Opinion

Opinion issued May 8, 2003

In The

Court of Appeals

For The

First District of Texas

NO. 01-02-00106-CV

____________

IP PETROLEUM COMPANY, INC., Appellant

V.

WEVANCO ENERGY, L.L.C.; DAVID L. NEAL,

INDIVIDUALLY AND AS ADMINISTRATOR

OF THE ESTATE OF FRANCES NEAL;

MARK SCHOOMAKER; JANE SCHOOMAKER;

BONNIE VAUGHAN; AND MARTIN PHILLIPS, Appellee s

* * *

WEVANCO ENERGY, L.L.C.; DAVID L. NEAL,

INDIVIDUALLY AND AS ADMINISTRATOR

OF THE ESTATE OF FRANCES NEAL;

MARK SCHOOMAKER; JANE SCHOOMAKER;

BONNIE VAUGHAN; AND MARTIN PHILLIPS, Appellants

V.

IP PETROLEUM COMPANY, INC., Appellee

On Appeal from the 129th District Court

Harris County, Texas

Trial Court Cause No. 99-24160

O P I N I O N

A jury found that IP Petroleum Company, Inc., appellant, was grossly negligent

when it breached its contract with Wevanco Energy, L.L.C.; David L. Neal,

Individually and as Administrator of the Estate of Frances Neal; Mark Schoomaker;

Jane Schoomaker; Bonnie Vaughan; and Martin Phillips (collectively, “the

plaintiffs”). In 11 points of error, IP argues that it did not breach the contract and the

award of lost profits and attorneys’ fees was improper. The plaintiffs appeal the trial

court’s refusal to award prejudgment interest on purely economic damages. We

reverse and render judgment that the plaintiffs take nothing.

Factual and Procedural Background

The Kerans Theory

In 1993, Dr. Don Snyder read a scientific article in an issue of a professional

association bulletin. The article, entitled “Karst-Controlled Reservoir Heterogeneity

in Ellenburger Group Carbonates of West Texas,” was written by a geologist, Charles

Kerans. It proposed an unconventional new approach to drilling for oil in West

Texas.

The article was based on a theory of “karsting,” or cave formation, in the

Ellenburger Formation in West Texas. According to the Kerans theory, millions of

years ago, caves were formed in West Texas and were slowly filled with sediment.

Over time, new rock was formed on top of the caves, collapsing the roofs of the caves

and slowly burying the collapsed caves far below the surface. Kerans theorized that

the buried, collapsed caves created three distinct strata in the Ellenburger

Formation—a “cave roof” zone, a “cave fill” zone, and a “cave floor” zone. Both the

cave roof and cave floor zones contain oil, Kerans opined, but existing wells had

tapped only the oil in the cave roof zone. According to Kerans, if oil wells were

drilled deeper into the Ellenburger Formation, through the cave roof zone and the

unproductive cave fill zone, those wells might produce oil if they tapped into a

productive area of the cave floor zone.

The Kerans theory marked a significant departure from the conventional

approach to drilling in the Ellenburger Formation. The conventional approach,

known as the “scratch and sniff” method, was to drill only to the very top of what

Kerans called the cave roof zone and siphon off any oil. The concern was that if a

well was drilled any deeper, it would be inundated by a zone of water.

The Millard E-2 Well

Dr. Snyder decided to test the Kerans theory on the Millard E-2 well in the

Penwell Field in Ector County. In 1955, Phillips Petroleum Company had drilled the

Millard E-2 to a total depth of 8600 feet—just a few hundred feet short of where

Kerans theorized the oil-rich cave floor zone might be found. Dr. Snyder believed

that the Millard E-2 presented an opportunity to test the Kerans theory at relatively

low cost. Phillips executed a “farmout agreement” with Dr. Snyder, allowing him to

deepen the well.

The Investors

Dr. Snyder approached Richard Reeve, the owner of Cleveland Oil Company.

The two men had previously worked together on several projects. Cleveland Oil paid

Snyder $40,000, and Reeve agreed to have Cleveland Oil find investors in exchange

for a four percent overriding royalty interest. Cleveland Oil did not have to pay any

of the drilling costs, but would receive four percent of the profits.

The promotional materials Cleveland Oil sent to prospective investors

indicated that “this is a wildcat test.”

The materials also indicated that “mechanical

risk is present in re-entries.” This risk disclosure was made because the Millard E-2

had been abandoned for 50 years and it was impossible to predict how badly the well

had deteriorated.

