Lion Copolymer Holdings, LLC v. Lion Polymers, LLC

Opinion issued March 21, 2019
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-17-00671-CV
———————————
LION COPOLYMER HOLDINGS, LLC, Appellant
V.
LION POLYMERS, LLC, Appellee
On Appeal from the 190th District Court
Harris County, Texas
Trial Court Case No. 2014-10394A
MEMORANDUM OPINION
Appellant, Lion Copolymer Holdings, LLC (the “Company”), challenges the
trial court’s judgment, entered after a jury trial, in favor of appellee, Lion Polymers,
LLC (“LP”), on LP’s breach-of-contact claim against the Company. In four issues,
the Company challenges the legal and factual sufficiency of the evidence supporting
the jury’s verdict and contends that the trial court erred in admitting certain evidence
and in awarding LP pre-judgment interest and costs.
We modify and affirm in part and reverse and remand in part.
Background
The Company, a Delaware Limited Liability Company, manufactures
synthetic rubber for the automotive and construction industries. Pursuant to the
amended “LLC Agreement” (the “Agreement”), under which the Company was
formed, the Company’s “members,” such as LP, share in the Company’s profits and
proceeds through tiered distribution provisions, or “waterfalls,” based on the type
and quantity of units, or fractional membership interests in the Company, that each
member holds. In 2007, the Company admitted LP as a member and issued it
1,237,500 Class 1 Preferred Units and 1,964,492 Class 3 Common Units. At issue
in this case is the Company’s distribution of proceeds related to LP’s holdings of
Class 3 units.
Pertinent Portions of the Agreement
The Company, as a pass-through entity taxed as a partnership, allocates its
profits and losses to each individual member, who then pays taxes on the amounts
allocated. Because a member may incur tax liability on profits not actually
2
distributed, the Agreement, at section 6.01(d), provides for certain “Tax Advances”
as follows, in pertinent part:
On each Tax Distribution Date, the Company shall, to the extent the
Board determines such amounts to be available for distribution, make
distributions to the Members in such amounts as the Board determines
are sufficient to satisfy the Members’ projected estimated income tax
liability with respect to the Company’s income allocable to their Units
for such period. . . . Such tax liability will be calculated as though each
Member were an individual residing in the State of New York based
upon the highest marginal income tax rates, taking into account U.S.
federal, state, and local income taxes . . . , which the Board estimates
are applicable, utilizing the respective rates for ordinary income or
capital gains, depending on the characterization of the Company’s
estimated income for such period. Any distribution made to a member
pursuant to this Section 6.01(d) shall be treated as an advanced
distribution of, and shall reduce, the amounts next distributable to such
Member pursuant to Section . . . 6.02.
Section 6.02 of the Agreement governs how and to whom proceeds are to be
paid after a “Recapitalization Transaction,” defined as the financing or refinancing
of debt secured by the assets of the Company in an amount in excess of $10,000,000,
in the aggregate, and followed by the distribution of all, or a significant portion of,
such amounts to the members existing as of such date. Section 6.02(1) generally
provides:
[U]pon a Recapitalization Transaction, after adjusting the Capital
Accounts for all distributions made under Section 6.01 and all
allocations under this Article 6, all available proceeds distributable to
the Members shall be distributed to the Members as follows:
(a) First, to the Holders of Class 4 Common Units in an amount
equal to the amounts owed to such Holders . . . .
3
(b) Next, to the Holders of Class 1 Preferred Units until their Unpaid
Class 1 Return is eliminated; . . . .
(c) Next, to the Holders of Class 1 Preferred Units until their
Unreturned Class 1 Capital is eliminated; . . . .
(d) Thereafter, to the Holders of Class 2 Common Units, Class 3
Common Units, and Class 4 Common Units (but not the holders
of Class 1 Preferred Units) pro rata in proportion to the number
of such Units.
Thus, reading sections 6.01(d) and 6.02 together, the Company advances sufficient
cash to each member to satisfy the member’s estimated income tax liability and then
recoups the advance from a subsequent non-tax distribution of proceeds under, as
pertinent here, section 6.02 by reducing the amount of the distribution to the
member.
The Instant Suit
On September 9, 2011, the Company, after a $300,000,000 Recapitalization
Transaction, distributed $150,000,000 in proceeds to its members (the “2011
Distribution”). On March 7, 2013, after a $230,000,000 Recapitalization
Transaction, the Company again distributed a portion of the proceeds to its members
(the “2013 Distribution”). LP, disputing that it had received its proper share of the
proceeds in the 2011 and 2013 Distributions, brought a breach-of-contract suit
against the Company. In its suit, LP alleged that the Company (1) had improperly
withheld certain sums, as a “strike-price deduction,” from LP’s portion of the 2011
Distribution (the “strike-price claim”) and (2) had withheld certain section 6.01(d)
4
tax advances twice—once from LP’s portion of the 2011 Distribution and again from
LP’s portion of the 2013 Distribution (the “double-deduction claim”). The trial court
granted summary judgment in favor of LP on its strike-price claim, and we affirmed,
as modified, the trial court’s judgment. See Lion Co-Polymers Holdings, LLC v.
Lion Polymers, LLC, No. 01-16-00848-CV, 2018 WL 3150863, at *18 (Tex. App.—
Houston [1st Dist.] June 28, 2018, pet. filed) (mem. op.). The trial court severed
LP’s double-deduction claim into the instant suit.
In its second amended petition, LP asserted, with respect to its
double-deduction claim, that the Company had breached the Agreement by
deducting from LP’s share of the 2011 Distribution tax advances in the amount of
$361,295 attributable to the third and fourth quarters of 2011 that the Company had
not yet paid to LP. Subsequently, after the Company paid the advances to LP, it then
deducted the same advances from LP’s portion of the 2013 Distribution. LP
explained that it had learned about the double-deduction through its deposition in
the underlying strike-price suit of the Company’s Tax Matter Member, Rich Furlin.
LP notified the Company that, in support of its claim, it intended to introduce at trial
a spreadsheet that Furlin created in February 2012 (the “February 2012
Spreadsheet”) and his deposition testimony about the spreadsheet. As discussed
below, the Company moved to exclude the February 2012 Spreadsheet and “any
testimony related to that spreadsheet.” The trial court denied the Company’s motion.
5
Trial
At trial, Stephen Lyttleton, an owner and manager of LP, testified that, on
September 9, 2011, he received a letter from Furlin describing LP’s share of the 2011
Distribution, with respect to both its Class 1 and Class 3 units. The trial court
admitted into evidence a bank notice of wire transfer, reflecting the Company’s
payment to LP for its Class 1 and Class 3 shares, combined. On September 13, 2011,
Furlin sent Lyttleton a spreadsheet detailing how he had calculated LP’s share.
Lyttleton testified that Furlin’s calculations were incorrect because none of the tax
advances that LP had received in 2010 and prior to the date of the 2011 Distribution
had been deducted, in accordance with section 6.01(d) of the Agreement.
