Editorial Caballero, S.A. De C v. and Grupo Siete International, Inc. v. Playboy Enterprises, Inc. ( 2012 )

NUMBER 13-10-00586-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
EDITORIAL CABALLERO, S.A. DE C.V. AND
GRUPO SIETE INTERNATIONAL, INC., Appellants,
v.
PLAYBOY ENTERPRISES, INC., Appellee.
On appeal from the 332nd District Court
of Hidalgo County, Texas.
OPINION
Before Justices Rodriguez, Vela, and Perkes
Opinion by Justice Rodriguez
This is a commercial dispute between appellants, Editorial Caballero, S.A. de C.V.
(EC) and Grupo Siete International, Inc. (GSI), and appellee, Playboy Enterprises, Inc.
(PEI). For over twenty years EC published and distributed a Spanish language version
of Playboy magazine in Mexico and other Latin American countries. In October 1996,
PEI and EC entered into a licensing agreement (License Agreement) that provided, in
relevant part, that EC could publish a Spanish language version of Playboy for distribution
in the United States. GSI was EC's assignee of the U.S. distribution rights to the
Spanish language version of Playboy. In January 1998, PEI terminated the License
Agreement because EC and GSI allegedly failed to pay certain monies due under the
License Agreement and under a Renegotiated Payment Plan Agreement. EC and GSI
claimed that PEI caused the failure of the project. Suit was filed. EC and GSI filed
claims against PEI, and PEI filed counter-claims against EC and GSI. The case was
tried twice to a jury.
Following the first trial, EC and GSI appealed. See Playboy Enter., Inc. v.
Editorial Caballero, S.A. de C.V., 202 S.W.3d 250, 276 (Tex. App.—Corpus Christi 2006,
pet. denied) (Playboy I). In Playboy I, this Court rendered judgment against EC and GSI
on all claims except breach of contract and fraudulent concealment, remanding those
claims for a new trial. Id. We also remanded all claims asserted by PEI against EC and
GSI. Id.
The second trial, the judgment from which this appeal is taken, began on March
31, 2010. Rejecting PEI's argument that our 2006 decision and the law of the case
doctrine precluded many of EC and GSI's claims, the trial court submitted EC and GSI's
claims against PEI for breach of the License Agreement, common law fraud, statutory
fraud, antitrust violations, and theft. In addition, the trial court submitted PEI's claims
against EC and GSI for breach of the License Agreement, breach of the Renegotiated
Payment Plan Agreement, and fraud. The jury found against EC and GSI on their claims
and in favor of PEI on its claims. The trial court entered judgment in favor of PEI and
2
awarded breach-of-contract damages in the amount of $410,000. 1 It also awarded
$1,680,000 in attorneys' fees, $500,000 in conditional appellate attorneys' fees, and
interest. Following the entry of judgment in PEI's favor and the denial of EC and GSI's
post-judgment motions, EC and GSI appealed.
By three issues, with multiple sub-issues, EC and GSI contend that (1) they are
entitled to a new trial based on jury misconduct; and (2-3) the evidence is insufficient to
support the adverse jury findings. We affirm.
I. JURY MISCONDUCT
By their first issue, EC and GSI contend that the trial court abused its discretion
when it denied their motion for new trial based, in part, on allegations of material jury
misconduct that caused injury. The jury returned a 10-2 verdict. EC and GSI argue that
the trial court abused its discretion in refusing to (1) admit and rely on affidavits from the
two dissenting jurors; (2) hear live testimony from any of the jurors, especially the two
juror affiants; and (3) grant a new trial based on juror misconduct. PEI responds that the
juror affidavits did not contain competent, admissible evidence of jury misconduct, and its
objections to those affidavits were properly sustained. We agree with PEI.
A. Standard of Review and Applicable Law
We review a trial court's ruling on a motion for new trial based on jury misconduct
for an abuse of discretion. Vela v. Wagner & Brown, Ltd., 203 S.W.3d 37, 48 (Tex.
App.—San Antonio 2006, no pet.) (op. on reh'g). An abuse of discretion will be found
when the trial court's ruling is arbitrary, unreasonable, or without reference to guiding
1
The jury also awarded fraud damages against EC and GSI, but PEI elected to recover on its
contract claims instead.
3
principles. Goode v. Shoukfeh, 943 S.W.2d 441, 446 (Tex. 1997).
Whether jury misconduct occurred and caused injury is a question of fact for the
trial court. Golden Eagle Archery, Inc. v. Jackson, 24 S.W.3d 362, 372 (Tex. 2000). To
obtain a new trial based on juror misconduct, an appellant must show (1) the misconduct
occurred, (2) it was material, and (3) it probably caused injury. TEX. R. CIV. P. 327;
Golden Eagle Archery, 24 S.W.3d at 372. A motion for new trial based upon jury
misconduct must be supported by a juror's affidavit alleging that outside influences were
brought to bear upon the jury. Weaver v. Westchester Fire Ins. Co., 739 S.W.2d 23, 24
(Tex. 1987) (per curiam); see TEX. R. CIV. P. 327(b); see also TEX. R. EVID. 606(b).
An outside influence "must emanate from outside the jury and its deliberations."
Soliz v. Saenz, 779 S.W.2d 929, 931-32 (Tex. App.—Corpus Christi 1989, writ denied);
see Golden Eagle Archery, 24 S.W.3d at 370; King v. Bauer, 767 S.W.2d 197, 198 (Tex.
App.—Corpus Christi 1989, writ denied). An outside influence does not include
"information not in evidence, unknown to the jurors prior to trial, acquired by a juror and
communicated to one or more other jurors between the time the jurors received their
instructions from the court and the rendition of the verdict" and does not include
"[i]nformation gathered by a juror and introduced to the other jurors by that juror, even if
the information were introduced specifically to prejudice the vote . . . ." Soliz, 779
S.W.2d at 932; see, e.g., King, 767 S.W.2d at 198 (holding that "discussion of newspaper
articles is not considered an outside influence"). In sum, under this rule, a juror may
testify about "improper contacts with individuals outside the jury" or "matters or
statements not occurring during the course of the jury's deliberations." Golden Eagle
Archery, 24 S.W.3d at 370. However, "[a] juror may not testify as to any matter or
4
statement occurring during the course of the jury's deliberations or to the effect of
anything upon his or any other juror's mind or emotions as influencing him to assent to or
dissent from the verdict concerning his mental processes in connection therewith, . . . ."
TEX. R. CIV. P. 327(b); see TEX. R. EVID. 606(b) ("[A] juror may not testify as to any matter
or statement occurring during the jury's deliberations, or to the effect of anything on any
juror's mind or emotions or mental processes, as influencing any juror's assent to or
dissent from the verdict."); Golden Eagle Archery, 24 S.W.3d at 370.
B. Discussion
1. Affidavits
In support of their jury misconduct allegations in their motion for new trial, EC and
GSI attached the affidavits of the two dissenting jurors. The affidavits set out the
following three instances that allegedly occurred during jury deliberations:
$ One juror reported to other jurors that she had been informed of a death in her
family, and she switched her vote in order to conclude the deliberations more
quickly;
$ Another juror admitted that he read on the internet the appellate decision
concerning the first trial of this case; and
$ A third juror stated that he knew that the Sanchez family 2 had a lot of money and
that his (the juror's) sister was an attorney.
a. Death in Juror's Family
Personal pressures felt by jurors to wrap up the deliberations do not constitute
2
At trial, Marco Antonio Sanchez described the Sanchez family business as a medium-size media
company in Mexico. In late 1977, the Sanchez family acquired EC, known at that time as Caballero Con
Le Mejor de Playboy. Marco's father, Javier Sanchez, was the president of EC who, on EC's behalf,
executed the License Agreement that forms the basis of this lawsuit.
