DaimlerChrysler Motors Company, LLC v. Tommy J. Manuel, Tommy Manuel Auto Leasing, Inc., and Manuel Auto Sales, Ltd.

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH

NO. 02-07-00299-CV

DAIMLERCHRYSLER MOTORS APPELLANT
COMPANY, LLC AND APPELLEE

V.

TOMMY J. MANUEL, TOMMY APPELLEES
MANUEL AUTO LEASING, INC., AND APPELLANTS
AND MANUEL AUTO SALES, LTD.

----------

FROM THE 141ST DISTRICT COURT OF TARRANT COUNTY

----------

OPINION

----------

I. INTRODUCTION

Following a bench trial in this breach of contract case, the trial court

rendered judgment for damages against Appellant and Cross-Appellee

DaimlerChrysler Motors Company, LLC (Chrysler) and in favor of Appellees and

Cross-Appellants Tommy J. Manuel, Tommy Manuel Auto Leasing, Inc., and

Manuel Auto Sales, Ltd. (collectively, Manuel) but denied recovery of Manuel‘s
attorney‘s fees.1 In four issues, Chrysler contends (1) that the best efforts

provision in its contract with Manuel is unenforceable or that Chrysler

conclusively proved that it complied with the best efforts provision by ultimately

settling a protest by a competing dealer of Manuel‘s application for a new

dealership, (2) that Manuel‘s damages from delay in opening the new dealership

are consequential damages barred by limitation-of-damages provisions in the

parties‘ contracts, (3) that the trial court abused its discretion by admitting

unreliable expert testimony regarding damages for lost profits, and (4) that the

trial court erred in calculating prejudgment interest. In his cross-appeal, Manuel

contends that the trial court erred by failing to award him any trial and appellate

attorney‘s fees. We affirm in part and reverse and remand in part.

II. BACKGROUND2

Chrysler manufactures Chrysler, Dodge, Dodge Truck, and Jeep motor

vehicles. Tommy Manuel has been a franchised automobile dealer in the Dallas-

1
Tommy J. Manuel; Tommy Manuel Chrysler-Jeep, Inc.; and Manuel
Dodge, Ltd. were plaintiffs in the trial court. During the pendency of this appeal,
Tommy Manuel Chrysler-Jeep, Inc. changed its name to Tommy Manuel Auto
Leasing, Inc., and Manuel Dodge, Ltd. changed its name to Manuel Auto Sales,
Ltd.
2
The trial court made extensive findings of fact—twenty-nine pages‘ worth.
Findings of fact that are unchallenged are binding on an appellate court unless
the contrary is established as a matter of law or there is no evidence to support
the finding. McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986); Raman
Chandler Props., L.C. v. Caldwell’s Creek Homeowners Ass’n, Inc., 178 S.W.3d
384, 390 (Tex. App.—Fort Worth 2005, pet. denied). We draw the bulk of the
facts recited below from the trial court‘s unchallenged findings, which from our
review of the record are supported by sufficient evidence.

2
Fort Worth area for forty-seven years, including twenty-five years as a franchised

Chrysler and Dodge dealer in Fort Worth and Richardson. At the time of trial,

Tommy Manuel owned or controlled at least nine motor vehicle dealerships in the

Dallas-Fort Worth market.

A. Historical Backdrop

In the mid-1990s, as number three of the ―Big Three‖ in that day, Chrysler

developed a market realignment plan called ―Project 2000‖ to reorganize,

relocate, and establish more motor vehicle dealerships to improve sales in the

Dallas-Fort Worth area and to better compete with its rivals, Ford and General

Motors. As an essential part of Project 2000, Chrysler sought to have its various

Dallas-Fort Worth franchised dealers agree to waive their rights to protest the

establishment or relocation of other dealerships in the Dallas-Fort Worth area.

Texas and other states closely regulate the distribution and sale of

automobiles. In response to the superiority of economic power and bargaining

strength of American automobile manufacturers in their relationships with dealers

that had developed by the 1950s, with dealers completely dependent upon those

manufacturers for their supply of automobiles, Congress3 and state legislatures

enacted regulatory schemes to protect retail dealers from perceived abusive and

3
See Automobile Dealers‘ Day in Court Act, 15 U.S.C. §§ 1221–1225
(1956).

3
oppressive acts by the manufacturers.4 In accord with the policy of protecting

dealers and consumers, the United States Supreme Court upheld the

constitutionality of a California statute that prohibited manufacturers from

relocating or adding new dealerships to their market areas where the effect of

such added competition would be injurious to existing franchisees and to the

public interest.5 The Court held that a state may, consistent with due process,

provide that the filing of a protest by an existing dealer can, without a prior

hearing, prevent another dealer from relocating or establishing a new dealership

in the existing dealer‘s defined market area until after a hearing and resolution of

the protest.6

The Texas Motor Vehicle Commission Code (TMVC), this State‘s first

regulation of the motor vehicle manufacturer-dealer relationship, was adopted in

1971.7 The policy of the TMVC, set forth in what is now section 2301.001 of the

4
See New Motor Vehicle Bd. of Cal. v. Orrin W. Fox Co., 439 U.S. 96, 101–
02 & n.5, 99 S. Ct. 403, 407–08 & n.5 (1978) (listing then-existing federal and
state statutes and quoting from Senate committee report as to its grave concern
that the disparity in economic power and bargaining strength had enabled
manufacturers to, in effect, write the rules by which the two parties conduct their
business affairs as set forth in the sales agreements or franchises that the
manufacturer prepares for the dealer‘s signature) (quoting S. Rep. No. 84-2073,
at 2 (1956)).
5
Id. at 107–08, 99 S. Ct. at 410–11.
6
Id.
7
See Act of April 7, 1971, 62nd Leg., R.S., ch. 51, 1971 Tex. Gen. Laws
89. The TMVC has been amended almost every session since its inception.
Currently, the regulatory function is performed by the Motor Vehicle Division of

4
occupations code, is to ensure a sound system of distribution and sale of motor

vehicles for the protection of the public interest and welfare of the citizens of

Texas through exercise of this State‘s police power.8

The TMVC, as do similar state statutory schemes like California‘s, provides

a procedure by which an existing dealer may protest the establishment or

relocation of a dealership that will sell the same line or make of vehicles in the

same county or within fifteen miles of the existing dealership. 9 The filing of a

notice of protest triggers an administrative proceeding requiring a hearing before

the Commission, in which the applicant for the new dealership has the burden to

establish ―good cause‖ for establishing or relocating the dealership at the

proposed location.10 In the meantime, filing of the notice effects an immediate

statutory stay as to any action by the applicant to establish or relocate the

proposed new dealership or relocation until the protest is resolved.11 Among its

findings of fact, the trial court found that a hearing and final resolution of the

the Texas Department of Transportation, and the substantive law is now codified
as Chapter 2301 of the Texas Occupations Code. See, e.g., Tex. Occ. Code §
2301.001 (West 2004). Current sections of the occupations code referenced in
this opinion correspond to sections of the former TMVC in effect at the time of the
events and suit that remain substantially unchanged.
8
See id.
9
See Tex. Occ. Code Ann. § 2301.652 (West Supp. 2011).
10
Id.
11
See id. § 2301.803 (West Supp. 2011).

5
protest could take years. Complicating matters in this case, the TMVC provides

that any agreement waiving terms of the TMVC is void and unenforceable.12

B. Project 2000

By mid-July of 1999, after several years of efforts to obtain agreements for

the realignment of the Dallas-Fort Worth market from its various dealers in the

area, Chrysler had circulated and obtained settlement agreements, including

waivers of the right to protest, from each of the Dallas-Fort Worth area dealers

participating in Project 2000, with the exception of Manuel. Manuel was aware of

Chrysler‘s plan but was not originally a Project 2000 participant for several

reasons. Chrysler had litigation pending against one of Manuel‘s dealerships

(and other dealerships in Texas and California) for allegedly seeking fraudulent

warranty credits from Chrysler for engine cores (the Cores litigation), and Manuel

had a protest against Chrysler pending before the Commission arising out of the

Cores litigation. Additionally, Manuel had bought and operated for twenty-five

years a successful dealership in Richardson with a ―trip,‖ that is, three

lines―Chrysler, Dodge car, and Dodge truck. Chrysler had been trying to buy

the Chrysler line from Manuel for many years, and he had refused to sell it.

Chrysler desired the Chrysler line to keep Manuel from protesting other dealers

in that market area as well as to give that ―point‖ to another dealer to complete

the Project 2000 market realignment. Chrysler approached Manuel last

12
See id. § 2301.003 (West 2004).

6
regarding Project 2000 because it knew that Manuel would be the most

expensive to deal with. Joe Park, Chrysler‘s Dallas zone manager at the time,

recalled at trial, ―We had to get him out of the way.‖

In mid-August 1999, during a meeting of Dodge truck dealers in San

Antonio, Chrysler representatives from Detroit and the Dallas zone office met

with Manuel about joining Project 2000, and the parties proceeded to negotiate.

Chrysler offered Manuel $5 million for his Chrysler line at the Richardson

dealership, and Manuel bargained for $15 million and another dealership to

replace it. The parties discussed possible locations for an additional dealership,

and Park told Manuel that the other dealers had signed waivers of the right to

protest relocations or additional dealerships in joining Project 2000. By the end

of August 1999, the two parties had arrived at a comprehensive agreement.

C. The Agreements

Manuel signed two written agreements dated August 31, 1999, after

reviewing them with his attorney (who had represented him in the Cores

litigation). One was a settlement and release agreement (the Settlement

Agreement) similar to those entered into with the other dealers participating in

Project 2000. Pursuant to the Settlement Agreement, Chrysler paid Manuel

$15.34 million to settle the Cores litigation, to relinquish the Chrysler line at his

Richardson dealership, and to waive any right to protest the other dealers

involved in Project 2000. The second agreement, attached to and referenced in

the Settlement Agreement, was titled ―Agreement to Enter into Sales and Service

7
Agreement‖ (the AESSA). By the AESSA, Chrysler agreed to enter into a

franchise agreement with Manuel for a new Chrysler-Jeep dealership in South

Arlington (the South Arlington dealership), conditioned upon Manuel providing

the land, building the facility, and furnishing the capital investment for the new

dealership by January 1, 2001.

The Settlement Agreement stated that the South Arlington dealership was

―subject to the possibility that it may be protested‖ by another dealer and that a

protest ―can significantly delay the establishment or relocation of the dealership

subject to the protest.‖ The AESSA in turn provided that, in the event of a protest

against the South Arlington dealership, Chrysler would ―use its best efforts to

litigate or settle the protest or lawsuit in order to allow the establishment of [the

South Arlington] dealership.‖

Pursuant to the terms of the Settlement Agreement, Manuel ceased selling

Chrysler vehicles at his Richardson dealership within thirty days after the

agreements were signed in August 1999. As required by the AESSA, Manuel

created a new corporation (Tommy Manuel Chrysler-Jeep, Inc.) and filed his

application with the Commission for the new dealership in South Arlington in

December, which was approved on January 14, 2000. Manuel purchased

property for the South Arlington dealership in April 2000.

D. Meador’s Protest

On January 28, 2000, Meador Chrysler-Plymouth, Inc. (Meador), one of

the other dealerships that was part of Project 2000 and whose dealer-principal

8
had signed a protest waiver, filed a notice of protest against the creation of the

South Arlington dealership, which would be located less than fifteen miles from

Meador‘s existing dealership. The filing of Meador‘s protest was unexpected by

both Manuel and Chrysler, and it triggered the statutory stay of Manuel‘s

attempts to open the South Arlington dealership.

Chrysler‘s zone manager and other representatives met with Mr. Meador

and his business associate on a number of occasions, requesting that Meador

withdraw its protest. Chrysler moved to have the protest dismissed by the

Commission, acting as Meador‘s attorney-in-fact as provided by Meador‘s

settlement agreement. Failing that effort, on March 31, 2000, Chrysler filed suit

in federal district court in the Western District of Texas, obtained a stay of the

administrative proceeding, and sought injunctive relief and to compel arbitration

of the issues raised by Meador‘s protest. The federal court initially stayed the

state administrative proceeding but, after a hearing, denied all relief on June 7,

2000, abated the suit in its own court, and returned the protest to the

Commission for resolution. Chrysler then sought and obtained permission to file

an interlocutory appeal of the adverse ruling and intervened in the administrative

proceeding before the Commission. In July 2000, Chrysler filed its appeal to the

Fifth Circuit Court of Appeals from the federal district court‘s adverse decision.

Also in July of 2000, pursuant to a strategy agreed upon at a meeting between

Manuel and Chrysler and their respective attorneys, Manuel filed a separate suit

9
in state court against Meador for damages resulting from the delay of the

establishment of his new dealership caused by Meador‘s protest.

In September 2000, some eight months after the protest had been filed,

Chrysler had intensive settlement negotiations with Meador. Chrysler ultimately

settled the Meador protest in October 2000 by giving Meador a letter of intent for

an additional dealership and paying Meador $17,000 in attorney‘s fees. In

November 2000, Chrysler advised Manuel to proceed with building his facility for

the new dealership in South Arlington, and the Meador protest was formally

dismissed on December 21, 2000.

E. This Suit

It was undisputed that the years 2000 and 2001 were exceptionally good

years for car sales in the Dallas-Fort Worth market, but Manuel was not able to

complete and open the South Arlington dealership until February 2002. A

significant downturn in sales and a steep decline of the American market share of

automobiles began in 2002. They were continuing at the time of trial, and the

new dealership sustained a loss for 2002 and subsequent years.

In 2004, Manuel sued Chrysler for breach of contract and other causes of

action, seeking damages caused by the delay in opening the South Arlington

dealership as the result of Chrysler‘s failure to resolve Meador‘s protest, the

costs Manuel incurred in litigating Meador‘s protest before the state agency and

in state court, and attorney‘s fees. Manuel contended that Chrysler failed to use

10
its best efforts as required by the AESSA to litigate or settle the Meador protest,

thereby causing the delay in the opening of the South Arlington dealership.

The trial court granted summary judgments to Chrysler on most of

Manuel‘s causes of action, including breach of contract, but on the morning of

trial on damages, the trial judge announced during opening statements that he

would hear evidence regarding breach of the best efforts clause by Chrysler.