In February 2012, Furlin, to correct the errors in the 2011 Distribution,
compiled and sent to LP the February 2012 Spreadsheet. Lyttleton testified that the
February 2012 Spreadsheet also contained errors. Although Furlin had properly
deducted the tax advances that the Company had paid to LP prior to the 2011
Distribution, he had also improperly deducted future tax advances that the Company
had not yet paid to LP. Specifically, the Company deducted a total of $1,964,492 in
tax advances from LP’s share of the 2011 Distribution attributable to its Class 3
units. Lyttleton testified that the total amount that the Company should have
deducted was $1,603,197. Lyttleton testified that the difference, $361,295, was
attributable to tax advances for the third and fourth quarters of 2011, which the
6
Company had not yet paid to LP as of the date of the 2011 Distribution. The trial
court admitted into evidence the February 2012 Spreadsheet, which reflects that a
total of $1,964,492 in “Article 6.01(d) Distributions,” or tax advances, was deducted
from the LP’s share of the 2011 Distribution, including “Tax Allocations” in the
amount of $313,328 and $47,967 for the third and fourth quarters of 2011, as
follows:
On February 21, 2012, Furlin sent Lyttleton an email stating that he had
“applied the Article 6.01(d) distributions for [LP’s] Class 3 Common to equal
$1,964,492 in the September 2011 distribution detail schedule.” Lyttleton testified
that this was the last communication that he had with Furlin, until he attended
Furlin’s deposition, during which Furlin, in “his sworn deposition,” “said he verified
what he—what’s in this spreadsheet, that what was deducted and how much in tax
advances that they claimed that we had received, and it was the wrong amount. It
was the same amount.” On March 8, 2012, Lyttleton sent the Company a draft
spreadsheet showing his understanding of how the tax advances should have been
applied. He noted that he was trying to figure it out himself because he “wasn’t
getting any answers.”
7
Lyttleton further testified that, on March 7, 2013, he received a letter from
Company accountant David Wascom, notifying LP of the 2013 Distribution. In the
letter, Wascom explained that the Company would be taking into account the article
6.01(d) tax advances since the 2011 Distribution. Lyttleton testified that, because
the third and fourth quarter 2011 tax advances at issue were actually paid to LP after
the date of the 2011 Distribution, the same advances that Furlin had previously
deducted from LP’s share of the 2011 Distribution were deducted a second time.
Lyttleton testified that, based on the double deduction, LP had suffered damages in
the amount of $361,295.
On May 25, 2012, LP, through its principal, Pete De Leeuw, sent an email to
the Company’s board of directors, Company manager Goradia Capital (“Goradia”),
and Furlin, stating that LP’s tax attorney, Robert Phillpott, had analyzed the actual
distributions to understand whether the Agreement had been properly followed. The
trial court admitted into evidence Phillpott’s report and spreadsheets.
In his report, Phillpott stated that he had reviewed a Goradia spreadsheet dated
April 17, 20121 and had concluded that there existed “material differences for all
Members with respect to the amounts that should have been distributed to the
Members through the 2011 [Distribution].” With respect to LP’s tax advances,
Phillpot concluded that LP, prior to a 2010 recapitalization transaction, had received
1
The spreadsheet is not included in the appellate record.
8
cumulative tax advances in the amount of $238,086. And, between that date and the
2011 Distribution, LP had received cumulative tax advances in the amount of
$2,375,013. The trial court admitted into evidence cancelled checks and bank
records reflecting these amounts.
Lyttleton explained that Phillpott’s amounts included LP’s Class 1 and Class
3 units. Thus, to obtain the portion attributable solely to LP’s Class 3 units, at issue
in this case, such amounts must be multiplied by the portion of the total amount
attributable to LP’s Class 3 units, i.e., 61.35 percent.2 Doing so results in $146,066
in cumulative tax advances attributable to LP’s Class 3 units for 2010 and
$1,457,070 in cumulative tax advances attributable to LP’s Class 3 units through the
date of the 2011 Distribution. Together, these total $1,603,136 in tax advances
attributable to LP’s Class 3 units that should have been deducted from LP’s share of
the 2011 Distribution. Lyttleton noted that these amounts approximated those that
Furlin had stated in the February 2012 Spreadsheet for these same time periods. The
issue, however, was that the February 2012 Spreadsheet went further and also
deducted future advances.
2
The record shows that members, such as LP, owning more than one classification
of membership interest, i.e., Class 1 and Class 3, have a single capital account, but
the taxable income is allocated to each type of membership unit. Thus, LP’s capital
account reflected an ownership interest based on the sum of its Class 1 and Class 3
units, of which 38.65% was allocated to LP’s Class 1 units and 61.35% was
allocated to its Class 3 units.
9
Vijay Goradia, chairman of the boards of Goradia and the Company, testified,
by videotaped deposition, that he “rel[ied] on Rich Furlin to do the calculations”
pertaining to the Company’s tax advances and distributions. He testified that
Goradia manages the Company and that Furlin had worked for Goradia since it
began managing the Company.
Furlin testified at trial that, as secretary of the Company and its Tax Matter
Member, it was his responsibility to see that the distributions to members were
correct. He noted that he was also a vice president of Goradia. He testified that he
was “the person who calculated the 2011 Section 6.02 distribution that the Company
paid.” He admitted that the initial calculations supporting the 2011 Distribution to
LP were incorrect because LP’s tax advances for 2010 and through the 2011
Distribution had not been deducted, in accordance with the Agreement. He
performed the recalculation of the 2011 Distribution in the February 2012
Spreadsheet, a file he titled: “Lion 2011 Distribution, Final Reallocation, February
2012.”
Furlin testified that only $1,603,197 had been paid to LP as tax advances on
its Class 3 units prior to the 2011 Distribution and that the Agreement did not
authorize the Company to deduct future tax advances from its distributions. He
admitted that he applied $1,964,492 in the February 2012 Spreadsheet because he
had included $361,295 attributable to LP’s third and fourth quarter 2011 tax
10
advances, which had not yet been paid. He explained that he used the incorrect
deduction of $1,964,492 in the February 2012 Spreadsheet because the Company
“had another lawsuit going on unrelated to this. And [he] thought that what [he] was
supposed to do was put in that amount that was . . . being disputed in the other
lawsuit.” He added: “I thought that that was the right number to put in given what
was transpiring. It was a mistake, and I was wrong.”
Furlin testified, however, that the Company did not actually use the February
2012 Spreadsheet or the spreadsheets prepared by Lyttleton or Phillpott. Rather, the
Company obtained its “final calculation” from its attorney, Corby Brooks. Furlin
testified that, in June 2012, Brooks compiled a set of spreadsheets (the “June 2012
Spreadsheet”), which Brooks submitted to the Company attached to a letter titled,
“Confidential Settlement Negotiations.” Furlin explained that the June Spreadsheet
was “used to determine how much people should have gotten in 2010 versus what
they got in 2010, and how much they should have gotten based on the correct
calculation in 2011 versus how much they did get in cash in 2011.” Furlin later
testified, however, that the June 2012 Spreadsheet was not the final schedule.
Furlin testified that the Company finalized its calculations in August 2012,
determined that it had actually overpaid LP $1,331,655 in the 2011 Distribution, and
resolved to recoup such overpayment by withholding certain sums from LP, as
follows:
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Q. . . . . When did the Company actually complete its work with
respect to trying to figure out how to adjust the distributions that
had already been made to take into account these tax advances?
A. It—it took until the beginning of August 2012 for us to know
exactly what the right amounts of the final distribution should be.
Q. All right. And how did you communicate that determination to
Mr. Lyttleton?
