David Tubb and Superior Shooting System, Inc., Appellants/Cross-Appellees v. Aspect International, Inc. and James Sterling, Appellees/Cross-Appellants

ACCEPTED
12-14-00323-CV
TWELFTH COURT OF APPEALS
TYLER, TEXAS
11/3/2015 4:23:01 PM
Pam Estes
CLERK

FILED IN
12th COURT OF APPEALS
No. 12-14-00323-CV TYLER, TEXAS
11/3/2015 4:23:01 PM
__________________________________ PAM ESTES
Clerk

In the Twelfth Court of Appeals
Tyler, Texas
__________________________________

David Tubb and Superior Shooting System, Inc.,
Appellants

v.

Aspect International, Inc. and James Sterling,
Appellees
___________________________________

Appellants’ Reply Brief
___________________________________

Wesley Hill Greg Smith
Bar No. 24032294 Bar No. 18600600
Ward, Smith & Hill, PLLC Ramey & Flock, P. C.
P. O. Box 1231 100 E. Ferguson, Suite 500
Longview, Texas 75606 Tyler, Texas 75702
Telephone: 903-757-6400 Telephone: 903-597-3301
Facsimile: 903-757-2323 Facsimile: 903-507-2413

Attorneys for Appellants

Oral Argument Requested
 CONTENTS

Authorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

The Reply Argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

I. The “gotcha” of an incomplete record has been cured . . . . . . . . . . . . . . . 1

II. Aspect has not proved a repudiation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

A. Aspect is wrong about the substantive law:
Repudiation requires the absolute, unconditional
refusal to perform in the future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. Aspect likewise is wrong about the standard and scope of review . . 5

1. In determining whether undisputed historical facts
constitute a repudiation, this Court makes a legal
determination, which it decides de novo . . . . . . . . . . . . . . . . . . . 5

2. Under City of Keller v. Wilson, the emails and phone-call
transcripts must be considered in context and in their
entirety . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

C. The facts not only do not establish a renunciation, they negate
it . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

D. Superior did not repudiate the deal by once forwarding a
lawyer’s suggestion about a lease arrangement . . . . . . . . . . . . . . . . . 19

E. Aspect’s claims about the supply of materials do not even
prove an ordinary breach, let alone establish a repudiation . . . . . . . 21

III. There is no probative evidence of damages: Sterling’s attempt to
value his services was both inadmissible and legally insufficient . . . . . . 23

Conclusion and Prayer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

ii
Certificate of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Certificate of Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Appendices:

A. PX55

B. Detailed Phone-Call Transcript Excerpts
(PX55 & DX17, 18a, 19a, 20a, & 21a)

iii
 AUTHORITIES

CASES:

Cal-Tex Lumber Company v. Owens Handle Company,
989 S.W.2d 802 (Tex. App.–Tyler 1999, no pet.) . . . . . . . . . . . . . 19, 20

City of Keller v. Wilson,
168 S.W.3d 802 (Tex. 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 7, 19, 27

Coastal Transportation Co. v. Crown Cent. Petroleum Corp.,
136 S.W.3d 227 (Tex. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Crown Life Ins. Co. v. Reliable Mach. & Supply Co.,
427 S.W.2d 145 (Tex. Civ. App.–Austin 1968, writ ref’d n.r.e.) . . . . 20

Dallas Railway & Terminal Co. v. Gossett,
294 S.W.2d 377 (Tex. 1956) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Dudley v. Born,
710 S.W.2d 638 (Tex. Civ. App.–Beaumont 1986, writ ref’d n.r.e.) . . 2

Ennis Business Forms, Inc. v. Gehrig,
534 S.W.2d 183 (Tex. Civ. App.–Waco 1976, writ ref’d n.r.e.) . . . . 2, 3

Griffith v. Porter,
817 S.W.2d 131 (Tex. App.–Tyler 1991, no writ) . . . . . . . . . . . . . . . . 21

Holt Atherton Indus., Inc. v. Heine,
835 S.W.2d 80 (Tex. 1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch,
443 S.W.3d 820 (Tex. 2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 27, 28

In re R.J.H.,
79 S.W.3d 1 (Tex. 2002) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

iv
Jenkins v. Jenkins,
991 S.W.2d 440 (Tex. App.–Fort Worth 1999, pet. denied) . . . . . . 2, 4

Kerr-McGee Corp. v. Helton,
133 S.W.3d 245 (Tex. 2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 28

Kilgore v. Northwest Texas Baptist Educ. Soc.,
37 S.W.598 (Tex. 1896) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2, 3

Mar-Len of Louisiana v. Gorman-Rupp Company,
795 S.W.2d 880 (Tex. App.–Beaumont 1990, writ denied) . . . . . . . 4, 5

Mayhew v. Town of Sunnyvale,
964 S.W.2d 922 (Tex. 1998) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Murray v. Crest Construction,
900 S.W.2d 342 (Tex. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Natural Gas Pipeline Co. of Am. v. Justiss,
397 S.W.3d 150 (Tex. 2012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23, 24

New York Party Shuttle, LLC v. Bilello,
414 S.W.3d 206 (Tex. App.–Houston [1st Dist.] 2013, pet. denied) . . 2

Porras v. Craig,
675 S.W.2d 503 (Tex. 1984) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

State Farm Fire and Cas. Ins. Co. v. Vandiver,
941 S.W.2d 343 (Tex. App.–Waco 1997, no pet.)(per curiam) . . . . . . 1

Stinson v. Cravens, Dargan & Co.,
579 S.W.2d 298 (Tex. Civ. App.-Dallas 1979, no writ) . . . . . . . . . . . 24

Taylor Publishing Co. v. Systems Marketing, Inc.,
686 S.W.2d 213 (Tex. App.–Dallas 1984, writ ref’d n.r.e.) . . . . . . . . 20

Volkswagen of Am., Inc. v. Ramirez,
159 S.W.3d 897 (Tex.2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

iv
RULES, STATUTES AND OTHER AUTHORITIES:

17A AM. JUR.2D CONTRACTS § 723 (2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

17 C.J.S. CONTRACTS § 712 (2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

49 David R. Dow & Craig Smyser, TEXAS PRACTICE:
CONTRACT LAW § 9.11 (2015) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

RESTATEMENT (SECOND) OF CONTRACTS § 250 . . . . . . . . . . . . . . . . . . . . . 20

13 WILLISTON ON CONTRACTS § 39:40 (4th ed.) . . . . . . . . . . . . . . . . . . . . . 2, 4

23 WILLISTON ON CONTRACTS § 63:45 (4th ed.) . . . . . . . . . . . . . . . . . . . . . . . 4

vi
 The Reply Argument

I. The “gotcha” of an incomplete record has been cured.

Initially, the reporter’s record omitted transcriptions of several short video-

deposition clips that were presented to impeach James Sterling during cross-

examination. Aspect says this means it wins. Not at all. Because the court reporter

has filed a supplemental record including her transcription of each deposition clip

played at trial, the record is complete. See Supp. RR vols 5a and 6a.1

II. Aspect has not proved a repudiation.

Aspect’s recovery–a rescissionary award purporting to value Sterling’s

invested time–is not sustainable absent proof that Superior repudiated the

ammunition deal. There is no such proof. Rather, the facts–largely drawn from

uncontested emails and phone-call transcripts–not only do not support a

repudiation claim, they negate it.