The parties tried the case to the bench over a sporadic period of about six weeks

regarding that issue and damages. Among its findings of fact, the trial court

found that Chrysler failed to use its best efforts to resolve the Meador protest and

that Chrysler ―breached the contract.‖ 13 The trial court rendered a final judgment

awarding Manuel $370,668.50 in damages plus prejudgment interest but denied

Manuel recovery of attorney‘s fees. Both parties appealed. Chrysler seeks

reversal of the trial court‘s judgment and rendition of a take-nothing judgment,

and Manuel seeks remand for a new trial on the issue of attorney‘s fees.

III. BEST EFFORTS

By its first issue, Chrysler argues that the AESSA‘s best efforts clause is

unenforceable because it lacks measurable goals and guidelines and that even if

the best efforts clause is enforceable, the goal of the agreement was the opening

of the South Arlington dealership, meaning best efforts are irrelevant because

13
The trial court‘s findings of fact and conclusions of law do not expressly
state that Chrysler breached the AESSA (as opposed to the Settlement
Agreement), but only the AESSA contains a best efforts clause.

11
that goal was ultimately met. Chrysler alternatively contends that the evidence

conclusively established that Chrysler used its best efforts to resolve the Meador

protest.14

A. Enforceability of “Best Efforts” Clause

1. Standard of Review

When a contract is unambiguous, interpretation of the written instrument is

a question of law for the court. MCI Telecomm. Corp. v. Tex. Util. Elec. Co., 995

S.W.2d 647, 650B51 (Tex. 1999) (citing Coker v. Coker, 650 S.W.2d 391, 393

(Tex. 1983)); see Heil Co. v. Polar Corp., 191 S.W.3d 805, 809B10 (Tex. App.—

Fort Worth 2006, pet. denied) (―The interpretation of an unambiguous contract is

a question of law, which we review de novo.‖). More specifically, the

enforceability of a contract is a legal issue that we review de novo. See Elijah

Ragira/VIP Lodging Grp., Inc. v. VIP Lodging Grp., Inc., 301 S.W.3d 747, 754

(Tex. App.—El Paso 2009, pet. denied); Chavez v. McNeely, 287 S.W.3d 840,

843–44 (Tex. App.—Houston [1st Dist.] 2009, no pet.).

2. Goals and guidelines

14
Manuel urges us to summarily overrule Chrysler=s first issue, arguing that
an independent basis exists for the judgment in that the trial court could have
based its breach of contract finding on breach of paragraph 3 of the Settlement
Agreement. But the trial court specifically found that Chrysler failed to use its
best efforts to resolve the Meador protest, a provision contained only in the
AESSA. The trial court had also previously granted summary judgment against
Manuel for breach of the Settlement Agreement and made no finding, and none
was requested, that Chrysler failed to comply with paragraph 3 of the Settlement
Agreement. Thus, we will consider Chrysler=s first issue on the merits.

12
 Chrysler first argues that ―best efforts‖ is a vague standard that is rarely

held enforceable. But Chrysler‘s own general counsel and legal department

drafted the settlement agreements and AESSAs used to implement Project 2000.

Moreover, and to the contrary, courts enforce contractual best efforts clauses in a

wide variety of circumstances. See E. Farnsworth, Farnsworth on Contracts '

7.17c (2d ed. 2001) (stating it is no longer the case that ―a duty defined only in

terms of best efforts‖ is too indefinite to be enforceable) (citations omitted);

Kenneth A. Adams, Understanding “Best Efforts” and Its Variants (Including

Drafting Recommendations), 50 No. 4 Practical Lawyer, Aug. 2004, at 17 (noting

courts in most jurisdictions have held best efforts clauses enforceable).

―Whatever the test of best efforts, there is no question but that courts today

regard the standard of best efforts—like that of good faith—as a workable

standard in a variety of circumstances.‖ E. Farnsworth, On Trying to Keep One’s

Promises: The Duty of Best Efforts in Contract Law, 46 U. Pitt. L. Rev. 1, 12

(1984).

Courts construing a best efforts provision that does not specify the

performance to be required commonly hold the promisor to the standard of the

diligence a reasonable person would use under the circumstances. See, e.g.,

CKB & Assocs., Inc. v. Moore McCormack Petroleum, Inc., 809 S.W.2d 577, 578

(Tex. App.—Dallas 1991, writ denied) (op. on reh‘g) (comparing performance of

best efforts with that of average prudent operator in light of circumstances of

case); see also Bloor v. Falstaff Brewing Corp., 601 F.2d 609, 614–15 (2d Cir.

13
1979) (holding licensor could not treat licensee=s brands less favorably than its

own); Van Valkenburgh, Nooger & Neville, Inc. v. Hayden Publ’g Co., 281 N.E.2d

142, 144 (1972) (holding publisher who promised best efforts to promote author‘s

book not restricted from also promoting competing series); Farnsworth, 46 U.

Pitt. L. Rev. at 7–8 (―Best efforts is a standard that has diligence as its

essence . . . .‖).

Chrysler, quoting from the Dallas court of appeals opinion in CKB,

specifically complains that the best efforts clause in this case lacks measurable

goals and guidelines. 809 S.W.2d at 580. In that case, CKB had agreed to use

its best efforts to refine crude oil into specific volumes of refined products, as set

out in the agreement in a schedule specifying percentages of total refinery output

for each product. Id. at 578. Instead of refining the crude oil to produce the

quantities specified in the contract, CKB operated the refinery to produce the

highest dollar yield on the crude. Id. at 579, 582. Moore McCormack sued CKB

for breach of contract, and the trial court rendered summary judgment in Moore

McCormack=s favor. Id. at 580. CKB appealed. Id.

As Chrysler points out, the CKB court described the provision for ―best

efforts‖ in a contract as Aa nebulous standard. . . . Under some circumstances, a

party could use best efforts to achieve a contractual goal and fall well short.

Under different circumstances, an effort well short of one=s best may suffice to hit

a target.@ See id. at 581. Thus, that court reasoned, ―To be enforceable, a best

efforts contract must set some kind of goal or guideline against which best efforts

14
may be measured.@ Id. at 581–82 (citing Pinnacle Books, Inc. v. Harlequin

Enters., 519 F. Supp. 118, 121 (S.D.N.Y. 1981)). The court concluded that when

sufficient guidelines exist, a party that performs within the guidelines fulfills the

contract regardless of the quality of its efforts. Id. at 582. Only when a party

misses the guidelines would a court measure the quality of its efforts ―by the

circumstances of the case . . . and by comparing the party‘s performance with

that of an average, prudent, comparable operator.‖ Id. (citing Bloor, 601 F.2d at

613–14; Pinnacle, 519 F. Supp. at 122; Arnold Prods., Inc. v. Favorite Films

Corp., 176 F. Supp. 862, 866 (S.D.N.Y. 1959)). Ultimately, the court affirmed the

summary judgment against CKB because it concluded that CKB made no efforts

to meet the production standards specified in the contract, stating: ―As a matter

of law, no efforts cannot be best efforts.‖ Id. (citing Bloor, 601 F.2d at 613B14).15

Thus, the CKB court did not further explore the ―goal or guideline‖ standard.

Chrysler argues that the best efforts clause in the AESSA is unenforceable

because it fails to set forth a measurable goal or guideline in that no date was

specified by which Chrysler was required to litigate or settle the Meador protest.

15
As Manuel notes, other Texas courts have encountered best efforts
clauses in a variety of contracts without discussion of how such a clause should
be interpreted. See, e.g., Malatt v. C&R Refrigeration, 179 S.W.3d 152, 158
(Tex. App.—Tyler 2005, no pet.) (holding best efforts clause did not require
actual sale of machine but implying reasonable time); Aquila Sw. Pipeline, Inc. v.
Harmony Exploration, Inc., 48 S.W.3d 225, 233–34 (Tex. App.—San Antonio
2001, pet. denied) (interpreting Section 2.306(b) of UCC, which expressly
imposes a best efforts standard upon the parties to a contract for exclusive
dealing in goods).

15
Manuel responds that, reading the contract as a whole, the AESSA required

Chrysler to settle or litigate the Meador protest in a manner that allowed Manuel

to open the South Arlington dealership on or before January 1, 2001. Manuel

references language in the AESSA stating that he was required to build and

complete the facilities for the South Arlington dealership before January 1, 2001,

that the establishment of the South Arlington dealership was of ―major

importance‖ to Chrysler, and that ―time is of the essence.‖

In Herrmann Holdings, Ltd. v. Lucent Technologies, Inc., the contract

required Lucent to use its ―reasonable best efforts‖ to file registration paperwork

with the Securities and Exchange Commission (SEC) ―as promptly as

practicable‖ or ―in the most expeditious manner practicable.‖ 302 F.3d 552, 556

(5th Cir. 2002). Rejecting the very argument by Lucent that Chrysler makes

here, the Fifth Circuit Court of Appeals held that Herrmann Holdings‘s pleadings

stated a claim for breach of contract, significantly stating that ―[r]equiring

contracting parties to fix a date certain in order to set a temporal guideline in

which to complete a certain task demands more definiteness than Texas law

requires.‖ Id. at 560 (emphasis added).

Here, the best efforts provision states: ―[Chrysler] will use its best efforts to

litigate or settle the protest or lawsuit in order to allow the establishment of [the

South Arlington] dealership.‖ The best efforts provision does not include

language similar to the ―as promptly as practicable‖ or ―in the most expeditious

manner practicable‖ language in Herrmann Holdings, but the AESSA does

16
specifically and expressly contemplate establishing the South Arlington

dealership by January 1, 2001.16 Even absent such language, we cannot

interpret the best efforts provision as placing no deadline at all for Chrysler to

litigate or settle the Meador protest because doing so reads the January 1, 2001

deadline out of the AESSA and renders the best efforts clause itself

meaningless. See id. Rather, the goal or objective of the best efforts provision in

the AESSA, in light of the agreement as a whole, was for Chrysler to use its best

efforts to litigate or settle the Meador protest in such a period of time that Manuel

could establish the South Arlington dealership by January 1, 2001.

Moreover, other courts have held enforceable ―best efforts‖ requirements

in contracts that contained none of the defining language in Herrmann Holdings.

See, e.g., First Union Nat’l Bank v. Steele Software Sys. Corp., 838 A.2d 404,

428–29, 433, 448 (Md. App. 2003) (holding ―best efforts‖ is a standard in and of

itself and is therefore enforceable, noting that even where ―best efforts‖ is not

defined it is ―a standard that has diligence as its essence‖ and a term that ―takes

its meaning from the circumstances‖); see also Coady Corp. v. Toyota Motor

Dist., Inc., 361 F.3d 50, 59 (1st Cir. 2004) (―‘Best efforts‘ is implicitly qualified by

a reasonableness test—it cannot mean everything possible under the sun.‖)

(citing Macksey v. Egan, 633 N.E.2d 408, 413 & n.16 (Mass. App. Ct. 1994));

16
That Chrysler agreed to an extension of time for Manuel to establish and
open the dealership when Meador=s protest was not resolved by that time is
further indication that time was of the essence. See Siderius, Inc. v. Wallace
Co., 583 S.W.2d 852, 864 (Tex. Civ. App.—Tyler 1979, no writ).

17
Baron Fin. Corp. v. Natanzon, 509 F. Supp. 2d 501, 513–14 (D. Md. 2007)

(applying Maryland law and holding best efforts clause enforceable and defined

in terms of reasonableness highly dependent upon surrounding circumstances);

Mark P. Gergen, The Use of Open Terms in Contract, 92 Columbia L. Rev. 997,

1000 (1992) (―Best efforts clauses and other terms that require a party to use

reasonable diligence in performance are obviously like a negligence rule.‖).

This is in accord with the well-established rule that, where a contract does

not fix the time for performance (which is Chrysler‘s specific complaint about the

AESSA), it will be presumed that the agreement is to be performed within a

reasonable time. Hewlett-Packard Co. v. Benchmark Elecs., Inc., 142 S.W.3d

554, 563 (Tex. App.—Houston [14th Dist.] 2004, pet. denied); CherCo Props.,

Inc. v. Law, Snakard & Gambill, P.C., 985 S.W.2d 262, 266 (Tex. App.—Fort

Worth 1999, no pet.). What is a reasonable time depends upon the facts and

circumstances as they existed at the time the contract was formed. CherCo

Props., Inc., 985 S.W.2d at 266. Therefore, even if the January 1, 2001 date

specified in the AESSA for opening the new dealership were not controlling (and

it is undisputed that the protest was not resolved in time for Manuel to build his

facility and open for more than a year after that date), we hold that the best

efforts provision in the AESSA had a measurable timeline or goal of resolving

any protest by settlement or litigation within a reasonable time and was thus

enforceable. We overrule the first part of Chrysler‘s first issue.

B. The Quality of Chrysler’s Efforts

18
 Chrysler next argues that, even if the best efforts clause is enforceable, the

AESSA‘s only goal was the opening of the South Arlington dealership and that

because Chrysler‘s efforts eventually settled the protest, it met the goal because

the South Arlington dealership eventually opened. Thus, Chrysler, citing

Herrmann Holdings, 302 F.3d at 559, argues that the ―analysis ends‖ and that

whether Chrysler used its best efforts is irrelevant. But the Fifth Circuit‘s opinion

in Herrmann Holdings is again instructive in rejecting this argument. In that case,

Lucent eventually filed the registration paperwork with the SEC, and the SEC

approved the transaction. Id. at 557. But by that time, the Herrmanns had been

damaged by the decline in Lucent‘s stock price. Id. The Fifth Circuit held that

the Herrmanns had stated a plausible claim for breach of the best efforts clause;

in other words, that Lucent eventually filed the paperwork and that the SEC

eventually approved the transaction did not negate as a matter of law the

allegations of a breach by Lucent of the best efforts clause. Id. at 561.

The goal of the contract here—a goal Chrysler itself identified as having

major importance—was not just opening the South Arlington dealership

someday, but opening the dealership by January 1, 2001. Using the CKB

analysis, we consider the ―performance . . . of an average, prudent, comparable

operator‖ under the circumstances of the case to determine the quality of

Chrysler‘s performance. See 809 S.W.2d at 582. We conclude that, even

absent a date certain by which Chrysler was obligated to litigate or settle the

protest, the fact that Chrysler eventually settled the Meador protest so that the

19
South Arlington dealership opened a year later than contemplated does not

establish as a matter of law that Chrysler met the goal. We overrule this part of

Chrysler‘s first issue.