A. Well, there are—there are two ways. One is, each quarter, we
knew people owed—we knew certain people owed money. So
each quarter from December through the second quarter of 2012,
we were taking out estimates of what we thought the final would
be. So they knew that in—that in Q1—or the fourth quarter of
2012, their entire—that we were going to be make a repayment
of $600,000. They knew in 20—in the first quarter we were
making another 200—400,000. And that by the June tax
distribution, we had withheld another 200,000.
So the sum of that all was $1.3 million. And then we sent
[Lyttleton] that—all—and all the shareholders their notification
of whether they were getting money or whether they had owed
money. But everybody had had their payments already reduced
by that time. But it took through August of 2012 to get
everything finalized.
Thus, testified Furlin, there was no double-deduction of tax advances.
The trial court admitted into evidence the Company’s spreadsheet (the
“August 2012 Spreadsheet”). The August 2012 Spreadsheet states that LP received
cumulative tax advances prior to August 2010 of $238,086; that LP received
cumulative tax advances after August 2010 of $1,457,328; and that LP owed the
Company a combined $1,331,655, of which $865,361 was attributed to its Class 3
units.
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With respect to correlating the Company’s spreadsheets with actual
distributions to LP, Furlin testified:
Q. You heard some assertions that this is all about following the
money, and you have to tick and tie everything, and you have to
show that everything ties to cash, and you should reconcile the
bank accounts because the bank accounts will show that
everything ticks and ties, right?
A. That was what was said, yes.
Q. But you admit that the final spreadsheet, whatever the final
spreadsheet is, won’t actually tie to what was actually distributed
to all of the unitholders, would it?
A. Well, these are deductions. These aren’t how much was paid in
cash.
Furlin noted that, although the Company, in its live answer in this case, states
that it had “made $1,935,154 in Section 6.01 distributions” to LP, that was “wrong.”
He further explained that, although, in May 2015, he executed an affidavit 3 in this
case stating that, prior to the 2011 Distribution, LP “received a total of over 1.9
million in Section 6.01 distributions related to its Class 3 units,” he was including
amounts paid for the entire month of September.
In the excerpts of his videotaped deposition presented to the jury at trial, Furlin
testified that he was “the only one that made calculations that the Company used”;
that the February 2012 Spreadsheet was the final spreadsheet that he compiled; and
3
The affidavit itself was not admitted into evidence.
13
that the “ultimate amount” withheld in tax advances from LP’s share of the 2011
Distribution was “1 million 964.”
Wascom, a certified public accountant from the firm Hannis T. Bourgeois,
testified that he prepared tax allocations and returns for the Company. He testified
that it was Furlin, and not Brooks, who created the spreadsheets from which the
Company eventually made its 2011 Distribution to members, as follows:
Q. So you don’t know what the Company actually did in 2011
because you didn’t review any of Furlin’s spreadsheet
calculations of the 2011 distribution, did you?
A. Not at that time, but subsequently I did.
....
Q. But you told me at the deposition that you didn’t review any of
them?
A. I didn’t review his calculations, but I have to be provided the
calculations to know how much distributions each member gets
in preparation of a tax return.
Q. So it’s your testimony that you looked at the spreadsheets, you
just didn’t check his calculations?
A. And let’s—let’s be clear. Which spreadsheets are you referring
to?
Q. I’m referring to the spreadsheets that Mr. Furlin made to
calculate the 2011 Section 6.02 distribution.
A. I would have had to have seen those spreadsheets.
Q. You looked at those spreadsheets?
A. Yes.
....
Q. You agree with me that it was Rich Furlin who created the
spreadsheets that calculated payments made to the members for
Section 6.02 distributions that were eventually made, don’t you?
14
A. Yes.
Q. Not Corby Brooks, somebody else. It was Rich Furlin, right?
A. Correct.
(Emphasis added.) Wascom later noted, however, that he had used Brooks’s
calculations, which he stated represented the final correction to LP’s share of the
2011 Distribution, in preparing tax documents and that, according to Brooks, LP was
overpaid in the 2011 Distribution and owed the Company $1.3 million. On March
7, 2013, Wascom sent a letter to LP stating that he was preparing the 2013
Distribution and had taken into account all section 6.01(d) tax advances since the
2011 Distribution, which included the third and fourth quarter 2011 tax advances.
Eugene Kenyon, the managing director of Goradia and member of the
Company’s board of directors, also testified that, based on August 2012 Spreadsheet,
which he stated was the final spreadsheet, the Company withheld $1,331,655 from
LP’s 2011 Distribution.
In its charge, the trial court asked the jury to determine whether the Company
“failed to comply with the [Agreement] by double deducting $361,295 in tax
advances from LP” and, if so, to determine the amount of damages, if any, owed to
LP. The jury answered that the Company had breached the Agreement and awarded
damages to LP in the amount of $361,295. The trial court denied the Company’s
motion for judgment notwithstanding the verdict. The trial court entered a judgment
on the verdict, awarding LP damages in the amount of $361,295. The trial court also
15
awarded LP pre-judgment interest in the amount of $66,072.44 through April 19,
2017, increasing by $49.49 per day until the date of judgment, May 24, 2017, and
costs in the amount of $3,707.85.
Sufficiency of the Evidence
In its first issue, the Company argues that that evidence is legally and factually
insufficient to support the jury’s verdict that the Company breached the Agreement
and that LP was entitled to $361,295 in damages. The Company asserts that the
“evidence conclusively established that the Company did not use the February 2012
spreadsheet, but did actually use the August 2012 spreadsheet.”
Standard of Review and Legal Principles
When a party challenges the legal sufficiency of the evidence to support an
adverse finding on which it did not have the burden of proof, it must demonstrate
that there is no evidence to support the adverse finding. See Exxon Corp. v. Emerald
Oil & Gas Co., L.C., 348 S.W.3d 194, 215 (Tex. 2011). We will sustain a legal-
sufficiency or no-evidence challenge if the record shows one of the following: (1) a
complete absence of evidence of a vital fact, (2) that rules of law or evidence bar the
court from giving weight to the only evidence offered to prove a vital fact, (3) that
the evidence offered to prove a vital fact is no more than a scintilla, or (4) that the
evidence establishes conclusively the opposite of the vital fact. City of Keller v.
Wilson, 168 S.W.3d 802, 810 (Tex. 2005). In conducting a legal-sufficiency review,
16
a “court must consider evidence in the light most favorable to the verdict and indulge
every reasonable inference that would support it.” Id. at 822. Jurors are the sole
judges of the credibility of the witnesses and the weight to give their testimony. Id.
at 819. They may choose to believe one witness and to disbelieve another. Id.
Reviewing courts may not impose their own opinions to the contrary. Id. “Courts
reviewing all the evidence in a light favorable to the verdict thus assume that jurors
credited testimony favorable to the verdict and disbelieved testimony contrary to it.”
Id.
If there is more than a scintilla of evidence to support the challenged finding,
we must uphold it. Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors,
Inc., 960 S.W.2d 41, 48 (Tex. 1998). “[W]hen the evidence offered to prove a vital
fact is so weak as to do no more than create a mere surmise or suspicion of its
existence, the evidence is no more than a scintilla and, in legal effect, is no
evidence.” Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004).
