Blackstone Medical, Inc. D/B/A Orthofix Spinal Implants v. Phoenix Surgicals, LLC , 470 S.W.3d 636 ( 2015 )

Affirmed and Opinion Filed July 22, 2015.
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-13-00870-CV
BLACKSTONE MEDICAL, INC. D/B/A ORTHOFIX SPINAL IMPLANTS, Appellant
V.
PHOENIX SURGICALS, L.L.C., Appellee
On Appeal from the County Court at Law No. 4
Dallas County, Texas
Trial Court Cause No. CC-11-00902-D
OPINION
Before Justices Bridges, Lang, and Lang-Miers
Opinion by Justice Lang
Blackstone Medical, Inc. d/b/a Orthofix Spinal Implants appeals the trial court’s final
judgment incorporating the jury verdict and award of $705,232.80 in damages in favor of
Phoenix Surgicals, L.L.C. In three issues, Orthofix argues the trial court erred when it denied
Orthofix’s motions for directed verdict and judgment notwithstanding the verdict because: (1)
the statute of frauds precluded, as a matter of law, Phoenix’s claims for breach of contract due to
wrongful termination of the agreement and promissory estoppel; (2) the trial court applied an
improper measure of damages and there is “no evidence to prove recoverable damages” under
the correct measure of damages; and (3) the evidence is legally insufficient to support Phoenix’s
claim for promissory estoppel as to the expense of hiring of a sales “specialist.”
Phoenix filed a cross-appeal. In its sole issue on cross-appeal, Phoenix argues the trial
court erred, as a matter of law, when it awarded Phoenix attorneys’ fees in an amount less than
what Phoenix requested.
We conclude the trial court did not err when it denied Orthofix’s motion for a directed
verdict and motion for judgment notwithstanding the verdict on Phoenix’s claims for breach of
contract due to wrongful termination and promissory estoppel. Also, we conclude the trial court
did not err when it declined to award Phoenix all of the requested attorneys’ fees. The trial
court’s final judgment is affirmed.
I. FACTUAL AND PROCEDURAL BACKGROUND
Orthofix is a manufacturer and supplier of spinal implants, orthopedics, and biologics-
related medical products. Phoenix is an independent, multi-line distributor of medical products,
including spinal implant devices. In March 2009, Orthofix and Phoenix executed a sales
representative agreement. That agreement was effective from February 1, 2009 to December 31,
2011, with automatic renewal for additional one-year periods. Section 5(J) of the agreement
prohibited Phoenix from selling undisclosed competing products:
J. During the Term of this Agreement, and except for those products
identified in Exhibit C hereto (“Disclosure of Competitive Products Carried by
Representative”), Representative shall not, without the prior written consent of
Company, solicit sales of any product competitive with or similar to any of the
Products, nor act as distributor, representative, agent, dealer or otherwise on
behalf of any manufacturer of any such competitive or similar product.
Representative shall keep the Company informed of all other companies or
business establishments whose merchandise the Representative represents. In the
event Company adds a new Product to this Agreement which competes with a
third party product being carried or offered by Representative, Representative
agrees to not renew its representation of such third party with respect to the
competitive product upon the expiration or termination of such representation
without obtaining the written consent of the Company.
In addition, section 9 contained provisions addressing the early termination of the agreement:
9. TERMINATION
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A. Termination for Cause. The following actions by or events
involving [Phoenix] shall each constitute a material breach of this Agreement and
give [Orthofix] an immediate right, but not obligation, to terminate this
Agreement for cause:
....
5. Any material breach of obligations under this Agreement,
including, but not limited to any violation of the provisions
of Section 5;
....
B. Termination without Cause. Company may terminate this
Agreement without cause by providing thirty (30) days’ written notice to
[Phoenix]. In the event of termination without cause by [Orthofix], [Orthofix]
shall pay to [Phoenix] a lump sum amount equal to the average monthly
commission received by [Phoenix] during the previous six (6) months for each
month that would have remained during the Term of this Agreement or one (1)
year, whichever is shorter.
During the contractual relationship, Phoenix distributed and sold products manufactured
by Orthofix’s competitors and Phoenix fully disclosed its sales activities to Orthofix. Also,
during the contractual relationship, Orthofix and Phoenix discussed Phoenix hiring a “sales
specialist” to exclusively sell Orthofix’s Trinity® Evolution™ biologics product in the Boston
area. Orthofix and Phoenix discussed sharing the cost of Phoenix hiring this “sales specialist”
for the first six months of employment. Based on this understanding, Phoenix hired a “sales
specialist,” Cheri Malo, and paid her salary.
On August 26, 2010, Orthofix sent Phoenix a letter terminating their agreement. That
letter stated, in part:
It has come to our attention that Phoenix Surgicals, LLC[,] has been actively
soliciting sales of competitive products in violation of the terms of the above-
referenced agreement. In light of Phoenix’s material breach of its obligations,
Blackstone hereby terminates the agreement for cause, effective immediately.
The agreement states that “Phoenix shall not, without the prior written Consent of
Blackstone, solicit sales of any product competitive with or similar to any of the
Products, nor act as distributor, representative, agent, dealer or otherwise on
behalf of any manufacturer of any such competitive or similar product.”
Nevertheless, Phoenix has been actively soliciting sales of competitive products
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manufactured by at least the following Blackstone competitors: Lanx, Orthovita,
Spine Wave, Spinology, US Spine, and Vertiflex. Such activity constitutes a
material breach of the agreement.
(Footnotes omitted.)
On September 14, 2012, Phoenix filed its second amended petition, asserting several
claims, including one for breach of contract due to wrongful termination.1 Phoenix alleged, in
part:
Notwithstanding Orthofix’s contentions to the contrary, [Orthofix’s] termination
of the [a]greement was done without cause or justification. Despite Phoenix
having fulfilled all conditions precedent, Orthofix breached the [a]greement by
wrongfully and improperly terminating [Phoenix] without justification or cause.
As a result, Orthofix has proximately caused, and continues to cause, Phoenix
direct and consequential damages . . .
The crux of Phoenix’s wrongful termination claim was that Orthofix breached the agreement
when it claimed it was terminating the agreement “with cause” because “Phoenix had been
soliciting the sales of products of Orthofix’s competitors” in violation of the agreement’s
exclusivity provision. Phoenix asserted that Orthofix terminated the agreement “without cause,”
in part, because Orthofix was fully aware that Phoenix was selling competitor’s products and
waived enforcement of the exclusivity provision prohibiting the sale of competitor’s products. In
its prayer for relief, Phoenix sought all actual, compensatory, and consequential damages, and a
declaration that it was entitled to the lump sum payment due under the parties’ agreement as a
result of a termination of the agreement without cause. On October 23, 2012, Phoenix filed a
supplement to its second amended petition, adding the affirmative counter-defenses of estoppel
and waiver with respect to its claim for breach of contract due to wrongful termination.
1
In that petition, Phoenix alleged claims against Orthofix for breach of contract for unpaid commissions, breach of contract due to wrongful
termination of the agreement, breach of contract for wrongful sales and distribution of Orthofix products, breach of the covenant of good faith
and fair dealing, tortious interference with existing contracts, tortious interference with prospective contracts, violations of the Connecticut
Franchise Act, violations of the Connecticut Unfair Trade Practices Act, unjust enrichment, and declaratory judgment. In the alternative to its
claim for breach of contract due to wrongful termination, Phoenix alleged a claim for promissory estoppel. Also, Phoenix sought recovery of
its attorneys’ fees. Phoenix’s original and first amended petition are not included in the clerk’s record on appeal.
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On January 6, 2012, Orthofix’s filed its first amended answer and counterclaim, generally
denying the allegations and asserting the affirmative defenses of failure to state a claim on which
relief may be granted, the claims are barred by the statute of frauds, the doctrine of merger, and
the parol evidence rule, Phoenix suffered no compensable damages, justification, and Phoenix’s
claims are barred by its own inequitable conduct.2 Also, Orthofix specifically denied acting with
malice, and that its conduct or intent justified the submission of a jury question on exemplary
damages. Further, Orthofix asserted a counterclaim for breach of contract, alleging Phoenix
breached the agreement by initiating litigation in Connecticut. Orthofix sought attorneys’ fees
on its breach of contract counterclaim.
