the Huff Energy Fund, L.P., WRH Energy Partners, L.L.C., William R."Bill" Huff, Rick D'Angelo, Ed Dartley, Bryan Bloom, and Riley-Huff Energy Group, LLC v. Longview Energy Company

Fourth Court of Appeals
San Antonio, Texas
OPINION
No. 04-12-00630-CV

THE HUFF ENERGY FUND, L.P., WRH Energy Partners, L.L.C., William R. “Bill” Huff,
Rick D’Angelo, Ed Dartley, Bryan Bloom, and Riley-Huff Energy Group, LLC,
Appellants

v.
Longview
LONGVIEW ENERGY COMPANY,
Appellee

From the 365th Judicial District Court, Zavala County, Texas
Trial Court No. 11-09-12583-ZCVAJA
Honorable Amado J. Abascal, III, Judge Presiding

Opinion by: Sandee Bryan Marion, Chief Justice
Concurring Opinion by: Marialyn Barnard, Justice
Dissenting opinion by: Luz Elena D. Chapa, Justice, joined by Rebeca C. Martinez, Justice
Concurring and Dissenting Opinion by: Patricia O. Alvarez, Justice

Sitting en banc: Sandee Bryan Marion, Chief Justice
Karen Angelini, Justice
Marialyn Barnard, Justice
Rebeca C. Martinez, Justice
Patricia O. Alvarez, Justice
Luz Elena D. Chapa, Justice
Jason Pulliam, Justice

Delivered and Filed: November 25, 2015

REVERSED AND RENDERED

In the underlying lawsuit, appellee, Longview Energy Company (“Longview”), sued two

of its directors and others for, among other claims, breach of fiduciary duty by taking a corporate

opportunity that belonged to Longview. Following a jury trial, several liability questions were
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submitted to the jury. The two liability questions addressed in this opinion asked whether either

of the directors (1) failed to comply with his fiduciary duty to Longview by taking a corporate

opportunity and (2) failed to comply with his fiduciary duty of loyalty by improperly engaging in

competition with Longview. The jury answered affirmatively to both questions, as well as

affirmatively to other questions that held all the defendants liable. The trial court awarded

Longview $95.5 million in monetary disgorgement and imposed a constructive trust on a variety

of assets owned by one of the defendants. On appeal, appellants, the defendants below, all raise—

in addition to other issues—legal sufficiency challenges to the evidence in support of the liability

findings. Because we conclude the evidence is legally insufficient to support the jury’s finding on

the corporate opportunity question and because we conclude Longview did not plead a competition

cause of action, we reverse and render a take-nothing judgment in favor of appellants.

BACKGROUND

The defendants below and appellants here are two of Longview’s directors, William R.

“Bill” Huff and Rick D’Angelo. The other defendants/appellants are The Huff Energy Fund, L.P.

(“HEF”), WRH Energy Partners, L.L.C., and Riley-Huff Energy Group, LLC (“Riley-Huff

Energy”). 1 At the center of this dispute are leases in the Eagle Ford shale, an oil and gas formation

encompassing thirteen million acres in South Texas.

Longview is an oil and gas company. In 2006, HEF purchased stock in Longview, which

entitled HEF to appoint Bill Huff and Rick D’Angelo to Longview’s board of directors. Bill Huff

is the head of HEF and Rick D’Angelo evaluated potential energy investments for HEF. Sometime

in 2009, HEF and Bobby Riley formed Riley-Huff Energy. In mid-2009, HEF encouraged its

portfolio companies, including Longview, to explore investment opportunities in the Eagle Ford.

1
Two other defendants were Ed Dartley and Bryan Bloom. The trial court’s judgment ordered Longview to take
nothing of and from Bloom and Dartley, and this portion of the judgment was not challenged on appeal.

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On September 10, 2009, representatives of both HEF and Longview met in New Jersey to

discuss investment strategies for Longview, including the Eagle Ford shale. According to

Longview, it was at this meeting that Bill Huff agreed to fund any investment “that Rick Pearce

likes.” Pearce is Longview’s chief operating officer and senior petroleum engineer. Over the next

several months Longview’s management investigated opportunities in the Eagle Ford shale.

Longview commissioned an Eagle Ford shale study from consulting geologist/geophysicist Mark

Lober. At the time, Lober had been consulting with Pat Gooden, an Eagle Ford land broker, on

another deal. Gooden, in turn, had been working with another Eagle Ford land broker, Tamara

Ford, who operated under the name Wyldfire Energy. Longview’s management later met with

Gooden and Ford to discuss Eagle Ford leases. At Longview’s first meeting with the land brokers

on December 2, 2009, neither Gooden nor Ford presented any specific leases to Longview.

Instead, Ford drew circles on a map of various counties to indicate general areas where

acreage/leases were available.

On December 17, 2009, Longview’s management, Lober, and D’Angelo met to discuss

Lober’s geological findings, Longview’s economic plans, development of the Eagle Ford acreage,

and the land brokers. On December 21, 2009, Longview’s management had its second meeting

with the land brokers. New circles, or “blobs,” were added to the maps, but no specific leases

were identified. At about this same time, Ford was also meeting with Bill Riley. Throughout the

remainder of December 2009 and into early January 2010, Longview’s management and D’Angelo

continued to discuss Lober’s work and various maps.