However, if the evidence at trial would enable reasonable and fair-minded people to
differ in their conclusions, then factfinders must be allowed to do so. City of Keller,
168 S.W.3d at 822. “A reviewing court cannot substitute its judgment for that of the
trier-of-fact, so long as the evidence falls within this zone of reasonable
disagreement.” Id.
17
When a party challenges the factual sufficiency of the evidence supporting a
finding, we review all of the evidence that supports or contradicts the factfinder’s
determination in a neutral light and set aside the finding only if it is so contrary to
the overwhelming weight of the evidence as to be clearly wrong and manifestly
unjust. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001); Plas–Tex,
Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989); Pool v. Ford Motor Co.,
715 S.W.2d 629, 635 (Tex. 1986). Again, the factfinder is the sole judge of the
witnesses’ credibility and may choose to believe one witness over another. See
Zenner v. Lone Star Striping & Paving, L.L.C., 371 S.W.3d 311, 314 (Tex. App.—
Houston [1st Dist.] 2012, pet. denied).
Breach and Damages
To prevail on its breach-of-contract claim, LP was required to establish
(1) that a valid contract existed between the parties; (2) that LP tendered
performance or was excused from doing so; (3) that the Company breached the terms
of the contract; and (4) that LP sustained damages as a result of the Company’s
breach. West v. Triple B Servs., LLP, 264 S.W.3d 440, 446 (Tex. App.—Houston
[14th Dist.] 2008, no pet.). Here, neither party argues that there was not a valid
contract between the parties or that LP failed to tender performance. The Company
asserts, rather, that the evidence is insufficient to support the jury’s verdict that the
18
Company breached the Agreement by deducting the same tax advances twice and
that LP incurred damages in the amount of $361,295.
As its evidence that the Company breached the terms of the Agreement by
withholding future tax advances from the 2011 Distribution, LP presented section
6.01(d) of the Agreement which provides, in pertinent part:
On each Tax Distribution Date, the Company shall, to the extent the
Board determines such amounts to be available for distribution, make
distributions to the Members in such amounts as the Board determines
are sufficient to satisfy the Members’ projected estimated income tax
liability with respect to the Company’s income allocable to their Units
for such period. . . . Any distribution made to a member pursuant to this
Section 6.01(d) shall be treated as an advanced distribution of, and
shall reduce, the amounts next distributable to such Member pursuant
to Section . . . 6.02.
(Emphasis added.) Thus, the parties agreed that the Company would advance
sufficient cash to LP to satisfy LP’s estimated income tax liability and then recoup
these tax advances from LP in a subsequent non-tax distribution of proceeds by
reducing the amount it paid to LP. See Valence Operating Co. v. Dorsett, 164
S.W.3d 656, 662 (Tex. 2005) (holding that we give contract terms their plain,
ordinary, and generally accepted meaning).
The record shows that the Company paid the 2011 Distribution to LP on
September 9, 2011. It is undisputed that Furlin, in September 2011, provided LP
with the calculations underlying the 2011 Distribution and that these calculations
19
were incorrect because none of the Company’s previous tax advances to LP had been
deducted, in accordance with section 6.01(d).
Furlin then prepared the February 2012 Spreadsheet to correct the errors. The
February 2012 Spreadsheet, which the trial court admitted into evidence,4 shows that
the Company deducted $1,964,492 in tax advances from LP’s share of the 2011
Distribution. An excerpt from the spreadsheet shows that this amount included taxes
attributable to the third and fourth quarters of 2011, in the amount of $313,328 and
$47,967, respectively, for a total of $361,295:
On February 21, 2012, Furlin sent Lyttleton an email stating that he had “applied the
Article 6.01(d) distributions for [LP’s] Class 3 Common to equal $1,964,492 in the
September 2011 distribution detail schedule.” Furlin testified that getting to the
$1,964,492 necessarily required a “reach into the future.”
The record shows, and the Company states in its brief, that the Company paid
LP its third quarter 2011 tax advance on September 15, 2011 and paid LP its fourth
quarter 2011 tax advance in January 2012. Thus, at the time of the 2011 Distribution,
the Company had not yet paid tax advances to LP for the third and fourth quarters
4
On appeal, the Company challenges the admissibility of Furlin’s testimony about
the February 2012 Spreadsheet. It does not challenge the admissibility of the
February 2012 Spreadsheet itself.
20
of 2011. The parties do not dispute that the terms of the Agreement did not authorize
the Company, in making distributions of proceeds, to reach into the future and
deduct future tax advances.
Furlin admitted that, prior to the 2011 Distribution, only $1,603,197 had been
paid to LP as tax advances on its Class 3 units. He testified that he applied the
$1,964,492 amount because the Company “had another lawsuit going on unrelated
to this. And [he] thought that what [he] was supposed to do was put in that amount
that was . . . being disputed in the other lawsuit.” He added: “I thought that that was
the right number to put in given what was transpiring. It was a mistake, and I was
wrong.”
Furlin testified, however, that the amount stated in the February 2012
Spreadsheet was “not the ultimate amount that was actually distributed.” He
testified that “the ultimate distribution” was “finalized” in “April of 2012”; that the
Company “got calculations from” Brooks in “May and June 2012 that were used for
the final calculation”; and that the Company did not use Brooks’s schedule but
applied “the final August 2012 schedule.”
Furlin further testified at trial, however, that he was “the person who
calculated the 2011 Section 6.02 distribution that the Company paid.” He testified
that the Company, in its live answer in this case, states that it had “made $1,935,154
in Section 6.01 distributions” to LP, although he disputed its accuracy. He explained
21
that, although, in May 2015, he executed an affidavit in this case stating that, prior
to the 2011 Distribution, LP “received a total of over 1.9 million in Section 6.01
distributions related to its Class 3 units,” he was including amounts paid for the entire
month of September.
Moreover, in the excerpts of his videotaped deposition presented to the jury
at trial, which we hold below that the trial court did not err in admitting, Furlin
testified that he was “the only one that made calculations that the Company used”;
that the February 2012 Spreadsheet was the final spreadsheet that he compiled; and
that the “ultimate amount” withheld in tax advances from LP’s share of the 2011
Distribution was “1 million 964.”
Wascom testified that it was Furlin who created the spreadsheets and
calculated the payments “that were eventually made,” as follows:
Q. I’m referring to the spreadsheets that Mr. Furlin made to
calculate the 2011 Section 6.02 distribution.
A. I would have had to have seen those spreadsheets.
Q. You looked at those spreadsheets?
A. Yes.
....
Q. You agree with me that it was Rich Furlin who created the
spreadsheets that calculated payments made to the members for
Section 6.02 distributions that were eventually made, don’t you?
A. Yes.
Q. Not Corby Brooks, somebody else. It was Rich Furlin, right?
A. Correct.
22
(Emphasis added.) Wascom later testified, however, that he had used Brooks’s
spreadsheet, which he stated represented the final correction to LP’s 2011
Distribution, in preparing certain tax documents. Kenyon also testified that the
August 2012 Spreadsheet was the final spreadsheet.
“It is the province of the jury to resolve conflicts in the evidence, and when
reasonable jurors could resolve conflicting evidence either way, we presume they
did so in accordance with the verdict.” Gunn v. McCoy, 554 S.W.3d 645, 665 (Tex.
2018); City of Keller, 168 S.W.3d at 820. The factfinder is the sole judge of the
witnesses’ credibility, and it may choose to believe one witness over another. See
City of Keller, 168 S.W.3d at 819.