On January 11, 2013, the trial court granted, in part, and denied, in part, Orthofix’s
motions for traditional and no-evidence summary judgment, ordering that Phoenix take nothing
on some of its claims.3 However, the trial court denied the motions as to Phoenix’s claims for
breach of contract due to wrongful termination, breach of contract for unpaid commissions, and
request for declaratory judgment. Also, on January 11, 2013, the trial court denied, in its
entirety, Phoenix’s motion for partial summary judgment on its claims for breach of contract,
promissory estoppel, and declaratory judgment based on Phoenix’s assertion that Orthofix
wrongfully terminated the agreement.
Although Phoenix sought all actual, compensatory, and consequential damages in its
second amended petition, on February 5, 2013, during a pretrial hearing, Phoenix stated, on the
record, it was not submitting lost sales and profits as a measure of damages. Instead, Phoenix
stated it was seeking the “liquidated damages” provided for in section 9(B) of the agreement.
2
Orthofix’s original answer is not included in the clerk’s record on appeal.
3
Specifically, the trial court ordered that Phoenix take nothing on its claims for unjust enrichment, breach of the covenant of good faith and fair
dealing, breach of contract for wrongful sales and distribution of Orthofix products, tortious interference with existing contract, tortious
interference with prospective contracts, violations of the Connecticut Franchise Act, and violations of the Connecticut Unfair Trade Practices
Act.
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Orthofix responded that the provision was not a liquidated damages provision, but a contractual
penalty, and the only available measure of damages was lost profits. The trial court declined to
rule whether the provision was a liquidated damages provision or penalty during the pretrial
hearing.
On February 8, 2013, after the close of the presentation of all evidence, Orthofix filed its
motion for directed verdict. On February 11, 2013, after a hearing, the trial court signed an order
granting a directed verdict as to Phoenix’s alternative claim for promissory estoppel for wrongful
termination. However, the trial court denied Orthofix’s motion for directed verdict as to
Phoenix’s claims for breach of contract due to wrongful termination of the agreement,
promissory estoppel as to the expenses of hiring the “sales specialist,” Malo, and breach of
contract for unpaid commissions. Those claims proceeded to the jury, which found in favor of
Phoenix and awarded Phoenix a total of $705,232.80 in damages: $668,826, the lump sum fee
provided for in section 9(B) of the agreement, for breach of contract due to wrongful termination
of the agreement; $27,503 on the claim for promissory estoppel as to the hiring of Malo; and
$8,903.80 for breach of contract for unpaid commissions.
On February 22, 2013, Phoenix filed its application for attorneys’ fees, seeking a total of
$340,322.75. On March 25, 2013, Phoenix filed a motion for leave to file its third amended
petition accompanied by the amended petition. Phoenix’s third amended petition added, in part,
a statement that as to its claim for breach of contract due to wrongful termination, “Phoenix’s
damages are, at a minimum, the amount equal to the lump-sum payment required by the
[agreement] when terminated by Orthofix without cause.” Also, Phoenix added, in part, a claim
for promissory estoppel, alleging “Phoenix justifiably relied on Orthofix’s promise to share in
the expense of hiring independent contractor, Cheri Malo, which also caused financial detriment
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to Phoenix for which it now seeks compensation.” Also, on March 25, 2013, Orthofix filed its
motion for judgment notwithstanding the verdict.
On April 1, 2013, the trial court granted Phoenix’s motion for leave to file its third
amended petition. On April 2, 2013, the trial court signed an order denying Orthofix’s motion
for judgment notwithstanding the verdict. Also, on April 2, 2013, the trial court signed the final
judgment, which incorporates the jury’s verdict and awarded Phoenix $200,000 in attorneys’
fees. On May 2, 2013, Phoenix filed a motion for new trial, which was overruled by operation of
law.
II. BREACH OF CONTRACT AND PROMISSORY ESTOPPEL CLAIMS
In issue one, Orthofix argues four points: (1) the trial court erred when it denied
Orthofix’s motion for directed verdict on Phoenix’s claim for breach of contract due to wrongful
termination; (2) the trial court erred when it denied Orthofix’s motion for directed verdict on
Phoenix’s claim for promissory estoppel; (3) the trial court erred when it denied Orthofix’s
motion for judgment notwithstanding the verdict on Phoenix’s claim for breach of contract due
to wrongful termination; and (4) the trial court erred when it denied Orthofix’s motion for
judgment notwithstanding the verdict on Phoenix’s claim for promissory estoppel. In issue two,
Orthofix argues two points: (1) the trial court erred when it denied Orthofix’s motion for directed
verdict on Phoenix’s claim for breach of contract due to wrongful termination as to the measure
of damages; and (2) the trial court erred when it denied Orthofix’s motion for judgment
notwithstanding the verdict on Phoenix’s claim for breach of contract due to wrongful
termination as to the measure of damages. Issue three includes two points: (1) the trial court
erred when it denied Orthofix’s motion for directed verdict on Phoenix’s claim for promissory
estoppel; and (2) the trial court erred when it denied Orthofix’s motion for judgment
notwithstanding the verdict on Phoenix’s claim for promissory estoppel. We divide these issues
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into two main categories addressing: (1) the breach of contract claim; and (2) the promissory
estoppel claim.
A. Standards of Review
1. Standard of Review for Denial of Motion for Directed Verdict
A directed verdict is warranted when the evidence is such that no other verdict can be
reached and the moving party is entitled to judgment as a matter of law. Halmos v. Bombardier
Aerospace Corp., 314 S.W.3d 606, 619 (Tex. App.—Dallas 2010, no pet.); Byrd v. Delasancha,
195 S.W.3d 834, 836 (Tex. App.—Dallas 2006, no pet.). A directed verdict for a defendant may
be proper in two situations: (1) when a plaintiff fails to present evidence raising a fact issue
essential to the plaintiff’s right of recovery; or (2) if the plaintiff either admits or the evidence
conclusively establishes a defense to the plaintiff’s cause of action. Prudential Ins. v. Fin.
Review Servs., 29 S.W.3d 74, 77 (Tex. 2000); Mauricio v. Castro, 287 S.W.3d 476, 479 (Tex.
App.—Dallas 2009, no pet.). If a fact issue is raised on a material question, a directed verdict is
not proper and the issue must go to the jury. See Exxon Corp. v. Emerald Oil & Gas Co., 348
S.W.3d 194, 220–21 (Tex. 2011); see also Flying J Inc. v. Meda, Inc., 373 S.W.3d 680, 685
(Tex. App.—San Antonio 2012, no pet.).
The standard of review for the denial of a directed verdict is a legal sufficiency or “no
evidence” standard of review. Mauricio, 287 S.W.3d at 478–79. When reviewing a directed
verdict, an appellate court considers all the evidence in a light most favorable to the nonmovant,
and resolves all reasonable inferences that arise from the evidence admitted at the trial in the
nonmonvant’s favor. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750–51 (Tex. 2003);
Mikob Props., Inc. v. Joachim, No. 05-13-01613-CV, 2015 WL 2394117, at *4 (Tex. App.—
Dallas May 19, 2015, no pet. h.).
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2. Standard of Review for Denial of Motion for Judgment Notwithstanding the Verdict
A trial court should grant a motion for judgment notwithstanding the verdict when: (1)
the evidence is conclusive and one party is entitled to recover as a matter of law, or (2) a legal
principle precludes recovery. Kwik Indus., Inc. v. Rock Prairie Holdings, Ltd., No. 05-13-00054-
CV, 2015 WL 1449902, at *7 (Tex. App.—Dallas Mar. 30, 2015, no pet.) (mem. op.); Iroh v.
