In The
Court of Appeals
Ninth District of Texas at Beaumont
____________________
NO. 09-16-00339-CV
____________________
SAM RAYBURN MUNICIPAL POWER AGENCY, Appellant
V.
RALPH J. GILLIS, GILLIS BORCHARDT & BARTHEL LLP,
OBAIN ASSOCIATES LIMITED AND THE
JASPER/VPPA SETTLEMENT TRUST, Appellees
On Appeal from the 253rd District Court
Liberty County, Texas
Trial Cause No. CV1408743
MEMORANDUM OPINION
This appeal involves two complex energy projects and the relationship
between the members of the projects and an attorney that assisted the members in
structuring both projects. Sam Rayburn Municipal Power Agency (SRMPA,
Plaintiff, Appellant or Cross-Appellee) is a municipal energy provider, organized in
1979 by ordinances of three Texas cities: Jasper, Livingston, and Liberty. SRMPA
purchases electrical power wholesale and sells it to (1) its constituent members
1
Jasper, Livingston, and Liberty, (2) Vinton Public Power Authority (VPPA), which
is the electrical power arm of Vinton, Louisiana, and (3) other potential buyers.
SRMPA filed suit against its former attorney, Ralph J. Gillis (Gillis), and Gillis’s
law firm, Gillis Borchardt & Barthel LLP1 (the Gillis Firm), Obain Associates
Limited (Obain), and the Jasper/VPPA Settlement Trust (the Trust) (collectively
Defendants or Appellees) regarding what the parties referenced as the “Nisco Deal”
and the “Cambridge Project.” SRMPA alleged that Gillis and the Gillis Firm acted
as SRMPA’s “general counsel” at the time of both projects and that Gillis engaged
in wrongful conduct causing damages to SRMPA. It is undisputed that SRMPA was
not a participant in the Nisco Deal. SRMPA claims that Gillis failed to disclose the
opportunity to participate in the Nisco Deal to SRMPA. And, SRMPA contends in
its appellate brief that:
By using his alter ego, Obain Associates Limited (of which Gillis was
the undisclosed principal), [], and intermediary trusts that Gillis also
created, [], Gillis concealed from his client, SRMPA, that he would be
personally receiving millions of dollars from each of these two sets of
contracts. [] Gillis is even yet scheduled to receive an additional $1
million per year from the Cambridge Project until 2036, approximately
another twenty million dollars. []
1
Gillis testified that Gillis, Borchardt & Barthel LLP was formerly known as
Gillis & Angley, LLP. An exhibit introduced and admitted at trial included an annual
report filed with the Massachusetts Secretary of the Commonwealth, Corporations
Division, on March 1, 2013 by Gillis, Borchardt & Barthel LLP noted the partnership
name changed when Edward Angley retired.
2
SRMPA also alleged that the City of Jasper and the Trust knowingly participated in
Gillis’s conduct.
Gillis denied the allegations made by SRMPA, and the City of Jasper and the
Trust also denied the allegations. The Trust filed a counterclaim against SRMPA for
contractual indemnity and filed a motion to bifurcate the counterclaim because “[n]o
party has alleged that the indemnity provision at issue is ambiguous, so there is no
liability issue to be submitted to the jury as to the [indemnity] [c]laim.” The trial
court signed an Order Bifurcating the Trust’s Indemnity Claim Against Plaintiff, and
reserving the counterclaim for post-verdict consideration by the trial court.
The claims of SRMPA were tried to a jury. In a 10-2 verdict, the jury
responded “No” to the first question, “Did Gillis comply with his fiduciary duty to
SRMPA regarding the NISCO Deal[.]” In response to the fourth question, the jury
awarded $5,000,000 in damages for the Nisco Deal. In the fifth question the jury
found that Gillis fraudulently concealed his breach of fiduciary duty in connection
with the Nisco Deal. In the sixth question the jury was asked to find the date on
which SRMPA obtained sufficient knowledge that would have required a reasonably
prudent person to make an inquiry that, if pursued would lead to discovery of the
breach, and the jury answered: “March 27, 2001.” In response to the seventh
question, the jury answered “No” to the question, “Did Gillis comply with his
3
fiduciary duty to SRMPA regarding the Cambridge Project[.]” In response to
question ten, the jury awarded SRMPA past damages of $1,799,059 for the
Cambridge Project, but no future damages. In response to question eleven, the jury
found that Gillis complied with his fiduciary duty to SRMPA with respect to the cost
of transmission upgrades. In response to question two, the jury found that the City
of Jasper did not knowingly participate in Gillis’s conduct regarding the Nisco Deal.
In response to question eight, the jury found that neither the City of Jasper nor the
Trust knowingly participated in Gillis’s conduct regarding the Cambridge Deal. The
jury answered “yes” to question thirteen, asking whether Obain was responsible for
the conduct of Gillis. Ten of the members of the jury also answered “yes” that the
harm to SRMPA resulted from gross negligence, malice, or fraud, but the jury left
blank the answer of the amount of exemplary damages and that question required
the jury to unanimously agree upon its answer.
The trial court struck the jury’s answer to question fourteen asking whether
the harm to SRMPA resulted from gross negligence, malice or fraud, because the
question’s predicate required a unanimous answer and only ten of the twelve jurors
agreed, and the court concluded that the jury plainly erred by answering the question
“on less than a unanimous vote and by not complying with the Question’s
predicate[.]” Because of the jury’s response to question six, the trial court concluded
4
that the claims against Gillis and the Gillis Firm as to the Nisco Deal were barred by
limitations. The trial court then awarded SRMPA $1,799,059 in damages for the
Cambridge Project in past damages and no future damages, denied the Trust’s
indemnity claim, and ordered SRMPA to pay all of the Trust’s costs of court.
SRMPA appealed, and Gillis, Obain, and the Trust cross appealed. We affirm the
trial court’s judgment.
Background Facts
Gillis is an attorney and, according to all parties, Gillis is knowledgeable
regarding the law, regulations, and contractual aspects of acquiring and selling
electrical power. Gillis represented SRMPA and VPPA for more than thirty years as
legal counsel in various energy transactions and projects.
According to the Plaintiff’s Fifth Amended Petition, the live pleading at the
time of trial (hereinafter “the petition”), SRMPA alleged that Gillis structured
business transactions that affected his client’s interests, Gillis utilized separate legal
entities of his creation that disguised the arrangements of the projects and that he
was making over $1 million yearly for over twenty years from the projects. The
Plaintiff alleged that Gillis, the Gillis Firm, and the entities he created, were liable
to SRMPA on theories of breach of fiduciary duty, fraud, unjust enrichment, money
5
had and received, alter ego, usurpation of opportunity, and interference with
prospective contract.
Specifically, SRMPA complained in the petition about two energy
arrangements or concepts, the “Nisco Deal” and the “Cambridge Project.” SRMPA
alleged that Gillis failed to disclose to SRMPA that the contracts for the Nisco Deal
violated SRMPA’s rights under its Power Supply Agreement with VPPA, and
SRMPA alleged that Gillis created Obain and the Trust to hide significant payments
that Obain (and thereby Gillis) would be receiving as a result of the new contracts
Gillis structured as part of the Nisco Deal. SRMPA also alleged Gillis and the parties
to the Nisco Deal contracts entered into confidentiality agreements on Gillis’s
advice, and SRMPA was “deprived of its opportunity to participate in the Nisco Deal
and has suffered damages in the amount of 50% of the Nisco Deal revenues
generated during 2001 through 2011.” SRMPA alleged that, until shortly before this
lawsuit was filed, SRMPA never learned what the Nisco Deal was, that Entergy had
brought the deal to Gillis as lawyer for SRMPA, that Gillis had taken the deal instead
to Jasper and VPPA, or that Gillis was benefiting personally from it.
SRMPA alleged that in response to a change in gas prices that occurred in
approximately 2003, amendments to the Nisco Deal agreements were made under
Gillis’s new concept, the Cambridge Project, and one of the necessary participants
6
of the Cambridge Project was SRMPA rather than Jasper. According to the petition,
the Cambridge Project involved SRMPA, three Entergy affiliates, Jasper, VPPA and
the Trust, and the Trust would receive the payments from SRMPA. SRMPA alleged
that Gillis created the Trust to help disguise the fact that much of the money that
SRMPA would be paying under the Cambridge Project was actually going to Obain
and Gillis. According to the petition, Gillis, the Gillis Firm, Obain, and the Trust
breached their fiduciary duty to SRMPA, Gillis and the Gillis Firm fraudulently
concealed that Obain was a beneficiary of the Trust, Obain was Gillis’s alter ego,
and the Defendants were unjustly enriched.