C. Legally Sufficient Evidence of Breach of Best Efforts Clause

In the final part of its first issue, Chrysler argues that, even if it missed the

goal of timely resolving the protest, the evidence nevertheless conclusively

establishes that it used its best efforts. Manuel responds that, under the

evidence, that issue was one of fact that was properly resolved against Chrysler

by the trial court as fact finder.

1. Standard of Review

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 (1999); Robert W. Calvert, “No Evidence” and

“Insufficient Evidence” Points of Error, 38 Tex. L. Rev. 361, 362–63 (1960). In

determining whether there is legally sufficient evidence to support the finding

under review, we must consider evidence favorable to the finding if a reasonable

factfinder could and disregard evidence contrary to the finding unless a

reasonable factfinder could not. Cent. Ready Mix Concrete Co. v. Islas, 228

20
S.W.3d 649, 651 (Tex. 2007); City of Keller v. Wilson, 168 S.W.3d 802, 807, 827

(Tex. 2005).

Findings of fact entered in a case tried to the court have the same force

and dignity as a jury=s answers to jury questions. Anderson v. City of Seven

Points, 806 S.W.2d 791, 794 (Tex. 1991). The trial court=s findings of fact are

reviewable for legal sufficiency of the evidence to support them by the same

standards that are applied in reviewing evidence supporting a jury=s answer.

Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996); Catalina v. Blasdel, 881

S.W.2d 295, 297 (Tex. 1994).

Whether a contractual best efforts obligation has been met or fulfilled is

usually a question of fact because it is heavily dependent upon the particular

circumstances of the case. See, e.g., Mor-Cor Packaging Prods., Inc. v.

Innovative Packaging Corp., 328 F.3d 331, 334 (7th Cir. 2003) (Posner, J.)

(characterizing best efforts as a standard in and of itself and stating whether

standard is met is question of fact involving ―the application of a standard, ‗best

efforts,‘ to the particular facts of the case‖); Informed Physician Servs., Inc. v.

Blue Cross and Blue Shield of Md., Inc., 711 A.2d 1330, 1342 (Md. 1998)

(confirming that what constitutes reasonable efforts is largely a question of fact);

Widewaters Prop. Dev. Co. v. Katz, 836 N.Y.S.2d 746, 748 (N.Y. App. Div. 2007)

(noting that whether the obligation to use best efforts has been fulfilled will almost

invariably involve an issue of fact); First Union Nat’l Bank, 838 A.2d at 428

21
(stating that factual determination may be required as to whether party used best

efforts).

2. Analysis

Chrysler argues that the AESSA did not obligate it to pay any money to

Meador and urges that its other efforts to resolve Meador‘s protest were

Areasonable and prudent@ in settling the protest within nine months. Chrysler

points to evidence that its zone manager Joe Park (1) met with Meador‘s co-

owner and sales manager (because Mr. Meador was ill and unavailable) soon

after Meador filed its protest and urged withdrawal of the protest; (2) remained in

constant contact with them; (3) later talked to Mr. Meador, who would not

overrule his co-owner‘s answer of ―no‖; and (4) finally reminded Meador‘s

representatives that Meador‘s protest was a breach of Meador‘s own contractual

agreement not to protest other relocations or new dealerships in Project 2000.

But Park never offered money to Meador to withdraw its protest because he did

not think he needed to since Meador had signed a contract. Park also testified

that he did not think Meador wanted money and instead wanted to delay

Manuel‘s dealership as long as possible. Chrysler thus continued on its litigation

path, seeking to have the administrative protest dismissed, obtaining a stay of

those proceedings, and filing suit in federal court against Meador for an injunction

and to compel arbitration regarding the validity of the protest.

22
 In CKB, the Dallas court of appeals stated that ―[w]hen a party misses the

guidelines, courts measure the quality of its efforts by the circumstances of the

case and by comparing the party‘s performance with that of an average, prudent,

comparable operator.‖ 809 S.W.2d at 582 (citations omitted). While there is

evidence of the circumstances surrounding Meador‘s protest, of Chrysler‘s efforts

to have Meador withdraw that protest (which Chrysler refers to as evidence of

efforts to settle), and of Chrysler‘s eventual settlement of the protest, the

evidence is undisputed that Chrysler and Meador did not exchange settlement

proposals until September 2000 and that they did not reach a settlement until

October 4, 2000.

The trial court could have reasonably inferred that Chrysler wanted to

―clear the market‖ for all of the dealerships participating in Project 2000 and that

Chrysler‘s strategy was, in effect, to remove the protest waiver issue to federal

court and seek arbitration to avoid a determination of that issue by the

Commission under the Texas regulatory scheme (which is not to say that such a

strategy was unreasonable per se). The federal district court denied injunctive

relief and Chrysler‘s motion to compel arbitration on June 7, 2000, and issued an

eleven-page order explaining the reasons, including that the validity of the protest

waiver under the terms of the TMVC was more appropriately for the agency to

decide and that Manuel was not a party and would not be bound by an arbitration

award or a decision from the federal court. See DaimlerChrysler Motors Corp. v.

Meador Chrysler-Plymouth, Inc., No. A-00-CA-216-SS, at *10–11 (W. Dist. Tex.

23
June 7, 2000). Hence the federal court abated the suit in its own court and

returned the issue to the administrative agency for decision. Id.17 At least by that

point, as the trial court in this case noted during closing arguments, Chrysler

must have had ―some understanding‖ of the unlikelihood of success with its

litigation efforts. Yet Chrysler still did nothing to settle for several more months.

During that time, Chrysler pursued its interlocutory appeal to the Fifth Circuit

Court of Appeals and strategized with Manuel to coordinate his filing suit in state

court against Meador, all of which only further delayed the resolution of the

Meador protest. After settling with Meador in October 2000, Chrysler notified

Manuel that he could proceed with building his facility in November 2000, and the

protest was formally dismissed in December 2000. By that time, all of the other

Project 2000 dealers in the area were selling cars. But Manuel was unable to

begin building his new dealership facility by reason of the pending protest until

after the settlement and, consequently, was not able to open for business until

February 2002.

17
The decision of the federal district court to return the proceedings
regarding validity of the protest waiver to the Commission seems prescient,
considering that it predated by less than a year the legislature‘s amendment of
the TMVC to give the Commission original, exclusive jurisdiction over issues
regarding sale and distribution and other issues governed by the Code and to
require abatement of a suit seeking DTPA and other damages pending an
administrative determination of Code-based issues that would govern the
remainder of the case. See Subaru of Am., Inc. v. David McDavid Nissan, Inc.,
84 S.W.3d 212, 222 (Tex. 2002) (interpreting legislature‘s amendment to Section
3.01(a) of the Code, Act of May 18, 2001, 77th Leg., R.S., ch. 155, § 5, 2001
Tex. Gen. Laws 313, 327).

24
 What would a prudent, comparable automobile manufacturer have done?

As was acknowledged by the parties in the Settlement Agreement, Chrysler and

Manuel both knew from the outset that a protest could entail significant delay,

and Chrysler knew that a protest by any dealer participating in Project 2000

would present a significant obstacle to the accomplishment of its planned market

realignment. The testimony was undisputed that Chrysler had planned all along

to pay dealers for their agreement not to protest for that very reason and had

budgeted $50 million toward preventing or resolving protests such as that filed by

Meador in order to implement Project 2000 in the Dallas-Fort Worth area.

Chrysler budgeted $11.2 million to pay another dealer for a protest waiver but

ended up paying that dealer $1 million and giving him a new point (a new

dealership), and Chrysler paid $1 million to another dealer who was not a Project

2000 participant in order to settle a threatened protest within a few days after that

dealer approached Chrysler.

Although Chrysler offered evidence that Meador only wanted to delay

Manuel‘s new dealership as long as possible, there was contradictory evidence

that Meador might have been interested in a settlement and that it wanted a

―point‖. Chrysler had two open points and a substantial remaining budget of

around $30 million after payments to Manuel and other dealers but did not offer

either money or a point to Meador until late September 2000, so there is no way

to know what Meador would have accepted at an earlier date. And Chrysler=s

25
witnesses were unable to explain why Chrysler never offered any of its multi-

million dollar budget to settle the Meador protest.

Chrysler argues that the AESSA did not obligate it to pay any money to

Meador, that it had no contractual obligation to use the $50 million it had

allocated to its budget to settle protests by dealers, and that it could simply have

―ignored‖ settling with Meador until it had fully litigated its pending federal court

and administrative proceedings. Chrysler reasons that Manuel‘s position (and

the trial court‘s finding of failure to use best efforts) imposed ―an additional

burden‖ on Chrysler of settlement. Chrysler argues that its choice to litigate

rather than settle was solely within its discretion under the AESSA, that it was

entitled to exercise its legal right to enforce Meador‘s agreement to waive the

statutory right to protest, and that there was no prohibition in either the AESSA or

the Settlement Agreement against Chrysler trying to hold Meador to its

agreement. According to Chrysler, punishing it for choosing to pursue litigation

rather than to settle would strip Chrysler of its right to access to the courts to

enforce its rights.

By all of these arguments, Chrysler overlooks its agreement in the AESSA

that contractually obligated it to use its best efforts not simply to litigate but ―to

litigate or settle the protest or lawsuit in order to allow the establishment of the

South Arlington dealership.‖ [Emphasis added]. The question is not whether

Chrysler should have litigated, as we agree that was its right. Rather, the

question is when did Chrysler‘s choice to litigate to the exclusion of making any

26
efforts toward settlement become unreasonable. See CKB, 809 S.W.2d at 582

(stating that when a party fails to meet goal or guideline, court measures quality

of its efforts by circumstances and comparison of performance of the prudent

comparable operator); see also Herrmann Holdings, 302 F.3d at 559 (stating

court may look to circumstances of case and compare party‘s performance in

similar cases in determining whether party failed to exercise best efforts).

According to a letter from Manuel‘s counsel, Chrysler assured Manuel in

mid-June 2000 that it was going to dismiss the federal appeal and attempt to

settle with Meador while Manuel filed suit and litigated against Meador in state

court. Although Manuel did file and litigate that suit, Chrysler still made no effort

to settle with Meador until late September. As held by the court in CKB, ―[N]o

efforts cannot be best efforts.‖ See 809 S.W.2d at 582.

Applying the appropriate standard of review, we hold that there is legally

sufficient evidence to support the trial court=s finding that Chrysler breached the

best efforts provision in the AESSA. See Cent. Ready Mix Concrete, 228 S.W.3d

at 651; City of Keller, 168 S.W.3d at 807, 827; see also Martinez, 977 S.W.2d at

334. We overrule the remainder of Chrysler‘s first issue.

IV. LIMITATION OF DAMAGES

By its second issue, Chrysler contends that the trial court erred by

awarding Manual damages of $370,668.50 based upon Manuel‘s claim for lost

profits for the one-year period during which Manuel was not able to open the

South Arlington dealership. Chrysler relies upon the AESSA‘s limitation-of-

27
damages provision, which limits recoverable damages solely to ―out-of-pocket

expenses that cannot be mitigated,‖ and argues that Manual is barred from

recovering lost profits as damages by waiver of ―incidental and consequential

damages‖ in both the AESSA and the Settlement Agreement.18 Chrysler

complains that the trial court erred as a matter of law in disregarding these

contractual limitations of damages. Alternatively, Chrysler contends that, if the

trial court concluded that the limitation of damages provisions were ambiguous,

there is no evidence to support the trial court‘s finding of fact that the parties‘

intent was to allow recovery of ―actual damages‖ under the Settlement

Agreement.

A. Preservation of Error

Manuel first asks us to summarily overrule Chrysler‘s second issue

because Chrysler failed to negate every basis supporting the judgment.

Specifically, Manuel argues that Chrysler only challenges ―lost profits‖ but that

the trial court could have rested its damage award on Manuel‘s individual claims

for lost salary and rental income for which there is evidence and which Manuel

asserts are independent grounds not challenged on appeal.

Rule of appellate procedure 38.1(f) provides that ―[t]he statement of an

issue or point will be treated as covering every subsidiary question that is fairly

18
As mentioned above, the trial court‘s findings of fact and conclusions of
law do not expressly state that Chrysler breached the AESSA (as opposed to the
Settlement Agreement), but only the AESSA contains a best efforts clause.

28
included.‖ Tex. R. App. P. 38.1(f). In this regard, the Supreme Court of Texas

has stated that ―disposing of appeals for harmless procedural defects is

disfavored‖; that appellate courts are to construe appellate briefs ―reasonably, yet

liberally, so that the right to appellate review is not lost by waiver‖; and that

―appellate courts should reach the merits of an appeal whenever reasonably

possible.‖ Perry v. Cohen, 272 S.W.3d 585, 587 (Tex. 2008).

While Chrysler‘s second issue discusses the damages awarded in short-

hand form as ―lost profits,‖ Chrysler‘s overarching contention is that the limitation-

of-damages clause of the AESSA limits Manuel‘s damages to out-of-pocket

expenses that cannot be mitigated.19 None of Manuel‘s damage claims—

whether for lost profits, lost owner‘s salary, or lost rental income—are for out-of-

pocket expenses; each claim seeks recovery of benefit-of-the-bargain damages

as if the contract had been performed. See Bechtel Corp. v. Citgo Prods.

Pipeline Co., 271 S.W.3d 898, 927 (Tex. App.—Austin 2008, no pet.) (stating that

expectation damages are designed to award the claimant ―the benefit of his

bargain by being put in as good a position as he would have been had the

contract or promise been performed‖).

19
Out-of-pocket expenses are reliance damages designed ―to reimburse
the plaintiff for expenditures made toward execution of the contract, in order to
restore the status quo before the contract.‖ See Foley v. Parlier, 68 S.W.3d 870,
884–85 (Tex. App.—Fort Worth 2002, no pet.) (contrasting reliance or out-of-
pocket damages with expectancy or benefit-of-the-bargain damages).

29
 Whether Manuel may recover any damages (which would include lost

profits, lost salary, and lost rentals) other than out-of-pocket expenses is fairly

included within Chrysler‘s second issue; lost owner‘s salary and rental income

are not independent, unchallenged grounds supporting the trial court‘s judgment.

