ACCEPTED
01-15-00621-CV
FIRST COURT OF APPEALS
HOUSTON, TEXAS
11/25/2015 6:47:00 PM
CHRISTOPHER PRINE
CLERK
NO. 01-15-00621-CV
In the FILED IN
1st COURT OF APPEALS
FIRST COURT OF APPEALS HOUSTON, TEXAS
at Houston 11/25/2015 6:47:00 PM
______________________________________________
CHRISTOPHER A. PRINE
Clerk
SUPPLY PRO, INC. and
HARMON K FINE,
Appellants,
v.
ECOSORB INTERNATIONAL, INC.,
d/b/a BIOCEL TECHNOLOGIES,
Appellee
______________________________________________
Appealed from the 11th District Court
of Harris County, Texas
______________________________________________
AMENDED BRIEF OF APPELLANTS
______________________________________________
Richard H. Edelman William F. Harmeyer
Texas Bar. No. 06413200 Texas Bar No. 09019000
rhe@edelmanoffice.com wharmeyer@harmeyerlaw.com
BARLOW JONES L.L.P. WILLIAM F. HARMEYER &
17225 El Camino Real, Suite 400 ASSOCIATES, P.C.
Houston, Texas 77058 7322 Southwest Freeway, Suite 475
Telephone: (281) 488-8440 Houston, Texas 77074
Facsimile: (281) 488-6832 Telephone: (713) 270-5552
Facsimile: (713) 270-7128
ATTORNEYS FOR APPELLANTS
ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL
APPELLANTS: Supply Pro, Inc. and Harmon K. Fine
Richard H. Edelman William F. Harmeyer
Texas Bar. No. 06413200 Texas Bar No. 09019000
rhe@edelmanoffice.com wharmeyer@harmeyerlaw.com
BARLOW JONES L.L.P. WILLIAM F. HARMEYER &
17225 El Camino Real, Suite 400 ASSOCIATES, P.C.
Houston, Texas 77058 7322 Southwest Freeway, Suite 475
Telephone: (281) 488-8440 Houston, Texas 77074
Facsimile: (281) 488-6832 Telephone: (713) 270-5552
Facsimile: (713) 270-7128
APPELLEE: Ecosorb International, Inc. d/b/a Biocel Technologies
T. Earnest Freeman Jonathan S. Stoger
Texas Bar No. 07431600 Texas Bar No. 00797504
ernest@thefreemanlawfirm.com jstoger@stogerlaw.com
Stephen G. Scholl JONATHAN STOGER LAW
Texas Bar No. 17801350 2301 Morse Street
steve@thefreemanlawfirm.com Houston, Texas 77019
THE FREEMAN LAW FIRM, P.C. Telephone: (713) 522-2848
1770 St. James Place, Suite 120 Facsimile: (713) 522-1120
Houston, Texas 77056
Telephone: (713) 973-1000
Facsimile: (713) 973-1004
ii
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
INDEX OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
STATEMENT OF THE CASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ISSUES PRESENTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SUMMARY OF THE ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARGUMENT.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
I. Standards of Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. Denial of motion for JNOV or to disregard jury findings. . . . . . . . . 13
B. Legal Sufficiency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
C. Damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
D. Contract Construction.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
II. The evidence is legally insufficient to support the jury’s liability
findings on the clawback provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
A. The proposed take or pay term was not part of the parties’ original
agreements on the July purchase orders. . . . . . . . . . . . . . . . . . . . . . . 17
B. Because the proposed take or pay term was not part of the original
agreements on the July purchase orders, and Fine did not agree to
it in the August 16 email, the clawback provision was not
impliedly part of the parties’ workout agreement. . . . . . . . . . . . . . . 19
III. In the alternative, if the proposed take or pay term was part of the
parties’ original agreements on the July purchase orders, then the
evidence raised a material fact question on whether the take or pay term
was induced by fraud; and the trial court reversibly erred by refusing to
submit appellants’ requested charge questions on fraudulent inducement
or equitable estoppel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
iii
A. The take or pay term was fraudulently induced. . . . . . . . . . . . . . . . . 23
B. The fraudulent inducement was not absolved or mooted by the
workout agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
C. Error and harm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
IV. The evidence is legally insufficient to prove the damages found in
charge question 7(b-d) (as well as questions 6(b-c), 10, and 11).. . . . . . . . 34
A. Storage charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
B. Clawback provision. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
C. Take or pay damages on the purchase orders.. . . . . . . . . . . . . . . . . . 38
V. The evidence is legally and factually insufficient to support the awards
of punitive damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
A. Punitive damage limits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
B. The evidence is legally insufficient to prove that Supply Pro
committed fraud independently from Fine. . . . . . . . . . . . . . . . . . . . . 41
C. The evidence is legally insufficient to support separate awards of
punitive damages against Fine and Supply Pro because there is no
evidence of independent fraud by Supply Pro. . . . . . . . . . . . . . . . . . 41
D. The combined $1.8 million punitive damage award is excessive
under the Texas and Federal Standards. . . . . . . . . . . . . . . . . . . . . . . 43
VI. The trial court erred by not incorporating Biocel’s remittitur on
prejudgment interest into the Judgment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
PRAYER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
WORD COUNT CERTIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
CERTIFICATE OF SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
APPENDIX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
iv
INDEX OF AUTHORITIES
Cases
Am. Mfrs. Mut. Ins. Co. v. Schaefer,
124 S.W.3d 154 (Tex. 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 23
Bunton v. Bentley, 153 S.W.3d 50 (Tex. 2004).. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Burbage v. Burbage, 447 S.W.3d 249 (Tex. 2014). . . . . . . . . . . . . . . . . . . . . . . 15
Chambers v. Equity Bank, SSB, 319 S.W.3d 892
(Tex. App.–Texarkana 2010, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005). . . . . . . . . . . . . 15, 16, 21, 23
Columbia Rio Grande Healthcare, L.P. v. Hawley,
284 S.W.3d 851 (Tex. 2009). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 33, 34
Dallas Ry. & Terminal Co. v. Gossett,
156 Tex. 252, 294 S.W.2d 377 (1956). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ERI Consulting Eng’rs, Inc. v. Swinnea,
318 S.W.3d 867 (Tex. 2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Ford Motor Co. v. Castillo, 444 S.W.3d 616 (Tex. 2014). . . . . . . . . . . . . 15, 28-30
Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671 (Tex. 2000). . . . . . . . . . . 31, 32
Graham Cent. Station, Inc. v. Pena, 442 S.W.3d 261 (Tex. 2014). . . . . . . . . . . 14
Guevara v. Ferrer, 247 S.W.3d 662 (Tex. 2007). . . . . . . . . . . . . . . . . . . . . . . . . . 15
Hoss v. Alardin, 338 S.W.3d 635 (Tex. App.–Dallas 2011, no pet.). . . . . . . . . . . 20
Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd.,
352 S.W.3d 462 (Tex. 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 22
v
Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am.,
341 S.W.3d 323 (Tex. 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Kachina Pipeline Co., Inc. v. Lillis, No. 13-05956,
2015 WL 5889109 (Tex. Oct. 9, 2015). . . . . . . . . . . . . . . . . . . . . . . . 16, 17, 22, 23
LHC Nashua Partnership, L.L.C. v. PDNED Sagamore Nashua, L.L.C.,
659 F3d 450 (5th Cir. 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Lindley v. McKnight, 349 S.W.3d 113
(Tex. App.–Fort Worth 2011, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Malone v. Kisabeth Co., Inc. 726 S.W.2d 188
(Tex. App.–Fort Worth 1987, writ ref’d n.r.e.). . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Manon v. Solis, 142 S.W.3d 380
(Tex. App.–Houston [14th Dist.] 2004, pet. denied).. . . . . . . . . . . . . . . . . . . . . . . 14
Nat’l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419 (Tex. 2015).. . . . . . . 24
Owens-Corning Fiberglas Corp. v. Malone,
972 S.W.2d 35 (Tex. 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40, 41, 43
Plains Exploration & Prod. Co. v. Torch Energy Advisors Inc.,
No. 13-0597, 2015 WL 3653330 (Tex. June 12, 2015).. . . . . . . . . . . . . . . . . . . . 16
Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014).. . . . . . . . . . . . . . . . . . . . . . . . . 16, 23
Se. Pipe Line Co., Inc. v. Tichacek, 997 S.W.2d 166 (Tex. 1999). . . . . . . . . . . . . 14
Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640 (Tex. 1996). . . . . . . . . . . 16, 23
Tiller v. McLure, 121 S.W.3d 709 (Tex. 2003).. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Tony Gullo Motors I, L.P. v. Chapa,
212 S.W.3d 299 (Tex. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40, 43
vi
Travelers Ins. Co. v. Wilson, 28 S.W.3d 42
(Tex. App.—Texarkana 2000, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Statutes
Tex. Bus. & Com. Code Ann. § 2.201 (West 2009). . . . . . . . . . . . . . . . . . . . . . . . 18
Tex. Bus. & Com. Code Ann. § 2.207 (West 2009). . . . . . . . . . . . . . . . . . . . . 18, 19
Tex. Bus. & Com. Code Ann. § 2.710 (West 2009). . . . . . . . . . . . . . . . . . . . . . . . 34
Tex. Civ. Prac. & Rem. Code Ann. § 41.006 (West 2014).. . . . . . . . . . . . . . . . . . 39
Tex. Civ. Prac. & Rem. Code Ann. § 41.008 (West 2014).. . . . . . . . . . . . . . . . . . 39
Tex. Civ. Prac. & Rem. Code Ann. § 41.011 (West 2014).. . . . . . . . . . . . . . . . . . 40
Rules
Tex. R. App. P. 9.4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Tex. R. App. P. 44.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Tex. R. Civ. P. 278. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Tex. R. Civ. P. 301. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
vii
STATEMENT OF THE CASE
This dispute arose from sales of K-Sorb, a treated cellulose fiber product, by
Ecosorb International, Inc., d/b/a Biocel Technologies (“Biocel”) to Supply Pro, Inc.
(“Supply Pro”). The trial court entered judgment (the “Judgment,” 4 C 2454-56) on
a jury verdict (4 C 1931-56), awarding Biocel actual damages for fraud, punitive
damages, and prejudgment interest totaling over $2.7 million against Supply Pro and
its owner and President, Harmon Fine.1
ISSUES PRESENTED
1. Because the proposed take or pay term was not part of the parties’
original agreements under the July 13 and 29 purchase orders as a matter
of law, the proposed “clawback provision” for the take or pay term was
not impliedly part of the parties’ workout agreement, and the evidence
is legally insufficient to support the jury’s liability findings relating to
the clawback provision.
2. In the alternative, if the proposed take or pay term was part of the
parties’ original agreements on the July 13 and 29 purchase orders, then
the evidence raised a material fact question whether the take or pay term
was induced by fraud, and the trial court erred by refusing to submit
appellants’ requested charge questions on fraudulent inducement or
equitable estoppel.
1
The following record abbreviations will be used: Clerk’s Record, “__ C __”; Supplemental
Clerk’s Record, “__ SC __”; Reporter’s Record, “__ R __”; Plaintiff’s Exhibits, “P __”;
Defendant’s Exhibits, “D __.” It appears that the portion of the reporter’s record from 5 R
86, line 13, to 5 R 152, line 22, is the same as 5 R 152, line 23, to 5 R 218, line 18.
Therefore, no citations have been made to the latter portion of the reporter’s record.
1
3. The evidence is legally insufficient to support the damage awards for
storage charges, the clawback provision, and the take or pay term.
4. The evidence is legally and factually insufficient to support the awards
of punitive damages.
5. The trial court erred by not incorporating Biocel’s remitittur on
prejudgment interest into the Judgment.
STATEMENT OF FACTS
As relevant to the issues presented in this appeal, Supply Pro manufactured and
sold forty percent of the absorbent floating boom that was used to contain and clean-
up the oil spill (the “spill”) that resulted from the British Petroleum (“BP”) Deepwater
Horizon rig explosion, which occurred in April of 2010. 2 C 1280(¶9); P 79(0050
¶1);2 4 R 103-104. Fine is the President and owner of Supply Pro. 2 C 1280; 4 R 14;
8 R 39. Supply Pro sells its boom through distributors rather than end users. 4 R
205-06. Supply Pro’s distributor for selling boom to BP was Pacific Environmental
(“PE”). 2 C 1280(¶9). John Summers was the consultant at PE who introduced BP
to Supply Pro and served as the intermediary between them. 4 R 130-31, 145; 5 R
239. In order for boom to perform its function, the material inside the boom must
float, absorb oil, and not absorb water. 5 R 231. Historically, the filler material
2
Parenthetical references following exhibit numbers are to the last 4 digits of the bates-stamp
number of the page within the exhibit. The pages of some exhibits are not in bates-number
order.
2
inside the boom that performs this function has been scrap polypropylene
(“polyscrap”). 4 R 221-22. However, following the spill, there was not enough
polyscrap to produce the amount of boom needed for the spill, and non-scrap
polypropylene was too expensive to use in boom. 4 R 106-07, 143; 5 R 231-32; 7 R
10.
