
At trial, Horizon's trial counsel, Victor Vital, testified as to the amount, reasonableness, and necessity of Horizon's attorneys' fees and costs incurred through trial. The Acadia defendants objected to Vital's testimony regarding attorneys' fees, including the amount and the segregation percentage, because Horizon had not timely disclosed these details before trial. The trial court overruled this objection. Vital then testified that Horizon had incurred $875,789.50 in attorneys' fees and $156,291.18 in expenses "up to [the] date of trial." Vital opined that Horizon would incur between $100,000 and $150,000 in additional attorneys' fees and expenses through the conclusion of the trial. He testified that he excluded 25% of the attorneys' fees Horizon incurred because that percentage related to claims that did not support the award of attorneys' fees. To reach 25%, Vital reviewed the billing records and tried to determine which of the billing entries applied to each claim, some of which were "inextricably covered." See generally Tony Gullo, 212 S.W.3d at 313 (holding attorneys' fees are not necessarily
After all parties closed, the Acadia defendants orally moved for an instructed verdict "on attorney's fees" based on the failure to segregate and on the absence of evidence regarding reasonableness. The trial court denied the motion. During closing jury arguments, Vital stated without objection that the total amount of trial attorneys' fees Horizon requested — $904,342.12
The jury charge inquired as to attorneys' fees: "What is a reasonable fee for the necessary services of Horizon's attorney, stated in dollars and cents?" The question then specifically asked for a dollar amount for each phase of the case from trial through "the completion of proceedings in the Supreme Court of Texas." The Acadia defendants did not object to the submission of the attorney-fees question in the charge on the basis of nonsegregation. The jury awarded Horizon $900,000 "for representation in the trial court" but awarded no damages for appellate attorneys' fees.
Horizon filed a motion for entry of judgment on the jury's findings, requesting an award of $900,000 in trial attorneys' fees, and a motion to disregard the jury's finding on the issue of appellate attorneys' fees based on Vital's uncontradicted testimony. In the Acadia defendants' motions to disregard the jury's findings, they asserted that Vital's segregation testimony was conclusory and, thus, was insufficient to show appropriate segregation. The Acadia defendants alternatively argued that the award of trial attorneys' fees should be "$656,842.12 ($875,789.50 × 25%), not the $900,000 requested." The trial court entered final judgment awarding Horizon $769,342
The Acadia defendants summarily challenged the awarded attorneys' fees in their motion for new trial.
The Acadia defendants first contend in their sixth issue that Horizon cannot recover attorneys' fees on its breach-of-contract claims because the authorizing statute relied on by Horizon in seeking attorneys' fees — section 38.001 of the civil practice and remedies code — is preempted by the more specific Covenants Not to Compete Act. Compare Tex. Bus. & Com. Code Ann. §§ 15.51-.52 (West 2011), with Tex. Civ. Prac. & Rem. Code Ann. § 38.001 (West 2015).
We have concluded that the jury's damage awards for breach of contract were supported by legally insufficient evidence of future lost profits; therefore, section 38.001(8) cannot support Horizon's recovery of attorneys' fees. See Mustang Pipeline, 134 S.W.3d at 201 (holding plaintiff may recover attorneys' fees only if plaintiff prevailed on cause of action authorizing such fees and recovered damages). However, Horizon recovered under the Texas Theft Liability Act based on the jury's findings that the individual defendants intentionally stole Horizon's property or trade secrets as prohibited by penal code section 31.05 during the course and scope of their employment with Horizon, which Acadia and PRP ratified. See Act of May 26, 1999, 76th Leg., R.S., ch. 858, § 4, 1999 Tex. Gen. Laws 3537, 3539 (amended 2013 to remove section 31.05 from purview of Theft Liability Act upon adoption of Uniform Trade Secrets Act) (current version at Tex. Civ. Prac. & Rem. Code Ann. § 134.002(2) (West Supp.2014)). The Theft Liability Act provides for the recovery of attorneys' fees. Tex. Civ. Prac. & Rem. Code Ann. § 134.005(b) (West 2011). The Acadia defendants do not assert that Horizon could not recover attorneys' fees under the Theft Liability Act. Accordingly, Horizon was entitled to recover its attorneys' fees. We overrule this portion of the Acadia defendants' sixth issue.