See Tex. R. App. P. 38.1(f); Perry, 272 S.W.3d at 586–87; cf. Reliford v. BNSF

Ry. Co., No. 02-09-00322-CV, 2011 WL 255795, at *1 (Tex. App.—Fort Worth

Jan. 27, 2011, no pet.) (mem. op.) (holding appellant failed to challenge each

independent ground supporting judgment because jury found statute of

limitations barred claim and appellant only complained of charge error on his

affirmative cause of action). Thus, we will address the merits of Chrysler‘s

second issue.

B. Applicable Law

Included within the resolution of Chrysler‘s second issue are legal

determinations relating to the interpretation of contracts, the consideration of

separate writings together, ambiguity, and the differences between direct and

consequential damages for breach of contract.

1. Rules of Interpretation and Contract Construction

Interpretation of an unambiguous contract is a question of law for the court

to decide de novo. Coker, 650 S.W.2d at 393. Our primary concern in

construing a written contract is to ascertain the objective intent of the parties as

expressed in the contract. Id.; City of the Colony v. N. Tex. Mun. Water Dist.,

272 S.W.3d 699, 722 (Tex. App.—Fort Worth 2008, pet. dismissed). We

30
examine and consider the entire document in an effort to harmonize and give

effect to all provisions of the contract so that none will be rendered meaningless.

Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex.

2006); Coker, 650 S.W.2d at 393; City of the Colony, 272 S.W.3d at 722.

We examine all parts of the agreement in light of the circumstances

surrounding the formation of the contract. Columbia Gas Transmission Corp. v.

New Ulm Gas, Ltd., 940 S.W.2d 587, 591 (Tex. 1996). Instruments pertaining to

the same subject matter must be considered together to ascertain the intent of

the parties. In re Prudential Ins. Co., 148 S.W.3d 124, 135 (Tex. 2004) (orig.

proceeding); see City of Keller, 168 S.W.3d at 811 (even writings executed at

different times must be considered together if they pertain to the same

transaction); DeWitt County Elec. Co-op., Inc. v. Parks, 1 S.W.3d 96, 102 (Tex.

1999). We view the contracts ―from a utilitarian standpoint bearing in mind the

particular business activity sought to be served.‖ Frost Nat’l Bank v. L & F

Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005) (quoting Reilly v. Rangers

Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987)); Clark v. Cotten Schmidt, L.L.P.,

327 S.W.3d 765, 772 (Tex. App.—Fort Worth 2010, no pet.).

Whether a contract is ambiguous is a question of law for the court. J.M.

Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). Lack of clarity

does not create an ambiguity, and a contract is not ambiguous merely because

the parties advance conflicting interpretations. Id.; City of the Colony, 272

S.W.3d at 722. We determine whether a contract is ambiguous by considering

31
the contract as a whole in light of the circumstances present when the parties

entered into it. Universal Health Servs., Inc. v. Renaissance Women’s Grp.,

P.A., 121 S.W.3d 742, 746 (Tex. 2003). The trial court should ascertain the

objective intent of the parties as expressed in the writing itself. Sun Oil Co. v.

Madeley, 626 S.W.2d 726, 731 (Tex. 1981). A contract is ambiguous when its

meaning remains uncertain or subject to more than one reasonable interpretation

after it is subjected to applicable rules of interpretation. Frost Nat’l Bank, 165

S.W.3d at 312; Coker, 650 S.W.2d at 393–94. It is only after a determination by

the trial court that the contract is in fact ambiguous that parol evidence becomes

admissible, and then only to assist the fact finder in determining what the

subjective intent of the parties was at the time they entered into the contract.

See Sun Oil Co., 626 S.W.2d at 731; see also Coker, 650 S.W.2d at 395.

2. Law on Contract Damages

Because the agreements do not define the terms ―actual damages‖ or

―consequential damages,‖ we presume that the parties intended their ordinary

meanings. Cherokee Cnty. Cogeneration Partners, L.P. v. Dynegy Mktg. &

Trade, 305 S.W.3d 309, 314 (Tex. App.—Houston [14th Dist.] 2009, no pet.).

The trial court found, and neither party disagrees, that the AESSA did not involve

the sale of goods or services. Therefore, we will apply common-law definitions

rather than those set forth in Article 2 of the UCC. See id. (holding supply

contract for purchase of natural gas to operate cogeneration facility not a contract

for sale of goods and thus applying common law rather than UCC definition of

32
consequential damages); Wade & Sons, Inc. v. Am. Standard, Inc., 127 S.W.3d

814, 823 (Tex. App.―San Antonio 2003, pet. denied) (noting different definitions

used for direct and consequential damages under Texas common law and as

Texas courts have interpreted the UCC).

At common law, the term ―actual damages‖ encompasses both ―direct‖ and

―consequential‖ damages. Arthur Andersen & Co. v. Perry Equip. Corp., 945

S.W.2d 812, 816 (Tex. 1997); Henry S. Miller Co. v. Bynum, 836 S.W.2d 160,

163 (Tex. 1992) (Phillips, C.J., concurring). ―Direct damages,‖ also known as

―general damages,‖ are those inherent in the nature of the breach of the

obligation between the parties, and they compensate a plaintiff for a loss that is

conclusively presumed to have been foreseen by the defendant as a usual and

necessary consequence of the defendant‘s act. Arthur Anderson & Co., 945

S.W.2d at 816; Cherokee Cnty., 305 S.W.3d at 314. One measure of direct

damages is the ―benefit of the bargain‖ measure, which utilizes an expectancy

theory and evaluates the difference between the value as represented and the

value received. See Mood v. Kronos Prods., Inc., 245 S.W.3d 8, 12 (Tex. App.—

Dallas 2007, pet. denied) (generally, measure of damages for breach is that

which restores injured party to position he would have had if contract had been

performed); Frost Nat’l Bank v. Heafner, 12 S.W.3d 104, 111 n.5 (Tex. App.—

Houston [1st Dist.] 1999, pet. denied) (citing Henry S. Miller, 836 S.W.2d at 163).

―Consequential damages,‖ also referred to as ―special damages,‖ are

those said to result naturally but not necessarily from the wrongful act because

33
they require the existence of some other fact beyond the relationship of the

parties. Arthur Andersen, 945 S.W.2d at 816 (consequential damages not

necessarily referable to the breach, but the loss must still have been reasonably

foreseeable or within the contemplation of the parties); Henry S. Miller, 836

S.W.2d at 163; Cherokee Cnty., 305 S.W.3d at 313–14; Tenn. Gas Pipeline Co.

v. Technip USA Corp., No. 01-06-00535-CV, 2008 WL 3876141, at *8–9 (Tex.

App.—Houston [1st Dist.] 2008, pet. denied) (mem. op.) (op. on reh‘g).

Damages that might be considered ―consequential‖ in one contract may be

direct damages in another. As Judge Cardozo wrote many years ago, the

distinction between direct and consequential damages under the common law is

not absolute: ―There is need to keep in mind that the distinction is not absolute,

but relative. To put it in other words, damage which is general in relation to a

contract of one kind may be classified as special in relation to another.‖ Kerr

S.S. Co. v. Radio Corp. of Am., 157 N.E. 140, 141 (N.Y. 1927) (also noting that

damages for delay may be direct in some instances and consequential in others);

see Rexnord Corp. v. DeWolff Boberg & Assocs., Inc., 286 F.3d 1001, 1004 (7th

Cir. 2002) (Posner, J.) (stating that common law ―distinguishes between direct

and consequential damages, the difference lying in the degree to which the

damages are a foreseeable (that is, a highly probable) consequence of a

breach‖); Computrol, Inc. v. Newtrend, L.P., 203 F.3d 1064, 1071 n.5 (8th Cir.

2000) (―We are not convinced that the [contract‘s] restriction on ‗special,

incidental, or consequential damages,‘ standing alone, precludes the recovery of

34
lost profits . . . . [I]t is incorrect to classify mechanically . . . lost profits . . . as

consequential damages.‖). If the language of the contract indicates that the

parties contemplated lost profits as the probable result of the breach, then those

lost profits are more properly seen as a part of the contract, itself, and thus a

form of direct damages. Viastar Energy, LLC v. Motorola, Inc., No. 1:05-CV-

1095-DFH-WTL, 2006 WL 3075864, at *5–6 (S.D. Ind. Oct. 26, 2006); see also

White & Summers, Uniform Commercial Code § 10-4 (Update 2011) (noting that

it is a ―fallacy‖ to assume that damages to a buyer, such as those resulting from

delay, are inherently consequential, since damages that are consequential under

one contract may be direct or ordinary under another); 11 Corbin on Contracts §

56.6 (2005) (noting courts‘ difficulty in establishing a workable distinction

between general and special damages, and observing that the appropriate

distinction of claimed damages varies with the context). Even under the UCC, it

has been noted that consequential damages under § 2.715(2) may overlap with

difference in value damages recoverable under § 2.714(2). White & Summers,

Uniform Commercial Code § 10-4.20

20
Despite the vast number of cases purporting to define ―consequential
damages‖ by repeating the same time-honored but general definitions and
distinctions between consequential and direct damages, the meaning remains
elusive. See, e.g., T.Co Metals, L.L.C. v. Dempsey Pipe & Supply, Inc., 592 F.3d
329, 341 (2nd Cir. 2010) (citing White & Summers, Uniform Commercial Code §
10-2 (5th ed. 2006) (noting ―reasonable persons often differ whether an item of
damage is ‗consequential‘‖); Applied Data Processing, Inc. v. Burroughs Corp.,
394 F. Supp. 504, 508 (D. Conn. 1975) (discussing Michigan law and stating
neither in Michigan nor elsewhere does the term ―consequential damages‖ have
a clearly established meaning); see also Glenn D. West, Sara G. Duran,

35
 Lost profits may be either ―direct‖ or ―consequential‖ damages, depending

on their nature. Cherokee Cnty., 305 S.W.3d at 314; Mood, 245 S.W.3d at 12;

Cont’l Holdings, Ltd. v. Leahy, 132 S.W.3d 471, 475 (Tex. App.—Eastland 2003,

no pet.). As Chrysler argues, profits lost on other contracts or relationships

resulting from the breach (such as resale of property to a third party) are

generally classified as indirect or consequential damages. See Mood, 245

S.W.3d at 12; Leahy, 132 S.W.3d at 475. However, lost profits that represent the

benefit-of-the-bargain measure of damages required to restore the plaintiff to the

economic position he would have enjoyed if the contract had been performed are

―direct‖ damages when shown to be ―conclusively presumed‖ to have been

foreseen by the parties as a usual and necessary consequence of a breach. See

Cherokee Cnty., 305 S.W.3d at 314.

C. Analysis

1. Relevant Contractual Language

In relevant part, the limitation-of-damages provision in the AESSA states:

In the event of default under this Agreement, the sole liability of the
defaulting party is payment of the other party=s out-of-pocket
expenses that cannot be mitigated. Both [Manuel] and [Chrysler]

Reassessing the “Consequences” of Consequential Damage Waivers in
Acquisition Agreements, 63 Bus. Law 777, 780 (May 2008) (suggesting that few
transactional lawyers can define ―‗consequential‘ damages accurately and many
misconstrue the impact a waiver of such damages may have‖); Gregory K.
Morgan & Albert E. Phillips, Design Professional Contract Risk Allocation: The
Impact of Waivers of Consequential Damages and Other Limitations of Liabilities,
33 J.C. & U.L. 1, 13 (2006) (stating ―no one knows what consequential damages
are or may be, at least not with predictability or uniformity‖).

36
 waive all rights to other compensatory damages or to consequential
or punitive damages under any theory of law or cause of action.
[Emphasis added.]

The Settlement Agreement, to which the AESSA is attached as ―Exhibit A,‖

also contains a limitation-of-damages provision, which states as follows:

[Manuel] and [Chrysler] waive any claims they may have for
incidental or consequential damages, for punitive or exemplary
damages, and for jury trial, that may arise by virtue of any breach of
this [Settlement] Agreement or the AESSA, or by virtue of any
transaction based in whole or in part upon a provision of this
[Settlement] Agreement or the AESSA. The parties remain liable for
any actual damages. [Emphasis added.]

The Settlement Agreement also provides that

[t]his [Settlement] Agreement is not part of the Sales and Service
Agreement of any dealership. The terms of any Sales and Service
Agreement prevail if there is any conflict. To the extent that there is
any conflict between this [Settlement] Agreement and any other
agreement or document other than a Sales and Service Agreement
between [Chrysler] and [Manuel], the terms of this [Settlement]
Agreement prevail. [Emphasis added.]

2. Agreements Must Be Construed Together

Chrysler first contends that only the limitation-of-damages provision in the

AESSA (limiting Manuel‘s recovery solely to ―out of pocket expenses that cannot

be mitigated‖) applies because the trial court found that Chrysler failed to use its

best efforts and only the AESSA contains a ―best efforts‖ clause.21 But Manuel

21
Chrysler intimates that the AESSA is only a letter of intent for which Manuel
paid Chrysler nothing. But Manuel gave up his longstanding, successful Chrysler
line at his Richardson dealership (Manuel‘s lost profits that he would have
received from the Richardson dealership as the result of the delay while he
waited to build and open his new dealership constituted his alternative measure
of damages) and agreed to waive his own rights to protest any other relocations

37
replies that the Settlement Agreement must be considered together with and

applies to any breach of the AESSA and further states that the Settlement

Agreement prevails over the AESSA in the event of a conflict, meaning the trial

court correctly awarded damages pursuant to the Settlement Agreement‘s

limitation-of-damages provision, which provides that ―[t]he parties remain liable

for any actual damages.‖

Chrysler does not challenge the trial court‘s finding that the Settlement

Agreement and the AESSA ―comprise the entire agreement between the parties.‖

That finding mirrors &3(l) of the AESSA, which states that ―[t]his Agreement,

together with the [Settlement Agreement] executed contemporaneously with this

agreement, is the entire Agreement between [Manuel] and [Chrysler].‖ The

Settlement Agreement refers to and describes the purpose of the AESSA to

―allow Manuel to apply to the State of Texas for permission to establish a

Chrysler, Plymouth, and Jeep Dealership in Tarrant County, within the Dallas

Market at the location set forth in Exhibit A [the AESSA].‖

or new dealerships in Project 2000. Moreover, Chrysler has not argued that the
AESSA was not binding, nor has it challenged the trial court‘s conclusion that the
AESSA (as well as the Settlement Agreement) is valid and enforceable. Letters
of intent may be enforceable as valid contracts where parties agree on material
terms even where they leave open other terms for later negotiation. Foreca, S.A.
v. GRD Dev. Co., 758 S.W.2d 744, 746 (Tex. 1988) (holding intent to be bound is
essential element of enforceable agreement); John Wood Grp. USA, Inc. v. ICO,
Inc., 26 S.W.3d 12, 19 (Tex. App.—Houston [1st Dist.] 2000, pet. denied) (noting
intent to be bound by letter of intent may be found as a matter of law).

