J. Mark Swinnea v. ERI Consulting Engineers, Inc. and Larry Snodgrass

ACCEPTED
12-14-00288-CV
TWELFTH COURT OF APPEALS
TYLER, TEXAS
5/11/2015 8:32:04 PM
CATHY LUSK
CLERK
No. 12-14-00288-CV
FILED IN
In the Twelfth Court of Appeals 12th COURT OF APPEALS
TYLER, TEXAS
Tyler, Texas 5/11/2015 8:32:04 PM
CATHY S. LUSK
Clerk
J. MARK SWINNEA
Appellant
v.
ERI CONSULTING ENGINEERS, INC.
AND LARRY SNODGRASS
Appellees
Appealed from the 114th Judicial District Court
Smith County, Texas
APPELLANT’S BRIEF
Michael E. Gazette Greg Smith
Texas Bar No. 07784500 Texas Bar No. 18600600
Law Office of Michael E. Gazette Nolan Smith
100 E. Ferguson, Suite 1000 Texas Bar No. 24075632
Tyler, Texas 75702 RAMEY & FLOCK, P.C.
Telephone: 903-596-9911 100 E. Ferguson, Suite 500
Facsimile: 903-596-9922 Tyler, Texas 75702
megazette@suddenlink.com Telephone: 903-597-3301
Facsimile: 903-597-2413
gsmith@rameyflock.com
nolans@rameyflock.com
ATTORNEYS FOR APPELLANT
The Parties and Their Counsel
I. Appellant:
J. Mark Swinnea
II. Appellees:
ERI Consulting Engineers, Inc.
Larry Snodgrass
III. Counsel for Appellant:
Gregory D. Smith
Nolan Smith
RAMEY & FLOCK, P.C.
100 E. Ferguson, Suite 500
Tyler, TX 75702
Telephone: (903) 597-3301
Facsimile: (903) 597-2413
gregs@rameyflock.com
nolans@rameyflock.com
Michael E. Gazette
Law Office of Michael E. Gazette
100 E. Ferguson, Suite 1000
Tyler, TX 75702
Telephone: (903) 596-9911
Facsimile: (903) 596-9922
megazette@suddenlink.com
i
IV. Counsel for Appellees:
Deborah Race
Ireland, Carroll & Kelley, P.C.
6101 S. Broadway, Suite 500
Tyler, TX 75703
Telephone: (903) 561-1600
Facsimile: (903) 581-1071
drace@icklaw.com
Mike A. Hatchell
Locke Lord, LLP
100 Congress Avenue, Suite 300
Austin, TX 78701
Telephone: (512) 305-4752
Facsimile: (512) 305-4800
mahatchell@lockelord.com
Roger W. Anderson
Gillen & Anderson
613 Shelley Park Plaza
Tyler, TX 75701
Telephone: (903) 581-8600
Facsimile: (903) 581-8790
randerson@gillenanderson.com
/s/ Gregory D. Smith
GREGORY D. SMITH
ii
CONTENTS
Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
The Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Issues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Summary of the Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
I. Snodgrass should take nothing. . . . . . . . . . . . . . . . . . . . . . . . . . . 8
A. Because Snodgrass has proved no individually
recoverable actual damages, he cannot recover. . . . . . . . . 8
B. The Court should have addressed Swinnea’s attacks
on Snodgrass’s standing to recover ERI’s lost profits
and punitive damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
II. The Court should eliminate or revise the trial court’s
disgorgement award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
A. If punitive disgorgement is to be allowed in this case, it
is subject to all recognized limitations on the recovery
and amount of punitive damages. . . . . . . . . . . . . . . . . . . 11
1. Disgorgement that ventures beyond restoring a
windfall is a species of punitive damages. . . . . . . 11
2. The plaintiffs have been awarded a punitive
disgorgement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
iii
a. Being punitive and not restitutionary, the
disgorgement is subject to all restrictions
upon the recovery and amount of punitive
damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
B. Because no actual damages have been recovered in
connection with the buy-out transaction, there is no
legal basis for even a punitive disgorgement.. . . . . . . . . 15
C. Because the law will not support two punitive-damage
awards for the same conduct, one or the other of the
$1 million punitive damages or the $720,000 punitive
disgorgement must go.. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
III. Because the $1 million punitive-damage award and the punitive
disgorgement award have been entered without the required due-
process analysis, the Court should, at a minimum, remand both
awards for a proper excessiveness analysis. . . . . . . . . . . . . . . . . . . . . 17
A. The reduction in actual damages requires a new analysis of
punitive damages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
IV. The $1 million punitive-damage award and the punitive disgorge-
ment award necessarily are excessive, both individually and
collectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
A. The disgorgement is excessive insofar as it requires Swinnea
to return monies he did not come by in the buyout. . . . . . . . . . 24
B. Both punitive awards are excessive in relation to
statutory limits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
1. The Court should reconsider and reverse its sua sponte
decision to invoke an inapplicable exception to the
statutory cap on punitive damages. . . . . . . . . . . . . . . . . . 25
iv
a. When the Court invoked a cap-busting exception
to affirm, it rendered an improper, sua sponte
decision.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
b. There has been no cap-busting offense. . . . . . . . . 27
c. Because the criminal offense was not the subject
of findings in the trial court, there is no basis for
busting the statutory punitive-damage cap. . . . . . 30
d. Because no actual damages have been awarded
in connection with the cap-busting conduct, there
is no predicate for an uncapped punitive-damage
award. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
e. Because the disgorgement awarded is punitive, it
must be aggregated with any punitive-damage
recovery and the total subjected to a single
statutory cap. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
C. The awards violate the Krause factors and are excessive in
relation to due-process limitations. . . . . . . . . . . . . . . . . . . . . . . 32
V. The plaintiffs are not entitled to attorneys fees. . . . . . . . . . . . . . . . . . 36
VI. The law of the case does not bar this Court from granting any of
the relief Swinnea requests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Conclusion and Prayer.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Certificate of Service.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Certificate of Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Appendix
v
AUTHORITIES
CASES:
Allstate Ins. Co. v. Kelly, 680 S.W.2d 595 (Tex. App.-Tyler 1984,
writ ref’d n.r.e.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Bennett v. Reynolds, 315 S.W.3d 867 (Tex. 2010). . . . . . . . . . . . . . . . . . 33, 34
Boyce Iron Works, Inc. v. Sw. Bell Tel. Co., 747 S.W.2d 785
(Tex. 1988). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Boyer v. Wilmington Materials, Inc., 754 A.2d 881 (Del. Ch. Ct 1999). . . . 24
Bradleys’ Elec., Inc., v. Cigna Lloyds Ins. Co., 995 S.W.2d 675
(Tex. 1999) (per curiam). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Briscoe v. Goodmark Corp., 102 S.W.3d 714 (Tex. 2003). . . . . . . . . . . 37, 38
Bunton v. Bentley, 153 S.W.3d 50 (Tex. 2004) (per curiam). . . . . . . . . . 17, 24
Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999). . . . . . . . . . . . . . . . . . . . . . 2, 18
City of Houston v. Jackson, 192 S.W.3d 764 (Tex. 2006). . . . . . . . . . . . 37, 40
Cleaver v. Cleaver, 140 S.W.3d 771 (Tex. App.-Tyler 2004, no pet.).. . . . . 21
Commodity Futures Trading Comm’n v. Sidoti, 178 F.3d 1132
(11th Cir. 1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Comm. Gen. Life Ins. Co. v. Bryson, 219 S.W.2d 799 (Tex. 1949). . . . . . . . 38
Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000). . . . . . . . . . . . . 37
Doubleday & Co., Inc. v. Rogers, 674 S.W.2d 751 (Tex. 1984). . . . . . . . 9, 39
vi
Glazener v. Jansing, No. 03-02-00796-CV, 2003 WL 22207226,*6
(Tex. App.-Austin Sept. 25, 2003, no pet.).. . . . . . . . . . . . . . . . . . . . . 28
Haase v. Glazner, 62 S.W.3d 795 (Tex. 2001). . . . . . . . . . . . . . . . . . . . . 27, 28
Hernandez v. Sovereign Cherokee Nation Tejas, 343 S.W.3d 162
(Tex. App.-Dallas 2011, pet. denied). . . . . . . . . . . . . . . . . . . . . . . . . . 35
Hopwood v. State of Texas, 236 F.3d 256 (5th Cir. 2000).. . . . . . . . . . . . . . . 40
Hudson v. Wakefield, 711 S.W.2d 628 (Tex. 1986). . . . . . . . . . . . . . . . . . . . 37
Int’l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567 (Tex. 1963). . 11, 12
Int’l Telecharge, Inc. v. Bomarko, Inc., 766 A.2d 437 (Del. 2000). . . . . . . . 16
Khorshid, Inc. v. Christian, 257 S.W.3d 748 (Tex. App.-Dallas
2008, no pet.).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Kinzbach Tool Co. v. Corbett-Wallace Corp., 160 S.W.2d 509
(Tex. 1942). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Marin v. IESI TX Corp., 317 S.W.3d at 314 (Tex.App.--
Houston [1st Dist.] 2010, pet denied). . . . . . . . . . . . . . . . . . . . . . . . . . 29
McCullough v. Scarbrough, Medlin & Assoc., Inc., 435 S.W.3d 871
(Tex. App.–Dallas 2014, pet. denied). . . . . . . . . . . . . . . . . . . . . . . . . . 30
Miller v. Bank of Am., N.A., 326 P.3d 20 (N.M. Ct. App. 2013). . . . . . . . . . 16
Moore v. Jet Stream Invs., Ltd., 261 S.W.3d 412 (Tex. App.-
Texarkana 2008, pet. denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Morton v. Nguyen, 412 S.W.3d 506 (Tex. 2013). . . . . . . . . . . . . . . . . . . . . . 12
Mossler v. Nouri, 2010 WL 2133940 at *3 (Tex. App.-Austin 2010,
pet. denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
vii
Owens-Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35
(Tex. 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Pat Baker Co. v. Wilson, 971 S.W.2d 447 (Tex. 1998)(per curiam). . . . . . . 26
Peden v. State, 917 S.W.2d 941 (Tex. App.—Fort Worth 1996,
pet. ref’d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Preston Carter Co. v. Tatum, 708 S.W.2d 23 (Tex. App.-Dallas 1986,
writ ref’d n.r.e.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Redmon v. Griffith, 202 S.W.3d 225 (Tex. App.-Tyler 2006, pet. denied). . . 8
Safeshred, Inc. v. Martinez, 365 S.W.3d 655 (Tex. 2012). . . . . . . . . . . . . . . 16
S.E.C. v. First City Fin. Corp., Ltd., 890 F.2d 1215 (D.C. Cir. 1989). . . . . . 25
Serv. Corp. Int’l v. Guerra, 348 S.W.3d 239 (Tex. App.-Corpus Christi
2009, pet. granted).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
State Bar of Texas v. Evans, 774 S.W.2d 656 (Tex. 1989)(per curiam).. . . . . 9
State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 208, 123 S. Ct.