Biocel, and its parent company, International Cellulose Corporation (“ICC”),
manufacture and sell cellulose fiber products made from recycled paper and
cardboard. 3 R 50, 88-89. Steve Kempe is the owner of ICC, which manufactures
the goods that Biocel sells. 5 R 9, 12-13. One of Biocel’s products is K-Sorb, a
cellulose fiber product that has been chemically treated to make it hydrophobic (water
repellent). 2 C 1279-80; 5 R 13-14; 7 R 25. Before the spill, Biocel had not sold
much K-Sorb. 3 R 90-92; P 125. During the spill, Biocel was being contacted by a
lot of people about using its products to make boom. 3 R 69-70; 5 R57.
On May 13, 2010, Larry Svoboda, Biocel’s Vice President for sales and
marketing and its only salesperson (3 R 50, 88-89), emailed Scott Mitchell, the sales
manager for Supply Pro (4 R 204), that K-Sorb had the attributes needed for use in
boom and that the finest boom manufacturers were using Biocel’s hydrophobic fiber
as a filler in boom. P 3; 7 R 10. Svoboda also let Mitchell know that the supply
chain was finite and Supply Pro better get in now if they wanted it. 7 R 10.
3
Supply Pro had previously bought Biocel products for resale (3 R 51-53; 7 R
8) and began buying K-Sorb for use in making its boom. 3 R 51-56; 4 R 14-15, 17;
7 R 8. On June 29, Mitchell emailed Svoboda that Supply Pro was expecting to ship
ten truckloads of boom per day by mid-July and would thus need to buy 168,480
pounds of K-Sorb per day by then. P 18. A truckload of K-Sorb is 1,056 bags, each
weighing 30 pounds, and thus 31,680 pounds. P 13; 3 R 74. At $13.80 per bag, a
truckload costs $14,572.80. P 131(1185).
On July 11, Svoboda emailed Fine and Mitchell (the “July 11 email”) that
Biocel had “many new customers that are booking more than their needs,” and that
“due to the extreme production demands created by the oil containment crisis in the
Gulf of Mexico, all orders for our hydrophobic materials” would be subject to the
following “special terms”: (1) orders would be “non-cancellable, ‘take or pay;’”3 (2)
orders would require a minimum 14 day lead time; and (3) orders would be for full
truck loads. P 23-24. Because purchase orders (“POs”) could generally be cancelled
unless there were terms prohibiting it (5 R 51, 63), the proposed take or pay term was
a material change in Biocel’s terms. 6 R 45.
3
Because “take or pay” is another way of saying non-cancellable (5 R 59), this term will
simply be referred to as the proposed “take or pay term.”
4
On July 13, Supply Pro submitted blanket PO4 no. 41724 (the “July 13 PO”)
to Biocel for 31,680 bags (30 truckloads) of K-Sorb. P 26.5 On July 16, Biocel
issued its order acknowledgment (the “July 16 OA”) for the July 13 PO. P 30; 5 R
62. This OA contained the special terms set forth in the July 11 email, including the
proposed take or pay term. P 30. The first 25 truckloads ordered in the July 13 PO
were shipped and invoiced from July 19 to 30. P 31.
On July 15, the BP well leak was capped (4 R 152, 190; 5 R 239), but the
massive spill clean-up was expected to continue and require boom until November.
4 R 29-31, 35, 155; 5 R 237, 244-45, 284. However, on July 23-25, Tropical Storm
Bonnie unexpectedly dispersed the remaining oil, although this would not be
determined for several days. 4 R 157-58, 190; 5 R 43-44.
On July 27, BP instructed Supply Pro to reduce its production from ten
truckloads of boom per day to three until August 17, but cautioned that circumstances
could change quickly as the oil moved or reached land areas. P 34(0006); 5 R 284,
340-41. On July 29, Supply Pro submitted PO no. 41778 (the “July 29 PO”) to Biocel
for 29,568 bags (28 truckloads) of K-Sorb. P 37; 5 R 68-69. This would be needed
4
A blanket purchase order is a purchase order for multiple shipments of material in which the
seller invoices for each shipment as it is released. 3 R 157.
5
This PO reflects a unit cost of $14,572.80, which applies to a truckload, rather than a bag.
Thus, the total price on the PO, $461,666,304.00 is thus the incorrect product of multiplying
the cost for a truckload by the number of bags ordered.
5
to supply the three truckload per day shipping schedule until August 17.6 5 R 296;
7 R 36.
On July 29, Biocel issued its OA (the “July 29 OA”) for Supply Pro’s July 29
PO. P 38; 5 R 71-72. This OA again reflected the special terms, including the
proposed take or pay term. P 38; 5 R 72. Supply Pro did not reply to the July 16 or
29 OAs or otherwise respond concerning any of Biocel’s proposed special terms.
On Friday, July 30, BP advised Supply Pro that conditions had changed
drastically and instructed Supply Pro to stop all boom production until further notice
because BP lacked space to store more material, but acknowledged that production
could resume at a later time. P 34(0016); 5 R 242-43, 246. BP also said it might take
several weeks to evaluate their long term plan. P 34(0016). Summers took this to
mean that BP was overstocked with boom, and that this was an interruption, after
which production would resume, rather than a cancellation. 5 R 244-45, 247.
However, by the following Wednesday, August 4, 2010, Summers and Supply Pro
had concluded that this was not merely an interruption and sent Biocel notices that
it was cancelling the remainder of its July 13 PO and all of its July 29 PO. P 25, 36.
On Wednesday, August 11, Kempe and Fine met for lunch to discuss a possible
6
A truckload of fiber makes about 1.5 truckloads of boom. 7 R 43. Therefore, 28 truckloads
of fiber would make about 42 truckloads of boom. At three truckloads of boom being
shipped per day, this PO would supply boom shipments for about 14 days.
6
workout of the cancelled orders. 5 R 76; 6 R 30. By then, Supply Pro had paid for the
25 truckloads that had been delivered on the July 13 PO (roughly $364,320), as well
as for all of the K-Sorb that had been delivered and invoiced under its previous
purchase orders. P 127(0967-68) (reflecting payments for 41724 REL. 1-25 and a
zero unpaid balance on issued invoices as of August 11).7
On Friday, August 13, Kempe sent Fine an email (the “August 13 email”),
proposing written terms for what they had discussed on August 11. P 46(1387-88);
5 R 81-82, 87, 94. This email reflected that, of the 34,868 remaining undelivered
bags of K-Sorb that Supply Pro had ordered in the July POs, Biocel then had in stock
6912 bags of finished K-Sorb plus raw materials to produce an additional 11,616
bags. P 46(1387); 5 R 84, 87, 91. As relevant to the relief awarded in the Judgment,
the August 13 email proposed that:
A. If Supply Pro was not compensated by PE for terminating its boom
deliveries, then:
1. Supply Pro and Biocel would continue trying to sell the remaining
6912 bags of K-Sorb until February 1, 2011, after which Supply
Pro would be invoiced for any remaining inventory.
2. Subject to its vendor’s approval, Biocel would return the unused
7
According to Biocel’s records, Supply Pro paid Biocel nearly $900,000 from January of 2010
to March of 2011. P 127.
7
raw material8 it had in stock for 11,616 bags if Supply Pro would
pay a $12,750 restocking fee (otherwise, those bags would be
produced and invoiced to Supply Pro). 5 R 96.
3. Biocel would waive the purchase requirement for the remaining
16,320 bags (for which Biocel did not yet have raw materials in
inventory (5 R 88)).
B. Alternatively, if Supply Pro was later compensated by PE for
terminating its boom deliveries, Supply Pro would so notify Biocel and
compensate Biocel in the same proportion as Supply Pro was
compensated less the restocking fee (in item A2 above), if paid by
Supply Pro (this provision was referred to by Kempe as the “clawback
provision” (5 R 101)).
P 46 (1387-88).
On Monday, August 16, Fine replied by email (the “August 16 email”) to
Kempe’s August 13 email:
I authorize you to return the chemical to your manufacturer and charge
me the $12,750 for return. . . .
Supply Pro accepts the offer of your assistance in selling the remaining
6912 bags within a 6 month period. Supply Pro will purchase the
balance unsold at that time. . . .
P 46(0946). Although the August 16 email said nothing about any of the other
provisions of the August 13 email (P 46(0946); 6 R 34), Kempe emailed back within
ten minutes that the return process was underway. P 46(0946). On August 27,
8
The raw materials to be returned for the restocking fee were the chemicals used to make the
fiber in K-Sorb hydrophobic. P 46(0946); 4 R 78-79. Biocel’s remaining inventory of fiber
for those bags may have been used in ICC’s other operations over time. 6 R 42.
8
Kempe emailed Fine that the raw material return had been completed. P 51; 5 R 104.
Supply Pro paid Biocel the restocking fee (5 R 105), but the parties never
communicated about the portions of the August 13 email to which the August 16
email had not responded.
On September 3, following negotiations between BP and PE, and then between
the owners of PE (5 R 247-52), PE sent Supply Pro a wire transfer for $1,592,448.00.
P 55, 128; 4 R 185-86. This represented full payment for PE’s cancelled orders for
58 truckloads of boom from Supply Pro (the “cancellation fee”). P 50; 4 R 215; 5 R
268.
On December 1, Fine advised Kempe that Supply Pro still had 21 truckloads
of boom in its warehouse9 and $1.7 million of feedstock that would probably never
be used. P 58; 4 R 226-27. Supply Pro was never able to sell much of this remaining
fiber boom (7 R 20); none of the remaining 6912 bags of K-Sorb held by Biocel were
ever sold; and Supply Pro did not pay for them. 2 C 1282(¶15-16). Nor did Supply
Pro disclose to Biocel that it had been paid for its terminated boom deliveries or pay
Biocel any portion of its cancellation fee.
Biocel filed suit against Supply Pro in 2012, and the case was tried to a jury.
In response to the thirteen charge questions, the jury found that:
9
BP had returned 13 truckloads of unused boom to Supply Pro. 5 R 275-76.
9
1. The parties agreed that the clawback provision proposed in the August
13 email would be part of the “workout agreement.”10
2. Supply Pro failed to comply with the workout agreement.
3. Biocel and Fine agreed that Fine would personally guaranty the workout
agreement.
4. Fine failed to comply with the personal guaranty.
5. Supply Pro and Fine each committed fraud against Biocel.11
6. The damages resulting from the failure to comply were:
a. The price of the 6912 bales on February 1, 2011 that Biocel was
unable to resell at a reasonable price: $95,385.60.
b. Commercially reasonable and necessary charges for the custody
and care of the goods stored by Biocel: $303,815.65.
c. Biocel’s proportionate share of compensation received by Supply
Pro from its distributor for the termination of the boom deliveries:
$385,517.00.
7. The damages from the fraud were:
a. The price of the 6912 bales on February 1, 2011 that Biocel was
unable to resell at a reasonable price: $95,385.60 [same as 6a.].
10
The trial court denied appellants’ request to define the “workout agreement” as consisting
of the August 13 and 16 emails. 8 R 7-8.
11
As it was submitted in the charge, Biocel’s fraud claim was based on the allegations that Fine
and Supply Pro had fraudulently induced the workout agreement by: (1) entering into it
without intending to perform; and (2) misrepresenting that it was in a precarious financial
position due to the sudden evaporation of its market for boom and that it had no expectation
of receiving compensation for the cancellation of its boom sales. 2 C 1283-84.
10
b. Commercially reasonable and necessary charges for the custody
and care of the goods stored by Biocel: $303,815.65 [same as 6b].
c. Biocel’s proportionate share of compensation received by Supply
Pro from its distributor for the termination of the boom deliveries:
$385,517.00 [same as 6c].
d. The unpaid amounts due under the July POs: $480,902.60 [the
sum of the amounts awarded in 7a and 7b].
8. By clear and convincing evidence, the harm to Biocel resulted from
fraud of each, Supply Pro and Fine.
9. A reasonable fee for the necessary services of Biocel’s attorney was:
a. For preparation and trial: $637,455.
b. For appeal to the Court of Appeals: $42,500.
c. For appeal to the Supreme Court of Texas: $32,500.
10. Biocel’s proportionate share of compensation received by Supply Pro
from Supply Pro’s distributor for the termination of the boom deliveries:
$385,517.00 [same as 6c and 7c].12
11. The unpaid amounts due under the July 13 and July 29 POs:
$480,902.60. [same as 7d.]
12. The exemplary damages that should be assessed against Supply Pro for
the conduct found in question 8a: $800,000.00.
13. The exemplary damages that should be assessed against Fine for the
conduct found in question 8b: $1,000,000.00.
4 C 1931-56.
12
This amount approximates the amount due for the 27,956 bags that were ordered but not
produced, without reduction for the restocking fee.
11
On April, 21, 2015, pursuant to Biocel’s election, the trial court entered
Judgment on the fraud and exemplary damage findings (rather than the contract
findings). 4 C 2454-56. Appellants filed timely post-judgment motions, asserting all
of the sufficiency of the evidence challenges presented in this appeal. 4 C 2457-81.
