Alta Mesa Holdings, L.P., Alta Mesa Acquisition Sub, LLC, the Meridian Resource & Exploration LLC Change in Control Severance Plan, and the Meridian Resource & Exploration, LLC v. Steven Ives and Lloyd Delano

Affirmed in Part as Modified, Reversed and Rendered in Part, and Opinion filed

April 14, 2016.

In The

Fourteenth Court of Appeals

NO. 14-14-00739-CV

ALTA MESA HOLDINGS, L.P., ALTA MESA ACQUISITION SUB, LLC, THE

MERIDIAN RESOURCE & EXPLORATION LLC CHANGE IN CONTROL

SEVERANCE PLAN, AND THE MERIDIAN RESOURCE & EXPLORATION,

LLC, Appellants

V.

STEVEN IVES AND LLOYD DELANO, Appellees

On Appeal from the 152nd District Court

Harris County, Texas

Trial Court Cause No. 2011-06887

OPINION

Appellees, Steven Ives and Lloyd Delano, sued appellants, Alta Mesa Holdings,

L.P. (Holdings), Alta Mesa Acquisition Sub, LLC (Acquisition Sub), The Meridian

Resource & Exploration LLC Change in Control Severance Plan (the Severance Plan),

and The Meridian Resource & Exploration, LLC (TMRX), for breach of their

employment agreements as well as claims under the Employee Retirement Income

Security Act (ERISA).1 Appellees sought severance benefits under both their

employment agreements and the Severance Plan. After a bifurcated trial in which the

employment agreement claims were tried to a jury and the ERISA claims were tried to

the bench, the trial court rendered judgment awarding appellees damages on both the

breach of contract and ERISA claims. In three issues and multiple sub-issues,

appellants contend that the trial court erred in awarding appellees damages under the

Severance Plan, damages under the employment agreements, and attorney’s fees under

Chapter 38 of the Texas Civil Practice and Remedies Code. We affirm in part and

reverse and render in part.

I. Background

In 2010, appellees were officers and employees of TMRX, which at the time was

a subsidiary of The Meridian Resource Corporation (Meridian). Appellees both entered

employment agreements with TMRX and were covered by the Severance Plan. In May

2010, Meridian merged into Acquisition Sub, which was itself a subsidiary of Holdings

created for purposes of the merger.2

Both the employment agreements and the Severance Plan permitted appellees to

resign for “Good Reason” and thereafter receive severance benefits. Both men tendered

their resignations on February 1, 2011, citing Good Reason for doing so. They

subsequently asserted that their job responsibilities had been significantly reduced post-

merger, which they contend constituted Good Reason for the resignations under both the

1

29 U.S.C. §§ 1001–1461.

2

Employee-friendly severance plans and employment agreements, such as the ones at issue in

this case, are often used by companies anticipating a change in control in order to retain key executives

during the uncertainty of a potential merger or acquisition. Such agreements are commonly referred to

as “golden parachutes.” See Elloway v. Pate, 238 S.W.3d 882, 887 n.1 (Tex. App.—Houston [14th

Dist.] 2007, no pet.); Greathouse v. Glidden Co., 40 S.W.3d 560, 566 (Tex. App.—Houston [14th

Dist.] 2001, no pet.).

2

Severance Plan and the employment agreements. Appellees filed the present lawsuit on

the same day that they tendered their resignations. Appellants to date have not paid

appellees benefits under either the Severance Plan or the employment agreements.

By its terms, the Severance Plan is administered by a committee, which was

defined to consist of Joseph Reeves, Meridian’s founder and one-time chief executive

officer, and Michael Mayell, Meridian’s president and chief operating officer. The plan

further provided that upon a “Change in Control,” defined so as to include a merger, the

committee would include “such individuals as may be appointed by Joseph Reeves and

Michael Mayell.” It is undisputed that at no point have Reeves and Mayell appointed

anyone else to be on the committee.

Post-merger, TMRX attempted to appoint its new manager, Harlan Chappelle, as

the sole member of the committee. TMRX further attempted to adopt a series of three

amendments to the plan documents. The validity of Chappelle’s appointment and the

three amendments was a principal dispute below and continues to be so in this appeal.

The first amendment, made at the same time as Chappelle’s appointment and

executed by him as TMRX’s manager, redefined committee to mean “one or more

individuals as may be appointed by the Board of Managers of TMRX to serve as the

Committee until such time as removed or replaced by the Board of Managers of TMRX

in its discretion.” The second amendment, purportedly authorized by Chappelle as the

sole member of the new committee, prohibited employees from recovering severance

benefits under both the plan and an employment agreement.3 The third amendment

added claim procedures that included a requirement that a claimant must file a claim

within six months for any benefits he or she contends were not provided in accordance

3

The second amendment specifically stated that

in the event that a Participant is eligible to receive payments and benefits under both (i)

this Plan and (ii) any other severance or change-of-control plan, program, contract, or

agreement . . . then any monetary benefits provided under this Plan will be reduced and

offset by the monetary benefits due and payable from the Other Source.

3

with the plan, as well as review and appeal procedures. Prior to trial, the trial court

granted appellees summary judgment, finding the three amendments void, as they were

not passed in accordance with the amendment procedures in the plan documents.

After the trial court’s summary judgment rulings, Holdings sent letters to Reeves

and Mayell, requesting that they either (1) ratify the three amendments, (2) “issue a Plan

determination [regarding appellees’ claims] as the committee,” or (3) appoint Holdings

as the new committee. At no point, however, did appellants actually file a challenge

with Reeves and Mayell or submit any evidence for their review. Reeves and Mayell

declined to ratify the amendments or name any successors to the committee. Appellants

subsequently requested that the trial court appoint a new, temporary committee to

consider appellees’ claims, which the trial court denied.

Trial proceeded to a jury on the breach of the employment agreements and to the

bench on the claims for severance benefits under the plan. The jury found that TMRX,

Acquisition Sub, and Holdings failed to comply with appellees’ employment

agreements and such failures were not excused by waiver or ratification. The jury

further found Ives was entitled to $276,719 in damages for the breach, and Delano was

entitled to $422,579. The jury also calculated the amount of attorney’s fees incurred by

each appellee in prosecuting the claims.