Longview’s management ultimately decided to present an investment proposal to its board

of directors at the board’s January 28, 2010 board meeting. In advance of this meeting, Bob

Gershen, Longview’s president and CEO, distributed reading materials to the directors. These

materials included a proposed strategy for investing in the Eagle Ford and economic projections.
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At the board meeting, Rick Pearce presented Longview’s plan to invest $40 million—to be

acquired from Huff—to purchase 20,000 Eagle Ford acres. The maps shown to the board, acquired

from Ford and Gooden, showed available acreage but not specific leases within the acreage. After

the presentation, the board did not vote on the proposal because, according to Longview, D’Angelo

said Huff would not support an investment in Eagle Ford trend acreage. During a subsequent

investigation, Longview’s management learned that three days before the January 28 board

meeting, Riley-Huff Energy signed a contract with Wyldfire to purchase some of the same acreage

Longview was considering buying through the same land brokers. This contract was not

mentioned at the January 28 board meeting. After not receiving Huff’s investment, and after

considering other funding options and conducting additional board meetings on February 1 and

February 5, 2010, Longview took no further action on its Eagle Ford investment plan. In the

meantime, Riley-Huff Energy acquired approximately 44,698 Eagle Ford acres for its own use.

Longview sued raising a variety of claims: (1) breach of fiduciary duty/usurpation of

corporate opportunity against Huff and D’Angelo; (2) fraud against all defendants; (3) tortious

interference with prospective business relationships against all defendants; (4) misappropriation

of trade secrets against all defendants; (5) aiding and abetting against all defendants; and (6)

conspiracy against all defendants. Ultimately, only two liability questions were submitted to the

jury: (1) did Huff and/or D’Angelo fail to comply with their fiduciary duty to Longview by taking

a corporate opportunity; and (2) did Huff and/or D’Angelo fail to comply with their fiduciary duty

of loyalty to Longview by engaging in competition with Longview without the informed approval

of Longview’s board. 2 The jury answered “yes” to the questions. The trial court rendered

2
Other questions were also submitted regarding whether Riley-Huff Energy and/or The Huff Energy Fund LP
knowingly participated in Huff’s and/or D’Angelo’s failure to comply with their fiduciary duty (the aiding/abetting
claim); and whether Riley-Huff Energy wrongfully obtained assets in the Eagle Ford shale as a result of Huff’s and/or

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judgment in favor of Longview, and awarded Longview a constructive trust of various assets

owned by Riley-Huff Energy as well as a $95 million monetary award.

STANDARD OF REVIEW

Appellants, who did not have the burden of proof at trial, all raise legal sufficiency

challenges to the evidence. “A party will prevail on its legal-sufficiency challenge of the evidence

supporting an adverse finding on an issue for which the opposing party bears the burden of proof

if there is a complete absence of evidence of a vital fact or if the evidence offered to prove a vital

fact is no more than a scintilla.” Waste Mgmt. of Texas, Inc. v. Texas Disposal Sys. Landfill, Inc.,

434 S.W.3d 142, 156 (Tex. 2014); see also City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex.

2005). “More than a scintilla exists when the evidence as a whole rises to a level enabling

reasonable and fair-minded people to have different conclusions.” Waste Mgmt. of Texas, 434

S.W.3d at 156; Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997).

“However, if the evidence is so weak that it only creates a mere surmise or suspicion of its

existence, it is regarded as no evidence.” Waste Mgmt. of Texas, 434 S.W.3d at 156. In conducting

a legal-sufficiency review, we consider the evidence in the light most favorable to the judgment,

crediting evidence that a reasonable fact finder could have considered favorable and disregarding

unfavorable evidence unless the reasonable fact finder could not. City of Keller, 168 S.W.3d at

807. We indulge every reasonable inference that supports the trial court’s findings. Id. at 822.

“The final test for legal sufficiency must always be whether the evidence at trial would enable

reasonable and fair-minded people to reach the verdict under review.” Id. at 827.

D’Angelo’s failure, if any, to comply with their fiduciary duty. Longview did not submit its claims for fraud, tortious
interference with prospective business relationships, misappropriation of trade secrets, and conspiracy to the jury.

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JURY QUESTION NUMBER ONE

The jury was first asked whether Bill Huff and Rick D’Angelo failed to comply with their

“fiduciary duty to Longview Energy Company by taking a corporate opportunity.” Specifically,

the jury was asked as follows:

Did [Bill Huff and/or Rick D’Angelo] fail to comply with his fiduciary duty
to Longview Energy Company by taking a corporate opportunity?

Because they are Longview Energy Company directors, Bill Huff and Rick
D’Angelo owe fiduciary duties to Longview Energy Company with respect to
corporate opportunities.

A Longview Energy Company director may not take a corporate
opportunity for himself if:

(1) Longview Energy Company had an interest or a reasonable expectancy
in the opportunity;
(2) Longview Energy Company was financially able to pursue the
opportunity;
(3) the opportunity was within Longview Energy Company’s line of
business; and
(4) the director diverted the business opportunity to another and thus
brought the director’s interests into conflict or competition with
Longview Energy Company’s interest.

