United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT September 9, 2004
Charles R. Fulbruge III
Clerk
No. 03-41279
DAVID E. WEBB; THOMAS DIXON,
Plaintiffs-Counter Defendants–Appellees,
versus
CAI WIRELESS SYSTEMS INC; ET AL
Defendants
JARED ABBRUZZESE,
Defendant-Counter Claimant–Appellant.
Appeal from the United States District Court
for the Eastern District of Texas
USDC No. 4:02-CV-5
Before REAVLEY, JONES AND DENNIS, Circuit Judges
PER CURIAM:*
Defendant-Appellant Jared Abbruzzese appeals from a jury
verdict awarding damages to Plaintiffs-Appellees David Webb and
Thomas Dixon on their fraud claims against him. Because
Abbruzzese failed to present properly his contentions on appeal
*
Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
1
in the district court, our review is quite limited. Finding no
plain error, we affirm.
I. Facts and Proceedings
In the late 1990s, Webb served as chief executive officer of
CS Wireless Systems, Inc., and Dixon was CS’s senior vice
president in charge of operations. Abbruzzese was chairman of
the board of directors of CS and their chief executive officer of
CAI Wireless Systems, Inc., the parent company of CS.
During this time, CAI’s senior management was seeking a
“strategic partner”–i.e., a major telecommunications firm–to
invest in or purchase CAI and CS. But a major obstacle hampered
CAI’s ability to market CS: Heartland Wireless, a company that
owned a minority interest in CCS. During an October 1998 meeting
in Dallas, CAI and CS management formulated a plan to deal with
the Heartland problem. The plan involved CAI buying out
Heartland’s stake in CS, followed by a merger of CAI and CS. It
was hoped that the resulting company would then be in abetter
position to attracted a purchaser or a merger partner. The
executives were particularly interested in attracting MCI
WorldCom as a joint-venture partner, since (among other things)
WorldCom lacked a wireless business and thus was likely to retain
many CAI and CS employees after a merger.
While the senior managers were in Dallas for this strategy
meeting, Abbruzzese and Webb met privately over dinner. Webb
testified at trial that Abbruzzese used this dinner as an
2
opportunity to persuade him and Dixon to remain with the company,
so that the two would employ their superior contacts in the
industry to help Abbruzzese achieve the plan described above. In
1997, Webb and Dixon had signed three-year employment contracts
with CS, which granted each a number of options to purchase CS
stock. According to Webb, during the dinner in October 1998,
Abbruzzese promised that both Webb’s and Dixon’s CS options would
“come forward,” meaning that the CS options would be replaced by
options to buy stock in the post-merger company.
In December 1998, CAI bought Heartland’s interest in CS.
About a month later, Abbruzzese telephoned Webb. Webb testified
that Abbruzzese told him that Sprint had recently bought a
substantial position in CAI. Webb also testified that Sprint was
the worst possible strategic partner. Since Sprint already had a
wireless business, Abbruzzese claimed that Sprint would not need
to retain CAI’s and CS’s management. Abbruzzese also claimed
that Sprint was only interested in obtaining the broadband
telecommunications spectrum owned by CAI and CS at a cheap price.
According to Webb, ABBRUZZESE encouraged Webb and Dixon to
negotiated separation agreements with CS before Sprint took over
the company, and Abbruzzese offered to help them do so before he
too was terminated by the impending new owner. Webb testified
that he tape-recorded this conversation with Abbruzzese and
played it for Dixon.
3
Believing that their hard work at CS was for naught, Webb
and Dixon both signed separation agreements and accepted
severance packages in February 1999. Each separation agreement
contained a release of any claims that the departing executive
might have against CS or any of its affiliates or employees,
including Abbruzzese. The separation agreements also
extinguished Webb’s and Dixon’s stock options in CS. In
addition, Webb and Dixon entered into consulting agreements,
which obligated each to aid in the selling of certain CS assets.
A few weeks after Webb and Dixon signed their separation
agreements, the two remaining senior executives at CS (the
company’s chief financial officer and its general counsel and
three less-senior CS employees all received a number of CAI stock
options.