Igwe, No. 05-13-00027-CV, 2015 WL 1261818, *3 (Tex. App.—Dallas Mar. 19, 2015, no pet.
h.); COC Servs., Ltd. v. CompUSA, Inc., 150 S.W.3d 654, 662 (Tex. App.—Dallas 2004, pet.
denied); see TEX. R. CIV. P. 301. A judgment notwithstanding the verdict is proper when a
directed verdict would have been proper. TEX. R. CIV. P. 301; Fort Bend Cty. Drainage Dist. v.
Sbrusch, 818 S.W.2d 392, 394 (Tex. 1991); Helping Hands Home Care, Inc. v. Home Health of
Tarrant Cty., Inc., 393 S.W.3d 492, 515 (Tex. App.—Dallas 2013, pet. denied). Also, the
standard of review for the denial of a motion for judgment notwithstanding the verdict is the
same as for the denial of a motion for directed verdict. City of Keller v. Wilson, 168 S.W.3d 802,
823 (Tex. 2005) (“the test for legal sufficiency should be the same for summary judgments,
directed verdicts, judgments notwithstanding the verdict, and appellate no-evidence review”);
Iroh, 2015 WL 1261818, at *3 n.3.
B. Phoenix’s Claim for Breach of Contract Due to Wrongful Termination
In issue one, points one and three, and issue two, points one and two, Orthofix argues the
trial court erred when it denied Orthofix’s motion for directed verdict and motion for judgment
notwithstanding the verdict on Phoenix’s claim for breach of contract due to wrongful
termination. Specifically, Orthofix contends it proved, as a matter of law, its affirmative defense
of statute of frauds, which bars Phoenix’s breach of contract claim. Also, Orthofix asserts the
evidence precludes, as a matter of law, the damages element of Phoenix’s breach of contract
claim.
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1. Motion for Directed Verdict as to the Affirmative Defense of Statute of Frauds
In the first point of issue one, Orthofix claims it conclusively established its affirmative
defense of statute of frauds, which barred Phoenix’s claim for breach of contract due to wrongful
termination. It is Orthofix’s contention that what Phoenix claims was a waiver of compliance is
actually an oral modification that is precluded by the statute of frauds. Phoenix responds that the
statute of frauds does not apply because Phoenix claimed Orthofix waived compliance with the
written contract, not that there was an oral modification.
a. Applicable Law
The contention that a party to a contract is excused from performance because of a prior
material breach by the other contracting party is an affirmative defense that must be affirmatively
pleaded. Compass Bank v. MFP Fin. Servs., Inc., 152 S.W.3d 844, 852 (Tex. App.—Dallas
2005, pet. denied); see RE/MAX of Tex., Inc. v. Katar Corp., 961 S.W.2d 324, 327 (Tex. App.—
Houston [1st Dist.] 1997, pet. denied); see generally, Tony Gullo Motors I, L.P. v. Chapa, 212
S.W.3d 299, 314 (Tex. 2006) (referring to prior material breach as an affirmative defense to a
contract claim). When one party to a contract commits a material breach of that contract, the
other party is excused from any obligation to perform. Mustang Pipeline Co. v. Driver Pipeline
Co., 134 S.W.3d 195, 196 (Tex. 2004) (per curiam); Compass Bank, 152 S.W.3d at 852.
Waiver is an affirmative defense that must be affirmatively pleaded. TEX. R. CIV. P. 94.
Waiver is the intentional relinquishment of a known right or intentional conduct inconsistent
with claiming that right. In re Gen Elec. Corp., 203 S.W.3d 314, 316 (Tex. 2006). Waiver may
be express or implied. Waiver may be established by showing a party has expressly renounced a
known right. Motor Vehicle Bd. v. El Paso Indep. Auto. Dealers Ass’n, 1 S.W.3d 108, 111 (Tex.
1999); Martin v. Birenbaum, 193 S.W.3d 677, 681 (Tex. App.—Dallas 2006, pet. denied). Also,
an implied waiver may be established by showing a party’s prolonged silence or inaction in
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asserting a known right. El Paso Indep. Auto. Dealers, 1 S.W.3d at 111; Martin, 193 S.W.3d at
681. Waiver is largely a matter of intent. El Paso Indep. Auto. Dealers, 1 S.W.3d at 111.
Ordinarily, waiver is a fact question, but it may be established as a matter of law when the facts
and circumstances are admitted or clearly established. El Paso Indep. Auto. Dealers, 1 S.W.3d
at 111; Martin, 193 S.W.3d at 681. Statements made and conduct occurring before the signing
of the agreement cannot constitute waiver of the terms in the agreement. Comiskey v. FH
Partners, L.L.C., 373 S.W.3d 620, 640 (Tex. App.—Houston [14th Dist.] 2012, pet. denied).
Modification of a contract is an affirmative defense. White v. Harrison, 390 S.W.3d 666,
674 (Tex. App.—Dallas 2012, no pet.). A modification to a contract creates a new contract that
includes the new modified provisions and the unchanged old provisions. Boudreaux Civic Ass’n
v. Cox, 882 S.W.2d 543, 547–48 (Tex. App.—Houston [1st Dist.] 1994, no writ). A valid
contract modification must include a meeting of the minds supported by consideration. White,
390 S.W.3d at 674. An oral modification of a written contract is enforceable under the statute of
frauds only if the modification does not materially alter the obligations imposed by the
underlying agreement. White, 390 S.W.3d at 674.
The contention that an agreement falls within the statute of frauds is an affirmative
defense. TEX. R. CIV. P. 91; Biko v. Siemens Corp., 246 S.W.3d 148, 159 (Tex. App.—Dallas
2007, pet. denied). The party pleading the statute of frauds bears the burden of establishing its
applicability. Berryman’s South Fork, Inc. v. J. Baxter Brinkman Int’l Corp., 418 S.W.3d 172,
192 (Tex. App.—Dallas 2013, pet. denied); Kalmus v. Oliver, 390 S.W.3d 586, 589 (Tex.
App.—Dallas 2012, no pet.). Under the statute of frauds, certain contracts are not enforceable
unless they are in writing and signed by the person against whom enforcement of the contract is
sought. See TEX. BUS. & COM. CODE ANN. § 26.01(a) (West 2009); Berryman’s, 418 S.W.3d at
192; S & I Mgmt., Inc. v. Sungju Choi, 331 S.W.3d 849, 854 (Tex. App.—Dallas 2011, no pet.).
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The question of whether an agreement falls within the statute of frauds is one of law.
Berryman’s, 418 S.W.3d at 192; Biko, 246 S.W.3d at 159; see Bratcher v. Dozier, 162 Tex. 319,
321, 346 S.W.2d 795, 796 (1961). However, whether the circumstances of a particular case fall
within an exception to the statute of frauds is generally a question of fact. See Berryman’s, 418
S.W.3d at 192; Kalmus, 390 S.W.3d at 589.
b. Application of the Law to the Facts
In its pleadings, as more fully described above, Phoenix asserted that Orthofix breached
the contract by wrongfully terminating its agreement with Phoenix without cause or justification.
Orthofix asserted the affirmative defense of the statute of frauds on the basis that it barred
Phoenix’s claims. In its third amended petition, Phoenix asserted the affirmative counter-defense
of waiver in response to Orthofix’s affirmative defenses.
In its motion for directed verdict, Orthofix argued, in part, that the evidence conclusively
established that Orthofix’s breach of contract was excused because of a prior material breach of
the agreement by Phoenix. Further, Orthofix argued that all of the alleged oral agreements that
Phoenix claimed amended the agreement, constituting a waiver of compliance by Orthofix and
excusing Phoenix’s prior material breach “are barred under both the statute of frauds and the
express terms of the [a]greement.” Phoenix responded to the motion arguing it presented
evidence that Orthofix breached the agreement when Orthofix purported to terminate that
agreement “for cause,” Orthofix waived compliance with the exclusivity provision of the
agreement, and the agreement is not subject to the statute of frauds. The trial court denied
Orthofix’s motion for directed verdict as to Phoenix’s claim for breach of contract due to
wrongful termination of the agreement.
