Lakeway Regional Medical Center, LLC and Surgical Development Partners, LLC// Lake Travis Transitional LTCH, LLC N/K/A Lake Travis Specialty Hospital, LLC v. Lake Travis Transitional LTCH, LLC N/K/A Lake Travis Specialty Hospital, LLC// Lakeway Regional Medical Center, LLC Surgical Development Partners, LLC Brennan, Manna, & Diamond, LLC And Frank T. Sossi

ACCEPTED

03-15-00025-CV

7943312

THIRD COURT OF APPEALS

AUSTIN, TEXAS

11/23/2015 10:21:08 AM

JEFFREY D. KYLE

CLERK

No. 03-15-00025-CV

______________________________________________

FILED IN

3rd COURT OF APPEALS

IN THE COURT OF APPEALS AUSTIN, TEXAS

FOR THE THIRD DISTRICT OF TEXAS 11/23/2015 10:21:08 AM

AUSTIN, TEXAS JEFFREY D. KYLE

______________________________________________ Clerk

APPELLANTS, LAKEWAY REGIONAL MEDICAL CENTER, LLC AND

SURGICAL DEVELOPMENT PARTNERS, LLC// CROSS-APPELLANT,

LAKE TRAVIS TRANSITIONAL LTCH, LLC N/K/A LAKE TRAVIS

SPECIALTY HOSPITAL, LLC

v.

APPELLEES, LAKE TRAVIS TRANSITIONAL LTCH, LLC N/K/A LAKE

TRAVIS SPECIALTY HOSPITAL, LLC// CROSS-APPELLEES, LAKEWAY

REGIONAL MEDICAL CENTER, LLC, SURGICAL DEVELOPMENT

PARTNERS, LLC, BRENNAN, MANNA, & DIAMOND, LLC

AND FRANK T. SOSSI

___________________________________________

BRIEF OF APPELLEE

LAKE TRAVIS TRANSITIONAL LTCH, LLC N/K/A

LAKE TRAVIS SPECIALTY HOSPITAL, LLC (“LTT”)

___________________________________________

Jane M.N. Webre

S. Abraham Kuczaj, III

Robyn B. Hargrove

SCOTT DOUGLASS

& MCCONNICO LLP

303 Colorado Street, 24th Floor

Austin, TX 78701

(512) 495-6300

(512) 495-6399 Fax

COUNSEL FOR LTT

ORAL ARGUMENT REQUESTED

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TABLE OF CONTENTS

INDEX OF AUTHORITIES......................................................................................v

STATEMENT OF THE CASE ..................................................................................x

STATEMENT OF JURISDICTION..........................................................................x

RECORD.................................................................................................................. xi

APPENDIX .............................................................................................................. xi

ISSUES ................................................................................................................... xii

OVERVIEW ..............................................................................................................1

STATEMENT OF FACTS ........................................................................................1

A. Defendants seek to acquire LTT’s facility, which was designed

with the flexibility to operate as a long-term care hospital or an

acute-care hospital. ................................................................................1

B. LTT shares confidential information with Defendants pursuant

to the LOI. .............................................................................................3

C. Defendants manipulate the LOI diligence process to game the

HUD mortgage guaranty process. .........................................................5

D. Defendants use LTT’s confidential information to secure the

HUD guaranty. ......................................................................................8

SUMMARY OF ARGUMENT ...............................................................................10

ARGUMENT ...........................................................................................................11

A. Ample evidence supports the jury’s causation finding. ......................11

1. The equal inference rule applies only when multiple

reasonable inferences are equally probable. .............................12

2. There are no equal inferences from the evidence; the only

reasonable inference is that HUD relied on Defendants...........14

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B. The damages findings are supported by sufficient evidence. .............17

1. LTT was a proper assignee of Berry and McDonald. ...............17

2. Ample evidence supports the jury’s award of $7.9 million

in lost fair market value of LTT. ...............................................20

a. Phillips v. Carlton confirms that fair market value

can be based on an agreed purchase price. .....................20

b. The evidence and Defendants’ judicial admissions

establish that $7.9 million was the fair market

value for LTT. .................................................................22

c. $7.9 million is within the range of evidence of

LTT’s lost fair market value, particularly in light

of the mitigation instruction. ..........................................24

d. Relying on the agreed purchase price does not

conflict with the summary judgment ruling

regarding section 2..........................................................25

e. The measure of damages does not impermissibly

“mix and match” methodologies to calculate fair

market value....................................................................27

3. Berry’s testimony was not conclusory or speculative. .............28

4. The loss in fair market value was foreseeable. .........................32

5. Ample evidence supports the jury’s award of $790,000 in

lost fair market value for the confidential information .............36

6. In the alternative, remand is proper because there is

evidence of some damages........................................................38

C. SDP’s argument that it is not a party to the LOI fails again. ..............38

1. SDP waived any complaint that it was not a party to the

LOI. ...........................................................................................38

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2. An agent may be personally liable on contracts made for

the benefit of his principal—even where the principal is

disclosed. ...................................................................................39

3. SDP identified itself as a party to the LOI and obligated

itself under the LOI and is consequently individually

liable for breach of the LOI. .....................................................40

4. The LOI is not ambiguous regarding SDP’s party status,

and no jury question was proper. ..............................................42

5. There is ample evidence that SDP breached the LOI. ..............43

D. The trial court properly charged the jury on breach of contract

and damages. .......................................................................................44

1. Background on broad-form submission and Casteel ................45

2. Casteel granulation is not required unless the alleged

invalid theory was presented to the jury at trial. .......................47

a. Factual allegations underlying breach of contract

do not need to be granulated. ..........................................48

b. Casteel does not apply if the alleged invalid theory

was not before the jury at trial. .......................................52

c. LTT never advocated at trial that Defendants

breached section 2 of the LOI.........................................55

3. Defendants’ proposed instruction would not have cured

any alleged error and was otherwise improper. ........................56

E. The fee award was proper. ..................................................................58

CONCLUSION AND PRAYER .............................................................................58

CERTIFICATE OF SERVICE ................................................................................60

CERTIFICATE OF COMPLIANCE .......................................................................60

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INDEX OF AUTHORITIES

Cases

Alonysius v. Kislingbury,

No. 01-13-00147-CV, 2014 WL 4088145 (Tex. App.—Houston

[1st Dist.] Aug. 19, 2014, no pet.) .......................................................... 19, 38

American Nat’l Bank of Houston v. Am. Loan & Mortg. Co.,

228 S.W. 169 (Tex. Comm’n App. 1921, judgm’t adopted).........................39

Basic Capital Mgmt., Inc. v. Dynex Commercial, Inc.,

348 S.W.3d 894 (2011)..................................................................... 32, 33, 34

Bed, Bath & Beyond, Inc. v. Urista,

211 S.W.3d 753 (Tex. 2006) ................................................................. passim

Benge v. Williams,

__S.W.3d__, No. 01-12-00578-cv, 2014 WL 6462352

(Tex. App.—Houston [1st Dist.] Nov. 18, 2014, n.p.h.) .................. 52, 53, 56

Benton v. State,

336 S.W.3d 355 (Tex. App.—Texarkana 2011, pet. ref’d)...........................23

Bohnsack v. Varco, L.P.,

668 F.3d 262 (5th Cir. 2012) .................................................................. 26, 27

Burbage v. Burbage,

447 S.W.3d 249 (Tex. 2014) .........................................................................13

City of Dallas v. Redbird Development Corp.,

143 S.W.3d 375 (Tex. App.—Dallas 2004, no pet.) ........................ 29, 30, 32

Clear Lake City Water Authority v. Kirby Lake Dev., Ltd.,

123 S.W.3d 735 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) .......54

Coastal Transp. Co., Inc. v. Crown Central Petroleum,

136 S.W.3d 227 (Tex. 2004) .........................................................................29

Columbia Medical Center of Las Colinas v. Bush,

122 S.W.3d 835 (Tex. App.—Fort Worth 2003, pet. denied) .......................50

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Columbia Rio Grande Healthcare, L.P. v. Hawley,

284 S.W.3d 851 (Tex. 2009) .................................................................. 47, 52

Crown Life Ins. Co. v. Casteel,

22 S.W.3d 378 (Tex. 2000) ................................................................... passim

Dillard v. Texas Elec. Co-Op,

157 S.W.3d 429 (Tex. 2005) .........................................................................46

Duke Energy Field Services, L.P. v Meyer,

190 S.W.3d 149 (Tex. App.—Amarillo 2005, pet. denied) ..........................29

Empire Life Ins. Co. of America v. Valdak Corp.,

468 F.2d 330 (5th Cir. 1972) .........................................................................19

Faour v. Faour,

789 S.W.2d 620 (Tex. App.—Texarkana 1990, pet. denied) ........................18

Formosa Plastics Corp., USA v. Kajima Int’l, Inc.,

216 S.W.3d 436 (Tex. App.—Corpus Christi—Edinburg 2006,

pet. granted, judg’t vacated by agrt.) .............................................................50

GJP, Inc. v. Ghosh,

251 S.W.3d 854 (Tex. App.—Austin 2008, no pet.).....................................56

Gupta v. Eastern Idaho Tumor Institute, Inc.,

140 S.W.3d 747 (Tex. App.—Houston [14th Dist.] 2004, pet. denied) .......57

Haase v. Glazner,

62 S.W.3d 75 (Tex. 2001) ............................................................................26

Hancock v. Variyam,

400 S.W.3d 59 (Tex. 2013) ...........................................................................13

Harris County v. Smith,

96 S.W.3d 230 (Tex. 2002) .................................................................... 46, 47

Holt Atherton Industries, Inc. v. Heine,

835 S.W.2d 80 (Tex. 1992) ...........................................................................28

Horizon/CMS Healthcare Corp. v. Auld,

34 S.W.3d 887 (Tex. 2000) ...........................................................................23

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Hughes v. Pearcy,

No. 03-10-00319, 2014 WL 7014353 (Tex. App.—Austin 2014,

pet. denied) ....................................................................................................23

Id. at *11...................................................................................................................21

Inimitable Group, L.P. v. Westwood Group Dev. II, Ltd.,

264 S.W.3d 892 (Tex. App.—Fort Worth 2008, no pet.) .............................57

Instone Travel Tech Marine & Offshore v. Int’l Shipping Partners, Inc.,

334 F.3d 423 (5th Cir. 2003) .................................................................. 39, 42

Jelinek v. Casas,

326 S.W.3d 526 (Tex. 2010) .........................................................................13

Louisiana-Pacific Co. v. Knighten,

976 S.W.2d 674 (Tex. 1988) .........................................................................56

Lozano v. Lozano,

52 S.W.3d 141 (Tex. 2001) .................................................................... 12, 13

Marathon Corp. v. Pitzner,

108 S.W.3d 724 (Tex. 2003) .........................................................................13

McFarland v. Boisseau,

365 S.W.3d 449 (Tex. App.—Houston [1st Dist.] 2011, no pet.).................54

McMillin v. State Farm Lloyds,

180 S.W.3d 183 (Tex. App.—Austin 2005, pet. denied) ....................... 24, 37

Mediacomp, Inc. v. Capital Cities Comm’n, Inc.,

698 S.W.2d 207 (Tex. App.—Houston [1st Dist.] 1985, no writ) ................42

Medina v. Hart,

240 S.W.3d 16 (Tex. App.—Corpus Christi 2007, pet. denied) ...................23

Memon v. Shaikh,

401 S.W.3d 407 (Tex. App.—Houston [14th Dist.] 2013, no pet.) . 48, 49, 54

Osterberg v. Peca,

12 S.W.3d 31 (Tex. 2000) .............................................................................38

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Phillips v. Carlton Energy Group, LLC.