Evidence Regarding the Nisco Deal2
The Nisco Deal was developed in the late 1990s, became operational in 2001,
and continued in operation until December 1, 2011. The Nisco Deal was developed
from certain losses Entergy Gulf States Louisiana, L.L.C. (Entergy) was
experiencing in the 1990s from regulations, primarily in Texas, that affected
Entergy’s relationship with the owner of a power-generating operation fueled by
“petcoke,” a byproduct of three petrochemical plants and refineries near Lake
Charles, Louisiana. Former Entergy officer John Hurstell testified that he contacted
2
We have limited our discussion of the evidence in relation to the structure of
the Nisco Deal and the Cambridge Project as necessary for the determination of the
appellate issues presently before this Court.
7
Gillis about helping him structure a deal for Entergy to lower unrecovered costs.
Hurstell and Gillis discussed an assignment of the retail loads to VPPA which would
then have a “sleeve” that would be either SRMPA or Jasper. Gillis testified that he
told Hurstell that Jasper or SRMPA could be the intermediary wholesale purchaser,
and that Gillis preferred SRMPA because it was a stronger entity than Jasper. Gillis
testified that at that time he did not know if SRMPA would be interested because
SRMPA “was beginning to look at some structure to dissolve . . . and they had just
spent a lot of money over two years to get [another agreement] negotiated and in
place[,]” so Gillis suggested that Jasper be a “backup arrangement” if SRMPA “falls
through.”
According to Gillis, Hurstell told Gillis that Entergy agreed that VPPA could
be the retail distributor and that Entergy wanted a confidentiality agreement
regarding the potential assignment of the retail load to VPPA. Gillis testified that
when he met in 1999 with representatives of VPPA, Vinton, and Jasper to discuss
the potential deal, he was asked if he could work on a contingency basis and,
although he was uncomfortable with a contingency fee instead of an hourly rate, he
left the meeting with the understanding that one-third of whatever benefit the deal
produced would be his contingency fee and that each of the participating cities would
pay a share of that fee.
8
Bruce Halstead3 and R.C. Horn4, two former members of the SRMPA Board
of Directors, testified that Gillis presented the Nisco Deal to the SRMPA Board in
an executive session on January 26, 1999, but the SRMPA Board did not choose to
participate in the Nisco Deal. An email dated March 20, 2001, from Gillis to the
SRMPA Board President was also admitted into evidence. Bruce Halstead, who
served as an SRMPA Board member starting in the summer of 1998 and who was
elected as the SRMPA Board President in August of 1999, testified that the email
3
According to the appellate record, in 1998, Halstead was elected as the
Mayor of Liberty, Texas, and when he ran for that position, he ran “on the issue of
electricity.” As one of the three member cities that organized SRMPA, the City of
Liberty had the right to appoint two Board members to the SRMPA Board. The City
of Livingston had appointed its Mayor at the time, Ben Ogletree, and its City
Manager, Sam Gordon. The City of Jasper had appointed its Mayor, R.C. Horn, and
another individual, H.C. Dickerson, a City of Jasper council member, to the SRMPA
Board. The City of Liberty then appointed Halstead, its Mayor, and Norman Dykes,
its City Manager. In August of 1999, Halstead was elected by the SRMPA Board to
serve as President of the SRMPA Board of Directors.
4
R.C. Horn was formerly the Mayor of Jasper, and he served on the SRMPA
Board of Directors as the representative for the City of Jasper. Horn also served as
the Secretary of the SRMPA Board in 1999. Horn identified Exhibit 66 as the
minutes from the January 26, 1999 SRMPA Board meeting. Horn’s name appears
on the minutes as Secretary. Horn testified that he recalled that Gillis made a
presentation to the SRMPA Board in executive session on January 26, 1999, and that
the presentation involved a proposal for SRMPA coming together with VPPA to
supply power to some plants in Louisiana. According to Horn, SRMPA turned it
down because they did not have all the information they needed. Horn also recalled
that Gillis told the SRMPA Board that the proposal would be a good opportunity for
SRMPA and the power association if they would take part in it.
9
from Gillis was sent to him shortly before the SRMPA Board meeting on March 27,
2001, and the email discussed SRMPA’s earlier refusal of the Nisco Deal.
Halstead testified that during an SRMPA Board meeting in 2001 a Board
member brought up a news article that discussed Jasper selling wholesale power
outside of the SRMPA, and the Board member inquired as to the legality because of
Jasper’s previous connection with SRMPA. According to Halstead, the Board
member requested an amendment to the agenda for the March 27, 2001 meeting so
the Board could discuss the news article. Halstead testified that the minutes for the
meeting reflect that he quoted Gillis and he explained to the Board that the contract
in question was a wholesale activity independent of SRMPA with customers outside
of Jasper. The minutes from the March 27, 2001 SRMPA Board meeting that were
admitted into evidence provided the following:
Sam Gordon addressed the Board regarding a story he became aware
of in the news media in which the City of Jasper entered into a contract
with Entergy for the purpose of wholesaling power. Mr. Gordon stated
that he desired more information on this matter in light of the fact that
the member cities of the SRMPA are required to buy all their power
requirements from the Agency. Bruce Halstead quoted the Agency’s
general counsel as saying that the contract in question is a wholesaling
activity independent of the Agency with customers outside of Jasper.
Additional discussion indicated that participant cities’ contracts with
the Agency require them to buy all power requirements for their
respective “captive” load from the Agency but that the contracts did not
prohibit independent wholesale activities.
10
The contracts for the Nisco Deal had a term through April 30, 2008. Gillis testified
that the monthly profit to the participants in the Nisco Deal was around $30,000 in
2001 and 2002, and that profit was split among Jasper, Obain, and VPPA. According
to Gillis, due to the market driven nature of the Nisco Deal and gas prices, in 2003
there was no profit. Gillis explained that there had not been a minimum payment
established and that in 2004 he called Hurstell to negotiate a guaranteed minimum
payment. Ultimately, the minimum payment was negotiated to be a million dollars
annually, which was divided equally among VPPA, Obain, and Jasper on a monthly
basis.
Marilyn Sutton testified that in 1985 she was appointed City Secretary and
Financial Officer for the City of Livingston, and that in 2005, she was appointed
City Manager and Financial Officer for the City of Livingston. Sutton explained that
she attended the SRMPA Board meeting on January 26, 1999. She testified that she
had no memory of Gillis presenting anything about the Nisco Deal to the Board at
that meeting or at any other time and that her notes from the meetings during that
time frame do not reflect that Gillis presented the Nisco Deal to the Board. She
recalled Gillis leading the discussion at the January 26, 1999 executive session in
regards to the Board’s best course of action because of Senate Bill 7’s deregulation
legislation, which was the main issue before the SRMPA Board at that time.
11
According to Sutton, she also attended a Board meeting in 2001 when Board member
Gordon asked a question about Jasper buying power from Entergy to sell to VPPA.
Sutton testified that Gordon had seen an article in the “Jasper Newsboy” wherein the
City Council had discussed a wholesale power agreement Jasper had, and Gordon
asked that it be placed on the agenda for discussion at the next Board meeting.
According to Sutton, Gillis was not at the meeting and Bruce Halstead, who was
president of the SRMPA Board at the time, explained that he had talked to general
counsel and that the City of Jasper “was well within their limits” in entering into a
confidential wholesale power agreement outside the scope of SRMPA and that
SRMPA was not to know about it.
Ben Ogletree testified that he was appointed to the SRMPA Board in 1985
and was a Board representative and Mayor for the City of Livingston. He testified
he served on the SRMPA Board from 1985 to 1991, and then again from 1996 until
late 2011 or early 2012. Ogletree explained that, within a year of being appointed to
the SRMPA Board, he met Gillis in Gillis’s capacity as general counsel for SRMPA.
According to Ogletree, he remembered a discussion during a 2001 Board meeting
when Board member Sam Gordon raised an issue about how Jasper was buying
power outside of the SRMPA arrangement, but Ogletree did not recall at any time
Gillis presenting to the Board the Nisco Deal or a proposal for SRMPA to buy power
12
from Entergy and sell it to VPPA for its use in serving the IP loads near Lake
Charles. Ogletree testified that Halstead, after talking to Gillis, explained to the
Board that it was permissible for Jasper to buy power outside the SRMPA
agreement, but that no details could be disclosed due to confidentiality agreements.
According to Ogletree he was not aware that the arrangement inquired about by
Gordon in 2001 was called the “Nisco Deal” until the discussion and contract
negotiations for the Cambridge Project, and it concerned him that he could never get
details about the arrangement.