The trial court denied appellants’ post-judgment motions on June 29, 2015 (4 C
2510); but did not rule on, or modify the Judgment to reflect, the remittitur that Biocel
filed on June 29, 2105 to correct the award of prejudgment interest. 4 C 2511-12.
SUMMARY OF THE ARGUMENT
In this appeal, Supply Pro does not challenge its liability to pay for the 6912
undelivered bags of K-Sorb that had been produced when it cancelled the POs.
Appellants do, however, challenge their liability for the storage charges for those
bags as well as the liability that was based on Biocel’s proposed take or pay term and
proposed clawback provision, relating to the remaining bags that had been ordered
in the July POs but never produced.
As discussed in the following sections, the proposed take or pay term was not
part of the parties’ original agreements on the July POs; the proposed “clawback
provision” pertaining to the proposed take or pay term was not expressly or impliedly
part of the parties’ workout agreement; and the evidence is therefore legally
insufficient to support the jury’s liability and damage findings relating to the
12
clawback provision. Alternatively, if the proposed take or pay term was part of the
parties’ original agreements on the July POs, then the evidence raised a fact issue
whether that term was induced by fraud. The workout agreement was not a
ratification of the original agreements that could absolve this fraud because appellants
did not know of the fraud when it entered into the workout agreement. Therefore, the
trial court reversibly erred by refusing to submit appellants’ proposed charge
questions on fraudulent inducement or equitable estoppel.
The evidence is also legally insufficient to support the award of damages for
storage charges because there is no evidence that the remaining 6912 bags of K-Sorb
should have been stored at all; and there is no evidence of a commercially reasonable
storage rate. The evidence is also legally insufficient to support the jury’s
independent finding of fraud against Supply Pro and, in turn, its separate award of
punitive damages against Supply Pro because there was no allegation or evidence that
the alleged fraudulent conduct was committed by anyone at Supply Pro besides Fine.
The total $1.8 million punitive damage award was also excessive.
ARGUMENT
I. Standards of Review
A. Denial of motion for JNOV or to disregard jury findings.
A trial court may grant a judgment notwithstanding the verdict (“JNOV”) if
13
there is no evidence to support one or more of the jury findings on issues necessary
to liability. Tiller v. McLure, 121 S.W.3d 709, 713 (Tex. 2003); see Tex. R. Civ. P.
301. The denial of a motion for JNOV is thus reviewed under a legal sufficiency
standard. Manon v. Solis, 142 S.W.3d 380, 387 (Tex. App.–Houston [14th Dist.]
2004, pet. denied).
A jury’s answer may be disregarded if it has no support in the evidence or is
immaterial. Tex. R. Civ. P. 301; Se. Pipe Line Co., Inc. v. Tichacek, 997 S.W.2d 166,
172 (Tex. 1999). A question is immaterial when it should not have been submitted,
calls for a finding beyond the province of the jury, such as a question of law, or has
been rendered immaterial by other findings. Se. Pipeline, 997 S.W.2d at 172.
B. Legal Sufficiency.
To challenge the legal sufficiency of evidence supporting an adverse finding
on an issue for which the challenging party did not have the burden of proof, the party
must show that no evidence supports the adverse finding. Graham Cent. Station, Inc.
v. Pena, 442 S.W.3d 261, 263 (Tex. 2014). A no evidence (legal sufficiency)
challenge will be sustained when the record confirms either: (1) a complete absence
of a vital fact; (2) the court is barred by rules of law or evidence from giving weight
to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a
vital fact is no more than a scintilla; or (4) the evidence conclusively establishes the
14
opposite of the vital fact. Ford Motor Co. v. Castillo, 444 S.W.3d 616, 620 (Tex.
2014). More than a scintilla exists where the evidence would enable reasonable and
fair-minded people to reach different conclusions. Burbage v. Burbage, 447 S.W.3d
249, 259 (Tex. 2014).
In a legal sufficiency review, the evidence is viewed in the light most favorable
to the judgment, crediting favorable evidence and inferences if reasonable jurors
could, and disregarding contrary evidence and inferences unless reasonable jurors
could not. Id.; Ford Motor Co., 444 S.W.3d at 620. However, evidence cannot be
taken out of context in a way that makes it seem to support a verdict when it does not.
City of Keller v. Wilson, 168 S.W.3d 802, 812 (Tex. 2005). Where no objection has
been made to the jury charge, the legal sufficiency of the evidence is measured by the
charge submitted to the jury. Burbage, 447 S.W.3d at 260.
C. Damages.
Uncertainty as to the fact versus the amount of legal damages is fatal to
recovery. See ERI Consulting Eng’rs, Inc. v. Swinnea, 318 S.W.3d 867, 877-78 (Tex.
2010). However, where evidence is legally insufficient to prove the amount of
damage awarded, but legally sufficient to prove that some amount of damage was
suffered, the case should be remanded for remittitur or retrial. Id.; Guevara v. Ferrer,
247 S.W.3d 662, 670 (Tex. 2007).
15
D. Contract Construction.
A written contract must be construed to give effect to the parties’ intent
expressed in the text, as understood in light of the facts and circumstances
surrounding the contract’s execution, but subject to the parol evidence rule. Houston
Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 469
(Tex. 2011). The construction of an unambiguous contract is a question of law that
is reviewed de novo. Kachina Pipeline Co., Inc. v. Lillis, No. 13-05956, 2015 WL
5889109, at *2 (Tex. Oct. 9, 2015). In construing a contract, courts examine the
entire contract and give effect to each provision so that none is rendered meaningless.
Id. at *3.
In construing a contract, a court does not consider only the parts favoring one
party and disregard the remainder as that would render the latter meaningless. City
of Keller v. Wilson, 168 S.W.3d at 811. Nor may courts rewrite contracts or insert
terms that the parties could have bargained for but did not.13
If a contract can be given a definite legal meaning, then it is not ambiguous.
Kachina, 2015 WL 5889109, at *3. Conversely, a contract is ambiguous only if it is
subject to two or more reasonable interpretations. Plains Exploration & Prod. Co.
13
Ritchie v. Rupe, 443 S.W.3d 856, 891 (Tex. 2014); Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124
S.W.3d 154, 162 (Tex. 2003); Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 646 (Tex.
1996).
16
v. Torch Energy Advisors Inc., No. 13-0597, 2015 WL 3653330, at *7 (Tex. June 12,
2015). While evidence of circumstances can be used to inform the contract text and
render it capable of one meaning, extrinsic evidence can only be considered to
interpret an ambiguous writing, not to create an ambiguity. Kachina, 2015 WL
5889109, at *3.
Where an agreement is ambiguous, the parties’ intent is a fact question.
Kachina, 2015 WL 5889109, at *2. Whether a contract is ambiguous is a legal
question for the court. Id.
II. The evidence is legally insufficient to support the jury’s liability findings
on the clawback provision.
A. The proposed take or pay term was not part of the parties’ original
agreements on the July purchase orders.14
It is undisputed in this case that Biocel and Supply Pro are “merchants” and
that the original sales of K-Sorb were subject to Chapter 2 of the Texas Business and
Commerce Code (the “TBCC”). Section 2.207(a) and (b) of the TBCC provide:
(a) A definite and seasonable expression of acceptance or a written
confirmation which is sent within a reasonable time operates as an
acceptance even though it states terms additional to or different from
those offered or agreed upon, unless acceptance is expressly made
conditional on assent to the additional or different terms.
14
No charge question was requested or submitted on this issue, and none was warranted
because, as discussed in this section, this was an issue of contract construction and, thus, a
question of law for the court. See Kachina Pipeline Co., Inc., 2015 WL 5889109, at *2.
17
(b) The additional terms are to be construed as proposals for addition
to the contract. Between merchants such terms become part of the
contract unless:
(1) the offer expressly limits acceptance to the terms of the offer;
(2) they materially alter it; or
(3) notification of objection to them has already been given or is
given within a reasonable time after notice of them is received.
Tex. Bus. & Com. Code Ann. § 2.207(a), (b) (West 2009) (emphasis added); see id.
cmt. 3 (stating that additional terms that materially alter a contract are not included
unless expressly agreed to).15
In this case, the July 11 email (P 23), purporting to impose the proposed take
or pay term, was not an offer or an acceptance of any offer, and there is no evidence
that Supply Pro ever agreed (or even responded) to that email. Therefore, the July 11
email did not create a contract and was not otherwise binding on Supply Pro.
Supply Pro’s July POs were offers to buy K-Sorb and did not include a take or
pay term. P 26, 37. Under section 2.207(a), Biocel’s July 16 and 29 OAs were
expressions of acceptance of the POs even though they contained additional terms to
15
In contrast to the foregoing provisions of section 2.207, the TBCC Statute of Frauds is
satisfied between merchants if, among other things, a sufficient written confirmation is
received by a party unless written notice of objection to its contents is given within ten days
after it is received. Tex. Bus. & Com. Code Ann. § 2.201(b) (West 2009). However, the
only effect of such a confirmation “is to take away from the party who fails to answer the
defense of the Statute of Frauds . . . .” Id. cmt 3. It thus does not establish terms of the
contract or override the effect of section 2.207 in doing so. See id. Because Supply Pro does
not contend in this appeal that the agreements under the POs (or the workout agreement)
were unenforceable under the Statute of Frauds, TBCC section 2.201 does not apply.
18
those set forth in the POs, including the proposed take or pay term. P. 30, 38.
Pursuant to section 2.207(b), this additional term was to be construed as a proposal
for an addition to the contract. Because the proposed take or pay term was a material
alteration to the POs (as well as to Biocel’s own terms and conditions (6 R 45)), it did
not become part of the agreements for the purchase of K-Sorb under the POs as a
matter of law. See TBCC § 2.207(b)(2).
B. Because the proposed take or pay term was not part of the original
agreements on the July purchase orders, and Fine did not agree to
it in the August 16 email, the clawback provision was not impliedly
part of the parties’ workout agreement.
The sole purpose of the clawback provision in the August 13 email was to
compensate Biocel for what Kempe considered to be Supply Pro’s take or pay
obligation for the bags of K-Sorb that were ordered but not produced. 5 R 101.
However, because the proposed take or pay term was not part of the parties’
agreements on the July POs, as discussed in the preceding section, Supply Pro had no
take or pay obligation for which to compensate Biocel in the workout agreement. In
that Supply Pro had no take or pay obligation, and Fine’s August 16 email did not
agree to the clawback provision (P46(0946); 6 R 34), there is no reasonable
interpretation of the August 16 email by which it could either be construed as
ambiguous with regard to the clawback provision, or as somehow having impliedly
19
agreed to it.
Although Kempe testified that Fine had orally agreed during the August 11
lunch to the terms that would later be proposed in the August 13 email (6 R 48-49,
94), he did not say what statements Fine had made that Kempe interpreted as
signifying such agreement. Because Kempe was not competent to testify about Fine’s
subjective intent, his testimony that Fine had orally agreed to the matters that would
be proposed in the August 13 email was speculative, conclusory, and therefore no
evidence.16
In addition, the fact that Kempe sent the August 13 email shows that, despite
whatever had been discussed on August 11, Kempe still felt a need to reduce his
understanding of the agreement to writing and to secure Fine’s assent to that
understanding. He thus stated in the August 13 email, “Kindly confirm your
acceptance of the above. I also need to hear from you specifically regarding the
16
See, e.g., Dallas Ry. & Terminal Co. v. Gossett, 156 Tex. 252, 294 S.W.2d 377, 380-81
(1956) (“the naked and unsupported opinion or conclusion of a witness does not constitute
evidence of probative force and will not support a jury finding even when admitted without
objection.”); Lindley v. McKnight, 349 S.W.3d 113, 129-30 (Tex. App.–Fort Worth 2011,
no pet.) (holding that the affiant’s statement that she knew that Daws was relying on
statements made by McKnight was conclusory and thus no evidence because it did not
disclose the facts underlying that knowledge ); Hoss v. Alardin, 338 S.W.3d 635, 644-45
(Tex. App.–Dallas 2011, no pet.) (holding that Alardin’s testimony that he and Hoss had
agreed to be partners was conclusory and thus no evidence of an expression of intent to be
partners); Travelers Ins. Co. v. Wilson, 28 S.W.3d 42, 48 (Tex. App.—Texarkana 2000, no
pet.) (“A conclusory statement, whether by a lay or expert witness, is not evidence.”).
20
disposition of the unconverted raw material.” P 46(1388).
However, rather than confirm an acceptance of the entire August 13 email, Fine
narrowly specified in the August 16 email precisely which aspects of the August 13
email he was agreeing to:
I authorize you to return the chemical to your manufacturer and charge
me the $12,750 for return. . . .
Supply Pro accepts the offer of your assistance in selling the remaining
6912 bales [within] a 6 month period. Supply Pro will purchase the
balance unsold at that time.
P 46(0946). Obviously, had Fine intended to agree to the entire August 13 email,
there would have been no reason for him to respond in such a specific, exact, and
limited manner.17 By not agreeing or responding to any other terms in the August 13
email, Fine was clearly declining to accept them.
