Webb v. CAI Wireless Systems Inc.

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that this opinion should not be published and is not precedent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.

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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.

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 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

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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

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Accordingly, we AFFIRM the judgment of the district court.

17