Regarding claims under the Severance Plan, the trial court entered detailed

findings of fact, including that the Severance Plan, by its terms, created a presumption

in favor of appellees’ assertion of Good Reason for their resignations and at no point did

TMRX file a claim or any evidence with the committee purporting to challenge that

appellees had Good Reason to resign.4 In its conclusions of law, the trial court stated

4

In its definitional section, the plan states: “For purposes of any determination regarding the

existence of Good Reason, any claim by the [appellees] that Good Reason exists shall be presumed to

be correct unless the Company establishes to the Committee by clear and convincing evidence that

Good Reason does not exist.”

4

among other things that appellees “had no obligation under the Severance Plan to

engage in any administrative process beyond the assertion that Good Reason existed”;

the burden of exhausting available administrative remedies was on TMRX, and if

TMRX wanted to challenge the claim of Good Reason, it needed to do so before the 30-

day “payment deadline” had passed; and when TMRX failed to take any action to

challenge appellees’ assertion of Good Reason, the presumption favoring appellees

became conclusive. The trial court further concluded that it was without authority to

replace Reeves and Mayell with a new, temporary committee. The trial court

additionally determined that TMRX and the Severance Plan owed Ives $267,188.58 and

DeLano $399,967.12 on their ERISA claims and awarded appellees their attorney’s fees

expended in pursuing the ERISA claims.

In its final judgment, the trial court assessed damages and attorney’s fees in

keeping with the verdict and the findings of fact and conclusions of law, except that the

court did not award attorney’s fees on the breach of contract cause of action against

Holdings, apparently based on our opinion in Fleming & Associates, L.L.P. v. Barton,

425 S.W.3d 560, 574-75 (Tex. App.—Houston [14th Dist.] 2014, pet. filed) (holding that

attorney’s fees are not available in a breach of contract cause of action against a

partnership under Texas Civil Practice and Remedies Code section 38.001(8)).

II. ERISA Claims

In their first issue, appellants contend the trial court erred in awarding appellees

benefits under the Severance Plan. Specifically, appellants contend that the court

improperly (1) struck the three plan amendments as void, (2) rewrote the plan to impose

a 30-day deadline on TMRX to challenge appellees’ claims, and (3) refused to appoint a

new, temporary committee to consider appellees’ claims rather than awarding benefits.

We will begin by addressing the propriety of the three amendments and then will turn to

the 30-day deadline and proposed temporary committee.

5

A. The Three Amendments

The trial court struck all three attempted plan amendments as not properly

adopted in accordance with the terms of the plan. Under ERISA, severance plans must

provide procedures for amendment and these procedures must be followed for

amendments to be effective. See 29 U.S.C. § 1102(b)(3); Curtiss-Wright Corp. v.

Schoonejongen, 514 U.S. 73, 75 (1995); see also Depenbrock v. Cigna Corp., 389 F.3d

78, 82 (3rd Cir. 2004) (“[A]n amendment is ineffective if it is inconsistent with the

governing instruments.”); Confer v. Custom Eng’g, 952 F.2d 41, 43 (3rd Cir. 1991)

(“Only a formal written amendment, executed in accordance with the Plan’s own

procedure for amendment, could change the Plan.”).5 The Severance Plan in the present

case required amendments to be “by a written instrument that is authorized by the

committee.” Appellants do not dispute that the committee of Reeves and Mayell

declined to adopt the proposed amendments. The real dispute then is whether TMRX

had authority under the plan to change the makeup of the committee post-merger, thus

allowing the new committee to enact the amendments.

Section 2.1 of the plan defines the committee to mean “prior to a Change in

Control [i.e., in this case, the merger], Joseph Reeves and Michael Mayell” and “after a

Change in Control, . . . such individuals as may be appointed by Joseph Reeves and

Michael Mayell.” Appellees argue that since it is undisputed that Reeves and Mayell

neither approved of the three amendments nor appointed anyone else to the committee

who could have approved the amendments, the attempted amendments were void. We

agree.

In support of their position that TMRX retained authority to appoint a new

5

Because ERISA is a federal statute, we are bound by the precedents of the United States

Supreme Court and give strong consideration to opinions of the federal appellate courts. Sharp v.

Caterpillar, Inc., 932 S.W.2d 230, 235 (Tex. App.—Austin 1996, writ denied); see also Penrod

Drilling Corp. v. Williams, 868 S.W.2d 294, 296 (Tex. 1993).

6

committee, appellants point to section 10(b) of the Severance Plan which provides that

“the power to appoint the Committee . . . shall be exercised by TMRX.” Based on this

language, appellants contend that TMRX could appoint new committee members when

Reeves and Mayell failed to do so. They further assert that in holding otherwise, the

trial court rendered section 10(b) meaningless, citing Shell Oil Co. v. Khan, 138 S.W.3d

288, 292 (Tex. 2004) (“We construe contracts as a whole in an effort to harmonize and

give effect to all the provisions of the contract so that none will be rendered

meaningless.”).

Article 10, entitled “Adoption of Plan by Affiliates,” concerns the possible

adoption of the Severance Plan by entities affiliated with TMRX. Section 10(a) permits

such affiliates to adopt the plan. Section 10(c) states that, for ERISA purposes, the plan

when adopted by affiliates shall still constitute a single plan rather than a separate plan

for each affiliate. Section 10(b), the one relied upon by appellants, states in full: “The

provisions of the Plan shall apply separately and equally to each adopting Affiliate in

the same manner as is expressly provided for the Company, except that the power to

appoint the Committee and the power to amend or terminate the Plan shall be exercised

by TMRX.”

Appellants do not dispute that the only way provided in the plan for TMRX to

amend the plan was by “a written instrument that is authorized by the Committee,” as

provided in article IX; however, they nonetheless contend section 10(b) permits TMRX

to change the makeup of the committee. We disagree with appellants’ construction.