Meanwhile, CAI executives continued the search for a
strategic partner for CAI and CS, although the two companies
never formally merged. In March of 1999, CAI shares were trading
at $1.625; by April, the price had driven dramatically to $9.50
per share. At that point, a bidding war for CAI developed
(principally between Sprint and WorldCom), which drove the price
of CAI stock even higher. Despite this bidding war and
Abbruzzese’s claims to Webb a few months earlier, Sprint never
purchased an interest in CAI. Near the end of April, it was
WorldCom that bought CAI for $28 per share. As part of this
acquisition, all the CAI stock options held by CAI and CS
4
employees became fully vested and were exercised. Abbruzzese
realized $8,317,500 on his CAI options.
Plaintiffs testified that they learned about the WorldCom
purchase from an April 1999 media report and that in October 1999
they reviewed a proxy statement for the transaction and
discovered that Abbruzzese had lied to them in January 1999 about
Sprint buying a large interest in CAI. Disgruntled about missing
out on the profitable WorldCom deal, they field suit against CS
and CAI in Texas state court in November 2001. The two companies
removed the case to federal district court on the basis of
diversity jurisdiction, and the Plaintiffs amended their
complaint to add claims against Abbruzzese. Plaintiffs’ cause of
action against CS and CAI were later severed from this suit
against Abbruzzese after the two companies filed suggestions of
bankruptcy as a result of the bankruptcy of WorldCom.
In May of 2003, Plaintiff’s case against Abbruzzese
proceeded to trial, with Plaintiffs alleging three claims under
Texas law: (1) breach of contract; (2) statutory stock fraud; and
(3) fraud. Regarding their fraud claim, Plaintiffs averred that
they signed their separation agreements and agreed to leave CS in
reliance on Abbruzzese’s fraudulent misrepresentation that Sprint
had bought an interest in CAI and planned to terminate all CAI
and CS executives.
At the close of Plaintiffs’ evidence, the trial judge
granted judgment as a matter of law to Abbruzzese on Plaintiff’s
5
breach of contract claims, concluding that the evidence might
support a contract between Plaintiffs and CAI, but not
Abbruzzese. The jury found that Abbruzzese had committed fraud
and stock fraud, and it awarded Webb $5,160,000 in actual damages
and $1,125,000 in exemplary damages. Dixon was awarded
$1,159,601 in actual damages and $1,125,000 in exemplary damages.
Abbruzzese appeals, contesting: (1) the accuracy of the
compensatory damages interrogatory submitted to the jury; (2) the
evidence supporting the jury’s finding that Plaintiffs did not
waive their fraud claims against Abbruzzese; and (3) Plaintiff’s
evidence on compensatory damages.
II. The Compensatory Damages Interrogatory
The jury verdict in this case consisted of answers to a
series of special interrogatories. Abbruzzese disputes the
wording of the special interrogatory on compensatory damages for
fraud, which read as follows
What sum of money, if any, if paid now in cash, would
fairly and reasonably compensate David Webb and/or Thomas
Dixon for their damages, if any, proximately caused by Jared
Abbruzzese’s fraud?
Consider the following elements of damages, if any, and
none other: the value of the opportunity, if any, to receive
stock options that David Webb and/or Thomas Dixon gave up in
reliance upon the fraud.
On appeal, Abbruzzese presents two challenges to this
interrogatory. He first contends that the jury should have been
asked whether Plaintiffs had demonstrated “by a preponderance of
6
the evidence that they would have in reasonable certainty
received options.” Abbruzzese emphasizes that–even if he had not
committed fraud–other factors could have prevented Plaintiffs
from receiving CAI stock options. In Abbruzzese’s view, this
interrogatory failed to ask the jury to decide whether Plaintiffs
probably would have obtained the options absent his fraud. In
other words, Abbruzzese’s first objection essentially argues that
the jury was not required to determined if his conduct caused the
damages claimed by the Plaintiffs.
Second, Abbruzzese maintains that this interrogatory invited
the jury to determine the value of the mere opportunity or chance
to receive stock options in CAI and to award that amount to
Plaintiffs. According to Abbruzzese, Texas law prohibits
recovery for loss of a chance.
As an initial matter, Plaintiffs respond that Abbruzzese did
not raise his current objection in the district court. To
preserve error regarding a jury charge, the complaining party
must have complied with Rule 51 of the Federal Rules of Civil
Procedure. Rule 51 requires a party challenging a jury charge to
state “distinctly the matter objected to and the grounds of the
objection.” FED. R. CIV. P. 51 (May 2003) (amended Dec. 2003).