Frank Cox, the managing member of Wevanco Energy, L.L.C. had invested

with Reeve in the past, and Cox decided that Wevanco would invest in the Millard

E-2. Cox’s accountant, David Neal, also invested, as did several of Neal’s friends

and family members.

Selection of IP Petroleum

Snyder, Reeve, and Cox chose IP as the operator of the well. Snyder presented

the proposal to Dr. Mike Senich, a project geologist at IP. Dr. Senich reviewed the

promotional materials and found one sentence in the solicitation letter to be of

particular interest—“Other than for faulting, the Cave Roof is thought to be

reasonably continuous across a field, while the Cave Floor zones are more

heterogeneous much like Permian age rock.” Dr. Senich testified that he understood

this to mean that if the cave floor contained any oil at all, it might be productive in

some areas but unproductive in others. He estimated that the chances of success for

the Millard E-2 were one in ten, or possibly one in five.

Scott Nonhof, an engineer, conducted a petroleum engineering analysis on the

well. Nonhof’s handwritten notes indicate: “*Bottom Line - Don’t have any

production data worth a flip. . . . This is a WILDCAT not supported by Production

Data but risk to reward is very high. Supper [ sic ] low cost to do reentry.”

IP agreed to participate, and IP and Cleveland Oil signed a participation letter

agreement that described the objective of the project to “deepen the Phillips

Petroleum Millard E #2 from its current TD of 8626' to +/- 9000' to test the

Ellenburger Cave Floor Zone.” IP also agreed to pay 50 percent of the drilling costs,

in exchange for a 50 percent share of the profits if the project were to succeed.

The Joint Operating Agreement

Before drilling began, Cleveland Oil, IP, and all the investors executed a

comprehensive Joint Operating Agreement (JOA). The JOA is a form contract

promulgated by the American Association of Petroleum Landmen and is used

throughout the industry. The two provisions of the JOA that are at issue in this case

provide as follows:

[IP, as the operator would] continue the drilling of the well with due

diligence to a depth of 9125' below the surface of the ground or a depth

sufficient to test the Lower Ellenburger Formation, whichever is lesser,

unless granite or other practically impenetrable substance or condition

in the hole, which renders further drilling impractical, is encountered at

a lesser depth, or unless all parties agree to complete or abandon the

well at a lesser depth.

. . . .

[IP] shall have no liability as Operator to the other parties for losses

sustained or liabilities incurred, except such as may result from gross

negligence or willful misconduct.

The Drilling

On December 3, 1997, IP began drilling the Millard E-2, and, as warned in the

promotional materials, IP encountered mechanical difficulties that ultimately

increased the costs of drilling to $383,000, instead of $282,625 as originally

projected. IP paid all drilling expenses as they were incurred, expecting a pro rata

reimbursement from the other investors in accordance with the JOA.

On the evening of December 31, 1997, Reeve, Senich, and Snyder were losing

hope because they were nearing the target depth, and there were no signs of oil. At

about 10 p.m., the mudlogger approached the three men and asked what they wanted

him to do with the oil and gas “shows” in the sample.

Dr. Senich testified he was

surprised to have had shows at this depth—he thought they had already drilled too

deep and were past the area where he expected to find oil and gas. Likewise, Snyder

testified he thought they had a dry hole “because we had drilled past the point that I

had predicted that we would encounter this lower collapse zone.”

Dr. Senich

testified that, in general, operators know that it is critical not to drill past the spill

point because, once a well taps into water, it will produce only water and not oil. Dr.

Snyder was convinced, based on the Kerans theory, that the well was already past its

spill point, and Dr. Senich also thought it was too deep. Most of IP’s employees

testified that the Millard E-2 was drilled to a depth sufficient to test the Lower

Ellenburger, but the plaintiffs’ experts testified to the contrary.

The Agreement to Complete the Well

The shows were good news, but they presented a dilemma. In order to run a

test and determine whether the shows actually indicated significant quantities of oil,

it would be necessary to set pipe to reinforce the side of the well hole. Setting pipe

would narrow the hole, and because of the depth and the age of Millard E-2, the hole

was narrow already. After a test was run and the hole was narrowed, it would remain

physically possible to deepen the well further, but additional drilling would be

pointless. By then, the well would be so narrow that it would be virtually impossible

to extract oil from the well in paying quantities.

Cox consulted with Neal and then urged Dr. Senich to run the test immediately.

