Bear Ranch, L.L.C. v. Heartbrand Beef, Inc.
885 F.3d 794
5th Cir.2018Background
- HeartBrand sold 424 Akaushi cattle to Bear Ranch in 2010 under Full‑Blood and F1 Program Contracts that imposed sale, registration, and resale restrictions; the contract provided prevailing‑party attorney’s fees and injunctive relief for breaches.
- Bear Ranch later bought additional Akaushi cattle from third parties (Spears, Beeman, Twinwood) in handshake deals; HeartBrand asserted the 2010 restrictions should apply to those later purchases.
- Bear Ranch sued HeartBrand (originally alleging antitrust and unfair practices), then amended to raise breach and fraudulent‑inducement claims; HeartBrand and Beeman counterclaimed for fraud and sought rescission.
- The district court granted partial summary judgment holding the 2010 contract restrictions did not extend to the Spears/Beeman/Twinwood cattle and barred oral agreements by the statute of frauds; fraud counterclaims proceeded to trial.
- A jury found Bear Ranch liable for fraud on the Beeman sale and breach of the 2010 contracts; an advisory jury found unjust enrichment of ~$23.2M and awarded $1.825M exemplary (punitive) damages; district court entered injunctive relief, constructive trust terms, and awarded $3.2M in attorney’s fees.
- On appeal the Fifth Circuit affirmed all rulings except it reversed the exemplary damages award, holding punitive damages were not supported under Texas law given only equitable relief and presumed (not actual) damages.
Issues
| Issue | HeartBrand (Plaintiff) Argument | Bear Ranch (Defendant) Argument | Held |
|---|---|---|---|
| Sufficiency of evidence for fraud (Beeman sale) | BearBrand argued Bear Ranch promised to sell 30% of calves and to comply with Full‑Blood restrictions for Beeman cattle; relied on communications and intent evidence. | Bear Ranch contended insufficient evidence of a false, knowing representation or reliance. | Affirmed: sufficient evidence that Bear Ranch misrepresented intent to sell 30% and comply, supporting fraud under Texas law. |
| Admissibility of Andrien’s valuation expert | Andrien’s report valued unjust enrichment (~$89.8M) and was relevant to equitable damages; cross‑examination and rebuttal could address weaknesses. | Exclude under Daubert as unreliable and prejudicial (big jump in damages late in case). | Affirmed: district court did not abuse discretion admitting Andrien; weaknesses addressed by cross‑examination and rebuttal. |
| Injunction imposing 2010 contract restrictions on Twinwood/Spears cattle | HeartBrand said unrestricted sales would irreparably harm its program and justify permanent injunction. | Bear Ranch argued changed circumstances and that injunction was unwarranted post‑summary judgment. | Affirmed: no significant change in circumstances; injunction modification denied. |
| Exemplary (punitive) damages award of $1.825M | HeartBrand argued punitive damages appropriate given fraudulent inducement and unjust enrichment risk. | Bear Ranch argued punitive damages unavailable because there were no actual pecuniary damages—only equitable relief/prevention of unjust enrichment. | Reversed: under Texas law punitive damages require proof of actual (non‑nominal) damages; equitable remedy here produced only presumed harm, so exemplary damages improper. |
Key Cases Cited
- Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (expert‑testimony gatekeeping and admissibility)
- Kumho Tire Co. v. Carmichael, 526 U.S. 137 (trial court’s gatekeeping extends to nonscientific experts)
- Hensley v. Eckerhart, 461 U.S. 424 (degree of success as primary factor in fee awards)
- Nabours v. Longview Sav. & Loan Ass’n, 700 S.W.2d 901 (Tex. 1985) (equitable relief and discussion of exemplary damages requiring actual damages)
- Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663 (Tex. 1995) (punitive damages require proof of actual damages)
- Wal‑Mart Stores, Inc. v. McKenzie, 997 S.W.2d 278 (Tex. 1999) (standard of review for exemplary damages is legal question reviewed de novo)