Here, the jury could have reasonably chosen to believe Goradia and Furlin’s
testimony that Furlin was in charge of calculating the distributions to members and
ensuring their accuracy, and it could have chosen to believe Furlin’s trial testimony
that he was “the person who calculated the 2011 Section 6.02 distribution that the
Company paid” and that the February 2012 Spreadsheet was the last set of
calculations that he prepared. The jury also could have reasonably chosen to credit
Wascom’s testimony that it was Furlin who “created the spreadsheets that calculated
the payments made to the members for the section 6.02 distributions that were
eventually made.”
23
Further, from the evidence and testimony, the jury could have reasonably
concluded that only $1,603,197 had been paid to LP as tax advances on its Class 3
units prior to the 2011 Distribution; that the Agreement did not authorize the
Company to deduct future tax advances from its distributions; and that Furlin applied
$1,964,492 in the February 2012 Spreadsheet because he had included $361,295
attributable to LP’s third and fourth quarter 2011 tax advances, which had not yet
been paid.
Although Furlin testified that the $1,964,492 stated in the February 2012
Spreadsheet was “not the ultimate amount that was actually distributed” and that
“the ultimate distribution” was later “finalized” in “the final August 2012 schedule,”
this testimony was impeached by Furlin’s deposition testimony that he was “the only
one that made calculations that the Company used”; that the February 2012
Spreadsheet was the final spreadsheet that he compiled; and that the “ultimate
amount” withheld in tax advances from LP’s share of the 2011 Distribution was “1
million 964.” Also, Furlin testified that, long after the events, in May 2015, he
executed an affidavit in this case stating that, prior to the 2011 Distribution, “[LP]
received a total of over 1.9 million in Section 6.01 distributions related to its Class
3 units.”
Finally, Lyttleton and Wascom testified, and the parties do not dispute, that
the Company also deducted from LP’s share of the 2013 Distribution these same
24
third and fourth quarter 2011 tax advances. Lyttleton testified that, based on the
$313,328 and $47,967 tax advances having been deducted twice, LP was damaged
in the amount of $361,295.
From the evidence, the jury could have reasonably concluded that the
Company breached the Agreement by twice deducting $361,295 in tax advances
from LP’s distributions and that LP was damaged in the amount of $361,295.
The Company asserts that the evidence of the parties’ continued discussions
after the February 2012 Spreadsheet and the existence of subsequent spreadsheets
“conclusively establishes that the Company used the August 2012 Spreadsheet.”
The Company asserts that “no reasonable juror could disregard the fact that so many
later spreadsheets were exchanged between the parties.” To prevail on appeal, the
Company is required to demonstrate that this evidence conclusively establishes the
opposite of a vital fact. See Exxon Corp., 348 S.W.3d at 215. The ongoing nature
of the dispute, on its own, however, does not conclusively establish that the February
2012 Spreadsheet was not ultimately used or that the third and fourth quarter 2011
tax advances were not twice deducted from LP’s distributions. Furlin, himself,
testified that each of the subsequent spreadsheets by Lyttleton, Phillpott, and Brooks
were not used. Although Furlin, Wascom, and Kenyon testified that the Company
used the August 2012 spreadsheet, their testimony was inconsistent, and the jury
could have reasonably discredited such testimony. See City of Keller, 168 S.W.3d
25at 819. When, as here, the evidence at trial would enable reasonable and fair-minded
people to differ in their conclusions, then factfinders must be allowed to do so. See
id. at 810.
The Company also asserts that LP’s bank records conclusively establish that
the August 2012 Spreadsheet was used and that no double-deduction occurred. The
tax advances that the Company references in its brief, however, took place prior to
the 2011 Distribution. Such prior advances do not conclusively establish that the
subsequent tax advances at issue were not deducted. Alignment with actual prior
tax distributions supports, but does not conclusively establish, that the August 2012
calculations were actually applied. Moreover, Furlin testified that, because the
Company made further deductions, the bank records of the distributions in this case
will not correlate with any of the spreadsheets.
The Company asserts that, between January 2010 and March 8, 2013, it paid
LP $19,719,245.27 and that there is no evidence that the total amount that it owed
LP differed from that amount. LP’s burden at trial, however, was limited to
presenting evidence supporting its claim for damages in the amount of $361,295.
Considering the evidence in the light most favorable to the verdict and
indulging every reasonable inference that would support it, we conclude that there
is more than a scintilla of evidence to support the jury’s findings that the Company
breached the Agreement by twice deducting the tax advances applicable to the third
26
and fourth quarters of 2011 and that LP suffered damages in the amount of $361,295.
See Exxon Corp., 348 S.W.3d at 215 (holding that party challenging legal sufficiency
of evidence to support adverse finding on which it did not have burden of proof must
demonstrate that no evidence supports adverse finding); City of Keller, 168 S.W.3d
at 810. We hold that the evidence is legally sufficient to support the jury’s findings.
We hold that the Company’s factual-sufficiency challenge is inadequately
briefed. See TEX. R. APP. P. 38.1(i) (“The brief must contain a clear and concise
argument for the contentions made, with appropriate citations to authorities . . . .”).
The Company, in its brief, argues only that there is no evidence to support the jury’s
findings. With respect to its factual sufficiency challenges, the Company asserts
only:
• “Alternatively, for these same reasons, the evidence is so weak
that it is factually insufficient to support a finding that the
Company owed [LP] any money; reversal and a new trial are
therefore warranted.”
• “Alternatively, the evidence of a double deduction and the
amount owed is so weak that it is factually insufficient; reversal
and a new trial are therefore warranted.”
• “Alternatively, the evidence supporting the jury’s findings is so
weak and so contrary to the overwhelming weight of all the
evidence that the jury’s verdict should be set aside and a new trial
ordered because it is factually insufficient.”
Beyond these bare assertions, the Company provides no substantive argument in
support of its conclusions. See id. Accordingly, we conclude that the issue has been
inadequately briefed and that error, if any, is waived. See Lowry v. Tarbox, 537
27
S.W.3d 599, 614 (Tex. App.—San Antonio 2017, pet. denied) (holding factual
sufficiency challenge waived for inadequate briefing because appellants argued only
that there was no evidence to support jury’s finding); City of Hous. v. Levingston,
221 S.W.3d 204, 217 n.9 (Tex. App.—Houston [1st Dist.] 2006, no pet.) (holding
“any points concerning factual sufficiency were inadequately briefed” because,
although City, in “Summary of the Argument” portion of its brief, asserted that
evidence was “alternatively, ‘factually insufficient,’” and, in “Argument” portion of
its brief, asserted that evidence was factually insufficient to support jury’s award of
damages and was “against the overwhelming weight of the evidence,” City made no
substantive argument in support of its conclusion).
Admission of Evidence
In its second issue, the Company argues that the trial court abused its
discretion in admitting Furlin’s “deposition testimony on the February 2012
spreadsheet.” The Company asserts that Furlin’s deposition testimony “had almost
no probative value because it was based on an incorrect premise supplied by [LP’s]
counsel.” Further, any probative value of the testimony was outweighed by the
danger of unfair prejudice, confusion of the issues, and misleading the jury because
the jury “was not equipped to evaluate the probative force of deposition testimony
procured through a misrepresentation by [LP’s] counsel.” See TEX. R. CIV. P. 402,
403.
