Joseph W. Peine v. Elite Airfreight, Inc. ( 2016 )

Opinion issued August 11, 2016
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-14-00860-CV
———————————
JOSEPH W. PEINE, Appellant
V.
ELITE AIRFREIGHT, INC., Appellee
On Appeal from the 189th District Court
Harris County, Texas
Trial Court Case No. 2008-61097
MEMORANDUM OPINION
Appellant Joseph W. Peine appeals from a directed verdict rendered against
him in his breach of contract suit against appellee Elite Airfreight, Inc.1 In three
1
The trial court also granted a directed verdict against appellant on his claims against
another defendant, Advanced Logistics Services, Inc. (ALSI). Appellant is not
challenging this ruling on appeal. Because ALSI did not file a notice of appeal in
issues, appellant argues that the trial court: (1) erred by granting the directed verdict,
(2) abused its discretion by excluding the testimony of Elite’s former legal counsel,
and (3) abused its discretion by sealing portions of the record. We affirm.
Background
Appellant sued Elite for breach of contract.2 In his live pleading at trial,
appellant pleaded that Elite and Schlumberger Technology Corporation were the
sole parties to a contract to manage inventory for Schlumberger, Elite formed and
used Advanced Logistics Services, Inc. (ALSI) to manage the Schlumberger
inventory, and that Elite and ALSI were joint venturers or members of a joint
enterprise. Appellant further alleged that problems had arisen in managing the
inventory and that Elite hired him as a general manager in October 2002 “to turn
around the Schlumberger inventory control problems,” and “to salvage the
Schlumberger contract.” Specifically, appellant alleged that he entered into five one-
year service contracts with Elite from 2002 to 2006, and that under the terms of those
contracts, Elite agreed to pay appellant a salary, plus “a fifty percent (50%) bonus
this case and appellant did not raise any issues or points of error in his brief against
ALSI, ALSI is not a party to this appeal. See Showbiz Multimedia, LLC v. Mountain
States Mortg., Ctrs., Inc., 303 S.W.3d 769, 771 nn.2, 3 (Tex. App.—Houston [1st
Dist.] 2009, no pet.) (citing TEX. R. APP. P. 3.1(a), (c), 38.8(a)(1) and 42.3; Gray v.
Allen, 41 S.W.3d 330, 331 n.2 (Tex. App.—Fort Worth 2001, no pet.)).
2
Appellant also asserted claims against Elite for quantum meruit, common law fraud,
conversion, tortious interference with a prospective relationship, and slander and/or
defamation of business reputation, but the trial court granted summary judgment on
those claims, and appellant is not challenging those rulings on appeal.
2
of the gross profits Elite showed for [that] calendar year.”3 Appellant alleged that
Elite materially breached all five contracts by failing to pay appellant his bonus any
of those years.
At trial, appellant testified that he met with Elite’s president, Bobby Hale, in
October 2002 to discuss employment. Appellant’s brother, Edward Peine, who was
Elite’s attorney, had initially approached appellant about the opportunity and was
present at the meeting.
Appellant testified that during that meeting Hale hired him to be the “General
Manager of a cost center for Elite,” that appellant identified as ALSI. Appellant
explained that although Hale did not describe it as such, appellant understood that
he was being hired to manage a “warehouse operation that was run for the benefit of
Elite which [appellant] interpreted to be a cost center.” When asked if he and Hale
had a discussion about whom appellant would be working for, appellant answered:
“I was working for Elite.”
According to appellant, he and Hale agreed to model appellant’s
compensation on a written employment contract that ALSI had with one of
appellant’s predecessors. Hale told appellant that although that employee’s contract
3
Appellant attempted unsuccessfully to amend his petition two more times after the
docket control order’s pleading amendment deadline had passed. The trial court
struck appellant’s Third Amended Petition and denied appellant leave to file his
Fourth Amended Petition.