5
outside influences. See, e.g., Rosell v. Cent. W. Motor Stages, Inc., 89 S.W.3d 643,
660-61 (Tex. App.—Dallas 2002, pet. denied) (explaining that a statement by the bailiff to
jurors that they would have to deliberate another day if they told the court that they were
deadlocked was not outside influence); Perry v. Safeco Ins. Co., 821 S.W.2d 279, 281
(Tex. App.—Houston [1st Dist.] 1991, writ denied) (concluding that family pressure to go
on vacation was not outside influence); Kirby Forest Indus., Inc. v. Kirkland, 772 S.W.2d
226, 234 (Tex. App.—Houston [14th Dist.] 1989, writ denied) (holding that pressure from
employers to return to work, and family, recreational, and personal pressures are not
outside influences). The trial court could have reasonably determined that the portions
of the jurors' affidavits discussing another juror's statements about a death in her family
related to the effect of the death on the juror's mind or emotions or mental processes, as
influencing her assent to or dissent from the verdict. See TEX. R. CIV. P. 327(b); TEX. R.
EVID. 606(b); Golden Eagle Archery, 24 S.W.3d at 370; Goode, 943 S.W.2d at 446.
Therefore, misconduct did not occur, and the trial court could have concluded that the
affidavits were incompetent and inadmissible in this regard.
b. Appellate Decision Read on the Internet
The trial court could have made the same determination regarding the portion of
one juror's affidavit explaining that another juror said, during deliberations, that he had
read the appellate decision involving the first trial. The affidavit which stated that the
juror read the decision on the internet, implies internet research. The affidavit did not
state, however, that the juror said anything more about the opinion.
In a criminal context, this Court recently decided the issue of whether internet
research constitutes an "outside influence." See McQuarrie v. State, No.
6
13-09-00233-CR, 2011 Tex. App. LEXIS 2859, at *13-18 (Tex. App.—Corpus Christi Apr.
14, 2011, pet. granted) (mem. op., not designated for publication) (citing Soliz, 779
S.W.2d at 931-32).3 In McQuarrie, we held that "independent research on the internet
[conducted by a juror] during an overnight recess and conveyed . . . to the other jurors
during deliberations the next morning" did not constitute an outside influence. Id.; see
Mathis v. State, No. 05-05-01119-CR, 2006 Tex. App. LEXIS 4645, at *24-27 (Tex.
App.—Dallas May 31, 2006, no pet.) (not designated for publication) (holding internet
research did not constitute an outside influence); Johnson v. State, No. 08-05-00017-CR,
2006 Tex. App. LEXIS 8618, at *7-8 (Tex. App.—El Paso Oct. 5, 2006, no pet.) (not
designated for publication) (concluding that information found on a computer system was
not an outside influence); see also Lucero v. State, 246 S.W.3d 86, 95 (Tex. Crim. App.
2008) (noting that the State relied primarily on civil cases in support of its position "that the
Bible reading [by the jury foreman during jury deliberations] was not an "outside influence"
and that appellant was, therefore, improperly attempting to impeach the jury's verdict
under Rule 606(b)") (citing Golden Eagle Archery, 24 S.W.3d at 366-75 (rules
contemplate that an "outside influence" originates from sources other than the jurors
themselves); Brandt v. Surber, 194 S.W.3d 108, 134 (Tex. App.—Corpus Christi 2006,
pet. denied) (a jury's discussion of newspaper articles is not an "outside influence"); Easly
v. State, 163 S.W.3d 839, 842 (Tex. App.—Dallas 2005, no pet.) (a chart brought into jury
room with calculations of time appellant would serve in prison after application of the
3
The Texas Court of Criminal Appeals recently granted petition in In re McQuarrie, without oral
argument, on the following issue: Did the court of appeals violate McQuarrie's federal and state
constitutional right to confrontation and cross-examination by upholding the trial court's exclusion, pursuant
to Texas Rule of Evidence 606(b), of juror testimony and affidavits offered for purposes of his motion for
new trial on the ground that a juror conveyed to other jurors harmful information obtained from her internet
research during an overnight break in deliberations? No. PD-0803-11, 2011 Tex. Crim. App. LEXIS 1517,
at *1 (Tex. Crim. App. Nov. 16, 2011).
7
parole laws is not an "outside influence"); Perry, 821 S.W.2d at 281 (juror using dictionary
to share a definition with other jurors is not an "outside influence")). In McQuarrie, we
also held that "the trial court properly excluded the affidavits and testimony" of the jurors
because the affidavits did not contain any evidence of outside influence and that the trial
court "did not abuse its discretion in denying [plaintiff's] motion for new trial on this basis."
2011 Tex. App. LEXIS 2859, at *17.
Holding that internet research does not constitute an outside influence is also
consistent with the general rule that "[i]nformation gathered by a juror and introduced to
the other jurors by that juror, even if the information were introduced to prejudice the vote,
does not add up to outside influence." Soliz, 779 S.W.2d at 932; see Brandt, 194 S.W.3d
at 134 ("[One juror's] affidavit stating that other jurors discussed newspaper articles
during deliberations was not evidence of any outside influence, but only described
matters on the minds of other jurors during deliberations. The affidavit is, therefore,
incompetent to serve as evidence of juror misconduct."). The trial court could have
reasoned that evidence of a juror reviewing this Court's earlier opinion found on the
internet, without more, described only matters on the mind of this juror during
deliberations. Thus, it could have concluded that the affidavit was incompetent on this
basis as well. See TEX. R. CIV. P. 327(b); TEX. R. EVID. 606(b).
c. Information Regarding the Sanchez Family and the Jury
Foreman's Sister
The same analysis applies to EC and GSI's supporting affidavits setting out that
"the jury foreman stated during jury deliberations that he knew the Sanchez family had a
lot of money" and that "the jury foreman . . . sa[id] that his sister is an attorney and that he
knew both the business and financial background of the Sanchez family." Once again,
8
the trial court could have determined that these statements proffered by EC and GSI
through the affidavits are incompetent and inadmissible because they occurred during
deliberations and do "not add up to outside influence." Soliz, 779 S.W.2d at 932. The
trial court could have, therefore, concluded that these statements from the affidavits
describe only matters on the mind of another juror during deliberations. See TEX. R. CIV.
P. 327(b); TEX. R. EVID. 606(b); Brandt, 194 S.W.3d at 134.
2. Evidentiary Hearing
EC and GSI also argue that when an affidavit avers misconduct, the language of
rule 327(a) requires that the trial court grant an evidentiary hearing. See TEX. R. CIV. P.
327(a) ("When the ground of a motion for new trial, supported by affidavit, is misconduct
of the jury . . . the court shall hear evidence thereof from the jury or others in open court
. . . ."). EC and GSI contend that, in this case, the trial court abused its discretion when it
did not hold such a hearing.
In support of this argument, EC and GSI rely on Sharpless v. Sim. See 209
S.W.3d 825, 828 (Tex. App.—Dallas 2006, pet. denied). In Sharpless, a verdict for the
plaintiff was entered in a double fatality driving accident. Id. at 827. After the verdict,
the parties learned that one of the jurors had conducted her own independent internet
research of the defendant's driving record. Id. After conducting an evidentiary hearing,
the trial court denied the defendant's motion for new trial based upon jury misconduct.
Id. EC and GSI argue that Sharpless demonstrates the necessity of an evidentiary
hearing when proof is adduced that a juror improperly conducted research on the internet.
However, the Sharples Court did not consider whether an evidentiary hearing on
jury misconduct is mandatory or whether internet research constitutes an outside
9
influence because neither party disputed these matters. See id. at 827-28. Rather, the
Sharpless Court conducted an unchallenged hearing and considered only whether the
internet research caused injury. Id. (citing TEX. R. CIV. P. 327(a); Golden Eagle Archery,
24 S.W.3d at 372). Finding none, the court concluded that the trial court did not abuse its
discretion when it determined that Sharpless and Southwestern failed to discharge their
burden under rule 327(a). See id. at 829. Sharpless is, thus, distinguishable from the
present case and provides no support for EC and GSI's evidentiary hearing argument.