In this regard, Kempe’s interpretations of the August 16 email is parol evidence
and thus could not create an ambiguity as to its meaning. See Kachina, 2015 WL
5889109, at *6 (“A party’s interpretation of an agreement is parol evidence and
17
In his deposition that was read to the jury, Fine answered, “yes,” when asked, “And so, . . .
you accepted essentially the terms of the work-out deal as contained in the August 13th email;
is that fair?” 4 R 77. However, in that the immediately preceding and following questions
(4 R 76-77) were focused exclusively on the two provisions of the August 13 email with
which Fine’s August 16 email had agreed, his affirmative answer to the broader question,
taken in context, can only be read to refer to his agreement to those two provisions of the
August 13 email. See City of Keller, 168 S.W.3d at 812 (noting that, in reviewing legal
sufficiency, evidence cannot be taken out of context in a way that makes it seem to support
a verdict when it does not).
21
cannot be used to create ambiguity or show motive.”). The same is true regarding
Fine’s cross-examination testimony about the content and legal effect of the take or
pay term in the OAs:
Q: Okay. Well, that’s not a risk my client wanted - - assumed in the
paperwork, was it? He didn’t say that “You pay me as long as
you get paid from BP.” He said “take or pay.” That was y’all’s
deal, and that’s the deal you accepted, isn’t it Mr. Fine?
A: Yes.
4 R 70.
The August 13 and 16 emails created an unambiguous, integrated agreement
that superseded any prior oral agreement; and any evidence concerning an oral
agreement that was reached at the August 11 lunch is also barred by the parol
evidence rule. See Houston Exploration Co., 352 S.W.3d at 469 (“The parol evidence
rules when parties have a valid, integrated written agreement, and precludes
enforcement of prior or contemporaneous agreements.”).18
Similarly, because the two emails can be given a definite legal meaning based
on the plain meaning of the language used, they must be construed as a matter of law.
Kachina, 2015 WL 5889109, at *2-3. Interpreting Fine’s August 16 email as either
18
As with the Supply Pro’s contentions on the agreements created by the July POs and OAs,
this challenge is based solely on contract construction, not application of the Statute of
Frauds. That is, Supply Pro doesn’t contend that any of the agreements are unenforceable
for lack of a sufficient writing, but only that the trial court incorrectly construed the writings
that formed the parties’ agreements.
22
being ambiguous or as somehow impliedly accepting terms of the August 13 email
to which it made no reference, not only rendered the content of the August 16 email
meaningless,19 it improperly rewrote the workout agreement to insert terms that the
parties could have bargained for but did not.20
Because the evidence is therefore legally insufficient to show that the clawback
provision was part of the workout agreement, it is also legally insufficient to support
the jury’s findings that the clawback provision was induced by fraud or breached.
III. In the alternative, if the proposed take or pay term was part of the parties’
original agreements on the July purchase orders, then the evidence raised
a material fact question on whether the take or pay term was induced by
fraud; and the trial court reversibly erred by refusing to submit
appellants’ requested charge questions on fraudulent inducement or
equitable estoppel.
A. The take or pay term was fraudulently induced.
A trial court is required to submit the questions, instructions, and definitions
in the jury charge that are raised by the pleadings and the evidence. Tex. R. Civ. P.
278. Where a question, instruction, or definition requested by a party is supported by
19
See Kachina, 2015 WL 5889109, at *3 (noting that in construing a contract, courts examine
the entire contract and give effect to each provision so that none is rendered meaningless);
City of Keller, 168 S.W.3d at 811 (instructing that in construing a contract, a court does not
consider only the parts favoring one party and disregard the remainder as that would render
the latter meaningless).
20
Ritchie, 443 S.W.3d at 891; Am. Mfrs. Mut. Ins. Co., 124 S.W.3d at 162; Tenneco Inc., 925
S.W.2d at 646.
23
the pleadings and evidence, accurately states the applicable law, and would have
assisted the jury, a trial court abuses its discretion by failing to submit it. See
Columbia Rio Grande Healthcare, L.P. v. Hawley, 284 S.W.3d 851, 862 (Tex. 2009).
A contract is subject to avoidance on the ground of fraudulent inducement.
Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 331
(Tex. 2011). The elements of fraudulent inducement are: (1) a material representation
was made; (2) the representation was false and either known to be false when made
or made without knowledge of its truth; (3) the representation was intended to be and
was relied upon by the injured party; and (4) the complained of injury was caused by
the reliance. See Nat’l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419, 423
(Tex. 2015). In this context, “material” means that a reasonable person would attach
importance to, and would be induced to act upon, the information in determining his
choice of action in the transaction in question. Italian Cowboy Partners, 341 S.W.3d
at 337.
In this case, Supply Pro specifically pled fraudulent inducement of the take or
pay term and equitable estoppel as affirmative defenses. 2 C 1823. The following
evidence supported this defense. Svoboda told Mitchell early in their discussions that
“the supply chain is finite. If I wanted to get in, I better get in now.” 7 R 10.
Similarly, the July 11 email represented that the proposed take or pay term was
24
necessitated by “extreme production demands” created by the spill. P 23. It further
stated that the email was being sent to “all of” Biocel’s Hydrphobic customers; that
customers with the last minute orders were the most demanding; that many customers
were booking more than their needs; and that Svoboda had customers who wanted
two or three trailers of product at their location. P 23. The email then asked,
“[p]lease work with us [sic] we will continue to fill all orders. It also couched the
proposed take or pay term within requirements that orders required a minimum 14 day
lead time, and that orders would be for full truck loads. P 23.
In July, Svoboda was continuing to tell Supply Pro that Biocel had overseas
and east coast customers for the fiber, that it was “first come, first served,” and that
if Supply Pro wanted to get the product, it needed to put in a purchase order. 7 R 14-
15. The July 13 PO repeated that the proposed take or pay term was being instituted
because of “the extreme production demands” from the spill. P 30.
As late as a lunch on July 29, shortly before Supply Pro sent the July 29 PO,
Svoboda told Mitchell that he was getting calls all the time for fiber to make boom,
and that Supply Pro needed to get a place in line. 7 R 23-24. He similarly told Phillip
Baron, Supply Pro’s operations manager (4 R 219), at that lunch that Biocel needed
to get Supply Pro tied down right away because Biocel had other customers for the
fiber, and Supply Pro needed to commit to giving Biocel orders so Biocel could get
25
Supply Pro in the manufacturing loop. 6 R 76. The July 29 OA then again repeated
the “extreme production demands” justification for the proposed take or pay term.
P 38.
However, despite the number of people who had been contacting Biocel during
the spill about fiber for boom (3 R 69-70, 110; 5 R 57), it turned out that Biocel’s
actual demand from customers other than Supply Pro was far from extreme. Besides
Supply Pro, the biggest boom manufacturers at that time were New Pig, SPC Brady,
Spill Tech, and United Absorbents. 7 R 10. Of the customers to whom Biocel had
actually sold fiber for boom besides Supply Pro, Svoboda could only name New Pig,
Spill Tech (which was going to make boom with it, but didn’t), an unnamed company
in South Carolina, and an individual named Lannie. 3 R 92-94.
Although Svoboda had represented in July of 2010 that Biocel had supplied
hydrophobic fiber to five major boom manufacturers (P 85(1136)), Svoboda admitted
at trial that he had only talked to five major manufacturers. 3 R 93-95. Similarly,
although the July 11 email purported to be sent to all of Biocel’s hydrophobic
customers, Svoboda couldn’t name a single other customer to whom it had been sent.
3 R 06-109. Nor could he name a single customer besides Supply Pro to whom the
special terms had been sent on Biocel’s OAs. 3 R 108.
When asked who was creating the extreme production demand referenced in
26
the July 11 email, Svoboda could only answer, “[e]verybody,” and could not name
any other customers. 3 R 110. He admitted that New Pig had had a problem with the
boom they made from Biocel’s fiber and quit buying in June. 3 R 110-11. Svoboda
then admitted that Biocel’s sales for June and July were mostly to Supply Pro and
that, in fact, Supply Pro was the extreme production demand referred to in the July
11 email. 3 R 110-11.
The representation in the July 11 email and July 16 and 29 OAs that Biocel’s
production demands would require a minimum 14 day lead time on orders also proved
bogus. P 23, 30, 38. By July 27, the purported minimum 14 day lead time after the
July 13 PO, Biocel had already shipped, and invoiced Supply Pro for, 16 of the
truckloads ordered in the July 13 PO. P 31, 127. There is no evidence that orders
from any of Biocel’s other customers’ had been turned away or put behind those of
Supply Pro. The non-existence of the purported need for a 14 day lead time on orders
thus further demonstrated the lack of any extreme production demand from other
customers.
However, it hadn’t been Svoboda’s idea to send the July 11 email or to try to
impose the proposed take or pay term. In the late nineteen-seventies, Kempe had
worked for an insulation company whose business went through a boom period, then
crashed. 5 R 54-55. Many cellulose companies went out of business then and others
27
were caught with warehouses full of high cost paper when the price dropped 75%.
5 R 55.
Even though there was no shortage of Biocel’s raw materials (6 R 44), Kempe
believed the spill was creating a similar demand bubble, and he wasn’t willing to take
the risk of an abrupt cancellation of purchase orders. 6 R 42-44. Although Biocel
had never tried to impose a take or pay term before (6 R 44-45), Kempe viewed this
as the way to shift the risk of cancellation to Supply Pro. 5 R 53; 6 R 42. However,
rather than take a chance that Supply Pro would not agree to accepting this risk if it
knew the truth about Biocel’s actual demand from other customers, Kempe instructed
Svoboda to send the July 11 email (5 R 57), creating the false impression that Biocel
was experiencing more production demand than it could supply, and, thus, if Supply
Pro did not go along with the proposed take or pay term, the product would all be
quickly sold to Supply Pro’s competitors. P 23. Biocel continued to promote this
illusion with its OAs and Svoboda’s remarks to Mitchell and Baron about Biocel’s
heavy demand until the very day Supply Pro issued its last PO. 6 R 76; 7 R 14-15,
23-24.
An analogous situation occurred in Ford Motor Co., where Ford entered into
a settlement agreement while the jury was deliberating in the trial of a rollover
accident. See 444 S.W.3d at 618-20. Ford’s settlement decision was strongly
28
influenced by a note from the jury asking, “[w]hat is the maximum amount that can
be awarded?” Ford later learned that the plaintiffs’ attorney had conspired with the
jury foreman to send that note (and against the requests of the other jurors that she not
do so). Id. at 618-19. When Ford refused to pay the settlement amount, the plaintiff
sued Ford to enforce the settlement, and Ford asserted fraudulent inducement as a
defense. Id. at 619.
Although the jury note had merely asked a question, the Texas Supreme Court
held that it nevertheless met the requirement for a false statement of fact because
untrue statements of fact were clearly implied by the question:
A jury note, asking about the maximum amount of damages, implies that
the jury is deliberating damages and that it intends to award the
maximum amount. It also implies that the note is from the jury
collectively. The evidence indicates that neither implication was true.
According to the testimony of several jurors, the jury was not actually
deliberating damages at the time of Cortez's note, and several jurors
specifically told Cortez not to send a note about damages. Because the
note implies material statements that were false, we conclude that some
evidence exists of the first element of fraudulent inducement.
Id. at 621.
Based on the facts showing the collusion between the plaintiffs’ attorney and
the jury foreman, the Court found that the evidence was sufficient to establish that the
note was sent at the direction of the plaintiffs with knowledge that it was false and
with the intent that Ford rely upon it. Id. at 621-23. Likewise, because the note
29
implied that the jury was deliberating damages and intended to award the maximum
amount, and Ford had no knowledge that these implications were false, the evidence
was legally sufficient to show that Ford justifiably relied on the implications in
entering into the settlement. Id. at 623.
In this case, if the Court concludes that the proposed take or pay term was part
of the original agreements on the July POs, then it can reasonably be inferred from
the direct evidence outlined above that Biocel deliberately misrepresented the level
of its actual demand in order to induce Supply Pro to accept the proposed take or pay
term, while concealing that it was merely attempting to unilaterally shift the risk of
a cancellation to Supply Pro. Because Biocel’s statements, emails, and OAs created
the false impression that Biocel could not keep pace with its demand and would
therefore be able to sell its fiber to other customers if Supply Pro did not accept the
proposed take or pay term, and Supply Pro did not know these statements were false,
the evidence was sufficient to show that Supply Pro justifiably relied on these false
statements and implications. Because Supply Pro would have had no reason to accept
the proposed take or pay terms if it had known the truth, and would not have done
so,21 the evidence was also sufficient to show actual reliance. Finally, because the
21
In a February of 2011, Fine emailed Kempe, among other things, that “[i]f Larry [Svoboda]
had been ethical about . . . what you were selling to others during the spill, I never would
have given you a [PO].” P 62(0914).
