Supply Pro, Inc. and Harmon K. Fine, Individually v. Ecosorb International, Inc., D/B/A Biocel Technologies
01-15-00621-CV
| Tex. App. | Nov 25, 2015Background
- Biocel sold treated cellulose fiber (K-Sorb) to Supply Pro for use in oil-absorbent boom after the Deepwater Horizon spill; Supply Pro (owned by Harmon Fine) placed large July 2010 blanket POs.
- Biocel sent a July 11 email and order acknowledgments stating new "take-or-pay" (noncancellable) terms and 14-day lead times; Supply Pro issued POs and Biocel shipped part of the orders.
- BP curtailed boom purchases in late July; Supply Pro cancelled remaining deliveries and sought a workout with Biocel in August.
- Kempe (Biocel) sent an August 13 proposed workout (including a "clawback" provision tying Biocel recovery to any compensation Supply Pro received from its distributor); Fine replied August 16 agreeing only to return of raw-materials (pay $12,750) and to let Biocel try to sell 6,912 finished bales for six months.
- PE (Supply Pro’s distributor) paid Supply Pro ~$1.59m for cancelled boom; Biocel sued in 2012. A jury found Supply Pro and Fine liable for fraud, breach of the workout agreement, and awarded actual and exemplary damages; the trial court entered judgment for Biocel. Appellants (Supply Pro, Fine) appeal, arguing legal insufficiency and charge error.
Issues
| Issue | Plaintiff's Argument (Biocel) | Defendant's Argument (Supply Pro/Fine) | Held (trial/jury outcome and appellate posture) |
|---|---|---|---|
| Whether Biocel's July order acknowledgments' additional "take-or-pay" term became part of the July POs | Biocel contends its OAs added terms under UCC §2.207 and created noncancellable obligations | Supply Pro argues the take-or-pay term materially altered the POs and thus did not become part of the contract as a matter of law | Jury/Trial: Charge included related issues; jury found fraud & workout breach. Appellants on appeal argue legal insufficiency—trial court entered judgment for Biocel on fraud. |
| Whether the August emails created a workout agreement that included the clawback provision | Biocel treats the August 13 email (and subsequent conduct) as creating an agreement including clawback if Supply Pro was compensated | Supply Pro/Fine argue the August 16 email accepted only limited terms (return fee and Biocel’s sale efforts) and did not agree to the clawback; parol evidence/contract construction support that the clawback was never agreed | Jury/Trial: Jury found the clawback was part of the workout; appellants assert on appeal that evidence is legally insufficient and the trial court mis-construed the emails. |
| Whether the take-or-pay term (if part of original deals) was fraudulently induced | Biocel relies on its representations of extreme demand to justify take-or-pay; it argued no fraud induced the term | Defendants argue Biocel misrepresented demand to force the take-or-pay term and that the record shows Kempe/Svoboda created a false impression; requested jury questions on fraudulent inducement and equitable estoppel were refused | Jury/Trial: Jury found Supply Pro and Fine committed fraud and awarded damages; appellants claim the court erred by refusing to submit fraudulent-inducement questions, which would have negated much liability. |
| Sufficiency and reasonableness of damages (storage, clawback, unpaid POs) and punitive damages | Biocel sought storage, proportion of PE payment (clawback), unpaid PO amounts, plus attorneys’ fees and exemplary damages | Defendants argue (1) storage was unnecessary and unsupported (no evidence of reasonable storage cost; material was essentially worthless); (2) clawback was not part of the workout; (3) unpaid PO award double-counted items and was not an element of the fraud claim; (4) punitive awards against both corporate and individual defendants for the same conduct were improper and excessive | Jury/Trial: Jury awarded specific actual damages, attorney fees, and $1.8M exemplary damages (split between Supply Pro and Fine); trial court entered judgment. Appellants ask appellate reversal or remittitur for prejudgment interest, elimination/reduction of storage/clawback/PO awards, and reversal or reduction of punitive damages. |
Key Cases Cited
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal-sufficiency review principles; evidence must be considered in context)
- Ford Motor Co. v. Castillo, 444 S.W.3d 616 (Tex. 2014) (standards for no-evidence legal-sufficiency review)
- Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323 (Tex. 2011) (fraudulent inducement voids contracts; elements of fraudulent inducement)
- Tenneco Inc. v. Enterprise Prods. Co., 925 S.W.2d 640 (Tex. 1996) (parol evidence and contract construction principles)
- ERI Consulting Eng'rs, Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010) (damages: uncertainty as to fact vs amount)
- Fortune Prod. Co. v. Conoco, Inc., 52 S.W.3d 671 (Tex. 2000) (ratification and whether a defrauded party’s later conduct forecloses remedies for fraud)