1
Besides, the Sterling deposition was preserved by videotape and a written deposition transcript
made when the deposition was given. The original trial record identifies each impeachment video clip
by terminal page-and-line references to that written transcript. E.g., 5 RR 5 (“I want to look, specifically,
at Page 69, lines 5 through 16.”). In this circumstance, the record could alternatively be supplemented
by directing the court reporter to file the relevant portions of the written deposition transcript. State
Farm Fire and Cas. Ins. Co. v. Vandiver, 941 S.W.2d 343, 348-49 (Tex. App.–Waco 1997, no pet.)(per
curiam). If for any reason the Court were to deem the current supplemental record inadequate (it isn’t),
Superior would in that event request the opportunity to supplement the record with the deposition
transcript excerpts.

1
 A. Aspect is wrong about the substantive law: Repudiation requires
a defendant’s absolute, unconditional refusal to perform in the
future.

Aspect argues “repudiation lite,” whereby it bootstraps allegations of a past ordinary

breach into an inference or “indication” of a future ordinary breach and then calls

the result a repudiation.

For over 100 years, the Texas courts have insisted that repudiation occurs

only when the defendant’s words or actions amount to the “absolute,”

“unconditional,” and “unequivocal” present refusal to perform his contract in the

future. Kilgore v. Northwest Texas Baptist Educ. Soc., 37 S.W. 598, 600 (Tex. 1896)

(intent to repudiate must be “declared in positive terms and unconditionally”); Ennis

Business Forms, Inc. v. Gehrig, 534 S.W.2d 183, 189 (Tex. Civ. App.–Waco 1976, writ

ref’d n.r.e.)(“The doctrine of anticipatory breach is applicable only where there is

an unequivocal renunciation of the contract by the defaulting party.”). To have

constituted a repudiation, the defendant’s statements and actions must “be absolute,

positive, unretracted, unretractable, and unconditional.” Dudley v. Born, 710 S.W.2d

638, 644 (Tex. Civ. App.–Beaumont 1986, writ ref’d n.r.e.); see also New York Party

Shuttle, LLC v. Bilello, 414 S.W.3d 206, 216 (Tex. App.--Houston [1st Dist.] 2013, pet.

denied); Jenkins v. Jenkins, 991 S.W.2d 440, 447 (Tex. App.–Fort Worth 1999, pet.

denied). Repudiation does not arise merely because of an ordinary breach or the

possibility of a future breach. 13 WILLISTON ON CONTRACTS §39:40 (4th ed.) (“mere

2
nonfeasance” will not support a determination of repudiation). Nor can a

repudiation arise when the purportedly repudiating party continues in any way to

perform. See Kilgore, 37 S.W. at 601(when the promisor is actively engaged in

performance, no declared intent to abandon it at some future time could operate

to terminate it); Ennis Business Forms, 534 S.W.2d at 189 (“The party not in default

will be justified in treating the contract as repudiated or abandoned only where the

other party ... clearly shows a fixed intention, during nonperformance, to repudiate

...”)(emphasis added). Repudiation, to be effective, must go to the “whole contract

... and it must be distinct, unequivocal, and absolute.” 17A AM. JUR.2D CONTRACTS

§723 (2015).

To feign support, Aspect quotes from a practice guide. Yet the quoted text

was never intended as a definition of repudiation. It was instead a comment on the

(1) breadth and (2) certitude to which the record must show the defendant’s

contract renunciation. See Appellee Br. at 40, quoting 49 David R. Dow & Craig

Smyser, TEXAS PRACTICE: CONTRACT LAW §9.11 (2015) (“To give rise to an

anticipatory breach, a repudiation must be clear and unequivocal and must apply to the

entire contract.”). The cases the practice guide cites confirm the repudiation elements

set out in Superior’s initial brief, stating that repudiation

consists of words or actions by a contracting party that indicate he is
not going to perform his contract in the future. [citation omitted] It
is conduct that shows a fixed intention to abandon, renounce, and

3
 refuse to perform the contract.” Jenkins v. Jenkins, 991 S.W.2d 440, 447
(Tex. App.–Fort Worth 1999, pet. denied).

And because repudiation represents a “harsh remedy,” the requirement that the

repudiating statement be clear and absolute is “a strict one,”2 for which the courts

intentionally “set the bar high.”3 A party’s intent not to perform “may not be

implied from doubtful and indefinite statements that performance may or may not

take place.” 23 WILLISTON ON CONTRACTS §63:45 (4th ed.). So equivocation will not

suffice. Nor will ambiguous prior conduct from which the plaintiff speculates that

the defendant might commit a future ordinary breach. It must be this way or else

parties like Aspect could find a repudiation in every run-of-the-mill hiccup

encountered in starting a new business.

The two cases Aspect discusses do not suggest any different conclusion.

They both involved classic instances of repudiation – where a defendant stated in

unequivocal terms that it would not perform its contract going forward. Murray v.

Crest Construction, a per curiam decision, involved a contractor’s unequivocal, pre-

performance declaration that “it would not perform on the promissory note when

its performance became due.” 900 S.W.2d 342, 344 (Tex. 1995). Mar-Len of Louisiana

v. Gorman-Rupp Company, likewise involved the clearest unequivocal and fixed

2
See 17 C.J.S. CONTRACTS §712 (2015).
3
13 Williston on Contracts §39:40.

4
intention to abandon all future performance. Mar-Len not only stopped all work on

the parties’ project, but it expected all vendors to do likewise and told Gorman-

Rupp so, stating that any contract work Gorman-Rupp might perform would be “at

[its] own risk. 795 S.W.2d 880, 887 (Tex. App.–Beaumont 1980, writ denied). In

both these cases, the bone of appellate contention was not on repudiation’s existence

but on its effect. In Mar-Len, for example, the issue was whether Mar-Len’s “clearly

undisputed” repudiation could excuse Gorman-Rupp from a condition precedent.

Id.

B. Aspect likewise is wrong about the standard and scope of
review.

1. In determining whether undisputed historical facts
constitute a repudiation, this Court makes a legal
determination, which it decides de novo.

This is no he-said-she-said case. The material facts as to what Tubb said or

did are largely undisputed, memorialized in black-and-white emails and transcribed

phone conversations. Such items don’t call for credibility assessment or pose any

choice between competing testimonial versions of disputed fact. Instead, Aspect’s

case will rise or fall on this Court’s legal analysis of Tubb’s undisputed words and

acts. That is a matter to address de novo, because “the trial court is in no better

position to decide legal issues than the appellate court.” In re R.J.H., 79 S.W.3d 1

(Tex. 2002). The analysis remains essentially a legal one even though the trial court

5
has purported to “find” repudiation as a fact rather than as a legal conclusion. The

characterization of an issue as law or fact is likewise a matter this Court decides de

novo. See Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 937 (Tex. 1998) (“The district

court's findings ... purport to decide the ultimate legal issue of whether a taking has

occurred. This, however, involves a question of law, and we therefore owe no

deference to the trial court's ‘findings’ in this regard.”). This Court owes the trial

court’s repudiation finding no deference.

2. Under City of Keller v. Wilson, the emails and phone-call
transcripts must be considered in context and in their
entirety.