A Longview Energy Company director may take a corporate opportunity
for himself if:

(1) the business opportunity is first presented to the director in his
individual and not his corporate capacity;
(2) the opportunity is not essential to the corporation;
(3) the corporation does not have an interest or expectancy in the business
opportunity; and
(4) the director has not wrongfully employed the resources of the
corporation pursuing the opportunity.

[Emphasis added.]

As the first part of this question was phrased, to hold Huff and/or D’Angelo liable for

taking a corporate opportunity, the jury was required to make affirmative implied findings on all

of the first four factors relevant to when a director may not take a corporate opportunity. Because

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the jury answered “yes” as to both Huff and D’Angelo, the jury impliedly found that (1) Longview

had an interest or a reasonable expectancy in the opportunity; (2) Longview was financially able

to pursue the opportunity; (3) the opportunity was within Longview’s line of business; and (4) the

director diverted the business opportunity to another and thus brought the director’s interests into

conflict or competition with Longview’s interest.

On appeal, Huff and D’Angelo assert there is legally insufficient evidence that they

breached their fiduciary duty to Longview by usurpation of corporate opportunity because (1)

Longview had no actual, cognizable interest or expectancy in any specific property, but only “a

self-labeled ‘hypothetical’ plan to invest in” the Eagle Ford; (2) the idea to invest in the Eagle Ford

originated from Huff and D’Angelo in their investment management roles at HEF and thus was

not presented to them as directors of Longview; (3) Longview did not have the financial ability to

“fund its ‘hypothetical’ plan,” and neither HEF, Huff, nor D’Angelo had a duty to fund Longview’s

investments; (4) Longview’s board voted to reject the opportunity to invest in the Eagle Ford; and

(5) there is no evidence that Huff or D’Angelo personally benefitted from or took an opportunity

for himself. Huff and D’Angelo also argue they were not required to establish the first four factors

relevant to when a director may not take a corporate opportunity because there is a threshold legal

question of whether a corporate opportunity existed. Based on this argument, Huff and D’Angelo

contend that because there was no corporate opportunity to be taken in this case, there is no reason

for this court to examine the four factors set forth in question number one.

An appellate court must measure the sufficiency of the evidence by the jury charge as it

was submitted. Romero v. KPH Consol., Inc., 166 S.W.3d 212, 221 (Tex. 2005); Oliva v. Davila,

373 S.W.3d 94, 101 (Tex. App.—San Antonio 2011, pet. denied). Therefore, we do not review

the evidence to determine whether a corporate opportunity did, in fact, exist. Instead, we review

the evidence to determine only whether legally sufficient evidence supports the jury’s four implied
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findings as stated in question number one. Because we conclude the evidence is legally insufficient

to support the first implied finding, which is dispositive of this liability issue, this opinion discusses

only whether Longview “had an interest or a reasonable expectancy in the opportunity.” See TEX.

R. APP. P. 47.1.

Longview is a Delaware corporation, and the parties agree Delaware’s corporate

opportunity law governs Huff’s and D’Angelo’s liability. 3 The seminal Delaware corporate

opportunity case—which all parties and the trial court recognize—is Guth v. Loft. Inc., 5 A.2d 503,

510-11 (Del. 1939), in which the Delaware Supreme Court held that

the rule of corporate opportunity, is merely one of the manifestations of the general
rule that demands of an officer or director the utmost good faith in his relation to
the corporation which he represents.

It is true that when a business opportunity comes to a corporate officer or
director in his individual capacity rather than in his official capacity, and the
opportunity is one which, because of the nature of the enterprise, is not essential to
his corporation, and is one in which it has no interest or expectancy, the officer or
director is entitled to treat the opportunity as his own, and the corporation has no
interest in it, if, of course, the officer or director has not wrongfully embarked the
corporation’s resources therein.

Whether a director of a corporation is duty bound to acquire a business opportunity for the

corporation, or to refrain from acquiring the opportunity for himself, depends upon whether the

corporation has an interest, actual or in expectancy, in the opportunity, or whether the acquisition

of the opportunity by the director may hinder or defeat the plans and purposes of the corporation

in the carrying on or development of the legitimate business for which it was created. See Johnston

v. Greene, 121 A.2d 919, 923-24 (Del. 1956) (citing Colorado & Utah Coal Co. v. Harris, 97

Colo. 309, 49 P.2d 429 (Colo. 1935)). For the corporation to have an actual or expectant interest

3
At trial, Appellants filed an unopposed Rule 202 Motion to Take Judicial Notice of Delaware Law. See TEX. R.
EVID. 202. During oral argument in this court, the parties agreed Delaware law was applicable to the substantive
issues.

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in the opportunity, there must be some tie between the opportunity and the nature of the corporate

business. See id. at 924.