On appeal, in contrast to the arguments made in its motion for directed verdict, Orthofix
argues only that the evidence conclusively established its affirmative defense of statute of frauds,
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which barred Phoenix’s affirmative defense of oral modification. However, Phoenix did not
assert the affirmative counter-defense of oral modification. Instead, Phoenix argued that
Orthofix’s conduct constituted an implied waiver of compliance with certain contract provisions.
Further, the record reflects there was some evidence adduced at trial that, during the contractual
relationship, Phoenix disclosed its sales activities to Orthofix and, for a period of time, Orthofix
remained silent or did not act to assert its rights under the agreement. See El Paso Indep. Auto
Dealers, 1 S.W.3d at 111 (implied waiver may be established by showing party’s prolonged
silence or inaction in asserting known right). Accordingly, we conclude the trial court did not err
when it denied Orthofix’s motion for directed verdict on its affirmative defense of statute of
frauds as to the breach of contract due to wrongful termination.
The first part of issue one is decided against Orthofix.
2. Motion for Judgment Notwithstanding the Verdict
as to the Affirmative Defense of Statute of Frauds
In the third point of issue one, Orthofix contends that, as a matter of law, the statute of
frauds precludes Phoenix’s claim for breach of contract because “[a]llowing Phoenix to recover
by using alleged subsequent oral modifications to contradict the parties’ valid, proven contract
would defeat the recognized purposes of the statute of frauds to safeguard the integrity of written
instruments against fraud, remove uncertainty, and reduce litigation.”
Phoenix responds that question number 1 of the jury charge, which asked whether
Orthofix breached the contract by terminating the agreement under section 9(A)(5), “did not
require the jury to find that the [agreement] had been orally modified in order [for the jury] to
answer [the question] in the affirmative.” Also, Phoenix contends that the jury may have
determined Orthofix’s breach was not excused because there was no prior material breach of the
contract by Phoenix. As a result, Phoenix claims the jury could have found in favor of Phoenix
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without reaching the issue of whether Phoenix’s prior material breach was excused because
Orthofix waived compliance.
a. Probable Rendition of an Improper Judgment
An appellant must attack all independent bases or grounds that fully support a
complained of ruling or judgment. Creech v. Columbia Med. Ctr. of Las Colinas Subsidiary,
L.P., 411 S.W.3d 1, 6 (Tex. App.—Dallas 2013, no pet.); Oliphant Fin. L.L.C. v. Angiano, 295
S.W.3d 422, 423–24 (Tex. App.—Dallas 2009, no pet.). If an independent ground fully supports
the complained-of ruling or judgment, but the appellant assigns no error to that independent
ground, an appellate court must accept the validity of that unchallenged independent ground, and
any errors in the grounds challenged on appeal are harmless because the unchallenged
independent ground fully supports the complained-of ruling or judgment. Oliphant, 295 S.W.3d
at 423–24; Prater v. State Farm Lloyds, 217 S.W.3d 739, 740–41 (Tex. App.—Dallas 2007, no
pet.).
The harmless error rule states, in part, that before reversing a judgment because of an
error of law, an appellate court must find that the error amounted to such a denial of the
appellant’s rights as was reasonably calculated to cause and probably did cause “the rendition of
an improper judgment.” TEX. R. APP. P. 44.1(a)(1); G&H Towing Co. v. Magee, 347 S.W.3d
293, 297 (Tex. 2011) (per curiam). The harmless error rule applies to all errors. Magee, 347
S.W.3d at 297 (citing Lorusso v. Members Mut. Ins. Co., 603 S.W.2d 818, 819–20 (Tex. 1980)).
b. Application of the Law to the Facts
Question number 1 of the trial court’s jury charge contained one question with two
instructions. The question was whether Orthofix breached the contract. The instructions were
that Orthofix’s breach was excused if there was a prior material breach of the contract by
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Phoenix and Phoenix’s prior material breach was excused if Orthofix waived compliance.
Specifically, question number 1 of the trial court’s jury charge states:
Question Number 1
Did Orthofix fail to comply with the Sales Representative Agreement by
terminating the Sales Representative Agreement under Section 9(A)(5)?
Failure to comply by Orthofix is excused by Phoenix’s previous failure to comply
with a material obligation of the same agreement. In order to properly terminate
the Agreement for cause, Phoenix must have materially failed to comply with
Section 5(1) of the Agreement by soliciting the sale of products competitive with
or similar to Orthofix’s products, except for those products otherwise agreed to by
Orthofix and Phoenix.
The circumstances to consider in determining whether a failure to comply is
material include:
(a) the extent to which the injured party will be deprived of the benefit
which it reasonably expected;
(b) the extent to which the injured party can be adequately
compensated for the part of the benefit of which it will be
deprived;
(c) the extent to which the party failing to perform or to offer to
perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to
perform will cure it’s failure, taking into account the circumstances
including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or
to offer to perform comports with standards of good faith and fair
dealing.
Phoenix’s non-compliance, if any, with Section (J) of the Agreement is
excused if compliance is waived by Orthofix.
Waiver is an intentional surrender of a known right or intentional conduct
inconsistent with claiming the right.
Contractual provisions may be waived even if a contract states all
modifications to the written contract must be in writing, but the existence of a
contract provision disclaiming waiver and requiring any waiver to be in writing
and signed by the waiving party may be some evidence of non-waiver.
The jury answered “Yes” to question number 1.
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Orthofix’s burden in this case is to demonstrate that the answer of “Yes” to question
number 1 and the finding in Orthofix’s favor was error. See Creech, 411 S.W.3d at 6. The
language of question number 1 shows that because question number 1 was submitted with the
two instructions described above, the jury may have answered question number 1 “Yes” because
it found: (1) Orthofix breached the contract and Orthofix’s breach was not excused because there
was no prior material breach of the contract by Phoenix, or (2) Orthofix breached the contract
and Orthofix’s breach was excused because of a prior material breach of the contract by Phoenix
and Phoenix’s prior material breach was excused because Orthofix waived compliance.
However, on appeal, Orthofix argues only that the trial court erred when it denied Orthofix’s
motion for judgment notwithstanding the verdict because the statute of frauds prohibited the
inclusion of the instruction that Phoenix’s prior material breach could be excused if Orthofix
waived compliance. Orthofix does not argue error because there was no evidence to support the
jury’s finding that Orthofix breached the contract and Orthofix’s breach was not excused because
there was no prior material breach of the contract by Phoenix. As a result, Orthofix fails to
attack all independent bases or grounds that fully support the jury’s verdict. Creech, 411 S.W.3d
at 6; Oliphant, 295 S.W.3d at 423–24.
Assuming, without deciding, the trial court erred when it denied Orthofix’s motion for
judgment notwithstanding the verdict on the basis argued because, as a matter of law, the statute
of frauds prohibited the inclusion of the instruction that Phoenix’s prior material breach could be
excused if Orthofix waived compliance, that error is harmless because Orthofix fails to challenge
on appeal an independent ground that fully supports the jury’s verdict. See Oliphant, 295
S.W.3d at 423–24; Prater, 217 S.W.3d at 740–41.
The third point of issue one is decided against Orthofix.
–16–
3. Breach of Contract - Element of Damages
In issue two, points one and two, Orthofix argues that the lump-sum provision in section
9(B) of the agreement “is not an available measure of damages” for breach of contract because:
(1) Orthofix elected to terminate the agreement for cause under section 9(A) and risk a wrongful
termination lawsuit resulting in damages, and the lump-sum provision contained in section 9(B),
which addresses termination of the agreement without cause, cannot be substituted for those
damages; and (2) Phoenix abandoned its claim for lost profits, which is the only appropriate
measure of damages for wrongful termination. Also, Orthofix contends that there was no
evidence of the proper measure of damages, i.e., lost profits, because Phoenix presented no
evidence of damages and stipulated that it “suffered no damages as a result of the alleged
wrongful termination, save and except Orthofix’s failure to pay the lump-sum payment.”