1513, 155 L. Ed. 2d 585 (2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006). . . . . 19, 32
Trevino v. Turcotte, 564 S.W.2d 682 (Tex. 1978). . . . . . . . . . . . . . . . . . . . . 40
U.S. v. Project on Gov’t Oversight, 572 F. Supp. 2d 73 (D.D.C. 2008). . . . . 16
Walling v. Metcalfe, 863 S.W.2d 56 (Tex. 1993). . . . . . . . . . . . . . . . . . . . . . 26
Wecosign, Inc. v. IFG Holdings, Inc., 845 F. Supp. 2d 1072
(C.D. Cal. 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
viii
Western Reserve Life Assurance Co. of Ohio v. Graben, 233 S.W3d
360 (Tex. App.-Fort Worth 2007, no pet.). . . . . . . . . . . . . . . . . . . . . . 37
Wingate v. Hajdik, 795 S.W.2d 717 (Tex. 1990). . . . . . . . . . . . . . . . . . . . . . . 8
OTHER AUTHORITIES:
Bill Analysis, SB 25, Acts of April 11, 1995, 74th Leg., R.S.,
ch. 19, 1995 Tex. Gen. Laws 108 (amended 2003). . . . . . . . . . . . . . . 27
Doug Dendleman, Measurement of Restitution, 68 WASH. & LEE
L. REV. 973. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
George P. Roach, Unjust Enrichment in Texas: Is it a floor wax or a
dessert topping? 65 BAYLOR L. REV. 153 (Winter 2013). . . . . . . . . . 11
RESTATEMENT (THIRD) OF RESTITUTION & UNJUST ENRICHMENT
§ 42 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
RESTATEMENT (THIRD) OF RESTITUTION & UNJUST ENRICHMENT
§ 42 cmt d (2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT
§ 51 cmt. e (2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
RESTATEMENT (THIRD) OF RESTITUTION & UNJUST ENRICHMENT
§ 51, cmt. f (2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT
§ 51 cmt h. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 45 cmt c. . . . . . . . . . . . 14
RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 45(1). . . . . . . . . . . . . . . 14
ix
RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 45
reporter’s note, cmt c.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
TEX. ATTY. GEN. OP. NO. MW-582 (1983).. . . . . . . . . . . . . . . . . . . . . . . . . . 28
TEX. CIV. PRAC. & REM. CODE ANN. §41.004(a). . . . . . . . . . . . . . . . . . . . . . . 9
TEX. R. APP. P. 44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
TEX. R. APP. P. 47.1.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
TEX. R. APP. P. 49.9.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
TEX. UNIFORM TRADE SECRETS ACT § 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
x
The Case
This case litigates claims for breach of fiduciary duty and fraud between
ERI Consulting Engineers, Inc., and its current sole owner, Larry Snodgrass, on
the one hand, and the company’s former 50% co-owner, Mark Swinnea, on the
other.
After a bench trial, the Honorable Cynthia Stevens Kent, former presiding
Judge of the 114th District Court, found for ERI and Snodgrass, on claims for
fraud and fiduciary duty. ERI Consulting Eng’gs, Inc. v. Swinnea, 318 S.W.3d 867,
871 (Tex. 2010). Judge Kent rendered judgment awarding $720,000 as
disgorgement of the consideration Swinnea received in the buyout of his ERI
stock, together with $300,000 in lost-profit damages. 2 CR 173-74. 1 Snodgrass
recovered another $1,000,000 in punitive damages. Id.
Swinnea appealed. In an opinion by Justice Griffith, this Court initially
rendered a take-nothing judgment, on the basis that there was no evidence of
any actual damage. Swinnea v. ERI Consulting Eng’gs, Inc., 236 S.W.3d 825, 832
(Tex. App.-Tyler 2007). On further review, the supreme court affirmed in part
and reversed in part: (1) it affirmed the holding that ERI and Snodgrass take
noting on civil conspiracy claims against Swinnea’s company, Brady
Environmental; (2) it reversed and remanded the buyout consideration awards
1
All clerk’s record cites are cites to the clerk’s record from the original trial.
1
for the trial court to apply the equitable disgorgement facts set out in Burrow v.
Arce, 997 S.W.2d 229 (Tex. 1999); and, (3) finding some evidence of about
$178,000 in lost profits, reversed and remanded the lost profits issue together
with “any remaining issues concerning the trial court’s initial award of $1 million
in punitive damages . . .” ERI Consulting Eng’gs, Inc. v. Swinnea, 318 S.W.3d 867,
889, 882 (Tex. 2010).
Next, this Court, in a second opinion by Justice Griffith, suggested a
remittitur of $121,398.95 in lost profit, which the plaintiffs accepted (reducing
actual damages to $178,601.25 in lost profits). ERI Consulting Eng’gs, 364 S.W.3d
at 422. The Court affirmed the $1 million punitive-damage award to Snodgrass--
-without addressing Swinnea’s arguments that Snodgrass lacked the necessary
actual-damage predicate and without addressing whether the award exceeded a
constitutionally permissible ratio---even though the recovery now far exceeds the
presumptive constitutional cap (a 4-to-1 ratio to actual damages).
On further remand, the trial court, the Honorable Christy Kennedy, has
reinstated the same disgorgement that her predecessor initially awarded. She did
not conduct a requested due-process review of punitive damages because she
reasoned that this Court’s decision foreclosed that right.
Issues
1. May a corporate shareholder recover lost profits individually when the
recovery is solely based on harm to a corporation? May such a
2
shareholder recover punitive damages if he has no properly recovered
actual damages? And may the Court now address these matters, which it
failed to address in its prior opinion in the case.
2. Should the punitive-damage award and the punitive disgorgement be
remanded, for an aggregate analysis of compliance with common-law,
statutory, and constitutional requirements, in light of the remitted and
recharacterized actual damages?
3. Is the combination of a $1 million punitive-damage award and a $720,000
punitive disgorgement statutorily or constitutionally excessive when actual
damages are only $178,000 and the case does not involve death, grievous
physical injury, financial ruin, or actions that endanger a large segment of
the public?
4. Does a court err when it disgorges profits (such as, in this case, rental
revenues) that were not obtained by wrongdoing?
5. Does concurrent recovery of both express punitive damages and punitive
disgorgement violate principles forbidding double recovery of punitive
damages?
6. Does it violate the one-satisfaction rule and other relevant principles to
award a claimant attorney’s fees if the claimant’s greatest recovery is not in
contract but is under a fiduciary-duty theory?
