James J. McKinley and Kin-Tek Laboratories, Inc. v. Kin-Tek Analytical, Inc., 01-19-00642-CV

Background

In Feb. 2014 Kin-Tek Analytical, Inc. (Analytical) purchased substantially all assets of Kin-Tek Laboratories, Inc. (Laboratories) under an Asset Purchase Agreement; Botts owns 60% of Analytical and McKinley 40%.
The Agreement allocated assumed liabilities in Exhibit B and expressly disclaimed any liabilities not listed or for amounts exceeding estimates "set beside each" item; several categories in Exhibit B showed "No estimate provided."
After closing, Analytical asserted various post‑closing losses (uncollectible receivables, obsolete inventory, unused vacation, warranty costs, product documentation/design defects, undisclosed obsolete parts, obsolete/malfunctioning equipment, hazardous materials) and sued for breach; jury awarded $274,134.41 in damages and $193,067.82 in attorney’s fees.
Appellants (McKinley and Laboratories) moved for JNOV and appealed, principally challenging recovery for items characterized as "Excluded Liabilities" and the legal/factual sufficiency of evidence supporting individual damage categories.
The trial court entered final judgment for Analytical; on appeal the court reviewed contract interpretation and legal/factual sufficiency of the evidence under Texas standards.
The appellate court affirmed: it held that Exhibit B’s language meant items with no amount set were Excluded Liabilities (Analytical assumed zero for those line items) but nevertheless found legally and factually sufficient evidence to support the jury’s damage awards for the contested categories; fraud claims were not submitted to the jury and related appellate complaints were moot.

Issues

Issue	Plaintiff's Argument (Analytical)	Defendant's Argument (McKinley/Labs)	Held
1. Recovery for Exhibit B categories showing "No estimate provided" (Excluded Liabilities)	Analytical argued those categories were excluded (assumed $0) consistent with Exhibit B language	Appellants argued that because no dollar amount was listed, Analytical implicitly assumed all amounts for those categories or Botts, as insider, knew amounts and assumed liability	Court held Exhibit B unambiguous: absent an amount "set beside" a category, Analytical assumed no liability (amount = $0); appellants’ contract‑interpretation argument rejected
2. Sufficiency of evidence for damages identified as excluded (receivables, inventory, vacation, warranties)	Analytical presented Form 8594 and testimony showing these liabilities and amounts reflected post‑closing	Appellants argued Botts had access to records and should have known those amounts pre‑closing, undermining damages	Court found legally and factually sufficient evidence (Form 8594 and testimony) to support jury awards for these amounts
3. Sufficiency for product documentation/design and failure to disclose damages	Analytical relied on testimony that documentation/design defects and undisclosed obsolete parts existed pre‑closing and caused remediation costs	Appellants said defects/issues arose post‑closing or were isolated incidents, not pre‑existing, so damages unsupported	Court held testimony (Botts, Vrazel, invoices, vendor work) permitted reasonable inferences that defects/obsolescence existed pre‑closing; evidence legally and factually sufficient
4. Sufficiency for obsolete/malfunctioning equipment damages	Analytical presented testimony and replacement/rental costs for several pieces of equipment allegedly not working at closing	Appellants argued timing was uncertain and issues were discovered only after closing, so no pre‑closing defect shown	Court found testimony supported jury inferences that equipment was nonfunctional or obsolete at closing; award sustained
5. Sufficiency for hazardous materials disposal damages	Analytical produced chemist testimony and a Clean Harbor disposal quote for old cylinders and permeation tubes present at closing	Appellants argued items were not "hazardous" or did not require outside disposal	Court applied common meaning of "hazardous," found evidence that cylinders/tubes posed risk and required specialized disposal, and upheld the $10,500 award

Key Cases Cited

City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal‑sufficiency standard and deference to jury credibility findings)
Cain v. Bain, 709 S.W.2d 175 (Tex. 1986) (factual‑sufficiency standard: set aside only if verdict is against the great weight of the evidence)
Italian Cowboy Partners, Ltd. v. Prudential Ins. Co., 341 S.W.3d 323 (Tex. 2011) (when contract is ambiguous)
J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223 (Tex. 2003) (no single provision given controlling effect in contract construction)
Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706 (Tex. 1997) (standards for sufficiency challenges—in negative proof contexts)
Regal Fin. Co. v. Tex Star Motors, Inc., 355 S.W.3d 595 (Tex. 2010) (review of sufficiency challenges)
Osterberg v. Peca, 12 S.W.3d 31 (Tex. 2000) (when jury charge is not objected to, sufficiency is measured against the charge given)