30
proposed take or pay term was a material alteration of the terms between the parties
(6 R 45), and thus subjected Supply Pro to liability for cancellation that it would not
have otherwise had, the evidence was sufficient to show that Supply Pro was injured
by relying on the false statements and implications. Therefore, the evidence raised
a material fact question on whether the take or pay term was fraudulently induced.
B. The fraudulent inducement was not absolved or mooted by the
workout agreement.
In response to appellants’ position that the fraudulent inducement of the take
or pay term should have been submitted to the jury, Biocel has argued, without
citation of authority, that when the parties entered into the workout agreement, any
preexisting inequitable conduct became irrelevant. 4 C 2487(¶11), 2494(¶32).
There can be circumstances in which a party who was fraudulently induced to
enter into a contract may ratify the contract in such a manner that his remedies for
fraud are foreclosed. See Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 676
(Tex. 2000). Such a ratification can occur where the defrauded party, after he
becomes aware of the fraud, enters into a new or amended agreement by which the
rights of the parties are adjusted. See, e.g., Chambers v. Equity Bank, SSB, 319
S.W.3d 892, 901 (Tex. App.–Texarkana 2010, no pet.).
However, one seeking to establish such a ratification has the burden to prove
31
the defrauded party’s knowledge of the fraud and their voluntary, intentional choice
to ratify the agreement in light of that knowledge. LHC Nashua Partnership, L.L.C.
v. PDNED Sagamore Nashua, L.L.C., 659 F3d 450, 461 (5th Cir. 2011). The key
question is whether the defrauded party had knowledge of the fraudulent acts at the
time of the alleged ratification. Id. This is because it is only after the defrauded party
has learned of the fraud that his performance is no longer being induced by the fraud.
See Fortune Prod. Co., 52 S.W.3d at 680. Absent a ratification, there is no authority
that an amendment to, or novation of, an agreement induced by fraud forecloses the
defrauded party’s remedies for the fraud or otherwise makes the fraud irrelevant.
In this case, there is no evidence that Fine or Supply Pro knew that Biocel’s
representations concerning its extreme demand had been false by the time Supply Pro
entered into the workout agreement. Because the workout agreement was therefore
not a ratification of the original agreements on the July POs for this purpose, Supply
Pro did not relinquish its remedies for the fraudulent inducement by entering into the
workout agreement.
C. Error and harm.
In addition to being supported by the pleadings and evidence outlined above,
charge questions on fraudulent inducement and on equitable estoppel were submitted
by Supply Pro and refused by the trial court. 4 C 1958, 1961. These questions
32
tracked the language of Pattern Jury Charge questions 101.21-101.25 and 105.1-105.4
and were thus accurate statements of the applicable law. Therefore, the trial court
abused its discretion in refusing to submit at least one of these questions.
A trial court’s error in refusing a charge question, instruction, or definition is
harmful and, thus, reversible if the error probably caused rendition of an improper
judgment, considering the pleadings, the nature of the case, the evidence presented,
and the charge in its entirety. See Tex. R. App. P. 44.1(a); Columbia Rio Grande
Healthcare, 284 S.W.3d at 862.
In this case, Supply Pro and Fine were each held liable for fraudulently
inducing a clawback provision to which they never expressly agreed and which arose
from a take or pay term to which they either never expressly agreed or were
fraudulently induced to accept. They were not allowed to submit a question on, or
argue, their fraudulent inducement / equitable estoppel defense. The facts giving rise
to this defense preceded all facts upon which appellants’ liability was based and, if
found by the jury, would have eliminated roughly half of the actual damages awarded
as well as a significant portion of the punitive damages.
The trial court twice cautioned Biocel during the charge conference about the
appellate risk of not submitting these questions, and Biocel twice refused to submit
them. 8 R 6-8. These were the only questions appellants submitted on any
33
affirmative defense, and no other question, instruction, or definition set forth any
defensive theory. These questions would have not only assisted the jury, but were
essential to enable the jury to make the necessary findings on a contested issue that
was critical for a valid determination of appellants’ liability and damages. See
Columbia Rio Grande Healthcare, 284 S.W.3d at 851. Under these circumstances,
the record clearly reflects that the refusal to submit either of these charge questions
probably caused rendition of an improper judgment.
IV. The evidence is legally insufficient to prove the damages found in charge
question 7(b-d) (as well as questions 6(b-c), 10, and 11).
A. Storage charges.
In answer to charge question 6b and 7b, the jury found that the commercially
reasonable and necessary charges for custody and care of the goods stored by Biocel
was $303,815.65. 4 C 1940. Even in the incorrect form that this element was
submitted,22 there is no evidence that the K-Sorb should have been stored at all or that
22
The trial court refused to include the word, “incurred,” in this element of damage, as it is
stated in the applicable TBCC provision. See Tex. Bus. & Com. Code Ann. § 2.710 (West
2009) (“Incidental damages to an aggrieved seller include any commercially reasonable
charges . . . incurred in . . . care and custody of the goods after the buyer’s breach . . . .”
(emphasis added)); Malone v. Kisabeth Co., Inc. 726 S.W.2d 188, 191-92 (Tex. App.–Fort
Worth 1987, writ ref’d n.r.e.) (reversing and rendering a take-nothing judgment on charges
to store chairs on appellee’s premises where there was no evidence that any loss was suffered
from having to pay to have other chairs stored elsewhere; no loss from being foreclosed from
storing other chairs on its premises due to these chairs occupying the space; and no evidence
of any other expense being incurred from keeping the chairs on the premises).
34
the rate Biocel charged for storage was commercially reasonable.
On December 1, 2010, Kempe emailed Fine to remind him that any of the 6912
bags of K-Sorb that remained unsold by February 1, 2011, would be invoiced and
shipped to Supply Pro. P 58(0805). Within an hour, Fine emailed that Supply Pro
had $1.7 million of feedstock that had not been converted into finished product and
would probably never be used, as well as 21 truckloads of finished boom. P
58(0805). On February 1, Kempe invoiced Supply Pro $95,385.60 for the 6912 bags
and stated that any of this material that was not delivered would accrue storage
charges of $0.15 per bag in March, $0.20 per bag in April, and $1.00 per bag
thereafter. P 60, 61. Biocel continued to store the bags until the time of trial, and its
storage charges totaled the $303,815.65 awarded by the jury, and thus more than three
times the total sales price of the material being stored. 5 R 150.
The evidence is legally insufficient to show that Biocel should have stored the
material at all or thus that any storage charge was necessary. Before and after the
spill, there was no market for boom made with hydrophobic fiber such as K-Sorb. 3
R 112-13; P 125. After the spill, there was also no realistic prospect that demand
would resume for K-Sorb because: (1) there was an excess of boom in the market (7
R 19); (2) there was a pre-existing preference for polyscrap boom (4 R 221-22); (3)
boom made with fiber was more expensive than that made with polyscrap (3 R 121;
35
4 R 147); (4) some of the boom manufactured by New Pig with Biocel fiber had
failed (3 R 56, 95-96, 99-100; 5 R 35); and, thus, (5) hydrophobic fiber fill had been
identified as a product that didn’t work as well as polyscrap and had a bad reputation
in the marketplace. 7 R 19.
Based on Fine’s December 1 email, Kempe was aware that Supply Pro was
inundated with both fiber and fiber boom and, thus, had minimal chance of using any
of the 6912 bags. P 58(0805). The finished K-Sorb fiber could also not be turned
into any other type of product or used in any other product lines (5 R 56), but was
incinerable. 5 R 40.
Kempe acknowledged that he was under no obligation to store the 6912 bags
of K-Sorb (P 84(0884)), and that Fine had not asked him to do so. 6 R 46-47. Under
these circumstances, because there was no reasonable expectation that the product
could ever actually be sold, used, or delivered to Supply Pro, it was wholly
unnecessary and unreasonable for Biocel to store it, and the K-Sorb should have
instead either been discarded or incinerated. There is, thus, no evidence that the 6912
bags should have been stored at all or that any storage cost was necessary.
Even if it had been reasonable or necessary to store the material at all, the
evidence is legally insufficient to support the amount awarded. Biocel stored the
material on its own premises (5 R 129), but there is no evidence that Biocel incurred
36
any out-of-pocket cost to do so.23 Nor was there any evidence of the cost that any
third-party storage facility would have charged to store the K-Sorb. In addition, no
foundation was laid that Kempe had any knowledge of prevailing storage rates, and
he did not testify whether he believed his rates were reasonable, let alone any basis
therefor. It is likewise unfathomable how it could have been commercially
reasonable for Biocel’s monthly storage rate to increase five-fold (from $0.20 to
$1.00) from one month to the next. P 60. Under these circumstances, the jury had no
valid basis upon which to determine whether Biocel’s storage rate was even remotely
within the range of what was commercially reasonable.
Moreover, even if there had been evidence of commercially reasonable rates
for storage, it would have been commercially unreasonable to accrue storage charges
that were more than three times the purchase price of the goods being stored. After
it became apparent that the K-Sorb could not be used or resold, and was essentially
worthless, Biocel should have mitigated its damages by disposing of or destroying the
material, rather than running up storage charges for over three years thereafter.24
23
Although Kempe testified that the storage fee was to compensate Biocel for the burden of
having to handle, store, and maintain the material (5 R 150), there is no evidence that Biocel
actually did anything to handle or maintain the material, let alone of the cost of doing so.
There was also no evidence that Biocel lost any sales or incurred any extra cost from storing
the material in areas where other goods might have otherwise been produced or stored.
24
At most, Biocel’s damages in this regard should not have exceeded the reasonable cost to
incinerate or discard the 6912 bags of K-Sorb. However, because Biocel neither offered
37
Therefore, the evidence was legally insufficient to support the award of storage
charges.
B. Clawback provision.
In answer to questions 6c, 7c, and 10, the jury found that Biocel’s damages
pertaining to the clawback provision were $385,517.00. 4 C 1940. As discussed in
section II above, the clawback provision was not expressly or impliedly part of the
workout agreement. Therefore, it could not have been fraudulently induced or
breached, and the evidence is legally insufficient to support the jury’s answers
awarding recovery for this element of damage.
C. Take or pay damages on the purchase orders.
In answer to questions 7d and 11, the jury found that the unpaid amounts under
the July 13 and July 29 POs was $480,902.60. 4 C 1940, 1944. This represents the
amount that would have been due for all 34,848 bags that remained undelivered when
Supply Pro cancelled the POs (and was the sum of the damages awarded in questions
7a and 7c). 5 R 149.
This amount was not recoverable for Biocel’s fraud claim because Biocel
alleged fraud only with regard to the workout agreement, not the underlying POs, and
evidence of those costs nor submitted a damage measure that would have included them, it
waived that element of damage. Tex. R. Civ. P. 279.
38
there is no evidence of any fraud by Supply Pro concerning the POs.25
In addition, because the 34,848 bags included the 6912 bags (P 46 (1387)) for
which damages were found in question 7a (and 6a), and damages for the remaining
27,936 undelivered bags were awarded in question 7c (4 C 1940), this amount would
have been a double recovery of those amounts. There was thus no basis upon which
the unpaid amounts under the POs could have properly been awarded for fraud, and
question 7d and 11 should be disregarded as immaterial.
V. The evidence is legally and factually insufficient to support the awards of
punitive damages.
A. Punitive damage limits.
In any action in which there are two or more defendants, an award of
exemplary damages must be specific as to each defendant. Tex. Civ. Prac. & Rem.
Code Ann. § 41.006 (West 2014). As relevant to this case, exemplary damages
awarded against a defendant may not exceed the greater of: (1) two times the amount
of economic damages; or (2) $200,000. Tex. Civ. Prac. & Rem. Code Ann. § 41.008
(West 2014). In determining the amount of exemplary damages, the trier of fact shall
25
Because the workout agreement was a novation of the agreements for the July POs (and those
agreements were unambiguous): (1) the charge correctly included no questions on the terms
of the POs or whether they were breached; and (2) the amounts unpaid under the POs were
correctly not submitted as an element of damage in question 6, concerning damages from
breach of the workout agreement. Questions 10 and 11 were not predicated on any finding
of liability.
39
consider evidence, if any, relating to: (1) the nature of the wrong; (2) the character of
the conduct involved; (3) the degree of culpability of the wrongdoer; (4) the situation
and sensibilities of the parties concerned; (5) the extent to which such conduct
offends a public sense of justice and propriety; and (6) the net worth of the defendant.
Tex. Civ. Prac. & Rem. Code Ann. § 41.011 (West 2014).