Touting the no-evidence standard, Aspect says it may prove its repudiation

lite by divorcing snippets of the parties’ conversations from the larger context of the

conversations as a whole–even when that context otherwise would negate the very

inference Aspect seeks to draw. This is, of course, categorically wrong. Where, as

here, the cause of action turns on proof of an “absolute and unconditional” refusal

to perform, the plaintiff cannot render its email and phone-call proof absolute,

unequivocal or unconditional by editing the contrary qualifications, equivocations

and conditions out of the conversation. As stated in City of Keller v. Wilson, the no-

evidence standard does not authorize an appellate court to ignore undisputed proof

that the fact-finder would not have been allowed to reject. Nor may a court

6
selectively edit phone-call transcripts to draw conclusions that would be patently

unreasonable when considered in light of the conversations on their whole.

[I]n a number of cases, the lack of supporting evidence may not
appear until all the evidence is reviewed in context. For example,
publications alleged to be defamatory must be viewed as a whole –
including accompanying statements, headlines, pictures, and the
general tenor and reputation of the source itself. A court reviewing
legal sufficiency cannot disregard parts of a publication, considering
only false statements to support a plaintiff’s verdict or only true ones
to support a defense verdict.
...
[Likewise,] in reviewing intentional infliction of emotional
distress claims for legal sufficiency, “we consider the context and the
relationship between the parties.” Acts that might constitute
outrageous conduct when dealing with a hearing-impaired consumer
may be legally insufficient between business parties. In our no-
evidence reviews of successful claims, we have invariably reviewed not
just evidence showing the conduct was outrageous, but also evidence
showing that, in context, it was not.
More generally, evidence cannot be taken out of context in a
way that makes it seem to support a verdict when in fact it never did.
. . . thus, if evidence may be legally sufficient in one context but insufficient in
another, the context cannot be disregarded . . . . Either “evidence contrary to
the verdict” must be defined to exclude material contextual evidence,
or it must be an exception to the general rule. City of Keller v. Wilson,
168 S.W.3d 802, 811 (Tex. 2005)(emphasis added).

This is all the difference. Tubb never said Superior renounced the ammo deal. Nor

did he act to do so (such as by signing a third-party contract that could not be

performed without renouncing the contract with Aspect). And the emails, phone

transcripts, and other documentary evidence–when viewed in context as City of Keller

7
requires–does not support but negates any reasonable inference of absolute or

unequivocal contract renunciation.

C. The facts not only do not establish a renunciation, they negate
it.

Did Superior, by its words and acts, clearly and unequivocally renounce

future performance? Not at all.

• The deal terms had never required signing a written document, CR454 (FOF
10, stating deal terms), and there certainly was never any timetable for doing
so. Thus, the parties’ differing views on the form of agreement and the
structure of the negotiation could not work a repudiation. Indeed, even an
outright refusal to negotiate towards such a document would not have
repudiated the contract in this case.

• Tubb always was willing to sign a contract document, and the unedited
emails and phone transcripts show that he actively sought to move that
process along. E.g., PX55 12/31/12 transcript at 7, 9-11; 1/4/13 transcript
at 2-3; 1/8/13 transcript at 10; 1/24/13 transcript at 3. He opposed
Sterling’s late-stage effort to bully a meeting in which Sterling’s lawyer alone
could have dictated a one-sided contract. But this is no evidence Tubb ever
“resisted” signing a contract. Rather, Tubb had every right to insist on a
balanced negotiation.

• Tubb did not sign any document. But neither did Sterling. In fact, by no fault
of Tubb’s, there simply never was any execution-ready document he could
have considered signing. Sterling admittedly produced only a “template” or
“sample” document, and he did so only as a mere “basis for negotiation.”
E.g., 4 RR 119-20, 216-17; 5 RR 16-17; 6 RR 108.

• Tubb, like Sterling, actively involved his lawyers in working towards such a
document. After consulting at least two attorneys, he provided Sterling with
the discussion draft of a limited-liability-company agreement. And he
repeatedly expressed his intent that the parties work towards mutually
acceptable terms. (Even Sterling, in emails both to Tubb and Sterling’s own

8
 counsel, conceded that Tubb’s position was one of “we’re moving forward
with this.” 4 RR 203.)

That a document was not signed before Sterling quit the deal was in respects

Sterling’s own fault: he actively hindered the negotiation by repeatedly referring to

the relationship as a “joint venture,” e.g., 4 RR 119-20, 5 RR 14-17, 6 RR 108,

causing confusion, delay, and prompting Tubb’s accurate retorts that a joint venture

wouldn’t work in Texas without exposing the venturers unnecessarily to undesired

personal liability. E.g., 4 RR 217. It was Tubb who furnished the only proposed

agreement for a limited-liability company. Sterling seems ignorant of the effects his

miscommunications caused.

More importantly, the emails and transcribed phone conversations, fairly

read, show both men agreeing–repeatedly–that a writing was desirable and agreed to

hammer one out. E.g., PX55 12/31/12 transcript at 7-11. In the end, Tubb didn’t

sign a contract for the same reason Sterling didn’t sign one: Aspect and its lawyer

pulled the plug on the deal before the parties could settle on the contract’s form and

terms. The best way to know this is to read the unedited phone-call transcripts,

which are gathered in PX55, in their contextual entirety. We have attached PX55 as

an appendix to this brief. (We also include, as a second appendix, a reasonably

detailed editing of the phone transcripts.) The gist of these transcripts is as follows:

9
 The New Year’s Eve conversation. In this phone call, Tubb not only

endorsed a face-to-face discussion of contract terms as “a great plan,” PX55, 12/01

transcript at p. 2, but he proposed to do so at a specific time and place–the Dallas

Safari Club show. Id. Tubb then reiterated his full commitment to the deal. Id. at 3

(“you and I decided we were going to do a deal and 50 percent is 50 percent.”).

Both men agreed they should get the contract drafting “part of this arrangement

behind us.” Reinforcing his intent, Tubb turned the conversation to the “rough

draft” agreement he had sent Sterling. Id. at 7. After the parties determined that an

initial meeting between the lawyers wasn’t in the cards, Tubb said the men should

visit anyway, exactly because “we need to get an agreement if we’re going to move

forward.” Id. at 10. Then Tubb reminded Sterling that the lawyers had said the deal

would require a “different animal” from the structure contemplated under Sterling’s

proposed joint-venture type agreement. Sterling responded that he was “open to

some other kind of agreement.” Id. at 10-11.

Sterling then proposed to just turn the lawyers loose in the negotiation. Id.

at 11. Tubb, holding a different viewpoint on how best to involve the lawyers,

suggested that the parties first “sit down and ... put some outline to” the agreement.

Id. Sterling then agreed with Tubb’s proposal and ended the discussion by saying

“we’ll just keep moving forward.” Id.

10
 The January 4 phone call. This conversation began when Tubb proposed

to “get together” as he was then in Dallas “for the Safari Club show.” PX55 1/4/13

transcript at 2. Sterling balked. Knowing full well that Tubb was in Dallas without

legal counsel, Sterling instead tried to bully a negotiation where his lawyer alone

would control the discussion. To this end, Sterling claimed there would be “no

sense” in any meeting unless it included his lawyer attempting to draft an agreement

on the spot. Id. In other words, Sterling sought to game the situation. The

conversation could have broken down then and there. But Tubb persevered,

suggesting that his presence in Dallas presented a chance to at least “just sit down

and ... cover our points and see if we can move forward.” Id. at 2-3. Sterling agreed

that was “probably what we ought to do.” Tubb suggested talking on Monday.

Sterling agreed. Id. at 3-4.

The January 7 phone call. On Monday, January 7, the men spoke as

promised. Tubb, unprompted, started by reurging his commitment to the deal.