3
Facts
As the Court will recall from prior proceedings, Larry Snodgrass and
Mark Swinnea owned equal interests in two business entities, ERI Consulting
Engineers, Inc., and Malmeba Company, Ltd., which they operated together for
ten years. 2 RR 21.2 Snodgrass and ERI then bought Swinnea’s ERI stock, in
2001. PX6; 4 RR 129. ERI paid $497,500 in cash consideration while Snodgrass
gave Swinnea Snodgrass’s half-interest in Malmeba, which owned the building
ERI officed in. PX7.
Meanwhile, Chris Power, a key ERI employee who was restless to own his
own company, was preparing to leave ERI. When Swinnea learned of Power’s
intentions, he persuaded Power to remain at ERI. To satisfy Power’s desire for
business ownership, the two men and their wives formed an abatement
contractor, Air Quality Associates (AQA), which their wives owned and would
operate. 2 RR 64.
While ERI was a consulting company, in the business of handling
abatement project design, bidding, and oversight, AQA instead handled the
complimentary tasks typical of an abatement contractor. The relationship
between the two types of businesses---consulting company and abatement
2
Unless preceded by an “SH”, all record and exhibit cites are to the original trial record from
2005. Any citation to the status hearing that occurred in November 2013 is preceded by “SH.”
4
contractor---was in respects similar to that of an architect and a building
contractor.
Almost immediately, AQA began winning competitive bids for ERI-
administered projects. Merico, a Longview abatement contractor and AQA
competitor, investigated AQA’s ownership, discovering Power’s and Swinnea’s
involvement with the new company. 4 RR 136-41; 5 RR 10. (Power and Swinnea
were board members and their wives were officers, with Power’s wife being
AQA’s president. 2 RR 72, 79). Merico told Snodgrass it would sever its
relationship with ERI unless he agreed to block AQA from bidding on ERI-
administered projects. 5 RR 13. Pleased with the AQA relationship, Snodgrass
refused. Id. So Merico stopped bidding ERI projects. Id. About the same time,
the Swinneas exited AQA, selling out to Power and his wife.
AQA won many more ERI-administered abatement projects. And both
companies---AQA and ERI---prospered. At ERI, corporate revenue doubled in
the three years after Swinnea sold his stock. 4 RR 201. In 2004, the year before
trial, ERI earned $800,000 in net profits---earning nearly twice the cash
consideration paid for Swinnea’s stock, in just a single year. 4 RR 114.
ERI’s accountant concluded the inevitable: Swinnea’s share of the
business had been worth the consideration paid in the buyout. 4 RR 115. At the
hearing before Judge Kennedy, on remand, Swinnea’s accounting expert, Nick
Burkette, agreed. SH 73. Specifically, Burkette valued Swinnea’s share of the
5
business in a range between $613,000 and $800,000. SH 73. Further, illustrating
the company’s post-buyout prosperity, Burkette concluded that a year after the
buyout, at the end of 2002, Swinnea’s ownership share had appreciated to
$979,000, and he estimated that two more years later (i.e., at the end of 2003), the
half interest ERI/Snodgrass had bought for $497,000 in cash consideration was
worth just shy of $1.5 million. SH 73.
Meanwhile, the relationship between Swinnea and Snodgrass had
deteriorated. Snodgrass ultimately fired Swinnea. (A part of the buyout called for
Swinnea to remain at the company as an employee for several years.) Snodgrass
and ERi then sued Swinnea, Malmeba, and Brady Environmental.
In the bench trial, Swinnea’s counsel was outmatched and
outmaneuvered. The result, as this Court knows, was a judgment (1) concluding
that Swinnea breached his fiduciary duty, committed fraud, and conspired with
Brady, and (2) awarding over a million dollars in what the court characterized as
actual damages---lost profits and disgorgement of buyout consideration---as well
as attorney’s fees and a million-dollar punitive-damage award to Sndograss.
Summary of the Argument
The $178,000 in lost ERI profit is the only actual damage recovered.
Snodgrass, ERI’s shareholder, may not recover ERI’s lost profits, and thus his
failure to recover proper actual damages dooms his recovery of punitive
6
damages. Swinnea briefed this matter in the initial appeal. But the Court never
reached it. The Court may and should do so now.
This case also involves a $720,000 punitive disgorgement award. The
award is punitive and not restitutionary because Swinnea has not reaped any
windfall and thus has nothing needing to be restored. The evidence from both
disdes’ accountants is that the value of Swinnea’s ERI stock supported the
consideration given in exchange. Nonetheless, the trial court has reinstated the
same punitive disgorgement award while this Court has upheld the punitive
damages under a cursory analysis. No one has considered the punitive damages
in light of either the reinstated disgorgement or the vast reduction in actual
damages.
Worse, this Court has short-circuited the statutory cap upon punitive
damages---which rightfully sets the maximum total amount of punitive
disgorgement and punitive damages at $356,000---and it has done so on an
unbriefed, sua sponte, ground for excepting this case from the statutory cap. Nor
has any court analyzed the excessiveness of the combination of both punitive
awards as measured against the U.S. Constitution’s due-process limitations on
excessive punishment. Yet the awards are clearly excessive. Both awards exceed
the 4:1 ratio of punitive damages to actual damages elicited by both the United
States and Texas Supreme Courts as a benchmark maximum. And the case lacks
the factual underpinnings that would be required to break free of this benchmark
7
(death, grievous physical injury, financial ruin, or actions endangering a large
segment of the public).
And, finally, the recovery of attorney’s fees violate the one-satisfaction
rule. Here, the plaintiffs’ greatest recovery comes under a fiduciary-duty theory,
which is a non-fee-bearing claim..
Argument
I. Snodgrass should take nothing.
A. Because Snodgrass has proved no individually recoverable
actual damages, he cannot recover.
A corporate shareholder like Snodgrass may not recover individually for a
loss sustained only by the corporation. Wingate v. Hajdik, 795 S.W.2d 717, 719
(Tex. 1990). The recovery must be the corporation’s, so that the damages can be
available to pay the corporation’s creditors. Id. In other words, a corporate
shareholder lacks standing to recover individually for a wrong done to the
corporation--even if he is injured by that wrong, see Redmon v. Griffith, 202 S.W.3d
225, 233 (Tex. App.-Tyler 2006, pet. denied), and even if a corporation only has
one shareholder. Mossler v. Nouri, 2010 WL 2133940 at *3 (Tex. App.-Austin
2010, pet. denied).
Here, ERI alone owns the cause of action under which lost profits were
awarded because the sole evidence of lost profits derives from harm to the
corporation (ERI’s loss of a customer). See Amended Additional Findings of
8
Fact and Conclusions of Law, Findings of Fact ¶ 6a (“recovery of lost profits,
alone, from the loss of the Merico relationship as actual damages . . .”). Because
Snodgrass lacks standing to recover ERI’s lost profits, two things follow. First,
the Court should reform the lost-profit award to eliminate Snodgrass as a
recipient. And second, because Snodgrass has not recovered any proper actual
damages, the court should also vacate the punitive-damage award, which has
been rendered solely in Snodgrass’s favor. See Tex. Civ. Prac. & Rem. Code Ann.
§ 41.004(a)(claimant seeking punitive damages must actually recover damages
other than nominal damages); Doubleday & Co., Inc. v. Rogers, 674 S.W.2d 751,
753-54 (Tex. 1984) (“Under Texas law, punitive damages are not recoverable as
a general rule in the absence of actual damages”). It is really that simple.
B. The Court should have addressed Swinnea’s attacks on
Snodgrass’s standing to recover ERI’s lost profits and
punitive damages.
The Court was required to address all issues necessary to the rendition of
complete relief. See State Bar of Texas v. Evans, 774 S.W.2d 656, 659 n. 5 (Tex.
1989)(per curiam); Bradleys’ Elec., Inc., v. Cigna Lloyds Ins. Co., 995 S.W.2d 675
(Tex. 1999) (per curiam) (requiring consideration of all points affording greatest
relief). Swinnea on appeal challenged Snodgrass’s right to any recovery – be it
actual or punitive damages – on the ground that any lost profit was solely
9
recoverable by ERI. See Appellant’s Brief at xiii, 45-48 (Appendix C). The Court
failed to address this claim-determinative argument.
II. The Court should eliminate or revise the trial court’s disgorgement
award.
Here, Swinnea received no extra or additional contractual consideration
for his ERI stock as a result of any wrongdoing. As the undisputed evidence
establishes, the consideration Mr. Swinnea gave up – his ERI stock – was worth
as much as the consideration he received in return. And, the record is void of
any metric suggesting that Swinnea’s conduct increased the sales price. In such
circumstances, there is no need for disgorgement, whether as restitution or as
punishment. Rather, if Swinnea was to be punished, it should have been solely
through the award of punitive damages. There is no reason why a proper
punitive-damage recovery would not fully serve the purposes of such awards.