The Acadia defendants argue in the remaining portion of their sixth issue that the trial and appellate attorney-fees awards were erroneous for multiple reasons. Similarly, Horizon asserts in the three issues of their cross appeal that their attorney-fees awards were improperly reduced. Because we have reduced Horizon's compensatory damages based on insufficient evidence of lost profits and concomitantly reduced the awarded exemplary damages upon a suggestion of remittitur, we need not consider these arguments. The correct remedy in such a situation is to reverse the trial court's award and remand for a new trial on the issue of attorneys' fees. See Barker v. Eckman, 213 S.W.3d 306, 313-15 (Tex. 2006); see also Bossier Chrysler-Dodge II, Inc. v. Rauschenberg, 238 S.W.3d 376, 376 (Tex.2007): Young v. Qualls, 223 S.W.3d 312, 314-15 (Tex.2007).
In their seventh issue, the Acadia defendants argue that the trial court abused its discretion by ordering Saul to pay sanctions for pretrial discovery abuse.
The Acadia defendants argue that the sanctions order was based on Saul's breach of fiduciary duty as alleged by Horizon; thus, the failure of that theory of recovery on appeal (as also urged by the Acadia defendants in their appeal) results in "the same relief on the issue of discovery sanctions." But the trial court's sanctions against Saul were based on the breach of his duty as a party to preserve relevant evidence after Horizon filed suit against Acadia, PRP, and the individual defendants. See Trevino v. Ortega, 969 S.W.2d 950, 954-57 (Tex.1998). The sanctions were not related to Horizon's ultimate success on its claim for breach of fiduciary duty against Saul. We overrule Horizon's seventh issue.
The Acadia defendants seek leave to file a postsubmission brief to provide "additional record references, case authority, and analysis relevant to ... three questions" posed by the panel at oral argument. Oral argument in this appeal was heard on November 4, 2014; however, the panel did not request postsubmission briefing. The Acadia defendants filed their motion for leave to file their postsubmission brief on December 1, 2014, which Horizon opposes. See 2d Tex.App. (Fort Worth) Loc. R. 1.C.
In their postsubmission brief, the Acadia defendants raise new issues and provide new record references and cases to support their previously-briefed arguments. Although some of the Acadia defendants' assertions in the postsubmission brief are in response to the panel members' questions at oral argument, their postsubmission brief goes beyond merely answering those questions and strays into the impermissible territory of adding new issues to its appeal and shoring up issues that they did not brief as fully as they might have preferred. Further, the Acadia defendants already have filed approximately 125 pages of briefing — 29,942 words — in this appeal. We recognize this is a complicated appeal but briefing must end at some point. This end point may certainly be set at oral argument. For these reasons, we deny the Acadia defendants' motion for leave and did not consider their postsubmission brief in our determination of this appeal. See Black v. Shor, 443 S.W.3d 154, 161 n. 2 (Tex.App.-Corpus Christi 2013, pet. denied); see also Tex. R. App. P. 38.7; Standard Fruit & Vegetable Co. v. Johnson, 985 S.W.2d 62, 65 (Tex.1998).
We conclude that the evidence of future lost profits was legally insufficient and the judgment for those amounts must be vacated. Although the evidence of theft of trade secrets, fraud, and fraud by nondisclosure was sufficient to support the actual damages tied to those claims, the exemplary-damage award was excessive in light of the vacatur of the lost-profit damages. Therefore, we reverse in part the judgment of the trial court awarding Horizon future lost-profit damages and render a take-nothing judgment on Horizon's claims upon which the jury awarded damages for future lost profits. We reverse that portion of the trial court's judgment awarding exemplary damages jointly and severally against Acadia and PRP and render judgment that the exemplary damages are not awarded jointly and severally against Acadia and PRP. We also reverse the trial court's judgment regarding attorneys' fees and remand for a new trial on attorneys' fees. See Tex. R. App. P. 43.2(a), (c), (d), 43.3.
Horizon prevailed and was awarded damages that were supported by sufficient evidence. Soon Phat, 396 S.W.3d at 95 (recognizing remand for new trial cannot be had solely on issue of exemplary damages).