Phoenix responds that the jury found Orthofix terminated the agreement without cause and there
is “no legal support for Orthofix’s efforts to dodge the lump-sum payment due [to] Phoenix.”
a. Motion for Directed Verdict as to the Element of Damages
In its motion for directed verdict, Orthofix argued the lump sum provided for in the
agreement for termination without cause was not a liquidated damages provision, and if it was, it
is unenforceable because it is a disproportionate penalty. Relying on a case from the Delaware
Court of Chancery, Orthofix argued the lump-sum provision was not a liquidated damages
provision because a termination fee is different than liquidated damages paid in the event of a
breach of contract. See Brazen v. Bell Atl. Corp., No. 14976, 1997 WL 153810 (De;. Ch. Mar.
19, 1997) (mem. op.) affirmed on other grounds 695 A.2d 43 (Del. 1997). Also, Orthofix argued
that if the lump-sum provision is a liquidated damages clause, it cannot be enforced because
Orthofix has proven that Phoenix did not incur any actual damages. Phoenix responded that
“Phoenix and Orthofix agree the lump-sum payment due under the [agreement] in the event of
–17–
termination without cause by Orthofix is not a liquidated damages provision. Hence, Orthofix’s
arguments in its directed verdict motion asserting the lump[-]sum payment obligation is not
enforceable must be ignored.”
During the hearing on Orthofix’s motion for directed verdict, Orthofix initially stated it
was not going to argue the portion of its motion relating whether the lump-sum provision in the
agreement was a liquidated damages clause because Phoenix “has stipulated that the [section]
9(B) fee or buyout lump[-]sum payment is not a liquidated damages clause.” However, by the
end of the hearing, Orthofix contended that “[t]here was no way you get to the [lump-sum] fee
unless it is a liquidated damages provision, and [Phoenix] ha[s] abandoned that contention.” The
trial court denied Othofix’s motion for directed verdict as to Phoenix’s claim for breach of
contract due to wrongful termination.
Texas Rule of Appellate Procedure 33.1 establishes the prerequisites for preserving an
appellate complaint. To preserve a point for appellate review, a party must make a timely,
specific objection or motion to the trial court that states the grounds for the ruling sought with
sufficient specificity, unless the grounds are apparent from the context, obtain a ruling on the
complaint, and comply with the rules of evidence or procedure. TEX. R. APP. P. 33.1.
Complaints and arguments on appeal must correspond with the complaint made at the trial court
level. Knapp v. Wilson N. Jones Mem’l Hosp., 281 S.W.3d 163, 170 (Tex. App.—Dallas 2009,
no pet.). To preserve an error for appeal, a party’s argument on appeal must comport with its
argument in the trial court. Tate v. Andrews, 372 S.W.3d 751, 754 (Tex. App.—Dallas 2012, no
pet.); Knapp, 281 S.W.3d at 170–71.
On appeal, Orthofix does not argue or cite to case law relating to liquidated damages and
the enforceability of such provisions. As a result, Orthofix’s motion for directed verdict and
argument during the hearing did not apprize the trial court of the argument it now makes on
–18–
appeal. Accordingly, we conclude Orthofix failed to preserve issue two, point one, for appellate
review. See TEX. R. APP. P. 33.1.
b. Motion for Judgment Notwithstanding the Verdict as to the Element of Damages
During the jury charge conference, Orthofix objected to question number 2, arguing the
lump-sum payment provided for in the agreement in the event the contract was “Terminat[ed]
without Cause” was not an available measure of damages. Specifically, counsel for Orthofix
argued:
Orthofix objects to Question 2 for failure to include a limined [sic] instruction to
the effect that the lump sum payment set forth in Section 9(B) of the sales
representative agreement is unavailable as a form of damages. If the jury finds a
breach of the sales representative agreement and answers Question Number 1, it is
Orthofix’s position that the lump sum payment that would result from a without-
cause termination of the sales representative agreement under Section 9(B) of the
agreement is not triggered by with-cause termination under Section 9(A) of the
agreement even if the jury finds the cause asserted by Orthofix was deficient.
Thus the lump sum payment is unavailable as a matter of law. And as a result,
Orthofix objects to the absent instruction to the effect the lump sum payment is
unavailable as a form of damages and hereby requests such an instruction.
The trial court denied Orthofix’s objection to question number 2.
Question number 2 of the trial court’s jury charge states:
Question Number 2
What sum of money, if any, paid now in cash, would fairly and reasonably
compensate Phoenix for its damages, if any, that resulted from Orthofix’s
termination of the Sales Representative Agreement you identified in answer to
Question Number 1?
In answering questions about damages, answer each jury question
separately. Do not increase or decrease the amount in one answer because of your
answer to any other questions about damages relating to the other claims in other
questions. Do not speculate about what any party’s ultimate recovery may or may
not be. Any recovery will be determined by the [trial] court when it applies the
law to your answers at the time of judgment.
Consider the elements of damages listed herein for this question and none
other. Do not add any amount for interest on damages, if any.
–19–
The jury answered question number 2 by writing the amount “$668,826” in the space provided.
This amount matched the evidence at trial of the amount calculated to be owed pursuant to the
lump-sum provision in section 9(B) of the agreement.
After the jury returned its verdict, with the trial court’s permission, Phoenix filed its third
amended petition, amending its damages on the breach of contract due to wrongful termination
of the agreement claims to state, in part, “Specifically, Phoenix’s damages are, at a minimum, the
amount equal to the lump sum payment required by the [agreement] when terminated by
Orthofix without cause.”
In its motion for judgment notwithstanding the verdict, Orthofix argued three main
points:
[1.] The [trial court] should disregard the jury’s answer to Question Number 2
and award no recovery to [Phoenix] on its wrongful termination claim because the
without-cause termination fee provided by § 9(B) of the [agreement] was legally
unavailable to [Phoenix] and [Phoenix] stipulated that it suffered no actual
damages.
....
[2.] [T]he termination provisions of the [a]greement are exclusive alternatives.
Only § 9(B) sets forth a stipulated sum to be paid, while termination under § 9(A)
does not trigger any payment. Orthofix elected to terminate the [a]greement
under § 9(A) and undertook the accompanying risk of any litigation that might
arise and the risk of having to pay expectation damages in the form of lost profits;
thus, the separate termination scheme set forth under § 9(B) was never triggered. .
..
Orthofix has found no case allowing a terminated party to recover a without-cause
termination fee following a with-cause termination subsequently found to be
faulty during litigation.
[3.] In a distributor termination case, the proper measure of damages for a
distributor’s claim is its “overall business loss,” which is often in the form of lost
profits. . . . During trial, [Phoenix] stipulated that “it suffered no damages as a
result of the alleged wrongful termination, save and except Orthofix’s failure to
pay the lump sum payment.”
(Emphasis added).
–20–
These arguments are premised on Orthofix’s contention that the jury’s finding that
Orthofix did not terminate with cause under section 9(A) did not allow for the applicability of
section 9(B), which contains the lump-sum provision when the agreement was terminated
without cause. However, in question number 1, the question submitted to the jury was whether
Orthofix complied with section 9(A) of the agreement. The jury was instructed that in order to
terminate for cause, Phoenix must have materially failed to comply with section 5(J) of the
agreement. Orthofix argued at trial that it terminated Phoenix for cause, but the jury disagreed.
Phoenix’s third amended petition claimed the contractually specified damages in section 9(B)
were its damages because it was terminated without cause. The record shows the section 9(B)
sums are the damages Phoenix contended it was due in the testimony presented to the jury. On
appeal, Orthofix argues only that the contractual calculation in section 9(B) of the agreement was
not actual lost profits damages. Orthofix cites to no case law demonstrating the lump-sum
provision in the agreement could not be awarded as Phoenix pleaded.