There has been a single award of actual damages–$178,000–conferred solely as
compensation for the profits ERI lost from severance of the Merico
relationship. So, it is fitting that there should be a single punitive award.
The punitive disgorgement overlaps and duplicates the express punitive
damages and is unnecessary.
10
A. If punitive disgorgement is to be allowed in this case, it is
subject to all recognized limitations on the recovery and
amount of punitive damages.
1. Disgorgement that ventures beyond restoring a windfall
is a species of punitive damage.
Primarily, the disgorgement remedy seeks to neutralize windfalls to
defendants. RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT
§ 51 cmt. e (2011) (“the object of the disgorgement remedy—to eliminate the
possibility of profit from conscious wrongdoing”); George P. Roach, Unjust
Enrichment in Texas: Is it a floor wax or a dessert topping? 65 BAYLOR L. REV. 153, 248
(Winter 2013) (“disgorgement is measured by the defendant’s gain and
effectively seeks to restore the defendant to her original position”). A
restitutionary disgorgement award would neutralize any windfall to Swinnea from
the buyout: it would restore him as nearly as possible to the pre-buyout state. See
Int’l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 576-77 (Tex. 1963) (limiting
disgorgement to only the incremental windfall – not total consideration – gained
because of improper conduct). If the recovery goes deeper, leaving a defendant
like Swinnea with less than he brought into the transaction, it is a species of
punitive damage. That is, when a court orders a defendant to disgorge more than
his net profits, the disgorgement award becomes a punitive damage award.
RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT § 51 cmt h
(“ . . . making the defendant liable in excess of net gains, results in a punitive
11
sanction . . . ”); RESTATEMENT (THIRD) OF RESTITUTION & UNJUST
ENRICHMENT §§ 42, 51 (2011) (disgorgement liability exceeding the defendant’s
windfall crosses the border into punitive damages).
Here, in holding that disgorgement is available in cases involving
contractual or buy-out consideration, the Texas Supreme Court did not imply
that disgorgement may be used as a device purely to circumvent the traditional
and constitutional limitations upon punitive-damage recoveries. To say otherwise
would overturn decades of jurisprudence. See, e.g., Int’l Bankers Life Ins. Co., 368
S.W.2d at 576-77.
2. The plaintiffs have been awarded a punitive
disgorgement.
In this case, the disgorgement award is 100% a second punitive-damage
award. After all,
• there is no windfall in Swinnea’s favor to be disgorged in restitution;
• in promoting the award, the plaintiffs invoked punitive-damage principles;
• the award’s judicial analyses have all been under the analytical framework
applicable to punitive damages; and
• while restitution should generally be mutual3, there has been no reciprocal
restitution to Swinnea.
3
See, e.g., Morton v. Nguyen, 412 S.W.3d 506, 509-10 (Tex. 2013)(discussing the “common alw
requirement of mutual restitution”).
12
As the undisputed evidence proves, the legitimate consideration Swinnea
gave up – principally his ERI stock – was worth as much as what he received in
return and now has been ordered to disgorge. Swinnea’s conduct, however
culpable the Court may perceive it to be, did not create any windfall such as
occurs when a fiduciary takes a secret commission. See, e.g., Kinzbach Tool Co. v.
Corbett-Wallace Corp., 160 S.W.2d 509 (Tex. 1942). Undisputed evidence shows
that Swinnea’s shares of ERI stock were very valuable. Swinnea came by the
shares honestly. And their value at the time of sale was derived honestly,
accumulated through years of toil. As the undisputed proof shows, these shares
were valued at or above the consideration paid to Swinnea in the buy out. Nor
did Swinnea profit from his brief engagement with AQA.
Moreover, a proper restitutionary award would require ERI and Snodgrass
to likewise restore the consideration received in exchange. Here, there has been
no award returning reciprocal consideration.
Even if there would have been some identifiable windfall to Swinnea, the
actual damages would fully offset it. This would eliminate any basis for
restitutionary disgorgement.
The restitutionary remedy serves to deprive the defendant of unjust
gains, but it also has the effect of compensating the plaintiff to the
extent of the award for any losses resulting from the appropriation.
Similarly, an award of the plaintiff’s proven losses also has the
effect of reducing the defendant’s unjust enrichment by the amount
of the award. An award of the greater of the two remedies thus ordinarily
serves the objectives of both forms of relief and best prevents double recovery.
13
RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 45 cmt c
(emphasis added).
Consequently, a plaintiff is generally entitled to recover the greater of (1) his own
full loss or (2) the defendant’s windfall. RESTATEMENT (THIRD) OF UNFAIR
COMPETITION § 45(1). 4 For this reason, when there are actual damages, the only
unjust enrichment that may be recovered is that unjust enrichment “that is not
taken into account in computing actual loss.” TEX. UNIFORM TRADE SECRETS
ACT § 3; accord RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 45 reporter’s
note, cmt c. A plaintiff’s recovery of both her damages and the defendant’s
profits would be “anomalous in restitution terms, constituting a punitive
sanction.” RESTATEMENT (THIRD) OF RESTITUTION & UNJUST ENRICHMENT §
42 cmt d (2011).
In these circumstances, the disgorgement cannot be considered as
anything but a species of punitive-damage recovery. ERI essentially conceded
this. Its arguments to the trial court in support of disgorgement didn’t identify
any windfall and had nothing to do with neutralizing one. Instead, the pervasive
theme was that Swinnea should be punished.
4
Accord Doug Dendleman, Measurement of Restitution, 68 WASH. & LEE L. REV. 973, 985 (citing
RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT ¶¶ 13-15, 40-43, 45-56)
(Where the plaintiff is damaged and the defendant unjustly enriched, “the plaintiff may choose
between compensatory damages and restitution”).
14
a. Being punitive and not restitutionary, the
disgorgement is subject to all restrictions upon
the recovery and amount of punitive damages.
Three things follow from the fact that the disgorgement here is a punitive
damage. First, to be sustainable as a punitive-damage recovery, the conduct at
issue must have been the source of an actual-damage award. Second, the
disgorgement cannot overlap or duplicate another punitive-damage award. And
finally, any disgorgement must be screened for excessiveness under Texas
common law, statutory law, and the due-process clauses of the Texas and U.S.
constitutions. Due process does not allow any such disgorgement except to the
extent that the sum of disgorgement and any express punitive damages remains
within a constitutionally permissible ratio in relation to the remitted and
reconstituted actual damages. It cannot be any other way, or else these
fundamental protections would be too easily avoided.
The disgorgement in this case violates each of these principles.
B. Because no actual damages have been recovered in
connection with the buy-out transaction, there is no legal
basis for a punitive disgorgement.
While restitutionary relief, including restitutionary disgorgement, can be
awarded even where there are no actual damages proved, this applies only if the
award is in fact a restitutionary one. All punitive-damage awards, in contrast,
15
require a predicate recovery of actual damages, even where the punitive award is
meted out in the form of a “disgorgement.”
Here, the buyout did not cause any actual damage. Therefore, any
punitive-damage award tied to the buyout is improper.
C. Because the law will not support two punitive-damage awards
for the same conduct, one or the other of the $1 million
punitive damages or the $720,000 punitive disgorgement must
go.
Even if each punitive award would have otherwise been sustainable, they
could not both be recovered, because the law condemns “multiple punitive
damages awards for the same conduct.” State Farm Mut. Auto. Ins. Co. v. Campbell,
538 U.S. 208, 422, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003); Safeshred, Inc. v.
Martinez, 365 S.W.3d 655, 664 (Tex. 2012). A court may award one punitive-
damage recovery per injury. Allstate Ins. Co. v. Kelly, 680 S.W.2d 595, 606 (Tex.
App.-Tyler 1984, writ ref’d n.r.e.) (recovery of both exemplary damages and
treble damages amounted to an improper double recovery of punishment
damages). As a result, disgorgement may not be awarded, in addition to punitive
damages, when to do so results in double punishment. Int’l Telecharge, Inc. v.
Bomarko, Inc., 766 A.2d 437, 442 (Del. 2000); see also U.S. v. Project on Gov’t
Oversight, 572 F. Supp. 2d 73, 77 (D.D.C. 2008); Miller v. Bank of Am., N.A., 326
P.3d 20, 32-33 (N.M. Ct. App. 2013); Wecosign, Inc. v. IFG Holdings, Inc., 845 F.
Supp.2d 1072, 1084 (C.D. Cal. 2012).