___ S.W.3d ___, No. 12-0255, 2015 WL 2148951

(Tex. May 8, 2015) ................................................................................ passim

Pleasant v. Bradford,

260 S.W.3d 546 (Tex. App.—Austin 2008, pet. denied) ........... 22, 24, 27, 28

Powell Elec. Sys., Inc. v. Hewlett Packard Co.,

356 S.W.3d 113 (Tex. App.—Houston [1st Dist.] 2011,

no pet.) ........................................................................................ 47, 50, 51, 52

Reid Road Mun. Utility Dist. No. 2 v. Speedy Stop Food Stores, Ltd.,

337 S.W.3d 846 (Tex. 2011) .........................................................................29

Rojas v. Duarte,

393 S.W.3d 837 (Tex. App.—El Paso 2012, pet. denied).............................38

Romero v. KPH Consol., Inc.,

166 S.W.3d 212 (Tex. 2005) .........................................................................53

Rough Creek Lodge Operating, L.P. v. Double K Homes, Inc.,

278 S.W.3d 501 (Tex. App.—Eastland 2009, no pet.)..................... 47, 50, 51

Sand Point Ranch, Ltd. v. Smith,

363 S.W.3d 268 (Tex. App.—Corpus Christi 2012, no pet.) ........................54

Shelby Distributions, Inc. v. Reta,

441 S.W.3d 715 (Tex. App.—El Paso 2014, no pet.) ...................................49

Springs Window Fashions Div., Inc. v. Blind Maker, Inc.,

184 S.W.3d 840 (Tex. App.—Austin 2006, pet. granted,

judgm’t vacated w.r.m.) .................................................................................28

Stinnett v. Paramount-Famous Lasky Corp.,

37 S.W.2d 145 (Tex. Comm’n. App. 1931, holding approved) ............. 18, 19

Stuart v. Bayless,

964 S.W.2d 920 (Tex. 1998) (per curiam) ....................................................32

Sunbridge Healthcare Corp. v. Penny,

160 S.W.3d 230 (Tex. App.—Texarkana 2005, no pet.) ..............................50

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Tex. Dep’t of Human Servs. v. E.B.,

802 S.W.2d 647 (Tex. 1990) .........................................................................45

Tex. Dept. of Assistive & Rehabilitative Servs. v. Abraham,

No. 03-05-00003-CV, 2006 WL 191940, n.8 (Tex. App.—Austin

Jan. 27, 2006, no pet.) (mem. op.) .................................................... 45, 53, 56

Texas Comm’n on Human Rights v. Morrison,

381 S.W.3d 533 (Tex. 2012) (per curiam) ............................................. 49, 54

Thota v. Young,

366 S.W.3d 678 (Tex. 2012) ...................................................... 46, 47, 49, 54

Traxler v. Entergy Gulf States, Inc.,

376 S.W.3d 742 (Tex. 2012) .........................................................................44

United Pacific Railroad Co. v. Williams,

85 S.W.3d 162 (Tex. 2002) ...........................................................................56

USAA Cty. Mut. Ins. Co. v. Cook,

241 S.W.3d 93 (Tex. App.—Houston [1st Dist.] 2007, no pet.)...................13

Wingate v. Hajdik,

795 S.W.2d 717 (Tex. 1990) .................................................................. 17, 18

Statutes

12 U.S.C. § 1715z-7(a) ........................................................................................5, 14

24 C.F.R. § 242.16 .....................................................................................................5

Tex. Gov't Code § 22.220 ..........................................................................................x

Tex. R. Civ. P. 277 ...................................................................................................45

Other Authorities

Restatement (Second) of Contracts § 351 (1981) ....................................................32

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STATEMENT OF THE CASE

Nature of the Case: This breach of contract case involves two hospital

projects in Lakeway, Texas. Lake Travis Transitional

LTCH, LLC (“LTT”) sued Lakeway Regional Medical

Center, LLC (“LRMC”) and Surgical Development

Partners, LLC (“SDP”) (together, “Defendants”), as well

as certain Lawyer Defendants involved in the transaction,

for improperly taking LTT’s confidential information

obtained pursuant to a binding Letter of Intent (the

“LOI”) and using it to secure a lucrative government-

backed mortgage that allowed them to build a competing

hospital. The LOI had contemplated that LTT and

Defendants would work together on the LTT project, and

did not permit the use of LTT’s information for any other

purpose. The LOI is attached at App.1.

Trial Court: 343rd District Court of Travis County, Texas. Hon.

Steven Yelenosky rendered a pretrial partial summary

judgment. Hon. Lora Livingston presided over the

subsequent jury trial and rendered the final judgment.

Course of Proceedings: Judge Yelenosky rendered partial summary judgment as

to LTT’s claim for misappropriation of trade secrets and

its claim that Defendants breached section 2 of the LOI.

The summary judgment orders are the subject of LTT’s

Brief of Cross-Appellant.

LTT’s remaining claims were tried to a jury, which found

that Defendants breached the LOI. App.4. Judge

Livingston rendered judgment on the jury’s verdict

against Defendants for $7.9 million in actual damages,

together with $2 million in stipulated attorneys’ fees, pre-

and post- judgment interest, and costs of court. App.3.

STATEMENT OF JURISDICTION

This Court has jurisdiction over this appeal from a final judgment of a

district court pursuant to Texas Government Code § 22.220.

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RECORD

The record on appeal includes a 3-volume Clerk’s Record and four 1-volume

supplemental Clerk’s Records, only one of which is labeled “supplemental.”

Citations to the 3-volume Clerk’s Record will be to volume and page: ___CR___.

Citations to the one-volume Clerk’s Records will be to date and page: 5/21CR___,

6/18CR___, 7/17CR___, or 7/21CR___.

There is a 20-volume Reporter’s Record, a 1-volume supplemental

Reporter’s Record, and a 1-volume Reporter’s Record that is not labeled

“supplemental.” Volume 1 of the 20-volume Reporter’s Record is a Master Index.

Volumes 2 and 3 are pretrial hearings held on 2/4/14 and 7/2/14, respectively.

Volumes 4 through 15 include the jury trial in August 2014. Volumes 16 and 17

include the exhibits from the 2/4/14 pretrial hearing. Volumes 18 through 20

include the trial exhibits. The Supplemental Reporter’s Record includes additional

trial exhibits; it is duplicative of some of the exhibits in Volume 20. The 1-volume

Reporter’s Record (filed 1/22/15) is the same 7/2/14 hearing transcript as Volume

3 of the 20-volume Reporter’s Record.

Citations to the Reporter’s Record will be to volume and page number:

___RR___. Citations to trial exhibits will be to party and exhibit number: PX___,

DX___. Citations to video deposition testimony will be to the Court Exhibit

number (CE___), followed by the hour, minute, and second.

APPENDIX

References to items included in the Appendix will be to App. ____.

App. 1 Letter of Intent (PX2)

App. 2 Confidentiality Agreement (PX4)

App. 3 Judgment (6/18CR3-5)

App. 4 Charge of the Court (3CR12997-13009)

App. 5 May 10 e-mail (PX180)

App. 6 June 21 letter (PX136)

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ISSUES

1. The evidence showed that Defendants communicated with HUD extensively

to secure and protect their government-backed mortgage guaranty, that Defendants

used confidential information from LTT received pursuant to the LOI to answer

HUD’s questions about whether LTT was a potential competitor hospital, and

HUD parroted Defendants’ arguments in defending its failure to consider LTT

when analyzing whether Lakeway was underserved. Is that evidence—and the

reasonable inferences that flow from it—sufficient to support the jury’s

determinations regarding causation?

2. Can LTT, as assignee of its principals, sue for damages under the LOI?

3. Is the jury’s determination that LTT’s loss of fair market value was $7.9

million supported by sufficient evidence, given: (1) direct evidence and counsel’s

judicial admission in open court that $7.9 million was the fair market value a

willing buyer and a willing seller had agreed for LTT before breach; and (2)

evidence that the loss of fair market value was $13.8 million, together with

evidence that LTT could have recouped about half of that in mitigation by selling

the land and certain equipment?

4. Was Berry’s testimony regarding LTT’s fair market value conclusory and

speculative? Did Defendants waive this issue by failing to object to the testimony

at trial?

5. Were LTT’s damages foreseeable? Could Defendants have anticipated that

LTT would suffer a loss in market value if they: (1) persuaded LTT to stop

construction of its hospital under the LOI, even though LTT was two years ahead

of Defendants’ planned hospital; then (2) used LTT’s confidential information to

secure a lucrative mortgage guaranty that gave Defendants a significant

competitive advantage in the area?

6. Is the jury’s finding of $790,000 for loss of value of LTT’s confidential

information supported by sufficient evidence?

7. Is SDP a party to the LOI? Did it waive any charge error by failing to object

that the charge defined LOI as being the agreement “between SDP and LTT?” Is

there sufficient evidence that SDP breached the LOI?

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8. The charge properly included broad-form questions for breach of contract

liability and damages. Defendants argue that the questions impermissibly mixed

valid and invalid theories, claiming that the jury could have based its “yes” answer

on a breach of section 2 of the LOI, and section 2 is not enforceable. At trial, LTT

presented no evidence or argument that Defendants had breached section 2; there is

no possibility that the jury could have based its answer on section 2. Does Casteel

and its presumed harm rule apply under these circumstances?

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OVERVIEW

At issue is a breach of the LOI, and it is critical to identify the relevant

breach. LTT did not contend at trial that Defendants breached the LOI by failing

to consummate the transaction contemplated by the LOI. Instead, the gravamen of

LTT’s claim for breach is deceit. Defendants breached the LOI by taking LTT’s

confidential information—shared to facilitate Defendants’ acquisition of LTT’s

facility—and instead using that information to secure a $166 million HUD-backed

mortgage to build a competing hospital for their own economic benefit. The

misuse of LTT’s confidential information in violation of the LOI is the basis of

LTT’s breach of contract claim, and there is substantial evidence that Defendants

did just that.

STATEMENT OF FACTS

LTT also relies on the statement of facts in its opening brief.

A. Defendants seek to acquire LTT’s facility, which was designed with the

flexibility to operate as a long-term care hospital or an acute-care hospital.

This suit involves a hospital LTT developed in the Lakeway area. LTT’s

CEO Robert Berry explained that the hospital was designed to open as a long-term

acute care hospital (“LTCH”) with the ability to convert into a general acute-care

hospital (“ACH”). 6RR79; 6RR96; PX25. LTT secured C1 zoning from the City

of Lakeway, which was appropriate since there was no specific category for

hospitals, and Lakeway approved LTT’s general development plan. 6RR101-02;

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DX158.1 LTT hired architects and contractors to “make an initial assessment of

the viability of that site.” 6RR104. LTT secured agreements from them to keep all

hospital information confidential. 6RR108.

Healthcare REIT financed LTT’s hospital. 6RR113. As with the architects

and contractors, LTT required confidentiality agreements from its lenders before

sharing information about the project. See PX392; PX36; 6RR114-15. Under their

lease, Healthcare REIT would finance construction, HCN would be the landlord,

and LTT would be the tenant. PX338; 6RR122-124 (explaining financial structure

of lease). The lease contemplated $21.6 million in construction financing.

6RR124-25.

Construction began in 2008, and by spring 2009 was near completion.

LRMC, a larger hospital just a half-mile away, was just beginning development.

SDP’s CEO Eddie Alexander testified that LRMC was planned as a physician-

owned hospital, but regulatory changes would soon ban that. 11RR8-9. The plan

was for LRMC “to avoid the ban on physician-ownership by opening LTT as its

initial campus.” 11RR10. Defendants contacted LTT because they “were

interested in acquiring our lease.” 6RR89.

Before providing information to Defendants, LTT took steps to protect

confidentiality. On May 11, 2009, SDP and LTT executed a Confidentiality

1

Lakeway’s approval for an “Acute Care Hospital” rather than an LTCH reflects the long-term

plan for the facility to be an ACH.

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Agreement “in order for us to share any information with [SDP]…so they could

assess…the potential of acquiring our lease.” App.2; 6RR135. LTT would not

have disclosed any information about its facility to Defendants without the

Confidentiality Agreement. 6RR135-36.

LTT provided information to Defendants as negotiations continued. See

PX15; PX379; PX61; PX359; RR143-34. On Sept. 15, 2009, the parties executed

the LOI, through which Defendants “reaffirm [their] interest in the acquisition of

the” LTT lease “as the initial campus for” LRMC. App.1.

B. LTT shares confidential information with Defendants pursuant to the LOI.

After the LOI was executed, at Defendants’ request, construction on LTT’s

hospital “was postponed in key areas.” 6RR152. At the time, completion was

“probably three months” away. 8RR130. Berry testified that the delay was costly,

so the best efforts provision in section 3 of the LOI was important to LTT.

6RR151. Berry testified that section 6 of the LOI—which prohibited the parties

from using information obtained in the project discussions for their own benefit

even in the future—was also critical. 6RR156.

Defendants also interpreted the confidentiality and non-circumvention

provisions as continuing beyond termination. On Jan. 14, 2011, Frank Sossi—a

founder, officer, outside general counsel, and board member of SDP and LRMC—

explained:

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Based on our Letter of Intent with [LTT],…we are greatly concerned

that the Section 6 (Standstill and Non-Circumvention) and Section 9

(Confidentiality) provisions of that Letter of Intent, both of which

survive any termination of that Letter of Intent, require [LTT] to have

positive obligations to SDP and LRMC regarding any information

exchanged related to that Letter of Intent. Those obligations

specifically require that the Parties act in good faith and that any

knowledge gained in the discussions not be used by the Parties for

their own benefit.

PX45; PX442 (emphasis added). Sossi’s contemporaneous correspondence also

demonstrates that Defendants viewed both LRMC and SDP as parties to the LOI.

Pursuant to the LOI, LTT gave Defendants significant confidential

information regarding virtually every aspect of their hospital. See, e.g., PX385

(Alexander asks for diligence); PX353-358 (operational agreements); PX422

(“most current set of hospital plans”); PX341 (“mechanical & electrical

specification plans”); PX386 (contract file); PX344 (specific pages from

architectural drawings); 8RR125 (CAD file of architectural drawings); PX345

(architectural specs); PX 360-61 (information regarding equipment and vendors);

PX 362, 365 (costs); DX59 (SDP officer seeking information). LTT also allowed

Defendants’ consultants to tour the hospital and participate in construction

meetings. 6RR172. The purpose of this information sharing was to facilitate

Defendants’ acquisition of LTT’s lease under the LOI.

On Oct. 21, 2009, Defendants’ architect, Page Southerland Page, produced a

report based on its analysis of the confidential information LTT provided. PX368

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(the “PSP Report”). The PSP Report raised three concerns regarding LTT’s

hospital: (1) code violations; (2) inadequate parking; and (3) cost to convert to

Defendants’ use. Id.2 Alexander sent the PSP Report to Sossi and LTT’s lender

Scott Brinker. PX32. Sossi would later repeat the three concerns from the PSP

Report.

Even after the PSP Report, Defendants continued to negotiate towards

acquiring LTT’s lease. See, e.g., DX60; PX451; PX425; PX79. LTT relied on

those assurances: “we continued to standstill with our project. We did not make

public announcements about our project at that time. And we…continued to hold

off on construction in areas where they had changes that they wanted to make.”

6RR195. Defendants consistently represented that they wanted to proceed and

acquire the lease under the LOI. Until they didn’t.