28
Standard of Review and Principles of Law
We review a trial court’s decision to admit or exclude evidence for an abuse
of discretion. Bay Area Healthcare Grp., Ltd. v. McShane, 239 S.W.3d 231, 234
(Tex. 2007). A trial court abuses its discretion if it rules arbitrarily or unreasonably
or without reference to guiding rules or principles. Bowie Mem’l Hosp. v. Wright,
79 S.W.3d 48, 52 (Tex. 2002). We will uphold a trial court’s evidentiary ruling if it
is supported on any legitimate ground, even if such ground was not raised in the trial
court. Hooper v. Chittaluru, 222 S.W.3d 103, 107 (Tex. App.—Houston [14th Dist.]
2006, pet. denied).
We will not reverse an erroneous evidentiary ruling unless the error probably
caused the rendition of an improper judgment or prevented a proper presentation of
the appeal. See TEX. R. APP. P. 44.1(a); Sw. Elec. Power Co. v. Burlington N. R.R.
Co., 966 S.W.2d 467, 474 (Tex. 1998). A successful challenge to a trial court’s
evidentiary rulings typically requires the complaining party to demonstrate that the
judgment turns on the particular evidence excluded or admitted. Interstate
Northborough P’ship v. State, 66 S.W.3d 213, 220 (Tex. 2001). Any “[e]rror in
admitting evidence is generally harmless if the contested evidence is merely
cumulative of properly admitted evidence.” Fairmont Supply Co. v. Hooks Indus.,
Inc., 177 S.W.3d 529, 532 (Tex. App.—Houston [1st Dist.] 2005, pet. denied); see
29
also Volkswagen of Am., Inc. v. Ramirez, 159 S.W.3d 897, 907 (Tex. 2004) (holding
that even if trial court errs in admitting certain testimony, such error is rendered
harmless and deemed waived if objecting party allows same or similar evidence to
be admitted without objection).
Relevant evidence is presumed to be admissible. See TEX. R. EVID. 402.
Evidence is relevant if “(a) it has any tendency to make a fact more or less probable
than it would be without the evidence; and (b) the fact is of consequence in
determining the action.” TEX. R. EVID. 401. However, relevant evidence may be
excluded if its probative value is substantially outweighed by the danger of unfair
prejudice, confusion of the issues, or misleading the jury. TEX. R. EVID. 403; see
Diamond Offshore Servs. Ltd. v. Williams, 542 S.W.3d 539, 544 (Tex. 2018).
Analysis
The Company complains of the following colloquy between LP’s counsel and
Furlin during Furlin’s deposition:
Q. . . . I’m going to hand you [the February 2012 Spreadsheet]. Do
you know what this is?
A. Yes.
Q. What is it?
A. I can’t validate this is the final because I don’t—you know, if this
matches exactly what was the final distribution, but this is the
calculation of the September 2011 distribution following the
waterfall as it was intended and comparing it to what we actually
did in 2011.
30
Q. . . . . You can see the file name at the bottom . . . . And then the
file name I believe is Lion 2011 Distribution Final Reallocation
February 2012.XLXS. Is that—is this the final spreadsheet you
did?
A. I would say it probably is because that’s how I would have named
it.
Q. Would there have been one you did after February of 2012?
A. I don’t recall. Of course, sometimes final is final version 1,
version . . .
Q. I totally understand. I’ve been looking at this as if it was the
final, but I want to make sure it is the final. This is the—I’ll
represent to you that in the spreadsheets that have been produced
to us, this is the final dated spreadsheet we have.
A. Then okay.
Q. But again, I want to make sure this is the final because I want to
make sure I have your numbers that form the basis of everything
you’ve done here.
A. Okay.
Q. So if this is the final, this should tie to what was actually
distributed to all of the unit holders, right?
A. No.
Q. Why not.
A. There were two parts. One was the 2010 recalculation and the
2011 recalculation. It was the sum of those. It’s a zero sum gain
[sic]. So some people were overpaid, some people were
underpaid. We did 2010 and 2011 and summed up the amounts
and said okay. But the sum, who was overpaid, who was
underpaid.
Q. Fair enough. So for [LP’s] Class 3 units, because they only
received a distribution in the 2011 distribution, this would show
the amount that they received in the 2011 distribution only, right?
A. This would show what they were—should have received and
compared to what they did receive.
Q. Right. This is the ultimate amount. I know there was some after-
the-fact changes that were made to make sure the ultimate cash
31
flow movements were correct. But this is the ultimate amount of
their distribution. Is that fair to say?
A. Yes.
....
Q. At the time the 2011 distribution was calculated, 1.964 million
was deducted from [LP] as [an] applied article 6.01(d)
distribution, right?
A. Correct.
Q. In reality, less than that had actually been distributed under
6.01(d) as tax advances to [LP], right?
A. Right, but you can’t look at one side of it. . . .
Q. But the answer to my question is yes, right?
A. The answer is yes, but you’re—yes.
....
Q. And you did withhold the 1 million 964?
A. That’s correct.
(Emphasis added.)
Specifically, the Company complains about the portions of Furlin’s testimony,
italicized above, which were played for the jury. The Company argues that such
testimony had “almost no probative value” and constituted “extremely weak
evidence” because they were induced by a misrepresentation by LP’s counsel,
underlined above, that the February 2012 Spreadsheet was “the final dated
spreadsheet we have.” It argues that the admission of these portions of Furlin’s
deposition testimony was harmful because it “constitutes the only direct evidence
that the Company used the [February 2012 Spreadsheet] or deducted the third and
fourth quarter 2011 tax advances consistent with that spreadsheet.”
32
The testimony at issue is relevant because it has a tendency to make a fact of
consequence, i.e., whether the $361,295 that Furlin included in the February 2012
Spreadsheet was ultimately withheld from LP’s share of the 2011 Distribution, more
or less probable than it would be without the evidence. See TEX. R. EVID. 401.
The trial court further could have reasonably concluded that the inherent
probative force of Furlin’s testimony was considerable, because it served as evidence
that he used the February 2012 Spreadsheet and deducted the third and fourth quarter
2011 tax advances in accordance. See TEX. R. EVID. 403.
Next, the trial court could have reasonably concluded that the testimony at
issue did not have a tendency to suggest a decision on an improper basis. See id.Examining the testimony at issue, as emphasized below, reflects that LP’s counsel
was attempting to ascertain whether the February 2012 Spreadsheet was the final
spreadsheet that Furlin compiled:
Q. . . . . Is that—is this the final spreadsheet you did?
A. I would say it probably is because that’s how I would have named
it.
Q. Would there have been one you did after February of 2012?
A. I don’t recall. . . .
Q. I totally understand. I’ve been looking at this as if it was the
final, but I want to make sure it is the final. This is the—I’ll
represent to you that in the spreadsheets that have been produced
to us, this is the final dated spreadsheet we have.
A. Then okay.
33
Q. But again, I want to make sure this is the final because I want to
make sure I have your numbers that form the basis of everything
you’ve done here.
A. Okay.
(Emphasis added.)