16
While disgorgement can sometimes co-exist with punitive damages, in
such cases the disgorgement should be strictly limited to merely neutralizing the
defendant’s windfall. It cannot spill into duplicative punishment for the same
conduct. Campbell, 538 U.S. at 423. Because the disgorgement in this case is
solely punitive, either it or the separate punitive-damage award must give way.
III. Because the $1 million punitive-damage award and the punitive
disgorgement award have been entered without the required due-
process analysis, the Court should, at a minimum, remand both
awards for a proper excessiveness analysis.
A. The reduction in actual damages requires a new analysis of
the excessiveness of punitive damages.
The reduction in actual damages---a five-fold reduction in what the trial
court perceived as actual damages when setting the punishment--requires a
remand for a new and coordinated look at all exemplary-damage awards. Bunton
v. Bentley, 153 S.W.3d 50, 53 (Tex. 2004) (per curiam). Indeed, any substantial
“adjustment of compensatory damages” “requires reevaluation of the factors
supporting an award of exemplary damages.” Id. Here, the actual damages have
been reduced by roughly 80 percent. The initial punitive-damage award was
rendered by a trial court that fictitiously construed the $720,000 in buy-out
consideration as actual damages and thought the lost profits were about twice as
much as actually was proved. The trial court formerly thought it was setting a 1:1
ratio of punitive to actual damages. To award $1 million in express punitive
17
damages, let alone $1.72 in total punishment, would not have been possible in
this case---which does not involve death, grievous physical injury, or anything
approaching economic calamity---had the trial court known that actual damages
were only $178,000.
Being a species of punitive damage, the disgorgement in this case must be
considered in connection with all other punitive damages when it comes to
evaluating the awards against the applicable statutory and constitutional limits.
Were the law to require anything less, the constraints on excessive punishment
could be circumvented merely by dividing an excessive punishment into two
smaller awards – one expressly termed punitive damages and another called
forfeiture or disgorgement.
Not only must each punitive award withstand isolated scrutiny, but the
total of all such awards must satisfy all common-law, statutory, and
constitutional due-process requirements. Anything less would be illogical.
Because the disgorgement award is punitive and not restitution, it (together with
any award of express punitive damages to Snodgrass) must be analyzed by the
trial court as an initial matter and by this Court for constitutional excessiveness
and compliance with the Krause factors. The trial court has not done so.
Application of the Burrow factors, which have been applied to the disgorgement
award in isolation, does not avoid analysis under the Krause factors or the
statutory and constitutional requirements.
18
Despite clear Supreme-Court precedent requiring a due-process analysis,
Owens-Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998); Tony Gullo
Motors I, L.P. v. Chapa, 212 S.W.3d 299, 307 (Tex. 2006), no court has lifted a
finger to consider whether the combined $1.72 million in punitive awards might
be constitutionally excessive. They presumptively are because they far exceed the
4:1 ratio that is the presumptive dividing line between permissible and
constitutionally-invalid punishment.
Rather than consider the limits due process places upon a defendant’s
punishment, once the supreme court had reversed in part on other grounds,
Justice Griffith’s opinion perfunctorily invoked Alamo National Bank v. Krause
with no real attempt at analysis, solely in connection with the express punitive
award to Snodgrass. When he did so, Justice Griffith
• failed to attempt any constitutional due-process analysis,
• invoked an impermissible, sua sponte ground to avoid the statutory cap, and
• denied Swinnea any chance to brief any of these matters.
Justice Griffith’s discussion failed to acknowledge the effect of the lost-profits
remittitur, the supreme court’s reconstitution of the disgorgement as other than
actual damages, or even the fact that the latter award had been vacated and
remained to be reassessed on remand. Worse, the Court’s decision has precluded
the trial court from conducting any punitive-damage analysis in light of the
19
revised actual damages and the remanded disgorgement. That, of course, put the
cart far in front of the horse, as even the plaintiffs acknowledged when they told
the supreme court a due-process analysis of the award to Snodgrass occurring in
isolation, before the punitive disgorgement could be assessed, would as a matter
of law be “premature.” See Response to Petition for Review at 3-7 (attached as
Appendix D).
To convince the supreme court to deny Swinnea’s petition for review---
which sought a due-process excessiveness analysis---ERI and Snodgrass argued
that such analysis should be reserved to the trial court on remand, to be
performed in conjunction with the disgorgement-factor analysis. See Response to
Petition for Review at 3-4 (“. . . the trial court will no doubt follow this
Court’s instruction that a change in the underlying damage awards
requires a new due process review ”)(attached as Appendix D). The trial court,
however, didn’t perform any excessiveness analysis---in part because it didn’t
interpret this Court’s decision as allowing it to do so and in part because the
plaintiffs reversed field. Despite their estoppel/admission, ERI and Snodgrass
subsequently avoided a constitutional analysis of punitive damages, incorrectly
telling the District Court that it need not engage the necessary excessiveness
review because “[t]he Supreme Court and the Court of Appeals have disposed of
the issues with regard to the lost profits and punitive damages.” See 1 RR 4
20
(November 12, 2013 Hrg). Their prior position in the appellate courts renders
the latter position void.
By persuading the supreme court into denying review through an
argument that the trial court would perform a due-process review, ERI and
Snodgrass are estopped from arguing against the propriety of such a review now.
See Cleaver v. Cleaver, 140 S.W.3d 771, 775 (Tex. App.-Tyler 2004, no pet.)
(“judicial estoppel requires only that a party take an affirmative position that is
successfully maintained in the earlier proceeding, and that is contrary to the
position it now seeks to invoke”).
The trial court did not set out to order punitive damages at a 5:1 ratio.
Instead, it is highly likely that the trial court, knowing what everyone now knows
about the modest level of actual damages---would today reshape the punitive-
damage award more in keeping with established norms, if given a chance. This
Court’s prior decision--affirming punitive damages notwithstanding the
remittitur of lost profits and the recasting of the disgorgement award to reveal its
punitive nature--has denied the trial court the chance to synchronize the
punishment, if any, with the true harm.
When actual damages have been reduced to only about 15% of their
former amount, it should suggest taking a fresh look at the amount of punitive
damages, unencumbered by the initial punitive award---an award that was
21
molded by and bears the mark of the trial court’s initial, judicially-repudiated
assessment of actual damages.
A trial court that initially saw fit to punish Swinnea at what the court
mistakenly thought was a 1:1 ratio would likely reformulate its view of the
proper punishment in light of the reformulated actual damages. Most reasonable
jurists in this circumstance would adopt the position famously attributed to John
Maynard Keynes. When accused of a flip flop on economic policy, he is said to
have replied: “When the facts change, I change my mind. What do you do, sir?”
Here, the sine qua non in assessing the amount of punitive damages---actual
damages---has changed dramatically. That the trial court initially saw a 1:1 ratio
of punitive to actual damages as appropriate, today implies a total punishment in
the range of $180,000. Judge Kennedy, the new trial judge, presumably also
would conform the punitive damages to fit the true level of actual damages. So,
the law, equity, and basic principles of fairness all say the trial court should be
afforded the opportunity to evaluate punitive damages anew, armed with
accurate knowledge of (1) the true actual damages, (2) the disgorgement award’s
status as a punitive-damage award, and (3) the necessity to measure propriety of
the combination of all punitive awards (disgorgement and express punitive
damages) against the applicable legal, statutory, and constitutional yardsticks.
The punitive-damage award that this Court has affirmed is erroneous
because it arises from an erroneous trial-court analysis. The trial court’s
22
disgorgement analysis is of course erroneous because, among other things, it
does not consider the disgorgement in context of the total punitive damages,
including the award to Snodgrass, and does not acknowledge that the
disgorgement would be subject to the traditional protections against excessive
punitive damages.
This assuredly caused the rendition of an improper judgment, and is thus
reversible. TEX. R. APP. P. 44. It cannot be cured or papered over by appellate
review purporting to pronounce the punitive-damage amount to be within a
range that is statutorily and constitutionally permissible under the correct facts.
The punitive awards must be vacated and remanded because they rest on an
improper analysis, in circumstances that don’t allow the Court to find the error
harmless. It is simply not possible to say with any assurance that the trial court
would again issue a million dollar punishment on top of a $720,000 punitive
disgorgement (for a total of $1.72 million in punishment) now, in this $178,000
damage case, simply because its predecessor issued a million dollars in total
punishment when actual damages were purported to be $1,020,000.
When the actual damages were reduced fivefold, it triggered the
requirement for a constitutional due-process review. Bunton, 153 S.W.3d at 53.