This rule “is intended to provide the trial court with an
opportunity to correct any error it may have made in the
instruction before the jury begins its deliberation.” 9A CHARLES
7
ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 2553, at 400 (2d Ed.
1995).
In the charge conference, Abbruzzese’s lawyer contested the
use of the term “opportunity,” arguing that: “there is no
opportunity in this case as it currently exists giving [sic] the
striking of the breach of contract action. We would submit that
an appropriate term would be ‘entitlement’ if any to receive
stock options.” Twice more Abbruzzese’s counsel urged the court
to replace “opportunity” with “entitlement.” But the attorney
never elaborated on why “entitlement” was preferable beyond his
initial reference to the court’s granting judgment as a matter of
law to Abbruzzese on Plaintiffs’ breach of contract claim. In
other words, it appears that the sole basis of the objection was
the district court’s conclusion that Plaintiffs had not presented
enough evidence for the jury to find that Abbruzzese was
contractually bound to deliver the CAI options to Plaintiffs.
Abbruzzese’s obscure objection did not provide the trial court
with an opportunity to address either of his current
contentions.1
1
While the entitlement reference could theoretically be
related to Abbruzzese’s first argument on appeal, which regards
causation, use of the term “entitlement” in this context lacks
support in Texas law. Cf. Taita Chem Co. v. Westlake Styrene,
LP, 351 F.3d 663, 667 (5th Cir. 2003)(“[T]he appellant must show
that the proposed instruction offered to the district court
correctly stated the law.”). Abbruzzese presents no authority
for the proposition that Plaintiffs had to demonstrate that the
were legally entitled to the CAI options in order to recover
damages. Under Texas law, consequential damages are available
for losses proximately caused by a tortfeasor’s fraudulent
8
We therefore conclude that Abbruzzese did not state
“distinctly the matter objected to and the grounds of the
objection.” FED R. CIV. P. 51. “Rule 51 holds litigants to a
difficult standard of error preservation for good reason. It
requires that objections be brought before the trial judge for a
possible remedy at the trial court level, saving judicial
resources.” Taita Chem. Co. v. Westlake Styrene, LP, 351 F.3d
663, 668 (5th Cir. 2003). Consequently, we review Abbruzzese’s
challenge to the compensatory-damages interrogator for plain
error only. Id.; Russell v. Plano Bank & Trust, 130 F.3d 715,
721 (5th Cir. 1997).
This standard requires the party to demonstrate that: (1)
the district court erred; (2) the error was plain; (3) the plain
error affected the party’s substantial rights; and, (4) failure
to correct the error would seriously affect the fairness,
integrity, or public reputation of the proceedings. E.g., Taita
Chem., 351 F.3d at 668. To show that the interrogatory was
erroneous, Abbruzzese must establish that, viewing the
interrogatory as a whole, it creates “substantial and
conduct. See Arthur Anderson & Co. v. Perry Equip. Corp., 945
S.W.2d 812, 816 (Tex. 1997); see also El Paso Dev. Co. v. Ravel,
339 S.W.2d 360, 364 (Tex. Civ. App. 1960, writ ref’d n.r.e.)(“We
believe the law to be well settled in Texas, as well as under
general principles as to damages, that an injured party is
entitled to recover in a tort action such damages as result
directly, naturally and proximately from fraud. However, remote
damages, or those which are too uncertain for ascertainment, or
are purely conjectural, speculative or contingent, cannot be
recovered.”).
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ineradicable doubt whether the jury [was] properly guided in its
deliberations.” Id. at 667. Even if the interrogatory was
erroneous under this standard, we will affirm nonetheless if we
determine, based on the entire record, that the “error could not
have affected the outcome of this case.” Taita Chem., 351 F.3d
at 667. “This standard provides the district court great
latitude concerning the charge.” Id.
The thrust of Abbruzzese’s current objection to the
compensatory-damages interrogatory centers on causation.
Abbruzzese contends that the interrogatory permitted the jury to
award Plaintiffs damages without finding that they were either
more likely than not or reasonably certain to receive CAI stock
options absent Abbruzzese’s fraud. He points out that several
other events could have caused Plaintiffs not to receive CAI
stock options even absent the fraud–e.g., the Plaintiffs might
have left CS for another reason before being granted CAI options.