C. Defendants manipulate the LOI diligence process to game the HUD

mortgage guaranty process.

On June 3, 2009, shortly after executing the Confidentiality Agreement,

Defendants met with officials at HUD to discuss obtaining Section 242 hospital

mortgage insurance for LRMC. Section 242 insurance is only available for

hospitals in areas that are underserved. 12 U.S.C. § 1715z-7(a); 24 C.F.R. §

242.16.

2

LTT disagreed with the PSP Report’s concerns, and its architects “responded to every item.”

6RR180; PX462; 8RR131-41. The Texas Department of Health inspected the LTT facility the

day after the PSP Report and found 6 code violations, as compared to 71 in the PSP Report.

DX56; 6RR184-85; 8RR142-43.

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Defendants received preliminary approval of their HUD application before

discussions with LTT. PX55. LTT did not know about the HUD application, and

Berry testified he would not have contracted with Defendants had he known,

because the standstill caused LTT delay at a time when “we had a significant

competitive advantage in that market in that our facility was near completion, and

…I don’t know that they’d even started to move dirt or not.” 8RR64-65.

Defendants never disclosed to HUD the LOI or that LTT was building a

hospital a half-mile away. PX167; 10RR11, 14 (HUD representative Robert

Deen); 11RR20 (Alexander never told HUD about LTT even though he “knew that

LTT planned to open as a general acute care facility”). Indeed, just a few days

before the meeting with HUD, Alexander asked Berry to hold off announcing that

LTT would open as an ACH rather than an LTCH. PX61, PX26.

A condition of a Section 242 guaranty is that the area be underserved, so

LTT’s proximity as a competitor was critical, and Defendants should have

disclosed it. Defendants’ HUD expert said:

I think HUD as an independent party would need the info. Hopefully

it was provided to HUD with disclosure of earlier encumbrances (the

letter of intent and confidentiality agreement). I think HUD would

have been negligent if they hadn’t gotten the info. They could have

been crucified for not doing due diligence. Taxpayers would demand

full review.

10RR88-89.

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Defendants were aware that they should disclose LTT to HUD. Their

application—which does not mention LTT—was submitted less than two weeks

before the LOI. While the application was pending, Sossi sent an e-mail to SDP

consultants with the subject line: “DO NOT DISCUSS WITH HUD—Questions

on ‘existing’ or ‘acquired lease.’” PX177. In that e-mail, Sossi discussed the

pending acquisition of the LTT lease:

One of the alternatives has been an attempt to acquire the Long Term

Acute Care Hospital being constructed around the corner form [sic]

the LRMC acute care facility….At present the facility could be

converted to a general acute care hospital as a first step in a Main

Campus approach for LRMC.

PX177. Sossi recognized that LTT’s facility was readily converted to an ACH:

“We believe we can get the facility opened…configured in a manner to allow a

real acute care hospital to function during the construction period for LRMC….”

Id. Sossi acknowledged LTT’s hospital was a competitor. PX169 (11/12/09 Sossi

e-mail: Defendants could lease LTT hospital and “configure it as a general acute

care hospital that could be open about 24 months in advance of LRMC and

eliminate a potential competitive facility”).

On Mar. 17, 2010, HUD approved Defendants’ application, which gave

Defendants a mortgage guaranty of $166 million with estimated savings of

$65,557,605 over the life of the loan. PX85; PX72 at SDP6874; 11RR28. On

Mar. 22, 2010, Sossi informed Brinker that there would be no deal under the LOI.

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PX35. Brinker responded that Berry would follow up “with respect to the LOI,

including the confidentiality provision.” Id.

D. Defendants use LTT’s confidential information to secure the HUD guaranty.

LTT and its counsel followed up with Alexander regarding the return of

confidential information that LTT had provided under the LOI. PX81. On

May 10, 2010, Alexander promised that all materials were returned and he had

instructed his staff to delete any electronic materials. Id.; PX82; 11RR81. But that

same day, Defendants used LTT’s confidential information for their own benefit to

secure the HUD guaranty.

Rip Miller, CEO of a Westlake hospital, sent HUD an e-mail questioning the

guaranty because “there is a similar private hospital about ½ mile away, directly

behind the US Post Office, about 90% completed and scheduled to open this

summer.” PX179. Miller noted that LTT’s hospital “will be in direct competition

to your guaranteed project” and the “area is clearly NOT underserved.” Id. This

was the first HUD heard of LTT. 10RR12. On receiving Miller’s inquiry, Deen

contacted Defendants’ consultant and asked about the “new hospital behind the

post office.” App.5. Sossi answered Deen’s questions on May 10, 2010. App.5

(the “May 10 e-mail”). Sossi never sent the inquiry to LTT. 12RR115.

At the time of Miller’s inquiry, Defendants were desperate to get the HUD

funding; HUD was “the only viable option we had” to get financing for LRMC.

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11RR216. In the May 10 e-mail Sossi argued that LTT is not a competing hospital

(and thus HUD should fund the pending $166 million loan guaranty), and he

invoked the same three concerns from the PSP Report: (1) code violations; (2)

inadequate parking; and (3) cost to convert to Defendants’ use. App.5. Sossi

insisted at trial that he gleaned this information about the LTT facility based on a

visit to the construction site in May 2009, and he prepared the May 10 e-mail not

based on the PSP Report, but from “what was in my head.” 12RR143-44, 159.

Sossi entered the fenced LTT construction site as a trespasser: “uninvited and

without permission.” 13RR6-7.

HUD responded to Miller, parroting the May 10 e-mail and stating that HUD

did not believe the LTT hospital was a competitor because it could not meet

“general acute licensing standards without expensive redesign/reconstruction and

will not achieve general acute care zoning because of site limitations.” PX179.

Ten days later, HUD agreed to go forward on the guaranty and issue amendments

Defendants had requested. PX86.

After learning of HUD’s communication with Miller, LTT’s counsel asked

HUD to postpone closing on the guaranty pending a full review, given that LTT

had not been disclosed during the application process. PX181. HUD forwarded

the letter to Sossi, who responded, once again, with confidential information

obtained pursuant to the LOI. App.6 (the “June 21 letter”). The June 21 letter

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represented that plans for LTT “were discussed in detail with the HUD client

services team,” confirming that Defendants’ communications with HUD regarding

LTT were not limited to the May 10 e-mail. Id.

SUMMARY OF ARGUMENT

This case was well-tried, the jury’s findings are well-supported by the

evidence, and the judgment is proper. This Court should reject Defendants’

challenges on appeal, because they are divorced from the actual case tried and the

actual evidence presented.

The jury’s causation determinations rest on the reasonable inference that, in

making its decision to grant Defendants the guaranty, HUD relied on Defendants’

communications in violation of the LOI—including the May 10 e-mail, the June 21

letter, and the discussions “in detail” that Defendants had with HUD regarding

whether LTT was a competitor. Defendants’ contention that HUD could have

based its decision on communications with LTT is absurd; that is not a reasonable

inference from the evidence, and it is certainly not equally probable.

The jury’s award of $7.9 million for lost fair market value of LTT is

supported by sufficient evidence and judicial admissions by Defendants’ counsel,

particularly when viewed in light of the charge’s mitigation instruction. Fair

market value can properly be based on the value a willing buyer and willing seller

agreed to, and it is undisputed that value for LTT was $7.9 million. Moreover, the

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jury could reasonably have calculated that sum by accepting the testimony that fair

market value was $13.8 million, but the loss could be mitigated by the sale of

certain equipment and land.

The contention that SDP is not a party to the LOI and cannot be liable for its

breach is almost frivolous. SDP undertook numerous express obligations under the

LOI, and Sossi expressly invoked the LOI’s standstill, confidentiality, and non-

circumvention provisions on behalf of both SDP and LRMC. Moreover, Sossi’s

overlapping roles support a reasonable inference that his various communications

with HUD were made for both SDP and LRMC.

There was no Casteel error in the charge, because the broad form liability

and damages questions did not impliedly mix valid and invalid theories. There

was no evidence or argument at trial that Defendants breached section 2 of the

LOI, so there is no possibility that the jury based its finding of breach on an invalid

basis. As a threshold matter, moreover, section 2 is enforceable, so it was not an

invalid theory at all.

ARGUMENT

A. Ample evidence supports the jury’s causation finding.

Defendants’ HUD guaranty caused LTT’s investor support to dry up and

“doomed the LTT project.” 9RR208; 13RR121-23. Defendants concede the point;

they do not challenge that they breached the LOI or whether their securing the

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HUD loan caused harm to LTT. Instead, Defendants argue narrowly that there is

insufficient evidence that Defendants’ communications with HUD in breach of the

LOI caused HUD to issue the loan commitment, grant amendments that would

save LRMC tens of millions of dollars over the life of the loan; and close and

defend the loan. Brief at 19-24. They attempt to parse inferences available from

the evidence, but Defendants’ reliance on the equal inference rule is misplaced.

The evidence—and the only reasonable inferences flowing from the evidence—

support the jury’s causation findings.

1. The equal inference rule applies only when multiple reasonable

inferences are equally probable.

The equal inference rule provides that “a jury may not reasonably infer an

ultimate fact from meager circumstantial evidence which could give rise to any

number of inferences, none more probable than another.” Lozano v. Lozano, 52

S.W.3d 141, 148 (Tex. 2001) (citations omitted). Under the rule, “circumstantial

evidence is not legally insufficient merely because more than one reasonable

inference may be drawn from it.” Id. “If circumstantial evidence will support

more than one reasonable inference, it is for the jury to decide which is more

reasonable… .” Id. at 148-49.

The mere existence of multiple reasonable inferences is thus not the end of

the inquiry under the equal inference rule. Rather, the rule applies only when none

of the reasonable inferences is more probable than any other. Hancock v. Variyam,

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400 S.W.3d 59, 70-71 (Tex. 2013). In Hancock, a professor sued a colleague who

sent a defamatory letter to faculty. Id. at 62. The letter was also sent to an entity

reviewing accreditation for the professor’s department, but there was no evidence

of who within the entity received the letter. Id. at 70. The plaintiff argued that the

denial of accreditation was evidence that the letter damaged the professor’s

reputation with the entity. Id. Because there was “no evidence that the inference

regarding the letter was more probable than other possible inferences,” the Court

held that the denial of accreditation was insufficient to establish that the unsolicited

letter damaged the professor’s reputation with the entity. Id. at 70-71.

The equal inference rule thus provides that when circumstantial evidence

does not make one competing inference more probable than the other, the jury may

not reasonably infer either. See Lozano, 52 S.W.3d at 148; USAA Cty. Mut. Ins.

Co. v. Cook, 241 S.W.3d 93, 101 (Tex. App.—Houston [1st Dist.] 2007, no pet.)

(equal inference rule not applicable where competing inference could not be

equally inferred). 3 The rule has no application where, as here, substantial evidence

supports the reasonable inference that Defendants’ communications with HUD

caused HUD to issue and defend the guaranty, and no contrary inference is even

reasonable, let alone equally probable.

3

The additional cases Defendants cite are consistent in applying the equal inference rule only

where there are truly equal inferences, and neither is more probable than the other. See Burbage

v. Burbage, 447 S.W.3d 249, 262-63 (Tex. 2014); Jelinek v. Casas, 326 S.W.3d 526, 536-38

(Tex. 2010); Marathon Corp. v. Pitzner, 108 S.W.3d 724, 739 (Tex. 2003).

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2. There are no equal inferences from the evidence; the only reasonable

inference is that HUD relied on Defendants.

By law, HUD may only insure mortgages for “urgently needed hospitals.”

12 U.S.C. § 1715z-7(a). Information about potentially competing hospitals, such

as LTT, was therefore critical to whether HUD could guaranty Defendants’ loan.

HUD would have been “negligent” if it did not consider whether LTT was a

competing hospital and “would have been crucified for not doing due diligence.”

10RR88-89.

The following chronology demonstrates HUD’s reliance on Defendants’

communications in making its decisions:

• March 17. HUD made the initial loan commitment. 4 10RR10-11.

Defendants had not disclosed LTT’s existence to HUD. 10RR13-14.

HUD thus committed without knowing that LTT was a potential

competitor hospital.

• April 30. Defendants requested amendments for a more favorable

interest rate. PX85; 11RR74-77.

• May 8. Miller informed HUD that LTT was a nearby competitor to

LRMC, arguing that “[t]his area is clearly NOT underserved.”

PX179. The loan and amendments were still pending.

4

An initial commitment is not binding, and HUD could have rescinded it based on the failure to

disclose LTT as a competitor. 12 U.S.C. § 1709(e) allows HUD to rescind at any time for

misrepresentation in securing Section 242 mortgage insurance.

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• May 10. HUD representative Deen contacted Defendants (not LTT)

and requested detailed information about LTT. App.5 at 3. Deen

noted: “[a]nything you can tell me about the [LTT] Hospital will be

helpful.” Id.

• May 10. Sossi responded to Deen with the May 10 e-mail—addressed

in a familiar way to “Bob.” Sossi’s arguments regarding whether LTT

was a competitor could only be based on confidential information.

App.5; see 6RR228-30, 178-79. Deen contacted SDP personnel to

verify what he called “Mr. Sossi’s facts” from the May 10 e-mail.

1CR2170; 10RR16.5

• May 11. HUD responded to Miller, parroting Sossi’s arguments and

stating that LTT’s facility was not a competitor. PX179. HUD’s

defense of the initial commitment was thus based directly on

information Defendants provided HUD in violation of the LOI.