In this case, there is a close tie between the nature of the Eagle Ford opportunity and the

nature of Longview’s business as an oil and gas exploration and production company. However,

the inquiry does not end here. The next considerations are whether Longview had an interest,

actual or in expectancy, in the Eagle Ford opportunity, or whether the purchase of the property by

the director might hinder or defeat Longview’s plans and purposes in the carrying on or

development of the legitimate business for which it was created. Id. at 923-24. There is no dispute

that Longview did not have an actual existing property right in the Eagle Ford opportunity.

Therefore, as to the first consideration, the inquiry is narrowed to whether Longview had an

expectancy in the opportunity.

Longview is an oil and gas exploration and production company. Eagle Ford is what is

known as “a resource play or a source rock play,” meaning it is the source of oil and gas. Longview

had explored the Eagle Ford as an investment opportunity prior to the September 10, 2009 meeting

with Bill Huff and Rick D’Angelo. Longview’s vice president, David Fuller, testified Longview

had been aware of Eagle Ford for many years and knew it could produce oil and gas, but at the

time, it was not economically feasible to get the oil and gas out of the ground—that is, until

technology changed, and horizontal drilling and fracking made production feasible. Fuller testified

that in December 2009 the average price for Eagle Ford acreage was $1,000 per acre and, if

Longview had been able to raise $40 million, Longview would have obtained roughly 40,000

acres.

Rick Pearce testified the planned proposal to the Longview board of directors was to

acquire 3,000 acres in seven prospects, a total of 21,000 acres, at an estimated capital cost of $40

million. Pearce explained Longview needed acreage blocks large enough to drill horizontally, but
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he did not want to purchase “one large chunk of acreage somewhere.” Instead, he wanted to buy

acreage spread across the “trend.” Pearce explained “trend acreage” as “if a new trend has started

—for instance, if somebody has found a new reservoir that will produce, one that hasn’t produced

in the past, then you try to get out in front of that. From your knowledge of regional geology, you

try to predict best where that reservoir [is] or where the potential for that reservoir is going to be

and you buy acreage out in front of it before it becomes a hot play and gets all leased up.” Pearce

testified Longview prepared two economic scenarios: one in which Longview purchased 100% of

the 21,000 acres and then brought in an industry partner, and a second scenario in which Longview

would begin with an industry partner and purchase the acreage on a fifty-fifty basis.

The land brokers with whom Longview worked indicated they had available land in the

Eagle Ford trend, referred to as “blobs.” When asked why the land brokers did not identify a

specific lease or provide a specific property description, Pearce replied that unscrupulous people

would take that information and contact the owner directly, thereby cutting the land broker out of

the purchase. Pearce said he was comfortable that the land brokers could get specific property if

Longview wanted to purchase acreage immediately. When asked if the brokers were offering

Longview specific property, Pearce replied “Defined well enough within the fairways of the Eagle

Ford, yes.”

This evidence shows Longview wanted to invest in the Eagle Ford shale, spent time and

money investigating investment opportunities in Eagle Ford property, and entered into discussions

with land brokers about the availability of oil and gas property to acquire. But the question is

whether these actions rise to the level of an “expectancy” in an opportunity. We conclude it does

not. Instead, the evidence shows only that Longview had been, “in a general way, ‘negotiating for

and endeavoring to purchase’ the interests involved.” Colorado & Utah Coal Co., 49 P.2d at 431.

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One of the cases on which the Guth court relied for its holding that a corporate director

may take an opportunity for his own if, among other things, the corporation had no interest or

expectancy in the opportunity was Colorado & Utah Coal Co. In that case, the corporation was a

coal company, and the suit was for the purpose of impressing a trust upon coal lands acquired by

its president, who was also a director, in his individual capacity. There was evidence the

corporation had investigated and considered these same coal properties, together with other coal

properties. Nevertheless in holding that a corporate opportunity had not been established, the

Colorado Supreme Court stated:

. . . These parties are operating in a territory containing coal deposits of vast, we
might almost say of unlimited, extent. Such is the condition of this record as to
force the conclusion that, if plaintiff had an interest in expectancy in the property
in question, it had a virtual monopoly of extensive fields into which its officers and
directors were forever precluded from entering. We find in the authorities, and in
reason, no support for such an extension of the doctrine of expectancy.

Id.

The same can be said here. The Eagle Ford shale encompasses millions of acres across

thousands of miles. And, there is no dispute that the availability of land rapidly changed as other

oil and gas companies also pursued Eagle Ford investment opportunities. The evidence is

undisputed that Riley-Huff Energy began acquiring Eagle Ford property for itself as early as

September 2009, which the trial court did not consider wrongfully obtained. 4 There is no dispute

that Longview wanted to invest in the Eagle Ford shale. Longview claims its opportunity was “a

concept [to] acquire 21,000 acres[,] which would be expanded to ‘roughly 40,000 acres’ . . . and

then drill one well per tract to ‘prove up’ the leased area’s oil-producing capability,” “a proprietary

strategy for investing in Eagle Ford,” and an “interest in investing in a resource play.” But, to

4
The trial court expressly excluded from the constructive trust “those leases acquired by Riley-Huff pursuant to the
‘BGE’ transaction and the ‘Maali’ transaction, as set forth on exhibit B attached hereto and made a part hereof, and
any associated wells, rights and other property interests.”