In addition, the Due Process Clause of the Fourteenth Amendment prohibits the
imposition of grossly excessive or arbitrary punishments on a tortfeasor. See
generally Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 305-08 (Tex. 2006);
Bunton v. Bentley, 153 S.W.3d 50, 53-54 (Tex. 2004); Owens-Corning Fiberglas
Corp. v. Malone, 972 S.W.2d 35, 48-54 (Tex. 1998). Courts must consider multiple
punitive damage awards for the same conduct to be against a party’s substantive due
process rights. Owens-Corning Fiberglas Corp., 972 S.W.2d at 48. Under the Due
Process standard, the relevant factors for determining whether punitive damages are
excessive are: (1) the degree of reprehensibility of the defendant’s misconduct; (2)
the disparity between the actual or potential harm suffered by the plaintiff and the
punitive damages awarded; and (3) the relative size of civil penalties imposed in
comparable cases. See Tony Gullo Motors, 212 S.W.3d at 308; Bunton, 153 S.W.3d
at 53. Even if an assessment of punitive damages is not deemed excessive under
governing state law, it may violate a party’s substantive due process right to
40
protection from grossly excessive punitive damage awards. Owens-Corning
Fiberglas Corp., 972 S.W.2d at 45.
B. The evidence is legally insufficient to prove that Supply Pro
committed fraud independently from Fine.
In answer to charge questions 5 and 8, the jury found that Supply Pro and Fine
each committed fraud and that the harm to Biocel resulted from the harm of each. 4
C 1938, 1941. In this regard, Biocel’s fraud claim was based on the allegations that
Supply Pro had fraudulently induced the workout agreement by: (1) entering into it
without intending to perform; and (2) misrepresenting that it was in a precarious
financial position due to the sudden evaporation of its market for boom and that it had
no expectation of receiving compensation for the cancellation of its boom sales. 2 C
1283-84. However, all of the conduct that Biocel relies upon to support these
allegations was committed solely by Fine, and there was no allegation or evidence
that anyone besides Fine committed or participated in any fraudulent conduct on
Supply Pro’s behalf. Therefore, there is no evidence to support the jury’s finding that
Supply Pro separately committed fraud, i.e., apart from that committed by Fine; or for
any finding of harm resulting from such fraud by Supply Pro.
C. The evidence is legally insufficient to support separate awards of
punitive damages against Fine and Supply Pro because there is no
evidence of independent fraud by Supply Pro.
41
In answer to charge questions 12 and 13, the jury found Supply Pro and Fine
each separately liable for fraud and awarded punitive damages against each of them
(4 C 1954-55) even though, as discussed in the preceding section, the same conduct
by Fine was the alleged basis for both, and there was no allegation or evidence that
anyone besides Fine committed or participated in any such conduct. In addition, Fine
is the sole shareholder of Supply Pro (4 R 14; 8 R 39), and the combined $1.8 million
award of punitive damages was nearly 2.3 times greater than the actual damages
awarded and, thus, greater than the maximum amount that could have been awarded
against a single defendant under CPRC section 41.008.
By requiring a specific award of exemplary damages against each defendant,
prohibiting joint and several liability among defendants, and providing a specific list
of the factors that must be considered as to each defendant, Chapter 41 of the CPRC
reflects a clear policy and intent that exemplary damages be imposed against a
defendant only for that defendant’s own conduct and only based on application of the
relevant factors to that defendant’s particular conduct.
In this case, any wrongful conduct was committed solely by Fine. There was
no one else at Supply Pro who failed to supervise him or committed any other act or
omission that was fraudulent or would otherwise warrant imposition of punitive
damages.
42
Under these circumstances, the award of punitive damages against Supply Pro
as well as Fine amounts to a multiple award of punitive damages for the same conduct
by a single person. See Owens-Corning Fiberglas Corp., 972 S.W.2d at 48.
Moreover because Fine is the sole shareholder of Supply Pro, the punitive damage
award against Supply Pro results in either a multiple award of punitive damages
against the same defendant or a penalty merely for Fine’s business being incorporated
rather than unincorporated. Rather than operating to limit liability, the corporate
entity is instead serving as a mechanism for arbitrarily multiplying liability. Under
such circumstances, any punitive damages should have either been awarded against
Fine for his individual conduct or against Supply Pro for Fine’s conduct on Supply
Pro’s behalf, but not both. Therefore, the trial court erred by entering judgment for
punitive damages against both defendants.
D. The combined $1.8 million punitive damage award is excessive
under the Texas and Federal Standards.
With regard to the amount of the awards, the alleged fraud in this case did not
cause physical harm, threaten health or safety, or cause or threaten financial ruin. See
Tony Gullo Motors, 212 S.W.3d at 308. Instead, nearly 90% of the fraud damages
awarded in this case was for either: (1) goods Biocel never produced and for which
it incurred no cost (and for which the underlying take or pay basis was either not
43
agreed to by Supply Pro or was fraudulently induced); or (2) Biocel’s unnecessary
and excessive charges to store worthless goods. Under these circumstances, an award
of exemplary damages totaling $1.8 million, (as well as the imposition of punitive
damages against both Fine and Supply Pro based solely on Fine’s conduct) is
excessive under both the Texas and Federal Standards.
VI. The trial court erred by not incorporating Biocel’s remittitur on
prejudgment interest into the Judgment.
The period from April 27, 2012 (when the lawsuit was filed) to April 21, 2015
(the date the Judgment was signed) was six days less than three years (1089 days), or
2.984 years. Prejudgment interest, accruing on the actual damages of $783,421.05
at 5% for 2.984 years, would come to $116,886.42, rather than the $118,266.64
awarded in the Judgment. On June 29, 2015, Biocel filed a remittitur to correct this
error. 4 C 2511. The trial court erred by not incorporating this remittitur into the
Judgment. Therefore, if the amount of the Judgment is not reduced based on
appellants’ other issues, appellants ask the Court to modify the Judgment to reflect
this lower amount of prejudgment interest.
PRAYER
Based on the foregoing, appellants request the Court to: (1) reverse the
judgment of the trial court except for the award of $95,385.60 (that Supply failed to
44
pay for the 6912 manufactured bags of K-Sorb); (2) render a take-nothing judgment
against Biocel’s claims based on the clawback provision, the take or pay term, storage
of the 6912 bags of K-Sorb, and fraud and punitive damages against Supply Pro; (3)
disregard the immaterial jury findings on questions 7d and 11; and (4) remand the
case for a new trial on any remaining issues.
Respectfully submitted,
/s/ Richard H. Edelman
Richard H. Edelman
Texas Bar. No. 06413200
rhe@edelmanoffice.com
BARLOW JONES L.L.P.
17225 El Camino Real, Suite 400
Houston, Texas 77058
Telephone: (281) 488-8440
Facsimile: (281) 488-6832
William F. Harmeyer
Texas Bar No. 09019000
wharmeyer@harmeyerlaw.com
WILLIAM F. HARMEYER & ASSOCIATES, P.C.
7322 Southwest Freeway, Suite 475
Houston, Texas 77074
Telephone: (713) 270-5552
Facsimile: (713) 270-7128
ATTORNEYS FOR APPELLANTS
45
WORD COUNT CERTIFICATION
The number of words in this Brief, as defined in Texas Rule of Appellate
Procedure 9.4(i)(1), is 11,264.
/s/ Richard H. Edelman
Richard H. Edelman
CERTIFICATE OF SERVICE
This Brief was eServed on November 25, 2015 on the following counsel for
appellee:
T. Earnest Freeman ernest@thefreemanlawfirm.com
Stephen G. Scholl steve@thefreemanlawfirm.com
Jonathan S. Stoger jstoger@stogerlaw.com
s/ Richard H. Edelman
Richard H. Edelman
rhe@edelmanoffice.com
46
APPENDIX
Date
ITEM Signed or Record
Filed Reference
A. Final Judgment 04/21/15 4 C 2454-56
B. Charge of the Court [jury verdict] 02/12/15 4 C 1931-56
C. The August 13 and 16 emails P 46
47
A
€3
q fl¬
CAUSE NO. 2012-24524 oe
ECOSORB INTERNATIONAL, INC. § IN THE DISTRICT COURT
dJbJa BIOCEL TECHNOLOGIES §
Plaintiff §
§
v. § OF HARRIS COUNTY. TEXAS
§
SUPPLY PRO, INC., and
HARMON K. FINE, Individually
§
§
®WSK
Defendants §
FINAL JUDGMENT
11th JUDICIAL DISTRICT Time:
-
IXapuly
On die 3rd day of February, 2015, came on to be heard the above-entitled and numbered
cause and ECOSORB INTERNATIONAL, INC. d/b/a BIOCEL TECHNOLOGIES, the
Plaintiff, appeared in person and by attorney of record and answered ready for trial. SUPPLY
PRO, INC., and HARMON K. FINE, Individually, the Defendant, appeared in person and by
their attorneys of record and announced ready for trial. A jury having been previously demanded,
a jury consisting of twelve (12) qualified jurors was duly empaneled and the case proceeded to
trial.
At the conclusion of the evidence, the Court submitted the questions of feet in the case to
the jury. The Charge of the Court and the verdict of the jury arc incorporated for all purposes by
reference. Because it appears to the Court that the verdict of the jury was for the Plaintiff and
against the Defendant, judgment should be rendered on the verdict in favor of the Plaintiff and
against Defendant.
IT IS THEREFORE ORDERED, ADJUDGED and DECREED that Plaintiff, ECOSORB
INTERNATIONAL, INC. d/b/a BIOCEL TECHNOLOGIES has judgment against Defendants,
SUPPLY PRO, INC., and HARMON K. FINE, for actual damages in the sum of
$ said sum representing $ awarded by the jury, minus an
1
"SSKBSS
a»metweoHm*9 ylbto.kSf calculated at the rate of Five Percent (5%) percent from April 27, 2012 (the
date suit was filed) until the date preceding the entry of this Final Judgment.
IT IS FURTHER ORDERED, ADJUDGED and DECREED that the total amount of the
judgment here rendered shall bear interest at the rate of (5%) percent compounded annually from
the date of this Final Judgment until paid.
IT IS FURTHER ORDERED, ADJUDGED and DECREED that all writs and processes
for the enforcement and collection of this judgment or the costs of court may issue as necessary.
2455
All other relief not expressly granted in this Final Judgment is DENIED.
SIGNED this day of APR/ 2 1 2015_, 2015.
JUDGE PRESIDING
3
2456
B
to
S
w
§ CAUSE NO. 2012-24524
i ECOSORB INTERNATIONAL. INC. IN THE DISTRICT COURT OF
i d/bj’a BIOCEL TECHNOLOGIES
*
§
a §
£
3 vs. § HARRIS COUNIT, TEXAS
! SUPPLY PRO, INC. and HARMON K.
§
§
* FINE. Individually § 11™ JUDICIAL DISTRICT
CHARGE OF THE COURT
MEMBERS OF THE JURY:
After the dosing arguments, you will go to the jury room to decide the case, answer the
questions that are attached, and reach a vcrdicL You may discuss the case with other jurors only
when you are all together in the jury room.
Remember my previous instructions: Do not discuss the case with anyone else, either in
person or by any other means. Do not do any independent investigation about the case or conduct
any research. Do not look up any words in dictionaries or on the Internet Do not post informa¬
tion about the case on the Internet. Do not share any special knowledge or experiences with the
other jurors. Do not use your phone or any other electronic device during your deliberations for
any reason.
Any notes you have taken arc for your own personal use. You may take your notes back
into the jury room and consult them during deliberations, but do not show or read your notes to
your fellow jurors during your deliberations. Your notes arc not evidence. Each of you should
_
rely on your independent recollection of the evidence and not be influenced by the fact that an¬
other juror has or has not taken notes.
You must leave your notes with the bailiff when you are not deliberating. After you com¬
plete your deliberations, the bailiff will collect your notes. When you are released from jury duty,
the bailiff will promptly destroy your notes so that nobody can read what you wrote,
INSTRUCTIONS
l. Do not let bias, prejudice, or sympathy play any part in your decision.
2. Base your answers only on the evidence admitted in court and on the law that is in
these instructions and questions. Do not consider or discuss any evidence that was not admitted
in the courtroom.
FILED
Chris Danlol
District Clerk
l FEB 12
RECORDER’S MEMORANDUM Tim*:. Ken Is
TMsuYstmmenUSofpoorquaWy
al the lime of imagine By.
y
1931
3. You arc to make up your own minds about the facts. You are the sole judges of
the credibility of the witnesses and the weight to give their testimony. But on matters of law, you
must follow all of my instructions.
4. If my instructions use a word in a way that is different from its ordinary meaning.
use the meaning 1 give you, which will be n proper legal definition.
5. All the questions and answers are important. No one should say that any question
or answer is not important
6. Answer “yes*' oc “no" to all questions unless you arc told otherwise A “yes'* an¬
swer must be based on a preponderance of the evidence unless you are told otherwise. Whenever
a question requires an answer other than “yes" or “no," your answer must be based on a prepon¬
derance of the evidence unless you arc told otherwise.
The term "preponderance of the evidence" means the greater weight of credible evidence
presented in this ease. If you do not find tliat a preponderance of the evidence supports a “yes"
answer, then answer "no" A preponderance of the evidence is not measured by the number of
witnesses or by the number of documents admitted in evidence. For a fact to be proved by a pre¬
ponderance of the evidence, you must find that the fact is more likely true than not true.
A fact may be established by direct evidence or by circumstantial evidcnccÿoFhbth. A
fact is established by direct evidence when proved by documentary evidence or by witnesses
who saw the act done oc heard the words spoken. A fact is established by circumstantial evidence
when it may be fairly and reasonably inferred from other facts proved.