• May 20. HUD agreed to go forward and issue the amendments

Defendants had requested. PX86; 11RR83-84. The loan closed and

funded the next day. 11RR84-85.

5

When Deen’s deposition testimony was read at trial, the court reporter transcribed “Mr. Sossi’s

facts” as “Mr. Sossi’s fax.” Compare 10RR16 with 1CR2170. Deen had an opportunity to

review and correct his deposition testimony, indicating that “Mr. Sossi’s facts” is the correct

transcription. See Tex. R. Civ. P. 203.1.

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• June 11. Concerned that HUD based its decision on incomplete

information, LTT’s counsel requested that HUD stay the loan pending

a review. DX116. HUD did not ask for further information from

LTT, but, once again, sent the inquiry to Defendants. PX181.6

• June 21, Sossi responded to HUD that the plans for LTT “were

discussed in detail with the HUD Client Service Team” and informed

HUD that Defendants “expect HUD to defend the decision to issue the

Guarantee.” App.6. Defendants thus admitted that their “detailed”

discussions with HUD about LTT influenced HUD’s determination

that Lakeway was underserved for the purpose of issuing the

guaranty. The same day HUD received Sossi’s June 21 letter, it

responded to Sossi that he can be “assured HUD intends to defend the

guarantee.” PX182.

HUD relied on Sossi to such an extent in its decisions to issue and defend

the guaranty that Deen—who handled LRMC’s application and testified as HUD’s

corporate representative—thanked Sossi for providing information regarding LTT:

“Well done good and faithful solicitor!” PX184. Defendants also worked closely

6

Defendants contend that it is an equally reasonable inference that HUD defended its decision

on the LRMC loan “based on information LTT provided.” Brief at 21. That contention is

nonsensical, given that the only communication between HUD and LTT was counsel’s letter

urging HUD to stay the loan pending further review, and HUD’s reaction was to forward that

letter to allow Sossi to weigh in. PX181.

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to help HUD resist LTT’s FOIA request for information HUD relied on when

determining the Lakeway area was underserved. PX136; PX182; PX187; PX188;

PX87; 12RR121-22, 124-261.

Given this evidence, HUD’s motivation to avoid appearing negligent in

approving the guaranty, and its joint efforts with Defendants to avoid disclosing

the lack of investigation, the only reasonable inference is that Defendants’

disclosures in breach of the LOI resulted in HUD’s decision to close, fund, and

defend Defendants’ guaranty. There is no other reasonable inference from the

evidence, and certainly not one that is equally probable.

B. The damages findings are supported by sufficient evidence.

1. LTT was a proper assignee of Berry and McDonald.

Defendants’ position that LTT, as assignee of Berry and McDonald’s claims

under the LOI, cannot recover damages ignores long-settled Texas precedent, the

plain language of the LOI, and the evidence.

First, Defendants argue LTT’s principals cannot recover damages for LTT’s

loss in market value, citing Wingate v. Hajdik, 795 S.W.2d 717, 719 (Tex. 1990).

Brief at 27. While Wingate recognized the general rule that “a corporate

stockholder cannot recover damages personally for a harm done solely to the

corporation,” it reiterated this equally well-established exception: “This rule does

not, of course, prohibit a stockholder from recovering damages for wrongs done to

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him individually, ‘where the wrongdoer violates a duty arising from a contract or

otherwise, and owing directly by him to the stockholder.’” Wingate, 795 S.W.2d

at 719. The exception applies exactly here, where Defendants violated duties

arising under the LOI that Defendants owed directly to Berry and McDonald.

In support of this exception, the Wingate court cited Stinnett v. Paramount-

Famous Lasky Corp., 37 S.W.2d 145, 149-151 (Tex. Comm’n. App. 1931, holding

approved). Stinnett is instructive. In that case, shareholders alleged that the

defendants’ conduct forced their theater out of business and compelled them to

“sell their business at great sacrifice.” Id. at 149. The Court rejected the argument

that only the corporation could recover damages for the destruction of its business,

holding that if “the wrongful acts are not only wrongs committed against the

corporation, but also violations of duties arising from contracts or otherwise and

owing directly to the injured stockholders, the stockholders should be permitted to

file and maintain a suit for injuries sustained as a stockholder and as an

individual.” Id. at 150-51.7

Berry and McDonald were parties to the LOI. App.1. LTT was wholly

owned by Berry and McDonald, so they owned a personal property interest in

7

Other courts agree that shareholders may recover for the loss of value to their company when

that loss results from the shareholder’s individual cause of action. See, e.g., Empire Life Ins. Co.

of America v. Valdak Corp., 468 F.2d 330, 336 (5th Cir. 1972); Faour v. Faour, 789 S.W.2d 620,

622 (Tex. App.—Texarkana 1990, pet. denied) (“a shareholder may sue for violation of his

individual rights, regardless of whether the corporation also has a cause of action”).

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LTT. 6RR98-99; Tex. Bus. Orgs. Code Ann. § 101.106(a). As is discussed below,

Defendants’ breach of the LOI resulted in a significant loss in value of LTT and its

assets. When Defendants destroyed LTT by breaching their contract with

McDonald and Berry, they destroyed McDonald’s and Berry’s personal property.

Texas law allows Berry and McDonald recover this loss in value. See Stinnett, 37

S.W.2d at 151 (shareholders could recover damages resulting from destruction of

business in breach of duty owed to shareholders); Empire Life Ins. Co. of Am., 468

F.2d at 336 (pledgor shareholder could damages based on loss in value to pledged

stock); Alonysius v. Kislingbury, No. 01-13-00147-CV, 2014 WL 4088145 at *4

(Tex. App.—Houston [1st Dist.] Aug. 19, 2014, no pet.) (mem. op.) (corporation’s

owner could recover corporate funds diverted in breach of owner’s contract).

Berry and McDonald assigned their causes of action to LTT. PX421;

8RR163-64. Under the assignment, LTT is free to assert the principals’ right to

sue for damages they suffered, including recovering damages for the loss in value

of LTT and its assets. See Stinnett, 37 S.W.2d at 151; Empire Life Ins. Co. of Am.,

468 F.2d at 336; Alonysius, 2014 WL 4088145 at *4.

Defendants argue that disclosure or use of LTT’s confidential information

could not create liability or damages. Brief at 26. The LOI is not so restrictive.

Section 6 prohibits the use of “any knowledge” or the sharing of “any information”

gained in the development process for the LTT project. App.1. Section 9 provides

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that “all information” disclosed by any party at any time in connection with the

LTT Project was subject to its confidentiality obligations. Id. The broad

protections of sections 6 and 9 encompass any LTT information disclosed during

the Project review. 6RR90-91.

This Court should reject Defendants’ attempt to parse interests between

LTT, Berry, and McDonald.

2. Ample evidence supports the jury’s award of $7.9 million in lost fair

market value of LTT.

Defendants’ challenge to the jury’s award of $7.9 million in lost fair market

value is contrary to recent Supreme Court precedent and ample evidence.

a. Phillips v. Carlton confirms that fair market value can be based

on an agreed purchase price.

Defendants’ legal and factual sufficiency challenge to the $7.9 million loss

in LTT’s fair market value is governed by Phillips v. Carlton Energy Group, LLC.

___ S.W.3d ___, No. 12-0255, 2015 WL 2148951 (Tex. May 8, 2015). In Phillips,

the defendant contracted with the plaintiff to invest $8.5 million for a 10% interest

in an oil and gas concession owned by a third party. Id. at *4. Prior to funding the

investment, the defendant attempted to eliminate the plaintiff from the deal by

terminating its contract with the plaintiff and convincing the third party to

terminate its contract with the plaintiff, stripping the plaintiff of a 38% interest in

the concession. Id. The defendant then entered a new contract with the third party

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and began developing the prospect. Id. The plaintiff filed suit to recover the fair

market value of its 38% interest. Id. at *5.

The plaintiff advanced three different models of determining the fair market

value. Id. at *5-6. The first two models, based on the value of gas in the ground,

yielded two alternative value ranges. Id. The third model was based on the

defendant’s original unfulfilled agreement with plaintiff to pay $8.5 million for a

10% interest, which extrapolated to a fair market value of $31.16 million for the

plaintiff’s 38% interest. Id. at *6. The jury awarded $66.5 million, reduced by a

remitter to $31.16 million. Id. at *7.

On appeal, the Court held that “when lost profits are not sought as damages

themselves but are used to determine the market value of property for which

recovery is sought,” the lost profits must be shown with reasonable certainty. Id. at

*10. However, Phillips explained that the reasonable certainty requirement

“should not be used to deny a claimant damages equal to the value the market

would have placed on lost property.” Id. While the Phillips Court held that the

first two damage models were not reasonably certain, it held that calculating the

$31.16 million value for the 38% share from the $8.5 million the defendant was

willing to pay for a 10% share was legally sufficient evidence of fair market value,

noting that this “calculation is based on an actual offer by a willing buyer –

[defendant] – to a willing seller – [plaintiff].” Id. at *11; see also Pleasant v.

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Bradford, 260 S.W.3d 546, 559-60 (Tex. App.—Austin 2008, pet. denied)

(purchase price agreed to by parties constitutes sufficient evidence of property’s

value as represented).

b. The evidence and Defendants’ judicial admissions establish that

$7.9 million was the fair market value for LTT.

Berry testified that fair market value could be determined by the price a

willing buyer would pay a willing seller. 8RR100. Berry then testified, using the

net income methodology, that LTT’s fair market value was $13.8 million before

Defendants’ breach. 8RR100-03; see also 8RR82-99; PX416. LTT’s fair market

value was rendered virtually worthless by Defendants’ breach. 8RR102-03. While

the $7.9 million awarded by the jury falls squarely within the range of loss to fair

market value Berry testified about using the net income methodology, consistent

with the holding in Phillips, there is other evidence that directly establishes $7.9

million as a measure of LTT’s fair market value prior to breach.

LTT’s principals Berry and McDonald were willing sellers and Defendants

were willing buyers of LTT’s operations in Lakeway for $7.9 million under the

LOI. App.1; 12RR171. Sossi testified that the amount to be exchanged when the

deal closed would be between $7.5 million and $8.5 million. Id. When asked by

Defendants’ counsel about the amount of consideration that the parties had agreed

upon in the LOI to acquire the hospital, LTT’s expert testified that the sum was

$7.9 million. 13RR103-05.

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In addition to that testimony, during his opening statement Defendants’

counsel informed the jury that the parties agreed the consideration under the LOI

was $7.9 million: “You heard what counsel said, approximately $7.9 million was

what was going to be paid.” 6RR60. Defendants’ counsel made a similar

argument in closing, moments before telling the jury that “fair market value

is…the price a willing buyer and a willing seller can agree to”:

[W]e were going to give them about $8 million under the terms of the

LOI, but what was that for? Was that just for the information, or was

that for the opportunity to take over the actual bricks and mortar

facility? We weren’t paying $8 million for information. We were

considering paying $8 million in terms of the 1.5 lump sum payment,

plus taking on some of their debt, we were willing to do that to take

the facility.

14RR106-07.

Defense counsels’ clear, deliberate, and unequivocal declarations in open

court are judicial admissions that preclude Defendants from disputing that the fair

market value of LTT was $7.9 million. Horizon/CMS Healthcare Corp. v. Auld,

34 S.W.3d 887, 905 (Tex. 2000); Medina v. Hart, 240 S.W.3d 16, 24 (Tex. App.—

Corpus Christi 2007, pet. denied); Benton v. State, 336 S.W.3d 355, 360 (Tex.

App.—Texarkana 2011, pet. ref’d); Hughes v. Pearcy, No. 03-10-00319, 2014 WL

7014353, *5 (Tex. App.—Austin 2014, pet. denied) (mem. op.) (attorney’s

“admi[ssion] during closing arguments that [client] failed to comply with the

licensing agreement” constituted a judicial admission). Defendants’ judicial

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admissions regarding LTT’s fair market value, along with Berry’s testimony that

LTT was rendered virtuously worthless as a result of Defendants’ actions, are

factually and legally sufficient to support the jury’s award of $7.9 million in lost

market value. Phillips, at *11.

c. $7.9 million is within the range of evidence of LTT’s lost fair

market value, particularly in light of the mitigation instruction.

“Where there is proof to support a range of damage options, the mere fact

that nothing in the record shows how the jury arrived at a specific amount is not

fatal to the verdict.” McMillin v. State Farm Lloyds, 180 S.W.3d 183, 202 (Tex.

App.—Austin 2005, pet. denied). Consequently, “‘[e]vidence corresponding to the

precise amount found by the jury is not essential’ in order to withstand a legal-

sufficiency challenge.” Pleasant, 260 S.W.3d at 559. A damage award “is not per

se arbitrary because it does not match up precisely with figures presented by expert

testimony.” Id. at 560. As long as there is a rational basis for the award, “a jury’s

finding will not be disregarded merely because its reasoning in arriving at the

award may be unclear.” Id. at 559.

At Defendants’ request the jury was instructed in the damages question to

reduce LTT’s damages by amounts “LTT could have avoided by the exercise of

reasonable care.” App.4 Q6. Defendants do not contend that the jury did not

follow the mitigation instruction; their brief is silent on the issue. The evidence on

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mitigation provided an independent basis for the jury to find LTT’s fair market

value was $7.9 million.