It is well-settled that upon breach of contract, a party may pursue any remedy which the
law affords in addition to the remedy provided in the contract. See Accent Builders Co. v. Sw.
Concrete Sys., Inc., 679 S.W.2d 106, 109 (Tex. App.—Dallas 1984, writ ref’d n.r.e.); Ganske v.
WRS Grp., Inc., No. 10-06-00050-CV, 2007 WL 1147357, at *4 (Tex. App.—Waco Apr. 18,
2007, no pet.) (mem. op.). It is critical to the resolution of this case that section 9(B) of the
agreement clearly provided for a remedy in the event the agreement was terminated without
cause:
In the event of termination without cause by [Orthofix], [Orthofix] shall pay to
[Phoenix] a lump sum amount equal to the average monthly commission received
by [Phoenix] during the previous six (6) months for each month that would have
remained during the Term of this Agreement or one (1) year, whichever is shorter.
–21–
Accordingly, we conclude the trial court did not err when it denied Orthofix’s motion for
judgment notwithstanding the verdict as to the element of damages for Phoenix’s claim for
breach of contract due to wrongful termination.
Issue two, point two is decided against Orthofix.
C. Promissory Estoppel Claim
In issue one, points two and four, and issue three, points one and two, Orthofix argues the
trial court erred when it denied Orthofix’s motion for directed verdict and motion for judgment
notwithstanding the verdict on Phoenix’s promissory estoppel claim.
1. Motion for Directed Verdict on Promissory Estoppel Claim
As to its motion for directed verdict, Orthofix contends “The statute of frauds [] bars the
alleged oral promise—that Orthofix would share the cost of hiring Malo as a dedicated sales
representative for the Trinity® Evolution™ product—underlying Phoenix’s promissory estoppel
claim.” As a result, Orthofix claims the evidence is legally insufficient to support that claim. In
addition, Orthofix argues the alleged oral promise is governed by section 5(C) of the
representative sales agreement and the evidence is legally insufficient to prove the alleged oral
promise to share costs was outside the terms of the agreement.
Texas Rule of Appellate Procedure 33.1 establishes the prerequisites for preserving an
appellate complaint. TEX. R. APP. P. 33.1. To preserve a point for appellate review, a party must
make a timely, specific objection or motion to the trial court that states the grounds for the ruling
sought with sufficient specificity, unless the grounds are apparent from the context, obtain a
ruling on the complaint, and comply with the rules of evidence or procedure. TEX. R. APP. P.
33.1.
In its motion for directed verdict, the only argument Orthofix made with respect to the
promissory estoppel claim relating to the agreement to share the expenses for Malo was
–22–
“Phoenix has failed to present evidence raising a fact issue as to the existence of an agreement
regarding Cheri Malo.” During the hearing on Orthofix’s motion for directed verdict, the trial
court inquired, “So now, what about the claim for promissory estoppel regarding the alleged
agreement for Cheri Malo’s expenses? Why do you believe I should grant directed verdict on
that? . . . . Why would promissory estoppel not fit there?” Counsel for Orthofix withdrew the
argument, stating:
I was really thinking of the contract termination lump sum payment. I don’t think
the same arguments apply to Cheri Malo because I can’t think of any reason why
she’s within the statute of frauds or—and you’re right that if those—you know,
whatever those damages were, they were of reliance nature. So I’m not going to
quarrel with you on Cheri Malo.
In its order disposing of Orthofix’s motion for directed verdict, the trial court granted the motion
as to the alternative claim for promissory estoppel relating to the wrongful termination of the
agreement, but denied the motion as to the unpleaded claim for promissory estoppel “as to the
hiring of [] Malo.”
We conclude Orthofix has failed to preserve for appeal its argument that the trial court
erred when it denied Orthofix’s motion for directed verdict on Phoenix’s claim for promissory
estoppel. See TEX. R. APP. P. 33.1. The second point of issue one and the first point of issue
three are decided against Orthofix.
2. Motion for Judgment Notwithstanding the Verdict on Promissory Estoppel Claim
As to its motion for judgment notwithstanding the verdict, Orthofix argues “The statute
of frauds [] bars the alleged oral promise—that Orthofix would share the cost of hiring Malo as a
dedicated sales representative for the Trinity® Evolution™ product—underlying Phoenix’s
promissory estoppel claim.” As a result, Orthofix claims the evidence is legally insufficient to
support that claim. In addition, Orthofix argues the alleged oral promise is governed by section
5(C) of the agreement and the evidence is legally insufficient to prove the alleged oral promise to
–23–
share costs was outside the terms of the agreement. Phoenix responds that its promissory
estoppel claim “does not seek to alter, counter, or defeat its responsibility and liability for []
Malo.” Phoenix claims that Phoenix “took and assumed full responsibility and liability for []
Malo,” by recruiting, training, and paying her.
a. Applicable Law
In some cases, promissory estoppel is used as a counter-defensive plea. Frost Crushed
Stone Co. v. Odell Geer Constr. Co., 110 S.W.3d 41, 46 n.1 (Tex. App.—Waco 2002, no pet.).
In those circumstances, promissory estoppel may be used to bar the application of the statute of
frauds and allow enforcement of an otherwise unenforceable oral promise. Id. Promissory
estoppel defeats a statute of frauds defense if a plaintiff proves all elements of a cause of action
for promissory estoppel in addition to showing that the defendant promised to sign a written
document complying with the statutes of frauds. Ortiz v. Collins, 203 S.W.3d 414, 425 (Tex.
App.—Houston [14th Dist.] 2006, no pet.).
Although promissory estoppel is normally a counter-defensive theory, it is an available
cause of action to a promisee who relied to his detriment on an otherwise unenforceable promise.
See Frost, 110 S.W.3d at 44; Bechtel Corp. v. Citgo Products Pipeline Co., 271 S.W.3d 898, 926
(Tex. App.—Austin 2008, no pet.). Generally, promissory estoppel is a viable alternative to
breach of contract. Trevino & Assocs. Mech., L.P. v. Frost Nat’l Bank, 400 S.W.3d 139, 146
(Tex. App.—Dallas 2013, no pet.); Allied Vista, Inc. v. Holt, 987 S.W.2d 138, 141 (Tex. App.—
Houston [14th Dist.] 1999, pet. denied). The promissory estoppel doctrine presumes that no
contract exists. Subaru of Am., Inc. v. David McDavid Nissan, Inc., 84 S.W.3d 212, 226 (Tex.
2002). Although promissory estoppel is not applicable to a promise covered by a valid contract
between the parties, promissory estoppel will apply to a promise outside a contract. Trevino, 400
–24–
S.W.3d at 146; see Richter v. Wagner Oil Co., 90 S.W.3d 890, 899 (Tex. App.—San Antonio
2002, no pet.).
The parol evidence rule excludes only prior and contemporaneous negotiations. See
Garcia v. Karam, 276 S.W.2d 255, 258 (Tex. 1955); Sheffield v. Gibson, No. 14-06-00483-CV,
2008 WL 190049, *3 (Tex. App.—Houston [14th Dist.] Jan. 22, 2008, no pet.) (mem. op.). The
parol evidence rule does not apply to agreements made subsequent to the written agreement.
Lakeway Co. v. Leon Howard, Inc., 585 S.W.2d 660, 662 (Tex. 1979); Garcia, 276 S.W.2d at
258; Sheffield, 2008 WL 190049, at *3; Digby v. Tex. Bank, 943 S.W.2d 914, 928 (Tex. App.—
El Paso 1997, writ denied); Mortgage Co. of Am. v. McCord, 466 S.W.2d 868, 871 (Tex. Civ.
App.—Houston [14th Dist.] 1971, writ ref’d n.r.e.) (“Extrinsic evidence may always be offered
to show a new agreement or that an existing written contract has been changed, waived, or
abrogated in whole or in part.”).
b. Application of the Law to the Facts
Question number 3 of the jury charge contained one question and states, “Did Phoenix
and Orthofix agree to share in the expense of a dedicated biologics sales representative (Cheri
Malo) for the Boston area?” The jury answered “No” to question number 3, finding there was no
agreement. Orthofix does not challenge the jury’s answer to question number 3 on appeal.