The plan contains no suggestion that TMRX could change the membership of the

committee after a merger other than as expressly provided, through the actions of

Reeves and Mayell. Just as TMRX could act only through the committee to enact any

plan amendments, it could act only through Reeves and Mayell to name a new

committee post-merger. Section 10(b) does not change this.

The better reading of section 10(b) is that it prevents “adopting affiliates” from

7

amending the plan or appointing a new or different committee. Section 10(b) has no

application to the situation here, where there has been a merger rather than an adoption

by an affiliate; this is highlighted by the fact the plan already provides specific

instructions regarding the makeup of the committee after a merger. See McCreary v.

Bay Area Bank & Trust, 68 S.W.3d 727, 731-32 (Tex. App.—Houston [14th Dist.]

2001, pet. dism’d) (“One general rule of construction is that when there is a conflict

between two provisions, the specific provision controls over the general provision.”).6

Appellants complaints about the attempted plan amendments are without merit.

Because TMRX was without authority to amend the plan, the trial court properly struck

the attempted amendments as void. See 29 U.S.C. § 1102(b)(3); Schoonejongen, 514

U.S. at 75; Confer, 952 F.2d at 43.

B. 30-Day Deadline & New Temporary Committee

Appellants next contend that even assuming the amendments were not valid, the

trial court erred in (1) implying a 30-day deadline for TMRX to contest appellees’

benefits claims and (2) refusing to appoint a new temporary committee for the purpose

of determining appellees’ rights to benefits. In discussing these contentions, it is

important to note findings that appellants do not dispute. While appellants argue that

the trial court erred in holding that TMRX waived any contest to appellees’ assertion of

6

Appellants further argue that if TMRX did not have the authority to appoint new committee

members, the plan would have been left in the impossible situation of having no active committee

when Reeves and Mayell failed to appoint successors post-merger. Appellants suggest that this would

have caused TMRX to breach its fiduciary duty as plan administrator. These arguments, however, are

speculative, incomplete, and multifarious. Except to the extent that they are repeated in appellants’

argument that the trial court should have appointed a new, temporary committee to consider appellees’

benefits claims, we decline to address the merits of these contentions. See Tex. R. App. P. 38.1(i)

(“The brief must contain a clear and concise argument for the contentions made, with appropriate

citations to authorities and to the record.”); Jones v. Villages of Town Ctr. Owner’s Ass’n, No. 14-12-

00306-CV, 2013 WL 2456873, at *6 (Tex. App.—Houston [14th Dist.] June 6, 2013, pet. denied) (“If

the appellate court concludes that a point of error is multifarious, it may refuse to review or it may

consider the point of error if it can determine with reasonable certainty the error about which complaint

is made.”); In re A.R., 236 S.W.3d 460, 477 (Tex. App.—Dallas Oct. 19, 2007, no pet.) (mem. op.)

(holding that issue could not be considered because it was multifarious and inadequately briefed).

8

Good Reason by not submitting such contest to the committee within 30 days,

appellants do not dispute that (1) appellees asserted Good Reason for resigning in their

resignation letters and (2) TMRX never submitted a claim or took any other action with

the Reeves and Mayell committee contesting appellees’ assertion of Good Reason.7 As

will be explained, these other findings, fully supported by the record, render the trial

court’s finding of a 30-day deadline irrelevant.8 Additionally, appellees have shown no

grounds requiring appointment of a new, temporary committee by the trial court.

Under article II of the unamended plan, any claim of Good Reason by a

participant ”shall be presumed to be correct unless the Company establishes to the

Committee by clear and convincing evidence that Good Reason does not exist.”9 Thus,

as the trial court concluded, once appellees submitted their resignation letters citing

Good Reason and seeking benefits, the burden shifted to TMRX to dispute those claims

with the committee. On the same day that he received appellees’ letters, Chappelle,

TMRX’s manager, replied in letter form, stating that he accepted their resignations but

7

Appellants, of course, contend that TMRX validly changed the makeup of the committee and

disputed appellees’ claims for benefits with the newly installed committee. As detailed in the prior

section of this opinion, however, TMRX’s attempt to change the makeup of the committee was

ineffective. Appellants do not dispute that they never submitted a claim or took any other action with

the Reeves and Mayell committee contesting appellees’ assertion of Good Reason.

8

Unchallenged findings of fact are binding on an appellate court unless the contrary is

established as a matter of law or there is no evidence to support the finding. McGalliard v. Kuhlmann,

722 S.W.2d 694, 696 (Tex. 1986). However, even if appellants had challenged these findings, they

were supported by legally and factually sufficient evidence, as presented below. See generally City of

Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005) (addressing standards of review for legal

sufficiency of the evidence); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (standards of review for

factual sufficiency).

9

Article II additionally states that in a claim of Good Reason, “any position taken by the

Participant shall be presumed to be correct unless the Company establishes to the Committee by clear

and convincing evidence that such position is not correct.” As set forth above, in its findings of fact

and conclusions of law, the trial court noted that under the plan, a presumption was created that

favored appellees “declaration of resignation for Good Reason,” appellees had no obligation to engage

in any administrative process beyond their assertion that Good Reason existed, and TMRX carried the

burden of exhausting any administrative process. The court additionally concluded that because

TMRX failed to take any action to challenge the assertion of Good Reason, the plan’s presumption was

conclusive.

9

also that “the Company reserves its right to invoke any relevant section under [the] Plan,

including the separation for cause provisions.” Appellants, however, do not assert that

TMRX ever followed up by contesting the assertion of Good Reason with the

committee of Reeves and Mayell.