38
 The Settlement Agreement contains numerous other references to the

AESSA. And significantly, the limitation-of-damages provision in the Settlement

Agreement also states that it applies to ―any claims for damages by virtue of any

breach of this [Settlement] Agreement or the AESSA.‖ [Emphasis added].

Finally, the Settlement Agreement provides that, to the extent of any conflict with

any other agreement (other than a Sales and Service Agreement, not at issue

here), which would include the AESSA, ―the terms of this [Settlement] Agreement

prevail.‖ [Emphasis added.]

We agree with Manuel that the two agreements must be construed as one

instrument and interpreted together. Although the AESSA limits Chrysler‘s

liability for breach of that agreement to ―out-of-pocket expenses that cannot be

mitigated,‖ the Settlement Agreement states that it applies to any breach of that

agreement or the AESSA, that it prevails to the extent of any conflict with the

AESSA, and that ―[t]he parties remain liable for any actual damages.‖ [Emphasis

added.]

3. Lost Profits May Be Direct or Consequential Damages

There is no bright-line rule that lost profits always constitute consequential

damages under the common law (as Chrysler seems to contend), and Chrysler‘s

cases holding that lost profits are consequential damages are not persuasive.

For example, Tooke v. City of Mexia, 197 S.W.3d 325, 329 (Tex. 2006), did not

involve common law consequential damages but instead interpreted section

271.153 of the Texas Local Government Code, which limits recovery to the

39
―balance due and owing‖ under a contract with a city plus interest, thereby

excluding recovery under that statute for all lost profits as consequential

damages.22

In Leahy, 132 S.W.3d at 475, also relied upon by Chrysler, the limitation-

of-damages provision expressly excluded recovery for ―lost profits,‖ both direct or

consequential. Neither the AESSA nor the Settlement Agreement in this case

even mentions ―lost profits,‖ nor do the limitation-of-damages provisions purport

to allocate that risk to either party, even though the lost profits were the only type

of damages that Manuel would likely suffer from a significant delay caused by a

protest from another dealer and that very risk was expressly mentioned in the

Settlement Agreement and addressed by both the Settlement Agreement and the

AESSA. Courts have construed limitation-of-damages clauses to preclude both

direct and consequential lost profits where the clauses expressly waived

damages for either lost profits or consequential damages, but have held that

direct lost profits were not precluded where only ―consequential‖ damages, either

generally or ―including‖ lost profits, were waived. Compare id. (limitation-of-

liability clause precluded both direct and consequential lost profits where contract

waived damages for ―loss of profits, loss of business, or any other indirect or

22
We agree with our sister court in Cherokee County that Tooke should not
be extended beyond the governmental-immunity context. See 305 S.W.3d at
315 n.8 (noting that lost profits are consequential damages under local
government code section 271.153) (quoting City of Houston v. Petroleum
Traders Corp., 261 S.W.3d 350, 359 (Tex. App.—Houston [14th Dist.] 2008, no
pet.)).

40
consequential damages‖ (emphasis added)), with Cherokee Cnty., 305 S.W.3d at

314 (holding direct lost profits recoverable although contract disallowed

―consequential‖ damages), and Tenn. Gas, 2008 WL 3876141, at *6–8 (holding

clause limiting recovery of consequential damages ―including . . . lost profits‖

barred only consequential lost profits).23

The recent Cherokee County case supports recovery of lost profits for

resale to third parties as direct damages in the face of a limitation-of-damages

clause, similar to the one in this case, which waived recovery of consequential

damages without mentioning lost profits. See 305 S.W.3d at 315. In that case, a

long-term contract for purchase of gas to operate a cogeneration facility

contained a provision allowing the buyer to use the gas to operate the facility or

to resell the gas to third parties. Id. at 311. When the seller failed to deliver the

required volumes of gas as the claimed result of weather disruptions, the buyer

sued for damages based on the difference between the amount it would have to

pay under the contract and the much higher amount that it would have received

by selling the gas to third parties during that period. Id. at 311–12. The seller

contended that the damages amounted to lost profits waived by the clause

prohibiting recovery of consequential damages, and the trial court granted

summary judgment to the seller. Id. at 312. The Houston Fourteenth Court of

23
See also Penncro Assocs., Inc. v. Sprint Spectrum, L.P., 499 F.3d 1151,
1156 (10th Cir. 2007) (holding direct lost profits allowed where clause provided
―no consequential damages are recoverable includ[ing], but . . . not limited to, lost
profits, lost revenues and lost business opportunities‖).

41
Appeals reversed and remanded, holding that the lost profits from the buyer‘s

inability to resell gas not delivered to customers at the higher market value were

―direct‖ damages not precluded by the waiver of ―consequential‖ damages

contained in the contract. Id. at 314–15. Holding that the contract was not a sale

of goods controlled by the UCC, the court used the common law definition of

―consequential damages‖ and held that, by the parties‘ express agreement that

the buyer could resell the gas to a third party, the contract thereby implicitly

authorized the buyer to profit from increases in the market price of the gas; thus,

any wrongful interference with that contract right ―would naturally and necessarily

cause [the buyer] to suffer direct damages in the form of profits on the

[a]greement itself.‖24 Id. at 315 & n.11. Thus, depending on the unique

circumstances of each case, including the specific language of the contract, lost

profits may be direct or consequential damages.

4. Ambiguity Concerning Recoverable Damages

a. Conflict Concerning Recoverable Damages

Considering the contracts together, the AESSA limits Chrysler‘s liability to

out-of-pocket expenses, but the Settlement Agreement provides that it ―prevails‖

to the extent of any conflict with the AESSA and states that the parties ―remain

24
The Houston court contrasted those direct loss of profits from inability to
sell the gas with profits lost on its contracts for sale of electricity produced from
the gas at its cogeneration facility, which would be consequential damages. Id.
at n.12; see also Tenn. Gas, 2008 WL 3876141, at *8 (holding gas pipeline
suffered consequential damages when seller=s failure to timely deliver purchased
equipment prevented it from selling gas to its customers).

42
liable for any actual damages.‖ The first and most obvious conflict is between

the AESSA, which limits recovery to out-of-pocket expenses and excludes

consequential damages, and the Settlement Agreement, which allows recovery

for actual damages. The second conflict is between the retention of liability for

―any actual damages‖ and the waiver of consequential damages, both within the

same paragraph of the Settlement Agreement.

Chrysler attempts to reconcile the obvious conflict between the limitation to

―out-of-pocket expenses‖ in the AESSA and the retention of liability for ―actual

damages‖ in the Settlement Agreement by focusing on a waiver of

―consequential‖ damages contained in both agreements. Chrysler argues that

the lost profits damages awarded to Manuel are barred from recovery under both

agreements as ―consequential damages‖ because they constituted only

anticipated lost income from collateral contracts, that is, retail sales that Manuel

claimed his new dealership could have made to third parties during its first year

of operation had it opened on time. But as discussed above, lost profits are not

per se consequential damages solely because sales to third parties are involved.

See, e.g., Cherokee Cnty., 305 S.W.3d at 314–15.

Chrysler also posits that one measure of direct ―actual damages‖ is ―out-of-

pocket expenses‖ and that interpreting the retention of liability for ―actual

damages‖ so as to allow Manuel‘s recovery only of out-of-pocket expenses (by

reason of the waiver of consequential damages) is consistent with the limitation

of damages in the AESSA to out-of-pocket expenses. While this proposed

43
construction superficially harmonizes the two clauses, the limitation-of-damages

clause in the AESSA already uses the term ―out-of-pocket expenses.‖ It is not

reasonable to interpret both terms, that is, ―actual damages‖ and ―out-of-pocket

expenses,‖ to have the same meaning as that would render one or the other term

meaningless or redundant. See Cmty. Improvement Ass’n of Lake Conroe Hills,

Inc. v. Beckham, No. 07-03-00036-CV, 2004 WL 2000666, at *4 (Tex. App.—

Amarillo 2004, no pet.) (mem. op.) (declining to interpret different words used in

document to have the same meaning, effectively rendering one or the other

redundant); Cherokee Water Co. v. Freeman, 33 S.W.3d 349, 354 (Tex. App.—

Texarkana 2000, no pet.) (holding that construing different terms to have same

meaning would render some words to be meaningless); see also Penncro

Assocs., Inc., 499 F.3d at 1157 (―When a contract uses different language in

proximate and similar provisions, we commonly . . . assume that the parties‘ use

of different language was intended to convey different meanings.‖). Thus, we

must assume that the use of the term ―actual damages‖ rather than ―out-of-

pocket expenses‖ in the Settlement Agreement was for a purpose and means

something other than ―out-of-pocket expenses.‖

Chrysler next argues that reading the limitation of damages clause in the

Settlement Agreement so that the more specific waiver of consequential

damages controls over the more general term ―actual damages‖ leads to a

conclusion that the parties intended to retain liability only for actual damages that

are not incidental or consequential, meaning direct damages may be recovered

44
but that Manuel‘s lost profits are unrecoverable consequential damages.

Chrysler cites Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 133–34 (Tex.

1994) for the secondary rule of construction that specific provisions control over

general provisions.25 But Forbau further states that ―[t]his is but an application of

our long-established rule that ‗[n]o one phrase, sentence, or section [of a

contract] should be isolated from its setting and considered apart from the other

provisions.‘‖ Id. (quoting Guardian Trust Co. v. Bauereisen, 132 Tex. 396, 403–

05, 121 S.W.2d 579, 583 (1938)). And it bears repeating that lost profits are not

per se consequential damages solely because there will be a subsequent sale to

third parties. See, e.g., Cherokee Cnty., 305 S.W.3d at 314–15.

25
Chrysler also argues that the waiver of ―other compensatory damages‖
(in addition to the waiver of consequential damages) in the AESSA is more
specific and controls over the more general retention of liability for ―actual
damages‖ in the Settlement Agreement (applying the specific-over-general rule
of construction, so as to preclude recovery of all lost profits). But the ordinary
meanings of the terms ―actual damages‖ and ―compensatory damages‖ are that
they are synonymous. See Tate v. Hernandez, 280 S.W.3d 534, 541 (Tex.
App.—Amarillo 2009, no pet.) (holding ―actual damages‖ and ―compensatory
damages‖ have same meaning); Anderson v. Alcus, 42 S.W.2d 294, 296 (Tex.
Civ. App.—Beaumont 1931, no writ) (noting ―actual damages‖ are synonymous
with ―compensatory damages‖). Chrysler‘s only suggestion to resolve this
conflict is to ignore the provision in the Settlement Agreement allowing recovery
of actual damages. Application of that rule of construction here would require
that we simply disregard that provision in violation of the basic rule that we avoid
interpreting contracts so as to render terms meaningless. Second, we are at a
loss to see how one synonymous term can be more specific than another. Third,
Chrysler overlooks the provision that the Settlement Agreement ―prevails‖ in the
event of a conflict with the AESSA, so that the parties‘ retention of liability for
―actual damages‖ in the Settlement Agreement trumps the waiver of ―other
compensable damages‖ in the AESSA.

45
 Chrysler‘s proposed interpretation—that the more specific waiver of

consequential damages controls over the more general term ―actual damages,‖

meaning Manuel may only recover lost profits that are ―direct damages‖—is

reasonable. But this does not end our analysis because Chrysler‘s interpretation

is not the only reasonable interpretation of the agreements. Manuel contends

that the two agreements are ambiguous because they conflict on their face when

read together.26 Specifically, Manuel points out that the Settlement Agreement

expressly provides that it ―prevails‖ in the event of a conflict with the AESSA and

that the Settlement Agreement‘s limitation of damages provision expressly states

that it applies to a breach of the AESSA. Manuel also points to the inherent

conflict between the Settlement Agreement‘s purported waiver of consequential

damages and simultaneous retention of liability for any actual damages. Given

these conflicts and the provisions in the AESSA that time was of the essence and

that Chrysler had the obligation to use its best efforts to litigate or settle any

protest so that the South Arlington dealership could open by January 1, 2001,

26
Manuel, citing Wilburn v. Mo.-Kan.-Tex. Ry. Co. of Tex., 268 S.W.2d 726,
731 (Tex. Civ. App.—Dallas 1954, no writ) (op. on reh‘g) (stating that ―[a] contract
will not be construed to limit the remedial rights of the parties unless such an
intention is clear‖), argues that the limitation-of-damages clauses are ambiguous,
which renders them unenforceable. While we agree that the clauses are
ambiguous as discussed below, this rule of construction is inapplicable here
because the contracts provide that their terms will not be strictly construed
against either party. Moreover, this rule of strict construction does not apply in
the context of commercial contracts between sophisticated parties. See Green
Int’l, Inc. v. Solis, 951 S.W.2d 384, 387 (Tex. 1997) (holding no-damages-for-
delay clause enforceable in agreement between experienced parties familiar with
such risk-shifting clauses).

46
Manuel‘s interpretation of the agreements—preserving the right to recover any

actual damages—is also reasonable.

After applying the applicable rules of interpretation and considering all of

the circumstances surrounding the execution of the agreements; the lack of

specific waiver of lost profits in either agreement; and the lack of any definition of

consequential, compensatory, or actual damages, we are left with terms that

remain subject to more than one reasonable interpretation. They are therefore

ambiguous as a matter of law, and we hold that the trial court did not err by

implicitly finding that the contracts are ambiguous.

b. Evidence of Parties’ Intent

While the trial court did not make an explicit conclusion of law that the

contract was ambiguous, it implicitly did so because it made a finding of fact that

the parties ―intended to retain the right to actual damages.‖ Chrysler argues in

the last part of its second issue that there is no evidence to support the trial

court‘s finding of the parties‘ intent because no witness provided parol evidence

of the parties‘ intent concerning the damage waiver provisions since neither

Manuel‘s attorney nor Chrysler‘s attorney—the only persons who drafted or

negotiated wording changes in the agreements—were asked any questions on

this topic and because no changes were made in the damage limitations in the

agreements.