Dr. Senich testified that Cox and Snyder “wanted to stop immediately” at about the

9000' mark, but Senich wanted to drill a little bit further to allow room for the tools

that test the well. IP ultimately drilled the well to 9015'.

IP delivered “completion letters” to each investor, which stated in pertinent part

that “IP . . . hereby recommends . . . attempting an open hole completion in the

Ellenburger formation in the interval of 8,947' - 9,010' . . . . Should you elect to

participate, please evidence your election in the space provided.” Each investor

signed the completion letters. Cox, however, testified that he thought the E-2 could

still be deepened if IP had not reached the Lower Ellenburger. David Neal testified

that he signed the letters because he understood them to mean IP had “found the

zone.”

The tests indicated that the well would produce three percent oil and 97 percent

water, a mix that would not produce oil in paying quantities.

The Aftermath

Upon hearing the test results, Cox demanded that IP drill the well deeper.

Glynn Broussard, a land man and team leader for IP, testified that Cox refused to take

“no” for an answer and, at one point, Broussard told Cox that “IP felt like we had a

dry hole and it was—we were done and we weren’t going to pursue drilling the well

any deeper. If he wanted to drill the well deeper, he had every right to.” Neither

Wevanco nor any other investor exercised its right under the JOA to take over the

well. Cox, however, testified that IP misled him into believing IP intended to deepen

the well.

In July 1998, IP gave notice of its intent to plug and abandon the well. In

accordance with the JOA, at that time, the plaintiffs were given an election either to

agree to the abandonment or to disagree and take over the well. The plaintiffs refused

to select either option. Thus, the plaintiffs had at least two opportunities—when the

completion was proposed and when the abandonment was proposed—to deepen the

Millard E-2 themselves and to retain all the profits. They rejected both opportunities.

The plaintiffs argued that they had no motivation to produce oil from the

Millard E-2 without a P-4—a regulatory form filed with the Railroad Commission

that allows an operator to sell oil from a well. The P-4 on the Millard E-2 gave IP the

sole authority to sell oil on the well. The plaintiffs contended that IP was

“intentionally holding the rights to the well hostage” until the plaintiffs reimbursed

IP for the drilling expenses it believed it was due under the JOA.

The Trial

The plaintiffs sued IP, alleging that IP breached its alleged obligation to further

deepen the Millard E-2; and IP counterclaimed, seeking reimbursement for its drilling

expenses under the JOA. The jury found that IP failed to drill to a depth sufficient

to test the Lower Ellenburger Formation and that the failure was the result of gross

negligence or willful misconduct. The jury also found that IP had breached the

participation letter agreement and that none of the plaintiffs had agreed to the

completion of the wells.

The jury found that, had IP deepened the Millard E-2 to a sufficient depth, the

plaintiffs would have realized a profit of $534,274. The jury then found that, had the

Millard E-2 been a success, the plaintiffs would have realized an additional profit of

$3,560,000. The jury also awarded $1,424,000 in attorneys’ fees through trial and

$178,000 in appellate attorneys fees.

JOA Breach

In issue four, IP asserts that the evidence was legally and factually insufficient

to support the jury’s finding that IP’s alleged failure to drill to a sufficient depth

under the JOA was the result of gross negligence or willful misconduct.

Exculpatory Clause

The exculpatory clause in the JOA provides that IP “shall have no liability as

Operator to the other parties for losses sustained or liabilities incurred, except such

as may result from gross negligence or willful misconduct.” The plaintiffs contend

that this clause does not apply in breach of contract situations. We disagree.

Generally, exculpatory clauses in a contract are utilized to exempt one party

from future liability for negligence. See Allright, Inc. v. Elledge , 515 S.W.2d 266,

267 (Tex. 1974). We have found only two cases discussing exculpatory clauses

exempting a party from liability for breach of contract . See Cone v. Fagadau Energy

Corp. , 68 S.W.3d 147 (Tex. App.—Eastland 2001, pet. filed); Abraxas Petroleum

Corp. v. Hornburg , 20 S.W.3d 741 (Tex. App.—El Paso 2000, no pet.).

In Cone , the court was faced with a provision in a JOA identical to the one that

we have before us in this case. See Cone , 68 S.W.3d at 154 . In the operating

agreement, the language requiring a showing of gross negligence and willful

misconduct immediately followed the provision requiring the operator to conduct its

operations in a good and workmanlike manner. Id . at 155. Cone’s complaints,

however, did not allege the failure of the operator to operate in a good and

workmanlike manner. Id . Therefore, the Eastland Court of Appeals held that the

exculpatory clause did not pertain to Cone’s breach of contract claims against the

operator. See id.