3
had been with ALSI, ALSI no longer existed as an entity and all of ALSI’s stock
had been transferred to Elite. Hale also informed appellant that instead of receiving
stock in the company, as his predecessor had, appellant would receive a bonus of
50% of the business’s gross profits. Appellant also testified that in January 2003,
January 2004, January 2005, and January 2006, he and Hale reaffirmed their October
2002 employment agreement, under the terms of which appellant’s compensation
included a bonus of “50 percent of ALSI’s gross profit.”
Appellant testified that he started working for Elite the next day. The record
includes a number of forms that appellant completed when he began working in
2002, including a substance abuse prevention policy that identified both “Elite Air
Freight Inc./Administaff” and ALSI as appellant’s employer. All of the other forms
admitted in evidence at trial, as well as appellant’s W-2 forms for 2002-2006,
identified appellant’s employer as either ALSI or Administaff. Furthermore,
appellant drafted two résumés after April 2006 in which he claimed that he had been
employed as a warehouse manager for ALSI from October 2002 to April 2006. The
record also contains emails and other correspondence between Hale and appellant,
as well as transcripts of recorded conversations between appellant and one or more
of Elite’s shareholders in 2006.
Appellant’s brother, Edward, served as Elite’s legal counsel until 2003 in a
wide variety of corporate and litigation matters and also represented ALSI for many
4
years. Edward was deposed prior to trial after appellant designated him as a fact and
expert witness in the case. At trial, the court sustained Elite’s objection to Edward’s
testimony based on attorney-client privilege. In a bill of exceptions, Edward
explained that he would have offered testimony at trial describing the content of
conversations that he claims to have had with Hale about the companies’ financial
health, business deals, employment matters, and the terms of future potential
contracts. Among other things, Edward explained that he attended Hale’s October
2002 meeting with appellant and he would testify as to the contents of that meeting.
Appellant’s proffer includes Edward’s live testimony and the transcript of Edward’s
deposition testimony, both of which were filed under seal with this court. 4 At the
close of appellant’s case, the court granted a directed verdict in favor of Elite.
Directed Verdict
In his first issue, appellant argues that the trial court erred by rendering a
directed verdict against him because he produced some evidence of each element of
his breach of contract claims against Elite.
A. Standard of Review
We review directed verdicts under the same legal-sufficiency standard that
applies to no-evidence summary judgments. City of Keller v. Wilson, 168 S.W.3d
4
The trial court also sealed the exhibits to appellant’s responses to the defendants’
no-evidence and traditional motions for summary judgment that were filed in 2009.
Appellant is not specifically complaining about the sealing of these materials.
5
802, 823–24 (Tex. 2005); see also Merriman v. XTO Energy, Inc., 407 S.W.3d 244,
248 (Tex. 2013) (citing King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 750 (Tex.
2003)). We sustain a legal-sufficiency point when (1) there is a complete absence of
evidence regarding a vital fact, (2) rules of law or evidence preclude according
weight to the only evidence offered to prove a vital fact, (3) the evidence offered to
prove a vital fact is no more than a scintilla, or (4) the evidence conclusively
establishes the opposite of the vital fact. City of Keller, 168 S.W.3d at 810. We
consider the evidence in the light most favorable to the nonmovant, crediting
evidence a reasonable jury could credit and disregarding contrary evidence and
inferences unless a reasonable jury could not. Id. at 827. Conclusive evidence cannot
be disregarded. See id. at 816 (“Evidence is conclusive only if reasonable people
could not differ in their conclusion.”) The nonmovant bears the burden to identify
evidence before the trial court that raises a genuine issue of material fact as to each
challenged element of its cause of action. See Johnson v. Brewer & Pritchard, P.C.,
73 S.W.3d 193, 210 (Tex. 2002). A directed verdict in favor of the defendant is
proper if the plaintiff “fails to present evidence raising a fact issue essential to [its]
right of recovery,” or “admits or the evidence conclusively establishes a defense to
[its] cause of action.” Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29
S.W.3d 74, 77 (Tex. 2000). We may affirm a directed verdict on any ground that
6
supports it. Exxon Corp. v. Breezevale Ltd., 82 S.W.3d 429, 443 (Tex. App.—Dallas
2002, pet. denied).
