Blackstone Medical, Inc. D/B/A Orthofix Spinal Implants v. Phoenix Surgicals, LLC
470 S.W.3d 636
| Tex. App. | 2015Background
- Orthofix (manufacturer) and Phoenix (independent distributor) executed a written sales representative agreement (2/1/09–12/31/11, auto-renew), containing an exclusivity/competition clause (§5(J)) and dual termination schemes: termination for cause (§9(A)) and termination without cause with a lump‑sum payment formula (§9(B)).
- During performance Phoenix sold some competitors’ products but disclosed those sales to Orthofix; the parties discussed and Phoenix hired a Boston‑area ‘‘sales specialist’’ (Cheri Malo) to sell Orthofix biologic product with an oral understanding Orthofix would share initial costs.
- Orthofix terminated the agreement in August 2010, citing a material breach (soliciting competitors’ products) and asserted termination for cause.
- Phoenix sued for, among other things, breach of contract for wrongful termination (seeking the §9(B) lump sum) and promissory estoppel (reliance on Orthofix’s promise to share Malo’s hiring costs); jury awarded $705,232.80 (including $668,826 under §9(B), $27,503 for Malo reliance, $8,903.80 commissions).
- Orthofix moved for directed verdict and JNOV arguing statute of frauds barred Phoenix’s claims, the §9(B) figure was not an available damages measure (lost profits was proper), and promissory estoppel lacked evidence; trial court denied those motions and awarded Phoenix $200,000 in attorneys’ fees (Phoenix sought ~$340k). Trial court judgment affirmed on appeal.
Issues
| Issue | Plaintiff's Argument (Phoenix) | Defendant's Argument (Orthofix) | Held |
|---|---|---|---|
| Whether statute of frauds bars Phoenix’s wrongful‑termination claim/wavier theory | Orthofix waived enforcement of exclusivity by knowledge and inaction; waiver is a fact question | Any oral modification/waiver is barred by statute of frauds; statute precludes Phoenix’s recovery | Court: waiver/implied waiver was supported by evidence; statute of frauds defense not established as matter of law; denial of directed verdict/JNOV affirmed |
| Whether lump‑sum §9(B) payment was available damages for wrongful termination | §9(B) is the contractual remedy for termination without cause and Phoenix limited damages to that sum | §9(B) is unavailable after Orthofix elected termination for cause; proper measure is lost profits; §9(B) may be a penalty/liquidated damages and unenforceable | Court: jury found termination without cause; §9(B) is an available contractual remedy and evidence supported award; objection not preserved on some points; denial of JNOV affirmed |
| Whether promissory estoppel for sharing Malo’s costs is barred by statute of frauds or contractual terms | Promissory estoppel applies to an oral post‑contract promise outside the written agreement; Phoenix reasonably relied and suffered detriment | Oral promise is within scope of written agreement or barred by statute/parol/merger | Court: promise was post‑agreement (parol evidence rule inapplicable) and jury found detrimental reliance; statute of frauds did not preclude equitable promissory‑estoppel recovery; denial of JNOV affirmed |
| Whether trial court abused discretion in awarding only $200,000 of requested attorneys’ fees ($340,322.75 requested) | Phoenix provided affidavit showing hours, rates and reasonableness; thus entitled to full amount | Phoenix failed to segregate or document time and tasks per El Apple; evidence insufficient for full award | Court: applicant’s affidavit lacked lodestar detail (who did what when); evidence legally insufficient to support additional $140,322.75; award of $200,000 (not challenged) upheld |
Key Cases Cited
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (standard for legal‑sufficiency review of jury findings)
- King Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex. 2003) (view evidence in light most favorable to nonmovant on directed verdict)
- Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195 (Tex. 2004) (prior material breach excuses performance)
- El Paso Indep. Auto. Dealers Ass'n v. Motor Vehicle Bd., 1 S.W.3d 108 (Tex. 1999) (waiver may be implied by silence/inaction; waiver as fact question)
- Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006) (prior material breach referenced as affirmative defense)
- El Apple I, Ltd. v. Olivas, 370 S.W.3d 757 (Tex. 2012) (requirements for lodestar attorneys’‑fees proof; need detailed time/identity of workers)
- Accent Builders Co. v. Sw. Concrete Sys., Inc., 679 S.W.2d 106 (Tex. App.—Dallas 1984) (breaching party may pursue remedies in addition to contractual ones)