In Abraxas , the court determined that an exculpatory clause provision identical

to the one before us was unambiguous. See Abraxas Petroleum Corp. , 20 S.W.3d at

759 . The court concluded that there was some evidence that the parties did not intend

the exculpatory clause to apply to any and all claims because the clause was placed

in an article which concerned the operator’s authority to conduct operations in the

contract area. Id . More significantly, the operator’s limitation of liability was linked

directly to imposition of the duty to act as a reasonably prudent operator, which

strictly concerns the manner in which the operator conducts drilling operations on the

lease. Id . Accordingly, the El Paso Court of Appeals concluded that the exculpatory

clause was limited to claims based upon an allegation that the operator failed to act

as a reasonably prudent operator and did not apply to a claim that it breached the

JOA. Id .

Here, in the breach of contract section of their second amended original

petition, the plaintiffs alleged the following:

23.Defendant further breached its agreement with Plaintiffs by

failing to drill and deepen the oil and gas well in question to the

Contract Depth as defined in the Farmout Agreement, Joint

Operating Agreement, and the Participation and Purchase and

Sale Agreement. Specifically, with regard to the contract depth,

Defendant as successor to the Cleveland Oil Company, had the

duty to (1) prosecute the re-entry of the test well to it (sic)

objective depth (as described in Exhibit “A” to the Participation

and Purchase and Sale Agreement) with due diligence and in a

good and workmanlike manner; and (2) accept responsibility for

losses sustained by Plaintiffs resulting from Defendant’s gross

negligence or from breach of its obligations under the

Participation and Purchase Sale Agreement.

Unlike in Cone and Abraxas , the plaintiffs here claimed IP failed to conduct

operations in a good and workmanlike manner; therefore, the exculpatory clauses in

the JOA applied, and the plaintiffs had to establish that IP was grossly negligent or

acted with willful misconduct when it breached the contract.

Standard of Review

In reviewing a legal sufficiency challenge, we must view the evidence in a light

that tends to support the finding of the disputed fact and disregard all evidence and

inferences to the contrary. Weirich v. Weirich , 833 S.W.2d 942, 945 (Tex. 1992). If

more than a scintilla of evidence exists, the evidence is legally sufficient.

Browning-Ferris, Inc. v. Reyna , 865 S.W.2d 925, 928 (Tex. 1993). To rise above a

scintilla, the evidence offered to prove a vital fact must do more than create a mere

surmise or suspicion of its existence. Kindred v. Con/Chem, Inc. , 650 S.W.2d 61, 63

(Tex. 1983). In determining legal sufficiency, we consider whether the evidence rises

to a level that would enable reasonable and fair-minded people to differ in their

conclusions. Transp. Ins. Co. v. Moriel , 879 S.W.2d 10, 25 (Tex. 1994).

Gross Negligence or Willful Misconduct

The jury affirmatively answered the following question:

Did IP Petroleum Company, Inc.’s failure to drill to a depth sufficient

to test the Lower Ellenburger Formation result from gross negligence or

willful misconduct?

“Gross negligence or willful misconduct” means:

(a)a specific intent by IP Petroleum Company Inc. to cause

substantial injury to Plaintiffs; or

(b) an act or omission by IP Petroleum Company, Inc.,

(i)which, when viewed objectively from the standpoint

of IP Petroleum Company, Inc. at the time of its

occurrence, involved an extreme degree of risk,

considering the probability and magnitude of the

potential harm to others; and

(ii)of which IP Petroleum Company, Inc. had actual,

subjective awareness of the risk involved, but

nevertheless proceeded with conscious indifference

to the rights, safety, or welfare of others.

This was a significant finding because, under the JOA, for IP to be found liable, the

jury had to have found that IP was grossly negligent or acted with willful misconduct.

To support a finding of gross negligence, there must be evidence that IP had

“actual subjective knowledge of an extreme risk of serious harm.” Moriel , 879

S.W.2d at 22 . The magnitude of the risk is judged from the viewpoint of the

defendant at the time the events occurred. Id . at 23. The harm anticipated must be

extraordinary harm, not the type of harm ordinarily associated with breaches of

contract or even with bad faith denials of contract rights; harm such as “death,

grievous physical injury, or financial ruin.” Id . at 24; Bluebonnet Sav. Bank, F.S.B.

v. Grayridge Apartment Homes, Inc. , 907 S.W.2d 904, 911 (Tex. App.—Houston [1st

Dist.] 1995, writ denied).