David Riggins testified by video deposition regarding his tenure as a Board
member of Vinton Public Power Authority (VPPA). From 1997 to 2001, as a Vinton
city councilmember, Riggins served on the VPPA Board. From 2001 to 2006, as
Mayor of Vinton, he continued to serve on the VPPA Board. He testified that it was
his understanding that initially SRMPA was first approached to be part of the power
project with VPPA, but according to VPPA representatives that attended the meeting
“sometime” in January of 1999, SRMPA “did not see the value in it and refused at
that time because they didn’t see that there was enough sufficient profit to participate
in it.” After that, VPPA decided to work with the City of Jasper to try and put the
transaction together. From the onset, Riggins understood that Gillis would be
compensated one-third of the profit. According to Riggins, SRMPA did not feel the
13
chances of success were “sufficient, but Jasper was willing to participate and that
the chances, based off of what Entergy had first said, was somewhere below 50
percent.” Riggins recalled that the project started off well but then there was a time
it was “mothballed” because another VPPA member, Donny Dupre,5 had a problem
with Gillis’s receipt of development fees. Later, after Riggins became Mayor of
Vinton in 2001, he reached out to Gillis and asked if they could move forward with
the project and get the Nisco Deal back on track. According to Riggins, eventually
the Nisco Deal was back on track and was profitable for Vinton. Riggins agreed that
he had described his understanding of Obain Associates Limited as being Gillis’s
“business development entity distinct from [Gillis’s’] lawyering[.]” Riggins also
agreed he had no first-hand knowledge of the basis for Dupre telling him SRMPA
had declined to move forward on the Nisco Deal, but he recalled that he interpreted
from what Dupre conveyed to him that it was because SRMPA “didn’t feel it was
profitable enough to move forward.” At trial, counsel for SRMPA asked Riggins
about Exhibit 249, which Riggins testified appeared to be a communication from
Dupre to Gillis, dated sometime on or after April 20, 2000, and it appeared to be in
response to Gillis’s April 20, 2000 email to Dupre. Riggins testified he did not recall
ever seeing the document prior to trial. Riggins agreed that in the communication
5
According to Riggins, Dupre is deceased.
14
Dupre purportedly states (1) he wants Vinton’s share of the profits to be equal to the
three Texas cities that make up SRMPA, (2) that Dupre states “[t]he last figure you
told me [for the deal] was about 24 million for Vinton’s part[,]” and (3) that Dupre
states in the communication that VPPA should fire its lawyers. Riggins maintained
that he did not know what was going on between Gillis and Dupre back in April of
2000 “other than [what] Mr. Dupre report[ed] back to us.”
Evidence Regarding the Cambridge Project
Paul Wellenius, SRMPA’s expert on the electrical power business and
electrical transactions, testified that as the Cambridge Project was being discussed
and developed, the Nisco Deal was extended to allow for the development of the
Cambridge Project as a replacement concept. As the Nisco Deal’s ending term
approached, the Cambridge Project became operational in December 2011. Gillis
testified that he created the Cambridge Project as an expansion of the Nisco Deal
and that the Cambridge Project would “wrap around” or “encapsulate” the Nisco
Deal. Gillis explained that Jasper and Vinton had already benefitted from the Nisco
Deal but he wanted to bring SRMPA into the Cambridge Project so that he could get
Livingston and Liberty “out of the well they had gotten into not through their own
fault[,]” and also so Livingston and Liberty could “share the wealth.” According to
15
Gillis, the four cities had always worked well together and “together they were a
formidable block.”
Bruce Halstead testified that Gillis contacted him around 2008 or 2009, with
an idea that Gillis thought of when Gillis was either a “guest lecturer” or “teaching
a course” at the University of Cambridge.6 Halstead also testified that Gillis brought
the idea of the Cambridge Project to SRMPA. Halstead testified that he understood
that Gillis would be getting compensation for his services in Nisco, and he
understood that Gillis’s compensation in the Cambridge Project was in the form of
a “reassignment fee.” According to Halstead, he was told that Gillis would be paid
a fee, but Gillis never discussed that Gillis was being paid part of the $3 million.
Halstead testified that he recalled the “reassignment fee” being part of the modeling
that SRMPA received from their consulting engineer, Doug Phethean, on the
Cambridge Project. Halstead agreed that SRMPA also had a financial adviser and
other consultants such as Fulbright & Jaworski7 and Finken who worked for SRMPA
6
Gillis testified that he was a “visiting fellow” at the University of Cambridge
for two years while he also worked on a book that was published.
7
According to Halstead, SRMPA had to stay in contact with the Texas Public
Utilities Commission and they made trips to Washington, D.C. for meetings and
discussions regarding federal hydropower issues and other federal regulation, as well
as had bond refunding going on at the time. Gillis went with them on the trips as
SRMPA’s “general counsel.” SRMPA also had a lobbyist, and Fulbright & Jaworski
was its bond counsel and tax counsel. Halstead testified that SRMPA had to have
16
on the Cambridge Project. Halstead testified that the modeling for the Cambridge
Project showed the “bottom line to [SRMPA]” would be profitable.
Q. Was this Cambridge Project, was this something that you wanted to
see done as president of SRMPA?
A. When we were provided the modeling and the forecasting, most
definitely wanted to move ahead with the project. The bottom line to
the Agency was estimated on a monthly basis revenues anywhere from
400 to $450,000 a month; and because of the Cambridge concept and
what would have to be in place, we would have to enter into a
Supplemental Requirements Power Supply Agreement or an S-RPSA.
Our RPSA would end in 2021. This deal would extend that delivered
power through 2035.
Q. And was that a benefit to SRMPA?
A. Huge benefit. Look at the -- if they met the modeling -- and it was a
conservative model -- if we met the model, [$]400,000 a month for 12
months through 2035 is a significant amount of money. That money
coming through the Agency would then be distributed to the member
cities. I wasn't mayor at the time and I was still on the board, but being
a citizen of Liberty, I would want Liberty’s share of those revenues to
come back to the city for lowering rates, stabilizing rates, infrastructure,
and things of that nature.
Halstead was aware that there would need to be concessions from Jasper and VPPA
and he was also made aware of the Jasper/VPPA Settlement Trust.
the Fulbright & Jaworski attorneys review the Cambridge Deal to make sure there
was no negative impact on the SRMPA bonds or bond rating, but he was not sure if
they also reviewed it for tax consequences. He testified that the Fulbright & Jaworski
attorneys did review the Cambridge contracts for SRMPA.
17
Q. Did you know at the time the Cambridge Project was being
developed what concessions would be needed to deal with whatever
Jasper and VPPA’s interests may have been from back earlier?
A. Other than those line items that were delineated in the modeling, the
reassignment fee, and then also us, as Sam Rayburn, trying to realize
the value of the asset of the headroom moving forward.
....
Q. That’s the extent of your awareness of whatever it was that was the
need to be addressed with respect to back when in terms of Jasper and
VPPA; right?
A. I believe closer to the signing of the Cambridge Deal that I was --
signed off on a document dealing with the Jasper/VPPA Settlement
Trust and how that was to operate within Cambridge.
Halstead stated that during the time Gillis represented SRMPA he knew that
Gillis also represented VPPA. Halstead agreed that after the Cambridge Project
documents were signed, SRMPA decided to terminate Gillis as its general counsel.
Q. Now, how long after SRMPA signed the documents to enter into the
Cambridge Project did it let Mr. Gillis go?
A. Cambridge Deal began December 2011; and Mr. Gillis was
discharged midway through 2012, I believe.
....
Q. Why did the SRMPA board terminate Mr. Gillis?
A. Personalities on the board. I don’t believe, though, there were any
bases logically for his termination given the length of service and what
he had done. And I was a staunch supporter of his and actually voted to
18
retain him, and I thought it was a matter of some of the board members’
personalities getting in the way.
Q. But those personalities did not get in the way until after they signed
the Cambridge documents; correct?
A. It arose at a later date, yes, ma’am.
Gillis testified that he initially presented the idea of bringing SRMPA into the
Cambridge Project to VPPA to persuade VPPA to invite SRMPA into the deal even
though SRMPA was not a necessary party. According to Gillis, after VPPA accepted
the idea, he contacted Halstead with SRMPA and explained that with the Cambridge
Project, the value of the Nisco Deal would continue, and the fee Gillis was receiving
from the Nisco Deal would also continue. According to Gillis, the reassignment fee
was capped at $3 million and it was to be retained by the Trust out of the VPPA
retail rate revenues and would then be paid one-third to VPPA, one-third to Jasper
for forgoing the Nisco Deal that was profitable for Jasper, and the remaining one-
third to Gillis as his fee. Gillis explained that the Nisco Deal still exists through
suspension agreements that continue into 2036.
Sutton testified that she knew that Jasper and Vinton received money from the
Cambridge Project. However, she did not become aware until around the time of the
filing of the lawsuit that Gillis’s company, Obain, received part of the reassignment
fee paid in connection with the Cambridge Project.