Moreover, while we agree with EC and GSI's basic contention that when an
affidavit avers jury misconduct the trial court should grant an evidentiary hearing, in this
case we have already concluded that the affidavits attached to EC and GSI's motion for
new trial provided no evidence of an outside influence. See TEX. R. CIV. P. 327(a); King,
767 S.W.2d at 198-99 (concluding trial court did not err in refusing to consider the juror's
testimony concerning jury misconduct which included reading outside newspaper
accounts because her affidavit did not raise an outside-influence issue); see also de
Damian v. Bell Helicopter Textron, Inc., No. 02-08-00210-CV, 2011 Tex. App. LEXIS
7316, at *91-95 (Tex. App.—Fort Worth Aug. 31, 2011, pet. dism'd) (concluding that
where affidavits did not raise outside influence, the trial court was not required to receive
juror affidavits or testimony); Davis v. BNSF Ry. Co., No. 10-09-00309-CV, 2010 Tex.
App. LEXIS 8201, at *8 (Tex. App.—Waco Oct. 6, 2010, pet. denied) (mem. op.) (holding
that affidavits filed in support of a motion for new trial were insufficient to require an
evidentiary hearing because they raised "only speculation of possible outside influence";
therefore, the trial court did not err in quashing subpoenas of jurors); WPS, Inc. v.
Enervest Operating, L.L.C., No. 01-06-00759-CV, 2010 Tex. App. LEXIS 4233, at *51-53
10
(Tex. App.—Houston [1st Dist.] May 28, 2010, pet. denied) (mem. op. on reh'g)
(upholding the striking of juror affidavits regarding juror misconduct under rule 327(b) and
rule 606(b) because the affidavits were "patently inadmissible" which was implicitly
acknowledged by WPS in its brief); Villegas v. State, No. 13-05-371-CR, 2008 Tex. App.
LEXIS 1899, at *40-46 (Tex. App.—Corpus Christi Mar. 13, 2008, pet. denied) (mem. op.,
not designated for publication) (determining that when a juror affidavit failed to establish
outside influence, a juror could not testify about what happened during deliberations, and
the trial court did not err in striking juror affidavits). Because the affidavits did not aver
jury misconduct, the trial court did not err in refusing to consider the affidavits or the
testimony of the jurors at a hearing.
3. Summary
Based on the above, the matters set out in the affidavits did not constitute improper
outside influences warranting a new trial under Texas law. Because EC and GSI
submitted no evidence tending to show juror misconduct, the trial court properly
sustained PEI's objections to the affidavits, properly struck the affidavits, and properly
denied EC and GSI's request for an evidentiary hearing. The trial court did not abuse its
discretion in so concluding and, further, did not abuse its discretion in denying EC and
GSI's motion for new trial on that basis. We overrule EC and GSI's first issue.
II. EVIDENTIARY CHALLENGES TO ADVERSE FINDINGS
By their second and third issues, EC and GSI challenge every adverse jury finding,
most of which are challenges to the sufficiency of the evidence.
A. Standard of Review for Sufficiency Challenges
"When a party attacks the legal sufficiency of an adverse finding on an issue on
11
which [it] has the burden of proof, [that party] must demonstrate on appeal that the
evidence establishes, as a matter of law, all vital facts in support of the issue." Dow
Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001) (per curiam). When an appellant
attacks the legal sufficiency of an adverse finding on an issue for which it did not have the
burden of proof, the appellant must demonstrate that there is no evidence to support the
adverse finding. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005); Croucher v.
Croucher, 660 S.W.2d 55, 58 (Tex. 1983). Such a no-evidence challenge will be
sustained only if: (1) there is a complete absence of evidence of a vital fact; (2) the court
is barred by rules of law or of evidence from giving weight to the only evidence offered to
prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere
scintilla; or (4) the evidence establishes conclusively the opposite of a vital fact. City of
Keller, 168 S.W.3d at 810; King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex.
2003) (quoting Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997)).
In conducting a legal sufficiency review, we review the evidence presented at trial in the
light most favorable to the jury's verdict and indulge every reasonable inference that
would support it, crediting favorable evidence if reasonable jurors could and disregarding
contrary evidence unless reasonable jurors could not. Del Lago Partners, Inc. v. Smith,
307 S.W.3d 762, 770 (Tex. 2010); City of Keller, 168 S.W.3d at 822, 827. "The final test
for legal sufficiency must always be whether the evidence at trial would enable
reasonable and fair-minded people to reach the verdict under review." City of Keller, 168
S.W.3d at 827.
In reviewing a factual-sufficiency challenge to a jury finding on an issue on which
the appellant had the burden of proof, the appellant must show that "the adverse finding is
12
against the great weight and preponderance of the evidence." Dow Chem. Co., 46
S.W.3d at 242. In reviewing a factual-sufficiency challenge to a jury finding on an issue
on which the appellant did not have the burden of proof, we consider and weigh all of the
evidence and set aside the verdict only if the evidence that supports the jury finding is so
weak as to make the verdict clearly wrong and manifestly unjust. Cain v. Bain, 709
S.W.2d 175, 176 (Tex. 1986) (per curiam); Ins. Network of Tex. v. Kloesel, 266 S.W.3d
456, 469-70 (Tex. App.—Corpus Christi 2008, pet. denied); Bay, Inc. v. Ramos, 139
S.W.3d 322, 329 (Tex. App.—San Antonio 2004, pet. denied) (en banc). In either type of
factual-sufficiency challenge, we must examine both the evidence supporting and that
contrary to the judgment. See Dow Chem. Co., 46 S.W.3d at 242; Plas-Tex, Inc. v. U.S.
Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989). Additionally, the jury is the sole judge of
witnesses' credibility, and it may choose to believe one witness over another; a reviewing
court may not impose its own opinion to the contrary. See Golden Eagle Archery, 116
S.W.3d at 761.
B. EC and GSI's Claims Against PEI
By their second issue, EC and GSI argue that the evidence is legally insufficient to
support the jury's adverse findings on the following issues: (1) breach of the License
Agreement; (2) common law fraud; (3) statutory fraud; (4) an antitrust violation; and (5)
theft of property, a service, or trade secrets.4 Because EC and GSI asserted these
4
Although EC and GSI title their second issue a "factually insufficient and/or against the
overwhelming weight of the evidence" issue, factual sufficiency is not raised in the body of their brief.
Rather, the substance of this issue is based only on legal sufficiency principles, and we will review the
second issue accordingly. Compare TEX. R. APP. P. 47.1 ("The court of appeals must hand down a written
opinion that is as brief as practicable but that addresses every issue raised and necessary to final
disposition of the appeal."), and Martinez v. El Paso County, 218 S.W.3d 841, 844 (Tex. App.—El Paso
2007, pet. dism'd) ("When reviewing a civil matter, an appellate court has no discretion to consider an issue
not raised in the appellant's brief."), with TEX. R. APP. P. 38.1(f) ("The statement of an issue or point will be
13
claims against PEI, they had the burden of proof on all related evidentiary issues.