PX55 1/7/13 phone transcript at 2-3 (“I truly have not deviated ever from half the

net profits ... I’m still holding on that.”). Tubb questioned whether Sterling

remained committed to being paid out of manufacturing profits. Id. Sterling initially

agreed he was, but quickly launched into a rant about how his time “keeps adding

up” and how he “would need to start having some income to justify his time,”

goading Tubb to ask just how much time Sterling claimed to have invested. Sterling

11
called it “a high number” then demanded that his time on the website project – time

he had never billed but had agreed to contribute as equity in the ammunition deal

– now had to “get paid.” Id. at 4-6. After some intervening discussions, including

a discussion of the manufacturing location in which Tubb simply noted that looking

perhaps “a couple years down the road, if we had other machines, it would have

made more sense to have [the manufacturing] in Canadian.,” id. at 11, the

conversation ended with Sterling’s direction for Tubb to “let me know whether

you’re going to pay [Sterling’s website-project time] or not.”

The January 7 email. Later on the 7th, Sterling sent Tubb an email (PX106)

and an invoice for Sterling’s time on the website project. Despite what Aspect now

claims, this email didn’t recount any “destructive” conduct or refusal to sign a

contract. Just the opposite. The email’s first paragraph reiterated that the parties had

that day reaffirmed their agreement to the ammunition deal.

The email’s next four paragraphs declared Sterling’s other projects with Tubb

to be “on hold” and reported the status of Sterling’s work to procure ammunition

packaging. Id. The email’s penultimate paragraph pressed Tubb on Sterling’s new

demand to be paid for the website-project time. But it did not suggest that Tubb

had refused to sign a contract, because he had not done so. This paragraph states

in full: “San Diego Media – Since we don’t have a signed contract on the

ammunition project, you need to pay me for my time on the SDM project. I will

12
email you invoices later today.” Id. The email’s final paragraph (1) suggested that

Sterling wanted to also begin billing for his time on the ammunition project (a

breach of the agreement) and (2) declared that Sterling would refuse any further

work on the ammunition project until the parties could manage to “formalize our

agreement in a signed contract.” Id.

The January 8 phone call. On Tuesday, January 8, Tubb acknowledged

receiving Sterling’s invoice for the website project work. PX55 1/8/13 phone

transcript at 2. He also acknowledged a statement of time for the ammunition

project and was astonished by the amounts alleged. Id. at 7 (“Holy smokes”).

Sterling then said he’d insist the ammunition-project statement be paid in full unless

the two men could manage to sign a written contract. Tubb reaffirmed his

commitment “to do the ammo thing.” But he disapproved Sterling’s effort to extort

a huge payment. And he said Sterling’s choice of an hourly rate wasn’t “a prudent

figure.” Id. at 8. At this point, Sterling tried to bait Tubb into walking away from the

deal, saying: “[I]f you want to have a parting of the ways, then you can get your

equipment out of here.” Id. Tubb didn’t bite, but asked Sterling what he preferred.

Sterling responded that he was “willing to move forward” under “some kind of

written contract” (reflecting that neither the wording nor even the specific kind of

organizational structure had yet been settled upon). Id.

13
 Both men agreed they should have hammered out a written contract at the

outset. Id. at 8-9. Then, when Sterling downplayed his shared responsibility in the

situation, (“I’ve said that [we need to sign a contract] over and over”), Tubb quickly

pointed out that Sterling had furnished only a boilerplate joint-venture

agreement–the very type agreement the lawyers recommended against using in

Texas. Id. at 9. Sterling conceded the point (“That’s fine”), and said he would fall

in line with “whatever is appropriate” as respects the form of organizational

structure. Id. Clearly, there was substantial work to be done before either party

would be in position to sign a contract document.

In this same January 8 discussion, Tubb asked Sterling if he’d been able to

review the LLC agreement forwarded from Tubb’s lawyer. Sterling said an LLC

would be fine. Id. at 10. Then both men agreed that the critical task was to state

their deal in mutually agreeable words. Id. (Sterling: “but our agreement ... would

have to be put in there ...” Tubb: “That’s right. And that may be very hard for us

to do.”). Then, reflecting that the project was an ongoing one, Tubb asked about

Sterling’s progress on the retail boxes. Id.. The men then talked briefly about the

“big bill” Sterling had just submitted, Tubb agreed he’d pay the website-project

invoice, and Sterling now acknowledged that Tubb’s lawyer, too, should be involved

in the contract drafting. Id. at 11-12 (Sterling: “But who’s going to be your attorney

14
that’s handling it [Tubb’s side of the contract drafting]? Is it going to be the guy in

Amarillo?”).

Sterling asked if Tubb’s lawyer had seen the “sample joint-venture

agreement” Sterling had sent. Tubb reminded him that the lawyer had pronounced

it “not a good one.” Id. at 12. And Sterling then conceded his document had never

been more than “simply a boilerplate joint venture agreement.” Id. at 12-13. Sterling

agreed the next step was to “get our attorneys on [to]” finding the right kind of

agreement. Id. at 13. Tubb closed by saying he’d be visiting with the raw-material

suppliers. Id. And Sterling closed by saying he was “willing to move forward.” Id.

at 14.

The January 9 phone call: In this quick call, Tubb said he was sending a

check for the website invoice. PX55, 1/9/13 phone transcript at 2. Sterling, having

had his website-project invoice paid, talked about the need to go forward with the

inventory-tracking project because it was the key to having accurate expense

numbers for calculating profit under the ammunition agreement. Id. at 6. Sterling

acknowledged receiving an email from Tubb’s counsel. Id. at 7. And in closing

Sterling said he would be talking to his counsel to “see if we can move this thing

further still.” Id.

The January 24 phone call: This phone call, on a Thursday, began with a

clear indication the ammunition project was moving forward: a business-as-usual

15
discussion about the boxes necessary for selling ammunition. PX55 1/24/13

transcript at 2-3. Tubb then asked about the attorneys’ work toward a contract

document. Id. at 3 (“... [H]as there been any movement with the attorneys”).

Sterling, whose task it was to get the lawyers together, said nothing had been done,

blaming travel schedules (“[e]verybody has been traveling”). Id. But Sterling said he

expected the lawyers to get together early the following week. Id. Tubb was awaiting

any sign of progress.

Further confirming the deal’s green-light status, the parties also talked about

the effort to acquire materials. Id. at 4. Sterling did question Tubb about the fact

that Tubb had not been able to get some materials, whereas Sterling had managed

to obtain samples from a dealer (“one in .223 and one in .9 millimeter”). Id. at 4-5.

Tubb agreed to check out the problem. And Sterling, being satisfied with that

commitment, promised to “move forward,” and to “next week ... follow up with the

attorneys.” Id. at 5.

The conversations and emails on the whole: Nothing about the

December or January emails and phone conversations, considered in their full and

proper context, begins to show any refusal to sign a written contract or other

conduct to repudiate the deal. So as of January 24, there was no repudiation or

refusal to sign a contract, and Tubb had no reason to think Sterling might ever

contend otherwise. Instead, all indications were that the project was going forward,

16
although it definitely appeared that Sterling may not have actually gotten the

attorneys together (at no fault of Tubb).

The lawyer’s February 5 letter: The very next thing after Sterling’s promise

to follow up with the lawyers, Sterling, acting through counsel, called off the deal.