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characterize this concept, strategy, and interest in investing as an “expectancy” would give

Longview “a virtual monopoly of extensive fields into which its officers and directors were forever

precluded from entering.” Id.

Also, an opportunity must be something more than a desire to invest—especially when the

investment is in an area as large as the Eagle Ford shale. In Johnston, the Delaware Supreme

Court addressed the chancellor’s finding that a corporation’s need for investments constituted an

interest in the opportunity to acquire a specific business entity:

. . . Now, this is an application of the rule of corporate opportunity that requires
careful examination. It is one thing to say that a corporation with funds to invest
has a general interest in investing those funds; it is quite another to say that such a
corporation has a specific interest attaching in equity to any and every business
opportunity that may come to any of its directors in his individual capacity. This is
what the Chancellor appears to have held. Such a sweeping extension of the rule of
corporate opportunity finds no support in the decisions and is, we think, unsound.

Johnston, 121 A.2d at 924.

Again, the same can be said here. There is no dispute Longview wanted to invest in the

Eagle Ford and devoted extensive resources to developing an investment strategy. And, although

we agree with Longview’s argument on appeal that business opportunities “often consist of

complex ideas, strategies, and transactions that can only be executed . . . over a period of time,”

the opportunity must be something more than a concept or strategy. To conclude Longview had

an expectancy in a loosely-defined “strategy” would effectively preclude Longview’s directors

from investing in “any and every business opportunity that may” arise in the Eagle Ford shale. Id.

Finally, we must ask whether Riley-Huff Energy’s purchase of the Eagle Ford property

hindered or defeated Longview’s plans and purposes. Both the Delaware Supreme Court in

Johnston and the Colorado Supreme Court in Colorado & Utah Coal Co. held that one of the

considerations in whether a corporate director is duty bound to refrain from purchasing property

for himself depends upon whether the purchase of the property by the director may hinder or defeat
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the plans and purposes of the corporation in the carrying on or development of the legitimate

business for which it was created. Johnston, 121 A.2d at 923-24; Colorado & Utah Coal Co., 49

P.2d at 430.

The same weakness that underscores Longview’s arguments above applies here. Because

Longview’s own description of its opportunity is that it was a strategy or interest in investing “in

a resource play,” we do not believe Riley-Huff Energy’s acquisition of acreage in the Eagle Ford

hindered or defeated Longview’s plan to also acquire acreage in the Eagle Ford. This is

particularly true given the fact that the availability of Eagle Ford leases spread over millions of

acres and thousands of miles, and several oil and gas companies other than Longview and Riley-

Huff Energy were in competition for leases in the Eagle Ford.

For these reasons, we conclude the evidence is legally insufficient to support the jury’s

implied finding that Longview “had an interest or a reasonable expectancy in the opportunity.”

Because the evidence is legally insufficient to support one of the four implied findings the jury

was required to make, the judgment cannot be affirmed on the grounds that Huff and D’Angelo

failed to comply with their “fiduciary duty to Longview Energy Company by taking a corporate

opportunity.” 5

JURY QUESTION NUMBER TWO

The jury was next asked whether Bill Huff and Rick D’Angelo failed to comply with their

fiduciary duty of loyalty to Longview Energy Company by engaging in competition with

Longview without the informed approval of Longview’s board of directors. The jury was

instructed that a Longview “director fails to comply with his fiduciary duty of loyalty to

5
Because we conclude the evidence is legally insufficient to support the first implied finding that Longview “had an
interest or a reasonable expectancy in the opportunity,” we do not address the sufficiency of the evidence in support
of the remaining implied findings under jury question number one.

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[Longview] if he engages in competition with [Longview] without the informed approval of

[Longview’s] board of directors.” The jury answered “yes” as to both Huff and D’Angelo. On

appeal, Huff and D’Angelo assert (1) under Delaware law, competition by itself will not

independently support breach-of-fiduciary-duty liability and (2) Longview failed to plead a cause

of action for competition separate from its usurpation of a corporate opportunity cause of action.

We agree Longview did not plead a separate cause of action for competition; therefore, we do not

address whether Delaware law supports such a cause of action. See TEX. R. APP. P. 47.1.

We review a trial court’s decision to submit a jury question or instruction under an abuse

of discretion standard. In re V.L.K., 24 S.W.3d 338, 341 (Tex. 2000). “A clear abuse of discretion

exists when the trial court submits a jury question that is neither supported by the pleadings nor

tried by consent.” Crowson v. Bowen, 320 S.W.3d 486, 488 (Tex. App.—Fort Worth 2010, no

pet.); Stephanz v. Laird, 846 S.W.2d 895, 902 (Tex. App.—Houston [1st Dist.] 1993, writ denied).