1. Breach of the License Agreement
EC and GSI argue that the evidence is legally insufficient to support the jury's
finding that PEI did not fail to comply with the License Agreement. They contend that
there is undisputed and conclusive evidence that PEI breached the License Agreement in
the following ways: (1) by failing to provide them with certain written information as
required by Paragraph 8a of the Licensing Agreement; (2) by first agreeing to allow a
monthly distribution of 225,000 copies into the U.S. and then unilaterally refusing to allow
any more than 39,950 copies for monthly distribution; and (3) by not complying with its
contractual obligation of good faith and fair dealing.
a. Internal Memoranda
EC and GSI assert that PEI breached the last sentence of Paragraph 8a of the
License Agreement which states, "In the event Licensor does not approve any aspect of
the Foreign Edition, Special Issues or Calendar, Licensor [PEI] will advise Licensee [ES
and GSI] in what respect any such aspect is unacceptable." EC and GSI complain that
PEI breached this provision because it did not provide them with certain written internal
memoranda dated December 9, 1996, February 4, 1997, and February 7,
1997—memoranda from Hugh Hefner to Playboy executives expressing his general
treated as covering every subsidiary question that is fairly included."), and Hagberg v. City of Pasadena,
224 S.W.3d 477, 480 (Tex. App.—Houston [1st Dist.] 2007, no pet.) (providing that even though a specific
point may not be recited within a statement of issues presented, that point is not waived if raised within the
body of the brief). Nonetheless, to the extent the second issue could be construed as a challenge to the
factual sufficiency of the evidence, under the proper standard of review we would further conclude that the
adverse findings were not against the great weight and preponderance of the evidence. See Dow Chem.
Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001) (per curiam).
14
concerns about a Spanish edition of Playboy being distributed in the U.S.5 We disagree.
Paragraph 8a, in its entirety, provides the following:
Licensee acknowledges that Licensor has an interest in maintaining
the worldwide goodwill and recognition of the Trademarks and in being
assured that the Foreign Edition, Special Issues, and Calendars
correspond as closely as possible in quality, format and content to their
American counterparts; and Licensor acknowledges that Licensee has an
interest in maintaining a quality that meets its standards and in producing a
Foreign Edition, Special Issues and Calendars that meet the needs of the
relevant market. For the foregoing reasons, it is agreed that both Licensor,
or its authorized representative, and Licensee must approve in writing (by
initialing where appropriate) in advance of publication, all aspects of each
issue of the Foreign Edition, and each and every Special Issue and
Calendar, including but not limited to, all aspects of advertising (including
advertisers, products advertised, advertising copy, sales practices and
terms), all editorial text (whether originating in the U.S.A., the Territory, or
elsewhere, including translations), all photographs and cartoons, all
aspects of editorial design and structure (including design, artwork, layout
and design and copy lines of the front cover), all aspects of manufacturing
and production (including paper, printing and binding), all advertisements,
publicity and promotional material regarding the Foreign Edition, Special
Issues and Calendars (including advance information to be given to news
media) and all aspects of distribution (including the cover price and discount
for newsstand sale and subscription prices). In the event Licensor does
not approve any aspect of the Foreign Edition, Special Issues or Calendar,
Licensor will advise Licensee in what respect any such aspect is
unacceptable.
EC and GSI contend that, in addition to Paragraph 8a's required pre-publication, written
approval of all aspects of each issue, through Paragraph 17 of the License Agreement,
5
Hugh Hefner sent a December 9, 1996 memo to Christie Hefner, among others, reiterating that
he did not want a second language version competing with Playboy in the United States and explaining that
"[w]ith the acquisition of the Mexican Playboy by a U.S. firm, it is important to make clear that the editorial
focus and distribution of this Spanish language version of the magazine remain essentially Mexican." In
his February 4, 1997 memo to Henry Marks, after setting out that he had no problem with a direct Spanish
translation if they owned the magazine, Heftner continued, "But I have already rejected the idea of a
separate Spanish language edition of PLAYBOY in the U.S. as being too confusing. And I am even more
opposed to allowing some outside company [to] own and distribute a Spanish edition (Mexican or other)
here in the U.S." Finally, Hefner's February 7, 1997 memo sent to Christie Hefner expressed the following:
"I think it is naive to assume that distributing 100,000 copies of a Mexican edition of PLAYBOY in the United
States won't have some impact on the newsstand sales of the U.S. edition when our own single copy sales
are often no more than 500,000."
15
Licensor PEI was to provide written notice of its disapproval of any such aspect.
Paragraph 17 provided that "[a]ll legal notices, consents, and other communications
required by the terms of this agreement . . . shall be in writing."
It is undisputed that Paragraph 8a provided for pre-publication, written approval of
aspects of each issue or edition. Pursuant to Paragraph 8a, the specific aspects of
distribution that required such approval included the cover price, any discounts for
newsstand sales, and the subscription price. And, assuming without deciding that the
last sentence of Paragraph 8a through Paragraph 17 required PEI to advise EC and GSI,
in writing, of any unacceptable aspects, the question becomes, did the evidence establish
that the Hugh Hefner written memoranda expressed disapproval of an aspect of the
magazine covered by Paragraph 8a, such that PEI was required to provide those memos
to EC and GSI.
Although the evidence established that Hugh Hefner expressed his concern about
the development of a Spanish language version of Playboy to be distributed in the U.S.
and that PEI did not provide either EC or GSI with Hefner's written memoranda that
addressed his concerns, a reasonable jury could have concluded that the Hefner
memoranda did not address any aspect of any issue of the Foreign Edition, Special
Issues, or Calendar that was identified in Paragraph 8a. The jury could have rationally
concluded that, through these memos, PEI was not disapproving or refusing to approve
any specific Paragraph 8a aspect. Thus, a reasonable jury could have concluded that
PEI was not required to advise EC and GSI of Hefner's concern by providing them with his
memoranda. Rather, the evidence establishes that three issues of the magazine, the
October, November, and December 1997 issues, were distributed in the U.S. This
16
evidence supports a determination that PEI approved, for U.S. distribution, all Paragraph
8a aspects of the three issues, including the cover price, the discount for newsstand sale,
and the subscription price. After so concluding, the jury could have reasonably
determined that PEI did not fail to comply with the License Agreement in this regard.
See City of Keller, 168 S.W.3d at 827.
b. Number of Copies for Distribution in the U.S.
As a second breach-of-contract theory, EC and GSI argue that PEI breached the
last sentence of Paragraph1.a(ii) of the License Agreement when it limited distribution of
each of the three issues of the Foreign Edition to 39,950 copies. Paragraph 1.a.(ii)
provides, in relevant part, the following:
Licensor's approval of such distribution and sale in the United States, if at
all, will not occur until at least six (6) months following the legal formation of
the joint venture Grupo Siete International, Inc., and if such approval is
granted, will not exceed one-hundred-fifty thousand (150,000) copies per
issue.
EC and GSI assert that "[w]here, as here, a reasonable construction of this clause
is that it allows the monthly distribution of a quantity higher than the actual sale[s] amount
of 150,000 copies per month, this [t]rial [c]ourt should have declared that the contract was
breached as a matter of law" because PEI approved only 39,950 copies per issue for
distribution in the U.S. EC and GSI contend that although this provision may limit sales,
it does not limit distribution and PEI should have allowed monthly distribution of more than
150,000 issues in order to accomplish an actual sale of 150,000 copies.
At EC and GSI's request, the trial court submitted the meaning of this provision to
the jury through the following instruction in Question 1A: "The [c]ourt further instructs
you that [this] term of the License Agreement is ambiguous, which means that it is
17
susceptible to more than one meaning." It is clear, however, that the jury rejected EC
and GSI's suggested construction and resolved ambiguity, if any, against EC and GSI
when it found that PEI did not fail to comply with the License Agreement. By so finding,
the jury impliedly concluded that this provision expressly allowed PEI to set U.S. sales
and distribution figures at a number not to exceed 150,000 copies per month, and
therefore, PEI did not breach that provision when it formally approved a monthly
distribution in the U.S. of 39,950 copies. Thus, we are not persuaded by this argument,
especially in light of the fact that the ambiguity instruction was submitted to the jury at EC
and GSI's request. See Tittizer v. Union Gas Corp., 171 S.W.3d 857, 862 (Tex. 2005)
(per curiam) (explaining that a party cannot complain on appeal that the trial court took a
specific action that the complaining party requested).