7. Do not decide who you think should win before you answer the questions and
then just answer the questions to match your decision. Answer each question carefully without
j considering who will win. Do not discuss or consider the effect your answers will have.
8. Do not answer questions by drawing straws or by any method of chance.
9. Some questions might ask you for a dollar amount. Do not agree in ndvance to
decide on a dollar amount by adding up each juror’s amount and then figuring the average.
10. Do not trade your answers. For example, do not say, “l will answer this question
your way if you answer another question my way."
11 . Unless otherwise instructed The answers to the questions must be based on the
decision of at least 10 of the 12 jurors. The same 10 jurors must agree on every answer. Do not
agree to be bound by a vote of anything less than 10 jurors, even if it would be a majority.
12. In answering questions about damages, answer each question separately, Do not
increase or reduce the amount in one answer because of your answer to any other question about
damages. Do not speculate about what any party's ultimate recovery* may or may not be. Any
recovery will be determined by the court when it applies the law to your answers at the lime of
judgment.
As I have said before, if you do not tallow these instructions and definitions, you will be
guilty of juror misconduct, and I might have to order a new trial and start this process over again
This wouid waste your time and the panics’ money, and would require the taxpayers of this
2
1932
county to pay for another trial. If a juror breaks any of these rules, tell that person to stop and re¬
port it to me immediately.
***
3
1933
QUESTION 1
Did Biocel and Supply Pro agree that the following provisions would be part of the
workout agreement?
“Should BP, Supply Pro’s distributors), or other third party compensate
Supply Pro for terminating boom deliveries or should BP resume such deliver¬
ies from Supply Pro or Supply Pro’s distributors) and irrespective of the
above:
1. If compensated, Biocel will be compensated by Supply Pro in the same
proportion as Supply Pro is compensated, less the restocking fee of
$12,750 outlined above if the raw material return option is elected by
Supply Pro.
2. If deliveries are resumed, Biocel will resume deliveries in the same pro¬
portion as Supply Pro resumes deliveries.
3. Any combination of compensation or deliveries to Supply Pro will be also
handled in the same proportion of compensation and deliveries to Biocel.
4. Other than the offset for the $12,750 restocking fee should Supply Pro
elect that option, there will be no other offsets to compensation or quanti¬
ties delivered.
5. Supply Pro will notify Biocel in a timely manner in the event compensa¬
tion and, or deliveries are provided or resumed as outlined above.”
In deciding whether the parties reached an agreement, you may consider what they said
and did in light of the surrounding circumstances, including any earlier course of dealing. You
may not consider the parties’ unexpressed thoughts or intentions.
Answer “Yes” or “No.”
Answer:
***
4
1934
II
QUESTION 2
Did Supply Pro fail to comply with the workout agreement with Biocel?
In addition to the language of the agreement, the law imposes on a party to a contract a
duty to perform the contract in good faith. In that connection, good faith means honesty in fact
and the observance of reasonable commercial standards of fair dealing.
Answer “Yes” or “No.”
Answer:
***
1
5
1935
QUESTION 3
Did Biocel and Harmon Fine agree that Harmon Fine would personally guaranty the
workout agreement?
In deciding whether the parties reached an agreement, you may consider what they said
and did in light of the surrounding circumstances, including any earlier course of dealing. You
may not consider the parties’ unexpressed thoughts or intentions.
Answer “Yes” or “No.”
Answer:
***
6
1936
If you answered “Yes” to Question 3 then answer the following question. Otherwise, do not an¬
swer the following question.
QUESTION 4
Did Harmon K. Fine fail to comply with the personal guaranty with Biocel?
In addition to the language of the agreement, the law imposes on a party to a contract a
duty to perform the contract in good faith. In that connection, good faith means honesty in fact
and the observance of reasonable commercial standards of fair dealing.
Answer “Yes” or “No.”
Answer:
***
7
1937
QUESTION 5
Did Supply Pro or Hannon Fine commit fraud against Biocel?
Fraud occurs when —
a. a party makes a material misrepresentation, and
b. the misrepresentation is made with knowledge of its falsity or made recklessly
without any knowledge of the truth and as a positive assertion, and
c. the misrepresentation is made with the intention that it should be acted on by the
other party, and
d. the other party relies on the misrepresentation and thereby suffers injury.
“Misrepresentation” means:
i. A false statement of fact, or
ii. A promise of future performance made with an intent, at the time the
promise was made, not to perform as promised, or
iik-A statement of opinion based on a false'StatefflenTbFfact. dr
iv. A statement of opinion that the maker knows to be false, or
v. An expression of opinion that is false, made by one claiming or implying
to have special knowledge of the subject matter of the opinion.
“Special knowledge” means knowledge or information superior to that
possessed by the other party and to which the other party did not have
equal access.
a. Supply Pro.
Answer “Yes” or “No.”
Answer: Mh.
b. Harmon Fine.
Answer “Yes” or “No.”
Answer: Mi
***
8
1938
If you answered “Yes” to Questions 2 or 4 then answer the following' question. Otherwise, do
not answer the following question.
QUESTION 6
What sum of money, if any, if paid now in cash, would fairly and reasonably compensate
Biocel for its damages, if any, that resulted from such failure to comply?
Do not add any amount for interest on damages, if any.
Answer separately in dollars and cents for damages, if any.
Consider the following elements of damages, if any, and none other:
a. The price of the 6912 bales on February 1, 2011, if Biocel was unable after rea¬
sonable effort to resell them at a reasonable price, or the circumstances reasonably
indicated that such effort would be unavailing.
Answer: S 39ÿ, leO
b. Commercially reasonable and necessary charges for custody and care of the goods
stored by Biocel.
Answer: $
c. Biocel’s proportionate share of compensation received by Supply Pro from its dis¬
tributor for the termination of boom deliveries.
Answer:$ 3'S6 .5T*).QO
***
9
1939
If you answered “Yes” to Questions 5a or 5b then answer the following question. Otherwise, do
not answer the following question.
QUESTION 7
What sum of money, if any, if paid now in cash, would fairly and reasonably compensate
Biocel for its damages, if any, that resulted from such fraud?
Do not add any amount for interest on damages, if any.
Answer separately in dollars and cents for damages, if any.
Consider the following elements of damages, if any, and none other:
a. The price of the 6912 bales on February 1, 2011, if Biocel was unable after rea¬
sonable effort to resell them at a reasonable price, or the circumstances reasonably
indicated that such effort would be unavailing.
Answer: $
I
b. Commercially reasonable and necessary charges for custody and care of the goods
stored by Biocel.
Answer: $ 303/
c. Biocel’s proportionate share of compensation received by Supply Pro from its dis¬
tributor for the termination of boom deliveries.
Answer: $ 3*% 6ÿ51*1. QQ
d. The unpaid amounts due under the purchase orders dated July 13, 2010 and July
29, 2010, issued by Supply Pro to Biocel.
Answer: $ H-so qoa.fo
***
10
1940
Answer the following question as to Supply Pro or Harmon Fine only if you unanimously an¬
swered “Yes" to Questions 5a or 5b as to that same entity or person. Otherwise, do not answer
the following question as to that same entity or person.
To answer "Yes" to the following question, your answer must be unanimous. You may answer
"No” to the following question only upon a vote of ten or more jurors. Otherwise, you must not
answer the following question.
QUESTION 8
Do you find by clear and convincing evidence the harm to Biocel resulted from fraud?
“Clear and convincing evidence" means the measure or degree of proof that produces a
firm belief or conviction of the truth of the allegations sought to be established.
Fraud occurs when —
a. a party makes a material misrepresentation, and
b. the misrepresentation is made with knowledge of its falsity or made recklessly
without any knowledge of the truth and as a positive assertion, and
c. the misrepresentation is made with the intention that it should be acted on by the
other party, and
d. the other party relies on the misrepresentation and thereby suffers injury.
“Misrepresentation” means:
i. A false statement of fact, or
ii. A promise of future performance made with an intent, at the time the
promise was made, not to perform as promised, or
iii. A statement of opinion based on a false statement of fact, or
iv. A statement of opinion that the maker knows to be false, or
v. An expression of opinion that is false, made by one claiming or implying
to have special knowledge of the subject matter of the opinion.
"Special knowledge” means knowledge or information superior to that
possessed by the other party and to which the other party did not have
equal access.
a. Supply Pro.
Answer “Yes” or “No.”
Answer; lift
b. Hannon Fine.
Answer “Yes” or “No.”
Answer- Jf£L
•
II
1941
If you answered “Yes” to Questions 2 or 4, then answer the following question. Otherwise, do
not answer the following question.
QUESTION 9
What is a reasonable fee for the necessary services of Biocel’s attorney, stated in dollars
and cents?
Factors to consider in determining a reasonable fee include —
1. The time and labor required, the novelty and difficulty of the questions involved,
and the skill required to perform the legal services properly.
2. The fee customarily charged in the locality for similar legal services.
3. The amount involved and the results obtained.
4. The experience, reputation, and ability of the lawyer or lawyers performing the
services.
Answer with an amount for each of the following:
a. For preparation and trial.
Answer: $
b. For an appeal to the Court of Appeals.
Answer: $ *43 j 50O
c. For an appeal to the Supreme Court of Texas.
Answer: $ 3l,Soo
***
12
1942
QUESTION 10
What sum of money, if any, would fairly and reasonably compensate Biocel for Biocel’s
proportionate share of compensation received by Supply Pro from Supply Pro’s distributor for
the termination of boom deliveries?
Answer: $
***
/
13
1943
QUESTION 11
What sum of money, if any, would fairly and reasonably compensate Biocel for the un¬
paid amounts due under the purchase orders dated July 13 and July 29, 2010, issued by Supply
Pro to Biocel?
Answer: $ 490,303. UP
***
14
1944
PRESIDING JUROR
When you go into the jury room to answer the questions, the first thing you will need to
do is choose a presiding juror.
It is the duty of the presiding juror to:
a. have the complete charge read aloud if it will be helpful to your deliberations;
b. preside during your deliberations;
c. see that your deliberations are conducted in an orderly manner and in accordance
with the instructions in this charge;
d. write out and hand to the bailiff any communications concerning the case that you
desire to have delivered to the judge;
e. vote on the questions;
f. write your answers to the questions in the spaces provided; and
g. certify to your verdict in the space provided for the presiding juror’s signature or
to obtain the signatures of all the jurors who agree with the verdict if your verdict
is less than unanimous.
Do you understand the duties of the presiding juror? If you do not, please tell me now.
***
15
1945
INSTRUCTIONS FOR SIGNING THE VERDICT CERTIFICATE
I. Unless otherwise instructed, you may answer the questions on a vote of 10 jurors.
The same 10 jurors must agree on every answer in the charge. This means you may not have one
group of 10 jurors agree on one answer and a different group of 10 jurors agree on another an¬
swer.
2. If 10 jurors agree on every answer, those 10 jurors sign the verdict. If 11 jurors
agree on every answer, those 11 jurors sign the verdict. If all 12 of you agree on every answer,
you are unanimous and only the presiding juror signs the verdict.
3. All jurors should deliberate on every question. You may end up with all 12 of you
agreeing on some answers, while only 10 or 11 of you agree on other answers. But when you
sign the verdict, only those 10 who agree on every answer will sign the verdict.
4. There are some special .instructions before Questions 8 explaining how to answer
that question. Please follow the instructions. If all 12 of you answer that question, you will need
to complete a second verdict certificate for that question.
Do you understand these instructions? If you do not, please tell me now.
***
JUDGE PRESIDING
16
1946
_
_
_
Check one:
VERDICT CERTIFICATE
Our verdict is unanimous. All 12 of us have agreed to each and every answer. The presid¬
ing juror has signed the certificate for all 12 of us.
Signature of Presiding Juror Printed Name of Presiding Juror
Our verdict is not unanimous. Eleven of us have agreed to each and every answer and
have signed the certificate below.
Our verdict is not unanimous. Ten of us have agreed to each and every answer and have
signed the certificate below.
1.
Signature of Juror Printed Name of Juror
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
17
1947
If all 12 of you have answered “Yes” to Question 8, then you must sign this certificate also.
ADDITIONAL CERTIFICATE
/ Our verdict is unanimous in answering Question 8. All 12 of us agreed to that answer.
The presiding juror has signed the certificate for all 12 of us.
VJtcndtL
Signature of Presiding Juror Printed Name of Presiding Juror
(
18
1948
4 9
END OF JURY CHARGE
\
19
1949
•*> • t
H
Cause No. aoia'WSa* P'3
H £G0$oR$ ini'l \nc
(iff § In the District Court of
I §
3 §
vs. § Harris County, TEXAS
§
§
R£, Defendant § 11th Judicial District
8
6Uÿ|WM|)/\ Y\ÿj
)r\d*iV»cLdlH Question from the Jury During Deliberations
Question No. 1 :
P flic, siM ryÿ (i ftfrp/joP OV.~ÿTK t
ZlMdlkihÿktlE
i
T
Signed:
Presiding Juror
Answer:
C P£> ,
/
.