The record further supports the conclusion that TMRX never submitted a claim or

took any other action with the Reeves and Mayell committee contesting appellees’

assertion of Good Reason. As discussed above, in November 2013, Holdings sent a

letter to Reeves and Mayell requesting that they either (1) ratify the three amendments,

(2) “issue a Plan determination as the committee,” or (3) appoint Holdings as the new

committee. This letter does not constitute a challenge by TMRX to appellees’ assertion

of Good Reason for several reasons, including that (1) it was on behalf of Holdings and

not TMRX; (2) although it asked, as one alternative, that Reeves and Mayell make a

determination under the plan, it does not actually challenge appellees’ assertion of Good

Reason in any manner or suggest what determination the committee should make; and

(3) it contains an offer to send “an administrative record” only if Reeves and Mayell

decided to issue a determination. In response, Reeves and Mayell declined to take any

of the proposed actions; however, such response did not convert the letter into a

challenge to appellees’ claims for benefits. Appellants do not cite any other evidence

that they contested appellees’ assertion of Good Reason.10 As the trial court found,

under the terms of the Severance Plan, because TMRX failed to establish the contrary

with the committee by clear and convincing evidence, appellees’ assertion of Good

Reason for resigning was presumed correct.11 The record supports this conclusion

10

Prior to the trial court’s summary judgment ruling, which determined the three attempted

amendments were invalid, appellants apparently had operated under the assumption that the

amendments were valid. Under the proposed amendments, TMRX was not required to contest

appellees’ benefits claims with the committee of Reeves and Mayell and, thus, they had not done so.

11

As the trial court stated: “Because TMRX failed to file any claim or otherwise take any

action with the Committee challenging the Plaintiff’s Good Reason, the Severance Plan’s presumption

that Plaintiffs’ resigned for Good Reason is conclusive.”

10

regardless of the trial court’s additional finding that if TMRX had wanted to contest the

assertion of Good Reason, it needed to do so within 30 days. Therefore, appellants’

challenge to that finding is irrelevant. See, e.g., Norred v. Hartsfield, 360 S.W.3d 583,

586-87 (Tex. App.—Dallas 2011, no pet.) (disregarding challenge to trial court’s

finding where finding had no effect on the judgment); Cooke Cty. Tax Appraisal Dist. v.

Teel, 129 S.W.3d 724, 731 (Tex. App.—Fort Worth 2004, no pet.) (same).

Appellants additionally assert, however, that filing a challenge with the

committee of Reeves and Mayell would have been futile because the pair had exhibited

an unwillingness to act as the committee. On that basis, appellants argue that the trial

court should have appointed a new, temporary committee to consider whether appellees

were entitled to benefits, and they request that this court remand the case back to the

trial court with instructions to appoint a new, temporary committee. While courts

applying ERISA have recognized the possibility that seeking recourse with the

appropriate administrative body under a plan might become futile under certain

circumstances, the remedy provided in such cases is not court appointment of a new

administrative body, but an ability to seek redress in court without having first

exhausted the administrative process. See, e.g., Hall v. Nat’l Gypsum Co., 105 F.3d

225, 232 (5th Cir. 1997); B & S Welding LLC Work Related Injury Plan v. Oliva-

Barron, 447 S.W.3d 425, 429 (Tex. App.—Dallas 2014, no pet.). Thus, appellants’

ERISA-based arguments that they were, and are, entitled to appointment of a new,

temporary committee are not well-founded.12 Appellants exercised the remedy to which

12

Appellants additionally argue that without a determination by the committee, there is nothing

for this court to review under the appropriate “arbitrary and capricious” standard because appellees

failed to exhaust the available administrative remedies. See generally Napoli v. Johnson & Johnson,

Inc., 624 Fed. App’x 861, 863 (5th Cir. 2015) (explaining that when an ERISA plan administrator is

given discretionary authority, its decisions within the scope of that authority should be overturned if

the administrator acted arbitrarily or capriciously); Bourgeois v. Pension Plan for the Emp’ees of Santa

Fe Int’l Corps., 215 F.3d 475, 479 (5th Cir. 2000) (discussing requirement that a claimant exhaust

available administrative remedies before bringing suit for benefits). However, it was TMRX that

failed to exhaust its available administrative remedies, not appellees. The trial court determined that

11

they were entitled—they got their day in court.

Appellants do not offer any other authority supporting the creation of a new

temporary committee under similar circumstances. Appellants chiefly cite cases in

which appellate courts have sent ERISA disputes back to plan administrators because a

benefits decision was not made according to proper procedures, but none of the cited

cases remotely involved a situation such as this, in which the employer failed to contest

a presumption favoring the claimant, nor did they involve appointment of new plan

administrators. See Shelton v. ContiGroup Cos., 285 F.3d 640, 643-44 (8th Cir. 2002)

(ordering remand to plan administrator for decision on the merits where employer rather

than administrator had previously removed claimant from plan); Sanford v. Harvard

Indus., Inc., 262 F.3d 590, 594-98 (6th Cir. 2001) (affirming remand to plan

administrator because decision to revoke claimant’s benefits had originally been made

by employer rather than by authorized body). Because none of appellants’ arguments

concerning the award of benefits under the Severance Plan have merit, we overrule their

first issue.

III. Employment Agreement Claims

Under their second issue, appellants raise two arguments related to the award of

damages to appellees based on alleged breaches of their employment agreements. The

jury found that TMRX, Acquisition Sub, and Holdings all failed to comply with the two

agreements, and the trial court awarded damages against those entities in keeping with

the jury’s findings. Appellants first assert that, as a nonsignatory to the agreements,

Holdings cannot be held liable for breach of those agreements. Second, appellants

appellees did everything administratively required of them under the plan when they filed resignation

letters citing Good Reason, and this conclusion is supported by the plan documents themselves. See

generally Hall, 105 F.3d at 231 (explaining that a trial court’s decision regarding exhaustion is

reviewed under an abuse of discretion standard). Under the plan, this created a presumption in

appellees’ favor unless and until TMRX challenged the assertion of Good Reason by filing evidence

with the committee, something TMRX has never done.

12

contend the trial court erred in rejecting their proposed jury instruction that would have

excluded Holdings as part of “the Company” as that term is used in the employment

agreements. Appellants request a remand for a new trial on the issue of liability under

the employment agreements.

A. Alta Mesa Holdings’ Liability

Appellants contend that Holdings cannot be held liable for breach of the

employment agreements because it was neither a party to the agreements nor was it

bound by them post-merger. We agree.

Among other elements, a plaintiff in a breach of contract cause of action must

prove that a valid contract existed between the plaintiff and the defendant. E.g., West v.