EC and GSI also contend that, under this theory of recovery, the evidence is legally
insufficient to support this adverse finding as a matter of law. They assert that there is
undisputed and conclusive evidence that establishes PEI agreed to allow monthly
distribution of 225,000 copies of the Spanish language version of Playboy in the U.S. and
breached the License Agreement when it only allowed the monthly distribution of 39,950
copies. In support of this argument, EC and GSI point to PEI's approval of the use of a
media kit which identified a monthly distribution objective of 225,000 copies.6 However,
we have already determined that the "media kit was not the formal written approval for
U.S. distribution required by the License Agreement." Playboy I, 202 S.W.3d at 259.
Thus, this argument fails under the law of the case doctrine. See Hudson v. Wakefield,
711 S.W.2d 628, 630 (Tex. 1986).
6
Fernando Peramo, EC and GSI's editor-in-chief for the Mexican Playboy magazine, described
the media kit as a "presentation of what we send advertisers."
18
In support of their contention that the evidence conclusively establishes that PEI
approved a 225,000 distribution figure, EC and GSI also reference testimony provided by
Marco Sanchez, Paul Siegel, Randy Hills, and Fernando Peramo, all executives or
employees of either PEI or EC during the relevant time period. Our review of the
evidence, however, reveals that this referenced testimony is based on PEI's asserted
approval of the media kit; therefore, it provides no support. EC and GSI refer us to no
evidence, and we find none, that PEI gave written approval for the distribution of 225,000
copies per issue. Rather, reviewing the evidence in the light most favorable to the
verdict, the testimony of Marco Sanchez and Hills supports a determination that the only
written approval given by PEI was for the distribution of 39,950 copies.
Finally, the jury could have credited favorable testimony provided by Javier
Sanchez, an experienced businessman who signed the License Agreement on behalf of
EC, and disregarded contrary evidence, if any, that PEI approved the distribution of
225,000 copies. See Del Lago Partners, 307 S.W.3d at 770; City of Keller, 168 S.W.3d
at 822, 827. Javier Sanchez testified that he read and understood the agreement; his
lawyers also read the agreement and advised him concerning it; and he discussed the
meaning of the agreement with PEI representatives. In addition, Javier Sanchez agreed
that, going into the agreement, he understood that the distribution and sale of the
Spanish-language version of the magazine in any country other than Mexico would be
subject to PEI's prior written approval that could be withdrawn once given on notice from
PEI and that such approval, if any, would not exceed 150,000 copies per issue—in other
words, the maximum amount of copies per issue would be 150,000. The jury could have
reasonably concluded that Javier Sanchez understood that the License Agreement set
19
out a maximum of 150,000 copies per issue for sale and for distribution in the U.S. and
that the understanding or agreement did not set the lower or actual limit that PEI would
approve. And after so concluding, the jury could have reasonably determined that PEI
did not fail to comply with the License Agreement in this regard. See City of Keller, 168
S.W.3d at 827.
c. Good Faith and Fair Dealing
As a third theory of recovery on their breach-of-contract claim, EC and GSI argue
that PEI did not act in good faith and failed to cooperate or to deal fairly with them. 7 EC
and GSI contend that the following evidence conclusively established this breach: (1)
certain internal memoranda were not turned over or discussed with EC and GSI; (2) PEI
interfered with EC and GSI's attempt to distribute the magazines within the U.S.; and (3)
after EC and GSI received a default letter and offered to pay PEI $50,000 in exchange for
PEI's agreement to sit down in good faith and cooperate with them, PEI refused to do so,
instead choosing to terminate the License Agreement. We disagree.
Under Illinois law, parties to a contract "are entitled to enforce the terms of a
contract to the letter and an implied covenant of good faith cannot overrule or modify the
express terms of a contract."8 N. Trust Co. v. VIII S. Mich. Assocs., 657 N.E.2d 1095,
7
As part of Question 1A, the failure-to-comply question, the trial court included the following
instruction:
The [c]ourt instructs you the License Agreement includes an implied duty of good
faith and fair dealing. This ensures parties do not take advantage in a way that could not
have been contemplated at the time the contract was drafted or do anything that would
destroy the other party's right to receive the benefit of the contract. Accordingly, a party
with absolute discretion under a contract must exercise such discretion in a manner
consistent with the reasonable expectations of the other party. Whenever the cooperation
of one party is necessary for the other party's performance, there is an implied condition
that such cooperation will be given.
8
The trial court applied Illinois law to the License Agreement based on a choice-of-law provision
contained in that agreement. The trial court also ruled that a duty of good faith and fair dealing existed
20
1104 (Ill. App. Ct. 1995); see St. Mary's Hosp. v. Health Pers. Options Corp., 721 N.E.2d
1213, 1217 (Ill. App. Ct. 1999); Harrison v. Sears, Roebuck & Co., 546 N.E.2d 248, 256
(Ill. App. Ct. 1989); see also Resolution Trust Corp. v. Holtzman, 618 N.E.2d 418, 423-24
(Ill. App. Ct. 1993) (explaining when a mortgage contract gave the lender a series of
options to be exercised at its sole discretion, the duty of good faith and fair dealing could
not negate the lender's right to choose and exercise those options). We have already
concluded that PEI was exercising its rights under the terms of its contract with EC and
GSI when it did not disclose its internal memoranda and when it limited the distribution of
monthly copies of the magazine. In addition, the evidence establishes that EC and GSI's
$50,000 offer to pay was approximately half of what EC and GSI were contractually
required to pay, and the License Agreement expressly gave PEI the right to terminate for
non-payment. Therefore, the jury could have reasonably concluded that PEI was
exercising its contractual rights, which cannot be overruled or modified by an implied
covenant of good faith, and, therefore, did not fail to comply with the License Agreement
in this regard. See N. Trust Co., 657 N.E.2d at 1104; see also City of Keller, 168 S.W.3d
at 827; State Nat'l Bank v. Academia, Inc., 802 S.W.2d 282, 293 (Tex. App.—Corpus
Christi 1990, writ denied) (applying Illinois law).
d. Summary
Reviewing the evidence presented at trial in the light most favorable to the jury's
verdict and indulging every reasonable inference that would support it, we conclude that
the evidence is legally sufficient to support the jury's adverse finding on all three
under Illinois law. Because PEI contends that the trial court improperly imposed a duty of good faith in this
case, for the purposes of this analysis we will only assume, without deciding, that such a duty exists under
Illinois law.
21
breach-of-contract theories of recovery set out above. See Del Lago Partners, Inc., 307
S.W.3d at 770; City of Keller, 168 S.W.3d at 822, 827. The evidence would enable
reasonable and fair-minded people to reach the verdict under review. See City of Keller,
168 S.W.3d at 827.
2. Fraud
EC and GSI also contend that the evidence is legally insufficient to support the
jury's adverse fraud findings. They argue that the undisputed evidence conclusively
established that PEI committed common law fraud and statutory fraud against them.
a. Common Law Fraud
The jury answered "No" to Question 2A, "Did [PEI] commit fraud against [EC or
GSI]?" For this question, the trial court instructed the jury that fraud occurs when,
a. a party fails to disclose a material fact within the knowledge of that
party,
b. the party knows that the other party is ignorant of the fact and does
not have an equal opportunity to discover the truth,
c. the party intends to induce the other party to take some action by
failing to disclose the fact, and
d. the other party suffers injury as a result of acting without knowledge
of the undisclosed fact.