Ever since, Swinnea has sought such a review. And when it seemed in their
interest to do so, even the plaintiffs agreed such a review was required in the trial
court. Respectfully, the Court should have afforded Swinnea the prior
23
opportunity to brief the constitutionality of punitive damages in light of the
major appellate reduction in underlying actual damages. Id. Now, a remand to
afford the trial court the chance to reevaluate the combined punitive awards is
required, and would be required even had the current punitive-damage amount
been constitutionally sustainable. Id.; See Moore v. Jet Stream Invs., Ltd., 261 S.W.3d
412, 432 (Tex. App.-Texarkana 2008, pet. denied) (remanding to the trial court
to reconsider attorney’s fee award in light of modified damage award).
Because this complaint did not exist before appeal but arises from this
Court’s judgment, and because ERI shooed off supreme-court review with its
promise of a forthcoming, actual due-process review of the punitive damages,
this complaint is fair game for this appeal. Bunton, 153 S.W.3d at 53; TEX. R. APP.
P. 49.9.
The punitive awards must be vacated and remanded for a proper analysis.
IV. The $1 million punitive-damage award and the punitive
disgorgement award necessarily are excessive, both individually and
collectively.
A. The disgorgement award is excessive insofar as it requires
Swinnea to return monies he did not come by in the buyout.
A court may not disgorge profits that were not obtained as a result of
wrongdoing. Boyer v. Wilmington Materials, Inc., 754 A.2d 881, 907 (Del. Ch. Ct
1999); Commodity Futures Trading Comm’n v. Sidoti, 178 F.3d 1132, 1137-38 (11th
Cir. 1999). The courts must therefore distinguish between those profits that are
24
obtained through wrongdoing (and thus are disgorgeable) from those that are
not. S.E.C. v. First City Fin. Corp., Ltd., 890 F.2d 1215, 1231 (D.C. Cir. 1989); see
also RESTATEMENT (THIRD) OF RESTITUTION & UNJUST ENRICHMENT § 51, cmt.
f (2011). The recovery in this case does not do so. Rather, it confiscates 100% of
the rentals ERI paid Swinnea to lease office space, even though half of this sum
is rentals earned on the 50% interest Swinnea acquired in the leased premises years before the
events at issue. The latter amount, totaling $66,500, is not disgorgeable under any
circumstance.
B. Both punitive awards are excessive in relation to statutory
limits.
1. The Court should reconsider and reverse its sua sponte
decision to invoke an inapplicable exception to the
statutory cap on punitive damages.
Today, Swinnea labors under $1.72 million burden of punitive awards---$1
million in punitive damages to Snodgrass and $720,000 in punitive disgorgement.
Per Section 41.008 of the Civil Practice and Remedies Code, these awards
cannot legally exceed about $356,000 (two times economic damages) in
combination.
25
a. When the Court invoked a cap-busting exception
to affirm, it rendered an improper, sua sponte
decision.
Notwithstanding the facially applicable statutory punitive-damage cap, this
Court affirmed the entire $1 million in express punitive damages based on a
determination that the cap could be disregarded because the trial court
supposedly found “the type of conduct described in” one of the section
41.008(c) cap-busting exceptions (the subsection 41.008(c)(11) exception for the
felony offense of securing execution of a document by deception). Swinnea, 364
S.W.3d at 424. This was wrong. It not only afforded Swinnea no chance to brief
the issue of the statutory cap (or the issue of excessiveness in light of the
reduction in actual damages and reconstitution of disgorgement) but it violated
an important prohibition on sua sponte rulings.
Respectfully, the issue of the cap-busting statute was never the Court’s to
decide. A court of appeals may not render a decision sua sponte upon an issue that
no party has raised or briefed. Pat Baker Co. v. Wilson, 971 S.W.2d 447, 450 (Tex.
1998)(per curiam); Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex. 1993). This is
axiomatic. Here, no one raised an issue of any cap-busting exception. So the
issue was not on the Court’s table.
At a minimum, if the Court intended to address the exception’s potential
application, it should have afforded Swinnea notice and a prior opportunity to
brief the issue (including its preservation). Now, the Court should vacate its
26
pronouncements about the exception and should instead render judgment that
the statute does not apply to the conduct at issue or, alternatively, does not apply
to the punitive damages awarded here because they necessarily relate to conduct
that does not support any cap-busting exception.
b. There has been no cap-busting offense.
This Court has applied the statutory exception for securing documents by
deception far too broadly. The legislature painstakingly has limited the
availability and magnitude of punitive damages, not once, but three times. Bill
Analysis, SB 25 (April 5, 1995); see Acts of April 11, 1995, 74th Leg., R.S., ch.19,
1995, 74th Leg., R.S., ch. 19, 1995 Tex. Gen. Laws 108, 108-113 (amended 2003).
At any of these times, the legislature could have declared fraudulent inducement
exempt from the statutory cap, but it did not do so. Instead, it enacted Section
41.008(c), identifying specifically-enumerated criminal offenses. Section
41.008(c) is a narrow provision, as evidenced by the infrequency in which courts
have applied it. Conversely, the punitive-damage cap is far-reaching. This court’s
decision not only contradicts the proper statutory intent but invites others to
attempt similar end runs at the statutory cap, through other tort causes of action.
Fraudulent inducement and securing a document by deception are
different, albeit they implicate potentially overlapping conduct. Fraudulent
inducement is a particular species of fraud arising in the context of a contract
27
and requires the existence of a contract as part of its proof. Haase v. Glazner, 62
S.W.3d 795, 798-99 (Tex. 2001). Securing execution of documents by deception
focuses more sharply on situations where the gist of the culpable activity is an
undertaking to obtain execution of a document by deceptive means–typically a
check or authorization for government benefits. See, e.g., TEX. ATTY. GEN. OP.
NO. MW-582 (1983) (fraudulently obtaining food stamps). Here the buyout
transaction is papered by documents, but they are not the focus of the
fraudulent-inducement claim.
If Swinnea’s conduct constitutes securing execution of documents by
deception, then every time a seller omits to disclose a material fact in connection
with a transaction that happens to be memorialized by a document, it would
abrogate the statutory cap on punitive damages in such widely-litigated matters
as statutory fraud in a real-estate transaction. But that is not what prior courts
have concluded. E.g., Glazener v. Jansing, No. 03-02-00796-CV, 2003 WL
22207226, *6 (Tex. App.-Austin Sept. 25, 2003, no pet.) (cap applied to statutory
fraud claim).
Swinnea started a business that competed with an ERI customer and for a
while kept that fact from Snodgrass. That may perhaps breach a fiduciary duty.
But, it is a far cry from conduct that criminal offenses takes aim at–hoodwinking
a victim into signing a check, deed, or the like. The documents in this case were
freely negotiated, reviewed, and signed in an ordinary closing, after consultation
28
with counsel. They are incidental to the current issues. The gist of the acts and
the gist of the plaintiffs’ claims does not focus on the securing of documents.
This distinction cannot be stressed enough.
If the conduct alleged here---garden-variety fraudulent inducement---
sustains a cap-busting exception, then fraudulent inducement will never be
subject to the legislative caps on punitive damages. That surely cannot be the
law.
This court’s decision raises concerns regarding fair notice. It is not at all
apparent that civil or tort allegations of secretly forming a new
vendor/contractor would, if proved, make Swinnea guilty of a felony, let alone
strip away the statutory cap protecting him against punitive damages exceeding
two times Snodgrass’s individually recoverable economic damages. To afford fair
notice and procedural due process, a claimant wishing to avoid the statutory cap
should be required to reveal that intention in a pleading that identifies an alleged
cap-busting criminal offense. Marin v. IESI TX Corp., 317 S.W.3d 314
(Tex.App.—Houston [1st Dist.] 2010, pet. denied) (holding it enough to plead
facts that in retrospect could be said to constitute the criminal elements).
29
c. Because the criminal offense was not the subject
of findings in the trial court, there is no basis for
busting the statutory punitive-damage cap.
To bust the statutory cap on exemplary damages, Snodgrass needed to
secure trial court findings that Swinnea committed the criminal offense—that he
secured execution of a document by deception. See McCullough v. Scarbrough,
Medlin & Associates, Inc., 435 S.W.3d 871, 912 (Tex. App.-Dallas 2014, pet.
denied). It should not be enough that the trial court issued broad findings that
this Court then sua sponte and ex-post-facto pronounced as supporting the offense.
In McCullough, in contrast, the Charge actually submitted the offense to the jury
(theft in that case). Here, however, ERI and Snodgrass failed to request,
propose, or secure any finding that Swinnea committed the elements of the
criminal offense.
d. Because no actual damages have been awarded
in connection with the cap-busting conduct,
there is no predicate for an uncapped punitive-
damage recovery.