Chrysler provides no case law stating that parol evidence of the parties‘

true intent as an issue of fact is required when a contract is ambiguous. Rather,

47
the rule is that parol evidence of intent of the parties may be considered when

the court has determined that a contract is ambiguous. Philadelphia Am. Life Ins.

Co. v. Turner, 131 S.W.3d 576, 587 (Tex. App.―Fort Worth 2004, no pet.) (citing

Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995),

and Sage St. Assocs. v. Northdale Constr. Co., 863 S.W.2d 438, 445 (Tex.

1993)). The primary and best evidence of the parties‘ intent remains the

agreement itself, considered in light of all of the surrounding facts and

circumstances. See Emerald Tex., Inc. v. Peel, 920 S.W.2d 398, 402 (Tex.

App.—Houston [1st Dist.] 1996, no writ) (citing City of Pinehurst v. Spooner, 432

S.W.2d 515, 518 (Tex. 1968)). The fact finder may consider other evidence that

may be helpful in illuminating the parties‘ true intent. Sw. Airlines Co. v. Jaeger,

867 S.W.2d 824, 829–30 (Tex. App.—El Paso 1993, writ denied), disapproved of

on other grounds by Dallas Market Ctr. Dev. Co. v. Liedeker, 958 S.W.2d 382,

386–87 (Tex. 1997), overruled, Torrington Co. v. Stutzman, 46 S.W.3d 829, 840

n.9 (Tex. 2000). Moreover, parties do not ordinarily contract with reference to

what happens if there is a breach. ―Parties generally have their minds addressed

to performance of contracts―not to their breach or the consequences which will

follow a breach.‖ See 24 R. Lord, Williston on Contracts § 64:15 (4th ed. 1999).

In this case, there is legally sufficient evidence to support the trial court‘s

finding that the parties intended to retain the right to actual damages, even

though there is not specific testimony of their subjective intent regarding the

limitation of damages provisions. That evidence included the agreements

48
themselves; the circumstances surrounding Chrysler‘s planning, negotiations,

and implementation of Project 2000; the sophistication and longstanding

relationship of the parties; the parties‘ negotiations; Chrysler‘s need for

franchised dealers to be able to sell Chrysler‘s motor vehicles to the public; the

purpose of the agreement for a franchise, which was for both Chrysler and

Manuel to make profits from car sales; the overriding importance to success of

the marketing plan such that each participating dealer agreed to waive the right

to protest another dealer; and, finally, the recognition by both parties that a

protest might nevertheless be made and result in significant delay in opening the

new dealership.27

Chrysler agreed in the AESSA to grant a franchise to Manuel, and the

AESSA specifically set forth Chrysler‘s ―planning potential‖ for Manuel‘s new

dealership as 1,076 vehicles to be supplied by Chrysler in the new dealership‘s

first year so that Manuel could resell those vehicles to consumers. As conditions

required for Chrysler to grant Manuel the franchise, Manuel was to acquire

suitable land for the construction of the dealership and provide building and site

plans to be approved by Chrysler for a facility—the minimum requirements for

27
Moreover, a limitation or waiver of damages in a contract is an affirmative
defense, so that Chrysler, rather than Manuel, had the burden of proof to offer
any parol or other extrinsic evidence that the parties‘ true intent was to preclude
recovery of the damages claimed by Manuel. See Leahy, 132 S.W.3d at 475;
Regency Advantage Ltd. P’ship v. Bingo Idea–Watauga, Inc., 928 S.W.2d 56, 63
(Tex. App.—Fort Worth 1995), rev’d in part on other grounds, 936 S.W.2d 275
(Tex. 1996) (per curiam).

49
which were specifically set forth (excluding a body shop) in the AESSA as 20,350

square feet of facility including a new vehicle showroom for six vehicles, a parts

department of 5,500 square feet, a service department of 11,500 square feet with

22 service stalls, and 110,100 square feet of total land area. The AESSA stated

these requirements were based upon Chrysler‘s ―planning potential‖ of ―1076

units‖ for the first year of operation of the dealership. Additionally, in November

2001, Chrysler prepared for Manuel a ―Dealer Agreement Portfolio‖ including a

document signed by Manuel and titled ―DAP-3,‖ which forecast the new

dealership‘s net profit as $702,674 for its first year of actual operation based

upon Chrysler‘s estimated ―planning potential‖ for the new dealership‘s first year

of actual operation along with parts and service, minus expenses.

Jim Dimond, Chrysler‘s national market representation manager in 2000

and whose department developed Project 2000, testified his department

determined dealer planning potential. Chrysler purchased data on auto

registrations from all parts of the country, demographic data with population and

income levels, and counts of competitive dealers in market areas. Dimond

explained that ―planning potential‖ is each market‘s share of ―forward looking

financial volumes.‖ As Dimond noted, the AESSA cautioned that planning

potential was not intended to predict the number of units that the dealer would

sell or that Chrysler would sell to the dealer and that number might change with

market conditions. Nevertheless, he admitted that Chrysler used planning

50
potential for the number of anticipated sales for the first year for a new

franchised-dealership because it is ―the best number if we have no track record.‖

Dimond described the South Arlington area as a growing market with a

strong population and increasing income where Chrysler needed to establish

more ―points.‖ Dimond explained that the only way that a dealer can sell cars in

the United States and the only way a manufacturer can distribute cars for sale to

consumers is through a franchised dealership. As relevant here, the TMVC

defines a ―franchise‖ as one or more contracts between a franchised dealer as

franchisee and a manufacturer (or distributor) as franchisor, in which: ―(A) the

franchisee is granted the right to sell and service new motor vehicles

manufactured or distributed by the franchisor or to service motor vehicles under

the contract and a manufacturer‘s warranty‖ and ―(D) the franchisee‘s business

substantially relies on the franchisor for a continued supply of motor vehicles,

parts, and accessories.‖ Tex. Occ. Code Ann. § 2301.002 (West 2008).

Van Gray, Chrysler‘s national dealer placement manager in 1998 and

1999, testified that Chrysler would not have undertaken the risky venture of

slating a new dealership in the South Arlington area unless it thought the

dealership could make money. It belabors the obvious to say that Chrysler and

Manuel were sophisticated parties in the automobile business and, as reflected

by the agreements, that both knew a protest from another dealer was possible

and could result in significant delay. But the AESSA placed the obligation to use

best efforts to litigate or settle the protest on Chrysler (requiring only that Manuel

51
cooperate with Chrysler) and provided that time was of the essence, and

Manuel‘s actual damages could be no other than the profits he lost by reason of

the delay caused by Chrysler‘s failure to use its best efforts to litigate or settle the

Meador protest.28

Considering the evidence favorable to the trial court‘s finding concerning

the parties‘ intent if a reasonable factfinder could and disregarding evidence

contrary to the finding unless a reasonable factfinder could not, we hold that

legally sufficient evidence supports the trial court‘s finding that the parties

intended to retain liability for the damages awarded to Manuel in this case. See

Cent. Ready Mix Concrete Co., 228 S.W.3d at 651; City of Keller, 168 S.W.3d at

827. There was ample evidence from which the trial court could reasonably have

found that the parties intended to allocate the risk of delay from any protest to

Chrysler such that it was to retain liability for ―any actual damages‖ including

Manuel‘s lost profits, rentals, or salary resulting from such a delay. We therefore

overrule Chrysler‘s second issue.

V. RELIABILITY OF EXPERTS

By its third issue, Chrysler contends that the trial court abused its

discretion in admitting the testimony of Allen Wilkerson, Manuel‘s CPA, and

28
The amount of damages awarded by the trial court was within the range
of and less than half of Chrysler‘s own estimate and, as indicated by the trial
court in a letter to the parties, amounts to approximately four months‘ of lost
profits. The amount could have tied to the four-month period, from June 7, 2000,
when the federal district court denied relief to Chrysler, to October 4, 2000, the
date of Chrysler‘s ultimate settlement with Meador.

52
Dr. James R. Vinson, Manuel‘s economist, regarding ―lost profits‖ of the new

dealership in this case because both experts‘ opinions were based upon an

unreliable methodology and foundation. Chrysler characterizes the testimony

and opinions as falling into the ―scientific testimony arena‖ subject to its

Daubert/Robinson challenge and running objection to the testimony at trial. See

Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 592–93, 113 S. Ct. 2786,

2796 (1993); E.I. duPont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 556

(Tex. 1995).

For Manuel‘s primary damage model, his experts determined lost profits

from the South Arlington dealership‘s delay in opening from November 2001 to

November 2002 based upon actual data from Manuel Dodge (the Richardson

dealership) for that period. Vinson referred to the damages model as the

―business plan model,‖ which he said is accepted in the industry for financing and

venture capital for projected profitability and which has been relied upon in other

Texas cases.

Vinson testified that he asked Wilkerson to use Chrysler‘s online manual

for the specific criteria per unit and the Richardson dealership‘s actual records

during the same period regarding actual profits and expenses as a ―yardstick,‖

which he testified was the most comparable business to the South Arlington

dealership because it was, like the South Arlington dealership, also a two-line

dealership (after Manuel ceased selling the Chrysler line) that was actually in

53
operation during that period, located in a similar area with similar demographics,

and was under the same ownership and management.

Vinson chose the figure of 1,076 new units because Chrysler calculated

that number as the ―planning potential‖ for anticipated sales from that dealership

for 2001 as a performance guideline based on Manuel‘s historical experience of

operating at or near Chrysler‘s planning potential. Wilkerson performed the

calculations comparing the proposed South Arlington dealership and the

Richardson dealership, and he testified that the ―adjusted forecasted income

loss‖ to the South Arlington dealership, because it was not open during 2001,

was $864,468. Wilkerson also testified that Manuel would have, in addition,

personally earned an owner‘s salary of $475,632 and collected rent paid to him

by the dealership entity in the amount of $600,000. Thus, Manuel‘s total net

profit according to Vinson and Wilkerson would have been $1,940,100 for the

period that he could not open the South Arlington dealership.

Chrysler challenged the admissibility of the testimony of both experts as

being based upon an unreliable foundation and methodology, contending that:

(1) their damage model was not an acceptable methodology for calculating lost

profits; (2) neither witness considered actual sales of the new dealership after it

finally opened in 2002; (3) nor did they consider other comparable dealerships in

the area but instead used as their ―benchmark‖ Manuel‘s own most successful

dealership from a different market for a ―shining star year‖ of sales; (4) they relied

upon Chrysler‘s ―planning potential‖ for 2001 to estimate future sales and did no

54
independent market or demographic analysis; (5) they failed to include start-up

costs for the new business; and (6) they used estimates of Dodge sales to

formulate opinions on Chrysler/Jeep sales.

A. Reliability Test

We do not regard the Robinson test for reliability of scientific opinions to be

applicable to the expert opinions in this case. Instead, we hold that the general

reliability test of Gammill is more appropriate. Compare Robinson, 923 S.W.2d

at 556 (relying on Daubert and identifying six nonexclusive factors for

determining whether scientific evidence is reliable), with Gammill v. Jack Williams

Chevrolet, Inc., 972 S.W.2d 713, 726 (Tex. 1998) (holding factors listed in

Daubert and Robinson cannot be applied to all expert testimony, but general

requirements of Texas Rule of Evidence 702 for reliability still require trial court to

determine whether testimony is supported by more than credentials and ipse dixit

of expert and to ensure that opinion comports with applicable professional

standards and has a reliable basis in the knowledge and experience of the

discipline); see also Paschal v. Great W. Drilling, Ltd., 215 S.W.3d 437, 448 (Tex.

App.—Eastland 2006, pet. denied) (holding Gammill test appropriate for expert

testimony of a certified public accountant regarding analysis of financial records

for tracing of embezzled funds).

B. Methodology

Chrysler argues that the method utilized by Vinson for determining lost

profits was improper. Chrysler‘s own expert, however, did not testify that the

55
methodology used by Manuel‘s experts was improper, nor did he propose

another method or calculate or offer an opinion as to what the actual sales for

2001 would have been for the twelve months that the South Arlington dealership

was not open. See KMG Kanal-Muller-Gruppe Deutschland GMBH & Co. v.

Davis, 175 S.W.3d 379, 396 (Tex. App.—Houston [1st Dist.] 2005, no pet.)

(holding testimony of expert with doctorate in economics, who taught a university

course in corporate evaluation and whose method of business valuation was not

shown to have been rejected by any authority or opposing expert, was reliable

under Gammill).

There is no one proper method for determining lost profits as damages.

See Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960

S.W.2d 41, 50 (Tex. 1998) (noting that supreme court was ―not retreating from

our refusal to endorse one method for determining lost profits‖) (citing Holt

Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 85 (Tex. 1992)). The ―yardstick‖

method used by Vinson, consisting of a study of profits from business operations

that are closely comparable to that of a plaintiff, has been accepted for

calculating lost profits and, in particular, for new businesses. See Lehrman v.

Gulf Oil Corp., 500 F.2d 659, 667 (5th Cir. 1974) (recognizing ―yardstick‖ and

―before and after‖ as two generally recognized methods of determining lost profits

as damages). Texas courts have accepted the yardstick analysis specifically for

determining lost profits from a new business by using a comparable established

business that is also owned and operated by the plaintiff, as in this case. See,

56
e.g., Signal Peak Enters. of Tex., Inc. v. Bettina Invs., Inc., 138 S.W.3d 915,

925 (Tex. App.—Dallas 2004, pet. struck) (holding expert opinion proper for lost

profits based on projected revenues minus projected operating expenses for

plaintiff‘s own existing business); America’s Favorite Chicken Co. v. Samaras,

929 S.W.2d 617, 629 (Tex. App.—San Antonio 1996, writ denied) (describing

model presented by expert as having intelligent, objective basis by taking into

account historical operations of other franchises operated by plaintiff, potential for

failure of new franchise, and other factors including plaintiff‘s experience in the

industry as well as historical data on his franchise operations); Pena v. Ludwig,

766 S.W.2d 298, 303 (Tex. App.—Waco 1989, no writ) (holding reasonableness

or reliability of methodology went to weight and not admissibility where profits of

established business of plaintiff could serve as a reliable basis for calculating lost

profits of new business; plaintiff was primarily responsible for operating both

shops and familiar with their management and financial condition, and factual

data from established business provided sound basis for probable loss to new

business). Thus, we reject Chrysler‘s assertion that the expert testimony was

unreliable because it was based on the ―yardstick‖ method.