Here, the plaintiffs, who were seeking monetary lost profits, summarize the

evidence to support the jury’s finding of gross negligence as follows:

IP apparently did not prepare a written drilling plan for the E-2, which

is the normal procedure, and could not explain its failure to do so.

IP got stuck during the drilling operation because of its failure to use

drilling mud and spent over $100,000 trying to get unstuck.

IP did not run a drill stem test on the E-2, which many witnesses

testified would be the customary, reasonable and prudent thing to do and

Wevanco’s witnesses testified would have shown that the well was not

in the Lower Ellenburger.

IP failed to tell Cox and Wevanco it thought setting pipe would mean

the E-2 could not be deepened if it were not productive.

IP told Cox and others that it was considering deepening the E-2 well

when it had absolutely no intention of doing so.

IP allowed the farmout to expire while it was still operating, discovered

that fact, and did not do anything about it, requiring Cox to obtain a

second farmout to protect the investors’ rights in the E-2.

IP, against the advice of Cox, unsuccessfully attempted to set an

inflatable bridge plug down hole.

IP obtained the P-4 on the well, which the jury could reasonably

conclude was at best intended to hold up Wevanco over the issue of the

unpaid drilling expenses and at worst a deliberate attempt to prevent

Cox from deepening the E-2.

While this may be legally sufficient evidence of negligence, this evidence does

not rise to the level of gross negligence as defined in the jury charge. Nor was there

evidence of willful misconduct. “Throughout the history of Texas law, ‘wilful

misconduct’ has been defined in a manner akin to ‘gross negligence.’” Marshall

Indep. Sch. Dist. v. U.S. Gypsum Co. , 790 F. Supp. 1291, 1300 (E.D. Tex. 1992).

Thus, as the jury instruction indicated, a finding of willful misconduct required

evidence of “a specific intent by IP Petroleum Company Inc. to cause substantial

injury to Plaintiffs.” We hold that the evidence is legally insufficient to support the

jury’s finding. We sustain issue four.

JOA

In issue one, IP argues the plaintiffs’ claim for breach of the JOA was without

merit as a matter of law. The JOA states that IP “shall have no liability as Operator

to the other parties for losses sustained or liabilities incurred, except such as may

result from gross negligence or willful misconduct.”

Having held there was no evidence of gross negligence or willful misconduct,

we sustain IP’s issue one.

Because we have sustained IP’s issues one and four, which are dispositive of

the plaintiffs’ claims that IP breached the JOA, we need not consider IP’s issues two,

three, five, and six as those issues are moot.

Participation Letter Agreement

In issue seven, IP contends that Texas law precludes any liability to the

plaintiffs under the participation letter agreement.

The jury affirmatively answered the following question:

Did IP Petroleum, Inc. fail to comply with the following agreement?

Deepen the Phillips Petroleum Millard E #2 from its

current TD of 8626' to +/- 9000' to test the Ellenburger

Cave Floor Zone. . . . The well will be deepened from the

depleted Ellenburger Cave Roof, through the dense

Ellenburger Cave Fill interval, then test the objective, the

Ellenburger Cave Floor.

The “agreement” from which the excerpt was taken was the participation letter

agreement—a contract entered into between IP and Cleveland Oil.

IP argues that,

for two reasons, this was an improper question to submit to the jury: (1) the plaintiffs

were not parties to the participation letter and cannot seek to enforce it, and (2) the

participation letter agreement was superseded by the JOA.

Parties to the Agreement

The participation letter agreement was drafted by Cleveland Oil and signed by

a land manager from IP. The plaintiffs contend that they signed essentially identical

agreements with Cleveland Oil, but they were unable to produce any copies of the

signed agreements at trial. They did, however, produce an unsigned copy which was

admitted into evidence.

Generally, a plaintiff may not enforce a contract to which he is not a party.

Stine v. Stewart , 80 S.W.3d 586, 589 (Tex. 2002). However, a third party may

recover on a contract made between other parties only if the parties intended to secure

a benefit to that third party, and only if the contracting parties entered into the

contract directly for the third party’s benefit. Id . “The intention to contract or confer

a direct benefit to a third party must be clearly and fully spelled out or enforcement

by the third party must be denied.” MCI Telecomm. Corp. v. Texas Utils. Elec. Co. ,

995 S.W.2d 647, 651 (Tex. 1998). Any doubt is resolved against a finding that the

party was intended to be a third-party beneficiary. Mandell v. Hamman Oil & Ref.