The mere existence of one liability theory that is similar to a cap-busting
offense does not lift the statutory cap for other conduct potentially supporting
punitive damages, contrary to the Court’s implicit presumption. If a cap-busting
exception is to be applied, it should govern only insofar as the punitive damages
actually punish the alleged cap-busting conduct (here, fraudulent inducement of
the buyout, that is, the loss to ERI/Snodgrass from having been induced into
30
the buyout). There has been no recovery of any actual damage for such conduct. Rather, the
lost-profits award arises solely from the formation of the abatement contracting
company AQA, which caused ERI’s loss of the Merico business relationship.
Further, a plaintiff asserting a punitive-damage-cap-busting offense
should secure findings on the amount of damages attributable to the alleged cap-
busting conduct. Serv. Corp. Int’l v. Guerra, 348 S.W.3d 239, 252 (Tex. App.-
Corpus Christi 2009, pet. granted) (evidence of cap-busting offense could not be
used to avoid statutory cap unless that conduct caused plaintiff’s actual damage),
rev’d on other grounds, 348 S.W.3d 221 (2011). Snodgrass failed to do so.
Given that the only actual damages were sustained in connection with
theories other than fraudulent inducement, it makes sense that most, if not all,
punitive damages were likewise aimed at redressing other conduct. If the record
does not conclusively establish the applicability of the statutory cap on punitive
damages, the Court should consider remand to the trial court, to reassess
punitive damages and identify which, if any, punitive damages have been
awarded in connection with the buyout (for which there are no supporting actual
damages) and which have been awarded for Swinnea’s AQA involvement (which
is, as a matter of law, subject to the statutory cap).
31
e. Because the disgorgement awarded is punitive, it
must be aggregated with any punitive-damage
recovery and the total subjected to a single
statutory cap.
As already stated, the law obviously requires that all punitive awards pass
the same statutory and constitutional muster. This means that if the punitive
damages in favor of Snodgrass survive, the award must be aggregated with the
punitive disgorgement award and the combined total must be subjected to a
single statutory cap. That is, the total of these combined awards cannot exceed
two times actual damages or approximately $356,000.
C. The awards violate the Krause factors and are excessive in
relation to due-process limitations.
Due Process. Exemplary damages are subject to an ultimate federal
constitutional check for exorbitance. Tony Gullo Motors I, L.P., 212 S.W.3d at 307.
Even if an assessment of exemplary damages is not deemed excessive under
governing state law, it may violate a party’s substantive due process right to
protection from “grossly excessive” exemplary damage awards. Khorshid, Inc. v.
Christian, 257 S.W.3d 748, 767 (Tex. App.-Dallas 2008, no pet.).
The United States Supreme Court has concluded that four times the
amount of compensatory damages is close to the line of constitutional
impropriety for exemplary damages. Tony Gullo, 212 S.W.3d at 308. Here, both
punitive damage awards ($1 million punitive damage award and punitive
32
disgorgement award) exceed the 4:1 ratio ($1 million to $178,000 equals 6 to 1
ratio; $720,000 to $178,000 equals 4.04 to 1). To push punitive damages past the
4:1 ratio would “seem[] a [constitutional] stretch” that (1) would “leave[] no
room for greater punishment in cases involving death, grievous physical injury,
financial ruin, or actions than endanger a large segment of the public” and (2)
could not “be squared with [the Texas Supreme Court’s] on-point Tony Gullo
Motors I, L.P. v. Chapa decision, another ‘scheme of deception’ case” in which the
Texas Supreme Court held that a ratio of 4.33 to 1 exceeded constitutional
limits. Tony Gullo, 212 S.W.3d at 308.
While it is true that a rigid ratio of 4:1 is not universally required, the U.S.
Supreme Court has stated that “ratios greater than those we have previously
upheld may comport with due process where ‘a particularly egregious act has
resulted in a small amount of economic damages.’” Bennett v. Reynolds, 315
S.W.3d 867, 879 (Tex. 2010)(quoting State Farm Mut. Auto. Ins. Co. v. Campbell).
This exception, however, does not apply here because $178,000 is not a small
amount of economic damages. See Bennett, 315 S.W.3d at 879 (approximately
$6,000 award was not small amount of exemplary damages for purposes of
exception).
Here, the harm is purely economic, does not approach the level of the
punitive award, and was mostly, if not completely, offset by profit obtained
through the AQA relationship. Properly understood, the case reflects only injury
33
to the corporation, ERI, a party to which the trial court found no need of
awarding any express punitive damages at all. If it would have been possible to
uphold a punitive-damage award to Snodgrass, who has not personally sustained
a recoverable loss, it would nonetheless be impermissible to sustain any such
award in the amount of $1 million under the mere guise of the freewheeling
“reprehensibility exception.” Yet that is precisely what Justice Griffith’s analysis
on the Court’s behalf does. In the process, it “subvert[s] the constraining power
of the ratio guidepost.” Bennett, 315 S.W.3d at 879.
This Court’s Kraus analysis in its 2012 opinion reached the wrong result.
Here, the harm was economic rather than physical. It was limited to dishonesty
and deceit occurring in a business relationship. And, despite the trial court’s
contrary findings, there is no evidence of any specific desire to harm the
plaintiff. Just the opposite. Swinnea, in forming AQA, sought a prosperous,
mutually beneficial relationship between the two companies, AQA and ERI.
Swinnea’s ERI stock was always worth what was paid for it. Chris Power
had independent plans to leave ERI, but AQA’s formation prevented his
departure. Only one ERI customer relationship, with Merico, was affected.
AQA’s formation created an altogether new customer for ERI, to take Merico’s
place. ERI had a choice to pick the relationship with AQA or a continued
relationship with Merico. Merico worked only in the declining industry of
asbestos remediation, while AQA’s interests and prospects were broader. Power
34
continued to work for ERI and with AQA. The relationship between ERI and
AQA was consensual, mutually beneficial, and grew rapidly. By all accounts,
both companies prospered. ERI’s profits grew immensely after the buyout, with
the increase in profit being many times larger than the Merico lost profit. And
the Merico lost profit is fully compensated by the actual-damage recovery.
At bottom, Swinnea is being punished for helping form AQA when it
appears ERI is pleased to maintain a business relationship with AQA. As
between the parties, Swinnea is the only one who has not profited from AQA’s
existence.
These are simply not the sort of conditions that support enormous
punitive damages in the range of ten times actual damages. See e.g., Hernandez v.
Sovereign Cherokee Nation Tejas, 343 S.W.3d 1162, 177-78 (Tex. App.-Dallas 2011,
pet. denied); see also Preston Carter Co. v. Tatum, 708 S.W.2d 23, 25 (Tex. App.-
Dallas 1986, writ ref’d n.r.e.). In such circumstances, “the punishment assessed
against [the defendant] should not be calamitous or ruinous.” Preston Carter Co.,
708 S.W.2d at 25. Preston Carter Co. is instructive. There, an award of exemplary
damages of $300,000 was excessive when (i) the appellate court had reduced
compensatory damages from $165,000 to $40,000 (creating a ratio of punitive
damages to actual damages of roughly 7 ½ : 1); (ii) the conduct did not spring
from ill will or any specific desire to do harm to the plaintiff, (iii) the transaction
35
was purely a business affair, and (iv) the loss was purely financial. Preston Carter
Co., 708 S.W.2d at 25.
Importantly, Justice Griffith’s analysis ignored the necessity to reserve room for
punishment of the most egregious violations – which, unlike this case, involve serious
personal injury, economic calamity, or actual and grievous harm to great
numbers of people. Here, the sole harm not only is economic, but it doubtless
has been offset (likely many times over) by profit ERI has obtained through the
wildly successful AQA relationship, which ERI has embraced and continues to
nurture and profit from, handsomely. ERI’s willing, longstanding acceptance of
AQA and their prosperous long-term relationship together cannot be over-
emphasized in any excessiveness analysis of punitive damages.
Judge Kent, when she assessed punitive damages, must have thought she
was acting well within the mainstream, assessing punitive damages at a 1:1 ratio
(right at the mean of punitive-damage awards). Now, things are vastly different.
The notion of $1,020,000 in actual damages has been shattered. The punitive-
damages and punitive disgorgement approach an amazing 10:1 ratio to actual
damages. Punishment this big is insupportable statutorily and constitutionally.
V. The plaintiffs are not entitled to attorney’s fees.
The trial court’s judgment violates the one satisfaction rule. Under this
rule, a plaintiff is entitled to only one recovery, even when his injury could be
36
said to result from multiple culpable acts. Crown Life Ins. Co. v. Casteel, 22 S.W.3d
378, 390 (Tex. 2000). The plaintiff may recover under his one best legal theory--
the one entitling him to the greatest relief. Boyce Iron Works, Inc. v. Sw. Bell Tel. Co.,
747 S.W.2d 785, 787 (Tex. 1988). Here, the plaintiffs’ greatest recovery is under
a fiduciary-duty claim. Breach of fiduciary duty is not a fee-bearing claim. See W.