Because the jury answered “No,” to question number 3, they were instructed to proceed to
question number 5, which contained one question and some instructions:
Question Number 5
Did Phoenix reasonably and substantially rely to its detriment on
Orthofix’s promise, if any, to share in the expense of a dedicated biologics sales
representative (Cheri Malo) for the Boston area, and was this reliance foreseeable
by Orthofix?
For a person’s reliance to be reasonable, he must have exercised
reasonable diligence in protecting his own interests. A person’s failure to protect
–25–
his own interests is not excused by his confidence in the honesty and integrity of
the other party.
A party’s conduct includes the conduct of another who acts with the
party’s authority or apparent authority.
Authority for another to act for a party must arise from the party’s
agreement that the other act on behalf of and for the benefit of the party. If the
party so authorizes another to perform an act, that other party is also authorized to
do whatever else is proper, usual, and necessary to perform the act expressly
authorized.
Apparent authority exist f a party (1) knowingly permits another to hold
himself out as having authority or, (2) through lack of ordinary care, bestows
upon an another such indication of authority that lead a reasonably prudent person
to rely on the apparent existence of authority to his detriment. Only the acts of
the party sought to be charged with responsibility for the conduct of another may
be considered in determining whether apparent authority exists.
The jury answered “Yes” to question number 5.
First, we address Orthofix’s claim that the statute of frauds bars the oral promise made by
Orthofix to Phoenix that it would share in the costs associated with Malo. However, Phoenix did
not assert promissory estoppel as a counter-defense to the affirmative defense of statute of
frauds. See Frost Crushed Stone, 110 S.W.3d at 46 n.1. Instead, Phoenix sought affirmative
relief under the equitable doctrine of promissory estoppel based on the premise that it
detrimentally relied on Orthofix’s oral promise to share in the costs of Malo. Orthofix’s statute
of frauds argument ignores the basic contention and legal authority under which Phoenix’s
promissory estoppel claim was brought. See Frost Crushed Stone, 110 S.W.3d at 44. Further,
the jury found that Phoenix and Orthofix did not agree to share the costs associated with Malo
and, on appeal, Orthofix does not challenge that finding by the jury.
Second, we address Orthofix’s claim that the alleged oral promise is governed by section
5(C) of the agreement and the evidence is legally insufficient to prove the alleged oral promise to
share costs associated with Malo was outside the terms of that agreement. Orthofix argues that
the written agreement “extinguished any purported prior promise or understanding between the
–26–
parties, in accordance with the merger doctrine, the parol evidence rule, and the express terms of
the agreement.” However, the parol evidence rule excludes only prior and contemporaneous
negotiations. See Garcia, 276 S.W.2d at 258; Sheffield, 2008 WL 190049, at *3. Orthofix’s
alleged promise to share in the expense of the “sales specialist,” Malo, for the Boston area
occurred after the agreement was executed. As a result, the parol evidence rule does not apply to
Orthofix’s alleged oral promise to the share costs associated with Malo as it was outside the
terms of the agreement. See Lakeway, 585 S.W.2d at 662; Garcia, 276 S.W.2d at 258; Sheffield,
2008 WL 190049, at *3; Digby, 943 S.W.2d at 928; McCord, 466 S.W.2d at 871.
We conclude the trial court did not err when it denied Orthofix’s motion for judgment
notwithstanding the verdict on Phoenix’s claim for promissory estoppel. The fourth point of
issue one and the second point of issue three are decided against Orthofix.
III. ATTORNEYS’ FEES
In its sole issue on cross-appeal, Phoenix argues the trial court erred, as a matter of law,
when it refused to award Phoenix all of its attorneys’ fees. Phoenix argues that its counsel
provided an “extensive affidavit” detailing the efforts undertaken in the lawsuit and explained
how the $340,322.75 in requested attorneys’ fees “advanced all of the claims asserted by
Phoenix against Orthofix and the necessity of such legal services.” Also, Phoenix argues the
only controverting evidence offered by Orthofix was an unverified declaration, arguing
Phoenix’s counsel failed to properly segregate their fees. Orthofix responds, in part, that
Phoenix failed to satisfy its burden to segregate attorneys’ fees.
A. Standard of Review
An appellate court reviews a trial court’s decision to award attorneys’ fees for an abuse of
discretion. El Apple I, Ltd. v. Olivas, 370 S.W.3d 757, 761 (Tex. 2012); Classic Superoof LLC v.
Bean, No. 05-12-00941-CV, 2014 WL 5141660, *8 (Tex. App.—Dallas Dec. 17, 2014, pet.
–27–
denied) (mem. op.); Jarvis v. Rocanville, 298 S.W.3d 305, 318 (Tex. App.—Dallas 2009, pet.
denied). If attorneys’ fees are proper under section 38.001(8) of the Texas Civil Practice and
Remedies Code, the trial court has no discretion to deny them. Smith v. Patrick W.Y. Tam Trust,
296 S.W.3d 545, 547 (Tex. 2009).
The sufficiency of the evidence to support the amount of the award is a relevant factor in
assessing whether the trial court abused its discretion. Jarvis, 298 S.W.3d at 318. Accordingly,
an appellate court reviews the amount awarded under legal and factual sufficiency standards. Se.
Pipe Line Co. v. Tichacek, 997 S.W.2d 166, 173 (Tex. 1999) (remanding to court of appeals, in
part, for consideration of factual sufficiency of attorneys’ fees); Am. Nat’l Petroleum Co. v.
Transcon. Gas Pipe Line Corp., 798 S.W.2d 274, 280 (Tex. 1990) (remanding to court of
appeals, in part, for consideration of factual sufficiency of attorneys’ fees); Classic Superoof,
2014 WL 5141660, at *8 (legal sufficiency); Brockie v. Webb, 331 S.W.3d 135, 138–39 (Tex.
App.—Dallas 2010, no pet.) (Brockie II) (legal and factual sufficiency); Aaron Rents, Inc. v.
Travis Cent. Appraisal Dist., 212 S.W.3d 665, 671 (Tex. App.—Austin 2006, no pet.) (legal
sufficiency); Cannon v. Castillo, No. 11-12-00256-CV, 2014 WL 3882190, at *3–4 (Tex.
App.—Eastland Aug. 7, 2014, no pet.) (mem. op.) (factual sufficiency).
In reviewing the sufficiency of the evidence supporting an award of attorneys’ fees, an
appellate court considers the following factors: (1) the time and labor required, the novelty and
difficulty of the questions involved, and the skill required to perform the legal service properly;
(2) the likelihood that the acceptance of the particular employment will preclude other
employment; (3) the fee customarily charged in the locality for similar legal services; (4) the
amount involved and the results obtained; (5) the time limitations imposed by the client or by the
circumstances; (6) the nature and length of the professional relationship with the client; (7) the
experience, reputation, and ability of the lawyer or lawyers performing the services; and (8)
–28–
whether the fee is fixed or contingent on results obtained or uncertainty of collection before the
legal services have been rendered. See TEX. DISCIPLINARY R. PROF’L CONDUCT 1.04(b),
reprinted in TEX. GOV’T CODE ANN. tit. 2, subtit. G app. A (West 2013); El Apple, 370 S.W.3d at
760-61; Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997);
Brockie II, 331 S.W.3d at 138–39. When reviewing the record, an appellate court determines
whether any evidence supports the award of attorneys’ fees. Brockie II, 331 S.W.3d at 135, 138–
39; Good v. Baker, 339 S.W.3d 260, 268 (Tex. App.—Texarkana 2011, pet. denied).
B. Applicable Law
A party may recover attorneys’ fees only as provided by contract or statute. Tex.