19
Edward Mintz testified that he practiced law full-time until he was hired in
2012 by SRMPA as its executive director, a position he still held at the time of trial.
According to Mintz, from 1999 until Gillis’s tenure as counsel for SRMPA ended in
2012, SRMPA looked to Gillis to give legal advice as general counsel, to generate
business opportunities and broker deals for SRMPA, and to represent SRMPA
before the regulatory agencies. Mintz testified that SRMPA regularly paid Gillis’s
hourly rate-based fees and paid the invoices from the Gillis Firm for Gillis’s work
on the Cambridge Project. Mintz explained that the contracts for the Cambridge
Project run through the year 2036, and SRMPA will continue benefitting from the
Cambridge Project.
According to Mintz, SRMPA agreed to pay the $3 million a year reassignment
fee through 2036 to the Trust, but Mintz testified that Gillis led him to believe that
the only beneficiaries of the Trust were the City of Jasper and VPPA, who were
being paid for giving up the Nisco Deal. Mintz agreed that Gillis never informed
SRMPA that Gillis and Gillis’s wife (through Obain) were receiving one-third of the
fee from the Trust. Mintz testified that after Gillis’s representation of SRMPA ended
in June of 2012, Mintz discovered that a portion of the amount being paid by the
Trust to Obain was then going to Gillis. According to Mintz, the Cambridge Project
has been the most profitable project in the history of SRMPA and, in the four-and-
20
a-half years prior to the trial, SRMPA had profits of approximately $70 million as a
result of its involvement in the Cambridge Project.
The Trial Court’s Judgment
The trial court entered a final judgment based upon the verdict of the jury and
after considering post-trial motions from the parties. In the final judgment the trial
court (1) awarded SRMPA no damages from Defendants as to the Nisco Deal
because the jury found that SRMPA should have discovered Gillis’s breach of
fiduciary duty in connection with the Nisco Deal by March 27, 2001, and therefore
the statute of limitations had run; (2) found Gillis violated his fiduciary duty to
SRMPA and awarded $1,799,059 in past damages, plus post-judgment interest, to
SRMPA from Gillis and Obain in connection with the Cambridge Project; (3) denied
SRMPA’s claims against Gillis, Borchardt & Barthel LLP and rendered a take-
nothing judgment as to those claims; (4) denied SRMPA’s claims relating to the
upgrade of the Entergy transmission system and rendered a take-nothing judgment
as to those claims; (5) denied SRMPA’s claim for exemplary damages against Gillis
and rendered a take-nothing judgment as to that claim; (6) denied SRMPA’s claims
for equitable relief against Defendants and rendered a take-nothing judgment in
favor of Defendants as to those claims; and (7) denied SRMPA’s claims against the
Trust and rendered a take-nothing judgment as to those claims. As to the Trust’s
21
bifurcated indemnity counterclaim, the trial court denied the Trust’s indemnification
claim but ordered SRMPA to pay all costs of court incurred by the Trust in the
matter.
Appellate Issues
SRMPA presents five issues on appeal. In its first issue, SRMPA argues that
the trial court erred in denying SRMPA’s claims for equitable relief because Gillis
“breached his fiduciary duty regarding both the Nisco Deal and the Cambridge
Project,” and that the trial court should have required Gillis to “disgorge the monies
he has already received from the Nisco Deal and the Cambridge Project” and should
have imposed a constructive trust on the funds Gillis is scheduled to continue
receiving under the Cambridge Project. In issue two, SRMPA argues that, as to the
Nisco Deal, the trial court erred in failing to disregard the jury’s answer on
limitations as immaterial and that, as a matter of law, SRMPA should recover the $5
million in damages that the jury found SRMPA suffered from Gillis’s breach of
fiduciary duty because the award is not barred by limitations. In its third issue,
SRMPA challenges the amount of the jury’s award relating to Gillis’s breach of
fiduciary duty in connection with the Cambridge Project. SRMPA alleges that
“[b]ased on the conclusive, undisputed evidence, the amount awarded as past
damages to SRMPA should now be rendered in the total amount of $4,350,074.90.”
22
In its fourth issue, SRMPA asserts that the Gillis Firm should be jointly and severally
liable with Gillis (and Obain as his alter ego) for the full damages awarded on the
basis of respondeat superior. In issue five, SRMPA argues the trial court erred in
failing to enjoin Gillis and the Gillis Firm from representing the Trust adversely to
SRMPA on matters related to Gillis’s past representation of SRMPA.
Cross-Appellants Gillis and Obain ask this Court to find there was no evidence
or legally insufficient evidence to support submission of certain jury questions, and
that the trial court should have granted Gillis’s and Obain’s motion for directed
verdict or motion for judgment notwithstanding the verdict. According to Cross-
Appellants Gillis and Obain, Gillis owed no fiduciary duty to SRMPA in the Nisco
Deal because SRMPA chose not to participate in the Nisco Deal. Obain and Gillis
also contend that as to the Cambridge Project, SRMPA had knowledge of Gillis’s
fee in the Cambridge Project, and SRMPA’s damages are foreclosed because it
signed the Cambridge Project documents with knowledge that Gillis, through Obain,
would receive a fee from Jasper and VPPA, and after obtaining such knowledge,
SRMPA continued to accept the benefits of the Cambridge Project so they should
be estopped from any recovery.
On cross appeal, the Trust argues that it is entitled to entry of judgment against
SRMPA on the Trust’s indemnity counterclaim because “the unambiguous language
23
of the parties’ agreement provides that [SRMPA] shall hold the Trust harmless from
the exact claims brought against it below.”
Analysis
Denial of Equitable Relief
In SRMPA’s first issue, it argues the trial court should have granted equitable
remedies “to prevent the lawyer defendant and his alter ego from benefit[t]ing
personally, and retaining ill-gotten gains, from their breaches of fiduciary duty and
self-dealing, by keeping $1 million per year for the next twenty years.” SMRPA
specifically argues that the equitable remedies of disgorgement and constructive
trust are necessary here, regardless of whether SRMPA suffered or benefitted from
Gillis’s alleged self-dealing.
We review a trial court’s decision granting or denying equitable relief for an
abuse of discretion. See Wagner & Brown, Ltd. v. Sheppard, 282 S.W.3d 419, 428-
29 (Tex. 2008). A trial court must balance the equities involved in a case seeking
equitable relief. See In re Gamble, 71 S.W.3d 313, 317 (Tex. 2002) (orig.
proceeding). We will not disturb a trial court’s ruling on a claim seeking equitable
relief unless it is arbitrary, unreasonable, and unsupported by guiding rules and
principles. See Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004); Downer v.
Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985).
24
A jury does not determine the expediency, necessity, or propriety of equitable
relief such as disgorgement or constructive trust. See Burrow v. Arce, 997 S.W.2d
229, 245 (Tex. 1999). Whether “a constructive trust should be imposed must be
determined by a court based on the equity of the circumstances.” Id. The scope and
application of equitable relief such as a constructive trust “‘within some limitations,
is generally left to the discretion of the court imposing’ it.” Baker Botts, L.L.P. v.
Cailloux, 224 S.W.3d 723, 736 (Tex. App.—San Antonio 2007, pet. denied)
(quoting Wheeler v. Blacklands Product. Credit Ass’n, 627 S.W.2d 846, 849 (Tex.
App.—Fort Worth 1982, no writ)).
At the hearing on SRMPA’s Motion to Modify, Correct or Reform Final
Judgment,8 the trial court stated the following:
[F]or the record, I have literally reviewed this trial back and
forth, over and over again, looked at various documents when I thought
I needed help to do so, because I still have all that stuff from the
summary judgment. And not -- so that it’s clear, I did not include
anything that wasn’t testified about in the trial.
Because I do think that it is the Court’s duty to look closely --
and I want to point out very simply that [Plaintiff’s counsel] made a
statement in a previous argument when we signed the original judgment
back in August, I believe it was, that the jury got this wrong on certain
issues. And, so, I wanted to, in my mind, see if I thought that was true,
looking at it from an equitable situation, not from necessarily the
answers to the questions.
8
We review the denial of a motion to modify, correct, or reform a judgment
for an abuse of discretion. See Wagner v. Edlund, 229 S.W.3d 870, 879 (Tex. App.—
Dallas 2007, pet. denied).
25
But in order to do that, I’ve gone back through the Charge; and I
even considered how we put the Charge together. And I will say, for
the record, the Charge was basically the Charge the Court wanted with
the input, obviously, by counsel; and I would think the Charge was,
more or less, what the plaintiff wanted, as well -- objections aside, of
course -- and was geared in a way to get to the point of whether Mr.