B. Applicable Law
To prevail on a breach-of-contract claim, a party must prove that (1) a valid
agreement between plaintiff and defendant existed, (2) the plaintiff performed or
tendered performance, (3) the defendant breached the agreement, and (4) the
plaintiff sustained damages as a result of the breach. Beverick v. Koch Power, Inc.,
186 S.W.3d 145, 150 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) (citing
Prime Prods., Inc. v. S.S.I. Plastics, Inc., 97 S.W.3d 631, 636 (Tex. App.—Houston
[1st Dist.] 2002, pet. denied)). The elements of a valid contract are: (1) an offer, (2)
an acceptance, (3) a meeting of the minds, (4) each party’s consent to the terms, and
(5) execution and delivery of the contract with the intent that it be mutual and
binding. See Beverick, 186 S.W.3d at 150 (citing Prime Prods., 97 S.W.3d at 636).
The necessary elements of written and oral contracts are the same and must be
present for a contract to be binding. See Wal–Mart Stores, Inc. v. Lopez, 93 S.W.3d
548, 555 (Tex. App.—Houston [14th Dist.] 2002, no pet.). In determining the
existence of an oral contract, courts look to the communications between the parties
and to the acts and circumstances surrounding those communications. Beverick, 186
S.W.3d at 150–51 (citing Prime Prods., 97 S.W.3d at 636).
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C. Analysis
Elite argues that the trial court correctly granted a directed verdict on
appellant’s breach of contract claims because the evidence was legally insufficient
to establish that a meeting of the minds occurred with respect to the amount of profits
that appellant was promised and there was no evidence that appellant incurred any
damages as a result of the alleged breach of the 2002 contract.
Appellant testified in great detail about a meeting he had with Hale, Elite’s
president, in October 2002 during which time Hale offered to hire him to work for
Elite managing the warehousing business that serviced Elite’s Schlumberger
contract. The discussion centered on an examination of a written contract that had
been executed by ALSI and a previous manager whose place appellant was taking.
Appellant and Elite did not enter into a written contract but had an oral agreement
which incorporated some, but not all, of the provisions of the previous employee’s
written contract.
Appellant testified that he and Hale agreed that appellant’s compensation
included an annual base salary of $120,000, plus a bonus of 50% of the gross profits
from the warehousing business.5 Appellant also testified at trial in 2014 that he and
5
Appellant testified that although ALSI is a separate legal entity from Elite, ALSI
and Elite shared common finances and control. According to appellant, ALSI ran
the warehousing business that serviced Elite’s Schlumberger contract and
Schlumberger was ALSI’s only customer.
8
Hale reached agreements in January 2003, January 2004, January 2005, and January
2006 that, in his opinion, reaffirmed their 2002 employment agreement which
entitled him to a bonus of “50 percent of ALSI’s gross profit” for each year.
Appellant did not offer testimony of any additional facts to support his assertion
relating to the formation of the alleged 2003-2006 oral employment contracts.
Appellant further testified that although he managed the warehousing business
from 2002 to 2006, he never received the full amount of the bonus he was owed.
Appellant also offered evidence at trial showing the gross profits derived from the
warehousing business from 2003-2006 that his unpaid bonus was supposedly based
upon, as well as the amount of compensation he actually received during his
employment. Appellant testified that he was not owed any bonus for 2002.
Elite argues that the trial court correctly granted a directed verdict in its favor
on appellant’s 2002 breach of contract claim because appellant did not present any
evidence to support the damages element of that claim. Although appellant alleged
that Elite materially breached the 2002 contract by failing to pay him his bonus for
that year, appellant testified at trial that he was not owed any bonus for 2002. Thus,
appellant’s testimony establishes that he was not damaged by Elite’s alleged breach
of the 2002 contract because appellant was not owed a bonus for that year.
Accordingly, the trial court did not err in granting a directed verdict in Elite’s favor
with respect to appellant’s claim for breach of the 2002 oral contract.