We do not agree that the compensatory-damages interrogatory,
read as a whole and considered along with the other jury
instructions, permitted the jury to award damages to Plaintiffs
without finding that those damages were proximately caused by
Abbruzzese’s fraud. The charge contained the following
instructions regarding damages:
You may award compensatory damages only for injuries
that an injured party proves were proximately caused by the
other party’s allegedly wrongful conduct. . . .You should
not award compensatory damages for speculative injuries, but
only for those injuries which the injured party has actually
10
suffered or that the injured party is reasonably likely to
suffer in the future.
. . .
If you decide to award compensatory damages, you should
be guided by dispassionate common sense. Computing damages
may be difficult, but you must not let that difficulty lead
you to engage in arbitrary guesswork. On the other hand,
the law does not require that an injured party prove the
amount of his losses with mathematical precision, but only
with as much definiteness and accuracy as the circumstances
permit.
You must use sound discretion in fixing an award of
damages, drawing reasonable inferences where you find them
appropriate from the facts and circumstances in evidence.
In addition, the instructions included a definition of proximate
cause–the accuracy of which neither party disputes. And the
complained of interrogatory asked the jury to compensate the
Plaintiffs for any damages “proximately caused by Jared
Abbruzzese’s fraud.”2 Read as a whole, see Taita Chem., 351 F.3d
at 669-70, the charge and the interrogatory required the jury to
determine that the Plaintiffs’ damages were proximately caused by
Abbruzzese’s conduct.
Interspersed with his causation argument, Abbruzzese also
argues that the compensatory-damages interrogatory invited the
jury to compensate Plaintiffs for a mere lost opportunity or
2
Initially, the compensatory-damages interrogatory lacked
the proximate-cause element. Abbruzzese’s counsel objected to
this omission in the charge conference. Plaintiffs agreed that
proximate cause is a necessary element of consequential damages,
and the parties and the court proceeded to debate how best to
incorporate that element into the instructions. They decided to
add this proximate-cause reference to the compensatory-damages
interrogatory and to include in the jury instructions the
aforementioned general instruction defining proximate cause.
11
chance to gain CAI options. He relies on Kramer v. Lewisville
Mem. Hosp., 858 S.W.2d 397 (Tex. 1993) for the proposition that
Texas law does not allow a party to recover damages for the loss
of a chance. In Kramer, the Texas Supreme Court held that a
plaintiff cannot recover “for negligent treatment that decreases
a patient’s chance of avoiding death or other medical conditions
in cases where the adverse result probably would have occurred
anyway.” 858 S.W.2d 398. Critically, the Kramer court focused
on causation, explaining that if a plaintiff did not have to show
that the defendant medical professional’s negligence probably
caused her injury, “we do not believe that a sufficient number of
alternative explanations and hypotheses for the cause of the harm
are eliminated to permit a judicial determination of
responsibility.” Id. at 405. To be sure, the Texas Supreme
Court rejected the contention that a lost chance of survival is a
“discrete compensable injury,” but it did so because it felt that
the truth seeking function of the law demands that a plaintiff
prove that the tortfeasor was more likely than not the cause of
the complained-of harm. Id. Here, as shown above, the jury
instructions and the compensatory-damages interrogatory required
the jury to determine that Abbruzzese proximately caused
Plaintiffs’ claimed damages. Even if the use of the term
“opportunity” was somewhat misleading, “the result is not a clear
and obvious error that seriously affects substantial rights and
the fairness, integrity, or public reputation of the judicial
12
proceedings.”3 Taita Chem., 351 F.3d at 668-69. Therefore, we
do not find plain error.
III. Waiver of Plaintiffs’ Fraudulent-Inducement Claims
On appeal, Abbruzzese asserts that no evidence supports the
jury’s finding that Plaintiffs did not waive their rights to sue
for fraud. Abbruzzese notes that the separation agreements that
Plaintiffs signed when they left CS contained releases of
liability. At trial, Abbruzzese relied on these releases, and
Plaintiffs countered that the releases were unenforceable because
Abbruzzese had fraudulently induced Plaintiffs to sign the
separation agreements containing the releases. The trial judge
submitted a special interrogatory on waiver to the jury, and the
jury found that neither Plaintiff had waived his right to
complain about Abbruzzese’s fraud. On appeal, Abbruzzese asserts
that the evidence at trial conclusively demonstrated that
Plaintiffs ratified the releases by continuing to accept benefits
under their consulting agreements after they learned of
Abbruzzese’s fraudulent conduct. Accordingly, Abbruzzese
maintains that no evidence supports the jury’s answer to the
waiver interrogatory.