Gillis violated a fiduciary duty and, if he did, when did it become
known and so forth with all the questions that we asked. So, in my
overall review, I took the Charge and acted as a juror, as well, to see if
I thought they had gotten it wrong.
And I’ve come to conclusions, and I’ve come to what I think are
going to be my rulings in this case.
....
. . . [I]f I’m going to create a constructive trust, I have to go
forward and find out, one, in my mind, if the jury did get it right or close
enough to right or reasonably right or do I find that, based on [Gillis’s]
conduct, that he should be punished more than the jury indicated? . . .
But what does “equity” mean? It means what is fair. You know,
if someone does a wrong, what is fair? What is their fair treatment? And
we are talking about money here, period. And vice versa, what is the
justice of this case?
So, in reviewing all the facts and in reviewing all the things that
I think I had the duty to do, which I am telling you, whether I’m right
or wrong, I have looked at for hours in this case, I can see where the
jury, without just that one bit of evidence that’s been argued before me
about the profits of [SRMPA], I can see where the jury imposed the
1.79 -- or whatever it was -- million dollars’ damage against Mr. Gillis
because he was in violation of his fiduciary duties by not disclosing he
was getting a fee just on that one basis alone in the -- in the Cambridge
[Project].
However, if I recall, . . .
[Bruce Halstead] got a memo -- and it wasn’t on the date that the
jury found -- but he got a memo from Gillis before that indicating that
this deal was in place and next time I come to you with a wacky
deal . . . I believe he was still the president of [SRMPA] at the time that
they called off the deal and also still the president at the time they
committed to the deal. And he knew he was getting a fee for Nisco,
26
which he knew was a partnership between Jasper and VPPA and
however Entergy was involved in that deal.
But does that knowledge carry over? And would Gillis have had
any damage had he simply said to [SRMPA], “Yes, I’m getting a fee;
and it’s whatever it is. I am getting a fee, and that’s part of the Trust
that I’ve set up. I’m going to get paid for these activities”? I don’t know
that we would even be here at this point in time. I mean, [SRMPA]
would have either gone along with it or not and there would be a
Cambridge [Project] or there wouldn’t[.]
So, . . . I think the jury got it pretty close to right. And I think
they awarded damages for his violation of fiduciary duty up to the date
of this trial, when it was finally known, by virtue of their verdict, and
the Nisco Deal was ruled on fairly, in my mind, legally, as well as
factually.
And, so, I am not going to set up a constructive trust in this case,
and the jury judgment that I signed before is the one that will remain in
place at this time.
The trial court signed an order denying SRMPA’s Motion to Modify, Correct or
Reform.
SRMPA cites to First United Pentecostal Church of Beaumont v. Parker, 514
S.W.3d 214 (Tex. 2017), in support of its argument that the trial court erred in failing
to grant equitable relief. According to SRMPA, Parker “stands in a long line of
precedents that, without regard to whether a fiduciary such as Gillis has caused his
client damage, the fiduciary must not be permitted to benefit from the transactions
affected by his breach of fiduciary duty.”
In Parker, the First United Pentecostal Church of Beaumont sued The Lamb
Law Firm, P.C., Kip Lamb, and Leigh Parker, for theft, embezzlement,
27
misapplication of funds by a fiduciary, breach of fiduciary duty, fraud, legal
malpractice, conspiracy, and “other wrongful conduct[,]” after the law firm spent
over a million dollars that the church had entrusted for safekeeping to the law firm.
514 S.W.3d at 217-18. Parker claimed that he was a contract attorney with the Lamb
Law Firm and that he did not find out about the theft until 2010, but the church
alleged that Parker was associated with or worked for the firm, was part of a joint
venture with Lamb and the firm, that Parker knowingly participated in Lamb’s
breach of fiduciary duty, made intentional misrepresentations to the church to cover
up the fact that the money was gone, and he was jointly and severally liable for the
church’s damages. Id. In his no-evidence motion for summary judgment, Parker
argued that the church had not produced any evidence of causation between his
actions and the church’s damages. Id. at 218. In support of his traditional motion for
summary judgment, Parker attached his affidavit in which he averred he was a
contract attorney for the firm, that he had no knowledge of Lamb’s scheme until the
summer of 2010, and that he did not control or receive any of the church’s money.
Id. He also attached a copy of Lamb’s reply to a criminal presentencing investigation
in which Lamb admitted he used the church’s funds. Id. The trial court granted
Parker’s motion for summary judgment without specifying the reasons and this
Court, in a split decision, affirmed the trial court’s ruling. Id. at 219 (citing 520
28
S.W.3d 53 (Tex. App.—Beaumont 2015)). In appealing this Court’s decision
affirming the granting of summary judgment in favor of Parker, the church argued,
in relevant part, that it did not need to provide evidence of causation in order to
survive summary judgment on its breach of fiduciary duty claim. Id. Parker argued
the church failed to preserve error, and even if error was preserved, evidence of
proximate cause of the church’s damages was necessary to survive summary
judgment and the church did not present such evidence. Id.
The Texas Supreme Court held that this Court erred by determining that
summary judgment for Parker was proper on the breach of fiduciary duty claim but
the church was entitled to proceed with its claim for equitable relief. Id. at 221-22.
In so ruling, the Texas Supreme Court noted that, although Parker argued he did not
profit from his relationship with the church and the church failed to allege a factual
basis for fee forfeiture or disgorgement as to him, he did not address the equitable
remedies in his motion for summary judgment. Id. at 222.
Unlike Parker, the trial court in this case ruled upon the request for equitable
relief after presiding over a jury trial and after considering all of the evidence and
equities. A trial court has broad discretion in balancing the equities involved in a
case seeking equitable relief. See In re Gamble, 71 S.W.3d at 317; Craddock v.
Sunshine Bus Lines, Inc., 133 S.W.2d 124, 126 (1939). In the present case, the record
29
reflects that the trial judge considered whether equitable remedies were fair and just
on the facts, and the trial judge stated that he spent hours reviewing evidence and
pleadings related to that issue before deciding to deny equitable relief. After
reviewing the appellate record and facts in this case, we cannot say the trial court
acted arbitrarily or unreasonably or that the trial court’s decision was unsupported
by guiding rules and principles. According to the record, the trial court weighed the
equities based upon the evidence presented at trial. We conclude the trial court did
not abuse its discretion in denying SRMPA’s request for equitable relief. See
Sheppard, 282 S.W.3d at 428-29; Cire, 134 S.W.3d at 838; Downer, 701 S.W.2d at
241-42. We overrule SRMPA’s first issue.
Limitations Regarding the Nisco Deal
SRMPA argues in its second appellate issue that the trial court erred in
“sustain[ing] the Defendants’ limitations defense and disregard[ing] the jury’s
finding that Gillis’[s] breach of fiduciary duty regarding the Nisco Deal damaged
SRMPA in the amount of $5 million.”
Jury question five asked “Did Gillis fraudulently conceal his breach of
fiduciary duty, in connection with the Nisco Deal, from SRMPA?”9 The jury
9
The question contained a definition for fraudulent concealment, and
provided that
30
answered “yes[.]” Jury question six asked “On what date did SRMPA obtain
sufficient knowledge that would have required a reasonably prudent person to make
inquiry that, if pursued, would lead to discovery of Gillis’[s] breach of fiduciary duty
in connection with the Nisco deal?” The jury answered “March 27, 2001[.]” SRMPA
requested an additional instruction for question six that was refused by the trial court.
The instruction SRMPA requested stated as follows:
In answering this question, you are instructed that, as a fiduciary, an
attorney is obligated to render a full and fair disclosure of facts material
to the client’s representation. Therefore, facts which might ordinarily
require a person to make inquiry may not raise suspicion where a
fiduciary relationship is involved.
According to SRMPA, the evidence conclusively established fraudulent
concealment, and the jury’s answer on the limitations issue is inadequate to override
the finding on fraudulent concealment because the limitations question was
“infirm[]” and “without a proper instruction.” SRMPA also argues that the evidence
did not support the jury’s answer on the “discovery” question if the issue had been
Fraudulent concealment occurs when:
1. the defendant has actual knowledge that he committed a wrong;
2. the defendant concealed the wrong by making a misrepresentation
or by remaining silent when he had a duty to speak;
3. the defendant had a fixed purpose to conceal the wrong; and
4. the plaintiff reasonably relied on the misrepresentation or silence.
31
properly framed and that the jury’s answer to the “discovery” question should be
disregarded as immaterial.
The statute of limitations for a claim of breach of fiduciary duty is four years.