9
Appellant’s 2014 trial testimony that he believed that he and Hale had reached
agreements in 2003, 2004, 2005, and 2006 that, in his opinion, reaffirmed their 2002
agreement for those years is not evidence of a meeting of the minds sufficient to
constitute an agreement that appellant would receive a bonus of 50% of ALSI’s gross
profits for 2003–2006. See Celmer v. McGarry, 412 S.W.3d 691, 702 (Tex. App.—
Dallas 2013, pet. denied) (“But Celmer’s subjective belief about terms of a purported
second agreement several years after it was allegedly formed is not evidence of a
meeting of the minds sufficient to constitute an agreement that McGarry would
receive 50% of Celmer’s entire recovery, plus $200 per hour for his services, plus
expenses.”); see also Paciwest, Inc. v. Warner Alan Props., LLC, 266 S.W.3d 559,
567–68 (Tex. App.—Fort Worth 2008, pet. denied) (determination of whether
meeting of minds has occurred is based on objective standard; evidence of party’s
subjective belief years later of what contract says or whether amendment occurred
is not relevant to whether there was meeting of minds sufficient to amend contract).
There is no other evidence in the record supporting appellant’s claims that he
and Elite entered into one-year oral employment contracts in January 2003, January
2004, January 2005, and January 2006, and that both parties agreed that appellant
would be paid a 50% bonus based on gross profits for those years. See Beverick, 186
S.W.3d at 150 (setting forth elements of valid oral contract, including “meeting of
the minds,” and stating that existence of valid contract is essential element of breach
10
of contract claim). Because appellant has failed to present sufficient evidence that
he and Elite had a meeting of the minds with respect to the alleged 2003, 2004, 2005,
and 2006 oral contracts, the trial court did not err in rendering a directed verdict
against appellant on these claims. See Prudential Ins. Co. of Am., 29 S.W.3d at 77;
City of Keller, 168 S.W.3d at 810.
We overrule appellant’s first issue with respect to appellant’s claims for
breaches of the 2002, 2003, 2004, 2005, and 2006 oral contracts.
Exclusion of Testimony and Sealing of Portion of Court’s Record
In his second and third issues, appellant argues that the trial court abused its
discretion when it excluded Edward’s testimony and sealed a portion of the record
based upon the court’s erroneous conclusion that Edward’s testimony was protected
by the attorney-client privilege.
A. Standard of Review
We review a trial court’s exclusion of evidence and its decision to seal court
records for an abuse of discretion. See U–Haul Int’l, Inc. v. Waldrip, 380 S.W.3d
118, 132 (Tex. 2012) (exclusion of evidence); BP Prods. N. Am., Inc. v. Hous.
Chronicle Publ’g Co., 263 S.W.3d 31, 34 (Tex. App.—Houston [1st Dist.] 2006, no
pet.) (sealing of court records). A trial court abuses its discretion if it acts without
regard for guiding rules or principles. U–Haul Int’l, Inc., 380 S.W.3d at 132; BP
Prods. N. Am., Inc., 263 S.W.3d at 34. We can only reverse the trial court’s
11
judgment, however, if the error probably caused the rendition of an improper
judgment or prevented appellant from properly presenting his case on appeal. TEX.
R. APP. P. 44.1(a); see also Madison v. Williamson, 241 S.W.3d 145, 151 (Tex.
App.—Houston [1st Dist.] 2007, pet. denied).
We construe orders and contracts under the same rules of interpretation. See
Icon Benefit Adm’rs II, L.P. v. Mullin, 405 S.W.3d 257, 264 (Tex. App.—Dallas
2013, orig. proceeding [mand. denied]); Payless Cashways, Inc. v. Hill, 139 S.W.3d
793, 795 (Tex. App.—Dallas 2004, no pet.). When a written instrument is so worded
that it can be given a certain or definite legal meaning or interpretation, the court
will construe the document as a matter of law. See Coker v. Coker, 650 S.W.2d 391,
393 (Tex. 1983).