Based on this instruction, in order to recover on this common law fraud claim, EC
and GSI had to establish not only failure to disclose, but also that they were ignorant of
the undisclosed facts and did not have an equal opportunity to discover the truth, that PEI
intended to induce them to take an action based on the non-disclosure, and that they
suffered injury as a result of the non-disclosure. On appeal, EC and GSI have not
challenged the jury finding with respect to all elements. Because we must affirm the
22
take-nothing judgment on EC and GSI's common law fraud claim unless the evidence
conclusively establishes all elements of the fraud claim and because EC and GSI, the
parties that had the burden of proof, have not challenged the jury finding with respect to
every element of that claim, their argument that the take-nothing judgment on their fraud
claim must be reversed fails. See Dow Chem. Co., 46 S.W.3d at 241; Rich v. Olah, 274
S.W.3d 878, 886-88 (Tex. App.—Dallas 2008, no pet.).
b. Statutory Fraud
The jury also answered, "No," to the statutory fraud Questions 3A, 4A, and 5A,
"Did [PEI] commit statutory fraud as defined [in the respective questions] against [EC and
GSI]?" On appeal, EC and GSI assert that PEI committed statutory fraud because,
PEI never told [EC and GSI] about the true extent of [Hugh Hefner's]
objections and concerns. The internal memos from Hugh Hefner, referred
to above, make reference to the fact that such concerns were "previously
expressed," within the PEI organization. In addition, multiple other
memos, such as ones from Dick Rosenzweig, the Executive Assistant to
Hugh Hefner and member of PEI's Board of Directors, reveal the true depth
of Mr. Hefner's concerns.
EC and GSI argue that PEI had a legal duty to disclose this information.
However, none of the statutory fraud jury questions involve non-disclosure.
Question 3A asked about false representations of a past or existing material fact that was
made to and relied on by EC or GSI in entering into a contract; Question 4A asked about
a false material promise to do an act with the intent of not relying on it that was made to
relied on by EC or GSI in entering into a contract; and Question 5A asked about PEI's
actual awareness of the falsity of a promise made by another person, its failure to disclose
that false representation or promise, and a benefit received from it. Thus, all three
questions required EC and GSI to prove a false representation or promise. On appeal,
23
their statutory fraud arguments do not identify any false representations or promises that
PEI allegedly made. Furthermore, as with the common law fraud analysis, because we
must affirm the take-nothing judgment on this statutory fraud claim unless the evidence
conclusively establishes all elements of the claim and because EC and GSI have not
challenged the jury finding with respect to all elements of that claim, their argument fails.
See Dow Chem. Co., 46 S.W.3d at 241, Rich, 274 S.W.3d at 886-88.
4. Antitrust Violation
EC and GSI challenge the legal sufficiency of the evidence to support the jury's
adverse antitrust finding that PEI did not engage in a contract, combination, or conspiracy
in restraint of trade or commerce that harmed EC or GSI. More specifically, EC and GSI
assert the following:
[T]he undisputed evidence conclusively established that PEI stole EC's and
GSI's money, business, License Agreement, goodwill, customer lists,
advertisers, distributors, customers, vendors, and subscribers by duping
EC and GSI into believing that the export of the Foreign Edition was a
genuine project, when in reality this project would and could not go forward
unless and until PEI owned it for itself. In furtherance of this theft, PEI
allowed three issues of the Foreign Export to enter the United States in the
fall of 1997, at a substandard number of distributed copies, knowing full well
that EC's and GSI's business would not be viable at these numbers, but in
an effort to test the market for consumer interest and potential for
cannibalization of U[.]S[.] Playboy so that PEI could then force EC and GSI
out of business and steal this project for PEI. Additionally, the undisputed
evidence conclusively established that PEI engaged in the following
conduct: (1) Hugh Hefner's and/or PEI's actions to own this project; (2)
Hugh Hefner's and/or PEI's attempts to monopolize the marketplace in the
USA and prevent competition with U[.]S[.] Playboy by EC and GSI; (3) PEI's
internal plan to force EC and GSI into a material default under the License
Agreement; (4) PEI's internal plan to forcibly take over one or both of EC
and GSI over their objection, so that PEI could own the project; (5) PEI's
internal plan to sell Foreign Editions for direct PEI profit; and (6) PEI's
internal plan to pursue this project as either a 100% PEI owned project or at
least one in which PEI controlled the project and had a majority and/or
substantial ownership interest in the project.[ ]
24
In support of this argument, EC and GSI rely on ten PEI memoranda that were
admitted as trial exhibits. EC and GSI assert that "[t]hese documents evidence not only
an agreement by and amongst employees of PEI, but also with Hugh Hefner, the majority
stockholder of the entity, as well as persons outside the company." Without further
citation to the reporter's record, EC and GSI contend that,
[i]n addition to the document[s] mentioned above, there is undisputed and
conclusive evidence of an agreement involving Christie Hefner and/or PEI
and/or Hugh Hefner and/or Laura de Laviada and/or others, which
demonstrates that there was an agreement between PEI and a third party to
completely disrupt the contract that the parties had entered into.
The following antitrust question was submitted: "Did [PEI] engage in a contract,
combination, or conspiracy in restraint of trade or commerce that harmed [EC or GSI]?"
See TEX. BUS. & COM. CODE ANN. § 15.05(a) (West 2011).9 The charge included no
instructions or definitions.
At the charge conference, PEI requested the following instruction, which read in
relevant part as follows:
To establish their [antitrust violation] claim, EC and GSI must prove
each of the following elements:
1. That Playboy entered an agreement with another corporation or
with a person who was not an officer, director, agent, or
employee of Playboy . . . .
PEI correctly argued that the charge was defective because it submitted a claim for
agreement in restraint of trade but omitted the required elements of that claim, including
that PEI entered into an agreement with another person—another corporation or a person
who is not an officer, director, agent, or employee of PEI. The trial court refused PEI's
9
Section 15.01(a) of the Texas Free Enterprise and Antitrust Act "adopted the language of the
federal Sherman Antitrust Act." Red Wing Shoe Co., Inc. v. Shearer's Inc., 769 S.W.2d 339, 343 (Tex. App
—Houston [1st Dist.] 1989, no writ).
25
request.
"The Texas Free Enterprise and Antitrust Act [TFEAA] provides that '"every
contract, combination, or conspiracy in restraint of trade is unlawful."' Levinthal v.
Kelsey-Seybold Clinic, P.A., 902 S.W.2d 508, 511 (Tex. App.—Houston [1st Dist.] 1994,
no writ) (quoting TEX. BUS. & COM. CODE ANN. § 15.05(a)); see also Puentes v. Spohn
Health Network, No. 13-08-00100-CV, 2009 Tex. App. LEXIS 4131, at *13 (Tex.
App.—Corpus Christi June 11, 2009, pet. denied) (mem. op.). In order to establish a
violation of section 15.05 of the TFEAA, EC and GSI were "required to prove a concerted
action by two or more persons." Levinthal, 902 S.W.2d at 511 (citing Red Wing Shoe
Co., Inc. v. Shearer's Inc., 769 S.W.2d 339, 344 (Tex. App.—Houston [1st Dist.] 1989, no
writ)). "To show a concerted action by two or more persons to illegally restrain trade, a
plaintiff faces the threshold requirement of identifying a co-conspirator." Levinthal, 902
S.W.2d at 511 (citing Red Wing Shoe Co., 769 S.W.2d at 345).
Moreover, "[a] company cannot conspire with its own employees as a matter of
law." Red Wing Shoe Co., 769 S.W.2d at 345; see Jack Russell Terrier Network of N.
Ca. v. Am. Kennel Club, Inc., 407 F.3d 1027, 1034-35 (9th Cir. 2005) (explaining that
under the federal act, co-conspirators must be "actual or potential competitors" and
"separate entities pursuing different economic goals" with "divergent economic
interests"); Arnold Pontiac-GMC, Inc. v. Gen. Motors Corp., 786 F.2d 564, 574 (3d Cir.