As Abbruzzese concedes, he failed to present this argument
in his motion for judgment as a matter of law in the district
3
Again, we note that Abbruzzese has not shown that the
alternative term proposed by his trial counsel, “entitlement,”
would have improved the accuracy of the compensatory-damages
interrogatory. See supra note 1.
13
court. Thus, we review for plain error. See, e.g., Industrias
Magromer Cueros y Pieles S.A. v. La. Bayou Furs Inc.,293 F.3d
912, 920-21 (5th Cir. 2002). When applying the plain-error
standard in the context of a challenge to the sufficiency of the
evidence, this court asks only whether there was any evidence
supporting the jury verdict. Id. And “we may not question the
sufficiency of whatever evidence we do find.” Little v. Bankers
Life & Cas. Co., 426 F.2d 509, 511 (5th Cir. 1970). Our review
is, therefore, “extremely limited.” See Resolution Trust Corp.
v. Cramer,6 F.3d 1102, 1107 (5th Cir. 1993).
Abbruzzese’s argument that Plaintiffs’ continued acceptance
of benefits under their consulting agreements waived their rights
to rescind the releases in their separation agreements depends on
his assertion that the two documents compose one contract. In
asserting that the two documents compose one contract, Abbruzzese
claims that the district court held that they were a single
contract and that the court directed the jury to consider them as
such. The waiver interrogatory stated that the jury could find
that Webb or Dixon or both “intentionally renounced their right
to claim fraud” “by continuing to accept benefits under the
Separation Agreement and/or the Consulting Agreement.” While the
district court might plausibly have concluded that the two
documents comprised one agreement, we do not think that the
court, in fact, had so concluded. We do not read the “and/or”
phrase in this interrogatory as directing the jury to view the
14
documents as a single contract. Rather, through this wording,
the court permitted the jury to find–as the jury did– that the
Plaintiffs did not intentionally waive their right to rescind the
releases in the separation agreements when they continued to
accept benefits under the consulting agreements.
We conclude that there was some evidence from which the jury
could find that Plaintiffs did not, by accepting benefits under
their consulting agreements, intend to waive their rights to
rescind the releases that were procured by Abbruzzese’s fraud.
The separation agreement and the consulting agreement were
contained in separate documents, and the jury heard testimony
that they were two separate agreements. In addition, Webb
testified that his fulfillment of his obligations under the
consulting agreement “had nothing to do with [Abbruzzese] lying
to me.” Accordingly, we hold that Abbruzzese has not met his
stringent burden of showing plain error in order to prevail on
appeal.
IV. Evidence on Compensatory Damages
Finally, Abbruzzese contends on appeal that no evidence
supports the amount of compensatory damages awarded by the jury.
Specifically, Abbruzzese asserts that Plaintiffs presented no
evidence of the number of CAI options that they would have
received had Plaintiffs not left CS. Abbruzzese claims that all
of the evidence presented by Plaintiffs concerning the number of
options lost was based on their breach-of-contract theory, i.e.,
15
their allegation that Abbruzzese promised them that their CS
options would “come forward” after the merger that never
occurred. Abbruzzese therefore reasons that, because the
district court refused to send Plaintiffs’ breach-of-contract
claim to the jury, the record contained no evidence upon which
the jury could base a finding that Plaintiffs lost a certain
number of options as a result of Abbruzzese’s fraud.
Here again, Abbruzzese admits hat he did not challenge the
sufficiency of the evidence on fraud damages in his motion for
judgment as a matter of law. Consequently, “the issue before us
is whether there is any evidence to support the amount of damages
for which the jury found [Abbruzzese] liable.” See Cramer, 6
F.3d at 1108 (emphasis added). Under this standard, we conclude
that there was certainly evidence upon which the jury could have
based its damages award. Specifically, as noted above, the jury
heard that several CS executives–who were at or below Plaintiff’s
level–received CAI options in March of 1999, shortly after the
Plaintiffs were induced to leave by Abbruzzese’s fraud. From
this, the jury could have concluded that absent Abbruzzese’s
fraud, Webb and Dixon would have remained at CS and received CAI
options, which were the same options that became quite lucrative
in April of 1999, when CAI was acquired by WorldCom.
Accordingly, there was no plain error.
V. Conclusion
16
Accordingly, we AFFIRM the judgment of the district court.
17