Berry testified that the pre-breach value of LTT was $13.8 million, and post-

breach LTT was “virtually worthless” except for the value of equipment that could

be sold for “about 60 percent of the historical cost.” 8RR102-03. The historical

cost of the equipment was $1,360,000. PX416 at 19RR471. Berry also testified

that, after Defendants’ breach, LTT sold the land on which the hospital was built

for $4-5 million. 9RR164-65. Based on this evidence, the jury could have found

LTT suffered a fair market value loss of $13.8 million but that the loss could be

mitigated by the sale of equipment and land. If the jury followed the mitigation

instruction, it easily could have found damages of $7.9 million. Indeed, if the jury

reduced the damages by exactly 60% for the equipment and $5 million for the land,

the damages would be $7,984,000—within 1% of the $7.9 million awarded. When

combined with evidence that $7.9 million was the price Defendants agreed to pay

for LTT’s hospital, it is plain that the record supports the jury’s award of $7.9

million for the lost fair market value of LTT.

d. Relying on the agreed purchase price does not conflict with the

summary judgment ruling regarding section 2.

Defendants argue that the verdict may not rest on the agreed $7.9 million

purchase price under the LOI, because “allowing LTT to recover the amount Berry

and McDonald would have received under Section 2 conflicts with Judge

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Yelenosky’s summary judgment order.” Brief at 44. As is discussed in LTT’s

opening brief of appellant, the summary judgment as to section 2 was error. If this

Court agrees, it need not address this argument challenging the damages award.

In addition, looking to the agreed consideration does not ipso facto

transform the award into impermissible benefit of the bargain damages.

Defendants cite no authority for the proposition that the consideration

contemplated by the parties cannot provide the “fair market value” of property, if

that is an appropriate measure of consequential damages for a contract claim. 8

Indeed, that is exactly what the Court in Phillips did: the consideration

contemplated in the contract between the defendant and plaintiff was sufficient to

establish the lost fair market value caused by the defendant’s tortious interference

with the plaintiff’s contract. 2015 WL 2148951 at *11.

Bohnsack v. Varco, L.P. is instructive. 668 F.3d 262 (5th Cir. 2012).

Bohnsack arose out of negotiations between an inventor and the defendants to

patent and acquire a cleaning device for drilling fluids. The parties “agreed in

principle” on the amount defendants would pay to acquire the invention. Id. at

270-71. The negotiations fell through and a dispute arose over the harm caused by

8

Defendants cite Haase v. Glazner, which holds that a party cannot recover benefit of the

bargain damages for a fraud claim when the contract is unenforceable. 62 S.W.3d 75, 800 (Tex.

2001). LTT sought lost fair market value as consequential, not benefit of the bargain, damages,

and Defendants do not argue on appeal that the other provisions of the LOI (e.g., sections 3, 6

and 9) were unenforceable, making Haase inapposite.

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the delay and defendants’ actions. The jury awarded the inventor $600,000 as

benefit-of-the-bargain damages for the fraud claim and $600,000 as reasonable

royalty damages for the misappropriation of trade secrets claim. Id. at 272. The

Fifth Circuit reversed the $600,000 benefit-of-the-bargain award because the

“agree[ment] in principle” was not an enforceable contract between the parties. Id.

at 275-76. However, the Fifth Circuit upheld the $600,000 reasonable royalty for

misappropriation based on the consideration contemplated in the unenforceable

“agree[ment] in principle,” holding that the “terms negotiated between [the parties]

are sufficient evidence to prove the value” of the confidential information. Id. at

280. Similarly, while Judge Yelenosky found section 2 unenforceable, the

consideration agreed by the parties under the LOI is sufficient to support the

amount of loss in fair market value to LTT. Id.; see also Pleasant, 260 S.W.3d at

559 (holding purchase price agreed to by parties constitutes sufficient evidence of

property’s value as represented).

e. The measure of damages does not impermissibly “mix and

match” methodologies to calculate fair market value.

Defendants contend that LTT cannot “mix and match” measures of lost fair

market value other than the net income method Berry used. Brief at 45. That

contention is without merit; in Phillips, the Court considered three different lost

fair market value damage methodologies. 2015 WL 2148951 at *5-6 & 11.

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The requirement that a party determine lost profits based on “one complete

calculation” does not mandate a single damages methodology. For example, while

Holt Atherton held that lost profits must be determined by “one complete

calculation,” this Court subsequently explained that Holt Atherton applies to the

calculation itself rather than the damage model. Compare Holt Atherton

Industries, Inc. v. Heine, 835 S.W.2d 80, 85 (Tex. 1992) with Springs Window

Fashions Div., Inc. v. Blind Maker, Inc., 184 S.W.3d 840, 887, 889 (Tex. App.—

Austin 2006, pet. granted, judgm’t vacated w.r.m.) (holding “there is sufficient

evidence that [plaintiff] incurred lost profits damages based on two measures,” and

suggesting remittur to allow recovery under the larger measure).

The jury could determine LTT’s lost fair market value by considering the

testimony and Defendants’ judicial admissions. Id.; see also Phillips, 2015 WL

2148951 at *5-6 & 10-11; Pleasant, 260 S.W.3d at 560 (the “jury can depart from

expert valuations if other evidence presented at trial is sufficient for them to do

so,” and holding that five different appraisal models gave the jury a range of values

to support damages awarded). Based on Texas law and the totality of the record,

the evidence is sufficient to support the damages awarded.

3. Berry’s testimony was not conclusory or speculative.

Defendants contend that Berry’s opinion of LTT’s lost market value was

conclusory, speculative, and “lacking in reasonable certainty.” Brief at 31-38. That

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contention is wrong, but as discussed above, even without Berry’s testimony, the

evidence is sufficient to support the jury’s $7.9 million award.9

Further, Defendants failed to object or request a limiting instruction to

Berry’s testimony regarding market value, so any challenge to the sufficiency of

that testimony is waived. See Coastal Transp. Co., Inc. v. Crown Central

Petroleum, 136 S.W.3d 227, 229 (Tex. 2004) (objection required to preserve

challenge to “underlying methodology, technique, or foundational data used by

expert witness); City of Dallas v. Redbird Development Corp., 143 S.W.3d 375,

385 (Tex. App.—Dallas 2004, no pet.) (complaint about lost profit calculations by

plaintiff’s president constituted an “attack on the methodology, technique, and

foundational data” that defendant failed to preserve); Duke Energy Field Services,

L.P. v Meyer, 190 S.W.3d 149, 153 (Tex. App.—Amarillo 2005, pet. denied)

(defendant’s failure to object or seek limiting instruction to owner’s opinion

evidence “waived its complaint to the general admission of the evidence.”)

When an expert’s “underlying methodology is challenged, the court

‘necessarily looks beyond what the expert said,’” so a timely objection is required

for the court to “evaluate the underlying methodology, technique, or foundational

data.” Crown Central, 136 S.W.3d at 233. Here, Defendants attack Berry’s

9

Defendants do not dispute that Berry, as LTT’s CEO and managing member with familiarity of

LTT’s operations and assets could testify regarding the value of LTT and its assets. Reid Road

Mun. Utility Dist. No. 2 v. Speedy Stop Food Stores, Ltd., 337 S.W.3d 846, 854-55 (Tex. 2011).

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methodology, technique, and foundational data, contending that he failed to

explain: (i) “key pieces of his pro forma,” (ii) his reliance on an allegedly

“factually incorrect pro forma,” (iii) “his assumed ‘extraordinarily high’ occupancy

rate,” (iv) “inconsistencies in his testimony,” and (v) his use of a three-year

multiplier. Brief at 34-38; City of Dallas, 143 S.W.3d at 385. Those challenges

require this Court to “look beyond” what Berry said to evaluate the reliability of

his testimony, and thus Defendants failed to preserve them.

On the merits, Berry sufficiently explained and tendered facts on lost fair

market value. See City of Dallas, 143 S.W.3d at 386 (lost profits testimony not

conclusory where expert tenders facts to support conclusions). Berry testified that

as managing member and CEO of LTT, he has personal knowledge of LTT and its

assets. 6RR98-99. He explained that the definition of fair market value was the

price a willing buyer would pay a willing seller. 8RR100. Berry testified that the

loss in fair market value as a result of Defendants’ conduct was “approximately

$13.8 million.” 8RR100-01. Berry testified that he determined that loss by using

the net income methodology to calculate LTT’s fair market value prior to the

breach, and then subtracting LTT’s remaining value after Defendants’ breach.

8RR101-03. Berry, who was an experienced CPA and hospital administrator,

testified that the net income methodology was generally recognized as a valid

methodology and described how it is used. 8RR101-02. Berry explained that

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valuations are determined by multiplying EBITDA 10 by a period of time that is

“typically between three and seven years,” and that he used a three-year multiplier

because LTT had not yet begun operations. Id. Berry explained that he arrived at

EBITDA using a detailed, 48-month financial pro forma that he compiled and used

for LTT long before Defendants’ misconduct came to light. 8RR102, 82-83;

RX416. Berry testified that the pro forma was based on a model that he had used

many times, it had proven to be reliable, and he tailored it to LTT using objective

data. 8RR84-85. Berry provided detailed information about how specific line

items in the pro forma were developed and calculated. 8RR85-89.

LTT’s damages expert, Tom Glass, testified that he analyzed Berry’s pro

forma and vouched for “the reasonable certainty of the numbers.” 13RR34-35, 37-

43; see also 8RR43-45. And while Defendants argue that Berry’s projected

occupancy rate of 81.6% was “extraordinarily high” (Brief at 37), Glass compared

Berry’s pro forma to SDP’s self-described “conservative” pro forma for the LTT

facility, and found that SDP projected even more admissions as well as a “95-

96%” occupancy rate. 13RR45-47; PX163. Glass testified that SDP’s projections

for the LTT facility were another factor establishing the reasonableness of Berry’s

pro forma. 13RR50. Glass also noted that Berry’s pro forma projected 22 beds per

10

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. 8RR101.

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day starting out, and ramped up in the following years, consistent with Berry’s

testimony about the developing market. 13RR121.

Taken together, the evidence is sufficient to support the jury’s award. See

City of Dallas, at 386 (where expert tendered evidence to support lost profits

testimony, it is the role of the jury to sort out the evidence and act as “the sole

judge of the witnesses’ credibility and the weight to be given their testimony”).

4. The loss in fair market value was foreseeable.

Consequential damages “result naturally, but not necessarily from the acts

complained of.” Basic Capital Mgmt., Inc. v. Dynex Commercial, Inc., 348

S.W.3d 894, 901 (2011). To be recoverable, consequential damages must be

foreseeable and directly traceable to the defendant’s wrongful act and result from

it. Stuart v. Bayless, 964 S.W.2d 920, 921 (Tex. 1998) (per curiam).

Whether consequential damages are foreseeable is an objective inquiry that

asks whether the breaching party had reason to foresee the loss as a probable result

of the breach at the time the contract was made. See Restatement (Second) of

Contracts § 351 cmt. a (1981) (“[T]he party in breach need not have made a ‘tacit

agreement’ to be liable for the loss. Nor must he have had the loss in mind when

making the contract, for the test is an objective one based on what he had reason to

foresee.”). A loss is foreseeable if it follows from the breach “(a) in the ordinary

course of events, or (b) as a result of special circumstances, beyond the ordinary

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course of events, that the party in breach had reason to know.” Basic Capital, 348

S.W.3d at 902 (quoting Restatement (Second) of Contracts § 351 (1981)). Because

the inquiry is focused on what the party in breach “had reason to know” or what

loss follows in “the ordinary course of events,” proving foreseeability does not

require direct evidence that the parties anticipated the specific loss at the time the

contract was made. Id. at 902–03.

The Texas Supreme Court recently reaffirmed this principle. In Basic

Capital, a lender, Dynex, agreed to provide $160 million in financing to Basic for

real estate investments. 348 S.W.3d at 896–97. Soon thereafter, market interest

rates rose, making the terms unfavorable to Dynex. Id. at 897. When Dynex

refused to provide further funding, Basic sued for breach of contract. Id. At trial,

the jury found that Dynex breached the agreement and awarded Basic damages for

the increased costs it paid in obtaining alternate financing for some investments

and for the profits it lost from other investments for which it could not find

alternate financing. Id. at 897–98. The court of appeals held “that Basic could not

recover lost profits as consequential damages for Dynex’s breach of the [$160

million commitment] because there was no evidence that Dynex knew, when it

made the Commitment, what specific investments would be proposed, or that other

financing would not be obtainable.” Id.

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The Supreme Court reversed. Id. at 896. The Court held that to be “liable

for the consequential damages resulting from a breach of a loan commitment, the

lender must have known, at the time the commitment was made, the nature of the

borrower’s intended use of the loan proceeds but not the details of the intended

venture.” Id. at 903. The Court found that the evidence supported a finding that

“Dynex knew that Basic’s purpose in arranging the $160 million commitment was

to ensure financing” for real estate investments. Id. As for the foreseeability of the

lost profits resulting from a breach of that agreement, the Court held:

Dynex certainly knew that if market conditions changed and interest

rates rose, its refusal to honor the Commitment would leave Basic

having to arrange less favorable financing.…Certain that its breach

would increase Basic’s costs, Dynex cannot profess blindness to the

foreseeability that its breach would also cost Basic business.

Id.

Here, there is ample evidence that at the time Defendants entered into the

LOI, they had reason to know that a breach of the LOI to gain a competitive

advantage over LTT would cause the value of LTT and its confidential information

to decrease. To begin with, Defendants touted their prior experience developing

hospitals. 11RR121-28, 132-33, 215-16; 12RR139-40. Before entering the LOI,

Defendants recognized that LTT was a competitor hospital with a substantial head

start on construction. PX25; 10RR167-68; 11RR9-10. Defendants investigated

LTT to determine its impact on LRMC, including by having Sossi trespass on

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LTT’s closed construction site. 13RR7-8; see also 12RR175-76; 13RR22. During

the project review, Defendants asked LTT to delay announcing LTT’s plans to

open as a general acute care hospital. 11RR12-14: 12RR24-25. This was shortly

before Defendants met with HUD, and the evidence shows that Defendants were

aware that HUD’s knowledge of a nearby competitor could be detrimental to the

HUD loan—which was Defendants’ “only viable option” to finance LRMC.