Co. , 822 S.W.2d 153, 161 (Tex. App.—Houston [1st Dist.] 1991, writ denied). To

determine the parties’ intent, courts must examine the entire agreement when

interpreting a contract and give effect to all the contract’s provisions so that none are

rendered meaningless. Stine , 80 S.W.3d at 589 .

Shortly after IP signed the participation letter agreement with Cleveland Oil,

Richard Reeve, Cleveland Oil’s owner, sent IP a letter outlining the “burden

clarification of the [Penwell] prospect (as described in that participation agreement

dated 10/31/97 between The Cleveland Oil Company, L.L.C. . . . and IP. . . .).” In this

letter, Reeve explains that “IP shall serve as Operator. IP will maintain the same

spirit of operations as would Cleveland, where the Operator is operating for the

benefit of all parties . . . .” Stephen Guidry, IP’s land manager, signed this burden

clarification. We hold that this clarification indicates that the plaintiffs were third-party beneficiaries of the participation agreement between IP and Cleveland Oil.

JOA

IP argues that the participation agreement was superceded by the JOA because

the two agreements contain inconsistent drilling obligations and gross negligence

provisions.

Instruments pertaining to the same transaction may be read together to ascertain

the parties’ intent, even if the parties executed the instruments at different times. Ft.

Worth Indep. Sch. Dist. v. City of Ft. Worth , 22 S.W.3d 831, 840 (Tex. 2000). Only

when the terms of one contract are so inconsistent with those of the other that the two

cannot subsist together is there a presumption that the second superceded the first.

Willeke v. Bailey , 189 S.W.2d 477, 479 (Tex. 1945).

We must examine the two agreements and their respective drilling obligations.

Participation Letter Agreement

JOA

“Deepen the Phillips Petroleum

Millard E #2 from its current TD of

8626' to +/- 9000' to test the

Ellenburger Cave Floor Zone.”

“[IP] shall thereafter continue the

drilling of the well with due diligence

to a depth of 9125' below the surface

of the ground or a depth sufficient to

test the Lower Ellenburger Formation,

whichever is lesser . . . unless all

parties agree to complete or abandon

the well at a lesser depth.”

The participation letter agreement only addresses drilling to a depth necessary to test

the Ellenburger Cave Floor Zone. The JOA, however, authorized IP to stop drilling

at 9125' even if it believed it had not yet reached the Lower Ellenburger Formation.

Furthermore, the JOA authorized IP to stop drilling at a lesser depth if all parties

agreed to complete or abandon the well.

The letter agreement does not allow a consensual completion of the drilling at

any point above the Ellenburger Cave Floor Zone. If the parties had signed the

completion letters with the understanding that IP had not yet reached the Ellenburger

Cave Floor Zone, IP would have been in violation of the participation letter

agreement. As such, the two agreements contain mutually inconsistent terms.

We hold that the JOA superseded the participation letter agreement.

We sustain issue seven.

In issue eight, IP argues that, even under the participation letter agreement, it

is not liable to the plaintiffs.

Having held that the JOA superseded the participation letter agreement, issue

eight is moot.

Damages

In issue nine, IP asserts that the plaintiffs failed to establish lost-profits

damages with “reasonable certainty” where the lost profits damages were based on

(1) a “wildcat” prospect drilled to test a new and unproven scientific theory and (2)

seven additional hypothetical wells. In issue 10, IP contends that the trial court erred

by awarding attorneys’ fees to the plaintiff. In issue 11, IP argues that the trial court

erred by awarding prejudgment interest to the plaintiffs.

Having held that there was legally insufficient evidence to establish that IP

breached the JOA, and having held that the JOA superceded the participation letter

agreement, we hold that the plaintiffs are not entitled to damages, attorneys’ fees, or

prejudgment interest.

We sustain issues 9, 10, and 11.

Future Damages

In their sole point of error, the plaintiffs argue that the trial court erred when

it refused to award prejudgment interest on the future damages awarded for lost

profits.

Damages, in this case, are contingent on the breach of contract finding. We

have held there was legally insufficient evidence to establish that IP breached its

contract.

We overrule the plaintiffs’ sole point of error.

Conclusion

We reverse the judgment of the trial court and render judgment that the

plaintiffs take nothing. We affirm the remainder of the trial court’s judgment.

George C. Hanks, Jr.

Justice

Panel consists of Chief Justice Radack and Justices Nuchia and Hanks.