Triple B Servs., LLP, 264 S.W.3d 440, 446 (Tex. App.—Houston [14th Dist.] 2008, no

pet.). In other words, the plaintiff must show that the defendant has obligated itself

under the contract. E.g., Interstate Inv. Corp. v. Rillo, No. 01-03-00818-CV, 2005 WL

267663, at *3 (Tex. App.—Houston [1st Dist.] Feb. 3, 2005, no pet.); Miles v. Plumbing

Servs. of Houston, Inc., 668 S.W.2d 509, 512 (Tex. App.—Houston [14th Dist.] 1984,

writ ref’d n.r.e.); see also Baylor Univ. v. Sonnichsen, 221 S.W.3d 632, 635 (Tex. 2007)

(“Evidence of mutual assent in written contracts generally consists of signatures of the

parties and delivery with the intent to bind.”). The only signatories to the employment

agreements at issue in this case were appellees and TMRX.

Although at the time the agreements were executed, TMRX was a subsidiary of

Meridian and Meridian and all of its subsidiaries were subsequently merged into

Acquisition Sub which was itself a subsidiary of Holdings, the mere existence of a

corporate relationship between Holdings and TMRX is not enough to make Holdings

liable on TMRX’s contracts. See In re Merrill Lynch Trust Co. FSB, 235 S.W.3d 185,

191 (Tex. 2007) (“[C]orporate affiliates are generally created to separate the businesses,

liabilities, and contracts of each. Thus, a contract with one corporation . . . is generally

13

not a contract with any other corporate affiliates.”). Courts generally will not disregard

the corporate fiction and hold a parent corporation liable for the obligations of a

subsidiary unless something more is presented, such as evidence supporting an agency

relationship or grounds for piercing the corporate veil. See, e.g., Lucas v. Tex. Indus.,

Inc., 696 S.W.2d 372, 374-75 (Tex. 1984) (discussing circumstances under which

corporate fiction may be disregarded in order to hold parent liable for obligations of

subsidiary whether contractual or tortious in nature); see also Hanson Sw. Corp. v. Dal-

Mac Constr. Co., 554 S.W.2d 712, 716-19 (Tex. App.—Dallas 1977, writ ref’d n.r.e.)

(holding plaintiff failed to establish liability of parent corporation under alter ego or

agency theories for construction contract entered into with subsidiary, even though

parent guaranteed purchase money loan for shopping center site, controlled flow of

funds to subsidiary, and owned all of subsidiary’s stock, and representations were made

that parent or related companies owned the shopping center). Here, appellees did not

plead, attempt to prove, or argue any theory of piercing the corporate veil or agency.

See In re Merrill Lynch, 235 S.W.3d at 191 (declining to disregard corporate structure

where plaintiffs made no allegations supporting that outcome).

Instead, appellees point to section 4.8 of the employment agreements as imposing

liability for breach on Holdings. Section 4.8 states that: “For the purposes of this

Agreement, Company shall include any parent, subsidiary division of the Company, or

any entity, which directly or indirectly, controls, is controlled by, or is under common

control with the Company.” Although this statement clearly encompassed Meridian at

the time of execution and arguably encompassed Holdings post-merger (see discussion

below), the fact remains that the only signatory defendant was TMRX and, as stated,

appellees did not press any theory to pierce the corporate veil or establish an agency

relationship. The beginning of each of the employment agreements states that the

agreement is between TMRX and the respective employee, Ives or Delano. The term

“Company” is elsewhere used in the agreements to specify various rights and

14

obligations, including who the employer was, who pays the salaries, who can terminate

the agreements, and who has to pay benefits upon termination by the employee for

Good Reason. However, just because the contract states that a nonparty to the contract

is required to pay under the contract doesn’t make that party liable. See In re Merrill

Lynch, 235 S.W.3d at 191; Lucas, 696 S.W.2d at 374-75. Neither Meridian nor

Holdings made any promises in the employment agreements; they were not parties to

those agreements.

Appellees additionally argue that in the merger, Holdings, through Acquisition

Sub, obtained the assets and liabilities of TMRX, which would include liabilities to

appellees under their employment agreements. This conclusion, however, is contrary to

the express terms of the merger agreement. Section 2.1 of the merger agreement states

that

[u]pon the terms and subject to the conditions hereof, at the Effective Time,

Target [Meridian] shall merge with and into Merger Sub [Acquisition Sub]

and the separate corporate existence of Target shall thereupon cease and

Merger Sub shall be the surviving company in the Merger (sometimes

referred to herein as the “Surviving Company”). The Merger shall have the

effects set forth in . . . Section 10.008 of the [Texas Business Organizations

Code], including the Surviving Company’s succession to and assumption

of all rights and obligations of Target.13

13

Section 10.008 of the Organizations Code concerns the consequences of a merger; among

other things, it provides that “all liabilities and obligations of each organization that is a party to the

merger are allocated to one or more of the surviving or new organizations in the manner provided by

the plan of merger.” Tex. Bus. Org. Code § 10.008(a)(3). Additionally,

each surviving or new domestic organization to which a liability or obligation is

allocated under the plan of merger is the primary obligor for the liability or obligation,

and, except as otherwise provided by the plan of merger or by law or contract, no other

party to the merger, other than a surviving domestic entity or non-code organization

liable or otherwise obligated at the time of the merger, and no other new domestic entity

or non-code organization created under the plan of merger is liable for the debt or other

obligation.

Id. § 10.008(a)(4). The merger agreement clearly states that Acquisition Sub, as the “Surviving

Company,” succeeded to TMRX’s obligations under the employment agreements, a reading

reemphasized by the agreements reference to section 10.008.

15

Thus, while Holdings signed the merger agreement and was the sole owner of the shares

of Acquisition Sub, the merger agreement specified that Acquisition Sub assumed the

obligations of Meridian and its subsidiaries (including TMRX), not Holdings.14

Lastly, appellees cite the following exchange during the testimony of Harlan

Chappelle who, in addition to being manager of TMRX, was CEO of Holdings and

Acquisition Sub:

Q. Sure. Okay. So, I understand so what you are saying Alta Mesa

Acquisition Sub Company acquired the obligations under my clients’

employment agreement [sic]?