Tex. Civ. Prac. & Rem. Code § 16.004(a)(5) (West 2002). SRMPA contends that
the doctrine of fraudulent concealment tolls limitations “because a person cannot be
permitted to avoid liability for his actions by deceitfully concealing wrongdoing
until limitations has run.” S.V. v. R.V., 933 S.W.2d 1, 6 (Tex. 1996).
A trial court must submit in its charge to the jury all questions, instructions,
and definitions that are raised by the pleadings and the evidence. See Tex. R. Civ. P.
278; Hyundai Motor Co. v. Rodriguez, 995 S.W.2d 661, 663-64 (Tex. 1999); E.I.
DuPont de Nemours & Co. v. Roye, 447 S.W.3d 48, 56 (Tex. App.—Houston [14th
Dist.] 2014, pet. dism’d). The parties have the right to be judged by a jury properly
instructed in the law. Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 388 (Tex.
2000). The goal, therefore, is to submit to the jury the issues for decision logically,
simply, clearly, fairly, correctly, and completely. Roye, 447 S.W.3d at 56. To
achieve this goal, trial courts enjoy broad discretion so long as the charge is legally
correct. Id. We review a trial court’s decision to refuse a particular instruction under
an abuse of discretion. Thota v. Young, 366 S.W.3d 678, 687 (Tex. 2012); Shupe v.
Lingafelter, 192 S.W.3d 577, 579 (Tex. 2006). Explanatory instructions should be
32
submitted when, in the sole discretion of the trial court, they will help the jurors
understand the meaning and effect of the law and the presumptions the law creates.
Pitts v. Sabine River Auth. of Tex., 107 S.W.3d 811, 819 (Tex. App.—Texarkana
2003, pet. denied). The court should not burden the jury with surplus instructions.
Acord v. Gen. Motors Corp., 669 S.W.2d 111, 116 (Tex. 1984). Consequently, every
correct statement of the law does not necessarily belong in the jury charge. Maddox
v. Denka Chem. Corp., 930 S.W.2d 668, 671 (Tex. App.—Houston [1st Dist.] 1996,
no writ). When a trial court refuses to submit a requested instruction, the question
on appeal is whether the request was reasonably necessary to enable the jury to
render a proper verdict. Tex. Workers’ Comp. Ins. Fund v. Mandlbauer, 34 S.W.3d
909, 912 (Tex. 2000). A trial court’s error in refusing an instruction is reversible
only if it “probably caused the rendition of an improper judgment.” Union Pac. R.R.
Co. v. Williams, 85 S.W.3d 162, 166 (Tex. 2002); see also Tex. R. App. P. 44.1(a)
(addressing reversible error in civil cases).
Tendering a proposed jury question or instruction will not suffice to preserve
error when a proper objection has not been made to the question or instruction
submitted. See Kirkpatrick v. Mem’l Hosp. of Garland, 862 S.W.2d 762, 769 (Tex.
App.—Dallas 1993, writ denied); see also Carr v. Weiss, 984 S.W.2d 753, 766 (Tex.
App.—Amarillo 1999, pet. denied); Boorhem-Fields, Inc. v. Burlington N. R.R. Co.,
33
884 S.W.2d 530, 535 (Tex. App.—Texarkana 1994, no writ); Schutz v. S. Union Gas
Co., 617 S.W.2d 299, 302 (Tex. Civ. App.—Tyler 1981, no writ). “A request for
submission is required to preserve the right to complain of a trial court’s failure to
submit a question; whereas, an objection is required to preserve a complaint as to a
defective question.” Hartnett v. Hampton Inns, Inc., 870 S.W.2d 162, 166 (Tex.
App.—San Antonio 1993, writ denied) (citing Tex. R. Civ. P. 274, 278). Appellant
only objected that question six was incomplete, and not that it was improper. And,
Appellant did not explain to the trial court why the requested instruction was
reasonably necessary in order for the jury to render a proper verdict. See Tex. R. Civ.
P. 274.
In Carr, the court explained:
Objections to the charge and requests for submission of issues are not
alternatively permissible methods for complaining of the charge.
Because a request for another charge is not a substitute for an objection,
in the absence of a specific objection to the submitted question and
instruction, the tender of a correct question is not sufficient to preserve
error, even if a defectively worded special instruction is contained in
the court’s proposed charge. Moreover, it is the rule that if a trial court’s
charge fairly and fully presents all controlling questions to the jury, it
is not error to refuse to submit additional issues or instructions which
are mere shades or variations of the questions already submitted.
984 S.W.2d at 766 (citations omitted). Appellant’s objection at trial did not
specifically assert that the question six was improper. See Tex. R. Civ. P. 274; Garza
v. Southland Corp., 836 S.W.2d 214, 218 (Tex. App.—Houston [14th Dist.] 1992,
34
no writ) (“A mere request to submit a different instruction or issue [other] than that
proposed by the court does not sufficiently point out the specific objectionable
matter and will not be considered an ‘objection’ for the purposes of Rule 274.”).
Generally, a request for a different instruction is not a substitute for an objection and
does not preserve error. See Hernandez v. Montgomery Ward & Co., 652 S.W.2d
923, 925 (Tex. 1983), overruled on other grounds by Acord v. Gen. Motors Corp.,
669 S.W.2d 111, 114 (Tex. 1984); but see State Dep’t of Highways & Pub. Transp.,
838 S.W.2d 235, 240-41 (Tex. 1992) (concluding a request can serve as an objection
for preservation purposes if the trial court is made aware of the complaint and issues
a ruling). Appellant’s request for an instruction and the generic “incomplete”
objection was insufficient to preserve the error Appellant asserts on appeal.
Therefore, Appellant waived any complaint regarding the court’s rejection of the
instruction.
Nevertheless, even assuming SRMPA preserved the argument it makes in its
second issue, we cannot say that the trial court abused its discretion in rejecting the
instruction requested by SRMPA. A jury instruction is proper when it assists the
jury, accurately states the law, and is supported by the pleadings and evidence.
McIntyre v. Comm’n for Lawyer Discipline, 247 S.W.3d 434, 446 (Tex. App.—
Dallas 2008, pet. denied). However, “[a]n incorrect jury instruction is grounds for
35
reversal only if it likely caused the rendition of an improper verdict.” Id. at 444
(citing Tex. R. App. P. 44.1(a) and Williams, 85 S.W.3d at 166). When a trial court
denies the request to include an instruction, the question on appeal is whether the
proposed instruction was reasonably necessary to enable the jury to render a proper
verdict. Id. at 446.
SRMPA argues on appeal that it cited to Willis v. Maverick, 760 S.W.2d 642,
645 (Tex. 1988) and Courseview, Inc. v. Phillips Petroleum Co., 312 S.W.2d 197,
205 (Tex. 1957) in the trial court in support of its requested instruction. However,
the cases cited by SRMPA do not support its argument on appeal that the absence of
SRMPA’s requested instruction prevented the jury from “deal[ing] intelligently with
the questions submitted.” We note that included within the instructions on jury
question one, the trial court instructed the jury that in order to prove he complied
with his duty, Gillis “must show— . . . 3. Gillis acted in utmost good faith and
exercised the most scrupulous honesty toward SRMPA; and . . . 5. [that] Gillis fully
and fairly disclosed all important information to SRMPA concerning the
transactions.” We further note that the party that is seeking to avoid limitations
has the burden to plead, prove, and obtain favorable jury findings on the issue
of discovery as a matter of avoidance of limitations. Woods v. William M. Mercer,
Inc., 769 S.W.2d 515, 518 (Tex. 1988).
36
The Texas Supreme Court has recognized two doctrines that may apply
to extend the running of a statute of limitations: fraudulent concealment and
the discovery rule. Shell Oil Co. v. Ross, 356 S.W.3d 924, 927-30 (Tex. 2011).
Fraudulent concealment is a fact-specific equitable doctrine that may toll the
statute of limitations until the fraud is discovered or could have been
discovered with reasonable diligence. Id. at 927; Borderlon v. Peck, 661 S.W.2d
907, 909 (Tex. 1983). The discovery rule is a limited exception, and it may also
defer the accrual date of a cause of action until an injury “was or could have
reasonably been discovered.” Ross, 356 S.W.3d at 929-30. The concepts require
the injured party to exercise “reasonable diligence” or act “reasonably” with
respect to the discovery of the alleged wrongdoing. Id. at 927-30.