B. Attorney-Client Privilege
The attorney-client privilege is governed by Rule 503 of the Texas Rules of
Evidence. TEX. R. EVID. 503. Under this rule, a “client has a privilege to refuse to
disclose and to prevent any other person from disclosing confidential
communications made to facilitate the rendition of professional legal services to the
client.” Id. 503(b)(1). The client waives the attorney-client privilege if he discloses
or consents to the disclosure of any significant part of the privileged matter, unless
such disclosure itself is privileged. See TEX. R. EVID. 511(1); see also In re JDN
Real Estate–McKinney L.P., 211 S.W.3d 907, 922–23 (Tex. App.—Dallas 2006,
12
orig. proceeding [mandamus denied]) (stating general rule that no attorney-client
privilege attaches to communications made in presence of or disclosed to third
party).
C. Analysis
Appellant argues that Elite waived its attorney-client privilege when it
deposed Edward and elicited testimony from its former legal counsel divulging
information and communications that Elite now claims are privileged. Elite contends
that it did not waive the attorney-client privilege by taking Edward’s deposition
because the deposition was taken pursuant to a confidentiality order which
“preserved the parties’ rights to assert the confidentiality of any information in this
suit.”
The parties entered into an Agreed Confidentiality and Protective Order
(Order) prior to Edward’s deposition. The Order states in part:
Neither the taking of, nor the failure to take, any action to enforce the
provisions of this Order, nor the failure to object to any act or omission,
waives any claim or defense in this lawsuit, including any claim or
defense that information is or is not proprietary, secret, or confidential.
Citing to this language, Elite argues on appeal that the Order “make[s] clear that the
parties were free to engage in discovery to determine the underlying facts of this
dispute, without waiving any subsequently asserted claim, defense, or privilege.”
Elite’s attempt to shoehorn the facts of this case into the Order’s non-waiver
clause is of no avail. The plain language of the Order states that a party does not
13
waive any claim or defense under two circumstances: (1) by taking (or not taking)
“any action to enforce the provisions of [the] Order,” or (2) by “fail[ing] to object to
any act or omission.”6 The alleged waiver in this case is not the result of Elite’s
attempt to enforce the Order, failure to enforce the Order, or Elite’s failure to object
to any act or omission. On the contrary, the conduct at issue here involves affirmative
actions taken by Elite during the course of this litigation—specifically, Elite’s
counsel’s eliciting of testimony from Edward regarding information that Edward
acquired during his representation of Elite and ALSI, and communications between
Edward and Hale, including the 2002 meeting between them—information and
communications that Elite now contends are privileged. These affirmative steps
taken by Elite are not covered by the plain language of the Order. See Coker, 650
S.W.2d at 393.
After the trial court excluded Edward’s testimony, appellant’s testimony was
the only evidence before the court when it rendered a directed verdict against
appellant. Nevertheless, we cannot say that the exclusion of Edward’s testimony
probably caused the rendition of an improper judgment with respect to appellant’s
breach of contract claims because appellant admitted at trial that he was not owed
6
The Order generally prohibits the disclosure of “[a]ll information, Documents, and
Confidential Information produced in this lawsuit . . . to any person or entity which
is not a party, except as otherwise provided in this Order.” Neither party alleges that
the Order has been violated.
14
any bonus for 2002, thus establishing that he was not harmed by Elite’s alleged
breach of that contract. Edward does not claim to have any knowledge about the
formation of the remaining oral contracts in 2003, 2004, 2005, and 2006.
Accordingly, we cannot say that the exclusion of Edward’s testimony was
harmful with respect to any of appellant’s breach of contract claims. See TEX. R.
APP. P. 44.1(a); Madison, 241 S.W.3d at 151. We overrule appellant’s second issue.
In light of our disposition, we need not reach appellant’s third issue.
Conclusion
We affirm the trial court’s judgment.
Russell Lloyd
Justice
Panel consists of Justices Higley, Huddle, and Lloyd.
15