To this end, Sterling’s lawyer sent a demand letter forbidding Tubb to communicate

with Sterling except through counsel and alleging that Tubb and Superior had

“breached and repudiated” the agreement. DX24. The letter said Tubb had

repudiated the deal by: (1) “insist[ing] upon design and other requirements ... that

have unnecessarily delayed ... timely production of ammunition,” (2) failing to

provide “materials and components,” and (3) “expressing a desire and intent to

move the manufacturing equipment ... from Tyler, Texas ....” Id. Then, counsel

demanded payment of $315,984 “within ten days.” Aspect, he said, would hold

Superior’s loading equipment hostage unless it received “prompt payment of the

foregoing sum.” Id.

Of course, the matters in counsel’s letter do not conceivably constitute a

repudiation:

(1) Tubb had a right to set design standards. Indeed, his unquestioned

expertise respecting precision ammunition was an important part of his contribution

to the project. Aspect’s suit does not contend that Tubb’s exercise of this right was

improper.

17
 (2) Nor are the alleged failures to provide materials and “caliber conversion

equipment” evidence of repudiation. One repudiates a contract by unequivocally

declaring he will not perform it in the future. The items Aspect alleges at most raise

a matter of ordinary breach. (This is not to say that it is not possible for conduct to

work a repudiation. But it must be conduct unequivocally renouncing all future

performance, such as, perhaps, entering a binding third-party contract inconsistent

with the current agreement.).

(3) Respecting a manufacturing location, the parties had agreed only that the

initial location would be in Tyler. Regardless what had been said in November at the

Sterling home, the subsequent evidence demonstrated that (a) Tubb’s opposition

to Sterling’s Tyler location had primarily been a reaction to learning that Sterling’s

garage was right by a railroad track, and (b) Tubb had gotten over this initial

reaction and thereafter consistently affirmed his agreement that manufacturing

would proceed in Tyler. Sterling accepted this. And Tubb relied on Sterling’s

acceptance, through his commitments of time and resources.

Tellingly, counsel’s February 5 letter did not blame Tubb for the failure to get

to a signed contract. In fact, it did not mention the matter. Nor did the letter dare

invite Tubb to affirm the contract (something he had done in almost every phone

conversation). Aspect instead unilaterally ended the deal, demanded $315,000, and

18
ransomed Superior’s equipment, hoping to leverage Tubb’s capitulation. The tactic

didn’t work then. Nor should it work now.

Both men had presented boilerplate documents and both had shown their

willingness to negotiate. So why should Sterling’s efforts be considered as

performance and Tubb’s parallel efforts at a contract be construed as renouncing

the deal? Maybe Sterling’s endorsements of a written contract were more animated.

But there was no contest to see who could shout “I want a written contract” the

loudest or most often.

Nor should this Court be fooled by Aspect’s bluster about a so-called

“destructive path.” E.g., Appellee Br. at 21, 29. None of that happened. Aspect’s

phone-conversation excerpts are ripped from their context and edit out Tubb’s

repeated affirmations and efforts toward a signed contract. They thus contradict the

standard of no-evidence review established in City of Keller. Tubb’s words and

actions, properly viewed in context, were the antithesis of any clear and unequivocal

renunciation of intent to perform in the future.

D. Superior did not repudiate the deal by once forwarding a
lawyer’s suggestion about a lease arrangement.

Citing this Court’s decision in Cal-Tex Lumber Company v. Owens Handle

Company, Aspect claims Superior repudiated the ammunition deal in July 2012, by

forwarding an informal email from Tubb’s lawyer, in which the lawyer suggested

19
that a lease arrangement might work better for both parties’ interests. PX82. Aspect

is wrong.

A party does not repudiate his agreement merely by proposing alternative

contract terms. To work a repudiation, the party must instead demand acceptance of

his alternative terms as an ultimatum–where the party says he will not perform

“except on conditions which go beyond the contract.” RESTATEMENT (SECOND)

OF CONTRACTS §250; see Taylor Publishing Co. v. Systems Marketing, Inc., 686 S.W.2d

213, 217 (Tex. App.–Dallas 1984, writ ref’d n.r.e.). Such a demand “is a

repudiation” because and only because the ultimatum incorporates a “complete

refusal of performance” as respects the original agreement. RESTATEMENT

(SECOND) OF CONTRACTS §250 cmt d; See also Crown Life Ins. Co. v. Reliable Mach. &

Supply Co., 427 S.W.2d 145, 150 (Tex. Civ. App.–Austin 1968, writ ref’d n.r.e.).

Merely proposing that the parties consider a mutually advantageous contract tweak

suggests no such ultimatum.

The Cal-Tex case that Aspect cites is a good example of an

ultimatum/repudiation. 989 S.W.2d 802, 813 (Tex. App.–Tyler 1999, no pet.).

There, the defendant lumber company not only proposed a new contract, but its

representative declared “We’re not going to pay you a dime [under the old contract].

... [T]his is it. You can forget the old contract. It’s this or nothing.” Id. at 814. That

kind of ultimatum is what is missing here.

20
 Tubb’s lawyer merely recommended a lease to Tubb, as a better “proposed

approach.” PX82 (“Consequently, I recommend that Superior simply lease the

equipment ... to Aspect. ... I am sending a copy of this email to Marilyn Ault also so

that she can offer input on this proposed approach.”). Sterling knew all too well that the

lawyer’s email was just a friendly proposal. His email response thus termed it a

“suggestion ... having both ‘Advantages’ and ‘Disadvantages,’” which Sterling would

think about over the weekend. Id. Moreover, for the lawyer’s July 2012 suggestion

to now be treated as a repudiation, Sterling not only needs to find a non-existent

ultimatum, but he also needed to, back in 2012, (1) contemporaneously declare the

proposal a repudiation and (2) cease to perform. E.g., Griffith v. Porter, 817 S.W.2d

131, 135 (Tex. App.–Tyler 1991, no writ) (“if the repudiation is not accepted ..., the

contract is kept alive”). Sterling did neither.4

E. Aspect’s claims about the supply of materials do not even prove
an ordinary breach, let alone establish a repudiation.

Aspect is far, far off base with its claims that Superior’s effort to supply

materials somehow worked a repudiation. First and foremost, Superior had not only

spent a couple hundred thousand dollars on the loading machine, but had supplied

4
Incidentally, Sterling in his July 2012 email response recognized that there would be “back and
forth” involving lawyers and recognized that “other ideas” might yet be proposed, and he urged Tubb
that throughout the process the two men should guard against being led too much by the lawyers,
promising that Tubb could protect his interests “more than any legal agreement” simply by appealing
“to [Sterling’s] sense of honor” and the men’s “long-running friendship.” PX82.

21
substantial materials. Sterling in deposition testimony judicially conceded that

Superior had provided everything (except bullets) needed to begin production.

Supp. CR vol. 6A 12-13. Sterling also never disputed Tubb’s testimony that Sterling

knew 100,000 bullets were about to be shipped when he pulled the plug on the

ammo deal. And, most important of all, Sterling’s written inventory of items being

returned to Superior (PX80) cataloged an extensive cache of materials, including

bullet feeders, over 4,000 pounds of brass, 23 commercial containers of powder,

nearly 100,000 rifle primers, 10,000 packaging trays, and even thousands of bullets.

PX80. What is more:

• The record shows Aspect was not in position to ship any product until, in

mid-January, when it finally procured the necessary boxes.

• The terms of agreement afforded no deadline for having materials at the

ready.

• And back on January 7 (before Aspect procured the necessary product boxes),

Sterling had declared an immediate hiatus to all performance, saying

performance would cease until the parties signed a written document.