The trial court could have reasonably concluded that Furlin’s testimony that
the February 2012 Spreadsheet was the final spreadsheet he compiled was not
procured by misrepresentation. Although the evidence was prejudicial, it was not
unfairly prejudicial. “Testimony is not inadmissible on the sole ground that it is
‘prejudicial’ because in our adversarial system, much of a proponent’s evidence is
legitimately intended to wound the opponent.” Diamond Offshore Servs., 542
S.W.3d at 549 (internal quotations omitted). “Rather, unfair prejudice is the proper
inquiry.” Id. “‘Unfair prejudice’ within its context means an undue tendency to
suggest a decision on an improper basis, commonly, though not necessarily, an
emotional one.” Id. There being no misrepresentation, no improper basis is shown.
Next, because the complained-of portions of Furlin’s testimony relate directly
to the heart of the dispute, it did not have a tendency to confuse or distract the jury
from the main issues in the case. Further, there being no misrepresentation as the
Company asserts, the trial court could have reasonably concluded that the jury was
equipped to evaluate the probative force of Furlin’s testimony and that it was
unlikely to confuse or mislead the jury. See TEX. R. CIV. P. 403.
34
We conclude that the probative value of the complained-of portions of
Furlin’s deposition testimony was not substantially outweighed by the danger of
unfair prejudice or a tendency to confuse or mislead the jury. See id. We hold that
the trial court did not abuse its discretion in admitting the complained-of portions of
Furlin’s deposition testimony.
Accordingly, we overrule the Company’s second issue.
Prejudgment Interest
In its third issue, the Company asserts that the trial court erred in assessing
prejudgment interest because it used an incorrect accrual date. The Company argues
that the trial court erred by calculating prejudgment interest beginning on September
3, 2013, which was 180 days after the Company notified LP of the 2013 Distribution,
because the Company did not receive notice of LP’s double-deduction clam until LP
filed its amended petition on October 30, 2015. See TEX. FIN. CODE § 304.104.
Subject to exceptions not applicable to the instant case, “prejudgment interest
accrues on the amount of a judgment during the period beginning on the earlier of
the 180th day after the date the defendant receives written notice of a claim or the
date the suit is filed and ending on the day preceding the date judgment is rendered.”
Id.; see also Tex Star Motors, Inc. v. Regal Fin. Co., 401 S.W.3d 190, 203–04 (Tex.
App.—Houston [14th Dist.] 2012, no pet.) (“[P]rejudgment interest accrues
beginning on the 180th day after the date the defendant receives written notice of a
35
claim or on the date suit is filed, whichever occurs first.”). “A claim is a demand for
compensation or an assertion of a right to be paid.” Johnson & Higgins of Tex., Inc.
v. Kenneco Energy, Inc., 962 S.W.2d 507, 531 (Tex. 1998) (internal quotations
omitted); Wheelbarger v. Landing Council of Co–Owners, 471 S.W.3d 875, 892
(Tex. App.—Houston [1st Dist.] 2015, pet. denied). A defendant has notice of a
claim for purposes of prejudgment interest only if the plaintiff’s written notice
communicates that the plaintiff is claiming a right to compensation and provides
enough information that the defendant could plausibly settle the claim without
incurring interest. Wheelbarger, 471 S.W.3d at 892; see also Owens–Ill., Inc. v.
Estate of Burt, 897 S.W.2d 765, 769 (Tex. 1995). The relevant date is that on which
the plaintiff asserted the claim that ultimately results in a recovery. Wheelbarger,
471 S.W.3d at 893. When a plaintiff first asserts such claim in an amended petition,
prejudgment interest begins to accrue on the date of the amended petition. Id.Here, the trial court, in its judgment, awarded LP prejudgment interest “on the
actual damages awarded at a rate of 5% from September 3, 2013, for the prosecution
of this case through judgment in the amount of $66,072.44 through April 19, 2017,
which amount shall increase by $49.49 per day until the date this judgment is signed
[May 24, 2017].”
The Company asserts that September 3, 2013 represents the 180th day after
the date of the March 7, 2013 Distribution. However, it did not receive written notice
36
of LP’s double-deduction claim until October 30, 2015, when LP first raised the
claim in its second amended petition. See TEX. FIN. CODE § 304.104; see also Tex
Star Motors, Inc., 401 S.W.3d at 203–04 (“[P]rejudgment interest accrues beginning
on the 180th day after the date the defendant receives written notice of a claim or on
the date suit is filed, whichever occurs first.” (emphasis added)).
Again, the relevant date is that on which the plaintiff asserted the claim that
ultimately results in a recovery. Wheelbarger, 471 S.W.3d at 893. The record shows
that September 3, 2013 is the 180th day after the Company notified LP of the 2013
Distribution and that LP did not raise its double-deduction claim in its original
petition. Rather, LP, in its second amended petition, alleged that the Company
“breached the [Agreement] when the Company deducted tax advances from the third
and fourth quarters of 2011 from both the 2011 Distribution and another distribution
in 2013,” and LP demanded damages and accrued interest. At trial, the jury was
asked: “Did the Company fail to comply with the LLC Agreement by double
deducting $361,295 in tax advances from [LP]?” The jury answered: Yes. And, it
awarded LP damages in the amount of $361,295. The trial court entered judgment
for LP in accordance with the jury’s verdict. Thus, the date upon which LP’s claim
for prejudgment interest began accruing is October 30, 2015, when LP amended its
petition to include its double-deduction claim. See id.; see also Tex Star Motors,
Inc., 401 S.W.3d at 204 (holding that when plaintiff first asserted claims upon which
37
it later recovered in amended petition, defendant lacked notice of claims until filing
of amended petition and plaintiff entitled to prejudgment interest only from date of
amended petition).
LP asserts that it first gave written notice of its claim to the Company on
November 4, 2011, when it notified the Company by email that the tax advance
calculations in the 2011 Distribution were incorrect, and in 2012 emails from
Lyttleton to Furlin and Wascom regarding same. However, these 2011 and 2012
communications precede the 2013 Distribution and do not assert a claim for
compensation based on the Company having twice deducted the same tax advance
in 2011 and again in 2013, the claim that ultimately resulted in LP’s recovery. See
Wheelbarger, 471 S.W.3d at 893; see also Tex Star Motors, Inc., 401 S.W.3d at 204.
We hold that the trial court erred in assessing prejudgment interest beginning
on September 3, 2013, rather than beginning on October 30, 2015. Accordingly, we
sustain the Company’s third issue.
Costs
In its fourth issue, the Company argues that the trial court erred by taxing
specific costs in the judgment and by including in its award costs for copies of
deposition transcripts, which are not taxable.
In response to a request for an award of costs, the trial court’s role is to
“adjudicate which party or parties is to bear the costs of court, not to determine the
38
correctness of specific items.” See Madison v. Williamson, 241 S.W.3d 145, 158
(Tex. App.—Houston [1st Dist.] 2007, pet. denied) (holding trial court determines
who is “successful” party and entitled to costs). Thus, the judgment “should not
state the amount taxed as costs, but only that costs are awarded against a certain
party.” Diggs v. VSM Fin., L.L.C., 482 S.W.3d 672, 674 (Tex. App.—Houston [1st
Dist.] 2015, no pet.); see also TEX. R. CIV. P. 131; see, e.g., Star Operations, Inc. v.
Dig Tech, Inc., No. 03-15-00423-CV, 2017 WL 3263352, at *2 (Tex. App.—Austin
July 27, 2017, pet. denied) (mem. op.) (“The final judgment included an award of
court costs, ‘including the cost of deposition transcripts and subpoenas necessarily
obtained for use in this suit.”).
