610 S.W.3d 763
Tex.2020Background
- In 2005 Texas EMC Products (the Partnership) was formed to commercialize Vladimir Ronin’s energetically modified cement (EMC); EMC Cement BV (Class A) licensed its patents to the Partnership and owned 49.5%; Walker, Wilson and related parties (Class B) provided financing and owned 49.5%; EMC Management was the 1% general partner.
- The Partnership struggled commercially, retooled its process (Pozzo Slag) in 2010, then defaulted on its bank loan in 2011; Few Ready Mix/Walker & Wilson paid the bank, followed by a foreclosure sale at which VHSC purchased the plant and hired key employees (including Pike).
- Plaintiffs (the Partnership, EMC Management, and EMC Cement BV) sued Walker, Wilson, Pike, Few Ready Mix, and VHSC for claims including breach of partnership agreement, breach of fiduciary duty, misappropriation of trade secrets, tortious interference, and conspiracy; defendants asserted counterclaims (including loan-deficiency claim by VHSC).
- A jury found for the EMC plaintiffs on multiple counts and awarded sizable damages (including $7M to EMC Cement BV for breach of the partnership agreement and $1.5M for misappropriation); trial court denied injunctive relief but entered judgment on the jury verdicts and awarded attorneys’ fees.
- The court of appeals affirmed in part and reversed as to a permanent injunction (ordering one issued); the Texas Supreme Court granted review and principally considered standing/capacity, legal sufficiency of the damages evidence, entitlement to a permanent injunction, and VHSC’s deficiency counterclaim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether limited partner (EMC Cement BV) lacks constitutional standing or capacity to recover for loss in value of its partnership interest | EMC Cement BV: it personally suffered diminution in value and may sue for that injury | Walker: such claims belong to the Partnership; EMC Cement BV lacks standing/capacity to recover individually | Court: Constitutional standing exists to sue for diminution in value; capacity (who may recover) is a merits/capacity issue (waivable). The Court nonetheless found insufficient evidence of damages and rejected the recovery. |
| Legal sufficiency of misappropriation damages ($1.5M) | EMC Cement BV: jury measures (value an investor would pay; costs saved) supported award | VHSC/Pike: no evidence supports either measure; trial court properly set aside part of the verdict | Court: Court of appeals erred to reinstate a JNOV-disregarded damages finding not challenged on appeal; ultimately EMC Cement BV takes nothing for trade-secret damages. |
| Legal sufficiency of other damages (lost market value awards totaling millions) | EMC plaintiffs: expert valuations (Lygren, Miller) and plant valuation (Swanstrom/Lygren) supported market-value loss | Defendants: experts’ projections speculative, conclusory, and unsupported; purchase price/book value ≠ market value | Court: Expert opinions were conclusory or analytically unsupported and plant-cost testimony did not show fair market value; no legally sufficient evidence of damages—rendered take-nothing judgment. |
| Entitlement to permanent injunction for trade-secret misappropriation | EMC Cement BV / court of appeals: possession and ability to use secrets creates presumption of imminent/irreparable harm warranting injunction | VHSC: trial court found VHSC no longer using the claimed secrets and that adequate legal remedy existed | Court: Trial court did not abuse discretion; adequate remedy at law existed (damages could be measured), so injunction denial affirmed. |
| VHSC counterclaim for promissory-note deficiency | VHSC: Few Ready Mix assigned/purchased the note; deficiency owed by Partnership | EMC plaintiffs: evidence showed payments left principal balance at $0; jury question defined note as the original bank note | Court: Evidence allowed reasonable jury finding that Partnership did not fail to pay a deficiency; VHSC not entitled to JNOV—affirmed. |
Key Cases Cited
- Franchise Tax Bd. of Cal. v. Alcan Aluminium Ltd., 493 U.S. 331 (U.S. 1990) (shareholders can have Article III standing to sue for injuries that reduce the value of their investment)
- DaimlerChrysler Corp. v. Inman, 252 S.W.3d 299 (Tex. 2008) (distinguishing jurisdictional standing from other uses of “standing”)
- Dubai Petroleum Co. v. Kazi, 12 S.W.3d 71 (Tex. 2000) (statutory/claim prerequisites are merits issues, not jurisdictional ones)
- Meyers v. JDC/Firethorne, Ltd., 548 S.W.3d 477 (Tex. 2018) (constitutional standing distinct from right to relief under a statute)
- Wingate v. Hajdik, 795 S.W.2d 717 (Tex. 1990) (a shareholder generally cannot recover individually for wrongs done solely to the corporation)
- In re Fisher, 433 S.W.3d 523 (Tex. 2014) (limited partner may bring claims for injuries suffered directly; capacity issues can require pleading/verification)
- Pledger v. Schoellkopf, 762 S.W.2d 145 (Tex. 1988) (Rule 93(2) verified plea required to contest a plaintiff’s capacity to sue in a particular capacity)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (no-evidence review standards)
- Coastal Transp. Co. v. Crown Cent. Petroleum Corp., 136 S.W.3d 227 (Tex. 2004) (when objections to expert methodology are required and when a legality/sufficiency challenge may be raised on appeal)
- Sonat Expl. Co. v. Cudd Pressure Control, Inc., 271 S.W.3d 228 (Tex. 2008) (court of appeals may not reverse trial court on grounds not raised by the parties)