In these circumstances, there was no basis for finding any breach on Tubb’s part

at all. And if there was evidence of breach, it would be a mere ordinary breach, and

no indication of any absolute or unequivocal renunciation.

22
 Tubb may not have gotten everything Sterling wanted when he would have

liked to have it, but Tubb did not ever refuse to provide materials, and certainly did

not abandon, refuse, or renounce the contract in this respect.

In summary, to have proven an unequivocal renunciation, Sterling would

have needed evidence of Tubb saying the equivalent of “I don’t intend to go

forward with the ammo deal,” or equivalent, unequivocal conduct. But there is no

such proof, and thus no repudiation.

III. There is no probative evidence of damages: Sterling’s attempt to value
his services was both inadmissible and legally insufficient.

“[T]he naked and unsupported opinion or conclusion of a witness does not

constitute evidence of probative force.” Natural Gas Pipeline Co. of Am. v. Justiss, 397

S.W.3d 150, 156-57, 59 (Tex. 2012), quoting Dallas Railway & Terminal Co. v. Gossett,

294 S.W.2d 377, 380 (Tex. 1956); see also Coastal Transportation Co. v. Crown Cent.

Petroleum Corp., 136 S.W.3d 227, 232 (Tex. 2004). This rule applies to both expert

and lay-witness opinions. Justiss, 397 S.W.3d at 156-57, 59. All opinions–even those

of plaintiffs attempting to value their own losses–must have reliable bases. See Justiss,

397 S.W3d at 156-57, 159 (property owner’s testimony was legally insufficient to

23
 support damages where he failed to provide any reliable basis for his opinion on the

diminution in his property’s value).5

Even under the established “Property-Owner Rule,” which says a landowner

is qualified to testify to his property’s value, the courts “insist that the testimony

meet the ‘same requirements [for reliable foundation] as any other opinion

evidence.’” Justiss, 397 S.W.3d at 156, quoting Porras, 675 S.W.2d at 504. In all such

cases, the opinion testimony is “the functional equivalent” of expert valuation

testimony and as such cannot be based on “naked conjecture or solely speculative

factors.” Justiss, 397 S.W.3d at 158.

The failure to present damage valuation testimony having a reliable basis is

generally fatal to recovery. Justiss, 397 S.W.3d at 158 (“Generally, when no evidence

supports a judgment, we render judgment against the party with the burden of

proof”), citing Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d 897, 912 (Tex.2004);

Id. (“if an owner’s estimate is speculative, ‘the owner’s testimony may be of such

minimal probative force to warrant a judge’s refusal even to submit an issue to the

5
See also Stinson v. Cravens, Dargan & Co., 579 S.W.2d 298, 299 (Tex. Civ. App.-Dallas 1979, no
writ) (boat owner’s testimony valuing his loss was “too conjectural” to be probative where he gave no
reliable basis for his repair estimate); accord Porras v. Craig, 675 S.W.2d 503, 504 (Tex. 1984)(holding that
even though property owner was qualified to testify to market value, his testimony provided no evidence
of that value); see also Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84 (Tex. 1992) (business owner’s
conclusory testimony of lost profits could not support a judgment).

24
jury.’”); accord Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch, 443 S.W.3d

820, 827-38 (Tex. 2014); Kerr-McGee Corp. v. Helton, 133 S.W.3d 245 (Tex. 2004).

Sterling’s damage opinion has no reliable basis and, thus, was nonprobative

and inadmissible.

Sterling’s project rate. Sterling purported to value his services by

multiplying an hourly rate of $140 times the time allegedly worked. PX57; 4 RR 239.

That would be fine – if only there was a reliable basis for accepting a $140 rate in

the circumstances. But there isn’t. Sterling said $140 was his “standard” project

manager rate, 4 RR 238, which he claims Tubb paid him on other projects. 4 RR

238. But Sterling had never done anything like the ammunition deal before. He had

never before loaded ammunition commercially and he had never before worked for

a manufacturing company, let alone helped in automating a manufacturing

operation.

Not surprisingly, Sterling did not demonstrate that he knew anything about

the charges typically incurred in implementing similar set ups or about the

reasonable billing practices in the industry for such efforts. (In fact, he didn’t even

identify the relevant industry.) And there was absolutely no rational basis for

inferring the missing information. (Aspect says that Tubb agreed his work was

worth $140 an hour. But Tubb actually said the opposite. While Aspect quotes

Tubb, from the January 8 phone conversation, as saying “you’re worth your 140

25
bucks an hour, 120 bucks an hour,” this is a selective editing that mischaracterizes

the testimony. Tubb actually said Sterling was worth that rate for loading the commercial

QuickBooks program and working on Superior’s website. But when it came to Sterling’s

services on the ammunition deal (a type of matter Sterling had never before

tackled), Tubb categorically denied that Sterling had stated a fair rate. DX19a at 8

(“[I]n my opinion, you’re worth your 140 bucks an hour, 120 bucks an hour

working on these QuickBooks and working on San Diego Media and all that stuff,

but this joint venture thing, I don’t think ... that’s a prudent figure.”).

Sterling’s qualifications. Sterling did not demonstrate that he had even

been qualified to undertake to automate an ammunition loading operation. He

merely assumed he could get by, apparently based on his skimpy and long stale

experience working for an IT contractor undertaking networking tasks for Bank of

America and Unisys, and the unrelated tasks he had performed for Tubb – helping

with a website build-out and installing commercial accounting/inventory control

software. 4 RR 93 (“It’s just that, with my background, I felt like I knew that I could

do all of this.”) Indeed, Sterling otherwise had merely drawn insurance disability

payments for the prior ten years. 4 RR 49, 5 RR 22, 45, 98. Yet Sterling’s prior work

for Tubb involved merely installing a server and accounting software, 4RR77-78,

and working to finalize a “simple website,” started by a commercial website

provider, allowing customers to order products online. 4 RR 78-80, 83. Sterling did

26
not say how or why those tasks would qualify him for this work or qualify him to

render an opinion as to its value.

Sterling’s hours. Sterling likewise did not begin to explain what tasks he did

that reasonably could have taken so many hours as he claimed to have expended on

the project.

At a minimum, there is an analytical gap the size of Dallas standing between

Sterling’s value opinion and its slender-to-non-existent speculative bases. This is not

a recipe for recovery. Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch, 443

S.W.3d 820, 829 (Tex. 2014)(Analytical gaps in opinion testimony make it not only

inadmissible but no evidence). To draw any conclusion about a reasonable value of

Sterling’s efforts, one must speculate as to the scope and character of the services

provided on this project, speculate that the prices Tubb previously paid Sterling for

website work were reasonable for that work at that time, and further speculate that

the reasonable value of the prior website services would be probative of the value

of services performed in setting up an ammunition manufacturing operation. In

short, Sterling’s valuation testimony is pure ipse dixit. This is of course fatal to his

opinion. See City of Keller, 168 S.W.3d at 813 (“[A]n appellate court conducting a no-

evidence review cannot consider only an expert’s bare opinion, but must also

consider contrary evidence showing it has no scientific basis.”). The Court should

27
reverse and render, as occurred in cases such as Houston Unlimited, Inc., 443 S.W.3d

at 827-38, and Kerr-McGee Corp. v. Helton, 133 S.W.3d 245 (Tex. 2004).

Conclusion and Prayer

Because there is no evidence of repudiation, because the undisputed facts

establish the opposite of repudiation, and because there was no non-speculative

proof of damages, the Court should reverse the decision below and render

judgment that Aspect and Sterling take nothing. Alternatively, the Court should

reverse and remand for a new trial.