Taxing the costs, as distinguished from adjudicating the costs, is a ministerial
duty of the clerk. Diggs, 482 S.W.3d at 674; see also TEX. R. CIV. P. 129, 149, 622.
Accordingly, the successful party at trial must submit a record of its court costs to
the court clerk, either before or after the judgment is entered, so that the clerk can
perform its ministerial duty and tax costs in accordance with Texas Rule of Civil
Procedure 622. Madison, 241 S.W.3d at 158; see also TEX. R. CIV. P. 622 (“The
clerk of the district or county court or the justice of the peace, as the case may be,
shall tax the costs in every case in which a final judgment has been rendered . . . .”).
Thereafter, to the extent that a party wishes to complain about the court clerk’s
taxation of any specific cost, the remedy is a motion to re-tax costs in the trial court.
39
Gumpert v. ABF Freight Sys., Inc., 312 S.W.3d 237, 239 (Tex. App.—Dallas 2010,
no pet.) (“A party that wishes to challenge items contained in the clerk’s bill of costs
must file a motion to retax costs,” and such should “stat[e] which items should have
been included in the bill of costs or which items should have been excluded.”
(emphasis added)). A motion to re-tax costs “confronts the correctness of the clerk’s
ministerial calculations” and “is the proper method for correcting errors such as
miscalculating the cost of an item or billing an item that is not statutorily taxable.”
Campbell v. Wilder, 487 S.W.3d 146, 152 (Tex. 2016); see also Gumpert, 312
S.W.3d at 241–42 (holding that trial court erred by denying motion to retax costs
because recovery of costs to obtain copies of deposition transcripts not authorized
by statute or rule). Because the taxing of costs is a ministerial duty of the clerk, the
motion may be filed even after the case has been disposed of on appeal, so long as
it is filed before the mandate issues and the costs are paid. Operation Rescue–Nat’l
v. Planned Parenthood of Houston & Se. Tex., Inc., 937 S.W.2d 60, 87 (Tex. App.—
Houston [14th Dist.] 1996), aff’d as modified, 975 S.W.2d 546, 570 (Tex. 1998); see
Waste Mgmt. of Tex., Inc. v. Tex. Disposal Sys. Landfill, Inc., No. 03-10-00826-CV,
2014 WL 6705741, at *4–5 (Tex. App.—Austin Nov. 14, 2014, no pet.) (mem. op.)
(citing Reaugh v. McCollum Exploration Co., 167 S.W.2d 727, 728 (Tex. 1943)
(holding that motion to retax costs should be filed in court in which costs accrue and,
thus, appellate court lacks jurisdiction to retax district court costs)).
40
Here, LP asserts that the Company waived this issue by not filing a motion to
re-tax costs. The record before us, however, does not establish that LP has submitted
a record of its costs to the district clerk so that the clerk can perform its ministerial
duty to tax costs. See Madison, 241 S.W.3d at 158 (successful party at trial must
submit record of its court costs to court clerk, either before or after judgment is
entered, so that clerk can perform its ministerial duty and tax costs in accordance
with Rule 622).; see also TEX. R. CIV. P. 622 (“The clerk of the district or county
court or the justice of the peace, as the case may be, shall tax the costs in every case
in which a final judgment has been rendered . . . .”); TEX. R. CIV. P. 203.2 (requiring
deposition officer to file sworn certificate stating “the amount of the deposition
officer’s charges for preparing the original deposition transcript, which the clerk of
the court must tax as costs” (emphasis added)); see, e.g., Shaikh v. Aerovias de
Mexico, 127 S.W.3d 76, 82 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (“If any
of the deposition costs listed in Aeromexico’s Bill of Costs were the court reporter’s
charges for preparing the original deposition transcript, a certificate as required by
rule 203.2(f) should have been filed with the Harris County District Clerk.”
(emphasis added)). Because the record does not reflect that the district clerk was
asked to tax the costs, we conclude that the Company has not waived this issue by
not filing a motion to re-tax the costs to complain about the court clerk’s taxation of
any specific cost. See Waste Mgmt. of Texas, Inc., 2014 WL 6705741, at *4 (“As
41
far as we can tell from the record, Texas Disposal has not presented to the district
clerk either of the appendices of costs that it has presented to this Court. Likewise,
the record indicates that the only bill of costs issued by the district clerk in this matter
is for $158, which reflects various filing fees and a clerk’s record. This is,
then, . . . the current, official amount of Texas Disposal’s court costs.”); Shaikh, 127
S.W.3d at 82 (noting that costs are those items included in clerk’s bill of costs).
The record shows that LP filed a motion for entry of judgment, in which it
sought a total of $3,707.85 in costs, comprised of filing fees of $276.00 and court
reporter fees in the amount of $3,431.85 for “depositions in this matter that were
used at trial.” To its motion, LP appended the affidavit of its attorney, who testified
that the attached costs were necessarily incurred in the litigation; receipts from the
district clerk for various filings; and invoices from the court reporter “For the
Original & 1 Copy of the Deposition of: Richard Furlin,” in the amount of $1,515.30;
“For the Original & 1 Copy of the Deposition of: Vijay Goradia,” in the amount of
$1,444.30; and “For the Original & 1 Copy of the Deposition of: David Wascom,”
in the amount of $772.25. The district clerk’s bill of costs in the record before us
includes only fees for the clerk’s record. The trial court, in its judgment, awarded
LP “Court costs in the amount of $3,707.85.”
We hold that the trial court erred by taxing the Company with a specific
amount of costs, i.e., “Court costs in the amount of $3,707.85,” in the judgment. See
42
Diggs, 482 S.W.3d at 674 (“The judgment should not state the amount taxed as costs,
but only that costs are awarded against a certain party.”).
Moreover, to the extent that the trial court’s award includes fees for copies of
deposition transcripts, we note that section 31.007(b) expressly limits recovery of
costs to the fees of the court reporter for the original of stenographic transcripts
necessarily obtained for use in the suit. See TEX. CIV. PRAC. & REM. CODE § 31.007
(providing that trial court “may include in any order or judgment all costs,” including
“fees of the court reporter for the original of stenographic transcripts necessarily
obtained for use in the suit” (emphasis added)); TEX. R. CIV. P. 140 (disallowing fees
for copies); Waste Mgmt. of Texas, Inc., 2014 WL 6705741, at *4 (“The costs for
video depositions or copies of depositions or transcripts, however, are not
recoverable as court costs.”); Gumpert, 312 S.W.3d at 241–42 (holding that
“because no statute or rule authorizes the recovery of the costs to videotape a
deposition or obtain a copy of a deposition transcript,” those items are not
recoverable costs); Shaikh, 127 S.W.3d at 82 (holding costs of copying depositions
are not taxable costs).
Accordingly, we sustain the Company’s fourth issue.
Conclusion
We reverse the portion of the trial court’s judgment awarding LP prejudgment
interest and remand to the trial court for a re-computation of prejudgment interest in
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accordance with this opinion. We modify the trial court’s judgment to delete the
trial court’s award of a specific amount of costs. As modified, we affirm the
remainder of the trial court’s judgment.
Sherry Radack
Chief Justice
Panel consists of Chief Justice Radack and Justices Goodman and Countiss.
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