Reserve Life Assurance Co. of Ohio v. Graben, 233 S.W3d 360, 377-78 (Tex. App.-
Fort Worth 2007, no pet.).
VI. The law of the case does not bar this Court from granting any of the
relief Swinnea requests.
A conclusion reached by an intermediate appellate court does not
bar reconsideration of the initial conclusion in a subsequent appeal,
and the decision to revisit the conclusion is left to the discretion of
the court under the particular circumstances of each case. City of
Houston v. Jackson, 192 S.W.3d 764, 769 (Tex. 2006).
Under the law-of-the-case doctrine, questions of law decided on appeal
to a court of last resort will govern the case throughout its subsequent states.
Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986). Under a corollary of the
doctrine, an intermediate court of appeals will ordinarily follow its original
decision in later appeals of the same case. Briscoe v. Goodmark Corp., 102 S.W.3d
714, 716 (Tex. 2003). The point is to “narrow[] the issues in successive stage of
the litigation,” so as to achieve the goal of “uniformity of decision as well as
judicial economy and efficiency.” Hudson, 711 S.W.2d at 630. And yet this is not
a doctrine that requires stubborn adherence, but only a matter of general
37
practice. “A decision rendered on an issue before the appellate court does not
absolutely bar reconsideration of the same issue on a second appeal. Application
of the doctrine is discretionary, depending on the particular circumstances
surrounding that case.” Briscoe, 102 S.W.3d at 716-17. Because the law of the case
is required by neither the Constitution nor statute, it in fact “should be
disregarded when compelling circumstances require redetermination of the point
of law decided on the prior appeal.” Peden v. State, 917 S.W.2d 941, 956 (Tex.
App.—Fort Worth 1996, pet. ref’d). Thus, this Court has authority to revisit
rulings it made in this case on remand from the supreme court. And if on doing
so the Court determines that its original decision of any issue is erroneous, the
Court need not adhere to the erroneous ruling. Id. Indeed, the court’s duty “to
administer justice under the law” is a much higher duty and clearly “outweighs
[any secondary, minor] duty to be consistent.” Id. at 717, quoting Comm. Gen. Life
Ins. Co. v. Bryson, 219 S.W.2d 799, 800 (Tex. 1949).
In Briscoe, the supreme court upheld the appellate court’s discretion, on a
second appeal, to reconsider and overturn its own prior decision. Briscoe, 102
S.W.3d at 717 (“Finding clear error in its first decision, [the court of appeals] had
the power to overturn that first decision on the second appeal. . . . Because its
first decision was clearly erroneous, the law of the case doctrine did not apply.”).
Thus, this Court has authority to revisit both express and implied rulings from
the prior appeal--such as its express rulings (a) busting the statutory cap on
38
punitive-damage award and (b) affirming the $1million amount of punitive
damages as well as the implied ruling denying Swinnea’s attack on Snodgrass’s
standing to recover the actual damages necessary to upholding the punitive
damages in his favor.
In this case, the Court, upon remand from the Texas Supreme Court and
without entertaining further briefing, affirmed a $1 million punitive-damage
award in favor of Snodgrass, a claimant who clearly recovered no actual damages
of his own and just as clearly lacked the standing to claim the right to recover
ERI’s corporate lost profit. This has occurred even though Swinnea briefed
these issues. The resulting error---the award of debilitating punitive damages by
one who has no basis to recover them---is fundamental and inarguable. In Texas,
“punitive damages are not recoverable as a general rule in the absence of actual
damages.” Doubleday & Co., Inc. v. Rogers, 674 S.W.2d 751, 753-54 (Tex. 1984).
And so far as we know, no American jurisdiction would sustain a punitive-
damage recovery in this circumstance.
So the basis for revisiting the punitive-damage recovery is compelling.
And, in fact, the matter of Snodgrass’s punitive-damage recovery may not even
implicate the law of the case, for two reasons: first, to the extent that it addresses
a matter of Snodgrass’s standing, it is non-waivable and should always be within
the Court’s reach. Second, it is not clear that law-of-the-case principles address
issues that have not been expressly decided.
39
All indications here are that the Court on remand simply failed to address
Swinnea’s preserved, appellate-briefed attack on Snodgrass’s grounds for
individually recovering punitive damages. Swinnea was entitled to a decision on
the issue. TEX. R. APP. P. 47.1 (“the court of appeals must hand down a written
opinion that . . . addresses every issue raised and necessary to final disposition of
the appeal.) The Court should decide these issues and throw Snodgrass’s
recoveries out.
What is more, the supreme court’s denial of Swinnea’s petition for review
is irrelevant here. See, e.g. Trevino v. Turcotte, 564 S.W.2d 682, 685 (Tex. 1978)
(holding that a court of appeals’ conclusion was not binding under the law of the
case doctrine when the petitioner’s first writ of error was denied by the Supreme
Court “writ refused, no reversible error”); see also City of Houston, 192 S.W.3d at
769 (citing and approving Trevino); accord Hopwood v. State of Texas, 236 F.3d 256,
274 (5th Cir. 2000) (“within the law of the case framework, it is not clear error for
a court of appeals to tackle legal questions that the Supreme Court has declined
to answer: lower courts are bound only by the Supreme Court holdings and not
by the Court’s election, either express or implied, to leave open particular legal
questions”).
40
Conclusion and Prayer
Mark Swinnea is not arguing that buyout consideration can never be
disgorged. But if such disgorgement is to be awarded here, it is a species of
punitive damage and must be treated as such. Such awards must be subject to
the principles forbidding duplicative and excessive punitive damages, including a
review for compliance with constitutional due process.
The punitive damages to Snodgrass, and the duplicative, punitive
disgorgement violate the common law as well as the statutory and constitutional
prohibitions against excessive punitive damages.
WHEREFORE, PREMISES CONSIDERED, the Court should
eliminate Snodgrass’s recovery of ERI’s lost profit, eliminate both plaintiffs’
recovery of attorney’s fees, eliminate or reduce the disgorgement, eliminate or
reduce the $1 million award of punitive damages, or alternatively remand for a
trial court evaluation of the aggregate of the punitive recoveries, as may be
appropriate. Of course, Swinnea prays for all other relief, in whatever form, that
may be proper under the grounds and arguments in this appeal.
41
Respectfully submitted,
/s/ Greg Smith
Greg Smith
State Bar No. 18600600
Nolan Smith
Texas Bar No. 24075632
RAMEY & FLOCK, P.C.
100 East Ferguson, Suite 500
Tyler, TX 75702
Telephone: (903) 597-3301
Facsimile: (903) 597-2413
gsmith@rameyflock.com
nolans@rameyflock.com
Michael E. Gazette
Law Office of Michael E. Gazette
100 East Ferguson, Suite 1000
Tyler, TX 75702
Telephone: (903) 596-9911
Facsimile: (903) 596-9922
megazette@suddenlink.com
COUNSEL FOR APPELLANT,
J. MARK SWINNEA
42
Certificate of Service
The undersigned certifies that a copy of the above and foregoing
document was served upon counsel for Appellees in accordance with the
applicable Texas Rules of Civil Procedure on this the 11th day of May, 2015, on
the following:
Via email drace@icklaw.com
Deborah Race
Ireland, Carroll & Kelley, P.C.
6101 S. Broadway, Suite 500
Tyler, TX 75703
Via email mahatchell@lockelord.com
Mike A. Hatchell
Locke Lord, LLP
100 Congress Avenue, Suite 300
Austin, TX 78701
Via email randerson@gillenanderson.com
Roger W. Anderson
Gillen & Anderson
613 Shelley Park Plaza
Tyler, TX 75701
/s/ Greg Smith
Greg Smith
43
CERTIFICATE OF COMPLIANCE
1. This brief complies with the type-volume limitation of TEX. R. APP. P.
9.4 because it contains 8,668 words, excluding the parts of the brief
exempted by TEX. R. APP. P. 9.4(i)(2)(B).
2. This brief complies with the typeface requirements of TEX. R. APP. P.
9.4(e) because it has been prepared in the proportionally spaced
typeface using Word Perfect X5 in 14 point Times New Roman font.
Dated: May 11, 2015.
/s/ Gregory D. Smith
GREGORY D. SMITH
44
No. 12-14-00288-CV
In the Twelfth Court of Appeals
Tyler, Texas
J. MARK SWINNEA
Appellant
v.
ERI CONSULTING ENGINEERS, INC.
AND LARRY SNODGRASS
Appellees
Appealed from the 114th Judicial District Court
Smith County, Texas
APPENDICES
A. Amended Judgment
B. Amended Additional Findings of Fact
C. Excerpt from Appellant’s Original Brief
D. Excerpt from Response to Petition for Review in Cause No. 12-0241