Worldwide Asset Purchasing, L.L.C. v. Rent-A-Center E., Inc., 290 S.W.3d 554, 570 (Tex.
App.—Dallas 2009, no pet.). Section 38.001(8) of the Texas Civil Practice and Remedies Code
allows the recovery of attorneys’ fees from an individual or corporation, in addition to the
amount of a valid claim and costs, if the claim is for an oral or written contract. TEX. CIV. PRAC.
& REM. CODE ANN. § 38.001(8) (West 2015); Smith, 296 S.W.3d at 547; Classic Superoof, 2014
WL 5141660, at *8. To recover attorneys’ fees under section 38.001, a plaintiff must: (1) prevail
on a cause of action for which attorneys’ fees are recoverable; and (2) recover damages. Classic
Superoof, 2014 WL 5141660, at *8 (citing Woodhaven Partners, Ltd. v. Shamoun & Norman,
L.L.P., 422 S.W.3d 821, 846 (Tex. App.—Dallas 2014, no pet.)).
To calculate reasonable attorneys’ fees, the fact-finder should multiply the number of
hours worked by the attorney’s hourly rate. See Guity v. C.C.I. Enter. Co., 54 S.W.3d 526, 528
(Tex. App.—Houston [1st Dist.] 2001, no pet.). The resulting amount is commonly referred to
as the “lodestar” figure. Guity, 54 S.W.3d at 528. The party applying for the award of attorneys’
fees under the lodestar method bears the burden of proof or “documenting the hours expended on
–29–
the litigation and the value of those hours.” El Apple, 370 S.W.3d at 761–63; Smith, 296 S.W.3d
at 547.
When applying for a fee under the lodestar method, the applicant must provide sufficient
details of the work performed before the court can make a meaningful review of the fee request.
El Apple, 370 S.W.3d at 764. For purposes of lodestar calculations, this evidence includes, at a
minimum, documentation of: (1) the nature of the work; (2) who performed the services and their
rate, e.g., if multiple attorneys or other legal professionals are involved in a case, the fee
application should indicate which attorney performed a particular task or category of tasks; (3)
approximately when the services were performed; and (4) the number of hours worked. El
Apple, 370 S.W.3d at 763, 764. Although an attorney could testify to these details, in all but the
simplest cases, the attorney would probably have to refer to some type of record or
documentation to provide this information. El Apple, 370 S.W.3d at 763.
C. Application of the Law to the Facts
Prior to Phoenix resting its case in chief, the parties stipulated that, if Phoenix prevailed,
the issue of Phoenix’s attorneys’ fees would be submitted to the trial court. After the jury
returned a verdict in favor of Phoenix, it filed an application for the award of attorneys’ fees
attaching the affidavit of Phoenix’s attorney as evidence. Phoenix sought a total of $340,322.75
in attorneys’ fees. In Orthofix’s written response to Phoenix’s application for an award of
attorneys’ fees, Orthofix stated, in part, “[Phoenix’s] requested fee should not stand and should
instead be reduced from $340,322.75 to $200,000.00, which is more than a reasonable and
necessary fee for the claims that were tried and for which fees are recoverable.” During the
hearing on attorneys’ fees, the trial court specifically asked Phoenix’s attorney if he thought
there was “any problem with [his] affidavit,” and Phoenix’s attorney answered, “I do not.” Also,
the trial court noted that Orthofix’s attorney had conceded that Phoenix was entitled to $200,000
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in attorneys’ fees. The trial court’s order granting Phoenix’s application for attorneys’ fees states
that the application is “modified consistent with [the] amount awarded in [the] final judgment.”
The final judgment awarded Phoenix, in part, $200,000 in attorneys’ fees. Accordingly, we
review the evidence to determine whether Phoenix proved, as a matter of law, that it was entitled
to the additional $140,322.75, constituting the remainder of the requested attorneys’ fees.
In this case, Phoenix’s attorney sought a total of $340,322.75, but did not indicate in his
affidavit how the “1,028.25 hours in partner time, 138.40 hours in of counsel and senior
associate time, 156 hours in associate time, and 23.4 hours in paralegal time” were devoted to
any particular task or category of tasks. See El Apple, 370 S.W.3d at 763. Although the affidavit
supporting the fee application acknowledges that the attorneys and paralegals billed at different
rates, it did not indicate which attorneys or paralegals performed a particular task or category of
tasks. See El Apple, 370 S.W.3d at 763. Nor did Phoenix’s attorney present time records or
other documentary evidence of the services performed, who performed them and at what hourly
rate, when they were performed, and how much time the work required. See El Apple, 370
S.W.3d at 763–64. Instead, Phoenix’s attorney based his firm’s time estimates on generalities
such as the amount of discovery in the case, and a general description of the factual allegations
and the causes of action involved in the case. Further, in his affidavit, Phoenix’s attorney makes
the general assertion that:
The foregoing billing rates and attorney’s fees were customary, reasonable,
necessary, and appropriate in conjunction with the prosecution of Phoenix’s
claims in this action. In this regard, I am familiar with and have knowledge of the
fees charged in the north Texas area for substantially similar litigation. The time
expended by me and the other personnel performing the legal services rendered to
Phoenix and the fees charged as fully described herein were customary,
reasonable, necessary, and appropriate given (1) the time and labor required, the
novelty and difficulty of the issues presented, and the skill required to properly
perform the legal services, (2) the likelihood that Phoenix’s representation by
[counsel] would preclude it from other employment and engagements, (3) the fees
customarily charged in north Texas for similar legal services, (4) the amount in
controversy and the results obtained in this action[,] (5) the time limitations
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imposed by Phoenix and by the circumstances surrounding this action, (6) the
nature of the professional relationship between Phoenix and [counsel], (7) the
experience, reputation, and ability of [counsel] and the other [] personal
performing the services I have described, and (8) attorney’s fees Phoenix agreed
to following the performance of the legal services described herein and having
been previously rendered.
Phoenix’s attorney’s affidavit provides none of the specificity needed for the trial court to make
a meaningful lodestar determination. See El Apple, 370 S.W.3d at 763.
We conclude the evidence is legally insufficient to establish Phoenix was entitled to an
award of the additional $140,322.75 in attorneys’ fees as a matter of law. We express no opinion
as to award of attorneys’ fees in the amount $200,000 because, on appeal, Orthofix does not
challenge the amount of the award of attorneys’ fees and, at trial, Orthofix conceded that
Phoenix was entitled to $200,000 in attorneys’ fees. Phoenix’s sole issue on cross-appeal is
decided against it.
IV. CONCLUSION
The trial court did not err when it denied Orthofix’s motion for a directed verdict and
motion for judgment notwithstanding the verdict on Phoenix’s claims for breach of contract due
to wrongful termination and promissory estoppel. Also, the trial court did not err when it
declined to award Phoenix all of the requested attorneys’ fees.
The trial court’s final judgment is affirmed.
130870F.P05
/Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE
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Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
BLACKSTONE MEDICAL, INC. D/B/A On Appeal from the County Court at Law
ORTHOFIX SPINAL IMPLANTS, No. 4, Dallas County, Texas
Appellant Trial Court Cause No. CC-11-00902-D.
Opinion delivered by Justice Lang. Justices
No. 05-13-00870-CV V. Bridges and Lang-Miers participating.
PHOENIX SURGICALS, L.L.C., Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.
It is ORDERED that appellee Phoenix Surgicals, L.L.C., recover its costs of this appeal
from appellant Blackstone Medical, Inc. d/b/a Orthofix Spinal Implants and from Westchester
Fire Insurance Company as surety on appellant’s cost bond; and the full amount of the trial
court’s judgment and the costs of this appeal, to the extent that they exceed the liability of
Westchester Fire Insurance Company as surety on appellant’s cost bond, from appellant
Blackstone Medical, Inc. d/b/a Orthofix Spinal Implants and from Westchester Fire Insurance
Company as surety on appellant’s supersedeas bond.
Judgment entered this 22nd day of July, 2015.
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