11RR20-22, 40-41, 63-64. Defendants considered information provided to HUD

about LRMC to have been submitted confidentially, and Defendants recognized

that such information in the hands of a competitor could cause “substantial

competitive harm.” PX187 at 3. Based on this evidence, the jury could reasonably

infer that Defendants, as experienced hospital developers in economic conditions

that Alexander recognized were “as bad as I’ve ever experienced in my career,”

could reasonably foresee that breaching the LOI to gain a competitive advantage

would diminish the market value of LTT’s nearby facility.

LTT halted construction at Defendants’ request, at considerable expense.

6RR151-53. Berry testified that delay was one reason the LOI included the best

efforts provision. Id. The parties also agreed to the exception to section 6 that

allowed LTT to continue discussions with potential equity investors because they

recognized that LTT planned on opening and operating its facility if the LOI

transaction was not consummated. CE3:0:18:43-0:23:53. And during closing

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argument, Defendants’ counsel conceded Defendants foresaw the possible impact

of their actions on LTT’s value:

I want to note the concept of foreseeability. I want to note that every

one of these damage questions that you’re going to be required to

answer means that you will—if you write a number in there, you’ll be

required to find that the defendants foresaw, they were able to foresee

the consequences of these actions. I guarantee you when Frank Sossi

sent that letter—sent that e-mail, he had no idea that the plaintiff

would come back and say that cost them $34 million. It’s just not

even realistic. He thought the facility, if they did it, was worth 7 max.

14RR112 (emphasis added).

Finally, because of the sensitive nature of the information and the potential

competitive impact that could result from a breach, the parties agreed that breach

of the confidentiality and non-circumvention provisions of the LOI would mean

that “material and irreparable harm shall be presumed,” that injunctive relief would

be appropriate, and that the non-breaching party would “be entitled to seek all

other rights or remedies which the Party may have in law or equity.” App.1 §10.1.

The parties thus anticipated broad available relief for any breach.

5. Ample evidence supports the jury’s award of $790,000 in lost fair

market value for the confidential information

Evidence also supports the jury’s finding of $790,000 in lost fair market

value of LTT’s confidential information.11 Berry testified based on his personal

knowledge that the fair market value of the confidential information was $7.9

11

The $790,000 award was not included in the judgment because LTT elected to recover the

$7.9 million in lost fair market value to LTT. This Court may render judgment for $790,000 if it

determines that the $7.9 million award is unsupported.

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million before Defendants’ breach and was rendered virtually worthless as a result

of the breach. 8RR104-06, 161-62. The jury found that the lost fair market value

was $790,000, a number falling within the pre-breach and post-breach values. As

discussed above, “[w]here there is proof to support a range of damage options, the

mere fact that nothing in the record shows how the jury arrived at a specific

amount is not fatal to the verdict.” McMillin, 180 S.W.3d at 202. The evidence

presented by Berry’s testimony provided both the method and range from which

the jury could arrive at its verdict, and the jury’s award should be upheld on that

basis alone.

Defendants again ignore the instruction regarding mitigation. Defendants

argued that LTT could have reduced its damages by commencing operations and

earning profits. SDP projected that profits from the LTT facility could generate

$7-8 million of profits in its first five years of operation, broken out on a yearly

basis. PX163; 13RR45-50; 11RR61. Similarly, LTT presented evidence, also

broken out on a yearly basis, that it could have earned profits of up to $34.5

million over five years. PX416; 8RR82-89; 13RR34-50. While LTT does not

believe that its damages were subject to mitigation, the evidence presented to the

jury was sufficient to allow it to determine that the loss in market value to LTT of

$7.9 million may have been reduced by mitigation to $790,000. The jury’s

damages award falls within the range provided and is supported by evidence.

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6. In the alternative, remand is proper because there is evidence of some

damages.

In the alternative, if this Court determines that there is no evidence to

support the specific damage awards, it should remand rather than rendering a take-

nothing judgment because there is evidence of some damage to LTT. “Remand in

the interests of justice is appropriate in a case where the plaintiff has proved

liability and that he has sustained some loss as result, but has failed to prove the

amount of damages with reasonable certainty.” Rojas v. Duarte, 393 S.W.3d 837,

846 (Tex. App.—El Paso 2012, pet. denied); see also Tex. R. App. P. 43.3.

C. SDP’s argument that it is not a party to the LOI fails again.

SDP repeats its argument that it was not a party to the LOI and as a result

cannot be liable for breach of the LOI. Judge Yelenosky and Judge Livingston

rejected this argument, and it should fare no better in this Court.

1. SDP waived any complaint that it was not a party to the LOI.

The charge defined “Letter of Intent” as “the letter agreement between LTT

and SDP dated September 15, 2009.” App.4 at 12999. SDP did not object to this

definition, and SDP cannot complain on appeal that it was not a party to the LOI

and should not have been included in the charge questions regarding breach and

damages. See Osterberg v. Peca, 12 S.W.3d 31, 55-56 (Tex. 2000) (sufficiency of

the evidence is measured under the charge). SDP’s argument regarding its party

status can be disposed of on that basis alone.

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2. An agent may be personally liable on contracts made for the benefit of

his principal—even where the principal is disclosed.

SDP argues that, because it disclosed its agency relationship with LRMC, it

cannot be held liable under the LOI. Brief at 58-59. But it is well established that

an agent can be personally liable under a contract, even if the agent discloses that

he is acting on behalf of a principal. See American Nat’l Bank of Houston v. Am.

Loan & Mortg. Co., 228 S.W. 169, 171 (Tex. Comm’n App. 1921, judgm’t

adopted) (“An agent, although his agency is known and who has authority to bind

his principal through contract, is not precluded from binding himself personally

upon such contract.”). “The mere fact that an agency relationship exists does not

preclude the imposition of personal liability on an express contract with a third

party, even though the contract is primarily for the benefit of the principal.”

Instone Travel Tech Marine & Offshore v. Int’l Shipping Partners, Inc., 334 F.3d

423, 428 (5th Cir. 2003). Instead, where an agent “has pledged his own

responsibility in addition to that of his principal, he will be bound accordingly.”

American Nat’l, 228 S.W. at 171. The agent’s liability is thus not predicated upon

the agency relationship, but on the contractual obligations the agent undertakes.

Id. When the agent has expressed in the contract “an interest of his own, together

with his principal, both principal and agent may be held upon the contract.” Id.

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3. SDP identified itself as a party to the LOI and obligated itself under

the LOI and is consequently individually liable for breach of the LOI.

SDP is identified as a Party to the LOI in section 9, which concerns the

confidentiality of the Proprietary Information:

[A]ll information disclosed by any Party or its Representatives at any

time to any other Party or its Representatives in connection with the

Project in any manner shall be deemed “Proprietary Information.”

The term “Representative(s)” means, in the case of LRMC or SDP,

any director, officer, employee, member, shareholder, or agent of

LRMC or SDP engaged in the evaluation of the Project. . . .

PX2 at §9.1 (emphasis added). If, as SDP contends, it were acting solely as the

agent of LRMC, then SDP would have been included among LRMC’s unnamed

Representatives, just as LRMC’s other agents were. Instead, the LOI lists SDP as

a Party with its own Representatives. Berry testified that this language in the LOI

meant that both LRMC and SDP were parties to the LOI. 9RR173-174.

In addition, SDP had affirmative obligations under the LOI. For example,

SDP took on financial obligations in exchange for disclosure of the Proprietary

Information:

In consideration of the Principals’ willingness to enter into this Letter

of Intent and disclose Proprietary Information relating to the Lease

and the Facility to SDP and LRMC, SDP shall cause LRMC to deposit

as earnest money the amount of $50,000. . .

App.1 at §4 (emphasis added).

Despite this and other similar covenants (e.g., the provisions of sections 6

and 9 imposing affirmative obligations on each of the Parties regarding the

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treatment of information exchanged during project review), SDP relies on a single

sentence in the LOI to attempt to insulate itself from liability:

Surgical Development Partners, LLC, (“SDP”) is pleased to submit

this Letter of Intent, as the agent for LRMC, to each of you

(collectively, the “Principals”) (each a “Party” and collectively the

“Parties”) …

Brief at 58. But rather than show that SDP has no independent interest in the

agreement, the sentence includes SDP as a Party. The same paragraph further

confirms SDP’s party status:

The objective of this Binding Letter of Intent is to indicate SDP’s

interest in the Project and to establish the ground rules for the

ongoing exchange of information between the Parties to facilitate the

development of the Project and the exchange of information required

for such a process to succeed. To clarify this relationship and to best

protect the interests of all of the Parties, the Parties hereto agree as

follows: . . . .

App.1 at 1 (emphasis added). Consistent with this, Alexander signed the LOI as

President and CEO of SDP (printing it on SDP letterhead)—not as an agent of

LRMC. App.1 at 1, 7; 6RR149; 9RR173-74.

LTT’s lawyer in the negotiation of the LOI testified that both SDP and

LRMC are parties to the LOI because they are defined as “Parties.” CE3:0:4:49-

0:6:21&0:9:47-0:10:09; see also CE3:0:6:21-0:8:45. Similarly, Sossi, who drafted

the LOI on behalf of Defendants, also considered SDP to be a party to the LOI in

an email he wrote to LTT’s landlord before this lawsuit was filed:

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Based on our Letter of Intent with [LTT] … we are greatly concerned

that the Section 6 (Standstill and Non-Circumvention) and Section 9

(Confidentiality) provisions of that Letter of Intent, both of which

survive any termination of that Letter of Intent, require your Tenant to

have positive obligations to SDP and LRMC regarding any

information exchanged related to the Letter of Intent.

PX442 at 2 (emphasis added).

SDP is plainly a party to the LOI. SDP’s argument that it can avoid liability

simply by disclosing its principal fails, as a matter of law, because it incorrectly

“presupposes that an agent is necessarily not liable on a contract where the other

party is aware that it is acting as an agent.” Instone Travel, 334 F.3d at 430;

Mediacomp, Inc. v. Capital Cities Comm’n, Inc., 698 S.W.2d 207, 211 (Tex.

App.—Houston [1st Dist.] 1985, no writ) (“an agent of a known principal may be

personally liable if the agent…has pledged his own responsibility in addition to

that of his principal”).

4. The LOI is not ambiguous regarding SDP’s party status, and no jury

question was proper.

SDP asserts that the LOI is ambiguous regarding whether SDP was a party

to it, and there should have been a jury question as to its party status. Brief at 59.

That contention is without merit, for several reasons.

First, SDP did not plead ambiguity, so it cannot raise that issue now.

1CR2659-64; Tex. R. Civ. P. 94. SDP also waived any charge error by failing to

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object to the definition of LOI as being the “letter agreement between SDP and

LTT.” App.4 at 12999.

On the merits, the LOI terms and evidence discussed above in Section C.3

establish that the LOI is unambiguous regarding whether SDP is a party.

5. There is ample evidence that SDP breached the LOI.

SDP argues that it did not breach the LOI, but its argument is based on the

false premise that only Sossi communicated with HUD in breach of the LOI, and

he did so on behalf of LRMC only. Brief at 60-61. The evidence shows that at all

times, Sossi was a co-owner, board member, and general counsel for SDP.

10RR156-57; 12RR79-81. Sossi copied SDP officers and/or employees on the

May 10 e-mail and other LTT-related communications to HUD. App.5; PX184;

PX187; PX188; PX191; PX428; PX432; PX488. After receiving the May 10

email, HUD reached out to others at SDP to verify “Mr. Sossi’s facts.” App.5;

10RR16; see also 1CR2170. Sossi claimed the protections of the LOI for both

SDP and LRMC. PX442.

The jury could reasonably infer from the evidence that Sossi sent the May 10

e-mail, as well as other communications to HUD, on behalf of SDP and LRMC. In

addition, SDP communicated with HUD about LTT in respect to the FOIA request

and LTT’s June 11, 2010 letter. 11RR112-14. Those communications on behalf

of SDP provide additional support for the jury to infer, given Sossi’s many

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overlapping roles, that Sossi’s communications with HUD were made for both

SDP and LRMC.

D. The trial court properly charged the jury on breach of contract and damages.

Question 1 of the charge is a plain-vanilla, broad form PJC breach of

contract question, and Question 6 is the corresponding broad form damages

question. App.4. Defendants argue that the broad form questions were flawed

under Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000), because they

impliedly mixed valid and invalid liability theories. Specifically, Defendants argue

that the jury could have based its findings on section 2 of the LOI, which Judge

Yelenosky had ruled was unenforceable. This challenge to the charge fails for two

reasons.

First, the charge did not impliedly instruct the jury on an invalid liability

theory. As is discussed in LTT’s Cross-Appellant’s Brief, section 2 was

enforceable and should not have been dismissed on summary judgment. Because

section 2 was enforceable, there was no reason to exclude it from the breach of

contract questions in the charge. See Traxler v. Entergy Gulf States, Inc., 376

S.W.3d 742, 751 (Tex. 2012) (finding no Casteel problem when underlying

liability theories are valid); Casteel, 22 S.W.3d at 388 (requiring submission of an

invalid theory before presuming harm); see also Tex. Dept. of Assistive &

Rehabilitative Servs. v. Abraham, No. 03-05-00003-CV, 2006 WL 191940, at *7,

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n.8 (Tex. App.—Austin Jan. 27, 2006, no pet.) (mem. op.) (declining to remand

under Casteel where jury question included multiple liability theories, all of which

were valid). If this Court determines that section 2 is enforceable there is no need

to address this charge issue further.