C. Foundational Data

We interpret Chrysler‘s remaining complaints in its third issue as

challenging the underlying foundational data relied upon by Vinson and

Wilkerson. See Merrell Dow Pharms. v. Havner, 953 S.W.2d 706, 712 (Tex.

1997) (―The substance of the [expert‘s] testimony must be considered. . . . The

57
underlying data should be independently evaluated in determining if the opinion

itself is reliable.‖). In this regard, Chrysler‘s complaints merge with a legal

sufficiency type analysis for lost profits damages. Once a plaintiff has chosen a

particular methodology of evaluation, ―recovery of lost profits must be predicated

on one complete calculation.‖ Holt Atherton, 835 S.W.2d at 85.

The amount of the loss must be proven by competent evidence with

―reasonable certainty‖ by whatever method is chosen, but the rule regarding such

proof is intended to be ―flexible enough to accommodate the myriad

circumstances in which claims for lost profits arise.‖ Tex. Instruments, Inc. v.

Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279 (Tex. 1994) (reaffirming Sw.

Battery Corp. v. Owen, 131 Tex. 423, 425–26, 115 S.W.2d 1097, 1098–-99

(1938)). What constitutes reasonably certain evidence of lost profits is a ―fact

intensive determination.‖ Holt Atherton, 835 S.W.2d at 85. At a minimum,

opinions or estimates of lost profits must be based upon objective facts, figures,

or data from which the amount of lost profits may be ascertained. Springs

Window Fashions Div., Inc. v. The Blind Maker, Inc., 184 S.W.3d 840, 884–85

(Tex. App.―Austin 2006, pet. granted, judgm‘t vacated w.r.m.) (op. on reh‘g).

Where estimates are based on objective facts or data and there are firm reasons

to expect a business to yield a profit, recovery is not prohibited simply because

the enterprise is new. Tex. Instruments, Inc., 877 S.W.2d at 280. It is the

activity that is the enterprise, and if the activity is well-established, the fact that a

newly formed entity is engaging in the activity will not preclude recovery. Id.

58
 1. Reliance on “Planning Potential”

In November 2001, before the opening of the dealership, Chrysler

prepared and Mr. Manuel signed a document introduced into evidence and

referred to as a DAP-3, which projected net profits for the first year of operation

of the South Arlington dealership based upon the number of units Chrysler

estimated for anticipated sales during the first year of actual operation. Chrysler

now says that its estimate is ―not reliable‖ and should not have been used by

Manuel‘s experts to project sales. However, Van Gray, Chrysler‘s own national

dealer placement manager responsible for placing, planning, and relocating

dealerships, testified that planning potential is a common methodology prepared

and used by automobile manufacturers. In a new ―green field market‖ such as

South Arlington, it was the ―best number‖ available to capitalize and plan a

dealership. In an established market, he said, planning potential would be similar

to minimum sales responsibility. Gray further testified that Chrysler performs

extensive market research as to where dealerships are to be located and as to

what the planning potentials should be. Manuel‘s experts accepted that Chrysler

had properly evaluated the market and the resulting anticipated sales based

upon data researched by its market research company, Urban Sciences. They

testified that planning potential is consistently used as an industry standard and

concluded that it was reasonable to use the planning potential assigned in the

AESSA by Chrysler itself as the estimate for sales of new vehicles for that year

59
by the dealership. Thus, the experts‘ reliance on Chrysler‘s planning potential

did not render their opinions unreliable.

2. Comparable Dealership

Chrysler‘s expert (1) criticized Manuel‘s experts‘ use of Manuel‘s

Richardson dealership‘s operation for 2001 as a comparable dealership by which

to ascertain the new dealership‘s anticipated net profits for that year, (2) thought

that Manuel‘s experts should have used subsequent actual years of operation for

the new dealership, and (3) believed that Chrysler‘s number of units of 1076 was

―too high‖ to use as estimated actual sales for that year. Manuel‘s experts,

Vinson and Wilkerson, testified that they forecast lost profits based upon the

Richardson dealership during the same time period because it was under

Manuel‘s same experienced ownership and management in the same year that

the South Arlington dealership was unable to open, because it sold two lines

made by Chrysler, as did the South Arlington dealership, and because the

demographics were comparable. Vinson and Wilkerson testified that they chose

a dealership owned and managed by Manuel because using other dealerships

would inject too many uncertainties and extraneous variables into the

comparison. Chrysler‘s dealer placement manager, Van Gray, agreed that

management by the dealer-principal is the most important factor in the

profitability of a dealership.

Additionally, Vinson and Wilkerson testified that the Richardson dealership

and Manuel‘s West Loop Dodge dealership were the only two of Manuel‘s

60
dealerships that they could have used for the year in question. They did not use

the West Loop Dodge dealership in Fort Worth because it sold other lines of

vehicles not manufactured by Chrysler, and it would have been extremely difficult

to separate out the expenses and revenues attributable to Chrysler vehicles.

They did not use Manuel‘s Lancaster dealership as a basis for comparison

because Manuel did not own that store during the relevant time period.

Chrysler also criticizes Manuel‘s experts‘ choice of using Manuel Dodge as

its yardstick because that dealership sold Dodge trucks, and the Dallas-Fort

Worth area is the biggest truck market in the world and more likely to be

profitable for that reason. But Wilkerson testified that the gross profit per vehicle

was within the same range for both dealerships. He tested the damage model by

comparing it to gross profit per unit for other area dealers doing business in 2001

and concluded that the model was very conservative. We hold that the experts‘

reliance on the Richardson dealership as the most comparable dealership did not

render their opinions unreliable.

3. Applicable time period

Chrysler‘s argument that Vinson and Wilkerson should have used

subsequent years of the South Arlington dealership‘s actual operation versus

Manuel‘s damage model based on the 2001 period during which the dealership

was delayed in opening was arguably the most contentious subject of the trial as

to damages. The dealership opened in February of 2002. However, both

Chrysler‘s and Manuel‘s witnesses agreed that the years of 2000 and 2001 were

61
exceptionally great years for Chrysler sales in the Dallas/Fort Worth area,

whereas the significant downturn in the automobile market began in 2002, when

registrations for Chrysler vehicles declined by 20 percent and profit for all dealers

fell $8.2 million. The downturn was continuing at the time of trial. The South

Arlington dealership had a loss of $482,000 in 2002. But Manuel‘s experts

testified that looking at actual performance in 2002 would not accurately reflect

how the dealership would have performed in 2001. Wilkerson testified that the

difference between actual and projected sales was $1.1 million.

Each of these areas of contention was hotly disputed. We cannot say that

that the trial court abused its discretion in admitting the expert testimony on this

record. See Cooper Tire & Rubber Co. v. Mendez, 204 S.W.3d 797, 800 (Tex.

2006) (stating trial court‘s determination of reliability of expert‘s opinion reviewed

for abuse of discretion). Chrysler‘s own estimate, reflected in its DAP-3 for

Manuel‘s South Arlington dealership‘s net profit for its first year of operation, was

$702,674. The DAP-3 listed as ―fixed expenses‖ a salary of $240,000 for Tommy

Manuel and $540,000 in rent to him for a total of $780,000 to Tommy Manuel,

personally. The ―actual damages‖ of $370,668.50 awarded by the trial court

were well within the range of Chrysler‘s own estimate of net profits as well as

those of Manuel‘s witnesses.

Moreover, even if there was an error in admission of the expert testimony,

it was harmless. The trial court‘s finding as to damages is supported by the

evidence as to the amounts for rental and salary estimated to be paid to Mr.

62
Manuel by the dealership, which Vinson testified could be considered either as

added to net profit or as fixed expense. See Springs Window Fashions, 184

S.W.3d at 887 (holding evidence―also provided by Vinson―that significant

portion of net income was distributed to corporation‘s owner as compensation

and benefits constituted evidence supporting award for lost profits for business

otherwise operating at a loss) (citing Bettius & Sanderson, P.C. v. Nat’l Union

Fire Ins. Co., 839 F. 2d 1009, 1014 (4th Cir. 1988) (explaining concept in context

of a professional corporation, which would otherwise never be able to show lost

profits because its net income for tax purposes is usually near zero even if

shareholders are earning large incomes)). Accordingly, we overrule Chrysler‘s

third issue.

VI. PREJUDGMENT INTEREST

In its final judgment, the trial court awarded Manuel damages of

$370,668.50 plus prejudgment interest of $126,425.88, calculated at the per

diem rate of $83.78 and representing ―prejudgment interest on past damages

having accrued at the lawful rate of eight and one-quarter percent (8.25%) per

annum from January 12, 2003 until the date of this judgment.‖ Chrysler contends

in its fourth issue that the trial court erred in miscalculating the amount of

prejudgment interest because it used an incorrect date of accrual (180 days after

the date Chrysler received the first of two notices of a claim on July 16, 2002),

incorrectly granting Manuel more than $35,000 in unearned prejudgment interest.

63
 For a breach-of-contract claim, prejudgment interest begins to accrue on

the earlier of (1) 180 days after the date a defendant receives written notice of a

claim, or (2) the date suit is filed. Johnson & Higgins of Tex., Inc. v. Kenneco

Energy, Inc., 962 S.W.2d 507, 532 (Tex. 1998). A claim ―is a demand for

compensation or assertion of a right to be paid.‖ Toshiba Mach. Co., Am. v. SPM

Flow Control, Inc., 180 S.W.3d 761, 785 (Tex. App.—Fort Worth 2005, pet.

granted, judgm‘t vacated w.r.m.). A claim need not demand an exact amount or

list every element of damage. Id. ―The abuse of discretion standard applies to

the trial court‘s factual findings as they relate to prejudgment interest; but the de

novo standard applies to the trial court‘s application of the law to the facts.‖ Id.;

see also Figueroa v. Davis, 318 S.W.3d 53, 66 (Tex. App.—Houston [1st Dist.]

2010, no pet.).

Chrysler does not contest the trial court‘s finding of fact that Chrysler

received two written notices from Manuel, one on July 16, 2002, and the other on

May 31, 2004. Chrysler‘s contention is that the first time it had notice of any

claim against it for damages for breach of the AESSA or Settlement Agreement

was Manuel‘s May 31, 2004 demand letter and that the July 16, 2002 written

notice was for an entirely different claim on which Manuel did not prevail in the

trial court. Therefore, Chrysler argues that the written notice of that other claim

cannot constitute the date from which prejudgment interest was to run.

In the July 16, 2002 letter, Manuel asserted that Chrysler had orally agreed

at the June 14, 2000 strategy meeting to dismiss its appeal in federal court and

64
attempt to negotiate a settlement with Meador while Manuel sued Meador in

state court for damages as a result of Meador‘s protest and that the Chrysler

representatives present at the meeting ―unanimously agreed‖ to reimburse

Manuel for Manuel‘s legal fees and expenses.

Pursuant to the alleged agreement reached at the meeting, Manuel filed

suit against Meador in Tarrant County District Court on July 12, 2000. Manuel

continued the state court suit against Meador to a conclusion, claiming breach of

contract, fraud, and promissory estoppel, and seeking damages for lost profits,

lost income, loss of opportunity, rental and salary.29 Manuel eventually agreed to

submit the case against Meador to binding arbitration, pursuant to which a take-

nothing judgment was rendered against Manuel in June 2002.

Tommy Manuel testified that he hand-delivered a brown envelope to the

Dallas zone manager containing his letter demand of July 16, 2002, together with

documents consisting of hourly billings by Manuel‘s attorney and his expert in

that case, for reimbursement by Chrysler of his attorney‘s fees and expenses

incurred in connection with his state court litigation against Meador. Chrysler

denied any such agreement to reimburse Manuel for attorney‘s fees and

expenses in the state court litigation. After a series of discussions and repeated

oral demands by Manuel to Chrysler representatives, Chrysler notified Manuel by

29
Contemporaneously with settling Meador‘s protest in late September or
early October 2001, Chrysler offered to reimburse Manuel‘s attorney‘s fees in
connection with the suit against Meador if Manuel would immediately drop the
suit against Meador, which offer Manuel summarily rejected.

65
a February 26, 2004 letter that Chrysler would not meet the demand for the

attorney‘s fees and expenses.30

The second demand letter of May 21, 2004, which Chrysler contends

constitutes the only ―written notice‖ of Manuel‘s claim against Chrysler, reiterated

Manuel‘s claim that Chrysler had agreed to pay his attorney‘s fees and expenses

in prosecuting the suit in state court against Meador. But the second letter also

made demand for payment of the damages that Manuel had sustained as the

result of the delay in opening the South Arlington dealership, including lost

profits.

Manuel relies upon Johnson & Higgins of Tex., Inc. v. Kenneco Energy,

Inc., in which the supreme court held that a stand-still agreement tolling the

running of limitations for filing of a suit against Johnson & Higgins pending

resolution of other litigation, rather than a later formal DTPA demand letter, was

sufficient written notice of a claim against Johnson & Higgins for purposes of

accrual of prejudgment interest. See 962 S.W.2d at 531. In particular, Manuel

cites language of the court noting that at the time of the stand-still agreement,

Johnson & Higgins had sufficient information to obtain a settlement without

incurring any prejudgment interest and that it was not necessary that the

document give specific notice to the other party, so long as it demands

30
Manuel did not prevail on its claim for those attorney‘s fees and
expenses in this case in the trial court and has not pursued recovery of those
amounts by cross-appeal.

66
compensation or asserts a right to payment. See id. Manuel argues that the July

16, 2002 letter similarly sufficiently asserted his right to payment and points to

the documents attached to that letter, which he describes as including

documentation of other damages, including lost profits, as well as attorney‘s fee

statements and expert witness expenses. He also refers to testimony of a

Chrysler representative about possible settlement options with Manuel, including

damages of over two million dollars based upon that witness‘s own review of the

July 16, 2002 demand letter.