“Jury questions must be supported by the pleadings.” Webb v. Glenbrook Owners Ass’n,

Inc., 298 S.W.3d 374, 380 (Tex. App.—Dallas 2009, no pet.); see also TEX. R. CIV. P. 278 (“The

court shall submit the questions, instructions, and definitions in the form provided by Rule 277,

which are raised by the written pleadings and the evidence.”). “When issues not raised by the

pleadings are tried by express or implied consent of the parties, they shall be treated in all respects

as if they had been raised in the pleadings.” TEX. R. CIV. P. 67. However, “written pleadings,

before the time of submission, shall be necessary to the submission of questions . . . .” Id.; see

also Gibbins v. Berlin, 162 S.W.3d 335, 342 (Tex. App.—Fort Worth 2005, no pet.). Trial by

consent does not occur where the complaining party properly objects to the submission of issues

not raised by the pleadings. Harkey v. Tex. Employers’ Ins. Ass’n, 146 Tex. 504, 509, 208 S.W.2d

919, 922 (1948). “Certainly issues are not tried merely by the hearing of the testimony thereon;

submission to the jury undoubtedly is part of the process. So, although the complaining party does
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not object to the testimony on the issues but does object to their submission on some tenable

ground, he cannot be regarded as impliedly consenting that they be tried when not raised by the

pleadings, as contemplated by Rule 67.” Id. In this case, appellants objected to the submission of

jury question number two on the ground that it was not supported by the pleadings; therefore, the

issue was not tried by consent.

There is no contention by Longview that it expressly or specifically stated in its last live

petition that it was raising a “competition” claim. Instead, Longview asserts it pled the claim

because “competition” was a “pervasive theme” in its petition. A pleading should contain “a short

statement of the cause of action sufficient to give fair notice of the claim involved . . . .” TEX. R.

CIV. P. 47(a). When, as here, special exceptions are not filed, we construe the petition liberally in

favor of the pleader. Roark v. Allen, 633 S.W.2d 804, 809 (Tex. 1982). We will uphold the petition

as to a cause of action that may be reasonably inferred from what is specifically stated, even if an

element of the cause of action is not specifically alleged. See id. In determining whether a pleading

is adequate, we examine whether an opposing attorney of reasonable competence, on review of

the pleadings, can ascertain the nature and the basic issues of the controversy. Bowen v. Robinson,

227 S.W.3d 86, 91 (Tex. App.—Houston [1st Dist.] 2006, pet. denied).

To determine whether Longview’s petition gave fair notice of a breach of fiduciary duty

by competition claim, we turn first to the “Factual Background” section of the petition. In the

“Relationship of the Parties” subsection of the petition, Longview contended that three of the

defendants—D’Angelo, Dartley, and Bloom—held positions with HEF portfolio companies that

were “direct competitors of Longview,” one of which was Riley-Huff Energy. Longview

characterized Riley-Huff Energy as a “direct competitor of Longview.” In the “The Scheme and

Its Roots” subsection, Longview stated as follows:

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Longview diligently educated its Directors concerning their duties of
loyalty to the company. These duties demand absolute fidelity to Longview’s
interests and require an extra measure of diligence when a director may have
divided interests by, for instance, simultaneously serving as a director, officer,
partner, investor or manager of entities in competition with Longview. Accordingly,
in 2007, Longview distributed a guidance letter prepared by its corporate counsel
[that] cautioned “[i]f an investor opposes or favors, out of its own economic self-
interest and not necessarily that of the corporation, an action being considered by
the corporation, it should express that position in its capacity as a stockholder of
the corporation . . . and not as a director.” [Emphasis added.]

Longview next referred to a letter sent on the eve of the January 28 board meeting from

WRH Energy to Longview, which

did not disclose that the Huff parties had decided to pursue Eagle Ford opportunities
through Riley-Huff and its other portfolio companies rather than Longview, nor
that it already had negotiated a contract with Ford’s company, Wyldfire.
Accordingly, the letter is plainly a pretext designed to obscure the decision to hijack
Longview’s valuable Eagle Ford opportunity. Moreover, the inherent conflict
ignored by Huff and his minions was that—although their control of multiple
portfolio companies in the energy sector allowed them the luxury of covering losses
in many of these companies with a bonanza in one company—Longview rises and
falls according to its individual performance. In other words, Longview had duties
to all its shareholders, not just to Huff Energy; it made a great difference to those
Longview shareholders whether an Eagle Ford payday wound up in Longview
rather than inside another Huff portfolio company. [Emphasis added.]

Longview next alleged:

Soon after execution of its January 25, 2010 agreement with Wyldfire, Huff
Energy’s majority-owned portfolio companies embarked on an ambitious
investment program in the Eagle Ford acres previously presented to Longview,
ultimately pouring millions of dollars into lease acquisitions and drilling wells on
these very properties. Riley-Huff ultimately acquired through Wyldfire thousands
of acres first identified and targeted by Longview and it obtained tens of thousands
of acres from other sources. Contrary to their fiduciary duties to Longview, neither
Huff nor D’Angelo ever presented these opportunities to Longview or its Board.
[Emphasis added.]