Second, even if section 2 is not enforceable, the court did not err by

submitting the liability and damages questions in broad form. Texas law does not

require granulation of each individual factual allegation in support of a single

liability theory such as breach of contract, particularly when there was no

discussion of breach of section 2 at trial.

1. Background on broad-form submission and Casteel

Texas law requires the broad-form submission of jury questions whenever

feasible. Tex. R. Civ. P. 277; see also Tex. Dep’t of Human Servs. v. E.B., 802

S.W.2d 647, 649 (Tex. 1990) (requiring broad-form submission “in any or every

instance in which it is capable of being accomplished.”). In Casteel, the Supreme

Court recognized a limited exception to this rule when a question mixes valid and

invalid liability theories, thus injecting error into the question and making it

impossible for the appellate court to determine whether the jury based its answer

solely on the invalid theory. Casteel, 22 S.W.3d at 388. In those circumstances,

the error may be presumed harmful. Id. The Court has since expanded Casteel to

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other contexts, such as broad-form damages questions that list invalid elements.

See Harris County v. Smith, 96 S.W.3d 230, 235 (Tex. 2002).

However, the Court has cautioned against expanding the doctrine too far. In

Bed, Bath & Beyond, Inc. v. Urista, the Court explained:

When, as here, the broad-form questions submitted a single liability

theory (negligence) to the jury, Casteel’s multiple-liability-theory

analysis does not apply.

211 S.W.3d 753, 757 (Tex. 2006) (emphasis added). And in Thota v. Young the

Court cautioned against allowing the Casteel exception to swallow the rule:

Notwithstanding Casteel’s presumed harm analysis in situations that

erroneously commingle valid and invalid theories of liability, we have

repeatedly reaffirmed our longstanding, fundamental commitment to

broad-form submission.

366 S.W.3d 678, 689 (Tex. 2012); see also Harris County, 96 S.W.3d at 235

(“Neither our decision today nor Casteel is a retrenchment from our fundamental

commitment to broad-form submission.”).

These limits make sense if broad-form submission is to survive in any

meaningful way. A fundamental component of broad-form submission is that the

jury need not agree on the individual factual allegations, “so long as they agree on

the legally relevant result.” Dillard v. Texas Elec. Co-Op, 157 S.W.3d 429, 434

(Tex. 2005). For example, jurors may agree that a defendant was negligent, “even

if half believed the negligent act was overloading his truck and half believed it was

failing to warn oncoming traffic . . .” Id.

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The general rule thus remains that, in a case involving a single liability

theory such as negligence or breach of contract, the court should submit the claims

to the jury in broad form rather than granulated to individual factual allegations.

See Thota, 366 S.W.3d at 689 (negligence); Urista, 211 S.W.3d at 757

(negligence); Powell Elec. Sys., Inc. v. Hewlett Packard Co., 356 S.W.3d 113, 123-

24 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (contract); Rough Creek Lodge

Operating, L.P. v. Double K Homes, Inc., 278 S.W.3d 501, 509 (Tex. App.—

Eastland 2009, no pet.) (contract). Otherwise, the Casteel exception would

swallow the rule.

2. Casteel granulation is not required unless the alleged invalid theory

was presented to the jury at trial.

The typical scenario triggering Casteel arises when the charge injects error

by instructing the jury to consider an erroneous liability theory or damages

element. See, e.g., Casteel, 22 S.W.3d at 387 (single question instructed jury on

thirteen listed liability grounds, several of which were invalid); Harris County, 96

S.W.3d at 231-232 (damages question instructed the jury it could consider

unsupported elements of damages); Columbia Rio Grande Healthcare, L.P. v.

Hawley, 284 S.W.3d 851, 865 (Tex. 2009) (submission of invalid theory under

Casteel involves a “trial court’s error in instructing a jury to consider erroneous

matters.”). That is not the situation here—the standard, broad-form jury questions

at issue did not reference section 2 or suggest to the jury that it should consider

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Defendants’ breach of section 2 in determining liability or damages. App.4 at Q1,

Q6. Instead, Defendants’ Casteel argument is based on the assumption that,

because the broad-form questions did not instruct the jury to exclude section 2,

they impliedly mixed invalid and valid liability theories.

Courts have struggled with defining precisely when individual factual

allegations related to a claim constitute separate liability theories that require

granulation. There is no doubt, however, that Casteel is not triggered unless the

alleged invalid issue was presented to the jury at trial. Here, there was no evidence

or argument at trial regarding breach of section 2.

a. Factual allegations underlying breach of contract do not need to

be granulated.

“When a plaintiff alleges that multiple instances of the same kinds of acts

committed by the same defendant result in liability for the same cause of action, it

is an open question as to whether the acts constitute multiple theories of liability or

simply multiple factual allegations supporting a single theory of liability.” Memon

v. Shaikh, 401 S.W.3d 407, 416 (Tex. App.—Houston [14th Dist.] 2013, no pet.).

Courts have come down on both sides of this issue.12 Defendants ignore this split

in authority, and instead cite only to a limited set of cases that have required

Casteel granulation. See Brief at 52-55.

12

LTT has been unable to identify any Third Court cases on this issue; nor did Defendants cite

any.

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The bulk of authority, however, agrees that Casteel does not require the

granulation of factual issues related to a single liability theory, such as negligence

or breach of contract. See, e.g., Urista, 211 S.W.3d at 757 (“Where, as here, the

broad-form questions submitted a single liability theory (negligence) to the jury,

Casteel’s multiple-liability-theory analysis does not apply.”); Thota, 366 S.W.3d at

681-82, 693 (plaintiff alleged five different reasons why the defendant doctor was

negligent, but court concluded that the case involved only one liability theory,

negligence, and held that granulation of inferential rebuttal and defensive theories

was not required) 13; Shelby Distributions, Inc. v. Reta, 441 S.W.3d 715, 718-19

(Tex. App.—El Paso 2014, no pet.) (Casteel’s presumed-harm rule did not apply to

a single broad-form liability question because that question involved only one

liability theory—retaliatory discrimination); Memon, 401 S.W.3d at 416 (plaintiff

13

In Thota and Urista, the Supreme Court makes clear that a negligence claim is a single liability

theory under Casteel. The Court has not yet analyzed whether a breach of contract claim should

be treated the same way, but the appellate courts that have analyzed this question agree that

breach of contract is a single liability theory, like negligence. Defendants ignore these cases, and

instead focus on a single decision in Morrison, which involved a statutory claim for adverse

employment actions. See Texas Comm’n on Human Rights v. Morrison, 381 S.W.3d 533 (Tex.

2012) (per curiam). The Labor Code mandates, as a jurisdictional prerequisite to suit, that the

plaintiff first file a charge of discrimination with the EEOC. Tex. Lab. Code §§ 21.201, 21.254.

The plaintiff in Morrison failed to file an EEOC charge on her claim of failure to promote, but

nevertheless presented evidence at trial that she was denied a promotion. The Court found error

under Casteel where the charge asked if the defendant had taken “adverse personnel actions”

without limiting the jury’s consideration of the denied promotion. Id. at 537. The Morrison

opinion does not explain why “negligence” is a single liability theory and “adverse personnel

actions” are not, but logically the unique statutory requirements for a Labor Code cause of action

are the difference. Because the statute mandates EEOC exhaustion as a jurisdictional matter,

every factual allegation that could give rise to liability under the statute must be treated as an

independent liability theory. Regardless, as set forth below, Morrison is distinguishable because

denied promotion was an issue actually presented to the jury at trial.

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had alleged defamation liability based on multiple statements; the court held that

“on the facts of this case, in which each factual allegation required proof of the

same elements and resulted in the same injuries, only one theory of liability was

presented.”); Formosa Plastics Corp., USA v. Kajima Int’l, Inc., 216 S.W.3d 436,

455 (Tex. App.—Corpus Christi—Edinburg 2006, pet. granted, judg’t vacated by

agrt.) (rejecting defendant’s argument that fraud question should have included

separate answer blanks for each of the contracts at issue because “Casteel applies

to multiple theories of liability; by contrast, the instant situation involves only

one—fraud.”); Sunbridge Healthcare Corp. v. Penny, 160 S.W.3d 230, 254 (Tex.

App.—Texarkana 2005, no pet.) (case submitted under a single negligence theory

did not require Casteel granulation); Columbia Medical Center of Las Colinas v.

Bush, 122 S.W.3d 835, 858 (Tex. App.—Fort Worth 2003, pet. denied) (same).

In particular, two recent cases hold that breach of contract is a single liability

theory that does not need to be granulated under Casteel. Powell, 356 S.W.3d at

123-124; Rough Creek Lodge, 278 S.W.3d at 509. In Rough Creek the defendant

challenged submission of a contract question in broad form, claiming that it could

not determine the factual basis for the jury’s answer on appeal. The court of

appeals disagreed, explaining:

Unlike Casteel, [the plaintiff] asserted a single cause of action: breach

of contract. Merely because this required the resolution of multiple

fact questions does not convert it into multiple theories of liability.

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Unlike Harris County, the jury was not instructed to consider an

element of damage for which there was no evidence.

Rough Creek, 278 S.W.3d at 509 (emphasis added).

In Powell, the plaintiff alleged eleven different contract breaches. Powell,

356 S.W.3d at 123. The trial court submitted contract liability to the jury in broad

form. On appeal, the defendant argued that several of the breach theories were

invalid because they were not the cause of the alleged damages, and the charge

therefore included Casteel error. The court of appeals disagreed because breach of

contract was a single theory of liability and the trial court did not otherwise instruct

the jury to consider erroneous matters. Id. at 124. The court also noted that,

although there may have been evidence that the defendant breached the contract in

multiple ways, the plaintiff “never contended that any other breach caused

damages, so there was no risk that the jury might find damages based on evidence

of other breaches.” Id. at 123.

Here, like the defendants in Rough Creek and Powell, Defendants allege that

the court should not have submitted broad-form contract questions to the jury, but

instead should have limited the jury’s consideration to particular allegations of

breach. That argument ignores the case law that Casteel simply does not apply to

single liability theories.

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b. Casteel does not apply if the alleged invalid theory was not

before the jury at trial.

This Court does not need to resolve the question of precisely where to draw

the line between factual allegations and liability theories under Casteel because

Casteel does not apply unless the allegedly invalid “liability theory” was actually

presented to the jury at trial. See Powell, 356 S.W.3d at 123 (declining to apply

Casteel presumed harm in a contract case when the plaintiff never contended at

trial that invalid breach theories had caused damages, “so there was no risk that the

jury might find damages” on that basis); Benge v. Williams, __S.W.3d__, No. 01-

12-00578-cv, 2014 WL 6462352, at *11 (Tex. App.—Houston [1st Dist.] Nov. 18,

2014, n.p.h.) (“If one of the plaintiff’s legal theories does not support liability as a

matter of law and the plaintiff presented evidence to the jury on that theory that

may have led the jury to answer affirmatively the broad-form liability question

incorporating the invalid theory, there is a Casteel-type charge error.”) (citing

Hawley, 284 S.W.3d at 863-65).

Benge provides an excellent example of this concept. See Benge, 2014 WL

6462352. The plaintiff sued her surgeon for negligence in performing surgery and

in failing to obtain informed consent that a resident would assist. The plaintiff did

not plead informed consent, so that was an invalid liability theory. The charge

asked only a broad form liability question on negligence. In analyzing whether

there was Casteel error, the court of appeals determined that “[e]vidence regarding

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the disclosure issue was a major theme of [plaintiff’s] case and was explicitly

incorporated into liability questions asked of her expert.” Id. at *12. The court

concluded that the “disclosure theory was a primary theme of the case,” Id. at *15,

and for that reason the broad form question raised a Casteel issue:

The introduction of evidence admissible for multiple purposes does

not in itself create a Casteel problem. But the broad-form negligence

question here necessarily included a non-disclosure legal theory

because the evidence explicitly included standard-of-care questions on

informed consent.

Id. at *18.