A. It did.

Q. And you’re contending, though, I think by your explanation that Alta

Mesa Holdings, L.P., did not in your opinion acquire those?

A. No. I wouldn’t suggest that at all. I was just suggesting that it flowed

through Alta Mesa Acquisition Sub’s obligation of that subsidiary.

Q. Well, I understand the flow-through portion. Let me ask the ultimate

question: Do you believe—just your opinion—that Alta Mesa Holdings,

L.P., has a contractual obligation under my clients’ employment

agreements?

A. I believe we have a responsibility to make sure that employment

agreement is upheld.

Appellees assert that this excerpt demonstrates that Holdings was in fact liable for

breach of the employment agreements because its CEO acknowledged such

responsibility. Appellants, on the other hand, suggest that Chappelle was just “acting

like any good CEO” in recognizing that he had a responsibility to ensure all of the

companies under his umbrella honored their contractual obligations. However,

14

This conclusion is also supported by the employment agreements themselves, which provide

in section 4.4 that “[i]f the Company shall at any time be merged or consolidated into or with any other

entity, the provisions of this Agreement shall survive any such transaction and shall be binding on and

inure to the benefit and responsibility of the entity resulting from such merger or consolidation.”

(Emphasis added.) As discussed, Acquisition Sub was the entity resulting from the merger, not

Holdings.

16

regardless of which interpretation of the testimony is correct, parol evidence such as this

cannot be used to contradict the unambiguous terms of the merger agreement. See Saba

Zi Expl., L.P. v. Vaughn, 448 S.W.3d 123, 131 (Tex. App.—Houston [14th Dist.] 2014,

no pet.) (“Where the parties have entered into an unambiguous written contract, the

instrument alone will be deemed to express the intention of the parties because it is the

objective intent, not subjective intent, that controls. . . . An unambiguous contract will

be enforced as written, and parol evidence will not be received for the purpose of

creating an ambiguity or to give the contract a meaning different from that which its

language imports.”). Likewise, this brief, imprecise testimony does not make Holdings

liable for the employment agreements when it was not a party to those agreements, and

appellees have not raised any theory to make Alta Mesa Holdings liable for breach as a

nonparty. See In re Merrill Lynch, 235 S.W.3d at 191; Lucas, 696 S.W.2d at 374-75.

Accordingly, the trial court erred in awarding appellees breach of contract damages

against Holdings. We therefore sustain appellants’ second issue to the extent that it

concerns Holdings’ liability.15

B. Defining “Company”

Also under issue two, appellants contend that the trial court erred in refusing to

instruct the jury that Holdings should not be considered as part of the Company as that

term was used in the employment agreements. During the charge conference, appellants

specifically requested the following instruction or definition be included in the charge:

“‘The Company’ means The Meridian Resource & Exploration LLC (also referred to as

‘TMRX’) and Alta Mesa Acquisition Sub, LLC.” Appellants essentially urged the trial

court to rule as a matter of law that Holdings was not included in the definition of

Company in section 4.8 of the employment agreements discussed above. See generally

City of Keller v. Wilson, 168 S.W.3d 802, 814-15 (Tex. 2005) (discussing standards of

15

The appropriate appellate remedy for this error will be discussed at the conclusion of the

analysis of appellants’ second issue.

17

review in matter of law challenges). The trial judge refused the definition and submitted

TMRX and Acquisition Sub on one line and Holdings on a separate line for answers to

the liability questions.

The importance of this issue extends beyond whether Holdings could be held

liable for breach of the agreements. As we held above, as a nonsignatory, Holdings

could not be held liable for breach absent pleading or proof of some other theory of

liability. Appellants’ argument here additionally addresses whether TMRX and

Acquisition Sub could be held liable for actions or situations involving Holdings.

Appellants explain that the requested definition was necessary because it

addresses whether TMRX and Acquisition Sub had a contractual responsibility to

ensure that appellees were made officers of Holdings. Appellants argue that while, pre-

merger, Meridian may have been included under the definition of “Company” in section

4.8 as TMRX’s parent company, post-merger, it was Acquisition Sub which stepped

into Meridian’s place, not Holdings, which was further removed as a parent of

Acquisition Sub. Appellants allege that without the requested definition, the charge

permitted the jury to find a breach occurred because appellees were not made officers of

Holdings—conduct that appellants contend did not fall within the scope of the

employment agreements.16

16

The employment agreements permitted appellees to terminate the agreements and receive

benefits for Good Reason if they were removed from their executive positions. According to

appellants, the guaranteed positions were within TMRX and Acquisition Sub and appellees were not

entitled to receive positions within Holdings. As appellants state it: “the employment agreements

were drafted to ensure that [appellees] never received a demotion in rank or responsibility—not to

guarantee them promotions to more prominent positions within larger organizations.”

Appellees argue that under the employment agreements, they were entitled to be named (and

have the corresponding duties and responsibilities of) officers of Holdings, as they had been officers of

Meridian and not just TMRX before the merger. Appellees further contend it was Holdings that

diminished their job duties by reassigning those duties to other subsidiaries. Appellees also assert that

the evidence demonstrated TMRX and Acquisition Sub breached the contract in other ways as well.

We need not determine whether the evidence favors one side or the other on these allegations because

we find the trial court did not err in refusing appellants’ requested instruction.

18

Appellants correctly point out that section 4.4 of the employment agreements

potentially limits who can be held liable for breach of the agreements when it states that

“[i]f the Company shall at any time be merged or consolidated into or with any other

entity, the provisions of this Agreement shall survive any such transaction and shall be

binding on and inure to the benefit and responsibility of the entity resulting from such

merger or consolidation.” However, despite appellants’ emphasis, this section has no

apparent application to determining which entities should be included in section 4.8’s

definition of “Company” post-merger. It certainly does not redefine that term after a

merger. Appellants seek to limit the definition of Company in section 4.8 to either

TMRX or its immediate parent, Acquisition Sub, but section 4.8 is not so limited.