1986) ("[T]here is no conspiracy or concerted action for the purpose of Section 1 of the
Sherman Act when a corporation merely acts in concert with its own employees[.]");
Solomon v. Houston Corrugated Box Co., 526 F.2d 389, 396 (5th Cir. 1976) ("it is
well-settled that the Sherman Act's conspiracy or agreement requirement is not met by a
26
'conspiracy' between a corporation and its corporate officer[.]"). And one cannot sustain
an action under subsection 15.05(a) of the TFEAA regarding conspiracies or
combinations in restraint of trade when he has not provided any evidence that the
defendant engaged in any concerted action with any other independent entity. See
Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 761-62 (1984) (noting that
in order to recover under the federal act, a plaintiff must assert concerted action between
two or more entities); Red Wing Shoe Co., 769 S.W.2d at 345; see also Puentes, No.
13-08-00100-CV, 2009 Tex. App. LEXIS 4131, at *13 ("[A] violation of subsection
15.05(a) cannot be based on concerted action between a corporation and its
wholly-owned subsidiary . . . .").
Now, on appeal, because PEI objected to the charge as defective on the basis that
it omitted a required element of an antitrust claim—that PEI entered into an agreement
with another person—we measure the sufficiency of the evidence not by the charge but
by the antitrust law set out above. See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000)
(providing that when a complaining party has not alerted the trial court of an alleged
defect by objecting to the court's charge, it is the charge, and not some other, unidentified
law, against which we measure sufficiency of the evidence); see also Equistar Chem.,
L.P. v. Dresser-Rand Co., 240 S.W.3d 865, 868 (Tex. 2007) (concluding that an
argument that the charge submitted an improper measure of damages was waived by
failure to present to trial court); Gen. Chem. Corp. v. De La Lastra, 852 S.W.2d 916, 920
(Tex. 1993) (holding that the failure to object to jury questions based on state law waived
assertion on appeal that federal maritime law controlled). Therefore, EC and GSI must
show that the evidence establishes that PEI entered into a conspiracy, combination, or
27
conspiracy with a separate and independent business or person, see Levinthal, 902
S.W.2d at 511, and based on our review of the record, EC and GSI have not done so.
Much of EC and GSI's antitrust argument focuses on various alleged internal plans
of PEI. The memoranda referenced by EC and GSI discuss PEI's position regarding
distribution of the Spanish edition of Playboy in the U.S., its evolving relationship with EC
and GSI, and viable options that would allow for the continued publication of a Spanish
language magazine. The memoranda, however, do not conclusively establish that PEI
engaged in a contract, combination, or conspiracy in restraint of trade or commerce
against EC and GSI with another person or business, as they assert. Rather, with only
one exception, the referenced memoranda establish that PEI was reviewing the venture
and was planning internally. An internal plan is not a contract, combination, or
conspiracy with a separate and independent business or person, and evidence of an
agreement between or among PEI's employees, agents, officers, directors, and/or
stockholders does not conclusively establish the agreement element of an antitrust claim.
Additionally, although EC and GSI assert that the evidence establishes that there
existed an agreement between PEI and other persons outside the company, our review of
the record reveals that the only unaffiliated person with whom PEI communicated was
Laura de Laviada, a Mexican business woman. Marks identified her as a possible
successor to EC and GSI; however, there is nothing in the record that establishes PEI
reached an agreement with her. Christie Hefner testified that while she might have
communicated in writing with de Laviada about the matter, she did not think that she had
met with her and agreed that she had never made a deal with her in Mexico. Instead,
Christie Hefner testified that after the contract was terminated with EC and GSI, it took
28
five years to find a new licensee to relaunch the publications in Mexico and the new
licensee was not de Laviada.
Therefore, assuming without deciding that this is an antitrust claim and not just a
claim for breach of contract as PEI urges,10 reviewing the evidence presented at trial in
the light most favorable to the jury's verdict and indulging every reasonable inference that
would support it, we conclude that the evidence is legally sufficient to support the jury's
adverse finding on the antitrust claim. See Del Lago Partners, Inc., 307 S.W.3d at 770;
City of Keller, 168 S.W.3d at 822, 827. The evidence would enable reasonable and
fair-minded people to reach the verdict under review. See City of Keller, 168 S.W.3d at
827.
5. Theft of Property, Service, or Trade Secrets
Finally, EC and GSI contend that the undisputed evidence conclusively
established that PEI committed theft of property, theft of a service, or theft of trade secrets
from both EC and GSI. After generally asserting that the evidence conclusively
establishes that PEI committed theft of property, a service, and trade secrets, EC and GSI
repeat, for each asserted theft, the contentions and arguments made in their antitrust
issue. They also rely on the same evidence. EC and GSI do not, however, discuss the
elements of their theft claims, elements that were detailed in the jury charge. See TEX.
R. APP. P. 47.1 ("The court of appeals must hand down a written opinion that is as brief as
practicable but that addresses every issue raised and necessary to final disposition of the
appeal."); Martinez v. El Paso County, 218 S.W.3d 841, 844 (Tex. App.—El Paso 2007,
10
PEI also asserts that there are other bases to deny recovery on this antitrust claim, including (1)
EC and GSI do not have standing; (2) they failed to establish the relevant product and geographic market;
and (3) they failed to establish any injury to their business in Texas. Because of the disposition of this
issue, however, we need not address PEI's remaining responsive assertions. See TEX. R. APP. P. 47.1.
29
pet. dism'd) ("When reviewing a civil matter, an appellate court has no discretion to
consider an issue not raised in the appellant's brief, even if the ends of justice so
require."). Neither do they argue why the evidence is insufficient to support the jury's
finding with respect to those elements. See TEX. R. APP. P. 47.1; Martinez, 218 S.W.3d
at 844. Therefore, EC and GSI's argument that the take-nothing judgment on their theft
claims must be reversed fails. See TEX. R. APP. P. 47.1; Martinez, 218 S.W.3d at 844;
see also Dow Chem. Co., 46 S.W.3d at 241; Rich, 274 S.W.3d at 886-88.
6. Summary
Based on the above analysis, we overrule EC and GSI's second issue challenging
the jury's adverse findings on their claims against PEI.
B. PEI'S COUNTERCLAIMS
In their third issue, EC and GSI challenge all of the jury's findings on PEI's
counterclaims.
1. Breach-of-Contract Counterclaims
EC and GSI first address the jury's findings in favor of PEI on its breach-of-contract
counterclaims. Specifically, EC and GSI challenge the findings that they failed to comply
with the agreements and that their failures to comply were not excused. They also
appear to assert charge error when they argue that PEI failed to use or rely on Illinois law
in their breach-of-contract jury questions.
a. Sufficiency of the Evidence to Establish Breach
EC and GSI challenge the sufficiency of the evidence to support the jury's findings
that EC and GSI breached the License Agreement and the Renegotiated Payment Plan
30
Agreement—issues for which EC and GSI did not have the burden of proof.11 However,
the evidence establishes that the License Agreement entitled PEI to $450,000 in
guaranteed royalties over the term of the License Agreement, plus percentage royalties.
This included a guaranteed 1997 royalty of $100,000 to be paid quarterly. It is
undisputed that as of November 1997 EC and GSI had not made their first three quarterly
payments for that year and that the fourth quarterly payment was due. EC and GSI also
owed PEI $25,000 in other payments related to certain unaudited rebillables.
The License Agreement provided that the "failure of [EC] . . . to make any payment
required hereunder within five (5) days after notice from [PEI] that . . . payment is past
due" was an event authorizing termination. On November 14, 1997, however, the
parties signed the Renegotiated Payment Plan Agreement, providing that EC could have
until December 18, 1997 to pay $100,000 of the overdue amount and until February 28,
1998 to pay the remaining $25,000. Even with this extension, the evidence shows that
EC did not make the payments as required. PEI provided EC with the required notice
and an opportunity to cure. After EC failed to cure, PEI terminated the License
Agreement.