Finally, Longview alleged that

[b]y as early as April 2010, Huff Energy had dumped almost $40 million
into Riley-Huff’s Eagle Ford play, which—by no coincidence—was exactly what
Longview had proposed to do only weeks earlier to its Board (and to Huff and
D’Angelo as Directors). Huff Energy took this investment tack for its own benefit
because it would reap nearly 100% of the value from investments made through its
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majority owned and controlled companies, whereas it would gain only a fraction of
any profits from an investment made through independently owned and managed
Longview. This, of course, flatly contravened Huff and D’Angelo’s strict duty of
loyalty to Longview, which prohibited them from exploiting business opportunities
that fairly belonged to Longview and required them to present such opportunities
to Longview before exploiting them for their own self-interests. Their usurpation
is all the more egregious because Huff and D’Angelo (aided by their cohorts) acted
under the cloak of their directorships and acted not only surreptitiously but
implemented their scheme through the misuse of confidential, proprietary corporate
information supplied by Longview. . . . . [Emphasis added.]

The next section of the petition stated the “Claims” asserted by Longview. Under the claim

entitled “Breach of Fiduciary Duty/Usurpation of Corporate Opportunity (Against Huff and

D’Angelo),” Longview alleged

55. D’Angelo and Huff owe Longview a duty of loyalty.
56. Longview was financially able to exploit the Eagle Ford opportunity.
57. The Eagle Ford opportunity was within Longview’s line of business.
58. Longview had an interest or expectancy in the Eagle Ford opportunity.
59. By diverting the Eagle Ford opportunity to themselves, D’Angelo and Huff
placed themselves in a position of conflict or competition with Longview.
60. D’Angelo and Huff breached their fiduciary duties to Longview by usurping
the Eagle Ford opportunity and misusing proprietary information supplied by
Longview in regard to the Eagle Ford. . . . . [Emphasis added.]

This “Breach of Fiduciary Duty/Usurpation of Corporate Opportunity (Against Huff and

D’Angelo),” section set forth the same elements the jury later considered in jury question number

one instructing the jury when a Longview director “may not take a corporate opportunity for

himself.”

The petition also included specific “Claims” subsections for “Fraud,” “Tortious

Interference with Prospective Business Relationships,” “Misappropriation of Trade Secrets,”

“Aiding and Abetting,” and “Conspiracy.” However, as we have already noted, although there

was a specific “Claims” subsection for breach of fiduciary duty based on usurpation of corporate

opportunity, there was no specific “Claims” subsection for breach of fiduciary duty based on

unapproved competition.

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After reading the petition in its entirety and construing the petition liberally in favor of

Longview, we conclude the petition did not give fair notice to appellants of a separate competition

claim. It is true the petition characterized Riley-Huff Energy as a competitor of Longview and

contended Longview educated its directors on their duty of loyalty especially when the director

served in a position with another entity that competed with Longview. But, any reference to

competition was in connection with its claim of usurpation. The factual allegations spoke in terms

of a director considering or appropriating an opportunity that belonged to Longview: (1) what a

director should do when the director favored “an action being considered by the corporation”; (2)

the WRH letter did not disclose that “the Huff parties had decided to pursue Eagle Ford

opportunities through Riley-Huff and its other portfolio companies rather than Longview” and the

letter was a “pretext designed to obscure the decision to hijack Longview’s valuable Eagle Ford

opportunity”; (3) “Riley-Huff ultimately acquired through Wyldfire thousands of acres first

identified and targeted by Longview . . . [and] neither Huff nor D’Angelo ever presented these

opportunities to Longview or its Board”; and (4) HEF’s actions “contravened Huff and D’Angelo’s

strict duty of loyalty to Longview, which prohibited them from exploiting business opportunities

that fairly belonged to Longview.”

We also note that Longview’s “theme” of appropriating an opportunity was carried through

to the remaining claims expressly asserted by Longview. Under the “Fraud” claim, Longview

alleged (1) “D’Angelo and Huff concealed from Longview their intentions to appropriate the Eagle

Ford opportunity for themselves and affirmatively misrepresented that Huff intended to fund an

Eagle Ford investment through Longview”; (2) Longview did not know D’Angelo and Huff

“would appropriate the very business opportunity they had encouraged and induced Longview to

pursue”; (3) D’Angelo and Huff “went to great lengths to fraudulently conceal their ultimate

design to appropriate the Eagle Ford opportunity for themselves”; (4) by “concealing and
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facilitating the scheme to appropriate the Eagle Ford opportunity, [the defendants] intended to

cause Longview to: (a) use its own resources to develop the information necessary to make an

investment in the Eagle Ford; and (b) refrain from pursuing alternative means for exploiting the

Eagle Ford opportunity”; and (5) Longview “reasonably believed that: (a) D’Angelo and Huff did

not intend to appropriate the Eagle Ford opportunity for themselves.”

Under the “Tortious Interference with Prospective Business Relations” claim, Longview

alleged the “defendants intentionally interfered with this prospective relationship [with the land

brokers] by appropriating the Eagle Ford opportunity for themselves.” Longview’s petition also

contained a paragraph entitled “Constructive Trust,” which stated as follows:

The defendants wrongfully usurped the Eagle Ford opportunity, and they
were unjustly enriched by their wrongful conduct. Specifically, the defendants
unjustly obtained thousands of acres of leases in the Eagle Ford that fairly belong
to Longview. Accordingly, Longview is entitled to a constructive trust over all the
subject leases in the defendants’ possession or on any assets that the defendants
obtained by virtue of the usurpation. [Emphasis added.]