While section 4.8 expressly encompasses a parent organization, it additionally

encompasses “any entity, which directly or indirectly controls, is controlled by, or is

under common control with the Company.” Thus, the question inherently becomes a

fact determination as to whether any entity other than TMRX directly or indirectly

controlled TMRX or was under common control. This is as true post-merger as it was

pre-merger, and appellants cite no provision suggesting otherwise.17 Moreover,

appellants steadfastly refuse to engage the issue as a fact question, insisting, instead,

that the issue is merely one of contract interpretation.

We conclude instead that the jury was properly tasked by the trial court with

determining whether TMRX and Acquisition Sub should be held liable for actions by

Holdings under the employment agreements. The trial court therefore did not err in

refusing to instruct the jury that Holdings was excluded as a matter of law from the

definition of Company in the agreements.

17

The definition of Company within section 4.8 appears designed to prevent decisions from

being made outside of TMRX (or the surviving entity after a merger) that would defeat the benefits

and protections afforded the signatory employee. Nothing in section 4.4 changes that design. Section

4.4 only addresses which entity may be held liable post-merger; it does not create a loophole for

defeating the purposes of the agreement by permitting actions to be taken by related entities that would

otherwise have been breaches of the agreements.

19

The trial court erred in assessing liability for breach of the employment

agreements against Holdings but not in assessing that liability against TMRX and

Acquisition Sub. Although appellants have requested reversal and remand under their

second issue, we are not limited by that request and must render the judgment that the

trial court should have rendered. See Tex. R. App. P. 43.3; Garza v. Cantu, 431 S.W.3d

96, 108-09 (Tex. App.—Houston [14th Dist.] 2013, pet. denied). The appropriate

disposition under these circumstances is to reverse the portion of the judgment assessing

breach of contract liability against Holdings and render judgment appellees take nothing

against Holdings on those claims.

IV. Attorney’s Fees

In their third issue, appellants contend that the trial court erred in awarding

attorney’s fees to appellees under Chapter 38 of the Civil Practice and Remedies Code

against TMRX and Acquisition for breach of the employment agreements. Under the

“American Rule,” “litigants may recover attorney’s fees only if specifically provided for

by statute or contract.” Epps v. Fowler, 351 S.W.3d 862, 865 (Tex. 2011). Appellees

cited Chapter 38 as the sole basis to recover attorney’s fees on their claims for breach of

the employment agreements. Section 38.001 provides that “[a] person may recover

reasonable attorney’s fees from an individual or corporation, in addition to the amount

of a valid claim and costs, if the claim is for: . . . (8) an oral or written contract.” Tex.

Civ. Prac. & Rem. Code § 38.001(8). Appellants contend that as limited liability

companies, TMRX and Acquisition Sub are excluded from the entities against which

attorney’s fees may be recovered under section 38.001: individuals and corporations.

We agree.

The availability of attorney’s fees under a particular statute is a question of law

for the court. Holland v. Wal–Mart Stores, Inc., 1 S.W.3d 91, 94 (Tex. 1999). In

construing a statute, our main goal is to determine and give effect to the Legislature’s

intent. Nat’l Liab. & Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527 (Tex. 2000). To do so,

20

we look primarily to the language of the statute itself, as we consider it “a fair

assumption that the Legislature tries to say what it means, and therefore the words it

chooses should be the surest guide to legislative intent.” Fitzgerald v. Advanced Spine

Fixation Sys., Inc., 996 S.W.2d 864, 866 (Tex. 1999). If a statute defines a term, courts

are bound to construe that term by its statutory definition. Tex. Gov’t Code §

311.011(b); Tex. Dep’t of Transp. v. Needham, 82 S.W.3d 314, 318 (Tex. 2002).

In our recent opinion in Fleming & Associates, L.L.P. v. Barton, we held that

under the plain language of section 38.001, a court could not order a partnership

(specifically a limited liability partnership) to pay attorney’s fees. 425 S.W.3d 560,

574-75 (Tex. App.—Houston [14th Dist.] 2014, pet. denied). Appellants contend that

the same reasoning that applied to partnerships in that case applies to limited liability

companies in the present case. In Fleming, we explained that neither “individual” nor

“corporation” was defined in the Code Construction Act or Chapter 38, so the ordinary

meaning of those terms should be applied in construing section 38.001. Id. at 575. We

then noted that research did not reveal any definition of “individual” or “corporation”

that included any type of partnership, and that the statutory interpretation doctrine

“expressio unius est exclusion alterious”—meaning the expression of one concept

implies the exclusion of another—suggests the legislature did not intend section 38.001

to apply to partnerships because it did not use any term encompassing partnerships. Id.

Applying that analysis to the present case, it appears that the question of whether

an LLC is contained within the term “corporation” is a closer call than whether

partnership is included within “individual” or “corporation.”18 The additional difficulty

lies with the fact “company” and “corporation” are sometimes used synonymously. See,

18

In light of our analysis in Fleming, appellees do not contend that the term “individual,” as

used in section 38.001, should be read so as to encompass LLCs. Moreover, neither the dictionary

definition of “individual” nor the typical legal usage of the term encompasses legal entities. See

Hoffman v. L&M Arts, No. 3:10-CV-0953-D, 2015 WL 1000838, at *4-10 (N.D. Tex. Mar. 6, 2015)

(mem. op.) (holding section 38.001 does not authorize the recovery of attorney’s fees from LLCs).

21

e.g., Black’s Law Dictionary 117 (2d Pocket ed. 2001) (defining “company” as “[a]

corporation . . . that carries on a commercial or industrial enterprise”); Roget’s II: The

New Thesaurus 81, 96 (3d ed. 1996) (including “corporation” among the synonyms for

“company,” and for “corporation,” it just says “see company”). That cannot be said for

“partnership” and “individual” or “corporation.”