Signed this day of .,20 _
Mike D. Miller
Judge Presiding
SSSSA
FEBlU1 l»B»
Tun®-.
By. 'ooputy
afihe lime of imaging
1950
t
MEMBERS OF THE JURY:
With reference to your request for certain information you are directed to the
evidence, both documentary and testimonial, which was admitted in this case. However,
you are instructed that if the jurors disagree as to the statement of any witness, they may,
upon applying to the Court, have read to them from the court reporter’s notes that part of
the witness’ testimony on the particular point in dispute and no other. Therefore, if you
have disagreed upon any point in the testimony, and you will so state to the Court in
writing, and point out in writing the point upon which you have disagreed, then the Court
will have the court reporter read back to you only the testimony on the point in dispute.
The court reporter will need sufficient time to examine the notes to locate all the
testimony on the point concerning your inquiry; therefore, the Court will request that you
be patient and allow sufficient time for this to be done, if you so request.
JUDGE MIKE MILLER
1951
/ '»
MEMBERS OF THE JURY:
In answer to your request to get a copy of Mr. Fine’s deposition, you are
instructed that you have received all of the evidence admitted in this trial and are guided
thereby. The printed deposition transcripts themselves are not admitted in evidence.
JUDGE MIKE MILLER
1952
i
CAUSE NO. 2012-24524
p1!.
n
H ECOSORB INTERNATIONAL, INC. § IN THE DISTRICT COURT OF
CM
d/b/a BIOCEL TECHNOLOGIES §
§
vs. § HARRIS COUNTY, TEXAS
il §
p
SUPPLY PRO, INC. and HARMON K. §
FINE, Individually § 11TH JUDICIAL DISTRICT
MEMBERS OF THE JURY:
In discharging your responsibility on this jury, you will observe all the instructions that
have been previously given you.
***
JUDGE PRESIDING
11#-**
nlf M
1953
{
You must unanimously agree on the amount of any award of exemplary damages.
QUESTION 12
What sum of money, if any, if paid now in cash, should be assessed against Supply Pro
and awarded to Biocel as exemplary damages, if any, for the conduct you found in answering
Question 8a?
“Exemplary damages” means an amount that you may in your discretion award as a pen¬
alty or by way of punishment.
—
Factors- to consider in awarding exemplary damages, if any, are
a. The nature of the wrong.
b. The character of the conduct involved.
c. The degree of culpability of Supply Pro.
d. The situation and sensibilities of the parties concerned
e. The extent to which such conduct offends a public sense of justice and propriety.
f. The net worth of Supply Pro.
Answer in dollars and cents, if any.
Answer: $
***
2
1954
t
You must unanimously agree on the amount of any award of exemplary damages.
QUESTION 13
What sura of money, if any, if paid now in cash, should be assessed against Hannon Fine
and awarded to Biocel as exemplary damages, if any for the conduct you found in answering
Question 8b?
“Exemplary damages” means an amount that you may in your discretion award as a pen¬
alty or by way of punishment.
Factors to consider in awarding exemplary damages, if any, are
a. The nature of the wrong.
—
b. The character of the conduct involved.
c. The degree of culpability of Harmon Fine.
d. The situation and sensibilities of the parties concerned.
e. The extent to which such conduct offends a public sense of justice and propriety.
f. The net worth of Harmon Fine.
Answer in dollars and cents, if any.
Answer: $ )f QOQÿQQQ
***
3
1955
- 4
ADDITIONAL CERTIFICATE
We, the jury, have answered the above and foregoing questions as herein indicated, and
herewith return same into court as our verdict.
I certify that the jury was unanimous in answering the following questions:
Answer “All” or list questions: ALL-
PRESIDING JUROR
Printed Name of Presiding Juror
4
1956
C
FROM STEVE KEMPE
SENT FRIDAY AUGUST 13 2010 315 PM
TO HKFINEPROSORBENTSCOM
CC LARRY SVOBODA
SUBJECT BP BOOMS
HARMON
ENJOYED OUR LUNCH MEETING WEDNESDAY AND THE OPPORTUNITY TO DISCUSS THE SITUATION REGARDING THE 1W BOOMS AM
CERTAIN WE CAN WORKTOGETHER TO CRAFT MUTUALLY AGREEABLE RESOLUTION
AS YOU ARE AWARE EFFECTIVE JULY 2010 WE INSTITUTED SPECIAL TERMS AND CONDITIONS ON ALL HYDROPHOBIC MATERIAL
ORDERS THOSE TERMS AND CONDITIONS SPECIFIED THAT ORDERS WERE NON CANCELLABLE ONCE PLACED SUPPLY PROS NOTICE ON
AUGUST 2010 TO STOP DELIVERIES OF THE REMAINING TRUCKLOADS ON YOUR P0 41724 AND ALL 28 TRUCKLOADS OF P0 41778
COMBINED REQUIREMENT OF 34848 BAGS CAME AS COMPLETE SHOCK TO US AS WE WERE ASSURED UP UNTIL THAT DATE THAT THE
DELIVERIES WERE ONLY ON HOLD PENDING REVISED SCHEDULING CONFIRMATION WE CURRENTLY HAVE 6912 BAGS OF MATERIAL AND
SPECIFIC INVENTORY FOR AN ADDITIONAL 11616 BAGS
BASED ON OUR DISCUSSIONS AND SOME SUBSEQUENT THINKING WE PROPOSE THE FOLLOWING
SHOULD 1W SUPPLY PROS DISTRIBUTORS OR OTHER THIRD PARTY NOT COMPENSATE SUPPLY PRO FOR TERMINATING BOOM DELIVERIES
OR SHOULD BP NOT RESUME SUCH DELIVERIES FROM SUPPLY PRO OR SUPPLY PROS DISTRIBUTORS
TOGETHER AND INDEPENDENTLY SUPPLY PRO AND ECOSORB WILL CONTINUE THEIR EFFORTS TO SELL THE EXISTING ECOSORB
INVENTORY OF 6912 BAGS FOR PERIOD OF MONTHS ENDING FEBRUARY 12011 SUPPLY PRO WILL BE INVOICED FOR
WHATEVER OF THIS INVENTORY REMAINS AT THE END OF THAT PERIOD
OUR VENDOR HAS CONDITIONALLY AGREED TO ACCEPT RETURN OF THE UNUSED RAW MATERIAL SUBJECT TU THEIR ANALYSIS
APPROVAL AND IF APPROVED TRANSPORTATION HANDLING AND RESTOCKING FEES THE TOTAL COST OF PROCESSING AND
RETURNING THIS UNUSED MATERIAL WILL BE 12750 IF WE ARE TO RETURN THE MATERIAL WE HAVE TO NOTIFY THEM BY
WEDNESDAY AUGUST 18 TO START THEIR EVALUATION AND ACCEPTANCE PROCESS IF WE DO NOT RETURN THE MATERIAL AND IT
IS CAREFULLY MAINTAINED THERE IS SHELF LIFE OF MONTHS THE DECISION TO BE MADE IS WHETHER TO RETURN IT NOW OR
TO RETDIN IT IN THE HOPE OF UTILIZING AND SELLING THE ADDITIONAL 11616 BAGS OF KSORB HYDROPHOBIC TO BE
MANUFACTURED PLEASE GIVE THIS YOUR IMMEDIATE ATTENTION AND ADVISE WHAT YOU PREFER AS TIME IS OF THE ESSENCE IN
GETTING THE RETURN PROCESS STARTED AND COMPLETED IF YOU ELECT FOR US NOT TO RETURN THIS MATERIAL ANY REMAINING
ON HAND ON JANUARY 2011 WILL BE PROCESSED INTO FINISHED KSORB HYDROPHOBIC AND INVOICED TO SUPPLY PRO
PT XH1BIT
BIOCEL 001387
JI9AL
WE WILL WAIVE THE REMAINING PURCHASE REQUIREMENT OF A6320 BAGS 34848 LESS 6912 ON HAND AND LESS 11616 IN
PROCESS
SHOULD BP SUPPLY PROS DISTRIBUTORS OR OTHER THIRD PARTY COMPENSATE SUPPLY PRO FOR TERMINATING BOOM DELIVERIES OR
SHOULD BP RESUME SUCH DELIVERIES FROM SUPPLY PRO OR SUPPLY PROS DISTRIBUTORS AND IRRESPECTIVE OF THE ABOVE
IF COMPENSATED ECOSORB WILL BE COMPENSATED BY SUPPLY PRO IN THE SAME PROPORTION AS SUPPLY PRO IS
COMPENSATED LESS THE RESTOCKING FEE OF 12750 OUTLINED ABOVE IF THE RAW MATERIAL RETURN OPTION IS ELECTED BY
SUPPLY PRO
IF DELIVERIERS ARE RESUMED ECOSORB WIU RESUME DELIVERIES IN THE SAME PROPORTION AS SUPPLY PRO RESUMES
DELIVERIES
ANY COMBINATION OF COMPENSATION OR DELIVERIES TO SUPPLY PRO WILL BE ALSO HANDLED IN THE SAME PROPORTION OF
COMPENSATION AND DELIVERIES TO ECOSORB
OTHER THAN THE OFFSET FOR THE 12750 RESTOCKING FEE SHOULD SUPPLY PRO ELECT THAT OPTION THERE WILL BE NO OTHER
OFFSETS TO COMPENSATION OR QUANTITIES DELIVERED
SUPPLY PRO WILL NOTIFY ECOSORB IN TIMELY MANNER IN THE EVENT COMPENSATION AND OR DELIVERIES ARE PROVIDED OR
RESUMED AS OUTLINED ABOVE
WE UNDERSTAND THE DIFFICULTIES THIS SITUATION HAS CREATED FOR BOTH OF US AND BELIEVE THIS IS REASONABLE SOLUTION AS
UNDERSTAND IT SUPPLY PRO RELIED ON PURCHASE CONTRACTS AS THE BASIS FOR THEIR PURCHASE ORDERS TO US ACCORDINGLY YOU
SHOULD EXPLORE WHATEVER RECOURSE YOU MAY HAVE BELIEVE IT IS HIGHLY LIKELY THAT BP WILL MAKE GOOD ON ITS BOOM
COMMITMENTS WHICH MAY WELL RESOLVE THIS MATTER FOR US BOTH
KINDLY CONFIRM YOUR ACCEPTANCE OF THE ABOVE ALSO NEED TO HEAR FROM YOU SPECIFICALLY REGARDING THE DISPOSITION OF THE
UNCONVERTED RAW MATERIAL
LARRY AND SEVERAL STRATEGIES AS YOU AND DISCUSSED
ARE REVIEWING REGARDING ONGOING NATURAL FIBER BOOM SALES LARRY WILL
CONTACT YOU AND SCOTT EARLY NEXT WEEK TO DISCUSS OUR IDEAS
BEST REGARDS
STEVE
STEVEN KEMPE
PRESIDENT
ECOSORB INTERNATIONAL
7134336701 OFFICE
7136104706 DIRECT
7134332900 FAX
7136104746 DIRECT FAX
WWWECOSORBCOM
BIOCEL 001388
STEVE KEMPE
FROM STEVE
KEMPE
SENT MONDAY AUGUST 16 2010 448 PM
TO HKFINEPROSORBENTSCOM
SUBJECT RE BP BOOMS
THE RETURN PROCESS IS UNDERWAY AS MENTIONED THEY WILL TEST 8ND APPROVE BEFORE CONSENTING DONT ANTICIPATE ANY
PROBLEM AND THEY SEEM TO BE MORE THAN COOPERATIVE PROBABLY BE NEXT WEEK BEFORE THEY RET ME KNOW
STEVE
FROM HARMON FINE MAILTOHKFLNEPROSORBENTSCOM
SENT MONDAY AUGUST 16 2010 441 PM
TO STEVE KEMPE
SUBJECT RE BOOMS
AUTHORIZE YOU TO RETURN THE CHEMICAL TO YOUR MANUFACTURER AND CHARGE ME THE 12J50 FOR RETURN THE GOODS SHOULD BE
RETURNED IN SUCH CONDITION THAT THE MANUFACTURER WILL HAVE NO CAUSE NOT TO ACCEPT ITS RETURN
SUPPLY PRO ACCEPTS THE OFFER OF YOUR ASSISTANCE IN SELLING THE REMAINING 6912 BALES WITHING MONTH PERIOD SUPPLY PRO
WILLPURCHASE THE BALANCE UNSOLD AT THAT TIME IT WOULD BE VERY HELPFUL FOR BOTH OUR COMPANIES IF THE CUSTOMER FOR THE
50000 PZECES OF BOOM WOULD PLACE AN ORDER WITH SUPPLY PRO
BEST REGARDS
HARMON FINE
SUPPLY PRO INC
1231 HAHLA SI
HOUSION TEXAS 77020
PHONE 7136729050
FAX 736747659
EMAIL HKLHTEPROSARBCNCSVOZU
VISIT OUR WEB AT WWWPROSORBENCSEAM
BIOGEL 000946