Under a section entitled “Maximum Amount of Damages Claimed,” Longview alleged

“[t]he defendants stole Longview’s opportunity to invest in the Eagle Ford by breaching their

fiduciary duties, defrauding Longview, and misappropriating Longview’s trade secrets.”

If we cannot reasonably infer that the petition contains a claim, then we must conclude the

petition does not contain this claim, even under our liberal construction. See SmithKline Beecham

Corp. v. Doe, 903 S.W.2d 347, 354-55 (Tex. 1995). Here, general allegations referring to an entity

as a competitor of Longview did not implicate a cause of action based on competition. The facts

alleged by Longview in conjunction with the wording of the claims expressly pled, leads us to the

conclusion that the petition did not assert a separate competition claim that could reasonably be

inferred from the specific language used in the petition.

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When a plaintiff’s petition omits an element of a cause of action or fails to state it with

sufficient clarity to inform the defendant of the nature of the suit, a defendant must specially except

to the plaintiff’s pleadings. Crabtree v. Ray Richey & Co., 682 S.W.2d 727, 728 (Tex. App.—

Fort Worth 1985, no writ). On the other hand, when a plaintiff pleads none of the elements of a

viable cause of action, the defendant is not obligated to file special exceptions that would suggest

to the plaintiff possible causes of action against the defendant. Here, because we conclude a

competition cause of action could not be reasonably inferred from what was specifically stated in

Longview’s petition, appellants were not required to file special exceptions that would suggest to

Longview all possible causes of action that could be filed against them.

For these reasons, we conclude the trial court erred when it submitted question number two

to the jury. Therefore, we next consider whether the error was harmful. We will reverse the trial

court’s judgment only if the charge error was harmful, meaning it probably caused the rendition

of an improper verdict. Wackenhut Corp. v. Gutierrez, 453 S.W.3d 917, 921 (Tex. 2015); TEX. R.

APP. P. 44.1(a)(1). Submission of an improper jury question may be harmless when an appellate

court determines the verdict was based on a valid theory of liability. Gilbert Wheeler, Inc. v.

Enbridge Pipelines (E. Texas), L.P., 449 S.W.3d 474, 486 (Tex. 2014); Thota v. Young, 366

S.W.3d 678, 693-94 (Tex. 2012).

In this case, Longview did not submit to the jury its claims for fraud, tortious interference

with prospective business relationships, misappropriation of trade secrets, and conspiracy.

Therefore, the only basis for liability against any of the appellants is that Huff and D’Angelo

breached their fiduciary duty to Longview. Only jury questions one and two addressed whether

Huff and D’Angelo breached their fiduciary duty, and all other findings flowed from the jury’s

affirmative finding on at least one of those questions. As explained above, we conclude the

evidence is legally insufficient to support the jury’s finding under question number one that Huff
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and D’Angelo failed to comply with their fiduciary duty to Longview “by taking a corporate

opportunity,” and the judgment cannot be affirmed on that basis. Therefore, the only remaining

theory of liability for breach of fiduciary duty was the competition cause of action. Because we

have concluded the verdict was based, in part, on the corporate opportunity theory of liability for

which the evidence is legally insufficient, submission of the improper jury question on the

remaining competition theory of liability was harmful because the jury found Huff and D’Angelo

liable under this theory. Therefore, the judgment cannot be affirmed on the grounds that Huff and

D’Angelo failed to comply with their fiduciary duty of loyalty to Longview by engaging “in

competition with [Longview] without the informed approval of [Longview’s] board of directors.”

LIS PENDENS

Finally, appellants contend that if the judgment is reversed, this court should expunge any

notices of lis pendens filed by Longview under Texas Property Code section 12.0071(c)(2). See

TEX. PROP. CODE ANN. § 12.0071(c)(2) (West 2014). Section 12.0071(c) provides that a court

shall order a notice of lis pendens expunged if that court determines “the claimant fails to establish

by a preponderance of the evidence the probable validity of the real property claim.” Id.

§ 12.0071(c)(2). Longview, however, claims this requested relief should be brought before the

trial court. We agree.

It does not appear this court has jurisdiction to remove a notice of lis pendens. See In re

Estate of Sanchez, No. 04-11-00332-CV, 2012 WL 1364979, *7 (Tex. App.—San Antonio Apr.

18, 2012, pet. denied) (mem. op.) (stating “Section 12.0071 allows a party to file a motion

requesting the trial court expunge a notice [of] lis pendens.” (emphasis added)). Further, this court

has not been provided any authority demonstrating this court’s jurisdiction to remove a notice of

lis pendens. Accordingly, we decline to issue any orders, as requested by appellants, to expunge

the notices.
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CONCLUSION

For the reasons stated above, we conclude the evidence is legally insufficient to support

the jury’s finding on the corporate opportunity question and we conclude Longview did not plead

a competition cause of action. Therefore, we reverse the trial court’s judgment and render a take-

nothing judgment in favor of appellants. 6

Sandee Bryan Marion, Chief Justice

6
Because our disposition of the issues addressed in this opinion are dispositive of the appeal, we do not address
appellants’ remaining issues on appeal. TEX. R. APP. P. 47.1.

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