We cannot say that the trial court abused its discretion in refusing to submit
the instruction requested by SRMPA. The trial court correctly noted that jury
question six asked the jury to find the date on which SRMPA obtained sufficient
knowledge that would have required a reasonable and prudent person to make an
inquiry that, if pursued, would have lead SRMPA to discover Gillis’s breach of
fiduciary duty in connection with the Nisco Deal. We conclude that the additional
instruction proposed by SRMPA was not “reasonably necessary to enable the jury
to render a proper verdict.” See Mandlbauer, 34 S.W.3d at 912. Accordingly, the
37
trial court did not abuse its discretion when it refused to submit the instruction to the
jury. Furthermore, we cannot say that the trial court’s refusal of the requested
instruction probably caused the rendition of an improper judgment. Dew, 208
S.W.3d at 456; see also Tex. R. App. P. 44.1(a). Therefore, the alleged error, if any,
was harmless.
Because we have already determined (1) that the trial court did not abuse its
discretion in refusing to submit the requested instruction and (2) the trial court did
not abuse its discretion in denying SRMPA equitable relief, we need not address
SRMPA’s argument that the jury’s “limitations” answer to jury question 6 should be
disregarded because Gillis’s limitations defense has no application to an equitable
claim or that the limitations finding is immaterial “in an equitable context.” We
overrule SRMPA’s second issue.
Damages Awarded Relating to the Cambridge Project
In issue three, SRMPA argues that there is “conclusive evidence” in the record
of the actual amounts the Trust distributed to Obain from the Cambridge Project
prior to trial, “but the trial court failed to use that evidence to award an accurate
amount of SRMPA’s past damages regarding the Cambridge Project.” According to
SRMPA, the jury awarded SRMPA $1,799,059 in damages regarding the Cambridge
Project, which was the exact amount presented in an exhibit by SRMPA’s damage
38
expert as “Cambridge Deal (Past [Damages])” attributable to “Gillis (Obain
Associates Limited)[.]” SRMPA contends, however, that the expert clarified in his
testimony at trial that the figure in his exhibit only represented past damages through
2013 and it did not include damages from 2013 to 2016 (the date of the trial) and
that the expert included the damages amount from 2014 and up until trial in his
calculations for the “Cambridge Deal (Future [Damages])” attributable to “Gillis
(Obain Associates Limited)” on an exhibit. According to SRMPA, the jury
“apparently us[ed] the chart” and “overlook[ed] the undisputed testimony” and other
exhibits establishing that an additional $2,551,015 should have been included with
the $1,799,059 awarded to arrive at the “full” and “correct amount” of past damages
against Gillis and Obain.
Under Texas law, “whether to award damages and how much is uniquely
within the factfinder’s discretion.” Golden Eagle Archery, Inc. v. Jackson, 116
S.W.3d 757, 772 (Tex. 2003). The evidence need not correspond to the precise
amount found by the jury. See Pleasant v. Bradford, 260 S.W.3d 546, 559 (Tex.
App.—Austin 2008, pet. denied). A jury is “not tied to awarding damages exactly as
requested by the injured party[,]” and it does not have to rely solely on an expert’s
opinion in calculating damages. Bayer Corp. v. DX Terminals, Ltd., 214 S.W.3d 586,
606 (Tex. App.—Houston [14th Dist.] 2006, pet. denied); see also Main Bank &
39
Trust v. York, 498 S.W.2d 953, 957 (Tex. App.—San Antonio 1973, writ ref’d n.r.e.)
(a jury may disbelieve an expert and “the factfinder is not cut off from exercising
considerable personal judgment about how far such opinions are to be relied on[]”).
When the evidence at the trial supports a range of damages, “an award within that
range is an appropriate exercise of the jury’s discretion, and a reviewing court is not
permitted to speculate on how the jury actually arrived at its award.” Drury Sw., Inc.
v. Louie Ledeaux #1, Inc., 350 S.W.3d 287, 292 (Tex. App.—San Antonio 2011, pet.
denied). The jury could have disbelieved the expert testimony regarding the future
damages. In fact, the jury awarded SRMPA nothing for future damages. However,
SRMPA does not complain on appeal about the jury’s decision not to award SRMPA
any future damages in relation to the Cambridge Project. We conclude that the
evidence is sufficient to support the jury’s award and we may not substitute our
judgment for that of the factfinder. See City of Keller v. Wilson, 168 S.W.3d 802,
822 (Tex. 2005) (appellate court may not substitute its judgment for that of the
factfinder so long as the evidence falls within the zone of reasonable disagreement).
We overrule SRMPA’s third issue.
Respondeat Superior
In SRMPA’s fourth issue it argues the Gillis Firm should be jointly and
severally liable with Gillis (and Obain as his alter ego) for the full damages awarded
40
to SRMPA on the basis of respondeat superior. According to SRMPA, the trial court
erred in limiting the liability of damages to Gillis and Obain and in not also imposing
that liability on the Gillis Firm.
On appeal, the Gillis Defendants argue that SRMPA presented this argument
for the first time on appeal. The Gillis Defendants further argue that SRMPA did not
plead respondeat superior against the Gillis Firm and that SRMPA did not submit a
respondeat superior question to the jury. In their Reply Brief, SRMPA argues that it
presented the argument to the trial court in its post-verdict Motion to Modify, Correct
or Reform Final Judgment, when SRMPA made the statement in one sentence in its
post-verdict Reply Brief that “‘all of the foregoing amounts of damages should be
awarded against Gillis, Borchardt & Barthel LLP on the basis of
vicarious/respondeat superior liability.’”
SRMPA does not cite to any other pleading or part of the appellate record to
support its contention that the trial court was made aware of its argument regarding
respondeat superior. In its Motion to Modify, Correct or Reform Final Judgment,
although SRMPA asked the trial court to award the damages against the Gillis law
Firm, Gillis, and Obain on the basis of “vicarious/respondeat superior liability[,]”
SRMPA did not provide any legal authority to the trial court to support its argument.
SRMPA bore the burden of proof on this issue. See 20801, Inc. v. Parker, 249
41
S.W.3d 392, 397 n.6 (Tex. 2008) (plaintiff pleading respondeat superior bears the
burden of proof). Furthermore, SRMPA does not cite to any other place in the record
where it pleaded, proved, or secured a finding in support of its vicarious liability
claim against the Gillis Firm. Accordingly, we cannot say that the trial court abused
its discretion in refusing to modify the final judgment on this issue. See Wagner v.
Edlund, 229 S.W.3d 870, 879 (Tex. App.—Dallas 2007, pet. denied) (appellate court
reviews the denial of a motion to modify, correct, or reform a judgment for an abuse
of discretion). Therefore, we overrule issue four.
SRMPA’s Request for a Permanent Injunction Against Gillis and the Gillis Firm
In issue five, SRMPA argues that Gillis and the Gillis Firm should be
permanently enjoined from representing VPPA because after SRMPA discharged
Gillis and the Gillis Firm in 2012 he continued to represent VPPA “against
SRMPA’s interests on the same subject matter on which he had previously
represented SRMPA.” According to SRMPA, “[t]his is the only appropriate relief
possible when a fiduciary violates his position of trust.” SRMPA includes no
citations to the appellate record on this issue. SRMPA did not secure a ruling on any
request as to this “remedy[,]” and there was no jury question presented on this issue.
As such, SRMPA has not preserved this issue for appeal, and there is nothing for
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this Court to review.10 See Tex. R. App. P. 33.1; 38.1(i). We overrule SRMPA’s fifth
issue.
Cross-Appeal by Gillis and Obain Regarding Sufficiency of the Evidence to Support
Submission of Certain Jury Questions and Denial of Motion for Directed
Verdict/Motion for Judgment JNOV
In their cross appeal, Gillis and Obain argue that Gillis is entitled to judgment
on all issues regarding the Nisco Deal because SRMPA did not submit evidence or
provide legally sufficient evidence that SRMPA ever engaged Gillis to pursue the
Nisco Deal; that SRMPA failed to submit evidence or present legally sufficient
evidence that the Nisco Deal was a business opportunity that SRMPA would have
actually pursued, agreed upon, and implemented; that SRMPA failed to establish
that Gillis concealed his relationship with Obain when the Cambridge Project
agreements were being negotiated and executed; and that SRMPA failed to establish
that it suffered actual damages or that Gillis’s alleged concealment profited Gillis to
the detriment of SRMPA. Gillis and Obain contend that SRMPA’s request for a
10
We also note that the only authority SRMPA cites in support of this
argument is Intermarque Automotive Products, Inc. v. Feldman, 21 S.W.3d 544, 553
(Tex. App.—Texarkana 2000, no pet.). Feldman does not address the propriety of
the grant of a permanent injunction against an attorney from representing another
client. In Feldman, the court of appeals merely included a footnote wherein it
generally discusses the remedy of fee forfeiture and references Burrow v. Arce, 997
S.W.2d 299 (Tex. 1999). See Feldman, 21 S.W.3d at 553 n.17 (quoting Burrow, 997
S.W.2d at 544).