We do not find Johnson & Higgins to be analogous to this case for several

reasons. First, the standstill agreement and the later DTPA letter in that case

involved the same claim against Johnson & Higgins, not two separate claims as

in this case. Secondly, the other litigation was ongoing at the time the standstill

agreement was entered into and arose from the same occurrence, so that

Johnson & Higgins had ample notice of the nature of the claim. Thirdly, as the

supreme court pointed out, the ―standstill agreement plainly says that ‗Kenneco

asserts that, to the extent underwriters are found not to be liable [in the federal

action] . . . , J & H is liable to Kenneco for the amounts which Kenneco has

claimed under the Policy.‖ Through the specific language of the standstill

agreement, itself, it was clear that Kenneco was asserting a right to be paid for

the same amounts claimed in the federal suit. Thus, Johnson & Higgins had

sufficient information at that time to obtain a settlement without incurring any

prejudgment interest at all. See Owens–Illinois, Inc. v. Estate of Burt, 897

67
S.W.2d 765, 769 (Tex. 1995) (―[A] defendant must have notice and an

opportunity to settle a claim.‖).

In contrast, this case involved two separate claims under two different

contracts entered into, if at all, at different times and related to different

occurrences and suits. We agree with Chrysler that the final judgment used the

wrong date from which to calculate prejudgment interest. The subject of the

letter of July 16, 2002, used by the court as the start date is not the claim on

which Manuel prevailed, and we can find no mention in that letter or in the

accompanying documentation that can be interpreted even to suggest a right to

damages against Chrysler upon which this suit was based. Prejudgment interest

cannot be based on an unrelated claim arising from a different alleged contract

(the alleged oral agreement of June 14, 2000), made under entirely different

circumstances (the strategy meeting of Chrysler and Manuel and their respective

lawyers), and which was not a part of the contracts that were the basis of this

lawsuit. The May 27, 2004 demand letter for damages, which expressly

references and demands damages for breach of the AESSA and Settlement

Agreement against Chrysler, is the correct date of written notice. The date of the

later demand letter was less then 180 days beforer Manuel filed this suit on June

9, 2004. Therefore, the accrual date for purposes of calculating prejudgment

interest is June 9, 2004, the date on which Manuel filed this suit. See Johnson &

Higgins, 962 S.W.2d at 532. We sustain Chrysler‘s fourth issue. Calculating an

8.25% rate on $370,668.50 from June 9, 2004 to May 31, 2007 gives a total of

68
$90,985.08. We modify the judgment to instead award only that amount of

prejudgment interest.

VII. ATTORNEY’S FEES

In his cross-appeal, Manuel contends in four issues that the trial court

erred by failing to award him trial and appellate attorney‘s fees. Chrysler

responds that the trial court did not err because Michigan law applies and does

not permit recovery of attorney‘s fees for breach of contract actions, because the

AESSA prohibits recovery of attorney‘s fees, and because an award of appellate

attorney‘s fees is not mandatory.

A party can recover attorney‘s fees under civil practice and remedies code

chapter 38 if the claim is one listed in section 38.001, such as for breach of

contract, and if the party (1) is represented by an attorney, (2) presented his or

her claim to the opposing party or that party‘s duly authorized agent, and (3) the

opposing party did not tender the just amount owed within thirty days. See Tex.

Civ. Prac. & Rem. Code Ann. §§ 38.001, .002 (West 2008). If all of the statutory

elements are established and there is proof of the reasonableness of the fees, an

award of fees under section 38.001 is mandatory. See AMX Enters., L.L.P. v.

Master Realty Corp., 283 S.W.3d 506, 516 (Tex. App.—Fort Worth 2009, no

pet.).

A. Trial Attorney’s Fees

Chrysler does not dispute whether Manuel established each of the

statutory elements but instead contends that Manuel may not recover attorney‘s

69
fees for other legal reasons. First, Chrysler argues that Michigan law applies and

that Michigan law does not permit the recovery of attorney‘s fees in breach of

contract actions. However, Chrysler did not file a motion or otherwise request

that the trial court take judicial notice of Michigan law until after the trial. While

we do not hold that a motion seeking judicial notice of the law of another state

will always be untimely if filed after trial, Chrysler‘s posttrial motion was untimely

in this case. Choice-of-law matters may be waived, and we hold that Chrysler

waived its choice-of-law complaint in this case by failing to raise the matter

before trial, by failing to object to the admission of evidence at trial concerning

Manuel‘s attorney‘s fees, and by cross-examining Manuel‘s attorney about the

segregation of attorney‘s fees, all of which are inconsistent with Chrysler‘s

appellate contention that Michigan law prevents the recovery of attorney‘s fees in

this case.31 See Gen. Chem. Corp. v. De La Lastra, 852 S.W.2d 916, 920 (Tex.

31
One of our sister courts of appeals explained this rule as follows:

A court may take judicial notice of the laws of another
jurisdiction at any point in a proceeding. The issue of a choice-of-
law determination is distinct from the court‘s power to generally take
judicial notice of a foreign state‘s law. Thus, the mere fact that the
court may take judicial notice of foreign laws does not mean that
choice-of-law issues may be raised at any point in the proceeding. A
preliminary motion is, therefore, necessary to assure the application
of the laws of another jurisdiction. The court may undertake a
choice of law analysis sua sponte, but rule [of civil procedure] 202
does not compel this action.

Pittsburgh Corning Corp. v. Walters, 1 S.W.3d 759, 769 (Tex. App.—Corpus
Christi 1999, pet. denied) (citations omitted) (emphasis added).

70
1993) (holding party waived application of maritime law to case ―by failing to

object to evidence and jury questions regarding damages which are not

recoverable under maritime law‖); Burlington N. & Santa Fe Ry. Co. v.

Gunderson, Inc., 235 S.W.3d 287, 290 (Tex. App.—Fort Worth 2007, pet.

withdrawn) (holding trial court permitted to presume Texas and other state‘s law

similar because party failed to file motion requesting judicial notice of other

state‘s law).

Chrysler also argues that the AESSA‘s limitation-of-damages provision

bars recovery of Manuel‘s attorney‘s fees because it provides that the non-

breaching party‘s sole remedy will be out-of-pocket expenses that cannot be

mitigated. Chrysler reasons that Manuel waived any claims for other damages

and that attorney‘s fees are incidental damages. But Texas law provides that

attorney‘s fees are more in the nature of costs than damages. See, e.g., Alma

Grp., L.L.C. v. Palmer, 143 S.W.3d 840, 846 (Tex. App.—Corpus Christi 2004,

pet. denied); see also Heliflight, Inc. v. Bell/Agusta Aerospace Co., LLC, No.

4:06-CV-425-A, 2007 WL 4373259, at *2 (N.D. Tex. Dec. 12, 2007) (mem. op.).

The AESSA does not purport to prohibit recovery of costs or attorney‘s fees in

state court litigation. Therefore, we hold that the AESSA does not prohibit the

recovery of Manuel‘s attorney‘s fees.

Chrysler next argues that the trial court properly denied Manuel‘s request

for attorney‘s fees because Manuel failed to segregate his attorney‘s fees

between those incurred prosecuting claims for which attorney‘s fees are

71
recoverable and those incurred prosecuting claims for which attorney‘s fees are

not recoverable. To support its contention, Chrysler relies on Green Int’l, Inc.,

951 S.W.2d at 389, in which the supreme court stated: ―A failure to segregate

attorney‘s fees in a case containing multiple causes of action, only some of which

entitle the recovery of attorney‘s fees, can result in the recovery of zero

attorney‘s fees.‖ However, this statement from Green Int’l, Inc. has been

characterized as dicta and is inconsistent with a subsequent supreme court

opinion which holds that the failure to segregate attorney‘s fees does not bar all

recovery of attorney‘s fees. See Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d

299, 314 (Tex. 2006) (―Chapa‘s failure to segregate her attorney‘s fees does not

mean she cannot recover any. Unsegregated attorney‘s fees for the entire case

are some evidence of what the segregated amount should be.‖); see also Air

Routing Int’l Corp. (Canada) v. Britannia Airways, Ltd., 150 S.W.3d 682, 693

(Tex. App.—Houston [14th Dist.] 2004, no pet.) (holding statement in Green

concerning nonrecovery of fees for failure to segregate is nonbinding dicta).

Under Chapa, remand is the appropriate remedy so that Manuel may offer

evidence of the segregated amount of reasonable and necessary attorney‘s fees.

See Chapa, 212 S.W.3d at 314.

As mentioned, Chrysler does not contend on appeal that Manuel failed to

establish any of the section 38.001 or 38.002 requirements, and it appears from

our review of the record that Manuel presented evidence of each statutory

requirement. Indeed, Manuel presented evidence that reasonable and

72
necessary attorney‘s fees in this case exceeded $480,000 through trial, with at

least another $125,000 for an appeal through the supreme court. Thus, even

assuming that Manuel‘s attorney fee evidence consisted only of unsegregated

fees, the trial court erred by failing to award him any attorney‘s fees. See AMX

Enters., L.L.P., 283 S.W.3d at 516 (stating section 38.001 fee award mandatory if

statutory elements met and proof of reasonableness presented). We therefore

sustain Manuel‘s first three issues and remand this case for a new trial

concerning the segregated amount of reasonable and necessary attorney‘s fees

for Manuel‘s breach of contract claim.

B. Appellate Attorney’s Fees

Manuel contends in his final issue that the trial court erred by failing to

award him any appellate attorney‘s fees, arguing that if an award of trial

attorney‘s fees is mandatory under section 38.001, an award of appellate

attorney‘s fees is likewise mandatory. See End Users, Inc. v. Sys. Supply For

End Users, Inc., No. 14-06-00833-CV, 2007 WL 2790379, at *6 (Tex. App.—

Houston [14th Dist.] Sept. 27, 2007, no pet.) (mem. op.) (citing Lee v. Perez, 120

S.W.3d 463, 469 (Tex. App.—Houston [14th Dist.] 2003, no pet.) (holding

appellate attorney‘s fees mandatory if trial fees mandatory under section 38.001).

Chrysler, citing several cases, responds that the factfinder may award appellate

attorney‘s fees but is not required to do so. See Anderson, Greenwood & Co. v.

Martin, 44 S.W.3d 200, 221 (Tex. App.—Houston [14th Dist.] 2001, pet. denied);

see also Hunsucker v. Fustok, 238 S.W.3d 421, 431 (Tex. App.—Houston [1st

73
Dist.] 2007, no pet.); Clements v. Minn. Life Ins. Co., 176 S.W.3d 258, 265 (Tex.

App.—Houston [1st Dist.] 2004, no pet.), superseded by statute on other grounds

as recognized by State Farm Life Ins. Co. v. Martinez, 216 S.W.3d 799, 804

(Tex. 2007); Neal v. SMC Corp., 99 S.W.3d 813, 818 (Tex. App.—Dallas 2003,

no pet.); Olivares v. Porter Poultry & Egg Co., 523 S.W.2d 726, 732 (Tex. Civ.

App.—San Antonio 1975, no writ).

Although Chrysler correctly cites the general rule that the factfinder may

but is not required to award appellate attorney‘s fees, none of Chrysler‘s cases

specifically addresses the scenario present here—whether appellate attorney‘s

fees are mandatory when trial attorney‘s fees are mandatory under section

38.001 of the civil practice and remedies code. The Anderson court, although it

stated the general rule, held earlier in the opinion that the fee claimant could not

prevail on its contract claim, meaning there was no basis for the recovery of any

attorney‘s fees. See 44 S.W.3d at 221; cf. Lee, 120 S.W.3d at 469 n.27

(distinguishing and declining to follow Anderson). Hunsucker concerned

appellate attorney‘s fees for an appeal of an order dismissing a medical

malpractice suit for failure to file an expert report, see 238 S.W.3d at 423–24,

431, and Clements addressed an intervenor‘s attorney‘s fees under the

insurance code. See 176 S.W.3d at 265–66. Finally, the Olivares court rejected

the appellant‘s contention that appellate attorney‘s fees for breach of contract

and quantum meruit claims are never recoverable. See 523 S.W.2d at 732.

74
 On the other hand, Manuel cites authority for the proposition that appellate

attorney‘s fees are mandatory if trial attorney‘s fees are mandatory under section

38.001. See End Users, Inc., 2007 WL 2790379, at *6. In End Users, Inc., the

claimant presented uncontested evidence that $30,000 was a reasonable fee for

an appeal to the court of appeals and that $25,000 was a reasonable fee for an

appeal to the Texas Supreme Court. Id. Because the evidence was

uncontested, the court of appeals modified the trial court‘s judgment to award the

uncontested amount of appellate attorney‘s fees. Id.

We agree with our sister court of appeals and hold that if an award of trial

attorney‘s fees is mandatory under civil practice and remedies code section

38.001, an award of appellate attorney‘s fees is likewise mandatory. Unlike the

End Users, Inc. court, though, we cannot simply modify the trial court‘s judgment

concerning the award of appellate attorney‘s fees because the evidence

concerning those fees was not conclusive. Therefore, we sustain Manuel‘s

fourth issue but remand this case for a new trial concerning the amount of

Manuel‘s reasonable and necessary appellate attorney‘s fees. See World Help

v. Leisure Lifestyles, Inc., 977 S.W.2d 662, 684 (Tex. App.—Fort Worth 1998,

pet. denied) (remanding for consideration of appellate attorney‘s fees when

evidence not conclusive).

VIII. CONCLUSION

Having overruled Chrysler‘s first three issues and having sustained

Chrysler‘s fourth issue, we affirm as modified the portion of the trial court‘s

75
judgment awarding damages to Manuel and affirm as modified the prejudgment

interest awarded to Manuel. In addition, having sustained each of Manuel‘s four

issues, we reverse the portion of the trial court‘s judgment awarding no attorney‘s

fees to Manuel and remand this case to the trial court for a new trial concerning

the amount of Manuel‘s reasonable and necessary trial and appellate attorney‘s

fees.

ANNE GARDNER
JUSTICE

PANEL: GARDNER and WALKER, JJ.; and DIXON W. HOLMAN (Senior
Justice, Retired, Sitting by Assignment).

DELIVERED: February 24, 2012

76