28
 Respectfully submitted,

/s/ Greg Smith
Greg Smith
State Bar No. 18600600
RAMEY & FLOCK, P.C.
100 East Ferguson, Suite 500
Tyler, TX 75702
Telephone: (903) 597-3301
Facsimile: (903) 597-2413
gsmith@rameyflock.com

Wesley Hill
State Bar No. 24032294
WARD, SMITH & HILL, PLLC
P. O. Box 1231
Longview, TX 75606
Telephone: (903) 757-6400
Facsimile: (903) 757-2323
wh@wsfirm.com

COUNSEL FOR APPELLANTS

29
 CERTIFICATE OF SERVICE

The undersigned certifies that a copy of the above and foregoing document

was served upon counsel for Appellees in accordance with the applicable Texas

Rules of Civil Procedure on this the 3rd day of November, 2015, on the following:

keith@mkdlaw.us
Keith Dollahite
M. Keith Dollahite, P.C.
5457 Donnybrook Ave.
Tyler, Texas 75703

trey@yw-lawfirm.com
Trey Yarbrough
Yarbrough Wilcox, PLLC
100 E. Ferguson, Suite 1015
Tyler, Texas 75702

/s/ Greg Smith
Greg Smith

30
 CERTIFICATE OF COMPLIANCE
1. This brief complies with the type-volume limitation of TEX. R. APP. P. 9.4
because it contains 6,693 words, excluding the parts of the brief exempted
by TEX. R. APP. P. 9.4(i)(2)(B).
2. This brief complies with the typeface requirements of TEX. R. APP. P. 9.4(e)
because it has been prepared in the proportionally spaced typeface using
Word Perfect X5 in 14 point Garamond font.

Dated: November 3, 2015.

/s/ Gregory D. Smith
Gregory D. Smith

31
 No. 12-14-00323-CV
__________________________________

In the Twelfth Court of Appeals
Tyler, Texas
__________________________________

David Tubb and Superior Shooting System, Inc.,
Appellants

v.

Aspect International, Inc. and James Sterling,
Appellees
___________________________________

APPENDICES
___________________________________

A. PX55

B. Detailed Phone-Call Transcript Excerpts
(PX55 & DX17, 18a, 19a, 20a, & 21a)
APPENDIX A

PX55
 APPENDIX B

DETAILED PHONE-CALL
TRANSCRIPT EXCERPTS

(PX55 & DX17, 18a,
19a, 20a & 21a)
 Phone-Call Transcript Summary
PX55 & DX17, 18a, 19a, 20a, & 21a

Monday, December 31 phone-call transcript:

Tubb: Calls “meeting face-to-face ... a great plan” and promptly suggests a mutually
convenient place between Canadian and Tyler – in Dallas, where Tubb
was scheduled to be at the Safari Club show. DX 17 at 2.

Sterling: Calls Tubb’s suggestion “probably as good as any” for a meeting, then
apologizes for having “butted heads” and gotten his “feelings hurt.” Id. at
3.

Tubb: “.. [Y]ou and I decided we were going to do a deal and 50 percent is 50
percent. ... [M]y big concern is ... where is this most efficiently run from.
... [A]nd obviously today I think it’s most efficiently run from ... where
we have it. ... There’s no doubt. But ... one of the things that hurt my
feelings too was I made a big deal about how close I was to the
proximity of the railroad tracks [in Canadian] . . . and you’ve got trains
going by your house. ...”

Sterling: “... I’m open to all considerations ...” Id. at 3-4.

Sterling: “... I’m setting this thing up on a shoestring to keep the expenses down,
otherwise, we’re not going to have any profit to do anything with.

Tubb: “I’m 100 percent on that deal.” Id. at 5.

Sterling: “And there’s been some people interjecting into this that really hurt my
feelings ....”

Tubb: “[R]ight. I understand that.” Id. at 6.

Tubb: [Returning to his prior hesitance to set up manufacturing so close to a
railroad track:] “... I’m over it ...” Id. at 7.

Tubb: [O]bviously I sent you an agreement, that was from my guy in Amarillo, you
know, a rough draft ...”
Sterling: “Well, the blank document, you know, whatever is appropriate as far as the
legal entity that I described to you from the beginning ... that keeps the
assets of the business ... separate from everything else ... [a]nd lays out a
fair agreement ...”

Tubb: “... I’m all over fair ...” Id. at 7-8.

Sterling: “[W]e have to hammer out this agreement ... I think that probably you
should have your attorney there too so we could.”

Tubb: “Yeah, I know that won’t work [presumably because his lawyer is in
Amarillo, not Dallas]

Sterling: “Okay. Well, ... let me talk to my attorney and see, you know, what we can
do here. ... [B]ut we really need to – to get that part of this arrangement
behind us. ...”

Tubb: “Sure ....”

Sterling: “But anyway, I’m sticking to our agreement, I’m still working, and fully
intend to do what I said I was going to do.”

Tubb: “All right. Enough said.”

Tubb: “... [W]e need to visit anyway ...”

Sterling: “[M]aybe I can get over there and meet you at the Safari Club.”

Tubb: “... [W]e need to get an agreement if we’re going to move forward on this,
you know. ...”

Sterling: “I think that would be in both our best interests ....”

Tubb: “... [N]ot to poke, but we can’t – you can’t do it if you want a venture
agreement in Texas according to everybody I talked to. Its got to be a
different ... on a different animal.”

Sterling: “...[L]ike your attorney said, as far as indebtedness [i.e., personal liability of
joint venturers for the venture’s debts], they [sic] may apply. And I
don’t know if that’s true but if it is and that’s not the appropriate thing
to do then I’m open to some other kind of agreement. ...”
Sterling: “... [T]hat’s why I said we need to just get our attorneys involved and let
them work it out between them ...”

Tubb: “Right. Well, maybe we’ll sit down and visit and kind of put some outline to
it. ...”

Sterling: “... I’ll be in touch and we’ll just keep moving forward, David.”

Tubb: “Yeah, I think this thing [the Safari Club show] is Thursday, Friday, Saturday.”

Sterling: “Yeah, let me look at my schedule and see what I can do.”

Tubb: “All right. Very good.” Id at 8-11.

Friday, January 4, 2013 phone-call transcript:

Tubb: “I didn’t know if you ever come up with maybe a time or something. I’m
down here for the Safari Club show.”

Sterling: “No.”

Tubb: “If you wanted to try to get together.”

Sterling: “No. Yeah, yeah, the purpose of me trying to get together with you face-to-
face is try to ... get my attorney over there and maybe draw up some
kind of agreement. But if we can’t do that, then there’s no sense in me
coming over.”

Tubb: “... I would be happy to visit ....”

Sterling: “... [W]e talk all the time on the phone ....”

Tubb: “... [M]aybe we ought to just sit down and budget some time ... and we’ll go
back through and ... reiterate and cover our points and see if we can
move forward here ....”

Sterling: “Well, I think that’s probably what we ought to do. ...”

Sterling: “So whatever we got to do here, we got to do.”
Tubb: “... [Y]ou want to try to visit Monday or something like that?

Sterling: “Yeah, Monday is fine.”

Monday, January 7, 2013 phone-call transcript:

Tubb: “... I may be unclear on some things. I truly have not deviated ever from
half the net profits .... I’m still holding on that. ... any comment about
that?”