However, despite this loose relationship between the common usage of the terms

“company” and “corporation,” it is clear that as used in Texas statutes, the legal entities

identified by the terms “corporation” and “limited liability company” are distinct

entities with some but not all of the same features. See generally SJ Med. Ctr., L.L.C. v.

Estahbanati, 418 S.W.3d 867, 874–75 (Tex. App.—Houston [14th Dist.] 2013, no pet.)

(“Limited liability companies have been said to offer ‘the best of both worlds—the

limited liability of a corporation and the favorable tax treatment of a partnership.’”)

(quoting Historic Boardwalk Hall, LLC v. Comm’r, 694 F.3d 425, 429, n.1 (3d Cir.

2012)); Shook v. Walden, 368 S.W.3d 604, 613 n.10 (Tex. App.—Austin 2012, pet.

denied) (“LLCs are a comparatively recent innovation in business organizational form,

in essence affording the corporation-like benefit of limited liability but with partnership

tax treatment.”). Corporations and LLCs are indeed governed by separate titles within

the Business Organizations Code. See Tex. Bus. Orgs. Code §§ 20.001-23.110 (Title 2,

governing corporations), 101.001-.621 (Title 3, governing LLCs). In other words, the

use of one of the terms does not encompass the other type of entity.

Appellees emphasize that under both Texas law and Delaware law—the latter

being the law of TMRX’s creation—LLCs are treated the same as corporations for

certain purposes. See, e.g., Tex. Bus. Orgs. Code § 101.002(a) (providing that specified

sections of Title 2 apply to LLCs); Poore v. Fox Hollow Enters., No. C.A. 93A-09-

0051994 WL 150872, at *2 (Del. Super. Ct. Mar. 29, 1994) (explaining that LLCs

afford liability limitations for members and managers similar to those afforded to

shareholders and directors of a corporation). However, far from demonstrating that the

22

term corporation in section 38.001 should be read as encompassing LLCs, these

examples reinforce that these are distinct entities; if they were not, there would be no

reason to specifically state when they should be treated the same. 19

The history of section 38.001 and its predecessor statute, article 2226 of the Texas

Revised Civil Statutes, further supports the conclusion that use of the term

“corporation” does not encompass an LLC. Article 2226 provided that “any person,

corporation, partnership, or other legal entity having a valid claim against a person or

corporation” could recover attorney’s fees against the “persons or corporation.” See

Fleming, 425 S.W.3d at 575. The fact that “corporation” is first used in a list of entities

that includes “partnerships” and “other legal entities” indicates that the term was not

intended to encompass those other types of entities, because to read the term otherwise

would render use of these other terms meaningless. See, e.g., Columbia Med. Ctr. of

Las Colinas, Inc. v. Hogue, 271 S.W.3d 238, 256 (Tex. 2008) (“The Court must not

interpret the statute in a manner that renders any part of the statute meaningless or

superfluous.”). Thus, when the term is used again in the same sentence to define against

whom attorney’s fees could be recovered, it again should not be read as encompassing

“partnerships” or “other legal entities” such as LLCs. See Tex. Dep’t of Transp. v.

Needham, 82 S.W.3d 314, 318 (Tex. 2002) (“[C]ourts should not give an undefined

statutory term a meaning out of harmony or inconsistent with other provisions, although

it might be susceptible of such a construction if standing alone. In ascertaining a term’s

meaning, courts look primarily to how that term is used throughout the statute as a

whole. Statutory terms should be interpreted consistently in every part of an act.”); see

also Hoffman v. L&M Arts, No. 3:10-CV-0953-D, 2015 WL 1000838, at *8-9 (N.D.

19

Appellees additionally cite legislative history from the creation of LLCs in which certain

facets of LLCs were compared to similar features of corporations (and partnerships). See The House

Committee on Business and Commerce, Bill Analysis, Tex. H.B. 278, 72nd Leg., R.S. (1991). The

mere fact the two legal entities share some similar features does not support the conclusion that the

legislature intended for the use of the term “corporation” in section 38.001 to encompass other distinct

legal entities such as LLCs.

23

Tex. Mar. 6, 2015) (mem. op.) (reaching same conclusion). The codification of the

provision into section 38.001 was intended to be nonsubstantive in nature; therefore, the

entities against whom attorney’s fees can be recovered under the section still should not

include “other legal entities” such as LLCs. See Hoffman, 2015 WL 1000838, at *8

(reaching same conclusion); Fleming, 425 S.W.3d at 575 (addressing nonsubstantive

nature of codification).20

Lastly, appellees point out that numerous cases have affirmed attorney’s fees

awards against LLCs; however, it does not appear that the appealing parties argued in

any of these cases that section 38.001 did not permit such an award against an LLC.

Accordingly, these cases do not stand for the proposition that section 38.001 authorizes

recovery of attorney’s fees against LLCs. Cf. Fleming & Assocs., 425 S.W.3d at 576

n.17 (pointing out that although several cases have affirmed awards against

partnerships, no cases have specifically addressed whether the awards were authorized

by section 38.001). Because section 38.001 does not authorize the recovery of

attorney’s fees in a breach of contract action against an LLC and appellees have not

sought attorney’s fees for prosecution of that cause of action on any other basis, we

sustain appellants’ third issue and reverse the award of attorney’s fees against TMRX

and Acquisition Sub for that cause of action.

V. Conclusion

Because the trial court erred in assessing liability for breach of the employment

agreements against Holdings, we reverse the portion of the judgment assessing breach

of contract liability against Holdings and render judgment appellees take nothing against

Holdings on those claims. Furthermore, because the trial court erred in awarding

20

Appellees point out that LLCs were not an established form of legal entity either at the time

article 2226 was enacted or when it was codified into section 38.001. While accurate, this point does

not change the fact that LLCs are not corporations but are “other legal entities” against which section

38.001 does not authorize the recovery of attorney’s fees.

24

attorney’s fees on the breach of contract claims against TMRX and Acquisition Sub, we

reverse the portion of the judgment awarding such fees. Finding no error in the

remainder of the judgment, we affirm the remaining portions.

/s/ Martha Hill Jamison

Justice

Panel consists of Justices Jamison, McCally, and Wise.

25