AZZ Incorporated and AZZ Group, L.P. v. Michael Coleman Morgan Boyce Galvanizing, LLC And Big Spring Holdings, LLC
462 S.W.3d 284
Tex. App.2015Background
- AZZ (galvanizing company with 35 plants) employed Cole Morgan, who signed a Code of Ethics and an Employee Invention/Trade Secret/Non‑Compete Agreement; Morgan later left to form Boyce Galvanizing in Big Spring, TX.
- While still employed, Morgan prepared a business plan, solicited financing and investor interest, communicated repeatedly with Interstate Steel (an AZZ customer), and obtained letters of intent from six AZZ customers to support a bank loan.
- Morgan resigned Sept. 2011; Boyce opened Feb. 18, 2013. Interstate Steel began using Boyce then and Boyce earned ~$468,098 from Interstate Steel through trial.
- AZZ sued for misappropriation of trade secrets, breach of fiduciary duty, and breach of contract. Jury found no misappropriation or fiduciary breach but found Morgan breached the contracts; the jury awarded zero past and future lost‑profits (the only damages submitted). Trial court entered take‑nothing judgment; AZZ appealed.
- AZZ argued it conclusively proved $454,000 in past lost profits (Interstate Steel) and that the zero awards were against the great weight and preponderance of the evidence; appellees argued lack of causal nexus and unreliable expert opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AZZ conclusively established $454,000 in past lost‑profits from loss of Interstate Steel | AZZ: expert showed lost profits ($454,000) attributable to Interstate Steel and thus established damages as a matter of law | Appellees: causation lacking; customers at‑will and evidence supports other reasons for loss; expert assumptions speculative | Court: AZZ did not conclusively establish $454,000; some evidence supported jury’s zero finding, so legal‑sufficiency challenge fails |
| Whether the jury’s zero past and future lost‑profits findings are against the great weight and preponderance of the evidence | AZZ: objective evidence of injury (lost customer, letters of intent, revenues) makes a zero award clearly wrong | Appellees: evidence was contested; causal link speculative; expert relied on faulty assumptions | Court: factual sufficiency review favors jury; zero past and future awards are not against the great weight and preponderance of the evidence |
| Whether, given conditional submission of damages and alleged charge error on fiduciary‑duty question, remand is required for disgorgement or new damages finding | AZZ: damages question was conditional; if fiduciary question was improperly submitted, remand could permit damages/disgorgement under fiduciary theory | Appellees: jury’s zero damages and speculative expert analysis make any remand unnecessary | Court: Even if fiduciary question had been submitted differently, Fuller’s speculative assumptions taint damages; no remand or relief awarded; disgorgement unsupported by evidence of monies to disgorge |
Key Cases Cited
- Peterson Grp., Inc. v. PLTQ Lotus Grp., L.P., 417 S.W.3d 46 (Tex. App. — Houston [1st Dist.] 2013) (lost‑profits causation and foreseeability for contract damages)
- Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80 (Tex. 1992) (lost profits may be awarded with reasonable certainty; plaintiff need not produce all supporting documents)
- ERI Consulting Eng'rs, Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010) (plaintiff must show amount of loss by competent evidence with reasonable certainty)
- Tex. Instruments, Inc. v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276 (Tex. 1994) (lost‑profits proof need not be mathematically exact)
- Stuart v. Bayless, 964 S.W.2d 920 (Tex. 1998) (consequential damages must be directly traceable and foreseeable)
- Atlas Copco Tools, Inc. v. Air Power Tool & Hoist, Inc., 131 S.W.3d 203 (Tex. App. — Fort Worth 2004) (lost‑profits projections speculative when premised on uncertain renewals or assumptions)
- Dow Chem. Co. v. Francis, 46 S.W.3d 237 (Tex. 2001) (standard for legal‑sufficiency review when appellant bore burden of proof)
- Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757 (Tex. 2003) (appellate courts must defer to jury on credibility in factual sufficiency review)
- Sw. Battery Corp. v. Owen, 115 S.W.2d 1097 (Tex. 1938) (uncertainty as to the fact of legal damages defeats recovery)