Sterling: “No, that was our understanding.”

Tubb: “... [E]very joint venture that I’ve done ... typically nobody got paid until we
had a sale. ... Do you concur with that?”

Sterling: “My agreement was that I deferred all my time and expenses as equity in the
joint venture and so I was expecting to manufacture the ammunition
per agreed for 50 percent of the net profit.”

Tubb: “Absolutely, that’s, yeah, understood and I see nothing wrong with that.”

Tubb: [Obviously referring to the 12/29 email that Sterling had intended for his
lawyer:] “You made the comment ... in one of your e-mails or
something you were ... really interested in attaching a lien on those
machines.”
Sterling: “No, I don’t think so.” PX55 at ____ DX ____ at 2-4.

Sterling: “... Its been over a year now and there’s been no income.”

Tubb: “I understand.”

Sterling: “And my time keeps adding up, so, yeah, I would need to start having some
income to justify my time ....”

Tubb: “So what is your time at this point?”

Sterling: “... [I]t’s a high number.”

Tubb: “... What’s your hourly rate, James?” Id. at 4-5.
...

Sterling: “...And the San Diego Media project [i.e., the invoices Sterling agreed to
commit as equity in the deal] I think that needs to go ahead and get paid
one way or the other. ... [L]et me know whether you’re going to pay it
or not.” Id. at 15.

Tuesday, January 8 phone-call transcript (PX 55; DX 19A):

Tubb: “I got your bill that you sent [regarding the San Diego Media Website
project]. PX 55 at ___; DX 19a at 2.
...

Tubb: “... [H]oly smokes ....” Id. at 7 (expressing amazement at Sterling’s “bill” for
his services on the ammunition deal).

Sterling: “[T]he only way we can move forward and you not pay me for my time this
year is with a signed contract in which we go into the ammunition
business ....”

Tubb: “... I want to do the ammo thing. ... I just think that what you did is not
what I would have done. Okay? I would have been up front and say I’m
going to bill you for this whole thing, this is my rate and this is how
much (inaudible) on this.... [Y]ou’re worth your 140 bucks an hour, 120
bucks an hour working on these QuickBooks and working on San
Diego media and all that stuff, but [on] this joint venture thing, ... I
don’t think ...that’s a prudent figure.”

Sterling: “...[I]f you want to have a parting of the ways, then you can get your
equipment out of here and we can–we can move on. ...”

Tubb: “What would you prefer?”

Sterling: “... I’m willing to move forward but I’m not going to do it without some
kind of written contract ... we should have done that from the
beginning.”
Tubb: “Yeah, we really should have.”

Sterling: “I’ve said that over and over ...”
Tubb: “Well, James, you wanted to do the joint venture [form of relationship] ...
and everybody I’ve talked to on my–said that’s–the way you had your
joint venture constructed (inaudible) and/or the fact that you can’t use a
joint venture very well in Texas.”

Sterling: “That’s fine. ... I’m more than willing to do whatever is appropriate. ...”

Tubb: “... [D]id you read that LLC, the one I sent you that came from Ruben?”

Sterling: “Yeah, it was blank so none of our agreement was in there. So, yeah, an
LLC would be fine but our agreement as we have documented it over
the period of this last year would have to be put in there and agreed to
by both sides.”

Tubb: “That’s right. And that may be very hard for us to do. I don’t know.”

Sterling: “But that’s where we are.”

Tubb: “Right. Well, what is the status on these boxes [i.e., boxes for retail
ammunition sales]?”
...

Tubb: “.... You’re bringing in ... your big bill [on the ammunition project]. ... [I]t
doesn’t quite sit with me. The rest of your billing, ... I have zero issues
with that.”

Sterling: “... [D]oes that mean you’re going to write me a check for the San Diego
Media project bill I sent you yesterday?”

Tubb: “I will.”

Sterling: “... Obviously my time is worth something. All right?”

Tubb: “I agree. ...”

Sterling: “... As to what that value is, we’d have to put it in a contract and see what
sticks in your craw.”

Sterling: “... But who’s going to be your attorney that’s handling it? Is it going to be
the guy in Amarillo?
Tubb: “Yeah, ... He’s a very good business attorney.”

Sterling: “... I imagine he’s probably seen that sample joint venture agreement that I
had sent to you previously. ...”
Tubb: “... [H]e was just like Andy. He said it’s not a good one.”
...

Sterling: “But that’s simply a boilerplate joint venture agreement. ... [I]f there’s a
better agreement out there, ... then we can get our attorneys on it ....”

Tubb: “Well, I think that’s (inadudible). ... [O]bviously next week I’m going to visit
with several people. Obviously ... we can’t make any money if we don’t
have product so ... ”
...

Sterling: “... So I’m willing to move forward with you.”

Tubb: “Okay. Well, I’ll ring you tomorrow. ...”

Wednesday, January 9 phone-call transcript (DX 20a):

Tubb: “(inaudible) let you know we’re going to (inaudible).”

Sterling: “We’re going to what?”

Tubb: “Get you a check.”
...

Sterling: “... [W]hen I get that check, I’ll start the process [referencing Superior’s
web-site and inventory-control projects].
...

Sterling: “... [W]e’re still not quite out of that San Diego Media mess and they’ve
actually got ... control of that web site. ...”
...

Sterling: “... She’s waiting on a SKU number scheme-up from me as to tracking the
ammunition components and cost of goods and things like that so that
we’ll all be on the same page ... [A]s far as it relates to our agreement. ...
I don’t need to see anything else [respecting access to Superior’s
 financial data] and all I’m interested in is that you and I have accurate
numbers as far as our agreement. ...”

Tubb: “That’s fine.”
...

Sterling: “... I got an email from your attorney and I’ll talk to my attorney today and
see if we can move this thing further still.”

Tubb: “Very good.”

Thursday, January 24 phone-call transcript (DX 21a):
Tubb: “I saw we got our boxes in. ...”

Tubb: “You said ... there was some issue with the color?

Sterling: “No, the color is fine. ...

Sterling: “There was a minor flaw on the printing process ...”

Sterling: “[M]y suggestion would be to have them [the ammo boxes] reprinted.”

Tubb: “That’s probably the easiest thing, yeah.”
...

Tubb: “... [H]as there been any movement with the attorneys?”

Sterling: “Everybody has been traveling, including myself, and we kind of lost a
week. I kind of expect them to get together early next week.”
...

Tubb: “... (inaudible) says we’re going to have some bullets pretty soon so ...”

Sterling: “Yeah, okay. What’s Art’s situation?”

Tubb: “... [H]e asked me if I wanted any more .308 brass and I feigned off at this
point because we’ve got .308 brass.”

Sterling: “Uh-huh.”
Tubb: “At this point anyway so ...”

Sterling: “Yeah, the hot ticket right now is .223.”

Tubb: “... I’m still waiting on Mr. (Inaudible)’s stuff. I’ve pushed him–you know.”

Sterling: “Really?”

Tubb: “Yeah, don’t have any of that yet.”

Sterling: “... [T]hat’s interesting because I ordered one in .223 and one in .9
millimeter and had it within three days.”

Tubb: “That’s interesting. ... I don’t know what’s going on then.”
...

Tubb: “... I expected them a long time ago based on what he said ...”

Sterling: “... All right.”
...
Sterling: “... [L]et me move forward with this because this week is pretty much shot.
I’ll say next week I’ll follow up with the attorneys and make sure they
make contact and see if anything can move on that.”

Tubb: “Okay.”