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constructive trust asks this Court to circumvent the Texas Utilities Code. Gillis and
Obain assert that they are not asking this Court to reverse the jury’s findings, but are
asking this Court to hold that (1) there was no evidence or only legally insufficient
evidence to support submission of certain jury questions, and (2) the trial court
should have granted Gillis’s and Obain’s motion for directed verdict or motion for
judgment notwithstanding the verdict.
We first address Gillis’s and Obain’s argument that the trial court erred in
denying its motion for directed verdict on Gillis’s and Obain’s ratification defense.
Gillis and Obain argued in their motion for directed verdict and in their cross appeal
that SRMPA has ratified Gillis’s and Obain’s alleged wrongful receipt of the fee
because SRMPA continues to participate in the Cambridge Project and retain its
benefits. In denying the motion for directed verdict on ratification, the trial court
stated the following:
So, ratification, another interesting issue; but in reading the language
put forth in the Charge submitted, proposed charge and instructions
submitted, it practically calls for a jury nullification of some of the other
issues in this. I don’t think a party is, because they continue into a
lucrative contract, can’t carve out an alleged wrongdoing rather than
just saying, okay, everybody’s done at the expense and cost of people
that aren’t even parties to this lawsuit. So, although I find that an
interesting issue, as well, I’m going to deny your Motion on ratification.
We review a trial court’s decision on a motion for directed verdict under the
same standard of review as a legal sufficiency, or no-evidence, challenge. See
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City of Keller, 168 S.W.3d at 823; Haynes & Boone, L.L.P. v. Chason, 81 S.W.3d
307, 309 (Tex. App.—Tyler 2001, pet. denied) (“An appeal from the denial of a
motion for directed verdict is . . . a challenge to the legal sufficiency of the
evidence.”). “[A] directed verdict is proper only if the evidence conclusively
establishes the movant’s right to judgment, negates the opponent’s right to judgment,
or is insufficient to raise a fact issue on a vital fact.” In re Estate of Longron, 211
S.W.3d 434, 438 (Tex. App.—Beaumont 2006, pet. denied) (citing Prudential Ins.
Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000)).
Because ratification is an affirmative defense, the party raising the issue bears
the burden to offer proof on each of the elements of the defense: (1) approval by act,
word, or conduct; (2) with full knowledge of the facts of the earlier act; and (3) with
the intention of giving validity to the earlier act. Motel Enters., Inc. v. Nobani, 784
S.W.2d 545, 547 (Tex. App.—Houston [1st Dist.] 1990, no pet.). Even assuming
without deciding that a ratification defense applies in this context, Gillis and Obain
failed to cite the trial court to evidence that would support each of the elements of a
ratification defense, and we agree with the trial court that granting the directed
verdict on ratification could potentially nullify other jury answers. We overrule
Gillis’s and Obain’s cross appeal regarding ratification. Because we have already
overruled SRMPA’s issues regarding equitable relief, limitations and damages,
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Gillis’s and Obain’s other issues on cross appeal are moot. Therefore, we overrule
all of Gillis’s and Obain’s issues on cross appeal.
The Trust’s Indemnity Counterclaim
In its cross appeal, the Trust asserts that it does not challenge the portion of
the judgment that SRMPA take nothing against the Trust but the Trust argues that it
is entitled to entry of judgment against SRMPA on the Trust’s indemnity
counterclaim because “the unambiguous language of the parties’ agreement provides
that [SRMPA] shall hold the Trust harmless from the exact claims brought against
it below.” The Trust filed a proposed final judgment that included the following in
relevant part:
VII.
It is therefore, ORDERED that FINAL JUDGMENT is hereby
rendered in this matter:
....
AS TO DEFENDANT THE TRUST’S INDEMNITY CLAIM:
(8) Defendant The Jasper/VPPA Settlement Trust shall have
and recover actual damages from Plaintiff Sam Rayburn Municipal
Power Agency in the amount of $391,519.91, as the Trust’s reasonable
and necessary fees and expenses incurred to date in defending against
Plaintiff’s claims in this litigation. In the event of an appeal of this Final
Judgment by Plaintiff to the court of appeals, if the appeal is
unsuccessful, Defendant The Jasper/VPPA Settlement Trust shall have
and recover further damages from Plaintiff Sam Rayburn Municipal
Power Agency in the amount of $50,000.00 as its reasonable appellate
fees in that court; and in the event of an appeal by Plaintiff to the
Supreme Court of Texas, if the appeal is unsuccessful, Defendant The
Jasper/VPPA Settlement Trust shall have and recover further damages
from Plaintiff Sam Rayburn Municipal Power Agency in the amount of
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$25,000.00 as its reasonable appellate fees in that court. Post-judgment
interest will accrue on this judgment at a rate of 5% per annum until the
judgment is paid by Plaintiff;
(9) All costs of court incurred by Defendant The Jasper/VPPA
Settlement Trust in this matter shall be taxed against, and payable by,
Plaintiff Sam Rayburn Municipal Power Agency; and
(10) All relief not expressly granted in this Judgment is hereby
denied.
The Trust filed its Motion for Entry of Final Judgment on Jury’s Verdict and
on Its Counterclaim for Indemnity, and argued that, because the jury found no
liability against the Trust, “the Trust is entitled to entry of Final Judgment in its favor
that SRMPA take nothing by way of all of its claims and allegations against the
Trust[,]” and that “[t]he Trust is also entitled to judgment in its favor against SRMPA
for all of the costs of court incurred by SRMPA in this matter.” At the hearing on
the motion, the trial court discussed its ruling on the indemnity as follows:
THE COURT: . . . I think I’m going to find that [SRMPA], by
virtue of that contract and that [] clause, did not indemnify them for this
-- this type of action; and, so, I am definitely going to take out No. 8.
[Counsel for the Trust]: That’s fine, Your Honor. I would
suggest, one, that the Court could simply take that out by just circling
the whole paragraph, marking it out, and initialing it, I think, would be
sufficient. But I would say that No. 9, because they did not prevail on
their claims against us, we’re still entitled to costs of court.
THE COURT: . . . I didn’t question it.
[Counsel for the Trust]: Thank you.
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THE COURT: That was another reason I was thinking about
awarding it was because it could be viewed as a frivolous lawsuit, or
frivolous. Obviously, they had a -- they had a point to make and tried
to do that with that.
So, I am, on Page 5 [of the Trust’s proposed final judgment],
going to mark that out and rule in the bifurcated trial that the settlement
trust is not entitled to indemnity by [SRMPA] at this time.
The parties both argue that the language in the indemnity provision is
unambiguous. The parties disagree on the application of the indemnity language. By
its plain language, the provision in question is an indemnity provision. As a general
rule, an indemnity provision does not apply to claims between the parties to an
agreement. See Claybar v. Samson Expl., LLC, No. 09-16-00435-CV, 2018 Tex.
App. LEXIS 928, at *7 (Tex. App.—Beaumont Feb. 1, 2018, pet. filed); Nat’l City
Mortg. Co. v. Adams, 310 S.W.3d 139, 144 (Tex. App.—Fort Worth 2010, no pet.);
MG Bldg. Materials, Ltd. v Moses Lopez Custom Homes, Inc., 179 S.W.3d 51, 63
(Tex. App.—San Antonio 2005, pet. denied); Ganske v. Spence, 129 S.W.3d 701,
708 (Tex. App.—Waco 2004, no pet.); Wallerstein v. Spirt, 8 S.W.3d 774, 780 (Tex.
App.—Austin 1999, no pet.); Derr Constr. Co. v. City of Houston, 846 S.W.2d 854,
858 (Tex. App.—Houston [14th Dist.] 1992, no writ). For the Trust to make the
claim that it is entitled to indemnification, the Trust bears the burden to prove that
the indemnity provision is applicable, that is, that a third party has filed a claim
against the Trust, or the indemnity clause expressly includes language indicating that
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it also applies to direct claims between the indemnitor and indemnitee. See generally
MG Bldg. Materials, Ltd., 179 S.W.3d at 63; Ganske, 129 S.W.3d at 708; Coastal
Transp. Co. v. Crown Centr. Petroleum Co., 20 S.W.3d 119, 130 (Tex. App.—
Houston [14th Dist.] 2000, pet. denied). We conclude that on this record the Trust
has not met its burden. In denying the Trust’s indemnity counterclaim, the trial court
stated on the record that the indemnity provision was not triggered by “this type of
action[.]” We agree, and we overrule the Trust’s issue on cross appeal.
Having overruled Appellant’s and Cross-Appellants’ issues, we affirm the
trial court’s judgment.
AFFIRMED.
_________________________
LEANNE JOHNSON
Justice
Submitted on March 13, 2018
Opinion Delivered July 26, 2018
Before McKeithen, C.J., Kreger and Johnson, JJ.
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