Benge makes clear that Casteel is limited to cases where the plaintiff

advocated an invalid liability theory at trial that could have influenced the jury’s

decision. For Casteel presumed harm to apply, “the erroneous instruction must

have ‘probably prevented the appellant from properly presenting the case to the

court of appeals.’” Abraham, 2006 WL 191940, at *7 n. 8 (citing Romero v. KPH

Consol., Inc., 166 S.W.3d 212, 227 (Tex. 2005)). But where, as here, the invalid

theory was not advocated at trial, the jury could not have been misled, and the

defendant could not have been harmed by the submission of a broad form

question. 14

14

The presumption of harm under Casteel is not always a foregone conclusion; nor is the

inclusion of a flawed liability theory in a broad-form question always automatically reversible

under Casteel. Abraham, 2006 WL 191940, at *7 n.8. If the appeals court is “reasonably certain

that the jury was not significantly influenced by issues erroneously submitted to it” then the court

may find that any error was harmless. Id; see also Urista, 211 S.W.3d at 757 (under traditional

harm analysis, an incorrect jury instruction requires reversal only if it “was reasonably calculated

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The cases Defendants cite are distinguishable on this critical basis. In each

case, the invalid liability theory was prominently featured at trial. See Morrison,

381 S.W.3d at 537 (plaintiff presented evidence at trial that she was denied a

promotion); McFarland v. Boisseau, 365 S.W.3d 449, 450-51 (Tex. App.—

Houston [1st Dist.] 2011, no pet.) (jury found defamation liability on eight

statements listed in the charge but only two were properly before the jury); Sand

Point Ranch, Ltd. v. Smith, 363 S.W.3d 268, 275 (Tex. App.—Corpus Christi

2012, no pet.) (two groups of plaintiffs challenged a partition order; one group did

not have standing; court allowed both sets of plaintiffs to challenge the order at

trial and submitted only one question that failed to differentiate between the

parties); Clear Lake City Water Authority v. Kirby Lake Dev., Ltd., 123 S.W.3d

735, 739-41, 748 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) (only one of

three contract liability theories presented at trial was valid).15 In each case there

to and probably did cause the rendition of an improper judgment.”). Further, there was sufficient

evidence that Defendants breached sections 3, 6, and 9 of the LOI, and that those breaches

resulted in harm to LTT. Viewing the record as a whole, any alleged error in the charge did not

cause the rendition of an improper judgment. See Thota, 366 S.W.3d at 696 (where a reasonable

jury could resolve conflicting evidence either way, “we presume the jury did so in favor of the

prevailing party.”). That is particularly true here, where LRMC did not even challenge the

sufficiency of the evidence of its breach of LOI sections 3, 6, and 9.

15

Clear Lake was decided before Thota and Urista, which cautioned against applying Casteel

too broadly and held that Casteel does not apply in a case asserting a single liability theory.

Thota, 366 S.W.3d at 681-82; Urista, 211 S.W.3d at 757. Perhaps for this reason, the court in

Clear Lake did not analyze whether multiple theories of contract breach are independent liability

theories under Casteel. Id. at 753. However, that same court later acknowledged in Memon that

it is an “open question” whether factual allegations in support of a cause of action are “liability

theories” under Casteel. See Memon, 401 S.W.3d at 416. In light of subsequent case law, Clear

Lake is questionable authority on this issue.

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was a real possibility that the jury would base its decision on an invalid theory that

was actually litigated at trial, unless the charge instructed the jury not to do so.

There is no such possibility here.

c. LTT never advocated at trial that Defendants breached section 2

of the LOI.

Here, the charge did not instruct the jury to consider section 2 of the LOI.

Nor did LTT contend at trial that Defendants breached section 2 of the LOI, or that

any breach of section 2 caused LTT damages. When asked which contract

provisions LTT contended Defendants had breached, LTT’s Berry answered

“Sections 3, 6, [and] 9.” 8RR177. Berry testified that LTT contended Defendants

failed to use their best efforts in breach of section 3, and that they had used LTT’s

confidential and proprietary information in violation of sections 6 and 9. Id. There

was nary a discussion of any breach of section 2.16

Defendants nevertheless argue that the charge was flawed because it did not

limit the jury’s consideration to the specific contract provisions at issue. If this is

the law, then every contract case, regardless of the evidence at trial, will require

granulated submission, and any defendant in a breach of contract case can cherry-

pick random contract provisions, allege there was legally insufficient evidence in

16

As is discussed above in section B.2.a, reference to the agreed purchase price of a terminated

contract to establish value is proper and does not impermissibly seek to enforce that contract.

See Phillips, 2015 WL 2148951 at *11. Thus, any reference to section 2 to identify the

consideration agreed upon for LTT does not involve a claimed breach of section 2.

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support of breach of those contract provisions, and contend that a broad-form

question was therefore improper. That is not the law.

3. Defendants’ proposed instruction would not have cured any alleged

error and was otherwise improper.

The court properly refused Defendants’ requested instruction listing the

elements of a breach of contract claim. 3CR12972. That is a superfluous

instruction that would have confused the jury. Further, it would not have cured

any alleged Casteel issues.

“A trial court is afforded more discretion when submitting instructions than

when submitting questions.” GJP, Inc. v. Ghosh, 251 S.W.3d 854, 886 (Tex.

App.—Austin 2008, no pet.). A trial court has great latitude and considerable

discretion to determine necessary and proper jury instructions. Id.; see also

Abraham, 2006 WL 191940, at *8 (citing Louisiana-Pacific Co. v. Knighten, 976

S.W.2d 674, 676 (Tex. 1988)). When a trial court refuses to submit an instruction,

“the question on appeal is whether the request was reasonably necessary to enable

the jury to render a proper verdict.” Benge, 2014 WL 6462352, at *11. The court

should not reverse unless the refusal probably caused the rendition of an improper

judgment. United Pacific Railroad Co. v. Williams, 85 S.W.3d 162, 170 (Tex.

2002). Further, the “charge need not and should not burden the jury with surplus

instructions, even if the additional instructions are correct statements of the law.”

Ghosh, 251 S.W.3d at 887-88.

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The court did not abuse its discretion here. The instruction conflates legal

questions properly determined by the court, such as whether there was a valid,

enforceable contract, with the discrete factual questions properly before the jury,

such as whether the defendant failed to comply with the contract terms. See, e.g.,

Inimitable Group, L.P. v. Westwood Group Dev. II, Ltd., 264 S.W.3d 892, 899

(Tex. App.—Fort Worth 2008, no pet.) (“Whether an agreement is legally

enforceable or binding is a question of law.”); Gupta v. Eastern Idaho Tumor

Institute, Inc., 140 S.W.3d 747, 756 (Tex. App.—Houston [14th Dist.] 2004, pet.

denied) (“A trial court should not submit a pure question of law to the jury, but it

may submit a question that asks the jury to resolve a factual dispute regarding a

party’s failure to perform.”). Further, the instruction would have submitted

causation and damages to the jury twice; the charge had a separate question on

whether Defendants’ failure to comply resulted in damages. App.4 Q6.

The jury did not need to know the elements of a breach of contract claim in

order to determine whether Defendants failed to comply with the LOI; that is why

the PJC frames breach of contract questions as it does. Nor would an instruction

on the elements of a contract claim have directed the jury not to consider breach of

section 2 of the LOI. Moreover, instructing the jury that it can find a “failure to

comply” only when there is a “valid, enforceable agreement” to which the

defendants were “proper parties” asks the jury to speculate on questions not

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properly before it—without any guidance on what a “valid, enforceable contract”

or a “proper party” would be.

E. The fee award was proper.

For the reasons discussed above, this Court should affirm the judgment.

Because LTT can recover on its contract claim against Defendants, this Court

should affirm the fee award as well. Defendants stipulated as to the amount of the

fee award.

CONCLUSION AND PRAYER

As noted at the start of this brief, this case was well-tried, the jury’s findings

are well-supported, and judgment is proper. LTT respectfully prays that this Court

affirm the judgment in its entirety. In the alternative, LTT prays that the Court

render judgment for $790,000 in damages. In the further alternative, LTT prays

that this Court remand for a new trial in the interest of justice. LTT prays for such

additional relief to which it may be entitled.

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Respectfully submitted,

SCOTT DOUGLASS & MCCONNICO LLP

303 Colorado Street, 24th Floor

Austin, TX 78701

(512) 495-6300

(512) 495-6399 Fax

By: /s/ Jane Webre_________

Jane M.N. Webre

State Bar No. 21050060

jwebre@scottdoug.com

S. Abraham Kuczaj, III

State Bar No. 24046249

akuczaj@scottdoug.com

Robyn B. Hargrove

State Bar No. 24031859

rhargrove@scottdoug.com

COUNSEL FOR LTT

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CERTIFICATE OF SERVICE

I certify that the foregoing pleading was served on the following counsel of

record via the electronic noticing system and e-mail, on November 20, 2015.

Jeff Cody

Barton Wayne Cox

NORTON ROSE FULBRIGHT

2200 Ross Avenue, Suite 2800

Dallas, TX 75201-2784

Joy Soloway

NORTON ROSE FULBRIGHT

1301 McKinney, Suite 5100

Houston, TX 77010-3095

Robert A. Bragalone

B. Ryan Fellman

GORDON & REES, LLP

2100 Ross Avenue, Suite 2800

Dallas, TX 75201

Jessica Z. Barger

Raffi Melkonian

Wright & Close, LLP

One Riverway, Suite 2200

Houston, TX 77056

/s/ Jane Webre______

Jane Webre

CERTIFICATE OF COMPLIANCE

I certify that the foregoing instrument was prepared using Microsoft Word

2010, and that, according to its word-count function, the sections of the foregoing

pleading covered by TRAP 9.4(i)(1) contain 14,370 words.

______/s/ Jane Webre________

Jane Webre

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APP. 1

LTT v LRMC/SDP

exhibitsticker.com

No. D-1-GN-12-000983

PX0002

APP. 2

LTT v LRMC/SDP

exhibitsticker.com

No. D-1-GN-12-000983

PX0004

APP. 3

DC BK14294 PG476

Filed in The District Court

of Travis County, Texas

OCT 17 2014 RT

At 1:?Jc; 4 M.

CAUSE NO. D-1-GN-12-000983 Amalia Rodriguez-Mendoza, Cieri<.

LAKE TRAVIS TRANSITIONAL LTCH, § IN THE DISTRICT COURT OF

LLC n/k/a LAKE TRAVIS SPECIALTY §

HOSPITAL, LLC, §

§

v. § TRAVIS COUNTY, TEXAS

§

LAKEWAY REGIONAL MEDICAL §

CENTER, LLC, SURGICAL §

DEVELOPMENT PARTNERS, LLC, §

BRENNAN, MANNA & DIAMOND, LLC, §

AND FRANK T. SOSSI, § 345th JUDICIAL DISTRICT

JUDGMENT

On August I I. 2014. this cause came on to be heard. Plaintiff Lake Travis

Transitional LTCH, LLC n/k/a Lake Travis Specialty Hospital, LLC ("Plaintiff' or "LTT"),

appeared in person and by attorney of record and announced ready for trial. Defendant

Lakeway Regional Medical Center, LLC ("LRMC") and Defendant Surgical Development

Partners, LLC ("SDP") (collectively, "Defendants" and each a "Defendant"), appeared in

person and by their attorney of record and announced ready for trial. A jury having been

previously demanded, a jury was duly empanelled and the case proceeded to trial.

The jury heard the witnesses and the presentation of evidence. At the conclusion

of the evidence, the Court submitted the questions of fact in the case to the jury. The

charge of the court and the verdict of the jury are incorporated by reference herein for all

purposes. On August 28. 2014, the jury returned a verdict to the Court. Because it

appears to the Court that the verdict of the jury was for Plaintiff LTT and against

1138876

3

DC BK14294 PG477

Defendants SDP and LRMC, judgment should be rendered on the verdict in favor of the

Plaintiff LTT and against the Defendants SDP and LRMC.

IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED that Plaintiff

L TT, in respect to its breach of contract claim, have and recover actual, past damages

from Defendants SOP and LRMC. jointly and severally, in the amount of $7,900,000.00,

as well as prejudgment interest on that amount at an annual rate of five percent (5.0% ).

As of October 13. 2014. prejudgment interest on that amount, calculated as simple

interest based on the date this case was filed on April 3, 2012, totals $998,863.01, which

amount shall increase by $1,082. 19 per day until the date this judgment is signed.

The Court finds that the parties have stipulated that the amount of reasonable

attorney fees incurred by Plaintiff LTT in the prosecution of its breach of contract claim

against Defendants SOP and LRMC is $2,000,000.00. IT IS THEREFORE ORDERED,

ADJUDGED, AND DECREED that Plaintiff L TT have and recover from Defendants

SDP and LRMC, jointly and severally, reasonable attorneys' fees incurred in the

prosecution of LTT' s breach of contract claim in the sum of $2,000,000.00 pursuant to

Chapter 38 of the Texas Civil Practice and Remedies Code.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that all costs of

court incurred by Plaintiff LTT in this matter are adjudged against and shall be recovered,

jointly and severally, from Defendants SDP and LRMC.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that Plaintiff LTT

have judgment against Defendants SDP and LRMC, and that the total amount of

2

1138876

4

DC BK14294 PG478

•

judgment for Plaintiff LTT against Defendants SOP and LRMC, jointly and severally,

shall be as follows: actual damages in the sum of $7,900,000.00; plus prejudgment

interest on that sum as set forth above; plus attorneys' fees in the stipulated amount of

$2,000,000.00; plus costs of court; plus post-judgment interest on the sum total of each of

the foregoing, at an annual rate of five percent (5.0% ), compounded annually, from the

date this judgment is rendered until paid.

IT IS FURTHER ORDERED, ADJUDGED, AND DECREED that all writs and

processes for the enforcement and collection of this judgment or the costs of court shall

tssue as necessary.

IT IS THEREFORE ORDERED, ADJUDGED, AND DECREED by the Court

that the relief specified above is hereby granted and, as to all parties and issues in this

case, all relief not specifically granted herein is expressly denied. This judgment is final,

disposes of all claims and parties. and is appealable.

SIGNED on October _ _il ~-.-

'

,:~~-/ - .

'

HONORABLE'LdRA .-- INGSTON

'

PRESIDINGJUDGE

3

5

APP. 4

12997

12998

12999

13000

13001

13002

13003

13004

13005

13006

13007

13008

13009

APP. 5

LTT v LRMC/SDP

exhibitsticker.com

No. D-1-GN-12-000983

PX0180

APP. 6

LTT v LRMC/SDP

exhibitsticker.com

No. D-1-GN-12-000983

PX0136