Based on our review of the evidence under the appropriate standard, the evidence
is sufficient to support the jury's findings that EC and GSI breached the License
Agreement and the Renegotiated Payment Plan Agreement. See City of Keller, 168
S.W.3d at 810; Croucher, 660 S.W.2d at 58. It is legally sufficient because there is not a
complete absence of evidence, but rather more than a scintilla of evidence, properly
11
Question 15 asked whether EC and/or GSI failed to comply with the License Agreement, and
Question 18 asked whether EC and/or GSI failed to comply with the Renegotiated Payment Plan
Agreement. To each question, the jury answered "Yes" for EC and "Yes" for GSI.
31
admitted, to support the findings and because the evidence does not establish
conclusively the opposite of such findings, as urged by EC and GSI. See City of Keller,
168 S.W.3d at 810; King Ranch, Inc., 118 S.W.3d at 751. Furthermore, we conclude that
the evidence is factually sufficient because it is not so weak as to make the verdict clearly
wrong and manifestly unjust. See Cain, 709 S.W.2d at 176; Ins. Network of Tex., 266
S.W.3d at 469-70; Bay, Inc., 139 S.W.3d at 329.
b. EC and GSI's Excuse Defense
EC and GSI also challenge the jury's refusal to find that their breaches were
excused—an affirmative defense for which EC and GSI had the burden of proof. 12 See
Trencor, Inc. v. Cornech Mach. Co., 115 S.W.3d 145, 153 (Tex. App.—Fort Worth 2003,
pet. denied) (citing TEX. R. CIV. P. 94) (setting out that excuse is an affirmative defense
upon which the defendant has the burden of proof). Although the jury questions
instructed the jury that EC and GSI's actions may be excused for PEI's prior breach,
estoppel, or ratification, EC and GSI complain on appeal only of the jury's refusal to find
prior breach—PEI's non-disclosure of the three Hefner internal memoranda—as an
excuse. However, as set out above, there was sufficient evidence to support the jury's
finding that PEI did not commit a breach of contract by keeping its internal memos
internal. There likewise is evidence to support the jury's finding that EC and GSI's
breaches of the License Agreement and the Renegotiated Payment Plan Agreement
were not excused by any prior contractual breach on PEI's part. Thus, we conclude that
the evidence is both legally and factually sufficient because the jury's answers are fully
12
Question 16 asked if EC and/or GSI's failure to comply with the License Agreement was
excused, and Question 19 asked if EC and/or GSI's failure to comply with the Renegotiated Payment Plan
Agreement was excused. To each question, the jury answered "No" for EC and "No" for GSI.
32
supported by the evidence that would enable reasonable and fair-minded people to reach
the verdict under review, see City of Keller, 168 S.W.3d at 827, and those adverse
findings are not against the great weight of the evidence. See Dow Chem. Co., 46
S.W.3d at 242.
c. Illinois Law
EC and GSI contend that PEI intentionally omitted any reference to Illinois law in
their breach-of-contract jury questions and, thereby, eradicated any entitlement it had to
the jury's affirmative findings of breach. EC and GSI did not, however, object to the jury
questions on the ground that they were allegedly being submitted under the wrong state's
law. And they did not request the submission of any jury instructions relating to Illinois
law to accompany the questions concerning PEI's breach-of-contract counterclaims. As
a result, EC and GSI have waived any error on this basis. See TEX. R. CIV. P. 274 ("A
party objecting to a charge must point out distinctly the objectionable matter and the
grounds of the objection. Any complaint as to a question, definition, or instruction, on
account of any defect, omission, or fault in pleading, is waived unless specifically included
in the objections."); Jarrin v. Sam White Oldsmobile Co., 929 S.W.2d 21, 25 (Tex.
App.—Houston [1st Dist.] 1996, writ denied) ("To complain of the trial court's omission of
a requested instruction on appeal, a party is obliged to make a written request to the trial
court . . . .").
d. Damage Award
Finally, EC and GSI argue that the evidence is insufficient to support the jury's
awards of $312,500 and $48,750 in damages on PEI's breach-of-contract counterclaims.
We are not persuaded by this argument because it is based on allegations which we have
33
already concluded are not supported by the record—that the evidence demonstrates that
neither EC nor GSI breached the agreements, that PEI submitted its breach of contract
claim without reference to Illinois law, and that the evidence demonstrates that the
breaches were legally excused. Therefore, we need not address this contention further.
See TEX. R. APP. P. 47.1.
2. Fraud Counterclaims
EC and GSI also contend that all findings against them on PEI's fraud claims were
not supported by sufficient evidence. However, PEI elected to recover not on its fraud
claims but on its breach of contract claims which we have concluded are supported by the
evidence. We decline to address appellant's second issue as it is not dispositive to this
appeal. See id.
3. Attorneys' Fees
Finally, EC and GSI challenge the jury's award of attorneys' fees in the amount of
$1,680,000 and $500,000 contingent appellate fees. They first argue that PEI is not
entitled to recover attorneys' fees, asserting that Illinois law precludes such an award.
Relying on Brundidge v. Glandale Fed. Bank and Hamer v. Kirk, EC and GSI
acknowledge that Illinois law permits the recovery of attorneys' fees where an agreement
between the parties allows the successful litigant to recover attorneys' fees and the
expenses of suit. See Brundidge, 659 N.E.2d 909, 911 (1995); Hamer, 356 N.E.2d 524,
526 (1976). Here, the License Agreement expressly authorizes the recovery of
attorneys' fees and litigation costs. Thus, this argument fails.
EC and GSI further argue that the award should be disregarded because PEI
failed to introduce evidence of attorneys' fees incurred solely in connection with the
34
prosecution of the breach of contract claims, and because PEI brought both tort claims
and contract claims, this failure to segregate fees is fatal to any right to recover fees.
See Varner v. Cardenas, 218 S.W.3d 68, 698 (Tex. 2007). However, EC and GSI
waived any objection to any failure to segregate by failing to object to the attorneys' fees
jury question on the ground that PEI had not segregated its attorneys' fees. Where "[n]o
objection [is] made based on the failure to segregate . . . any error in failing to segregate
the fees [is] waived, and the trial court [can] only disregard the jury finding if it [is]
unsupported by the evidence or [is] immaterial." Estate of Montague v. Nat'l Loan
Investors, L.P., 70 S.W.3d 242, 250 (Tex. App.—San Antonio 2001, pet. denied); see
also Petroleum Solutions, Inc. v. Head, No. 13-09-00204-CV, 2011 Tex. App. LEXIS
3289, at *147 (Tex. App.—Corpus Christi Apr. 29, 2011, pet. filed) (mem. op.) (explaining
that where the appellant "did not object to the segregation of [appellee's] attorney's fees
and expenses, . . . [appellant's] segregation contention was waived"). In Montague, the
court of appeals upheld the jury's attorneys' fee award where there had been no objection
to the failure to segregate, and where, as here, the jury awarded less than the total
amount of attorneys' fees sought. See 70 S.W.3d at 250.
Finally, EC and GSI also assert that the fees should be disregarded because the
evidence conclusively demonstrated that neither EC nor GSI breached either the License
Agreement or the Renegotiated Payment Plan Agreement and, if there was any breach, it
was excused as a matter of law. We have already decided these evidentiary issues
against EC and GSI and, therefore, need not address them as a basis for their attorneys'
fees argument. See TEX. R. APP. P. 47.1.
35
4. Summary
Based on the above analysis, we overrule EC and GSI's third issue challenging the
jury's findings in favor of PEI on PEI's counterclaims.
III. CONCLUSION
We affirm the judgment of the trial court.
NELDA V. RODRIGUEZ
Justice
Delivered and filed the 12th
day of January, 2012.
36